morning matters - rhb tradesmart · this prompts us to hike our full-year credit cost assumption...

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1

Key Market Indices (28 March 2013) Key Statistics

Value Change % Change % YTD SET Value by investor Type: Daily SET 1544.57 -16.30 -1.0% 11.0% Buy (THBm) Sell (THBm) Net (THBm) SET50 1014.98 -10.98 -1.1% 7.4% Institution 3,991.80 4,801.20 -809.40 SET100 2275.59 -25.27 -1.1% 9.5% Proprietary 7,138.26 7,141.04 -2.78 Foreign 12,173.62 11,485.75 687.88 Dow Jones 14578.54 52.38 0.4% 11.3% Retail 50,020.42 49,896.12 124.30 S&P500 1569.19 6.34 0.4% 10.0% Nasdaq 3267.52 11.00 0.3% 8.2% SET Value by investor Type FTSE 6411.74 24.18 0.4% 8.7% MTD (THBm) YTD (THBm) FSSTI 3308.10 -4.93 -0.1% 4.5% Institution 10,058.16 29,890.14 Hang Seng 22299.63 -165.19 -0.7% -1.6% Proprietary 343.73 -2,203.55 Nikkei 12335.96 -120.53 -1.0% 18.7% Foreign 6,965.84 4,615.78 KLCI 1674.04 6.47 0.4% -0.9% Retail -17,367.73 -32,302.38 SHANGHAI SE

2236.30 -64.96 -2.8% -1.4% JCI 4940.98 12.88 0.3% 14.5% SET50 Index Future Long Short Net MTD YTD SET 5-yr avg 2011 2012F

Institution 8,037 8,541 -504 -964 5,038

PE (x) 14.4 17.7 14.2 Foreign 5,919 5,622 297 -1,013 -12,912 P/BV(x) 1.9 2.5 2.3 Local 21,369 21,162 207 1,977 7,874 Yield(%) 4.0 2.7 3.2

MARKET DATELINE

THAILAND EQUITY

Investment Research

Morning Matters WHAT’S INSIDE

On the Platter

Kasikornbank (KBANK TB; FV THB234.7 – Buy) Company Update: One-

Off Uptick In Provisions Seen

KBANK’s 1Q13 results are likely to reflect steady growth in loans, non-

interest/net fee incomes and net interest margin. However, management has

guided for a one-off increase in counter-cyclical provisions of up to THB3.5bn

for the quarter. This prompts us to hike our full-year credit cost assumption

from 62bps to 70bps, thereby trimming our FY13 and FY14 earnings forecasts

by 4.1% and 3.8% respectively. Correspondingly, our FV is pared to THB234.7

from THB254.6 (ROE: 20.8%, COE: 11.0%, growth rate: 5.0%). Maintain BUY.

MEDIA HIGHLIGHTS • Aapico set for banner year

• Berli Jucker to go full throttle in Vietnam

• Central spends THB1bn to open about 60 Tops outlets

• SCG consolidates for higher regional strength

• No worries over BoI setback

• LPG subsidy may go untouched in April

• Dems skewer loan bill in debate

• Exports tumble in February as baht rises

ECONOMIC HIGHLIGHTS

• Thailand: Exports tumble in February as baht rises

• US: Business activity expanded at a slower pace in March

• Japan: Manufacturers see rebound after deepest slump since quake

• S. Korea: Output unexpectedly falls as growth forecast lowered

• India: Current-account deficit widened to record last quarter

• Euro: German unemployment rises as Europe’s crisis takes toll • US: Consumers’ confidence cools as jobless claims rise

29 Mar 2013

SET Intraday Chart

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2

MEDIA HIGHLIGHTS

Aapico set for banner year Aapico Hitech Plc (AH), the SET-listed auto-parts maker, expects 10% sales growth and a

higher net profit this year once insurance claims from the 2011 flood crisis are paid. It

plans to review its sales target after the 34th Bangkok International Motor Show, being

held now at Impact Muang Thong Thani, ends on April 7. Last year, Aapico achieved sales

of THB16.1bn baht for a net profit of THB917m. (Bangkok Post)

Berli Jucker to go full throttle in Vietnam

Berli Jucker Plc (BJC), the SET-listed manufacturing and trading company, will start its

retail business in Vietnam in the first half of this year. BJC, majority owned by whisky

tycoon Charoen Sirivadhanabhakdi, is also considering whether to invest THB1bn to

expand its tissue paper production capacity in Vietnam or Thailand this year. (Bangkok

Post)

Central spends THB1bn to open about 60 Tops outlets Central Food Retail Co (CFR), the operator of Tops supermarkets, is set to spend 1 billion

baht to fund its expansion this year. The budget will be used to open 12-15 new branches

of Tops Market, Tops Supermarket and Central Food Hall, plus 50 new branches under

Tops Daily. (Bangkok Post)

SCG consolidates for higher regional strength Siam Cement Group is consolidating its cement and building-materials businesses - the

two fastest-growing - to strengthen its competitiveness for further regional expansion.

