Chailease Holding Company Ltd
TWSE:5871
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
121
195.5
|
| Price Target |
|
We'll email you a reminder when the closing price reaches TWD.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Chailease Holding Company Ltd
You don't have any saved screeners yet
Welcome to the Chailease Fourth Quarter 2021 Earnings Release Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. And for your information, a webcast replay will be available within an hour after this conference is finished.
And now I would like to turn the call over to Vic Wang, the Senior Manager of Investor Relations. Mr. Wang, please go ahead.
Good afternoon, everyone. This is Vic. I would like to welcome you to Chailease Holding Fourth Quarter and Full Year 2021 Results Conference Call. I'm joining here this afternoon by Ms. Sharon Fan, Head of IR, and she will open to your questions in Q&A period.
I will walk you through this quarter's earnings presentation, which is available for download on our corporate website under IR section. As a reminder, please refer to the disclaimer regarding forward-looking statements at the front of the presentation.
The agenda we are going to cover for today on Slide 3 includes management highlights, fourth quarter and full year 2021 consolidated performance review, followed by the segment performance review for our 3 major operations: Taiwan, China and ASEAN.
Without further delay, I would like to start the presentation from Slide 4. A few highlights for a overview of our full year 2021 operation results. First, the summary table here shows the loan portfolio growth for the year and for the quarter. For the year 2021, Taiwan, China and ASEAN loan portfolio grew 21%, 11% and 13%, respectively. On a consolidated level, we delivered 16% loan portfolio growth, which is in line with the full year guidance, with better-than-expected loan growth from Taiwan operation.
For the loan growth guidance this year 2022, we expect Taiwan to increase 16%, China to grow around 15%, and ASEAN to grow 15% to 20%. On the consolidated level, we expect mid-teens of loan portfolio growth this year.
Second, overall asset quality remained stable and healthy with slightly decreased delinquency ratio for Taiwan and ASEAN. Third, for the second consecutive year, the company has named to both DJSI World Index and Emerging Market Index in a diversified financial service and capital market industry. It also shows the company has long-term commitment to high standard ESG and our sustainability efforts to long international recognition.
Let's move to the next section, consolidated performance review. Moving on to Slide 6. Consolidated loan portfolio reached TWD 557 billion for fourth quarter 2021, with 16% year-over-year growth and 6% sequential increase.
The next slide, Slide 7, shows you the trend of our consolidated loan yield and cost of funds for the past 3 years. But you can see we maintained a stable interest rate over the long term. The loan yield slightly increased for fourth quarter 2021, was due to slightly increase for Taiwan operation. We will discuss the change of each operation region in the next section.
Next slide, Slide 8. On the left-hand side, the consolidated revenue for 2021 reached TWD 72, representing 21% growth compared to 2020. On the right-hand side, fourth quarter consolidated revenue was TWD 19 billion, up 6% from the previous quarter.
Moving on to Slide 9. On the left-hand side, the consolidated net profit for 2021 totaled TWD 21.6 billion and earnings per share was TWD 14.8, increased 28% compared to 2020. The better growth of net profit in 2021 came from less expected credit loss was booked and improved cost-to-income ratio. On the right-hand side, fourth quarter consolidated net profit was up 2% from prior quarter.
Turning to Slide 10. This page shows you our loan portfolio mix and the profit contribution in terms of operating region. On the left-hand side, we can see Taiwan business accounts for 50% of group total loan portfolio in 2021. China is about 36%, and ASEAN maintained at 14% in 2021. On the right-hand side, in 2021, Taiwan net profit contribution accounts for 46% and China accounts for 48% increase from 45% in 2020. ASEAN contributed 6% to the consolidated net profit, if we exclude the minority interest.
Moving on to Slide 11. The chart on the left-hand side, cost-to-income ratio lowered to 26% for 2021. We expect this ratio should be maintained this year. The chart on the right-hand side, asset-to-equity slightly increased to 6.1x for 2021.
