TISCO Financial Group
TISCO Financial Group Company Update
Outperform (17TP Bt75.00) Close Bt73.50
Banking
Earnings upgrade/Earnings downgrade/Overview unchanged
April 19, 2017
Better‐than‐expected showing Price Performance (%)
Source: SET Smart
FY17
FY18
Consensus EPS (Bt)
7.189
8.188
KT ZMICO vs. consensus Share data
7.2%
7.1%
Reuters / Bloomberg
TISCO.BK/TISCO TB
Paid‐up Shares (m)
800.65
Par (Bt)
10.00
Market cap (Bt bn / US$ m)
59.00/1,713.00
Foreign limit / actual (%)
49.00/46.57
52 week High / Low (Bt)
74.25/41.00
Avg. daily T/O (shares 000)
3,000.00
NVDR (%)
17.81
Estimated free float (%)
74.06
Beta
0.69
URL
www.tisco.co.th
CGR
Anti‐corruption
Level 4 (Certified)
Maintain Outperform rating We maintain our Outperform rating for TISCO following our earnings upgrade. We expect TISCO to feel no material impacts from IFRS9 and the PromptPay program, unlike other larger banks, which should enable TISCO to show outpacing earnings growth vs. larger banks in the next few years. We also see that the acquisition of SCBT’s retail business will help strengthen TISCO’s profitability and competiveness in the L‐T. Moreover, its attractive dividend yield of ~5% will be TISCO’s near‐term price catalyst. Note that TISCO will go XD (@Bt3.50/share) on 26 Apr‐17. Indicates lower credit cost guidance on much better asset quality TISCO anticipates that its loans excluding SCBT could be flat in 2017 and auto hire purchase loans may contract this year. Meanwhile, other retail loans should help offset this contraction, especially auto cash loans and Somwang auto loans, which it expects to grow >10% and >30%, respectively. Corporate loans should also see slight growth this year. Loans including the acquisition of SCBT should grow >15% for 2017. In addition, TISCO provided its new indication for credit cost in 2017, which it expects at ~120‐130bps, down from its latest guidance of 130‐140bps. This should be thanks to its better‐than‐expected NPL control, lower losses on repossessed cars and a higher provision write‐back from a better bad debt recovery rate. The asset management and investment banking (IB) businesses should also help boost non‐interest growth this year. Note that TISCO booked underwriting fee income of ~Bt120mn for the TPIPP IPO in 1Q17 and set up a new private fund with a Bt10bn fund size in 1Q17. Raised earnings estimates for 2017‐19E by 12‐15% We raised our net profit estimates by 15% for 2017E, 13% for 2018E and 12% for 2019E. The revisions are mainly to fine‐tune with the better‐than‐ expected 1Q17 results and TISCO’s latest guidance, especially with respect to the lower provision. The main revisions are 1) the potential for a lower‐ than‐expected provision; and 2) higher‐than‐expected NIM and fee income (Figure 1). Following our NP revision, we raised our 17E target price to Bt75/share for implied P/BV of 1.7x (from Bt62/share). Acquisition of SCBT to strengthen TISCO’s retail platform in the L‐T We expect the acquisition of SCBT’s retail business (Figure 2) to strengthen TISCO’s profitability and competitiveness in the L‐T, especially in the retail segments from 2018E onwards (full‐year consolidation). Note that TISCO estimates the consolidation of SCBT’s assets to be complete in 4Q17E. 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 (%) Dividend (Bt) BV (Bt) FY Ended 31 Dec PER (x) PBV (x) Dividend yield (%) ROE (%)
