Business & Finance
Business and Finance
Business and Finance
Wed, February 25, 2009
Tue, February 24, 2009 Thai Capital Fund: The Thai Capital Fund Reports Fourth Quarter Earnings
JERSEY CITY, NJ--(Marketwire - February 24, 2009) - The Thai Capital Fund, Inc. (the "Fund") (
The Fund's investments in Thailand are made through a wholly owned investment plan ( the "Investment Plan") established under an agreement between SCB Asset Management Co., Limited ("SCBAM"), the Fund's investment manager, and the Fund. The Fund's investments through the Investment Plan are managed by SCBAM, located in Bangkok, Thailand. Daiwa SB Investments (Singapore) Limited, the Fund's investment adviser, provides SCBAM with advice regarding investments through the Investment Plan and manages the Fund's assets held outside the Investment Plan.
FOURTH QUARTER EARNINGS RESULTS
For the quarter ended December 31, 2008, the Fund incurred a net investment loss of U.S. $197,000 (equivalent to a loss of U.S. $0.06 per share), resulting in net investment income for the year ended December 31, 2008 of approximately U.S. $432,000 (equivalent to income of U.S. $0.14 per share). Net realized and unrealized losses from investment activities and foreign currency transactions for the quarter ended December 31, 2008 were approximately U.S. $7,300,000 (equivalent to a loss of U.S. $2.32 per share). As a result, net realized and unrealized losses for the year ended December 31, 2008 were approximately U.S. $18,991,000 (equivalent to a loss of U.S. $6.01 per share).
In comparison, for the quarter ended December 31, 2007, the Fund incurred a net investment loss of approximately U.S. $136,000 (equivalent to a loss of U.S. $0.04 per share), resulting in net investment income for the year ended December 31, 2007 of approximately U.S. $540,000 (equivalent to income of U.S. $0.17 per share). Net realized and unrealized gains from investment activities and foreign currency transactions for the quarter ended December 31, 2007 were approximately U.S. $1,334,000 (equivalent to a gain of U.S. $0.42 per share). As a result, net realized and unrealized gains increased to approximately U.S. $10,081,000 (equivalent to a gain of U.S. $3.19 per share) for the year ended December 31, 2007.
On December 31, 2008, the total net assets of the Fund were approximately U.S. $23.2 million. The net asset value per share on that date was U.S. $7.32, based on 3,167,316 shares outstanding. In comparison, on December 31, 2007, total net assets were approximately U.S. $42.0 million, equivalent to a net asset value per share of U.S. $13.27, based on 3,163,037 shares outstanding. The Fund generated a negative investment return of 44.14% for the year ended December 31, 2008, when measured against the net asset value per share of U.S. $13.27 calculated on December 31, 2007. In comparison, the Stock Exchange of Thailand ("SET") Index decreased 49.34% for the same period, in U.S. dollar terms.
As of December 31, 2008, the Fund had 93.81% of its net assets invested in Thai common stocks and 4.67% in Thai cash instruments. The remaining assets were made up of 2.16% in short-term U.S. dollar time deposits and liabilities in excess of other assets of 0.64%.
As of February 19, 2009, the Fund had total net assets of approximately U.S. $22.8 million, equivalent to a net asset value per share of U.S. $7.21. On that same date, the Fund's shares on the NYSE Alternext closed at U.S. $6.35, representing a trading discount of 11.93% to its net asset value per share.
FOURTH QUARTER MARKET REVIEW
After enjoying a strong and sustained period of expansion with Gross Domestic Product ("GDP") growth averaging 5.5% per year over the past decade, Thailand cannot escape the adverse consequences of deteriorating global economic conditions. We forecast negative real GDP growth (-0.8% YoY) for 2009, the worst performance by the economy since the Asian financial crisis of 1997-98.
In our forecasts we assumed weaker aggregate demand (including private sector consumption and investment) and a sharp contraction in international trade and services income from abroad. Fiscal policy measures are likely to play only a limited role in supporting domestic demand in the near term partly because disbursement of public funds is often delayed. Also while political risk seems to have eased and various stimulus packages are in the pipeline, the new government's actions are circumscribed by the fiscal year 2009 budget drawn up by the previous administration. No large-scale infrastructure projects should be expected to begin anytime soon.
We anticipate a sharp economic slowdown during the fourth quarter of 2008 ("4Q08") and the first quarter of 2009 due mainly to a contraction in external demand for Thai goods and services, though demand for imports (mainly consumer goods) could remain strong. Economic activity will remain at low ebb for most of 2009, with a slight pick up towards year-end.
We are not seeing much upside potential for the first half of 2009 and we are also hopeful that there is not much downside either. We are expecting the SET to trade in the 380 to 450 range, with the key factors for the first half relating to earnings and dividends.
