Srisawad Corporation - Global Alliance Partners
Srisawad Corporation Earnings Review
Buy (17E TP Bt58.00) Close Bt49.75
Financial
Beat forecast/Below forecast/In line
August 16, 2017
Results in line with forecasts Results date: August 15, 2017 Price Performance (%)
Source: SET Smart
FY17
FY18
Consensus EPS (Bt)
2.433
3.054
KT ZMICO vs. consensus Share data
‐0.9%
‐6.4%
Reuters / Bloomberg
SAWAD.BK/SAWAD TB
Paid‐up Shares (m)
1,087.32
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
54.00/1,625.00
Foreign limit / actual (%)
49.00/22.30
52 week High / Low (Bt)
55.50/25.00
Avg. daily T/O (shares 000) NVDR (%)
5,963.00 9.18
Estimated free float (%)
47.41
Beta
1.62
URL
www.meebaanmeerod.com
CGR
Anti‐corruption
n.a.
Note: An executive of KT ZMICO Securities is also a member of SAWAD’s board and KT•ZMICO is a Financial Advisor for SAWAD. Prapharas Nonthapiboon Analyst, no 17836 [email protected] 66 (0) 2695‐5872
Among leading growth stocks in the financial sector We maintain our Buy rating for SAWAD. We like SAWAD as it remains among the leading growth stocks in the financial sector. We expect SAWAD’s move to restructure as a holding company and acquire BFIT to post synergy benefits to the group in the longer run. 2Q17 net profit in line with both our forecast and the street estimate SAWAD’s 2Q17 net profit of Bt630mn (+45% YoY, ‐9% QoQ) was in line with both our forecast (Bt631mn) and the street estimate (Bt643mn). 2Q17 net profit came in at Bt630mn (+45% YoY, ‐9% QoQ) The solid growth YoY was backed mainly by its robust loan growth of 54% YoY and 7% QoQ. This should be thanks to its continuing branch expansion to 2,283 branches at end‐2Q17 (95 and 153 new branches in 2Q17 and 1H17, respectively) vs. 2,130 branches at end‐16 and its target for 200‐300 new branches in 2017. Meanwhile, the interest spread after full‐quarter consolidation of BFIT in 2Q17 weakened to 21% vs. ~24% previously, due mainly to 1) the full‐quarter consolidation of BFIT in 2Q17 vs. around a one‐month consolidation in 1Q17 given BFIT’s lower asset yield; 2) SAWAD’s policy to book most of its new lending under hire purchase contracts (slightly lower yield but also lower risk vs. under loan contracts); and 3) some special promotions to clients, especially on car and agricultural land products to maintain its share. Moreover, SAWAD also booked income (around Bt50mn+/‐) from the successful settlement of its NPL purchase business in 2Q17. 2Q17 NP dropped QoQ due to the absence of extra income in 2Q17 The weakened NP QoQ was due to the absence of extra income in 2Q17 vs. the recognition of a one‐off gain of Bt102mn in 1Q17 as a result of measuring the fair value of SAWAD’s 9.84% equity interest in BFIT. Excluding such extra gain, its 2Q17 NP would increase by ~4% QoQ. NPL ratio quite stable QoQ SAWAD’s asset quality remains manageable with the NPL ratio quite stable QoQ at 4.55% vs. 4.6% in 1Q17 following its prudent risk management and its policy to do loan write‐offs every 2Q and 4Q; we should see slightly higher provisions in such quarters accordingly. 1H17 net profit came in at Bt1.3bn (+55% YoY) With 1H17 net profit of Bt1.3bn representing 52% of our FY17 NP forecast, we keep our earnings forecast unchanged. Business restructuring on track SAWAD’s Business Restructuring Plan within 2017 remains on track, which mainly includes 1) partial business transfer, primarily the collateralized lending business, to “Srisawad Power 2014” by 3Q17; and 2) restructuring itself as a holding company; and 3) restructuring businesses within the group of companies to create better synergies among the group, especially synergy with BFIT. In addition, it is likely that SAWAD will strengthen its risk management to bring it more in line with the BoT’s standards by 2H17, especially in terms of NPL classification (three‐month criteria) and provisioning. SAWAD expects that the net impact in terms of the provision will be quite modest given its low loan to value (~50%). Financials and Valuation FY Ended 31 Dec Net profit (Btmn) EPS (Bt) EPS growth (%) BV (Bt) Dividend (Bt) FY Ended 31 Dec PER (x) PBV (x) Dividend yield (%) ROE (%)
