Tuesday, July 18th, 2017
PETALING JAYA: Bank Negara Malaysia (BNM) yesterday reiterated that access to financing is not the primary issue in affordable housing with a stable housing loan approval rate of 74% and about RM40 billion housing loans approved in the first five months of the year.
The central bank was responding to calls by some quarters to review housing loan criteria for potential buyers of affordable houses.
“The comments made by some parties had caused confusion and were not based on facts and accurate information. If the issue of affordable housing is to be resolved, all parties must be clear on the root cause of the matter and honestly strive to help those affected by it,” it said in a statement.
BNM noted that the RM40 billion of housing loans approved were for more than 152,000 borrowers in the first five months of 2017, of which three quarters were first-time house buyers.
The central bank said banks have introduced more flexible financing solutions to improve affordability, such as that offered for 1Malaysia People’s Housing (PR1MA) homes.
Outstanding housing loans have continued to outpace overall loan growth, increasing by 8.6% year-on-year to RM493 billion as at end-May 2017, according to BNM.
The central bank said based on engagements with banking institutions, housing loans rejected by banking institutions mostly involved borrowers with high levels of pre-existing debt obligations that would expose them to severe financial risk if further debt is extended.
“For such borrowers, the risk of foreclosure is significantly higher and they are much more likely to fall into financial hardship in the event of income shocks or large medical expenses.”
The central bank is of the view that there is a need to address the shortage of affordable houses and the high house prices relative to income.
“Housing affordability has not improved significantly where average national house prices remained at 4.4 times of median income (affordable range is 3.0 and below), with lower affordability recorded for some major states and urban cities.”
Given that, BNM is urging the housing developers, authorities and relevant stakeholders to intensify efforts to reduce costs and accelerate supply.
Based on National Property Information Centre’s data, less than 30% of new housing launches in 2015-2016 were for houses priced less than RM250,000, compared with 70% during the 2008-2009 period.
BNM explained that the responsible financing guidelines are in place to protect the interests of borrowers by ensuring that those who borrow have the capacity to honour their financial obligation.
“Financial institutions will offer financing to all eligible borrowers and only reject loan applicants who are clearly over-extended in terms of the ability to take on more debt and have adverse credit repayment histories. It is worth reminding that banking institutions’ core business is to provide financing.”
KUALA LUMPUR: Ekovest Bhd will be developing 60 acres of land within the KL River City project launched yesterday, with a total gross development value (GDV) of RM16.5 billion.
The entire KL River City, which will see the rehabilitation and transformation of a 2.2km stretch of Sungai Gombak, comprises 320 acres of potential development area, with an estimated GDV of RM50 billion.
Ekovest, for starters, will be rolling out mixed development projects with a combined GDV of RM6.5 billion, namely EkoTitiwangsa, Eko Quay, EkoRiverCentre, EkoAvenue and EkoGateway, and a flood attenuation and mitigation system known as Great.
The system, which is to be constructed along Sungai Gombak, will entail a development cost of RM950 million for a period of 2½ years.
“This system will also provide an improved flood mitigation system in and around Kuala Lumpur City Centre,” Ekovest managing director Datuk Seri Lim Keng Cheng told reporters after the launch ceremony yesterday.
This will be followed by future developments with a GDV of about RM10 billion.
Lim said while 30 acres of the developmental land is from the group’s existing landbank, the remaining 30 acres comes from the government as part of a land swap.
About 20-30% of the projects will be financed with internally generated funds. “The balance we will either go for a bank loan or we welcome strategic partners who want to come in,” Lim said.
The group will seek advice on whether to opt for a private placement to raise funds.
Ekovest, which is involved in civil engineering and building works, has an order book of about RM12.5 billion which includes the Setiawangsa-Pantai Expressway, formerly known as DUKE 3. In addition, it has tendered for projects worth more than RM10 billion.
Lim said he is positive on the prospects of the property market, which he expects to rebound.
Ekovest shares gained 12 sen to RM1.17 with 71.92 million units traded yesterday. It was the third most active counter.
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PETALING JAYA: Matang Bhd has resubmitted its bid to buy two parcels of land measuring 4219.79 acres in Raub, Pahang, after it failed to acquire the lots two months ago.
The indicative purchase price is RM180 million, which is subject to adjustments based on the outcome of the due diligence and an adjustment mechanism to the purchase price to be agreed upon in the sale and purchase agreement (SPA).
Recall that Matang made its tender for the land in April at an undisclosed sum. In May, the group announced that its bid had been unsuccessful and its deposit had been refunded. It is not known if the pricing now is the same as that of the initial bid.
