Capital markets executive summary | Tue 9 May 2023

Capital markets executive summary | Tue 9 May 2023

Hartalega to decommission Bestari Jaya facility

Once one of the stock market’s darlings during Covid with its share price peaking at RM20.28 on 30 Jul 2020, the company now makes the painful decision to decommission 4 plants with 40 production lines accounting for 30% of total capacity. The exercise will take 6 months to complete. It will result in an impairment loss of RM347m for the financial year ended 31 Mar 2023. Further provision for retrenchment costs and contract obligation expenses of RM70m will be made in FY2024. Retrenched staff may be redeployed to the company’s Sepang facility. Supermax is also considering decommissioning older less efficient plants and consolidating production in Meru, Klang. Kossan meanwhile has no such plans. Hartalega closed at RM1.87, Supermax at 86 sen, Kossan at RM1.22 and Top Glove at 94 sen.

ECM Libra’s associate sells entire 27% interest in TYK Capital to PE firm

Positive Carry Sdn Bhd – which ECM Libra owns 30% of – signed a conditional sale and purchase agreement with Enzo II Holdings Pte Ltd – the special purpose vehicle for Singapore-based PrimeMovers Equity (S) Pte Ltd – to dispose of the 24m shares for RM120m cash. PrimeMovers is an existing shareholder of TYK Capital Sdn Bhd. ECM Libra stands to receive RM36m cash from the sale and record RM26.86m gain on sale after 11 years holding the asset. TYK Capital is the ultimate holding company of Engtek Group, which is involved in manufacturing precision engineering components. Engtek Group was previously listed on Bursa as Eng Teknologi Holdings Bhd and was privatised in 2012. The remaining 70% of Positive Carry is held by Plato Capital Ltd. Datuk Lim Kian Onn – deputy chairman of ECM Libra – is a substantial shareholder of Plato. The counter closed at 17.5 sen.

AIMS to work with Gamuda in building Cyberjaya data centre

Fresh from the 49% sale to NYSE-listed DigitalBridge on 20 Apr 2023, TIME dotCom’s data centre unit is considering constructing AIMS Cyberjaya Block 2 to accelerate the expansion of its data centre business across Asia. The purpose-built 8MW data centre will be completed by end-2023. The company achieved above 90% occupancy in AIMS Cyberjaya Block 1 in less than a year. Gamuda’s next-gen digital IBS solution employing IR 4.0 technology will be used to construct the project. It leverages Gamuda’s digital construction ecosystem from cloud-based design to AI-IoT-enabled robotic manufacturing that enables fast-tracked delivery. Time dotcom closed at RM5.65 while Gamuda closed at RM4.10.

Alibaba’s logistics business to be listed in early 2024

Cainiao Network Technology – which provides software and shares data with warehouses, carriers and logistics firms – will raise USD1b-USD2b in a Hong Kong listing. In the past years, Alibaba has bought stakes in express delivery companies to ensure reliable services. In 2013, it co-founded Cainiao with partners including department store owner Intime Group, conglomerate Fosun Group and several logistics firms. Alibaba took control of Cainiao 4 years after that and raise its stake from 47% to 67%. Cainiao accounts for 6% of Alibaba’s total revenue, reporting CNY42b (USD6.07b) sales for 9M ended Dec 2022, up 22% year-on-year. The spin-off of Alibaba’s 6 units – the remaining 5 being Cloud Intelligence, Taobao Tmall Commerce, Local Services, Global Digital Commerce and Digital Media and Entertainment – is expected to lower the heat from the government. Analysts expect the listing to attract global investors.

Egos clash as the US faces a fiscal cliff

With Treasury Secretary Janet Yellen’s 1 Jun deadline drawing near, President Biden and House Speaker Kevin McCarthy will meet to discuss raising the USD31.4t debt limit today. Nothing substantial is expected as the outcome because McCarthy wants spending cuts in return for agreeing to lifting the debt limit. The Republicans hold the trump card especially when 43 Senate Republicans signed a letter not to support a clean debt ceiling increase. Even if the bill passes Congress, the Democrats need 60 votes in the 100-seat Senate to pass the law and will now be at least 3 short. Biden and the Democrats are considering a number of manoeuvres which may prove controversial or challenging to pull off. While some Republicans don’t believe in the 1 Jun deadline, others are hoping for compromise to be reached in today’s meeting.