Please turn to Slide 12. The consolidated annualized ROA increased to 3.5% in 2021 compared to 3.2% in 2020. The consolidated ROE on the right-hand side was 24%. The calculation of ROE excludes preferred shares.
The next slide, Slide 13. The consolidated delinquency ratio on the left-hand side at fourth quarter end was down 0.2 percentage points to 2.2% as Taiwan and ASEAN delinquency ratio decreased for the quarter. Later in this presentation, I will talk about each region in more detail. Moving on to the right-hand side, allowance to portfolio ratio slightly decreased to 2.3% this quarter.
Moving on to segment review, let's look at our operation performance region by region. On Slide 15, our Taiwan loan portfolio reached TWD 278 billion at fourth quarter end 2021, representing 21% year-over-year increase, and quarter-over-quarter growth rate was 6%. But the new disbursement for micro financing, used car financing and lending in construction machines remained the growth drivers for the year.
Slide 16. This slide shows the change of Taiwan solar asset. The Taiwan solar net asset reached TWD 36 billion at fourth quarter end 2021, representing 17% year-over-year increase, and quarter-over-quarter was up 3%. The solar asset accounts around 9% of Taiwan total assets.
Next slide, Slide 17. This page presents trends of our Taiwan loan yield and cost -- funding cost. In recent quarters, the loan yields slightly increased as we grew more in micro financing and cofinancing for Taiwan. The greater improved cost of fund was mainly attributable to Taiwan loan interest environment and improved company credit profile.
Moving on to Slide 18. Revenue for our Taiwan operation for 2021 reached TWD 36.4 billion, representing 22% year-over-year growth. The slower revenue accounts 12% of Taiwan revenue for the year 2021. For the quarter-over-quarter comparison, on the right-hand side, fourth quarter revenue grew by 7%, representing continued business momentum.
Turning to next slide, Slide 19. Taiwan's profit for 2021 grew by 26% compared to 2020. The higher bottom line growth compared to top line was mainly attributable to improved cost-to-income ratio and stable expected credit loss was booked compared to 2020. The fourth quarter Taiwan net profit was about TWD 3.1 billion, which increased by 3% quarter-over-quarter.
On Slide 20, on the left-hand side, Taiwan delinquency ratio at fourth quarter was down 0.3 percentage points at 2%, with decreased new delinquent amount this quarter compared to prior quarter. On the right-hand side, recovery from delinquency increased to TWD 1.3 billion for the quarter.
Next slide, Slide 21. Allowance to loan portfolio in Taiwan decreased from 2% in third quarter to 1.9% in fourth quarter due to better loan portfolio growth for the quarter.
Let's turn to China operation. Slide 22 shows China total loan and receivable reached TWD 198 billion at fourth quarter 2021, which grew by 11% year-over-year and 6% increase quarter-over-quarter. The slower-than-expected year-over-year loan portfolio growth was mainly due to COVID disruptions.
Turning to Slide 23. This page shows the change of loan yield and cost of fund trend for our China operation. We continued to maintain stable spread over the quarters.
Next slide, Slide 24. China revenue for 2021 totaled TWD 28 billion, increased 22% year-over-year. On the right-hand side, fourth quarter revenue increased 4% sequentially.
Moving on to Slide 25. China net profit for 2021 was about TWD 13 billion, increased by 45% year-over-year. The higher profit growth compared to top line was mainly driven by less expected credit loss and improved cost-to-income ratio this year. On the right-hand side, China fourth quarter net profit was down 5% sequentially, was -- less tax rebate was recognized for the quarter. China booked RMB 9 billion in fourth quarter and RMB 36 billion tax rebate in third quarter.
Million.
Million.
Turning to next slide, Slide 26. On the left-hand side, China delinquency ratio at fourth quarter end was slightly up, 0.1 percentage point to 1.9%. On the right-hand side, recovery and write-off amount remained stable for the quarter.
Next slide, Slide 27. China's allowance to portfolio ratio for fourth quarter 2021 was maintained at 2.5% for the quarter as asset quality remained stable.
