TISCO Financial Group - Global Alliance Partners
TISCO Financial Group Company Update
Underperform (15E TP Bt44.00) Banking
Earnings upgrade/Earnings downgrade/Overview unchanged
December 15, 2014
2015 outlook remains challenging
FY14
FY15
Consensus EPS (Bt)
5.121
5.738
KT ZMICO vs. consensus Share data
0.4%
‐1.9%
Reuters / Bloomberg
TISCO.BK/TISCO TB
800.62
Paid‐up Shares (m)
10.00
Par (Bt) Market cap (Bt bn / US$ m)
34.00/1,043.00
Foreign limit / actual (%)
49.00/47.68
52 week High / Low (Bt)
47.50/36.00
Avg. daily T/O (shares 000)
1,241.00 8.20
NVDR (%) Estimated free float (%)
74.26
Beta
0.87
URL
www.tisco.co.th
CGR 2013
Trim earnings and TP to reflect weak operating environment We change our rating for TISCO to Underperform from Sell into Strength following our change in the stock rating criteria and our earnings cut with the new 15E target price at Bt44/share as we still expect TISCO to face a challenging operating environment in 2015, especially in the auto hire purchase business. Nov‐14 loans improved slightly 0.2% MoM TISCO reported loan growth of 0.2% MoM in Nov‐14, driven mainly by corporate loans and SME loans for car dealers. Meanwhile, retail loans continued to contract 1% MoM. YTD loans still dropped 6.8% in 11M14. 2015 guidance still highlights weak lending environment In our latest call, TISCO gave some preliminary guidance for 2015E, which will still be quite challenging, especially regarding the loan growth target. However, the bank expects some earnings cushion on the likelihood of lower provisioning and stable NIM. Revise down net profit estimates for 15‐16E We trimmed our net profit forecasts for TISCO for 15‐16E by 6‐7% to fine‐tune with its latest 2015 guidance. Following our NP cut, we also trimmed our 15 target price to Bt44/share from Bt47/share previously. 4Q14E earnings outlook to increase YoY, but be stable QoQ We preliminarily estimate TISCO’s 4Q14E net profit at Bt1.1bn (+37% YoY and +1% QoQ). The main boosts for the earnings growth YoY should come from a much lower provision and higher NIM. Financial and Valuation FY Ended 31 Dec
2012
2013
2014E
2015E
2016E
PPOP (Btm)
5,507
8,037
8,718
8,624
9,017
Net profit (Btmn)
3,705
4,249
4,117
4,505
5,003
EPS (Bt) EPS growth (%) Dividend (Bt)
5.09
5.31
5.14
5.63
6.25
13.4%
4.3%
‐3.1%
9.4%
11.1%
2.40
2.00
2.06
2.08
2.31
Prapharas Nonthapiboon
BV (Bt)
25.00
28.71
31.75
35.32
39.49
Analyst, no 17836
FY Ended 31 Dec
2012
2013
2014E
2015E
2016E
[email protected]
PER (x)
8.40
8.06
8.31
7.60
6.84
66 (0) 2695‐5872
PBV (x)
1.71
1.49
1.35
1.21
1.08
5.61 21.3%
4.68 20.6%
4.81 17.0%
4.87 16.8%
5.41 16.7%
Dividend yield (%) ROE (%)
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 7
Nov‐14 loans improved slightly 0.2% MoM TISCO reported loan growth of 0.2% MoM in Nov‐14 vs. a contraction of around 0.5‐1% MoM since the beginning of the year. The main drivers for the growth in this month were 1) the 2% MoM growth in corporate loans, as there was some draw down of project finance loans in the real estate sector; and 2) the 2.6% growth of SME loans for car dealers (floor plan segment) to prepare for the motor expo in Dec‐14. However, retail loans continued to decline by ~1% MoM this month (‐0.9% MoM in new car segment and ‐1.4% MoM in used car segment). Meanwhile, its loans for 11M14 still contracted by 6.8% YTD due mainly to the sharp drop in loans for car dealers and auto hire purchase loans, especially in the used car segment. 