Muangthai Leasing Buy (17E TP Bt29.00) - Global Alliance Partners
Muangthai Leasing Company Update
Buy (17E TP Bt29.00) Close Bt23.30
Earnings upgrade/Earnings downgrade/Overview unchanged
Favorable growth prospects remain intact Among the top tier growth play stocks Price Performance (%)
Source: SET Smart
FY16
FY17
Consensus EPS (Bt)
0.603
0.858
KT ZMICO vs. consensus Share data
7.8%
2.6%
Reuters / Bloomberg
MTLS.BK/MTLS TB
Paid‐up Shares (m)
2,120.00
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
49.00/1,406.00
Foreign limit / actual (%)
49.00/2.97
52 week High / Low (Bt)
23.90/14.00
Avg. daily T/O (shares 000) NVDR (%)
8,214.00 3.21
Estimated free float (%)
20.07
Beta
0.79
URL
www.muangthaileasing.co.th
CGR
Anti‐corruption
Level 2 (Declared)
Finance & Securities November 11, 2016
We maintain our Buy rating for MTLS as we see that it remains appealing on its impressive earnings outlook, which should continue outperforming financial peers (we expect robust EPS CARG of 44% in 2016‐18E) thanks to its leading position in the field and the favorable industry outlook. Management’s latest business targets MTLS highlighted its latest business targets and outlook for 2016‐17E, which still indicates a promising earnings outlook. MTLS still expects its top line to grow ~50% (+/‐) for 2017E and possibly ~30% (+/‐) in 2018E and also raised its total branch target to ~2,200 branches at end‐2017E (vs. >2,000 branches previously). Meanwhile, it keeps its target of ~1,600 branches at end‐2016E. Apart from the strong growth in its core products (collateralized motorcycle and car loans), MTLS highlighted that we will see much higher growth for higher yield products (i.e., agricultural land with an average yield of ~23‐24% vs. car products of ~20%) as well as for its non‐collateralized products, especially for personal loans (with a yield of ~26%) and nano finance (~29%). However, we expect to see higher NPL risk following its gearing towards higher risk segments. MTLS is also studying opportunities in overseas CLMV markets but does not expect to see any material progress in the next couple of years. Asset quality need a closer watch Its NPLs for 3Q16 increased both YoY and QoQ following its rapid credit expansion. This resulted in a higher NPL ratio to 0.95% of loans in 3Q16 vs. 0.94% in 2Q16 and 0.92% at end‐2015. The increase in the NPLs mainly came from collateralized car loans, which it expanded aggressively during the past few years. Note that the management anticipates that its NPL level could increase to ~1.5%. We expect MTLS’s NPL ratio to increase to 1.4% in 2017E and 2.1% in 2018E to reflect its future strategy and loan mix. Raised earnings estimates for 2016‐18E by 4‐10% We raised our net profit forecasts for MTLS by 10% for 2016E, 8% for 2017E and 4% for 2018E, mainly to fine‐tune with the latest better‐than‐ expected results and the firm’s latest business operating environment. The main revisions reflect the potential for 1) stronger‐than‐expected loan growth; 2) a higher interest spread reflecting the firm’s portfolio mix to grow more in high‐yield/higher risk assets as mentioned earlier. Specifically for 2016E, we lowered the provision level to reflect the firm’s change in its provisioning policy, which helped save/lower its provision for 3Q16 by roughly ~Bt35‐40mn for the one‐time adjustment as mentioned in the results report. Note that we also raised its provision level for conservativeness to take into account the likelihood of weaker asset quality following its changing loan mix and its rapid expansion. Following our NP revision, we raised the 17E target price (TP) from Bt27/share to Bt29/share for implied target PER of 32x. Financials and Valuation
Prapharas Nonthapiboon Analyst, no 17836 [email protected] 66 (0) 2695‐5872
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 572 544 0.26 15% 2.41 0.13 2014 90.78 9.67 0.56 15%
2015 856 825 0.39 52% 2.67 0.20 2015 59.87 8.74 0.86 15%
2016E 1,750 1,387 0.65 68% 3.12 0.26 2016E 35.62 7.47 1.12 23%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 5
2017E 2,582 1,876 0.88 35% 3.74 0.31 2017E 26.33 6.22 1.33 26%
2018E 3,492 2,480 1.17 32% 4.60 0.41 2018E 19.92 5.06 1.76 28%
Figure 1: Key changes in our earnings revision 2016E Net Profit (Btmn) % Change in net profit from previous forecasts % YoY Change in net profit Loan growth (%) Interes t Spread Provision for loan loss (Btmn) Provision for loan loss (% to loans) Cos t to income ratio Source: KT ZMICO Research
New 1,387 10% 68% 90% 19.3% 347 1.45% 49.1%
2017E
Previous 1,255
New 1,876 8% 35% 50% 19.5% 666 1.85% 52.9%
69% 19.5% 355 1.66% 50.7%
2018E
Previous 1,736
New 2,480 4% 32% 35% 19.1% 923 1.90% 53.2%
45% 19.1% 544 1.75% 52.0%
Previous 2,373
35% 18.8% 711 1.70% 51.8%
Figure 2: MTLS's P/BV band and sensitivity of market prices based on P/BV at different standard deviation levels (X) 9.0 8.5 8.0 7.5 7.0 6.5 6.0
Upside/ Downside vs. market price
(Bt)
(%)
26
11
7.9
25
6
+1.5SD
7.6
24
1
+1.0SD
7.2
22
-4
PBV (x)
+2.5SD
8.3
+2.0SD
Avg. -0.5 S.D. -1.0 S.D. -1.5 S.D. -2.0 S.D.
