Market Outlook 08 August 2008
SET surprising surged strongly by 4.5% yesterday, led by heavy buying in big caps. However, we expect to see profit taking today in line with regional bourses. We are much more optimistic on the economic front. Lower oil prices have brightened up the economic climate which may improve private confidence and investment in the second half of the year. More importantly, projected robust growth in 2Q08 earnings of the non-financial sector (amid a temporary lull in politics – we expect the Government to try to amend the 2007 Constitution after Aug 18), will improve market sentiment. We expect the index to move sideways up (resistant 710-715 pts), and thus we recommend buying at weakness (support 685-690 pts) focusing on domestic-related stocks benefiting from weaker oil prices – property (AP, PS, QH), contractors (CK, ITD) and petrochemical (PTTCH, PTTAR).
During periods of falling oil price trend, we expect the banking sector to outperform the SET as we project aggregate '08 net profit to rocket 1,145% YoY, partly thanks to lower provision. Also, banks’ core business has improved in line with higher domestic consumption demand, which has pushed SETBANK index higher, up by 16% since mid-July. As oil prices have softened from its peak of $147/bbl, while the SET has risen only slightly by 5.3% (weighed down by energy stocks), stocks of larger banks have rebounded strongly than medium and small ones –KTB has barely changed.
For KTB (fair value of Bt9.80, '09 PBV of 1x), we project its '08 net profit to jump 76% YoY in 2008 and further by 24% YoY in 2009. The bottom line is KTB is quite attractive as it is the only one large bank whose stock is trading below its 0.8x BV (see details in our report dated August 6).
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