Capital markets executive summary | Fri 25 Aug 2023

Capital markets executive summary | Fri 25 Aug 2023

Sime Darby to take over UMW

Sime Darby Berhad will buy 61.18% of UMW Holdings Berhad from parent Permodalan Nasional Bhd (PNB) for RM3.57b or RM5 per share, 8.2% premium to the RM4.62 close. A mandatory general offer (MGO) will follow for the remaining 38.82% to take UMW private at a cost of RM2.27b. The price values UMW at a price-to-earnings ratio (PER) of 14.1 times and price-to-book ratio of 1.3 times. For comparison, Sime Darby’s PER is 13 times, DRB-Hicom 15.2 times, Bermaz Auto 8.5 times and MBM Resources 5.1 times. The transaction will be funded by borrowings resulting in Sime Darby’s net gearing ratio doubling from 0.2 times to 0.4 times. CIMB is the principal adviser and AmInvestment Bank is the independent adviser. The transaction will be completed by 4Q2023 and the MGO by 1Q2024. Other major shareholders are Retirement Fund Inc (KWAP) with 9.13% and Employees Provident Fund (EPF) with 7.62%. Sime Darby closed at RM2.11.

Dynasty Harmony’s AA3 rating affirmed

RAM Ratings affirmed the rating of the RM165m Islamic medium term notes (2018/2033) issued out of the company’s RM300m sukuk programme (2018/2036). The rating reflects the stable cash flows, adequate liquidity and healthy subordinated finance service coverage ratio (FSCR). Dynasty Harmony is wholly-owned by GFM Services Berhad and related to KP Mukah Development Sdn Bhd, the concession holder for the Universiti Teknologi MARA campus in Mukah, Sarawak. Dynasty Harmony’s sukuk are subordinated to KP Mukah’s Bank Pembangunan Malaysia Berhad variable-rate financing facility because dividends from KP Mukah are the source of payment. The subordinated FSCR was 1.79 times at end-Dec 2022 due to lower financing rate for KP Mukah’s Bank Pembangunan facility, timely concession receipts and minimal maintenance service charge (MSC) deductions. KP Mukah should distribute RM25m dividends annually to Dynasty Harmony. KP Mukah’s FSCR should stay above the 1.5 times rating threshold and the subordinated FSCR above 1.2 times due to the tight financing structure, constraints on cost escalations and limitations on distributions to Dynasty Harmony shareholders. GFM Services which closed at 20 sen is seeking a listing transfer from the ACE Market to the Main Market.
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Bank Muamalat’s sukuk programme assigned preliminary ratings

MARC Ratings assigned preliminary ratings to the proposed RM5b sukuk programme comprising senior sukuk wakalah (A+), Tier-2 subordinated sukuk wakalah (A-) and additional Tier-1 (AT-1) sukuk wakalah (BBB). It affirmed the A+ rating of the RM2b Islamic senior notes programme. The bank’s financing book comprised 77%. Gross impaired financing was a negligible 0.85% at end-2022 because retail financing with direct salary deductions made up 60% of total financing. Financing loss coverage of 125.5% buffers against impairment risks. Pre-tax profit rose from RM254.9m in 2021 to RM306.7m in 2022, while net financing income increased by 21.8% to RM664.5m in 2022 alongside rate hikes. The common equity tier 1 (CET1) ratio of 12.5% and total capital ratio of 17.6% at end-2022 are similar to peers. DRB-Hicom which owns 70% of the bank closed at RM1.57. Khazanah holds the balance 30%.

ANIH’s negative outlook maintained

MARC Ratings maintained the negative rating watch on the company’s senior sukuk musharakah programme with RM1.48b outstanding 1st placed on 25 May 2023. Uncertainties emerged from the supplemental concession agreement (SCA) between ANIH and the government signed on 17 Nov 2022 because it was signed without the sukukholders’ prior consent which could lead to the declaration of an event of default. ANIH is the concession holder for the 60km Kuala Lumpur-Karak Highway and the 174.5km East Coast Expressway Phase 1. While the SCA extends the concession expiry from 2032 to 2069, it entails lane widening and flood mitigation works costing RM2.3b. ANIH plans to get a bank loan to redeem the outstanding sukuk and to fund the initial construction cost. The company has RM304.4m cash as at end-Jul 2023, sufficient to redeem the RM180m sukuk which will become due on 29 Nov 2023.

Vietnam’s VNG files for US IPO

The internet startup will be the first Vietnamese technology company to list in New York’s Nasdaq Global Select Market as soon as Sep 2023. It plans to raise USD150m by offering 22m shares at a price to be determined later. VNG will continue to be controlled by founders Le Hong Minh and Vuong Quang Khai with 51%. VNG will own 49% of VNG Corp, the Vietnamese operating company. VNG Corp, formerly Vinagame, started as a game publisher in 2004. Subsidiary VNGGames has 9 studios outside of Vietnam including in Thailand, Singapore, Malaysia, Taipei and China. The company expanded into music sharing, video streaming, messaging, a news portal and mobile payments. Its Zalo messaging app is the most-used chat platform in Vietnam since 2020 with 75m monthly active users. Lead banks are Citigroup, Morgan Stanley, UBS and Bank of America. China’s Tencent will have 23% votes in a dual-class share structure while Singapore’s GIC will hold 5.4%.