Thursday, September 14th, 2017


Astro’s 2Q net profit soars 96%, declares 3 sen dividend

KUALA LUMPUR (Sept 14): Astro Malaysia Holdings Bhd’s second quarter net profit jumped 96% to RM246.34 million, from RM125.43 million a year earlier, mainly due…

Merge Energy diversifying into auto services, plantation machinery businesses

SHAH ALAM: Merge Energy Bhd is venturing into the auto services and plantation machinery businesses to boost its recurring income stream.

Executive director and CEO Datuk Abdul Jalil Abdul Karim said it recently acquired auto services provider Arena Terbaik Sdn Bhd, which has been in operation since 2013, with a view to benefit from the maintenance of vehicle fleets for the public and the private sectors.

The group completed the acquisition of Arena Terbaik last week for RM50,000. Arena Terbaik is principally engaged in the business of providing repairing and maintenance services and trading of parts and equipment specialised for motor vehicles.

Merge Energy is also in the midst of applying for an approved permit (AP).

“It’s a small business but it’s a sure business, where we can have a small revenue stream, and in the future, have an AP to import cars and some selected vehicles for government use,” Abdul Jalil told reporters after Merge Energy’s AGM here yesterday, adding that it plans to import mid-range to luxury vehicles, as well as big motor-cycles.

He said the group has a landbank of 30 acres in Serendah, Selangor, should it need a big area for a workshop or yard to place imported cars.

Merge Energy is also considering offers for development of the land into residential, commercial or industrial projects, or outright sale.

Abdul Jalil said it is also looking at importing construction and plantation machinery from China, as there is a big demand for such machinery given the high exchange rate to buy equipment from the US and Europe.

“We’re keen to explore the plantation machinery opportunity. We look at this to be a good prospect in the future as the plantation business is growing and there’s a big demand for plantation machinery,” said Abdul Jalil.

Executive director Raizita Ahmad said these two businesses will not be its main activities but will provide steady, recurring income to the group.

Merge Energy and its subsidiaries are principally contractors of various kinds of building, structural and civil engineering works as well as a specialist in contracts for infrastructure and water works. Construction makes up 90% of the group’s revenue.

The group saw a net loss of RM1.4 million in the first quarter ended June 30, 2017, mainly due to a drop in progress billings with project completion and no new projects secured.
Raizita said the group hopes to do better in the second quarter, with its new ventures and prospects, as well as internal restructuring for cost savings and downsizing of contract staff.

“Nevertheless we’ve put in bids, private and government, but we’re looking at putting in more bids with government-related companies. We’re doing okay in this business. We’re trying to offer our services to other government sectors, as they’ve a lot more facilities to maintain,” said Abdul Jalil.

He added that Merge Energy has a tender book of RM800 million for water and general infrastructure works, and the building of industrial parks for government-related companies. It has an outstanding order book of RM40 million.

Despite limited construction tenders, especially in the water-related sectors and fewer projects due to limitation in government budget, Abdul Jalil opined that Merge Energy is doing fine.

“Our specialty is more on building water infrastructure but the government is not scaling down on the development. They’re slowing down the implementation, but the need is there. Selangor has to build new plants.

“Bidding for water projects, the issue is on the price being so competitive. There are many players and construction companies, and we’re one of them, so there will be lots of price war but we’re okay. As long as there is a healthy margin to live on, we’re doing fine,” said Abdul Jalil.

Merge Energy closed 5.26% lower at 36 sen yesterday with 47,700 shares traded.

High finance costs hit EcoWorld Development’s Q3 bottom line

PETALING JAYA: Eco World Development Group Bhd’s (EcoWorld) net profit for the third quarter ended July 31, 2017 fell 41.47% to RM26.09 million from RM44.58 million a year ago due to finance costs and share of initial losses incurred by joint venture (JV) companies.

In a filing with Bursa Malaysia yesterday, EcoWorld said it incurred finance costs during the quarter on new term loans taken to fund the investments in and advances to JV and associated companies.

The lower profit was also due to a share of the initial losses incurred by JV companies namely Eco World International Bhd (EWI), Eco Grandeur, Eco Ardence and BBCC pending commencement of property development profit recognition.

Revenue for the quarter rose 4.89% to RM762.92 million from RM727.34 million a year ago due to a higher percentage of completion compounded by a higher number of sold units having attained the criteria for profit recognition.

