TISCO Financial Group
TISCO Financial Group Company Update
Outperform (17TP Bt77.00) Close Bt74.75
Banking
Earnings upgrade/Earnings downgrade/Overview unchanged
July 13, 2017
Growth prospects remain intact Price Performance (%)
Source: SET Smart
Indicates lower credit cost guidance again on better asset quality TISCO hinted that its credit cost guidance for 2017E is likely to be lower to around 100bps vs. its original guidance of ~120‐130bps. 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. It still sees loan contraction on its auto hire purchase loans given higher price competition. However, other consumer 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 see slight growth this year. Therefore, we expect loans including the acquisition of SCBT to grow 12% for 2017.
FY17
FY18
Consensus EPS (Bt)
7.526
8.391
KT ZMICO vs. consensus Share data
2.3%
6.2%
Reuters / Bloomberg
TISCO.BK/TISCO TB
Paid‐up Shares (m)
800.65
Par (Bt)
10.00
Market cap (Bt bn / US$ m)
60.00/1,758.00
Foreign limit / actual (%)
49.00/44.47
52 week High / Low (Bt)
80.75/49.75
Avg. daily T/O (shares 000)
3,731.00
NVDR (%)
19.19
Estimated free float (%)
77.39
Beta
0.65
URL
www.tisco.co.th
CGR
Anti‐corruption
Level 4 (Certified)
Prapharas Nonthapiboon Analyst, no 17836 [email protected] 66 (0) 2695‐5872
Well‐managed asset quality and profitability We maintain our Outperform rating for TISCO. We like TISCO for its well‐ managed asset quality and profitability. Moreover, 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 remain TISCO’s price appeal.
Acquisition of SCBT to enhance TISCO’s retail platform in the L‐T The transfer of SCBT’s retail business is still in process, with TISCO estimating that the consolidation of SCBT’s assets will be complete in 4Q17E. Note that the latest acquired retail assets of SCBT stood at ~Bt39bn (vs. ~Bt41.6bn as of 3Q16); see Figure 1. TISCO sees potential for cross‐ selling synergy for all acquired assets, except for the personal loan portfolio, which TISCO does not intend to expand further. Moreover, this business transfer is expected to incur one‐time transfer costs (likely ~Bt250mn) in 4Q17E. TISCO expects no impact to profit in such quarter as the recording of revenue from the acquired business will compensate for the transfer expenses. Raised earnings estimates for 2018‐19E by 2% We fine‐tuned TISCO’s earnings to reflect the latest operating results and business guidance as well as the latest transaction/exposure for the acquisition of SCBT’s retail business. We raised our net profit forecasts for 2018‐19E by 2%. The main revisions are 1) the potential for a lower‐than‐ expected provision; 2) higher‐than‐expected NIM and 3) higher‐than‐ expected one‐time transfer expenses vs. our previous assumption (see Figure 2). Following our NP revision, we raised our 17E target price to Bt77/share for implied P/BV of 1.78x (from Bt75/share previously). Financials and Valuation 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 8,501
2018E 9,583
2019E 10,299
4,250 5.31 0% 2.20 35.09 2015 14.08 2.13 2.94 15.8%
5,005 6.25 18% 3.50 38.96 2016 11.96 1.92 4.68 16.9%
6,165 7.70 23% 3.85 43.25 2017E 9.71 1.73 5.15 18.7%
7,131 8.91 16% 4.00 48.40 2018E 8.39 1.54 5.35 19.4%
7,739 9.67 9% 4.35 54.17 2019E 7.73 1.38 5.82 18.8%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 5
Figure 1: Key data for acquired assets of SCBT’s retail businesses Acquired assets (Btmn) Housing loans Personal loans SME loans Credit card loans Other assets Total Deposits
3Q16 25,000 7,000 5,000 4,000 600 41,600 36,100
2Q17 25,350 5,850 3,900 3,900 n.a. 39,000 ~30,000
% BD (2Q17) 65% 15% 10% 10% 0% 100%
Yield as per TISCO's guidance ~4‐5% ~20% ~10% ~10% n.a. ~8%
Source: TISCO, KT ZMICO Research
Figure 2: Key changes in our earnings revision 2017E New Previous 6,165 6,173 0% 23% 12% 15% 4.04% 4.02% 2,386 2,908 1.00% 1.20% 44.7% 42.1%
Key assumption changes Net Profit (Btmn) % Change in net profit from previous forecasts % Change in net profit YoY Loan growth (%) Net interest margin (NIM) Provision for loan loss (Btmn) Provision for loan loss (% of average loans) Cost to income ratio (%) Source: Company data, KT ZMICO Research
2018E New Previous 7,131 7,024 2% 16% 2% 5% 4.21% 4.17% 2,553 3,055 1.00% 1.15% 42.2% 41.3%
2019E New Previous 7,739 7,622 2% 9% 6% 9% 4.18% 4.11% 2,660 3,256 1.00% 1.15% 41.5% 40.6%
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 S.D. +1.5 S.D. +1 S.D. +0.5 S.D. Avg.
