Monday, May 14th, 2018

 

Investor optimism buoys Malaysian stock market, ringgit

PETALING JAYA: Despite a sharp fall of nearly 50 points after the opening bell today, the local stock exchange surprised on the upside, closing in positive territory on optimism in the new Pakatan Harapan administration.

The FBM KLCI tumbled as much as 49.37 points or 2.7% before reversing and soaring 30.11 points or 1.6% at midday to touch a high of 1876.62 points. At market close, the gain narrowed to 3.91 points or 0.21%, with the key index settling at 1,850.42 points.

In line with the positive market sentiment, there were 930 gainers versus 405 losers, with an exceptional high trading volume of 6.58 billion shares valued at RM7.31 billion.

The gainers were led by Nestle (M) Bhd, British American Tobacco (Malaysia) Bhd and Heineken Malaysia Bhd, which rose RM5.70, RM5.68 and RM2.32, to RM141.30, RM28.38 and RM22.50, respectively.

On the currency front, the ringgit strengthened 0.18% to 3.9435 as at 5pm today against last Tuesday's closing of 3.9505. Worth to note that the local unit weakened to an intraday low of 3.9875 in early trade.

Areca Capital Sdn Bhd CEO Danny Wong Teck Meng said the smooth change in the federal government has restored market confidence in the Malaysian market, while the establishment of the Council of Eminent Persons is poised to create a cleaner and transparent environment for Malaysia, which is a strong catalyst to lure the foreign funds.

He explained another reason for the market relief was the paring down of local and foreign funds' holdings in Malaysian equities prior to the election. “And now, you see these funds starting to build their portfolios with Malaysian stocks again,” he told SunBiz.

JF Apex Securities head of research Lee Chung Cheng however said foreign funds remained on the sidelines amid strong support from local institutional funds. He is maintaining the year-end target of 1,860 points for the FBM KLCI at the moment.

“We think the large-cap stocks are still okay, but small- and mid-cap stocks are facing high cost production,” he said, noting that better corporate earnings are expected this year with a high-single digit growth.

According to MIDF Research, foreign attrition began five trading days before polling day, with foreign investors net selling seen at greater than RM200 million.

As of May 9, the cumulative year-to-date inflow stands at RM2.52 billion net compared with the RM14.3 billion accumulated before GE13 during the period of Jan 1 to May 3, 2013.

For the whole of 2018, MIDF Research expects foreign net inflows to be lower than last year’s RM10.3 billion, in lieu of not only the “uncertainties” related to the elections, but also the headwinds caused by geopolitical events and also more interest rate hikes by the US Fed and the Bank of England.

Commenting on the currency market, FXTM Global Head of Currency Strategy & Market Research Jameel Ahmad said while there has been some weakness in the ringgit, this will likely fizzle out and is considered as marginal losses in comparison to the shock seen in the offshore markets last week.

“The relatively smooth transition of power for Mahathir being sworn in as prime minister is a likely catalyst behind the losses in the ringgit being smaller than expected.

“This reduced anxiety that Malaysia would come under a period of uncertainty and the likelihood that the election outcome uncertainties will continue to fade and present an opportunity for the ringgit to recover.” 

Public Invest Research, which foresees heightened volatility in the ringgit due to the lack of policy visibility at this point, said the outlook for the ringgit will depend on how convincing the fiscal plans of the new government are.

“Until then, it remains to be seen whether the ringgit will continue its uptrend or otherwise. That aside, the ringgit, as with other regional currencies, will remain susceptible to the shifting trend in US policy decision. This can be a harbinger to more volatile Asean currencies.”

MIDF Research is maintaining the ringgit forecast of 4.0 on average and 3.95 at the end of the year on sound economic fundamentals, elevated and stable commodities prices and strong external demand.


SP Setia earnings down 45% in first quarter

PETALING JAYA: SP Setia Bhd’s net profit for the first quarter ended March 31 fell 45% to RM61.49 million from RM112.12 million a year ago mainly due to the property development segment where its Australian project received marginal recognition.

Its revenue dropped 36% to RM665.50 million from RM1.03 billion mainly on marginal recognition from the Parque Melbourne project for the current quarter compared to the previous corresponding quarter, where revenue was substantially recognised upon settlement based on the completion method previously.

“As majority of the units in Parque Melbourne has been settled in previous quarters, revenue contribution for the current quarter has hence dropped,” it said.

Over the same period, the group secured sales of RM1.11 billion. Local projects contributed RM635.6 million, which represented 58% of the total sales while international projects contributed RM469.1 million, which represented the remaining 42% of the total sales.

