Research and consultancy, Tabbush Report

Daniel Tabbush

Research and consultancy

Tabbush Report

We provide research and consultancy on Asian banks. Our focus is on what we call “Asian bank research, without the noise.” We are interested in the most critical swing-factors for banks, the NPL and credit cycle, and where we believe there is a gap between perception and reality. We often focus on the less studied components of bank financial statements.  Our research is highly thematic, sometimes examining unlisted banks and companies as a window on mainstream banks. 

Being independent allows us to look at smaller banks, often overlooked by others. Analysis of BIS bank guidelines in the context of Asia, is also a focal point, while we also analyze global banks operating in the region. We use what we believe is the most comprehensive, reliable financials database, SNL Financial. S&P Capital IQ augments our database, with corporate data and CEIC, with economics. 

Asian bank research, without the noise.

Equity Bottom-Up

<ul>
<li>TCAP's market capitalization remains well below early FY20 unlike peers</li>
<li>Returns are substantial at TCAP and these should rise further</li>
<li>There are few banks that compare with its 8% dividend yield</li>
</ul>


TCAP's market capitalization remains well below early FY20 unlike peers
Returns are substantial at TCAP and these should rise further
There are few banks that compare with its 8% dividend yield


Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

*Big Quarter: Kasikornbank (KBANK.TB) (KBank) reported an impressive 4Q20 result of  THB 13.3 bn, increasing THB 6.7 bn (98.5%) linked quarter. Excluding gains, core operating results still improved THB 3.7 bn or 63.8% linked quarter to THB 9.5 bn. The sole driver to this stellar bottom-line performance at KBank was a massive THB 10.1 bn (93.8%) reduction in its loan loss provision – better than 3Q20 guidance;   *Credit Improvement, But KBank Hyper Aggressive On Lower Provisions: The real story for KBank is that its loans under moratorium declined from THB 71.0 bn (40% of outstandings) to THB 46.3 bn (19% of outstandings) on a linked quarter basis. With recoveries of THB 3.4 bn during 4Q20, we find that KBank’s net new NPLs during the period substantially decelerated from 22.3% at 2Q20 to 3.5%. By our calculation, we find that reserve cover remains short by close to THB 13.0 bn (about one quarter of bottom-line performance) – suggesting that the current provision reduction came a quarter too early; and*Negative Operating Jaws: KBank actually posted negative operating jaws during the quarter with linked quarter operating revenues declining THB 532 mn (1.5%) and operating expenses increasing THB 3.8 bn (23.2%) - the C/I ratio 11.5% higher to 57.3%.  Management intends to manage expenses better going forward, but no specifics have as yet been given.

*Big Quarter: Kasikornbank (KBANK.TB) (KBank) reported an impressive 4Q20 result of  THB 13.3 bn, increasing THB 6.7 bn (98.5%) linked quarter. Excluding gains, core operating results still improved THB 3.7 bn or 63.8% linked quarter to THB 9.5 bn. The sole driver to this stellar bottom-line performance at KBank was a massive THB 10.1 bn (93.8%) reduction in its loan loss provision – better than 3Q20 guidance;   *Credit Improvement, But KBank Hyper Aggressive On Lower Provisions: The real story for KBank is that its loans under moratorium declined from THB 71.0 bn (40% of outstandings) to THB 46.3 bn (19% of outstandings) on a linked quarter basis. With recoveries of THB 3.4 bn during 4Q20, we find that KBank’s net new NPLs during the period substantially decelerated from 22.3% at 2Q20 to 3.5%. By our calculation, we find that reserve cover remains short by close to THB 13.0 bn (about one quarter of bottom-line performance) – suggesting that the current provision reduction came a quarter too early; and*Negative Operating Jaws: KBank actually posted negative operating jaws during the quarter with linked quarter operating revenues declining THB 532 mn (1.5%) and operating expenses increasing THB 3.8 bn (23.2%) - the C/I ratio 11.5% higher to 57.3%.  Management intends to manage expenses better going forward, but no specifics have as yet been given. 

