Kiatnakin Bank
Kiatnakin Bank Underperform (17E TP Bt59.00)
Company Update
Close Bt57.75
Banking November 3, 2016
Earnings upgrade/Earnings downgrade/Overview unchanged
Improving outlook but stretched valuations Price Performance (%)
Seeing gradual improvement in used car auto hire purchase lending KKP highlighted its latest operating environment, which mainly includes 1) gradual improvement in the used car segment; although this should not be enough to see net growth for auto hire purchase loans for 2016E, hopefully there will be slight growth in 2017E; 2) ongoing improvement in asset quality for auto hire purchase loans, while residential project loans still need to be watched closely; and 3) the bank is seeing less provisioning pressure given its solid 181% reserve to the BoT’s required reserve in 3Q16.
Source: SET Smart
FY15
FY16
Consensus EPS (Bt)
5.616
5.904
KT ZMICO vs. consensus Share data
8.1%
5.2%
Reuters / Bloomberg
KKP.BK/KKP TB
Paid‐up Shares (m)
846.75
Par (Bt)
10.00
Market cap (Bt bn / US$ m)
49.00/1,397.00
Foreign limit / actual (%)
44.00/35.65
52 week High / Low (Bt)
60.75/32.75
Avg. daily T/O (shares 000)
3,374.00
NVDR (%)
12.19
Estimated free float (%)
68.68
Beta
0.90
URL
www.kiatnakin.co.th
CGR
Anti‐corruption
Level 4 (Certified)
Prapharas Nonthapiboon Analyst, no 17836 [email protected] 66 (0) 2695‐5872
Limited room for upside We maintain an Underperform rating for KKP despite our earnings upgrade as the recent price run‐up (+2% in 1 month and +13% in 1 quarter) post narrow upside potential vs. our 2017E target price and could largely reflect its upbeat 3Q16 results, which were boosted mainly by the extra income on its distressed asset management business. The stock’s main price appeal should still come from its sound dividend yield of ~6%; meanwhile, the positive catalyst could come from the booking of extra income on its distressed asset management business, which depends on the success of NPL resolutions/NPA sales but is quite volatile in each period.
Long‐term strategy gearing toward higher yield assets The group’s long‐term strategic intents aim at 1) reducing the dependency on auto hire purchase loans (it targets its hire purchase loans at below 50% in the next 3‐5 years from 65% currently); 2) gearing toward higher yield loans, especially in personal loans, small SME (micro SME under the TCG guarantee program) and car quick cash loans, along with penetrating lower risk loans (housing loans and Lombard loans); and 3) continuing to boost its fee‐based income through its capital market units and the issuance of innovative products. Despite the potential for strong growth following its aggressive move in high yield lending, we still need to monitor the asset quality in these segments in the L‐T. Raise net profit estimates for 16‐17E by 11‐14% We raised our net profit estimates for 2016‐17E by 14% and 11%, respectively, to fine‐tune with its latest guidance and, in particular, the higher‐than‐expected 3Q16 results. The main revisions are 1) the extraordinarily high income from its distressed asset management business in 3Q16 (especially huge gain from NPA sales of Bt815mn in 3Q16); and 2) a better‐than‐expected NIM on the benefit of the low interest rate environment and its L‐T gearing towards higher yield loans. Following our NP revision, the 17E target price was raised to Bt59/share for implied target P/BV of 1.1x from Bt52/share previously. Financials and Valuation FY Ended 31 Dec PPOP (Btm) Net profit (Btm) EPS (Bt) EPS growth (%) Book value (Bt) Dividend (Bt)
2014 5,695 2,734 3.24 ‐38% 43.52 1.85
2015 5,514 3,317 3.92 21% 44.79 3.00
2016E 5,485 5,140 6.07 55% 48.96 3.50
2017E 5,323 5,255 6.21 2% 51.67 3.72
2018E 5,609 5,554 6.56 6% 54.51 3.94
FY Ended 31 Dec PER (X) PBV (X) Dividend yield (%) ROE (%)
2014 17.81 1.29 3.20 8%
2015 14.74 1.29 5.19 9%
2016E 9.51 1.18 6.06 13%
2017E 9.31 1.12 6.45 12%
2018E 8.80 1.06 6.82 12%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 5
Figure 1: Key changes in our earnings revision 2016E Previous 4,496
Net profit (Btmn) Net profit change from previous forecasts (%) Net profit change YoY (%) Loan growth (%) Provision for loan loss (Btmn) Provision for loan loss (bps of loans) Gain (loss) from sale of foreclosed assets Loan spread (%) Net interest margin (NIM) Source: KT ZMICO Research
New 5,140 14% 55% ‐1% 2,824 1.61% 1,405 5.0% 4.9%
0% 2,750 1.55% 800 4.6% 4.5%
2017E Previous 4,727
5% 2,424 1.30% 750 4.5% 4.4%
New 5,255 11% 2% 4% 2,378 1.30% 850 4.8% 4.7%
Figure 2: KKP's P/BV band and sensitivity of market prices based on P/BV at different standard deviation levels (X) 1.8
2016E
PBV (x)
1.6 1.4
+2 S.D. +1.5 S.D. +1 S.D. +0.5 S.D.
