Capital markets executive summary | Mon 7 Aug 2023

Capital markets executive summary | Mon 7 Aug 2023

Kawan Renergy plans ACE Market listing

The engineering solutions provider and independent power producer involved in power generation and the sale of electricity had its draft prospectus published on Bursa’s website. The initial public offering (IPO) entails the issuance of 110m new shares and offer for sale of 34.5m existing shares. 27.5m new shares are for the Malaysian public, 19.25m for directors and employees, and 63.25m for bumiputra investors. The company’s main revenue contributor is the design, fabrication, installation and commissioning of industrial process equipment such as heat exchangers, pressure vessels, boilers and heaters, process plants focusing on food processing, oleochemical and chemical processing and waste recovery, and renewable energy and co-generation plants. The company’s profit after tax was RM4.43m in FY ended 31 Oct 2020, RM6.88m in FY2021 and RM14.23m in FY2022. Revenue was RM48.82m in FY2020, RM64.04m in FY2021 and RM139.18m in FY2022. The IPO proceeds will be used for the new 2MW power plant, as working capital for co-generation plant projects, to buy additional machineries, repay bank borrowings and to upgrade its 1.2MW Bercham plant. M&A Securities is the principal adviser, sponsor, underwriter and placement agent.

Gabungan AQRS’ sukuk programme MARC-1 and A ratings affirmed

MARC Ratings affirmed the ratings of the RM200m Islamic commercial papers / Islamic medium term notes programme. The ratings reflect the company’s moderate construction order book and low counterparty risk since most of its construction contracts are government-related, moderated by slow receipt of contract receivables and timely replenishment of its construction order book. At end-Apr, its RM1b construction order book comprised Gambang Residensi (35% of order book), Light Rail Transit 3 (12%), Sungai Besi-Ulu Kelang Elevated Expressway, Pusat Pentadbiran Sultan Ahmad Shah and East Coast Rail Link. The take up rate for the company’s property development project E’Island Lake Haven Residence in Puchong with RM502m gross development value (GDV) was 90% whereas The Peak in Johor Bahru with RM689m GDV was 40%. Revenue in 1Q2023 climbed 18.8% year-on-year to RM85.2m but pre-tax profit fell by 24.2% to RM5m. The company’s profits will come from the current order book and RM353.9m unbilled sales mostly from E’Island. Total borrowings were RM303.1m at end-2022 for gross finance-to-equity (FE) ratio of 0.60 times and net FE ratio 0.30 times. Revenue from completion of construction projects will be used to pay RM115m borrowings by 1H2024 thereby lowering the FE ratio to 0.35 times by end-2024. The counter closed at 29 sen.

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Government committed towards fractional share trading by year end

The plan is to reduce the current RM100 board lot size for trading on Bursa Malaysia. This will allow retail investors to access blue-chip stocks more easily. Retail investors may be able to buy 1-2 units or RM50, therefore, more investors will be able to afford buying shares. The move is expected to boost the Malaysian capital market. Individual or retail investors accounted for 28% of the total average daily trading value as at end-Jul. In 2022, retail investors opened 13,800 new accounts or 14% of the total 99,600 new accounts.

Glostrext’s IPO shares oversubscribed 174 times

The geotechnical instrumentation service provider said that 11,756 applications for 1.93b new shares were received for the bumiputra public portion or 189.11 times oversubscribed. 6,974 applications for 1.62b new shares were received for the remaining public portion for an oversubscription of 157.97 times. 10.18m new shares for directors, employees and persons who have contributed are also fully subscribed. 91.58m shares for selected investors via private placement are fully placed out. Glostrext will list on the ACE Market on 15 Aug. M&A Securities is the adviser, sponsor, underwriter and placement agent.

Sweden’s SBB considers USD3.4b IPO of its residential unit

Stockholm-based Samhallsbyggnadsbolaget i Norden AB (SBB) needs to raise funds to pay off USD8b of debt. Faced with rating downgrades, the latest was S&P’s downgrade to CCC+, the company expects a cash deficit of SEK8.1b (RM3.5b) in the next 12 months. It suffered a setback when talks with Brookfield Asset Management Ltd to sell a 51% stake in a portfolio of school buildings ended in Jul. It is now planning to spin off its entire residential business with a portfolio of SEK36.5b (RM15.7b). The timing of the listing is targeted to be 4Q2023 or 1H2024. Alternatively, SBB could bring in institutional investors for 50% of the residential portfolio while retaining the other half. Analysts are skeptical because the residentials contributed SEK3.56b of the total 1H2023 segment operating loss of SEK5.75b.