Capital markets executive summary | Thu 12 Oct 2023

Capital markets executive summary | Thu 12 Oct 2023

Hektar REIT proposes private placement to fund investments

Hektar Real Estate Investment Trust (REIT) is proposing a private placement of up to 20% of the total number of issued units to 3rd party investors to be identified. From the RM53.64m gross proceeds at 53 sen indicative issue price, RM52.5m is for future viable investments within 24 months from completion. The private placement could be in a single tranche or in multiple tranches subject to the board’s approval, and completed within 6 months from the date of Bursa Securities’ approval for the listing and quotation of the placement units. The REIT decided on private placement to save on borrowing costs if it obtains financing and time as compared to a rights issue. The counter closed at 62 sen.

Edra Solar’s sukuk AA2 rating affirmed

RAM Ratings affirmed the rating of the company’s RM245m ASEAN SRI sukuk. The rating reflects the project economics and operational performance of the 50MWac solar photovoltaic plant in Kuala Ketil, Kedah and the power purchase agreement (PPA) with Tenaga Nasional Berhad (rated AAA). There were no outages in 2022 and 5M2023. In FY2022, energy production exceeded the declared annual quantity (DAQ), the forecast submitted to TNB at the beginning of the year, by 8.8% above the PPA minimum of 70%. In 5M2023, production rose 8.2% and should meet the DAQ for this year. Revenue was slightly lower from RM34.6m in 2021 to RM34.3m in 2022. Operating profit before depreciation, interest and tax (OPBDIT) was down from RM28.5m to RM27.8m. Pre-financing cash flow fell from RM31.1m to RM27.7m. At Apr 2023, finance service coverage ratio (FSCR) with cash balances was 2.92 times. Minimum annual FSCR with cash balances is projected at 1.68 times and average at 7.87 times, in line with the AA2 rating.
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RHB’s and Bank of China’s ratings affirmed

RAM Ratings affirmed the financial institution ratings of RHB Bank Berhad, RHB Islamic Bank Berhad and RHB Investment Bank Berhad and their debt facilities. The ratings reflect the domestic banking franchise and credit metrics. RHB, the 4th largest banking group, contributes 10% of the Malaysian banking system’s deposits and loans at end-Jun 2023 and has sizeable market shares in financing for residential properties and small and medium enterprises (SME). Its post-dividend common equity tier-1 capital ratio historically more than 15% and 16.7% at end-Jun 2023 is among the highest in the local banking industry. Gross impaired loan (GIL) ratio inched up from 1.5% at end-Dec 2021 to 1.6% at end-Jun 2023 versus the industry’s 1.8%. Lower provisions and reversals improved credit cost ratio from 30bps in 2021 to 15bps in 2022. Better treasury-related income and loan growth pushed pre-tax profit up 10% from RM1.9b in 1H2022 to RM2.1b in 1H2023. RHB Bank closed at RM5.57. Separately, RAM affirmed Bank of China (Malaysia) Berhad’s AA1 and P1 financial institution ratings premised on expectation of strong parental support from Bank of China (Hong Kong) Limited and Bank of China Limited. GIL ratio weakened from 2.2% at end-Dec 2021 to 4% at end-Jun 2023 due to impairments in several accounts under relief measures albeit highly collateralised. GIL coverage ratio plunged from 124.5% to 62%.

Bina Darulaman’s sukuk rating affirmed

MARC Ratings affirmed the short-term rating of MARC-2 on the company’s RM100m Islamic commercial papers programme. The Kedah state-owned company benefits from its strength in construction and property, improving leverage, adequate liquidity, and ability to win state contracts. Moderating is the short-term construction projects mostly in Kedah. Construction order book was RM636m at end-Jun 2023 including the RM392m water treatment plant upgrading in Pelubang, Kedah to be completed in 2025. In May, the company’s state road maintenance contract was renewed for 2023-2026 at a value of RM204m. It bought a granite quarry in Langkawi for RM13m in Aug 2023 and will launch a new RM60.7m gross development value (GDV) township by end-2023. Total GDV for ongoing property development projects is RM102.6m with 90% take-up rate. Revenue fell from RM83.1m in 1H2022 to RM81.5m in 1H2023. Pre-tax loss widened from RM4.9m to RM10.9m due to higher material and labour costs. Borrowings came down from RM91.5m in 2022 to RM80.3m in 1H2023 for a low debt-to-equity ratio of 0.17 times. The counter closed at 30 sen.

Bumi Armada’s unit gets USD105.5m term loan

In Apr 2019, the offshore energy facilities and services provider refinanced its USD380m short term loans and USD280m revolving credit facilities into a single facility consisting of USD260m Tranche 1, which matured on 23 Nov 2022, and USD400m Tranche 2 which will mature in May 2024. Wholly owned unit Bumi Armada Holdings Labuan Ltd has just accepted the new syndicated term loan facility with a 25 Sep 2028 final maturity date. The proceeds from the facility will be used to refinance Tranche 2. At Jun 30, short-term borrowings were RM1.41b and long-term borrowings RM3.41b. The counter closed at 55 sen.