Capital markets news summary for Wed 15 Feb 2023

Capital markets news summary for Wed 15 Feb 2023

TIME investors concerned about losing growth catalyst with sale of data centre

The company filed with Bursa on 22 Nov 2022 that it will divest 49% of the ordinary shares and 100% of the irredeemable convertible preference shares in AIMS Data Centre Holdings and 21% in AIMS Data Centre Thailand to US-based DigitalBridge Group for RM2b cash. The company will still retain a minority 30% thereby unlocking the value of the data centre yet form a partnership with DigitalBridge to grow the capital-intensive business. TIME will pay out RM1b in dividends or 54 sen per share from the sale proceeds. Minority investors are worried that the sale of a high-growth business will cause TIME to lose a catalyst for share price appreciation. The company is 28.91% owned by Pulau Kapas Ventures – which is owned by Khazanah and Global Transit International. Khazanah has a direct 10.65% interest. The counter closed at RM5.30.

Betamek wins RM123.5m Perodua contracts

The company – which provides one-stop electronics manufacturing services solutions to automotive makers – debuted on the ACE Market on 26 Oct 2022. The company’s major customer for its vehicle audiovisual products and vehicle accessories is Perodua, with which is has a 2-decade long partnership. Its managing director – Mirzan – is the eldest son of Tun Dr Mahathir. The electronic manufacturing services company secured contracts to supply electronic parts for a new Perodua model. The car manufacturer recently launched the new Axia and it plans to build 330,000 vehicles in 2023. The contract begins in 4Q ending 31 Mar 2023 and for a period of 6 years. Betamek closed at 59 sen, up from its 50 sen IPO price.

Budget likely to have lower development expenditure

Prime Minister Anwar Ibrahim said that the government will not introduce a broad-based consumption tax such as the goods and services tax. Instead, the government seeks to manage the federal budget through, amongst others, the expansion of the economy resulting from the pipeline of domestic and foreign investment projects. Public expenditure will also be reduced to account for reduced leakages caused by previous weak management. The affected sectors include education, healthcare and basic infrastructure. The federal budget has been under increasing pressure from the now RM1.5t public debt, or 82% of gross domestic product. Debt service charge is higher at RM46b in 2023 – or 16% of government revenue – compared with RM41b in 2022 – or 14% of revenue. Separately, the World Bank observed that salaries and pensions for civil servants remain high. The figure has doubled from RM58.2b in 2010 to RM115.2b in 2022.

Singapore plans 0.1% budget deficit

The government is trying to narrow the gap from the previously revised 0.3% of gross domestic product. This will be achieved by growing revenues by 7.1% including raising taxes on high-value property transactions, luxury cars and tobacco, and lowering expenditure by 2.6%. The budget for 2023 of SGD104b is to push the country towards post-Covid and help mitigate cost of living pressures with inflation at 6.5%. SGD3b have been allocated to defray the 8% goods and services tax for lower income households. The Deputy Prime Minister Lawrence Wong – slated to become the prime minister after the elections to be held by 2025 – said that inflation is expected to remain high in 1H2023. In Jan 2024, all Singaporean households will receive SGD300 when the GST is raised to 9%. Singapore plans to increase the effective tax rate for multinational enterprises to 15% from 2025 in line with the global floor rate.

US inflation for Jan 2023 up 6.4% year-on-year

Core consumer price index (CPI) – which excludes food and energy – rose by 5.6% from Jan 2021. Together with Jan’s jobs growth, inflationary pressures appear sustained despite the Federal Reserve’s aggressive monetary tightening. The data support officials’ statements that further rate hikes plus keeping the rates elevated for a prolonged period are needed to deal with inflation. Goods deflation seems to be losing steam and a strong labour market is driving wage growth and service prices. Shelter was the biggest contributor to inflation, accounting for half. However, there is a significant lag between real-time price changes and government statistics for housing, which could eventually exhibit deflation in coming months. Energy prices increased for the first time in 3 months.