TRIS Rating Co., Ltd. announced that from 12 July 2004, TRIS Rating has assigned "Rating Outlooks" for all of its customers to provide companies and investors with the prospective direction of each company's medium-term credit rating over the next one to two years. The "Outlooks" are categorized as Positive, Stable, Negative, or Developing.
It is important to note that the "Rating Outlooks" do not indicate an expectation, only a future plausible direction of the rating, TRIS Rating said.
Rating Outlook Rationale
Company Name Company Rating Issue Rating Rating Outlook
FINANCIAL INSTITUTION
1.Bank of Ayudhya PLC (BAY) A- BBB+ Positive
Rationale: The positive outlook reflects BAY's more favorable business performance. BAY will benefit from the good prospects of the banking sector, in line with the recovery of the Thai economy. The bank's profitability is expected to improve after redeeming the bank's high-cost SLIPS in March 2004. Its recent re-engineering activities may also help improve its profitability. BAY's NPL coverage should improve as management strongly commits to setting higher loan loss provisions and continues its efforts to improve asset quality.
2. GE Capital Auto Lease PLC (GECAL) - AAA Stable
Rationale: The stable outlook reflects the unconditional and irrevocable guaranty by GECAL's parent, GE Capital Corporation (GECC), which is rated at "AAA" and "Aaa" by Standard and Poor's and Moody's Investors Service, respectively. This credit profile of the guarantor incorporates the business diversification and sustainable profitability of GECC.
3. Hi-Way Co., Ltd. (Hi-Way) BBB+ BBB+ Stable
Rationale: The stable outlook reflects the support from Hi-Way's parent, TISCO Finance PLC and its high profitability. Motorcycle demand is expected to continue its upward trend during the next 2-3 years as a result of the improving economic environment. TRIS Rating expects that Hi-Way will be able to maintain its market position and high profitability in the next 2-3 years. However, if the competitive environment becomes more intense due to large non-bank consumer finance companies aggressively entering the market, Hi-Way's profitability may be impacted, in which case the rating outlook should be revised.
4. Industrial Finance Corporation of Thailand (IFCT) A+ - N.A.
5. KGI Securities (Thailand) PLC (KGI) BBB - Stable
Rationale: KGI's stable outlook recognizes the good medium-term prospect for the stock market although the liquidity and share prices in Thai stock market remain volatile. After its capital restructuring activities, KGI still has sufficient liquidity and capital base to expand its domestic business. Despite intense competition among brokers, the current rating assumes that KGI will be able to maintain its strong position in the brokerage business. The company is also expected to earn stable income from its asset management business performed under One Asset Management Ltd.
6. Kiatnakin Finance PLC (KK) BBB+ BBB+ Positive
Rationale: The positive outlook incorporates sustainable profitability of KK. The rating reflects KK's experience in its niche of residential project loans. KK also benefits from the recovery of the property sector that resulted in gains for the company's investment in distressed assets. With its sufficient capitalization, KK plans to become a commercial bank and may benefit from the expanded scope of business.
7. Krungthai Card PLC (KTC) A- A- Stable
Rationale: The stable outlook reflects KTC's leading position in the credit card business. The company's marketing campaigns have been successful in extending new customer base and card utilization. As the business has expanded, the company has been able to maintain its satisfactory credit quality and provisioning policy. New businesses such as asset financing and personal loans were successfully launched under the company's business plan.
8. Nava Leasing PLC (NVL) BBB BBB+ Negative
Rationale: The negative outlook reflects the continued intense competition in the car hire purchase market, which is NVL's core business, and the company's relatively high cost of funds compared with large players, which will negatively impact the company's profitability. However, the outlook may be revised to stable if the company can sustain its current level of profitability while maintaining the credit quality of its loan portfolio at acceptable levels after management has expanded its business by extending loan for fleet hire purchase and the leasing of equipment and machinery.
9. Phatra Leasing PLC (PL) BBB+ BBB+ Stable
Rationale: The stable outlook reflects PL's capability to maintain its leading position in the automobile operating lease business. The company is likely to retain its existing major clients, as well as expand its customer base while maintaining its good asset quality. However, its profitability remains pressured by intense competition and the company's leverage is expected to remain high amid its growing portfolio.
