Monday, July 17th, 2017

 

Credit Suisse CEO flags start of work on 2018-2020 plan

ZURICH, July 17 — Credit Suisse begins work this month on planning for its strategic priorities beyond the Swiss bank’s current set of targets, chief executive Tidjane Thiam said in a memo to staff. Credit Suisse aims to achieve its current…


Dollar index hits 10-month low on Fed bets, strong China data

NEW YORK, July 17 — The US dollar hit its lowest level against a basket of major currencies in 10 months today and the Australian dollar hit a more than two-year high on strong Chinese economic data and doubts that the Federal Reserve would…


Puma raises forecast after leap in sales and profits

FRANKFURT, July 17 — German sporting goods firm Puma raised its sales and profits forecasts for the full year today, saying it enjoyed strong second-quarter performance and was confident for the second half. The Bavaria-based firm now expects…


Celcos to feel pinch in profitability as leverage rises: RAM

PETALING JAYA: The leverage indicators of Malaysian cellular operators (celcos) are expected to gradually deteriorate in this maturing and slower growth environment, said RAM Ratings co-head of infrastructure and utilities ratings Davinder Kaur Gill.

This depends on factors such as intensity of competition in the industry and the magnitude of any larger-than-expected capex, in addition to impending spectrum fees.

Despite the introduction of spectrum assignment fees for 900MHz and 1800MHz bands last year, the rating agency said the financials of celcos have remained resilient.

The debt-to-OPBDIT (operating profit before depreciation, interest and taxes) ratios of all incumbent celcos rose to 1.81 times from 1.53 times the previous year, subsequent to the funding of spectrum costs with borrowings.

While RAM expects mild contraction in the mobile industry’s revenue growth in 2017, profitability and margins are anticipated to stay flattish.

In comparison with regional peers, RAM noted that the Malaysian celcos continue to fare well despite stiff competition, as the profitability of incumbents remains superior to that of their counterparts in neighbouring countries.

The Malaysian average industry OPBDIT margin of 44.3% is among the highest in the region.

“While incumbents have resorted to trimming costs via digitalisation and other cost optimisation means to weather tough times, cost management strategies may, in our view, be limited and fully exhausted over a longer period,” she explained.

RAM Ratings also said the fixed-broadband space continues to hold prospects for growth given the ongoing rollout of the High-Speed Broadband 2 and suburban broadband projects.

“Although we observed a slowdown in the growth trajectory of TM’s fixed-broadband base, which stayed flat year-on-year in 2016 and 1Q 2017, substitutions of the lower-speed Streamyx for UniFi remained encouraging,” Davinder Kaur noted.


Celcos to feel pinch in profitability: RAM

PETALING JAYA: The leverage indicators of Malaysian cellular operators (celcos) are expected to gradually deteriorate in this maturing and slower growth environment, said RAM Ratings co-head of infrastructure and utilities ratings Davinder Kaur Gill.

This depends on factors such as intensity of competition in the industry and the magnitude of any larger-than-expected capex, in addition to impending spectrum fees.

Despite the introduction of spectrum assignment fees for 900MHz and 1800MHz bands last year, the rating agency said the financials of celcos have remained resilient.

The debt-to-OPBDIT (operating profit before depreciation, interest and taxes) ratios of all incumbent celcos rose to 1.81 times from 1.53 times the previous year, subsequent to the funding of spectrum costs with borrowings.

While RAM expects mild contraction in the mobile industry’s revenue growth in 2017, profitability and margins are anticipated to stay flattish.

In comparison with regional peers, RAM noted that the Malaysian celcos continue to fare well despite stiff competition, as the profitability of incumbents remains superior to that of their counterparts in neighbouring countries.

The Malaysian average industry OPBDIT margin of 44.3% is among the highest in the region.

“While incumbents have resorted to trimming costs via digitalisation and other cost optimisation means to weather tough times, cost management strategies may, in our view, be limited and fully exhausted over a longer period,” she explained.

RAM Ratings also said the fixed-broadband space continues to hold prospects for growth given the ongoing rollout of the High-Speed Broadband 2 (HSBB2) and suburban broadband (SUBB) projects.

“Although we observed a slowdown in the growth trajectory of TM’s fixed-broadband base, which stayed flat year-on-year in 2016 and 1Q 2017, substitutions of the lower-speed Streamyx for UniFi remained encouraging,” Gill noted.


