Kasikornbank
Favorable situations in 2015 BUY
Kasikornbank Plc (KBANK)
- Further growth foreseen in 2015. KBANK maintains cautious policy
KBANK estimate Thailand 2015’s GDP to grow 4.0%, up from 1.6% estimated
in 2014, in line with the forecasts by many economic agencies. Major driving
factors are the government and private investments and the export industry
that would revive following the world economic rebound and from the low
base in 2014. Overall, the business growth is expected in 2015. Net loan
growth is estimated at around 8-9%yoy, versus lower than 8%yoy in 2014,
boosted mainly by corporate and SME loans, while retail loan growth would
remain close to that of the sector’s. NIM would rise slightly from FY2014
target to 3.5-3.7%, while fee income would help boost non-interest income
growth above 15%yoy. The bank still maintains its target to keep the cost to
income ratio at not over 45%, close to that of 2014.
- Major assumptions revised in 2015, no effect on profit forecast though
Although we revise our assumptions for the business growth in 2015,
including loan, fee income, and credit cost, to be consistent with the banks’s
assumption, it has no impact on our FY2015 earnings forecast. We maintain
our forecast for earnings growth in FY2014 and FY2015 at 18.9%yoy and
16.9%yoy, respectively, higher than the sector’s average of 7.3%yoy and
13.3%yoy, with ROE forecast of 20-21% p.a. on average.
- Top pick of big banks
We recommend BUY for KBANK. Fair value (GGM, based on 2.45x PBV and
20% long-term ROE forecast) is B260 in 2014 and B301.20 in 2015; total
returns (dividend included) can be expected at 11% at end-2014 and 30% at
end-2015. Given its strength of good loan structure and diversified income
base, especially for fee income that has been very strong and lower
investment expense, the bank’s profitability would become better from now
on.
