Monday, August 20th, 2018

 

Dow, S&P higher on trade talk optimism, Nasdaq slips on tech weakness

NEW YORK, Aug 20 — The S&P 500 and Dow Industrials rose today on optimism around the upcoming Sino-US trade talks, but the Nasdaq fell as technology stocks retreated. The planned lower-level trade talks between the United States and China…


China defies US pressure as EU parts ways with Iranian oil

BEIJING, Aug 20 — China, seeking to skirt US sanctions, will use oil tankers from Iran for its purchases of that country’s crude, throwing Tehran a lifeline while European companies such as France’s Total are walking away due to fear of…


Tesla keeps dropping on doubts Musk has the money to go private

NEW YORK, Aug 20 — Elon Musk’s acknowledgment of the hurdles standing in the way of his effort to take the company private and the emergence of another electric-car company attracting interest from a key investor is whipsawing Tesla Inc…


Wall St higher on US-China trade talk optimism

NEW YORK, Aug 20 — US stock index opened higher today as reports of planned trade talks between the United States and China raised hopes of a potential resolution to their trade spat. Lower-level trade talks will be held on August 22 and 23,…


PepsiCo puts fizz into healthy drinks with US$3.2b SodaStream deal

LONDON, Aug 20 — PepsiCo will buy carbonated drink-machine maker SodaStream for US$3.2 billion (RM13.1 billion) as it battles Coca-Cola for an edge in the health-conscious beverage market. Founded in Britain in 1903, SodaStream was a coveted…


Moody’s affirms Petronas’ ‘A1’ rating

PETALING JAYA: Moody's Investors Service which affirmed Petroliam Nasional Bhd's (Petronas) 'A1' rating, today flagged potential changes in government policies for oil and gas sector as credit negative for the group, which is currently being challenged as the sole owner of the country's oil and gas resources.

The Sarawak government is making a play for direct authority over oil and gas resources in the state. In July, the Gabungan Parti Sarawak-led State Assembly passed the Oil Mining (Amendment) Bill 2018 which requires only one licence for exploration, prospecting and mining of oil and gas.

After Petronas failed in June to get the courts to declare it as the sole owner and authority of oil and gas resources in the country, it has been silent on the matter.
The federal government has thus far not weighed in on the issue.

Moody's senior vice-president Vikas Halan said in a statement that potential changes to government's policies for the oil and gas sector could affect Petronas' position as the sole owner of the country's petroleum resources, and increase the royalties paid on its upstream oil and gas production.

“While these changes could be credit negative for Petronas, their implementation will take time and we expect the group to have the financial flexibility to reduce dividends and capital spending to minimise any adverse impact on its credit profile,” Halan said.

Nevertheless, he said Petronas' financial profile and liquidity position are stronger than those of its higher rated global peers, and it thus has a cushion to absorb some deterioration in its credit metrics before its ratings face downward pressure.

Petronas' gross financial leverage, as measured by its total debt/ earnings before interest, taxes, depreciation, and amortisation (ebitda), improved to 0.7 times for the 12 months ended March 2018 from about 1.0 times for 2016.

Moody's said it expects Petronas to maintain its gross financial leverage below 0.8 times-1.0 times for the next two to three years.

The company's total debt/ total capitalisation remains conservative at below 15% as of March 2018 and Moody's expects this to be maintained at 15% to 20% over the next two to three years compared to its downgrade threshold of above 30% to 35%.

The company's net adjusted cash position, which had increased to RM90 billion as of March 31, 2018 from RM42.8 billion on Dec 31, 2016, will likely be maintained at a level of RM80 billion to RM100 billion over the next two to three years based on Moody's current oil price assumption of US$45 to US$65 per barrel through 2019.
Moody's said this also incorporates its expectation of gradual increase in dividends to the government to RM25 billion by 2020.

The rating agency has affirmed the A1 rating on the senior unsecured notes issued by Petronas Capital Ltd, the (P) A1 rating on the US$15 billion (RM61.6 billion) medium-term note programme and the A1 rating on the sukuk issued through Petronas Global Sukuk Ltd.

Moody's said the rating affirmation indicates that the group will maintain its strong operating profile, credit metrics and liquidity as it continues to generate free cash flow in an improved oil price environment and as it nears the end of its capital spending cycle.

Moody's said the stable outlook also reflects its expectation that Petronas will maintain its strong credit profile over the next 12 to 24 months. It further reflects Moody's expectation that the group will continue to adjust its spending on operating and capital expenditure to protect its financial position.

The national oil company's rating is supported by its large-scale hydrocarbon reserves; strong financial metrics; conservative financial policies; and solid liquidity profile.


DRB-Hicom shares gain on Proton-Geely China JV pact

PETALING JAYA: DRB-Hicom Bhd's share price gained 3.81% or 9 sen to close at RM2.45 with 22.73 million shares done today, on news of a joint venture in China which will enable subsidiary Proton Holdings Bhd to assemble and market cars there.

This is DRB-Hicom's highest gain since Aug 13, having closed at RM2.32 last Monday. The stock has been fluctuating since.

Proton Holdings and Zhejiang Geely Holding Group entered into a heads of agreement to set up an equal stake joint venture (JV) company which will enable Proton to assemble and market its cars in China.

DRB-Hicom said in a statement yetoday that the partnership via the yet to be named JV entity includes the setting up of a production facility in China which will assemble vehicles, and the development of a network of dealers to market the Proton range in China.

