Tuesday, August 15th, 2017


Wall Street opens flat as North Korea tensions fade

WASHINGTON, Aug 15 — US stocks opened flat today after North Korea’s leader delayed a decision on firing missiles towards Guam, pointing to receding tensions between the United States and North Korea. Pyongyang’s plans to fire missiles…

US retail sales surge in July on strong autos

WASHINGTON, Aug 15 — American consumers spent at a brisk pace in July, pushing US retail sales to their biggest increase in seven months, according to official figures released today. Auto sales helped drive the mid-summer upswing after…

Lotte gains on reports of bullish outlook

PETALING JAYA: Lotte Chemical Titan Holding Bhd’s shares rebounded as much as 11.7% today after research houses gave bullish view on the petrochemical unit’s outlook.

At market close, its shares were up by 42 sen or 8.9% to RM5.12 on some 26.94 million shares traded, giving it a market capitalisation of RM11.82 billion.

Lotte’s warrants are among the active stocks with gains between 12.5% and 80%, except for LCTITAN-CB and LCTITAN-CF, which fell 16.7% and 11% respectively.

JPMorgan Chase & Co initiated coverage on Lotte with an “overweight” recommendation and it is expected to reach RM7 within a year, while HSBC projects the stock to trade at RM7.60 in the next one year.

Maybank Investment Bank Research has also set a target price of RM7.85 for Lotte with a “buy” call.

Lotte was listed last month at an initial public offering (IPO) price of RM6.50, halved from its initial price of RM8 due to weak market demand.

The shares tumbled to a low of RM4.14 on Aug 1 after it announced a 71.9% fall in net profit for the second quarter ended June 30, 2017 against RM404.03 million in the previous corresponding period.

The drop was dragged down by an 8.5% increase in cost of goods sold, arising from high inventory cost carried forward from turnaround activities in the first quarter as well as higher unit production cost due to water supply interruption last April.

ABM: Commercial banks have sufficient liquidity

KUALA LUMPUR: The Association of Banks Malaysia (ABM) today said the funding and liquidity conditions of commercial banks in Malaysia are within acceptable levels, alluding to concerns highlighted by a news report last week.

“It is important to note that misleading reporting on asset and liability positions may misrepresent the liquidity situation in the marketplace and may cause concern among the business community and the public,” it said in a statement.

The increase in banking sector loan-to deposit ratio (LDR) has been driven by anticipated moderation in deposits growth since 2011 but has remained relatively stable, hovering between 86.7% and 89.3% over the last three years.

ABM said the LDR is a simplistic measurement that does not take into account increased sophistication by banks in Malaysia to diversify its sources of funding beyond the deposits and interbank markets to include bond and equity, and other financial instruments.

It said LDR has become less relevant in light of developments in the financial system over the last 10 years.

Traditionally, banks relied primarily on customer deposits as a major source of funding, however, since the mid-2000s, the proliferation of alternative investment products available to the average consumer coupled with lower savings and higher consumer activism has reduced the relative stability of customer deposits. This resulted in a shift to a broader funding base by the banks.

While deposits remain the main source of funding for banks, the banking sector continues to raise medium-term funds to better manage maturity and currency mismatches.

It said, to address the limitations of LDR, the regulators have introduced other indicators of liquidity risk such as the Liquidity Coverage Ratio (LCR), the loan-to-fund ratio (LTF) as well as the loan-to-fund-and-equity ratio (LTFE) in 2015.

ABM said the LTF and LTFE, available in Bank Negara Malaysia’s Monthly Statistical Bulletin, are better measurements of liquidity as they reflect the broader based funding of banks.

The LTF includes issuances of debt securities in the denominator and provides a more comprehensive assessment of the banks’ funding structure while the LTFE includes equity.

The LCR standard ensures that banks have sufficient high-quality liquid assets that can be used to satisfy liquidity needs in a 30-day severe stress environment and considers a broader range of factors that can affect funding stability, such as the type of counterparty, transaction tenor and redemption features of a specific product.

For commercial banks, the LCR stood at 142% as at June 2017, which is well above the minimum transitional requirement of 80% in 2017.

It should also be noted that almost all banks maintained LCR levels above the fully phased-in requirement of 100%, which will only take effect in 2019.

Astro to face competition from Ansa Broadcast

PETALING JAYA: Astro Malaysia Holdings Bhd will soon face competition from a new cable TV operator, dubbed Ansa Broadcast, which is owned by local tycoon Tan Sri Vincent Tan Chee Yioun.