2015 1,336 1.31 53% 4.67 0.03 2015 37.98 10.65 0.06 33%
2016 2,005 1.92 46% 6.54 0.05 2016 25.95 7.60 0.09 35%
2017E 2,521 2.41 26% 8.91 0.07 2017E 20.63 5.58 0.13 31%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 4
2018E 3,143 2.86 19% 11.33 0.08 2018E 17.39 4.39 0.16 29%
2019E 3,995 3.55 24% 14.55 0.10 2019E 14.02 3.42 0.21 28%
Figure 1: 2Q17 Earnings Results Statement of comprehensive income (Btmn) Fiscal Year‐Ended Dec. Interest Income
2Q16
1Q17
2Q17
939
1,194
1,247
% YoY % QoQ
1H16
1H17 % YoY
33%
4% 1,776
2,441
2016
37% 4,008
2017E % YoY % 1H to 17E 5,423
35%
45% 48%
Interest Expenses
86
126
143
65%
13% 165
269
63% 369
566
53%
Net Interest Income
853
1,067
1,104
29%
3% 1,611
2,172
35% 3,639
4,857
33%
45%
Non Interest Income
314
390
571
82%
46% 608
961
58% 1,327
1,725
30%
56%
Operating Income
1,167
1,458
1,675
44%
15% 2,220
3,133
41% 4,967
6,582
33%
48%
Operating Expenses
565
650
739
31%
14% 1,053
1,389
32% 2,298
3,081
34%
45%
Operating Profit Provision expenses (Reversal)
601
808
936
56%
16% 1,166
1,744
50% 2,669
3,501
31%
50%
57
41
70
22%
72% 96
110
16% 158
405
156%
27%
Taxes
110
174
179
63%
3% 215
353
64% 502
619
23%
57%
Net Profit
434
690
630
45%
‐9% 854
1,320
55% 2,005
2,521
26%
52%
PPOP
492
634
757
54%
19% 951
1,392
46% 2,167
2,882
33%
48%
EPS (Bt)
0.42
0.66
0.58
40%
‐12% 0.82
1.21
49% 1.92
2.41
26%
50%
2Q16
1Q17
2Q17
1H16
1H17
2016
Key Statistics and Ratios (%)
2017E
Gross NPLs (Btmn)
647
923
983
647
983
635
1,034
Gross NPLs/Loans
4.62%
4.60%
4.55%
4.62%
4.55%
3.63%
4.22%
Loan Loss Reserve/NPLs
63.0% 101.0%
93.8%
88.9%
93.8%
61.3% 112.9%
Loan Loss Reserve/Loans
2.9%
4.6%
4.3%
2.9%
4.3%
2.2%
4.8%
32.5%
26.4%
25.3%
32.5%
25.3%
30.8%
27.9%
Equity/Asset Loan to borrowing ratio
127.9% 135.5% 123.9%
127.9% 123.9%
120.4% 131.1%
Debt to equity ratio (x)
2.1
2.1
2.7
2.2
2.6
2.7
2.4
Cost to Income
48.5%
44.6%
44.1%
47.5%
44.3%
46.3%
Non Interest Income/Total Income
26.9%
26.8%
34.1%
27.4%
30.7%
26.7%
46.8% 26.2%
Interest Spread
25.0%
22.3%
21.0%
24.3%
22.0%
24.4%
21.5%
Net Interest Margin
25.7%
20.4%
17.0%
25.2%
19.1%
24.8%
21.0%
Loan Growth YoY
42.6%
62.4%
54.1%
42.6%
54.1%
51.0%
40.4%
Loan Growth QoQ Source: KTZMICO Research
13.3%
15.0%
7.5%
13.3%
7.5%
Figure 2: SAWAD's P/BV band and sensitivity of market prices based on P/BV at different standard deviation levels (X)
Source: Bloomberg, KT ZMICO Research
Jul-17
May-17
Jan-17
Mar-17
Nov-16
Jul-16
Sep-16
May-16
Jan-16
Mar-16
Nov-15
Jul-15
Sep-15
May-15
Jan-15
2017E
Mar-15
Nov-14
Jul-14
Sep-14
May-14
12.0 11.0 +3.0 S.D. 10.0 9.0 +2.0 S.D. 8.0 +1.0 S.D. 7.0 Avg. 6.0 -1 S.D. 5.0 -2.0 S.D. 4.0 3.0 2.0
Implied PBV (x) market price
p Downside to current price
(Bt)
(%)
+2.0SD
9.1
81
63
+1.5SD
8.5
76
52
+1.0SD
7.8
70
40
+0.5SD
7.2
64
29
Average
6.5
58
17
-0.5SD
5.9
52
5
-1.0SD
5.2
47
-6
-1.5SD
4.6
41
-18
-2.0SD
3.9
35
-29
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 4
Figure 3: SAWAD's PER band and sensitivity of market prices based on PER at different standard deviation levels (X) 45
2017E
Implied PER (x) market price (Bt)
(%)
+2.0SD
31.6
76
53
+1.5SD
29.3
71
42
+1.0SD
27.0
65
31
+0.5SD
24.8
60
20
Average
22.5
54
9
-0.5SD
20.2
49
-2
-1.0SD
17.9
43
-13
-1.5SD
15.6
38
-24
-2.0SD
13.3
32
-35
40 +3.0 S.D.
