thanachart capital pcl (tcap)1 company update 8 nov 2016 please see disclaimer on last page...

Company Update 8 Nov 2016

Please see disclaimer on last page 1

Thanachart Capital PCL (TCAP)

Earnings to fare better in 4Q16

► Analyst meeting on 7 Nov 2016.

► 4Q16 net profit expected to increase 15.3% QoQ and

27.5% YoY to Bt1.7bn.

► NPLs expected to decline for ten consecutive quarters.

► We maintain our BUY recommendation with a 2017

target price of Bt51.00.

4Q16 net profit expected to grow both QoQ and YoY

We attended TCAP’s analyst meeting yesterday, at which

management reviewed its 3Q16 results as well as gave details on

the 4Q16 outlook. Regarding the bank’s guidance, we expect 4Q16

net profit to increase 15.3% QoQ and 27.5% YoY to Bt1.7bn.

Earnings are expected to be boosted by lower provision expense

and leftover tax benefit. We assume 4Q16 credit cost to be in line

with the bank’s guidance at 0.70%, down from 0.91% in 3Q16. The

improvement is owing to strengthening asset quality as well as the

bank’s model adjustment during 3Q16 in calculating probability of

default and loss given default related to its SME and corporate

portfolios. Apart from that, we estimate net interest margin (NIM) to

stay at 3.03%, down from 3.2% in 3Q16 but up from 2.94% in 4Q15.

This similarly causes net interest income to drop QoQ but rise YoY.

In terms of OPEX, 4Q16 cost-to-income ratio is estimated to be

51.6%, down from 52.6% in 4Q15. Regarding lending, TCAP

expects 4Q16 loans to inch up QoQ and we accordingly forecast

loans to climb 1.0% QoQ, particularly driven by the corporate and

housing segments.

Asset quality to get even stronger

TCAP remains upbeat on its asset quality. Specifically, it reckons

4Q16 NPLs would continue declining from 2.56% in 3Q16, which

would mark the tenth straight quarterly drop, thanks to its improved

credit policy resulting in a healthier loan portfolio. In addition, the

bank believes its coverage ratio of 132.94% in 3Q16 is sufficient as

it is still well above the industry average of 129.64%. The trend of

consistently strengthening asset quality makes the bank confident

its position to guard against economic volatility as well as future

regulations, i.e. IFRS 9.

BUY

2017 TP: Bt51.00 Closing price: Bt40.75

Upside/downside 25.2%

Sector Banking

Paid-up shares (shares mn) 1,206

Market capitalization (Bt mn) 49,164

Free float (%) 78.70

12-mth daily avg. turnover (Bt mn) 182.83

12-mth trading range (Bt) 42.75/32.00

Major shareholders (%)

Thai NVDR 18.9

MBK PCL 10.8

State Street Bank Europe Limited 4.9

Financial highlights

Source: SETSMART, AWS

Thailand Research Department

Mr. Warut Siwasariyanon,

License, No. 17923

Tel: 02 680 5041

Ms. Veeraya Rattanaworatip,

Assistant Analyst

2014 2015 2016E 2017E

Revenue (Btmn) 39,908 40,205 39,932 39,842

Net profit (Btmn) 5,120 5,437 6,052 6,632

EPS (Bt) 4.24 4.61 4.87 5.50

EPS growth (%) -43.3 8.6 5.7 12.8

P/E (x) 9.6 8.8 8.4 7.4

BVPS (Bt) 42.6 44.7 45.3 50.2

P/BV (x) 1.0 0.9 0.9 0.8

DPS (Bt) 1.60 1.80 2.00 2.20

Div. yield (%) 3.9 4.4 4.9 5.4

ROE (%) 10.4 10.5 11.1 11.4

Please see disclaimer on last page


2

Maintain BUY recommendation

We maintain our BUY recommendation with a 2017 target price of Bt51.00, based on a

prospective PBV of 1.02x and long-term ROE of 11%. We see the counter as still attractive as

it is currently trading at a low PBV of 0.90x. Further, it has a decent dividend yield of 4.9%.

