RAM Ratings has reaffirmed the AAA(bg)/Stable/P1 ratings of AEON Credit Service (M) Berhad’s (or the Company) RM400 million CP/MTN Programme (2007/2014).

Published on 29 October 2013

RAM Ratings has reaffirmed the AAA(bg)/Stable/P1 ratings of AEON Credit Service (M) Berhad’s (or the Company) RM400 million CP/MTN Programme (2007/2014). The ratings reflect the strength of the unconditional and irrevocable guarantees extended by a consortium of 3 banks – Bank of Tokyo Mitsubishi UFJ Ltd, Mizuho Bank Ltd, and Malayan Banking Berhad – based on the weakest-link approach under RAM’s criteria for guaranteed bonds.
AEON Credit is a key player in the consumer-durables and motorcycle-financing segments in Malaysia. The Company represents AEON Financial Service Co, Ltd’s footprint in the Malaysian consumer-financing market. In FY Feb 2013, AEON Credit’s gross receivables surged 58% to RM2.4 billion (FY Feb 2012: +34% to RM1.5 billion), mainly driven by the rapid expansion of its unsecured personal financing, motorcycle easy-payment and used-car easy-payment (UCEP) schemes. RAM notes that during the period, Bank Negara Malaysia (BNM) had tightened regulatory control for banks on consumer financing effective January 2012. BNM’s regulation had not applied to non-banks such as AEON Credit prior to July 2013. Moving forward, the Company is expected to maintain its growth trend, albeit at a more moderate pace.
RAM remains cautious about the Company’s asset quality as its receivables portfolio, mainly extended to the lower-income segment, is unseasoned given the rapid growth. The debt-servicing capabilities of these borrowers are often more vulnerable to adverse changes in economic conditions. We are also cognisant of the credit and operational risks arising from AEON Credit’s new businesses in UCEP and SME equipment financing. That said, the Company’s lucrative margins provide a strong buffer against credit costs.
In line with its business growth, AEON Credit’s gearing ratio had risen to 5.3 times as at 20 August 2013 (end-February 2013: 4.3 times). Its capital-adequacy ratio had also dropped to 16.3%, not far from the minimum of 16% imposed by BNM on AEON Credit. We understand that the Company is in the midst of raising capital for business growth and to refinance its maturing debts.

Media contact
Gladys Chua
(603) 7628 1049
gladys@ram.com.my