Head Office 32/1, Charansanitwong Road, Bangor, Bangplad, Bangkok Tel: Fax: Website:

Transcription

1 (Translation) -Information Memorandum- Muangthai Leasing Public Company Limited (MTLS) Head Office 32/1, Charansanitwong Road, Bangor, Bangplad, Bangkok Tel: Fax: Website: Listing Date As at November 26, 2014 (Trading commencement on November 26, 2014) Listing Securities Capital Secondary Market Offering Price Number of common shares 2,120,000,000 shares, at par value of Baht 1 per share, total value of Baht 2,120 million. (Total offering of 545,000,000 shares. Offering to public 502,500,000 shares, at par value of Baht 1 per share, total value of Baht million and offering to directors, executives and employees of the Company and/or its subsidiary 42,500,000 shares, at par value of Baht 1 per share, total value of Baht 42.5 million.) As of November 26, 2014 (Trading Commencement) Registered Capital: Common Shares Baht 2, million Paid-up Capital: Common Shares Baht 2, million The Stock Exchange of Thailnad (SET) Baht 5.50 per share for both offering to public and to directors, executives and employees of the Company and its subsidiary Offering Date November 19-21, 2014 Objectives and plans for utilizing the capital increase Objectives and plans for Amount Period of use Utilizing the capital increase (Million Baht) 1. Loan expansion and working capital 2, within Loan repayment within June 2015 Green Shoe Option -None- Type of Business and Nature of Operation Muangthai Leasing Public Company Limited ( MTLS or the Company ) was founded by Mr. Chuchart Petaumpai and Mrs. Daonapa Petampai on May 22, At present, the Company provides vehicle title loan and personal loan to individuals through its branches.. As of June 30, 2014, The Company had total 454 branches, including 58 Branches, 261 Sub branches and 135 Service centers. 1

2 Products and Services 1 Vehicle title loan business The Company offers vehicle title loan service to individual who has the ownership in the vehicle for specified period. The customer that requests for the loan has to surrender his vehicle registration book to the Company as collateral without transferring vehicle ownership to the Company. The customer needs to sign the memorandum of understanding with regard to the ownership transfer, transfer document as well as proxy form of the Department of Land Transport. However, the customer can still possess and utilize his vehicle as usual. The title loan services of the Company are as follows. (a) Motorcycle title loan Motorcycle title loan is a loan service provided to individual who has the ownership of and possesses motorcycle. Moreover, the age of the motorcycle used as collateral must not exceed 12 years and the owner must have the ownership of the motorcycle no less than 15 days. The loan amount of motorcycle title loan will be from Baht 3,000 to Baht 30,000 and the payment period will be months. (b) Car title loan Car title loan is a loan service provided to individual who has the ownership of and possesses car. Moreover, the age of the car used as collateral must not exceed 25 years and the owner must have the ownership of the car no less than 4 months. The car types that can be used to apply for the Company s loan include passenger car, commercial car, van, 6-wheel and 10-wheel trucks. The loan amount of car title loan will not exceed Baht 200,000 and the payment period will be months for the loan amounts that are less than Baht 30,000 and months for the loan amounts from Baht 30,000. (c) Agricultural vehicle title loan Agricultural vehicle title loan is a loan service provided to farmer only who has the ownership of and possesses agricultural vehicle. Moreover, the owner must have the ownership of the vehicle no less than 15 days. The agricultural vehicle types that can be used to apply for the Company s loan include tractor and Thai farmer truck. The loan amount of agricultural vehicle title loan will not exceed Baht 70,000 for Thai farmer truck and not exceed Baht 150,000 for tractor and the payment period will be months for the loan amounts that are less than Baht 30,000 and months for the loan amounts from Baht 30, Personal loan business The Company offers personal loan under the supervision of the Bank of Thailand. The Company has obtained the permission from the Ministry of Finance to operate personal loan under the supervision of the Bank of Thailand since August 31, The Company s policy in personal loan is to offer the service to existing customers that have used the Company s title loan with good payment record since the Company offers personal loan with no collateral. Moreover, the Company limits the loan amount of personal loan from Baht 3,000 to Baht 10,000 and the loan amount from Baht 5,000 is required one guarantor who is a householder or a government officer since the Company considersthat he has a secured career and permanent residence that can prevent the credit risk from the borrower. The payment period for the personal loan will be 6-18 months. Moreover, the Company has invested in percent of Muangthai Leasing Insurance Broker Company Limited ( MTLI ). MTLI acts as a non-life insurance broker and offers compulsory motorcycle insurance, compulsory motor insurance and personal accident insurance. MTLI obtained non-life insurance broker license according to Non-Life Insurance Act B.E from Office of Insurance Commission ( OIC ) on May 4, MTLI offers its insurance service through MTLS branches only to facilitate MTLS customers. 2