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

Since the beginning of February, a lot of companies in Thailand have announced stock buybacks ranging from a maximum spend of THB 10m to THB 16bn. With one exception, these buybacks will be executed on the Stock Exchange of Thailand (SET).In this Insight, we look at the SET's repurchase rules, the companies that have announced buybacks and their ability to complete the buyback, the impact of the buyback if completed, and formulate trades on some of the stocks where we see a high probability of the buyback being completed.

Since the beginning of February, a lot of companies in Thailand have announced stock buybacks ranging from a maximum spend of THB 10m to THB 16bn. With one exception, these buybacks will be executed on the Stock Exchange of Thailand (SET).In this Insight, we look at the SET's repurchase rules, the companies that have announced buybacks and their ability to complete the buyback, the impact of the buyback if completed, and formulate trades on some of the stocks where we see a high probability of the buyback being completed.

Thailand Buybacks - Show of Strength or Leap of Faith?

Asean-focused. Ex-Head of Thai Research

Athaporn Arayasantiparb, CFA

Asean (Thailand) Focused Independent Research

M Corp Review

M Corp is led by Athaporn Arayasantiparb who served as Head of Research for UOB and ANZ in Thailand and was an award-winning telecoms analyst at UBS in 2010 (AsiaMoney Thailand category) and Regional Strategist for DMG in Singapore. Prior to that, he also served as Kasikornbank credit analyst and scholar. He has a total work experience of 17 years, of which 14 were in research and 4 in research management roles. He started his career as an engineer for PTT and currently manages family investments. He holds an MBA from Stern (NYU) and CFA Charter since 2006. Apart from IPO Radar, which focuses on future listings, MCorp Review also provides six on-going thematic series ranked by frequency in descending order, namely: 1) Silicon Stories (technology) 2) Sathorn Series (financial services) 3) Thai-Coons (billionaire origin stories) 4) Reality Check (data-driven, investigative) 5) Thai Media Spotlight; and 6) Thai Macro Watch (global market drivers).

Thematic (Sector/Industry)

In his biography of The Mall Group founder Supaluck Umpuj (ranked no. 15 by Forbes), author Thanomsak details how Thailand's richest woman parlayed her father's single mall into Central Group's biggest competitor through joint ventures such as Paragon and Emporium. We teased out a few important points from the book (150 pages in Thai), including:<ul>
<li>
Market landscape. The department store industry is basically a duopoly between Central and the Mall Group. Competition is fierce.</li>
<li>
Alliances and strategy. Siam Piwat (MBK is largest shareholder) and Bangkok Bank have partnered with the Mall Group in Paragon and Emporium, their two biggest malls. It is customary for smaller players to partner against the market leader. The Mall's biggest strength is their focus on event marketing.</li>
<li>
Differences in corporate cultures. The Umpuj family is much smaller than the Chirathivat who run Central Group. They are also rather focused on Bangkok, while their rivals have stronger presence abroad and upcountry.</li>
<li>
Risks and outlook. The entire industry is susceptible to e-commerce's expanding role in Thailand. Increasing expansion and new players like IconSiam only raises their vulnerability.</li>
</ul>

In his biography of The Mall Group founder Supaluck Umpuj (ranked no. 15 by Forbes), author Thanomsak details how Thailand's richest woman parlayed her father's single mall into Central Group's biggest competitor through joint ventures such as Paragon and Emporium. We teased out a few important points from the book (150 pages in Thai), including:

Market landscape. The department store industry is basically a duopoly between Central and the Mall Group. Competition is fierce.

Alliances and strategy. Siam Piwat (MBK is largest shareholder) and Bangkok Bank have partnered with the Mall Group in Paragon and Emporium, their two biggest malls. It is customary for smaller players to partner against the market leader. The Mall's biggest strength is their focus on event marketing.

Differences in corporate cultures. The Umpuj family is much smaller than the Chirathivat who run Central Group. They are also rather focused on Bangkok, while their rivals have stronger presence abroad and upcountry.

