Advancecon’s delayed IPO
Main Market-bound Advancecon Holdings Bhd’s postponement of its listing does not bode well for the market. The postponement came after it was given the green light by the authorities to list and just before the company issued its prospectus. The reason cited was due to outstanding queries from the Securities Commission. To be sure, these situations are rare. But the question is, why did these new issues crop up after all parties had sufficient time during the initial public offering (IPO) application process to verify all the information? And more importantly, what is the issue that is the subject of the regulator’s query?
To be fair, it is rare that such events occur. But there have been other cases. In 2013, Ranhill Energy and Resources Bhd had to return monies collected for the sale of its shares in its planned IPO. The company and its CEO were censured for not disclosing the cancellation of a licence from Petroliam Nasional Bhd. Earlier in 2010, in the IPO process of Focus Point Holdings Bhd, it was discovered that the operator of optical shops and centres in the country did not have qualified optometrists or opticians in its outlets.
The discovery came about after the shares were allotted and it was eventually resolved with the promoters and advisers buying back the shares of the company from investors and a new IPO date being set.
In Advancecon’s case, it could be something as minor as providing additional information about its business, and the IPO may proceed after that without a glitch. But the fact that it was delayed may make some investors cautious. Ideally, all issues should be thoroughly vetted by the relevant bodies prior to the listing. However, the market is not perfect. The trick is to reduce these occurrences as much as possible. On the other hand, it is also crucial for the authorities to ensure that all issuers coming to the market do not fall short of any of the stipulated standards, and sometimes, we just have to live with inconveniences that need to occur when certain issues need to be ironed out at a late stage.
Renewable energy to benefit TNB
Analyst reports following Tenaga Nasional Bhd’s (TNB) financial results dissected the usual aspects of the energy giant. Most were happy with the results and the direction the company is headed, notwithstanding the usual issues with fuel costs and expenses.
Its results were heavily reliant on the power generated and sold in Peninsular Malaysia, but one aspect TNB has shown is the higher returns from its overseas ventures. Its share of associates’ income during its second quarter increased by more than 200% to RM61.8mil due to the better performance of its stakes in domestic independent power producers and also those abroad.
It is also good to know that TNB is looking abroad for opportunities where it can generate income and expertise that can only help the electric company here in Malaysia. It’s been reported that TNB plans to have international investments amounting to 20% of its earnings by 2025.
Its international investments are also looking like a portfolio of diversified investments, as not all of it are in coal or the so-called traditional sources of power. TNB’s acquisition of solar and wind-energy firms in Europe bolsters its expertise and learning curve when pursuing renewable energy (RE) deals around the world and also here in Malaysia.
TNB’s pursuit of RE is a natural progression, given the leaps that industry globally has taken in recent times in power generation in Europe. As Europe pushes for more RE, the cost of producing a unit of such energy will also drop, as more energy firms are adapting toward RE as a source of power for their business.
The cheaper cost of RE will also be beneficial for TNB as its slowly weans itself off coal and gas-powered stations as a means toward generating power for the country.
Another benefit it may have is that its current coal-powered assets might benefit from sluggish crude oil prices, which are not expected to rally strongly in the years ahead.
Malaysian banks in Indonesia
Malaysian banks have for some time now been active participants in the Indonesian market. The two main players, Malayan Banking Bhd (Maybank) and CIMB Group Holdings Bhd, are now posting stellar profits from their significant Indonesian banking units.
Maybank and CIMB via PT Bank Maybank Indonesia Tbk and PT Bank CIMB Niaga Tbk, respectively, showed improved earnings mainly boosted by higher net interest margins and lower provisions.
Maybank Indonesia posted a strong set of financial results in the financial year ended Dec 31, 2016 (FY16), with earnings surging 71% to a record 1.9 trillion rupiah or RM650.38mil. Its strong growth in profit was underpinned by sound net interest income growth, controlled cost management and better provisioning for non-performing loans.
CIMB Niaga recorded a 387% growth in consolidated net profit for FY16. CIMB Niaga’s annual profit jumped to 2.082 trillion rupiah (RM694.6mil) - or an earnings per share of 82.83 rupiah - from 427.9 billion rupiah (RM142.8mil) in the preceding year.
But it wasn’t always like this. After making big investments in banks there, the Malaysian banks had to endure some tough times. Detractors had earlier questioned if these banks had made the right decision in paying lofty prices to acquire banks there. Tough competition - Indonesia has more than 100 commercial banks - and sometimes flip-flop Government policies impacting foreign investors were reasons why Maybank and CIMB’s Indonesian banking investments were questioned before. Indeed, both banks didn’t perform well in their early days and suffered losses arising from exposure to the commodities and oil and gas sectors there. While the banks have posted positive results, analysts are still concerned about the asset quality of both these banks’ Indonesian operations. In the end, though, it is very likely that both Maybank and CIMB have learnt their tuition fees of operating in Indonesia. Imagine the situation if they were only now trying to find a bank to acquire there.