GLCs and construction stocks among major losers
Axiata heads the list followed by Maybank and GenM
Government-linked companies (GLCs) and stocks that were seen to be closely linked to the previous ruling party saw major declines in absolute amount in the last six months since the general election.
GLCs have come under focus after Prime Minister Tun Dr Mahathir Mohamad, who led the Pakatan Harapan victory, called for a review on the role played by GLCs and remuneration paid to their top executives.
Cutbacks on mega public infrastructure projects saw a sell-down on construction stocks, while the promise to break up monopolies and renegotiate lopsided contracts which were against the government are expected to weigh down on corporate earnings.
Axiata Bhd, a company controlled by Khazanah Nasional Bhd recorded the largest drop of RM15.1bil in value as compared to the RM48bil market cap it commanded based on the RM5.29 price it was done a day before the GE14 on May 8.
As at Nov 30, the telco’s share price stood at RM3.63, giving it a market cap of RM33bil. Sentiment towards telco companies waned following the government’s call for them to reduce broadband prices. For the second quarter FY18, Axiata recorded a net loss of RM3.36bil – its second consecutive quarter in the red.
Other GLCs with market value losses in excess of RM10bil during the period of our research were Malayan Banking Bhd (Maybank), CIMB Group Holdings Bhd, Tenaga Nasional Bhd and Telekom Malaysia Bhd (TM).
Not unlike Axiata, TM suffered a sell-down and at the time of our cutoff period traded near to its eight-year low. The national telecommunication company had reported a net loss of RM175.6mil for the third quarter ended Sept 30 on the back of about RM1bil in impairments.
On Nov 29, IHH Healthcare Bhd, which was also majority controlled by Khazanah divested a 16% stake in the healthcare group to Japan’s Mitsui & Co Ltd for RM8.42bil or RM6 a share. Observers say this could kick off a restructuring of companies under the sovereign wealth fund portfolio.
FGV Holdings Bhd, which saw relentless selling, is now considered a penny stock with prices having fallen below the RM1 mark.
On Nov 30, the world’s biggest palm oil producer traded at 89 sen after RM2.64bil in market cap was wiped out.
On a more positive note, the plantation company, which undertook its biggest impairment from the 2014 acquisition of the Londonlisted Asian Plantations Ltd in the third quarter ended Sept 30, 2018 has moved into recovery mode under a new leadership.
Where non-GLCs are concerned, shares Genting Malaysia Bhd and its parent company Genting Bhd came under pressure for mainly two reasons. One was the unexpected hike in casino tax by 10% points to 35%, effective 1 Jan 2019. Secondly was uncertainty on the opening date of its outdoor theme park, which is the subject of Genting’s legal suit against Disney and Twenty-First Century Fox.
The new theme park based on the 20th Century Fox World design was supposed to boost the number of visitors to Genting Highlands resort for the next two years from June 2019.
Over the period of this analysis, Genting Malaysia erased RM12.85bil in value while Genting lost close to RM9bil.
It appears that Genting group’s run of bad luck is far from over as at the time of writing it found itself embroiled in a lawsuit with US-based casino operator Wynn Resorts Holdings LLC, which accuses Genting of copying Wynn’s building design for its Las Vegas casino that it is building.
E-government service provider MyEG Services Bhd saw RM5.3bil wiped out from its market cap as investors fled the stock which is linked to the previous ruling party. This translated to a decline of more than 50%, percentage-wise.
In the construction space, the biggest decliners in absolute terms were heavyweight Gamuda Bhd, which saw RM6.76bil in value wiped out.
Elsewhere IJM Corp Bhd lost RM3.71bil in value, while RM1.65bil was erased from George Kent (Malaysia) Bhd’s market cap when its shares fell to RM1 as off Nov 30 versus the RM3.94 it traded on May 8.
Overall, out of the Top 50 largest decline in absolute amount, the research showed that 37 of the companies recorded losses in excess of RM1bil.