Market Talk Investment Strategy Research Division

English research reports are a rough translation of our Thai-language research products. It is produced primarily with time efficiency in mind, so that English-English research reports are a rough translation of our Thai-language research products. It is produced primarily with time efficiency in mind, so that English-reading clients can see what the main recommendations are from our Thai-language research team. Given that this is a rough-and-ready translation, Asia Plus Securities Company cannot be held responsible for translation inaccuracies.

ASIA PLUS SECURITIES CO.,LTD. Broker#8. Research Protection @Copyright 2015

The Thai language research reports and information contained therein are compiled from public data sources and our analysts' interviews with executives of listed companies. They are presented for informational purposes only and not to be deemed as solicitations to buy or sell any securities. Best attempts have been made to verify information from these vast sources, but we cannot guarantee their accuracy, adequacy, completeness and timeliness. The analyses and comments presented herein are opinions of our analysts and do not necessarily reflect the views of Asia Plus Securities.

SECURITIES CO.,LTD. Broker#8. Research Protection @Copyright 2015"

Investment Strategy

Thursday, May 7, 2020

The inflation rate contracted for the second consecutive month, so Thailand is at risk of deflation, which may result in a decline in prices of goods and services as well as asset value of many industries. SET Index today is still expected to undergo correction. Today we sell DOHOME and RATCH to take profit and switch to BCP. Top picks are BCP(FV@B22), DCC(FV@B2.28), and STA(FV@B14).

SET Index 1,278.63 Change (pts) -23.03 Market Cap (Million B) 51,385

Watch SET Index signal today

While COVID-19 infection has slowed down, US-China trade war tension has re-ignited. On Tuesday, SET Index fell in line with global stock markets and closed at 1,278.63 pts, down 23.03 pts (-1.77%) with trading value of B51.3bn. The market was mainly weakened by 1) energy plays, especially PTT (-1.41%), PTTEP (-0.59%), BGRIM (-3.91%), and RATCH (-1.88%), 2) transportation plays, led by AOT (-2.81%), BEM (-2.65%), and BTS (-1.74%), and 3) commerce plays, led by CPALL (-1.76%), BJC (-5.59%), and CRC (-3.38%), as well as other big-cap stocks, e.g. IVL (-6.09%), AWC (-5.45%), and SCC (-2.31%).

The Ministry of Commerce reported Thailand's inflation rate in April 2020 of -2.99%yoy, contracting for the second consecutive month from -0.54% in March. Thailand is getting closer to a deflation (three consecutive months of negative inflation rate). During deflation, product and service prices in many industries tended to fall (especially transportation, property, and media). Considering a deflation and the economic deceleration at present, investors have to be cautious about many industries, especially those with a bigger share of fixed cost (e.g. electronic part, auto, petrochemical, and petrol station). Some industries would suffer from a decline in asset prices, especially property developers (both for sales and for rental). Investors still have to watch the government's economic stimulus measures, especially household consumption boost through cash handout for people affected by the COVID-19 pandemic, which would gradually inject money into the economic system. However, these measures would boost the economy for only the short term as long as businesses cannot resume normal operation. SET Index today is still expected to undergo correction, but having limited downside. For our portfolio today, we sell DOHOME and RATCH (5% of portfolio each) to take profit and switch to BCP, which is still much laggard compared with the sector. Top picks are BCP, DCC, and STA.

Thailand's inflation rate negative, deflation likely, affecting property, auto, part plays

The Ministry of Commerce reported Thailand's headline inflation rate in April 2020 of -2.99%yoy, contracting for the second consecutive month mainly due to a drop in prices of energy goods (-29.31%, in line with a plunge in global crude oil prices) and raw food.

The entire world may probably face deflation in 2020; Thailand may possibly meet the deflation criteria too.

Net Buy and Sell by Investor Type (Million B) Foreign -4,604.90 Proprietary 19.93 Institutional 409.10 Retail 4,175.87

Therdsak Thaveeteeratham Fundamental Investment Analyst on Capital

Market, Technical Investment Analyst License No: 004132

Paradorn Tiaranapramote Fundamental Investment Analyst on Securities

License No: 075365

Takit Chardcherdsak Fundamental Investment Analyst on Securities

License No: 087636

Wanapruk Komonwitayatorn Fundamental Investment Analyst on Securities

License No: 110506

Pawat Pattrapong Quantitative Analyst Assistant

Market Talk Investment Strategy | Research Division

Deflation criteria

Source: European Central Bank (ECB) / ASPS Research

Inflation rates by country

Source : Bloomberg

Thailand is technically not facing a deflation yet, but a deflation is possible for the rest of the year. Crude oil price is now swinging around US$25-26, so 2020 average Dubai crude oil price is anticipated to plummet from the 2019 average of US$62. Meanwhile, the economy of not only Thailand but also the whole world is projected to not rebound yet in 2H20.

