Khon Kaen Sugar Industry (KSL) - BUY
12-month target price : Bt14.90
Recommendation : BUY
Closing Price (6 Jan 09) : Bt10.00
4Q profit will rise QoQ, YoY
- We project 4Q08 net profit at Bt1.20b, increasing by 17.3% from Bt1.02b QoQ and 25.4% from Bt953.52m YoY.
- 2008 profit is forecasted at Bt5.25b, increasing sharply from a loss of Bt3.99b YoY.
- Business is set to improve further next year and we rate 'BUY' stance on the stock whose fair value is at Bt14.90/share.
We project 4Q08 net profit at Bt1.20b
We expect loan in the last quarter of 2008 to remain fairly flat. Despite expansion of good loans, BAY sold some bad loans, while its AYAL portfolio is let to run down according to the bank's policy. As such, for the full year, net loan growth would stand at around 22%. NIM for the quarter is projected to be weaker from 4.28% QoQ but the full year average would remain at a healthy level of around 4.1%. Its fee income is projected to further expand but non-interest income would be hurt from booking of the remaining 20% impairment charge on CDOs, coupled with loss from investment of no more than Bt200m. We thus expect BAY to report a net profit of Bt1.20b for the fourth quarter, which is based on assumptions of Bt1.80b in provisioning charges, Bt200m in loss from foreclosed assets, 61.3% Cost/Income ratio and resumption of normal income tax rate payment. For the year 2008, net profit would stand at Bt5.25b, representing a sharp increase from a loss as high as Bt3.99b during the same period of last year.
NPLs worth approximately Bt9b have been transferred to SAM in Oct at around 40% of the face value. This would cause no adverse impact on its P/L statement. Meanwhile, the NPL/Loan ratio would fall to around 9% as previously expected.
We foresee ongoing business expansion in 2009
For 2009, we expect business will continue to expand. However, its ROE target at 20% for 2010 looks somewhat aggressive and must rely to a great extent on the inorganic growth. At present, there is pending deal but the details have not yet been disclosed. The size, however, is estimated at around Bt10-20b.
We project 2009 net profit at Bt6.49b based on assumptions of around 7% loan growth and a 20% improvement in fee income. Cost/Income is projected to fall and the bank will resume normal income tax payment. The fair value for 2009 is at Bt14.90 based on around 1x P/BV whereby we have reduced down ROE to 12.5%. Maintain 'BUY'.
By Phillip Securities (Thailand) Plc. on Jan 7, 2009
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