Capital markets executive summary | Wed 17 May 2023

Capital markets executive summary | Wed 17 May 2023

Hume Cement 3Q net profit rises 14 times

The figure shot from RM1.92m in 3Q ended 31 Mar 2022 to RM27.01m in 3Q ended 31 Mar 2023. The performance was driven by the revised selling price of cement and higher cement sales volume. Earnings per share increased from 0.38 sen to 5.36 sen but the company did not declare any dividends. Revenue jumped 50.71% from RM191.76m to RM288.1m. The results allowed Hume Cement to turnaround from 9M2022 net loss of RM1.82m to 9M2023 net profit of RM19.44m. Apart from the sale price and volume, lower cement rebates helped improve profitability. Offsetting them were higher coal and electricity costs. Revenue grew 46.33% from RM513.26m in 9M2022 to RM751.05m in 9M2023. The Hong Leong group company is pro-cyclical and expects to benefit from the continued recovery of construction activities. The counter closed at 96 sen.

YNH Property sells Desa Seri Hartamas land to Sunway

YNH Property’s wholly-owned subsidiary Kar Sin Berhad signed a sale and purchase agreement (SPA) on 12 May to dispose of the 5.098-acre plot to Sunway Living Space Sdn Bhd for RM170m cash. YNH will receive an additional RM50m cash from Sunway if it obtains a new development order (DO) for a project with a minimum 7 times plot ratio within 1 year from the SPA. The current DO is for a plot ratio of 5. Sunway Property’s landbank is currently 3,063 acres with a potential gross development value of RM48.9b over 15 years. For YNH, this is the 3rd asset disposal after selling 163 Retail Park in Mont Kiara and AEON Mall Seri Manjung in Perak to ALX Asset Berhad for RM423m cash in Mar. The disposal proceeds will be used to reduce bank borrowings from RM951.81m to RMRM733m. YNH will book a net gain on sale of RM2.6m. Despite its net loss widening from RM2.79m in FY2021 to RM14.59m in FY2022, YNH’s share price has jumped 47% in the last 12 months to RM4.90. Sunway closed at RM1.56.

Vantage Data Centers to build RM13.32b 2nd data centre in Cyberjaya

The global provider of hyperscale data centres will build the KUL2 campus – its largest in the Southeast Asia region – to deliver 256MW of IT capacity. It is on a 35-acre site next to the existing KUL1 campus. The complex will include 10 facilities across 2.75m square feet. The 1st facility will open its doors in 4Q2025. Vantage is currently expanding its KUL1 campus with a 4th 16MW facility. Both campuses will deliver a combined 287MW of IT capacity to meet the demands of hyperscalers, cloud providers and large enterprises. Vantage has 7 campuses across the region that are either operational or under development. Globally, Vantage operates 28 campuses in North America, Europe, Middle East, Africa and Asia Pacific.

TA Securities sees Edelteq’s fair value as 33 sen

That is 37.5% higher than the IPO price of 24 sen, which is already 17.7 times price-earnings multiple of 2022 earnings per share. TA Securities’ valuation is 20 times 2024 earnings per share assuming a compound annual growth rate (CAGR) of 12.5% for revenue and CAGR of 14.6% for core net profit. The research house sees a decline in sales in 2023 due to the global slowdown in the semiconductor industry, and expects a rebound in 2024 driven by 5G, artificial intelligence, high-performance computing, the internet of things and vehicle electrification. The new factory in Batu Kawan which will be operational in Mar 2024 should add capacity for revenue growth. Edelteq provides engineering support for integrated circuit assembly and test processes in the semiconductor industry. The RM24m IPO proceeds will be used for repayment of bank borrowings 42.7%, the Batu Kawan factory 15.3% and working capital 14.1%.

Morgan Stanley may cut 7% investment banking jobs in Asia

US-China tensions and weaker economic growth are stunting deal flow. China will take the biggest hit. The bank will start talks with more than 40 affected bankers this week. The cuts are part of Morgan Stanley’s plan to lay off 3,000 workers globally this quarter, or 5% of staff. At the end of 2022, the bank fired 50 investment bankers, mainly in China. Even though Asia contributed 13% to net revenue the past 5 years or USD6.7b at end-2022, the bank joins others in scaling back in China. US President Biden will sign an executive order to limit investment in key parts of China’s economy by US businesses in the coming weeks. Separately, Michael Burry – the fund manager made famous in the movie The Big Short – has a contrarian view with his Scion Asset Management going long on JD.com and Alibaba as the 2 stocks make up 20% of the company’s portfolio.