OREANDA-NEWS. Fitch Ratings (Thailand) has resolved the Rating Watch Evolving on Asia Plus Group Holdings Public Company Limited (ASP). ASP's National Long-Term Rating is affirmed at 'A-(tha)' with a Stable Outlook and its National Short-Term Rating is affirmed at 'F2(tha)'.

KEY RATING DRIVERS

Fitch believes the ASP group is highly operationally integrated and there is no material change to the consolidated credit profile or risk appetite of ASP following the revamp of the group holding structure. The securities subsidiary, Asia Plus Securities Limited (ASPS), is fully owned by ASP and shares a name and logo with its parent. ASP and ASPS also share a majority of board members. Funding and liquidity are centrally managed by the holding company and Fitch understands there is no regulatory restriction on intra-group funding between each subsidiary and the holding company.

ASP has a sound domestic securities franchise operating without direct partnership with commercial banks. Its share of the securities brokerage market by trading volume dropped slightly to 3.4% in 1H15 from 3.8% in 2014 amid strong competition in the industry. The company has maintained its average commission rate at 0.17% in 2014, higher than the industry average of 0.14%. In addition, ASP has a well-diversified revenue structure with non-brokerage revenue (investment banking, trading and asset management) accounting for about 40% of the company's total revenue in 1H15.

ASP's financial performance remains sound and is likely to continue, albeit with some volatility. Its annualised ROE was 15.4% in 1H15 (2014: 18.3%). The company's diversified revenue sources should continue to support stable profitability. ASP's leverage is manageable with its equity-to-asset ratio at 46%, while the holding company's double leverage ratio (defined as equity investments in subsidiaries plus intangibles, divided by common equity) remains acceptable at 105%.

RATING SENSITIVITIES

Material sustained weakening in key financial performance ratios could lead to negative rating action. A shift in strategy towards more risky businesses could also have a negative impact on the ratings.

A sustained solid financial performance through the industry cycles while maintaining a sound franchise may lead to a rating upgrade. However, this is unlikely in the short term given the increasing competition in Thailand's securities industry.