TRIS Rating Co., Ltd. has affirmed the company and current issue ratings of Phatra Leasing PLC (PL) at “A-”, and has also assigned a “A-” rating to PL’s proposed issue of up to Bt500 million in senior debentures. The outlook remains “stable”. The ratings reflect the proven ability of PL’s management team to maintain a strong market position in the automobile operating lease business as well as the ability to expand the lease portfolio despite increasingly intense competition and an unfavorable operating environment. The ratings also reflect PL’s good credit risk and residual risk management systems along with a conservative underwriting process, which have enabled the company to maintain a good asset quality. The ratings also take into consideration an increasing demand from corporations for outsourced automobile maintenance services. The uncertain operating environment and intense competition will continue to be major constraints 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 its customer base, while maintaining good asset quality. However, profitability is still pressured by intense competition and an uncertain operating environment.
TRIS rating reported that PL continues to maintain its market-leading position as an automobile operating lease operator. In 2008, the company had more than 20% market share, measured by total assets for lease, the highest among the 25 large operators in TRIS Rating’s database. The company renders both operating lease and finance lease services to medium- and large-sized companies. At the end of FY2009 ending September 2009, PL had net assets for lease of Bt4,640 million and outstanding financial lease receivables of Bt662 million, up from Bt4,265 million and Bt334 million in FY2008. A strong nationwide service network and a large capital base enhance PL’s ability to service large-sized customers. PL has a high exposure to customer concentration risk. However, the risk has been mitigated by the low default risk of its large customers with relatively good quality. In addition, PL’s top 20 customers are now more diversified.
PL’s expertise together with a proven track record and operating efficiency in the operating lease business support its ability to attract new clients. New leased assets continuously rose from Bt1,054 million in FY2006 to Bt1,631 million in FY2007 and to Bt2,198 million in FY2008. In FY2009, despite an unfavorable business environment, new leased assets were Bt2,113 million, nearly the same level as FY2008. Since Muangthai Life Assurance Co., Ltd. became PL’s major shareholder in 2006, there have been moves to capture synergies between the two parties. However, the fruits of these efforts have not yet been fully realized.
TRIS Rating said, PL had a net profit of Bt218 million for FY2009, equal to FY2008. The return on average assets was 3.8% in FY2009, decreasing from 4.2% in FY2008. The drop in profitability was partly due to additional general provisioning expense for normal loans, following the expansion of financial lease portfolio. Given no extraordinary expenses and gradual recovery of economy, profitability is expected to improve in FY2010. PL’s satisfactory performance since FY2007 is partly benefited from the tax privilege from PL’s new investments in assets for lease, according to the announcement of the Director General of the Revenue Department with regard to income taxes (issue 156th). The tax benefit for PL will end in FY2010.
PL funded most of the asset growth by borrowing, which drives up leverage. At the end of FY2009, the ratio of debt to total equity was 2.30 times, up slightly from 2.23 times in FY2008. However, the ratio is adequate for PL to expand in the medium term. PL has maintained a stringent asset and liability management policy by managing debt duration through long-term borrowings to match the tenors of its lease contracts (most of which are three to four years). Since the ratio of short-term debts (including debentures) to total debts increased to 51.5% as of September 2009 from 49.5% as of September 2008, the proceeds from the proposed issue of up to Bt500 million in senior debentures with a three-year tenor will better match the asset structure in terms of both duration and interest rate structures, said TRIS Rating. -- 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- PL126A: Bt300 million senior debentures due 2012 Affirmed at A- Up to Bt500 million senior debentures due 2013 A- Rating Outlook: Stable
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