Sunday, July 23rd, 2017

 

Tread carefully on proposal to exempt small, medium firms from audits: SME Corp CEO

PETALING JAYA: The proposal to apply the audit exemption provision in the Companies Act 2016 on small and medium companies has to be treated cautiously as there are a few possible drawbacks to SMEs, according to SME Corp Malaysia.

Its CEO Datuk Dr Hafsah Hashim (pix) said SMEs may not be able to maintain proper accounting records, hence there is a need for an annual audit so that SMEs can have access to an independent finance professional.

“Not many SMEs have in-house accounting professionals, so the mandatory annual audit can assist such companies,” she told SunBiz in an email interview.

The compulsory annual audit, which may be exempted in the Act, will also deter fraud and protect the directors of such SMEs so that there is less risk of sanctions for failure to maintain proper accounting records.

“If the annual audit is removed, ad-hoc audits may still be required for funding or financing purposes. Such ad-hoc audits may be expensive,” Hafsah added.

She said doing away with annual audits for small companies would also have an impact on the submission of tax returns since the submission process requires the audited accounts. When banks extend financing or loans, the banks would also want to have a copy of the audited accounts.

In addition, there will be an impact on the accounting profession, as many accountants will see a drastic reduction in their audit revenue. Audits of small companies provide a training ground for fresh accountants. About 78% of the accountants who responded to a survey stated that they do not have any strategy to cope with any possible audit exemption.

On the bright side, Hafsah said audit exemption for dormant companies and small private companies will allow start-ups and SMEs to enjoy cost savings as they will no longer need to appoint auditors to audit their accounts.

“Overall, the amendments of the Companies Act 2016 are positive and supportive of businesses particularly SMEs in the country. The Act will lower costs and improve ease of doing business for SMEs by introducing a single electronic template for incorporation of companies, allowing a single shareholder and director, waiver of AGM and exemption of audits for dormant and small companies.”

SME Corp and the Malaysian Institute of Accountants have declined to comment further on the progress of the proposed audit exemption in the Act, as it is under the purview of the Companies Commission of Malaysia (SSM).

An SSM spokesperson said it has looked at the feedback on the proposed audit exemption for SMEs. “SSM is preparing a Practice Note on the issue and will be releasing it for the public’s information,” the spokesperson told SunBiz.

According to the SSM’s website, under Section 255 (3) of the Companies Act 2016, the registrar may exempt certain classes of companies from compliance with requirements on financial statements. The categories for such exemptions are yet to be released.

SSM said, generally, the law requires every company to appoint an auditor for each financial year. However, under Section 267(2) of the Companies Act 2016, the registrar is empowered to exempt certain categories of private companies from having to appoint an auditor for a financial year.

“However, the registrar has yet to invoke this provision and, therefore, the audit requirement is still mandatory for all companies,” SSM said in its Frequently Asked Questions section.


Banks assure eligible borrowers of access to housing loans

PETALING JAYA: More than RM25.7 billion in loans have been approved by commercial banks in Malaysia from January to May this year, with loans in excess of RM24.6 billion disbursed for the purchase of residential property, said The Association of Banks Malaysia (ABM).

“ABM would like to reiterate that its member banks, which comprise the commercial banks operating in Malaysia, have been and will continue to provide home loans to eligible borrowers.

“Commercial banks are in the business of lending and financing will be extended to viable applicants,” it said in response to calls to relax the lending criteria for potential buyers of affordable housing.

This follows Bank Negara Malaysia’s (BNM) assurance last week that access to financing is not the primary issue in affordable housing, with about RM40 billion housing loans approved in the first five months of the year and a stable approval rate of 74%.

ABM said housing loans form the single largest component of commercial banks’ total loan portfolio, representing 34.4% of the total outstanding loans as at end May 2017.

According to ABM, the main reasons for rejection of loan applications are high debt service ratio (DSR), adverse credit history, insufficient income, yet to be established repayment capacity and weak documentation or banking records.

