Chailease Holding Co (中租控股) last week reported that its net income grew 48 percent year-on-year to NT$640 million (US$21.1 million) last month, although that was a decline from the NT$670 million reported for July amid concerns that a slowing Chinese economy might have negatively affected the Taiwanese leasing services provider.
However, the company should still reap benefits from the substantial potential in China’s leasing industry in the long run, because of the growing funding needs of small and medium-sized enterprises (SME) there, analysts and industry watchers say.
That is evident from the company’s securing of a syndicated loan of US$137 million from 10 banks for one of its overseas units last week.
State-run Bank of Taiwan (台灣銀行) said in a statement on Thursday that the syndicated loans were oversubscribed by 14 percent as lenders were bullish on the growth potential of Chailease.
Chailease’s cumulative earnings totaled NT$4.52 billion for the first eight months of the year, up 20 percent from the same period last year for earnings of NT$4.13 per share.
Earnings would expand 14 percent year-on-year, if excluding one-off gains from the company’s property projects, according to the company’s filing with the Taiwan Stock Exchange.
The results met JPMorgan Securities Ltd’s forecast and are 5 percent higher than the market consensus forecast.
“We expect [the company to see] improving business momentum for the China operations in the third quarter in terms of portfolio growth and asset quality,” JPMorgan analysts Jemmy Huang (黃聖翔) and Josh Klaczek wrote in a research note on Thursday.
Yuanta Securities Investment Consulting Co (元大投顧) also maintained its positive view on Chailease, as the company is now in the peak season of the year.
The company’s revenue for this quarter is forecast to grow by 8 to 10 percent from last quarter’s NT$8.42 billion and could increase by another 5 to 6 percent sequentially next quarter, Yuanta analyst Peggy Shih (施姵帆) said in a client note on Friday.
Chailease started operating in China in 2005, but its main operation is still in Taiwan. Last year, 32 percent of the company’s total lease assets were in China versus 50 percent in Taiwan, according to the company’s data.
With potential asset quality deteriorating in China during economic downturns and the likely increase in credit costs from next year, Chailease could see slower earnings growth from this year through to 2016, compared with the more than 50 percent increases registered in the past two years, BNP Paribas Securities Co analyst Leif Chang said.
However, trade finance could be a niche revenue driver for the company in the next two to three years, Chang said.
“We believe the market has overlooked the trade finance service launched in the second half last year. ROE [return on equity] here could be 17.2 percent — higher than traditional capital leases,” he wrote in a report on Tuesday.
Chailease shares have declined 6.09 percent in Taipei trading over the past month, more than the broader market’s 5.23 percent fall in the period. On Friday, the stock closed at NT$75.6 on the Taiwan Stock Exchange.
Analysts say the company’s shares could still face short-term pressure, after Chinese Nationalist Party (KMT) Legislator Alex Fai (費鴻泰) last week accused the company of usury, keeping false accounting books and inflating sales, even though the Shilin District Court in July ruled in favor of the company in a lawsuit.
JPMorgan said this should have minimal impact on the company’s operations, but Yuanta is cautious about its potential reputation impact, as it could be an excuse for investors to sell off the stock.
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