Thanachart Capital

Thanachart Capital Plc (TCAP)

- Car leasing to slow down. Real drivers are SME and corporate loans
We hold a negative outlook toward TCAP’s core business after the
analyst meeting. The bank kept its business goal in 2014 unchanged like
before the political crisis, under GDP growth forecast of 4% and
controllable liquidity risk despite the Fed’s QE tapering. Accordingly, we
project the bank’s business growth to be lower than the projection,
especially net loan growth which had been estimated at 6-7%yoy, up
from 4.7%yoy in 2013, depending mostly on corporate and SME loans
(32% of total loans). For the car leasing loan which accounts for 53% of
total loans, it is projected to stabilize or grow only slightly (because new
loan issuing was insignificantly higher than loan repaying during the
economic uptrend) since the bank has adopted a stricter measure in
issuing loan, especially for used cars, while domestic new car sales are
anticipated to weaken from last year. However, there would be
supporting factors from a good control of fixed cost and debt provision
that is projected to decrease in 2014. Credit cost is anticipated to slide
from 145bp to only 60bp, which is also lower than our estimate of 90bp,
because TCAP has made advance provision from extraordinary income
for car leasing NPL, and overall NPL is expected to decrease to only 4%
of total loans. Due to all these factors, the bank kept 2014 ROE forecast
at 13-15%, higher than our forecast of 11.77%.
- Maintain forecast. Downside limited due to very conservative assumption
We maintain our earnings forecast for 2014-2015. Normalized EPS is
projected to grow continuously by 8.6%yoy and 8.7%yoy, respectively.
As we use a more conservative assumption of debt provision growth
than TCAP’s in making our forecast and project the ROE at only 11.8%
to reflect the current economic slowdown, the forecast is very unlikely to
be revised down in the near future.
- Hold for dividend. Not to outperform market in near future
We reiterate to hold TCAP for its dividend yield of 5-6% p.a. in the next
few years. 2014 fair value is B33.39 (GGM), at 0.78x PBV and under
long-term ROE forecast of 12%. Although the share price has undergone
correction until the PBV and PER are very low comparing to peers, it
would not outperform the market in the near future as still suppressed
by the economic deceleration.