Daol Securities (Thailand) has expressed a positive outlook regarding the acquisition of shares in Thai Airways International Public Company Limited (SET: THAI) by Krung Thai Bank (KTB) and Bangkok Bank (BBL) through the debt-to-equity conversion. The acquisition is expected to benefit both banks by reducing non-performing loans (NPLs) as soon as the fourth quarter of 2024.
According to the prospectus dated October 20, 2022, BBL’s loans to THAI (excluding debentures) totaled THB 9.3 billion, while KTB’s loan stood at THB 6.9 billion. Following the debt-to-equity conversion, BBL holds approximately 2.4 billion shares in THAI, representing a 10.35% stake, up from 9.4 million shares previously. The conversion price was set at THB 2.5452 per share, bringing the total converted value to THB 6.1 billion. Consequently, BBL’s NPL ratio is projected to decrease by 0.22 percentage points from the third quarter of 2024, where it stood at 3.40%. If the rights offering (RO) is fully subscribed, BBL’s stake in THAI will adjust to around 7.30%, in line with its plan not to exceed a 10% ownership.
On the other hand, KTB holds approximately 1.327 billion shares in THAI, accounting for a 5.728% stake. The conversion price for KTB was also THB 2.5452 per share, leading to an estimated conversion value of THB 3.4 billion. This conversion is expected to reduce KTB’s NPL ratio by 0.13 percentage points from the third quarter of 2024, where it was 3.14%. Upon the successful completion of the RO and full subscription by existing shareholders, KTB’s holding in THAI will reduce to around 4.02%.
Daol Securities (Thailand) recommends a “Buy” rating for KTB, setting a target price of THB 24.50. The firm anticipates KTB’s net profit to reach THB 43 billion in 2024, marking an 18% increase from the previous year, the highest among banks. The net profit for the fourth quarter of 2024 is expected to rise from last year, with KTB focusing more on providing low-risk government loans, which can withstand economic downturns. Currently, KTB is trading at a low valuation with a price-to-book value (P/BV) ratio of just 0.67 times.