1.2 1.0
Jan-16
Jan-15
Jan-14
Jan-13
Jan-12
Jan-11
Jan-10
Jan-09
Jan-08
Jan-07
Jan-05
0.4
Jan-06
0.6
0.2
Avg.
-0.5 S.D. -1 S.D. -1.5 S.D. -2S.D.
0.8
Source: Bloomberg, KT ZMICO Research
Implied market
Upside/ Downside
price (Bt)
to current price (%) 12
+2.0SD
1.3
64
+1.5SD
1.2
59
3
+1.0SD
1.1
54
-6
+0.5SD
1.0
49
-15
Average
0.9
44
-24
-0.5SD
0.8
38
-33
-1.0SD
0.7
33
-42
-1.5SD
0.6
28
-51
-2.0SD
0.5
23
-60
Figure 3: KKP's PER band and sensitivity of market prices based on PER at different standard deviation levels (X)
2016E
16 14
PER (x)
+2 S.D.
Implied market
Upside/ Downside
price (Bt)
to current price (%)
+2.0SD
12.9
78
36
+1.5SD
11.7
71
23
+1.0SD
10.4
63
10
+0.5SD
9.2
56
-3
Average
8.0
48
-16
2
-0.5SD
6.7
41
-29
0
-1.0SD
5.5
33
-42
-1.5SD
4.2
26
-55
-2.0SD
3.0
18
-68
12
+1 S.D.
10 Avg.
8 6
-1 S.D.
4
Source: Bloomberg, KT ZMICO Research
Jan-16
Jan-15
Jan-14
Jan-13
Jan-12
Jan-11
Jan-10
Jan-09
Jan-08
Jan-07
Jan-06
Jan-05
-2 S.D.
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 5
Statement of Comprehensive Income (Btmn) Year‐end 31 Dec Interest on Loans and Deposits
2014 4,976
2015 4,754
2016E 4,435
2017E 4,732
2018E 5,553
Hire Purchase Income
9,744
8,910
8,931
8,839
9,133
Interest & Dividend on Securities
604
578
405
439
531
Investment in FRA Unit trusts
606
534
1,079
626
521
15,929
14,776
14,850
14,636
15,739
Total Interest Income Interest Expenses on Borrowing Net Interest Income Non‐Interest Income
7,016
5,328
4,445
4,509
4,856
22,945
20,104
19,296
19,145
20,595
3,968
4,804
6,505
6,357
6,707
26,914
24,908
25,801
25,501
27,301
Operating Expenses
6,519
7,017
7,952
7,828
8,342
Operating Profit
6,125
6,224
6,478
6,346
6,734
Provision (Reversal) for loan loss
Operating Income
3,199
3,208
2,824
2,378
2,568
Taxes
385
602
920
942
1,035
Minority Interest
‐45
‐108
‐73
‐81
‐89
Net Profit
2,734
3,317
5,140
5,255
5,554
PPOP
5,695
5,514
5,485
5,323
5,609
3.24
3.92
6.07
6.21
6.56
2014 8,308
2015 10,833
2016E 11,441
2017E 12,056
2018E 12,639
EPS (Bt)
Statement of Financial Position (Btmn) Year‐end 31 Dec Cash & Money Market Items Net Investment
33,015
24,033
25,861
26,875
28,109
Finance & Securities Loans ‐ Gross
60,385
61,720
62,908
69,314
79,419
Hire Purchase Loans ‐ Gross
124,252
116,246
112,759
113,886
118,442
Net Loans
177,457
169,356
165,015
171,036
184,095
Total Assets
241,153
236,144
236,137
245,530
262,425
Deposits
132,315
104,327
105,474
108,533
119,495
Total Borrowings
184,881
174,621
170,085
175,735
188,653
Total Liabilities
19,805
30,891
32,582
34,079
35,801
Paid‐up Capital
8,428
8,468
8,468
8,468
8,468
Retained Earning
17,029
18,346
21,465
23,198
24,840
Total Equity
36,682
37,929
41,460
43,751
46,153
Source: KTZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 5
Valuations and Ratio Analysis Year‐end 31 Dec
2014
2015
2016E
2017E
2018E
3.24
3.92
6.07
6.21
6.56
Per/Share Data (Bt) EPS DPS
1.85
3.00
3.50
3.72
3.94
BVPS
43.52
44.79
48.96
51.67
54.51
17.81
14.74
9.51
9.31
8.80
P/BV (X)
1.29
1.29
1.18
1.12
1.06
Dividend yield (%)
3.20
5.19
6.06
6.45
6.82
Net Profit
‐38.1
21.3
55.0
2.2
5.7
EPS
‐38.4
20.8
55.0
2.2
5.7
6.8
6.0
10.1
‐2.7
7.5
‐35.6
21.0
35.4
‐2.3
5.5
Multiplier PE (X)
Percentage Growth (%)
Net Interest Income Non Interest Income Operating Expense
‐5.2
7.6
13.3
‐1.6
6.6
Operating Profit
1.6
1.6
4.1
‐2.0
6.1
Loans
‐3.2
‐3.6
‐1.3
4.3
8.0
Deposits
‐9.4
‐21.2
1.1
2.9
