Capital markets executive summary | Fri 1 Sep 2023

Capital markets executive summary | Fri 1 Sep 2023

Ekovest plans fundraising via private placement for RTS Link project

In Jul 2022, wholly-owned Ekovest Construction Sdn Bhd accepted a RM1.98b letter of award as the engineering procurement and construction contractor from Adil Permata Sdn Bhd, the main contractor of the RM3.7b project. Adil Permata was awarded 6 packages but financial constraints held back progress of the project, which is scheduled to be operational by 1 Jan 2027. Ekovest will private place 269.58m new shares or 10% of its issued shares to raise RM117.27m for the construction cost. It will be in tranches with the 1st tranche priced at 43.5 sen or a 4.35 sen or 9.09% discount to the 5-day volume weighted average market price of 47.85 sen. The issue price for the remainder will be fixed later. RM86m of the proceeds is for the RTS Link, RM28.47m for working capital and RM2.8m for placement expenses. AmInvestment Bank is the principal adviser and placement agent and Astramina Advisory is the financial adviser. Public Investment Bank and UOB Kay Hian are joint placement agents. The exercise will be completed by 4Q2023. The counter closed at 54 sen.

Malaysia Debt Venture’s AA3 and P1 ratings affirmed

RAM Ratings affirmed MDV’s AA3 and P1 corporate credit ratings, and the ratings of its RM2b conventional and Islamic commercial papers and medium term notes programmes. MDV, which was established in 2002 as wholly-owned by the government, is highly strategic due to its role of nurturing technology firms that are underserved by commercial banks. The ratings reflect expectations of strong government support, demonstrated previously through the partial conversion of debt to equity, government guarantees and financing cost subsidy. The impairment of 2 large accounts caused the gross impaired financing (GIF) ratio to jump from 12.3% in 2021 to 21% in 2022, amidst its financing portfolio shrinking further. The company’s credit cost ratio trended higher from 1.9% in 2021 to 3.5% in 2022. GIF coverage deteriorated from 89% in 2021 to 76.3% in 2022. MDV suffered a RM18.6m pre-tax loss in 2022 from a RM7.2m pre-tax profit in 2021, given the impairments and absence of unrealised fair value gains from investments. It posted post-tax profits by reversing written down deferred tax assets following a partial exemption granted by the Ministry of Finance.
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Hong Leong ratings affirmed

RAM Ratings affirmed Hong Leong Financial Group’s AA1 and P1 ratings and the AAA and P1 financial institution ratings of Hong Leong Bank (HLBB), Hong Leong Islamic Bank (HLISB) and Hong Leong Investment Bank (HLIB). RAM assigned the same ratings to the proposed commercial papers and medium term notes programmes by HLBB and HLISB. The ratings reflect the established position in the retail and SME markets. Another positive factor is its asset quality, with gross impaired loan ratio going up slightly from 0.49% at end-Jun 2022 to 0.52% at end-Mar 2023 versus the industry’s 1.7%. Credit cost in 9M to Jun 2023 was below 10 bps. Net interest margin fell from 1.79% in FY2022 to 1.72% in 9MFY2023 as funding cost rose. Investment income, insurance earnings and improved contribution from Bank of Chengdu helped lift return on assets from 1.7% in FY2022 to 1.8% in 9MFY2023 while return on risk weighted assets inched up from 3.2% to 3.4%. Common equity tier-1 (CET-1) capital ratio increased from 11.8% at end-Jun 2022 to 11.9% at end-Mar 2023. Hong Leong Financial Group closed at RM18.22 and Hong Leong Bank at RM19.96.

Sunview plans RM39.31m private placement

The renewable energy company is proposing a private placement of 46.8m new shares to fund its engineering, procurement, construction and commissioning (EPCC) projects. The new shares represent 10% of Sunview’s issued shares and will be placed to independent investors at an issue price to be determined later. The assumed price of 84 sen is at a 9.87% discount to the 5-day volume weighted average market price of 93.2 sen. The exercise will be completed in 4Q2023. The company will continue investing in solar photovoltaic (PV) plants and increase its installed capacity to bump up recurring revenues. Wholly-owned Fabulous Sunview Sdn Bhd and Solarcity REIT Sdn Bhd were selected as solar power producers under the Corporate Green Power Programme (CGPP). Solarcity REIT is allocated an export capacity of 29.99MWac while Fabulous Sunview’s consortium with JAKS and Ann Joo is also allocated 29.99MWac. Sunview’s net profit for 1Q ended Jun 2023 increased 9.85% year-on-year from RM1.8m to RM1.99 million. Revenue surged 3-fold from RM31.5m to RM108.72m due to the construction of large-scale solar 4 (LSS4) projects. The company’s unbilled orderbook was RM472.71m at end Jun, giving financial visibility for the coming year. The counter closed at 88 sen.

Australia’s Snowy Hydro project cost surges 6-fold to AUD12b

When power prices are low, the project will pump water uphill into a dam, which will release it to generate power when prices are high. Snowy Hydro plus a 248-gigawatt pipeline of new projects will take over when 2/3 of the coal power plants retire by 2033. The project will fill gaps in intermittent wind and solar power when it is completed in late 2028. It was announced 6 years ago by a previous government and originally scheduled for completion in 2021. The initial design underestimated costs while the site’s geology slowed construction. Snowy Hydro is also replacing the fixed price contract with the Italian Webuild-led consortium for an incentivised target cost contract.