21 Jan 2014
SET-listed motorcycle leasing firm Group Lease Public Company Limited (GL) has decided to spend about 330 million baht to buy back its own stocks from the market in a Treasury Stock program aimed at enhancing its returns on equity (ROE) and boosting earnings per share (EPS).
GL chairman and chief executive Mitsuji Konoshita stated that the decision was prompted by the “unrealistically low prices” of GL shares that have been traded recently. “The prevailing share prices are far below our company’s fundamentals,” Mr. Konoshita stated. “Since we have plenty of liquidity now, we decided to use the excess liquidity to buy back our own stocks,” he added.
In an official filing with the SET today (Jan 21, 2014), GL said its Board of directors decided at a meeting yesterday (Jan 20,2014) to buy back 5% of the company’s paid-up capital of 1,025 million baht, or amounting to 51.25 million shares by using a budget of 330 million baht.
The Board resolution will be tabled for approval at the Annual General Meeting of Shareholders (AGM) in April before being implemented. The buy-back price will be based on the average prices of the five trading days prior to the final go-ahead decision plus a premium of no more than 15%.
The filing said the company will finance the Treasury Stock program by using surpluses from its operating cash flows and its 702 million baht retained earnings.
The latest move came as the company has embarked on a new overseas expansion drive to enter the motorcycle leasing market in Laos. An application has been lodged with the Bank of Laos (BoL) for an official license which is expected to be granted in the second quarter, while operations are projected to start in the third quarter.
The treasury-stock decision underscores the company’s confidence in its continuous growth potentials in Thailand, neighboring Cambodia and the latest new market in Laos. Against earlier forecasts of monthly sales in Thailand reaching about 10,000 units at this time, Mr. Konoshita stated that the actual sales today are about 7,000 units or roughly the same as a year ago due to the general economic slowdown in 2013 and the ongoing political crisis which has undercut consumers’ confidence.
But thanks to GL’s aggressive sales growth over the last few years – the current monthly sales of 7,000 units roughly tripled from the numbers three years ago — total outstanding portfolios now stand at about 4.5 billion baht, or a substantial 45% increase from a year ago. The company has put a conservative estimate that this will rise to 5 billion baht by year end.
Meanwhile, GL’s outlook in Cambodia appears more promising. According to Mr. Konoshita, monthly sales of about 770 units last month are expected to reach 2,000 by Songkran this year. GL’s operations in Phnom Penh, undertaken by its wholly-owned subsidiary GL Finance (GLF), had stalled somewhat in recent months because of the political unrest there but now that the situation has returned to normal, sales are expected to pick up aggressively. Monthly sales are expected to hit 4,000 units by end-2014.
The GL management is bullish on the likely substantial revenue contributions from its Cambodian operations because of the low NPLs and high profit margins. “Out of an outstanding portfolio of 3,000 units there, we only have had 12 cases of NPL (representing an NPL ratio of only 0.4%) and 10 stolen units (which were all insured),” Mr. Konoshita stated. And significantly, the net profit margin in Cambodia is twice as much as that in Thailand, he added.
Mr. Konoshita projected that the total outstanding portfolios in Cambodia would stand at around 1 billion baht by end-2014, which would substantially augment GL’s overall profitability this year.
He added that the outlook for 2014 marks a major improvement from 2013 where the company’s main operations in Thailand were hampered by the economic slowdown and political uncertainty in the latter part of the year. The company reported a net profit 0f 227 million baht for the nine-month period ending last September, or 9.32% lower from the corresponding period a year before. The result from the last quarter of 2013 is expected to be flat due to continuously high provisioning for bad and doubtful debts owing to delayed payments by clients.
Looking ahead, Mr. Konoshita said the strong growth potentials in Cambodia will be augmented by GL’s expansion into Laos this year. At the invitation of HONDA NCX Co. Ltd., which holds the HONDA franchise for Cambodia, Laos and Myanmar, Mr. Konoshita has recently surveyed the Lao motorcycle markets and confirmed its commercial viability. A license to engage in the hire-purchase business is expected to be granted by the Lao national bank in the second quarter while actual operations will likely kick off in the third quarter this year.