With the aim to increase Asean sales from 18 per cent of the total, the group has

budgeted Bt40 billion to Bt50 billion for further regional expansion via mergers and

acquisitions. Besides a petrochemical complex in Vietnam, much of the investment could

be slated for a floor-tile plant in Vietnam and cement plants in Cambodia, Indonesia and

Myanmar. (The Nation)

No worries over BoI setback The delay of new Board of Investment (BoI) incentives is unlikely to affect foreign direct

investment (FDI), as companies remain confident of continued support, say Japanese

investors. The BoI earlier this month postponed indefinitely the launch of Thailand's new

five-year promotion policy from its original schedule of mid-year. The delay will allow time

to review issues such as zoning criteria and the types of projects that will see investment

incentives abolished. (Bangkok Post)

LPG subsidy may go untouched in April Next month's scheduled partial float of liquefied petroleum gas (LPG) prices for

households and transport may be put off for another month, says Energy Minister

Pongsak Raktapongpaisal. he said the potential deferral stems from a time-consuming

study of a proposed subsidy scheme for street vendors and low-income earners. The

Energy Policy Administration Committee this week is expected to discuss a framework for

the partial float of LPG prices. (Bangkok Post)

Dems skewer loan bill in debate Opposition and Democrat leader Abhisit Vejjajiva raised doubts about the government's

ability to repay the debt and the transparency of the scheme, with the bill being

submitted to the House without details of the transport projects. He said if the projects

were implemented under normal budgetary procedures, the House would be able to

scrutinise it. Ms Yingluck admitted the borrowing will initially increase public debt in

proportion to the GDP of the country, but the bill will eventually generate income, raise

GDP and thereby reduce the size of public debt compared to GDP. (Bangkok Post)

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3

ECONOMIC HIGHLIGHTS

Thailand: Exports tumble in February as baht rises

Thai exports in February fell by 5.8% y-o-y on tepid global demand, baht appreciation

and declining agriculture shipments. But the government remains upbeat about achieving

8-9% export growth this year as earlier projected. Vatchari Vimooktayon, the commerce

permanent secretary, said Thailand fetched USD17.9bn from exports last month. In baht

terms, exports were valued at THB530bn, down by 11.3%. The baht appreciation was a

big factor behind the export slump, said Mrs Vatchari, adding that Thai exports can

expect more pain over the next two or three months should the baht strengthen further.

(Bangkok Post)

US: Business activity expanded at a slower pace in March Business activity in the US expanded in March at a slower pace than forecast, a sign the

rebound in manufacturing will cool. The MNI Chicago Report’s business barometer fell to

52.4 this month, the lowest level of the year, from 56.8 in February. Manufacturing,

which makes up about 12% of the economy, may stabilize as some businesses wait for

more evidence that sales will hold up in the face of across-the-board cuts in government

spending. At the same time, rising consumer purchases led by automobile and home

sales will help prevent a decline in investment and inventory rebuilding. (Bloomberg)

Japan: Manufacturers see rebound after deepest slump since quake Japan’s manufacturers predict a rebound in production this month after the deepest slide

since the aftermath of the March 2011 earthquake, with the central bank poised to step

up monetary stimulus next week. Industrial output will rise 1% in March after a 0.1%

drop in February from the previous month, according to forecasts submitted for a Trade

Ministry report released in Tokyo today. Production tumbled 11% in February from a year

earlier, reflecting last year’s recession. (Bloomberg)

S. Korea: Output unexpectedly falls as growth forecast lowered

South Korea’s industrial production unexpectedly fell in February, signaling that a

recovery in Asia’s fourth-largest economy may be slower than expected as a weaker yen

threatens exports. Output fell 0.8% last month from January when it fell 1.2%, Statistics

Korea said. Production fell 9.3% y-o-y, a decline partly attributable to February having

fewer working days this year because of the Lunar New Year holiday. Today’s output

decline may bolster the government’s case for a larger supplementary spending package

after Finance Minister Hyun Oh Seok announced plans for stimulus yesterday. The

government cut the 2013 growth outlook from 3% to 2.3%. (Bloomberg)

India: Current-account deficit widened to record last quarter India’s current-account deficit widened to a record last quarter as oil and gold imports

surged, adding pressure on the government to extend a policy overhaul and attract

foreign investment as the rupee weakens. The deficit in the current account, the

broadest measure of trade, was USD32.6bn in the three months ended Dec. 31, or 6.7%

of GDP, compared with a revised USD22.6bn gap from July through September, the

Reserve Bank of India said in a statement yesterday. (Bloomberg)

Euro: German unemployment rises as Europe’s crisis takes toll

German unemployment unexpectedly rose in March as renewed tensions in financial

markets increased concerns the euro region’s recovery will falter. The number of people

out of work increased a seasonally adjusted 13,000 to 2.94 million, the Nuremberg-based

Federal Labor Agency said today. The adjusted jobless rate held at 6.9%, slightly above a

two-decade low of 6.8%. The euro area, the country’s largest export market, remains

mired in recession and Cyprus’s botched bailout is weighing on German confidence.

(Bloomberg)

US: Consumers’ confidence cools as jobless claims rise Confidence among US consumers fell to a six-week low and claims for jobless benefits

rose more than forecast, highlighting the risks to the economy posed by federal

government budget cuts. The Bloomberg Consumer Comfort Index dropped to minus

34.4 in the week ended March from minus 33.9 as Americans’ views of the economy

deteriorated to the lowest point since early February. Applications for unemployment

insurance benefits rose by 16,000 to 357,000 last week, the Labor Department said.