2015 guidance still highlights weak lending environment In our latest call, TISCO gave some preliminary guidance for 2015E, which will still be quite challenging, especially regarding the loan growth target. TISCO now expects the loan growth target for 2015E at around the mid‐single digits, lower than the guidance gave in the latest meeting of single‐digit growth, with the main growth driver to be corporate loans. Meanwhile, auto hire purchase loans should remain fragile, due partly to the high competition from the auto makers’ leasing subsidiaries (captive market) and the higher rate of loan repayments vs. new lending. However, TISCO expects some earnings cushion to offset the weak lending environments (i.e., the likelihood of lower provisioning, at least stable NIM). It highlighted that the provisioning level for 2015E could be less than this year’s target (~160 bps of average loans) but still higher than its normal level of around 120‐130 bps. Moreover, TISCO anticipates a stable interest rate environment for 2015, which should benefit the bank’s net interest margin (NIM). On top of this, it expects to boost fee income, especially in regard to fees related to non‐auto bancassurance (life and non‐life bancassurance). Revise down net profit estimates for 15‐16E We trimmed our net profit (NP) forecasts for TISCO to fine‐tune with its latest 2015 guidance and the latest operating environments, especially the weak lending YTD. We made no significant change to the 14E NP forecast, but revised down the 15‐16E NP forecasts by 6‐7%, mainly on lower loan growth and slightly higher provisioning. However, we see some earnings cushion from the likelihood of better‐than‐expected NIM thanks to its efficient NIM management and the low interest rate environment. Figure 1: Key changes in our earnings revision Key assumption changes Net Profit (Btmn) % Change in net profit from previous forecasts % Change in net profit YoY Loan growth (%) Net interest margin (NIM) Net fee income growth (%) Provision for loan loss (Btmn) Provision for loan loss (% of average loans)
2014E New Previous 4,117 4,079 1% ‐3% ‐7% 2% 2.94% 2.91% ‐3% ‐7% 4,727 4,803 1.68% 1.63%
2015E New Previous 4,505 4,856 ‐7% 9% 1% 13% 3.03% 2.89% 10% 13% 4,218 4,590 1.55% 1.45%
New 5,003 ‐6% 11% 7% 2.96% 11% 4,114 1.45%
2016E Previous 5,337
12% 2.80% 11% 4,809 1.35%
Source: Company data, KT ZMICO Research Assign new rating of Underperform from Sell into Strength Following our change in the stock rating criteria as well as our earnings cut, we assign an Underperform rating for TISCO from a Sell into Strength rating previously. We also trimmed our 15 target price estimate for TISCO to Bt44/share (for an implied target P/BV of 1.25x) from Bt47/share previously following our NP cut. REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 7
4Q14E net profit to increase sharply YoY, but be quite stable QoQ We preliminarily estimate TISCO’s 4Q14E net profit at Bt1.1bn (+37% YoY and +1% QoQ). The main boosts for the earnings growth YoY should come from a much lower provision and higher NIM. Note that in 4Q13, TISCO set aside a huge provision of Bt1.61bn (including an extra provision) vs. our estimate of ~Bt1.18bn in 4Q14E (see Figure 2). Figure 2: 4Q14E earnings forecast Statement of Comprehensive Income Fiscal Year‐Ended December Net Interes t Income
% YoY
% QoQ
2014E
2,319
4Q13
2,502
3Q14
2,642
4Q14E
14%
6%
9,873
% YoY 10%
Non Interes t Income
1,528
1,577
1,478
‐3%
‐6%
6,027
‐12%
Opera ti ng Income
3,847
4,078
4,120
7%
1%
15,900
1%
Opera ti ng Expens es
1,231
1,544
1,525
24%
‐1%
5,931
‐5%
Opera ti ng Profi t
2,345
2,162
2,298
‐2%
6%
8,795
8% 14%
Provi s i on (Revers a l )
1,613
1,149
1,183
‐27%
3%
4,727
Ta xes
185
277
287
56%
4%
1,048
‐1%
Net Profi t PPOP EPS (Bt)
804 2,331 1.00
1,089 2,142 1.36
1,101 2,275 1.38
37% ‐2% 37%
1% 6% 1%
4,117 8,718 5.14
‐3% 8% ‐3%
Key Statistics & Ratios
4Q13 3Q14 4Q14E 4,966 6,470 6,556
Gros s NPLs (Btmn) Gros s NPLs /Loa ns Loa n Los s Res erve/NPLs
2014E 6,556
1.70%
2.35%
2.42%
2.42%
127.9%
105.8%
117.2%
117.2%
Ti er I/Ri s k As s et
9.1%
12.2%
N.A.
11.8%
13.3%
16.2%
N.A.
