The Stock Exchange of Thailand moved mostly sideways last month. The index started out the month on a positive footing, gaining almost 30 points to peak at 1,695.99. However, after poor results from banks and big conglomerates such as SCC, the SET retreated to close at a January low of 1,671.46, up only 0.2% from the year-end.
Average daily turnover shot up 27% from the month before to 68 billion baht. Foreign investors, net buyers since the beginning of the year, bought more than 20 billion baht in the first half of the month.
However, with the weak results from banks, foreign investors’ net buying slipped to 18 billion baht, and as of Thursday it was just 957 million baht for the year-to-date.
Meanwhile, local institutions were net sellers of 24 billion baht in January, largely due to long-term investment fund (LTF) redemption. Retail investors booked a net buy position of just 266 million baht.
All bank results fell short of market expectations, largely due to bigger provisions and increasing credit costs. Although interest rates are on an uptrend, the outlook for banks appears dull and economic conditions are expected to be challenging.
Market sentiment has been further shaken by the weak results of Siam Cement Group (SCC) and its subsidiaries. Indeed, most fourth-quarter 2022 results have been below market expectations and many results previews are on the negative side.
This trend has continued into early February with the SET moving sideways-down at around 1,660 to 1,670 points.
FEW POSITIVE CATALYSTS
While the return of Chinese tourists is encouraging, we have yet to see a material impact on the Thai economy. The number of Chinese tourists remains low as inbound flights are limited, and it could take some time before substantial impact is seen. All considered, the market is still searching for positive catalysts.
A weak fourth-quarter results season is the key concern now. For the year to date, the market has already revised down earnings per share (EPS) forecasts by 1.9% for this year and by 0.4% for 2024.
If results continue to disappoint, we could see significant further downward revisions and our SET target of 1,720 points will be difficult to reach.
Another drag on the market is exports; the dollar value in December was down 14.6% year-on-year. This was the third consecutive month of contraction, and we expect January to stay in the red zone.
For 2023, we project a 3.5% decline in exports and 3.3% growth in GDP. But if the export decline this year hits the double digits, GDP could end up in the negative zone as well.
One positive factor that could freshen the investment mood in the near term is February is the month for dividend stocks to perform. We see the SETHD index outperforming the SET by 1.7% with a 90% confidence level.
Another factor that could prop up the market is the general election, which is expected to be held in May. Indeed, we could see positive movement in the market around late February or early March as the market typically gets a boost around three months prior to an election. Our stock picks at this time — AP, BBL, GLOBAL, MAJOR, and
TIPH — offer solid results and/or dividend yields.
AP has long been one of our top picks in the property sector for its healthy profitability and high dividend yield. We expect its fourth quarter earnings to jump 15.2% year-on-year on the contribution from new projects. The developer’s 2023 outlook remains bright with a large backlog of 37 billion baht as of late 2022.
The company also has plans for land purchases of around 20 billion baht in 2023 which will help secure revenue growth into 2024. We project a yield of around 5% for both 2022 and 2023 and note that the stock typically performs well during dividend season.
Among banks, BBL remains our top pick. Although its results were slightly below forecasts, they were strong compared with peers. NPLs fell by 9.8 billion baht quarter-on-quarter, but credit cost stayed at 7.9 billion baht, bringing the 2022 total to 32.6 billion baht. This provides a robust cushion for the bank if economic conditions deteriorate in the second half. BBL also has a tidy dividend yield of around 3% per year.
HOME IMPROVEMENT
GLOBAL saw a lacklustre 2022 with projected profit of 3.4 billion baht, flat year-on-year. But a high base effect was at play here with 2021 profit growth up a huge 63% year-on-year. Going forward, operations should gain positive momentum. The construction materials and home improvement company added only 2-5 branches per year from 2019-22 due to the pandemic. For this year, we expect GLOBAL to add two branches in both Myanmar and Indonesia, and one branch in both Cambodia and Laos. This expansion should help profits regain strength and rise 16% in 2023.
With the Covid situation much improved, people are returning to theatres. This means the profit of cinema operator MAJOR should return to normal levels. Hollywood blockbusters are back, starting in the fourth quarter with Black Adam, Black Panther: Wakanda Forever and Avatar: The Way of Water. MAJOR should have a strong performance in 2023 and we expect profit to surge 78% with an expected dividend yield of around 4%.
Another turnaround stock is TIPH. We expect the insurer’s fourth-quarter earnings to continue expanding after a big jump in the third quarter of 2022. This should continue into 2023 and we expect profit growth this year of 67%. We believe TIPH will be a sound investment with an expected dividend yield of around 4% per year.
