The ASEAN economic community - comprising
Thailand, Malaysia, Singapore, Indonesia, Myanmar, Vietnam, Philippines, Laos,
Cambodia, Bhutan – will come into force in 2015 allowing many free movements
for goods, services, capital and workers. Large Thai banks are poised for
growth as they enjoy greater access to other regional markets and to increased
growth across a wide variety of industries. One such bank which presents a good
investment opportunity is Kasikornbank or Kbank. Kbank is Thailand’s fourth
largest bank by assets, but the reason that it presents a better investment
opportunity than the other Thai banks is that it is the leading lender to small
and medium-sized businesses in Thailand. This business segment is dominated by
growth areas – tourism, healthcare and dentistry, autoparts – as well as being
the major market segment for loans in the Thai market. This is a high-yielding market
segment that as the economy grows will allow Kbank to leverage the
relationships it makes to serve these same companies as they transition into
large-scale corporations. It also helps that Kbank is the leading lender for
franchise businesses in Thailand as well as being well-known for its retail
banking customer service – evidenced by winning The Asian Banker Journal’s Best
Retail Bank in Thailand Award for the past four years. However in truth most of
the major Thai banks would be good investments because:
·
The Asia-Pacific region is
experiencing fast-growth and has not really felt the impact of any “world”
financial crisis – credit is still easily obtainable;
·
The banking industry is a
high-beta industry so changes in stock price is rapid presenting a good
opportunity whilst...
·
The banking industry is a growth
area in developing economies.
KBank operates 865 branches across
Thailand, including 288 in Bangkok. KBank also has nine overseas offices
including in Los Angeles, Hong Kong, Shenzhen, Beijing, Shanghai, Kunming,
Tokyo, Yangon and the Cayman Islands (to facilitate offshore financial
services). The bank have experienced rapid share price growth from THB 85 in
2009 to THB 195 being their latest price. Their major shareholders are other
financial institutions that generally prefer risk-averse investment strategies
including 29% foreign shareholders (unknown), 11% holding by State Street Bank companies,
3.5% holding by HSBC companies, 10.5% holding by JP Morgan-owned companies, and
a 1.05% holding by the Government of Singapore’s Sovereign Wealth Fund.
Investing in KBank would provide
exposure to a banking sector in a country where credit is easily obtained in
Thailand for local businesses – it is as if there was no financial crisis. This
fact is evidenced by the growth statistics of Kbank since the ostensible “world”
financial crisis of 2008. Return on equity has grown from 12.58% in 2008-2009
to 20.76% on the 31st December 2012. Earnings per share have grown
from 6.22 at year end 2009 to 14.73 on the 31st December 2012. Revenues
have more than doubled from year end 2009 to year end 2012. Finally, market
capitalization has grown from THB 203,427,120,000,000 in year end 2009 to THB 463,095,850,000,000
in 2013.
KBank also possesses a history of
innovation in the Thai banking market. In 1980 they were the first Thai bank to
issue Floating Rate Certificates of Deposit on the London market and in 1998
they pioneered the use of SLIPS (Stapled Limited Interest Preferred Stock) as a
financial vehicle for fundraising – later copied by other banks. Furthermore,
in 2011 they were the first Thai bank to serve as a neutral third party escrow
agent on behalf of home buyers and sellers, thus developing a new product
market as well as being the world’s first bank to offer a secured system of
payment via mobile phone. 2012 saw KBank take advantage of the vast numbers of
Myanmar migrant workers by becoming the first bank to allow them to remit funds
to their country.
Future developments augur well for KBank’s
share price and future growth. KBank are opening a second Chinese retail and
business banking branch in Chengdu in May 2013, aimed at building a track
record so that it can apply for a local banking license from the Chinese
government. KBank’s first Chinese branch in Shenzhen was opened in conjunction
with China Minsheng Banking Corporation, allowing KBank’s customers to use
financial services provided by their partner. Therefore, both banks jointly
provide yuan-denominated credits to Thai companies investing in China and
baht-denominated loans to Chinese companies investing in Thailand. Furthermore,
KBank are looking to open branches in ASEAN countries to pave the way to take
advantage of their leading SME-loan business by leveraging it in other ASEAN
countries.
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