Capital markets news summary for Thu 23 Feb 2023

Capital markets news summary for Thu 23 Feb 2023

Gamuda buys Australian transport projects for AUD212m

The company signed the agreement with Downer EDI Works Pty Ltd and VEC Civil Engineering Pty Ltd to acquire the business which provides civil construction services with specialist rail capability. The purchase price equivalent to RM636m will be paid in cash. As at 31 Oct 2022, Gamuda had RM3.36b in cash and RM5b in borrowings. The acquisition will be completed in Jun 2023 and is pursuant to the company’s aim of achieving AUD3b annual revenue in Australia in the next 2-3 years. Gamuda had applied multiples for recent transactions and comparable companies in the Australian market when arriving at the enterprise value of the transport project business. The acquisition will enable the company to participate in different segments of the transport infrastructure market including tunnelling, track construction, line electrification, and construction of depots, stabling yards and stations. The company will also be able to leverage on the relationships with the government, public transport authorities and the community. The counter closed at RM4.06.

Media Prima recorded RM53.9m net profit

The figure is up 4% against 2021. Revenues were RM997.9m with advertising improving to contribute RM748.9m. Big Tree – which provides outdoor advertising services – turned around with RM7.2m net profit compared with a loss of RM36.2m the previous year. REV Media Group – the online marketing business – saw net profit increasing by 46% from RM12m to RM17m, driven by 7% growth in advertising revenue. Media Prima Television Networks and Media Prima Audio posted revenue of RM471.6m and net profit of RM68m. Media Prima Television Networks remained the most watched network in Malaysia, with TV3 and 8TV growing their reach to over 32% of the Malay and 42% of the Chinese audiences. Overall, Media Prima Television Networks reached over 36% of Malaysia’s broadcast audience. Content sales revenue increased by 25% to RM54.1m. The company will be focussing on content boost, inventories premiumisation and new revenue streams in future. The counter closed at 45 sen.

End-financing troubles for 94% of developers

The Real Estate and Housing Developers’ Association (REHDA) found in a survey that 61% of developers had unsold residential units with 23% priced above RM1m, 15% in the RM400k-RM500k bracket and 11% in the RM500k-RM600k bracket. While there is interest amongst buyers, they were let down by banks which rejected them due to income ineligibility, adverse buyer’s credit history and lower margin of financing. Sales performance for 2H2022 rose to 54% or 5,239 units from 49% in 1H2022. 1,622 units of 2-3 storey terrace houses were sold primarily in Seremban and Johor Bahru. There were 9,669 units launched in 2H2022 – 97% of which were residential – up 23% from 7,843 units in 1H2022. 51% of property developers are not planning new launches in 1H2023 until banks ease up on end-financing.

Tencent investors flee after ESG rating downgrade

After Sustainalytics – an environmental social governance (ESG) ratings company and a unit of Morningstar Inc – downgraded Tencent to the category of non-compliant with UN principles in Aug 2022, ESG funds sold more than USD1.2b of the company’s shares. The downgrade is caused by China’s record of surveillance and suppression of free speech, including on Tencent’s WeChat platform. Added to that is the government’s crackdown on technology firms. The censorship and surveillance issues which Sustainalytics are concerned with include religion, the Ukraine war, Covid and LGBTQ. Apart from Tencent, Baidu and Weibo were also downgraded as part of the triad that play a significant role. Some ESG investors – such as Sweden’s Alecta with USD107b assets under management – have exited China altogether.

China’s Baidu posts 26% increase in net income

The NASDAQ and Hong Kong-listed internet company made USD1.096b in net profit a 26% increase year-on-year. 4Q2022 contributed 2/3 of the figure. Revenues were slightly up by 1% at USD17.931b. The company’s cloud computing service managed to offset gloomy advertising sales during China’s economic downturn. Moving forward, the company plans to launch Ernie Bot – an embedded artificial intelligence (AI) akin to OpenAI’s ChatGPT – in its flagship search services in Mar, and expand its reach to smart speakers and automobile software platforms after that. The company faces stiff competition from Tencent’s WeChat and Alibaba’s Taobao. Baidu’s cloud unit is going up against Huawei and Alibaba by targeting smart city projects and industrial businesses. The company’s streaming service – iQiyi – grew 3% in revenues. Following the results, the company announced a USD5b share buyback.