Issue 16

Petronas ventures into renewable energy

Petroliam Nasional Bhd (Petronas) is acquiring 100% interest in Amplus Energy Solutions Pte Ltd, also known as M+, a leading Singapore-based company with a portfolio of distributed, renewable energy assets in Asia. 

In a statement Monday, Petronas said it had entered into an agreement with I Squared Capital, an independent global infrastructure investment manager. 

The acquisition, which is expected to be completed later this month, marks the oil major international foray into renewable energy. 

Established in 2013, M+ caters to commercial and industrial customers, specialising in end-to-end solutions for rooftop and ground-mounted solar power projects. 

With a cumulative capacity of over 500 megawatt (MW) under operation and development, M+ serves more than 150 commercial and industrial customers at over 200 locations across India, the Middle East and South East Asia. 

“This acquisition reflects Petronas’ strategic intent to grow in the renewable energy space as part of our strategy to step out beyond oil and gas into the new energy business. 

“This also represents our first international solar venture and we look forward in providing energy solutions to our customers in these high growth energy markets,” Petronas president and group chief executive officer Tan Sri Wan Zulkiflee Wan Ariffin said. 

Commenting on the transaction, Gautam Bhandari, founding partner at I Squared Capital said: “Under I Squared Capital, M+ grew by over 400% annually to become a world-class, end-to-end company serving the corporates in Asia to reduce their greenhouse gases and combat climate change. 

“We believe that M+ will continue to play a leading role in building a greener future thanks to an outstanding management team and wish them and Petronas the best in their future endeavours.” 

Petronas is also working on a number of clean energy initiatives in Malaysia. 

Recently, Petronas announced a collaboration with UiTM Holdings Sdn Bhd, the investment arm of Universiti Teknologi Mara, to jointly develop large scale solar photovoltaic power plants and on-campus energy optimisation and solar rooftop projects.


From – The Star


SBIF, COPE Private Equity invest $14.25m in Malaysia-based MDT Innovations

SBI Islamic Fund II (Brunei) Limited and Malaysia’s COPE Private Equity have jointly invested up to $14.25 million in Malaysia-based MDT Innovations, the latter said in an announcement on Monday. 

The capital will be used to support MDT Innovations’ research and development, enhance its product quality, expand its business and maintain its competitive edge as it seeks to become a market leader in the Internet of Things (IoT) industry. 

Founded in 2004, MDT Innovations focuses on IoT value chains ranging from intelligent wireless communications, IoT as a service, to neutral network solutions, the company offers services in the key domains such as crowd movement, things management and fintech enablement. 

“We are pleased to be partnering with COPE and SBIF II, two leading institutions to support the growth of MDT Innovations. We believe MDT Innovations is uniquely positioned to tap the huge market that is IoT in Asia-Pacific,” said MDT Innovations CEO Liew Choon Lian. 

COPE Private Equity managing partner Azam Azman commented: “MDT Innovations is a Malaysian company with world class technical know-how in the IoT industry. We are excited to partner with Liew and his talented team and look forward to support their growth in the years to come.” The investment was made out of COPE Private Equity’s fourth fund. DEALSTREETASIA had reported that the vehicle, COPE Opportunities IV achieved its final close at $70 million in October 2018. 

The firm will be looking at a trade sale or IPO for some of its portfolio companies this year. COPE IV will be cutting check sizes between $5 million and $20 million – a relatively under-served market segment within Malaysia – with a typical holding period of three to five years. 

The fund was launched in 2016 and had a first close at RM200 million ($48.2 million) last October and a second close at RM275 million ($66.3 million) early this year. Its predecessor, a 2013-vintage vehicle, COPE Opportunities III, was closed at RM80 million ($19 million) and has been fully deployed. Meanwhile, SBI Islamic Fund II is a shariah compliant private equity fund managed by SBI (B) Sdn Bhd, a joint venture fund management company established by Brunei’s Ministry of Finance and Economy (MOFE) and Tokyo-listed SBI Holdings Inc. One of the LPs of the fund which has the mandate to invest into a diverse range of late-stage companies across Asia is Jeddah-based Islamic Development Bank.

From – Deal Street Asia

SET-listed Sino-Thai Engineering to acquire Mo Chit Land for $136m

Sino-Thai Engineering and Construction Pcl (STEC), a Thai-listed construction company, is set to acquire Mo Chit Land Company from BTS Group’s subsidiary U City Pcl for 4.32 billion baht ($135.85 million). 

STEC’s board of directors approved the development of the 7.79-billion baht ($245.12 million) Mo Chit Complex project on Mo Chit Land’s plots in Chana District, Bangkok, according to a disclosure made on the Stock Exchange of Thailand. 

The project includes 36-storeyed twin towers with three levels of basement including a connecting path and a skywalk linking to BTS Mo Chit. 

STEC’s president Pakpoom Srichamni said, the company will look at a range of financing options including working capital, cash from operating business, loan from financial institutions and long term loan debentures to fund the deal. 

U City reported an accumulated loss of 630 million baht as of end of 2018. Once this acquisition is completed, it will turn into profit for the first time since 2015.

From – Deal Street Asia

South Korean chaebols are betting big on Vietnamese conglomerates

When one conglomerate has its eye on another, discounts go out the window. South Korea’s chaebols are betting big on Vietnam’s sprawling corporations. 