A deflation would affect some industries as follows:

Industries suffering from lower prices – In 2009 and 2015, where Thailand showed negative inflation rates for more than six months, some industries showed a decline in prices. Particularly, the transportation industry (especially aviation) was affected by a drop in oil prices. Property developers had to lower property prices like at present. Utility prices (electricity, water, and gas) dropped. Entertainment service and membership fees and prices of entertainment equipment dropped.

Industries with high fixed cost – A deflation is expected to affect industries with high fixed cost, e.g. electronic part, petrochemical, oil, petrol station, auto, and any other production sectors (real sector).

Deflation Criteria Note

Negative inflation rate for at

least three consecutive monthsX

Headline inflation rate has dropped yoy for two months and

dropped mom for three months. Yet, core inflation rate was

+0.41% in April

Prices of many types of products

declining X

In April, prices of oil, transport, raw food dropped, while prices

of many other goods still rose at weaker paces.

Lower expected inflation rate /The BOT cut 2020 headline inflation rate forecast to -1%yoy

from December projection of +0.8%.

GDP declining more severely

than inflation rate while

unemployment rate is rising

/

The BOT estimated 2020 GDP growth of -5.3%, lower than

inflation rate forecast of -1%. Unemployment rate has declined

since the beginning of 2020.

Jan-20 Feb-20 Mar-20 Apr-20Switzerland 0.2 -0.1 -0.5 -1.1 Deflation

Spain 1.1 0.7 0.0 -0.7Potential

DeflationItaly 0.5 0.3 0.1 0.0Portugal 0.8 0.4 0.0 0.1

France 1.5 1.4 0.7 0.4Eurozone 1.4 1.2 0.7 0.4Belgium 1.4 1.1 0.6 0.6Germany 1.7 1.7 1.4 0.8

Greece 0.9 0.2 0.0 -UK 1.8 1.7 1.5 -Canada 2.4 2.2 0.9 -US 2.5 2.3 1.5 -Norway 1.8 0.9 0.7 -

Thailand 1.1 0.7 -0.5 -3.0Malaysia 1.6 1.3 -0.2 -

S.Korea 1.5 1.1 1.0 0.1Philipines 2.9 2.6 2.5 2.2

Indonesia 2.7 3.0 3.0 2.7Hong Kong 1.4 2.2 2.3 -Japan 0.7 0.4 0.4 -Singapore 0.8 0.3 0.0 -

China 5.4 5.2 4.3 -India 7.6 6.6 5.9 -

StatusCountryHeadline Inflation Rate (%yoy)

No Deflation Yet

No Deflation Yet

Potential

Deflation

Market Talk Investment Strategy | Research Division

Change in goods prices (2009, 2015 & present)

Source : Bloomberg

Watch U.S. employment figures

Markets are watching employment figures again. Reported yesterday, U.S. nonfarm employment (ADP) in April 2020 plummeted 20.24 million (versus only 2 million drop expected), down further from 149,000 drop in March.

Reported this Friday, U.S. nonfarm payrolls in April 2020 are expected to plunge 22 million, more severely than 0.7 million drop in March 2020. U.S. unemployment rate in April 2020 is projected to jump to a historical high of 16%, versus 4.4% in March.

Sell in May likely, switching to safe havens. Favor BCP, STA, DCC

From the beginning of May 2020, 71 out of 94 stock markets worldwide have plummeted, considering global index like MSCI ACWI (MSCI All Country World Index) that already fell 2.2%mtd. Meanwhile in Thailand, only one trading day has passed and SET Index already fell 1.77%mtd.

