Krung Thai Bank
Krung Thai Bank Unrated (16TP Bt18.50)
Company Update
Close Bt17.40
Banking
Earnings upgrade/Earnings downgrade/Overview unchanged
April 25, 2016
Concern over asset quality continues Price Performance (%)
Source: SET Smart
FY16
FY17
Consensus EPS (Bt)
2.236
2.568
KT ZMICO vs. consensus Share data
‐7.9%
‐6.9%
Reuters / Bloomberg
KTB.BK/KTB TB
Paid‐up Shares (m)
13,976.06
Par (Bt)
5.15
Market cap (Bt bn / US$ m)
243.00/6,932.00
Foreign limit / actual (%)
25.00/12.16
52 week High / Low (Bt)
21.40/15.20
Avg. daily T/O (shares 000) NVDR (%)
50,760.00 5.46
Estimated free float (%)
44.93
Beta
1.19
URL
www.ktb.co.th
CGR
Higher NPL risk to remain KTB’s key share price overhang We see that KTB’s inexpensive valuation and sound dividend yield of 4.4% remain its main share price supports. However, the sharp deterioration of KTB’s asset quality in 1Q16 (the biggest jump in NPLs vs. peers) as well as the ongoing market concern over its higher asset quality risk will remain the key share price overhangs in the medium term. KTB expects slower pace of NPL hike for the remaining quarters Although KTB highlighted that the NPL outlook for the rest of the year should remain on an uptrend, it expects the pace of the increase to be slower vs. the sharp 1Q16 rise. The bank said it will continue to be more proactive in its NPL resolution and control process and will aim to maintain its reserve‐to‐NPL ratio at higher than 100%. NPL rise in 1Q16 started to come from corporate and large SMEs Note again that KTB’s NPLs in 1Q16 rose sharply by Bt13.7bn or 18% QoQ (the highest rise vs. peers) to 3.7% of loans from 3.2% in 4Q15. The NPL increase in 1Q16 was largely caused by new NPL inflow that started to come from corporate and large SME clients, followed by an ongoing increase in the small SME and retail sectors since last year. The weakened asset quality prompted KTB to set a higher provision (173 bps) in 1Q16 to cope with higher NPL risk. However, the reserve‐to‐NPL ratio (103%) and its reserve to the BoT’s required reserve (135%) for 1Q16 remain inferior vs. peers. Therefore, we still expect a high provision level for the rest of the year. Trim net profit estimates for 16‐17E by 9% We trimmed our net profit (NP) forecasts for KTB by 9% for both 2016‐17E, mainly to reflect the latest 2015 results, especially in regard to the likelihood for a higher‐than‐expected provision on much higher NPL risk and lower NIM on the recent lending rate cut impact. Following our NP revision, we trimmed our 16E target price to Bt18.50/share (from Bt20/share previously) for an implied target P/BV of 1.0x based on L‐T ROE of 13.9% and an L‐T growth rate of 9.8%. Financials and Valuation
Anti‐corruption
Level 4 (Certified)
Note: KT ZMICO has two major shareholders, Krungthai Bank PLC (KTB) and Seamico Securities PLC (ZMICO). Therefore, prior to making investment in the securities of KTB and ZMICO, investor should consider risk factors carefully.
FY Ended 31 Dec
2014
2015
2016E
2017E
2018E
PPOP (Btmn)
52,032
59,433
59,996
61,077
63,491
Provision (Btmn)
18,643
30,542
30,573
26,566
22,303
Net Profit (Btmn)
33,191
28,492
28,837
33,466
39,834
2.37
2.04
2.06
2.39
2.85
EPS Growth (%)
‐3.8%
‐14.2%
1.2%
16.1%
19.0%
Book value (Bt)
22.65
EPS (Bt)
16.60
17.59
18.93
20.60
Dividend (Bt)
0.90
0.76
0.76
0.84
1.00
FY Ended 31 Dec
2014
2015
2016E
2017E
2018E
Prapharas Nonthapiboon
PER (X)
7.33
8.54
8.44
7.27
6.11
Analyst, no 17836
PBV (X)
1.05
0.99
0.92
0.84
0.77
[email protected]
Div. Yield (%) ROE (%)
5.17 15.1%
4.37 11.9%
4.39 11.3%
4.81 12.1%
5.73 13.2%
66 (0) 2695‐5872
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 5
Figure 1: KTB’s financial targets for 2016 vs. our forecasts Financial targets
KTB's targets Actual KTB's targets* KTZ's Forecasts 2015E 2015 2016E 2016E Loan Growth 6‐7% 4% 3‐4% 4% Net Fee income growt 10‐12% 30% 10% 9% Net interes t margin N.A. 3.02% N.A. 2.96% NPL Ratio (gross ) Maintain 3.2% Maintain 4.3% Provis ion (Btmn) 8,400 (Normali zed) + Extra 30,542 ~12,000 (Norma li zed) + Extra 30,573 Provis ion (% of l oa ns ) N.A. 1.51% N.A. 1.45% Cos t to Income N.A. 43.7% N.A. 43.6% ROE Maintain 11.9% Mai ntain 11.3% Loan to Depos it N.A. 94.9% 92‐95% 95.1%
Source: KT ZMICO Research
Figure 2: Key changes in our earnings revision 2016E New 28,837 ‐9% 1% 4% 9% 2.96% 43.6% 30,573 1.45%
Net profit (Btmn) NP change from previous (%) NP Growth YoY (%) Loan growth Net fee income growth (%) NIM (%) Cost to income ratio (%) Provision for loan loss (Btmn) Provision for loan loss (% of loans) Source: KT ZMICO Research
2017E Previous 31,730 11% 4% 12% 3.05% 44.3% 27,410 1.30%
New 33,466 ‐9% 16% 5% 9% 2.97% 44% 26,566 1.20%
Previous 36,964 16% 6% 12% 3.11% 45% 24,584 1.10%
Figure 3: KTB's P/BV band and sensitivity of market prices based on P/BV at different standard deviation levels (X) 2.0
2016E
+2 S.D.
