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Siam Commercial Bank Pcl [SET:SCB] closed with a negative note on Wednesday at 119.50 baht per share, down 0.52% from the previous close. SCB is Thailand's third-largest bank and 21.3% owned by the investment arm of the Thai royal family's Crown Property Bureau. SCB shares have been under selling pressure throughout the year, down over 34% in the past 12 months, despite its low valuation with a P/E (TTM) of 8.75, as investors remain concerned about a further increase in non-performing loans (NPLs) in Thailand's banking system.
In October, steelmaker Sahaviriya Steel Industries (SSI) went into bankruptcy, leaving lenders including Krung Thai Bank [SET:KTB], Siam Commercial Bank and Tisco Bank [SET:TISCO] stuck with a debt of an estimated 50 billion baht, according to the Nikkei.
Less than two weeks ago, Jasmine International [SET:JAS] won a bid from the National Broadcasting and Telecommunications Commission (NBTC) of Thailand for the 900 MHz spectrum and will have to pay a record 75.67 billion baht for the 4G spectrum license. The company said it has lined up 75 billion baht from a consortium of banks, which one of them could be Bangkok Bank [SET:BBL]. Investors were dumping telecom companies last week on concerns that the companies could have overpaid for the licenses and that an escalation of a price war in the Thai mobile phone market could soon erupt. If the telecom companies begin to lose money, bank stocks could be the next to get dumped.
There are no signs of a significant change in economic fundamentals, as exports continued to slump for the eleventh consecutive month in November, down 7.42% year-on-year, while imports sank 9.53%, the Commerce Ministry of Thailand said on Monday. The Bank of Thailand’s (BOT) index for private consumption, which makes up half of the economy, rose 0.7% in November from the previous month, while investment increased 0.8%, the fifth straight month of gains. The BOT sent out a warning yesterday that China's economic transition, the wider divergence of monetary policy among major economies, low farm prices and the prolonged drought are headwinds for Thailand's economic growth next year.
SCB reported its third-quarter earnings on October 19 with revenues of 39.29 billion baht, up 23.52% year-on-year, beating the 37.81 billion baht consensus estimate of the 6 analysts according to the Financial Times. The third-quarter 2015 earnings came in at 2.65 baht per share, down 32.05% year-on-year, missing the 3.06 baht per share estimate of 6 analysts. The bank said in a statement that NPLs jumped to 3.02% of total lending at the end of September, the highest since 2010.
According to Reuters, the bank set aside loan-loss provisions (LLPs) of 16 billion baht, up almost 400% from a year earlier, to reflect rising bad debts. The statement said of that amount, 11 billion baht were linked to the SSI debt. SCB is expected to announce its fourth-quarter earnings report on January 18. The market is expecting earnings of 3.23 baht per share on revenues of 33.03 billion baht. The 23 analysts covering SCB expect the company to trim its dividends by 9.45%, to 5.43 baht per share for the fiscal year 2015, from 6 baht per share paid in 2014.
Technically, SCB made a bearish double top reversal at around 200 baht per share at the end of 2014. Since then, the stock has pulled back over 40%. The double top chart pattern was confirmed at the beginning of December and the price projected for SCB shares is 88 baht per share, determined by subtracting the height of the double top chart pattern from the point of breakdown. There is a trendline resistance at around the 105 baht per share level. Of course, SCB shares could bounce if a sharp turnaround in Thailand's exports and consumption emerges.
As of December 26, 2015, the consensus forecast amongst 28 investment analysts polled by the Financial Times advises investors to hold their position in SCB, with the median 12-month price target of 155 baht per share.
Disclosure: No position and no recommendation. |
