ส วนท 2 หน า บร ษ ท ศร สว สด พาวเวอร 1979 จาก ด (มหาชน)

Transcription

1 ส วนท 2 หน า บร ษ ท ศร สว สด พาวเวอร 1979 จาก ด (มหาชน)

2 ส วนท 2 หน า บร ษ ท ศร สว สด พาวเวอร 1979 จาก ด (มหาชน)

3 บร ษ ท ศร สว สด พาวเวอร 1979 จาก ด (มหาชน) Message from Chairman The political instability impeded the economic recovery in Also, the government s measures aimed at stimulating the economy remained unable to boost the economy in household and small entrepreneur sectors. Meanwhile, the demand for financing services in the household and corporate sectors remains rather high. A survey suggests that the number of low income earners who are unable to access funding services from financial institutes stand approximately million people. This is especially true for the case of funding sources from financial institutions and commercial banks. Serving loan demand for this particular group of low income earners and small entrepreneurs with the lack of funding access, the Company, hence, managed to boost its loan growth by 39 percent, compared to the growth level seen in In addition, as of the end of 2014, the Company s branch network was expanded to include 457 branches, making the total of 1,059 branches. The Company s branches are available to serve customer in communities in Bangkok and other provinces across the country. Despite the solid loan growth, however, the Company has continued to maintain its cautious lending policies. In 2013, the Company began to change its capital structure and became a public company listed to the Stock Exchange of Thailand. The Company has raised fund and started listing in the Stock Exchange of Thailand since 8 May The listing helped to strengthen the Company s capital structure, enabling the Company to pursue business expansion plans. Meanwhile, the Company has also sought other financial instruments in order to add more channels for low- cost funding sources. For instance, short-term financial instruments and debentures were issued and offered to institutional investors and high net worth investors. Tris Rating Co., Ltd. rated BBB for the Company s credit rating. The Company has continued to be committed to enhancement of operating profit growth, expansion of branch networks to cover extensive communities, cautious lending policies, and effective risk management amid the changing environment, e.g., falling prices of used cars and a fall in the interest rate. Moreover, the Company will seek business partners, both domestically and internationally, while adding more varieties of business portfolios, e.g., expansion of debt collection business, purchase of distressed assets from financial institutions for management, and launch of the insurance broker business. The Company will strengthen the business, with highly motivated and experienced personnel, management, and employees, to drive the Company s sustainable growth, maximizing customers satisfactory based on the Company s rules and regulations. ส วนท 2 หน า

4 บร ษ ท ศร สว สด พาวเวอร 1979 จาก ด (มหาชน) In regard to personnel development, the Company still emphasizes the importance of personnel development by regularly providing trainings. The training subjects vary; some relate to work while some help to enhance the personnel s potential. The Company always keeps in mind that the personnel s careers should advance well in line with the Company s growth. The Board of Directors would like to take this opportunity to express our deep gratitude towards customers, business partners, investors and shareholders for their support. Our deep gratitude is also offered to all management and employees for their dedication and devotion to the Company s growth going forward. Dr. Thanong Bidaya Chairman ส วนท 2 หน า

5 Part I บร ษ ท ศร สว สด พาวเวอร 1979 จาก ด (มหาชน) Business Operation 1. Policies and Overall Business Operation 1.1 Vision and Mission Vision To become a leader of financial convenience store in Thailand Mission To provide prompt financial services covering all areas in demand, with appropriate risk management and continued quality development for employees to gear up for sustainable growth 1.2 Company History, Changes and Significant Development SAWAD was originally founded by the Kaewbootta family to operate an auto title loan business in Petchaboon province. The Company has continued to extend its service coverage by opening new branches in other provinces to include financial services offered to customers who need financial aids but have limited access to financing services offered by banks and financial institutions. At present, SAWAD and its subsidiaries offer auto-backed loans and home-backed loans through their 1,059 branches (update as of 31 December 2014), under the service mark / trade name Mee Baan Mee Rod Ngern Sod Than Jai (literally translated as Your car and/or your home can bring you instant cash ) The Company s strengths include its prompt services, fast approval and lending process as well as easy access and close relationship with customers. The Company offers financing services to general retail customers in Bangkok, Bangkok s vicinity, and other provinces nationwide. The Company s major changes and development can be summarized below The Kaewbootta family founded the Company to provide vehicle title loans in Petchaboon province. The business had been expanded to include larger service coverage in other provinces, marking a pioneer of the so-called car-for-cash loan segment Sold the existing business which included branches and the service mark to another operator in the industry. ส วนท 2 หน า

