Capital markets executive summary | Tue 20 Jun 2023

Capital markets executive summary | Tue 20 Jun 2023

Leader Energy plans RM2b IPO

This would be Malaysia’s biggest initial public offering (IPO) since 2017. The power company expects to submit its prospectus to the Securities Commission by end-Jun and the listing is anticipated to happen in Dec 2013. The company is a subsidiary of HNG Capital Berhad, controlled by Penang businessman H’ng Bok San. In 2018, the company evaluated a Singapore listing. Malaysia’s IPO market is down 17% year-on-year to RM1.7b. The largest IPOs in recent years were Lotte Chemical Titan’s RM3.8b in 2017 and Mr DIY’s RM1.5b in 2020. Leader Energy has 832MW of power plants in 7 countries in Southeast Asia and Taiwan. Apart from thermal power plants, the company’s portfolio includes solar, wind, hydro and high-voltage transmission lines. It plans to pursue only renewable energy projects in future.

Sunreit Capital Berhad’s RM3b commercial papers programme P1 rating affirmed

RAM Ratings affirmed the P1(s) rating of the short-term debt programme. Sunreit Capital is a wholly-owned fundraising vehicle of Sunway Real Estate Investment Trust (REIT). The rating reflects Sunway REIT’s credit profile and the collateral properties. As at end-Dec 2022, the properties valued at RM7.68b provided a 2.38 times collateral cover over outstanding debts, more than the 1.67 times required in RAM’s rating methodology for well-secured debt. The actual loan-to-value ratio is below the maximum 0.5 times financial covenant for the programme. Strong post-Covid performances in particular retail malls and hotels boosted the REIT’s revenue, net property income and renewal rates. Sunway REIT’s diversified sources of debt funding, robust underwriting commitments from financiers and ability to access the capital markets affords it financial flexibility that mitigates refinancing risk arising from the 44% share of short-term borrowings in its debt mix. Sunway REIT closed at RM1.59.

Mainstreet advises Minda Global shareholders reject takeover

SMRT Holdings Berhad had sold its shares in SMR Education Sdn Bhd (SMRE) for RM49.46m to Special Flagship Holdings Sdn Bhd (SFH). SMRE in turn is the largest shareholder in Minda Global. SFH is controlled by Tan Sri Dr Palaniappan Ramanathan Chettiar and the persons-acting-in-concert (PAC) are Puan Sri Kamatchi, Maha Ramanathan Palan, Malayandi Subu Palan, Kalaimani Subramaniam, Meenakshi a/p Malayandi and SMRE. In May, Minda Global received a conditional mandatory takeover offer at 7.12 sen from SFH. Mainstreet Advisers – who were appointed the independent adviser – said that the price is at a 7.46 sen or 51.16% discount to the 14.58 sen value per share based on adjusted net asset method. They suggest that shareholders decline the offer because the price is not fair and not reasonable. SFH and the PAC intend to keep Minda Global listed and do not intend to invoke the Capital Markets and Services Act’s s222(1) compulsory acquisition provision. Minda Global shares closed at 10 sen, up 46% this year.

Sarawak Petchem’s sukuk wakalah AAA rating affirmed

RAM Ratings affirmed the AAA(s) rating of the RM6b sukuk wakalah programme (2022/2052). The enhanced rating (s) reflects the joint and several irrevocable and unconditional guarantee from Sarawak Economic Development Corporation (SEDC), whose credit profile mirrors the Sarawak state’s AAA rating. Sarawak Petchem has favourable arrangements with Petronas – which supplies natural gas to the company’s methanol plant, provides technical support and offtakes the methanol output. The cost of natural gas – the main input – is passed through in the methanol prices to Petronas. Covid-related manpower shortages and procurement delays plus raw material price increases heighten the construction risk. On 24 Feb 2023, 86.55% of works were completed against the planned 84.65%. The plant is expected to commence operations in Apr 2024.

Singapore is not rushing to regulate AI

The country is adopting a wait-and-see approach as Western governments deliberate on the risks posed by artificial intelligence (AI). Nonetheless, it promotes the responsible use of the technology by calling for companies to collaborate in AI Verify – the world’s first AI testing toolkit that enables users to conduct technical tests on their AI models and record process checks. AI Verify was launched in 2022 and IBM and Singapore Airlines have started pilot testing. Tech leaders including OpenAI’s Sam Altman and Elon Musk have warned about AI’s dangers. Google, Microsoft and IBM are among tech giants which have already joined the AI Verify Foundation — a global open-source community that discusses AI standards and best practices, and collaborate on governing AI. Singapore plans to learn from the industry before deciding on regulation. In contrast, the European Union became the first to set minimum standards with its Artificial Intelligence Act while China has developed draft rules to manage the development of generative AI products.