PETALING JAYA: Defaults affecting Malaysian listed companies and issued debts that started in late 2021 and spilled into early 2022 might spur merger and acquisition activity (M&A) if a deal is considered value enhancing, according to MIDF Research head Imran Yassin.
With regard to investors’ perception of the defaults, he believes it is important to look into the context of the recent defaults, whether they are company-specific or involved industries that are affected by the Covid-19 pandemic.
“While investors’ sentiment may be affected by this, there are several industries/companies that have performed well during the pandemic which should provide some positive sentiment as well,” Imran told SunBiz.
“Besides, we believe that there are many other factors that would have affected sentiment. Therefore, we do not think that this will affect sentiment in isolation.”
Against the backdrop of increases in interest rates around the world to combat rising inflationary pressures, the head of research expects more fundraising either in the equity or, most likely, in the debt market.
Inter-Pacific Securities head of research Victor Wan, however, sees no extra motivation arising from the current situation for companies to pursue M&A, saying such deals will be based on their specific needs. However, he believes defaults would be a particular concern for distressed companies that have yet to recover due to the higher restraints in the face of an expected rate increase this year.
“The higher rates might spell pressure on these companies as they face margin squeeze and cash flow restraints.”
Wan conceded that this would be part of the push and pull factors for companies to consider M&A as an option.
Of the most recent defaults, apparel maker and retailer Jerasia Capital Bhd announced last month that its subsidiary had defaulted on repayment of financing facilities worth RM26.4 million.
Separately, Genting Hong Kong Ltd has filed to wind up the company as the Covid-19 pandemic had driven its German shipbuilding subsidiary into insolvency. Following this, Genting Hong Kong Ltd warned investors of a potential cross default amounting to US$2.78 billion (RM11.66 billion).
The debt market has also seen similar happenings, as Serba Dinamik Holdings Bhd confirmed a default on its US$222.22 million sukuk in December.
On the flip side, Wan said listed companies are more likely to opt for privatisation given the low valuation environment of the market. He explained that as everyone is looking for better value, and if a company believes it is undervalued by the market, it might be better off going private to unlock that value.
Source: The Sun Daily
A word from our sponsor:
Need Help With Your Personal Finance / Money Issue or need a coach to help you structure or just want to learn the financial skill to self manage your financial matters and retirement. iLearnFromCloud.com
Need to solve a problem quickly, now you can solve it by learning the art of problem solving Art Of Problem Solving
Feeling hungry. Latest food news from Best Restaurant To Eat Malaysian Food and Travel Blog
Memory loss. Need to organize better. Solve problem fast with Free Mind Mapping Software Mind Mapping 101
Need A Customized System Development for your business or Going Paperless XPERT TECHNOLOGIES - Empowering The Paperless Economy
No comments:
Post a Comment