Tuesday, December 26th, 2017


Chinese court auctions skyscraper for US$84 million

BEIJING, Dec 26 — A Chinese court is auctioning a skyscraper on the country’s largest e-commerce website — with a sky-high starting price of 553 million yuan (approx. RM343.7 million). The 39-floor building in Taiyuan, northern Shanxi…

Discounts may be no boon to property buyers

PETALING JAYA: House buyers looking for discounts in a slow property market need to beware of the taxman who may come a-calling.

Currently, stamp duty is charged at 1% on properties worth up to RM100,000, 2% for homes valued at RM100,001 to RM500,000 and 3% for homes worth more than RM500,000.

With the current soft property market, there are more opportunities now for buyers to find discounted assets.

However, most buyers are not aware that the stamp duty is based on the market value of the property and not the selling price. As a result, buyers need to bear the increased stamp duty, notwithstanding the willing buyer-seller clause, in the event the market rate assessed is higher than the selling price.

A buyer who declined to be named told SunBiz recently that she needed to fork out several thousand ringgit more to pay for higher stamp duty as the Inland Revenue Board (IRB) believes that the transacted price was too low.

“What is their basis, I have no idea. Where they get their valuation also I have no idea. They said they just feel that the transaction price is not at the market value. So they feel that it (stamp duty) should be raised,” she added.

When contacted, IRB declined to respond to queries, saying no comment will be made on a particular case.

Crowe Horwath KL Tax Sdn Bhd managing director S.M. Thanneermalai noted that the IRB director-general has the right to disregard certain transactions if he believes the transaction is not conducted on market price basis.

Thanneermalai said the authority also has the right to make adjustments on the transactions as he thinks fit.

“This is an old law and is nothing new. The legislation is there, they (IRB) have done it in the past, but maybe they are doing it more frequently now,” he said.

Traditionally, Thanneermalai said, many people have been trying to keep costs down by buying properties under a certain price threshold and make “under-the-counter” payments.

“You know what happens, there are people who sometimes agree with one another to show a lower price to understate the tax. And then they pay under the counter.

“But if the taxpayers can prove that there was no intention to reduce the price, and it (the transaction) was actually done on an open market basis, they need to prove that they are not in any way colluding to reduce the price and defend themselves in the court,” he said.

Even though buyers may oppose the authority’s assessment by submitting notice within 30 days, they are still not exempted from paying the original duty within 30 days from the date of the notice of assessment. This means that buyers still need to pay for the duty under protest while proceeding along with the objection.

Hibiscus Petroleum share price jumps on news of Sabah deals

PETALING JAYA: Shares of Hibiscus Petroleum Bhd rose as much as 6.8% today after its indirectly owned subsidiary SEA Hibiscus Sdn Bhd entered into a novation agreement to acquire the entire interest of Sabah Shell Petroleum Co Ltd and Shell Sabah Selatan Sdn Bhd in the North Sabah Enhanced Oil Recovery production sharing contract (PSC).

On Bursa Malaysia today, Hibiscus Petroleum rose 4 sen or 4.9% to 85 sen, with 80.55 million shares changing hands. It was the second most actively traded stock of the day.

SEA Hibiscus will then continue production and further develop petroleum resources at the North Sabah oil fields upon the completion of the proposed acquisition of 50% participating interest in the PSC for US$25 million (RM101.9 million).

Petronas Carigali holds the other 50% interest in the joint operating agreement (JoA) and the PSC.

Barring any unforeseen circumstances, Hibiscus Petroleum expects the proposed acquisition to be completed on March 31, 2018.

Hibiscus Petroluem noted that Petronas’ conditions have been clarified and agreed between the sellers, Petronas and SEA Hibiscus.

“Petronas Carigali has given its consent to Shell for the assignment of the interest pursuant to the JoA in favour of SEA Hibiscus,” it said, noting that the execution of the novation agreement as a positive development.

Xidelang targets M&As, e-commerce

KUALA LUMPUR: China-based casual and sport-shoe maker Xidelang Holdings Ltd, which expects its profit for the financial year ending Dec 31, 2017 (FY17) to double from a year ago, will focus on merger and acquisitions (M&A), and e-commerce activities in FY18.

Managing director and CEO Ding Pengpeng said it will look for trading or manufacturing companies as its M&A targets and will launch activities after Chinese New Year.

“We’ve been talking to some companies, mainly local companies. Most are unlisted companies, but they are not small either,” he told reporters after its EGM today.

He said Xidelang has successfully switched from an original equipment manufacturer to original design manufacturer shoemaker and is internationally recognised for manufacturing some international brands.

“We will acquire if there’s a right company as we have to look into management and operations.”

