Capital markets executive summary | Wed 16 Aug 2023

Capital markets executive summary | Wed 16 Aug 2023

Glostrext Bhd closed at 32% premium on ACE Market

The stock closed at 25.5 sen after opening at 65 sen or 342% above its 19 sen initial public offering (IPO) price on opening. Trading volume was 306.62m shares. The listing offers the company greater financial flexibility to pursue growth opportunities, raise its marketing profile, and retain and attract skilled employees. Glostrext provides piling, structural and geotechnical-related services, covering instrumentation, testing and monitoring services to construction projects and completed buildings and infrastructure. It earns 64.33% of its revenue from Singapore and 35.01% from Malaysia. The 19 sen IPO price was based on a price-earnings multiple of 18.81 times based on earnings per share of 1 sen for FY2023.

Sepangar’s AA1 sukuk rating affirmed

RAM Ratings affirmed the rating of Sepangar Bay Power Corporation Sdn Bhd’s RM575m sukuk murabahah. The company operates a 100MW combined-cycle gas turbine power plant in Kota Kinabalu, Sabah. It has consistently operated within the performance limits set in the power purchase agreement (PPA) with sole offtaker Sabah Electricity Sdn Bhd (SESB), thereby enabling the receipt of full capacity payments since 2015. Sepangar also continues to fully pass through fuel costs to SESB as the plant has operated within the stipulated heat rates. For FYE Dec 2022, the plant had an average 12-month rolling equivalent factor of 94.65%, better than the 87% in the PPA. The PPA requirements were also satisfied in 5M2023. Sepangar’s operating cash flow fell from RM52.21m in 2021 to RM39.77m in 2022 due to purchases of diesel as backup fuel. Notwithstanding this and a RM7.3m dividend payout, the finance service coverage ratio (FSCR) with cash balances and post-distribution was 1.86 times on 3 Jul 2023. The distribution covenant is a minimum FSCR of 1.80 times. Under RAM’s stress analysis assuming no further dividends, the minimum FSCR is 1.81 times throughout the sukuk’s tenor, in line with AA1-rated transactions.
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JB Cocoa’s sukuk A+ rating affirmed

MARC Ratings affirmed the rating on the company’s RM500m sukuk wakalah programme. JB Cocoa is wholly-owned by Singapore-based JB Foods Limited, which guarantees the sukuk. The rating assessment considers the credit profile of JB Foods. JB Cocoa is a major global cocoa processor and its longstanding experience in the cocoa industry enables it to manage the cocoa price volatility. Its global grinding market share stayed at 3% in the last 4 years. JB Cocoa’s 180k metric tonnes per annum (mtpa) grinding capacity posted a higher utilisation rate from 84% in 2022 to 91% in 1Q2023. There has been steady demand for its cocoa butter, cocoa powder and cocoa liquor. Its processing facility expansion in Côte d’Ivoire will be completed by end-2024 and add 50k mtpa grinding capacity. The expansion will enable JB Cocoa to lower logistical costs and enjoy tax savings when exporting to the European Union. Revenue grew 15.7% year-on-year to RM2.2b and operating profit by 24.9% to RM114.2m in 2022. Operating margin, though, stayed in the low single digit due to higher cocoa bean price, accounting for 90% of cost of sales, which rose by 22.6% to USD3,009 per metric tonne at end-May 2023. Excluding trade facilities, borrowings of RM170.1m gives an adjusted finance-to-equity ratio of 0.21 times.

Ranhill Utilities’ net profit jumps 72%

The company’s net profit increased from RM7m to RM12.06m in 2Q ended 30 Jun 2023 driven by its environment and energy segments. Earnings per share rose from 0.54 sen to 0.94 sen. Revenue expanded 29.51% from RM458.38m to RM593.67m aided by a water tariff hike for subsidiary Ranhill SAJ Sdn Bhd and increased revenue from engineering unit Ranhill Worley Sdn Bhd. For 6M2023, the company’s net profit almost doubled from RM12.88m to RM23.18m. It declared a dividend of 3.5 sen per share. Revenue was up from RM851.8m to RM1.11b. Ranhill is exploring an expansion of its water supply operations to other states through the asset light model. Ranhill and its consortium partners have proposed a project to supply 432m litres of treated water per day to 3 regions in Indonesia namely DKI Jakarta Selatan, Bekasi City and Bekasi Regency. The company also proposed an extension to the power purchase agreement for its Teluk Salut power plant which will expire in 2029. The counter closed at 60 sen.

European gas prices climb 18% due to threat of Australian strikes

Unresolved labour disputes could disrupt global supplies if Australian liquefied natural gas (LNG) workers go on strike. There was some progress in talks between union officials and Woodside Energy Group Ltd, which is one of the two companies operating the affected LNG facilities. Nonetheless, both sides are still far from an agreement with the strike decision on Fri looming. Up to 10% of global LNG exports are at risk of interruption if the workers stage a walkout. Europe, which rarely buys Australian gas, will have to compete against Asian countries for replacement. It is worthy to note that prior to this setback, Woodside was successful in terminating the floating production storage offloading (FPSO) contract with Bumi Armada. The other affected facility, Gorgon, which is operated by Chevron Corp is already holding back from some spot market sales.