SET Index has limited upside scope in the short-term

business April 23, 2018 01:00

By Therdsak Thaveeteeratham
Executive Vice President  Research
Asia Plus Securities

During the past nine trading days, the SET Index rose 76 points. Interestingly, rises in stock prices were centralised in big caps. 

Of 539 listed companies in the SET, 14 big caps with market cap combined at Bt8.29 trillion or about 46 per cent of total market cap. Local institutional investors were the main buyers.

From now, big caps could drive the SET Index less, given there is not much upside. Among them, PTT, AOT, CPALL and BAY should be switched.

PTTEP, PTTGC, BDMS and IVL have upside of less than 10 per cent. There remain no new factors for BBL, KBANK, SCB, ADVANC, SCC and CPN. Therefore, this shortterm period may not see the SET Index rise above 1,800 points with stability.

This week, trade wars and the Syrian situation could weigh less on the Thai stock market. Meanwhile, oil price movement should be folฌlowed on expectation to move in a narrow range or move down.

Locally, negative sentiment from the NLA’s rejection of the entire list of NTBC candidates for its board members and the Committee on Energy Policy’s decision to shift the exfactory price structure of oil could affect ICT with the highest impact to DTAC and refineries, respectively.

We prefer PLANB (fair value @Bt7.30) with estimated 1Q18 profit growth at 36 per cent quarฌter on quarter and  20 per cent year on year, and WHA (FV@Bt4.89) with a leapfrog profit expected in 1Q18.

Prakit Siriwattanaket

Vice President

Kasikorn Securities

Since early 2018, stock prices of construction group dropped nearly 20 per cent due mainly to:

Unsatisfactory 4Q17 and 2017 earnings due to problem of lower than expected income realisation after several big construction projects could not commence.

There were few auctions for the government’s mega-projects.

We believe that the construction group could turn around this year as mega-projects will surely commence. Once the government projects take off, the private sector will follow, particularly property projects along the area of MRT projects. Given high backlogs, STEC, CK, ITD, UNIQ, PYLON and SEAFCON could see a turnaround of their growth.

Auctions for new projects from adjustment of the new procurement bill are expected from the middle of this year onwards and this could trigger speculation in construction stocks continuously.

Now, construction stocks’ valuations are much cheaper than earlier. Some companies are traded at Price to earnings ratio of 1520 times (based on estimated earnings per share in 2018), while several companies’ EPS growth will likely stand out.

For example, STEC is expected to turn around from a loss of Bt611 million to a profit of Bt1 billion and next year’s growth of 58 per cent next year. Based on a consensus, it’s highly likely to see outstanding profit growth of PYLON, SEAFCO from the previous quarter and the same period of last year.

Therefore, now is the opportunity to accumulate construction stocks before their earnings announcement in the first two weeks of this May.

We pick STEC, CK, PYLON.