Capital markets executive summary | Thu 14 Dec 2023

Capital markets executive summary | Thu 14 Dec 2023

Tower REIT proposes rights issue to raise RM66m

The real estate investment trust will use up to RM40m from the proceeds to reduce its borrowings amounting to RM272.75m as at 30 Sep. The balance of the proceeds will go towards refurbishing the existing properties in its portfolio, which includes Menara HLX, Plaza Zurich and Menara Guoco. The rights issue will entail up to 280.5m units, on the basis of 2 rights units for every 3 existing units, and the proceeds amount is based on 35 sen per rights unit. The issue price and the entitlement basis will be fixed later. The REIT’s manager will obtain irrevocable and unconditional undertakings from its major unitholder GLM Equities Sdn Bhd (GLME), a subsidiary of Guocoland (Malaysia) Bhd, and Associated Land Sdn Bhd (ALSB) to subscribe for a minimum of RM17.31m. The manager will also seek an undertaking from GLME to take up any rights units not subscribed by other entitled unitholders of up to RM48.14m, which is subject to obtaining an exemption for GLME from having to make a mandatory general offer. GLME holds 21.66% in Tower REIT and ALSB 4.78% as at 21 Nov. The minimum subscription could push GLME’s stake to 30.7% and ALSB’s 6.77%. The additional subscription could make GLME’s unitholding hit 51.09% while ALSB’s would be reduced to 4.78%. The exercise will be completed in 1Q2024. Hong Leong Investment Bank is the adviser. The units closed at 38 sen.

Sapura Energy wins financiers’ approval-in-principle for debt restructuring

The PN17 oil and gas service provider received written confirmation from the Corporate Debt Restructuring Committee that 75% of the financiers of its RM10.3b multi-currency financing facilities gave the approval-in-principle. The company needs to address its debts, which also involves RM1.5b in claims from vendors. Sapura Energy’s application for an additional 6-month extension to submit its regularisation plan for exiting the PN17 status, from 30 Nov 2023 to 31 May 2024, is pending Bursa Securities’ decision. The company reported that its net profit trebled from RM10.18m or 0.06 sen per share in 3Q FY Jan 2023 to RM30.89m or 0.19 sen per share in 3Q FY Jan 2024 because of lower depreciation, higher share of profit from joint venture and associate, and foreign exchange gain. Quarterly revenue fell 13.42% from RM1.28b to RM1.1b as slower project progress in the engineering and construction segment caused revenue recognised to be lower. Net profit more than doubled from RM99.53m in 9MFY2023 to RM219.78m in 9MFY2024. Revenue slipped 4.06% from RM3.33b to RM3.2b. The counter closed at 5 sen.
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SC amends Equity Guidelines for accelerated transfer to Main Market

The Securities Commission (SC) announced the accelerated transfer framework that will take effect on 1 Jan 2024. The criteria are: (1) listed on the ACE Market for at least 1 year (2) maintain at least RM1b market capitalisation for 6 months (3) audited profits for at least the 3 most recent full financial years with minimum aggregate profit after tax of RM20m and minimum profit after tax of RM6m in the most recent financial year, and (4) have been operating in the same core business for the 3 most recent full financial years. The objective of the capital market measures is to improve stock market vibrancy and reduce market friction. The ACE Market saw 20 IPOs that raised RM1.26b from Jan-Oct.

US Fed keeps rates unchanged

The Federal Reserve maintained the target range for the federal funds rate at 5.25%-5.5% in their meeting which concluded yesterday. Chair Jerome Powell said that the Fed is willing to cut rates even if the US economy does not fall into a recession in 2024. He would see it as a sign that the economy is normalizing and does not need a tight monetary policy. The Fed has observed progress on inflation in the 3 core areas alongside a still robust labour market. Despite lingering inflation, it will begin to discuss policy easing. It indicated it could be cutting rates by 0.75% in 2024, although traders are pricing in 1.5% in rate cuts.

ADB participates in financing USD4b Indonesian healthcare project

The Asian Development Bank (ADB), Asian Infrastructure Investment Bank (AIIB), Islamic Development Bank (IsDB) and the World Bank are financing the Primary Healthcare and Public Health Laboratories Upgrading and Strengthening (PLUS) project, which will fully equip more than 10k primary healthcare facilities and more than 500 public health laboratories in Indonesia to meet the minimum service standards. The project entails buying equipment, commissioning, user training, operations and maintenance services, and capacity development. ADB said that its participation amount is USD650m (RM3.06b), and it is the 3rd in a series of its support towards developing Indonesia’s post-covid health system transformation agenda.