2015 9,399
2016 8,965
2017E 9,001
2018E 9,978
2019E 10,778
4,250 5.31 0% 2.20 35.09 2015 13.85 2.09 2.99 15.8%
5,005 6.25 18% 3.50 38.96 2016 11.76 1.89 4.76 16.9%
6,173 7.71 23% 3.70 43.26 2017E 9.53 1.70 5.03 18.8%
7,024 8.77 14% 3.90 48.43 2018E 8.38 1.52 5.31 19.1%
7,622 9.52 9% 4.00 54.15 2019E 7.72 1.36 5.44 18.6%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 6
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) Non‐interest income growth (%) Provision for loan loss (Btmn) Provision for loan loss (% of average loans) Cost to income ratio (%)
2017E New Previous 6,173 5,391 15% 23% 15% 17% 4.02% 3.92% 9% 5% 2,908 3,523 1.20% 1.45% 42.1% 41.1%
2018E New Previous 7,024 6,237 13% 14% 5% 5% 4.17% 4.13% 5% 8% 3,055 3,754 1.15% 1.40% 41.3% 41.0%
2019E New Previous 7,622 6,804 12% 9% 9% 8% 4.11% 4.05% 11% 9% 3,256 3,861 1.15% 1.35% 40.6% 40.3%
Source: Company data, KT ZMICO Research
Figure 2: Key data for acquired assets of SCBT’s retail businesses Acquired assets/liabilities (Sept‐16) Assets Deposits Net asset value (NAV) Estimated timeline for asset transfer completion and consolidation (Btmn) Assets Loans Deposits NPL ratio (%) No. of deposit accounts No. of lending accounts No. of credit card accounts Acquired assets (Btmn) Housing loans 25,000 Personal loans 7,000 SME loans 5,000 Credit card loans 4,000 Other assets 600 Total 41,600 Source: TISCO, KT ZMICO Research
(Btmn) 41,600 36,100 5,500 4Q17 TISCO (as of Mar‐17) 266,850 220,523 155,999 2.37% ~120bn ~750bn ‐
SCBT‐Retail business % to TISCO (as of Sept‐16) 41,600 16% 41,000 19% 36,100 23% ~3% ~100bn ~300bn ~140bn cards
% BD 60% 17% 12% 10% 1% 100%
Yield as per TISCO's guidance ~4‐5% ~20% ~10% ~10% n.a. ~7‐8%
Figure 3: TISCO's P/BV band and sensitivity of market prices based on P/BV at different standard deviation levels (X) 2.4 2.0 1.6
+2 S.D. +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.
1.2 0.8
Source: Bloomberg, KT ZMICO Research
Jul-16
Jan-17
Jul-15
Jan-16
Jul-14
Jan-15
Jul-13
Jan-14
Jul-12
Jan-13
Jul-11
Jan-12
Jul-10
Jan-11
Jan-10
Jul-09
Jan-09
0.4
2017E
PBV (x)
Implied market Upside/ Downside price (Bt) to current price (%)
+2.0SD
2.0
87
18
+1.5SD
1.9
80
9
+1.0SD
1.7
74
0
+0.5SD
1.6
67
-8
Average
1.4
61
-17
-0.5SD
1.3
54
-26
-1.0SD
1.1
48
-35
-1.5SD
1.0
41
-44
-2.0SD
0.8
35
-52
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 6
Figure 4: TISCO's PER band and sensitivity of market prices based on PER at different standard deviation levels (X) 12 11 10 9 8
2017E
PER (x)
+2.0SD
10.5
81
10
+1.5SD
9.8
76
3
+2 S.D. +1.5 S.D. +1 S.D. +0.5 S.D. Avg.
Implied market Upside/ Downside price (Bt) to current price (%)
+1.0SD
9.2
71
-4
+0.5SD
8.5
66
-10
Average
7.9
61
-17
4
-0.5SD
7.2
56
-24
3
-1.0SD
6.6
51
-31
-1.5SD
5.9
46
-38
-2.0SD
5.3
41
-45
-0.5 S.D.
Source: Bloomberg, KT ZMICO Research
Jan-17
Jul-16
Jul-15
Jan-16
Jul-14
Jan-15
Jul-13
Jan-14
Jul-12
Jan-13
Jul-11
Jul-09
Jan-10
Jan-09
5
Jan-12
6
Jul-10
-1 S.D. -1.5 S.D. -2 S.D.
