Krungthai Card turns red to black

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

Net income may reach 1.5 billion baht, or about 6 baht a share, from 1.28 billion baht, or 4.97 baht a share, last year, CEO 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.

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

"The company has substantially improved the debt- collection system that was a big concern to investors," Mr 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 141% this year, the best performer in the SET100 Index, a measure of Thailand's 100 biggest publicly traded companies that is up 20% in the same period. The stock rose 0.7% to 71.75 baht as of 11:06am. in Bangkok, heading for a record close.

The shares trade at a multiple of about 11 times Mr 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."

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

Krungthai Card's net income surged 46% 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 rose 11% 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 increased, according to a company statement.

The company expects revenue to increase more than 15% next year as it plans to add about 500,000 new card customers to its 1.7 million existing cardholders, Mr 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% in 2015 from an estimate of 23% this year as commercial banks compete more aggressively with consumer-finance companies, Krungsri's Mr Tanadech said.

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