TRIS Rating Co., Ltd. has affirmed the company rating of Siam Panich Leasing PLC (SPL) and the ratings
of SPL’s senior debentures and bills of exchange at “A-” with “stable” outlook. The ratings are based on the company’s strong market position in the automobile hire purchase business, the ability to continuously expand its loan portfolio by geographic diversification through provincial branches, conservative asset and liability management, as well as its experienced management team. However, these strengths are partially offset
by intense competition and rising interest rates, more risk exposure from an increasing proportion of used
car hire purchase clients, and higher losses from repossessed assets which affect the company’s profitability. Moreover, uncertain economic conditions and sustained high oil prices should adversely impact demand for automobile hire purchase loans.
The “stable” outlook reflects SPL’s experienced management team and efficient operating
system, enabling the company to maintain both its market position and portfolio growth in line with
TRIS Rating’s expectations. Moreover, despite the economic slowdown resulting from many negative
events, SPL is expected to be able to maintain its profitability and asset quality at an acceptable level. If
SCB’s tender offer succeeds as planned, TRIS Rating will review the business and financial profile of SPL
after seeing evidence of the benefits derived from increasing ownership by SCB.
TRIS Rating reported that SPL is one of Thailand’s leading automobile financing operators. The company’s total loan portfolio grew by 14.4% last year, from Bt37,341 million at the end of 2004 to Bt42,710 million at the end of 2005. Its net interest income for 2005 was reported at Bt2,048 million, 4.2% higher than Bt1,966 million in 2004. SPL’s net profit increased only 3.1% because operating expenses rose by 19.1%, partially offsetting the benefits of higher revenue. The company’s operating expenses to total income ratio increased from 17.8% in 2003 to 20.7% in 2004 and 21.8% in 2005 because the company has suffered losses on repossessed assets.
TRIS Rating said that rising interest rates have forced SPL’s funding costs higher while the interest rates charged to customers have not increased as rapidly as funding costs. The result is a narrowing spread as the company could not pass on increasing funding costs to its customers because the competition in the new car hire purchase market remains intense. To mitigate the pressure on narrowing spreads, SPL has focused more on the used car hire purchase segment which gives higher yields. However, more used car hire purchase loans may impact SPL’s overall asset quality, provisions for loan losses, and finally, profitability.
TRIS Rating said, currently, Siam Commercial Bank PLC (SCB), SPL’s major shareholder, is in the process of making a voluntary tender offer for 135,204,161 outstanding shares of SPL at Bt38 per share. SCB Group currently owns 37.11% of SPL. SCB’s tender offer will be valid only when it gets at least an additional 37.89% ownership stake through the tender, ultimately owning not less than 75% of SPL’s shares. TRIS Rating expects that by becoming a strategic entity under the SCB umbrella, SPL’s business and financial profile should strengthen as it can leverage on SCB’s nationwide branch network and funding sources. — End
Siam Panich Leasing PLC (SPL)
Company Rating: Affirmed at A-
Issue Ratings:
SPL06NA: Bt600 million senior debentures due 2006 Affirmed at A-
SPL073A: Bt3,500 million senior debentures due 2007 Affirmed at A-
SPL073B: Bt3,500 million senior debentures due 2007 Affirmed at A-
SPL074A: Bt500 million senior debentures due 2007 Affirmed at A-
SPL075A: Bt1,250 million senior debentures due 2007 Affirmed at A-
SPL07OA: Bt400 million senior debentures due 2007 Affirmed at A-
SPL081A: Bt810 million senior debentures due 2008 Affirmed at A-
SPL081B: Bt500 million senior debentures due 2008 Affirmed at A-
SPL083A: Bt4,000 million senior debentures due 2008 Affirmed at A-
SPL091A: Bt300 million senior debentures due 2009 Affirmed at A-
SPL102A: Bt900 million senior debentures due 2010 Affirmed at A-
SPL109A: Bt300 million senior debentures due 2010 Affirmed at A-
Bt225 million bills of exchange due 2008 Affirmed at A-
Rating Outlook: Stable