Thai: Thai Market Strategy-Re-opening picks and potentially underpriced stocks

  • Re-opening theme revisited
  • Screening for potentially underpriced stocks
  • Our base-case YE21 SET target is 1605

COVID vaccination progress has been slow in Thailand to date—only 3.2% of the population as of late May. But the pace should accelerate in June-July, when local Astra Zeneca production ramps up and bigger quantities of other vaccines are imported (see Figure 2 for the vaccine rollout plans). Stocks that dropped during the past month in reaction to the escalating COVID-19 outbreak (chiefly in the Transport, Tourism, Retail, Industrial Estate, and Bank sectors) could see decent rebounds over the next two months. Commodity plays (such as Chemical, Refinery) are also preferred, as a global demand recovery is in play.

Our base-case YE21 SET target is 1605 (a 10% discount to our YE22 SET target of 1784, pegged to a PER of 18.2x, EPS of 98). Our bull-case target is 1694 (a 5% discount to our YE22 SET target); it assumes a stronger macro-economic recovery in 2H21 and next year and a rising bond yield environment.

Re-opening theme revisited

The COVID-19 outbreak during April-May has slammed plays that are exposed to slowing business activity. Many stocks affected by this outbreak have slid by 15-20%. Slowing new infections, growing confidence over the vaccination rollout, and anticipation of a macro-economic recovery afterward could make for decent price rebounds among stocks that have been sold down during the current COVID outbreak, chiefly in the Tourism, Transport, Industrial Estate, Retail, Restaurant, and Media (Out-of-Home) sectors (see Figure 1 and the table on the right-hand side of this page).

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