Capital markets executive summary | Fri 6 Oct 2023

Capital markets executive summary | Fri 6 Oct 2023

SunCon JV wins RM595m distribution centre contract from Daiso

Sunway Construction Group Bhd’s unincorporated joint venture with construction firm Kajima (M) Sdn Bhd signed a letter of acceptance with Daiso Malaysia Group Sdn Bhd for the design and construction of its 130k sq ft global distribution centre (GDC) warehouse in Pulau Indah, Selangor. The 34.5-month contract will have construction begin in May 2024 and be completed in May 2026. Wholly owned Sunway Construction Sdn Bhd will enter into a detailed JV agreement with Kajima with equal shareholding and Kajima as the JV’s lead. Japan-headquartered Daiso supplies household items and will be investing RM1b to turn the GDC into a global distribution hub for logistics operations to distribute Daiso’s products from Japan and China to 22 countries in Asia and the Middle East. The GDC will start operating in Jan 2027. Separately, Sunway Construction won a contract worth RM190m from K2 Strategic Infrastructure Malaysia Sdn Bhd to develop a data centre in Johor. The 14-month contract will be completed in phases with final completion in 4Q2024. The company has secured RM2.2b contracts this year. The counter closed at RM1.91.

CGS-CIMB’s commercial papers programme assigned MARC-1 preliminary rating

MARC Ratings assigned a non-bank financial institution rating of AA to CGS-CIMB Securities Sdn Bhd and the preliminary rating to its proposed RM1b commercial papers programme. The company is 75% owned by China Galaxy Securities Co Ltd (CGS), a Chinese government–owned entity. The shareholding will increase to 100% when regulatory approval is obtained. CGS is a major brokerage firm in China with asset size of RMB690.5b (RM443.3b) at end-Jun 2023. CGS-CIMB has available banking lines of RM1.4b. Moderating factors include its susceptibility to stock market volatility. The company started operating in Jul 2019 and now has 30 branches. Its market share among stockbroking firms at 11.7% of Bursa Malaysia’s total trading value at end-Jun 2023 is one of the largest. In line with its parent’s business strategy, CGS-CIMB is expanding into fund and wealth management. In 2024, the stockbroker plans to offer corporate finance after getting a licence, expand its Shariah-compliant products, and provide environmental, social and governance advisory services. In 1H2023, revenue was up 5.2% year-on-year to RM144m and pre-tax profit grew from RM27.1m in 1H2022 to RM35.1m. Margin financing continues to grow in contribution from 23.2% to 35%. Cost-to-income ratio improved from 88.3% in 2022 to 71.5% as revenue streams diversified. Capital ratio was 21.7% at end-Jun 2023. CIMB Group Holdings closed at RM5.41.
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BNM participates in Project Mandala to facilitate cross-border transactions

The Bank for International Settlements and its central bank partners launched Project Mandala to explore encoding jurisdiction-specific policy and regulatory requirements for cross-border applications such as foreign direct investment, borrowing and payments. The project’s objective is to minimise the compliance burden, a key challenge against smooth and efficient cross-border payments. The proposed “compliance-by-design” architecture will enhance the transparency of country-specific policies by automating compliance procedures and introducing real-time transaction monitoring. Quantifiable and configurable foreign exchange rules and anti-money laundering and counter financing for terrorism measures could be integrated.

Morrison-Petronas JV to get new partners for 2GW renewable energy

Singapore plans to decarbonise its energy mix but a lack of space is forcing it to import 30% of electricity or 4GW of renewable energy by 2035. In Sep, Vanda RE, the joint venture between Gurin Energy Pte Ltd and Petronas, was one of five projects that won approval from Singapore to supply 2GW of renewable energy from Indonesia. The project requires at least a 2GW solar plant and a 4.5GWh battery. Vanda is 75% owned by Gurin, a subsidiary of Infratil, which in turn is backed by Morrison & Co, a New Zealand-based fund that specialises in infrastructure development. Morrison has hired advisers to discuss with partners interested in taking up part of its 75% shareholding and with experience in the region. In Sep, Infratil said that Vanda would not require any specific financial commitment from it.

India’s Oyo Hotels in talks with Apollo to refinance after IPO delayed

The lodging-booking company is discussing with Apollo Global Management Inc to refinance a USD660m loan in an attempt to have more time to cut debt. Parent Oravel Stays is negotiating to extend the loan from the 2026 maturity to 5 years with a decision expected as early as next month. It was the 1st Indian unicorn to raise debt from foreign institutions. Oyo Hotels, whose investors include Softbank which owns 47% and Airbnb, posted its 1st ever annual profit. The IPO proceeds would have helped the company repay debt instead of seeking refinancing. It was once seen as India’s Airbnb-equivalent and valued at USD10b. It filed to raise INR84.3b in its 1st IPO attempt in 2021.