Strong nationwide base keeps Muangthai Leasing on a roll
Muangthai Leasing Plc (MTLS), which listed on the Stock Exchange of Thailand last November, has grown from a small provincial finance company 23 years ago to a provider of secured and unsecured loans to customers nationwide. Chief executive Chuchat Petaumpai discusses the company’s strategy and outlook.
Please explain Muangthai’s history.
We started 23 years ago in Phitsanulok province as a leasing company working with motorcycle dealers and providing financing to their customers. Over time we expanded to motorcycles for cash, as we saw demand from our customer base that required additional cash after they had finished their loan payments. We then expanded Muangthai throughout the northern and central regions.
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Please explain Muangthai’s business model.
Muangthai provides both secured and unsecured loans through 900 branches throughout the country. We have four products: motorcycle title loans, car and agricultural-vehicle loans, land title loans and nanofinance. We have a very simple philosophy — we want to provide the best service to our customers, be it the simple act of serving them a glass of water when they walk into our branch or charging the lowest interest and commission in the country for our products. By doing this, we have been able to expand our customer base very strongly. We now have a 10-billion-baht portfolio, of which 70% is motorcycle loans, 20% vehicle loans and the remainder land title deeds and nanofinance. Our customers are farmers, construction workers, salarymen and -women, small business owners and civil servants.
Muangthai’s performance has been very strong in recent years. What are the reasons for this?
Our biggest issue has always been funding our growth. Before becoming a public company, we had to use long-term loans and company equity as our funding base and were still able to grow by 20% per year despite average interest costs of 6.5%. Becoming a public company has provided us with new expansion options. First, we can expand throughout the rest of Thailand, specifically Bangkok and southern Thailand, where we only have 10 branches combined. Second, our cost of financing has decreased through a combination of short- and long-term loans from 6.5% to 4.5%, and we expect it will be below 4% in the near future. Third, our debt-to-equity ratio is only 0.88, and we are allowed to increase it to 4. So financing growth is not an immediate concern any more.
How has Thailand’s economic slowdown affected you?
The economic slowdown has resulted in an increased need for cash by our customers which has helped our business. However, we must be able to collect, and this is where Muangthai thrives, as we have the lowest NPL ratio in the industry at 1.1% compared with 2.5% for financial institutions, 3% for credit-card companies and 5-7% for leasing companies. This reflects our internal system and a strong culture that ensures that teams within the company work together and with customers to ensure loans are repaid.
What are the biggest risks facing your business?
What affects us are events such as the 2011 flood crisis or this year’s drought. During such periods, certain customers within certain regions are affected, but because Muangthai is spread throughout Thailand with multiple products, we’re able to manage through these crises and still grow.
How will the Asean Economic Community (AEC) affect your business?
The AEC offers new opportunities both for us and our competitors. In terms of competition we are not concerned, as by next year we’ll have 1,350 branches nationwide, and for a new entrant entering with one, two or even three branches, it will be very difficult to compete. We also don’t plan on expanding throughout the region yet, as our focus is on Thailand for now. However, we do hope that with the AEC and improved regulations for migrant workers in Thailand that our customer base may expand from purely Thai nationals to all nationalities within the country.
Where do you see Muangthai in five years?
Over the next three years, our business plan is very clear. We’ll expand by an additional 450 branches this coming year and 500 in the following year with the aim of growing 50% per year. We do not have any plans at the moment to expand throughout Cambodia, Laos, Myanmar and Vietnam, but perhaps it may be the case in the future. We may expand our product offerings to our existing customer base as well. But we can only achieve these results if our team continues to work hard, and with our corporate culture of honesty, hard work and teamwork, we’re confident our discipline will ensure we achieve these targets and that our customers are still serviced well.
Source: Bangkok Pos?