Silver Point

Thomas J. Monaco

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

*Big Quarter: Kasikornbank (KBANK.TB) (KBank) reported an impressive 4Q20 result of  THB 13.3 bn, increasing THB 6.7 bn (98.5%) linked quarter. Excluding gains, core operating results still improved THB 3.7 bn or 63.8% linked quarter to THB 9.5 bn. The sole driver to this stellar bottom-line performance at KBank was a massive THB 10.1 bn (93.8%) reduction in its loan loss provision – better than 3Q20 guidance;   *Credit Improvement, But KBank Hyper Aggressive On Lower Provisions: The real story for KBank is that its loans under moratorium declined from THB 71.0 bn (40% of outstandings) to THB 46.3 bn (19% of outstandings) on a linked quarter basis. With recoveries of THB 3.4 bn during 4Q20, we find that KBank’s net new NPLs during the period substantially decelerated from 22.3% at 2Q20 to 3.5%. By our calculation, we find that reserve cover remains short by close to THB 13.0 bn (about one quarter of bottom-line performance) – suggesting that the current provision reduction came a quarter too early; and*Negative Operating Jaws: KBank actually posted negative operating jaws during the quarter with linked quarter operating revenues declining THB 532 mn (1.5%) and operating expenses increasing THB 3.8 bn (23.2%) - the C/I ratio 11.5% higher to 57.3%.  Management intends to manage expenses better going forward, but no specifics have as yet been given.

*Big Quarter: Kasikornbank (KBANK.TB) (KBank) reported an impressive 4Q20 result of  THB 13.3 bn, increasing THB 6.7 bn (98.5%) linked quarter. Excluding gains, core operating results still improved THB 3.7 bn or 63.8% linked quarter to THB 9.5 bn. The sole driver to this stellar bottom-line performance at KBank was a massive THB 10.1 bn (93.8%) reduction in its loan loss provision – better than 3Q20 guidance;   *Credit Improvement, But KBank Hyper Aggressive On Lower Provisions: The real story for KBank is that its loans under moratorium declined from THB 71.0 bn (40% of outstandings) to THB 46.3 bn (19% of outstandings) on a linked quarter basis. With recoveries of THB 3.4 bn during 4Q20, we find that KBank’s net new NPLs during the period substantially decelerated from 22.3% at 2Q20 to 3.5%. By our calculation, we find that reserve cover remains short by close to THB 13.0 bn (about one quarter of bottom-line performance) – suggesting that the current provision reduction came a quarter too early; and*Negative Operating Jaws: KBank actually posted negative operating jaws during the quarter with linked quarter operating revenues declining THB 532 mn (1.5%) and operating expenses increasing THB 3.8 bn (23.2%) - the C/I ratio 11.5% higher to 57.3%.  Management intends to manage expenses better going forward, but no specifics have as yet been given. 

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

Since the beginning of February, a lot of companies in Thailand have announced stock buybacks ranging from a maximum spend of THB 10m to THB 16bn. With one exception, these buybacks will be executed on the Stock Exchange of Thailand (SET).In this Insight, we look at the SET's repurchase rules, the companies that have announced buybacks and their ability to complete the buyback, the impact of the buyback if completed, and formulate trades on some of the stocks where we see a high probability of the buyback being completed.

Since the beginning of February, a lot of companies in Thailand have announced stock buybacks ranging from a maximum spend of THB 10m to THB 16bn. With one exception, these buybacks will be executed on the Stock Exchange of Thailand (SET).In this Insight, we look at the SET's repurchase rules, the companies that have announced buybacks and their ability to complete the buyback, the impact of the buyback if completed, and formulate trades on some of the stocks where we see a high probability of the buyback being completed.

Thailand Buybacks - Show of Strength or Leap of Faith?

