Securities

Securities 

 

The arrival of the newest competitor, discount broker SBITO, is posing a threat to securities companies. In our 3Q15F preview, we expect a sharp YoY fall, but stable QoQ, in line with the daily market turnover (-26% YoY and +3% QoQ). ASP has a few IPO deals in 2H15, suggesting a potential HoH rise in IB fees. We are neutral on this sector with only moderate dividend yield expected and downside risk from rising price competition. We continue to prefer ASP to MBKET.  

Threat from the newcomer, a discount broker. Starting operations on October 16, SBI Thai Online Securities (SBITO) is the most recent competitor, adding to newcomer ASL Securities, which started operations in May, and LH Securities, which started operations in 4Q14. As a joint venture between SBI Group, Japan's stock and derivatives online trading leader (55% holding) and Finansa Securities, SBITO is the country's second full online stock trading firm after ASL Securities. SBITO allows customers to open stock trading accounts and submit the necessary documents at 7-Eleven convenience stores across the country and is offering a special promotion - trading fees are only 0.015-0.02% of transaction value for three months after its inauguration vs. a standard rate of 0.15%. This is causing controversy among the brokerage community and is seen as a threat for securities firms. As a result of rising competition from newcomers, MBKET’s market share continued shrinking to 8.2% in 3Q15 from 9.2% in 1H15 and 10.56% in 2014. ASP’s market share slipped to 2.97% in 3Q15 from 3.4% in 1H15 and 3.6% in 2015.  

HoH rise in IB fees in 2H15 for ASP. We expect a HoH rise in investment banking (IB) fees in 3Q15 for ASP on its two IPO deals – Com7 (COM7) with an IPO size of Bt1bn in 3Q15 and JAS Asset (J) with an IPO size of Bt333mn in November. ASP has 39 IB deals (22 IPOs and 17 advisory assignments) in the pipeline as of 2Q15. ASP’s IPO deals already in the filing process include Taokaenoi Food & Marketing (TKN) and Industrial Real Estate Investment Trust (MIT). In 3Q15, MBKET had the Bt120mn IPO of Daii Group (DAII), which listed on mai. MBKET’s IPO deals already in the filing process include Netbay (NETBAY), listing on mai.   

3Q15F: Sharply down YoY, slightly up QoQ. Average daily market turnover (excluding proprietary trading) in 3Q15 fell 26% YoY but increased 3% QoQ to Bt37.2bn. 9M15 YTD daily market turnover is Bt41.1bn (+8% YoY) very close to our full-year assumption of Bt41bn. On a QoQ basis, we expect a slight rise in the bottom lines of securities companies driven by a 3% QoQ rise in a daily market turnover and a QoQ rise in IB fees. We forecast ASP’s 3Q15F earnings to rise 12% QoQ to Bt156mn and MBKET’s 3Q15F earnings to increase 4% QoQ to Bt240mn. On a YoY basis, a 25% YoY fall in daily market turnover and declining market share is expected to slash 3Q15F earnings: -47% YoY for ASP and -38% YoY for MBKET. 

Prefer ASP to MBKET. We are neutral on this sector as we now expect only moderate dividend yield. We continue to prefer ASP to MBKET for three reasons. 1) We expect rising IB income to lift earnings HoH in 2H15, but vice versa for MBKET. 2) ASP has been hit less by rising competition from new brokers as it has greater revenue diversification. 3) ASP has a slightly cheaper valuation as seen in higher dividend yield.