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RAM Ratings affirms AA2/Stable/P1 issue ratings of ORIX Leasing and ORIX Credit
Published on 21 Oct 2024.
RAM Ratings has affirmed the AA2/Stable rating of ORIX Leasing Malaysia Berhad’s (OLM or the Group) RM500 mil Medium-Term Notes (MTN) Programme (2016/2031). The AA2/Stable rating of ORIX Credit Malaysia Sdn. Bhd.’s (OCM) RM1.5 bil MTN Programme (2021/2051) and the P1 rating of its RM500 mil Commercial Papers Programme (2020/2027) have also been affirmed.
A wholly owned subsidiary of OLM, OCM is highly integrated with the Group and contributed 61% of the Group’s pre-tax profit in FY Mar 2024. As such, the credit profiles of OLM and OCM are closely aligned. The ratings also benefit from an uplift from its ultimate parent – ORIX Corporation (ORIX Corp) – reflecting our expectation of its continued support given the Group’s strategic importance to ORIX Corp. Apart from exercising strong oversight of OLM’s operations, ORIX Corp guarantees almost all the Group’s bank borrowings and provides credit lines. OLM’s established franchise and market leadership in the domestic hire purchase and leasing industry are also considered in the ratings.
OLM’s gross impaired financing (GIF) ratio improved further to 1.4% as at end-March 2024 (end-March 2023: 2.1%), owing to sizeable write-offs. An expanding receivables base also contributed to the lower ratio. GIF coverage was a significantly stronger 120%, up from 78% the year before, as the Group employed a more stringent provisioning policy.
OLM’s pre-tax profit rose marginally to RM91 mil in FY Mar 2024 from RM88 mil a year ago, primarily driven by the stronger performance of the auto leasing segment, although offset by higher provisions from a more conservative provisioning policy and rising staff costs. The Group’s smart device rental segment – which had previously faced asset quality challenges and subsequently ceased new business – has stabilised with most problematic accounts already written off. However, higher funding costs led to a slight contraction in OLM’s net interest margin to 5.0% (fiscal 2023: 5.2%).
The Group continues to boast a robust balance sheet. Gearing inched up as OLM expanded its financing base, but it was still low at 1.9 times as at end-March 2024. Cash balances and funding lines provided 3.6 times coverage of short-term debt on the same date.
Analytical contacts
Lee Yee Von
(603) 3385 2503
yeevon@ram.com.my
Wong Yin Ching, CFA
(603) 3385 2555
yinching@ram.com.my
Media contact
Sakinah Arifin
(603) 3385 2500
sakinah@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.
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Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.
Published by RAM Rating Services Berhad
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