The share price of Ngern Tid Lor Public Company Limited (SET: TIDLOR) plunged 14% to THB13.50 per share on Friday after the announcement of its 2Q24 financial results that raised concerns in the market of its asset quality.
The company reported a net profit of Baht 1,091.4 million, strong growth of 17.7% YoY. Meanwhile, total revenue rose 20% to Baht 5,464.2 million, primarily from its business expansion.
However, the non-performing loan (NPL) ratio of TIDLOR at the end of 2Q24 stood at 1.86%, rising from 1.60% at the end of the first quarter. This increase was influenced by economic conditions and debtor quality following the expiry of the debt moratorium. The Company’s allowance for expected credit losses amounted to Baht 4,356.0 million, accounting to a NPL coverage ratio of 227.3%, a decline from 264.1% at the end of the previous quarter, but still at a strong level. These provisions adhere to prudent risk management and consideration of potential future uncertainties.
In 2Q24, the Company incurred total expenses of Baht 4,099.1 million, with the majority attributed to service and administrative expenses, totaling Baht 2,603.6 million, rising by 14.7% (YoY). This aligned with the continued growth of both the lending and insurance brokerage businesses. The cost-to-income ratio for 2Q24 was 53.4%, a decrease from 55.3% in the same quarter last year.
Financial costs amounted to Baht 590.1 million, an increase of 38.4% (YoY), driven by the rise in policy rate since last year and additional borrowing to support business growth. Credit losses amounted to Baht 905.4 million, a rise of 35.2% (YoY), corresponded to the expansion of the overall loan portfolio, higher write-offs, and prudent provisions to address external uncertainties, responsible lending measure, and price volatility of used car within the market, as well as asset quality amid a slower-than-expected economic recovery.
As of June 30, 2024, the Company’s total assets reached Baht 105,294.0 million, an increase of 5.1% from Baht 100,147.9 million as of December 31, 2023. This growth was supported by the expansion of both the lending and insurance brokerage businesses, with the key assets comprising loans and high purchase receivables totaling Baht 103,041.6 million.
Meanwhile, total liabilities amounted to Baht 75,440.4 million, rising 5.2% from Baht 71,724.4 million as of December 31, 2023. This increase was primarily due to higher borrowings to facilitate loan portfolio growth and support working capital.
JP Morgan wrote in its research paper that a notable deterioration in asset quality is a key negative for the company. The extent of NPL formation about 450bps cumulative in the past six quarters along with a still weak macro environment suggest asset quality issues are not done yet. Meanwhile, 1H24 credit costs of 342bps are running above guidance of 300-335bps. Special mention loan and NPL increased by 82/25bps QoQ to 173% and 1.86%, respectively. NPL coverage came off by 37 percentage points to 227%.
Still, JP Morgan maintained an Overweight rating for TIDLOR at a target price of THB22.00 per share. The firm highlighted an expansion of NIM by 28bps QoQ to 15.74% as a positive note. The finco has Baht 23 billion in available credit facilities with FIs, which suggests CoF should be manageable over the next six months. Additionally, cost management was also performing well for the company.
