TRIS Rating Co., Ltd. has upgraded the company rating of KGI Securities (Thailand) PLC (KGI) to "BBB" from "BBB-". The rating reflects KGI's continued improved performance, diversified revenue structure, sufficient liquidity and capital base. The rating also takes into account the good prospects for the stock market, which supports the continued growth of securities firms. However, these strengths are partially offset by intense competition in the brokerage business, and the chance that brokerage fees will be liberalized in 2005, which would affect the profitability of all securities firms.
TRIS Rating reported that the capital restructuring activities completed in 2003 have changed not only KGI's financial structure but also its business direction. The activities included divestment of overseas debentures, a capital reduction with the amount of the reduction returned to shareholders, and elimination of accumulated losses. During the past few years, KGI diversified by investing in several overseas securities firms through its wholly owned subsidiary, KGI Securities (Thailand) International Holdings Ltd. (HOLDCO). Because it was overcapitalized, KGI decided to reduce its registered capital from Bt17,332 million to Bt12,999 million, returning Bt4,333 million to all shareholders. KGI sold the overseas debentures held by HOLDCO and used the proceeds as one of sources of funds for the capital returned to shareholders. Moreover, KGI used its share premium and all of its reserves to eliminate accumulated losses, enabling the company to pay dividends in the future years.
TRIS Rating said that as a result of capital restructuring, KGI's asset size fell from Bt8,607 million as of December 2002 to Bt5,624 million as of September 2003. KGI's main assets have shifted from investments to securities business receivables and cash. In terms of revenue structure, KGI no longer has substantial interest and dividend income from overseas investments. KGI instead relies more on income from its domestic businesses. However, KGI has a more diversified revenue structure than most other securities companies, which rely heavily on brokerage income. KGI has earned stable asset management incomes from its subsidiary, One Asset Management Ltd. (ONEAM) and has recorded significant gains on trading securities. KGI is expanding its investment banking business but it will take time for the company to generate substantial revenue from this line of business.
Since 1999, KGI has recorded a net profit every year even during the period of freely-negotiated brokerage fees (2000-2001). KGI posted a nine-month profit in 2003 of Bt511 million, compared with Bt456 million in the same period a year earlier. Following the return of capital, returns on assets and equity are expected to increase. Despite returning capital to shareholders, KGI has sufficient liquidity and capital base for business expansion. The uptrend of the stock market will support KGI's businesses. However, competition from new brokers has led to a drop in KGI's market share. Moreover, like other securities companies, KGI's future profitability may be negatively affected by pending regulatory changes to liberalize brokerage fee rate, TRIS Rating said. -- End
KGI Securities (Thailand) PLC (KGI)Company Rating: Upgraded to BBB from BBB-
TRIS Rating reported that the capital restructuring activities completed in 2003 have changed not only KGI's financial structure but also its business direction. The activities included divestment of overseas debentures, a capital reduction with the amount of the reduction returned to shareholders, and elimination of accumulated losses. During the past few years, KGI diversified by investing in several overseas securities firms through its wholly owned subsidiary, KGI Securities (Thailand) International Holdings Ltd. (HOLDCO). Because it was overcapitalized, KGI decided to reduce its registered capital from Bt17,332 million to Bt12,999 million, returning Bt4,333 million to all shareholders. KGI sold the overseas debentures held by HOLDCO and used the proceeds as one of sources of funds for the capital returned to shareholders. Moreover, KGI used its share premium and all of its reserves to eliminate accumulated losses, enabling the company to pay dividends in the future years.
TRIS Rating said that as a result of capital restructuring, KGI's asset size fell from Bt8,607 million as of December 2002 to Bt5,624 million as of September 2003. KGI's main assets have shifted from investments to securities business receivables and cash. In terms of revenue structure, KGI no longer has substantial interest and dividend income from overseas investments. KGI instead relies more on income from its domestic businesses. However, KGI has a more diversified revenue structure than most other securities companies, which rely heavily on brokerage income. KGI has earned stable asset management incomes from its subsidiary, One Asset Management Ltd. (ONEAM) and has recorded significant gains on trading securities. KGI is expanding its investment banking business but it will take time for the company to generate substantial revenue from this line of business.
Since 1999, KGI has recorded a net profit every year even during the period of freely-negotiated brokerage fees (2000-2001). KGI posted a nine-month profit in 2003 of Bt511 million, compared with Bt456 million in the same period a year earlier. Following the return of capital, returns on assets and equity are expected to increase. Despite returning capital to shareholders, KGI has sufficient liquidity and capital base for business expansion. The uptrend of the stock market will support KGI's businesses. However, competition from new brokers has led to a drop in KGI's market share. Moreover, like other securities companies, KGI's future profitability may be negatively affected by pending regulatory changes to liberalize brokerage fee rate, TRIS Rating said. -- End
KGI Securities (Thailand) PLC (KGI)Company Rating: Upgraded to BBB from BBB-