Capital markets executive summary | Wed 23 Aug 2023

Capital markets executive summary | Wed 23 Aug 2023

Solar projects lift Solarvest’s 1Q net profit

Solarvest Holdings Bhd’s net profit jumped 56.54% from RM4.28m in 1Q ended 30 Jun 2022 to RM6.70m in 1Q ended 30 Jun 2023. Earnings per share increased from 0.6 sen to 1 sen. Revenue almost trebled from RM52.66m to RM143.39m due to larger contribution from Large Scale Solar 4 (LSS4) projects. The outlook for renewable energy (RE) in Malaysia is positive with the government targeting its capacity to grow from 40% of the country’s total energy mix to 70%. The company’s subsidiaries are part of 3 consortiums selected by the Energy Commission for the Corporate Green Power Programme (CGPP) with 90MW total generation capacity. The plants will be commissioned in 2025. Its unbilled order book was RM457m at 30 Jun, which will be progressively recognised in FY2024-FY2025. It looks to grow its order book from the 800MW CGPP projects. The company has signed corporate power purchase agreements for 83.6MW under the Powervest programme, which will contribute RM37m annual recurring revenue after completion in 12-18 months. The counter closed at RM1.29.

EKVE’s bank-guaranteed sukuk rating affirmed

RAM Ratings affirmed the AAA(bg) rating of EKVE Sdn Bhd’s RM1b guaranteed sukuk murabahah. The rating reflects the irrevocable and unconditional kafalah or guarantees from AAA-rated Maybank Islamic and Bank Pembangunan. The guarantees enhance the sukuk’s credit profile above the standalone position. EKVESB has a 50-year concession agreement with the government for the 36.16km East Klang Valley Expressway from Sungai Long in Kajang to Ukay Perdana in Ampang. The construction progress is behind schedule at 91.82% at 25 Mar 2023 against the projected 98.56%. The project missed the original Sep 2019 completion deadline due to land acquisition issues and covid lockdowns. Lack of funds is currently holding back construction, although additional debt funding is being sought by EKVESB and parent Ahmad Zaki Resources Berhad. The company expects section 1 from the Sungai Long toll to the Ampang toll to commence operations in early 2024 and the project to be fully completed by Dec 2024. The completion delays will force the company to refinance or seek more equity injection to be able to service the sukuk especially when the principal repayment begins in 2026. Ahmad Zaki closed at 23 sen.
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Sabah state’s SMJ sukuk assigned AAA rating

RAM Ratings assigned the rating to the RM10b multi-currency sukuk wakalah programme. SMJ is the wholly Sabah state-owned oil and gas company established following the Commercial Collaboration Agreement (CCA) between the state government and Petronas. The rating equates to Sabah state’s credit strength because the company is highly strategic to the state government as the designated entity responsible for managing the state’s participation in the oil and gas value chain in Sabah pursuant to the CCA. SMJ obtained favourable terms from SMJ is only investing in mature and profitable oil and gas assets including the Samarang production sharing contract, the Sabah ammonia urea plant and indirect interest in Petronas LNG9 Sdn Bhd. In the next 3 years, The company’s average annual net operating cash flow (NOCF) will be RM491m while its NOCF debt coverage ratio will be 0.3 times.

Standard Chartered Malaysia and Saadiq AAA and P1 ratings affirmed

RAM Ratings affirmed the long and short-term financial institution ratings of Standard Chartered Bank Malaysia Berhad and its Islamic banking subsidiary. The bank has strong financial support from parent Standard Chartered PLC apart from its strong funding and liquidity profile, healthy capitalisation and sound asset quality. Its common equity tier-1 capital ratio was 14.3% and loan loss coverage was 114% at end-Mar 2023. The bank’s gross impaired loan (GIL) ratio was steady at 3.8% at end-Mar 2023 down from 3.9% at end-Dec 2021, although above the industry’s 1.7%, partly due to a stricter classification policy. Pre-tax profit rose 5-fold from RM155.5m in FY2021 to RM743.4m in FY2022 as large overlay provisions were released. Net interest margin inched up from 2% to 2.2% alongside rate hikes. Return on risk-weighted assets improved from 0.5% to 2.4% to 2.6% annualised in 1Q2023 with better trading and fee incomes. Underlying the bank’s robust funding profile is its strength in cash management and transaction banking. Current and savings account balances and retail deposits were 70% and 38% respectively of total customer deposits at end-Mar 2023 in comparison with the industry’s 31% and 38%.

Thailand’s Kasikornbank to buy Home Credit Vietnam

The 2nd biggest lender in Thailand is in talks to acquire the consumer finance provider in a deal worth USD1b (RM4.6b) to push further into Vietnam. With total assets of USD119.7b, only Bangkok Bank is bigger. It hopes to become one of Vietnam’s top 20 banks by total assets by 2027. The deal takes advantage of potentially lower valuation as Vietnamese banks come under pressure from a slowing economy and trouble in the real estate sector that have driven an increase in bad loans and forced rate cuts. This transaction will be the 2nd largest merger and acquisition deal in Vietnam’s financial industry this year after the USD1.5b stake sale in Vietnam Prosperity Joint Stock Commercial Bank to Japan’s Sumitomo Mitsui in Mar.