SINGER (MALAYSIA) SDN BHD - 2023 |
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| Report ID | 60538900469673 | Popularity | 171 views 14 downloads | |||||
| Report Date | Dec 2023 | Product | ||||||
| Company / Issuer | Singer (Malaysia) Sdn Bhd | Sector | Financial Institution | |||||
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| Rationale |
Rating action 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 under the programme as at end-September 2023 stood at RM101.0 million. Rationale The affirmed rating reflects Singer’s long and profitable track record in selling and financing consumer durables and motorcycles, supported by strong operating profit margins. Moderating factors are the high competition particularly in motorcycle financing and its high delinquency rate. Singer offers financing options for motorcycles and consumer durables purchases through its wide network of 362 outlets and 674 independent merchants nationwide. The ‘Singer’ brand has been established since 1906, initially known for its sewing machines. It came under the control of Tan Sri Dato’ Seri Vincent Tan Chee Yioun, the founder of Berjaya Corporation Berhad (BCorp), since 1989. As at end-1H2023, its group’s asset size stood at RM1 billion. Singer’s financing mainly targets consumers in the low- and low-to-middle income groups. Hence, its asset quality is exposed to the credit profiles of these consumers which are generally weaker. However, the related risks are mitigated by reasonable underwriting procedures, small-ticket loans, averaging RM11,000 for motorcycles and RM2,900 for consumer durables, in addition to its high-income buffer of two main income streams, product margin and finance-related income. That said, Singer’s three-month gross delinquency rate as at end-1H2023 stood at 34.6% (nine-month basis: 23.8%), reflecting in part its customer profile that is more vulnerable to adverse changes in economic conditions. Hence, the company’s business model requires high provision to maintain its asset quality. As a result, its impaired financing on a nine-month basis was 100% provisioned, translating to a net delinquency ratio of zero. Despite this, with the high-income buffer, the company posted an improved pre-tax profit of RM24.1 million in 1H2023 compared to 1H2022 (RM18.1 million), with an operating profit margin averaging around 17% over the past five years; revenue from the motorcycle segment surged to RM98.5 million in 1H2023 (2022: RM91.7 million) as economic activities returned to normalcy. Overall, MARC Ratings views that Singer’s adequate risk-pricing results in structurally resilient operating profitability; high profit rates provide cushion against weaker asset quality. Singer’s borrowings remained low at RM208.4 million as of end-1H2023 (2022: RM193.2 million), translating to a debt-to-equity (DE) ratio of 0.28x. Following the initial drawdown of RM101.0 million from the MTN programme in September 2023, its DE ratio increased to 0.42x, but remained favourable compared to other non-bank finance companies. Rating outlook The stable outlook reflects our expectation that Singer will broadly maintain its key financial metrics with the leverage ratio kept below 1.25x over the next 12-18 months. Rating trajectory Upside scenario Any likelihood of an upgrade would be guided by a significant and sustained improvement in Singer’s asset quality position while maintaining its healthy profitability metrics. Downside scenario The rating action and/or outlook could come under pressure if the group embarks on aggressive debt-funded expansions that will lead to a higher leverage ratio, and/or there are changes in the business environment or plans resulting in adverse impact on operating performance. Key strengths
Key risks
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