Bangkok--21 Dec--TRIS Rating TRIS Rating Co., Ltd. has affirmed the company ratings of Thitikorn PLC (TK) and Hi-Way Co., Ltd. (Hi-Way) at “BBB+” with “stable” outlooks. The rating of TK reflects its market-leading position in the motorcycle hire purchase business, experienced management team, extensive branch network, high profitability and solid capitalization. However, the credit risk of its target customers who are highly vulnerable to economic changes, an uncertain economic situation, and intense competition may lead to difficulties in expanding the loan portfolio and suppress asset quality and profitability. While the “stable” outlook is based on the expectation that TK’s management team and extensive branch network will enable it to maintain the leading market position and efficiently manage its asset quality. TK’s strong capital base is expected to help support future business expansion and absorb the downside risk from adverse changes in the business environment.The rating of Hi-Way reflects its strong market position in the motorcycle hire purchase business which concentrates in the Greater Bangkok, experienced management team and relatively high profitability. The rating also reflects Hi-Way’s status as a wholly-owned subsidiary of TISCO Bank PLC (TISCO), which is expected to be a source of continuous support. However, the rating is constrained by customer credit risk, higher non-performing loans, continuous pressure from losses on repossessed motorcycles, intense competition, and weaker capitalization after a huge dividend payout. Moreover, an uncertain economic situation may impact the ability of Hi-Way’s customers to meet their installment payment obligations and thus hurt Hi-Way’s asset quality and profitability. The “stable” outlook reflects the expectations that Hi-Way will be able to maintain its market position with high profitability and continue to get strong support from its parent. TRIS Rating reported that TK’s main business is making motorcycle hire purchase loans. Outstanding motorcycle loans rose continuously from Bt2,800 million in 2003 to Bt4,273 million in 2005, as the number of new motorcycle registrations rose. In 2006, while the number of new motorcycles fell by 1%, TK’s motorcycle loans slightly increased to Bt4,310 million at the end of the year. Although the continued economic slowdown cut the number of registrations by 21% for the first nine months of 2007, TK’s motorcycle loans rose to Bt4,356 million at the end of September 2007, up 1% from the end of 2006. At the end of September 2007, total outstanding loans were Bt5,170 million, down from Bt5,383 million in 2006 and Bt5,769 million in 2005. The shrinkage came as TK’s automobile hire purchase business slowed. Automobile loans now make up a smaller portion of TK’s total loan portfolio, falling from 26% in 2005 to 20% in 2006 and to 16% at the end of September 2007. TK reported a net profit of Bt217 million for the first three quarters of 2007, 17% higher than the same period in 2006. Return on average assets improved to 5.3% over the first nine months of 2007 (annualized). TK owns 68 branches in 37 provinces throughout Thailand. The company is more geographically diversified than competitors. New motorcycle loans from provincial areas represented 40.2% of TK’s total new motorcycle loans for the first nine months of 2007, up from 36.6% in 2006. TRIS Rating said about Hi-Way that the company is the second largest motorcycle hire purchase operator in the Greater Bangkok in terms of new accounts. Its loan portfolio increased from Bt2,596 million in 2005 to Bt2,976 million in 2006. New motorcycle registrations in Thailand topped two million units for three consecutive years during 2004-2006. In 2007, Thailand’s motorcycle industry slowed sharply with unit registrations falling by approximately 21% for the first nine months of 2007 compared with the same period in 2006. However, Hi-Way has maintained its market position. Its loan portfolio rose to Bt3,042 million at the end of June 2007. Its net profit was Bt119 million in 2006, modestly down from Bt123 million in 2005. For the first half of 2007, the company reported Bt95 million in net income, a substantial increase from Bt57 million for the same period of 2006. The improvement is partly due to the change in the accounting methods at TISCO Group and Hi-Way. Commission expense is now amortized over the contract period instead of being recognized as an expense at the point of loan origination. TRIS Rating said, the economic slowdown since 2006 has prompted Hi-Way to focus more on the quality of its loan portfolio and customers by screening loan applications more conservatively. In 2007, Hi-Way strengthened its overall cushion for possible loan losses, matching TISCO’s policy. The ratio of allowance for possible loan losses to total loans increased from 8% in 2006 to 9.2% at the end of June 2007.