Capital markets executive summary | Mon 19 Jun 2023

Capital markets executive summary | Mon 19 Jun 2023

CN Asia diversifies into downstream oil and gas in Kazakhstan

The company signed an agreement with Markmore Energy (Labuan) Limited (MELL) and CaspiOil Gas LLP (COG) to build a central processing complex (CPC) plant and pipeline at the Rakushechnoye Oil and Gas Field in Kazakhstan to process the natural gas to produce liquefied petroleum gas and condensate, and processing and production of natural gas extracted from the same field. In return, CN Asia will pay MELL USD150m (RM691.5m) in cash, shares and redeemable convertible preference shares (RCPS). The cash consideration will be raised via private placement of 73.4m new shares, or 30% of the total existing number of placement shares and renounceable rights issue of 4.54b CN Asia shares on the basis of 13 rights shares per 1 existing share together with up to 907.03m free detachable warrants on the basis of 1 warrant for every 5 rights shares. CN Asia will issue 1.21b ordinary shares at 19 sen and 1.21b RCPS also at 19 sen to MELL. The company has also undertaken to raise financing for the design, construction and commissioning of the CPC plant and pipeline amounting to USD285m (RM1.3b). The proposals are expected to be completed in 1Q2024. The counter closed at 20 sen.

SC fines KC Chia & Noor audit partners and bans them for 1 year

The Audit Oversight Board (AOB) imposed fines of RM50k on Chia Kwong Chow and RM25k on Tai Yoong Noor. They are not allowed to audit any public interest entity (PIE) or scheduled funds for 12 months from 10 May. Chia – the engagement partner – failed to assess whether a PIE capitalising a significant amount of consultation fees as deferred expenditure is appropriate in accordance with the Malaysian Financial Reporting Standards. He failed to obtain audit evidence to ascertain transactions with incomplete records of deferred expenditure, and did not perform alternative audit procedures for verification. The consultation fees classified as deferred expenditure were subsequently reclassified as non-current assets held for sale. He failed to evaluated whether the classification of the deferred expenditure as non-current assets held for sale is appropriate in accordance with MFRS 5. Tai was the engagement quality control reviewer who failed to review the selected audit documentation relating to significant judgments and significant risk areas of the engagement and the basis of the conclusions. The fine and ban were imposed after due process including appeal.

Resintech signs MOU with Sarawak on sustainable aviation fuel

Resintech Plastics (Sarawak) Sdn Bhd (RPSB) signed the memorandum of understanding (MOU) with SEDC Energy Sdn Bhd (SESB), a subsidiary of Sarawak Economic Development Corporation. The MOU outlines the framework for a joint venture to operate in the plastic industry sector and contribute to Sarawak’s initiative in producing the world’s first sustainable aviation fuel (SAF) from algae. Resintech will provide the critical infrastructure needed for the cultivation of algae. The SAF is produced using the algae’s photosynthetic processes that convert sunlight and carbon dioxide into lipids. These lipids are harvested and refined into the final product. The counter closed at 53 sen.

Lekas refinancing on track for completion by Jul 2023

Lebuhraya Kajang-Seremban Sdn Bhd (Lekas) is the concessionholder for the 44 km Kajang-Seremban Highway. RAM Ratings affirmed the C2 rating of Lekas’ RM633m junior sukuk istisna’ with negative outlook. The company obtained an extension from the original scheduled payment date of 12 Jun 2023 to 31 Jul 2023. The request to extend the maturity of the RM460m redeemable convertible secured Islamic debt securities (RCSIDS) to the same date is pending lenders’ approval. The rating and outlook reflect a high probability of default given the company’s rigid cashflows and lumpy repayment. Notwithstanding, Lekas has received a letter of offer from a financial institution to refinance the junior sukuk and RCSIDS with a term loan. The company expects to complete the restructuring of the debt facilities by end-Jul 2023. RAM Ratings has observed significant progress with no indication of developments that could upend the refinancing exercise. The related parties are committed to ensuring the debts are successfully restructured. Lekas is 50% owned by IJM Corporation which closed at RM1.56.

Vietnam’s energy crisis could force foreign companies out

Many companies including Samsung and Apple supplier Foxconn have factories in north Vietnam. A hot summer and drought are causing power outages. Factory operations have been badly affected by lengthy blackouts with little to no prior warning. KingBill XNK Joint Stock Company that produces aluminium parts in Bac Ninh province complained of a 26-hour power cut which cost them tens of thousands of dollars that day. Several areas in the north — where major industrial parks are located — were instructed to reduce their energy use by half last week. Almost half of Vietnam’s electricity is supplied by hydroelectric plants and 11 big plants in the north and central regions shutdown recently. Heatwaves since early May have dried up rivers and reservoirs. Concurrently, electricity demand spiked up 20% with the use of air-conditioning and electric fans. Japan’s chamber of commerce warned the authorities that some companies may consider shifting their factories out of Vietnam.