Thursday, October 12th, 2017

 

Ministry, Energy Commission launch websites to shed light on power industry

KUALA LUMPUR: The Energy, Green Technology and Water Ministry (KeTTHA) and the Energy Commission (EC) have launched two websites in a bid to disseminate operational and planning information on the electricity supply situation to members of the public and industry players.

The Single Buyer (SB) and the Grid System Operator (GSO) websites will not however share information which is deemed confidential under the purchase of electricity contracts between Tenaga Nasional Bhd (TNB) and the independent power producers (IPPs).

“Customers will be more informed of the intricacies of electric power system planning and operation with the data and information shared within the respective websites,” the EC said in a statement today.

As ring-fenced entities, SB and GSO are required by the industry to demonstrate transparency, independence and non-discriminatory conduct in its operations. The establishment of the websites in order to publish relevant real-time operation information publicly is seen as one way to achieve this.

From the SB’s website, consumers can get information on historical and forecast energy demand, highest demand, highest energy recorded and more, while the GSO’s website publishes data for Peninsular Malaysia’s grid system, comprising power station information, system generation and demand profiles, fuel mix and tie-line data, and system constraints.

The operational data is automatically updated in real time. Any additional publication will be updated regularly for example, information regarding system constraint is updated weekly. Over time, more information is expected to be added to both websites.

For industry players, there will be special privileges to apply for an account with this platform, in order to access operation data specific to their business portfolio.

To recap, the EC separated the operations of SB and GSO from other activities of TNB via the enforcement of the Electricity Supply Act (Amendment) 2015, which came into force on Jan 1, 2016.

Under this arrangement, SB and GSO now operate autonomously where their functions, operations and performance are under the supervision and regulations of the EC.

SB is responsible for the management of electricity purchasing from power generation plants while GSO is responsible for the day-to-day real-time operation and management of the Peninsular Malaysia grid system operation including interconnections with Thailand and Singapore.


Analysts say 700Mhz spectrum pricing structure is ‘pro-business’

PETALING JAYA: Analysts contend that the pricing structure for the reallocation exercise by the Malaysian Communication and Multimedia Commission (MCMC) for 700Mhz spectrum blocks is “pro-business”, and therefore a positive development for the sector.

HLIB Research said the costs are lower than expected vis-à-vis per 900MHz block for RM218.3 million charge and RM18.8 million annual fee.

“No update on the sub-2GHz bands (2.1/2.3/2.6GHz) expiring 2017-18 but this solidifies our earlier belief that pricing will be benchmarked against 1800MHz’s RM95.1 million per block,” the firm said in its report.

AmInvestment Bank’s note called the pricing structure “favourable” for the telco sector given that the 700MHz band has over 40% wider coverage footprint compared with the 900MHz band.

“However, we believe that the pricing exercise for the upcoming band should have the similar minimal earnings per share (EPS) and balance sheet impact expected from the earlier 1800MHz spectrum assignment, which cost only 44% of the price component and annual fee of the 700MHz band,” AmInvestment said. The firm expects minimal impact on the balance sheets of telcos, except for Digi.com Bhd.

“Based on a 2x5MHz allocation for the lump sum payment, the FY18F net debt/ebitda (earnings before interest tax depreciation and amortisation) and impact is minimal, remaining at 1.5x for Axiata, 1.2x for Maxis and 1.8x for TM. However, given Digi’s low debt levels, its FY18F net debt/ebitda will rise from 0.6x to 0.7x, which is still comfortably within the group’s acceptable gearing,” it explained.

Applications for the 700MHz frequency bands, which are currently used for analogue broadcasting services, open on Oct 31 and close on Jan 2, 2018.

The validity period of the spectrum assignment will be 15 years from the effective date of the spectrum assignment and each applicant can indicate interest for up to four blocks. Successful applicants who choose to pay a lump sum will be charged RM215.54 million for a 2x5MHz spectrum block. Instalment payments are at least RM45 million higher.

For instance, the price for a spectrum block will be RM260.60 million for five equal annual payments, RM328.38 million for 10 equal annual payments and RM417.12 million for 15 equal annual payments. The annual fee for each 2x5MHz spectrum block is set at RM18.54 million.

AmInvestment stated that the additional frequency band will not immediately translate into higher revenues, which will only materialise from higher paying subscriber market share on the back of improved service quality and speed, compared with other players.

AmInvestment maintained a neutral call on the sector, given the continued intense competition in the telco segment, with hold recommendations on Maxis and Digi and buys on Axiata and TM, due to a game-changing re-merger likelihood.

HLIB maintained its neutral call on the sector due to the lack of positive catalysts in the near term, although the firm maintained that telcos remain stable supported by resilient domestic demand.

