Capital markets news summary for Mon 20 Mar 2023

Capital markets news summary for Mon 20 Mar 2023

Uzma plans 10% placement to fund Sungai Petani solar project

The issuance of 35.2m shares will raise RM21.79m to part fund the 50MW large scale solar 4 project in Ladang Bukit Hijau, Kuala Muda. The shares will be issued to external parties at a discount not more than the 10% of the company’s 5-day volume weighted average market price immediately before the price-fixing date. The estimated proceeds assume an issue price of 61.9 sen. On Fri, Uzma’s shares closed at 64 sen. In Aug 2021, Uzma Kuala Muda Sdn Bhd signed a power purchase agreement with Tenaga Nasional Berhad for a 21-year term. The project cost is estimated at RM229m. The balance of the project cost will be funded via internally generated funds and borrowings.

Poh Huat succumbs to weakening North American demand

The company’s net profit plunged 55% from RM15.35m in 1Q ended 31 Jan 2022 to RM6.83m in 1Q ended 31 Jan 2023. The principal buyers in North America have made adjustments to their procurement and inventory as business confidence drops in view of weakening consumer spending power. Its Vietnamese operations – which focuses on the home furniture segment – saw a large cut in shipment. Their buyers adjusted orders to reflect consumers affected by inflation and higher interest rates. The Chinese New Year holidays also contributed to lower production while a weaker US dollar reduced earnings. The low base effect post-Covid is tapering off and momentum for the global furniture market will slow. The higher cost of living and uncertainty about job security are forcing consumers to prioritise essentials over furniture. Inflation and higher interest rates are also making home ownership expensive and thus reducing demand for furnishing. The company is however comfortable with RM166.63m cash against RM5.75m bank borrowings. The counter closed at RM1.36.

Sim Leisure 2022 revenue up 282%

The Singapore Exchange-listed theme park developer and operator recorded revenue of RM67.6m. The company also turned around with net profit of RM25.9m. The strong performance came about after the lifting of Covid restrictions and pent up demand drove visitors to the company’s unique attractions. KidZania Kuala Lumpur – which the company bought in Dec 2020 – became profitable after 7 months of active operations in 2022, posting RM6.5m in net profit for 2022. The company’s proprietary Escape parks in Petaling Jaya and Penang also saw higher visitor numbers with school groups and corporate team building exercises accounting for one-third. The company plans to open 7 new destinations – including Escape Ipoh in 4Q2023 and Escape Cameron Highlands – plus overseas properties. It is also proposing to acquire KidZania Singapore. Sim Leisure Gulf provides theme design and construction services to, amongst others, the Jurassic Park zones of Universal Studios Singapore. The stock closed at SGD0.30 up from an all-time low of SGD0.14 in Aug 2022.

Goldman Sachs revises oil price projections downwards

The bank – which is the most bullish – sees Brent rising to USD94 per barrel in the next 12 months and USD97 in 2H2024. In comparison, they previously predicted that the oil price would reach USD100 per barrel. Oil has slumped to a 15-month low with Brent falling 12% this week to below USD73 a barrel. The China demand boom has been overshadowed by banking stress, recession fears and an exodus of investor flows. As prices decline, OPEC will only raise production in 3Q2024, instead of 2H2023 as predicted earlier.

UBS offers 0.25 Swiss francs for Credit Suisse

The USD1b all-share offer falls far short of Credit Suisse’ close at 1.86 Swiss francs on Fri. Both banks are reluctant to consolidate and each one spent the weekend working out options. The Swiss government – whose central bank pumped USD54b in emergency funds into Credit Suisse – plans to bypass a shareholder vote and push for the merger. The agreement could be signed soon. UBS has also insisted on a material adverse change clause that kills the deal in case Credit Suisse’ credit default spreads jump by 1% or more. In addition, the Swiss government is also expected to provide a guarantee against the risks involved in the merger.