THAILA N D INVESTMENT BANKING - Top Thailand Small Cap Companies
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INVESTMENT BANKING
Top Thailand Small Cap Companies
TH
AIL
AN
D
TH
AIL
AN
D
TOP THAILAND
SMALL CAP COMPANIES
20 JEWELS
2021 EDITION
THAILAND Kasamapon Hamnilrat kasamapon.ha@rhbgroup.com +662 088 9739 Chatree Srismaicharoen chatree.sr@rhbgroup.com +662 088 9743 Vatcharut Vacharawongsith vatcharut.va@rhbgroup.com +662 088 9736 Wetid Tangjindakun wetid.ta@rhbgroup.com +662 088 9745 Paiboon Janesathit paiboon.ja@rhbgroup.com +662 088 9628
CONTENTS List Of Companies By Alphabetical Order Asia Sermkij Leasing PCL ………………………………………………………………………………………… 1 Diamond Building Products PCL……………………………………………………………………….…………. 3 Exotic Food PCL…………………………………………………………………………………..………….…….. 5 Gunkul Engineering PCL …………………………………………………………………………………………… 7 Index Living Mall PCL…………………………………………………………………………..………………….. 9 Karmarts PCL ……………………………………………………………………….……………………………… 11 LEO Global Logistics PCL………………………………………………………………………………………… 13 Mega Lifesciences PCL …………….…………………………………………………………………..………….. 15 Plan B Media PCL ……..................…………………………………………………………………………….. 17 RS PCL…………………………………………………………………………………………………….………… 19 Saksiam Leasing PCL……….………………………………………………………………………………………. 21 Sappe PCL ……………….…………………………………………………………………………………….…… 23 SCG Ceramics PCL …………..……………………………………………………………………………………. 25 Sermsang Power Corp PCL ……………………………………………………………………………………… 27 SISB PCL ………………..…………………………………………………………………………………………… 29 TAC Consumer PCL ………..………………………………………………………………………….………….. 31 Thai Foods Group PCL …………………………………………………………………………………………... 33 Thai Vegetable Oil PCL ……………………………………………………………………………………………. 35 Thitikorn PCL……………………………….………………………………………………………………………... 37 Thonburi Healthcare Group PCL ……..…………………………………………………………………………… 39
List of Companies By Industry Classification
Commerce
Index Living Mall PCL 9
Karmarts PCL 11
Mega Lifesciences PCL 15
RS PCL 19
Construction Materials
Diamond Building Products PCL 3
SCG Ceramics PCL 25
Energy & Utilities
Gunkul Engineering PCL 7
Sermsang Power Corp PCL 27
Food & Beverage
Exotic Food PCL 5
Sappe PCL 23
TAC Consumer PCL 31
Thai Foods Group PCL 33
Thai Vegetable Oil PCL 35
Finance & Securities
Asia Sermkij Leasing PCL 1
Saksiam Leasing PCL 21
Thitikorn PCL 37
Health Care Services
Thonburi Healthcare Group PCL 39
Media & Publishing
Plan B Media PCL 17
Mai
LEO Global Logistics PCL
13
Professional Services
SISB PCL 29Foreword
The facts: The 20 small-cap stocks featured in last year’s Thailand Top Small Cap Jewels Handbook 2020 have
provided average positive absolute returns of 73% – higher than the SET Index’s 21% and slightly lower returns than
the MAI Index’s 85%. However, they did outperform in terms of average returns: 94%, with the highest prices reached
between 4 Jun 2020 and 21 Apr 2021. This figure is higher than the SET and MAI Indices returns of 22.6% and 85%
over the same period last year.
There were five stocks that gave very impressive returns of more than 100%: Com7, Exotic Food, R&B Food Supply,
Sri Trang Agro-Industry, and Thanapiriya. There were also four counters that gave negative returns: Eastern Water
Resources Development & Management, Netbay, SEAFCO, and WHA Utilities & Power. This year, in order to provide
more alpha ideas in today’s tough market, we have included eight companies in this handbook that have never been
under our coverage before. Consequently, we hope investors find this book valuable and discover new ideas that can
generate excess returns for their portfolios.
RHB Research wishes to express our gratitude to the management teams of the featured companies in Thailand Top
Small Cap Jewels Handbook 2021 for their generous time in helping us better understand their respective business
models and allow us to share our views and opinions. Credit is also due to our dedicated team of analysts, who have
invested countless man hours to produce this year’s edition. We remain humbled and encouraged by the continued
interest and support of all the institutional and retail clients of RHB Investment Bank.
Kasamapon Hamnilrat
Head of Thailand Research RHB Securities (Thailand) PCL
30 April 2021
Price performance of the 20 small-cap stocks featured in the 2020 edition
Ticker Name Closing price (THB) Absolute Highest Date of Return
30-Apr-20 21-Apr-21 return in price highest
price
+/-
2020 reached
SET SET Index (pts) 1,301.66 1,580.01 21% 1,596.27 2-Apr-21 22.6%
MAI MAI Index (pts) 256.19 473.07 85% 473.07 21-Apr-21 85%
1 AU TB After You PCL 8.85 10.40 18% 12.80 11-Mar-21 45%
2 AAV TB Bangkok Aviation Fuel 1.87 2.62 40% 3.06 14-Dec-20 64%
3 CHG TB Chularat Hospital PCL 2.46 3.00 22% 3.10 12-Apr-21 26%
4 COM7 TB Com7 PCL 21.50 72.25 236% 77.50 19-Apr-21 260%
5 DRT TB Diamond Building Products 5.30 6.40 21% 6.85 10-Sep-20 29%
6 EASTW TB Eastern Water Resources 10.00 9.90 -1% 10.80 8-Jun-20 8%
Development
7 EXOIT TB Exotic Food PCL 5.20 14.00 169% 14.90 8-Feb-21 187%
8 GFPT TB GFPT PCL 11.40 11.90 4% 14.70 21-Jul-20 29%
9 MEGA TB Mega Lifesciences PCL 29.00 34.25 18% 43.00 27-Jan-21 48%
