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Trinity
Watthana
TNITY <Bt5.80>
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Recommendation
New : SELL
Previous : SELL
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Earnings
meet forecast despite Bt7mn loss in 2H02
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Trinity Watthana (TNITY)
announced a 2002 net profit of Bt70mn, in line with our
earlier forecast. However, the brokerage recorded a Bt7mn
loss in 2H02 versus earnings of Bt77mn in the first six
months due to a reduction in market share and a steep drop
in market trading volumes.
Despite its weak second half
performance, TNITY's financial position has improved after
it raised Bt563mn via an IPO and a private placement last
December. These two fund-raising exercises helped boost the
company's book value by 22% to Bt6.34/share at end-2002.
Nevertheless, we are
maintaining our SELL recommendation on TNITY given
its low market share and bearish market conditions. We
expect its net profit to fall 41% this year to Bt41mn,
putting the stock on an expensive P/E of nearly 20x. . Based
on our target P/E of 15x, TNITY is worth just Bt4.44/share,
indicating a downside risk of 23%.
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TNITY:
Earnings Forecast |
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2001 |
2002 |
2003F |
2004F |
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Brokerage
fees (Bt mn) |
42 |
247 |
176 |
185 |
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Net profit
(Bt mn) |
-62 |
70 |
41 |
50 |
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Brokerage
fees/share (Bt) |
0.7 |
1.77 |
1.26 |
1.33 |
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Eps (Bt) |
-1.03 |
0.51 |
0.3 |
0.36 |
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BVps (Bt) |
3.97 |
6.34 |
6.55 |
6.8 |
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Dps (Bt) |
- |
0.15 |
0.09 |
0.11 |
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P/Brokerage
fees (x) |
8.33 |
3.27 |
4.6 |
4.36 |
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P/E (x) |
-5.63 |
11.48 |
19.58 |
16.22 |
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P/B (x) |
1.46 |
0.92 |
0.89 |
0.85 |
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Dividend
yield (%) |
- |
2.61 |
1.53 |
1.85 |
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ROE (%) |
-25.89 |
12.55 |
4.6 |
5.36 |
- TNITY reported a net profit
of Bt70.3mn for 2002, marginally below our forecast of
Bt71.3mn. After making a net profit of Bt77mn in 1H02,
TNITY recorded losses of Bt4mn and Bt3mn in 3Q02 and 4Q02
respectively. This was due to a plunge in average daily
market turnover from Bt10bn in 1H02 to Bt5.7bn in the
second half, coupled with a sharp decline in its market
share from 2-3% in 1H02 to 1.6%. As TNITY has only been in
the brokerage business for two years, its cost structure
is relatively high compared to competitors. Since TNITY
only became a full broker 11 months ago, it has to pay
brokerage seat fees to the SET at 0.025% of the company's
monthly turnover.
TNITY:
Declining market share
- Last December TNITY issued
75.3mn new shares divided into two lots. Some 47.3mn
shares were offered to strategic partners, Krung Thai Bank
(KTB) and Thailand Equity Fund (TEF), at Bt6.50/share.
Another 28mn shares were sold in an IPO at Bt9.25 each.
The proceeds of Bt563mn were used to expand TNITY's
investment portfolio, particularly in debt instruments. In
4Q02, investment rose to Bt659, making it the biggest item
in the balance sheet, representing 63% of total assets.
This compared with investment of just Bt279mn at the end
of last September. Since the new shares were offered above
the par value of Bt5, TNITY's book value per share
increased from Bt5.19 at end-September to Bt6.34 at
end-2002.
TNITY's market share has
fallen continuously and was just 1.42% last month. Assuming
a market share of 1.60% this year and average daily turnover
of Bt9bn, we expect the company to report a 2003 net profit
of just Bt41mn, down 41% from last year. Other key
assumptions in our forecast are: 1) advisory &
underwriting fees income to grow 20% to Bt49mn; and 2)
operating expenses to represent 80% of total revenue (versus
77% in 2002). If TNITY's two strategic partners become more
active in sending orders to the brokerage, our earnings
forecast could prove too conservative. At the same time,
however, TNITY needs to maintain a market share of at least
2.2% just to reach the same level of profitability as last
year – a very tall order given intensive industry
competition and bearish market conditions.
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TNITY:
4Q02 & 2002 Results |
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Bt mn |
4Q02 |
3Q02 |
4Q01 |
qoq |
yoy |
2002 |
2001 |
yoy |
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Revenue: |
33 |
43 |
1 |
-24.8% |
3578.7% |
327 |
54 |
502.8% |
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Brokerage |
28 |
31 |
0 |
-7.8% |
n.m. |
247 |
42 |
490.7% |
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Fees
& service |
7 |
10 |
3 |
-30.9% |
106.3% |
77 |
10 |
657.1% |
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Gain
from investment trading |
0 |
1 |
0 |
n.m. |
n.m. |
2 |
2 |
46.1% |
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Others |
-3 |
2 |
-3 |
n.m. |
n.m. |
1 |
1 |
59.1% |
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Expenses: |
-61 |
-47 |
-42 |
29.4% |
45.2% |
-253 |
-115 |
120.4% |
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Personnel |
-22 |
-26 |
-25 |
-17.0% |
-11.9% |
-131 |
-63 |
108.7% |
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Premises |
-10 |
-10 |
-9 |
0.0% |
4.1% |
-40 |
-25 |
61.0% |
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Others |
-30 |
-12 |
-8 |
159.5% |
262.3% |
-82 |
-27 |
202.5% |
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Net
revenue |
-29 |
-4 |
-41 |
n.m. |
n.m. |
74 |
-61 |
n.m. |
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Net
profit |
-3 |
-4 |
-17 |
n.m. |
n.m. |
70 |
-62 |
n.m. |
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Eps
(Bt) |
-0.05 |
-0.06 |
-0.28 |
n.m. |
n.m. |
1.03 |
-1.03 |
n.m. |
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Analyst: Ratchanok
(Orange) Dandamrongrak Ext.1560
ratchanok.d@kimeng.co.th
If you have
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Copyright © March 2000,
Kim Eng Securities (Thailand) PLC. All rights reserved.
Disclaimer
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