Jul-17
May-17
Jan-17
Mar-17
Nov-16
Jul-16
Sep-16
May-16
May-17
Feb-17
Nov-16
Aug-16
May-16
Feb-16
Nov-15
Jan-16
Nov-15
May-15
Sep-15
May-15
Jul-15
Feb-15
Jan-15
Mar-15
Nov-14
Nov-14
Aug-14
Sep-14
May-14
Jul-14
May-14
Mar-16
+2.0 S.D.
12.0 30 +1.0S.D. 11.0 25 Avg. +3.0 S.D. 10.0 20 -1 S.D. 9.0 +2.0 S.D. 15 S.D. S.D. 8.0 -2+1.0 10 7.0 Avg. 6.0 -1 S.D. 5.0 -2.0 S.D. 4.0 Source: Bloomberg, KT ZMICO Research 3.0 2.0
Aug-15
(X) 35
Downside to current price
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 4
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, M‐CHAI, POMPUI, TTL, NMG, SAWAD.
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 returns over a six‐month period due to specific UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant catalysts SELL: Expecting negative total returns of 10% or more primary market index by 10% over the next 12 months. over the next 12 months
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 4
KT ZMICO Securities Company Limited Head Office
WWW.KTZMICO.COM
8th, 15th‐17th,19th, 21st Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok, Thailand 10500 Telephone: (66‐2) 695‐5000 Fax: (66‐2) 695‐5173 KT ZMICO Connect 662 695 5555
Central World Branch
Amarin Branch
22nd Floor, Amarin Building, 496‐502 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 018‐6200 Fax: (66‐2) 018‐6298, (66‐2) 018‐6299
8th Floor, Ton Son Tower, 900 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 626‐6000 Fax: (66‐2) 626‐6111
Phaholyothin Branch
Sindhorn Branch
Viphavadee Branch
2nd Floor, Sindhorn Tower 1, 130‐132 Wireless Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 627‐3550 Fax: (66‐2) 627‐3582, 627‐3600
G Floor, Lao Peng Nguan 1 Bldg., 333 Soi Cheypuand, Viphavadee‐Rangsit Road, Ladyao, Jatujak, Bangkok 10900 Telephone: (66‐2) 013‐8600 Fax: (66‐2) 618‐8569
BangKhae Branch
Chiang Mai Branch
Pak Chong Branch
999/9 The Offices at Central World, 16th Fl., Rama 1 Rd, Pathumwan, Bangkok 10330 Telephone: (66‐2) 264‐5888 Fax: (66‐2) 264 5899
1291/1, Shinnawatra Tower II, 3rd Floor, Phaholyothin Road, Phayathai, Bangkok 10400 Telephone: (66‐2) 686‐1500 Fax: (66‐2) 686‐1666
Ploenchit Branch
518 The Mall Group Building Bangkhae Branch, 6th Floor, Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Telephone: (66‐2) 454‐9979 Fax: (66‐2) 454‐9970
422/49 Changklan Road, Changklan Subdistrict, Amphoe Meuang, Chiang Mai 50100 Telephone: (053) 270‐072 Fax: (053) 272‐618