10.1
NPLs
42.1
0.5
‐2.0
1.0
‐3.0
NPLs (Btmn)
10,352
10,408
10,200
10,302
9,993
NPLs/Loans
5.6
5.8
5.8
5.6
5.1
80.4
91.7
113.5
127.5
148.2
15.2
16.1
17.6
17.8
17.6
Asset Quality Ratio (%)
Loan Loss Reserve/NPLs Capital & Liquidity Ratio (%) Equity/Asset Tier I to Risk Assets
14.8
14.6
15.7
15.7
15.3
Total Capital Adequacy Ratio
15.2
16.5
19.0
18.9
18.3
Loan to Deposit & Borrowing
109.5
113.5
113.0
114.4
115.2
Profitability Ratio (%) ROA
1.1
1.4
2.2
2.2
2.2
ROE
7.6
8.9
12.9
12.3
12.4
50.6
49.2
47.0
47.5
47.4
Cost to Income Net Interest margin
3.91
4.33
4.91
4.68
4.75
Loan spread
3.98
4.40
5.04
4.77
4.80
Key Assumptions
2014
2015
2016E
2017E
2018E
Loan Growth ‐ Net
‐3.2
‐3.6
‐1.3
4.3
8.0
Cost to Income
50.6
49.2
47.0
47.5
47.4
3.9
4.3
4.9
4.7
4.8
3,199
3,208
2,824
2,378
2,568
1.74
1.81
1.61
1.30
1.30
Net Interest margin Provision (Btmn) Provision (% of loans)
Source: KTZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 5
Note: KT ZMICO has two major shareholders, Krungthai Bank PLC (KTB) and Seamico Securities PLC (ZMICO). Therefore, prior to making investments in the securities of KTB and ZMICO, investors should consider the risk factors carefully. An executive of KT ZMICO Securities is also a board member of BCP, BTC, CI, CPI, KBS, MAJOR, MK, PACE, PSL, SVH, VNG, ZMICO, SAWAD, TFG. A management member of KT ZMICO Securities is also a board member of BTC and NFC. KT ZMICO is a financial advisor for U, LOXLEY, ZMICO, MAKRO, CPALL, SAFARI, PACE, TPOLY, M‐CHAI, TFD, SUTHA. KT ZMICO is a co‐underwriter of ALLA.
Corporate Governance Report (CGR) Source: Sec, Thai Institute of Directors Association (IOD) Excellent (scores: 90 ‐ 100) Very Good (scores: 80 – 89) Good (scores: 70 – 79)
Satisfactory (scores: 60 – 69) Pass (scores: 50 – 59) No Logo N/A (scores: below 50)
Anti‐corruption Progress Indicator Source: Sec, Thailand's Private Sector Collective Action Coalition Against Corruption programme (Thai CAC)
Level 1 (Committed) : Organization’s statement or board's resolution to work against corruption and to be in compliance with all relevant laws. Level 2 (Declared) : Public declaration statement to participate in Thailand's private sector Collective Action Coalition Against Corruption (CAC) or equivalent initiatives Level 3 (Established) : Public out preventive measures, risk assessment, communication and training for all employees, including consistent monitoring and review processes Level 4 (Certified) : Audit engagement by audit committee or auditors approved by the office of SEC, and receiving certification or assurance by independent external assurance providers (CAC etc.) Level 5 (Extended) : Extension of the anti‐corruption policy to business partners in the supply chain, and disclosure of any current investigations, prosecutions or closed cases Insufficient or not clearly defined policy Data not available / no policy
DISCLAIMER This document is produced using open sources believed to be reliable. However, their accuracy and completeness cannot be guaranteed. The statements and opinions herein were formed after due and careful consideration for use as information for the purposes of investment. The opinions contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. The use of any information contained in this document shall be at the sole discretion and risk of the user.
