Wednesday, November 8th, 2017

 

Foreign firms in Penang still collating flood impact info

PETALING JAYA: Foreign companies operating in Penang faced considerable disruption, especially in manpower, during the floods which hit the state over the weekend.

The American Malaysian Chamber of Commerce (Amcham) told SunBiz in an email there had been considerable disruption for US firms operating in the flood-hit state in terms of labour, with workers either having to deal with the damage to their homes or being unable to commute to work.

“Many of our members have risk mitigation plans in place to help them prepare for these types of events to limit the impact on their production and supply chains, though of course there will still be some disruption. At this early stage, it is difficult to estimate the overall costs incurred and what would be the total impact on business,” said Amcham executive director Siobhan Das.

As at press time, Amcham was still collecting feedback from its members in the state on the impact of the big flood.

Malaysian-German Chamber of Commerce and Industry (MGCCI) executive director Daniel Bernbeck echoed the sentiments of Amcham, saying a few German companies were “rightly affected” in manpower mainly, but also in factory and office operations.

Bernbeck said he does not see the natural disaster having any influence on the flow of German investments into the state, both in the short and long term. German investments “are usually very long-lasting and sustainable”, he added.

“Typically, German investors do not change their mind on political or natural upheavals in a short time. Malaysia is generally a country of stable conditions, both in natural and political circumstances. Because of this Malaysia has become a preferred location for German investments in Southeast Asia, particularly the SMEs,” he said.

About 15% of Amcham’s 280 member companies operate out of Penang.
MGCCI which has 400 member companies, has about 20 member companies operating in the north of Peninsular Malaysia.

According to the Malaysian Investment Development Authority, Penang received the highest foreign direct investments for the first half of 2016, with RM6.22 billion.

The industrial hub in northern Peninsular Malaysia, which is the base for many foreign companies especially those in the manufacturing sector, was hit by what was dubbed as the “worst” flood in its history.

On a separate note, the Penang Freight Forwarders Association Honorary Secretary Ali Ahmad told SunBiz that freight operations both for sea and air were unaffected as the worst of the floods were over the weekend and after office hours.

Federation of Malaysian Manufacturers Penang branch chairman Dr Ooi Eng Hock reportedly told a local business daily that loss are estimated at RM200 million, with smaller businesses affected the most.


Qatari investor offloads entire 5% stake in Bharti Airtel

SINGAPORE/MUMBAI: A Qatari investor sold its entire 5% stake in top Indian telecoms carrier Bharti Airtel today for 96 billion rupees (RM6.2 billion), adding to the sanctions-hit Gulf nation’s recent stake sales in foreign companies.

An affiliate of the Qatar Foundation Endowment (QFE) sold about 199.9 million shares in the phone carrier at 481 rupees each via a block trade, it said in a statement.

The sale price was a 6.4% discount to Bharti Airtel’s Tuesday closing price, but will still give the Qatari investor a significant return over its 68 billion-rupee investment in the Indian company in May 2013.

QFE will reinvest the proceeds from Bharti Airtel stake sale as part of growth of its global portfolio and diversification, it said in the statement.

Rashed Fahad Al-Noaimi, chief executive of investments at Qatar Foundation will step down from Bharti Airtel’s board after the settlement of the sale.

The sale comes at a time when other Qatari firms, including its sovereign wealth fund, are cutting stakes in foreign companies to raise cash and withstand pressure on the economy, which has been hit by sanctions imposed by Saudi Arabia, the United Arab Emirates, Bahrain and Egypt since early June.

The Gulf countries cut diplomatic and transport ties with Doha on June 5, accusing it of backing terrorism, a charge which Doha denies.

Bharti Airtel shares closed 3.7% down at 495.30 rupees. Still, the stock is up 62% in 2017 on signs of an end to a bruising price war in the Indian telecoms space and hopes that industry consolidation would benefit established players. – Reuters


Wall Street edges lower as bank stocks weigh

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Construction stocks continue to fall

PETALING JAYA: KAF Research said the selldown of construction stocks could be indicative of a downward repricing of market expectations towards smaller or subcontract roles for local construction players, should a foreign contractor emerge as the winning bidder.

The KL Construction Index continued its downtrend hitting a low of 317.94 points, before closing 0.48 points lower to 318.63 points today.

“Specifically for Gamuda, the negative reaction could be triggered by fears of its reduced prospects for MRT3 and the associated loss of PDP income under this new tender structure,” it said.

However, it still expects Gamuda to emerge with a role in MRT3, backed by its local expertise and track record, particularly in dealing with the limestone formations with karstic features that occupy most of Kuala Lumpur.

“Gamuda also has a leg up on its rivals in that it can redeploy its tunnel boring machines currently used for the MRT2 for future MRT3 works, with associated savings in mobilisation costs. The same applies for its skilled workforce, some of whom are trained at the group’s tunnel training academy, the first in the region,” it said.

