TMBBANKTMBCOMEBACKOFTHEUNDERDOG0109

1、oct-12may-12dec-12jan-12 mar-12jul-12sep-121,417.3343,5502,86043.76tmb7.610.8n.a.1.39n.a.-10-20403020100-thailandcompany updatebuy (upgraded from sell)tmb bank (tmb)comeback of the underdog9 january 2013share price:target price:bt2.08bt2.50 (from bt1.64)upgrade to buy. we are upgrading tmb to a buy

2、(from sell) with anew target price of thb2.50. we raise our fy12-14f earnings forecastsby 9%, 22% and 42%, respectively, to incorporate strong loan growth,nim expansion, better operating efficiency and asset qualityworaphon wiroonsri, cfatermporn.tmaybank-ke.co.th(02) 658 6300stock informationdescri

3、ption: the bank engages in universal bankingbusiness to serve corporate, sme, and retail customers. ingbank b.v., a large financial group in europe is its strategicpartner and is its major shareholder as well as ministry offinance. the bank also conducts its business through anationwide branch netwo

4、rk and in certain major centers ofthe world. tmb was listed on the set in december 1983.ticker :shares issued (mn) :market cap (us$mn):3-mth avg. daily turnover (us$mn):set index:free float (%):improvements. tmb shares have underperformed over the past twoyears, in contrast with its very gradually i

5、mproving operationalperformance. current valuations do not look cheap, but are still attractivewhen compared to its earnings growth prospects and rising roe. webelieve that tmb will be interesting as a turnaround stock.continuing improvements drive earnings growth momentum. sincethe 1997 banking cri

6、sis, tmb has had longstanding story about a pendingmerger and capital increases. tmb reported huge losses due mainly topoor asset quality and dismal operating efficiency. however, after theentry of ceo mr. boontuck, its performance gradually improved. it hasbecome a leader in transactional banking,

7、focusing on fee income andhigh-yield, short-term sme loans. also, it has restructured its fundingbase in an attempt to lower funding costs. a cost control programme hasimproved operating efficiency, and its asset quality problem has beensolved. we believe that tmb has successfully restructured its b

8、usiness,and a growth phase should ensue.roe hitting 13.3% by fy14f. we raise our fy12-14f net profitforecasts by 9%, 22% and 42%, respectively, on improvements in its loangrowth, nim, and cost-to-income ratio. although fy13f net profit willgrow just 14.8%yoy (sector average is 23%) owing to tax expe

9、nsesfollowing the end of tax loss carry-forward benefits, we expect tmbs pre-ndtax profit growth to be outstanding at 42.5%yoy, (2 to tcap). we alsomajor shareholders :ministry of financeing bank n.v.key indicatorsroe annualised (%)net cash (btmn):nta/shr (btmn):interest cover (x):historical chart%2

10、6.0925.19expect strong earnings growth in fy14f, at 34.2% yoy. this will helpboost roes to 13.3%, vs. below 10% in the past. 4q12f results, to beannounced next week, will likely show positive momentum continuingfrom 3q12. net profit for the quarter is expected at thb1.75b, up 22%qoq and 80% yoy, and

11、 the highest level since 1q06.a turnaround stock. over the past two years, tmb shares haveunderperformed the market and the setbank index. however,operational improvements and accelerating earnings growth momentummake tmb a turnaround stock this year, in our view. our fy13-14fprojections are now 16%

12、 and 34% above consensus estimates, and weexpect to their upgrades especially after the 4q12 results announcement.currently trading at 1.4x pbv (its historical average) and 13.8x per onour estimates, the stock is not too expensive in light of an improvingearnings performance and with roes expected r

13、ise to 13.3% in fy14f.we believe tmb should be re-rated and thus upgrade it to a buy with anew target price of thb2.50, based on a pbv of 1.79x (+1s.d. to itshistorical average).tmb summary earnings tablefye: dec 31 (btmn) 2010 2011 2012f 2013f 2014foperating income 16,167 20,817 24,258 27,578 31,29

14、9pre-provisioning profitprofit before taxrecurring net profit4,8793,2253,2027,1764,0724,00910,1505,5495,48013,3047,9056,28916,06410,6128,443performance52-week high/lowtmbsetbt2.04/bt1.40recurring basic eps (bt)eps growth (%)dps (bt)per (x)div yield (%)0.0764.60.0232.10.60.0925.20.0317.21.90.1336.70.