16.1%
110.4%
132.7%
131.9%
131.9%
Loa n to Depos i ts a nd Borrowi ngs
94.6%
103.8%
103.9%
103.9%
Cos t to Income
32.0%
37.9%
37.0%
37.3%
Ca pi ta l Adequa cy Ra ti o Loa n to Depos i t Ra ti o
Non Interes t Income/Tota l Income
37.6%
37.4%
34.5%
37.9%
Ta x ra te Net Interes t Ma rgi n Provi s i on/Loa ns
18.4% 2.88% 2.24%
20.0% 3.07% 1.66%
20.4% 3.15% 1.74%
20.0% 2.94% 1.68%
Loa n growth YoY Loa n growth QoQ
17.7% 2.6%
‐3.5% ‐2.0%
‐7.4% ‐1.5%
‐7.4%
Source: Bloomberg and KTZMICO Research
Figure 3: TISCO's P/BV band and sensitivity of market prices based on P/BV at different standard deviation levels (X)
2014E
2.4 +2 S.D. 2.0 1.6 1.2 0.8
+1.5 S.D. +1 S.D. +0.5 S.D. Avg. -0.5 S.D. -1 S.D. -1.5 S.D. -2 S.D.
+2.0SD
2.1
67
56
+1.5SD
1.9
62
44
+1.0SD
1.8
56
32
+0.5SD
1.6
51
20
Average
1.5
46
8
-0.5SD
1.3
41
-4
-1.0SD
1.1
36
-16
-1.5SD
1.0
31
-28
-2.0SD
0.8
26
-40
Jul-14
Jan-14
Jul-13
Jan-13
Jul-12
Jan-12
Jul-11
Jan-11
Jul-10
Jan-10
Jul-09
Jan-09
0.4
PBV (x) Implied market Upside/ Downside price (Bt) to current price (%)
Source: Bloomberg, KT ZMICO Research REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 7
Figure 4: TISCO's PER band and sensitivity of market prices based on PER at different standard deviation levels (X)
2014E
12 11 10 9 8
+2 S.D. +1.5 S.D. +1 S.D. +0.5 S.D. Avg.
PER (x) Implied market Upside/ Downside price (Bt) to current price (%)
+2.0SD
10.8
55
+1.5SD
10.1
51
29 20
+1.0SD
9.3
48
11
+0.5SD
8.6
44
3
Average
7.9
40
-6
-0.5SD
7.1
36
-15
-1.0SD
6.4
33
-24
4
-1.5SD
5.7
29
-32
3
-2.0SD
4.9
25
-41
Jul-14
Jan-14
Jul-13
Jan-13
Jul-12
Jan-12
Jul-11
Jan-11
Jul-10
Jan-09
5
Jan-10
6
-0.5 S.D. -1 S.D. -1.5 S.D. -2 S.D.
Jul-09
7
Source: Bloomberg, KT ZMICO Research REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 7
Statement of Comprehensive Income (Btmn)
2012
2013
2014E
2015E
2016E
15,211 8,166 7,044 6,138 13,183 6,447 5,535 0 1,922 121 1,081 (28) 3,705 5,507 5,627 5.09
19,272 10,304 8,968 6,833 15,802 6,241 8,143 0 4,141 354 1,064 (107) 4,249 8,037 8,390 5.31
19,319 9,446 9,873 6,027 15,900 5,931 8,795 0 4,727 125 1,048 (77) 4,117 8,718 8,843 5.14
18,333 8,798 9,535 6,628 16,163 6,183 8,728 0 4,218 100 1,152 (104) 4,505 8,624 8,724 5.63
19,329 9,640 9,689 7,314 17,003 6,480 9,141 0 4,114 100 1,282 (124) 5,003 9,017 9,117 6.25
2012
2013
2014E
2015E
2016E
Year‐end 31 Dec Ca s h & Money Ma rket Items Net Inves tment Fi na nce a nd Securi ti es Loa ns ‐ Gros s Hi re Purcha s e Loa ns ‐ Gros s Net Loa ns Total Assets
32,243 7,016 84,619 163,697 243,544 290,497
54,555 11,490 103,813 188,337 286,332 359,263
30,635 13,788 97,273 173,270 263,282 314,572
29,212 14,477 110,891 162,874 265,277 316,046
30,645 14,766 127,525 166,132 284,070 336,889
Depos i ts Interba nk & Money Ma rket ST a nd LT Borrowi ngs Other l i a bi l i ti es Total Liabilities
219,823 13,971 27,877 10,445 272,117
264,641 16,703 44,084 10,617 336,044
205,097 17,371 55,257 11,162 288,886
198,533 17,545 59,661 11,737 287,475
213,225 19,299 60,085 12,344 304,953
7,279 9,472 1,446 18,196
8,006 11,896 3,085 22,987
8,006 14,258 3,156 25,420
8,006 17,067 3,206 28,278
Year‐end 31 Dec Tota l Interes t & Di vi dend Income Interes t Expens es on Borrowi ng Net Interes t Income Non‐Interes t Income Opera ti ng Income Opera ti ng Expens es Opera ti ng Profi t Extra ordi na ry Item Provi s i on (Revers a l ) for Doubtful Accounts Ga i n (Los s ) on Tra di ng Securi ti es Ta xes Mi nori ty Interes t Net Profi t Pre Provi s i oni ng Opera ti ng Profi t (PPOP) Pre Provi s i oni ng Profi t (PPP) EPS (Bt)
