Srisawad Power 1979
Srisawad Power 1979 Company Update
Buy (17E TP Bt54.00) Close Bt39.25
Financial
Earnings upgrade/Earnings downgrade/Overview unchanged
August 10, 2016
Among top‐tier growth play stocks Price Performance (%)
Source: SET Smart
FY16
FY17
Consensus EPS (Bt)
1.723
2.235
KT ZMICO vs. consensus Share data
‐6.0%
‐9.2%
Reuters / Bloomberg
SAWAD.BK/SAWAD TB
Paid‐up Shares (m)
1,045.50
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
41.00/1,174.00
Foreign limit / actual (%)
49.00/22.37
52 week High / Low (Bt)
48.78/32.50
Avg. daily T/O (shares 000) NVDR (%)
4,401.00 2.75
Estimated free float (%)
47.63
Beta
0.74
URL
www.meebaanmeerod.com
CGR
Anti‐corruption
n.a.
Note: An executive of KT ZMICO Securities is also a member of SAWAD’s board.
Prapharas Nonthapiboon Analyst, no 17836 [email protected] 66 (0) 2695‐5872
Continuing growth momentum We rolled over to use the 17E target price (TP), which stands at Bt54/share, for implied target PER of 33x. We maintain our BUY call and still like SAWAD for being among the top growth stocks in the financial sector with expected EPS CAGR of 27% in 2016‐18E, outperforming the financial sector. This should be thanks to its leading position in the field and the promising industry outlook that still offers ample room to grow. 2Q16 net profit in line with our forecast and the street estimate SAWAD’s net profit of Bt434mn for 2Q16 was quite in line with our forecast and the consensus estimate of Bt426‐428mn. 2Q16 net profit stood at Bt434mn (+49% YoY, +3% QoQ) The impressive results were backed mainly by solid loan growth of 43% YoY and 13% QoQ and non‐interest income growth of 36% YoY and 7% QoQ, thanks to its aggressive branch expansion to 1,896 branches in 2Q16 vs. the target of ~2,000 branches at end‐16, with 136 and 269 new branches opened in 2Q16 and 1H16, respectively. The interest spread improved to 25% on both lower funding cost and a higher yield. The 1H16 net profit of Bt854mn (+50% YoY) represented 50% of our 16E forecast; we thus maintain our NP forecast for 2016E. Asset quality remains manageable Its asset quality remains manageable with the NPL ratio for 2Q16 declining to 3.27% of loans vs. 3.6% in both 2Q15 and 1Q16, following its more stringent measures in lending, collection and the NPL control processes since late 2014. The lower NPLs should also be due partly to SAWAD’s policy to normally do bad loan write‐offs every 2Q and 4Q. New businesses continue showing more progress At end‐Jun‐16, SAWAD signed a contract to purchase new NPLs from SCB at ~Bt483mn or ~60% of the total face value of Bt813mn. The total accumulated NPL purchases as of 2Q16 were Bt2.bn. In addition, SAWAD also started its lending business in Myanmar in Jun‐16 with total lending exposure of ~Bt215mn as of Jun‐16. Note that lending in Myanmar is done through a local dealer of Kubota Thailand, who provides hire‐ purchase loans for new agricultural vehicles of the Kubota brand. The loan to value is ~50% and the total yield will be ~30% vs. a yield of ~27‐ 29% in Thailand. Although there is quite strong demand in Myanmar, SAWAD will closely monitor this business in the beginning stage and has initially set a budget for lending in Myanmar of Bt500mn. This could possibly increase to >Bt1.0bn for 2016‐17E, depending on the asset quality outlook. Financials and Valuation FY Ended 31 Dec PPOP (Btm) Net profit (Btmn) EPS (Bt) EPS growth (%) BV (Bt) Dividend (Bt) FY Ended 31 Dec PER (x) PBV (x) Dividend yield (%) ROE (%)
2014 1,043 855 0.85 11% 3.43 0.02
2015 1,504 1,336 1.31 53% 4.67 0.03
2016E 1,936 1,692 1.62 24% 6.17 0.04*
2017E 2,558 2,175 2.03 25% 8.03 0.05*
2018E 3,476 2,958 2.69 33% 10.50 0.07*
2014 45.92 11.44 0.06 37%
2015 29.96 8.40 0.08 33%
2016E 24.25 6.36 0.11 30%
2017E 19.34 4.89 0.13 29%
2018E 14.58 3.74 0.18 29%
*Assume stock dividend at the ratio of 40:1 coupled with cash dividend.
