Posted on 27 Aug 2015
Corporates have buffers to withstand RM weakness: S&P's
Seventy five per cent of corporates
which Standard and Poor's rates in Malaysia have sufficient buffers to
withstand the ringgit weakening up to RM4.50 to the dollar for a year.
Its corporate ratings director for
Asia Pacific Xavier Jean said this was because these companies have a number of
levers they can pull to repair their balance sheets or financial ratios if the
ringgit weakens too fast.
"They can reduce capital
spending, dividends or divest assets,"he said during a webcast on Ringgit
Depreciation: What's The Possible Impact On Rated Malaysia Companies?
The eight companies are MISC, IOI,
Petronas, Genting, Axiata, Sime Darby, Telekom Malaysia and Tenaga Nasional
Bhd.
Although financial ratios will
weaken because of debt growth but it will remain in broad bands.
Jean also does not expect to see
negative rating action or downgrade on these companies duet to the higher
reported debt.
"The companies we rate have
partial hedging, whether through financial instruments or natural hedges with
cash flows generated through either the US dollars or outside of Malaysia. This
will mitigate the increase in reported debt ."
Except for Telekom and Tenaga
Nasional, the remaining six use foreign current debt for more than 50 per cent
of the total debt, he added.
The Malaysian rated corporates are
also less exposed than those in Indonesia.
Another aspect is the structural
credit which Jean points out that leverage levels are moderate. "The
companies we rated have conservative balance sheets and relied less
aggressively on borrowings than other companies elsewhere in the region."
One of the added risks corporates
fear is the timing of the depreciation of the currency and the impact on
liquidity.
"But this was not the case for
Malaysia as liquidity is sound and corporates have cash and are able to manage
the short term requirements."
MISC and Petronas generate the
revenue and cash flow in US dollars while IOI, Genting, Sime Darby also have
sizeable revenues and profits from abroad denominated in foreign currencies.
In the case of Tenaga and Telekom,
foreign currency debt is manageable, constituting less than 25 per cent of the
total debt.
"Telekom's leverage levels are moderate
while in the case of Tenaga, it can pass the higher fuel cost through
tariffs."
Seventy five per cent
of corporates which Standard and Poor's rates in Malaysia have
sufficient buffers to withstand the ringgit weakening up to RM4.50 to
the dollar for a year.
Its corporate ratings director for Asia Pacific Xavier Jean said this
was because these companies have a number of levers they can pull to
repair their balance sheets or financial ratios if the ringgit weakens
too fast.
"They can reduce capital spending, dividends or divest assets,"he said
during a webcast on Ringgit Depreciation: What's The Possible Impact On
Rated Malaysia Companies?
The eight companies are MISC, IOI, Petronas, Genting, Axiata, Sime
Darby, Telekom Malaysia and Tenaga Nasional Bhd.
Although financial ratios will weaken because of debt growth but it will
remain in broad bands.
Jean also does not expect to see negative rating action or downgrade on
these companies duet to the higher reported debt.
"The companies we rate have partial hedging, whether through financial
instruments or natural hedges with cash flows generated through either
the US dollars or outside of Malaysia. This will mitigate the increase
in reported debt ."
Except for Telekom and Tenaga Nasional, the remaining six use foreign
current debt for more than 50 per cent of the total debt, he added.
The Malaysian rated corporates are also less exposed than those in
Indonesia.
Another aspect is the structural credit which Jean points out that
leverage levels are moderate.
"The companies we rated have conservative balance sheets and relied less
aggressively on borrowings than other companies elsewhere in the
region."
One of the added risks corporates fear is the timing of the depreciation
of the currency and the impact on liquidity.
"But this was not the case for Malaysia as liquidity is sound and
corporates have cash and are able to manage the short term
requirements."
MISC and Petronas generate the revenue and cash flow in US dollars while
IOI, Genting, Sime Darby also have sizeable revenues and profits from
abroad denominated in foreign currencies.
In the case of Tenaga and Telekom, foreign currency debt is manageable,
constituting less than 25 per cent of the total debt.
"Telekom's leverage levels are moderate while in the case of Tenaga, it
can pass the higher fuel cost through tariffs."
Read More :
http://www.nst.com.my/node/97711
