Tuesday, September 5th, 2017
PETALING JAYA: Independent retail research firm Retail Group Malaysia (RGM) has revised its annual growth forecast downwards from 3.9% to 3.7% for the Malaysia retail industry in 2017, the second revision since end of last year, on the back of lower purchasing power.
RGM also revised the third quarter (Q3) growth rate estimate from 5% (made in June 2017) to 4%. This is higher than the latest projection made by Malaysia Retailers Association (MRA) members.
Q4 growth rate’s estimate remains at 5.5%, taking into consideration the growth of 0.3% achieved during the same period a year ago.
“For the rest of this year, the rise of our purchasing power will continue to fall behind the increase in prices of retail goods. More retail goods are expected to raise prices because of higher fuel prices in recent months,” said RGM.
Based on this latest revision, the total sale turnover for Malaysia retail industry in 2017 is estimated at RM101.4 billion, according to RGM.
Retail sales contracted 1.2% and expanded 4.9% for Q1 and Q2 respectively.
RGM said full recovery of the Malaysian retail market is highly dependence on external economic demand and ringgit performance for the rest of the year.
Meanwhile, it said members of the retailers’ association are not optimistic on their businesses in the next three months. They estimate an average growth rate of 2.9% in Q3’17.
RGM said the Q2 results met market expectation as members of MRA projected 4.8% growth.
After a dismay performance in first three months of this year, the retail industry managed to recover slightly in Q2. The Hari Raya festival that began at end-May boosted retail sales during this period. Malaysian consumers shopped more with heavy price discounts offered by retailers throughout the country.
For the first six months of this year, the retail sale growth rate was 2.5%, as compared to the same period a year ago.
KUALA LUMPUR: Malaysia Debt Ventures Bhd (MDV), a wholly owned subsidiary of Minister of Finance Inc (MOF Inc), has launched a third fund amounting to RM1 billion, which could potentially benefit about 300 companies and finance up to 400 to 500 projects.
The fund, which is to be raised through the issuance of Islamic medium term notes (IMTN), has a tenure of 20 years and could see a potential disbursement of RM4 billion within the period. The fund, which is expected to be dished out in four rounds, also carries an interest rate of 8% for borrowings.
“For RM1 billion the government approves, we are able to fund about RM4.5 billion worth of projects,” MDV managing director Datuk Md Zubir Ansori Yahaya told reporters at the launching ceremony today.
Thus far, some 15 companies have been identified as potential borrowers of up to RM100 million.
Zubir said unlike MDV’s previous two funds which were catered to developed, mature and revenue-stage companies with clear and strong credit profiles, this fund will be focusing on technology-based companies that are in early stages of growth and development.
For the first round of the fund in 2002, MDV sourced RM1.6 billion from the Japanese Bank of International Cooperation (JBIC). Six years later, as part of the second tranche, it raised RM1.5 billion through the issuance of IMTN.
Established in 2002, MDV has disbursed more than RM11 billion in financing to more than 680 tech firms, which in turn aided these companies to complete and deliver 773 projects.
Also present at the event, Finance Minister II Datuk Seri Johari Abdul Ghani said there is a need for alternative funding to be made available to small and medium enterprises (SMEs) in the technology sector, which has a higher risk profile, which in turn makes it difficult to secure traditional funding.
The government has to date allocated more than RM17 billion through various initiatives to promote technology exports, financing and guarantees for SMEs, in a bid to bridge the digital divide and promote technology entrepreneurship.
Johari also alluded to an increase in allocation for these enterprises in Budget 2018, in view of the growing needs for financing for SMEs.
“Historically, every year you will see figures keep increasing based on the size of our gross domestic product (GDP),” Johari told reporters at the sidelines of the launch ceremony.
He said 98% of businesses in Malaysia are SMEs which contribute 36% and 18% to GDP and total exports respectively.
“I think it is a very significant portion of this ecosystem,” he added.
PETALING JAYA: Despite the hiccup in loan growth momentum that eased slightly in July by 10 basis points from the previous month to 5.6% year-on-year (yoy), demand was up with approvals picking up yoy, indicating favourable pick-up in loans ahead, said Kenanga Research.
It said business loans are also likely to pick up pace on easing of approvals as asset quality appears to be contained.
The research house said its view of moderate loans growth ahead still stands with system loans expected to grow between 5.5% and 6.0% for 2017. Growth will be supported by the resilient household as cost-push inflation is expected to be contained in 2H17.
“The rise in applications beckons a positive momentum ahead as both business and households’ applications picked up. The rise in approvals for both business and household is encouraging and we expect conditions to be favourable going forward as asset quality looks to be improving,” it added.
With excess liquidity easing, it opined that net interest margin (NIM) compression will be mild as banks will be able to adjust their lending rates as demand accelerates, as seen in the surge in average lending rates for July.
“We still see limited catalyst to drive earnings growth for the industry materially beyond our current expectation of a mid-to-high single-digit growth.”
Kenanga Research reiterated its “neutral” call on the banking sector as it sees no change in the prevailing conditions ahead. There is no concrete catalyst and game changer on the horizon and structural and cyclical headwinds are still prevailing such as moderating economy, subdued loans growth and downward pressure on NIM.
HLIB Research maintained its 2017 loan growth forecast at 6.0% yoy, supported mainly by business segment that will capitalise on the development spending as well as recovery in the SME segment.
“We expect banks to post earnings recovery in 2017, on the back of higher loan growth expectations, stable contribution from non-interest income, continued discipline on expenses, and ending of impairment programme.”
It stayed neutral on the sector due to the uncertainty of MFRS9 implementation on bank earnings. Various liquidity measures are also expected to put more pressure to bank net interest margin.
HLIB’s top picks are Malayan Banking Bhd, AMMB and BIMB Holdings Bhd.
