Capital markets executive summary | Tue 7 Nov 2023

Capital markets executive summary | Tue 7 Nov 2023

Surian Creation sues Euro Holdings for exploiting it to get banking facilities

The furniture maker, 3 of its subsidiaries and its managing director Datuk Seri Lim Teck Boon are being sued for allegedly using another company to obtain banking facilities. Surian Creation Sdn Bhd filed the lawsuit at the High Court in Melaka claiming that the defendants had conspired by seizing full control over Surian Creation and then using it to obtain banking facilities for the benefit of the defendants. It is seeking RM19.29m from the defendants. Euro Holdings is denying any impropriety and that the alleged claims made by Surian Creation are vexatious, frivolous and without merit. The company will engage legal counsel to defend itself against Suria Creation’s legal action. Euro Holdings shares closed unchanged at 7.5 sen.

Jimah Energy Ventures’ AA3 sukuk rating affirmed

RAM Ratings affirmed the rating of Jimah Energy Ventures Sdn Bhd’s (JEV) RM4.85b senior Islamic medium term notes (IMTN) (2005/2025). JEV runs a 1,400MW coal-fired power plant in Port Dickson under a 25-year power purchase agreement (PPA). Full available capacity payments (ACP) were received in 2022 as the unscheduled outage rate (UOR) was below the PPA limit of 6%. Minor ACP cuts were made in 1H2023 because of failure to satisfy despatch capacity requirements. Lower daily utilisation payments (DUP) for several months in 2022 and 1H2023 were fully offset by bonus DUPs earned for the remainder. Total revenue almost doubled from RM2.67b in 2021 to RM4.66b in 2022 due to higher fuel costs, even though the tariff for the ACP and DUP was halved from 1 Jan 2022 as per the PPA. Thinner margin energy payments (EP) contributed a larger proportion of revenue, thereby reducing operating profit before depreciation, interest and tax (OPBDIT) margin. Pre-tax profit fell in tandem with lower financing cost for the senior IMTN. In 1H2023, negative fuel margins caused a pre-tax loss. Finance service coverage ratio (FSCR) with cash balances was 2.66 times on 12 May 2023. RAM’s sensitivity analysis shows minimum FSCR with cash balances of 1.50 times going forward.
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Fund manager Brookfield raised USD26b in 3Q2023

Toronto-based alternative asset manager Brookfield Asset Management is on track to raise USD150b fresh capital this year with expectations of earnings and dividend growth in 2024. The firm posted 8% higher distributable earnings year-on-year of USD568m in the quarter. Fee-bearing capital, money the firm raised for 3rd parties, was USD440b at end-Sep and the company expects to hit USD1t by 2028. The company manages USD850b of assets including those owned by parent Brookfield Corp and has been one of the world’s most active investors this year. The company raised USD61b since the beginning of 2023, which supplies it with USD102b of dry powder. Recent deals include buying most of the assets of bankrupt data centre developer Cyxtera Technologies Inc for USD775m and Dubai-based credit card processor Network International Holdings plc for GBP2.2b. Its attempt to buy Origin Energy Ltd was rejected by top shareholder AustralianSuper.

Bain buys Guidehouse

McLean, Virginia-based Guidehouse provides management and technology consulting and other services to federal government agencies such as the Departments of Defense, Homeland Security and Veterans Affairs, to state and local governments, and to businesses. The deal values it at USD5.3b including debt. In 2018, Veritas Capital, which invests in businesses at the intersection of government and technology, bought PricewaterhouseCoopers’ US public-sector consulting business and rebranded it as Guidehouse. The company acquired Navigant Consulting in 2019, Dovel Technologies in 2021 and Grant Thornton’s public-sector advisory practice in 2022, expanding annual revenue from USD600m in 2018 to USD3b in 2023. US consulting should grow 8% to USD94b this year, down from 10.5% in 2022 and 11.1% in 2021. The global consulting market will grow by 8% this year to USD250b, lower than the 10.7% increase in 2022.

China invests USD5.4b in start-up memory chipmaker

Changxin Xinqiao Memory Technologies Inc, founded in 2021, makes products that compete against Micron Technology and Samsung in line with China’s goal of technological self-sufficiency amidst US sanctions. Ahead of its planned initial public offering in China that could value it at USD14.5b, the company raised CNY39b from government-backed investors. The Hefei-based company secured CNY14.6b from state-backed China Integrated Circuit Industry Investment Fund Phase II in late Oct and funding from 2 local government-affiliated investors in its latest funding round. This is one of the biggest investments that the Big Fund has made in a year after its top executives were investigated on corruption. Some of the company’s shareholders and its general manager are related to China’s leading DRAM chipmaker Changxin Memory Technologies Inc, also headquartered in Hefei.