TRIS Rating has assigned the rating to the proposed issue of up to Bt5,500 million in senior debentures of Ayudhya Capital Auto Lease PLC (AYCAL) at “A+” and has also affirmed the company and current issue ratings of AYCAL at “A+” with “stable” outlook. The ratings reflect an enhancement from AYCAL’s stand-alone rating as it is a core strategic subsidiary of its parent company, Bank of Ayudhya PLC (BAY). BAY is rated “AA-” with “stable” outlook by TRIS Rating. AYCAL is BAY’s core subsidiary in the automobile hire purchase business, which strongly supports BAY’s universal banking platform. AYCAL’s stand-alone 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 rigorous risk management system. However, these strengths are partially offset by an intense competition in automobile and motorcycle hire purchase businesses which may pressure AYCAL’s business expansion, financial performance, and asset quality in the future.
The “stable” outlook reflects the expectation that AYCAL’s business direction will continue to closely align with BAY Group’s business strategy, and the company will continue to get strong support from BAY. The outlook also considers the ability of the management team to sustain strong market position in the auto and motorcycle hire purchase businesses. With experienced management, rigorous risk management system, and strong support from BAY, TRIS Rating expects the company would be able to improve the financial performance and continue to improve assets quality in the medium term.
AYCAL became BAY’s wholly-owned subsidiary in February 2008. AYCAL’s total loans and receivables as of September 2012 accounted for 22% of BAY’s consolidated loan. Net income of AYCAL for the first nine months of 2012 contributed 31% to BAY’s consolidated net income for the same period. Business and financial supports from BAY are expected to further 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 amount of lending from BAY to AYCAL at 58% of BAY’s total lending to subsidiaries as of September 2012.
AYCAL is a sole subsidiary for BAY’s auto loan business, under the name “Krungsri Auto”. The company provides hire purchase financing for the purchase of new cars, used cars, and motorcycles, and also renders secured personal loans services through auto sales and lease back. The company is the second largest among 20 auto hire purchase operators in TRIS Rating’s database, with Bt152 billion of outstanding loans as of December 2011, representing around 13% market share. Also, the company is the second largest motorcycle hire purchase operator, having outstanding loans of Bt5.5 billion as of December 2011.
With 20 years of experience in the industry, AYCAL has developed a proficient management team and strong business platform, which have enabled the company to successfully compete and maintain leadership position. AYCAL has applied the risk management model from its parent company’s practice, which in turn supported by BAY’s strategic shareholder, GECIH. In addition, both AYCAL and BAY are regulated under the same standard criteria set by the Bank of Thailand (BOT). Due to prudent credit risk management and an efficient collection system, AYCAL’s asset quality continues to improve. Due to the severe flood impact in the last quarter of 2011, non-performing loans (NPLs), defined as delinquent loans with more than three months past due to average hire purchase loans, increased to 1.89% as of December 2011, from 1.45% in 2010. The ratio normalized to 1.40% as of June 2012 and further declined to 1.26% as of September 2012.
Profitability slightly declined in 2011 as AYCAL gave assistances to customers who were affected by the floods in the fourth quarter of 2011. The flood assistance program, together with the rising interest rates in 2011, resulted in a narrower average interest spread to 5.48% from 6.09% in 2010. The company’s net income was Bt3,150 million in 2011, almost flat from Bt3,103 million in 2010. For the first nine months of 2012, net income was Bt3,486 million, up by 11% from the same period in 2011. Return on average assets (ROAA) and return on average equity (ROAE) decreased to 2.32% and 22.66%, respectively, in 2011 from 2.81% and 26.11% in 2010. The non-annualized ROAA and ROAE for the first nine months of 2012 were 2.08% and 20.66%, respectively. The shareholders’ equity to total asset ratio declined slightly to 10.01% at the end of 2011 from 10.52% in 2010. The ratio slightly improved to 10.10% as of September 2012. The level of capital of AYCAL is lower than other hire purchase operators rated by TRIS Rating.
Company Rating: A+ Issue Ratings: AYCAL132A: Bt7,000 million senior debentures due 2013 A+ AYCAL13OA: Bt1,558 million senior debentures due 2013 A+ AYCAL145A: Bt5,000 million senior debentures due 2014 A+ AYCAL14OA: Bt2,000 million senior debentures due 2014 A+ AYCAL155A: Bt3,000 million senior debentures due 2015 A+ AYCAL156A: Bt3,000 million senior debentures due 2015 A+ AYCAL159A: Bt3,000 million senior debentures due 2015 A+ AYCAL15OA: Bt2,000 million senior debentures due 2015 A+ Up to Bt5,500 million senior debentures due within 2015 A+ Rating Outlook: Stable
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