MY Strategy
Maintain “neutral”: The recent floods in Kelantan, Terengganu, Pahang, Perak and Johor, which displaced over 200,000 people, is said to be one of the worst to hit the country in decades.
A quick scan revealed that public-listed companies (plcs) under our coverage should not be materially affected by the floods.

No auto assemblers/producers, glove producers or oil and gas fabricators under our coverage have plants, factories or yards in Kelantan and Terengganu.

For the palm oil sector, 2.7%/3.2% of total planted areas in 2013 and 1.5%/2.5% of crude palm oil (CPO) production in the 11-month period for 2014 come from Kelantan/Terengganu.

Any impact of the floods will be small. For the plcs under our coverage, Felda Global Ventures Holdings Bhd’s total estates affected by the floods is 6.3%. The other plcs do not have exposure in these two states, except for TH Plantations Bhd, Kuala Lumpur Kepong Bhd and Boustead Plantations Bhd.

For plcs not under coverage, TDM Bhd has 74% of its total planted oil palm area in Terengganu.

Tenaga Nasional Bhd’s electricity sales in Kelantan, Terengganu and Pahang account for less than 10% of its total sales. Its assets are mostly insured since floods are an annual recurrence.

Banks and retailers will see some economic loss as the floods have disrupted operations, and banks will defer loan instalments for the flood victims.

On a broader scale, the reconstruction of homes, restoration of public infrastructure like hospitals, schools, roads and bridges, and cash handouts to victims, could range anywhere from RM500 million to more than RM1 billion, we estimate, depending on the severity of the damage, which is only assessable after the floods subside.

Small, unlisted contractors are likely to take on the reconstruction works. — Maybank IB Research, Dec 30

This article first appeared in The Edge Financial Daily, on December 31, 2014.