Here's what we have for the week

Significant Event

• Affin Bank is selling Affin Hwang AM, the asset management arm to CVC Capital Partners for RM 1.54 billion.
•  Axiata Group Bhd, the parent company of Celcom, is acquiring a 66% stake in Indonesia’s PT Link Net Tbk for RM 2.55 billion.

Real Estate Industry 

• Frasers Logistics & Commercial Trust is disposing of the building, Cross Street Exchange for S$810.8 million.
• CapitaLand Investment Ltd is disposing of JCube, located at Jurong East for S$340 million.
• Penang-based developer, Ideal United Bintang is acquiring 17 parcels of land located at Seberang Perai Utara, Penang for RM 475 million.

Users can get access all the major transactions of offices, lands, and factories in Malaysia via this tool.

Company Expansion Plan

• IOI Corp is planning to reduce its reliance on oil palm and venture into other crops, which include durian, coconut, and kenaf.
• Perodua had earmarked RM 1.33 billion for capital expenditure for the improvement of its plant and the development of the new model.
• Rhone Ma Holdings Bhd’s RM 40 million new manufacturing plant is expected to increase the company's production capacity by four times from the existing capacity of 2,500 tonnes per annum.

Users can filter the companies' activities via industry or nature of activities via using our tool for Malaysia companies and Singapore companies via the link.

Daily Insights

• Many pandemic winners such as Netflix and Peloton are beaten down, hence, we did compile a list of changing spending behavior of the world's major countries.
• Here’s our view on the Russian and Ukraine conflict. Besides oil and natural gas, this product is rising steadily but is ignored by the investment community.
• Has value emerged for Malaysia's largest capitalization tech stock? 
• Check out Petronas Malaysia Bid Round 2022 (MBR 2022) and what opportunities are available for the industry players.
• Why do we think SGD is going stronger.

News we are reading

• MAS is tightening its monetary policy by strengthening its currency to curb inflation. (Channel News Asia)
• China conditionally approves AMD acquisition for Xilinx, clearing the last hurdle. (Reuters)
• BNM issued a statement, claiming that the central bank is allowed to fund the country's deficit. (The Edge)
• A new water treatment plant costing RM 1.6 billion will be built in Kuching. (The Star)

Trades we are monitoring

• Long agriculture products
• Long USD

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I was curious why Affin Bank is so eager to sell off its asset management arm, Affin Hwang AM. This arm is performing well and Affin paid RM 1.36 billion acquiring Hwang-DBS Investment Bank Bhd and the asset management and futures businesses of Hwang-DBS in 2014. If you factor in the USD/MYR currency, this makes this disposal a loss-making one. Why is Affin Bank making these distressed sales?

After some research, we don’t see any capital adequacy problem arising in Affin’s book, nor is the business going obsolete. We think the reason lies in its parent organization, Boustead Holdings. Boustead Holdings is facing a serious cash flow issue. It does not have enough cash to pay off its current liabilities. Although the company owns numerous assets, those assets are not easy to turn into cash when market timing is bad.

Hence, we are making a bold guess, betting that Affin Bank will declare a special dividend in order to increase Boustead Holdings' cash level. Let’s see whether this guess turns into reality or not.

Lastly, I watch Netflix’s movie, Don’t Look Up recently, you should watch it. That’s all for the week. Happy Chinese New Year.