Stock Breakdown: Siam Global

Majority owned by Siam Cement, Siam Global (GLOBAL) is the group’s home renovations and construction materials chain. As with other retailers, it has suffered from the COVID-19 infections spread during last quarter – and may report contraction in sales and profit for 2Q20.

Analysts are estimating net profit of 420 million baht, down 19 per cent year on year. 

Global operates in the small towns and rural provinces there by avoiding head on competition with likes of Home Pro, an associate of Land and Houses, and Thai Watsadu of Central Group. Over the past 10 years it has established brand value, and improvement in margin.  Through branch additions, and economy of scales, it improved its profit margin from around 5.5 per cent in 2015 to around 8.5 per cent last year. It will add 7 new stores in Thailand and 1 in Cambodia. Analysts expect Cambodia operations to become profitable this year.

Recent recovery in share price has been led expectations of pick up in sales from pent up demand and increase in farm income in third quarter when effect of weather pattern, El Nino, will bring rains, and improve farm income from fourth quarter of this year. Analysts community is forecasting annual profit to contract 10 per cent this year followed by over 20 per cent rise in 2021. While the company deserves a premium rating due to expanding network, and expansion in Cambodia, its current PE rating of 37x is high relative to its peers and its own historic rating.

Will you pay so much in anticipation of rains? We will not. Take Profit.

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