Krungthai Card Outperform (17E TP Bt150.00)
Krungthai Card Outperform (17E TP Bt150.00)
Earnings Preview
Close Bt138.00
Financial March 29, 2017
Earnings upgrade/Earnings downgrade/Overview unchanged
Expect modest growth for 1Q17E earnings Price Performance (%)
Expect 1Q17E net profit of Bt664mn (+5% YoY, +4% QoQ) We expect KTC to post 1Q17E net profit (NP) of Bt664mn, up 5% YoY and 4% QoQ. The main reason behind the modest NP growth, especially on a QoQ basis, should be seasonality as loans and spending growth normally weaken QoQ in every 1Q. However, we expect the momentum to improve, especially in 4Q and 2Q, respectively, which are normally the high seasons of the year. We expect loans for 1Q17E to drop by around 3% QoQ, but they should still increase by 12‐13% YoY (vs. the firm’s target of around >10%). The provision for 1Q17E is likely to be higher YoY for reasons of conservativeness but decline QoQ as KTC set a quite aggressive provision in 4Q16. The net interest margin (NIM) will likely weaken QoQ due partly to seasonality.
Source: SET Smart
FY17
FY18
Consensus EPS (Bt)
11.072
12.596
KT ZMICO vs. consensus Share data
‐0.5%
‐0.1%
Reuters / Bloomberg
KTC.BK/KTC TB
Paid‐up Shares (m)
257.83
Par (Bt)
10.00
Market cap (Bt bn / US$ m)
36.00/1,033.00
Foreign limit / actual (%)
49.00/7.27
52 week High / Low (Bt)
156.50/82.50
Avg. daily T/O (shares 000) NVDR (%)
975.00 3.82
Estimated free float (%)
41.97
Beta
0.96
URL
www.ktc.co.th
CGR
Moderate dividend yield of ~3% the near‐term price catalyst We maintain our Outperform rating for KTC. We still like KTC on 1) the firm’s continuing market share gains, especially the credit card business; 2) its solid balance sheet in comparison to peers; and 3) its inexpensive valuation vs. financial peers. Moreover, the near‐term price catalyst could come from its moderate dividend yield of ~3% (DPS for 2016 at Bt4.00/share with XD date on 21 April and payment date on 16 May‐17).
Card spending growth the main challenging target for 2017E KTC also hints that it has seen slowing momentum for its credit card spending growth in 1Q17E, which is below its spending growth target of 15% for 2017E. We see that this could be its main challenging target for 2017E, given that some credit card operators (e.g., SCB) are becoming more aggressive in the market again after being quite passive in the past couple years. Note that earlier this year KTC revealed its financial targets for 2017, which mainly include ~10% loan growth, >10% bottom line growth, 15% card spending growth and a stable NPL outlook, see Figure 2. However, we see KTC generally being able to achieve or do better than most of its targets in the past few years. Asset quality should remain well controlled Its NPL ratio for 1Q17E is likely to be quite stable QoQ at ~1.6‐1.7% of loans but drop from 2.0% in 1Q16 following KTC’s continued prudent risk management. Financials and Valuation
Level 4 (Certified)
Anti‐corruption
Note: Krung Thai Bank is the major shareholder of both Krungthai Card Pcl. and KT ZMICO Securities. Prapharas Nonthapiboon Analyst, no 17836 [email protected] 66 (0) 2695‐5872
FY Ended 31 Dec
2015
2016
2017E
2018E
2019E
PPOP (Btm)
7,256
8,565
9,438
10,632
11,898
Net profit (Btm)
2,073
2,495
2,842
3,245
3,618
EPS (Bt)
8.04
9.68
11.02
12.58
14.03
EPS growth (%)
18%
20%
14%
14%
12%
Book value (Bt)
33.87
40.03
47.05
55.14
64.17
Dividend (Bt)
3.25
4.00
4.50
5.00
5.50
FY Ended 31 Dec
2015
2016
2017E
2018E
2019E
PER (X)
17.17
14.26
12.52
10.97
9.83
PBV (X)
4.07
3.45
2.93
2.50
2.15
Dividend yield (%)
2.36
2.90
3.26
3.62
3.99
ROE (%)
26%
26%
25%
25%
24%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 4
Figure 1: 1Q17 earnings preview
Statement of comprehensive income (Btmn) Fiscal Year‐Ended Dec.
