Monday, August 13th, 2018

 

Trade wars to hit Malaysian steel sector

PETALING JAYA: The Malaysian steel sector will be affected negatively in 2018 and 2019 due to the trade wars on the external front, said MIDF Research.

“Changes in global trade policies, tepid global demand as well as the local steel mill cost structure will continue to impede any positive demand for the companies under our observation,” it said in a report today.

It expects the steel sector to experience more headwinds from the trade wars as China’s demand for steel is shaky, coupled with the slump in its construction industry.

“The demand from China’s manufacturing sector takes up to 360 million metric tons annually, close to 60% of its annual consumption. But, the demand is expected to shudder further due to China’s environmental health and occupational safety policies,” MIDF Research said.

It noted that steel players such as Ann Joo Resources, Lysaght Galvanised Steel, Southern Steel, SC Steel, Mycron Steel and Choo Bee Metal have reacted negatively to the announcements and influx of news on trade and tariff wars.

It expects the trend to persist because globally, steel demand is projected to grow to 1,616.1 million metric tons this year and tepid growth will be plagued by low demand for 2019, growing to 1,626.7 million metric tons.

“This means less demand for export for the local steel mill. Most of the local companies are affected by unwavering overhead costs and operational expenditure, making the sector unattractive,” said MIDF Research.

Meanwhile, the government has announced the exclusion of sales and services tax for building materials and construction services, which would be a breather for the construction sector from the grim outlook of project cuts, it added.


Trade wars to hit M’sian steel sector

PETALING JAYA: The Malaysian steel sector will be affected negatively in 2018 and 2019 due to the trade wars on the external front, said MIDF Research.

“Changes in global trade policies, tepid global demand as well as the local steel mill cost structure will continue to impede any positive demand for the companies under our observation,” it said in a report today.

It expects the steel sector to experience more headwinds from the trade wars as China’s demand for steel is shaky, coupled with the slump in its construction industry.

“The demand from China’s manufacturing sector takes up to 360 million metric tons annually, close to 60% of its annual consumption. But, the demand is expected to shudder further due to China’s environmental health and occupational safety policies,” MIDF Research said.

It noted that steel players such as Ann Joo Resources, Lysaght Galvanised Steel, Southern Steel, SC Steel, Mycron Steel and Choo Bee Metal have reacted negatively to the announcements and influx of news on trade and tariff wars.

It expects the trend to persist because globally, steel demand is projected to grow to 1,616.1 million metric tons this year and tepid growth will be plagued by low demand for 2019, growing to 1,626.7 million metric tons.

“This means less demand for export for the local steel mill. Most of the local companies are affected by unwavering overhead costs and operational expenditure, making the sector unattractive,” said MIDF Research.

Meanwhile, the government has announced the exclusion of sales and services tax for building materials and construction services, which would be a breather for the construction sector from the grim outlook of project cuts, it added.


MAHB: Over 75% of airports we handle not commercially viable

PETALING JAYA: More than 75% of the 39 airports operated by Malaysia Airports Holdings Bhd (MAHB) are not commercially viable, said the airport operator.

“These airports are managed on a cross-subsidisation model in order to provide the Malaysian people with the required connectivity among its smaller towns and rural outposts. Maintaining this network of airports has involved a huge outlay of both capital and operational expenses,” it said in a statement today in response to a media report on competition in the airport sector.

MAHB manages a network of 39 airports in Malaysia, comprising five international airports, 16 domestic airports and 18 short take-off and landing ports.

It noted that airport operations and management in Malaysia are done in a highly regulated environment and all aeronautical charges are entirely determined by regulatory authorities.

“In the case of MAHB, we are governed by the operating agreements we have with the Malaysian government which has stringent mechanism for revision of charges. It is also part of the operating agreements that these charges must be below regional levels,” it said, adding that it cannot introduce any ancillary charges unless decided by the government.

MAHB said, as a listed company, it has to sustain its business growth through a balanced cost and revenue model. Notwithstanding this, it has been supporting the growth of airlines operating in Malaysia throughout the years with low charges and incentive programmes.

MAHB was the top loser on Bursa Malaysia today, sliding 5.38% or 53 sen to RM9.33 with 12 million shares done.


