Tuesday, August 14th, 2018


Malaysian economy could shrink if US-China trade war escalates

KUALA LUMPUR: Malaysia's gross domestic product (GDP) could contract by 1.3% in two years should the trade war between the United States and China intensify.

CIMB Group chief economist Dr Donald Hanna said Malaysia's economic growth could shrink in the event of continuous escalation in tariff imposition and a confidence shock in the financial market, which could result from, say, China offloading its substantial holdings of US debt.

That will not only result in a reduction of global trade but will also affect Malaysia, which is an open economy – and trigger interest rate increases in the US.

However, at current levels, Hanna noted that the impact of the trade duel between the two economic giants on Malaysia is small.

He projected GDP growth to decelerate to around 5.1% in the second quarter (Q2) of 2018 from the 5.8% recorded in Q2 2017 – taking the cue from the slower growth in the Industrial Production Index for June, which rose only 1.1%.

Full-year GDP growth is expected to be around 5.1-5.2%. This will be due to the natural moderation in GDP growth which started slowing down after a robust expansion in the second half of last year and not due to the US-China tensions.

Hanna said the trade war appears to be one of US President Donald Trump's policies that could see some longevity, compared to others on issues such as immigration and abortion.

He noted that if Trump's objective of waging a trade dispute is to shrink the US trade deficit, it is not likely to be achieved because of other macroeconomic policies that the US administration has in place.

Hanna, who was speaking at the 13th CIMB Asean Research Institute's Asean Roundtable Series: Trade War and Its Impact on Asean, also said Malaysia could be a preferred location for US and Chinese companies to relocate their investments – in the face of tariff slapping.

Echoing that sentiment, European Union-Malaysia Chamber of Commerce and Industry CEO Roberto Benetello said China is likely to rethink its trade alliances in the region and get closer to partners in Asean.

This could be a call to accelerate the Regional Comprehensive Economic Partnership (RCEP), which could see a slowdown in the ratification process, thanks to the ongoing spat.

American Malaysian Chamber of Commerce executive director Siobhan M Das said that without the US market, Asean could become a dumping ground for China's excesses.

Malaysia Productivity Corp board member and former ambassador of Malaysia to the World Trade Organisation (WTO) Datuk Muhamad Noor Yacob said the focus should be on the WTO's Dispute Settlement Body.

Although observers have voiced their concerns over the possibility of Trump pulling the US out of the WTO, the country has been one of its active users, accounting for more than 100 of the 500 disputes attended to by the body since 1995. It has also been an active respondent to many disputes.

The roundtable also saw speakers stressing on the importance of the RCEP and free trade agreements between the regional trading bloc and potential trading partners.

AirAsia sells remaining 25% share of joint venture with Expedia for US$60m

PETALING JAYA: AirAsia Group Bhd has divested its remaining 25% stake in its joint venture (JV) company AAE Travel Pte Ltd for US$60 million (RM240 million) to the 75% stakeholder, Expedia Inc's Expedia Southeast Asia Pte Ltd, in a bid to monetise its investment and utilise the proceeds as working capital.

AirAsia divested the other 25% interest it had on March 10, 2015.

The group announced in a bourse filing yesterday that it has executed an agreement for the disposal and the cash purchase consideration is net of AirAsia's concurrent purchase of AirAsiaGo.com domain names and related assets from AAE Travel by Travel 360 Sdn Bhd.

AirAsiaGo.com, which offers a full suite of travel products including AirAsia flight and hotel packages featuring Expedia Group lodging content, will continue to be powered by Expedia Group.

In accordance with the asset transfer agreement, the JV company will transfer its right, title and interest in and to certain assets related to the AirAsiaGo business and brand to Travel360, while the private label and co-brand agreement by Travel360 stipulates that Expedia will provide certain private label services in respect of the AirAsiaGo business to AirAsia Bhd.

“This sale represents the divestment of the last of our non-core investments from the previous round of joint ventures. These proceeds will be used to develop big unicorn products such as BigPay, Travel 360, Redbox Logistics and Ourshop.

“This first set of joint ventures has taught us a tremendous amount and shareholders who have seen huge returns from our first round of partnerships haven't seen anything yet,” group CEO Tan Sri Tony Fernandes said in a separate statement.

“Expedia Group has been a great partner to AirAsia and we look forward to continuing to work very closely in the future, particularly regarding regional and global distribution of AirAsia flights, he added.

Meanwhile, Expedia Group president and CEO Mark Okerstrom said the acquisition of full ownership of AAE Travel reflects the group’s full belief in the immense potential of the Asian travel market of over US$485 billion.

The joint venture was formed on March 29, 2011 to establish an online travel agency with three main brands, namely, AirAsiaGo, GoRooms and Expedia.