-- Corporate results for 4Q08 and full year 2008 to be announced by the end of February should not be too positive. We most likely will not see the typical boost in the market from the shift in valuations due to the uncertain outlook for this year. We are forecasting average earnings-per- share growth this year of only 1.89%. -- On the positive side, listed Thai companies are in a relatively strong financial position and can maintain very attractive dividend payouts, especially relative to declining interest rates at commercial banks. For this reason, we believe that the Thai stock market will be supported even with generally negative news expected ahead. We currently estimate that Thai shares offer a dividend yield of 6.84% based on our current 2008 forecasts. Shares will go ex-dividend in March and April, and we could see further downside then. With that said, we hold to our long- standing recommendation for long-term investors to hold for dividends and wait for the recovery in share prices later this year. -- Another major positive is that the Thai stock market is predominately domestic-oriented and, based on market capitalization weighting, stands to benefit from a direct boost from the government stimulus package, even if it eventually proves insufficient to lift the overall economy. By our estimate, foreign sales account for probably less than 20% of total listed company sales. -- A third positive factor is that the Thai baht should strengthen over time against the U.S. dollar, as should regional currencies. This point is based on the assumption that there will be an eventual realignment of trade and savings in the global economy and that realignment should favor Asian currencies. If this proves true, it should attract new foreign investment to the Thai stock market.
The ten largest equity classifications of the Fund held at December 31, 2008 were:
Percentage Industry of Net Assets ------------- 1. Energy 21.96% 2. Banks 20.20 3. Property Development 12.14 4. Media & Publishing 9.11 5. Communication 7.99 6. Commerce 7.53 7. Health Care Services 5.49 8. Food & Beverage 2.29 9. Construction 1.84 10. Transportation 1.33
The ten largest equity positions held by the Fund at December 31, 2008 were:
Percentage Issue of Net Assets ------------- 1. Bangkok Bank Public Co., Ltd 10.15% 2. PTT Exploration and Production Public Co., Ltd 9.85 3. Kasikornbank Public Co., Ltd 9.13 4. PTT Public Co., Ltd 6.83 5. Advanced Info Service Public Co., Ltd 6.41 6. Bangkok Chain Hospital Public Co., Ltd 5.45 7. Amarin Printing & Publishing Public Co., Ltd 4.69 8. BEC World Public Co., Ltd 3.63 9. CP ALL Public Co., Ltd 3.04 10. Banpu Public Co., Ltd 2.76 QUARTERLY RESULTS OF OPERATIONS* Net Realized And Unrealized Gains (Losses) on Investments Net Increase Net and Foreign (Decrease) in Net For the Quarter Investment Currency Assets Resulting Ended Income (Loss)* Transactions* From Operations ---------------- ----------------- ----------------- Total Per Total Per Total Per (000's) Share (000's) Share (000's) Share ------- ------- -------- ------- -------- ------- March 31, 2008 $ 0 $ 0 $ 2,016 $ 0.64 $ 2,016 $ 0.64 June 30, 2008 451 0.14 (5,772) (1.82) (5,321) (1.68) September 30, 2008 178 0.06 (7,935) (2.51) (7,757) (2.45) December 31, 2008 (197) (0.06) (7,300) (2.32) (7,497) (2.38) ------- ------- -------- ------- -------- ------- For the Year Ended December 31, 2008 $ 432 $ 0.14 $(18,991) $ (6.01) $(18,559) $ (5.87) ======= ======= ======== ======= ======== ======= March 31, 2007 $ 107 $ 0.03 $ 427 $ 0.14 $ 534 $ 0.17 June 30, 2007 409 0.13 4,844 1.53 5,253 1.66 September 30, 2007 160 0.05 3,476 1.10 3,636 1.15 December 31, 2007 (136) (0.04) 1,334 0.42 1,198 0.38 ------- ------- -------- ------- -------- ------- For the Year Ended December 31, 2007 $ 540 $ 0.17 $ 10,081 $ 3.19 $ 10,621 $ 3.36 ======= ======= ======== ======= ======== ======= PER SHARE SELECTED QUARTERLY FINANCIAL DATA Net Asset Market Share For the Quarter Ended Value Price** Volume** ------------------- ------------------- --------- High Low High Low (000's) --------- --------- --------- --------- --------- March 31, 2008 $ 13.97 $ 11.75 $ 13.55 $ 9.45 392 June 30, 2008 14.50 11.89 13.60 10.86 300 September 30, 2008 11.77 9.78 11.00 7.78 323 December 31, 2008 9.84 6.47 8.20 5.03 181 March 31, 2007 $ 10.33 $ 9.38 $ 11.88 $ 9.15 610 June 30, 2007 11.94 10.63 13.20 10.65 597 September 30, 2007 13.73 11.74 15.85 10.35 608 December 31, 2007 14.09 12.35 15.48 12.05 402 * Net of Thai withholding tax. ** As reported on the NYSE Alternext, formerly the American Stock Exchange, LLC.
