Wednesday, May 23rd, 2018

 

GST removal seen as boon for property market

PETALING JAYA: The removal of the Goods and Services Tax (GST) will boost sentiments in the property sector, particularly the commercial sub-sector.
Sunway University Business School professor of economics Dr Yeah Kim Leng said there will be some downward pressure in terms of pricing and consumers will benefit from this.

“Now is a good time to spur demand, a good time to buy and a good time for developers to market their products. Property developers could lower prices or promote packages to push sales during this period,” he told SunBiz.

However, the long-term impact of the GST removal and the return of the Sales and Services Tax (SST) would depend on the finalised SST list as some items, including construction materials, could be exempted.

Meanwhile, Malaysian Institute of Estate Agents past president Siva Shanker said the removal of GST would spur the property market, particularly the commercial sub-sector.

According to him, many individual sellers of commercial units were absorbing GST to spur sales but with GST at zero rate from June 1, both supply and demand of commercial properties would increase, as there would be greater incentive to invest.

Overall, the property market is expected to show improvement from July onwards and perform better in the second half of 2018. The property market is expected to perform better this year compared with 2017, as the “feel good” factor from the general election drives private consumption.

“That euphoria will translate into sales immediately for the retail sector; private consumption will rise. When people feel good, they spend … the feel good factor will continue as this government continues to do the right things, which I think they are. Malaysians will see changes that they never expected to see in their whole life and this will make them spend even more,” said Siva.

He said the property market will be positive in terms of volume and value this year compared with 2017, albeit at a small growth of 2-4%, before raking in “fantastic growth” in 2019 and 2020.

“For 2018, perception and euphoria will drive the market and domestic economy. I think the property market will turn the U-curve this year and I reiterate my opinion that 2021 will be the next property high,” he added.

Although developers are expected to be more positive in terms of new launches this year, they will also be more focused on the types of properties that have demand and avoid areas with low demand or overhang.

On the overhang, Siva said it would take a year or two for these units to be absorbed as they were built speculatively and developers would have to consider cutting prices or use marketing methods that would attract buyers.

Yeah, meanwhile, said GST, which is a broader and more efficient tax system, could make a comeback when the nation is more ready in the future.

“I would not rule out the return of GST. If we can raise the income levels of B40 and M40, GST could make a comeback next time when we are more ready … GST is stable and flexible. It can be adjusted to suit the economic situation. For example if the economy is doing well, the GST rate can be raised. SST also can be adjusted but the tax base is not so broad,” he said.

Yeah said the most important thing for the government to do is to focus on spending efficiency and raising income levels.


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Local stocks skid on debt risk, fresh US-China trade tensions

PETALING JAYA: Malaysian stocks skidded 2.21% today – the steepest decline among markets in the Asian region – on renewed trade tensions between the US and China as well as concern over rising public debt in the country.

The FBM KLCI tumbled 40.78 points or 2.21% to close at its intraday low of 1,804.25 points after heavy selling emerged in the afternoon session, just 4.25 points shy of the 1,800-point psychological level.

A total of 2.69 billion shares valued at RM3.34 billion changed hands. Market breadth was negative with 763 losers against 237 gainers.

Among the top losers were Dutch Lady Milk Industries Bhd, Panasonic Manufacturing Malaysia Bhd, Ajinomoto (M) Bhd and Axiata Group Bhd, which fell 96 sen, 68 sen, 64 sen and 64 sen, to RM69.02, RM38.94, RM22.90 and RM4.43, respectively.

The trading/services index contracted 2.77% while the industrial index eased 2.23%.

On the currency front, the ringgit weakened 0.3% to 3.9790 against the US dollar as at 5pm today.

Asian stock markets were mostly in the red, with Hong Kong seeing a decline of 1.82%, followed by Singapore and Tokyo, which fell 1.32% and 1.18% respectively, after US President Donald Trump's remarks on Tuesday that he was not happy with the latest round of trade talks with China, just a couple of days after both countries agreed to put their trade dispute “on hold”.

