Leasing

Leasing 

- Nano-finance benefits GCAP most    

 

According to the rules and condition for a nano-finance business operation and qualification of non-banks announced by the Bank of Thailand (BOT), we believe nano-finance loans will be a new business to boost loan growth and earnings of listed leasing companies (including MAI). However, we do not expect for aggressive growth in the early step; since it is a highly risky business with no collateral, most banks will probably grant loans for their existing customers first before expanding to new customers. For ten leasing companies under our study, only six companies are obtaining a license for the nano-finance loans operation, which are SAWAD, MTLS, AEONTS, GCAP, SINGER, and TK. According to our study, GCAP will benefit most in terms of 2015 net profit from the nano-finance business because of its low profit base and low loan yield of only 18.34% on average in 2015, whereas the other five banks have loan yields of over 20% already. Since average loan yield of nano-finance loans is as high as 36% p.a., every 1% increase in the proportion of nano-finance loan to total outstanding loans will help increase GCAP’s FY2015 net profit by 1.6% from the initial forecast and fair value by 0.2% (GGM). 

 

- Interest rate downtrend benefits ASK, GL, MTLS   

 

As a result of relieved pressure from the inflation rate, the BOT might impose a stimulus measure by reducing the policy interest rate. According to our study under an assumption that the policy rate is cut by 25-100 bp, at every 25 bp decrease in the interest rate, FY2015 net profit of leasing companies under our coverage will increase by 0.78% from the initial forecast. ASK, GL, and MTLS will benefit most from such a situation since they have a number of floating rate debts and great proportion of fixed rate loans. 

 

- Top picks are ASK, LIT, AEONTS. Buy GCAP    

 

We select ASK([email protected]), LIT([email protected]), and AEONTS(FV@B138) as top picks of the sector in 2015 for their strong net profit growth, inexpensive share prices, and attractive upsides and dividend yields. We also recommend buying GCAP([email protected]) for the benefit from the nano-finance issue mentioned above.