TRIS Rating Co., Ltd. has affirmed the company rating of EASY BUY PLC, formerly known as SIAM A&C CO., LTD., and its long-term bills of exchange (B/E) at "BBB+" and has assigned EASY BUY's proposed up to Bt3,000 million guaranteed debentures at "AA" with "stable" outlook.
The guaranteed debentures are fully guaranteed by EASY BUY's parent company, ACOM CO., LTD., a company rated "Baa1/Positive" by Moody's and "BBB+/Positive" by Standard & Poor's. The rating of EASY BUY's guaranteed debentures is based on the credit quality of the guarantor, ACOM, and the unconditional and irrevocable guarantee of the debentures. ACOM's rating is supported by its strong market position as one of the top-four consumer finance companies in Japan in terms of loan receivables and asset size with a strong operating branch network in the consumer finance business, its strong capital base, its high profitability, and its sound and experienced management team. However, these strengths are constrained by intense competitive environment and regulatory risk, which might negatively affect the performance of non-bank consumer finance companies.
The ratings of EASY BUY and its B/E are based on the company's good credit risk and information system management, the strong support it receives from its parent company and strategic partners, its solid market position in the non-bank consumer finance business and its capable management. The ratings also take into consideration the industry's low penetration rate and strong market demand in the retail finance business. However, the ratings are constrained by EASY BUY's low capitalization against the industry average, an intense competitive environment, less favorable business factors and regulatory risk, which might limit the company's business expansion and profitability in the future.
The "stable" outlook for the guaranteed debentures reflects TRIS Rating's expectation that ACOM will be able to sustain its solid position in the non-bank consumer finance market despite the unfavorable regulatory controls and intense competitive environment in the Japanese consumer finance industry. The outlook also reflects ACOM's ability to maintain its financial performance by adequately controlling asset quality and operating costs.
While the outlook of EASY BUY and its B/E reflects TRIS Rating's expectation that the company can deliver financial performance as expected and can sustain its solid position in the non-bank consumer finance business due to its sufficient track record, good brand recognition and strong support from its major shareholders. EASY BUY's good operational and risk management systems are expected to help mitigate future downside risk from adverse changes in the business environment.
TRIS Rating reported that as of June 2005, EASY BUY's assets represented 2.2% of ACOM's total assets, and its loan receivables accounted for about 2.4% of ACOM's total receivables. For the first half of 2005 (January-June), the company's contribution to ACOM's net profit was 2.2%. EASY BUY is ACOM's first overseas subsidiary in Southeast Asia, and figures significantly in ACOM's strategy to be a major regional player in the consumer finance industry. ACOM has shown a strong commitment to EASY BUY, providing financial and business support by providing technology, know-how for business practices and developing new products for the Thai market.
TRIS Rating said that EASY BUY's marketing strategy to build up an extensive network vendors and expanding its business by cross selling has helped the company rapidly acquire a sizable customer base in the consumer finance industry in Thailand. Its nine years of experience in the non-bank consumer finance industry has provided EASY BUY with sufficient track record and good brand recognition. The company has adopted many of ACOM's business operation and risk management tools, including a modern credit-scoring model, and effective vendor and information management systems, and has also adopted ACOM's loan collection methods and standards to ensure asset quality control. The nature of its business, providing small loans per customer to a large number of customers, helps diversify risk, but the company is subject to regulation risk and reputation risk. Asset quality is a crucial factor to EASY BUY's credit profile when the company has been pressured by its low capitalization and changing business factors.
Strong financial and business support from EASY BUY's parent company, ACOM, and its strategic partner, is crucial for EASY BUY's future market position and sustainable growth. There is a strong link between EASY BUY and ACOM, evidenced by ACOM's on-going business and financial supports provided to EASY BUY, said TRIS Rating. - End
Company Rating: Affirmed at BBB+ Issue Ratings: Bt1,000 million bills of exchange due 2007 Affirmed at BBB+ Up to Bt3,000 million guaranteed debentures due 2009 AA Rating Outlook: Stable