Statement of Financial Position (Btmn)
Pa i d‐up Ca pi ta l Reta i ned Ea rni ng Other equi ty i tems Total Shareholders' Equity Source: KTZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 5 of 7
8,006 20,353 3,256 31,615
Key Statistics and Ratios
2012
2013
2014E
2015E
2016E
Year‐end 31 Dec Per/Share Data (Bt) EPS DPS for common s ha res BVPS
5.09 2.40 25.00
5.31 2.00 28.71
5.14 2.06 31.75
5.63 2.08 35.32
6.25 2.31 39.49
8.40 1.71 5.61
8.06 1.49 4.68
8.31 1.35 4.81
7.60 1.21 4.87
6.84 1.08 5.41
Growth (%) Net profi t EPS Net Interes t Income Non Interes t Income Opera ti ng Income Growth Opera ti ng Expens e Growth Opera ti ng Profi t Loa ns Depos i ts NPLs
13.4 13.4 1.9 56.7 21.7 30.6 36.6 34.2 478.8 18.6
14.7 4.3 27.3 11.3 19.9 (3.2) 47.1 17.7 20.4 60.3
(3.1) (3.1) 10.1 (11.8) 0.6 (5.0) 8.0 (7.4) (22.5) 32.0
9.4 9.4 (3.4) 10.0 1.7 4.3 (0.8) 1.2 (3.2) 10.0
11.1 11.1 1.6 10.4 5.2 4.8 4.7 7.3 7.4 5.0
Asset Quality Ratio (%) Gros s NPLs (Btmn) Gros s NPLs /Loa ns Loa n Los s Res erve/NPLs Accrued Interes t/Loa ns Loa n Los s Res erve/Loa ns Property Forecl os ed/Loa ns
3,099 1.2 165.4 0.1 1.8 0.9
4,966 1.7 127.9 0.2 1.8 1.5
6,556 2.4 117.2 0.1 2.6 1.7
7,211 2.6 123.4 0.1 3.0 1.6
7,572 2.6 132.2 0.1 3.1 1.5
Capital and Liquidity Ratio (%) Equi ty/As s et Ti er I to Ri s k As s ets Ca pi ta l Adequa cy Ra ti o Loa n to Depos i t Ra ti o Loa n to Depos i t a nd Borrowi ng Ra ti o
6.3 9.1 13.0 113.0 100.2
6.4 9.1 13.3 110.4 94.6
8.1 11.8 16.1 131.9 103.9
8.9 12.5 16.3 137.9 106.0
9.4 13.0 16.2 137.7 107.4
1.4 21.3 48.9 2.52 2.78
1.3 20.6 39.5 2.59 2.79
1.2 17.0 37.3 2.72 2.94
1.4 16.8 38.3 2.76 3.03
1.5 16.7 38.1 2.64 2.96
2012 34.2
2013 17.7
2014E (7.4)
2015E 1.2
2016E 7.3
48.9 2.78 1,922 0.77% 0.89%
39.5 2.79 4,141 1.42% 1.53%
37.3 2.94 4,727 1.75% 1.68%
38.3 3.03 4,218 1.54% 1.55%
38.1 2.96 4,114 1.40% 1.45%
Multiplier PER (X) P/BV (X) Di vi dend yi el d (%)
Profitability Ratio (%) ROA ROE Cos t to Income Interes t Sprea d Net Interes t Ma rgi n
Key Assumptions Loa n Growth ‐ Net Cos t to Income Net Interes t Ma rgi n Provi s i on for l oa n l os s (Btmn) Provi s i on for l oa n l os s (% of l oa ns ) Provi s i on for l oa n l os s (% of a vera ge l oa ns )
Source: KTZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 6 of 7
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 BUY: Expecting positive total returns of 15% or more over the next 12 months OUTPERFORM: Expecting total returns between ‐10% to +15%; returns expected to exceed market return over six months period because of specific catalysts UNDERPERFORM: Expecting total returns between ‐10% to +15%; returns expected to below market return over six months period because of specific catalysts SELL: Expecting negative total returns of 10% or more over the next 12 months
SECTOR RECOMMENDATIONS OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to outperform the relevant primary market index by at least 10% over the next 12 months. NEUTRAL: The industry, as defined by the analyst's coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months. UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant primary market index by 10% over the next 12 months.
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 7 of 7
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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.
