Orix Leasing’s issue rating gets an upgrade on stronger shareholder support

KUCHING: RAM Rating Services Bhd has upgraded Orix Leasing Malaysia Bhd’s (Orix Leasing) CP/MTN programme of up to RM500 million and MTN programme of up to RM500 million, from AA3/Positive to AA2/Stable.

The ratings firm guided that the upgrade is premised on the stronger credit profile of Japanbased Orix Corporation (Orix Corp), which wholly owns Orix Leasing.

Orix Leasing’s ratings are closely related to Orix Corp’s credit fundamentals given its strategic importance to its parent company.

“We expect a high likelihood of financial support from ORIX Corp in times of need. In this respect, ORIX Corp’s ability to support the Company has strengthened given its healthier financial metrics.

“Notably, the Group has demonstrated further improvement in its asset quality and leverage

We expect a high likelihood of financial support from ORIX Corp in times of need. In this respect, ORIX Corp’s ability to support the Company has strengthened given its healthier financial metrics. RAM Rating

levels beyond our expectations, while also trimming its exposure to real estate, which used to be a main source of impairment,” opined the ratings firm.

Additionally, Orix Leasing’s healthy asset- quality indicators continue to highlight its prudent credit culture and stringent monitoring procedures. Its gross impaired-financing (GIF) ratio had eased further to 1.2 per cent as at end- June 2016 while its GIF coverage ratio came up to a robust 161.4 per cent.

“Despite the tougher economic environment, we believe that the Company’s asset quality will remain intact, underscored by its tighter underwriting standards and intensified collection efforts,” shared the ratings firm.

Given the weak business sentiment as well as Orix Leasing’s emphasis on credit quality and margin preservation over growth, its gross receivables in the first quarter of financial year 2016 (1QFY16) saw a decrease of 12 per cent, followed by a further five5 per cent decrease in 1QFY17.

“As such, we expect a more subdued earnings outlook over the next 12 months. In line with the reduction in receivables, ORIX Leasing’s gearing ratio had eased to 1.7 times as at end- June 2016 compared to 2.4 times as at end-March 2015,” concluded RAM Ratings.