The share price of Tisco Financial Group Public Company Limited (TISCO) rose ฿2.50/share or 2.54% to ฿101.00/share as of 15:56 local time in Thailand, with a trading value of 1,491 million baht, after announcing better-than-expected 1Q21 results.
Maybank Kim Eng (Maybank) maintained “BUY” and target price of ฿110.00/share over good quality with decent ROE and dividend yield.
Maybank was confident in TISCO’s asset quality (222% NPL coverage) and it has a strong capital level of 22.8%, which could provide downside protection to dividend and earnings shocks. The CEO reiterated TISCO will focus on sustainable and quality earnings growth and maintain a high dividend payout ratio to improve ROE. Key risks are higher-than-expected credit cost and weaker NIM.
The CEO of TISCO targeted to grow HP motorcycle and used-car loans (5% of total loans) as these two segments offer a relatively high risk-adjusted return vs HP new car loans. Among retail lending, HP motorcycle loans was the only segment that grew by 3.0% QoQ in 1Q21. Note that yield on HP motorcycle loan is 30%, which is higher than credit card and unsecured personal loans for 16-25%, and credit cost is 10-15% as there is no down payment.
Also, guiding that asset quality is better than expected. Although its NPL ratio was stable QoQ at 2.5%, Stage 2 loans declined by 9.7% QoQ and accounted for 12% of total loans. Only 4% of total loans requested for an extension of the debt-relief program as at 1Q21. Management maintained a conservative provisioning policy and guided that its current NPL coverage of 222% is enough for 3.5-4.0% NPL ratio. Maybank expected credit cost to decline QoQ and maintain credit cost assumption at 100bps for this year vs 150bps in 1Q21.