Tuesday, December 5th, 2017


US stocks gain as tech shares recover

WASHINGTON, Dec 5 — Wall Street stocks rose early today, with technology shares leading the broader market after tumbling in the prior session. Large tech companies such as Amazon, Facebook and Google-parent Alphabet gained amid bargain…

US trade gap widens in October on record imports

WASHINGTON, Dec 5 — US imports of goods and services rose to the highest on record in October, widening the trade gap to its highest level in nine months, according to government data released today. The trade deficit for the month was pushed…

Indonesia to keep Opec membership frozen, deputy energy minister says

JAKARTA, Dec 5 — Indonesia will keep a freeze on its membership of the Organisation of the Petroleum Exporting Countries (Opec), deputy energy minister Arcandra Tahar said today, following “directions” from the country’s President….

Anti-profiteering Act no longer relevant

PETALING JAYA: Malaysia’s average inflation in the January-July 2017 period, which has returned to the rate before the Goods and Services Tax (GST) was introduced, suggests that the anti-profiteering regulation is no longer relevant, Institute for Democracy and Economic Affairs’ (Ideas) policy paper states.

Ideas’ new policy paper on “Anti-profiteering Regulations: Effects on Consumer Prices & Business Margins” explores the effectiveness of the Price Control Act as well as the potential effects of the anti-profiteering regulations.

“Theoretically, the regulation is meant to address profiteering concerns, instead of addressing general upward price pressure due to the newly introduced tax system. But in practice, the difference might not matter to the government, leaving the regulation working beyond its intended scope,” Ideas founding associate Hafiz Noor Shams said in his paper.

He added that this raises the concern that the regulation could be abused in the sense that it can become an additional tool for the government to manage general inflation and suggested that a more dynamic net profit benchmarking be adopted to help prevent abuse, as it would tie the regulation to market conditions instead of dates chosen by the government.

Conclusively, the paper was unable to determine whether the Act was effective in curbing price inflation due to limited data available as well as the unreliability of the year-on-year measurement spoilt by base effect caused by the GST.

Among his recommendations were that the benchmark formula be made more dynamic in the short run and a sunset clause be reintroduced into the regulation to wind it up, in the long run.

The research is based on meetings with government officials as well as on statistics from the Companies Commission, Department of Statistics and the Ministry of Domestic Trade, Cooperative and Consumerism.

Hafiz said that the regulation may no longer be relevant regardless of the efficacy of the Price Control and Anti-Profiteering Act in controlling inflation.

“Apart from that, there are concerns that the regulation is stepping beyond its mandate by becoming a tool for the government to manage general inflation instead of fighting anti-profiteering practices,” he said in his policy paper.

“This has possibly led to business closures thus raising the concerns about competition,” he added.

The Companies Commission of Malaysia (SSM) show that the number of terminated businesses rose significantly in 2015 when 33,326 businesses closed, a figure significantly above the 2011-2015 average of 21,073. In 2016, the figure fell to 26,872 businesses. The same source shows the growth of total companies in Malaysia slowed down in 2015 and 2016.

He acknowledged however that there may be multiple factors which led to the closure of businesses but it cannot be denied that the net profit control made it more difficult for the business to run at a time when economic growth was slow.

In explaining the anti-competitive nature of the 2015-2016 profit control mechanism, he said the regulation unfairly discriminated against low-cost businesses. This is in addition to forcing all businesses to absorb rising costs.

This year the regulation was liberalised, addressing some of the issues but still leaving the benchmark inflexible and extended indefinitely. Hafiz said the absence of a sunset clause in the regulation suggests that it is no longer about the GST and has instead become a general tool to manage inflation rather than simply fight off GST-linked profiteering.

Prestariang signs on INCS and Dell Global Business for SKIN project

PETALING JAYA: Prestariang Bhd has appointed In Continu Et Services (INCS) as its strategic technology partner to perform the works and services in the implementation of Sistem Kawalan Imigresen Nasional (SKIN).

In a filing with Bursa Malaysia today, the group said Prestariang Tech Services Sdn Bhd (PTECH) has entered into a memorandum of agreement (MoA) for the development phase (MOA-DP) with INCS.

Under this MoA, PTECH agreed to appoint INCS to plan, study, design, develop, customise, supply, deliver, install, configure, integrate/interface, test, commission, support and provide warranty for the comprehensive and integrated solution for specified modules.

PTECH also signed a letter of intent (LOI) with INCS to appoint INCS as its service provider to provide onshore and offshore maintenance services and to define the salient terms of the conditional memorandum of agreement for the maintenance services phase (MOA-MSP).

INCS is a subsidiary of Imprimerie Nationale S.A. and a member of Groupe Imprimerie Nationale (IN Group).

Prestariang had on March 28, 2017 entered into a heads of agreement with Thales Communications & Security SAS and Thales Malaysia Sdn Bhd for the proposed implementation of SKIN.

