Corporate sector leaps in parallel with GDP growth in 2022

By Zairina Zainudin and Durratul Ain Ahmad Fuad

KUALA LUMPUR, Dec 14 (Bernama) -- The Malaysian corporate sector rode on the strong gross domestic product (GDP) growth in 2022, which was driven by the low base effect and the ramping up of business activities across industries.

The recovery in supply chain disruptions coupled with the resumption of activities that were put on hold due to the pandemic have been supporting the entire ecosystem throughout the year.

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Bank Negara Malaysia Governor Tan Sri Nor Shamsiah Yunus had previously said that corporations and businesses’ financial performance remained healthy as reflected in the third quarter (Q3) GDP performance, where outstanding loans grew by five per cent with the growth in loan repayments outpacing loan disbursements.

“Loan disbursements continued to record sustained growth, particularly in the manufacturing and wholesale trade sectors,” she said.

Nevertheless, some went through the year on a bumpy road, especially the rubber glove makers on the back of low average selling prices for rubber gloves, unattractive rubber price and the shortage of labour. 

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Year of recovery

Malaysia University of Science and Technology (MUST) economics professor Dr Geoffrey Williams said 2022 has been a year of recovery for many sectors albeit from a low base.

He said the sectors that have benefited from the opening up in the local markets were retail, restaurants and domestic tourism.

“As international markets have opened up, we see exports across most sectors have risen and manufacturing has also benefited,” he said.

He said finance and banking have benefited from better loan repayments and higher interest rates.

“Oil and gas (O&G) have benefited from higher oil prices and Petronas (Petroliam Nasional Bhd) has posted healthy profits that help the subsidies bill but also allow it to invest more in the O&G sector,” he told Bernama.

He said private higher education also has had a much better year as lockdown restrictions have eased.

However, Williams said some sectors were performing less well due to the hangover from the lockdowns and labour shortages.

“Palm oil has lost tens of billions in revenue due to the foreign worker ban and other sectors depending on foreign workers such as construction and some manufacturing sectors have also suffered,” he added. 

The corporate sector also witnessed the revival of Battersea Power Station project in London, which now transformed and reopened as an office, shopping and restaurant hub plus apartments, after being decommissioned for decades.

The 9 billion British pound (1 pound=RM5.38) iconic building, which was once a coal-fired power station, was officiated by The Yang di-Pertuan Agong Al-Sultan Abdullah Ri’ayatuddin Al-Mustafa Billah Shah Ibni Almarhum Sultan Ahmad Shah Al-Musta’in Billah on Oct 13.

ESG in focus

The pandemic has served as a great lesson for companies to ensure that their businesses are always resilient to withstand economic shocks and being sustainable for a long-term.

As such, efforts to adopt the environmental, social, and governance (ESG) agenda such as green initiatives, sustainability reporting, electric vehicle (EV) and renewable energy dominated the market with support from the government and its agencies. 

Prominent government-linked companies (GLC) such as national oil company Petronas and utility giant Tenaga Nasional Bhd took the early initiatives in the country and currently going through a period of transition in their respective fields.

CIMB Group Holdings Bhd, which ranked fourth amongst banks globally in ESG performance, has doubled its sustainable finance commitment to RM60 billion by 2024 after achieving the RM30 billion target in the first half of this year, two years ahead of schedule.

According to accounting firm KPMG’s biennial Survey of Sustainability Reporting 2022, 97 per cent of Malaysia’s top 100 companies included sustainability data in annual reports.

The report, which involved 58 countries, also showed that Malaysia led the top 10 countries by percentage of the top 100 companies that included sustainability information in their annual financial reports.

Big tickets M&A

In the pandemic’s aftermath, merger and acquisition (M&A) activity in the country is relatively strong with many big-ticket deals taking place this year, including the multi-billion exercise by Amanat Lebuhraya Rakyat Bhd to take over four major highways in the Klang Valley for RM5.5 billion.

