Monday, December 4th, 2017

 

Malaysia’s 2018 fiscal deficit target of 2.8% of GDP achievable: RAM

PETALING JAYA: RAM Ratings opines that Malaysia’s target to narrow its fiscal deficit to 2.8% of gross domestic product (GDP) under Budget 2018, from an estimated 3.0% in 2017, is achievable despite the federal government debt remaining elevated and its contingent liabilities significant at 16.9% of GDP in first half of 2017 (1H 2017).

It said federal government debt remains elevated despite the anticipated decline to 50.3% of GDP by end-2018, from the 2017 estimate of 51.2%.

The government’s hefty debt burden translates into a relatively high debt service-to-revenue ratio of 12.6% in 2018, higher than those of Malaysia’s peers in the region. This is exacerbated by higher bond yields following the adjustment of the Foreign Exchange Administration rules in November 2016.

“That said, these effects have since partially normalised,” said RAM.

The government’s contingent liabilities also remained significant at 16.9% of GDP in 1H 2017, which imposes a continuous risk on its fiscal position.
This ratio is estimated to rise to 18.4% by 2023, premised on RAM’s expectation of existing and upcoming infrastructure projects as well as the government’s routine commitments to housing and higher-education loan agencies.

“That said, stricter oversight over the issuers of these debts is likely following the establishment of the Fiscal Risk and Contingent Liability Technical Committee, and a possible introduction of a limit on guaranteed debt in the future,” said RAM.

It added that the adjustment to the government’s Medium-Term Fiscal Framework targeted fiscal deficit to an average 2.4% of GDP throughout 2018-2020, from a near-balance target by 2020, is realistic and indicates a more gradual pace of fiscal consolidation.

Fiscal revenue is expected to rise 6.5% to RM240.0 billion in 2018, as negative pressures ease. This will be driven by resilient economic growth and a gradual recovery in global commodity prices.

“Notably, O&G revenue is projected to exceed the government’s budgeted amount given its conservative assumed oil price of US$52 per barrel,” said RAM head of sovereign ratings Esther Lai.

These factors are, however, balanced by tax rate reductions for three brackets of personal income taxes, which are estimated to have a fiscal impact of RM1.6 billion (0.1% of GDP) – and tax relief measures for companies.

While there is a higher likelihood of fiscal slippage leading up to the 14th general election, RAM said, there is evidence that the government’s budgetary discipline has improved.


Beijing orders regions to ‘regulate’ gas market as prices soar (VIDEO)

BEIJING, Dec 4 — China’s state planner has ordered eight regions to meet with natural gas producers, liquefied natural gas (LNG) terminal operators and traders on Monday to “regulate” the market as prices of the clean fuel soar due to…


IJM, Sunway and two others team up to bid for High-Speed Rail deal

PETALING JAYA: IJM Corp Bhd is teaming up with three other parties including Sunway Construction Sdn Bhd to jointly bid for the Kuala Lumpur-Singapore High Speed Rail (HSR) project.

In a filing with Bursa Malaysia yesterday, IJM said wholly owned subsidiary IJM Construction Sdn Bhd entered into a prebid agreement with Jalinan Rejang Sdn Bhd, Maltimur Resources Sdn Bhd and Sunway Construction to work together on an exclusive basis to participate in the tender for the project delivery partner (PDP) role in the HSR project.

The parties have set up a consortium known as IJM Construction Sdn Bhd-Jalinan Rejang Sdn Bhd-Maltimur Resources Sdn Bhd-Sunway Construction Sdn Bhd Consortium for the tender and to undertake the project if the bid is successful. Each party holds a 25% stake in the consortium.

Last week, Gamuda Bhd and Malaysian Resources Corp Bhd announced that they would jointly participate in the PDP tender for HSR.

The PDP will help in the Malaysian civil infrastructure portion of the HSR project. It will also be responsible for developing the detailed design for the infrastructure works as well as delivering the infrastructure works on budget and on time. The infrastructure design covers the station and the alignment structures including bridges, tunnels and embankments that are within Malaysia.


Tunku Shazuddin is new chairman of Berjaya Food

PETALING JAYA: Berjaya Food Bhd told the stock exchange today it has appointed Datuk Tunku Shazuddin Tunku Sallehuddin as its new chairman.