DRB-Hicom unit launches high-tech paint shop in Pekan

PETALING JAYA: Hicom Automotive Manufacturers (Malaysia) Sdn Bhd launched its high-tech paint shop (pix) in Pekan, Pahang, yesterday, as part of efforts to strengthen its position as one of the preferred automotive assemblers in the region.

“The establishment of this high-tech paint facility will enhance our standing as one of the region’s most prefered component assemblers in the automotive industry,” said DRB-Hicom Bhd group managing director Datuk Seri Syed Faisal Albar.

Hicom Automotive, a fully owned subsidiary of DRB-Hicom, has been operating in Pekan for the last 30 years and has assembled close to 500,000 passenger and commercial vehicles from 20 international marques, including C class, E class, S class and GLC class, Fuso and MB Actros under the Mercedes-Benz banner.

The new facility will increase its production capacity from 25,000 units to 50,000 units annually, driven by the paint shops’ ability to operate around the clock.

“The new paint shop features a robotic paint system for the primer and top coating application; the feature that has allowed us to decrease production time by as much as 50% compared with the manual application method previously employed,” said Hicom Automotive CEO Ismail Pandak.

Syed Faisal said the facility is part of the group’s commitment to ensure its readiness to face Industry 4.0, which has seen the development of “smart factories” around the world, as industry players innovate and improve their business processes to minimise cost.

“Industry 4.0 requires us to develop a knowledge-based economy in our efforts to become a high-income nation. By increasing the technology involved in the production line, we are encouraging Warga DRB-Hicom to increase their technical knowledge and ensure their skills are at par with their international counterparts,” he said.


Sunway establishes RM10 billion sukuk programme

PETALING JAYA: Sunway Bhd, which announced a RM1.1 billion project in the Kuala Lumpur city centre last week, has established an Islamic Medium-Term Note Programme of RM10 billion in nominal value.

Proceeds from the sukuk programme will be used, among others, to finance the investment activities, working capital requirements and/or general corporate purposes of the issuer and/or Sunway and/or its subsidiaries.

The group told Bursa Malaysia that the first issuance of the notes was made on July 17. The notes, which will have a tenure of up to 100 years, allow Sunway to issue different tranches from time to time that may be unsecured or secured with different pools of assets/securities during the tenure of the sukuk programme. 

The bonds are unrated and can be issued under the syariah principle of Wakalah Bi Al-Istithmar or Mudharabah (profit sharing). Upon issuance, the bonds are transferable and tradeable.

Sunway had on May 9 lodged with the Securities Commission Malaysia, the required information and relevant documents relating to the sukuk programme pursuant to the prevailing Guidelines on Unlisted Capital Market Products Under the Lodge and Launch Framework.

Kenanga Investment Bank Berhad is the sole principal adviser, and together with HSBC Amanah Malaysia Bhd, the joint lead arrangers and joint lead managers for the sukuk programme.

Sunway shares rose 10 sen to close at RM4.06 yesterday on some 5.69 million shares done, bringing it a market capitalisation of RM8.45 billion.


TAHPS Group given ‘neutral’ call by PublicInvest

PETALING JAYA: PublicInvest Research has initiated coverage on Bandar Bukit Puchong master developer TAHPS Group Bhd with a “neutral” call, citing thin trading liquidity and lacklustre sales outlook in the near term as a dampener for share price appreciation but its deep value is an attractive proposition for very long-term investors.

The research firm expects TAHPS’s stock price to continue to trade at a steep discount of 70% to its revalued net asset valuation, with a target price of RM7.37. It said the discount to RNAV of RM20 a share is to its low profile and lack of investor publicity over the years.

The 110-year-old group, which also owns 2,349ha of oil palm plantations in Terengganu and Pahang, is the largest owner of undeveloped land in the Puchong township, with 610 acres in Bandar Bukit Puchong and Puchong Utama. Based on IOI Properties project development nearby, PublicInvest thinks the potential gross development value (GDV) from its existing land bank (net area: 400 acres) could fetch up to RM10 billion.

Property development brings in 95% of the group’s earnings. The group sits on a cash pile of RM84 million with zero borrowings. TAHPS does not have a dividend payout policy, but has made generous dividend payouts in the 2013 to 2015 financial years, giving out more than 50% of its profit as dividend – which translated into attractive dividend yields of 3%-5%.

