(Repeat for additional subscribers)
June 9 (The following statement was released by the rating agency)
Fitch Ratings has upgraded PT Panin
Sekuritas Tbk's (Panin Sekuritas) National Long-Term Rating to 'AA-(idn)' from
'A+(idn)'. The Outlook is Stable. At the same time, Fitch also has assigned a
National Short-Term Rating of 'F1+(idn) to the company.
'AA(idn)' Long-Term National Ratings denote expectations of very low default
risk relative to other issuers or obligations in the same country. The default
risk inherently differs only slightly from that of the country's highest rated
issuers or obligations.
KEY RATING DRIVERS
The rating upgrade reflects improvement in Panin Sekuritas's risk profile, which
is underpinned by robust capitalisation and low leverage, resilient performance
in earnings and asset quality as well as manageable exposure in its investment
activities to market risks. In addition, the rating upgrade also considers the
improved regulatory environment, including new rules to set a minimum free float
for publicly listed companies at 7.5% of paid-up capital, which are aimed at
increasing liquidity in the stock market.
Panin Sekuritas' equity to asset ratio has been consistently high and improved
in the last two years due to limited borrowings and strong internal capital
generation. The ratio rose to 74% in 2013from 56% in 2012, thanks to substantial
retention of earnings. The company's business expansion has been largely funded
through its own retained earnings.
Panin Sekuritas's asset management fees continued to increase in the last two
years and were the largest revenue contributor of around 65% of total revenue in
2013. Its assets under management (AUM) of IDR 15tn at end-2013 made it the
sixth-largest asset manager in Indonesia. Panin Sekuritas accounted for about
1.39% of total trading value in the Indonesian brokerage market, placing it 23rd
out of 116 securities companies with Panin Sekuritas's retail accounts
comprising of about 97% of total brokerage clients.. In Fitch's view, Panin
Sekuritas is one of the strongest domestic securities companies in Indonesia
because of its resilient and strong performance in revenue and profitability
through cycles and contained market risk exposures.
The Stable Outlook reflects Fitch's expectation that Panin Sekuritas will
maintain a steady risk profile over the near to medium term without significant
increase in leverage.
Upward rating potential is limited given that the capital market in Indonesia is
still evolving, it is susceptible to external shocks and it is reliant on
wholesale short-term funding. Upward rating potential is also limited by the
weaker regulatory and operating environment in the brokerage sector compared
with the banking industry. Downward pressure may arise from a material increase
in risk appetite such as overly aggressive proprietary trading and margin
financing, and significant increase in leverage for new business ventures.