“Their dependable dividend yield will be a plus point in a volatile market,” it added.
On MCMC exploring the idea of reload with identification mechanism, HLIB said while the move would enhance reload safety, it will undeniably pose challenges to telcos in terms additional cost and may curb spending due to the inconvenience.

HLIB’s top pick is TIMEdotcom, which is seeing retail gain momentum on the back of reach expansion and undisputable high-value products; data centre’s steady expansion and strong growth trajectory underpinning its Asean ambition. It has a hold call on the stock with a target price of RM9.98.


Takeover offer price for Johan revised upwards

PETALING JAYA: The takeover offer price for Johan Holdings Bhd has been revised upwards by one sen to 26 sen per share.

The group told Bursa Malaysia that this is because the offeror, Mustika Manis Sdn Bhd, bought an additional 2.1% stake for 26 sen or RM3.9 million today.

The 26 sen offer price is to be equivalent to be price paid by the offeror for the second acquisition.

Following that, the offer price now represents a 1.33% premium to its five-day volume weighted average price of 25.66 sen.

Johan said the board will hold a board meeting to deliberate the offer and make an announcement in due course.

The offerors include its chairman Tan Sri Tan Kay Hock, his spouse Puan Sri Tan Swee Bee, Kin Fai International Ltd, Kwok Heng Holdings Ltd, Star Wealth Investment Ltd and Suncrown Holdings Ltd. It is the offerors' intention to maintain Johan's listing status.

Johan ended up two sen to 28 sen on some 1.01 million shares done today.


Low awareness, adoption of Industry 4.0 among Malaysian manufacturers

PETALING JAYA: The low awareness and adoption of Industry 4.0 among Malaysian manufacturers may be due to the lack of market size to incentivise them to automate, said Second Minister of International Trade and Industry Datuk Seri Ong Ka Chuan.

Industry 4.0 refers to the trend of automation and data exchange in manufacturing technologies. It is described as the fourth industrial revolution, smart manufacturing or digital factories.

Ong said the world is moving towards Industry 4.0, a process where the manufacturing process is digitalised and automated. As such, production will be accurate, eliminating human errors and improving consistency in the quality of products that can be produced in large quantities.

“To achieve Industry 4.0, it’s not only technology, you also need a market size big enough to incentivise you to go into that. Our achievement in Industry 4.0 is low, but I realised there is an important challenge that we need to look into, which is the market size. Malaysia is a small market, so we can’t say everybody should go for Industry 4.0, as you don’t have the market big enough to sustain, so we have to help them (manufacturers) to go into a bigger market,” he told a press conference at the Federation of Malaysian Manufacturers (FMM) Industry 4.0 Conference today.

According to the FMM-Malaysian Institute of Economic Research Business Conditions Survey in 2H2016, only 12% of the respondents are very aware of Industry 4.0. About 41% are somewhat aware, 28% need more information and 19% are not aware at all.

Ong opined that sometimes manufacturers are not ignorant, but the market size or production is not enough for them to embark on automation.

“If they have the market size and get more market penetration, from there, they will adopt (Industry 4.0) themselves and change their strategy in manufacturing. They’re not totally passive and the government is not giving a blanket incentive to help everybody. We only help those who are ready to adopt and we give them some incentives. For those who’re not, we’re not forcing them because they may not have the market size to incentivise them to go for that. Looking at the reality, there are some reasons behind that. They need to explore new markets,” said Ong.

He said the government is committed to assisting SMEs make the leap into Industry 4.0, since they face a different set of challenges compared with the multinational corporations. This includes strengthening digitalisation among SMEs through e-commerce and adoption of innovative technology.

Ong said the government needs to assist manufacturers and provide incentives in the beginning for them as automation requires investments. It has proposed such incentives for Budget 2018.

“This is an agenda that we need to give priority to because it affects the production and competitiveness in the international market, so we need to digitalise our manufacturing process,” said Ong.

Other initiatives already embarked on leading up to the overall Industry 4.0 concept includes the National Strategic Roadmap on Internet of Things, the Digital Free Trade Zone and framing 2017 as the year of the Internet Economy for Malaysia.

The National Policy on Industry 4.0 is also being developed and the policy framework is targeted to be completed by year end. Ong said the role of the government is more of an enabler for Industry 4.0 transformation to be realised.

He added that industry associations echo the sentiments of the government that digitalisation through Industry 4.0 should be bottom-up instead of top-down and industry associations need to take charge and advocate rapid adoption in the manufacturing and manufacturing-related services.


