Earnings fell 7.4% short of estimate
KKP reported a 4Q13 profit of Bt1bn, down 4% YoY but up 4% QoQ. The result was 7.4% lower than our estimate (but was 6% above the Bloomberg consensus), attributable mainly to lower gains on asset sales during the quarter than modeled (we had assumed Bt250m; KKP booked Bt168m). FY13 earnings jumped 30% YoY to Bt4.4bn, which represents 98%% of our FY13 projection of Bt4.5bn. Results highlights
Lending rose by 2.0% QoQ and 12.1% YoY to Bt214bn (driven by construction-related SME loans), in line with our estimate. NIM was 3.46%, down by 28 bps YoY and 17 bps QoQ. Fee income rose by 25% YoY and 15% QoQ to Bt1.1bn, boosted by advisory fees for BMTU’s takeover of BAY during the quarter.
The bank holding company set loan loss provisions of Bt554m for the 4Q13, up by 56% YoY and 62% QoQ. Its NPLs/loans ratio was 3.8% at YE13, up from 3.5% at end-September, while its loan loss coverage ratio fell to 100% from 109.7% three months earlier. Outlook
We now think KKP may set heavier loan loss provisions than we earlier forecast, tied to recalcitrant HP debtors (given slow new car sales and a largely inactive used car HP operation, loan portfolio growth may also slow more sharply than our current model suggests). We have revised up our loan loss provisioning assumptions by 11% to Bt2.1bn for FY14 and by 13% to Bt1.8bn for FY15. What’s changed?
Because of our heavier loan loss provisioning assumptions, we have cut our FY14 earnings projection by 4% to Bt4.8bn and our FY15 number by 3.5% to Bt5.5bn. Recommendation
A lower expectation for FY14 earnings means that our YE14 target price falls by 9.8% to Bt45, pegged to an unchanged justified PBV of 1.0. However, the stock currently offers attractive dividend yields of 6.8% for FY14 and 7.2% for FY15. We regard KKP as a dividend play. Our TRADING BUY rating stands.