KGI Securities has “Neutral” view on the Thai banking sector, stating that the Covid-19 resurgence will prolong the recovery for three months and pressure earnings in 4Q20 and 1Q21. Still, KGI preferred BBL, TMB and KKP on individual positive factors.
The security company stated that the second round of COVID-19 will drag on banks’ recovery for three months and pressure earnings in 4Q20 and 1Q21. To weigh in the short-term risk in KGI’s stock selection and prefer Bangkok Bank Public Company Limited (BBL), TMB Bank Public Company Limited (TMB), and Kiatnakin Phatra Public Company Limited (KKP).
KGI gave an “Outperform” rating on BBL with a target price at ฿160.00/share, stating that BBL’s asset quality and earnings profile will be more resilient than peers if the local COVID-19 outbreak is severe, while the recovery in its operation and improvement in ROE should be at a faster pace than peers when the economy turns to recovery in 2021. With the lowest exposure to troubled loans resulting from the COVID-19 pandemic and highest LLR/loan, BBL may have room to cool off if the COVID-19 situation eases. Furthermore, it may gain in the new investment cycle from large corporates after COVID-19. Lastly, its subsidiary bank in Indonesia has seen a strong recovery. Applying PBV 0.65x, KGI maintained its 2021 target price at Bt160.00.
KGI gave an “Outperform” rating on TMB with a target price at ฿1.53/share. The security company saw interesting forward 2-year earnings growth for TMB due to operating cost savings and less volatile provisioning expense due to its policy to de-leverage growth on risky assets for almost two years. Applying PBV 0.7x, thus, KGI reached a new fair price of Bt1.53, from Bt1.35.
Lastly, KGI gave an “Outperform” rating on KKP with a target price at ฿68.00/share, expecting that KKP’s earnings profile relies heavily on capital market conditions. With the rallies in the capital and bond markets, KGI expected higher fee income from asset management and raised gain on investment, which then have us revise up its 2020/2021 earnings forecasts by 8%/23%. Applying PBV 1.2x, KGI reached a new 2021 target price of Bt68.00, while maintaining a rating of Outperform on the counter.