(The following statement was released by the rating agency)
Feb 19 - Fitch Ratings has affirmed Indonesia-based PT Toyota Astra Financial Services’ (TAFS) National Long-Term Rating at ‘AAA(idn)’ with Stable Outlook. At the same time the agency has assigned TAFS a National Short-Term Rating of ‘F1+(idn)'.
Fitch has also assigned TAFS’s proposed unsecured senior bond III of up to IDR1.5trn with a maturity of up to four years a National Long-Term Rating of ‘AAA(idn)’ and a National Short Term Rating of ‘F1+(idn)'. Proceeds from the issue will be used to support business growth.
Its IDR1.3trn senior bond II issued in 2012 has been affirmed at National Long-Term ‘AAA(idn)'.
Rating Action Rationale
TAFS’s ratings reflect strong support from Toyota Financial Services Corporation (TFSC), one of its two major shareholders. TFSC is a wholly owned subsidiary of Toyota Motor Corporation (TMC; ‘A’/Stable), one of the biggest automotive manufacturers in the world. As part of the Toyota group, TAFS benefits from product knowledge-sharing and funding support. The latter is derived from TMC’s strong relationship with Japanese banks and Japanese government-backed financial institutions.
TAFS also benefits from support from Astra International (AI), the other major shareholder, particularly in dealership networks. AI is a leading car distributor in Indonesia and holds exclusive rights for Toyota sales in the country.
The new bonds are rated at the same level as TAFS’s National ‘AAA(idn)’ Long-Term rating to reflect Fitch’s view that they represent direct, unconditional, unsecured and unsubordinated obligations of the company.
Rating Drivers and Sensitivities
Any decline in TMC’s ownership would exert downward pressure on its ratings as would diminished support from both shareholders. However, Fitch sees this prospect as remote in the foreseeable future, given TAFS’s strategic role in TMC’s and AI’s Toyota car financing business. There is no upside potential for the National Rating, which is already at the peak of the scale.
TAFS’s debt/equity ratio (DER) fell to 7.3x at end-September 2012 from 8x at end-2011, following capital injection of IDR150bn from its major shareholders in Q112 to support growth. TAFS’s receivables increased to IDR12.6trn at end-September 2012 (2011: IDR11trn) and its market share was stable at about 27% of Toyota car credit sales in 2012.
In Fitch view, being a captive finance company that only focuses on new car financing, TAFS’s profitability is lower than that of peers that engage in new and used car financing. Return on asset (ROA) and return on equity (ROE) stood at about 2% and 21% respectively in Q312. However, Fitch expects TAFS’s profitability to improve in medium-term as the company will embark on used car financing as early as March 2013.
TAFS’s asset quality remains manageable with non-performing loans remaining stable at 0.4% at end-September 2012. Fitch expects pressure on asset quality to mount in line with business growth, particularly outside Java. However, TAFS has a tight financing policy and has maintained adequate reserves in anticipation of a rise in non-performing loans.
TAFS was established by TFSC to support Toyota car sales in Indonesia. It is equally owned by TFSC and AI.