sawad final
TRANSCRIPT
Outline
❖ Business description ❖ Core products❖ Investment thesis
➢ Ambitious ROE target propelled by high loan growth➢ Nano finance and debt collection services to support growth ➢ Plan to launch bonds of THB 2.5bn in late 2015 3rd Quarter to boost
expansion➢ Manageable Risk and NPL ➢ Branch expansion
❖ Financial statement❖ Risk❖ Valuation❖ Trade Strategy
Business Description
• Collateral-backed loans
• Asset owners, in need of quick cash
• Branches throughout Thailand
Srisawad Power 1979(sawad)
Fast Money Co.Ltd(FM)
SWP Asset Management
Co. Ltd(AMC)
New motorcycles ,Personal loan ,Nano finance
Debt Collection
Outline❖ Business description ❖ Core products❖ Investment thesis
➢ Ambitious ROE target propelled by high loan growth➢ Nano finance and debt collection services to support growth ➢ Plan to launch bonds of THB 2.5bn in late 2015 3rd Quarter to boost
expansion➢ Manageable Risk and NPL ➢ Branch expansion
❖ Financial statement❖ Risk❖ Valuation❖ Trade Strategy
Core Product
❖ Auto Backed Loans❖ House and Land Backed Loan❖ Personal Loans❖ New Motorcycle Hire Purchase
Outline❖ Business description ❖ Core products❖ Investment thesis
➢ Ambitious ROE target propelled by high loan growth
➢ Nano finance and debt collection services to support growth ➢ Plan to launch bonds of THB 2.5bn in late 2015 3rd Quarter to boost
expansion➢ Manageable Risk and NPL ➢ Branch expansion
❖ Financial statement❖ Risk❖ Valuation❖ Trade Strategy
Ambitious ROE target of 30-35% per year
❖ Loan growth target: 20-30% (2015-2017)❖ Driven by aggressive lending in the banking market❖ 25 million members of the workforce = “out of system” *❖ Targeting low-income clients (those difficult to receive loans
from large banks)
*National Statistical Office: not on a payroll or drawing fixed salary
Outline❖ Business description ❖ Core products❖ Investment thesis
➢ Ambitious ROE target propelled by high loan growth➢ Nano finance and debt collection services to
support growth ➢ Plan to launch bonds of THB 2.5bn in late 2015 3rd Quarter to boost
expansion➢ Manageable Risk and NPL ➢ Branch Expansion
❖ Financial statement❖ Risk❖ Valuation❖ Trade Strategy
Nanofinance and debt collection services
❖ Awarded Nanofinance licenses from the Ministry of Finance - May 2015
❖ Lending budget at THB 500m - commence 2015 3rd Quarter❖ Potential clients: franchisees of 30 local brand names
1. Jiang Fish Ball 2. Kieng Empire 3. Hong Kong Noodles❖ Diversify into distressed asset management and debt
collection services via its subsidiary.
Loans expansion via SME clients
Outline❖ Business description ❖ Core products❖ Investment thesis
➢ Ambitious ROE target propelled by high loan growth➢ Nano finance and debt collection services to support growth ➢ Plan to launch bonds of THB 2.5bn in late
2015 3rd Quarter to boost expansion➢ Manageable Risk and NPL ➢ Branch Expansion
❖ Financial statement❖ Risk❖ Valuation❖ Trade Strategy
Launch bonds of THB 2.5bn in 2015 3rd Quarter
❖ Main aspect: firm’s rapid expansion outlook❖ Rise in number of branches => firm to increase its lending &
efficiency in debt collection❖ Low net D/E ratio of 1.7x at the end of Q1 2015❖ Estimate new borrowing bring D/E ratio = 2.4x❖ => leverage D/E ratio
Outline❖ Business description ❖ Core products❖ Investment thesis
➢ Ambitious ROE target propelled by high loan growth➢ Nano finance and debt collection services to support growth ➢ Plan to launch bonds of THB 2.5bn in late 2015 3rd Quarter to boost
expansion➢ Manageable Risk and NPL ➢ Branch Expansion
❖ Financial statement❖ Risk❖ Valuation❖ Trade Strategy
Manageable Risk and NPL
Proportion of Receivables:
“More than 70% of the loans are categorised as Current”
Quality of loans
Outline❖ Business description ❖ Core products❖ Investment thesis
➢ Ambitious ROE target propelled by high loan growth➢ Nano finance and debt collection services to support growth ➢ Plan to launch bonds of THB 2.5bn in late 2015 3rd Quarter to boost
expansion➢ Manageable Risk and NPL ➢ Branch Expansion
❖ Financial statement❖ Risk❖ Valuation❖ Trade Strategy ❖ n3.gstatic.com/images?q=tbn:ANd9GcQVSoFQ1_sJIQuGItbwfFySAJIxu8A3Hq-8S9I0-
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Branch Expansion
❖ Plans to raise its branch network to 1,300 offices in 2015 1,500 offices in 2016 from 1,059 offices in 2014. ❖ The company also plan to expand its business overseas.
Outline❖ Business description ❖ Core products❖ Investment thesis
➢ Ambitious ROE target propelled by high loan growth➢ Nano finance and debt collection services to support growth ➢ Plan to launch bonds of THB 2.5bn in late 2015 3rd Quarter to boost
expansion➢ Manageable Risk and NPL ➢ Branch Expansion
❖ Financial Statement Analysis❖ Risk❖ Valuation❖ Trade Strategy
❖ Trade Strategy
Financial Statement Analysis: INCOME STATEMENT• SAWAD’s revenues increased by 35.16% from 1.45bn to
1.95bnNet income improved by 48.53% from THB 575.43m. to 854.69m.
