(The following statement is issued by the rating agency)
KUALA LUMPUR, Nov 25 - RAM has assigned a long-term rating of A2 to EON Capital Berhad's ("EON Capital") proposed up to RM300 million Secured Fixed Rate Bonds.
All net proceeds arising from the proposed Bonds will be utilised to part-finance the acquisition of EON Bank. Based on our sensitivity analysis, EON Capital's cash flow is robust and adequate to meet the repayment of its proposed Bond issue.
EON Capital will be the holding company of EON Bank Berhad ("EON Bank"). As a Group, EON Bank has, among others, EON Finance Berhad ("EON Finance") and Malaysian International Merchant Bankers Berhad in its stable; these are collectively known as the EON Banking Group ("EBB Group").
EON Capital will be listed on the Main Board of the Kuala Lumpur Stock Exchange ("KLSE") upon the finalisation of its proposed corporate exercise, which involves the transfer of Kedah Cement Holdings Berhad's listed status to EON Capital by end-FY 2002.
As a bank holding company, the key risk EON Capital faces is the sustainability of dividends from its subsidiaries.
Nevertheless, these subsidiaries including EON Bank and EON Finance are well-managed and have exhibited profit growth over the last few years.
The Group has a strong foothold in the retail sector, especially car hire-purchase loans. In the future, we expect the entities within the Group to improve their asset quality and performance against the backdrop of a brighter economic landscape.
The EBB Group's performance has shown a positive trend in the last 3 years, culminating in a pre-tax profit of RM328.22 million in FYE 31 December 2001 ("FY 2001").
The main contributors to its profitability have been EON Finance and EON Bank. The finance company, with its strong presence in the hire-purchase of transportation vehicles, has successfully maintained its profit record in the last few years, achieving a pre-tax profit of RM212.43 million in FY 2001 (FY 2000: RM232.34 million).
The commercial bank, with its enlarged operations after the acquisition of Oriental Bank Berhad in FY 2001, attained a higher pre-tax profit of RM101.10 million in FY 2001 (FY 2000: RM86.22 million).
More importantly, EON Bank and EON Finance's asset quality is deemed strong compared to other RAM-rated commercial banks and finance companies.
Taking into account the full impact of the acquisitions at Bank level, EON Bank's gross and net non-performing loan ratios (6-month basis) stood at 9.63% and 7.79%, respectively, at end-FY 2001, while EON Finance reported respective ratios of 2.06% and 0.73%. ((Kuala Lumpur Newsroom +603 2275-6846, Fax +603 2072-6752 [email protected]))