3 Revenue Structure Revenue Jan - Jun 2013 Jan - Jun 2014 MB % MB % MB % MB % MB % Interest Income from Loans - Vehicle Title Loan , , Personal Loan Total Interest Income from Loans , , Fee and Service Income 1) Other Income 2) Total Revenues , , Remark : 1) Fee and Service Income includes front end fee, penalty and collection fee, Insurance commission from MTLI 2) Other Income includes information service fee to insurance companies, gain from assets sales, damage compensation for repossessed vehicles, etc. Target Customers The Company has a policy to offer loans to individual who has his own collateral and locates or works in the area of the Company s branches. The borrower must have a minimum income as prescribed. Most customers of the Company have many occupations such as factory worker, employee, merchant, farmer and government officer. Distribution Channels The Company offers loans to its customers through its branches that cover most parts of the country which are Northern, Eastern, Western, Central and Northeastern. This allows the Company to reach out its target customers. There are 3 types of the Company s branches which are Branch, Sub branch and Service center that are determined by the number of customers in each branch. As of June 30, 2014, MTLS had 454 branches, including 58 Branches, 261 Sub branches and 135 Service centers. Source of Supply The Company s primary source of fund is loans from commercial banks which represented percent of total source of fund of the Company. As of June 30, 2014, the Company had loans from 5 commercial banks of Baht 9, million, while total outstanding loan balance of Baht 4, million. Moreover, the Company also had capital from the shareholders, accounted for approximately percent of the total source of fund of the Company. Competitive Strategies 1. Providing convenient and fast service The Company has a concise loan approval process that allows its customers to know the approval and obtain money within 20 minutes. However, the Company still focuses on cautious loan approval process. Besides, when the customers paid up all outstandingsto the Company, they are able to obtain their vehicle registration books from the branch immediately. 2. Attentive and friendly service The Company prioritizes and focuses on service quality to customers. All of the Company s employees will be trained regularly with regard to customer service. Therefore, the employees will be able to provide service to customers politely and friendly as the Company s slogan Serve you as you are the close ones. With this policy, the customers will come back and apply for the Company s loan services repeatedly and recommend the Company s services to others. 3

4 3. Effective debt collection and management The experience in this business allows the Company to understand the customers behavior and habits. Therefore, the Company is able to determine credit approval process, loan amount and effective debt collection process that are suitable for the customers characteristics. The Company has employed the debt management policy called MTL Model, which is all-around debt management model, consisting of loan quality monitoring, debt collection monitoring and debt management monitoring. This model allows the Company to control its receivables within determined benchmarks. 4. Services covering most areas of the country The Company has branches to serve customers covering most parts of the country. This will facilitate the customers to apply for the Company s loan services and help the Company to grow its customer base consistently. Industry and Competition Vehicle title loan, which is the Company s main business, is classified as household loan that grew averagely in at percent annually, which was higher that the growth of Gross Domestic Product (GDP) in that grew 6.10 percent annually, due to the Government s economic stimulus package, especially first-car tax-incentive scheme. Then, in 2013, household loan grew at decreasing rate at percent from the slowdown in demand of housing loan. Other factors were the ending of first-car tax-incentive scheme at December 31, 2012 and prolonged domestic political situation incorporated with most financial institutions were more cautious in the approval of household loans due to concerns about the creditworthiness of borrowers and collateral. In the second quarter of 2014, household loan demand increased consistently with the improvement of the private consumption from the resolved political situation and the government policy to stimulate private consumption. Apart from above reasons, the major factor that contributed to the growth of the Company s business of vehicle title loan was the growth in motorcycle and automotive industry. From statistics of the Department of Land Transport, the cumulative registered vehicles in had been increasing from million units in 2010 to million units in 2013, representing 6.72 percent annual growth, as a result of the steady expansion in automotive industry. The type of vehicle that had been registered the most was motorcycle, which accounted for percent of total cumulative registered vehicles with 4.89 percent annual growth while the proportion of registered cars had been percent of total cumulative registered vehicles with 9.62 percent annual growth. In the second quarter of 2014, the total cumulative number of registered vehicles was million units. Motorcycle was still the vehicle that was registered the most at the proportion of percent, followed with car at the proportion of percent of total cumulative registered vehicles which had an increasing trend. This reflected that the number of the Company s target customers, who were eligible to use the registered vehicle as collateral for loan, has been increasing every year. Therefore, the management believes that the Company s business has a potential to grow constantly in the future. The number of cumulative registered vehicles in and the second quarter of 2014 (unit : units) Q Q Motorcycle 17,299,814 18,152,469 19,147,225 19,964,990 19,659,439 20,173,466 Car 9,887,706 10,651,817 11,827,710 13,023,547 12,554,212 13,489,194 Truck and Large Passenger Car 954, ,426 1,037,334 1,104,231 1,067,051 1,128,739 Agricultural Vehicle 307, , , , , ,614 Others 34,910 35,450 35,865 36,456 36,147 36,647 Total Vehicles 28,484,829 30,194,937 32,476,977 34,624,406 33,781,957 35,352,660 4

5 Source : Department of Land Transport Market Competition There are 3 companies that have the same business model, offer the same loan service as the Company does and focus on lowto-medium-income customers that could not reach loan service from commercial banks. These companies are CFG Service Company Limited ( CFGS ), Srisawad Power 1979 Public Company Limited ( SAWAD ) and Nim See Seng Leasing Group. When considering data and information among the Company and those competitiors, CFGS and SAWAD offer both hire-purchase and secured loans that have variety of collateral such as car, agricultural vehicle, home and land. On the other hand, the Company and Nim See Seng Group mainly offer vehicle title loans. With more than 22 years of experience in vehicle title loan, the Company has advantages in expertise and understanding in customer s behavior. Therefore, the Company can determine credit limit and loan approval process and manage its receivables effectively. When looking at title loan business only, the Company has the most market share at percent of total loan receivables of the Company and the 3 companies that have the same business model and offer the same loan service as the Company does. Environmental Impacts -none- Summary of Material Contracts 1) Financial Loan Agreement As of June 30, 2014, the Company has loan agreements with 5 financial institutions as follows; Financial Institution No.1 Credit line 1 Borrower : Muangthai Leasing Public Company Limited Loan type : Overdraft Loan amount : 30 million baht Collateral : - Personal guarantee by Mr. Chuchat Petaumpai and Mrs. Daonapa Petampai - Pledge of land and buildings owned by Mr. Chuchat Petaumpai and Mrs. Daonapa Petampai Outstanding as of June 30, 2014 : million baht Major Conditions : -None- Credit line 2 Borrower : Muangthai Leasing Public Company Limited Purpose of Loan : Purchase of land for new office building Loan type : Long term loan Loan amount : million baht Collateral : Land and buildings pledge Outstanding as of June 30, 2014 Major Conditions : : million baht - Debt to Equity ratio (D/E Ratio) not exceeding 2 times (Debt is calculated from total debt deducting fixed deposit pledge.) - Maintain more than 3 months overdue receivables to total receivables ratio not exceeding 10% - Interest Coverage Ratio not less than 1.5 times - Maintain less than 3 months overdue receivables to total receivables under this agreement that is free from collateral ratio to be not less than 1.7%. 5