Asean-focused. Ex-Head of Thai Research

Athaporn Arayasantiparb, CFA

Asean (Thailand) Focused Independent Research

M Corp Review

M Corp is led by Athaporn Arayasantiparb who served as Head of Research for UOB and ANZ in Thailand and was an award-winning telecoms analyst at UBS in 2010 (AsiaMoney Thailand category) and Regional Strategist for DMG in Singapore. Prior to that, he also served as Kasikornbank credit analyst and scholar. He has a total work experience of 17 years, of which 14 were in research and 4 in research management roles. He started his career as an engineer for PTT and currently manages family investments. He holds an MBA from Stern (NYU) and CFA Charter since 2006. Apart from IPO Radar, which focuses on future listings, MCorp Review also provides six on-going thematic series ranked by frequency in descending order, namely: 1) Silicon Stories (technology) 2) Sathorn Series (financial services) 3) Thai-Coons (billionaire origin stories) 4) Reality Check (data-driven, investigative) 5) Thai Media Spotlight; and 6) Thai Macro Watch (global market drivers).

As the merger between TMB and Thanachart gets a nudge from the Ministry of Finance and could be finalized this month, we try to answer a few questions in this review:<ul>
<li>
Takeover premium. Based on our estimates, the potential improvements in ROE from the merger and potential divestment of MBK, we think it justifies an Bt11.1/sh premium for Thanachart. The new best case price target for Thanachart stands at Bt64.25/sh, implying a 29% premium over current share price.</li>
<li>
Negotiations will play a key role in the actual takeover price. We provide a table of how much money is left on the table for TMB if they acquire TCAP at lower than what we expect.</li>
<li>
Benefits. Thanachart has a higher ROE than TMB and appears smaller but better managed. The merger would allow TMB to re-enter the securities business (more cross-selling), enlarge its asset management franchise, and scale up deposit base for both banks...more so on the Thanachart side.</li>
<li>
Size. Even after the merger, the combined bank would still have a much smaller headcount than BAY, smallest of the five largest Thai banks. However, it would have more branches than BAY and just 11% less branches than KBANK. </li>
</ul>

As the merger between TMB and Thanachart gets a nudge from the Ministry of Finance and could be finalized this month, we try to answer a few questions in this review:

Takeover premium. Based on our estimates, the potential improvements in ROE from the merger and potential divestment of MBK, we think it justifies an Bt11.1/sh premium for Thanachart. The new best case price target for Thanachart stands at Bt64.25/sh, implying a 29% premium over current share price.

Negotiations will play a key role in the actual takeover price. We provide a table of how much money is left on the table for TMB if they acquire TCAP at lower than what we expect.

Benefits. Thanachart has a higher ROE than TMB and appears smaller but better managed. The merger would allow TMB to re-enter the securities business (more cross-selling), enlarge its asset management franchise, and scale up deposit base for both banks...more so on the Thanachart side.

Size. Even after the merger, the combined bank would still have a much smaller headcount than BAY, smallest of the five largest Thai banks. However, it would have more branches than BAY and just 11% less branches than KBANK. 


Reality Check 2019: What Premium Does Thanachart Deserve from TMB's Takeover?

Thai Equity - Bottom-up - Equities, Pi Securities PCL, Thailand

Pi Research

Thai Equity - Bottom-up - Equities

Leading, full-service investment firm in Thailand

Pi Securities PCL, Thailand

Pi Securities is a well known securities company with 40 years experience in the industry, serving more than 60,000 clients. We offer one - stop service providing full range of financial products and services including extensive Brokerage, Proprietary Trading (Equities and Bonds), Advisory Services, Structured Products.

Moreover, our new research team tailored for institutional clients to focus on mid to small cap of Thai equities and trading strategies. Our services offered to our premium clients also include arrangement of company or site visits to with the managements of Thai listed companies.

Note: Effective on 1 March 2022, Country Group Securities PCL changed its name to Pi Securities

We initiate coverage on PLAT with a BUY rating, based on a target price of Bt9.4 and derived from the DCF methodology (WACC 10.8% and terminal growth 1%), or equivalent to 26.7xPE’18E, which is a 10% discount from its domestic peers.The story:<ul><li>Solid recurring income from prominent-brand hotels and malls</li><li>Revenue expansion expected after less lucrative contracts expire</li><li>Rental area to triple within next five years</li><li>Massive hotel room additions to spur strong earnings growth</li></ul>Risks:<ul><li>Economic slowdown</li><li>Failure of investments and future projects</li></ul>Background: The Platinum Group Public Company Limited (PLAT) was established in 2002 to operate commercial real estate leasing. Its company first project was the Platinum Fashion Mall, which has been operating since 2005 as one of Thailand’s largest retail clothing centers and as a one-stop wholesale shopping destination. PLAT then opened the Novotel Bangkok Platinum next door to its Platinum Fashion Mall Phase Two building in 2011.

