Capital markets news summary for Wed 8 Feb 2023

Capital markets news summary for Wed 8 Feb 2023

MyEG battered down 27% due to uncertainty

The Immigration Department director general was reported to have said that all immigration services and processes will revert to the Immigration Department by 2025 including those currently managed by third parties. The Home Ministry has allocated RM900m for the National Integrated Immigration System (NIISe) to be launched in 2 years. NIISe – which is being developed by Iris Corporation – will replace the 13 year old Malaysian Immigration System. The new system converges all immigration transactions including passport renewals, visa applications, and applications and renewals of foreign worker permits. Immigration-related services is estimated to contribute 40%-50% of MyEG’s revenues. Although Affin Hwang believes that the 2-year timeframe for NIISe is a tall order, policy risk is a key challenge for MyEG. The upside though will come from favourable changes to the Immigration Department’s outsourcing policy, strong demand for its blockchain business, and securing new e-government contracts. The counter closed at 70 sen, while Iris Corporation closed at 16 sen.

ATA IMS potential new major customer sparks rally

The counter was up 127% supported by retail buying. The company – which provides electronic manufacturing services for the home, environmental care, lighting, healthcare and automotive industries – had reported a core net loss of RM23m for 6 months ended 30 Sep 2022. The company’s subsidiaries received termination notices from UK-based Dyson – which contributes circa 40% of revenues – effective 31 Mar 2023 without explaining the cause, although reports state that it was motivated by forced labour allegations. The counter closed at 45 sen.

SMRT to exit education business

The company plans to sell SMR Education to Special Flagship Holdings for RM49.46m. SMR Education owns 42% of Minda Global – which owns University of Cyberjaya, Asia Metropolitan University and Cyberjaya College. The sale proceeds will be used to partly satisfy the RM72m price for acquiring the remaining 36% of N’osairis Technology Solutions from Permata Kirana. Both the sale and acquisition are related party transactions. The transactions will be completed in 2Q2023. UOB Kay Hian is the principal adviser while Quantephi is the independent adviser. The counter closed at 18 sen while Minda Global closed at 6.5 sen.

Sugar glut could send prices plummeting

The commodity hit a 6-year high at 20.84 cents per pound on New York Mercantile Exchange (NYMEX) up from the low of 9.21 cents in Jul 2020. Brazil is expected to have a bigger harvest starting Apr. It makes up for lower Indian output thereby capping exports from the country – which is the world’s number 2 grower. In addition, India is diverting more cane towards ethanol production. European production is hit by drought and a pesticide ban. A fall in sugar prices plus a weaker US dollar could improve Malaysian sugar manufacturers’ profits. MSM closed at 86 sen.

ADB sees no reshoring from China

Despite US-China tensions, the Asian Development Bank (ADB) sees no evidence of companies moving their operations out of China. Some companies may diversify their supply chain to mitigate geopolitical risk, but reshoring is not happening either on the global value chain or on foreign direct investment. Separately, Taiwan’s exports fell by 21% in Jan to USD31.5b, the lowest since 2009 caused by weak technology product demand. Imports shrank 17%, the most in 3 years. On a positive note, Taiwan Semiconductor Manufacturing Co sees sales growing in 2023 while most of its global competitors are expecting a downturn.