10 NETBAY TB Netbay 31.25 27.00 -14% 37.25 5-Jun-20 19%
11 PR9 TB Praram 9 Hospital 6.90 9.90 43% 10.70 12-Apr-21 55%
12 PTG TB PTG Energy PCL 13.80 20.70 50% 21.90 9-Mar-21 59%
13 RBF TB R&B Food Supply PCL 4.70 19.50 315% 19.90 5-Apr-21 323%
14 SEAFCO TB SEAFCO PCL 5.25 4.82 -8% 7.20 3-Aug-20 37%
15 SISB TB SISB PCL 8.60 10.10 17% 11.00 2-Apr-21 28%
16 STA TB Sri Trang Agro-Industry PCL 13.00 46.75 260% 56.75 1-Mar-21 337%
17 TEAMG TB Team Consulting 2.06 2.24 9% 2.60 18-Aug-20 26%
18 TNP TB Thanapiriya PCL 2.06 6.16 199% 6.45 20-Apr-21 213%
19 TQM TB TQM Corporation PCL 78.75 127.50 62% 149.00 24-Sep-20 89%
20 WHAUP TB WHA Utilities and Power PCL 4.72 4.50 -5% 4.94 4-Jun-20 5%
Simple Average Returns 73% 94%
Top Thailand Small Cap Companies 202120 Jewels – at a glance
Company name FV Mkt Cap P/E (x) P/BV (x) Div Yield (%) ROE (%)
(THB) (THBm) FY19 FY20 FY19 FY20 FY19 FY20 FY19 FY20
Asia Sermkij Leasing PCL 27.5-31.4 10,029.0 8.8 8.6 1.4 1.3 7.9 7.8 16.5 15.9
Diamond Building Products 7.7 6,731.0 11.8 12.1 3.0 3.5 5.6 5.9 25.3 28.8
PCL
Exotic Food PCL 17.0-18.3 6,328.0 51.9 19.9 7.9 6.2 1.0 4.1 16.0 34.9
Gunkul Engineering PCL 4.0-4.5 37,306.0 15.4 27.5 3.1 2.7 3.8 4.8 21.9 29.6
Index Living Mall PCL 16.0-17.0 7,019.0 11.4 15.7 1.4 1.4 3.3 3.0 12.5 8.4
Karmarts PCL 4.9-5.4 3,731.0 14.3 28.1 3.7 3.7 6.6 3.3 26.0 13.1
LEO Global Logistics PCL 8.0 2.288.0 31.2 40.2 6.8 3.6 na 1.0 21.8 9.1
Mega Lifesciences PCL 42.0 30,297.0 25.4 20.9 5.1 4.3 2.0 2.2 20.9 21.2
Plan B Media PCL 8.5 24,072.0 32.4 171.7 3.5 4.3 2.5 1.2 10.8 2.5
RS PCL 30.5-32.5 24,312.0 66.9 46.0 14.1 12.1 1.2 na 21.4 28.3
Saksiam Leasing PCL 11.5-12.6 25,361.0 35.2 30.9 6.0 5.0 na 1.0 14.1 15.4
Sappe PCL 34.0-36.0 7,989.0 19.8 21.0 2.9 2.8 3.2 3.9 15.6 13.5
SCG Ceramics PCL 2.3 12.521.0 74.5 29.8 1.4 1.4 0.6 1.4 1.9 4.8
Sermsang Power 17.5-18.5 13,369.0 26.0 20.6 3.8 3.4 0.7 0.7 14.1 15.4
Corp PCL
SISB 13.8 9,306.0 42.1 58.2 5.1 5.0 1.0 0.8 12.1 8.5
TAC Consumer PCL 9.5-11.4 4,438.0 27.4 23.6 6.4 6.1 3.3 4.1 23.9 26.5
Thai Foods Group PCL 6.0-6.6 23,879.0 19.1 11.3 2.9 2.6 4.3 1.7 16.3 24.4
Thai Vegetable Oil PCL 38.0-40.0 28,705.0 20.8 17.3 3.2 3.0 3.9 4.8 15.8 18.6
Thitikorn PCL 11.4-14.4 5,350.0 10.5 13.7 1.0 0.9 5.4 4.2 9.1 6.9
Thonburi Healthcare Group 27.5-29.0 21,651.0 69.6 na 2.5 2.6 1.6 1.2 5.3 0.7
PCL
16,638.5 30.7 32.5 4.3 3.8 3.2 3.0 16.1 16.3
Average
Note: All prices as at 30 Apr 2021
Note 2: na = not available
Source: Bloomberg, RHB
Top Thailand Small Cap Companies 2021Market capitalisation (THBm) FY20 ROE (%)
Gunkul Engineering PCL
Exotic Food PCL
Mega Lifesciences PCL
Gunkul Engineering PCL
Thai Vegetable Oil PCL
Diamond Building Products
Saksiam Leasing PCL
RS PCL
RS PCL
T.A.C.Consumer PCL
Plan B Media PCL
Thai Foods Group PCL
Thai Foods Group PCL
Mega Lifesciences PCL
Thonburi Healthcare Group
PCL Thai Vegetable Oil PCL
Sermsang Power Corp PCL
Asia Sermkij Leasing PCL
SCG Ceramics PCL
Sermsang Power Corp PCL
Asia Sermkij Leasing PCL
Saksiam Leasing PCL
SISB
Sappe PCL
Sappe PCL
Kamart PCL
Index Living Mall PCL
LEO Global Logistics PCL
Diamond Building Products
SISB
Exotic Food PCL
Index Living Mall PCL
Thitikorn PCL
Thitikorn PCL
T.A.C.Consumer PCL
SCG Ceramics PCL
Kamart PCL
Plan B Media PCL
LEO Global Logistics PCL
Thonburi Healthcare Group PCL
0 10,000 20,000 30,000 40,000
0% 20% 40% 60%
Source: Bloomberg, RHB Source: Bloomberg, RHB
Top Thailand Small Cap Companies 2021FY20 P/E (x) FY20 dividend yield (%)
Plan B Media PCL Asia Sermkij Leasing
PCL
SISB Diamond Building
Products
RS PCL
Thai Vegetable Oil PCL
LEO Global Logistics PCL Gunkul Engineering
PCL
Saksiam Leasing PCL
Thitikorn PCL
SCG Ceramics PCL
T.A.C.Consumer PCL
Kamart PCL
Exotic Food PCL
Gunkul Engineering PCL
Sappe PCL
T.A.C.Consumer PCL
Kamart PCL
Sappe PCL
Index Living Mall PCL
Mega Lifesciences PCL
Mega Lifesciences
Sermsang Power Corp
PCL
PCL
Exotic Food PCL Thai Foods Group PCL
Thai Vegetable Oil PCL SCG Ceramics PCL
Thonburi Healthcare
Index Living Mall PCL Group PCL
Thitikorn PCL Plan B Media PCL
Diamond Building
Products Saksiam Leasing PCL
Thai Foods Group PCL LEO Global Logistics
PCL
Asia Sermkij Leasing PCL
SISB
0 50 100 150 Sermsang Power Corp
PCL
0% 2% 4% 6% 8%
Source: Bloomberg, RHB Source: Bloomberg, RHB
Top Thailand Small Cap Companies 2021Fair value: THB27.50-31.40
Asia Sermkij Leasing Price: THB28.50
Growth With High Dividend
Asia Sermkij Leasing PCL (ASK TB)
Price Close
Investment Merits
35.0
30.0 • Poised to deliver record earnings in 2021F;
25.0
• Balance sheet strengthened after cash call;
20.0
• High dividend payout ratio.
15.0
10.0
5.0
0.0 Company Profile
Oct-17
Feb-18
Apr-18
Oct-18
Feb-19
Apr-19
Oct-19
Aug-17
Dec-17
Jun-18
Aug-18
Dec-18
Jun-19
Aug-19
Apr 21
Asia Sermkij Leasing (ASK), established in 1984, operates a hire
Source: Bloomberg purchase (HP) business for all types of automobiles, giving personal
loans and loans for vehicle inventory (ie floor plan financing). ASK also
Stock Profile offers auto registration and transfers, machinery and automobile
Bloomberg Ticker ASK TB insurance facilitation services. Its customers are in Bangkok and
Avg Turnover (THB/USD) 56.55m/1.8m
metropolitan areas.
