Nava Leasing (NVL) reported
2002 net profit of Bt61mn, 40% higher than our forecast of
Bt43mn. NVL's bottom line was boosted by a provisions
write-back of Bt23mn (versus provisioning expense of Bt1.6mn
in 2001) and a 66% surge in other income to Bt31mn.
Operating profits, however,
plunged 58% to Bt29mn due to a a sharp narrowing of the
company's net interest spread from 5.15% to 3.06%. This was
despite aggressive loan growth of 68% last year.
In March last year, NVL
issued Bt1.2bn in debentures with a fixed coupon rate of
5.75% for four years. This helped reduce its overall cost of
funds from 7.44% in 2001 to 6.50% as well as expand its loan
base. The debentures issue boosted NVL's total
interest-bearing debt from Bt680mn at end-2001 to Bt1.67bn
last December. As a result, the company's interest expenses
jumped 71% last year to Bt76mn.
However, intensifying
competition in the auto financing industry has triggered a
fall in NVL's yield on loans from 12.59% to 9.56%. This led
to a 30% drop in net interest income from Bt122mn to Bt86mn.
On the positive side, NVL has
seen an improvement in asset quality. NPLs dropped from
Bt96mn at end-2001 (or 7.56% of gross loans) to Bt91mn
(4.26% of loans).
We plan to revise our 2003
earnings forecast and target price after a company visit
this Friday (March 14). For the time being, we retain our SELL
rating on NVL. We expect net profit to decline this year due
to the absence of extra items while the latest round of
interest rate cuts will hurt its yield on lending. NVL's
cost of funds, on the other hand, will be more difficult to
adjust downwards as most of its loans are fixed, with a
maturity of more than a year.
