Industry Update Monday March 23, 2015 Securities Sector Very good dividend yields despite wobbling business SECURITIES Rec: NEUTRAL The securities business has been wobbling, but there are still revenues from other businesses, e.g. investment banking (IB) and gain from proprietary trading. Accordingly, securities stocks have a strong point from low P/E ratio and high dividend yield; top picks are MBKET and KGI.  Still facing fierce competition The securities brokerage business would remain in fierce competition in 2015. One new brokerage company, LHS, was opened in late 2014 and other three companies are obtaining licenses from the Securities and Exchange Commission (SEC) and may start the business around 2H15; these will lessen market shares of existing companies. Moreover, one of the three new companies focuses on online trading, which has lower brokerage fee rate than usual, so it would decrease average brokerage fee rate of the sector. Previously, average brokerage fee rate in 2014 was 0.127%, down from 0.136% in 2013.  Sector Index : 2,351.19 SET Index : 1,529.96 Profit to show flat growth Apart from fierce competition in the brokerage business, other businesses are also facing limitations. For the IB business, only 17 companies have submitted filings in 2015 and combined IPOs value is projected to be substantially lower than that of 2014, so fee revenue may decline from last year. For the margin loan business, the government’s anti-speculation measure taking effects since January 1, 2015 is an impediment. However, we maintain our assumption for daily trading value (prop-trade excluded) of B41.5bn on average in 2015; although YTD daily trading value is B51.5bn on average, which is 24% higher than the assumption, we believe Fed’s benchmark interest rate increase, which is likely at the end of this year, would depress trading value since 2H15 onward. Overall, we estimate FY2015 net profit at B4.12bn.  Maintain NEUTRAL We maintain NEUTRAL for the sector and select MBKET([email protected]) as a top pick for its biggest market share and biggest IB filings value among peers, low P/E ratio of only 10.66x, high dividend yield of 7.5%, and an upside of 31.4%. Another pick is KGI([email protected]) for its dividend yield of above 8.4% and an upside of 10.4%. Key Data (Bm) FY: Dec 31 Brokerage Fee Revenue Operating Expenses Net Profit PER (x) PBV (x) ROAA ROAE Source : ASP Research FY13A 13,061 11,539 4,926 5.94 0.97 7.63% 17.25% FY14A 11,244 10,903 4,393 9.42 1.40 6.26% 14.66% FY15F 11,105 10,685 4,117 15.03 2.03 5.55% 13.69% FY16F 11,105 10,685 4,117 15.03 1.97 5.64% 13.31% FY17F 11,105 10,685 4,117 15.03 1.92 5.61% 12.94% Kawee Manitsupavong License no.: 003974 [email protected] Tanawin Pichatsiriporn Analyst Assistant This report is a rough translation of one of our Thai-language research products. It is produced primarily with time efficiency in mind, so that English-reading clients can see what the main recommendations are from our Thai-language research team. Given that this is a rough-and-ready translation, Asia Plus Securities pcl cannot be held responsible for translation inaccuracies.) The reports and information contained herein are compiled from public data sources and our analysts' interviews with executives of listed companies. They are presented for informational purposes only and not to be deemed as solicitations to buy or sell any securities. Best attempts have been made to verify information from these vast sources, but we cannot guarantee their accuracy, adequacy, completeness and timeliness. The analyses and comments presented herein are opinions of our analysts and do not necessarily reflect the views of Asia Plus Securities.