We expect the SET Index to consolidate in the near term, which is justified after the curtain on earnings reporting comes down and numerous stocks are trading ex-dividend.
An interest rate increase by the Federal Reserve at its March 15-16 meeting, rising Omicron infections and the global economic impact of the crisis in Ukraine will likely put downward pressure on the market.
Positive factors include dividend plays, as stocks of companies with attractive dividends and/or strong growth stories will take centre stage. As well, the SET's aggregate fourth-quarter net profit came in at 270 billion baht, driving 2021 full-year profit to exceed market expectations. We thus believe the index may have priced in the post-outbreak economic recovery.
Among the negative factors, high coronavirus case numbers -- over 40,000 a day when rapid antigen tests are included -- are a concern, but most are mild or asymptomatic. We believe the infection rate will gradually decline, and stocks of companies that have felt the pandemic pain are expected to improve.
As Russia steps up military pressure in Ukraine, it is becoming more difficult to predict the duration or outcome of the crisis. We expect multiple nations will continue to announce more sanctions on Moscow with consequences for the world economy. Some of this may have been priced in already.
MARCH OUTLOOK
The SET Index broke above the 1,700 resistance level in February and hit a high of 1,718 before retreating to a monthly low of 1,656 on the day Russian troops entered Ukraine. We expect the index to remain volatile in March. There is a potential upside towards the previous high of 1,718 if the index breaks above 1,690. However, a failure to breach this level could cause the index to nosedive towards 1,650 and 1,625. Investors are advised to focus on stocks with attractive dividends and/or strong growth stories. Top picks for the month include:
- ADVANC (Hold, Target 220 baht): We forecast 2022 net profit to edge up 3% to 28 billion baht as the mobile market leader's core business bounces back with an improving economy and easing of pandemic concerns. As well, average revenue per user (ARPU) will likely continue to increase alongside a larger proportion of 5G users.
- If the TRUE-DTAC merger goes ahead, the domestic mobile market will become a level playing field for the remaining two major players, and price wars to boost market share will ease. This will drive up ARPU and prompt players to reduce their marketing expenditure.
- JMT (Buy, target 80 baht): We forecast 2022 net profit to soar 61% to 2.3 billion baht. The debt management company's portfolio is predicted to expand by 90% in 2022 based on its budget for bad debt purchases of 15 billion baht per year. This is made possible in part by a larger capital base following the exercise of rights offers, and a potential increase of non-performing loans in the financial system. Revenue from the debt collection services business is estimated to increase 18%.
- JWD (Buy, target 25 baht): We forecast the logistics firm's 2022 core profit will grow a further 26% to a record-high 654 million baht. Its cold storage, logistics and auto-linked businesses will likely remain strong, while profit contributions from TMS and new businesses (ESCO, FuzePost and ALPHA) are expected to increase. Additionally, the company is seeking more M&A opportunities, which could provide an upside to our earnings forecast.
- KCE (Buy, target 80 baht): Our target price for the electronics supplier is pegged to a 2022 price/earnings (PE) ratio of 32 times, implying 0.5 standard deviation (SD) above its five-year average. The stock's valuation is attractive, trading at a 2022 PE of 24.5 times, well below its five-year average of 28 times.
- MINT (Buy, target 40 baht): Our target price for the hospitality group is based on a discounted cash flow method, using weighted average cost of capital of 7% and terminal growth of 2.5%. The stock's valuation looks attractive, trading at an estimated 2022 EV/EBITDA of 14 times or 1.0 SD below its 10-year average, while its peers ERW and CENTEL are trading at their 10-year historical average level and -0.5 SD.
