Wednesday, July 26th, 2017

 

Wall Street opens at record highs on strong earnings

WASHINGTON July 26 — US stock indexes opened at record highs today following a set of strong quarterly earnings, led by Boeing and AT&T, while investors awaited the outcome of a two-day Federal Reserve meeting. Boeing rose 7 per cent, boosting…


Petronas scraps C$36b Canada LNG project

CALGARY/KUALA LUMPUR: Malaysia’s Petroliam Nasional Bhd (Petronas) scrapped a proposed C$36 billion (RM123 billion) liquefied natural gas (LNG) project in western Canada due to weak prices, in a blow to both its global ambitions and Canada’s hopes of becoming a major LNG player.

Pacific NorthWest LNG in British Columbia was meant to produce 12 megatonnes per year and spur further development of Canada’s largest shale play, but industry observers said the move was widely expected given years of delay.

“It is a good decision not to invest in this project which is expensive and risky,” said Subbu Bettadapura, senior director, Asia Pacific, Frost and Sullivan. “Only question is why they took so long to come to this decision.”

Analysts had been sceptical about the project’s prospects given current low gas prices and constraints facing state-run Petronas, which has been cutting costs to deal with lower profits and cash flow.

The decision is the latest setback for Canada’s energy industry, already bruised by international oil firms selling off around US$23 billion in Canadian energy assets this year alone.

“We have a window of opportunity to develop B.C.’s LNG industry, but the next several years will be critical,” said Gillian Robinson, spokeswoman for the BC LNG Alliance. “We risk losing thousands of jobs and billions of dollars in benefits if B.C. does not have diversified access to markets.”

Pacific NorthWest LNG received approval from the Canadian government last year, but Petronas delayed its final investment decision on what would have been its biggest foreign investment.

The C$36 billion price tag included around C$11 billion for the export terminal, C$6.5 billion in pipelines, the C$5.5 billion Petronas paid for Progress Energy and its natural gas assets and around C$2 billion a year expected to be spent on producing natural gas.

TransCanada Corp, which was contracted to build the pipeline connecting gas wells to the LNG terminal, said it will be reimbursed for costs associated with the project. It had spent C$500 million as of April, spokesman Shawn Howard said.

Petronas had no immediate comment when asked about TransCanada’s statement.

Japan Petroleum Exploration Co (Japex) said it would take a loss of about C$102 million due to the scrapping of the project.

Petronas had planned to produce its own gas to supply Pacific NorthWest LNG, rather than buying it from other producers, but no LNG demand means firms like Painted Pony Petroleum and Seven Generations Energy will continue to see low gas prices, analysts said.

“The demise of the LNG industry in Western Canada means that Western Canadian gas will largely remain captive to the oversupplied North American market,” BMO Capital Markets analyst Randy Ollenberger said in a note.

Of more than a dozen projects proposed for British Columbia, only the C$1.6 billion privately held Woodfibre project has so far been given the green light by its developers.

Last July Royal Dutch Shell and partners pushed back a final investment decision on their proposed LNG Canada project, citing global industry challenges.

Michelle Mungall, British Columbia’s energy minister, said she will be calling other LNG companies to reassure them her government is ready to work with them, but B.C. Green Party leader Andrew Weaver released a statement saying the future does not lie in “chasing the fossil fuel economy.”

The ruling New Democratic Party, which formally took power this month, is backed by the environmentalist Green Party. Its rise has fuelled uncertainty about energy development in the province.

A spokesman for Canada’s Natural Resources Minister Jim Carr said Petronas’ move was a business decision.

Pacific NorthWest LNG board chairman Datuk Anuar Taib said in a statement that Petronas and partners would continue to develop natural gas assets in Canada.

“We are disappointed that the extremely challenging environment brought about by the prolonged depressed prices and shifts in the energy industry have led us to this decision,” Anuar said.

However, Petronas also appears to have shifted its focus to the US$27 billion Refinery and Petrochemical Integrated Development in Johor, that got a US$7 billion investment boost from Saudi oil giant Aramco in February. – Reuters


Brace for possible electricity surcharge, consumers told

KUALA LUMPUR: The Energy Commission, Malaysia’s regulatory body for the electricity supply industry, said the government is concerned about tariff increases but consumers need to be mindful that electricity rebates will not continue forever and they must brace for possible imposition of a surcharge.

Acting CEO and senior director, electricity industry development and market regulation, Ir Azhar Omar said the helping hand will not last long and Malaysians need to be prepared for the inevitable and use electricity prudently.

“We should be imposing surcharges but out of concern for the well-being of the people, the government is still using reserves to absorb the increase in costs because funds available may not be able to cater to future needs. People need to be prepared,” he told Bernama Radio recently.

