Analyst Expects KKP to Outperform Peers, Giving “BUY” Recomm. at ฿50

KTB Securities (Thailand) (KTBST) has given a “BUY” recommendation on Kiatnakin Phatra Bank Public Company Limited (KKP) with a target price of ฿50.00/share as 2020E earnings to decline at a slower pace than peers amid higher risk of higher loan-loss provision

      

KTBST’s recommendation and target price on KKP based on 2020E PBV of 0.9x, or -1.0 SD below its 10-yr average. At an analyst meeting held on October 22, KTBST was neutral toward the company’s guidance, which is in line with its forecast. 

 

NPL and loan-loss provision are expected to increase as the moratorium program is set to end in 4Q20, which may cause loss on car repossession to deepen. KTBST estimated credit cost at 220 bps in 4Q20 compared to 161 bps in 9M20. 

 

KTBST maintained KKP’s 2020E net profit forecast at Bt5.3bn, which indicates a decline of -12%. In 4Q20E, net profit to remain roughly flat QoQ, which should outperform its peers, in expectation of profits in the EDT business.

 

KKPs share price outperformed the SET Index by 6% in one month. KTBST expected KKPs stronger-than-expected 3Q20 earnings results to ease concern over high NPL in HP loans, and its track record of consistently paying high dividend yield of 8% should lend support to the share price. 

 

Additionally, the stock currently trades at an attractive PBV of 0.7x, which is -1.5 SD below its 10-yr average.

 

In 4Q20E, KTBST estimated KKP’s net profit to remain roughly flat QoQ as the EDT business is expected to generate profits. Expecting KKP to set aside relatively lower loan-loss provision compared to its peers in the small bank sector given a lack of skip payment.

 

Given the deteriorated economy, KTBST raised concern over loss on car repossession, which is a major downside risk to its forecast, and NPL ratio is expected to surge once the moratorium program ends in 4Q20.