TISCO FINANCIAL GROUP PCL (TISCO)
Price Target Bt 11.5(-14%)
Median Consensus: Bt 10.5
Price Bt 13.3
12 Month Range Bt13.7/8.6
Market Capitalization Bt 7,198 m
Share in issue (Par10) 541.18 m
Book Value/share (Y08) N/A
Free Float (8/8/2551) 93.75%
Foreign Limit/Available 49%/5.69%
NVDR in hand (% of shares) 5.35%
Average Volume (‘000) 1,951.08
Group EPS Growth 2008A 2009F
Downgrade from outperform to HOLD
TISCO released better-than-expected 1Q09 net profits at Bt454mn, up 18%qoq and 6%yoy. TISCO has succeeded acquiring Primus Leasing since early March, which helped boosted loans base. Strong NIM is the key for inspiring earnings for this quarter. However, we are still bearish view on HP player on this year tough economy. With recent strong rally and limited upside, We downgraded the stock from Outperform to HOLD. Management still expects double digit loans growth for 2009F, while key driver would be fee income.
- Net interest margin: surprisingly expanded substantially 64bps qoq from 3.35% to 3.99%, benefiting from downward interest rate, which reduced funding cost in faster pace than loans yield as well as its strategy to penetrate high-yield segments. Net interest income surged satisfactorily 26%qoq and 19%yoy.
- Loans: grew satisfactorily 3.8%qoq, the best banks in term of loans growth in this quarter. This was driven by Primus Leasing acquisition as well as rising penetration rate in HP business.
- Fee income: however declined 10%qoq. Brokerage fee declined sharply 43%qoq as a result of poor stock market. However, sharp decline in investment loss helped boosted Non-NII growth.
- Operating cost: was flat qoq. Increase in premises and equipment expense was offset by declining staff cost. Cost-to-income ratio declined to 47%.
- Provisions: was Bt293mn, rising from Bt140mn last quarter. This was due mainly to higher risk for HP loans on current stagnant economy.
- NPLs: was flat qoq. TISCO’s NPL ratio was still quite low at 2.28%. However, we are still concern about outlook on its NPL. Coverage ratio declined to 61%.
- 1Q09 results: was accounted to 28% of our full year forecasts, implying that our earnings forecasts may be on upside risk. However, on conservative basis, we maintain our current forecast for this year. Also, we believe that interest rate down cycle is likely to come an end, capping benefit on its NIM.
Recommendation & Valuation: TISCO share price has performed very well in the past one month on trading theme of deep discount stocks. Now, share price look quite not attractive in term of valuation, trading at 0.8x PBV vs ROE of 13%. Thus, we downgrade the stock recommendation from outperform to HOLD with a target price of Bt11.50. Dividend yield at the current level may not attractive when compared to downside risk. We believe that positive issues, such as downtrend interest rate, Primus Leasing acquisition, has already priced in. We recommend investor to beware on short-term taking profit on the stock as such strong rally. More importantly, key risks for TISCO remain on poor economic condition, which would affect HP player more than commercial banks.
By Trinity Securities Company Limited on April 21, 2009
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