Capital markets executive summary | Wed 13 Sep 2023

Capital markets executive summary | Wed 13 Sep 2023

Cypark issues sukuk to Jakel

Cypark Renewable Energy Sdn Bhd established a RM500m perpetual sukuk musharakah programme in Jun 2020 with RM232.96m outstanding at end-Apr. The company issued the 2nd tranche of RM100m to its 22.51% shareholder, Jakel Capital Sdn Bhd, for working capital and repayment of borrowings. Jakel has committed to subscribing for a further RM165 million at a later date. The sukuk are unsecured. In the quarter ended 30 Apr 2023, the company suffered its 1st loss since listing in 2010 of RM298.48m because of RM376m one-off provision for potential liability due to delays in existing projects and impairments on outstanding receivables and intangible assets for its waste-to-energy project in Ladang Tanah Merah, Negeri Sembilan. Revenue for the quarter was RM32.21m. Cypark’s other projects include a 172 megawatt-peak (MWp) large scale solar (LSS) plant in Terengganu and 98MWp LSS2 floating plant in Kelantan both to be completed by Dec 2023. RHB Investment Bank is the principal adviser, lead arranger and lead manager. The counter closed at 80 sen.

SHC Capital’s AA- sukuk rating affirmed

MARC Ratings affirmed the rating on the company’s RM200m sukuk wakalah programme. SHC Capital is wholly-owned by Tunas Cool Energy Sdn Bhd, which is a subsidiary of Sin Heng Chan (Malaya) Berhad. Tunas owns a district cooling system plant and has been distributing chilled water for air conditioning to 4 higher learning institutions in the Pagoh Education Hub in Johor for the past 6 years through a network of underground pipes. It has a 20-year contract with Sime Darby Property Selatan Satu Sdn Bhd, whereby the ultimate obligor is the government. The take-or-pay contract guarantees minimum annual revenue of RM15.02m until 2037, thereby giving the company stable annual operating cash flow of RM7m-RM9m. The contract also has an energy cost pass-through provision. Finance service coverage ratios average 2.3 times until 2037 with a minimum of 1.9 times based on MARC’s sensitised case. Sin Heng Chan closed at 30 sen.
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Bumi Armada closes financing for Armada Sterling V FPSO

30%-owned Bumi Armada 98/2 Pte Ltd achieved financial close for the USD948m project financing facility. The proceeds were used to refinance a USD930m bridging loan. Bumi Armada 98/2 is a joint venture with Shapoorji Pallonji and owns the Armada Sterling V floating production storage offloading (FPSO) vessel. The vessel is on dry lease to SP Bumi Armada Godavari Private Ltd, which Bumi Armada owns 30% of and Shapoorji Pallonji 70%. SP Bumi Armada Godavari won a USD2.1b tender from India’s Oil and Natural Gas Corp Ltd (ONGC) for the charter hire and operations of the FPSO at the KG-DWN-98/2 block in Bay of Bengal for 9 years. The Armada Sterling V FPSO is awaiting hydrocarbons from ONGC to conduct tests for final acceptance. Damage to the field’s critical subsea infrastructure forced a delay in the 1st oil date initially scheduled for 1Q2023. Bumi Armada closed at 52 sen.

Hektar REIT buys Kolej Yayasan Saad

The real estate investment trust’s (REIT) trustee, MTrustee Bhd, entered into a conditional sale and purchase agreement with KYS College Sdn Bhd to buy Kolej Yayasan Saad in Ayer Keroh, Melaka, for RM150m cash. The 30-year lease to KYSA Education Sdn Bhd, which began on 22 June, will be novated to MTrustee. Jones Lang Wootton valued the property at RM150m using the income approach by way of investment method on 22 June 2023. Hektar REIT will finance the purchase price with borrowings, internal funds and a proposed placement of 99.76m new units or 20% of the existing issued units to 3rd party investors at 56.7 sen. From the RM56.56m placement proceeds, RM19.56m is for working capital whereas RM35m will be used for the purchase price balance to be paid within 12 months of the sale and purchase agreement becoming unconditional. Hektar REIT closed at 64 sen.

UK’s Argonaut Capital Partners shorts hydrogen

Barry Norris, the founder and chief investment officer of the London-based hedge fund is sceptical that the business models of hydrogen companies will work. The firm has shorted a few companies. Unlike solar or wind, hydrogen must be extracted first with a huge upfront cost to build the electrolyser to split water into hydrogen and oxygen. The most common and cheapest forms of production use fossil fuels. The only cost-competitive form of green hydrogen is produced with hydro and nuclear. Storage is another challenge to make it viable for moving vehicles. Since the US Inflation Reduction Act was signed into law in 2022, low-carbon hydrogen project announcements jumped by 58%, even though there is significant uncertainty on how the USD280b subsidies will work in practice.