After we launched our 2Q22 earnings preview (Time to take positions!) on August 02, BAM’s stock price rose 9% to Bt18.30. In this report, we suggest letting profits run, as we expect strong earnings growth for 2H22, supported by seasonality and economic recovery from COVID-19 effects. Moreover, new NPLs available to the market, a lower tax rate, and more focus on SME debt settle-ment will enhance the firm’s numbers going forward. BUY!
Strong cash collection in 2H22
We expect BAM to achieve its 2022 cash collection target of Bt17.5bn. 1H22 cash collection was Bt7.1bn (equal to 41% of its full-year target). Cash collection should accelerate in 2H22, supported by asset manage-ment industry seasonality. The drivers are moderate demand for NPAs and improving debt-servicing capacity among distressed borrowers (generally, BAM’s clients were more adversely impacted by COVID-19 effects than higher inflation; the Thai economy will continue recovering from COVID-19 effects). Hence, demand for NPAs will rise and the debt-servicing capacity of distressed borrowers will expand. NPL cash collection will be the key long-term earnings growth driver.