6 บร ษ ท ศร สว สด พาวเวอร 1979 จาก ด (มหาชน) 2008 Srisawad Power 1979( SAWAD or the Company) was established (formally known as PV and KK Service 2008), with the registered capital of Baht 1 million, without any business operation Acquired Srisawad Power Co., Ltd (SP), engaging in the debt collection business and the auto title business (with less than 100 branches) Under SAWAD Group s umbrella, SP expanded the debt collection and lending businesses to include 136 branches. The Company increased the registered and paid-up capital to Baht 5 million and launched the auto-backed loans and home-backed loan business under the service slogan Mee Baan Mee Rod Ngern Sod ThanJai Restructured the business by acquiring two companies, without business operation - Srisawad Power 1982 Co., Ltd ( SP 1982 ) (formally known as K.P.N Holding Co. Ltd - Fast Money Co. Ltd. ( FM ) (formally known as J.D.T Money Service Co., Ltd) The Company increased the registered and paid-up capital to Baht 200 million. SP s business was transferred to the Company after SAWAD purchased and received the transfer of loan receivables and hire purchase receivables for operation and management at the Company and SP The branch network was expanded to include 265 branched at the end of The Company increased the registered capital and paid-up capital from Baht 200 million to Baht 750 million. The Extraordinary Shareholder Meeting No. 1/2013 held on 31 May 2013 approved the plan to privatize the Company to become a public company with a change of the par value from Baht 100 per share to Baht 1 per share. The Company increased the registered capital from Baht 750 million to Baht 1,000 million by raising the capital of Bath 250 million, with 250 million shares allocated for the initial public offering. The Company was registered the privatization on 14 June 2013 As of 31 December 2013, the Company s branch network included a total of 602 branches During April 2014, the Company carried on the initial public offering for the total shares of 250,000,000 at a par value at Baht 1 and at a share price of Baht 6.90 per share. In addition, the Company registered the change of the paid-up capital to Baht 1,000 million (1,000,000,000 shares at a par value of Baht 1) with the Business Development Department, Ministry of Commerce on 2 May Then, the Stock Exchange of Thailand listed 1,000,000,000 ordinary shares at the par value of Baht 1, with the stock trading started on 8 May The Company booked Baht 53.2 million in expenses related to the public offering, for which it presented in the item about ส วนท 2 หน า

7 premiums of ordinary shares. บร ษ ท ศร สว สด พาวเวอร 1979 จาก ด (มหาชน) Issued senior and unsecured bonds valued at Baht 500 million, with maturity of one year and six months, for institutional investors and high net worth investors on 30 June The Company founded Srisawad Asset Management Co. Ltd, with the registered capital of Baht 25 million, with holding of percent. The new company was set to operate debt collection services and purchase distressed assets from financial institutions, with an operating license being granted by the Bank of Thailand in July 9, On 9 September 2014, the Extraordinary Shareholder Meeting No 3/2014 resolved to allow the Company to receive the business transfer from Srisawad Power 1982 Co, Ltd., its subsidiary. The transaction was completed on 30 September 2014 and Srisawad Power 1982 already registered the company s dissolution and it has now been under the company liquidation process. 1.3 The Company s Structure As of 31 December 2014,the Company owned the following companies. Srisawad Power1979 Plc. (SAWAD) Provide secured loans with vehicles, home and land as collaterals 99.99% 99.99% Srisawad Power 1982 Co. Ltd.( SP 1982 ) Transferred all assets to SAWAD and now under company liquidation Fast Money Co. Ltd. (FM) Offer hire purchase loans for new motorcycles and personal loans Srisawad Asset Management Operate debt collection and purchase distressed assets for management ส วนท 2 หน า

8 บร ษ ท ศร สว สด พาวเวอร 1979 จาก ด (มหาชน) 2. Business Characteristics At present, SAWAD Group offers secured retail loans under the service slogan Mee Baan Mee Rod Ngern Sod Than Jai. The lending services consist of hire purchase loans for new motorcycles and personal loans; in addition, the Company has just expanded its business to cover debt collection business and purchase of distressed assets from financial institutions for management. The secured retail loan services are classified by types of lending and collaterals as discussed below: - Auto-backed loans and home-backed loans: The Company provides loans secured by all kinds of old vehicles including motorcycles, commercial cars, trucks, public buses, vehicles for agricultural purposes, e.g., tractors and rice harvesters, and four-wheel cars. The services also include loans collateralized by houses, land, townhouses and condominiums. To seek auto title loans, potential customers are required to own the right of the vehicle registration, which is essential for legal transactions. The legal transactions can be inked into two types, namely loan agreements and hire purchase contracts. In case of the loan agreement, customers are requested to present the vehicle registration certificate to the Company as collateral but they do not have to transfer the ownership to the Company. On the other hand, customers seeking hire purchase loans are requested to transfer the ownership of the vehicle registration to the Company. As for home-backed loans, customers are requested to hold the ownership of the deed. This lending service also comes with two kinds of legal transactions, i.e., loan agreement and mortgage agreements or consignment contracts. - Fast Money Co., Ltd. offers hire purchase loans for new motorcycles and non-secured personal loans. - As for the debt collection business and the purchase of distressed assets from the financial institutions for management, this business is operated by Srisawad Asset Management, which is SAWAD s subsidiary founded in As of 31 December 2014, SAWAD Group s total receivable portfolios amounting to Baht 7, million, consisting of the total auto title loan receivables amounting to Baht 4,505.94, hire purchase loan receivables of Baht 2, million, the home-backed loan receivables valued at Baht million and new motorcycle hire purchase and personal loan receivables of Baht million, accounting for percent, percent, percent and 2.14 percent, respectively, of the total loans. ส วนท 2 หน า

