FW: RAM Ratings reaffirms Maybank’s AAA ratings

Published on 21 Dec 2018.

RAM Ratings has reaffirmed Malayan Banking Berhad's (Maybank or the Group) respective ASEAN and Malaysian national-scale financial institution ratings at seaAAA/Stable/seaP1 and AAA/Stable/P1. Concurrently, the ratings of all the Group's debt issues have been reaffirmed. 

Maybank is the fourth-largest bank by assets in ASEAN. The reaffirmation of Maybank's ratings reflects the Group's strong ASEAN franchise, solid capitalisation, diversified earnings base and deposit funding strength in Malaysia. As the largest bank in Malaysia, Maybank is systemically important to the country. 

While pressure on the Group's asset quality lingers, the credit quality of its loan portfolio is expected to hold up. Its gross impaired loan (GIL) ratio had weakened to 2.7% as at end-September 2018, mainly due to a large collateralised loan in Singapore in 2Q FY Dec 2018. On a positive note, the inflow of impaired oil and gas (O&G) accounts, which had contributed to a rise in the Group's GIL ratio in 2016, has slowed. Maybank recorded a respective 31% and 15% y-o-y reduction in impairment losses in fiscal 2017 and 9M fiscal 2018, translating into an annualised credit cost ratio of 0.4%. This is a notable improvement from the 0.6% seen in fiscal 2016 when Maybank had actively managed the rescheduling and restructuring of borrowers in the O&G and related sectors, and borne the necessary provisions. That said, increasing interest rates and uncertainties arising from the upcoming presidential election in Indonesia, the challenging outlook for the power sector in Singapore and the ongoing trade war between the US and China could introduce some stress to asset quality.

Maybank recorded a pre-tax profit of RM10.0 billion in fiscal 2017 (9M fiscal 2018: RM7.8 billion). Its profit performance is improving on account of easing credit costs and should support internal capital generation. Taking into consideration RM2.8 billion of regulatory reserves as at end-September 2018, the Group's adjusted GIL coverage ratio stood healthy at 99%. Meanwhile, Maybank's common equity tier-1 capital ratio was a solid 13.6% as at the same date.

Table 1: Maybank's issue ratings

	Rating/Outlook
Maybank
RM3.0 billion Subordinated Note Programme (2011/2031)	AA1/Stable
RM20.0 billion Subordinated Note Programme (2012/2112)	AA1/Stable
RM10.0 billion Additional Tier-1 Capital Securities Programme     (2014/2114)	AA3/Stable
RM10.0 billion Senior and Subordinated Sukuk Murabahah   Programme (2015/2117)  - Senior  - Subordinated	AAA/Stable AA1/Stable
RM10.0 billion Commercial Paper/Medium Term Note   Programme (2016/2023)	AAA/Stable/P1

Note: Maybank has redeemed and subsequently terminated the RM4.0 billion Innovative Tier-1 Capital

Securities Programme (2008/2073) in September 2018

Analytical contact                
Chan Yin Huei                    
(603) 7628 1180                
yinhuei@ram.com.my            

Media contact
Padthma Subbiah
(603) 7628 1162
padthma@ram.com.my

 

 

FW: AAM News: Bond ETFs drawing more institutional investors, Van Eck says

 

 

If you cannot view this mail please click here.   Latest News  |  Magazine  |  Events  |  Best of the Best Awards  |  E-Magazine   Latest News 24 December 2018 Bond ETFs drawing more institutional investors, Van Eck says Market Access: Large investors increasingly using bond ETFs for asset allocation, according to a senior company executive   Singapore's Fullerton taps insiders to fill roles of duo who left for US rival Going Places: Karen Wu and Ken Goh take over responsibilities of Jason Zhu and Shih Yu-Jen, who joined Franklin Templeton Read More PE Panorama: A big X-mas gift may face bigger challenges Private Equity: Isssues affecting the asset class go beyond making money in a frothy Asian market Read More Malaysia EPF's third quarter income up 12.82% on local, regional stock gains Investments: But the pension fund has a cautious outlook due to a "challenging" domestic market and an uncertain external environment Read More Monthly Top Ten PE Panorama: Talent wars…and an image problem Malaysia may issue more equity crowdfunding, P2P lending licences in 2019 Cambridge Associates' head of Asia Alvin Tay resigns South Korea's NPS picks four managers for alternatives mandates, report says BNP Paribas names Caleb Wong as head of alternative investors in Asia Pacific AXA to buy out China joint venture partners for 4.6 billion RMB Allianz Real Estate invests in logistics sector in China and India Singapore's GLP and Canadian partners set up European logistics fund PE Panorama: Don't bet heavily on IPO exits for private equity-backed firms Korea's KIC hires manager for first ESG mandate, adopts responsible investing rules   Coming Up         As per the Guidance on Direct Marketing issued by the Office of the Privacy Commissioner for Personal Data in Hong Kong which took effect on April 1, 2013, we would like to inform you that we intend to continue sending you promotional emails such as newsletters, new promotions and product updates. If you do not wish to receive such emails, please contact us at news@asiaasset.com. For enquiries please contact us at (852) 2547-7331.     Unsubscribe to this mailing list COPYRIGHT © 2018 ASIA ASSET MANAGEMENT. ALL RIGHTS RESERVED. 1701 Singga Commercial Centre, 148 Connaught Road West, Hong Kong   Tel: (852) 2547-7331   E-mail: enquiries@asiaasset.com

 

 

FW: RAM Ratings reaffirms Sarawak Hidro’s AAA/Stable rating

 

Published on 30 Nov 2018.