“Despite the softer sentiment and majority of the public taking a cautious approach, the RM1.11 billion sales achieved were within expectations and also validates the strategy SP Setia has adopted for the local market in rolling out more mid-range landed properties in our established townships,” said SP Setia president and CEO Datuk Khor Chap Jen.

The group’s prospects going forward remain positive with total unbilled sales of RM7.95 billion, anchored by 46 ongoing projects and effective remaining land banks of 9,586 acres with a gross development value of RM139.72 billion as at March 31.

“With a sustained momentum and strong sales achieved to date, we are optimistic of meeting the sales target of RM5 billion for the current financial year.”


SunCon accepts RM180m Penang medical centre job

PETALING JAYA: Sunway Construction Group Bhd’s (SunCon) subsidiary Sunway Construction Sdn Bhd (SCSB) yesterday accepted the letter of award issued by Alliance Parade Sdn Bhd, for proposed development of the first phase of Sunway Medical Centre in Penang for RM180 million.

Alliance Parade is an indirect wholly owned subsidiary of Sunway Bhd, which is a major shareholder of SunCon.

The project will commence on May 15 and is expected to be completed by Dec 15, 2020. The project is expected to contribute positively to the earnings of SunCon from the financial year ending Dec 31 onwards.

Upon securing the project, SunCon’s outstanding order book as at to-date amounts to RM6.3 billion.

“The project is subject to normal construction risk of materials price fluctuation. However, with the past experiences and expertise of SCSB in construction projects, this risk could be mitigated,” SunCon said.

The project is a related party transaction by virtue of Evan Cheah Yean Shin being a director and major shareholder of SunCon as well as director of several subsidiaries and major shareholder of Sunway.

Tan Sri Dr Jeffrey Cheah Fook Ling, Puan Sri (Dr) Susan Cheah Seok Cheng, Sarena Cheah Yean Tih, Adrian Cheah Yean Sun, Sungei Way Corp Sdn Bhd and Active Equity Sdn Bhd are major shareholders of both SunCon and Sunway as well as persons connected to Evan. Datuk Chew Chee Kin is a director of both SunCon and Sunway.

SunCon has obtained its shareholders’ mandate for such recurrent related party transactions entered into or to be entered into by SunCon and its subsidiaries with Sunway and its group of companies at its last annual general meeting held on June 15, 2017.


Construction shares hit by ‘mega projects review’ news

PETALING JAYA: Construction stocks were badly hit by news of a review of mega projects by the new Pakatan Harapan-led government, with stocks like George Kent (M) Bhd, Gabungan AQRS Bhd, Ahmad Zaki Resources Bhd and WCT Bhd hitting limit-down today.

The construction index tumbled 36.35 points or 12.93% to 244.78 points, bucking the positive trend seen in the broader market.

Given the uncertainty in the implementation of the mega projects, JF Apex Securities head of research Lee Chung Cheng does not foresee any bargain hunting for construction stocks anytime soon.

“Maybe there will be some rebound, but the market still needs more clarity,” he told SunBiz.

Areca Capital Sdn Bhd CEO Danny Wong Teck Meng concurred, saying that the construction industry may need two to three months for more certainty.

“Valuations of some construction stocks are too ahead, it’s time to look at fundamentals,” he noted.

After a RM1.18 or 29.9% drop to RM2.76 in its share price, George Kent was quick to announce a share buy-back exercise of up to 10% of its total number of issued shares, which is due for shareholders’ approval at its AGM.

George Kent and MRCB are Project Delivery Partners (PDP) for LRT3.

Gamuda, which has been playing an active role in the local construction scene, also saw heavy selling pressure, leading to a 89 sen or 17.5% decline its share price to close at RM4.21.

Besides taking on the PDP role with MMC for the MRT 1 and MRT 2 project, it was also recently appointed the PDP for the northern section of the HSR project together with its partner MRCB.

Ahmad Zaki and WCT shares shed 30 sen and 38 sen to close at 42 sen and 90 sen, respectively.

Prior to last Wednesday’s general election, Tun Mahathir Mohamad, now prime minister, had promised to review the Kuala Lumpur-Singapore High Speed Rail and the East Coast Rail Line (ECRL) if Pakatan Harapan won, saying that at RM55 billion, the ECRL was not feasible.
Nonetheless, contracts for the ECRL have been gradually awarded. For instance, Lafarge Malaysia Bhd bagged a RM270 million contract in March to supply cement to China Communications Construction (ECRL) Sdn Bhd under the mega project.


Ranhill to tap opportunities in environment, power sectors

GELANG PATAH: Ranhill Holdings Bhd is focused on strengthening prospects for its core businesses by tapping into opportunities in the environment and power sectors, both locally and overseas.

