Monday, July 9th, 2018

 

Twitter shares fall after report says account suspensions to cause user decline

NEW YORK, July 9 — Shares of Twitter Inc fell 9 per cent today after a report said the social media company had suspended more than 70 million fake accounts in May and June, which could lead to a decline of monthly active users in the second…


Top Glove says it overpaid RM640.5m for Aspion

PETALING JAYA: Top Glove Corp Bhd, whose shares tumbled as much as RM3.63 or 30% on Monday, said an investigation by an independent accounting firm showed that it overpaid RM640.5 million for the acquisition of Aspion Sdn Bhd.

Irregularities were discovered in certain balance sheet items of Aspion after it was taken over by Top Glove on April 4. Top Glove paid a whopping RM1.37 billion for Aspion.

“From the interim report given by the independent accounting firm, there is currently an overstatement of inventory, plant and machinery in Aspion's accounts amounting to RM74.4 million. Further, the interim report also states that the acquisition price of Aspion was overstated by RM640.5 million. Therefore, the claim amount of RM714.9 million in the legal proceedings consists of the overstatement of assets and the overvaluation,” it told Bursa Malaysia on Monday.

Top Glove said, however, the litigation will not impact Aspion's business operations, which will continue as usual. It also stressed that the group's business operations remain resilient and scalable, with a healthy cashflow.

“Top Glove remains upbeat in terms of outlook. With the combined capabilities of Aspion, the group is confident of continued growth going forward. It recognises there will always be challenges in business and is focused on taking immediate steps to address the issues.”

Shares of Top Glove plunged to a six-month low of RM8.47 in early trade Monday, hitting limit-down, on news that it had filed a suit against Adventa Capital Pte Ltd, alleging fraudulent misrepresentations in the Aspion deal. The stock managed to pare losses but still settled 24.5% or RM2.97 lower at RM9.13, wiping RM3.8 billion off its market capitalisation. It was among the most actively traded counters on Bursa Malaysia with 50.63 million shares changing hands.

Short selling of Top Glove shares was suspended Monday after its share price declined more than 15%. A total of 10 Top Glove's structured warrants saw falls of between 17.8% and 63.2%.

Claiming a sum of not less than RM714.86 million, Top Glove alleged that fraudulent misrepresentations were made by Adventa Capital directors Low Chin Guan and Wong Chin Toh.

An analyst who declined to be quoted said if the case proved to be a fraud, Aspion will be another “big company” with inflated financial figures after national cargo carrier Transmile, which saw the discovery of losses of up to RM496 million for 2005 and 2006 through a special audit.

He opined that the case is now about whether Top Glove failed in its due diligence or the vendor intentionally hid important information.

“It's hard to say who is right or wrong right now – while it could be a failure of Top Glove in carrying out the due diligence, on the other hand they may blame the seller for not disclosing the information.

“If this is the case, it could be something not very favourable to Top Glove and will affect them materially,” he told SunBiz.

PublicInvest Research downgraded Top Glove to “trading sell” as it believes the share price will react negatively to the news and will remain under pressure pending further clarification by the management. The target price is maintained at RM10.65.

Given that Top Glove is not cancelling the entire deal, the research house said it could mean that Aspion will still be able to contribute to the group, though its contribution may not be as great as expected.

The purchase of Aspion comes with a core net profit target of RM80.9 million and RM108.3 million for FY18 and FY19, and Adventa Capital will reimburse Top Glove for any shortfall in the core net profit up to an aggregate maximum limit of RM100 million.

PublicInvest Research believes the lawsuit sends a signal of a potential lower-than-expected contribution from Aspion.

“We maintain our earnings forecast pending more clarity on the matter. The downside risk to our earnings estimates will be lower-than-expected contribution from Aspion and a long-drawn litigation process.”

Kenanga Research noted that the legal action raises uncertainty over Aspion’s future operations and earnings outlook.

For illustrative purposes, based on the back-of-the envelope calculation, Top Glove’s FY19 earnings could be reduced by 12% with a lower target price of RM8.25 from RM9.49 if profit guarantee and profits generated by Aspion were to be stripped out.

It reiterated an “underperform” call for Top Glove with an unchanged target price of RM9.40.


Adventa defers proposed rights issue

PETALING JAYA: Adventa Bhd has deferred its rights issue plan after its major shareholder and managing director Low Chin Guan said he is not in a position to provide an undertaking for the fundraising exercise amid legal proceedings against him by Top Glove Corp Bhd.

“In view of the above, the board resolves to defer the proposed rights issue. Adventa will make further announcements in the event there are material developments,” according to Adventa's filing with Bursa Malaysia.

In a separate announcement, Adventa clarified that the group and its subsidiaries are not involved in the legal proceedings between Low and Top Glove.

Adventa's share price declined 4.5 sen or 8.3% to close at 5 sen today on 430,000 shares done.

Last January, Adventa announced a plan to undertakea a right issue exercise on the basis of three rights shares for every three shares as well as one free warrant for every two rights shares subscribed. The rights issue was to raise RM50.42 million for business expansion and working capital.