Underperform (15E TP Bt44.00) Banking
Earnings upgrade/Earnings downgrade/Overview unchanged
December 15, 2014
2015 outlook remains challenging
FY14
FY15
Consensus EPS (Bt)
5.121
5.738
KT ZMICO vs. consensus Share data
0.4%
‐1.9%
Reuters / Bloomberg
TISCO.BK/TISCO TB
800.62
Paid‐up Shares (m)
10.00
Par (Bt) Market cap (Bt bn / US$ m)
34.00/1,043.00
Foreign limit / actual (%)
49.00/47.68
52 week High / Low (Bt)
47.50/36.00
Avg. daily T/O (shares 000)
1,241.00 8.20
NVDR (%) Estimated free float (%)
74.26
Beta
0.87
URL
www.tisco.co.th
CGR 2013
Trim earnings and TP to reflect weak operating environment We change our rating for TISCO to Underperform from Sell into Strength following our change in the stock rating criteria and our earnings cut with the new 15E target price at Bt44/share as we still expect TISCO to face a challenging operating environment in 2015, especially in the auto hire purchase business. Nov‐14 loans improved slightly 0.2% MoM TISCO reported loan growth of 0.2% MoM in Nov‐14, driven mainly by corporate loans and SME loans for car dealers. Meanwhile, retail loans continued to contract 1% MoM. YTD loans still dropped 6.8% in 11M14. 2015 guidance still highlights weak lending environment In our latest call, TISCO gave some preliminary guidance for 2015E, which will still be quite challenging, especially regarding the loan growth target. However, the bank expects some earnings cushion on the likelihood of lower provisioning and stable NIM. Revise down net profit estimates for 15‐16E We trimmed our net profit forecasts for TISCO for 15‐16E by 6‐7% to fine‐tune with its latest 2015 guidance. Following our NP cut, we also trimmed our 15 target price to Bt44/share from Bt47/share previously. 4Q14E earnings outlook to increase YoY, but be stable QoQ We preliminarily estimate TISCO’s 4Q14E net profit at Bt1.1bn (+37% YoY and +1% QoQ). The main boosts for the earnings growth YoY should come from a much lower provision and higher NIM. Financial and Valuation FY Ended 31 Dec
2012
2013
2014E
2015E
2016E
PPOP (Btm)
5,507
8,037
8,718
8,624
9,017
Net profit (Btmn)
3,705
4,249
4,117
4,505
5,003
EPS (Bt) EPS growth (%) Dividend (Bt)
5.09
5.31
5.14
5.63
6.25
13.4%
4.3%
‐3.1%
9.4%
11.1%
2.40
2.00
2.06
2.08
2.31
Prapharas Nonthapiboon
BV (Bt)
25.00
28.71
31.75
35.32
39.49
Analyst, no 17836
FY Ended 31 Dec
2012
2013
2014E
2015E
2016E
[email protected]
PER (x)
8.40
8.06
8.31
7.60
6.84
66 (0) 2695‐5872
PBV (x)
1.71
1.49
1.35
1.21
1.08
5.61 21.3%
4.68 20.6%
4.81 17.0%
4.87 16.8%
5.41 16.7%
Dividend yield (%) ROE (%)
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 7
Nov‐14 loans improved slightly 0.2% MoM TISCO reported loan growth of 0.2% MoM in Nov‐14 vs. a contraction of around 0.5‐1% MoM since the beginning of the year. The main drivers for the growth in this month were 1) the 2% MoM growth in corporate loans, as there was some draw down of project finance loans in the real estate sector; and 2) the 2.6% growth of SME loans for car dealers (floor plan segment) to prepare for the motor expo in Dec‐14. However, retail loans continued to decline by ~1% MoM this month (‐0.9% MoM in new car segment and ‐1.4% MoM in used car segment). Meanwhile, its loans for 11M14 still contracted by 6.8% YTD due mainly to the sharp drop in loans for car dealers and auto hire purchase loans, especially in the used car segment. 