TRIS Rating Co., Ltd. has assigned the company rating of Krungthai Car Rent & Lease PLC (KCAR) at “BBB+” with “stable” outlook. The rating reflects KCAR’s experienced management team and improving market position supported by its increased capital after recapitalization in late 2005. The rating also reflects KCAR’s relatively strong profitability and efficient management of residual risk as shown by higher revenues from gain on sale of leased assets. The rating also takes into consideration the business’s stable revenue flow from mostly three-year contracts with its clients. Moreover, rising corporate demand for outsourced automobile operating lease services also supported opportunities for business growth. However, an uncertain operating environment and fierce competition may constrain profitability and the ability to expand business. In addition, as KCAR’s leased assets have been significantly boosted over the last three years, its capability to handle and manage sizable portfolio during expansion period has yet to be monitored.
The “stable” outlook is based on TRIS Rating’s expectation that KCAR will be able to maintain its market position by retaining existing major customers and acquiring new accounts. Profitability is expected to be maintained through cost control and recurring gain from the sale of leased assets.
TRIS Rating reported that KCAR was established in 1992 by Mr. Paitoon Chantarasereekul to operate an automobile operating lease business. The company was listed on the Stock Exchange of Thailand (SET) in
late 2005. Currently, the Chantarasereekul family holds a majority stake (75.2%) in KCAR. The company is currently headed up and managed by a second generation of the Chantarasereekul family. KCAR provides both long-term and short-term automobile operating lease services. In terms of net leased assets, KCAR is the third largest domestic automobile operating lease operator among 25 players in TRIS Rating’s database. KCAR’s net leased assets have nearly doubled, rising from Bt1,283 million in 2004 to Bt2,299 million in 2007. In 2006-2007, operating leases accounted for approximately 90% of total rental revenue, up from 85% in 2004 and 83% in 2005. At the end of 2007, the company owned 4,657 automobiles with 90% under operating lease contracts, and the remainder for short-term rentals and replacement.
TRIS Rating said, KCAR has a competitive advantage through vertical integration with its related companies. Approximately 50% of leased assets are acquired through authorized car dealers owned by the Chantarasereekul family. KCAR benefits by getting more information about special promotions to be offered by car manufacturers which may enable the company to acquire new cars fleet at lower cost. In addition to more than 500 outsourced automobile maintenance service centers nationwide, KCAR also has its own automobile maintenance service center. The service center helps KCAR control unnecessary maintenance expenses which may occur from some outsourced service centers. KCAR liquidates all leased assets through its subsidiary, Krungthai Automobile Co., Ltd. (KA), after the contracts expire. With KA’s experienced management team and certification of used cars under the “Toyota Sure” program, KCAR is able to achieve higher prices than liquidation through traditional auction agents. The company has consistently recorded gains from sale of residual assets, a gain of Bt121 million and Bt149 million in 2006 and 2007, respectively, which contributed 12% to KCAR’s total consolidated revenue for both years.
Despite decreasing profitability, KCAR’s net profit margin of 18.1% in 2007 is considered relatively high compared with peer companies. As KCAR funded a substantial portion of the growth in leased assets through borrowings, the ratio of debt to capitalization increased from 60.5% in 2005 to 64.1% in 2007. KCAR’s financial flexibility is moderate, with some mismatches of its assets and liabilities structure in the short term. However, the highly liquid nature of its assets for disposal is expected to partly mitigate this liquidity risk, said TRIS Rating. -- End
Krungthai Car Rent & Lease PLC (KCAR)
Company Rating: BBB+
Rating Outlook: Stable
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Copyright 2008, TRIS Rating Co., Ltd. All rights reserved. Any unauthorized use, disclosure, copying, republication, further transmission, dissemination, redistribution or storing for subsequent use for any purpose, in whole or in part, in any form or manner or by any means whatsoever, by any person, of the credit rating reports or information is prohibited. The credit rating is not a statement of fact or a recommendation to buy, sell or hold any debt instruments. It is an expression of opinion regarding credit risks for that instrument or particular company. The opinion expressed in the credit rating does not represent investment or other advice and should therefore not be construed as such. Any rating and information contained in any report written or published by TRIS Rating has been prepared without taking into account any recipient’s particular financial needs, circumstances, knowledge and objectives. Therefore, a recipient should assess the appropriateness of such information before making an investment decision based on this information. Information used for the rating has been obtained by TRIS Rating from the company and other sources believed to be reliable. Therefore, TRIS Rating does not guarantee the accuracy, adequacy, or completeness of any such information and will accept no liability for any loss or damage arising from any inaccuracy, inadequacy or incompleteness. Also, TRIS Rating is not responsible for any errors or omissions, the result obtained from, or any actions taken in reliance upon such information.
