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RAM Ratings affirms MDV’s AA3 ratings
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.
Analytical contacts
Jeremy Noel Paul
(603) 3385 2556
jeremynp@ram.com.my
Wong Yin Ching, CFA
(603) 3385 2555
yinching@ram.com.my
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.
Published by RAM Rating Services Berhad
© Copyright 2023 by RAM Rating Services Berhad
