MARC Ratings has affirmed its rating of A/Stable on Singer (Malaysia) Sdn Bhd’s RM300.0 million Medium-Term Notes (MTN) Programme. The outstanding amount as at end-September 2024 stood at RM150.0 million.

Singer’s well-established domestic track record in the credit sale and hire-purchase financing of consumer durables and motorcycles, and its high profit margins are key drivers of the rating. These strengths are counterbalanced by the timely collection of receivables, which contribute to a relatively high delinquency rate, as well as the increasingly competitive operating environment for credit sale and hire-purchase financing.

Singer offers financing for motorcycles and consumer durables, supported by a wide network of 304 outlets and 610 independent merchants nationwide, including in underserved areas. Accordingly, the group remains exposed to a market segment that is more vulnerable to changing economic conditions. Its three-month gross delinquency rate stood at 34.5% as at end-1H2024, although this rate declined to 21.8% on a nine-month basis. The rating agency understands that delinquent loans of nine months and above have been fully provisioned, thereby mitigating asset quality risks. While Singer writes off about RM66 million annually based on a five-year average, the actual loss rate is offset by an average annual recovery of RM42 million, translating into a 63.6% recovery rate of the written-off amount. In addition, healthy operating profit margins, which have been resilient at about 17% p.a. over the last five years, provide a cushion to absorb potential asset quality shocks and any impact on capital.

Singer’s pre-tax profit declined to RM21.0 million in 1H2024 (1H2023: RM24.1 million) as revenue fell by 9.1% y-o-y, largely due to lower motorcycle sales. Borrowings stood at RM331.2 million, translating into a strong debt-to-equity ratio of 0.40x. MARC Ratings does not expect any material changes to the capital structure in the near term.