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KKP TB Summary

Core Content

Kiatnakin Bank (KKP TB) is a Thai bank with a share price of THB43.75 and a target price of THB40.00, reflecting a -9% adjustment. The market capitalization is USD1.2 billion, with an average daily trading volume of USD3 million. The bank is currently rated as HOLD, and the target price has been unchanged.

Key Financial Highlights

• Earnings Outlook: 2Q14 earnings fell by 14% QoQ and 51% YoY to THB600m, below forecasts due to losses from repossessed car sales (THB497m).
• Loan Growth: Reduced to 5% for FY14, from 9%, due to weak retail loan demand and issues with SME developers.
• Asset Sales Losses: Revised up to THB1.1 billion from THB300 million due to weaker gains and higher losses from car repossessions.
• Earnings Revision: FY14 and FY15F earnings are cut by 26% and 11% respectively.
• Dividend Yield: Expected to be 4.2% for FY14, with a net dividend yield of 5.7% for FY15 and 6.9% for FY16.
• P/E Ratio: Core P/E is 12.5 for FY14, 8.8 for FY15, and 7.2 for FY16.
• P/BV Ratio: P/BV is 1.1 for FY14, 1.0 for FY15, and 0.9 for FY16.
• Book Value: Increased to THB43.50 for FY14, THB46.12 for FY15, and THB49.31 for FY16.
• ROAE: Dropped to 8.6% for FY14, but expected to rise to 11.7% and 13.4% for FY15 and FY16 respectively.
• ROAA: 1.2% for FY14, expected to rise to 1.6% and 1.8% for FY15 and FY16.
• Coverage Ratio: Fell to 68.8% in 2Q14 from 91.2% in 1Q14 due to increased NPLs.
• NPL Ratio: Jumped to 5.58% in 2Q14 from 4.19% in 1Q14, mainly due to real estate loans.
• Net Interest Income (NII): Fell 5% QoQ and 5.9% YoY to THB2,069 million in 2Q14 due to a contraction in NIM to 3.45%.
• Non-Interest Income: Dropped 35% QoQ and 69% YoY to THB534 million due to losses from asset sales.

Key View

• Earnings Cut: Due to weak loan demand and higher losses from asset sales, earnings for FY14 and FY15 are revised downward.
• HOLD Rating: The bank's performance is expected to remain stable, but there are concerns over asset quality.
• Dividend Yield: The dividend yield is expected to remain attractive at 4.2% for FY14 and increase to 5.7% for FY15.
• Asset Quality Concerns: The NPL ratio is expected to remain high, and the coverage ratio is expected to be low.

Financial Statements Overview

• Balance Sheet:
  • Loans and advances increased to THB234,026.6 million by FY16.
  • Deposits from customers rose to THB181,573.7 million by FY16.
  • Total assets increased to THB307,727.6 million by FY16.
• Income Statement:
  • Operating income is expected to increase to THB17,252.7 million by FY16.
  • Core net profit is expected to rise to THB5,343.2 million by FY16.
  • Net profit is expected to increase to THB6,590.3 million by FY16.

Market and Investment Information

• 52-Week High/Low: THB50.75/35.00.
• Free Float: 68.0%.
• Issued Shares: 840 million.
• Market Cap: THB38.6 billion.
• Major Shareholders:
  • THEPKANJANA PANIDA: 4.3%
  • WATTANAVEKIN THITINAN: 4.2%
  • Eastern Sugar & Cane Co. Ltd.: 4.1%

Share Price Performance

• 1 Month: 0.5%
• 3 Months: 3.4%
• 12 Months: -8.0%
• Relative to Index: -4.1% (1M), -5.1% (3M), -11.4% (12M)

Additional Information

• Losses from Repossessed Cars: Expected to remain high at THB350 million per quarter due to weak debt repayment ability.
• Credit Costs: Maintained at 125bps due to expected higher credit costs to improve coverage ratio.
• Liquidity: Loans to deposits ratio increased to 96.3% in 2Q14.
• Capital Adequacy: Tier 1 capital is expected to remain stable at around 12.6% for FY16.

Research Contacts

• Thailand:
  • Maria LAPIZ: Head of Institutional Research
  • Jesada Techahusdin: Head of Retail Research
  • Sukit Udomsirikul: Head of Retail Research
• Malaysia:
  • WONG Chew Hann: Head of Research
  • Desmond CH'NG: Banking & Finance
  • LIAW Thong Jung: Banking & Finance
• Singapore:
  • NG Wee Siang: Head of Research
  • Gregory YAP: SMID Caps
  • ONG Kian Lin: S-REITs
• Indonesia:
  • Wilianto IE: Head of Research
  • Aurellia SETIABUD: Property
• Philippines:
  • Luz LORENZO: Head of Research
  • Lovell SARREAL: Consumer
• Vietnam:
  • LE Hong Lien: Head of Institutional Research
  • THAI Quang Trung: Deputy Manager, Institutional Research

Disclaimer

This report is for general information purposes only and is not intended as an offer to sell or a solicitation of an offer to buy any securities. Investors are advised to seek professional advice before making investment decisions. Past performance is not necessarily indicative of future results.