12 Jul 2016
Now that the official license has been granted by the Indonesian authorities (OJK), SET-listed digital finance firm Group Lease Public Company Limited (GL) is embarking on a new, major expansion in Indonesia which is expected to support substantial growth both in terms of revenue and net profits over the next five years.
“Our Indonesian operations will kick off to a ‘rocket start’ because we have been waiting for the license for a long while and, in the process, have been making the various necessary preparations,” GL’s Executive Board Chairman Mr. Tatsuya Konoshita stated.
Spearheading the Indonesian operations will be PT Group Lease Finance Indonesia (GLFI), a joint venture between Group Lease Holdings PTE. Ltd. (GLH, a GL subsidiary based in Singapore which holds 65%), J Trust Asia (JTA, GL’s strategic partner which subscribes to GL’s latest batch of US$130 million convertible debentures, holding 20%) and local Indonesian partners holding the remaining 15%.
Mr. Tatsuya projected that the Indonesian operations will enjoy profit margins higher than that in Thailand and Cambodia and will turn profitable in a very short period – thanks to a new, fees-based model where GLFI will charge fees and commission from various lines of consumer financing it manages while its partner J Trust Bank (Indonesia), through its local network of 62 branches, provides the funding and is responsible for any NPLs.
Mr. Tatsuya added that GLFI will focus on agricultural machinery, second-hand motorcycles, assets-backed loans (such as cars and motorcycles), white goods (various types of electrical appliances) and solar panels. GLFI also plans to expand into new areas of financing for low-income people such as housing finance and household refurbishments. Since all preparations are ready, the company expected to sign the first client for agricultural machinery within this month.
Out of its base in Thailand, GL has been expanding successfully into the neighboring countries of Cambodia and Laos. Of the 222 million baht net profit in the first quarter this year, more than half or about 120 million was contributed from operations outside Thailand the bulk of which from Cambodia.
GL has attached a great deal of importance to the Indonesian business which represents a new phase of major expansion. GL Chairman & Chief Executive Officer Mr. Mitsuji Konoshita has stated that the Indonesian market, with its more than 250 million population, is ten times the size of the Cambodian market. “Significantly, about 70% of the Indonesian market is still untapped by anybody,” Mr. Mitsuji stated.
The digital finance platform that GL has successfully developed in Cambodia will now be implemented in Indonesia. According to Mr. Tatsuya, the fees-based model in Indonesia will bring net profit margin of more than 40% which is significantly higher than in Cambodia and Thailand.
GLFI is now projecting net profit for the first full year of operation in 2017 to top 120 million baht and, according to Mr. Tatsuya, profits from the Indonesian operations are projected to balloon to ten times the profits in Cambodia in five years’ time.
An extraordinary meeting of GL shareholders last month approved the issuance of US$ 130 million convertible debentures for JTA plus 170 million warrants (GL-W4) for GL shareholders. Carrying a conversion price of 40 baht each for both the debentures and warrants, the new funds that are being raised will be used to finance expansion in GL’s existing markets of Thailand, Cambodia and Laos as well as other markets in Southeast Asia and elsewhere. Funding in Indonesia will come from J Trust Bank (Indonesia) which can mobilise deposits from the local Indonesian market.
The GL Chairman Mr. Mitsuji stated recently that volatilities in regional financial markets as a result of Brexit would present good opportunities for mergers and acquisitions (M&As) since companies that are potential takeover targets will now become cheaper.