Wednesday, March 28th, 2018
SINGAPORE:Singapore Exchange (SGX) is seeking market feedback on proposed safeguards to address expropriation and entrenchment risks of dual class shares (DCS) following broad support for the structure in an earlier public consultation.
“As Singapore transitions to the New Economy, we need to offer a capital structure that meets the funding requirements of companies. Market participants have also expressed a desire for more investment choices. We have reviewed the feedback received and are therefore proposing that the dual class share structure be made available to suitable companies,” said Singapore Exchange Regulation CEO Tan Boon Gin.
SGX is proposing that DCS companies meet existing Mainboard admission criteria. They must also satisfy the exchange on their suitability to list. A few factors SGX would consider include the role and contribution of the holder of multiple vote (MV) shares, the business model and whether sophisticated investors have participated in the company.
To address expropriation risks, SGX has listed a range of key actions which require shareholders to vote via an enhanced voting process where all shares including MV shares carry one vote each. These actions include for the appointment and removal of independent non-executive directors and the winding-up or delisting of the issuer. Independent directors will also make up the majority, including the chair, of the audit committee, the nominating committee and the remuneration committee.
Safeguards against risks of the founders entrenching themselves include allowing each MV share to carry a maximum of 10 votes, and limiting initial holders of MV shares to only directors.
SGX is also proposing event-based sunset clauses including requiring MV shares be converted to one-vote shares once the V-shareholder ceases to be a director, or sells or transfers the MV shares. Shareholders can choose to do away with these safeguards through the enhanced voting process.
“The one-share-one-vote structure will continue to be the default structure. The DCS structure is not for all companies, nor all investors. As it is associated with the risks of entrenchment and expropriation, we have proposed specific safeguards to mitigate these risks. Investors must nevertheless be informed of the risks of DCS if they invest in them,” Tan said.
SGX is proposing to clearly mark out DCS stocks on trading screens. DCS companies must prominently identify themselves as such in their prospectuses, annual reports, circulars and announcements.
The consultation is open till 27 April 2018. SGX has published responses to its first consultation together with this second consultation.
PETALING JAYA: Sapura Energy Bhd’s net loss widened to RM2.29 billion in the fourth quarter ended Jan 31 from a net loss of RM172.32 million a year ago, mainly due to a RM2.1 billion impairment registered in its drilling segment.
“The group assesses all aspects of its asset lifecycle periodically based on market changes and views impairment assessments as a healthy industry practice. The impairment recorded, which has no impact on cash, creates a lighter asset base for the group by reducing the total carrying value and depreciation charge of our drilling rigs going forward,” said its president and group CEO Tan Sri Shahril Shamsuddin.
“This enables us to operate at a lower cost base in the future while enhancing our competitiveness for growth and at the same time improve profitability,” he said in a statement.
Sapura Energy’s shares continued to be the most actively traded stock this week, closing 4.5 sen lower to 50 sen with some 214.14 million shares changing hands.
In a filing with Bursa Malaysia today, the group said the net loss was also due to a lower share of profit from associates and joint ventures of RM56.94 million, compared with RM147.48 million a year ago.
At the operating level the group registered a 27.84% lower profit of RM348.9 million, compared with RM483.5 million for the corresponding quarter in 2016 due to lower revenue from the engineering and construction and drilling business segments.
Revenue for the quarter fell 34.40% to RM1.19 billion from RM1.81 billion a year ago.
During the quarter, the engineering and construction segment recorded a wider pre-tax loss of RM84.2 million compared with RM37.7 million a year ago, while revenue fell 42% to RM670.3 million from RM1.16 billion a year ago.
The drilling segment also recorded a wider pre-tax loss of RM2.11 billion after impairments compared with a pre-tax profit of RM3.4 million a year ago, while revenue fell 42% to RM230.4 million from RM397.4 million a year ago.
For the financial year ended Jan 31 (FY18), the group suffered a net loss of RM2.5 billion compared with a net profit of RM208.32 million a year ago, in line with lower revenue, which fell 22.95% to RM5.89 billion from RM7.65 billion a year ago.
Moving forward, the group is optimistic that the gradual recovery in the industry will improve its medium-to-long term prospects and will remain focused on maintaining strong operational performance and replenishing its orderbook.