1.8
+1.5 S.D.
1.6 1.4
+1 S.D.
1.2
+0.5 S.D. Avg.
1.0
-0.5 S.D.
0.8 0.6
-1 S.D.
0.4
-1.5 S.D.
0.2
-2 S.D.
Jan-16
Jan-15
Jan-14
Jan-13
Jan-12
Jan-11
Jan-10
Jan-09
Jan-08
Jan-07
Source: Bloomberg, KT ZMICO Research
Implied market
Upside/ Downside
price (Bt)
to current price (%)
+2.0SD
1.8
35
100
+1.5SD
1.6
31
76
+1.0SD
1.4
27
53
+0.5SD
1.2
23
30
Average
1.0
19
7
-0.5SD
0.8
15
-16
-1.0SD
0.6
11
-39
-1.5SD
0.3
7
-62
-2.0SD
0.1
3
-86
Figure 4: KTB's PER band and sensitivity of market prices based on PER at different standard deviation levels (X) 25
2016E
20
Source: Bloomberg, KT ZMICO Research
Jan-16
Jan-15
Jan-14
Jan-13
Jan-12
Jan-11
Jan-10
Jan-09
0
Jan-08
5
Jan-07
10
+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.
Jan-06
15
+2 S.D.
Jan-05
Jan-06
Jan-05
0.0
PBV (x)
PER (x) Implied market
Upside/ Downside
price (Bt)
to current price (%)
+2.0SD
16.4
34
94
+1.5SD
14.6
30
74
+1.0SD
12.9
27
53
+0.5SD
11.2
23
33
Average
9.5
20
13
-0.5SD
7.8
16
-8
-1.0SD
6.1
13
-28
-1.5SD
4.3
9
-48
-2.0SD
2.6
5
-69
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 5
Statement of Comprehensive Income (Btmn) Year‐end 31 Dec Total Interest Income Total Interest Expenses Net Interest Income Fee and Service income Gain on exchange Other Income Total Non‐Interest Income Operating Income Personnel Expenses Premises & Equipment Exp. Other Expenses Total Operating Expenses Operating Profit Extraordinary Item Provision for Loan Losses Taxation Minority Interests Net Profit PPOP PPP EPS (Bt)
2014 130,466 51,072 79,394 16,383 4,827 7,447 28,657 108,051 26,067 8,888
2015 132,525 51,657 80,868 21,343 6,701 7,697 35,741 116,609 27,374 9,297
2016E 130,762 49,404 81,358 23,293 7,371 7,591 38,255 119,613 27,921 9,483
2017E 135,016 50,191 84,825 25,414 7,666 7,577 40,656 125,481 29,540 10,052
2018E 146,045 56,153 89,892 27,980 8,049 7,850 43,878 133,770 31,608 10,656
13,191 48,146 59,216 ‐ 18,643 7,184 (887) 33,191 52,032 51,834 2.37
14,249 50,920 65,041 ‐ 30,542 5,608 (1,048) 28,492 59,433 59,033 2.04
14,737 52,141 66,822 ‐ 30,573 6,826 (1,236) 28,837 59,996 59,409 2.06
15,831 55,424 69,558 ‐ 26,566 8,481 (1,545) 33,466 61,077 60,031 2.39
17,093 59,357 73,913 ‐ 22,303 10,422 (1,854) 39,834 63,491 62,137 2.85
2014
2015
2016E
2017E
2018E
74,770 456,721 ‐ 258,495 1,952,996 5,191 1,958,187 (76,021) 1,882,166 30,733 28,116 58,141 2,789,143
71,470 397,358 ‐ 261,732 2,027,440 5,750 2,033,191 (85,935) 1,947,256 30,008 26,355 81,154 2,815,333
72,185 413,252 ‐ 286,733 2,108,473 6,086 2,114,558 (110,508) 2,004,051 29,108 27,145 101,110 2,933,584
72,907 392,590 ‐ 304,698 2,213,812 6,611 2,220,423 (123,073) 2,097,350 28,235 27,417 113,455 3,036,651
73,636 396,516 ‐ 313,687 2,347,695 7,246 2,354,940 (131,376) 2,223,564 27,388 27,691 121,883 3,184,364
2,151,268 167,215 146,971
2,135,499 194,243 116,240
2,216,647 196,185 126,240
2,278,714 202,071 131,240
2,383,534 208,133 132,240
87,822 2,553,276
119,052 2,565,034
125,160 2,664,234
131,590 2,743,615
138,358 2,862,266
72,005 20,834 119,660 ‐ 19,644 232,142
72,005 20,834 135,202 ‐ 17,844 245,884
72,005 20,834 152,812 ‐ 18,976 264,627
