Pembangunan Leasing Corporation’s (PLC)’s Guaranteed Notes Issuance Programme (GNIP) rating is reaffirmed to reflect the strength of the unconditional and irrevocable guarantee provided by Bank Pembangunan & Infrastruktur Malaysia Berhad (BPIMB). BPIMB’s A-rating from MARC which is higher than PLC’s stand-alone corporate debt rating, reflects its strategic importance in the socio-economic development of the country and its 99.9% government ownership that have translated into a continued strong funding base and capital adequacy position of the Bank. PLC’s asset quality improved in FY2002. However, MARC remains concerned over the sustainability of PLC’s business growth following its limited funding sources, as well as the increased competition posed by the on-going merger and/or privatization of finance companies.

PLC is principally involved in the provision of hire purchase (HP), lease and factoring facilities. In FY2002, the Group’s total gross receivables increased by 32.7% to RM341.7 million, driven mainly by the 35.4% and 63.8% growth in gross leasing and factoring receivables respectively. The financing portfolio remained concentrated on manufacturing (30.2%), wholesale and retail trade (19.9%), as well as transport and storage (11.4%). Non performing accounts (NPAs) continued to decline to RM52.9 million during the year (FY2001: RM59.9 million), with HP delinquent accounts forming the largest proportion (60.8%) of PLC’s total NPAs. With the improvement in asset quality, gross NPA ratio fell from 23.3% in FY2001 to 15.5% in FY2002, albeit higher than the
industry average of 11.2% for finance companies.

As at 30 September 2003, total financing and NPAs increased to RM347.5 million and RM69.1 million respectively.

The gearing ratio rose to 8.4 times in FY2002 (FY2001: 7.0 times), due to the higher amount of debt brought about by the GNIP secured during the year. The ratio, however, improved to 5.8 times as at 30 September 2003. As a result of the new Development Financial Institutions Act (DFIA) ruling, loans from BPIMB have been progressively reduced. In FY2002, it accounted for only 10.1% of PLC’s total funding base, compared to 42.2% in FY2001. The proportion was further reduced to 10.0% as at 30 September 2003.

PLC’s asset/liability management has improved with the RM200.0 million GNIP which narrowed interest rate and maturity gaps. As at 30 September 2003, PLC issued RM115.0 million CPs at average interest rate of 3.15% p.a. to match its factoring receivables, as well as RM75.0 million MTNs at a yield-to-maturity of 5.85% p.a. to fund its HP and leasing receivables.

The Group’s pretax profit was reduced by 22.3% to RM3.5 million compared to FY2001, attributable mainly to the higher loan loss provisions. Consequently, return on asset and equity was reduced to 1.1% and 10.4% respectively. Results for the nine-month period ending 30 September 2003 was, however, more encouraging with pre-tax profits recorded at RM8.6 million, mainly due to lower loan loss provisions.