KUALA LUMPUR: Seventy five per cent of corporates which Standard and Poor's rates in Malaysia have sufficient buffers to withstand the ringgit weakening up to RM4.50 to the dollar for a year.
Its corporate ratings director for Asia Pacific Xavier Jean said this was because these companies have a number of levers they can pull to repair their balance sheets or financial ratios if the ringgit weakens too fast.
"They can reduce capital spending, dividends or divest assets,"he said during a webcast on Ringgit Depreciation: What's The Possible Impact On Rated Malaysia Companies?
The eight companies are MISC, IOI, Petronas, Genting, Axiata, Sime Darby, Telekom Malaysia and Tenaga Nasional Bhd.
Although financial ratios will weaken because of debt growth but it will remain in broad bands.
Jean also does not expect to see negative rating action or downgrade on these companies duet to the higher reported debt.
"The companies we rate have partial hedging, whether through financial instruments or natural hedges with cash flows generated through either the US dollars or outside of Malaysia. This will mitigate the increase in reported debt ."
Except for Telekom and Tenaga Nasional, the remaining six use foreign current debt for more than 50 per cent of the total debt, he added.
The Malaysian rated corporates are also less exposed than those in Indonesia.
Another aspect is the structural credit which Jean points out that leverage levels are moderate.
"The companies we rated have conservative balance sheets and relied less aggressively on borrowings than other companies elsewhere in the region."
One of the added risks corporates fear is the timing of the depreciation of the currency and the impact on liquidity.
"But this was not the case for Malaysia as liquidity is sound and corporates have cash and are able to manage the short term requirements."
MISC and Petronas generate the revenue and cash flow in US dollars while IOI, Genting, Sime Darby also have sizeable revenues and profits from abroad denominated in foreign currencies.
In the case of Tenaga and Telekom, foreign currency debt is manageable, constituting less than 25 per cent of the total debt.
"Telekom's leverage levels are moderate while in the case of Tenaga, it can pass the higher fuel cost through tariffs."