Moving on to Slide 28. The ASEAN total loan and receivable at fourth quarter end 2021 was around TWD 77 billion, up 13% year-over-year and 7% quarter-on-quarter growth. Vietnam continued to deliver over 20% loan portfolio growth in 2021, while Thailand and Vietnam both grew 7% sequentially.
Let's turn to next slide, Slide 29. ASEAN revenue for 2021 totaled TWD 7.9 billion, increased 18% year-over-year. On the right-hand side, first quarter revenue also increased 8% sequentially.
Moving on to Slide 30. ASEAN net profit for 2021 was about TWD 2.3 billion, increased 68% year-over-year. The higher portfolio growth compared to top line was mainly driven by decreased expected credit loss and interest expense this year. On the right-hand side, ASEAN fourth quarter net profit was up 9% sequentially.
The last slide, Slide 31. On the left-hand side, on delinquency ratio at fourth quarter decreased, 0.4 percentage points to 3.5% compared to 3.9% in third quarter 2021. On the right-hand side, ASEAN's allowance to loan portfolio ratio for fourth quarter 2021 was 3.2%, of [indiscernible] loan portfolio growth for the quarter.
And this also bring us to the end of my presentation for today. Thank you for your time. Now I would like to turn the call to operator to start Q&A. Operator?
[Operator Instructions] And now we have Jemmy Huang of JPMorgan for questions.
Three questions from my side. I think the first one is in China. If you look at your portfolio growth in China, even though in general, it's below your expectation and target in 2021. But could you share, is there any major discrepancy in terms of geographic or industry-wide trend for your branches in China? That's the first one.
The second one is in Southeast Asia. I think this year, you are targeting somewhere around 15% to 20% portfolio growth. For the 5 countries, is there any discrepancy in terms of the growth momentum?
And then the final question is on GDR. I think you mentioned the potential foundation through GDR. So should we refer to the historical fundraising activity that the potential dilution should be controlled within somewhere around 10% also?
Okay. Regarding the China portfolio growth for last year 2021, 11% full year growth compared to our original plan -- business plan is actually -- our target is like 15% to 20%. It's a little bit lower. I think our CEO has explained, the 2 major factors is because of the -- there's still COVID disruption from time to time, some small-scale city lockdown affect our daily operations. So that's one factor.
The other is the gradual slowdown of the macroeconomic, the GDP growth, also has some impact. But I think we are still right, these are double-digit growth. And we hope to like go back to a little bit higher growth momentum for this year. So our growth guidance for this year for China operation will be back to around 15% this year, and that's one.
And for the second question, the ASEAN growth, I think because we have been trying to have a better coverage of our ASEAN footprint for the past couple of years. Right now, we already have this full coverage with 7 different subsidiaries, cover 7 different countries and also especially for like Vietnam, Malaysia already built up to some good scale.
So I think going forward, that's the reason why, going forward, we are looking for a better growth momentum for our overall asset, although it still accounts for a small portion of the overall whole group. But I think going forward, still we are more looking for -- in addition to Thailand or in addition to Vietnam and Malaysia used to be our major growth driver for the past 2, 3 years. I think we also expect our Thailand can have a better growth for this year. So that's the reason why our CEO has guided for like 15% to 20% of the portfolio growth at our growth target for our ASEAN operation for 2022.
And regarding the capital fundraising plan, as you know, that the company, we always want to grow at with a healthy leverage balance sheet. So like every some year, we need to -- with our growing exercise, we need to do some equity fundraising to bring down the leverage ratio to support the following 3 to 5 years of the growth. So with this kind of high-level guidance, I think, probably the fundraising side were pretty much similar to the previous one. So I think the direction won't be as high as like 10% because I think our share price has better like valuation now. Yes.
And next question is coming from Chung Hsu of Credit Suisse.