In a separate filing, Prestariang said Prestariang SKIN Sdn Bhd (PSKIN) has entered into a teaming agreement with Dell Global Business Center Sdn Bhd to participate in the SKIN project. The two parties agreed to collaborate and co-operate on a confidential basis to mutually agree on the workshare, scope of works and price, and will enter into a subcontractor agreement.

George Kent registers 21% growth in net profit

PETALING JAYA: George Kent (Malaysia) Bhd’s net profit for the third quarter ended Oct 31, 2017 rose 20.79% to RM28.68 million from RM23.74 million a year ago due to higher profit contribution from the engineering and metering divisions.

In a filing with Bursa Malaysia today, the group said its engineering division’s segment profit rose 26% on improvement in profit margin of certain projects. As for the metering division, segment profit rose 60% to RM11.66 million from RM7.30 million a year ago.

Revenue for the quarter rose 4.09% to RM127.09 million from RM122.09 million a year ago, derived mainly from the sales of water meters locally. Revenue from the metering division rose 39% to RM44.95 million from RM32.45 million a year ago.

For the nine months ended Oct 31, 2017, net profit rose 22.42% to RM72.55 million from RM59.26 million a year ago while revenue rose 8.36% to RM444.08 million from RM409.82 million a year ago.

The group has declared a second interim dividend of two sen per share amounting to RM11.27 million, which is 50% higher, for the financial year ending Jan 31, 2018. The dividend is payable on Jan 12, 2018.

Masteel gets extension for private placement exercise

PETALING JAYA: Malaysia Steel Works (KL) Bhd (Masteel) has been granted a six-month extension, until June 8, 2018, to complete its private placement exercise to raise up to RM23.96 million.

Masteel’s board of directors said in a Bursa Malaysia filing, the group has been granted the extension by the stock market regulator in a letter dated Dec 4.

The group announced its proposed private placement exercise, of up to 10% of the company’s total share capital, on May 25.

The bulk of the proceeds will be for the re-payment of its credit facilities amounting to RM23.78 million.

Masteel’s share price fell 6.345 to close at RM1.33 with some 18.45 million shares done.

FBM KLCI surges despite weaker sentiment

KUALA LUMPUR: Bursa Malaysia closed lower, but the benchmark index ended at an intra-day high of 1,724.84, up 11.71 points, led by Hong Leong Bank and Maybank, as investors reacted positively to the re-balancing exercise carried out by MSCI Inc on 14 stocks.

Trading was active and that was evident from the total turnover of 1.84 billion units valued at RM2.23 billion versus Monday's 1.80 billion units worth RM2.57 billion.

Losers led gainers 624 to 298 while 352 counters were unchanged, 569 untraded and 31 were suspended.

“The significant increase in the FBM KLCI is due to a reaction to the rebalancing of the key index,” said an analyst.

Of heavyweights, Hong Leong bank soared RM1.70 to RM17, Maybank and Genting Malaysia jumped 13 sen each to RM9.38 and RM5.13, respectively, TM advanced 21 sen to RM6.18 and Hong Leong Financial Group was 54 sen higher at RM16.94.

TNB gained six sen to RM15.64, Public Bank was flat at RM20 and Genting Bhd declined four sen to RM8.91.

Of actives, PUB rose one sen to 21 sen, Berjaya Corp edged up half-a-sen to 36 sen, Borneo Oil and Netx Holdings were flat at nine sen and 4.5 sen, respectively, and Trive Property fell one sen to 4.5 sen.

On the scoreboard, the FBM Emas Index advanced 35.57 points to 12,395.39, FBMT 100 Index expanded 45.45 points to 12,070.3, FBM Emas Shariah Index trimmed 3.57 points to 12,835.92 and the FBM 70 Index shed 77.06 points to 15,263.6.

The FBM Ace gave up 31.84 points to 6,207.04.

Sector-wise, the Finance Index soared 251.92 points to 16,155.31, Plantation Index gained 8.37 points to 7,872.14 and the Industrial Index added 4.07 points to 3,167.69.

The Main Market volume went up to 1.26 billion units, worth RM2.14 billion, from Monday's 1.20 billion units, worth RM2.47 billion.

Volume on the ACE Market was lower at 372.96 million shares, valued at RM64.08 million, from 395.17 million shares, worth RM66.35 million, yesterday.

Warrants volume narrowed to 196.37 million units, worth RM26.32 million, from 200.50 million units, valued at RM32.33 million.

Consumer products accounted for 73.62 million shares traded on the Main Market, industrial products (273.79 million), construction (47.26 million), trade and services (471.64 million), technology (171.23 million), infrastructure (9.75 million), SPAC (2.86 million), finance (49.89 million), hotels (3.47 million), properties (109.72 million), plantations (37.28 million), mining (11,700), REITs (11.14 million), and closed/fund (10,800).