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PETALING JAYA: Analysts have lowered their estimates for Felda Global Ventures Holdings Bhd (FGV) following the group’s dismal results for the second quarter ended June 30, 2017.
“Given that 1H17 earnings fell below our expectations, we cut our 2017-19E core earnings per share (EPS) by 15-20% mainly to account for a lower earnings contribution from the sugar business (mainly from MSM Malaysia Holdings Bhd) and our higher 2018-19E crude palm oil (CPO) production cost assumptions,” Affin Hwang Capital said in its report today.
It maintained its “hold” rating on the stock, but due to the cut in the core EPS, it revised downwards its 12-month target price on FGV to RM1.60 from RM1.87 previously.
Meanwhile, MIDF Research cut its FY17 core net profit estimates by 67% to RM23 million from RM70 million previously, after assuming lower fresh fruit bunches (FFB) production in the plantation division.
It maintained its “neutral” call with a target price of RM1.59. Despite the weak 1H17 results, it expects earnings to improve in the rest of the year due to higher FFB volume and noted the management’s commendable effort to control cost.
Last Wednesday, FGV reported a 65% drop in its 2Q17 net profit to RM26 million from RM74 million a year ago while revenue rose 2% to RM4.22 billion from RM4.14 billion a year ago.
In 1H17, revenue rose 8.3% year-on-year to RM8.55 billion mainly due to higher contribution across all divisions, with plantation sugar and logistics and others (LO) divisions’ revenues rising 3.8%, 13% and 50.6% respectively year-on-year. Pre-tax profit rose 34.8% to RM56 million.
The group attributed the results to the RM41.6 million loss incurred in the sugar sector as a result of higher raw material costs and a weaker ringgit despite improved average selling price and higher domestic sales volumes.
After excluding impairments, provisions for litigation loss, foreign exchange gains and other one-off items, FGV recorded a core net profit of RM120.1 million in 1H17, from a core net loss of RM8.2 million in 1H16.
“This was below our expectations, accounting for 43% of our previous 2017E forecasts. The variance was mainly due to the loss-making sugar division,” said Affin Hwang Capital.
Note that FGV has revised downwards its FFB production target for the year to 4.3 million tonnes from the initial 4.5 million tonnes, citing shortage of labour and the slow recovery of younger age trees.
The group achieved FFB production of 1.04 million tonnes for 2Q17 and 1.85 million tonnes for 1H17. Last year, it achieved FFB production of 3.9 million tonnes.
FGV shares rose three sen to close at RM1.58 today on some 5.4 million shares done.
PETALING JAYA: The foreign tide returned to Bursa Malaysia last week after three successive weeks of attrition as foreigners turned net buyers last week despite the short trading week of three days.
For the week, foreign funds acquired RM36.2 million net based on transactions in the open market, excluding off market deals, marking the lowest weekly foreign acquisition for the year, said MIDF Research.
“We note that the six-day selling streak was snapped on Monday as global funds acquired RM7.10 million net on that day. Foreign buying momentum increased the next day by seven times to RM52.2 million net.
“However on Wednesday, international fund managers cleared their positions ahead of the long weekend, disposing RM23.1 million net,” it said in its fund flow report today.
It noted that August was the first month of net outflows this year, which amounted to RM241.9 million net. Nonetheless, cumulative year to date net inflow still stands above the RM10 billion mark.
Foreign participation rate was resilient last week as foreign average daily trade value (ADTV) remained above RM800 million for the fifth week in a row.
Meanwhile, retail participation edged higher for the week with retail ADTV increasing by 25% to RM865 million after being below RM700 million for three straight weeks.
PETALING JAYA: Telekom Malaysia Bhd (TM) is taking legal action against R&A Telecommunication Group Bhd for damaged cables at a construction area in Sri Petaling.
In a filing with Bursa Malaysia today, R&A said its wholly-owned subsidiary R&A Telecommunication Sdn Bhd (RASB) received a writ of summons and statement of claim from Messrs Zahir Jeya & Zainal, which is acting on behalf of TM, on Aug 30, 2017.
TM is claiming an outstanding sum of RM112,790.30 and 5% interest per annum on the amount, calculated from Jan 9, 2014 till the date of full settlement. TM is also claiming for cost and any other relief deemed suitable and beneficial by the court.
To recap, TM was informed on March 9, 2013 that its underground trunking, copper cables and fibre optics (cables) at Sri Petaling near Endah Parade (construction area) were damaged.
Following an investigation, TM noticed that RASB and/or its agent and/or employees had commenced horizontal direct drilling works at the construction area and had negligently caused damage to TM’s cables.
R&A said the financial and operational impact of the writ of summons and statement of claim on the group is minimal, as RASB is not a major subsidiary and has ceased operations since June 2015.
It said that the estimated potential liabilities to the group are limited to the amount claimed. R&A is seeking the necessary legal advice to remedy the situation.
PETALING JAYA: The Association of Banks in Malaysia (ABM) today announced the rollout of the revised customer service charter for the commercial banking industry.
Developed through a joint collaboration between ABM and its member banks, comprising 27 local conventional commercial banks, the revised charter has been rolled out by all its member banks effective Aug 30, 2017, ABM said in a statement today.
The association said the banks have taken a step further by establishing certain minimum industry standards with regard to the turnaround time for specified banking services.
ABM said the service standards have been designed from the customer’s perspective, noting that new ways of banking, such as digital channels, have also been taken into account.
“With the introduction of the minimum industry standards, it is hoped that customers will have an even more positive banking experience,” it said.
ABM said the requirement for banks to be transparent about the time frames for specified services will enable consumers to compare the services offered by each bank more easily.
Introduced in 2011, the standardised template for the charter is to underscore commercial banks’ commitment to deliver a consistent high standard of customer service.
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