GLOBAL: In an interview with Bloomberg, the
corporate executive vice-president of Orix Corporation, Kazuo Kojima, said
that the firm is looking to spend up to JPY50 billion (US$506 million) in
acquisitions throughout Southeast Asia, the Middle East and Africa in the
next 12 months. The firm, which is ranked among the top in Japan in terms of
acquisitions, is looking to increase its focus on SMEs and consumer lending
business in emerging markets as a means of diversifying its business away
According to data by Bloomberg, Orix has announced a total of 15 acquisitions and joint ventures in the last year, with 20% of the company’s JPY1.1 trillion (US$11.09 billion) in revenue focused on overseas investments.
Orix had recently acquired a 25.7% stake worth US$225 million in the Mediterranean & Gulf Insurance & Reinsurance Company (Medgulf) from SLH Holding, a majority stakeholder in the Bahrain-based insurance company. Medgulf is a major shareholder in Medgulf Saudi Arabia, which is listed on the Saudi Arabian stock exchange, Tadawul.
In 2011, Medgulf had announced a partnership with Allianz Takaful to develop their insurance platforms in Bahrain and Qatar. The deal involved a transfer of 75% of Allianz Takaful to Medgulf as a means of leveraging on the Bahrain-based insurer’s wide market presence.
Wednesday, July 31, 2013
MALAYSIA: The Al Hadharah Boustead REIT, the first
plantation-based Islamic real estate investment trust in Malaysia, could be
subject to privatization following an announcement on the Kuala Lumpur Stock
Exchange (Bursa Malaysia) on the 12th July calling for the suspension
of trading on Al Hadharah Boustead REIT’s and Boustead Holding’s securities.
Affin Investment Bank is said to be involved in the privatization of the Islamic REIT by Boustead Holdings, its parent company. However, when contacted by Islamic Finance news, representatives at the investment bank could not provide comments on the deal.
The Al Hadharah Boustead REIT was first listed on Bursa Malaysia in February 2007, making it the second Islamic REIT to be listed in Malaysia, and the first to invest in plantation estates and mills. At present, the Islamic REIT manages 12 oil palm estates and three palm oil mills encompassing 19,945 hectares in total, and is majority owned by Boustead Holdings with 53.6% of the I-REIT’s shares, followed by Lembaga Tabung Angkatan Tentera; a savings scheme for Malaysia’s armed forces, with 12.7%.
Speaking to Islamic Finance news, a market analyst at a Malaysia-based investment bank said that the most likely rationale for the privatization of the Islamic REIT is its illiquid position and lackluster interest from equity investors mainly due to the fact that it is pegged to plantation assets — a less than popular choice among other REIT managers on both the conventional and Islamic side. “From my understanding, the Al Hadharah Boustead REIT has not seen much improvement in yield since its listing. Plantation yields are generally not as attractive as other REITs such as commercial and industrial buildings, because there is generally more of a growth story there in terms of acquisitions and expansion. They also generate income during financial downturns and recessions,” she said.
The source also added that plantation yields are viewed to be relatively stagnant as they are not tagged to movement in commodity prices. However, according to the Al Hadharah Boustead REIT website, the terms for rental, which is reviewed every three years include historical, prevailing and expected crude palm oil prices, cost of production, extraction rates and yield per hectare.
Islamic REITs in Malaysia are subject to the regulatory requirements of the Securities Commission of Malaysia’s Islamic Real Estate Investment Trust guidelines which were issued in November 2005.
According to a research report by Affin Investment Bank dated the 1st July, Boustead currently has a total planted area of 68,375 hectares in Peninsular Malaysia and 41,924 hectares in the East Malaysian states of Sabah and Sarawak. The planted areas include estates bought back from Golden Crop Returns and19,945 hectares held under a lease arrangement with Al Hadharah Boustead REIT. “Unless pricing is attractive, Boustead has no plans to acquire new plantation land bank,” the report suggested.
Published on 30 July 2013
RAM Ratings has reaffirmed the long-term AA3 rating of Besraya (M) Sdn Bhd’s (“Besraya” or “the Company”) RM700 million Sukuk Mudharabah Issuance Facility (“the Sukuk”), with a stable outlook. Besraya is the toll concessionaire for the 16.6-km Sungai Besi Highway (“SBH”) and the 12.3-km Besraya Eastern Extension (“BEE”) that is currently under construction (the 2 routes are collectively known as “the Highways”); the concession will expire on 15 May 2040. The rating reflects the ready traffic from surrounding areas and Besraya’s strong debt-coverage levels. These positives are, however, moderated by the construction risk of the BEE, competition from existing and new roads, regulatory and single-project risks.
RAM’s analysis shows that Besraya should generate about RM80 million of annual pre-financing cashflow on average throughout the Sukuk’s tenure; this translates into a minimum finance service coverage ratio (“FSCR”) of 2.00 times (with cash balances, post-distribution on payment dates) – a level commensurate with the rating. That said, it is crucial that Besraya retains a sufficient cash buffer before making any distributions to its shareholders in the next 1-2 years, in view of uncertainties such as higher-than-expected construction costs, the timing of the BEE’s completion and its ability to increase toll rates for the SBH in 2014. Any unfavourable turn in such events may exert pressure on its rating.
