Capital markets executive summary | Tue 19 Sep 2023

Capital markets executive summary | Tue 19 Sep 2023

Cape EMS to acquire US-based iConn

iConn Inc, an electronic manufacturing services (EMS) provider which offers virtual manufacturing, will be purchased for USD16.5m (RM76.6m). Listed in Mar, Cape EMS will privately place 10% of its share base to raise RM106.15m based on an indicative price of RM1.15 or 4.5% discount to the 5-day volume weighted average market price up to 25 Aug. The company’s balance RM133.15m from the RM155.7m IPO proceeds is earmarked for other purposes. The acquisition of iConn comes with a guarantee of USD8m aggregate profit after tax in 2024-2026. iConn is 44.6% owned by the Hidirlar Family Trust, 36.9% by Rabia Hidirlar Investment Trust and 18.5% by Low Kim Teck Henry. With the integration of iConn’s design and engineering capabilities, Cape EMS will be able to expand its range of services especially as the US is the company’s biggest export market for FY2022, growing 47.8% year-on-year. Hong Leong Investment Bank is the principal adviser and placement agent. The counter closed at RM1.14.

TIME dotCom’s AA2 sukuk rating affirmed

RAM Ratings affirmed the rating of the RM1b Islamic medium term notes programme (2017/2037). The rating reflects the company’s operational performance and financial profile. TIME focuses on high-density high-rise buildings, which offers better margins and enables it to quickly expand its customer base. Revenue and operating profit before depreciation, interest and tax kept increasing. Despite the capital-intensive business, free operating cash flow has been positive and the company maintained its net cash position since 2014. On 20 Apr 2023, TIME sold its data centre business to DigitalBridge and retained 30% in AIMS Data Centre (Thailand) Ltd and AIMS Data Centre Holding Sdn Bhd. The company will use RM1b of the sale proceeds for reinvestment. The earnings loss from the AIMS divestment will be 8% of net profit. In RAM’s stressed cashflow analysis with heavy capital expenditure and moderate revenue growth, TIME’s liquidity and credit metrics were unaffected given the cash pile. RAM sees some risk in the form of 5G on the company’s fixed broadband business. The counter closed at RM5.30.
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ITMAX wins 15-year video surveillance contract from MBJB

Southmax Sdn Bhd, a 65%-owned subsidiary of ITMAX System Bhd was awarded the contract for the provision of video surveillance services to the Johor Bahru City Council (MBJB). The 15-year contract, from Sep 2023-Sep 2038, based on service subscription is worth RM105.32m. The contract requires ITMAX to build a smart command centre and a closed-circuit camera system with artificial intelligence features. The company listed on the Main Market in Dec 2022. The counter closed at RM1.47.

Australia and India loan deals to rise

Bankers at the Asia Pacific Loan Market Association conference in Singapore expect Asian loan volumes to rebound in 2024 with deal flows in the 2 countries offsetting China’s economic slowdown. Australia closed its largest syndicated loan deal in 2023, AirTrunk’s AUD4.6b (RM14b) in Aug. India’s Adani Group is in talks to refinance USD3.5b. Loan volumes in the region ex-Japan and excluding bilaterals shrunk 26% year-on-year to USD355b so far in 2023, the 1st time annual volume falls below USD400b since the 2008 global financial crisis. Sponsor-backed merger and acquisition activity plus an end to the rate-hike cycle next year should push up loan volumes in the region by 10%, according to Deutsche Bank’s Amit Khattar.

Singtel sells 20% of data centre business to KKR

A fund managed by global investment firm Kohlberg Kravis Roberts & Co LP (KKR) will acquire the interest from Singapore Telecommunications for SGD1.1b (RM3.78b) cash, with an option to increase to 25% by 2027. The investment sets Singtel’s regional data centre business enterprise value at SGD5.5b. Singtel is looking to tap KKR’s expertise investing in global data centres and telecommunication infrastructure, whereas the investment for KKR is part of its Asia infrastructure strategy. The proceeds will be used for expansion across Asean markets including Singapore, Indonesia, Thailand and Malaysia. Singtel has 62MW existing capacity in Singapore and is building a new 58MW data centre in Tuas apart from projects in Batam and Bangkok. It will have total capacity of 155MW in 2025 scalable to 200MW. The Southeast Asia data centre market, which will grow 17% in the next 5 years versus 12% for the rest of the world, will see USD9b-USD13b investment inflows. Malaysia, Indonesia and Thailand will gain the most capacity with Johor benefitting from spill-over from Singapore’s supply constraints.