15、0415.92.00.1414.80.0513.82.30.1934.20.0610.33.01-mth3-mth6-mth1-yrsytdp/bv (x)2.11.31.61.41.3absolute (%)relative (%)6.40.811.12.429.09.822.7-9.47.55.7book value (bt)roae (%)1.146.61.207.91.2910.11.3910.81.5313.3roaa (%)consensus net profit (btmn)0.60.60.85,0520.95,4191.16,311source: company reports

16、 and kelive research estimates.see appendix i for important disclosures and analyst certifications2012f 2013f2014f2012f2013f 2014f2002 2003 2004 2005 2006 2007 2008 2009 2010 20112002 2003 2004 2005 2006 2007 2008 2009 2010 201112.5%11.2%tmb bank (tmb)highlightscontinuing improvements to drive earni

17、ngs growth momentumsince the 1997 financial crisis, tmb has had a long-running story about apossible merger and capital increases. there were many speculationsthat tmb would report huge losses due mainly to poor asset quality andoperating efficiency.however, after the entry of ceo mr. boontuck, tmbs

18、 performancegradually improved. it has become a leader in transactional banking witha focus on fee income and high-yield, short-term sme loans. it has alsorestructured its funding base in an attempt to lower funding costs. a costcontrol programme has been instituted to improve operating efficiency.i

19、mportantly, its asset quality issues have been resolved.in the past, owing to its many problems, tmb lost market share. assetsand loans have declined since 2005, before improving slightly in 2011.then expansion started in 2012, and we expect full-year loan growth tocome in at 15%. we believe that lo

20、an growth momentum will continue at13% and 11% in fy13f and fy14f, respectively.chart 1: tmb loan portfoliobtbn700.0600.0559.5546.2517.7574.6500.0400.0468.9427.6369.1363.7398.4458.1300.0200.0100.00.020052006200720082009201020112012f 2013f 2014fsource: company reports and kelive research estimates.a

21、key issue for tmb currently is the high level of npls, which are beingcontinuously resolved. the current npl ratio is below 6% and shouldcontinue decreasing. the coverage ratio is also gradually improving andshould hit 100% from fy13f onward.chart 2: tmb npl ratiochart 3: tmb coverage ratio25.0% 22.

22、9%20.0%16.6%16.4%120%100%81%89%104%114%15.0%13.5%11.7%14.7%9.9%80%60%69%47% 50%67% 66%58% 57%73%10.0%5.0%7.5%5.9%5.0% 4.5%40%20%27%0.0%source: company reports and kelive research estimates.9 january 20130%source: company reports and kelive research estimates.page 2 of 12tmb bank (tmb)revised earning

23、s projectionswe believe that the bulk of tmbs restructuring efforts are behind it, andthat tmb will now enter a growth phase. we raise our assumptions fortmbs loan growth, nim, fee income and cost-to-income ratio, resulting inearnings upgrades of 9%, 22% and 42% for fy12-14f.table 1: tmb earnings re

24、vision2012f2013f2014fpreviousnewchangepreviousnewchangepreviousnewchangeloan growth (%)nim (%)fee income growth (%)cost-to-income ratio (%)credit costs (%)net profit (btmn)eps (bt)dps (bt)15.0%2.64%21.5%59%1.05%5,0240.1150.03515.0%2.63%21.1%58%1.06%5,4800.1260.0400.0%-0.01%-0.3%-1%0.01%9%9%14%8.0%2.

25、80%14.2%55%1.10%5,1610.1190.03513.0%2.92%17.7%52%1.10%6,2890.1440.0455.0%0.12%3.5%-3%0.00%22%22%29%8.0%2.88%10.9%53%1.10%5,9330.1360.04011.0%3.04%16.9%49%1.00%8,4430.1940.0603.0%0.16%6.0%-5%-0.10%42%42%50%source: kelive research estimates.we expect tmbs loan growth to be in line with the sector aver

26、age, afterunderperforming in the past. short-term sme loans with high yields andlow npls will be a key focus for tmb. currently, tmbs loan mix is 49%corporate, 32% sme and 19% retail. we expect the sme portfolio tobecome the biggest driver of loan growth in the near future.chart 4: tmb loans growth

