Capital markets executive summary | Fri 18 Aug 2023

Capital markets executive summary | Fri 18 Aug 2023

Supercomnet’s transfer to Main Market approved

Supercomnet Technologies Bhd became the first company to be listed on the ACE Market in Apr 1999. Its market capitalisation has risen more than 7-fold from RM144.08m to RM1.06b. The company received the approval from Bursa Malaysia for the transfer of its listing. On 21 Aug, the shares of the company will start trading on the Main Market. The counter will be a constituent of the health care equipment and services sub-sector within the healthcare sector. Supercomnet manufactures and assembles medical devices and cables, automotive fuel tanks, and wires and cables for electrical appliances, consumer electronics and the automotive markets. The medical segment, which contributes much of its gross profit, supplies to multinational customers from the US and Europe, and new and emerging device manufacturers. The counter closed at RM1.35.

Southern Power’s sukuk AA- rating affirmed

MARC Ratings affirmed the rating on Southern Power Generation Sdn Bhd’s RM3.4b sukuk. The rating reflects the company’s 21-year power purchase agreement (PPA) with offtaker Tenaga Nasional Berhad, moderated by technical and operational issues affecting its ability to receive full capacity and energy payments. At end-Jun 2023, unplanned outage rates (UOR) for Unit 1 improved from 24.03% in 2021 to 10.36% while Unit 2 improved from 32.56% to 13.12%. Notwithstanding, they stayed above the PPA threshold of 4%. The RM464.5m capacity payments in 2022 were 14.3% lower than projected and recently, a problem with Unit 2’s hot reheat bypass system in early Jun 2023 caused the UOR to rise and led to a RM35.2m capacity payment deduction. Southern Power expects the UORs to fall below 4% by Jan 2024 for Unit 1 and May 2024 for Unit 2. The heat rate was also above the PPA threshold and therefore, fuel costs were only partially passed through. Cash flow from operations (CFO) was RM226.3m in 2022 and CFO interest coverage was 1.20 times. The minimum finance service coverage ratio is projected to be 1.32 times while the average will be 1.89 times.
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CIMB Thai’s AA2 and P1 ratings affirmed

RAM Ratings affirmed the financial institution ratings and the AA3 rating of CIMB Thai Bank Public Company Limited’s RM2b Tier-2 subordinated debt programme (2014/2044). The ratings reflect expectations of continued support from parent CIMB Bank Berhad (AAA/P1) due to CIMB Thai’s strategic role in CIMB Bank’s ASEAN-focused strategy. The bank had undergone huge bad debt write-offs and disposals caused primarily by commercial loan impairments. The Forward23+ strategy forced CIMB Thai to rundown its commercial banking book and refocus towards consumer banking, wealth management, treasury and markets. Commercial loans are now only 4% of its loan portfolio down from the high teens 5 years ago. The gross impaired loan (GIL) ratio improved from 3.7% at end-Dec 2021 to 3.2% at end-Mar 2023. CIMB Thai’s common equity tier-1 capital ratio was 16.5% in Dec 2022, up from 16.2% the prior year. GIL coverage ratio was also up from 112.5% to 121.6%. The 2018-2022 average return on risk weighted assets was only 0.86%. CIMB Group closed at RM5.64.

George Kent’s A+ and MARC-1 sukuk ratings affirmed

MARC Ratings affirmed the ratings of the RM100m Islamic commercial papers programme and RM500m Islamic medium term notes programme with a combined RM500m limit. The ratings reflect the company’s liquidity position, balance sheet, 80-year water metering business, client relationships, brand recognition and geographical diversification. Moderating factors are volatile construction contract flows, working capital movements, and cost pressures. George Kent’s water metering business recorded RM143.6m revenue and RM33.4m profit in FYE Mar 2023. Stronger demand in Singapore and Hong Kong offset thin low-mid 20% operating profit margins in the domestic market. For the engineering business, the construction revenue and profit continued to decline to RM103.4m and RM8.9m in FY2023. Its order book is depleted with the only remaining project being the rubber glove manufacturing facility for 40%-owned Dynacare which will be completed by 3Q2023. Cash flow from operations turned positive in FY2023 after 2 straight years of net outflows. Cash was RM250.2m at end-Mar 2023 against debt of RM200m. Debt-to-equity ratio was steady at 0.38 times. The counter closed at 48 sen.

Singapore’s open economy a magnet for money laundering

The influx of foreign money into Singapore in recent years pushed total assets under management up 16% to SGD5.4t in 2021 compared to a lower global increase of 12% to USD112t in the same year. This week, the authorities smashed a group suspected of laundering proceeds from overseas organised crime, such as scams and online gambling. The raids on 9 locations bagged assets worth SGD1b including 94 properties, bank accounts with SGD110m, 50 vehicles, SGD23m in cash, luxury handbags and watches, jewellery, and gold bars, reminiscent of Malaysia’s own 2018 score on a politically-linked posh apartment. 10 foreigners 31-44 years old from China, Cambodia, Cyprus and Vanuatu were arrested. The Monetary Authority of Singapore had contacted the financial institutions where potential criminal proceeds had been identified.