Bangkok--12 Jul--Fitch Ratings
Fitch Ratings-Bangkok-12 July 2018: Fitch Ratings (Thailand) has affirmed Finansia Syrus Securities Public Company Limited's (FSS) National Long-Term Rating at 'BBB+(tha)' with a Stable Outlook, and its National Short-Term Rating at 'F2(tha)'.
KEY RATING DRIVERS
The National Ratings reflect FSS's moderate business profile, limited diversification and dependence on retail brokerage income. The ratings are supported by the firm's sound capitalisation and liquidity buffers, which allow FSS to withstand downside risks.
Fitch expects FSS's profitability to remain on par the industry average over the medium term. The company has shown an ability to maintain a comparable brokerage commission fee with the market amid heavy competition. However, volatile trading volume will pressure profitability in light of FSS's high operating cost structure, thin operating margin and capital expenditure requirements.
FSS has maintained a stable market presence in its core segment of retail brokerage. More than 68% of its total revenue is generated from securities brokerage commissions, compared with the 55% industry average. The firm's business strategy could increase the diversity of its revenue base and the quality of its earnings, but Fitch believes there are significant execution risks.
The company has sound capitalisation that is comparable with local peers, as evident from its lower asset/equity ratio of 2.3x, against the industry's 3.9x, at end-2017. The agency believes current capital would enable FSS to buffer moderate downside risks in the medium term.
RATING SENSITIVITIES
A significant reduction in profitability or significantly higher risk profile and risky-asset growth that deviate from industry trends, all over a sustained period, could trigger negative rating action.
The National Ratings could be upgraded if FSS improves its key financial metrics through the industry cycle, while keeping its risk profile and business franchise relatively constant.