In a filing with the stock exchange yesterday, Matang said it had issued a letter of intent to Raub Mining & Development Co Sdn Bhd (RMDC) and Raub Oil Mill Sdn Bhd (ROM) setting out its intention through its wholly owned subsidiary Matang Holdings Bhd or its nominees for the acquisition again.
The acquisition includes a 60-tonne/hour palm oil mill as well as buildings, quarters, plant and machinery, equipment, vehicles and stocks of the estate and mill.
Upon the acceptance of the letter of intent by RMDC and ROM, Matang said, the parties will begin the process of due diligence and negotiations in good faith to finalise and agree on the SPA and other related documentation for the purchase of the assets.
Matang has said its acquisition is in line with the group’s plan to expand its oil palm operations, which is expected to contribute positively to its future revenue and profit.
Matang shares were unchanged at 12 sen yesterday on some 8.68 million units done, giving the company a market capitalisation of RM217.2 million.
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KUALA LUMPUR: Six new advisers have been included in Bursa Malaysia Bhd’s list for the Leading Entrepreneur Accelerator Platform (LEAP) Market, which caters to small and medium enterprises (SMEs).
The stock market regulator said in a statement yesterday that it has approved the inclusion of Crowe Horwath Advisory Sdn Bhd, DWA Advisory Sdn Bhd, MainStreet Advisers Sdn Bhd, Strategic Capital Advisory Sdn Bhd, WYNCorp Advisory Sdn Bhd and ZJ Advisory Sdn Bhd to the existing list of 14 advisers under its Register of Advisers.
“The Advisers will play a critical role in working with interested SMEs to determine their suitability for listing on the LEAP Market and thereafter to guide them on their post-listing obligations,” said CEO of Bursa Malaysia, Datuk Seri Tajuddin Atan.
Advisers are responsible for undertaking due diligence and performing reasonable queries on potential applicants to assess their suitability for listing.
The adviser also has to prepare listing documents and guide the company to comply with post listing requirements.
Bursa said the expansion of the advisers list to beyond existing investment banks and brokers is part of the new market structure of the LEAP Market, which aims to expand the reach of services available to SMEs seeking to list on the new LEAP Market.
The LEAP Market complements both the Main Market and ACE Market by addressing the funding gap faced by the SMEs. It also enhances the existing SME funding ecosystem and address the over-dependency of these SMEs on financial institutions by providing them access to the capital market.
PETALING JAYA: AmInvestment Bank has raised its FY18-19F net profit forecast for Eonmetall Group by 13% and 28% respectively based on the company’s strong earnings growth.
AmInvestment Bank maintained its “buy” call on Eonmetall with a higher fair value of 97 sen from 78 sen previously. This is a 30% premium to its closing price of 74.5 sen yesterday. Some 441,400 shares changed hands.
“We like Eonmetall for the growing acceptance by palm oil millers in Malaysia and Indonesia for its oil extraction plants. It enjoys good margins for these oil extraction plants in the absence of competition, coupled with the in-sourcing of inputs (steel products and metalwork machinery) used in the fabrication of these plants.
“Generally, steel products, metalwork machinery and oil extraction plants each contribute about a third to the group’s earnings,” it said in a report yesterday.
The net profit forecast was raised to reflect the revenue recognition from the solvent extraction plant (SEP); product and capacity expansion; and diversification and overseas expansion.
Eonmetall offers the sale of SEP to palm oil mills via outright sales and build-operate-transfer (BOT) or joint venture (JV) basis, and is currently in talks with a public listed company to build several palm-pressed fibre oil extraction (PFOE) plants on a BOT basis.
The arrangement for the PFOE plants are expected to be finalised in 2H’17. Eonmetall is also making inroads into Indonesia, offering its SEP to the palm oil mills on either a BOT or JV basis.
AmInvestment Bank noted the increase in Eonmetall’s production capacity for manufacturing of downstream steel products by 100% to 30,000 tonnes per annum, and machinery and equipment (M&E) by 60% to 80 units per annum.
The downstream products include hypermarket racks, new boltless, racking with galvanised materials, furniture racks and livestock (broiler/breeder), while the M&E product is deformed bar.
In terms of expansion, the company plans to expand its business overseas via a JV for steel processing plant in the UAE (2HFY17) to cater to the demand of downstream steel products in the Middle East and North Africa (MENA) region.
It is also planning a JV for steel racking manufacturing plant in the UAE (2HFY17) and Bangladesh (1HFY18), to cater to the demand in MENA and South Asia region.
Eonmetall’s business is divided into three core divisions namely steel and trading, M&E and engineering, procurement, construction and commissioning (EPCC).
