Tuesday, November 21st, 2017


Tech stocks boost Nasdaq to record

NEW YORK, Nov 21 — Technology stocks boosted the Nasdaq Composite index to a record at the open today, while encouraging results from some retailers and Medtronic helped bolster the gains. As the third-quarter earnings season winds down and…

EU frees up cross-border online shopping

BRUSSELS, Nov 21 — The European Union have agreed to lift barriers to consumers shopping online for cheaper goods and services in other EU countries, with the rules to take effect late next year. The European Parliament, the European Council…

Most unsold homes in Kedah are PR1MA units

PETALING JAYA: The residential property overhang situation in the country, which worsened in the first half of 2017 (1H2017), is mainly due to the high number of unsold completed PR1MA units in Kedah.

According to the Property Market Report for First Half 2017 published by the Valuation and Property Services Department (JPPH), Kedah surpassed the overhang numbers in Johor, capturing nearly 21% (4,363 units) of total national overhang.

“The turn of event was due to the unsold completed units, which are mostly PR1MA projects in Kuala Muda District and Baling District. Kuala Muda District recorded 3,401 completed unsold units, of which nearly 69% comprised PR1MA houses priced mostly in the range of RM300,000 to RM400,000,” it said in the report.

In Baling District, JPPH said, there was a fair share of overhang between PR1MA houses and other private developments, which were mostly double-storey terrace units in the RM200,000 to RM250,000 range.

Johor stood second with more than 18% of national overhang share, which mainly comprised double-storey terrace and apartment/condominium units priced from RM500,000 to RM1 million and RM400,000 to RM500,000 respectively.

Nationwide, unsold units grew to 20,876 units worth RM12.26 billion in 1H2017 from 13,438 units worth RM7.59 billion a year ago.

For 1H 2016, Johor recorded the highest overhang nationwide, accounting for 21.1% (2,831 units) of the total 13,438 units. By type, two- to three-storey terraced units (27.3%) and condominium/apartment units (23.7%) dominated the overhang.

In terms of new residential launches, 28,397 units were launched in 1H 2017, reflecting a 9.1% decline from 31,257 units launched in 1H 2016. Sales performance was low at 23.9%.
Kuala Lumpur recorded the highest number of new launches, accounting for nearly 30% of the national total, followed by Pahang, which accounted for nearly 15% of the national total. The total number of new launches in Pahang stood at 4,196 units in 1H2017.

“The upsurge in launches was attributed to the PR1MA Pahang houses, where more than half are concentrated in Kuantan (2,203 units). There were other state and federal-led PR1MA housing launches, across the districts in the state. Sales performance however remained low in the first six months of the year,” said JPPH.

PR1MA did not respond to queries from SunBiz about the report.

Bank Negara Malaysia’s (BNM) quarterly bulletin had emphasised that 83% of the 130,690 unsold residential units in the first quarter of 2017 were priced above RM250,000.

“Over the period 2016 to 1Q 2017, only 21% of new launches were for houses priced below RM250,000. This is insufficient to match the income affordability profile of about 35% of households in Malaysia,” said BNM.

It further explained that unsold residential units priced below RM250,000 reflected the unattractive location of some affordable housing projects due to factors such as distance from workplace and low transport connectivity, and preference for landed over high-rise properties.

“Thirdly, applicant registries maintained by providers of affordable housing may comprise many non-creditworthy applicants, resulting in delays in the allocation of affordable homes”, BNM said.

The central bank suggested that a single entity for affordable housing be established to accelerate the rebalancing of supply towards the affordable range while ensuring new projects are in decent locations with good transport connectivity.

To increase efficiency in allocation of affordable homes, applicant registries should be regularly updated, verified and filtered to prioritise creditworthy households while ineligible applicants should be directed to rental housing, it added.

Land disposal gain lifts Boustead Plantations

PETALING JAYA: Boustead Plantations Bhd’s net profit for the third quarter ended Sept 30, 2017 leaped 15 times to RM562.42 million from RM37.36 million in the same quarter a year ago, mainly attributable to a land disposal gain of RM555 million.

Its revenue, however, declined 8% to RM183.43 million from RM199.33 million.

The group proposes to declare an interim dividend of 3 sen and a special dividend of 7 sen per share.

For the first nine months of the year, Boustead Plantations’ net profit jumped more than threefold to RM628.8 million from RM177.5 million on the back of a 6% increase in revenue to RM541.93 million from RM511.23 million.

The average crude palm oil (CPO) selling prices for the nine-month period was RM2,871 per metric ton (MT), up 16% from RM2,475 per MT in the same period last year, while average palm kernel price rose 8% to RM2,478 per MT.

Fresh fruit bunch (FFB) production increased 5% to 696,668 MT, mainly as a result of improved yields post El-Nino in the first half of the year. Average oil extraction rate for the period was 20.9% and kernel extraction rate was 4.3%, slightly lower than the same period last year.

Looking ahead, Boustead Plantations vice-chairman Tan Sri Lodin Wok Kamaruddin said while Peninsular Malaysia and Sabah have seen improved FFB yields, this may be hampered by erratic weather conditions and labour shortages, along with difficult ground conditions in Sarawak.

