TISCO Financial Group (TISC.BK/TISCO TB)*

DAILY Navigator Thailand Top Stock Ideas b
TISCO Financial Group (TISC.BK/TISCO TB)*
The best among small banks
Bt41.25 Outperform
Maintained
1 Thaninee Satirareungchai, CFA
2 66.2658.8888 Ext. 8851
3 thaninees@kgi.co.th
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Riding the strong car sales
Favorable interest rate trend
Company update
Maintain Outperform with a 2013 target price of Bt56.00
Now one of our top buys
We like TISCO for having the largest exposure to new car lending
(53%), its balance sheet mismatch that works to its benefit during the
interest rate downtrend, and its strong financial position. With that,
we believe the counter deserves to trade at a premium to its small
bank peers. We rate TISCO Outperform with a 2013 target price of
Bt56.00, based on 2.0x 13PBV.
Riding the strong car sales
With its portfolio structure of 66% hire purchase (HP), 80% of which
are new cars, TISCO stands to be the key beneficiary of the strong
pent-up new-car demand, and the government’s first car program (to
end in December 2012) should add further support to the new-car
loan demand. TISCO’s loan growth has been outstanding at 17.2% in
7M12, the highest in the industry, and the momentum should
continue over the remainder of the year, potentially at an even
stronger pace, thanks to the strong recovery in both auto production
and sales.
Favorable interest rate trend
Structurally, small banks with large exposure to HP lending, including
TISCO, should benefit from the downward trend of interest rates
thanks to their typical balance sheet structures and duration
mismatches. The short duration of liabilities but long duration of
assets makes those banks’ liabilities re-price faster than assets. This
should help improve their NIM.
Figure 1: Domestic car sales hit an all-time high again in July
Auto sales, ‘000 vehicles
140
120
100
80
60
40
20
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Source: Bloomberg; KGI Securities (Thailand)
2009 2010 2011 2012
*The Company may be issuer of Derivative Warrants on these securities.
Figure 2: Auto production posted new highs for three
consecutive months
Auto production, ‘000 vehicles
0
Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12
Source: The Federation of Thai Industries; KGI Securities (Thailand)
Figure 3: TISCO has the largest exposure to new-car HP
Loan portfolio breakdown, percent
Source: Company data; KGI Securities (Thailand) estimates
Valuation and Recommendation
We rate TISCO Outperform with a 2013 target price of Bt56.00,
based on 2.0x 13PBV. TISCO is now one of our top buys.
http://research.kgi.com; Bloomberg: KGIT Please see back page for disclaimer September 5, 2012 1
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TISCO KK TCAP BAY SCB
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HP (new cars) HP (used cars) HP (new+used) Others
Year-end Pre-prov. profits Pretax profits Net income EPS EPS Growth
(Bt mn) (Bt mn) (Bt mn) (Bt/Share) (%)
2010 6,307 4,360 3,090 4.26 55.5
2011 6,138 4,855 3,267 4.50 5.7
2012F 6,430 4,687 3,598 4.94 9.9