Net Gearing (%) 651
Market Cap (THBm) 10,029m Highlights
Beta (x) 28.50
Set to deliver new record-high earnings in 2021. Management set a
BVPS (THB) 14.62
target of 17% YoY loan growth for 2021, being more confident on its
52-wk Price low/high (THB) 14.07 – 29.50
recovery – in view of the vaccine rollout and reopening of the economy,
Free float (%) 50.93 especially from 2H21 onwards. This should lead to an increase in loans
and better asset quality. ASK believes the resurgence in COVID-19
cases early this year should have a smaller adverse impact than the
Major Shareholders (%) previous one. The rejuvenation in HP demand should come from the
expected rebound in the sales of new and old trucks (70% of total
Chailease Finance Co 36.61
loans), in line with the economic recovery and e-commerce trend.
Chailease International Co (Malaysia) 11.88
Management plans to increase lending for purchases of used trucks
compared with financing of new vehicles, as the former provides higher
yields. The surge in e-commerce during the pandemic spiked up the
demand for logistics services around the globe, including in Thailand.
Share Performance (%) Over the longer term, we believe ASK should also benefit from the
1m 3m 6m 12m
rising electric vehicle (EV) trend in Thailand.
Absolute 47.99 44.61 75.94 90.78 Stronger balance sheet after raising fresh capital. Post ASK’s recent
Relative 48.00 36.42 43.13 68.85 announcement on increasing capital, we expect it to raise THB2.99bn
via an existing 2-for-1 rights issue at THB17.00 per share (ex-date: 27
Apr). This will increase its paid-up capital to THB2.6bn, from THB1.8bn.
Proceeds from the exercise will be used to support long-term growth
Wetid Tangjindakun +66 2088 9745
and repay debts. The company aims to cut its interest-bearing debt-to-
wetid.ta@rhbgroup.com equity ratio to 4.4x, from 6.5x currently. ASK also plans to lower its cost
of funds via long-term loans from banks, instead of issuing new
debentures. With abundant system liquidity and subdued demand for
credit, borrowings from financial institutions have become cheaper.
High dividend payout. ASK’s dividend yield was at an attractive 7-8%
pa in 2018-2020, even when facing challenging times. We expect DPS
to continue to rise moderately, given its sustained earnings growth and
stronger balance sheet after raising equity.
1
Top Thailand Small Cap Companies 2021Company Report Card
Profit & Loss Dec-18 Dec-19 Dec-20
Net interest income (THBm) 1,894 2,054 2,254
Operating profit (THBm) 1,460 1,543 1,687
Latest results. Amidst the pandemic, ASK’s 2020 net profit grew Reported net profit (THBm) 811 870 883
slightly by 1.6% YoY, mainly on a 9.8% YoY rise in NII, underpinned by Recurring net profit (THBm) 811 870 883
a 7.7% growth in loans from increased lending for the purchase of Recurring net profit growth (%) 8.9 7.2 1.6
trucks. NIM stayed at 5.3%, with effective cost management mitigating Recurring EPS (THB) 2.31 2.47 2.51
lower yields to help customers. Still, topline growth enabled ASK to set DPS (THB) 1.61 1.72 1.70
aside provisions to cushion economic uncertainties. Expected credit Dividend Yield (%) 7.42 7.93 7.83
loss (ECL) increased 19.3% YoY, bumping credit cost higher to 130 bps Recurring P/E (x) 9.4 8.8 8.6
(2019: 120 bps). NPL ratio rose to 2.9% from 2.6% in 2019. Return on average equity (%) 16.3 16.5 15.9
P/B (x) 1.5 1.4 1.3
Balance sheet/cash flow. As at end-2020, ASK’s D/E ratio ticked up to Source: Company data, RHB
6.9x (2019: 6.7x), compared to its debt covenant D/E ratio of 10x. With
the injection of fresh capital, ASK should be able to manage its liquidity Balance Sheet (THBm) Dec-18 Dec-19 Dec-20
to support more aggressive business expansion in 2021 and beyond. Total gross IEAs 35,889 41,298 44,490
Total assets 36,252 41,815 44,931
ROE. ROE is on a gradual upward cycle in 2017-2019. Even when Total IBLs 30,224 32,254 37,771
facing the pandemic in 2020, ROE just slightly dropped to 15.9% from Total liabilities 31,131 36,391 39,263
16.5% in 2019, given the soft growth in 2020 net profit and high Shareholder's equity 5,121 5,424 5,668
dividend payouts. Minority interest 0 0 0
Total equity 5,121 5,424 5,668
Dividend. ASK has paid good dividends over the past three years Total liabilities & equity 36,252 41,815 44,931
(2017-2020), at a ratio of 65-70% of net profit. The payout is at the
Source: Company data, RHB
upper boundary of its dividend policy of 40-70% of net profit. With
dividend yields at 7-8%, it can be classified as a dividend stock, in our
Key Ratios Dec-18 Dec-19 Dec-20
view. Return on IEAs (%) 7.6 7.5 7.4
Management. ASK’s major shareholders currently are the Chailease Cost of funds (%) 2.6 2.6 2.6
Net interest spread (%) 5.0 4.9 4.9
Group (48.5% stake) and Bangkok Bank (7.4% stake). They provide
Net interest margin (%) 5.4 5.3 5.3
support synergies to ASK in terms of financing and business-related Net cust loans/assets (%) 99.0 98.8 99.0
matters. ASK is a founding member of Thai Hire Purchase Association Credit cost (bps) 132 121 130
and member of the National Credit Bureau. The management team Gross cust loan growth (%) 6.4 15.1 7.7
comes from the Chailease group, and has 5-10 years of experience in Source: Company data, RHB
the leasing and related fields.
Investment Case
Sustained growth, with high dividend yield. We like ASK for its
sustained growth, high dividend yield, and attractive valuation. We
believe management’s extensive experience could help ASK deliver
moderate but sustained growth, as has been the case since the
company was established.
Attractive valuation. We estimate ASK’s FV to be in the range of
THB27.50-31.40, derived by pegging the consensus 2021F BV of
THB17.55 against P/BVs of 1.6-1.8x. Our P/BV range is based on
ASK’s 5-year P/BV historical mean.
Key risks. ASK’s business outlook depends largely on domestic truck
sales as well as that of other vehicles, which is related to the economic
situation. A deterioration in economic outlook would result in lower new
HP lending and weaker asset quality. Any adverse regulatory changes
and intense competition would also impact the company’s profitability.
2
Top Thailand Small Cap Companies 2021Fair Value: THB7.70
Diamond Building Products Price: THB7.10
Time For a Diamond Cut
Diamond Building Products PCL (DRT TB) Investment Merits
Price Close
8.0
7.0 • Strength in product diversity
6.0
• Consistent growth within management’s FY21 business target
5.0
4.0 • Resumption of FY21 earnings growth to strengthen dividends
3.0
Company Profile
2.0
1.0
Diamond Building Products manufactures and distributes roofing
0.0
Oct-17
Feb-18
Apr-18
Oct-18
Feb-19
Apr-19
Oct-19
Aug-17
Dec-17
Jun-18
Aug-18
Dec-18
Jun-19
Aug-19
Apr 21
products, boards and ceilings, siding boards, other roof accessories,
Source: Bloomberg and non-roof products, and provides roof stripping and installation
services under the trademark names Diamond, Adamas, and Jearanai.