For the nine months ended July 31, 2017, net profit rose 76.07% to RM175.94 million from RM99.93 million a year ago while revenue rose 12.2% to RM2.03 billion from RM1.81 billion a year ago.

During the quarter, EcoWorld achieved RM772 million in sales from its domestic projects, 40% higher than the RM552 million achieved a year ago. Up to Aug 31, 2017, its year-to-date sales amounted to RM2.393 billion, 9% higher than the RM2.202 billion achieved a year ago.

The group said it remains well-positioned to achieve its sales target of RM4 billion from domestic projects for financial year ending Oct 31, 2017 based on upcoming launches of three new projects namely Eco Forest, Eco Business Park V and Eco Horizon.

The group’s unbilled sales as of Aug 31, 2017 stood at RM6.22 billion. It has a total of 5,426.6 acres of undeveloped land.

Meanwhile EWI, EcoWorld’s 27%-owned JV, narrowed its net loss in the third quarter ended July 31, 2017 to RM24.2 million from a net loss of RM46.41 million a year ago mainly due to unrealised foreign exchange differences as a result of appreciation in exchange rate of the British pound during the quarter.

Revenue fell 66.32% to RM97,000 from RM288,000 a year ago. EWI said revenue and profits associated with the group’s property development activities will be recognised by its subsidiary and JV when the construction of the relevant units are completed and delivered in the first half of 2018.

For the nine months ended July 31, 2017, net loss narrowed to RM55.08 million from RM165.03 million a year ago while revenue fell 7.8% to RM461,000 from RM500,000 a year ago.

EWI achieved RM1.56 billion worth of sales in the first 10 months of the financial year, of which RM1.5 billion were locked-in during the first three quarters of the financial year. Total cumulative sales rose to RM7.26 billion as at Aug 31, 2017 due to the strengthening of the British pound and Australian dollar against the ringgit.

The group’s share of cumulative unbilled sales as at Aug 31, 2017 amounted to RM5.68 billion. For the remaining two months of the financial year, EWI said it will work towards achieving its sales target of RM2.5 billion with several international roadshows planned to promote its UK projects.

EcoWorld’s share price rose 0.63% or 1 sen to close at RM1.59 yesterday with a total of 330,500 shares traded, giving it a market capitalisation of RM4.68 billion.

EWI’s share price rose 0.93% or 1 sen to close at RM1.09 yesterday with a total of 363,400 shares traded, giving it a market capitalisation of RM2.59 billion.

AbleGroup MD boosts stake to 43.97%, launches MGO at 13 sen a share

PETALING JAYA: AbleGroup Bhd's major shareholder and managing director Datuk Lim Kim Huat has upped his stake in the group to 43.97%, triggering a mandatory takeover offer for the remaining shares at 13 sen apiece.

The offer price represents a 7% discount to the company's last transacted price before trading in its shares was halted yesterday pending the announcement.

Lim will increase his stake in the group through Parallel Pinnacle Sdn Bhd, by taking over substantial shareholder Loi Heng Sewn’s 10.72% interest in AbleGroup.

In a filing with Bursa Malaysia yesterday, AbleGroup’s board of directors said it has deliberated on the offer and has no intention to seek an alternative person to make a takeover bid for the offer shares.

The board said it is in the midst of sourcing for an independent adviser to advise the non-interested directors and the holders of the offer shares in relation to the offer.

Lim and spouse Datin Chan Shiou Bin are the controlling shareholders of Parallel Pinnacle through their interest in Golden Century Overseas Ltd. They plan to maintain the listing status of AbleGroup.

AbleGroup made a net profit of RM248,000 for the second quarter ended June 30, 2017, against a net loss of RM235,000 for the same quarter in the previous year, on double the revenue from completion of good margin projects. Revenue for the quarter stood at RM3.5 million, compared with RM1.6 million for the same quarter in 2016.

Astro Q2 net profit almost doubles

PETALING JAYA: Astro Malaysia Holdings Bhd’s net profit for the second quarter ended July 31, 2017 rose 96.4% to RM246.34 million from RM125.43 million a year ago due to an increase in earnings before interest, tax and depreciation and amortisation (ebitda) and a decrease in net finance costs.

The drop in finance cost was attributed to favourable unrealised foreign exchange gains arising from unhedged non-current balance sheet liabilities.

Revenue for the latest quarter of RM1.42 billion was 0.6% lower than the RM1.43 billion of the previous corresponding period, due mainly to a fall in subscription and licensing income.