KT ZMICO RESEARCH – RECOMMENDATION DEFINITIONS STOCK RECOMMENDATIONS
SECTOR RECOMMENDATIONS
BUY: Expecting positive total returns of 15% or more OVERWEIGHT: The industry, as defined by the analyst's over the next 12 months coverage universe, is expected to outperform the relevant OUTPERFORM: Expecting total returns between ‐10% primary market index by at least 10% over the next 12 months. to +15%; returns expected to exceed market returns NEUTRAL: The industry, as defined by the analyst's coverage over a six‐month period due to specific catalysts universe, is expected to perform in line with the relevant UNDERPERFORM: Expecting total returns between primary market index over the next 12 months. ‐10% to +15%; returns expected to be below market UNDERWEIGHT: The industry, as defined by the analyst's returns over a six‐month period due to specific coverage universe, is expected to underperform the relevant catalysts primary market index by 10% over the next 12 months. SELL: Expecting negative total returns of 10% or more over the next 12 months
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 5 of 5
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th
th
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KT•ZMICO Securities Company Limited
st
8 , 15 -17 , 19 , 21 Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok 10500 Telephone: (66-2) 695-5000
Phaholyothin Branch
rd
Fax. (66-2) 631-1709
Ploenchit Branch
th
nd
2
Sindhorn Branch
3 Floor, Shinnawatra Tower II,
8 Floor, Ton Son Tower,
1291/1 Phaholyothin Road,
900 Ploenchit Road, Lumpini,
Floor, Sindhorn Tower 1, 130-132 Wireless Road, Lumpini,
Phayathai, Bangkok 10400
Pathumwan, Bangkok 10330
Pathumwan, Bangkok 10330
Telephone: (66-2) 686-1500
Telephone: (66-2) 626-6000
Telephone: (66-2) 627-3550
Fax. (66-2) 686-1666
Fax. (66-2) 626-6111
Fax. (66-2) 627-3582, 627-3600
Nakhon Pathom Branch 1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
Chachoengsao Branch
Viphavadee Branch
Phitsanulok Branch
G Floor, Lao Peng Nguan 1 Bldg.,
Krung Thai Bank, Singhawat Branch
333 Soi Cheypuand, Viphavadee-Rangsit Road,
114 Singhawat Road,
Ladyao, Jatujak, Bangkok 10900
Muang, Phitsanulok 65000
Telephone: (66-2) 618-8500
Telephone: 083-490-2873
Fax. (66-2) 618-8569
th
Chonburi Branch
Pattaya Branch
108/34-36 Mahajakkrapad Road,
4 Floor, Forum Plaza Bldg.,
382/6-8 Moo 9, T. NongPrue,
T.Namuang, A.Muang,
870/52 Sukhumvit Road, T. Bangplasoy,
A. Banglamung, Cholburi 20260
Chachoengsao 24000
A. Muang, Cholburi 20000
Telephone: (038) 362-420-9
Telephone: (038) 813-088
Telephone: (038) 287-635
Fax. (038) 362-430
Fax. (038) 813-099
Fax. (038) 287-637
Khon Kaen Branch
5th Floor, Charoen Thani Princess Hotel,
Hat Yai Branch
Sriworajak Building Branch
200/301 Juldis Hatyai Plaza Floor 3,
1st – 2nd Floor, Sriworajak Building, 222
260 Srichan Road, T. Naimuang,
Niphat-Uthit 3 Rd,
Luang Road, Pomprab,
A. Muang, Khon Kaen 40000
Hatyai Songkhla 90110
Bankgok 10100
Telephone: (043) 389-171-193
Telephone: (074) 355-530-3
Telephone: (02) 689-3100
Fax. (043) 389-209
Fax: (074) 355-534
Fax. (02) 689-3199
Central World Branch
Chiang Mai Branch
Phuket Branch
999/9 The Offices at Central World,
422/49 Changklan Road, Changklan
22/61-63, Luang Por Wat Chalong Road,
16th Fl., Rama 1 Rd, Pathumwan,
Subdistrict, Amphoe Meuang,
Talat Yai, Mueang Phuket,
Bangkok 10330
Chiang Mai 50100
Phuket 83000
Telephone: (66-2) 673-5000,
Telephone: (053) 270-072
Tel. (076) 222-811,(076) 222-683
(66-2) 264-5888 Fax. (66-2) 264-5899
Fax: (053) 272-618
Fax. (076) 222-861
Pak Chong Branch
Cyber Branch @ North Nana
173 175, Mittapap Road,
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd.,Klong Toey Nua Subdistrict , Wattana District, Bangkok 10110 Telephone: 083-490-2871
Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Tel. (044) 279-511 Fax. (044) 279-574
Nakhon Ratchasima Branch
Bangkhae Branch
6th Floor The Mall Group Building Bangkhae 275 Moo 1 Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Tel. (66-2) 454-9979 Fax. (66-2) 454-9970
624/9 Changphuek Road, . Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171 Information herein was obtained from sources believed to be reliable, but its completeness and accuracy are not guaranteed. All opinions expressed constitute our views on that date and are not intended as an offer or solicitation to sell or buy any securities. Investors should exercise care when making a decision to invest in securities. No one may modify or distribute any part of this report unless written permission is first received from Seamico Securities Plc. If any modifications are made, quotes or references taken from the report and the report date must be clearly mentioned and must not cause misunderstanding or damage to the company.
