Bangkok--1 Feb--TRIS Rating TRIS Rating Co., Ltd. has assigned a “A-” rating for the proposed up to Bt1,000 million subordinated debentures of TSFC Securities Ltd. (TSFC). At the same time, TRIS Rating has affirmed the company rating of TSFC at “A”. The rating outlook remains “stable”. The ratings reflect TSFC’s capable management team, the ability to sustain its leading market position in margin loans (credit balance financing), sound asset management, and sufficient liquidity. The ratings also take into consideration the good prospects for the stock market in the medium term, which would help support the company’s growth. Although investment in equity (through unit trusts) provides high returns, this asset class contains a degree of market risk. Therefore, performance may be more volatile. The “stable” outlook is based on the expectation that TSFC will be able to maintain its leading position in the margin loans business. TSFC is expected to maintain an acceptable capital level while expanding its loan portfolio. Most importantly, asset quality is expected to remain good, as TSFC is expected to retain its conservative credit approval and monitoring policies. TRIS Rating reported that TSFC is the only company in Thailand licensed to conduct securities financing, including margin loan refinancing, loans against pledged securities, and securities repurchase agreements. Driven by higher demand for margin loans in 2003, TSFC became the market leader in margin loans, with market shares of 22% in 2003, 32% in 2004, 29% in 2005, 25% in 2006, and 26% as of September 2007. Most of TSFC’s margin loans are classified as normal.As a result of the company’s capable and experienced management and continual development of its risk management framework, TSFC has not only sustained its leading position in the margin loan business, it has also been able to improve its financial performance. TSFC’s profits grew sharply from Bt130 million in 2000 to Bt242 million in 2004. As the stock market experienced a remarkable recovery in 2003, TSFC built up a substantial amount of margin loans, launched Employee Stock Option Program (ESOP) financing, and introduced other fee-based products, thus enabling the company to diversify its sources of revenue. TSFC has also launched other businesses, including mutual fund guarantees and securities borrowing and lending (SBL), but the ability to generate substantial revenue from these new businesses has yet to be proved. TSFC reported a lower profit of Bt165 million in 2005, but recovered to Bt295 million in 2006 and Bt339 million for the first nine months of 2007. Profitability, as measured by return on average equity (ROAE) and return on average assets (ROAA) grew to 17.07% and 1.78% (not annualized), respectively, as of September 2007. TRIS Rating said, TSFC’s liquidity is considered sufficient. The company has ongoing relationships with various funding sources. Although TSFC’s capital structure has been weakened by a rapid growth in assets, its current capital funds are adequate to finance normal business expansion. As of September 2007, TSFC’s shareholders’ equity grew by 21% to Bt2,174 million from Bt1,793 million at the end of 2006. The company’s equity to assets ratio decreased slightly to 10.34% as of September 2007 from 10.56% in 2006.