2015 guidance still highlights weak lending environment In our latest call, TISCO gave some preliminary guidance for 2015E, which will still be quite challenging, especially regarding the loan growth target. TISCO now expects the loan growth target for 2015E at around the mid‐single digits, lower than the guidance gave in the latest meeting of single‐digit growth, with the main growth driver to be corporate loans. Meanwhile, auto hire purchase loans should remain fragile, due partly to the high competition from the auto makers’ leasing subsidiaries (captive market) and the higher rate of loan repayments vs. new lending. However, TISCO expects some earnings cushion to offset the weak lending environments (i.e., the likelihood of lower provisioning, at least stable NIM). It highlighted that the provisioning level for 2015E could be less than this year’s target (~160 bps of average loans) but still higher than its normal level of around 120‐130 bps. Moreover, TISCO anticipates a stable interest rate environment for 2015, which should benefit the bank’s net interest margin (NIM). On top of this, it expects to boost fee income, especially in regard to fees related to non‐auto bancassurance (life and non‐life bancassurance). Revise down net profit estimates for 15‐16E We trimmed our net profit (NP) forecasts for TISCO to fine‐tune with its latest 2015 guidance and the latest operating environments, especially the weak lending YTD. We made no significant change to the 14E NP forecast, but revised down the 15‐16E NP forecasts by 6‐7%, mainly on lower loan growth and slightly higher provisioning. However, we see some earnings cushion from the likelihood of better‐than‐expected NIM thanks to its efficient NIM management and the low interest rate environment. Figure 1: Key changes in our earnings revision Key assumption changes Net Profit (Btmn) % Change in net profit from previous forecasts % Change in net profit YoY Loan growth (%) Net interest margin (NIM) Net fee income growth (%) Provision for loan loss (Btmn) Provision for loan loss (% of average loans)
2014E New Previous 4,117 4,079 1% ‐3% ‐7% 2% 2.94% 2.91% ‐3% ‐7% 4,727 4,803 1.68% 1.63%
2015E New Previous 4,505 4,856 ‐7% 9% 1% 13% 3.03% 2.89% 10% 13% 4,218 4,590 1.55% 1.45%
New 5,003 ‐6% 11% 7% 2.96% 11% 4,114 1.45%
2016E Previous 5,337
12% 2.80% 11% 4,809 1.35%
Source: Company data, KT ZMICO Research Assign new rating of Underperform from Sell into Strength Following our change in the stock rating criteria as well as our earnings cut, we assign an Underperform rating for TISCO from a Sell into Strength rating previously. We also trimmed our 15 target price estimate for TISCO to Bt44/share (for an implied target P/BV of 1.25x) from Bt47/share previously following our NP cut. REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 7
4Q14E net profit to increase sharply YoY, but be quite stable QoQ We preliminarily estimate TISCO’s 4Q14E net profit at Bt1.1bn (+37% YoY and +1% QoQ). The main boosts for the earnings growth YoY should come from a much lower provision and higher NIM. Note that in 4Q13, TISCO set aside a huge provision of Bt1.61bn (including an extra provision) vs. our estimate of ~Bt1.18bn in 4Q14E (see Figure 2). Figure 2: 4Q14E earnings forecast Statement of Comprehensive Income Fiscal Year‐Ended December Net Interes t Income
% YoY
% QoQ
2014E
2,319
4Q13
2,502
3Q14
2,642
4Q14E
14%
6%
9,873
% YoY 10%
Non Interes t Income
1,528
1,577
1,478
‐3%
‐6%
6,027
‐12%
Opera ti ng Income
3,847
4,078
4,120
7%
1%
15,900
1%
Opera ti ng Expens es
1,231
1,544
1,525
24%
‐1%
5,931
‐5%
Opera ti ng Profi t
2,345
2,162
2,298
‐2%
6%
8,795
8% 14%
Provi s i on (Revers a l )
1,613
1,149
1,183
‐27%
3%
4,727
Ta xes
185
277
287
56%
4%
1,048
‐1%
Net Profi t PPOP EPS (Bt)
804 2,331 1.00
1,089 2,142 1.36
1,101 2,275 1.38
37% ‐2% 37%
1% 6% 1%
4,117 8,718 5.14
‐3% 8% ‐3%
Key Statistics & Ratios
4Q13 3Q14 4Q14E 4,966 6,470 6,556
Gros s NPLs (Btmn) Gros s NPLs /Loa ns Loa n Los s Res erve/NPLs
2014E 6,556
1.70%
2.35%
2.42%
2.42%
127.9%
105.8%
117.2%
117.2%
Ti er I/Ri s k As s et
9.1%
12.2%
N.A.
11.8%
13.3%
16.2%
N.A.