173 175, Mittapap Road, Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Telephone: (044) 279‐511 Fax: (044) 279‐574
Korat Branch
Khon Kaen Branch
Chonburi Branch
624/9 Changphuek Road, T.Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171
5th Floor, Charoen Thani Princess Hotel, 260 Srichan Road, T. Naimuang, A. Muang, Khon Kaen 40000 Telephone: (043) 389‐171‐193 Fax: (043) 389‐209
4th Floor, Forum Plaza Bldg., 870/52 Sukhumvit Road, T. Bangplasoy, A. Muang, Cholburi 20000 Telephone: (038) 287‐635 Fax: (038) 287‐637
Pattaya Branch
Chachoengsao Branch
Hat Yai Branch
Easy Point 2, 392/65 Moo.9, T.Nong Prue, A. Bang Lamung, Chonburi 20260 Telephone: (038) 420‐965 Fax: (038) 420‐968
108/34‐36 Mahajakkrapad Road, T.Namuang, A.Muang, Chachoengsao 24000 Telephone: (038) 813‐088 Fax: (038) 813‐099
200/301, 200/303 JULDIS HATYAI PLAZA Floor 3 , Niphat‐Uthit 3 Rd, Hatyai Songkhla 90110 Telephone: (074) 355530‐3 Fax: (074) 355534
Phuket Branch
22/61‐63, Luang Por Wat Chalong Road, Talat Yai, Mueang Phuket, Phuket 83000 Telephone: (076) 222‐811, (076) 222‐683 Fax: (076) 222‐861
Phitsanulok Branch
227/171 Borom Trilokkanat Road, Muang, Phitsanulok 65000 Telephone: 055‐219‐255 to 8 Fax: 055‐219‐259
Nakhon Pathom
Cyber Branch Ayutthaya
Cyber Branch @ North Nana
Cyber Branch Chiangrai
KrungThai Bank, Rojana Branch 253 Moo 5, Rojana Road, Phai Ling, Phra Nakhon Si Ayutthaya, Phra Nakhonsi Ayutthaya, 13000 Telephone: 035‐242‐477 Fax: 035‐242‐476
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd., Klong Toey Nua Subdistrict , Wattana District , Bangkok 10110 Telephone: 083‐490‐2871
River Hotel (Building 3rd),1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
KrungThai Bank, Hayaek Phokhun Mengrai Branch 116/19 Moo 19, Highway 110 Road, Rop Wiang, Mueang Chiang Rai, Chiang Rai, 57000 Telephone: 053‐715‐067 Fax: 053‐715‐068
Buy (17E TP Bt58.00) Close Bt49.75
Financial
Beat forecast/Below forecast/In line
August 16, 2017
Results in line with forecasts Results date: August 15, 2017 Price Performance (%)
Source: SET Smart
FY17
FY18
Consensus EPS (Bt)
2.433
3.054
KT ZMICO vs. consensus Share data
‐0.9%
‐6.4%
Reuters / Bloomberg
SAWAD.BK/SAWAD TB
Paid‐up Shares (m)
1,087.32
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
54.00/1,625.00
Foreign limit / actual (%)
49.00/22.30
52 week High / Low (Bt)
55.50/25.00
Avg. daily T/O (shares 000) NVDR (%)
5,963.00 9.18
Estimated free float (%)
47.41
Beta
1.62
URL
www.meebaanmeerod.com
CGR
Anti‐corruption
n.a.
