Dividend Stocks from Thailand: Higher Yield in the Emerging Market

Written by Money Infant and Dividend Ninja

Stock Exchange of Thailand (SET)

Stock Exchange of Thailand (SET)

As I’m Canadian, I tend to stick with Canadian and U.S. dividend stocks, and any global investing is done through ETFs or Index Funds (currently index funds in my case). Like most North American investors, that’s about it for global diversification. But what if you reside in another country and you gained a knowledge and understanding of the companies around you. Would you be inclined to invest in them?  That’s the scenario my online friend Steve at Money Infant finds himself in, as a U.S. expatriate living with his family in Thailand.  Steve asked me if I could look into three Thai stocks for him and crunch the numbers. In return, I asked him if he could do a write-up for the companies, and then we could we post it on the Ninja. 😉

Steve just wrote an interesting post this week on stocks from Thailand, and the dynamics of this emerging market, in Emerging Markets Diversity, Thai Stocks for Profits. The roots for the development of a stock exchange in Thailand go back as early as 1967. However it wasn’t until 1972 through to 1974 that the Thai government extended control and regulation over the operations of finance and securities companies. By May 1974, legislation was enacted to create “The Securities Exchange of Thailand”.  On January 1st, 1991 its name was formally changed to “The Stock Exchange of Thailand” (SET).

The currency in Thailand is the baht (THB), which is currently equivalent to $.0322 U.S. or Canadian Dollars. In other words, $1 USD will buy you around 28 to 30 baht. Most Thai stocks can be purchased directly on the SET, some European exchanges, or directly as OTC (over the counter) on U.S. exchanges. Most stocks that trade on the SET would be considered small-cap companies by North American standards, with higher debt and higher yields. If you are feeling adventurous, here are three Thai stocks to consider. The following companies all trade on the SET (Stock Exchange of Thailand).

Thai Tap Water Supply Public Company Limited (TTW)

Thai Tap Water (TTW)Thai Tap Water is in the business of supplying tap water in the provinces of Nakhon Pathom and Samut Sakhon.  It was formed in 2000 with just 100,000 baht registered capital and has since grown to now have 23.3 billion baht in registered capital.  TTW was first listed on the SET in 2008.  The main customer for TTW if the Provincial Waterworks Authority (PWA) a government agency tasked with building and managing the waterworks affairs and providing potable drinking water to the people of Thailand.  TTW has a 30 year contract with PWA to supply them with treated drinking water.  TTW has also been expanding through acquisition with the purchase of Pathum Thani Water Co. and Bangpa-In Industrial Estate Water Supply.  The company is also exploring the possibility of entering into the solar energy and bio-mass energy production fields.

In U.S. Dollar terms, TTW is a $778 million dollar company, making it a small-cap in North American terms. It has a current dividend yield of 6.83%, and PE Ratio of 11.03. However the price to sales ratio is high at over 5.1. The last dividend reported on Feb.9th was for 0.25 baht per share, with an EPS of 0.53 per share. 4-traders estimates a payout ratio around 69%. This makes it very similar to the previous “income trust” type of stock here in Canada. Recent cash flow has been negative, as the company has been investing over 63.5 million baht in CAPEX (capital expenditures), and over 1.1 billion baht in “other investing activities” The company has a current debt to asset ratio of 51%, with 21.7 billion baht in assets, and total debt of 11.5 billion baht. TTW is currently trading at a 5 year high, and is pushing its support level at 5.75 baht (see chart). It may be a better to wait and buy at a lower price point around 4.75 baht.

MBK Public Company Limited (MBK)

MBK Public Company Ltd. has as its primary business the development, management and rental of shopping centers, office space, hotels and car parks.  The best known of its properties is the MBK Shopping Mall in downtown Bangkok.  The company was founded in 1974 and has traded on the SET since 1996.  In addition to its main businesses, MBK Public Company Ltd also engages in the production and distribution of rice (Thailand is the world’s largest exporter of rice), machinery rental, production and distribution of plastic bags and provides both security services and warehouse rentals.  The company also has several other business channels, making it an extremely diverse company.

