AA2 ratings of ORIX Leasing’s debt programmes reaffirmed

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

The reaffirmation reflected RAM Ratings’ anticipation of ready parental support from ORIX Corporation (ORIX Corp or group) in times of need, given the company’s strategic importance to the group.

“ORIX Corp’s credit profile has remained intact, as represented by its stronger earnings, comfortable gearing and satisfactory asset- quality indicators despite some uptick in credit costs,” the ratings firm said.

According to RAM Ratings, ORIX Leasing’s asset quality stayed healthy as at end- June 2017, with a gross impairedfinancing ratio of 1.2 per cent, underpinned by the company’s prudent underwriting and monitoring.

“The company posted net impairment write-backs in fiscal 2017 and first quarter ( 1Q) fiscal 2018, the result of its smaller base of receivables and recoveries in the previous financial year,” RAM Ratings said.

“ORIX Leasing had revised its policy on general provisions in July 2017, which pushed its loanloss reserve coverage down to 104 per cent as at end- July 2017 ( end- March 2017: 181 per cent); the company intends to maintain a minimum coverage of 100 per cent going forward.”

“ORIX Leasing’s financing portfolio has been contracting in the last two fiscal years, given the lacklustre demand for industrial equipment financing amid uneven economic growth and keener competition. Nonetheless, a small growth achieved in 2Q financial year ( FY) March 2018 has offered it some respite.

“Given its muted receivables growth, the company’s gearing ratio remained low at 1.3 times as at end- June 2017. Notably, ORIX Leasing stands among the most profitable non- bank financial institutions in RAM Ratings’ rated portfolio, with a return on asset of 4.6 per cent in FY March 2017.”