Capital markets executive summary | Mon 31 Jul 2023

Capital markets executive summary | Mon 31 Jul 2023

More than 700 representatives attended HSR briefing

The officials from local and foreign firms, and foreign missions were present at the Kuala Lumpur-Singapore High Speed Rail (KL-SG HSR) briefing for the Request for Information (RFI). The foreign companies are based in the United Kingdom, Spain, Germany, the Netherlands, Australia, China, South Korea, Japan, Hong Kong, Thailand and Singapore. Afterwards, almost 30 local and international companies registered to purchase the RFI documents. MyHSR Corporation Sdn Bhd extended the purchase period to 15 Nov 2023, which is the closing date for the submission of concept proposals, following the encouraging response. Interested parties were reminded to submit a clear vision and plan that will leverage rail connectivity to boost economic growth while ensuring that the sustainability and low-carbon aspects of the system are incorporated.

TNB’s ratings affirmed

RAM Ratings affirmed the AAA ratings of Tenaga Nasional Berhad’s RM5b Islamic medium term notes (MTN) programme (2017/2067), RM10b Islamic MTN programme (2020/2070) and the P1 rating of its RM2b Islamic commercial papers programme (2021/2028). The ratings reflect TNB’s strategic position as the national electric utility, and its resilient operating and financial performance. The company has a monopoly over power distribution with 57% of the total installed capacity in Peninsular Malaysia at end-Dec 2022. Also, as a government-linked entity, there is high probability that TNB will receive extraordinary government support if it falls into financial distress. TNB gained from the imbalance cost pass through (ICPT) mechanism under the Incentive-Based Regulation framework that protected its earnings as fuel prices jumped last year. The timing mismatch between fuel payments and the recovery of surcharges forced the company to drawdown additional borrowings. TNB’s heavier debt load of RM97.09b (2021: RM81.12b) raised its gearing from 1.39 to 1.61 times. Funds from operations debt coverage fell to 0.20 times (2021: 0.25 times). Operating cashflow debt coverage declined to 0.10 times (2021: 0.16 times) before improving to an annualised 0.18 times in 1Q2023. The counter closed at RM9.57.

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Projects behind Exsim Capital’s sukuk still on track

Exsim Capital Resources Berhad, wholly owned by Exsim Development Sdn Bhd, issued RM323m Tranche 2 and RM300m Tranche 3 out of its RM2b sukuk musharakah programme. The developers granted the contractor another time extension to complete the projects which faced workforce and building material supply issues during covid. These issues should no longer materially affect progress. The developers and independent project certifier believe that the revised completion dates for the D’Quince, D’Vervain and D’Erica projects can be met. Therefore, Exsim Capital should be able to make full repayment of the sukuk on the expected maturity dates. Buyer defaults under the sale and purchase agreements (SPA) were 0.6% for Tranche 2 and 0.7% for Tranche 3 of the initial gross development value, below RAM’s applied default frequency of 7.2%. Units where buyers defaulted or SPAs were terminated were resold within 1-3 months with minor price differences. At end-May 2023, the 3 projects combined only had 5 unsold units. There were no cost overruns given the fixed-price lump-sum contracts.

Gobi partners HSBC to support Hong Kong and Asean innovation

Under the memorandum of understanding, they will drive business and financial connectivity between the Greater Bay Area in China and Asean, including “TaqwaTech”, which are start-ups that serve the Muslim community. The partners also seek opportunities in sustainable innovation and investment aligned to the United Nations Sustainable Development Goals, and support the growth and empowerment of diverse entrepreneurs. HSBC views Asean as the largest digitally enabled population in the world, with its e-commerce industry projected to grow to USD88b by 2025. A survey jointly conducted by Google, Temasek and Bain & Company, suggests that Southeast Asia’s digital economy will reach USD330b by 2025. Gobi Partners is a local-based venture capital firm with USD1.6b (RM7.29b) assets under management.

Tencent investee in fresh USD200m fundraising round

Beijing Taoche Technology Co, a used car sales platform in China, wants to raise USD200m (RM910.29m). The company, currently valued at USD1b, has appointed an adviser on the new funding round. It is targeting an initial public offering (IPO) as soon as 2024 with the US among potential listing venues. In 2018, Hong Kong-listed Yixin Group Ltd transferred ownership of Taoche to a new entity, which separately agreed a preferred share subscription with Tencent Holdings Ltd and JD.com Inc. In late 2020, Taoche agreed to a CNY500m investment from a Ningbo city government-owned company on condition that the company lists by 2023.