Capital markets executive summary | Wed 27 Dec 2023

Capital markets executive summary | Wed 27 Dec 2023

HE Group signs underwriting agreement for ACE Market listing

The company struck the deal with Alliance Islamic Bank Bhd for its IPO involving the issuance of 86.88m new shares or 19.75% of its enlarged shares and an offer for sale of 44m existing shares or 10% of the enlarged shares. 22m new shares are for the Malaysian public via balloting, 11m new shares as pink form allocation for directors, employees and persons who have contributed, and 53.88m for selected investors via private placement. Alliance Islamic Bank will underwrite the 33m new shares for the Malaysian public and the pink form allocation. Subsidiary Hexatech Engineering Sdn Bhd is an electrical engineering service provider focused on power distribution systems for end-user premises, and industrial and commercial substations. The company is a Grade 7 Contractor registered with the Construction Industry Development Board and a Class A Electrical Contractor recognised by the Malaysian Energy Commission, which allow it to undertake projects without size and value restriction.

Sime Darby Property’s sukuk AA+ rating affirmed

MARC Ratings affirmed the rating on the RM4.5b sukuk musharakah programme with a one-notch uplift from 58% shareholder Permodalan Nasional Berhad’s implicit support. Projects launched in 9M2023 with RM3.2b gross development value (GDV) had 75% take up rate at 5 Nov. Developable landbank is 13,640 acres and close to populated areas. Unbilled sales were RM3.7b at end-Sep 2023 giving earnings visibility until 2026. Completed inventories were RM433.1m at end-9M2023. The company signed its 1st tenant for Metrohub 2, E-Metro Logistics Park, for 21% of the 800k sq ft gross lettable area. Industrial launches with RM675.6m GDV at end-9M2023 hit 86% take up rate at 5 Nov. For 40% owned Battersea Power Station, Phase 3B 204-unit apartment building was launched in Oct 2022 and achieved practical completion in Nov 2023. The take up rate was 53% at end-9M2023 due to high interest rates in the UK. The Phase 3B office building, 50 Electric Boulevard, should be completed by 1Q2024. Revenue grew from RM1.8b in 9M2022 to RM2.4b in 9M2023. Pre-tax profit rose from RM323.1m to RM440.7m contributed by Klang Valley townships. Borrowings rose from RM3b in 2022 to RM3.4b at end-Sep 2023. Gross debt-to-equity ratio weakened from 0.31 times to 0.34 times. Cash balances were RM661.9m. The counter closed at 62 sen.
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Singer’s A bond rating affirmed

MARC Ratings affirmed the rating on the company’s RM300m medium term notes (MTN) programme, which reflects its track record in selling and financing consumer products and motorcycles with high profit margins. Moderating factors are the intense competition in motorcycle financing and high delinquency rate. The company has 362 outlets and 674 independent merchants. Total assets were RM1b at end-1H2023. The 3-month gross delinquency rate at end-1H2023 was 34.6%, higher than the 9-month rate of 23.8%. Impaired financing on a 9-month basis was 100% provisioned for a zero net delinquency ratio. Although Singer makes large provisions for impaired financing, pre-tax profit jumped from RM18.1m in 1H2022 to RM24.1m in 1H2023. Motorcycle segment revenue climbed from RM91.7m in 2022 to RM98.5m in 1H2023. Profit margin averaged 17% in the last 5 years. Borrowings were RM208.4m at end-1H2023 for a debt-to-equity (DE) ratio of 0.28 times, which increased to 0.42 times after the RM101m maiden MTN issuance in Sep 2023.

TCS Group proposes 2-for-5 rights issue with free warrants

The cash call aims to raise RM29.23m as working capital for the company’s existing construction projects. It entails a renounceable rights issue of 243.6m new shares, on the basis of 2 rights shares for every 5 existing shares held on an entitlement date to be announced later. The 12 sen issue price is at a 27% discount over yesterday’s 16.5 sen close. There will also be 146.16m free detachable warrants on the basis of 3 warrants for every 5 rights shares subscribed. On the latest practicable date of 7 Dec, the issued share capital was RM66.16m made up of 429m shares and 180m warrants. TCS will seek an exemption for managing director Datuk Tee Chai Seng and wife Datin Koh Ah Nee, who together own 56.68%, from having to make a mandatory general offer. Shareholders’ approval for the exemption will be sought at an extraordinary general meeting. The cash call should be completed in 2Q2024.

AstraZeneca buys China’s Gracell Biotechnologies

The USD1.2b (RM5.56b) cash deal values US-listed Gracell at USD2 per ordinary share or USD10 per American depositary share plus a non-tradable contingent value right of 30 cents per ordinary share, provided specified regulatory milestones are satisfied. Gracell shares jumped 65%. China accounted for 13% of AstraZeneca’s 2022 sales. The Gracell acquisition will complement the company’s capabilities in CAR-T and T-cell receptor therapies in solid tumours. Gracell’s FasTCAR platform improves T-cell fitness and could raise the treatment effectiveness. The deal, which should close in 1Q2024, also includes the acquisition of Gracell’s cash, cash equivalents and short-term investments of USD234.1m as at 30 Sep 2023.