Kasikornbank likely to beat SME loan growth prediction

All thanks to rice payments.

According to Maybank Kim Eng, the bank expects SME loan growth of 6-8% this year but it is highly possible it will beat this target after the rice payments.

The potential resumption of infrastructure spending by the National Council for Peace and Order (NCPO) should be another growth driver for SMEs in the building and construction sector which accounts for 20% of KBank's SME loan portfolio of THB510bn.

Here's more from Maybank Kim Eng:

Revise up FY14-15F key assumptions. We revise up loan growth by 50bps to 6.5% and 8.5% for this year and next to reflect the improving SME loan demand.

In particular SMEs within the farming sector (incl. fertilizers, chemicals and tractors) have started to rebuild their inventories for the renewed spending by rice farmers. Earnings should grow 12% pa in 2014-15F, supported by healthy non-interest income and NIM.

Following the military coup, KBANK’s share price rose 8% in one week. However, we recommend stay invested with revised a TP of THB225. KBANK trades at 10x 2014F PE and 1.8x PBV with 19.4% ROE, still relatively cheap compared to the sector average in terms of PBV/ROE.

We like KBANK due to its well-balanced loan portfolio/ revenue structure and high NIM. We expect it to benefit from the better private consumption and investment which would lead to the higher non-interest income.