RAM Ratings reaffirms Toyota Capital’s AAA(s)/P1(s) issue ratings

Published on 04 Dec 2019.

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RAM Ratings has reaffirmed the AAA(s)/Stable/P1(s) ratings of Toyota Capital Malaysia Sdn Bhd’s (the Company) RM2.5 billion Conventional and Islamic CP/MTN Programme. The enhanced ratings of the CP/MTN Programme reflect the credit strength of an irrevocable and unconditional guarantee extended by Toyota Motor Finance (Netherlands) BV (Toyota Netherlands), a fully owned subsidiary of Toyota Financial Services Corporation (TFS). Toyota Netherlands has a credit support agreement with TFS, which in turn has a similar contract with Toyota Motor Corporation (TMC or the Group). As such, the ultimate support from TMC enhances the credit profiles of the debt facilities beyond Toyota Capital’s stand-alone credit strength. 

As one of the world’s largest vehicle manufacturers, TMC boasts a strong business profile with diversified geographical operations and a robust financial profile. These strengths are moderated by a competitive global auto industry, the Group’s susceptibility to currency fluctuations and potential technological disruptions, including rapid advancements in autonomous and clean vehicles. Excluding debts held under the financial services division, the Group had retained its strong net-cash position as at end-March 2019. On the same basis, its funds from operations debt cover ratio was a robust 1.34 times in FY Mar 2019.

Toyota Capital is a captive financier for Toyota vehicles in Malaysia, providing leasing and hire-purchase (HP) financing in support of Toyota vehicle sales. Ultimately owned by TMC, the Company is expected to continue to derive strong financial flexibility from the former in the form of loans and guarantees on its debt securities. 

Toyota Capital’s gross impaired financing ratio was a stable 1.1% as at end-March 2019 (end-March 2018: 1.2%), sustained by a large RM41.0 mil write-off of delinquent receivables. This contributed to an improved delinquency profile, which in turn resulted in a better credit cost ratio of 0.3% in FY Mar 2019 (FY Mar 2018: 0.6%). Asset quality pressures nonetheless persist, given a trend of higher write-offs of impaired financing and newly classified impaired loans. The Company has a relatively large exposure to lower-income borrowers – a segment which is more vulnerable to adverse changes in economic conditions. 

Excluding non-recurring items relating to a change in the fair value of cross-currency interest rate swaps, Toyota Capital’s adjusted pre-tax profit improved to RM54.7 mil in FY Mar 2019 (FY Mar 2018: RM41.3 mil), primarily attributable to lower net impairment charges. The Company’s operating profitability is anticipated to remain   subdued as weaker sales of Toyota vehicles result in sluggish receivables growth. Toyota Capital’s gross receivables were a lower RM4.7 bil as at end-March 2019 (end-March 2018: RM4.9 bil). Its adjusted net gearing ratio of 8.8 times (unadjusted: 9.8 times) as at end-June 2019 is still high, although having declined due to a lighter debt load amid a contracting receivables base.


Analytical contact
Hafiz Abdul Aziz
(603) 3385 2534

Media contact
Padthma Subbiah
(603) 3385 2577


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.

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