Capital markets news summary for Thu 16 Feb 2023

Capital markets news summary for Thu 16 Feb 2023

Malaysia’s 2P petroleum reserves at 6.9b barrels, 61% in Sarawak

4.2b probable and proven (2P) barrels of oil equivalent are in Sarawak while 1.3b are in Sabah. 2P reserves have more than 50% chance of being technically and economically possible to be produced. Although the country’s reserves can last 15 years based on the reserves life index calculation, it can be lengthened to 40 years with high capital investments and the application of new technologies. Petronas signed 9 production sharing contracts (PSC) under the Malaysia Bid Round (MBR) 2023 which they anticipate to attract RM1.7b in capital commitment for drilling activities in the deepwater areas and the underexplored formations. The PSC counterparties comprise 4 existing investors and 4 new ones. In Jan, Petronas signed 3 PSCs for Discovered Resource Opportunities clusters. The company launched its annual MBR 2023 on 15 Feb with the virtual data room open until the bid submission deadline on 15 Sep 2023.

TNB will complete 50MW solar project in Bukit Selambau by end-2023

The project is under the large scale solar (LSS) 4 programme. It is located next to the existing 30MW solar farm also in Bukit Selambau which was completed under the LSS 2 programme. The new 50MW project will be able to power 28,700 homes annually. Tenaga Nasional Berhad (TNB) also has another completed 50MW solar farm in Sepang. The company is seeking another 30MW solar project this year to meet its target 8,300MW renewable energy capacity by 2025. According to the company’s studies, hydro has reached its peak in the peninsula while wind is not suitable because Malaysia’s location at the equator means there is less wind. Solar, although the most suitable, recently faced a hurdle for the LSS 4 programme due to the sudden rise in solar panel costs. Solar panels and other raw materials make up 40% of project costs and vendors offer 30 years’ warranty. The extension of the power purchase agreement from 21 years to 25 years helps improve cashflows. Apart from Malaysia, TNB has signed memoranda of understanding with Electricity Generating Authority of Thailand, Planet Utility and B Grimm Power to explore renewable and other power generation opportunities in Thailand. The counter closed at RM9.95.

India’s Jan palm oil imports fall 25% against Dec 2022

The imports at 833,667 tonnes are the lowest since Jul 2022 as the narrowing discount to rival oils prompted buying of soybean and sunflower oils. Soybean oil imports climbed 45% to 366,625 while sunflower oil imports surged 138% to a record 461,458 tonnes. Russia, Ukraine, Romania and Bulgaria are competing in offering sunflower oil at a discount to soybean oil. India – the world’s largest importer of vegetable oils – bought 1.66m tonnes in Jan, up 6%. The country’s imports in the first quarter of Nov 2022 to Jan 2023 grew 30% year-on-year to 4.7m tonnes. A big drop in imports is expected in Feb.

Farm Fresh to buy The Inside Scoop for RM83.9m

The dairy producer will purchase 53% from the existing shareholders for RM68.4m – RM48.4m in cash and RM20m via the issuance of 13.16m new Farm Fresh shares at RM1.52 each. The companies will then sign a share subscription agreement for Farm Fresh to acquire 12% of the enlarged issued The Inside Scoop (TIS) shares for RM15.5m. Eventually, Farm Fresh will own 65% of TIS while Edmund Tan Jun Hua – the company’s co-founder – will have the remaining 35%. Edmund Tan will also have a put option for Farm Fresh to acquire the 35%. The total cash portion of RM63.91m will be funded via Farm Fresh’s IPO proceeds earmarked for its facilities in Australia and Malaysia. The company decided to pivot towards building the largest homegrown ice-cream chain in Malaysia. The counter closed at RM1.59.

Berkshire Hathaway sold 86% of its TSMC holdings in 4Q2022

Following news that the Warren Buffet company bought a USD5b stake, its share price rose in Nov 2022. Taiwan Semiconductor Manufacturing Co’s (TSMC) share price is still up 40% from an Oct 2022 low when its forward price-earnings ratio was 10.3 times. However, the large USD3.7b sale spooked investors who have been accustomed to Berkshire Hathaway’s practice of long-term investment and continuing to add shares. TSMC cut its spending by 10% to USD36b in 2022 after the Biden administration imposed new restrictions on China’s access to critical technologies. Separately, Ray Dalio – founder of Bridgewater Associates which is the world’s largest hedge fund – claims that China is winning the trade war against the US, judging by world trade and dominance. The biggest challenge for the US is internal which has been exhibiting symptoms of decline such as poor infrastructure, a deterioration in education and the opioid crisis.