Coup Has C hanged GL Fundamentals for the Better
GL press release (May 29, 2014)
The fundamentals of SET-listed motorcycle leasing firm Group Lease Public Company Limited (GL) have changed significantly for the better in the aftermath of last week’s coup since the provincial economy is being rejuvenated by rice-mortgage payments to farmers and other economic stimulus measures.
Saying that the military takeover marked an important turning point changing things for the better, GL chairman and chief executive Mitsuji Konoshita stated: “There will be a time lag of about two months before the real impact begins to bear fruit.” He added: “This means we will see marked improvement in our results in the third and last quarters this year,” he added.
Mr. Konoshita maintained that the improved fundamentals will give a big boost to all-year 2014 performance. Additionally, the company’s growing motorcycle-leasing business in neighboring Cambodia, which reached the break-even point in March, will also begin to make meaningful profits contribution to the consolidated accounts this year.
Prior to the latest political change, GL had been expanding sales in Thailand despite the economic slowdown. “While other companies stopped growing or even shrank their businesses, we continued to grow even during bad times so that we would be able to realize maximum gains once the(political and economic) situations return to normal,” Mr. Konoshita stated.
The company’s hire-purchase income rose by about 30% in the first quarter and continued to grow at about the same pace in the current quarter. But now that the provincial economy is being reactivated and rural incomes are being boosted by the long-delayed rice-mortgage payments, GL’s sales are expected to jump more than 40% in the third and last quarter.
Mr. Konoshita explained that as the company continued to expand sales, it would also have to incur expenses. “But the profits will catch up later,” he added.
GL’s consolidated net profit in the first quarter dropped markedly to 10.76 million baht from 90.63 million baht in the same period last year owing to large provisions for bad and doubtful debts which were necessitated by clients’ late payments prompted by the economic slowdown. These provisions rose from 60.82 million baht to 120.98 million baht over the same period.
The company has maintained that the large provisions in Q1 could become a blessing in disguise since a large portion could be reversed back into profits once market conditions return to normal. This is seen as likely to happen in the third and last quarters this year now that the company’s overall undamentals have changed.