Sunday, January 19, 2014

Analysis of Thailand-based KASIKORNBANK

Please read the disclaimer here:http://greedydragoninvestment.blogspot.com/p/about-greedy-dragon.html. Enjoy the article, bitches!


So far, I have covered stocks from 3 Southeast Asian countries: Malaysia, Indonesia and Singapore. Unfortunately I’ve not analysed any companies from Thailand, the land of good food, sweet chicks, weird commercials and hopefully good investment opportunities. This changes today as I’m going to look into KASIKORNBANK, a Thailand-based bank. The stock closed at 168 Thai Baht on Friday. As I will explain in this article, I think that the stock is about as good as a tom yam and pad thai lunch (which is pretty good). Anyway, let’s get down to business.

The bank earns good returns on capital. In 2013, the bank achieved return on average equity and return on average assets of 20.45% and 1.89% respectively. Management runs the bank efficiently. In 2013, KASIKORNBANK achieved an efficiency ratio of 43.74% which is really good.

KASIKORNBANK is expanding at a healthy pace as evidenced by its deposit growth. The bank managed to grow its deposits at a compounded annual rate of 9.59% over the 5-year period of 2009-2013. Deposits experienced a year-on-year growth of 9.95% in 2013. The bank also grew revenue from fees and services at a compounded annual rate of 17.02% over the 5-year period of 2009-2013. Revenue from fees and services grew by 18.51% in 2013.

For the year ended 2013, KASIKORNBANK had a net interest margin of 3.55%. If you take into account the bank’s impairment loss on loans, the bank’s net interest margin is decent enough but not great. The bank’s impairment loss on loans as a percentage of total average loans has been between 0.64%- 1.02% or an average of 0.76% in the 5-year period of 2009-2013.

As at December 31, 2013, the bank had a gross non-performing loans ratio of 2.11% which is manageable if you consider the fact that it has a coverage ratio of 134.52%. In other words, the amount of reserves the bank has set aside for loan losses is 34.52% larger than the size of its current non-performing loans.

The bank has a large deposit base to fund its loans and investments. As at December 31, 2013, the bank has a loans-to-deposits ratio of only 94.06%. KASIKORNBANK is also well-capitalized. As at December 31, 2013, KASIKORNBANK had a total capital ratio and a tier 1 capital ratio of 15.78% and 12.57% respectively. This is significantly above the minimum total capital ratio and tier 1 capital ratio of 8.50% and 6.00% respectively that’s required by the Bank of Thailand.

According to Bloomberg, KASIKORNBANK currently has a price/earnings ratio of 9.73 which I think is a fair deal considering the above average performance and stability of the bank. I know that there have been protests taking place in Thailand recently. But I think this is a short-term challenge, and that Thailand should still be a stable country over the long-term. I plan to take a small position in the stock sometime in the near future.


Before I wrap this up, I want to share an irrelevant thought of mine. I read an article earlier today that said people over 20 should stop saying YOLO (you only live once). Well, I think that YOLO is an awesome word and the dude that wrote the article is wrong. You only live once, and you should aim to live the best life that you can. Thank you for reading. Take care and stay rational. YOLO BITCHES!!!

4 comments:

  1. hi,

    Can i know how you buy Thailand stocks?

    regards,
    HW

    ReplyDelete
    Replies
    1. Hi HW, I just used my local remisier. My brokerage house is RHB OSK, but I think most brokerage house in Malaysia can do it for you.

      Delete
    2. Oh.. That is great news. Thanks and your articles too. Its a great one.

      Delete
    3. You're most welcome. Take ccare

      Delete