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 6
Figure 1: 2Q16 Earnings Results Statement of comprehensive income (Btmn) Fiscal Year‐Ended Dec.
2Q15
1Q16
2Q16
% YoY % QoQ
1H15
1H16 % YoY
2015
2016E % YoY % 1H to 16E
Interest Income
652
837
939
44%
12% 1,260
1,776
41% 2,814
4,049
44%
44%
Interest Expenses
64
78
86
34%
10% 128
165
29% 281
461
64%
36%
Net Interest Income
588
759
853
45%
12% 1,132
1,611
42% 2,534
3,588
42%
45%
Non Interest Income
230
294
314
36%
7% 438
608
39% 963
1,202
25%
51%
Operating Income
818
1,053
1,167
43%
11% 1,570
2,220
41% 3,496
4,790
37%
46%
Operating Expenses
401
488
565
41%
16% 758
1,053
39% 1,678
2,431
45%
43%
Operating Profit Provision expenses (Reversal)
418
565
601
44%
6% 812
1,166
44% 1,818
2,358
30%
49%
51
38
57
11%
49% 98
96
‐3% 168
244
45%
39%
Taxes
75
105
110
46%
4% 145
215
49% 314
423
35%
51%
Net Profit
291
420
434
49%
3% 569
854
50% 1,336
1,692
27%
50%
PPOP
342
459
492
44%
7% 667
951
43% 1,504
1,936
29%
49%
EPS (Bt)
0.29
0.41
0.42
45%
1% 0.56
0.82
46% 1.31
1.62
24%
50%
2Q15
1Q16
2Q16
1H15
1H16
2015
Gross NPLs (Btmn)
358
441
458
358
458
406
592
Gross NPLs/Loans
3.64%
3.56%
3.27%
3.64%
3.27%
3.51%
3.65%
Loan Loss Reserve/NPLs
87.1%
89.3%
88.9%
87.1%
88.9%
87.5%
89.6%
Key Statistics and Ratios (%)
Loan Loss Reserve/Loans
2016E
3.2%
3.2%
2.9%
3.2%
2.9%
3.1%
3.3%
37.0%
34.6%
32.5%
37.0%
32.5%
34.9%
30.6%
Equity/Asset Loan to borrowing ratio
154.5% 136.1% 127.9%
154.5% 127.9%
139.6% 115.8%
Debt to equity ratio (x)
1.7
1.7
1.9
1.9
2.1
2.1
2.3
Cost to Income
49.0%
46.4%
48.5%
48.3%
47.5%
48.0%
50.8%
Non Interest Income/Total Income
28.1%
28.0%
26.9%
27.9%
27.4%
27.5%
25.1%
Interest Spread
23.8%
24.4%
25.0%
24.0%
24.3%
24.7%
25.0%
Net Interest Margin
24.2%
22.5%
22.6%
25.3%
22.3%
24.5%
21.6%
Loan Growth YoY
50.9%
40.8%
42.6%
50.9%
42.6%
48.0%
40.3%
Loan Growth QoQ Source: KTZMICO Research
11.9%
6.9%
13.3%
11.9%
13.3%
9.8%
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
Jun-16
Aug-16
Apr-16
Feb-16
Jan-16
Sep-15
Nov-15
Jul-15
Apr-15
May-15
Feb-15
Oct-14
2016E
Dec-14
Aug-14
Jul-14
May-14
12.0 +3.0 S.D. 11.0 +2.5 S.D. +2.0 S.D. 10.0 +1.5 S.D. 9.0 +1.0 S.D. 8.0 +0.5 S.D. Avg. 7.0 -0.5 S.D. 6.0 -1 S.D. -1.5 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
9.8
61
53
+1.5SD
9.1
56
42
+1.0SD
8.4
52
31
+0.5SD
7.6
47
19
Average
6.9
43
8
-0.5SD
6.2
38
-3
-1.0SD
5.5
34
-15
-1.5SD
4.7
29
-26
-2.0SD
4.0
25
-37
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 6
Figure 3: SAWAD's PER band and sensitivity of market prices based on PER at different standard deviation levels (X) 45
2016E +3.0 S.D.