Hong Leong Investment Bank (HLIB) Research, which has downgraded Astro to a “hold” call with a lower target price of RM2.47, said Ansa Broadcast, previously known as U-television, is in the midst of entering the satellite pay-TV segment.

“While details remain scarce, we understand that Ansa is currently deciding which satellite solution to adopt, either to lease bandwidth from operators or launch its own satellite.”

It said the implementation may take some time before the new broadcast is officially launched.

“If it materialises, Astro will face the pressure that has been absent for past 20 years with Ansa’s entrance as a new DHT satellite player.”

HLIB Research said while many non-satellite broadcasters such as ABNXcess, MiTV and Mega TV had failed historically, Ansa could be disruptive in offering aggressive pricing and content variances, albeit it is not expected to be an overnight success.

Astro has monopolised Malaysia’s DTH satellite pay-TV for the past 20 years and the exclusivity clause finally ended in February 2017.

Meanwhile, Astro reportedly is seeking a fair ground against over-the-top (OTT) players in Malaysia and wants them to be regulated by the Communication and Multimedia Act 1998.

“Astro believes that with a level playing field upon regulation, it will be in a better position as it owns most of the broadcasting rights in Malaysia. Given so, pirated OTT players remain a significant threat that cannot be avoided.”

HLIB Research highlighted that the weak ringgit will drive up content cost for Astro as most of its content is sourced internationally.

Television still dominates a lion’s share (40%) of the advertising expenditure (adex) pie, despite the spill over of adex from traditional to digital platform.

Nonetheless, the research house said given the soft advertising market it is crucial for Astro to sustain its subscription fees and evolve faster than ever to differentiate from its peers.

Astro’s share price rose two sen to close at RM2.69 today on some 1.26 million shares done, giving it a market capitalisation of RM14 billion.

AISB acquires Parkwood with plans to develop residential project

PETALING JAYA: Amalgamated Industrial Steel Bhd (AISB) is acquiring Parkwood Sdn Bhd for RM709,435 cash and settle its debt of RM17.75 million, as part of its strategic plan to venture into property development.

In a filing with Bursa Malaysia yesterday, AISB said it has entered into a conditional share sale agreement (SSA) with LGB Holdings Sdn Bhd and CSLim Holdings Sdn Bhd for the proposed acquisition.

In addition to the RM709, 435 cash consideration, there will also be a settlement of the amount owing by Parkwood to LGB upon the completion of the proposed acquisition.

Parkwood owns two parcels of leasehold land in Kampung Sungai Kayu Ara, Petaling Jaya, with a total combined land area of 1.82 acres. AISB, which is involved in the business of mild steel pipes, plans to undertake a residential development on the land, upon completion of the proposed acquisition.

The audited net book value of the land as at Dec 31, 2016 is RM17.84 million while the market value as appraised by the valuer as of Aug 7, 2017 is RM18.60 million.

Recall that AISB had obtained shareholders' approval in February 2015 to diversify into property development.

The purchase consideration and settlement sum will be satisfied entirely in cash via internally generated funds.

Public Investment Bank Bhd has been appointed as the adviser for the proposed acquisition while Sierac Corporate Advisers Sdn Bhd has been appointed as the independent adviser to advise the non-interested directors and shareholders.

AISB's share price rose 8.05% to close at 47 sen Tuesday, with a total of 13,000 shares traded. It has a market capitalisation of RM64.67 million.

Ringgit likely to return to fair value in 2H17

PETALING JAYA: Standard Chartered Research expects the ringgit to return to its “fair value” in the second half of 2017, instead of first half of 2018.

“In line with this, we recently revised down our USD/MYR forecasts to 4.20 for Q3-2017 and 4.10 for end-2017, ” it said in a report yesterday.

From a valuation standpoint, the research house said the ringgit remains highly attractive and is particularly relevant in an environment where investors, in their search for yield, are settling for assets with stretched FX valuations elsewhere in emerging markets.

“Despite the 4% ringgit rally so far in Q2, the ringgit real effective exchange rate is only a touch above its all-time lows, including the Asian financial crisis; it is also 11% below its 10-year moving average.”

It added that the fundamental backdrop for the ringgit is arguably improving as Q1 GDP growth was the highest in two years, and net foreign direct investment inflows rose to the highest level since 1999.

