Kiatnakin Bank's FY13F net profit expected to grow 45%

And fee income growth is seen to reach 24.6%.

Maybank Kim Eng analysts have become more confident about the outlook for KK, given the increasing clarity on its earnings growth prospects in the wake of synergy gains from the consolidation with PHATRA. The analyst thus raised its FY13F-14F earnings forecasts by 10% and  13%, respectively, and increased its target price to THB65.00 (from THB53.00).

Here's more from Maybank Kim Eng:

Emerging as an investment bank with strong growth potential. The  merger with PHATRA has wrought a change to KK’s revenue and  earnings structure as of 4Q12 and 2013 will be the first full-year of  earnings consolidation with PHATRA.

Synergies are evident as KK leverages on PHATRA’s investment portfolio using its strong balance sheet. The portfolio size has already increased from THB7.0b to THB10.0b with the potential to grow further.

In turn, PHATRA’s private banking platform can be relied upon to service KK’s high net worth clients. KK can also lend bridging loans to PHATRA’s corporate clients and its franchise can help PHATRA expand its own retail client base. In our view, such synergies will bear fruit and help boost KK’s profitability.

Raise earnings forecasts and target price. We have become more  confident about the outlook for KK after an analyst meeting and have raised our FY13F-14F earnings forecasts by 10% and 13%, respectively.

While our FY13F gross loan growth projection is unchanged at 23.5% YoY (KK’s target: +19% YoY), we raise our NIM forecast slightly to reflect KK’s focus on the high-yield segments, i.e. used-car hire purchase, personal loans and SME lending.

We also project 2013 fee income to grow from 16.4% YoY previously to 24.6% YoY in view of the expanded market share of its broking business after the merger, as well as the rise in daily stock market turnover. In line with management’s guidance, we trim our credit cost assumption to 70bps from 100bps.

We therefore expect FY13F net profit to grow 45% YoY (EPS: +22% YoY) with another 28% YoY growth in FY14F. More importantly, our target price goes up to THB65.00 (based on 1.51x P/BV) from THB53 on higher BVPS and a higher L/T ROE assumption (from 14.5% to 16.5%). Our new target price implies a PER of just 11.0x.