Thanachart Capital

Q2 2012 profit was 32.5% above our number: TCAP posted 2Q12 earnings of Bt1.7bn, up by 43% qoq and 8% Year on Year. The result beat our estimate by 32.5% and the consensus by 43.5%, attributable to lower loan loss provisioning and a better NIM than modeled. Thus, pre-provision operating profit totaled Bt3.4bn, up 20% Quarter on Quarter (but down 11% Year on Year). 1H12 earnings represent 52% of our FY12 forecast.
Results highlights: Lending rose by 4.3% Quarter on Quarter and 6.4% YTD to Bt720bn at end-June—better than our assumption of 3% Quarter on Quarter. Net interest margin (NIM) rose by 15 bps Quarter on Quarter to 2.90% in 2Q12, due to robust HP business growth in tandem with hefty new car sales expansion. As such, net interest income (NII) rose by 10% Quarter on Quarter (and was flat Quarter on Quarter) to Bt6.2bn.
TCAP slahsed its loan loss provisioning by 40% YoY to Bt488m (we expected 2Q12 LLPs of Bt700m). The NPLs/loans ratio declined to 5.1% at end-June from 5.7% three months earlier, while the loan loss coverage ratio inched up to 69% from 66% at end-March.
Outlook: 3Q12 earnings will rise further Quarter on Quarter in tandem with new car sales and good funding cost management.  
Recommendation: Given an improving lending growth profile and a well-managed NIM, we believe TCAP has considerable scope for earnings upside in 2H12. Besides, the stock currently trades at a very cheap YE12 PBV of 1.0x, much lower than the sectoral mean of 1.55x and its last peak of 1.2x in 2010. Our TRADING BUY rating stands.
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