RAM Ratings has reaffirmed the AAA/Stable rating of Sarawak Hidro Sdn Bhd's (Sarawak Hidro or the Company) RM5.54 billion Sukuk Murabahah (2016/2031). The rating reflects the Company's superior finance service coverage ratio (FSCR, with cash balances, post-distribution, calculated on payment dates) of 2 times throughout the Sukuk's tenure – a level commensurate with an AAA rating under RAM's project-finance rating framework. This is supported by the Government of Malaysia's (GoM) continued commitment to top up any shortfall in cashflow in relation to the targeted FSCR of 2 times throughout the life of the Sukuk. 

The irrevocable and unconditional liquidity support from the GoM is articulated through a strongly worded letter of undertaking (LoU) from the Minister of Finance (Incorporated) (MoF). The LoU remains in force despite changes in the Company's shareholding; Sarawak Energy Berhad (SEB, rated AA1/Positive), via its 100%-owned subsidiary, SEB Power Sdn Bhd (SEB Power), fully acquired Sarawak Hidro from the MoF on 16 August 2017.

Following the acquisition of Sarawak Hidro by SEB, the Company's debt-servicing ability has improved substantially, thanks to stronger dispatch demand and full payments received in accordance with the take-or-pay arrangement under its power purchase agreement with Syarikat SESCO Berhad (SESCO) – a wholly owned subsidiary of SEB and the sole off-taker of the Company's electricity output. Sarawak Hidro's FSCR stood at a robust 5.28 times as at the last repayment date in August 2018 – higher than our projected 3.95 times. Additionally, the Company is anticipated to enjoy substantial long-term operational cost savings through synergies with SEB's other hydro power plants. Sarawak Hidro is also bound by other strict covenants, which tighten the transaction structure and provide further certainty throughout the tenure of the Sukuk. 

Sarawak Hidro is an independent power producer that owns and operates the 2,400MW Bakun hydroelectric plant, under the PPA that runs up to 31 March 2043. The first unit of the Plant was commissioned in August 2011, with full commercial operation achieved in July 2014. The Bakun dam, which the Company owns, is Malaysia's largest hydro-powered electricity producer and key to the development of the Sarawak Corridor of Renewable Energy. As with other IPPs, Sarawak Hidro is exposed to regulatory and single-project risks.

Analytical contact
Ong Ju Laine
(603) 7628 1183
julaine@ram.com.my

Media contact
Padthma Subbiah
(603) 7628 1162
padthma@ram.com.my

 

 

FW: RAM Ratings reaffirms AA2/Stable rating of Kesas’ sukuk

Published on 30 Nov 2018.

RAM Ratings has reaffirmed the AA2/Stable ratings of Kesas Sdn Bhd's (the Company) RM735 million Sukuk Musharakah IMTN (2014/2023). The reaffirmation of the rating is based on our expectation that the Company will maintain its strong debt-servicing aptitude, underpinned by the mature traffic profile of the Shah Alam Expressway (the SAE or the Expressway). 

The Expressway's traffic volume has been declining, with its average daily traffic (ADT) contracting to 326,872 vehicles in FY Jul 2018 (FY Jul 2017: 341,148 vehicles), albeit within RAM's expectation. This is largely attributable to the reduction in traffic volume at the Awan Besar/Kecil toll plaza, following the commencement of operations for the Light Rail Transit (LRT) extension, the road enhancement at the Jalan Puchong-Sungai Besi interchange and the abolishment of toll collections along Federal Highway Route 2 (FHR2). On the other hand, the cancellation of the KL-Klang Bus Rapid Transit (BRT) busway and the delay in completion date of the LRT 3 project to 2024 will relieve the downward pressure on the SAE's future traffic performance. 

Taking into account the potential traffic diversion to competing infrastructure, we envisage a further decline in the Expressway's traffic volume if its toll rate increases over the next few years (+25% to RM2.50 due in 2016 is assumed to be delayed to 2020 and +20% to RM3.00 in 2021). Despite a lower projected ADT in our stressed sensitivity tests, however, the Company's debt-servicing capability remains intact. 

While the abolishment of toll collections remains uncertain in the medium term, we believe that the GoM will balance its expropriation plans against any potential implication on the debt capital market. On this note, Kesas has been promptly receiving compensation payments from the GoM for its inability to raise toll rates as per its CA. We believe the GoM will continue to honour the compensation arrangement in the event of non-revision. 

As with most concession-related projects, Kesas is inherently exposed to single-project risk, although the entire stretch of the SAE is unlikely to be disrupted at any particular time.

 

Analytical contact
Nurhayati Sulaiman
(603) 7628 1040
yati@ram.com.my

Media contact
Padthma Subbiah
(603) 7628 1162
padthma@ram.com.my