Capital markets executive summary | Thu 27 Apr 2023

Capital markets executive summary | Thu 27 Apr 2023

Mitsui emerges as substantial shareholder of LGMS

LGMS Berhad – the 1st Bursa-listed cybersecurity services company – debuted on the ACE Market on 8 Jun 2022 at 50 sen. The share price peaked at RM1.41 in Sep 2022. Mitsui holds 114m shares or 25% after having bought 104.88m shares yesterday in an offmarket deal. The largest shareholders are executive chairman Fong Choong Fook with 53.86% and his wife Goh Soon Sei 16.1%. The company also released its audited accounts showing net profit growing 12% from RM10.32m in 2021 to RM11.55m in 2022. Revenue climbed 16% from RM28.26m to RM32.79m contributed by larger number of contracts. It attributed the stronger demand to accelerated use of the internet and adoption of the digital medium following Covid lockdowns. The company sees continued opportunities in cybersecurity in Malaysia and Southeast Asia as businesses move towards digital transformation. Kaspersky reported that cyberattacks in Malaysia surged 197% from 9.2m incidents in 2021 to 13.4m incidents in 2022. The counter closed at RM1.12.

Bahvest Resources shareholders requisition EGM to replace directors

After the drama at South Malaysia Industries, the Sabah-based gold mining company received an extraordinary general meeting (EGM) requisition to remove non-executive chairman Datuk Seri Dr Md Kamal Bilal, managing director and CEO Datuk Lo Fui Ming and executive director Lo Teck Yong. The 3 of them hold 17.13%. The notices came from Marlex Trading Ltd, Innosabah Capital Holdings Sdn Bhd, Datuk Freddy Lim Nyuk Sang, Yong Fen Yoo and Chong Tzu Khen. The EGM is proposed to be held on 25 May. The notices also contain a request for the record of depositors to facilitate the issuance of the EGM notice to shareholders. The board is convening an emergency meeting and seeking legal advice. The company said it will make the necessary announcements. Bahvest reported net profit plunging 84.5% from RM3.89m in 2021 to RM602k in 2022. It reasoned that gold production was lower because mining operations were hampered by unusual weather patterns, although revenue jumped 11.4% from RM97.29m in 2021 to RM108.34m in 2022. The counter closed at 38.5 sen, up 16.67% year-to-date.

Capital A secures USD100m for MRO facility

Its engineering and maintenance subsidiary – Asia Digital Engineering (ADE) – secured the investment from Hong Kong-based investment firm OCP Asia Ltd to be utilised for the construction and operation of an initial 14-line aircraft maintenance hangar facility in Sepang. Phase 1 will be completed by 2Q2024 and Phase 2 by 3Q2024. The 21-acre maintenance, repair and overhaul (MRO) facility will cater to aircraft run by AirAsia and other airlines. Currently, ADE leases 2 MRO facilities in Subang and Johor Bahru. Cashflows from the 14 lines will be reinvested to expand to 20 lines within 3 years. In 4-5 years, ADE should contribute 30%-40% of profits. A portion of the investment will be allocated for ADE’s vertical business expansion and entry into new geographical markets. An industry report projects Malaysia’s MRO market to grow by 8.5% compounded annually from USD1.5b in 2020 to USD2.5b in 2026. Capital A closed at 74 sen.

Meditech Gloves targets RM88.6m graphene glove sales in 2023

Meditech Gloves Sdn Bhd said that its joint research with the UK’s Cranfield University with the support of the Malaysian Rubber Board made a breakthrough to successfully blend graphene with latex. The company successfully ran its 1st fully blended graphene glove at its factory in Nilai early this year. The UK and Europe are showing strong interest in graphene gloves which are thinner and biodegrades in a shorter time period which is more sustainable. In contrast, nitrile or synthetic gloves decompose in 100 years and some were dumped into the ocean during Covid leading to microplastics in the natural food cycle. Meditech Gloves has been supplying medical-grade gloves internationally and domestically for 19 years. The company projects annual demand for graphene gloves to grow 50%.

US debt ceiling crisis pushes 5-year credit default swaps to new highs

The country is expected to run out of cash in Jun-Jul 2023. This is a frequent affair often averted at the last minute by duelling Democrats and Republicans in Congress. The result of falling off the fiscal cliff would be unprecedented financial and economic catastrophe. The debt ceiling – which limits the amount that the Treasury Department can borrow to pay off bills – is currently at USD31.4t. If no deal is struck by the x-date, the Treasury will be prevented from issuing new debt to fund the country’s expenses. The government will have to cut spending by the USD350b fiscal deficit amount. The economy will recede by 4% and 7m jobs will disappear, sending the unemployment rate to 8% from the current 3.5%. The stock market will lose USD10t in value. The US Federal Reserve will not be able to accept US government bonds as collateral thereby making it impossible for it to provide liquidity to the financial system. The Republicans could be holding back as a strategic play against President Joe Biden’s 2024 re-election, a similar tactic employed during Obama’s time in 2011 and 2013. Investors may be losing faith as the 5-year credit default swap widened to 62 basis points, double at the start of 2023 and the highest since 2011.