Thai Military Bank
Ambitious goal succeeded
Thai Military Bank Plc (TMB)
- 3Q14 profit disappointing from other incomes, core business very strong
TMB announced 3Q14 net profit at B2.39bn, 9% lower than projected,
decreasing 7.3%qoq but growing 27.6%yoy. Provision for bad debts was
lower than expected, but other incomes, Fx again and capital gain, also
decreased more than expected, so the net profit was lower than projected.
Excluding such items, the normalized profit was B3.19bn or the growth of
16.1%qoq and 9.8%yoy. The core business was very strong in this quarter.
Net interest income and fee income from fund selling and bancassurance
has grown significantly. Operating expense increased more than projected,
but the income grew at a more accelerated rate, so cost to income ratio
dropped to only 50.25%. In addition, there is nothing to worry in terms of
asset quality; NPL increased slightly but is in line with the industry’s. NPL
coverage ratio was very high at 145.3% at end-3Q14.
- To increase ROE to target of 14-15%
We maintain FY2014-2015 earnings forecast, projecting remarkable net
profit growth of 47.7%yoy and 22.0%yoy, higher than the sector’s average
of 8.1%yoy and 13.3%yoy. Positive factors are growing net loan, NIM, and
fee income, good expense control (cost to income ratio), good asset quality
control, and ROE target of 14% in 2014 and 15% in 2015.
- Top pick of medium-sized banks
We recommend buying TMB. Fair value is B3.40 in 2014 and B3.76 in 2015,
based on PBV of 1.87x (GGM), under long-term ROE forecast of 13.70% and
LT growth of 9%. The current share price provides more than 13% returns,
close to the 10-year average.
