RAM Ratings reaffirms AAA(s)/P1(s) ratings of Toyota Capital’s guaranteed debt facilities

Published on 21 Nov 2022.

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RAM Ratings has reaffirmed the AAA(s)/Stable/P1(s) ratings of Toyota Capital Malaysia Sdn Bhd’s (Toyota Capital or the Company) RM2.5 billion Conventional and Islamic CP/MTN Programme. 

The enhanced ratings of the Programme reflect the credit strength of an irrevocable and unconditional guarantee extended by Toyota Motor Finance (Netherlands) BV (Toyota Netherlands), a wholly owned subsidiary of Toyota Financial Services Corporation (Toyota Financial Services). Toyota Netherlands has a credit support agreement with Toyota Financial Services, which in turn has a similar contract with Toyota Motor Corporation (TMC or the Group). Support from TMC enhances the credit profiles of Toyota Capital’s debt facilities beyond the Company’s standalone credit strength. 

As one of the top two global automotive manufacturing giants, TMC boasts a solid business profile, with diversified geographical operations and robust financial metrics. Despite the impact of the acute semiconductor shortage, the Group registered growth in vehicle sales of 4.6% in FY Mar 2022, propped up by recovery in sales volumes in Asia (excluding Japan), Europe and the Middle East. TMC’s financial standing is solid, with a net cash position of JPY3.7 trillion and low gearing of 0.10 times (excluding borrowings held under its financial services division) as at end-March 2022.

Ultimately owned by TMC, Toyota Capital is expected to continue to derive substantial financial flexibility from the Group by way of liquidity lines and guarantees on bonds and sukuk. Toyota Capital is a captive financier for Toyota vehicles in Malaysia, providing leasing and hire-purchase financing in support of Toyota vehicle sales.

Toyota Capital recorded strong financing growth of 12% in the 15-month period ending June 2022, mainly driven by EZ Beli, a three-tier step-up financing product introduced in December 2019. The Company is expected to register another year of sturdy growth in FY Mar 2023, aided by the fulfilment of backlogged orders as well as new model launches. Asset quality improved in fiscal 2022, with gross impaired financing (GIF) reducing to RM49.6 mil as at end-June 2022 (end-March 2021: RM71.8 mil), closer to pre-pandemic levels. This followed the lifting of the restriction on vehicle repossessions under the Covid-19 Bill 2020 and prompt collection efforts. Toyota Capital’s GIF ratio eased to 0.8% at the same date, down from a peak of 1.4% a year earlier. 

Strong financing growth from the higher-yielding EZ Beli plan, a decline in the cost of funds and a much lower modification loss resulted in an increased adjusted pre-tax profit of RM94.8 mil in FY Mar 2022. This translated into an adjusted return on assets (ROA) of 1.5% (FY Mar 2021: adjusted pre-tax loss of RM3.6 mil and adjusted ROA of -0.1%). The improvement in earnings momentum was sustained in 1Q FY Mar 2023. However, interest rate hikes since May 2022 will exert pressure on the Company’s net interest margin going forward as the bulk of its receivables are on fixed rates while funding costs will be more expensive. Although slightly lower, Toyota Capital’s adjusted net gearing remained elevated at 10.7 times as at end-June 2022 (end-March 2021: 11.8 times). The indicator may rise in the near term as the Company takes on more debt to back business expansion.


Analytical contacts
Lee Jo Yee
(603) 3385 2583

Sophia Lee
(603) 3385 2619


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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