Capital markets executive summary | Mon 8 May 2023

Capital markets executive summary | Mon 8 May 2023

F&N records net profit of RM102m for 2Q2023

The figure rose 8.6% from RM93.9m in 2Q2022 ended 31 Mar 2023. Revenue climbed 8.9% from RM1.1b to RM1.2b. For 1H2023, net profit surged 60.5% from RM186.8m to RM299.8m, while revenue increased by 9.5% from RM2.21b to RM2.42b. Sales momentum during the festive season and the contribution from Cocoaland – which was acquired in Nov 2022 – contributed to the stronger performance although there was higher interest expense. The company has begun producing ketupat sold by Sri Nona – which was acquired in 2021 – at Cocoaland’s factory, as part of the automation initiatives. The company will start producing the remaining Sri Nona products at Cocoaland’s Rawang factories in 2023. The company has also submitted an environmental impact assessment (EIA) for its 2,726.37-hectare integrated dairy farm at Ladang Permai Damai in Negri Sembilan. It is appointing international strategic partners and finalising investment details. The company will start milking by 2025 with Phase 1 production at 20-100m litres of milk. The counter closed at RM27.44.

Westports 1Q2023 net profit jumped 21%

The figure rose from RM151.9m in 1Q2022 to RM183.6m due to the corporate tax reverting to 24% following the one-off prosperity tax in 1Q2022. This was a one-off tax measure introduced by the previous government in the 2022 budget, where companies with chargeable income above RM100m were taxed at 33% instead of 24%. Operational revenue fell by 3% from RM516.3m in 1Q2022 to RM503m due to lower value-added services, in particular storage revenue. The container segment contributed 86% to total revenue with a throughput volume of 2.55m twenty-foot equivalent units (TEUs). Intra-Asia trade supports the company’s throughput volume with 63% of the total container volume handled. Despite inflation and the global economic slowdown, the company handled more transshipment and gateway containers – the latter contributing 1.03m TEUs. With the completed liquid bulk terminal 5 seeing active utilisation, the company has begun building liquid bulk terminal 4A, which is scheduled for completion by end-2023. Cost increases are the company’s challenges, especially manpower and electricity. The counter closed at RM3.52.

Federal government gives in principle approval for Penang LRT

The Prime Minister said that additional funds will be allocated to expedite the RM10b light rail transit (LRT) project. The project – which is part of the Penang Transport Master Plan (PTMP) – is 29.5km long and connects Bayan Lepas and Komtar with 27 stations. The funds will come from the government’s development expenditure or an off-budget fundraising or through public-private partnership. In 2019, the Pakatan Harapan government had agreed to a government guarantee for a USD500 million project loan but it was cancelled in Dec 2020 with the change in government. The Penang state government applied for a final rail scheme approval for the project on 21 May 2020, the issuance of which is pending approval of the environmental impact assessment (EIA) for the Penang South Reclamation project as the LRT’s alignment runs through one of the reclaimed islands. Construction can only begin after the final rail scheme is approved.

Genting Malaysia issues RM500m bonds

Its wholly-owned subsidiary GenM Capital Berhad issued the AAA-rated medium term notes (MTN) in 3 tranches – RM250m maturing in 5 years with coupon rate of 5.07% per annum, RM150m 7 years 5.35% and RM100m 10 years 5.52%. The coupons are paid semi-annually. This is the 3rd issuance under the RM5b MTN programme which was set up in 2015. The issuance proceeds will be used for, among others, the development of properties and resorts including Genting Highlands. AmInvestment Bank and Hong Leong are joint lead managers for the issuance. In Feb, the company reported a net loss of RM519.98m for 2022. Then in Apr, the company announced that it expects to realise a gain on disposal of USD967m (RM4.289b) from the disposal of 4 parcels of the Miami Herald land measuring 15.47 acres for USD1.225b. Genting Malaysia closed at RM2.76.

Fitch downgrades Egypt to B

The country’s sovereign credit rating fell 1 notch from B+ with a negative outlook. Its external financing risk has increased given that it requires a lot of financing from foreign sources, the conditions in the external financing environment have weakened and that worsening investor sentiment could derail Egypt’s broader financing plan. These come amidst a background of great uncertainty in the exchange rate for the Egyptian pound and lower external reserves. Fitch believes that further delaying the transition to a flexible exchange rate could delay the International Monetary Fund (IMF) programme. At end-Apr, S&P revised the country’s outlook to negative due to significant foreign financing that the government needs to plug budget deficits. In dealing with one of Egypt’s worst economic crises, the government had secured a USD3b IMF loan in Dec 2022, miniscule compared to the USD42b debt service amount in 2022-2023 alone.