Capital markets executive summary | Fri 16 Jun 2023

Capital markets executive summary | Fri 16 Jun 2023

F&N to invest RM1b in upstream fresh milk business

Fraser & Neave Holdings Berhad launched its upstream fresh milk business with the development of its integrated dairy farm in Gemas, Negeri Sembilan. Phase 1 will produce 100m litres of fresh milk. The 2,726-hectare farm will eventually have 20,000 milking cows and produce 200m litres of fresh milk annually for the domestic and foreign markets. The processing and packaging line is adjacent to the milking parlour. Apart from lowering the cost per litre of fresh milk, the integrated dairy farm helps with the vertical integration of F&N’s business thereby making it less dependent on imported milk for downstream production and distribution. The farm – which will also be used for feed crop farming – will be designed for sustainable farming and circular economy practices. Green technology will be used throughout its processes. F&N closed at RM25.44.

Betamek and Shenzhen Zhonghong develop advanced driver systems

Both companies signed a 1-year memorandum of understanding (MOU) to develop advanced driver assistance systems (ADAS) and automotive cockpit systems for the Asean automotive market. They will also explore electronic and digital systems for the growing electric vehicle (EV) market. The MOU will help Betamek move beyond its existing range of automotive electronics parts and accessories, and pursue opportunities in multimedia infotainment systems, digital instrument clusters and custom components. Shenzen Zhonghong specialises in digital clusters, audio, video, navigation and telematics systems, and smart cockpit solutions. The companies may sign a definitive agreement in future to form a joint entity to leverage on their respective strengths, as a marketing arm and service hub targeting the wider Asean market. Betamek closed at 48 sen.

TNB Western Energy’s AAA rating affirmed

MARC Ratings also gave the RM3.7b outstanding sukuk a stable outlook. The sukuk were issued by TNB Western Energy – a subsidiary of TNB Manjung Five Sdn Bhd – to finance the construction of the latter’s 1,000MW coal-fired power plant in Manjung, Perak. TNB Manjung Five operates the plant under a 25-year power purchase agreement with Tenaga Nasional Berhad. Commercial operations were achieved on 28 Sep 2017. The rating reflects AAA-rated TNB’s unconditional and irrevocable guarantee to fund shortfalls in the finance service account. MARC also accounted for the undertaking by TNB to maintain full ownership in TNB Manjung Five and TNB Western Energy. The plant’s unplanned outage rate (UOR) as at end-Dec 2022 was 7.88%, above the limit of 6% following extended outage during a major planned maintenance on a steam turbine causing capacity payments lower by 1.70% to RM298.8m. There were no major operational issues after that and the UOR fell to 7.23% as at end-Mar 2023. The high coal price was passed through via higher energy payments of RM1.67b against forecast of RM778.4m. Base case cash flow projections indicate minimum and average finance service coverage ratios of 1.25x and 2.05x respectively. TNB closed at RM9.11.

Boustead denies BHPetrol sale

Bloomberg had reported that the company was considering the sale of Boustead Petroleum Marketing Sdn Bhd (BHPetrol) for RM2b, and that several oil and gas companies have shown interest. In response to the report, Boustead stated that any discussions on selling BHPetrol had not been material. In addition, the company has not appointed an adviser for the transaction. It has also not acquired any shares from other shareholders of BHPetrol. Instead, the company is concentrating on the group-wide reset after the takeover by Lembaga Tabung Angkatan Tentera (LTAT) has been completed. On 12 Jun, LTAT’s offer closed with it successfully holding a total of 97.63% shareholding in Boustead. Trading will be suspended on 20 Jun ahead of de-listing. The counter closed at 86 sen.

TikTok to invest billions of dollars in Southeast Asia e-commerce business

As the US scrutinises the short video app’s security, the company which is owned by China’s ByteDance announced its plans for Southeast Asia over the next few years. The region has a population of 630m — half of which are below 30. It is one of TikTok’s biggest markets with more than 325m monthly visitors to the app. Notwithstanding, stiff competition from Shopee, Lazada and Tokopedia prevent it from becoming a major e-commerce revenue source. The investment plan calls for spending on training, advertising and supporting small vendors who want to join its e-commerce platform TikTok Shop. Content on the platform is more diversified with more users and it has graduated from advertising to allowing users to purchase goods through links during livestreaming. E-commerce transactions in the region hit almost USD100b (RM463b) in 2022 and Indonesia contributed USD52b. TikTok’s USD4.4b share – although higher than USD600m in 2021 – still lagged Shopee’s USD48b. The UK and New Zealand banned TikTok on government phones on concerns that China could use the app to harvest user data or advance its interests.