TRIS Rating Co., Ltd. has affirmed the rating of Hi-Way Co., Ltd. and its Bt400 million senior debentures (HWAY069A) at "BBB+". The ratings reflect strong demand in the motorcycle hire purchase business which is related to the continued growth of motorcycle demand, Hi-Way's strong market position in the motorcycle hire purchase business in the Bangkok Metropolitan Area (BMA) and its high profitability. Furthermore, the ratings also take into account the strong support Hi-Way receives from its parent, TISCO Finance PLC (TISCO). However, these strengths are partially offset by the company's customer credit risk and competitive pressures, especially aggressive strategies employed by newcomers.
TRIS Rating has also confirmed the "stable" outlook for the rating of Hi-Way, which reflects the support from its parent 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, and if Hi-Way's profitability becomes significantly impacted, the rating outlook may be re-considered.
TRIS Rating reported that Hi-Way is a wholly owned subsidiary of TISCO, a leading finance company in Thailand. TISCO closely reviews and monitors Hi-Way's business plan and performance, using the same standards and practices as it does for its own business. The economic recovery and the government's policy to improve Thailand's grassroots economic system has enhanced consumers' purchasing power. Together with promotions offering low down payments, new low-priced motorcycle models, and widespread loans from hire purchase operators, middle- to low-income level customers were able to purchase motorcycles more easily. The low down payment strategy led to rapid expansion of the loan portfolio, however, this caused increases in the delinquency rate in 2003.
TRIS Rating said that Hi-Way, like its peers, has suffered from losses on sales of repossessed motorcycles. After new models were launched at lower prices, many target customers for used motorcycle, instead shifted to buy new units. This had a negative impact on the selling price of the repossessed motorcycle. The average loss per unit on the sale of repossessed motorcycles rose from approximately Bt5,000 in 2002 to Bt8,000 in 2003. Although Hi-Way plans to sell repossessed motorcycles in major cities, and expects to get better prices than it currently does through auction, the success of this new sales channel needs to be proven.
Hi-Way is the second largest motorcycle hire purchase operator in the Bangkok Metropolitan Area, maintaining a 20% market share for several years. The high profitability of the motorcycle hire purchase business has attracted other financial service providers. GE Capital Auto Lease PLC (GECAL) started offering motorcycle hire purchase loans in 2002 and took 4% market share. With an aggressive strategy to pay higher commissions to dealers, its market share increased to 9% in 2003. TRIS Rating expects that Hi-Way's long-term relationships with dealers, its experienced management team, well-rounded operation and strong support from its parent company will be the key factors helping Hi-Way maintain its strong market position and market share.
TRIS Rating said about the motorcycle hire purchase business that after struggling through the effects of the 1997 financial crisis, the average annual growth rate of domestic motorcycle sales was 28% during 1998-2003. Total domestic sales increased continuously, from 491,829 units in 1998 to 1,687,132 units in 2003. For the first five months of 2004, domestic sales totaled 836,390 units, heading toward the industry's target of 1,900,000 units in 2004. TRIS Rating expects the growth rates for motorcycle sales during the next 2-3 years will not increase as sharply as it has in the past three years, but the rate will remain stronger than GDP growth. -- End
Hi-Way Co., Ltd. Company Rating: Affirmed at BBB+ Issue Rating: HWAY069A: Bt400 million senior debentures due 2006 Affirmed at BBB+ Rating Outlook: Stable
TRIS Rating has also confirmed the "stable" outlook for the rating of Hi-Way, which reflects the support from its parent 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, and if Hi-Way's profitability becomes significantly impacted, the rating outlook may be re-considered.
TRIS Rating reported that Hi-Way is a wholly owned subsidiary of TISCO, a leading finance company in Thailand. TISCO closely reviews and monitors Hi-Way's business plan and performance, using the same standards and practices as it does for its own business. The economic recovery and the government's policy to improve Thailand's grassroots economic system has enhanced consumers' purchasing power. Together with promotions offering low down payments, new low-priced motorcycle models, and widespread loans from hire purchase operators, middle- to low-income level customers were able to purchase motorcycles more easily. The low down payment strategy led to rapid expansion of the loan portfolio, however, this caused increases in the delinquency rate in 2003.
TRIS Rating said that Hi-Way, like its peers, has suffered from losses on sales of repossessed motorcycles. After new models were launched at lower prices, many target customers for used motorcycle, instead shifted to buy new units. This had a negative impact on the selling price of the repossessed motorcycle. The average loss per unit on the sale of repossessed motorcycles rose from approximately Bt5,000 in 2002 to Bt8,000 in 2003. Although Hi-Way plans to sell repossessed motorcycles in major cities, and expects to get better prices than it currently does through auction, the success of this new sales channel needs to be proven.
Hi-Way is the second largest motorcycle hire purchase operator in the Bangkok Metropolitan Area, maintaining a 20% market share for several years. The high profitability of the motorcycle hire purchase business has attracted other financial service providers. GE Capital Auto Lease PLC (GECAL) started offering motorcycle hire purchase loans in 2002 and took 4% market share. With an aggressive strategy to pay higher commissions to dealers, its market share increased to 9% in 2003. TRIS Rating expects that Hi-Way's long-term relationships with dealers, its experienced management team, well-rounded operation and strong support from its parent company will be the key factors helping Hi-Way maintain its strong market position and market share.
TRIS Rating said about the motorcycle hire purchase business that after struggling through the effects of the 1997 financial crisis, the average annual growth rate of domestic motorcycle sales was 28% during 1998-2003. Total domestic sales increased continuously, from 491,829 units in 1998 to 1,687,132 units in 2003. For the first five months of 2004, domestic sales totaled 836,390 units, heading toward the industry's target of 1,900,000 units in 2004. TRIS Rating expects the growth rates for motorcycle sales during the next 2-3 years will not increase as sharply as it has in the past three years, but the rate will remain stronger than GDP growth. -- End
Hi-Way Co., Ltd. Company Rating: Affirmed at BBB+ Issue Rating: HWAY069A: Bt400 million senior debentures due 2006 Affirmed at BBB+ Rating Outlook: Stable