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Published on April 17, 2008

TMB has been one of the worst-performing major Thai stocks in the past decade having under-performed the market index by more than 200 per cent.

According to Phatra Securities, which recommended "buy" on TMB with an upside gain of 24 per cent and a target price of Bt1.68 per share share, TMB has made record lows declining 50 per cent from the bottom of the crisis in the third quarter of 1998, while the banking sector index has recovered by more than 250 per cent over the same period.

 Yesterday, TMB stock closed at Bt1.37 per share, up 0.74 per cent from the previous closing. 

In 2004 TMB went through a merger with DBS Thai Danu Bank and the Industrial Finance Corporation of Thailand but the bank later had to classify more non-performing loans, put in more provisioning and go through a series of re-capitalisation schemes.

Phatra said TMB has so far tried to avoid needed fundamental changes within the bank by obtaining capital from the government and existing shareholders. But now, even the Finance Ministry, its major shareholder, agrees that the bank needs a new major shareholder and new management to revamp TMB's business model and strategy, all internal processes, management and board of directors.

But things are expected to improved.

"We expect TMB's financial results to improve significantly, starting from the first quarter 2008," Phatra said in a recent report. "Apart from lower provisions, we expect TMB's operating profit to improve from lower funding costs and yield improvements. This should improve stock price performance from a record low level, against low market expectations." 

On April 25, TMB shareholders will meet and the new major shareholder, ING Bank NV, is expected to announce a key new business plan and changes in the bank's management which is hoped will lead to a significant revamp of the bank's business structure.

Tisco Securities, which recommended "buy" for the bank with a target price of Bt1.50 per share, said in a recent paper that TMB is expected to post a first-quarter net profit of Bt330 million, compared to a Bt23 billion loss in the fourth quarter last year due to a steep fall in provisioning costs to Bt1 billion.

"Synergies from its strategic partnership with ING should help TMB improve its bancassurance and asset management operations, leading to 20 per cent growth in fee income in 2008F. We expect the bank to record a net profit of Bt6.8 billion  this year after a massive Bt44 billion net loss in 2007. The turnaround is mainly due to lower provisioning expenses, a reduction in NPLs from the bank's restructuring and the sale of bad debt," Tisco Securities said.

BT Securities also recommended speculative "buy" for TMB with a target price of Bt1.60 per share, saying TMB is expected to get a credit rating upgrade after the bank posts net profits and can service interest payments to its hybrid bond in July 2008.

The bank is expected to make a profit this year as the management targets to increase loans by 5 per cent, while its interest spread is expected to be 2.6 per cent. The bank's non-interest income will rise by 20 per cent, while the cost to income ratio will fall to 60 per cent or lower.

Phillips Securities expected TMB to post a first quarter net profit of Bt822.38 million and recommended  "buy" for the bank with a target price of Bt1.58 per share.

There was a report earlier that TMB is planning to wipe out retained loss and share discount by reducing its par value from Bt10 to Bt1 by 2010 at the redemption date of the Finance Ministry's preferred shares. Therefore, TMB would be able to pay dividends by 2010 onwards.

However, Phillips Securities said the retained loss wipe-out plan is unlikely to happen this year. TMB's retained loss as of the end of last year was Bt103.65 billion with a share discount of Bt303.09 billion. The bank has common shares of 41.537 billion and preferred shares of 1.99 billion. According to Phillips Securities, to cut all the retained loss, TMB might have cut its par value from the current Bt10 a share to Bt0.66.

Jiwamol Kanoksilp

The Nation