1Q16
4Q16
1Q17E
% YoY % QoQ
2016
2017E
% YoY % 1Q to 17E
Net Interest Income
1,346
1,552
1,505
12%
‐3% 5,766
6,225
8%
24%
Non Interest Income
2,423
2,822
2,730
13%
‐3% 10,332
11,461
11%
24%
Operating Income
3,769
4,374
4,235
12%
‐3% 16,098
17,686
10%
24%
Operating Expenses
1,652
1,818
1,820
10%
0% 6,902
7,528
9%
24%
Operating Profit Provision expenses (Reversal)
2,117
2,556
2,415
14%
‐6% 9,196
10,158
10%
24%
1,317
1,757
1,580
20%
‐10% 6,070
6,596
9%
24%
Tax expenses
165
160
171
4%
7% 631
720
14%
24%
Net Profit
635
640
664
5%
4% 2,495
2,842
14%
23%
PPOP
1,952
2,397
2,244
15%
‐6% 8,565
9,438
10%
24%
EPS (Bt)
2.46
2.48
2.57
5%
4% 9.68
11.02
14%
23%
1Q16
4Q16
1,185
1,140
Key Statistics and Ratios Gross NPLs (Btmn) Gross NPLs/Loans
2.00%
1.66%
1Q17E
2016
1,120
1,140
1.68%
1.66%
2017E 1,133 1.5%
Loan Loss Reserve/NPLs
423%
473%
495%
473%
497%
Loan to borrowing
136%
134%
136%
134%
134%
5.0
5.6
9.5%
8.8%
Debt to Equity ratio (X)
5.2
Provision to loans
8.9%
5.6 10.4%
5.3 8.5%
Cost to Income
43.8%
41.6%
43.0%
42.9%
42.6%
Non Interest Inc./Total Income
64.3%
64.5%
64.5%
64.2%
64.8%
Net Interest Margin
14.6%
15.2%
14.2%
14.5%
13.9%
Tax rate
20.6%
20.0%
20.5%
20.2%
20.2%
Loan Growth YoY
10.9%
13.2%
12.7%
13.2%
13.0%
Loan Growth QoQ Source: KTZMICO Research
‐2.5%
10.5%
‐3.0%
Figure 2: KTC’s financial targets for 2017E vs. our forecasts Performance targets ROE Net profit growth Loan growth (YoY) Credit card loans Personal loans Credit card spending growth NPLs/Loans Source: KTC, KT ZMICO Research
2015 Actual 25.7% 18.1% 10.3% 10% 12% 12% 2.1%
2016 KTC's Targets >20% 15.0% 10.0% N.A. 15% 15%
Earnings Preview
Close Bt138.00
Financial March 29, 2017
Earnings upgrade/Earnings downgrade/Overview unchanged
Expect modest growth for 1Q17E earnings Price Performance (%)
Expect 1Q17E net profit of Bt664mn (+5% YoY, +4% QoQ) We expect KTC to post 1Q17E net profit (NP) of Bt664mn, up 5% YoY and 4% QoQ. The main reason behind the modest NP growth, especially on a QoQ basis, should be seasonality as loans and spending growth normally weaken QoQ in every 1Q. However, we expect the momentum to improve, especially in 4Q and 2Q, respectively, which are normally the high seasons of the year. We expect loans for 1Q17E to drop by around 3% QoQ, but they should still increase by 12‐13% YoY (vs. the firm’s target of around >10%). The provision for 1Q17E is likely to be higher YoY for reasons of conservativeness but decline QoQ as KTC set a quite aggressive provision in 4Q16. The net interest margin (NIM) will likely weaken QoQ due partly to seasonality.
Source: SET Smart
FY17
FY18
Consensus EPS (Bt)
11.072
12.596
KT ZMICO vs. consensus Share data
‐0.5%
‐0.1%
Reuters / Bloomberg
KTC.BK/KTC TB
Paid‐up Shares (m)
257.83
Par (Bt)
10.00
Market cap (Bt bn / US$ m)
36.00/1,033.00
Foreign limit / actual (%)
49.00/7.27
52 week High / Low (Bt)
156.50/82.50
Avg. daily T/O (shares 000) NVDR (%)
975.00 3.82
Estimated free float (%)
41.97
Beta
0.96
URL
www.ktc.co.th
CGR
Moderate dividend yield of ~3% the near‐term price catalyst We maintain our Outperform rating for KTC. We still like KTC on 1) the firm’s continuing market share gains, especially the credit card business; 2) its solid balance sheet in comparison to peers; and 3) its inexpensive valuation vs. financial peers. Moreover, the near‐term price catalyst could come from its moderate dividend yield of ~3% (DPS for 2016 at Bt4.00/share with XD date on 21 April and payment date on 16 May‐17).
