Published on 28 September 2012
RAM Ratings has reaffirmed the AAA(s)/P1(s) ratings of
Toyota Capital Malaysia Sdn Bhd’s (“Toyota Capital” or “the Company”) RM1.0
billion Islamic Commercial Papers/Medium-Term Notes Programme (2008/2015)
(“Islamic CP/MTN Programme”), as well as the AAA(s) rating of the Company’s
RM1.2 billion MTN Programme (2008/2018). At the same time, RAM Ratings has
assigned a P1(s) rating to Toyota Capital’s RM600 million CP Programme.
Concurrently, the outlook on the reaffirmed long-term ratings has been revised
from negative to stable.
The enhanced ratings of Toyota Capital’s CP and MTN
Programmes reflect the credit strength of the irrevocable and unconditional
guarantee extended by Toyota Motor Finance (Netherlands) BV (“Toyota
Netherlands”), a fully owned subsidiary of Toyota Financial Services
Corporation (“Toyota Financial Services”). RAM Ratings notes that Toyota
Netherlands has a credit-support agreement with Toyota Financial Services; in
turn, Toyota Financial Services also has a similar contract with Toyota Motor
Corporation of Japan (“Toyota Motor” or “the Group”). As such, the ultimate
support from Toyota Motor enhances the credit profiles of the conventional debt
facilities beyond Toyota Capital’s stand-alone credit strength. Meanwhile, the
ratings of the Islamic CP/MTN Programme are underpinned by a Purchase
Undertaking from Toyota Capital, which is in turn backed by an irrevocable and
unconditional guarantee extended by Toyota Netherlands, with the ultimate
credit support stemming from Toyota Motor.
Toyota Motor’s strong business profile is underscored by its
position as one of the world’s largest vehicle manufacturers. The revision of
the long-term rating outlook, from negative to stable, is premised on the
Group’s resilient business profile, as evidenced by its healthier earnings in
1Q FYE 31 March 2013 (“FY Mar 2013”), underpinned by the recovery of its sales
and production in almost all markets. The Group has recovered from the
production disruptions caused by the Japanese earthquake and prolonged flooding
in Thailand in 2011; production levels have been in full swing since early this
year. The long-term ratings also reflect Toyota Motor’s solid global
positioning, strong financial profile with superior liquidity, and geographical
diversity. These strengths are, however, moderated by the keenly competitive
global auto industry, Toyota Motor’s vulnerability to foreign-currency
fluctuations and its laggard position in certain emerging markets.
Ultimately owned by Toyota Motor, Toyota Capital is
primarily a financier for Toyota vehicles in Malaysia; its goal is to
complement and support the sale of this marque here. On this note, the Company
derives support and financial flexibility from its ultimate shareholder. Its
asset quality stayed solid as at end-March 2012, with a low gross impaired-loan
(“GIL”) ratio of 0.42% and a credit-cost ratio of 0.25% (end-March 2011: 0.57%
and 0.21%). At the same time, the Company’s GIL coverage ratio stood at a
robust 238.3%. Underpinned by its prudent credit-underwriting standards, Toyota
Capital’s asset quality is expected to remain solid.
In tandem with an enlarged gross receivables base (end-March
2012: RM3.3 billion; end-March 2011: RM2.7 billion), the Company’s interest
income ascended 14% year-on-year (“y-o-y”) to RM192 million in fiscal 2012.
Nevertheless, its net interest margin narrowed from 2.7% to 2.5% y-o-y amid
stiff competition and higher funding costs. Toyota Capital’s adjusted net
gearing ratio hit a high of 16.4 times as at end-March 2012, as more debt had
been assumed to fund its expanding auto-financing business. Concerns over its
high gearing level are, however, partly mitigated by the expected support from
Toyota Motor, if needed. The provision of auto-financing services to mainly
Toyota and Perodua vehicles also gives rise to a certain degree of
concentration risk.
Media contact
Juliana Koay
(603) 7628 1169
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