RAM Ratings assigns and reaffirms top ratings for Genting Group

Published on 08 June 2012

RAM Ratings has reaffirmed the respective long- and short-term corporate credit ratings of Genting Berhad (“Genting” or “the Group”), at AAA and P1. Concurrently, RAM Ratings has assigned a final enhanced long-term rating of AAA(s) to Genting Capital Berhad’s (“Genting Capital”) RM2.0 billion Medium-Term Notes Programme (2012/2032). Meanwhile, the enhanced AAA(s) rating of GB Services Berhad’s (“GB Services”) RM1.6 billion Medium-Term Notes Programme (2009/2024) has also been reaffirmed. The long-term ratings have a stable outlook. Genting Capital’s and GB Services’ debt facilities are backed by full, unconditional and irrevocable corporate guarantees from Genting. As such, the enhanced ratings are based on Genting’s credit profile.

Genting is the sole licensed casino operator in Malaysia, and one of only 2 in Singapore. It is also currently the largest casino operator in the United Kingdom (“UK”). Besides its main leisure and hospitality (“L&H”) business, the Group is involved in power generation, oil-palm plantations and property development as well as oil and gas. Genting Capital and GB Services, incorporated for financing purposes, are wholly owned subsidiaries of Genting.

Genting’s credit profile is supported by strong and steady cashflow from its L&H business, particularly Resorts World Sentosa (“RWS”) in Singapore and Resorts World Genting (“RWG”) in Malaysia. RWS benefits from a duopoly in the Singaporean gaming sector while RWG enjoys a monopoly in Malaysia. RWS, opened in 2010, has added to the geographical diversity of the Group’s L&H operations. Notably, Genting possesses a strong cashflow-generating ability, robust balance sheet and ample liquidity. Nonetheless, these positives are moderated by the Group’s exposure to regulatory risk and the susceptibility of its L&H earnings to events that may affect the tourism industry. Unlike RWG, whose patrons mainly consist of local day-trippers, RWS and the Group’s London casinos depend more on tourists.

Underpinned by a full year’s contributions from RWS and RWG’s stronger earnings, Genting’s revenue and operating profit before depreciation, interest and tax advanced a respective 28.7% and 15.5% year-on-year (“y-o-y”) in fiscal 2011. The Group’s power, plantation and property businesses also recorded y-o-y improvements. As at end-December 2011, Genting’s funds from operations (“FFO”) debt cover had strengthened to 0.51 times, from 0.48 times a year earlier. Meanwhile, the weaker performance of its gaming operations in 1Q FYE December 2012, and to a smaller extent, its power and plantation divisions, had not materially affected its financial metrics. The Group’s annualised FFO debt coverage ratio stayed strong at 0.50 times. Moreover, its balance sheet strengthened, with a wider net cash position as at end-March 2012. Notwithstanding Genting’s capital investments over the near-term, mainly for the last phase of RWS as well as general maintenance and upgrading of RWG, its balance sheet and cashflow-protection measures are envisaged to remain strong, with a gearing ratio of less than 0.4 times and an FFO debt cover exceeding 0.4 times over the medium term. These have not factored potentially sizeable investments by the Group should it embark on new business ventures.

In the meantime, Genting has been actively seeking opportunities to expand its global presence, particularly in L&H. While it recently encountered setbacks in the development of an integrated resort adjacent to its video lottery terminal facility in New York, the Group is envisaged to participate in the bidding of future developments in the city, if and when the opportunity arises. We also do not discount expansion of gaming operations in Miami should the state’s gaming industry be liberalised in the future. Meanwhile, the Group is reportedly also eyeing new markets such as Japan, South Korea, Vietnam and Sri Lanka. These new ventures could entail sizeable capital expenditure and may require longer gestation periods than Genting’s earlier projects. “We opine that competitive pressures and the challenging operating landscape in new markets could also mean lower profitability, compared with the margins currently enjoyed in RWG and RWS. Nonetheless, comfort can be derived from the Group’s strong operational performance in its Malaysian and Singaporean operations, as well as its success in turning around its operations in the UK," observes Kevin Lim, RAM Ratings’ Head of Consumer and Industrial Ratings.

