RAM Ratings assigns AA3/Stable/P1 ratings to Malaysia Debt Ventures’ proposed sukuk/bonds

Published on 29 Nov 2021.

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RAM Ratings has assigned AA3/Stable/P1 ratings to Malaysia Debt Ventures Berhad’s (MDV or the Company) proposed RM2 bil Conventional and Islamic Commercial Papers/Medium-Term Notes Programmes. Concurrently, we have reaffirmed the Company’s corporate credit ratings of AA3/Stable/P1. 

The ratings incorporate our expectation of strong support from the Government of Malaysia. MDV is a technology financier wholly owned by the government through the Minister of Finance and the Federal Land Commissioner.  

MDV is deemed highly strategic to the government given its role in promoting the growth of Malaysia’s information and communications technology (ICT) sector, although the Company is not the only entity spearheading the nation’s technology agenda. Established in 2002, MDV’s mandate is to address the funding needs of young technology companies – particularly small and medium-size enterprises – that are unserved or underserved by commercial banks. 

MDV’s strong relationship with the government has been evident since its inception. Support has been demonstrated through the partial conversion of MDV’s debt to equity, government guarantees, sukuk funding cost subsidies and being entrusted to run government financing programmes to develop the technology sector.

MDV’s financing portfolio contracted further to RM0.8 bil as at end-June 2021 (end-December 2019: RM1.0 bil), mainly driven by early redemptions relating to green energy projects as customers refinanced with commercial banks post plant completion. The Company has been more selective in underwriting over the last few years, which has caused its financing base to gradually reduce. MDV’s financing book largely comprises financing extended to ICT (59%) and green technology (37%) sectors. About two-thirds of the portfolio comprised project-based financing that are mostly secured from government and government-related agencies as well as large corporates.

MDV’s asset quality remains weak in view of its developmental mandate. The Company’s gross impaired financing (GIF) ratio jumped to 23.6% as at end-June 2021 (end-December 2020: 18.7%) due to a lumpy account from the renewable energy and fuels sector, exacerbated by its smaller financing base. Excluding the account – which subsequently regularised in August 2021 – MDV’s GIF ratio would stand at a lower 19.1%. Credit costs moderated to 1.3% in FY Dec 2020 (FY Dec 2019: 1.9%). In 1H FY Dec 2021, the Company recorded a writeback of provisions amounting to RM1.2 mil due to the normalisation of a financing facility from Stage 2 to Stage 1 as well as the redemption of another account. GIF coverage stayed relatively low at 53% as at end-June 2021. 

MDV’s pre-tax profit halved to RM6.3 mil in FY Dec 2020 on the back of diminished financing income from a smaller financing base and thinner margins. Impairment expenses (RM12.3 mil) had also contributed to the weak profit performance. The Company recorded a sizeable loss after tax of RM74 mil for the year due to the writedown of deferred tax assets following an amendment to the Income Tax Act 1967. The one-off event had no cashflow impact but weakened the Company’s gearing to 4.7 times as at end-June 2021 (end-December 2019: 4.1 times), albeit still manageable vis-à-vis its risk profile.


Analytical contacts
Jeremy Noel Paul 
03 3385 2556

Wong Yin Ching, CFA
03 3385 2555


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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