TRIS Rating Affirms Company and Issue Ratings of “PL” at “A-/Stable”

TRIS Rating Co., Ltd. has affirmed the company and issue ratings of Phatra Leasing PLC (PL) at “A-” with “stable” outlook. The ratings reflect the proven ability of PL’s management to maintain a strong market position in the automobile operating lease business despite increasingly intense competition and an unfavorable operating environment. The ratings also reflect PL’s experienced management team, good credit risk and residual risk management systems, and conservative underwriting process, which have enabled the company to maintain good asset quality as the loan portfolio expands. The ratings also take into consideration increasing demand by corporate for outsourced automobile maintenance services. The uncertain operating environment will continue to be a major constraint on profitability and business expansion.

The “stable” outlook reflects PL’s ability to maintain its leading position in the automobile operating lease business and deliver medium-term performance as expected. The company is likely to retain major customers, as well as expand the customer base, while maintaining good asset quality. However, profitability is still pressured by intense competition and unexpected losses from changes in the economic and operating environment.

TRIS Rating reported that PL was able to maintain its position as the market leader in automobile operating lease business. The company has more than 20% market share of total leased assets in 2007 held by 25 large operators in TRIS Rating’s database. The company renders both operating lease and finance lease services to medium- and large-sized companies. As of December 2008, PL had assets of Bt5,931 million, of which 78% was automobile leased assets. A strong nationwide service network and a large capital base enhanced PL’s ability to service large customers. This caused PL to have high exposure to concentration risk. However, the risk was offset by low default risk as large customers are for the most part financially reliable. With good credit risk management, PL had good asset quality. As of December 2008, the amount of overdue leases was only Bt2.6 million, or 0.04% of the total portfolio.

TRIS Rating said, in FY2006, PL’s two major clients decided to stop using its automobile lease services. These two clients comprised 22% of PL’s total leased assets. However, the management team tapped new customers to replace the two major lessees. Consequently, new leased assets rose from Bt1,054 million in FY2006 to Bt1,631 million in FY2007 and Bt2,198 million in FY2008. Average new lease assets continued to increase, rising from Bt264 million per quarter during FY2006 to Bt408 million per quarter during FY2007 and to Bt549 million in FY2008. Currently, leased assets are more diversified; the company serves more than 500 customer accounts nationwide. There are moves to capture synergies with the major shareholder, Muangthai Life Assurance PLC. However, these efforts have not yet been strongly realized.

PL’s net profit was Bt219 million in FY2008, down from Bt267 million in FY2007. The drop was the result of increases in interest expenses and operating expenses, despite higher gains from the disposal of leased assets. PL funded most of the asset growth by borrowing, which drives up leverage. As of December 2008, the ratio of debt to total equity was 2.36 times, up from 2.23 times at the end of FY2008 (September 2008) and 1.93 times at the end of FY2007. -- End

Company Rating: Affirmed at A- Issue Ratings: PL094A: Bt500 million senior debentures due 2009 Affirmed at A- PL104A: Bt400 million senior debentures due 2010 Affirmed at A- PL105A: Bt120 million senior debentures due 2010 Affirmed at A- PL109A: Bt400 million senior debentures due 2010 Affirmed at A- PL113A: Bt700 million senior debentures due 2011 Affirmed at A- PL114A: Bt160 million senior debentures due 2011 Affirmed at A- PL11NA: Bt140 million senior debentures due 2011 Affirmed at A- Rating Outlook: Stable Copyright 2009, TRIS Rating Co., Ltd. All rights reserved. Any unauthorized use, disclosure, copying, republication, further transmission, dissemination, redistribution or storing for subsequent use for any purpose, in whole or in part, in any form or manner or by any means whatsoever, by any person, of the credit rating reports or information is prohibited. The credit rating is not a statement of fact or a recommendation to buy, sell or hold any debt instruments. It is an expression of opinion regarding credit risks for that instrument or particular company. The opinion expressed in the credit rating does not represent investment or other advice and should therefore not be construed as such. Any rating and information contained in any report written or published by TRIS Rating has been prepared without taking into account any recipient’s particular financial needs, circumstances, knowledge and objectives. Therefore, a recipient should assess the appropriateness of such information before making an investment decision based on this information. Information used for the rating has been obtained by TRIS Rating from the company and other sources believed to be reliable. Therefore, TRIS Rating does not guarantee the accuracy, adequacy, or completeness of any such information and will accept no liability for any loss or damage arising from any inaccuracy, inadequacy or incompleteness. Also, TRIS Rating is not responsible for any errors or omissions, the result obtained from, or any actions taken in reliance upon such information.

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