Covid-19 dampens outlook of firms


  • Corporate News
  • Saturday, 29 Feb 2020

IGB Bhd concurs, as it expects the group’s performance, particularly its property investments in retail and hotel segments to be affected by the uncertainty in the global and local economy, also due to the Covid-19 virus outbreak. The developer of Mid Valley Megamall is bracing for a more challenging scenario in the near term, due to a “scheduled increase in supply of new retail space and slower demand for office space in Kuala Lumpur.

IT is no surprise that the Covid-19 theme has featured prominently in the business outlook which listed companies have posted in their latest quarterly results.

The virus outbreak, naturally, has dampened their outlook.

This comes at a time when some companies had been hoping to see a better year in 2020, following the battering received in the previous year from the effects of the US-China trade war.

An obvious victim are the airlines and tourism-related companies.

AIRASIA Group Bhd for example, says it will be “severely affected by the rapid spread of the Covid-19”.

It also reckons that its internal projections for the year may not be achieved.

The airline, which reported a net loss of RM303.72mil for the financial year ended December 31,2019 (FY19), added that demand for airline travel has seen a considerable decline but that it is taking positive action to face this challenge by managing capacity and costs.

On the positive side, the airline adds that it “looks forward to the bounce after Covid-19 when demand for airline travel should return.”

Sunway Real Estate Investment Trust (Sunway Reit), which is exposed to the tourism-related industry through the hotels it owns, notes that the Covid-19 outbreak will indirectly “dampen the demand for hotel rooms and meetings, incentives, conventions and exhibitions (MICE) activities in Malaysia for the short-term.”

This is in addition to the existing oversupply situation from new hotel rooms as well as the rapid growth of airbnb in Malaysia.

Sunway Reit remains cautious on the potential impact of the Covid-19 on the performance of its hotel and retail segments, should the outbreak prolong.

As such, Sunway Reit will be undertaking strategic revenue management and cost containment to enhance its profitability for its hotel segment, while reconfiguring its tenancy mix for the retail segment, going forward.

IGB Bhd concurs, as it expects the group’s performance, particularly its property investments in retail and hotel segments to be affected by the uncertainty in the global and local economy, also due to the Covid-19 virus outbreak.

The developer of Mid Valley Megamall is bracing for a more challenging scenario in the near term, due to a “scheduled increase in supply of new retail space and slower demand for office space in Kuala Lumpur.”

In the manufacturing sector, exporters are bracing for the impact of supply disruptions as a result of the Covid-19 outbreak.

In the semiconductor space, Globetronics Technology Bhd says its financial performance may be impacted by the outbreak of the disease and disruption in the supply chain in China, based on its customers’ recent forecast and guidance.

While precision engineering services company Frontken Holdings Bhd’s customers are not affected by the extended lunar new year break in China at present, the impact of Covid-19 is still unknown, should the outbreak prolong.

In the semiconductor space, Globetronics Technology Bhd says its financial performance may be impacted by the outbreak of the disease and disruption in the supply chain in China, based on its customers’ recent forecast and guidance.In the semiconductor space, Globetronics Technology Bhd says its financial performance may be impacted by the outbreak of the disease and disruption in the supply chain in China, based on its customers’ recent forecast and guidance.

Frontken recently posted a historical net profit of RM74.2mil in FY19 in spite of a marginal growth in revenue, driven by its semiconductor subsidiaries in Taiwan and Singapore as well as its oil and gas subsidiaries in Malaysia.

Noting that the overall business conditions in 2020 will continue to be challenging, the group remains cautiously optimistic that its subsidiaries in Taiwan, Singapore, Malaysia and the Philippines will continue to contribute positively to Frontken’s earnings and continue its momentum this year.

Food and beverage manufacturers like Nestlé Malaysia Bhd are also noting pressures from external factors, including commodity prices.

“There will be pressure from external factors, including commodity prices or any of the several crisis that the world is confronting in this early part of the year.

“But we remain optimistic that with our strong fundamentals and our focus on consumer-driven commercial activities, we are well-positioned to achieve continued growth in 2020, ” its CEO Juan Aranols says in the group’s fourth quarter results announcement.

On the other hand, glove manufacturers are among those more optimistic this year, gaining as the outbreak continues to escalate.

Supermax Corp Bhd is among the beneficiaries, saying in its second results that demand for Malaysian-made gloves had begun to pick up towards the end of last year as US buyers diverted their orders to non-China glove producers as a result of the ongoing US-China trade spat.

“Going into 2020, glove demand received a further boost following the outbreak of Covid-19 in China, ” it says.

Hartalega Holdings Bhd, another glove maker, is also positive on its long-term prospects, underpinned by rising demand, despite rising operating costs, including the hike in minimum wages.

In the construction and property development sectors, companies are generally expecting another challenging year in view of the persistently soft property market, and potentially lower infrastructure spending.

Among construction players, IJM Corp Bhd, in its third quarter results announcement, foresees lower availability of new construction jobs in the local market and a more competitive tender environment, with plans to focus on the execution and timely completion of its existing order book.

IJM Corp expects the local property market to remain challenging, with key issues being price affordability, overhang of high-rise properties, rising cost of living and tight financing arrangements.

Another construction player, LBS BINA GROUP BHD, also cites “global and regional headwinds” as potentially dampening prospects for the year, while SUNWAY CONSTRUCTION GROUP BHD, noting weak conditions locally, says it will continue to expand overseas and rely on its in-house pipeline projects by its intermediate holding company, Sunway Group for sustained growth.

As for the property developers, S P Setia Bhd is looking to focus on growing its existing established townships with residential and commercial properties, given prevailing market conditions.

The group also cites the Covid-19 outbreak, saying it will “monitor closely how the situation unfolds”, noting that its impact on the economic outlook remains uncertain.

On a more positive note, S P Setia is hopeful that measures outlined in Budget 2020 to promote home ownership will serve as catalysts for the property market, along with the lowering of the overnight policy rate (OPR) rate in January.

MAH SING GROUP BHD, meanwhile, is banking on the newly introduced stimulus package to stimulate economic growth and boost business sentiment this year.

“This in turn will spur improved consumer confidence that is a key factor in property purchase, ” it says in its fourth quarter results announcement.

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 18
Cxense type: free
User access status: 3
   

Did you find this article insightful?

Yes
No

50% readers found this article insightful

Across the site