Sunday, January 14th, 2018

 

Nestle Malaysia in RM100 a share club, thanks to innovation

KUALA LUMPUR: If you had believed in Nestle Malaysia Holdings Bhd MD Alois Hofbauer (pix) when he took the helm of the group in 2013 and invested in the group, you would now be part of a novel group of investors in an organisation whose share has passed the RM100 apiece mark.

The group’s share price has appreciated 75% in the last five years since Hofbauer brought in his strategy of fuel, innovate and transform to drive growth.

It is not the work of only one man, however. In fact, the journey to this milestone in Nestle Malaysia’s 105-year history involved more than 6,000 of its own people – from stockists in its warehouse to the highest level of management – turning the group into what Hofbauer calls an “innovation machine”.

This was done via a twofold approach of first convincing employees that their ideas would be taken seriously and second that they would make it work in the marketplace.

“We created this culture where innovation is rewarded.When you innovate basically you are seen by the company – not only that you can express yourself, you are empowered to bring new ideas to the company and you see what you have created in the company environment,” Hofbauer explained when met late last year, adding that this led to ideas coming from all levels in the group.

These ideas were not only focused on new products but also processes and new business models. An annual excellence in innovation award progressed to one which carried with it a US$10,000 (RM40,000) cash prize and two business-class air tickets to Europe.

The culture of “Idea is King” has translated into sales. The group made about RM100 million from new product sales in 2013, and managed to quadruple that to RM400 million, contributing 50% to the 4% growth in sales in the food and beverage business in a market which is at best flat, or in reality has been in negative growth in recent times.

Hofbauer, however, sees light at the end of the tunnel for the industry, citing strong macroeconomic figures as well as its own growth over the last few years as signs of improving consumer sentiment.

Nestle Malaysia’s food and beverage sales have been progressively growing – from 1% in 2015, 3% in 2016 and to 4% or RM4 billion in 2017.

“We are now recognised as the most innovative, most speedy company when it comes to bringing new products and offerings and these are products which are created in Malaysia for Malaysians, which makes a big difference.

“How much more Malaysian can you be than Kit-Kat Nasi Lemak, which doesn’t exist anywhere else in the world?” Hofbauer asked, adding that the product is one of its best sellers.


Indonesian central bank issues fresh warning on cryptocurrencies

JAKARTA: Indonesia's central bank has issued a fresh warning about trading in cryptocurrencies like bitcoin because of the risk of losses to the public and even a potential threat to the stability of the financial system.

Bank Indonesia (BI) has previously said that cryptocurrencies were not recognised as a legal medium of exchange, so that they could not be used as a means of payment in Indonesia.

“The ownership of virtual currencies is high risk and prone to speculation because there is no authority who takes responsibility, there is no official administrator and there is no underlying asset to be the basis for the price,” BI spokesman Agusman said in a statement issued late on Friday.

He said that virtual currencies could also be used in money laundering and terrorism funding, and due to all these factors could have an impact on the stability of the financial system and causes losses for society.

“(Cryptocurrency) is not a legal medium of exchange. We remind (people of) its risks. When the risks occur, the losses will be borne by the public. We are obliged to protect consumers and protect them from a bubble,” Agusman said by telephone on Saturday.

Asked whether such statements from authorities could stir panic among those who had already invested in cryptocurrencies, he said: “They didn't consult with us when buying … please help us make the people understand.”

Indonesian authorities have been stepping up their warnings and last month BI issued a regulation banning use of cryptocurrencies by financial technology companies involved in payment systems, and said it is examining whether there's a need to regulate trading on virtual currency exchanges.

South Korean authorities this week sent global bitcoin prices temporarily plummeting and virtual coin markets into turmoil when the justice minister, Park Sang-ki, said regulators were preparing legislation to halt cryptocurrency trading. – Reuters


MRCB still in talks with govt on EDL concession termination

PETALING JAYA: Negotiations between the government and Malaysian Resources Corp Bhd (MRCB) on the termination of Johor Bahru Eastern Dispersal Link’s (EDL) concession is still ongoing, although it has stopped collecting the RM6.80 per trip toll since the start of the year.

Malaysian Highway Authority (LLM) Director-General Datuk Ismail Md Salleh told SunBiz in an email response recently that the Ministry of Finance is still in discussions with the highway concessionaire on terms of the mutual termination agreement.

When contacted, MRCB declined to respond to queries, saying the parties are still in negotiation.