9 Revenue Structure บร ษ ท ศร สว สด พาวเวอร 1979 จาก ด (มหาชน) The Company s revenue structure in the consolidated financial statement in is as follows: Consolidated Financial Statement Core business Million Percentage Million Percentage Million Percentage Revenue from hire purchase business Interest income from lending , , business Total revenue from core business 1, , , Other revenue 1/ Total revenue 1, , , Note: 1/ Other revenue includes fees, service charges, expense and penalty fees, and etc. 2.1 Business Operation by Products Auto title and home-backed loans Characteristics of the products or services SAWAD Group provides secured loans, collateralized by all kinds of vehicles, including personal cars with not exceeding seven seats, personal trucks (pick-up trucks), motorcycles, six-wheel vehicles, thewheel vehicles, trailers and vehicles used for agricultural purposes as well as other collaterals including houses, land, condominiums. As of 31 December 2014, the Company offered auto title loans and home-backed loans with the total net receivables under the hire purchase contracts and loan agreements totaling Baht 7, million. Over 57 percent of the total lending value was from loans collateralized by four wheel vehicles. ส วนท 2 หน า

10 Loan values classified by collaterals บร ษ ท ศร สว สด พาวเวอร 1979 จาก ด (มหาชน) Loans classified by collaterals /1 31 December December December 2014 million percentage million percentage million percentage Motorcycles , Commercial Cars , Vehicles used for agricultural purposes Four-wheel vehicles 1, , , Deeds of houses, land and condominiums Total 3, , , Note /1 Debt values calculated by receivables from the hire purchase contracts or loan agreements deducted by interest not yet booked as revenue and unidentified income in totaling Baht million and Baht million and Baht 7.41million as of 31 December 2014 Loan accounts classified by collaterals Accounts classified by collaterals 31 December December December 2013 contract percentage contract percentage contract percentage Motorcycles 66, , , Commercial Cars 4, , , Vehicles used for agricultural purposes Four-wheel vehicles 23, , , Deeds of houses, land and condominiums 3, , , Total 97, , , ส วนท 2 หน า

11 Examples of collaterals บร ษ ท ศร สว สด พาวเวอร 1979 จาก ด (มหาชน) motorcycles Four-wheel and six-wheel commercial vehicles Ten-wheel vehicles Tractors rice harvesters Trailers Personal cars Personal pick-up Deeds of house and Legal transactions and contracts can be classified into two groups (1) Loan agreements: The Company provides lending services under the loans agreements secured by all kinds of collaterals. The collaterals can be classified into two categories: 1.1) For loans collateralized by all kinds of vehicles, customers do not have to transfer the ownership of the vehicle registration when the loan agreement is inked but they are required to present the vehicle registration certificate to the Company and also sign in a transfer request for floating transfer of collaterals to the Company. In case a customer defaults on his obligation to repay loan for a certain duration specified by the Company, the Company will send a warning letter and the customer shall repay loan within seven days. If the customer fails to repay loan by the specified time, then the Company shall confiscate the collateral. Once the collateral is confiscated, the customer is allowed to redeem the collateral within 30 days. If no redemption is done within 30 days, the Company is entitled to sell the collateral. Also, the Company is entitled to register the ownership transfer with no legal actions required. 1.2) Legal transactions for loans secured by the deeds of land, houses and condo units can be classified into two categories as follows: Mortgage contracts: A customer, as a mortgagee, registers mortgage with the Company, as a mortgagor, and signs a loan agreement. Then the customer presents the deed to the Company as collateral on the day the loan is extended to the customer. Note that the land ส วนท 2 หน า

12 บร ษ ท ศร สว สด พาวเวอร 1979 จาก ด (มหาชน) customer still holds the right to possess and use the collateral. If the customer defaults on his obligation to repay loan for a certain period, the Company, as a lender and mortgagor will send a notice to the customer, requesting the customer to repay loan within specified time. If no loan repayment is done, then the Company shall file a lawsuit against the customer and take possession of the collateral or sell it by auction. Consignment contracts: A customer, as a seller on consignment, signs a consignment contract with the Company, as a buyer on consignment. The ownership of the collateral belongs to the buyer after the consignment contract is inked. The ownership will be returned to the seller upon the collateral redemption within the time specified in the contract. If the seller fails to redeem the collateral within the redemption period (lending period), the ownership of the collateral will completely belong to the Company. In other word, if the customer defaults on this obligation to repay loan for a certain period of time, the Company is entitled to take possession of the collateral without any legal actions required. (2) Hire purchase contracts: SAWAD Group provides hire purchase loans collateralized by vehicles. A customer is required to transfer the ownership of the vehicle registration certificate and presents the vehicle registration certificate to the Company as collateral. As for a rice combine harvester with no ownership documents, the customer is required to present an ownership certificate issued by the manufacturer and a sale contract as collateral but he or she still remains an owner of the vehicle. If the customer leaves the outstanding balance overdue for specific time, the Company will proceed with the collection procedure. In case the customer defaults on his obligation to repay loan for a certain period longer than the Company s policy, the Company will send a notice to terminate the contract and request that the customer repay debts within 30 days. Failure to do so will results in collateral confiscation. After the Company confiscates the collateral, the customer is given 30 days to redeem the collateral. If the customer fails to redeem the collateral within the specified time, the Company will sell the collateral by auction. ส วนท 2 หน า

