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Kasikornbank

Robust core business to drive 2H14 profit BUY

Kasikornbank Plc (KBANK)

As a big commercial bank with diversified loan structure, KBANK

would revive and grow aggressively in 2H14, while fee income is

also its strong point. Therefore, we revise up our FY2014 earnings

forecast and fair value.


- 2Q14 profit weakens a bit as projected. Expense rises

KBANK posted 2Q14 net profit at B1.19bn, contracting 1.7%qoq but rising

6.9%yoy, in line with projection. Non-interest income decreased, while

operating expense increased. Cost to income ratio rose from 39.95% in

1Q14 to 44.31%, in line with the bank's previous projection that its expense

would grow at a faster rate in the rest of the year due to seasonal effect and

rising personnel expense, reflecting from 2014 cost to income ratio target of

45%. For positive factors, net fee income in 2Q14 increased better than

expected, thanks to the growth in fee income from loan transaction, fund

selling, and securities brokerage. Net interest income also grew above

projection. NIM stood at 3.69%, increasing 14bp, better than expected,

because funding cost decreased at a faster rate than loan yield.

- Up forecast. Long-term ROE touches 20%

Based on a projection that the economy would rebound in 2H14, we revise

up our earnings forecast for 2014-2015 by 17.6% and 32.7%, respectively,

mainly by increasing loan growth and NIM and cutting credit cost. After the

revision, 2014-2015 net profit growth forecast is 18.9%yoy and 16.8%yoy,

respectively, higher than the sector's average projected at 7.2%yoy and

13.0%yoy.

- Up 2014 fair value to B260

We recommend BUY for KBANK. FY2014 fair value after the forecast revision

(GGM, 2.45x PBV, 20% long-term ROE forecast) is B260, implying a total

return (dividend yield included) of over 20%. KBANK is a good choice

amidst the reviving economy for its diversified income base and potentially

growing fee income.


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