The share price of Chayo Group Public Company Limited (CHAYO) dropped for the first time in a week after the stock had the highest rate in the relative strength index (RSI) at 92.18 as of February 2, 2021, which indicates an overbought. CHAYO gained a total of 32.60% in the past six trading sessions and 56% in a month.
CHAYO began the rally since the middle of December last year, closing the session on December 14, 2020, at ฿7.55/share. The share continued to pick up the pace, though faced profit-taking along the way, and closed an all-time high at ฿12.80/share on February 1, 2021. However, the share price started to decline after the RSI indicated that CHAYO was overbought at 92.18. Chayo dropped ฿0.30/share or 2.34% to ฿12.50/share with a trading value of 50 million baht at the closing of the morning session on Tuesday, February 2, 2021.
Late January, KTB Securities (Thailand) (KTBST) stated that it maintained a BUY rating on CHAYO and raised the target price to Bt11.00 from Bt9.50 and our 2021E PER multiples to 35x (+2.25 SD above its 3-yr average) from 30x (+1.25 SD).
The target price implied 2021E PEG of 1x based on KTBST’s EPS growth estimate at 34% CAGR in 2020-22E. The security company is positive about CHAYOs earnings outlook following the company’s guidance at a group conference call on January 26. Earnings are expected to grow significantly as 1) interest income from the unsecured loans would increase after the cost was fully amortized, 2) the size of asset management portfolio has increased, and 3) an establishment of JV is due to complete by end-1Q21E, which implies a continued increase in the company’s asset management portfolio.
KTBST maintained a 2021E net profit forecast at Bt223mn, which indicates a rise of 35%, as 1) interest revenue would increase +38% along with the size of asset management portfolio, and 2) the cost of finance should decrease further in line with the policy rate of 0.5%. In 4Q20E, KTBST expected net profit to jump +126% YoY, +39% QoQ to Bt44.0mn, as interest income was estimated to surge +79% YoY and the company is expected to book a gain of Bt20.0mn from selling NPA.
Still, KTBST stated that CHAYOs share price gained in one and 12 months and thereby outperformed the SET Index by 13%/102%, respectively. The stock will likely continue to be an outperformer given 1) the stronger earnings growth outlook which KTBST estimated EPS to grow 34% CAGR in 2020-22E, 2) a potential increase in revenue from debt collections after the cost of its unsecured loans was fully amortized.