Note: An executive of KT ZMICO Securities is also a member of SAWAD’s board and KT•ZMICO is a Financial Advisor for SAWAD. Prapharas Nonthapiboon Analyst, no 17836 [email protected] 66 (0) 2695‐5872
Among leading growth stocks in the financial sector We maintain our Buy rating for SAWAD. We like SAWAD as it remains among the leading growth stocks in the financial sector. We expect SAWAD’s move to restructure as a holding company and acquire BFIT to post synergy benefits to the group in the longer run. 2Q17 net profit in line with both our forecast and the street estimate SAWAD’s 2Q17 net profit of Bt630mn (+45% YoY, ‐9% QoQ) was in line with both our forecast (Bt631mn) and the street estimate (Bt643mn). 2Q17 net profit came in at Bt630mn (+45% YoY, ‐9% QoQ) The solid growth YoY was backed mainly by its robust loan growth of 54% YoY and 7% QoQ. This should be thanks to its continuing branch expansion to 2,283 branches at end‐2Q17 (95 and 153 new branches in 2Q17 and 1H17, respectively) vs. 2,130 branches at end‐16 and its target for 200‐300 new branches in 2017. Meanwhile, the interest spread after full‐quarter consolidation of BFIT in 2Q17 weakened to 21% vs. ~24% previously, due mainly to 1) the full‐quarter consolidation of BFIT in 2Q17 vs. around a one‐month consolidation in 1Q17 given BFIT’s lower asset yield; 2) SAWAD’s policy to book most of its new lending under hire purchase contracts (slightly lower yield but also lower risk vs. under loan contracts); and 3) some special promotions to clients, especially on car and agricultural land products to maintain its share. Moreover, SAWAD also booked income (around Bt50mn+/‐) from the successful settlement of its NPL purchase business in 2Q17. 2Q17 NP dropped QoQ due to the absence of extra income in 2Q17 The weakened NP QoQ was due to the absence of extra income in 2Q17 vs. the recognition of a one‐off gain of Bt102mn in 1Q17 as a result of measuring the fair value of SAWAD’s 9.84% equity interest in BFIT. Excluding such extra gain, its 2Q17 NP would increase by ~4% QoQ. NPL ratio quite stable QoQ SAWAD’s asset quality remains manageable with the NPL ratio quite stable QoQ at 4.55% vs. 4.6% in 1Q17 following its prudent risk management and its policy to do loan write‐offs every 2Q and 4Q; we should see slightly higher provisions in such quarters accordingly. 1H17 net profit came in at Bt1.3bn (+55% YoY) With 1H17 net profit of Bt1.3bn representing 52% of our FY17 NP forecast, we keep our earnings forecast unchanged. Business restructuring on track SAWAD’s Business Restructuring Plan within 2017 remains on track, which mainly includes 1) partial business transfer, primarily the collateralized lending business, to “Srisawad Power 2014” by 3Q17; and 2) restructuring itself as a holding company; and 3) restructuring businesses within the group of companies to create better synergies among the group, especially synergy with BFIT. In addition, it is likely that SAWAD will strengthen its risk management to bring it more in line with the BoT’s standards by 2H17, especially in terms of NPL classification (three‐month criteria) and provisioning. SAWAD expects that the net impact in terms of the provision will be quite modest given its low loan to value (~50%). Financials and Valuation FY Ended 31 Dec Net profit (Btmn) EPS (Bt) EPS growth (%) BV (Bt) Dividend (Bt) FY Ended 31 Dec PER (x) PBV (x) Dividend yield (%) ROE (%)
2015 1,336 1.31 53% 4.67 0.03 2015 37.98 10.65 0.06 33%
2016 2,005 1.92 46% 6.54 0.05 2016 25.95 7.60 0.09 35%
2017E 2,521 2.41 26% 8.91 0.07 2017E 20.63 5.58 0.13 31%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 4
