Capital markets executive summary | Wed 7 Jun 2023

Capital markets executive summary | Wed 7 Jun 2023

Khazanah invests in PolicyStreet

The insurance technology company was founded in 2017 and was granted the Financial Adviser and Islamic Financial Adviser licences by Bank Negara Malaysia in 2019. It offers digital and customised insurance solutions to consumers and businesses. It sees opportunities in improving Malaysia’s insurance penetration rate currently at 5.3% compared to Singapore’s 9.3% and the Organisation for Economic Co-operation and Development (OECD) at 9.4%. Khazanah led a Series B fundraising round which raised a total of USD15.3m via its Dana Impak. The investment complements its Future Malaysia Programme which supports the local start-up ecosystem of entrepreneurs, start-ups, venture capital and corporate venture programmes through collaboration with domestic and international partners. The programme injects risk capital into companies with sustainable business models that deliver socioeconomic impact to Malaysia. PolicyStreet targets to serve 2.5m gig workers and 300k small and medium-sized enterprises within 5 years.

Bursa and RAM debt fundraising platform receives SC approval in principle

On 22 Dec 2022, Bursa Malaysia and RAM Holdings Berhad signed a shareholders’ agreement (SHA) to jointly develop a debt fundraising platform. On 27 Dec, the companies formed Bursa Malaysia RAM Capital Sdn Bhd – which is owned 51% by Bursa and 49% by RAM – to operate it. The platform will facilitate listed and unlisted small to mid-sized companies in tapping into a new pool of capital outside of the traditional wholesale markets. The credit-rated investment notes issued on the platform allow investors to trade them in a transparent and regulated market. ESG-rating enables issuers to reinforce ESG credentials with investors. In the SHA, RAM will be responsible for pricing services of debt instruments. The Securities Commission (SC) issued the approval on 2 Jun for BR Capital to be a recognised market operator under the SC’s guidelines on recognised markets. Bursa closed at RM6.18.

Skyworld plans to list in 3Q2023

The property development company signed an underwriting agreement with Kenanga Investment Bank for the initial public offering (IPO) and listing on the Main Market. Skyworld will issue 208m new shares and offer for sale 192m existing shares. Of that figure, 50m shares are for the Malaysian public, 25m for eligible directors, senior management, employees and persons who have contributed to the company, 150m for MITI-approved Bumiputra investors and 175m for other institutional and selected investors. The proceeds will be used for expanding landbank, repaying bank borrowings, working capital and listing costs. Skyworld Development Berhad focuses on high-rise residential apartments in the Klang Valley with completed and on-going projects in Setapak, Taman Desa, Sentul, Setiawangsa, Bukit Jalil and Jalan Ipoh.

Bumi Armada’s FPSO Kraken shuts down

The floating production storage and offloading (FPSO) vessel is deployed in the Kraken field in the UK North Sea with EnQuest as the operator. It received final acceptance from EnQuest in Jun 2017. Bumi Armada was paid 70%-80% of the full bareboat charter (BBC) rate – USD480k per day or USD175m per year – until 1Q2020 for failing to meet the 95% uptime threshold. Since then, the FPSO has been operating well until the hydraulic submersible pump transformer issue which the company announced on 2 Jun. Most analysts expect the vessel to be out of commission for 6 months. FPSO Kraken contributed 35% of Bumi Armada’s revenue in 2022. The BBC contract ends in 2H2025 with options for 17 annual extensions. The company’s orderbook is RM11.1b with potential extension worth RM9.3b. 3 FPSO contracts will expire in 2024-2025 while 4 others expire after that. The counter plunged from 64 sen on 2 Jun to close at 48 sen.

Asia Pacific geopolitics accelerates diversification from US dollar

According to Moody’s Investors Service, sovereigns, central banks and companies may be prodded to raise funds, invest reserves and invoice merchandise trade in other currencies due to emerging geopolitical fault lines. However, the US dollar is unlikely to be knocked off the primary currency for international trade and reserves in the near future. The financial fault lines will raise the dependence on local pools of capital thereby driving the growth of local currency bonds markets and reduce exchange rate risks for issuers. Financing costs however will climb as scarce local liquidity experiences stronger demand. In general, Asia Pacific economies’ reliance on US dollar debt financing has already declined but the region still depends on the dollar for trade invoicing and reserves management. Multilateral development banks will still remain a key sources of long-term project finance, largely in US dollars.