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Siam Panish Leasing
SPL <Bt34.50>

Recommendation
New : BUY
Previous : BUY

Earnings rise 15% in 2002 on strong demand for auto loans

Siam Panich Leasing (SPL) reported a 2002 net profit of Bt775mn, up 15% yoy and in line with our forecast of Bt787mn. The company also announced a better-than-expected interim dividend of Bt1/share, resulting in a full-year dividend of Bt1.75. The stock has come under selling pressure today, however, since its interim dividend represents a yield of less than 3%.

This year we expect SPL to record 14.5% growth in operating profit to Bt986mn. Its bottom line, however, is projected to dip 3% to Bt751mn due to a rise in its corporate tax rate to 30% (versus 20% last year) and the absence of extra income from bad debt write-backs Nonetheless, we are maintaining our BUY rating on SPL as well as our year-end target price of Bt42.79/share. This is based on a 2003 PER of 15x assuming full EPS dilution from the exercise of the remaining 64mn SPL-W2 units. At the current level, SPL also offers attractive dividend yields of 5-6%.

SPL: Earnings Forecast

	2001	2002	2003F	2004F
Operating profit (Bt mn) *	619	861	986	1,102
Net profit (Bt mn)	674	775	751	836
Eps (Bt)	3.39	3.89	3.77	4.20
BVps (Bt)	19.35	22.51	24.40	26.49
Dps (Bt)	-	1.75	1.88	2.10

P/E (x)	10.19	8.87	9.15	8.22
P/B (x)	1.78	1.53	1.41	1.30
Dividend yield (%)	-	5.07	5.46	6.08
ROE (%)	19.19	18.60	16.07	16.49
* before provisions & other income

SPL's car loans grew 40% last year, in line with domestic auto sales. Over the past three years, SPL has issued debentures worth about Bt3-4bn a year with maturity of 3-4 years (in line with the maturity of its HP loans). Next month SPL is planning to issue a Bt3.5bn debentures issue with an expected coupon rate of just over 3% (versus 5.5% for last year's issue). Despite falling loan yields, SPL should be able to maintain its relatively high net interest spread of 5.4%.

In 4Q02 SPL booked a net profit of Bt154mn, down 17% qoq. This was due to a sizable provision of Bt40mn (versus Bt7mn the previous quarter), despite improving asset quality.

As 93% of SPL's revenue comes from HP (while the remainder is divided equally between equipment leasing and factoring equally), SPL's total loan portfolio grew in line with domestic car sales. Low interest rates, coupled with aggressive marketing campaigns from auto companies, helped trigger a surge in new car sales last year by 37.8% to 409k units, with about half of sales financed by loans. SPL's HP loan book expanded by 40.3% last year, aided by its long-established nationwide network. However, its total loan portfolio rose 37.5% due to contraction on its factoring business.

SPL: Loans & Expansion
Bt mn	Gross loans			Growth
	Dec-02	Dec-01	Dec-00	Dec-02	Dec-01	Dec-00
1. HP	19,429	13,846	9,614	40.3%	44.0%	27.5%
2. Equipment leasing	997	801	869	24.5%	-7.8%	-2.5%
3. Factoring	738	747	689	-1.2%	8.4%	33.5%
TOTAL	21,164	15,394	11,172	37.5%	37.8%	6.8%

SPL's business has been aided by the declining trend in interest rates which has allowed it to issue new debentures at lower coupon rates. Last year SPL issued a Bt3bn debenture with a fixed coupon rate of 5.50%, 70 basis points lower than the 6.20% coupon rate for a prior debenture issue a year earlier. As the table below shows, SPL's net interest spread increased from 46 bps from 4.93% to 5.39% last year due mainly to a 185 bps drop in cost of funds (from 7.22% in 2001 to 5.37%). The company plans to launch a Bt3.5bn debenture next month with an expected coupon rate of 3.1-3.5%.

SPL: Spread widening
%	2002	2001	4Q02	3Q02	2Q02	1Q02
Yield on lending	10.76	12.15	10.56	10.88	11.06	11.37
Cost of funds	5.37	7.22	5.11	5.29	5.89	5.86
Net Interest Spread	5.39	4.93	5.44	5.59	5.17	5.51

Despite aggressive loan growth of almost 40%, NPLs remained at Bt1,100mn (compared to Bt1,112mn a year earlier). In other words, the company's NPL ratio declined from 7.2% of total loans to 5.2%. SPL maintains a conservative provisioning policy and has boosted provisions last year to Bt84mn versus Bt25mn in 2001.

SPL : 4Q02 & 2002 Results

Bt mn

4Q02

3Q02

4Q01

qoq

yoy

2002

2001

yoy

Net interest income

331

315

241

5.1%

37.1%

1,204

902

33.5%

Operating expenses

-102

-83

-73

23.0%

38.3%

-343

-282

21.5%

Operating profit

230

233

168

-1.3%

36.6%

861

619

39.0%

Other income (incl write back)

24

30

21

-19.8%

13.8%

192

92

109.2%

Provisions

-40

-7

-8

518.4%

387.5%

-84

-25

242.4%

Pre-tax profit

213

256

181

-16.7%

17.9%

969

687

41.1%

Income tax

-59

-70

0

-16.3%

n.m.

-194

-13

1435%

Net profit

154

186

181

-16.9%

-14.7%

775

674

15.0%

EPS (Bt)

0.77

0.93

0.91

-16.9%

-14.8%

3.89

3.39

14.9%

Net Interest Spread

5.44%

5.59%

4.82%

5.39%

4.93%

Analyst: Ratchanok (Orange) Dandamrongrak Ext.1560
ratchanok.d@kimeng.co.th

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