Downside to current price
(Bt)
(%)
+2.0 S.D.
+2.0SD
34.9
56
43
+1.0S.D.
+1.5SD
32.6
53
34
Avg.
+1.0SD
30.4
49
24
-1 S.D.
+0.5SD
28.1
46
15
Average
25.9
42
6
15
-0.5SD
23.6
38
-3
10
-1.0SD
21.4
35
-12
-1.5SD
19.1
31
-22
-2.0SD
16.9
27
-31
40 35 30 25 20
Source: Bloomberg, KT ZMICO Research
Aug-16
Jun-16
Apr-16
Feb-16
Jan-16
Nov-15
Sep-15
Jul-15
May-15
Apr-15
Feb-15
Dec-14
Oct-14
Jul-14
Aug-14
May-14
-2 S.D.
Implied PER (x) market price
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 6
Statement of Comprehensive Income (Btmn) 2014
2015
Total Interest Income
1,955
2,814
4,049
5,517
7,174
Total Interest Expenses
219
281
461
715
1,014
Net Interest Income
1,736
2,534
3,588
4,802
6,160
Total Non‐Interest Income
735
963
1,202
1,549
2,037
Operating Income
2,471
3,496
4,790
6,351
8,198
Fee and service expenses
126
127
163
188
216
Year‐end 31 Dec
2016E
2017E
2018E
Administrative expenses
1,095
1,551
2,268
3,062
3,766
Total Operating Expenses
1,220
1,678
2,431
3,250
3,982
Operating Profit
1,251
1,818
2,358
3,102
4,216
Provision expenses
189
168
244
383
518
Extraordinary Items
‐
‐
‐
‐
‐
Income Tax expense
207
314
423
544
739
Net Profit
855
1,336
1,692
2,175
2,958
Pre Provisioning Operating Profit (PPOP)
1,043
1,504
1,936
2,558
3,476
EPS (Bt)
0.85
1.31
1.62
2.03
2.69
2014
2015
Cash
348
333
349
367
385
Deposits with banks/Loans to related parties
21
‐
‐
‐
‐
Net Investment
40
1,268
4,079
7,306
9,640
Gross Loans
7,816
11,568
16,234
21,864
28,006
Less: Loan Loss Reserves
(273) (355) (531) (837) (1,267)
Statement of Financial Position (Btmn) As at 31 Dec
2016E
2017E
2018E
Assets
Net Loans
7,543
11,213
15,704
21,028
Foreclosed properties
208
95
99
104
26,740 109
Premises and Equipment, Net
245
391
469
532
574
Other Assets
186
340
397
479
589
Total Assets
8,592
13,640
21,098
29,816
38,038
S‐T borrowings from financial institutions
3,764
1,010
2,525
5,050
7,575
Other Borrowings
1,000
7,277
11,500
15,500
18,230
Other Liabilities
395
581
614
650
687
Total Liabilities
5,160
8,868
14,639
21,200
26,492
Liabilities & Equity
Paid‐up Capital
1,000
1,020
1,045
1,072
1,098
Premium on Share Capital
1,422
1,422
1,422
1,422
1,422
Retained Earning
874
2,182
3,832
5,953
8,835
Other Equity Items
136
143
153
163
183
Minority Interest
‐
6
6
7
8
Total Shareholders' Equity
3,432
4,766
