Investors dump BN-linked counters

This article first appeared in The Edge Financial Daily, on May 15, 2018.
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KUALA LUMPUR: The stock market responded to the swing in the ruling power by dumping counters with perceived links to former prime minister Datuk Seri Najib Razak as well as component parties of Barisan Nasional (BN).

An initial selling pressure was seen across the board when the market reopened yesterday after a three-day break following a historic win in the 14th general election that saw a change in government. However, the downward pressure lasted about 30 minutes to an hour for most counters before a rebound was seen, leaving companies with links to BN behind.

Destini Bhd is one of the top losers among counters linked to the former ruling government. Its share price fell by 40.7% or 17.5 sen to close at 25.5 sen with about 28.3 million shares traded. The group’s largest shareholder and group managing director Datuk Rozabil Abdul Rahman, with a 25.4% stake, is Umno Perlis treasurer.

George Kent (M) Bhd, in which Najib’s “golf buddy” Tan Sri Tan Kay Hock has a controlling stake of 42.21%, hit limit down in morning trade, falling by 29.95% or RM1.18 to close at RM2.76 with about 1.8 million shares done.

Johan Holdings Bhd, another company controlled by Tan with a 50.8% stake in the company, also fell by 24.44% or 5.5 sen to 17 sen.

MyEG Services Bhd (MyEG), a company whose income is derived mainly from government contracts, fell by 29.84% or 77 sen to close at RM1.81 with about five million shares traded. MyEG executive chairman Datuk Dr Norraesah Mohamad, who is a substantial shareholder of the company with a 30.88% stake, was previously a senator and Umno Supreme Council member.

Malaysian Resources Corp Bhd (MRCB) fell by 21.5% or 21.5 sen to 78.5 sen with about 138.3 million shares traded.

Some 16.6% of MRCB shares are held by a known friend of Najib, Tan Sri Mohamed Salim Fateh Din. It is worth noting that the Employees Provident Fund (EPF) is the largest shareholder with 34.9%.

Petra Energy Bhd also fell by 21.6% or 13.5 sen to close at 49 sen with about 392,700 shares traded. The largest shareholder of the group is Tan Sri Bustari Yusof, who is the brother of Datuk Seri Fadillah Yusof, the former works minister, who is also part of Parti Pesaka Bumiputera Bersatu (PBB). The Sarawak businessman who is often described as Najib’s golf buddy, has a 27.5% stake via Shorefield Resources Sdn Bhd. Datuk Mohamed Nizam Abdul Razak, brother of Najib, is also the non-executive director of Petra Energy and is the fourth largest shareholder with a 9.11% stake.

KUB Malaysia Bhd, which is linked to Umno, the biggest component party of BN, fell by 20.3% or eight sen to 31.5 sen with about 9.6 million shares traded. It is 52.17%-controlled by Anchorscape Sdn Bhd, an investment holding company linked to Darhim Dali Hashim and Datuk Abdul Rahman Mohd Redza. Darhim is a director of Prasarana Malaysia Bhd and chief executive officer (CEO) of Radimax Group Sdn Bhd, a shipyard, engineering and vessel-building company, while Abdul Rahman is an Umno Linggi state assemblyman.

Media Prima Bhd and Utusan Melayu (M) Bhd, the two media companies that are connected with Umno, also saw some selldown throughout the day with their stocks closing 7.94% and 17.74% lower to 29 sen and 25.5 sen respectively. Utusan Melayu is directly owned by Umno with a 49.8% stake. As for Media Prima, a noteworthy substantial shareholder is politically connected Altima Inc, which has a 7.9% stake in the company.

Star Media Group Bhd saw its share price fall by 3.74% or four sen to RM1.03 with about 1.2 million shares traded. The company which owns the largest paid English newspaper in terms of circulation in Malaysia, is 42.46% owned by MCA, the second largest component party within BN. MCA suffered a heavy defeat in the latest general election, narrowly winning only one parliamentary seat through its deputy president Wee Ka Siong in Ayer Hitam, Johor.

Datasonic Group Bhd, which is said to have links with Umno, also fell by 8.42% or eight sen to close at 87 sen with about 12.6 million shares traded. The e-passport manufacturer has a strong dependency on revenue contribution from contracts won from the government previously.

 

No more ‘special treatment’

Danny Wong, Areca Capital Sdn Bhd CEO, told The Edge Financial Daily that the companies that are linked to scandal-mired Najib and his supporters, will lose the “special treatment” of the past but could still excel if they could compete on a level playing field.

“Moving forward, the companies that are linked to Umno and had won contracts through their connections can still provide an efficient solution and service to the government, and do well in the future,” Wong said, pointing out that the new government under Pakatan Harapan is likely to focus on cost efficiency if it sticks to the reform agenda.

Similarly, Hong Leong Investment Bank head of retail research Loui Low also believes that companies with niche businesses could sustain earnings despite a government change.

“If the company is offering a solution that is niche and without much substitutes in the market like My EG, they could actually still benefit despite the change in government,” Low said.

He added that the selldown pressure could continue for companies linked to Umno as sentiment remains negative at the moment; the selldown pressure was strong, especially for those that reached limit down yesterday.

However, Rakuten Trade Sdn Bhd vice-president of research Vincent Lau warned that it may not be time to buy into these companies at the moment.

“The selldown pressure remains very strong as at closing,” said Lau.