Capital markets executive summary | Mon 9 Oct 2023

Capital markets executive summary | Mon 9 Oct 2023

Minox International Group IPO oversubscribed 143.76 times

The stainless steel sanitary valves, tubes and fittings distributor is raising RM22.5m by issuing 90m new shares at 25 sen. It received 15,818 applications for 2.605b shares for 18m new shares for the Malaysian public. The bumiputra portion received 8,849 applications for 1.145b shares or 126.29 times oversubscribed. The non-bumiputra portion received 6,969 applications for 1.469b shares or 161.22 times oversubscribed. The 10.8m shares for directors and employees were fully subscribed. The company fully placed out 45m shares to bumiputra investors approved by the Ministry of Investment, Trade and Industry and 16.2m shares to selected investors. The 18m existing shares offered for sale were fully taken up. Minox, which will list on 17 Oct, serves the food and beverage, pharmaceutical and semiconductor industries, with offices in Malaysia, Indonesia, Singapore and Thailand. M&A Securities is advising.

AEON’s issue rating outlook raised from stable to positive

RAM Ratings revised the outlook on the AA2 rating of AEON Co (M) Bhd’s RM1b Islamic commercial papers / Islamic medium term notes programme (2016/2031). Rapid deleveraging in the past 2 years strengthened the company’s credit metrics. In FY2022, revenue grew 14.1% year-on-year while operating profit before depreciation, interest and tax (OPBDIT) gained 2.7%. The retail and property management segments performed better due to improved operating conditions and mall occupancy rates. In 1HFY2023, revenue rose 2% because of occupancy and rental rate improvements. Mall rejuvenation exercises, digitalising operations, online presence and in-house products should bump up retail sales and retain mall tenants. Mall expansions will also drive future growth and keep AEON as Malaysia’s largest mall owner and leading retail operator. At end-Jun 2023, total borrowings excluding lease liabilities fell to RM458.9m, half of pre-2021 levels. Adjusted debt to OPBDIT was down from 2.38 times at end-Dec 2022 to 2.31 times. Funds from operations debt coverage inched up from 0.38 times to 0.39 times. In RAM’s sensitised financial projections, adjusted debt to OPBDIT should be 2.4-2.5 times while funds from operations debt coverage should be 0.4-0.42 times for the next 3 years. Despite AEON being its Japan-based parent’s largest revenue contributor in Southeast Asia, RAM sees the company to be independent due to its stronger financial profile. The counter closed at RM1.11.
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KLK and Batu Kawan AA1 ratings affirmed and removed from negative watch

RAM Ratings reinstated the outlook on the issue ratings of Kuala Lumpur Kepong Berhad’s (KLK) and Batu Kawan Berhad’s sukuk programmes to stable. KLK accounts for 90% of Batu Kawan’s earnings making their credit profiles closely linked. The removal comes after KLK’s strategic collaboration agreement with Boustead Holdings Berhad and Lembaga Tabung Angkatan Tentera (LTAT) was terminated. The agreement would have made KLK a 65% shareholder of Boustead Plantations Berhad through a leveraged buyout resulting in KLK’s debt level increasing substantially. The negative rating watch on 1 Sep 2023 emerged because of concerns over KLK’s projected weaker financial metrics. KLK closed at RM21.40 whereas Batu Kawan closed at RM20.30.

UMW sells 26% of industrial equipment unit to Toyota Industries for RM260m

Wholly-owned UMW Equipment Division Sdn Bhd signed a share sale and purchase agreement to sell the shares of UMW Toyota Material Handling Sdn Bhd (UTMH) and a shareholders agreement with Toyota Industries Co to collaborate in the industrial equipment business in Malaysia, Singapore, Vietnam and China. UMW, which will retain 74%, set up UTMH as the special purpose vehicle (SPV) and injected 6 business units with original investment cost of RM643.08m. The sale will be completed by end-2023. The company will record a gain on disposal of RM85.5m or 7.32 sen per share. The sale proceeds will be used for working capital, future investments, capital expenditure and repayment of borrowings. UMW closed at RM4.72, up 36% this year.

Exxon almost finalising USD60b acquisition of Pioneer Natural Resources

This will be Exxon Mobil Corp’s largest takeover since merging with Mobil Corp in 1999. The parties could come to an agreement this week. Pioneer closed at USD237.43 for a market capitalisation of USD55.35b. The deal will combine 2 of the largest landholders in the Permian Basin of Texas and New Mexico, the most productive area for US shale, and turn Exxon into the oil field’s biggest producer with a 1.2m barrels a day output.