Wednesday, December 12th, 2018
NEW YORK, Dec 12 — Wall Street stocks were back on the upswing early today amid heightened volatility on the latest positive signs in the US-China trade fight. About 20 minutes into trading, the Dow Jones Industrial Average was up 1.0 per cent at…
LONDON, Dec 12 — Opec said today it had offset a drop in sanctions-hit Iranian oil exports and lowered the 2019 forecast of demand for its crude, underlining the challenge the producer group faces to prevent a glut even after last week’s…
LONDON, Dec 12 — Stock markets rallied today as US President Donald Trump sounded upbeat about doing a trade deal with China, while sterling jumped off 20-month lows as Prime Minister Theresa May vowed to fight a challenge to her leadership….
PETALING JAYA: Sinotop Holdings Bhd has proposed to dispose of its underperforming China-based fabric businesses, which has seen an erosion in profit margin in the past three financial years.
The assets comprise investments in its wholly owned subsidiary Be Top Group Ltd (Be Top) and its wholly owned subsidiary, Top Textile (Suzhou) Co Ltd, which are involved in the manufacturing and sale of fabric products.
Sinotop told the stock exchange that it has invested RM328.13 million in Be Top and RM67.17 million in Top Textile.
The disposal will be done via open tender whereby the disposal consideration can be only determined based on the winning bid upon the completion of the process.
The net profit of the foreign assets had decreased significantly from RM4.17 million in the financial period ended Dec 31, 2015 to RM0.67 million in the 18-month financial period ended June 30, 2018.
The profit margin of the foreign assets had been shrinking over the past three financial years, from a high of 2.25% in 2015 to 0.32% in the 18-month ended June 30, 2018.
Sinotop said the foreign assets are facing multiple challenges in China due to slower economic growth as well as low margins arising from stiff competition from competitors.
“In addition, Sinotop’s foreign assets are also exposed to factors such as more stringent regulatory requirements, higher production costs and exchange rates fluctuation, which have further impacted its financial performance,” it added.
Upon completion of the proposal disposal, the project management services and infrastructure construction business will become the sole core business of Sinotop.
While Sinotop may be classified as a cash company after the disposal exercise, the board intends to maintain its listing status on the Main Market of Bursa Malaysia.
Its shares gained 3.70% to close at 28 sen today with 239,300 shares done.
PETALING JAYA: While the overall online hiring scene of Malaysia registered a negative growth for the eighth consecutive month, declining by 11% year-on-year (y-o-y) in October, the oil and gas sector showed no sign of slowing down, according to the Monster Employment Index (MEI).
The index noted that the banking, financial services and insurance (BFSI) recorded the steepest plunge of 16% in October, while the retail industry declined 14%.
The online recruitment for the oil and gas industry, which grew 13% in October, showed no signs of slowing down as the sector continued its growth pattern for 19 consecutive months.
“The oil and gas industry has had a tough couple of years, and the recovery and stabilization of oil prices has paved the way for new investments and operations. ‘Smart drilling’ will be key in the future of the oil and gas industry, with business strategies linked inseparably to technology,” said Monster.com CEO Abhijeet Mukherjee (APAC and Middle East).
Besides oil and gas, another industry which registered positive growth and led the online recruitment activity in October was the information technology, telecom/internet service provider and business process outsourcing/information technology enabled services sector.
After five months of being in the forefront among occupation groups, the demand for hospitality and travel professionals saw the steepest decline of 26% in October.
Customer service role, however, saw the most-notable annual growth among occupation categories with a rise of 25%, the first positive sign since February 2018.
PETALING JAYA: Bermaz Auto Bhd’s (BAuto) net profit for the second quarter ended Oct 31 more than tripled to RM73.92 million from RM22.2 million a year ago due to higher revenue and gross profit margin from domestic operations.
In a filing with Bursa Malaysia, the group said its higher earnings were also due to significantly higher share of profit contribution from its associate company, Mazda Malaysia Sdn Bhd.
“The improvement in gross profit margin was mainly attributed to favourable sales mix and a stronger Malaysian ringgit against the Japanese yen, while the higher share of profit contribution from Mazda Malaysia arose from the increase in production volume for the new CX-5 model to cater for both the domestic and export markets,” it said.
“This was slightly dampened by a lower profit contribution from the Philippine operations, in line with the decrease in their sales volume,” it added.
Revenue for the quarter rose 46.34% to RM690.32 million from RM471.71 million a year ago due to a surge in sales volume from its domestic operations as a result of the zerorisation of the Goods and Services Tax (GST) from June till August this year.