Stock Profile
Bloomberg Ticker DRT TB
Avg Turnover (THB/USD) 7.86m/0.25m Highlights
Net Gearing (%) 0.48
Strength in product diversity. Compared to other industry players, the
Market Cap (THBm) 6,731m
company – with its 19% industry market share – performed relatively
Beta (x) 0.64 well in FY20, given the pandemic situation, with only a slight earnings
BVPS (THB) 2.04 decline from FY19’s high base. This is attributed to its advantages in
52-wk Price low/high (THB) 5.20 – 7.35 the full-coverage product portfolio (roof, wall, and floor) in response to
Free float (%) 36.89 different renovation demands from households during the social-
distancing period, and its diversified sale channel networks throughout
the country.
Major Shareholders (%) Consistent growth within management’s FY21 business target.
Myriad Materials 51.46 Management set a conservative business plan for its FY21 operations –
a 5% YoY revenue growth, and 27-29% GPM sustained from FY20. As
the majority of its sales revenue comes from traditional agent channels,
other sales channels especially modern trade, exports, and housing
projects will see more emphasis. The demand pattern in these sales
channels should return to normal, especially when customer traffic rates
Share Performance (%) in modern trade, demand in neighbouring countries, and new housing
1m 3m 6m 12m project launches – especially in tourist destinations – return to pre-
pandemic levels. In addition, its capacity expansions are on a
Absolute 13.60 21.37 22.41 33.96
consistent basis, while its long-term goal to enhance profit margins is by
Relative 13.61 13.18 (10.40) 12.03
upgrading its existing production facilities to Smart Factories with
automated systems.
Chatree Srismaicharoen +66 2088 9743
Resumption of FY21 earnings growth to strengthen dividends.
After FY20’s inevitable earnings decline due to the pandemic, we
chatree.sr@rhbgroup.com
expect the demand situation to ease in 2H21. Management has also
seen growth signals since the beginning of this year. FY21 net profit is
expected to grow within the range of 7-10% YoY. Within Thailand’s
construction material sector, DRT can be regarded as one of the top
stocks offering consistent earnings growth, and superb dividend yields.
Based on its consistent increase in DPS over the past years, even
despite FY20’s weaker performance, we expect its solid cash flow to
support dividends once again in FY21.
3
Top Thailand Small Cap Companies 2021Company Report Card
Profit & Loss Dec-18 Dec-19 Dec-20
Total turnover (THBm) 4,329 4,748 4,381
Latest results. Despite COVID-19 affecting purchasing demand, Reported net profit (THBm) 423 572 557
especially in provincial areas, the company’s FY20 net profit of Recurring net profit (THBm) 423 572 557
THB557m only saw a slight decline of 2.5% YoY. In our view, the Recurring net profit growth (%) 2.7 35.2 (2.5)
almost-flat FY20 net profit was acceptable as FY19’s net profit Recurring EPS (THB) 0.45 0.60 0.59
represented a high base, with a strong 35% YoY growth. Excluding DPS (THB) 0.36 0.40 0.42
gains on the sale of unused land, and provisions for employee Dividend Yield (%) 5.1 5.6 5.9
retirement benefits, FY20 core profit declined by a negligible 0.2% YoY. Recurring P/E (x) 15.9 11.8 12.1
The pandemic resulted in weaker sales volumes for its new housing Return on average equity (%) 20.4 25.3 28.8
projects (8% of sales revenue) and export markets (17%), and the P/B (x) 3.2 3.0 3.5
temporary closure of modern trade stores (16%) in several major cities P/CF (x) 13.3 9.8 8.0
in 2Q20 directly impacted FY20 core revenue, which saw a 7.7% YoY Source: Company data, RHB
decline. Only sales revenue from domestic sale agents performed better
in FY20. Success in bringing GPM to 29% in FY20 vs 26.8% in FY19
Balance Sheet (THBm) Dec-18 Dec-19 Dec-20
was a key factor to mitigate lower core revenue in FY20, as its
Total current assets 1,366 1,410 1,239
operations benefitted from lower raw material costs and energy used in
Total assets 3,138 3,332 3,419
production.
Total current liabilities 922 858 1,220
Balance sheet/cash flow. The company has been in conservative Total non-current liabilities 139 215 262
mode, in terms of working capital management and financial gearing. Total liabilities 1,062 1,073 1,482
Even with a demand slowdown, and tough competition within the Shareholder's equity 2,076 2,259 1,937
industry, DRT has been able to stringently manage working capital with Minority interest 0 0 0
FY20’s abrupt reduction in inventory levels, resulting in operating cash Other equity 0 0 0
flow jumping to THB844m – above the THB500-800m per year range Total liabilities & equity 3,138 3,332 3,419
during normal periods. Interest-bearing debt balance, as at end-FY20 Total debt 527 461 957
was 117% higher YoY than that of end-FY19, mainly in increased short- Net debt 506 430 935
term borrowings from banks. However, this should not be a major
Source: Company data, RHB
concern as net D/E as of end-FY20 was only 0.48x compared to 0.19x
as of end-FY19.
Cash Flow (THBm) Dec-18 Dec-19 Dec-20
ROE climbed further from 25.3% in FY19 to 28.8% in FY20. The ROE Cash flow from operations 507 688 844
improvement – despite a slight decline in FY20 earnings performance – Cash flow from investing activities (140) (239) (409)
was mainly on lower shareholder equity after the regular dividend Cash flow from financing activities (370) (438) (445)
payment and the exercise of treasury stock purchases within FY20. Cash at beginning of period 24 20 31
Dividend. Based on its dividend policy of >50%, DRT paid out cash Net change in cash (4) 11 (9)
dividends at a 70% ratio for FY20. This confirms the company’s strict Ending balance cash 20 31 22
policy of paying at the high payout ratio, even during tough times, and Source: Company data, RHB
also prioritizing stable DPS growth rather than swinging in tandem with
EPS trends. Therefore, we expect FY21 DPS to stay at THB0.45,
implying 7% dividend yield.
Management. Satid Sudbuntad was promoted from Managing Director
to CEO on 1 Jan 2018. He has been with the company for over 15
years, and is involved in all departments, including production,
marketing, customer relationship, and investor relations.
Investment Case
FV of THB7.70. We regard DRT as a mix of consistent growth and high
dividend yields. FY21 will be an opportunity for the company to resume
its business growth, especially when demand patterns return to
normalcy. Based on its historical 5-year average P/E of 12x, our FV is
THB7.70.
4
Top Thailand Small Cap Companies 2021Fair value: THB17.00-18.30
Exotic Food Price: THB14.90
Some Like It Hot
Exotic Food PCL (XO TB)
Investment Merits
Price Close
16.0
14.0
• Ongoing popularity of home cooking due to the resurgence of COVID-
12.0 19 infections, while the company’s venture into new markets may
10.0 drive sales growth;
8.0
• Cost controls may support FY21F earnings to grow 13% YoY;
6.0
4.0
• Potential upside from launches of hemp-based seasoning.
2.0
0.0
Company Profile
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Source: Bloomberg Exotic Food manufactures and distributes seasoning products like
sauces for dipping (82% of sales), food ingredients like coconut milk
Stock Profile
and curry paste (11% of sales), fruit & vegetable juices (0.1% of sales),
prepared Thai cuisine meals (1% of sales), and instant & semi-instant
Bloomberg Ticker XO TB
foods like dried and preserved products (6% of sales). With more than
Avg Turnover (THB/USD) 109.6m/3.5m 700 store-keeping units (SKUs) in its stable, these are distributed under
Net Gearing (%) -9.2 the company’s own brands such as Exotic Food, Thai Pride, and Flying
Market Cap (THBm) 6,328m Goose. Products are exported to over 60 countries, with the majority
Beta (x) 0.76
82% of sales generated from Europe in 2020. It focuses on selling
products to distributors abroad, and these are stocked in grocery and
BVPS (THB) 2.42
modern retail stores for end-users.