2018E 3,143 2.86 19% 11.33 0.08 2018E 17.39 4.39 0.16 29%
2019E 3,995 3.55 24% 14.55 0.10 2019E 14.02 3.42 0.21 28%
Figure 1: 2Q17 Earnings Results Statement of comprehensive income (Btmn) Fiscal Year‐Ended Dec. Interest Income
2Q16
1Q17
2Q17
939
1,194
1,247
% YoY % QoQ
1H16
1H17 % YoY
33%
4% 1,776
2,441
2016
37% 4,008
2017E % YoY % 1H to 17E 5,423
35%
45% 48%
Interest Expenses
86
126
143
65%
13% 165
269
63% 369
566
53%
Net Interest Income
853
1,067
1,104
29%
3% 1,611
2,172
35% 3,639
4,857
33%
45%
Non Interest Income
314
390
571
82%
46% 608
961
58% 1,327
1,725
30%
56%
Operating Income
1,167
1,458
1,675
44%
15% 2,220
3,133
41% 4,967
6,582
33%
48%
Operating Expenses
565
650
739
31%
14% 1,053
1,389
32% 2,298
3,081
34%
45%
Operating Profit Provision expenses (Reversal)
601
808
936
56%
16% 1,166
1,744
50% 2,669
3,501
31%
50%
57
41
70
22%
72% 96
110
16% 158
405
156%
27%
Taxes
110
174
179
63%
3% 215
353
64% 502
619
23%
57%
Net Profit
434
690
630
45%
‐9% 854
1,320
55% 2,005
2,521
26%
52%
PPOP
492
634
757
54%
19% 951
1,392
46% 2,167
2,882
33%
48%
EPS (Bt)
0.42
0.66
0.58
40%
‐12% 0.82
1.21
49% 1.92
2.41
26%
50%
2Q16
1Q17
2Q17
1H16
1H17
2016
Key Statistics and Ratios (%)
2017E
Gross NPLs (Btmn)
647
923
983
647
983
635
1,034
Gross NPLs/Loans
4.62%
4.60%
4.55%
4.62%
4.55%
3.63%
4.22%
Loan Loss Reserve/NPLs
63.0% 101.0%
93.8%
88.9%
93.8%
61.3% 112.9%
Loan Loss Reserve/Loans
2.9%
4.6%
4.3%
2.9%
4.3%
2.2%
4.8%
32.5%
26.4%
25.3%
32.5%
25.3%
30.8%
27.9%
Equity/Asset Loan to borrowing ratio
127.9% 135.5% 123.9%
127.9% 123.9%
120.4% 131.1%
Debt to equity ratio (x)
2.1
2.1
2.7
2.2
2.6
2.7
2.4
Cost to Income
48.5%
44.6%
44.1%
47.5%
44.3%
46.3%
Non Interest Income/Total Income
26.9%
26.8%
34.1%
27.4%
30.7%
26.7%
46.8% 26.2%
Interest Spread
25.0%
22.3%
21.0%
24.3%
22.0%
24.4%
21.5%
Net Interest Margin
25.7%
20.4%
17.0%
25.2%
19.1%
24.8%
21.0%
Loan Growth YoY
42.6%
62.4%
54.1%
42.6%
54.1%
51.0%
40.4%
Loan Growth QoQ Source: KTZMICO Research
13.3%
15.0%
7.5%
13.3%
7.5%
Figure 2: SAWAD's P/BV band and sensitivity of market prices based on P/BV at different standard deviation levels (X)
Source: Bloomberg, KT ZMICO Research
Jul-17
May-17
Jan-17
Mar-17
Nov-16
Jul-16
Sep-16
May-16
Jan-16
Mar-16
Nov-15
Jul-15
Sep-15
May-15
Jan-15
2017E
Mar-15
Nov-14
Jul-14
Sep-14
May-14
12.0 11.0 +3.0 S.D. 10.0 9.0 +2.0 S.D. 8.0 +1.0 S.D. 7.0 Avg. 6.0 -1 S.D. 5.0 -2.0 S.D. 4.0 3.0 2.0
Implied PBV (x) market price
p Downside to current price
(Bt)
(%)
+2.0SD
9.1
81
63
+1.5SD
8.5
76
52
+1.0SD
7.8
70
40
+0.5SD
7.2
64
29
Average
6.5
58
17
-0.5SD
5.9
52
5
-1.0SD
5.2
47
-6
-1.5SD
4.6
41
-18
-2.0SD
3.9
35
-29
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 4
Figure 3: SAWAD's PER band and sensitivity of market prices based on PER at different standard deviation levels (X) 45
2017E
Implied PER (x) market price (Bt)
(%)
+2.0SD
31.6
76
53
+1.5SD
29.3
71
42
+1.0SD
27.0
65
31
+0.5SD
24.8
60
20
Average
22.5
54
9
-0.5SD
20.2
49
-2
-1.0SD
17.9
43
-13
-1.5SD
15.6
38
-24
-2.0SD
13.3
32
-35
40 +3.0 S.D.
Jul-17
May-17
Jan-17
Mar-17
Nov-16
Jul-16
Sep-16
May-16
May-17
Feb-17
Nov-16
Aug-16
May-16
Feb-16
Nov-15
Jan-16
Nov-15
May-15
Sep-15
May-15
Jul-15
Feb-15
Jan-15
Mar-15
Nov-14
Nov-14
Aug-14
Sep-14
May-14
Jul-14
May-14
Mar-16
+2.0 S.D.
12.0 30 +1.0S.D. 11.0 25 Avg. +3.0 S.D. 10.0 20 -1 S.D. 9.0 +2.0 S.D. 15 S.D. S.D. 8.0 -2+1.0 10 7.0 Avg. 6.0 -1 S.D. 5.0 -2.0 S.D. 4.0 Source: Bloomberg, KT ZMICO Research 3.0 2.0
Aug-15
(X) 35
Downside to current price
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 4
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, M‐CHAI, POMPUI, TTL, NMG, SAWAD.
