Capital markets executive summary | Thu 4 Jan 2024

Capital markets executive summary | Thu 4 Jan 2024

Khazanah and CGC Digital invest in Funding Societies

Southeast Asia’s largest MSME digital finance platform plans to expand beyond Kuala Lumpur, Selangor, Penang and Johor, with the target of 25k MSMEs by end-2025. It also wants to widen the reach of its Islamic financing solutions which were launched in May 2023 and has hit RM100m in disbursements. Over USD3.5b (RM16b) in business financing has been disbursed via 5m transactions with 100k businesses in Malaysia, Singapore, Indonesia, Thailand and Vietnam. Khazanah’s investment falls within its Dana Impak mandate, which will enable Shariah-compliant financing to contribute 50% of disbursements by 2025. CGC Digital’s partnership with Funding Societies began in early 2023 with Credit Guarantee Corporation’s guarantee at the transactional level of the digital supply chain financing.

Solarpack’s green sukuk AA2 rating affirmed

RAM Ratings affirmed the rating of Solarpack Suria Sungai Petani Sdn Bhd’s RM305m ASEAN Green SRI sukuk wakalah. The 90.88MW solar photovoltaic project in Kuala Muda, Kedah was awarded under the Large Scale Solar 3 scheme with a 21-year power purchase agreement. Since its commercial operations on 8 Mar 2022, there were no unscheduled outages in 9M2023. Net electrical output was 134.7GWh. RAM’s sensitised cashflows show minimum annual finance service coverage ratio (FSCR) with cash balances post-distribution at 1.66 times and average FSCR at 2.02 times. FSCR without cash balances will fall below 1 time in several years, necessitating cash retention. The sinking fund account (SFA) is for meeting sukuk obligations. The company must maintain a minimum balance in the SFA and the maintenance reserve account and achieve an FSCR of at least 1.65 times before making any restricted payments including distributions to shareholders. The minimum required finance service reserve account (FSRA) balance will be satisfied instead with a bank guarantee procured by the company’s shareholder. Operating profit before depreciation, interest and tax (OPBDIT) was RM28.5m in FY2022 and RM26m in 9M2023. Cash was RM30.3m at end-Oct 2023 enough to cover RM12.5m principal and profit payments in Apr 2024.
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Maybank Ageas AA1 and P1 ratings affirmed

RAM Ratings affirmed the company’s corporate credit ratings and the AA2 rating of its RM3b subordinated bonds programme. It is the largest domestic non-life insurance and takaful player with a 16% share of aggregate gross premiums and contributions in 2022 and a leader in bancassurance. Domestic non-life operations gross premiums and contributions climbed 10% year-on-year in 2021, 18% in 2022 and 17% in 1H2023. New business growth in the life and family takaful segment was 5% in 2022 and 7% in 1H2023 against the industry’s 3% and 2%. 75% of the domestic new business was single-premium or contribution instead of recurring. Non-life/general takaful contributed 60% to pre-tax profit while life/family takaful delivered 40% in the past 3 years except 2022. 3-year average commission ratio was 13% and management expense ratio was 27% for the life and non-life business compared to the industry’s 25% and 36%. Pre-tax return on assets (ROA) averaged 1.9% in the last 3 years and rose to 2% in 1H2023. Gearing was 0.3 against the rating threshold 0.5 times at end-Jun 2023 while double leverage ratio was 1 time against the threshold of 1.4 times. Maybank closed at RM8.89.

KKR-backed BrightSpring files for IPO

The home and community-based healthcare services provider had been planning to raise USD1b. KKR bought the company in 2019 and combined it with PharMerica Corp into a diversified healthcare company offering clinical, pharmacy and non-clinical support services. The terms of the offering will be disclosed in a subsequent filing with the US Securities and Exchange Commission. Goldman Sachs, Jefferies Financial Group, Morgan Stanley, UBS, Bank of America, Guggenheim Securities and Leerink Partners are underwriting. US listings fell sharply from USD339b raised in 2021 to USD26b in 2023. A number of companies including cloud and data security startup Rubrik and EQT AB-owned health-care payments company Waystar Holding Corp are considering going public in 2024.

SK Hynix to raise USD1b via bond sale

The world’s 2nd largest memory chipmaker, which plans to issue US dollar bonds, has appointed 8 investment banks. The term sheet shows that the bonds will have 3 and 5-year tenors. Operating losses were KRW8.1t in 9M2023 due to the slowdown in demand for chips. Prices of memory chips should recover this year following production cuts by chipmakers. At the same time, SK Hynix is focusing resources to keep its leadership position in high bandwidth memory chips used in generative artificial intelligence. In Apr 2023, the company issued USD1.7b convertible bonds, its first time in a decade.