The highway toll concessionaires -- Sistem Penyuraian Trafik KL Barat Sdn Bhd (Sprint), Syarikat Mengurus Air Banjir & Terowong Sdn Bhd (Smart), Lingkaran Trans Kota Holdings Sdn Bhd (Litrak) and KESAS Sdn Bhd, were acquired from Gamuda Bhd, Lingkaran Trans Kota Holdings Bhd and Kumpulan Perangsang Selangor Bhd.

Other major M&A includes the takeover of Malaysia’s largest gummy candy producer, Cocoaland Holdings Bhd, by Fraser and Neave Holdings Bhd for RM488.15 million as well as the Malaysia Building Society Bhd-Malaysian Industrial Development Finance Bhd merger, which is likely to be completed by the first quarter of next year.

The market also witnessed mega-merger involving Axiata Group Bhd, Telenor Asia Pte Ltd and Digi.com Bhd for the telecommunications operations, Celcom Axiata Bhd and Digi.

At completion, Axiata and Digi’s parent company Telenor will hold equal ownership of 33.1 per cent each in the newly-merged company, which is proposed to be named Celcom Digi Bhd.

As for IHH Healthcare Bhd, the company is ready to proceed with its open offer to acquire an additional 26 per cent stake in Indian healthcare service provider, Fortis Healthcare Ltd, should it receive the capital market regulator and court’s approvals.

IHH is the largest shareholder in Fortis with 31.17 per cent equity interest, which was acquired via a preferential allotment in November 2018.

New listing on stock exchange

Bursa Malaysia saw 34 new initial public offerings (IPO) as of Nov 30, 2022 compared with 28 in 2021.

Of the 34 new listings, four were on the Main Market versus five in 2021 while 25 were on the ACE Market (11 in 2021) and five were on the LEAP Market (12 in 2021).

Among the companies were Senheng New Retail Bhd, Farm Fresh Bhd, AME REIT and Unitrade Industries Bhd.

As of Nov 30, 2022, Farm Fresh topped the largest IPO with a market capitalisation of RM2.51 billion.

On the Practice Note 17 (PN17) and Guidance Note 3 (GN3) updates, a total of 28 companies have been classified under the PN17 and GN3 status as of Nov 2, 2022, representing 2.98 per cent of the total 941 companies listed on the main market and ACE market of Bursa Securities.

Airasia X Bhd, Alam Maritim Resources Bhd, Asia Media Group Bhd, Barakah Offshore Petroleum Bhd, Bertam Alliance Bhd represents the top five PN17 companies listed on the main market while Southern Score Builders Bhd, formerly known as G Neptune Bhd, is one of the GN3 companies on the ACE market.

The PN17 status is issued to financially distressed companies that are listed on the Main Market of Bursa Malaysia while the GN3 is equivalent to PN17 but for companies that are listed on the ACE Market.            

Corporate sector to continue growth progress in 2023

Putra Business School associate professor Dr Ahmed Razman Abdul Latiff said although the global economic outlook for 2023 is predicted to be slower than this year, economic growth in 2023 for Asian countries would be higher than the rest of the world. 

He said Malaysia’s GDP growth for 2023, on the other hand, is expected to be around four to five per cent.

“Corporate sector will continue their growth progress and should take advantage of the recent ratification by the government on the two of the largest free trade agreements -- the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), by exploring new markets and expanding their products and services, taking advantage of competitive ringgit,” he said.

Malaysia’s economy grew by 14.2 per cent in the third quarter of 2022 supported by continued expansion in domestic demand, firm recovery in the labour market, robust electrical and electronics (E&E) as well as non-E&E exports and ongoing policy support.

Overall, the GDP expanded by 9.3 per cent during the first nine months of 2022.

As many international rating agencies anticipated that 2023’s growth might be slower, Williams said he expected the expansion in Malaysia’s economy could also mimic the pace across various segments -- sales, investment and new products, with consumers being extra cautious.

“I would say a slower (growth) but continued recovery from the low base of the last two years,” he added.

-- BERNAMA