Bangkok--26 Nov--Fitch Ratings
Fitch Ratings (Thailand) Limited has affirmed Asia Plus Securities Public Company Limited’s (ASP) National Long-Term Rating at ‘A-(tha)’ and its National Short-Term Rating at ‘F2(tha)’. The Outlook is Stable.
The ratings reflect ASP’s established market position in domestic retail brokerage and investment banking (IB) in Thailand. This is reinforced by its management’s strong expertise and reputable track record in the Thai securities industry. The ratings are also supported by ASP’s sound profitability, capital and liquidity.
The ratings also take into account the company’s continuing reliance on volatile securities brokerage as well as on proprietary trading and investments. However, this should reduce in the long term as ASP diversifies into non-brokerage businesses.
Sustainable profitability growth resulting from diversification without compromising its financial and risk profile could lead to a positive rating action. Conversely, a material increase in risk appetite or in business/earnings volatility without an accompanying increase in capital and liquidity could lead to a negative rating action. A significant rise in leverage leading to a material weakening in financial flexibility could also put pressure on the ratings.
ASP’s net profit rose 7% yoy to THB443m in 9M12 while its return on assets remained acceptable at 8.2%. Declining brokerage business from foreign institutions was offset by higher trading gains and a lower corporate income tax rate. ASP has been able to resist industry-wide downward pressure on commission fee, reporting only slightly lower average commission rate during 9M12 compared with that of 2011. Its average commission rate was higher than the industry average, reflecting the company’s focus on providing quality service rather than price cutting. Fitch does not expect the full year 2012 performance to significantly deviate from its 9M12 result. However, its enlarged investment portfolio could introduce further earnings volatility over the short- to medium- term.
The global economic downturn could weigh on ASP’s proprietary trading and investment business, which has increased significantly in size to levels of over THB2bn, similar to that witnessed in 2010. Fitch will continue to monitor any structural changes to investment risks/appetite and volatility. ASP’s expansion into equity derivatives has also led to increased market risk although this is partly mitigated through its hedging strategy and remains closely monitored by its risk management division.
ASP’s funding and liquidity remain stable. Its liquid assets to total assets ratio remained high 40% at end-9M12. Leverage, notwithstanding an increase, remains manageable with a debt/equity ratio of 0.26x. The company had a strong net liquid capital ratio (NCR) of 84% at end-9M12. While lower than 2011’s levels of over 100%, the NCR was still significantly above the regulatory requirement of 7%. Its equity/assets ratio was also strong at 51% at end-9M12.
ASP is one of Thailand’s leading securities brokerage companies. ASP’s business activities cover local/global securities and derivatives brokerage, trading and investment, investment banking, equity and debt underwriting, asset and wealth management and equity derivative products.