Thai Slump Tests Billionaires Who Built Fortune From $330 Loans

(Bloomberg) -- Billionaire husband-and-wife team Chuchat Petaumpai and Daonapa Petampai built a fortune by providing small loans in Thailand. They now face a major test as a slowing economy crimps earnings growth.

Their micro-lender Muangthai Capital Pcl is on course for the weakest profit growth since its listing in 2014, stoking a 6.3% share-price drop in the past three months that exceeded the 1.7% decline in the benchmark SET index.

“We’re watching the economic situation carefully to see how it impacts repayment ability,” Chuchat said in an investor presentation Thursday. “A drought affected farmers’ incomes, and they are our biggest customers. That problem has eased, but we still need to assess the situation.”

Muangthai Capital grew rapidly by tapping into the demand for small loans among the millions of Thais, like farmers and blue-collar workers, who lack the credit history required by commercial banks. But an economic slowdown is squeezing incomes, debt serviceability and potentially demand for credit -- a problem faced by major banks too.

“The company will find it hard to replicate the same exponential earnings growth as in past years because of more limited branch expansion,” said Chalie Kueyen, an analyst at KGI Securities (Thailand) Pcl in Bangkok.

Shareholdings

Muangthai Capital’s average annual earnings growth of 61% from 2014 to 2018 propelled a more than 10-fold surge in the firm’s shares after its initial public offering.

In the first nine months of this year, it reported a profit of 3.1 billion baht ($102 million), a climb of just 15% from the same period a year earlier.

Daonapa, 65, and Chuchat, 67, each have stakes in Muangthai Capital worth more than $1 billion, according to data compiled by Bloomberg. The company provides credit backed by motorcycles, automobiles and farm vehicles.

Average loan size is typically about 10,000 baht at an interest rate of around 24%, according to Chuchat. He said he still expects earnings growth through 2020 because of branch expansion, lower borrowing costs and strict risk management to curb bad debt.

To contact the reporter on this story: Anuchit Nguyen in Bangkok at anguyen@bloomberg.net

To contact the editors responsible for this story: Sunil Jagtiani at sjagtiani@bloomberg.net, Margo Towie

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