Bursa corporates slip on weak 3Q 2021 GDP but 4Q outlook improving

Published on 15 Mar 2022.

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Alongside the release of RAM’s 2021 Corporate Default and Rating Transition Study, we analysed the performance of 725 non-financial Bursa Malaysia corporates against the backdrop of a still-challenging year. After a promising export-driven recovery in 1H 2021, growth retreated to -4.5% in 3Q 2021. The reimposition of a nationwide MCO from June to its gradual easing in mid-July dampened the economy and concurrently saw 3Q 2021 corporate earnings take a beating.

Over half (55.2%) of the 725 companies in our sample recorded lower EBITDA Y-o-Y (median Y-o-Y change: -8.6%), while one in five recorded operating losses. Despite the weaker earnings, leverage metrics as measured by both EBITDA-to-Debt and Debt-to-Equity ratios reveal still-robust balance sheets and debt servicing aptitude.  Companies’ liquidity positions have also remained adequate to cushion against rising uncertainties. Bursa firms have sufficient reserves to sustain four months of operating expenses, with most of these reserves in liquid cash and cash equivalents. 

Dissecting the data by profile, the performance of larger firms (with median revenue of RM1.5 bil) showed more resilience. Median EBITDA contracted by a milder -11.6% compared to smaller firms (-41.5%), who fared worse than the overall median of the sample (-22.3%). Cash conservation initiatives were notably more pronounced for smaller firms, with median Cash-to-Opex of about seven months vs. larger firms’ three months, the latter possibly reflective of stronger banking relationships and access to funding.

Closer scrutiny of the sectoral breakdown of Malaysian corporates reveal that the healthcare, plantation and technology sectors consistently rank favourably across financial metrics tracked by RAM. Not surprisingly, these sectors have benefited from the increased demand and needs arising from the pandemic. The worst-hit were the energy, construction and property sectors that have been directly impacted by extended lockdowns, weak consumer/business sentiment and stop-work measures.

Preliminary 4Q 2021 results for some firms indicate a pickup in corporate earnings in tandem with the economy’s rebound of 3.6% in 4Q 2021. A patchy economic recovery is expected moving into 1H 2022 as local new COVID cases remain high, the impact of the floods in December last year, a tight labour market, as well as supply chain disruptions, rising costs of inputs and inflationary pressures on the external front. Geopolitical tensions is another factor that could impinge growth in 2022.


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Han Ting Ting
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Established in 1990, RAM Ratings is a leading credit rating agency registered under the Securities Commission’s Guidelines on Registration of Credit Rating Agencies, 2011. In addition to the provision of credit ratings for corporate bonds and sukuk and their issuers, RAM Ratings also provides research and publications on Islamic finance, fixed income and macro-economic and industry analysis as well as data analytics relating to credit risk, counterparty assessments and other related domains. 


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