Astro group CEO Datuk Rohana Rozhan said its diversified revenue streams across the TV, radio and digital platforms, advertising expenditure (adex) and e-commerce continued to show resilience.

“Margins and profits in Q2FY18 benefited from lower cost to serve and one-off savings arising from content secured on more favourable terms,” she said in a statement.

For the six months period, net profit increased by 35% to RM442.17 million RM327.60 million due mainly to an increase in ebitda, decrease in depreciation of property, plant and equipment and drop in net finance costs.

Revenue for the current period of RM2.75 billion was lower by 1.6% against the previous corresponding period’s RM2.79 billion, due mostly to a decrease in subscription and licensing revenue.

The group said H1FY18 revenue was lower primarily due to the end of a one-off sports channel sub-licensing, marginally lower contribution from subscriptions and e-commerce. This was partially mitigated by higher contribution from adex, NJOI and production revenue.

“Going forward, the company expects revenue growth in the immediate term to be underpinned by e-commerce, adex, production revenues and NJOI.”

The board declared a second interim dividend of 3 sen per share.

Astro’s share price closed 1.87% lower at RM2.63 yesterday with 818,200 shares traded.

Sunway Construction bags RM581.6m govt housing deal

PETALING JAYA: Sunway Construction Group Bhd’s (SunCon) unit Sunway Construction Sdn Bhd has secured a contract worth RM581.6 million for the construction of 1Malaysia Civil Servant Housing (PPA1M) project in Kelantan.

In a filing with Bursa Malaysia yesterday, SunCon said Sunway Construction has entered into a contract with Liziz Standaco Sdn Bhd for the proposed construction and completion of six blocks of 29-storey PPA1M apartment units.

SunCon said the 30-month project is expected to be completed by the first quarter of 2020.
The group said it expects the project to contribute positively to the earnings of SunCon Group from the financial year ending Dec 31, 2018 onwards.

SunCon said its outstanding order book to date amounts to RM4.7 billion, upon securing the project.

US stocks pull back from records after solid data

NEW YORK, Sept 14 — Wall Street stocks pulled back from records early today after US data pointed to higher consumer prices and a tighter labour market. The Consumer Price Index, which tracks the cost of household goods and services, jumped…

HLIB Research: Construction sector still ‘overweight’ on rollout of mega rail projects

PETALING JAYA: Hong Leong Investment Bank (HLIB) Research is maintaining its “overweight” valuation on the construction sector, as it expects a strong revival in job flows next year, driven by several mega rail projects.

In a note yesterday, its analyst Jeremy Goh said these mega rail projects include the East Coast Rail Link (ECRL), Kuala Lumpur-Singapore High-Speed Rail (HSR) and Mass Rapid Transit 3 (MRT3).

He said the significance of these mega rail projects to the construction sector should not be underestimated, noting that job wins hit a high of RM28 billion in 2012, and RM56 billion in 2016, when the MRT1 and MRT2 were rolled out.

“Our top picks are centred on the upcoming influx of mega rail projects. We favour Gamuda Bhd (buy, target price: RM6.36) given its strong track record with civil rail projects (Northern Double Track, MRT1 and MRT2).

“We also like George Kent (M) Bhd (buy, target price: RM3.73) as the only local player with an expertise in rail-related systems.”

Moreover, Goh said that most contractors within the research house’s coverage continue to exhibit healthy orderbook levels with cover ratios exceeding two times.

He said, while 2017 year-to-date (January-August) sector job wins have normalised downwards as expected, the sum of RM15 billion is still on track to meet its full year target of RM25 billion with the LRT3 awards starting to roll out.

As such, Goh said the research house remained positive on the sector’s outlook despite the higher than expected proportion of results disappointment.

For the recent 2Q17 results season, Goh said, six out of the 13 contractors under HLIB Research coverage (46%) reported core earnings that were below expectations, four (31%) were within and three (23%) were above. Of the six results, half were revenue driven.

Kimlun had a timing gap for its manufacturing deliveries between its completed Singapore jobs and commencement of MRT2, whereby HSL experienced delays in kicking off its Kuching Wastewater System job due to ground conditions, Goh said.

Others include Edgenta, which incurred higher depreciation and amortisation charges following its acquisition of KFM and UEMS.