(Bloomberg)

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4

Outperform

Current Target Upside/

Recc. Price Price Downside PE (x) Yield

(%) Remarks

(Bt) (Bt) (%) 2013f 2013f

CK Trading Buy 24.20 43.30 78.9 40.5 2.3

MBK Buy 177.50 267.00 50.4 7.5 3.9 SAMART Buy 27.75 30.00 8.1 16.4 4.3 LOXLEY Buy 6.90 10.10 46.4 15.6 1.9

ITD Buy 7.25 12.00 65.5 62.8 0.2

AIT Buy 104.00 110.00 5.8 13.9 5.4 KK Buy 66.50 79.00 18.8 11.1 5.0 MINT Buy 24.00 32.50 35.4 22.9 1.1 KTB Buy 24.80 32.80 32.3 8.4 3.3 BLAND Buy 1.97 2.56 29.9 125.7 0.0

Underperform

Current Target Upside/

Recc. Price Price Downside PE (x) Yield

(%) Remarks

(Bt) (Bt) (%) 2013f 2013f

CPF Sell 33.00 28.00 -15.2 26.9 1.7 TISCO Sell 55.25 48.00 -13.1 10.8 4.6 CPALL Neutral 45.75 48.50 6.0 30.8 2.4 PSL Neutral 17.80 12.83 -27.9 33.2 3.1 PTTEP Neutral 148.50 158.08 6.5 9.9 4.0 TTA Sell 17.80 13.60 -23.6 153.1 1.4 SPALI Sell 20.80 15.50 -25.5 10.9 3.7

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5

DIARY OF EVENTS

7-May 8-May 9-May 10-May 11-May

US Data

Arial 7pt.

MY Data

MY Results

Second Chance Properties

SIA Engineering

OSIM International

US Data

MY Data

MY Results

US Data

MBA Mortage Applications (May 4)

MY Data

Automobile COE Open Bid

Cat A (May 9) Automobile COE Open Bid

Cat B (May 9)

Automobile COE Open Bid

Cat C (May 9)

MY Results

Singapore Airlines Ltd

ASL Marine Holdings

Ellipsiz Ltd Sembcorp Marine

United Overseas Bank

US Data

Initial Jobless Claims (May 5)

Continuing Claims (Apr

28)

MY Data

MY Results

Wilmar International City Developments

Hiap Hoe

Singapore

Telecommunications

Vicom Ltd

US Data

MY Data

MY Results

Sembcorp Industries

Mewah International


US Data

MY Data

MY Results

SATS Ltd

ComfortDelgro Corp

US Data

MY Data

Retail Sales Ex Auto (YoY)

(Mar)

Retail Sales (YoY) (Mar) Retail Sales (MoM) sa

(Mar)

MY Results

Fragrance Group

Global Premium Hotels

First Resources Ltd

Armstrong Industrial Olam International

US Data

MBA Mortage Applications

(May 11)

MY Data

MY Results

US Data

Initial Jobless Claims (May

12) Continuing Claims (May 5)

MY Data

MY Results

US Data

MY Data

MY Results

Tiger Airways


US Data

MY Data

MY Results

US Data

Existing Home Sales (Apr)

Existing Home Sales MoM

(Apr)

MY Data

MY Results

Avago Technologies Ltd

US Data

MBA Mortage Applications

(May 18)

New Home Sales (Apr)

New Home Sales MoM (Apr)

MY Data

Automobile COR Open Bid

Cat A (May 23)

Automobile COR Open Bid

Cat B (May 23)

Automobile COR Open Bid Cat C (May 23)

MY Results

US Data


12)

Continuing Claims (May 5)

MY Data


19)

Continuing Claims

(May12)

MY Results

Global Logistics Properties

Ltd

US Data

MY Data

MY Results

28 27 26 25 22 28 27 26 25 22

1 BBL 581.1 98.3 -96.7 -393.7 -84.6 KTB -278.3 -395.2 -488.4 -278.1 -351.0 DTAC 5,087.5 KTB -1,648.2 INTUCH 18,636.6 SCC -3,506.6

2 BAY 237.8 374.8 54.5 113.4 253.1 KBANK -247.6 92.1 424.3 183.6 0.2 CPF 2,207.1 TRUE -882.9 DTAC 8,696.7 LH -3,388.6

3 DTAC 219.5 -142.0 34.1 130.3 348.4 SCC -166.8 -302.5 -25.0 -189.9 -463.1 PTTGC 2,054.1 BANPU -831.9 PTT 6,426.5 BANPU -2,302.5

4 INTUCH 203.6 380.9 -249.2 102.9 50.0 TRUE -160.3 -27.1 -211.3 209.0 269.5 ADVANC 1,986.9 SCC -664.9 ADVANC 6,337.2 SIRI -1,160.5

5 PTT 117.7 56.2 -91.5 -23.3 115.7 ADVANC -107.7 -19.1 513.0 9.1 255.9 INTUCH 1,896.2 DEMCO -630.7 PTTEP 5,473.1 DEMCO -739.3

