Thitikorn

Thitikorn Plc
3Q13 profit was 60% below our estimate
TK posted 3Q13 earnings of Bt69m, a plunge of 66% YoY and 35% QoQ. The result was 60% below our estimate and 54% short of the Bloomberg consensus, attributable to heavy loan loss provisions, which increased by 41% YoY and 14% QoQ to Bt306m, exceeding our assumption by 53%. As such, pre-provisioning operating profit (PPOP) dived 24% YoY (but was flat QoQ) to Bt147m. TK’s 9M13 earnings plunged 26% YoY; they represent only 53% of our old FY13 projection of Bt710m.
Results highlights
Net lending grew by 0.8% QoQ and 11.7% YoY—in line with our estimate—driven by business diversification upcountry. Note that in addition to the economic slowdown, 3Q13 lending expansion was severely dampened by flooding in 24 provinces. NIM eroded 38 bps YoY to 30.5% from 30.9% in the same period last year.
TK set heavy loan loss provisions of Bt306m for the quarter, up by 41% YoY and 14% QoQ, largely reflecting deteriorating asset quality. Its 3Q13 LLPs were 53% greater than our assumption. The NPLs/loans ratio inched up to 3.9% at end-September 2013 from 3.4% at end-June 2013. The loan loss coverage ratio dipped to 140% at end-September from 145% at end-June.
Outlook
We expect TK to report better motorcycle HP lending growth in 4Q13 onward, as the delayed effects of the first-time car buyer tax rebate program and the provincial flooding fade. 
What’s changed?
Because of the heavy loan loss provisions set for 3Q13, we have slashed our earnings forecasts by 22.5% to Bt550m for FY13 and by 23.2% to Bt630m for FY14. 
Recommendation
Our deep profit projection cuts prompted us to downgrade our YE14 target price from Bt15.2 to Bt12. We expect TK’s earnings to gradually improve in 4Q13 onward. Its anticipated dividend yields for FY13 and FY14 operations remain good at 5.2% and 6.2%, respectively. Our TRADING BUY rating stands.