72,005 20,834 175,008 ‐ 20,135 287,982
72,005 20,834 202,529 ‐ 21,322 316,689
Statement of Financial Position (Btmn) Year‐end 31 Dec Assets Cash Interbank & Money Market REPO Net Investment in Securities Loans Accrued Interest Receivables Loans & Accrued Int.Rec. Less: Loan Loss Reserves Net Loans and Receivables Properties Foreclosed Premises and Equipment, Net Other Assets Total Assets Liabilities & Equity Total Deposits Interbank & Money Market Total Borrowings Other Liabilities Total Liabilities Paid‐up Capital (Bt5.15 Par) Premium on Share Capital Retained Earnings Unrealized Loss on LT Securities Other Equity Items Total Shareholders' Equity
Source: KTZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 5
Key Statistics and Ratios Year‐end 31 Dec Per share Data (Bt) EPS DPS BVPS
2014
2015
2016E
2017E
2018E
2.37 0.90 16.60
2.04 0.76 17.59
2.06 0.76 18.93
2.39 0.84 20.60
2.85 1.00 22.65
Valuation analysis PER (X) P/BV (X) Dividend yield (%)
7.33 1.05 5.17
8.54 0.99 4.37
8.44 0.92 4.39
7.27 0.84 4.81
6.11 0.77 5.73
Growth (%) Net Profit EPS Net Interest Income Non Interest Income
‐3.8% ‐3.8% 23.1% 4.0%
‐14.2% ‐14.2% 1.9% 24.7%
1.2% 1.2% 0.6% 7.0%
16.1% 16.1% 4.3% 6.3%
19.0% 19.0% 6.0% 7.9%
Net Fee & Service Income Operating Income Operating Expenses Operating Profit PPOP PPP Loans ‐ Net Deposits Gross NPLs
4.3% 17.4% 21.6% 13.5% 17.6% 10.7% 10.8% 14.3% 1.6%
30.3% 7.9% 5.8% 9.8% 14.2% 13.9% 3.8% ‐0.7% 32.8%
9.1% 2.6% 2.4% 2.7% 0.9% 0.6% 4.0% 3.8% 38.7%
9.1% 4.9% 6.3% 4.1% 1.8% 1.0% 5.0% 2.8% ‐2.0%
10.1% 6.6% 7.1% 6.3% 4.0% 3.5% 6.0% 4.6% ‐9.7%
Asset Quality Ratio Gross NPLs (Btmn) Gross NPLs/Loans Loan Loss Reserve/NPLs Accrued Interest/Loans Loan Loss Reserve/Loans Property Foreclosed/Loans
57,489 76,371 105,947 103,869 93,831 2.4% 3.2% 4.3% 4.0% 3.5% 132.2% 112.5% 104.3% 118.5% 140.0% 0.3% 0.3% 0.3% 0.3% 0.3% 3.9% 4.2% 5.2% 5.6% 5.6% 1.6% 1.5% 1.4% 1.3% 1.2%
Capital & Liquidity Ratio Equity/Asset Tier I to Risk Assets Capital Adequacy Ratio Loan to Deposit Ratio Loan to Deposit and Borrowing Ratio Profitability Ratio ROA ROE Cost to Income Non Interest Income/Total Income Net Interest Margin (NIM)
Key Assumptions Loan Growth ‐ Net Cost to Income Net Interest Margin (NIM) Provision expenses (Btmn) Provision (% of loans) Source: KTZMICO Research
8.3% 10.9% 14.8% 90.8% 85.0%
8.7% 11.4% 15.2% 94.9% 90.0%
9.0% 12.7% 15.4% 95.1% 90.0%
9.5% 13.1% 15.5% 97.2% 91.9%
9.9% 13.5% 15.7% 98.5% 93.3%
1.2% 15.1% 44.6% 26.5% 3.10%
1.0% 11.9% 43.7% 30.7% 3.02%
1.0% 11.3% 43.6% 32.0% 2.96%
1.1% 12.1% 44.2% 32.4% 2.97%
1.3% 13.2% 44.4% 32.8% 3.01%
2014 2015 2016E 2017E 2018E 10.8% 3.8% 4.0% 5.0% 6.0% 44.6% 43.7% 43.6% 44.2% 44.4% 3.10% 3.02% 2.96% 2.97% 3.01% 18,643 30,542 30,573 26,566 22,303 0.95% 1.51% 1.45% 1.20% 0.95%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 5
Note: KT ZMICO has two major shareholders, Krungthai Bank PLC (KTB) and Seamico Securities PLC (ZMICO). Therefore, prior to making investment in the securities of KTB and ZMICO, investor should consider 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, BIGC, BJC. KT ZMICO is a co‐underwriter of TPBI.