6 SAMART 114.9 128.9 84.0 -96.9 -80.5 AMATA -94.1 -35.8 -9.9 -27.8 -60.2 SCB 1,846.9 AMATA -612.1 BAY 4,669.9 MINT -504.3

7 PTTEP 114.2 178.2 258.6 29.7 -103.2 RML -52.1 15.0 5.9 -0.2 -7.6 BAY 1,545.7 CPN -464.2 PTTGC 4,513.1 TRUE -365.2

8 PTTGC 84.9 189.8 162.4 47.7 53.8 TUF -42.9 19.8 219.8 56.6 194.6 OISHI 1,299.7 ASP -349.5 BBL 4,472.4 AMATA -343.3

9 EGCO 70.7 49.8 2.8 10.6 -9.4 QH -34.4 8.1 2.1 66.6 -157.9 PTTEP 1,125.5 CK -338.1 KBANK 4,152.1 UV -326.1

10 TCAP 69.9 12.4 25.0 -6.2 7.4 GLOW -29.7 2.4 -19.2 16.3 -8.7 TCB 1,007.7 AP -228.7 CPF 2,716.4 RML -297.6

11 STEC 62.5 62.3 20.0 -10.2 149.9 SUSCO -25.0 -3.0 -1.2 3.2 -48.8 BIGC 992.6 KGI -210.6 TCAP 2,610.7 TTCL -281.9

12 MINT 51.5 47.8 80.6 58.2 87.8 JAS -25.0 16.5 44.1 -55.4 -6.1 TCAP 983.7 IRPC -193.4 TMB 2,577.4 STPI -264.5

13 THAI 50.9 -3.1 7.5 2.4 46.2 SCB -20.5 432.6 -43.8 318.6 -144.4 STEC 814.1 TRC -182.1 BIGC 2,565.2 AAV -254.6

14 SIRI 49.3 108.4 2.0 -88.1 -3.7 TISCO -20.1 -43.2 -4.8 -0.2 -27.4 TMB 775.6 AAV -171.6 TOP 2,335.8 ASP -214.3

15 LPN 43.4 146.7 34.3 36.4 -57.6 BJC -18.9 -17.2 -6.8 25.6 80.4 VGI 774.7 RML -92.9 BGH 1,876.4 CK -194.6

16 TOP 39.9 -10.7 2.8 31.9 -100.7 SCCC -18.2 41.8 11.8 -21.7 -3.5 LH 589.0 TICON -87.6 TUF 1,707.5 JAS -192.2

17 CK 36.2 34.6 -12.0 58.7 169.3 IVL -18.0 -3.3 -18.3 -9.0 8.0 TPIPL 402.2 JAS -85.7 SPALI 1,597.2 MINT-W4 -187.5

18 BIGC 32.6 52.0 45.4 36.8 76.8 MCOT -12.6 -4.9 -3.6 -5.0 -28.2 MINT 386.9 TIPCO -83.3 CPALL 1,587.1 KGI -177.6

19 TMB 29.3 -96.7 -48.5 124.7 -15.7 TTW -12.6 -12.0 -7.3 -30.9 21.6 THCOM 373.0 KBANK -82.3 SCB 1,574.4 CPN -168.9

20 BLAND 28.3 8.6 1.2 2.4 4.5 VIBHA -12.0 1.3 -0.0 0.0 0.6 AEONTS 338.5 AOT -80.2 OISHI 1,409.4 WHA -154.8

% % of % of

Turn. paidup paidup

1 GJS 6.87 1 TISCO-P 66.16 65.86

2 TRUE 2.76 2 BBL 31.05 29.99

3 TMB 6.71 3 KBANK 29.13 28.50

4 RML 12.55 4 TWFP 21.67 24.77

5 KTB 19.10 5 SPALI 21.60 17.94

6 LHBANK 37.31 6 LPN 21.11 21.73

7 BTS-W2 18.06 7 L&E-W2 20.75 7.77

8 BLAND 1.69 8 E-W1 19.46 22.27

9 EVER 4.19 9 THRE 18.66 15.50

10 BAY 46.69 10 LH 17.59 21.18

11 AP 25.90 11 DTAC 15.45 13.33

12 SIRI 5.68 12 AP 15.39 12.92

13 TWZ 0.78 13 TCAP 15.36 12.60

14 GSTEL 4.81 14 LRH 15.18 15.73

15 QH 3.42 15 SPCG-W1 14.98 13.31

16 N-PARK 0.18 16 BAY 14.85 13.89

17 LH 23.83 17 GOLD-W1 14.75 14.87

18 APURE 0.49 18 CITY 14.44 9.51

19 BBL 49.68 19 THIP 14.35 12.64

20 BTS 2.96 20 TISCO 14.30 13.69

Source : SET.OR.TH

29 March 2013

10,291,500

-6,475,100

6,180,000

671,000

2,529,900 8,709,900

4,650,400

11,435,90010,863,700

4,854,500 3,523,100

9,991,200

8,918,500

7,320,800 2,670,400

9,227,5738,556,573

2,443,400 11,361,900

9,378,559 2,433,900 11,812,459 6,944,659

6,006,800 5,581,600 11,588,400

279,999,581 -7,885,573

425,200

572,200

196,328,291 161,065,653 1,277,816,397

166,682,701 25,306,256 26,226,480

-1,461,000

74,970,598

41,953,500 37,278,800

902,308,024 3,650,100

99,645,251 727,878,228

8,377,600 1,331,400

43,333,100 28,526,200

1,147,700

104,053,050 1,608,874

2,591,9002,809,700 8,211,300

8,168,624

3,425,500 4,886,500

4,888,749 3,279,875

5,401,600

8,312,000

8,000,000

300,000,000

6,074,143,747

74,229,798

1,011,300

843,803,210

503,405,255

315,525,949 2,367,811,000 365,893,489

440,193,379 367,964,647 2,859,920,138

3,512,494,860

10,025,921,523

655,531,069 544,461,149

1,763,391,791 2,123,251,472

3,424,427

347,000,000

710,633 660,933

67,517,442 77,281,246

311,505,677 320,609,239

14,302,200

15,955,000 1,699,500

20,795,700 1,785,600

25,627,400 -11,144,400

17,654,500 14,255,500

22,581,300 19,010,100 1,475,698,768

7,241,500 18,385,900

15,149,200 -13,455,200

20,136,200 - 20,136,200 20,136,200

847,000

