Bangkok--5 Apr--Fitch Ratings
Fitch Ratings (Thailand) has affirmed Finansa Public Company Limited’s (FNS) National Long-Term Rating at ‘BBB-(tha)’ and National Short-Term Rating at ‘F3(tha)’. Fitch also has removed the ratings from Rating Watch Negative (RWN), on which the ratings were placed since 10 October 2012. The Outlook is Negative.
Rating Action Rationale
The affirmation of the National ratings and the removal of RWN follow FNS’s completion of its capital increase of THB213m in Q412 and the subsequent improvement in leverage and liquidity. FNS’s performance improved H212, although it continued to report a net loss for the full year.
The Negative Outlook reflects Fitch’s expectation that FNS’s group earnings and prospects could remain weak and volatile in the medium-term. This could continue to put pressure on its capital position and constrain its ability to materially strengthen performance, leverage and liquidity.
Rating Drivers and Sensitivities
Negative rating triggers include a further net loss in 2013, increasing leverage and a failure to maintain sufficient liquid assets and its committed credit facility relative to short-term debt. Event risks such as a lapse in the commitment of its key shareholders or management and a failure to roll over its credit facility could also result in negative rating action. The occurrence of any of these events could trigger a multiple-notch downgrade.
A material improvement of the leverage and liquidity profiles on both standalone and consolidated basis could lead to the Outlook being revised to Stable. However, rating upgrade is unlikely under the company’s current business model, which is susceptible to market volatility.
FNS reported a narrower net loss of THB34m in 2012, compared with a net loss of THB150m in 2011. Increasing revenue from its investment banking business was offset by a large loss- sharing from one of its associated companies, Prospect Development (PD), after plans for asset sales were delayed.
FNS’s borrowings (short-term debentures) declined to THB318m or 24% of equity at end-2012 (end-H112: THB560m or 50% of equity). Liquid assets/short-term borrowings strengthened to over 100% at end-2012 from about 37% at end-H112. Short-term borrowings should further decline to THB250 by end-Q113. The improving liquid assets coverage, together with FNS’s committed credit line of THB270m, should ease immediate liquidity pressure.
While FNS’s consolidated leverage is low with debt/equity of 0.2x and total liabilities/total equity of 0.4x at end-2012, leverage at the holding company was much higher at 1.1x for both measures, mainly due to large borrowings from its subsidiaries. This has also led to a high double leverage ratio at the holding company of 179%.
FNS plans to invest directly in PD’s assets, which are mainly rental warehouses and factories, in 2013, which could help stabilise future revenues. This is expected to be funded by the proceeds from the partial divestment of its stake in PD and from the sales of its investment in a foreign equity fund. A pending capital increase of about THB80m via private placement, if completed, would be used for future investment.
Contacts:
Primary Analyst
Patchara Sarayudh
Associate Director
+66 2108 0153
Fitch Ratings (Thailand) Limited
Level 17, Park Ventures,
57 Wireless Road, Lumpini, Patumwan
Bangkok 10330
Secondary Analyst
Chutimas Sivamard, CFA
Director
+66 26108 0152
Committee Chairperson
Jonathan Lee
Senior Director
+88 62 8175 7601
Note to Editors: Fitch's National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated 'AAA' and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as 'AAA(tha)' for National ratings in Thailand. Specific letter grades are not therefore internationally comparable.
Additional information is available at www.fitchratings.com. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable criteria, “Global Financial Institution Criteria”, dated 15 August 2012, “Securities Firms Criteria”, dated 15 August 2012 and “National Ratings Criteria”, dated 19 January 2011, are available at www.fitchratings.com.