- This is still a thought in progress, thus excuse the usual typos/grammatical errors etc etc … but the idea of momentum (effectively I’m thinking of a derivative of Soros’ Theory of reflexivity) is an interesting phenomenon. There is something to be said about the nature of momentum for a company’s business and thus its stock price movement. Companies demonstrating consistent quality earnings growth seem to have an air about them that nothing can go wrong with their business and quarter after quarter, year after year, they will have positive news developments, positive business developments that maintain or lead to a strong price performance. This is then further compounded by positivity from the media, from the sell-side analysts and brokers, from the buy-side fund managers buying into the name out of FOMO. The momentum continues to a point where the company (may) raise equity at valuations which at the time can be perfectly justified by 99% of market participants and then (perhaps) the business will use the raised capital to expand the business to yet an even high level. From the top of my head I can think of companies such as CPALL, BDMS, and SCC as straightforward examples that have continually shown decent ROIC’s
- But what prompted this was a discussion in the office regarding TTCL, BEAUTY and TKN’s share price performance. These are names that showed positive momentum for a period of 2-4 years, either raised equity at high valuations or had owners selling stakes to funds at valuations that, at the time, made sense to the buyers. Now looking back people will call the founders cheeky/clever for exiting a portion of their net worth, but most of the time this will probably be coming from the same investors/traders/market participants that purchased the shares and defended the high multiples/valuations at the time.
- Flipping to the other side, negative momentum, TTCL was a high flier, winning projects doing well left right and center on everything they touched. But with a sudden loss of projects in Myanmar, followed by their main Japanese investor/partner leaving. One has the sense that this negative momentum may translate into further projects lost and continued weaker earnings. Now no sell-side analyst covers them (ok a few but not like 12 months ago), their earnings are continuing to decline and there is no positive news flow. Will the same occur to BEAUTY or TKN? Time will tell, that’s the benefit of hindsight..
- And so what? Markets are what they are, on the way up the sky is the limit, on the way down there seems like there’s no end in sight, so just apply some common sense…
LH founder tendering for 10% of shares outstanding
Chart 1: LH 12 month stock price
Announced to the market just 2 weeks (interesting to see that the stock popped at the beginning of the year to this acquisition price level). The founder states that he wants to increase the investment in the company without changing the business nor the dividend policy. An EGM shall be held on the 7th August 2018.
- GIC is the shareholder that Anant Asavabhokhin aim’s to buy the stake from.
- He may increase his official stake from 24% to 34%.
- The tender offer price is THB 11.80 / share
- This could reduce what market participants are saying is an overhang on the stock price.
SET index Series changes
SET Index Series semi-annual review results to be used in 2H2018, which will be effective on July 2, 2018. Local funds track this, so take that into account when looking at the share price movements this past Thursday and Friday.
* SET50 Inclusion: BGRIM, DELTA, GLOW, KTC, RATCH & TOA
* SET50 Exclusion: BCP, KCE, PSH, SAWAD, TPIPP & WHA
* SET100 Inclusion: BGRIM, BLA, DELTA, ERW, GLOW, PRM, RATCH, RS, THANI, TOA & TTW
* SET100 Exclusion: ANAN, BA , BEC, BIG, JMART, JWD, MC, MONO, THCOM, TTA & UNIQ
* SETHD Inclusion: BCP, GLOW, MAJOR, RATCH, SGP, SPRC, TOP & TTW
* SETHD Exclusion: ANAN, BA, INTUCH, KTC, MC, SPALI, THCOM & TMB
A big WTF with GGC & PTTGC
Apparently there may be a THB 2 bn gap in GGC’s inventory. Yes, someone there may be forgotten about some 70,000 tonnes of raw mats that fell off the back of a truck (Company news announcement).
“The Company has recently found certain facts indicating that as at 31 May 2018 the quantity of raw materials of 71,848 tons in the information system of the Company for which the full payment has been made, is significantly different from the actual quantity of raw materials at the storage facilities of the suppliers.
The level of damage the Company may sustain from this issue depends on how much the Company will be able to follow up and claim from the persons who are responsible for the shortfall of raw materials in the inventory. The potential amount of damages is approximately THB 2,100 million
So the stock has tumbled by 24%. So the MD has already resigned. And whilst the impact to PTTGC is minimal (~1.8% of PTTGC’s consolidated profits). This isn’t exactly a sign of capability within PTT Group….the only positive I can take away from this is that the Audit and Risk committees and the Auditor did their jobs.
Chart 2: GGC 12 month stock price
Chart 3: PTTGC 12 month stock price