Small/Mid Cap Strategy and Stock Picks - the DBS Vickers ...
Small/Mid Cap Strategy and Stock Picks - the DBS Vickers ... Small/Mid Cap Strategy and Stock Picks - the DBS Vickers ...
Regional Small/Mid Cap Strategy Q2 2008 Country Assessment GROWTH AND VALUATION Our small-mid cap universe (market cap
Regional Small/Mid Cap Strategy Q2 2008 Country Assessment STRATEGY AND STOCK PICKS A. REVIEW In 1Q08, our small cap picks gave investors an average market cap-weighted return of 4.1%, ahead of the SET Index's 2.7% loss. Leading the gains was Quality Houses (QH TB), one of Thailand’s leading residential property developer. The counter registered 34.6% gain during the quarter. QH was still the best performer among the small-cap stocks we selected for 1Q08. Regional Container Lines (RCL TB) fell 16% as market sentiment for container shipping was frail due to the anticipated slowdown in the global economy and high bunker oil price. Review: 1Q08 Small Cap Picks Stock Shares Price (Bt) Market Cap (Btm) (m) 25-Dec-07 25-Mar-08 Return 25-Dec-07 25-Mar-08 Return MAJOR TB 880.34 18.00 18.30 1.7% 15,846 16,110 1.7% QH TB 7,392.42 2.14 2.88 34.6% 15,820 21,290 34.6% TISCO TB 544.62 28.75 29.00 0.9% 15,658 15,794 0.9% RCL TB 663.00 29.00 24.30 -16.2% 19,227 16,111 -16.2% Small Cap 5.2% 66,551 69,305 4.1% SET 843.28 820.31 -2.7% Out-performance 6.9% Source: DBS Vickers B. 2Q08 RECOMMENDATION PS is a potential beneficiary of improving domestic factors. We feature IRP for its bright earnings prospects after expanding its PET capacity to become the world’s second largest producer. Review: 1Q08 Small Cap Picks Mkt Price Target EV/ P/ Div Vol/day Company Ticker Cap (Bt) Price % P/E EBITDA BV Yld ROE 6m (US$m) 25-Mar-08 (Bt) Upside 08F 08F 08F 08F 08F (m shrs) Indorama Polymers IRP TB 395 9.00 14.00 56% 6.8 6.8 1.8 4.4 30.3 0.5 Preuksa Real Estate PS TB 742 10.70 12.26 15% 12.2 9.3 2.4 2.5 19.9 2.7 Source: DBS Vickers Indorama Polymers (IRP) will be the world’s 2nd largest PET producer upon the completion of its expansion to achieve its aggressive target capacity of 1.4m tpa by 2009. IRP’s production capacity was 603k tpa at end 2007, while the acquisition of 355k tpa facilities in the U.K. and Netherlands is expected to be complete by end-Mar 2008. The greenfield 432k tpa plant in the U.S.A. will fulfill its target. IRP is one of the top growth stocks in our Thailand universe. Valuations are cheap at just 6.8x 2008 PE, and dividend yield moderate at 4.4%. Our Bt14/share target price is based on 10.5x 2008 PE. Its earnings prospects should improve in 2Q08. Preuksa Real Estate (PS) is the largest residential property developer in Thailand in terms of market share (16%) and second largest in terms of market capitalization. It focuses on low- to mid-priced townhouses and detached houses. In 2007, PS successfully expanded into the city condominium market. PS’ presales rocketed to a record high of Bt13.6bn in 2007, due to its aggressive new project launches and expansion into the condominium market. And its prospects remain positive. 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. Our target price is Bt12.26 based on 14x FY08 PE. PS is now our top pick in the residential property sector. Page 47
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Regional <strong>Small</strong>/<strong>Mid</strong> <strong>Cap</strong> <strong>Strategy</strong> Q2 2008<br />
Country Assessment<br />
GROWTH AND VALUATION<br />
Our small-mid cap universe (market cap