52-wk Price low/high (THB) 4.80 – 15.10
Free float (%) 42.86
Highlights
Major Shareholders (%)
Cook-at-home demand continues. We are still optimistic on Exotic
Food’s outlook this year, as the resurgence of COVID-19 infections in
Soyphet Jantarach 23.1
some of its European markets may stabilise the demand for home
Vasana Jantarach 14.3 cooking ingredients. It intends to penetrate new markets in Europe and
Jittiporn Jantarach 11.9 China by allocating a THB15m budget to get shelf space in more
modern retail stores. Exotic Food booked purchase orders worth
THB350m in 1Q21. We think the shipping container shortage may
disrupt sales only in 1Q21, and this problem should dissipate in the
Share Performance (%)
following quarters. These factors may support its 2021F topline growth
1m 3m 6m 12m of 10% YoY.
Absolute 11.72 27.68 38.83 175.00
Controllable costs. Exotic Food’s costs may stay manageable this
Relative 11.73 19.49 6.02 153.07
year, mainly due to favourable contracted prices for raw materials, as
well as improving economies of scale in production, and a stronger
product sales mix. It is also possible the company may be unable to
Vatcharut Vacharawongsith +66 2088 9736 attend exhibition events locally and abroad for another year, which may
vatcharut.va@rhbgroup.com
help keep opex low. Local sales, which account for c.75% of total sales,
may help limit FX risks. We assume a stable GPM of 41%, and smaller
opex-to-sales ratio (by 1ppt) of 14% this year. As such, we estimate
2021 EPS at THB0.85 (+13% YoY).
Upside from exporting hemp-based seasoning products. The
company’s strength in product exports may strongly support its planned
distribution of hemp-based sauce products, as hemp products are legal
in most European countries. Management recently said it has
completed the product development procedure, and is waiting for
government approvals (launches are likely to happen by 4Q21).
5
Top Thailand Small Cap Companies 2021The products may have premium positioning, which would boost GPMs. Profit & Loss Dec-18 Dec-19 Dec-20
Earnings upside should kick in, largely from 2022F onwards. Total turnover (THBm) 1,145 991 1,268
Reported net profit (THBm) 222 122 318
Recurring net profit (THBm) 222 122 318
Recurring net profit growth (%) 275.9 (45.0) 161.1
Company Report Card Recurring EPS (THB) 0.63 0.29 0.75
DPS (THB) 0.87 0.16 0.61
Latest results. FY20 net profit skyrocketed 161% YoY to THB318m, on Dividend Yield (%) 5.8 1.0 4.1
strong sales and GPM growth, and a material decline in opex. Total Recurring P/E (x) 23.7 51.9 19.9
sales surged by 28% YoY as COVID-19 boosted home-cooking Return on average equity (%) 34.3 16.0 34.9
activities, as well as the demand for sauce and condiments. Also, it P/B (x) 7.3 7.9 6.2
could distribute products through more retail stores there. GPM jumped P/CF (x) 19.9 43.4 15.3
by 5.1ppts, to 41%, as increased purchase orders led to a higher overall Source: Company data, RHB
utilisation rate and economies of scale. It also benefitted an improving
sales mix of high-margin products. Its opex-to-sales ratio decreased
Balance Sheet (THBm ) Dec-18 Dec-19 Dec-20
8.8ppts to 15%, due to lesser promotional and travelling expenses, as
Total current assets 436 359 672
well as the cancellation of fixed cost reclassification at its new plant.
Total assets 992 934 1,244
Balance sheet/cash flow. Exotic Food is in a net cash position, which Total current liabilities 243 125 185
should ease financial needs to support operations and longer-term Total non-current liabilities 24 8 33
business expansion. Operating cash flow improved by 184% YoY to Total liabilities 266 133 218
THB413m in 2020, while debt repayments and smaller dividends for Shareholder's equity 718 793 1,019
2019 lowered financing cash flow. Capex was at c.THB60m last year, Minority interest 0 0 0
and is likely stable in 2021, for a new production line on food Other equity 7 8 7
ingredients. Total liabilities & equity 992 934 1,244
Total debt 44 24 38
ROE. Exotic Food’s ROE surged to 35% in 2020, from 16% the Net debt (141) (35) (94)
previous year – mainly due to the splendid NPM growth of 12.8ppts, to
Source: Company data, RHB
25%.
Dividend. The company’s policy is to pay at least 50% of NPAT as Cash Flow (THBm ) Dec-18 Dec-19 Dec-20
dividends. It paid semi-annual DPS of a combined THB0.61 for FY20, Cash flow from operations 265 146 413
vs THB0.16 for FY19, implying a handsome c.5% yield. We expect Cash flow from investing activities (185) (117) (220)
yields to stay around 3-4% over the next two years. Cash flow from financing activities (5) (154) (122)
Cash at beginning of period 110 185 60
Management. Exotic Food was established in 1999, and built its first
Net change in cash 75 (126) 72
owned production facilities in 2000. Founded by Managing Director
Ending balance cash 185 60 132
Jittiporn Jantarach (12% stake) and Deputy Managing Director Vasana
Jantarach (14% stake), the stock was listed in 2014. Their mother, Source: Company data, RHB
Soyphet Jantarach, is the vice chairman, and holds 23%.
Investment Case
More stories to drive growth. Apart from a possible new global uplift
in home-cooking activity, even after the COVID-19 pandemic ends,
Exotic Food may boost its topline further by penetrating more new
markets in Europe and China. It has allocated a listing fee budget to
access more retailing channels, and launch high-GPM hemp-related
products. These may be key investment catalysts, in our view.
Its fair value ranges THB17.00-18.30, derived from applying P/Es of
20-21.5x to the EPS assumption of THB0.85 (+13% YoY). Our P/E
range is based on the stock’s +0.5SD to +1SD from its 3-year historical
trading mean. Compared with Thailand’s food and beverage sector, the
fair value range is still equivalent to c.-0.5SD from the sectors’ 3-year
historical trading mean. Exotic Food is trading at 16x FY21 P/E, which is
at -1SD from its 3-year historical mean.
Key risks. Slowdown in consumption, fluctuation in raw material prices
and FX rates, and uncertainties like natural disasters and outbreaks.
6
Top Thailand Small Cap Companies 2021Fair Value: THB4.00-4.50
Gunkul Engineering Price: THB4.20
Growth Ahead To Pick Up Pace
Gunkul Engineering (GUNKUL TB)
Investment Merits
Price Close
4.5
4.0 • On the road to achieving capacity of 1,000MWe in 2023F;
3.5
3.0
• Invigorated by a new and young management team;
2.5
• High growth expected in 2021.
