Fitch Ratings-Jakarta/Taipei/Singapore-14 October 2011: Fitch Ratings has assigned Indonesia-based PT Surya Artha Nusantara Financial (SANF) a National Long-Term 'AA(idn)' Rating with a Stable Outlook and a National Short-Term 'F1+(idn)' Rating.

SANF's ratings reflect strong support and commitment from its majority shareholder, Astra International (AI), 50.11% owned by Jardine Cycle & Carriage Ltd, part of Jardine Matheson Group. Any change in support from its parent, AI, would have an impact on SANF's ratings, as would significant changes in AI's financial performance.

SANF is a financing arm of Astra Group supporting the latter's business as the largest heavy equipment distributor in Indonesia with a 41%-51% market share in the past 10 years though its subsidiary, PT United Tractors Tbk (UT). UT holds sole distribution rights for Komatsu heavy equipment and SANF financed 21% of UT's total sales in 2010.

Fitch notes that SANF has consistently sound asset quality, with no non-performing loans (overdue more than 90 days) and low levels of written-off loans over the last five years. SANF's strong asset quality is underpinned by strict lending criteria and strong account management, which is supported by longstanding relationship with its suppliers and customers. SANF's leasing portfolio is dominated by Komatsu brand, which accounted for almost 60% of total receivables at end-June 2011. Its focus on the Komatsu brand with a high resale value allows SANF to recover a significant portion of unpaid principal from repossessed assets.

SANF's underlying profitability improved in the last two years, with return on asset increasing to 3.8% in 2010 and in H111 from 3.1% in 2009. This was the result of a larger net managed receivable base, a stable cost-to-income ratio and lower provision charges due to sound asset quality. Fitch expects earnings to remain satisfactory in 2012 on expected manageable funding cost and strong heavy equipment demand in the market.

SANF's debt-to-equity ratio continued to increase to 7.2x at end-H111 (2009: 4.4x) due to additional debt being incurred for loan expansion. Fitch notes that both its shareholders, Astra International and Marubeni Group, injected additional capital of IDR400bn in Q311 to support further business expansion. This should help management maintain its debt-to-equity ratio below 8x over the next three years.

SANF was established in 1983 by Astra Group focusing on the heavy equipment leasing business. It is owned by Astra International (60% of ownership) and Marubeni Group (40%).

Source: PT Fitch Ratings Indonesia