Analysts:
Chun
Huang/ Susan Chu
RATIONALE
The 'twA+' long-term counterparty
credit rating and 'twA-1' short-term
rating on Yuanta Core Pacific
Securities Corp. (Yuanta) reflect
the company's leading position
in Taiwan's securities industry,
its strong capitalization, and
balanced business profile. These
strengths are partly offset
by the highly competitive and
volatile operating environment
facing domestic securities firms.
Yuanta
is Taiwan's top securities firm.
The company had an 8.3% share
of the retail brokerage market
in the first half of 2004, and
its outstanding margin loan
balance averaged NT$24 billion
over the same period, both ranking
first among Taiwan's 50 integrated
securities firms. Yuanta' market
share is likely to strengthen
slightly following the expected
year-end completion of the proposed
merger with Asia Securities
Corp. Aside from the retail
brokerage market, Yuanta is
strong in both debt and equity
underwriting, and is dominant
in warrant issuance, with a
market share of about 25% over
the past few years.
Yuanta's capitalization is strong.
The company had a net worth
of NT$53.8 billion as at the
end of June 2004, ranking first
among Taiwan's securities firms
and one of the island's top
15 financial groups. Yuanta's
leverage, defined as the ratio
of assets to equity, was 2.2x
at the end of June 2004. This
capital structure provides a
comfortable cushion for the
company's business needs and
helps somewhat offset the volatility
inherent in its operating environment.
Yuanta has a better balanced
business profile compared with
other domestic securities firms.
The company has proven successful
in extending its business beyond
the traditional scope of most
small and midsize securities
firms that exclusively rely
on proprietary trading and retail
brokerage to support their business.
As a result, Yuanta has been
able to minimize the impact
of periodic market shocks, as
evidenced by its ability to
post a profit for ten straight
years in the 1994-2003 periods.
Furthermore, the continuing
consolidation of the domestic
securities industry remains
a positive factor for Yuanta,
as the company has the resources
and know-how to exploit market
opportunities as they arise.
OUTLOOK:
STABLE
The outlook reflects the expectation
that Yuanta, supported by its
strong capitalization, satisfactory
risk management, and balanced
business profile, should be
able to minimize the risks posed
by Taiwan's volatile financial
markets. Despite the company's
expansion policy, the company
is expected to maintain its
risk profile because of these
strengths.
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