Although TCAP’s loan growth is likely to fall into negative territory this year, we estimate its

lending to turnaround from next year onward corresponding with the recovering automotive

market as well as improving lending sentiment resulting from the government’s infrastructure

investments.

Figure 1: TCAP’s 4Q16 results preview Unit: Btmn 4Q15 3Q16 4Q16F %QoQ %YoY 2015 2016F %YoY

Net-interest income 6,985 7,284 7,013 -3.7% 0.4% 27,730 28,330 2.2%

Non-interest income 2,890 2,981 2,795 -6.2% -3.3% 12,474 11,601 -7.0%

Net operating income 9,876 10,265 9,807 -4.5% -0.7% 40,205 39,932 -0.7%

Non-interest expense 5,194 5,307 5,057 -4.7% -2.6% 20,319 20,764 2.2%

Pre-provision profit 4,682 4,957 4,750 -4.2% 1.5% 19,886 19,167 -3.6%

Provision expense 1,713 1,676 1,218 -27.3% -28.9% 8,600 6,070 -29.4%

Pre-tax profit 2,969 3,281 3,532 7.7% 19.0% 11,286 13,098 16.1%

Net Profit 1,359 1,502 1,732 15.3% 27.5% 5,437 6,052 11.3%

EPS (Bt) 1.17 1.29 1.44 11.3% 22.7% 4.61 4.87 5.7%

Loans 714,628 680,300 687,115 1.0% -3.9% 714,628 687,115 -3.9%

Deposits 669,454 691,573 694,064 0.4% 3.7% 669,454 694,064 3.7%

NIM 2.94% 3.20% 3.03% -17bps 9bps 2.91% 3.10% 19bps



3



4


CG Report

5

Score Range Number of Logo Description

90 – 100

80 – 89

70 – 79

60 – 69

50 – 59

Below 50

No logo given

Excellent

Very Good

Good

Satisfactory

Pass

N/A

Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (IOD) in 2015.

Corporate Governance Report disclaimer

The disclosure of the survey result of the Thai Institute of Directors

Association (“IOD”) regarding corporate governance is made pursuant

to the policy of the Office of the Securities and Exchange Commission.

The survey of the IOD is based on the information of a company listed

on the Stock Exchange of Thailand and the Market for Alternative

Investment disclosed to the public and able to be accessed by a

general public investor. The result, therefore, is from the perspective of

a third party. It is not an evaluation of operation and is not based on

inside information.

The survey result is as of the date appearing in the Corporate

Governance Report of Thai Listed Companies. As a result, the survey

result may be changed after that date, Asia wealth Securities Company

Limited does not conform nor certify the accuracy of such survey result.


CG Report

6

ขอมล Anti-Corruption Progress Indicator ของบรษทจดทะเบยน

ระดบ 1ACD AEONTS AFC AIRA AJ ALUCON AMC AQUA ARIP AUCT BAT-3K BIG BJCBLISS BMCL BOL BRR BSBM CBG CCET CCN CGD CMR CPH CSC CSPCTW DCON DRACO DSGT DTCI E EMC ESSO FOCUS FSMART GIFT GLANDGRAND GUNKUL HFT HTECH IHL ILINK ITD JSP KDH KTIS KTP LEE LSTMAJOR MATCH MAX M-CHAI MDX MIDA ML MPIC NC NEP NNCL NWR OHTLPICO PK PL PPM PRAKIT PRECHA PRIN PSTC PYLON RAM RICH RS SANKOSAUCE SAWAD SAWANG SCN SEAFCO SF SHANG SIRI SMART SMM SOLAR SPACK SPGSPPT SPVI STA STAR SVH SVOA SWC TAPAC TC TCCC TCJ TCOAT THTKS TNH TNPC TPA TPAC TPOLY TRC TRUBB TSE TTA TTI TTL TTTMTWP TWZ U UMS UPA UPOIC UTP UVAN VARO VI VIBHA VIH VTEWG

