Capital markets executive summary | Thu 30 Nov 2023

Capital markets executive summary | Thu 30 Nov 2023

NTT Docomo joins Mitsui consortium in Edotco bidding

The Japanese mobile operator joined the consortium, which also includes JTower, in bidding for new shares in Axiata Group Bhd’s tower subsidiary for USD750m in addition to buying existing shares from Japan’s Innovation Network Corp, Khazanah and Kumpulan Wang Persaraan. The more than 50% controlling stake could be worth USD1.5b. Axiata currently owns about 62.4% of the tower unit. The Employees Provident Fund has also been discussing buying Edotco’s new shares, although it is not interested in the existing shares. Edotco, which began in 2012, has more than 54k towers in 9 Asian countries. It bought 3k towers in the Philippines from PLDT Inc last year. This could be NTT Docomo’s 1st deal in Southeast Asia since 2013. Axiata closed at RM2.30.

Orkim assigned AA- corporate credit rating

MARC Ratings assigned the rating based on the company’s position as the largest domestic vessel owner with 16 clean petroleum product (CPP) tankers and 2 liquified petroleum gas tankers or 17% market share by fleet size at Jun 2023. 7 of the 18 vessels are on 5-10 year contracts. Orkim’s utilisation rate is 90% due to relationships with Petronas and Shell since 2010. If the 9 charter contracts expiring next year are not renewed, the tankers can go on the spot market. In 2022, spot charters contributed 13% to total revenue. Orkim’s market position is secure because of barriers to entry in the fuel transportation sector including stringent health, safety, security and environment requirements set by oil majors, local regulations and licensing requirements including cabotage laws, and financing restrictions for new entrants. The 7 long-term contracts have RM843.5m in unrealised revenue at end-May 2023, thereby giving revenue visibility until 2032. Revenue increased at a 9.8% CAGR from 2018-2022. EBITDA margins were generally 45% except when it fell to 36.8% in 2021 because of covid. Prices of bunker fuel, which is the major cost, are factored in the base freight rates of the charter contracts. After financing the 5 vessels bought for RM213.6m in 2021, which pushed debt-to-equity (DE) ratio up to 1.43 times, the ratio has fallen to 1.10 times at end-Jun 2023. 7 new vessels in 2024-2026 at a cost of RM559.1m would raise debt, although they should have contracts. Minimum finance service cover ratio is 1.7 times in 2024 and average is 1.8 times in 2023-2027 in base case projections.
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Alliance Bank A1 and P1 ratings affirmed

RAM Ratings affirmed the financial institution ratings of Alliance Bank Malaysia Berhad and Alliance Islamic Bank Berhad and the ratings of their facilities. Common equity tier-1 capital ratio weakened from 14.6% at end-Mar 2022 to 13.3% at end-Jun 2023, lower than the industry’s 15%, because of loan growth and transfers from retained earnings to regulatory reserves. Provisioning reserves were 120%. Gross impaired loan (GIL) ratio surged from 1.8% to 2.6% against the industry’s 1.8% as delinquencies rose when retail and SMEs had to resume loan repayments at higher interest rates an as a large corporate account became impaired. Net interest margin was 2.67% in FY Mar 2023. Pre-tax profit gained 7% to RM887m in FY2023 due to larger interest income and smaller impairment provisions, despite a fall in investment income. Loan growth of 7.9% in FY2023 came evenly from consumer and SME banking, in contrast with the SME-led growth in the previous years. The counter closed at RM3.39.

Cambodia to announce scrapping Botum Sakor coal power project today

The USD1.5b 700MW project by the Royal Group in Koh Kong, which had been criticised for encroaching on Cambodia’s densest forest areas, is due for completion by end-2025. Cambodia will instead build an 800MW natural gas fired plant to be commissioned by 2030. The country is considering its 1st liquefied natural gas import terminal for use by the power plant. Cambodia wants to raise clean energy from 52% of total electricity generation capacity in 2022 to 70% by 2030. With Botum Sakor cancelled, the only remaining coal power project under development is 265MW in Oddar Meanchey, which has been long-delayed. Royal Group, a local conglomerate with investments in telecoms and transport, will build the gas plant.

Singapore’s Keppel to buy UK’s Aermont Capital

Keppel Capital Holdings will acquire 100% of the issued voting shares of UK-based asset manager Aermont Capital in 2 tranches at SGD1.35b (RM4.6b). In 1H2024, the company will buy 50% of Aermont for EUR356.9m. The balance will be bought for EUR575m in 1H2028. Keppel, which began as a small ship repair yard in 1968, announced in May that it plans to become a USD150b asset manager focusing on green energy by 2030, a business model similar to Canada’s Brookfield Asset Management and Australia’s Macquarie Group. The initial 50% acquisition and the eventual 100% is a step towards that ambition. The acquisition gives Keppel a foothold in Europe.