Analyst Expects BAM to Have Strong Outlook in 2021, Recomm. “BUY” at ฿25

KTB Securities (Thailand) (KTBST) reiterates a “BUY” rating on Bangkok Commercial Asset Management Public Company Limited (BAM) at a target price of ฿25.00/share, which is pegged to 2021E PBV of 2.0x (its average level), as having a positive about BAMs earnings outlook following the company’s bullish guidance on 4Q20E earnings at an Opportunity Day on December 8, 2020. 

 

Buffet with several positive factors in 4Q20E. KTBST had a positive view of BAMs earnings outlook following the company’s bullish guidance on 4Q20E earnings at an Opportunity Day yesterday. Key highlights:

 

1. BAM has forecasted cash collection from the NPL business to increase in 4Q20E given a potential revenue recognition of approximately Bt1.1bn, and as the company will auction its secured NPLs worth Bt777mn by December 25.

 

2. Cash collection from the NPA business has been forecasted to increase in 4Q20E in expectation of revenue recognition of Bt150mn from its medium-size assets and Bt900mn from its large-size asset, which may be split in 4Q20E and 1Q21E.

 

3. BAM has set its cash collection target of Bt15.0-16.0bn in 2021 and its asset purchase target of Bt12.0bn compared to Bt10.0bn in 2020. The company also aims to auction its NPL assets in 1Q21E.

 

4. BAM has sought a partner to make recurring income and to increase its NPA sales.

 

Maintain 2020-21E core profit forecast. In 2020E, KTBST forecasted core profit of BAM to drop -63% to Bt2.32bn, as cash collection is expected to decline -34% to Bt13bn due to a suspension of operations at the Legal Execution Department for two months due to the COVID-19 outbreak.

 

In 4Q20E, core profit is expected to contact YoY but to rise QoQ. A decline YoY would be due primarily to a high base in 4Q19, a period BAM booked revenue of Bt1.5bn, while KTBST expected BAM to recognize just Bt1.0bn in this quarter. A growth QoQ would contribute to higher NPL sales and the company’s aggressive online and offline marketing strategy.

 

In 2021E, KTBST forecasted core profit to rebound strongly +101% to Bt4.67bn as 1)  NPA/NPL asset portfolio is estimated to increase to Bt11.4bn from Bt10bn in 2020E in expectation that commercial banks will dump their NPA/NPL assets in early 2021E following the ending of the moratorium program, and 2) cash collection would improve along with rising asset portfolio.

 

KTBST estimated BAMs net D/E at 2.2x at YE2021E, while the company’s covenant is 3.0x, which is more than enough to buy more assets for management.

 

BAM’s target price is Bt25.00, which is pegged to 2021E PBV of 2.0x (its average level). KTBST estimated EPS to grow at 48.6% CAGR in 2020-22E as 1) the size of BAMs asset portfolio is expected to increase further, but the cost is expected to decrease given the deteriorated economy and the ending of the Bank of Thailand’s moratorium scheme, which may prompt commercial back to dump their NPL assets, and 2) BAM has a healthy financial position with a low D/E.