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RAM Ratings upgrades ORIX Leasing's issue rating to AA2 on stronger shareholder support
RAM Ratings has upgraded the long-term ratings of ORIX Leasing Malaysia Berhad's (ORIX Leasing or the Company) CP/MTN Programme of up to RM500 million and MTN Programme of up to RM500 million, from AA3/Positive to AA2/Stable. Concurrently, we have reaffirmed the P1 short-term rating of the CP/MTN Programme. 

The upgrade is premised on the stronger credit profile of Japan-based ORIX Corporation (ORIX Corp or the Group), which wholly owns ORIX Leasing. The Company's ratings are closely related to ORIX Corp's credit fundamentals given its strategic importance to its parent. We expect a high likelihood of financial support from ORIX Corp in times of need. In this respect, ORIX Corp's ability to support the Company has strengthened given its healthier financial metrics. Notably, the Group has demonstrated further improvement in its asset quality and leverage levels beyond our expectations, while also trimming its exposure to real estate, which used to be a main source of impairment.

ORIX Leasing's healthy asset-quality indicators continue to highlight its prudent credit culture and stringent monitoring procedures. Its gross impaired-financing (GIF) ratio had eased further to 1.2% as at end-June 2016 while its GIF coverage ratio came up to a robust 161.4%. Despite the tougher economic environment, we believe that the Company's asset quality will remain intact, underscored by its tighter underwriting standards and intensified collection efforts.

Given the weak business sentiment as well as ORIX Leasing's emphasis on credit quality and margin preservation over growth, its gross receivables shrank 12% in FY Mar 2016, followed by a further 5% in 1Q FY Mar 2017. As such, we expect a more subdued earnings outlook over the next 12 months. In line with the reduction in receivables, ORIX Leasing's gearing ratio had eased to 1.7 times as at end-June 2016 (end-March 2015: 2.4 times).

Analytical contact Media contact
Liang Huey Jean Padthma Subbiah
(603) 7628 1124 (603) 7628 1162
[email protected] [email protected]

The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security's market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.

RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings' credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.

Similarly, the disclaimers above also apply to RAM Ratings' credit-related analyses and commentaries, where relevant.

Published by RAM Rating Services Berhad
© Copyright 2016 by RAM Rating Services Berhad
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