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 returns over a six‐month period due to specific UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant catalysts SELL: Expecting negative total returns of 10% or more primary market index by 10% over the next 12 months. over the next 12 months
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 4
KT ZMICO Securities Company Limited Head Office
WWW.KTZMICO.COM
8th, 15th‐17th,19th, 21st Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok, Thailand 10500 Telephone: (66‐2) 695‐5000 Fax: (66‐2) 695‐5173 KT ZMICO Connect 662 695 5555
Central World Branch
Amarin Branch
22nd Floor, Amarin Building, 496‐502 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 018‐6200 Fax: (66‐2) 018‐6298, (66‐2) 018‐6299
8th Floor, Ton Son Tower, 900 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 626‐6000 Fax: (66‐2) 626‐6111
Phaholyothin Branch
Sindhorn Branch
Viphavadee Branch
2nd Floor, Sindhorn Tower 1, 130‐132 Wireless Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 627‐3550 Fax: (66‐2) 627‐3582, 627‐3600
G Floor, Lao Peng Nguan 1 Bldg., 333 Soi Cheypuand, Viphavadee‐Rangsit Road, Ladyao, Jatujak, Bangkok 10900 Telephone: (66‐2) 013‐8600 Fax: (66‐2) 618‐8569
BangKhae Branch
Chiang Mai Branch
Pak Chong Branch
999/9 The Offices at Central World, 16th Fl., Rama 1 Rd, Pathumwan, Bangkok 10330 Telephone: (66‐2) 264‐5888 Fax: (66‐2) 264 5899
1291/1, Shinnawatra Tower II, 3rd Floor, Phaholyothin Road, Phayathai, Bangkok 10400 Telephone: (66‐2) 686‐1500 Fax: (66‐2) 686‐1666
Ploenchit Branch
518 The Mall Group Building Bangkhae Branch, 6th Floor, Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Telephone: (66‐2) 454‐9979 Fax: (66‐2) 454‐9970
422/49 Changklan Road, Changklan Subdistrict, Amphoe Meuang, Chiang Mai 50100 Telephone: (053) 270‐072 Fax: (053) 272‐618
173 175, Mittapap Road, Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Telephone: (044) 279‐511 Fax: (044) 279‐574
Korat Branch
Khon Kaen Branch
Chonburi Branch
624/9 Changphuek Road, T.Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171
5th Floor, Charoen Thani Princess Hotel, 260 Srichan Road, T. Naimuang, A. Muang, Khon Kaen 40000 Telephone: (043) 389‐171‐193 Fax: (043) 389‐209
4th Floor, Forum Plaza Bldg., 870/52 Sukhumvit Road, T. Bangplasoy, A. Muang, Cholburi 20000 Telephone: (038) 287‐635 Fax: (038) 287‐637
Pattaya Branch
Chachoengsao Branch
Hat Yai Branch
Easy Point 2, 392/65 Moo.9, T.Nong Prue, A. Bang Lamung, Chonburi 20260 Telephone: (038) 420‐965 Fax: (038) 420‐968
108/34‐36 Mahajakkrapad Road, T.Namuang, A.Muang, Chachoengsao 24000 Telephone: (038) 813‐088 Fax: (038) 813‐099
200/301, 200/303 JULDIS HATYAI PLAZA Floor 3 , Niphat‐Uthit 3 Rd, Hatyai Songkhla 90110 Telephone: (074) 355530‐3 Fax: (074) 355534
Phuket Branch
22/61‐63, Luang Por Wat Chalong Road, Talat Yai, Mueang Phuket, Phuket 83000 Telephone: (076) 222‐811, (076) 222‐683 Fax: (076) 222‐861
Phitsanulok Branch
227/171 Borom Trilokkanat Road, Muang, Phitsanulok 65000 Telephone: 055‐219‐255 to 8 Fax: 055‐219‐259
Nakhon Pathom
Cyber Branch Ayutthaya
Cyber Branch @ North Nana
Cyber Branch Chiangrai
KrungThai Bank, Rojana Branch 253 Moo 5, Rojana Road, Phai Ling, Phra Nakhon Si Ayutthaya, Phra Nakhonsi Ayutthaya, 13000 Telephone: 035‐242‐477 Fax: 035‐242‐476
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd., Klong Toey Nua Subdistrict , Wattana District , Bangkok 10110 Telephone: 083‐490‐2871
River Hotel (Building 3rd),1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
KrungThai Bank, Hayaek Phokhun Mengrai Branch 116/19 Moo 19, Highway 110 Road, Rop Wiang, Mueang Chiang Rai, Chiang Rai, 57000 Telephone: 053‐715‐067 Fax: 053‐715‐068
