Thailand's stock market has entered a new era in terms of share valuation, with a lower price-to-book (P/B) ratio predicted, says SCB Securities (SCBS).
Companies use the P/B ratio to compare a firm's market capitalisation to its book value, according to Investopedia. Book value is also the net asset value of a company calculated as total assets (such as patents and goodwill) minus intangible assets (liabilities).
"The share valuation during the crisis will decline because of a drop in companies' profit, except for four businesses," said SCBS managing director Sukit Udomsirikul.
Businesses where the P/B ratio is expected to see a significant drop are property (from 1.3 times to 0.7 times), construction (from 1.1 times to 0.4 times), hospitality (from 1.2 times to 0.8 times) and media (from 3.1 times to 2.6 times).
Aggregate earnings per share for SET-listed companies is forecast at 62.57 baht, down 27% year-on-year as the pandemic has dented earnings of companies and exacerbated the economic slowdown, said Mr Sukit.
The four businesses shielded from the lower P/B ratio are healthcare, retail, food and ICT, according to SCBS.
SCBS upgraded the P/B ratio for four businesses, covering healthcare (5.7 times from 4 times at current valuation), commerce (5.4 times from 4.1 times), ICT (3.2 times from 2.3 times) and food (2.2 times from 2.0).
Thailand's economic woes are projected to reach a trough in the second quarter and recovery momentum is anticipated in the second half, said Mr Sukit.
Full-year GDP will contract as the services sector, notably tourism, which contributes more than 10% of the country's GDP, will take some time to recover, he said.
"The SET index is expected to move sideways in the second half and has a high possibility to drop near the end of this year due to external factors, especially US politics," said Mr Sukit.
The Thai cabinet reshuffle is the main domestic factor warranting a close watch as the move will affect investor confidence, especially policies related to economic stimulus and infrastructure development, he said.
If new economic stimulus measures cannot be rolled out within this quarter, the economy, particularly the tourism industry, will be affected as a whole, said Mr Sukit.