Thursday, June 21st, 2018


Japan launches WTO complaint over South Korea steel duties

GENEVA, June 21 — Japan has launched a complaint at the World Trade Organisation to challenge South Korean anti-dumping duties on Japanese stainless steel bars, a WTO filing showed today. Japan said a South Korean “sunset review” had concluded…

FBM KLCI slides below 1,700 points to 16-month low

PETALING JAYA: The local stock market's benchmark index slipped below the 1,700-point phychological level today as investors were spooked by continued uncertainy in the trade spat between the US and China.

The FBM KLCI sank as much as 27.86 points or 1.63% to 1,681.89 points, its lowest level since January 2017. At the close of trading, it was down by 17.43 points or 1.02% to 1,692.32 points. A total of 2.13 billion shares were traded valued at RM2.68 billion. Market breadth was negative with losers outpacing gainers by 748 to 199.

The broader market was mainly dragged down by banking and telco stocks. Among the top losers were Hong Leong Bank, Telekom Malaysia, Hong Leong Financial Group and Public Bank, which fell 56 sen, 49 sen, 42 sen and 16 sen to RM17.90, RM3.14, RM17.90 and RM22.62, respectively.

Elsewhere in the region, the China and Hong Kong markets continued to see heavy selling pressure. Hong Kong's Hang Seng Index fell 1.35% and the Shanghai composite index lost 1.37%.

In currencies, the ringgit was also weaker today, depreciating as much as 0.3% to 4.0162 against the US dollar. As at 5pm, it was trading at 4.0150.

Maybank Kim Eng, the investment arm of Maybank Group, said at its Invest Asia UK conference yesterday that Asia's underlying fundamentals remain solid with resilient growth prospects despite headwinds from US-China trade friction and rising US interest rates.

Its CEO Datuk John Chong said investors should look beyond the short-term noise and focus on the region's long-term growth prospects. “While there have been substantial capital outflows as a result of the stronger US dollar, higher interest rates and US-China trade friction, Asia is now better positioned to weather the volatility.”

Chong noted that countries in the region have largely strengthened their current account balances, increased their foreign reserves and kept inflation in check over the past five years.

“Stronger private and infrastructure investments as well as a rising middle class are significant growth thrusts going forward. We believe investors will see real value emerging in Asian corporates after the recent market tantrums and should capitalise on the opportunity.”

For Malaysia, Chong said the government's commitment to adopt fiscal reforms and narrow the fiscal deficit bodes well for the country's economy.

Following the recent market correction, he said the FBM KLCI is now priced attractively at 15.4 times on 12 months forward earnings as of June 19.”This puts it at the lower end of its trading range of 15.4x to 17.3x over the past three years.”

Opec confident of deal ahead of crucial talks with partners

VIENNA: Organisation of the Petroleum Exporting Countries (Opec) energy ministers expressed optimism today they were nearing a compromise on oil output policy, with Saudi Arabia acknowledging that a big production increase would be “politically unacceptable” to arch foe Iran.

Opec and non-Opec partner countries are due to hold crunch talks here today and tomorrow to decide the fate of an 18-month-old supply-cut pact that has cleared a global oil glut and lifted crude prices to multi-year highs.

Saudi Arabia, backed by non-member Russia, is now racing to convince the alliance to raise production again in order to meet growing demand in the second half of 2018.

Adding an extra one million barrels per day to the market “sounds like a good target to work with”, Saudi Energy Minister Khalid al-Falih said at a seminar organised by Opec.

Regional rival Iran however is fiercely opposed to unwinding the agreed production curbs, as its oil industry is bracing for fresh sanctions following US President Donald Trump's decision to quit the international nuclear pact.

Several other Opec members, including Venezuela and Iraq, are also against major changes to the pact as they are unable to immediately boost production.

Signalling that positions might be softening, Saudi's Falih acknowledged that “not every country can respond to an allocation of higher production” and said it was important to be “sensitive” to those concerns.

Allowing countries like dominant player Saudi Arabia to make up for the shortfalls of other members “may be a technical solution but it may not be politically acceptable to others”, he said at the Vienna seminar.

As the clock ticks down to the upcoming ministerial meetings, a face-saving compromise appeared to be in the works.

“We hope that there will be an agreement,” Iraqi Oil Minister Jabbar al-Luaibi told reporters. “Iraq is trying very hard to narrow the gap between the two blocs.”

UAE Energy Minister Suhail Mohammed al-Mazrouei added: “I am very optimistic.”

