Analyst Sees a Buying Opportunity for MTC with Positive View on Soft Loan and a TP at ฿52
Analyst Sees a Buying Opportunity for MTC with Positive View on Soft Loan and a TP at ฿52.00/Share.
KTB Securities (Thailand) (KTBST) has made an analysis on Muangthai Capital Public Company Limited (MTC), maintaining the “BUY” recommendation as well as the target price at ฿52.00/share, seeing that MTC’s cost of funds to decrease in 2020-21E on soft loan of THB 6,000 million.
KTBST states that it has a positive view of MTC’s earnings performance after MTC has tapped a Bt6.00bn fund from the Government Saving Bank at an interest rate of 0.01% per annum in order for the company to allow a six-month loan payment holidays for its customers and a cut in loan rate to 22% from 28% to people who are affected by the COVID-19 outbreak.
KTBST estimates MTC’s 2020-21E cost of funds to decrease by Bt92-122mn, or 2%, given the soft loan of Bt6bn at the 0.01% rate and a cut in the policy rate by 25 bps in March while the company’s debentures that are due in 2.25 years have an average coupon rate of 2.3% (issued ahead of the rate cut). This thus will provide upside of 1.6-1.8% to KTBST’s 2020-21E net profit forecasts.
The interest spread in 2020-21E is expected to widen by 26-36 bps given the lower cost of funds. Meanwhile, interest income would stay roughly flat, as its loan rate during the grace period will remain unchanged. MTC’s loan yield stands at 21.9%, which is below the ceiling rate of 22% that the company will reduce to its customers who have faced the impact from the COVID-19 outbreak.
In this regard, KTBST has reiterated a BUY rating with a target price of Bt52.00, which is pegged to 2020E PBV of 5.6x, or -1.5 SD below its 5-yr average. MTC’s share price currently trades at 2020E PBV of 4.8x, or -2 SD, which underperformed the SET Index by 22% in a one-month period.
Thus, KTBST views the current share price as a buying opportunity, as 1) KTBST forecasts 2020-21E net profit to grow 7-19% and ROE to remain a high of 25%, and 2) the government’s economic stimulus packages may slow the pace of increase in NPL ratio, which should bode well for provision expense.