Jan-11
7
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 6
Statement of Comprehensive Income (Btmn)
2015
2016
2017E
2018E
2019E
16,888 6,758 10,130 6,359 16,489 5,923 9,404 0 5,277 129 1,032 (6) 4,250 9,399 9,528 5.31
16,012 5,091 10,920 6,140 17,060 6,844 8,983 0 3,972 13 1,221 (18) 5,005 8,965 8,978 6.25
16,687 5,069 11,618 6,695 18,313 7,712 9,020 0 2,908 80 1,500 (19) 6,173 9,001 9,081 7.71
18,936 5,873 13,062 7,035 20,097 8,291 9,999 0 3,055 100 1,706 (21) 7,024 9,978 10,078 8.77
20,500 6,860 13,640 7,820 21,460 8,708 10,801 0 3,256 100 1,852 (23) 7,622 10,778 10,878 9.52
2015
2016
2017E
2018E
2019E
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 Purchas e Loa ns ‐ Gros s Net Loa ns Total Assets
32,264 8,617 85,352 152,908 232,634 280,294
39,216 7,632 87,649 137,285 217,471 271,280
39,632 8,745 132,031 127,675 251,803 307,272
40,052 9,207 140,034 131,506 263,077 319,595
40,476 9,693 154,038 140,711 285,541 343,178
Depos its Interba nk & Money Ma rket ST a nd LT Borrowi ngs Other l i a bil i ti es Total Liabilities
158,125 10,249 74,519 9,206 252,099
155,068 5,197 70,329 9,391 239,984
185,461 5,301 71,852 9,911 272,524
194,270 5,566 70,401 10,462 280,699
213,794 5,844 69,004 11,047 299,690
8,007 16,979 3,110 28,095
8,007 19,922 3,267 31,195
8,007 23,243 3,389 34,638
8,007 27,254 3,515 38,775
8,007 31,703 3,645 43,354
Year‐end 31 Dec Tota l Interes t & Di vidend 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 Profit Extra ordi nary Item Provis ion (Revers a l ) for Doubtful Accounts Ga in (Los s ) on Tra ding Securi ti es Ta xes Mi nority Interes t Net Profi t Pre Provi s i oni ng Opera ti ng Profit (PPOP) Pre Provi s i oni ng Profit (PPP) EPS (Bt)
Statement of Financial Position (Btmn)
Pa i d‐up Ca pita l Reta ined 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 4 of 6
Key Statistics and Ratios
2015
2016
2017E
2018E
2019E
Year‐end 31 Dec Per/Share Data (Bt) EPS DPS for common s ha res BVPS
5.31 2.20 35.09
6.25 3.50 38.96
7.71 3.70 43.26
8.77 3.90 48.43
9.52 4.00 54.15
Multiplier PER (X) P/BV (X) Di vi dend yi eld (%)
13.85 2.09 2.99
11.76 1.89 4.76
9.53 1.70 5.03
8.38 1.52 5.31
7.72 1.36 5.44
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 its NPLs
0.0 0.0 6.2 4.5 5.5 0.7 11.5 (9.3) (23.0) 14.1
17.8 17.8 7.8 (3.4) 3.5 15.5 (4.5) (5.6) (1.9) (25.9)
23.3 23.3 6.4 9.0 7.3 12.7 0.4 15.5 19.6 6.0
13.8 13.8 12.4 5.1 9.7 7.5 10.9 4.6 4.8 (1.0)
8.5 8.5 4.4 11.2 6.8 5.0 8.0 8.5 10.1 (0.2)
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
7,701 3.2 80.1 0.2 2.3 2.1
5,710 2.5 139.8 0.2 3.0 1.7
6,054 2.3 138.6 0.2 2.8 1.2
5,993 2.2 149.3 0.2 2.9 1.2
5,981 2.0 162.2 0.1 2.9 1.2
Capital and Liquidity Ratio (%) Equity/As s et Ti er I to Ris k As s ets Ca pita l Adequa cy Ra tio Loa n to Depos i t Ra ti o Loa n to Depos i t a nd Borrowi ng Ra ti o
10.0 13.9 17.9 150.7 102.4
11.5 15.2 19.3 145.1 99.8
11.3 15.4 18.8 140.0 100.9
12.1 16.0 19.0 139.8 102.6
12.6 16.3 18.8 137.9 104.2
1.4 15.8 35.9 3.41
1.8 16.9 40.1 3.98
2.1 18.8 42.1 4.02
2.2 19.1 41.3 4.17
2.3 18.6 40.6 4.11
Profitability Ratio (%) ROA ROE Cos t to Income Net Interes t Ma rgi n
Source: KTZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 5 of 6
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, M‐CHAI, POMPUI, TFD, CI, TTL, NMG.
