Sunday, July 29th, 2018

 

Khazanah board’s resignation not expected to impact local stock market

KUALA LUMPUR: The resignation of the entire board members of Khazanah Nasional Bhd is not likely to have any impact on the local equity market as Bursa Malaysia is mainly influenced by regional bourses, said Hermana Capital Bhd chief executive officer and chief investment officer Datuk Dr Nazri Khan Adam Khan.

“In fact, the effect is relatively muted. So far, we do not see any big fluctuation in stock prices related to companies Khazanah has invested in, which include CIMB Bank Bhd and Axiata Group Bhd,” he told Bernama.

Nazri Khan said reports that Khazanah, Permodalan Nasional Bhd and Petronas would likely come under the ambit of the Prime Minister's Office instead of the newly formed Ministry of Economic Affairs would not hamper investors' confidence in Malaysia.

“It is just a restructuring move and a baby step to improve the governance and feasibility of the three companies under the New Economic Model.
“Furthermore, it is also one of the ways to phase out political appointees in the government-linked companies (GLCs) as expounded by Prime Minister Tun Dr Mahathir Mohamad,” he said.

Commenting on Inter-Pacific Securities Sdn Bhd's statistics that foreign net outflow on Bursa Malaysia amounted to RM437.1 million from Monday to Thursday compared with foreign net selling of RM247.1 million a week earlier, Nazri Khan said it was mainly due to losses in oil and gas-related stocks affected largely by tensions between Yemen and Saudi Arabia.

Meanwhile, Assistant Professor of Management at Asia School of Business Dr Renato Lima de Oliveira said a series of resignations and changes in the GLCs would give greater leeway to the new government to pursue their policy priorities and manifesto.

“There is a lot of goodwill with the current government, with Malaysia's historical alternation of power, and Pakatan Harapan (PH) will have the ability to put together their governing team. Many can see these changes as part of a unique historical moment.

“However, it is important to stress that one of the key points of PH ascension to power was to strengthen the country's institutions.

“It is important in the long run to strengthen the governance of GLCs and protect them from political changes and pressures,” said de Oliveira, who is also a fellow at the Institute for Democracy and Economic Affairs.

However, if the government were to shift the vision of how the GLCs should function, which is a complex issue, he said it needed to draft a vision and engage the society via public hearings, forums or parliamentary debate.
From the feedback gathered, it must hire the right people to tackle the tasks at hand, he added.

“Ideally, recruit (the right people) through a system such as an independent search committee that ensures positions are filled by merit,” he said.
De Oliveira said as Malaysia is getting closer towards having competitive elections involving changing the government, it would not be helpful to have key state positions changing hands every time there was a change of government.
He noted that the GLCs should be protected from political changes and pressures to enable them to become more focused in executing the policy priorities of the government in power.

On Friday, Mahathir said the resignation of Khazanah managing director Tan Sri Azman Mokhtar and the rest of the board members would enable the government to restructure the sovereign wealth fund accordingly.

Their resignation would “clear the deck to allow the government to restructure it” in line with policies of the new administration, he said, adding that the government was not on a witch-hunt.


Ivory Properties says Cheras apartments project is off

PETALING JAYA: Ivory Properties Group Bhd has terminated a memorandum of understanding (MoU) with Taman Segar Management Corp and Upper Label Sdn Bhd for the redevelopment of apartments in Cheras, which would have marked its foray into the affordable housing segment in Kuala Lumpur.

In a filing with Bursa Malaysia on Friday, the group said the MoU lapsed on July 11, 2018, with the parties mutually agreeing not to proceed with it.

Under the year-old MoU, the three parties had planned to demolish and redevelop three blocks of 35-year old apartments with 300 units and build 800 units on the 4.45-acre site.

Last year, the property developer said the purpose of the MoU was to have an understanding with Taman Segar residents to proceed with an application to Kuala Lumpur City Hall.

It said the market value of the land was RM400 to RM500 per sq ft and the new units would measure 800 sq ft each. The developer was to award 300 units to the residents as compensation while the remaining 500 units were to be sold at about RM300,000 each.

On Bursa Malaytsia, Ivory Properties fell 1.72% or half sen to 28.5 sen with110,000 shares traded last Friday.


Human bankers are losing to robots as Nordea Bank sets a new standard

STOCKHOLM, July 29 — Something interesting happened in Swedish finance last quarter. The only big bank that managed to cut costs also happens to be behind one of the industry’s boldest plans to replace humans with automation. Nordea Bank AB,…


Axiata to book non-cash loss on Idea Cellular-Vodafone Idea merger

PETALING JAYA: Axiata Group said it is likely to book a RM1.5 billion to RM3 billion non-cash financial loss from the merger of 16.33% owned Idea Cellular and Vodafone Idea Ltd, which will make it the largest carrier in India by subscribers and revenue market share.

