MSWG Weekly Newsletter 23 April 2021 (English)

Date & Time

Company

Quick-take

27.04.21 (Tue) 10.30 am

Lotte Chemical Titan Holdings Bhd (AGM)

In FY2020, Group revenue decreased by 18% (or RM1,537 million) from RM8,438 million to RM6,901 million due to the reduction in average product selling prices and sales volume. Despite its major statutory turnaround and the headwinds facing the petrochemical industry in FY2020, the Group’s operating profit has increased by 5% to RM272 million, from RM260 million in 2019 due to improved Polymer to Naphtha margin. However, profit after tax was lower at RM154 million from RM443 million recorded in FY2019, primarily due to higher share of losses from its U.S. associate’s operations.

27.04.21 (Tue) 02.00 pm

Westports Holdings Bhd 
(AGM)

Westports’ revenue surged by 11% y-o-y to RM1.97 billion in FY2020 mainly due to revenue from construction activities and higher container revenue which was driven by tariff increase and growth in value added services.  Meanwhile, its PAT improved by 11% y-o-y to RM654 million in FY2020 mainly due to higher container revenue and reduction in fuel cost.

It expects a low single-digit container throughput growth for 2021.  The vaccination programs across the globe should pave the way for some gradual recovery in the regional and global economies.

28.04.21 (Wed) 10.00 am

Nestle (Malaysia) Bhd
(AGM)

Nestle’s revenue decreased by 1.9% y-o-y to RM5.4 billion in FY2020. Export sales up by 1.6%, contributed RM1.1 billion of revenue, but this was negated by weak domestic revenue, which dropped 2.8% to RM4.3 billion in FY2020.  Meanwhile, PAT declined by 17.9% y-o-y to RM552.7 million in FY2020, mainly due to significant Covid-19 related expenses.

Nestle foresees economic volatility to persist through 1H2021, it will continue to focus on safety of its people, supply of products to its customers and support vulnerable communities through different programs.

28.04.21 (Wed) 10.00 am

Malakoff Corporation Bhd (AGM)

As a move towards the low carbon economy, Malakoff strives to continue expanding its renewable energy and the waste management portfolios. In FY2020, it has sealed three solar projects, secured two PPAs for its two small hydro projects and has successfully bid for a second biogas power plant in Johor.

28.04.21 (Wed) 10.00 am

Petronas Dagangan Bhd
(AGM)

PetDag recorded RM18.7 billion of revenue in FY2020, a y-o-y decrease of 38.2% due to the decline in total sales volume and average selling price.  Its net profit was lower at RM272.4 million in FY2020 as compared to RM829.5 million a year earlier as it was affected by the sharp decline in petroleum product prices at the beginning of year 2020 and the ensuing Covid-19-related movement restrictions.

28.04.21 (Wed) 11.00 am

Kumpulan H&L High-Tech Bhd (AGM)

Kumpulan H&L High-Tech achieved revenue of RM18.5 million in FY2020, a decline of 18.2% compared to FY2019.  It recorded a lower net profit of RM2.43 million, which was a 27.6% decline as compared to FY2019. This was due to reduction in turnover in the manufacturing segment despite an increase in plantation segment revenue.

It expects the recovery of its manufacturing business to accelerate starting from 2H2021 when its main markets in the USA and Europe and its population receive the vaccinations completely.

28.04.21 (Wed) 11.00 am

Country View Bhd
(AGM)

For the FYE 30 November 2020 (“FY2020”), Country View recorded a revenue and PBT of RM90.2 million and RM19.6 million respectively as compared to the revenue and profit before tax of RM162.7 million and RM33.9 million in the previous year.

28.04.21 (Wed) 05.00 pm

Bintulu Port Holdings Bhd (AGM)

The Group recorded operating revenue of RM707.31 million in FY2020, 1.27% lower than the RM716.42 million recorded in FY2019. PBT decreased by 27.8% to RM93.3 million (2019: RM129.3 million) mainly due to higher depreciation of right-of-use assets and provisions for maintenance dredging costs.  Bintulu Port expects its performance in FY2021 will continue to be affected by the unprecedented impact caused by the ongoing Covid-19 pandemic.  

