Capital markets executive summary | Tue 8 Aug 2023

Capital markets executive summary | Tue 8 Aug 2023

Eve Energy breaks ground on Kulim lithium battery factory

The global lithium battery manufacturer held the event for its facility with an initial investment of USD422m (RM1.92b). The factory will be Eve’s 53rd and will produce cylindrical lithium-ion batteries for power tools and electric two-wheelers manufactured in Malaysia and in Southeast Asia. The construction period will be 3 years. The project supports the 12th Malaysia Plan and the National Automotive Policy 2020 towards achieving net-zero greenhouse gas emissions by 2050. The project is expected to draw in more companies to invest in Malaysia in the electric vehicle industry and its ecosystems.

Yinson signs USD230m syndicated term loan for Brazil FPSO

Yinson Production was awarded the supply, operation and maintenance of the floating production storage and offloading (FPSO) vessel Maria Quitéria by Petróleo Brasileiro SA in Feb 2022. The FPSO is for the Jubarte field as part of the Parque das Baleias Integrated Project offshore Brazil. The syndicated term loan was structured and arranged by Global Infrastructure Partners (GIP), an independent infrastructure fund manager with USD100b in assets under management. Gramercy Funds Management participated in the loan. This is the first transaction between Yinson Production and GIP, and is GIP’s first financing for an FPSO. The conversion of the FPSO in Shanghai is almost 70% completed as at Jun and is on track to hit first oil in 2H2024. The counter closed at RM2.55.

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Telekosang Hydro One’s senior sukuk and junior bonds placed on negative outlook

RAM Ratings took the rating action on the company’s AA3-rated RM470m ASEAN Green SRI senior sukuk wakalah bi al-istithmar (2019/2037) and the A2-rated RM120m ASEAN Green junior bonds (2019/2039). The company’s deteriorating liquidity position and potential breaches in the finance service reserve account (FSRA) minimum balances over the next few years follow issues with Sinohydro Corporation (M) Sdn Bhd and Power Construction Corporation of China Limited, the engineering, procurement, construction and commissioning (EPCC) contractor. The EPCC contractor owes the company liquidated damages because the 24MW Plant 1 began operations only in Feb 2023 from the scheduled Sep 2022. Meanwhile, Telekosang Hydro Two’s 16 MW plant has been delayed to Nov 2023 from Aug. If there are shortfalls in the FSRA in the next 3 years, the finance service coverage ratio will fall below the 1.65 times AA3 rating threshold, triggering a rating downgrade.

SEP Resources’ sukuk AAA rating affirmed

RAM Ratings affirmed the rating of SEP Resources (M) Sdn Bhd’s RM150m Islamic medium term notes. The sukuk’s superior credit profile and outstanding debt coverage indicators, tight cash retention features disallowing distributions to shareholders, and robust finance service coverage ratios (FSCR) underlie the rating. SEP receives cashflows from subsidiary Budaya Positif Sdn Bhd via a credit linkage in the form of Murabahah stocks. Budaya Positif has a 22.5-year concession with Universiti Malaysia Perlis for the development of student hostels in Padang Siding, Perlis, which entitles it to monthly payments. Maintenance is subcontracted to Pesona Asset Management Sdn Bhd, an SEP-related company. Prompt concession payments and healthy profit margins for the maintenance services kept the FSCRs in Dec 2022 and Jun 2023 above the minimum 1.80 times for a AAA rating. Risk of non-performance is low given the simple maintenance requirements and performance scores were 93% in 2022 and 92% in 6M2023. The sukuk are guaranteed by Pesona Metro Holdings Berhad, which owns 70% of SEP. The counter closed at 16 sen.

IHH’s Indian associate to launch IPO

Agilus Diagnostic Ltd, a subsidiary of Fortis Healthcare Ltd, will be undertaking an initial public offering (IPO) after their boards gave their approvals. The timing will be determined by the boards, taking into account prevailing market conditions and other factors including the Securities and Exchange Board of India (SEBI) regulations. IHH acquired the 31.17% equity in Fortis through a USD584m preferential allotment to Northern TK Venture Pte Ltd, a wholly-owned subsidiary of IHH. In Nov 2022, IHH was discussing with SEBI on the mandatory open offer for an additional 26% in Fortis. Subsequently, SEBI advised that the open offer could proceed after obtaining an order from the Delhi High Court. The counter closed at RM5.93.