Together, Axiata Group said in a statement, Vodafone Idea will serve a customer base of 440 million, representing 39% of the total market share while its revenue market share is estimated to be at 37.5%. Its revenue is forecasted to be in excess of US$10 billion (RM40.6 billion).

The group said, the non-cash financial loss is due to applicable accounting standards from the dilution of Axiata Group’s shareholding in the merged enlarged Idea-Vodafone entity from 16.33% to 8.17%, upon completion of the merger which will result in the loss of certain shareholder’s rights as provided under the subscription agreement dated June 25, 2008 between, inter-alia, Axiata Group and Idea in relation to subscription by Axiata Group of shares in Idea.

The estimated loss above is expected to have a material impact on the financial quarter ended June 30, 2018. The actual impact on de-recognition from the reclassification of Idea will be provided upon completion of the merger. Being a non-cash item, the financial impact above will have no bearing to Axiata Group’s current or future cash position.

In a separate statement issued last Friday, the group said its cash balance is strong at RM5.7 billion as of end March 2018 with debts well within covenant and will not be a factor to impact Axiata’s dividend policy and payment for 2018.


Axiata to book non-cash loss on Idea-Vodafone deal

PETALING JAYA: Axiata Group said it is likely to book a RM1.5 billion to RM3 billion non-cash financial loss from the merger of 16.33%-owned Idea Cellular and Vodafone Idea Ltd, which will make it the largest carrier in India by subscribers and revenue market share.

The group said the non-cash financial loss is due to applicable accounting standards from the dilution of Axiata Group’s shareholding in the merged enlarged Idea-Vodafone entity from 16.33% to 8.17%, upon completion of the merger which will result in the loss of certain shareholder’s rights as provided under the subscription agreement dated June 25, 2008 between; inter-alia, Axiata Group and Idea in relation to subscription by Axiata Group of shares in Idea.

The estimated loss above is expected to have a material impact on the financial quarter ended June 30, 2018. However, being a non-cash item, the financial impact will have no bearing on Axiata Group’s current or future cash position.

In a separate statement issued last Friday, the group said its cash balance is strong at RM5.7 billion as of end March 2018 with debts well within covenant and will not be a factor to impact Axiata’s dividend policy and payment for 2018.


RAM upgrades retail sector outlook to stable after two years

PETALING JAYA: RAM Ratings has revised the negative outlook for the local retail sector after almost two years, as the sector is seen as a key beneficiary of the upbeat consumer sentiment after the 14th general election in May.

The rating agency revised the negative outlook, in place since October 2016, to stable following the betterment in consumer sentiments after the polls and the surge in the Malaysian Institute of Economic Research’s consumer sentiment index(CSI) to a high of 132.9 points in 2Q 2018, after languishing below 100 points for 15 consecutive quarters since 3Q 2014.

Following the implementation of the Goods and Services Tax (GST) on April 1, 2015, the CSI hit a trough of 63.8 in 4Q 2015.

RAM’s head of consumer and industrial ratings Kevin Lim said the zero-rating of the GST effective June 1 is expected to translate into stronger consumer spending and sales for retailers, especially during the three-month tax holiday until the Sales and Services Tax (SST) is reinstated on Sept 1.

This view is also shared by Retail Group Malaysia, which projected a stronger 5.3% rise in retail sales for 2018 from the earlier estimate of 4.7%.

However, Lim said, in some cases the move to zero-rate GST may broaden the operating margins of businesses that have been absorbing the tax.

“Amid promotional campaigns, expansion of outlets and restraint in passing on higher costs to consumers, we can observe (from a sample of seven retailers) that average post-GST operating margins (for 3Q 2015– 1Q 2016) had mostly narrowed y-o-y compared to the previous corresponding period,” he said.

“Consumer spending and retail sales are envisaged to normalise somewhat after the reinstatement of the SST. However, the overall tax burden on consumers will be considerably lighter, with the government’s tax collection estimated to come in at RM21 billion per annum, that is, less than half of the amount collected through the GST,” he added.

The government has also pledged initiatives aimed at increasing the purchasing power of consumers, particularly lower-income households earning less than RM3,500 a month.

In that light, RAM Ratings anticipates some upside in the sales and operating performances of retailers such as AEON Co (M) (AA2/Stable/P1), F&N Holdings (AA1/Stable/P1), Mydin Mohamed Holdings (issue rating: AAA(fg)/Stable) 2 and Poh Kong Holdings (issue ratings: AAA(fg)/Stable/P1).

Lim said the more favourable operating landscape is expected to provide some much-needed respite to these players, which have been affected by weak consumer sentiment in recent years.


RAM lifts retail sector outlook after two years

PETALING JAYA: RAM Ratings has revised the negative outlook for the local retail sector after almost two years, as the sector is seen as a key beneficiary of the upbeat consumer sentiment after the 14th general election in May.

