Capital markets executive summary | Mon 28 Aug 2023

Capital markets executive summary | Mon 28 Aug 2023

TNB and Indonesia’s PLN to study subsea power grid link

Tenaga Nasional Bhd and PT Perusahaan Listrik Negara (Persero) signed a memorandum of understanding to jointly study connecting the peninsular Malaysia and Sumatra power grids across the Strait of Malacca via the first subsea cross-border interconnection in Southeast Asia. The study will cover the technical, financial and economic feasibility, and a preliminary environmental impact assessment. The idea which was proposed before but deemed too expensive may now be viable with the current high energy prices and demand for renewable energy. TNB signed another MOU with Singapore’s SP PowerAssets Ltd to study a 2nd interconnection facility. Separately, Sabah Electricity Sdn Bhd signed an MOU with PLN for a feasibility study on linking the grids in Sabah and Kalimantan. Thailand, which is interested in purchasing electricity, may require an upgrade in interconnectivity, although discussions are on sharing reserves for balancing electricity supplies. Peninsular Malaysia currently has a reserve margin of 30% to 40%. TNB closed at RM9.97.

Cahya Mata Sarawak ratings outlook revises from positive to stable

RAM Ratings changed the outlook while keeping the corporate credit ratings at AA3 and P1 and the RM2b sukuk programme (2017/2037) rating at AA3. The earlier positive outlook was premised on Cahya Mata Phosphates Industries Sdn Bhd, which manufactures phosphates, starting commercial operations and generating substantial profits from FY2024. This will help the company diversify away from its construction-centric businesses. Uncertainties arose when the electricity supply was cut on 10 Jul 2023 by Syarikat SESCO Berhad. Despite Cahya Mata Sarawak pursuing arbitration, if commercial operations stay postponed, losses will continue and there could be impairments. Following the dispute resolution, Cahya Mata Phosphates may have to pay RM266m in one-off costs and penalties to SESCO while its profitability could be reduced by higher electricity tariff. Cahya Mata Sarawak’s credit profile is supported by its strong foothold in Sarawak’s construction industry, and net cash position with RM817.48m cash and gearing of 0.16 times at end-Mar 2023. Its annualised funds from operations debt cover for 1Q FY Dec 2023 was 0.33 times. The counter closed at RM1.11.
Would you like us to email you when our latest executive summary is available?

CIMB Bank’s AAA and P1 ratings affirmed

RAM Ratings affirmed the financial institution ratings of CIMB Bank, CIMB Islamic and CIMB Investment Bank. It also affirmed the AA1 and P1 corporate credit ratings of CIMB Group. The rating agency assigned a P1 rating to the proposed RM3b conventional commercial papers programme and affirmed the respective ratings of the entities’ debt facilities. Underlying the ratings is the group’s strong franchise in Southeast Asia and Malaysia, sound capital and liquidity buffers, healthy profits, and expectations of extraordinary government support given the group’s systemic importance to Malaysia. CIMB is the 2nd largest bank in the country and 5th in Southeast Asia by asset size. Foreign operations contribute 40% of total loans, although Indonesia and Thailand and lumpy impairments kept its 3.2% gross impaired loan ratio at end-Mar 2023 above domestic peers. Lower impairment charges, 7.7% loan book growth, 6bps higher net interest margin and larger fee-based income pushed pre-tax profit up 33% from RM6.4b in FY2021 to RM8.5b in FY2022. The counter closed at RM5.61.

IHH buys another 24.53% in India’s Ravindranath GE

IHH Healthcare Bhd increased its shareholding in Ravindranath GE Medical Associates Private Ltd (RGE) from 73.64% to 98.17% for a cash consideration of INR7.4b (RM415m). Wholly-owned Gleneagles Development Private Ltd (GDPL) entered into an agreement to buy the shares held by Dr Ravindranath Kancherla and his affiliates. The remaining 1.83% is held by minority shareholders. IHH wants to expand RGE’s operations and strengthen its leading market position. It has been IHH’s key asset since the initial investment in 2015 and has grown into a leading healthcare chain in India with a reputation for multi-organ transplant services. RGE owns Gleneagles Global Hospitals which operates 6 multi-specialty hospitals in Hyderabad, Chennai, Bangalore and Mumbai, with a 1,500-bed capacity. The exercise is expected to be completed by 4Q2023. The purchase price will be paid in cash via internally generated funds and bank borrowings. The counter closed at RM5.97.

Indian food delivery firm Swiggy plans 2024 IPO

The Softbank-backed food delivery company has reinitiated talks with banks including Morgan Stanley, JP Morgan and Bank of America. Swiggy delivers food from restaurants and groceries, and was valued at USD10.7b in its 2022 fundraising. Similar to many Indian startups, it paused its IPO plans for months amid a funding crunch and investor concerns about overvaluations. Global and Indian markets have since rebounded, and the company has invited 8 investment banks to make pitches in early Sep on the IPO. Earlier in 2022, Swiggy was considering raising USD800m-USD1b. Swiggy plans to list in Jul-Sep 2024 after the national elections due by May. Rival Zomato’s shares have appreciated 54.8% this year, proof that investor confidence is returning to India’s financial markets. Grocery startup Zepto raised USD200m at a USD1.4b valuation, the 1st Indian startup with a billion-dollar valuation mark in the last year. Swiggy’s food delivery business turned profitable after 9 years although its newer grocery delivery service, Instamart, is still loss-making.