Krung Thai Card (KTC) posted
a net profit last year of Bt141mn, up 17.4% on pro forma
2001 earnings of Bt120mn. KTC's impressive growth follows
its purchase last year of the credit card portfolio, worth
about Bt8bn, of its parent company, Krung Thai Bank (KTB).
This resulted in a huge surge in KTC's assets from Bt120mn
in 2001 to Bt9.24bn at the end of last December.
In April last year, the Bank
of Thailand (BOT) helped fuel a boom in credit card usage
after it scrapped the minimum salary requirement for card
applicants. KTB cut its own minimum salary limit from
Bt15,000/month to Bt7,500/month. As a result, KTC saw a 249%
increase in its number of cards issued from 171,266 to
598,173.
KTC's pre-provisioning profit
(PPP) doubled from Bt81mn in 2001 to Bt160mn but higher
provisioning expenses trimmed expansion in its bottom line
to just 17.4%.
This year we expect KTC to
issue only 50,000 new credit cards following an about-turn
by the BOT last November. Worried that low-income earners
were accumulating too much debt, the central bank imposed
new restrictions on credit card issuers. It required new
applicants to earn minimum monthly salaries of Bt15,000 and
capped annual interest rates at 18%. Slower growth in credit
card issuance will be partly offset, however, by KTC's
launch of a new personal loans business late last year.
We expect KTC to report 20%
growth in PPP and 22% growth in net profit to Bt172mn
(Bt1.72/share). Based on a 2003 PER of 12x, our target price
for KTC is Bt20.64, representing a potential upside of 26%.
Accordingly, we have upgraded our recommendation from HOLD
to BUY.