2.0
1.5
Company Profile
1.0
0.5
0.0
Gunkul Engineering (GUNKUL) was founded in 1982 as an electrical
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Apr 21
equipment trader. Now, it mainly operates renewable energy (RE)
Source: Bloomberg
power plants – particularly related to wind and solar – as a core
business. The company is still a manufacturer and supplier of over
Stock Profile 5,000 electrical products, and also a 1-stop RE engineering,
Bloomberg Ticker GUNKUL TB procurement and construction (EPC) company. Its total electricity
Avg Turnover (THB/USD) 662.7m/21.3m capacity is at 624MWe (operating capacity of 578MWe, and
Net Gearing (%) 232 constructing capacity of 46MWe).
Market Cap (THBm) 37,306m
Beta (x) 0.96
BVPS (THB) 1.41 Highlights
52-wk Price low/high (THB) 2.00 – 4.24 Road to 1,000MWe in 2023F. GUNKUL aims to accelerate its
Free float (%) 43.83 capacities by 60%, from the present where it already has 376MWe, via
greenfield and brownfield projects. With capex earmarked at c.THB7bn
pa, growth should come from: i) New RE projects under power
Major Shareholders (%)
purchase agreements (PPA) in Thailand and Vietnam, and solar
rooftops under private PPAs, ii) a higher EPC & turnkey project backlog,
Gunkul Group 49.9
iii) better electrical equipment sales, and iv) its innovation platform.
Gunkul Dhumrongpiyawut 3.6
New, young management team. On 11 Mar, GUNKUL announced its
new management structure. Its businesses have been divided into four
segments: i) Energy, ii) high-voltage equipment, iii) construction &
turnkey projects, and iv) innovation. This segmentation should make
Share Performance (%) each unit more agile, while making them possible targets for spinning
1m 3m 6m 12m off to become listed entities in the future. The new management team
Absolute 11.76 62.02 104.90 58.33 comprises executives with extensive experience, who have also worked
Relative 11.77 53.83 72.09 36.41 for the company for many years. We believe the new team will lead
GUNKUL to grow continuously and sustainably.
Going into cannabis farming. GUNKUL is planning to venture into
Wetid Tangjindakun +66 2088 9745 smart cannabis farming, using 5,000 rai of land that its wind farms
Wetid.ta@rhbgroup.com power. In phase 1, it plans to cultivate cannabis on the first 200 rai, and
then sell cannabidiol oil (better known as CBD oil), as well as by-
products after processing. Management expects this to contribute
c.THB2-2.4bn pa to core revenue in 2022. However, pricing and
margins will be determined by a regulating body.
High growth in 2021F. Core profit should surge YoY, mainly due to
better wind speeds and higher irradiation levels that boost RE power
generation. There also would be profit contributions from solar projects
in Thailand and Vietnam (operational in 2020-2021F).
7
Top Thailand Small Cap Companies 2021Company Report Card
Profit & Loss Dec-18 Dec-19 Dec-20
Total turnover (THBm) 6,461 7,195 10,975
Reported net profit (THBm) 1,085 2,147 3,412
Latest results. GUNKUL’s net profit hit record highs for three Recurring net profit (THBm) 1,820 2,138 1,203
consecutive years (2018-2020). 2020 net profit was at THB3.4bn (+54% Recurring net profit growth (%) 189.0 17.5 -43.7
YoY), mainly due to net extra gains (especially profits from the disposal Recurring EPS (THB) 0.21 0.24 0.14
of investments in solar power plants in Japan (Utsunomiya and DPS (THB) 0.05 0.15 0.18
Iwakuni), and from net FX gains). However, FY20 core profit dropped Dividend Yield (%) 1.20 3.88 4.84
44% YoY, mainly on weak wind speeds and low irradiation levels. Recurring P/E (x) 18.1 15.4 27.5
Return on average equity (%) 12.0 21.9 29.6
Balance sheet/cash flow. GUNKUL’s long-term PPAs enable it to P/B (x) 3.7 3.1 2.7
enjoy strong cash flow through the period of each of its contracts. This P/CF (x) 29.4 9.2 54.0
gives it enough liquidity to run, while allowing for room to take out loans, Source: Company data, RHB
in our view. Power producers like GUNKUL usually have high D/E ratios
(2x-2.5x), because of its nature of their business – which uses financial Balance Sheet (THBm) Dec-18 Dec-19 Dec-20
leverage to invest in projects. Total current assets 5,539 7,285 11,782
Total assets 35,625 39,042 46,032
ROE. Its ROE has increased over the last three years (2018-2020), Total current liabilities 8,505 8,205 12,983
mainly due to extraordinary gains. Without these items, ROE should Total non-current liabilities 17,620 19,504 20,574
decline YoY over the next three years. GUNKUL’s recurring profits of Total liabilities 26,125 27,709 33,557
c.THB1.5-2bn pa are not enough to push ROE to climb further, unless it Shareholder's equity 8,911 10,712 12,350
decides to pay generous dividends or records substantial earnings. Minority interest 590 621 125
Other equity 0 0 0
Dividend. Its policy is to pay at least 40% of company-only net profit. In Total liabilities & equity 35,625 39,042 46,032
the last three years, GUNKUL has continued to pay higher DPS, with Total debt 23,601 22,336 27,363
dividend yields of 3-5% pa. This is a major attraction for dividend- Net debt 21,207 18,142 21,246
chasing investors. Source: Company data, RHB
Management. Gunkul Dhumrongpiyawut founded the company, and is
Cash Flow (THBm) Dec-18 Dec-19 Dec-20
currently its chairman. Recently, GUNKUL welcomed a new
Cash flow from operations 1,124 3,573 611
management team that was appointed to make it more agile. Sopacha Cash flow from investing activities (6,192) (765) 186
Dhumrongpiyawut is the company’s new president, while Somboon Cash flow from financing activities 4,808 (2,083) 1,965
Aueatchasai was appointed as its new CEO, having been promoted Cash at beginning of period 1,048 893 1,600
from his previous position as deputy managing director. The rest of the Net change in cash (260) 726 2,762
management team comprise employees who were promoted as well. Ending balance cash 893 1,600 4,392
Source: Company data, RHB
Investment Case
Expect accelerated growth. GUNKUL is one of the small power
producers in the utility sector with high potential to grow over the long
term. With its solid balance sheet and aggressive expansion plan
(growing via four main divisions), investors should expect solid capital
gains. The stock offers dividend yields of 3-5% pa – outpacing its RE
peers – and is trading below the average P/E of the sector.
Valuation. We estimate GUNKUL’s fair value at THB4.00-4.50 per
share. This is derived by imputing forward P/Es of 16-18x on Bloomberg
consensus EPS of THB0.25 per share. Our P/E range is based on the
forward P/E mean of RE players.
Key risks: Bad weather conditions, cost overruns from any delays in
projects’ construction, and plant outages.
8
Top Thailand Small Cap Companies 2021Fair value: THB16.00-17.00
Index Living Mall (ILM TB) Price: THB 13.90
Buy Market Leader At a Discount
Index Living Mall PCL (ILM TB)
Price Close
Investment Merits
18.0
16.0 • Strong on all fronts.
14.0
• Margin boost from new segment
• Balancing revenue structure with recurring income
12.0
10.0
8.0
6.0 Company Profile
4.0
Index Living Mall operates furniture, home decoration, and home
Feb-21
Mar-21
Apr-21
Dec-20
Jan-21
Apr 21
appliance retail businesses under its own and other brands, through
Source: Bloomberg retail, private projects, dealerships and online channels, with over 25
years of experience. It also provides franchise rights to foreign
Stock Profile companies, and OEM services to its overseas clients. ILM has 65 retail
Bloomberg Ticker ILM TB stores in nine countries – 44 stores in Thailand and 21 stores overseas.