Ranhill president and CEO Tan Sri Hamdan Mohamad said moving forward, it will continue to seek out viable opportunities, both locally and overseas. By 2022, it targets to own and operate gross 1,000 megawatts (MW) power plants that deliver clean energy and 3,000 million litres daily (MLD) water and wastewater treatment capacity of which 700 MLD will be international.

“In regional markets, we are focused on expanding our water and wastewater treatment operations in Thailand, particularly in industrial parks, as well as in China where we have already earmarked pursuits and aim to secure new projects. We are also exploring other markets in the region, which have immense untapped potential, especially as governments scale up efforts to develop sustainable water supply and wastewater treatment systems.”

Meanwhile, to meet the growing demand for electricity in Sabah, together with a strategic partner, it is in the final phase of negotiations involving a 300MW Combined Cycle Power Plant in Sandakan.

It is also pursuing opportunities through proposals with reputable consortia in the Indo-China area with majority participating interest in expanding its power generation footprint.

“Looking ahead, we are confident that with these strategic plans in place and equipped with our strong capabilities and expertise, we are well-positioned to achieve greater growth over the long term,” said Hamdan.


APFT sells flight training company

PETALING JAYA: Practice Note 17 company APFT Bhd is selling its Asia Pacific Flight Training Sdn Bhd (APFTSB) for RM10,000 to two individuals, apart of its streamlining exercise to divest its loss making and non-contributing subsidiary.

The deal was done a willing buyer, willing seller basis,taking into account the net loss and liabilities of APFTSB of RM16.6 million and RM6.1 million on the latest audited financial statement for the financial year ended July 31, 2016; and the unaudited net loss and net liabilities of RM30.3 million and RM36.7 million respectively for the financial year ended Jan 31.

Mohamad Farizan Razali and Muhammad Syafiq Ibrahim are both Malaysian citizens and reside in Malaysia.

There are no liabilities, including contingent liabilities and guarantees, to be assumed by the purchasers.

APFT invested a total sum of RM46.2 million in APFTSB.

APFT has about eight months to submit its regularisation plan to the authorities. It intends to undertake and formulate a self-regularization plan which will not result in a significant change in the business direction or policy of the company.


Maybulk’s net loss narrows in first quarter

PETALING JAYA: Tycoon Robert Kuok-controlled Malaysian Bulk Carriers Bhd’s (Maybulk) net loss narrowed to RM14.34 million for the first quarter ended March 31, compared with RM33.21 million in the same quarter a year ago, due to improved charter rates from the dry bulk segment and reduced loss from associate.

Revenue declined 16.5% to RM54.26 million from RM64.96 million.

The group said in a filing with the stock exchange that the dry bulk market started the year on a steady note but weakened by the end of Q1 due to seasonal factors.

“The board is cautiously optimistic on the dry bulk markets for the balance of the year,” it noted.

The group also announced the retirement of Kuok Khoon Kuan ,70, who joined the board in 1995, as CEO. He will be replaced by by executive director Hor Weng Yew, 51, who was Senior Director, Tanker and Strategic Business Development for the Kuok (Singapore) Limited Group.

Maybulk shares closed 14 sen or 21.9% higher at 78 sen on some 8.53 million shares done.


FGV disposes of non-core chemical firm for RM145m

PETALING JAYA: Felda Global Ventures Holdings Bhd (FGV) is disposing of its 30% stake in Taiko Clay Chemicals Sdn Bhd for RM145 million, as part of the group’s efforts to dispose of non-core businesses.

FGV told Bursa Malaysia that its 72%-owned subsidiary Felda Palm Industries Sdn Bhd, which in turn a wholly owned subsidiary of FGV, yesterday entered into an agreement with Orient View Sdn Bhd for the proposed disposal.

Taiko Clay Chemicals is involved in manufacture and sale of activated bleaching earth and related products; production of sulphuric acid, oleum and battery acid; general trading and manufacturing of aluminium sulphate.

FGV’s original cost of investment in Taiko Clay Chemicals is RM41.45 million, which will bring a one-off gain on disposal of RM16.06 million.

Taiko Chemical Industries Sdn Bhd and Batu Kawan Bhd own 62% and 8% equity interest in Taiko Clay Chemicals each.

The audited net profit of Taiko Clay Chemicals for the financial year ended Dec 31, 2016 and 2017 was RM55.61 million and RM61.74 million, respectively.

Explaining the rationale behind the divestment, FGV said Taiko Clay Chemicals’ overseas expansion plan will likely require additional capital injection from its shareholders.

