Bangkok--14 Jul--Fitch Ratings
Fitch Ratings (Thailand) has today assigned Phatra Securities Public Company Limited (Phatra) a National Long-term rating of 'A-(tha)' and National Short-term rating of 'F2(tha)'. The Outlook is Stable.
The ratings reflect Phatra's relatively strong investment banking and brokerage franchise for institutions and high net worth clients as well as its solid capital, high liquidity, and debt free position. In anticipation of strong price competition following the liberalisation of brokerage fees in 2012, Phatra has started to diversify its revenue stream. The company expects to increase its revenue from new business units, particularly Direct Investment, Equity and Derivatives Trading, as well as from new financial products which are expected to contribute at least 25% in the next two to three years.
The Outlook is Stable given strong capital and liquidity positions and despite weak market conditions. Downside risks could stem from prolonged weakness in capital market conditions. Significant diversification into riskier areas such as derivatives and proprietary trading could also raise the firm's risk profile. Material changes in the terms of the agreement with Merrill Lynch (Banc of America Securities-Merrill Lynch (BAS-ML)) could also affect the ratings.
As a result of the Business Service Agreement signed with BAS-ML, Phatra's brokerage revenue from BAS-ML accounted for almost all its brokerage revenue from foreign clients and 40% of its total brokerage revenue in Q109. The security brokerage business contributed the largest share to the firm's total revenue at 62% while revenue from investment banking business accounted for 16% of total revenue in 2008. Phatra reported a substantial impairment on its long-term proprietary investment of THB249m which caused its net profit to decline to THB207m in 2008 (2007: THB485m). Phatra continued to report weak performance in Q109 with net profit of THB36m (down 72% yoy) due mainly to lower average daily trading value which fell by 54% yoy as market sentiment continue to deteriorate. As a result, Phatra's ROAE and ROAA fell to 5% and 3.5%, respectively, in Q109 from 15.4% and 8.6%, respectively, in Q108.
Phatra's proprietary investment trading portfolio accounted for 39% of total equity and 28% of total assets at end-March 2009. Liabilities, mainly securities and derivatives business payables, stood at 27.4% of Phatra's total assets at end-March 2009. The Securities and Exchange Commission requires securities firms in Thailand to maintain a 7% Net Capital Ratio (NCR). Phatra's NCR stood at 221% at end-March 2009 while the equity/assets ratio increased to 72.6% from 67.9% at end-2008.
Phatra was founded in 1997 and a group of key management currently owns a 36.7% stake through holding companies. Phatra is the leading investment banking house in Thailand and has the second-largest market share in the domestic brokerage business, at 6%, in 2008.
Note to Editors: Fitch's National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated 'AAA' and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as 'AAA(tha)' for National ratings in Thailand. Specific letter grades are not therefore internationally comparable.
Contacts: Patchara Sarayudh, Vincent Milton, Bangkok, +662 655 4761/4759.
Media Relations: Shivani Sundralingam, Singapore, Tel: + 65 6796 7215, Email: [email protected].