Media contact
Evelyn Khoo
(603) 7628 1075
evelyn@ram.com.my

News Alert - June 13, 2012

. KLCI closes lower on eurozone uncertainties
. UEM Land to adopt dividend policy to pay out 20%-40% of PATAMI
. Lagarde: Action to save the euro is needed in 'more shortly than three months'
. China's Baosteel cuts July prices by 200 yuan/tonne
. Financial services legislation to be tabled in current parliament sitting
. Zeti: BNM to continue to monitor developments in Europe read
. BFood sets bold expansion targets for its Kenny Rogers Roasters restaurant business
. Ho Hup Construction Co Bhd and Zen Courts Sdn Bhd to appoint a valuer to appraise Bukit Jalil Development Sdn Bhd's worth
. Expect steady growth from KPJ

Esso fully redeems RM300 million Islamic CP Programme before maturity

Published on 08 June 2012

RAM Ratings has received confirmation that Esso Malaysia Berhad (“Esso” or “the Company”) has made an early redemption of the outstanding notes under its RM300 million Islamic Commercial Papers Issuance Programme (2011/2018) (“ICP”) on 30 May 2012. The Islamic CP Programme was subsequently cancelled on 4 June 2012. Following this, RAM Ratings no longer has any rating obligation on the facility.

To recap, Esso had announced on 17 August 2011 that Philippines based-San Miguel Corporation had proposed to acquire Exxon Mobil Corporation’s (“ExxonMobil”) entire 65%-stake in Esso; the acquisition was completed on 30 March 2012. On this note, Esso’s P1 rating was placed on Rating Watch, with a negative outlook, premised on concerns that the Company's credit profile would deteriorate after the exit of ExxonMobil. If the ICP had remained under surveillance, its rating would have been subjected to downward pressure.

Media contact
Evelyn Khoo
(603) 7628 1075
evelyn@ram.com.my

Petronas Dagangan Berhad Annual Report for FYE December 2011

PetronasDaganganBerhad_AR2012

RAM Ratings reaffirms HSBC Bank Malaysia's AAA/P1 financial institution ratings

Published on 12 June 2012

RAM Ratings has reaffirmed HSBC Bank Malaysia Berhad’s (“HSBC Malaysia” or “the Bank”) long- and short-term financial institution ratings at AAA and P1, respectively. Concurrently, we have also reaffirmed the AA1 rating of the Bank’s RM1 billion Tier-2 Subordinated Bonds (“Sub Bonds”). Both the long-term ratings have a stable outlook. The 1-notch rating differential between the Bank’s long-term financial institution rating and that of its Sub Bonds reflects the subordinated nature of the latter to the Bank’s senior unsecured obligations. 

The financial institution ratings are premised on HSBC Malaysia’s strong international franchise and established domestic market position, on top of its robust asset quality, favourable funding and liquidity positions, as well as healthy profitability and adequate capitalisation. It is the largest locally incorporated foreign bank in Malaysia by asset size. The Bank is ultimately wholly owned by HSBC Holdings Plc, a global financial institution. Aside from financial support, the Bank is also able to leverage on its parent’s international network, brand name, expertise and best practices. 

In fiscal 2011, HSBC Malaysia’s gross loans expanded 14.7% year-on-year (“y-o-y”) while its share of the industry’s loans remained at around 4.0%. While we note that the Bank’s absolute gross impaired loans (“GILs”) grew 7.1% y-o-y to RM741.4 million as at end-December 2011, its higher loan base has kept the GIL ratio in check at 1.9%, which still compares well against its AAA-rated peers and the industry average. 

In addition, the Bank’s pre-tax profit advanced 32.8% to RM1.4 billion in fiscal 2011 (fiscal 2010: RM1.0 billion), buoyed by broad-based income growth and less loan-loss provisioning. The Bank also remained adequately capitalised as at end-December 2011, with overall and tier-1 risk-weighted capital-adequacy ratios of 13.0% and 9.3% (after proposed dividends), respectively. The financials presented in this press release refer to the consolidated results of HSBC Malaysia and its Islamic banking subsidiary, HSBC Amanah Malaysia Berhad.   

Media contact
Chew Wei Li
(603) 7628 1025
weili@ram.com.my

News Alert - June 12, 2012

. KLCI rises to highest level in one month
. Handal unit gets LoA from Petronas Carigali for contract worth RM120m
. Uzma unit gets LoA from Petronas Carigali for contract worth RM36m
. MAHB eyes new jobs in Indonesia, China and the Philippines
. Web poll shows 69% of professionals careful about online image
. EPF set to complete acquisition of RRI land
. UEM Land-Khazanah JV for RM5.4b GDV Desaru project
. Gas Malaysia IPO boost for major listings
. Tan Chong downgraded as 1Q net profit falls 57% to RM32m

MISC Berhad annual accounts: 2011

23

MARC AFFIRMS ITS AAA RATING ON CAGAMAS MBS BERHAD’S RM2,060 MILLION MORTGAGE-BACKED FIXED RATE SERIAL BONDS (CMBS 2005-2)

