RAM Ratings reaffirms AA1(bg)/P1 ratings of AEON Credit's RM400 million debt facility, with stable outlook

Published on 25 August 2011
RAM Ratings has reaffirmed the respective long- and short-term ratings of AA1(bg) and P1 for AEON Credit Service (M) Berhad’s (AEON Credit or the Company) RM400 million Conventional and Islamic Commercial Papers/Medium-Term Notes (CP/MTN) Programme, with a stable outlook. The ratings reflect the strength of the unconditional and irrevocable guarantee extended by a consortium of 3 guarantor banks - Bank of Tokyo Mitsubishi UFJ Ltd, Mizuho Corporate Bank Ltd, and Malayan Banking Berhad - based on the weakest-link approach.



AEON Credit provides easy-payment schemes for general purposes, motorcycle purchases and personal financing. It also issues credit cards, with the distinction of being one of the larger non-bank players in the Malaysian consumer-financing industry. The Company represents AEON Credit Service Co Ltd’s (AEON Credit Japan) footprint in the Malaysian consumer-financing market. Through its 58.2%-stake, AEON Credit Japan continues to play a crucial role in the Company’s business direction and strategies.

AEON Credit’s net interest margin remained healthy at 16.95% in FYE 20 February 2011 (FY Feb 2011). The margin is a function of its lending to higher-risk, low-to-medium-income consumers whose debt-servicing capabilities are often more susceptible to adverse changes in economic conditions. The Company’s lucrative margins (which correspond to its commendable profitability ratios) provide a strong buffer against its relatively higher credit costs.

Meanwhile, AEON Credit’s asset quality has remained stable, with its ratio on newly classified impaired loans over average gross loans and credit-cost ratio easing to a respective 5.08% and 5.24% as at FY Feb 2011 (FY Feb 2010: 5.34% and 5.40%). As the Company does not have access to customer deposits, it relies heavily on bank loans and the issuance of private debt securities to meet the funding needs of its lending operations. The Company’s gearing ratio remained largely stable at 2.95 times as at FY Feb 2011 (FY Feb 2010: 2.82 times). Going forward, we expect AEON Credit’s profitability to be sustained, aided by its robust margins and stable loan-loss charges.

Media contact
Joanne Kek
(603) 7628 1163
joanne@ram.com.my