Avg Turnover (THB/USD) 45.0m/1.4m
Highlights
Net Gearing (%) 113.6
Market Cap (THBm) 7,019m Strong on all fronts. ILM has maintained its leading market share for
Beta (x) 1.36 over 10 consecutive years, despite the rise of new competitors. Its sales
BVPS (THB) 10.05
structure, which focuses on house-branded products (c. 80%) makes its
margins relatively higher than its home furnishing peers (FY20 GPM:
52-wk Price low/high (THB) 9.25 – 16.00
46%; industry average: c.24-26%). Its fully integrated model from
Free float (%) 25.07 manufacturing consumer end-products, and built-in services through its
wide range of brand portfolios have been its competitive edge, allowing
it to sustain its high margins and market share in this fast-moving
Major Shareholders (%) industry. Its light expansion model through long-term lease, and the
Thammadapanich 38.9
overseas franchise model also allow it to expand to new markets with
limited capital investment.
Patamasatayasonthi Family 29.3
Margin boost from new segment. Given its strong track record, ILM
plans to ramp up ‘Younique’, its one-stop service that bundles interior
design and customised built-in furniture at all its outlets. The first-mover
advantage, scaling up of this wing through its partnership model, and
Share Performance (%)
expansion to provincial areas should help its GPM continue to widen,
1m 3m 6m 12m thanks to its service’s added value with relatively higher margin. We
Absolute (9.74) 12.10 23.01 40.40 expect this to help the company achieve its GPM (+50bps YoY) and
Relative (9.73) 3.91 (9.81) 18.48 revenue target (high single-digit growth) in 2021, despite the absence of
new store expansions.
Balancing revenue structure with recurring income. ILM currently
Vatcharut Vacharawongsith +66 2088 9736 operates five (mid & small) community malls, and rents some of its
vatcharut.va@rhbgroup.com store space to strategic tenants. It plans to reduce its store size and
increase rental space (c. 6% of total revenue) at most of its outlets –
aimed at ramping up its recurring revenue proportion in its books should
borne fruit soon. The change of store format in its initial projects has
proven that it can provide net incremental revenue and draw in more
traffic to the stores while improve group average sales per sq.m. in the
long run.
9
Top Thailand Small Cap Companies 2021Company Report Card
Profit & Loss Dec-18 Dec-19 Dec-20
Total turnover (THBm) 9,658 9,798 8,119
Reported net profit (THBm) 542 596 421
Latest results. ILM’s earnings decreased to THB421m (29.3% YoY)
Recurring net profit (THBm) 578 617 446
despite impressive cost management, owing to the revenue decline and Recurring net profit growth (%) 24.9 9.8 (29.3)
one-time adjustment on the change of lease recognition. Operating Recurring EPS (THB) 1.14 1.22 0.88
revenue fell 17.2% YoY to THB8.2bn, largely from weaker spending DPS (THB) - 0.46 0.42
sentiment and the nationwide closure of stores (2 months) during the Dividend Yield (%) - 3.3 3.0
first lockdown. While rental revenue also decreased by the same Recurring P/E (x) 12.1 11.4 15.7
magnitude (-17.7% YoY) from the rental discounts during COVID-19, Return on average equity (%) 11.9 12.5 8.4
online sales grew remarkably by 153% YoY on the shift of its focus to e- P/B (x) 1.5 1.4 1.4
commerce channels during the lockdown. P/CF (x) 5.7 4.5 3.4
Source: Company data, RHB
Dividends. ILM’s dividend payment policy is to pay at least 50% of net
profit from normal operations, according to consolidated financial
Balance Sheet (THBm ) Dec-18 Dec-19 Dec-20
statements after deduction of tax revenue and legal reserves. ILM
Total current assets 3,329 3,482 2,302
announced an FY20 DPS of 0.42, or c. 2.7% yield. We expect the 12,282 12,201 12,951
Total assets
company to continue to deliver c.3% yield in 2021-22F, supported by its Total current liabilities 4,964 3,058 2,266
strong operating cash flow and light expansion model. Total non-current liabilities 2,745 4,183 5,605
Total liabilities 7,709 7,241 7,871
Solid balance sheet. Excluding the Thai Financial Reporting Standard
Shareholder's equity 4,570 4,956 5,076
16 or TFRS16’s impact, which saw higher lease liabilities of THB2.4bn
Minority interest 2 1 1
in the recent year, the decline of interest bearing debt towards equity Other equity 1 2 2
(from 0.9x to 0.6x) is in line with management’s plan to continue Total liabilities & equity 12,282 12,201 12,951
leveraging its balance sheet during the economic disruptions. Ongoing Total debt 5,074 4,665 3,133
plans to lower inventory levels and prepay loan instalments should keep Net debt 4,747 4,140 3,027
its balance sheet solid.
Source: Company data, RHB
ROE. ILM’s ROE decreased to 8.4% in 2020 (from 12.5% in 2019).
Given its modest earnings growth prospects, ROE is expected to return Cash Flow (THBm ) Dec-18 Dec-19 Dec-20
to double digit levels in 2021-22F. Cash flow from operations 1,223 1,576 2,085
Cash flow from investing activities (569) (562) (332)
Management. Excluding its major shareholders, who are pioneers of Cash flow from financing activities (644) (815) (2,171)
Thailand’s home furnishing industry, with over 36 years of experience, Cash at beginning of period 316 326 524
Mrs Kannikar Chalitaporn, ILM’s Chairman is also on the executive Net change in cash 10 198 (418)
committee of Osotspa Plc (OSP TB, BUY, TP: THB 46.0) and is a Ending balance cash 326 524 106
former director of Siam Commercial Bank (SCB TB, BUY, TP: THB Source: Company data, RHB
107).
Investment Case
Recovery from low base. While the private consumption recovery,
reopening of hotels post the pandemic, and pent-up demand in property
sectors point to higher demand for home furnishing products, its low-
base revenue – owing to last year’s store closures should be key factors
that supporting the SSSG surge in FY21-22F. While its overall market
segmentation, and scaling-up of its customised built-in furniture – which
mostly focus on the mid-to-high income segment in Thailand – should
see a relatively quick recovery, the accelerating urbanisation in its core
overseas markets, like Vietnam and Indonesia, should bolster its
demand in the long run.
FV in THB16.00-17.00 range, indicating FY21F’s P/E of 15-15.5x at the
mean of its historical level since its listing. While the recovery should be
gradual ahead of the nationwide vaccinations, we see ILM as a cyclical
play, and expect earnings to return to pre-pandemic levels in 2022F.
Risks: Uncertainties over store expansion plans, delays in private
consumption recovery, fluctuation of currency, and rising pricing
competition from online channels.
