TRIS Rating has assigned an “A+” rating to the proposed issue of up to Bt8,000 million in senior debentures of Ayudhya Capital Auto Lease PLC (AYCAL). At the same time, TRIS Rating has also affirmed AYCAL’s company and current senior debenture ratings 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 December 2012 accounted for 24% of BAY’s consolidated loans. Net income of AYCAL for 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 60% of BAY’s total lending to subsidiaries as of December 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 Bt194 billion of outstanding loans as of December 2012, representing about 14% market share. Also, the company is the second largest motorcycle hire purchase operator, having outstanding loans of Bt7 billion as of December 2012 (a 27% growth from Bt5.5 billion in 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. Non-performing loans (NPLs), defined as delinquent hire purchase loans with more than three months past due to average hire purchase loans, decreased to 1.24% at the end of 2012 from 1.89% at the end of 2011.
Profitability significantly improved in 2012 after slightly declining in 2011 due to the flood impact in the fourth quarter of 2011. The company’s net income rose to Bt4,750 million in 2012 from Bt3,150 million in 2011 (almost flat from Bt3,103 million in 2010). Return on average assets (ROAA) and return on average equity (ROAE) also increased to 2.68% and 27.14%, respectively, in 2012 from 2.32% and 22.66% in 2011. As loans expanded, the shareholders’ equity to total asset ratio declined to 9.80% at the end of 2012 from 10.01% in 2011. The level of capital of AYCAL is lower than other hire purchase operators rated by TRIS Rating. However, strong financial support from BAY has enhanced AYCAL’s financial liquidity and flexibility.
TRIS Rating Co., Ltd./www.trisrating.com Contact: santaya@trisrating.com, Tel: 0-2231-3011 ext 500/Silom Complex Building, 24th Floor, 191 Silom Road, Bangkok 10500, Thailand Copyright 2013, 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.