THAILAND SET

Siam Commercial Bank Shares Are About To Break Out Despite Mixed Financial Results

Witawat (Ed) Wijaranakula, Ph.D.
Fri Mar 24, 2017

Siam Commercial Bank PCL (SET:SCB), Thailand's third largest lender by assets, 2.77 trillion baht, as of June 30, 2016, operates four business segments: the wholesale banking group, the business banking group, the retail banking group, and the special business group, which is responsible for non-performing loan, or NPL, solutions. As of March 15, 2017, SCBís top two principle shareholders are Thailand-based Vayupak Mutual Funds One and the Crown Property Bureau, which manages the Thai royal familyís properties and investments, with 23.12% and 22.96% of total shares, respectively. Foreign investors hold 32.25% of both ordinary and preferred shares.

SCB said on January 19 that its fourth-quarter 2016 revenues were 32.6 billion baht, up 0.89% year-on-year, but missing the 34.32 billion baht consensus estimate of 2 analysts, according to Thompson Reuters. The company posted fourth-quarter 2016 earnings of 3.74 baht per share, up 7.78% year-on-year, beating the 3.73 baht per share consensus estimate of 4 analysts. The company said the increase in profit was a result of higher net interest income and higher net fee and service income. 

For the full-year 2016, revenues were 133.33 billion baht, down 2.97%, missing the 134.03 billion consensus estimate of 17 analysts, while earnings were 14.01 baht per share, up 0.94% over the same period the previous year, and beating the 13.56 baht per share consensus estimate of 24 analysts. 

In the press release, SCB said its NPLs stood at 2.67% of total lending at the end of 2016, versus 2.89% at the end of 2015, due to an improvement in asset quality of the corporate segment, offset by a slight increase in NPLs of the small and medium-sized enterprise, or SME, and retail segments. The bank's loan loss provision decreased 24.2% from the previous year to 22.53 billion baht, due to an improvement in asset quality, while its bad debt coverage ratio rose 134.3% at the end of 2016 from 109.8% at the end of 2015. The provision for credit losses is an estimated amount to be lost and is treated as a non-interest expense on the company's financial statements. 

For 2016, SCB reported a dividend of 5.50 baht a share. The 24 analysts covering the company expect dividends of 5.90 baht a share for the upcoming fiscal year, representing a year-over-year increase of 7.27%. SCB will report its first-quarter 2017 earnings on April 20. The earnings expectations are for 3.00 baht, down 12.28% year-on-year, on revenues of 31.71 billion baht, up 6.59% during the same period the previous year.

Technically, SCB shares are about to break out the symmetrical triangle chart pattern. The next head resistance is at 166 baht.. There are several supports at the 144 and 150 baht levels if SCB pulls back. According to Thomson Reuters, the consensus amongst 27 polled investment analysts covering SCB gave the company an Outperform rating, with the median 12-month price target of 165 baht per share, as of March 18. 

Disclosure: No position and no recommendation.

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