RAM Ratings reaffirms Pac Lease’s AA3 rating

KUALA LUMPUR: RAM Ratings has reaffirmed the AA3/Stable/ P1 ratings of Pac Lease Bhd’s commercial papers/medium term notes (CP/MTN) Programme of up to RM1.0 billion (2017/2024).

RAM said the reaffirmation incorporates its expectation of continuous support from OCBC Bank ( Malaysia) Bhd which was rated as AAA/Stable/ P1, giving Pac Lease’s strategic fit with the Malaysian operations of the larger OCBC Group.

“The former’s equipment financing business complements and enhances OCBC Malaysia’s suite of financial services.

“Pac Lease’s ties to OCBC Malaysia also partially mitigates the refinancing risk arising from its high reliance on short-term funding, in view of its ability to tap the latter for contingent funds if needed,” it said in a statement yesterday.

The ratings also took into consideration Pac Lease’s healthy asset quality and sound profitability, which came within RAM’s expectations.

“The company recorded a lower gross impaired financing ratio of 0.9 per cent as at end-December 2017, while loan-loss reserve coverage was still comfortably above 100 per cent after an impairment writeback from the implementation of MFRS 9 in January 2018.”

Meanwhile, Pac Lease said its credit costs may hover between 30 and 50 basis points ( bps), higher than the 19 bps clocked in for fiscal 2017, albeit manageable.

With a return on assets of 3.1 per cent in fiscal 2017, Pac Lease’s profitability remained sound, as wide net interest margins that have averaged five per cent in the last five years continued to prop up its top line which boosted the company’s pre-tax profit to RM46.7 million in fiscal 2017. — Bernama