Johannesburg, 6 Dec 2013 — Global Credit Ratings has affirmed the long term national scale and affirmed the short term national scale issuer ratings assigned to Real People Investment Holdings Limited of BBB(ZA) and A2(ZA) respectively; with the outlook accorded as Stable. Furthermore, Global Credit Ratings has assigned an initial international scale rating of BB to Real People Investment Holdings Limited; with the outlook accorded as Stable. The ratings are valid until 12/2014.
Global Credit Ratings has accorded the above credit rating(s) on Real People Investment Holdings Limited based on the following key criteria:
The ratings reflect the group’s intrinsic credit strength and are based on its growing finance and collection franchise, good risk management practices, strong business model, and also the demonstrated support from its shareholders. On the other hand, the group’s ratings are constrained by its relatively high funding concentrations, as well as its focus/exposure to the unsecured lending market/clientele.
The change in the group’s strategic focus is deemed credit neutral and should reduce the overall risk profile of its loan book through the gradual reduction and/or workout of its general purpose, unsecured loan/advances portfolio; however, such strategy is not without its share of caution.
On a simulated basis, the group continue to build capital at a rate in excess of what is being used for organic growth; this point is echoed when running the group’s historical and current balance sheet through our business scenario stress tests – though the net buffer has been thinning of late.
The group’s asset quality markers reflect the usual high levels of impairments, synonymous with the microfinance market; the combined book showed an improved position overall, while the level of provision coverage strengthen its loss absorption capacity – and that despite the ‘data noise’ absorbed from the stressed education and run-off books.
By and large, while bottom line earnings closed below expectations, the group’s long-term trend remained within acceptable norms; nonetheless, the performance must be seen in the context of a business undergoing a shift in its operations.
Positive rating movement/s: further progress in the group’s market positioning, trading performance, financial profile and portfolio collections track record (and that across the entire product pool).
Negative rating movement/s: a ratings downgrade may be triggered by credit losses materially above expectations, higher than expected liquidity gaps, less stringent credit norms and a weaker franchise.
|NATIONAL SCALE RATINGS HISTORY|
|Initial rating (Nov/2011)|
|Long term: BBB(ZA); Short term: A2(ZA)|
|Last rating (Jan/2013)|
|Long term: BBB(ZA); Short term: A2(ZA)|
|Primary Analyst||Secondary Analyst|
|Dirk Greeff||Kurt Boere|
|Sector Head: Financial Institution Ratings||Analyst|
|+27 11 784 1771||+27 11 784 1771|
|Sector Head: Corporates|
|+27 11 784 1771|
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
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SALIENT FEATURES OF ACCORDED RATINGS
GCR affirms that a.) no part of the rating was influenced by any other business activities of the credit rating agency; b.) the rating was based solely on the merits of the rated entity, security or financial instrument being rated; c.) such rating was an independent evaluation of the risks and merits of the rated entity, security or financial instrument; and d.) the validity of the rating is for a maximum of 12 months, or earlier as indicated by the applicable credit rating document.
Real People Investment Holdings Limited participated in the rating process via face-to-face management meetings, teleconferences and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible.
The credit rating/s has been disclosed to Real People Investment Holdings Limited with no contestation of the rating.
The information received from Real People Investment Holdings Limited and other reliable third parties to accord the credit rating included the latest audited annual financial statements for March 2013 (plus four years of comparative numbers), most recent year to date management accounts to September 2013, and a breakdown of facilities available and related counterparties.
The ratings above were solicited by, or on behalf of, the rated client, though GCR has not been compensated for the provision of the ratings.