| SRI TRANG AGRO (STA), which is listed in Singapore and Thailand, is one of the September 2020 alpha picks from the Thai stock market. Excerpts from UOB KH report by Thailand Research Team. |
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Sri Trang Agro |
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Share price: |
Target: |
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Source: UOBKH |
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STA produces and exports natural rubber. Its products include natural rubber, ribbed smoked sheets (RSS), block rubber (TSR), concentrated latex.
Its other businesses include the production and distribution of finished products such as gloves.
2H20 earnings are likely to double from 1H20’s earnings.
The key drivers would be:
| a) improvement in the natural rubber business as local raw material prices are now declining on seasonally larger market output; and b) huge earnings contribution from Sri Trang Gloves (STGT) due to an ASP jump. |
Sri Trang Gloves was spun off for a listing in Thailand in July 2020 and is now 56% owned by its parent, Sri Trang Agro. Maintain BUY with a 2021 target price at Bt45.50, based on SOTP valuation.
We have pegged a valuation of 7x 2021F PE (below the stock's 10-year mean at 13x) to the natural rubber business and 21x 2021F PE (in line with Kossan Rubber Industry's 5-year mean PE of 21x) to the glove business.
Share Price Catalyst
Rising global glove demand.
Rising tire demand from recovering in automotive industry.
Full report here.
See also SRI TRANG AGRO: Target price raised to 71 baht (S$3.14) by Citi Research