2013F 7,597 5,570 4,430 6.09 23.1
2014F 8,764 6,292 5,008 6.88 13.0
Year-end ROAA ROAE P/E P/BV Dividend Yield
(%) (%) (x) (x) (%)
2010 1.8 20.9 9.6 2.0 5.5
2011 1.7 21.1 9.1 1.8 5.7
2012F 1.5 21.0 8.3 1.7 6.0
2013F 1.6 22.9 6.7 1.4 7.4
2014F 1.6 22.7 6.0 1.3 8.4
Sector Banking 52-week trading range (Bt) 30.8-43.3
12M target price (Bt/shr) 56.0 Mkt cap-Bt bn/US$ bn 29.8/1
Upside/downside (%) 36.6 Outstanding shares (mn) 728
The ranking of excess return (%) 92.0 Free floating shares (mn) 565
Dividend yield-12/13F (%) 7.4 Foreign ownership (mn) 345
Book value/shr-12/13F (Bt) 28.3 3M avg. daily trading (mn) 2
P/BV-12/13F (x) 1.4 Abs. Performance (3,6,12M)(%) 16.3; 7.2; 1.2
NPL ratio (%) 1.4 Rel. Performance (3,6,12M)(%) 3.5; 0.1; -14.1
90
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Balance Sheet
As of 31 Dec (Bt mn) 2010 2011 2012F 2013F 2014F
Total Assets 171,408 220,718 253,882 295,110 350,608
Cash 903 903 814 559 1,920
Interbank and Money Mkt Securities 12,545 30,722 16,698 10,645 8,175
Securities (resale) 0 0 0 0 0
Investments 6,481 3,706 4,354 4,354 4,354
Loans & Accrued Int. - Net 145,704 180,852 226,279 273,744 330,351
Properties Foreclosed 21 258 299 299 299
Properties, Premises and Equipment 1,395 1,451 1,411 1,481 1,481
Others 4,357 2,825 4,028 4,028 4,028
Total Liabilities 156,550 204,406 235,787 274,358 327,037
Deposits 48,533 37,979 89,774 105,013 125,827
Interbank and Money Mkt Securities 10,843 14,479 14,083 16,473 19,738
Account Payable 532 448 756 756 756
REPO Securities 0 0 0 0 0
Short-term Borrowings 54,044 54,044 54,044 54,044 54,044
Debt issued and borrowings 90,776 145,397 123,364 144,305 172,906
Others 5,866 6,104 7,809 7,809 7,809
Shareholders' Equity 14,857 16,312 18,095 20,752 23,571
CommonStock 7,279 7,279 7,279 7,279 7,279
Capital Surplus 0 0 0 0 0
Retained Earnings 7,578 9,032 10,816 13,473 16,292
Preferred Stock 0 0 0 0 0
Supplementary
Non Performing Loans 2,654 2,612 3,532 4,212 5,023
Source: Company data; KGI Securities (Thailand) estimates
Profit & Loss
DAILY Navigator Thailand Top Stock Ideas b
Year to 31 Dec (Bt mn) 2010 2011 2012F 2013F 2014F
Interest Income 9,433 12,369 14,944 17,941 21,464
Interest Expense 2,572 5,461 7,977 9,303 11,018
Net Interest Income (NII) 6,861 6,907 6,966 8,639 10,446
Provision and Restructuring Loss 1,947 1,283 1,743 2,028 2,472
NII after Provision 4,914 5,624 5,224 6,611 7,975
Non-interest Income, net (non-NII) 3,964 4,163 5,252 5,696 6,090
Fee income, net 2,708 2,852 3,515 3,937 4,330
Investment Gains 201 34 52 56 56
Investment Income 0 0 0 0 0
Others 1,055 1,277 1,685 1,704 1,704
Non-interest Expenses 4,518 4,932 5,789 6,737 7,772
Profit before Tax 4,360 4,855 4,687 5,570 6,292
Income Tax 1,256 1,562 1,063 1,114 1,258
Minority Interest 14 26 26 26 26
Net Profit 3,090 3,267 3,598 4,430 5,008
EPS (Bt) 4.3 4.5 4.9 6.1 6.9
Pre-provision Profit before Tax 6,307 6,138 6,430 7,597 8,764
Pre-provision Profit after Tax 5,051 4,576 5,366 6,483 7,506
Source: Company data; KGI Securities (Thailand) estimates
*The Company may be issuer of Derivative Warrants on these securities.