+0.5SD
6.8
21
-8
Average
6.5
20
-13
4.5
-0.5SD
6.1
19
-18
4.0
-1.0SD
5.8
18
-23
-1.5SD
5.4
17
-27
-2.0SD
5.1
16
-32
5.5
Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16
5.0
Implied market price
2016E
+3.0 S.D. +2.5 S.D. +2.0 S.D. +1.5 S.D. +1.0 S.D. +0.5 S.D.
Source: Bloomberg, KT ZMICO Research
Figure 3: MTLS's PER band and sensitivity of market prices based on P/BV at different standard deviation levels (X) 60.0 55.0
+1.5 S.D.
50.0
+1.0 S.D.
40.0 35.0 30.0 25.0
+0.5 S.D.
Avg.
-0.5 S.D. -1.0 S.D. -1.5 S.D. -2 S.D.
Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16
45.0
+2.0 S.D.
Source: Bloomberg, KT ZMICO Research
Implied market price
Upside/ Downside vs. market price
(Bt)
(%)
38
62
53.2
35
49
+1.0SD
48.6
32
36
+0.5SD Average -0.5SD -1.0SD -1.5SD -2.0SD
44.0 39.4 34.8 30.2 25.6 21.0
29 26 23 20 17 14
24 11 -2 -15 -28 -41
2016E
PER (x)
+2.0SD
57.8
+1.5SD
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 5
Statement of Comprehensive Income (Btmn) Year‐end 31 Dec Total Interes t Income Total Interes t Expens es Net Interes t Income Fee and Servi ce i ncome Other income Total Non‐Interes t Income Opera ti ng Income Pers onnel expens es Reta l expens es Total Opera ting Expens es Opera ti ng Profi t Provi s i on expens es Extraordi na ry Items Income Ta x expens e Mi nori ty Interes ts Net Profi t Pre Provi s i oning Operati ng Profi t (PPOP) EPS (Bt)
2014 1,567 266 1,301 279 9 289 1,590 514 97 883 708 14 (13) 136 ‐ 544 572 0.26
2015 2,225 228 1,998 317 17 334 2,331 710 164 1,269 1,063 25 (6) 207 ‐ 825 856 0.39
2016E 4,028 336 3,692 419 18 437 4,129 1,108 280 2,029 2,100 347 (15) 351 ‐ 1,387 1,750 0.65
2017E 6,653 623 6,030 444 21 465 6,495 1,861 489 3,434 3,061 666 (41) 479 ‐ 1,876 2,582 0.88
2018E 9,278 953 8,324 492 24 516 8,841 2,513 685 4,706 4,135 923 (90) 642 ‐ 2,480 3,492 1.17
Statement of Financial Position (Btmn) As at 31 Dec
2014
2015
2016E
2017E
2018E
Assets Ca s h Depos i ts wi th ba nks /Loa ns to rel ated parti es Net Inves tment Gros s Loans Accrued Interes t Recei va bl e Les s : Loa n Los s Res erves Net Loans
706 19 501 7,448 ‐ (325) 7,123
153 18 1 12,630 ‐ (336) 12,295
168 27 ‐ 23,951 ‐ (647) 23,304
185 30 ‐ 35,886 ‐ (1,252) 34,635
203 33 ‐ 48,428 ‐ (2,077) 46,351
Premi s es a nd Equi pment, Net Other As s ets Total Assets
362 66 8,777
520 97 13,083
718 158 24,374
898 236 35,983
988 361 47,936
Liabilities & Equity O/D a nd Short‐term borrowi ngs from ba nks Other Borrowi ng Other Li a bi l i ti es Total Liabilities
500 2,967 204 3,671
3,218 3,907 306 7,431
9,917 7,470 373 17,759
14,611 13,006 430 28,047
19,450 18,236 490 38,176