MBK Public Company (MBK)MBK has a market capitalization of 18.29 billion baht, or approximately $606.7 million USD. It has a current dividend yield of 5.18%, and a PE ratio of 10.68. MBK has a debt to asset ratio of 30%, with 27.4 billion baht in assets, and 14.7 billion baht in debt. The price to sales ratio of 1.88 and price to book ratio of 1.23 indicate this stock is fairly valued. This stock (like many on the SET) has had a good run-up in price over the years, so it’s not a cheaply priced stock. MBK currently has a stable long-term trading pattern, and is currently trading at 96.50 baht per share. A better price point for entry may be around 85 baht.

Kiatnakin Bank Public Company Limited (KK)  

Kiatnakin Bank is one of the smaller Thai banks with 61 branches throughout Thailand, the majority of them being in Bangkok and the greater Bangkok area.  The bank provides all the ususual commercial and personal banking services in regards to loans and deposit products.  In addition, it also provides life insurance products, car auction services and is involved in the sale of land and buildings.  The bank also provides a security brokerage service.  Kiatnakin Bank was founded in 1971 and has been listed on the SET since 1988.

Kiatnakin Bank (KK)KK has a market capitalization of 21.57 billion baht, or approximately $719 million USD. It has a current dividend yield of 7.05%, and a PE Ratio of 7.552. It has a price to book value of 0.929, and a price to sales of 1.41. This company is currently trading at 34 baht per share, with 35 baht being a 3-year price ceiling and next support level. It may be a better buy around 30 baht. Kiatnakin has a current debt to asset ratio of around 48%, with total assets of over 184 billion baht, and total debt over 165 billion baht. Banks and financials however, consider consumer and business loans as assets. KK has over 130 billion baht on the books as loans which is approximately 78% of its assets.

iShares Thailand Investable Market Index Fund (THD)

[easyazon-image-link asin=”9749511867″ alt=”Your Investment Guide to Thailand” src=”http://ecx.images-amazon.com/images/I/41D9JRBjqvL._SL500_.jpg” align=”left” width=”150″ height=”230″]

Another way to play the emerging market in Thailand is through the iShares Thailand Investable Market Index Fund (THD). It only has a yield of 2.78%, but it has had tremendous growth over the last year. With a 52-week high of 72.65 USD, and a 52-week low of 49.43, that’s a whopping 46% increase. In 2009 this ETF returned 80.78%, and 57.01% in 2010. It was down -4.56% in 2011, and has a 2012 YTD (year to date) return of approximately 13.72%. Keep in mind however, that the Thai stock market has had a huge run-up in price over the last few years.

The MER on THD is 0.59%. That may seem higher for ETF investors, but it’s a bargain compared to international equity mutual funds. Of course the biggest reason to hold an ETF such as this is simply diversification. While you obtain a higher yield by holding Thai stocks directly, there is also more inherent risk. THD gives you a basket of 86 Thai stocks that make up the SET index, and thereby a safer play with a nominal yield.

Conclusion

Thailand is considered an emerging market. That means you can make some big gains, but also there is the potential for loss. If you are living in Thailand, then you would certainly have an edge in understanding these companies. However most of the Thai companies are considered small cap companies by North American standards, have higher yields, but also many carry higher debt. The iShares ETF THD, may be a safer play albeit with a lower yield. If the emerging market economy of Thailand interests you, then be sure to check out Bruce Bickerstaff’s book, [easyazon-link asin=”9749511867″]Your Investment Guide to Thailand[/easyazon-link].

Readers, what’s your take? Have you considered holding foreign stocks directly instead of an ETF? Are you ready to take the plunge into Thai stocks?

Steve is the owner of the site Money Infant and a recent expatriate living in Thailand in semi-retirement.  He writes on a variety of finance and investment related subjects as well as focusing on life in Thailand and Thailand investment opportunities. He is also active on Twitter, Facebook and Google+ and would love to hear from anyone with an interest in making, saving and investing money or life as an expatriate. The Dividend Ninja does not live in Thailand. He lives in Vancouver Canada where it’s cold and usually rains a lot. 😉

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31 Responses to “Dividend Stocks from Thailand: Higher Yield in the Emerging Market”

  1. Nick

    Mar 07. 2012

    Steve talk Thai! Steve talk Thai very well! (Please tell me you get the reference…)

    It sounds like you know what you’re talking about for sure… Even domestically I mainly stick with index funds and focus most of my energy on making more money (and annoying people…).

    Interesting stuff though, for sure.

