Fitch Assigns First-Time 'BB(tha)' Rating to KTB Securities (Thailand)

Stocks News Thursday September 21, 2017 15:15 —PRESS RELEASE LOCAL

Bangkok--21 Sep--Fitch Ratings Fitch Ratings (Thailand) has assigned KTB Securities (Thailand) Company Limited (KTBST) a National Long-Term Rating of 'BB(tha)' with a Stable Outlook. At the same time, the agency assigned the company a National Short-Term Rating of 'B(tha)'. KEY RATING DRIVERS KTBST's National Ratings are based on its standalone financial profile, which takes into account its small local franchise and weak financial profile, especially a poor capital buffer and weakening liquidity and funding profile. The rating also reflects Fitch's view that its overall operation and profitability outlook is improving after a change of management. The company's management and strategy is one of the key rating drivers. The 2016 change in management led to improvement in the outlook for KTBST's strategy and profitability, with recent performance turning around following nine years of losses. However, KTBST's profitability remains more volatile than the average for the Thai security industry due to its very small domestic franchise. Fitch believes that KTBST's current capitalisation, though weak relative to its risk profile, should be able to support its business growth over the next one to two years because asset growth is likely to be moderate and profitability is likely to improve. Fitch expects KTBST to face increasing funding and liquidity risks as it funds its business expansion. However, Fitch believes the risks are manageable at the current rating, given the company's policy is to cap debt issuance at 1x its equity and maintain credit lines from commercial banks to mitigate refinancing risk. KTBST's franchise is small with only about 1% share of the Thai brokerage market over the past several years. Its market share improved in the recent years but remains below that of its rated peers. RATING SENSITIVITIES A significant reduction in its capitalisation, weakening profitability or decreasing liquidity could put downward pressure on the ratings. Fitch believes potential rating upside is limited over the near term given the company's small franchise, and its weak business and financial profile. Increased revenue diversification as well as improvements in its financial profile, particularly in liquidity and capital, would be positive for the rating. The full list of ratings actions follows: - National Long-Term Rating assigned at 'BB(tha)'; Stable Outlook - National Short-Term Rating assigned at 'B(tha)'

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