TRIS Rating Co., Ltd. has affirmed the rating of Phatra Leasing PLC (PL) and the ratings of PL's Bt400 million (PL04DA) and Bt900 million (PL066A) senior debentures at "BBB+". The ratings reflect PL's leading position in the automobile operating lease business, continued improvement in profitability, sufficient cash flow protection and good asset quality. The ratings also take into account good prospects for the automobile operating lease business. However, these strengths are partially offset by the higher leverage level, the continuing high concentration of large customers, and intense competition in the automobile operating lease business, which could dampen PL's profitability.
TRIS Rating reported that PL was incorporated in 1987 by the Lamsam group, engaging in leasing and hire purchase business at the beginning. PL has focused on providing corporate clients with automobile operating leases along with necessary add-on services since 1995. By having good relationships with various dealers and automobile maintenance shops nationwide, the company is capable of providing clients with a full range of services for large fleets under long-term lease contracts. PL holds a dominant share of the operating lease market, providing operating leases for various types of vehicles, including sedans, luxury, and multi-purpose vehicles. PL's lease assets soared nearly 60% in FY2003, when it acquired a large fleet service contract for a large financial institution. Its lease assets rose further by 9.1% during the first half of FY2004, ending at Bt3,419 million as of March 2004. With its capability to service large fleets, PL successfully expanded its customer base outside its network of related companies, making it less reliant on the group. PL is currently servicing customers with more than 6,000 units of vehicles. Since its main customers are large firms, PL is exposed to customer concentration risk. Lease assets for the twenty largest customers constitute more than 60% of total lease assets. However, this risk is partly mitigated as most of PL's large customers are financially reliable and PL is likely to retain its long-term relations with them. As of September 2003, PL had no leasing receivables more than three months overdue. Moreover, most of PL's lease assets are automobiles, which are marketable and provide flexibility for the company.
TRIS Rating said PL posted its fifth straight yearly profit in FY2003, reporting the highest profit since its inauguration. PL's lease yield was pressured by intense competition; however, PL benefited from a steady decrease in cost of funds and economies of scale. PL's profitability compares favorably with that of its peers. Its net profit margin increased to 14.3% in FY2003, a continued improvement from 12.2% in FY2001. PL continued its strong growth in revenues and profit in the first half of FY2004, posting hefty year-on-year increases in revenues and net profit of 49.4% and 74.7% respectively.
PL also generated higher funds from operations to cope with its higher interest burden. PL's earnings before interest, tax, depreciation and amortization (EBITDA) interest coverage ratio was strong at 9.7 times in FY2003, compared with 9.0 times in FY2002. Despite higher yearly profits and funds from operations, PL funded most of its asset growth by borrowing, pushing its debt to capitalization ratio sharply upwards from 63.7% as of September 2002 to 74.8% as of March 2004. Leverage is expected to remain high, but in line with its peers. Its funds from operations to total debt ratio fell from 42.4% as of September 2002 to 29.4% as of September 2003. However, PL has sufficient financial flexibility due to its marketable lease assets and available credit lines from various financial institutions. PL is expected to expand its asset base further, driven by a growing economy and an increasing customer appetite for operating leases. Like other operating lease firms, PL's profitability could be undermined by intense competition, which leads to lower lease yields and higher residual risks, TRIS Rating said. -- End
Phatra Leasing PLC (PL)
Company Rating: Affirmed at BBB+
Issue Ratings:
PL04DA: Bt400 million senior debentures due 2004 Affirmed at BBB+
PL066A: Bt900 million senior debentures due 2006 Affirmed at BBB+
TRIS Rating reported that PL was incorporated in 1987 by the Lamsam group, engaging in leasing and hire purchase business at the beginning. PL has focused on providing corporate clients with automobile operating leases along with necessary add-on services since 1995. By having good relationships with various dealers and automobile maintenance shops nationwide, the company is capable of providing clients with a full range of services for large fleets under long-term lease contracts. PL holds a dominant share of the operating lease market, providing operating leases for various types of vehicles, including sedans, luxury, and multi-purpose vehicles. PL's lease assets soared nearly 60% in FY2003, when it acquired a large fleet service contract for a large financial institution. Its lease assets rose further by 9.1% during the first half of FY2004, ending at Bt3,419 million as of March 2004. With its capability to service large fleets, PL successfully expanded its customer base outside its network of related companies, making it less reliant on the group. PL is currently servicing customers with more than 6,000 units of vehicles. Since its main customers are large firms, PL is exposed to customer concentration risk. Lease assets for the twenty largest customers constitute more than 60% of total lease assets. However, this risk is partly mitigated as most of PL's large customers are financially reliable and PL is likely to retain its long-term relations with them. As of September 2003, PL had no leasing receivables more than three months overdue. Moreover, most of PL's lease assets are automobiles, which are marketable and provide flexibility for the company.
TRIS Rating said PL posted its fifth straight yearly profit in FY2003, reporting the highest profit since its inauguration. PL's lease yield was pressured by intense competition; however, PL benefited from a steady decrease in cost of funds and economies of scale. PL's profitability compares favorably with that of its peers. Its net profit margin increased to 14.3% in FY2003, a continued improvement from 12.2% in FY2001. PL continued its strong growth in revenues and profit in the first half of FY2004, posting hefty year-on-year increases in revenues and net profit of 49.4% and 74.7% respectively.
PL also generated higher funds from operations to cope with its higher interest burden. PL's earnings before interest, tax, depreciation and amortization (EBITDA) interest coverage ratio was strong at 9.7 times in FY2003, compared with 9.0 times in FY2002. Despite higher yearly profits and funds from operations, PL funded most of its asset growth by borrowing, pushing its debt to capitalization ratio sharply upwards from 63.7% as of September 2002 to 74.8% as of March 2004. Leverage is expected to remain high, but in line with its peers. Its funds from operations to total debt ratio fell from 42.4% as of September 2002 to 29.4% as of September 2003. However, PL has sufficient financial flexibility due to its marketable lease assets and available credit lines from various financial institutions. PL is expected to expand its asset base further, driven by a growing economy and an increasing customer appetite for operating leases. Like other operating lease firms, PL's profitability could be undermined by intense competition, which leads to lower lease yields and higher residual risks, TRIS Rating said. -- End
Phatra Leasing PLC (PL)
Company Rating: Affirmed at BBB+
Issue Ratings:
PL04DA: Bt400 million senior debentures due 2004 Affirmed at BBB+
PL066A: Bt900 million senior debentures due 2006 Affirmed at BBB+