Capital markets executive summary | Wed 28 Jun 2023

Capital markets executive summary | Wed 28 Jun 2023

Creador buys 40% of Pet World

The private equity firm acquired the stake in the Malaysian pet food maker for an undisclosed sum from founding family and COPE Private Equity. Pet World International Berhad was founded in 2006 by Choy Peng Yew and has grown to become the largest local pet food producer in Malaysia with the ProDiet, ProBalance and Delizios brands. It sells products offering standard and premium formulations for cats and dogs at over 20,000 outlets in the country. In the last 3 years, the pet care segment grew at a 27% compound annual growth rate. The company is planning a Singapore initial public offering to raise USD100m (RM467m) as early as end-2023. COPE – a Malaysian shariah-compliant private equity firm – invested in Pet World since 2021 which enabled the company to set up a manufacturing plant in Shah Alam.

Pestech terminated from Gemas-JB electrified double-track project

Pestech Technology Sdn Bhd received received the notice of termination for default on 10 May from Syarikat Pembenaan Yeoh Tiong Lay Sdn Bhd (SPYTL) for its role as sub-contractor. The notice alleged the occurrence of an insolvency event, repudiation by Pestech, and breach of representations, warranties or undertakings. The fixed sub-contract price project worth RM339m was awarded in Oct 2018 to an unincorporated joint venture between Pestech and Ansaldo STS Malaysia Sdn Bhd. The total sub-contract price for Pestech’s portion is RM75m. According to Pestech, after receiving the notice, the parties tried to resolve the matter amicably but talks broke down. SPYTL tried to call on the performance bond given by Maybank. Pestech subsequently took legal action against SPYTL to stop the bank from paying. The High Court granted Pestech’s application on 13 Jun. The company had completed 70% of the project. Early this year, the company’s chairman and CEO pleaded not guilty to the charge of abetting in the misappropriation of RM10.6m. The counter closed at 18 sen, down 42% this year.

SC’s Fikra Ace will strengthen Islamic capital markets

The Securities Commission launched Fikra Ace, which sets out a structured approach in the development of Islamic fintech. Fikra Ace is an enhanced, 3-year initiative following the launch of the Islamic fintech accelerator programme, Fikra, in May 2021. Fikra Ace consists of 3 components: (1) accelerator – an Islamic solutions-focused accelerator programme; (2) circle – a networking platform to connect Islamic capital market stakeholders and the fintech industry; and (3) excel – a platform for collaborations with higher learning institutions. Companies with fintech solutions will be identified, nurtured and connected to the Islamic capital markets ecosystem. Islamic fintech will also be supported by building capacity and a talent pipeline. The Aug 2023 cohort will focus on Islamic social finance, shariah-compliant sustainable and responsible investment, and Islamic fund and wealth management. Application submissions are open until 4 Aug. Fikra Ace is organised together with Malaysia Digital Economy Corporation (MDEC) as the ecosystem and strategic partner.

MHB’s RM1b sukuk murabahah programme AA- rating affirmed

MARC Rating affirmed the rating with stable outlook. There is no outstanding amount under the programme. Malaysia Marine and Heavy Engineering Holdings Berhad has a conservative balance sheet, solid liquidity and strong competitive position as the largest domestic offshore fabricator. The 1-notch rating uplift reflects continued business support from Petronas. The rating is tempered by inconsistent contract flow, especially for the heavy engineering business, the result of tough competition from regional players. The order book rose to RM7.2b at end-Mar 2023 from a RM1.8b per year average in 2017-2021. New projects worth RM5.8b were awarded by Petronas Carigali and its joint ventures in the last 12 months. The contracts provide earnings visibility up to end-2025. The capital structure is conservative with a 0.19 times debt-to-equity ratio as at end-Mar 2023. Apart from the sukuk murabahah programme, the company has unutilised banking facilities of RM400.9m for additional liquidity. The counter closed at 52 sen.

Indera Persada’s RM280m fixed rate serial bonds AA1 rating affirmed

RAM Ratings has affirmed the rating with stable outlook. It reflects consistent and timely concession-based cash inflows from the Public Works Department (PWD). The availability charges, which are the sole source of repayments, are paid by the PWD for its RM250m Melaka training centre constructed by the company via a private finance initiative contract awarded in 2013. The projected debt service coverage ratios (DSCR) are expected to meet the minimum 1.5 times to support the rating and financial covenants. However, the stressed cashflows show a temporary fall in DSCR to 1.36 times in Sep 2023 on account of lower cash retention after paying shareholders and subordinated lenders. If monthly concession payments are timely, it can be avoided. The company still relies on advances from parent Digistar Corporation Berhad to cover residual expenses not met by concession receipts. Although there is no written undertaking from Digistar, the risk of Indera Persada’s non-performance is minimal with low monthly maintenance service charge deductions of 2% in 2022 (2021: 8% average). Digistar closed at 8 sen.