Capital markets executive summary | Thu 15 Jun 2023

Capital markets executive summary | Thu 15 Jun 2023

Ewein receives takeover offer at 60 sen

The company manufactures precision sheet metal moulds, tools, dies and fabricated parts used in electrical and electronics equipment, precision plastic injection moulding products and product finishing. Nationgate Holdings Berhad’s managing director and major shareholder Ooi Eng Leong raised his interest in the company from 3.84% to 43.82% after buying 39.99% from Hijauwasa Sdn Bhd for RM72.36m. Collectively, Ooi and persons-acting-in-concert (PAC) – Datuk Seri Hong Yeam Wah and Goh Kiang Teng – hold 50.59% of Ewein. Ooi made the mandatory takeover offer to acquire all the remaining 149.01 million shares or 49.41% for RM89.41m. Notwithstanding, the offer price of 60 sen per share is 14.3% lower than Ewein’s last traded price of 70.5 sen as at 4.16pm yesterday, after which trading is suspended until 9am today. The company’s share price has jumped more than 100% this year. Ooi and the PAC intend to maintain the company’s listing status on the Main Market. The company’s founder and executive chairman Datuk Ewe Swee Kheng – who was a witness in Lim Guan Eng’s RM6.3b Penang undersea tunnel graft case – passed away in Oct 2021.

Hong Leong Industries exits fibre cement board

The company signed a conditional share sale and purchase agreement with Saint-Gobain Malaysia Sdn Bhd to sell Hume Cemboard Industries Sdn Bhd (HCB) for RM79.5m. The disposal price will be based on the net asset value of HCB on completion date plus an additional RM20m premium. HCB has 2 plants located in Petaling Jaya and Chemor, Perak. After the disposal of the non-core asset, Hong Leong Industries (HLI) will continue to be involved in the manufacturing, assembling and distribution of motorcycles, scooters and related parts and products, manufacturing and sale of ceramic tiles, and distribution and trading of marine-related products. The sale will be completed in 2Q or 3Q ending 30 Jun 2024. HLI expects to post a RM12.9m gain on sale. The counter closed at RM8.74.

US rate hike paused but sharp increase may be needed in 2H2023

After 10 consecutive increases, the US Federal Reserve voted against raising interest rates in spite of elevated inflation. The federal funds rate stays at 5%-5.25%. The decision offers time for the economy to adapt and for the Federal Open Market Committee to evaluate additional information in developing monetary policy. The members suggested further tightening towards end-2023 to drive inflation down to the target 2%. The Federal Reserve has forecast that a mild recession will begin this year, with the monetary tightening so far managing to rein in economic growth and bring inflation moderately lower. It released an updated economic forecast with 2023 GDP growth at 1%, up from 0.4% in Mar. The median inflation rate is slightly lower at 3.2%. The potential headwinds from tighter credit conditions following the collapse of banks suggest a more moderate pace in rate increases. Bank of America expects the Federal Reserve to hike 0.25% in Jul.

TSH Resources’ RM150m Sukuk Murabahah Programme affirmed at AA-

MARC Ratings affirmed the rating with a stable outlook. The outstanding amount was RM90m as at end-Mar 2023. The programme was established by TSH Sukuk Murabahah Sdn Bhd (TSM) – a wholly-owned subsidiary of TSH Resources Berhad. TSH granted an irrevocable and unconditional undertaking to meet TSM’s purchase obligations. TSH’s robust cash flow generation from higher production of fresh fruit bunches and higher average crude palm oil price (CPO) – up from RM3,570 per metric tonne in 2021 to RM4,100 per metric tonne in 2022 – propped up its balance sheet. The rating is moderated by sensitivity to CPO price volatility and cross-border risk arising from its plantation located primarily in Kalimantan. TSH Resources closed at 94 sen.

Lower oil demand growth due to economic slowdown and clean energy

Post-pandemic oil demand recovery ends in 2023 according to the International Energy Agency. The outlook for 2024 is weakened by the economic slowdown and the transition to renewable energy sources. Even though demand from China and India bumped up 2023’s growth by 300k barrels per day (bpd) to 2.4m bpd, 2/3 will be lost as use of electric vehicles becomes more widespread. The peak in global oil demand will happen by 2030. Global upstream investments in oil and gas exploration, extraction and production that will hit USD528b in 2023 – the highest since 2015 – will ensure sufficient supply until 2028. Oil demand is expected to rise from 102.3m bpd in 2023 to 105.7m bpd in 2028.