Top 5 Stocks Pick Market Theme (1 - 2 months) The SET index has been very volatile and dynamic

on news flow. EU sovereign debt has hammered the market, together with the poor us economic data. On the domestic front, flooding has made daily headlines and will potentially hit GDP growth with minus half to one percentage point. In this time when policy stimulus is much needed, the cabinet has approved a corporate tax cut to 23% from 30% earlier (and soon more clarity on wage increase) that will cushion the adverse impact to listed companies profitability from slowing economic activities. Therefore, we can summarize equity strategy for the SET as follows; 1. Avoid cyclical sector such as energy & petrochemical sector which will be greatly impacted 2. Concentrate with the fundamentally sound stocks 3. Looking for stocks that benefit from the great flood damage in the central of Thailand. with cheap valuation and high yield. from the possibility of the soft recession.

food sector, retails sector, residential property sector and banking sector. The top picks are CPF, CPALL, SPALI, HMPRO, TASCO, DCC, TUF, KBANK, PS and SCCC.

Therefore, we recommend investing in agriculture &

The company's strategy to focus on food products should bring about a more stable margin and support a share price re-rating. Combined exports to the US and EU are only 9% of sales 2. TUF 3. CPALL 4. HMPRO 5. SPALI On 10 October 2011, the Thai Cabinet approved corporate tax cuts to 23% in 2012 and 20% in 2013. This policy was campaigned for by Pheu Thai Party before the

1. CPF

election and aimed to compensate Thai companies for a potential rise in minimum daily wages. Deputy Finance Minister Boonsong Teriyaphirom estimated tax revenue forgone of Bt52.2bn. SPALI currently pay almost the full 30% corporate tax rate. Based on the sensitivity analysis, earnings upsides are 10.0% in 2012E and 14.3% in 2013E for SPALI. Near-term earning risk While flooding in Bangkok has not yet reached a precarious level, it has caused access difficulties in some areas and negatively impacted site visits for certain property projects. The flood surging down from Chao Phraya river and the release of water to downstream river basins following overcapacity of dams in the North could put Bangkok at increasing risk of flooding. Also, there should be rising demand for construction material and labor for home renovation and reconstruction after the flood recedes, potentially leading to higher construction costs and labor shortages. We believe it is still too early to quantify the impact but the

flood could overshadow the benefit from corporate tax cuts in early 2012. 6. KBANK 7. TASCO 8. DCC Tax cut supports earnings growth from 2012 onward. We expect DCCs 3Q11 net profit to grow in-line with our preliminary forecast of Bt278mn, up 10.8% YoY thanks to new capacity and a healthy margin. In 4Q11-2012, we foresee benefits from higher ceramic tile demand after the flooding. As a result, we maintain our full-year net profit forecast for 2011 at Bt1.25bn. Looking ahead, the corporate tax cut to 23% from 2012 onward could help offset rising wage costs and we increased our 2012 net profit forecast by 5.1% to Bt1.40bn. Given the hefty business outlook and good dividend yield of 5.0-6.0% p.a., we rate Outperform on the counter with a new target price of Bt70.00 (from Bt64.00).

 New capacity to boost revenue 14.6% YoY. Apart purchasing power from upcountry, as crop prices 3Q11 at 177 points compared with 170 points in 3Q10, of 6mn sqm per year to 61mn sqm per year should help demand for ceramic tile and boost 3Q11 revenue 14.6% Bt1.5bn from Bt1.3bn in 3Q10. Expect good 3Q11 net profit, underpinned by healthy Adjusting its product mix to sell more 16x16 ceramic tile, higher price, would help increase DCCs selling price in 3Q10 to Bt129.5/sqm. This would help offset rising costs and allow DCCs gross profit margin (GPM) to 43.1%. As a result, we expect 3Q11 net profit to increase 10.8% YoY remain healthy at production from Bt129/sqm which has a GPM. YoY to serve high new capacity remained high in from higher

to Bt278mn. 9. SCCC