Insight - Crucial to improve business conditions

For now, this temporary relief provides some breathing space for recovery, and helps to prevent a chain of defaults or even delistings, said Areca Capital CEO Danny Wong.(pic)

THE extension of time to issue financial statements by companies is helpful but for those affected financially, more is required.

Basically, there must be an improvement in the underlying business conditions: everything hinges on the effective control of the pandemic.

Covid-19 has impacted the cashflow and profitability of many companies; however, it is a matter of time when conditions will improve via, for example, a successful vaccination programme.

For now, this temporary relief provides some breathing space for recovery, and helps to prevent a chain of defaults or even delistings, said Areca Capital CEO Danny Wong.

The permitted delay for companies to announce financial results should give more time to access information that may not be available remotely during the movement control order (MCO) 2.0.

It could be a relief period for financially affected companies that may plan to raise funding on the market, such as larger companies looking for white knights.

“Bursa Malaysia could organise Zoom conferences for listed companies to share on their recovery efforts, ’’ said Etiqa Insurance & Takaful chief strategy officer Chris Eng.

That should help, to a certain extent, to allay investors’ uncertainty over the state of some companies especially those in the worst-hit sectors.

For now, investors may shy away from companies with potential problems especially involving Practice Note 17/2005 (PN17) relating to companies in financial distress, said Wong.

Bursa Malaysia, in granting a one-month extension for the issuance of financial statements, is cognizant that listed companies may face practical difficulties in the preparation and finalisation of financial statements.

This is due to, among other things, the MCOs and standard operating procedures (SOPs) implemented to curb the spread of Covid-19.

The extension is for financial statements due by the end of February, March and April, 2021.“We believe that with an additional month, listed issuers and their auditors would have more time to prepare their financial statements, conduct a proper audit and review the necessary documents.

“This relief measure also seeks to balance the need for transparency and the challenges faced by listed issuers, ’’ said Bursa Malaysia.

The challenges and difficulties posed by the pandemic are unprecedented; in response, Bursa Malaysia has taken the unprecedented move, in line with international practices in other developed stock exchanges, to accord various relief measures to listed issuers from time to time.

“The relief measures are much needed by some of our listed issuers to help them navigate these challenging times without being unduly burdened by regulatory impediments, ’’ said Bursa Malaysia.

The exchange had carefully considered each of these relief measures to ensure that there would be timely disclosure and adequate transparency in the marketplace.

“These proactive and pre-emptive efforts introduced by the exchange are a testament to our relentless efforts in maintaining stability and investor confidence in our market, ’’ said the regulator.

Bursa Malaysia believes that the one-month period is sufficient, as all businesses are now allowed to operate albeit in a restricted manner, under the latest MCO and SOPs.On any further developments when the loan moratorium ends, Bursa Malaysia said: “The exchange will closely monitor ongoing developments that may affect listed issuers and investors.’’

This is to ensure that it continues to operate an orderly and fair market, underpinned by transparent and timely disclosure, as well as adequate investor protection.

If a listed issuer triggers the criteria for unsatisfactory financial condition between Jan 1 to June 30,2021, it will be accorded one of the following relief measures:

> If it triggers any of the suspended criteria in PN17/Guidance Note 3 (GN3), an 18-month relief period (where it will not be classified as PN17/GN3 listed issuer during this period) is allowed to reassess its financial condition at the end of the relief period before making the requisite announcement;

> If it triggers any of the non-suspended criteria in PN17/GN3, a longer timeframe to regularise its condition (24 months instead of 12 months) will be allowed.

Regulatory reliefs

When regulatory reliefs were first introduced by the Securities Commission and Bursa Malaysia in 2020, the duration and impact of business disruptions, as a result of the pandemic, were still uncertain.

This extension would certainly be welcome as the actual duration of business disruptions had turned out to be longer than expected.

It would also allow businesses time to adapt to the post-vaccination phase and a potentially normalised operating environment, said Fortress Capital CEO Thomas Yong.

Among the most affected financially are the hotels, hospitality and tourism sectors.

While most hotels can finalise their accounts remotely even in the MCO period, what will really help them is more tangible assistance from the government.

Hotels hope the government will seriously consider its proposals for higher wage and utilities subsidies, moratorium of loans, waiver of assessment, quit rent, licences and various tourism taxes for 2021, said Malaysian Association of Hotels vice-president C.S. Lim.

“MCO 2.0 has brought another halt to the hospitality business, when our prime hotel and hospitality-related properties was experiencing a strong rebound, during the recovery MCO, in its Tanjung Jara, Pangkor Laut and Cameron Highlands resorts, ’’ said YTL Hospitality Real Estate Investment Trust CEO Datuk Mark Yeoh.

Inter-state travel, which will hopefully be allowed soon with the ending of MCO 2.0, together with a successful vaccination program, will help the hospitality sector to get back on its feet and welcome the return of customers, he added.

Growing again

With a faster rollout of the Covid-19 vaccine, political stability, lower cost of doing business and faster approval processes, businesses can start to grow again, said Small and Medium Enterprises Association national secretary Yeoh Seng Hooi.

Infrastructure projects and productive investments have to kick off fast, while government procurement will help to support SMEs, he added.

While any help is much appreciated, there are some areas that require more assistance due to the severe knocks they had received from the pandemic and lockdowns.

Yap Leng Kuen is a former business editor of StarBiz. The views expressed here are the writer’s own.

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