Securities Sector
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Volume beyond expectation, boosting securities sector in short term. Top pick's still FSS
UNDERWEIGHT
Index Sector 1,167.70
SET 1,304.71
Market’s volume still dance in short term in response to
QE3, but FY2012 overall look still as expected
- Sector’s 3Q12 profit projected to recover from 2Q12, then
stabilizing in 4Q12
- Maintain “Underweight”. FSS is top pick due to upside
over 20%
- Market’s volume still dance in short term in response to QE3, but
FY2012 overall look still as expected
Due to the benefits from QE3 launched by the US’s central bank, the average
trading volume per day (proprietary trading not included) in September has
increased to B32.4bn. In the first 5 days of 4Q12, the trading volume still has
remained high at B37.1bn. Accordingly, the trading volume since the
beginning of year until present (YTD) has stood at B26.7bn which is higher
than our FY2012 projection at B26bn. Noticeably, the current Index has
rallied by over 1,300 pts with expected PER at 15x which is expensive while
the global economy still has faced risks after IMF has revised down the
forecast of global economy. In addition, during the rest of 4Q12, the average
trading volume per day has a chance to decline below B30bn due to foreign
investors’ trading volume that tends to decelerate during the late of year
because of long holidays. Therefore, FY2012 average trading volume is
projected not to differ much from our assumption.
- Sector’s 3Q12 profit projected to recover from 2Q12, then
stabilizing in 4Q12
In 3Q12, the sector’s profit is projected to grow from 2Q12 due to the
following reasons. 1) The revenue from securities trading commission is
projected to improve from 2Q12 as a result of the average trading volume
per day (proprietary trading not included) that has risen as mentioned above
while the net commission fee (proprietary trading not included) is projected
to still stabilize from 2Q12. 2) The profit from portfolio is projected to
significantly exceed one in 2Q12 since the Index at end-3Q12 has closed at
1,298.79 pts, ascending from at end-2Q12 by 10.8%. 3) The revenue from
investment banking business is projected to weaken slightly from 2Q12.
Although there’re many deals of IPO stocks, the financial advisory revenue
has been gradually recognized in 2Q12 already. Nevertheless, this would be
compensated by underwriting revenue. In 4Q12, the sector’s profit is
projected to decline from 3Q12 because profit from portfolio tends to drop
along with the Index that is limited in rising from now on. In terms of the
revenue from commission fee, it still has a chance to near one in 3Q12 while
the revenue from investment banking business is likely to remain stable since
there’re many IPO stocks waiting to enter the market such as VGI, TMC and
AKP.
- Maintain “Underweight”. FSS is top pick due to upside over 20%
We maintain our forecast, based on conservative method that assigns the
average trading volume per day (proprietary trading not included) at B26bn.
The profit of this sector is projected to shrink from the prior year by 16.2%
and might stabilize as closely in 2013. Accordingly, we maintain
“Underweight” to reflect lower profitability in a long run. We reiterate our
recommendation of “BUY” for FSS ([email protected]) due to the market sharing of
commission fee that has been ranked in 1 of the 3 highest for all along.
Moreover, 2012 is the golden year for FSS’s investment banking business
that has been highly successful. Combined with the underwriting revenue
from TMC in 4Q12, FSS’s 2012 profit is likely to grow by 97% which is the
most outstanding among peers. In terms of MBKET ([email protected]), we
recommend “HOLD” due to small portfolio despite benefits from increased
trading volume. Similarly, we recommend “HOLD” for KGI ([email protected]) due to
risks from fluctuation in portfolio management despite large size of portfolio
and benefits from increased Index. Nevertheless, both MBKET and KGI’s
profitability is projected to still gleam continuously, as dividend yield is
projected at above 8%.
