TRIS Rating Co., Ltd. has assigned a rating of “A-” to the proposed issue of up to Bt300 million in senior debentures of Phatra Leasing PLC (PL). At the same time, TRIS Rating has affirmed the company and current issue ratings of PL at “A-” with “stable” outlook. The ratings reflect the proven ability of PL’s management to maintain a strong market position in the automobile operating lease business despite increasingly intense competition and an unfavorable operating environment. The ratings also reflect PL’s experienced management team, good credit risk and residual risk management systems, as well as conservative underwriting process, which have enabled the company to maintain a good asset quality as the loan portfolio expands. The ratings also take into consideration increasing demand from corporates for outsourced automobile maintenance services. The uncertain operating environment will continue to be a major constraint on profitability and business expansion.
The “stable” outlook reflects PL’s ability to maintain its leading position in the automobile operating lease business and deliver medium-term performance as expected. The company is likely to retain major customers, as well as expand the customer base, while maintaining good asset quality. However, profitability is still pressured by intense competition and unexpected losses from changes in the economic and operating environment.
TRIS Rating reported that PL was able to maintain its position as the market leader in automobile operating lease business. The company has more than 20% market share of total leased assets in 2007 held by 25 large operators in TRIS Rating’s database. The company renders both operating lease and finance lease services to medium- and large-sized companies. As of March 2009, PL had assets of Bt5,600 million, of which 83% was leased assets. A strong nationwide service network and a large capital base enhanced PL’s ability to service large customers. This caused PL to have high exposure to concentration risk. However, the risk was offset by low default risk as large customers are financially reliable. With good credit risk management, PL had good asset quality. As of March 2009, the amount of overdue leases was only Bt2.5 million, or 0.05% of the total portfolio.
PL’s expertise with a proven track record and operating efficiency in operating lease business support its ability to attract new client base. New leased assets rose from Bt1,054 million in FY2006 to Bt1,631 million in FY2007 and Bt2,198 million in FY2008. For the first half of FY2009, new leased assets were Bt863 million, down from Bt1,166 million for the same period in FY2008. Average new lease assets per quarter decreased from Bt549 million in FY2008 to Bt432 million for the first half of FY2009. Currently, leased assets are more diversified; the company serves more than 500 customer accounts nationwide. There are moves to capture synergies with the major shareholder, Muangthai Life Assurance PLC. However, these efforts have not yet been strongly realized.
TRIS Rating said, PL’s net profit was Bt105 million for the first half of FY2009, up from Bt91 million for the same period of FY2007. The increase was mainly due to more gains from the disposal of leased assets. PL funded most of the asset growth by borrowing, which drives up leverage. As of March 2009, the ratio of debt to total equity was 2.31 times, up from 2.23 times at the end of FY2008 (September 2007) and 1.93 times at the end of FY2007. PL has tried to manage debt duration through long-term borrowings to match the tenor of lease contracts (most of which are three to four years). The company’s management mitigated liquidity risk by securing long-term credit lines from commercial banks in March 2009. Its short-term debts (including debentures) to total debts, therefore, declined to 43.4% as of March 2009 from 49.5% as of September 2008. The proceed from the proposed issue of up to Bt300 million in senior debentures with three-year tenor is to match asset structure in terms of both duration and interest rate structures. -- End
Company Rating: Affirmed at A- Issue Ratings: PL104A: Bt400 million senior debentures due 2010 Affirmed at A- PL105A: Bt120 million senior debentures due 2010 Affirmed at A- PL109A: Bt400 million senior debentures due 2010 Affirmed at A- PL113A: Bt700 million senior debentures due 2011 Affirmed at A- PL114A: Bt160 million senior debentures due 2011 Affirmed at A- PL11NA: Bt140 million senior debentures due 2011 Affirmed at A- Up to Bt300 million senior debentures due 2012 A- Rating Outlook: Stable
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