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)
Anti‐corruption Progress Indicator
Satisfactory (scores: 60 – 69) Pass (scores: 50 – 59) No Logo N/A (scores: below 50)
Source: Sec, Thailand's Private Sector Collective Action Coalition Against Corruption programme (Thai CAC) Level 1 (Committed) : Organization’s statement or board's resolution to work against corruption and to be in compliance with all relevant laws. Level 2 (Declared) : Public declaration statement to participate in Thailand's private sector Collective Action Coalition Against Corruption (CAC) or equivalent initiatives Level 3 (Established) : Public out preventive measures, risk assessment, communication and training for all employees, including consistent monitoring and review processes Level 4 (Certified) : Audit engagement by audit committee or auditors approved by the office of SEC, and receiving certification or assurance by independent external assurance providers (CAC etc.) Level 5 (Extended) : Extension of the anti‐corruption policy to business partners in the supply chain, and disclosure of any current investigations, prosecutions or closed cases Insufficient or not clearly defined policy Data not available / no policy DISCLAIMER
This document is produced using open sources believed to be reliable. However, their accuracy and completeness cannot be guaranteed. The statements and opinions herein were formed after due and careful consideration for use as information for the purposes of investment. The opinions contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. The use of any information contained in this document shall be at the sole discretion and risk of the user.
KT ZMICO RESEARCH – RECOMMENDATION DEFINITIONS STOCK RECOMMENDATIONS
SECTOR RECOMMENDATIONS
BUY: Expecting positive total returns of 15% or more OVERWEIGHT: The industry, as defined by the analyst's over the next 12 months coverage universe, is expected to outperform the relevant OUTPERFORM: Expecting total returns between ‐10% primary market index by at least 10% over the next 12 months. to +15%; returns expected to exceed market returns NEUTRAL: The industry, as defined by the analyst's coverage over a six‐month period due to specific catalysts universe, is expected to perform in line with the relevant UNDERPERFORM: Expecting total returns between primary market index over the next 12 months. ‐10% to +15%; returns expected to be below market UNDERWEIGHT: The industry, as defined by the analyst's returns over a six‐month period due to specific coverage universe, is expected to underperform the relevant catalysts primary market index by 10% over the next 12 months. SELL: Expecting negative total returns of 10% or more over the next 12 months
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 6 of 6
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
Outperform (17TP Bt75.00) Close Bt73.50
Banking
Earnings upgrade/Earnings downgrade/Overview unchanged
April 19, 2017
Better‐than‐expected showing Price Performance (%)
Source: SET Smart
FY17
FY18
Consensus EPS (Bt)
7.189
8.188
KT ZMICO vs. consensus Share data
7.2%
7.1%
Reuters / Bloomberg
TISCO.BK/TISCO TB
Paid‐up Shares (m)
800.65
Par (Bt)
10.00
Market cap (Bt bn / US$ m)
59.00/1,713.00
Foreign limit / actual (%)
49.00/46.57
52 week High / Low (Bt)
74.25/41.00
Avg. daily T/O (shares 000)
3,000.00
NVDR (%)
17.81
Estimated free float (%)
74.06
Beta
0.69
URL
www.tisco.co.th
CGR
Anti‐corruption
Level 4 (Certified)