Financial Statement Analysis: GROWTH RATE
• SAWAD’s growth in earnings per share increased 17.78% Five year annualized earnings per share growth ranks highest in its industry.
Financial Statement Analysis: CASH FLOW• In 2014, Srisawad Power 1979 PLC increased its cash reserves by 246.55%
(247.57m) Cash Flow from Financing totalled 80.09% (1.57bn) ofits revenues.
• SAWAD used 1.13bn for operations while cash used for investing totalled 188.70m.
Financial Statement Analysis: BALANCE SHEET
Debt to Total Capital ratio of 44.50%
Outline❖ Business description ❖ Core products❖ Investment thesis
➢ Ambitious ROE target propelled by high loan growth➢ Nano finance and debt collection services to support growth ➢ Plan to launch bonds of THB 2.5bn in late 2015 3rd Quarter to boost
expansion➢ Manageable Risk and NPL ➢ Branch Expansion
❖ Financial Statement Analysis❖ Risk Analysis❖ Valuation❖ Trade Strategy
Risk Analysis
High NPL ratio compared with consumer finance peersSAWAD’s NPL Ratio is the highest among its consumer finance peers, because some clients have income streams on a quarterly or half-yearly basis. However, We believe that its low loan-to-value at 30-70% and high interest rate charged cover any default risks, which therefore results in an impressive bad debt recovery rate of 50% in the first year after customers go into default.
Dependence on senior management Major shareholders and management has a strong background in the vehicle pledging loan business in the vehicle-pledging loan business in the provincial markets.
Provisions charged remain high which are in line with SAWAD’s larger portfolio. However, we believe that its effective in-house debt collection unit will mitigate rising NPL amid high household debt
Outline❖ Business description ❖ Core products❖ Investment thesis
➢ Ambitious ROE target propelled by high loan growth➢ Nano finance and debt collection services to support growth ➢ Plan to launch bonds of THB 2.5bn in late 2015 3rd Quarter to boost
expansion➢ Manageable Risk and NPL ➢ Branch Expansion
❖ Financial Statement Analysis❖ Risk❖ Valuation❖ Trade Strategy
Valuation LOW Profile, HIGH Profit• Recommendation: BUY
Share Price Forecast
Valuation LOW Profile, HIGH Profit• PRICE: Positive trend Dividends Forecast
2014 Annual Earnings of 0.9118 per share & EPS Forecast
2015 1st Quarter Earnings of 0.27 per share
Possible Climax Top price
❖ Growth stock tends to reach climax top when its P/E expands to 2.3X of P/E at break out
❖ SAWAD broke out with massive volume on 08/12/2014 ➢ P/E = 34.69 >>> 2.3X P/E ~ 79➢ EPS on 08/12/2014 ~ 0.7 ➢ FY2015 EPS ~ 1.24➢ Climax Top price ~ 79*1.24 ~ 98➢ Upside ~ 150%
❖ SAWAD may or may not reach its climax top price
Outline❖ Business description ❖ Core products❖ Investment thesis
➢ Ambitious ROE target propelled by high loan growth➢ Nano finance and debt collection services to support growth ➢ Plan to launch bonds of THB 2.5bn in late 2015 3rd Quarter to boost
expansion➢ Manageable Risk and NPL ➢ Branch Expansion
❖ Financial Statement Analysis❖ Risk❖ Valuation❖ Trade Strategy
Trade Strategy
Trade Strategy
Trade Strategy
Support from Institutional Investors
Support from Institutional Investors
These are accumulating shares of SAWAD.
❖ Invest 50% of allocated capital when 1) Price breaches 50 days SMA resistance with strong volume (preferably > 50
days Average Volume).2) Price breaks out from new base with strong volume. 3) Pocket Pivot Buypoint - Up day with volume > prior down Volume within 10
sessions.❖ Allocate 30% when price goes up 2.5% and 20%when price goes up another 2%
(so we will buy within range of 5% from buypoint).“Pyramiding: Averaging UP not Averaging Down!”
❖ Have to buy a stock in a unit of board lot i.e. 1 board lot = 100 shares. So it might be difficult to do pyramiding.
Trade Strategy
Trade Strategy
❖ Hedge Currency Risk by short Thai Baht 50% of position size.❖ Consider take profit when return ~ 20%❖ MUST “CUTLOSS” if loss reaches 8% (Max. 10%)❖ Why CUTLOSS?
You Will Survive if CutLoss!
Position Sizing
❖Minimum allocated capital should be 10% of total available fund. Otherwise position might be too small.
❖With 8% cutloss for 10% position sizethen we only risk 8%*0.1 = 0.8% of portfolio
Position Sizing
❖Maximum position size? ❖ Define your maximum risk based on your risk
tolerance. Let 2% drawdown = Max for each position.Maximum position size = 2%/0.08 = 25%
❖ Good trade should yield Reward to Risk ≥ 2:1
“At the end of the day, the most important thing is how good are you at risk control.”
“If I have positions going against me, I get right out; if they are going for me, I keep them… Risk control is the most important thing in trading. If you have a losing position that is making you uncomfortable, the solution is very simple: Get out, because you can always get back in.”
Paul Tudor Jones
“The only way you get a real education in the market is To invest cash, Track your trade, and Study your mistakes.”
Jesse Livermore
Q&A