AXIATA Group Bhd, the just renamed TM International Bhd, was among the biggest losers in percentage terms among component stocks of the KL Composite Index (KLCI) in the first quarter.
This is unusual for a telecommunications company (telco) as companies in this industry were among the most stable stocks around the world.
But, it was downhill for Axiata’s price from the start of its listing and demerger from Telekom Malaysia Bhd (TM) in April last year. Its descent continued after the October global market fall as investors shunned companies that had high borrowings. At that time and until its current rights issue, Axiata was one of the region’s most highly-geared telcos.
Hence, it called for a rights issue to strengthen its balance sheet, but its price fell further after that was announced as minority shareholders are averse to chipping in more cash at this time.
The exercise will raise RM5.25bil cash for Axiata, and reduce its borrowings of RM20bil, a gearing level of 1.8 times, to about RM15bil, a gearing of 0.9 times. The rights issue is supported by its biggest shareholder, Khazanah Nasional Bhd.
Axiata fell from RM7.85 a share at its listing in April last year to RM2.49 on Friday, a drop of 68%.
For the first quarter, the much smaller Pelikan International Corp Bhd was the biggest loser among the KLCI stocks.
Its size may be a factor for its weak performance as small cap stocks generally fell much more than the big caps this year.
It also reflected the greater earnings volatility of small cap stocks. Pelikan swung into the red, with a loss of RM43mil in its October-to-December quarter due to lower sales, a weaker euro and a few other exceptional items.
That loss caught analysts by surprise as they had not expected the recession in Europe, where most of Pelikan’s revenue is derived, to cause a drop in its sales of stationery products.
There are now two shareholders with stakes of almost equal size in Pelikan. Its chief executive officer Loo Hooi Keat, who owns 29.4%, has been joined by the pilgrims fund board, Lembaga Tabung Haji, with its stake of 28.1%.
At one time, Pelikan was viewed as a promising consumer stock with global interests. Zelan Bhd, another relatively small KLCI stock, was also one of the biggest losers during the quarter. Its drop followed news of the departure of its chief executive officer Chang Si Fock, a founding director known for his expertise in the business of constructing power plants.
A member of the MMC Corp Bhd group, Zelan saw its share price falling along with that of MMC.
Zelan’s price fell from a high of over RM5 last year in tandem with IJM Corp Bhd in which the former is the biggest shareholder after the Employees Provident Fund.
As IJM’s price rebounded in the last two weeks, Zelan’s price was lifted from its lows. Zelan’s stake of 8.7% in IJM is now worth about RM370mil, equal to Zelan’s own total market value.
That valuation overlooks Zelan’s net cash of over RM50mil and order book of over RM3bil.
The order book could be a problem as the company reported a net loss of about RM130mil in the fourth quarter last year due mainly to project losses in Saudi Arabia and the United Arab Emirates. There is a likelihood, however, as pointed out by RHB Research, that there might not be further losses as building material costs have come down.
Sunrise Bhd, with a net profit of RM52mil in the October to December quarter, is one of the more profitable companies among the losers’ list. It is in the out-of-favour property sector and its purchase of the Angkasa Raya land in Kuala Lumpur just before the global recession was dampener to sentiment. Even so, the shares of this asset-rich group had been priced to liquidation values, AmResearch said in a recent note.
Mulpha International Bhd is another asset-rich group on the list. It is the single biggest shareholder, with a stake of 22.8%, of FKP Property Group which is listed on the Australian Stock Exchange.
FKP is Australia’s biggest owner and operator of retirement villages and its stock tripled last month after it sold a property and completed a rights issue, reducing its balance sheet risk. Mulpha also owns hotels in Australia and resort projects there and in Johor.
Some of these biggest losers could become the biggest gainers later this year if economic conditions and market sentiment recover.
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