Company Update
Close Bt57.75
Banking November 3, 2016
Earnings upgrade/Earnings downgrade/Overview unchanged
Improving outlook but stretched valuations Price Performance (%)
Seeing gradual improvement in used car auto hire purchase lending KKP highlighted its latest operating environment, which mainly includes 1) gradual improvement in the used car segment; although this should not be enough to see net growth for auto hire purchase loans for 2016E, hopefully there will be slight growth in 2017E; 2) ongoing improvement in asset quality for auto hire purchase loans, while residential project loans still need to be watched closely; and 3) the bank is seeing less provisioning pressure given its solid 181% reserve to the BoT’s required reserve in 3Q16.
Source: SET Smart
FY15
FY16
Consensus EPS (Bt)
5.616
5.904
KT ZMICO vs. consensus Share data
8.1%
5.2%
Reuters / Bloomberg
KKP.BK/KKP TB
Paid‐up Shares (m)
846.75
Par (Bt)
10.00
Market cap (Bt bn / US$ m)
49.00/1,397.00
Foreign limit / actual (%)
44.00/35.65
52 week High / Low (Bt)
60.75/32.75
Avg. daily T/O (shares 000)
3,374.00
NVDR (%)
12.19
Estimated free float (%)
68.68
Beta
0.90
URL
www.kiatnakin.co.th
CGR
Anti‐corruption
Level 4 (Certified)
Prapharas Nonthapiboon Analyst, no 17836 [email protected] 66 (0) 2695‐5872
Limited room for upside We maintain an Underperform rating for KKP despite our earnings upgrade as the recent price run‐up (+2% in 1 month and +13% in 1 quarter) post narrow upside potential vs. our 2017E target price and could largely reflect its upbeat 3Q16 results, which were boosted mainly by the extra income on its distressed asset management business. The stock’s main price appeal should still come from its sound dividend yield of ~6%; meanwhile, the positive catalyst could come from the booking of extra income on its distressed asset management business, which depends on the success of NPL resolutions/NPA sales but is quite volatile in each period.
Long‐term strategy gearing toward higher yield assets The group’s long‐term strategic intents aim at 1) reducing the dependency on auto hire purchase loans (it targets its hire purchase loans at below 50% in the next 3‐5 years from 65% currently); 2) gearing toward higher yield loans, especially in personal loans, small SME (micro SME under the TCG guarantee program) and car quick cash loans, along with penetrating lower risk loans (housing loans and Lombard loans); and 3) continuing to boost its fee‐based income through its capital market units and the issuance of innovative products. Despite the potential for strong growth following its aggressive move in high yield lending, we still need to monitor the asset quality in these segments in the L‐T. Raise net profit estimates for 16‐17E by 11‐14% We raised our net profit estimates for 2016‐17E by 14% and 11%, respectively, to fine‐tune with its latest guidance and, in particular, the higher‐than‐expected 3Q16 results. The main revisions are 1) the extraordinarily high income from its distressed asset management business in 3Q16 (especially huge gain from NPA sales of Bt815mn in 3Q16); and 2) a better‐than‐expected NIM on the benefit of the low interest rate environment and its L‐T gearing towards higher yield loans. Following our NP revision, the 17E target price was raised to Bt59/share for implied target P/BV of 1.1x from Bt52/share previously. Financials and Valuation FY Ended 31 Dec PPOP (Btm) Net profit (Btm) EPS (Bt) EPS growth (%) Book value (Bt) Dividend (Bt)
2014 5,695 2,734 3.24 ‐38% 43.52 1.85
2015 5,514 3,317 3.92 21% 44.79 3.00
2016E 5,485 5,140 6.07 55% 48.96 3.50
2017E 5,323 5,255 6.21 2% 51.67 3.72
2018E 5,609 5,554 6.56 6% 54.51 3.94
FY Ended 31 Dec PER (X) PBV (X) Dividend yield (%) ROE (%)
2014 17.81 1.29 3.20 8%
2015 14.74 1.29 5.19 9%
2016E 9.51 1.18 6.06 13%
2017E 9.31 1.12 6.45 12%
2018E 8.80 1.06 6.82 12%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 5
Figure 1: Key changes in our earnings revision 2016E Previous 4,496
Net profit (Btmn) Net profit change from previous forecasts (%) Net profit change YoY (%) Loan growth (%) Provision for loan loss (Btmn) Provision for loan loss (bps of loans) Gain (loss) from sale of foreclosed assets Loan spread (%) Net interest margin (NIM) Source: KT ZMICO Research
New 5,140 14% 55% ‐1% 2,824 1.61% 1,405 5.0% 4.9%
0% 2,750 1.55% 800 4.6% 4.5%
2017E Previous 4,727
5% 2,424 1.30% 750 4.5% 4.4%
New 5,255 11% 2% 4% 2,378 1.30% 850 4.8% 4.7%
Figure 2: KKP's P/BV band and sensitivity of market prices based on P/BV at different standard deviation levels (X) 1.8
2016E
PBV (x)
1.6 1.4
+2 S.D. +1.5 S.D. +1 S.D. +0.5 S.D.