The interview on ‘Fixed Electricity Tariff’ was broadcast at 6.15pm on July 11 over FM Radio 93.9 MHz and via Facebook live social media platform.

Azhar said it is not because the government could not absorb the cost increase but it prefers to use the funds for the country’s economic development, adding that the country needs a lot of financial resources to build hospitals, roads and other facilities.

“The role of the commission is to ensure reliable electricity supply at reasonable prices by factoring in the costs of providing electricity and reasonable returns to the utility company, fuel supply costs and others,” he said.

He said the commission does not want the country’s utility company, Tenaga Nasional Bhd (TNB), to profit excessively and is currently conducting an audit on the company to ensure that costs incurred during the first regulatory period are reasonable and efficient, as required.

“The first regulatory period will end on Dec 31, 2017. From Jan 1, 2018, we will begin the second revision for the second regulatory period,” said Azhar.

During the first-generation power purchase agreement, most of the independent power producers (IPPs) made slightly higher profits, he said.

On that basis, the government has negotiated the rate which was set earlier, and upon negotiations, many IPPs agreed to reduce prices.

“We have collected about RM1.8 billion. All the while, we use this fund to provide rebates and so on.

“Come December 2017, we would still have some balance (from RM1.8 billion), but from January onwards, I have to look at the revision, whether it’s an increase or otherwise,” said Azhar, adding the commission has already used RM1.3 billion out of the amount it collected.

Another initiative that adapted to the changing global backdrop would be the Imbalance Cost Pass-Through (ICPT) rebate, he said.

“The ICPT rebate policy is to offset costs that are beyond the control of the utility company.

“It is closely related to the world’s fuel costs. If it cannot be passed on in terms of rebates or surcharges, these costs will have to be borne by the government,” said Azhar.

For TNB to provide good service, he said, it requires an income that could cover its costs.

“If the costs continue to escalate and income is still inadequate, eventually TNB will wind up and if the utility company closes down, service will decline and the government will be forced to bail it out,” he said. – Bernama


Sunsuria, Genlin to jointly develop KL site

PETALING JAYA: Sunsuria Bhd and Genlin Development Sdn Bhd are jointly acquiring and developing two pieces of freehold land measuring 2.23 acres in Sentul, Kuala Lumpur, for a mixed project comprising serviced apartments and retail units.

In a filing with Bursa Malaysia yesterday, Sunsuria said its 99.99%-owned subsidiary Sunsuria Gateway Sdn Bhd has entered into a joint venture (JV) with Genlin via a shareholders’ agreement (SHA) for the project.

Sunsuria executive chairman Datuk Ter Leong Yap said the land purchase reflects the group’s ambition to broaden its horizons as the company continues to seek out and pursue new development opportunities.

“We are enjoying tremendous success with our current projects in Sunsuria City and The Forum in Setia Alam, and they continue to be well received by our customers. We want to build on this success and take our best-in-class solutions to high-growth potential areas. This opportunity to expand our business to within the heart of Kuala Lumpur is just the first step and we expect new landbank opportunities in the near future,” he said in a statement yesterday.

Goodwill Signature Sdn Bhd, a wholly owned subsidiary of Sunsuria Gateway, has been identified as the JV vehicle to undertake the development of the land. Goodwill Signature will also acquire the land from Genlin for RM28 million cash.

Under the SHA, both Sunsuria Gateway and Genlin will respectively hold 70% and 30% shareholding equity in Goodwill Signature. Sunsuria Gateway expects to fully subscribe for the shares in Goodwill Signature in cash through internally generated funds.

Goodwill Signature will finance the land purchase via shareholders’ advances by the parties, based on the agreed proportions. Sunsuria Gateway’s share of the shareholders’ advances is RM19.6 million.

The subscription of shares in Goodwill Signature is expected to be completed by the fourth quarter of the financial year ending Sept 30, 2017 (FY17) while the proposed land acquisition is expected to be completed by the first quarter of FY18.

Astramina Advisory Sdn Bhd is the appointed financial advisor for Sunsuria Group in relation to the proposals.

Sunsuria’s shares fell 0.68% to close at RM1.46 yesterday with a total of 72,000 shares traded, giving it a market capitalisation of RM1.17 billion.


Melati Ehsan’s Q3 net profit down 93%

PETALING JAYA: Melati Ehsan Holdings Bhd’s net profit for the third quarter ended May 31, 2017 plunged 93.28% to RM514,000 from RM7.65 million a year ago, even as revenue more than doubled to RM32.24 million from RM13.26 million a year ago.

