Capital markets executive summary | Thu 7 Dec 2023

Capital markets executive summary | Thu 7 Dec 2023

Jati Tinggi valued at 35 sen by PublicInvest

The research house’s estimate is based on 14 times price-earnings multiple to the company’s 2.5 sen earnings per share forecast for FY Nov 2024. Key growth drivers for the underground and overhead utilities engineering services provider are its main contractor position, expansion into Sabah and Sarawak, demand for electricity alongside economic and population growth and urbanisation, government initiatives supporting utilities, growth of renewable energy, and foreign and domestic investments. PublicInvest said that the company will be able to seize these opportunities because of its track record, improved project management and delivery using technology, experienced senior management, and technically competent project team. Jati Tinggi, which will list on the ACE Market on 20 Dec, will raise RM18m by issuing 66.8m new shares. The proceeds will be used for repaying bank borrowings (38.8%), working capital (40.7%) and capital expenditure (1.1%).

SC to streamline ACE-to-Main Market transfer mechanism

The Securities Commission (SC) will introduce the automatic transfer framework in Dec that will allow qualifying ACE Market companies to transfer to the Main Market from Jan 2024. The simplified and accelerated process will enable seamless transfers of listings of quality companies, which will create opportunities for foreign investors to participate in the companies. The SC is also working with Bursa Malaysia on new measures to facilitate start-up IPOs, including reducing time-to-market. It will introduce a small offering exemption in the Capital Markets and Services Act next year that will allow for offerings of a certain size to be made to sophisticated investors. This should reduce the regulatory burden in the fundraising process for start-ups and MSMEs, and provide clarity for fundraising instruments, such as agreements for equity and convertible notes, which are common in start-up funding.
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Eddie Ong buys 28.462% of Hektar REIT

The businessman, who is also a major shareholder in the Hextar group companies, KIP REIT, Classic Scenic and Perak Transit, acquired 143.9m shares of Hektar REIT. Ong bought 42.8m shares directly at 89 sen and 101.1m shares indirectly via Hextar Rubber at the same price on Mon via direct business transactions. The price was higher than Hektar REIT’s close of 63 sen on Wed, which is at a historical price-earnings ratio of 4.71 times. Ong owns 21.7% of KIP REIT whose portfolio includes AEON Mall Kinta City, and the KIP Malls in Selangor, Johor, Melaka and Negeri Sembilan. While Hektar REIT is retail-focused with its portfolio comprising Subang Parade, Mahkota Parade, Wetex Parade and Kulim Central, it plans to diversify into education and industrial. Ong said that there is no plan to merge both REITs and they will operate independently. Hektar REIT made a net profit of RM39.61m in 2019, then fell into net losses of RM24.09m in FY2020 and RM31.5m in FY2021, before turning around with a net profit of RM78m in 2022. Net income in 9MFY2023 fell 32.04% year-on-year from RM33.82m to RM23m because of higher finance costs. Net property income in 9MFY2023 declined by 5.25% from RM48.64m to RM46.09m. Revenue was down 6.24% from RM89.55m of RM83.96m.

IOI Properties buys W hotel from Tropicana

The property developer’s subsidiaries, IOI PFCC Hotel Sdn Bhd and Flora Development Sdn Bhd, signed a sale and purchase agreement with Tropicana’s subsidiary, Tropicana Residences Sdn Bhd, to acquire the 5-star hotel in Jalan Ampang for RM270m cash. Tropicana paid RM43.45m for the land in 2010 and undertook RM320.56m worth of development as at 31 Oct this year. The disposal, to be completed in 1Q2024, values W KL at a price of RM1.8m per key and Tropicana will record a net pro forma gain on disposal of RM7.41m. Tropicana will use RM164.86m to partially repay its bank borrowings and RM105m to fully repay W KL’s bank borrowings. At 30 Sep, Tropicana’s total borrowings were RM3.26b. Tropicana closed at RM1.23 while IOI Properties closed at RM1.69.

Abu Dhabi-based Neovision establishes USD250m carbon credit fund

Neovision Wealth Management’s fund, the Global Carbon Credit Development Fund, will invest in the development of carbon credits in frontier markets. The fund is the first of its kind in the Middle East and will focus on projects managed by investment firm Global Frontier Capital. The carbon credits, which are tradeable units of greenhouse gas emissions, generated by the fund will allow purchasers to offset against their overall emissions. The global transition towards low-carbon will raise demand for carbon credits. Notwithstanding, some environmentalists say that carbon credits are not enough to reduce emissions if more fossil fuel is produced.