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Shares in BAM, country’s largest NPL manager, drop 6%
EconAug 31. 2020
By The Nation
The price of shares in Bangkok Commercial Asset Management (BAM), the country’s biggest manager of distressed assets, fell 6 per cent to Bt23 in today’s morning session (August 31) after it reported a disappointing second-quarter performance.
BAM’s second-quarter profit was Bt136 million, down 82 per cent year on year.
Thanatphat Suksrichavalit, an analyst at Maybank Kim Eng Securities (Thailand), said BAM shares dropped due to a Q2 performance that was lower than market expectations of 80 per cent.
The decline was mainly due to the Covid-19 fallout and changes in financial reporting standards that meant the company was unable to recognise revenue despite cash flowing in.
“In fact, BAM was still able to generate cash flow of about Bt2.7 billion. Although it was 6 per cent down year on year and 14 per cent down quarter on quarter, it was still higher than the 20 per cent drop expected by the market,” said the analyst.
He forecast BAM’s performance would recover to its first-quarter level now that the Legal Execution Department has reopened after the Covid-19 lockdown, allowing the BMA to auction off non-performing asset [NPA]s.
“We found signs of NPA sales growth after the company held an [assets] auction in June,” he added.
“As the company is not facing cash flow difficulties, we expect it to pay a dividend of Bt1 per share as the market expects.”
An analyst at Trinity Securities said BAM revenue from NPLs dropped 28 per cent quarter on quarter because the Legal Execution Department was closed from April to May, causing auctions of collateral assets to be postponed.
“Although profit from selling NPAs increased by 92 per cent quarter on quarter, it could not compensate for the loss in revenue from NPLs,” the analyst said. “The company’s operating cost dropped slightly in line with its revenue, while expected credit loss [ECL] rose slightly from the deduction of NPL income from accrued income.”
The analyst expected the cash flow from NPLs to recover over the remainder of this year, while cash flow from NPAs should be high as the BAM will launch promotions to boost sales.
“BAM has reassessed the value of deferred tax asset [DTA] and found an increase in deferred tax liability (DTL) from the Legal Execution Department’s debtors, causing the company’s remaining DTA to be Bt5 billion,” he added.
An analyst at Yuanta Securities (Thailand) said BAM shares were still interesting because its performance has bottomed out, while its NPL and NPA sales are likely to recover steadily.
“In addition, BAM gained positive sentiment from financial institutions’ bad debt, which is expected to increase in 2021, resulting in a rise in NPLs,” the analyst said.
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