Jul 23, 2013

Starhill Global Reit Q2 DPU up 10.2%

Starhill Global posted DPU of 1.19cts for 2Q, up 10.2% from 1.08cts a year ago. Distributions will be recieved on 23 Aug.

Net Property Income (NPI) rose 5.2% while revenue is up 6% y-o-y.

For some reason their corporate website is unavailable but you may read the rest of the announcement here;

Jul 18, 2013

Thai Bev 18 July 2013; do you see a window or a door?

People with an interest in Thaibev would have surely been watching the downward spiral for the past month or so. Looking at the closing of Thaibev today, what do you see looming; a window of opportunity or the exit door?

Today we see a new sell call coming from UBS setting TP of $0.51 as they think current valuations are rich and Thaibev faces multiple risks going forward. They speculate that if F&N's property is transacted at a lower value, Thaibev will have to pay more to TCC. Another risk is regarding the rollback of government rice subsidies and the recent excise tax hike to weaken spirit sales along with a slowdown in broader domestic consumer spending.

I understand that domestic beer Chang is brewed with rice as one of its ingredients, while steamed rice is also used in producing their spirits. Thailand currently stockpiles massive amounts of rice, and when the government has to sell them before it rots, would it not push down the prices of rice, thereby reducing raw material costs? I am unsure what does UBS mean by relating the rollback of rice subsidies to a risk for Thaibev, perhaps readers you can enlighten me?

UBS believes changes to the subsidy will reduce income of farmers/low income workers forcing them to lower their consumption or avoid Thaibev spirits for cheaper alternatives (is that it?). In Jan 2013, Thailand raised the minimum wage throughout the country. Alcohol is also one of the most resilient products during an economic downturn. The only change would be from an expensive to a cheaper alternative alcohol drink between boom and bust years.
The rice subsidy programme definitely will be scaled down or modified to reduce the burden on the Kingdom's budget, but it would not be stopped, as the government is seeking a soft landing from this issue. As long as the scheme helps support the income of the farmers, I believe the farmers would accept a reduction or some changes just so the scheme can be sustained.

In Thai news The Nation, S&P lowered Thaibev to BBB- on higher leverage. I do not really pay attention to what and how they rate; most of them are what we all already know.

Third news today; TCC and Thaibev has applied for and received approval to extend up till 31 Dec 2013 to restore F&N's public float.

Reasons given were;
1. TCC had been in discussion with potential investors but unable to undertake the disposal as market conditions became unfavorable.
2. Ongoing review for alternative strategic options to unlock shareholder value.

It is unfortunate the market took a turn for the worse since May which soured the mood for many companies originally looking for a public listing or fund raising this year. If I read this right, it is a positive thing for shareholders as Khun Charoen did not hastily sell out his precious shares before the deadline, which may have caused the price to plummet and destroy shareholder value instead. He is also heavily invested in the fate of both companies, and the extension will provide more breathing room for the review and the release of public float. Some may read these actions as time-wasting or inefficient, but personally I view it positively with the interests of minority shareholders' being protected.

Lets look forward to tomorrow.

Access to the Thai stock market for retailers

I shall attempt to share some information in response to reader Shuaka's question in my previous post;

1. How do we buy thai stocks in SG
There are a few local brokers that offer access to the Thai market, such as CIMB, POEMS, OCBC, DBSV.

2. Local brokers buy offline and high comm charges
You can place your orders via the online trading platform as you normally do for SGX. You have to expect some delay in your orders getting processed as they are handled manually by the central dealers. By default, your platform's price feed should be about 15minutes delayed. I highly recommend getting access to real time feeds. An economical shortcut will be to load the prices via the Stock Exchange of Thailand (SET)'s website, if you do not mind the hassle.

Here are some snippets of the commission charges;




I use CIMB and I am quite satisfied with it but I suggest readers to ask your current brokers/representatives for more information such as fees, dividend information and then evaluate which mode is best for yourself.

3. Share my thai portfolio
Personally I have been going in and out as the Thai market is more volatile. Most of the stocks are not very attractively priced but the fund outflows produced a dip which enabled me to pick some.

I just attach a snippet from my recent activity, but I am reluctant to share my portfolio because this blog is mainly to discuss and share information, and I am not going to post stuff like the next hot stock or make some stock calls like a prophet. I am interested in the financials and retail counters personally. Please do share your views.

If you have read my previous posts about purchasing TRUE, I have already sold out completely. You can load the chart, I think it has broken the strong resistance which I was hesitant to risk. It should be comfortably above 8.20 today.