Maintain Outperform rating We maintain our Outperform rating for TISCO following our earnings upgrade. We expect TISCO to feel no material impacts from IFRS9 and the PromptPay program, unlike other larger banks, which should enable TISCO to show outpacing earnings growth vs. larger banks in the next few years. We also see that the acquisition of SCBT’s retail business will help strengthen TISCO’s profitability and competiveness in the L‐T. Moreover, its attractive dividend yield of ~5% will be TISCO’s near‐term price catalyst. Note that TISCO will go XD (@Bt3.50/share) on 26 Apr‐17. Indicates lower credit cost guidance on much better asset quality TISCO anticipates that its loans excluding SCBT could be flat in 2017 and auto hire purchase loans may contract this year. Meanwhile, other retail loans should help offset this contraction, especially auto cash loans and Somwang auto loans, which it expects to grow >10% and >30%, respectively. Corporate loans should also see slight growth this year. Loans including the acquisition of SCBT should grow >15% for 2017. In addition, TISCO provided its new indication for credit cost in 2017, which it expects at ~120‐130bps, down from its latest guidance of 130‐140bps. This should be thanks to its better‐than‐expected NPL control, lower losses on repossessed cars and a higher provision write‐back from a better bad debt recovery rate. The asset management and investment banking (IB) businesses should also help boost non‐interest growth this year. Note that TISCO booked underwriting fee income of ~Bt120mn for the TPIPP IPO in 1Q17 and set up a new private fund with a Bt10bn fund size in 1Q17. Raised earnings estimates for 2017‐19E by 12‐15% We raised our net profit estimates by 15% for 2017E, 13% for 2018E and 12% for 2019E. The revisions are mainly to fine‐tune with the better‐than‐ expected 1Q17 results and TISCO’s latest guidance, especially with respect to the lower provision. The main revisions are 1) the potential for a lower‐ than‐expected provision; and 2) higher‐than‐expected NIM and fee income (Figure 1). Following our NP revision, we raised our 17E target price to Bt75/share for implied P/BV of 1.7x (from Bt62/share). Acquisition of SCBT to strengthen TISCO’s retail platform in the L‐T We expect the acquisition of SCBT’s retail business (Figure 2) to strengthen TISCO’s profitability and competitiveness in the L‐T, especially in the retail segments from 2018E onwards (full‐year consolidation). Note that TISCO estimates the consolidation of SCBT’s assets to be complete in 4Q17E. 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 (%) Dividend (Bt) BV (Bt) FY Ended 31 Dec PER (x) PBV (x) Dividend yield (%) ROE (%)
2015 9,399
2016 8,965
2017E 9,001
2018E 9,978
2019E 10,778
4,250 5.31 0% 2.20 35.09 2015 13.85 2.09 2.99 15.8%
5,005 6.25 18% 3.50 38.96 2016 11.76 1.89 4.76 16.9%
6,173 7.71 23% 3.70 43.26 2017E 9.53 1.70 5.03 18.8%
7,024 8.77 14% 3.90 48.43 2018E 8.38 1.52 5.31 19.1%
7,622 9.52 9% 4.00 54.15 2019E 7.72 1.36 5.44 18.6%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 6
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) Non‐interest income growth (%) Provision for loan loss (Btmn) Provision for loan loss (% of average loans) Cost to income ratio (%)
2017E New Previous 6,173 5,391 15% 23% 15% 17% 4.02% 3.92% 9% 5% 2,908 3,523 1.20% 1.45% 42.1% 41.1%
2018E New Previous 7,024 6,237 13% 14% 5% 5% 4.17% 4.13% 5% 8% 3,055 3,754 1.15% 1.40% 41.3% 41.0%
2019E New Previous 7,622 6,804 12% 9% 9% 8% 4.11% 4.05% 11% 9% 3,256 3,861 1.15% 1.35% 40.6% 40.3%
Source: Company data, KT ZMICO Research
Figure 2: Key data for acquired assets of SCBT’s retail businesses Acquired assets/liabilities (Sept‐16) Assets Deposits Net asset value (NAV) Estimated timeline for asset transfer completion and consolidation (Btmn) Assets Loans Deposits NPL ratio (%) No. of deposit accounts No. of lending accounts No. of credit card accounts Acquired assets (Btmn) Housing loans 25,000 Personal loans 7,000 SME loans 5,000 Credit card loans 4,000 Other assets 600 Total 41,600 Source: TISCO, KT ZMICO Research
(Btmn) 41,600 36,100 5,500 4Q17 TISCO (as of Mar‐17) 266,850 220,523 155,999 2.37% ~120bn ~750bn ‐
SCBT‐Retail business % to TISCO (as of Sept‐16) 41,600 16% 41,000 19% 36,100 23% ~3% ~100bn ~300bn ~140bn cards
% BD 60% 17% 12% 10% 1% 100%
Yield as per TISCO's guidance ~4‐5% ~20% ~10% ~10% n.a. ~7‐8%
Figure 3: TISCO's P/BV band and sensitivity of market prices based on P/BV at different standard deviation levels (X) 2.4 2.0 1.6
+2 S.D. +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.