From an earnings standpoint, any potential loss of PDP income from MRT3 may be mitigated by a subcontracting role for tunnel works and possibly, sections of the elevated sections, albeit at lower amounts and margins relative to MRT1 and MRT2.

KAF Research expects Gamuda’s bids for one of the main subcontracting packages under ECRL to be intact and reaffirmed its “buy” call with an unchanged target price of RM6.50.

HLIB Research concurred that Gamuda is in a prime position to secure tunneling works for MRT3, as the only contractor with the expertise in the country.

It also has much understanding of tunneling within the Klang Valley’s karstic limestone formations,” it added.

Gamuda’s stock price has been on a downtrend ever since news of the scrapping of the project delivery partner model for MRT3 broke. Its share price closed one sen lower to RM4.80 today, with some 20 million shares traded.

HLIB Research said Gamuda is maintaining its RM10 billion orderbook replenishment guidance over the next two years, which includes jobs such as the MRT3 and East Coast Rail Line (ECRL).

To recap, MRT Corp said in its notice of tender that it is calling for local construction and infrastructure development companies to participate in a tender to select a turnkey contractor to build and finance, on a turnkey basis.

“With the winning consortium required to fund MRT3, this would help remove the government’s funding burden. We understand that this new structure for the MRT3 is likely to attract interest from both Japanese and Chinese consortiums,” said HLIB Research.

Due to the shorter elevated portion compared with MRT1 and MRT2, HLIB Research said it is likely that fewer viaduct packages would be dished out thus contractors who have undertaken viaduct works for MRT1 and MRT2 should stand out, namely IJM Corp Bhd, Sunway Construction Group Bhd, Ahmad Zaki Resources Bhd, Gadang Holdings Bhd and Mudajaya Group Bhd.

The research house maintained its “buy” call on Gamuda with an unchanged target price of RM6.36. It views the recent share price retracement as a good opportunity to accumulate. It maintained its “overweight” call on the construction sector.


Construction stocks hit by downward repricing

PETALING JAYA: KAF Research said the selldown of construction stocks could be indicative of a downward repricing of market expectations towards smaller or subcontract roles for local construction players, should a foreign contractor emerge as the winning bidder.

The KL Construction Index continued its downtrend hitting a low of 317.94 points, before closing 0.48 points lower to 318.63 points today.

“Specifically for Gamuda, the negative reaction could be triggered by fears of its reduced prospects for MRT3 and the associated loss of PDP income under this new tender structure,” it said.

However, it still expects Gamuda to emerge with a role in MRT3, backed by its local expertise and track record, particularly in dealing with the limestone formations with karstic features that occupy most of Kuala Lumpur.

“Gamuda also has a leg up on its rivals in that it can redeploy its tunnel boring machines currently used for the MRT2 for future MRT3 works, with associated savings in mobilisation costs. The same applies for its skilled workforce, some of whom are trained at the group’s tunnel training academy, the first in the region,” it said.

From an earnings standpoint, any potential loss of PDP income from MRT3 may be mitigated by a subcontracting role for tunnel works and possibly, sections of the elevated sections, albeit at lower amounts and margins relative to MRT1 and MRT2.

KAF Research expects Gamuda’s bids for one of the main subcontracting packages under ECRL to be intact and reaffirmed its “buy” call with an unchanged target price of RM6.50.

HLIB Research concurred that Gamuda is in a prime position to secure tunneling works for MRT3, as the only contractor with the expertise in the country.

It also has much understanding of tunneling within the Klang Valley’s karstic limestone formations,” it added.

Gamuda’s stock price has been on a downtrend ever since news of the scrapping of the project delivery partner model for MRT3 broke. Its share price closed one sen lower to RM4.80 today, with some 20 million shares traded.

HLIB Research said Gamuda is maintaining its RM10 billion orderbook replenishment guidance over the next two years, which includes jobs such as the MRT3 and East Coast Rail Line (ECRL).

To recap, MRT Corp said in its notice of tender that it is calling for local construction and infrastructure development companies to participate in a tender to select a turnkey contractor to build and finance, on a turnkey basis.

“With the winning consortium required to fund MRT3, this would help remove the government’s funding burden. We understand that this new structure for the MRT3 is likely to attract interest from both Japanese and Chinese consortiums,” said HLIB Research.

Due to the shorter elevated portion compared with MRT1 and MRT2, HLIB Research said it is likely that fewer viaduct packages would be dished out thus contractors who have undertaken viaduct works for MRT1 and MRT2 should stand out, namely IJM Corp Bhd, Sunway Construction Group Bhd, Ahmad Zaki Resources Bhd, Gadang Holdings Bhd and Mudajaya Group Bhd.

The research house maintained its “buy” call on Gamuda with an unchanged target price of RM6.36. It views the recent share price retracement as a good opportunity to accumulate. It maintained its “overweight” call on the construction sector.


