Capital markets executive summary | Thu 17 Aug 2023

Capital markets executive summary | Thu 17 Aug 2023

UEM buys majority stake in Cenergi from Khazanah

UEM Group Bhd bought the shares in the sustainable energy solutions company to grow its renewable energy (RE) business. Cenergi was incorporated in 2008 and is Malaysia’s largest grid-connected palm oil mill effluent biogas player. The company portfolio consists of 23 biogas power plants in Malaysia and Indonesia with 39.6 megawatts (MW) total generation capacity and 20 solar farm and rooftop solar projects in Malaysia with a total peak capacity of over 37.6MW. Cenergi’s pipeline includes biogas, rooftop solar and solar farm projects that are under development in Malaysia plus subsidiary Cenergi EE Holdings Sdn Bhd’s 29.99MWac quota under the Energy Commission’s Corporate Green Power Programme. From Aug 2012 to May 2023, Cenergi supplied green energy equivalent to powering 310,234 homes for a year, while at the same time reducing 2.4m tonnes of carbon emissions which is akin to removing 547,762 passenger vehicles from the roads.

SP Setia 2Q net profit down 46%

The company’s net profit in 2Q ended 30 Jun 2023 fell from RM80.09m to RM43.06m due to 57% higher finance costs and foreign exchange losses which negated its higher gross profit. Earnings per share was down from 1.97 sen to 1.06 sen. Finance costs rose from RM60.01m to RM94.1m. There was an unrealised foreign exchange loss of RM17.53m as against a forex gain of RM8.12m a year ago. Gross profit climbed 13% from RM275.92m to RM311.29m even though revenue shrank 7.4% from RM1.02b to RM942.72m because of lower contributions from Singapore and Malaysia’s central region. For 1H2023, net profit fell by 33% from RM147.59m to RM98.51m whereas revenue moved up slightly by 1.3% from RM1.89b to RM1.91b. SP Setia closed total sales of RM2.56b in 1HFY2023 or 60% of its 2023 target. It received total bookings of RM470m as at 30 Jun 2023 which it intends to convert into sales in a timely manner. The company has 44 ongoing projects and unbilled sales totalling RM6.82b as at 30 Jun 2023. The counter closed at 79 sen.
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MAHB terminates aerotrain contract awarded to Pestech

Pestech Technology Sdn Bhd (PTSB) was appointed by Malaysia Airports (Sepang) Sdn Bhd as the design and build contractor for the Kuala Lumpur International Airport (KLIA) aerotrain replacement programme on 14 Dec 2021 through an open tender process. After an incident on 1 Mar 2023 when 114 passengers had to walk from the main terminal building to the satellite building on the train tracks after the aerotrain broke down, MAHB suspended the service. MA Sepang issued the notice of termination of the RM742.95m contract to PTSB claiming that the project was more than 250 days behind schedule due to PTSB’s non-performance, which compromised significant project milestones, thereby risking delays to deliver the project by the 2025 deadline. Pestech failed to remedy the material breach within the specified time period. MA Sepang can now complete the works by engaging an experienced and credible third-party contractor and other parties for the replacement of the train tracks and system. MAHB closed at RM6.89 while Pestech closed at 29 sen.

MHB records net loss in 2Q

Malaysia Marine and Heavy Engineering Holdings Bhd (MHB) suffered a RM388.7m net loss for 2Q ended 30 Jun 2023 compared to a RM21.97m net profit the prior year. The reason for the loss is the additional cost provisions for ongoing projects. Revenue, however, surged over double the RM400.63m a year ago to RM1.06b, primarily driven by the heavy engineering segment. Accordingly, loss per share was 24.3 sen compared to earnings per share of 1.4 sen previously. Ongoing projects helped the heavy engineering segment to post revenue of RM990.9m from RM309.9m in the same quarter last year. For 6M2023, net loss was RM385.16m from a net profit of RM24.69m in 6M2022, whereas revenue jumped 89.7% from RM818.41m to RM1.55b. The difficulties faced by the heavy engineering segment in executing the ongoing projects within the budgets will remain in the environment of raw material price escalations and global supply chain disruptions. The projects were awarded on a lump sum basis by clients years ago before inflationary issues emerged. The company is exploring contracting strategies with clients through the alliance concept or on a cost-plus basis to mitigate inflationary risks for future projects. The marine segment will also face stiffer competition from China’s shipyards despite demand for dry-docking activities increasing as vessel owners prepare stronger seaborne trade. The counter closed at 48 sen.

Intel and Tower terminate merger over regulatory issues

The proposed acquisition by Intel of contract chipmaker Tower Semiconductor in a USD5.4b (RM25b) deal has been mutually terminated. The parties cited the inability to obtain regulatory approvals on a timely basis. Intel had agreed to buy Tower in 2022 and instead now will have to pay a USD353m termination fee to Tower. Neither company explained the regulatory approvals which were pending, although Tower indicated that there were no indications received regarding the required regulatory approval as their merger agreement passed the 15 Aug 2023 deadline. US-China tensions are spilling over into corporate dealmaking. Another company, DuPont De Nemours Inc also abandoned plans to buy electronics materials maker Rogers Corp for USD5.2b after delays in getting approval from Chinese regulators.