In a filing with Bursa Malaysia yesterday, the group said the lower profit was due to lower other income and higher administrative expenses. During the same quarter a year ago, other income was mainly derived from gain on disposal of a subsidiary.

The construction segment reported a higher pre-tax profit of RM4.05 million during the quarter compared with RM2.83 million a year ago while revenue was also higher at RM76.73 million compared with RM43.17 million a year ago.

The improved performance was mainly due to the People’s Housing Programme (PPR) project and the new road work in East Coast Economic Region (ECER) project.

However, the property development segment’s pre-tax loss widened to RM429,000 compared with RM246,000 a year ago while revenue was lower at RM176,000 compared with RM597,000 a year ago.

The decrease in revenue was due to sales recognised in the previous financial year, which were then cancelled and forfeited during the financial period under review.

The trading segment reported a higher pre-tax profit of RM322,000 compared with RM157,000 a year ago while revenue was higher at RM11.58 million compared with RM6.394 million a year ago.

The increase in sales and profit during the quarter was due to higher volume of building materials being traded and consumed by the group’s appointed sub-contractors for the construction division.

For the nine months ended May 31, 2017, net profit fell 91.03% to RM1.53 million from RM17.03 million a year ago while revenue rose 76.42% to RM88.49 million from RM50.16 million a year ago.

The group expects the ongoing construction works for the ECER and PPR projects to continue contributing positively to its revenue and profitability, despite a cautious economic outlook.

It said the government’s proactive spending and pump priming of the economy would drive domestic demand, thereby supporting growth, which would result in business and construction activities that would benefit the group.

“The outlook of the local construction sector is good and will benefit the industry players. Ongoing projects and those scheduled to commence in the near term such as road works and affordable housing schemes will ensure the sector continues to grow in the next few years.”

The group’s share price rose 0.59% to close at 84.5 sen yesterday with 30,000 shares traded, giving it a market capitalisation of RM100.87 million.


Islamic banks pledge continued financing for affordable housing

KUALA LUMPUR: The Association of Islamic Banking Institutions Malaysia (AIBIM) has reaffirmed that Islamic banking institutions will continue to provide home financing facilities to eligible customers through various financing schemes offered by its members, in response to recent media reports on calls to relax the criteria for affordable home financing.

AIBIM president Datuk Mohd Redza Shah Abdul Wahid said Islamic banking institutions have been providing financing to ensure customers have continuous access to home financing.

“As at May 2017, a total of RM14.25 billion has been approved by the Islamic banks for the purchase of residential properties. This represented 37.3% of the total Islamic financing amounted to RM38.2 billion,” said Mohd Redza.

Islamic banking institutions offer various types of home financing products to cater to different needs of specific market segments, such as government servants, nurses and members of the armed forces; rural and urban lower income groups; and young urban adults. The products are offered based on various syariah contracts, namely Tawarruq, Musyarakah Mutanaqisah and Murabahah.

Mohd Redza said the responsible financing guidelines are in place to protect the interests of home purchasers who are extended the financing by ensuring that they have the capacity to honour their financial obligations. This is to ensure that these customers do not fall into financial hardship in the future.

AIBIM strongly advises all potential house buyers to approach the banks for any financing advisory assistance.

Last week, the Association of Banks Malaysia (ABM) said 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.

ABM reiterated that its member banks, which comprise the commercial banks operating in Malaysia, have been and will continue to provide home loans to eligible borrowers. – Bernama


AirAsia: Listing of Indonesian, Philippine units by Q1 2018

KUALA LUMPUR: AirAsia Bhd’s plans to list its Indonesian and Philippine subsidiaries are in progress and they are expected to make their debuts on the respective countries’ stock exchange latest by the first quarter of next year.

AirAsia Group CEO Tan Sri Tony Fernandes said AirAsia Indonesia’s progress had been a little more ahead than its Philippine counterpart but both are progressing well and en route for their debuts on the equity markets.

“It’s going to be this year or the first quarter of next year … both of these companies are going to be very valuable going forward,” he told reporters on the sidelines of Invest Malaysia 2017 yesterday.

On the disposal of its leasing business, he said the airline is currently working on the details of the deal but he is optimistic that it could be done this year.

“We basically have maintained our position that we are going to sell it. We are going to make sure that we have the best price for AirAsia,” he said.

Meanwhile, Fernandes said the airline is currently in its best position regarding oil price due to the stability of the commodity. “We don’t care what the price is as long as it is stable, then it is easy to manage the business. This is one of the areas that always concern the business people.” – Bernama


AirAsia Indonesia, Philippines listings by Q1

KUALA LUMPUR: AirAsia Bhd’s plans to list its Indonesian and Philippine subsidiaries are in progress and they are expected to make their debuts on the respective countries’ stock exchange latest by the first quarter of next year.

