RAM Ratings assigns A1/P1 ratings to ORIX Leasing’s proposed debt facilities

Published on 08 April 2013

RAM Ratings has assigned respective long- and short-term ratings of A1 and P1 to ORIX Leasing Malaysia Berhad’s (“ORIX Leasing” or “the Company”) Proposed Commercial Papers/Medium-Term Notes (“CP/MTN”) Programme of up to RM500 million. Concurrently, we have reaffirmed the AAA(bg) rating of ORIX Leasing’s up to RM150 million Bank-Guaranteed MTN Programme (2011/2016) and the P1 rating of its up to RM150 million CP Programme (2011/2016). The AAA(bg) rating reflects the strength of the irrevocable and unconditional guarantee from Malayan Banking Berhad, rated AAA/Stable/P1 by RAM. The guarantee enhances the credit profile of this debt facility beyond the Company’s credit strength. All the long-term ratings have a stable outlook.

ORIX Leasing is a leader in the Malaysian leasing industry and is wholly owned by Japan-based ORIX Corporation. The Company benefits from solid parental support through the sharing of technical expertise as well as the provision of shareholder loans and financial guarantees.

ORIX Leasing’s gross receivables expanded rapidly in fiscal 2012, reaching RM2.7 billion by the end of the year (end-March 2012: RM2.2 billion). The growth had been driven by additional lending to various sectors including construction, business-services, manufacturing, agriculture, timber, mining and quarrying. The Company’s adjusted gross impaired-loan ratio eased from 2.4% to 2.0% over the same period, aided by its enlarged receivables base. Additionally, ORIX Leasing’s credit-cost ratio stayed at a low 0.2% (annualised) for 9M FY Mar 2013 and its GIL coverage ratio stood at a robust 136.8%. Notwithstanding the possibility of an uptick in defaulted credits as its loan portfolio matures, we believe that ORIX Leasing’s overall asset quality will remain healthy. This is underscored by the Company’s prudent underwriting standards and conservative provisioning policies.

The Company chalked up a higher pre-tax profit of RM87.7 million in 9M FY Mar 2013 (9M FY Mar 2012: RM75.8 million). The better showing was mainly a result of the larger interest income from the strong expansion of its hire-purchase portfolio as well as higher operating lease rentals and motor-vehicle hire charges. To support its growth, the Company’s gearing level inched up to 2.4 times as at end-December 2012 (end-March 2012: 2.2 times).

Media contact

Peter Kong

(603) 7628 1029

peterkong@ram.com.my