9,506,055

11,255,631

1,716,553,249

2,393,260,193

2,060,206

307,949,569 370,850,626

-26,152,000 2,354,634 2,742,000 28,894,000 31,636,000

572,486,791 -18,719,400

697,075,658 682,155,834

592,632,117 29,954,700 41,190,000

21,636,777 10,381,146 32,017,923

NetBuy Sell Total

1,908,842,894

29,860,600 22,503,300 22,400 22,300 52,363,900 7,357,300

11,235,300

33,858

Net Buy Net Sell Net Buy Net Sell

2 Jan- 28 Mar 131 - 28 Mar 13Mar 13 Mar 13

Total Volume Shares

(Last)

NVDR Shrs. Paid up CapitalNVDR Shrs.

27-Mar-13 2-Jan-13

BUY VALUES SELL VALUES

Most Active Volume (shares) NVDR Shares to Total Paid-up Shares(%)

NET BUY NET SELL Month to Date Year to Date

Most Active Values (Btmn)

THAI NVDR : Top Ranking

RHB Research PP 7767/09/2012 (030475) 29 Mar 2013


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1

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MARKET DATELINE

THAILAND EQUITY

Investment Research

Company Update

Kasikornbank PCL

One-Off Uptick In Provisions Seen

KBANK’s 1Q13 results are likely to reflect steady growth in loans, non-

interest/net fee incomes and net interest margin. However,

management has guided for a one-off increase in counter-cyclical

provisions of up to THB3.5bn for the quarter. This prompts us to hike

our full-year credit cost assumption from 62bps to 70bps, thereby

trimming our FY13 and FY14 earnings forecasts by 4.1% and 3.8%

respectively. Correspondingly, our FV is pared to THB234.7 from

THB254.6 (ROE:20.8%, COE:11.0%, growth rate: 5.0%). Maintain BUY.

Keeping to growth targets. KBank’s management has retained its full-year

2013 growth and key profitability targets of: i) loans growth of 9%-11%, ii)

non-interest income to rise up to 15%, iii) gross NPL ratio of below 2.4%, iv)

NIMs of 3.4%-3.6%, and v) a cost-to-income ratio of 45%. That said, its 1Q

tends to be a seasonally weaker period given the lumpy seasonal SME loan

repayments and a high base effect due to strong retail loans growth in 4Q.

Cautious, yet a little optimistic. Its management is cautiously optimistic on

the group’s and Thailand’s macroeconomic growth outlook in 2013, citing

heightening spending on government infrastructure and stable private

investments and domestic consumption as helping to counter the external

economic headwinds, as export growth could be derailed by weak employment

data in Western countries. Given its strength in the SME base, the bank may

only benefit from: i) the multiplier uptick in SME loans growth once the strong

government infrastructure spending trickles down to the SME supply chain, and

ii) overall economic growth driving consumer spending upward. We expect the

disbursements of the Thai government’s infrastructure spending to peak in

2015.

Buy Target THB234.7

Previous THB254.6

Price THB208

Banks

KBANK is a full-fledged financial

institution with principal activities that

include commercial banking, insurance,

investment banking, treasury and others

Stock Statistics

Bloomberg Ticker KBANK TB

Market Cap THB497,798m

USD16,995m

52 wk H/L price

(THB)

219 144

3m ADT THB1,008m

YTD Returns (%) 7.5

Beta (x) 1.09

Major Shareholders (%)

Thai NVDR Co Ltd 28.9

State Street Bank and Trust 9.9

State Street Bank Europe 5.3

Share Price Performance (%)

Month Absolute Relative

1m (1.9) (2.1)

3m 7.5 (3.5)

6m 14.0 (4.9)

12m 35.5 7.2

6-month Share Price Performance

97

100

102

105

107

110

112

115

117

120

122

130

140

150

160

170

180

190

200

210

220

230

28

-Mar-

12

30

-May-1

2

01

-Aug

-12

03

-Oct-

12

05

-Dec-1

2

06

-Fe

b-1

3

Price Close Relative to Stock Exchange of Thailand Index (RHS)

