Securities Sector

Securities Sector

2Q13’s profit to decelerate due to long holidays and severe market correction
Total trading volume (prop-trade excluded) since the beginning of 2Q13 until
present has been B50bn a day, declining 13.4%qoq due to the long holidays of
Songkran festival during the quarter but still increasing 100.2%yoy, so the
brokerage fee income weakened accordingly. SET Index has been undergoing
drastic correction, falling as deeply as 10.5% from the record high of 1,643 pts as a
result of foreign selling. Therefore, profits from securities investment of securities
companies might be dull or even result in loss in this quarter. Nevertheless, it
would be partially compensated by the investment banking business because 5 IPO
stocks have started to be traded in this quarter: SANKO, CHO, CHG, PTG, and
MONO, while 2 other companies are projected to be traded by 2Q13. Consequently,
we project 2Q13’s net profit to decelerate from the prior quarter by 44%qoq but
still grow 150%yoy.
- Thick trading volume to boost 2013’s profit, but risk remains in long term
The sector’s profit in the second half of the year tends to stabilize from 2Q13. The
market would still be fluctuating. However, as profits of listed companies would be
magnificent (with market’s EPS growth estimated at 23% in 2013), the Thai stock
market is still interesting for investing in terms of fundamental. Year-to-date
trading volume has stabilized at B54bn a day, substantially exceeding our estimate.
As a result, we have to revise up our profit forecast for 2013, under an assumption
for average trading volume increasing from B28bn a day to B45bn. In addition,
there would also be incomes from the investment banking business, such as IPO
underwriting, as well as PO and PP of more than 30 companies that have already
submitted the fillings to the SEC. Accordingly, the net profit forecast of the
securities sector is increased 88% from previously forecast to the growth of
92%yoy. Securities companies with remarkable earnings results would be UOBKH
and TNITY because the 2 companies have gained additional market share and have
higher commission fee charge than the sector’s average. At the same time, MBKET
has a strong point as it captures the largest market share. Nevertheless, in 2014,
net profits of most securities companies are projected to decrease because many
countries would gradually call off their stimulus measures, which would make total
trading volume decline or, to be optimistic, stay flat from this year after hitting the
year’s high.
- SET shows short-term rebound. Speculate low PER & high div. stocks
Despite significant net profit growth projected, we still maintain UNDERWEIGHT for
the sector because the earnings likely have already peaked in 1Q13 and would
decelerate or only stabilize in the following quarters. Prices of securities stocks also
have already risen to respond to positive factors (average returns YTD have
increased 60%). Accordingly, in the short term we recommend only speculating,
focusing on those with low PER and high dividend yield. 2013’s fair value is
estimated by using conservative PER of 10-12x (2014’s fair value is also
considered). We recommend speculating MBKET([email protected]) and KGI([email protected]),
which have given the return of 11%, as well as UOBKH([email protected]), of which the
2013’s expected PER is low at only6x.