Sharon, I have 2 questions. First question is, I think, in Chinese session, management mentioned about new business in Taiwan and China. Just wanted to clarify, get more color. The new business, the Chairman mentioned the buy now, pay later. Is that part of your micro finance, the personal loan business? And how has that been growing? And how big of it is in your portfolio?
And secondly, on China, I think, if I said correctly, site factoring business. I don't recall Chinese as I mentioned, this business, is this something that's completely new? Or is it something that's been -- that Chailease has been doing? And how big is it now as a percentage of portfolio? I'll come to the second question. I think if you can answer the first one first.
Okay. Regarding this buy now, pay later, I think, it's still in the early stage of the new business development for our Taiwan operation, although it's not a totally new product, but we just want to make the business model from the off-line to the online, like new business model in Taiwan currently.
So far, we haven't really have a plan to launch this into China market yet. But hopefully, if we have more good track record and so that we can gradually replicate our successful experience from Taiwan into other ASEAN operation that for buy now pay later product.
And yes, this is one of our very traditional product line, if you can see our product road map development for our Taiwan development. And we also introduced this product into China market some years ago, just only accounts for a very small portion currently because I think for the traditional semi equipment leasing, for that market, we still have a very good growth potential opportunity in China market. So we will still position as a very core product for our China market development.
Okay. I see. Okay. My second question is, when I try to back out your new NPL influx and some of the asset quality data from your presentation, I noticed, in the fourth quarter, Chinese stepped-up charge-offs, it looks like across the region. Just wondering, has the reserve loan ratio come off slightly in the fourth quarter? Is there a target to maintain this ratio at a certain level?
I understand during the Chinese session, management mentioned that asset quality is still in eco condition. Just wondering if there is a target and whether that provision level -- or general provision level is something that management maybe assess in the late part of first quarter or second quarter this year to meet the target?
Okay. Basically, our provision policy, remember, Chung, that we want to cover roughly about 2x of the estimated loss. So we need to consider both the delinquency ratio and also the recovery rate, right? So with quite stable delinquency ratio for all the 3 major operation regions, I believe that our reserve ratio will be maintained by a similar level throughout the year this year.
Okay. So the overall provisioning that you guided flat year-over-year, it should be enough to maintain a steady reserve-to-loan ratio?
Yes, yes, yes.
[Operator Instructions] And next, we have Teresa Lee of APG Asset Management.
I have 2 questions. The first one regarding the loan yield. And I noticed from the presentation that our loan yield in Taiwan is actually trending up in '21. Can you give us the reason? And how do we see the trend in '22?
And also in China, we see the yield trend down in '21. And can you also be last the reason why? And how do we focus the loan yield in China in '22? And the second question regard to the gap between the loan yield and top up the fund on yield. Can you give us some guidance of the trend in Taiwan and in China regarding the gap in 2022?
Okay. Regarding the loan yield, slightly picking up for our Taiwan operation is mainly because of the product mix change. As you know, for the recent years, our Taiwan major growth driver comes from those high-yield products, like used car financing, micro business financing. So when they have a higher-than-average growth rate for Taiwan. That's the reason why our branded the average loan yield of the Taiwan gradually increase. Actually, different products has different pricing and different credit cost.
So overall, it won't impact to our like margin over the overall return. So that's the reason for Taiwan loan yield increase. And in China, actually, I didn't see our loan yield for China decrease. Actually, it should be quite stable throughout last year. And I think that also our management view that because we didn't change our pricing strategy. So I think -- and the -- the core products still remain quite similar for our China operation. So I think the yield should be maintained at a similar level for our China operation for this year.
And regarding the spread, our company's business model is that we want to maintain a reasonable and stable spread as the first priority. So given different funding cost for different like interest rate environment, like in Taiwan is such a low interest rate environment, we enjoy lower funding cost. And in China, the funding cost level will be much higher than in Taiwan.
But actually, with the given funding cost level that we decide what kind of spreads that we want to earn to design our pricing strategy. So I believe going forward, unless we have a mix change. Otherwise, I believe, we will maintain quite stable spread going forward for Taiwan, China and all the other major operating areas.