We initiate coverage on PLAT with a BUY rating, based on a target price of Bt9.4 and derived from the DCF methodology (WACC 10.8% and terminal growth 1%), or equivalent to 26.7xPE’18E, which is a 10% discount from its domestic peers.The story:Solid recurring income from prominent-brand hotels and mallsRevenue expansion expected after less lucrative contracts expireRental area to triple within next five yearsMassive hotel room additions to spur strong earnings growthRisks:Economic slowdownFailure of investments and future projectsBackground: The Platinum Group Public Company Limited (PLAT) was established in 2002 to operate commercial real estate leasing. Its company first project was the Platinum Fashion Mall, which has been operating since 2005 as one of Thailand’s largest retail clothing centers and as a one-stop wholesale shopping destination. PLAT then opened the Novotel Bangkok Platinum next door to its Platinum Fashion Mall Phase Two building in 2011.

PLAT: Mall Operator to Make Precious Metal from Sales and Rental Growth

Maybe, it's the confusing name (One of the largest Asian private equity firms based in Korea uses the same initials), or maybe it's just because we like to go there for haircuts and buying supplements ( <a href="https://www.smartkarma.com/insights/skirmish-on-the-supplement-aisle" target="_blank" data-smartkarma-citation="insights:13917">Skirmish on the Supplement Aisle</a>). We just can't quite shake off MBK, so we decided to visit the firm again. And while we were following up on these dudes, why not do the same for another retail-themed stock like <a href="https://www.smartkarma.com/entities/3685" target="_blank" data-smartkarma-citation="entities:3685:1">Berli Jucker Public Co Ltd (BJC TB)</a>, which of course owns <a href="https://www.smartkarma.com/insights/big-c-live-die-re-list" target="_blank" data-smartkarma-citation="insights:15819">Big C: Live, Die, Re-List?</a>…

Maybe, it's the confusing name (One of the largest Asian private equity firms based in Korea uses the same initials), or maybe it's just because we like to go there for haircuts and buying supplements ( Skirmish on the Supplement Aisle). We just can't quite shake off MBK, so we decided to visit the firm again. And while we were following up on these dudes, why not do the same for another retail-themed stock like Berli Jucker Public Co Ltd (BJC TB), which of course owns Big C: Live, Die, Re-List?…

MBK & Big C: Recoveries Don't Quite Come Through Yet

Thailand

MBK Public Company Limited is a diversified holding company primarily involved in shopping center and real estate development and management. The company also operates in hotel and tourism, golf, food solutions, financial services, and auction businesses. Headquartered in Bangkok, Thailand, the company was founded in 1974.

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MBK (MBK TB)

Kasikornbank – Less Is More

KASIKORNBANK: KBank reported an impressive 4Q20 result - driven by a 93.8% reduction in provisions, as moratorium loans declined from 40% to 19%....

Thomas J. Monaco

Thailand Buybacks - Show of Strength or Leap of Faith?

Since the beginning of February, a lot of companies in Thailand have announced stock buybacks ranging from a maximum spend of THB 10m to THB 16bn....

Brian Freitas

Reality Check 2019: What Premium Does Thanachart Deserve from TMB's Takeover?

As the merger between TMB and Thanachart gets a nudge from the Ministry of Finance and could be finalized this month, we try to answer a few...

Athaporn Arayasantiparb, CFA

PLAT: Mall Operator to Make Precious Metal from Sales and Rental Growth

We initiate coverage on PLAT with a BUY rating, based on a target price of Bt9.4 and derived from the DCF methodology (WACC 10.8% and terminal...

Pi Securities PCL, Thailand

MBK & Big C: Recoveries Don't Quite Come Through Yet

Maybe, it's the confusing name (One of the largest Asian private equity firms based in Korea uses the same initials), or maybe it's just because we...

Athaporn Arayasantiparb, CFA

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