27、vs. sectorchart 5: tmb loans portfolio mixed (as of 3q12)20%18%15% 15%15%15%10%8%6%12%10%13%11% 11%11%retail19.1%corporate5%1%2%48.9%0%-5%-10%-2%-8%-15%-20%-19%-11%sme32.0%200620072008200920102011 2012f2013f2014ftmbsectorsource: company reports and kelive research estimates.source: company reports.t

28、he strategy of focusing on short-term sme loans is positive for nims, asthese loans usually have high yields. tmb has also restructured itsfunding base by raising casa to 64% currently vs. 40% in the past. thisis a great help in reducing tmbs funding costs. with its funding baserestructured, a risin

29、g portion of sme loans in the portfolio and decliningnpls, tmbs nims will continue to improve, while the rest of the sectorpast their peak would seedeclining nims. we believe that themomentum of nim expansion will continue, and nims will rise to above3% in fy14f.9 january 2013page 3 of 122012f 2013f

30、2012f 2013f2014f200420052006200720082009201020112014f20042005200620072008200920102011ndtmb bank (tmb)chart 6: tmb nim3.3%3.1%2.9%2.7%2.6%2.9%3.0%2.5%2.3%2.2%2.3%2.4%2.1%1.9% 2.0%1.9%1.9% 2.0%1.9%1.7%1.5%source: company reports and kelive research estimates.with the aim of becoming a leading transact

31、ional bank, tmb haslaunched various new financial products, which we see as positive. thiswill help boost tmbs deposit and client base, which will also benefit feeincome growth. we forecast fy13-14f fee income growth at 18% and17%, respectively.tmb has also focused on improving cost efficiency, whic

32、h has resulted ina continuous decline in its cost-to-income ratio. we expect this trend tocontinue and the cost-to-income ratio to drop below 50% in 2014f.chart 7: tmb fee income growthchart 8: tmb cost-to-income ratio25.0%20.0%21.1%17.7%16.9%110.0%100.0%94.3%98.5%15.0%10.0%5.0%8.7%5.6%11.1%90.0%80.

33、0%71.1%76.2%69.8%0.0%70.0%65.5%-5.0%-10.0%-9.8%60.0% 52.8% 55.1%50.0%58.2%51.8%48.7%-15.0%-20.0%-15.5%40.0%200720082009201020112012f2013f2014fsource: company reports and kelive research estimates.source: company reports and kelive research estimates.overall, we estimate tmbs fy13f pre-tax profit to

34、grow at a robust42.5% yoy (2 highest in the sector, tcaps has the highest growth at112%yoy). however, the bottom line will be pressured by highercorporate taxes following the end of tax loss carry-forward benefits. weexpect fy13f net profit growth of only 14.8% vs. the sector average of23%. however,

35、 we expect fy14f net profit to grow strongly at 34.2%yoy and boost roes from below 10% to 13.3%.9 january 2013page 4 of 12tiscotcaptmbscbktbkkkbanksectorbaybbltmb bank (tmb)chart 9: tmb pre-tax profitbt bnchart 10: tmb net profitbt bn12.0+34.2%9.0+34.2%8.410.610.08.0+14.8%8.0+42.5%7.97.06.0+36.7%5.5

36、6.36.04.03.2+36.3%4.15.55.04.03.03.24.01.92.02.02.00.00.61.00.00.420082009201020112012f2013f2014f20082009201020112012f2013f2014fsource: company reports and kelive research estimates.chart 11: thai banks 2013f pre-tax profit growthsource: company reports and kelive research estimates.chart 12: tmb ro

37、e120.0% 111.9%14.0%13.3%100.0%80.0%12.0%10.0%10.1%10.8%7.9%60.0%8.0%6.6%40.0%20.0%42.5%38.8%30.1%25.0% 21.9%18.3% 16.7% 16.4%13.5%6.0%4.0%4.2%2.0%1.0%0.0%0.0%20082009201020112012f2013f2014fsource: company reports and kelive research estimates.source: company reports and kelive research estimates.4q1

38、2f results, to be announced next week, will likely show positivemomentum continuing from 3q12. net profit is expected at thb1.75b,the highest level since 1q06, representing growth of 22% qoq and 80%yoy.9 january 2013page 5 of 12tmb bank (tmb)table 2: tmb consolidated financial resultsincome statemen

