Capital markets executive summary | Wed 2 Aug 2023

Capital markets executive summary | Wed 2 Aug 2023

KGW ends listing day with 9.52% premium

The freight services provider debuted on the ACE Market up 2 sen over its initial public offering (IPO) price of 21 sen. The most active counter with 180.39m shares changing hands hit an intraday high of 25 sen. The company was established in 2005 and is a non-vessel operating common carrier (NVOCC) providing logistics services, including ocean freight services, air freight services and freight forwarding services, and warehousing and distribution of healthcare-related products and devices. Malaysian exports to the US account for 71.8% of its revenue. It is trading at 6.94 times price-earnings (PE) ratio based on RM16.34m profit after tax for FY ended 31 Dec 2022.

Penang Port’s sukuk AA- rating affirmed

MARC Ratings affirmed the rating on the company’s RM1b Islamic medium term notes programme. Rating drivers include the company’s robust operational track record and healthy cash flows, Penang Port being a key trade gateway port in northern peninsular for container and conventional cargo, the concession agreement expiring in Mar 2055, and the expertise of parent MMC Port which runs a number of major domestic ports. These are moderated by the company’s equity base and the impact of the global economic slowdown and geopolitical events. Revenue climbed 8.3% year-on-year in 1Q2023 to RM120.2m due to higher throughput volume and the turnaround of cruise terminal operations. Pre-tax profit jumped 44% year-on-year to RM15.5m. Operating profit before interest, tax, depreciation and amortisation (OPBITDA) interest coverage was a healthy 3 times. The company’s only debt load is the RM1b sukuk, which will start to amortise from Dec 2026 with the first RM200m coming due. MMC was privatised and delisted in Dec 2021.

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Sarawak’s Infracap Resources and Aquasar Capital AAA(s) ratings affirmed

RAM Ratings affirmed the ratings of Infracap Resources’ RM15b sukuk murabahah programme (2021/2041) and Aquasar Capital’s RM1.5b sukuk murabahah programme (2014/2029). The companies are the Sarawak state government’s funding conduits for infrastructure development projects and strategic investments. Although the state government does not guarantee the sukuk, the ratings reflect Sarawak’s credit strength and the government’s commitment to meet principal and profit payments through annual budget allocations. Sarawak has large cash reserves and a proven track record of prudent financial management. The state is also politically and economically important to the federal government. Even though debts will rise to support infrastructure development and fund strategic investments in the medium term, this is balanced by a growing revenue. Sarawak’s GDP growth increased from 2.9% in 2021 to 5.5%-6.5% in 2022. GDP growth should slightly moderate to 5%-6% in 2023. The state’s revenue expanded 56% from RM7.62b in 2021 to RM11.9b in 2022, resulting in a fiscal surplus of RM1.1b (2021: RM3.7b deficit). More than 70% of the revenue came from the oil and gas sector. Revenue is expected to fall 7.3% in 2023 as commodity prices decline, but the state is still expected to record a modest fiscal surplus.

Opcom diversifies with purchase of 49% in power transmission firm

The fibre optic manufacturer entered into a conditional share sale agreement with M Saraswathy Manikum to acquire 5.39m shares or 49% equity interest in power transmission company Transgrid Ventures Sdn Bhd and its subsidiaries, Transmission Grid Ventures Sdn Bhd, Raub Energy Ventures Sdn Bhd and Transgrid Borneo Sdn Bhd, for RM98m to be paid via cash and new Opcom shares. The acquisition will offer Opcom diversification into the power generation and transmission businesses. Transgrid Ventures provides engineering, procurement, construction and commissioning services, project management services and engineering consultancy, and supply and maintenance of equipment for power transmission and distribution infrastructure. Raub Energy Ventures is expected to complete a 4MW biomass renewable energy power plant in Raub, Pahang by 4Q2023. Opcom closed at 77 sen.

China offers loan support for businesses to sustain recovery

The National Development and Reform Commission (NDRC) said that a bond credit enhancement tool that is backed by financial institutions, which was previously used to help cash-strapped property developers issue bonds, will be expanded to all qualified private companies. The NDRC notice also listed down 28 points to broaden market access, enhance financial support and commitment towards land issues, strengthening legal protections, and stamping out on negative commentary about the private sector. The NDRC is China’s top economic planning agency and the notice fleshes out policies set out by top leaders including President Xi Jinping to promote the private sector growth. Covid restrictions and regulatory crackdowns on the tech and property sectors forced companies to refrain from investing and hiring. The economy is under pressure from a property slump, falling exports and soaring youth unemployment. Policymakers are now focusing on how to rebuild confidence among private firms.

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