Securities

Securities  

 

Decreasing brokerage income. We expect a fall in brokerage market share to bring 2015F brokerage income down by 6% for ASP and 10% for MBKET. Rising competition from newcomers eroded MBKET’s market share to 8.34% in 2Q15 from 9.8% in 1Q15 and 10.56% in 2014 and ASP’s to 3.14% in 2Q15 from 3.53% in 1Q15 and 3.6% in 2014. Starting operations in May, ASL Securities is the most recent competitor, adding to newcomers LH Securities, which started operations in 4Q14, and Apple Wealth Securities and AEC Securities, both of which started operations in 2013. In 2Q15, average daily market turnover (excluding proprietary trading) fell 3% YoY and 28% QoQ to Bt35.9bn. YTD daily market turnover is Bt43.1bn. We maintain our 2015F average daily market turnover of Bt44bn (+6%), driven by the QEs by the central banks of the EU and Japan and the low interest rate environment. 

 

Expect higher IB fees in 2H15. Both ASP and MBKET had no IPO deals in 2Q15 but we look for growing investment banking (IB) fees in 2H15, with more IB deals in the pipeline. ASP’s IB deals rose to 32 (18 IPOs and 14 advisory assignments) in 1Q15 from 27 at 3Q14, though we note that the average size is smaller. MBKET has more than 10 IB deals (5-7 IPOs, 2-3 REITs, and 2-3 infrastructure funds) with total size of more than Bt10bn. ASP’s IPO deals already in the filing process include Com7 (COM7), Chaopraya Mahanakorn (CMC), and JAS Asset (J). COM is scheduled to list in 3Q15. MBKET’s IPO deals already in the filing process include Akara Resources (AKARA) on the SET and Daii Group (DAII) and Netbay (NETBAY) on mai. MBKET booked IB fees from the IPO of Platinum Group (PLAT), with an IPO size of Bt5.2bn, in 1Q15. However, it had no IPO in 2Q15 and this means IB fees will fall QoQ in 2Q15. 

 

2Q15F preview: Lower brokerage income. Securities companies’ 2Q15F profits are being dampened by the drop in daily market turnover and in market share. For ASP, we forecast a plunge in 2Q15F earnings of 49% YoY (on lower brokerage income and IB fees) and 38% QoQ (on brokerage income) to Bt130mn. For MBKET, we forecast a fall in 2Q15F earnings of 7% YoY and 45% QoQ to Bt200mn, due to decreasing brokerage income.    

 

1H15F dividend. We forecast 1H15 DPS of Bt0.12/share (2.8% yield) for ASP and Bt0.75/share (3.2% yield) for MBKET, assuming a payout ratio of 75% for both. 

 

Prefer ASP to MBKET. We prefer ASP to MBKET for three reasons. 1) We expect ASP to have stronger earnings in 2015F than MBKET (+5% for ASP vs. -15% for MBKET) as MBKET has been hit harder by rising competition from new brokers. 2) We expect ASP to have higher 2015F dividend yield (8% for ASP vs. 7% for MBKET). 3) ASP has greater diversification of revenue to provide a balance between brokerage income and non-brokerage income with active investment banking activities, recurring income from asset management and a sizable investment portfolio.