CHAYO Jumps 5% to a New High, Analyst Recomm. “BUY” at ฿11 on Bright Earnings Prospects

The share price of Chayo Group Public Company Limited (CHAYO) rose ฿0.50/share or 5.05% to ฿10.40/share as of 15:21 local time in Thailand, with a trading value of 76 million baht. 

 

KTBST Securities maintained a “BUY” rating on CHAYO but raised its target price to Bt11.00 from Bt9.50 and its 2021E PER multiples to 35x (+2.25 SD above its 3-yr average) from 30x ( +1. 25 SD). The KTBST target price implies 2021E PEG of 1x based on its EPS growth estimate at 34% CAGR in 2020-22E. 

 

KTBST was positive about CHAYO’s earnings outlook following the company’s guidance at a group conference call held yesterday (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.

 

The analyst maintained its 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 is estimated to surge +79% YoY and the company is expected to book a gain of Bt20.0mn from selling NPA.

 

CHAYO’s share price gained in one and 12 months and thereby outperformed the SET Index by 1 3 % / 1 0 2 %, 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.