Lower crude prices expected this year are likely to take a bite out of SET-listed energy firms' net profit by at least 15%, says Kasikorn Securities (KS).
Oil prices are expected to decline slightly because the recent 1.2-million-barrel cut at December's Opec meeting did not result in any meaningful spike in oil prices, said KS senior vice-president Jakapong Chawengsri.
Brent crude remains at around US$60 per barrel, while the pipe infrastructure is poised to result in more US crude supply in the second half by 2 million barrels, which should keep oil prices benign, Mr Jakapong said.
KS expects oil prices will continue declining to $57 for Dubai crude and $60 for Brent crude this year from $68 and $71 in 2018, respectively.
This outlook would take a toll on the net profit of SET-listed energy firms, the combined net profits of which are projected to fall to 157 billion baht from 188 billion estimated in 2018, a decline of 15-20% year-on-year, he said.
Lower crude prices may compel leading oil refinery companies to shut down for maintenance, said Mr Jakapong.
The sectors recommended for investment this year are commerce, industrial estates and conventional electricity power plant, according to KS.
In 2018, the top performing sector in terms of net profit growth was technology at 40%, followed by industrial at 26%, services at 17%, energy and resources at 15% and finance at 13%, according to some 70% of SET-listed firms responding to the bourse's survey.
This contrasted with the energy sector leading net profit gains in 2017 on the strength of high oil prices.
SET-listed companies have until the end of February to submit their financial statements.
KS maintains a SET index target with a 12-month forward of 1,750 points and a 13% rise in total return.
KS head of research Passakorn Linmaneechote said three key risk factors in 2019 are the US policy interest rate, oil price fluctuation and Sino-US trade disputes, all of which are poised to put significant pressure on the global and Thai equity markets.
"Brexit is another systemic event risk that needs to be monitored," Mr Passakorn said. "We still prefer domestic names over exporters because of fewer earnings uncertainties, except for the agro-business sector, which we are confident in due to fundamental improvements."
A weak provincial economy and farm income could prompt the Bank of Thailand to adopt a long pause in raising interest rates, with a one-time rate hike anticipated in the final quarter, he said.
The US Federal Reserve might not raise the fed fund rate this year as the US economy is projected to expand slowly, easing pressure on higher interest rates globally, said Mr Passakorn.