Tunku Shazuddin, one of two sons of the Sultan of Kedah Tan Sri Tunku Sallehuddin Sultan Badlishah, replaces Datuk Seri Robin Tan Yeong Ching.

Currently, Tunku Shazuddin is a shareholder and managing director of Seri Libana Sdn Bhd, a company involved in interior fit-outs and project management specifically handling government contracts.

He also provides consultancy services to various state and government departments, including acquisition of new technologies and funding for various agricultural and tourism initiatives.

Tunku Shazuddin, who graduated from Kansas Wesleyan University, the US, majoring in design and marketing, began his career with Johan Design Associates and managed numerous design projects from graphic, interior design to branding for various corporate and private clients.

He continued his career in the same industry with other companies including Hewlett Packard, Data One and Keppel Group of Singapore until year 2001.

In 2002, he ventured into the design business and formed an agency in 2005 and subsequently became a major shareholder for both Rethink Sdn Bhd and Reka 3 Sdn Bhd.


UK agrees to ‘regulatory alignment’ on both sides of Irish border

BRUSSELS, Dec 4 — Britain agreed today to keep Northern Ireland in “regulatory alignment” with the European Union after Brexit, Irish government sources said, raising hopes Prime Minister Theresa May can strike a deal in Brussels to start…


Cypark to develop solar PV plant in Negri Sembilan

KUALA LUMPUR, Dec 4 — Cypark Resources Bhd announced that its wholly-owned subsidiary, Cypark Renewable Energy Sdn Bhd (CRE), had received a Letter of Acceptance of Offer from the Energy Commission (EC) for the development of large scale solar…


CRRC Urban Traffic buys stake in Ireka, firms sign business collaboration pact

PETALING JAYA: Ireka Corp Bhd has signed a share subscription agreement (SSA) with CRRC Urban Traffic (Europe) Co Ltd (CRRC UT), which will see the latter emerging as a substantial shareholder holding 8.48% equity interest.

Ireka also signed a memorandum of understanding (MoU) with CRRC UT to explore business opportunities. CRRC UT is a member of the China-based CRRC Group, which manufactures rolling stock and rail related products and systems.

Under the MoU, the two parties will explore business opportunities in four key areas namely urban traffic solutions, tourism and infrastructure projects across Malaysia and Southeast Asia; logistics, with the objective of supporting Chinese companies operating in Malaysia and Southeast Asia; trading of construction and building materials to support the abovementioned Chinese companies; and rail and infrastructure construction projects arising from China’s One Belt One Road initiative in Malaysia.

The long-term strategic collaboration will provide a platform for both parties to leverage on each other’s technical knowledge, expertise and experience for expansion and growth in the four key areas.

Ireka said the investment from the joint venture will provide the ideal opportunity to diversify into a number of new areas, in particular, urban traffic solutions and rail infrastructure related projects.

“We are particularly pleased to welcome CRRC UT as our new strategic shareholder in the company. The stake that CRRC UT has invested in Ireka and the upcoming joint venture is another great step forward for our company’s growth,” Ireka group managing director Datuk Lai Voon Hon said in a statement today.

He said CRRC UT will be a financially strong partner while CRRC’s technical know-how will complement its wide business network.

The CRRC Group already has a presence in Malaysia and is an active player in the country’s rail industry through its supply of contracts for the LRT System, Express Rail Link and KTM Komuter.

Ireka believes it is ideally positioned to take on the new challenge based on its 50 year track record in building a number of major national infrastructure projects such as the North-South Highway, KL International Airport, Cheras-Kajang Highway and MRT1 Package V7.

Ireka’s share price fell 1 sen or 1.64% to close at 60 sen today with a total of 36,800 shares traded.


CRRC UT invests in Ireka

PETALING JAYA: Ireka Corp Bhd has signed a share subscription agreement (SSA) with CRRC Urban Traffic (Europe) Co Ltd (CRRC UT), which will see the latter emerging as a substantial shareholder holding 8.48% equity interest.

Ireka also signed a memorandum of understanding (MoU) with CRRC UT to explore business opportunities. CRRC UT is a member of the China-based CRRC Group, which manufactures rolling stock and rail related products and systems.