29.04.21 (Thur) 11.00 am

Poh Huat Resources Holdings Bhd (AGM)

Poh Huat’s sales to US and Canada accounted for 96% of the Company’s revenue for FY2020. The Company has to take steps to diversify its sales base to avoid over-dependence on its key markets. The Company is also flushed with cash with the cash balance at RM190 million for FY2020. Its deployment of its healthy cash balance which could have a telling effect on the performance of the Company in FY 2021. Besides, it should seriously consider returning the excess cash to shareholders in the form of special dividends.

30.04.21 (Fri) 11.00 am

Dynaciate Group Bhd (AGM)

Dynaciate reported revenue of RM59.25 million for FYE 2020 compared to RM108.30 million for FPE 2019 due to lower productivity from work-in-progress as construction activities were halted during the MCO.

It recorded a loss before tax (“LBT”) of RM18.16 million (FPE 2019: LBT of RM17.08 million) mainly due to lower revenue recognised which was insufficient to absorb the high fixed overheads and cost overruns as well as loss of RM2.67 million arising from the disposal of associates.

30.04.21 (Fri) 11.00 am

Ajiya Bhd (AGM)

Ajiya’s revenue in FY2020 was 21.5% lower to RM255.0 million, mainly due to lower demand for the Group’s products. The profit net of tax in FY2020 registered at RM0.40 million compared to RM4.28 million in the preceding financial year, marking a reduction of RM3.88 million or 90.7% y-o-y. 

A one-off transaction in relation to the provision of bad debts has impacted the profitability of the Group.

One of the points of interest to be raised:

Company

Points/Issues to Be Raised

Lotte Chemical Titan Holdings Bhd (AGM)

Despite a major statutory turnaround and headwinds facing the petrochemical industry in FY2020, LCT’s operating profit has increased by 5% to RM272 million, from RM260 million in 2019 due to improved Polymer to Naphtha margin. Nevertheless, PAT was lower at RM154 million from RM443 million recorded in FY2019, primarily due to higher share of losses from its U.S. associate’s operations (page 36 of IAR).

1. Will the improved polymer to naphtha spread experienced in 2020 be sustainable in 2021?
2. LCT recorded a share of loss of associates amounting to RM119.25 million in FY2020 (FY2019: a profit of RM158.26 million). Excluding the one-off gain of RM139.5 million recorded in FY2019 arising from an equity stake disposal exercise, the y-o-y comparison suggests a worsening performance of LCT’s 40% associate - Lotte Chemical USA Corporation (LCUC).

What were the main reasons for the share of losses from its U.S. associate’s operations? What are the catalysts to enable a turnaround performance of LCUC?

Westports Holdings Bhd 
(AGM)

The Group’s accumulated impairment loss on trade receivables have increased significantly to RM8.1 million in FY2020 (FY2019: RM1.9 million) (Note 18, page 71 of AR 2020).

1. What were the reasons for the high impairment loss on trade receivables?
2. What actions have been taken to recover the said amount?
3. What is the percentage of the impairment loss of RM8.1 million that is expected to be uncollectable?
4. How much of the impaired trade receivables have been recovered to-date?

Nestle (Malaysia) Bhd
(AGM)

1. “Other expenses” have increased by 220% from RM16.4 million in FY2019 to RM52.4 million in FY2020. (page 56 of Corporate Governance and Financial Report (CGFR) 2020)

1. What were the reasons for the significant increase in other expenses?
2. What are the purposes of these expenses? 
3. Are these one-off or recurring expenses? If recurring expenses, how will the additional expenses impact the Group’s operating margin in FY2021?

2. The Group’s has written off trade receivables of RM1.13 million in FY2020 (FY2019: RM683,000) (Note 19, page 107 of CGFR 2020).

1. What was the nature of these trade receivables that have been written off?

2. What actions have been taken to recover the said amount prior to writing off?

Malakoff Corporation Bhd (AGM)

Malakoff has identified the renewable energy (RE) and waste management & environmental services as the two key growth areas. In FY2020, Malakoff had sealed three sale and purchase agreements (SPAs) for three rooftop solar projects, two renewable energy power purchase agreements (REPPAs) with Tenaga Nasional Berhad for the two small hydro projects and has successfully bid for a second biogas power plant in Johor.

