INVESTMENT HIGHLIGHTS

• Lower net profit on higher taxation and OPEX

• NII remain robust

• Provisions came in lower

• Better asset quality

• No change to our forecast

• Maintain BUY with unchanged TP of RM7.70 pegging the stock to 1.3x FY19 Price-to-Book multiple

Lower net profit due to taxes. CIMB Thai FY18 net profit was lower by THB378m to THB6.9m. This was mainly due to continued higher taxation and OPEX. Tax was 2.5x higher than last year, coming in at THB264.3m. The tax for 4QFY18 was particularly high at THB65m, a +75.8%qoq increase.

Also from higher OPEX, but this was due to personnel. FY18 OPEX grew +9.6%yoy to THB8.35b. The increase in OPEX came from increase in employee expenses and others. These expanded +11.4%yoy to THB4.53b and +8.8%yoy to THB2.23b respectively. However, we understand that the higher OPEX growth was due to hiring of personnel which we indicate as a positive sign towards improving business conditions.

Robust NII growth. NII grew +5.3%yoy to THB10.75b, as interest income outpaced interest expense (+5.2%yoy to THB15.31b vs. +4.8%yoy to RM4.56b). This was despite NIM being lower by -18bps yoy to 3.71%. The NII expansion was due to solid gross loans growth which grew +6.9%yoy to THB227.8b.

Lower provisions also played a part. Provisions for FY18 fell - 2.6%yoy to THB4.92b. Gross NPL ratio was 4.3% as at 4QFY18 vs. 4.8% as at 4QFY17.

Deposits growth remain solid. Deposits (inclusive of Bill of Exchanges, Debentures and selected Structured Deposit Products) grew +6.5%yoy to THB234.3b. This resulted in Modified LD to come in within the 97% level.

FORECAST

We make no changes to our forecast pending the Group's 4QFY18 result next month.

Source: MIDF Research - 16 Jan 2019