KUALA LUMPUR: MARC Ratings has upgraded DRB-Hicom Bhd's RM3.5 billion sukuk programme rating from A+IS to AA-IS, with the outlook revised to stable from positive.
The rating agency said the upgrade reflects DRB-Hicom's improved credit profile, driven by the strong performance of its automotive operations in recent years, especially its key subsidiary, Proton Holdings Bhd.
"Improving leverage and a healthy liquidity position — both at the holding company and group levels — support the rating action," it said.
In the first half of 2024 (1H24), DRB-HICOM sold 126,088 vehicles, representing 32.3 per cent of the domestic total industry volume (TIV), highlighting its role as a major player in the local automotive market.
However, the rating agency observed a decline in its overall market share due to intense competition.
"The outstanding orders of 25,511 units as at end-June 2024 would provide earnings visibility over the near term, although TIV is expected to trend lower from the recent past in the absence of incentives for buyers.
"However, DRB-Hicom's continued ability to undertake timely launches of new models and upgrades of various marques under the group — Proton, Honda, Mitsubishi and Isuzu, among others — is expected to support sales volume," the agency adds.
MARC Ratings also observed that funding pressures from DRB-Hicom's holding company to its subsidiaries have eased in recent years, and it anticipates future expansions, including Proton's investment in its Tanjung Malim assembly facilities, to be financed at the subsidiary level.
Proton, in which DRB-Hicom holds a 50.1 per cent stake alongside China's Zhejiang Geely Holding Group, contributed half of the group's automotive sales in 1H24.
The agency said it expects Proton to support the repayment of its RM300 million redeemable convertible cumulative preference shares to the parent company moving forward.
MARC Ratings noted that Pos Malaysia's cost-reduction and income-generating initiatives are showing progress, reducing annual losses since 2022.
"The group also benefits from steady earnings from concession assets like Puspakom, Angkasapuri Media City, and the ICQS Complex in Bukit Kayu Hitam," it added.