MTD returns of 94 stock markets worldwide

Source: ASPS Research

Headline

Inflation Rate

Core Inflation

Rate

Alcoholic

Beverage &

Tobacco

Non-Alcoholic

Beverage

Healthcare &

Personal

Service

Transportation HousingRecreation &

Education

Jan 09 -0.44 1.58 1.15 4.54 1.55 -14.42 -7.47 0.82

Feb 09 -0.11 1.78 0.57 4.31 1.45 -12.33 -5.10 0.73

Mar 09 -0.22 1.46 0.57 4.53 1.45 -12.64 -5.00 0.73

Apr 09 -0.96 1.04 0.57 4.19 1.44 -12.79 -4.90 0.73

May 09 -3.32 -0.31 5.48 3.74 1.34 -15.20 -4.90 -10.05

Jun 09 -4.01 -0.92 13.33 3.85 1.44 -17.61 -4.99 -10.05

Jul 09 -4.40 -1.12 13.67 3.83 1.23 -18.07 -5.08 -10.14

Aug 09 -1.05 -0.21 13.54 3.28 1.23 -9.97 4.41 -10.23

Sep 09 -0.95 -0.10 13.65 2.63 1.23 -8.85 4.40 -10.14

Jan 15 -0.41 1.64 2.67 1.33 1.34 -6.91 1.33 0.69

Feb 15 -0.52 1.45 2.36 0.88 1.09 -6.43 1.33 0.67

Mar 15 -0.57 1.31 1.52 0.97 1.15 -5.98 1.37 0.59

Apr 15 -1.04 1.02 2.38 0.84 1.02 -7.03 1.38 0.59

May 15 -1.27 0.94 2.03 0.82 1.04 -6.36 0.50 0.75

Jun 15 -1.07 0.94 2.10 0.56 0.93 -6.07 0.49 0.73

Jul 15 -1.05 0.94 2.01 0.49 0.87 -6.95 0.44 1.25

Aug 15 -1.19 0.89 2.01 0.26 0.71 -7.58 0.30 1.27

Sep 15 -1.07 0.96 2.15 0.47 0.89 -7.08 0.12 1.31

Oct 15 -0.77 0.95 2.14 0.47 1.01 -6.50 0.10 1.25

Nov 15 -0.97 0.88 1.78 0.47 0.94 -6.12 0.08 1.26

Dec 15 -0.85 0.68 1.77 0.09 0.85 -5.22 -0.29 1.13

Jan 16 -0.53 0.59 1.78 0.14 0.98 -3.91 -0.28 1.16

Feb 16 -0.50 0.68 10.73 0.12 0.92 -4.80 -0.41 1.15

Mar 16 -0.46 0.75 14.43 0.14 0.78 -4.28 -0.50 1.16

Mar 20 -0.54 0.54 0.02 2.30 0.36 -4.93 0.09 0.47

Apr 20 -2.99 0.41 0.02 2.32 0.16 -9.77 -4.56 0.34

Goods with Rising Prices Goods with Falling PricesInflation Rate

%yoy

Positive return (>0%mtd) in 23 markets

Negative return (≤0%mtd) in 71 markets

Market Talk Investment Strategy | Research Division

Fund outflow has continued in stock markets. Foreigners were with MTD net selling of US$2.97bn in Asian stock markets, including net selling of US$142m or B4.6bn in Thailand.

Monthly foreign trading value in Asia

As of May 5, 2020

Source : Bloomberg / ASPS Research

Fund flow has mostly switched to safe assets. Thailand's one-year bond yield fell to a historical low of 0.62%. SET Index may undergo further correction as fund outflow continues, especially after it already rallied earlier. External factors are still certain (e.g. the new round of trade war), while 1Q20 market earnings are expected to be weak. Selling in May is still likely.

We recommend investment in the following two themes:

1. Stocks with low bet and high dividend yields. We like BTSGIF and DCC for expected dividend yields of 9.4%p.a and 7.4%p.a, respectively.

2. Stock with particular drivers, e.g. STA and BCP.

STA – STA's earnings are expected to grow robustly from 1Q20 on thanks to continuously rising demand for rubber gloves. Moreover, STA would enjoy positive sentiment from the listing of its subsidiary STGT in 3Q20, which would help boost its capital for further business expansion to catch up with growing demand for rubber growth at the right time.

BCP – BCP has rebounded only 3.3% in the past one month. It is still laggard compared with a continuous rise in global crude oil prices earlier. It is still laggard compared with other refinery plays, e.g. SPRC (+23.9%), IRPC (+13.0%), and TOP (+10.2%). It is also much laggard compared with its own subsidiaries in the past one month, compared with BCPG (BCP holds 70.04% stake) that rallied 22.7%.

One-month returns of BCP vs subsidiaries and rivals

Source: ASPS Research

Date Indonesia Philippines S. Korea Taiwan Thailand Total2018 -3,656 -1,080 -5,676 -12,182 -8,913 -31,508

2019 3,465 -240 924 9,377 -1,496 12,030

2020 (ytd) -1,329 -998 -18,631 -18,456 -5,221 -44,635

Jan 2020 1 -164 -165 -751 -562 -1,641

Feb 2020 -340 -179 -3,000 -4,659 -627 -8,804

Mar 2020 -375 -303 -10,544 -12,077 -2,450 -25,749

Apr 2020 -560 -325 -3,964 818 -1,439 -5,470

May 2020 (mtd) -56 -28 -958 -1,788 -142 -2,971

Unit: Million US$

BPC vs subsidiaries BPC vs Refinery Plays

Market Talk Investment Strategy | Research Division

SET vs Sector Return 2019 SET vs Sector Return 2020 YTD

Source: ASPS Research Source: ASPS Research

Market Talk Investment Strategy | Research Division

Market Talk Top Picks

Source: ASPS Research

StartDate Avg. Cost Last

BTSGIF 24-Apr-20 30% 1.32% 7.60 7.70 n.a. n.a. n.a. 9.40

Infrastructure fund with low fluctuation (low beta) and solid

fundamentals. Much cheaper than book value. High dividend yield

expected.