Card spending growth the main challenging target for 2017E KTC also hints that it has seen slowing momentum for its credit card spending growth in 1Q17E, which is below its spending growth target of 15% for 2017E. We see that this could be its main challenging target for 2017E, given that some credit card operators (e.g., SCB) are becoming more aggressive in the market again after being quite passive in the past couple years. Note that earlier this year KTC revealed its financial targets for 2017, which mainly include ~10% loan growth, >10% bottom line growth, 15% card spending growth and a stable NPL outlook, see Figure 2. However, we see KTC generally being able to achieve or do better than most of its targets in the past few years. Asset quality should remain well controlled Its NPL ratio for 1Q17E is likely to be quite stable QoQ at ~1.6‐1.7% of loans but drop from 2.0% in 1Q16 following KTC’s continued prudent risk management. Financials and Valuation
Level 4 (Certified)
Anti‐corruption
Note: Krung Thai Bank is the major shareholder of both Krungthai Card Pcl. and KT ZMICO Securities. Prapharas Nonthapiboon Analyst, no 17836 [email protected] 66 (0) 2695‐5872
FY Ended 31 Dec
2015
2016
2017E
2018E
2019E
PPOP (Btm)
7,256
8,565
9,438
10,632
11,898
Net profit (Btm)
2,073
2,495
2,842
3,245
3,618
EPS (Bt)
8.04
9.68
11.02
12.58
14.03
EPS growth (%)
18%
20%
14%
14%
12%
Book value (Bt)
33.87
40.03
47.05
55.14
64.17
Dividend (Bt)
3.25
4.00
4.50
5.00
5.50
FY Ended 31 Dec
2015
2016
2017E
2018E
2019E
PER (X)
17.17
14.26
12.52
10.97
9.83
PBV (X)
4.07
3.45
2.93
2.50
2.15
Dividend yield (%)
2.36
2.90
3.26
3.62
3.99
ROE (%)
26%
26%
25%
25%
24%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 4
Figure 1: 1Q17 earnings preview
Statement of comprehensive income (Btmn) Fiscal Year‐Ended Dec.
1Q16
4Q16
1Q17E
% YoY % QoQ
2016
2017E
% YoY % 1Q to 17E
Net Interest Income
1,346
1,552
1,505
12%
‐3% 5,766
6,225
8%
24%
Non Interest Income
2,423
2,822
2,730
13%
‐3% 10,332
11,461
11%
24%
Operating Income
3,769
4,374
4,235
12%
‐3% 16,098
17,686
10%
24%
Operating Expenses
1,652
1,818
1,820
10%
0% 6,902
7,528
9%
24%
Operating Profit Provision expenses (Reversal)
2,117
2,556
2,415
14%
‐6% 9,196
10,158
10%
24%
1,317
1,757
1,580
20%
‐10% 6,070
6,596
9%
24%
Tax expenses
165
160
171
4%
7% 631
720
14%
24%
Net Profit
635
640
664
5%
4% 2,495
2,842
14%
23%
PPOP
1,952
2,397
2,244
15%
‐6% 8,565
9,438
10%
24%
EPS (Bt)
2.46
2.48
2.57
5%
4% 9.68
11.02
14%
23%
1Q16
4Q16
1,185
1,140
Key Statistics and Ratios Gross NPLs (Btmn) Gross NPLs/Loans
2.00%
1.66%
1Q17E
2016
1,120
1,140
1.68%
1.66%
2017E 1,133 1.5%
Loan Loss Reserve/NPLs
423%
473%
495%
473%
497%
Loan to borrowing
136%
134%
136%
134%
134%
5.0
5.6
9.5%
8.8%
Debt to Equity ratio (X)
5.2
Provision to loans
8.9%
5.6 10.4%
5.3 8.5%
Cost to Income
43.8%
41.6%
43.0%
42.9%
42.6%
Non Interest Inc./Total Income
64.3%
64.5%
64.5%
64.2%
64.8%
Net Interest Margin
14.6%
15.2%
14.2%
14.5%
13.9%
Tax rate
20.6%
20.0%
20.5%
20.2%
20.2%
Loan Growth YoY
10.9%
13.2%
12.7%
13.2%
13.0%
Loan Growth QoQ Source: KTZMICO Research
‐2.5%
10.5%
‐3.0%
Figure 2: KTC’s financial targets for 2017E vs. our forecasts Performance targets ROE Net profit growth Loan growth (YoY) Credit card loans Personal loans Credit card spending growth NPLs/Loans Source: KTC, KT ZMICO Research
2015 Actual 25.7% 18.1% 10.3% 10% 12% 12% 2.1%
2016 KTC's Targets >20% 15.0% 10.0% N.A. 15% 15%
