Hire Purchase Business
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Benefits from interest rate downtrend
Benefits from interest rate downtrend… led by ASK and GL
- Big banks march to cut loan and deposit rate… hirepurchase sector still not on same way
- ASK and GL get most benefits from interest rate
downtrend
- Top picks are ASK, GL and AEONTS due to tendency of
outstanding ESP growth in 2013 Market cap (B bn) 92.24
- Big banks march to cut loan and deposit rate… hirepurchase sector still not on same way
The big banks (BBL, SCB and KBANK) have announced the cut of loan and
deposit rate. While the loan rate has been cut by 0.125%, the deposit rate
has been cut even further by 0.125-0.25% during the past 2-3 days to be in
line with the BOT’s policy of low interest rate. The policy interest rate (RP 1-
day) is cut by 0.25% to 2.75% for the sake of domestic economic growth,
especially in terms of domestic investment and spending which have been
affected constantly by the deceleration of global economy. For 6
entrepreneurs of the leasing sector under our coverage (especially the auto
and motorcycle hire-purchase companies which are ASK, GL, and TK), they
are projected not to announce the loan rate cut in anytime soon since the
need for loans is still aggressive and most of the entrepreneurs haven’t
revised up the interest rate due to highly aggressive competition. For
AEONTS and IFS, AEONT’s loan structure focuses on cash loan and credit
card (mostly are floating-rate loans) while IFS focuses on factoring loan
business which is also a floating rate. Accordingly, we project that AEONTS
and IFS are unlikely to get much of benefits from the interest rate
downtrend. For KCAR (the entrepreneur of auto hire for operating lease and
used car business), it barely has benefited from the interest rate downtrend
because the company’s revenue isn’t in the form of interest income while
most of the capital is fixed cost from car financing from domestic hirepurchase companies, which is currently in a very low level already.
- ASK and GL get most benefits from interest rate
downtrend
ASK (the entrepreneur of auto hire-purchase) and GL (the entrepreneur of
motorcycle hire-purchase) are projected to get most benefits from the
interest rate downtrend. According to the mentioned 2 companies’ debt
structure, there’s short-term debt with 80% floating interest rate of the total
debt while the loan structure is with fixed interest rate. The cut of loan rate
for the hire-purchase is projected not to be seen anytime soon, likely to be
beneficial for the companies’ spread during 4Q12 which is the peak of this
industry.
- Top picks are ASK, GL and AEONTS due to tendency of
outstanding ESP growth in 2013
For the auto/motorcycle hire-purchase sector, top picks are ASK (BUY,
[email protected]) and GL (BUY, 2013FV@B70). In term of the consumer
finance sector, top pick is AEONTS (BUY, [email protected]) due to tendency
of 2012-2013 net profit’s aggressive growth and the outstanding average
2012-2013 dividend yield of over 5% p.a. (as illustrated on the table of the
next page).
