Analysts Raise SAWAD’s Target Price to ฿101, Seeing Partnership with GSB as Growth Driver

Analyst upgraded Srisawad Corporation Public Company Limited (SAWAD)’s target price to ฿101.00/share despite it was trading at the lowest P/E ratio among non-banks, compared to MTC, KTC and SINGER. SAWAD set to book an extra profit from Fast Money in 1Q21, expecting a full-year net profit to reach 5.7 billion baht, an increase of 25.8% YoY.

 

SAWAD targeted loan growth of 20% compared to 5% YoY in 2020, due to a plan to open 200-300 new stores per year, and forecasted new loan products such as motorcycle title loan and personal loan, to grow 30%, as well as fee income from from beginning insurance brokers and late penalty fees. Furthermore, SAWAD expected to recognize a revenue of 300 million bath from selling its shares in Fast Money to the Government Saving Bank (GSB) and 20% shares in SWP Asset Management (SWP) to Noble Development Public Company Limited (NOBLE).

 

KGI Securities (KGI) raised a target price of SAWAD to ฿101.00/share from ฿71.00/share, stating that the guidance from SAWAD’s management indicates the new platform being set up will enable the company to cope with intensifying yield competition and help it improve loan yield among non-banks and new players. KGI also saw a lot of opportunities ahead such as i) joining with GSB, which will allow the access to low-cost funding and a larger customer base, ii) motorcycle leasing with another subsidiary (S-Capital, 65% stake) that will be run by professionals, and iii) platform to expand international business. 

 

KGI also revised 2021/2022 earnings 5% each to reflect i) adding extra gain on investment of 300 million baht in 2021, ii) raising loan yield +50bps each year to 20.8% in 2021/2022, and iii) raising credit cost to 100bps/100bps (from 60bps/50bps). 

 

As SAWAD is trading at the lowest P/E among non-banks at 16.7x (vs. 23x for MTC, 27x for KTC, and 23x for SINGER, KGI re-rate P/E multiple to 20x of 2022F earnings, reaching a new target price of ฿101.00/share and maintaining a rating of Outperform on SAWAD. 

 

Maybank Kim Eng (Maybank) has given a “BUY” recommendation on SAWAD with a new target price of ฿84.00/share (4.5x FY21E P/BV, 22x P/E and 22.5% long-term ROE), and raised 2021/2022 earnings forecasts by 7% each. Maybank was positive on SAWADs strategy to increase insurance commission income to offset the reduction in late-penalty fees, believing the partnership with GSB could help SAWAD to grow its loan portfolio and reduce OPEX to offset decline in loan yields. SAWAD will book 300 million baht one-time gain from selling shares in subsidiaries in 1Q21. Key risks are weaker-than-expected fee income growth and asset quality.

 

Meanwhile, KTBST Securities (KTBST) reiterated a “BUY” rating, but raised a target price to ฿85.00/share from ฿74.00/share and 2021E PBV multiples to 4.7x (the mean of its 5-yr historical level) from 4.2x (-0.5 SD) to reflect the brighter outlook. 

 

KTBST was slightly positive about SAWAD’s earnings outlook following the company’s guidance at an analyst meeting on March 3, maintaining the 2021E core profit forecast at 5.36 billion baht, which indicates a growth of +19% YoY, as 1) total loan is estimated to increase +25%, and 2) NPL ratio is estimated at 3.4%. In 2022E, KTBST projected net profit to grow a further +21% to 6.48 billion baht. 

 

SAWAD’s share price outperformed the SET Index by 3%/42% in one and six months. A partnership with GSB will be a key earnings growth driver. KTBST foresaw EPS to grow 20% CAGR in 2020-22E.