This article first appeared in Capital, The Edge Malaysia Weekly on September 18, 2017 - September 24, 2017

MALAYSIAN companies listed on the Singapore Stock Exchange (SGX) have seen mixed share price performance over the year, with losers outpacing gainers.

Year to date, the share prices of companies like UG Healthcare Corp, ZICO Holdings Inc, Axcelasia Inc and Astaka Holdings Ltd have fallen. Only Riverstone Holdings Ltd and ISEC Healthcare Ltd have bucked the trend.

With the Singapore dollar hovering near multi-year high levels against the ringgit, one would wonder whether these companies are now at an even more disadvantageous position compared with their Singaporean peers in terms of earnings due to currency translation and dividends for their investors.

A fund manager notes that the Malaysian companies will always be at a disadvantage because of the exchange rate difference, but yet they chose to list there because of the interest shown by Singaporean investors.

“There has always been some interest in Singapore for Malaysian shares. They see Malaysian shares as more dynamic. In some ways, the business environment in Malaysia is seen as more exciting than in Singapore,” says a seasoned fund manager.

It is worth noting that the daily trade volumes of most of these counters are thin as large chunks of their shares are tightly held by individuals.

A banker says these companies could have chosen to list on the SGX because of the general perception that Singapore offers a better international profiling.

However, he points out that companies could reap higher valuations in Malaysia because of the mandate local institutional funds have to invest mostly in local equities. This has often been said to be the reason for Malaysia’s stock market premium compared with neighbouring countries.

Where earnings are concerned, currency weakness has probably impacted negatively only two of the six companies we are looking at.

This is because most companies keep their reporting currency in ringgit, except for ISEC Healthcare and UG Healthcare, which chose to report their earnings in Singapore dollars.

Eyecare specialist ISEC Healthcare, which derives most of its revenue from Malaysia but also operates in Singapore, is one company that is seeing overall revenue growth despite currency translation working against its favour.

In its cumulative six months ended June 30, 2017, ISEC Healthcare reported a 17.2% year-on-year increase in revenue to S$17.7 million — S$13.3 million from its Malaysian operations and S$4.4 million from its Singapore business. Net profit for the first half of the year amounted to S$3.61 million, up 8.4% from a year ago.

The company pointed out that in ringgit terms, it made RM41.5 million in revenue, up 9.8%, due to more patient visits. However, when translated into Singapore dollars, the increase was only 3.9%.

Nevertheless, ISEC Healthcare’s shares have done better than most of the other Malaysian companies listed on Singapore’s Catalist board, gaining 5.08% YTD. The counter closed at 31 Singapore cents last Friday. Its price-earnings ratio (PER) stands at 23.31 times and has a dividend yield of 1.61%.

Glove manufacturer UG Healthcare has seen a different fate this year. The Seremban-based company, which has a June 30 financial year end, posted a 50% decline in net profit despite achieving record revenue of S$65.24 million in FY2017.

UG Healthcare derives half of its revenue from Europe, while the rest comes from North and South America, Malaysia and other parts of Asia. Net profit shrank to S$2.44 million from S$5.45 million a year ago as average raw material prices, a gas tariff hike, higher depreciation and foreign worker levy dragged down margins, all these while grappling with fluctuations in currencies.

Undoubtedly, its share price took a hit, falling 15.8% since the beginning of the year. It closed at 24 Singapore cents last Friday. At a PER of 18.86 times, UG Healthcare stands comparable with the average PER of Malaysian glove makers at 19 times.

Riverstone, another Malaysian rubber glove maker that reports its earnings in ringgit, although faced with similar external circumstances as UG Healthcare, registered an 11.4% y-o-y increase in net profit to RM60.72 million for the cumulative six months ended June 30, 2017. Revenue also grew 37.4% to RM418.94 million on cost controls and operational capabilities.

Most of its revenue is derived from Europe and Southeast Asia.

Riverstone can be said to be one of the more popular Malaysian companies listed on the SGX. Since the beginning of the year, the counter has gained 19.32%. It closed at S$1.03 last Friday. The company has a PER of 18.59 times, slightly below that of UG Healthcare.

In terms of dividend yield, Riverstone delivered 1.99% and UG Healthcare, 2.45%.

Meanwhile, consultancy firms ZICO and Axcelasia have both seen a decline in their share prices since the beginning of the year. ZICO fell 6.67% to 28 Singapore cents last Friday while Axcelasia dropped 46% to 60 Singapore cents.

ZICO reported a 16.9% y-o-y increase in net profit to RM3.38 million in 1HFY2017 while Axcelasia incurred a net loss of RM2.15 million. Both companies derive the bulk of their revenue from Malaysia, but they are in the midst of expanding their operations to other parts of Asia.

ZICO’s PER stands at a whooping 52.1 times, but did not given out any dividend in the last financial year.

Johor-centric property developer Astaka also incurred a loss in its financial year ended June 30, 2017. It did not record any revenue as the sales of its property developments can only be recognised upon completion and when ownership is transferred to buyers.

The counter has shed 35.29% since the beginning of the year. It closed at 11 Singapore cents last Friday.

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