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Fitch Ratings-Taipei/Hong Kong/Singapore-24 August 2009: Fitch Ratings has today affirmed Primasia Securities Co., Ltd. (Taiwan)'s (Primasia) National Long-term rating at 'BBB-(twn)', National Short-term rating at 'F3(twn)', Individual rating at 'D/E', Support rating at '5', and simultaneously removed the ratings from Rating Watch Negative (RWN), where it was placed on 27 February 2009. At the same time, Fitch has assigned the National Long-term rating a Negative Outlook.
The rating affirmation on Primasia is mainly supported by its improved liquidity and capitalisation as the company returned to profitability in H109 after a hefty net loss in 2008. The Negative Outlook reflects Fitch's concern that the heightened market volatility could negatively impact Primasia's earning performance and balance sheet soundness in 2009-2010, due to the highly concentrated and potentially volatile nature of its stock market exposure. The agency may revise Primasia's Outlook to Stable if it demonstrates improvement in the diversification of its investment portfolio and enhances stability in earnings and capitalisation.
Primasia reported an un-audited net profit of TWD333m (26% of equity) in H109 after a sizeable net loss of TWD663m (69% of equity) in 2008, as the strong recovery of Taiwan's stock market since March 2009 helped boost its trading profits and valuation gains. Its liquidity improved in H109 but remained relatively weak compared with local peers'. Nevertheless, the company's liquid assets are sufficient to cover its short-term liabilities. Meanwhile, Primasia's capital adequacy ratio increased sharply to 282% at end-H109 from 182% at end-2008, higher than the minimum regulatory requirement of 150%.
Primasia, established in 1989, is a small securities firm with a 0.1% equity brokerage market share in Taiwan. Its major shareholders include David Tran (and his associated investment) with a 60% stake, as well as Nikko Cordial Securities Inc. (Nikko Cordial, 'A'/Rating Watch Evolving) with a 34% stake. Primasia indicated that Sumitomo Mitsui Banking Corporation (SMBC) will keep its investment in Primasia after acquiring Nikko Cordial on 1 October 2009.
Note to editors: Fitch's National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated 'AAA' and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as 'AAA(twn)' for National ratings in Taiwan. Specific letter grades are not therefore internationally comparable.
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