Anti‐corruption Progress Indicator
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 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 returns over a six‐month period due to specific catalysts UNDERPERFORM: Expecting total returns between ‐10% to +15%; returns expected to be below market returns over a six‐month period due to 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 5 of 5
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KT•ZMICO Securities Company Limited
st
8 , 15 -17 , 19 , 21 Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok 10500 Telephone: (66-2) 695-5000
Phaholyothin Branch
rd
Fax. (66-2) 631-1709
Ploenchit Branch
th
nd
2
Sindhorn Branch
3 Floor, Shinnawatra Tower II,
8 Floor, Ton Son Tower,
1291/1 Phaholyothin Road,
900 Ploenchit Road, Lumpini,
Floor, Sindhorn Tower 1, 130-132 Wireless Road, Lumpini,
Phayathai, Bangkok 10400
Pathumwan, Bangkok 10330
Pathumwan, Bangkok 10330
Telephone: (66-2) 686-1500
Telephone: (66-2) 626-6000
Telephone: (66-2) 627-3550
Fax. (66-2) 686-1666
Fax. (66-2) 626-6111
Fax. (66-2) 627-3582, 627-3600
Nakhon Pathom Branch 1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
Chachoengsao Branch
Viphavadee Branch
Phitsanulok Branch
G Floor, Lao Peng Nguan 1 Bldg.,
Krung Thai Bank, Singhawat Branch
333 Soi Cheypuand, Viphavadee-Rangsit Road,
114 Singhawat Road,
Ladyao, Jatujak, Bangkok 10900
Muang, Phitsanulok 65000
Telephone: (66-2) 618-8500
Telephone: 083-490-2873
Fax. (66-2) 618-8569
th
Chonburi Branch
Pattaya Branch
108/34-36 Mahajakkrapad Road,
4 Floor, Forum Plaza Bldg.,
382/6-8 Moo 9, T. NongPrue,
T.Namuang, A.Muang,
870/52 Sukhumvit Road, T. Bangplasoy,
A. Banglamung, Cholburi 20260
Chachoengsao 24000
A. Muang, Cholburi 20000
Telephone: (038) 362-420-9
Telephone: (038) 813-088
Telephone: (038) 287-635
Fax. (038) 362-430
Fax. (038) 813-099
Fax. (038) 287-637
Khon Kaen Branch
5th Floor, Charoen Thani Princess Hotel,
Hat Yai Branch
Sriworajak Building Branch
200/301 Juldis Hatyai Plaza Floor 3,
1st – 2nd Floor, Sriworajak Building, 222
260 Srichan Road, T. Naimuang,
Niphat-Uthit 3 Rd,
Luang Road, Pomprab,
A. Muang, Khon Kaen 40000
Hatyai Songkhla 90110
Bankgok 10100
Telephone: (043) 389-171-193
Telephone: (074) 355-530-3
Telephone: (02) 689-3100
Fax. (043) 389-209
Fax: (074) 355-534
Fax. (02) 689-3199
Central World Branch
Chiang Mai Branch
Phuket Branch
999/9 The Offices at Central World,
422/49 Changklan Road, Changklan
22/61-63, Luang Por Wat Chalong Road,
16th Fl., Rama 1 Rd, Pathumwan,
Subdistrict, Amphoe Meuang,
Talat Yai, Mueang Phuket,
Bangkok 10330
Chiang Mai 50100
Phuket 83000
Telephone: (66-2) 673-5000,
Telephone: (053) 270-072
Tel. (076) 222-811,(076) 222-683
(66-2) 264-5888 Fax. (66-2) 264-5899
Fax: (053) 272-618
Fax. (076) 222-861
Pak Chong Branch
Cyber Branch @ North Nana
173 175, Mittapap Road,
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd.,Klong Toey Nua Subdistrict , Wattana District, Bangkok 10110 Telephone: 083-490-2871
Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Tel. (044) 279-511 Fax. (044) 279-574
Nakhon Ratchasima Branch
Bangkhae Branch
6th Floor The Mall Group Building Bangkhae 275 Moo 1 Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Tel. (66-2) 454-9979 Fax. (66-2) 454-9970
624/9 Changphuek Road, . Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171 Information herein was obtained from sources believed to be reliable, but its completeness and accuracy are not guaranteed. All opinions expressed constitute our views on that date and are not intended as an offer or solicitation to sell or buy any securities. Investors should exercise care when making a decision to invest in securities. No one may modify or distribute any part of this report unless written permission is first received from Seamico Securities Plc. If any modifications are made, quotes or references taken from the report and the report date must be clearly mentioned and must not cause misunderstanding or damage to the company.
