Results Review 9 Nov 2016 Please see disclaimer on last page 1 Muangthai Leasing PCL (MTLS) Healthy loan expansion ► 3Q16 net profit surged 33.5% QoQ and 82.2% YoY to Bt401mn. This beat both our estimate and the Bloomberg consensus. ► Despite solid loan expansion, NPLs remained at a low 0.95%. ► We maintain our BUY recommendation with a 2017 target price of Bt28.00. 3Q16 net profit jumped both QoQ and YoY MTLS reported a 3Q16 net profit of Bt401mn, up 33.5% QoQ and 82.2% YoY. This beat both our estimate and the Bloomberg consensus by 16% and 21%, respectively. Our projection overestimated the level of provision expense. The outstanding 3Q16 performance was attributed to its solid loan growth in tandem with continuous branch expansion, especially in the Northeastern region. In 3Q16, its number of branches surged to 1,515, from 1,236 branches in 2Q16. Meanwhile, lending increased 18.9% QoQ and 62.4% YTD. In terms of OPEX, the 3Q16 cost-to-income ratio stayed at 48.6%, down from 49.3% in 2Q16 and 53.4% in 3Q15. This suggests that the company was able to generate income at a faster pace than its costs from branch expansion. Overall, 9M16 earnings made up 78% of our FY16 earnings estimate. Healthy loan expansion Although MTLS’ 3Q16 NPL ratio slightly increased to 0.95% from 0.94% in 2Q16, this is still low given its aggressive loan expansion and the current economic environment. We believe one of the reasons for this low NPL level is the company’s locally-penetrated strategy allowing its staff to develop closer relationships and easily track customers, hence better NPL management. MTLS aims to continue its expansion strategy aiming to reach more of the population still without access to the traditional banking system. Specifically, it targets 1,600 branches in 2016 which we believe is definitely achievable. Maintain BUY recommendation Given the promising growth prospects and strong asset quality, we maintain our BUY recommendation with a 2017 target price of Bt28.00. Our target price is based on a prospective PBV of 8.0x (Gordon Growth Model) and long-term ROE forecast of 20%. BUY 2017 TP: Bt28.00 Closing price: Bt19.40 Upside/downside 44.3% Sector Finance & Securities Paid-up shares (shares mn) 2,120 Market capitalization (Bt mn) 41,128 Free float (%) 20.07 12-mth daily avg. turnover (Bt mn) 147.56 12-mth trading range (Bt) 22.10/14.00 Major shareholders (%) Mr. Chuchat Petaumpai 37.4 Mrs. Daonapa Petaumpai 34.0 Financial highlights Source: SETSMART, AWS Thailand Research Department Mr. Warut Siwasariyanon, License, No. 17923 Tel: 02 680 5041 Ms. Veeraya Rattanaworatip, Assistant Analyst 2014 2015 2016E 2017E Revenue (Btmn) 1,590 2,331 4,032 5,842 Net profit (Btmn) 544 825 1,252 1,707 EPS (Bt) 0.33 0.39 0.59 0.81 EPS growth (%) 49.6 16.6 51.7 36.4 P/E (x) 58.1 49.9 32.9 24.1 BVPS (Bt) 2.4 2.7 3.1 3.6 P/BV (x) 8.1 7.3 6.3 5.4 DPS (Bt) 0.13 0.20 0.30 0.41 Div. yield (%) 0.7 1.0 1.5 2.1 ROE (%) 15.5 15.3 20.6 24.3
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Results Review 9 Nov 2016
Please see disclaimer on last page 1
Muangthai Leasing PCL (MTLS)
Healthy loan expansion
► 3Q16 net profit surged 33.5% QoQ and 82.2% YoY to
Bt401mn. This beat both our estimate and the
Bloomberg consensus.
► Despite solid loan expansion, NPLs remained at a low
0.95%.
► We maintain our BUY recommendation with a 2017
target price of Bt28.00.
3Q16 net profit jumped both QoQ and YoY
MTLS reported a 3Q16 net profit of Bt401mn, up 33.5% QoQ and
82.2% YoY. This beat both our estimate and the Bloomberg
consensus by 16% and 21%, respectively. Our projection
overestimated the level of provision expense. The outstanding 3Q16
performance was attributed to its solid loan growth in tandem with
continuous branch expansion, especially in the Northeastern region.
In 3Q16, its number of branches surged to 1,515, from 1,236
branches in 2Q16. Meanwhile, lending increased 18.9% QoQ and
62.4% YTD. In terms of OPEX, the 3Q16 cost-to-income ratio
stayed at 48.6%, down from 49.3% in 2Q16 and 53.4% in 3Q15.
This suggests that the company was able to generate income at a
faster pace than its costs from branch expansion. Overall, 9M16
earnings made up 78% of our FY16 earnings estimate.
Healthy loan expansion
Although MTLS’ 3Q16 NPL ratio slightly increased to 0.95% from
0.94% in 2Q16, this is still low given its aggressive loan expansion
and the current economic environment. We believe one of the
reasons for this low NPL level is the company’s locally-penetrated
strategy allowing its staff to develop closer relationships and easily
track customers, hence better NPL management. MTLS aims to
continue its expansion strategy aiming to reach more of the
population still without access to the traditional banking system.
Specifically, it targets 1,600 branches in 2016 which we believe is
definitely achievable.
Maintain BUY recommendation
Given the promising growth prospects and strong asset quality, we
maintain our BUY recommendation with a 2017 target price of
Bt28.00. Our target price is based on a prospective PBV of 8.0x
(Gordon Growth Model) and long-term ROE forecast of 20%.
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