Analyst Maintains a Positive View on JMT after Entering to SET50, Upgrading TP to ฿20.80

Maybank Kim Eng has made an analytic review onJMT Network Services Public Company Limited (JMT), according to the Bank of Thailand, the financial institutions’ gross NPLs totaled THB456 billion (+2.4% YoY) in 1Q19, close to the loan growth of +3% YoY, 2.95% of total loans (+2bps YoY). The management said the auction atmosphere for selling debt is still normal as in the previous year. So Maybank can see that this year’s growth is not a concern.

Maybank expects JMT’s investment for debt buying should not less than THB2.5 billion in the previous year. The amount of debt is not less than THB20-25 billion vs THB146 billion at the end of FY 2018, (+15-17% YoY). Maybank believes JMT may buy secured loan by about billion baht in mid-year and the big lump for non-secured in the late 3Q-4Q19, as a growth base for next year.

Maybank maintains a positive view on 2Q19 earnings, with revenue of THB575 million (+5% QoQ, + 28% YoY) based on cash collection of THB730 million, (+3% QoQ, +33% YoY) from the new debt purchased at the end of FY 2018 and cleared cost debt portfolios.
As a result, gross profit margins improved at all levels. Although the insurance business is still losing QoQ, it has started to develop positively from increased sales per month while gradually adjusting the portfolio to decrease the loss ratio before turning to profit at the end of the year.

Maybank estimates 2Q19 net profit of THB150 million (+4% QoQ, +25% YoY), another quarter with the all-time high. There is a high chance that the net profit will continue to break the all-time high in the remaining two quarters by QoQ, following the debt collection cycle based on the past 2 years (1Q <2Q <3Q <4Q).

Maybank has upgraded the target price to THB20.80 based on Forward P/E’20F +1.50SD = 22x vs 3-Yr CAGR (2018-21) +23% equivalent to PEG = 0.96X. This is to reflect the bullish momentum in the next 6-12 months, both in terms of 2H19 net profit from the debt portfolio that recognises 100% profit since the end of 2Q19. That includes the new debt it gradually buys this year, likely to exceed the target due to the impact of the IFRS9 (excluding in the estimate) before starting to realise full income in 1Q-2Q20.

JMT also has insurance business as another upside risk that should be followed next year.  Moreover, Maybank also warns JMT about the economic slowdown which may affect the collection of cash from non-performing loans, risks from the competition in the industry.