6,452
8,610
11,538
Total Liabilities and Shareholders Equity Source: KTZMICO Research
8,592
13,640
21,098
29,816
38,038
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 6
Valuation and Ratio Analysis 2014
2015
EPS
0.85
1.31
1.62
2.03
2.69
DPS
0.02
0.03
0.04
0.05
0.07
BVPS
3.43
4.67
6.17
8.03
10.50
Year‐end 31 Dec
2016E
2017E
2018E
Per/Share Data (Bt)
Multiplier (X) P/E
45.92
29.96
24.25
19.34
14.58
P/BV
11.44
8.40
6.36
4.89
3.74
Dividend yield (%)
0.06
0.08
0.11
0.13
0.18
Growth YoY (%) Net Profit
48.5%
56.3%
26.6%
28.6%
36.0%
EPS
11.4%
53.3%
23.5%
25.4%
32.7%
Net Interest Income
42.8%
45.9%
41.6%
33.8%
28.3%
Non Interest Income
60.9%
37.4%
29.4%
32.7%
34.4%
Net Fee and Service income
69.1%
33.9%
21.9%
19.3%
17.1%
Operating Income
44.8%
41.5%
37.0%
32.6%
29.1%
Operating Expenses
43.7%
37.5%
44.9%
33.7%
22.5%
Operating Profit
45.8%
45.4%
29.7%
31.5%
35.9%
PPOP
47.6%
44.1%
28.7%
32.2%
35.9%
Loans
36.6%
48.0%
40.3%
34.7%
28.1%
NPLs
52.8%
25.7%
45.9%
38.7%
30.7%
Financial Ratio Gross NPLs (Btmn) Gross NPLs/Loans
2014
2015
323
406
2016E 592
2017E 822
2018E 1,074
4.1%
3.5%
3.6%
3.8%
3.8%
Loan Loss Reserve/NPLs
84.6%
87.5%
89.6%
101.8%
117.9%
Loan Loss Reserve/Loans
3.5%
3.1%
3.3%
3.8%
4.5%
Provision expenses (Reversal)/Total loans Equity/Asset Loan to borrowing ratio
2.4%
1.5%
1.5%
1.8%
1.9%
39.9%
34.9%
30.6%
28.9%
30.3%
164.1%
Debt to Equity ratio
1.50
139.6% 1.86
115.8% 2.27
106.4%
108.5%
2.46
2.30
ROA
11.7%
12.0%
9.7%
8.5%
8.7%
ROE
37.5%
32.6%
30.2%
28.9%
29.4%
Cost to Income
49.4%
48.0%
50.8%
51.2%
48.6%
Non Interest Income/Total Income
29.7%
27.5%
25.1%
24.4%
24.9%
Loan spread
24.2%
24.7%
25.0%
24.8%
24.4%
Net Interest Margin (NIM)
25.5%
24.5%
21.6%
19.4%
18.4%
Net Profit Margin
31.8%
35.4%
32.2%
30.8%
32.1%
Tax rate
19.5%
19.0%
20.0%
20.0%
20.0%
Key Assumptions
2014
2015
2016E
2017E
2018E
Loan Growth ‐ Net
36.6%
48.0%
40.3%
34.7%
28.1%
Cost to Income
49.4%
48.0%
50.8%
51.2%
48.6%
24.2%
24.7%
25.0%
24.8%
24.4%
Loan spread Provision expenses (Reversal) (Btmn) Provision expenses (Reversal)/Total loans Source: KTZMICO Research
189 168 244 383 518 2.4%
1.5%
1.5%
1.8%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 5 of 6
1.9%
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, PLE, TPOLY, M‐CHAI, CI. KT ZMICO is a co‐underwriter of ALT, EKH, RJH.
