Asia Plus Securities
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Asia Plus Securities Plc (APS)
Securities companies are usually not the most popular stocks due to
the linkage of their underlying business and stock market volatility.
However, the payoff in catching the uptrend can be very rewarding.
During the last stock market boom, ASP shot up from the Bt2.34/share
level in November 2012 to peak at Bt5.4/share in May 2013, a rise of
more than 100% over a span of only six months. Fundamentally, we also
favor ASP’s success in ramping up its asset management business,
which effectively lowers its earnings volatility. Valuations are
extremely attractive, with ASP trading on implied dividend yields of
9.2% for 2014 and 10.5% for 2015.
Rising daily market turnover assumption and market share. Brokerage income is
expected to jump HoH in 2H14, led up by the rise in turnover HoH. We have raised our
2014 average daily market turnover assumption (excluding proprietary trading) by 14%
to Bt40bn from Bt35bn (vs. Bt44bn in 2013) to incorporate the stronger turnover thus
far in 3Q14 than earlier anticipated. QTD average daily market turnover is Bt48bn,
bringing YTD average daily market turnover up to Bt36bn. Its brokerage market share
also rose to 4.2% QTD in 3Q14 from 3.72% in 1H14.
Good investment gain in 3Q14. As the SET has continued trending up in 3Q14, we
expect good investment gain, both realized and unrealized. The SET has risen 6% QTD in
3Q14 vs. 8% QoQ in 2Q14, which is good news for ASP given its large equity trading
portfolio of Bt1.53bn, with Bt926mn in local listed securities and Bt1.5bn in overseas
listed securities (US, Japan, HK, China, UK, France, Italy and Spain). In 2Q14, its
investment portfolio surged 39% QoQ or Bt1bn, Bt686mn from local listed companies.
Well diversified non-brokerage fees. A balance between investment banking and
asset management fees helps sustain non-brokerage fees. We expect non-brokerage
income to be fairly stable HoH in 2H14, with HoH lower investment banking (IB) fees
from IPO deals partly offset by HoH higher asset management fees from the market
rally. In 2Q14, ASP booked IB fees from two IPO deals – Ichitan Group (ICHI) with IPO
size of Bt3.9bn and Srisawad Power 1979 (SAWAD) with IPO size of Bt1.73bn. It still has
20 deals in the pipeline: 7 IPOs (including Chaopraya Mahanakorn, which is in the
process of filing), 1 PO and 12 financial advisory deals. ASP expects two to three debt
issuance deals to materialize in 2H14.
Raise TP and upgrade to Buy. Our rise in average daily turnover assumption to
Bt40bn from Bt35bn lifts our 2014F by 16% and our target price by 19% to Bt4.4. We
upgrade it to Buy, with an attractive estimated dividend yield of 9% (6% for 2H14F). We
prefer ASP to MBKET, as it has greater diversification of revenue with a balance
between brokerage income and non-brokerage income provided by its active
investment banking activities, recurring income from asset management, and sizable
investment portfolio, which has a high leverage to the stock market rally.