Observers say the participating countries could simply agree to stop exceeding their quotas for cutbacks, and stick to the agreed target of trimming production by 1.8 million barrels per day (bpd).

The 24 nations in the pact, known as Opec+, are currently keeping more than two million bpd off the market.

Most of the shortfall has come from Venezuela, where an economic crisis has savaged the country's petroleum production. Output has also plummeted in Libya, where fighting between rival factions has damaged key oil infrastructure.

In London, oil prices fell today as crude exporters in Opec appeared to be nearing a deal to increase production.

Benchmark Brent crude dropped US$1.80 a barrel, or 2.4%, to a low of US$72.94 before recovering a little to US$73.30 (RM293), down US$1.44, by 1358 GMT. US light crude was 71 cents lower at US$65.00 (RM260).

Brent reached a 3½-year high above US$80 a barrel last month but has fallen steadily in recent weeks as Saudi Arabia, de facto leader of Opec, has signalled it intends to raise production to stabilise prices.

Harry Tchilinguirian, head of oil strategy at French bank BNP Paribas, told Reuters Global Oil Forum he expected Opec and Russia to agree a compromise that would see a small increase in global oil production.

“It would seem that an aggregate increase in production for Opec+ of between 500,000 bpd and 1 million bpd is the range that is being considered,” he said. – AFP, Reuters

Greece nears end to 8-year bailout odyssey

LUXEMBOURG, June 21 — Eurozone ministers today neared an agreement to set the terms of Greece’s departure from eight years of bailout programmes, despite splits over the degree of debt relief needed by cash-strapped Athens. Greece is slated to…

US jobless claims fall for fourth straight week

NEW YORK, June 21 — US claims for unemployment fell for the fourth week in a row last week, extending an unprecedented streak of low levels, the Labour Department reported today. The continued scarcity of layoffs suggested June was likely to be…

Poland says eurozone budget could spell 'end of EU'

WARSAW, June 21 — Poland today warned that a eurozone budget proposed by France and Germany to bolster the 19-member currency bloc could spell the end of the European Union should it drain resources from the shared budget of all members. …

UAE regulator asks listed companies to declare exposure to Abraaj

DUBAI, June 21 — United Arab Emirates’ top security regulator has asked UAE-listed companies to declare their exposure to Dubai-based private equity firm Abraaj, which filed for provisional liquidation last week. The Securities & Commodities…

Lower broadband prices will eat into TM’s earnings: Analysts

PETALING JAYA: Analysts have slashed earnings forecasts for Telekom Malaysia Bhd (TM) by as much 20% after Multimedia and Communications Minister Gobind Singh Deo indicated that broadband prices will drop by at least 25% by year-end.

The news also sent TM's share price down by as much as 14% today to a day low of RM3.12. At market close, the stock was 49 sen or 13.5% down at RM3.14 on volume of 68.53 million shares.

PublicInvest Research expects TM to post a reduction of 8% to 30% in average revenue per user (ARPU) but its subscriber base could rise 15% annually as broadband becomes more affordable. It will also prompt TM to be more aggressive in implementing cost-cutting measures in order to grow its bottom line.

After taking into account lower ARPU, higher customer base and lower operating costs, PublicInvest Research has cut its FY18-20 earnings forecasts for TM by 6% to 20%. Its target price for the telco's share is reduced from RM5.60 to RM4.65 with a “trading buy” call.

Given subdued revenue growth, PublicInvest Research believes TM's management will be more aggressive in implementing cost rationalisation measures in order to deliver earnings growth beyond FY19.

“We reckon areas for cost efficiency improvement include direct and manpower cost, which accounts for 40% of total cost.”

Due to the negativity surrounding TM and the industry, MIDF Research has downgraded its call recommendation to “sell” from “neutral” with a lower target price of RM3.02 from RM4.09.

“To be on the conservative side, we are cutting FY18 and FY19 earnings estimates downward by -1.7% and -10.4% respectively as we reduce our broadband ARPU assumptions to reflect the government initiative of making internet services more accessible to the masses.”

The research house opined that any cost-saving initiative programme implemented by TM would be inadequate to match the reduction in broadband prices.

“In addition, due to the earnings pressure and the group's commitment capex commitment for long-term growth, we expect the dividend payment to remain unattractive as well.”