1.2 0.8
Source: Bloomberg, KT ZMICO Research
Jul-16
Jan-17
Jul-15
Jan-16
Jul-14
Jan-15
Jul-13
Jan-14
Jul-12
Jan-13
Jul-11
Jan-12
Jul-10
Jan-11
Jan-10
Jul-09
Jan-09
0.4
2017E
PBV (x)
Implied market Upside/ Downside price (Bt) to current price (%)
+2.0SD
2.0
87
18
+1.5SD
1.9
80
9
+1.0SD
1.7
74
0
+0.5SD
1.6
67
-8
Average
1.4
61
-17
-0.5SD
1.3
54
-26
-1.0SD
1.1
48
-35
-1.5SD
1.0
41
-44
-2.0SD
0.8
35
-52
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 6
Figure 4: TISCO's PER band and sensitivity of market prices based on PER at different standard deviation levels (X) 12 11 10 9 8
2017E
PER (x)
+2.0SD
10.5
81
10
+1.5SD
9.8
76
3
+2 S.D. +1.5 S.D. +1 S.D. +0.5 S.D. Avg.
Implied market Upside/ Downside price (Bt) to current price (%)
+1.0SD
9.2
71
-4
+0.5SD
8.5
66
-10
Average
7.9
61
-17
4
-0.5SD
7.2
56
-24
3
-1.0SD
6.6
51
-31
-1.5SD
5.9
46
-38
-2.0SD
5.3
41
-45
-0.5 S.D.
Source: Bloomberg, KT ZMICO Research
Jan-17
Jul-16
Jul-15
Jan-16
Jul-14
Jan-15
Jul-13
Jan-14
Jul-12
Jan-13
Jul-11
Jul-09
Jan-10
Jan-09
5
Jan-12
6
Jul-10
-1 S.D. -1.5 S.D. -2 S.D.
Jan-11
7
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 6
Statement of Comprehensive Income (Btmn)
2015
2016
2017E
2018E
2019E
16,888 6,758 10,130 6,359 16,489 5,923 9,404 0 5,277 129 1,032 (6) 4,250 9,399 9,528 5.31
16,012 5,091 10,920 6,140 17,060 6,844 8,983 0 3,972 13 1,221 (18) 5,005 8,965 8,978 6.25
16,687 5,069 11,618 6,695 18,313 7,712 9,020 0 2,908 80 1,500 (19) 6,173 9,001 9,081 7.71
18,936 5,873 13,062 7,035 20,097 8,291 9,999 0 3,055 100 1,706 (21) 7,024 9,978 10,078 8.77
20,500 6,860 13,640 7,820 21,460 8,708 10,801 0 3,256 100 1,852 (23) 7,622 10,778 10,878 9.52
2015
2016
2017E
2018E
2019E
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 Purchas e Loa ns ‐ Gros s Net Loa ns Total Assets
32,264 8,617 85,352 152,908 232,634 280,294
39,216 7,632 87,649 137,285 217,471 271,280
39,632 8,745 132,031 127,675 251,803 307,272
40,052 9,207 140,034 131,506 263,077 319,595
40,476 9,693 154,038 140,711 285,541 343,178
Depos its Interba nk & Money Ma rket ST a nd LT Borrowi ngs Other l i a bil i ti es Total Liabilities
158,125 10,249 74,519 9,206 252,099
155,068 5,197 70,329 9,391 239,984
185,461 5,301 71,852 9,911 272,524
194,270 5,566 70,401 10,462 280,699
213,794 5,844 69,004 11,047 299,690
8,007 16,979 3,110 28,095
8,007 19,922 3,267 31,195
8,007 23,243 3,389 34,638
8,007 27,254 3,515 38,775
8,007 31,703 3,645 43,354
Year‐end 31 Dec Tota l Interes t & Di vidend 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 Profit Extra ordi nary Item Provis ion (Revers a l ) for Doubtful Accounts Ga in (Los s ) on Tra ding Securi ti es Ta xes Mi nority Interes t Net Profi t Pre Provi s i oni ng Opera ti ng Profit (PPOP) Pre Provi s i oni ng Profit (PPP) EPS (Bt)
Statement of Financial Position (Btmn)
Pa i d‐up Ca pita l Reta ined 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 4 of 6
Key Statistics and Ratios
2015
2016
2017E
2018E
2019E
Year‐end 31 Dec Per/Share Data (Bt) EPS DPS for common s ha res BVPS
5.31 2.20 35.09
6.25 3.50 38.96
7.71 3.70 43.26
8.77 3.90 48.43
9.52 4.00 54.15
Multiplier PER (X) P/BV (X) Di vi dend yi eld (%)
13.85 2.09 2.99
11.76 1.89 4.76
9.53 1.70 5.03
8.38 1.52 5.31
7.72 1.36 5.44
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 its NPLs
0.0 0.0 6.2 4.5 5.5 0.7 11.5 (9.3) (23.0) 14.1
17.8 17.8 7.8 (3.4) 3.5 15.5 (4.5) (5.6) (1.9) (25.9)
23.3 23.3 6.4 9.0 7.3 12.7 0.4 15.5 19.6 6.0
13.8 13.8 12.4 5.1 9.7 7.5 10.9 4.6 4.8 (1.0)
8.5 8.5 4.4 11.2 6.8 5.0 8.0 8.5 10.1 (0.2)
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
7,701 3.2 80.1 0.2 2.3 2.1