6 Financial Institution No.2 Credit line 1 Borrower : Muangthai Leasing Public Company Limited Loan type : Long term loan Loan amount : 203 million baht Collateral : - Fixed deposit pledge owned by Mr. Chuchat Petaumpai - Personal guarantee by Mr. Chuchat Petaumpai and Mrs. Daonapa Petampai Outstanding as of June 30, 2014 : 203 million baht Major Conditions : Maintain total direct and indirect shareholding proportion of Mr. Chuchat Petaumpai, Mrs. Daonapa Petampai and Petaumpai family to be not less than 51%. Credit line 2 Borrower : Muangthai Leasing Public Company Limited Purpose of Loan : Purchase of land for new office building Loan type : Long term loan Loan amount : million baht Collateral : Land and buildings pledge Outstanding as of June 30, 2014 : million baht Major Conditions : - Debt to Equity ratio (D/E Ratio) not exceeding 2 times (Debt is calculated from total debt deducting fixed deposit pledge.) - Maintain more than 3 months overdue receivables to total receivables ratio to be not exceeding 10% - Interest Coverage Ratio not less than 1.5 times - Maintain less than 3 months overdue receivables to total receivables under this agreement that is free from collateral ratio to be not less than 1.7%. - Maintain total direct and indirect shareholding proportion of Mr. Chuchat Petaumpai, Mrs. Daonapa Petampai, Petaumpai family and Petampai family to be not less than 51% of total Company s shares. Financial Institution No.1 and 2 (Syndicated Loan) Credit line 1-6 Borrower : Muangthai Leasing Public Company Limited Loan type : Long term loan Loan amount : 7,935 million baht Collateral : - Fixed deposit pledge owned by Mr. Chuchat Petaumpai - Personal guarantee by Mr. Chuchat Petaumpai and Mrs. Daonapa Petampai - Land and buildings pledge owned by Mr. Chuchat Petaumpai and Mrs. Daonapa Petampai - Conditional transfer ownership in motorcycles, cars and right to receive payment under loan agreement. - Conditional transfer the Company s fixed deposit accounts. Outstanding as of June 30, 2014 : 3, million baht 6

7 Major Conditions : - Maintain total direct and indirect shareholding proportion of Mr. Chuchat Petaumpai, Mrs. Daonapa Petampai, Petaumpai family and Petampai family to be not less than 51% of total Company s shares throughout the contract period. - Debt to Equity ratio (D/E Ratio) not exceeding 2 times (Debt is calculated from total debt deducting fixed deposit pledge.) - Maintain more than 3 months overdue receivables to total receivables ratio to be not exceeding 10% - Interest Coverage Ratio not less than 1.5 times - Maintain less than 3 months overdue receivables to total receivables under this agreement that is free from collateral ratio to be not less than 1.7%. Financial Institution No.3 Credit line 1 Borrower : Muangthai Leasing Public Company Limited Loan type : Overdraft Loan amount : 10 million baht Collateral : - Fixed deposit pledge owned by Mr. Chuchat Petaumpai - Share certificate pledge owned by Mr. Chuchat Petaumpai - Personal guarantee by Mr. Chuchat Petaumpai and Mrs. Daonapa Petampai Outstanding as of June 30, 2014 : 9.81 million baht Major Conditions : -None- Credit line 2 Borrower : Muangthai Leasing Public Company Limited Loan type : Promissory Note Loan amount : million baht Collateral : - Fixed deposit pledge owned by Mr. Chuchat Petaumpai - Share certificate pledge owned by Mr. Chuchat Petaumpai - Personal guarantee by Mr. Chuchat Petaumpai and Mrs. Daonapa Petampai Outstanding as of June 30, 2014 : million baht Major Conditions : -None- Financial Institution No.4 Borrower : Muangthai Leasing Public Company Limited Loan type : Promissory Note Loan amount : 100 million baht Collateral : - Fixed deposit pledge owned by Mrs. Daonapa Petampai - Personal guarantee by Mr. Chuchat Petaumpai and Mrs. Daonapa Petampai Outstanding as of June 30, 2014 : million baht Major conditions : As of June 26, 2014, the Company is approved by bank to change the direct and indirect shareholding proportion of Mr. Chuchat Petaumpai, Mrs. Daonapa Petampai, Petaumpai family and Petampai family from not less than 70% to be not less than 51% of total Company s shares throughout the contract period. 7