13 บร ษ ท ศร สว สด พาวเวอร 1979 จาก ด (มหาชน) Loan amount classified by legal transactions Auto title loan classified by legal transactions and contracts 31 December December December 2014 million percentage million percentage million percentage Loan agreements 2, , , Hire purchase contracts 1, , , Total 3, , , In term of repayment period, the Company allows 6-48 installment periods, depending on types of collaterals. For example, the maximum repayment period for loans collateralized by motorcycles is 18 installment periods while loans collateralized by general vehicles, customers are given a maximum of 36 installment periods. As for popular cars, home or land deeds, the repayment period does not exceed 48 installment periods. Finally, in terms of interest, the rates vary, depending on types of collaterals Loan Approval Process Considering approving loan applications, the Company emphasizes the qualifications of the customers and/or guarantors to assess their repayment ability. Also, the quality of assets placed as collaterals and the repayment ability of the guarantors are taken into account. The staff members at branch offices carefully examine the information and identification of the potential customers as well as the documents showing their income as well we their guarantors. Moreover, the staff also carries on inspections on site. In terms of asset quality appraisal, the Company has an effective team working on examining the conditions and the liquidity of the collaterals to determine credit limits. For vehicles, the examining team considers types, ages, models, brands, physical conditions and popularity. Generally, the Company offers auto title loans for cars aged not more than 15 years and motorcycles aged not more than five years. As for commercial vehicles, such as tractors and harvesters, or over-aged vehicles, the Company considers physical conditions on a case-by-case basis. Over 80 percent of the total collaterals are vehicles with average ages between 2-14 years. For home and land collaterals, the Company conducts the asset valuation, based on the appraisal values given by the Land Department as well as the market prices of the property nearby. ส วนท 2 หน า

14 Loan Approval Process บร ษ ท ศร สว สด พาวเวอร 1979 จาก ด (มหาชน) Examine and analyze credits Consider and approve loan application Customers submit loan applications บร การส นเช อ Close account/return of collaterals/confiscate of collateral/ take legal actions Receive repayment on installments/ collection D File contracts and collateral documents Lending Approval Process A customer who needs loans from the Company is welcomed to contact staff members at all branches. An application form shall be accompanied by supporting documentation from both the customer and a guarantor (if any), including a copy of ID card, a copy of house registration, financial documents, e.g., a salary certificate, a copy of passbook, the documents proving the ownership of the collaterals, e.g., an original car registration certificate, an original land deed. Following the documentation process, an officer explains details about the loans, the credit limit, the interest rate, and the installment periods. Once the customer agrees on terms and conditions, the officer accordingly records the information of the customer and the guarantor (if any) in a loan application form. Loan analysis process The branch staff in charge checks the accuracy of the identification documents as well as financial documents of the customer and the guarantor (if any) and then examines the overall conditions of the collateral and verifies the documents showing the ownership of the collateral. The officer will do the inspection on site to verify the accuracy of the documents and the existence of collateral before checking with the Company s data base. In case a motorcycle is put as collateral, the branch staff focuses on verification of the ownership document because doing inspection on site requires high cost when compared to the credit limit. After gathering all supporting documentation, the staff in charge completes a report about the customer and the guarantor (if any) in order to assess their ability to repay loan, the credit limit, and terms and relevant conditions. Finally, the report is submitted to the authorized officers in charge of final loan approval. ส วนท 2 หน า

