Bangkok--16 Dec--Fitch Ratings
Fitch Ratings (Thailand) Limited held its inaugural semi-annual investor briefing in Bangkok today. The agency highlighted that in 2015 falling oil prices will squeeze the profitability of corporates in the energy sector while rising leverage in the Thai private sector will constrain the performance of banks.
The ratings of major Thai corporates are likely to remain stable despite the heightened risk, backed by their strong business profiles and their ability to adjust investment costs. For the bank sector, while provisioning costs may increase, Thai banks’ ratings should also prove resilient, supported by their sizeable capital buffers and reserves.
Mr. Win Phromphaet, CFA, Head of Investment for the Social Security Office, Thailand’s largest institutional investor, was the guest speaker at Fitch’s event and he discussed the Thai and global investment outlook.
Mr. Vincent Milton, Managing Director of Fitch Ratings (Thailand), opened the investor briefing by announcing the launch of Fitch’s new Thai website (https://www.fitchratings.co.th/). He said that although most Thai firms’ ratings were stable throughout the challenging environment during 2014, new areas of risk are emerging that may have a more material impact in 2015.
During the conference, Fitch Ratings’ (Thailand) senior analysts discussed the outlooks and key risks of their respective sectors.
Mr. Lertchai Kochareonrattanakul, Senior Director of Corporates, said that the rating Outlooks of most large Thai corporates remain Stable, supported by strong business positions and relatively solid credit metrics. Lower oil prices will weaken PTT Public Company Limited’s (PTT; BBB+/AAA(tha)/Stable) operating cash flows in 2015, resulting in higher leverage. However, Fitch believes that PTT has flexibility to reduce its capital expenditure and manage its leverage to be consistent with the current rating. In addition, if PTT’s standalone ratings fall below Thailand’s sovereign rating (BBB+/Stable), its ratings would benefit from a one notch uplift to reflect the implicit support of the state.
Among other key sectors, mobile phone operators are likely to face slow revenue growth and high marketing expenses in 2015, but those factors will be offset by lower regulatory costs. Although capital expenditure for the roll-outs of 3G networks will remain high, the financial positions of mobile phone operators should prove resilient, supported by low leverage ratios and strong operating cashflows. As such, the rating Outlooks for Advanced Info Service Public Company Limited (BBB+/AA+(tha)/Stable) and Total Access Communication Public Company Limited (BBB/AA(tha)/Positive) remain Stable.
Mr. Parson Singha, Senior Director of Financial Institutions, said that while the weak operating environment is putting pressure on bank sector earnings and asset quality, Thai banks have the capacity to deal with these challenges and the Rating Outlook for the sector is generally Stable. In particular, the largest Thai banks, such as Bangkok Bank Public Company Limited (BBB+/AA(tha)/Stable), Siam Commercial Bank Public Company Limited (BBB+/ AA(tha)/Stable), Kasikornbank Public Company Limited (BBB+/ AA(tha)/Stable) and Krung Thai Bank Public Company Limited (BBB/ AA+(tha)/Stable) have built up strong buffers of capital and loan loss reserves, which support their financial profiles. However, there are also significant downside risks tied to the expansion of leverage in the Thai private sector, especially among smaller entities that are more exposed to consumer lending and leveraged corporates.
The conference was attended by over 50 executives and officials from the regulatory, investor, financial and corporate sectors.