TRIS Rating has affirmed the company and senior debenture ratings of Singer Thailand PLC (SINGER) at “BBB” with “stable” outlook. The ratings reflect the company’s strong brand name recognition in electrical home appliances among its target customers, its nationwide branch network and sales network, plus its proven track record in financing electrical home appliance purchases. The ratings also take into account SINGER’s diverse customer base, experienced management team, and well-trained sales staff who are familiar with the target customers. However, these strengths are offset by the credit profiles of its target customers which are vulnerable to changes in economic conditions. The “stable” outlook reflects TRIS Rating’s expectation that SINGER’s management team will be able to implement the new marketing strategies and launch the new products needed to stabilize the company’s market position, as planned. The overall business and financial performance are expected to improve steadily, and loan quality will be controlled at an acceptable level.
SINGER changed its corporate structure by selling all its hire purchase receivables to Singer Leasing (Thailand) Co., Ltd. (SLL) on 31 December 2012. SINGER now focuses on the trading segment and is expanding its market coverage. SINGER targets new customers by utilizing its well-recognized “SINGER” brand and its extensive network of 211 branches and approximately 3,500 salespersons. SLL provides financing services for SINGER’s customers who purchase “SINGER” brand products.
In 2010, SINGER refocused its efforts on the sales of home electrical appliances. SINGER has a lengthy track record in this segment. The company also implemented a strategy to expand its market coverage to include small entrepreneurs. SINGER now emphasizes the sale of income-generating products or commercial electrical appliances, such as freezers, air time vending machines for mobile phones, and petrol vending machines. These commercial electrical appliances contributed 27% of total sales in 2010, 41% in 2012, and 48% for the first nine months of 2013. In 2012, the number of outstanding accounts rebounded significantly, increasing to 161,881 accounts from 143,099 accounts in 2011. The number of outstanding accounts has continued to grow. By September 2013, the number had risen to 180,988 accounts, an 11.8% increase from the 2012 level. The new target customers, small-scale entrepreneurs, are considered to be higher quality customers than SINGER’s traditional target groups. In addition, SINGER’s new products will generate income for the small-scale entrepreneurs. The income streams will improve the customers’ repayment ability and enhance overall loan quality. However, these new products were launched only a short time ago. In TRIS Rating’s view, SINGER will need more time to prove if the new strategy will stabilize its market position and improve its performance.
SINGER’s hire purchase receivables have expanded continuously after it refocused on the new customer segments and product segments. Outstanding hire purchase receivables have increased continuously, rising from Bt1,164 million in 2010 to Bt2,096 million at the end of September 2013. In late 2008, SINGER strengthened its underwriting process by setting up a credit control department to verify and analyze credit applications. The new department meant the credit approval authority was separated from SINGER’s salespersons. The new department created an internal check and balance system to improve asset quality and operating standards. These efforts improved the quality of its receivables. For example, the ratio of non-performing hire purchases receivables to total hire purchase receivables (NPL ratio) improved, falling from a high of 34.2% in 2007 to 4.3% at the end of 2012. However, the NPL ratio increased to 5.3% in September 2013. The management team explained that the recent increase in the NPL ratio was mainly due to a new collections system, which changed the cut-off collection date for each month. TRIS Rating will closely monitor the NPL ratio to ensure that the higher ratio is not the result of a deterioration in loan quality. During the past two years, SINGER has concentrated on selling just some specific products. TRIS Rating expects the company will also diversify its customer base, in terms of product type, to prevent concentration risk.
SINGER’s financial status suffered in 2006 and 2007 due in large part to the bad debts from motorcycle loans. The equity base weakened substantially, falling to Bt624 million in 2007 from Bt2,299 million in 2005. SINGER undertook an aggressive business turnaround effort. The company strengthened its underwriting criteria and process, implemented more stringent control of collections, reduced unnecessary operating expenses, and expanded its product lines and customer base. As a result, net profit substantially improved, rising to Bt89 million in 2010 from a Bt10 million loss in 2009. Net profit has continued to grow, rising to Bt142 million in 2011, and Bt226 million in 2012. The company reported Bt277 million in net profit for the first nine months of 2013, up 52% from the same period in 2012. Consequently, the return on average assets improved to 11.3% for the first nine months of 2013, from 9.2% in 2012 and 6.6% in 2011. As a result of the improving profitability, the equity base climbed to Bt1,389 million as of September 2013, from Bt1,193 million in 2012 and Bt981 million in 2011. The debt to capitalization ratio decreased to 39.1% in 2012, from 42.8% in 2011 and 49.3% in 2010. The ratio slightly increased to 46.9% as of September 2013. At the current level, the ratio is considered sufficient for the company to expand. In 2012, SINGER refinanced all its borrowings under a debt rescheduling agreement which included the issuance of new debentures. The refinancing helped the company increase its financial flexibility. The debt rescheduling agreement prevents SINGER from raising additional funds through new borrowings without the consent of the majority of its lenders.
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 2014, 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.