Du Pont Analysis
Year to 31 Dec (%) 2010 2011 2012F 2013F 2014F
Tax burden: net profit/pre-tax profit 0.7 0.7 0.8 0.8 0.8
Extraordinaries: pre-tax profit/oper. profit (OP) 1.0 1.0 1.0 1.0 1.0
Credit costs: OP/pre-provision OP (PPOP) 0.7 0.8 0.7 0.7 0.7
Costs: PPOP/pre-prov. oper. rev. (PPOR) 0.6 0.5 0.5 0.5 0.5
Non-int. income: PPOR/pre-provision NII 1.6 1.6 1.8 1.7 1.6
Int. margin: pre-provision NII/asset 0.0 0.0 0.0 0.0 0.0
Leverage: asset/equity 11.5 13.5 14.0 14.2 14.9
Multiply the above to derive:
ROE 20.8 20.0 19.9 21.3 21.2
Source: Company data; KGI Securities (Thailand) estimates
Key Assumptions & Ratios
Year to 31 Dec
Growth (YoY %)
2010 2011 2012F 2013F 2014F
Loans & Accrued Interests 27.6 24.1 25.1 21.0 20.7
Deposits (14.6) (21.7) 136.4 17.0 19.8
Total Assets 21.5 28.8 15.0 16.2 18.8
Total Equity
Growth (YoY %)
18.7 9.8 10.9 14.7 13.6
Net Interest Income 14.7 0.7 0.9 24.0 20.9
Provision 25.8 (34.1) 35.8 16.4 21.9
Non-interest Income 38.0 5.0 26.2 8.5 6.9
Total Revenue (NII + Non-NII) 22.3 2.3 10.4 17.3 15.4
NP 55.4 5.7 10.1 23.1 13.0
EPS 55.5 5.7 9.9 23.1 13.0
PPP before Tax 43.6 (2.7) 4.8 18.2 15.4
PPP after Tax
Profitability (%)
7.1 (9.4) 17.3 20.8 15.8
Yield on Int.-earning Assets 5.6 6.4 6.3 6.6 6.7
Cost of Funds 1.7 3.1 3.7 3.8 3.8
Net Interest Margin 4.06 3.56 2.95 3.16 3.24
Fee Income/Total Revenue 25.5 25.8 28.9 27.6 26.3
Fee Income/Total Assets 1.6 1.3 1.4 1.3 1.2
Cost/Op Income Ratio 41.7 44.6 47.4 47.0 47.0
ROAA 1.8 1.7 1.5 1.6 1.6
ROAE
Capital Adequacy (%)
20.9 21.1 21.0 22.9 22.7
Tier 1 Ratio 11.3 9.9 10.1 11.8 13.8
Tier 2 Ratio 6.3 5.4 5.2 5.1 5.1
Capital Adequacy Ratio 17.5 15.3 15.3 17.0 18.9
Equity/Assets Ratio
Asset Quality (%)
8.7 7.4 7.1 7.0 6.7
NPLs Ratio 1.8 1.4 1.4 1.4 1.4
NPLs Coverage Ratio 156.8 169.3 146.9 149.1 150.9
Provision/Loans Ratio
Liquidity (%)
2.8 2.4 2.2 2.2 2.2
Loans/Deposits Ratio 308.8 487.8 257.8 266.7 268.6
Loans/Deposits and Borrowings Ratio
Per Share Data (Bt)
107.6 101.0 108.6 112.3 113.1
Pre-provision EPS (weighted avg.) 13.9 6.3 7.4 8.9 10.3
Pre-provision EPS (fully diluted) 7.0 6.3 7.4 8.9 10.3
EPS (weighted avg.) 8.5 4.5 4.9 6.1 6.9
EPS (fully diluted) 4.3 4.5 4.9 6.1 6.9
DPS 2.3 2.4 2.5 3.0 3.4
BVPS 20.3 22.3 24.7 28.3 32.2
Source: Company data; KGI Securities (Thailand) estimates
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DAILY Navigator Contact Information
Thailand Research Name Abbr. Sector Coverage Ext. Email
Itphong Saengtubtim IS Head of Research 8840 itphongs@kgi.co.th
General line: Rakpong Chaisuparakul RC Strategist 8845 rakpongc@kgi.co.th
66.2658.8888 Adisak Kammool AK Retail strategist 8843 adisakk@kgi.co.th
Kingpai Koosakulnirund KK Food, hotel 8857 kingpaik@kgi.co.th
Phatipak Navawatana PN Telecom, media, healthcare 8847 phatipakn@kgi.co.th
Nat Panassutrakorn NP Construction material, contractor, consumer 8849 natp@kgi.co.th
Pragrom Pathomboorn PP Economist 8846 pragromp@kgi.co.th
Thaninee Satirareungchai, CFA TS Banking 8851 thaninees@kgi.co.th
Pongpat Siripipat PS Derivatives 8844 pongpats@kgi.co.th
Suchot Tirawannarat STi Automobile, soft commodity 8850 suchott@kgi.co.th