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 6 of 6
th
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.
Buy (17E TP Bt54.00) Close Bt39.25
Financial
Earnings upgrade/Earnings downgrade/Overview unchanged
August 10, 2016
Among top‐tier growth play stocks Price Performance (%)
Source: SET Smart
FY16
FY17
Consensus EPS (Bt)
1.723
2.235
KT ZMICO vs. consensus Share data
‐6.0%
‐9.2%
Reuters / Bloomberg
SAWAD.BK/SAWAD TB
Paid‐up Shares (m)
1,045.50
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
41.00/1,174.00
Foreign limit / actual (%)
49.00/22.37
52 week High / Low (Bt)
48.78/32.50
Avg. daily T/O (shares 000) NVDR (%)
4,401.00 2.75
Estimated free float (%)
47.63
Beta
0.74
URL
www.meebaanmeerod.com
CGR
Anti‐corruption
n.a.
Note: An executive of KT ZMICO Securities is also a member of SAWAD’s board.
Prapharas Nonthapiboon Analyst, no 17836 [email protected] 66 (0) 2695‐5872
Continuing growth momentum We rolled over to use the 17E target price (TP), which stands at Bt54/share, for implied target PER of 33x. We maintain our BUY call and still like SAWAD for being among the top growth stocks in the financial sector with expected EPS CAGR of 27% in 2016‐18E, outperforming the financial sector. This should be thanks to its leading position in the field and the promising industry outlook that still offers ample room to grow. 2Q16 net profit in line with our forecast and the street estimate SAWAD’s net profit of Bt434mn for 2Q16 was quite in line with our forecast and the consensus estimate of Bt426‐428mn. 2Q16 net profit stood at Bt434mn (+49% YoY, +3% QoQ) The impressive results were backed mainly by solid loan growth of 43% YoY and 13% QoQ and non‐interest income growth of 36% YoY and 7% QoQ, thanks to its aggressive branch expansion to 1,896 branches in 2Q16 vs. the target of ~2,000 branches at end‐16, with 136 and 269 new branches opened in 2Q16 and 1H16, respectively. The interest spread improved to 25% on both lower funding cost and a higher yield. The 1H16 net profit of Bt854mn (+50% YoY) represented 50% of our 16E forecast; we thus maintain our NP forecast for 2016E. Asset quality remains manageable Its asset quality remains manageable with the NPL ratio for 2Q16 declining to 3.27% of loans vs. 3.6% in both 2Q15 and 1Q16, following its more stringent measures in lending, collection and the NPL control processes since late 2014. The lower NPLs should also be due partly to SAWAD’s policy to normally do bad loan write‐offs every 2Q and 4Q. New businesses continue showing more progress At end‐Jun‐16, SAWAD signed a contract to purchase new NPLs from SCB at ~Bt483mn or ~60% of the total face value of Bt813mn. The total accumulated NPL purchases as of 2Q16 were Bt2.bn. In addition, SAWAD also started its lending business in Myanmar in Jun‐16 with total lending exposure of ~Bt215mn as of Jun‐16. Note that lending in Myanmar is done through a local dealer of Kubota Thailand, who provides hire‐ purchase loans for new agricultural vehicles of the Kubota brand. The loan to value is ~50% and the total yield will be ~30% vs. a yield of ~27‐ 29% in Thailand. Although there is quite strong demand in Myanmar, SAWAD will closely monitor this business in the beginning stage and has initially set a budget for lending in Myanmar of Bt500mn. This could possibly increase to >Bt1.0bn for 2016‐17E, depending on the asset quality outlook. Financials and Valuation FY Ended 31 Dec PPOP (Btm) Net profit (Btmn) EPS (Bt) EPS growth (%) BV (Bt) Dividend (Bt) FY Ended 31 Dec PER (x) PBV (x) Dividend yield (%) ROE (%)
2014 1,043 855 0.85 11% 3.43 0.02
2015 1,504 1,336 1.31 53% 4.67 0.03
2016E 1,936 1,692 1.62 24% 6.17 0.04*
2017E 2,558 2,175 2.03 25% 8.03 0.05*
2018E 3,476 2,958 2.69 33% 10.50 0.07*
2014 45.92 11.44 0.06 37%
2015 29.96 8.40 0.08 33%
2016E 24.25 6.36 0.11 30%
2017E 19.34 4.89 0.13 29%
2018E 14.58 3.74 0.18 29%
*Assume stock dividend at the ratio of 40:1 coupled with cash dividend.
