SCB’s stock has been on a consistent upward trajectory over the past month, rising approximately 4-5%. With a positive outlook after an analyst meeting, CGSI has raised SCB’s target price to THB130 per share, giving an upside from the current share price around 13%.
CGS International Securities (Thailand) (CGSI) disclosed in its analysis paper after a meeting with SCB X Public Company Limited (SET: SCB) executives that SCB is expecting to cut its expenses by 2 billion baht annually following the sale of investments in Purple Ventures by the end of Q3 2024. This cost reduction is anticipated to support profit growth in 2025. Furthermore, SCB plans to prioritize the improvement of retail loan quality, thereby reducing bad debt provisions in 2025-2026.
Furthermore, SCB is expanding its portfolio with the AutoX (not listed) vehicle title loan company, resulting in a significant loan portfolio growth of 97.3% year-on-year in Q3 2024, increasing by 53.4% from the end of 2023. Moreover, SCB is also expanding its digital loans, which comprised 1.2% of the total loan portfolio in Q3 2024.
CGSI noted an adjustment in SCB’s Earnings Per Share (EPS) projections for 2024-2026, increasing by 1.8-10.8% due to an expected rise in SCB’s Net Interest Margin (NIM) to 3.98-4.03%. There is also an assumption adjustment for bad debt provisions during the period, given SCB’s continued stringent loan release criteria and bad debt write-offs from Q4 2023 through Q3 2024.
Additionally, the cost-to-income ratio has been adjusted from 42.1-42.3% to 40.6-41.1% for 2025-2026, reflecting the net positive impact of the Purple Ventures investment sale, resulting in reduced operating expenses.
Based on these new estimates, SCB’s Return on Equity (ROE) is expected to increase from 8.9% in 2024 to 9.4-9.9% in 2025-2026. Furthermore, SCB is projected to maintain a high dividend payout ratio of 80% during 2024-2026.
CGS has also revised SCB’s target price to 130 baht from 111 baht, upgrading its recommendation from “hold” to “buy,” seeing EPS growth prospects of 7.3-7.4% in 2025-2026 alongside an attractive dividend yield of 9.6-10.3% per year.
Nevertheless, SCB faces downside risks if Non-Performing Loans (NPL) surge in housing, credit card, and unsecured personal loans, along with potential lower-than-expected fee income. On the upside, successful debtor relief measures targeting housing, automotive loans, and cost-saving measures will positively impact SCB.
