Bangkok--Jan 27--TRIS Rating
TRIS Rating Co., Ltd. has affirmed the company rating of Siam Panich Leasing PLC (SPL) and the ratings of its current senior debentures and bills of exchange at “A-”. At the same time, TRIS
Rating has assigned the ratings of “A-” to SPL’s proposed up to Bt800 million senior debentures. The rating outlook is still “stable”. SPL will use the funding from its new debentures to expand its business. The
ratings are based on the strong market position of SPL in the automobile hire purchase market and its experienced management team. However, these strengths are partially offset by intense competition in both the new and used car hire purchase businesses, and higher funding costs from rising interest rates. Moreover, uncertain economic conditions and sustained high oil prices should adversely impact demand for automobile hire purchase.
The “stable” outlook reflects SPL’s experienced management team and efficient operating
system, enabling the company to maintain both its market position and portfolio growth in line with
TRIS Rating’s expectations. Moreover, despite the economic slowdown resulting from many negative events, SPL is expected to be able to maintain its profitability and asset quality at an acceptable level.
TRIS Rating reported that SPL’s total loan portfolio grew by 12.2%, from Bt37,341 million at the end of 2004 to be at Bt41,890 million at the end of September 2005. Net interest income for the first nine months of 2005 was reported at Bt1,540 million, 4.8% higher than Bt1,469 million recorded for the same period in 2004. Although net interest income increased, net profit declined by 2.0% because operating expenses rose by 30.5%. The operating expenses to total income ratio increased from 17.8% in 2003 to 20.7% in 2004 and 21.3% at the end of September 2005. Since 2003, the growth in SPL’s loan portfolio was mainly funded through new borrowings, resulting in higher leverage. The ratio of shareholders’ equity to total assets decreased from 20.6% in 2002 to 17.0% in 2003, 15.8% in 2004, and 14.3% at the end of September 2005. In 2006, SPL plans to lower its leverage from securitization which will improve its capital structure.
TRIS Rating said SPL cannot pass on increasing funding costs to its customers because the competition in the new car hire purchase market remains high. Interest rates charged to hire purchase customers have not
increased as rapidly as funding costs, resulting in a narrowing spread. Major operators, including SPL, have moved to participate in used car hire purchase segment which gives higher yields, in an effort to maintain their spreads. However, more used car hire purchase loans may impact overall asset quality, provisions for loan losses, and finally, profitability. End.