Analyst expects “Muangthai Capital”’s 4Q20 net profit to make a record high of 1.37 billion baht, an increase of 21% from an expansion in loan business, coupled with an increase of new branches. Therefore, recommending “BUY” at an upgraded target price of ฿80.00/share.
KTB (Thailand) Securities forecasts Muangthai Capital Public Company Limited (MTC)’s net profit in 4Q20 to grow by 21% YoY and 2% QoQ to 1.37 billion baht on higher loan and lower cost of finance, despite a narrower loan yield.
Total loan would increase 17% YoY and 5 % QoQ, as the number of branches may have increased to 4,984 (4,107 in 4Q19, 4,798 in 3Q20). Meanwhile cost of finance would decrease to 3.8% after MTC has tapped a soft loan from the Government Saving Bank. Cost to income ratio would reduce to 47.8%. But loan yield would narrow to 20.9 % after the company cut its interest rate charge for motorcycle loan to 18% in 2H20 and maintained this rate until 4Q20
Also, KTBST expects MTC’s 2021 net profit to grow 16% to 6.06 billion baht as total loan would increase 17% on the back of the company’s plan to open 600 new stores this year, and NPL ratio is expected to remain at a low level of 1.1%, together with credit cost would decrease to 66 bps given its high coverage ratio of 201%. Nevertheless, loan yield would decline to 20.9% from 21.2% in 2020E due to the cut of interest rate charge to attract more customers given a threat from the partnership between SAWAD and the Government Saving Bank.
The Bank of Thailand recently announced a new credit assistance measure for debtors in the COVID-19 restricted provinces, comprising Samutsakorn, Chonburi, Rayong, Chanthaburi, and Trad. KTBST expects a limited impact on MTC’s earnings as 1) the company will continue to book its interest income while debtors are obliged to comply with their routines at a minimum payment to loans — the earlier moratorium program allowed suspension of payment for a certain time, and 2) the potentially qualified loans to the new assistance measure will be just 8% of total loan, which is a similar level to the company’s moratorium loans in 2020.
KTBST reiterates a BUY rating on MTC but raises the target price to ฿80.00/share from ฿65.00/share as the analyst roll forward its valuation to 2021E base. At the same time, maintaining its PBV multiples at 6.7x, which is -0.25 SD below its 5-yr average. KTBST believes MTC should trade at a discount to its historical level given an intensified competition and a higher downside risk of loan yield from a threat of the partnership between SAWAD and GSB.
Meanwhile, KGI (Thailand) Securities projects MTC’s 4Q20 earnings will be around 1.4 billion baht, an increase of 22% YoY and full-year 2020 earnings will be 5.2 billion baht, up 23% YoY. KGI, also, reaches a new 2021 target price of ฿72.00/share, from ฿61.00/share, but downgraded MTC to Neutral, from Outperform.