Srisawad Corporation: Asset quality problem lingers
- 1Q24 results in line with expectations, as higher-than-expected OPEX offset lower-than-expected credit cost
- Surge in OPEX in 1Q24 was due to high loss on sales of repossessed vehicles
- FY24F earnings cut by 11% to reflect lower loan growth and higher OPEX assumptions
- Maintain HOLD with lower TP of THB39.00
Related Stories
- Srisawad Corporation: A better year 202604 Mar 2026
- Srisawad Corporation: Back on track17 Nov 2025
- Srisawad Corp: All eyes on 2H25 performance20 Aug 2025
The y/y increase in earnings was attributed to higher interest income (from loan expansion), while the q-o-q decline was due mainly to higher OPEX.
Pre-provision operating profit (PPOP) increased 15.0% y/y but declined 6.7% q/q. The y-o-y increase was attributed to strong increase in interest income, while the q/q decline was due to higher OPEX.
1Q24 earnings accounted for 23% of our new FY24F forecasts. Note that normally SAWAD’s operating performance is stronger in 2H than in 1H.
The strong y/y loan expansion was attributed to the consolidation of FM’s portfolio. Recall that on 30 Jun 2023, SAWAD acquired a 49% stake in Fast Money Company Limited (FM) from the Government Savings Bank (GSB). As a result, SAWAD’s stake in FM increased to 98% (vs. 49% previously). With that, FM’s status changed to a subsidiary of SAWAD. However, only FM’s balance sheet was consolidated into SAWAD in 2Q23, while its statement of comprehensive income was not consolidated until 3Q23.
Loans expanded 49.5% y/y and 1.4% q/q to Bt101.8bn at end-1Q24. The y/y loan expansion was attributed to the consolidation of FM’s loans of approx. Bt17bn at end-2Q23. Meanwhile, the small q/q expansion was due to the company’s stricter loan approval criteria and NPL sales and write-offs (especially for motorcycle HP loans) during the quarter.
Note that SAWAD has 5,534 branches at end-1Q24 (vs. 5,430 at end-4Q23). It expects to open some 100-200 more branches in 2024.
In terms of loan breakdown, car title loans made up 25% of the total loan portfolio; land title loans made up 25%; motorcycle title loans (partly under its 98% subsidiary [FM] and partly under SAWAD’s other subsidiaries) made up 16%; motorcycle HP loans (operated under its 72% subsidiary – SCAP) made up 31%, and personal loans (also operated under SCAP) made up the other 3% of loans at end-4Q23.
SCAP’s strategy shifting towards asset quality management. With the company’s loan portfolio’s quality problem, arising from its aggressive motorcycle HP lending strategy in FY22 prior to the motorcycle HP rate cap (at 23% p.a.) effective on 10 Jan 2023, SCAP’s strategy has recently shifted towards asset quality management (i.e., balance sheet clean-up) and away from portfolio expansion. Management expects the balance sheet clean-up process to continue in 2Q24.
Moreover, management has hinted at a new strategy for SCAP that instead of expanding its HP portfolio, SCAP will leverage its motorcycle HP’s customer base by offering motorcycle title loans for those customers who already paid for their HP loans for at least 30 months.
Management believes that this strategy is better off for SCAP, as it will save VAT (value-added tax) expenses on HP contracts, while yields on motorcycle title loans or HP are comparable.
Note that an average term of motorcycle HP is approx. 36 months, while an average term of motorcycle title loans is approx. 12 months.
SAWAD: Loan breakdown at end-1Q24 (%)
Source: Company, DBSVTH
NIM to decline from lower yield and higher cost of funds. We expect SAWAD’s yield to decline in FY24F due to (i) the full-year consolidation of FM’s loan portfolio (i.e., motorcycle title loans of which yield is lower than that of SAWAD’s average) and (ii) the interest rate cap on motorcycle HP (i.e., capped at 23% p.a. since 10 Jan 2023 vs. approx. 36% p.a. previously charged).
Nonetheless, there is still room for yield improvement from motorcycle title loans, given that the interest rate for vehicle title loans is capped at 24% p.a., while those motorcycle title loans in FM’s portfolio are charged at only 15-18% p.a.
Recall that GSB agreed to support FM with low interest rate funding if FM uses such funds to provide motorcycle title loans at an interest rate of not higher than 18% p.a. to support the low-income group to have access to loans at an appropriate rate.
Meanwhile, we expect cost of funds to increase from rising interest rates and larger funding base. Net-net, NIM is likely to decline from FY23.
Surge in OPEX in 1Q24 was due to high loss on sales of repossessed vehicles. OPEX increased 40.1% y/y and 9.3% q/q in 1Q24, due mainly to high loss on sales of repossessed vehicles (from the motorcycle HP business). Meanwhile, its cost-to-income (C/I) ratio also increased to 53.9% in 1Q24 (vs. 49.0% in 1Q23 and 50.0% in 4Q23).