Standard Chartered Research, which expects the Malaysian gross domestic product (GDP) to grow 4.6% in 2017 from 4.2% in 2016, has lowered its forecast for 2017 current account surplus to 2.4% of GDP from 3.0%, reflecting a slower-than-expected recovery in commodity prices.

Given that palm oil and natural gas prices have fallen since the start of 2017, the research house said the commodity trade surplus is likely to be smaller than previously expected.

Despite reaching a peak of 5.4% growth in Q1, Standard Chartered Research expects growth momentum to slow in the coming quarters, as the reasons that drove Q1 growth – resilient consumer spending, robust demand from China and strong investment – may taper off.

Standard Chartered Research noted as the debt-service ratio for Malaysian households is high at 22% of disposable income, it will continue to weigh on household consumption.

However, it said softer consumer goods imports should support the trade balance, with key downside risk being the return of capital goods imports to the Q1 growth level.

Standard Chartered Research has raised 2017 inflation forecast to 4.0% from 3.6%, as a result of rising food prices due to supply disruptions and higher transport costs.

On the monetary policy, the research house expects the Overnight Policy Rate to remain unchanged at 3% for the rest of 2017.

“We think that Bank Negara Malaysia will look beyond the temporary pick-up in cost-driven headline CPI (consumer price index) inflation. The central bank expects only a mild pick-up in core inflation, a view that we concur with.”

Penang govt yet to submit application on China loan: MoF

GEORGE TOWN: The Ministry of Finance (MoF) has yet to receive any formal application from the Penang government over its intention to apply for a loan from the Export-Import Bank of China (Exim) to finance the RM27 billion Penang Transport Master Plan (PTMP) project.

Second Finance Minister Datuk Seri Johari Abdul Ghani said the federal government has no issue with the application so long as the entity applying for the loan is able to repay it.

“But we need to go through the right procedures, not only at the MoF level, but also adhere to Bank Negara’s procedures and all other processes as well.

“This is to ensure that the borrower is able to sustain or repay from the proceeds of the business being undertaken in Malaysia,” he told reporters after officiating the National Public Sector Accountant Conference 2017 yesterday.

He said the borrower also needs to justify the application for overseas funding, while there is ample liquidity domestically.

It was reported earlier in May that the Penang State Legislative Assembly had passed a bill allowing the state government to borrow from banks or financial institutions.

Chief Minister Lim Guan Eng had said the loan would be primarily used to fund investments and implementation of physical development, economic and social programmes for the state, including the PTMP and other related projects. – Bernama

GDP growth seen slowing in second quarter

KUALA LUMPUR: Malaysia’s economic growth is expected to have slowed slightly in the second quarter as weaker private consumption partly offset a boost from resilient manufacturing and trade, a Reuters poll showed.

The economy likely grew 5.4% in April-June from the same period a year earlier, cooling from a 5.6% pace in the first quarter, according to the median forecast from 12 economists surveyed.

Forecasts ranged from 4.9% to 6%.

Malaysia’s economy grew faster than expected in January-March as solid exports and strong domestic demand produced the fastest growth in two years.

The central bank expects full-year growth to come in at 4.3-4.8%, up from 4.2% in 2016, which was the lowest rate since contracting in 2009. – Reuters

Maxwell explores mining business in Philippines

PETALING JAYA: Maxwell International Holdings Bhd, a Practice Note (PN 17) company, has entered into a memorandum of understanding (MOU) with Global Mining and Agricultural Ventures Corp to jointly undertake mining activity in the Philippines, as part of the group's business regularisation plan.

Global Mining, a company incorporated in the Philippines, is the holder of the operation agreement of mineral mining in the Global Mines with Sibuyan Nickel Properties Development Corp, which holds the leases/rights for mining, extraction and process of nickel ores on two parcels of land with total area of about 1,580 hectares on the Sibuyan Island, Romblon, Philippines.

The estimated resources per nickel content (1%) are about 19 million metric tonne. The development right is for 25 years, expiring in 2035.

Maxwell said the MOU provides the group with an opportunity to venture into a new sustainable and profitable business, which is expected to help upllift it from its PN17 status.

“It would also provide the shareholders of the company an opportunity to participate in a sustainable and profitable mining business in the future,” it added.The MOU is valid for a three-month period.

Maxwell shares closed unchanged at 1.5 sen Tuesday, on some 346,600 shares done, giving it a market capitalisation of RM6 million.