TRIS Rating affirms the company rating on Singer Thailand PLC (SINGER) at “BBB-” and revises the outlook to “stable” from “negative”. The outlook revision reflects SINGER’s improved asset quality, revenue stability, and earnings quality.
The rating also incorporates its relatively strong capital. However, its modest franchise and exposure to relatively high-risk segments of retail consumer finance and commercial lending for small- and medium sized enterprises (SMEs) constrain its rating.
TRIS expects improvement in SINGER’s earnings quality over the next few years. Competitive dealer pricing policies should continue to be effective in sustaining the company’s gross margins. At the same time, its retail business with diversified geography, and a recent move into auto-title lending should help generate more stable loan yields on a risk-adjusted basis. TRIS also expects the company’s business growth by expanding its franchise network to help maintain low operating expenses.
While forecasting SINGER’s profitability, as measured by earnings before taxes over average risk-weighted assets (EBT/ARWA) around 5.3% in 2020 and 4.1% in 2021-2022. SINGER has been able to improve its earnings since 2019 as EBT/ARWA rose to 2.7%, from -1.1% in 2018. Lower credit costs as well as improved gross margins and operating efficiencies were key drivers for the improvements.