OREANDA-NEWS. Fitch Ratings (Thailand) has assigned Finansia Syrus Securities Public Company Limited (FSS) a National Long-Term Rating of 'BBB+(tha)' with a Stable Outlook. At the same time, the agency also assigned a National Short-Term Rating of 'F2(tha)'.

KEY RATING DRIVERS
FSS's National Ratings reflect its moderate franchise in the securities brokerage business in Thailand. FSS has a strong market share of 5.6% (for the first nine months of 2015) in terms of stock market trading value, ranking third overall. However, its average trading fee has been declining due to intense competition, and the company's business structure is less diversified compared with those of domestic peers rated more highly by Fitch.

Revenue from the securities brokerage business accounted for 75%-85% of total revenue over the past five years. The firm's reliance on low-margin retail brokerage means that it has structurally weak profitability and exposure to volatile market conditions. While FSS has attempted to improve revenue diversification through investments in SBI Thai Online Securities Company Limited (a Thai discount brokerage) and SBI Royal Securities Public Company Limited (in Cambodia), Fitch believes it may take several years before these investments make meaningful contribution to the bottom-line.

The Outlook for the rating is Stable given FSS's strong capital and liquidity positions, which are commensurate with the risks entailed by its business model. FSS's equity-to-asset ratio was 43.8% at end-June 2015 (the security industry average was 30.9% at end-December 2014). In addition, FSS's funding has been stable with backup credit facilities from eight commercial banks and TSFC Securities Public Company Limited (a securities finance corporation established under the Securities and Exchange Act B.E.2535), and its liquidity (seen in its net liquid capital ratio) has been substantially higher than regulatory requirements.

RATING SENSITIVITIES
FSS's National Ratings could be upgraded if the company can materially increase its earnings quality, such as by strengthening its franchise or improving revenue diversification, and sustain this improvement through the industry cycle without compromising its balance-sheet strength and risk profile.

A significant reduction in its capitalisation, either from weakening profitability or aggressive risky asset growth, that deviates from industry trends could put downward pressure on the ratings.

The full list of ratings actions follows:
- National Long-Term Rating assigned at 'BBB+(tha)'; Stable Outlook
- National Short-Term Rating assigned at 'F2(tha)'