TRIS Rating Co., Ltd. has affirmed the ratings of Thai Commercial Auto Co., Ltd. (TCA) and its Bt500 million senior debentures at "BBB+" with "stable" outlook. TCA was established to provide hire purchase loans to the Yontrakit Group's clients. The ratings reflect the strong support, both business and financial, that TCA receives from its shareholders, as well as its good asset quality control system. The ratings take into consideration the Yontrakit Group's years of experience as a key automobile distributor for European and Korean cars in the Thai market and the expertise of TISCO Bank PLC in automobile hire purchase business. However, these strengths are partially offset by intense competition in both the automobile distributor industry and the automobile hire purchase industry in Thailand, which affects TCA's competitive position and loan portfolio growth.
While the "stable" outlook reflects TRIS Rating's expectation that TCA will continuously receive business and financial support from its major shareholders. The outlook may be revised if the TCA's shareholder structure or business model changes.
TRIS Rating reported that after TISCO Bank, one of TCA's three shareholders, consolidated its business strategy and centralized its group's operation in 2004, TCA has provided automobile hire purchase services for only the Yontrakit Group's clients, while TISCO Bank has served for non-Yontrakit Group's hire purchase demand. Therefore, the Yontrakit Group's business performance will directly influence TCA's business direction. As total sales of automobiles by the Yontrakit Group were slow down, TCA's new loans for the Yontrakit Group decreased from Bt1,275 million in 2003 to Bt974 million in 2004. The outstanding loans also continuously decreased from Bt2,855 million in 2003 to Bt2,389 million in 2004 and Bt2,298 million at the end of June 2005. TRIS Rating expects that as long as Yontrakit Group does not improve its market position in the automobile market, TCA's portfolio will decrease over the next 2-3 years.
However, TRIS Rating said, TCA's asset quality is considered good, as it applies the same standard for credit approval as TISCO Bank, and uses the same asset quality control system. Although the ratio of non-performing loans (NPLs) (overdue more than three months and accounts under legal proceedings) increased from 0.7% in 2003 to 1.4% in 2004 and 1.7% at the end of June 2005, it is below the average of peers rated by TRIS Rating. Moreover, TCA has set an allowance for possible loan losses to sufficiently cover all NPLs.
As the size of TCA's portfolio will be unlikely to expand in the medium term, the management has decided to reduce the capital base by returning half of TCA's paid up capital, worth Bt400 million, to the shareholders. The strong capital base will deteriorate after the implementation of the capital reduction plan in the first half of 2006, TRIS Rating said. -- End
Thai Commercial Auto Co., Ltd. (TCA) Company Rating: Affirmed at BBB+ Issue Rating: Bt500 million senior debentures due 2006 Affirmed at BBB+ Rating Outlook: Stable
While the "stable" outlook reflects TRIS Rating's expectation that TCA will continuously receive business and financial support from its major shareholders. The outlook may be revised if the TCA's shareholder structure or business model changes.
TRIS Rating reported that after TISCO Bank, one of TCA's three shareholders, consolidated its business strategy and centralized its group's operation in 2004, TCA has provided automobile hire purchase services for only the Yontrakit Group's clients, while TISCO Bank has served for non-Yontrakit Group's hire purchase demand. Therefore, the Yontrakit Group's business performance will directly influence TCA's business direction. As total sales of automobiles by the Yontrakit Group were slow down, TCA's new loans for the Yontrakit Group decreased from Bt1,275 million in 2003 to Bt974 million in 2004. The outstanding loans also continuously decreased from Bt2,855 million in 2003 to Bt2,389 million in 2004 and Bt2,298 million at the end of June 2005. TRIS Rating expects that as long as Yontrakit Group does not improve its market position in the automobile market, TCA's portfolio will decrease over the next 2-3 years.
However, TRIS Rating said, TCA's asset quality is considered good, as it applies the same standard for credit approval as TISCO Bank, and uses the same asset quality control system. Although the ratio of non-performing loans (NPLs) (overdue more than three months and accounts under legal proceedings) increased from 0.7% in 2003 to 1.4% in 2004 and 1.7% at the end of June 2005, it is below the average of peers rated by TRIS Rating. Moreover, TCA has set an allowance for possible loan losses to sufficiently cover all NPLs.
As the size of TCA's portfolio will be unlikely to expand in the medium term, the management has decided to reduce the capital base by returning half of TCA's paid up capital, worth Bt400 million, to the shareholders. The strong capital base will deteriorate after the implementation of the capital reduction plan in the first half of 2006, TRIS Rating said. -- End
Thai Commercial Auto Co., Ltd. (TCA) Company Rating: Affirmed at BBB+ Issue Rating: Bt500 million senior debentures due 2006 Affirmed at BBB+ Rating Outlook: Stable