Short Position - Banking, energy, technology, Dataprep
WITH the slew of banking results for the recent quarter fully released, the market appears to have gained more confidence that an economic recovery is now on a firmer footing.
Share prices of lenders that have been climbing in the past week illustrate this.
Even AMMB Holdings Bhd, which has been in the news lately for its past links to scandal-ridden 1MDB, has seen its share price recover fairly well this week after a steep decline earlier, riding on this positive wave.Even so, data still points to a long way to go for banks.
For example, core earnings growth for banks fell by some 21% last year largely due to high provisions set aside for potential credit losses.
Most banks, could still be setting aside high amounts for doubtful debts this year as uncertainties continue to linger.
Banks with exposure to beaten-down industries like aviation and tourism will take a relatively long time to recover.
Additionally, there was also a slower pace of loan growth in the fourth quarter (Q4) for most banks and this will take some time to pick up.
Reports indicate that regional banks like Malayan Banking Bhd and CIMB Group Holdings Bhd continued to report subdued loan growth last year with local loan expansion offset by a drop in the international markets’ loans.
All this said, while the question of when will the recovery come – and more importantly – stay, still remains unanswered, it is safe to say that there is more optimism now, if market behaviour is anything to go by.And as they say, a little optimism always never hurts.
Dataprep’s dizzying climb
IF there is to be one counter on Bursa Malaysia that amplifies the “bubble” fears of tech stocks, it has to be Dataprep Holdings Bhd.
The loss-making IT firm has seen its share price skyrocket from 17 sen to RM3.15, all within the last 30 days. And the price surge has taken place for no apparent reason. This is a spike of 1,752%.
The recent GameStop Corp share price saga comes to mind. Its shares surged from about US$20 (RM82) to US$483 over a period of two weeks in January.
The stock then fell to around US$50 only to surge back again to around US$260.
In GameStop’s case, the stock was furiously bought by an army of retail traders edging on one another on the Reddit platform to buy the shares and put a short squeeze on some hedge funds who were shorting the stock. But who is edging on whom to buy Dataprep shares at these mind-boggling prices?
Dataprep reported widening losses of RM6.8mil for the nine months ended Sept 30,2020.
All its business segments were down. So what gives?
Dataprep has some new shareholders and has acquired a controlling stake in a company called Ridaa Associates Sdn Bhd which is relatively unheard of.
Ridaa sells multimedia goods and hardware and operates businesses under a few telco licences. Little else has been revealed, to justify the close to RM2bil market capitalisation that Dataprep currently enjoys.
In the midst of this wild share price spike, some of the company’s employees could have made a killing.
Last week, Dataprep’s filings showed that 6.6 million shares under the company’s exercise of employees’ share options scheme or Esos, were issued at a price of 17 sen apiece.
If those shares were sold, profits from the sale tops some RM19.5mil.
Powering the future
THE bids are in and the Energy Commission (EC) has selected 30 companies that have been shortlisted for the LSS4 solar project, which is the largest solar award to date.
The shortlisted bidders were in two categories, with package 1 consisting 20 companies and package 2 10 other companies. Package 1 was for a total of 323.06MW and Package 2 for a further 500MW.
The list of companies shortlisted contained a number of companies that are already solar players and also did include companies that on the surface are venturing into the solar business for the first time.
The indicative price range for the bids varied where the smaller players were given a larger band of between RM0.1850/kWh to RM0.2481/kWh while those shortlisted for the larger capacity saw a price range from RM0.1768/kWh to RM0.1970/kWh.
Parties awarded LSS4 project are mandated to have their plants up and running by the end of 2023. Each plant is meant to have a minimum term of 21 years of operation.
The interesting mix of players suggest that this is an evolving business that has seen prices being proposed drop over time where it is increasingly becoming competitive from the price range of the first LLS project when it was rolled out.
That would indicate that as time passes, the cost of generating power is getting cheaper with solar panel prices falling, improvements in technology and also possibly land cost that may not be on a steep curve given the economic recession the country is in. It also shows that the scale of each project is increasing over the years with the LSS1 awarded 450MW in capacity, LSS2 563MW and LSS3 500MW.With Tenaga Nasional Bhd (TNB) having pledged to not get into any more greenfield coal-fired plants, the future of Malaysia’s energy mix will certainly take a more ESG (environmental, social and governance) bias.
The world over the move towards more sustainable power has been accelerating. Financiers of oil and gas companies are demanding such changes be instituted by the oil giants and most of them have ventured into different spectrums of the energy mix.
With oil and gas producing countries now looking towards hydrogen as the next source of fuel to power their economies, the need to accelerate more adoption of ESG-powered energy plants is no longer an option in the future.
In fact, investors too have been demanding more conscious efforts from companies to make their businesses more ESG compliant.
It is no secret that companies that are linked to renewable energy have seen a nice pop in their share prices in recent times and the latest list of companies shortlisted do indicate many of the existing players have gone in to expand their portfolio of RE-assets.
There are a few interesting names on the list, which would indicate first-timers into the business or a switch to solar power for energy needs of some large manufacturers.
The question of sufficient expertise and protection is valid but surely the EC would have learnt over the years how to protect the interest of Malaysia in securing not only a growing source of renewable energy but also on a more equitable basis for the country.
Companies at the onset of Malaysia’s IPP journey too did not have prior expertise in that journey but there have been no failures of delivering what has been contracted out.
Not doing so was just forgoing money for companies that could rely on foreign expertise to deliver that has been contracted with TNB.