    Reply to this comment
    • Money Infant

      Mar 07. 2012

      Kup khun mak khrap! Khun Steve bpen gaeng mak. Pood Thai nidnoy 🙂

      This year Thai stocks should continue to do well so if you want to really annoy people consider some diversification.

      Reply to this comment
  2. Sigma Swan

    Mar 07. 2012

    I held Nintendo stock for about two years – which actually pays a dividend. I didn’t know that at the time because none of the stock screeners I was using listed the yield. I’ve noticed that can be a problem all around, actually, for foreign stocks. I have trouble getting good, consistent yield information. So I’d just say be careful and double check your yields as you could be surprised in either direction 🙂

    Reply to this comment
  3. Bruce

    Mar 07. 2012

    Interesting article thanks. Readers who would like to delve deeper into the issue of Thai investments may wish to obtain my book “Your Investment Guide to Thailand” via amazon.com. Further details at http://www.burning-bison.com

    Reply to this comment
  4. Money Infant

    Mar 07. 2012

    Yields for Thai stocks are listed on the SET website: http://www.set.or.th/en/index.html

    There are differences between dividends in Thailand and the US though. Many Thai companies only pay dividends once a year and because many of the companies have a mandate to pay out 50% or more of net profits as dividends the dividend payments can vary wildly at times. I’ve actually seen companies with a yield of 4% one year and 20% the next (or vice versa).

    Reply to this comment
  5. American Debt Project

    Mar 08. 2012

    As for KK Bank, it would be really hard for me as someone who knows nothing about the Thai banking system to invest in a banking stock. I would want to know what kind of risk Thai banks are comfortable with, for example Latin American banks tend to be much more conservative in underwriting policy than US banks. I would also want to compare it against larger banks in Thailand, just to get an idea of how they stack up. This article was really interesting, I hope you guys do more like it!

    Reply to this comment
    • Money Infant

      Mar 08. 2012

      Actually Kasikorn Bank (KK) is one of the largest banks in Thailand. And Thai banks do tend to be more conservative in their lending policies than Western banks. They got burned back in 1997 with the Asian banking crisis and have since tightened things up considerably.

      Reply to this comment
      • Money Infant

        Mar 08. 2012

        Whoops sorry! That’s what I get for answering comments before finishing my first cup of coffee!

        Yes, KK is a smaller regional bank. What I said about banks in general holds true though. Banks in Thailand are very well capitalized thanks to the Asian banking crisis in 1997.

        Kasikorn bank (KBANK) is one of the largest banks in Thailand and is a favorite of institutional investors. 17 of the top 20 holders of this stock are non-Thai banks and investment funds. It has a dividend yield of 1.72%

        Reply to this comment
  6. Poor Student

    Mar 08. 2012

    I guess I have been hindering my opportunities by not really looking outside Canada for investment chances. I am going to look hard into the Thai ETF. You said there was a huge run up in the Thai markets for the last few years, is there any reason to expect a pull back?

    Reply to this comment
    • Money Infant

      Mar 08. 2012

      There was actually a pullback in 2011 when the iShares lost 4.23%. A good part of that was due to the massive flooding in and around Bangkok which affected the rice crops as well as closing down many factories for over a month. The Thai GDP lost 10.8% in the 4th quarter of 2011 due to these floods. Everything is now back to normal and better since those factories have increased production to make up for back orders in the 4th quarter.

      Reply to this comment
      • Poor Student

        Mar 10. 2012

        I will keep all that advice in mind. I probably won’t add any emerging markets until my domestic portfolio is where I want it.

        By the way, if I were going to splurge on a vacation, how nice is Phuket? I read about it a while ago and have wanted to see it for myself, but the opinion of someone in tHailand would be valuable. Have you made it to Phuket while you have been in Thailand?

        Reply to this comment
        • Money Infant

          Mar 10. 2012

          It kind of depends on what type of vacation experience you are looking for. I have been visiting Phuket since 1997 and it is vastly different today vs 15 years ago. The last time I was there was this past December and I don’t think I will be going back. Hit me up via my contact form and we can talk more.