AmInvestment Bank, meanwhile, said a 25% reduction in Unifi (TM's broadband service) revenue alone could potentially wipe out almost 90% of TM's FY19 earnings. “Including a similar reduction in Streamyx revenue, it will translate to a slight loss for TM.”

Following that, the research house expects TM to continue appealing to the government to reconsider its decision as such a drastic cut will derail the group's capex rollout programme under the High-Speed Broadband 2 drive to connect suburban and rural areas.

“This will also hinder plans to provide internet access throughout Malaysia, which Gobind indicated may be recognised as a basic human right by the government.”

AmInvestment Bank also noted that the national agenda to reduce broadband prices together with TM's convergence strategy to offer quad-play services to eventually lead the path towards sector consolidation as the need for a potential re-merger with Axiata Group is re-accentuated by its weak Q1 18 results.

Aeon Wallet to be launched in August

KUALA LUMPUR: Aeon Credit Service (M) Bhd is targeting to launch its cashless payment service Aeon Wallet in August, which will become another core business segment for the group.

Aeon Credit, a subsidiary of Aeon Financial Service Co Ltd Japan, is principally engaged in consumer finance operations through provision of easy payment and hire purchase schemes for purchase of consumer durables and motor vehicles, personal financing schemes and issuance of credit cards.

Aeon Credit will be launching two new products in the current financial year ending Feb 28, 2019 (FY19), in line with the company’s digital initiatives, namely the Aeon Wallet and Aeon Member Plus Card that will provide customers with payment, privileges and benefit to complement the evolving customer lifestyle, attracting customers from all segments to go cashless.

Chief financial officer (CFO) Lee Kit Seong said the e-wallet will be another payment settlement tool for consumers in the market as it looks to first tap into its 6 million member base in the group and to have 1 million users for the e-wallet in a year.

“We’re also introducing the Aeon Member Plus Card to consolidate the loyalty programme of the Aeon group of companies in Malaysia. The e-wallet is one of the settlements like Touch ‘n Go, Alipay, and WeChat Pay. Our e-money will ultimately become mobile payment and Aeon Pay (a settlement medium like iPay88),” Lee told reporters after its AGM today.

“After we expand internally, we will go externally. From e-money, we’re going to put it into a mobile wallet. We want to integrate the Aeon companies (such as Aeon, Aeon Big, Aeon Credit) in Malaysia to have one member (system). Once comfortable, we will go to the region,” added Lee.

Aeon Credit has doubled its capital expenditure (capex) to RM120 million for FY19, from RM60 million in FY18, to invest in its operations and business expansion. The capex will be utilised for its branch transformation and digital marketing initiatives, the upgrading of its system infrastructure and for the introduction of its e-money business.

Lee expects the company to maintain its momentum for FY19, with strong domestic demand being the key driver for growth, along with its transformation business model and continuous improvement in asset quality under the new MFRS9 environment.

Meanwhile, chairman Ng Eng Kiat has maintained that “it is not wrong” in relation to the additional assessments and penalties by the Inland Revenue Board totaling RM96.82 million.

“It’s an issue not just in relation to having to pay the tax. We’re taking the grounds that we’re not liable for those tax. We’re now appealing to the Special Commissioners of Income Tax,” said Ng, adding that it is also in consultation with tax agents, auditors and solicitors.

He said although IRB has raised an assessment and failure to pay by a certain time will result in penalties, winding up of the company or action against the board of directors, it has applied to the Court of Appeal against the High Court’s May decision to get a stay. The hearing has been deferred to July.

Berjaya Food returns to the black in fourth quarter

PETALING JAYA: Berjaya Food Bhd (BFood) swung to the black registering a net profit of RM837,000 for the fourth quarter ended April 30 against a net loss of RM3.37 million in the previous corresponding period, mainly due to higher profit contributions from Starbucks’ operations in tandem with the higher revenue.

In addition, there was no consolidation of the losses from PT Boga Lestari Sentosa, operator of the Kenny Rogers Roasters (KRR) operations in Indonesia following its disposal in the preceding quarter.

Revenue was up 5.7% to RM160 million from RM151.42 million.

BFood has recommended a fourth interim dividend of 1 sen per share for the quarter under review, payable on July 26.

Its full-year net profit went down to RM1.14 million from RM11.44 million, while revenue expanded 5.6% to RM639.6 million from RM605.44 million.

BFood said in a filing with the stock exchange that with the continuing revenue growth momentum of Starbucks and the completion of disposal of KRR (Indonesia), the board expects the group’s operating performance will be encouraging going forward.