A key issue involving the negotiation will be the large amount of debt the concession holders has on its books due to the EDL, which constitutes about 26% of the group’s total debt of RM3.9 billion as at Sept 30, 2017, a drag on its financials.

Previously, the Second Finance Minister Datuk Seri Johari Abdul Ghani reportedly said the government will pay a cash compensation of an estimated RM70 million annually to MRCB for the loss of revenue resulting from the toll abolishment.

Asked how the compensation would impact MRCB’s financials, Affin Hwang Capital Research analyst Loong Chee Wei told SunBiz that the compensation is expected to improve the earnings and cash flow of the group, adding that the estimated RM70 million cash compensation per annum to MRCB should be sufficient to offset the group’s losses incurred due to interest expense, amortisation as well as operating costs.

Nevertheless, Loong said there is still uncertainty on whether the government will take over the debts of the EDL concession.

“If not, the compensation is just sufficient to defray the total costs of operating the expressway but does not generate a good return on investment,” he added.

The 8.1km EDL was built at a cost of RM1.2 billion.

According to news reports, MRCB has injected RM58 million into the EDL for the past two years, due to the cash flow mismatch between its toll collection and debt obligations. On June 2017, MRCB pumped in another RM67 million to repay its concession unit’s term loans.

The government will reportedly settle an amount of RM2.2 billion to PLUSMalaysia Bhd for the abolishment of tolls in three other locations, namely Batu Tiga, Sg Rasau in Selangor and Bukit Kayu Hitam in Kedah, as announced under Budget 2018.


Move to corporatise Customs Dept postponed

SINTOK: The move to corporatise the Royal Malaysian Customs Department, scheduled to be implemented this month, has been postponed to allow it to conduct a more detailed study on the move.

Its director-general Datuk Seri T. Subromaniam said he would visit several countries – Australia, South Africa, Singapore and the UK – to see how their customs departments manage their organisations.

“The top management will go to several countries to see their models then we will prepare a Cabinet Paper.

“So there is no decision … we will examine the possibility of corporatisation because we cannot rush to make any changes … so it is up to the government (to evaluate) it after we make the report,” he said.

He was speaking to reporters at the ceremony to present executive diplomas in business administration at Universiti Utara Malaysia on Saturday.

On March 13, 2017, Prime Minister Datuk Seri Najib Abdul Razak announced that corporatisation represented the government’s reward to the department for its excellent performance and its staff would enjoy a better service scheme.

In September, Treasury Secretary-General Tan Sri Dr Mohd Irwan Serigar Abdullah said the Customs Department would be corporatised this month following the implementation of the Goods and Services Tax (GST).

On GST collection last year, Subromaniam said, the department achieved the RM42 billion target set, but complete information on the amount would only be announced by the prime minister. – Bernama


CIMB’s divestment reflects strategy to focus on core business: MIDF Research

PETALING JAYA: CIMB Group Holdings Bhd’s move to pare down its stakes in its asset management joint ventures is part of the group’s strategy of focusing on its core banking business, said MIDF Research.

“We opine that the latest divestment is part of the group’s strategy of focusing on its core banking business, given the recent trend such as the partnership with China Galaxy. We believe that the group’s earnings going forward will not be significantly impacted by the divestment. This is due to the fact that group asset management and investment contributes about 2% to 3% of group’s pre-tax profit,” MIDF Research said.

The research house is tweaking upwards its FY18 net profit forecast by +15.1% to take into account the potential gains but it is maintaining its FY18 core net profit because of the one-off nature of the transaction.

“Overall, we do not foresee any negative impact for this divestment. We believe that it is part of the group’s overall strategy to focus on its core banking business as highlighted by previous other transactions. We opine that robust loans growth and stable margins will be the group’s growth drivers for this year,” added MIDF.

CIMB is expecting an improvement of +18bps to its common equity tier 1 (CET1) ratio, which MIDF estimated would be about 12% after the divestment.

“While we believe that the group is sufficiently buffered for the impact of MFRS 9, we opine that this divestment will have provided additional cushion.”

It maintained its “buy” call on CIMB and is adjusting its target price to RM7.17 (from RM7.10) to take into account slightly higher book value of equity per share due to this transaction.

Meanwhile, HLIB Research said it is not entirely surprised with the transaction as this in line with the group’s T18 targets, which includes CET1 ratio of 12.0%.

“To note, CIMB already hit a 12% CET1 target during 9M’17 results, and along with the potential uplift from the disposal of Bank of Yingkuo, this will put CIMB in a much stronger capital position due to the MFRS9 implementation that could impact its CET1 as high as 50bps. Overall, the disposal of assets will not have any material impact on the group’s earnings,” said HLIB.