39、t (btmn)interest incomeinterest expensesnet interest incomenet fee & service incomeother incomenon-interest incomestaffing costsother operating expensesnon-interest expensesoperating profits (ppop)provisioningpre-tax profittaxationminority interestnet profiteps (bt)up (bt)bvps (bt)4q117,4753,607

40、3,8689326121,5442,3201,6633,9821,4294449851069700.020.031.201q127,4763,5383,9389516601,6111,7511,5113,2622,2871,2421,046861,0320.020.051.222q127,3793,3284,0511,1075321,6391,7021,7773,4792,2119321,279971,2630.030.051.223q127,7743,3534,4211,1856271,8121,8131,7703,5832,6501,1951,4551081,4370.030.061.25

41、4q12f8,0293,3834,6461,2768632,1391,8941,8893,7833,0011,2321,7691291,7490.040.071.29%qoq3%1%5%8%38%18%4%7%6%13%3%22%18%3%22%22%13%3%yoy7%-6%20%37%41%39%-18%14%-5%110%178%80%20%48%80%80%110%8%201126,14811,91214,2353,7322,8506,5816,8256,81613,6417,1763,1044,07240224,0090.090.161.202012f30,65813,60217,0

42、564,5202,6827,2027,1616,94714,10810,1504,6015,54939305,4800.130.231.29%yoy17%14%20%21%-6%9%5%2%3%41%48%36%-4%35%37%37%41%8%key financial ratiosnet interest margin (nim)- asset yields- funding costsloan growth yoyloan growth qoqloan growth ytddeposit growth yoynet l/dnpl ratio (bank only)coverage rat

43、iocost-income rationon-interest income / total inc.tax rate (effective)provisioning charges / net loanspre-provisioning roaroetier-1 ratiocar2.46%4.34%2.10%9.5%2.5%9.5%9.6%83%5.2%75%74%29%1%0.47%0.8%7.5%11.1%16.1%2.43%4.18%1.98%6.0%0.8%0.8%3.1%84%5.4%76%59%29%1%1.31%1.3%7.8%11.2%16.2%2.52%4.25%1.92%

44、11.4%5.1%6.0%7.5%83%5.2%82%61%29%1%0.93%1.3%9.5%11.5%18.7%2.80%4.64%2.00%12.4%3.4%9.6%5.5%87%5.1%85%57%29%1%1.16%1.6%10.7%11.6%18.9%2.91%4.76%2.00%15.0%4.9%15.0%8.5%88%4.9%89%56%32%1%1.14%1.8%12.6%11.6%18.8%2.39%4.00%1.82%9.5%n.a.9.5%9.6%83%5.2%75%66%32%1%0.86%1.1%7.9%11.1%16.1%2.63%4.37%1.94%15.0%n

45、.a.15.0%8.5%88%4.9%89%58%30%1%1.14%1.4%10.1%11.6%18.8%source: company reports and kelive research estimates.an interesting turnaround stock upgrade to buyover the past two years, tmb shares have underperformed the marketand the setbank, on unattractive operating ratios and low profitabilityrelative

46、to its peers, factors that underlined our previous sell rating ontmb. the stock is under owned among foreigners, based on ourestimateschart 13: thai banks 2011 share price performancechart 14: thai banks 2012 share price performancetmb -33.1%tmb17.7%tcapkkbayktbtiscosetbankkbankset indexbblscb-25.7%

47、-17.9%-14.6%-13.9%-6.7%-3.8%-2.8%-0.7%4.4%12.6%bblset indextiscoktbtcapsetbankbaykkscbkbank27.4%35.8%36.8%39.8%41.1%43.5%47.7%51.6%55.8%58.6%-40.0%-30.0%-20.0%-10.0%0.0%10.0%20.0%0.0%10.0%20.0%30.0%40.0%50.0%60.0%70.0%source: company reports and kelive research estimates.9 january 2013source: compan

48、y reports and kelive research estimates.page 6 of 12tmb bank (tmb)however, the operational improvement and accelerating earningsmomentum could attract investors interest this year, in our viewespecially when we start seeing consensus upgrading earnings. we thinkupgrades could start post 4q12 results

49、 announcement. our fy13-14fprojections are currently 16% and 34% above consensus estimates.table 3: tmb vs. consensus2012f2013f2014fkeliveconsensus% diffkeliveconsensus% diffkeliveconsensus% diffnet profit (btmn)eps (bt)dps (bt)5,4800.1260.0405,0520.1150.0368%9%11%6,2890.1440.0455,4190.1210.03916%19

50、%15%8,4430.1940.0606,3110.1470.05634%32%7%source: bloomberg and kelive research estimatesthe stocks current valuation of 1.4x pbv, its historical average, and perof 13.8x do not appear expensive, especially in light of an improvingearnings performance and with roes expected to rise to 13.3% infy14f.

