TRIS Rating Co., Ltd. has assigned a rating to the proposed issue of up to Bt5,000 million in senior debentures of Ayudhya Capital Auto Lease PLC (AYCAL) at “A+”. At the same time, TRIS Rating has also affirms the company and current issue ratings of AYCAL at “A+”. The outlook remains “stable”. The ratings reflect the enhancement from AYCAL’s standalone rating by the credit profile of its parent company, Bank of Ayudhya PLC (BAY). The bank is rated “AA-” with a “stable” outlook by TRIS Rating. AYCAL is BAY’s strategic subsidiary in the automobile hire purchase business, which helps fill out BAY’s range of universal banking services. AYCAL’s standalone rating is based on the company’s strong market position in the automobile and motorcycle hire purchase businesses, experienced management team with a proven track record, and its good risk management system. However, these strengths are partially offset by intense competition in the used automobile and motorcycle hire purchase businesses and uncertainty from changing operating environment. The uncertainty may pressure AYCAL’s business expansion plan, financial performance and asset quality in the future.
The “stable” outlook reflects the expectation that AYCAL’s business direction continues to be closely aligned with BAY Group’s business strategy and the company continues to receive strong support from BAY. The outlook also considers the ability of the management team to sustain its strong market position in the auto and motorcycle hire purchase businesses. With experienced management, a good risk management system, and strong support from BAY, TRIS Rating expects the company will be able to maintain its assets in good quality and improve its financial performance in the medium term.
TRIS Rating reported that AYCAL became BAY’s wholly-owned subsidiary in February 2008, following BAY’s business reorganization after GE Capital International Holdings Corporation (GECIH) purchased a 32.93% stake in BAY. AYCAL’s total receivables as of December 2009 accounted for 16% of BAY’s consolidated loans outstanding. AYCAL”s net income for 2009 contributed 30% to BAY’s consolidated net income for the same period. Business and financial support from BAY are expected to enhance AYCAL’s market position in its core businesses and improve its financial flexibility. AYCAL is one of the subsidiaries getting priority from BAY’s financial supports, as reflected in the proportion of outstanding loans from BAY to AYCAL. Loans to AYCAL comprised 74% of BAY’s total lending to subsidiaries as of June 2009, up from 26% as of June 2008.
TRIS Rating said that as part of the reorganization of BAY in late 2008, AYCAL became a sole subsidiary for BAY’s auto loan business, providing hire purchase financing for new cars, used cars, and motorcycles. AYCAL also renders secured personal loans services through auto sales and lease back, under the brand “Car4Cash”. The company is the second-largest among 20 auto hire purchase lenders in the TRIS Rating database. AYCAL has Bt97,346 million of outstanding loans or 13.5% market share as of June 2009, up slightly from 12.9% in 2008. Also, the company is the second-largest motorcycle hire purchase operator, having outstanding loans of Bt3,606 million as of December 2009.
With 16 years of experience in the industry, AYCAL has developed a proficient management team and business platform that has enabled the company to compete successfully. AYCAL has applied the risk management model from its parent company. Both AYCAL and BAY, therefore, are regulated under the same standard criteria set by the Bank of Thailand. Due to good credit risk management and an efficient collection system, AYCAL has good asset quality, despite its high-risk portfolio. As of December 2009, non-performing loans (NPL), defined as delinquent loans with more than three months past due, divided by average outstanding loans, declined to 1.48% from 2.2% as of December 2008. This figure is considered low when compared with peers.
AYCAL reported net interest income for 2009 at Bt7,118 million, 24% higher than the amount of Bt5,731 million in 2008. Profitability improved in 2009, supported mainly by a rise in the average interest spread to 6.60% in 2009 from 5.88% in 2008. Net income was Bt1,979 million, up by 26% from Bt1,573 million in 2008. Return on average assets and return on average equity increased to 1.98% and 18.01%, respectively, in 2009 from 1.74% and 15.33% in 2008. The shareholders’ equity to total asset ratio increased to 11.14% at the end of 2009 from 10.90% in 2008. AYCAL has lower capital status than other hire purchase operators in the high-risk market segments. However, TRIS Rating expects the level of AYCAL’s capital to rise gradually as operating income grows. -- End