Company Update
Close Bt17.40
Banking
Earnings upgrade/Earnings downgrade/Overview unchanged
April 25, 2016
Concern over asset quality continues Price Performance (%)
Source: SET Smart
FY16
FY17
Consensus EPS (Bt)
2.236
2.568
KT ZMICO vs. consensus Share data
‐7.9%
‐6.9%
Reuters / Bloomberg
KTB.BK/KTB TB
Paid‐up Shares (m)
13,976.06
Par (Bt)
5.15
Market cap (Bt bn / US$ m)
243.00/6,932.00
Foreign limit / actual (%)
25.00/12.16
52 week High / Low (Bt)
21.40/15.20
Avg. daily T/O (shares 000) NVDR (%)
50,760.00 5.46
Estimated free float (%)
44.93
Beta
1.19
URL
www.ktb.co.th
CGR
Higher NPL risk to remain KTB’s key share price overhang We see that KTB’s inexpensive valuation and sound dividend yield of 4.4% remain its main share price supports. However, the sharp deterioration of KTB’s asset quality in 1Q16 (the biggest jump in NPLs vs. peers) as well as the ongoing market concern over its higher asset quality risk will remain the key share price overhangs in the medium term. KTB expects slower pace of NPL hike for the remaining quarters Although KTB highlighted that the NPL outlook for the rest of the year should remain on an uptrend, it expects the pace of the increase to be slower vs. the sharp 1Q16 rise. The bank said it will continue to be more proactive in its NPL resolution and control process and will aim to maintain its reserve‐to‐NPL ratio at higher than 100%. NPL rise in 1Q16 started to come from corporate and large SMEs Note again that KTB’s NPLs in 1Q16 rose sharply by Bt13.7bn or 18% QoQ (the highest rise vs. peers) to 3.7% of loans from 3.2% in 4Q15. The NPL increase in 1Q16 was largely caused by new NPL inflow that started to come from corporate and large SME clients, followed by an ongoing increase in the small SME and retail sectors since last year. The weakened asset quality prompted KTB to set a higher provision (173 bps) in 1Q16 to cope with higher NPL risk. However, the reserve‐to‐NPL ratio (103%) and its reserve to the BoT’s required reserve (135%) for 1Q16 remain inferior vs. peers. Therefore, we still expect a high provision level for the rest of the year. Trim net profit estimates for 16‐17E by 9% We trimmed our net profit (NP) forecasts for KTB by 9% for both 2016‐17E, mainly to reflect the latest 2015 results, especially in regard to the likelihood for a higher‐than‐expected provision on much higher NPL risk and lower NIM on the recent lending rate cut impact. Following our NP revision, we trimmed our 16E target price to Bt18.50/share (from Bt20/share previously) for an implied target P/BV of 1.0x based on L‐T ROE of 13.9% and an L‐T growth rate of 9.8%. Financials and Valuation
Anti‐corruption
Level 4 (Certified)
Note: KT ZMICO has two major shareholders, Krungthai Bank PLC (KTB) and Seamico Securities PLC (ZMICO). Therefore, prior to making investment in the securities of KTB and ZMICO, investor should consider risk factors carefully.
FY Ended 31 Dec
2014
2015
2016E
2017E
2018E
PPOP (Btmn)
52,032
59,433
59,996
61,077
63,491
Provision (Btmn)
18,643
30,542
30,573
26,566
22,303
Net Profit (Btmn)
33,191
28,492
28,837
33,466
39,834
2.37
2.04
2.06
2.39
2.85
EPS Growth (%)
‐3.8%
‐14.2%
1.2%
16.1%
19.0%
Book value (Bt)
22.65
EPS (Bt)
16.60
17.59
18.93
20.60
Dividend (Bt)
0.90
0.76
0.76
0.84
1.00
FY Ended 31 Dec
2014
2015
2016E
2017E
2018E
Prapharas Nonthapiboon
PER (X)
7.33
8.54
8.44
7.27
6.11
Analyst, no 17836
PBV (X)
1.05
0.99
0.92
0.84
0.77
[email protected]
Div. Yield (%) ROE (%)
5.17 15.1%
4.37 11.9%
4.39 11.3%
4.81 12.1%
5.73 13.2%
66 (0) 2695‐5872
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 5
Figure 1: KTB’s financial targets for 2016 vs. our forecasts Financial targets
KTB's targets Actual KTB's targets* KTZ's Forecasts 2015E 2015 2016E 2016E Loan Growth 6‐7% 4% 3‐4% 4% Net Fee income growt 10‐12% 30% 10% 9% Net interes t margin N.A. 3.02% N.A. 2.96% NPL Ratio (gross ) Maintain 3.2% Maintain 4.3% Provis ion (Btmn) 8,400 (Normali zed) + Extra 30,542 ~12,000 (Norma li zed) + Extra 30,573 Provis ion (% of l oa ns ) N.A. 1.51% N.A. 1.45% Cos t to Income N.A. 43.7% N.A. 43.6% ROE Maintain 11.9% Mai ntain 11.3% Loan to Depos it N.A. 94.9% 92‐95% 95.1%
Source: KT ZMICO Research
Figure 2: Key changes in our earnings revision 2016E New 28,837 ‐9% 1% 4% 9% 2.96% 43.6% 30,573 1.45%
Net profit (Btmn) NP change from previous (%) NP Growth YoY (%) Loan growth Net fee income growth (%) NIM (%) Cost to income ratio (%) Provision for loan loss (Btmn) Provision for loan loss (% of loans) Source: KT ZMICO Research
2017E Previous 31,730 11% 4% 12% 3.05% 44.3% 27,410 1.30%
New 33,466 ‐9% 16% 5% 9% 2.97% 44% 26,566 1.20%
Previous 36,964 16% 6% 12% 3.11% 45% 24,584 1.10%
Figure 3: KTB's P/BV band and sensitivity of market prices based on P/BV at different standard deviation levels (X) 2.0
2016E
+2 S.D.
