Monday, November 20th, 2017


Luxury property freeze to affect market sentiment

PETALING JAYA: The freeze on luxury properties and the possible rate hike next year are expected to affect market sentiment, according to analysts.

Kenanga Research foresees some knee-jerk reaction to developers’ share prices over the next few days.

The Properties Index fell as much as 11.83 points or 1% to 1211.60 points yesterday, before closing 9.93 points or 0.81% lower at 1213.50 points.

SP Setia was the top loser among all property stocks with a drop of 10 sen or 2.9% to RM3.39, followed by Gamuda Bhd and Eastern & Oriental Bhd, which fell 7 sen and 6 sen to RM4.70 and RM1.41.

Kenanga Research said it was surprised by the government’s move to freeze luxury properties given that the property market has stabilised and most developers’ pipeline of launches are now focused on townships or affordable housing supply as demand for commercial spaces and luxury condominiums has been very weak over the last few years.

Among stocks under its coverage, UOA Development Bhd and Malaysian Resources Corp Bhd have the highest exposure to development in KL while other developers such as Eco World Development Group Bhd, Mah Sing Group Bhd, SP Setia Bhd and Sunway Bhd have moderate exposure. However, most of their projects have secured the necessary master plan approvals.

Nonetheless, Kenanga Research said the measure is good for Kuala Lumpur in the long run and may benefit developers with on-going commercial or luxury condominium projects.

The research firm noted that it could provide a window for developers with light balance sheet to acquire prime commercial land bank in view of less demand given the freeze, while taking a longer-term development view on the land.

Kenanga Research is maintaining a “neutral” call on the property sector pending Q3 reporting season.

On possible rate hikes next year, it said a 50-basis-point increase in average lending rates will result in a 5%-6% increase in monthly mortgage payments for those who have taken 90% margin of financing.

With that, housing affordability is likely to deteriorate further unless banks are willing to absorb further margin compression from lower lending rates, not to mention the cost-push inflation effect on property replacement costs.

The possible rate hike may also dampen the current demand momentum as some buyers may take a “wait-and-see” stance.

Meanwhile, PublicInvest Research is maintaining a “neutral” view on the property sector considering that it is still hobbled by the somewhat high household debt of 84.6% to GDP ratio amid weakened housing affordability and strict lending by banks.

The Real Estate and Housing Developers Association has yet to come out with a statement on the issue as at press time.

UEM’s Q3 earnings more than doubled to RM86m

PETALING JAYA: UEM Sunrise Bhd’s net profit more than doubled to RM86.6 million for the third quarter ended Sept 30, 2017 against RM36.33 million in the same quarter a year ago, underpinned by strong construction progress from its international and local projects, inventory monetisation initiatives and a gain from the disposal of its land in Richmond, Canada.

Its revenue also rose 69.9% from RM421.25 million to RM715.77 million.

The property developer told Bursa Malaysia that it is on track to meet its sales target of RM1.2 billion for the current financial year in view of commendable bookings received.

To date, it has launched projects with a total gross development value of about RM1.9 billion, exceeding its target for 2017 of RM1.7 billion.

UEM Sunrise’s unrecognised revenue as at Sept 30 stood at RM2.9 billion.

Commenting on Bank Negara’s remarks on imbalances in the property market, the group said it has and will continue to address those challenges by reviewing and consolidating its products in response to the shift in the market.

“In addition, we will continue with our asset monetisation strategy through the divestment of our non-core assets to provide us the additional capital resources to secure strategic land banks in the central region.”

UEM Sunrise’s nine-month net profit jumped 158% from RM94.01 million to RM242.43 million. Revenue came in at RM2.16 billion, 77.1% higher than the RM1.22 billion it made a year ago.

Its shares gained 1 sen or 0.96% to close at RM1.06 today on some 996,300 shares done.

India’s biggest tax hike may cut palm oil imports

MUMBAI: India’s palm oil imports are likely to drop until the end of the year after the world’s largest edible oils buyer raised import taxes to the highest in more than a decade, importers and dealers said.

India announced late on Friday that it raised its import tax on crude palm oil to 30% from 15%, while the duty for refined palm oil has been raised to 40% from 25%.

Malaysian palm oil futures dropped more than 3% to a three-month low of RM2,626 a tonne today.

“Short term demand will see a major impact because it was such a steep price hike, but (India’s) local oilseed production is not enough to cover all its demand,” said David Ng, derivatives specialist at Phillip Futures in Kuala Lumpur.

The duty hike should lift India’s local oilseed prices, which may encourage farmers to sell oilseeds and increase supply for crushing, said Dinesh Shahra, managing director of Ruchi Soya.

