MARC RATINGS AFFIRMS PAC LEASE'S RATINGS WITH STABLE OUTLOOK

MARC Ratings has affirmed its ratings of AA/MARC-1 on Pac Lease Berhad's Medium-Term Notes/ Commercial Papers (MTN/CP) Programmes with a combined limit of RM1.5 billion. The long-term rating outlook is stable. As of October 31, 2024, the outstanding issuances stood at RM535 million MTNs and RM280 million CPs.

Pac Lease's strong market position and lengthy operating track record in the domestic industrial hire purchase (HP) industry, underpinned by healthy profit margins and sound asset quality metrics, remain key rating drivers. The long-term rating also incorporates a one-notch uplift based on the rating agency's assessment that parental support from Singapore-based Oversea-Chinese Banking Corporation Limited (OCBC), one of the largest banks in the region, would be forthcoming, if required. Pac Lease is a wholly-owned subsidiary of OCBC Capital (Malaysia) Sdn Bhd which, in turn, is an indirect wholly-owned subsidiary of OCBC; the group is expected to maintain effective control of Pac Lease throughout the tenure of the programme. The parental support assumption also considers the operational and financial linkages within the group.

For 1H2024, Pac Lease recorded a healthy 8.0% YTD loan growth to RM2.7 billion (2023: 10%), reflecting continued demand for industrial HP. This has been aided by the group's strong customer retention ability and its wide product lines. Loan book is deemed diversified with business services accounting for 27.1% of total loans, construction and property at 19.9%, manufacturing at 19.7%, and 15.4% for transport and storage. By loan type, HP financing accounted for 90.1% of Pac Lease's loan portfolio with the remainder mostly comprising term loans to small- and medium-sized enterprises (SME).

MARC Ratings notes that Pac Lease's asset quality has remained resilient against rapid loan growth, reflecting strong credit assessment processes and stringent monitoring, notwithst