TRIS Rating Co., Ltd. has affirmed the company rating of Hi-Way Co., Ltd. and the rating of its senior debentures (HWAY069A) at "BBB+" with "stable" outlook. The ratings reflect Hi-Way's ability to maintain its market position in the motorcycle hire purchase business in the Bangkok Metropolitan Area (BMA) and continuously strong support from its parent, TISCO Bank PLC. However, the ratings are constrained by the company's customer credit risk, increasing non-performing loans (NPLs), higher losses on repossessed motorcycles, and the intense competition in the motorcycle hire purchase business. Moreover, the uncertain economy may impact the ability of customers to service their installments which will affect Hi-Way's asset quality and profitability.
While the "stable" outlook reflects the expectations that Hi-Way will be able to maintain its high profitability and sufficient capitalization, and will continue to get support from Hi-Way's parent, TISCO Bank. TRIS Rating expects that Hi-Way will be able to maintain its market position in the motorcycle hire purchase business.
TRIS Rating reported that Hi-Way is the second largest motorcycle hire purchase operator in the BMA, increasing its market share from 23% in 2004 to 25% in 2005. Hi-Way's loan portfolio increased from Bt1,236 million in 2003 to Bt2,086 million in 2004 and Bt2,403 million at the end of June 2005. The high profitability of the motorcycle hire purchase business has attracted non-bank financial institutions to enter the market. In order to maintain its market position and, at the same time, try to take market share from weaker competitors, Hi-Way implemented an aggressive strategy, lowering interest rate charges to customers and offering better commissions to dealers. The rising ratio of NPLs (overdue more than three months and accounts under legal proceedings) to average loans during 2005 stems from aggressive acquisition of new loans during 2004 through the first half of 2005. This ratio increased from 11.7% at the end of 2004 to 13.4% at the end of June 2005. Furthermore, the tremendous growth of the loan portfolio in the previous year and frequent motorcycle model changes meant more repossessed and used motorcycles were supplied to the market. The market price of used motorcycles fell and resulted in higher losses when selling those repossessed motorcycles. The average loss on repossessed assets has rebounded to around Bt8,600 per unit for the first half of 2005, after falling to Bt5,800 in 2004 from Bt8,000 in 2003. All of these negative factors have impacted Hi-Way's profitability, despite the fact that its profitability was relatively high when compared with other financial service providers. Return on average assets (ROA) fell from 9.7% in 2003 to 6.2% in 2004 and to 5.9% at the end of June 2005.
TRIS Rating said, Hi-Way is a wholly-owned subsidiary of TISCO Bank that was upgraded from a leading finance company to become a full bank in mid-2005. TISCO Bank 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 structure of the TISCO Group of companies is expected to be changed in the first half of 2006 by establishing a holding company to own TISCO Bank and all subsidiaries. TISCO Bank will be able to expand its lending portfolio to the TISCO Group. Hi-Way is expected to benefit from low rate funding from TISCO Bank. - 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