210,116 people have been displaced in Kelantan, Terengganu, Pahang, Perak and Johor as at 9pm yesterday (29 Dec), in one of the worst floods to hit the country in decades.
The north-eastern state of Kelantan has been the worst hit with the number of people displaced making up 70% of the total, followed by Terengganu/Pahang at 14.9%/11.5%. Land access is limited as waters submerge many of the main roads.
The government has pledged an extra MYR500m to help victims, on top of an initial MYR50m allocation. The first BRIM payment for 2015 will be brought forward to 15 January from end-January.
What’s Our View
A quick scan revealed that PLCs under our coverage should not be materially affected by the floods.
- No auto assemblers/producers, glove producers or oil & gas fabricators under our coverage have plants, factories nor yards located 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 CPO production in 11M 2014 come from Kelantan/Terengganu; any impact of the floods will be small. For the PLCs under our coverage, FGV’s (HOLD) total estates affected by the floods is 6.3% (see details overleaf). The other PLCs do not have exposure in these two states except for THPlant (<6% of total landbank; HOLD), KLK (<4%; HOLD) and Boustead Plant (<3%; BUY). For PLCs not under coverage, TDM has 74% of its (2013) total planted oil palm area in Terengganu.
- Tenaga’s (BUY) electricity sales in Kelantan, Terengganu and Pahang account for less than 10% of its total sales. Every 10% impact on sales in these three states for a 10-day block lowers revenue by MYR118m or 1.1% on FY8/15 net profit. Its assets are mostly insured since floods are an annual recurrence.
- Banks and the consumer-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 MYR500m to >MYR1b, we estimate, depending on the severity of the damage which is only accessible after the floods subside. Small, unlisted contractors are likely to take on the reconstruction works.
Impact on FGV. Total assets affected by the floods is 6.34% or 23,730 ha. As at 29 Dec, the opportunity loss of FGV’s FFB production is estimated to be 11k tonnes, or 0.2% of the forecasted annual production. The estimated flood damages (including repair costs) and opportunity losses due to the floods is MYR21m as at 29 Dec, or 4% of our FY15 net profit forecast of MYR527m. We maintain our earnings forecasts and HOLD call.
Auto production / assembly plants location in Malaysia:
Impact on Tenaga. The combined electricity sales at Kelantan, Terengganu and Pahang account for less than 10% of Tenaga’s total sales, we understand. Every 10% impact on sales in these three states for a 10-day block will lower revenue by MYR118m, we estimate. This would impact our FY8/15 net profit forecast by 1.1%. Elsewhere, its assets are mostly insured since floods are almost an annual recurrence. We maintain our earnings forecasts and BUY call.
by Maybank IB