18 WE ARE KENANGA LEADERSHIP MESSAGE VALUE CREATION MODEL KENANGA INVESTMENT BANK BERHAD ANNUAL REPORT 2023 GROUP MANAGING DIRECTOR’S MANAGEMENT DISCUSSION AND ANALYSIS Investment Banking Amidst the persistently challenging macro environment in 2023, the Investment Banking division registered a PBT of RM5.7 million compared to RM15.8 million the previous year. In the equity capital market, the division successfully listed Synergy House Berhad in the second (2nd) quarter of FY2023 (“2Q2023”) and SkyWorld Development Berhad in the third (3rd) quarter of FY2023 (“3Q2023”) on the ACE Market and Main Market of Bursa Malaysia Securities Berhad, respectively. Notably, the Initial Public Offering (“IPO”) for SkyWorld Development Berhad, which the division singlehandedly raised RM320.0 million for, marked the third (3rd) largest IPO fundraising in 2023. In addition, it assumed roles as Joint Underwriter and Joint Placement Agent for Plytec Holding Berhad’s ACE Market listing in the fourth (4th) quarter of FY2023 (“4Q2023”), and presently, the division has initiated filings for two (2) IPOs slated for listing in the second (2nd) half of 2024 (“2H2024”). Furthermore, it took on the role as Joint Bookrunner for Pavilion REIT’s private placement of RM720.0 million, earmarked to partially finance its RM2.2 billion acquisition of Pavilion Bukit Jalil from Malton Berhad. Additionally, the division also acted as Joint Placement Agent in Al-’Aqar Healthcare REIT’s private placement of RM138.0 million, primarily for the repayment of borrowings. As a result of its efforts in the equity capital market, Kenanga IB also ranked #3 in terms of equity and rights offerings by Bloomberg. In 2023, its Debt Capital Markets department (“DCM”) established seven (7) new programmes, assuming key roles as Sole Principal Adviser, Lead Arranger, Lead Manager, and Facility Agent. Notably, two (2) of these programmes, namely Singer (M) Sdn Bhd’s RM300.0 million Medium Term Note (“MTN”) programme and SkyWorld Capital Berhad’s RM300.0 million Islamic MTN programme, received ratings from MARC Ratings Berhad. This contributed to the division’s joint second (2nd) runner-up position in MARC Ratings Berhad’s League Table, within the Issue Count Category. Moreover, the division also served as Joint Lead Manager and participated in the book-building exercise for several government-guaranteed sukuk programmes, such as Prasarana Malaysia Berhad’s RM1.5 billion sukuk issuance, Perbadanan Tabung Pendidikan Tinggi Nasional’s RM1.5 billion sukuk issuance, and Danainfra Nasional Bhd’s RM780.0 million sukuk issuance. On the Merger & Acquisition front, the division served as Independent Advisers for numerous mergers and acquisitions, notably the privatisation of Boustead Holdings Berhad; Sunway REIT’s acquisition of six (6) Giant hypermarkets; Malaysia Building Society Berhad’s acquisition of Malaysian Industrial Development Finance Berhad; CapitaLand Malaysia Trust’s acquisition of Queensbay Mall in Penang; the privatisation of UMW Holdings Berhad; and Pelikan International Corporation Berhad’s disposal of German-based Pelikan Group GmbH to Holdham SAS. In the face of a rising interest rate environment, the Corporate Banking unit has maintained a prudent approach to expanding its loan portfolio. With a focus on loan assets quality, the unit has steadily grown its portfolio, which currently stands at RM598.0 million as at FY2023. Within the Islamic capital markets space, the Islamic Markets team within the division, supported by its Shariah Committee, took on the role of Shariah Adviser for the pre-IPO Shariah screening of both Synergy House Berhad and SkyWorld Development Berhad. Following the successful application submitted to the Securities Commission Malaysia, both companies were granted the status of ‘Shariah compliant IPO’ accordingly. In addition, the team continues to provide Shariah advisory services for Kenanga Investors Berhad’s Islamic funds and private mandates. For instance, it was appointed as the Shariah adviser for the newly launched Kenanga Islamic Asia Pacific (ex-Japan) Total Return Fund. The Shariah Committee also remained actively engaged as the Shariah Adviser for sukuk programmes initiated by DCM clients. Furthermore, they worked closely with the Facility Agency team to streamline subsequent issuances for other DCM clients. Looking ahead, Islamic Markets is poised to extend its Shariah expertise to support any ESG initiatives within the Group, including providing guidance on potential Shariah-compliant Green/ sustainable and responsible investment sukuk deals for DCM clients. Meanwhile in FY2023, Group Treasury realised a loss of RM1.8 million before tax as net income decreased sharply due to lower net interest amid a high deposit rate environment and strong competition in the deposit market. Although government bonds delivered a higher return in 2023, Group Treasury remained prudent in its trading positions, and the Group’s liquidity ratios also remain healthy and in compliance with regulatory liquidity requirements. Given the expected path of policy interest rates, a peak in interest rates presents an opportunity for investors, and moving forward, there will be a higher contribution from fixed income activities. Moreover, Group Treasury will persist in diversifying its product portfolio, particularly in forex, with the aim of enhancing profitability and increasing sales volume.
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