Pa i d‐up Ca pi tal Premi um on Share Capi tal Reta i ned Ea rni ng Other Equi ty Items Mi nori ty Interes t Total Shareholders' Equity of the bank Total Liabilities and Shareholders Equity
2,120 2,380 538 68 ‐ 5,106 8,777
2,120 2,380 1,043 109 ‐ 5,652 13,083
2,120 2,380 1,966 149 ‐ 6,615 24,374
2,120 2,380 3,247 189 ‐ 7,936 35,983
2,120 2,380 5,030 229 ‐ 9,759 47,936
Source: KTZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 5
Valuation and Ratio Analysis Year‐end 31 Dec
2014
2015
2016E
2017E
2018E
Per/Share Data (Bt) EPS DPS BVPS
0.26 0.13 2.41
0.39 0.20 2.67
0.65 0.26 3.12
0.88 0.31 3.74
1.17 0.41 4.60
Multiplier (X) P/E P/BV Di vi dend yi el d (%)
90.78 9.67 0.56
59.87 8.74 0.86
35.62 7.47 1.12
26.33 6.22 1.33
19.92 5.06 1.76
54.8% 15.0% 19.7% 35.4% 17.3% 19.1% 22.0% 15.7% 9.4% 27.6% ‐10.4%
51.6% 51.6% 53.5% 31.1% 13.6% 46.6% 43.7% 50.2% 49.7% 69.6% 4.2%
68.1% 68.1% 84.8% 45.8% 32.1% 77.1% 59.9% 97.6% 104.4% 89.6% 104.3%
35.3% 35.3% 63.3% 15.4% 6.0% 57.3% 69.2% 45.8% 47.6% 49.8% 112.6%
32.2% 32.2% 38.1% 19.7% 10.8% 36.1% 37.1% 35.1% 35.2% 34.9% 97.3%
Growth YoY (%) Net Profi t EPS Net Interes t Income Non Interes t Income Fee a nd Servi ce i ncome Opera ti ng Income Opera ti ng Expens es Opera ti ng Profi t PPOP Loa ns NPLs Financial Ratio Gros s NPLs (Btmn) Gros s NPLs /Loa ns Loa n Los s Res erve/NPLs Loa n Los s Res erve/Loa ns Provi s i on expens es (Revers a l )/Tota l l oa ns Equi ty/As s et Loa n to borrowi ng ra ti o Debt to Equi ty ra ti o Profitability Ratio ROA ROE Cos t to Income Non Interes t Income/Tota l Income Interes t Sprea d Net Interes t Ma rgi n (NIM) Net profi t Ma rgi n Ta x ra te
Key Assumptions Loa n Growth ‐ Net Cos t to Income Net Interes t Ma rgi n Provi s i on expens es (Revers a l ) (Btmn) Provi s i on expens es (Revers a l )/Tota l l oa ns Source: KTZMICO Research
112 117 238 507 1,000 1.5% 0.9% 1.0% 1.4% 2.1% 290.2% 287.6% 271.4% 247.0% 207.8% 4.4% 2.7% 2.7% 3.5% 4.3% 0.2% 0.2% 1.5% 1.9% 1.9% 58.2% 43.2% 27.1% 22.1% 20.4% 214.8% 177.3% 137.8% 129.9% 128.5% 0.72 1.31 2.68 3.53 3.91
7.4% 15.5% 55.5% 18.2% 16.4% 18.8% 29.3% 20.0%
7.5% 15.3% 54.4% 14.3% 17.9% 19.4% 32.2% 20.0%
7.4% 22.6% 49.1% 10.6% 19.3% 20.2% 31.1% 20.0%
6.2% 25.8% 52.9% 7.2% 19.5% 20.1% 26.4% 20.0%
5.9% 28.0% 53.2% 5.8% 19.1% 19.7% 25.3% 20.0%
2014 2015 2016E 2017E 2018E 27.6% 69.6% 89.6% 49.8% 34.9% 55.5% 54.4% 49.1% 52.9% 53.2% 18.8% 19.4% 20.2% 20.1% 19.7% 14 25 347 666 923 0.2% 0.2% 1.5% 1.9% 1.9%
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 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, TPOLY, M‐CHAI, TFD, SUTHA.