Industry 4.0 policy completed

KUALA LUMPUR: The government has completed the draft of the National Policy on Industry 4.0 and will make an announcement on the new policy soon, according to International Trade and Industry (Miti) Minister Darell Leiking.

Speaking at a press conference in conjunction with the networking session with chambers of commerce and business and industry associations today, Darell said that the government will serve as an enabler in driving the digital transformation in the manufacturing and related services sector.

“I believe that by providing an enabling ecosystem for the manufacturing sector to thrive by adopting new technologies, we can ensure that Malaysia will remain as an attractive prospect for high-technology, innovative and high value-added industries in years to come.

“The government has undertaken all due processes in finalising the draft policy including engaging as many stakeholders as possible and we will continue with these engagements more during the implementation phase later on,” he added.

Darell said that the ministry is also planning to formulate a new industrial master plan post year 2020.

He said among the focus areas will be sustainable development of industries, including green technology initiatives along the horizontal and vertical value chain of the manufacturing sector.

“We will take stock of current plan and initiatives in place and will undertake consultation with various stakeholders in due course,” he added.

Additionally, Darell said that a comprehensive consultation dialogue session with stakeholders,will be organised in the first quarter of next year.

He said the dialogue will serve as a platform to discuss business and industry related issues as well as measures to ensure the solutions are beneficial to the stakeholders and business environment.

On a separate matter, Darell revealed that InvestKL and Exim Bank Malaysia will soon be placed under the ministry (Miti) to complement its existing agency Malaysia External Trade Development Corp’s function in facilitating Malaysia’s global businesses by providing necessary banking and credit support in cross-border business ventures.

Exim Bank is currently an agency under the purview of the Finance Ministry.

On the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, Darell said the government is undertaking further analysis and needs more time to evaluate the agreement and its benefits as well as its impact to Malaysia as a whole.

At the moment, Mexico, Japan and Singapore have ratified the agreement.

The networking session was attended by 150 officials representing 74 national and international chambers of commerce and business and industry associations in Malaysia.


Supply rate cut to hit revenue of Gamuda Water

PETALING JAYA: The quantum of reduction for Syarikat Pengeluar Air Sungai Selangor Sdn Bhd’s (Splash) bulk supply rate (BSR) would likely result in lower revenue terms for Gamuda Bhd’s 80%-owned Gamuda Water Sdn Bhd.

Last Friday, Pengurusan Air Selangor Sdn Bhd (Air Selangor) said in a statement that the cost of treated water paid by Syabas (water distributor) to Splash (water treatment plant) will be reduced before water is distributed and charged to households and industrials.

Air Selangor targets to reduce Splash’s BSR from RM1.37 per cubic metre to 42-44 sen per cubic metre, which is a significant reduction of 67.9% to 69.3%.

“Based on our preliminary analysis, the BSR cut points to a less favourable post-restructuring revenue parameter for Gamuda Water, which currently holds an operations and maintenance (O&M) contract with Splash. We believe a significantly lower restructured BSR for Splash will trickle down to Gamuda Water in the form of lower revenue too,” said CGS-CIMB.

It said in its research report today that Gamuda Water’s RM40-50 million net profit contribution to Gamuda (at 80% stake) should therefore be similarly reduced, even if the O&M contract is retained under Air Selangor’s new terms.

CGS-CIMB said the news of a BSR reduction is a negative surprise, as it suggests less lucrative post-restructuring O&M contracts.

“We retain our net profit forecasts for Gamuda pending likely further details for the O&M terms ahead of the signing of the sale and purchase agreement on Sept 14,” it added.

The lower BSR, however, is expected to reduce the operating cost and have a positive impact on the operational efficiency of Air Selangor.

CGS -CIMB said once the acquisition is concluded, bonds and loans owed by the four water concession companies totalling in excess of RM8 billion will be taken over by Pengurusan Aset Air Bhd (PAAB) and restructured into a long-term lease rental.

Water-related loans extended by the federal government to the Selangor state government exceeding RM1.1 billion, will also be restructured into long-term lease rental.