16.1%
110.4%
132.7%
131.9%
131.9%
Loa n to Depos i ts a nd Borrowi ngs
94.6%
103.8%
103.9%
103.9%
Cos t to Income
32.0%
37.9%
37.0%
37.3%
Ca pi ta l Adequa cy Ra ti o Loa n to Depos i t Ra ti o
Non Interes t Income/Tota l Income
37.6%
37.4%
34.5%
37.9%
Ta x ra te Net Interes t Ma rgi n Provi s i on/Loa ns
18.4% 2.88% 2.24%
20.0% 3.07% 1.66%
20.4% 3.15% 1.74%
20.0% 2.94% 1.68%
Loa n growth YoY Loa n growth QoQ
17.7% 2.6%
‐3.5% ‐2.0%
‐7.4% ‐1.5%
‐7.4%
Source: Bloomberg and KTZMICO Research
Figure 3: TISCO's P/BV band and sensitivity of market prices based on P/BV at different standard deviation levels (X)
2014E
2.4 +2 S.D. 2.0 1.6 1.2 0.8
+1.5 S.D. +1 S.D. +0.5 S.D. Avg. -0.5 S.D. -1 S.D. -1.5 S.D. -2 S.D.
+2.0SD
2.1
67
56
+1.5SD
1.9
62
44
+1.0SD
1.8
56
32
+0.5SD
1.6
51
20
Average
1.5
46
8
-0.5SD
1.3
41
-4
-1.0SD
1.1
36
-16
-1.5SD
1.0
31
-28
-2.0SD
0.8
26
-40
Jul-14
Jan-14
Jul-13
Jan-13
Jul-12
Jan-12
Jul-11
Jan-11
Jul-10
Jan-10
Jul-09
Jan-09
0.4
PBV (x) Implied market Upside/ Downside price (Bt) to current price (%)
Source: Bloomberg, KT ZMICO Research REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 7
Figure 4: TISCO's PER band and sensitivity of market prices based on PER at different standard deviation levels (X)
2014E
12 11 10 9 8
+2 S.D. +1.5 S.D. +1 S.D. +0.5 S.D. Avg.
PER (x) Implied market Upside/ Downside price (Bt) to current price (%)
+2.0SD
10.8
55
+1.5SD
10.1
51
29 20
+1.0SD
9.3
48
11
+0.5SD
8.6
44
3
Average
7.9
40
-6
-0.5SD
7.1
36
-15
-1.0SD
6.4
33
-24
4
-1.5SD
5.7
29
-32
3
-2.0SD
4.9
25
-41
Jul-14
Jan-14
Jul-13
Jan-13
Jul-12
Jan-12
Jul-11
Jan-11
Jul-10
Jan-09
5
Jan-10
6
-0.5 S.D. -1 S.D. -1.5 S.D. -2 S.D.
Jul-09
7
Source: Bloomberg, KT ZMICO Research REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 7
Statement of Comprehensive Income (Btmn)
2012
2013
2014E
2015E
2016E
15,211 8,166 7,044 6,138 13,183 6,447 5,535 0 1,922 121 1,081 (28) 3,705 5,507 5,627 5.09
19,272 10,304 8,968 6,833 15,802 6,241 8,143 0 4,141 354 1,064 (107) 4,249 8,037 8,390 5.31
19,319 9,446 9,873 6,027 15,900 5,931 8,795 0 4,727 125 1,048 (77) 4,117 8,718 8,843 5.14
18,333 8,798 9,535 6,628 16,163 6,183 8,728 0 4,218 100 1,152 (104) 4,505 8,624 8,724 5.63
19,329 9,640 9,689 7,314 17,003 6,480 9,141 0 4,114 100 1,282 (124) 5,003 9,017 9,117 6.25
2012
2013
2014E
2015E
2016E
Year‐end 31 Dec Ca s h & Money Ma rket Items Net Inves tment Fi na nce a nd Securi ti es Loa ns ‐ Gros s Hi re Purcha s e Loa ns ‐ Gros s Net Loa ns Total Assets
32,243 7,016 84,619 163,697 243,544 290,497
54,555 11,490 103,813 188,337 286,332 359,263
30,635 13,788 97,273 173,270 263,282 314,572
29,212 14,477 110,891 162,874 265,277 316,046
30,645 14,766 127,525 166,132 284,070 336,889
Depos i ts Interba nk & Money Ma rket ST a nd LT Borrowi ngs Other l i a bi l i ti es Total Liabilities
219,823 13,971 27,877 10,445 272,117
264,641 16,703 44,084 10,617 336,044
205,097 17,371 55,257 11,162 288,886
198,533 17,545 59,661 11,737 287,475
213,225 19,299 60,085 12,344 304,953
7,279 9,472 1,446 18,196
8,006 11,896 3,085 22,987
8,006 14,258 3,156 25,420
8,006 17,067 3,206 28,278
Year‐end 31 Dec Tota l Interes t & Di vi dend Income Interes t Expens es on Borrowi ng Net Interes t Income Non‐Interes t Income Opera ti ng Income Opera ti ng Expens es Opera ti ng Profi t Extra ordi na ry Item Provi s i on (Revers a l ) for Doubtful Accounts Ga i n (Los s ) on Tra di ng Securi ti es Ta xes Mi nori ty Interes t Net Profi t Pre Provi s i oni ng Opera ti ng Profi t (PPOP) Pre Provi s i oni ng Profi t (PPP) EPS (Bt)
