Bangkok--4 Dec--TRIS Rating
TRIS Rating said today that the credit rating of Country Group Securities PLC (CGS) could be affected by the business restructuring plan as the new structure would take away the relatively stable income from fund management business from CGS and would make CGS?s revenue mix less diversified.
The business restructuring plan, approved by CGS?s Board of Directors on 29 November 2013, involves divesting key lines of business including investment banking and proprietary trading from CGS to a newly-established holding company. CGS?s investment in MFC Asset Management PLC (MFC) would also be transferred to the holding company. Currently, CGS holds a 24.9% stake in MFC. The share of profit from investment in MFC accounted for 15% of CGS?s pre-tax earnings in 2012. The business restructuring plan is subject to shareholders? approval and the restructuring is not expected to be complete sooner than June 2014. After the restructuring, CGS?s remaining business would be limited to securities and derivatives brokerage and providing related services.
In TRIS Rating?s view, the investment in MFC provides CGS with a relatively stable source of recurring income from fund management fees. With CGS?s securities business becoming weakened after the recent change in key management positions, the contribution from MFC is expected to be even more important to the financial performance of CGS. TRIS Rating views the smaller scope of business of CGS and the missing income stream from MFC to be affecting the credit rating of CGS. TRIS Rating may review the credit rating of CGS after the outcome of the shareholders? meeting on 15 January 2014 becomes known.
Currently, TRIS Rating assigns CGS?s company rating at ?BBB-?, with a ?stable? outlook.