MARC Ratings has affirmed its AA/Stable non-bank financial institution rating on CGS International Securities Malaysia Sdn Bhd (CGS MY) and the MARC-1 rating on CGS MY’s Commercial Papers (CP) Programme of up to RM1.0 billion in nominal value.

The ratings reflect CGS MY’s strong standing in Malaysia’s stockbroking sector, consistently ranking among the top two brokerage firms by trading volume over the past three years. Its position is bolstered by close ties to the CGS Group; CGS MY is a wholly-owned subsidiary of Singapore-based CGS International Holdings Ltd under apex entity China Galaxy Securities Co. Ltd (CGS). CGS is dual-listed on the Hong Kong and Shanghai exchanges, as well as majority-owned by the Chinese government through shareholding that traces up to China Investment Corporation and the Ministry of Finance. MARC Ratings expects strong parental support to CGS MY from CGS, evidenced by CGS’ past letters of comfort for CGS MY’s borrowings and CGS MY’s recent shift to report directly to CGS to improve regional oversight.

Stockbroking continues to be the core of CGS MY’s operations, contributing 50% to total revenue. However, the company is actively diversifying its revenue streams by expanding into corporate finance, equity capital markets, and regional product offerings.

In 2024, asset quality weakened due to a RM46.7 million expected credit loss on a structured financing deal, raising the impairment ratio to 1.97% as of end-2024 from 0.31% a year earlier. These impaired exposures are almost fully provisioned, with strengthened risk controls ─ including stricter requirements on collateral and loss caps ─ now in place for its structured financing portfolio.

CGS MY’s revenue rose 22% y-o-y to RM437 million in 2024, driven by strong performance in stockbroking. Nevertheless, profit before tax fell 40% to RM46 million due to higher overheads from business expansion and increased provisioning, mainly from the impaired structured financing deal.

As at March 2025, CGS MY’s capital adequacy ratio (CAR) declined to 8.6x (2023: 20.1x), mainly due to credit provisioning, lower eligible capital from subordinated loans, and capital injections into subsidiaries to support business expansion. Despite this, CAR remains well above the 1.2x regulatory minimum, and the debt-to-equity ratio of 0.86x is within the 2.5x covenant limit.