Securities Sector

Industry Update
Monday March 23, 2015
Securities Sector
Very good dividend yields despite wobbling business
SECURITIES
Rec: NEUTRAL
The securities business has been wobbling, but there are still revenues from other
businesses, e.g. investment banking (IB) and gain from proprietary trading.
Accordingly, securities stocks have a strong point from low P/E ratio and high
dividend yield; top picks are MBKET and KGI.

Still facing fierce competition
The securities brokerage business would remain in fierce competition in
2015. One new brokerage company, LHS, was opened in late 2014 and
other three companies are obtaining licenses from the Securities and
Exchange Commission (SEC) and may start the business around 2H15;
these will lessen market shares of existing companies. Moreover, one of the
three new companies focuses on online trading, which has lower brokerage
fee rate than usual, so it would decrease average brokerage fee rate of the
sector. Previously, average brokerage fee rate in 2014 was 0.127%, down
from 0.136% in 2013.

Sector Index : 2,351.19
SET Index : 1,529.96
Profit to show flat growth
Apart from fierce competition in the brokerage business, other businesses
are also facing limitations. For the IB business, only 17 companies have
submitted filings in 2015 and combined IPOs value is projected to be
substantially lower than that of 2014, so fee revenue may decline from last
year. For the margin loan business, the government’s anti-speculation
measure taking effects since January 1, 2015 is an impediment. However,
we maintain our assumption for daily trading value (prop-trade excluded) of
B41.5bn on average in 2015; although YTD daily trading value is B51.5bn
on average, which is 24% higher than the assumption, we believe Fed’s
benchmark interest rate increase, which is likely at the end of this year,
would depress trading value since 2H15 onward. Overall, we estimate
FY2015 net profit at B4.12bn.

Maintain NEUTRAL
We maintain NEUTRAL for the sector and select MBKET(FV@B31.01) as a
top pick for its biggest market share and biggest IB filings value among
peers, low P/E ratio of only 10.66x, high dividend yield of 7.5%, and an
upside of 31.4%. Another pick is KGI(FV@B4.47) for its dividend yield of
above 8.4% and an upside of 10.4%.
Key Data (Bm)
FY: Dec 31
Brokerage Fee Revenue
Operating Expenses
Net Profit
PER (x)
PBV (x)
ROAA
ROAE
Source : ASP Research
FY13A
13,061
11,539
4,926
5.94
0.97
7.63%
17.25%
FY14A
11,244
10,903
4,393
9.42
1.40
6.26%
14.66%
FY15F
11,105
10,685
4,117
15.03
2.03
5.55%
13.69%
FY16F
11,105
10,685
4,117
15.03
1.97
5.64%
13.31%
FY17F
11,105
10,685
4,117
15.03
1.92
5.61%
12.94%
Kawee Manitsupavong
License no.: 003974
kawee@asiaplus.co.th
Tanawin Pichatsiriporn
Analyst Assistant
This report is a rough translation of one of our Thai-language research products. It is produced primarily with time efficiency in mind, so that English-reading clients can see what the main recommendations are from our Thai-language research
team. Given that this is a rough-and-ready translation, Asia Plus Securities pcl cannot be held responsible for translation inaccuracies.) The reports and information contained herein are compiled from public data sources and our analysts'
interviews with executives of listed companies. They are presented for informational purposes only and not to be deemed as solicitations to buy or sell any securities. Best attempts have been made to verify information from these vast sources, but
we cannot guarantee their accuracy, adequacy, completeness and timeliness. The analyses and comments presented herein are opinions of our analysts and do not necessarily reflect the views of Asia Plus Securities.