20130923-Maybank_KERPL-Contractor_Sector_THB2t_Bill_Moves_To_The_Senate_11页_1mb

Sector Update Summary - 23 September 2013

Core Content

This report provides an update on the contractor sector in Thailand, focusing on the THB2t infrastructure loan bill and its potential impact on the industry. The bill has been approved by the Lower House and is set for a first reading in the Senate on 30 September. It aims to fund infrastructure development over the period 2014–2020, with a significant portion allocated to transportation and construction projects.

Main Points

Infrastructure Loan Bill

• Status: Approved by the Lower House (287-105 vote in second and third readings), pending Senate approval.
• Purpose: Enable the Ministry of Finance to borrow funds for infrastructure development.
• Risk: A potential petition to the Constitutional Court to assess the bill's legality, which could delay or derail the process.
• Political Risks: The month of October is expected to be volatile due to the debate of the Amnesty Bill, constitutional amendment, and the Preah Vihear conflict, which may affect the sector.

Key Projects

• High Speed Train: THB780 billion allocated (74% civil work), with 4 major routes planned.
• Public Trains: THB470 billion allocated (68% civil work).
• Dual Tracking: THB400 billion allocated.
• Motorways: THB270 billion allocated.
• Total Budget: THB2 trillion for infrastructure development.

Sector Outlook

• Overall Rating: Neutral due to uncertainty around court rulings and political instability.
• Stock Highlights:
  • CK: BUY, Target Price 27.00 Bt, Upside 14.89%
  • ITD: BUY, Target Price 6.90 Bt, Upside 18.97%
  • NWR: HOLD, Target Price 3.00 Bt, Upside 12.68%
  • STEC: BUY, Target Price 28.00 Bt, Upside 15.23%

Investment Profile

• 52-week High/Low Index: 162.22 / 105.01
• Performance (Absolute): 8.3% (1-month), 6.1% (3-month), -10.9% (6-month), 29.3% (1-year), 8.1% (YTD)
• Performance (Relative): -0.1% (1-month), -0.1% (3-month), -8.7% (6-month), 11.5% (1-year), 1.2% (YTD)

Key Information

• Infrastructure Development Programs: The report includes detailed breakdowns of various projects such as high-speed trains, MRT, dual tracking, and motorways.

• Pricing and Valuation Metrics:

  • P/E Ratios: Vary across stocks, with CK having the highest at 68x (12m) and STEC having a P/E of 24.7x (12m).
  • P/BV Ratios: CK at 4.5x (12m), ITD at 2.8x (12m), NWR at 2.2x (12m), and STEC at 4.7x (12m).
  • EPS Growth: CK at -38.7% (12m), ITD at -79.7% (12m), NWR at 60.1% (12m), and STEC at -0.1% (12m).
  • ROE: CK at 65.3% (12m), ITD at 10.5% (12m), NWR at 13.9% (12m), and STEC at 22.9% (12m).
  • Dividend Yield: CK at 1.5%, ITD at 0.0%, NWR at 2.3%, and STEC at 2.4%.

• Technical and Fundamental Ratings: The report includes both technical and fundamental ratings, which may differ due to varying methodologies.

• Forward Looking Statements: The report contains forward-looking statements, which are subject to change and based on current assumptions and information.

• Legal Disclaimers:

  • This report is not an offer to buy or sell securities.
  • It is not intended for personal investment advice.
  • No guarantee is given regarding accuracy or completeness of the information.
  • MKE and its Representatives are not liable for any losses arising from reliance on this report.

Key Figures and Tables

• Figure 1: Investment allocation for infrastructure development.
• Figure 2: Infrastructure Development Programs – Investment profile.
• Figure 3: Mass Rapid Transit Master Plan.
• Figure 4: New mass transit projects.
• Figure 5: Infrastructure programs.
• Figure 6: High speed train projects.
• Figure 7: High speed trains – Budget allocations.
• Figure 8: Double tracking railways.
• Figure 9: Road network.
• Figure 10: Road network with motorways.
• Figure 11: Infrastructure programs.
• Figure 12: Historically high backlog.
• Figure 13: SET Forward PBV.
• Figure 14: SET Forward PER.
• Figure 15: CK shares compared with PBV.
• Figure 16: ITD shares compared with PBV.
• Figure 17: NWR Forward PER.
• Figure 18: STEC Forward PER.

Contact Information

• Surachai Pramualcharoenkit
  Email: Surachai.P@maybank-ke.co.th
  Phone: (02) 658-6300

• Research Offices:

  • Malaysia: Wong Chew Hann, CA (Head of Research), Alexander Gart Hoff (Institutional Product Manager)
  • Singapore: Alexander Gart Hoff (Acting Head of Research)
  • Thailand: Sukit Udomsirikul (Head of Research), Maria LapiZ (Head of Institutional Research)
  • Philippines: Luz Lorenzo (Head of Research)
  • Vietnam: Michael Kokalari, CFA (Head of Research)
  • India: Jigar Shah (Head of Research)

• Legal Entities Disclosures:

  • Malaysia: Maybank Investment Bank Berhad (15938-H)
  • Singapore: Maybank KERPL (Co. Reg. No 197201256N)
  • Thailand: MBKET (Reg. No.0107545000314)
  • Philippines: Maybank ATRKES (Reg. No.01-2004-00019)
  • Vietnam: Maybank Kim Eng Securities JSC (License Number: 71/UBCK-GP)
  • Hong Kong: KESHK (Central Entity No AAD284)
  • India: Kim Eng Securities India Private Limited (Reg. No: INF/INB 231452435)
  • US: Maybank KESUSA (Broker ID 27861)
  • UK: Maybank KESL (Reg. No 2377538)

Summary

The contractor sector in Thailand is currently rated Neutral due to uncertainties surrounding the THB2t infrastructure loan bill and the political climate in October. The bill, which has been approved by the Lower House, is expected to be debated in the Senate starting on 30 September, with a potential court petition on its legality. The bill is critical for the development of various infrastructure projects, including high-speed trains, MRT, and motorways, which are expected to generate significant work for construction firms. Key stocks in the sector include CK, ITD, NWR, and STEC, with varying ratings and target prices based on their projected performance and market conditions. The report also includes detailed investment allocations, performance metrics, and legal disclaimers.