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 6
Figure 1: 2Q16 Earnings Results Statement of comprehensive income (Btmn) Fiscal Year‐Ended Dec.
2Q15
1Q16
2Q16
% YoY % QoQ
1H15
1H16 % YoY
2015
2016E % YoY % 1H to 16E
Interest Income
652
837
939
44%
12% 1,260
1,776
41% 2,814
4,049
44%
44%
Interest Expenses
64
78
86
34%
10% 128
165
29% 281
461
64%
36%
Net Interest Income
588
759
853
45%
12% 1,132
1,611
42% 2,534
3,588
42%
45%
Non Interest Income
230
294
314
36%
7% 438
608
39% 963
1,202
25%
51%
Operating Income
818
1,053
1,167
43%
11% 1,570
2,220
41% 3,496
4,790
37%
46%
Operating Expenses
401
488
565
41%
16% 758
1,053
39% 1,678
2,431
45%
43%
Operating Profit Provision expenses (Reversal)
418
565
601
44%
6% 812
1,166
44% 1,818
2,358
30%
49%
51
38
57
11%
49% 98
96
‐3% 168
244
45%
39%
Taxes
75
105
110
46%
4% 145
215
49% 314
423
35%
51%
Net Profit
291
420
434
49%
3% 569
854
50% 1,336
1,692
27%
50%
PPOP
342
459
492
44%
7% 667
951
43% 1,504
1,936
29%
49%
EPS (Bt)
0.29
0.41
0.42
45%
1% 0.56
0.82
46% 1.31
1.62
24%
50%
2Q15
1Q16
2Q16
1H15
1H16
2015
Gross NPLs (Btmn)
358
441
458
358
458
406
592
Gross NPLs/Loans
3.64%
3.56%
3.27%
3.64%
3.27%
3.51%
3.65%
Loan Loss Reserve/NPLs
87.1%
89.3%
88.9%
87.1%
88.9%
87.5%
89.6%
Key Statistics and Ratios (%)
Loan Loss Reserve/Loans
2016E
3.2%
3.2%
2.9%
3.2%
2.9%
3.1%
3.3%
37.0%
34.6%
32.5%
37.0%
32.5%
34.9%
30.6%
Equity/Asset Loan to borrowing ratio
154.5% 136.1% 127.9%
154.5% 127.9%
139.6% 115.8%
Debt to equity ratio (x)
1.7
1.7
1.9
1.9
2.1
2.1
2.3
Cost to Income
49.0%
46.4%
48.5%
48.3%
47.5%
48.0%
50.8%
Non Interest Income/Total Income
28.1%
28.0%
26.9%
27.9%
27.4%
27.5%
25.1%
Interest Spread
23.8%
24.4%
25.0%
24.0%
24.3%
24.7%
25.0%
Net Interest Margin
24.2%
22.5%
22.6%
25.3%
22.3%
24.5%
21.6%
Loan Growth YoY
50.9%
40.8%
42.6%
50.9%
42.6%
48.0%
40.3%
Loan Growth QoQ Source: KTZMICO Research
11.9%
6.9%
13.3%
11.9%
13.3%
9.8%
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
Jun-16
Aug-16
Apr-16
Feb-16
Jan-16
Sep-15
Nov-15
Jul-15
Apr-15
May-15
Feb-15
Oct-14
2016E
Dec-14
Aug-14
Jul-14
May-14
12.0 +3.0 S.D. 11.0 +2.5 S.D. +2.0 S.D. 10.0 +1.5 S.D. 9.0 +1.0 S.D. 8.0 +0.5 S.D. Avg. 7.0 -0.5 S.D. 6.0 -1 S.D. -1.5 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
9.8
61
53
+1.5SD
9.1
56
42
+1.0SD
8.4
52
31
+0.5SD
7.6
47
19
Average
6.9
43
8
-0.5SD
6.2
38
-3
-1.0SD
5.5
34
-15
-1.5SD
4.7
29
-26
-2.0SD
4.0
25
-37
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 6
Figure 3: SAWAD's PER band and sensitivity of market prices based on PER at different standard deviation levels (X) 45
2016E +3.0 S.D.
