Capital markets news summary for Wed 15 Mar 2023

Capital markets news summary for Wed 15 Mar 2023

Landmark’s Andaman Resort defaults on RM133m financing facility

A fire which broke out at the Andaman Resort in Jan 2021 caused the biggest revenue contributor to cease operations affecting the company’s cashflows. OCBC Bank issued a notice of recall on 8 Mar demanding the repayment of banking and credit facilities amounting to RM133.37m within 14 days. The company and Andaman Resort are working out a repayment plan in line with the financial position, including proposing to OCBC to set off the RM50.75m in the debt service reserve account against the amount outstanding. The remaining RM82.62m will be paid with funds to be raised within 60 days from 17 Mar – which is the date that Andaman Resort will submit the proposal to OCBC. Genting owns 21.7% of Landmarks while its Chief Executive Officer Mark Wee Liang Yee controls 23.19%. Landmarks has been posting operating losses for the past 12 years. In 2022, the company’s revenue grew from RM5.58m to RM24.29m, but its net loss widened from RM34.49m to RM43.28m, mainly due to damages caused by the fire. The counter closed at 15 sen.

Oppstar receives buy call from UOB with target price of RM2.28

The integrated circuit design service provider will be listed today. The target price is 3.62 times its IPO price of 63 sen, which is already at 19.6 times FY2023 price-to-earnings (PE) ratio. Instead, UOB Kay Hian’s target price is based on 50 times FY2024 P-E ratio. According to the research house, since there is no comparable local listed peers for valuation purposes, its valuation yardstick is based on a 10% premium of its global peers’ average 2-year forward PE ratio. UOB Kay Hian expects a 35% compounded annual growth rate for the company’s net profit in FY2023-FY2025, with price-to-earnings-to-growth (PEG) ratio at 0.5 times. If the PEG ratio is 2 times, the target price would be RM3.20 or 70 times PE ratio for FY2024. Oppstar won its first artificial intelligence application specific integrated circuit chip projects from China customers and looks likely to secure more as the US and its allies ban the export of chip technology to China. UOB Kay Hian notes that Oppstar’s current share of the RM819b global integrated circuit design market is small. Ahead of the IPO, the company posted a net profit of RM4.46m or 0.7 sen per share for 3QFY2023 ended 31 Dec. Affin Hwang is the principal adviser, sponsor, sole placement agent and sole underwriter.

Proton’s new stamping line in Tanjung Malim

The RM140m largest stamping line in Malaysia consists of 5 machines – 1 with 2,500 tonnes of force, 2 with 1,200 tonnes of force and 2 with 1,000 tonnes of force – and can produce 50 unique components including SUV body panels. It also has 6 robots to transfer parts between workstations and uses real-time data and machine learning for quality improvement. The company expects to reduce the annual use of imported parts by 115,000 units. The new line helps provide greater flexibility in deciding the monthly production mix and speeds up the production of new models. Construction began in Apr 2021 and was completed in Dec 2022. The company plans to launch a new hybrid electric vehicle (EV) SUV model. The company – 50.1% owned by DRB-Hicom and 49.9% by China’s Geely – was listed in 2004 and delisted in 2012.

Anzo to be delisted on 17 Mar

The contractor and timber service provider – formerly known as Harvest Court Industries – has been loss-making since FY2013. It was classified as an affected listed issuer in Oct 2019 after its consolidated revenue represented less than 5% of its share capital for the financial year ended 31 Jul 2019. Bursa has given the company 5 extensions since May 2020 to the deadline to submit a regularisation plan. The stock was suspended from trading on 21 Feb and was last traded at 0.5 sen. The company failed to appoint a principal adviser by 13 Mar as stipulated by Bursa on 13 Feb as a condition for granting a 6-month extension to 30 Apr for the company to submit its regularisation plan. On 14 Mar, Anzo filed saying that it no longer has any intention to submit a regularisation plan nor seek a further extension.

Federal Reserve faced with bank failures and higher inflation

The US consumer price index (CPI) – excluding food and energy – for Feb was up 0.5% from Jan and 5.5% from Feb 2022. Overall, the CPI rose 0.4% month-on-month and 6% year-on-year. The Federal Reserve is faced with the challenge of containing inflation – which is above its target 2% – while at the same time controlling the financial stability risks emerging after Silicon Valley Bank failed. The authorities have stepped in with a new backstop to protect uninsured depositors, in a move to create room for the Federal Reserve to continue with monetary tightening. There is concern that the Federal Reserve may delay rate hikes with the belief that the 4.5% rate increase in the last year contributed to the strained financial sector and bank failures. The Federal Reserve’s Federal Open Market Committee will meet on 21-22 Mar, and analysts predict a 0.25% increase will be decided.