Govt guarantees RM4.5b loan for Trans Sabah Gas Pipeline

PETALING JAYA: The government has guaranteed a RM4.53 billion loan taken to fund the entire cost of the Trans Sabah Gas Pipeline (TSGP) project, according to Minister in the Prime Minister’s Department Datuk Seri Abdul Rahman Dahlan.

“While the project will be funded by a soft loan from the Export and Import Bank of China, there’s no truth in the allegations that the loan amount would be RM100 billion and oil and gas blocks off Sabah were collaterised to China in order to secure the loan,” he said in a statement today in refuting a WhatsApp message making the claims.

The owner-cum-developer of the TSGP is Suria Strategic Energy Resources Sdn Bhd, a company wholly owned by the Ministry of Finance, while The China Petroleum Pipeline Bureau is the project’s engineering, procurement, construction and commissioning contractor.

Rahman also said,considering that land matters are under the state’s jurisdiction, it is also not conceivable for the project to go ahead without the engagement and cooperation of the Sabah state government.

“With this key energy infrastructure project, Sabah will be able to move up the value chain and add value to local commodities and raw materials, thus reducing state’s dependency on primary industries and creating employment for the people throughout the state and increase their income levels,” he said.

Meanwhile, Rahman said the RM14.31 million feasibility study for the Labuan – Menumbok bridge announced under Budget 2018 is critical to determine the technical feasibility and address the financial and economic appraisal of the project. The study will involve comprehensive data collection and engineering studies to develop the technical concept for the project. The scope will include evaluation of the risks involved, action required for mitigation measures and recommendations for a Private Finance Initiative (PFI) procurement model.

In 2010, a feasibility study was carried out by Universiti Malaysia Sabah, Universiti Sains Malaysia and Universiti Malaysia Sarawak which highlighted the need for the Labuan – Menumbok Bridge Link. However Rahman said, the feasibility study did not address the financial and economic appraisal of the project. The feasibility study was also very preliminary and insufficient to render itself for the development of possible PFI procurement models.


Wah Seong indirect unit faces €3.9m claim from Bauhuis, plans counter-claim

PETALING JAYA: Wah Seong Corp Bhd will be potentially sued for €3.9 million (RM19.1 million) in relation to its contract for the supply of pipe coating equipment to be installed and commissioned by Bauhuis at a pipe manufacturing plant in Regina, Canada.

Wah Seong told Bursa Malaysia that its indirect wholly owned subsidiary Wasco Coatings HK Ltd (WCHKL) had received a request for arbitration from Solomon Taylor & Shaw, the solicitor acting for Bauhuis BV, a company incorporated in the Netherlands.

Pursuant to the request for arbitration, Bauhuis estimates its claims in the arbitration to be €3.9 million resulting from monies outstanding under the contract dated Sept 2, 2015.

Wah Seong is of the view that Bauhuis’ claim can be legally defended and WCHKL will be filing a response to the request for arbitration within 28 days from Nov 8 as well as a counter-claim against Bauhuis.

The counter-claim against Bauhuis is estimated to be US$20.57 million (RM86.9 million) due to the cost overruns and delays attributed to Bauhuis.

Wah Seong does not foresee any material impact on its operations and financial position for the current financial year ending Dec 31, 2017.

“The company will announce further material developments on the arbitration as and when necessary,” it added.

Wah Seong’s share price rose 5.5 sen or 5.7% to close at RM1.02 today on some 4.64 million shares traded.


Wah Seong says Bauhius claiming €3.9 million, will file counter-claim

PETALING JAYA: Wah Seong Corp Bhd will be potentially sued for €3.9 million (RM19.1 million) in relation to its contract for the supply of pipe coating equipment to be installed and commissioned by Bauhuis at a pipe manufacturing plant in Regina, Canada.

Wah Seong told Bursa Malaysia that its indirect wholly owned subsidiary Wasco Coatings HK Ltd (WCHKL) had received a request for arbitration from Solomon Taylor & Shaw, the solicitor acting for Bauhuis BV, a company incorporated in the Netherlands.

Pursuant to the request for arbitration, Bauhuis estimates its claims in the arbitration to be €3.9 million resulting from monies outstanding under the contract dated Sept 2, 2015.

Wah Seong is of the view that Bauhuis’ claim can be legally defended and WCHKL will be filing a response to the request for arbitration within 28 days from Nov 8 as well as a counter-claim against Bauhuis.

The counter-claim against Bauhuis is estimated to be US$20.57 million (RM86.9 million) due to the cost overruns and delays attributed to Bauhuis.

Wah Seong does not foresee any material impact on its operations and financial position for the current financial year ending Dec 31, 2017.

“The company will announce further material developments on the arbitration as and when necessary,” it added.

Wah Seong’s share price rose 5.5 sen or 5.7% to close at RM1.02 today on some 4.64 million shares traded.