“In addition, Malaysia’s export growth was weaker than expected due to stiff competition from Indonesia which caters to price-sensitive markets such as China and India.”
Despite these challenges, he said, CPO prices have outperformed expectations as production recovery was not as strong as expected post El-Nino.

“It is anticipated that favourable CPO prices will remain supportive with upward potential should CPO production fall short of expectations. Robust global demand and comfortable stock levels are also expected to support CPO prices.”

On a separate note, Boustead Plantations proposes to undertake a bonus issue exercise to improve the liquidity of the stock and further reward its shareholders.

The bonus issue entails the issuance of 640 million new bonus shares and is to be undertaken on the basis of two bonus shares for every five existing shares held.

On the stock market today, Boustead Plantations rose 12 sen or 7.5% to close at RM1.73 on some 5.55 million shares traded.

RAM: Headline inflation to moderate to 4% in October

PETALING JAYA: The headline inflation rate is expected to moderate to 4% in October, from 4.3% in September, said RAM Ratings.

The rating agency attributed the slower pace of consumer price increases to weaker contribution from the transport fuel component amid tapering low-base effects of retail petrol prices.

It said the uptrend in global crude oil prices has been unexpectedly steep heading into the final quarter of 2017, with the average price of Brent crude surging to its highest level since June 2015, of US$57.50 a barrel in October.

“That said, we expect the dissipating low-base effects from retail petrol prices (on the transport component) and the tapering of the inflationary impact from the removal of cooking-oil subsidies in November (on the food component) to offset some of this unanticipated pressure,” it said.

RAM said the elevated headline inflation in 2017 is envisaged to moderate to 2.5% next year amid easing direct cost-push factors. It expects Brent crude prices in 2018 to average close to this year’s level at US$55 (RM228) a barrel.

“This trend, along with the absence of further spikes in food prices, will reduce the significance of the incremental lift from the food and transport components in 2018.”

RAM maintained its call that there is room for tighter monetary policy, with a hike of 25 basis points in the overnight policy rate (OPR) next year, on the back of stronger demand-pull factors amid a more sustainable growth momentum in 2018.

“We expect the OPR to end the year at 3.25%. This is also consistent with the more hawkish tone of the central bank’s last monetary policy statement for this year,” it said.

Supermax’s Q1 earnings up on higher selling prices, stronger US dollar

PETALING JAYA: Supermax Corp Bhd saw a 42.8% rise in net profit to RM27.9 million for the first quarter ended Sept 30, 2017 against RM19.54 million in the previous corresponding period, driven by higher selling prices, stronger US dollar as well as improved efficiency and productivity.

Revenue expanded 16% from RM269 million to RM312.02 million.

The glove manufacturer said in a filing with the stock exchange that global demand for both natural rubber and nitrile gloves remains strong with healthcare awareness continuing to rise, increasing regulation of the healthcare sector and ever higher healthcare spending in both the public and private sectors driving demand growth.

It also noted that the Chinese government’s concerted efforts to clamp down on the vinyl glove industry in China has also proven to be a boon for the natural rubber and nitrile glove producers as demand has shifted to them.

The clamp down is due to the highly polluting nature of vinyl glove plants which do not comply with China’s environmental regulations.

Supermax said in line with its continuous improvement efforts, the group is refurbishing, rebuilding and modernising its older manufacturing plants to gain maximum efficiency in production capability.

Supermax shares fell 6 sen or 2.9% to close at RM2 today, with some 6.29 million shares changing hands.

Trading in Sime Darby shares to be suspended on Monday

PETALING JAYA: Trading in Sime Darby Bhd shares will be suspended from 9am on Monday, Nov 27, in order to facilitate the proposed share distribution as part of its pure-play strategy.

All structured warrants relating to the company will also be suspended at the same time.

In a filing with Bursa Malaysia today, Sime Darby said the proposed distribution, together with the proposed internal restructuring and proposed listing were approved by shareholders at an EGM held last Monday.

Trading in Sime Darby shares will resume on Nov 30, the day of listing of Sime Darby Plantation and Sime Darby Property on the Main Market of Bursa Securities.

The last day of trading of Sime Darby shares before the implementation of the proposed distribution is at 5pm this Friday.

Sime Darby’s share price fell 2 sen or 0.2% to close at RM8.97 today on 7.44 million shares done.

Malaysian palm oil prices seen falling further on India duty increase

SINGAPORE: Malaysian palm oil futures will likely fall a further 2-3% after India, the world’s biggest buyer, raised its import duties to the highest in a decade, top industry analyst Dorab Mistry said today.

Malaysian palm oil futures slid for a third consecutive session today to their weakest since mid-August at RM2,612 a tonne, hit by worries that India’s surprise move late last week to raise duties on edible oil imports would hit demand.

“We saw price reaction to India’s move on Monday, Malaysian palm oil futures are likely to fall further by around 2-3% as the market adjusts to the duty increase,” Mistry told Reuters.

India lifted the import tax on crude palm oil to 30% from 15%, and increased import tax duty on refined palm oil imports to 40% from 25%.

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.

