Regional Morning Notes – Comprehensive Company Analysis
Regional Morning Notes
Comprehensive Company Analysis
Date: Wednesday, 13 November 2024
Broker: UOB Kay Hian
Muangthai Capital (MTC TB)
3Q24 Earnings Overview
Muangthai Capital (MTC) reported a net profit of Bt1,491 million for 3Q24, reflecting a 16% year-on-year (yoy) increase and a 3% quarter-on-quarter (qoq) rise. The earnings were in line with market expectations. Notably, the company’s non-performing loan (NPL) ratio continued to decline, showcasing an improvement in asset quality.
Financial Performance
- Total Gross Loans: Bt159,323 million (up 3.0% qoq, 14.8% yoy)
- Net Interest Income: Bt5,594 million (up 4.5% qoq, 10.6% yoy)
- Non-Interest Income: Bt233 million (down 7.7% qoq, 1.6% yoy)
- Loan Loss Provision: Bt1,222 million (up 6.3% qoq, down 6.0% yoy)
- Non-Interest Expenses: Bt2,734 million (up 2.8% qoq, 14.3% yoy)
- Pre-Provision Operating Profit: Bt2,713 million (up 4.6% qoq, 5.0% yoy)
- Net Income: Bt1,491 million (up 3.2% qoq, 16.0% yoy)
- EPS: Bt0.70 (up 3.2% qoq, 16.0% yoy)
Key Ratios
- NPL Ratio: 2.8% (down from 2.9% in 2Q24 and 3.2% in 3Q23)
- Loan Loss Coverage Ratio: 130% (up from 125% in 2Q24 and 110% in 3Q23)
- Net Interest Margin (NIM): 14% (unchanged qoq, down from 15% in 3Q23)
- Credit Cost: 311 basis points (up from 304 bps in 2Q24, down from 383 bps in 3Q23)
- Cost to Income Ratio: 46.9% (down from 47.5% in 2Q24, up from 45.2% in 3Q23)
- Number of Network Stores: 8,031 (up from 7,980 in 2Q24, 7,365 in 3Q23)
- Baseline Total Loans/Store: 19.6 (up from 19.1 in 2Q24, 18.6 in 3Q23)
Asset Quality and Loan Growth
MTC’s efforts to clean up its portfolio resulted in a decrease in the NPL ratio from 2.9% in 2Q24 to 2.8% in 3Q24. The loan loss coverage (LLC) ratio increased to 130% in 3Q24 from 125% in the previous quarter. The company’s credit cost slightly increased qoq but showed a significant yoy decline. Management has guided that the credit cost and NPL ratio peaked in 3Q23.
Store Expansion and Loan Portfolio
MTC opened 51 new network stores in 3Q24, bringing the total to 8,031 branches. The loan portfolio grew by 11.2% year-to-date (ytd). Despite a muted economy, MTC reported strong loan growth of 15% yoy and 3% qoq in 3Q24. The company is on track to achieve its 2024 loan growth target of 15-20%.
Future Earnings and Risks
MTC revised its net profit forecasts slightly for the years 2024-2026:
- 2024F: Bt6,015 million (down from Bt6,074 million, a 1.0% change)
- 2025F: Bt7,777 million (up from Bt7,713 million, a 0.8% change)
- 2026F: Bt9,551 million (up from Bt9,526 million, a 0.3% change)
Valuation and Recommendation
The recommendation is to maintain a BUY on MTC with an unchanged target price of Bt64.00, based on the Gordon Growth Model (cost of equity: 13%, long-term growth: 4%). This target price implies a 3.1x 2025F P/B ratio, slightly above -0.5 standard deviation to its five-year average.
Share Price Catalyst
A quarter-on-quarter reduction in credit cost will reaffirm an improvement in MTC’s asset quality outlook.
Environmental, Social, and Governance (ESG) Ratings
Environmental
- Climate change: Creating TCFD-aligned information disclosure guide.
- Net-zero emissions: Planning for net-zero emissions.
- Resource policy: Establishing plans to control resource usage in operations.
Social
- Emphasise customers: Feedback forms for better efficiency and satisfaction.
- Foster a quality workforce: Enhancing recruitment, personnel, and culture.
- Protect human rights: Implementing policies to protect human rights.
- Health and safety: Embracing a culture of safety and health in the workplace.
Governance
- Good corporate governance: Building investor confidence and competitiveness.
- Effective risk management: Guidelines for managing operational risks.
- Data privacy and cybersecurity: Securing organisational data using information technology.
