Bangkok Bank

Raise forecast and up 2013's FV to B280. Big CAPEX cycle brings about profit peak BUY

Bangkok Bank Plc (BBL)

Aggressive economic growth foreseen. Many factors to boost CAPEX cycle

According to BBL's vision for 2013, the bank is confident about aggressive

economic growth above the market's GDP forecast of 4-5% due to a clearer

flow of mega investment projects since 2013 until the next 3-5 years.

Although that bank projected that the government's basic utilities projects

in the next 7 years worth of B2.27tr, such as motorways, a train system

and new mass transits, high-speed trains, a railway public transportation,

road networks, etc, will not occur before 4Q13 when the investment act is

passed, the fact that the act will surely be passed has raised confidence

among the private sector to go forward with related investments first in

order to prepare for the future work, especially for contractors and raw

material entrepreneurs. There is also an urgent project of the government

that has to be started within the next 6 months, which is the B350bnwater

management project that has been delayed since 2012. Around 70%

of the government's investments in mega projects will come from loans, so

it would boost loan demands in the next 3-5 years. Moreover, the AEC

liberalization is another factor to encourage investment, both local and

international, particularly for small and medium SME. Furthermore, a

minimum wage raise to B300 a day will also benefit retail loans. All these

factors will boost provincial economic growth. BBL has a strong point in

corporate loans which comprise 45% of its total loans, followed by 17% of

medium SMEs, so it will fully benefit from the government's mega

investment projects, with net loan growth in 2013 estimated at 6-8% (the

real growth is usually higher) due mainly to all loan types especially those

in provincial areas from 30-50 branch expansion (fully and micro) in 2013.

At the same time, NIM is projected close to that of the prior year at 2.5-

2.6%.

Up 2013-2014's forecast…Profit marching to new high

We revise up our net profit forecast for 2013-2014 by 7.8% and 7.6%,

mainly from a reduction of credit cost assumption from 45bp to 42bp, close

to that of 2012 to be in line with BBL's policy. As a result, net profit growth

in 2013-2014 is estimated at 22.9%yoy and 13.8%yoy, respectively, likely

making the year's peak. We still hold a positive outlook toward BBL's

business in the next 3 years that the bank would be able to harvest fully

from this round of mega investment cycle.

Up 2013's fair value to B280. Top pick of big banks

We recommend buying BBL and select it as a top pick of the sector (other

from KTB). 2013's fair value is revised up to B280/share, at 1.79x PBV

(GGM), under long-term ROE forecast of 12.5% (from B244/share under

long-term ROE forecast of 11.5%). The current share price has 2013's PBV

of only 1.4x, which is very low compared with the sector's average of 1.9x,

having 29% upside from fair value. Dividend in 2H12 is projected at

B4.50/share, or an interim dividend yield of around 2% (semiannually).