It’s not always easy for retail investors to gain access to a publicly-listed company’s top-level management to ask questions and gain a deeper understanding of the company’s business – we recognise that at The Motley Fool Singapore. Thus, when any opportunity arises for me or any of my colleagues to speak to important executives of publicly-listed companies, we would aim to bring you, dear readers, any interesting insights we can glean about the company’s business. We’ve done that previously with instant beverage manufacturer Super Group (SGX: S10). Now, we’d like to do it with electronics and furniture…
It’s not always easy for retail investors to gain access to a publicly-listed company’s top-level management to ask questions and gain a deeper understanding of the company’s business – we recognise that at The Motley Fool Singapore.
Thus, when any opportunity arises for me or any of my colleagues to speak to important executives of publicly-listed companies, we would aim to bring you, dear readers, any interesting insights we can glean about the company’s business.
Last week, my colleague Stanley Lim and I had the chance to sit down for a cup of coffee with Courts Asia’s Chief Financial Officer, Ms. Kee Kim Eng, and Regional Head of Strategy Planning & Communications, Ms. Tammy Teo. The indented portions below are three interesting insights Stanley and I heard from Kim and Teo on how Courts Asia manages credit-related risks.
For those unfamiliar with Courts Asia, the sale of goods based on the company’s credit plans (i.e. Courts Asia’s many varieties of instalment plans) makes up roughly 20% of its total sales while the sale of goods based on cash payments constitutes the rest. So, credit control in relation to the sale of goods is pretty important for the company. Without further ado, here are the three insights as promised:
1) Courts Asia’s main geographical areas of operation are centred in Singapore and Malaysia. Each country’s Chief Executive is purely in charge of the company’s retail operation and in terms of hierarchy, is actually on par with the Chief Credit Officer. Both parties in turn report to Courts Asia’s Group Chief Executive Officer, Mr. Terence Donald O’Connor.
This arrangement is a way for Courts Asia to manage credit-related risks as it can minimise the odds of having the country Chief Executive drive up sales in an unsustainable manner by offering looser credit terms.
2) Courts Asia’s control of credit risks at the customer level is done through a scorecard. The scorecard has multiple levels of questions (which include the customer’s credit history, personal and family situation, and pay package) that the customer has to answer. If the customer fails to meet Courts Asia’s criteria at any level along the Scorecard, the company would usually deny the customer the ability to pay for his or her purchases with the company’s credit plans.
3) In July 2007, Courts Asia’s “180+ days delinquency rates” for credit sales-related receivables in Malaysia were at 16.2%; by March 2014, the delinquency rate had dropped by more than half to 7.4%. A big part of the improvement in the company’s credit-risk control had been due to Mr. Chan Yuen Kiong, who’s now Courts Asia’s Group Chief Information Officer and Chief Credit Officer.
He joined the company back in 2006 and steadily implemented a series of changes. These include: (1) Setting up the MIS (Management Information System) to learn about the performance of loans; (2) setting up call centres which help remind customers to pay-up in addition to gently chasing for loan repayments; and (3) changing the way loans are collected. The last point deserves further elaboration. Previously, Courts Asia had placed a focus on collecting loans that have been around the longest but Chan turned the procedure on its head by pulling the company’s focus on loans that are the largest.
Foolish Bottom Line
The control of credit-related risks is vital for Courts Asia and knowing how the company aims to improve its loan portfolio would certainly aid an investor in his or her study of it.
That’s all for now. Stay tuned for more insights into Courts Asia!
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Chong Ser Jing owns shares in Super Group.