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 5 of 5
KT ZMICO Securities Company Limited Head Office
WWW.KTZMICO.COM
8th, 15th‐17th,19th, 21st Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok, Thailand 10500 Telephone: (66‐2) 695‐5000 Fax: (66‐2) 695‐5173 KT ZMICO Connect 662 695 5555
Central World Branch
Amarin Branch
22nd Floor, Amarin Building, 496‐502 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 018‐6200 Fax: (66‐2) 018‐6298, (66‐2) 018‐6299
8th Floor, Ton Son Tower, 900 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 626‐6000 Fax: (66‐2) 626‐6111
Phaholyothin Branch
Sindhorn Branch
Viphavadee Branch
2nd Floor, Sindhorn Tower 1, 130‐132 Wireless Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 627‐3550 Fax: (66‐2) 627‐3582, 627‐3600
G Floor, Lao Peng Nguan 1 Bldg., 333 Soi Cheypuand, Viphavadee‐Rangsit Road, Ladyao, Jatujak, Bangkok 10900 Telephone: (66‐2) 013‐8600 Fax: (66‐2) 618‐8569
BangKhae Branch
Chiang Mai Branch
Pak Chong Branch
999/9 The Offices at Central World, 16th Fl., Rama 1 Rd, Pathumwan, Bangkok 10330 Telephone: (66‐2) 264‐5888 Fax: (66‐2) 264 5899
1291/1, Shinnawatra Tower II, 3rd Floor, Phaholyothin Road, Phayathai, Bangkok 10400 Telephone: (66‐2) 686‐1500 Fax: (66‐2) 686‐1666
Ploenchit Branch
518 The Mall Group Building Bangkhae Branch, 6th Floor, Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Telephone: (66‐2) 454‐9979 Fax: (66‐2) 454‐9970
422/49 Changklan Road, Changklan Subdistrict, Amphoe Meuang, Chiang Mai 50100 Telephone: (053) 270‐072 Fax: (053) 272‐618
173 175, Mittapap Road, Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Telephone: (044) 279‐511 Fax: (044) 279‐574
Korat Branch
Khon Kaen Branch
Chonburi Branch
624/9 Changphuek Road, T.Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171
5th Floor, Charoen Thani Princess Hotel, 260 Srichan Road, T. Naimuang, A. Muang, Khon Kaen 40000 Telephone: (043) 389‐171‐193 Fax: (043) 389‐209
4th Floor, Forum Plaza Bldg., 870/52 Sukhumvit Road, T. Bangplasoy, A. Muang, Cholburi 20000 Telephone: (038) 287‐635 Fax: (038) 287‐637
Pattaya Branch
Chachoengsao Branch
Hat Yai Branch
Easy Point 2, 392/65 Moo.9, T.Nong Prue, A. Bang Lamung, Chonburi 20260 Telephone: (038) 420‐965 Fax: (038) 420‐968
108/34‐36 Mahajakkrapad Road, T.Namuang, A.Muang, Chachoengsao 24000 Telephone: (038) 813‐088 Fax: (038) 813‐099
200/301, 200/303 JULDIS HATYAI PLAZA Floor 3 , Niphat‐Uthit 3 Rd, Hatyai Songkhla 90110 Telephone: (074) 355530‐3 Fax: (074) 355534
Phuket Branch
22/61‐63, Luang Por Wat Chalong Road, Talat Yai, Mueang Phuket, Phuket 83000 Telephone: (076) 222‐811, (076) 222‐683 Fax: (076) 222‐861
Phitsanulok Branch
227/171 Borom Trilokkanat Road, Muang, Phitsanulok 65000 Telephone: 055‐219‐255 to 8 Fax: 055‐219‐259
Nakhon Pathom
Cyber Branch Ayutthaya
Cyber Branch @ North Nana
Cyber Branch Chiangrai
KrungThai Bank, Rojana Branch 253 Moo 5, Rojana Road, Phai Ling, Phra Nakhon Si Ayutthaya, Phra Nakhonsi Ayutthaya, 13000 Telephone: 035‐242‐477 Fax: 035‐242‐476
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd., Klong Toey Nua Subdistrict , Wattana District , Bangkok 10110 Telephone: 083‐490‐2871
River Hotel (Building 3rd),1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
KrungThai Bank, Hayaek Phokhun Mengrai Branch 116/19 Moo 19, Highway 110 Road, Rop Wiang, Mueang Chiang Rai, Chiang Rai, 57000 Telephone: 053‐715‐067 Fax: 053‐715‐068
Buy (17E TP Bt29.00) Close Bt23.30
Earnings upgrade/Earnings downgrade/Overview unchanged
Favorable growth prospects remain intact Among the top tier growth play stocks Price Performance (%)
Source: SET Smart
FY16
FY17
Consensus EPS (Bt)
0.603
0.858
KT ZMICO vs. consensus Share data
7.8%
2.6%
Reuters / Bloomberg
MTLS.BK/MTLS TB
Paid‐up Shares (m)
2,120.00
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
49.00/1,406.00
Foreign limit / actual (%)
49.00/2.97
52 week High / Low (Bt)
23.90/14.00
Avg. daily T/O (shares 000) NVDR (%)
8,214.00 3.21
Estimated free float (%)
20.07
Beta
0.79
URL
www.muangthaileasing.co.th
CGR
Anti‐corruption
Level 2 (Declared)
Finance & Securities November 11, 2016
