Capital markets executive summary | Wed 1 Nov 2023

Capital markets executive summary | Wed 1 Nov 2023

CIMB eyes Indonesia’s Bank Commonwealth

Malaysia’s number 2 bank CIMB and Japanese finance company J Trust are competing to buy PT Bank Commonwealth, a 99% subsidiary of Commonwealth Bank of Australia (CBA), in a deal that could value the bank at USD400-USD500m. Bank Commonwealth focuses on retail, wealth management and business banking for SMEs. Morgan Stanley, the financial adviser for the sale, requested that bidders submit binding offers by early Nov. Bank Commonwealth was established in 1997 as a joint venture with Bank International Indonesia, and in 2002, CBA became its controlling shareholder. The lender had IDR18.39t (USD1.1b) total assets in 2022 and posted IDR350.77b net loss, more than double the loss in 2021 due to covid. Indonesia’s economy, Southeast Asia’s largest, grew at the highest rate in 3 quarters in the Apr-Jun period but should slow afterwards. Most Australian retail banks have been divesting non-core operations to focus on their home country. CBA sold 10% of China’s Bank of Hangzhou in 2022 for AUD1.8b to the Hangzhou municipal government. CIMB closed at RM5.71.

Edotco Malaysia’s AA+ sukuk rating affirmed

MARC Ratings affirmed the rating of the RM3b sukuk wakalah programme. Positive factors are the company’s strong position in the growing domestic telco tower industry, the steady business model with predictable cash flows, and low operational and counterparty risks. From Jun 2022-Jun 2023, total towers rose by 36 from 6,081 to 6,117, while tenancies increased by 1,032 from 13,029 to 14,061. Tenancy ratio was up from 2.1 times at end-1H2022 to 2.3 times at end-1H2023. Market share expanded from 19% to 22%. The company generates more than RM400m cash flow from operations a year, enough for RM53m-RM97m capex per annum and RM160m-RM200m shareholder returns per annum over the following 5 years. Edotco Malaysia’s debt-to-equity ratio fell to 1.4 times at end-Jun 2023 after most of its short-term borrowings were paid in 2022 and its equity grew. Borrowings should continue to shrink as RM100m sukuk are repaid in 2025 and RM600m in 2027. Axiata, which owns 63% of Edotco, closed at RM2.18.
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Sarawak gets federal government approval for subsea power cable to Singapore

The state received the in principle approval to begin studies on the project linking Tondong in Sarawak to Singapore. Sarawak plans to export up to 1GW of renewable energy to Singapore via the cable that will go through Indonesian territory by 2032. According to state-owned Sarawak Energy Berhad, negotiations are at an advanced stage. The electricity, mainly hydropower, will form a quarter of Singapore’s low-carbon electricity import target by 2035. Sarawak has the advantage of abundant renewable energy resources for electric power generation. Its vast network of rivers and high rainfall enable it to sustainably generate electric power through hydroelectric dams. The 2,400MW Bakun plant which was commissioned in 2011 is the largest hydroelectric power plant in Southeast Asia.

Berjaya Land obtains USD330m syndicated financing for Four Seasons Okinawa

The company secured the syndicated loan to fund the development of the resort and private residences project in Japan from a consortium of Japanese financial institutions led by Tokyo Star Bank Ltd and co-led by Okinawa Development Finance Corporation and Bank of The Ryukus. Other participating banks include Bangkok Bank Japan, The Ogaki Kyoritsu Bank and The Aichi Bank. The gross development value of the Four Seasons Okinawa is USD1.12b and the grand opening is scheduled for 2Q2O27. Berjaya Land is also invested in the Four Seasons Hotel and Residences Kyoto. The counter closed at 28 sen.

Singapore SPAC merging with satellite internet company

Pegasus Asia, a Singapore-listed special purpose acquisition company (SPAC), could seek the SGX’ approval to merge with satellite internet provider Kacific Broadband Satellites Ltd as soon as this week in a deal that could value the combined entity at more than USD600m. The merger could include a SGD100m-SGD150m PIPE or private investment in public equity. Pegasus Asia held its initial public offering in Jan 2022 and is the first Singapore-listed SPAC with international backers, including asset manager Tikehau Capital, Bernard Arnault’s holding company, Jean Pierre Mustier formerly of UniCredit and Standard Chartered’s Diego De Giorgi. The company has a 2-year deadline to complete an acquisition. Singapore-headquartered Kacific, which was established in 2013, is building an affordable broadband network to serve remote and underserved regions, and is providing high-speed satellite internet access to 25 Pacific and Southeast Asian countries. It launched its first satellite, Kacific1, in 2019 from Cape Canaveral, Florida on a SpaceX rocket.