Tuesday, September 12th, 2017
SINGAPORE/KUALA LUMPUR: Malaysia Airlines will announce a deal to buy eight widebody Boeing 787 jets during the visit of Prime Minister Datuk Seri Najib Abdul Razak to the United States, two industry sources said today.
The deal, worth more than US$1.8 billion (RM7.6 billion) at list prices, is expected to be one of the announcements that will be made after Najib meets with US President Donald Trump today, the sources said.
The United States was Malaysia’s third-largest trading partner in 2016. The meeting with Trump is critical for Najib, who is looking to raise his standing globally, and in Malaysia, where he is expected to call for a general election in the coming months.
An international graft probe by the United States and several other nations into state fund 1Malaysia Development Berhad (1MDB) has hurt Najib’s popularity. With the US visit, Najib is hoping to put the 1MDB controversy behind him.
Najib is scheduled to witness a memorandum of understanding signing ceremony between Malaysia Airlines and Boeing, according to a schedule of the prime minister’s events in Washington.
The two sources said Malaysia Airlines considered buying Airbus A330neos before settling on the 787 order.
Aircraft manufacturers typically give discounts to list prices.
Malaysia Airlines said it would not comment on reports that are speculative in nature. Boeing and Airbus declined to comment. The sources did not want to be named because the discussions were private.
Brendan Sobie, chief analyst at independent aviation research firm CAPA Centre for Aviation, said the timing of the order alongside Najib’s visit raised concerns of potential political influence over the purchase.
“This has happened before with Malaysia Airlines – and other airlines in this region for that matter – where the government has decided to buy an airplane that wasn’t really required,” Singapore-based Sobie said. “I think in this case the 787 is required anyway. But now that it is a political thing there are questions.”
Malaysia Airlines has been transforming its operations under two consecutive non-Malaysian bosses as it recovers from two tragedies in 2014, when flight MH370 disappeared in what remains a mystery and flight MH17 was shot down over eastern Ukraine.
The carrier is targeting a return to profit next year.
Malaysia Airlines CEO Peter Bellew said in June the carrier was in early negotiations with Airbus and Boeing for the purchase of 35-40 new long-range jets.
CAPA analyst Sobie said the airline needed widebodies for growth, as well as to replace ageing A330 aircraft over the next several years, making eight aircraft a smaller than expected order.
In the eight months ended Aug 31, Boeing announced 426 net orders compared to 215 at Airbus. – Reuters
PETALING JAYA: IOI Corp Bhd plans to dispose of a 70% stake in wholly owned specialty oils and fats manufacturing subsidiary Loders Croklaan Group B.V, to Koninklijke Bunge B.V (KBBV) for US$595 million plus €297 million, totalling about RM3.94 billion.
The disposal will include the sale of IOI Lipid Enzymtec Sdn Bhd and IOI Edible Oils (HK) Limited after an internal restructuring exercise by IOI Corp. IOI Loders Croklaan SC B.V. and Soyuz Loders Croklaan Corporation are not to be included in the sale.
IOI Lipid and IOI Edible contributed RM165.3 million in net profit to IOI Corp for the financial year ended June 30, 2016.
KBBV is a subsidiary of Bunge Ltd, a leading global agribusiness and food company operating in over 40 countries with approximately 32,000 employees.
Bunge buys, sells, stores and transports oilseeds and grains to serve customers worldwide; processes oilseeds to make protein meal for animal feed and edible oil products for commercial customers and consumers; produces sugar and ethanol from sugarcane; mills wheat, corn and rice to make ingredients used by food companies; and sells fertilizer in South America.
The group is expected to record a gain of RM2.5 billion from the sale.
The proceeds from the disposal will be used for repayment of bank borrowings (RM1.97 billion), future investment opportunities /working capital (RM1.17 billion), dividend to shareholders of 13 sen a share (RM788 million) and estimated expenses of the deal (RM10 million).
The repayment of borrowings will result in an interest savings of RM58.33 million per annum for IOI Corp.
The proposed disposal allows IOI Corp to enter into a strategic business collaboration with Bunge and leverage on the size of Bunge’s operations, established business network and expertise to build and expand Loders.
PETALING JAYA: US firms operating in Malaysia appear to be less enthusiastic in expanding their operations within the country, despite displaying a positive profit outlook.
According to the US Chamber of Commerce and the American Chamber of Commerce’s 2018 Asean Business Outlook Survey, only 19% of the survey’s respondents said that they plan to expand within the country. Indonesia, Vietnam and Philippines evidenced more interest for expansion of business.
The survey, polled senior executives representing US companies in all 10 Asean countries. Of the 356 American Malaysian Chamber of Commerce (AMCHAM) members, 53 responded to the survey accounting for 15%.
Some 77% on the other hand said they expect positive profit growth this year while 17% said they expect their earnings to be flat, and a mere 4% expected a decrease.
As for volatility of the local currency, 64% said the ringgit had impacted them negatively, while 21% saw the currency situation as positive.
A good majority of these companies (32%) said they would take no action if their company is affected by the ringgit whereas 29% said they will pass the cost to customers.
“Respondents are generally neutral about government agencies in Malaysia. No agencies received a satisfaction rate of higher than 50% or a dissatisfaction rate of higher than 40,” the report said.