Indian oilseed crushers had been struggling to compete with cheaper imports from Indonesia, Malaysia, Brazil and Argentina, reducing demand for local rapeseed and soybeans which have been trading below government-set prices in the physical market and angering farmers.

Indian soyoil and crude palm oil futures jumped by the daily maximum limit of 4% today.

“Importers will first clear earlier inventories. Then they will see at what level prices stabilise in the local market before deciding about December imports. December imports could be around 600,000 tonnes,” said a Mumbai-based dealer with a global trading firm.

While market participants were anticipating a duty hike, the extent of the increase surprised them.

“Many importers have sold palm oil in advance at the earlier duty rate. They will struggle in fulfilling commitments. Their entire margin has been wiped out,” the dealer said.

India’s palm oil imports in October stood at around 750,000 tonnes.

Edible oil imports for the full year, however, is expected to remain higher than last year.

“The overall import volumes are unlikely to change significantly for the entire marketing year as local oilseeds supplies are limited and there is huge demand,” said B.V. Mehta, executive director of the Solvent Extractors’ Association, a Mumbai-based trade body.

The South Asian country could import 15.5 million tonnes edible oils in the current year, down from an earlier estimate of 15.9 million tonnes, said Sandeep Bajoria, chief executive of the Sunvin group, a vegetable oil importer. – Reuters

EU ready for ‘most ambitious’ Brexit trade pact, says Barnier

BRUSSELS, Nov 20 — EU Brexit chief Michel Barnier said today the bloc would give Britain its “most ambitious” trade deal — but only if it meets the bloc’s stringent Brexit conditions. Barnier warned Britain it had to come up with a…

RSPO optimistic over certification

SANDAKAN: The Roundtable of Sustainable Palm Oil (RSPO), a leading not-for-profit body that provides certification for sustainable palm oil, is optimistic that the entire 150 growers worldwide under its scheme will be able to obtain RSPO certification in five years, more than double of the 72 growers certified now.

In 2016, Malaysia made up 30.91% of the globally-produced certified sustainable palm oil (CSPO), after Indonesia at 57.65%. Indonesia and Malaysia produce more than 85% of the world’s palm oil.

Certified growers are producers of palm oil whose operations have been certified against the RSPO Principles and Criteria (P&C).

In Malaysia, certified growers include Boustead Plantations Bhd, IOI Corp Bhd, Sime Darby Plantation Bhd.

RSPO technical director Salahudin Yaacob said the remaining 78 growers will have to get their mills and estates certified in the next five years.

Moreover, RSPO’s revised system also requires all RSPO growers to get all their plantations certified within five years, which is applicable from June 2018.

“Companies under RSPO subscribe to our conduct and they know they have to do it. If not, their membership will be suspended,” he told SunBiz during a familiarisation tour here early this month.

According to RSPO data, there are 304 certified palm oil mills globally. As of Oct 10, 2017, there are 11.61 million tonnes of RSPO-Certified Sustainable Palm Oil globally from 3.2 million hectares of certified areas, out of which 2.47 million hectares are productive areas. In Malaysia, certified growers are producing 3.67 million tonnes CSPO from a certified area of 965,817ha in the country.

Salahudin said RSPO aims to increase CSPO by two million tonnes annually worldwide but noted that this is a big task.

“Beginning 2016, we were having some challenges due to the withdrawals of Felda Global Ventures Holdings Bhd (FGV). When we lost the FGV certificate, we lost 1.75 million tonnes (of CSPO). So now we’re in the recovering phase and we’re hoping they (FGV) can bring all their units to certification within five years. We have big faith in FGV. We’re also hoping for growth in Indonesia and Africa.

“For us, it’s not the volume but the areas that we manage to bring into our scheme,” Salahudin told SunBiz.

The Federal Land Development Authority (Felda) and its 33.7%-associate FGV had voluntarily withdrawn the RSPO P&C certificates of 58 mills located throughout Malaysia effective May 3, 2016 to address on-the-ground sustainability issues.

Salahudin said the biggest challenge for RSPO is getting credible auditors and assessors due to the lack of proper education in this area in Malaysia.

“We’ve good standards, we’ve good system, but what we need is credible auditors and assessors. We do have assessors but they’re still not up to the mark. The same goes with auditing. When we send a certification body to audit, this also requires good auditors.”

He said most of the auditors or assessors learn on the fly and by experience, which takes time.

Most have experience dealing with ISO (International Organisation for Standardisation), a management system; whereas RSPO is a compliance system.