Low awareness, adoption of Industry 4.0 in Malaysia

PETALING JAYA: The low awareness and adoption of Industry 4.0 among Malaysian manufacturers may be due to the lack of market size to incentivise them to automate, said Second Minister of International Trade and Industry Datuk Seri Ong Ka Chuan (pix).
Industry 4.0 refers to the trend of automation and data exchange in manufacturing technologies. It is described as the fourth industrial revolution, smart manufacturing or digital factories.
Ong said the world is moving towards Industry 4.0, a process where the manufacturing process is digitalised and automated. As such, production will be accurate, eliminating human errors and improving consistency in the quality of products that can be produced in large quantities.
“To achieve Industry 4.0, it’s not only technology, you also need a market size big enough to incentivise you to go into that. Our achievement in Industry 4.0 is low, but I realised there is an important challenge that we need to look into, which is the market size. Malaysia is a small market, so we can’t say everybody should go for Industry 4.0, as you don’t have the market big enough to sustain, so we have to help them (manufacturers) to go into a bigger market,” he told a press conference at the Federation of Malaysian Manufacturers (FMM) Industry 4.0 Conference yesterday.
According to the FMM-Malaysian Institute of Economic Research Business Conditions Survey in 2H2016, only 12% of the respondents are very aware of Industry 4.0. About 41% are somewhat aware, 28% need more information and 19% are not aware at all.
Ong opined that sometimes manufacturers are not ignorant, but the market size or production is not enough for them to embark on automation.
“If they have the market size and get more market penetration, from there, they will adopt (Industry 4.0) themselves and change their strategy in manufacturing. They’re not totally passive and the government is not giving a blanket incentive to help everybody. We only help those who are ready to adopt and we give them some incentives. For those who’re not, we’re not forcing them because they may not have the market size to incentivise them to go for that. Looking at the reality, there are some reasons behind that. They need to explore new markets,” said Ong.
He said the government is committed to assisting SMEs make the leap into Industry 4.0, since they face a different set of challenges compared with the multinational corporations. This includes strengthening digitalisation among SMEs through e-commerce and adoption of innovative technology.
Ong said the government needs to assist manufacturers and provide incentives in the beginning for them as automation requires investments. It has proposed such incentives for Budget 2018.
“This is an agenda that we need to give priority to because it affects the production and competitiveness in the international market, so we need to digitalise our manufacturing process,” said Ong.
Other initiatives already embarked on leading up to the overall Industry 4.0 concept includes the National Strategic Roadmap on Internet of Things, the Digital Free Trade Zone and framing 2017 as the year of the Internet Economy for Malaysia.
The National Policy on Industry 4.0 is also being developed and the policy framework is targeted to be completed by year end. Ong said the role of the government is more of an enabler for Industry 4.0 transformation to be realised.
He added that industry associations echo the sentiments of the government that digitalisation through Industry 4.0 should be bottom-up instead of top-down and industry associations need to take charge and advocate rapid adoption in the manufacturing and manufacturing-related services.


MARC says Malaysia’s average monthly household excess income grows at slower pace

PETALING JAYA: Malaysian Rating Corp Bhd (MARC) estimates that average monthly household excess income grew at a slower pace of 6.6% in 2016 from a cyclical high of 7.7% in 2013.

“Similarly, on an inflation adjusted basis, the growth of monthly household excess income moderated to 6.6% during the same period, down from an average of 7.1% in the three-year period through 2015,” the rating agency said in a note today in response to the recent statistics on household income and expenditure.

MARC said consumers have been cautious in their spending habits amid a challenging economic environment as well as rising costs of living.

“Not surprisingly, private consumption growth has been subdued, averaging at 6.3% between 2014 and 2016, down from 7.5% in the preceding three-year period.”

Malaysia’s median and mean household incomes continued to grow, benefiting from the relatively resilient domestic economy. In particular, the median monthly household income grew 6.6% per annum on a compounded annual growth rate (CAGR) basis between 2014 and 2016, in line with the average nominal gross domestic product (GDP) growth of 6.5% during the period.

Similarly, the mean monthly household income rose by 6.2% per annum on a CAGR basis in the same two-year period.

Nonetheless, both the median and mean monthly household incomes growth have slowed from the pace recorded in the previous survey (11.7% and 10.3% respectively in the 2012-2014 survey). Both measures were also lower than the increases recorded in the survey during the 2009-2012 period.

MARC said this slower pace can be possibly attributed to the challenging domestic and global economic environments post the global financial crisis, collapse in international crude oil prices, depreciation of the ringgit as well as weaker global trade performance during the period.

However, it said more importantly, the incidence of poverty has declined significantly, with the poverty rate slipping further by 0.2 percentage points to 0.4% from 0.6% in 2014, which can be attributed to income transfers from the government, which directly benefited the B40 income group.

From a regional perspective, it said Malaysia has done a relatively credible job in improving overall income disparity, with a lower Gini Coefficient than some advanced economies such as Singapore (0.458) and Hong Kong (0.539).    


Ministry mulls setting up institution to handle green financing

KUALA LUMPUR: The Energy, Green Technology and Water Ministry (KeTTHA) may set up an institution to handle green financing if the remaining RM1.7 billion available under the Green Technology Financing Scheme (GTFS) is taken up quickly.