The “stable” outlook is based on TRIS Rating’s expectation that KCAR will be able to maintain its market position by retaining existing major customers and acquiring new accounts. Profitability is expected to be maintained through cost control and recurring gain from the sale of leased assets.
TRIS Rating reported that KCAR was established in 1992 by Mr. Paitoon Chantarasereekul to operate an automobile operating lease business. The company was listed on the Stock Exchange of Thailand (SET) in
late 2005. Currently, the Chantarasereekul family holds a majority stake (75.2%) in KCAR. The company is currently headed up and managed by a second generation of the Chantarasereekul family. KCAR provides both long-term and short-term automobile operating lease services. In terms of net leased assets, KCAR is the third largest domestic automobile operating lease operator among 25 players in TRIS Rating’s database. KCAR’s net leased assets have nearly doubled, rising from Bt1,283 million in 2004 to Bt2,299 million in 2007. In 2006-2007, operating leases accounted for approximately 90% of total rental revenue, up from 85% in 2004 and 83% in 2005. At the end of 2007, the company owned 4,657 automobiles with 90% under operating lease contracts, and the remainder for short-term rentals and replacement.
TRIS Rating said, KCAR has a competitive advantage through vertical integration with its related companies. Approximately 50% of leased assets are acquired through authorized car dealers owned by the Chantarasereekul family. KCAR benefits by getting more information about special promotions to be offered by car manufacturers which may enable the company to acquire new cars fleet at lower cost. In addition to more than 500 outsourced automobile maintenance service centers nationwide, KCAR also has its own automobile maintenance service center. The service center helps KCAR control unnecessary maintenance expenses which may occur from some outsourced service centers. KCAR liquidates all leased assets through its subsidiary, Krungthai Automobile Co., Ltd. (KA), after the contracts expire. With KA’s experienced management team and certification of used cars under the “Toyota Sure” program, KCAR is able to achieve higher prices than liquidation through traditional auction agents. The company has consistently recorded gains from sale of residual assets, a gain of Bt121 million and Bt149 million in 2006 and 2007, respectively, which contributed 12% to KCAR’s total consolidated revenue for both years.
Despite decreasing profitability, KCAR’s net profit margin of 18.1% in 2007 is considered relatively high compared with peer companies. As KCAR funded a substantial portion of the growth in leased assets through borrowings, the ratio of debt to capitalization increased from 60.5% in 2005 to 64.1% in 2007. KCAR’s financial flexibility is moderate, with some mismatches of its assets and liabilities structure in the short term. However, the highly liquid nature of its assets for disposal is expected to partly mitigate this liquidity risk, said TRIS Rating. -- End
Krungthai Car Rent & Lease PLC (KCAR)
Company Rating: BBB+
Rating Outlook: Stable
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Copyright 2008, TRIS Rating Co., Ltd. All rights reserved. Any unauthorized use, disclosure, copying, republication, further transmission, dissemination, redistribution or storing for subsequent use for any purpose, in whole or in part, in any form or manner or by any means whatsoever, by any person, of the credit rating reports or information is prohibited. The credit rating is not a statement of fact or a recommendation to buy, sell or hold any debt instruments. It is an expression of opinion regarding credit risks for that instrument or particular company. The opinion expressed in the credit rating does not represent investment or other advice and should therefore not be construed as such. Any rating and information contained in any report written or published by TRIS Rating has been prepared without taking into account any recipient’s particular financial needs, circumstances, knowledge and objectives. Therefore, a recipient should assess the appropriateness of such information before making an investment decision based on this information. Information used for the rating has been obtained by TRIS Rating from the company and other sources believed to be reliable. Therefore, TRIS Rating does not guarantee the accuracy, adequacy, or completeness of any such information and will accept no liability for any loss or damage arising from any inaccuracy, inadequacy or incompleteness. Also, TRIS Rating is not responsible for any errors or omissions, the result obtained from, or any actions taken in reliance upon such information.