One of the signs that the Malaysian economy is in recovery mode is the surfeit of Sukuk issuances by top Malaysian corporates in November 2021.
Malaysian electricity utility giant Tenaga Nasional Bhd (TNB) led from the front with the issuance of a RM3 billion (US$710.90 million) Sukuk Wakalah on 25 November, issued under its RM10 billion (US$2,369.67 million) Islamic Medium Term Notes (iMTN) Programme in nominal value based on the Shariah principle of Wakalah bi al-Istithmar.
TNB had earlier mandated Affin Hwang Investment Bank, AmInvestment Bank and CIMB Investment Bank to act as the Joint Lead Managers/Joint Bookrunners for the RM3 billion Sukuk Wakalah.
The issuance comprised four tranches in different tenors including: i) a RM300 million Tranche One with a 7-year tenor maturing on 25 November 2028 and priced at a periodic distribution rate of 3.92% per annum; a RM300 million Tranche Two with a 10-year tenor maturing on 25 November 2031 and priced at a periodic distribution rate of 4.08% per annum; a RM1,200 million Tranche Three with a 15-year tenor maturing on 25 November 2036 and priced at a periodic distribution rate of 4.47% per annum; and a RM1,200 million tranche with a 20-year tenor maturing on 25 November 2041 and priced at a periodic distribution rate of 4.67% per annum.
The demand for the TNB certificates was robust. According to the utility, at the peak of the book-building exercise, the Sukuk Wakalah was oversubscribed by approximately three times, from the initial issue size of RM2 billion, with orders received amounting to an aggregate of RM5.8 billion from over 40 accounts. The transaction was subsequently upsized from the initial issue amount of RM2 billion to RM3 billion, upon book closing. The Sukuk certificates are listed on the Bursa Malaysia (under the Exempt Regime).
Malaysia is the only country in the world whose Islamic Capital Market (ICM) dominates the overall capital market. In 2020, for instance, the size of overall capital market despite the impact of the pandemic totalled RM3.4 trillion (US$820 billion), up from the RM3.2 trillion in 2019. The ICM accounted for a staggering RM2.3 trillion compared with RM2.03 trillion in 2019 or 65.85% of the total capital market. In other words, the ICM grew 10.85% in 2020 compared to 2019. This momentum, according to the Securities Commission Malaysia, is projected to increase in 2021.
TNB continued to perform resiliently as Malaysia recovers from the adverse impact of the COVID-19 pandemic, charting an increase in revenue and net profit in tandem with increased economic activity in the first nine months of financial year 2021.
TNB’s group revenue edged up 9.6% year-on-year to RM36.9 billion from RM33.7 billion in line with the overall improvement in the Malaysian economy which grew 3% in the first nine months of 2021. This has contributed to a slightly higher group sales of electricity which grew by 1.1% to 87,950 GWh in the same period, and RM2.9 billion in net profit. Total revenue similarly increased for the first nine months in 2021 increased to RM 36,894.4 million from RM33,651.7 million for the same period in 2020.
The two other Malaysian Sukuk issuers in November included the flagship Bank Islam Malaysia, which issued a RM300 million (US$71.09 million) Sukuk on 12 November – the fourth tranche of Subordinated Sukuk Murabahah under its RM3 billion Sukuk Murabahah Programme established in 2018, to enhance the group’s capital adequacy.
According to Bank Islam the RM300 million issuance has a 10-year tenor and will mature on 12 Nov 2031. “The Subordinated Sukuk Murabahah shall qualify as Tier 2 regulatory capital of Bank Islam in compliance with Bank Negara Malaysia’s Capital Adequacy Framework for Islamic Banks (Capital Components). It will enhance the capital adequacy of the bank (Bank Islam) in line with the Basel III requirements,” added the Bank in a disclosure to Bursa Malaysia.
RAM Rating Services Bhd assigned a final long-term rating of ‘A1/stable’ and ‘AA3/stable’ to the Subordinated Sukuk Murabahah certificates.
In a further Sukuk transaction Pengurusan Air Selangor Sdn Bhd (Air Selangor) successfully completed a RM1 billion (US$236.97 million) Sukuk issuance on 1 November under its existing RM10 billion Sukuk Murabahah Programme.
According to Air Selangor, the transaction comprised two tranches – a debut first tranche RM430 million SRI Sukuk Kelestarian Air Selangor (SRI Sukuk) issuance and a second tranche of RM570 million Islamic medium term notes (IMTNs) across four series from seven to 20 years.
“The proceeds from the SRI Sukuk,” said the local airline, “will be utilised to finance eligible projects in compliance with Air Selangor’s Sustainable Development Sukuk Kelestarian Framework that include sustainable water supply and sustainable water management projects, all of which are in line with Air Selangor’s sustainability strategies.”
The proceeds of the iMTNs will be used to finance the company’s capital expenditure and working capital requirements. The transaction was jointly arranged by Bank Islam Malaysia, CIMB Investment Bank and OCBC Al-Amin Bank, who also acted as joint bookrunners.