The SET index extended its decline in January, marking the third consecutive month of reductions following an October high of 1,506 points.
A significant sell-off occurred in the first week of January, confirming a medium-term downtrend. The trading range for the month spanned 89 points, from 1,310 to 1,399 points. Among the key factors expected to influence trade in February:
Thai interest rates: The Bank of Thailand's Monetary Policy Committee is expected to maintain the policy rate at 2.25% when it meets on Feb 26. This reflects expectations of continued economic growth, driven by government stimulus and the tourism season. A stable interest rate environment is generally positive for the banking sector.
Economic stimulus: Government initiatives including the digital wallet and debt relief are expected to lift domestic consumption. The entertainment complex bill, if approved, could attract major foreign investment in the longer term. However, Thailand's adoption of the global minimum tax may impact corporate tax rates, and lower electricity prices could negatively affect the power sector.
US economic policies: New tariffs imposed by Donald Trump's administration pose significant risks to global trade and market stability. These include the 10% tariff on Chinese imports, while a 25% tariff on imports from Canada and Mexico is on hold for now. However, Trump hinted at a universal import tariff starting at 2.5% with monthly increases. These measures could increase market volatility and exacerbate currency fluctuations.
Corporate earnings: While overall fourth-quarter 2024 earnings are expected to show improvement, significant volatility is possible for the results of individual companies during the earnings season. Investors should carefully evaluate individual company performance and its impact on stock prices.
FEBRUARY OUTLOOK
The SET index is anticipated to continue its search for a new bottom, with the next support zone projected at 1,300 to 1,270 points. This would align with the previous bottom observed at 1,273 in August.
A test of this level could potentially trigger a rebound, with upside targets at 1,330 and 1,360. However, if the 1,270 support fails to hold, the next downside target would be 1,240 points.
In terms of investment strategy, be cautious and opportunistic. Volatile market conditions are being driven by external uncertainties and a lack of strong domestic catalysts. Our stock picks in February:
- CK (Buy, target 27.50 baht): Our target price for the construction contractor is derived from a sum of the parts valuation. Key catalysts are the BEM double-deck expressway project expected in the first half, and an ongoing share buyback programme, with only 6% of the shares repurchased so far, providing additional support to the price.
- CRC (Buy, target 45 baht): We estimate 2024 net profit for the retail group at 8.7 billion baht, an increase of 8% year-on-year, with a forecast for 9.9 billion baht (+14%) in 2025. Our valuation is based on a 2025 price/earnings (PE) ratio of 27.5 times, or 0.5 standard deviation (SD) below the three-year historical average. The current valuation of 21 times forecast 2025 earnings offers a significant discount, despite strong growth prospects.
- MAGURO (Buy, target 26 baht): Our 2024 net profit estimate for the restaurant group is 96 million baht (up 33% year-on-year). For 2025, net profit is projected to grow 47% to 141 million baht. Our target price is based on a 2025 PE ratio of 23.5 times.
- MINT (Buy, target 34 baht): We maintain our 2025 net profit forecast for the hotel and restaurant group at 8.3 billion baht, up 10% year-on-year. Growth is expected across all markets. First-quarter earnings should improve year-on-year, benefiting from the high season in Thailand and the Maldives, though quarter-on-quarter earnings may decline as it is the low season in Europe. Our target price is derived from a discounted cash flow (DCF) valuation incorporating a 7% weighted average cost of capital (WACC) and 2.5% terminal growth rate. The current valuation of 14.4 times 2025 earnings offers a significant discount to hotel peers ERW and CENTEL at their average levels.
- PTTEP (Buy, target 160 baht): Our target price for the oil and gas exploration firm is derived from a DCF valuation incorporating a 6.7% WACC and no terminal growth value. Our long-term crude oil price estimate is $65 a barrel. The current share price offers an attractive dividend yield of around 7.5% for 2024 and 2025.
- SAV (Buy, target 27 baht): Our target price for the air traffic control firm is 27 baht, based on a DCF valuation using an 8.2% WACC and a 2.5% terminal growth rate. We see upside potential to our 2025 projections, supported by business expansion into Laos and participation in a bid for a 1.2-billion-baht project by Airports of Thailand (AOT) in the first quarter.
- SISB (Buy, target 40 baht): We forecast 2025 net profit for the international school operator at 1.22 billion baht, up 32% year-on-year, supported by assumptions of 9% enrolment growth to 5,000 students and a 5% annual tuition fee hike. Our target price is based on a DCF valuation incorporating a 7.2% WACC and 3% terminal growth rate.