Capital markets executive summary | Thu 20 Apr 2023

Capital markets executive summary | Thu 20 Apr 2023

Cahya Mata Sarawak’s outlook revised to positive

While RAM Ratings affirmed the company’s AA3 and P1 corporate credit ratings, the outlook was raised from stable to positive due to improving business and financial profiles. In particular, the new phosphates manufacturing division started commissioning production and would transition to commercial operations by mid-2023. This will diversify the group’s current construction-focused business profile and further strengthen its financial profile, with the segment contributing half of earnings. The group will also directly benefit from Sarawak’s construction activity. RAM Ratings suggests that a rating upgrade could happen if the phosphates division demonstrates stable operational and financial performance. On the downside, challenges in ramping up production could cause a deviation from expected earnings and result in the outlook reverting to stable. The counter closed at RM1.13.

Food Market Hub, Supplybunny and Funding Societies integrate financing into supply chain

Food Market Hub’s 3,000 food and beverage (F&B) operators will be able to purchase inventory from Supplybunny’s 800 suppliers and defer payment up to 30 days. The suppliers will receive payment from Funding Societies upon fulfilment of the orders. This enables the F&B operators and suppliers – largely small and medium sized enterprises (SME) – to better manage their cashflows. The operators can manage their working capital as they focus on growing their businesses. Malaysia’s F&B industry is projected to grow 8% in 2023 to contribute RM35.2b to the country’s gross domestic product. It grew 22% in 2022. The option to manage cashflows gives SMEs breathing room in the event of a downturn, while also being able to reinvest in marketing and improving the customer experience. The terms of the up to RM50k financing include zero collateral, 14-day processing and minimal application documentation. The companies successfully ran a pilot involving cold-chain and fresh suppliers in the last few months.

Malaysia’s ALPS Global backs South African cannabis company’s IPO

Cilo Cybin Holdings Limited is the first South African company to win the right to grow, process and package cannabis goods, and will manufacture wellness, biotechnology and medical products for ALPS Global Holdings Berhad. The company aborted an initial public offering (IPO) 5 months ago. ALPS will underwrite a Cilo Cybin special purpose acquisition company (SPAC) with ZAR54m (RM13.3m) and receive an 85% equity interest in the company. ALPS values Cilo Cybin at USD1.3b. The listing in Johannesburg is planned for mid-2023. The underwriting of the SPAC will allow the firm to list by way of introduction on the Alternative Exchange in Johannesburg. After that, the company plans a second fundraising in US dollars by tapping into ALPS’ network in Malaysia and Singapore. ALPS itself plans to list on the Nasdaq by end-2023.

China’s Huayou to build nickel ore processing plant in the Philippines

It will be the 3rd such plant in the country. Zhejiang Huayou Cobalt Co Ltd is partnering with a local mining company. The country is a major producer of nickel ore and wants to attract investments in nickel processing to boost its export value. Huayou is also in talks to build a USD5b high-pressure acid leach plant in the Philippines after signing a deal to construct the same plant in Indonesia. Preliminary works could begin as early as 2023 if it secures a local partner for the project. The country has 34 nickel mines and sends much of its raw nickel ore to China and Japan. It currently has 2 nickel ore processing plants partly owned by the country’s biggest ore producer Nickel Asia Corp.

EU passes law on deforestation-linked commodities

Imports of palm oil, cocoa, coffee, beef, soy and other products will be banned if they are connected to the destruction of the world’s forests. Companies that sell goods to the European Union (EU) must produce a due diligence statement and verifiable proof that their goods were not grown on land deforested after 2020 or risk heavy fines. The objective is to eliminate deforestation – which contributes 10% of global greenhouse gas emissions – from the supply chains of everyday items. Malaysia and Indonesia object to the law on the premise that the EU – the world’s 3rd largest importer of palm oil – would use it to block market access. Malaysian smallholders especially would be unable to provide the required proof. The new law needs the formal approval of each member state before it is enforceable. After that, large companies have 18 months to comply while small companies have 24 months.