We maintain our Buy rating for MTLS as we see that it remains appealing on its impressive earnings outlook, which should continue outperforming financial peers (we expect robust EPS CARG of 44% in 2016‐18E) thanks to its leading position in the field and the favorable industry outlook. Management’s latest business targets MTLS highlighted its latest business targets and outlook for 2016‐17E, which still indicates a promising earnings outlook. MTLS still expects its top line to grow ~50% (+/‐) for 2017E and possibly ~30% (+/‐) in 2018E and also raised its total branch target to ~2,200 branches at end‐2017E (vs. >2,000 branches previously). Meanwhile, it keeps its target of ~1,600 branches at end‐2016E. Apart from the strong growth in its core products (collateralized motorcycle and car loans), MTLS highlighted that we will see much higher growth for higher yield products (i.e., agricultural land with an average yield of ~23‐24% vs. car products of ~20%) as well as for its non‐collateralized products, especially for personal loans (with a yield of ~26%) and nano finance (~29%). However, we expect to see higher NPL risk following its gearing towards higher risk segments. MTLS is also studying opportunities in overseas CLMV markets but does not expect to see any material progress in the next couple of years. Asset quality need a closer watch Its NPLs for 3Q16 increased both YoY and QoQ following its rapid credit expansion. This resulted in a higher NPL ratio to 0.95% of loans in 3Q16 vs. 0.94% in 2Q16 and 0.92% at end‐2015. The increase in the NPLs mainly came from collateralized car loans, which it expanded aggressively during the past few years. Note that the management anticipates that its NPL level could increase to ~1.5%. We expect MTLS’s NPL ratio to increase to 1.4% in 2017E and 2.1% in 2018E to reflect its future strategy and loan mix. Raised earnings estimates for 2016‐18E by 4‐10% We raised our net profit forecasts for MTLS by 10% for 2016E, 8% for 2017E and 4% for 2018E, mainly to fine‐tune with the latest better‐than‐ expected results and the firm’s latest business operating environment. The main revisions reflect the potential for 1) stronger‐than‐expected loan growth; 2) a higher interest spread reflecting the firm’s portfolio mix to grow more in high‐yield/higher risk assets as mentioned earlier. Specifically for 2016E, we lowered the provision level to reflect the firm’s change in its provisioning policy, which helped save/lower its provision for 3Q16 by roughly ~Bt35‐40mn for the one‐time adjustment as mentioned in the results report. Note that we also raised its provision level for conservativeness to take into account the likelihood of weaker asset quality following its changing loan mix and its rapid expansion. Following our NP revision, we raised the 17E target price (TP) from Bt27/share to Bt29/share for implied target PER of 32x. Financials and Valuation
Prapharas Nonthapiboon Analyst, no 17836 [email protected] 66 (0) 2695‐5872
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 572 544 0.26 15% 2.41 0.13 2014 90.78 9.67 0.56 15%
2015 856 825 0.39 52% 2.67 0.20 2015 59.87 8.74 0.86 15%
2016E 1,750 1,387 0.65 68% 3.12 0.26 2016E 35.62 7.47 1.12 23%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 5
2017E 2,582 1,876 0.88 35% 3.74 0.31 2017E 26.33 6.22 1.33 26%
2018E 3,492 2,480 1.17 32% 4.60 0.41 2018E 19.92 5.06 1.76 28%
Figure 1: Key changes in our earnings revision 2016E Net Profit (Btmn) % Change in net profit from previous forecasts % YoY Change in net profit Loan growth (%) Interes t Spread Provision for loan loss (Btmn) Provision for loan loss (% to loans) Cos t to income ratio Source: KT ZMICO Research
New 1,387 10% 68% 90% 19.3% 347 1.45% 49.1%
2017E
Previous 1,255
New 1,876 8% 35% 50% 19.5% 666 1.85% 52.9%
69% 19.5% 355 1.66% 50.7%
2018E
Previous 1,736
New 2,480 4% 32% 35% 19.1% 923 1.90% 53.2%
45% 19.1% 544 1.75% 52.0%
Previous 2,373
35% 18.8% 711 1.70% 51.8%
Figure 2: MTLS's P/BV band and sensitivity of market prices based on P/BV at different standard deviation levels (X) 9.0 8.5 8.0 7.5 7.0 6.5 6.0
Upside/ Downside vs. market price
(Bt)
(%)
26
11
7.9
25
6
+1.5SD
7.6
24
1
+1.0SD
7.2
22
-4
PBV (x)
+2.5SD
8.3
+2.0SD
Avg. -0.5 S.D. -1.0 S.D. -1.5 S.D. -2.0 S.D.
