TRIS Rating Co., Ltd. has raised the company rating of TSFC Securities PLC (TSFC)
to “BB+” from “BB” with “positive” outlook. The rating reflects TSFC’s improved debt
profile after completing the debt repayment obligations as scheduled in the Debt
Restructuring Agreement (DRA). The rating is, however, pressured by constrained financial
flexibility and financial performance, although the company has a strong capital fund after
recapitalization. The rating is also taken into account the operating environment factors
and market response to the company’s re-entry into the margin loan business as its core
business, and short track record in new businesses (private repurchase agreement (REPO) and
stock borrowings and lending (SBL)). The rating takes into consideration the support from
the largest shareholder -- the Stock Exchange of Thailand (SET), good operational system to
support the margin loan business, and improvement in the company’s financial performance in
2010.
The “positive” outlook reflects TRIS Rating’s expectation that the stock market will
continue to move in a positive momentum and TSFC would be able to deliver its business and
financial performance to be in line with the industry trend. In addition, the rating
outlook also takes into account the expected supports from SET as the largest shareholder.
The abilities to recapture the market position in the margin loan business, operate new
businesses as planned, and access to funding from various sources have yet to be proved.
TRIS Rating reported that TSFC entered the DRA on 20 March 2009, and on 22 July
2009 the company was able to fulfill the DRA’s condition to raise at least Bt1 billion of
new capital from existing shareholders, new investors and debt-equity conversion. The new
capital of Bt1,016.74 million (par at Bt10 per share) strengthened the company’s BIS ratio
to about 30% from 0.92% as of March 2009. After the recapitalization, SET became the largest
shareholder, holding 24.66% stake in TSFC, followed by the Ministry of Finance (MOF)
(10.56%), Krungthai Bank PLC (6.02%), Government Savings Bank (4.92%), 12 commercial banks
(17.72%), 36 securities companies (16.99%), funds managed by 14 fund management companies
(14.85%) and nine insurance companies (4.28%).
Under the DRA, all debtors were ranked pari pasu. Total debt obligations were
Bt8,725 million, of which were already repaid to the debtors as of 21 June 2010. The company
received credit facilities, mainly from four banks, which provided sufficient funding to
service all its debt obligations. However, TSFC has a constrained financial flexibility and
relatively low profitability, which might make the company be exposed to re-financing risk
in the future.
TRIS Rating said, TSFC continues to face challenges in its core business due to future uncertainty in changes of operating environment and market response to the company’s re-entry into the margin loan business. After being hurt by the financial crisis in 2008, TSFC’s market share in margin loan business nosedived from 27%-28% in 2006-2007 to 22% in 2008 and 12% as of June 2010. In 2009, TSFC’s total loans and receivables were Bt2,857 million, dropping by 24% from 2008. As of September 2010, the loans and receivables grew by 9% (year to date -- YTD) to Bt3,122 million.
According to the business plan, TSFC has an opportunity in the new businesses (private REPO and SBL), but success in efficiently running the new businesses has yet to be proved. However, management team will need time to build up a track record and achieve a considerable market size as stipulated in the business plan.
As of September 2010, TSFC’s total assets were Bt3,162 million, slightly dropping by 20% from Bt3,955 million at the end of 2009. In 2009, TSFC realized losses of Bt1,010 million from investment in equity-related securities, causing a net loss of Bt858 million. For the first nine months of 2010, TSFC reported a net profit of Bt64 million, and gradually recovered its financial performance during the first three quarters of 2010. After achieving the new capital increase in July 2009, the company has a strong capital fund. The ratio of shareholders’ equity to total assets jumped from 0.71% in 2008 to 29.3% in 2009, and stayed at 38.24% in September 2010, said TRIS Rating. -- End
? Copyright 2010, 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. All methodologies used can be found at http://www.trisrating.com/en/rating_information/rating_criteria.html.