Key Financials
| Year |
2023 |
2024F |
2025F |
2026F |
| Net Interest Income (Btm) |
19,644 |
22,017 |
26,388 |
30,532 |
| Non-Interest Income (Btm) |
1,026 |
1,091 |
1,407 |
1,550 |
| Net Profit (Btm) |
4,906 |
6,015 |
7,777 |
9,551 |
| EPS (Bt) |
2.3 |
2.8 |
3.7 |
4.5 |
| PE (x) |
20.4 |
16.7 |
12.9 |
10.5 |
| P/B (x) |
3.1 |
2.7 |
2.3 |
1.9 |
| Dividend Yield (%) |
0.4 |
1.1 |
1.5 |
1.5 |
| Net Interest Margin (%) |
15.1 |
14.2 |
14.7 |
0.0 |
| Cost/Income Ratio (%) |
46.9 |
47.6 |
46.6 |
46.6 |
| Loan Loss Coverage (%) |
115.9 |
121.0 |
125.0 |
124.0 |
| Consensus Net Profit (Btm) |
– |
5,854 |
7,045 |
8,584 |
| UOBKH/Consensus (x) |
– |
1.03 |
1.10 |
1.11 |
Balance Sheet
| Year |
2023 |
2024F |
2025F |
2026F |
| Cash with Central Bank (Btm) |
2,822 |
4,951 |
5,579 |
6,177 |
| Customer Loans (Btm) |
138,149 |
165,473 |
186,055 |
205,978 |
| Fixed Assets (Btm) |
2,134 |
2,173 |
2,264 |
2,416 |
| Other Assets (Btm) |
7,051 |
8,786 |
9,694 |
10,559 |
| Total Assets (Btm) |
150,156 |
181,384 |
203,593 |
225,129 |
| Customer Deposits (Btm) |
41,330 |
51,722 |
56,020 |
57,937 |
| Debt Equivalents (Btm) |
73,440 |
88,507 |
99,242 |
110,330 |
| Other Liabilities (Btm) |
3,469 |
3,796 |
4,277 |
4,736 |
| Total Liabilities (Btm) |
118,239 |
144,025 |
159,540 |
173,003 |
| Shareholders’ Equity (Btm) |
31,917 |
37,359 |
44,053 |
52,126 |
| Total Liabilities & Equity (Btm) |
150,156 |
181,384 |
203,593 |
225,129 |
Operating Ratios
| Year |
2023 |
2024F |
2025F |
2026F |
| NPL Ratio (%) |
3.1 |
2.9 |
2.8 |
2.7 |
| Loan Loss Coverage (%) |
115.9 |
121.0 |
125.0 |
124.0 |
| Loan/Deposit Ratio (%) |
188.1 |
187.0 |
187.5 |
186.7 |
| Liquid Assets/Short-Term Liabilities (%) |
6.8 |
9.6 |
10.0 |
10.7 |
| Liquid Assets/Total Assets (%) |
1.9 |
2.7 |
2.7 |
2.7 |
Key Metrics
| Year |
2023 |
2024F |
2025F |
2026F |
| Net Interest Income, yoy chg (%) |
19.9 |
12.1 |
19.9 |
15.7 |
| Fees & Commissions, yoy chg (%) |
16.3 |
2.4 |
36.2 |
11.2 |
| Pre-Provision Profit, yoy chg (%) |
19.4 |
10.4 |
22.5 |
15.6 |
| Net Profit, yoy chg (%) |
(3.7) |
22.6 |
29.3 |
22.8 |
| Customer Loans, yoy chg (%) |
18.1 |
19.8 |
12.4 |
10.7 |
| Customer Deposits, yoy chg (%) |
13.5 |
25.1 |
8.3 |
3.4 |
| Net Interest Margin (%) |
15.1 |
14.2 |
14.7 |
0.0 |
| Cost/Income Ratio (%) |
46.9 |
47.6 |
46.6 |
46.6 |
| Adjusted ROA (%) |
3.5 |
3.6 |
4.0 |
4.5 |
| Reported ROE (%) |
16.1 |
17.4 |
19.1 |
19.9 |
| Adjusted ROE (%) |
16.1 |
17.4 |
19.1 |
19.9 |
| P/BV (x) |
3.1 |
2.7 |
2.3 |
1.9 |
| Adjusted P/E (x) |
20.4 |
16.7 |
12.9 |
10.5 |
| Dividend Yield (%) |
0.4 |
1.1 |
1.5 |
1.5 |
| Payout Ratio (%) |
9.1 |
18.0 |
19.0 |
15.5 |
Conclusion
Muangthai Capital continues to show promising growth and improvement in asset quality, making it a strong buy recommendation. Despite slight increases in credit cost, the overall prospects for MTC remain optimistic. The company’s strategic expansion and robust financial performance position it well for achieving its growth targets.