15 Loan Approval Process บร ษ ท ศร สว สด พาวเวอร 1979 จาก ด (มหาชน) In approving loans, the Company set rules for officers authorized to approve loans, depending on the credit limit levels as well as the types of collaterals. Authorized officers include those in the positions of deputy branch manager, area manager, director of loan management department, management and Company s directors. If the information for loan approval meets the criteria for the Company s loan approval, the authorized officers inform the branch offices of the loan approval result and the branch offices then inform the customers accordingly. Provided that the loan application and supporting documentation are completed, the Company takes 30 minutes to consider approving loans with motorcycles and four-wheel vehicles as collaterals and one day for home-backed loans; this depends on the credit terms and conditions. Once a loan application is approved with the branch s authorized credit limit of not exceeding Baht 30,000, the branch can extend loan in cash to a customer immediately. In case the credit limit is higher than the branch s authority, the branch staff will submit all documents including the credit limit letter, the money-transfer request form, the report of examination of the car, the house registration book, the copy of ID card, and the copy of passbook to the loan management department to verify the transaction, the details of collateral, and the credit terms and conditions with the data base once again before transferring money directly to the customer s account in accordance with the bank s procedure. Following the money transfer transaction, the staff will submit all money transfer documents to the account department on a daily basis so that the account department will cross check to ensure that the information in the money-transfer form and the loan application from match the information in the data base, e.g., the customer s name, the credit limit, the lending duration. Once every detail is doublechecked, all information is recorded accordingly. Contract and Collateral Filing Procedure An area manager in charge verifies the contract and collateral documents prepared at a branch before sending all the documents to the head office within 30 days from the month end. After the documents arrive at the head office, the registration department will verify all documents once again. If the documents are found incomplete, the head office will notify the branch and the area officer at charge so that they can have the document complete. The officers at a special document room will copy all documents in order to make a back-up file in case the original documents are lost. After getting all documents copied, the head office will send all contract and collateral documents to the bank, which offers the funding to the Company within days, starting from the date when the head office receives the document envelop from the branch. This is exception for the contract and collateral ส วนท 2 หน า

16 บร ษ ท ศร สว สด พาวเวอร 1979 จาก ด (มหาชน) documents for loans collateralized by motorcycles, of which the Company keeps the documents at its document room, not at the bank. Cash Repayment and Collection Procedure Branches and the credit development department oversee repayment transactions and debt collection. Customers will be given a card identifying a contract number, the installment amount, and a due date and they can repay debts at specified payment channels. The Company s Call Center and branch staff closely monitor customers repayment. In case of one-week overdue, a staff at the head office will send a reminding massage to the customer s mobile phone. Customers can pay the bills at the Company s branches, Counter Services, and service counters at Krung Thai Bank, Bangkok Bank, and Kasikorn Bank across the country. Customers shall receive repayment evidence for every transaction, either in a form of a receipt issued by the head office s system or a temporary receipt issued by a repayment service provider. Account Closure or Enforcement of Collaterals Once a customer repays all debts as stated in the contract, the head office will issue a letter certifying the complete repayment and return the collateral ownership documents as well as other related documents so that the customer can either receive the transfer of collateral ownership or redeem the collateral right away. In case a customer defaults on his obligation to repay loan, the Company sets rules for the collection procedure in accordance with types of collaterals. When the customer begins to default on his obligation to repay loan, a collection staff will begin the collection procedure. The major strategy is phone calls: a collection officer at the head office calls up the customer with the call details being recorded in the system. In case the customer cannot be reached or the customer leaves the outstanding balance overdue beyond the Company s permission, a branch officer will begin to follow the customer. If no action is taken by the customer, the head office will send a registered letter notifying of the termination of the loan agreement. If the customer fails to make the repayment within 30 days from the notice date, the branch is entitled to confiscate the collateral. In this case, the customer is still allowed to redeem the collateral within 30 days after the confiscation date. After the specified timeframe, the Company is entitled to sell the collateral, with the price being based on the market price, the vehicle conditions vs. the remaining balance. The Company tries to sell the assets as fast as possible because the longer the time the lower the prices; this would negatively impact the Company s operational performance. In case of a loan agreement collateralized by a land deed, if a customer fails to redeem the deed within 30 days, the Company will file a lawsuit so that it can proceed with the sale by auction afterwards. As for a consignment contract, if a customer fails to redeem the collateral within the specified time, the ownership of the collateral will completely belong to the Company, as a complete seller on consignment. ส วนท 2 หน า

17 Market and Competition บร ษ ท ศร สว สด พาวเวอร 1979 จาก ด (มหาชน) 1) Industry Overview The Thai economy expanded by 6.4 percent in Key drivers included domestic demand growth both in terms of private consumption and private investment driven by the government s boosting policies including the daily wage hike, the raise for government officials, the first-time car buyer scheme, the first-home buyer scheme, and the reduction of corporate income tax. These measures helped to give a boost to domestic spending. Meanwhile, the state consumption and investment also played a key role in boosting the economy. However, in 2013 the political tension hindered the country s economic growth, with lower-than-expected growth. Also, in 2014 the economy was unable to grow as anticipated due to the prolonged political tension. Unit CAGR Gross Domestic Million Baht 9,042 10,140 10,540 11,375 11,899 9, Product (GDP) Headline Inflation percentage (0.90) Monthly Average Baht 16,205 16,819 17,403 18,766 19,259 N/A 5.01 Spending per Household Source: The National Statistics office, Macroeconomic Strategy and Planning Office, Bank of Thailand The table above suggests that the GDP during 2009 to 2012 increased at an average of 7.95 percent per annum while the monthly household spending for the same period continued to increase at an average of 5.01 percent per annum. Over 80 percent of the total spending related to spending on consumption goods, e.g., food, housing, and transportation. During 2009 and 2013 the number of new car registrations rose at an average of 12 percent per annum. According to the data from the Department of Land Transportation, in 2014 the number of newlyregistered cars decreased to 2.90 million units, down by 20.1 percent from the level seen in 2013 as a result of the impact of the first-time car buyer scheme. However, during 2009 and 2013, the number of newly-registered cars rose at an average of 12 percent per annum given that the automotive industry continued to expand in line with the overall economic growth. By types of vehicles, the proportion of registrations for motorcycles marked the highest level. In 2014, there were 2.90 million units of newlyregistered vehicles, led by motorcycles (1.82 million units accounting for 63 percent of the total new ส วนท 2 หน า

