Company Note
16 January 2018
Banking
Tisco Financial Group
TISCO Current
Previous
Close
2018 TP
Exp Return
THAI CAC
CG 2017
HOLD
HOLD
91.75
98.00
+ 6.8%
Certified
5
Consolidated earnings BT (mn) Loans (Bt bn) Growth (%) PPOP (Bt m) Growth (%)
2016
2017
2018E
2019E
245
271
285
299
-5.6
10.6
5.0
5.0
10,216
10,774
11,569
12,385
-3.3
5.5
7.4
7.1
5,005
6,090
7,183
7,709
EPS (Bt)
6.25
7.61
8.97
9.62
EPS (Bt) - Fully diluted
6.25
7.61
8.97
9.62
Growth (%)
17.7
21.8
17.8
7.3
PE (x)
14.7
12.1
10.2
9.5
PE (x) - Fully diluted
14.7
12.1
10.2
9.5
DPS (Bt)
3.50
4.20
4.50
4.75
Net profit (Bt m)
Yield (%)
3.8
4.6
4.9
5.2
BVPS (Bt)
39.07
43.36
47.52
52.16
P/BV (x)
2.3
2.1
1.9
1.8
Par (Bt)
10
10
10
10
Source: Company data, FSS estimates
Share data Close (15/01/2018) SET index
91.75 1,822.66
Foreign limit/actual (%)
49.00/43.06
Paid up shares (million)
800.64
Free float (%)
77.39
Market cap (Bt mn)
73,459.24
Avg. daily T/O (Bt mn) (2018 YTD) hi, lo, avg (Bt) (2018 YTD)
711.88 95.00, 88.75, 92.16
Price (Bt)
2,050.00
108.00
1,900.00
99.00
1,750.00
90.00 81.00
1,600.00
72.00
1,450.00
63.00
1,300.00
54.00
1,150.00
45.00
1,000.00 SET
850.00
TISCO
700.00
36.00 27.00
Jan-12 Feb-12 Apr-12 Jun-12 Jul-12 Sep-12 Nov-12 Jan-13 Feb-13 Apr-13 Jun-13 Jul-13 Sep-13 Nov-13 Jan-14 Feb-14 Apr-14 Jun-14 Jul-14 Sep-14 Nov-14 Jan-15 Feb-15 Apr-15 Jun-15 Aug-15 Sep-15 Nov-15 Jan-16 Feb-16 Apr-16 Jun-16 Aug-16 Sep-16 Nov-16 Jan-17 Feb-17 Apr-17 Jun-17 Aug-17 Sep-17 Nov-17 Jan-18
18.00
Source: SET
Analyst: Sunanta Vasapinyokul, CFA Register No.: 019459 Tel.: +662 646 9680 email:
[email protected] www.fnsyrus.com
We stand by our 2018E net profit at Bt7.2bn. It implies a jump of 18% Y-Y thanks to a decline in loan loss provision and full-year revenues realization from SCBT’s portfolio. Since TISCO's CAR of > 20%, the highest in the banking sector, hardly sees any impact from its purchase of SCBT's loans, we have revised up our DPS estimate to Bt4.2, implying a yield of 4.6%. Although we maintain our bullish view on its profit outlook, the counter has increased to trade at the upper end of its historical PBV. It now implies narrower upside. Hence, we retain our HOLD rating on TISCO at our TP of Bt98. New portfolio focuses on mortgage and home-equity loans We had neutral data from yesterday’s analyst meeting. To elaborate, TISCO’s management provided information that some items that took place in 4Q17 were extraordinary. Hence, they might not recur or would decrease in 2018. Worth mentioning is loans which sharply increased 11.8% last year thanks to its purchase of SCBT portfolio. Although they did not provide a target for this year, we initially expect loans to slightly increase or decrease in 2018 due to unsecured loan of Bt4bn transferred from SCBT because they will decrease in tandem with its age and eventually expire, if the bank chooses not to continue. In this regard, TISCO will focus its strategy on mortgage and home-equity loans; which have combined outstanding balance