Capital markets executive summary | Thu 2 Nov 2023

Capital markets executive summary | Thu 2 Nov 2023

BPMB extends RM1b financing to highway concessionaire Lekas

Bank Pembangunan Malaysia Berhad (BPMB) granted RM1b tawarruq asset financing facilities to Lebuhraya Kajang-Seremban Sdn Bhd (Lekas) in order to restructure the company’s debt obligations to ensure the highway remains sustainable and affordable to travellers. The facility is in support of the government’s initiative to reduce the urban cost of living. BPMB, Lekas and the government had previously initiated a concession restructuring exercise that entails a reduction in tolls. The bank sees the transaction as delivering impact capital for national development and such investments in infrastructure are crucial for Malaysia’s economic growth.

INTI’s proposed bonds assigned final AAA(fg) rating

RAM Ratings assigned the final rating to INTI Universal Holdings Sdn Bhd’s proposed RM300m medium term notes programme. The enhanced rating reflects AAA-rated Credit Guarantee and Investment Facility’s irrevocable and unconditional guarantee. The company was established in 1986 and operates a university in Nilai and a college each in Subang, Penang and Sabah. The institutions offer pre-university, undergraduate and postgraduate programmes, and professional certificates. Hope Education Group (Hong Kong) Co Ltd owns 51% of INTI and Intisari Tadbir Sdn Bhd holds 49%. The bond proceeds are for operating expenditure for the campuses in Nilai, Penang and Subang. Standalone, the company has an established brand name and track record in higher education, ranking in the top 10% of public and private higher education institutions in Malaysia. Funds from operations debt coverage (FFODC) should stay robust even after the anticipated one-off RM165m issuance from the proposed programme. Moderating factors include a more aggressive financial policy with dividend payouts to shareholders resulting in projected gearing ratio to peak at more than 1.5 times. INTI also operates in a highly competitive industry, and is exposed to regulatory risks and industry disruptions.
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SPR Energy’s senior sukuk downgraded with negative outlook

RAM Ratings downgraded the company’s RM580m senior sukuk ijarah from BBB2 to B1. SPR Energy owns a 100MW combined-cycle gas turbine power plant in Kimanis, Sabah. The sukuk were placed on rating watch on 9 Jun 2023 after an unexpected flashover incident at the second gas turbine (GT2) generator, which caused it to operate at half load from 31 Mar 2023 to 25 Aug 2023. The downgrade reflects the poor cashflow buffers, primarily due to the revenue loss from the incident. The B1 rating means that SPR Energy is in a very weak position to meet sukuk obligations and has limited capacity for more operational issues. If cashflows continue to underperform, the finance service reserve account may not have the required minimum balance in Jan 2024 and in Jan 2025 leading to an event of default. At end-Dec 2022, the 5.62% rolling unscheduled outage rate breached the power purchase agreement’s 4% limit, causing available capacity payment (ACP) losses of RM8.79m or 7% of total revenue. The heat recovery steam generator leakage problem since 2018 was finally fixed in Dec 2022. The GT2 shutdown reduced available capacity to 51.91MW for Apr-Aug 2023 with forced outage rate of 22.44%. SPR Energy lost 33% of its revenue for 8M2023.

UOB Malaysia’s AAA and P1 rating affirmed

RAM Ratings affirmed the bank’s financial institution ratings. It also affirmed the AAA ratings of its senior notes under the RM8b medium term notes programme and RM5b Islamic medium term notes programme, and the AA1 ratings of its Tier-2 subordinated notes under the respective programmes. The rating reflects support from parent United Overseas Bank Limited given the bank’s significant contribution towards assets and profits outside Singapore. UOB bought Citibank Berhad’s consumer banking business, making it one of the largest credit card players in Malaysia and bumping up earnings with higher card-related fees and net interest margin. Gross impaired loan (GIL) ratio fell from 2.9% to 2.6% year-on-year at end-Jun 2023. GIL coverage was 89% against the industry’s 92%. Common equity tier-1 capital ratio weakened from 18% at end-Jun 2022 to 15.4% at end-Jun 2023 versus the industry’s 14.8%. Funding profile is supported by 38% current and savings account deposits and 54% individual deposits.

CapitaLand and Pruksa set up SGD1b healthcare-related fund

After launching the CapitaLand SEA Logistics Fund in 2022, the Singapore-based real estate company and the Thai property developer agreed to commit an initial equity investment of SGD350m to the CapitaLand Wellness Fund to invest in wellness and healthcare-related real estate. The target equity size is SGD500m with an option to upsize to SGD1b and the target asset value is SGD2.9b when fully deployed. It will take advantage of the growing ageing population and rising healthcare spending in Southeast Asia with focus initially on Singapore, Thailand and Malaysia. The target investments are single or mixed-used assets ranging from residential to hospital facilities, although there will be an allocation for opportunities in Asia Pacific.