Published on 30 Aug 2023.
RAM Ratings has affirmed Malaysia Debt Ventures Berhad’s (MDV or the Company) AA3/Stable/P1 corporate credit ratings, alongside the same ratings of its RM2 bil Conventional and Islamic Commercial Papers/Medium-Term Notes Programmes.
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 (Incorporated) and the Federal Lands Commissioner.
MDV is deemed highly strategic to the government, given its importance to the nation’s agenda of nurturing firms in the technology sector. Established in 2002, MDV’s mandate is to address the funding needs of technology companies – particularly small and medium-sized enterprises – that are unserved or underserved by commercial banks. The Company’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 and a sukuk funding cost subsidy.
The credit profile of MDV’s financing book weakened in FY Dec 2022 after two sizeable accounts turned impaired. As a result, the Company’s gross impaired financing (GIF) ratio rose to an elevated level of 21.0% as at end-December 2022 (end-December 2021: 12.3%), the effects of which were compounded by the continued contraction of its financing portfolio. MDV’s credit cost ratio also increased further to 3.5% in fiscal 2022 (fiscal 2021: 1.9%), driven by the downgrade of the two major accounts. GIF coverage was a weaker 76.3% as at end-December 2022 (end-December 2021: 89%).
The Company recorded a pre-tax loss of RM18.6 mil in fiscal 2022 (fiscal 2021: pre-tax profit of RM7.2 mil), chiefly owing to the higher impairment charges for new impairments and absence of unrealised fair value gains from start-up investments. Earnings on a post-tax basis were, however, in the black due to a reversal of written down deferred tax assets following a partial exemption granted by the Ministry of Finance (MoF) from the Income Tax Act 1967 relating to unutilised tax losses.
Jeremy Noel Paul
(603) 3385 2556
Wong Yin Ching, CFA
(603) 3385 2555
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Published by RAM Rating Services Berhad
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Ratings on Malaysia Debt Ventures Berhad