of about Bt24bn. Moreover, the bank will aim at its conventional business, i.e. auto cash and hire-purchase lending. Given that, we expect loans to increase by 5% this year. Besides loan growth, spread which widened to roughly 5% in 4Q17 might narrow in 2018. In this regard, we have put our estimate at 4.68% because the high-yield loan exposure received from SCBT will also decrease. Stand by profit forecast, but expect dividend yield to be more attractive
Source: Setsmarts
SET Index
Expect dividend to be more attractive
We believe that 2018 earnings drivers will come mainly from the followings. First, we expect loan loss provision to decrease to 1% of total loans (vs. 1.32% in 2017). According to the latest information, TISCO’s coverage ratio has increased to 197%, sufficient for the bank’s current asset quality and the IFRS 9. In this regard, loan loss provision should decrease to its normal level. Second, TISCO will realize revenues from SCBT’s loan portfolio for full year. On this front, we anticipate an annual increment of about Bt400-500mn in revenues. Given that, we stand by our 2018E net profit at Bt7.2bn (+17.95% Y-Y). Note that TISCO’s latest CAR is at 20.7% (vs. 18% in 2016), while the bank’s Tier 1 is 16%. It’s now clear that the bank does not see any negative impact from its acquisition of SCBT portfolio. This surprises us since we earlier predict the purchase to set TISCO’s CAR back by 2%. The higher-than-expected CAR is made possible by the fact that the bank’s overall risk has decreased because most of the portfolio received is low-risk mortgage loan. As a result, we believe that TISCO will maintain its payout ratio at about 55%, the level seen in 2016. It translates to a DPS of Bt4.2 and implies dividend yield of 4.6%. Maintain 2018 TP at Bt98 and HOLD rating We stand by our 2018 TP at Bt98. It assumes justified PER of 11x (Ke 9.98%, ROE 19%) and 2018 prospective EPS of Bt8.97. At such TP, it implies 2018 PBV of about 2x, the upper end of its historical PER and PBV. Hence, we retain our HOLD rating on TISCO. Risks: A deterioration in asset quality, a rise in interest rate, and industry competition
Page 1 of 4
TISCO Income Statement (Consolidated) (Bt mn) Interest and dividends Interest costs
Important Ratios (Consolidated)
2015
2016
2017
2018E
2019E
16,888
16,012
16,469
18,342
18,948
Growth (%)
2015
2016
2017
2018E
2019E
6,758
5,091
4,815
5,341
5,452
Gross loans
(9.2)
(5.6)
10.6
5.0
5.0
Net interest income
10,130
10,920
11,655
13,001
13,495
Total assets
(11.8)
(3.2)
11.9
(1.5)
4.2
Non-interest income
6,359
6,140
7,650
7,749
8,324
Net interest income
6.2
7.8
6.7
11.6
3.8
16,489
17,060
19,305
20,749
21,820
Non-interest income
4.5
(3.4)
24.6
1.3
7.4
5,923
6,844
8,530
9,180
9,435
Operating costs
0.7
15.5
24.6
7.6
2.8
PPOP
10,566
10,216
10,774
11,569
12,385
Provision costs
19.2
(24.7)
(20.9)
(17.9)
5.0
Provisions
(5,277)
(3,972)
(3,140)
(2,577)
(2,706)
Pre-Provision profit
8.4
(3.3)
5.5
7.4
7.1
Optg. Profit after Provns.