The surveyed companies had cited corruption as their single greatest concern in the region except in Brunei and Singapore. This was followed by concerns on laws and regulations that inhibit business expansion.
Besides that, respondents also found it difficult to find graduates equipped with communication and cross collaboration skills in Malaysia. While the difficulty rate for the whole of Asean stood at 41%, Malaysia on its own registered about 53%.
AMCHAM executive director Siobhan Das, said that Malaysia continues to be an important base for US companies and the two way trade relationship between the region and US is vital for maintaining geopolitical stability and promoting growth between them.
AMCHAM has been engaging with the government to help improve the business climate in Malaysia.
KUALA LUMPUR: Investment deals between countries should involve more of the private sector and not just the public sector, said Institute for Democracy and Economic Affairs (IDEAS) chief executive Wan Saiful Wan Jan.
“State-owned enterprises is not the way to go. We want to make this a properly functioning investment deal between the countries, we must make sure it happens between the private sector. It cannot be continuously government-led,” he told reporters at a half-day symposium “Retreating US, Rising China: How Should We Respond?” organised by IDEAS today. He said Malaysia’s private sector involvement in these deals is not enough.
“We’re learning the wrong lesson from China that the government can play a bigger role in the economy. Even if it’s China, it’s not the case. We need to make sure the dominance of our government in the economy is reduced. The New Economic Model states that one of its targets is to reduce the government’s role in business. That seems to be forgotten by the government and I hope there is a revival of that,” said Wan Saiful.
He said Chinese investments in Malaysia is essentially a good thing, if the country continues with the principle of an open economy for Malaysia.
“We need to make sure there is rule of law, that there is transparency and proper governance of all the investments coming into the country … as long as we can ensure that, it will contribute to our economic growth.”
At the moment, he said there are concerns on projects involving Chinese investments as there is not enough information on it. Wan Saiful said there should be more transparency and information shared by the government with the people so that there is less criticism.
China’s Unirule Institute of Economics executive director Sheng Hong said China is the largest country that has advantage in international trade. However, state-owned enterprises (SOE) slow China’s economy down. In 2013, SOE’s real return on equity (ROE) was about -3.8%, while non-SOEs’ ROE was about 15.6%.
“China’s economic growth will be faster if we carry out the SOE reform. However, we have no hope to see the reform in the near future because of resistance from the interest group of SOEs,” said Sheng.
Zico Holdings senior adviser to Asean advisory, Yong Hee Kong pointed out that in Asean, an annual investment of US$210 billion (RM882 billion) is required for infrastructure projects. – by Ee Ann Nee
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KUALA LUMPUR: The discussions on Association of Southeast Asian Nations’ (Asean) internal economic-related affairs, which were held in the Philippines at the 31th Asena Free Trade Agreement Council, explored issues related to tariff commitments and applicable rules under the Asean Trade in Goods Agreement (Atiga).
In a statement yesterday, the Ministry of International Trade and Industry (Miti) said efforts were on-going to reduce and eventually end the identified non-tariff barriers (NTBs) and non-tariff measures (NTMs) within the association’s member states.
To date, out of the total 74 reported NTMs/NTBs, 54 cases had been resolved, it said.
Miti said the ministers also underlined the importance of the Asean Solutions for Investments, Services and Trade, an internet-based and business-friendly facility launched during Malaysia’s chairmanship of Asean in 2015, to handle complaints by enterprises in the association. – Bernama
PETALING JAYA: Sarawak-based property developer Ibraco Bhd’s acquisition of the 3.9 acres of leasehold land in Bandar Petaling Jaya Selatan is positive for the group, allowing it to expand its presence in the Klang Valley following its maiden project ContiNew, Jalan Tun Razak.
HLIB Research, which displayed a “mildly positive” sentiment on the acquisition, said the group had acquired the land at a competitive price of RM220 per sq ft that is deemed competitive given the land’s commercial title in the Petaling Jaya area. The land, acquired by Ibraco for RM37.4 million, is under a 99-year lease expiring on Oct 6, 2097.
“Based on the assumption of land cost to gross development value (GDV) ratio of 20%, the potential GDV of RM187 million is expected to increase the group’s total estimated GDV by 3.3% to RM5.9 billion,” the research house said.
“Assuming an earnings before interest and taxes margin of 22%, the GDV is estimated to increase our total Revalued Net Asset Valuation (RNAV) per share by 4 sen or 3% of our target price”, it added.
Meanwhile, the group said in its announcement with the stock exchange that it is yet to determine the budgeted GDV and gross profit to be generated from the development of the land at this juncture.
In 2011, the land was granted a development order (DO) for a mixed commercial development. Ibraco, however, intends to revise the development plan and re-apply for a new DO.
On the back of a strong three-year earnings compound annual growth rate of 42%, healthy unbilled sales of 1.8x, and above industry average margins and attractive dividend yield at 4%, HLIB has maintained its “buy” call on Ibraco shares.
“Our target price is maintained at RM1.00 with upward bias based on total RNAV of RM1.53 and unchanged 35% discount on RNAV for property segment,” it said.
Ibraco’s shares were untraded today.
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