Source: Bloomberg

Forecasts and Valuations Dec-10 Dec-11 Dec-12 Dec-13F Dec-14F

Net interest income (THBm) 46,744 56,491 63,581 69,429 76,186

Net income to ord equity (THBm) 20,047 24,226 35,260 41,385 46,114

Net profit growth 36.1% 20.8% 45.5% 17.4% 11.4%

Recurrent net profit (THBm) 20,047 24,226 35,260 41,385 46,114

Consensus EPS (THB) 8.4 10.1 14.7 17.6 20.2

EPS (THB) 8.4 10.1 14.7 17.3 19.3

DPS (THB) 2.50 2.50 4.42 5.19 5.78

Dividend Yield 1.2% 1.2% 2.1% 2.5% 2.8%

Return on average equity 15.7% 16.7% 20.8% 20.8% 20.0%

Return on average assets 1.4% 1.5% 1.9% 1.9% 2.0%

P/E (x) 24.8 20.5 14.1 12.0 10.8

P/B (x) 3.69 3.22 2.69 2.33 2.02

Source: Company data, RHBRI estimates

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Chalie Kueyen +66(0) 2862 9745 [email protected] Keith Wee [email protected]

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KEY TAKEAWAYS

No repeat of 4Q12’s NPL uptick. The group’s 4Q12 asset quality was

affected by a one-off 9.9% q-o-q uptick in absolute NPLs, as a result of certain

stringent reclassification of legacy flood-impacted loans into non-performing

ones. However, the overall NPL trend is expected to remain fairly stable in

1Q13, with gross NPL ratio likely to remain below 2.2% vs management’s full

year target of 2.4%.

Raising counter-cyclical provision buffer. The group could report an

increase in provisions of up to 34% q-o-q in its upcoming 1Q13 results. This

may imply an annualized credit cost of 108bps for 1Q13 vs 4Q12’s 81bps and

2012’s 66bps. However, the one-off lift in provisions, which is largely counter-

cyclical in nature, is a move to help raise the bank’s loans loss coverage to

above 132%. The subsequent quarters should see provisions normalizing to the

62bps level. That said, the expected tick-up in KBANK’s upcoming 1Q13

provision is expected to push its overall average credit cost for 2013 from our

original assumption of 62bps to 70bps, which also prompts us to revise our

provision estimates upwards. We have now built into our assumptions an

average quarterly provision of THB2.4bn vs management’s earlier guidance for

THB2bn.

Effectively managing NIMs. Despite intense competition for deposits in the

industry, KBANK is expected to post relatively healthy NIMs outcome for FY13,

underpinned by the following factors: i) it has a more stable funding structure

and liquidity levels, ii) as it has a less aggressive loans growth target of 9%-

11% vs the likes of SCB, which has targeted for 15%-20%, there is less need

for it to be aggressive in deposit-gathering, and iii) the bank is optimizing

returns by channeling growth in the higher-yield SME and consumer loans

segments (where average yields are at 7%), for which it is targeting 10%-12%

growth. This is in contrast to the lower-yield corporate loans which have

average yields of 4.7%, for which growth is anticipated to be at a more

moderate 4%-6%. Management has guided that NIMs for FY13 are likely to be

sustained at 3.4%-3.6% and confident that it would be able to maintain NIMs

above 3.40% by keeping its deposits growth at a slightly slower pace than

loans. This it can well afford given the former’s stronger liquidity and more

moderate loans growth targets. In fact, its management believes that the key

risk to its 2013 NIMs outlook lies in any potential decrease in policy rates while

the competition for deposits from Special Financial Institutions has eased

significantly since early-2012.

Non-interest and fee income growth intact. Both non-interest and fee

incomes are expected to grow by 15% and 12%-13% y-o-y respectively in

2013. The aggressive push of its non-loan related retail products, enhanced

multi-channel sales, pro-active customer data mining and analytics

management, strong campaign response rates and increasing product holds via

aggressive cross-selling and up-selling, have led to KBANK having among the

strongest non-interest income and transaction fee income franchises.



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Figure 1 KBANK’s key financial targets

Source: KBANK



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FINANCIALS AND VALUATIONS

Profit & Loss (THBm) Dec-10 Dec-11 Dec-12 Dec-13F Dec-14F

Interest income 62,272 83,693 96,174 108,174 119,638

Interest expense (15,528) (27,202) (32,593) (38,745) (43,452)

Net interest income 46,744 56,491 63,581 69,429 76,186

Non interest income 28,394 34,004 40,705 47,511 55,676

Total other income 28,394 34,004 40,705 47,511 55,676

Total operating income 75,138 90,495 104,286 116,941 131,862

Total costs x depn & amortn (34,907) (39,612) (43,219) (47,604) (55,592)

Operating EBITDA 40,231 50,884 61,067 69,336 76,270

Depreciation and amortisation (3,096) (3,407) (3,715) (4,023) (4,331)

Total costs (38,003) (43,019) (46,934) (51,627) (59,923)

Operating profit 37,135 47,477 57,352 65,314 71,939

Total provision charges (6,701) (7,346) (8,390) (9,787) (10,069)

