Group Lease undertaking big step in Indonesia
GROUP Lease says it is embarking on a major expansion in Indonesia, which is expected to support substantial growth in revenue and net profits over the next five years after the company was granted an official licence by the authorities in that country.
“Our Indonesian operations will kick off to a ‘rocket start’ because we have been waiting for the licence for a long while and, in the process, have been making the various necessary preparations,” said Tatsuya Konoshita, chairman of GL’s executive board.
Spearheading the Indonesian operations will be Group Lease Finance Indonesia (GLFI), a joint venture among Group Lease Holdings (GLH, a GL subsidiary based in Singapore that holds 65 per cent), J Trust Asia (JTA, GL’s strategic partner, a subscriber to GL’s latest US$130-million batch of convertible debentures, holding 20 per cent of the JV) and local Indonesian partners holding the remaining 15 per cent.
Tatsuya projected that the Indonesian operations would eventually enjoy profit margins higher than in Thailand and Cambodia and would turn profitable in a very short period. This is thanks to a new fee-based model where GLFI will charge fees and commissions from various lines of consumer financing it manages while its partner J Trust Bank (Indonesia), through its network of 62 branches, provides the funding and is responsible for any non-performing loans.
Tatsuya added that GLFI would focus on agricultural machinery, second-hand motorcycles, assets-backed loans (such as cars and motorcycles), white goods (various types of electrical appliances) and solar panels.
GLFI also plans to expand into new areas of financing for low-income people such as housing finance and household refurbishment.
Since all preparations are ready, the company expects to sign the first client for agricultural machinery before the end of this month.
Out of its base in Thailand, GL has been expanding successfully into the neighbouring countries of Cambodia and Laos. Of the Bt222-million net profit in the first quarter of this year, more than half or about Bt120 million was contributed from operations outside Thailand, mostly from Cambodia.
GL says it has attached a great deal of importance to the Indonesian business, which represents a new phase of major expansion. GL chairman and chief executive officer Mitsuji Konoshita has said the Indonesian market, with its more than 250-million population, is 10 times the size of the Cambodian market.
“Significantly, about 70 per cent of the Indonesian market is still untapped by anybody,” Konoshita said.
The digital finance platform that GL has successfully developed in Cambodia will now be implemented in Indonesia. According to Tatsuya, the fee-based model in Indonesia will bring net profit margin of more than 40 per cent, which is significantly higher than in Cambodia and Thailand.
GLFI is now projecting net profit for the first full year of operation in 2017 to top Bt120 million and, according to Tatsuya, profits from the Indonesian operations are projected to balloon to 10 times the profits in Cambodia in five years’ time.
