Capital markets executive summary | Fri 7 Jul 2023

Capital markets executive summary | Fri 7 Jul 2023

Leader Energy to list on Main Market

The company will offer 1b shares or 28.2% of its enlarged shares. 923.5m shares will be offered to institutions and 76.5m for retail investors. The institutional offering involves the placement of 673.5m shares to institutional and selected investors via public issue, and an offer for sale of 250m existing shares via private placement. The retail offering entails the issuance of 71m shares to the Malaysian public and 5.5m shares for directors and employees. The company is an independent power producer with utility-scale power assets and commercial and industrial solar projects in Malaysia, Cambodia, Vietnam, Singapore, Indonesia, Thailand and Taiwan. The company plans to expand into solar, wind, hydro, transmission and energy storage projects. The company’s net profit grew from RM166.08m in 2020 to RM175.36m in 2021 to RM177.2m in 2022. Revenue jumped from RM545.58m in 2020 to RM679.34m in 2021 to RM910.61m in 2022. Affin and RHB are the principal advisers.

Mercedes-Benz programmes AAA ratings affirmed

RAM Ratings affirmed the ratings for Mercedes-Benz Services Malaysia Sdn Bhd’s RM3b commercial papers and medium term notes programme (2018/2025) and RM3b medium term notes programme (2018/2038). Both programmes have a combined RM3b limit and are irrevocably and unconditionally guaranteed by Mercedes-Benz Group AG. The German firm is a premium vehicle manufacturer with global market leadership and sturdy financial metrics. Unit sales volume increased 29% in 2022 as the supply chains normalise and the economy recovers. Revenue climbed 12% from EUR133.9b in 2021 to EUR150b in 2022. Pre-tax profit jumped 45.1% from EUR12.3b to EUR17.9b, boosted primarily by larger sales volume, better pricing and a favourable product mix. Mercedes-Benz Group is in a net cash position with EUR14b cash and its orderbook will last into 2H2023. Mercedes-Benz Services financed 4.1 out of 10 new passenger cars sold by Mercedes-Benz Malaysia Sdn Bhd in 2022. Its standalone credit stands on satisfactory asset quality vis-à-vis a highly leveraged balance sheet and reliance on wholesale funding. Gross impaired financing (GIF) ratio fell from 1.8% at end-2021 to 0.9% at end-2022, while GIF coverage remained robust at 136% at end-2022. Gearing was up slightly from 9.9 times at end-2021 to 10.3 times at end-2022. Mercedes-Benz’ stock closed at EUR71.42.

BNM sticks to 3% OPR

Bank Negara Malaysia kept its benchmark interest rate at 3% arguing that the monetary policy stance is slightly accommodative and remains supportive of the economy. The Monetary Policy Committee (MPC) expects limited risks of future financial imbalances. The MPC appears to accept that prices have stabilised and instead will ensure that the monetary policy is conducive towards sustainable economic growth. This is in line with economists’ predictions. BNM maintained the rates in its 1st two meetings in 2023 after 4 straight hikes in 2022 of 1%. Notwithstanding, expectations of a wider rate differential between Malaysia and the US caused the ringgit to fall to 4.6580 / 4.6630 against the greenback compared with 4.6485 / 4.6555 at the previous close. Federal Reserve Bank of Dallas President Lorie Logan’s suggestion of a gradual increase in rates underlies the hawkishness in the US.

China Construction Bank’s AA+ and MARC-1 ratings affirmed

MARC Ratings affirmed the long and short-term ratings of AA+ and MARC-1 for China Construction Bank (Malaysia) Berhad (CCBM) with a stable outlook. The long-term rating is 1 notch below the AAA rating of parent China Construction Bank Corporation. CCBM is a strategic entity of its parent, which is of systemic importance to China’s financial system. Its rating is premised on very high level of support from the Chinese government. CCBM has a high total capitalisation of 67.1% at end-9M2022, healthy liquidity and funding positions. The high total capitalisation level suggests that the bank is unable to grow its loan base. Gross loans fell from RM1.6b in 2021 to RM1.3 billion in 9M2022. The bank’s loans tend to be sizeable with the top 5 borrowers – Chinese construction companies – accounting for 54.7% of total loans. Basel III liquidity coverage ratio was 301.4% and net stable funding ratio was 230.4% at end-9M2022.

Japan’s IPOs appreciated 75% on average

Newly-listed stocks on the Tokyo Stock Exchange have risen that much making the country the best performing equity market in the world. On the 1st trading day alone, debutantes gained 51% on average. Investors are looking at Japan’s attractively low geopolitical risk. Foreign buyers are also drawn to the weak yen, reforms in corporate governance and the Bank of Japan’s loose monetary policy. The largest listings – Rakuten Bank at USD676m and SBI Sumishin Net Bank at USD421m – increased more than 30% since they set their IPO prices in Apr and Mar during the banking crisis. The other 44 new stocks raised less than USD100m each. Space aircraft developer ispace Inc soared 500% from its IPO price even though the moon landing mission failed.