Leasing

Leasing

 

- 2Q15 profit to stabilize despite low season 

Although the second quarter is a low season due to long holidays and a new school semester, we estimate 2Q15 net profit of 13 leasing companies under our coverage at B1.28bn, stabilizing qoq but growing 42.9%yoy (including AUCT, GCAP, and LIT in MAI and SINGER in the commerce sector but excluding AEONTS since the company closes its fiscal year on February 20; two of which already announcing earnings results: THANI and IFS). Three companies that would show best net profit are GL, SINGER, and THANI, respectively. GL’s net profit would be driven by increasing loans after the business expansion in Cambodia; SINGER’s net profit would grow following sales, especially of air conditioners and washing machines during a high season; THANI’s net profit would benefit from growing loans and wider spreads as a result of decreasing funding cost (mature debts replaced by new lower-rate debts). 

- GL, LIT to show best profit among peers in 2H15 

The leasing industry would show better performance in 2H15, especially 4Q15 which is a year-end spending season. Retail loan companies like SINGER and AEONTS would benefit fully, so do truck leasing companies like ASK and THANI. In addition, LIT, a factoring loan company which focuses on buying account receivables from the government would also benefit from accelerated budget disbursement by the government in the second half of the year. A motorcycle leasing company like GL would show very good earnings as well from its business expansion in Cambodia. AUCT’s earnings would grow solidly, especially in 4Q15 as financial institutions would submit more repossessed cars for auction by the end of the year in order to prevent an impact on the used-car market. JMT would be able to generate more income in 2H15 because it has been able to buy more debts for its management as a result of the sluggish economy.  

- Top picks are THANI and TK 

We select THANI([email protected]) and TK([email protected]) as top picks of the sector. For THANI, truck sales started to revive, funding cost has decreased, the share price is undervalued, and dividend yield is very high. For TK, it is a turnaround stock in 2015.