Tisco Financial Group

Tisco Financial Group Plc (TISCO)
- 3Q13 profit to make quarterly new high despite decelerating car leasing loan
TISCO's 3Q13 net profit is projected at B1.18bn, rising 1.9%qoq and 24%yoy,
making a quarterly new high due to the following factors: 1) 3Q13 net interest
income is projected to grow 3.1%qoq and 26.1%yoy, in line with 3Q13 net loans
growth projected at 2%qoq and 25.4%yoy. Corporate loans for utility projects,
which are long-term loan, have been growing. SME loans have shown flat growth.
For retail loans, car leasing loan issuance has been growing continuously, but at
the slower rate than 1H13, as expected. TISCO has still focused on new car
business and avoided used car leasing loan issuance. Auto cash and personal
loans have grown blissfully. Overall, 9M13 net profit growth is projected at 15.2%
from end-2012, in line with FY2013 growth target of 20%yoy. 3Q13 NIM would
stay unchanged from the previous year at 2.82%. 2) 3Q13 fee and service income
is projected to grow 4.1%qoq and 18.8%yoy. Aside from fee income from loan
transaction that has grown along with the business, fee income has also grown
due to affiliated companies' fund selling, as well as income from bancassurance.
Brokerage fee from securities trading would decelerate qoq, as 3Q13 securities
trading volume has declined from B50.5bn a day in 2Q13 to B36bn, which would
press TISCO's investment portfolio. Despite pressure from increase in debt
provision and operational cost, credit cost and cost to income ratio would be close
to 2Q13: 116bp and 41.6%, respectively, which are not dreadful. TISCO's gross
NPL has stayed close to 2Q13 at 1.31% of total loans.
- Maintain earnings forecast. 4Q13 profit to be stable
We maintain TISCO's FY2013-2015 earnings forecast. 9M13 net profit would make
up 81% of FY2013 earnings forecast. However, if TISCO manage to boost growth
of other loans with higher yield and fee income that has been growing blissfully to
compensate for 3Q13 car leasing loan issuance, pressure from deceleration of car
leasing loan issuance would be negated.
- "BUY". Price undergoes correction, 15% upside, 7% p.a. dividend
yield
We upgrade our recommendation for TISCO from "HOLD" for dividend to "BUY".
The share price has undergone severe correction and pressure from core business
has been absorbed until the upside from fair value at 1.56x PBV, long-term ROE
at 19.5% is over 15%. FY2013-2015 average dividend yield would be nearly 7%
(paying once a year).