1. The solar projects are expected to achieve commercial operation date in the third quarter of 2021. How much of income will the three solar projects contribute to the Group?

2. What is Malakoff’s expectation on RE segment in terms of financial contribution?

3. There will be a loss of income to Malakoff once the PPAs for GB3 Plant and Prai Power Plant (with collective generating capacity of 990 MW) expire in 2022 and 2024 respectively.

By then, will the RE and waste management businesses be sufficient to offset the loss of income from the expiration of the two PPAs?

Petronas Dagangan Bhd
(AGM)

1. “Property, plant and equipment (PPE) expensed off” has increased to RM7.1 million (FY2019: RM625,000) (page 264 & 311 of IR 2020)

What were the reasons for the significant increase in PPE expensed off?

2. The Group’s impairment losses on trade receivables have increased significantly to RM10.5 million (FY2019: RM1.0 million) (page 311 of IR 2020).

1. What actions have been taken to recover the said amount? 

2. What is the probability of recovering the impaired amount?

3. To which business segment does the impaired trade receivables relate to?  How much of the impaired trade receivables have been recovered to-date?

Kumpulan H&L High-Tech Bhd (AGM)

5 years’ financial highlights of the Group have shown a declining revenue and profit trend since FY2017 (page 4 of Annual Report (AR) 2020).

(Source: Page 4 of AR 2020)

How does the Board plan to address the Group’s deteriorating financial performance, going forward?

Country View Bhd
(AGM)

The Group recorded a fair value gain of RM12.6 million from the transfer of property inventories to investment properties in FY2020 and RM10.3 million in FY2019. (page 89 of AR).

1. What is the type of property inventory that was transferred to investment   properties in FY2020?
2. What are the current occupancy rates of the investment properties that was transferred in FY2020 and FY2019 respectively?
3. What is the expected annual gross rental yield from the investment properties transferred in FY2020?

Why did the Group dispose investment properties at a loss of RM23,000 in FY2020 as compared to RM1.1 million gain reported in FY2019?

Bintulu Port Holdings Bhd (AGM)

In FY2020, the Group’s cargo throughput has declined 5.05% to 47.61 million tonnes and container throughput also dipped 1.7% to 339,660 TEUs compared to previous year. (Page 24 of Integrated Annual Report (IAR) 2020)

In view of the on-going Covid-19 pandemic which is affecting the global supply chain in the port services industry, what is the outlook on cargo and container throughput growth for Bintulu Port and Samalaju Port in 2021?

Poh Huat Resources Holdings Bhd (AGM)

96% of the sales of the Company for FYE 2020 were derived from US and Canada. (Page 6 of AR 2020)

These markets were severely affected by the pandemic.

1. What are the measures taken by the Company to diversify its sales base and reduce its dependence on these two markets?
2. Does the Company have any plans to diversify its main businesses of producing home and office furniture in view of the stiff competition of the business?

How does the Company ensure that the raw materials that it sources i.e. timber comes from sustainable forests as its key export markets of US and Canada have very strict requirements that the furniture they import has to come from sustainable forests?

Dynaciate Group Bhd (AGM)

The amount paid for non-audit services, including the recurring and non-recurring non-audit services provided by the external auditor and its local affiliates amounted to RM69,000 and this was 61.06% of the audit fees of RM113,000 in FYE2020 (Page 41 of the Annual Report 2020).

1. Please provide the breakdown of the non-audit services, including the recurring and non-recurring non-audit services provided by the external auditor and its affiliates.

What is the Company’s policy in relation to non-audit fees and audit fees? Is there a limit as to the percentage of non-audit fees to audit fees (or total fees) paid to the external auditor and its affiliates?

Ajiya Bhd (AGM)

The Group has plans to diversify its business portfolio in order to widen its revenue base and to attain better operating margins. It has identified several prospective businesses that would complement its existing business and help to expand its value chain. Among these options is the plan to position Ajiya as a main contractor in undertaking IBS construction projects nationwide (Page 28 of the Annual Report 2020).

1. How will the Board position Ajiya as a main contractor in undertaking IBS construction projects in the Malaysian market?

What is the Group’s targeted revenue percentage and operating profit margin contribution to be derived from the business?