A high DSR means that the applicant’s existing level of borrowings and repayment is very high compared with his income. Banks use the DSR to see how much of the applicant’s income is being utilised to pay off debts and if he can reasonably add on a new loan with respect to his earnings.

Adverse credit history may refer to the applicant’s poor repayment track record for existing credit facilities including credit cards, hire purchase or other borrowings.

As for insufficient income, some applicants may not have existing borrowings but their income is insufficient to support the amount of loans applied while some applicants may not have a steady income stream or their income cannot be verified.

In some rejected cases, the applicants’ ability to generate enough funds to make debt repayments on intermediate and long-term loans cannot be proven due to reasons such as the applicant having just entered the workforce or set-up a new business while some fail to produce sufficient evidence to support the amount or consistency of income or bank statements to support the application.

ABM said the rejection of housing loan applications cuts across all income ranges but trends higher among the lower to middle income group due to smaller disposable income relative to the new and existing monthly commitments.

“Generally, the types of properties which this category of applicants looks for are terrace houses and apartments. Apartments are especially popular in the key urban areas in view of the relatively lower pricing. It is therefore crucial for all borrowers to review their own affordability in line with their financial circumstances,” it said.

While banks look to grow their businesses through the growth of their loan portfolios, they are also cognisant that loans extended must be viable to protect the interest of their depositors.

Banks are also guided by regulatory guidelines as well as internal credit policies to ensure that borrowers are not unduly burdened by their financial obligations.


No-show inflation poses conundrum for Fed

WASHINGTON: After tightening monetary policy last month for the second time this year, the US central bank is expected to pause for the next few months to monitor developments.

The Federal Reserve (Fed) will leave the benchmark interest rate untouched when it meets tomorrow and Wednesday, partly because it has yet to begin to wind down its huge stock of bond holdings, and will not make another move on interest rates until that process is under way.

But the Fed also faces a growing conundrum as it waits for signs of long-absent inflation to finally appear.

In the normal course of events, as an economy recovers and hiring increases, that brings with it rising wages and inflation, which in turn prompts the central bank to increase lending rates to keep prices in check while still allowing economic growth to continue.

But despite nearly seven years of uninterrupted job creation and a very low unemployment rate of 4.4%, inflationary pressures and wage gains show little sign of life.

The central bank is running out of explanations.

While the Fed is expected to implement one more rate increase late this year, there are divisions among policymakers on the timing.

Fed chair Janet Yellen told Congress this month that the central bank was not blind to the data showing inflation stubbornly below the central bank’s 2% target. “We’re watching it very closely and stand ready to adjust our policy if it appears that the inflation undershoot will be persistent,” she said.

“We're watching it very closely and stand ready to adjust our policy if it appears that the inflation undershoot will be persistent,” she said, but it is too soon to say flat prices are due to more than transitory factors. – AFP


701Search to focus on promoting ‘ImSold’

KUALA LUMPUR: The operator of ImSold, a mobile app that allows users to buy and sell preloved items, is focusing on promoting the brand and growing its user base, and has no plans to monetise it yet.

ImSold is operated by tech firm 701Search Pte Ltd, which also owns online marketplace Mudah.my and its counterpart in Vietnam (chotot.vn) and Thailand (kaidee.com). 701Search’s parent is Telenor Group, which owns Digi.

To date, there have been over 1 million downloads of the app since it was launched in Malaysia in 2016. Malaysia is the first country where it was launched and over RM10 million worth of items have been sold via the app.

Its director Haywood Ho said it wants to build its audience and brand, and wait until people are familiar with the app before monetising its services.

“We generate revenue when users find our product useful and are willing to pay for it. But we haven’t started on any plans yet. We’re concentrating on growing and getting people to try it out,” he told SunBiz in an interview recently.  

He describes ImSold as an easy way to sell and buy preloved items. ImSold’s target audience is young people aged 18-25, especially young women. Popular categories in the app includes fashion, electronics, home and living, babies and kids.