15,843
14,189
13,915
14,146
15,091
Net profit
0.0
17.8
21.7
18.0
7.3
Net non-operating items
-
-
-
-
-
Pre-tax profit
5,288
6,244
7,634
8,992
9,680
Operating cost/income
Tax charge
1,032
1,221
1,517
1,789
1,951
Gross loans/deposits
Profit after tax
4,256
5,023
6,117
7,203
7,729
129
13
42
50
50
4,250
5,005
6,090
7,183
7,709
Operating Income Operating costs
Minority interests Net profit
Profitability etc. (%) 34.5
39.0
41.8
44.2
43.2
164.3
158.1
150.0
154.7
154.7
Average earnings yield
5.69
5.84
5.73
5.76
5.58
Average funding cost
2.58
2.15
1.98
2.12
2.15
Net interest margin
3.41
3.98
4.06
4.08
3.97
0.0
0.0
0.0
0.0
0.0
Non-interest inc./Income
38.6
36.0
39.6
37.3
38.2
Optg. income/Total Assets
5.9
6.3
6.4
6.9
7.0
Optg. costs/Total Assets
2.1
2.5
2.8
3.1
3.0
Fee income/Revenue
Balance Sheet (Consolidated) (Bt mn)
2015
2016
2017
2018E
2019E
259,725
245,114
271,137
284,694
298,929
542
521
716
520
520
ROA
1.5
1.8
2.0
2.4
2.5
(6,168)
(7,984)
(11,483)
(11,998)
(12,539)
ROE
15.7
16.8
18.4
19.7
19.3
232,634
217,471
240,628
251,967
264,624
Asset quality (%)
1,101
1,149
1,325
1,500
1,500
NPLs/Total loans
3.2
2.5
2.3
2.0
2.0
31,163
38,067
44,647
40,000
40,000
NPLs/Total assets
2.7
2.1
1.9
2.0
2.1
8,617
7,632
8,138
8,000
8,000
Provisions/Loans
0.0
0.0
0.0
0.0
0.0
47
7
5
7
7
80.1
139.8
197.0
191.7
185.2
Fixed assets
2,633
2,653
2,653
2,800
2,800
Capitalization (%)
Other assets
4,098
4,301
6,039
6,200
6,200
Tier 1
14.0
14.9
16.0
13.4
12.8
Total assets
280,294
271,280
303,436
298,974
311,631
Tier 2
4.0
4.9
4.7
5.4
5.2
Customer deposits
158,125
155,068
180,804
184,000
193,200
Total
18.0
19.8
20.7
18.8
18.1
Interbank liabilities
10,249
5,197
4,018
4,000
4,000
0
0
0
60,000
62,000
168,374
160,264
184,821
248,000
259,200
Other liabilities
9,206
9,391
12,804
0
0
Total liabilities
252,099
239,984
268,704
248,000
259,200
Paid up Capital
8,007
8,007
8,007
8,007
8,007
Valuations (x)
Share premium
Gross loans Accrued interest LLR Net loans & accrued
Cash Interbank assets Investments Foreclosed properties
Long-term borrowings
1,018
1,018
1,018
1,018
1,018
Appropriated reserves
710
801
801
801
801
Unappropriated reserves
16,979
19,922
23,125
26,585
30,304
99
101
127
100
100
28,194
31,295
34,732
38,061
41,780
Minority interests Shareholders' funds
Per share data Shares in issue (million)
Short-term borrowings
Loan Loss Reserves/NPLs
Source: Company data, FSS research
Page 2 of 4
800
801
800
801
801
5.31
6.25
7.61
8.97
9.62
Pre-Provision EPS (Bt)
13.20
12.76
13.46
14.44
15.46
BVPS (Bt)
35.20
39.07
43.36
47.52
52.16
DPS (Bt)
2.40
3.50
4.20
4.50
4.75
DPS/EPS (%)
45.2
56.0
55.2
50.2
49.4
P/E
17.3
14.7
12.1
10.2
9.5
Normalized P/E
17.3
14.7
12.1
10.2
9.5
P/BV
2.6
2.3
2.1
1.9
1.8
Dividend yield (%)
2.6
3.8
4.6
4.9
5.2
Reported EPS (Bt)
Finansia Syrus Securities Public Company Limited Head Office
Thaisummit Tower
Alma Link
Amarin Tower
Central Pinklao 1
999/9 The offices at Central World 18th, 25th Fl., Rama 1 Rd., Patumwan, Bangkok
1768 Thaisammit Tower Building, 5th, 31th Fl., New Petchburi Road, Bangkapi, Huaykwang, Bangkok
9th, 14th, 15th Fl., Alma Link Building 25 Soi Chidlom, Ploenchit, Lumpini, Patumwan, Bangkok
496-502 Amarin Tower 20th Floor, Pleonchit, Lumpini, Pathumwan, Bangkok