18 บร ษ ท ศร สว สด พาวเวอร 1979 จาก ด (มหาชน) registration) and followed by personal cars and personal pick-up trucks at 0.90 million units, accounting for 31 percent of the total new registration. Newly registered vehicles Million unit Unit: Million Personal cars/ pick-up trucks Motorcycles Others Total Source: Department of Land Transport During 2009 and 2013, the CAGR growth of the registration of personal cars with not more than seven seats reached the highest level at 26 percent. Meanwhile, the CAGR growth of the motorcycle registration stood at only 7 percent. This was a result of the tax privilege from the first-time car buyer scheme. After the first-time car buyer scheme expired, the growth in new vehicle registration returned to normal, as clearly seen from the drop in number of new registration. 2) Competitions The auto loan segment has continued to grow given the nature of loans secured by car registration certificates and attractive returns. This business segment should also benefit from high demand from low income earners who need to reach financing services. The Company projected the number of people seeking financing services at millions. On the back of the aforementioned factors, many operators have become more interested in this loan segment. Also, the new car market has become slower after the cars under the first-time car buyer scheme were delivered. Hire purchase loan providers then ส วนท 2 หน า

19 Slogan บร ษ ท ศร สว สด พาวเวอร 1979 จาก ด (มหาชน) expanded to the auto-title loan segment as they view that the business generates attractive returns while the competition in the hire purchase segment for new cars is rather intense. Players in the auto title loan segment can be classified into two major customer groups: 1) Players focusing on Grades A to B- customers who earn stable incomes: Such customer groups include employees of private firms or state enterprises. Most operators who focus on these customer groups include commercial banks and their subsidiaries, e.g., Krungsri Auto (Car4Cash), TISCO Bank (TISCO Auto Cash), Thanachart Bank: TBANK (Cash Your Car), KBANK (K-Car to Cash), SCB (My Car My Cash), and KTB Leasing (KTBL Car Convenience Cash). This group of players sees cost advantages thanks to their lower financial costs and larger branch networks, as well as stronger capital bases. These players focus primarily on financial documents, emphasizing customers with good financial records. 2) Players focusing on below Grade B- customers upcountry: The customer groups in this category include small business operators, factory employees, general workers, farmers and lower-end customers with limited access to funding or loan sources. The funding limitation may be caused by their unfamiliarity with transactions in the banking system, their uncertainty that their loan application will be approved, and their understanding that the loan application at a bank is way too complicated and slow. Financial service providers in this category include CFG Service Co. Ltd, G Capital Pcl., Muengthai Leasing Co. Ltd., and Nim See Seng Leasing Co. Ltd. They consider credit limits, based the customers data base. Branch officers who are close with the communities go to check the customers information on site, as well as examining supporting financial documents. Moreover, services include those collateralized by many asset items, including cars, motorcycles, vehicles used for agricultural purposes, land deeds, and etc. These operators focus on the expansion of branches in order to be close to communities, enabling them to develop relationships with community members and leaders. The operators focus on organizing marketing activities to promote their service brands and improve relationship with communities. Nonetheless, some operators in this group have limited funding advantages comparing to their peers. As of 31 December 2013, the Company captured the second biggest market share, with 23 percent of total receivable value in the non-financial institution system. Comparative Details vs. Peers SAWAD Mee Baan Mee Rod Ngern Sod Than Jai Other operators CFG Muangthai Leasing Nim See Seng Group G Capital Srisawad Ngern Tod Lor Convenient, Fast, Good Service and Lower interest rate NA Quick loan for advanced Thai agriculture Founded in ส วนท 2 หน า

