Tactical Screening: Thailand

Screening for potentially undervalued securities on Thailand Stock Exchange

We intend to employ a similar equity screening methodology that was undertaken for the Malaysian market (See Link) to screen for potentially undervalued securities listed on the Thailand Stock Exchange (SET). Recap, our screening methodology is predominantly based on the formulae of justified price-to-earnings (P/E) and price-to-book (P/B) ratios.

As shown below, for earnings growth rate of not less than 2.0% and a return on equity (ROE) of not less than 10.0% as well as a required discount rate of 8.0%, we should expect the trading P/E and P/B of the screened security to be at least 13.0x and 1.3x respectively. If the screened security is trading at P/E of below 13.0x time and P/B of less than 1.3x, the screened security may be potentially undervalued based on the justified formulae.

TH_Oct16_Computation.png

In addition to key parameters such as beta, P/E, ROE, net income growth rate and P/B, we have included additional criteria such as current ratio and leverage ratio to tighten the screening process. The results of our desktop screening are shown below (using CIMB iTrade stock filter):

TH_Oct16_Rate.png

TH_Oct16_GP.png

HFT: Hwa Fong Rubber (Thailand) Public Co. Ltd. engages in the manufacture and distribution of tires and tubes for vehicles. Its products include bicycle, motorcycle, all-terrain vehicle, and industrial tires. The company was founded on June 2, 1987 and is headquartered in Samutprakarn, Thailand (See link).

PRAKIT: Prakit Holdings Public Co. Ltd. is engaged in advertising production, media agency, investing business and providing the management service to subsidiary and associated companies. It operates through three segments: Service, Agency, and Investment. The company was founded in 1986 and is headquartered in Bangkok, Thailand (See link).

SPC: Saha Pathanapibul Public Co., Ltd. engages in the business of consumer goods distribution and property development business. It operates through three divisions: Household Products, Food Products, Personal Care Products and Products for Children. The company also engages in the business of investment in real estate projects and rents office buildings. Saha Pathanapibul Public was founded by Thiam Chokwatana in 1942 and is headquartered in Bangkok, Thailand (See link).

STANLY: Thai Stanley Electric Public Co., Ltd. engages in the manufacture and sale of automotive bulbs, lighting equipment, molds and dies and product designs. Its operations are carried out through the following plants: Bulb Plant, Lamp Plant, Die and Mold Plant, and Research and Development Center. The Bulb Plant manufactures automobile bulbs. The Lamp Plant includes the production of automotive lighting equipment, plastic injection process, and coating and assembly process. The Die and Mold Plant manufactures molds used to produce parts for electrical equipment. The Research and Development Center is responsible for applying the latest technology to the research and development activities needed to constantly improve product design. The company was founded on May 30, 1980 and is headquartered in Pathumthani, Thailand (See link).

The above analysis is a high-level desktop analysis and it does not substitute the need for a detailed fundamental analysis of the above mentioned listed companies.

DISCLAIMER: THIS IS A PERSONAL BLOG AND SHALL NOT BE RELIED IN WHATSOEVER MANNER BY ANYONE. ALL ARTICLES CONTAINED IN THIS SITE ARE FOR INFORMATION AND ILLUSTRATIVE PURPOSES ONLY AND DOES NOT PURPORT TO SHOW ACTUAL RESULTS. IT IS NOT, AND SHOULD NOT BE REGARDED AS INVESTMENT ADVICE OR AS A RECOMMENDATION REGARDING ANY PARTICULAR SECURITY OR COURSE OF ACTION. SOURCES USED IN THIS SITE HAVE NOT BEEN INDEPENDENTLY VERIFIED FOR ACCURACY, COMPLETENESS AND TIMELINESS. YOU SHOULD SEEK INDEPENDENT AND PROFESSIONAL INVESTMENT ADVICE IN REGARD TO YOUR INVESTMENT DECISIONS. THE AUTHOR MAY HOLD POSITIONS IN THE SECURITIES OR RELATED INSTRUMENTS MENTIONED ABOVE.

Author: Ken Utau

Markets Observer + Food Lover

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