THAI Shares Range Bound as Investors Await a Return to Profit

Witawat (Ed) Wijaranakula, Ph.D.
Thu Feb 9, 2017

Thai Airways International Public Company Limited (SET:THAI), 51.03% stake owned by the Ministry of Finance as of March 10, 2015, is a state-owned enterprise under the administration of the Ministry of Transport and the national carrier of the Kingdom of Thailand operating commercial flights domestically and internationally, and providing comprehensive air transport related services. 

The company operates three core business segments: Air transportation, which includes transport of passengers, cargo and mail on scheduled and chartered flights on THAI to domestic and international destinations; Airline related businesses including cargo and mail commercial, warehouse storage services, ground customer services, ground equipment services and catering services, and other activities segment, which consists of their technical department providing aircraft maintenance services, dispatch services, duty free sales on board and Thai shop-souvenir sales. 

Its subsidiaries, which THAI holds more than 50% equity, are comprised of the online ticketing service Thai-Amadeus Southeast Asia Company Limited (55% equity ratio) and passenger and cargo air transportation services Thai Smile Airways Company Limited (100% equity ratio).

THAI said on November 11 that its revenues for the third-quarter 2016, ending September 30, increased 1.29% year-on-year to 43.27 billion baht, exceeding the 42.38 billion baht consensus estimate of 2 analysts, according to the Financial Times. The company posted a third-quarter 2016 net loss of 1.6 billion baht, or -0.503 baht per share, compared to a loss of 9.9 billion baht during the same period the previous year, exceeding the 0.77 baht per share loss estimate of one analyst.

The company said lower fuel prices and operating costs from its current restructuring program helped reduced the losses, according to Reuters. Thai Airways' CFO, Narongchai Wongthanavimok, told Reuters in an interview, it has fallen short of its target to cut expenses by 10% for the year as, "cost reduction plans have not been fully implemented". The next earnings announcement is expected on February 27, 2017. The consensus estimate is EPS of -0.47 baht on revenues of 44.32 billion baht for the fourth-quarter 2016. 

From our technical viewpoint, THAI shares broke out the descending wedge chart pattern in early 2016, at about 10 baht per share, and has run up to the top of the trading range. The stock has been trading in the range between 20 and 30 baht since July, as investors wait for the company to return a profit. According to the Financial Times, the consensus amongst 21 polled investment analysts covering THAI gave the company a Sell rating, with the median 12-month price target of 21 baht per share, as of February 4. 

Disclosure: No position and no recommendation.


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