Besides having the same parent as Mudah, ImSold shares a similar concept, knowledge, history and office with Mudah, but remains a separate entity from its sister company.

“Mudah helps. It gives us some credibility. Mudah and ImSold do both buying and selling but it’s different people that we’re going after out there and the teams are separate. We think our audience needs different products that fit what they want and what they need.

“It’s like Lazada and Zalora. It’s complementary, it’s owned by the same owner but it’s different,” said the Singapore-based Ho.

Both Mudah and ImSold allow users to sell and buy preloved items. While Mudah sells big ticket items, including cars and properties to an older audience, ImSold is focusing on fashion due to its young demographics.

“They (young people) are not buying properties (yet) and we don’t want to concentrate on cars,” said the 35-year-old.

Recalling how the app was born, Ho explained that 701Search had previously wanted to leverage on its experience in selling and buying from Mudah and come out with a new and different product.

“We had the idea when we’re talking to people. We wanted to figure out what users want and we found out that students need to buy and sell things, but no one knew how to do it. We wanted to help solve this problem.

“We noticed that there’s a need for selling and buying smaller things … like clothes, fashion accessories, so we decided to launch something for that audience,” said Ho.

He declined to comment on its resemblance to Carousell, another similar app, but claimed that ImSold has a better experience for users.

“We’re doing a lot of things for the future. We’ve done quite well, even though Carousell is in Malaysia,” said Ho.

He said ImSold plans to provide value-added services in the future, such as delivery and payments.

“These would probably be part of our roadmap. We also need to figure out if people are interested. We’re still experimenting,” said Ho.  

Last month, ImSold was launched in Vietnam, which was deemed an attractive market due to its growing young population.

“We have experiences in Vietnam within the group and noticed that there is no player there for this product. It’s just launched, we want to see how it goes. We’re also probably looking at Southeast Asia. If it does well, we’ll go to other markets as well.”  

Ho said it has had some collaboration with Digi and needs to explore more collaboration with the telco, adding that the long-term plan for ImSold is to be the place that people go to buy and sell their lifestyle items.


Analysts maintain ‘neutral’ call on Maxis

PETALING JAYA: Analysts are maintaining “neutral” calls on Maxis Bhd as earnings are expected to be weak in the coming quarters due to lower data roaming revenue coupled with stiffer competition with the rolling out and usage of additional spectrums by its peers.

AmResearch said the expected lower data roaming revenue is in tandem with the termination of Maxis’ 3G radio access network arrangement with U Mobile in stages over an 18-month period ending on Dec 27, 2018.

The agreement was inked in October 2011 and was expected to last for 10 years.

PublicInvest Research, which has maintained a “neutral” call on Maxis with a price target of RM5.90, estimates the group’s FY18-19 earnings to drop by 3%-5% following termination of the network sharing alliance agreement with UMobile, despite registering a 17.6% increase in profit to RM574 million for the second quarter ended June 30, 2017. Its revenue was up by 3.3% to RM2.17 billion.

AmResearch is maintaining a “hold” call on Maxis with a target price of RM5.76. It expects stiffer competition going forward on the “backdrop of high rotational churn and price-focused competition” among telco players.

Similarly, PublicInvest sees competition stepping up in the form of product offerings and improvisation in services being rolled out by telco players.

The counter was up one sen to close at RM5.54 last Friday on some 5.89 million shares done, giving it a market capitalisation of RM43.19 billion.


PublicInvest Research positive on VSI’s rights share subscription

PETALING JAYA: PublicInvest Research is positive on VS Industry Bhd’s (VSI) plans to take up 43.5% of the rights shares to be issued by its Hong Kong-listed subsidiary V.S. International Group Limited (VSIG).

“We are positive on this development, with the group also having the opportunity to potentially increase its shareholding in the China-based operations, which are set to record stronger growth numbers ahead,” it said in a report last Friday.

