Thai Rating and Information Services Co., Ltd. (TRIS) announces that it has assigned a "BBB-" company rating to KGI Securities (Thailand) PLC (KGI). The rating is based on the persistently sluggish economy and its prolonged negative outlook. The economic downturn has adversely affected all securities companies including KGI. The rating also reflects the time that KGI's management team from its major shareholder, the Koos group, will need to rectify KGI's position in this volatile securities market situation. These weaknesses are mitigated by KGI's strong capital base and support from the Koos group that sustained the company's performance during financially difficult years.
TRIS said that trading on the Stock Exchange of Thailand (SET) has been hit by prolonged weak economic conditions. Average daily market turnover has been highly volatile: Bt3,764 million in 1997, Bt3,505 million in 1998, Bt6,571 million in 1999, Bt3,740 million in 2000 and Bt6,619 million during the first nine months of 2001. Amid general economic malaise and compounded by terrorist attacks on the United States, daily trading on the SET since September up to mid-November 2001 has averaged close to Bt3,700 million. The securities business outlook is closely tied to the weakening economic environment. The liberalization of brokerage fees since the fourth quarter of 2000 has significantly intensified competition in the business. The average brokerage fee declined from 0.4%-0.5% before liberalization to approximately 0.15% in 2001. Many securities firms are bearing losses in order to secure their client bases.
TRIS said the Koos group initially intended to use KGI as the group's core securities entity by setting up KGI Securities One Holding Ltd. (HOLDCO) in Hong Kong in 1999 as a wholly-owned subsidiary of KGI to handle KGI's foreign investments. However, because the Thai authorities in 1998 restricted the amount of baht that could be transferred out of the country, KGI was limited in the investments it could make through HOLDCO. In late 2000, the Koos changed its strategy by transferring KGI's parent status to KGI International Holding Ltd. (KGII), another holding company of the group that is incorporated in the Cayman Islands. At the end of 2000, HOLDCO had a 0.45% stake in KGII. In 2001, KGI swapped its investments worth Bt2,720 million or 36% of its total assets in 2000, for US$70 million in convertible debentures and straight bonds from KGII. These convertible debentures and straight bonds are expected to provide stable interest income to KGI to substitute for profit sharing from its former HOLDCO subsidiaries in foreign countries. In addition, KGI's 100% investment in One Asset Management Co., Ltd. (OAM) is expected to provide stable cash flow to KGI in the future. KGI has received dividends of approximately Bt22 million from OAM each year since 1999. KGI has a strong capital base compared with its peers. Its assets to equity ratio was 141.14% at mid-year 2001. At the end of June 2001, KGI had paid up capital of Bt14,930 million, after it increased capital by Bt7,000 million in 1998 and Bt5,000 million in the third quarter of 1999. Besides being able to inject new capital into KGI, the Koos group can also direct its client base in other countries to be potential clients of KGI.
KGI has been able to resolve some major conflicts, namely the resignation of its prior management and changing warrant conditions for reflecting proper market situation. KGI's new management team led by the Koos group became fully operational at KGI in 2001. Top management from the Koos group had experience in the securities business in Taiwan and Hong Kong before being appointed in Thailand. This could bring new ideas and fresh innovations to KGI. However, the team requires more time to prove its success in Thailand. KGI's management plans to reenter the investment banking business and expects it to generate significant revenues in the future, TRIS said.
KGI Securities (Thailand) PLC (KGI) Company Rating BBB-
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TRIS said that trading on the Stock Exchange of Thailand (SET) has been hit by prolonged weak economic conditions. Average daily market turnover has been highly volatile: Bt3,764 million in 1997, Bt3,505 million in 1998, Bt6,571 million in 1999, Bt3,740 million in 2000 and Bt6,619 million during the first nine months of 2001. Amid general economic malaise and compounded by terrorist attacks on the United States, daily trading on the SET since September up to mid-November 2001 has averaged close to Bt3,700 million. The securities business outlook is closely tied to the weakening economic environment. The liberalization of brokerage fees since the fourth quarter of 2000 has significantly intensified competition in the business. The average brokerage fee declined from 0.4%-0.5% before liberalization to approximately 0.15% in 2001. Many securities firms are bearing losses in order to secure their client bases.
TRIS said the Koos group initially intended to use KGI as the group's core securities entity by setting up KGI Securities One Holding Ltd. (HOLDCO) in Hong Kong in 1999 as a wholly-owned subsidiary of KGI to handle KGI's foreign investments. However, because the Thai authorities in 1998 restricted the amount of baht that could be transferred out of the country, KGI was limited in the investments it could make through HOLDCO. In late 2000, the Koos changed its strategy by transferring KGI's parent status to KGI International Holding Ltd. (KGII), another holding company of the group that is incorporated in the Cayman Islands. At the end of 2000, HOLDCO had a 0.45% stake in KGII. In 2001, KGI swapped its investments worth Bt2,720 million or 36% of its total assets in 2000, for US$70 million in convertible debentures and straight bonds from KGII. These convertible debentures and straight bonds are expected to provide stable interest income to KGI to substitute for profit sharing from its former HOLDCO subsidiaries in foreign countries. In addition, KGI's 100% investment in One Asset Management Co., Ltd. (OAM) is expected to provide stable cash flow to KGI in the future. KGI has received dividends of approximately Bt22 million from OAM each year since 1999. KGI has a strong capital base compared with its peers. Its assets to equity ratio was 141.14% at mid-year 2001. At the end of June 2001, KGI had paid up capital of Bt14,930 million, after it increased capital by Bt7,000 million in 1998 and Bt5,000 million in the third quarter of 1999. Besides being able to inject new capital into KGI, the Koos group can also direct its client base in other countries to be potential clients of KGI.
KGI has been able to resolve some major conflicts, namely the resignation of its prior management and changing warrant conditions for reflecting proper market situation. KGI's new management team led by the Koos group became fully operational at KGI in 2001. Top management from the Koos group had experience in the securities business in Taiwan and Hong Kong before being appointed in Thailand. This could bring new ideas and fresh innovations to KGI. However, the team requires more time to prove its success in Thailand. KGI's management plans to reenter the investment banking business and expects it to generate significant revenues in the future, TRIS said.
KGI Securities (Thailand) PLC (KGI) Company Rating BBB-
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