Capital markets executive summary | Mon 29 May 2023

Capital markets executive summary | Mon 29 May 2023

KNM proposes to sell FBM Hudson Italiana to British Midland

FBM Hudson Italiana manufactures heat exchangers and high-pressure equipment for the oil and gas industry. The proposed listing of FBM Hudson Italiana and FBM-KNM FZCO on Catalist – the sponsor-supervised board of the Singapore Stock Exchange – was aborted earlier because it was not feasible. The FBM group needs immediate restructuring and investment. Given that KNM lacks resources, it was decided that a disposal is the best solution. This proposed sale by wholly-owned KNM Europa BV to British Midland for EUR12m (RM59.1m) is dependent on satisfactory due diligence to be completed within 3 weeks. On 23 May 2022, KNM signed a sale and purchase agreement to sell Borsig – a German-based process equipment manufacturer – for EUR220.8m to GPR Siebzigste Verwaltungsgesellschaft mbH. On 31 Oct 2022, KNM announced that it was a PN17 issuer after its auditors expressed going concern issues. On 1 Dec 2022, the sale of Borsig was cancelled. In the same month, the company defaulted on its loans. It has been working with creditors to raise funds to repay borrowings. The counter closed at 6 sen.

Datasonic 4Q net profit jumped 69.8%

The figure increased from RM13.37m the prior year to RM22.7m in 4Q ended 31 Mar 2023. Revenue almost doubled from RM54.34m to RM104.9m. For the full year, net profit soared 746% from RM10.24m to RM76.37m. Bigger supply of passports as international borders opened, smart cards and personalisation services boosted revenue from RM136.43m to RM344.71m. The company declared a 4th interim dividend of 0.75 sen, for total dividends of 2 sen or 74.2% dividend payout ratio. As at 31 Mar 2023, its order book was RM339m. The trend of the demand for passports should continue while a rebound in MyKad orders to pre-Covid levels is expected. The counter closed at 42.5 sen.

IOI Properties 3Q net profit up 93.2%

The figure was up from RM59.72m in 3Q2022 to RM115.38m in 3Q ended 31 Mar 2023. Earnings per share increased from 1.09 sen to 2.1 sen. The primary reason was a fall in taxation from RM155.08m to RM36.7m. Revenue shrunk 23.5% from RM737.39m to RM564.67m. The property development segment posted weaker results especially because the China operations experienced the resurgence of Covid. For the 9M period, net profit almost trebled from RM394.26m to RM1.16b, whereas revenue rose 3.2% from RM1.87b to RM1.93b. The property development segment achieved sales with contracts exchanged at RM1.37b with local projects accounting for RM1.14b or 83% of the total. The Klang Valley region contributed RM645.6m and Johor RM457.4m. To counter the rate hikes in Malaysia, the company will focus on mid-price range residential units which are less sensitive. China and Singapore delivered RM226.5m or 17% of total sales. Singapore’s additional buyers’ stamp duty could affect foreign demand for the company’s Marina Bay project. The counter closed at RM1.11.

Merger rumours ring true with Sapura Energy’s new directors who are Petronas-related

Sapura Energy announced that 56-year-old Wan Mashitah Wan Abdullah Sani – former chief executive officer of Malaysia Marine and Heavy Engineering Holdings Bhd (MHB) – is an independent and non-executive director starting 26 May. She has over 28 years’ experience in finance, strategic planning, project costing and supply chain management. She was the CEO of E&P Operations and Maintenance Services Sdn Bhd from 31 March 2022 to 30 Sept 2022 after Petronas sold the company to Janamurni Sdn Bhd. Concurrently, 65-year-old Datuk Nur Iskandar A Samad also joined as an independent and non-executive director. He has 41 years’ experience in the downstream oil, gas and petrochemical industry. He was CEO of Petronas Chemicals Fertiliser (Kedah) Sdn Bhd, CEO of Petronas Penapisan Melaka Sdn Bhd and Malaysia Refining Company, and project director of petrochemical for Pengerang Integrated Complex in Johor. Sapura Energy closed at 3.5 sen while MHB closed at 51.5 sen.

US Congress to vote on Wed on debt ceiling deal

Kevin McCarthy – House Speaker – said that there will be reductions in spending, reforms that will lift people out of poverty and into the workforce, and it will rein in government overreach. There are no new taxes and no new government programmes. President Biden said that it is an important step forward that reduces spending while protecting critical programmes for working people and growing the economy for everyone. He added that it represents a compromise, where not everyone gets what they want. The announcements mark the beginning of lobbying to win enough votes in the Republican-controlled House and Democratic-held Senate to raise the debt ceiling in time to meet a 5 Jun deadline. Many Republicans in the House and Senate have suggested they would not support a deal which gave too much away. Treasury Secretary Janet Yellen said that the Treasury Department will make USD130b of payments by 2 Jun and owe USD92b by 5 Jun. The debt limit must be raised to let the government borrow more, or its resources would be insufficient to satisfy all of the obligations.