The physical price of gold as at 5pm stood at RM161.28 per gramme, up 21 sen from RM161.07 at 5pm yesterday. — Bernama

The truth behind Khazanah’s financials

KUALA LUMPUR, Dec 5 — With net assets worth well over RM100 billion, Malaysia’s sovereign wealth fund, Khazanah Nasional Bhd, is in the best position to outdo most other corporate entities on the media front if it wants to. But instead, it…

The truth behind Khazanah Nasional’s financials

KUALA LUMPUR: With net assets worth well over RM100 billion, Malaysia's sovereign wealth fund, Khazanah Nasional Bhd, is in the best position to outdo most other corporate entities on the media front if it wants to.

But instead, it chooses to go about its work quietly and shows humility by not shouting out its achievements.

That has been the image portrayed by the Khazanah management led by Managing Director, Tan Sri Azman Mokhtar, in the last 13 years.

But out of the blue came two reports in Singapore Straits Times in the last few weeks that thrust Khazanah into the spotlight that sparked off media interest on this side of the Causeway as well.

It started off early last month when the newspaper reported that a carefully thought-out internal succession for the top job at Khazanah was starting to unravel “due to some powerful lobbying by external candidates hoping to succeed Azman”.

Two Khazanah deputy managing directors and two outsiders were reported to be in the running to take over from Azman who has been at the helm since 2004 and whose contract expires at end-May 2019.

And last week, the Straits Times added another twist, by reporting that Khazanah was “feeling the heat” amid pressure on it to get higher returns and to change its investment strategy.

At the outset, highly-placed sources within Khazanah are puzzled over the timing of this speculation on the purported leadership change when Azman still has 18 months left until the end of his contract.

They are equally curious over the negative attacks on a professional institution whose track record on financials is solid and which has more than performed by any measure especially given the fact that Khazanah's mandate does not involve receiving any regular capital injections.

Both the traditional and social media jumped on the bandwagon taking the cue from the Singapore newspaper but Khazanah quickly doused their enthusiasm by describing their reports as “giving inaccurate and misleading” picture of its financial performance.

For instance, the Straits Times reported that Khazanah has managed a less than one per cent in dividends a year between 2013 and last year, but Khazanah disputed this by saying this conclusion is arrived at based on the daily's selective focus on a narrow and incomplete set of indicators of its financial performance.

It says that the most representative measure of Khazanah's financial performance should be based on total returns that take into account realised and unrealised returns as well as the distribution of returns through dividends.

This translated into an annual compounded return of 9.3% per annum over the 13-year period from May 2004 to December 2016, rather than just one per cent, or 2.6%, return as the newspaper articles implied.

Khazanah's shareholders' funds have also grown to RM37.8 billion as at December 2016 from RM13.2 billion in the same period in 2004, up RM24.6 billion.

The sources told Bernama that the misportrayal of Khazanah's financials in the media lately stemmed from ignorance of its portfolio and mandate as the Malaysian government's strategic investment fund.

Unlike entities such as the Employees Provident Fund and Tabung Haji, Khazanah does not receive regular capital injections and on top of this, it also undertakes catalytic investment – both domestically and internationally — apart from its developmental and national initiatives.

It places a premium on human capital development via its Yayasan Hasanah set up in 2015 with RM3 billion pledged as an endowment in perpetuity to drive a nation-building agenda of progressing Malaysia as a globally-competitive nation.

The capital is protected and only the interest is used thus ensuring its sustainability. Last year alone, the foundation spent about RM125 million for good causes primarily in education.

And it would continue doing this in perpetuity, said the sources, adding credit for this social face of Khazanah should go to the wisdom of Prime Minister Datuk Seri Najib Abdul Razak and the Khazanah Board.

“This investment could have been money that could have been declared as dividends. So commentators should make proper analysis before making simplistic and narrow assumptions and conclusions,” said the sources.

One social responsibility initiative that Khazanah could be proud of is the Skim Latihan 1Malaysia, or 1Malaysia Training Scheme, that provides skill training to unemployed graduates to enhance their employability.

So far, it has trained some 4,200 graduates at between RM80,000 and RM90,000 each and the good news is that over 80% of these otherwise unemployed graduates have found jobs.

Behind the scene, Khazanah was also tasked with the tough negotiations with Singapore for the development of the land inside the island republic once used as railways tracks for Malayan Railways (KTM) following the termination of service.
It has struck a very good deal with Singapore on the land.

Viewed objectively, the media hype about who's going to succeed Azman is, in reality, a non-issue at this point of time.

Not only because he still has many months of his contract left as well as the fact that Khazanah itself has a well-established and orderly succession process that will kick in when the time comes and in line with good institutional practice.

Within Khazanah circles itself, some would regard assumptions of a leadership change as even far-fetched as they expect Azman's contract to be extended as well, as Khazanah under his leadership is indeed in very good hands.

Senior journalist M. Shanmugam, in his column in The Star, wrote: ” What Azman has instilled in Khazanah is integrity in governing public assets and managing public funds.

“Khazanah is a well-respected sovereign fund in the international capital markets. It has earned a name among investors and bankers for its professional management that conforms to internationally-acceptable standards,” he said.

This is as high a recognition that any Malaysian corporate body could expect to get and Khazanah has achieved this and more without bragging about it. – Bernama