YTL Hospitality REIT acquiring Hokkaido ski resort for RM222.5m cash

PETALING JAYA: YTL Hospitality REIT (YTL REIT) is acquiring The Green Leaf Niseko Village for ¥6 billion cash (RM222.5 million) from Niseko Village KK (Niseko Village), an indirect wholly owned subsidiary of YTL Corp Bhd.

In a filing with Bursa Malaysia today, YTL REIT said its wholly owned subsidiary Starhill REIT Niseko GK (Starhill Niseko) has entered into a conditional sale and purchase agreement with Niseko Village.

YTL REIT said the acquisition is in line with its investment objective to continuously pursue the strategy to acquire and invest in high quality hospitality properties, with a view to provide long-term and sustainable income distribution to unitholders and achieve long-term growth in the net asset value per unit.

Upon completion of the acquisition, Starhill Niseko will lease the property to Niseko Village for 30 years with an option to renew for a further 30 years, at an annual rental rate of ¥315 million for the first five years with 5% rental increase every subsequent five years.

The lease arrangement will provide YTL REIT with a steady and secure income stream and is expected to contribute positively to the trust's future distributable income and distribution per unit.

The property comprises freehold land in Aza-Higashiyama, Niseko-cho, Abuta-gun in Hokkaido, Japan, measuring 2.65 acres on which the five-storey hotel is built. The
35-year-old hotel was substantially renovated, refurbished and reopened in December 2010.

Niseko-cho is a famous resort area that attracts international skiers. Last year, the 200-room hotel achieved an occupancy rate of 53.8%.

The property has a market value of ¥6 billion as at April 30, 2018 as ascribed by Savills Japan Co Ltd. Starhill Niseko expects to finance the purchase consideration and expenses related to the proposals with borrowings and/or internally generated funds.

As the proposed acquisition will be partly financed with borrowings, YTL REIT's gearing ratio is expected to increase from 37.5% to up to 40.2% based on the audited consolidated total assets value and borrowings of YTL REIT Group as at June 30.

The proposals, which will be completed by year-end, are not expected to have any material effect on YTL REIT's distribution policy of at least 90% of the distributable income for each financial year.

For the financial year ended June 30, 2018, YTL REIT declared an income distribution of 7.8683 sen per unit, representing 100% of the income available for distribution.

AmInvestment Bank Bhd has been appointed as the principal adviser for the proposals.

India’s Fortis sees signs of recovery, shareholders approve takeover by IHH Healthcare

BENGAlURU: Cash-strapped Indian hospital operator Fortis Healthcare Ltd said today it was starting to see some signs of recovery, as it secured shareholder approval for its takeover by Malaysia's IHH Healthcare Bhd.

Fortis, which operates about 30 private hospitals in India, reported a net loss of 707.4 million rupees (RM41.5 million) for the three months ended June 30, and has now been in the red for five of the last six quarters, as it struggled with a cash crunch, rising debt and other problems.

However, it said occupancy rates at its hospitals had risen to over 69% currently, from 62% in the quarter through June.

The first quarter loss reversed a 52.9 million rupee profit in the same period a year earlier, and income from operations fell 9.9% in the first quarter from a year earlier to 10.4 billion rupees.

“…The last quarter performance has been impacted severely due to the continuing challenges that the company had been facing over the last 18 months that have led to liquidity issues,” chief executive Bhavdeep Singh said in a statement.

The company said it aims to reach average occupancy levels for its hospital business of over 70% by the fourth quarter of fiscal 2019.
Fortis shareholders approved IHH's takeover bid for Fortis, ending months of speculation over control of the company. IHH will invest 40 billion rupees at 170 rupees per share in Fortis.

The prolonged takeover battle drew interest from five international and local suitors, eyeing ownership of Fortis amid a private healthcare boom in India.– Reuters

US stocks bounce as Turkish currency rises

NEW YORK, Aug 14 — Wall Street stocks gained early today as a bounce in the embattled Turkish currency tempered worries about emerging economies. About 10 minutes into trading, the Dow Jones Industrial Average was up 0.2 per cent at 25,248.29. The…

India’s Cosmos Bank loses US$13.5m in cyber attack

MUMBAI, Aug 14 — Cyber criminals hacked the systems of India’s Cosmos Bank and siphoned off nearly 944 million rupees (US$13.5 million, RM55.1 million) through simultaneous withdrawals across 28 countries over the weekend, the bank has told…

Indonesia to impose import curbs to halt currency’s slide

JAKARTA, Aug 14 — Indonesia plans to restrict imports of capital and consumer goods and accelerate the use of biofuel to cut crude oil purchases to stem a slide in the nation’s currency. The government will control inbound shipments of goods…

Toll concessionaires’ shares rise

PETALING JAYA: The shares of most toll concessionaires rose today after the government decided to postpone the abolishment of tolls.

