Analyst Expects a Bright 2021 Outlook for CHAYO, Upgrading Rating to “BUY” with TP of ฿18

Chayo Group Public Company Limited (CHAYO) reported a total income of 176.44 million baht for the first quarter ended 31 March 2021, up from 110.79 million baht in the same time last year. This resulted in an improved net profit of 64.47 million baht or 0.912 baht per share, compared to a net profit of 36.99 million baht or 0.053 baht per share in the same period last year.

 

The main reason for the increment in net profit mainly arose from the increment of interest income from loan to non-performing assets and income from lending business.

 

Following the positive operating results, KTBST Securities (KTBST) has upgraded CHAYO’s 2021 net profit forecast by 18% to 249 million baht (+60% YoY) as 1) NPL investment growth assumptions has been raised to +32% to reflect CHAYO’s higher NPL investment potential on potential warrants exercising (CHAYO-W1 and W2) in  2021-2023, and Chayo JV’s strong investment capability (threefold higher than CHAYO).

 

KTBST forecasted EPS to grow 32% CAGR in 2021-2024 on CHAYO and Chayo JV’s higher NPL investment. Additionally, CHAYO  has  strong  growth potential given a low interest-bearing debt to equity of 0.4x, which is well below its covenant of 2.5x.

 

In addition, KTBST predicted that financial institutions will steadily eliminate bad debt over the next 1-2 years as a result of the increase in NPLs. Besides this, the firm is expected to increase its unsecured loan portfolio in order to stabilize cash collection in the long run.

 

As a result, KTBST revised up a rating on CHAYO to “BUY” from HOLD and target price to ฿18.00/share from ฿10.40/share while maintaining 2021 PBV multiples at 5.7x.