1.8
+1.5 S.D.
1.6 1.4
+1 S.D.
1.2
+0.5 S.D. Avg.
1.0
-0.5 S.D.
0.8 0.6
-1 S.D.
0.4
-1.5 S.D.
0.2
-2 S.D.
Jan-16
Jan-15
Jan-14
Jan-13
Jan-12
Jan-11
Jan-10
Jan-09
Jan-08
Jan-07
Source: Bloomberg, KT ZMICO Research
Implied market
Upside/ Downside
price (Bt)
to current price (%)
+2.0SD
1.8
35
100
+1.5SD
1.6
31
76
+1.0SD
1.4
27
53
+0.5SD
1.2
23
30
Average
1.0
19
7
-0.5SD
0.8
15
-16
-1.0SD
0.6
11
-39
-1.5SD
0.3
7
-62
-2.0SD
0.1
3
-86
Figure 4: KTB's PER band and sensitivity of market prices based on PER at different standard deviation levels (X) 25
2016E
20
Source: Bloomberg, KT ZMICO Research
Jan-16
Jan-15
Jan-14
Jan-13
Jan-12
Jan-11
Jan-10
Jan-09
0
Jan-08
5
Jan-07
10
+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.
Jan-06
15
+2 S.D.
Jan-05
Jan-06
Jan-05
0.0
PBV (x)
PER (x) Implied market
Upside/ Downside
price (Bt)
to current price (%)
+2.0SD
16.4
34
94
+1.5SD
14.6
30
74
+1.0SD
12.9
27
53
+0.5SD
11.2
23
33
Average
9.5
20
13
-0.5SD
7.8
16
-8
-1.0SD
6.1
13
-28
-1.5SD
4.3
9
-48
-2.0SD
2.6
5
-69
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 5
Statement of Comprehensive Income (Btmn) Year‐end 31 Dec Total Interest Income Total Interest Expenses Net Interest Income Fee and Service income Gain on exchange Other Income Total Non‐Interest Income Operating Income Personnel Expenses Premises & Equipment Exp. Other Expenses Total Operating Expenses Operating Profit Extraordinary Item Provision for Loan Losses Taxation Minority Interests Net Profit PPOP PPP EPS (Bt)
2014 130,466 51,072 79,394 16,383 4,827 7,447 28,657 108,051 26,067 8,888
2015 132,525 51,657 80,868 21,343 6,701 7,697 35,741 116,609 27,374 9,297
2016E 130,762 49,404 81,358 23,293 7,371 7,591 38,255 119,613 27,921 9,483
2017E 135,016 50,191 84,825 25,414 7,666 7,577 40,656 125,481 29,540 10,052
2018E 146,045 56,153 89,892 27,980 8,049 7,850 43,878 133,770 31,608 10,656
13,191 48,146 59,216 ‐ 18,643 7,184 (887) 33,191 52,032 51,834 2.37
14,249 50,920 65,041 ‐ 30,542 5,608 (1,048) 28,492 59,433 59,033 2.04
14,737 52,141 66,822 ‐ 30,573 6,826 (1,236) 28,837 59,996 59,409 2.06
15,831 55,424 69,558 ‐ 26,566 8,481 (1,545) 33,466 61,077 60,031 2.39
17,093 59,357 73,913 ‐ 22,303 10,422 (1,854) 39,834 63,491 62,137 2.85
2014
2015
2016E
2017E
2018E
74,770 456,721 ‐ 258,495 1,952,996 5,191 1,958,187 (76,021) 1,882,166 30,733 28,116 58,141 2,789,143
71,470 397,358 ‐ 261,732 2,027,440 5,750 2,033,191 (85,935) 1,947,256 30,008 26,355 81,154 2,815,333
72,185 413,252 ‐ 286,733 2,108,473 6,086 2,114,558 (110,508) 2,004,051 29,108 27,145 101,110 2,933,584
72,907 392,590 ‐ 304,698 2,213,812 6,611 2,220,423 (123,073) 2,097,350 28,235 27,417 113,455 3,036,651
73,636 396,516 ‐ 313,687 2,347,695 7,246 2,354,940 (131,376) 2,223,564 27,388 27,691 121,883 3,184,364
2,151,268 167,215 146,971
2,135,499 194,243 116,240
2,216,647 196,185 126,240
2,278,714 202,071 131,240
2,383,534 208,133 132,240
87,822 2,553,276
119,052 2,565,034
125,160 2,664,234
131,590 2,743,615
138,358 2,862,266
72,005 20,834 119,660 ‐ 19,644 232,142
72,005 20,834 135,202 ‐ 17,844 245,884
72,005 20,834 152,812 ‐ 18,976 264,627
