Capital markets news summary for Tue 28 Feb 2023

Capital markets news summary for Tue 28 Feb 2023

Pharmaniaga’s RM552.3m vaccine provision triggers PN17

The company made the provision for slow moving inventories according to MFRS102 Inventories. Concurrently, it also wrote down the goodwill of the Indonesian units of RM50.3m. As the result, Pharmaniaga posted RM664.39m in net losses for 4Q2022. Revenue increased 21.22% from RM711.72m to RM862.72m. As the country moves to the endemic phase, there were lower sales of Covid vaccine. Pharmaniaga has RM968.27m short term borrowings and RM190.6m long term borrowings. It has cash of RM52.84m. The company’s regularisation plan to deal with PN17 will focus on strengthening the company’s financial standing and assuring that core business activities remain viable with growth prospects. The company sees Indonesia as crucial for its growth. It is also putting in effort to sell the vaccines. Pharmaniaga recorded a net loss of RM607.32m for 2022 down from a net profit of RM172.15m in 2021. Revenue shrank 27% from RM4.81b to RM3.51b. The counter closed at 44 sen.

Tyson Foods JV lifts MFM profits

Malayan Flour Mills (MFM) posted net profit for 4Q2022 up 95% from RM24.03m to RM46.87m. Revenue was up 18% to RM819.56m. For 2022, net profit shrank from RM173.91m to RM145.05m although revenue increased from RM2.47b to RM2.92b. The joint venture (JV) company’s poultry integration segment managed to penetrate further into the QSR chains, improved its margins from economies of scale as plant utilisation increased and experienced a better sales mix with higher average selling prices. This segment recorded higher quarterly revenues of 13.9% year-on-year from RM265.8m to RM302.7m. Flour and grains trading disappointed with pre-tax profit down from RM48.8m in 4Q2021 to RM2.9m due to high commodity prices, finance costs and foreign exchange translation loss from a strong US dollar. The counter closed at 81 sen.

Lower PPI increase of 1.3% in Jan

This compares with 3.5% year-on-year growth in Dec 2022. The lower increase is attributed to agriculture, forestry and fishing which contracted 20.9% in Jan compared with a decrease of 17.5% in Dec. Mining fell 2.2% as against a growth of 3.7% in Dec. The manufacturing sector expanded 4.5% compared with 6.1% in Dec. Electricity and gas supply sector was up slightly 1.2% from 1%. Water supply was unchanged at 3.8%. Local production fell 0.8% in Jan after shrinking 0.3% in Dec. The US producer price index was up 6% (+6.5% Dec), Germany up 17.8% (+21.6% Dec) and China down 0.8% (-0.7% Dec). According to Fitch’s 2023 Market Outlook Report, 19 out of 26 commodities will see price declines including palm oil. The price of other commodities including sugar and rice will rise.

Traders and banks see oil rising to USD90-USD100 in 2H2023

Oil demand is expected to grow by 2.2m barrels per day compared with 2022, much of which is from diesel, naphtha and liquid petroleum gas. There will be pressure on OPEC production. Russian oil is facing challenges getting to market. Sanctions on Russia is forcing cargoes to take longer routes to reach buyers in Asia. The country has warned that it will cut production. As there is little room on the supply side, a rally can be expected. Conflicting market forces – Russian supply, China’s reopening and the direction of monetary policy – have kept Brent in a tight range of USD10. The crude is trading at USD83 per barrel.

US businesses continue to make capital investments

The value of core capital goods orders excluding aircraft and military hardware rose by 0.8% month-on-month in Jan compared with a 0.3% decline in in Dec. Core capital goods shipments – used to calculate equipment investment in gross domestic product – climbed 1.1%. The tight labour market is forcing companies to make workers more productive, while the belief that any downturn will be short and mild makes businesses inclined towards their capital investment plans. Lower bookings for commercial aircraft – down 54.6% – led to a sharp 4.5% contraction in durable goods bookings, the lowest since Apr 2020. Survey data point to shrinking factory activity.