ระดบ 22S ABICO AF AKP AMARIN AMATA AOT APCO AYUD BEAUTY BFIT BH BKDBLAND BTNC CCP CI CSR CSS EFORL EPCO FE FNS FVC GEL GLOBALHEMRAJ IEC IFS INET JUTHA KASET KCAR KKC KSL L&E LALIN LTX MMALEE MBK MBKET MEGA MK MPG MTLS NCH NCL NPP OCC OCEAN PBPCA PRINC QH ROCK RPC S&J SGP SIAM SIS SKR SMG SMIT SORKONSUSCO TAKUNI TEAM TF TIC TIP TIPCO TMC TMI TPP TRT TRU TRUETSC TSI TTW TVD TVO UKEM UNIQ UWC VNG WIIK WIN XO

ระดบ 3AABC ACAP ADVANC AEC AGE AH AIE AMANAH ANAN AP APCS APURE ASASIA ASIAN ASIMAR BIGC BROOK BTS BWG CEN CENTEL CFRESH CHARAN CHO CHOTICM CNT COL CPALL CPF CPI CPL DELTA DEMCO DIMET DNA DTAC EAECF EE EVER FPI GBX GC GFPT GLOW HMPRO HOTPOT ICC ICHI IFECINOX INSURE IRC JAS JTS JUBILE KC KTC KYE LHK LPN LRH MAKROMC MCOT MFC MFEC MINT MJD MONO MOONG NBC NDR NINE NMG NSINTV OGC PACE PCSGH PDI PG PHOL PLAT PPS PR PRANDA PREB PSQLT RATCH RML ROBINS ROJNA RWI SAMCO SCCC SCG SEAOIL SE-ED SENA SINGERSITHAI SMK SMPC SPALI SPC SPCG SPI SRICHA SSI STANLY SUPER SVI SYMCSYNEX SYNTEC TASCO TCMC TFI THAI THRE THREL TICON TKT TLUXE TNL TPCORPTMILL TMT TSTE TSTH TTCL TU TVI UOBKH UREKA VGI VNT WACOAL WHAZMICO

ระดบ 3BAAV AHC AI AIT AKR ARROW ASK BA BDMS BEC BECL BJCHI BUICGH CHG CHOW CIG CITY CK CKP COLOR CWT EARTH EASON EPG F&DFANCY FIRE FMT FORTH GENCO GL GOLD GPSC GRAMMY HYDRO IRCP IT JCTKCM KWC LH LIT LOXLEY MACO MANRIN MATI MODERN MSC NOBLE NOK NPKNUSA OISHI OTO PAF PAP PATO PF PJW PLANB PLE POLAR PRG PTLQ-CON QTC RCI S11 SALEE SAM SAMART SAMTEL SAPPE SC SCP SFP SIMSLP SMT SPA SPORT SSC SST STEC STPI SUC SUTHA T TAE TBSPTCC TFD TGCI TGPRO THANA THIP TIW TK TMW TNDT TOPP TPC TPCHTPIPL TSR TT TYCN UAC UBIS UEC UMI UP UPF UT UV VPOWAVE WINNER YUASA

ระดบ 4ASP BAFS BANPU BAY BBL BKI BLA CIMBT CNS CSL DCC DRT DTCEASTW ECL EGCO ERW FSS GCAP HANA HTC INTUCH IRPC IVL KBANK KCEKGI KKP KTB LANNA LHBANK MTI NKI PSL PTG PTTEP SABINA SCB SNCSNP SSF SSSC TCAP THCOM TISCO TIMB TMD TNITY TOG

