• Thailand’s economy is expected to grow 2.7% in FY2023, according to the International Monetary Fund (IMF). The IMF expects the Thai economy to pick up in FY2024 to 3.2%, outpacing global growth forecasted at 2.9% for next year despite slowing demand worldwide, calling the economy’s inflation “manageable” as further discussion of government support is underway.
   
• The three Thai underlying companies that are available for trading on SGX as Singapore Depository Receipts (SDR) - PTT Exploration & Production (PTTEP), CP All, Airports of Thailand – are set to release 3QFY23 financial results in the coming month, with PTTEP’s earnings slated for 25 Oct. The PTTEP SDR is up 20% since the start of trading in May as concerns of oil supply constraints have been reignited by recent geopolitical tensions in the Middle East.
   
• Retail investors have net bought all three Thai SDRs in the month of September, with CP All attracting the highest net inflows in the first half of October. The three underlying companies have averaged quoted spreads of 2 to 3 ticks during Singapore and Thailand’s overlapping trading hours, with PTTEP having the tightest bid ask spreads, which have narrowed significantly by 25% in the first half of October. In month-to-date October, trading activity across the three SDR doubled to S$401,000.

Thai economy expected to pick up end 2023 and 2024

As Thailand sees a recovery buoyed by a revival in global tourism and resumption in business travels, its economy is expected to grow 2.7% in FY2023. The IMF expects the Thai economy to pick up in FY2024 to 3.2% despite slowing demand worldwide, outpacing global growth forecasted at 2.9% for next year, calling the economy’s inflation “manageable” as further discussion of government support is underway.

In particular, the three companies representing beneficial interest in the Singapore Depository Receipts (SDR) launched on 30 May this year are expected to release the financial results for 3QFY23.

Several macroeconomic factors are taken into consideration as companies release their quarterly earnings: The Federal Reserve maintaining a “higher for longer” outlook on rates, the economic uncertainty surrounding China’s growth with ongoing concerns from its property market, and the depreciation of the Thai Baht against a stronger U.S. dollar leading to foreign fund outflows.

The Bank of Thailand has also said in its 3Q financial stability report that it expects lower debt repayment ability in fragile household groups to improve in line with continued overall economic growth. The BOT added that it will monitor fund-raising ability of the business sector and the financial status of non-bank companies that are affected by inflation.

Retail investors net buying Thai SDRs in September

Despite the backdrop of tightened financial conditions, retail investors have net bought all three Thai SDRs in the month of September, with CP All attracting the highest net inflows in the first half of October. The three underlying companies have averaged quoted spreads of 2 to 3 ticks during Singapore and Thailand’s overlapping trading hours.

Notably, PTTEP SDR has the best bid ask spreads, which have narrowed significantly by 25% in the first half of October. As recent geopolitical developments in the Middle East have led to oil price volatility and prices of PTT Exploration & Production SDR (SGX:TPED) rose by roughly 20% since the start of trading on SGX.

PTT Exploration & Production (SGX: TPED)

Oil prices are expected to remain high in the remainder of the year on supply constraint concerns – stronger crude prices could provide support for the petroleum exploration and production company’s performance for the quarter to offset overall expenses. An uptick in production volume and stronger sales are also expected as OECD+ warned of a supply constraint of 3.3 million barrels a day by 4Q, marking the biggest global deficit since 2007.

CEO Montri Rawanchaikul in a recent interview announced that the company plans to raise its capex to between $25 billion and $30 billion in 2024-2028, and plans to spend a majority of that capital on upstream activities as the company develops projects in Malaysia, Thailand, and the United Arab Emirates (UAE) with increased production focused on natural gas.

In addition, Thailand’s Energy Policy and Planning Office (EPPO) forecasted in September that the nation’s overall energy demand, including diesel and electricity usage, is seen to rise 2.1% in FY2023 amid a tourism-led recovery. The agency added that demand for fuel is set to rise 3.2% year-on-year for the full-year and electricity consumption will rise 2.4% alongside expected domestic growth.

The Thai government is also considering extending its fuel subsidy scheme to cover motorcycle-taxi riders as part of wider efforts to help cut operating costs in public transportation. The move comes after the government recently cut diesel excise duty to help cap prices Sept. 20 to Dec. 31.

PTTEP is expected to report its Q3FY23 results on 25 October.

CP All (SGX: TCPD)

As Thailand leading retailer, sole 7-Eleven convenience store operator is seen to be a key beneficiary of recovered tourism as well as domestic consumption. After the company delivered nearly a 50% jump in net profit in 2QFY23, same store sales growth (SSSG) is also expected to be a key focus for the upcoming earnings report.

The positive earnings momentum is seen to continue for the quarter, with a Bloomberg consensus rating of 4.90 on a 1 to 5 scale, with 5 indicating a “strong buy”. Strongest including 28 buys, 1 hold and no sell ratings.

CP All also opened the first 7-Eleven store in Laos in October, as part of its wider effort to continue expansion overseas. The daily average turnover CP All TH SDR saw a 283% in October as of 18 Oct compared to the full month of September.

CP All is expected to report its Q3FY23 results on 10 November.

Airports of Thailand (SGX: TATD)

Seen to be the prime beneficiary of Thailand’s tourism recovery, Airports of Thailand is expected to deliver a year-on-year rise in net profit from a low base seen in previous years impacted by the global pandemic. Growth in profit is expected to reflect the recovery in global air travel and the rise in foreign tourist arrivals in Thailand, especially with travel restrictions fully lifted – including China’s borders reopening.

Thailand has recorded 19 million foreign tourists as of mid-September, generating 795 billion baht in revenue. The government’s visa waiver for tourists from China and Kazakhstan is also expected to give the recovering tourism sector a boost, with the government predicting 28 million arrivals for the full year. In comparison, Thailand saw a record 39.9 million foreign tourists in 2019 with 11 million from China.

With flight and passenger traffic volume being a major driver for AOT’s earnings, key risks for the company include a potential slowdown in the Thai tourism sector and slower-than-expected Chinese tourist arrivals.

Airports of Thailand is expected to report its Q3FY23 results on 21 November.

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