RAM reaffirms Pac Lease's issue ratings
Malaysia RAM Ratings has reaffirmed the A2/P1 issue ratings for Pac Lease Bhd’s (or the Company) CP/MTN Issuance Programme of up to RM500 million (2011/2018). Concurrently, the outlook on the long-term rating has been revised to positive.
The positive outlook reflects the enhanced operational support from OCBC Bank (Malaysia) Bhd (OCBC), following Oversea-Chinese Banking Corp Ltd’s increased stake in PacLease (from an indirect 63.5 per cent to 100 per cent) via OCBC Capital (Malaysia) Sdn Bhd. The Company’s business strategies and operations are under the purview of OCBC.
Being a bank-backed equipment-financing company gives PacLease the added advantage of funding support. The Company recently tied up with OCBC Al-Amin Bank Bhd, which is envisaged to gradually increase PacLease’s non-interest income as it refers equipment-financing customers to its new partner in return for a commission. PacLease’s risk-management systems will also be reviewed periodically by OCBC.
Despite its rapid growth PacLease’s asset-quality indicators have held up well. While its gross impaired-loan (GIL) ratio had inched up from 1.0 per cent to 1.3 per cent y-o-y as at end-March 2013, it is still deemed healthy. At the same time, the Company’s GIL coverage ratio came in at a strong 132 per cent while its credit-cost ratio remained stable at an annualised 0.4 per cent.
PacLease’s robust profitability is underpinned by its high-margin products. Its net interest margin and return on assets remained healthy at a respective 5.4 per cent and 3.2 per cent in fiscal 2012. Although the Company relies on wholesale borrowings as its main funding source, refinancing risk is partly mitigated by its unutilised borrowing facilities and the expected funding support from OCBC. As at end-March 2013, the Company’s gearing ratio stood at 4.4 times, which is comparable to those of its similarly rated non-bank financial institution peers in RAM’s portfolio.-- Reuters