Among the nine toll concessionaires listed on Bursa Malaysia, Lingkaran Trans Kota Holdings Bhd (Litrak) was the top gainer, rising 2.85% or 13 sen to close at RM4.69 with 704,700 shares traded today.

The company, which operates the Damansara-Puchong Highway and Sprint Highway, was the 13th top gainer. The stock went as high as RM5.90 today.

Malaysian Resources Corp Bhd’s (MRCB) share price rose 0.59% or half sen to close at 85.5 sen with 36.02 million shares traded, making it the ninth most active stock on the bourse today. The stock went as high as 86.5 sen today.

Ekovest Bhd’s share price rose 2.06% or 1.5 sen to close at 74.5 sen with 6.20 million shares done while Taliworks Corp Bhd rose 1.75% or 2 sen to close at RM1.16 with 1.74 million shares done. Ahmad Zaki Resources Bhd shares rose 3.96% or 2 sen to close at 52.5 sen with 5.47 million shares done.

Meanwhile, IJM Corp Bhd and Bina Puri Holdings Bhd closed unchanged today, at RM1.97 with 5.15 million shares done and 25 sen with 440,000 shares done, respectively.

Gamuda Bhd saw its share price fall 1.64% or 6 sen to close at RM3.59 with 7.59 million shares traded. It was the 19th top loser on the bourse today. WCE Holdings Bhd also saw its share price decline, by 0.59% or half sen to close at 84 sen with 292,400 shares done.

On Monday, Works Minister Baru Bian said it would cost the government RM400 billion to abolish the tolls in one go and that the government does not have the financial means to absorb the impact.

“After taking into account this factor, the government has agreed to postpone the proposal to abolish tolls until our economy really stabilises and allows for it,” he told the Dewan Rakyat.

Baru said the government will study other options that it deems to be more practical, in order to reduce the cost of living.

The abolishment of tolls was part of the government’s election manifesto, among other pledges including the removal of the goods and services tax.

Nestle’s Q2 earnings driven by higher margin

PETALING JAYA: Nestle (Malaysia) Bhd’s net profit for the second quarter ended June 30 rose 2.93% to RM166.16 million from RM161.44 million a year ago due to higher margin.

In a filing with Bursa Malaysia, the company said its gross profit margin increased by 10 basis points from 37.8% to 37.9%.

Nestle saw a slight increase in operating expenses from RM265 million to RM271 million, which was mainly attributed to the one-time costs from the start-up of the new national distribution centre (NDC). Pre-tax profit increased from RM211.9 million to RM214.4 million.

Revenue for the quarter rose 1.98% to RM1.31 billion from RM1.28 billion a year ago driven by the launch of new products and strong consumers and trade promotions.

In addition, increased festive sales during the Hari Raya period in June contributed to the company’s positive growth.

“In the second quarter, we also started operations in our new NDC. This move from the existing NDC to the new NDC resulted in a shift of sales from June (Q2) to July (Q3) because of the required and planned ramp-up of the operations in the new NDC, which will support strong growth in years to come,” it said.

The board of directors has declared an interim dividend of 70 sen per share amounting to RM164.15 million in respect of financial year ending Dec 31 which will be paid on Sept 27.

For the six months ended June 30, net profit rose 1.34% to RM397.38 million from RM392.13 million a year ago while revenue for the period rose 3.13% to RM2.74 billion from RM2.66 billion a year ago.

During the period, Nestle saw higher domestic sales and an increase in its export business. It said that the domestic growth was driven by strong demand, especially during the festive seasons.

The group continued to deliver strong innovations and renovations during the period, which have set a solid base for growth in the second half of the year.

Edaran slapped with UMA query

PETALING JAYA: Edaran Bhd has been issued an unusual market activity (UMA) query by Bursa Malaysia on the sharp rise in the price and volume of its shares recently.

The company’s share price jumped 57% or 26 sen to 71.5 sen on Monday with 47.36 million shares traded. The IT services provider is required to disclose any corporate development, rumour or other possible explanation that could have contributed to the sharp rise in its share price.

In response to the query, the IT services provider said there are no corporate developments and it is not aware of any rumour or other possible explanation that could have contributed to the sharp rise in its share price.

It said that it is continuously pursuing and identifying new business opportunities in its ordinary course of business and will make an immediate announcement as and when it enters into any agreement.

Short selling of Edaran shares were suspended on Monday as the daily short selling trade limit reached 3% of the issued number of shares.