AsiaPacificEquityResearch13March2019ThailandFinancialsAclassic"growthatareasonableprice"investmentThailandBanksHarshWardhanModiAC(65)6882-2450harsh.w.modi@jpmorgan.comBloombergJPMAMODIJ.P.MorganSecuritiesSingaporePrivateLimited/J.P.MorganSecurities(AsiaPacific)LimitedJidapaChirawattanakarn(66-2)684-2326jidapa.chirawattanakarn@jpmchase.comJPMorganSecurities(Thailand)LimitedGauravKhandelwal(91-22)61575092gaurav.khandelwal@jpmorgan.comJ.P.MorganIndiaPrivateLimitedAnuragRajat,CFA(65)68822407anurag.rajat@jpmorgan.comJ.P.MorganSecuritiesSingaporePrivateLimited/J.P.MorganSecurities(AsiaPacific)LimitedSeepage168foranalystcertificationandimportantdisclosures,includingnon-USanalystdisclosures.J.P.Morgandoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.www.jpmorganmarkets.comWeassumecoverageofThailandfinancialswithapositiveviewdespitemanychallenges.ThekeyreasontoownthesectorisamarkedstepupinEPSg(10%in2019-20),whilemultiplesarereasonableat10.4/1.11xP/E/P/Binourview.Creditcostsarecomingofffromcyclicalpeaks,furtheraidedbyFRS9.NIMappearstohavebottomed,withanunderappreciatedCASAstrength.Theseprovideearningsvisibility.Thewaitforcapexrevivalhasbeentorturous,butitstaysapotentialcatalyst.Fee,regulationanddigitalrisksareknown,andwilllikelyintensifywebelieve.Wereflecttheseinourstockpicks.WeinitiateonSAWADwithOW,upgradeTiscotoOW,maintainOWonKTBandBBL,whiledowngradingKBanktoNandSCBtoUW.EarningsarescarceacrossAsiabanks,withnineoutof10bankingsectorsdeliveringsub-10%EPSg.Thailandfinancialsoffer10%EPSgthisandnextyearwhiletradingat10.4xP/E,offeringgrowthandrelativevalue.Creditcostdrivenearningsis,bydefinition,cyclical.Hence,technically,theseearningsdonotdeservehighmultiples.Yet,2019/20provisionsof116/101bpsarecomingoffhighsandwilllikelyundershootthrough-the-cycleaverages.Thus,the...