Ding said the demand for casual and sporting shoes has increased due to changing consumers’ lifestyle, noting that Xidelang is on a growth trajectory.

In line with its plan to push the e-commerce business in FY18, he said Xidelang plans to convert 100 of its retail outlets in China to product showrooms next year.

It will roll out e-commerce in the first two quarters of FY18, leveraging on a combination of product showrooms (offline) and orders placed via the internet (online) simultaneously.

“Currently our online orders are still small. 2018 is to push the online business,” said Ding, adding that e-commerce will also be a new growth point for Xidelang in the future. It will be investing “tens of millions” of ringgit in the preliminary e-commerce business, mainly in systems.

“What we manufacture must tie in to what the information and market wants,” Ding said of its FY18 growth target.

He is confident that FY17’s profit will double from last year’s, based on the net profit reported in the first three quarters, which has exceeded last year’s. For the nine months ended Sept 30, 2017, Xidelang more than doubled its net profit to RM13.77 million from RM4.82 million a year ago.

At the EGM, shareholders approved its proposed bonus issue on the basis of one bonus share for every one existing share. It involves a bonus issue of up to 894.18 million new shares of US$0.04 (RM0.16) each, expected to be completed by first quarter of 2018.

RAM assigns ‘AA3’ rating to Edra Energy’s sukuk

PETALING JAYA: RAM Ratings has assigned an “AA3/stable” rating to Edra Energy Sdn Bhd’s proposed sukuk wakalah of up to RM5.28 billion in nominal value (2017/2037) to fund the largest gas plant in Malaysia.

In a statement today, the rating agency said it reflects the company’s strong project economics, underscored by stable cash flow generation, resulting in a minimum finance service coverage ratio (with cash balances, post-distribution, calculated on payment dates) of 1.5 times under RAM’s sensitised case upon completion of the plant.

“Given the technology used in the turbine is untested and no other plant of this scale is currently in commercial operation globally, the company is exposed to technology risk,” RAM co-head of infrastructure and utilities ratings Chong Van Nee said.

“As the plant is at the construction stage and equity will be progressively injected into the project throughout the construction period, this also exposes the project to construction-related risks and uncertainty of funding,” she added.

Edra Energy, an independent power producer, has signed a 21-year power purchase agreement (PPA) with Tenaga Nasional Bhd (TNB). It will design, construct, own, operate and maintain the largest gas power plant in Malaysia, with a capacity of 2,242 MW combined-cycle, gas-turbine power plant in Alor Gajah, Malacca.

Proceeds from the proposed sukuk amounting to RM5.09 billion will be utilised mainly to fund the construction of the plant.

RAM said the company is entitled to earn full available capacity payments regardless of the quantum of electricity generated, as long as it meets performance requirements under the PPA.

It said Edra Energy can also fully pass through fuel costs to TNB via energy payments received from selling electricity, provided that the plant operates within heat rates stipulated in the PPA.

EIA report for high-speed rail open for public viewing

KUALA LUMPUR: The Environmental Impact Assessment (EIA) report for the Kuala Lumpur–Singapore High Speed Rail (HSR) is open for public viewing and feedback from today until Jan 25, 2018, according to MyHSR Corp Sdn Bhd.

It said in a statement today that the report will be displayed for public viewing in the headquarters of the Land Public Transport Commission (SPAD) and the Department of Environment (DOE) headquarters in Putrajaya.

It will also be made available at state DOE offices in Kuala Lumpur, Selangor, Negeri Sembilan, Malacca and Johor as well as at other local authorities’ offices along the HSR alignment.

“We welcome the public to provide feedback on the findings of the EIA report. The report will then be updated to incorporate feedback gathered from the viewing and will be presented and considered for approval by the DOE,” said MyHSR Corp CEO Datuk Mohd Nur Ismal Mohamed Kamal.

“We have outlined the necessary measures to address and minimise the potential impacts throughout all phases of the project, which covers pre-construction, during construction and operations,” he added.

The EIA report assesses the environmental impact of the new railway project in terms air quality, noise and vibration, waste, water quality, coastal hydraulics, terrestrial and marine ecology, hydrology, geology, traffic, risk hazard assessment, public health and safety, economic evaluation and visual.

MRCB, TH Properties to jointly develop Setapak land

PETALING JAYA: Malaysian Resources Corp Bhd (MRCB) will be partnering Lembaga Tabung Haji’s unit TH Properties Sdn Bhd (THP) to develop three parcels of land belonging to the former’s wholly owned subsidiary, 59INC Sdn Bhd, in Setapak, Kuala Lumpur.

MRCB said its interest in the land measuring about 111,195 square metres in Setapak and its future development will be diluted as a result of TH Properties’ participation in 59INC.

