Bank - Car Hire-Purchase

Bank – Car Hire-Purchase

Car sales in Oct 2012 hit new high…TCAP - top pick of mid-cap banks 1.14 million units
Toyota Motor (Thailand) revealed car sales as of October 2012 at
142,000 units, the growth of 7.5%mom and 233.2%yoy or another
monthly high after the sales had decelerated during the low season in
the past 2 months (rainy season). Total car sales - passenger cars
and 1-ton pickups - made a new monthly record of 72,200 units
(+5.8%mom and 263.7%yoy) and 61,300 units (+9.1%mom and
225.5%yoy), respectively, reflecting aggressively increasing
demands as supported by accumulated demands since late 2011 in
which there was massive flood, introduction of new models of cars by
many manufacturers (which will increase in the end of this year
during Motor Expo between 29 November – 10 December, such as
new Toyota Vios 1.5L and eco-car Honda Brio Amaze 4 door), as well
as the tax deduction for first car buyers (the number of cars
exercising the tax deduction right has already exceeded the
government’s target of 500,000 units to 600,000 units). Accumulated
domestic car sales in 10M12 also hit a new record at 1.14 million
units, growing 59.9% from the same period last year and comprising
88% of the market’s car sales target for FY2012 at 1.3 million units.

Benefit car hire-purchase sector in 4Q12 and 1H13, especially TCAP
This situation will benefit operators of car hire-purchase business in
the banking sector under our coverage, such as TCAP, SCB, BAY,
TISCO, and KK. We anticipate overall net loan of these banks to grow
at a more accelerated rate in 4Q12, especially BAY of which the net
loan growth in 9M12 was 14%yoy lower than the full year target. We
believe TCAP will get the most benefit with its market share of more
than 30% in the new car hire-purchase business, reflected from its
car hire-purchase loan growth in the past 2 quarters which exceeded
the sector’s average by 4%qoq in each quarter. We believe 4Q12 will
be the quarter that TCAP could make the most aggressive loan
growth in the year with support from its strong capital adequacy ratio
after the sale of TLife. Moreover, the project of share repurchase in
the amount of not over 10% of the company’s current total paid-up
shares will rebuild confidence toward net profit growth of TCAP once
again.

Share price already corrects, time to accumulate. Top picks are KBANK and TCAP
We maintain OVERWEIGHT for the banking sector. SETBANK has
corrected more than 6% from the record high in early October and
has 1.8x PBV at present, so this is an appropriate chance to
accumulate. Top picks are KBANK and TCAP which would show
remarkable EPS growth in 2013 and still have attractive upside.