In FY16, the dividend payout ratio was reduced to 37% however, as group earnings softened due to poorer property demand. Dividend yield was only 1.5%.

Despite being a small scale property developer, TAHPS’s gross profit margin ranges from 48%-74%, one of the highest in the industry thanks to its relatively low land holding cost of RM3-7 per sq ft.

On its upcoming launches, the group plans to roll out two projects, Link Villas and BP Newtown Phase 3. Link Villas, is a 2- and 3-storey villa project, consisting of 140 units with a total GDV of RM100m (about RM720k-900k per unit). Depending on market conditions and residential development in Bukit Puchong, management plans to roll out a commercial shoplot project known as BP Newtown Phase 3 with a built-up area starting from 5,243 sq ft.

Launching of the villa project is expected by year-end. To enhance the value of the entire Bukit Puchong area, management is currently revamping the master development plan of Bandar Bukit Puchong and is scheduled for unveiling by year-end.

Risks to the stock include; share trading liquidity, with only an estimated 21% free float in the market; timing of monetisation of the full value of its landbank and any delay in the rolling out of the new master plan for Bandar Bukit Puchong.


‘Neutral’ TAHPS comes under the spotlight

PETALING JAYA: PublicInvest Research has initiated coverage on Bandar Bukit Puchong master developer TAHPS Group Bhd with a “neutral” call, citing thin trading liquidity and lacklustre sales outlook in the near term as a dampener for share price appreciation but its deep value is an attractive proposition for very long-term investors.

The research firm expects TAHPS’s stock price to continue to trade at a steep discount of 70% to its revalued net asset valuation, with a target price of RM7.37. It said the discount to RNAV of RM20 a share is to its low profile and lack of investor publicity over the years.

The 110-year-old group, which also owns 2,349ha of oil palm plantations in Terengganu and Pahang, is the largest owner of undeveloped land in the Puchong township, with 610 acres in Bandar Bukit Puchong and Puchong Utama. Based on IOI Properties project development nearby, PublicInvest thinks the potential gross development value (GDV) from its existing land bank (net area: 400 acres) could fetch up to RM10 billion.

Property development brings in 95% of the group’s earnings. The group sits on a cash pile of RM84 million with zero borrowings. TAHPS does not have a dividend payout policy, but has made generous dividend payouts in the 2013 to 2015 financial years, giving out more than 50% of its profit as dividend – which translated into attractive dividend yields of 3%-5%.

In FY16, the dividend payout ratio was reduced to 37% however, as group earnings softened due to poorer property demand. Dividend yield was only 1.5%.

Despite being a small scale property developer, TAHPS’s gross profit margin ranges from 48%-74%, one of the highest in the industry thanks to its relatively low land holding cost of RM3-7 per sq ft.

On its upcoming launches, the group plans to roll out two projects, Link Villas and BP Newtown Phase 3. Link Villas, is a 2- and 3-storey villa project, consisting of 140 units with a total GDV of RM100m (about RM720k-900k per unit). Depending on market conditions and residential development in Bukit Puchong, management plans to roll out a commercial shoplot project known as BP Newtown Phase 3 with a built-up area starting from 5,243 sq ft.

Launching of the villa project is expected by year-end. To enhance the value of the entire Bukit Puchong area, management is currently revamping the master development plan of Bandar Bukit Puchong and is scheduled for unveiling by year-end.

Risks to the stock include; share trading liquidity, with only an estimated 21% free float in the market; timing of monetisation of the full value of its landbank and any delay in the rolling out of the new master plan for Bandar Bukit Puchong.


Lower gas price hike positive surprise for glove players, says MIDF Research

PETALING JAYA: MIDF Research deems the reduction in the hike of natural gas tariff a positive surprise for glove producers as the quantum of increase is less than 1%.

This, the research house said, will assist in lowering gloves production costs and offsetting some of the impact of volatility coming from raw materials price and currency movements.

Owing to the rebate from the GCPT mechanism, the increase in the average effective gas tariff is now reduced to 0.57% to RM26.46/MMBtu for July-December period against RM26.31/MMBtu for January-June.

MIDF Research said most of the major glove players fall within the category F and L, where according to calculation will experience on average less than 1% increment in effective gas tariff from the previous tariff.

On average, natural gas constitutes of about 10% to 12% of the total glove production costs for glove producers under MIDF coverage.

“Hence, our preliminary calculation shows that all four glove producers under our coverage will have negligible impact on earnings of about