The two parties have concurrently entered into a share sale agreement and subscription and shareholders’ agreement with THP for the disposal of MRCB’s 40% equity interest in 59INC for RM100.14million while THP on another note has agreed to subscribe for 500,000 new shares in 59INC.

Following the completion of both agreements, THP will hold 70% equity interest in 591NC while the remaining 30% will be held by MRCB.

The proposed joint venture will allow MRCB to carry out multiple property development projects concurrently and at the same time have the flexibility to reallocate its cash flows and resources efficiently among its projects.

“In any case, MRCB will continue to maintain a share in the future development profits from the proposed development, based on its effective shareholding of 30% in 59INC,” it said.

MRCB rose 5.56% to RM1.14 with 21.46 million shares done today.

WTK unit served with winding-up petition

PETALING JAYA: WTK Holdings Bhd’s wholly-owned subsidiary Alanya Marine Ventures Sdn Bhd (AMV) has been served with a winding-up petition by its director Goh Chung Sen, who claimed for RM1.46 million being outstanding advances made to AMV by him.

The winding-up petition was presented to the High Court in Kuala Lumpur on Dec 18, 2017. The hearing of the petition at High Court is fixed on Feb 22, 2018.

In a stock exchange filing, WTK said due to a downturn in the oil and gas industry, AMV, despite its best efforts, has not been able to repay the advances.

“AMV is not a major subsidiary of WTK under the definition of the Main Market Listing Requirements of Bursa Malaysia Securities Bhd. The company’s total cost of investment in AMV is RM87.1 million,” it said.

WTK said the winding-up proceedings are not expected to have material impact on the group’s financial and operations.

“The expected losses arising from the winding-up proceedings are minimal. WTK group and AMV do not at this time intend to contest the petition so as to facilitate and allow the orderly winding up of AMV,” it added.

WTK closed up 1.45% at 70 sen today with 50,000 shares done.

Perak Transit gets RM8m grant for new terminal

PETALING JAYA: Perak Transit Bhd’s unit The Combined Bus Services Sdn Bhd has received an approval in principle from the Public-Private Partnership Unit of the Prime Minister’s Department, for a grant of up to RM8.01 million for the construction of Terminal Kampar.

The Perak-based bus service provider said in a Bursa Malaysia filing that it had received a letter dated Dec 21 from the government agency in which UKAS had approved in principle for the provision of the grant in the form of a facilitation fund to finance the infrastructure cost of the project.

“A facilitation fund agreement is to be executed between the Government of Malaysia, Bank Pembangunan Malaysia Bhd and The Combined Bus within three months from the date of the letter,” it said. The facilitation fund is to be payable by lump sum, reimbursable upon completion of the terminal.

It is expected to contribute positively to Perak Transit’s earnings and net tangible assets upon completion of the Terminal Kampar, expected in the fourth quarter of 2018.

Its shares were unchanged at 28 sen today with some 1.75 million shares done.

RAM reaffirms rating on Malaysian Reinsurance

PETALING JAYA: RAM Ratings has reaffirmed the “AA2” rating on Malaysian Reinsurance Bhd (Malaysian Re) on the back of its improved year-on-year financial performance, portfolio optimisation initiatives, positive reserve capitalisation and liquidity position as well as extension of voluntary cession (VC) arrangements.

RAM Ratings also reaffirmed “AA3” rating on Malaysian RE’s RM250 million subordinated Medium-Term Note (MTN) Programme (2015/2030) Malaysian RE, which is a wholly owned subsidiary of MNRB Holdings Bhd, that registered a “healthier pre-tax profit” of RM100.4 million in the financial year ended March 2017 against the RM7 million registered in the previous year, due to narrower underwriting losses and higher investment income amid improved market conditions.

Its gross premium for the same period was 6% lower at RM1.3 billion, due to its portfolio rebalancing exercise, which involves exiting unprofitable markets and business lines.

Nonetheless, the extension to VC arrangements until December 2019 is expected to contribute to earnings stability over the intermediate term.

Under the VC, local general insurers are required to cede a percentage of their business to Malaysian Re, which in turn will provide a stable base for domestic earnings growth, although future premium increases will largely depend on overseas business traction.

In terms of claims, Malaysian RE’s domestic business saw a narrowed loss rate on account of lower large and attritional losses while the overseas portfolio was more volatile and remained a drag to its underwriting performance.

Its reserves coverage stood strong as at end Sept 2017 with a net technical reserves to net earned premiums ratio of 147% while its capital adequacy ratio also improved to 207% in the same period supported by the accretion of profits for the period, which is seen as sufficient for the current reserve levels.