1.2 1.0
Jan-16
Jan-15
Jan-14
Jan-13
Jan-12
Jan-11
Jan-10
Jan-09
Jan-08
Jan-07
Jan-05
0.4
Jan-06
0.6
0.2
Avg.
-0.5 S.D. -1 S.D. -1.5 S.D. -2S.D.
0.8
Source: Bloomberg, KT ZMICO Research
Implied market
Upside/ Downside
price (Bt)
to current price (%) 12
+2.0SD
1.3
64
+1.5SD
1.2
59
3
+1.0SD
1.1
54
-6
+0.5SD
1.0
49
-15
Average
0.9
44
-24
-0.5SD
0.8
38
-33
-1.0SD
0.7
33
-42
-1.5SD
0.6
28
-51
-2.0SD
0.5
23
-60
Figure 3: KKP's PER band and sensitivity of market prices based on PER at different standard deviation levels (X)
2016E
16 14
PER (x)
+2 S.D.
Implied market
Upside/ Downside
price (Bt)
to current price (%)
+2.0SD
12.9
78
36
+1.5SD
11.7
71
23
+1.0SD
10.4
63
10
+0.5SD
9.2
56
-3
Average
8.0
48
-16
2
-0.5SD
6.7
41
-29
0
-1.0SD
5.5
33
-42
-1.5SD
4.2
26
-55
-2.0SD
3.0
18
-68
12
+1 S.D.
10 Avg.
8 6
-1 S.D.
4
Source: Bloomberg, KT ZMICO Research
Jan-16
Jan-15
Jan-14
Jan-13
Jan-12
Jan-11
Jan-10
Jan-09
Jan-08
Jan-07
Jan-06
Jan-05
-2 S.D.
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 5
Statement of Comprehensive Income (Btmn) Year‐end 31 Dec Interest on Loans and Deposits
2014 4,976
2015 4,754
2016E 4,435
2017E 4,732
2018E 5,553
Hire Purchase Income
9,744
8,910
8,931
8,839
9,133
Interest & Dividend on Securities
604
578
405
439
531
Investment in FRA Unit trusts
606
534
1,079
626
521
15,929
14,776
14,850
14,636
15,739
Total Interest Income Interest Expenses on Borrowing Net Interest Income Non‐Interest Income
7,016
5,328
4,445
4,509
4,856
22,945
20,104
19,296
19,145
20,595
3,968
4,804
6,505
6,357
6,707
26,914
24,908
25,801
25,501
27,301
Operating Expenses
6,519
7,017
7,952
7,828
8,342
Operating Profit
6,125
6,224
6,478
6,346
6,734
Provision (Reversal) for loan loss
Operating Income
3,199
3,208
2,824
2,378
2,568
Taxes
385
602
920
942
1,035
Minority Interest
‐45
‐108
‐73
‐81
‐89
Net Profit
2,734
3,317
5,140
5,255
5,554
PPOP
5,695
5,514
5,485
5,323
5,609
3.24
3.92
6.07
6.21
6.56
2014 8,308
2015 10,833
2016E 11,441
2017E 12,056
2018E 12,639
EPS (Bt)
Statement of Financial Position (Btmn) Year‐end 31 Dec Cash & Money Market Items Net Investment
33,015
24,033
25,861
26,875
28,109
Finance & Securities Loans ‐ Gross
60,385
61,720
62,908
69,314
79,419
Hire Purchase Loans ‐ Gross
124,252
116,246
112,759
113,886
118,442
Net Loans
177,457
169,356
165,015
171,036
184,095
Total Assets
241,153
236,144
236,137
245,530
262,425
Deposits
132,315
104,327
105,474
108,533
119,495
Total Borrowings
184,881
174,621
170,085
175,735
188,653
Total Liabilities
19,805
30,891
32,582
34,079
35,801
Paid‐up Capital
8,428
8,468
8,468
8,468
8,468
Retained Earning
17,029
18,346
21,465
23,198
24,840
Total Equity
36,682
37,929
41,460
43,751
46,153
Source: KTZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 5
Valuations and Ratio Analysis Year‐end 31 Dec
2014
2015
2016E
2017E
2018E
3.24
3.92
6.07
6.21
6.56
Per/Share Data (Bt) EPS DPS
1.85
3.00
3.50
3.72
3.94
BVPS
43.52
44.79
48.96
51.67
54.51
17.81
14.74
9.51
9.31
8.80
P/BV (X)
1.29
1.29
1.18
1.12
1.06
Dividend yield (%)
3.20
5.19
6.06
6.45
6.82
Net Profit
‐38.1
21.3
55.0
2.2
5.7
EPS
‐38.4
20.8
55.0
2.2
5.7
6.8
6.0
10.1
‐2.7
7.5
‐35.6
21.0
35.4
‐2.3
5.5
Multiplier PE (X)
Percentage Growth (%)
Net Interest Income Non Interest Income Operating Expense
‐5.2
7.6
13.3
‐1.6
6.6
Operating Profit
1.6
1.6
4.1
‐2.0
6.1
Loans
‐3.2
‐3.6
‐1.3
4.3
8.0
Deposits
‐9.4
‐21.2
1.1
2.9