Post-provision operating profit 30,434 40,131 48,962 55,527 61,870

Income from associates 6 13 20 24 28

Pre-tax profit 30,440 40,144 48,981 55,550 61,898

Taxation (9,094) (13,962) (11,136) (12,221) (13,618)

Profit after tax 21,346 26,183 37,845 43,329 48,281

Minority interests (1,299) (1,957) (2,585) (1,944) (2,166)

Profit after tax & minorities 20,047 24,226 35,260 41,385 46,114

Net income to ord equity 20,047 24,226 35,260 41,385 46,114

Recurring net profit 20,047 24,226 35,260 41,385 46,114

Source: RHBRI, Company Data

Balance Sheet (THBm) Dec-10 Dec-11 Dec-12 Dec-13F Dec-14F

Total gross loans 1,076,982 1,210,924 1,329,032 1,460,734 1,624,018

Securities - total 251,080 264,143 382,163 412,221 502,070

Other interest earning assets 97,560 111,969 249,979 210,974 230,476

Total gross interest earning assets 1,425,622 1,587,036 1,961,175 2,083,928 2,356,564

Total provisions (35,416) (38,328) (43,723) (47,052) (50,651)

Net loans to customers 1,041,566 1,172,596 1,285,309 1,413,681 1,573,367

Total net interest earning assets 1,390,206 1,548,708 1,917,452 2,036,876 2,305,913

Cash & accrued interest 32,457 53,211 35,127 43,785 33,656

Total investments 14,519 13,575 11,170 9,720 7,018

Tangible fixed assets 39,009 38,666 40,565 40,506 39,067

Intangible assets 16,614 18,805 21,962 16,614 16,614

Other assets 53,859 49,981 51,166 57,274 54,827

Total non-interest earning assets 156,459 174,238 159,991 167,899 151,183

Total assets 1,546,665 1,722,945 2,077,443 2,204,775 2,457,096

Broad deposits 1,133,100 1,295,569 1,565,384 1,623,437 1,777,768

Other interest-bearing liabilities 88,932 70,303 87,394 79,900 89,828

Total interest-bearing liabilities 1,222,032 1,365,873 1,652,778 1,703,336 1,867,596

Deferred tax liability 1,777 1,063 1,546 1,546 1,546

Other non-interest bearing liabilities 177,368 189,044 222,297 268,158 321,773

Total non-interest bearing liabilities 179,145 190,107 223,843 269,704 323,319

Total liabilities 1,401,177 1,555,980 1,876,621 1,973,040 2,190,915

Share capital 23,933 23,933 23,933 23,933 23,933

Retained earnings reserve 111,010 130,866 161,013 189,982 222,262

Shareholders' equity 134,943 154,799 184,946 213,915 246,195

Minority interests 10,545 12,167 15,876 17,820 19,986

Other equity 0 (0) 0 0 (0)

Total equity 145,488 166,965 200,821 231,735 266,181

Total liabilities & equity 1,546,665 1,722,945 2,077,443 2,204,775 2,457,096




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Balance Sheet Employment Dec-10 Dec-11 Dec-12 Dec-13F Dec-14F

Net cust loans/assets 67.3% 68.1% 61.9% 64.1% 64.0%

Net earning assets / assets 89.9% 89.9% 92.3% 92.4% 93.8%

Non-earning assets/assets 10.1% 10.1% 7.7% 7.6% 6.2%

Net cust loans/cust deposits 94.7% 94.4% 92.4% 93.8% 94.6%

Equity / assets 8.7% 9.0% 8.9% 9.7% 10.0%

Equity / gross cust loans 12.5% 12.8% 13.9% 14.6% 15.2%

Equity & provns / gross cust loans 15.9% 16.1% 17.2% 17.9% 18.3%

Asset risk weighting 73.1% 73.7% 65.7% 67.0% 67.3%

Liquid funds / cust deposits 34.6% 34.6% 48.0% 44.3% 46.1%

Provision charge / avg cust loans 0.7% 0.6% 0.7% 0.7% 0.7%

Provision charge / avg assets 0.5% 0.4% 0.4% 0.5% 0.4%

Total write-off / avg cust loans 0.5% 0.4% 0.4% 0.4% 0.4%

Total write offs / average assets 0.3% 0.3% 0.2% 0.2% 0.3%

Reported NPLs / net cust loans 3.2% 2.7% 2.6% 2.5% 2.3%

Estimated NPLs / net cust loans 3.2% 2.7% 2.6% 2.5% 2.3%

SP chg / avg cust loans -0.5% -0.5% -0.5% -0.5% -0.5%

GP charge / average cust loans -0.2% -0.2% -0.2% -0.1% -0.2%

Total provn chg / avg cust loans -0.7% -0.7% -0.7% -0.6% -0.6%

Reported NPLs / gross cust loans 3.1% 2.6% 2.5% 2.4% 2.3%

Estimated NPLs / gross cust loans 3.1% 2.6% 2.5% 2.4% 2.3%

Total provisions / gross cust loans 3.4% 3.3% 3.3% 3.2% 3.1%

Total provisions / reported NPLs 111.0% 127.1% 131.8% 135.3% 137.6%



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RHB Guide to Investment Ratings Buy: Share price may exceed 10% over the next 12 months

Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain

Neutral: Share price may fall within the range of +/- 10% over the next 12 months