CPALL 24-Feb-20 15% 6.56% 65.46 69.75 80.00 23.20 13% 2.02The government's economic stimulus measures would be launched after

the 2020 budget bill is passed and ready for disbursement in April 2020.

RATCH 21-Apr-20 5% 10.13% 59.25 65.25 75.00 15.35 1% 3.68Enjoying positive sentiment from higher electricity sales in summer and

work from home policy

STA 22-Apr-20 10% 7.67% 12.26 13.20 14.00 20.27Turn

around1.20

2020 net profit is expected to grow significantly, driven by a remarkable

growth in the rubber glove (20% of sales) and the natural rubber

businesses (80% of sales).

RS 13-Apr-20 10% 2.91% 10.30 10.60 13.00 20.75 25% 3.53

1Q20 profit is expected to grow qoq and yoy. Revenue from the

commerce business would grow continuously since RS started selling

through Amarin Channel in February 2020.

PTT 30-Apr-20 10% 0.00% 35.00 35.00 42.00 14.43 -34% 4.57PTT already absorbed negative factors in the energy industry, so it has

favorable valuation, upside, and dividend yield now.

DCC 05-May-20 5% 3.25% 1.54 1.59 2.28 11.86 5% 7.082020 net profit is estimated at B1.12bn, growing 16%yoy thanks to

strict cost control. Dividend yield is expected at 7%p.a.

DOHOME 15-Apr-20 5% 5.71% 7.00 7.40 7.90 20.10 -32% 1.62DOHOME has plummeted since the beginning of 2020. P/E ratio is only 24x (lower than the sector's average of 30x). Great growth in long run.

KBANK 28-Apr-20 10% 0.87% 85.75 86.50 120.00 7.50 -33% 4.62

KBANK already reflects weak earnings in 1Q20 and has favorable

valuation now, with PBV of only 0.49x (lower than 0.8x during Tom

Yum Goong crisis).

Stock Classification

Accumulated returns since beginning of the year

Stocks

Today we sell RATCH and DOHOME to take profit and switch to BCP by 10%

Fair Value

Accumulated returns

Accumulated returns since our recommendation

WeightDividend

Yield

Accumulated

Return

EPS Growth

20F

PER

2020F

Price

On Tuesday, we cut investment in DOHOME by 5% and switched to DCC.

Beta Portfolio

Strategist Comment

10.1%

7.7%

6.6%

5.7%

3.2%

2.9%

1.3%

0.9%

0.0%

-20.0% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0%

RATCH

STA

CPALL

DOHOME

DCC

RS

BTSGIF

KBANK

PTT

Dividend30%

Defensive30%

Growth40%

Dividend Defensive Growth

KBANKRATCH

PTTDCC

STACPALL

RSDOHOME

BTSGIF

Min,0.67

Beta Portfolio, 0.91

Max,1.35

-2.29%-0.92% -0.92%

-19.07%

-1.77% -1.77%

-26.0%

-21.0%

-16.0%

-11.0%

-6.0%

-1.0%

4.0%

YTD MTD -1D

ASPS Portfolio SET Index

Equity Calendar

Research DivisionMay 7, 2020

Monday Tuesday Wednesday Thursday Friday4 5 6 7 8

XD Delist XDASIAN @B0.20 CI-W1 APCS @B0.06

BGC @B0.142 SAWAD-W1 COM7 @B0.80 (spec. div @B0.20)

FPI @B0.045 ECF @B0.0167

ICHI @B0.35 XD JWD @B0.25

KUN @B0.02 AI @B0.12 MODERN @B0.12

KUN 25 existing : 1STD@free CI @B0.0155 NPK @B0.20

LRH @B0.43 COLOR @B0.04 SEAFCO @B0.11

LST @B0.40 HUMAN @B0.06 SSSC @B0.165

MM @B0.058 JSP @B0.005 SST @B0.0111111

NYT @B0.50 LH @B0.40 SST 10 exitsing : 1STD @free

RPH @B0.07 MOONG @B0.26 TC @B0.12

PUBLIC HOLIDAY S @B0.045 PUBLIC HOLIDAY THREL @B0.13 VIBHA @B0.045

(Constitution Day) SMIT @B0.20 (Wisakha Bucha Day) TWPC @B0.134 WHA @B0.0535

SWC @B0.25 WP @B0.05

TPCH @B0.123 ConversionTPOLY @B0.06881 XE AYUD-W1 1.03:1w @B37.853 (final)