In line with the gradual recovery, its services segment has seen increased levels of bidding and contracting activities globally.
In the last two months, the group secured RM2.7 billion of new orders in the services segment, which would contribute to revenues for FY19.
PETALING JAYA: Commercial real estate investors will continue to invest in the retail sector despite the oversupplied market, a commercial real estate investment sentiment survey done by Knight Frank Research revealed.
The survey targeted key players in commercial property, namely developers (56%), fund/REIT managers (24%) and commercial lenders (20%), to grasp their sentiment in real estate investment.
It showed that despite unfavourable market sentiment towards the retail sub-sector, all respondents intend to deploy more capital, citing opportunities available. For example, embarking on various asset enhancement initiatives will improve the competitiveness of their retail assets.
Surprisingly, the office market, which is also viewed unfavourably, is also expected to generate much attention from developers and lenders, with the exception of fund/REIT managers, who plan to limit exposure in this sub-sector mainly due to the oversupply situation that will inevitably place downward pressure towards rental yields of office properties.
The survey concluded that retail and office sub-sectors are expected to continue generating the most interest in 2018 despite their unfavourable outlook, due to the two sub-sectors generally having higher development values.
As for the hotel/leisure sub-sector, lenders plan to retain a similar exposure in 2018, whereas developers are expected to deploy more capital into this sub-sector. However, fund/REIT managers will limit their exposure to this sub-sector in 2018.
Developers’ plan to invest more in the hotel/leisure comes at a time where the tourism sector in Malaysia remains strong.
Hence, this sub-sector acts as a logical avenue for developers to diversify beyond the weakening office and retail sub-sectors, which used to be the highly coveted sub-sectors for developers.
Fund/REIT managers plan to limit their exposure towards the hotel/leisure sub-sector as they prefer to invest in the logistics/industrial sub-sector, due to higher yields and brighter prospects supported by the rise in e-commerce.
Logistics/industrial and healthcare/institutional sub-sectors will garner more attention from fund/REIT managers and lenders while developers remain on the sideline.
Besides that, the retail sub-sector is also better liked by fund / REIT managers although they will be more selective in the future.
PETALING JAYA: UMW Holdings Bhd said PNB Equity Resources Corp Sdn Bhd (PERC) has requested for time until April 30 to accept UMW’s offer to acquire its equity interest in Perusahaan Otomobil Kedua Sdn Bhd (Perodua).
UMW’s board of directors said in a Bursa Malaysia filing that, PERC had made the request via a letter dated today for which UMW has given its approval.
UMW had made a conditional offer to PERC for its 10% equity interest in Perodua at a price of RM417.5 million or RM29.80 per share.
Earlier its plans to acquire controlling stake in Perodua hit a snag, after both MBM Resources Bhd’s major shareholders Med-Bumikar Mara Sdn Bhd and its wholly owned subsidiary Central Shore Sdn Bhd rejected the RM501 million or RM2.56 per share take over offer.
“Notwithstanding this, for the avoidance of doubt and as announced on March 9, 2018, the proposed MBM Resources acquisition and the proposed Perodua acquisition (from PERC) are not conditional upon each other,” its board of directors said.
UMW’s shares fell 0.32% to close at RM6.17 with 678,300 shares done.
KUALA LUMPUR: As Malaysia develops to become a high-income nation, it is time for the citizens to aspire to attain an acceptable living wage level, said Bank Negara Malaysia (BNM) Governor, Tan Sri Muhammad Ibrahim.
He said the wages in the labour market were low with half of the workforce earning about RM1,700 a month, while the average starting salary for a diploma holder was only about RM350 above the minimum wage of RM1,200.
“Since 2014, the incomes of the bottom 40% (B40) of households expanded by 5.8% on an annual basis, equivalent to RM156 per month.
“However, expenditures grew at a faster pace of 6%, or RM120 per month, which leaves the B40 with little money to spend,” he told a media briefing on the BNM Financial Stability and Payment Systems Report 2017 here today.
Muhammad said living wages in Kuala Lumpur (KL) in 2016 was estimated at RM2,700 for an adult, RM4,500 for couples without children and RM6,500 for couples with two children.
“This is just a guideline used by many advanced economies to give an idea on what type of wage is considered decent.