8 Financial Institution No.5 Borrower : Muangthai Leasing Public Company Limited Loan type : Promissory Note Loan amount : 31 million baht Collateral : - Personal guarantee by Mr. Chuchat Petaumpai and Mrs. Daonapa Petampai - Land pledge owned by Mr. Chuchat Petaumpai and Mrs. Daonapa Petampai Outstanding as of June 30, 2014 : 31 million baht Major conditions : -None- 2) Rental Agreement The Company engaged in rental agreement with third parties and major shareholders to be used as the Company s offices. Most rental agreement terms are 3 years and are able to extend for 3 additional years. As of June 30, 2014, the Company had 454 branches which can be calculated as the obligations in the amount of million baht. 3) Broker Agreement Contract Party 1 st Agreement 2 nd Agreement Nam Seng Insurance Public Company Limited ( the Insurance Company ) and Muangthai Leasing Insurance Broker Company Limited ( MTLI ) Road Accident Victims Protection Company Limited ( the Insurance Company ) and Muangthai Leasing Insurance Broker Company Limited ( MTLI ) Date of Contract June 16, 2011 June 27, 2011 Term of Contract -None- -None- Nature of Contract MTLI acts as a broker of Nam Seng Insurance Public Company Limited MTLI acts as a broker of Road Accident Victims Protection Company Limited MTLI duty and responsibility - Contact, advise or manage individual or juristic person to engage into insurance contract with the Insurance Company - Receive insurance policy from the Insurance Company and deliver to the assured - Authorized in writing by the Insurance Company to receive premiums from the assured - Claim and follow up the assured to pay premiums to the Insurance Company Compensation MTLI has the right to receive benefit, compensation, pension or other privilege in the rate announced from time to time by the counter party. Termination of Contract - If MTLI violates any contract provisions or fails to perform any obligations which may harm the Insurance Company or the assured, the Insurance Company has the right to terminate the contract. - Both parties have the right to terminate the contract by informing in the written form to counter party not less than 30 days before termination. - MTLI lack of insurance broker qualifications specified by law, be revoked or not extend insurance broker license with any causes. 8

9 4) Agent appointment agreemnet Contract Party 1 st Agreement 2 nd Agreement Mr. Gate Pollerd ( Agent ) and Muangthai Leasing Public Company Limited Mr. Wasin Dejkijwikrom ( Agent ) and Muangthai Leasing Public Company Limited Date of Contract September 1, 2014 Term of Contract 1 year, started from September 1, 2014 and will end on August 31, When the contract expires and no any parties terminate the contract or violate the contract conditions, the contract will be automatically extended for the period of one year. Nature of Contract Major condition Compensation Termination of Contract Appointed agent to offers the Company s vehicle title loan service and personal loan service including receives payments and issues the Company s receipt from the system to customers at the office located in Tachai district, Sukhothai. Appointed agent to offers the Company s vehicle title loan service and personal loan service including receives payments and issues the Company s receipt from the system to customers at the office located in Khiri Mat district, Sukhothai. - Agents have to offer the Company s loan services to customers and strictly comply with the Company s rules, manuals and procedure to meet the Company service standard. - Agents are not permitted to act as agents of other companies or operators who provide similar services to the Company and do not take any actions to compete with the Company or affect the Company operation. - Agents have to provide loan services to customers by themselves and do not appoint any sub-agent to provide the Company s loan services. The Company agrees to provide compensation to agents in the form of commission calculated from the number of loan granted by agent each month ar the specified rate by the Company This contract will terminate if agent omits or fails to comply with the contract obligations or violates any conditions under this contract. Agent has to compensate the Company for any damages caused by agent within 15 days since receives the Company notification. - Both parties have the right to terminate the contract by informing in the written form to counter party. The termination will be effective in 15 days since the counter party receives this notification of termination including the case when agent s loan receivables qualiy significantly decreases. Feasibility Study Technical and Management Assistance Future Projects -none- -none- -none- Related Transactions In year 2013 and first 6 months of 2014, the Company had entered into the transactions with related parties who may have conflict of interest as follows: 9

10 1. Mr. Chuchat Petaumpai Relationship: - Mr. Chuchat Petaumpai is the Chairman of the Executive Committee and hold 1,405,000,000 shares of the Company (including spouse shareholding portion) accounted for percent of the Company s paid-up shares on May 16, Mrs. Daonapa Petampai s spouse Related transactions Transaction value (million baht) Necessary and Rationale of Transaction 2013 Jan Jun Building rent The Company rented 7 commercial buildings and warehouses from Mr. Chuchat Petaumpai to be used as the Company branches and auction center. (for 3 years period since January 1, 2012 to December 31, 2014). The rental fee was at fair price appraised by American Appraisal (Thailand) Company Limited, an independent asset appraiser approved by the office of SEC. This valuation is for the public propose. The audit committee reviewed and commented that this transaction is for the benefit of the Company s business. The rental fee is based on the price appraised by the independent asset appraiser approved by the office of SEC which is reasonable and fair. 2. Loan guarantee Credit line Credit usage 6, , , , Mr. Chuchat Petaumpai pledged bank loans using assets, fixed deposit and personal guarantee and did not charge any compensation for this guarantee. The audit committee reviewed and commented that this guartantee is nessessary and for the benefit of the Company s business to receive bank credit for the Company working capital. 3. Leasing agreement guarantee Credit line Outstanding Mr. Chuchat Petaumpai involved in personal guarantee of car leasing agreements among the Company and leasing companies and did not charge any compensation for this guarantee. The audit committee reviewed and commented that this guartantee is nessessary and for the benefit of the Company s business to make car leasing agreements for the Company operation. 2. Mrs. Daonapa Petampai Relationship: - Mrs. Daonapa Petampai is the Managing Director and hold 1,405,000,000 shares of the Company (including spouse shareholding proportion) accounted for percent of the Company s paid-up shares on May 16, Mr. Chuchat Petaumpai s spouse Related transactions Transaction value (million baht) 2013 Jan Jun 2014 Necessary and Rationale of Transaction 1. Building rent The Company rented 5 commercial buildings from Mrs. Daonapa Petampai to be used as the Company head office and branches (for 3 years period since January 1, 2012 to December 31, 2014). The rental fee was at the fair price appraised by American Appraisal 10

