KUALA LUMPUR: The financial troubles of Singapore-based Hyflux Ltd may have contributed to the sharp retreat of Malayan Banking Bhd's share price on Thursday.
In December 2013, it was announced that Maybank Singapore and Maybank Kim Eng Securites Pte Ltd would provide S$720mil 18-year term loan project financing to Hyflux Ltd subsdiary Tuaspring Pte Ltd for the development of its desalination and power plant facilities.
However, this debt exposure may be turning sour for Maybank as Hyflux and its subsidiaries are now seeking protection from the Singapore High Court to reorganise its business and debt.
Hyflux posted a net loss of S$22.2mil in the first quarter ended March 31, with significant losses incurred in Tuaspring.
"Excluding results from Tuaspring, profit after tax and minority interest was S$1mill for 1Q2018, versus S$27mil in 1Q2017 which included S$16.5mil gain on disposal arising from the Group’s divestment of its Galaxy Newspring portfolio in March 2017," said Hyflux in a press statement.
An analyst contacted by StarBiz said the impact of any bad debt provisions may only be reflected in Q2.
"Based on my understanding from reports, Hyflux is seeking a moratorium to restructure the debt. In this case, this might impact Maybank's bottom line as impairment allowances ie credit cost will rise. However, that impact of higher credit costs will likely be seen in Q2 of its financial year," said the analyst.
Bursa Malaysia has been battered for a second straight day on Thursday with Maybank among the leading decliners.
The market began falling sharply past the critical 1,800 level in first few minutes of trade, slipping as much as 36 points before retracing some losses. It ended the session 28.59 points lower at 1,775.66.
Malaysia's largest banking group, which is allocated the highest weightage on the FBM KLCI, fell as much as 81 sen or 7.5% at its lowest point. At market close, it was 42 sen lower at RM10.26 with 85 million shares traded.
This marked a second day of losses and a reversal of fortunes for Maybank, which had closed at a historical high of RM10.88 on May 21 and 22.
However, the bank's retreat also looks to be tied to the fortunes of the wider market. Analysts have attributed the broad-based selldown to a variety of factors, including investor caution over national debt levels and potential escalation of the US-China trade conflict.
"Due to the intense selling pressure, the cumulative net inflow into Malaysia so far this year has been substantially reduced to RM40.2m from RM2.52b before GE14," said MIDF Research in its May 21 Fund Flow Report.
Coupled with published reports on net outflows this week, Malaysia may have recorded a net outflow for the year of about RM430mil as at Wednesday.
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