Thursday, December 7th, 2017


Property sector – No full-fledged recovery in sight within next 12 months, says AmResearch

PETALING JAYA: AmResearch does not expect a full-fledged recovery of the sector within the next 12 months due to various key challenges coupled with subdued consumer sentiment and a potential interest rate increase next year.

In a note today, the research house said the key challenges include elevated home prices; low loan-to-value or financing margin offered by banks; and house buyers’ inability to qualify for a home mortgage due to their already high debt service ratios.

In addition, AmResearch noted that the still-subdued consumer sentiment against a backdrop of rising cost of living, weak job security and elevated household debts is holding consumers back from committing themselves to the purchase of big-ticket items, including a house.

“Not helping either, is the potential hikes in the overnight policy rate in 2018, given the recent shift in Bank Negara Malaysia’s policy stance towards a slightly more hawkish than before.”

AmResearch believes these issues could be partially addressed with the offering of affordable housing and more flexible financing plans to the low-income group.

However, it is mindful that affordable housing typically commands low margins and the margins could be crimped further given rising competition as the segment gets more crowded.

“We believe the investment case for an affordable housing developer only holds water if the developer is able to sell affordable houses in large quantities, has access to highly cost-effective and speedy construction methods, and most importantly, has the ability to secure strategic landbank with a high plot ratio at cheap prices.

“Otherwise, we are more inclined to see selling affordable housing as a means for developers in general to tide themselves over while waiting for the property market to turn around.”

The research house said the local property sector has been weak over the last four to five years, since hitting a peak in mid-2013.

“We believe the most encouraging signs we have seen in 2017 are: developers adjusting to the reality that mass-market affordable housing is where the demand is; and the willingness of certain developers to cut prices (to the tune of 10-15% or more) in order to clear unsold stocks. We expect these trends to prevail in 2018, bringing some life back to the sector.”

AmResearch, which is retaining its “neutral” stance on the property sector for 2018, said it sees a bright spot in developers with overseas projects.

“We have already seen green shoots of recovery in property markets in the UK, Australia, Singapore and Vietnam since 2017. These markets are ahead of Malaysia in terms of their recent boom-bust cycles. They have been through the consolidation phase and are now on a recovery path,” it added.

RGM lowers 2017 forecast again after retail sales fall in Q3

PETALING JAYA: Retail Group Malaysia (RGM) has revised its full-year retail sales growth forecast downwards for the third time since the end of 2016, from 3.7% to 2.2%, after retail sales fell 1.1% in the third quarter (Q3) of 2017.

The contraction in Q3 sales came in below the 2.9% and 4% growth forecasts by the Malaysia Retailers Association (MRA) and RGM respectively.

The drop in sales, amid an encouraging economic backdrop, is partly attributable to the early Hari Raya occasion as well as the weak spending propensity spurred by rising cost of living, which in turn has caused purchasing power to deteriorate, according to the Malaysia Retail Industry Report compiled by RGM, an independent retail industry research firm.

For the first three quarters of this year, retail sales grew 1.9% compared with the same period in 2016.

Based on the latest retail sales forecast revision, the total sale turnover for Malaysia’s retail industry in 2017 is estimated at RM100 billion.

The fashion and fashion accessories segment contracted 4.8% in Q3, while the pharmacy and personal care sector fared well with a 6% growth against the same quarter a year ago.

Meanwhile, MRA expressed pessimism on prospects for Q4, forecasting the average growth rate at 3.8% on the back of cautious spending by consumers.

While department store-cum-supermarket operators expect their businesses to rebound moderately with a growth rate of 1.8% in Q4, department store operators expect their business to rebound strongly with 9.3% growth.

Meanwhile, supermarket and hypermarket operators do not expect their businesses to return to the black anytime soon given the forecast 1.2% drop in Q4 sales.

For 2018, RGM is projecting a 6% growth in retail sales and the recovery is highly dependent on factors such as the general election, external economic demand and the ringgit’s performance.

Gamuda MD cautious on sub-contract prices, warns against complacency

SHAH ALAM: Gamuda Bhd, which is targeting to replenish its construction order book by RM6 billion-RM8 billion a year over the next two years, has warned that it cannot be complacent about sub-contract prices over the next few years as this may affect contract costs.

Gamuda group managing director Datuk Lin Yun Ling (pix) said most of its sub-contractors are concerned about the supply chain being over-stretched when there are many big projects coming in.

“So far, the sub-contract prices have not moved up much yet. But over the next two or three years, when other new projects come in, we will have to manage that,” he told a press conference after the group’s AGM here today.

