Bangkok--21 Jul--Fitch Ratings
Fitch Ratings (Thailand) has affirmed the National Ratings of Asia Plus Group Holdings Public Company Limited (ASP), Finansia Syrus Securities Public Company Limited (FSS) and Finansa Public Company Limited (FNS) as follows:
- ASP's National Long-Term Rating affirmed at 'A-(tha)' with a Stable Outlook and National Short-Term Rating affirmed at 'F2(tha)'.
- FSS's National Long-Term Rating affirmed at 'BBB+(tha)' with a Stable Outlook and National Short-Term Rating affirmed at 'F2(tha)'.
- FNS's National Long-Term Rating affirmed at 'BBB-(tha)' with a Stable Outlook and National Short-Term Rating affirmed at 'F3(tha)'.
KEY RATING DRIVERS
ASP's National Ratings reflect its robust domestic securities franchise, which the group operates through its key operating subsidiary, Asia Plus Securities (ASPS). Fitch assesses the group on a consolidated basis due to ASPS's large size relative to the group as well as the high level of integration between ASP and ASPS, operationally and financially. ASPS is among the stronger and more diversified securities firms in Thailand, with a large brokerage presence among retail investors as well as significant footprints in capital markets and investment banking.
Fitch expects ASP to maintain sound financials and navigate profitability pressure more successfully than its domestic peers. Its brokerage margins are likely to continue to outperform the industry average due to its well-established client relationships. The agency believes ASP's revenue has the potential to become further diversified as it expands its presence in wealth management and other non-brokerage businesses. Its leverage has remained low, with equity-to-assets ratios mostly above 50% over the past several years.
The affirmation of FSS's National Ratings reflects its moderate business franchise, sound capitalisation, manageable risk appetite, and adequate funding and liquidity. FSS remains a strong player with 5.4% market share by trading value, ranking fourth among securities firms in Thailand at end-1H17, but its brokerage commission fees have been declining in tandem with industry trends amid stiff price competition.
Fitch believes FSS's profitability continues to be constrained by lower brokerage margins and higher expenses from its infrastructure development. However, the company's sound capitalisation, reflected in an equity-to-assets ratio of 48.4% at end-1Q17, and adequate liquidity position should provide sufficient buffer against short-term business shocks. The agency views that FSS's risk controls are acceptable and the risk profile of its assets has been stable.
The affirmation of FNS's National Ratings reflects its standalone financial strength, which takes into account its small domestic franchise, volatile profitability as well as acceptable capital and liquidity position. FNS's recent investments in the warehouse and factory rental business will help stabilise its income stream, while profits from the investment banking business continue to be one of the key influences on the company's profitability.
FNS's leverage remains high, even though debt slightly declined in 1Q17. Fitch believes that FNS's ability to pay down debt, depending on its operating cash flow and dividend income, is acceptable; however, the company may have a shortfall if the domestic operating environment deteriorates significantly. The company faces refinancing risk due to its dependence on wholesale funding, however, Fitch believes this is mitigated by committed credit lines from lenders, ongoing cash generation, and an established investor base for its debentures.
RATING SENSITIVITIES
Fitch may consider downgrading the National Ratings of ASP or FSS if either firm's profitability declines significantly over a sustained period or if either entity aggressively expands its risky assets beyond that of industry peers or the agency's expectations.
FNS's ratings could be downgraded if the company has a weaker-than-expected performance that leads to significant deterioration in key financial ratios, particularly in liquidity and leverage. Any deviation from the debt repayment plan that stems from a higher risk appetite, significant losses from core operations of its subsidiaries or affiliates, or signs of a withdrawal in creditors' confidence may result in negative rating action.
Conversely, the agency may consider upgrading the ratings on ASP and FSS if the firms improve their key financial metrics through industry cycles while keeping their risk profiles and franchises relatively constant.
FNS's ratings could be upgraded if the company successfully executes its debt repayment plan while improving profitability on a sustained basis so that leverage steadily declines.