Can I know what is average duration for our products? And what is the average duration for our own funding?
Okay. Basically, we try to match the asset duration and liability duration. So the only difference is that given in different markets, we have different product mix. Like in China, we still -- 80% of product offerings still like equipment leasing. So the loan duration is about 3 years. And also, we rely on -- mainly on the 3 years bank borrowing. So that's pretty much matched.
For Taiwan, because we have a wider range of product offerings, for example, like factoring or some installment sales, those have shorter loan duration. So the blended asset duration for Taiwan is about 20 months. And in Taiwan, we have a more diversified funding source, some borrowing and commercial paper and securitization. So the brand is like liability -- asset duration -- liability duration also quite matched to the 20 months of the asset duration. I think the same policy applies to the other operating area, like in ASEAN.
Okay. So in the environment that Taiwan will likely to reduce the interest rates this year, while China -- sorry, Taiwan was likely to hike the interest rate this year, while China likely to reduce the interest rate this year. But no matter how the interest rate of our funding will change, we will maintain the gap stable.
Okay. Historically, Taiwan interest rate somehow will have some impact from like U.S. debt rate. So people expected that U.S. will increase the rate. But won't totally reflect in our local borrowing cost. And so we still believe the interest rate increase impact to our operation in Taiwan is quite manageable. And because we have a very diversified, we already developed quite diversified sales of funding in Taiwan. And Taiwan's liquidity is still abundant. So it should be -- has no likely impact to our overall funding cost for Taiwan.
And in China, actually, we are more and more like linked to the LTR for our borrowing cost -- bank borrowing cost. And as you know, the LPR actually hasn't really moved, and the other factor is that because our loan duration is like 3 years, it's not very long. And also, our customer need to repay every month, including interest and principle.
So for all the -- although for the existing loan contract, we cannot change the price. But if we observe the increase -- increasing trend of the overall funding cost is confirmed, then we will adjust our pricing for the new deal. So I think for the -- it probably will have some short-term impact if there's an increase of the funding cost. But actually, in the long run, the impact should be minimal and manageable.
[Operator Instructions] And the next question is coming from Anupam Mathur of Goldman Sachs.
So I have 2, 3 questions. Maybe I'll go one by one. Firstly, again, sorry, I didn't catch that. In terms of the asset quality outlook for each of the regions, what is our expectations this year? And any color on early indicators we usually track, how are they trending? And what is our credit cost guidance for this year for the 3 regions?
Okay. Regarding the asset quality, as you can see from our presentation, for all the 3 major operating areas, like Taiwan continue to maintain quite a good level, and Taiwan is our home market. So actually -- and also, in addition, we still expect Taiwan this year, the GDP growth should be quite good compared to last year. And so I think we are quite confident we can have a similar good asset quality for Taiwan operation.
And for China, right now, the delinquency ratio is still around 1.9%. And because our early indicator like the monthly account receivable collection rate also maintained very stable at a good level. And I think especially from this COVID impact gradually behind us, management also has quite confidence that at least we can maintain similar asset quality going forward this year for the China operation.
And for ASEAN, because during last year in the third quarter, there's some bigger COVID impact to most of the ASEAN countries like Vietnam and Malaysia, there's a main city lockdown in the third quarter. So we have some pickup of the delinquency ratio in Q3. But you can see in Q4, we already gradually improved the delinquency ratio to the current level. And I think also we have more positive view on the ASEAN for this year. So I think the asset quality should gradually improve a little bit for our ASEAN operation.
And sorry, what is the credit cost guidance?
Sorry?
The provision guidance for this year?
Provision. Because when our asset quality maintain or continue to improve, the provision -- general provision ratio will be as is maintained or gradually adjust them. Yes. So for China last year, the general provision ratio is about 1% to 1.2%. So I think it should be quite similar level.