Based on the number of vehicles repossessed in the respective quarters, management believes its loss on sales of repossessed vehicles should have already peaked in 3Q23.
However, some of the vehicles repossessed in a certain quarter may not be sold during the same quarter due to the regulation that requires the lenders to hold on to the vehicles for 30-60 days before selling – in case the borrowers would like to buy back their vehicles. This results in the higher number of vehicles sold compared with the number of repossessed vehicles in a particular quarter.
Due to the above reason, together with the higher number of repossessed vehicles in 1Q24, loss on sales continued to increase in 1Q24. Management expects the number of vehicles repossessed and sales will remain high in 2Q24 and believes the situation will normalise in 3Q24.
Note that, in 1Q23, SCAP started to require a 10-20% downpayment on motorcycle HP, implying loan-to-value ratio (LTV) of 80-90% (vs. 120-130% previously). On average, motorcycle HP will turn to NPL within the first nine months.
At this point, we expect SAWAD’s C/I ratio to increase to 51.4% in FY24F (vs. 49.7% in FY23), mainly due to higher loss on sales of repossessed vehicles.
To boost fee income from insurance sales. SAWAD’s fee/other income comprises appraisal fee, penalty fee, services fee, insurance commission fee, management fee, and income from bad debt recovery. Most of these fees grow in line with loans.
Fee income declined 4.0% y/y but increased 6.6% q/q in 1Q24. The y/y decrease was due to (i) the consolidation of FM’s statement of comprehensive income in 3Q23, which cancelled out FM’s fee expense and SAWAD’s income (approx. THB400-500mn/year) and (ii) the slowdown in motorcycle HP expansion, which in turn resulted in a slowdown in insurance sales. Meanwhile, the q/q increase was thanks to the increase in insurance sales.
SAWAD plans to grow its insurance sales through its branches and mobile platforms to boost fee income. Management revealed that currently only 30% of its loan customers bought insurances from the company, implying there is plenty of room for SAWAD to expand its insurance business.
Asset quality remained weak. NPL ratio increased to 3.2% at end-1Q24 (vs. 2.5% at end-1Q23 and 3.1% at end-4Q23) due to loan expansion amid the fragile economic condition and the deterioration of the current portfolio’s quality.
Meanwhile, credit cost was 1.9% in 1Q24 (vs. 1.3% in 1Q23 and 2.7% in 4Q23), while coverage ratio remained low at 55.6% end-1Q24 (vs. 53.5% at end-4Q23).
The y/y increase in credit cost was due to an increase in NPLs and higher loss on sales of repossessed vehicles (i.e., reflecting in higher loss given default [LGD] when calculating expected credit loss [ECL]). Meanwhile, the q/q decline in credit cost was due to the estimated impairment losses on repossessed vehicles booked in 4Q23 and a slower loan expansion in 1Q24.
FY24F earnings cut by 11% to reflect lower loan growth and higher C/I ratio. As we incorporated SAWAD’s 1Q24 results and revised our key forecast assumptions, our FY24F earnings were cut by 11%.
Specifically, we cut our loan growth assumption to 15% (vs. 20% previously) to reflect SCAP’s shift in business strategy towards asset quality control (vs. portfolio expansion previously).
Meanwhile, we raised our FY24F C/I ratio assumption to 51.4% (vs. 47.5% previously) to reflect higher losses on sales of repossessed motorcycles from its subsidiary – SCAP. Nonetheless, with the lower-than-expected credit cost recorded in 1Q24, we reduced our FY24F credit cost assumption to 2.1% (vs. 2.2% previously).
We now expect SAWAD’s earnings to increase 11.2% y/y in FY24F, driven mainly by strong top line growth (+20% y/y). Note that normally 2Q is the lowest quarter for SAWAD’s earnings.
Maintain HOLD with lower TP of THB39.00. As we incorporated SAWAD’s 1Q24 results and revised our key assumptions for FY23F, we derived a lower TP of THB39.00 (vs. THB40.00 previously) for SAWAD. Our TP is based on 1.7x FY24F P/BV, i.e., 1.5SD below its 5-year average P/BV. While SAWAD’s portfolio quality looks to remain weak, we believe it is close to the bottom. With that, our HOLD rating stands.
