Capital markets executive summary | Mon 18 Dec 2023

Capital markets executive summary | Mon 18 Dec 2023

Apollo Food shares suspended today pending announcement

The confectionery manufacturer sought for the trading suspension under Paragraph 3.1(b)(iv) of Practice Note 2 on Requests for Suspension of the Main Market Listing Requirements, which can be used by companies to publicise being served a notice of take-over. Bursa Malaysia approved the trading suspension from 9am-5pm today pending the release of a material announcement. The Johor-based company, a household brand for chocolate wafers and layer cakes, was listed in 2000 and is 51.31%-controlled by Singaporean brothers Liang Chiang Heng and Liang Kim Poh via Keynote Capital Sdn Bhd. It has been the subject of speculation of potential acquisition in recent years. The counter closed at RM5.40, up 40% this year.

FGV sukuk programme assigned AA- rating

MARC Ratings assigned the rating to the company’s sukuk murabahah programme, which is upsized from RM500m to RM3b. The programme was originally unrated and established in Dec 2021. The rating incorporates an uplift based on support from the Federal Land Development Authority (FELDA), which owns 81.9% of FGV. The 2nd largest domestic palm oil producer contributed 15% of Malaysia’s total annual CPO production and 4% globally in 2022. Total landbank is 439k ha and of the 333,764 ha cultivated with oil palm at end-Sep 2023, 60% is in Peninsular Malaysia, 34% in Sabah and the rest in Sarawak and Indonesia. Annual FFB production is 14m metric tonnes supplied by smallholders (40%), 3rd party plantations (30%) and FGV’s leased land (30%). FGV does a larger portion of CPO sales on spot whereas other players transact more forward contracts, which makes FGV more susceptible to CPO price volatility. Average oil extraction rate was 20.5% in 9M2023, comparable to Malaysian peers. The company has budgeted RM460m per annum to reduce the average tree age from 12.8 years at end-Sep 2023 to 10.2 years by 2025. Revenue fell 28.1% year-on-year to RM13.9b in 9M2023. Pre-tax profit plunged 89.4% year-on-year to RM157m. Gross debt-to-equity (DE) ratio weakened from 0.35 times in 2022 to 0.46 times at end-Sep 2023. Planned issuances of RM1.5b in 2024 will push the DE ratio to 0.7 times. The counter closed at RM1.35.
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Bakun Hydro’s sukuk AAA rating affirmed

The company owns and operates the 2,400MW Bakun hydroelectric plant in Sarawak under a take-or-pay power purchase agreement (PPA) with related company Syarikat SESCO Berhad until 31 Mar 2043. The Bakun dam was fully commissioned in July 2014 and is a key component of the Sarawak Corridor of Renewable Energy. RAM Ratings affirmed the rating of the company’s RM5.54b sukuk murabahah (2016/2031). The rating is based on the company’s cashflows and the federal government’s irrevocable and unconditional undertaking to top up cash to satisfy a minimum annual finance service coverage ratio (FSCR) of 2 times. Revenue gained 1.3% year-on-year to RM1.43b in FY2022 and 0.3% to RM712.1m in 1H2023. FSCR was 3.2 times on 11 Aug 2023. In RAM’s sensitised cashflows, the government may need to top up RM300m in 2029 to maintain the FSCR at 2 times because of a bullet repayment of the RM1b government-guaranteed sukuk in 2028, although it may alternatively be resolved through refinancing.

Temasek and KKR participate in TEG loan

Singapore’s Temasek Holdings Pte Ltd and KKR & Co are in the club deal for TEG Pty Ltd, which Silver Lake Management LLC bought in 2020. The AUD950m (RM2.98b) unitranche loan has a 5-year tenor and a 550 basis point margin. In addition, the deal includes a USD130m (RM607.04m) revolving credit facility. Australia-based TEG owns Ticketek, which sells tickets to concerts, musicals and sports events in Australia, the UK and Singapore. Underwhelming interest in the TEG auction earlier this year forced Silver Lake to opt for the dividend recapitalisation exercise for a payout.

Fosun’s hospital business in RM658m funding round

Loss-making Shanghai Fosun Health Technology Group Co, a subsidiary of Hong Kong-listed Shanghai Fosun Pharmaceutical Group Co, is talking to investors about raising CNY1b (RM658.48m) ahead of a potential Hong Kong IPO as soon as next year. Fosun Health has 20 medical facilities in China with 6,448 beds and holds 9 internet hospital licences in China. Operating revenue was CNY3.1b in 1H2023 or 15% of Fosun Pharma’s total revenue. Fosun has moved away from acquisitions to enhancing the value of its existing businesses. Last month, Fosun International Ltd’s application to list its Portuguese hospital operator Luz Saude SA was approved by the Hong Kong stock exchange.