The group proposed to procure irrevocable undertakings from Low to subscribe for his rights entitlements and all the remaining rights shares which have not been subscribed. 


BMW unveils plan to boost production in China

MUNICH, July 9 — BMW AG is increasing manufacturing capacity in China in a move that will help the automaker lower its reliance on imports from a US factory just as trade tensions between the two countries intensify. BMW and Chinese partner…


Groupon surges on report discounts provider is seeking a buyer

NEW YORK, July 9 — Groupon Inc surged as much as 14 per cent after a report that the discount-slinging website is actively seeking a buyer. The merchandise and voucher vendor has approached several public companies in recent weeks to try to drum…



Wall St enters third day of gains as trade fears ease

NEW YORK, July 9 — US stocks rose today, with bank stocks leading third day of gains in a row after strong US jobs data from last week helped investors brush aside trade concerns. The S&P financial index rose 1.3 per cent, providing the…


Technology goes from ‘neutral’ to ‘overweight’

PETALING JAYA: AmInvestment Bank Bhd upgraded its stance on the technology sector to “overweight” from “neutral” given its positive outlook on the sector over the next six months.

Its top picks for the sector are Inari Amertron Bhd and Malaysian Pacific Industries Bhd (MPI).

In its report today, the research firm said that the industry’s earnings for the second half of the year (2H 2018) would be driven by sensors, radio frequency (RF) chips and operational efficiencies.

In 2H 2018, AmInvestment said the sector’s key theme should revolve around connected cars, smart homes and automation, which paints a positive outlook for sensor and RF chip manufacturers, automated equipment manufacturers and companies looking to improve operational efficiencies through automation.

“In the smartphone segment, while sales volume is plateauing in developed markets, sensor and RF content continues to increase. Overall, the earnings prospects are looking positive for local semiconductor companies,” it added.

Meanwhile, AmInvestment said among the key beneficiaries during the second half period are Inari Amertron, MPI, Unisem and Globetronics given sensors and RF are imperatives in a connected world.

The research firm also noted that Inari Amertron and MPI are among the beneficiaries of the government’s announcement in Budget 2018 to provide matching grants and capital allowances to support automation initiatives.

It said prospects of ViTrox Corp and Pentamaster Corp are also exciting amid the rising adoption of automation.

Additionally, AmInvestment said its “overweight” stance on the sector may be further strengthened if there is a change in the US dollar outlook for the better; the semiconductor companies under its coverage (Inari, MPI and Unisem) secure new jobs of significance; and/or share prices correct by 15% to 20%.

However, it noted that among the key risks include the lukewarm demand for end-products owing to weak economic conditions; monotonous content growth in underlying products in the absence of innovation; and margin erosion in the face of a weakening US dollar.

“If such risks materialise, we may downgrade our stance on the sector from ‘overweight’ to ‘neutral’,” it added.


Zecon shares up despite possible termination of hospital job

PETALING JAYA: Zecon Bhd’s share price rose 4.41% today despite a possible termination of its turnkey contract for the Petra Jaya Hospital in Sarawak.
It closed at 35.5 sen with 1.33 million shares done.

On July 5, Health Minister Dr Dzulkefly Ahmad said the cabinet gave an approval in principal for the termination of the RM495 million hospital project which had only seen 34.5% progress with only six months left to its extended deadline of Dec 31. The project was supposed to have been completed on Nov 26, 2016.

He said the project will now be taken over by the Public Works Department, which will also have the onus of deciding on a new contractor.

When contacted for comments, the group’s CEO Syed Muzakir Al Joofre declined to comment.

It is understood however that the company has yet to receive any official notice on the contract termination. The hospital job was awarded to Zecon in April 2013, for a period of 42 months.

For the first nine months of the financial year ending June 30, Zecon registered a net loss of RM19.9 million against a net profit of RM 2.95 million attributable to Liquidated Ascertained Damages on one of its projects. Revenue grew to RM265.29 million from RM166.25 million.


FGV hopes PM’s China trip will benefit palm oil sector

KUALA LUMPUR: FGV Holdings Bhd is optimistic that Prime Minister Tun Dr Mahathir Mohamad’s official visit to China in August will benefit the palm oil sector, said president and group CEO Datuk Zakaria Arshad.

Speaking to reporters at the FGV open house today, he said the visit was also expected to improve bilateral trade relations between China and Malaysia.

When asked if FGV would participate in the visit, Zakaria said the company had yet to receive any information from the Prime Minister’s department on the trip.

Elaborating further, he said the bulk purchase of palm oil by China had decreased following competitive market prices in China and Malaysia, as well as the competition from Indonesia.

As the world’s third largest palm oil exporter, FGV has a market share of between 20% and 30% in China, said Zakaria, adding that the share had slightly declined.

Meanwhile, on the company’s operations, he said efforts were being made to review the company’s investment portfolios.

“We will be streamlining any problematic portfolios and concentrate on those which are profitable,” he added. – Bernama