2.0 1.6
-0.5 S.D. -1 S.D. -1.5 S.D. -2 S.D.
1.2 0.8
Jul-17
Jan-17
Jul-16
Jul-15
Jan-16
Jul-14
Jan-15
Jul-13
Jan-14
Jul-12
Jan-13
Jul-11
Jan-12
Jul-10
Jan-11
Jul-09
Jan-10
Jan-09
0.4
Source: Bloomberg, KT ZMICO Research
2017E
PBV (x)
Implied market Upside/ Downside price (Bt) to current price (%)
+2.0SD
2.0
87
19
+1.5SD
1.9
81
11
+1.0SD
1.7
74
2
+0.5SD
1.6
68
-7
Average
1.4
61
-16
-0.5SD
1.3
55
-25
-1.0SD
1.1
48
-34
-1.5SD
1.0
42
-43
-2.0SD
0.8
35
-52
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 7
2017E
PER (x)
+2.0SD
10.6
82
+1.5SD
9.9
77
5
+1.0SD
9.3
71
-2
+2 S.D. +1.5 S.D. +1 S.D. +0.5 S.D. Avg. -0.5 S.D.
Implied market Upside/ Downside price (Bt) to current price (%) 12
+0.5SD
8.6
66
-9
Average
7.9
61
-16
4
-0.5SD
7.3
56
-23
3
-1.0SD
6.6
51
-30
-1.5SD
5.9
46
-37
-2.0SD
5.3
41
-44
Source: Bloomberg, KT ZMICO Research
Jul-17
Jan-17
Jul-16
Jan-16
Jul-15
Jul-14
Jan-15
Jul-13
Jan-14
Jan-13
Jul-12
Jul-11
Jan-12
Jul-10
Jan-10
Jul-09
Jan-09
5
Jan-11
-1 S.D. -1.5 S.D. -2 S.D.