          Reply to this comment
    • The Dividend Ninja

      Mar 08. 2012

      Poor Student First priority is your asset allocation! In other words do you have the percentage of bonds, domestic stocks, etc. in your portfolio. I would personally say you would want to start out with a solid international equity ETF first. Keep THD around 5% to 10% (max) of your portfolio. Steve might disagree with me on that 😉

      An ETF such as this is going to be more volatile than a regular international equity ETF of blue chips. That can give you tremendous gains, but also the potential for loss. It all depends on when you buy in and how long you hold. Many newbie investors will buy these types of ETFs after a good runup and then sell after they lose value – then complain they lost money.

      On the other hand, an emerging equity ETF can easily outperform North American markets. In fact this ETF will likely move differently than U.S. or Canadian stock markets. That can give you an interesting diversification play, and hedge against North American markets.

      I have no idea what the Thai market is going to do in the future, or North American markets for that matter. But this ETF (thanks to Steve’s article) is on my watchlist. From a purely technical chart point of view, I do see a possible pullback 😉

      Cheers

      Reply to this comment
  7. The Dividend Ninja

    Mar 08. 2012

    Steve Thanks for co-authoring this post with me! I have to say this was one interesting article, and I thouroughly enjoyed it. 😉

    Reply to this comment
  8. MoneyCone

    Mar 08. 2012

    Very interesting post DN! I do have some EMs in my portfolio, but not Thailand.

    From 2008 till today, a 40% return is pretty nice!

    Reply to this comment
  9. My Own Advisor

    Mar 08. 2012

    Very cool post! Just tweeted!

    I also have some EM in my portfolio, via VWO ETF. We own a couple hundred shares of VWO, but Thailand is not in the top-10 countries owned. It is in there though.

    I might have to go over and check out Steve’s site, sounds good!

    I’ll follow your blog if you move to Thailand Ninja, just saying 🙂

    Reply to this comment
  10. Shilpan

    Mar 08. 2012

    Interesting article Steve and DN. I own BRIC ETFs, and they’ve done fairly well for the past three years. It’s interesting to learn about Thai market and its potential for new investors.

    Reply to this comment
    • The Dividend Ninja

      Mar 08. 2012

      Hi Shilpan, thanx for posting! 🙂 Did you see the comment above from Bruce, he has written a book on investing in Thailand. I’m going to add a link into it for the post.. Also be sure to keep an eye on Steve’s site, I’ll bet you a few dollars to doughnuts he will be writing more on this topic.

      Cheers!

      Reply to this comment
  11. A Student Investor

    Mar 09. 2012

    Nice to see you blog about the Asian market and looks like a new investment opporunity. I’m going to pass because of the little knowledge I have about the international markets and its economic problems (besides Europe). I could see a profit being made in the Thailand currency tho.

    Reply to this comment
    • The Dividend Ninja

      Mar 09. 2012

      A wise decision 😉 Always better to err on the side of caution, than take undue risk. You have to be 100% sure before you pull the trigger on anything, esepcially an area like this.

      Having said that, the THD ETF is now on my watch-list. If I see I good price point, I’ll buy 🙂

      Cheers!

      Reply to this comment
    • Money Infant

      Mar 09. 2012

      Actually the Thai currency (the Baht), hasn’t fluctuated much over the past 2 years. In any case I’m not sure how you would play it unless you are in Thailand. The Thai currency isn’t freely floating so it isn’t available as a cross in the global FX markets. Offshore you get a terrible exchange rate, so the only way to play the Baht would be to take physical possession of the currency.

      Reply to this comment
  12. My University Money

    Mar 09. 2012

    Long-term investors will ignore the emerging markets at their own risk going forward. I think it is fairly obvious that most of the world’s growth HAS to come from emerging markets in the coming decades. If S&P companies grow, it will be because of their exposure to these markets. That being said, I don’t trust my stock picking abilities at all, I think I’ll stick with my VWO ETF.

    Reply to this comment
  13. Great article on Thai stocks (I like that since I live here) and the comments give a lot of additional info. When investing my savings I rather play it safe. So far I have never invested directly in Thai stocks. I trusts Steve’s analysis of the companies (we met last week and had a coffee at a Starbucks here in Bangkok) and ideally I would like to see a high dividend index fund for Thai stocks or so, before I invest here. I keep already track of the long-term trend signals for the SET (Stock Exchange of Thailand) index. Maybe I use this article as a trigger to diversify a (small) part of my savings into the Thai index fund. I have to think about. Thanks for making me think.

    Reply to this comment

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