Shares of KTC dips as block trade of 100 million shares at 10% discount gives speculators a taste of reality

Shares of the high-flying Krung Thai Card Plc (KTC), a unit of state-owned Krung Thai bank Plc (KTB), saw a sharp dip in its price on Thursday after several large shareholders divested 100 million shares.

The shares were divested at a price around 10% below Tuesday’s closing price of 83 baht per share.

KTC, one of the country’s leading credit card and personal loan issuer, saw its shares decline by as much as 10.25% by the end of the morning session with prices hovering around 74.50 baht a share.

KTC was the most actively traded stock on the Stock Exchange of Thailand (SET) with more than 69 million shares changing hands by midday with trading value in excess of 5.2 billion baht.

The shares of KTC, a hot commodity in the equity market in Thailand, had hit 52-week high on January 11 this year when it was trading at 90.25 baht a share. Even at Tuesday’s closing price of 83 baht, it was trading at a price-to-earnings ratio of just over 40x with a  dividend yield of a mere 1.06%.

Any fundamental investor would not touch shares of such high PE but despite the high valuations, KTC remained a highly speculated upon stock.

But the sale of 100 million shares at 74.75 baht to some ‘institutional investors’ prompted a reality check thus helping to bring the soaring stock back to the ground.

“Usually when long term holders exit, after a ramp up in share price, it is regarded as a near term peak for the share price,” Krungsri Securities wrote in a note to clients this morning.

Krungsri on Monay (May 24th) had written to clients that “if you are looking for something to SELL, we see that DELTA and KTC are at the top of sell list.”

Krungsri said that while its research department does not cover these names, both stocks are overvalued on consensus ratings.  KTC’s share price has risen sharply over to trade near its all-time-high.  Its current market capitalization of US$6.5 billion, is larger than its parent KTB, which has a market cap of $4.7 billion.

Krungsri said that it suspects the recent speculative interest in this name stems from following 3 reasons:

  1. It has just completed the purchase of a 75% stake in Krung Thai Leasing Company, from its parent for 594 million baht.  Although not much information on prospects of the leasing business is available, investors feel KTC’s management can make the leasing business significantly profitable.
  • KTC has been aggressively adding new forms of personal loans etc. Although analysts have not upgraded their forecasts over the last 1 month, consensus expects its profits to rise 32% per annum for the next 2 years. The addition of the leasing business to bring an upgrade to this forecast.
  • CITIBANK – KTC is seen as a strong contender for the purchase of Citibank’s credit card business. We suspect Citibank, which has the largest credit card book in Thailand, will seek a very competitive price which may price out and see KTC unwilling to pay such premiums based on the valuation of its own business, but investors could be speculating on this acquisition.

Recent Exit by Key shareholders

Recent exits by key holders in a few companies have mixed impact post exits. Here are few examples of recent big exits

  • STGT exited during July – Oct ’21 when STGT price rose unexpectedly to near peak. Though holders exited by selling in the market over a few days, and without any official disclosure to the public, STGT price started to fall as investors feared of more exits.
  • STARK – In March ‘21, STARK holders sold $124 million worth, or 8% of outstanding share at 6% discount to last close. Share price recovered a bit during later days but is still trading slightly above placement price.
  •  BGRIM – In Jan ’21, BRGIM holders sold $91 million at 52 baht a share, or 3% discount to the market. It was a small stake and had no impact on price after the sale. BGRIM is trading at 41.50 baht. In Jul ’20, same holder had sold $111 million worth at 5% discount to last close, at 53.75 baht a share.
  • BH – In Dec ’20, BDMS sold its 11.3% stake in BH at 103 baht a share when BH was trading at 120 baht a share. Post exit, BH share price rose as BDMS’s exit was expected and removed the overhang.
  • TMB – In Dec ’20, Bank of Nova Scotia exited TMB by selling $167 million worth at 1.14 baht a share, slight discount to the market. TMB price fell for few days, and recovered. This exit was similar to BDMS’s exit of BH. It was expected and removed the overhang.
  • VGI – In Nov ’20.  BTS sold $258 million worth, 15% of VGI, at 6.0 baht a share or 11% discount to last close. VGI price remained unchanged. VGI is trading at 6.05 baht a share now.
  • STARK – In Oct ’20, holders of STARK sold 2.14 billion shares at 1.4 baht a share or total of $96 million, at 28% discount to last close. Price fell and did not recover for few months. Since then Stark has made a reverse share split is now trading at 4.1 baht a share (or 2.05 baht a share in old form).
  • DIF – In Sep ’20, TRUE sold 2.8% stake in DIF at 14.2 baht a share – at 4% discount. Share price has not recovered since as investors fear of further sale by TRUE. DIF is trading at 12.2 baht a share.
  •  In June ’20, TRUE also sold 300 million or 2.8% stake in DIF at 6% discount to last close when share price was above 15.0 baht a share.
  • OSP – In June ’20, holders of OSP sold $107 million worth – 90 million shares at 37 baht a share – slight discount to last close. OSP share price rose in later months as beverages stock prices rose. It is trading at 37 baht a share now.
  • CBG – In May ’20, CEO of CBG sold $60 million worth – 20 million shares at 98 baht a share, 5% discount to last close. Share price fell briefly but recovered in following months as its business took off following launch of new products.

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