7/129-221 Central Pinklao Office Building, Room 2160/1, 16th Fl., Baromratchonnanee Road, Arunamarin, Bangkoknoi, Bangkok
Bangkapi
Bangna
Sindhorn 1
Kian Gwan (Sindhorn 2)
Sindhorn 3
3105 N Mark Building, 3rd Floor, Room A3R02, Ladprao Road, Klongjan, Bangkapi, Bangkok
589 Tower 1 Office, 19th Floor, Room 589/105 Moo 12, Bangna-Trad Road, Bangna, Bangkok
130-132 Sindhorn Building 1, 2rd Floor, Wireless Road, Lumpini, Pathumwan, Bangkok
140/1 Kian Gwan House II 18th Floor, Wireless Road, Lumpini, Pathumwan, Bangkok
130-132 Sindhorn Building 3, 19th Floor, Wireless Road, Lumpini, Pathumwan, Bangkok
Ladprao
Prachachuen
Rang sit
Abdulrahim
Rattanatibet
555 Rasa Tower 2, 11st Floor, Unit 1106, Phaholyothin Road, Chatuchak, Bangkok
105/1 B Building, 4th Floor, Thessabansongkhrao Road, Ladyao, Jutujak, Bangkok
1/832 Moo 17 Kukod, Lumlookka Pratumtanee
990, Abdulrahim Place, 12nd Fl., Room 1210, Rama IV Road, Silom, Bangrak, Bangkok
576 Rattanatibet Road, Tumbon Banggrasor, Aumphoe Muang, Nonthaburi
Sriracha
Khonkaen 1
Khonkaen 2
Khonkaen 3
Udonthani
135/99 (G fl.) Sukumvit Road, Tumbon Sriracha Aumphoe Sriracha, Chonburi
311/16 2nd Floor, Klangmeung Road, Tumbon Nai Meung, Aumphoe Meung, Khonkaen
26/9 Moo 7, 2nd Floor Sri Chant Mai Road, Tumbon Nai Meung, Aumphoe Meung Khonkaen, Khonkaen
311/1 Khang Meung Road, Tumbon Nai Meung, Aumphoe Meung Khonkaen, Khonkaen
197/29, 213/3 Udon Dusadee Road, Tumbon Mak Khaeng, Aumphoe Muang Udon Thani, Udon Thani
Chiangmai 1
Chiangmai 2
Chiangmai 3
Chiangrai
Measai
308 Chiang Mai Land,
310 Chiang Mai Land,
Maliplace Building 32/4 moo 2
Chang Klan R., Chang Klan
Chang Klan R., Chang Klan
1 fll., Room B1-1, B1-2
Muang Chiangmai
Muang Chiangmai
Tumbon Maehia Chiangmai
353/15 Moo 4, Tumbon Rimkok Aumphoe Muang, Cheangrai
119 Moo 10, Tumbon Maesai, Aumphoe Muang, Cheangrai
Nakornratchasima
Samutsakorn
Phuket
Hatyai 1
Hatyai 2
1242/2 Room A3, 7 fl., The Mall Ratchasima
813/30 Norrasing Road, Tumbon Maha Chai, Aumphoe Meungsamutsakorn, Samutsakorn
22/18 Luangporwatchalong Road, Tumbon Talad Yai, Amphoe Muang Phuket, Phuket
200/221, 200/223 Juldis Hadyai Plaza, 2rd Floor, Building, Niphat Uthit 3 Road, Aumphoe Hadyai, Songkhla
106 Prachathipat Road, Aumphoe Hadyai, Songkhla
Hatyai 3
Trang
Suratthani
Pattane
200/222, 200/224, 200/226 Juldis Hadyai Plaza, 2rd Floor, Building, Niphat Uthit 3 Road, Aumphoe Hadyai, Songkhla
59/28 Huaiyod Road, Tumbon Thaptieng, Aumphoe Meungtrang, Trang
173/83-84 Moo 1 Watpho-Bangyai Road., Tumbon Makamtia, Aumphoe Mueang, Suratthani
300/69-70 Moo 4, Tumbon Rusamirae, Aumphoe Meung, Pattane
Mittraphap rood Tumbon Nai Muang Aumphoe Muang Nakornratchasima
Nakornratchasima
Recommendation Definitions BUY HOLD SELL TRADING BUY OVERWEIGHT NEUTRAL UNDERWEIGHT
The The The The The The The
latest close is below our target price and the estimated upside is 10% or more. latest close is below our target price and the estimated upside is 0-10%. latest close is above our target price. latest close is above our target price but the price is expected to be driven by short-term positive factors estimated return is higher than the market average. estimated return is the same as the market average. estimated return is lower than the market average
