TRIS Rating has affirmed the company and senior unsecured debenture ratings of Singer Thailand PLC at “BBB”. TRIS Rating has also removed the “CreditAlert” with “developing” implication and replaces it with a “stable” outlook because the major shareholder of SINGER might not significantly change the company’s core business over the next one to two years. The ratings reflect the company’s strong brand name in electrical home appliances, its nationwide branch and sales networks, 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. In addition, there is an opportunity for a synergy with the company’s new partners, Jaymart PLC (JMART) and Saha Pathanapibul Group (SAHAPAT Group). 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 is expected to maintain its operating and financial performances, and loan quality will be controlled at an acceptable level.
The rating and/or outlook upside may arise if SINGER can deliver better-than-expected financial performance and strengthen its financial profile by using improved synergies with JMART to its market position. In contrast, the rating and/ or outlook could be revised downward if deterioration in asset quality significantly affects SINGER’s financial performance.
On 8 June 2015 SINGER’s major shareholder, SINGER (THAILAND) B.V., sold its entire 40% stake in SINGER on the Stock Exchange of Thailand (SET). JMART became SINGER’s new major shareholder, owning 24.99% of SINGER’s outstanding shares, followed by SAHAPAT Group (7%). The remaining 8.01% was purchased by other investors. JMART is a retailer and wholesaler of mobile phones and related products. The company also provides debt collection and non-performing loan (NPL) management services. In addition, JMART rents and manages retail space by subletting the commercial space it rents into smaller units. SAHAPAT is the leading Thai distributor of consumer goods to Thai households nationwide. SINGER is expected to benefit from synergies with its new partners, JMART and SAHAPAT Group. Initially, SINGER may be able to generate another source of fee-based income by utilizing its own network to sell its products.
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. The company targets customers by utilizing its well-recognized “SINGER” brand and its extensive network of 214 branches and approximately 3,500 salespersons as of June 2015. 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 customers interested in new products. In addition, SINGER opened sales counters within MAKRO, a well-known discount retailer, to boost sales of its commercial products. Commercial electrical appliances contributed 55% of total sales in 2014, increasing from 41% of total sales in 2012 and 49% of total sales in 2013. However, sales of the higher valued commercial products have slipped during the current economic slowdown. The home electrical appliances segment comprised 62% of total sales in the first half of June 2015 compared with 38% for the commercial product segment.
The number of outstanding accounts has been maintained in 2015. By June 2015, the number had risen to 167,139 accounts, a 0.6% increase from 166,123 accounts in 2014. The new target customers, small-scale entrepreneurs, are considered to be higher quality customers than SINGER’s traditional target groups. 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. 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 increased continuously after it shifted focus to the commercial product segment. Outstanding hire-purchase receivables have increased continuously, rising from Bt1,295 million in 2011 to Bt2,180 million at the end of June 2015. In late 2008, SINGER strengthened its underwriting process by setting up a credit control department to verify and analyze credit applications. The new department separated the credit approval authority 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-purchase 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 6.5% in 2014. The NPL ratio slightly decreased to 6.1% at the end of June 2015. During the past three 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 suffered in 2006 after many motorcycle hire-purchase loans turned into 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 Bt241 million in 2014 and Bt103 million for the first half of 2015, compared with Bt170 million for the same period in 2014, 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 7.3% in 2014 and 6.1% for the first half of 2015 (annualized). SINGER’s equity base climbed to Bt1,578 million in 2014 from Bt848 million in 2010, but slightly decreased to Bt1,538 million at the end of June 2015. The debt to capitalization ratio was 42.03% as of June 2015. At the current level, the ratio is considered sufficient for the company to expand.
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