It remained affirmed of VSI’s prospects and maintained its “outperform” call on the company, with an unchanged target price of RM2.36.

Last week, VSIG announced a rights issue on a one-for-four basis to raise between HK$105.8 million (RM58.1 million) and HK$114.5 million (RM62.8 million) for expansion in China operations.

VSI’s 43.5% stake in the company will see it forking out about RM25.2 million to subscribe for its entitled portion based on the subscription price of HK$0.23 (12.6 sen) per rights share.

“This will be of no issue given its huge RM301.2 million cash pile as at April 30, 2017, though it has indicated that it will be financed entirely via borrowings. VSIG is reportedly in discussions to secure multiple large contracts from new customers, hence this exercise in preparation for the potential likelihood,” said PublicInvest Research.

Besides VSI’s full subscription for its entitled portion, other key shareholders in VSIG namely Datuk Beh Kim Ling, Datin Gan Chu Cheng and Datuk Gan Sem Yam who collectively own 9.7% in VSIG have also undertaken to subscribe for their respective portions.

From the proceeds, HK$35 million will be used to repay short-term borrowings taken previously to fund construction of new warehouses and for working capital, HK$9 million will be used for the purchase of a new dual-lane Surface Mount Technology assembly line, HK$12 million to purchase new high-tonnage injection machines, HK$23 million to enhance automation and the balance for working capital.

VSI’s share price rose 4 sen or 1.95% to close at RM2.09 last Friday with a total of 7.44 million shares traded, giving it a market capitalisation of RM2.47 billion.


Public Investment Bank in Bursa’s Islamic POs list

KUALA LUMPUR: Bursa Malaysia Bhd has added Public Investment Bank Bhd (PIVB) to its Islamic Participating Organisations (Islamic POs) list, making it the 13th stockbroking house partnering with Bursa Malaysia-i.

Bursa Malaysia CEO Datuk Seri Tajuddin Atan said together it will provide a conducive marketplace for the syariah investing community and will continue to spur the growth and vibrancy of the Islamic capital market domestically and regionally.

PIVB CEO Eddie Fong said this offers clients options and flexibility to invest and trade freely in the equity market in compliance with syariah principles.

“Moving forward, PIVB will strive to broaden its range of Islamic services that it presently offers to create a comprehensive marketplace and continuously contribute to the Malaysian Islamic capital market,” Fong said.

Bursa Malaysia had on Sept 5, 2016 launched Bursa Malaysia-i, the world’s first end-to-end integrated syariah investing platform. The platform incorporates a full range of syariah-compliant exchange-related services including listing, trading, clearing, settlement and depository services, to underscore Bursa Malaysia’s leadership as the global marketplace for syariah listings and investments.

With the latest addition, there are 13 Islamic POs carrying out Islamic stockbroking services of which BIMB Securities Sdn Bhd is on a full-fledged basis and the remainder on a “window” basis.


Fernandes hopes to achieve AirAsia plan in two years

DAVAO: After establishing AirAsia Bhd on a strong footing in the Asian aviation market for the past 16 years, its Group Chief Executive Officer, Tan Sri Tony Fernandes plans to consolidate the low-cost carrier Southeast Asian units under one listed holding company. The One AirAsia seeks to bring together the company’s Southeast Asian units in Malaysia, Thailand, the Philippines and Indonesia, and […]


Disruptive technology: Changing the way businesses work

New forms of technology are changing the way businesses work as few, if any, sectors remain immune from the impact of advanced technology. The use of new technologies will reshape systems, operations and employment prospects as technology eliminates the need for manpower in repetitive jobs, dangerous tasks or even to heighten productivity. And with Sarawak […]


The week at a glance 23 July 2017

Sabah & Sarawak Malaysia, Indonesia may take EU plan to curb palm oil imports to WTO Malaysia and Indonesia plan to raise the prospect of European Union curbs on the imports of palm oil with the World Trade Organisation, both countries said in a joint statement. A resolution by the European Parliament in April called […]