+0.5SD
6.8
21
-8
Average
6.5
20
-13
4.5
-0.5SD
6.1
19
-18
4.0
-1.0SD
5.8
18
-23
-1.5SD
5.4
17
-27
-2.0SD
5.1
16
-32
5.5
Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16
5.0
Implied market price
2016E
+3.0 S.D. +2.5 S.D. +2.0 S.D. +1.5 S.D. +1.0 S.D. +0.5 S.D.
Source: Bloomberg, KT ZMICO Research
Figure 3: MTLS's PER band and sensitivity of market prices based on P/BV at different standard deviation levels (X) 60.0 55.0
+1.5 S.D.
50.0
+1.0 S.D.
40.0 35.0 30.0 25.0
+0.5 S.D.
Avg.
-0.5 S.D. -1.0 S.D. -1.5 S.D. -2 S.D.
Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16
45.0
+2.0 S.D.
Source: Bloomberg, KT ZMICO Research
Implied market price
Upside/ Downside vs. market price
(Bt)
(%)
38
62
53.2
35
49
+1.0SD
48.6
32
36
+0.5SD Average -0.5SD -1.0SD -1.5SD -2.0SD
44.0 39.4 34.8 30.2 25.6 21.0
29 26 23 20 17 14
24 11 -2 -15 -28 -41
2016E
PER (x)
+2.0SD
57.8
+1.5SD
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 5
Statement of Comprehensive Income (Btmn) Year‐end 31 Dec Total Interes t Income Total Interes t Expens es Net Interes t Income Fee and Servi ce i ncome Other income Total Non‐Interes t Income Opera ti ng Income Pers onnel expens es Reta l expens es Total Opera ting Expens es Opera ti ng Profi t Provi s i on expens es Extraordi na ry Items Income Ta x expens e Mi nori ty Interes ts Net Profi t Pre Provi s i oning Operati ng Profi t (PPOP) EPS (Bt)
2014 1,567 266 1,301 279 9 289 1,590 514 97 883 708 14 (13) 136 ‐ 544 572 0.26
2015 2,225 228 1,998 317 17 334 2,331 710 164 1,269 1,063 25 (6) 207 ‐ 825 856 0.39
2016E 4,028 336 3,692 419 18 437 4,129 1,108 280 2,029 2,100 347 (15) 351 ‐ 1,387 1,750 0.65
2017E 6,653 623 6,030 444 21 465 6,495 1,861 489 3,434 3,061 666 (41) 479 ‐ 1,876 2,582 0.88
2018E 9,278 953 8,324 492 24 516 8,841 2,513 685 4,706 4,135 923 (90) 642 ‐ 2,480 3,492 1.17
Statement of Financial Position (Btmn) As at 31 Dec
2014
2015
2016E
2017E
2018E
Assets Ca s h Depos i ts wi th ba nks /Loa ns to rel ated parti es Net Inves tment Gros s Loans Accrued Interes t Recei va bl e Les s : Loa n Los s Res erves Net Loans
706 19 501 7,448 ‐ (325) 7,123
153 18 1 12,630 ‐ (336) 12,295
168 27 ‐ 23,951 ‐ (647) 23,304
185 30 ‐ 35,886 ‐ (1,252) 34,635
203 33 ‐ 48,428 ‐ (2,077) 46,351
Premi s es a nd Equi pment, Net Other As s ets Total Assets
362 66 8,777
520 97 13,083
718 158 24,374
898 236 35,983
988 361 47,936
Liabilities & Equity O/D a nd Short‐term borrowi ngs from ba nks Other Borrowi ng Other Li a bi l i ti es Total Liabilities
500 2,967 204 3,671
3,218 3,907 306 7,431
9,917 7,470 373 17,759
14,611 13,006 430 28,047
19,450 18,236 490 38,176
