Capital markets executive summary | Tue 12 Sep 2023

Capital markets executive summary | Tue 12 Sep 2023

Manufacturing sector sales up 2.5% for 7M2023

The sales value of the manufacturing sector inched up to RM1.03t for Jan-Jul 2023. The number of employees gained 1.7% to 2.34m, and salaries and wages expanded 3.8% to RM56.6b. Sales value per employee was up 0.8% to RM441,255. Month-on-month, manufacturing sector sales fell 3% to RM144b in Jul 2023, the 2nd straight month from -4% in Jun. Petroleum, chemical, rubber and plastic shrank 15.3% in Jul more than the 12.4% fall in Jun. Food, beverages and tobacco was down 7.8% while wood, furniture, paper products and printing contracted 0.6%. Sales value of export-oriented industries, 72.1% of total sales, kept its downtrend falling 7% in Jul against -7.4% in Jun. Coke and refined petroleum products fell 25.6%, vegetable and animal oils and fats -18.5%, and rubber products -10.8%. Conversely, domestic-oriented industries gained 9.2% in Jul versus +6.8% in Jun 2023. Motor vehicles, trailers and semi-trailers gained 22%.

Air Selangor’s sukuk AAA and P1 ratings affirmed

RAM Ratings affirmed the ratings of Pengurusan Air Selangor Sdn Bhd’s Islamic medium term notes programme and Islamic commercial papers programme with a RM10b combined limit. The company is wholly-owned by the Selangor state government and Air Selangor’s ratings are equated to the state’s. It is the sole licensee for water treatment and distribution in Selangor, Kuala Lumpur and Putrajaya. The company enjoys substantial financial flexibility from the Selangor state government, which supports via loans, grants and transfers of water infrastructure. In Aug 2022, water tariff rates increased for the 1st time since 2006 for non-domestic users and special categories bumping up revenue from RM2b in 2021 to RM2.3b in 2022. Notwithstanding, depreciation, leasing and financing costs kept the company incurring losses of RM1.3b in 2021 and RM1.1b in 2022. Full cost recovery requires frequent tariff revisions. Adjusted gearing will average 8.76 times and adjusted funds from operations debt coverage will average 0.04 times in the next 5 years. Air Selangor uses its cash reserves, operating cashflows and sukuk issuances for operations, capital expenditure, lease payments and debt servicing. The state government should provide financial support as needed. Non-revenue water improved from 28% in 2021 to 27.8% in 2022, but above the National Water Services Commission’s 27% target.
Would you like us to email you when our latest executive summary is available?

SAJ Capital’s AA- rating affirmed

MARC Ratings affirmed the rating of the company’s RM650m sukuk murabahah. SAJ Capital is wholly-owned by Ranhill Capital Sdn Bhd, which owns 80% of Ranhill SAJ Sdn Bhd. Dividends from Ranhill SAJ is the payment source for the sukuk. Ranhill SAJ is the exclusive supplier of treated water in Johor and it serves residential users (85% of customer accounts), commercial (14%) and other users (1%). The commercial segment contributes over 58% of revenue. Water consumption increased by 1.4% year-on-year to 512.2m cubic metres and revenue by 1.8% to RM1.12b in 2022. In 2023, Ranhill SAJ projects dividend payments of RM159.6m followed by RM125m annual average in 2024-2026. SAJ Capital’s finance service coverage ratio (FSCR) will average 3 times in 2023-2026. In MARC’s breakeven analysis, SAJ Capital needs a minimum of RM70m annual dividends from Ranhill SAJ to meet the 1.5 times FSCR covenant. Ranhill Utilities closed at 69 sen.

Ramsay and Sime Darby shortlist bidders for hospital sale

Australia’s Ramsay Health Care Ltd and Sime Darby Bhd invited healthcare companies and private equity firms to submit non-binding bids by end Aug. TPG Inc-backed Columbia Asia Sdn Bhd, Sunway Medical Centre, Macquarie Asset Management and PT Mitra Keluarga Karyasehat are among the suitors. The potential deal, which could fetch USD1.5b, followed a collapse in discussions with IHH Healthcare Bhd last year. Binding bids are due in Oct. Ramsay Sime Darby Health Care Sdn Bhd was founded in 2013, equally-owned by Australia’s biggest private hospital operator and Sime Darby. The company has 4 hospitals in Malaysia and 3 in Indonesia. Sime Darby closed at RM2.18.

Advanced MedTech to list in Singapore

The company makes urology and other medical equipment and provides contract manufacturing services. Its products have been supplied to more than 100 countries. The Temasek investee hired Goldman Sachs, Morgan Stanley and OCBC for the initial public offering (IPO), which could raise USD200m-USD300m, valuing it at USD1b. The listing could be as early as end 2023. It considered a US listing earlier this year after Temasek aborted a sale. Singapore’s IPO market, on track for the worst year since 2011, only had 3 new listings raising USD18.6m, down from USD348m in the same period last year.