More businesses risk liquidation

Survey shows 19% or 329 SMEs mull shutting down permanently in next 6 months; figures may be higher due to CMCO and no moratorium

by RAHIMI YUNUS / pic by MUHD AMIN NAHARUL

BUSINESSES are facing a greater risk of closure and liquidation due to lower consumer spending and movement restrictions, as a result of the third wave of Covid-19 infection.

In a survey conducted by the SME Association of Malaysia (SME Malaysia) post-Recovery Movement Control Order (RMCO) period, 19% or 329 small and medium enterprises (SMEs) are considering shutting down permanently in the next six months.

SME Malaysia president Datuk Michael Kang said these figures could be worse now with the Conditional MCO (CMCO) and no moratorium.

Some 380 SMEs (22%) said their cashflow can last only until October, while 535 SMEs (31%) until the end of November.

Another 343 SMEs (20%) said their cashflow is back to normal, according to the survey involving 1,713 participants.

“This round of CMCO is more serious because the industry does not get the support it had during the previous period. (More) SMEs would be closed due to huge problems in cashflow,” Kang told The Malaysian Reserve (TMR).

He said retail, tourism, food and beverage (F&B), and services sectors are struggling to cover operational costs such as payroll and rents.

He also said SMEs in Kuala Lumpur (KL), Selangor and Sabah would be hit worse due to the CMCO, particularly those operating in shopping malls.

Kang said some big restaurants in malls have a monthly operational expenditure as high as RM4 million.

“The government must come in and offer initiatives such as extending the moratorium for affected industries like tourism, retail, F&B and engineering services.” Singapore-based retailer Robinsons became the latest brand heading for liquidation after MBO Cinemas (MCAT Box Office Sdn Bhd) reportedly shut down for good a few weeks ago.

Robinson Co (Malaya) Sdn Bhd has started the liquidation process of its two stores in Malaysia at The Gardens Mall and The Shoppes at Four Seasons Place.

Datuk Robert Teo Keng Tuan of RSM Malaysia has been appointed as interim liquidator, and the provisional liquidator will take control of the company’s assets and assess options to realise value to maximise returns to creditors.

Concurrently, Robinson & Co (Singapore) Pte Ltd is also closing its last two stores in the island nation, located at The Heeren and Raffles City Shopping Centre, ending the company’s 162 years of history.

“Similarly, in Malaysia, the retail industry recorded the worst growth rate in 33 years with the outlook remaining negative for the remaining months of the year as consumers are expected to tighten their spending,” the department store operator said.

Malaysia’s third-largest cinema operator, MCAT Box Office, is also facing liquidation after being badly impacted by the movement restrictions.

MBO Cinemas is backed by Navis Capital Partners with a 92.74% stake, while businessman Tan Sri Abdul Rashid Abdul Manaf owns 7.26%. A government-linked private equity firm, Ekuiti Nasional Bhd, is an indirect shareholder through Navis.

Sunway University Business School economist Prof Dr Yeah Kim Leng said demand has slumped sharply as consumers are holding back purchases, which have slowed domestic economic activities.

“Domestically, consumer spending is declining due to movement restrictions and drop in income either through retrenchments or salary cuts. Externally, recovery is in place, but it is uneven across the board.

“Some businesses may decide to close down, especially in this current third wave, and businesses affected by the CMCO will likely face distress due to low business volume and that may not be sustainable,” Yeah told TMR.

He said F&B, leisure and hospitality are among sectors that would be highly impacted by the low business volume stemming from the change in consumer purchasing behaviour.

The economist also said SMEs would be taking the brunt of the Covid-19 impact, particularly entities that are unable to quickly adapt to catering to online purchases.

Meanwhile, the Malaysian Institute of Economic Research (MIER) is revising down its real GDP projection for 2020 to -5.5%, due to an assemblage of factors that further burden a reeling economy.

The think tank also reported that consumer sentiments remain cautious as reflected by the latest MIER Consumer Sentiments Index for the third quarter of 2020 (3Q20), which at 91.5 is little changed from 2Q20’s 90.1.

Going forward, MIER said consumers are also not keyed up about their financial outlook, albeit growing concerns about the job market.

Shopping, however, which piqued the interest of more consumers last quarter, looks likely to be in moderation this time around, it added.