The SBH, which straddles densely populated townships and industrial areas such as Salak Selatan, Seri Kembangan and Serdang, provides ready traffic demand. This will be complemented by the BEE, which will improve connectivity between the southern and eastern corridors around Kuala Lumpur. Although the SBH’s average daily traffic remained flat and within our expectations at 91,424 vehicles in FY Mar 2013, we opine that the Highways will enjoy more visible long-term growth potential upon the completion of the BEE.
Meanwhile, overall construction of the BEE was within schedule as at end-March 2013. However, a land acquisition along the Middle Ring Road 2 Link, in which negotiations were recently settled, took longer than expected and caused a delay. Despite so, Besraya still aims for completion by January 2014 and tolling to commence the following month (as scheduled); RAM’s sensitised analysis assumes a 6-month delay, i.e. tolling starts in August 2014. We will monitor developments closely; any events that might potentially cause a delay would warrant a rating reassessment. Meanwhile, construction cost has exceeded the budgeted amount by RM27 million, a result of an earlier variation order from the realignment and previous land-acquisition cost overruns. Besraya’s debt-servicing aptitude is expected to remain intact, supported by cashflow from the SBH.
The Highways face competition from the Maju Expressway, the KL-Seremban Highway and alternative toll-free routes – as evinced by the SBH’s historical traffic volumes – although fuel prices, travelling time and tariffs greatly determine commuters’ preferences. While recent news has surfaced on a potential interchange in Seri Kembangan by an alternative expressway that may divert some traffic from the SBH, this will only be factored into our traffic projections, pending more clarity on the interchange, as well as on the BEE’s ADT and toll rates upon its completion.
Regulatory risk is an inherent feature for the toll-road industry, as underlined by the Government of Malaysia’s decision to postpone the SBH’s scheduled toll-rate revision in 2013 by a year. Nevertheless, this is accompanied by RM12 million (or 50%) of monetary compensation received to date. Our analysis suggests that the Company’s debt-servicing ability may be compromised should it not be compensated with cash for non-revision of tariffs, or if the BEE does not start tolling with a tariff of RM2.00 for Class 1 (passenger) vehicles.
(603) 7628 1170
Maybank Islamic CEO Muzaffar Hisham wins Islamic Banker of The Year Award from Asset Triple A Islamic Finance Awards 2013 - BERNAMA
Maybank Islamic CEO Muzaffar Hisham wins Islamic Banker of The Year Award from Asset Triple A Islamic Finance Awards 2013
Tuesday, July 30, 2013
Published on 30 July 2013
RAM Ratings has reaffirmed the AAA rating of CJ Capital Sdn Bhd’s (“CJ Capital” or “the Company”) RM114 million Sukuk Murabahah (2010/2020); the long-term rating has a stable outlook. CJ Capital had been set up as a funding vehicle to raise the Sukuk Murabahah; it is wholly owned by Cahaya Jauhar Sdn Bhd (“Cahaya Jauhar” or “the Company”).
Cahaya Jauhar is a 60:40 joint venture between UEM Land Berhad and the Johor State Government (“State Government”) via State Secretary Johore (Incorporation) (“JSSI”). The Company had been incorporated to undertake the turnkey design-and-build contract for the development of Kota Iskandar in Nusajaya, Johor (“the Project”). Phase 1 and additional works pertaining to furnishings, landscaping and security have already been completed, in return for which Cahaya Jauhar is entitled to receive irrevocable and unconditional annuity payments of RM15 million per annum from JSSI for 10 years (“the Annuity”). The Annuity has been given to CJ Capital via the Deed of Hibah.
The AAA rating is supported by the highly predictable annuity payments from a strong counterparty, i.e. the State Government. The fulfilment of JSSI’s obligations is ensured, based on the strength and enforceability of the key governing documents (principally, the Deed of Annuity and the Deed of Hibah). Notably, the annuity payments are payable regardless of the termination or cancellation of agreements relating to the Project, or the variation, delay or cessation of the Project’s other phases. To date, all annuity payments from JSSI have been prompt.
The structural features of the transaction minimise potential cashflow leakage. The funds are to be paid directly into the Annuity Account – a designated account solely managed by the Trustee. The assignment of the Annuity and the charge over the designated accounts, including the Annuity Account, ensure that the Sukuk holders’ legal rights over the funds in these accounts are protected. In addition, covenants restrict CJ Capital from paying any dividend or embarking on any other activity (apart from exercising its rights or performing its obligations under the transaction agreements) until the Sukuk Murabahah has been fully repaid.
(603) 7628 1030
Brunei Darussalam: Questions on ‘mega-bridges’ financing
On June 20, the Ministry of Development signed a $138.9m deal with domestic firm Swee Sdn and South Korea’s Daelim Industrial to build the Sungai Brunei Bridge, ... Read more.
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