THB mn | 1Q24 | 1Q23 | y/y (%) | 4Q23 | q/q (%) |
Interest income | 4,595 | 3,108 | 47.9 | 4,546 | 1.1 |
Interest expense | (789) | (344) | 129.2 | (749) | 5.4 |
Fee/Other income | 818 | 852 | (4.0) | 767 | 6.6 |
SG&A | (2,492) | (1,778) | 40.1 | (2,281) | 9.3 |
PPOP | 2,131 | 1,853 | 15.0 | 2,283 | (6.7) |
ECL | (486) | (208) | 134.0 | (664) | (26.9) |
Net profit | 1,261 | 1,200 | 5.1 | 1,267 | (0.4) |
EPS (Bt) | 0.92 | 0.87 | 5.7 | 0.93 | (1.1) |
Loans | 101,831 | 68,100 | 49.5 | 100,399 | 1.4 |
Percent | 1Q24 | 1Q23 | y/y (ppts) | 4Q23 | q/q (ppts) |
Spread (bps) | 14.0 | 16.1 | (207.5) | 14.5 | (53.3) |
NIM (bps) | 15.1 | 17.4 | (236.2) | 15.5 | (41.4) |
Cost-to-income ratio | 53.9 | 49.0 | 4.9 | 50.0 | 3.9 |
Credit cost | 1.9 | 1.3 | 0.6 | 2.7 | (0.8) |
Operating margin | 30.4 | 41.4 | (11.0) | 30.5 | (0.1) |
Net margin | 23.3 | 30.2 | (6.9) | 23.8 | (0.5) |
ROE | 17.5 | 18.3 | (0.8) | 18.4 | (0.9) |
ROA | 4.5 | 6.5 | (2.0) | 4.6 | (0.1) |
NPL | 3.2 | 2.5 | 0.7 | 3.1 | 0.1 |
Coverage ratio | 55.6 | 47.4 | 8.3 | 53.5 | 2.1 |
Access more at DBS Insights Direct
GENERAL DISCLOSURE/DISCLAIMER
This report is prepared by DBS Vickers Securities (Thailand) Co Ltd (''DBSVTH''). This report is solely intended for the clients of DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBSVTH.
The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively, the “DBS Group”) have not conducted due diligence on any of the companies, verified any information or sources or taken into account any other factors which we may consider to be relevant or appropriate in preparing the research. Accordingly, we do not make any representation or warranty as to the accuracy, completeness or correctness of the research set out in this report. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group, may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies.
Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed, it may not contain all material information concerning the company (or companies) referred to in this report and the DBS Group is under no obligation to update the information in this report.
This publication has not been reviewed or authorized by any regulatory authority in Singapore, Hong Kong or elsewhere.
There is no planned schedule or frequency for updating research publication relating to any issuer.
The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that:
(a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and
(b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments stated therein.
Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets.
Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this report.
DBSVUSA, a US-registered broker-dealer, does not have its own investment banking or research department, has not participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does not engage in market-making.
General | This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. |
Australia | This report is being distributed in Australia by DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (“DBSVS”) or DBSV HK. DBS Bank Ltd holds Australian Financial Services Licence no. 475946. DBS Bank Ltd, DBSVS and DBSV HK are exempted from the requirement to hold an Australian Financial Services Licence under the Corporation Act 2001 (“CA”) in respect of financial services provided to the recipients. Both DBS and DBSVS are regulated by the Monetary Authority of Singapore under the laws of Singapore, and DBSV HK is regulated by the Hong Kong Securities and Futures Commission under the laws of Hong Kong, which differ from Australian laws. Distribution of this report is intended only for “wholesale investors” within the meaning of the CA. |
Hong Kong | This report has been prepared by a personnel of DBS Bank, who is not licensed by the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities in Hong Kong pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). This report is being distributed in Hong Kong and is attributable to DBS Bank (Hong Kong) Limited (''DBS HK''), a registered institution registered with the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). DBS Bank Ltd., Hong Kong Branch is a limited liability company incorporated in Singapore. For any query regarding the materials herein, please contact Dennis Lam (Reg No. AH8290) at [email protected] |
Indonesia | This report is being distributed in Indonesia by PT DBS Vickers Sekuritas Indonesia. |
Malaysia | This report is distributed in Malaysia by AllianceDBS Research Sdn Bhd ("ADBSR"). Recipients of this report, received from ADBSR are to contact the undersigned at 603-2604 3333 in respect of any matters arising from or in connection with this report. In addition to the General Disclosure/Disclaimer found at the preceding page, recipients of this report are advised that ADBSR (the preparer of this report), its holding company Alliance Investment Bank Berhad, their respective connected and associated corporations, affiliates, their directors, officers, employees, agents and parties related or associated with any of them may have positions in, and may effect transactions in the securities mentioned herein and may also perform or seek to perform broking, investment banking/corporate advisory and other services for the subject companies. They may also have received compensation and/or seek to obtain compensation for broking, investment banking/corporate advisory and other services from the subject companies. |
Singapore | This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) or DBSVS (Company Regn No. 198600294G), both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd and/or DBSVS, may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 6878 8888 for matters arising from, or in connection with the report. |