They’re even willing to forgo the markdown that typically comes with them. Samsung Electronics Co. is now the largest employer in the Southeast Asian nation. Since joining the World Trade Organization in 2007, a third of the country’s foreign direct investment has come from South Korea. 

Retail money is also chipping in. Last year, Koreans were the second largest foreign buyers of Ho Chi Minh City’s luxury condos, and they’ve rushed into Vietnam-focused stock funds, despite shunning other emerging markets. Seoul’s presence is felt everywhere. 

In March, South Korea’s SK Group announced plans to invest $1 billion in Vingroup JSC. This would be the company’s second large bet on a Vietnamese conglomerate: Last September, it bought a 9.5 percent stake in Masan Group Corp., a smaller peer, for $470 million. 

The math, though, is very wrong. At a minimum price of 100,00 dong ($4.31) a share, SK is valuing Vingroup at 43 times 2019 consensus earnings. If the South Korean company is interested in Vingroup’s real estate portfolio, it could just buy into residential developer Vinhomes JSC at 18.3 times earnings. 

The Vingroup subsidiary accounts for two-thirds of its parent’s revenue, anyhow. Or if SK fancies Vingroup’s retail mall operations, the Vincom Retail JSC unit is up for grabs at 26.2 times earnings. Of course, it’s up to SK Group to decide how much it wants to pay. 

But inadvertently, the Koreans are exacerbating an unhealthy trend in Vietnam’s stock market: The so-called Vin Family – Vingroup, Vinhomes and Vincom Retail – now accounts for almost a quarter of the benchmark index, up from 8 percent two years ago. 

That’s not unlike Samsung Group’s influence on South Korea’s Kospi Index. With Vingroup returning 20 percent this year – bolstered by SK’s $1 billion placement – active funds now have an unenviable choice: Hold your nose and buy a holding company at a sky-high valuation, or explain to your investors why you’re not beating the ETFs. 

Foreign portfolio inflow is already muted compared with last year. Increasingly, Vietnam’s equity market is starting to resemble Seoul’s – you don’t know who’s who in the labyrinth of cross-holdings. Vietnam Investment Group JSC, a private equity firm, is the largest shareholder of blue-chip Vingroup, followed by founder and chairman Pham Nhat Vuong’s 27.5 percent stake. Who owns the investment group, though? We have scant information since it’s privately held and structured as private equity. 

All we know is that Vingroup’s chairman “owns more than 10 percent charter capital,” according to a 2016 company filing. Vietnam Investment Group is by no means a passive investor, either. In 2016, Vingroup paid the firm more than $17 million for a land transfer agreement, and various office-rental and infrastructure-usage fees last year. 

The influence of this opaque shareholder on Vingroup’s business operations remains a big question mark. Perhaps this isn’t a big deal for South Korea’s retail investors, who had to disentangle close to 100,00 circular chaebol holdings as recently as 2013. But for everyone else, this is a red flag. 

So far, Vietnam is returning the love, and reveres South Korea’s manufacturing prowess. But if Hanoi allows its stock market to fester like Seoul’s, Vietnam will soon catch that notorious Korean discount, too.

From – Deal Street Asia

Forbes: ECRL cost-savings saves Malaysia from China's debt trap

Malaysia's success in renegotiating the East Coast Rail Link (ECRL) project with China is significant as it saves Malaysia from the debt trap that Sri Lanka fell into, Forbes writes. 

In an opinion piece, Economics Professor Panos Mourdoukoutas said the new deal is a big win for Prime Minister Tun Dr Mahathir Mohamad. 

"In dealing with China, Malaysia has dared to do something Sri Lanka, Pakistan, and the Philippines didn’t - bring Beijing back to the negotiating table to cut the cost of the investment projects assigned to Chinese contractors," he said. 

Mourdoukoutas said the ECRL served the interests of Beijing more than it served the interests of Kuala Lumpur. 

He explained that China's growing infrastructure projects around the world are part of its bid to "write the next chapter of globalisation and advance Beijing’s geopolitical agenda". 

However, many of China’s infrastructure projects aren’t economically viable, as they are built at inflated costs and leave countries involved heavily indebted to Beijing, he said. 

Quoting Current History journal, Mourdoukoutas wrote that some of China’s infrastructure projects in Sri Lanka, namely the deep-sea Hambantota port project, the Colombo Port City complex and the Mattala Rajapaksa International Airport, were white elephants that forced Sri Lanka into a debt trap. 

“The overpriced projects left Sri Lanka owing US$8bil (RM32bil), or around 10% of the island’s debt. That is close to what Sri Lanka owes Japan and India, but what rankles many is how Chinese loans have been used to fund questionable projects that generate little income,” he quoted Current History writers Neil DeVotta and Sumit Ganguly. 

"The situation has fuelled accusations that China seeks to entice strategically located countries (others include Djibouti and the Maldives) into debt traps that it then leverages to seize control of key infrastructure.” Mourdoukoutas said Dr Mahathir has been trying to avoid falling into the same trap that Sri Lanka did and he did so successfully in renegotiating the cost of the ECRL. 

Malaysia has managed to bring down the construction cost of the ECRL by RM21.5bil, which is almost a third of the original cost. The new price is set at RM44bil now, down 32.8% from the previous RM66bil. 

With the new price tag, the construction cost for the project is now at RM68mil per km, against RM98mil per km originally.

From – Deal Street Asia
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