BAuto has recommended a second interim dividend of 3.75 sen per share in respect of the financial period ended Oct 31, payable on Jan 25, 2019. The entitlement date has been fixed on Dec 31.
The group’s decision to absorb the sales tax for bookings received before Sept 1 but with vehicle delivery after the introduction of the Sales and Service Tax (SST) boosted customers’ demand especially for the new CX-5 model.
“This was partly offset by weaker sales from the Philippine operations as the automotive industry of the country is still struggling with the impact of the Tax Reform for Acceleration and Inclusion (TRAIN) law that was implemented in January this year,” said BAuto.
The group said that the TRAIN law has caused an increase in excise tax and consequently, car prices have also increased, thus affecting the demand for motor vehicles in the Philippines.
For six months ended Oct 31, BAuto’s net profit almost tripled to RM124.2 million from RM42.41 million a year ago while revenue rose 36.25% to RM1.18 billion from RM862.94 million a year ago.
Mazda’s sales volume improved by 59% year-on-year, in line with the country’s total industry volume (TIV) for passenger cars which grew 5.7% year-on-year for the first 10 months of 2018. The full year TIV is projected to hit 585,000 units.
BAuto said trading conditions of the automotive segment is expected to remain challenging following the end of the tax holiday period, competitive trading environment, weakening of the ringgit and cautious consumer sentiment due to local and global economic uncertainties.
Despite the challenging conditions, BAuto’s Malaysian operations is in a competitive advantage position due to the huge back orders collected during the GST tax holiday as a result of the group’s absorption of the SST. The bookings collected since the implementation of the SST on Sept 1 remains encouraging due to the upcoming festive seasons.
In the Philippines, Bermaz Auto Philippines Inc seeks to mitigate the downturn impact and sustain its sales volume through more aggressive marketing and support to its dealer network. It also plans to expand its dealerships from 18 at the beginning of FY18 to 21 dealerships at end of FY19.
KUALA LUMPUR: The ringgit is expected to gradually appreciate against the US dollar towards end of the year and strengthen below the RM4 level by early 2019, according to Rakuten Trade Sdn Bhd’s head of research Kenny Yee.
The local unit weakened 0.1% to 4.1865 against the greenback as at 5pm yesterday. Year-to-date, it has depreciated 3.4%.
“By end of this year, I expect it to improve to the RM4.05-RM4.10 level and should dip below RM4 early next year. Hopefully the foreign funds have started to flow back into Malaysia by that time,” Yee told the media during the fully online broker’s market outlook briefing here today.
“Initially, early this year we expect the ringgit to hover around RM3.80-RM3.90 level, but looking at what had happened in the US (rate hikes) and the recent (weakening of) Chinese renminbi, I think the ringgit has performed worse than expected,” he added.
Hence, Yee said the foreign funds are likely to return in the near term to take advantage of the lower ringgit.
Year-to-date, he said the foreign net selling stood at almost RM11 billion.
Moreover, Yee said Malaysia, which has a lower average market volatility compared with Singapore, Indonesia, Vietnam, Thailand and the Philippines, is known as the region’s safe haven for foreign funds and is likely to attract foreign investors’ interest.
“Malaysia is usually known as the region’s more defensive market, and it is a preferred destination for foreign funds,” he added.
The firm however substantially reduced its corporate earnings growth forecast for 2018 and 2019 to 4.1% and 4.2% respectively, from 6.8% and 8.3% previously on the back of the sharp earnings downgrade in the gaming, telecommuni-cation and plantation sectors.
“Going forward, we expect banking sector will continue to be the main catalysts for earnings growth,” he said.
However, for 2020, the firm expects a better performance for Malaysian com-panies with an estimated 7.6% growth.
Rakuten Trade’s top picks among the FBM KLCI component stocks are Malayan Banking Bhd (Maybank), Genting Bhd, CIMB Group Holdings Bhd, Axiata Group Bhd and Gamuda Bhd.
Yee noted that the index-linked blue chips are ripe for the picking following some of the heaviest sell-off seen in May and June.
In the small and mid cap space, Rakuten Trade favours Kelington Group Bhd, HSS Engineers Bhd, Malaysia Building Society Bhd, Perak Transit Bhd and Vizione Hold-ings Bhd.
According to Yee, the FBM KLCI is anticipated to grow over 7% or 100 points from the current 1,660 points to touch 1,780 points by year-end and reach 1,840 points in 2019 based on 16 times the market’s forecast earnings.
PETALING JAYA: Malaysia’s Industrial Production Index (IPI) increased by 4.2% in October compared with the same month last year, driven by the growth seen in all segments, namely mining, manufacturing and electricity, according to the Department of Statistics.
