Capital markets executive summary | Fri 2 Jun 2023

Capital markets executive summary | Fri 2 Jun 2023

Synergy House ended 18% below IPO price

The cross-border e-commerce seller and exporter of ready-to-assemble home furniture appears to spark a trend of disappointing market debuts after Radium Development closed 23% lower. The stock was the 3rd most actively traded with 82.38m shares changing hands. It swayed between 35 sen and 40.5 sen before ending the day at 35 sen, well below its initial public offering (IPO) price of 43 sen. Prior to listing, Apex Securities valued the stock at 50 sen based on projected earnings per share (EPS) of 5 sen for 2024 and price-earnings ratio (PER) of 10 times. TA Securities arrived at a valuation of 45 sen based on projected 2024 EPS and PER of 10 times. The PER for the company’s peers is 8-11 times. The performance on listing was not expected since the stock drew 14.02 times oversubscription. The company’s biggest markets are the UK (42.4% of revenue), the US (39.01%) and UAE (11.62%). It plans to expand its reach in the business-to-consumer market. Synergy House earned net profit of RM2.62m in 1Q ended 31 Mar 2023 or EPS of 0.62 sen. Kenanga was the principal adviser, sponsor, underwriter and placement agent.

Edotco raises USD700m syndicated loan

Edotco Investments (Labuan) Ltd signed the syndicated loan with OCBC Bank (Malaysia) Berhad as lead coordinator, mandated lead arranger (MLA) and facility agent. Other MLAs include Singapore’s DBS and MUFG Bank. The facility was structured with multi-tranche for refinancing and general corporate and investment purposes. The loan syndication followed edotco Malaysia’s maiden RM1.4b sukuk issuance in Sep 2022. OCBC was the principal adviser and sustainability structuring adviser. The company will use the proceeds from the facility to primarily fund its recent acquisition of 2,973 telecom towers from subsidiaries of PLDT Inc, the Philippines’ largest fully integrated telecommunications company. Axiata – which owns 63% of edotco – closed at RM2.80.

Cagamas raises RM3.42b

The largest issuance in a single month comprised RM943m 3-month conventional commercial papers, Islamic commercial papers and repurchase agreements, RM2.13b 1-year, 2-year, 3-year and 10-year conventional medium term notes, and SGD103m (RM350m) 1-year medium term notes. The proceeds will be used for purchasing housing loans and house financing from the domestic financial system, reflecting Cagamas’ financial intermediary role in the domestic banking system. Total funds raised to-date is RM9.76b. Cagamas has completed 6 foreign currency denominated issuances, including Singapore dollar and Hong Kong dollar, amounting to RM2.35b equivalent. The Singapore dollar-denominated bonds issued by wholly-owned Cagamas Global PLC are guaranteed by Cagamas, whereas the ringgit issuances are unsecured obligations of the company.

US Federal Reserve signals rate pause in Jun

Governor Philip Jefferson – who is nominated to be vice chair – said that the Federal Reserve would have more time to evaluate the data but it would not prevent them from raising rates later. The monthly jobs data is due today and the Federal Open Market Committee (FOMC) is scheduled to meet on 13-14 Jun. The market reacted immediately by reducing the bets for a hike from 60% previously to 35%. The FOMC has hiked rates 5 times in the last 14 months to 5%-5.25% as inflation stays above the 2% target. In the last meeting on 2-3 May, the Fed funds rate was raised by 0.25%. The decision to pause is based on the belief that the May rate increase will take time to flow through to the economy and the markets.

Debt ceiling bill passed by US Congress

The Republican-controlled House voted 314-117. The bill to suspend the USD31.4t debt ceiling until 1 Jan 2025 will go next to the Senate. It has to reach President Biden by Mon 5 Jun, the deadline when the federal government runs out of money and falls off the fiscal cliff. The bill when passed will set aside the politically risky issue until after the Nov 2024 elections. 165 Democrats plus 149 Republicans voted for the bill despite opposition from 71 hardline Republicans who demanded House Speaker Kevin McCarthy hold the line and insist on more spending cuts. Republicans however won a cap on government spending in the next 2 years, speeding up of the approval process for energy projects, claw back unused Covid funds and expand work requirements for food aid programmes.