While IJM’s construction division grew, Goh said the overall group earnings were held back by plantations which suffered from high production cost and tax. Lastly, Mitrajaya suffered cost overruns for its projects at Refinery and Petrochemical Integrated Development (Rapid), which dented margins.

Meanwhile, for the few results upside, Goh noted that they were all margin driven.

VS Industry’s long-term prospects impressive: Analysts

PETALING JAYA: Analysts are positive on VS Industry Bhd’s (VSI) long-term prospects, to be driven by the group’s potential of securing contracts from various new customers that will expand earnings growth.

“We came away from VSI’s company visit at Johor feeling upbeat due to the company’s impressive prospects in FY18 and FY19,” AmInvestment Bank’s analyst Lavis Chong said in a report yesterday.

It reiterated its “buy” recommendation on VSI with a higher fair value of RM2.85 per share from RM2.30 previously after raising its net profit forecasts for FY18/FY19 by 9-19%, and rolling forward earnings base to CY18. The group’s share price was up seven sen to close at RM2.49 with some 7.5 million shares changing hands. It has a market capitalisation of RM3.1 billion.

Chong said the electronics manufacturing service group installed additional lines in the middle of July and more lines are coming on stream in October-November.

VSI is working on procuring new jobs for an American lifestyle product, and a Swiss hygiene system for financial year 2019 (FY19). Together, the contracts could be worth more than 30% of VSI’s FY19 revenue. On another positive note, he said the management hinted that the acquisition of NEP Holdings by Ozner Water International Holding may not materialise.

Chong said this is because there was a clause in VSI’s initial purchase of NEP that mandates the future buyer to allow VSI to tag along an acquisition deal, if any. Management believes the acquirer may have lost interest due to this clause.

In addition, he said, the research house favours the group because of its association with customers, which enjoys robust growth prospects due to its product innovation; its positioning as a home-grown world-class electronic manufacturing services player; and its strong profit growth in FY17-FY19 underpinned by capacity expansion.

In a separate note, PublicInvest Research said it is lifting the group’s FY18 and FY19 earnings by 4.6% and 8.5% respectively to include anticipated new production previously unaccounted for.

“Our ‘outperform’ call is affirmed, with target price lifted to RM2.83 based on a raised 18 times, from previously 16 times multiple to a revised CY18 earnings-per-share. Three-year compound annual growth rate growth is anticipated at 33%, deeming the higher multiple justifiable in our view,” it added.

SC builds ‘fintech bridges’ with HK, Dubai and Singapore regulators

PETALING JAYA: The Securities Commission Malaysia (SC) has signed a series of innovation cooperation agreements with the Hong Kong Securities and Futures Commission, the Dubai Financial Services Authority and the Monetary Authority of Singapore.

The SC said in a statement yesterday that these “fintech bridges” were established to spur greater cooperation in facilitating and regulating innovations emerging within the digital finance industry.

The cooperation agreements follow the first agreement signed between SC and the Australian Securities and Investments Commission in June 2017.

These fintech bridges are expected to facilitate greater information sharing on emerging trends and regulatory developments as well as referrals of innovative businesses seeking to operate in each other’s jurisdictions and the exploration of potential joint innovation projects.

These efforts are expected to help shape the regulatory approach and encourage the growth of digital finance within the country.

“The fintech bridges with major markets in the Asia-Pacific and the Middle East form part of the SC’s digital strategy, and build on the already well-established relationships that the SC has with these regulators. Such efforts will promote innovation within capital markets, and enhance the cross-pollination of digital finance concepts which will benefit financial services institutions, startups and investors alike,” said SC chairman Tan Sri Ranjit Ajit Singh (pix).

He said these cooperation agreements would also shape facilitative and up-to-date regulations that would strengthen Malaysia’s market for fintech and digital innovation in capital markets.

The digital economy’s contribution to Malaysia’s gross domestic product is expected to grow to 20% by 2020 and as part of its digital agenda, the SC was the first jurisdiction in the Asia-Pacific to regulate equity crowdfunding in 2015, followed closely by peer-to-peer financing regulations in 2016.

To date, the registered market-based financing platforms have cumulatively raised a total of RM28 million for 50 small and medium enterprises since coming into operations in the middle of 2016.

SC has also in recent years introduced regulations on digital investment management services and launched the alliance of Fintech community initiative to engage with the growing financial technology community in Malaysia. It will be holding its fourth SCxSC Digital Finance Conference on Nov 6 and 7 this year.