• Since the launch of Thai Singapore Depository Receipts in May, the three inaugural Thai SDRs – Airports of Thailand (AOT) , CP All and PTT Exploration & Production (PTTEP) – collectively traded over S$11 million on the Singapore Exchange. The top traded SDR was PTTEP on the back of volatility in oil prices with max and daily trading ranges of 3.1% (20 ticks) and 1.1% (7 ticks), respectively.

• The three SDRs offer investors the opportunity to gain exposure to some of Thailand’s largest blue chip companies – garnering more than S$0.3 million in net buying interest from individual investors with a bulk of inflows to AOT and CP All.

• All 3 SDRs yielded positive returns as at 31 Aug, with PTTEP being the best performer at +9.8%, on the back of a rally in crude oil prices, while AOT and CP All returned more than 2%.

Market Update: Thailand

Thailand is seen to be nearing the end of its tightening cycle earlier than expected with the economy’s headline inflation rate hovering below the 1% level for three consecutive months, seeing the effects of the Bank of Thailand’s past cumulative rate hikes of 175 bps since August 2022.

The National Economic and Social Development Council (NESDC) estimates the headline inflation to be in the range of 1.7% to 2.2% with the current account projected to record a surplus of 1.2% of GDP. It expects the Thai economy to grow between 2.5% to 3%, backed by: favorable growth of private consumption; the continual recovery of tourism sector; and the continual expansion in both private and public investments.

The Thai economy recently saw a lower-than-expected GDP growth for 2Q23 at 1.8% yoy. Notably, private consumption in Thailand accelerated to 7.8% yoy. Growth was led by construction, accommodation and food sectors alongside transport as China’s expected rebound fell short of expectations along with its reopening.

Thailand appointed a new Prime Minister into office on Aug 22 following its May elections, lifting some weight from the political uncertainty that has lingered in the past months. The Bank of Thailand’s next meeting on Sept. 27 will be closely watched whether the central bank decides to leave its rates unchanged, which would be the first such move since the central bank embarked on its tightening cycle.

Earnings Snapshot

1. Airports of Thailand TH SDR

   Airports of Thailand PLC is the largest publicly traded company in Thailand and the world’s largest airport operator by market capitalization. It operates Thailand’s six international airports accounting for >80% of air traffic and providing services related to air transportation.

   3QFY23 (Apr-Jun 2023) earnings came in line with street’s expectations with net profit of Bt3.15bn (S$121.3m). Total revenue saw a jump of 163.85% yoy thanks to the rise in total number of flights and passengers.

   In 9MFY23, revenue from aeronautical activities (landing & parking charges, departure passenger service charges (PSC), aircraft service charges) was up 192% yoy and accounted for 49% of total revenue, while non-aeronautical (office & state property rents, service, concession) grew 166% yoy and accounted for 51%.

   Passenger volume also returned to 78% of pre-pandemic levels, with departure passenger service charges surging 204% yoy to Bt4.66bn (S$179.3m) in 3QFY23.

   Business outlook: The third runway of Suvarnabhumi Airport is currently under construction and the Midfield Satellite (SAT-1) Terminal is planned to open in September 2023.  Extending the management to the airports under the supervision of the Department of Airports, namely Udon Thani International Airport, Buriram Airport, and Krabi International Airport is also in progress.

2. CP All TH SDR

   CP All is the sole operator of 7-Eleven convenience stores in Thailand and manages a network of convenience stores, with its stores offering a range of food and non-food products.

   2QFY23 results (Apr-Jun 2023) delivered a net profit of Bt4.44bn (S$170.7m), up 47.7% from 2QFY22 supported by strong same store sales growth (SSSG).

   Total revenue came in at Bt232bn (S$8.9b), up 8.5% yoy amidst the continued recovery of economic activity, domestic consumption and tourism sector. Its convenience store business contributed for 44% of total revenue in 1H23 while its grocery wholesaling & retailing business (CP Axtra PCL) accounted for 50%.

   Gross profit for convenient store business in 2QFY23 was at Bt29.08bn, up 21% yoy. Gross profit margin increased 28.4% from 27% in 2QFY22, driven by product strategy adjustment.

   Business outlook:

   -Plans to open about 700 new stores in Thailand, achieve 100 stores in Cambodia and open its first store in Lao PDR in 2023.

   -Expects to see a continued rise in gross profit margin on the back of its product strategy catering to consumer demand with a focus on sales participation of higher-margin products in both food and non-food categories.

3. PTT Exploration & Production TH SDR

   PTTEP is ASEAN’s largest listed petroleum exploration and production company, mainly involved in producing natural gas, crude oil and condensate.

   Net profit in Q2FY23 came in higher than expected, at $610m – a 7% increase qoq primarily from gains on foreign exchange towards contracts in the quarter, after seeing net profit of $569m in Q1FY23.

   Income taxes fell by $227m from projects in Thailand, Oman and Malaysia due to lower profits. Operating expenses fell by $44m.

   Average sales volume of PTTEP and its subsidiaries in Q2FY23 fell 3% qoq to 444,868 barrels of oil equivalent per day (BOED) from Q1FY23’s 460,817 BOED.
   
   The company announced an interim dividend of THB4.25 (before taxes) for its 1H 2023 operations paid in August and its 12M yield is 5.75%.

   Business outlook:

   -PTTEP expects to maintain unit cost in the range US$27 – 28/BOE, lower than reported unit cost of 2022.

   -It also expects the average sales volume for the third quarter and full year 2023 to be approximately 470,000 and 464,000 barrels of oil equivalent per day respectively. Sales volume is expected to decline in 2023 yoy from lower sales volume from overseas projects.

Spotlight: Case Study for PTTEP

•In the last 30 days*, 20/24 trading sessions (83%) saw opening price direction of PTTEP on the Stock Exchange of Thailand (SET) tracking the direction of overnight oil price movements between the closing to opening hours on SET.

•High correlation (77%) between overnight oil price movements and PTTEP close to open price change. Overnight oil price movements could be a potential indicator for the opening price direction of PTTEP on SET.

•PTTEP SDR on SGX starts trading at 9AM SGT, ahead of SET’s pre-open at 1030AM SGT and open at 11AM SGT.

•For 16/23 (70%) SDR trading sessions in the last 30 days, the price change between SDR mid price prior to SET open vs PTTEP SET opening price were inline with the overnight directional movements in oil prices.

•Click here to read more about Singapore Depository Receipts.

Brokers' Calls

Looking Ahead

SGX Academy Webinar: Are Thai blue chips worth a relook?

Speaker: Gerald Wong, founder and CEO of Beansprout

Date: Tuesday, 12 Sep 2023 | Time: 7.30pm – 8.30pm | Click here for more details