Capital markets executive summary | Fri 3 Nov 2023

Capital markets executive summary | Fri 3 Nov 2023

Plytec IPO oversubscribed 6.72 times

The construction engineering solutions provider received 3,451 applications for 233.87m shares for the public offering of 30.3m new shares. There were 1,550 applications for 89.31m shares for the bumiputra portion or 4.89 times oversubscribed. The non-bumiputra portion received 1,901 applications for 144.55m shares or 8.54 times oversubscribed. The 21.21m shares for directors and employees, 75.76m shares for private placement to bumiputra investors approved by the Ministry of Investment, Trade and Industry, and 30.3m for private placement to selected investors were fully placed out. Plytec will list on 15 Nov on the ACE Market. KAF Investment Bank is principal adviser, sponsor, managing underwriter, joint underwriter and joint placement agent.

Potential rating upgrade for DRB-Hicom

MARC Ratings affirmed the ratings and revised the outlook on the RM3.5b sukuk programme rated A+ and the RM2b perpetual sukuk musharakah programme rated A- from stable to positive. The outlook was revised due to the automotive segment’s performance. Proton Holdings Berhad continued its strong sales with domestic market share expanding from 12.3% in 2017, when the Zhejiang Geely partnership started, to 20.8% of total industry volume in 1H2023. The sport utility vehicles X70 and X50 remain the sub-segment’s key models. Proton’s had orders of 67,582 units at end-Jul 2023. Revenue almost trebled from RM3.7b in FY2017 to RM9.4b in FY2022. The company turned around from a pre-tax loss of RM890m to pre-tax profit of RM183.9m. Including other car brands, DRB-Hicom sold a total of 130,054 vehicles or 35.5% market share in 1H2023. Revenue grew 22.1% year-on-year to RM8.1b in 1H2023 while pre-tax profit jumped 22.5% to RM285.7m. Excluding Bank Muamalat, borrowings were RM7.3b, 50% at DRB-Hicom and 22% at Proton. Adjusted debt-to-equity (DE) ratio was 0.76 times and net DE was 0.53 times. The counter closed at RM1.40.
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Genting Plantations’ AA2 and P1 ratings affirmed

RAM Ratings affirmed the company’s corporate credit ratings and the AA2(s) rating of wholly-owned funding conduit Benih Restu Berhad’s RM1.5b sukuk murabahah programme (2015/2030). Despite higher crude palm oil prices in 2022, the financial performance of the plantations segment was offset by weak downstream operations. Revenue only increased 1.9% year-on-year to RM3.19b whereas operating profit before depreciation, interest and tax (OPBDIT) kept at RM1.03b. As prices fell in 1H2023, revenue shrunk 11.8% and OPBDIT by 51.7% year-on-year. OPBDIT margin narrowed from 32.2% to 23.3%. Net gearing ratio rose from 0.17 times in FY2021 to 0.19 times in 1HFY2023. Annualised funds from operations (FFO) net debt coverage halved from 1.03 times to 0.44 times. RAM’s sensitised projections show that net gearing will be 0.21 times in FY2023-FY2024 whereas FFO net debt coverage will be 0.55-0.66 times. Fresh fruit bunch production declined 1.5% year-on-year to 1.99m tonnes in 2022 due to heavier rainfall and a smaller harvesting area in Malaysia after replanting. Output should grow as its Indonesian estates progressively mature. The company is exposed to regulatory risks in Indonesia where 63% of its planted area is located and to foreign exchange risk arising from US dollar-denominated borrowings accounting for 46% of total debt at end-Jun 2023. The counter closed at RM5.39.

Mitsui invests USD58m more in Axiata unit

Japan-based Mitsui & Co Ltd is raising its interest in Axiata Digital Services Sdn Bhd (ADS), Axiata Group Bhd’s subsidiary, from 3.29% to 20%. The additional investment gives Mitsui an effective interest of 12.69% in Axiata Digital & Analytics Sdn Bhd (ADA), Asia’s largest independent data and AI company, and values it at USD550m. After the initial investment in 2019, Mitsui has been working closely with ADS and ADA to deliver data and AI solutions to partners and clients in the Asia-Pacific region. Other ADA shareholders, such as Softbank and Sumitomo, have also provided support to ADA. Axiata closed at RM2.29.

SoftBank in Japan’s first listing of bond-type shares

The Japanese technology investment firm completed the listing on the Tokyo Stock Exchange and raised JPY120b (RM3.7b). The proceeds are for its medium-term plans, including building a large language model in 2024. The shares are classified as equity in accounting terms, although dividends are set at 2.5% and the shares can be redeemed by SoftBank after 5 years. There was robust demand from institutional investors too despite the offering being targeted at retail investors. Unlike corporate bonds, the shares are publicly listed and purchase through the tax-efficient Nippon Individual Savings Account appeals to individuals. The product promotes the transition from savings to investment amidst rising interest rates and with traditional bank deposits becoming less attractive.