Debt raising vital for Khazanah stable of enterprises

DEBT has always been an efficient tool for finance and investment and it comes to no surprise that the list of companies that have the largest amount of debt includes some of the largest companies on Bursa Malaysia.

Leading the pact is the stable of Khazanah Nasional Bhd companies. Companies that are controlled by Malaysia’s sovereign fund are monopolies and those that have invested in the infrastructure of the country. 

Be it for energy generation and transmission to telecommunication services, these companies often have to fork out large sums of money to complete the infrastructure for such services and as a consequence, debt raising is an important part of funding such investments.

It is no surprise that Tenaga Nasional Bhd (TNB), among the companies controlled by Khazanah, has the most amount of debt at RM21.6bil given the expensive nature and demands for funding power stations.

Among the Khazanah companies that had the biggest decline in debt is UEM Edgenta which saw its debt fall from RM4.5bil at the end of 2016 to RM1.4bil at the end of last year, aided by asset disposals that brought down its debt levels.

YTL Group is in the same segment as infrastructure companies.

The construction and infrastructure outfit has total net debt of RM20.8bil at the of last year from RM23.1bil the year before and much of the debt at YTL Corp is through their ownership of controlling stakes in other companies within the group.

Likewise for the MMC Group, it is the debt at power company Malakoff Bhd that has the biggest debt exposure.

With a net debt of RM12.2bil, Malakoff shoulders the bulk of the debt followed by MMC Corp, with its ownership of large ports, has debt amounting to RM8bil. 

Pos Malaysia and Gas Malaysia are the two companies within the group with a net cash position.

Ananda Krishnan controlled companies like Bumi Armada Bhd and Maxis Bhd which have a net debt of RM10.3bil and RM7.1bil respectively as at the end of last year. 

Heavy capital expenditure is needed to fund the floating production storage and offloading operations of Bumi Armada and for Maxis, big money needs to be continuously spent on maintaining and growing a cellular network that is subject to technology upgrades on a frequent basis.

Within the PNB group of companies, much of the debt is held by Sime Plantations. After going through a restructuring the facilitate the listings of three Sime Darby companies in November last year, debt at the cash generating company within the group made the most sense. 

Much of the debt previously grouped at Sime Darby Bhd was transferred to Sime Plantations, leaving Sime Darby with debt of RM902mil compared with RM12.7bil previously.

At the IOI Group, it was the large increase of debt at IOI Properties that increased the group’s total debt upwards by 64%. IOI Properties debt rose from RM3.7bil to RM10.2bil as the company bought 2.69 acres of leasehold land in Singapore’s Marina Bay area for RM7.77bil.

Net debt at IOI Corp fell to RM5.3bil from RM5.7bil and is set to drop further following the disposal of 70% of its stake in its Netherlands-based palm oil refinery, IOI Loders Croklaan Group BV, for RM3.94bil to Koninklijke Bunge BV.

Sapura Energy ’s net debt increased a smidgen to RM15.4bil from RM15bil on weak oil prices and as the industry had kept expansion and debt build up contained with a debt equity level of 1.3 times. 

That high debt to equity level has been a concern in some quarters but should the company proceed with the listing of its exploration and production arm, then the proceeds will help to reduce the indebtedness of the group.

The AirAsia group saw its net debt fall by 20% last year to RM7.6bil from RM9.5bil with the biggest fall seen in the larger low-cost carrier AirAsia. 

Ongoing streamlining activities to sell off non-core businesses, float its foreign subsidiaries and sell its stake in the aircraft leasing company should generate more cash for the group and reduce debt to bolster its strong cashflow generation.

As for the Lembaga Tabung Angkatan Tentera companies, the debt is mainly concentrated at Boustead Holdings but with Boustead Plantations sitting in a net cash position.

Among the notable entries in the list of companies in a net debt position, IGB Group saw its debt fall by 18% in 2017 from the year earlier and MRCB had an increase in its net debt to RM3.4bil from RM2.7bil.

In MRCB’s case, its net debt will fall due to the proceeds the company will be getting from the disposal of the Eastern Dispersal Link in Johor.

The notable changes in the net debt position of companies in the list belongs to WCE Holdings and Sunsuria.

WCE is building the RM6bil West Coast Expressway and it is understandable, like many other infrastructure project companies, to see debt increase as large-scale infra projects like a highway gets built. 

At the end of last year, it had a net debt of RM719.9mil from a net cash of RM77.6mil.

The company that saw the biggest improvement in net debt in percentage terms was Sunsuria, which saw its net debt fall to RM5.2mil in 2017 from RM231.8mil.