Capital markets executive summary | Mon 26 Jun 2023

Capital markets executive summary | Mon 26 Jun 2023

Yinson 1Q net profit up 73%

The figure jumped from RM120m in 1Q ended 30 Apr 2022 to RM208m in 1Q ended 30 April 2023 due to higher contribution from the engineering, procurement, construction, installation and commission (EPCIC) business. Revenue soared 200% from RM1.01b to RM3.02b from stronger EPCIC business activities related to floating production storage and offloading (FPSO) vessels Maria Quitéria, Atlanta and Agogo. Yinson Production and project partner Sumitomo Corporation achieved first oil for FPSO Anna Nery on 7 May after a successful 72-hour testing at the Marlim field. The company also received a 5-year extension for the bareboat charter contract for FSO PetroVietnam Technical Services Corporation (PTSC) Bien Dong 01, from 4 June 2023 to 3 June 2028. In New Zealand, Yinson Renewables’ wind projects are in the early stages of site investigation and development. In Singapore, Yinson GreenTech’s chargeEV and LHN Group are collaborating on electric vehicle charge points. The company’s rydeEV offers affordable subscription and lease-to-own e-bike plans with battery-swapping services to businesses such as MyEG. Yinson GreenTech’s all-electric passenger and cargo vessel prototypes, the Hydroglyder and Hydromover, respectively, will have full trials by end-2023. The counter closed at RM2.56.

Affin Bank issues RM500m AT1CS

The bank’s latest Additional Tier 1 Capital Securities (AT1CS) worth RM500m will strengthen its capital structure and offer financial flexibility. Its total capital ratio will increase by more than 130 basis points. The 5-year securities bear a distribution rate of 5.7% per annum. The bank stands to save on its financing cost compared to its previous AT1CS which give out 5.80%. Retail investors dominated the order book, which was 1.3 times oversubscribed. This is the first AT1CS launched this year in Malaysia and will be recognised as Basel III-compliant Additional Tier 1 Capital for the bank, in line with Bank Negara Malaysia’s Capital Adequacy Framework (Capital Components). The capital will be deployed for Affin Bank’s expansion, bolster its banking activities, address working capital requirements and cater for business necessities. The counter closed at RM1.86.

Continued fall in US leading economic index suggests recession in 3Q2023-1Q2024

The US Leading Economic Index fell for 14 straight months in May, indicating weaker economic activity in the future, according to New York-based research group The Conference Board. The index provides an early warning of business cycle turning points and the short-term direction of the economy. It was down 0.7% in May after decreasing by 0.6% in Apr. Between Nov 2022 and May 2023, the index fell 4.3%, greater than the 3.8% decline from May to Nov 2022. The reading is caused by weakening consumer expectations for business conditions, a negative yield spread and deteriorating credit conditions. Interest rate hikes plus enduring inflation will dull economic activity. The recession will be caused by tight monetary policy and fiscal spending.

PLSUKE’s A+ and AAA(bg) ratings affirmed

Projek Lintasan Sungai Besi – Ulu Klang Sdn Bhd (PLSUKE) holds the concession for the 24.4km Sungai Besi-Ulu Kelang Elevated Expressway (SUKE). The concession is for 55 years from 25 Dec 2014, with a 10-year conditional extension. The 16.6km Phase 1 commenced tolling in Oct 2022, while the 7.8km Phase 2 which was opened on 16 Jun will begin tolling on 30 Jun. Average annual daily traffic for this year until 14 Jun was 65,580. MARC Ratings affirmed the A+(s) rating for the RM2b sukuk wakalah programme. PLSUKE is wholly-owned by Projek Lintasan Kota Holdings Sdn Bhd (Prolintas) which is controlled by Permodalan Nasional Berhad (PNB). The rating reflects Prolintas’ unconditional and irrevocable guarantee with a two-notch uplift from Prolintas’ standalone rating on the basis of continued support from PNB. The rating agency also affirmed the AAA(bg) rating for the RM500m facilities guaranteed by Bank Pembangunan Malaysia Berhad. The RM4.7b senior facilities consisting of the sukuk wakalah, the bank-guaranteed sukuk and the syndicated Islamic term facilities have bullet repayment in 2027. They are expected to be refinanced, although the risk is mitigated by parentage and the long concession period.

IBM negotiating for Apptio

The target was founded in 2007 and sells online services that help manage information-technology budgets, forecasting and analysis. Most Fortune 100 companies are its customers. International Business Machines Corp (IBM) are in advanced talks to buy Apptio for USD4.5b-USD5b from its current owner, private equity firm Vista Equity Partners. An agreement could have been reached last weekend. After acquiring Red Hat in 2019, IBM spun off its Kyndryl business in 2021. It then sold off the Watson Health division. IBM is still focused on buying companies as it pushes deeper into automation technology, although each deal size will be smaller than the USD34b Red Hat price tag. IBM closed at USD129.43.