TRIS Rating Co., Ltd. has affirmed the company rating of KGI Securities (Thailand) PLC (KGI) at "BBB" with "stable" outlook. The rating reflects KGI's solid capital base and adequate liquidity. The rating also takes into account the good prospects for the stock market in the medium term, which supports the continued growth of securities firms. However, these strengths are partially offset by intense competition in the brokerage business. In addition, the liquidity and share prices in the Thai stock market are expected to remain highly volatile. The "stable" outlook is premised on the expectation of good medium-term prospects for the stock market although the liquidity and share prices in the Thai stock market remain highly volatile. The current rating assumes that KGI will retain market position in the brokerage business, as well as earn stable income from its asset management business from Asset Management Ltd. (1AM). In addition, KGI is expected to be able to control market risks arising from its investment portfolio and expand its business without substantially weakening its capital base and liquidity.
TRIS Rating reported that with a sound presence in the market, KGI is amongst the biggest securities firms in Thailand in terms of asset size, engaging in brokerage, investment banking, and portfolio investment and trading. After liquidation of its overseas investments made during 2000-2003, KGI returned some of its share capital to shareholders in 2003 and focused more on the domestic market. In the brokerage business, although KGI's brokerage market share fell in 2003 and 2004 due to intense competition and only a handful of initial public offerings (IPO) deals to attract clients, KGI still ranked fourth amongst 36 brokers in terms of brokerage market share. As for investment banking business, although KGI expanded its investment banking division in 2003, it takes time for the company to generate substantial revenue from this line of business. In addition, KGI also has been active in proprietary trading. Besides its core securities businesses, KGI has recognized stable asset management income from its subsidiary, 1AM.
TRIS Rating said that KGI booked a huge net profit in 2003, aided by a sharp rise in the stock market. However, following the downward movement of the stock market in 2004, KGI's net profit for the first nine months of 2004 dropped by 49% year-on-year, mainly due to losses on investments. KGI incurred losses on trading securities of Bt81 million for the first nine months of 2004, compared with a huge gain of Bt310 million in the same period in 2003. KGI is exposed to market risks as the ratio of its investment portfolio to total assets is relatively high. As of September 2004, the largest investment exposure was overseas. KGI invested in an overseas fund of funds in August 2004 due to the more attractive investment climate in foreign markets, and in order to diversify its income stream. KGI's net profit was Bt259 million for the first nine months of 2004, a sharp decrease from Bt511 million in the same period a year ago.
Despite KGI's weaker business performance, TRIS Rating affirms the current rating as it incorporates the fluctuating nature of securities business. The good medium-term prospects for the stock market are expected to support continued growth of KGI's businesses. Like other brokers, KGI will benefit from a fixed minimum brokerage fee rate, which is extended until mid-January 2007. However, KGI's profitability remains pressured from intense competition among brokers and volatile stock market movements. KGI has a solid capital base, aided partly by its ongoing bottom-line profit. The company's total assets to equity ratio, as of September 2004, was 1.4 times, better than the industry average of 1.7 times. KGI also had sufficient liquidity even after completely repaying its foreign borrowings and returning capital to shareholders in 2003. KGI's business and investment expansion in 2004 was made largely through its excess funds. However, the company also plans to borrow through bank loans and issuance of debt securities to fund its future expansion, TRIS Rating said. -- End
KGI Securities (Thailand) PLC (KGI) Company Rating: Affirmed at BBB Rating Outlook: Stable
TRIS Rating reported that with a sound presence in the market, KGI is amongst the biggest securities firms in Thailand in terms of asset size, engaging in brokerage, investment banking, and portfolio investment and trading. After liquidation of its overseas investments made during 2000-2003, KGI returned some of its share capital to shareholders in 2003 and focused more on the domestic market. In the brokerage business, although KGI's brokerage market share fell in 2003 and 2004 due to intense competition and only a handful of initial public offerings (IPO) deals to attract clients, KGI still ranked fourth amongst 36 brokers in terms of brokerage market share. As for investment banking business, although KGI expanded its investment banking division in 2003, it takes time for the company to generate substantial revenue from this line of business. In addition, KGI also has been active in proprietary trading. Besides its core securities businesses, KGI has recognized stable asset management income from its subsidiary, 1AM.
TRIS Rating said that KGI booked a huge net profit in 2003, aided by a sharp rise in the stock market. However, following the downward movement of the stock market in 2004, KGI's net profit for the first nine months of 2004 dropped by 49% year-on-year, mainly due to losses on investments. KGI incurred losses on trading securities of Bt81 million for the first nine months of 2004, compared with a huge gain of Bt310 million in the same period in 2003. KGI is exposed to market risks as the ratio of its investment portfolio to total assets is relatively high. As of September 2004, the largest investment exposure was overseas. KGI invested in an overseas fund of funds in August 2004 due to the more attractive investment climate in foreign markets, and in order to diversify its income stream. KGI's net profit was Bt259 million for the first nine months of 2004, a sharp decrease from Bt511 million in the same period a year ago.
Despite KGI's weaker business performance, TRIS Rating affirms the current rating as it incorporates the fluctuating nature of securities business. The good medium-term prospects for the stock market are expected to support continued growth of KGI's businesses. Like other brokers, KGI will benefit from a fixed minimum brokerage fee rate, which is extended until mid-January 2007. However, KGI's profitability remains pressured from intense competition among brokers and volatile stock market movements. KGI has a solid capital base, aided partly by its ongoing bottom-line profit. The company's total assets to equity ratio, as of September 2004, was 1.4 times, better than the industry average of 1.7 times. KGI also had sufficient liquidity even after completely repaying its foreign borrowings and returning capital to shareholders in 2003. KGI's business and investment expansion in 2004 was made largely through its excess funds. However, the company also plans to borrow through bank loans and issuance of debt securities to fund its future expansion, TRIS Rating said. -- End
KGI Securities (Thailand) PLC (KGI) Company Rating: Affirmed at BBB Rating Outlook: Stable