Capital markets news summary for Wed 22 Mar 2023

Capital markets news summary for Wed 22 Mar 2023

Malakoff buys 70% of Kelantan hydroelectric plants

The company – together with wholly-owned subsidiaries Tuah Utama Sdn Bhd (TUSB) and Malakoff Technical Solutions Sdn Bhd (MTSSB) – entered into a heads of agreement with Rising Promenade Sdn Bhd (RPSB), RP Hydro (Kelantan) Sdn Bhd (RPHK) and Rising O&M Engineering Services Sdn Bhd (ROMES) for the development of the small hydropower plants, namely, Kemubu 29MW, Kuala Geris 25MW and Serasa 30MW. The deal entails TUSB acquiring 70% of the ordinary shares of RPHK and subscribing for 250m RPHK preference shares. MTTSB will purchase 70% of the ordinary shares of ROMES from RPSB. RPHK had on 23 Jun 2021 entered into 3 separate renewable energy power purchase agreements with Tenaga Nasional Berhad for a 21-year term. The project cost will be funded 80% via ASEAN Green SRI Sukuk with the remaining 20% from equity including TUSB’s subscription of the preference shares. The counter closed at 68 sen.

Scientex in JV to build affordable homes in Indonesia

The joint venture (JV) agreement sees Indonesia’s Mustika Land owning 60%, Japan’s Creed Group 20% and Scientex 20%. The JV company will develop the 40-acre Graha Mustika Tamansari township in Bekasi, Greater Jakarta. The township’s phase 1 land measuring 12 acres will be acquired from PT Graha Mustika Tamansari – Mustika Land’s subsidiary – for the development of 400 affordable homes with an estimated gross development value of RM85.5m. The project will start in 2023 and be completed in 2025. Scientex’ long-term vision is to expand into Indonesia’s property development sector. Earlier, the company’s plan to acquire 960 acres in Tebrau from SP Setia for RM518.1m was cancelled on 6 Mar due to its failure to obtain a waiver of the Bumiputra equity condition imposed by the Economic Planning Unit. The counter closed at RM3.42.

Ekuinas launches RM100m fund for mid-market Bumiputra companies

The new fund called Dana Asas aims to accelerate the growth of companies with high potential. The government-linked private equity firm will allocate RM10m-RM30m per investment in companies with proven commercial viability. Apart from funds, the firm will also help map sustainable growth and aggressive value creation plans, strengthen business fundamentals and capacity development, and improve the investees’ ability to compete effectively. Target sectors exclude construction, real estate, gambling and liquor. Ekuinas will hold the investments for 5-7 years. The first investee is Eagle Cliffe (M) Sdn Bhd, which runs a chain of 19 Kaisar Farmasi outlets in the Klang Valley. During the Ekuinas investment period, they plan to expand to 100 outlets across Malaysia. Ekuinas’ portfolio now comprises 11 companies in oil and gas, education, food and beverage, pharmaceutical and healthcare, technology, manufacturing and retail.

Lotte Chemical secures USD2.4b loan for Indonesia petrochemical project

PT Lotte Chemical Indonesia (LCI) started construction on the Lotte Indonesia New Ethylene (LINE) project in Jan 2022 and will complete it in 2025. LCI is 51% owned by Lotte Chemical Titan (LCT) and 49% by Lotte Chemical Corp (LCC). As at 6 Jan, LCT and LCC have injected USD1.6b or 40% of the USD4b project cost into LCI. LCI entered into a loan agreement with Export-Import Bank of Korea, Korea Trade Insurance Corporation and commercial banks with a 12-year term for the balance USD2.4b. LCC is the guarantor for the facility. The LINE project includes a cracker plant that will convert naphtha and liquefied petroleum gas into 1,000 kilo tonnes per annum (KTA) of ethylene and 520 KTA of propylene. Upon completion, the group’s production capacity will grow by 65% from 3,568 KTA to 5,878 KTA. The project will support the 3 existing standalone polyethylene plants in the vicinity and also help Indonesia with import substitution. The counter closed at RM1.29.

US funds fear missing out on the next rally

The financial instability brought about by the banking crisis in the US and Europe are cues to get ready for the next boom. Funds are convinced that central banks will be forced to switch back to looser monetary policy which will trigger a renewed surge in the markets. Firms which get in at the start of the rally – sometimes the first few days – benefit from the highest returns. Large investors are buying longer-dated bonds, big 2022 losers like tech stocks and selectively riskier assets such as private credit. Franklin Templeton is adding longer maturity US, UK and German government bonds. JPMorgan bought long-dated Treasuries. Invesco sees the Federal Reserve pausing in the next few months and easing later in the year, triggering an equity market rally. They anticipate tech names to react well towards lower yields, and are overweight on cyclical stocks and small-caps. Invesco also favours defensive sectors like utilities and consumer staples. John Hancock is overweight on investment-grade corporate bonds.