Monday, July 16th, 2018


Moment of truth for Google as record EU antitrust fine looms

BRUSSELS, July 16 — Google is set to face a record-busting EU antitrust fine this week over its Android mobile operating system but rivals hoping that an order to halt unfair business practices will help them may be disappointed. The European…

China overloading poor nations with debt, top US official says

JOHANNESBURG, July 16 — China is saddling poor nations with unsustainable debt through large-scale infrastructure projects that are not economically viable, the head of the US Overseas Private Investment Corporation (OPIC) said today. The…

Salcon clinches RM71m storm water pumping station job in Sri Lanka

PETALING JAYA: Salcon Bhd has bagged a US$6.8 million (RM27.7 million) and 1.718 billion rupees (RM43.6 million) storm water pumping station contract in Sri Lanka.

The group said in a statement today that its wholly owned subsidiary Salcon Engineering Bhd received a letter of acceptance dated July 12 from the Ministry of Megapolis & Western Development, Sri Lanka, for the design and building of a storm water pumping station in Ambathale, Sri Lanka.

Salcon noted that the project is funded by World Bank and the scope of the construction contract includes, investigation, detailed design, supply, construction, testing and commissioning of all facilities of the pumping station inclusive of civil, architectural, mechanical, electrical and instrumentation works.

The duration of the project is 21 months and is expected to be completed in 2020.

The water pumping station is expected to enhance the conveyance capacity to reduce flood risks to the Colombo catchment area, while minimising the environmental impact from the proposed improvements and maintaining a sustainable environment.

The group has established a foothold in Sri Lanka with the completion of four major water projects – Hambantota, Batticaloa, Kelani Right Bank and Kandana.

On Bursa Malaysia today, Salcon’s share price declined 1 sen or 3.1% to 31 sen on volume of 1.48 million shares.

Strong auto sales boosts US retail spending in June

WASHINGTON, July 16 — US retail spending forged higher in June, with a second straight month of accelerating auto sales as the summer driving season set in, the Commerce Department reported today. Americans also spent more in bars and restaurants…

Weak oil prices offset Bank of America-led earnings optimism

NEW YORK, July 16 — US stocks were trading flat today as a sharp drop in crude oil prices weighed on energy companies, offsetting a rebound in financials stocks after Bank of America’s strong results reinforced expectations of a strong earnings…

RAM forecasts June inflation rising to 1.9%

PETALING JAYA: RAM Ratings expects Malaysia’s headline inflation rate to rise to 1.9% in June versus 1.8% in May, due to higher retail fuel prices, offsetting the positive impact from the zero-rating of the Goods and Services Tax (GST).

The Department of Statistics is set to announce June inflation on Wednesday.

The rating agency said in a statement today, zero-rated GST is conservatively estimated to have brought headline inflation down 0.4 percentage points, but was overshadowed by a larger increase in transport fuel inflation.

The average price of RON95 fuel soared 9.9% in June, driven by significant low-base effects. Its prices had averaged RM2/litre in June 2017 compared with RM2.09 in May 2017.

The price of RON95 is expected to stay unchanged at RM2.20/litre amid the reinstatement of subsidies, until a more targeted system is introduced.

Given that average prices had declined to RM1.96/litre in July 2017, RAM said the stronger low-base effect is envisaged to again intensify the component’s inflationary pressure in July 2018.

Non-residential consumers have been facing higher electricity tariffs since July 1 following the implementation of a surcharge (1.35 sen/kWh) on the average base tariff of 39.45 sen/kWh for the period of July to December 2018.

Residential users will, however, not feel any impact as this surcharge will be funded by Kumpulan Wang Industri Elektrik, a fund set up to manage the impact of electricity tariff on consumers.

RAM head of research Kristina Fong cautioned however, that there is a small chance there may be second-round inflationary pressures from this tariff amendment, if the increase in electricity costs for businesses is passed on.

“That said, the impact of the surcharge would be moderated by the savings gleaned from zerorised GST on electricity bills and their cost of doing business, thus alleviating the need for firms to raise prices.”

The rating agency said the tendency of businesses to pass on the full cost to consumers appears low to date, as observed from the natural gas tariff hike and imposition of foreign workers’ levy on employers this year.

For the whole of 2018, overall inflation is envisaged to average 1.5% on the back of reinstated fuel subsidies, lower prices after the zero-rating of the GST and a persistently weak growth trajectory for food prices.

However, RAM said uncertainties remain over the impact of the reinstatement of the Sales and Services Tax, with respect to the rate and product and business coverage of this tax system.

Meanwhile, it does not expect any further movement in the Overnight Policy Rate for now, and it expects Bank Negara Malaysia’s future actions to be data-dependent.