Jun 6, 2012 -

MARC has affirmed its AAA rating on Cagamas MBS Berhad’s (Cagamas MBS) mortgage-backed fixed rate serial bonds of RM2,060.0 million (CMBS 2005-2) with a stable outlook. The rating action affects the outstanding bonds of RM1,585.0 million. The affirmed rating on the residential mortgage-backed bonds reflect strong credit enhancement levels for the outstanding bonds based on the transaction’s collection account balance of RM481.4 million and the collateral pool balance of performing mortgages of RM1,988.1 million. In addition, the collateral pool containing seasoned mortgages of high credit quality has demonstrated strong performance thus far. The affirmed rating also benefits from satisfactory management of collateral servicing and transaction administration.

Cagamas MBS is a limited purpose entity and a wholly-owned subsidiary of Cagamas Holdings Berhad (Cagamas Holdings) whose principal activities are restricted to securitising Islamic home financing and conventional housing loams of public sector employees originated by the Government of Malaysia (GOM). The collateral backing this transaction is Portfolio 2005-2, a pool of eligible government staff housing loans (GSHLs) on which monthly mortgage instalments are made via direct salary/pension deductions. The GOM’s Housing Loans Division, or Bahagian Pinjaman Perumahan (BPP), is the servicer of Portfolio 2005-2.

Based on Cagamas’ quarterly servicer report for CMBS 2005-2 dated March 12, 2012 (the reporting date), the mortgage pool consisted of 33,403 fixed-rate mortgages with an outstanding pool balance of RM2,007.0 million, each having an average size of RM60,084.78 and a weighted average maturity of 14.5 years. Since MARC’s last review in May 2011, the transaction’s credit enhancement level had increased to 155.81% owing to the collateral pool’s strong performance. Portfolio 2005-2 has performed above expectations, reflected by its low cumulative default rate of 0.65% against MARC’s assumed cumulative default rate of 2.06%. A majority of the defaults as of the reporting date are the result of data reconciliation lags and delays in salary and/or pension deductions due to changes in the employment statuses of borrowers. Meanwhile, the collateral pool’s cumulative prepayment rate of 8.64% remained within MARC’s range of assumed stressed prepayment rates.

MARC’s cash flow analysis has shown that the bonds can still be adequately serviced under high-stress default scenarios for AAA-rated transactions. Funds in the Collection Account are sufficient to cover the forthcoming scheduled redemption of RM270.0 million of Tranche 3 bonds on December 12, 2012. Cagamas MBS may exercise the option to partially redeem the final tranche of CMBS 2005-2 on the next scheduled redemption date on the condition that RM90 million remains in the Collection Account post redemption. The cash flow analysis also considers increases of 7% to 13% in civil servant salaries under the government’s improved Malaysian Remuneration System, effective from April 2012 onwards. MARC views the salary increases to be a positive factor for the collateral pool’s performance going forward and expects some increases in prepayments.

MARC’s stable outlook for CMBS 2005-2 is premised on both the expectation that the collateral pool will continue to show stable performance and the transaction’s high overcollateralisation ratio, which allows the bonds to withstand a large increase in mortgage defaults and loss rates. MARC considers the risk of shortfalls arising from higher-than-expected prepayments to be well mitigated by CMBS 2005-2’s sizeable accumulated liquidity reserves.

Contacts:
Ng Chun Kean, +603-2082 2230/ chunkean@marc.com.my;
Jason Kok, +603-2082 2258/ jason@marc.com.my;
David Lee, +603-2082 2255/ david@marc.com.my.

Pac Lease’s RM200 million CP/MTN Programme fully redeemed

Published on 06 June 2012

RAM Ratings no longer has any rating obligation on Pac Lease Berhad’s RM200 million Commercial Papers/Medium-Term Notes Programme (2005/2012) (“CP/MTN Programme”), following the full redemption of the outstanding notes and cancellation of the CP/MTN Programme on 23 March 2012. The debt programme had previously carried respective long- and short-term ratings of A2 and P1, with a stable outlook.

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

News Alert - June 8, 2012

. KLCI closes up, but pares down some gains
. Labuan IBFC banking sector assets up 13% to US$38.3b in 2011
. Moody's: Malaysia's rating outlook is stable
. Asia must spur development of clean energy and improve electricity access
. Philippines risks joining money-laundering blacklist
. China proposes strengthening Internet guidelines
. Malaysian group wins Battersea bid
. Kenanga to pay RM890m for ECM Libra's IB
. IHH IPO priced at RM2.85 per share
. MyEG to expand at double-digit pace