Pa i d‐up Ca pi tal Premi um on Share Capi tal Reta i ned Ea rni ng Other Equi ty Items Mi nori ty Interes t Total Shareholders' Equity of the bank Total Liabilities and Shareholders Equity
2,120 2,380 538 68 ‐ 5,106 8,777
2,120 2,380 1,043 109 ‐ 5,652 13,083
2,120 2,380 1,966 149 ‐ 6,615 24,374
2,120 2,380 3,247 189 ‐ 7,936 35,983
2,120 2,380 5,030 229 ‐ 9,759 47,936
Source: KTZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 5
Valuation and Ratio Analysis Year‐end 31 Dec
2014
2015
2016E
2017E
2018E
Per/Share Data (Bt) EPS DPS BVPS
0.26 0.13 2.41
0.39 0.20 2.67
0.65 0.26 3.12
0.88 0.31 3.74
1.17 0.41 4.60
Multiplier (X) P/E P/BV Di vi dend yi el d (%)
90.78 9.67 0.56
59.87 8.74 0.86
35.62 7.47 1.12
26.33 6.22 1.33
19.92 5.06 1.76
54.8% 15.0% 19.7% 35.4% 17.3% 19.1% 22.0% 15.7% 9.4% 27.6% ‐10.4%
51.6% 51.6% 53.5% 31.1% 13.6% 46.6% 43.7% 50.2% 49.7% 69.6% 4.2%
68.1% 68.1% 84.8% 45.8% 32.1% 77.1% 59.9% 97.6% 104.4% 89.6% 104.3%
35.3% 35.3% 63.3% 15.4% 6.0% 57.3% 69.2% 45.8% 47.6% 49.8% 112.6%
32.2% 32.2% 38.1% 19.7% 10.8% 36.1% 37.1% 35.1% 35.2% 34.9% 97.3%
Growth YoY (%) Net Profi t EPS Net Interes t Income Non Interes t Income Fee a nd Servi ce i ncome Opera ti ng Income Opera ti ng Expens es Opera ti ng Profi t PPOP Loa ns NPLs Financial Ratio Gros s NPLs (Btmn) Gros s NPLs /Loa ns Loa n Los s Res erve/NPLs Loa n Los s Res erve/Loa ns Provi s i on expens es (Revers a l )/Tota l l oa ns Equi ty/As s et Loa n to borrowi ng ra ti o Debt to Equi ty ra ti o Profitability Ratio ROA ROE Cos t to Income Non Interes t Income/Tota l Income Interes t Sprea d Net Interes t Ma rgi n (NIM) Net profi t Ma rgi n Ta x ra te
Key Assumptions Loa n Growth ‐ Net Cos t to Income Net Interes t Ma rgi n Provi s i on expens es (Revers a l ) (Btmn) Provi s i on expens es (Revers a l )/Tota l l oa ns Source: KTZMICO Research
112 117 238 507 1,000 1.5% 0.9% 1.0% 1.4% 2.1% 290.2% 287.6% 271.4% 247.0% 207.8% 4.4% 2.7% 2.7% 3.5% 4.3% 0.2% 0.2% 1.5% 1.9% 1.9% 58.2% 43.2% 27.1% 22.1% 20.4% 214.8% 177.3% 137.8% 129.9% 128.5% 0.72 1.31 2.68 3.53 3.91
7.4% 15.5% 55.5% 18.2% 16.4% 18.8% 29.3% 20.0%
7.5% 15.3% 54.4% 14.3% 17.9% 19.4% 32.2% 20.0%
7.4% 22.6% 49.1% 10.6% 19.3% 20.2% 31.1% 20.0%
6.2% 25.8% 52.9% 7.2% 19.5% 20.1% 26.4% 20.0%
5.9% 28.0% 53.2% 5.8% 19.1% 19.7% 25.3% 20.0%
2014 2015 2016E 2017E 2018E 27.6% 69.6% 89.6% 49.8% 34.9% 55.5% 54.4% 49.1% 52.9% 53.2% 18.8% 19.4% 20.2% 20.1% 19.7% 14 25 347 666 923 0.2% 0.2% 1.5% 1.9% 1.9%
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 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, TPOLY, M‐CHAI, TFD, SUTHA.
