Executive summary for capital markets news | Fri 14 Apr 2023

Executive Summary for Capital Markets News | Fri 14 Apr 2023

CVC considers selling QSR interest after delays in IPO

The Luxembourg-based private equity firm is talking to at least 1 adviser on selling its 21% equity interest worth more than RM1.2b. It had acquired the stake in 2013 after making a joint buyout with Johor state government-owned Johor Corporation, which holds 56%. QSR Brands (M) Holdings Berhad holds the sole right from Yum! Brands Inc to run the KFC and Pizza Hut fast food chains in Malaysia, Singapore, Brunei and Cambodia. It runs 850 KFC and 500 Pizza Hut restaurants. CVC has been seeking an exit including multiple attempts at an initial public offering (IPO) since 2017. In 2019, CVC and the Employees Provident Fund were looking for buyers for their equity interest. QSR postponed an IPO plan in 2022 amid concerns that the poor economic conditions would weaken its valuation. CVC has been active in Southeast Asia which has a population of over 600m. Private equity firms here favour consumer-driven businesses in view of the growing population and increasing income levels.

Reservoir Link to build wastewater treatment plant for Unilever Indonesia

The company’s 85%-owned subsidiary – PT EnviroTech Akva Indonesia – signed an agreement with PT Unilever Oleochemical Indonesia to undertake the construction, commissioning and operations of the plant at Unilever’s premises in Sei Mangkei, North Sumatra. The project is based on build-own-operate-maintain and last for 10 years from the date of commercial operations. The wastewater plant will be integrated with Unilever’s existing plant. After the plant has been commissioned, the company will be appointed to receive, treat and discharge effluent. Reservoir Link provides well services for upstream oil and gas operators, and only in 2021 entered into the renewable energy space via an engineering procurement construction and commissioning contract for a solar project. The counter closed at 34 sen.

Maxim Global buys RM271m assets from major shareholders and directors

Maxim Holdings Sdn Bhd (MHSB) owns, among others, apartments and land in Taman Desa, land at Jalan San Ah Wing, and land in Alam Damai, Cheras and Taman Setia Jaya, Rawang. Maxim Global will acquire Zapland Property Sdn Bhd, Asiatic Network Sdn Bhd, Brogan Maxim Sdn Bhd and Maxim Realty Sdn Bhd – which collectively own 86.89% of MHSB. The vendors of the 4 companies comprise the managing director, his wife, his son and a non-independent non-executive director. The company will also purchase the remaining 13.11% in MHSB from a private company, Sanlens Sdn Bhd. The acquisition will be paid via the issuance of 217.39m new Maxim Global shares and RM69m cash. Upon completion of the acquisition, the vendors’ shareholding in Maxim Global could rise to 67.99% from 62.44% currently. No mandatory general offer is required as the vendors already have statutory control. After the acquisition, the company proposes a 2-to-1 share consolidation from 1.47b to 735.03m shares. Maxim Global will also assume the RM152.03m that the 4 companies owe their directors and creditors. The counter closed at 22 sen after rising 22.22% since 13 Jan.

Hong Seng aborts purchase of CSH Alliance’s EV business

Both parties signed a share sale agreement in Feb 2023 for glove maker Hong Seng to buy Alliance EV Sdn Bhd (AEV) for RM20m. AEV’s Project Volt is the setting up of an electric vehicle (EV) battery manufacturing plant while Project EV entails the setting up of an assembly plant to produce BYD’s T3 model commercial electric vans. However, Hong Seng later discovered that the terrain of the 55-acre land would limit the size of both projects and their future expansion potential. Hong Seng will pursue its own battery manufacturing project in collaboration with US-based EoCell Inc. CSH Alliance will proceed with its EV project by importing the BYD T3 vans. It will work on the assembly plant later. Hong Seng closed at 13 sen, down 39.53% from 21.5 sen on 15 Feb, 2 days after announcing the acquisition of AEV. CSH Alliance closed at 4.5 sen, down 30.77% from 6.5 sen on 13 Feb.

India assembled USD7b iPhones in 2022

Production in the country has trebled to 7% of total iPhone output after Apple accelerated a move beyond China. The shift included Apple’s partners such as Foxconn and Pegatron who have added assembly lines rapidly over the past year. In 2021, India only accounted for 1% of the world’s iPhones. The move out of China is attributed to the need to reduce dependence on China amid the US-China tensions. While China struggled with its Zero Covid policy causing lockdowns and chaos at the Foxconn plant in Zhengzhou, India’s Prime Minister offered incentives to boost local manufacturing. Apple will likely manufacture the next iPhones in India simultaneously with China in the fall of 2023, the 1st time an iPhone assembly runs concurrently in 2 countries. If the aggressive expansion of its suppliers continues, India could account for 25% of iPhone output. Foxconn alone is investing USD700m on a plant to make phone components and possibly iPhones.