6
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 5
Statement of Comprehensive Income (Btmn) Year‐end 31 Dec Tota l Interes t & Di vi dend Income Interes t Expens es on Borrowi ng Net Interes t Income Non‐Interes t Income Opera ti ng Income Opera ti ng Expens es Opera ti ng Profi t Extra ordi nary Item Provi s ion (Revers a l ) for Doubtful Accounts Gai n (Los s ) on Tra di ng Securi ties Taxes Minority Interes t Net Profi t Pre Provi s i oni ng Opera ti ng Profi t (PPOP) Pre Provi s i oni ng Profit (PPP) EPS (Bt)
Statement of Financial Position (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
16,536 5,008 11,528 6,684 18,212 8,144 8,520 0 2,386 50 1,498 (19) 6,165 8,501 8,551 7.70
18,323 5,625 12,697 7,085 19,782 8,345 9,605 0 2,553 100 1,732 (21) 7,131 9,583 9,683 8.91
19,499 6,442 13,057 7,976 21,033 8,732 10,321 0 2,660 100 1,880 (23) 7,739 10,299 10,399 9.67
2015
2016
2017E
2018E
2019E
Year‐end 31 Dec Cas h & Money Ma rket Items Net Inves tment Fi na nce a nd Securi ti es Loa ns ‐ Gros s Hire Purchas e Loa ns ‐ Gros s Net Loans 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
40,012 8,602 127,402 124,930 242,436 301,358
38,106 9,056 130,754 127,428 246,419 306,248
38,512 9,535 138,699 135,074 260,351 322,951
Depos its Interbank & Money Ma rket ST a nd LT Borrowi ngs Other li a bi li ti es Total Liabilities
158,125 10,249 74,519 9,206 252,099
155,068 5,197 70,329 9,391 239,984
180,809 5,249 70,650 9,911 266,618
182,617 5,354 68,939 10,462 267,372
195,857 5,461 67,243 11,047 279,608
8,007 16,979 3,110 28,095
8,007 19,922 3,267 31,195
8,007 23,234 3,389 34,630
8,007 27,233 3,515 38,754
8,007 31,559 3,645 43,210
Pai d‐up Ca pi ta l Reta i ned Earni ng Other equi ty i tems Total Shareholders' Equity
Source: KTZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 5
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
7.70 3.85 43.25
8.91 4.20 48.40
9.67 4.35 53.97
Multiplier PER (X) P/BV (X) Di vi dend yi eld (%)
14.08 2.13 2.94
11.96 1.92 4.68
9.71 1.73 5.15
8.39 1.54 5.62
7.73 1.39 5.82
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 Profit Loa ns Depos i ts 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)
23.2 23.2 5.6 8.9 6.8 19.0 (5.1) 12.2 16.6 8.0
15.7 15.7 10.1 6.0 8.6 2.5 12.7 2.3 1.0 (1.0)
8.5 8.5 2.8 12.6 6.3 4.6 7.5 6.0 7.3 3.0
Asset Quality Ratio (%) Gros s NPLs (Btmn) Gros s NPLs /Loa ns Loa n Los s Res erve/NPLs Accrued Interes t/Loa ns Loa n Los s Res erve/Loa ns Property Forecl os ed/Loa ns
7,701 3.2 80.1 0.2 2.3 2.1
5,710 2.5 139.8 0.2 3.0 1.7
6,168 2.4 168.1 0.2 3.6 1.0
6,106 2.4 200.2 0.2 4.1 1.0
6,289 2.3 220.7 0.1 4.5 1.0
Capital and Liquidity Ratio (%) Equi ty/As s et Ti er I to Ris k As s ets Ca pi ta l Adequa cy Ra ti o Loa n to Depos it Ra tio Loa n to Depos it 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
11.5 15.4 18.9 139.6 100.3
12.7 16.4 19.5 141.4 102.6
13.4 17.0 19.7 139.8 104.1
1.4 15.8 35.9 3.41
1.8 16.9 40.1 3.98
2.2 18.7 44.7 4.04
2.3 19.4 42.2 4.21
2.5 18.9 41.5 4.18
2015 (9.3) 35.9 3.41 5,277 2.21% 2.11%
2016 (5.6) 40.1 3.98 3,972 1.77% 1.72%
2017E 12.2 44.7 4.04 2,386 0.95% 1.00%
2018E 2.3 42.2 4.21 2,553 0.99% 1.00%
2019E 6.0 41.5 4.18 2,660 0.97% 1.00%
Profitability Ratio (%) ROA ROE Cos t to Income Net Interes t Ma rgin
Key Assumptions Loa n Growth ‐ Net Cos t to Income Net Interes t Ma rgin Provi s i on for l oa n l os s (Btmn) Provi s i on for l oa n l os s (% of l oa ns ) Provi s i on for l oa n l os s (% of a vera ge l oa ns )
Source: KTZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 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, M‐CHAI, POMPUI, TTL, NMG, SAWAD, TFD. KT ZMICO is a co‐underwriter of the IPO of BGRIM.
