Modest pre-holiday improvement foreseen

Modest pre-holiday improvement foreseen

As we enter the final month of the year, historical patterns suggest we will see active trading in the first half of December, followed by a slowdown in the second half due to extended holidays.

Some investors typically opt to close their positions for the year during this period. Among the key factors expected to influence the market direction:

Index at an advantageous position: The SET Index persisted at a low level throughout November, stabilising around the 1,400 threshold. Though the market faces various challenges, we remain optimistic about the index rebounding to between 1,415 and 1,430 by the end of 2023.

Potential government stimulus: The government's potential actions, coupled with the recent establishment of the Thailand ESG Fund, could significantly influence the performance of the SET Index this month.

Fed meeting: Investors are closely monitoring the upcoming Federal Open Market Committee meeting on Dec 12 and 13 for insights into the US interest rate trend. The Fed is widely expected to leave its benchmark rate unchanged, which would boost global equities.

Lacklustre earnings outlook: Our projections for 2023 indicate a modest aggregate net profit for SET-listed firms of around 1 trillion baht. Coupled with a modest gross domestic product (GDP) uptick of 2-4% according to the Bank of Thailand, this paints a subdued picture. Looking ahead to 2024, the SET Index may be shaped by government stimulus measures and the Chinese economic recovery, potentially dissuading foreign investors.

SEC regulations: The imposition of regulations governing short selling, naked shorts and cash-balance requirements by the Securities and Exchange Commission could temper trading sentiment.

In terms of investment strategy, we recommend considering stocks with robust fundamentals and those resilient to market fluctuations, especially those offering deep discounts.


Sideways movement is expected to persist, with a potential upward trajectory towards 1,460 points, contingent on finding support at 1,366 at the lower end of the sideways channel. Conversely, a breach beneath the support could pave the way for a further move downward, with a potential trough at 1,300. It's worth noting that the 1,330 level may serve as a support. The upside appears limited, in the range of 1,410 to 1,430. Our stock picks for December are:

  • AAI (Buy, target 5 baht): Our target price for the pet food maker is pegged to a 2024 price/earnings (PE) ratio of 21 times, aligning with the pet food sector's average of 23 times. Given that the share price has retreated 47% since the year began, there appears to be limited downside risk, and the outlook for 2024 appears even more promising. This optimism is bolstered by the anticipated contributions from two new original equipment manufacturing (OEM) customers from the United States.
  • BH (Buy, target 300 baht): Our valuation for Bumrungrad Hospital is based on a 2024 PE of 31 times. The shares are currently trading at 22.1 times PE, or 1.25 standard deviations (SD) below the five-year average. Notably, the share price peaked at 250 baht in 2015, with pre-Covid profit reaching 3.79 billion baht. We anticipate limited impact from the Israel-Hamas war on travel and international patients.
  • CPN (Buy, target 82 baht): Our valuation for the shopping centre operator is derived from a sum-of-the-parts approach. The core department store business is valued at 81 baht a share based on a discounted cash flow (DCF) analysis, with a weighted average cost of capital (WACC) of 7.5% and a terminal growth rate of 2.5%. The firm's small residential business represents a value of 1 baht per share with a forward PE of 8 times, matching the property sector's average.
  • CRC (Buy, target 48 baht): Our target price for Central Retail Corp is pegged to a 2024 PE of 33 times, positioning it 0.25 SD above the three-year average. CRC shares are currently trading at an undemanding PE of 27 times, and we anticipate solid growth in 2024. Government stimulus measures could provide an upside to our forecast.
  • PRM (Buy, target 7.70 baht): Our valuation for the provider of floating storage and offshore oilfield services is grounded in a 2024 core PE of 10 times, positioning it 1.0 SD below the five-year average. Currently, the shares are trading at an undemanding 6.7 times 2024 adjusted PE (-1.5 SD).
  • PTTEP (Hold, target 180 baht): Our valuation for the exploration arm of PTT Plc is based on a DCF analysis, using a WACC of 6.7% with no terminal growth value. Our long-term Dubai crude price assumption remains stable at $65 per barrel. With a solid performance amid attractive valuation, there exists potential for a rating upgrade.
  • SISB (Buy, target 40 baht): Our valuation for the international school operator is grounded in a DCF analysis, with a WACC of 7.1% and a terminal growth rate of 3%. Catalysts include enhanced wealth and an influx of expat, supporting a positive outlook.
  • SYNEX (Buy, target 12 baht): Our target price for the IT product distributor is pegged to a 2024 adjusted PE of 18 times, or 0.5 SD below the five-year average. With the shares now trading at an attractive 15 times estimated 2024 adjusted PE (-0.75 SD), and with the price having retreated 20% for the quarter to date, this is an opportune moment for increased investment. We project a robust 33% growth in core earnings per share for 2024.
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