Left Brain Right B - the DBS Vickers Securities Equities Research

Regional Equity Strategy 4Q 2009
Country Assessment
Stock picks for 4Q09. We feature six companies for 4Q09.
Three of them (SCC TB, DTAC TB, and THAI TB) are big-cap
counters, and the rest (TISCO TB, IRP TB, and TSTH TB) are
mid-caps.
Siam Cement (SCC TB) is Thailand’s largest conglomerate
with core businesses in cement, petrochemical, paper, and
building products. Despite the petrochemical down cycle,
SCC’s expanding capacity will cushion against the impact
of weakening product spreads. Its non-chemical
businesses should be prime beneficiaries of the economic
recovery and the government’s economic stimulus
package. SCC’s solid balance sheet will strengthen further
after the end of major capex for the new naphtha cracker.
We recommend Buy with a target price of Bt252, based
on 13x 2010 PE.
Total Access Communication (DTAC TB) will be a prime
beneficiary of 3G licenses, with potential 54% NPV
enhancement (from Bt43.00 to Bt66.00). Its current
valuations (12.8x FY10 PE and 5.0x EV/EBITDA) reflect
only the value of its 2G operations. Reiterate BUY with a
revised DCF-based target price of Bt54.50 (50%
probability of 3G license).
Thai Airways (THAI TB) is Thailand’s national flag carrier. It
operates 870 international and domestic flights per week.
Its prospects are brighter due to (i) continued cost cuts, (ii)
better management of fuel surcharge vs fuel cost, and (iii)
expectations that the new president (DD) will turn THAI
around. Cabin factor is improving m-o-m, and THAI
should benefit from the high tourist season in 4Q09.
Liquidity risk is also easing as it continues to secure
funding as planned and successfully delays A380 delivery
to Aug 2012. THAI should turn in Bt5bn net profit in
FY09F compared to the large Bt21bn loss last year.
Tisco Financial Group (TISCO TB) has a strong niche in
consumer finance, asset management, brokerage, and
investment banking. It is the third largest hire purchase
bank in Thailand by turnover, with double-digit loan
growth in the past three years. TISCO’s prospects are
turning positive following the domestic automotive
market recovery in 2H09, which will boost hire purchase
loan growth. Nonetheless, TISCO’s increased penetration
rate in the captive market and successful inorganic growth
in 1H09 lead us to believe that it will again post the
strongest hire purchase loan growth among peers. We
estimate FY09F and FY10F loan growth at 13.5% and
13.0%, respectively. We value TISCO at 1.4x FY10F P/BV,
which a target price of Bt26.00.
Indorama Polymers (IRP TB) will become the world’s 2nd
largest PET producer after the completion of its AlphaPet
project in 4Q09. The current PET industry rationalization
and IRP’s timely expansion allow the group to gain market
share as several competitors were forced to shut down
inefficient facilities. Earnings growth will be driven mainly
by new capacity and lower interest expense. Core net
profit should jump 327% (70% net profit growth) in
2009, and continue to grow by 12% and 7%,
respectively, in 2010-11F.
Tata Steel Thailand (TSTH TB) is the largest and most
efficient long steel producer in Thailand. It should be a
prime beneficiary when mega projects kick off in 4Q09F.
Rebar price has already picked up following signs of
demand recovery, rising 14% from 1QFY10 average to c.
Bt19.5/kg currently. Sales volume inched up 9% from
1H09 average to c. 90,000 tons/month in July and
August, thanks to higher exports and recovering demand.
Going forward, we remain positive on steel prices and
believe that it will continue to pick up, and enhance group
margins. TSTH’s new mini blast furnace that will start
ramping up production in Sep09 is also expected to help
save costs and lift group margins further.
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