20 Total receivables (million baht) As of 31 December 2013 บร ษ ท ศร สว สด พาวเวอร 1979 จาก ด (มหาชน) Other operators SAWAD CFG Muangthai Leasing Nim See Seng Group G Capital 5, , , , Branch network All regions All regions North/ Central/ Upper North -- /2 East/ West Collaterals /3 - Second-hand cars - Motorcycles - Trucks - Vehicles for agricultural purposes - Land Source: BOL and the Company s website Note: /1 Receivables and loans /2 Assigning representatives to stand by at branches of car dealers /3 The collateral data as of 1 Jun-13 3) Characteristics of customers and customer targets SAWAD Group has a policy to offer loans only to retail customers, not those in the big corporate sector. The Group s customer targets include Grade B- customers, including factories workers, general workers, state employees, and etc. Potential customers must own collaterals and the sources of their income should be clearly specified and verified by financial documents. A customer/a guarantor is required to submit supporting documentation for loan approval process, including a copy of ID card, a copy of house registration document, and a pay slip or a salary certificate. 4) Competitive Strategies The competition in the business is currently intensified both from the existing players and new players who were initially engaged in the hire purchase segment and then wanted to expand their business to the auto loan segment. Nonetheless, the Company does not intend to lower prices, but it rather focuses on the following strategies: - Fast Service and Management ส วนท 2 หน า

21 บร ษ ท ศร สว สด พาวเวอร 1979 จาก ด (มหาชน) The speed of loan approval process is one of key factors for operation in the secured-loan segment as it is a key factor taken into account by customers before choosing loan providers. SAWAD s credit officers at all branches can manage to inform customers of the approval results within 30 minutes for loans collateralized by motorcycles. This fast approval speed makes the Company become a competitive provider in the industry. - Comprehensive lending policy Despite the customer target in the B- Grade with rather limited access to financial services provided by banks of financial institutions, the Company always focuses on careful loan application approval process, especially in terms of information verification. Credit officers at branches ensure the accuracy of supporting loan application documents and also confirm the identification of the customers and their guarantors by inspections on site. Photos of actual locations of customers residents and work places are taken. The Company bears in mind that the customer information is very crucial to loan application approval and loan collections. - Effective Credit Management SAWAD Group emphasizes effective loan management, starting from the loan application approval process until the collection process. The Company focuses on offering loans to customers who reside or work within a boundary of kilometers away from branches, enabling the officers to verify customers information and proceed with debt collections in prompt manners. With effective credit management, the Company s NPL to total loan ratio stood at 4.13 percent as of 31 December Competitive coverage As of 31 December 2014, the Company s branch network was larger than its peers coverage. The Company has a plan to add a minimum of branches per annum to the branch network in order to expand the sale channels. The Company focuses on expansion at locations near communities with easy access to commercial banks. - Nationwide coverage The extensive service coverage network enables the Company to enjoy competitive advantage over its peers. As of 31 December 2014, the Company s coverage network included a total of 1,059 branches. Hence, the Company can manage to utilize its capacity for lending, handling repayment transactions, pursuing collection practices and verifying information of customers/guarantors in prompt and effective manners. In addition, the Company can also effectively take action in case of debt defaults or outstanding balances overdue. - Focus on effective recruitment process as well as continued training In response to the rapid branch expansion, the Company increases recruitment channels by recruiting directly from education institutions. Moreover, the Company also regularly organizes trainings on ส วนท 2 หน า

22 บร ษ ท ศร สว สด พาวเวอร 1979 จาก ด (มหาชน) products and related services, e.g., credit and financial training, training on information about land. Moreover, the Company also focuses on the importance pf personnel development. Not only can the branch staff members provide lending services, they can also work on debt collections, sale of forecast assets as well as launches of marketing strategies. - Public relation promotion with a focus on close relations with communities The Company has a policy to have branch officers and agents promote services and products as well as organizing public relation activities in order to widen brand awareness. The Company focuses on marketing activities aimed at tightening relationship with people in the communities as well as general customers. SAWAD highlights service quality, friendly atmosphere, prompt and convenient services. Customer satisfactory is regularly surveyed through telephone calls or visits. - Varieties of Service The Company offers varieties of financing services including many collateral items, such as personal cars, commercial cars, e.g., motorcycles, personal cars, pick-up trucks, tractors, rice harvesters and etc. With loans collateralized by the aforementioned collateral items, the Company s services can serve a wide range of targeted customers. 5) Pricing Policies The Company does not a policy on price competition, i.e., cutting interest rates. It rather considers lending based on types of collaterals as well as qualifications of customers and/or guarantors. The Company s funding cost and operating cost is set at a certain level that enables the Company to remain profitable and competitive. Thus, SAWAD does not have a policy to provide lending services below funding costs. As for credit limits for all collaterals, the Company approves credit limits at percent discounts from the market prices, depending on types of collaterals, models, years of manufacturing, and popularity. The loan management department reviews credit limits every six month or when the market sees significant changes in overall conditions. Meanwhile, the Company also identifies of the installment amounts and installment periods, taking into account customers ability to repay debts. However, the installment periods do not exceed 48 periods. For loans collateralized by land or home deeds, the Company considers credit limits, based on the value of land and buildings (if any). The credit limits are based on the appraisal prices given by the Company s appraisal team, details of contracts, and locations of the collaterals. For example, if the collateral is land in community area, the credit limit is higher than the land in other areas. 6) Sale and service channels ส วนท 2 หน า