Lin explained that sub-contract works provide jobs for small and medium enterprises (SMEs) and if there are a lot of projects around, when SMEs get busy, their sub-contract prices will go up.

“It’s something that we have to be careful about in the coming years. To a certain extent, it will affect the contract costs also. Overall, in the last few years (price increases) have been rather benign, but we shouldn’t be complacent about the next few years. We can’t take it for granted that it will stay benign,” he said.

He added that mega projects like the MRT 3 and the East Coast Rail Link involve foreign funding, which usually comes with foreign contractors that can ironically help to ease pressure on the supply chain.

“But then you don’t get the benefits of localisation. The government will have to weigh these different factors and make the right decision,” said Lin.

Meanwhile, he said the MMC-Gamuda joint venture is fully focused on its underground works for the KVMRT Line 2 and is fully braced for the challenges over the next 24 months, adding that it will only bid for the Line 3 project when the opportunity arises.

Lin said the company has completed the detailed ground mapping of the tunnel drives for KVMRT Line 2 and that four of the 12 tunnel boring machines are going through challenging mixed soil conditions. “We’ll encounter ground conditions that will change suddenly and drastically over a short distance. This is going to be challenging for four of the 12 tunnel drives,” he added.

Likening it to “extreme turbulence when you fly”, Lin said its tunnel crew will have to be at their best over the next 24 months.

“You don’t allow this to delay. You still have to arrive on time,” Lin said when asked if this will delay the project.

Gamuda has a current construction order book of RM8 billion that can last the group for three years. It is targeting property sales of RM3.5 billion for the financial year ending July 31, 2018 (FY18) after achieving record sales of RM2.4 billion in FY17.

Lin said although half of the property sales are from its overseas projects and half from Malaysia, two thirds of its property profits come from its overseas projects in Singapore, Hanoi, Ho Chi Minh City and Melbourne.

When asked on the sale of its 40%-owned Syarikat Pengeluar Air Selangor Holdings Bhd (Splash) to the Selangor state government, Lin said there is no new progress as yet.

The state government has taken over water assets belonging to three water concessionaires operating in the state, which are Puncak Niaga Holdings Bhd, Syarikat Bekalan Air Selangor Sdn Bhd and Konsortium Abbas Sdn Bhd, except for Splash. Discussions between Selangor and the shareholders of Splash on the purchase price have been ongoing for some time.

On Puncak Niaga’s lawsuit against the state government, and whether it will help or hurt Splash’s chances, Lin quipped that it is too early to speculate.

“I can’t go into details. We’ll just have to see what the government’s response is,” said Lin.

Stocks In Focus (08-12-2017)

KUALA LUMPUR (Dec 7): Based on corporate announcements and news flow today, stocks in focus on Friday (Dec 8) may include: Sapura Energy Bhd, Supermax…

Bitcoin – ‘like a charging train with no brakes’ – zooms past US$15,000

LONDON: Bitcoin rocketed above US$15,000 (RM61,200) for the first time today, after adding more than US$2,000 to its price in less than 12 hours.

Bitcoin, the world’s biggest and best-known cryptocurrency, has seen a more than fifteenfold surge in its value since the start of the year.

It climbed to as high as US$15,344 on the Luxembourg-based Bitstamp exchange around 1420 GMT, leaving it up more than 12% on the day, having traded just above US$13,000 12 hours earlier.

The latest surge brought bitcoin’s “market cap” – its price multiplied by the total number of bitcoins in circulation – to more than US$260 billion, according to Coinmarketcap, a trade website. That, in theory, makes its market value higher than that of Visa.

The value of all cryptocurrencies now stands at around US$415 billion, according to Coinmarketcap.

Bitcoin – which came into being in 2009 as a bit of encrypted software and has no central bank backing it and no legal exchange rate – has risen from a 2017 low of US$752 in the middle of January, and surged dramatically in the past month.

The increased interest has been driven by growing acceptance among traditional investors of an innovation once considered the preserve of computer nerds and financial experts.

But some, including the US Federal Reserve, have warned against dabbling in bitcoin as it could threaten financial stability, and fears of a bubble have increased as the price has soared.

“Bitcoin now seems like a charging train with no brakes,” said Shane Chanel, from Sydney-based ASR Wealth Advisers. “There is an unfathomable amount of new participants piling into the cryptocurrency market.”

But he warned: “Once the hype slows down, we will most certainly see some sort of correction.”

There are mounting concerns about its introduction into the mainstream financial system after US regulator the Commodity Futures Trading Commission last week cleared the way for bitcoin futures to trade on major exchanges.

