Sawasdee – October 18 , 2024

Limited upside, watch China's GDP

Today’s highlights

• The Ministry of Finance is preparing to support the real estate sector, sending to the cabinet a proposal for low-interest loans for 5 years for a maximum of Bt3mn per borrower, with a Bt50bn budget. This can be used for buying, renovating, repairing or building homes.
• The Minister of Energy plans to extend the diesel price cap of Bt33 per liter until the end of 2024, from the previous end date of October 31. The national energy plan is currently undergoing public hearings and will be presented to the National Energy Policy Council and the cabinet by the end of this year.
• The EIA reported that last week's crude oil stocks decreased by 2.2 Mbbl, contrary to expectations of an increase. Gasoline stocks also decreased by 2.2 Mbbl, more than expected.
• The ECB decided to cut interest rates by 25 bps as the market expected. This is the third rate cut this year and the first consecutive rate cut in 13 years, reflecting weak economic growth in the eurozone and slowing inflation.
• TSMC, the world's largest contract chip manufacturer, reported a record 54%YoY profit increase in 3Q24, reaching US$10.1bn, exceeding expectations. It forecasts further revenue growth in Q4, driven by demand for AI chips.
• US retail sales in September increased 0.4%MoM and 1.74%YoY, higher than expected. Initial jobless claims fell to 241,000 last week, lower than market expectations and the largest decrease in 3 months.
• China's Housing Ministry announced an expansion of the whitelist for real estate projects and increased the credit line to 4tn yuan to support the completion of housing transfers

Strategy today

In the short term the SET is expected to move sideways up but with limited upside after a sharp rise in the index. The market is waiting for more stimulus packages. External factors include 3Q24 earnings announcements by US and EU companies. China's stock market is expected to be less volatile. Our strategy is "selective buy".

Trading today

The SET is expected to move sideways with limited upside as investors are wary of geopolitical tension and as banks begin releasing 3Q24 earnings. We recommend "Selective Buy" with four main themes:
1) Earnings plays: stocks with strong fundamentals and strong 3Q24 profit - BEM, BCH, BDMS, GULF, TRUE, AU and TNP. Be cautious on sectors that are likely to come in below expectations - Energy, Petrochemicals, Packaging and Electronics.
2) For risk takers who want to speculate after the MPC cut interest rate, we recommend LHHOTEL, DIF, CPALL, AP, SIRI and banks (TISCO and KKP) who have large leasing portfolios, while leasing (MTC, TILDOR) has already moved up, already discounting expectations.
3) Stocks with high dividend yield and expected to be targets of Vayupak and tax-deductible funds; recommend stocks with profit expected to grow in 2025 - KTB, BBL, ADVANC and HMPRO.
4) Rising Brent price on concerns of spreading Middle East conflict. We expect price to average US$75-85/bbl. Oil stocks are able to hedge the risk. For investors who can take risks, we recommend an upstream oil stock - PTTEP

Daily top picks

BBL: 3Q24 net profit was Bt12.5bn, up 6%QoQ and 10%YoY, beating INVX and market expectations, on higher gain on financial products and investments. 4Q24 earnings are expected to slip QoQ but grow YoY, giving 2024 net profit growth of 8%, followed by an expected growth of 5% in 2025. Valuation is attractive, comparing PBV and ROE, while quality asset risk is lower than other banks.

BDMS:Our top pick in Healthcare. 3Q24 core profit is expected to reach an all-time high of Bt4.3-4.4bn, growing YoY and QoQ. 2024 core profit is expected to grow 13% to Bt16bn and grow 8% in 2025. Valuation is attractive, trading at 2024F PER of 27x (-2SD).