Capital markets executive summary | Tue 27 Jun 2023

Capital markets executive summary | Tue 27 Jun 2023

Algeria supreme court dismisses Malakoff’s appeal

The legal proceedings against Almiyah Attilemcania SPA (AAS) – in which Malakoff has a 35.7% indirect effective interest – was for a breach in 2014 of foreign exchange regulations on USD26.99m transactions relating to the sea water desalination plant in Tlemcen. In Nov 2018, AAS and Tlemcen Desalination Investment Company SAS (TDIC) – 70% subsidiary of Malakoff – received a notice from Sonatrach SPA – the national oil company – and L’Algerienne Des Eaux – the national public water company – to terminate the water purchase agreement signed on 9 Dec 2007. In 2019, Malakoff appointed international arbitration lawyers in Paris and Kuala Lumpur to challenge the claims in relation to the termination. The Court of Appeal upheld the lower court’s ruling in favour of the decision to impose a penalty of DZD3.9b (RM130m). The matter was brought to the supreme court in 2018, which in turn upheld the decision of the Court of Appeal. AAS’ solicitors said that the penalty will not be enforced until the appeals have been exhausted. The counter closed at 57.5 sen.

Petronas says that oil and gas is the new tobacco

The Glasgow Financial Alliance for Net-Zero (GFANZ) was formed during the COP26 climate conference in Glasgow as the world’s largest coalition of financial institutions committed to net-zero greenhouse gas emissions. Although it pledged USD130t (RM608t) assets under management for climate change projects in 2021, there was hardly any disbursement. When Petronas engaged the capital markets for financing, financial institutions avoided oil and gas including carbon capture projects. The adoption of international sustainability standards or accounting rules for emission disclosures will allow the capital markets to better assess oil and gas companies and new projects. World Business Council for Sustainable Development (WBCSD) president suggested embracing the voluntary standards published by the International Sustainability Standards Board (ISSB) yesterday. ISSB is part of the International Financial Reporting Standards (IFRS) foundation which writes global accounting rules.

KIP REIT’s RM210m Class A notes AAA rating affirmed

RAM Ratings has affirmed the rating of the medium term notes (MTN) issued out of KIP REIT Capital Sdn Bhd’s RM2b perpetual MTN programme. The collateral consists of KIPMall Tampoi, KIPMall Masai, KIPMall Bangi and AEON Mall Kinta City. The properties have diversified tenant bases, seasoned lease profiles and exposure to essential trade services which give them resilience. In addition, the issuance benefits from the diversified portfolio, strong structure, cash flow governance and liquidity position. The post-covid net operating cashflows rebounded 2 years earlier than anticipated. The master tenancy for Aeon Mall Kinta City which contributes 35% of net operating cashflows and value exposes the company to renewal risk because it expires in Sep 2025. With the adjusted valuation of RM570.82m (market value as at 30 Jun 2022 of RM679m), the Class A notes’ loan-to-value ratio is 36.79% and stressed debt service coverage ratio is 2.82 times, which supports the rating. The company also boasts high lease renewal rates of 78%-93% and post-covid rental reversion rates of 4.5%-6.1%. The average occupancy rate rose from 79% in FY2022 to 84% in 9MFY2023 while the average rental rate climbed from RM6.55 psf to RM6.61 psf. The counter closed at 90 sen.

JCorp prices RM1.5b sukuk

Johor Corp completed the bookbuilding on 23 Jun 2023 for the issuance from the RM2b Islamic medium term notes programme based on the shariah principle of wakalah bi al-istithmar. The programme received an unconditional and irrevocable guarantee from the Johor state government for the RM2b nominal value plus any profits accrued. Strong demand pushed the bid-to-cover ratio close to 5 times. The issuance was upsized from RM1.3b to RM1.5b with prices tightened by 15 basis points. Profit rate for the 7-year tranche is 4.45%, 10-year tranche 4.54% and 15-year tranche 4.80%. Maybank is the principal adviser, whereas Affin and Maybank are the joint lead arrangers. AmInvestment, CIMB and RHB join the 2 as joint lead managers.

Continued Singapore factory output fall points to recession

The 10.8% reduction in factory production from May 2022 is bigger than the 7.3% survey expectations. It has shrunk for the 8th consecutive month. Electronics, led by semiconductors, which contributes the bulk of export-driven manufacturing, plummeted 23%. Analysts now anticipate a contraction in 2Q2023 too after the 0.4% fall in 1Q2023, which will be a technical recession. The Singapore government had earlier maintained 0.5%-2.5% GDP growth although it projected non-oil export trade to experience an 8%-10% downturn.