Capital markets executive summary | Tue 11 Jul 2023

Capital markets executive summary | Tue 11 Jul 2023

SkyWorld falls 7.5% from IPO price on listing

The counter was the most actively traded on the Main Market with 110.51m shares changing hands. It debuted at the initial public offering (IPO) price of 80 sen, hit an intraday high of 81 sen and an intraday low of 73 sen before closing at 74 sen. The company’s market capitalisation was RM740m. Leading up to the listing, a number of research houses valued the stock at 90 sen to RM1.03. The 3rd largest listing on Bursa thus far raised RM166.4m for the company. It issued 208m new shares while its shareholders offloaded 192m existing shares and made RM153.6m. The company will use RM100m or 60% of the proceeds for land acquisition, RM35m or 21% for working capital and RM20m or 12% for repayment of bank borrowings. SkyWorld is focussed on the Klang Valley but will consider projects elsewhere if the gross development value is RM3b-RM5b. Kenanga is the principal adviser, underwriter and placement agent. Newfields is the financial adviser.

TA Securities sets Daythree Digital value at 42 sen

The valuation is based on projected earnings growth for FY2023 of 45.9%, FY2024 of 31.9% and FY2025 of 29.6%. The company is expected to benefit from the growing interest by businesses for digital transformation, including engaging global business services (GBS). Daythree is employed by 22 clients from different industries as at 31 May 2023. The energy and utilities segment and telecommunications and media segment contributed 72%-86% of revenue in FY2019-FY2022. TA Securities projects revenue to rise 22% compounded annually to RM118.3m and core net profit to climb 35.6% compounded annually to RM17.4m from FY2023-FY2025. The company will list on the ACE Market on 26 Jul.

AEON Credit’s AA3 and A1 ratings affirmed

RAM Ratings affirmed the ratings of the senior and subordinated sukuk wakalah programmes respectively plus the P1 rating of the RM1b Islamic commercial papers programme. The ratings reflect the company’s credit metrics, particularly asset quality and profitability, which remain resilient throughout economic cycles. Extraordinary support is also expected from ultimate parent Japan-based AEON Co Ltd and immediate holding company AEON Financial Service Co Ltd. The company manages asset quality well although it is exposed to non-prime borrowers. In FY ended Feb 2023, gross impaired financing (GIF) ratio was 2.9%, up from 2.7% the prior year, due to personal financing and motorcycle financing associated with lower-income and younger borrowers. GIF coverage ratio was a satisfactory 252% at end-Feb 2023. AEON Credit’s pre-tax profit climbed from RM526.8m in FY Feb 2022 to RM547m in FY Feb 2023 on the back of a fat 3-year average net interest margin of 11.1%. Adjusted gearing fell from 3.7 times to 3.5 times. The counter closed at RM11.18.

UMW’s AA+ and AA- ratings for sukuk musharakah and perpetual sukuk affirmed

MARC Ratings affirmed the ratings on the RM2b sukuk musharakah programme and the RM2b perpetual sukuk programme. The rating for the perpetual sukuk is two notches lower according to MARC Ratings’ methodology on subordinated and hybrid instruments. The ratings reflect UMW’s leading position in the automotive industry and robust financials with strong operating cash flow and low leverage. The standalone AA+ rating is a one-notch uplift based on implicit support from parent Permodalan Nasional Berhad. If its key credit metrics continue to improve, the standalone rating will be revised upwards. The company sells Toyota, Lexus and Perodua cars which in 1Q2023 recorded total turnover of 103,783 units or 53.9% of total industry volume, up from 53.2% for 2022. Borrowings fell to RM1.5b for a debt-to-equity ratio of 0.31 times at end-Mar 2023. It is in a net cash position with a cash balance of RM2.7b. The counter closed at RM3.81.

Southeast Asia only gets less than 40% pre-covid China tourism

China’s slow economic recovery is keeping its population at home instead of travelling overseas. Countries in the region were counting on an influx of Chinese tourists for an economic boost but for the Philippines, Singapore, Vietnam, Thailand and Indonesia, the numbers have been disappointing. The Philippines only recorded 14% of pre-covid levels while the highest, Indonesia, managed 39%. Thailand is expected to miss its 7m 2023 target by 2m prompting Nomura to revise its GDP growth down from 4% to 3.4%. Bali’s demand for luxury hotels weakened in Jan-May. In 1Q2023, only 1.6% of Chinese in tour groups went overseas in contrast with 30% in 1Q2019. Despite hopes for a better 2H2023, a Chinese tour agent confirmed that summer tour bookings have not improved. Malaysia only saw 30% demand for the summer holidays compared to 2019.