Downside to current price
(Bt)
(%)
+2.0 S.D.
+2.0SD
34.9
56
43
+1.0S.D.
+1.5SD
32.6
53
34
Avg.
+1.0SD
30.4
49
24
-1 S.D.
+0.5SD
28.1
46
15
Average
25.9
42
6
15
-0.5SD
23.6
38
-3
10
-1.0SD
21.4
35
-12
-1.5SD
19.1
31
-22
-2.0SD
16.9
27
-31
40 35 30 25 20
Source: Bloomberg, KT ZMICO Research
Aug-16
Jun-16
Apr-16
Feb-16
Jan-16
Nov-15
Sep-15
Jul-15
May-15
Apr-15
Feb-15
Dec-14
Oct-14
Jul-14
Aug-14
May-14
-2 S.D.
Implied PER (x) market price
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 6
Statement of Comprehensive Income (Btmn) 2014
2015
Total Interest Income
1,955
2,814
4,049
5,517
7,174
Total Interest Expenses
219
281
461
715
1,014
Net Interest Income
1,736
2,534
3,588
4,802
6,160
Total Non‐Interest Income
735
963
1,202
1,549
2,037
Operating Income
2,471
3,496
4,790
6,351
8,198
Fee and service expenses
126
127
163
188
216
Year‐end 31 Dec
2016E
2017E
2018E
Administrative expenses
1,095
1,551
2,268
3,062
3,766
Total Operating Expenses
1,220
1,678
2,431
3,250
3,982
Operating Profit
1,251
1,818
2,358
3,102
4,216
Provision expenses
189
168
244
383
518
Extraordinary Items
‐
‐
‐
‐
‐
Income Tax expense
207
314
423
544
739
Net Profit
855
1,336
1,692
2,175
2,958
Pre Provisioning Operating Profit (PPOP)
1,043
1,504
1,936
2,558
3,476
EPS (Bt)
0.85
1.31
1.62
2.03
2.69
2014
2015
Cash
348
333
349
367
385
Deposits with banks/Loans to related parties
21
‐
‐
‐
‐
Net Investment
40
1,268
4,079
7,306
9,640
Gross Loans
7,816
11,568
16,234
21,864
28,006
Less: Loan Loss Reserves
(273) (355) (531) (837) (1,267)
Statement of Financial Position (Btmn) As at 31 Dec
2016E
2017E
2018E
Assets
Net Loans
7,543
11,213
15,704
21,028
Foreclosed properties
208
95
99
104
26,740 109
Premises and Equipment, Net
245
391
469
532
574
Other Assets
186
340
397
479
589
Total Assets
8,592
13,640
21,098
29,816
38,038
S‐T borrowings from financial institutions
3,764
1,010
2,525
5,050
7,575
Other Borrowings
1,000
7,277
11,500
15,500
18,230
Other Liabilities
395
581
614
650
687
Total Liabilities
5,160
8,868
14,639
21,200
26,492
Liabilities & Equity
Paid‐up Capital
1,000
1,020
1,045
1,072
1,098
Premium on Share Capital
1,422
1,422
1,422
1,422
1,422
Retained Earning
874
2,182
3,832
5,953
8,835
Other Equity Items
136
143
153
163
183
Minority Interest
‐
6
6
7
8
Total Shareholders' Equity
3,432
4,766
6,452
8,610
11,538
Total Liabilities and Shareholders Equity Source: KTZMICO Research
