‘AA2 ratings of ORIX Leasing’s debt programmes stable’

KUALA LUMPUR: RAM Ratings has reaffirmed the respective AA2/Stable/P1 and AA2/Stable ratings of ORIX Leasing Malaysia Bhd’s CP/MTN Programme of up to RM500 million (2013/2020) and MTN Programme of up to RM500 million (2016/2031).

The reaffirmation reflects our expectation of ready parental support from ORIX Corporation (ORIX Corp), given RAM’s view that the Company is strategically important to ORIX Corp. ORIX Corp is one of Japan’s largest diversified financial services groups.

“ORIX Leasing maintains its dominant position in the industrial hire purchase and leasing space in Malaysia,” it said in a statement.

“The company’s asset quality has stayed strong; its gross impaired financing ratio trended lower over the last few years before inching up to a stillhealthy 1.1 per cent as at end-June 2018.”

“That said, RAM said ORIX Leasing’s credit cost ratio has increased to an annualised 0.6 per cent in 1QFY19 from a sizeable net writeback of impairments in FY18.

The company’s loan-loss coverage ratio is lower than prior years but still stood at a comfortable 118.4 per cent.

“ORIX Leasing is working towards the adoption of MFRS 9 in FY19 which is anticipated to lead to a marginal rise in its provisions for unimpaired exposure, although unlikely to be significant in view of its prudent underwriting standards.

ORIX Leasing’s gross receivables grew 5.4 per cent in FY18 – after having contracted in the past two fiscal years – with growth momentum continued into 1QFY19.

Meanwhile, ORIX Leasing’s gearing was kept at 1.4 times as at end-June 2018 as outstanding debts had reduced amid modest financing growth.

“Notably, ORIX Leasing’s profitability remains among the highest in RAM’s rated portfolio of non-bank financial institutions, with respective return on assets and net interest margin of 4.6 and 5.5 per cent in FY18.”