72,005 20,834 175,008 ‐ 20,135 287,982
72,005 20,834 202,529 ‐ 21,322 316,689
Statement of Financial Position (Btmn) Year‐end 31 Dec Assets Cash Interbank & Money Market REPO Net Investment in Securities Loans Accrued Interest Receivables Loans & Accrued Int.Rec. Less: Loan Loss Reserves Net Loans and Receivables Properties Foreclosed Premises and Equipment, Net Other Assets Total Assets Liabilities & Equity Total Deposits Interbank & Money Market Total Borrowings Other Liabilities Total Liabilities Paid‐up Capital (Bt5.15 Par) Premium on Share Capital Retained Earnings Unrealized Loss on LT Securities Other Equity Items Total Shareholders' Equity
Source: KTZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 5
Key Statistics and Ratios Year‐end 31 Dec Per share Data (Bt) EPS DPS BVPS
2014
2015
2016E
2017E
2018E
2.37 0.90 16.60
2.04 0.76 17.59
2.06 0.76 18.93
2.39 0.84 20.60
2.85 1.00 22.65
Valuation analysis PER (X) P/BV (X) Dividend yield (%)
7.33 1.05 5.17
8.54 0.99 4.37
8.44 0.92 4.39
7.27 0.84 4.81
6.11 0.77 5.73
Growth (%) Net Profit EPS Net Interest Income Non Interest Income
‐3.8% ‐3.8% 23.1% 4.0%
‐14.2% ‐14.2% 1.9% 24.7%
1.2% 1.2% 0.6% 7.0%
16.1% 16.1% 4.3% 6.3%
19.0% 19.0% 6.0% 7.9%
Net Fee & Service Income Operating Income Operating Expenses Operating Profit PPOP PPP Loans ‐ Net Deposits Gross NPLs
4.3% 17.4% 21.6% 13.5% 17.6% 10.7% 10.8% 14.3% 1.6%
30.3% 7.9% 5.8% 9.8% 14.2% 13.9% 3.8% ‐0.7% 32.8%
9.1% 2.6% 2.4% 2.7% 0.9% 0.6% 4.0% 3.8% 38.7%
9.1% 4.9% 6.3% 4.1% 1.8% 1.0% 5.0% 2.8% ‐2.0%
10.1% 6.6% 7.1% 6.3% 4.0% 3.5% 6.0% 4.6% ‐9.7%
Asset Quality Ratio Gross NPLs (Btmn) Gross NPLs/Loans Loan Loss Reserve/NPLs Accrued Interest/Loans Loan Loss Reserve/Loans Property Foreclosed/Loans
57,489 76,371 105,947 103,869 93,831 2.4% 3.2% 4.3% 4.0% 3.5% 132.2% 112.5% 104.3% 118.5% 140.0% 0.3% 0.3% 0.3% 0.3% 0.3% 3.9% 4.2% 5.2% 5.6% 5.6% 1.6% 1.5% 1.4% 1.3% 1.2%
Capital & Liquidity Ratio Equity/Asset Tier I to Risk Assets Capital Adequacy Ratio Loan to Deposit Ratio Loan to Deposit and Borrowing Ratio Profitability Ratio ROA ROE Cost to Income Non Interest Income/Total Income Net Interest Margin (NIM)
Key Assumptions Loan Growth ‐ Net Cost to Income Net Interest Margin (NIM) Provision expenses (Btmn) Provision (% of loans) Source: KTZMICO Research
8.3% 10.9% 14.8% 90.8% 85.0%
8.7% 11.4% 15.2% 94.9% 90.0%
9.0% 12.7% 15.4% 95.1% 90.0%
9.5% 13.1% 15.5% 97.2% 91.9%
9.9% 13.5% 15.7% 98.5% 93.3%
1.2% 15.1% 44.6% 26.5% 3.10%
1.0% 11.9% 43.7% 30.7% 3.02%
1.0% 11.3% 43.6% 32.0% 2.96%
1.1% 12.1% 44.2% 32.4% 2.97%
1.3% 13.2% 44.4% 32.8% 3.01%
2014 2015 2016E 2017E 2018E 10.8% 3.8% 4.0% 5.0% 6.0% 44.6% 43.7% 43.6% 44.2% 44.4% 3.10% 3.02% 2.96% 2.97% 3.01% 18,643 30,542 30,573 26,566 22,303 0.95% 1.51% 1.45% 1.20% 0.95%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 5
Note: KT ZMICO has two major shareholders, Krungthai Bank PLC (KTB) and Seamico Securities PLC (ZMICO). Therefore, prior to making investment in the securities of KTB and ZMICO, investor should consider 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, BIGC, BJC. KT ZMICO is a co‐underwriter of TPBI.
