Krungthai Card’s Bad-Debt Focus Boosts Earnings: Southeast Asia

Krungthai Card Pcl, the consumer finance company whose shares have more than doubled in Bangkok trading this year, predicts earnings will climb 17 percent to a record in 2014 as it improves debt collection.

Net income may reach 1.5 billion baht ($47 million), or about 6 baht a share, from 1.28 billion baht, or 4.97 baht a share, last year, Chief Executive Officer Rathian Srimongkol, 55, said in an interview. That’s more than the 1.37 billion baht average estimate of five analysts in a Bloomberg survey.

Rathian helped Krungthai Card rebound from its worst-ever loss after joining the company in 2011 by scrapping external debt collectors in favor of systems that identify problem accounts before they become delinquent. Bad-loan recovery jumped 26 percent in the first half and non-performing loans dropped to 2.8 percent of its portfolio, from 4 percent a year earlier.

“The company has substantially improved the debt-collection system that was a big concern to investors,” Rathian, a former executive with Siam City Bank Pcl, said in the Aug. 28 interview at his office in Bangkok. “Better debt collection and bad-loan control will help sustain earnings growth momentum.”

The company’s shares have gained 142 percent this year, the best performer in the SET100 Index, a measure of Thailand’s 100 biggest publicly traded companies that is up 20 percent in the same period. The stock rose 1.1 percent to 72 baht today, a record close.

Earnings Multiple

The shares trade at a multiple of about 11 times Rathian’s forecast for earnings this year, compared with 12.9 times for the Thai bourse’s index of financial and brokerage companies and 15.8 for the nation’s benchmark SET Index, according to data compiled by Bloomberg.

“There is still more room for the stock price to gain with additional earnings growth momentum to next year,” Tanadech Rungsrithananon, an analyst at Krungsri Securities Co., said by phone. “Management has performed an outstanding task with bad-loan recovery and low non-collectible loans in a tough economic environment.”

Southeast Asia’s biggest economy after Indonesia grew 0.1 percent in the first six months from a year earlier as anti-government protests that culminated in a military coup in May reduced investment and consumption.

The Bank of Thailand has cited rising consumer debt as one of the key risks to the economy. Household debt rose 11.4 percent to 9.79 trillion baht last year, central bank data showed. That’s about 82 percent of gross domestic product, among the highest in the region, according to Bloomberg’s calculations.

Consumer Spending

The economy has shown signs of recovery in the three months since the coup, and the central bank expects a “v-shaped” revival in the second half, Roong Mallikamas, senior director for macroeconomic and monetary policy at the Bank of Thailand, said Aug. 29.

Economic growth may reach 3.5 percent in the second half as consumer spending rebounds and the government accelerates investment in infrastructure, Prajin Juntong, the head of the military junta’s economic team, said on Aug. 27.

Consumer confidence rose for a second month in June, bolstering the shares of finance companies. Srisawad Power 1979 Pcl, a consumer-loan provider, has rallied 204 percent since its listing on May 7, sending its valuation to 26 times estimated 2014 earnings, according to data compiled by Bloomberg.

Credit Cards

Group Lease Pcl, a provider of loans for motorcycles, has gained 15 percent this year, with price-to-estimated earnings at 23. Aeon Thana Sinsap (Thailand) Pcl, a credit card and consumer-loan company, has advanced 23 percent and trades at 9 times forecast profit.

Krungthai Card’s net income surged 46 percent to a record 471 million baht in the second quarter as interest income rose and bad-debt recovery improved, according to the company. First-half profit increased 11 percent to 826.2 million baht.

The card issuer and loan provider controlled by Krung Thai Bank Pcl had a record loss of 1.62 billion baht in 2011 as Thailand’s worst floods in almost a century hindered customers’ ability to repay debt and marketing expenses rose, according to a company statement.

The company expects revenue to climb more than 15 percent next year as it plans to add about 500,000 new card customers to its 1.7 million existing cardholders, Rathian said. It also plans to provide loans to at least 100,000 new customers next year, from 700,000 now, he said.

Krungthai Card’s profit growth may slow to 14 percent in 2015 from an estimate of 23 percent this year as commercial banks compete more aggressively with consumer-finance companies, Krungsri’s Tanadech said.

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