Capital markets executive summary | Thu 9 Nov 2023
Capital markets executive summary | Thu 9 Nov 2023
Panda Eco System prices IPO at 16 sen
The company will raise RM17.5m in its listing on the ACE Market on 27 Nov. The IPO entails 109.29m new shares or 16.3% of the 671.19m enlarged shares. Half of the 33.56m new shares or 5% of the enlarged shares are for the bumiputra public and half for other Malaysian public. 42.77m or 6.4% are for directors and employees, and 32.95m for selected investors via private placement. Shareholders are offering 61.81m existing shares or 9.2% of the enlarged shares. Applications close on 15 Nov. CEO Loo Chee Wee and CTO Tay Kheng Seng own 94.2% via Goldcoin Capital Sdn Bhd, which will fall to 69.6% upon listing. RM2.7m of the proceeds are for developing new solutions, RM4.5m for domestic and regional expansion, RM1.7m for recruiting customer technical service engineers, RM3m for HQ expansion, and RM5.6m for working capital and listing expenses. Net profit inched up 2.7% from RM2.67m in 1H2022 to RM2.75m in 1H2023. Revenue climbed 22% from RM8.88m to RM10.8m. M&A Securities is adviser, sponsor, underwriter and placement agent.
Potential rating upgrade for Evyap Malaysia
MARC Ratings raised Evyap Sabun Malaysia Sdn Bhd’s rating outlook from stable to positive while affirming the rating of its RM500m sukuk wakalah programme at AA-. The subsidiary of Turkiye’s Evyap with 90 years’ track record in personal care and one of the largest domestic oleochemical products manufacturers produces multi-chained fatty acids, soap noodles, glycerine, ester and bar soaps, among others, at its 380k tpa Tanjung Langsat plant. The utilisation rate for its main product, fatty acids, was 92.1%. The 16k tpa ester production recently started and has a 62.1% utilisation rate. The group has customers in more than 100 countries and intragroup sales were 26% in 1H2023. Palm oil, palm stearin and palm kernel oil price increases are passed onto customers. Natural gas price increase reduced its margin from 10.1% 3-year average to 7.3% in 1H2023. With natural gas price falling 52.9% in 3Q2023 compared to 4Q2022, the margin should revert to 10%. Cash flow from operations was RM56.2m for interest coverage at 7.3 times and debt coverage at 0.3 times. Borrowings were RM355m at end-Jun 2023 for gross debt-to-equity ratio of 0.33 times. The RM350m 210k tonne per annum oleochemical plant under construction in Medan, Indonesia and funded 30% by borrowings will start producing fatty acids, glycerine and soap noodles in 2025. The rating will be upgraded if Evyap Malaysia’s cash flow and debt metrics remain at current levels, and especially if gross leverage ratio stays under 0.50 times.
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Amanat Lebuhraya Rakyat’s AAA rating affirmed
RAM Ratings affirmed the rating of the company’s RM5.5b senior sukuk programme (2022/2044). Amanat Lebuhraya Rakyat (ALR) was set up on 13 Dec 2021 and the acquisitions of the Damansara-Puchong Expressway, KESAS, SPRINT and SMART were completed on 13 October 2022. Aggregate average daily traffic jumped 39.7% year-on-year to 898,889 vehicles in 2022, followed by a 10% increase to 965,849 in 8M2023. RAM’s stressed minimum finance service coverage ratio with cash balances is 2.25 times against the base case 2.95 times and average is 5.19 times against the base case 11.58 times. The company is non-profit and is mandated to keep tolls affordable, repay all debts and transfer the highway assets to the government expeditiously.
Sunway’s existing perpetual sukuk and treasury sukuk assigned ratings
MARC Ratings assigned a A rating to Sunway Berhad’s RM5b perpetual sukuk programme and a AA- rating to Sunway Treasury Sukuk Sdn Bhd’s RM10b Islamic medium term notes programme. The RM600m issued perpetual sukuk are classified as a financial liability under MFRS 132 because a single investor who is the majority shareholder of Sunway subscribed for the sukuk. The company plans to issue subsequent tranches to 3rd party investors in order to enjoy 50% equity credit. The rated programmes will be used to refinance the outstanding perpetual sukuk. Borrowings grew from RM9.1b in 2022 to RM9.8b at end-1H2023 for gross debt-to-equity ratio of 0.7 times. The amount will stay at RM10b-RM11b in the medium term. Gross development value for ongoing property development projects is RM10.7b, with domestic projects RM4.5b, Singapore RM6.1b and China RM0.1b. Unbilled sales were RM4.9b and take-up rate was 66% at end-Jun 2023. Construction order book was RM5.8b including the Johor data centre RM1.6b and the Johor-Singapore Rapid Transit System Link RM587m. Construction margin is 11%-15%. The counter closed at RM1.88.
US’ fiscal health tied to Fed decisions
Interest costs in fiscal year ended 30 Sep was USD879.3b on the US government’s USD26.3t debt, up from USD717.6b a year ago, and 14% of total government outlays. The figure should grow alongside yield increases on long-term Treasuries in recent months. The US fiscal path is heavily influenced by Washington’s love for debt and it has driven up bond yields, threatened the return of bond vigilantes and forced Fitch’s Aug downgrade of the US. Budget deficits of USD2t and refinancing of issuances from Mar 2020 mean more Treasury coupon auctions and T-bills outstanding. Separately, JP Morgan reported that its Foreign Attractiveness of USD HG Bonds index fell 8bps last week to 93 bps while high-grade bond yields averaged 32bps lower after comments by Fed chair Jerome Powell and other officials strengthened sentiment for an economic soft landing. Overnight net buying of investment-grade bonds last week dropped 41% and concentrated on 5-10 year tenors after a drop in government bond yields.
