Executive summary for capital markets news | Mon 17 Apr 2023

Executive Summary for Capital Markets News | Mon 17 Apr 2023

Fajarbaru in logging agreement with Yayasan Pahang for 8,821 acres

The group’s logging and timber trading segment is one of its most profitable. It contributed profit before tax of RM19m in the last 4 quarters compared to the group’s RM14m, even though it accounted for only RM31m in revenues or 14% of the group’s RM216m. Grand Achievement Sdn Bhd (GASB) – a subsidiary of Fajarbaru Builder Group Berhad – signed 2 logging agreements with Lembaga Pemegang Amanah Yayasan Pahang as the sole and exclusive contractor for timber in 2 areas in Kuantan measuring 7,500 acres and 1,321 acres. GASB will pay a total of RM45.737m – RM39m for the 7,500-acre land and RM6.737m for the 1,321-acre land – to Yayasan Pahang. In addition, GASB will bear all deposit payments, survey and demarcation fees, licence processing fees and other payments to state authorities, and any increase in taxes, premiums and levies. The company does not require shareholders’ approval for this transaction. The agreements will have a positive effect on earnings for the financial year ending 30 Jun 2024. The counter closed at 28 sen.

MBSB gets MOF approval to acquire MIDF

Bank Negara Malaysia (BNM) has notified Malaysia Building Society Berhad (MBSB) that the Ministry of Finance (MOF) has granted approval for the proposed acquisition of Malaysian Industrial Development Finance Berhad (MIDF). On 6 Apr 2022, BNM said that it had no objections for MBSB to start negotiations with Permodalan Nasional Berhad (PNB). On 22 Apr 2022, MBSB and PNB signed an exclusivity agreement to negotiate with each other on finalising the structure, pricing, and terms and conditions to the exclusion of other parties. On 8 Jul 2022, MBSB sought a waiver from Bursa against deeming PNB and the Employees Provident Fund (EPF) – a major shareholder of MBSB – as persons connected to the transaction. On 21 Oct 2022, MBSB submitted an application to BNM to seek the approvals of BNM and MOF for the creation of a universal Islamic banking group. MBSB and PNB also signed an implementation agreement for the share sale agreement upon obtaining BNM’s and MOF’s approvals. On 10 Nov 2022, MBSB obtained the waiver from Bursa. The next step for MBSB includes seeking further regulatory and shareholders’ approvals. MBSB closed at 60 sen.

UEM Sunrise issues RM340m sukuk

The company established a perpetual Islamic medium term notes programme and a 7-year Islamic commercial papers programme with an aggregate limit of RM4b in nominal value in Jan 2022. The sukuk are structured based on the principle of murabahah via tawarruq – or third party – arrangement. Maybank and CIMB were the lead arrangers. The latest issuance in 3 tranches – 1-year tenor maturing on 15 Apr 2024, 2-year tenor maturing on 14 Apr 2025 and 5-year tenor maturing on 14 Apr 2028 – brings the total outstanding sukuk at RM1.395b. The company will use the issuance proceeds for general corporate purposes including buying land, for project development costs and refinancing of existing facilities. The company recorded a net profit of RM80.54m in 2022, turning around from 2 years of losses in 2020 of RM277.28m and in 2021 of RM213.05m. It will launch RM2.5b products in 2023 and target RM1.5b in sales. The latest sukuk issuance should strengthen the company’s cash balances last reported at RM1.02b on 31 Dec 2022. The counter closed at 28 sen.

Autocount prices IPO at 33 sen

Autocount Dotcom Berhad – which will be listed on the ACE Market on 9 May – will raise RM30.88m from a public issuance of 93.59m new shares or 17% of its enlarged 550.5m shares. The initial public offering (IPO) also entails an offer for sale of 44.04m existing shares or 8% of the enlarged shares. Malacca Securities is the principal adviser, sponsor, underwriter and placement agent. Autocount develops and distributes financial management software comprising accounting, point-of-sale and payroll. It has sold 70,000 software licenses for use by 210,000 businesses primarily in Malaysia and Singapore. In Malaysia, the company has a 13.76% market share for accounting software. The company’s revenue and net profit have grown 27% and 49% per year respectively from 2019 to 2022. The company’s financial performance in 2023 will be driven by the balance 79% of customers who have yet to upgrade to the newer software version. The issue price is at a lower price-to-earnings ratio (PER) of 13.13 times compared to 18 times at the start of the exercise as the company’s net profit grew from RM10.03m in 2021 to RM13.84m in 2022. Autocount will allocate RM17.3m or 56% of the proceeds to set up offices in Thailand, Indonesia, Vietnam and the Philippines.

Moody’s affirms Malaysia’s A3 rating and maintains stable outlook

The affirmation by Moody’s Investors Services is based on expectations that the country’s diverse economy, competitiveness and access to domestic financing will persist, thereby mitigating rising fiscal risks post-Covid, including a larger debt burden and weakened debt affordability. It also expects key economic policymaking institutions to maintain credibility and independence despite the political instability that has led to 4 changes in government since 2018, although social pressures may force policymakers to hold back reforms. Malaysia’s economic performance and resilience could potentially be improved with an influx of foreign investment in high-value industries as companies reconfigure their regional supply chains. The local and foreign currency country ceilings – which act as a cap on the ratings that can be assigned to the obligations of other entities domiciled in Malaysia – remain unchanged at Aa1 and Aa2 respectively. The 5-notch gap between the Aa1 local currency ceiling and the A3 sovereign rating is supported by policymaking institutions that remain transparent and effective despite political uncertainties, plus the country’s strong external position. The 1-notch gap between the Aa2 foreign currency ceiling and the Aa1 local currency ceiling accounts for past capital controls, although the size of domestic savings and effective policies reduce the risk of volatile capital flows and potential transfer and convertibility restrictions.