CREDIT ANALYSIS REPORT

DANAJAMIN NASIONAL BERHAD - 2022

Report ID 6053890046891 Popularity 68 views 11 downloads 
Report Date Sep 2022 Product  
Company / Issuer Danajamin Nasional Bhd Sector Finance
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Rationale
Rating action     
MARC Ratings has affirmed its insurer financial strength (IFS) rating of AAA and counterparty credit ratings of AAA/MARC-1 on Danajamin Nasional Berhad (Danajamin). Concurrently, the rating agency has affirmed its ratings of AAAIS and AA+IS on the Senior and Subordinated Sukuk Murabahah of up to RM2.0 billion under its Sukuk Murabahah programme. The one-notch rating differential between the Senior and Subordinated Sukuk Murabahah reflects the subordination of the latter to the senior obligations of Danajamin. The programme currently has an outstanding amount of RM500.0 million.

Rationale     
The affirmed IFS rating reflects Danajamin’s status as a government-owned financial guarantee insurer, its strong capitalisation and healthy liquidity position. The rating action is viewed independently of the impending amalgamation of Danajamin with Bank Pembangunan Malaysia Berhad (BPMB) which is now the sole shareholder of the former after having acquired 50% of Danajamin’s shares from Credit Guarantee Corporation Berhad (CGC) and the remaining 50% from Minister of Finance Incorporated (MoF Inc). Danajamin’s business and undertakings will be transferred and vested in BPMB via a business transfer scheme which is expected to be completed by 4Q2022. The amalgamation exercise is contingent on BPMB and Danajamin obtaining consent and approvals from relevant stakeholders.

In regard to Danajamin’s Senior Sukuk and Subordinated Sukuk Murabahah programme, it will be excluded from the scheme. Danajamin will amalgamate with BPMB upon the redemption of the sukuk programme in 4Q2022. For the redemption of the sukuk programme, Danajamin will utilise its deposit position equivalent to the full principal and half year profit payment towards fully redeeming the outstanding under the sukuk programme on October 6, 2022, when Danajamin can exercise its call option. 

The growth of Danajamin’s guarantee portfolio has been muted over the years with the total approved insured limit and outstanding guarantee amount standing at RM3.4 billion and RM2.6 billion (2020: RM4.1 billion; RM3.4 billion). It had 14 issuances as at end-2021 (2020: 18 issuances, 2019: 23 issuances) and concluded two new deals with an approved limit of RM214 million — in the real estate and construction sectors — during the year (2020: one deal; RM35 million, 2019: five deals; RM565 million). However, six issuers have fully redeemed and cancelled their facilities amounting to RM845.8 million, while other active issuers have redeemed partially, amounting to RM190.0 million. 

In line with the lower guarantee amount, Danajamin’s operating revenue declined to RM123.4 million in 2021 (2020: RM159.4 million). The decline was also due to the lower investment income following the lower overnight  policy rate (OPR) which affected the financial guarantee insurer’s (FGI) investment yield of 3.08% (2020: 4.01%). Its investment portfolio mainly comprises investments in short-term money market deposits and low-risk assets. These investments stood at 80.2% of total investments as at end-2021 (2020: 80.8%). Danajamin’s capital adequacy ratio of over 500% as at end-2021 was strong, significantly higher than the minimum regulatory requirement of 130%. Its net leverage ratio improved to 1.32x, well below the maximum leverage of 7.5x while liquidity remained strong. 

Upon the expected redemption of the outstanding under the sukuk programme in October 2022 and the completion of the amalgamation exercise, MARC Ratings will cease providing analytical coverage on Danajamin.

Strengths
Government-sponsored sole financial guarantee insurer
Sound governance structure
Strong liquidity position

Risk
Challenges to grow guarantee portfolio size


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