51、 we believe that the stock deserves to be re-rated and thus areupgrading our rating for tmb to buy with a new target price of thb2.50,based on 1.79x pbv (+1s.d. to its historical average).chart 15: tmb 1yr forward pbvpbv (x)3.002.50+2sd2.001.501.000.500.00avg pbv = 1.36x+1s.d. = 1.79x+1sdcurrent pbv

52、 = 1.43xavg-1sd-2sd200420052006200720082009201020112012f2013fsource: set, company reports and kelive research estimates.9 january 2013page 7 of 120000tmb bank (tmb)tmb bank summary of financialsincome statementbalance sheetfye dec (btmn)interest incomeinterest expenses201126,148-11,9122012f30,658-13

53、,6022013f33,704-14,0862014f37,589-15,470fye dec (btmn)cashinterbank & money market201113,217138,1422012f10,28175,1192013f11,07762,1842014f11,95357,662net interest income14,23517,05619,61822,119securities under resale agreementsinvestment securities113,660113,094118,154123,515net fee incomenon-in

54、terest income3,7326,5814,5207,2025,3187,9606,2169,180investment in subsidiariesnet loans0376,6180434,0630490,8100545,177properties foreclosed - net3,6403,0382,9452,726total operating incomeoperating expenses20,817-13,64124,258-14,10827,578-14,27431,299-15,235land, premises and equipment - netcustome

55、r liabilities under acceptances12,052199,9832210,7982511,44928goodwill - intangible assets750750750750operating profitloan loss provisioningpretax profittaxationminority interest7,176-3,1044,072-40-2210,150-4,6015,549-39-3013,304-5,3997,905-1,581-3516,064-5,45210,612-2,122-47other assetstotal assets

56、depositsinterbank & money marketsecurities under resale agreements60,544718,643452,31642,221039,066685,418490,76346,622041,719738,461534,93248,144043,614796,873583,07649,5610demand liabilities3,4403,4353,7454,082net profitrecurring net profit4,0094,0095,4805,4806,2896,2898,4438,443borrowingssubo

57、rdinated debentures102,266044,169045,469046,6460bank liabilities under acceptances19222528basic eps (bt)dps (bt)0.090.030.130.040.140.050.190.06other liabilitiestotal liabilities66,100666,36244,169629,18045,469677,78346,646730,038bvps (bt)1.201.291.391.53share capital41,35241,35241,35241,352weighted

58、 avg. no. of shares (mn)no. of shares - end period (mn)43,52943,52943,52943,52943,52943,52943,52943,529share premiumother reserves04,86704,86704,86704,867retained earnings5,9599,91514,35420,512financial ratiostotal equity52,17756,13360,57366,731fye dec20112012f2013f2014fminority interests10410410410

59、4profitability ratiosnet int. inc./ total op. incnet fee inc./ total op. incnon-interest inc./ total op. inc68.4%17.9%31.6%70.3%18.6%29.7%71.1%19.3%28.9%70.7%19.9%29.3%total equity & liabilities718,643685,418738,461796,873growth ratesnet interest margin2.39%2.63%2.92%3.04%fye dec20112012f2013f20

60、14fcost-to-income65.5%58.2%51.8%48.7%total assets22.0%(4.6%)7.7%7.9%liquidity ratiosshareholders equity4.8%7.6%7.9%10.2%net l/d rationet l/d ratio (inc. b/e)83.3%76.6%88.4%86.4%91.8%89.9%93.5%91.6%net loansdeposits9.7%9.6%15.3%8.5%13.1%9.0%11.1%9.0%capital adequacy ratiosinterest income43.3%17.2%9.9%11.5%tier 1 ratiocar11.1%16.1%11.6%