“In particular, RAM will keep abreast of developments in the policy direction of the new administration, as well as the potential repercussions from the ongoing trade tensions between China and the US, which may change Malaysia’s growth and inflation trajectory.”

IHH’s RM2.35b Fortis deal fairly valued: Analysts

PETALING JAYA: The proposed RM2.35 billion acquisition of India’s Fortis Healthcare Ltd by IHH Healthcare Bhd appears fairly valued, as it is value accretive and enhances visibility over the latter’s longer term prospects in India, said analysts.

Last Friday, IHH announced that it won the bid and its indirect wholly owned subsidiary Northern TK Venture Pte Ltd (NTK) proposes to buy a 31.1% stake in Fortis by way of preferential allotment for RM2.35 billion, at RM9.98 per share.

The group plans to launch a mandatory open offer to acquire a 26% stake in Fortis for RM1.97 billion. It will also undertake a mandatory open offer to buy a 26% stake in Fortis Malar Hospitals Ltd for RM17 million.

Analysts noted that the acquisition would increase the hospital operator’s revenue contribution coming from India to 24% post-acquisition from the current 6%, making it the group’s fourth largest home market.

Nevertheless, based on the group’s short and long-term plans for Fortis, analysts expect the acquisition to not be earnings accretive in the near term.

MIDF Research said in a report that the firm believes the acquisition is fairly valued given that Fortis is the second largest hospital player with pan-India footprint and strong presence in all key hubs across India; has a network of 40 hospitals; presence in five different countries and; owns a leading nationwide diagnostic business with 368 laboratories and over 24 wellness centres.

“Furthermore, the acquisition is also earnings accretive given that no new IHH shares will be issued to finance the acquisition and we are expecting revenue and ebitda (earnings before interest, tax, depreciation and amortization) to increase by 23.6% and 16.5% respectively post-acquisition,” it added.

MIDF said the acquisition would also increase the number of IHH’s operating hospitals to 83 from the current 43, and opens the door to new markets such as Sri Lanka.

Meanwhile, PublicInvest Research said that depending on IHH’s final stake in Fortis, the acquisition would potentially dilute the group’s FY19F earnings by circa 1-4%, while FY20F impact will be marginal, at around 0.5%-1%.

“Nevertheless, we are positive over the long-term prospects, as we see improvement in profitability of the hospitals given IHH’s expertise and track record as a global healthcare player.

“If, however, turnaround in Fortis proves to be tougher than expected, recovery period will likely prolong, resulting in potential earnings dilution of up to 5-10% and 3-6% in FY19F and FY20F,” it added.

Pending completion of the deal expected to be by fourth quarter of calendar year 2018 (4QCY18), PublicInvest said it maintained its earnings estimates and “neutral” stance on IHH with unchanged target price of RM6.57 premised on FY19 blended EV/ebitda.

European Union ‘open to palm oil’

KUALA LUMPUR: The European market is open to palm oil and there is no ban on the commodity, said Ambassador and Head of European Union Delegation to Malaysia, Maria Castillo Fernandez.

Clarifying the stance of Europe on palm oil, she said there is a discussion in the region to reduce the use of biofuels in order to reach the European Union’s goal of achieving 32% renewable energy target by 2030.

She clarified that palm oil has not been singled out as this extends to all types of biofuels.

“There is no singling out on palm oil. It’s all crops (and) it’s on biodiesel that doesn’t mean you are banning anything but you will have to use less biodiesel coming from all the crops for your renewable energy target,” she explained.

On how this will come to play, she said that will depend on the adoption of the delegated act next year.

Europe is the second largest market for Malaysian produced palm oil.

Fernandez reiterated that Malaysia’s trade relations is not just limited to palm oil, as the EU is Malaysia’s third largest trading partner. – By V. Ragananthini

DBE to supply poultry products to KFC in Perak

PETALING JAYA: DBE Gurney Resources Bhd’s wholly owned subsidiary DBE Poultry Sdn Bhd today inked an agreement with Ayamas Food Corp Sdn Bhd to supply poultry products to all the KFC restaurants in Perak from July 1, 2018 to June 30, 2019.

Ayamas is in the business of broiler contract farming, producers, processors and seller of chicken products.

“The signing of the agreement is expected to generate a turnover of RM36 million to the DBE Group per annum. This augurs well with DBE’s intention to increase its market share locally and to maintain its competitiveness in the market,” DBE said in a stock exchange filing today.

The DBE group expects positive contribution from the poultry division on its earnings in the future.

Amazon workers strike in Germany, joining action in Spain and Poland

FRANKFURT, July 16 — Thousands of workers will walk off the job tomorrow at Amazon warehouses in Germany to demand better working conditions, joining colleagues in Spain and Poland in taking action that coincides with a major sales promotion. The…