Thanachart Capital

- 4Q14 profit to fall despite lower provision. Fee income to grow but NIM to drop
TCAP's 4Q14 net profit is estimated at B1.19bn, falling 1.0%qoq and
22.7%yoy, making the year's low. Debt provision has decreased as asset
quality of car leasing loans improves and new NPL increases at a slower
rate, and fee income has risen owing to seasonal effect. However, NIM has
contracted continuously and net loans are projected to plunge further
because car leasing repayments have been higher than new loans and
excess liquidity is used on low-yield short-term investment. Operating cost
is also expected to increase due to seasonal effect. Overall, FY2014 net
profit is estimated at B4.95bn, plunging 46.4%yoy (9% lower than our
forecast of B5.42bn).
- To revise down FY2015 forecast after earnings report
We would revise down TCAP's earnings forecast by another 5-7%, cutting
net loans growth assumption from 8%yoy to 5%yoy. Under the new
forecast, FY2015 net profit is estimated to grow by 13.1%yoy, higher than
our preliminary projection of 11.1%yoy because of lower base in 2014. Core
businesses are not expected to recover yet; car leasing business is not likely
to return to normal (repayments at the same rate as new loans) until 2H15.
- High dividend yield
We recommend holding TCAP for over 5-6%p.a dividend yield (paid
semiannually). The current share price has a limited downside, with 0.7x
P/BV ratio (close to at the ten-year average). Under the new forecast,
FY2015 fair value would be revised down from B40.96 (GGM, 12.70% longterm
ROE, 0.89x P/BV ratio, 7% terminal growth) to B34-35 (GGM, 11.80%
long-term ROE, 0.75x P/BV ratio, 7% terminal growth), but still implying
upside.