Thailand Equities


Switch from PTTEP into TQM
Group Research05 Aug 2022
  • Remove PTTEP amid global oil price corrections
  • Add TQM to Blue-Chip
    Photo credit: AFP Photo


    Equity Picks Performance Since Inception

    As of 5 Aug 2022

    Key facts

    Inception Date 

     31 Jul 2017

    TWRR (%) 

    84.49

    Start Value 

     1,400,000

    TWRR Ann (%) 

    12.99

    Current Value 

    2,582,925

    Total Dividends Received ($) 

    245,058

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    Current DBS Equity Picks

    As of 5 Aug 2022

    BLUE CHIP: Provides steady growth over a longer time period
    DIVIDEND: Provides steady income stream
    GROWTH: Provides capital growth over 12 month  

     

    Our portfolio value rose by 10.2% during the past 12 months, strongly outperforming the benchmark Stock Exchange of Thailand (SET) Index’s 8.0% gain. Overall, our model portfolio has returned 84.5% since its initiation on 31 July 2017, beating the benchmark, which inched up 4.2% over the same period.

    Remove PTTEP. We are removing PTT Exploration and Production (PTTEP) from our portfolio, as sentiment could turn negative near term, amidst the correction in global oil prices.

    Add TQM to Blue-Chip category. TQM Corporation (TQM) is the No.1 and only SET-listed retail insurance broker in Thailand, with a 4m customer base and a market share of 6.4% in the non-life insurance market in 2021.

    Low-risk business model, net cash position. As an insurance broker, TQM does not bear any risk of insurance claims. Its core revenue is derived mainly from sales commissions (60%) and services rendered to insurers (40%), while its operating costs comprise mainly services, marketing, and administrative expenses. The company is in a net-cash position and is expected to remain so for the foreseeable future.

    Strong earnings growth outlook, combined with high ROE. Despite the COVID-19 pandemic, TQM saw its earnings jump 38% and 27% in 2020 and 2021. Looking forward, we conservatively expect the company’s earnings to grow 21% this year and 15% next year, thanks to an increase in its overall insurance sales and the consolidation of TQR’s premium sales from May 2022. We see upside risks to our earnings forecast as the company has just announced its new strategic direction to unlock the potential of its insurance services. The company will no longer focus on only “wealth protection” (i.e. insurance business) but will move to also cover “wealth creation” (i.e. financial services), leveraging its resources and strength (i.e. people and platform) and offer a total solution to its customers


     

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