10.1
NPLs
42.1
0.5
‐2.0
1.0
‐3.0
NPLs (Btmn)
10,352
10,408
10,200
10,302
9,993
NPLs/Loans
5.6
5.8
5.8
5.6
5.1
80.4
91.7
113.5
127.5
148.2
15.2
16.1
17.6
17.8
17.6
Asset Quality Ratio (%)
Loan Loss Reserve/NPLs Capital & Liquidity Ratio (%) Equity/Asset Tier I to Risk Assets
14.8
14.6
15.7
15.7
15.3
Total Capital Adequacy Ratio
15.2
16.5
19.0
18.9
18.3
Loan to Deposit & Borrowing
109.5
113.5
113.0
114.4
115.2
Profitability Ratio (%) ROA
1.1
1.4
2.2
2.2
2.2
ROE
7.6
8.9
12.9
12.3
12.4
50.6
49.2
47.0
47.5
47.4
Cost to Income Net Interest margin
3.91
4.33
4.91
4.68
4.75
Loan spread
3.98
4.40
5.04
4.77
4.80
Key Assumptions
2014
2015
2016E
2017E
2018E
Loan Growth ‐ Net
‐3.2
‐3.6
‐1.3
4.3
8.0
Cost to Income
50.6
49.2
47.0
47.5
47.4
3.9
4.3
4.9
4.7
4.8
3,199
3,208
2,824
2,378
2,568
1.74
1.81
1.61
1.30
1.30
Net Interest margin Provision (Btmn) Provision (% of loans)
Source: KTZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 5
Note: KT ZMICO has two major shareholders, Krungthai Bank PLC (KTB) and Seamico Securities PLC (ZMICO). Therefore, prior to making investments in the securities of KTB and ZMICO, investors should consider the risk factors carefully. An executive of KT ZMICO Securities is also a board member of BCP, BTC, CI, CPI, KBS, MAJOR, MK, PACE, PSL, SVH, VNG, ZMICO, SAWAD, TFG. A management member of KT ZMICO Securities is also a board member of BTC and NFC. KT ZMICO is a financial advisor for U, LOXLEY, ZMICO, MAKRO, CPALL, SAFARI, PACE, TPOLY, M‐CHAI, TFD, SUTHA. KT ZMICO is a co‐underwriter of ALLA.
Corporate Governance Report (CGR) Source: Sec, Thai Institute of Directors Association (IOD) Excellent (scores: 90 ‐ 100) Very Good (scores: 80 – 89) Good (scores: 70 – 79)
Satisfactory (scores: 60 – 69) Pass (scores: 50 – 59) No Logo N/A (scores: below 50)
Anti‐corruption Progress Indicator Source: Sec, Thailand's Private Sector Collective Action Coalition Against Corruption programme (Thai CAC)
Level 1 (Committed) : Organization’s statement or board's resolution to work against corruption and to be in compliance with all relevant laws. Level 2 (Declared) : Public declaration statement to participate in Thailand's private sector Collective Action Coalition Against Corruption (CAC) or equivalent initiatives Level 3 (Established) : Public out preventive measures, risk assessment, communication and training for all employees, including consistent monitoring and review processes Level 4 (Certified) : Audit engagement by audit committee or auditors approved by the office of SEC, and receiving certification or assurance by independent external assurance providers (CAC etc.) Level 5 (Extended) : Extension of the anti‐corruption policy to business partners in the supply chain, and disclosure of any current investigations, prosecutions or closed cases Insufficient or not clearly defined policy Data not available / no policy
DISCLAIMER This document is produced using open sources believed to be reliable. However, their accuracy and completeness cannot be guaranteed. The statements and opinions herein were formed after due and careful consideration for use as information for the purposes of investment. The opinions contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. The use of any information contained in this document shall be at the sole discretion and risk of the user.
