Capital markets executive summary | Wed 19 Apr 2023

Capital markets executive summary | Wed 19 Apr 2023

Ancom Nylex 3Q2023 net profit up 8%

Net profit grew from RM15.1m in 3Q2022 ended 28 Feb 2022 to RM16.4m in 3Q2023. Revenue, however, fell year-on-year from RM510m to RM483.9m. For 9M2023, net profit surged 57.1% from RM36.3m to RM56.9m, while revenue was up 8.1% from RM1.45b to RM1.57b. The key growth driver is the agricultural chemicals segment which contributed RM440m revenue in 9M2023, up 26.7% from RM347.4m. It is also the biggest profit contributor. The company is currently installing new reactors at its Shah Alam plant, which will expand its capacity for producing monosodium methanearsonate related products. This will enable the company to take advantage of customers switching from the banned paraquat in Thailand. The yield for one of Ancom Nylex’s new active ingredients has been very encouraging, and the company plans to start production at the new facility in Klang by end-2023. Also, Ancom Crop Care Sdn Bhd – the company’s subsidiary – entered into a share sale agreement with HJ Unkel (M) Sdn Bhd, Chong Sau Kin and Ye Suping to acquire 70% in HJ Unkel Chemicals Sdn Bhd for RM9m. The target will supply surfactant chemicals for the production of the active ingredients. The acquisition is backed by a RM2.5m net profit guarantee for FY2024 and FY2025. Ancom Nylex closed at RM1.12.

Gentari and City Energy sign MOU on hydrogen import and EV

Gentari – Petronas’ new energy division – and City Energy – Singapore’s sole piped town gas producer – have signed 2 memoranda of understanding (MOU). The 1st MOU is for the companies to jointly conduct feasibility studies on setting up a hydrogen supply chain from Malaysia to Singapore, while the 2nd MOU sets out the collaboration between the companies on enabling seamless access to the respective electric vehicle charging networks. Singapore is committed to achieve net zero emissions by 2050. City Energy which supplies gas to more than 880k homes and businesses, is already supplying hydrogen which is the largest component in town gas produced at City Energy’s Senoko Gasworks plant. Gentari, meanwhile, aims to produce up to 1.2m tonnes per annum of clean hydrogen. The collaboration on electric vehicle charging is the 2nd that City Energy has struck after the one with EV Connection in Apr 2022.

Funding Societies disbursed RM2b MSME financing in Malaysia

The Securities Commission-registered digital finance platform has been active in Malaysia since 2017. It is also licensed in Singapore, Indonesia and Thailand, and operates in Vietnam. Across the region, it has disbursed a total of RM13.4b over 5m loan transactions since 2015. Funding Societies is an online marketplace that connects micro small and medium-sized enterprises (MSME) to investors in order to increase their access to financing. Altogether almost 100,000 MSMEs have benefitted from its micro, term and invoice financing products. The company’s overall default rate is under 2%. The company has recently scaled up in Thailand and Vietnam and secured its first credit line from HSBC for RM224m. It has also entered into payment solutions with CardUp and investments into Bank Index to meet the needs of MSMEs beyond financing.

High Court strikes out Prolexus suit against South Malaysia Industries

Prolexus’ subsidiaries – Honsin Apparel Sdn Bhd and HiQ Media (Malaysia) Sdn Bhd – had filed a lawsuit to compel South Malaysia Industries (SMI) to provide them with the record of depositors (ROD) in their attempt to call for an extraordinary general meeting (EGM) to remove the current directors of SMI. The court said that the companies intentionally cited the wrong law. The companies relied on paragraphs 7.16(1) and 7.16(2) of the Main Market Listing Requirements which dealt with requests for the issuance of the ROD following notices of general meetings. Instead, the relevant law is s34(5) and s34(6) of the Securities Industry (Central Depositories) Act on access to the ROD. In addition, the court declared that the companies had abused the court process by creating a situation where the EGM requisition deadline could not be complied with and subsequently filed the suit the day after. Earlier this month, SMI filed a report with the Securities Commission alleging that Prolexus and parties acting in concert had accumulated more than 33% shareholding without making a mandatory general offer. Prolexus has now issued a fresh notice to SMI to requisition for an EGM. SMI closed at 80 sen while Prolexus closed at 46.5 sen.

More US consumers fall behind on credit card and loan payments

This is expected as the economy softens although delinquency levels are modest. Despite some consumer financial health trends weakening from 2022, consumers and businesses generally remain strong. Citigroup, for example, noted that delinquency rates were below normal levels in the bank’s very high quality loan portfolio. The current delinquency rates of 2.8% for branded cards and 4% for retail services will return to the normal levels of 3%-3.5% for branded cards and 5%-5.5% for retail services by early 2024. It has tightened credit standards and made larger provisions for credit losses. Bank of America’s net charge-offs – debt owed to a bank not likely to be recovered – reached USD807m but still below pre-pandemic levels. Good employment and wages support the consumers’ credit quality. UBS said that the impending recession will cause credit losses in 2023 and 2024, although loan defaults are expected to stay below the peaks experienced in prior downturns.