Time to focus on undervalued shares
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Time to focus on undervalued shares


The SET Index looks likely to advance this month with an expected trading range between 1,700 and 1,720 points, potentially marking the year’s high. In addition to earnings and dividend plays, investors are cheering the Chinese reopening, which should bode well for earnings growth.

Among the key factors expected to influence trade:

Earnings plays: We forecast aggregate fourth-quarter 2022 net profit of the SET Index to decline 16.9% year-on-year and 1.8% quarter-on-quarter to around 220 billion baht. Earnings reporting is well under way and will continue until Feb 28.

Domestic politics: The government is widely expected to dissolve the House sometime in mid-March, as the Election Commission needs time to redraw electoral boundaries for 400 constituencies. In any case, all political parties are already campaigning flat-out.

Fed signals: The US Federal Reserve raised its benchmark interest rate on Wednesday by a more modest 25 basis points as expected. And while members acknowledged that inflation was slowing down, the market is not certain if this means rate hikes have ended for now.

Oil prices: Global crude prices are holding steady around $80 a barrel and the global economic recovery is gaining some traction. The Opec+ alliance agreed this week to maintain its output cuts of 2 million barrels per day to support prices at what members believe is a reasonable level for producers and consumers.

Ukraine: A new phase of the war is expected to begin as Russia is said to be planning a major offensive while Ukraine will counter with advanced German and US tanks. In any case, prices of coal and gas look set to decrease as spring approaches.


The SET Index will likely continue to consolidate in a range of 1,650 to 1,692 points this month. A break above 1,692 would open an upside towards 1,712. The support levels are pegged at 1,650 and 1,630.

Investment strategy: We recommend investing in stocks with strong growth stories and those that remain undervalued. However, profit-taking could arise in late February as earnings reporting season enters the home stretch. Our stock picks for February:

  • BBL (Buy, target 170 baht): We expect the bank to report 2023 net profit growth of 11% to 32 billion baht, with upside potential to our forecast. We predict loan-loss provisions will decrease and the net interest margin will track rising interest rates. Additionally, we expect the bank to record higher fee-based income and investment gains. The bank will announce its 2023 business targets this month. Our Buy recommendation is pegged to a 2023 price to book value (PBV) of 0.6 times (1.0 standard deviation below its 10-year average).
  • CK (Buy, target 26 baht): Our target price for the construction contractor is based on a sum-of-the-parts valuation. Key catalysts are the upcoming signing of the contract for the Luang Prabang hydropower plant, and the Orange Line light rail project that could add 5 baht to our target price. We expect the company to sign a contract for the Orange Line in the first half of this year.
  • CPALL (Buy, target 75 baht): More tourists will be a key driver for the 7-Eleven operator in 2023. We estimate 2022 net profit of 14 billion baht, up 11% from 2021, with a further 30% jump to 19 billion in 2023. In the first quarter, the wholesale business (MAKRO) is forecast to fare better with same-store sales likely to grow further on the back of growing demand from the hotel, restaurant and catering segment. Same-store sales in the convenience segment are seen as returning to a growth path on the back of the government tax deduction measures.
  • ITNS (Buy, target 5.50 baht): Our target price for the IT network provider is pegged to 2023 price/earnings (PE) ratio of 17 times (a similar level to its peers). There is an upside to our forecast as the company aims to strike an M&A deal in the first half.
  • KTC (Buy, target 68 baht): Our target price for the credit-card company is pegged to 2023 PBV of 4.9 times (0.25 SD above its 5-year average). The stock currently trades at an undemanding 4.1 times 2023 book value, while credit cards and personal loans are forecast to grow significantly after a slowdown in 2020-21. The loan-loss ratio is expected to peak at 9%.
  • PLUS (Buy, consensus target 10.80 baht): The fruit and herbal juice business has experienced growing demand, particularly basil, chia seed and coconut products, in the export market. A key supporting factor is pent-up demand from China.
  • SSP (Buy, target 16 baht): Our target price is based on discounted cash flow, assuming a weighted average cost of capital of 5% and no terminal growth value. A key catalyst for the renewable energy investor is upcoming projects in Thailand and Vietnam. The stock looks undervalued, trading at 10 times estimated earnings compared to the sector average of 20 times.
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