Written by Money Infant and Dividend Ninja
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 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 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.
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.
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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