Three home improvement stocks have had poor performance for the past month as well as this quarter amid weaker outlook due to low season for the businesses and rising inflation.
The share price of Siam Global House Public Company Limited (SET: GLOBAL) was down 10.14% for the month and 18.42% quarter to date.
Home Product Center Public Company Limited (SET: HMPRO) fell 9.66% in one month and 17.61% in this quarter.
Dohome Public Company Limited (SET: DOHOME) decreased 9.24% for the past month and 21.96% since the second quarter started.
More importantly, all three stocks are underperforming the SET Index that fell 2.70% in the past month and 5.94% in 2Q22 amid volatility in the market due to concerns of potential recession from aggressive rate hikes by central banks.
Thailand’s inflation dropped to 4.65% in April 2022 from 5.73% in March. However, the consumer price spiked to 7.1% in May with food and energy prices as main contributors for the rise. Housing inflation jumped to 6.65% vs 0.98% due to electricity cost.
Rising price of essential products and costs of living lead to consumers having a second thought on purchasing non-essential goods, including home improvement.
As Thailand will enter a rainy season in the third quarter, investors are also expecting weaker results from the three stocks as consumers would hold off buying construction material.
Kiatnakin Phatra Securities (KKPS) stated in an analysis on June 15, 2022, which downgraded GLOBAL rating to underperform, saying that it turned more cautious on GLOBAL as its retail operations (sales and margin) could turn weaker than expected in 2H22-2023E from a weaker consumption outlook amid rising costs given the sharp rise in inflation.
“We also believe that the high-inflation atmosphere would lower affordability, making customers trade down or cut unnecessary spending including home improvement whose average ticket size is relatively larger than other retail formats,” wrote KKPS.
Despite the decline in share prices and negative short-term outlook, the consensus still gave buy recommendations on the leading home improvement stocks; GLOBAL and HMPRO.
According to Refinitiv, the consensus target price for GLOBAL is THB25.18 per share, while the price for HMPRO is THB17.46 per share. The consensus recommendation for DOHOME is splitted between buy and hold at THB23.35 per share. All three target prices represent 23-40% upside for these home improvement stocks.
In addition, due to a series of selloffs recently, the Relative Strength Index (RSI) of GLOBAL has plummeted to 7.89%, HMPRO to 26.3% and DOHOME to 25.6%, which is in oversold territory.