Capital markets executive summary | Fri 29 Dec 2023

Capital markets executive summary | Fri 29 Dec 2023

Master Tec prices IPO at 39 sen

The wire and cable manufacturer will list on the ACE Market on 29 Jan. Master Tec’s IPO price is at a price-earnings multiple of 20.31 times its RM19.56m net profit in FY2022 or 1.92 sen per share. The company will raise RM61.66m by issuing 158.1m new shares. 51m shares are for the Malaysian public, 2.14m for directors and employees, and 104.96m will be placed to selected investors. Current sole shareholder Datuk Lau Kim San will receive RM49.73m from the sale of 127.5m shares. After the listing, Lau’s shareholding will fall to 72%. Master Tec, which has a 30% dividend policy, has been manufacturing and distributing power cables, control and instrumentation cables, solar direct current power cables, and fibre optic cables since 2009. RM24.39m (39.55% of the proceeds) are for new machineries and equipment, RM16.78m (27.22%) for 2 new medium-voltage power cable factories in Alor Gajah, Melaka, RM16.29m (26.42%) for working capital, and RM4.2m (6.81%) for listing expenses. Master Tec’s annual production capacity is 9,500 tonnes and it plans to increase its capacity to manufacture 3,600 tonnes of medium-voltage power cables annually by 4Q2024.

Credit Guarantee Corporation AAA rating affirmed

The rating reflects Bank Negara Malaysia’s 78.6% ownership of Credit Guarantee Corporation Malaysia Berhad (CGC) and its strong capitalisation level. The company provides credit guarantees on financing given by participating financial institutions (PFIs) to MSMEs. Net financing guaranteed grew from RM9.4b in 2019 to RM15.1b 2022 due to government-initiated financing schemes during covid, although growth has slowed in 2023 as the schemes ended. The portfolio guarantee (PG) scheme, which makes up for 92.7% of CGC’s guaranteed loans in 1H2023, provides 70% average coverage on loans and the balance of the credit risk is retained by the PFIs. Gross non-performing financing ratio rose from 4.1% at end-2022 to 4.8% at end-Jun 2023 after the loan relief programmes expired. Exposure to high-risk MSME is mitigated by 39.7% capital level at end-1H2023. Total income jumped 59% year-on-year to RM260.4m in 1H2023 driven by a larger investment income of RM122.9m. The company turned around from a net loss of RM62.6m in 1H2022 to RM54.1m net profit in 1H2023 partly due to lower provision from RM150.7m to RM133.4m. The share of bonds and sukuk in total investments fell from 66.4% in 2022 to 61.4% at end-1H2023, and AA rated or better make up 86.4%.
Would you like us to email you when our latest executive summary is available?

Hong Leong Assurance’s AA2 and P1 ratings affirmed

RAM Ratings affirmed the company’s insurer financial strength (IFS) ratings and the AA3 rating of its RM2b subordinated notes programme. The one-notch difference is because of the notes’ unsecured and subordinated status. The company has an 8.3% share of annual premium equivalent (APE) in 1H2023 and is a top 5 life insurer. APE volumes which fell 12% in FY Jun 2022 shrunk 16% more in FY Jun 2023 because demand for investment-linked products weakened, although demand for protection-based policies continues. Gross premiums fell from RM3.17b in FY Jun 2022 to RM3.10b in FY Jun 2023. Pre-tax profit climbed 24% from RM309m to RM381m. At end-Jun 2023, RM16b liquid assets or 0.9 times net insurance contract liabilities were sufficient to meet potential claims. Hong Leong Financial Group closed at RM16.46.

IJM consortium to complete KLIA aerotrain replacement

Malaysia Airports Holdings Bhd (MAHB) plans to issue a letter of intent to the consortium to resume the aerotrain replacement project. In Aug, former CEO Iskandar Mizal announced that MAHB had terminated the contract awarded to Pestech in Dec 2021 because of non-performance. However, Pestech and France-based Alstom, both the original contractors, are now in the IJM consortium. IJM is subscribing for new Pestech shares representing 44.83% of its share base at 15 sen or RM124m. The deadlines for the 3-year project is Jul 2024 for the 1st aerotrain and Mar 2025 for the 2nd one. The aerotrain operations were suspended in Mar after a major breakdown. In Oct, MAHB announced that Iskandar Mizal’s contract expired and will not be renewed. IJM closed at RM1.89. MAHB closed at RM7.35. Pestech closed at 29 sen.

Monetary Authority of Singapore fines Credit Suisse for misconduct

The MAS fined the bank SGD3.9m for failure to prevent or detect misconduct by its relationship managers (RM) in the Singapore branch. The RMs had made false statements or omitted material information to clients relating to post-trade disclosures on executed interbank prices and spreads charged, which caused the clients to be charged spreads above bilaterally agreed rates for 39 over-the-counter bond transactions. MAS’ investigations discovered that the bank did not have adequate controls, including post-trade monitoring, which could have prevented or detected the misconduct. Credit Suisse compensated its clients as part of the civil penalty settlement.