Capital markets executive summary | Mon 23 Oct 2023

Capital markets executive summary | Mon 23 Oct 2023

Sabah state’s SMJ prices maiden RM900m sukuk

SMJ Sdn Bhd, wholly-owned by Chief Minister Incorporated of Sabah, priced the sukuk wakalah, which was issued from the company’s RM10b multi-currency sukuk wakalah programme. The sukuk have tenors of 5-15 years and profit rates of 4.23%-4.67% per annum. The order book was RM3.5b for a bid-to-cover ratio of 3.9 times. SMJ will acquire Sabah International Petroleum Sdn Bhd (SIP), which owns 10% of Petronas LNG9 Sdn Bhd that operates a liquefied natural gas plant within the Bintulu LNG Complex, and use the sukuk proceeds to refinance part of SIP’s borrowings. The cash flows from the investment allow the state government to diversify its sources of funds and optimise its capital structure in order to support its growth strategy of SMJ acquiring oil and gas assets. AmInvestment Bank is the principal adviser, lead arranger and joint lead manager. CIMB Investment Bank and Bank Pembangunan Malaysia Bhd are the joint lead managers.

International General Insurance’s AA+ rating affirmed

MARC Ratings affirmed the insurer financial strength of the Bermuda-based insurance company based on Malaysia’s national scale. Strengths are capitalisation level, reserving approach, performance and diversified underwriting portfolio. Moderating factors are the company’s moderate size and exposure to regulatory risks in different jurisdictions. International General Insurance’s (IGI) gross written premiums (GWP) jumped 21.6% year-on-year to USD373.5m in 1H2023 due to a shift towards short-tail lines, especially in energy, property and treaty reinsurance, which makes up 58.4% of GWP in 1H2023 versus 53.8% average for 2019-2022. The long-tail casualty lines were 28% of GWP. Net profit surged 68.3% year-on-year to USD74.4m in 1H2023 with lower claims and higher net earned premiums. Net combined ratio strengthened from 86.8% in 2021 to 79.5% at end-2022, against its peers’ 90%. Regulatory solvency ratio was 179%, above the Bermuda Monetary Authority’s 120% minimum. IGI’s statutory and surplus capital was USD414m. Cash and short-term deposits were USD435m or 43.9% of investment portfolio. Liquid assets-to-net technical reserves ratio was 135.3%. The fixed-income portfolio comprises internationally-rated investment-grade securities, which were 99% of the portfolio. A- rated securities or above was 69.1%, 10.9% of which was AA- and above.
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Air Selangor’s RM1b sukuk oversubscribed 3.6 times

Pengurusan Air Selangor Sdn Bhd issued its largest SRI Sukuk Kelestarian Air Selangor in 5 tranches with tenors 7-25 years. Orders totalled RM3.6b, enabling the company to upsize from RM700m to RM1b at book close. The proceeds will be used for eligible SRI projects that meet the criteria in the Air Selangor Sustainable Development Sukuk Kelestarian Framework and the sustainability guidelines and framework including water supply and water management projects in line with Air Selangor’s commitment towards the sustainability of water supply systems. The latest issuance is from the RM10b murabahah Islamic medium term notes programme set up in 2020 with Bank Islam as the principal adviser and lead arranger.

Bids close for USD1.2b SapuraOMV sale

In Nov 2018, Austria’s OMV announced investing USD975m for its share of SapuraOMV, a 50:50 joint venture with Sapura Energy Bhd, for its Asia expansion. The JV produced 30k barrels of oil equivalent per day (boepd) from its 2 Malaysian assets, SK310-B15 and SK408. It expects to treble production to 100k boepd through exploration interests in Australia, Mexico and New Zealand, and through M&A in the next 5-8 years. For Sapura Energy, the proceeds from the sale worth USD1.2b (RM5.73b) will reduce debt. Abu Dhabi’s Mubadala Investment, Japanese oil and gas explorer Inpex and Indonesian energy company Medco Energi were expected to put in bids due last week. M&A in Asia Pacific and Japan plunged 26% year-on-year to USD624.4b in 9M2023, a 10-year low. Regional deals in the energy and power sectors were down 44.9% to USD53b. Sapura Energy closed at 5.5 sen.

GCL to merge with Nasdaq-listed SPAC in USD1.2b deal

Singapore-based video game distributor Grand Centrex Ltd (GCL) signed a business combination agreement (BCA) with RF Acquisition Corp (RFAC), special purpose acquisition company (SPAC), and RF Dynamic LLC. RFAC is controlled by Malaysian Melvin Ong Xeng Thou. The company has been the exclusive distributor for 50% of the best sellers in the region including The Witcher 3, the Sonic series, Hogwarts Legacy and Cyberpunk 2077. AAA and AA game titles in Asia are projected to produce USD222.5b revenues in 2023, 57.8% of worldwide video game revenue. The number of users in Asia will reach 1.7b by 2027, 57% of global users. Single-player 1st person shooter Atomic Heart, which was launched in Feb 2023, is GCL’s 1st title as publisher for Asia. The number of units sold in Asia is half of global sales. The company wants to publish 6 or more new titles in the next year.