Capital markets executive summary | Wed 29 Nov 2023

Capital markets executive summary | Wed 29 Nov 2023

CPE Tech’s IPO oversubscribed 17.69 times

The engineering support services provider, which will list on the Main Market on 7 Dec, received 12,374 applications for 627.49m new shares worth RM671.42m. For the bumiputra portion, 6,619 applications were received for 254.95m shares or an oversubscription rate of 14.19 times. For the other public portion, 5,755 applications were received for 372.55m shares or an oversubscription rate of 21.20 times. The company fully placed out the 83.92m shares for bumiputra investors approved by the Ministry of International Trade and Industry (Miti). It also fully placed out 50.35m new shares and 67.13m existing shares being offered by shareholders to institutional and selected other investors. CPE Tech will raise RM179.58m from the issuance of 167.83m new shares. The price of RM1.07 values the company at a price-earnings ratio of 23.71 times over the basic earnings per share of 4.51 sen. KAF Investment Bank is the principal adviser, underwriter and placement agent.

ACSB’s AA- sukuk rating affirmed

MARC Ratings affirmed the rating on AZRB Capital Sdn Bhd’s (ACSB) RM535m sukuk murabahah. Ahmad Zaki Resources Berhad (AZRB) subscribed for redeemable convertible preference shares (RCPS-i) issued by Peninsular Medical Sdn Bhd (PMSB) with proceeds from ACSB’s sukuk issuance. PMSB assigned the monthly availability payments (AP) and maintenance services charges (MC) totalling RM9.2m it receives from the government to ACSB. The payments are for the concession to design, build and maintain the 300-bed Sultan Ahmad Shah Medical Centre for the International Islamic University (IIUM) in Kuantan. The maintenance services are sub-contracted to Advance Pact Sdn Bhd, which has a long-term contract with the government to service 22 other public hospitals. The rating is moderated by AZRB’s weak credit profile and potential spikes in maintenance costs. The parent company is largely involved in the engineering and construction sector, and the ongoing 36.16-km East Klang Valley Expressway should be completed in Dec 2025 from the original Sep 2019 deadline. AZRB has RM3b of borrowings used for various construction projects. The company’s order book was RM967m at end-Jun 2023, although there are challenges in replenishing, which creates earnings pressure in the near term. The counter closed at 20 sen.
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Exsim Capital’s green sukuk assigned final AA3 rating

RAM Ratings assigned the final rating to the RM365m Tranche 5 to be issued from Exsim Capital Resources Berhad’s RM2b sukuk musharakah programme. The tranche was downsized from RM390m because of lower net cash flow as at end-Oct 2023. Tranche 5 will be the first ASEAN Green SRI Sukuk in the region. Future cashflow receipts relating to the sales and purchase agreements for D’Clover Residences and D’Terra Residences will be used for the remaining construction costs of the projects and to pay for the Tranche 5 and the sukuk murabahah ICP fees, expenses and obligations. The RM85m sukuk murabahah ICP are unrated and are a liquidity line for cost overruns, working capital and shortfalls in the Tranche 5 payments. The sukuk murabahah ICP will be underwritten by United Overseas Bank (Malaysia) Berhad (rated AAA and P1) and will not be guaranteed. The take up for D’Clover was 99.3% and D’Terra was 99.2% at 15 Nov 2023.

Masteel’s sukuk AAA(bg) rating affirmed

MARC Ratings affirmed the rating on Malaysia Steel Works (KL) Bhd’s RM130m sukuk ijarah programme guaranteed by AAA-rated Bank Pembangunan Malaysia Berhad. The company’s standalone credit profile considers the exposure to volatility in raw material costs and in the prices of steel billets and steel bars and the moderate domestic market share, despite its industry track record and improving operational efficiency from production technology upgrades. Revenue rose 4.5% year-on-year to RM934.3m in 1H2023 with a larger sales volume. The company’s contribution of high-tensile steel bars and prime steel billets sold in the domestic market increased from 91% in 2021 to 96% in 2022. Operating profit margin shrank from 2.6% in 2022 to 1.8% in 1H2023 as steel bar prices fell by 5.3% year-on-year to RM3,690 per tonne on average and input costs increased. Raw material prices stayed elevated in comparison with historical levels, which should keep margins depressed. Total debt grew from RM471.4m in 2022 to RM482.2m at end-Jun 2023 primarily due to bill payables for working capital. Gross debt-to-equity (DE) ratio was 0.56 times and net DE ratio was 0.44 times. Masteel’s RM100.5m cash should be enough to redeem RM50m sukuk which mature tomorrow. The counter closed at 33 sen.

China’s SenseTime accused of round-tripping

Short-seller Grizzly Research published a report which alleges the Hong Kong-listed Chinese artificial intelligence company of inflating revenue. Documents and insiders describe how the company finances other companies, and in return, they fed business to SenseTime. The stock finished 5% lower in Hong Kong, although SenseTime denied the report’s accuracy. The leader in computer vision was listed in 2021, and was among the first Chinese tech companies to obtain government approval for the roll out of its large language model services. Growth has slowed due to a US blacklist in 2019 on accusations of human rights violations in Xinjiang, which restricted access to capital and US tech components. Alibaba and SoftBank have been reducing their shareholdings in the last several months. Grizzly Research issued a report criticising electric vehicle maker Nio in 2022 and announced that it was shorting PDD Holdings Inc in Sep.