Short position


  • short p
  • Saturday, 05 Jan 2019

Time will tell  

SANICHI TECHNOLOGY BHD has announced this week that it is acquiring a 12-storey building in Bangsar South, Kuala Lumpur, for RM46mil.

In explaining its rationale to the stock exchange for the proposed purchase, it said that the business activities of the group were precision mould and property development, hence, the proposed acquisition will be able to complement its business activities.

The planned purchase would be funded from internally generated funds and bank borrowings, it said.

However, the firm also warned that “in securing the bank borrowings to fund the proposed acquisition, the gearing level of the Sanichi group will increase and any adverse movement in interest rates may have an impact, which can adversely affect the group’s financial performance in the future.”

Already, in terms of current profitability, the firm is not doing great, at least based on its recent quarters.

The company reported a net loss of RM4.9mil for the nine months ended Sept 30, although its most recent quarter showed a net profit of RM2.4mil.

For the 18 months (due to change in financial year) ended Dec 31, 2017, Sanichi reported a net loss of RM17.9mil.

Investors who do not yet have a clear picture of what the company plans to exactly do with the fresh proposed acquisition may be scratching their heads, thinking whether this is the right move by the company.

The proposed deal does not require shareholders’ approval to go through.

The most pertinent question is obviously, can the proposed exercise help turn the company around in a sustainable manner?

Time will tell.

Granted, Sanichi is in a net cash position. At last look, its stock traded at 6 sen, trading between 5.5 sen and 18 sen over the past 52 weeks.

At its current price, the firm is valued at RM67mil.

 

<a href='/business/marketwatch/stocks/?qcounter=AIRASIA' target='_blank'>AIRASIA</a><a href='http://charts.thestar.com.my/?s=AIRASIA' target='_blank'><img class='go-chart' src='https://cdn.thestar.com.my/Themes/img/chart.png' /></a> planes are seen on the tarmac at Kuala Lumpur International Airport 2 (KLIA2) in Sepang, Malaysia December 13, 2017. Picture taken through glass. REUTERS/Lai Seng Sin

AirAsia-MAHB peace in sight?

THE CEOs of both AirAsia Group Bhd and MALAYSIA AIRPORTS HOLDINGS BHD (MAHB) have been at war for a long time and there seems to be no end to this long-standing feud.

There have been numerous spats over the years in terms of inadequacies of both parties in relation to collection of passenger service charges (PSC) to the quality of services at the airport, especially KLIA2, which was built at an exorbitant price and is often a bane for criticism.

The feud this time around has reached the corridors of the judiciary with MAHB demanding RM36mil from AirAsia over PSC fees that the airline did not collect.

AirAsia is supposed to collect RM73 per passenger in PSC for international departures but felt RM50 is the absolute amount for the facilities and services at KLIA2 terminal. In counter action, AirAsia is now going to seek compensation from MAHB for damages to its aircraft because of the repeated earthworks (repairs) on the runways at the airport.

Over the years, the feud has turned ugly even though both parties know pretty well they need each other... the airport needs the airline and vice versa. This is despite the fact that AirAsia wants its own terminal to keep cost and ticket prices low.

AirAsia is Asia’s biggest low-cost airline and biggest customer at KLIA2. It carries millions of passengers in and out of the country through all the airports managed by MAHB. The recent furore over maggots found in a dustbin at KLIA2, which escalated into a police case, and then withdrawing the case, was really unnecessary.

Yesterday, AirAsia Group CEO Tan Sri Tony Fernandes in his tweet, took a swipe at MAHB, saying “Unbelievable. The guys who built an almost RM5bil terminal which constantly fails and added so much cost to @airasia. And you want to charge 23 extra ringgit to our passengers for this rubbish terminal!!!!!”

Also the government has confirmed Raja Azmi Raja Nazuddin as the new CEO of MAHB for a three-year term, effective yesterday.

This love hate relationship is a story of gaps in actual delivery versus huge expectations.

Will the new CEO offer an olive branch to bring this feud to an end once and for all, or will it escalate further?

Worth noting is that goodwill gestures of not burdening passengers with too high charges help, more so, since the new departure tax will be imposed from the middle of this year which will push the overall cost of travelling higher.

 

Doom and bloom

MARKETS around the world have been hit in a bleak 2018. Talk of a recession or slowdown has gathered pace and evidence is there that global economic growth will take a hit next year.

Maybe it is down to the effects of the US-China trade war. Maybe also it is down to the normal respite markets and economies will have to endure to correct the imbalances that have built up over the years.

A slowdown is just a correction of exuberance that has built up in the past. It is painful, unpleasant but wholly natural. It has always been the way the markets and economies correct themselves.

But in any such phase, there are also opportunities that emerge.

In an economy, it is about companies making changes to be more competitive to not only survive the leaner times but also to emerge stronger when the bounce returns.

The property market will undergo a change in demand where adjustments to pricing and supply has to be made. Employment too will take a pause but that gives rise to prospective job seekers re-equipping themselves with new skills.

For companies and financial markets, depressed stock prices will mean that opportunity will surface for wily investors who can sniff an opportunity when others see gloom.

A slowdown or a recession is just like a means to an end. No one likes the problems it will cause but the adjustments that will take place will ensure that the bloom that follows the doom is something more meaningful when it happens.


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