Capital markets executive summary | Thu 26 Oct 2023

Capital markets executive summary | Thu 26 Oct 2023

Capital A to issue debt and equity of USD1b

AirAsia’s parent will list some of its businesses through Nasdaq-listed Aetherium Acquisition, a special purpose acquisition company, in 2024. The deal includes a new franchise business, which extends the AirAsia brand to companies that desire starting airlines in developing countries. In Jan 2022, Aetherium raised USD115m in its initial public offering of 11.5m units. Capital A’s fundraising includes the USD150m loan from Bangkok Bank this month. On 18 Oct, Bursa Malaysia rejected AirAsia X Berhad’s (AAX) application to lift its PN17 status, which Capital A needs in order for its sale of the 4 short-haul airlines to AAX to work. The rejection foils its own regularisation plans to lift it out of its PN17 status. Separately, Capital A reported that its load factor increased from 86% to 89% after passenger volume jumped 49% from 9.88m to 14.7m in 3Q2023. The counter closed at 90 sen.

Hanwha Q CELLS’ MTN AAA(fg) rating affirmed

RAM Ratings affirmed the rating of the company’s RM150m medium term notes (2021/2024) irrevocably and unconditionally guaranteed by AAA-rated Credit Guarantee Investment Facility. Hanwha Q CELLS Malaysia Sdn Bhd (HQC) manufactures solar photovoltaic (PV) cells and modules and is wholly-owned by Hanwha Q CELLS Co Ltd (Hanwha Q CELLS), the solar division of Hanwha Solutions, a South Korean petrochemical leader. HQC is one of 4 global manufacturing and research and development units with 23% of solar production capacity. Revenue surged 49% from RM2.2b in FY2021 to RM3.2b in FY2022 following price hikes, turning around from pre-tax loss of RM219m to a pre-tax profit of RM186.2m. Despite gearing improving from 3.02 times to 1.68 times as debts shrunk from RM1.92b to RM1.68b and share capital grew, liquidity profile is weak with only RM39.1m cash against RM172.3m short-term debts. RM1.23b of debts are guaranteed by Hanwha Solution, whose credit profile is supported by its strong position in the global solar panel and South Korean petrochemical industries, its global presence and robust balance sheet. Operating profit increased 11% in 1H2023 to KRW465b. The expansion in the US and South Korea pushed up debts from KRW6.4t to KRW7.7t although gearing remained at 0.78 times. Funds from operations debt coverage (FFODC) improved from 0.18 times to 0.22 times. Further US expansion should raise gearing to 1 time in the short term whereas FFODC would fall to sub-0.2 times.
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Astro obtains RM160m term loan from AmBank

Wholly-owned subsidiary, Measat Broadcast Network Systems Sdn Bhd (MBNS), accepted the facility with clean security. The fund are for costs relating to the production, purchase and licensing of content, programme or channels, and for MBNS’ capital expenditure, including asset acquisition for broadcast and transmission, and acquisition of software and platforms. The drawdown period is 6 months from the date of the letter of offer and must be fully repaid within 48 months from the 1st drawdown. The 1st instalment begins 6 months from 1st drawdown. According to Astro, the facility will help it more efficiently manage borrowings given the competitive pricing and tenor. On 14 Aug, MBNS received a RM400m term loan from Sumitomo Mitsui Banking Corp (SMBC) primarily to refinance SMBC’s RM380m term loan granted in Aug 2018. The counter closed at 40.5 sen, down 37.69% this year.

KKR almost closing USD400m investment deal with OMS

The US-based private equity firm is in advanced discussions to buy equity interest in Malaysian subsea cable company OMS Group Sdn Bhd valuing the company at USD1b. The funds will be used for the company’s expansion plans. OMS has been installing subsea cables for the last 3 decades including the Papua New Guinea national submarine fibre cable network and the South-East Asia Japan cable system 2. It has a fleet of cable-laying and repair ships. Global investors are drawn to digital infrastructure assets including data centres, phone towers, fibre and submarine cables in Asia as digitisation bumps up demand. OMS has been considering a listing on Bursa Malaysia as soon as this year to raise USD300m. In another news, KKR completed the IPO of Kokusai Electric, a Japanese builder of tools for making semiconductors, in Tokyo’s largest listing in 5 years. The firm sold 58.8m shares for the initial offer price of JPY1,840 in the listing worth JPY108b (USD721m). KKR paid JPY260b in 2018 for the former Hitachi unit.

Hong Leong mulls sale of Southern Steel

The conglomerate is working with advisers on selling its 70% interest in the Main Market-listed company at a valuation of USD100m-USD200m, up to double the current USD76m market capitalisation. Hong Leong has approached companies in the same industry and investors in the process. Southern Steel, which started producing galvanised sheet in Penang in 1965, was listed in 1993. Hong Leong eventually built up its shareholding in the company by buying shares from others. The counter closed at 73.5 sen, up 30% from the day before.