Statement of Financial Position (Btmn)
Pa i d‐up Ca pi ta l Reta i ned Ea rni ng Other equi ty i tems Total Shareholders' Equity Source: KTZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 5 of 7
8,006 20,353 3,256 31,615
Key Statistics and Ratios
2012
2013
2014E
2015E
2016E
Year‐end 31 Dec Per/Share Data (Bt) EPS DPS for common s ha res BVPS
5.09 2.40 25.00
5.31 2.00 28.71
5.14 2.06 31.75
5.63 2.08 35.32
6.25 2.31 39.49
8.40 1.71 5.61
8.06 1.49 4.68
8.31 1.35 4.81
7.60 1.21 4.87
6.84 1.08 5.41
Growth (%) Net profi t EPS Net Interes t Income Non Interes t Income Opera ti ng Income Growth Opera ti ng Expens e Growth Opera ti ng Profi t Loa ns Depos i ts NPLs
13.4 13.4 1.9 56.7 21.7 30.6 36.6 34.2 478.8 18.6
14.7 4.3 27.3 11.3 19.9 (3.2) 47.1 17.7 20.4 60.3
(3.1) (3.1) 10.1 (11.8) 0.6 (5.0) 8.0 (7.4) (22.5) 32.0
9.4 9.4 (3.4) 10.0 1.7 4.3 (0.8) 1.2 (3.2) 10.0
11.1 11.1 1.6 10.4 5.2 4.8 4.7 7.3 7.4 5.0
Asset Quality Ratio (%) Gros s NPLs (Btmn) Gros s NPLs /Loa ns Loa n Los s Res erve/NPLs Accrued Interes t/Loa ns Loa n Los s Res erve/Loa ns Property Forecl os ed/Loa ns
3,099 1.2 165.4 0.1 1.8 0.9
4,966 1.7 127.9 0.2 1.8 1.5
6,556 2.4 117.2 0.1 2.6 1.7
7,211 2.6 123.4 0.1 3.0 1.6
7,572 2.6 132.2 0.1 3.1 1.5
Capital and Liquidity Ratio (%) Equi ty/As s et Ti er I to Ri s k As s ets Ca pi ta l Adequa cy Ra ti o Loa n to Depos i t Ra ti o Loa n to Depos i t a nd Borrowi ng Ra ti o
6.3 9.1 13.0 113.0 100.2
6.4 9.1 13.3 110.4 94.6
8.1 11.8 16.1 131.9 103.9
8.9 12.5 16.3 137.9 106.0
9.4 13.0 16.2 137.7 107.4
1.4 21.3 48.9 2.52 2.78
1.3 20.6 39.5 2.59 2.79
1.2 17.0 37.3 2.72 2.94
1.4 16.8 38.3 2.76 3.03
1.5 16.7 38.1 2.64 2.96
2012 34.2
2013 17.7
2014E (7.4)
2015E 1.2
2016E 7.3
48.9 2.78 1,922 0.77% 0.89%
39.5 2.79 4,141 1.42% 1.53%
37.3 2.94 4,727 1.75% 1.68%
38.3 3.03 4,218 1.54% 1.55%
38.1 2.96 4,114 1.40% 1.45%
Multiplier PER (X) P/BV (X) Di vi dend yi el d (%)
Profitability Ratio (%) ROA ROE Cos t to Income Interes t Sprea d Net Interes t Ma rgi n
Key Assumptions Loa n Growth ‐ Net Cos t to Income Net Interes t Ma rgi n Provi s i on for l oa n l os s (Btmn) Provi s i on for l oa n l os s (% of l oa ns ) Provi s i on for l oa n l os s (% of a vera ge l oa ns )
Source: KTZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 6 of 7
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 BUY: Expecting positive total returns of 15% or more over the next 12 months OUTPERFORM: Expecting total returns between ‐10% to +15%; returns expected to exceed market return over six months period because of specific catalysts UNDERPERFORM: Expecting total returns between ‐10% to +15%; returns expected to below market return over six months period because of specific catalysts SELL: Expecting negative total returns of 10% or more over the next 12 months
SECTOR RECOMMENDATIONS OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to outperform the relevant primary market index by at least 10% over the next 12 months. NEUTRAL: The industry, as defined by the analyst's coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months. UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant primary market index by 10% over the next 12 months.
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 7 of 7
th
th
th
th
KT•ZMICO Securities Company Limited
st
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