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 5 of 5
KT ZMICO Securities Company Limited Head Office
WWW.KTZMICO.COM
8th, 15th‐17th,19th, 21st Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok, Thailand 10500 Telephone: (66‐2) 695‐5000 Fax: (66‐2) 695‐5173 KT ZMICO Connect 662 695 5555
Central World Branch
Amarin Branch
22nd Floor, Amarin Building, 496‐502 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 018‐6200 Fax: (66‐2) 018‐6298, (66‐2) 018‐6299
8th Floor, Ton Son Tower, 900 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 626‐6000 Fax: (66‐2) 626‐6111
Phaholyothin Branch
Sindhorn Branch
Viphavadee Branch
2nd Floor, Sindhorn Tower 1, 130‐132 Wireless Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 627‐3550 Fax: (66‐2) 627‐3582, 627‐3600
G Floor, Lao Peng Nguan 1 Bldg., 333 Soi Cheypuand, Viphavadee‐Rangsit Road, Ladyao, Jatujak, Bangkok 10900 Telephone: (66‐2) 013‐8600 Fax: (66‐2) 618‐8569
BangKhae Branch
Chiang Mai Branch
Pak Chong Branch
999/9 The Offices at Central World, 16th Fl., Rama 1 Rd, Pathumwan, Bangkok 10330 Telephone: (66‐2) 264‐5888 Fax: (66‐2) 264 5899
1291/1, Shinnawatra Tower II, 3rd Floor, Phaholyothin Road, Phayathai, Bangkok 10400 Telephone: (66‐2) 686‐1500 Fax: (66‐2) 686‐1666
Ploenchit Branch
518 The Mall Group Building Bangkhae Branch, 6th Floor, Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Telephone: (66‐2) 454‐9979 Fax: (66‐2) 454‐9970
422/49 Changklan Road, Changklan Subdistrict, Amphoe Meuang, Chiang Mai 50100 Telephone: (053) 270‐072 Fax: (053) 272‐618
173 175, Mittapap Road, Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Telephone: (044) 279‐511 Fax: (044) 279‐574
Korat Branch
Khon Kaen Branch
Chonburi Branch
624/9 Changphuek Road, T.Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171
5th Floor, Charoen Thani Princess Hotel, 260 Srichan Road, T. Naimuang, A. Muang, Khon Kaen 40000 Telephone: (043) 389‐171‐193 Fax: (043) 389‐209
4th Floor, Forum Plaza Bldg., 870/52 Sukhumvit Road, T. Bangplasoy, A. Muang, Cholburi 20000 Telephone: (038) 287‐635 Fax: (038) 287‐637
Pattaya Branch
Chachoengsao Branch
Hat Yai Branch
Easy Point 2, 392/65 Moo.9, T.Nong Prue, A. Bang Lamung, Chonburi 20260 Telephone: (038) 420‐965 Fax: (038) 420‐968
108/34‐36 Mahajakkrapad Road, T.Namuang, A.Muang, Chachoengsao 24000 Telephone: (038) 813‐088 Fax: (038) 813‐099
200/301, 200/303 JULDIS HATYAI PLAZA Floor 3 , Niphat‐Uthit 3 Rd, Hatyai Songkhla 90110 Telephone: (074) 355530‐3 Fax: (074) 355534
Phuket Branch
22/61‐63, Luang Por Wat Chalong Road, Talat Yai, Mueang Phuket, Phuket 83000 Telephone: (076) 222‐811, (076) 222‐683 Fax: (076) 222‐861
Phitsanulok Branch
227/171 Borom Trilokkanat Road, Muang, Phitsanulok 65000 Telephone: 055‐219‐255 to 8 Fax: 055‐219‐259
Nakhon Pathom
Cyber Branch Ayutthaya
Cyber Branch @ North Nana
Cyber Branch Chiangrai
KrungThai Bank, Rojana Branch 253 Moo 5, Rojana Road, Phai Ling, Phra Nakhon Si Ayutthaya, Phra Nakhonsi Ayutthaya, 13000 Telephone: 035‐242‐477 Fax: 035‐242‐476
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd., Klong Toey Nua Subdistrict , Wattana District , Bangkok 10110 Telephone: 083‐490‐2871
River Hotel (Building 3rd),1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
KrungThai Bank, Hayaek Phokhun Mengrai Branch 116/19 Moo 19, Highway 110 Road, Rop Wiang, Mueang Chiang Rai, Chiang Rai, 57000 Telephone: 053‐715‐067 Fax: 053‐715‐068