Jul 17, 2013

Krung Thai Bank stock reaction to debtor concerns

On Tuesday 16 July, Krung Thai Bank shares dived 3.59% to close at 18.8 baht over the prospect of high loan loss provision as its borrower Saha Farms Group faced financial difficulties.

KTB has a low non-performing loan coverage ratio of 95% in 1Q compared to industry average of 127%. According to Phillip Securities, they reckon KTB may have to increase their provision in 2Q.

Saha Farms Group is one of the leading chicken exporters in Thailand with 22% market share of total exports. Saha Farms export mainly to Japan, England, Germany, and China, to name a few countries.

Saha Farms faces a liquidity crunch due to incurring losses in 2012 due to increased costs of operations from wages to animal feed. Expenses arising from its business expansion activities the past few years coupled with a downtrend in chicken exports came at the wrong time for Saha Farms.

KTB is Saha's largest lender, accounting for about a 5 billion baht credit line. Thanachart and the Islamic Bank of Thailand are the two other major creditors. Saha will allow the banks to control its financial management until debt restructuring is complete and it gets back on its feet. Debt restructuring details are expected to be worked out within the next 2 months.

KTB believes Saha's business remains viable due to its pipeline of current orders, and with an increase in liquidity, it can fix the business. 

I believe this issue with Saha Farms should not affect KTB much and it ended up trading flat today amid a slight recovery, +1.06% to close at 19.00 baht today. The reaction was not big enough to cause a strong dip, thus it did not present an attractive price to increase my holdings.

Jul 7, 2013

Thaibev to spend 1.2Bn baht on sports marketing in 2014

Thai Bev Marketing Co plans to spend 1.2 billion baht (about S$50M) on sports marketing in 2014 to internationalize Chang's image and attract global drinkers. According to Senior Marketing Manager Khun Lathitham, it will be a 20% increase in promotion costs from 2013.

For readers who follow the English Premier League, they would have seen the name Chang proudly emblazoned across Everton's jerseys. Chang beer is also the official sponsor of popular clubs Barcelona and Real Madrid, as well as the Thai national football team. For many sports fans, especially football fans, beer goes hand in hand with watching a game.

Although no plans have been revealed, it is expected that Chang will have a role to play in the Fifa World Cup next year. Thaibev is gunning for accelerated growth by tapping F&N's strong business network in the ASEAN region.

Thaibev has spent money in music marketing via GMM Grammy domestically, and to reach drinkers globally, sports is the right channel. Chang is heavily dependent on marketing campaigns due to the nature of its business.

We can recall that Chang beer was reasonably successful at an early stage in 1995. It was able to enter the market with advertising and public relations and bump the market leader, Singha off to play second fiddle. The low selling price of Chang appealed to the people, who had diminished purchasing power in the economic crisis of 97. By 2000, Chang commanded a market share of about 60%.

The ASEAN Free Trade Agreement threw a spanner in the works as it came into effect in Jan 2010. It eliminates tariffs on imported beer from ASEAN members. It allowed foreign brews better access to the Thai market. Just 2 years before that, in 2008, Chang lost its market leader position to Singha. Chang has since embarked on aggressive marketing campaigns in sports and music activities. Chang currently holds about 30%, behind Singha at about 60%.

To put a sobering note on this, we recall the 1Q13 update on Thaibev's international business. In 1Q13, it reported a decrease in sales of 17% over 1Q12, with the bulk of the decline caused by Scotch whiskey and YLQ spirits in China.

Thaibev will be spending heavily on marketing, not just for Chang, but also for its young line of non-alcoholic drinks under Serm Suk. It is interesting to note that Singha introduced a new line of beer, Leo, as well as into non-alcoholic beverages such as water and sodas back in the 90s as it was losing out to Chang.

We should be expecting tamer results from the upcoming updates because;
1. Some whiskey sales were one-off in 2012.
2. Entertainment budget caps in China.
3. Weak distributor depletion in USA

Beer segment does not enjoy the fat margins enjoyed by liquor, and while the baht is expected to weaken, I hope volatile swings are minimized. Exporters, do not simply benefit from a weak currency, but a stable currency. The strengthening of the baht had been deflated by relentless foreign outflows without the central bank having to intervene much. Hopefully, this and the dollars thrown at marketing will prove fruitful in the coming days for investors.

What is distributor depletion?
Alcohol companies sometimes have sales incentive agreements with their distributors. The distributors may report depletions monthly, which are the total number of cases (of product) sold to retailers excluding non-income generating factors. The alcohol company will then credit the distributors by a set amount of money for depletions during a set period of time.