Thai Military Bank
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Go the distance
Thai Military Bank Plc (TMB)
- 4Q14 profit to grow against peers, pushing ROE near 14%
We estimate 4Q14 net profit at B2.41bn or the growth of 1.2%qoq and
34.3%yoy. Operating expenses would increase in this quarter, mainly from
personnel and marketing expenses in the high season, but they would be
compensated by the growth of net interest income. Likewise, net loan in
4Q14 is projected to grow 2.0%qoq and 7.4%yoy, mostly from corporate
loans, especially trade finance, medium-sized SME loans, and retail loans,
especially housing. On the other hand, SME loans for small-sized businesses
have remained sluggish as a result of the bank’s stricter policy amidst the
incomplete economic recovery. NIM has been in an uptrend as funding cost
has decreased gradually because TMB has not focused on increasing
deposits. Deposit base is projected to lower continuously. At the same time,
fee income and income from other operations are anticipated to grow
continuously in this quarter. Debt provisioning would decrease following
decreasing NPL. Overall, FY2014 net profit is estimated at B8.98bn, growing
56.5%yoy, 6% higher than our current forecast, while ROE at end-2014 is
projected near the target of 14%.
- Aim at increasing FY2015 ROE to target of 15%
We maintain our earnings forecast for FY2015, expecting the net profit to
show continued growth of 22%yoy, beating the sector’s average growth of
13.3%yoy. Major driving factors are net loan growth, NIM, fee income, cost
to income ratio, and asset quality control. Although the bank does not have
a solid goal in 2015, it will adhere to its long-term plan by using deposits as
a spearhead to boosting the business growth in the long run, expanding its
customer base and penetrating into a higher-yield market. In addition, the
bank will improve its transactional banking service to enhance its
competitiveness in the long run. All these factors would boost ROE in 2015
to the target of 15%.
- Top pick of medium-sized banks
We recommend BUY for TMB. 2015 fair value is B3.76 (GGM, based on PBV
of 1.87x, ROE forecast of 13.70%, and LT growth of 9%). The current share
price provides total return of over 25% (dividend yield included).
