Thanachart Capital

Thanachart Capital Plc (TCAP)

TCAP approves share repurchase of not over 10% with limit of B3.4bn
According to the Board of Directors Meeting, the project of share repurchase
has been approved for the financial management in the amount of not over
B3.4bn, amounting to 127,781,636 shares or not over 10% of the company’s
current total paid-up shares. The repurchase period would be 6 months from
11 December 2012 to 10 June 2013. The principle used to determine the
repurchase price taking into account in the average market price during the
last 30 days prior to the date on which the company discloses the information
of share repurchase (the average closing price in 30 days backward during 12
October 2012 until 26 November 2012 stands at B36.14/share). The
repurchase price will not be more than 1.1x of book value (BV) of the latest
disclosed financial statement (BV at end-3Q12 is B32.34, so the repurchase
price would be not over B35.57) and not over 115% of the average closing
share price prior to 5 working days.

Psychologically beneficial for confidence raising in short term after selling of TLife
This round of TCAP’s announcement of share repurchase is the second time
after the latest share repurchase project on 14 December 2010 (the new
share repurchase project will be implemented after 1 year following the final
date of the last project). We believe that the share price in a short term
would positively respond with the mentioned news since this signals that the
market price is substantially lower than the fair value. Moreover, this would
help raise the confidence of investors who hold uncertainty toward the
company’s growth tendency after the selling of TLife (whether the company
could maintain the potential growth compared with the preceding earnings
result). Accordingly, the benefits from share repurchase would reflect clearly
during 6 moths after the end of repurchase period. 1) 2012 ROE is projected
to increase to 14.6% from the current 14.1% under the assumption for the
repurchase price at B34-40 which would result in 6.7-7.8% of repurchased
shares (less than 10%) and a decrease of 8.1% in shareholders’ equity. (We
use 2012 ROE forecast for easy understanding because 2013 net profit
forecast at B13.7bn has included the extraordinary profit of B6.7bn from
selling of TLife.) 2) 2012 EPS and DPS is projected to increase by 7.1-8.5%
from the previous forecast based on different repurchase prices.
Nevertheless, the effects from the share repurchase project would depress
tier 1 capital by 0.5% to 9.9% from 10.4% due to amortization of the share
repurchase amount of B3.4bn, as illustrated on the following page.

Reiterate “BUY”, choosing as top pick of mid-cap banks
We reiterate our recommendation of “BUY”, choosing TCAP as a top pick of
the mid-cap banks under 2013 fair value at B49.14. We are in the process of
considering 2013 operating result to reflect the share repurchase project,
believing that the share price is likely to leap in response with the positive
news in a short term. In a long term, we still hold confidence toward the
company’s tendency of aggressive net profit growth in 2013. In addition, the
capital raising is no longer to be concerned about.