“Certification is here to stay. It will not go away, so efforts must be made to make sure that our system can produce good graduates who can become good auditors.

“The universities need to do something to churn out good graduates,” said Salahudin, adding that it is now working with Universiti Putra Malaysia to come up with modules for sustainable auditing.”

RSPO has 25 certification bodies under its scheme, which is officially recognized by Accreditation Services International GmbH.

Malaysia’s top CPO producer stepping up efforts for CSPO recognition

SANDAKAN: Malaysia’s top crude palm oil producing (CPO) state Sabah, is stepping up efforts to pool together its large number of plantation smallholders to achieve economies of scale and efficiency in full compliance of the Certified Sustainable Palm Oil (CSPO) by 2025, under a jurisdictional programme.

Non-governmental organisation Forever Sabah board chair and chief executive facilitator Cynthia Ong said it is unable to ascertain the exact number of smallholders in the state, but believes there are easily 100,000 smallholders.

A jurisdictional certification steering committee was formed in 2016 to spur Sabah, the first state in the world to adopt CSPO that is certified by the international standards of the Roundtable of Sustainable Palm Oil (RSPO). The committee will look into the issue of smallholders, sort out land issues, as well as to lower the cost of smallholders to obtain certification and to increase yield and income.

Sabah Forestry Department chief conservator of forests Datuk Sam Mannan said Sabah remains committed to pursue CSPO by 2025 to be relevant to the market and is not against the local Malaysian Sustainable Palm Oil (MSPO) certification, which will be made mandatory by the end of 2019.

“We chose what we think is best. We’ve chosen RSPO long before we talked about MSPO. MSPO can carry on, we’re not against any system that improves performance and work on the ground, but in the end, we decide what we want. This is our land, our rights, our hard work, our failures and our successes,” said Sam.

The Malaysian Palm Oil Certification Council (MPOCC) had expressed concern over the Sabah Forestry Department’s decision to seek the RSPO certification, instead of the MSPO, explaining that RSPO is a business-to-business arrangement and voluntary in nature.

MSPO is a national certification scheme developed taking into account domestic laws and regulations, and best practices relating to sustainable production of palm oil.

According to data from the Malaysian Palm Oil Board, Sabah is the top crude palm oil (CPO)-producing state in Malaysia with a production volume of 4.21 million tonnes or 26% of the country’s CPO production for the first 10 months of 2017.

Social enterprise Wild Asia field coordinator for Sabah, Burhanuddin Ismail said it act as a group manager for smallholders to obtain RSPO certification via a group certification scheme under the Wild Asia Group Scheme (WAGS).

WAGS is a programme created to support independent producers to improve their practices. It has 798 smallholder members who are RSPO-certified, mostly in Sabah.

He said it is a challenge to group these smallholders together, as they are scattered in terms of location, while some of them are illiterate, making documentation and adoption of new methods difficult. – by Ee Ann Nee

Mieco Chipboard’s third quarter earnings jump three-fold

PETALING JAYA: Mieco Chipboard Bhd’s net profit for the third quarter ended Sept 30, 2017 jumped more than three-fold to RM15.62 million from RM4.23 million a year ago driven by higher selling price and improved production efficiency.

In a filing with Bursa Malaysia today, the group said its performance a year ago was also lower due to higher production reject and repair and maintenance cost.

Revenue for the quarter rose 11.10% to RM101.13 million from RM91.03 million a year ago mainly due to the continued strong selling prices from plainboard.

For the nine months ended Sept 30, 2017, net profit fell 4.63% to RM34.56 million from RM36.24 million a year ago due to a one-time exceptional RM35 million gain on sale of Mieco Wood Products Sdn Bhd in the first quarter of 2016.

Revenue for the period rose 18.19% to RM273.86 million from RM231.71 million a year ago due to the higher overall sales volume, better plainboard selling prices and improved production efficiency.

The group anticipates market conditions to be more competitive and challenging in the particle board industry due to the downward pricing pressure on its products.

“The pricing pressure is due to the softening of global demand and keener competition on the recent entrance of new players in the market,” it said.

It said it will continue to explore new market opportunities locally and abroad, streamline production efficiency, impose stringent cost control, develop effective branding strategies and shift towards higher value products to mitigate the challenges.

Mieco’s share price rose 2.61% or 3 sen to close at RM1.18 today with a total of 5.93 million shares traded, giving it a market capitalisation of RM619.50 million.

KKB Engineering posts RM4.97m net profit in Q3

PETALING JAYA: KKB Engineering Bhd has posted a net profit of RM4.97 million for the third quarter ended Sept 30, 2017 (Q3), from a net loss RM135,000 in the previous corresponding quarter on the back of higher revenue.

