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4 Stocks This Week (Malaysia) [11 January 2019] GSH Corporation; Hatten Land; JB Foods; Riverstone Holdings

Singapore and Malaysia pledged to work together to ease regional tensions. How are stocks on SGX with significant Malaysian interests reacting?

 

On Tuesday, Minister for Foreign Affairs Dr Vivian Balakrishnan met his Malaysian counterpart in Singapore to discuss the recent bilateral disputes. After the meeting, both ministers jointly emphasised the importance of keeping the ground calm for discussions to take place and pledged to set up a working group to discuss legal and operational issues to de-escalate the situation.

According to SingStat, Malaysia was Singapore’s second largest trading partner for merchandise trade in 2017, with over $108.2 billion of goods changing hands. This amounts to 11.2% of Singapore’s total external merchandise trade of $967.1 billion, second only to China which accounted for $137.1 billion or 14.2%.

Malaysia was also Singapore’s tenth largest trading partner for services, amounting for $5.6 billion of exports and $3.7 billion imports respectively as of 2016.

On this week’s edition of 4 Stocks This Week, we will look at four firms with significant Malaysian exposure listed on the SGX.

Read Also: How The “New” Sales and Service Tax In Malaysia Will Affect Singaporeans 

GSH Corporation Limited (SGX: BDX)

GSH Corporation is a property developer in Southeast Asia, with four properties under development in Kuala Lumpur and Kota Kinabalu.

In May, GSH launched its second residential project in Malaysia – Coral [email protected], a 460-unit waterfront luxury condominium in Kota Kinabalu. In less than a month, GSH successfully sold all the 100 units released, with 70% bought by Malaysians and 5% bought by Singaporeans.

In November, GSH released its Q3 2018 financial results, announcing that revenue rose 33.7% year-on-year (YOY) to $28.0 million. However, the cost of sales rose at a greater pace of 65.6%, resulting in a 9.9% fall in GSH’s gross profit margin compared to Q3 2017. On the other hand, administrative expenses jumped 11.9% to $6.0 million, while finance expenses soared 38.9% to $4.9 million. GSH reported that net profit after tax grew by 10.7%, to $3.2 million.

As of 30 September 2018, GSH’s net borrowings stood at $301.6 million, 170% higher than the $111.6 million in net borrowings reported in 31 December 2017.

On Thursday, in an off-market transaction, GSH Executive Chairman Goi Seng Hui purchased approximately 22.5 million shares, which cost nearly $6.98 million. On Friday, he bought an additional 104.0 million shares, which cost another $32.3 million. Combined, these transactions raised his stake in GSH from 50.01% to 56.47%.

GSH fell $0.005 or 1.5% on Friday, closing at $0.325 per share and a market cap of $646.5 million this week.

Read Also: Buying An Overseas Property – Is It Ever Worth Your Money?

 Hatten Land Limited (SGX: PH0)

Hatten Land is the property development arm of Hatten Group, a conglomerate with other business interests in areas such as hospitality, retail and education.

In August, Hatten Land announced it would build the largest water theme park in Melaka for RM200 million, which is expected to be operational in the first half of 2020.

In November, Hatten Land released its financial results for the quarter ending 30 September 2018, reporting that quarterly revenue fell 9.4% YOY, which was attributed to lower sales from the Hatten City Phase 1, Vedro by the River and Hatten City Phase 2 projects respectively.

On the other hand, as a result of higher costs arising from increased sales activities and marketing campaigns combined with a rise in finance costs, net profit after tax tumbled by 86.7% to RM400,000.

Looking forward, Hatten Land says that the improving Malaysian property market and continued growth in tourist arrivals in Melaka, which is projected to reach 17.8 million in 2019, are likely to contribute to the company’s existing businesses in Melaka.

Nevertheless, Hatten Land says it will continue to actively explore opportunities to expand its business outside Melaka with the Cyberjaya project and Unicity project in Selangor and Negeri Sembilan respectively.

Hatten Land shares fell by $0.003 or 2.5% on Friday, closing at $0.115 and a market cap of $162.6 million this week.

Read Also: Can You Save Money Staying In Malaysia? A Singaporean Shares With Us How His Life Really Is.

JB Foods Limited (SGX: BEW)

JB Foods is one of the largest cocoa ingredient producers in Malaysia, including cocoa butter, powder, liquor and cake products.

In November, JB Foods released its Q3 2018 financial results, reporting that quarterly revenue rose 13.6% YOY, to US$86.2 million ($116.7 million). This was on the back of higher shipment volumes and improvements in the company’s processing margins. In addition, other gains rose by US$1.5 million, helped by foreign exchange gains arising from the British pound weakening against the US Dollar. Net profit before tax surged by 94.3%, to US$9.2 million ($12.4 million)

As of end-2017, JB Foods has a processing capacity of 145,000 Megatonnes (MT) of cocoa beans equivalent annually, with 85,000 MT in Malaysia and 60,000 MT in Indonesia.

CEO Tey How Keong attributes Q3 2018’s good performance to higher consumer demand arising from strong customer relationships. Cocoa demand is expected to rise significantly in the future, on the back of stronger consumer demand globally for chocolate and other downstream cocoa products.

Looking forward, JB Foods says that global economic uncertainties like escalating trade tensions and interest rate hikes will continue to be a key challenge for its business. Nevertheless, JB Group remains optimistic about its long-term prospects and says it will continue to adopt conservative and prudent measures and strategies.

JB Foods shares dipped by $0.005 or 0.8% on Friday, closing at $0.61 and a market cap of $186.4 million this week.

Read Also: Milk Powder Is Cheaper In Malaysia. Here’s Why.

Riverstone Holdings Limited (SGX: AP4)

Riverstone Holdings is a nitrile gloves manufacturer which specialises in producing cleanroom gloves and healthcare gloves, fingercots, face masks and packaging bags.

In November, Riverstone released its Q3 2018 financial results, reporting that revenue jumped 27.5% YOY from RM187.8 million to RM239.5 million, driven by a surge in glove orders. However, as Riverstone ramped up sales and marketing efforts in foreign markets such as the US, cost of goods sold (COGS) grew at 41.2%, outpacing revenue growth. This culminated with a 6.5% fall in net profit YOY, to RM32.1 million.

In November, Riverstone also announced that its wholly-owned subsidiary Eco Medi Glove had purchased 3 adjoining plots of industrial lands for a total consideration of approximately RM18,175,000.

As of end FY2018, Riverstone’s Phase 5 expansion is expected to raise annual production capacity by 1.4 billion gloves, to 9.0 billion. Riverstone says that it plans to increase capacity by between 1 to 1.5 billion pieces of gloves annually, to meet rising demand from burgeoning cleanroom and healthcare markets in Japan and the US.

More recently, the US Pharmacopeia Convention has introduced stricter healthcare regulations to take effect in Dec 2019, which will require workers handling dangerous drugs to don two pairs of gloves instead of just one. Executive Chairman and CEO Wong Teek Son has said that the move is expected to boost glove orders from Q3 or Q4 2019.

In December, Riverstone released its first ever sustainability report, where it identified key sustainability issues most material to its stakeholders and business. Moving forward, Riverstone says sustainability will form an integral part of the Group’s business strategy.

Riverstone shares traded flat on Friday, closing at $1.10 and a market cap of $815.2 million this week.

Read Also: How Much Does It Cost For Singapore Cars To Enter Malaysia? And Is It Worth Your Time (And Money)?

4 Stocks This Week is not a recommendation from us to buy or sell any of these stocks. For investors who are keen to find out more, you should continue researching about them before making your investment decisions.

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