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 returns over a six‐month period due to specific UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant catalysts SELL: Expecting negative total returns of 10% or more primary market index by 10% over the next 12 months. 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
Outperform (17TP Bt77.00) Close Bt74.75
Banking
Earnings upgrade/Earnings downgrade/Overview unchanged
July 13, 2017
Growth prospects remain intact Price Performance (%)
Source: SET Smart
Indicates lower credit cost guidance again on better asset quality TISCO hinted that its credit cost guidance for 2017E is likely to be lower to around 100bps vs. its original guidance of ~120‐130bps. 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. It still sees loan contraction on its auto hire purchase loans given higher price competition. However, other consumer 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 see slight growth this year. Therefore, we expect loans including the acquisition of SCBT to grow 12% for 2017.
FY17
FY18
Consensus EPS (Bt)
7.526
8.391
KT ZMICO vs. consensus Share data
2.3%
6.2%
Reuters / Bloomberg
TISCO.BK/TISCO TB
Paid‐up Shares (m)
800.65
Par (Bt)
10.00
Market cap (Bt bn / US$ m)
60.00/1,758.00
Foreign limit / actual (%)
49.00/44.47
52 week High / Low (Bt)
80.75/49.75
Avg. daily T/O (shares 000)
3,731.00
NVDR (%)
19.19
Estimated free float (%)
77.39
Beta
0.65
URL
www.tisco.co.th
CGR
Anti‐corruption
Level 4 (Certified)
Prapharas Nonthapiboon Analyst, no 17836 [email protected] 66 (0) 2695‐5872
Well‐managed asset quality and profitability We maintain our Outperform rating for TISCO. We like TISCO for its well‐ managed asset quality and profitability. Moreover, 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 remain TISCO’s price appeal.
Acquisition of SCBT to enhance TISCO’s retail platform in the L‐T The transfer of SCBT’s retail business is still in process, with TISCO estimating that the consolidation of SCBT’s assets will be complete in 4Q17E. Note that the latest acquired retail assets of SCBT stood at ~Bt39bn (vs. ~Bt41.6bn as of 3Q16); see Figure 1. TISCO sees potential for cross‐ selling synergy for all acquired assets, except for the personal loan portfolio, which TISCO does not intend to expand further. Moreover, this business transfer is expected to incur one‐time transfer costs (likely ~Bt250mn) in 4Q17E. TISCO expects no impact to profit in such quarter as the recording of revenue from the acquired business will compensate for the transfer expenses. Raised earnings estimates for 2018‐19E by 2% We fine‐tuned TISCO’s earnings to reflect the latest operating results and business guidance as well as the latest transaction/exposure for the acquisition of SCBT’s retail business. We raised our net profit forecasts for 2018‐19E by 2%. The main revisions are 1) the potential for a lower‐than‐ expected provision; 2) higher‐than‐expected NIM and 3) higher‐than‐ expected one‐time transfer expenses vs. our previous assumption (see Figure 2). Following our NP revision, we raised our 17E target price to Bt77/share for implied P/BV of 1.78x (from Bt75/share previously). Financials and Valuation 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 8,501
2018E 9,583
2019E 10,299
4,250 5.31 0% 2.20 35.09 2015 14.08 2.13 2.94 15.8%
5,005 6.25 18% 3.50 38.96 2016 11.96 1.92 4.68 16.9%
6,165 7.70 23% 3.85 43.25 2017E 9.71 1.73 5.15 18.7%
7,131 8.91 16% 4.00 48.40 2018E 8.39 1.54 5.35 19.4%
7,739 9.67 9% 4.35 54.17 2019E 7.73 1.38 5.82 18.8%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 5
Figure 1: Key data for acquired assets of SCBT’s retail businesses Acquired assets (Btmn) Housing loans Personal loans SME loans Credit card loans Other assets Total Deposits
3Q16 25,000 7,000 5,000 4,000 600 41,600 36,100
2Q17 25,350 5,850 3,900 3,900 n.a. 39,000 ~30,000
% BD (2Q17) 65% 15% 10% 10% 0% 100%
Yield as per TISCO's guidance ~4‐5% ~20% ~10% ~10% n.a. ~8%
Source: TISCO, KT ZMICO Research
Figure 2: Key changes in our earnings revision 2017E New Previous 6,165 6,173 0% 23% 12% 15% 4.04% 4.02% 2,386 2,908 1.00% 1.20% 44.7% 42.1%
Key assumption changes Net Profit (Btmn) % Change in net profit from previous forecasts % Change in net profit YoY Loan growth (%) Net interest margin (NIM) Provision for loan loss (Btmn) Provision for loan loss (% of average loans) Cost to income ratio (%) Source: Company data, KT ZMICO Research
2018E New Previous 7,131 7,024 2% 16% 2% 5% 4.21% 4.17% 2,553 3,055 1.00% 1.15% 42.2% 41.3%
2019E New Previous 7,739 7,622 2% 9% 6% 9% 4.18% 4.11% 2,660 3,256 1.00% 1.15% 41.5% 40.6%
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 S.D. +1.5 S.D. +1 S.D. +0.5 S.D. Avg.