AirAsia Group CEO Tan Sri Tony Fernandes said AirAsia Indonesia’s progress had been a little more ahead than its Philippine counterpart but both are progressing well and en route for their debuts on the equity markets.

“It’s going to be this year or the first quarter of next year … both of these companies are going to be very valuable going forward,” he told reporters on the sidelines of Invest Malaysia 2017 yesterday.

On the disposal of its leasing business, he said the airline is currently working on the details of the deal but he is optimistic that it could be done this year.

“We basically have maintained our position that we are going to sell it. We are going to make sure that we have the best price for AirAsia,” he said.

Meanwhile, Fernandes said the airline is currently in its best position regarding oil price due to the stability of the commodity. “We don’t care what the price is as long as it is stable, then it is easy to manage the business. This is one of the areas that always concern the business people.” – Bernama


LBS Bina buying land in Sri Kembangan for RM600m project

PETALING JAYA: LBS Bina Group Bhd is acquiring 7.98 acres of land Seri Kembangan from Stratmont Development Sdn Bhd for RM63 million or RM181.31 per square foot, with plans to develop a RM600 million mixed project.

In a filing with Bursa Malaysia yesterday, the group said its indirect wholly-owned subsidiary Utuh Aspirasi Sdn Bhd had entered into a sale and purchase agreement (SPA) with Stratmont Development for the acquisition of the vacant leasehold land.

“The proposed acquisition is in line with the group’s expansion plan. It presents an opportunity for the company to enhance the overall existing project plan, while enlarging the group’s land banks in the Klang Valley, which is one of the areas that has strong growth potential in Malaysia,” it said.

Based on preliminary plans, the mixed development will comprise four towers of service apartments offering 1,323 units with an estimated gross development value of RM600 million.

The residential units would be priced within the “affordable” range to cater to first time home buyers, working professionals and young families.

The group is in the initial stage of development planning for the project which is estimated to take eight years to complete. It plans to finance the development cost with internally generated funds and/or bank borrowings.

The proposed development is expected to commence next year, enabling the group to make fast turnaround on the land and contribute positively to its future revenue stream and profitability.

The land is located in Kinrara Uptown, LP7 in a mixed township development known as Taman Lestari Perdana. The township is accessible via various highways including MEX Highway and South Klang Valley Expressway.

A few proposed highways and infrastructure developments are expected to enhance the connectivity between Seri Kembangan and other areas. These include the proposed Serdang-Kinrara-Putrajaya Expressway, Kinrara-Damansara Expressway and the Seri Kembangan interchange at MEX Highway.

The group’s share price closed unchanged yesterday at RM1.97 with a total of 225,900 shares traded, giving it a market capitalisation of RM1.33 billion.


LBS Bina buying land for project

PETALING JAYA: LBS Bina Group Bhd is acquiring 7.98 acres of land Seri Kembangan from Stratmont Development Sdn Bhd for RM63 million or RM181.31 per square foot, with plans to develop a RM600 million mixed project.

In a filing with Bursa Malaysia yesterday, the group said its indirect wholly-owned subsidiary Utuh Aspirasi Sdn Bhd had entered into a sale and purchase agreement (SPA) with Stratmont Development for the acquisition of the vacant leasehold land.

“The proposed acquisition is in line with the group’s expansion plan. It presents an opportunity for the company to enhance the overall existing project plan, while enlarging the group’s land banks in the Klang Valley, which is one of the areas that has strong growth potential in Malaysia,” it said.

Based on preliminary plans, the mixed development will comprise four towers of service apartments offering 1,323 units with an estimated gross development value of RM600 million.

The residential units would be priced within the “affordable” range to cater to first time home buyers, working professionals and young families.

The group is in the initial stage of development planning for the project which is estimated to take eight years to complete. It plans to finance the development cost with internally generated funds and/or bank borrowings.

The proposed development is expected to commence next year, enabling the group to make fast turnaround on the land and contribute positively to its future revenue stream and profitability.

The land is located in Kinrara Uptown, LP7 in a mixed township development known as Taman Lestari Perdana. The township is accessible via various highways including MEX Highway and South Klang Valley Expressway.

A few proposed highways and infrastructure developments are expected to enhance the connectivity between Seri Kembangan and other areas. These include the proposed Serdang-Kinrara-Putrajaya Expressway, Kinrara-Damansara Expressway and the Seri Kembangan interchange at MEX Highway.

The group’s share price closed unchanged yesterday at RM1.97 with a total of 225,900 shares traded, giving it a market capitalisation of RM1.33 billion.