“Given that FGV views its interest in TCC (Taiko Clay Chemicals) as an investment in a non-core business, additional capital injection into TCC does not correspond with the objectives under SP20 (2020 Strategic Plan) and deviates from FGV’s current focus on the performance of its core businesses,” it added.

FGV also noted that Taiko Clay Chemicals may see a constraint in paying dividends in the future with its expansion plan. Since its investment in Taiko Clay Chemicals in 1997, Felda Palm Industries has received a total of RM58.6 million in dividends from Taiko Clay Chemicals.

On Bursa Malaysia today, FGV gained 19 sen or 11.8% to RM1.80 on volume of 108.2 million shares.


Maybank names new community financial services head

KUALA LUMPUR: Malayan Banking Bhd (Maybank) has appointed Datuk John Chong Eng Chuan as the new group CEO, community financial services (CFS) effective July 18, taking over from Datuk Lim Hong Tat who will retire from Maybank effective that same day.

Chong, who is currently the CEO of Maybank Investment Bank (Maybank IB) and Maybank Kim Eng (MKE), has 25 years of experience in investment banking with the Maybank Group.

Chong holds a Bachelor of Economics (Hons) degree from the University of Queensland in Brisbane, Australia. He is a chartered banker of the Asian Institute of Chartered Bankers and has also completed the Advanced Management Program at the Harvard Business School.

Maybank group president and CEO Datuk Abdul Farid Alias said Chong is the ideal successor for the post of group CEO, CFS as he has been a part of the group’s senior management for many years and cultivated strong relationships with local and regional stakeholders that will hold him in good stead in his new role.

Maybank is currently in the process of identifying suitable successor candidates for the CEO role in Maybank IB and MKE and an announcement will be made in due course, once necessary regulatory approvals have been secured. Chong will continue to lead MKE and Maybank IB until further advised.


AirAsia shareholders back airline, Fernandes

SEPANG: Shareholders of AirAsia Group Bhd have thrown their support behind the airline after group CEO Tan Sri Tony Fernandes apologised in a video for endorsing the former Barisan Nasional-led government.

On Bursa Malaysia today, AirAsia closed down 5.41% at RM3.50 with 63.54 million shares traded, while its long-haul, low-cost affiliate AirAsia X Bhd (AAX) gained 4% to 39 sen on volume of 38.43 million shares.

SunBiz spoke to a few shareholders at AirAsia’s EGM today, who remained confident of the group’s business prospects. They think that AirAsia’s stock still makes a good investment and will look at the airline’s fundamentals rather than its political links.

Shareholder Tan Swee Pean believed that Fernandes did not do anything wrong as he was under intense pressure, given the airline’s business and the importance of cooperating with the former government.

“Of course we will still support AirAsia, we also have our capital here. Fernandes said he will do his best, so we continue to support him,” said Tan, who has invested in AirAsia since the inception of the airline. She also has shares in AAX.

Tan said AirAsia’s share price has been doing well and she has confidence in the company as it is well managed. With time, she is also confident of a turnaround of AAX.

Another shareholder said his investments in AirAsia have performed better than the then Malaysian Airline System Bhd.

“His decision was purely for business,” quipped another shareholder on Fernandes’ actions.

Proxies of shareholders also accepted Fernandes’ apology, saying he was in a dilemma and was forced to make such a decision. “It’s a small mistake. (But) without AirAsia, we don’t think so many can fly,” one said.

Fernandes, AirAsia chairman Datuk Kamarudin Meranun and other directors were present at the EGM but did not meet the press. Shareholders said the management’s replies to questions were similar to what Fernandes said in his video.

The EGM was held to seek shareholders’ approval for the proposed disposal of its aircraft leasing operations, which was duly passed.

Minority Shareholder Watchdog Group (MSWG) general manager Lya Rahman, when met after the EGM, said in recent times, it has witnessed listed corporations rallying support or aligning themselves to certain political party, be it the incumbent government or the opposition. Although their numbers are not alarming, the rule of thumb dictates that listed companies should always remain apolitical or neutral.

“Bearing in mind that business should not mix with politics, it is our hope to see healthy corporate reforms taking place in our country post GE14 alongside the host of political reforms,” she said.

Lya added that businesses should be run professionally with creating shareholder value being the ultimate focus. Harbouring political motives can be detrimental to innocent shareholders who have to pay a costly price should the gamble taken by the head honcho not materialise.

“Another corporate reform that we hope to see is that no politicians are appointed to sit on the board of listed companies. MSWG has been strongly advocating against having politicians on PLC boards as it believes board members should be given ample breathing space to exude their independent stature.”