Small/Mid Cap Strategy and Stock Picks - the DBS Vickers ...

Regional Small/Mid Cap Strategy Q2 2008
Country Assessment
Thailand
Domestic plays
Our strategy for 2Q08 remains focused on domestic
demand recovery, following the government’s aggressive
economic stimulus programs. We are convinced that
Thailand’s economic prospects will be robust, with
domestic demand as the key growth driver for the next
2-3 years. We feature one small/mid cap stock, PS, that
should benefit from improving domestic consumption
next year. We also pick IRP on its growth story.
Our small cap picks for 1Q08 gave an average market cap-weighted return of
5% for the quarter (from 25 Dec 2007 to 25 Mar 2008), vs 2% gain for the SET
Index. Quality Houses (QH TB) was the best performer among the four
companies we picked for 1Q08, despite the market sell-off following complaints
of unsatisfactory construction work from residents of one of its housing
projects. Regional Container Lines (RCL TB) was the worst performer due to
weak freight rate and higher bunker oil price.
Our top picks for small/mid cap stocks are Preuksa Real Estate (PS TB) and
Indorama Polymers (IRP TB). PS is the largest residential property developer in
Thailand in terms of market share (16%) and second largest in terms of market
capitalization. We re-iterate our BUY rating for PS premised on (i) strong
earnings growth prospects, (ii) a quality management team, (iii) strong balance
sheet, and (iv) attractive valuation. IRP is one of the top growth stocks in our
Thailand universe. The counter will be the world’s 2nd largest PET producer after
its expansion to meet its aggressive growth target.
Chanpen Sirithanarattanakul (66) 2657 7824 chanpens@th.dbsvickers.com
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Refer to important disclosures at the end of this report