UOBKH highlights domestic reopening, global recovery plays as Thai corporates post strong Q2 results

FOLLOWING a strong showing by Thai corporates over the latest quarterly reporting season, UOB Kay Hian (UOBKH) is maintaining its end-2021 Stock Exchange of Thailand target of 1,660 with a preference for domestic reopening and recovery plays.

This comes as stocks under its coverage more than doubled year on year in aggregate earnings over Q2 of 2021 to exceed UOBKH's estimates by 8 per cent, said the research house in a report on Wednesday.

Based on its analysts' observations, the 110 per cent on-year surge in aggregate net profit has demonstrated continuous improvement from the low level in Q1 2020, with large-cap sectors such as the banking, commerce, energy, and petrochemical sectors performing "much better than expected".

However, they noted that transportation largely missed expectations with larger net losses, while the hotel segment continued to report net losses due to both sectors' reliance on foreign arrivals.

While UOBKH is expecting aggregate earnings to weaken 21 per cent in H2 of 2021 on a half-on-half basis due to lowered estimates for certain sectors, it projects a year-on-year surge of 60 per cent due to a strong rise in energy, petrochemicals and construction services.

"Earnings are expected to continue rising 10 per cent for 2022 largely due to strong earnings growth in commerce, property, and utility. The hotel and transportation sectors are likely to post a net profit in 2022 following net losses in 2021," said its analysts.

"We recommend a 'buy the dip' strategy as we believe more vaccines would likely be distributed to local residents throughout 2021. Although we do not expect a complete economic reopening to occur in 2021, a gradual and partial reopening announcement will be positive for the stock market going forward," they added.

As such, UOBKH is recommending stocks which stand to benefit from the Thai domestic economy and a more resilient global economic rebound. Top "buy" picks include Singtel's Thai subsidiary Advanced Info Services, hospitality group Minor International, electronic parts producer KCE Electronics, as well as subway line operator Bangkok Expressway and Metro.

The research house is "overweight" on the banking, construction services, electronics, energy and petrochemical, healthcare and property sectors. It is "market weight" on all other sectors except for media, which has an "underweight" rating given that the TV advertising industry has been hit hard by the Covid-19 pandemic, in its view.