11 Related transactions 2. Loan guarantee Credit line Credit usage 3. Leasing agreement guarantee Credit line Outstanding Transaction value (million baht) 2013 Jan Jun , , , , Necessary and Rationale of Transaction (Thailand) Company Limited, an independent asset appraiser approved by the office of SEC. This valuation is for the public propose. Moreover, the Company rented 2 commercial buildings to be used as the Company storage building (for 2 years period since January 3, 2013 to December 31, 2014). The rental fee was the same rate as the market rate the Company paid to third party for rental in the same area. The audit committee reviewed and commented that this transaction is for the benefit of the Company s business. The rental fee is based on the price appraised by the independent asset appraiser approved by the office of SEC and the market rate which is reasonable and fair. Mrs. Daonapa Petampai pledged bank loans using assets, fixed deposit and personal guarantee and did not charge any compensation for this guarantee. The audit committee reviewed and commented that this guartantee is nessessary and for the benefit of the Company s business to receive bank credit for the Company working capital. Mrs. Daonapa Petampai involved in personal guarantee of car leasing agreements among the Company and leasing companies and did not charge any compensation for this guarantee. The audit committee reviewed and commented that this guartantee is nessessary and for the benefit of the Company s business to make car leasing agreements for the Company operation. 3. Mr. Surapong Pechaumpai Relationship: - Mr. Surapong Pechaumpai is the Executive Committee and Deputy Managing Director and Mr. Chuchat Petaumpai s brother. Transaction value (million baht) Related transactions Necessary and Rationale of Transaction 2013 Jan - Jun 2014 Leasing agreement guarantee Credit line Outstanding Mr. Surapong Pechaumpai involved in personal guarantee of car leasing agreements among the Company and leasing companies and did not charge any compensation for this guarantee. The audit committee reviewed and commented that this guartantee is nessessary and for the benefit of the Company s business to make car leasing agreements for the Company operation. 4. Mr. Wasin Dejkijwikrom Relationship: - Mrs. Daonapa Petampai s brother - Hold 65,000,000 shares of the Company accounted for 4.13 percent of the Company s paid-up shares on May 16,

12 Related transactions Transaction value (million baht) 2013 Jan Jun 2014 Necessary and Rationale of Transaction Agent commission The Company paid agent commission to Mr.Wasin Dejkijwikrom based on the number of loan granted each month in the rate specified by the Company. The audit committee reviewed and commented that this transaction was a normal transaction to provide service to the Company s customers. The commission rate paid to Mr.Wasin is reasonable because it is the same rate as commission paid to other agent. The Company has no policy to appoint new agent in the future. Remark : More related transactions details can be found in the Company s prospectus. Contingencies and Commitments The Company had operating lease agreements related to office building. The term of the agreements ranging from 3 years to 5 years. As of September 30, 2014, The Company had contingencies to pay rent according to the agreements within 1 year at Baht million and more than 1 year but not more than 5 years at Baht million. Risk Factors 1. Risk from the competition in vehicle title loan business From the high return of vehicle title loan business, it has induced many players enter into title loan industry. As a result, the competition in this business has been more aggressive. However, the management of the Company has more than 22 years of experience in this title loan business. They have a good understanding in this business and are able to determine business outlook appropriately and effectively. The main strategy of the Company is to offer customers quality services with service mind and friendliness. The customers will be impressed and repeatedly apply for the Company s loan services. Therefore, the management believes that the Company will have no effects from aforementioned competition in vehicle title loan business. 2. Risk from receivables quality The Company is in the title loan business and focuses on low-to-medium-income customers who could not reach loan service from commercial banks and might have a significant chance of default risk. However, in the credit approval process, the Company concentrates in verification of customers and guarantors, along with effective debt management and collection system. This will reduce non performing loan (NPL) risk. Moreover, the Company also set the maximum credit limit on each type of loans and single limit on each customer to limit the maximum risk from each customer. In and the first 6 months of 2014, the Company had NPL to total loan receivables of 0.99 percent, 2.14 percent and 1.72 percent respectively. 3. Risk from inability to repossess collateral When the customer payment is overdue 2 installments, the Company has the right to repossess the collateral vehicles and sell by auction. However, such collateral vehicles are highly mobile, hence, difficult to trace. Therefore, to minimize the risk from collateral repossession, the Company set a condition for customers that they need to be in the area of the Company s branches. With this condition, the cutomer must have his permanent address or work in the area of the located branch so that the Company s credit analyst can verify the customer s address and monitor the customer closely. 12