“In Malaysia, the highest cost of living is actually here, and to a certain extent, the suggested minimum wage could also be applied in Penang and Johor Baru,” he said.
“If you are single person living in Muar, and you earn RM2,700, you will live very comfortably because the rental rates and the cost of living are low,” he said.
He said such living standards went beyond having basic necessities, as it included meaningful participation in the society, personal and family development and freedom from severe financial stress.
The provision of living wage should also commensurate with productivity, and could be a step towards a higher quality of life in Malaysia, he said, adding that the living wage could serve as a guide of the income level needed to achieve the minimum acceptable living standard.
Muhammad said about 27% of KL households earned below the minimum living wage, and they were mostly secondary school-leavers with low- to middle- skill jobs.
In contrast, those who earned above the minimum living wage were mostly tertiary graduates with high skilled jobs, he said.
He said the findings also underscored the importance of creating a workforce equipped with the ability to attain higher skilled and thus higher paying jobs, leading to higher living standards.
“There are two aspects to be considered — cost of living and improvement in income — and this is why the government has embarked on various strategies that could create high paying jobs,” he said.
Muhammad said BNM planned to set up the Malaysia Bureau of Labour Statistics next year, which would enable the government to keep tabs on job creations and monthly salaries. — Bernama
Kuala Lumpur, March 28 — Petroliam Nasional Bhd (Petronas) and Saudi Aramco, the national oil company of Saudi Arabia, have announced the formation of two joint-ventures for the Refinery and Petrochemical Integrated Development (RAPID) project,…
PETALING JAYA: Individual borrowers are likely to be more vulnerable to income and expenditure shocks if they earn less than RM5,000 per month and have a debt service ratio (DSR) level of above 60%, according to a study by Bank Negara Malaysia (BNM).
The study looks at monthly disposable income and liquid financial assets (LFA), after deducting debt repayments and expenditure on basic necessities.
The study titled “Indebted to Debt: An Assessment of Debt Levels and Financial Buffers of Households” also reveals that individual borrowers earning more than RM3,000 per month have sufficient financial buffers, based on a conservative assumption that LFA is more than total debt.
The bulk (69%) of Malaysian household financial assets are liquid, of which more than two-thirds are in deposits and unit trust funds.
Across income groups, LFA are mostly held by individuals with monthly earnings of more than RM5,000. Individuals earning less than RM3,000 per month have a LFA cover of less than one time (0.6 times) of their outstanding debt.
“This group of borrowers (earning below RM3,000) account for 20% of household debt, with a majority (56%) living in urban areas and one in five having a DSR of more than 60%.”
The inclusion of housing wealth, such as the disposal of residential property, would however provide sufficient cover of debt for this group.
The study found that a significant majority of borrowers are less vulnerable to unexpected income and expenditure shocks.
Meanwhile, the study shows that the impact of a higher cost of living is lower compared with an income shock.
“When expenditure rises by 20%, share of total borrowers with negative financial margin increases by 3.1 ppt from the baseline. This largely affects those living in urban areas who are subject to higher living expenses.”
BNM noted that Malaysian household debt growth has been moderating for seven consecutive years to 4.9% as at end-2017. The ratio of household debt-to-GDP declined to 84.3% from the peak of 89% in 2015.
It said risks to financial stability posed by household indebtedness remain manageable despite the existence of pockets of risks, and banks continue to have sufficient capital buffers to withstand potential losses arising from the household sector, even under severe macroeconomic and financial shocks.
Under the stressed scenarios, the potential losses to the banking system from credit exposures to borrowers with negative financial margin due to income, cost of living and cost of borrowing shocks are estimated at between RM66 billion and RM103.8 billion.
“Despite the severity of these shocks, banks are able to withstand the potential losses, which remain within banks’ total excess capital buffer of RM124.5 billion.”
In view of high property prices, BNM said more could be done to ensure renting becomes a viable alternative for households.
“A conducive rental market would provide borrowers the option to rent rather than incur more substantial debt and expenditure burdens associated with owning a home.”
Other measures include encouraging insurance and takaful coverage as a safety net; promoting responsible lending behaviour; and enhancing financial literacy.
Despite high household debt levels, the central bank said more measures to rein it in are not warranted given continued moderation in household debt expansion, declining household debt-to-GDP ratio and prudent debt service ratio level.