The steel and trading division produces steel products such as cold-rolled coils, galvanised coils, slotted angles and steel racking system. This division has been the core contributor to the company’s top line, accounting for about 75% over the past five years.
The M&E division products metalwork machinery such as cold rolling mills, metal forming machines and continuous galvanising lines while the third division provides EPCC works on solvent oil extraction plants.
PETALING JAYA: Prestariang Bhd’s unit Prestariang Skin Sdn Bhd (PSKIN) has entered into a 15-year concession agreement (CA) with the government via the Home Affairs Ministry, for the implementation of the National Immigration Control System (Sistem Kawalan Imigresen Nasional or SKIN).
In a filing with Bursa Malaysia yesterday, Prestariang said PSKIN has been granted the right and authority by the government to undertake the planning, design, financing, development, customisation, supply, delivery, installation, configuration, integration, interfacing, testing and commissioning of SKIN as well as to carry out maintenance services.
As announced by Prestariang in November last year, the system will be implemented by way of a public private partnership through the build, operate, maintain and transfer method.
Payment to Prestariang will commence upon commissioning of SKIN Solutions from year four to year 15 during the maintenance services period. As previously announced, the average annual payment is RM294.7 million.
The development works for the total solution are expected to be completed within 36 months from the development commencement date and Prestariang will fund the development cost via a combination of internally generated funds, borrowings and/or other fund raising exercise.
The CA is conditional upon PSKIN having obtained a written notice from the government confirming that it has fulfilled the conditions precedent within six months from the date of execution of the CA.
Trading in Prestariang’s shares was suspended yesterday pending the material announcement.
PETALING JAYA: Affin Hwang Capital has cut its earnings forecasts for AirAsia X Bhd and downgraded its call to “sell” with a lower target price of 27 sen from 57 sen previously.
In a research report yesterday, it said that it is cautious on AirAsia X due to its disappointing first quarter (Q1) results and cut its earnings forecasts by 32%-66% in FY17-19E on the back of higher jet fuel prices, heightened competition, higher operating expenses and weaker ringgit.
“Despite healthy forward booking trends and double-digit ASK (available seat kilometres) growth this year, we remain cautious on earnings outlook amid weaker currency, higher fuel prices, stiffer competition and increasing operation costs,” it said.
According to data from AirAsia X, forward traffic remains strong, signifying healthy travel demand for the year. Despite recording lower average base fare in Q1 (4% decline year-on-year), the company is expecting higher average base fare between June and August.
It is also expecting a higher load factor this year, compared with 79% in FY16. Affin Hwang Capital expects the company to achieve a load factor of 82% for FY17, supported by its routes with high load factor such as KL-Osaka-Honolulu.
The company aims to grow its ancillary revenue by 30% to RM835.5 million this year from RM642.7 million last year, driven by the various complementary services introduced such as sales of duty-free items, in-flight entertainment and twin seats. It also plans to launch WiFi on board by year-end.
In terms of operating expenses, AirAsia X said the recent increase in wages is crucial to retain talent especially amid a shortage of pilots, and revised the average basic salary for cabin crew from RM1,000 to RM1,200 in Q1.
Overall staff costs increased 40.3% year-on-year to RM105 million in Q1 from RM74.8 million a year ago. Affin Hwang Capital forecasts a 13.6% increase in staff cost this year to RM419.9 million from RM369.6 million a year ago.
Average fuel price was slightly higher at US$66/bbl in Q1’17 compared with US$64/bbl in Q4’16. It has imputed an average fuel price of US$65/bbl this year.
AirAsia X’s Q1 earnings were also affected by the weaker ringgit, as 68% of its operating expenses, including aircraft fuel and aircraft operating lease expenses, is denominated in US dollar. Part of the company’s borrowings is also denominated in US dollar.
“The question remains whether higher ASK growth is enough to offset rising operational expenses. We are of view that earnings will be significantly lower this year due to higher operating expenses. As such, we have changed our assumptions,” said Affin Hwang Capital.
The research house revised its earnings forecasts downwards by 65.6%, 56.4% and 32.5% for 2017E, 2018E and 2019E respectively, underpinned by limited growth in ASK, higher cost and limited upside in revenue per ASK.
“We are expecting ASK to grow by 15% this year and 7% next year from higher utilisation rate of current aircraft. As the two new aircraft are only arriving end of next year, we expect lower ASK growth next year.
“We also think AirAsia X faces pricing pressure as Malaysia Airlines Bhd is set to increase new routes next year. At the same time, AirAsia X will face several headwinds like weak ringgit and higher jet fuel prices,” it said.