OREANDA-NEWS. Fitch Ratings Indonesia has assigned PT Sinar Mas Multifinance (SMMF) a National Long-Term Rating of 'A-(idn)' and a National Short-Term Rating of 'F2(idn)'. The Outlook is Stable.

At the same time, Fitch has assigned the company's IDR500bn unsecured bond maturing on 10 April 2018 a National rating of 'A-(idn)'.

'A' National Long-Term 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.

'F2' National Short-Term Ratings indicate a good capacity for timely payment of financial commitments relative to other issuers or obligations in the same country. However, the margin of safety is not as great as in the case of the higher ratings.

KEY RATING DRIVERS

NATIONAL RATINGS
The ratings of SMMF reflect Fitch's expectation that the company will continue to benefit from support and commitment from its 99.99% shareholder, PT Sinarmas Multiartha Tbk (SMMA), a holding company in the Sinar Mas Group that focuses on the integrated financial services sector, which includes banking, multi-finance and insurance.

SMMF provides consumer financing and leasing and factoring services. Consumer finance makes up 74% of the company's total financing portfolio and factoring accounts for 22%.

SMMF's ratings reflect its limited synergies with SMMA and hence, its small role in expanding SMMA's franchise. This is because only a small portion of SMMA's business flow comes from the multi-finance business compared with its banking and insurance affiliates. SMMF accounted for about 5% of SMMA's total assets at end-1H15.

SMMF's equity-to-assets ratio of 35% at end-1H15 is among the highest among its peers, supported by a substantial capital infusion by SMMA in 2012. However, its profitability is low compared to its peers. ROA was 0.5% and ROE was 1.3% in 1H15. Its NPL ratio was at 3.8% at end-1H15, an improvement from 4.5% at end-2014.
Fitch expects SMMF's asset quality to continue to be under pressure in 2016 due challenging economic conditions such as higher interest rates and low commodity prices.

DEBT RATINGS
The bonds are rated at the same level as the issuer's National Ratings.

RATING SENSITIVITIES

NATIONAL RATINGS
Any weakening in the linkages between SMMF and SMMA, such as a significant reduction in SMMA's ownership or intra-group business referrals, or lower likelihood of financial support from SMMA, may lead to negative rating action, although Fitch considers this prospect to be remote in the foreseeable future.

A significant expansion in SMMF's role in helping its bank affiliate to provide comprehensive retail banking, which may strengthen SMMA's franchise, might have a positive impact on SMMF's ratings.

DEBT RATINGS
Any changes in the issuer's National Ratings would affect the issue rating.