RAM Ratings has reaffirmed the respective AA2/Stable/P1 and AA2/Stable ratings of ORIX Leasing Malaysia Berhad's (the Company) CP/MTN Programme of up to RM500 million (2013/2020) and MTN Programme of up to RM500 million (2016/2031). The reaffirmation reflects our anticipation of ready parental support from ORIX Corporation (ORIX Corp or the Group) in times of need, given the Company's strategic importance to the Group. ORIX Corp's credit profile has remained intact, as represented by its stronger earnings, comfortable gearing and satisfactory asset-quality indicators despite some uptick in credit costs.
ORIX Leasing's asset quality stayed healthy as at end-June 2017, with a gross impaired-financing ratio of 1.2%, underpinned by the Company's prudent underwriting and monitoring. The Company posted net impairment write-backs in fiscal 2017 and 1Q fiscal 2018, the result of its smaller base of receivables and recoveries in the previous financial year. ORIX Leasing had revised its policy on general provisions in July 2017, which pushed its loan-loss reserve coverage down to 104% as at end-July 2017 (end-March 2017: 181%); the Company intends to maintain a minimum coverage of 100% going forward.
ORIX Leasing's financing portfolio has been contracting in the last 2 fiscal years, given the lacklustre demand for industrial equipment financing amid uneven economic growth and keener competition. Nonetheless, a small growth achieved in 2Q FY Mar 2018 has offered it some respite. Given its muted receivables growth, the Company's gearing ratio remained low at 1.3 times as at end-June 2017. Notably, ORIX Leasing stands among the most profitable non-bank financial institutions in RAM's rated portfolio, with a return on asset of 4.6% in FY Mar 2017.
Loh Kit Yoong
(603) 7628 1031
(603) 7628 1162
The credit rating is not a recommendation to purchase, sell or hold 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.
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