- 1Q14 profit below expectation
TCAP's 1Q14 net profit made the five-quarter lowest at B1.32bn, plunging
14.0%qoq and 32.3%yoy (9% under our expectation), making up 23% of
FY2014 net profit forecast. Debt provision was as high as B1.66bn. Credit
cost dropped from FY2013 average of 145bp to 84bp. Because of the
sluggish economy caused by the prolonged political unrest, consumer
confidence and household spending dropped, thus affecting new car
purchasing loan and TCAP's car leasing loan. Used car leasing loan also
declined due to stricter policy. Corporate and SME loans grew, but they
comprise only 32% of total loans. New loan issuance was lower than
average repayments of over B10bn/month (mostly of car leasing loans).
1Q14 net loan slipped slightly by 0.1%qoq but grew 2.5%yoy (better than
expected). NIM fell slightly to 2.70% as a result of the interest rate cut.
Yield declined more rapidly than deposit. Fee income fell by 5.2%qoq (as
expected), mainly from car leasing business. Income from other operations
slumped 25.1%qoq (as expected); Fx gain could not compensate for lower
profit from investment. Still, cost to income ratio slipped slightly to 50.14%
(better than expected). Although operating expense dropped by 10.5%qoq
thanks to TCAP's policy, it was negated by smaller income base. In terms of
asset quality, NPLs increased to 4.68%; not only from car leasing, but also
other businesses e.g. home, credit card, and personal loan. - Not to rebound in 2Q14
We maintain our FY2014-2015 earnings forecast. Normalized EPS is
projected to grow 8.6%yoy, under an assumption for stricter debt
provisioning and ROE of only 11.8% to reflect the economic downtrend.
Consequently, a forecast down revision is unlikely in the near future. TCAP
is projected not to recovery qoq in 2Q14. New car purchasing loan is not
likely to grow, and used car leasing loan would be weak due to stricter
policy. - Sell. 0% upside despite dividend yield
We reiterate to sell. 2014 fair value is B33.39 (GGM, 0.78x PBV, 12% longterm
ROE). In spite of average dividend yield of 4-5% p.a, the share price
still has downside.