12-month target price : Bt9.30
Recommendation : BUY
Closing Price (4 Feb 09) : Bt7.70
Gain on sale of TBANK shares worth Bt3.49b
- On Feb 3, TCAP sold to BNS a sum of 416.53m TBANK shares at Bt18.38 apiece, translating to 1.6x TBANK's book value. The transaction raised a total of Bt7.66b.
- We expect TCAP would book gain on sale worth Bt3.49b from the transaction in the first quarter of 2009.
- We reiterate our 'BUY' rating on stock in view of attractive dividend yield during 2008-2009, coupled with still satisfactory capital upside from the current share price. The fair value is at Bt9.30/share.
TCAP sold 416.53m TBANK shares to BNS @Bt18.38
Pertaining to the BOT's permission for The Bank of Nova Scotia (BNS) to hold additional shares of TBANK for an amount not exceeding 49% of the paid-up shares, on Feb 3 TCAP further sold 416.53m TBANK shares to BNS at a price of Bt18.38 each, equivalent to 1.6x TBANK's book value or 24.01% of total paid-up shares of 1,734.62m shares. The total transaction was worth Bt7.66b. We expect TCAP to book gain on sale (before tax) of Bt3.49b on assumed TBANK cost of Bt10/share in its first quarter results.
Prior to the transaction, BNS held 433.39m shares in TBANK, equivalent to 24.98%, at Bt16.37/share. Following the purchase, its holding would rise to 849.92m or 48.99% of TBANK's paid-up shares. The cost per share would rise to Bt17.355 each due to higher cost for this last round. Meanwhile, TCAP's holding in TBANK would fall from 74.93% to 50.92%, translating to 883.28m shares.
2009 profit would be supported by the sale transaction
Previously, we expect TBANK would sell its capital increased shares to BNS, while TCAP would divest around 408.60m shares at 1.6x TBANK's 2008 year-end book value or Bt15.987/share. The gain would then come about at Bt2.44b (before tax), which would be booked in 1Q09. It turned out that both the selling price and quantity sold were higher-than-expected, which led us to revise up our earnings projection for 2009. In our opinion, the stake sale would be the key that (i) helps support TCAP earnings in 2009 as one-off gain should offset the impact of a reduction in its stake in TBANK to 51%, and (ii) enables it to continue paying good dividends.
BUY rating based on expectations of high dividends in 2008-09 and share price upside potential
We expect full-year 2008 dividend to be similar to a year-ago level at Bt0.90/share, translating into a 43% payout ratio. There remains an interim dividend for 2H09 of Bt0.60, which translates to a satisfactory yield of around 7.8%. For 2009, we estimate TCAP's profit to be about Bt3.45b. Our price target of Bt9.30/share is based on a P/BV of 0.43x (ROE of 8%). We also expect TCAP to keep dividends at existing levels. We maintain a BUY rating on TCAP.
By Phillip Securities (Thailand) Plc. on Feb 5, 2009
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