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    ASII   ID1000122807

PT ASTRA INTERNATIONAL TBK

(ASII)
  Report
End-of-day quote INDONESIA STOCK EXCHANGE  -  2022-11-27
6225.00 IDR   +0.81%
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Fitch Affirms Surya Artha Nusantara Finance at 'AA(idn)'; Outlook Stable

09/29/2022 | 06:57am EST

Fitch Ratings Indonesia has affirmed the National Long-Term Rating on PT Surya Artha Nusantara Finance (SANF) at 'AA(idn)', with a Stable Outlook.

Its National Short-Term Rating has also been affirmed at 'F1+(idn)'.

'AA' National Long-Term Ratings denote expectations of a very low level of default risk relative to other issuers or obligations in the same country or monetary union. The default risk inherent differs only slightly from that of the country's highest rated issuers or obligations.

'F1' National Short-Term Ratings indicate the strongest capacity for timely payment of financial commitments relative to other issuers or obligations in the same country. Under the agency's National Rating scale, this rating is assigned to the lowest default risk relative to others in the same country or monetary union. Where the liquidity profile is particularly strong, a '+' is added to the assigned rating.

Key Rating Drivers

Support-Driven Ratings: PT Surya Artha Nusantara Finance's (SANF) ratings reflect Fitch's view of a moderate likelihood of extraordinary support from its 60% parent, PT Astra International Tbk (AI), if needed. AI is one of Indonesia's largest conglomerates, with market leadership in the domestic automotive and heavy equipment sectors, and is 50.1% -owned by the Hong Kong-based Jardine Matheson Group's Jardine Cycle & Carriage Ltd.

Heavy Equipment Financier: SANF provides financing services for heavy equipment purchases. The business caters mainly to AI's heavy equipment arm, PT United Tractors Tbk's (UT), with affiliated brands such as Komatsu and UD Trucks dominating the share of units financed, although the company's underwriting process is brand-agnostic. SANF also provides channel financing and factoring services to AI's affiliates.

Stronger Parent: Fitch assesses that AI would have the ability to support SANF due to the parent's stronger credit profile and significantly larger balance sheet. As of June 2022, SANF's assets and equity comprised a relatively small share of its parent's consolidated assets and equity, at 1.2% and 0.4%, respectively.

Constrained Propensity to Support: However, Fitch believes that AI's propensity to support SANF is constrained by SANF's focus on the heavy equipment segment which is perceived to carry lower importance than AI's automotive segment; a limited contribution to AI's overall business (especially compared with AI's larger financing subsidiaries); and being branded differently from the parent.

This is counterbalanced by SANF's longstanding contribution as the extension of AI's financing arm to the heavy equipment segment, which has helped its sister company UT maintain leadership status in this sector.

Standalone Credit Profile: SANF's standalone credit profile does not drive its ratings but rather reflects its small franchise and heightened risk appetite, counterbalanced by satisfactory management, corporate governance, capitalisation and funding, the latter benefitting from its association with AI and Marubeni, SANF's other shareholder.

Coupled with lower provisioning expenses, the better top line from the mining boom has allowed a stronger profitability in 1H22, with pre-tax income/average assets improving to 3.1% (2021: 2.1%). SANF's non-performing ratio of 0.4% at end-1H22 was also well below the industry's 2.8%.

Rating Sensitivities

Factors that could, individually or collectively, lead to negative rating action/downgrade:

Weaker Parental Support: Any deterioration in AI's credit profile would be likely to result in negative action on SANF's National Long-Term Rating. Fitch may also downgrade the long-term rating if we perceive that AI's propensity to support its subsidiary will have weakened. This may be driven by a significant decline in AI's shareholding in SANF or a reduction in SANF's contribution to the group, for instance if AI were to de-prioritise its heavy equipment business, although Fitch does not expect such developments in the next 12-18 months.

The National Short-Term Rating would be resilient to at least a one-notch downgrade of the National Long-Term Rating.

Factors that could, individually or collectively, lead to positive rating action/upgrade:

Stronger Support Prospects: Fitch may take positive action on the National Long-Term Rating if we assess that AI's credit profile will have improved. Stronger synergies between SANF and its parent may also increase AI's propensity to support its subsidiary, which would be positive for the National Long-Term Rating. Examples would include a higher contribution from SANF to AI's overall business, a growing share of AI's heavy equipment sales financed by SANF, or a greater emphasis by AI on its heavy equipment distribution business.

There is no upside to the National Short-Term Rating, as it is at the highest point of the relevant scale.

DEBT AND OTHER INSTRUMENT RATINGS: KEY RATING DRIVERS

SANF's senior bonds are rated at the same level as its National Long-Term Rating, as the bonds constitute the company's direct and senior obligations and rank equally with all its other senior obligations.

DEBT AND OTHER INSTRUMENT RATINGS: RATING SENSITIVITIES

Any movement in SANF's National Long-Term Rating would result in similar action on its unsecured debt ratings.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

Public Ratings with Credit Linkage to other ratings

SANF's rating is driven by Fitch's expectation of support from its parent, AI.

(C) 2022 Electronic News Publishing, source ENP Newswire

Stocks mentioned in the article
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JARDINE MATHESON HOLDINGS LIMITED 2.77% 48.6 Delayed Quote.-14.03%
PT ASTRA INTERNATIONAL TBK 0.81% 6225 End-of-day quote.9.21%
PT UNITED TRACTORS TBK -0.34% 29750 End-of-day quote.34.31%
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Financials
Sales 2022 271 816 B 17,3 B 17,3 B
Net income 2022 30 233 B 1,92 B 1,92 B
Net cash 2022 807 B 0,05 B 0,05 B
P/E ratio 2022 8,51x
Yield 2022 4,76%
Capitalization 252 010 B 16 022 M 16 022 M
EV / Sales 2022 0,92x
EV / Sales 2023 0,85x
Nbr of Employees 129 248
Free-Float 49,9%
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Number of Analysts 18
Last Close Price 6 225,00 IDR
Average target price 7 437,78 IDR
Spread / Average Target 19,5%
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Managers and Directors
Djony Bunarto Tjondro President Director
Endro Wahyono Chief Finance & Accounting Officer
Prijono Sugiarto President Commissioner
Benny Halim Chief Information Systems & Technology Officer
Indrastuti Soekardi Hadiputranto Independent Commissioner
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