The portfolio of cars for China will primarily come from existing Geely platforms, although the external design of the vehicles will be undertaken by Proton. However, the agreement also provides for existing Proton platforms that are found suitable to be developed into models for the Chinese market.

DRB-Hicom Group managing director Datuk Seri Syed Faisal Albar said Geely's entry as a strategic partner of Proton has paved an easier route for Proton's entry into the lucrative Chinese market.

“Clearly with Geely on board, Proton's route into China has become more tenable. Part of Geely's role is to secure the manufacturing licences and regulatory approvals required for such a venture under China's regulations. Geely will also identify a suitable location where the manufacturing facility is to be based”, he added.

Existing Proton component vendors that have quality and a competitive edge may also be considered as suppliers for the JV company. This, Syed Faisal said, should sit well with the Malaysian government which has often prodded Malaysian component makers to venture into the Chinese market.

China's passenger car sales have grown tremendously over the last 10 years—from the sale of 6.76 million passenger cars in 2008 to 24 million units in 2017. Geely is seen as the clear leader in the segment, as the first privately-owned Chinese carmaker to sell over one million units.


DNeX unit gets time extension to challenge MyCC’s proposed RM17.4m fine

PETALING JAYA: Dagang Nexchange Bhd's (DNeX) wholly owned subsidiary Dagang Net Technologies Sdn Bhd has obtained an extension of time until Sept 3 to make an oral representation to the Malaysia Competition Commission (MyCC) with regard to a proposed RM17.4 million fine for alleged abuse of dominant power.

DNeX is challenging MyCC's proposed decision.

MyCC alleged that Dagang Net abused its position as a monopoly in the provision of trade facilitation services under the National Single Window, refusing to supply electronic mailboxes to end users of the Customs Information System, and imposing barriers to entry to the extent that may harm competition.

Dagang Net was also provisionally found to have imposed an exclusivity clause on its business partners, which would have had the effect of distorting competition in an upcoming market by creating barriers to entry for Dagang Net's competitors.

MyCC proposed a directive on Dagang Net to cease and desist the infringing conduct of imposing any future clauses in its MyChannel Partner Agreements and any future conditions that new and/or additional mailboxes will not be provided to end users.

It also proposed for Dagang Net's directors and senior management to enrol into a competition law compliance programme and training within three months.


Hess’ Southeast Asian oil & gas assets draw interest

SINGAPORE: The Southeast Asian offshore natural gas assets of US oil and gas producer Hess Corp, estimated to be worth as much as US$5 billion (RM22.05 billion), have attracted takeover interest from firms including Thailand's PTTEP PCL and Austrian energy group OMV AG, people familiar with the matter said.

Hess, which has a collection of gas fields in North Malay Basin in offshore Malaysia and in the Malaysia-Thailand Joint Development Area (JDA) with 50% equal partner Petroliam Nasional Bhd (Petronas), has not yet decided whether to sell the assets, according to financial and industry sources.

Their estimated market value would be US$4 billion to US$5 billion, the sources said. They declined to be identified because the takeover interest had not previously been made public.

The interest in Hess' assets, among the few long-term and sizeable projects in the region, comes as cashed-up firms such as PTTEP are buying overseas assets, while the likes of OMV and Kuwait Foreign Petroleum Exploration Co have been scouring for acquisitions in Asia.

Hess, which hasn't reported a profit since 2014, has been under pressure from investors to make money. It posted a smaller-than-expected loss in April-June, but many of its peers have turned profitable after the oil price crash two years ago, fuelling questions as to why Hess has not followed suit.

The firm is developing large offshore oil projects in South America and US shale oil. In 2014, it sold its Thai assets to PTTEP for US$1 billion and also sold its Indonesian assets.

“We don't comment on rumours but we continue to believe that our Malaysia assets are an important part of our portfolio and our value creation strategy,” Hess spokeswoman Lorrie Hecker said in a statement.

“JDA and North Malay Basin are significant long-term, low-cost cash generators, producing stable production and free cash flows, which provide funding for our compelling, long-term opportunities in Guyana and the Bakken (in the United States).”

“A number of parties have looked (at the Hess assets) and have teams working on this,” said one financial source.

“Increasing numbers of companies believe a sale is probable,” said the person, adding that Hess' project would also appeal to private-equity backed players and mid-sized energy firms.

He said PTTEP was working with a financial adviser for its interest in the assets.

Another source said some parties had done preliminary work on the assets and were waiting to see if Hess would start a sale process.

OMV and Kuwait Foreign Petroleum Exploration Co declined to comment.

This month, OMV won regulatory approval to buy Royal Dutch Shell's upstream assets in New Zealand for US$578 million. OMV said in March that the acquisition was a key step to develop Australasia into a core region in line with its new strategy.

Petronas declined comment while PTTEP said it was focused on expanding in Southeast Asia.

“PTTEP is interested in M&A deals with particular focus on assets located in PTTEP's region of experience such as South East Asia, which is PTTEP's areas of expertise and the operating risk is moderately low,” the Thai company told Reuters, declining to comment specifically on Hess assets.


China’s MoF, Securities Commission Malaysia sign MoU on regulatory cooperation

KUALA LUMPUR, Aug 20 — The Securities Commission Malaysia (SC) and China’s Ministry of Finance (MOF China) today signed a memorandum of understanding (MoU) for cross-border regulatory cooperation on accounting and audit matters under their…