Revenue for the quarter surged 78.3% to RM49.3 million, compared with RM27.6 million in the same period last year.

In a filing with Bursa Malaysia today, KKB said the increase in revenue was mainly due to higher revenue recognition from its civil construction division but offset by lower revenue from its steel pipes manufacturing division as compared to the preceding year corresponding quarter.

For the nine months period, its net loss widened to RM3.7 million, against RM1.7 million a year ago, while revenue jumped 80.7% to RM139.1 million, from RM77 million previously.

On its prospects, KKB said the group had weathered a tough 1H 2017, but saw a positive sign of recovery towards the 2H 2017. It will maintain its effort on cost management, product quality and operational efficiency to further improve its operating results, amid the threat of adverse effect from the volatility of raw material steel prices and foreign exchange rates on its performance.

KKB gained 4.5 sen or 5.33% to 89 sen today with a total of 843,100 shares traded.

Ringgit has greatly stabilised since November 2016: BNM

KUALA LUMPUR: The ringgit has seen significant developments since November last year when it was one of the most volatile currencies, but now it has not only strengthened but has greatly stabilised, said Bank Negara Malaysia (BNM) governor Tan Sri Muhammad Ibrahim.

“The implied volatility has declined from a peak of 9.7% to about 3.7% currently,” he said in his opening remarks at the Financial Markets Association of Malaysia’s annual dinner last Friday.

He said the influence of offshore market activities and its damaging spillovers to the ringgit exchange rate had subsided, consistent with the significant decline in transaction volume in the non-deliverable forward market.

“On the other hand, foreign exchange transaction volume in the onshore market has been sustained with improving transaction costs, facilitating business transactions for all market participants,” he said.

Muhammad said the ringgit did, to some extent, reflect Malaysia’s economic fundamentals, and the fact that its recent recovery coincided with strong domestic data releases suggested that.

“Nevertheless, in a global financial market that is driven by short-term developments, the ringgit exchange rate can veer in unexpected directions and reach levels that are far from reflecting economic realities,” he said.

“Unfortunately, most of these movements are not driven by facts, but perceptions and in ringgit’s case, I would call it misperceptions.

“We tend to, in some other instances, base our perception on prior evidence and situations that we are familiar with, rather than update our views with new information,” he said.

For many economists and analysts, Malaysia is an oil-dependent economy and when the oil price goes south, the Malaysian economy suffers.

“While this was true many years ago, these simple relationships are continuously assumed to be fixed and hold to perpetuity,” said Muhammad.

Despite the many structural changes leading to a more diversified Malaysian economy and reduced reliance on oil, this perception has persisted.

“For the uninitiated, the percentage of oil revenues to government revenues was 41.3% in 2009 compared to only 14.6% in 2016.

“This fact seems to elude many analysts,” he added. – Bernama

Foreign selling returns to Bursa

PETALING JAYA: Foreign selling returned to Bursa last week, with international investors dumping RM297.1 million net of Malaysian equities, the highest weekly attrition recorded in seven weeks.

“Foreign selling returned to Bursa at a rather intensified level compared with the amount disposed in the past six weeks that did not exceed RM100 million net,” MIDF Research said in its fund flow report today.

Foreign buyers exactly matched foreign sellers on Monday and a bout of acquisition took place on Tuesday where foreign investors bought RM181.3 million net, the highest net inflow in a day in almost five months despite the weak China industrial output data that coincided with the 0.22% dip in the FBM KLCI.

“However, foreign investors were back in selling mode thereafter until the week ended with Thursday recording the highest amount sold at US$282.1 million (RM1.17 billion) net. The heavy foreign buying on Thursday saw the FBM KLCI close at an eight-month low of 1,718 points ahead of the House of Representatives’ vote for a tax cut bill,” it said.

It noted that market sentiment improved later on Friday following the central bank’s announcement of a strong Q3’17 gross domestic product growth of 6.2%, which led to a 0.21% rebound in the FBM KLCI.

“Foreign selling still occurred on the same day but on a reduced level below RM100 million net,” it added.

Following the intense foreign selling last week, the cumulative year-to-date inflow has substantially decreased to RM9 billion from RM9.31 billion in the week before but the year-to-date inflow still offsets about 31% of the total net outflow from 2014 to 2016.

Foreign participation improved as the foreign average daily trade value (ADTV) surged by 27% to RM1.13 billion after three weeks of staying below the RM1 billion mark.

In contrast, the retail ADTV decreased by 8% to settle below the RM1 billion level at RM957 million.