TRIS Rating Co., Ltd. has upgraded the company rating of TSFC Securities Ltd. (TSFC) to "A" from "A-" and has assigned the rating of TSFC's proposed up to Bt1,000 million subordinated debentures at "A-" with "stable" rating outlook. The ratings reflect TSFC's capable management team, the ability to sustain its leading market position in margin loans (credit balance financing), sound asset management, and sufficient liquidity. The ratings also take into consideration good prospects for the stock market in the medium term, which would help support the company's growth. However, these strengths are partially offset by the high volatility of the stock market and the rapid expansion of margin loans which has weakened the company's capital structure. While the "stable" outlook is based on the expectation that TSFC will maintain its strong position in margin loans. TSFC is expected to maintain an acceptable capital structure while expanding its loan portfolio. Most importantly, asset quality is expected to remain good as TSFC should retain its conservative credit and investment management policies. The rating outlook is also premised on the expectation of good medium-term prospects for the stock market despite fluctuations.
TRIS Rating reported that TSFC is the only company licensed to conduct securities financing. Driven by higher demand for margin loans in 2003, TSFC became the market leader in margin loans, with 22% market share. In 2004, TSFC built its market share to 32%, posting a robust growth in margin loans. Even in the face of rapid growth, the company's assets are of high quality, attributable to its sound asset management. TSFC's margin loans are all classified as normal and the company's investment exposures are largely in government debt securities and investment-grade corporate debt securities.
TSFC's liquidity is considered sufficient. It has established relationships with various funding sources to finance its business expansion. The company is also considering issuing up to Bt1,000 million in long-term subordinated debentures to fund its new business opportunities. Profits have risen steadily since 1998. However, its profitability, as measured by net interest spread and return on assets, declined in 2004. TSFC has also launched other businesses, including mutual fund guarantees and stock borrowing and lending, but its ability to generate substantial revenue from these new businesses has yet to be proved. Although TSFC's capital structure has been undermined by its massive growth in assets in the past two years, TSFC's capital funds are acceptable and sufficient to finance its normal business expansion. However, if the rapid growth were to continue, it will pressure on the company's capital structure, TRIS Rating said. - End
TSFC Securities Ltd. (TSFC) Company Rating: Upgraded to A from A- Issue Rating: Up to Bt1,000 million subordinated debentures due 2010-2012 A- Rating Outlook: Stable