TRIS Rating Co., Ltd. has assigned the company rating of Mida Assets PLC (MIDA) at "BBB+" with "stable" outlook. The rating reflects MIDA's strong market position in the electrical home appliances hire purchase business in rural areas, its nationwide branch network and its experienced management team. However, the rating is partially constrained by the company's short track record in operating its large hire purchase portfolio, which rapidly grew during the last three years, and the nature of the sub-prime credit profiles of its customers. The rating is based on the assumption that MIDA's cash flow will strengthen in the next 2-3 years as the management will focus on improving efficiency following its significant expansion during the last three years.
While the "stable" outlook reflects the expectation that, in light of the continuing government-sponsored rural development campaigns, MIDA's experienced management team will be able to expand the company's hire purchase portfolio to serve increased demand in rural areas. TRIS Rating expects that MIDA will maintain its financial leverage at the current level to mitigate risks associated with the low credit profiles of its customers. Any aggressive financial policy or significant deterioration of MIDA's asset quality may cause outlook or rating revision.
TRIS Rating said that the government's ongoing grassroots economic support campaigns have boosted the purchasing power of rural people. Higher income levels, price-cutting by electrical home appliance manufacturers and technological advancements that have led to more attractive products such as flat-panel television, Video Compact Disc (VCD) and Digital Video Disc (DVD) players, have stimulated demand for electrical home appliances. However, the uncertainty of target customers' incomes should affect MIDA's asset quality. MIDA's non-performing loan to average loan ratio (overdue more than three months) has continuously increased from 6.6% in 2002 to 8.8% in 2003 and to 10.9% in 2004 (stand-alone basis). Following a rapid expansion over the past three years, management plans to focus on improving efficiency in the short to medium term. The capability to maintain the quality of a larger loan portfolio at an acceptable level needs to be proven. Low leverage and high operating margins provide certain cushion to absorb deterioration of MIDA's hire purchase portfolio, TRIS Rating said. -- End
Mida Assets PLC (MIDA)
Company Rating: BBB+
Rating Outlook: Stable
While the "stable" outlook reflects the expectation that, in light of the continuing government-sponsored rural development campaigns, MIDA's experienced management team will be able to expand the company's hire purchase portfolio to serve increased demand in rural areas. TRIS Rating expects that MIDA will maintain its financial leverage at the current level to mitigate risks associated with the low credit profiles of its customers. Any aggressive financial policy or significant deterioration of MIDA's asset quality may cause outlook or rating revision.
TRIS Rating said that the government's ongoing grassroots economic support campaigns have boosted the purchasing power of rural people. Higher income levels, price-cutting by electrical home appliance manufacturers and technological advancements that have led to more attractive products such as flat-panel television, Video Compact Disc (VCD) and Digital Video Disc (DVD) players, have stimulated demand for electrical home appliances. However, the uncertainty of target customers' incomes should affect MIDA's asset quality. MIDA's non-performing loan to average loan ratio (overdue more than three months) has continuously increased from 6.6% in 2002 to 8.8% in 2003 and to 10.9% in 2004 (stand-alone basis). Following a rapid expansion over the past three years, management plans to focus on improving efficiency in the short to medium term. The capability to maintain the quality of a larger loan portfolio at an acceptable level needs to be proven. Low leverage and high operating margins provide certain cushion to absorb deterioration of MIDA's hire purchase portfolio, TRIS Rating said. -- End
Mida Assets PLC (MIDA)
Company Rating: BBB+
Rating Outlook: Stable