Thailand | This report is produced by DBS Vickers Securities (Thailand) Co Ltd which is regulated by the Securities and Exchange Commission, Thailand. For any query regarding the materials herein, please contact Chanpen Sirithanarattanakul at [email protected] |
United Kingdom | This report is produced by DBS Bank Ltd which is regulated by the Monetary Authority of Singapore. This report is disseminated in the United Kingdom by DBS Bank Ltd, London Branch (“DBS UK”). DBS Bank Ltd is regulated by the Monetary Authority of Singapore. DBS UK is authorised by the Prudential Regulation Authority and is subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. Details about the extent of our regulation by the Prudential Regulation Authority are available from us on request. In respect of the United Kingdom, this report is solely intended for the clients of DBS UK, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBS UK. This communication is directed at persons having professional experience in matters relating to investments. Any investment activity following from this communication will only be engaged in with such persons. Persons who do not have professional experience in matters relating to investments should not rely on this communication. |
Dubai International Financial Centre | This communication is provided to you as a Professional Client or Market Counterparty as defined in the DFSA Rulebook Conduct of Business Module (the "COB Module"), and should not be relied upon or acted on by any person which does not meet the criteria to be classified as a Professional Client or Market Counterparty under the DFSA rules. This communication is from the branch of DBS Bank Ltd operating in the Dubai International Financial Centre (the "DIFC") under the trading name "DBS Bank Ltd. (DIFC Branch)" ("DBS DIFC"), registered with the DIFC Registrar of Companies under number 156 and having its registered office at units 608 - 610, 6th Floor, Gate Precinct Building 5, PO Box 506538, DIFC, Dubai, United Arab Emirates. DBS DIFC is regulated by the Dubai Financial Services Authority (the "DFSA") with a DFSA reference number F000164. For more information on DBS DIFC and its affiliates, please see http://www.dbs.com/ae/our--network/default.page. Where this communication contains a research report, this research report is prepared by the entity referred to therein, which may be DBS Bank Ltd or a third party, and is provided to you by DBS DIFC. The research report has not been reviewed or authorised by the DFSA. Such research report is distributed on the express understanding that, whilst the information contained within is believed to be reliable, the information has not been independently verified by DBS DIFC. Unless otherwise indicated, this communication does not constitute an "Offer of Securities to the Public" as defined under Article 12 of the Markets Law (DIFC Law No.1 of 2012) or an "Offer of a Unit of a Fund" as defined under Article 19(2) of the Collective Investment Law (DIFC Law No.2 of 2010). The DFSA has no responsibility for reviewing or verifying this communication or any associated documents in connection with this investment and it is not subject to any form of regulation or approval by the DFSA. Accordingly, the DFSA has not approved this communication or any other associated documents in connection with this investment nor taken any steps to verify the information set out in this communication or any associated documents, and has no responsibility for them. The DFSA has not assessed the suitability of any investments to which the communication relates and, in respect of any Islamic investments (or other investments identified to be Shari'a compliant), neither we nor the DFSA has determined whether they are Shari'a compliant in any way. Any investments which this communication relates to may be illiquid and/or subject to restrictions on their resale. Prospective purchasers should conduct their own due diligence on any investments. If you do not understand the contents of this document you should consult an authorised financial adviser. |
United States | This report was prepared by DBSVTH. DBSVUSA did not participate in its preparation. The research analyst(s) named on this report are not registered as research analysts with FINRA and are not associated persons of DBSVUSA. The research analyst(s) are not subject to FINRA Rule 2241 restrictions on analyst compensation, communications with a subject company, public appearances and trading securities held by a research analyst. This report is being distributed in the United States by DBSVUSA, which accepts responsibility for its contents. This report may only be distributed to Major U.S. Institutional Investors (as defined in SEC Rule 15a-6) and to such other institutional investors and qualified persons as DBSVUSA may authorize. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein should contact DBSVUSA directly and not its affiliate. |
Other jurisdictions | In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified, professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions. |
HONG KONG | SINGAPORE |
INDONESIA PT DBS Vickers Sekuritas (Indonesia) Contact: William Simadiputra DBS Bank Tower Ciputra World 1, 32/F Jl. Prof. Dr. Satrio Kav. 3-5 Jakarta 12940, Indonesia Tel: 62 21 3003 4900 Fax: 6221 3003 4943 e-mail: [email protected] | THAILAND |
Related Stories
- Srisawad Corporation: A better year 202604 Mar 2026
- Srisawad Corporation: Back on track17 Nov 2025
- Srisawad Corp: All eyes on 2H25 performance20 Aug 2025
Related Stories
- Srisawad Corporation: A better year 202604 Mar 2026
- Srisawad Corporation: Back on track17 Nov 2025
- Srisawad Corp: All eyes on 2H25 performance20 Aug 2025