Capital markets executive summary | Tue 14 Nov 2023

Capital markets executive summary | Tue 14 Nov 2023

LTAT makes takeover offer for Boustead Plantation

The Armed Forces Fund Board (LTAT) signed an unconditional share sale agreement with Boustead Holdings Bhd to acquire 739.20m Boustead Plantation (BPlant) shares or 33%, which would increase LTAT’s share of BPlant from 237.21m shares or 10.59% to 976.41m shares or 43.59%. Concurrently, LTAT made the mandatory takeover offer to acquire all remaining BPlant shares it does not own for RM1.55 per share, a 21.09% premium above BPlant’s RM1.28 net assets per share. The offer price is 1.3% more than BPlant’s closing price of RM1.53, up almost 140% this year. The offer is a significant step in the turnaround of Boustead Holdings and in rebalancing LTAT’s investment portfolio to improve its risk-return profile. Earlier, Kuala Lumpur Kepong Bhd’s proposed acquisition, which would have resulted in it having 65% while LTAT holds the balance 35% was aborted in Oct.

Tan Chong Motor’s rating outlook revised to negative

MARC Ratings affirmed the A+ rating of Tan Chong Motor Holdings Berhad’s RM1.5b sukuk murabahah programme. The company’s domestic market share continued to fall from 3% in 2020 to 1.4% in 1H2023 given stiff competition, fewer new models, and supply chain disruptions. The distributorship for China-made MG cars in Vietnam was terminated in Jun 2023 by principal SAIC Motor Corp Ltd, China’s largest automaker. Vietnam contributed 7% of revenue and MGs delivered 95% of sales each year from 2021 to 1H2023. The utilisation rate for the 2 assembly plants in Malaysia slipped from 61% in 2022 to 56% in 2023. The Vietnamese plants in Danang recently resumed operations rolling out Wuling commercial vehicles. More Completely Knocked Down (CKD) passenger and commercial models will be introduced to raise the utilisation rate from 25% in 1H2023. Revenue fell by 21.8% year-on-year to RM1.2b in 1H2023. Operating margin which shrank to 1.29% in 1H2023 and higher cost led to pre-tax loss of RM5.5m. There was a net cash outflow from operations of RM128.9m as inventory grew. Borrowings of RM1.4b give gross debt-to-equity (DE) ratio of 0.48 times and net DE ratio of 0.32 times. At end-1H2023, the company had RM462.6m cash. The counter closed at RM1.03.
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Golden Agri’s rating upgraded to AA2(s)

RAM Ratings upgraded the rating of Golden Assets International Finance Limited’s RM5b Islamic medium term notes programme (2012/2027) from AA3(s). The company is the fundraising vehicle of Indonesia-based Golden Agri-Resources Ltd, the 2nd biggest oil palm planter in the world, which issued an irrevocable and unconditional undertaking to the sukuk trustee for the benefit of sukukholders. Gearing ratio strengthened from 0.52 times at end-Jun 2022 to 0.41 times at end-Jun 2023 following repayments. Higher crude palm oil (CPO) prices helped adjusted funds from operations debt cover to rise from 0.39 times in FY2021 to 0.76 times in FY2022 and remain above 0.30 times in the next 2 years. Operating profit before depreciation, interest and tax increased 69.4% from USD1.1b in FY2021 to USD1.9b in FY2022 given +3% upstream and +135% downstream earnings. Results in 1HFY2023 weakened with the fall in CPO price, -7% fresh fruit bunch production because of replanting and -10% downstream performance. Falling fertiliser prices and higher productivity from replanted areas should lower unit costs in future.

Hextar Industries to transfer to Main Market

The company, which started operating in Dec 2011 and was listed on the ACE Market on 13 Feb 2014 as SCH Group, is in the business of manufacturing and distribution of fertilisers, supplying turnkey products for the quarry and mining industry, and providing equipment rental and lifting solutions. Hextar is proposing to transfer its listing to enhance its credibility, prestige and reputation. It has satisfied the transfer requirements including minimum RM500m market capitalisation, positive net working capital for the 12 months after the transfer, positive cash flow from operating activities in the most recent financial year and more than 25% of the issued shares are held by public shareholders. The transfer should be completed in 1Q2024. The counter closed at 38 sen.

Disposal of tissue manufacturer shares attracts global investors

Hong Kong-listed Vinda International Holdings Ltd also makes products for feminine care, baby care and incontinence. Swedish personal care product maker Essity AB, Vinda’s majority owner, announced a strategic review of its holding in Apr. Vinda’s market capitalisation is close to USD3b and the Essity stake is generating interest from investors including Brazilian Suzano SA, Bain Capital, CVC Capital Partners and DCP Capital. Indonesia’s Asia Pulp & Paper Co Ltd, which also sells tissues in China, made a preliminary proposal at more than HKD20 per share and is talking to lenders for financing. Another Indonesian company, RGE Pte Ltd, which also has a pulp and paper business, has been working on a competing offer. The daughter of RGE’s founder built a 7% interest in Vinda recently. The new major shareholder will have to work with founder Li Chaowang, who owns 21%.