On the local front, the equity market was also dragged down by an announcement by Prime Minister Tun Dr Mahathir Mohamad that the country's debt level has hit RM1 trillion, or 65% of gross domestic product (GDP), and not 55% of GDP as presented by the previous government.

JF Apex Securities head of research Lee Chung Cheng said besides the external trade war factor, local investors were jarred by the high level of national debt, which may weigh on Malaysia's sovereign credit ratings.

Following that, he does not expect net foreign fund inflows to happen anytime soon. “Foreign funds will continue to remain on the sidelines until more clarity from the new federal government,” he told SunBiz.

Areca Capital Sdn Bhd CEO Danny Wong Teck Meng said the market is closely monitoring how the government will address the debt issue in order to maintain credit ratings.

He highlighted that it will be crucial to see the introduction of measures to contain the fiscal deficit to GDP below 3%, in the next two to three weeks.
“Over the short term, people see what will happen and the government's ability to tackle the removal of GST, toll charges and subsidies. They're waiting for more clarity on how to cushion the cash flow problem.”

International rating agencies have warned that the GST removal is “credit negative” for Malaysia with revenue loss to the government, citing that the country should not be too dependent on the current high oil prices.


No go for BTM Resources’ Malacca waste-to-energy power plant project

PETALING JAYA: BTM Resources Bhd's plan to develop a municipal solid waste-to-energy generation plant in Malacca has come to a halt after the Department of National Solid Waste Management said it is not able to consider the application of setting up a such a plant there.

Last year, BTM's subsidiary BTM Western Power Green Energy Sdn Bhd (BTMWP) submitted an application and proposal to develop the RM435 million project in Malacca with a capacity of not less than 1,000 tonnes. BTMWP said it would develop, build, own and operate the project.

BTM entered into a memorandum of understanding with China Western Power International Pte Ltd and Sichuan No. 2 Electric Power Construction Co to tap into the reputation, experience and standing of Sichuan Power in power generation projects.

BTMWP entered into a heads of agreement with China's Sepco Electric Power Construction Corp for the award of an engineering, procurement, construction and commissioning with finance contract to be executed at later stage for the municipal solid waste-to-energy generation plant in Malacca.


Shareholders of India’s Fortis Healthcare vote out fourth director

BENGALURU/MUMBAI: Shareholders in India's cash-strapped Fortis Healthcare Ltd have voted out a fourth director, the hospital operator said today, amid displeasure over the board's handling of offers of investment.

Fortis has received five offers from local and international suitors wanting to invest in the firm or buy it. Though in need of funds, the company has become an attractive asset as private healthcare spending grows in India while the government expands access to insurance in a country lacking adequate health facilities.

At a shareholder meeting on Tuesday, attendees voted to remove director Brian Tempest, as sought by East Bridge Capital and Jupiter India. The two investors, who together control 12% of Fortis, have said the four board members failed to exercise fiduciary duties – a charge the four reject.

Investors also voted to approve Suvalaxmi Chakraborty, Ravi Rajagopal and Indrajit Banerjee as independent directors on the board, as sought by East Bridge and Jupiter.

Fortis' board initially agreed to be taken over by Manipal Hospitals Enterprises in March before shareholders intervened.

Earlier this month, the board voted to accept an investment offer from Hero nterprise Investment Office and Burman Family Office for 18 billion rupees (RM1.04 billion), valuing Fortis at 90 billion rupees.

Five of the board's eight directors voted for the latter offer, with investors responding by selling shares.

The offer was much lower than those of Manipal or Malaysia's IHH Healthcare Bhd, but it had waived due diligence to give Fortis quick access to funds needed to cut debt. – Reuters


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Luster: US$2.8m shortfall in Opal Deluxe profit guarantee

PETALING JAYA: Luster Industries Bhd has reported a shortfall of US$2.82 million (about RM12.07 million) in the profit guarantee provided by Opal Deluxe Limited for the financial year ended Dec 31, 2017.