13 4. Risk from sale of repossessed assets In 2013 and the first 6 months of 2014, the Company had losses from sale of repossessed vehicles of Baht million and Baht 7.04 million respectively. Such losses were from that the Company imposed more strict measures on reschedule customers. As a result, the number of repossessed vehicles elevated and increased the number of vehicles in each auction. Consequently, the competition in price was lessened and the auction price of repossessed vehicle decreased. The Company was aware of such impact and improved sale of repossessed assets process by opening 2 auction centers in Chonburi and Khon Kaen in February and March 2014 respectively. From the improvement, loss from sale of repossessed vehicles decreased from Baht 1,767 per unit in 2013 to Baht 1,013 per unit in the first 6 months of Risk from employee fraud Since the Company s loan service is in the retail finance business where average loan amount is low at the amount of Baht 11,600-14,300 per contract and the customer base is wide, the Company needs to delegate responsibility and authority to its branches. However, the Company has taken measures to prevent damages from employee fraud seriously. Head of credit analyst needs to audit credit documents and identify all customers prior approval. If he detects any abnormal information, Head of credit analyst must report such information to branch manager and internal audit department immediately to investigate and penalize those involved. Moreover, the Company has the internal audit department which regularly monitors branch operation and presents audit reports to executives and the Audit Committee. Those measures helped preventing fraud from employee. In and the first 6 months of 2014, losses from employee fraud were Baht 0.71 million, Baht 1.08 million, Baht 1.67 million and Baht 0.12 million respectively, representing 0.11 percent, 0.09 percent, 0.11 percent and 0.01 percent of total revenues in and the first 6 months of 2014 respectively. The management believes that those figures were minimal when comparing to the business size of the Company. 6. Risk from data and document backup The Company s business operation relies on computer network to store data and information of all retail customers. Then, the Company setup an automatic data backup routine between main server and backup server and record data in portable hard disk regularly. The Company also store loan agreements and related documents electronically. Sub branches and Service centers are responsible for scanning documents originated in their own branches and send the hard copies of those documents to Branches. The Company is developing Central Data System to effectively store all data and information from all Branches, Sub branches and Service centers. The system development is expected to be complete in Risk from fluctuation of interest rate The main source of fund of the Company for lending is loans from commercial banks in which interest rate has been charged in floating rate; however, main income of the Company is from interest income from loan receivables with fixed interest rate throughout the term of the agreement. The Company, so, has set the interest rate that is charged to the customers by considering interest rate trend in the money market to ensure that its interest rate and fee must be no less than its costs of fund and operating costs. Moreover, from this initial public offering, the Company will have more capital for loan expansion. Additionally, after listed in SET, the Company will be able to raise fund through many financial instruments and lower its costs of fund. 8. Risk from relying on funding from financial institutions The Company s main source of fund is from long term loans from commercial banks. Those term loans are syndicated loans from 2 commercial banks. If such banks gave no longer financial support to the Company, it would experience liquidity difficulty in lending to customers and eventually affected business operation. However, the Company has associated with those banks for a long time with good payment records and has complied with covenants and terms of loan agreements. Therefore, the Company has a 13

14 good relationship, has been supported and given increasing credit lines continuously. The management believes that the Company will receive continuous support from those banks in the long term. Furthermore, the Company s plan to IPO and listed in SET will help the Company to broaden its alternative for raising capital. 9. Risk from the Government control The Company s main business is the vehicle title loan which is not under the control of any government agency. The only restriction is to limit the interest rate under the specified rate in the Civil and Commercial Code that the Company has complied with. However, if any government agencies adopt a supervision policy for vehicle title loan to control companies in the industry to the same standards. The Company might be affected. However, the Company has been aware of the risk and adopted guidelines for financial institutions from the Bank of Thailand such as the allowance for doubtful accounts and revenue recognition. Therefore, the Company is confident that any control or supervision from the Government will have no significant effect to the Company s operations and competitiveness. 10. Risk from the Government s policy in response to shark loans According to reports in many media that the Ministry of Finance has a policy related to loans for small business or Nano Finance which is loans to enhance liquidity for small businesses that have no access to capital from financial institutions since those small businesses have no collateral or guarantee. The management believes that if such policy is actually adopted, there will be no significant impact to the Company since the interest rate that the Company has charged customers is less than the expected interest rate that the Ministry of Finance announced in the media. Moreover, the Company focuses on providing quality service to differentiate itself from its competitors. 11. Risk from relying on key management The Company has a clear objective to retain the management and employees in the long term. Most of the management team and employees has been working with the Company from the beginning. The Company also has the policy to train its employees in all levels and support them to grow in the organization continuously. Finally, in this offering, the Company allocated million shares to directors, the management and employees. Therefore, the management believes that such policies will retain its employees in the long term. 12. Risk from having major shareholders holding more than 50% of the Company s shares On May 16, 2014, Mr. Chuchat Petaumpai and Mrs. Daonapa Petampai collectively held percent of total issued shares of the Company. After this offering, the shareholding proportion of Mr. Chuchat Petaumpai and Mrs. Daonapa Petampai will decline to percent of total issued shares which allows Mr. Chuchat Petaumpai and Mrs. Daonapa Petampai have the authority to control the Company. However, the Company appointed the Audit Committee to examine, review and screen to ensure the transparency of the Company s operations. Moreover, the Board of Directors consists of 5 independent directors (including the Chairman) and 2 managements. This structure will balance voting rights in the Company s issues and help in management appropriately and effectively. 13. Risk from relying on major shareholders guarantee for bank loans At present, Mr. Chuchat Petaumpai and Mrs. Daonapa Petampai, major shareholders, provide personal guarantees as well as personal assets and personal bank accounts pledged for the Company s loans from commercial banks. Both major shareholders intend to fully coorperate in such guarantee to ensure that the Company follows and complies with terms of 14

