Posted Date : 30 Apr 2012
Malaysian Rating Corporation Berhad’s Chairman Mohammad Abdullah led the credit rating agency’s annual general meeting (AGM), which approved its accounts for the financial year ended December 31, 2011. He told shareholders that MARC posted an 18.3% increase in pre-tax profit to RM9.5 million in 2011 on the back of a 5.8% year-on-year growth in revenue to RM19.4 million. “The good results benefited from higher revenue and with marginal decrease in costs”, he said while attributing the revenue growth largely to new rating mandates and favourable domestic bond and sukuk issuance activity.
At the AGM, the shareholders also approved a final dividend payment of 10 sen per share to shareholders, bringing the total gross dividend for the year to 45 sen per share. MARC’s Chairman mentioned that this would be the highest gross dividend paid out to shareholders since 2005.
Mohammad Abdullah highlighted that MARC also achieved another significant milestone during 2011. Together with JCR-VIS Credit Rating Co. Ltd. (JCR-VIS), the credit rating agency entered into a technical assistance agreement with Islamic International Rating Agency (IIRA) on May 26, 2011. With the signing of this agreement, he expressed confidence that MARC will be able to build on its credibility and track record as a technical partner. MARC entered into its first technical assistance agreement in 2009 with Emerging Credit Rating Limited (ECRL) of Bangladesh.
Mohammad Abdullah also commented on prospects for the domestic bond market, “The Malaysian bond and sukuk pipeline will be sustained by corporate capital spending and Public Private Partnership (PPP) project financing. MARC forecasts gross corporate bond issuance to be in the range of RM65.0 billion to RM75.0 billion, which notably includes Projek Lebuhraya Usahasama Berhad’s RM23.35 billion sukuk that was issued in January 2012. This forecast assumes that the corporate balance sheets will remain healthy and the economy will continue to grow despite the increasingly uncertain outlook for the global environment.”
MARC’s Chief Executive Officer (CEO), Mohd Razlan Mohamed, said in his review of business and operations that MARC completed 23 new issue credit ratings with a total rated value of RM38.19 billion in 2011, comprising 12 corporate debt ratings (total rated value of RM9.12 billion), seven project finance ratings (total rated value of RM27.41 billion) and four structured finance ratings (total rated value of RM1.67 billion).
He also noted that Islamic instruments remained the preferred form of funding with such instruments accounting for the major portion of MARC’s rating universe last year. Of the 23 completed new issue credit ratings, 17 issues were Islamic instruments with a RM34.16 billion combined facility size, while the remaining six were conventional instruments totalling RM4.03 billion in facility size.
Among the notable Sukuk and corporate debt issuances rated by MARC in 2011, he highlighted were Projek Lebuhraya Usahasama Berhad’s RM23.35 billion Sukuk Musharakah Programme, ANIH Bhd’s RM2.5 billion Senior Sukuk Musharakah, Westports Malaysia Sdn Bhd’s RM2.0 billion Sukuk Musharakah Programme, as well as Hong Leong Financial Group Bhd’s Commercial Paper and Medium Term Notes Programme and DRB-Hicom Bhd’s Islamic Medium Term Note Programmes, both with facility size of RM1.8 billion.
MARC had seen a decrease in the number of corporate defaults in 2011 to two against 2010’s three corporate defaults. Despite the lower number of corporate defaults, thedowngrade-to-upgrade ratio climbed to 6.0:1 compared to 2.2:1 in the previous year. A substantial portion of the downgrades was contributed by the downgrade of the Selangor state’s water sector-related issuers arising from the deadlock in negotiations in the restructuring of the state’s water sector. Excluding the water sector issuers, the annual downgrade-to-upgrade ratio would be considerably lower at 2.0:1 and would imply improvement relative to 2010.
MARC’s CEO reiterated the rating agency’s commitment to its role as an independent arbiter of risk and to fulfil its mandate of providing timely, objective and accurate credit analyses. Finally, he said that MARC would continue to adopt an innovative approach towards developing new rating products to meet specific market requirements.
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