In a filing with Bursa Malaysia today, Luster said it has proposed to amicably settle the issue by entering into a proposed supplemental agreement with Opal.

The proposed supplemental agreement is for Opal to cause a third party to lease to Pan Cambodian Lottery Corp Limited a plot of land and building that is suitable for gaming and casino operations.

The agreement is also for Opal to transfer 35% of its equity shareholdings of Opal in Pan Cambodian Lottery to Luster at a nominal consideration of US$1.

The group expects to execute the proposed supplemental agreement within six months.

To recap, Luster acquired 60% equity interest in Pan Cambodian Lottery, a Cambodian gaming company, from Opal for US$4.2 million (RM14.9 million) in 2015.

The purchase consideration of US$4.2 million is based on price earnings of seven times on the average net profit guaranteed of Luster for the three financial years of 2015, 2016 and 2017.

Pursuant to the supplemental agreement dated Sept 4, 2015, Luster would be able to enforce the mortgage on the remaining 35% of the issued and paid-up capital of the company held by Opal, if Luster is unable to achieve the aggregate profit guarantee of US$3 million by the financial year ending Dec 31, 2017.

The 35% of the issued and paid-up capital of Luster held by Opal comprises 350 ordinary shares of US$2,000 each, which are mortgaged to Luster in accordance with the terms of a mortgage granted by Opal in favour of Luster (security shares).

This would cause the proportionate number of the security shares, which is equivalent to the shortfall to be transferred to Luster or its nominee.

If the shortfall in profit guarantee is greater than the value of the security shares, Opal will pay the difference between the shortfall in profit guarantee and the value of the security shares in cash.

In a separate filing, Luster reported a 8.36% rise in net profit to RM1.65 million in the first quarter ended March 31, from RM1.52 million a year ago driven by its property development and construction segment, which recorded a pre-tax profit of RM700,000.

Revenue for the quarter rose 38.13% to RM40.01 million from RM29.61 million a year ago mainly due to the sales recorded in property development and construction segment. The segment recorded a revenue of RM11.3 million, generated from the construction project in Kota Baru which was awarded on March 10, 2017.

Moving forward, Luster said it is cautiously optimistic in delivering better results this year by; continuing its efforts to become an original design manufacturer player; explore additional jobs while also exploring opportunities for joint ventures for the property development and construction segments; and expand its sales network and representatives in Cambodia for its gaming and leisure segment.

Luster shed 4.76% or half sen to 10 sen today with 2.03 million shares traded.


Auditor raises doubt over Perak Corp’s ability to continue as going concern

PETALING JAYA: Perak Corp Bhd’s independent auditor Messrs Ernst & Young has raised concern over the company's ability continue as a going concern due to its losses and liabilities.

Perak Corp incurred a net loss of RM340.6 million for the year ended Dec 31, 2017, with its current liabilities exceeding current assets by RM158.5 million.

In order to address the material uncertainty, it said the management will continue to negotiate with the banks with the view of restructuring the terms of the syndicated term loan; dispose of certain land for cash to meet any payment obligation should the need arise; ultimate holding corporation will continue to provide financial assistance; focus on cost saving and stringent cash flow management to remain competitive.

Meanwhile, Perak Corp announced a widened net loss of RM11.45 million for the first quarter ended March 31 compared with RM6.79 million in the same period a year ago, due to higher operating expenses and finance costs.

However, its revenue soared 54.8% to RM48.15 million from RM31.11 million.

In a separate filing with the stock exchange, Perak Corp disclosed that its settlement agreement with Perak Equity Sdn Bhd (PESB) has yet to be completed after five years due to the non-fulfilment of certain conditions.

The agreement was entered on Feb 28, 2012 to partially settle the total debt owing by PESB to Perak Corp by way of set-off against the total purchase sum of RM70.27 million for two properties to be acquired by Perak Corp from PESB.