GL's Aggressive Expansion into CLMV

12 Feb 2015

After posting an impressive financial turnaround in the last quarter of 2014, the SET-listed motorcycle leasing firm Group Lease Public Company Limited (GL) is pushing ahead with an aggressive expansion plan to capture the fast-growing and high-margin motorcycle leasing markets in Thailand’s neighboring countries of CLMV (Cambodia, Laos, Myanmar and Vietnam).

“We have already established a solid and extensive business infrastructure in Cambodia, where we have passed the break-even point since the mid-2014. Profits have grown steadily and will increase even more substantially in the months and years ahead,” GL’s Chairman and Chief Executive Officer Mr. Mitsuji Konoshita stated.

With the Cambodian business picking up momentum, GL is ready to launch similar leasing and micro-finance businesses in Laos. “We have made all the necessary preparations, installed all facilities and are now ready to go – just waiting for the license from the Lao central bank which is expected shortly,” Mr. Konoshita said.

In Myanmar where businesses are booming amid the local government’s economic and political reforms, GL is seriously studying the markets with plans to kick-start operations there next year while negotiations have been ongoing for the possible takeover of similar leasing and finance-related businesses in Vietnam. “While we continue to grow in the (relatively mature) Thai markets, we have also set a clear business strategy to expand into CLMV,” Mr. Konoshita stated.

The thrust into the relatively virgin markets in Thailand’s neighbors is coming as GL posted a significant financial turnaround in the last quarter of 2014 as profits soared to 93.76 million baht, which represents a sharp increase from the combined 21.5 million baht profits in the first nine months of 2014. On a year-to-year basis, the Q4-2014 profits mark a colossal 611% jump from the 13.19 million baht profits in Q4 of 2013.

GL executives said the 93.76 million baht Q4 2014 profits represent the highest-ever quarterly profits on an operational basis in the company’s history since the previous quarterly peak of 107 million baht in Q4 of 2012 had included about 27 million baht worth of provisioning adjustments which, if excluded, would have shown operational net profits of about 80 million baht for that quarter.

Mr. Konoshita attributed GL’s financial turnaround to Thailand’s economic recovery as well as larger profits contribution from GL’s overseas operations, especially those from Cambodia. “Business (in Thailand) has come back … our total portfolios have also increased substantially from the takeover of Tanabun in June last year,” he said. Of the total 93.76 million baht net profits in Q4 of last year, 72.67 million million baht was from the Thai operations while the bulk of the remaining 21.09 million baht was from GL Finance (GLF), GL’s subsidiary in Cambodia.

In unaudited statements filed with the Stock Exchange of Thailand, GL reported that consolidated revenue from interests income rose 36% from 349.59 million baht in Q4 2013 to 475.22 million baht in Q4 2014 while provisions for bad and doubtful debts as well as losses from sales of seized vehicles also decreased over the same period.

Mr. Konoshita maintained that the company has continued to expand through Thailand’s economic bad times in the early parts of 2014 which resulted in its total outstanding portfolio growing 50% to about 6.3 billion baht at the end of 2014. “We continued to expand even during bad times so that we can reap the rewards when the good times come,” Mr. Konoshita commented. “Well, the good times are here – we have seen the profits rising in Q4 and profits will shoot up even more from now on.”

Mr. Konoshita is particularly bullish on the Cambodian operations where GLF has set up an extensive nationwide network of 153 Points of Sales (POS), including 131 at HONDA dealers and another 22 at KUBOTA farm-machinery dealers. “The Cambodian market offers high profit margins against very low provisions for non-performing loans (NPLs). And because we are starting from a small base, the market there carries enormous growth potentials,” Mr. Konoshita said.

GLF is now doing about 2,000 vehicles monthly in Cambodia, with sales projected to rise to 3,000 in March and hit 5,000 per month by year-end. These figures compare to about 5-6,000 units of sales monthly in Thailand. And because of the higher profit margins from the Cambodian operations, aggregate profits from Cambodia are projected to surpass that of Thailand next year since the Thai markets are more competitive and offer leaner margins.

Mr. Konoshita asserted that the era of high provisions and low profits during 2013-14 has now become a thing of the past and the turnaround in profitability seen in the last quarter of 2014 would pick up stronger momentum this year and next.