Bangkok--14 Nov--Fitch Ratings
Fitch Ratings (Thailand) has affirmed Asia Plus Securities Public Company Limited’s (ASP) National Long-Term Rating at ‘A-(tha)‘ with a Stable Outlook and its National Short-Term Rating at ‘F2(tha)’
KEY RATING DRIVERS
ASP’s ratings are based on its standalone financial strength. The ratings are supported by the company’s sound financial performance and franchise relative to the industry. The ratings also take into account the company’s exposure to the volatile stock market, market risk on its trading activities and pricing pressure in Thailand’s competitive securities brokerage industry.
ASP has a market share of around 4% in securities brokerage trading volume. Its revenue sources are fairly diversified – about half comes from securities brokerage services, with the other half from investment banking, trading and asset management.
ASP’s financial performance is prone to volatility, but the company appears well-positioned to cope with weaker industry conditions while retaining its market position. The company’s annualised return on equity (ROE) dropped to 16% in 1H14 (1H13: 30%) as market conditions turned less favourable compared to 2013. Nevertheless, core underlying operations remain profitable, and the company’s liquidity and capital buffers remain satisfactory given its generally low risk appetite. ASP’s equity to asset ratio at 46% remains solid and well above the industry average of 31%.
RATING SENSITIVITIES
Material sustained weakening in ASP’s key financial performance ratio could lead to negative rating action. Rating downgrade pressure could also come from sustained earnings pressure, higher leverage, or liquidity problems – especially if this was the case relative to industry trends. A shift in strategy towards more risky businesses or over reliance on a single source of income, absent improved risk buffers, could also have a negative impact on the ratings.
A vastly strengthened franchise and greater stability in financial performance through industry cycles – perhaps reflecting even lower risk appetite – may lead to a rating upgrade. However, this is unlikely in the short-term as ASP’s standalone ratings are already among the highest for securities firms in Thailand.