Risks and outlook. The entire industry is susceptible to e-commerce's expanding role in Thailand. Increasing expansion and new players like IconSiam only raises their vulnerability.


Hidden Tigress 2019: Central Group's Biggest Competitor

As the merger between TMB and Thanachart gets a nudge from the Ministry of Finance and could be finalized this month, we try to answer a few questions in this review:<ul>
<li>
Takeover premium. Based on our estimates, the potential improvements in ROE from the merger and potential divestment of MBK, we think it justifies an Bt11.1/sh premium for Thanachart. The new best case price target for Thanachart stands at Bt64.25/sh, implying a 29% premium over current share price.</li>
<li>
Negotiations will play a key role in the actual takeover price. We provide a table of how much money is left on the table for TMB if they acquire TCAP at lower than what we expect.</li>
<li>
Benefits. Thanachart has a higher ROE than TMB and appears smaller but better managed. The merger would allow TMB to re-enter the securities business (more cross-selling), enlarge its asset management franchise, and scale up deposit base for both banks...more so on the Thanachart side.</li>
<li>
Size. Even after the merger, the combined bank would still have a much smaller headcount than BAY, smallest of the five largest Thai banks. However, it would have more branches than BAY and just 11% less branches than KBANK. </li>
</ul>

As the merger between TMB and Thanachart gets a nudge from the Ministry of Finance and could be finalized this month, we try to answer a few questions in this review:

Takeover premium. Based on our estimates, the potential improvements in ROE from the merger and potential divestment of MBK, we think it justifies an Bt11.1/sh premium for Thanachart. The new best case price target for Thanachart stands at Bt64.25/sh, implying a 29% premium over current share price.

Negotiations will play a key role in the actual takeover price. We provide a table of how much money is left on the table for TMB if they acquire TCAP at lower than what we expect.

Benefits. Thanachart has a higher ROE than TMB and appears smaller but better managed. The merger would allow TMB to re-enter the securities business (more cross-selling), enlarge its asset management franchise, and scale up deposit base for both banks...more so on the Thanachart side.

Size. Even after the merger, the combined bank would still have a much smaller headcount than BAY, smallest of the five largest Thai banks. However, it would have more branches than BAY and just 11% less branches than KBANK. 


Reality Check 2019: What Premium Does Thanachart Deserve from TMB's Takeover?

Thailand

Pruksa Holding Public Company Limited operates as a holding company. The Company, through its subsidiaries, invests in property developing and recurring income businesses. Pruksa Holding serves customers in Thailand.

Quality Houses Public Company Limited is a property development company. The Company specializes in single-house, apartment, and condominium development projects.

Amata Corporation Public Company Limited develops industrial estates primarily served for manufacturing plants and factories. The Company acquires land and develops essential infrastructure and facilities ready for industrialized operations. Ameta also has overseas investments in Vietnam.

AP Thailand PCL is a property development company. The Company develops residential property projects in Bangkok areas as well as manufactures and distributes precast concrete products.

Sansiri Public Company Limited develops real estate projects for sales and rentals.  Its projects include resort condominiums, residential and office buildings.  The Company also provides property and project management services.

Rojana Industrial Park Public Company Limited is a property development company which concentrates in industrial estate development projects.  The Company develops land sites suitable for industrial use such as small factories, while providing infrastructure and facilities such as electricity, water, telephone lines, employee housing and restaurants.

Frasers Property (Thailand) Public Company Limited operates as a real estate developer. The Company acquires, develops, owns, and manages hotels, residential, and commercial properties. Frasers Property serves customers in Thailand.

Principal Capital PCL is a property development company. The Company's primary objective is to develop property projects with a focus on the Central Business District (CBD) and prime area.

SC Asset Corporation Public Company Limited develops real estate properties for sale and rental.  The Company owns and manages Shinawatra Tower III office building. Additionally, SC Asset and its subsidiaries own Shinawatra Tower I and Shinawatra Tower II office buildings, develop single house, condominium and office building projects, and provide management consultant services.

