,Large scale solar concernsTHE country’s fourth large scale solar (LSS4) programme, which announced a total of 30 winners on March 12, has incorporated several major changes compared to the previous round. Unlike LSS3 that came with a quota of 500MW, the latest round offered double the capacity at 1,000MW. In addition, only 100% locally owned companies are allowed to bid, and as for listed players, they were required to have at least 75% local shareholding. However, a major difference between LSS3 and LSS4 would be the fact the latter entails a much larger pool of winners, with 10 listed companies directly benefiting from the programme. In comparison, LSS3 had only five winners. Interestingly, the list of winners under LSS4 comprised players in a diverse mix of sectors namely automotive, utilities, oil and gas, plantation, property and construction sectors. Some of these companies have no prior experience in solar power generation or the provision of engineering, procurement, construction and commissioning (EPCC) for solar facilities. For example, oil palm planter Gopeng Bhd and property developer MK Land Holdings Bhd that were among the 10 listed winners. Hence, questions arise on whether these companies, without core experience in the solar business, would be able to execute the projects effectively. While the demand for renewable energy is real, what is challenging is having the know-how to build and operate solar power generation in a profitable manner. It is noteworthy that only several of the awarded solar projects under the previous three cycles of the LSS programme have gone live. Not only that, a number of projects have missed the deadlines under their award and have received extensions. Surprisingly, the Energy Commission (EC) did not cancel the awards that missed deadlines and re-tender the capacity. The key issues that caused the delay in rolling out the projects as planned are financing and land-related woes. It is important for the EC to have a clear framework to avoid a recurrence of these problems in LSS4, especially since non-solar players will also be part of the programme. The country cannot afford to see similar problems arising, which would then interrupt the agenda to achieve 20% renewable energy in Malaysia’s generation mix by 2025. IPO exuberanceFIRST the Securities Commission (SC) revealed this week that it expects a healthy pipeline of around 30 initial public offerings (IPOs) for 2021 compared with 19 a year earlier. Then a new record was broken on Friday. ACE Market bound Flexidynamic Holdings Bhd saw a jaw-dropping and record breaking number of applications for its shares. The company, whose core business entails the design, engineering, installation and commissioning of glove chlorination systems, saw a total of RM445mil worth of applications chasing a mere RM2.8mil worth of shares available for the public. The company said that its overall oversubscription rate amounted to 155.72 times, very likely a new record on Bursa Malaysia. To be sure, the company which is seeking to raise RM15mil for its IPO, is issuing much more shares, around 56.8mil shares (raising around RM11.4mil) to selected private placees. Those places are clearly the lucky ones getting the IPO shares of a company that is hotly being pursued by investors. Nevertheless, the fact that close to half a billion ringgit worth of applications went in for one small IPO indicates the market is flush with liquidity. It is also likely that like a number of other ACE Market IPOs, this stock is likely to rise once it gets listed. The fear is overvaluation. Despite the exuberance, ultimately companies need to perform to justify their valuations. Stocks trading at very high price earnings multiples are meant to deliver on that kind of phenomenal growth. They are risky bets and at some point in the future, their share prices will adjust to their realistic valuation, based on what the earnings these companies ultimately report. Those fundamentals will always ring true and buyers of such stocks ought to do their research well before getting caught up in this euphoria. Watching over their shoulders CORPORATE Malaysia has had many challenges over the past year. Dealing with a pandemic-induced recession and a business environment that ground to a standstill have been top priority for many boards throughout Malaysia. While resuscitating business is their main agenda, news of the Malaysian Anti-Corruption Commission (MACC) charging the first person under what is called corporate liability law will send a new worry among corporate boards. The law, although passed sometime back, came into force in June last year. It basically means that corporations and their boards can be liable for corrupt acts of their employees. Transparency International lauded the charge. It says it has been advocating compliance of Section 17A of the MACC Act 2009 among corporates in the country. Malaysia continues to have perception issues, and a lot of people will say real problems, with corruption. Prosecution of the first case will also send a reminder for companies that it is a law that needs to be taken seriously. The charge is also a timely nudge for companies that want to circumvent the system to get ahead. There is pressure to deliver revenue among employees and companies but the way to go about it would be to not succumb to temptation for an easy way out. The first charge will almost certainly be the first of many. Scrubbing the taint of corruption from Malaysia is a long and tedious process but it has to start somewhere. Companies that resort to corruption to get ahead will be doing corporate Malaysia a big disservice. As competition gets heated internationally and locally, the adage of survival of the fittest will ring true. Connected companies will need to rely on elbow grease and ability, rather than greasing palms to get ahead in business and the charge hopefully serves a reminder to corporate Malaysia that times have changed for the better.
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