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The next IPO is TRADE FINANCE AND INVESTMENT LTD
ISSUE PRICE IS 20/
here r some details that i have found.
Financial Institutions
www.fitchratings.com 23 February 2011
Financial Services
Sri Lanka
Update
Trade Finance & Investments Ltd
Rating Rationale
· Trade Finance & Investments Ltd’s (TFI) rating factors in its high capitalisation
in terms of its size of operations and its good profitability. The rating is
constrained by its small asset base, limited product diversity and narrow
funding base.
· TFI has been in operation for over 30 years, and has established a franchise in
financing (lease and hire purchase), mainly for three‐wheelers (also called autorickshaws).
Three‐wheelers accounted for approximately 70% of assets financed
by TFI in the six months ended September 2010 (H111). In 2007, due to emission
concerns, the government of Sri Lanka imposed a ban on the import of twostroke
three‐wheelers with effect from early 2008, with a further ban on spare
part imports from 2011 (for some components after 2013). Fitch Ratings expects
demand for two‐strokes ultimately to decline and be replaced by the fourstroke
product. TFI has curtailed lending for two‐stroke three‐wheelers, with
much of the incremental lending going to four‐stroke three‐wheelers and loans
disbursed from its new branch in Jaffna (approximately 11% of the loan book at
end‐H111).
· Historically, advances in arrears at the three‐month level have been high, with
NPLs/loans of 22% at end‐H111, reflecting the risk profile of the clientele and
the company’s business strategy. However, TFI has consistently maintained its
six‐month NPLs/gross loans ratio in the 6%‐8% range over the last five years. Its
six‐month NPL/gross loans ratio was 6.8% at end‐H111 (FYE10: 7.1%), and the
net NPL/equity ratio was good at 13% at end‐H111 (1.7% for six‐month NPLs),
which was significantly better than the sector average.
· Funding is predominantly from equity, deposits and loans from its shareholders
and related parties. TFI’s equity/assets ratio was 56.5% at end‐H111, which was
significantly above the sector average. Its internal capital generation was
robust, in light of its good profitability (net interest margins were 18.8% for
H111 and 22.5% for FY10) and high earnings retention policy.
· All registered finance companies in Sri Lanka are required to be listed by June
2011. TFI is therefore planning a listing on the Colombo Stock Exchange for at
least 10% of voting shares in the last quarter of FY11. Equity proceeds from the
listing will be used for branch network expansion and loan growth.
Support
· Given TFI’s low systemic importance compared with mainstream commercial
banks, state support is unlikely and cannot be relied upon. However, some
support from its shareholders would be likely should it be necessary.
Key Rating Drivers
· The rating Outlook is Stable. The rating could be upgraded if TFI significantly
increased its market share in its core operations whilst maintaining good asset
quality and profitability indicators. Conversely, the rating would be downgraded
if there was a substantial weakening of TFI’s asset quality and profitability.
Profile
TFI is a finance company established in 1978. The Cooray family (owners of the
Jetwing Group) acquired TFI in the early 1990s, and currently owns around 93%.
Ratings
National
Long‐Term Rating BB+(lka)
Sovereign Risk
Foreign‐Currency Long‐Term IDR B+
Local‐Currency Long‐Term IDR B+
Outlooks
National Long‐Term Rating Stable
Sovereign Foreign‐Currency Long‐
Term IDR
Positive
Sovereign Local‐Currency Long‐
Term IDR
Positive
Financial Data
Trade Finance & Investments Ltd
H111 FY10
Total assets (USDm) 5.6 5.0
Total assets (LKRm) 627.0 566.2
Total equity (LKRm) 354.1 338.3
Net income (LKRm) 35.9 53.2
ROA (%) 12.0 a 9.9
ROE (%) 20.8 a 16.8
Equity to assets (%) 56.5 59.8
a Annualised
Analysts
Gerard Wickrema
+94 11 2541900
gerard.wickrema@fitchratings.lk
Ramali Perera
+94 11 2541900
ramali.perera@fitchratings.lk
Related Research
Applicable Criteria
· Global Financial Institutions Rating Criteria
(August 2010)
· Finance and Leasing Companies Criteria
(December 2010)
· Short‐Term Ratings Criteria for Corporate
Finance (November 2010)
Amendment
This report, which was originally
published on 24 January 2011, is
being republished with updated
spreadsheets from page 2.