15 the loan agreement from the commercial banks. However, after this offering, the Company plans to withdraw the guarantee of such major shareholders. The withdrawal of such guarantee will have no effect to those credit facilities that the Company obtains from those banks. Lawsuit Number of Employees -none- 1,503 employees as of June 30, 2014 (excluding 11 executives) Company Background Muangthai Leasing Public Company Limited ( The Company ), previously named D.S. Leasing Company limited, was established by Mr. Chuchat Petaumpai and Mrs. Daonapa Petampai in May 22, The major developments are as follows; 1992 Established to provide new and second hand motorcycle hire purchase business under D.S. Leasing Company limited 1998 Started providing motorcycle title loan 2001 Started providing agricultural vehicle title loan loan Changed the Company name from D.S. Leasing Company limited to Muangthai Leasing Company Limited. Terminated motorcycle hire purchase business 2003 Started providing car title loan 2006 Started operating personal loan under supervision of the Bank of Thailand. The Company has the permission from the Ministry of Finance to operate personal loan under the supervision of the Bank of Thailand since August 31, Invested in 19,998 shares of Muangthai Leasing Insurance Broker Company Limited which engages in insurance brokerage business accounted for 99.99% of paid-up capital for providing additional service to the Company customers Opened 1st and 2nd auction centers in Phitsanulok and Ayudhaya to be the auction center of branches located in Northern, Central and Western region Opened 3rd auction center in Chonburi to be the auction center of branches located in Central and Eastern region. The first auction date was Febuary 21, Opened 4th auction center in Khonkaen to be the auction center of branches located in Northeastern region. The first auction date was March 20, Converted to Public Company Limited Increased registered capital to Baht 2,120 Million for IPO and changed par value to Baht 1 per share, million shares offered to public and million shares offered to directors and employees of the Company and the subsidiary. Investment in subsidiaries As of September 30, 2014, the investment in subsidiaries shown as follows: unit: million baht Company name Type of business Paid up capital % of shareholding Investment value (Historical cost) Muangthai Leasing Insurance Broker Company Limited Insurance brokerage business

16 Change in Capital in the last 3 years Date (Registered at the Ministry of Commerce) Jul 28, 2011 Nov 21, 2011 Sep 26, 2012 May 30, 2013 May 16, 2014 Capital Increase (Decrease) After the Increase (Decrease) 1, , , , , (unit: million baht) Note/ Objective Loan business expansion Loan business expansion Loan business expansion Loan business expansion Increased registered capital for public offering of million baht, and offer to directors, management and employees of million baht. The objective of using the proceeds is to increase Credit line, be working Capital and repay bank loan. Accounting Period Auditor Registrar Financial Advisor Lead Underwriter Dividend Policy B.O.I. Certificates 1 January - 31 December Ms. Ratana Jala EY Office Limited Thailand Securities Depository Co. Ltd Finansia Syrus Securities Public Company Limited Finansia Syrus Securities Public Company Limited The Company and its subsidiary have a policy to pay dividend at least 50% of its net profit from its separate financial statement after deduction of corporate income tax and legal reserve. -None- No. of Shareholders As of November 24, 2014 Number of Shareholders 1 Strategic shareholders 1.1 Director, manager, and executive management including related persons and associated persons 1.2 Shareholders who have a holding of above 5% Number of Shares % of Paid-Up Capital 18 1,580,970, including related persons 1.3 Controlling Shareholders Non-strategic shareholders hold > 1 trading unit 10, ,029, Non-strategic shareholders hold < 1 trading unit Total Shareholders 10,252 2,120,000,

17 Major Shareholder As of November 24, 2014 Name After IPO Before IPO No. of shares % No. of shares % 1. Petaumpai s Group 1.1 Mr. Chuchat Petaumpai 792,500, ,500, Mrs. Daonapa Petampai 612,500, ,500, Total shares held by Petaumpai s Group 1,405,000, ,405,000, Mr. Wasin Dechkijvigrom 65,000, ,000, Mr. Sorchai Dechkijvigrom 65,000, ,000, Mrs. Chatsamorn Tiraganant 40,000, ,000, BNP Paribas Securities (Asia) Ltd. 26,000, Allianz Ayudhya Assurance Plc. 14,500, Chase Nominees Limited 7,391, Mr. Kanoksak Pinsaeng 6,500, Mr. Marachai Kongboonma 6,347, SCB Equity RMF 5,641, ,641,380, ,575,000, Foreign Shareholder As of November 24, 2014 No. of foreign shareholders: 57 Total no. of share held 38,488,900 or 1.82 % of paid up capital Note: The Company has a limitation on the percentage of equity shares held by foreign shareholders stated in the article of association (clause 10) that the Company s shares are freely transferred unless the shares transfer cause the percentage of foreign shareholding in the Company to be more than 49 percent of the paid-up capital. The Company shall not accept any transfer of shares if the transfer does not comply with the law or the Company s article of association. Board of Directors Name Position Inaugurated date 1. Admiral Apichart Pengsritong Chairman and Independent Director September 26, Mr. Chuchat Petaumpai Director 1) and Chairman of the Executive Committee 2) May 22, ) / April 17, ) 3. Mrs. Daonapa Petampai Director 1) and Managing Director 2) May 22, ) / April 17, ) 4. Mr. Yodhin Anavil Independent Director September 26, Mrs. Kongkeaw Piamduaytham Chairman of the Audit Committee and Independent September 26, 2012 Director 6. Mr. Kampol Tatiyakavee Audit Committee and Independent Director September 26, Mr. Chainoi Puankosoom Audit Committee and Independent Director May 9,