ระดบ 5BCP CPN GYT PE PM PPP PT PTT PTTGC SAT SCC THANI TOP

ไมเปดเผยหรอไมมนโยบายA ACC AJD AQ BCH BGT BROCK BSM BTC CHUO CPR CRANE EICFER JMART JMT KAMART KBS KIAT LDC MBAX MCS METCO NEW NEWS NYTPAE PDG PERM PMTA POST RCL RICHY ROH S SIMAT TCB TR TSFTVT WORKหมายเหตระดบ 1 : มนโยบายระดบ 2 : ประกาศเจตนารมณระดบ 3 : มมาตรการปองกน ซงทง 2 กรณ ถอเปนผลการประเมนในระดบเดยวกน

3A : บรษทมการประกาศเจตนารมณเขารวมโครงการ CAC หรอภาค3B : บรษทมค ามน และนโยบายของบรษท แตมไดประกาศเจตนารมณเขารวมโครงการ CAC หรอภาค

ระดบ 4 : ไดรบการรบรองระดบ 5 : ขยายผลสผท เกยวของ

Contact/Disclaimer

This Report has been prepared by Asia Wealth Securities Company Limited (”AWS”). The information in here has been obtained from sources believed to be reliable and accurate, but AWS makes no representation as to the accuracy and completeness of such information. AWS does not accept any liability for any loss or damage of any king arising out of the use of such information or opinions in this report. Before making your own independent decision to invest or enter into transaction, investors should study this report carefully and should review information relating. All rights reserved. This report may not be reproduced, distributed or published by any person in any manner for any purpose without permission of AWS. Investment in securities has risks. Investors are advised to consider carefully before making investment decisions.

Asia Wealth, Empower Your Wealth Call Center

02-680-5000

Branch Address Phone Fax

Head Office 540 Floor 7,14,17 , Mercury Tower, Ploenchit Road, Lumphini,

Pathumwan Bangkok 10330

02-680-5000 02-680-5111

Silom 191 Silom Complex Building,21st Floor Room 2,3-1 Silom Rd., Silom,

Bangrak, Bangkok, 10500 Thailand

02-630-3500 02-630-3530-1

Asok 159 Sermmitr Tower, 17th FL. Room No.1703, Sukhumvit 21 Road,

Klong Toey Nua, Wattana, Bangkok 10110

02-261-1314-21 02-261-1328

Pinklao

7/3 Central Plaza Pinklao Office Building Tower B, 16th Flr., Room

No.1605-1606 Baromrajachonnanee Road, Arunamarin, Bangkoknoi,

Bangkok 10700

02-884-7333 02-884-7357,

02-884-7367

Chaengwattana

99/99 Moo 2 Central Plaza Chaengwattana Office Tower, 22nd Flr., Room

2204 Chaengwattana Road, Bang Talad, Pakkred, Nonthaburi 11120

02-119-2300 02-835-3014

Chaengwattana 2

9/99 Moo 2 Central Plaza Chaengwattana Office Tower, 22nd Flr.,

Room 2203 Chaengwattana Road, Bang Talad, Pakkred, Nonthaburi

11120

02-119-2388 02-119-2399

Mega Bangna 39 Moo6 Megabangna, 1st Flr., Room 1632/7 Bangna-Trad Road,

Bangkaew Bangplee, Samutprakarn 10540

02-106-7345 02-105-2070

Rayong 356/18 Sukhumvit Road, Nuen-Phra Sub District, Muang District, Rayong

Province 21000

038-808200 038-807200

Khonkaen 26/9 Srijanmai Road, Tamboonnaimuang, Khon Khaen

40000

043-334-700 043-334-799

Chonburi 55/22 Moo 1, Samed Sub District, Muang District, Chonburi 20000 038-053-858 038-784-090

Chaseongsao 233-233/2 Moo2 1st Flr., Sukprayoon Road, Na Meung Sub-District,

Meung District, Chachoengsao 24000

038-981-587 038-981-591

thanachart capital pcl (tcap)1 company update 8 nov 2016 please see disclaimer on last page...

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