TRIS Rating has affirmed the company rating and the senior unsecured 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 its marketing strategies and launch the new products needed to stabilize the company’s market position, as planned. SINGER’s operating and financial performances 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), a wholly-owned subsidiary of SINGER, on 31 December 2012. SINGER now focuses on the trading segment and is expanding its market coverage. SINGER targets customers by utilizing its well-recognized “SINGER” brand and its extensive network of 216 branches and approximately 3,300 salespersons as of September 2014. 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 expanded 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. In January 2014, SINGER launched a sub-brand, “SINGER Get Rich”, to tap these customers interested in new products. In addition, SINGER opened sales counters within MAKRO, a well-known discount retailer; to boost its sales of commercial products. Commercial electrical appliances contributed 59% of total sales for the first half of 2014, increasing from 41% of total sales in 2012 and 49% of total sales in 2013.
The number of outstanding accounts has continued to grow. By June 2014, the number had risen to 178,061 accounts, a 10% increase from the 2012 level and a 1% increase from the 2013 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 needs time to prove whether 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 commercial product segment. Outstanding hire purchase receivables have increased continuously, rising from Bt1,164 million in 2010 to Bt2,226 million at the end of September 2014. 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. The ratio of non-performing hire purchases receivables to total hire purchase receivables (the NPL ratio) improved, falling from a high of 34.2% in 2007 to 4.3% at the end of 2012. However, the economic slowdown pushed the NPL ratio up to 6% in 2013 and 6.6% at the end of September 2014. 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 profitability has improved continuously. Its profitability suffered in 2006 after many of motorcycle hire purchase loans it made turned to be bad debts. As a result of the losses, SINGER took action. SINGER strengthened its underwriting criteria and process, implemented more stringent control of collections, reduced unnecessary operating expenses, and expanded its product lines and customers. As a result of these actions, net profit substantially improved, rising to Bt321 million in 2013 from a Bt10 million loss in 2009. However, net profit decreased to Bt217 million for the first nine months of 2014, compared with Bt277 million for the same period in 2013, due to higher provision expenses caused by a drop in loan quality. The ratio of return on average assets (ROAA) improved to 10.8% in 2013, from 6.6% in 2011. The ROAA dropped to 8.7% for the first nine months of 2014 (annualized). SINGER’s equity base climbed to Bt1,527 million as of September 2014, from Bt848 million in 2010. The debt to capitalization ratio decreased to 41.6% as of September 2014, from 49.3% in 2010. At the current level, the ratio is considered sufficient for the company to expand.
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