Thitikorn

Thitikorn Plc (TK)

2Q13 earnings below our forecast by 21.5%
TK posted 2Q13 earnings of Bt106m, a plunge of 39% YoY and 48% QoQ. The result was 21.5% below our estimate and 29.4% short of the Bloomberg consensus, attributable to heavy OPEX, which shot up by 25% YoY and 29% QoQ to Bt538m on sharply higher debt collection costs (we had assumed OPEX of only Bt510m). As such, pre-provision operating profit (PPOP) dived by 21% YoY and 47% QoQ to Bt147m. TK’s 1H13 earnings were flat YoY; they represent 44% of our FY13 projection of Bt710m.
Result highlight
Net lending grew by 3.2% QoQ and 15.2% YoY—in line with our estimate—driven by business diversification upcountry. Note that 2Q13 motorcycle sales totaled 549k units, down 6% YoY. TK’s NIM was 29.8%, down from 31.2% 1Q13. The NIM erosion was due largely to higher funding costs, which rose from 3.6% in 1Q13 to 3.9% in 2Q13.
TK set heavy loan loss provisions of Bt268m for the quarter, up 16% YoY (but down 7% QoQ), largely reflecting strong loan growth. Its 2Q13 LLPs were in line with our assumption. The NPLs/loans ratio dipped to 3.6% at end-June from 4.0% at end-March. The loan loss coverage ratio rose to 145% at end-June from 137% at end-March.
Outlook
We expect TK to report further strong growth in motorcycle HP lending in 3Q13 onward, as the delayed effects of the first-time car buyer tax rebate program fade. The firm guides that OPEX will be lighter in 2H13, as debt collection costs will decline. Thus, we expect a better 3Q13 performance, both QoQ and YoY. We maintain our lending growth forecast at 12% for FY13 (management guides for only 10%).
What’s changed?
Although TK’s 1H13 earnings represent only 44% of our FY13 earnings forecast of Bt710m, we maintain our model unchanged for the moment. We don’t anticipate extra costs comparable to those booked in 2Q13 for debt collection.
Recommendation
Stronger 2H13 earnings combined with a good dividend yield of 6.25%, should boost investor interest in the stock. Our TRADING BUY rating stands.