Tuesday, August 25, 2009

Major brokers upgrade Thailand's SET index target

Major brokerages have started upgrading their SET index targets for this year to 662 to 750 points in light of surprisingly robust earnings last quarter.

Therdsak Thaveeteeratham, head of research at Asia Plus Securities, said yesterday that the SET index target at his company has been lifted to 662 from 646.

The move followed the higher-than-expected earnings of listed companies in the second quarter, he said.

The new target represents a pricetoearnings (P/E) ratio of 12 times.

Shares yesterday closed 0.35 per cent higher at 655.46. Turnover was moderate at Bt17.53 billion.

He said funds flow would slow down in the rest of this year as several countries have planned to issue bonds while local political risk has been elevated.

Adisak Kammool, vice president of KGI Securities (Thailand), said his firm has revised its SET index forecast to 730 from 500.

The new estimate is based on listed companies' 2009 net profit growth of 15 per cent to Bt350.15 billion, the first advance in four years.

The energy sector, estimated to deliver an earnings jump of 59 per cent this year, is the major driver, he said.

In the first half, 471 of the 500 securities listed on the Stock Exchange of Thailand and the Market for Alternative Investment faced a 32percent yearonyear drop in net profit to Bt208.51 billion.

Their secondquarter earnings, however, fell at a slower pace of 17 per cent on year.

Kim Eng Securities (Thailand), the nation's biggest brokerage, raised its yearend target for the SET to 750 from 700 on expectations the economic recovery will boost corporate earnings.

"Thailand's weathered the economic slowdown extremely well," George Huebsch, Kim Eng's head of research, was quoted by Bloomberg as saying. "Earnings should improve further over the next several quarters with the economic recovāļŒery," he said.

Huebsch recommends shares of Kasikornbank, the country's thirdbiggest lender, and developer Supalai, as a rebound in consumer spending will boost demand for loans and residential properties.

He also favours Tipco Asphalt and Siam Cement because the government's increased spending will raise sales of building materials.

Tisco Securities, however, was the pessimist among the four brokerages.

It said in a note that the current market level of 650660, representing core operating earnings of 11.5 per cent and prospective earnings growth of about 20 per cent for 2010 or gross domestic product of around 3 per cent, is more expensive than its assumptions of core operating earnings at 12 per cent and 1 per cent in 2010 GDP growth.

The SET has experienced a bear market rally six times since 1975 with an average magnitude for the rally of 67 per cent and an average duration of about six months. The subsequent correction after the rally was normally in the range of about 1015 per cent.

The current bear market rally resulting from the global financial crisis has resulted in a 54-percent rise for the SET over a fivemonth period, leaving a 13percent gap to match the average, the brokerage said.

"Although we underestimated the magnitude of this rally, we stand by our scenario of a W-shaped market recovery and recommend that investors wait for a market pullback before adding to their positions," it said.

It recommends investors buy into stocks that are expected to pay good interim dividends for their conservative portfolio. These include Thai Vegetable Oil (TVO), Supalai (SPALI), Thai Plastic and Chemicals (TPC), Siam Makro (MAKRO), LPN Development (LPN) and Advanced Info Service (ADVANC).

The SET said in a statement that 76 companies listed on both the SET and the MAI have declared dividends of Bt60.09 billion, representing a 2.40percent dividend yield, for the first half.

PTT, ADVANC, Shin Corp (SHIN), PTT Exploration and Production (PTTEP) and Siam Cement (SCC) were the SET's highest payout stocks for the first six months.

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