Under the MoU, the two parties will explore business opportunities in four key areas namely urban traffic solutions, tourism and infrastructure projects across Malaysia and Southeast Asia; logistics, with the objective of supporting Chinese companies operating in Malaysia and Southeast Asia; trading of construction and building materials to support the abovementioned Chinese companies; and rail and infrastructure construction projects arising from China’s One Belt One Road initiative in Malaysia.

The long-term strategic collaboration will provide a platform for both parties to leverage on each other’s technical knowledge, expertise and experience for expansion and growth in the four key areas.

Ireka said the investment from the joint venture will provide the ideal opportunity to diversify into a number of new areas, in particular, urban traffic solutions and rail infrastructure related projects.

“We are particularly pleased to welcome CRRC UT as our new strategic shareholder in the company. The stake that CRRC UT has invested in Ireka and the upcoming joint venture is another great step forward for our company’s growth,” Ireka group managing director Datuk Lai Voon Hon said in a statement today.

He said CRRC UT will be a financially strong partner while CRRC’s technical know-how will complement its wide business network.

The CRRC Group already has a presence in Malaysia and is an active player in the country’s rail industry through its supply of contracts for the LRT System, Express Rail Link and KTM Komuter.

Ireka believes it is ideally positioned to take on the new challenge based on its 50 year track record in building a number of major national infrastructure projects such as the North-South Highway, KL International Airport, Cheras-Kajang Highway and MRT1 Package V7.

Ireka’s share price fell 1 sen or 1.64% to close at 60 sen today with a total of 36,800 shares traded.


Wall St set to rally after Senate approves tax bill

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Petronas sees crude oil holding at US$50-US$60 a barrel

PETALING JAYA: Petroliam Nasional Bhd (Petronas) will remain prudent in the “lower for longer” environment, as reflected in its activity level, with its oil price outlook hovering around the US$50 to US$60 per barrel level.

“At the time this report is published, oil prices have strengthened to above US$60 per barrel, driven by escalating tension in the Middle East. In the short term, crude oil prices are expected to remain volatile as traders may take position to capture opportunities from gyration of oil prices. Any geopolitical events can also push up oil prices as the market is still rebalancing,” Petronas vice-president of group procurement Samsudin Miskon said in the Petronas Activity Outlook report for 2018-2020.

In terms of project portfolio, Petronas said an average of 1.7Mboe/d production is forecasted over the next five years and upstream Malaysia has a robust pipeline of potential projects focused on developing greenfield projects and maximising ultimate recovery of brownfield projects.

“Petronas and its PACs will continue to mature potential development projects technically and commercially, within its portfolio to sustain the desired production level,” it said.

The projection of development portfolios for greenfield is about 20 projects with about 30% of these projects being oil projects, all with new facilities development.

For brownfield, Petronas expects about 30 projects with about 75% of these projects being oil projects. Some 10% of these involve new facilities development. These projections are based on when a specific activity begins, and not by contract award.

If oil price recovers for a sustainable period, Petronas expects a higher number of greenfield and brownfield projects to become commercially viable, provided that cost is kept at a competitive level. Activities for the oil and gas services and equipment sector may increase accordingly.

In terms of downstream, Petronas has a medium term (post 2020) positive outlook with expectations of a substantial increase in turnaround activity to cater for Pengerang Integrated Complex (PIC) due to the large size of its operations.

“PIC project is scheduled to come online by 2019, and turnaround activities will kickstart around 2022 onwards. It is a good opportunity for collaboration between industry players and foreign participation in building local capability,” it said.

Due to the size of the complex, Petronas expects activities to double once operation commences. It is estimated that in the next five to 10 years, the complex itself will spur new urban development with spin-off activities benefitting especially the local communities.

According to Samsudin, Petronas will continue to drive down cost and improve efficiency through CACTUS and CORAL 2.0, embracing digitalisation and industry collaboration while economies of scale is now the way to go, via integrated work scopes and longer contracting tenures.

In terms of technology, senior vice-president of project delivery and technology Mazuin Ismail said it is the key to unlock value and deliver sustainable solutions for the industry, in order to thrive in the challenging environment.

According to the report, robotics and drones utilisation will increase significantly in due time while data analytics supported by predictive maintenance will exponentially increase plant reliability, leading to less repair and maintenance requirements. These elements combined, may result in fewer contract opportunities.

Petronas also promotes collaboration with external parties by calling for proposals from external parties via its online crowdsourcing platform, Innovation [email protected] ([email protected]).