2.0 1.6
-0.5 S.D. -1 S.D. -1.5 S.D. -2 S.D.
1.2 0.8
Jul-17
Jan-17
Jul-16
Jul-15
Jan-16
Jul-14
Jan-15
Jul-13
Jan-14
Jul-12
Jan-13
Jul-11
Jan-12
Jul-10
Jan-11
Jul-09
Jan-10
Jan-09
0.4
Source: Bloomberg, KT ZMICO Research
2017E
PBV (x)
Implied market Upside/ Downside price (Bt) to current price (%)
+2.0SD
2.0
87
19
+1.5SD
1.9
81
11
+1.0SD
1.7
74
2
+0.5SD
1.6
68
-7
Average
1.4
61
-16
-0.5SD
1.3
55
-25
-1.0SD
1.1
48
-34
-1.5SD
1.0
42
-43
-2.0SD
0.8
35
-52
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 7
2017E
PER (x)
+2.0SD
10.6
82
+1.5SD
9.9
77
5
+1.0SD
9.3
71
-2
+2 S.D. +1.5 S.D. +1 S.D. +0.5 S.D. Avg. -0.5 S.D.
Implied market Upside/ Downside price (Bt) to current price (%) 12
+0.5SD
8.6
66
-9
Average
7.9
61
-16
4
-0.5SD
7.3
56
-23
3
-1.0SD
6.6
51
-30
-1.5SD
5.9
46
-37
-2.0SD
5.3
41
-44
Source: Bloomberg, KT ZMICO Research
Jul-17
Jan-17
Jul-16
Jan-16
Jul-15
Jul-14
Jan-15
Jul-13
Jan-14
Jan-13
Jul-12
Jul-11
Jan-12
Jul-10
Jan-10
Jul-09
Jan-09
5
Jan-11
-1 S.D. -1.5 S.D. -2 S.D.
