15 May 2017
Fast-growing SET-listed digital finance firm Group Lease Public Company Limited (GL) has reported impressive profits of 327.36 million baht in the first quarter this year, up 47.35% from the same period last year, on the back of improved performance in Thailand and most of the other regional markets in which the group operates.
The Q1 profits represent a new record high for the tenth consecutive quarter, up from the 324.40 million baht net profits in the last quarter of 2016.
In an official filing with the Stock Exchange of Thailand (SET) today (May 15), the company also disclosed that GL Holdings (GLH, a wholly-owned subsidiary in Singapore) resolved in a Board decision on May 9 to pay a US$9.99 million (about 346 million baht) dividend to GL within May 17. The dividend should provide a significant boost to the company’s operating results in the current quarter.
Chairman of GL’s Executive Committee Mr. Tatsuya Konoshita noted that the Q1 results could have been better if it had not been for the large investment expenses incurred to jump-start businesses in the two high-potential markets of Indonesia and Myanmar. “It was in the early phase and developmental stage of New Countries and New Products, but our business operations in this quarter made historical high profits,” Mr. Konoshita stated.
Significantly, Mr. Konoshita said the Q1 financial statements were given a “clean” audit by the company’s auditor Ernst & Young. As GL’s management had stated before, there was no need for any provisions for bad loans to the company’s two groups of major borrowers in Singapore and Cyprus or for impairment of GL’s investment in the Sri Lanka-listed finance firm Commercial Credit & Finance (CCF).
There had been concern among some GL shareholders over the need to provide an impairment charge for GL’s 29.99% stake in CCF since CCF’s price on the Colombo Stock Exchange had fallen from the time of GL’s acquisition. But Mr. Konoshita stressed that this was not necessary since CCF is a highly profitable company and GL treats this as a long-term investment. GL fully consolidated about 55.5 million baht profit of profit from CCF in the Q1 results.
The CCF profit contribution made up about 20% of GL’s total Q1 profits while the bulk of the remaining 80% came from operations in Thailand and Cambodia with the three other markets of Laos, Indonesia and Myanmar making smaller contributions since operations there are still in an early stage.
Mr. Konoshita noted that Thailand operations are picking up after a slowdown for the past three years in accordance with company strategy. On the company’s mainstay of motorcycle leasing, average monthly sales had risen from about 4,100 units in the first quarter last year to more than 4,500 units in the same period this year despite April being full of holidays as the company has increased the number of motorcycle contract dealers.
The Thailand business is also enhanced by a new addition to the hhire purchase division for second-hand motorcycles which is taking off after being introduced on a trial basis over the past year.
Meanwhile, GL’s operations in Cambodia have slowed down somewhat due to a drought which has affected the local economy, but sales of Honda motorcycles, Kubota agricultural machinery and solar panels are expected to pick up this year in light of more plentiful rainfalls.
Aside from motorcycle leasing, the company has also introduced “Asset-backed Loans” type of business in Cambodia as a new line of business whereby clients who already own motorcycles obtain financing by using their vehicles as collateral, Group Loans in Indonesia as new products and by new subsidiary in Myanmar.
Mr. Konoshita is bullish on the long-term growth potentials of the Indonesian and Myanmar markets where the group’s operations are in the early stages of development.
While the sheer size of the Indonesian market (with a population of more than 250 million) offers enormous opportunities for various financial services, Mr. Konoshita is particularly upbeat on the prospect in Myanmar where GL recently obtained a five-year exclusive license to provide financing for Honda, similar to the exclusive deal for Honda in Cambodia.
The Myanmar market is estimated to be roughly one million motorcycle sales per year (more than three times the size of the Cambodian market), yet Honda currently only has a 10% market share or about 100,000 units since the brand entered the Myanmar market only recently. The bulk of the market is dominated by low-quality Chinese models. “This means there is plenty of room for growth as Honda increases its market share to more than 50% in several years, and GL is the only finance company which can provide the financing for this market,” Mr. Konoshita stated.