10. Ratchthani Leasing PLC (THANI) - BBB Stable
Rationale: The stable outlook reflects that THANI should be able to maintain its competitiveness and profitability. THANI's low funding cost after the issuance of debentures supports its ability to compete in the market. Moreover, other income from related service businesses supplements THANI's operational result to be in line with TRIS Rating's expectation. However, the increasing number of non-accrual loans represents a concern and, if this trend continues, could negatively impact the rating.
11. SIAM A&C Co., Ltd. (SIAM A&C) BBB+ BBB+/AA Stable
Rationale: SIAM A&C's stable outlook reflects TRIS Rating's expectation that the company can sustain its solid position in the non-bank consumer finance business due to strong support from its major shareholders, ACOM Co., Ltd., Japan, ITOCHU Management (Thailand) Co., Ltd. and Siew & Co., Ltd. The company's conservative policy on loan loss provisioning is expected to mitigate losses associated with its portfolio of sub-prime assets which generally provide high returns.
SIAM A&C's guaranteed debentures outlook reflects the stable outlook for its guarantor, ACOM Co., Ltd., assigned by Standard and Poor's and Moody's Investors Service. ACOM's stable outlook is supported by sound capital, high profitability and manageable asset quality.
12. Siam Panich Leasing PLC (SPL) A- A- Stable
Rationale: SPL's stable outlook reflects TRIS Rating's expectation that the company's performance will remain in line with expectations despite gradually rising funding costs and highly competitive environment. SPL's long experienced management and strong relationship with automobile dealers will support its ability to maintain its market position, particularly in the hire purchase business. Although the Securities and Exchange Commission will provide guidelines for listed companies with stricter regulations on loan loss provision, the company's good asset quality and high profitability will be sufficient to absorb loss from the regulatory changes.
13. Small and Medium Enterprise Development Bank of Thailand (SME Bank) A+ A+ Stable
Rationale: The stable outlook reflects the continued explicit and implicit support from the government. The SME bank has significant involvement in government policy to promote small and medium entrepreneurs. The bank is in the process of gradually reorganizing bank's operations to enhance operating efficiency by developing the quality of its human resources. Though the bank improved its profitability in 2003, credit risk and operational risk still need to be improved.
14. Thai Commercial Auto Co., Ltd. (TCA) BBB+ BBB+ Stable
Rationale: TCA's stable outlook reflects TRIS Rating's expectation that the company will deliver performance as expected, despite a severe competitive environment and future downside risks from rising funding costs. Business and financial support from its major shareholders should help the company maintain its business and financial position in line with expectations.
15. Thai Military Bank PLC (TMB) BBB- BB+ Positive
Rationale: The positive outlook reflects the improvement in asset quality, capitalization and earning power of TMB. The three-way merger among TMB, DBS Thai Danu Bank PLC and Industrial Finance Corporation of Thailand (IFCT) will result in creation of Thailand's fifth largest bank, in terms of assets. The individual strengths of each partner is expected to result in a synergy that will generate more franchise value to TMB. This will help the bank as it enters into universal bank's operation in accordance with the Financial Master Plan's objective. However, TRIS Rating will closely monitor the integration risk after the merger completion.
16. TISCO Finance PLC (TISCO) A A Positive Rationale: TISCO's positive outlook reflects the likelihood that the company will deliver medium-term financial performance that is better than TRIS Rating's initial expectation. The company's plan to upgrade to be a commercial bank will benefit the company in terms of expanded scope of business and long-term competitive position. The company's good risk management system, its proven track records and its sufficient capital base will help mitigate future downside risks.
17. TSFC Securities Ltd. (TSFC) A- BBB+ Positive
Rationale: The positive outlook reflects the likelihood that TSFC will expand its core business and sustain its leading position in providing margin loans to investors, following good prospects for the stock market. TSFC needs to demonstrate further its ability to sustain volume amid market volatility over a long period. Should TSFC build a consistent track record, sustaining its strong market position without weakening its financial position, the rating should be upgraded.
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