The Stock Exchange of Thailand (SET) index ended lower in November after hitting the year's high of 1,506 points the month before. In the second week of November, the index broke below the 1,470 support level and drifted sideways down below 1,440 and 1,430 points.
The moving average convergence/divergence technical indicator also crossed below the zero line, confirming the bearish outlook. Among the factors affecting sentiment:
US monetary policy: The upcoming Federal Open Market Committee (FOMC) meeting on Dec 17 and 18 is expected to result in another 25-basis-point interest rate cut. However, the United States economic recovery trend, including GDP growth of 2.8% and declining unemployment, coupled with potential inflationary pressures from Trump administration policies, could influence the Fed's decision.
Domestic economic recovery: Thailand's third-quarter gross domestic product (GDP) growth exceeded expectations at 3.0%, driven by government stimulus measures such as debt relief and cash handouts. Reduced political tension has also provided the government with greater flexibility to carry out economic policies.
Chinese economy: Chinese equities have shown some signs of recovery, fuelled by speculation about the outcome of significant economic discussions in December. Additional stimulus measures are anticipated to lift economic growth, particularly after the disappointment that followed previous announcements. However, a threat by US President-elect Donald Trump to impose 10% tariffs on all Chinese imports could negatively impact exports.
Geopolitical risks: Despite a ceasefire agreement between Israel and Lebanon, ongoing regional tensions in the Middle East, coupled with the unresolved Russia-Ukraine war, continue to pose significant geopolitical risks that could lead to increased market volatility and pressure on oil prices.
December outlook
The SET index is likely to continue its downward trend. Support levels are seen at 1,400 and 1,380 points, also coinciding with the 200-day simple moving average. Resistance levels are at 1,450 and 1,470 points.
In terms of investment strategy, the SET index is likely to remain volatile. Given this uncertainty, a short-term trading strategy can be effective. This approach focuses on stocks with strong growth potential and high dividend yields, particularly when the index is near support levels or shows signs of an uptrend. Our stock picks for December are:
- AAV (Buy, target 3.60 baht): Our valuation for the parent of the budget carrier Thai AirAsia is based on a 2025 estimated core price/earnings (PE) ratio of 15.5 times, positioned at 1 standard deviation (SD) below the pre-Covid average during profitable years. AAV is expected to outperform the SET index in the fourth quarter of 2024 and the first quarter of 2025, driven by robust growth projections.
- CENTEL (Buy, target 44 baht): CENTEL is projected to lead the hotel sector in terms of earnings growth in 2025, with a forecast net profit of 1.7 billion baht, representing an 18% year-on-year increase. This growth will be driven by the absence of significant expenses incurred in 2024 and the full-year contribution of two renovated hotels in Phuket and Pattaya, which are expected to resume normal operations between late November and early December 2024. Our valuation is derived from a discounted cash flow (DCF) analysis, using a 7.6% weighted average cost of capital (WACC) and a 2.5% terminal growth rate.
- CRC (Buy, target 45 baht): Our valuation for Central Retail Corp is based on a 2025 PE of 27.5 times, positioned at 0.5 SD below the three-year historical average. While the current PE of 20 times estimated 2025 earnings offers a significant discount, we project strong growth prospects in 2024-25.
- MAGURO (Buy, target 22.50 baht): Our positive outlook on the restaurant operator is driven by the strong growth potential in the Thai full-service restaurant sector and its relatively low penetration rate compared with competitors. The stock's valuation remains attractive, particularly given its robust earnings growth outlook for 2024–25, with profits expected to reach record highs.
- SISB (Buy, target 40 baht): The international school operator is expected to deliver impressive growth in 2024, with a projected net profit of 914 million baht, reflecting a 35% year-on-year increase. Key growth drivers include increased enrolments, approaching the 4,600-student target (up 10% year-on-year), and a 5% tuition fee increase. Our target price is based on a DCF analysis with a 7.2% WACC and a 3% terminal growth rate.
- SPRC (Buy, target 8.50 baht): The oil refiner is projected to report a net profit of 2.5 billion baht in 2024, a significant recovery from the loss of 1.2 billion in 2023. This turnaround is driven by improved gross refining margins, supported by favourable crack spread dynamics and operational efficiencies, as well as higher crude throughput, reflecting increased volumes of crude oil processed compared with the prior year. Our target price is based on a 2025 price to book value of 0.88 times, which is 1.8 SD below the five-year historical average. The current stock price offers a dividend yield of 3.7% for the next two years.
- TOG (Buy, target 12 baht): Our valuation for the optical lens maker is based on a 2025 PE of 12 times, which is 1 SD below the five-year historical average. Key catalysts include the depreciation of the baht, the expansion of Rx lens production capacity, and the progress of the new factory investment plan scheduled for the first quarter of 2025.