Leasing
Factoring loan to benefit if TCG approves loan guarantee Neutral
Leasing
- TCG to propose amendment to credit guarantee act
The Thai Credit Guarantee Corporation (TCG) is preparing to request the
Ministry of Finance to amend the Credit Guarantee Corporation Act
B.E.2534, extending its loan guarantee coverage from only financial
institutions to non-bank issuers e.g. leasing, factoring, and nano-financing
and expanding the service coverage from only individuals and SME
corporate businesses to small and micro community enterprises,
cooperatives, and bodies of persons. The increase in the guarantee line has
not been clearly determined, preliminarily estimated at least around B100bn
based on the liquidity used by SME entrepreneurs through leasing,
factoring, and non-bank loan issuers.
- IFS, LIT, ASK benefit most
We believe IFS, LIT, and ASK would benefit most from the growth of
factoring loans and lending, focusing on bid bond loans, project financing
loans, and trade financing loans, especially IFS whose factoring loans
comprise 85% of its total loans). According to a discussion with loan
entrepreneurs, the amendment is believed to be advantageous to the loan
business since it will help facilitate further growth despite the economic
slowdown, particular for small SMEs which have high demands for factoring
loans. In the past, since banks and financial institutions have implemented
strict loan issuance policy for factoring loans, these groups of customers had
to turn to non-bank loan issuers instead. If non-bank factoring loans are
guaranteed by the TCG, it will be able to grow more strongly with more
limited risk. According to TCG’s regulation, a borrower will have to be
responsible for the credit guarantee fee (1.75% p.a. of the guarantee
amount for each SME, maximum five years from the date of the issuance of
the credit guarantee document).
- We like IFS and ASK. LIT overvalued
We recommend buying IFS ([email protected]) and ASK ([email protected]); P/E ratio of
the two stocks are only 11x, with average dividend yield of 3-5% p.a. For
LIT (FV@B4), we recommend taking profit since the share price has
substantially been overvalued now.
