|
||
|
Signs of maturity on the SET of sentiment-driven retail punters whose buying and selling decisions often defy fundamental analysis.  But 2005 may well have been a turning
point, according to Sharad Apte, adirector
of LEK Consulting.Total shareholder returns for the SET in 2005 equalled 20%, compared with -1.66% the previous year and 210.7% in the banner year 2003. ‘‘We’re possibly coming out of the valley. First we had the euphoria of Thaksinomics in 2003, then a retrenchment,’’ MrApte said. ‘‘Now we’re becoming more dividend-driven.The US markets are now mostly a dividend environment, andone would expect that to occur eventually in Thailand, with investors focusing more on yield stocks.’’ A glance through the 2005 Post/LEK/ PYI Consulting Shareholder Scorecard shows 19 out of 27 sectors posting positive shareholder returns, although only eight actually outperformed the market.  The concept of total shareholder return
(TSR) is at the heart of the Shareholder
Scorecard, and links the two factors that
ultimately define the value received by
investors from aninvestment—dividend
payments and capital gains.With the SET index up 6.8% for 2005 overall, thebulk of returnsstemmedfrom dividends.According to the SET, net profits of listed companies rose13% to 537.4 billion baht,with 393 companies posting profits and 63 losses. The largest companies that comprise the SET50 index accounted for 71% of total net profits reported, with gains of 11% from 2004. Dividend payments last year rose by 8% overall, with 216 companies paying dividends and the dividend yield of the entire market averaging 4%. Leading the table were three medium sized sectors — health care, food and beverages and agribusiness. All posted TSRs above 50%, handily beating larger, more liquid sectors such as banks, property, construction materials and communications, which underperformed. Peter Walter, country manager of LEK Consulting, noted that while the food and agribusiness industries both enjoyed strong cash flows last year, both sectors had now reached a stage of maturity in terms of ability to offer value toinvestors. ‘‘I don’t think that we will see tripledigit TSRs again for some time,’’ he said. MrWalter contrasted the performances of the market at the beginning of 2005 andthe year’s end,when political factors began to affect sentiment and earnings. ‘‘Over the past five to six months [of 2005], you saw much more caution due to political uncertainties. The effect on investment and cash flow also hurt TSRs.’’ Pathom Yongvanich, the managing partner of PYIConsulting, said the global pickup in commodities prices clearly helped the food and agribusiness sectors. ‘‘Palm oil, sugar and rubber prices all roselast year,which benefited producers in the sectors,’’ he said. Mr Pathom said the strong returns from health care reflected solid corporate performance. ‘‘Medical tourism is clearly pickingup,and the hospitals have a good strategy for growth,’’ he said. ‘‘Companies such as Bangkok Dusit Medical (BGH) or Bumrungrad(BH) also boast very solid, strong management teams.’’ Mr Apte agreed, adding that the high gains from health care were the fruit of years of restructuring and consolidation in an industry that had long been known for quality, but was over supplied and burdened by US dollar debt. ‘‘For all of the efforts by the government to promote the fashion industry, [health care] is a great industry right on the doorstep,’’ he said. One slight surprise in 2005 was petrochemicals, which posted nearly a 20% TSR loss, compared with a 47% gain over three years and a 41% gain over five. Mr Pathom noted,however, that losses in the sector were largely dictated by The Aromatics, which accounts for about 40% of the sector’s capitalisation. ATC’s one-yearTSRof -50.5%wasa sharp turnaround from the 81% gain over three years and 59% over five. ‘‘The market sees a cyclical downturn for the sector, and pushed down the [ATC] stock, even though management is trying to push a long-term view.’’ Mr Walter agreed, saying companies in cyclical industries had to be proactive to help reduce share-price volatility and reinforce their long-term strategy. PTT Chemical, formed last year from the merger of National Petrochemical and Thai Olefins, is one example of such a strategy, where exposure to upstream and downstream operations can help mitigate cyclical factors. MrApte notes that while current management trends are against conglomerates, a case can still be made for vertical integration and diversification. ‘‘Certainly, if you are a company that wants to make both cookies and petrochemicals, there is no real case for diversification,’’ he said. ‘‘But with vertical integration, where you own your own value chain, certainly can generate value for stakeholders.’’ Mr Pathom said the value proposition for conglomerates varied by sector and company. Telecom giant Shin Corp, he noted, historically traded at a 25% ‘‘conglomerate discount’’ from the sumof its parts, a discount assigned by themarket. The agribusiness conglomerate CP Group,however,follows a different model, listing individual companies on the SET. And while PTT is pursuing a strategy of vertical integration, Siam Cement has been focused on shedding non-core operations ever since the 1997 crisis. For 2006, both LEK and PYI are cautiously optimistic. ‘‘Economic uncertainties will affect the market,’’ Mr Walter said. ‘‘Political considerations,meanwhile, have already delayed free-trade talks and could affect the baht, while uncertainties in the US and China have ramifications for Thai exporters.’’ Mr Pathom said interest in mergers and acquisitions was very high as the relative returns for investors remained attractive. ‘‘While developed markets might see margins of 8% to 10%, you have to compare that with the 20% to 30%margins here. The difficulty, though, is in getting the deal done.’’ Mr Apte expects mid-sized sectors, such as agribusiness or health care, to play an increasingly important role in the SET. At the same time, while rising interest rates and economic uncertainties could derail the property market, and by extension, hurt the banking, building materials and construction sectors. ‘‘Ultimately, though, investors should not necessarily focus on one-year returns. You can manipulate results over one year,’’ Mr Apte said. ‘‘ You get a much better sense of a companyfromthefive-and10-yearTSRs. Good management teams are able to create value over the long term.’’
|
| © Copyright The Post Publishing Public Co., Ltd. 2006 Privacy Policy Comments to: Webmaster Advertising enquiries to: Internet Marketing Printed display ad enquiries to: Display Ads Full contact details: Contact us |