Anti‐corruption Progress Indicator
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 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 returns over a six‐month period due to specific catalysts UNDERPERFORM: Expecting total returns between ‐10% to +15%; returns expected to be below market returns over a six‐month period due to 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 5 of 5
th
th
th
th
KT•ZMICO Securities Company Limited
st
8 , 15 -17 , 19 , 21 Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok 10500 Telephone: (66-2) 695-5000
Phaholyothin Branch
rd
Fax. (66-2) 631-1709
Ploenchit Branch
th
nd
2
Sindhorn Branch
3 Floor, Shinnawatra Tower II,
8 Floor, Ton Son Tower,
1291/1 Phaholyothin Road,
900 Ploenchit Road, Lumpini,
Floor, Sindhorn Tower 1, 130-132 Wireless Road, Lumpini,
Phayathai, Bangkok 10400
Pathumwan, Bangkok 10330
Pathumwan, Bangkok 10330
Telephone: (66-2) 686-1500
Telephone: (66-2) 626-6000
Telephone: (66-2) 627-3550
Fax. (66-2) 686-1666
Fax. (66-2) 626-6111
Fax. (66-2) 627-3582, 627-3600
Nakhon Pathom Branch 1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
Chachoengsao Branch
Viphavadee Branch
Phitsanulok Branch
G Floor, Lao Peng Nguan 1 Bldg.,
Krung Thai Bank, Singhawat Branch
333 Soi Cheypuand, Viphavadee-Rangsit Road,
114 Singhawat Road,
Ladyao, Jatujak, Bangkok 10900
Muang, Phitsanulok 65000
Telephone: (66-2) 618-8500
Telephone: 083-490-2873
Fax. (66-2) 618-8569
th
Chonburi Branch
Pattaya Branch
108/34-36 Mahajakkrapad Road,
4 Floor, Forum Plaza Bldg.,
382/6-8 Moo 9, T. NongPrue,
T.Namuang, A.Muang,
870/52 Sukhumvit Road, T. Bangplasoy,
A. Banglamung, Cholburi 20260
Chachoengsao 24000
A. Muang, Cholburi 20000
Telephone: (038) 362-420-9
Telephone: (038) 813-088
Telephone: (038) 287-635
Fax. (038) 362-430
Fax. (038) 813-099
Fax. (038) 287-637
Khon Kaen Branch
5th Floor, Charoen Thani Princess Hotel,
Hat Yai Branch
Sriworajak Building Branch
200/301 Juldis Hatyai Plaza Floor 3,
1st – 2nd Floor, Sriworajak Building, 222
260 Srichan Road, T. Naimuang,
Niphat-Uthit 3 Rd,
Luang Road, Pomprab,
A. Muang, Khon Kaen 40000
Hatyai Songkhla 90110
Bankgok 10100
Telephone: (043) 389-171-193
Telephone: (074) 355-530-3
Telephone: (02) 689-3100
Fax. (043) 389-209
Fax: (074) 355-534
Fax. (02) 689-3199
Central World Branch
Chiang Mai Branch
Phuket Branch
999/9 The Offices at Central World,
422/49 Changklan Road, Changklan
22/61-63, Luang Por Wat Chalong Road,
16th Fl., Rama 1 Rd, Pathumwan,
Subdistrict, Amphoe Meuang,
Talat Yai, Mueang Phuket,
Bangkok 10330
Chiang Mai 50100
Phuket 83000
Telephone: (66-2) 673-5000,
Telephone: (053) 270-072
Tel. (076) 222-811,(076) 222-683
(66-2) 264-5888 Fax. (66-2) 264-5899
Fax: (053) 272-618
Fax. (076) 222-861
Pak Chong Branch
Cyber Branch @ North Nana
173 175, Mittapap Road,
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd.,Klong Toey Nua Subdistrict , Wattana District, Bangkok 10110 Telephone: 083-490-2871
Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Tel. (044) 279-511 Fax. (044) 279-574
Nakhon Ratchasima Branch
Bangkhae Branch
6th Floor The Mall Group Building Bangkhae 275 Moo 1 Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Tel. (66-2) 454-9979 Fax. (66-2) 454-9970
624/9 Changphuek Road, . Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171 Information herein was obtained from sources believed to be reliable, but its completeness and accuracy are not guaranteed. All opinions expressed constitute our views on that date and are not intended as an offer or solicitation to sell or buy any securities. Investors should exercise care when making a decision to invest in securities. No one may modify or distribute any part of this report unless written permission is first received from Seamico Securities Plc. If any modifications are made, quotes or references taken from the report and the report date must be clearly mentioned and must not cause misunderstanding or damage to the company.