5,710 2.5 139.8 0.2 3.0 1.7
6,054 2.3 138.6 0.2 2.8 1.2
5,993 2.2 149.3 0.2 2.9 1.2
5,981 2.0 162.2 0.1 2.9 1.2
Capital and Liquidity Ratio (%) Equity/As s et Ti er I to Ris k As s ets Ca pita l Adequa cy Ra tio Loa n to Depos i t Ra ti o Loa n to Depos i t a nd Borrowi ng Ra ti o
10.0 13.9 17.9 150.7 102.4
11.5 15.2 19.3 145.1 99.8
11.3 15.4 18.8 140.0 100.9
12.1 16.0 19.0 139.8 102.6
12.6 16.3 18.8 137.9 104.2
1.4 15.8 35.9 3.41
1.8 16.9 40.1 3.98
2.1 18.8 42.1 4.02
2.2 19.1 41.3 4.17
2.3 18.6 40.6 4.11
Profitability Ratio (%) ROA ROE Cos t to Income Net Interes t Ma rgi n
Source: KTZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 5 of 6
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, M‐CHAI, POMPUI, TFD, CI, TTL, NMG.
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)
Anti‐corruption Progress Indicator
Satisfactory (scores: 60 – 69) Pass (scores: 50 – 59) No Logo N/A (scores: below 50)
Source: Sec, Thailand's Private Sector Collective Action Coalition Against Corruption programme (Thai CAC) Level 1 (Committed) : Organization’s statement or board's resolution to work against corruption and to be in compliance with all relevant laws. Level 2 (Declared) : Public declaration statement to participate in Thailand's private sector Collective Action Coalition Against Corruption (CAC) or equivalent initiatives Level 3 (Established) : Public out preventive measures, risk assessment, communication and training for all employees, including consistent monitoring and review processes Level 4 (Certified) : Audit engagement by audit committee or auditors approved by the office of SEC, and receiving certification or assurance by independent external assurance providers (CAC etc.) Level 5 (Extended) : Extension of the anti‐corruption policy to business partners in the supply chain, and disclosure of any current investigations, prosecutions or closed cases Insufficient or not clearly defined policy Data not available / no policy DISCLAIMER
This document is produced using open sources believed to be reliable. However, their accuracy and completeness cannot be guaranteed. The statements and opinions herein were formed after due and careful consideration for use as information for the purposes of investment. The opinions contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. The use of any information contained in this document shall be at the sole discretion and risk of the user.
KT ZMICO RESEARCH – RECOMMENDATION DEFINITIONS STOCK RECOMMENDATIONS
SECTOR RECOMMENDATIONS
BUY: Expecting positive total returns of 15% or more OVERWEIGHT: The industry, as defined by the analyst's over the next 12 months coverage universe, is expected to outperform the relevant OUTPERFORM: Expecting total returns between ‐10% primary market index by at least 10% over the next 12 months. to +15%; returns expected to exceed market returns NEUTRAL: The industry, as defined by the analyst's coverage over a six‐month period due to specific catalysts universe, is expected to perform in line with the relevant UNDERPERFORM: Expecting total returns between primary market index over the next 12 months. ‐10% to +15%; returns expected to be below market UNDERWEIGHT: The industry, as defined by the analyst's returns over a six‐month period due to specific coverage universe, is expected to underperform the relevant catalysts primary market index by 10% over the next 12 months. SELL: Expecting negative total returns of 10% or more over the next 12 months
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 6 of 6
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