23 บร ษ ท ศร สว สด พาวเวอร 1979 จาก ด (มหาชน) Customers are welcomed at all branches across the country. As of 31 December 2014, the Company s branch network included a total of 1,059 branches. The branches open Mondays to Fridays, :30 hrs, and Saturdays, 08:30 15:30 hrs. The staff members at all braches organize public relation and sale promotion activities on a monthly basis in order to introduce services to potential customers in the community. In regard to payment channels, customers can settle installment bills at all branches, Counter Service, service counters of Bangkok Bank, Krung Thai Bank, and Kasikorn Bank. Customers only show the identification card indicating the contract number so that staff can record the repayment transactions and issue receipts Hire purchase loans for new motorcycles SAWAD Group launched the hire purchase loan services for new motorcycles in 2011 by the subsidiary FM. In late 2011, the Company suspended operation due to the flooding crisis that prevented manufacturers from producing new motorcycles and then resumed full operation later in May Characteristics of the products or services The business about hire purchase loan for motorcycles involves three parties, namely a customer (or a buyer or a hire purchaser, a dealer and a hire purchase loan provider. Once the hire purchaser agrees to buy a new motorcycle from the dealer, the hire purchaser signs a hire purchase contract with FM and makes repayment on installments, with durations of installment periods. The repayment duration depends mainly on the hire purchaser s ability to repay debts. Then, the hire purchaser can possess the hire-purchased motorcycle, with maintenance work under the responsibility of the hire purchaser. Meanwhile, the ownership belongs to FM until the hire purchaser completes the repayment as specified in the contract. In other word, the seller can own the ownership only after he or she repays hire purchase loans for full amount. In case a hire purchaser fails to settle the installment bills for four consecutive periods, FM will send a warning letter to the hire purchaser. If no repayment is done, FM will proceed with the confiscation process and sell the confiscated items by auction afterwards. The Company hires an independent company to organize the auctions. ส วนท 2 หน า

24 บร ษ ท ศร สว สด พาวเวอร 1979 จาก ด (มหาชน) FM offers hire purchase loans for new motorcycles, depending on models, types, and brands of the vehicles. Before approving the loans, FM takes into account the customer s ability to repay debts by checking the customer s information with National Credit Bureau Co. Ltd and sending branch officers to do the inspection on site in order to examine the accuracy of information and confirm the identifications of the customer and the guarantor. In and as of 31 December 2014, FM recorded hire purchase loans valued at Baht million, Baht million and Baht million, respectively. FM provides hire purchase loans for motorcycles which are highly popular among consumers, e.g., Honda, Yamaha and etc. Loans classified by types of motorcycles (%) Honda Yamaha Kawazaki Others Total FM considers approving loans, based on the brands of motorcycles because selling prices of popular brands do not fall much and there is high liquidity in case the vehicles need to be confiscated and resold. New loans classified by lending durations million percentage million percentage million percentage million percentage Shorter than 12 installment periods installment periods installment periods installment periods Total In 2013, the value of new hire purchase loans for motorcycles decreased from Baht million in 2012 to Baht million and fell further to Baht million in The decrease was a result of the Company s policy to scale down the new lending for hire purchase of motorcycles. ส วนท 2 หน า

25 บร ษ ท ศร สว สด พาวเวอร 1979 จาก ด (มหาชน) FM allows credit durations of months or 1-3 years. The durations depend on the customers ability to repay debts, which can be judged by the customer s income and existing liabilities. Most of FM s customers prefer the installment durations of months. FM s interest rates range from 12 to 15 percent per annum plus receivable risks, which vary in accordance with qualifications of customers, conditions of vehicles, popularity of vehicles, and installment durations Loan Approval Procedure The approval process for hire purchase loans for new motorcycles is similar to the process for autobacked and home-backed loans. The difference is about the procedure for loan application. To elaborate, when a customer seeks hire-purchase loans, the dealer will contact FM s officers to make an inquiry about credit limits, installment periods and repayment conditions. After that the officers check the customer s information from National Credit Bureau and verify the customer and the guarantor s information, similar to the case for auto title loans and home-backed loans. 1) Industry Sales of motorcycles have a direct impact on the hire purchase loan segment. Given that motorcycles are regarded as a convenient and fast mode of transportation, many people tend to choose this mode for commuting or business doing. Manufacturers also use advanced technology to design modern, beautiful and comfortable models. For example, the models with automatic gears are very well accepted by consumers, with demand likely to continue increasing. Hence, the motorcycle hire purchase loan business is attractive for investment; this can be seen from a growing number of new players entering the market, resulting in more intense competition. 2) Competition Competition can be classified into two segments: 2.1) Players under the umbrellas of motorcycle manufacturers Many motorcycle manufacturers set up their own companies to operate hire purchase lending in order to boost their sales and become more active in the market. These players bear rather low costs because they receive funding support from their parent companies. This group of players normally offers hire purchase loans only for motorcycles with particular brands. ส วนท 2 หน า