The manufacturing sector grew 5.4% in the month under review compared with October 2017, while electricity and mining grew at 2.1% and 1.4% respectively, contributing to the overall growth in IPI.
MIDF Research forecasts the IPI to expand at a steady pace in the fourth quarter of 2018 and in 2019 amid tapering trade tension effects, strong global demand, optimistic business environment and volatility risks in global commodity prices and currencies.
“As guided by the recent Business Tendency Survey data, we believe the IPI will be growing between 3%-4% during the first half of 2019.” For the whole of 2019, IPI is estimated to grow at 2.9%.
Malaysia’s manufacturing sales for October 2018 grew 10.2% to RM73.1 billion as compared with the RM66.3 billion reported a year ago, said the Department of Statistics.
The growth was attributable to the increase in transport equipment & other manufactures products (13.3%); electrical and electronics products (11.5%); and petroleum, chemical, rubber and plastic products (11.5%).
Meanwhile, the total number of employees engaged in the manufacturing sector in October 2018 was 1.07 million, an increase of 2.2 % or 23,042 compared with 1.05 million in October 2017.
PETALING JAYA: The RM26.7 million claim by Malaysia Airports Holdings Bhd (MAHB) from AirAsia X Bhd (AAX) for uncollected passenger service charges (PSC) will not have any material impact on the airline’s operations.
“In the event that AAX would have to reimburse the RM26.7 million worth of uncollected PSC to MAHB, the impact would not be material to AAX’s day-to-day operations as the company has generated a net operating cash flow of RM47.3 million on average for the past three quarters. Moreover, AAX has a net gearing which is still manageable, remaining below 0.7 times after considering such payments to MAHB,” MIDF Research said in its report.
On Tuesday, AAX told Bursa Malaysia that it was served with a writ of summons by MAHB worth RM26.7 million for uncollected PSC since July 1, 2018, which is in relation to the RM23 additional charge per passenger for international passengers since AAX has only been collecting RM50 instead of RM73 per passenger.
MAHB stated that same rates should apply to both klia2 and Kuala Lumpur International Airport (KLIA). However, AAX reiterated its stance that klia2 is a low-cost airport and the charges levied should commensurate with the level of services provided.
“Future adherence to the full PSC could push average fares upwards to sustain margins but we believe this will be partly mitigated by AAX’s prudence in shifting some of the future capacity into other core markets namely, Japan, South Korea and India to factor in the slower growth from the China segment,” said MIDF Research.
It noted that a re-rating catalyst for AAX would be the possible equal downward revision of PSCs for klia2 and KLIA without any plans to reverse out any previous charges according to the Malay-sian Aviation Commission (Mavcom).
It maintained its “neutral” call on the stock with an adjusted target price of 22 sen per share.
Meanwhile, AirAsia Group Bhd’s (AAGB) deal with Castlelake LP indicates AAGB’s aspirations to invest in shifting from being asset-heavy to being more digitally focused.
“Operationally, AAGB has partnered with Airbus and Palantir to establish an integrated Big Data platform which includes forecast of predictive maintenance and efficient scheduling of parts with a potential saving of US$40,000 per aircraft per year,” said MIDF Research in a separate report.
On Tuesday, Reuters reported that Castle-lake, a US private investment firm, has signed a deal to acquire about 30 narrowbody planes from AAGB for about US$800 million (RM3.34 billion).
The deal entails the purchase of AAGB’s older aircraft, which are under lease to AAGB’s affiliated airlines and is expected to be concluded in a few weeks.
“Previously, management noted that there will be a net addition of 24 aircraft in FY19. Taking into consideration the sale of 30 aircraft to Castlelake, there would be a net reduction of AAGB’s fleet (including other AOCs) by six aircraft. As such, we expect aircraft utilisation across AAGB in FY19 to increase above the 2.2% recorded for 9MFY18,” MIDF Research said.
If the acquisition is satisfied via cash, AAGB’s cash pile would increase to about RM7.77 billion, translating into a net cash position of about RM4.57 billion. Meanwhile, the writ of summons by MAHB to AAGB worth RM9.4 million is only less than 1% of its cash pile and FY18F/FY19F earnings.
“Therefore, AAGB’s financial health will not be adversely impacted in the event that AAGB has to reimburse the monies owed to MAHB,” it added.
It maintained its “buy” call on AAGB with an unchanged target price of RM3.48 per share.
AAGB shares were down 10 sen or 3.8% to RM2.54 today, while AAX declined half a sen or 2.1% to 23 sen.