8,592
13,640
21,098
29,816
38,038
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 6
Valuation and Ratio Analysis 2014
2015
EPS
0.85
1.31
1.62
2.03
2.69
DPS
0.02
0.03
0.04
0.05
0.07
BVPS
3.43
4.67
6.17
8.03
10.50
Year‐end 31 Dec
2016E
2017E
2018E
Per/Share Data (Bt)
Multiplier (X) P/E
45.92
29.96
24.25
19.34
14.58
P/BV
11.44
8.40
6.36
4.89
3.74
Dividend yield (%)
0.06
0.08
0.11
0.13
0.18
Growth YoY (%) Net Profit
48.5%
56.3%
26.6%
28.6%
36.0%
EPS
11.4%
53.3%
23.5%
25.4%
32.7%
Net Interest Income
42.8%
45.9%
41.6%
33.8%
28.3%
Non Interest Income
60.9%
37.4%
29.4%
32.7%
34.4%
Net Fee and Service income
69.1%
33.9%
21.9%
19.3%
17.1%
Operating Income
44.8%
41.5%
37.0%
32.6%
29.1%
Operating Expenses
43.7%
37.5%
44.9%
33.7%
22.5%
Operating Profit
45.8%
45.4%
29.7%
31.5%
35.9%
PPOP
47.6%
44.1%
28.7%
32.2%
35.9%
Loans
36.6%
48.0%
40.3%
34.7%
28.1%
NPLs
52.8%
25.7%
45.9%
38.7%
30.7%
Financial Ratio Gross NPLs (Btmn) Gross NPLs/Loans
2014
2015
323
406
2016E 592
2017E 822
2018E 1,074
4.1%
3.5%
3.6%
3.8%
3.8%
Loan Loss Reserve/NPLs
84.6%
87.5%
89.6%
101.8%
117.9%
Loan Loss Reserve/Loans
3.5%
3.1%
3.3%
3.8%
4.5%
Provision expenses (Reversal)/Total loans Equity/Asset Loan to borrowing ratio
2.4%
1.5%
1.5%
1.8%
1.9%
39.9%
34.9%
30.6%
28.9%
30.3%
164.1%
Debt to Equity ratio
1.50
139.6% 1.86
115.8% 2.27
106.4%
108.5%
2.46
2.30
ROA
11.7%
12.0%
9.7%
8.5%
8.7%
ROE
37.5%
32.6%
30.2%
28.9%
29.4%
Cost to Income
49.4%
48.0%
50.8%
51.2%
48.6%
Non Interest Income/Total Income
29.7%
27.5%
25.1%
24.4%
24.9%
Loan spread
24.2%
24.7%
25.0%
24.8%
24.4%
Net Interest Margin (NIM)
25.5%
24.5%
21.6%
19.4%
18.4%
Net Profit Margin
31.8%
35.4%
32.2%
30.8%
32.1%
Tax rate
19.5%
19.0%
20.0%
20.0%
20.0%
Key Assumptions
2014
2015
2016E
2017E
2018E
Loan Growth ‐ Net
36.6%
48.0%
40.3%
34.7%
28.1%
Cost to Income
49.4%
48.0%
50.8%
51.2%
48.6%
24.2%
24.7%
25.0%
24.8%
24.4%
Loan spread Provision expenses (Reversal) (Btmn) Provision expenses (Reversal)/Total loans Source: KTZMICO Research
189 168 244 383 518 2.4%
1.5%
1.5%
1.8%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 5 of 6
1.9%
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, PLE, TPOLY, M‐CHAI, CI. KT ZMICO is a co‐underwriter of ALT, EKH, RJH.
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 6 of 6
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.
