Capital markets executive summary | Tue 3 Oct 2023

Capital markets executive summary | Tue 3 Oct 2023

Boustead-KLK deal aborted

The proposed disposal of 33% in Boustead Plantations Bhd by the Armed Forces Fund Board (LTAT) and Boustead Holdings Bhd to Kuala Lumpur Kepong Bhd (KLK) would have given LTAT and Boustead RM1.15b to be used for paying RM800m in debt by end-2023 followed by RM1.7b to redeem the sukuk. The parties had extended the cut-off date of the strategic collaboration agreement from 11 Sept to 22 Sept, and later to 6 Oct, which now will not go through. The sale was proposed on 24 Aug at RM1.55 per share. KLK would extend a mandatory general offer to raise its shareholding to 65%, whereas LTAT and Boustead would hold 35%. The company would subsequently be delisted. This week, the government announced injecting RM300m to help LTAT address liquidity issues, ahead of sourcing for RM2b by year end. At end-Mar, Boustead’s short-term borrowings were RM3.99b and long-term borrowings RM2.78b. The counter closed at RM1.27.

Sime Darby Plantation AAA ratings affirmed

MARC Ratings affirmed the corporate credit rating and AA rating of the RM3b perpetual subordinated sukuk programme. The company has a very strong market position in upstream oil palm, track record as an integrated oil palm player, stronger balance sheet, and cash flow from large spread out planted areas. The corporate credit rating is raised 1 notch on implicit support from Permodalan Nasional Berhad. The company is the world’s largest oil palm plantation company with 577,344 hectares total planted area. It replants 4%-5% of its total plantation area annually at a cost of RM950m in 2023. In 1H2023, a 21.4% year-on-year fall in crude palm oil prices reduced revenue by 16% to RM8.4b. Pre-tax profit plunged from RM2.2b in 1H2022 to RM736m due to higher labour and fertiliser costs. Operating profit margin slid from 18.6% to 7.4%. Cash flow from operations (CFO) was down from RM1.1b to RM695m. Cash balances were RM668m. With borrowings of RM8.2b, adjusted gross debt-to-equity ratio was 0.43 times at end-1H2023 which should improve to 0.35 times. CFO debt coverage was 0.2 times while interest coverage was 4.3 times. The counter closed at RM4.28.
Would you like us to email you when our latest executive summary is available?

AMMB Group’s ratings upgraded to AA2

RAM Ratings upgraded AMMB Holdings Berhad’s long-term corporate credit rating and the long-term financial institution ratings of its banking subsidiaries to AA2 from AA3. AmBank (M) Berhad’s proposed RM8b subordinated notes programme for the issuance of additional tier-1 notes is assigned a rating of A2 and the tier-2 notes AA3. A private placement and the sale of the general insurance unit restored the bank’s common equity tier-1 capital (CET-1) ratio to 12.6% at end-Jun 2023 from 10.4% at end-Mar 2021. Gross impaired loan (GIL) ratio should remain at 2% or below, with new impaired loans from the mortgage and small and medium enterprise portfolios, from 1.7% at end-Jun 2023. GIL coverage was 104.9% at end-Jun 2023. Higher loan growth drove net loans to customer funding ratio to 97%, or 87% including long-term funding. Liquidity coverage ratio was 170% and net stable funding ratio was 104%. The larger portfolio of investment securities reduced net interest margin from 2% in FY2023 to an annualised 1.7% in 1Q FY Mar 2024. The counter closed at RM3.72.

AmMetLife to be sold to Great Eastern

AMMB Holdings Bhd and MetLife International Holdings LLC are proposing the divestment for RM1.12b. Wholly-owned AMAB Holdings Sdn Bhd owns 50% minus 1 share in AmMetLife Insurance Bhd and 50% plus 1 share in AmMetLife Takaful Bhd. The balance is owned by MetLife. After obtaining regulatory approvals including from the Ministry of Finance, Bank Negara Malaysia and the Monetary Authority of Singapore, the parties will enter into a sale and purchase agreement. AmMetLife Insurance will merge with Great Eastern Life Assurance while AmMetLife Takaful will merge with Great Eastern Takaful. The companies will enter into exclusive 20-year bancassurance and bancatakaful agreements for distribution of products through AMMB’s banking subsidiaries.

Germany’s Birkenstock to list on 11 Oct

The footwear maker will raise USD1.6b by issuing 10.75m new shares at USD44-USD49. The controlling shareholder, private equity firm L Catterton, is offering 21.51m existing shares. The Norwegian sovereign fund and Durable Capital Partners are interested in USD300m while LVMH chairman Bernard Arnault’s family holding company, an existing investor, may buy USD325m. The proceeds will be used to repay debt. Pricing is tentatively on 10 Oct and the stock will start trading on the New York Stock Exchange on 11 Oct. Arrangers include Goldman Sachs, JPMorgan and Morgan Stanley.