Thanachart Capital

Getting better HOLD

Thanachart Capital Plc (TCAP)

- 3Q14 profit to rebound. Fee income to grow remarkably

In line with our prediction after 1H14 earnings report, we estimate TCAP's

3Q14 net profit at B1.33bn, rising 8.0%qoq but falling 19.7%yoy. Fee

income from car leasing business is expected to drop, while fee income from

corporate loan, bancassurance, and brokerage businesses are projected to

rise thanks to a rebound of the capital market. In addition, debt provision is

projected to decrease. Credit cost is expected to drop from 110bp (the

year's high) in 2Q14 to 100bp in 3Q14.

- Waiting for core business to rebound in 2015

We maintain our FY2014-2015 earnings forecast. TCAP's net profit is

estimated to drop 33.8%yoy in 2014 (after B4.07bn net profit (after tax and

NCI) from TLife sales was booked in 2013) but rebound 8.0%yoy in 2015.

We believe TCAP has already passed its bottom in 1H14. Though the core

business (car leasing business) is not predicted to rebound in 2015, TCAP's

4Q14 earnings are projected to continue rebounding in 4Q14 thanks to the

company's policies on cost control and asset quality. TCAP has been waiting

for the core business to recover in 2015

- Strong point: high dividend yield

We recommend HOLD for the average dividend yield of 5-6%p.a. (paid

semiannually). With PBV of 0.9x, close to the ten-year average level, its

share price has a limited downside. The fair value is B38.20 in 2014 and

B41.62 in 2015 (GGM, 0.89x PBV, 12.70% long-term ROE, and 7% long

term growth)