Overall, HLIB is neutral on the announcement as asset management provides stable earnings to the group.

It believe FY2018 could be a better year for CIMB as it is encouraged with the various improvements made to achieve its T18 target. HLIB added that CIMB’s credit cost remains a wild card due to ongoing improvement in the CIMB Niaga and CIMB Thai.

HLIB maintained a “buy” call on CIMB and upgraded its target price to RM7.25 (from RM6.90).


CIMB’s divestment reflects strategy to focus on core business

PETALING JAYA: CIMB Group Holdings Bhd’s move to pare down its stakes in its asset management joint ventures is part of the group’s strategy of focusing on its core banking business, said MIDF Research.

“We opine that the latest divestment is part of the group’s strategy of focusing on its core banking business, given the recent trend such as the partnership with China Galaxy. We believe that the group’s earnings going forward will not be significantly impacted by the divestment. This is due to the fact that group asset management and investment contributes about 2% to 3% of group’s pre-tax profit,” MIDF Research said.

The research house is tweaking upwards its FY18 net profit forecast by +15.1% to take into account the potential gains but it is maintaining its FY18 core net profit because of the one-off nature of the transaction.

“Overall, we do not foresee any negative impact for this divestment. We believe that it is part of the group’s overall strategy to focus on its core banking business as highlighted by previous other transactions. We opine that robust loans growth and stable margins will be the group’s growth drivers for this year,” added MIDF.

CIMB is expecting an improvement of +18bps to its common equity tier 1 (CET1) ratio, which MIDF estimated would be about 12% after the divestment.

“While we believe that the group is sufficiently buffered for the impact of MFRS 9, we opine that this divestment will have provided additional cushion.”

It maintained its “buy” call on CIMB and is adjusting its target price to RM7.17 (from RM7.10) to take into account slightly higher book value of equity per share due to this transaction.

Meanwhile, HLIB Research said it is not entirely surprised with the transaction as this in line with the group’s T18 targets, which includes CET1 ratio of 12.0%.

“To note, CIMB already hit a 12% CET1 target during 9M’17 results, and along with the potential uplift from the disposal of Bank of Yingkuo, this will put CIMB in a much stronger capital position due to the MFRS9 implementation that could impact its CET1 as high as 50bps. Overall, the disposal of assets will not have any material impact on the group’s earnings,” said HLIB.

Overall, HLIB is neutral on the announcement as asset management provides stable earnings to the group.

It believe FY2018 could be a better year for CIMB as it is encouraged with the various improvements made to achieve its T18 target. HLIB added that CIMB’s credit cost remains a wild card due to ongoing improvement in the CIMB Niaga and CIMB Thai.

HLIB maintained a “buy” call on CIMB and upgraded its target price to RM7.25 (from RM6.90).


Sarawak’s Petros aims to be active oil & gas player within two years

MIRI: Petros, an oil and gas (O&G) company that is wholly owned by the Sarawak government, targets to become an active player in the O&G industry within two years.

Chief Minister Datuk Patinggi Abang Johari Tun Openg, said the company would try to exploit all opportunities in the O&G industry once it is operational.

“Wait two years for Petros to take active participation in the oil and gas industry, “ he said during the opening of the Parti Pesaka Bumiputera Bersatu (PBB) Miri Zone 10 delegates meeting today.

Petros was established in August 2017 to enable the state government to participate directly in the O&G industry in Sarawak.

In November 2017, Petros  chairman Tan Sri Hamid Bugo was reported as saying the company was expected to begin operations in the first quarter of 2018, and was looking for a suitable candidate to fill the post of the chief executive officer. At the same event, Abang Johari had proposed to change the Miri tourism promotion approach by using virtual reality method.

“Bario highlands as well as Bekenu beach in Miri are most suitable to use the new approach to attract tourist arrivals,” he said.

Meanwhile, State Legislative Assembly Deputy Speaker Datuk Gerawat Gala, who is also PBB Zone 10 Coordinator, said the delegates from eight branches had unanimously decided to maintain the current leadership in PBB.

Abang Johari will remain as PBB President and there would be no contest for the two deputy president posts as well as Youth and Women’s Chief at the party’s general assembly next month.


Chile slams World Bank for bias in competitiveness rankings

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Sturgeon sees ‘golden’ chance to argue for UK to remain in single market

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