Capital markets executive summary | Tue 2 May 2023

Capital markets executive summary | Tue 2 May 2023

PGF Capital net profit up 700%

The insulation products manufacturer recorded net profit of RM16.4m in the financial year ended 28 Feb 2023 compared to RM1.9m the prior year. This included a RM10.7m reversal of impairment on development properties offset by RM3m elimination of unrealised profit for goods in transit in Australia. Revenue grew 58.3% from RM57.6m to RM91.1m. For 4Q2023, net profit was RM5.3m and revenue RM25.0m. The insulation and related products segment contributed 97.4% of revenue and is also the largest contributor of profit. PGF attributed the financial performance to an improved post-Covid business landscape. Inflationary pressures were mitigated by lower ocean freight cost which enabled it to remain competitive. The company proposed a final dividend of 1 sen in addition to the 1 sen interim dividend paid in Nov 2022. Outlook for the company is bright considering the anticipated revision of the National Construction Code in Australia and Building Code in New Zealand which will raise demand for insulation. The company also owns the 1,311-acre Diamond Creeks Country Retreat in Tanjong Malim, Perak – leasehold land adjacent to Proton’s Automotive High-Tech Valley – planted with kumquat, passion fruit and durian. The counter closed at RM1.47.

ACE Market’s Teladan Setia proposes transfer to Main Market

After being listed for 2 years, the Melaka-based property developer has satisfied the requirements for the transfer based on the Securities Commission’s equity guidelines and Bursa’s Main Market Listing Requirements, among which is minimum aggregate profit after tax of RM20m for the past 3-5 financial years plus at least RM6m net profit for the most recent financial year. For financial year ended 31 Dec 2022, Teladan reported net profit of RM32.3m. It has a healthy current ratio of 2.2 times. The company has been generating positive operating cash flows for 2020-2022 and has cash and short-term deposits of RM132.7m. It is confident that its working capital will be sufficient for the next 12 months. The counter closed at RM1.20.

Anih’s highway concession extended to 2069

The company’s initial 28-year concession was set to expire in 2032. It signed a supplemental concession agreement (SCA) with the government on 17 Nov 2022 to extend the toll concession on the Kuala Lumpur-Karak Highway and Phase 1 of the East Coast Expressway. The SCA also includes lane widening and flood mitigation works estimated to cost RM2.3b. Toll compensation is suspended from 2022 until a new toll structure is implemented in 2027 subject to completion of the additional works. MARC Ratings – which affirmed the AA rating for the senior sukuk musharakah programme – said that Anih has arranged for a sukukholders’ meeting on 9 May 2023. The amount outstanding from the sukuk programme is RM1.48b. Although MARC projects the finance service coverage ratio to fall from 1.9 times to 1.8 times, it would still be above the 1.75 times covenant. MARC expects the company to put in place a new financing structure.

Apex Healthcare’s associate to sell Straits Apex for RM1.06b

40%-owned Straits Apex Group Sdn Bhd plans to divest its entire interest in Straits Apex Sdn Bhd to Quadria Capital, a private equity firm focused on healthcare. Straits Apex and its subsidiaries are involved in the contract manufacturing of orthopaedic devices, components and surgical instruments. The consideration is based on an enterprise value of USD240m and will be satisfied in 2 cash payments and 40% equity in a new holding company to be set up by Quadria to indirectly hold 100% of Straits Apex. The balance 60% of the new holding company will be held by Quadria. Apex Healthcare invested a total of RM7m for its 40% equity in Straits Apex Group since 2013. The value of that investment could be worth USD86m (RM379m) upon the sale. The counter closed at RM4.07.

Singapore’s PM-in-waiting admits to country’s waning competitiveness

Deputy Prime Minister Lawrence Wong said that Singapore cannot outbid major economies for foreign direct investments (FDI). Citing the example of Germany offering EUR10b (USD11b) in financing support in return for the construction of an Intel plant in the country, Lawrence said that it is double the budget that the government has allocated to grow the entire economy. The government is also talking to multinational corporations (MNC) about the need to raise taxes from the current 10% to the global minimum rate of 15% introduced by the Organisation for Economic Co-operation and Development (OECD). The MNCs are threatening that if the country’s tax rate rises, it will become less competitive than other countries. A third threat comes in the form of protectionism which for a country whose trade is 3 times its gross domestic product, would have severe repercussions. Near-shoring or friend-shoring, for example, means that countries place their factories and supply chain closer to them or in friendly countries. Global FDI will slow and become more concentrated in countries that are geopolitically aligned.