The SET index in January reached a monthly high of 1,438 points, but subsequently retreated. Breaking below the critical 1,400 threshold, it found support at 1,352, closely mirroring the low from December at 1,354.
The trading range this month is expected to be between 1,350 to 1,380 points. The direction will be influenced by developments in government economic policy, as well as anticipation of the next US Federal Reserve meeting in March.
Investors will continue to focus on earnings plays, likely contributing to market volatility. Persistent concerns include Chinese economic deceleration and escalating tension in the Middle East. Among the key factors expected to influence trade:
Fed speculation: After leaving the benchmark fed funds rate unchanged this week, Federal Reserve officials cautioned they want to see inflation start falling a bit faster before cutting rates. This appears to rule out a rate cut at the March 20 meeting, and most analysts now see a move in May as more likely.
Government economic policy: Any signs of progress on the digital wallet programme will be welcomed by investors, who see retailers as major beneficiaries. But the kick-off date remains up in the air, as officials said there probably would be a delay beyond May.
Earnings plays: The month of February typically brings a flurry of fourth-quarter earnings reports. We foresee a potential sell-off once the earnings season concludes on Feb 29, and stocks start trading ex-dividend.
Global headwinds: Challenges persist from China's economic deceleration and escalating tensions in the Middle East. Nevertheless, any positive developments will help global equities, including the Thai bourse.
FEBRUARY OUTLOOK
The Thai share index is directionless. A potential rebound towards 1,400 or 1,410 is plausible if the market can find support at 1,370. Conversely, a breach of this level could trigger a significant decline towards 1,330 and 1,310. Our stock picks for February:
- BCP (Buy, target 50 baht): Our target price for the energy company is derived from a sum-of-the-parts analysis. Despite a projected quarter-on-quarter improvement in the first quarter of 2024, the recent market reaction to the weak fourth-quarter 2023 earnings outlook has been evident in the share price decline. We see this as an opportune entry point for strategic investors.
- BH (Buy, target 300 baht): Our valuation for the hospital operator is pegged to a 2024 price/earnings (PE) ratio of 31 times. Currently trading at 24.8 times earnings, BH shares are positioned 1.25 standard deviations (SD) below the five-year average. Historical trading data shows the share price peaked at 250 baht in 2015 when net profit reached 3.44 billion baht. Net profit tallied 3.79 billion in 2019, pre-pandemic. Anticipating a limited impact from the Israel-Hamas conflict on travel, and gains from an upcoming hospital launch in Phuket, an expanded customer base is foreseen.
- HMPRO (Buy, target 16.30 baht): The valuation for the home improvement chain is based on a 2024 PE ratio of 30 times. The valuation is notably attractive at -2.0 SD, while we foresee consistent growth throughout 2024.
- MASTER (Buy, target 99 baht): Our target price for the cosmetic surgery hospital is based on a 2024 PE of 45 times, closely aligned with its average since its trading debut. While the stock's valuation is attractive, there is upside potential from recent M&A deals in 2023.
- MENA (Buy, target 2.90 baht): Our target price for the transport company is based on discounted cash flow (DCF) analysis using a weighted average cost of capital (WACC) of 7.7% and a terminal growth rate of 2.2%. The target price aligns closely with a forward PE ratio of 22 times, implying a price/earnings-to-growth (PEG) ratio of 1.0 time. Economic growth serves as a key catalyst for this promising venture.
- MINT (Buy, target 40 baht): Our valuation for the international hospitality group is derived through DCF, using a WACC of 7% and a terminal growth rate of 2.5%. MINT's current valuation stands at 10 times 2024 enterprise value/Ebitda, 2.0 SD below the 10-year average, presenting a compelling opportunity. Considering that peers ERW and CENTEL trade at their historical averages, we see this as an opportune moment to increase positions in MINT.
- MTC (Buy, target 48 baht): Our target price for the lender is pegged to a 2024 price-to-book value (PBV) of 2.9 times. This positions MTC at 0.25 SD below the 10-year average, while the current share price, trading at 2.5 times PBV, presents an enticing opportunity at -2.5 SD.
- PRM (Buy, target 7.70 baht): Our target price for the offshore oilfield storage and services firm is pegged to a 2024 core PE ratio of 10 times, positioning PRM favourably at 1.0 SD below the five-year average. Currently the shares trade at an undemanding 7.7 times 2024 adjusted PE, reflecting a -1.25 SD valuation.
- TOG (Buy, target 14 baht): Our target price for the optical lens maker is pegged to a 2024 PE of 13.5 times. This positions TOG favourably at 1.0 SD below the five-year average. The prospect of securing a new customer by mid-2024 serves as a potential catalyst for further growth.
