THAI: Capital increase via public offering

Today’s company update


THAI: Capital increase via public offering

News:

Regarding THAI’s capital increase, the number of newly issued shares is 483.89 million shares (ms) while the offering price is set at Bt 31 a piece. The allotments are as follows:

1) Ministry of Finance 246.933 ms

2) Existing shareholders 221.831 ms at ratio of 1 old share to 0.2667 new shares

3) Retail investors 15.106 ms.

Recommendation & Valuation

Although THAI’s capital increase might have some impact from EPS dilution resulting to lower our PER-derived target price (from Bt 37.75 to Bt 36.75). However, as Baht to US$ is stronger than our expectation, THAI should benefit from this currency movement. For every Bt 1/US$ strengthening other things being equal, we estimate the company’s earnings will increase by around 9%. As such, we are reviewing our earnings projection and target price for ’11. However, for existing shareholders and retail investors, we recommend subscribing the offered shares as the offering price of Bt 31 provides attractive upside of 18%.

Small bank: Outlook update for small banks

Auto H/P loan continues strong

Car sale growth +52% YoY in Aug and +54% YoY for 8M10: Domestic car sales continue strong in Aug-10 with total car sales of 65,724 units, increasing 52% YoY (but flat MoM). Meanwhile, the cumulative car sales (8M10) was 488,088 unit, up by 54% YoY

TISCO and KK is our pick

TISCO and KK valuations and div yield is attractive. Currently, TISCO is trading at PER of 9.1x/10.5x and PBV of 1.8x/1.7x of ‘10F/’11F earnings. Meanwhile, KK is presenting PER of 6.5x/8.9x and PBV of 0.7x/0.7x in ‘10F/11F. Assuming dividend payout at 60% for TISCO and 50% for KK, its current offers dividend yield of 7% for TISCO and 6% for KK.

Technical Analysis

However, the index’s pattern has not lost its rising trend, with the main support at 900 points performing well. The index was able to bounce from the 25-day EMA line along with the appearance of a Hammer sign.

Let Punch! - BUY (CENTEL, LH, HMPRO)