Fitch Affirms Indonesia's MPMF at 'A-(idn)'; Outlook Stable
OREANDA-NEWS. Fitch Ratings Indonesia has affirmed the National Long-Term Rating of PT Mitra Pinasthika Mustika Finance (MPMF) at 'A-(idn)'. The Outlook is Stable. Fitch also affirmed the National Short-Term Rating at 'F1(idn)'.
MPMF's ratings reflect Fitch's view of the continued support and linkage with its 60% controlling shareholder, PT Mitra Pinasthika Mustika Tbk (MPM; BB-/Stable), in times of need. The Stable Outlook reflects Fitch's expectation that MPM will continue to support MPMF in case of need.
'A' National Ratings denote expectations of low default risk relative to other issuers or obligations in the same country. However, changes in circumstances or economic conditions may affect the capacity for timely repayment to a greater degree than is the case for financial commitments denoted by a higher rated category.
'F1' National Short-Term Ratings indicate the strongest capacity for timely payment of financial commitments relative to other issuers or obligations in the same country. On Fitch's National Rating scale, this rating is assigned to the lowest default risk relative to others in the same country. Where the liquidity profile is particularly strong, a "+" is added to the assigned rating.
KEY RATING DRIVERS - National Ratings
The National Ratings are driven by Fitch's expectations of moderate probability of support from MPM. The support, however, is limited, as Fitch sees MPMF as a subsidiary of limited importance to MPM, given its modest level of integration and contribution to MPM in terms of financing the latter's automobile sales.
Another 40% of MPMF's stake is owned by JACCS Co., Ltd, a Japan-based financing company, which actively involves in the MPMF's operation and management. Fitch will reassess the support-driven rating of MPMF as the ownership structure evolves with the potential source of support coming from JACCS in addition to the continued support from MPM.
MPMF's performance has been under pressure in the first nine months 2015. Asset quality has deteriorated, due mainly to weakening in consumer financing portfolio amid challenging macroeconomic condition with slower economic growth, a high-interest-rate environment, tightened competition and the prolonged commodity sector downturn. As such, underlying profitability has weakened, with ROA significantly falling to 0.4% in the first nine months this year from 1.5% in 2014. MPMF's capital profile remained satisfactory with debt/equity ratio was one of lower in the industry at end-9M15, but could be easily eroded by rapid loan growth - in light of the company's notably weak internal capital generation.
RATING SENSITIVITIES - National Ratings
Any decline in MPM's ownership or support for MPMF, or a weakening of MPMF's importance to MPM, would exert downward pressure on the rating. A notable increase in the contribution by MPMF to MPM's vehicle business development that might be manifested in bigger role of MPMF to service MPM's automotive sales, might have a positive impact on MPMF's ratings.
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