“The Finance Ministry has been looking at that for some time. There are still a lot of processes to be done but with the incoming of green sukuk, that has given a boost of confidence in the finance sector. We are analysing the first GTFS. It will depend on the response,” said Energy, Green Technology and Water Minister Datuk Seri Panglima Dr Maximus Johnity Ongkili.

Speaking to reporters at the opening ceremony of the 8th International Greentech & Eco Products Exhibition & Conference Malaysia (IGEM 2017), Ongkili said the proposal for an institution is worth considering but it would have to study the market before turning the scheme into a bank, for instance.

“I think it is certainly on the agenda. We need to work at it. Number one is the mechanism, number two is the size. These are important. My own take is, if the remaining RM1.7 billion is finished quickly, then it is time to set up a proper institution to handle green financing,” he added.

The GTFS was introduced by the government in 2010, aimed at enabling easier access to financing for new green entrepreneurs. To date, it has facilitated over RM3.385 billion in funds for more than 302 green projects. Upon completion, these projects will have the potential to generate RM6.468 billion worth of green investments, create over 4,943 jobs and avert emissions amounting to 3.513 million tonnes of CO2eq.

There is another RM1.7 billion available under the scheme and the government has decided to extend the scheme, adding another RM5 billion for the next five years, to provide access to more entrepreneurs.

Meanwhile, Bank Negara Malaysia, Securities Commission Malaysia and the World Bank Group are currently developing an ecosystem to facilitate the growth of the clean financing portfolio to further promote green financing. Ongkili said the green sukuk has introduced an innovative financial instrument to accommodate global infrastructure needs and green financing.
On the number of bonds to be issued under the green sukuk, he said it would depend on those who won the bidding.


George Kent shares continue to rise on news of High-Speed Rail tender bid

PETALING JAYA: George Kent (Malaysia) Bhd’s share price continued to rise today on news of its intention to take on the Kuala Lumpur-Singapore High Speed Rail (HSR) project.
At market close, the stock was up six sen to RM3.29, with 2.88 million shares traded.

On Wednesday, George Kent announced that it had entered into a pre-consortium agreement with Siemens, whereby both parties will form an engineering, procurement and construction pre-consortium to bid for the development, financing, construction, technical operations and maintenance of the HSR, collectively termed as the “AssetsCo Tender”.

Hong Leong Investment Bank (HLIB) Research is positive on the tender bid as getting the AssetsCo role will further elevate George Kent’s prominence in the rail system scene and its net cash pile of RM395 million will come in handy for the AssetsCo bid.

As for its track record, George Kent is undertaking the LRT extension systems, MRT2 track works and LRT3 project delivery partner (PDP) role.

HLIB Research said from its understanding, AssetsCo will need to fund and build the systems portion of the HSR and rolling stock. “We gather that the AssetsCo portion will comprise RM20 billion of the overall RM60 billion HSR cost.”

To get its returns on investment, HLIB Research understands that AssetsCo will receive several payments which include availability payments, train lease fee, currency and indexation, energy strategy and based on other key performance indicators.

HLIB Research noted that Siemens will likely be the lead partner in the consortium for the AssetsCo bid and it has significant global experience in rail jobs, including rolling stock, automation systems and electrification.

“Should the consortium fail to win the AssetsCo tender, George Kent can still potentially participate in the HSR systems work via subcontracts from the winner.”

The AssetsCo tender is expected to be called by year-end. The construction of the HSR is scheduled to take place from 2018 to 2025 and operations to begin in 2026.
HLIB Research believes George Kent is in a prime position to participate in upcoming mega rail projects such as the ECRL and HSR.

“It also boasts solid financials with above industry return on equity of 24%, three-year projected earnings compound annual growth rate of 12% and net cash position of 70 sen per share.”

The research house is maintaining a “buy” call on George Kent with a target price of RM3.75.


Stocks In Focus [13-10-2017]

KUALA LUMPUR (Oct 12): Based on corporate announcements and news flow today, companies that might be in focus on Friday (Oct 13) include the following:…


SMRT in the dark over reason for share price spike

PETALING JAYA: SMRT Holding Bhd has clarified that it is in the dark over any reasons that could have contributed to the sudden surge in its share price on Thursday.

The education, talent development and talent technology group saw its share price jump 39.5% to hit 26.5 sen and settle at 22 sen just before trading in the stock was suspended on Thursday. SMRT closed at 19 sen on the previous day. Trading in SMRT will resume tomorrow.

SMRT’s board of directors said despite having made due enquiries, the group was unable to find any possible explanation to account for the unusual market activity and the increase in share price and volume of activity.

“There is no corporate development relating to the group’s business including those in the stage of negotiation or discussion that has not been previously announced that may account for the trading activity. There is no rumour or report concerning the business and affairs of the group that may account for the unusual market activity,” it said.