The share price of Kasikornbank Public Company Limited (SET: KBANK) and SCB X Public Company Limited (SET: SCB) are the only two banks that trade in the negative territory on Thursday amid rumours that they are at risk of shouldering loss from a default of Thai listed wire-production company Stark Corporation Public Company Limited (SET: STARK).
News circulating in the trading rooms have it that STARK may default on its bank loans amid ongoing issues at the company. KBANK and SCB are major lenders to STARK, according to the talks.
The share price of KBANK fell THB 4.00 or 3.04% to THB 127.50 per share in the morning session on Thursday. Meanwhile, SCB slipped THB 1.25 or 1.24% to THB 99.25 per share. Other banks in the exchange are either flat or post slight gains.
Tisco Securities wrote in a note that as of 3Q22, STARK had 8.6 billion baht in bank loans, of which 6.6 billion baht and 0.8 billion baht were backed by its properties and accounts receivable, respectively. The remaining 1.2 billion baht were unsecured loans. However, the properties backing the 6.6 billion baht in loans had an appraisal value of only 1.7 billion baht.
Tisco Securities also doubted that the accounts receivable have any significant value in the case of default. Assuming the value of properties remains at 1.7 billion baht (an optimistic assumption), Tisco Securities estimated that the lending banks will together need to set aside 6.9 billion baht in total provisioning expenses in the case of a default, equivalent to 14% of 1Q23E sector provisioning expenses and 34% of the 1Q23E provisioning expenses of KBANK and SCB.
In addition, Tisco Securities noted that it could not gauge the probability of STARK defaulting on its bank loans. Also, Tisco Securities did not have information about which banks have lent to STARK and caution that banks are unlikely to share such information.
Yesterday, STARK announced that as the company changed the board directors and executives (except Mr. Vonnarat Tangkaravakoon) and some of the information is being audited by the auditor. Therefore, the company needed to delay the submission of the consolidated and separate financial statements for the fiscal year ended December 31, 2022 later than the expected period (within April 21, 2023).
STARK stated that it anticipated submitting such financial statements between May and June 2023.