RAM Ratings puts Pendidikan Industri YS’s AA1(s) rating on Rating Watch, with negative outlook

Published on 28 September 2012

RAM Ratings has placed the AA1(s) rating of Pendidikan Industri YS Sdn Bhd’s (“PIYSB” or “the Group”) RM150 million Bai’ Bithaman Ajil Islamic Debt Securities (2008/2022) (“BaIDS”) on Rating Watch, with a negative outlook. The Rating Watch is premised on the protracted delay in the receipt of information from PIYSB’s management, despite repeated requests from RAM Ratings since June 2012. This has impeded our ongoing surveillance of the aforementioned debt securities. PIYSB is fully owned by Menteri Besar Selangor (Pemerbadanan) and provides educational services via Universiti Selangor (“Unisel”) and Inpens International College (“Inpens”) – both institutions of higher-learning established under the Private Higher Educational Institutions Act, 1996.

Meanwhile, RAM Ratings expects to resolve the Rating Watch within 3 months of this announcement, ideally through the successful completion of our review exercise. Nonetheless, if this avenue remains unavailable due to (but not limited to) the issuer’s inability to provide the requisite information, there may be downward pressure on the rating of PIYSB’s BaIDS or the rating could be suspended. For further details, please refer to our paper, Policy and FAQs on the Suspension or Withdrawal of Ratings by RAM Ratings, published in November 2009 and accessible via www.ram.com.my.

RAM Ratings' Rating Watch highlights a possible change in an issuer's existing debt rating. It focuses on identifiable events such as mergers, acquisitions, regulatory changes and operational developments that place a rated debt under special surveillance by RAM Ratings. In a broader sense, it covers any event that may result in changes in the risk factors relating to the repayment of principal and interest.

Issues will appear on RAM Ratings' Rating Watch when some of the above events are expected to or have occurred. Appearance on RAM Ratings' Rating Watch, however, does not inevitably mean that the existing rating will be changed. It only means that a rating is under evaluation by RAM and a final affirmation is expected to be announced. A "positive" outlook indicates that a rating may be raised while a "negative" outlook indicates that a rating may be lowered. A “developing” outlook refers to those unusual situations in which future events are so unclear that the rating may potentially be raised or lowered.

Media contact

Woon Tien Ern

(603) 7628 1040

tienern@ram.com.my

Ridge Islamic Capital seeks to capitalize on Egypt’s fledgling Islamic finance industry (By IFN)

Thursday 20^th September 2012

EGYPT: Newly launched Ridge Islamic Capital has outlined an aggressive growth strategy as it aims to capitalize on Egypt’s largely untapped market for Islamic finance. The firm was set up following Dubai-based Ridge Solutions International Holdings’ acquisition of investment banking and asset management company El Rashad. El Rashad, which operated under a conventional finance structure, will now convert its assets to comply with Shariah, with the entity now known as Ridge Islamic Capital. Ridge Solutions will also inject US$100 million in capital in Ridge Islamic Capital, which the firm will use to expand its business and launch products including a US$150 million Islamic fund-of-funds. The firm seeks to leverage the Egyptian government’s target of increasing the domestic Islamic finance industry’s market share to 35% from around 5% currently. In a statement, Miguel Henriques, the chief executive of Ridge Solutions, said that: “With a population that exceeds 83 million and the government-set target to increase Shariah compliant finance, Egypt represents an attractive proposition for us to present and differentiate our products from modern and traditional Islamic banking.” Meanwhile, Ridge Islamic Capital is also reportedly evaluating potential acquisitions as it seeks to add brokerage services to its capabilities. Ridge Islamic Capital and Ridge Solutions are owned by Angola-based Ridge Solutions Group.

 

RAM Ratings reaffirms Standard Chartered Malaysia’s AAA/P1 ratings

Published on 28 September 2012

RAM Ratings has reaffirmed Standard Chartered Bank Malaysia Berhad’s (“Standard Chartered” or “the Bank”) respective long- and short-term financial institution ratings, at AAA and P1. Concurrently, the AA1 rating of the Bank’s RM500 million Subordinated Bonds has also been reaffirmed. Both long-term ratings have a stable outlook. The 1-notch differential between the rating of the Subordinated Bonds and the Bank’s long-term financial institution rating reflects the subordinated nature of the former, as their payment obligations rank junior to the claims of Standard Chartered’s senior unsecured creditors.

The ratings reflect Standard Chartered’s healthy credit fundamentals and strong presence in the consumer- and corporate-banking space. As a wholly owned subsidiary of global banking group Standard Chartered PLC (“the Group”) and given its integral role in advancing the Group’s growth strategy in the Asia-Pacific region, the Bank is viewed to be strategically important to the Group. Standard Chartered has benefited from sizeable non-interest income and robust loan growth, particularly in personal lending, via its Islamic banking operations. The former has accounted for more than a third of the Bank’s gross income over the past 3 years, i.e. higher than generally observed within its peer group. Moreover, the Bank’s profitability compares favourably against that of its similarly rated peers.

Although Standard Chartered’s asset quality is currently healthy, its rapidly expanding unsecured loan portfolio is not fully seasoned. The Bank’s significant growth in this segment is viewed with some caution. Moving forward, we envisage the Bank’s credit-cost ratio to stabilise at around its current level (its annualised credit-cost ratio stood at 0.71% as at end-March 2012), which is slightly higher than its AAA-rated peers’. Nonetheless, we note that this is partly due to the Bank’s prudent provisioning policies. Its capitalisation levels were sturdy as at end-March 2012, with respective tier-1 and overall risk-weighted capital-adequacy ratios of 11.9% and 13.9%.

Media contact

Chan Yin Huei

(603) 7628 1180

yinhuei@ram.com.my

Government attracts over US$8 billion in orders for debut sovereign Sukuk sale (By IFN)

Wednesday 19^th September 2012

TURKEY: The government launched its much-anticipated debut sovereign Sukuk on the 18th September, raising US$1.5 billion in an offering that attracted more than US$8 billion-worth of orders. The Sukuk, which has a tenor of five-and-a-half years, offers a profit rate of 2.8%, equivalent to just 185 basis points over mid-swaps. The landmark sale follows the government’s announcement on the 5th September of its appointment of Citigroup, HSBC and Liquidity Management House for Investment to arrange the US dollar-denominated notes, with roadshows for the issuance held in Asia and the Middle East. The maiden offering also marks a turning point in Turkey’s Islamic finance market, which, despite rapid growth, has been on an uphill journey towards the issuance of the country’s first sovereign Sukuk, which was initially announced in 2003. Jason Kabel, the head of fixed income at the Bank of London and The Middle East (BLME), noted that: “It is encouraging that a country outside of Southeast Asia or the GCC is issuing a Sukuk of this size in US dollars. The Sukuk was significantly oversubscribed, with the book size closing at over US$8 billion despite being sub-investment grade and offering a profit rate of approximately 2.8%.” He added that the strong interest in the Sukuk demonstrates huge global demand for US dollar-denominated Islamic debt. “We expect to see more governments and institutions take advantage of this demand over the last quarter of 2012,” he said. The sovereign issuance comes after the first Turkish corporate Sukuk was issued just in 2010, by Kuveyt Türk Participation Bank. The issuance, worth US$100 million, actually preceded Turkey’s implementation of tax neutrality measures for Sukuk Ijarah, adopted by parliament in February 2011. With corporate Sukuk from Turkey remaining few and far between after Kuveyt Türk’s sale, the country’s debut sovereign Sukuk may just provide a much-needed spark to spur the further development of the local Sukuk market.