Financial Institutions
Trade Finance & Investments Ltd
February 2011 2
ISSUE PRICE IS 20/
here r some details that i have found.
Financial Institutions
www.fitchratings.com 23 February 2011
Financial Services
Sri Lanka
Update
Trade Finance & Investments Ltd
Rating Rationale
· Trade Finance & Investments Ltd’s (TFI) rating factors in its high capitalisation
in terms of its size of operations and its good profitability. The rating is
constrained by its small asset base, limited product diversity and narrow
funding base.
· TFI has been in operation for over 30 years, and has established a franchise in
financing (lease and hire purchase), mainly for three‐wheelers (also called autorickshaws).
Three‐wheelers accounted for approximately 70% of assets financed
by TFI in the six months ended September 2010 (H111). In 2007, due to emission
concerns, the government of Sri Lanka imposed a ban on the import of twostroke
three‐wheelers with effect from early 2008, with a further ban on spare
part imports from 2011 (for some components after 2013). Fitch Ratings expects
demand for two‐strokes ultimately to decline and be replaced by the fourstroke
product. TFI has curtailed lending for two‐stroke three‐wheelers, with
much of the incremental lending going to four‐stroke three‐wheelers and loans
disbursed from its new branch in Jaffna (approximately 11% of the loan book at
end‐H111).
· Historically, advances in arrears at the three‐month level have been high, with
NPLs/loans of 22% at end‐H111, reflecting the risk profile of the clientele and
the company’s business strategy. However, TFI has consistently maintained its
six‐month NPLs/gross loans ratio in the 6%‐8% range over the last five years. Its
six‐month NPL/gross loans ratio was 6.8% at end‐H111 (FYE10: 7.1%), and the
net NPL/equity ratio was good at 13% at end‐H111 (1.7% for six‐month NPLs),
which was significantly better than the sector average.
· Funding is predominantly from equity, deposits and loans from its shareholders
and related parties. TFI’s equity/assets ratio was 56.5% at end‐H111, which was
significantly above the sector average. Its internal capital generation was
robust, in light of its good profitability (net interest margins were 18.8% for
H111 and 22.5% for FY10) and high earnings retention policy.
· All registered finance companies in Sri Lanka are required to be listed by June
2011. TFI is therefore planning a listing on the Colombo Stock Exchange for at
least 10% of voting shares in the last quarter of FY11. Equity proceeds from the
listing will be used for branch network expansion and loan growth.
Support
· Given TFI’s low systemic importance compared with mainstream commercial
banks, state support is unlikely and cannot be relied upon. However, some
support from its shareholders would be likely should it be necessary.
Key Rating Drivers
· The rating Outlook is Stable. The rating could be upgraded if TFI significantly
increased its market share in its core operations whilst maintaining good asset
quality and profitability indicators. Conversely, the rating would be downgraded
if there was a substantial weakening of TFI’s asset quality and profitability.
Profile
TFI is a finance company established in 1978. The Cooray family (owners of the
Jetwing Group) acquired TFI in the early 1990s, and currently owns around 93%.
Ratings
National
Long‐Term Rating BB+(lka)
Sovereign Risk
Foreign‐Currency Long‐Term IDR B+
Local‐Currency Long‐Term IDR B+
Outlooks
National Long‐Term Rating Stable
Sovereign Foreign‐Currency Long‐
Term IDR
Positive
Sovereign Local‐Currency Long‐
Term IDR
Positive
Financial Data
Trade Finance & Investments Ltd
H111 FY10
Total assets (USDm) 5.6 5.0
Total assets (LKRm) 627.0 566.2
Total equity (LKRm) 354.1 338.3
Net income (LKRm) 35.9 53.2
ROA (%) 12.0 a 9.9
ROE (%) 20.8 a 16.8
Equity to assets (%) 56.5 59.8
a Annualised
Analysts
Gerard Wickrema
+94 11 2541900
gerard.wickrema@fitchratings.lk
Ramali Perera
+94 11 2541900
ramali.perera@fitchratings.lk
Related Research
Applicable Criteria
· Global Financial Institutions Rating Criteria
(August 2010)
· Finance and Leasing Companies Criteria
(December 2010)
· Short‐Term Ratings Criteria for Corporate
Finance (November 2010)
Amendment
This report, which was originally
published on 24 January 2011, is
being republished with updated
spreadsheets from page 2.
Financial Institutions
Trade Finance & Investments Ltd
February 2011 2