Bitcoin is to be offered on the CBOE Futures Exchange from this weekend and on the world’s biggest futures venue, the Chicago Mercantile Exchange, from Dec 18. – Reuters, AFP

Stanley Thai seeks court’s leave to remain as Supermax director

PETALING JAYA: Datuk Seri Stanley Thai Kim Sim, who vacated office as Supermax Corp Bhd’s executive director effective Nov 24, 2017 after being convicted of insider trading offences, has authorised lawyers to make an application to the court for leave to act as a director or be reappointed as a director.

The application will be made under Section 198(4) of the Companies Act 2016 and Section 318(1) of the Capital Markets and Services Act 2007. According to Section 198(4) of the Companies Act 2016, a person who has been disqualified may be reappointed or hold office as a director with the leave of the court.

Section 318(1) of the Capital Markets and Services Act 2007 states that a person who intends to apply for leave of the court to be a director or promoter of a listed corporation shall give to the Securities Commission not less than 10 days’ notice of his intention to apply.

Thai has been convicted by the Securities Commission for insider trading offences under Section 188 of the Capital Markets and Services Act 2007. The court has granted a stay of execution and an appeal has been filed against the conviction and sentence.

Supermax today also announced that Thai’s daughter Cecile Jaclyn Thai and nephew Tan Chee Keong have been appointed as executive directors effective Jan 2, 2018. Supermax reiterated that the position of the business remains intact and the management and board of directors stand firm in growing the business.

On Bursa Malaysia today, Supermax closed up 1.10% at RM1.84 with 589,100 shares traded.

Poh Kong net profit surges threefold in Q1

PETALING JAYA: Poh Kong Holding Bhd saw a more than threefold increase in net profit to RM5.36 million for the first quarter ended Oct 31, 2017 compared with the RM1.77 million recorded in the same quarter last year.

Revenue for the period rose 19.11% to RM220.93 million from RM185.47 million a year ago, driven by increased demand for gold jewellery and gold investment products, higher retail prices for gold and additional revenue contributed by new outlets.

Poh Kong said in a Bursa Malaysia filing that it is confident of its resilience to weather the challenges ahead for its current financial year ending July 31, 2018.

On Bursa Malaysia today, Poh Kong rose 1.67% to close at 61 sen on 63,800 shares traded.

Oceancash Pacific proposes transfer to Main Market

PETALING JAYA: Felt manufacturer Oceancash Pacific Bhd has proposed to transfer its listing from the ACE Market to the Main Market of Bursa Malaysia Securities.

Oceancash and its subsidiaries have met the requirements for the transfer of its listing to the Main Market based on audited consolidated financial statements with an aggregate net profit of at least RM20 million for the past three to five full financial years; and net profit for the most recent financial year of at least RM6 million.

It said the proposed transfer is undertaken to reflect the existing scale of the group’s operations and is expected improve the liquidity and marketability of its shares. The proposed transfer listing is to be completed by the second quarter of 2018.

Project Delivery Partner for KL-S’pore High-Speed Rail to be known by Q1 2018

JOHOR BARU: The winner of the bid to be the Kuala Lumpur-Singapore High Speed Rail (KL-SG HSR) Project Delivery Partner (PDP) will likely be known by the first quarter of next year.

MyHSR Corp Sdn Bhd commercial director Tonny Yeap said today the deadline to submit the PDP tender proposal is the end of January.

“Right now, we are still open for expressions of interest by companies in the tender, so the numbers (interest) are still changing.

“We are open to both local and foreign consortiums. What’s important is that the companies coming forward should and must have railway experience in Malaysia, alongside expertise in high-speed rail,” he told reporters at a media briefing here.

MyHSR Corp called for the tender to appoint the PDP for the mega project on Nov 22.
The PDP will develop the detailed design for the infrastructure works, which includes the stations and alignment structures within Malaysia, as well as construct them on budget and on time.

On whether the proposed alignment has been finalised, project delivery director Mark Loader said it has been submitted to the Land Public Transport Commission (SPAD) and is in the midst of a public inspection exercise which began on Nov 1 this year.

“At the end of the inspection process, we will gather the feedback from the public and address them, before going back to SPAD for our proposed final alignment.

“It will take us maybe one or two months to review all the comments and resubmit to SPAD our version of the railway scheme for final approval.

“By the end of the first quarter next year, we will submit our final proposal (alignment) and, assuming it is approved by SPAD, the alignment will then be fixed,” Loader said. – Bernama

Tech gains lift Nasdaq; consumer stocks weigh on S&P, Dow

NEW YORK, Dec 7 ― Gains in technology stocks helped lift the Nasdaq today, while the S&P 500 and the Dow were weighed down by losses in consumer stocks. Broadcom rose 3.2 per cent after the chipmaker reported upbeat profit and boosted its…