Executive summary for capital markets news | Fri 7 Apr 2023

Executive Summary for Capital Markets News | Fri 7 Apr 2023

Rhone Ma and Kulim to jointly develop Jemaluang Dairy Valley project

The company announced that its 49%-owned subsidiary – A2 Fresh Holdings Sdn Bhd (A2FSB) – had entered into a commercial agreement with the East Coast Economic Region Development Council, Kulim (Malaysia) Berhad and Jemaluang Dairy Valley Sdn Bhd (JDV) for the development of the Jemaluang Dairy Valley, a master lease agreement with the Johor state government, JDV and Kulim for the 275-hectare land in Mersing, and a revised joint venture cum shareholders agreement with Kulim and JDV. Kulim is responsible for the management of JDV while Rhone Ma will undertake daily operations. The project will be completed by Jul 2024 and produce 5.4m litres of fresh milk annually, +10% to national output in line with the country’s goal of self-sufficiency by 2025. Rhone Ma has an existing dairy farm in Batang Kali, Selangor established in 2020. The counter closed at 70 sen.

Hektar REIT renewed leases for 25% of NLA expiring in 2023

It amounts to 234,000 sq ft out of 962,565 sq ft of net lettable area (NLA) involving 213 tenancies. The REIT’s total net lettable area is 2.05m sq ft and the portion with tenancies expiring in 2023 is 47%. Visitor traffic jumped 60% from 13.2m in 2021 to 21.1m in 2022. Shopper traffic is now 75% of pre-pandemic levels. They are confident of renewing the remaining leases as footfall and business conditions have improved. For the 53% expiring after 2023, 94 tenants covering 528,121 sq ft will expire in 2024 while 58 tenants for 187,202 sq ft will expire in 2025. Hektar REIT owns 6 malls – Subang Parade in the Klang Valley, Mahkota Parade in Melaka, Wetex Parade and Segamat Central in Johor, and Central Square and Kulim Central in Kedah. The REIT’s net property income rose 24.82% from RM47.02m in 2021 to RM58.69m in 2022. Revenue grew 21.58% from RM96.6m to RM117.45m. The REIT’s units closed at 69.5 sen.

Jentayu closes Ohana Specialist Hospital in Setapak

The licence of the 30-bed hospital – run by its wholly-owned subsidiary Ultimate Forte Sdn Bhd – has been revoked due to non-compliance with mandated operating procedures. The notice from the Ministry of Health was received on 5 Apr. All patients have been relocated to other medical facilities. Ohana Specialist Hospital was acquired in February 2022, and the company claims to have subsequently made process improvements. The hospital is engaging with legal and other advisors to make a direct appeal to the Minister of Health within 30 days to overturn the decision. Ohana Specialist Hospital represents 7.66% of the company’s total assets and is expected to contribute a lower portion of income when the acquisition of the renewable energy assets is completed in 2H2024. In Jun 2021, the company announced the acquisition of Telekosang Hydro One Sdn Bhd and Telekosang Hydro Two Sdn Bhd which were developing a 40MW hydropower plant in Tenom, Sabah which was then 92% completed and Jentayu Solar Sdn Bhd which owns an operational 5.99MW solar farm in Pokok Sena, Kedah. In Dec 2021, the company received approval for 2 hydropower plants in Sungai Maligan and Ulu Padas in Sabah. Without the hospital operational, the company must rely on its building materials and engineering procurement construction and commissioning businesses for income. The counter closed at 90 sen.

Citaglobal and Genetec form JV for battery energy storage systems

The joint venture company – Citaglobal Genetec BESS Sdn Bhd (CGB) – will develop integrated manufacturing facilities. CGB will own the intellectual property and trademark, develop integrated solutions and facilitate technology sharing. Citaglobal will be responsible for marketing in Malaysia and ASEAN and to obtain the relevant approvals and support. Genetec will provide technical expertise and transfer knowledge on the systems to CGB. Each party will subscribe for 249,500 new CGB shares for a total of RM499k in 2Q2023, thereby raising CGB’s share capital to RM500k. Citaglobal closed at RM1.44 whereas Genetec closed at RM2.82.

Airbus to build a new China factory

The European aircraft manufacturer will add a second final assembly line at its existing factory site in Tianjin to double production capacity of its single-aisle best seller. The expansion will enable the company to produce 75 A320neo per month by 2026. The existing plant opened in 2008. With the company’s competitor – US-based Boeing – struggling with supply chain issues and unable to meet post-pandemic orders plus the ongoing US-China tensions and grounding of the 737 Max, Airbus stepped in to fill the void. In 2022, Chinese carriers ordered more than 300 narrow-body aircraft from Airbus at USD40b list prices. Airlines in China constitute 20% of deliveries for Airbus. Boeing has a completion and delivery centre for the 737 Max in Zhejiang province which opened in 2018 where aircraft are painted and interiors fitted in partnership with Commercial Aircraft Corp of China. Then, Boeing said that Chinese customers accounted for 1/3 of deliveries. Despite challenges in China, the US company managed to get new orders – USD37b from Saudia and Riyadh Air, and USD45.9b from Air India for 220 planes. Airbus’ share of the Air India order was for 250 planes.