10
Top Thailand Small Cap Companies 2021Fair Value: THB4.90-5.40
Karmarts Price: THB4.24
Return Of The Beauty Business
Kamartl PCL (KAMART TB)
Price Close
Investment Merits
10.0
9.0 • Expecting strong earnings rebound from 2Q21F, on the improving
8.0
7.0
consumption outlook and a boost in its physical store sales
6.0
• Potential market expansion abroad including to South Korea
5.0
4.0 • Hemp-based cosmetics as earnings upsides, likely from FY22F
3.0
2.0
1.0
0.0 Company Profile
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Karmarts imports, manufactures, and distributes cosmetics and
Source: Bloomberg skincare products, domestically and internationally. It sells its products
nationwide through the wholesale and retail formats such as traditional
Stock Profile trade (c.30% of sales), modern trade (c.50%), its Karmart shops and
Bloomberg Ticker KAMART TB online platforms (c.10%). Exports contributed c.10% of total sales last
Avg Turnover (THB/USD) 20.0m/0.6m year. As at end-2020, it owns a total of 60 Karmart shops, including 27
standalone outlets and 33 kiosks in department stores.
Net Gearing (%) 26.0
Market Cap (THBm) 3,731m
Beta (x) 1.35
BVPS (THB) 1.14
Highlights
52-wk Price low/high (THB) 2.66 - 4.68 Improving momentum. We expect Karmarts’ earnings to rebound
Free float (%) 63.96 close to normal levels in FY21. An improving outlook for local
consumption from 2Q21F onwards – given the ongoing vaccinations,
the under-control pandemic, and gradual border re-opening for
international tourists – should increase sales for both the modern trade
Major Shareholders (%)
and traditional trade platforms. Its cosmetic products’ positioning and
Wiwat Theekhakhirikul 23.2 characteristics may also successfully capture its targeted customers
Polkrit Theekhakhirikul 4.5 domestically and abroad, in our view. The company may need to pay
Woramol Theekhakhirikul 4.1 more attention to the online sales channel to serve its customers’ needs
in the new normal. It may also see better sales via its physical outlets,
including the specialty stores, which have strong growth potential with
rising new players on the platform, such as Watsons, Boots, Beautrium,
Share Performance (%)
EveAndBoy, and Hej Street. The second-wave of COVID-19 may be a
1m 3m 6m 12m headwind for 1Q21F performance, as this year’s bottom.
Absolute (0.47) 3.38 33.75 31.29
Potential overseas market expansion. Karmarts is in negotiations
Relative (0.46) (4.81) 0.93 9.36
with partners in South Korea for further expansion of its cosmetic
business overseas. The South Korean cosmetic industry is almost 50%
bigger than Thailand’s. If the negotiations are successful, it may act as
Vatcharut Vacharawongsith +66 2088 9736 a near-term positive catalyst, and present an earnings upside. Its
vatcharut.va@rhbgroup.com products are currently exported to 14 countries.
Hemp-based products a potential upside. We think Karmarts is
looking to secure cannabidiol from its suppliers, to develop hemp-
related cosmetic and skincare products, pending approvals from the
Food and Drug Administration. It is possible for the products to be
launched by 4Q21F, with its extended domestic distribution channels –
both physical and online – as key support systems. We expect these to
be positioned as premium products, allowing for superior GPM. We
leave this as an earnings upside, mainly from 2022F onwards.
11
Top Thailand Small Cap Companies 2021Company Report Card
Profit & Loss Dec-18 Dec-19 Dec-20
Total turnover (THBm) 1,479 1,487 1,294
Reported net profit (THBm) 360 261 133
Latest results. Karmarts posted total sales of THB1.29bn (-13% YoY)
Recurring net profit (THBm) 360 261 133
in 2020, mainly on the effects of COVID-19 on consumer spending.
Recurring net profit growth (%) 27.9 -27.5 -49.2
GPM was at 51%, down from 2019’s 53% due to promotional
Recurring EPS (THB) 0.41 0.30 0.15
campaigns amid intense competition in the cosmetic business. SG&A- DPS (THB) 0.28 0.28 0.14
to-sales ratio rose to 38.7% (+5.9ppts YoY) as a result of lower sales Dividend Yield (%) 6.6 6.6 3.3
and higher administrative expenses. Net profit totalled THB133m (-49% Recurring P/E (x) 10.4 14.3 28.1
YoY) due to the decline in sales, narrower GPM, and higher Return on average equity (%) 38.8 26.0 13.1
SG&A/sales ratio. Net profit margin fell to 10.3% (vs 17.6% in 2019). P/B (x) 3.8 3.7 3.7
P/CF (x) 16.2 11.4 14.8
Balance sheet/cash flow. The company’s total assets declined slightly
by 4% to THB1.52bn, while total liabilities fell 9% YoY to THB514m on Source: Company data, RHB
smaller bank loans. As such, D/E ratio was down to 0.5x at end-2020,
from 0.6x in 2019. Net D/E ratio fell to 0.2x, from 0.3x in the previous Balance Sheet (THBm) Dec-18 Dec-19 Dec-20
year. The healthy balance sheet should support the opening of new Total current assets 757 766 703
owned-outlets and its overseas expansions. Total assets 1,545 1,587 1,521
Total current liabilities 449 482 438
ROE. Karmarts’ ROE fell to 13% in 2020 from 26% in the previous year, Total non-current liabilities 110 83 76
mainly due to COVID-19, which resulted in strong promotional Total liabilities 559 565 514
campaigns that adversely hit net profit margins by 7.3ppts YoY. We Shareholder's equity 940 945 928
expect ROE to rebound in tandem with an earnings recovery in FY21. Minority interest 4 7 8
Other equity 41 70 71
Dividend. The company’s dividend policy is to pay no less than 50% of
Total liabilities & equity 1,545 1,587 1,521
its net profit. It has paid dividends on quarterly basis since 2012.
Total debt 326 300 271
Karmarts declared THB0.14 in annualised DPS for FY20, which was
Net debt 318 284 262
equivalent to a moderate dividend yield of 3%. This was down from
THB0.28 DPS and 6% yield in 2019. We expect dividend yields to go Source: Company data, RHB
back to the handsome range of 5-6% this year and the next.
Cash Flow (THBm) Dec-18 Dec-19 Dec-20
Management. CEO and Board Chairman, Wiwat Theekhakhirikul, ran Cash flow from operations 231 327 251
the electrical appliance business under the brand “Distar” for 27 years, Cash flow from investing activities (26) (36) (39)
since 1982. He commenced Karmarts’ operations in 2009. He currently Cash flow from financing activities (208) (282) (220)
holds 23% of total outstanding shares, as the largest shareholder. His Cash at beginning of period 11 8 16
sons, Wongwiwat and Pongwiwat are Assistant Managing Directors for Net change in cash (3) 8 (7)
business development and marketing. Ending balance cash 8 16 9
Source: Company data, RHB
Investment Case
The strongest beauty player. We are optimistic on Karmarts’ strength
in securing net profits last year, while its local peers delivered losses in
the cosmetic business. Its outlook this year and the next, may be more
attractive based on: i) An expected recovery in domestic consumption
and tourism; ii) securing sales at its own physical and online stores; and
iii) potential overseas market expansions. Net profit, which may turn to
robust growth, and improving earnings momentum likely from 2Q21F
onwards, could trigger investments. Based on consensus, we assume
average FY21F THB0.25 EPS (+67%) and THB0.26 (+4%) for FY22F.
FV in the range of THB4.90-5.40 is derived from applying a targeted
P/E of 19.5-21.5x (+0.5SD to +1SD from the stock’s 12-month Forward
P/E mean).
Key risks include slower-than-expected economic recovery, continuing
intense competition among cosmetic players, and delays in the
expansion of its store network and new export destinations.
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