UPOIC @B0.025 EFORL-W3 1:1w @B0.60 (final, "SP") DCC-W1 1:1w @B1.15

VNT @B1.40 EFORL-W4 1:1w @B0.50 (final, "SP") JKN-W1 1.125:1w @B13.3333 (final)

WAVE-W1 1:1w @B6.00 (final)

XE New shares tradingCI-W1 1.0172:1w @B2.1628 (final, "SP") JKN 67.498 m shrs (div)

NOK-W1 1.5695:1w @B3.18574 (final, "SP")

SAWAD-W1 1.237:1w @B48.476 (final, "SP")

SMT-W2 1:1w @B2.10 (final, "SP") New listing - MAI > WarrantDIMET-W3 466,923 units

XRVNG 7:1n @B3.75

MOC : Apr-20 CPI MPC meeting

11 12 13 14 15

XD Last Trading day XD Conversion Conversion

ANAN @B0.0265 B52-W2 AEONTS @B2.55 AS-W1 1:1w @B2.00 (final) PDI-W1 1:1w @B33.00

FMT @B1.625 TCJ-W2 CHAYO @B0.0037037

KAMART @B0.07 CHAYO 15 existing: 1STD @free

SENA @B0.171637 XD FNS @B0.10

SYNTEC @B0.05 AP @B0.40

TRT @B0.12 MK @B0.11 XE

TRU @B0.12 NEW @B0.20 B52-W2 0.204:1w @7.355 (final, "SP")

PPF @B0.175 TCJ-W2 1.02:1w @B9.804 (final, "SP")

XR SIRIP @B0.14

UREKA 5:2n @B0.80 SPA @B0.03 XW

SPA 2 existing: 1STD @free CHAYO 3 existing : 1CHAYO-W1 @free

18 19 20 21 22

XD XD Share Delist XD

NOBLE @B2.20 HFT @B0.13 SIMAT-W2 PF @B0.011111111160

WHART @B0.1715 PF 10 existing: 1STD @free

Conversion XEConversion SIMAT-W2 1.1261:1w @13.32 (final) VIBHA-W2 1.00086:1w @B0.999 (final, "SP") XE

TFG-W2 1:1w @B9.50 (final) TH-W2 1:1w @B1.00 (final, "SP")

SAMART-W2 1.014:1w @B14.80 XDDCC @B0.028-0.035 Conversion

NESDB - GDP 1Q/19 RS-W3 1.0047:1w @B12.4419 (final)

25 26 27 28 29

Conversion XR Conversion Conversion

ECF-W3 1.0008:1w @BB4.9958 HYDRO 1:1n @B0.14 CKP-W1 1.0007:1w @B6.00 (final) CI-W1 1.0172:1w @B2.1628 (final)

NOK-W1 1.5695:1w @B3.18574 (final)

SAWAD-W1 1.237:1w @B48.476 (final)

SMT-W2 1:1w @B2.10 (final)

BOT : Apr-20 Trade

Monday Tuesday Wednesday Thursday Friday1 2 3 4 5

Conversion XE XD Conversion

EFORL-W3 1:1w @B0.60 (final) FVC-W2 1.04545:1w @B0.954 (final, "SP") ALL @B0.10 B52-W2 0.204:1w @7.355 (final)

EFORL-W4 1:1w @B0.50 (final) PUBLIC HOLIDAY ALL 3.50 existing: 1STD @free TCJ-W2 1.02:1w @B9.804 (final)

(H.M. The Queen's Birthday )

MOC : May-20 CPI 8 9 10 11 12

XE XR XW Conversion

CRANE-W1 1:1w @B3.00 (final, "SP") YCI 1:2n @B0.80 JMART 9 existing: 1JMART-W4 @free VIBHA-W2 1.00086:1w @B0.999 (final)

RICHY-W2 1.22449:1w @B2.246 (final, "SP")

15 16 17 18 19

XW ConversionUREKA 3 existing: 1UREKA-W2 @free TH-W2 1:1w @B1.00 (final)

22 23 24 25 26ConversionFVC-W2 1.04545:1w @B0.954 (final)

MPC meeting29 30

BOT : May-20 Trade

Jun 2020

May 2020