KT ZMICO RESEARCH – RECOMMENDATION DEFINITIONS STOCK RECOMMENDATIONS
SECTOR RECOMMENDATIONS
BUY: Expecting positive total returns of 15% or more OVERWEIGHT: The industry, as defined by the analyst's over the next 12 months coverage universe, is expected to outperform the relevant OUTPERFORM: Expecting total returns between ‐10% primary market index by at least 10% over the next 12 months. to +15%; returns expected to exceed market returns NEUTRAL: The industry, as defined by the analyst's coverage over a six‐month period due to specific catalysts universe, is expected to perform in line with the relevant UNDERPERFORM: Expecting total returns between primary market index over the next 12 months. ‐10% to +15%; returns expected to be below market UNDERWEIGHT: The industry, as defined by the analyst's returns over a six‐month period due to specific coverage universe, is expected to underperform the relevant catalysts primary market index by 10% over the next 12 months. SELL: Expecting negative total returns of 10% or more over the next 12 months
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 5 of 5
th
th
th
th
KT•ZMICO Securities Company Limited
st
8 , 15 -17 , 19 , 21 Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok 10500 Telephone: (66-2) 695-5000
Phaholyothin Branch
rd
Fax. (66-2) 631-1709
Ploenchit Branch
th
nd
2
Sindhorn Branch
3 Floor, Shinnawatra Tower II,
8 Floor, Ton Son Tower,
1291/1 Phaholyothin Road,
900 Ploenchit Road, Lumpini,
Floor, Sindhorn Tower 1, 130-132 Wireless Road, Lumpini,
Phayathai, Bangkok 10400
Pathumwan, Bangkok 10330
Pathumwan, Bangkok 10330
Telephone: (66-2) 686-1500
Telephone: (66-2) 626-6000
Telephone: (66-2) 627-3550
Fax. (66-2) 686-1666
Fax. (66-2) 626-6111
Fax. (66-2) 627-3582, 627-3600
Nakhon Pathom Branch 1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
Chachoengsao Branch
Viphavadee Branch
Phitsanulok Branch
G Floor, Lao Peng Nguan 1 Bldg.,
Krung Thai Bank, Singhawat Branch
333 Soi Cheypuand, Viphavadee-Rangsit Road,
114 Singhawat Road,
Ladyao, Jatujak, Bangkok 10900
Muang, Phitsanulok 65000
Telephone: (66-2) 618-8500
Telephone: 083-490-2873
Fax. (66-2) 618-8569
th
Chonburi Branch
Pattaya Branch
108/34-36 Mahajakkrapad Road,
4 Floor, Forum Plaza Bldg.,
382/6-8 Moo 9, T. NongPrue,
T.Namuang, A.Muang,
870/52 Sukhumvit Road, T. Bangplasoy,
A. Banglamung, Cholburi 20260
Chachoengsao 24000
A. Muang, Cholburi 20000
Telephone: (038) 362-420-9
Telephone: (038) 813-088
Telephone: (038) 287-635
Fax. (038) 362-430
Fax. (038) 813-099
Fax. (038) 287-637
Khon Kaen Branch
5th Floor, Charoen Thani Princess Hotel,
Hat Yai Branch
Sriworajak Building Branch
200/301 Juldis Hatyai Plaza Floor 3,
1st – 2nd Floor, Sriworajak Building, 222
260 Srichan Road, T. Naimuang,
Niphat-Uthit 3 Rd,
Luang Road, Pomprab,
A. Muang, Khon Kaen 40000
Hatyai Songkhla 90110
Bankgok 10100
Telephone: (043) 389-171-193
Telephone: (074) 355-530-3
Telephone: (02) 689-3100
Fax. (043) 389-209
Fax: (074) 355-534
Fax. (02) 689-3199
Central World Branch
Chiang Mai Branch
Phuket Branch
999/9 The Offices at Central World,
422/49 Changklan Road, Changklan
22/61-63, Luang Por Wat Chalong Road,
16th Fl., Rama 1 Rd, Pathumwan,
Subdistrict, Amphoe Meuang,
Talat Yai, Mueang Phuket,
Bangkok 10330
Chiang Mai 50100
Phuket 83000
Telephone: (66-2) 673-5000,
Telephone: (053) 270-072
Tel. (076) 222-811,(076) 222-683
(66-2) 264-5888 Fax. (66-2) 264-5899
Fax: (053) 272-618
Fax. (076) 222-861
Pak Chong Branch
Cyber Branch @ North Nana
173 175, Mittapap Road,
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd.,Klong Toey Nua Subdistrict , Wattana District, Bangkok 10110 Telephone: 083-490-2871
Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Tel. (044) 279-511 Fax. (044) 279-574
Nakhon Ratchasima Branch
Bangkhae Branch
6th Floor The Mall Group Building Bangkhae 275 Moo 1 Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Tel. (66-2) 454-9979 Fax. (66-2) 454-9970
624/9 Changphuek Road, . Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171 Information herein was obtained from sources believed to be reliable, but its completeness and accuracy are not guaranteed. All opinions expressed constitute our views on that date and are not intended as an offer or solicitation to sell or buy any securities. Investors should exercise care when making a decision to invest in securities. No one may modify or distribute any part of this report unless written permission is first received from Seamico Securities Plc. If any modifications are made, quotes or references taken from the report and the report date must be clearly mentioned and must not cause misunderstanding or damage to the company.