18 Audit Committee Name Position 1. Mrs. Kongkeaw Piamduaytham* Chairman of the Audit Committee 2. Mr. Chainoi Puankosoom* Audit Committee 3. Mr. Kampol Tatiyakavee Audit Committee Remark: * Members of audit committee who have knowledge and experience to verify reliability of the financial statements. Ms. Duangkhae Songnuy is the secretary of the Audit Committee. Scope of Duties and Responsibilities 1. To review the accuracy and sufficiency of the financial reports of the Company. 2. To review the Company to ensure that the internal control and internal audit systems are suitable, and effective, and to review the independence of internal audit section, including approving the appointment, transference, or termination of internal audit section supervisor (heads) or those of other workgroups responsible for internal audit. 3. To review the Company to ensure that its operation is in accordance with the laws governing Securities and Exchange, regulations of the SET and laws concerning the business of the Company. 4. To consider, propose, and appoint independent persons who shall be assigned as the Company s auditor, to propose auditor s remuneration, and to participate in a meeting with the auditors at least once a year without management team. 5. To review connected transactions or any other transaction that may cause potential conflicts of interest in accordance with SET laws and SET regulations in order to ensure that those items are reasonable and of utmost benefits to the Company. 6. To prepare the Report of the Audit Committee and disclose the report in the Company s Annual Registration Statements. The Report of the Audit Committee must be signed by the Chairman of the Audit Committee and must at least contain the following information. (a) Opinions on accuracy, completeness and credibility of the Company s financial reports; (b) Opinions on sufficiency of the company's internal control system; (c) Opinions on the Company's compliance with the laws governing Securities and Exchange, regulations of the SET and laws concerning the business of the Company. (d) Opinions on suitability of auditors of the Company; (e) Opinions on transactions of possible conflicts of interest (f) The number of audit committee s meetings, and attendance of each audit committee member; (g) Opinions or observation by the audit committee during their auditing practice according to charter; and (h) Other transactions that shareholders and public investors should be informed under the scope of work and responsibilities assigned by the Company s board of directors. 7. To take care of any other action assigned by the board of directors with the consent of audit committee. Terms for holding office 1. The Chairman of the audit committee 3 years or director s holding office term 2. The members of the audit committee 3 years or director s holding office term Listing Condition -None- 18

19 Silent Period Relaxation Others Statistical Summary Shareholders, who own common shares before the company s public offering, holding 1,166,000,000 shares or 55.00% of paid up capital after the initial public offering certify to the Stock Exchange of Thailand that their shares will not be sold for the period of one year from the first trading day. Upon the expiry of 6 months period of the prescribed time, those shareholders will be allowed to sell 25% of the total amount of shares prohibited for sale and the rest after one year. -None- -None- Muangthai Leasing Public Company Limited (Separate financial statements) Remark Year In thousands Baht Baht /Share 2) Income 1) Earnings (Loss) Earnings (Loss) Dividend Book Value Payout Ratio (%) , , ,224, , ,524, , Jan-Sep ,329, , : 1) Interest income from loans and Fee and service income 2) Par Baht 1 per share for comparison, calculated based on the number of shares at the end of each period. Muangthai Leasing Public Company Limited and Its Subsidiary (Consolidated Financial Statements) Year In thousands Baht Baht /Share 2) Income 1) Earnings Earnings Dividend Book Value Payout (Loss) (Loss) Ratio (%) , , ,238, , ,539, , Jan-Sep ,342, , Remark : 1) Interest income from loans and Fee and service income 2) Par Baht 1 per share for comparison, calculated based on the number of shares at the end of each period. 19

20 Muangthai Leasing Public Company Limited (Separate financial statements) Balance Sheet As of 31 December and 30 September 2014 (in thousand baht) Sep 2014 Assets Current assets Cash and cash equivalents 29,909 47,506 87,730 65,204 Current portion of loan receivable 3,342,566 3,911,113 4,666,134 5,434,785 Other receivables related parties - - 3, Short-term loans ,966 11,019 12,934 Other current assets ,165 20,675 27,137 Total current assets 3,373,318 3,997,750 4,789,752 5,541,050 Non-current assets Loan receivables net of current portion 558, , ,171 1,199,301 Investment in subsidiary 2,000 2,000 2,000 2,000 Land, building and equipment 31,543 67, , ,925 Deferred tax assets - 9,615 25,172 18,264 Other non-current assets - 12,865 13,697 17,980 Total non-current assets 592, ,513 1,223,071 1,580,470 Total assets 3,965,606 4,785,263 6,012,824 7,121,520 Liabilities and shareholders equity Current liabilities Bank overdrafts and short-term loans from financial 770, , , ,108 institutions Other payables 66, ,941 92,527 91,282 Current portion of long-term loans - 905,597 3,055,221 2,652,440 Current portion of long-term loans from a related party - 47, Current portion of liabilities under hire purchase and 1,853 3,820 6,044 6,459 financial lease payable Income tax payable 27,582 90,249 46,522 39,663 Other current liabilities - 8,459 12,351 17,798 Total current liabilities 865,879 1,705,326 3,443,007 3,254,750 Non-current liabilities Long-term loan net of current portion 1,600,000 1,480, ,403 1,811,681 Long-term loans from a related party net of current 221, portion Liabilities under hire purchase and financial lease 3,186 4,227 11,577 10,026 payable net of current portion Deferred tax liabilities 11, Provision for long-term employee benefits 13,316 15,456 13,900 15,396 Total non-current liabilities 1,848,981 1,499, ,880 1,837,103 Total liabilities 2,714,860 3,205,009 4,081,888 5,091,853 20