Capital markets executive summary | Thu 23 Nov 2023

Capital markets executive summary | Thu 23 Nov 2023

KJTS gets Bursa approval to list on ACE Market

The company installs and manages building cooling energy systems, provides cleaning services, and repairs and maintains building mechanical and electrical elements, plumbing, drainage and sewerage, and retail outlet equipment in Malaysia, Thailand and Singapore. The company is offering 218.03m shares or 31.69% of its enlarged issued shares. 34.4m shares or 5% are for the Malaysian public, 28.3m shares or 2.18% are for directors, employees and persons who contributed. 168.63m shares or 24.51% are for institutional investors. The shareholdings of group managing director Lee Kok Choon and executive director Sheldon Wee Tah Poh will be diluted to 31.7% each. Profit after tax grew 12.84% annually from RM5.39m in FY2020 to RM6.87m in FY2022. Revenue climbed 13.15% per year from RM73.76m to RM94.44m. The company’s dividend policy is at least 20% of annual audited consolidated profit after tax. Hong Leong is the principal adviser, sponsor, sole underwriter and sole bookrunner.

Indera Persada’s MTN assigned final AA1 rating

RAM Ratings assigned the final rating to the company’s RM68m medium term notes (MTN). The preliminary rating was assigned on 9 Aug 2023. The monthly availability charges enable the projected debt service coverage ratios to stay above 1.50 times, although RAM’s sensitivity analysis indicates the need for prudent distributions to shareholders and payments to subordinated lenders. The company depends on advances from parent Digistar to cover its yearly expenses, which could affect its performance under the concession agreement. Another concern is that following a court ruling in Apr 2023 that Digistar must pay RM2.2m in commissions to the 30% minority shareholder of Indera Persada, the company made monthly payments to the shareholder until Sep 2023. Non-performance risk is low with monthly maintenance service charge deductions at 2% in 8M2023, the same as 2022. Digistar’s corporate guarantee is of little comfort because Digistar’s gearing ratio was 3.71 times and funds from operation debt coverage was 0.07 times in 9M2023. The counter closed at 6 sen.
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Manulife Holdings upgraded to AA2

RAM Ratings upgraded the company’s corporate credit rating (CCR) from AA3. This comes after RAM published the Methodology for Non-Operating Insurance Holding Companies that does not require the rating of a non-operating insurance holding company (IHC) to be notched down due to structural subordination subject to certain conditions. With Manulife Holdings Berhad (MHB) satisfying the criteria and it will remain debt-free, its rating reflects the credit profile of its primary subsidiary, Manulife Insurance Berhad (MIB). MHB supports parent Manulife Financial Corporation’s (MFC) expansion in Asia whose earnings contribution are expected to rise from 39% in 2022 to 50% by 2025. Despite an established presence in Malaysia, MIB’s market share was 2.2% at end-Jun 2023. Manulife Investment Management (M) Berhad has a 2.6% share of assets under management. The key rating factors are MIB’s capital adequacy ratio exceeding the 130% regulatory minimum and support from MFC. Pre-tax profit surged from RM2m in 1H2022 to RM42.1m in 1H2023 from stronger investment results of its life insurance segment. Weaker 2H2023 investment performance due to market volatility may be offset by lower reserve provisioning from medical plan pricing adjustments.

China’s CATL exploring dual listing in Hong Kong

Shenzhen-listed Contemporary Amperex Technology Co., Limited (CATL), the biggest manufacturer of electric vehicle batteries, is studying the potential 2nd listing in early 2024 after it paused a plan to sell USD5b global depository receipts (GDR) in Switzerland. CATL had appointed China International Capital Corp, China Securities International, Goldman Sachs and UBS earlier this year for the planned issuance. Chinese firms opted for GDR in Europe in recent years after the Shanghai-London Stock Connect cross-border listing programme was expanded to link Zurich and Frankfurt with Shanghai and Shenzhen. The Chinese government held up approvals earlier this year because the issuances were substantially taken up by Chinese investors who later converted the securities into shares in China to profit from price gaps. CATL shares have fallen 19% this year.

Singapore’s Carro to raise USD100m in pre-IPO fundraising

Carro was established in 2015 and its online platform enables consumers and dealers to buy and sell vehicles, and provides insurance and financing services. It competes against Carsome and Carousell and has since expanded into Malaysia, Indonesia, Thailand, Japan and Taiwan. The company is discussing with global and regional investors to raise funds ahead of a potential listing in the US in 18 months. The exercise could raise Carro’s valuation of over USD1b even higher. Concurrently, the company is also getting bank financing at 5% per annum to support expansion. It has raised over USD1b in debt and equity, including from Japan’s SoftBank Corp and Singapore’s sovereign wealth fund GIC. Earnings before interest, taxes, depreciation, and amortisation was over USD4m.