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April 30 (The following statement was released by the rating agency)
Fitch Ratings (Thailand) Limited has affirmed the National Long-Term Ratings of Aeon Thana Sinsap (Thailand) Public Company Limited (AEONTS) at 'BBB+(tha)'. The Outlook is remains Positive. The National Short-Term Rating has also been affirmed at 'F2(tha)'.
KEY RATING DRIVERS
The ratings reflect AEONTS' franchise strengths, acceptable performance, and effective origination and collection capabilities. The consumer finance company faces increased operating risks this year due to weaker economic conditions and rising levels of household debt in Thailand. As long as there are no severe and unanticipated shocks, these challenges should be manageable given the company's history of operating through volatile times.
AEONTS is dependent on wholesale funding, but refinancing risks appear manageable in the short term due to its strong banking relationships (particularly with Japanese banks) and access to debt capital markets. However, AEONTS' own banking relationships could be hurt if there is major credit deterioration at its Japanese parent, Aeon Financial Service Company Limited.
Leverage ratios have improved only incrementally despite strong profitability, due to high growth and dividend payouts. However, the leverage is comparable to other consumer finance companies rated by Fitch and is appropriate at these rating levels.
The Positive Outlook reflects AEONTS' success in navigating recent stressed environments, such as the extensive flooding in late 2011, and recent improvement in its performance, which we expect to be maintained.
While the Positive Outlook suggests potential upside to the company's rating, Fitch is still waiting to see evidence of sustained improvement in capitalisation, as well as more clarity in the economic environment. Continued profitability by the company at current levels, without a corresponding increase in risk appetite, could result in positive rating action on AEONTS.
The Positive Outlook may be removed if there continues to be no material change in leverage ratios, or if the company's growth strategy results in significantly weaker asset quality.
A material weakening in AEONTS' liquidity profile or funding situation could result in negative rating action.