Focus on firms with Turkish ops

  • Corporate News
  • Thursday, 06 Aug 2020

“I feel that IHH’s Acibadem is one of the bright spots for the IHH group. I am not really concerned at all and the developments in the lira are just white noise, ” the analyst said.

PETALING JAYA: The overnight fall in the Turkish lira has placed the focus on two stocks that have their operations in the country – IHH Healthcare Bhd and Malaysia Airports Holdings Bhd (MAHB).

The Turkish lira, which was already hovering at its historical lows, has seen renewed selling interest after it was reported that the overnight borrowing cost of the Turkish currency in the offshore market had surged to the highest level since March 2019.

There was a renewed fall in the Turkish lira yesterday, with the currency weakening by 1.86% against the US dollar to 7.0259 as at press time.

When contacted, an analyst from a local research house said he does not expect any impact on MAHB’s Turkish operations because revenues there were transacted in euros.

“They are not in the lira, so MAHB is not affected, ” he said.

The airport operator wholly owns the Istanbul Sabiha Gökçen International Airport, which contributed RM16.89mil to the group’s bottom line which came in at a net loss of RM20.38mil in the quarter ended March 31 2020, financial sheets showed.

MAHB’s shares rose three sen to RM5.01 yesterday.

Meanwhile, another analyst said that he does not expect a material impact on IHH, as most of the bad news from the Covid-19 pandemic had been factored into the stock price.

“I feel that IHH’s Acibadem is one of the bright spots for the IHH group. I am not really concerned at all and the developments in the lira are just white noise, ” the analyst said.

He said that when compared to a year ago, IHH’s Turkish lira debt had reduced by some 30% in its latest results.

According to its most recent financial statements, IHH’s Acibadem’s loans and borrowings stood at RM2.19bil on March 31,2020 from RM3.30bil a year ago.

IHH’s management was reported to have said in May last year that it was looking to further reduce its non-Turkish lira foreign currency debt for Acibadem to mitigate the overall effects of foreign currency fluctuations on IHH.

“There are a lot of moving parts for IHH since it is a big group consisting of various companies, but I don’t think this will impact the group, ” the analyst said.

MIDF Research in its report at the end of June noted that IHH’s Acibadem’s performance in its first quarter had been strong despite the pandemic and the weak lira.

“Acibadem’s revenue, after stripping off the effects of the weak lira translation, had grown by 8% year-on-year (y-o-y) despite the -4.4% y-o-y contraction in the number of inpatients admitted, ” MIDF Research said.

It added that Acibadem’s revenue intensity per patient also grew by 14.8% y-o-y due to the more complex cases that were undertaken in the quarter, and also pricing adjustments made during the quarter to account for inflation.

IHH’s shares declined by six sen yesterday to RM5.24 at its close.

On the lira, Bloomberg reported that the overnight forward-implied yield on the currency had jumped by as much as 1,020 percentage points to 1,050% on Tuesday.

The borrowing cost of the Turkish lira had surged after heavy interventions by its government in the currency late last week, draining the supply of the local currency.

It was reported that last week, Turkey’s state-owned banks had flooded the market with foreign exchange and had sold a substantial amount of US dollars there.

Meanwhile, the report also said that foreign investors have been barred from borrowing from local banks so as to deter short sellers from entering the market.

Since these group of people don’t have access to central bank funding in Turkey and may not have Turkish lira on hand, they would have to borrow the currency in the offshore market, where supply is limited and this had driven up the rate.

At the end of last month, analysts at MUFG Bank, Japan’s largest lender, were reported to have said by FXStreet that it had expected the Turkish lira to continue depreciating but did not expect a repeat of the currency crisis in 2018.

The analysts were reported to have said that the lira would continue to weaken until at least the Turkish authorities were able to establish credibility to stabilise inflation levels.

It was in early May that the Turkish lira fell to an all-time low of 7.269 against the US dollar.

“Turkey’s current account position turning to deficit with one of the largest negative real yields is a recipe for currency depreciation, ” the analysts were quoted as saying in the report.

The analysts said that a boom in lending in Turkey was driving the lira’s weakness.

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