The rating agency revised the negative outlook, in place since October 2016, to stable following the betterment in consumer sentiments after the polls and the surge in the Malaysian Institute of Economic Research’s consumer sentiment index(CSI) to a high of 132.9 points in 2Q 2018, after languishing below 100 points for 15 consecutive quarters since 3Q 2014.

Following the implementation of the Goods and Services Tax (GST) on April 1, 2015, the CSI hit a trough of 63.8 in 4Q 2015.

RAM’s head of consumer and industrial ratings Kevin Lim said the zero-rating of the GST effective June 1 is expected to translate into stronger consumer spending and sales for retailers, especially during the three-month tax holiday until the Sales and Services Tax (SST) is reinstated on Sept 1.

This view is also shared by Retail Group Malaysia, which projected a stronger 5.3% rise in retail sales for 2018 from the earlier estimate of 4.7%.

However, Lim said, in some cases the move to zero-rate GST may broaden the operating margins of businesses that have been absorbing the tax.

“Amid promotional campaigns, expansion of outlets and restraint in passing on higher costs to consumers, we can observe (from a sample of seven retailers) that average post-GST operating margins (for 3Q 2015– 1Q 2016) had mostly narrowed y-o-y compared to the previous corresponding period,” he said.

“Consumer spending and retail sales are envisaged to normalise somewhat after the reinstatement of the SST. However, the overall tax burden on consumers will be considerably lighter, with the government’s tax collection estimated to come in at RM21 billion per annum, that is, less than half of the amount collected through the GST,” he added.

The government has also pledged initiatives aimed at increasing the purchasing power of consumers, particularly lower-income households earning less than RM3,500 a month.

In that light, RAM Ratings anticipates some upside in the sales and operating performances of retailers such as AEON Co (M) (AA2/Stable/P1), F&N Holdings (AA1/Stable/P1), Mydin Mohamed Holdings (issue rating: AAA(fg)/Stable) 2 and Poh Kong Holdings (issue ratings: AAA(fg)/Stable/P1).

Lim said the more favourable operating landscape is expected to provide some much-needed respite to these players, which have been affected by weak consumer sentiment in recent years.


Research house maintains ‘buy’ call on Luxchem

PETALING JAYA: AmInvestment Bank research reiterated a “buy” call on Luxchem Corp Bhd with a lower fair value of RM0.81 per share (previously RM0.84/share), on expectations of better earnings in the second half of the year.

The research house said it expects a better latter half of the year as the first half was impacted by fewer working days in Malaysia and Indonesia due to Hari Raya falling in Q2, and the uncertainties in the local market after the 14th general elections.

“We continue to like Luxchem due to its: 1) exposure to industries with stable and commendable growth such as the glove sector (latex); 2) good earnings visibility backed by large clientele (~1,000 customers) and wide applications of its chemical products; and 3) capacity expansion in the group’s manufacturing arms, Luxchem Polymer Industries (LPI), and Transform Master Sdn Bhd,” it said.

Lower export sales were seen in Indonesia, Vietnam and Thailand, due to weaker sales in the manufacturing segment and the headwinds faced by Luxchem’s unsaturated polyester resin manufacturing arm LPI, which continues to operate in a highly competitive environment.

Filling up to 60-70% of its capacity, LPI continues to push to fill up its new capacity of 10K metric tons a year (MT/year) after facing increased competition coupled with a slower market.

Its manufacturing arm TMSB, however, is running at ~80% capacity and the group plans to further expand capacity from 13.8K MT/year to 20K MT/year in the next few years, indicating a sturdy demand of latex and latex-related chemicals from the glove sector.

This is seen as positive given that Luxchem is one of the key suppliers to the glove sector, which also remains as its main growth driver for FY18F.

The research house has also trimmed its FY18F-FY20F earnings forecast by 2-5% due to continued stiff competition in the unsaturated polyester resin industry and an expected slowdown in its Indonesian segment.

“Luxchem’s 2QFY18 core net profit came in slightly below expectations at RM10.0 million (QoQ: +1%, YoY: +10%). This brings 1HFY18 core net profit to RM19.8 million, which accounts for 45% of our full-year forecast and 44% of consensus estimates,” it said.


These nine BoE policy makers may decide to raise interest rates

LONDON, July 29 — As Bank of England policy makers prepare for their interest rate decision on August 2, expectations are running high for the first tightening since November. Traders see the odds of a hike at about 90 per cent. A Bloomberg survey…


Swiss newspaper: Swatch quits annual Baselworld trade fair

GENEVA, July 29 — Swiss watchmaker Swatch Group is quitting the annual Baselworld watch and jewellery trade fair, the NZZ am Sonntag newspaper reported today, calling time on an event that has been a fixture of the luxury industry calendar for a…