But the move is now likely to boost local oilseed processing activity, hitting imports, said Mistry, a director of Indian consumer goods company Godrej International.

He estimated Indian edible oil imports would decline from earlier estimates by 100,000 to 150,000 tonnes a month between December and February.

“There are around 2.2 to 2.3 million tonnes of rapeseed stocks and close to 10 million tonnes of soybeans,” said Mistry. “These stocks will start getting processed at a strong pace.”

India’s edible oil imports are likely to drop to 15.5 million tonnes this year, down from an earlier estimate of 15.9 million tonnes, analysts said following the Indian tax increase.

Energy Commission prefers competitive bids

KUALA LUMPUR: The Energy Commission (EC) said the competitive tendering process is its preferred method of procurement, though there will be cases where projects are awarded on a direct negotiation basis subjected to the government’s decision.

“Of course our preference is to go with competitive bidding, but there are some situation by the government that can direct us to do something else .… something different. All in all, we still want to achieve a competitive pricing for these projects,” EC chairman Datuk Abdul Razak Abdul Majid told reporters after launching a mobile application on energy statistics today.

“We are always in consultation with the Ministry of Energy, Green Technology and Water as well as the government. That is their policy decision. We will have to sort of make the proponents comply with our requirements,” he added.

The energy sector regulator had previously came under criticism following the award of several power plant projects without tender.  

Asked of the long-delayed power plant project Track 4A in Pasir Gudang, Johor, Abdul Razak said the project construction work is expected to begin within six months to a year.

The project, estimated to cost about RM4.7 billion, is now expected to achieve scheduled commercial operation on July 1, 2020, delayed from the initial target of mid-2018.

“Give them some time to get the procurement and so on. But as far as we are concerned, we have given the approval for them to proceed.

“I think the project is going on track and they are doing quite well. They have achieved financial close and they are moving on to try and hit the scheduled commissioning date by early 2020,” he added.

Track 4A was awarded to Tenaga Nasional Bhd (TNB), SIPP Energy Sdn Bhd and YTL Power International Bhd on a direct negotiation basis in May 2014.

However, both YTL Power and TNB withdrew from the project in June 2014 and October 2015 respectively. It was reported that YTL Power pulled out of the consortium because of the misconception on the way the project was awarded.

TNB, however, returned in May this year by acquiring 51% stake in Southern Power Generation Sdn Bhd (SPG), the special purpose vehicle to develop the 1,440MW combined-cycle gas turbine power plant.

SIPP Energy, which is a private investment vehicle owned by the Sultan of Johor, owns the other 49% stake.

Meanwhile, Abdul Razak noted that any adjustment on the electricity tariff will only be announced in January next year. The government had previously agreed to maintain the power tariff rebate of 1.52 sen/kWh for the second half of 2017.

Earlier, he said the mobile application on energy statistics, which is a first-of-its-kind in Asean, will allow the public to access Malaysia’s energy data, including the energy reserves, supply, transformation, consumption and prices.

Known as “MyEnergyStats”, the application can be downloaded for free from the Apple Appstore and Google Playstore.

Overhang in PR1MA units calls for review of approach

PR1MA has given us new numbers to chew on.

As at Nov 15, 2017 a total of 12,640 units of PR1MA homes have been sold. This is more than half of the 25,132 units open for sale.

Numbers they did not provide, however, relate to its completed units in Kedah that have not been sold. According to the National Property Information Centre (Napic), the 4,363 units unsold in the state with the highest number of overhang units were mostly PR1MA homes.

The question is should this be happening when the homes are purportedly affordably priced and based on proper demand analyses and market studies?

And should we be proceeding with the 141,161 units in various stages of construction when there is already an overhang in the market? Should the situation not at least warrant a review of the approach of PR1MA in their development?

Of course an overhang in Kedah does not mean that the same will happen in Kuala Lumpur or Selangor. As PR1MA rightly pointed out, a total of 224 units, or 42% of the 542 units up for sale for its PR1MA @ Jalan Jubilee in Bukit Bintang, Kuala Lumpur, were taken up in only three days.

Their statement however, while expressing the latent demand for affordable homes in strategic locations, does not reflect the likelihood of the buyers getting loans to purchase the home.

The largest unit in the Jalan Jubilee development, a 1,089 square foot unit with three bedrooms and two bathrooms, for example, is going for RM445,000. This is RM45,000 more than the promise of a maximum of RM400,000 for the home.The rationale of it, one hopeful buyer said, is that the extra RM45,000 is for an additional car park. It could not be ascertained if opting out of one car park is possible.

How far should PR1MA, which was launched in 2011, be allowed to deviate from its mandate?

A programme that was initially meant to help the average Malaysian buy his or her first house was relaxed in 2013 to allow purchases of second homes, and eligibility was widened this year to include households with a mothly income of RM15,000.

Should government resources not be spent in a targeted manner for those who need it the most?

Budget 2018’s announcement of a RM1.5 billion allocation for PR1MA to build homes that are worth RM250,000 and below also raises more questions really. Will the allocation be for land or a form of subsidy to keep prices low?

The numbers spell out the problem. The policy should dictate the solution.