“With the acquisition of Splash and the conclusion of the Selangor water industry restructuring, Air Selangor will have access to attractive funding terms from PAAB for its future capex projects. The terms of funding under PAAB are better than commercial funding, with lease payments made over 45 years at affordable lease rates,” said CGS-CIMB.

Selangor will also gain access to funding for projects relating to water resource, such as dams, which will be provided by the federal government in the form of grants.

CGS-CIMB has a “reduce” rating on Gamuda, with a target price of RM3.10. It also has a “reduce” rating on Salcon Bhd with a target price of 28 sen and “hold” rating on Taliworks Corp Bhd with a target price of 91 sen.

Although it is not a beneficiary of the Splash sale, Salcon may benefit from the pick-up in non-revenue water works relating to Selangor’s Old Water Pipe Replacement Programme following the full consolidation of water operations under Air Selangor.

Taliworks also could recover the RM638 million in accumulated receivables as at end of 1Q18 owed by Splash to the group’s O&M company.

“This is highly likely to be executed on a staggered basis rather than lump sum. Meanwhile, its O&M contract with Splash is likely to be renegotiated too,” said CGS-CIMB.

Taliworks’ wholly owned subsidiary Sungai Harmoni Sdn Bhd, contributed 13.6% of Taliworks’ FY16 net profit.


Guan Chong’s Q2 net profit soars on better margin

PETALING JAYA: Guan Chong Bhd’s net profit jumped 88.04% to a record high of RM43.03 million in the second quarter ended June 30 from RM22.88 million a year ago due to improved margin.

The group said in a statement today that the enhanced profitability was due to increased economies of scale, resulting from higher production volume to meet growing orders for cocoa ingredients from customers worldwide, as well as lower input costs.

Revenue for the quarter rose 1.92% to RM491.58 million from RM482.30 million a year ago mainly due to higher sales volume of cocoa ingredients, which rose 28%.

For the six months ended June 30, net profit almost tripled to RM82.36 million from RM28.64 million a year ago due to increased sales volume and economies of scale.

However, revenue for the period fell 9.19% to RM1.01 billion from RM1.11 billion a year ago due to lower selling prices of cocoa ingredients.

The board declared an interim single-tier dividend of 2 sen per share in respect of the financial year ending Dec 31 (FY18) to be paid on Sept 28. The total dividend payout of RM9.6 million represents 11.6% of the group’s 1H18 net profit.

Guan Chong’s share price fell 1.44% or 3 sen to close at RM2.06 with 1.1 million shares traded.


Bayer shares fall 10pc after Monsanto's Roundup cancer trial

FRANKFURT, Aug 13 — Bayer shares plunged more than 10 per cent today after a California jury ordered the German company’s newly acquired Monsanto subsidiary to pay US$289 million (RM1.2 billion) for not warning of cancer risks posed by its main…


Markets rattled as Turkish lira dives to record lows

ISTANBUL, Aug 13 — The crisis has been sparked by a series of issues including a faltering economy—the central bank has defied market calls for rate hikes—and tensions with the United States, which has hit Turkey with sanctions over its…


China unloads US soybean cargo amid public worries about cost of trade war

BEIJING, Aug 13 — A vessel carrying US soybeans was unloading its cargo worth at least US$23 million (RM94.35 million) at the Chinese port of Dalian on Monday, becoming one of the first shipments to incur hefty new import duties as the trade row…


Samenta voices concern over possible move to new ministry

PETALING JAYA: Small and medium enterprises association of Malaysia (Samenta) has voiced its concern over the possibility of government agencies such as SME Corp and SME Bank, moved to the newly resurrected Ministry of Entrepreneur Development.

“The current arrangement of placing SME Corp and the National SME Development Council within the Ministry of International Trade and Industry (MITI) has enabled seamless co-ordination within the MITI community,” it said while also welcoming the resurrection of the Entrepreneurship Development Ministry.

“Among the pain points of SME is that of market access and capacity building. Having SME Corp placed along with Matrade (Malaysia External Trade Development Corporation) and Malaysia Productivity Corporation (MPC) within MITI would help ensure a unified policy playbook for SMEs,” it added.

Stressing that policy certainty and continuity is important, Samenta said it will support the cabinet's decision and hopes that a decision will be made with continuity of these agencies in mind.