Take Profit: Target price has been attained. Look to accumulate at lower levels

Sell: Share price may fall by more than 10% over the next 12 months

Not Rated: Stock is not within regular research coverage Disclosure & Disclaimer All research is based on material compiled from data considered to be reliable at the time of writing, but RHB does not make any representation or warranty, express or implied, as to its accuracy, completeness or correctness. No part of this report is to be construed as an offer or solicitation of an offer to transact any securities or financial instruments whether referred to herein or

otherwise. This report is general in nature and has been prepared for information purposes only. It is intended for circulation to the clients of RHB and its related companies. Any recommendation contained in this report does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This report is for the information of addressees only and is not to be taken in substitution for the exercise of judgment by addressees, who should obtain separate legal or financial advice to independently evaluate the particular investments and strategies. RHB, its affiliates and related companies, their respective directors, associates, connected parties and/or employees may own or have positions in securities of the company(ies) covered in this research report or any securities related thereto, and may from time to time add to, or dispose off, or may be materially interested in any such securities. Further, RHB, its affiliates and related companies do and seek to do business with the company(ies) covered in this research report and may from time to time act as market maker or have assumed an underwriting commitment in securities of such company(ies), may sell them or buy them from customers on a principal basis and may also perform or seek to perform significant investment banking, advisory or underwriting services for or relating to such company(ies), as well as solicit such investment, advisory or other services from any entity mentioned in this research report. RHB and its employees and/or agents do not accept any liability, be it directly, indirectly or consequential losses, loss of profits or damages that may arise from any reliance based on this report or further communication given in relation to this report. The term “RHB” shall denote where applicable, the relevant entity distributing the report in the particular jurisdiction mentioned specifically herein below and shall refer to RHB Research Institute Sdn Bhd, its holding company, affiliates, subsidiaries and related companies. All Rights Reserved. This report is for the use of intended recipients only and may not be reproduced, distributed or published for any purpose without prior consent of RHB and RHB accepts no liability whatsoever for the actions of third parties in this respect. Malaysia This report is published and distributed in Malaysia by RHB Research Institute Sdn Bhd (233327-M), Level 11, Tower One, RHB Centre, Jalan Tun Razak, 50400 Kuala Lumpur, a wholly-owned subsidiary of RHB Investment Bank Berhad (RHBIB), which in turn is a wholly-owned subsidiary of RHB Capital Berhad. As of 04 Mar 2013, RHBIB does not have proprietary positions in the subject companies, except for: a) - As of 04 Mar 2013, none of the analysts who covered the stock in this report has an interest in the subject companies covered in this report, except for: a) - Singapore This report is published and distributed in Singapore by DMG & Partners Research Pte Ltd (Reg. No. 200808705N), a wholly-owned subsidiary of DMG & Partners Securities Pte Ltd, a joint venture between OSK Investment Bank Berhad, Malaysia (“OSKIB”) and Deutsche Asia Pacific Holdings Pte Ltd (a subsidiary of Deutsche Bank Group). DMG & Partners Securities Pte Ltd is a Member of the Singapore Exchange Securities Trading Limited and is a subsidiary of OSKIB, which in turn is a wholly-owned subsidiary of RHB

Capital Berhad. DMG & Partners Securities Pte Ltd may have received compensation from the company covered in this report for its corporate finance or its dealing activities; this report is therefore classified as a non-independent report. As of 04 Mar 2013, DMG & Partners Securities Pte Ltd and its subsidiaries, including DMG & Partners Research Pte Ltd do not have proprietary positions in the subject companies, except for: a) - As of 04 Mar 2013, none of the analysts who covered the stock in this report has an interest in the subject companies covered in this report, except for: a) -


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Special Distribution by RHB Where the research report is produced by an RHB entity (excluding DMG & Partners Research Pte Ltd) and distributed in Singapore, it is only distributed to "Institutional Investors", "Expert Investors" or "Accredited Investors" as defined in the Securities and Futures Act, CAP. 289 of Singapore. If you are not an "Institutional Investor", "Expert Investor" or "Accredited Investor", this research report is not intended for you and you should disregard this research report in its entirety. In respect of any matters arising from, or in connection with this research report, you are to contact our Singapore Office, DMG & Partners Securities Pte Ltd. Hong Kong This report is published and distributed in Hong Kong by OSK Securities Hong Kong Limited (“OSKSHK”), a subsidiary of OSK Investment Bank Berhad, Malaysia (“OSKIB”), which in turn is a wholly-owned subsidiary of RHB Capital Berhad. OSKSHK, OSKIB and/or other affiliates may beneficially own a total of 1% or more of any class of common equity securities of the subject company. OSKSHK, OSKIB and/or other affiliates may, within the past 12 months, have received compensation and/or within the next 3 months seek to obtain compensation for investment banking services from the subject company. Risk Disclosure Statements The prices of securities fluctuate, sometimes dramatically. The price of a security may move up or down, and may become valueless. It is as likely that losses will be incurred rather than profit made as a result of buying and selling securities. Past performance is not a guide to future performance. OSKSHK does not maintain a predetermined schedule for publication of research

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morning matters - rhb tradesmart · this prompts us to hike our full-year credit cost assumption...

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