Suchada Thiemthong ST Derivatives program trading 8852 suchadat@kgi.co.th
Tareetip Wongsaengpaiboon TW Residential property, industrial estates 8855 tareetipw@kgi.co.th
ASEAN Sales Name Abbr. Sector Coverage Ext. Email
General line: Danny Komolrit DK Thailand sales 8090 dannyk@kgi.co.th
66.2658.8888 Kannikar Pradiskesorn KP Thailand sales 8081 kannikarp@kgi.co.th
Datenusorn Rungruang DR Thailand sales 8082 datenusornr@kgi.co.th
The toll-free line for clients in HK and Singapore: 800.0800.5008
*The Company may be issuer of Derivative Warrants on these securities.
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DAILY Navigator KGI Securities Information
Locations China Taiwan
Shanghai
Room 1907-1909, Tower A, No. 100 Zynyi Road,
Shanghai,PRC200051
Shenzhen
Room 24D1, 24/F, A Unit, Zhen Ye Building, 2014
Bao’annan Road, Shenzhen
PRC 518008
Hong Kong Thailand
41/F Central Plaza, 18 Harbour Road,
Wanchai, Hong Kong
Telephone 852.2878.6888
Facsimile 852.2878.6800
KGI's Ratings Rating Definition
Disclaimer
*The Company may be issuer of Derivative Warrants on these securities.
KGI Securities
700 Mingshui Road,
Taipei, Taiwan
Telephone 886.2.2181.8888
Facsimile 886.2.8501.1691
KGI Securities (Thailand) Plc.
8th - 11th floors, Asia Centre Building
173 South Sathorn Road, Bangkok 10120, Thailand
Telephone 66.2658.8888
Facsimile 66.2658.8014
Outperform (OP) The stock's excess return* over the next twelve months is ranked in the top 40% of
KGI's coverage universe in the related market (e.g. Thailand).
Neutral (N) The stock's excess return* over the next twelve months is ranked in the range
between the top 40% and the bottom 40% of KGI's coverage universe in the related
market (e.g. Thailand).
Underperform (U) The stock's excess return* over the next twelve months is ranked in the bottom 40%
of KGI's coverage universe in the related market (e.g. Thailand).
Not Rated (NR) The stock is not rated by KGI Securities.
Restricted (R) KGI policy and/or applicable law regulations preclude certain types of
communications, including an investment recommendation, during the course of
KGI's engagement in an investment banking transaction and in certain other
circumstances.
* Excess return = 12M target price/current price-1
Note When an analyst publishes a new report on a covered stock, we rank the stock's
excess return with those of other stocks in KGI's coverage universe in the related
market. We will assign a rating based on its ranking. If an analyst does not publish a
new report on a covered stock, its rating will not be changed automatically.
Source KGI Securities and its subsidiaries and affiliates.
KGI Securities (Thailand) Plc. ( “The Company” ) disclaims all warranties with regards to all information contained
herein. In no event shall the Company be liable for any direct, indirect or any damages whatsoever resulting from
loss of income or profits, arising by utilization and reliance on the information herein. All information hereunder
does not constitute a solicitation to buy or sell any securities but constitutes our sole judgment as of this date and
are subject to change without notice.
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