Note: The expected return may change as market risks increase or decline. DISCLAIMER: This report has been prepared by Finansia Syrus Securities Public Company Limited (FSS). The information herein has been obtained from sources believed to be reliable and accurate; however FSS makes no representation as to the accuracy and completeness of such information. Information and opinions expressed herein are subject to change without notice. FSS has no intention to solicit investors to buy or sell any security in this report. In addition, FSS does not guarantee returns nor price of the securities described in the report nor accept any liability for any loss or damage of any kind arising out of the use of such information or opinions in this report. Investors should study this report carefully in making investment decisions. All rights are reserved. This report may not be reproduced, distributed or published by any person in any manner for any purpose without permission of FSS. Investment in securities has risks. Investors are advised to consider carefully before making investment decisions. Finansia Syrus Securities Public Company Limited may act as market maker and issuer of DWs. The company may prepare the research reports on those underlying securities. Investors should carefully read the details of the derivative warrants in the prospectus before making investment decisions.
Page 3 of 4
Thai Institute of Directors Association (IOD) – Corporate Governance Report Rating 2017
Sc ore Range
Rating
Desc ription
100-90
Excellent
80-89
Very Good
70-79
Good
60-69
Satisfactory
50-59
Pass
<50
no logo given
n/a
IOD (IOD Disclaimer) The Corporate Governance Report (CGR) of Thai listed Companies is based on a survey and assessment of information which companies listed on the Stock Exchange of Thailand and the Market for Alternative Investment (“listed companies”) disclose to the public. The CGR is a presentation of information from the perspective of outsiders on the standards of corporate governance of listed companies. It is not any assessment of the actual practices of the listed companies, and the CGR does not use any non-public information. The CGR is not therefore an endorsement of the practices of the listed companies. It is not a recommendation for investment in any securities of any listed companies or any recommendation whatsoever. Investors should exercise their own judgment to analyze and consider any information relating to the listed companies presented in this CGR report. No representation or warranty is made by the Institute of Directors or any of its personnel as to the completeness or accuracy of the CGR report or the information used.
---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Thailand's Private Sector Collective Action Coalition Against Corruption programme (Thai CAC) 1 CG Score 2017 from Thai Institute of Directors Association (IOD) 2 Companies participating in Thailand's Private Sector Collective Action Coalition Against Corruption programme (Thai CAC) under Thai Institute of Directors (as of July 31, 2017) are categorised into: - companies that have declared their intention to join CAC, and - companies certified by CAC.
Page 4 of 4
