Leasing sector

Leasing sector 

 

- Every 25bp cut in policy rate boosts sector's profit by 0.78%   

 

As a result of relieved pressure from the inflation rate and low oil price, 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 (based on 9M14 earnings). 

 

- ASK to benefit most. IFS to be weakened most   

 

According to our study, the policy rate cut would boost FY2015 earnings of ASK most significantly, followed by GL and MTLS, since they have large proportion of both floating rate liabilities and fixed rate loans. IFS is the only company to face negative effect from the cut. Despite large proportion of floating rate liabilities, IFS has larger proportion of floating rate loans, thus weakening its NIM and FY2015 earnings (but insignificantly though). 

 

- Top picks: ASK, LIT, GCAP   

 

The sector’s top picks in 2015 are ASK([email protected]), LIT([email protected]), and GCAP([email protected]). ASK is likely to benefit most from the policy rate cut, LIT would benefit from acceleration of FY2015 government investment budget disbursement, and GCAP is expected to generate the biggest profit from the nano-finance business. Their earnings are projected to grow remarkably in 2015. The share prices are currently inexpensive, with high upside and high dividend yield.