Capital markets executive summary | Tue 2 Jan 2024

Capital markets executive summary | Tue 2 Jan 2024

BHIC shareholders approve RM417m debt settlement

At the EGM on Fri, 99.92% of Boustead Heavy Industries Corp Bhd (BHIC) shareholders voted in favour of the debt settlement plan with 3 lenders and 64.99% parent Boustead Holdings Bhd (BHB) and amending the company’s constitution to enable the issuance of redeemable convertible preference shares (RCPS). On 6 Dec, BHIC proposed to partially settle RM90m owed to AmBank Islamic, RM63.3m owed to MBSB and RM30m to Affin and to fully settle its RM234m debt with BHB on 31 Dec. The partial debt settlement with the banks entails issuing new ordinary shares and Class A RCPS at 57 sen per share. The amount owed to BHB will be settled by issuing new BHIC shares, Class B RCPS and Class C redeemable preference shares at 57 sen per share. With the new ordinary shares, BHB’s interest in BHIC will increase from 64.99% to 72.38%, AmBank Islamic will hold 4.96%, MBSB 4.92% and Affin 2.33%. BHIC’s shareholders’ funds will grow from RM61m to RM420m. Net assets per share will improve from 24 sen to 74 sen. Gearing ratio will strengthen from 4.06 times to 0.02 times. The counter closed at 48 sen.

Harn Len buys substantial shareholder’s aquaculture business

The Johor-based oil palm planter and property developer entered into a conditional share sale agreement with Mohamed Nizam Jakel to acquire the entire 100k shares of Tiger Aquaculture Sdn Bhd (TASB), which owns 30 shrimp ponds on 300 acres in Pekan, Pahang. The RM42.5m purchase price will be satisfied through issuing 47.22m new Harn Len shares or 7.71% of its enlarged share base comprising ordinary shares and Class A Islamic redeemable convertible preference shares at 45 sen, thereby increasing Nizam’s shareholding to 12.8%. The acquisition should help the company diversify away from oil palm plantation. Harn Len has jointly operated 5 ponds with TASB since signing the memorandum of agreement on 24 Aug. The acquisition should be completed in 2Q2024. Malacca Securities is the principal adviser. The counter closed at 50 sen.
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CIMB sells its balance equity interest in CGS-CIMB

CIMB Group Sdn Bhd has completed the sale of its 25.01% interest in CGS-CIMB Securities International Pte Ltd (CSI) and 25% interest in CGS-CIMB Holdings Sdn Bhd (CCH) following the final call option exercised by CGS International Holdings Ltd (CGI). China Galaxy Securities Co Ltd (CGS), the 4th largest securities firm in China, owns CGI. In 2018, CIMB signed a partnership agreement with CGI to run a regional stockbroking business in Asia, which entailed selling its stockbroking business into the CGS-CIMB JV, which CIMB owned 50% and CGI 50%. The agreement granted put and call options for CGI to acquire CIMB’s stakes in the CGS-CIMB JV. In Dec 2021, CGI exercised the 1st call option for 24.99% in CSI and 25% in CCH. With the latest acquisition of the remaining shares in the CGS-CIMB JV, CGI has full ownership of the regional stockbroking business. CIMB will receive RM780m for the sale, and the total proceeds from the sale of its stockbroking business since 2018 totals RM2.5b. CIMB closed at RM5.85.

China traders buy up short-term bonds with liquidity easing

The strong interest in shorter-maturity bonds follows liquidity support from the central bank and expectations of interest rate cuts in 1H2024. The 1-year sovereign bond yield fell 20bps in the last week of Dec, the largest drop since Apr 2020. Yields for similar maturity negotiable certificates of deposit issued by AAA-rated banks have slid 24bps. After China’s 1-year bond yields peaked in early Dec, liquidity concerns dissipated as the robust government bond sales eventually slowed down. In addition, the People’s Bank of China intervened to stabilise the money market. The central bank injected a net CNY1.26t (RM821.01b) short-term cash via reverse repo last week, the most since late Oct, after the USD112b (RM521.12b) 1-year policy loans in mid-Dec, the largest infusion of medium-term liquidity.

Petronas’ Gentari invests in Taiwan’s largest offshore wind project

Gentari International Renewables Pte Ltd bought 49% of Canada-based Northland Power Inc’s ownership of the Hai Long offshore wind project off the Changhua coast in the Taiwan Straits, equivalent to 29.4% indirect interest. Northland has 30.6% ownership and will continue to lead the construction and operation of the joint venture between Northland and Japan-based Mitsui. The 1,022MW project in 2 phases is important in helping Taiwan achieve the target of 15GW of offshore wind to be constructed in 2026-2035 and supply clean energy to more than 1m households and industrial facilities. Gentari plans to build 30GW-40GW renewable energy capacity by 2030.