The SET index rebounded from its monthly low of 1,352 points in September, reaching a 10-month high of 1,471 by the end of the month. The breakthrough above 1,430, which has been a key resistance level since November 2023, indicates a positive trend.
On the technical side, the weekly moving average convergence/divergence has crossed back into positive territory, suggesting a medium-term uptrend, though a potential short-term pullback is possible. Among the key factors influencing the market:
US rate outlook: Following the 50-basis-point interest rate cut in September, the US Federal Reserve is expected to continue easing when it meets on Nov 17. While economic data shows a slowing economy, recessionary indicators are not yet apparent.
Domestic economic factors: Thailand's equity market is expected to benefit from political stability, stimulus measures and the upcoming Bank of Thailand Monetary Policy Committee meeting on Oct 16, which could set the direction for interest rates. The debut of Vayupak Fund units this month and the impact of its investments will also contribute to market optimism.
Chinese economic stimulus: Regulators in China have cut banks' reserve requirement ratio by 50 basis points, which has freed up about 1 trillion yuan for lending. They also announced measures to spur the capital and property markets, as well as outright cash handouts to about 4.5 million poor people. Following the moves, the CSI 300 index in Shanghai surged by more than 10%. Chinese arrivals to Thailand are expected to increase during the country's Golden Week holiday this week.
Geopolitical concerns: The Mideast is on a knife edge, with Israel reportedly discussing whether to bomb Iranian oil facilities in retaliation for Tehran's missile strikes. The latter followed Israel's assassination of the Hezbollah leader in Lebanon. A peaceful resolution could positively impact global equities, but may negatively affect gold and oil prices.
OCTOBER OUTLOOK
The SET index is projected to continue its upward trend in October. However, a temporary dip is likely, with the recent 1,430 resistance level now serving as a key support. The next support downward is at 1,410, while resistance levels are seen at 1,490 and 1,530 points. We recommend focusing on domestic plays, particularly retailers that are well-positioned to benefit from the government's cash handouts. Our picks for October are:
- BAFS (Buy, target 22 baht): Our valuation for the aircraft fuel supplier is based on a discounted cash flow (DCF) analysis and is supported by key catalysts, including the signing of an oil transport pipeline contract to the eastern region of the country, the arrival of the peak tourist season for air travel, and a potential downward trend in interest rates.
- COCOCO (Buy, target 15 baht): Our valuation for the coconut processor is based on a 2025 price/earnings (PE) ratio of 19 times, which is 0.4 standard deviation (SD) above the sector average of 17.3 times. This premium reflects the company's strong product positioning, global brand recognition and potential for rapid market expansion.
- KBANK (Buy, target 176 baht): Our target for the bank is based on a 2025 price-to-book value (PBV) of 0.7 times, which is 1.0 SD below the 10-year average. At its current trading price of 0.65 times PBV, the stock offers a significant discount compared with both the sector average (0.7 times) and key rival SCB (0.8 times).
- MAGURO (Buy, target 21.40 baht): Our valuation for the restaurant operator is based on a 2025 core PE ratio of 22 times. The stock is currently trading at a discount of 17.8 times compared with the sector average of 19.5. Among our covered quick-service restaurant stocks, MAGURO stands out for its significant growth potential, while earnings are believed to have bottomed out in the second quarter. The shares have an attractive valuation given its potential for record-breaking profits in the coming years.
- PTTEP (Buy, target 180 baht): Our valuation for the oil and gas exploration arm of PTT Plc is derived from a DCF analysis, using a weighted average cost of capital (WACC) of 6.7% and no terminal growth value. The long-term Dubai crude price assumption is $65 a barrel. The current share price offers an attractive dividend yield of 7% for the 2024-25 period.
- SFLEX (Buy, target 4.80 baht): Our target price for the packaging maker is based on a 2025 PE ratio of 13.5 times, which is 1.25 SD below the four-year average. This implies a price/earnings-to-growth ratio of 1.0 times. The stock is trading at a discount of 1.75 SD below its historical average PE, making it more attractive compared with the sector average of 16.0 times.
- SISB (Buy, target 40 baht): Our valuation for the international school operator is based a DCF analysis, using a WACC of 7.2% and a terminal growth rate of 3%. Key catalysts include the expected increase in student enrolment and the annual tuition fee adjustment.