6
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 5
Statement of Comprehensive Income (Btmn) Year‐end 31 Dec Tota l Interes t & Di vi dend Income Interes t Expens es on Borrowi ng Net Interes t Income Non‐Interes t Income Opera ti ng Income Opera ti ng Expens es Opera ti ng Profi t Extra ordi nary Item Provi s ion (Revers a l ) for Doubtful Accounts Gai n (Los s ) on Tra di ng Securi ties Taxes Minority Interes t Net Profi t Pre Provi s i oni ng Opera ti ng Profi t (PPOP) Pre Provi s i oni ng Profit (PPP) EPS (Bt)
Statement of Financial Position (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
16,536 5,008 11,528 6,684 18,212 8,144 8,520 0 2,386 50 1,498 (19) 6,165 8,501 8,551 7.70
18,323 5,625 12,697 7,085 19,782 8,345 9,605 0 2,553 100 1,732 (21) 7,131 9,583 9,683 8.91
19,499 6,442 13,057 7,976 21,033 8,732 10,321 0 2,660 100 1,880 (23) 7,739 10,299 10,399 9.67
2015
2016
2017E
2018E
2019E
Year‐end 31 Dec Cas h & Money Ma rket Items Net Inves tment Fi na nce a nd Securi ti es Loa ns ‐ Gros s Hire Purchas e Loa ns ‐ Gros s Net Loans 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
40,012 8,602 127,402 124,930 242,436 301,358
38,106 9,056 130,754 127,428 246,419 306,248
38,512 9,535 138,699 135,074 260,351 322,951
Depos its Interbank & Money Ma rket ST a nd LT Borrowi ngs Other li a bi li ti es Total Liabilities
158,125 10,249 74,519 9,206 252,099
155,068 5,197 70,329 9,391 239,984
180,809 5,249 70,650 9,911 266,618
182,617 5,354 68,939 10,462 267,372
195,857 5,461 67,243 11,047 279,608
8,007 16,979 3,110 28,095
8,007 19,922 3,267 31,195
8,007 23,234 3,389 34,630
8,007 27,233 3,515 38,754
8,007 31,559 3,645 43,210
Pai d‐up Ca pi ta l Reta i ned Earni ng Other equi ty i tems Total Shareholders' Equity
Source: KTZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 5
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
7.70 3.85 43.25
8.91 4.20 48.40
9.67 4.35 53.97
Multiplier PER (X) P/BV (X) Di vi dend yi eld (%)
14.08 2.13 2.94
11.96 1.92 4.68
9.71 1.73 5.15
8.39 1.54 5.62
7.73 1.39 5.82
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 Profit Loa ns Depos i ts 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)
23.2 23.2 5.6 8.9 6.8 19.0 (5.1) 12.2 16.6 8.0
15.7 15.7 10.1 6.0 8.6 2.5 12.7 2.3 1.0 (1.0)
8.5 8.5 2.8 12.6 6.3 4.6 7.5 6.0 7.3 3.0
Asset Quality Ratio (%) Gros s NPLs (Btmn) Gros s NPLs /Loa ns Loa n Los s Res erve/NPLs Accrued Interes t/Loa ns Loa n Los s Res erve/Loa ns Property Forecl os ed/Loa ns
7,701 3.2 80.1 0.2 2.3 2.1
5,710 2.5 139.8 0.2 3.0 1.7
6,168 2.4 168.1 0.2 3.6 1.0
6,106 2.4 200.2 0.2 4.1 1.0
6,289 2.3 220.7 0.1 4.5 1.0
Capital and Liquidity Ratio (%) Equi ty/As s et Ti er I to Ris k As s ets Ca pi ta l Adequa cy Ra ti o Loa n to Depos it Ra tio Loa n to Depos it 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
11.5 15.4 18.9 139.6 100.3
12.7 16.4 19.5 141.4 102.6
13.4 17.0 19.7 139.8 104.1
1.4 15.8 35.9 3.41
1.8 16.9 40.1 3.98
2.2 18.7 44.7 4.04
2.3 19.4 42.2 4.21
2.5 18.9 41.5 4.18
2015 (9.3) 35.9 3.41 5,277 2.21% 2.11%
2016 (5.6) 40.1 3.98 3,972 1.77% 1.72%
2017E 12.2 44.7 4.04 2,386 0.95% 1.00%
2018E 2.3 42.2 4.21 2,553 0.99% 1.00%
2019E 6.0 41.5 4.18 2,660 0.97% 1.00%
Profitability Ratio (%) ROA ROE Cos t to Income Net Interes t Ma rgin
Key Assumptions Loa n Growth ‐ Net Cos t to Income Net Interes t Ma rgin Provi s i on for l oa n l os s (Btmn) Provi s i on for l oa n l os s (% of l oa ns ) Provi s i on for l oa n l os s (% of a vera ge l oa ns )
Source: KTZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 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, M‐CHAI, POMPUI, TTL, NMG, SAWAD, TFD. KT ZMICO is a co‐underwriter of the IPO of BGRIM.
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 returns over a six‐month period due to specific UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant catalysts SELL: Expecting negative total returns of 10% or more primary market index by 10% over the next 12 months. 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
