Jaks Resources - Impact of Covid19
Covid19 has caused huge damage to stock markets globally. Stocks on Bursa saw their prices halved, some worse, in a matter of weeks. Many suffered margin calls and were forced to sell at depressed prices. Economy is practically brought to a halt by the lockdown. Malaysian government announced unprecedented stimulus package of RM250 billion to help ease the impact caused by the lockdown. However, not all businesses shared the same looming faith. The glove manufacturers see booming business prospect.
Jaks and Dayang forums were amongst the hottest lately as both were once Mr Koon's favorites. Investors were making switches between the two choices, continuing the debate which started months ago between two well known i3 individuals.
It appears that Dayang was badly affected by the sharp fall in oil prices prompting the investors to flee as they recall memory of the last oil crash.
Jaks was not spared from the panic selling across Bursa.
Investors are busy making portfolio adjustment seeking superior returns in the aftermath of Covid19. Uncertainties always come with higher risks hence higher returns. In uncertain times, the rich always turn to safer assets while the poor turn to risker assets for higher returns. I suppose this is because the rich do not want to be poor again, but the poor want to be rich. Are the rich always right ?
How is Jaks faring in the midst of Covid19 ?
Currently, the EPC2 construction contract in Vietnam is its only profitable business which appears to be experiencing some delays in construction progress. CEEC has announced in late March that construction activities at Hai Duong Power Plant has fully resumed. This means that the COD of Unit 1 could potentially be delayed by up to 2 months to Q3 2020.
Domestically, Jaks business is dominated by the development of Pacific Star project and the management of Evolve Mall. Both were loss making even prior to the pandemic. Pacific Star will face further delays. The latest extension of MCO allows projects with minimum 90% physical completion to move ahead permits Pacific Star to carry on its finalisation works. Evolve Mall continues to permit limited operation only. Unsure whether Jaks will grant rental discounts to those remained shut.
Malaysia will see higher deficit due to the plunge in oil prices and the RM250 billion stimulus package. Since January this year, Bank Negara has reduced the Overnight Policy Rate (OPR) by 50bps to 2.50%. These measures have caused our currency to depreciate sharply against the greenback.
The US Feb has lowered its federal fund rate to almost zero and US congress has approved few trillions in stimulus package to fight against the pandemic. These aggressive measures will almost certain to witness rise in inflation in the future.
However, current situation is not entirely negative to Jaks. Jaks may have the followings to its favour;
1. Jaks has about RM400m in bank borrowings which may benefit from the reduction in OPR.
2. Jaks has substantial holding in property. Property is considered a hedge against inflation, since property values and rents typically increase during times of inflation.
3. JHDP has very substantial borrowings in USD. Reducing Feb fund rate to zero means substantial savings in interest costs.
4. Appreciation in USD against Ringgit means future distributions, in USD, from JHDP will be higher in ringgit term. Hence, higher sharing of profit by Jaks from JHDP.
How is Dayang faring in the midst of Covid19 ?
I do not know enough to make judgement on Dayang. I leave it to greater Sifus to come out with better writings.
https://klse.i3investor.com/blogs/Jaks%20resources/2020-04-12-story-h1505928000-Jaks_Resources_Impact_of_Covid19.jsp
Conclusions;
Covid19 is detrimental to both health and economy. Majority of the businesses are affected negatively. It is important for investors to stay calm and clear headed about their investment portfolio. Decide wisely and you may find golden opportunities awaiting.
I hope this article has explained the impact of Covid19 on Jaks.
Best of luck to everyone!
DK66
P/S : Press "Like" if you agree with me, otherwise, please drop a comment. TQ
