Group Lease looks to high margins in CLMV after sales rebound in Q4
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AFTER POSTING an impressive turnaround in the last quarter of 2014, Group Lease is pushing ahead with an aggressive expansion plan to capture the fast-growing and high-margin motorcycle-leasing markets in Cambodia, Laos, Myanmar and Vietnam (CLMV).
“We have already established a solid and extensive business infrastructure in Cambodia, where we passed the break-even point in mid-2014. Profits have grown steadily and will increase even more dramatically in the months and years ahead,” Mitsuji Konoshita, chairman and chief executive officer, said yesterday.
With the Cambodian business picking up momentum, GL is ready to launch leasing and micro-finance businesses in Laos.
“We have made all the necessary preparations, have installed all facilities and are now ready to go – just waiting for the licence from the Laotian central bank, which is expected shortly,” he said.
In Myanmar, where business is booming amid the government’s economic and political reforms, GL is seriously studying the market with plans to kick-start operations there next year while negotiating for a takeover of similar leasing and finance-related businesses in Vietnam.
“While we continue to grow in the [relatively mature] Thai market, we have also set a clear strategy to expand into CLMV,” he said.
The thrust into the relatively virgin markets in Thailand’s neighbours is coming as GL’s profit soared to Bt93.76 million in the last quarter of last year, compared with only Bt21.5 million in the first three quarters. Fourth-quarter profit was also up 606 per cent from Bt13.19 million in the same quarter of 2013.
It was also the best quarter for operating profit in the company’s history, since the peak of Bt107 million in the fourth quarter of 2012 included Bt27 million of provisioning that, if excluded, would have shown an operating profit of about Bt80 million.
The turnaround was attributed to Thailand’s economic recovery and larger contributions from overseas operations, especially in Cambodia.
“Business [in Thailand] has come back,” Konoshita said.
The company’s portfolio also soared from the takeover of Tanabun, a provider of motorcycle financing, last June.
Of the fourth-quarter net profit, Bt72.67 million was from Thai operations while the bulk of the remaining Bt21.09 million was from GL Finance (GLF), GL’s subsidiary in Cambodia.
According to unaudited consolidated statements filed with the Stock Exchange of Thailand, GL’s fourth-quarter interest income rose 36 per cent on year to Bt475.22 million, while provisions for bad and doubtful debts as well as losses from sales of seized vehicles decreased over the period.
The company continued to expand through Thailand’s economic bad times in the early part of last year, which resulted in its portfolio growing 50 per cent to about Bt6.3 billion at the end of the year.
“We continued to expand even during bad times so that we can reap the rewards when the good times come,” Konoshita said. “Well, the good times are here – we have seen profits rising in the fourth quarter and profit will shoot up even more.”
In Cambodia, GLF has set up an extensive nationwide network of 153 points of sale, including 132 at Honda dealers and 21 |at Kubota farm-equipment dealers.
“The Cambodian market offers high profit margins against very low provisions for non-performing loans. And because we are starting from a small base, the market there carries enormous growth potential,” he said.
GLF is now financing about 2,000 vehicles monthly in Cambodia, with sales projected to rise to 3,000 next month and hit 5,000 per month by year-end, compared with about 5,500-6,000 units sold monthly in Thailand.
And because of the fatter profit margin from the Cambodian operations, retained earnings from Cambodia are projected to surpass those of Thailand next year, since the market here is more competitive and margins here are leaner.