Supalai Public Company Limited is a property development company which has operations in Bangkok metropolis as well as other leading provincial markets. The Company develops all types of residential products, including detached houses, townhouses and condominiums.

PT MNC LAND Tbk engages in the development of integrated resorts, commercial properties, and property services. The Company owns and operates a full range of commercial properties in Jakarta, Surabaya and Bali. MNC LAND's integrated resorts include Lido Lake Resort in West Java, Bali Nirwana Resort in Bali, and Mandalika Eco-Tourism Resort in West Nusa Tenggara.

Keihanshin Building Co., Ltd. leases office buildings, computer and telecommunication equipped buildings, off-track-betting, and other commercial facilities.  The Company also provides building management services and undertakes construction works.

Suzhou New District Hi-Tech Industrial Co., Ltd. develops residential buildings and constructs utility, transportation, and communication facilities for Suzhou Hi-Tech Industrial Development Zone.  The Company also provides renovation and warehousing services and invests in other businesses.

Suzhou New District Hi Tech Ind Co. (600736 CH)

Beijing North Star Company Limited develops, leases, and invests in properties. The Company operates shopping centers, hotels, restaurants, and recreation businesses.  The Company also provides property management.

Shui On Land Limited engages principally in the development, sale, leasing, management and ownership of residential, office, retail, entertainment and cultural properties in the PRC.

Zhejiang Sunriver Culture Co.,Ltd. provides services on cultural consultation, animation design, film and television planning, financial information consultation (excluding securities and futures), sports information consultation, education information consultation, software development, investment management, corporate  investment, asset management, and enterprise management.

Zhejiang Sunriver Culture Co., Ltd. (600576 CH)

Suning Universal Co., Ltd engages in real estate development and invests in urban infrastructure, education and high-tech projects.  The company also involves in building material manufacturing, import & export trades, hotel operation and financial consulting.

Crowell Development Corp. develops, sells, and leases residential and commercial buildings which are constructed by independent construction companies.

PT Summarecon Agung Tbk and its subsidiaries develop and invest in real estate. The Company develops and operates residential houses, apartments, shopping centers, recreational centers and office buildings.

United Overseas Australia Limited is a real estate development and management company.  The Company has interest in developed properties, both commercial and residential, in Kuala Lumpur, Malaysia.  The Company also has investments in the form of rental properties.

MBK Public Company Limited operates property business.  The Company owns Mah Boon Krong Center building complex located in downtown Bangkok.  The complex consists of shopping malls, an office building and the Patumwan Princess Hotel. Through its subsidiaries, the Company mills and distributes rice, other grain products and operates power generation and distribution business.

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MBK PCL (MBK TB)

TCAP - Concerns Oversized?

TCAP continues to see market capitulation well below early FY20, unlike Thai banks, despite its exceptionally high 8% dividend yield and ROA of...

Daniel Tabbush

Kasikornbank – Less Is More

KASIKORNBANK: KBank reported an impressive 4Q20 result - driven by a 93.8% reduction in provisions, as moratorium loans declined from 40% to 19%....

Thomas J. Monaco

Thailand Buybacks - Show of Strength or Leap of Faith?

Since the beginning of February, a lot of companies in Thailand have announced stock buybacks ranging from a maximum spend of THB 10m to THB 16bn....

Brian Freitas

Hidden Tigress 2019: Central Group's Biggest Competitor

In his biography of The Mall Group founder Supaluck Umpuj (ranked no. 15 by Forbes), author Thanomsak details how Thailand's richest woman parlayed...

Athaporn Arayasantiparb, CFA

Reality Check 2019: What Premium Does Thanachart Deserve from TMB's Takeover?

As the merger between TMB and Thanachart gets a nudge from the Ministry of Finance and could be finalized this month, we try to answer a few...

Athaporn Arayasantiparb, CFA

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