Understood. Then my second question is on China growth. I understand last year, we had a few challenges, and it came lower than expectation. So I'm just curious, like 15% seems a bit on the lower side, especially because we are coming from a lower base. And historically, we had such a strong growth. So I'm just wondering like what is the reason? Like are you seeing some slowdown in China? Or just some more color on growth outlook in China?
I think we try to explain this or below expected growth -- portfolio growth for China for 2020, there are 2 major reasons. One is the COVID impact still like there from time to time, has some disruption of our daily operations. So it will postpone some of our deal like completion. So that's one reason. And the other is the macro slowdown. So yes. That's the 2 major reasons.
But I think for these 2 reasons, in this year, we didn't see it will have further impact to our current operation now. So hopefully, that we can have a better growth for this year compared to last year's 11% Y-o-Y growth rate. Yes.
But my question is like why is it 15% and not closer to 20%? Because last year, we had a low base. Some of the deals got postponed, which might be happening in '22. So shouldn't '22 would be stronger than the 15%? Because if we look at like trend from 2020, the growth was quite strong for us in China. So I'm just wondering, like -- it seems a bit higher.
I think you're looking -- you just had a snapshot looking at first quarter or like in the early year of last year or first half of last -- I mean -- you mean, 2019, right? You compare 2020 with 2019, there is some low-end effect. But actually, in 2019, -- in 2020, we have a very, very strong growth quarter. So if we look at the year-end balance. Actually, 2020 is not a low base.
Right, right. No, I understand that. But I'm saying 2020, 2019, 2018 and even to some extent, 2017 have been quite strong growth for us. So given we are coming from a low base in 2021, as you mentioned, we had a few issues. So I'm just curious like why isn't there a catch-up to that some of the loan growth, which was postponed to this year. So I'm just wondering like -- because we always say it's underpenetrated and there is a lot of opportunity, so I'm just wondering like what is the reason.
Yes. I think although 2021 -- if you look at 2021 separately for first half and second half -- actually, for the second half, the growth rate is so high. And -- but starting from early of 2020 with a new impact macro factor impact, it's slow down again. So -- but in the second half of the 2021, we didn't like grow as set at the second half of the 2021 -- 2020. So overall, we can only deliver like 11% Y-o-Y growth compared like 22% in 2020.
Understood, understood. And maybe then last question is on Taiwan, which is growing quite fast, considering it's developed -- such a developed penetrated country. So what is the driver of our 15% growth guidance this year?
I think the major sector is still very, macro outlook for Taiwan, similar to last year. The GDP growth, I think, can reach like 10%, yes. And this will also make our traditional SME equipment leasing sector can be -- has a better growth compared to like past when GDP only 1% or 2%. That part of our business unit can only grow like 5%, 6%. But with a much better Taiwan macro GDP, I think, in that sector, we can have a higher growth rate than before.
And also with more new products and already built to some scale and accumulate to a good market share, a more competitive advantage in the [indiscernible] individual market segment, we can also still deliver better growth rate at 15% better than our long-term originally said the long-term time line sustainable growth rate should be around 10%. But I think in the near term for this year, we can have a better growth rate.
[Operator Instructions] The next question is from Anupam Martha of Goldman Sachs.
Sorry, just one more question from my side, is on the cost side. Given our growth is more stronger in the ASEAN side, which is typically a higher cost region for us. So do we expect some cost pressures this year?
Can you repeat your question? Sorry.
Right. No, I'm saying given our growth focus this year is more on the ASEAN side, which is a higher cost-to-income profile. So could it lead to slightly higher cost to income for us this year versus last year?
Okay. No, because I think our management already has quite a clear guidance. Therefore, our cost-to-income ratio should be maintained a similar level for this year. And for ASEAN, right now, it accounts for still small portion of the overall group. So although the growth rate is much stronger compared to the other region, but I don't think it will impact our cost-to-income ratio.
[Operator Instructions] Okay. Vic, and there are currently no questions.
We can end the call, please.
Thank you, Mr. Wang. And ladies and gentlemen, we thank you for your participation in Chailease Conference. You may now disconnect. Goodbye.