Capital markets news summary for Thu 16 Mar 2023

Capital markets news summary for Thu 16 Mar 2023

4 people arrested for Alpha Circle sukuk misappropriation

The company is the fundraising vehicle for NERS – which signed the concession to develop a foreign worker biometric system with the government on 20 Jul 2011 for a 12-year term. The board of directors on 29 Aug 2013 comprised, amongst others, a politician who was charged with several counts of bribery in Feb 2023 in relation to Jana Wibawa. The RM595m nominal value sukuk musharakah programme has a 10-year tenor and would originally mature on 31 May 2023, but the sukukholders agreed to defer the maturity to Aug 2023. The company ran into trouble because foreign worker permit applications fell during the Covid lockdowns. Funds for repayment were also allegedly diverted from the designated accounts into an account created in 2022. RHB is the facility agent while Pacific Trustees is the security trustee. The senior sukuk was downgraded by MARC to a C rating on 18 Jan 2023. The outstanding senior sukuk amounted to RM77m and outstanding junior sukuk was RM55m. Meanwhile, cash and amounts owed by the government total merely RM53m. If the company issues or renews 130,000 foreign worker permits per month from Jan-May, it will earn RM32.5m which together with the receivables and cash total RM85.75m. This may be sufficient to fully settle only the senior sukuk.

GFM Services buys developer of KL-Karak Highway RSA

The integrated facilities management and consultancy company will acquire 100% of Atmajaya Arvino Sdn Bhd (AASB) from Ahmad Nasri Abdul Gani for RM9m cash. AASB was awarded the rights by the Malaysian Highway Authority on 27 May 2022 to develop the rest and service area (RSA) at kilometre 68.7 where motorists from the East Coast Expressway and Karak-Tampin Highway pass through en route to Kuala Lumpur. Both the acquisition price and the development cost estimated at RM40m will be paid from internally generated funds. The company’s cash balance stood at RM98.9m as at 31 Dec 2022. Construction will begin in 2024 and be completed in 2026. A traffic study projects 10.3m vehicles in 2023. The company expects to earn recurring income from rental and the operations of the petrol station. GFM Services posted revenue of RM141m in 2022 up from RM124m in 2021, whereas net profit almost doubled to RM18m from RM10m. Earnings per share was 3.13 sen. The counter closed at 18.5 sen.

Eco-Shop plans IPO to raise RM800m

The company – which was founded in 2003 – sells a variety of products such as food, beverage, stationery and daily household necessities at a fixed price of RM2.40. It operates more than 200 outlets in Malaysia. Private equity firm Creador bought a stake in the company in 2019. The listing is planned as early as Sep 2023. Creador’s other investees which have been listed are Mr DIY and CTOS. Apart from Eco-Shop, dietary supplement manufacturer DXN and Johor Corporation’s plantation unit are also considering listing this year.

Abu Dhabi’s G42 buys ByteDance shares at USD220b valuation

The artificial intelligence firm controlled by Sheikh Tahnoon bin Zayed al-Nahyan – who is the UAE’s national security adviser – purchase a USD100m stake from existing investors. Shortly after, another fund bought a stake valuing ByteDance at USD225b. These valuations are at a heavy discount to the USD300b set during the share buyback programme in 2022. It is also significantly lower than the USD300b-USD400b it received in the secondary market in 2021. ByteDance’s short-form video app – TikTok – is contemplating separating from its parent to address concerns by the US government about national security risks arising from the user data of government officials falling into the hands of the Chinese government.

Ray Dalio’s warning about the US banking system

The Bridgewater Associates founder says that Silicon Valley Bank’s collapse is a canary in the coal mine. He joins other billionaires in raising the alarm on the ripple effects on venture capital and beyond. They indicated that the failure was the result of aggressive rate hikes by global central banks to manage soaring inflation. More problems will begin to surface as the debt and credit markets contract. Drawing on the past, the bubble has burst on the short-term debt cycle, and the markets are reaching a turning point where the contraction phase of the cycle runs its course. BlackRock chief executive officer Larry Fink warned that banks may need to pull back on lending to strengthen their balance sheets while regulators impose stricter capital standards. Pershing Square Capital Management founder Bill Ackman predicts more bank failures as leveraged assets face cashflow problems from higher interest rates. On a positive note, banks pulling back their facilities could reduce money supply to effectively address inflation, thereby eliminating the need for further rate hikes.