As expected, the Stock Exchange of Thailand performed well last month, bucking the historic "Sell in May" trend for stock markets, helped by early stirrings of hope for a peace agreement between the US and Iran.
The SET index pushed above 1,500 points early in May and has largely stayed there, with big-cap Delta Electronics providing a lift on the back of positive sentiment about all things artificial intelligence (AI) on the tech-heavy Nasdaq in the US. The gains by DELTA lifted the entire electronics sector, making it the biggest outperformer in May.
First-quarter results were also encouraging, with 51% above expectations, 33% in line and only 16% below expectations. The 10-year US Treasury yield has increased to around 4.5%, signalling interest rates have bottomed out and the Federal Reserve could increase rates later this year.
The SET ended May at 1,568.37 points, an increase of 5% from April, while average daily turnover was up 13.1% to 66 billion baht. Hopes that the Strait of Hormuz will reopen have pushed oil prices back below $90 a barrel.
The SET reached 1,600 points for the first time this year in early June, helped by data showing Thai GDP growth was 2.8% for the first quarter, attributed to a gain of around 10% in both private and public investment, creating positive sentiment for foreign direct investment. We upgraded our GDP growth forecast for this year to 1.8% from 1.2%.
JUNE PICKS
We believe the SET index will stay above 1,500 points throughout this year, but investors still need to be selective about stocks. Our picks for this month are Central Retail Corp (CRC), Gulf Development (GULF), MR. D.I.Y. (MRDIYT) and PTT Exploration and Production (PTTEP):
CRC reported a first-quarter net profit of 2.8 billion baht, 18% above the market consensus, and up 14% year-on-year. Operating results were helped by lower interest rates and increasing profit realisation from JD Sports. Same-store sales growth until early May was in the low single digits. Food operations in Vietnam saw the highest growth of 12% year-on-year, with same-store sales growth of 10%.
GULF posted net profit growth of 39% year-on-year and 3% quarter-on-quarter to 9.1 billion baht, 7% above the market consensus. Renewable energy contributions increased by 128% year-on-year, with revenue from solar plus battery-storage systems totalling 597 megawatts fully realised in the first quarter. We expect a strong second quarter, with the company benefiting from AI and data centre demand, as it plans to increase data centre capacity to between 1-2 gigawatts, from 163MW currently. A joint venture with Kore.ai is also expected to tap strong enterprise AI demand.
MRDIYT is a hot stock, entering the MSCI Global Small Cap Index in late May and slated to enter the FTSE Mid-Cap Index in late June. We also expect the company to enter the SET50 when revisions are announced in mid-June. Net profit in the first quarter was 678 million baht, up 25% year-on-year but down 20% from the previous quarter, due mainly to seasonal impacts. The home improvement chain has opened 65 new branches in the past 12 months with total sales increasing 21% to 5.4 billion baht. The trend will continue into the second quarter, though same-store sales growth is expected to flatten.
We continue to like PTTEP as the main beneficiary of increasing oil prices. Crude benchmarks are still up more than 30% since the US-Iran war started, and we expect prices to remain at $90-100 per barrel for at least 6-12 months. PTTEP booked hedging losses of more than 8 billion baht in the first quarter, but net profit was 13 billion baht and the dividend yield is more than 6% per year.
