DIF - 3Q24: Earnings as expected

DIF reported core profit of Bt2.9bn, slipping 0.3% YoY, but up 0.4% QoQ, meeting INVX estimates and we therefore keep our 2024F forecast unchanged. This brought 9M24 core profit to 75% of our full-year forecast. We believe the recent drop in share price following rising US bond yield is an opportunity to accumulate as we expect the Fed to continue to cut policy rate and Thai bond yield has moved in the opposite direction as US bond rate. Current share price also offers a decent dividend yield of 9.7% in 2024F.

3Q24 results in line with expectations. DIF reported 3Q24 net profit of Bt2.7bn, up 0.1% YoY and 0.8% QoQ. In the quarter, the fund booked Bt220mn unrealized loss on investment (non-cash). Stripping this out shows core profit of Bt2.9bn, a slip of 0.3% YoY but a rise of 0.4% QoQ. Rental income was Bt3.5bn, relatively flat QoQ and YoY. The main cost items were stable QoQ and YoY except for interest expense, which increased 2.3% YoY to Bt542mn due to a higher interest rate. 9M24 core profit accounted for 75% of our full-year forecast, keeping it on track to meet forecast. It has announced a DPU of Bt0.22 with XD on Nov 14.

Opportunity to accumulate after rising US bond yield hit share price. DIF share price fell 2.1% after the US election as investors are concerned over rising 10-year US government bond yield following Trump’s policies. This has driven 10-year US government bond yield up to 4.4% from 4.1% in the past one month. We believe a further rally in US bond yield will be limited as INVX expects US CPI to continue to move down and also expects the Fed to continue to cut policy rate. Additionally, 10-year Thai government bond yield has not taken the same path, falling to 2.4% from 2.5% in the past month rather than rising. We therefore see the recent drop in share price as an opportunity to accumulate.

Expect 4Q24F core earnings to drop slightly YoY, but to be flat QoQ. We expect 4Q24F earnings to drop YoY due to lower income from DTAC, as its contract ended in March 2024, but to be flat QoQ on stable rental income.

Maintain forecast. We expect DIF to report 2024F earnings of Bt11.7bn, flat YoY. We estimate 2024F DPU at Bt0.89, with 4Q24 DPU expected to be stable QoQ at Bt0.22. In 9M24, the fund has already paid a DPU of Bt0.67.

Risk and concerns. The rising bond yield makes dividend less attractive and thereby caps upside to share price as DIF is considered a yield play. Additionally, we also see risk of further divestment by TRUE is lower given its stronger financial performance post amalgamation.