TRIS Rating Co., Ltd. has affirmed the company and current issue ratings of Ayudhya Capital Auto Lease PLC (AYCAL) at “A+”, and has also assigned the rating to AYCAL’s proposed issue of up to Bt7,000 million in senior debentures at “A+”. The outlook remains “stable”. The ratings are enhanced by AYCAL’s standalone rating supported by the credit profile of its parent company, Bank of Ayudhya PLC (BAY). The bank is rated “AA-” with “stable” outlook by TRIS Rating. AYCAL is BAY’s core strategic subsidiary in the automobile hire purchase business, which helps fulfill BAY’s universal banking services. AYCAL’s standalone rating is based on the company’s strong market position in the automobile and motorcycle hire purchase businesses, experienced management team with a proven track record, and its good risk management system. However, these strengths are partially offset by an intense competition in used automobile and motorcycle hire purchase businesses and uncertainty in changing operating environment, which may pressure AYCAL’s business expansion, financial performance and asset quality in the future.
The “stable” outlook reflects the expectation that AYCAL’s business direction continues to closely align with BAY Group’s business strategy, and the company continues to get strong support from BAY. The outlook also considers the ability of the management team to sustain strong market position in the auto and motorcycle hire purchase businesses. With experienced management, good risk management system, and strong support from BAY, TRIS Rating expects the company would be able to maintain assets in good quality and improve the financial performance in the medium term.
TRIS Rating reported that AYCAL became BAY’s wholly-owned subsidiary in February 2008, following BAY’s business reorganization after GE Capital International Holdings Corporation (GECIH) purchased a 32.93% stake in BAY. AYCAL’s total receivables as of December 2009 accounted for 16% of BAY’s consolidated loan outstanding. Net income of AYCAL for 2009 contributed 30% to BAY’s consolidated net income for the same period. Business and financial supports from BAY are expected to enhance AYCAL’s market position in its core businesses and improve its financial flexibility. AYCAL is one of the subsidiaries getting priority from BAY’s financial supports, as reflected in the proportion of outstanding amount of lending from BAY to AYCAL at 74% of BAY’s total lending to subsidiaries as of June 2009 (up from 26% as of June 2008).
As part of the reorganization of BAY in late 2008, AYCAL became a sole subsidiary for BAY’s auto loan business, providing hire purchase financing for the purchase of new cars, used cars, and motorcycles. AYCAL also renders secured personal loans services through auto sales and lease back, under the brand “Car4Cash”. AYCAL is able to maintain the strong market position despite the slowdown in auto hire purchase market as a consequence of the downturn of Thailand’s automobile industry. The company is the second largest among 20 auto hire purchase operators in the TRIS Rating’s database, with Bt97 billion of outstanding loans or a 13.5% market share as of June 2009, slightly increased from 12.9% in 2008. Also, the company is the second largest motorcycle hire purchase operator, having outstanding loans of more than Bt5 billion as of December 2009.
With 16 years of experience in the industry, AYCAL has developed a proficient management team and business platform that has enabled the company to compete successfully. AYCAL has applied the risk management model from its parent company’s practice. Both AYCAL and BAY, therefore, are regulated under the same standard criteria set by the Bank of Thailand. Due to good credit risk management and an efficient collection system, AYCAL had good asset quality, despite its high risk portfolio. As of December 2009, non-performing loans (NPL), defined as delinquent loans with more than three months pass due to average outstanding loans, declined to 1.48% from 2.2% as of December 2008. This figure is considered low when compared with peers.
From the unaudited financial statement for 2009, AYCAL reported a net interest income of Bt7,118 million, or 24% higher than the amount of Bt5,731 million in 2008. Profitability improved in 2009, supported mainly by the increased average interest spread to 6.60% in 2009 from 5.88% in 2008. Net income was Bt1,979 million, up by 26% from Bt1,573 million in 2008. Return on average assets and return on average equity increased to 1.98% and 18.01%, respectively, in 2009 from 1.74% and 15.33% in 2008. The shareholders’ equity to total asset ratio increased to 11.14% at the end of 2009 from 10.90% in 2008. The level of capital of AYCAL is lower than other hire purchase operators in the high-risk market segments. However, TRIS Rating expects the level of capital to rise gradually from internal growth of operating income in the future. -- End
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