Against a business slowdown caused by the prolonged political crisis here, SET-listed motorcycle leasing firm Group Lease Public Company Limited (GL) has turned to expand aggressively in the booming markets of Cambodia and expects profits from the Cambodian operations to match that of Thailand’s operations next year.

According to GL chairman and chief executive Mitsuji Konoshita, the motorcycle leasing operations in Cambodia, conducted through GL’s wholly-owned subsidiary GL Finance (GLF), had reached the break-even point at the end of March and would start making significant profit contributions to the mother company here starting from the current quarter.

GLF was doing about 1,400 units of motorcycles per month at the end of March. Thanks to GL’s exclusive rights to finance the popular HONDA brand and the huge growth potentials in the Cambodian markets, the company has projected that monthly sales would jump to 3,500 units at the end of this year and grow further to about 5,000 units next year. These projections compare to the relatively stable monthly sales of about 7,000 units in Thailand.

“Our Cambodian operations are particularly promising because of the high profit margins and low NPLs,” Mr. Konoshita stated. Against the company’s existing 11.4% NPLs in Thailand (calculating on the basis of 3-month overdue clients), there is no NPLs for the outstanding portfolio of about 8,000 clients in Cambodia while the profit margins there are also substantially higher.

GL achieved a record-high net profit of 357.38 million baht in 2012 but this dropped to 240.31 million baht last year in the face of high provisions for bad and doubtful debts necessitated by late payments from clients because of the economic slowdown.

The company yesterday reported a consolidated net profit of 10.76 million baht in the first quarter this year, a steep decline of 88.13% from the 90.63 million baht net profit in the first quarter last year, which has resulted from the continuously high provisions for bad and doubtful debts as well as higher expenses from the start-up operations in Cambodia.

“Our clients and revenue in Thailand have continued to grow despite the economic slowdown and political uncertainty while (our operations in ) Cambodia are registering very rapid growth,” Mr. Konoshita stated. Thanks to a combination of strong growth potentials, good assets quality and high profit margins, he expected the total profit from Cambodia to match or even surpass that of Thailand within next year.

In an official filing with the SET, the company said total revenue from high-purchase interests and other income in Q1 rose 19.81% from 320.80 million baht last year to 384.38 million baht this year, which took into account the first significant consolidation of 12.29 million baht from the Cambodian subsidiary.

But the higher revenue was weighed down by a substantial increase in reserves for bad and doubtful debts, which rose 98.92% from 60.82 million baht to 120.98 million baht over the same period. The bulk of the reserves was provided for the Thai operations while only about 2 million baht was set aside as mandatory reserve for the Cambodian subsidiary. The Q1 profit was also partly affected by larger expenses from start-up costs in Cambodia.

Mr. Konoshita maintained that the large provisions in Q1 could become a blessing in disguise since a large portion could be reversed into profits once market conditions in Thailand return to normal which, he expected, could happen in the second half this year.

He added that the Q1 numbers should have been the bottom since the company’s overall performance has started to improve starting in Q2 because of better conditions here and rising profit contributions from the Cambodian subsidiary.