Short position: A pause too soon?, Maybulk’s changing business, Felcra reset

MPC had a quite rosy outlook on the Malaysian economy, saying that “the latest data indicated continued economic expansion in the final quarter of last year on account of resilient domestic demand.” — Bloomberg

A pause too soon?

IT was indeed a surprise when all but one economist from 27 predicted that the overnight policy rate (OPR) would be hiked by the Monetary Policy Committee (MPC) on Thursday and there was no increase.

The reason for the pause may be to wait and see what will happen internationally as the press statement issued stressed on the global conditions, moving forward.

Sure, there are concerns over the growth outlook that remains subject to downside risks, escalation of geopolitical tensions, weaker-than-expected growth out turns in major economies and a sharp tightening in financial market conditions, as what Bank Negara had pointed out.

But the MPC had a quite rosy outlook on the Malaysian economy, saying that “the latest data indicated continued economic expansion in the final quarter of last year on account of resilient domestic demand.”

“As a result, growth for 2022 is expected to exceed the earlier projected range of 6.5% to 7%. Coming off a strong performance in 2022, growth in 2023 is expected to moderate amid a slower global economy.

“Growth will remain supported by domestic demand. Household spending will be underpinned by sustained improvements in employment and income prospects,” it said.

The slowing growth has already been factored in from closer to the 8% range as forecast by the market to somewhere in the 4% altitude for this year.

Given the recession concerns globally, that is now being cooled. The prognosis is for a shallow downturn. A halving of the growth rate under those global conditions to a respectable 4% is no real cause for concern.

Which brings into question whether “politics” played a role in that decision?

The central bank is not immune to political pressure as there was quite a bit surrounding the debt moratorium.

With questions being raised over future OPR hikes, the repeated message was that it was Bank Negara’s call and not the government’s.

But is it possible that constant queries over the direction of interest rates and the effects on the leveraged consumer finally cause interest rates hikes to pause?

It may be a plausible reason but interest rates were heading towards normalisation and not being hiked to suppress runaway inflation.

Maybulk’s changing business

IT is increasingly difficult to figure out the business direction of once shipping giant, Malaysian Bulk Carriers Bhd (Maybulk).

Last August, it looked like Maybulk would become a big consumer play, with a detailed plan of getting into the supermarket business.

But this week, the company said supermarkets are out, metal shelving is in. One wonders if there will be a third new plan being announced in the future.

Maybulk is certainly a company in a transitory phase and has been in that position for a while. Once Malaysia’s largest dry-bulk player and proud member of the empire of tycoon Robert Kuok Hock Nien, it has been selling its ships and at last count only owns four vessels.

Then, last April, new major shareholders emerged, in the form of businessman Datuk Goh Cheng Huat and others under a vehicle called Tunas Capital Sdn Bhd. These parties bought a 32% stake in Maybulk from a Kuok entity.

By August, these new shareholders put in motion a plan for Maybulk to fork out some RM54mil to roll out 30 supermarkets. The proposal was also a related-party transaction involving the new shareholders of Maybulk. But three months later, Maybulk aborts that plan.

Last week, shares in Maybulk were bought and sold among the new entrants of the company. Goh buys 10% of Maybulk from Tunas Capital. The two shareholders of Tunas Capital also left the Maybulk board, just months after coming on board after they bought into the latter.

And then this week, Maybulk announced a brand new business, this time to venture into the business of commercial and industrial shelving through the acquisition of a firm for RM70mil.

The company being acquired supplies metal shelving solutions, among other things. The deal is disclosed as a non-related party transaction.

However, it is noteworthy that Maybulk major shareholder Goh is the founder and major shareholder of Eonmetall Group Bhd, which also makes metal shelving.

Also interesting is the name of the company that Maybulk is to acquire – E Metall Systems Sdn Bhd.

It was founded by one Jason Goh, a 37-year-old who had, in 2015, joined a metalwork and industrial process machinery and equipment manufacturing company listed on the Main Market of Bursa Malaysia.

Felcra reset

AFTER its Transformation 1.0 and 2.0, Felcra Bhd is now tasked with another transformation plan, Transformation 3.0, to assist the government with the national food security goals.

This proposal was recently mooted by Deputy Prime Minister Datuk Seri Ahmad Zahid Hamidi, who is also the Rural and Regional Development Minister.

For a fact, Felcra has all the trappings to activate the national food security agenda. This is given its vast involvement in oil palm, rubber, padi, livestock, fertiliser and agrifood-related businesses.

Often dubbed as a “mini Felda”, Felcra is the estate manager for 220,086ha of land owned by its smallholders under the consolidation and rehabilitation project business segment.

Felcra also owns some 30,000ha of oil palm plantations in Perak, Sarawak and Sabah, with six palm oil mills in Johor, Pahang and Perak and three joint-venture mills in Pahang and Sarawak.

In recent years, the group has diversified its portfolio into property development and construction, education and trading.

To put into perspective, Felcra, under its existing Transformation 1.0 and 2.0, has strategically mapped out its active participation in the national food security agenda.

The focus, among others, includes strengthening the food supply chain, enhancing the support and delivery services, improving technological knowledge and skills, as well as encouraging further adherence to good agricultural standards and practices.

It also plans to collaborate with the government in looking for new market access and encourage investment towards developing the economy in agriculture.

Felcra also aims to lead modernisation in the agricultural food sub-sector by leveraging on Industrial Revolution 4.0.

Therefore, given these clear-cut strategies, market observers opine that Felcra could actually do away with Transformation 3.0, instead to expedite and execute the proper implementation by fully maximising its existing resources and assets capabilities.

But, for this to happen, Felcra will definitely require a big sum of working capital for investments. Currently, Felcra is believed to be still addressing its short-term liquidity constraints and rebuilding its depleting cash position.