Most Thai banks are in terrible shape. These are not bargains compared to other opportunities in Thailand. In financial statements, avg. loan loss reserves as a % of Loans for Thai banks was about 7% as of June 30. But Thai analysts are predicting 20%+ of loans will ultimately be unrecoverable. Adjust book value for additional write-offs, and all these banks are selling at substantial premiums to adjusted book value. By substantial, I mean Adj. Book Value is several times greater than market cap, in the more-favorable instances. A number of banks have Adj. Book Value less than "0". There's going to be a lot of dilution as the banks recapitalize.
Banks accounted for 13% of the total market capitalization of common stocks listed on the Stock Exchange of Thailand in September, but for 50% of the turnover. Over the last month there's been a gold rush mentality. This sector is overbought, and expectation of 10-20 fold return over 2-5 years is much too optimistic. Admittedly, there's been aggressive liquidation of the finance companies in Thailand, but this hasn't carried over to the banks. Thailand is a very tough place for creditors to collect loans. The government is trying to change this, and probably will, but I'd bet it's still going to be tough collecting loans in Thailand a year from now.
In fairness, the banks are enjoying a very favorable spread right now between loan rates and deposit rates, and there's a good bit of value (in addition to book value) in owning a bank in what will someday probably again be a rapidly growing market. But this is too frothy for me.
If you have a decent size position in the Thai banks, I would highly recommend you subscribe to one of your references:
thaistocks.com
and see what he says about bank stocks. It's worth the $325 subscription fee, and some of his ideas, IMHO, are a lot better than the bank stocks.
Jethro |
