Wednesday, January 9th, 2019


Construction of CORE’s residential project in TRX begins

KUALA LUMPUR: CORE Precious Development Sdn Bhd has started construction of two serviced residence towers and one serviced apartment tower at the Tun Razak Exchange (TRX) following a groundbreaking ceremony today.

The project, targeted for completion by end-2022, will be sold exclusively via a sales preview by the middle of 2019.

Present at the ceremony were CORE managing director Frank Feng, TRX City Sdn Bhd CEO Datuk Azmar Talib, China Communications and Construction Group chairman Zhao Hui and representatives from WCT Holdings Bhd.

In a joint statement today, they said the development was positioned to be the frontier of global living and emphasised a modern urban living lifestyle catering to financial professionals and expatriates.

Feng said the company was confident of helping TRX to achieve its goal of becoming a financial centre and business hub.

“As an international investor, our vision is to collaborate with TRX City and our valued shareholders in transforming TRX into a world class financial centre in this region.

“We aim to create a modern urban living lifestyle within this TRX project,” he said.

HSBB rollout could bring revenue growth to TNB

PETALING JAYA: The rollout of high-speed broadband (HSBB) packages leveraging on Tenaga Nasional Bhd’s (TNB) fibre optic infrastructure could bring potential revenue growth to TNB via rental of fibre infrastructure.

However, it is uncertain whether TNB is capable of rolling out HSBB in untapped areas that have yet to be connected with existing fibre network, said PublicInvest Research in its report.

“If TNB can only provide services to areas that are already currently served by existing networks, then TNB has little differentiation from incumbent telco players apart from offering products at lower price points. Overall, we believe this could bring potential revenue growth to TNB through rental of the fibre infrastructure but earnings impact is expected to be insignificant to the group,” it said.

TNB’s wholly owned subsidiary City Broadband is among the broadband players in the pilot project but for TNB to compete directly against existing broadband players in a meaningful manner, significant investment would be required for last-mile connectivity.

On Tuesday, Astro, Maxis, Digi, Celcom and City Broadband launched new HSBB packages leveraging on TNB’s fibre optic infrastructure in Jasin, Malacca, where TNB implemented a three-month pilot project through the RM1 billion National Fiberisation and Connectivity Plan initiative announced in Budget 2019.

“Although this is negative to Telekom Malaysia (TM) as it introduces new competition into the fixed line broadband segment, connectivity is only restricted to limited areas covering 1,100 homes in Jasin.

“Impact on the respective players is expected to be immaterial but it remains to be seen whether TNB could also rollout similar arrangement with service providers in other locations throughout the country,” said Public-Invest Research, which maintained its “underweight” call on the sector.

For Astro, it believes that the deal would be value accretive as Astro’s 92% household penetration in Jasin is predominantly NJOI, which does not generate any TV subscription revenue currently. However, it noted that any earnings contribution would not be significant in the near term as it is only a trial project and will depend on the take-up rate by eligible households.

Meanwhile, Affin Hwang Capital has downgraded TM to “sell” from “hold” with an unchanged target price of RM2.30 in view of higher downside risk to its share price after a 13% rally since November 2018.

TNB’s high-speed fibre network should provide an irresistible option for TM’s 1.1 million Streamyx subscribers, given the significant speed upgrades and lower prices. However, competitive product offerings from Maxis and City Broadband may lure TM’s 1.2 million unifi subscribers, it said in its report.

Limited share price upside seen for property sector

PETALING JAYA: Rising interest rates, Malaysia’s slowing gross domestic product growth and unfavourable government policies will limit share price upside for Malaysian property development companies, said CGS-CIMB.

Although it expects the property companies in its coverage universe to post positive earnings growth this year, CGS-CIMB said share price upside will be limited and the sector is unlikely to re-rate to peak levels last seen in 2014.

“The property sector has garnered more interest lately due to its attractive valuations, but we believe the sector is cheap for a reason and this could be a false dawn. We believe developers could miss their new property sales targets for 2018, and are likely to set lower new sales targets for 2019. We think it’s a signal that the 2019 property market is likely to see lower new property sales and weaker buying sentiment,” it said in its report today.

According to its analysis, the medium 40% and bottom 40% (B40) households face difficulty in buying properties as the average house price is above both groups’ affordability range and despite government incentives and policies to address this issue, the oversupply in the property market has continued to rise since 2012.

“Likewise, property stocks have fallen from their peak valuations in 2014, some to the trough levels in 2008, making them attractively priced at the moment, in our opinion,” it added.

CGS-CIMB does not see much room for housing loan growth given the existing low interest rate environment, limited buyer’s affordability and possible interest rate hike.

In addition, restrictive government policies are still in place and it does not see any incentive for consumers to purchase property given the weak rental market and subdued property market.

Given the limited domestic affordability, higher real property gains tax and restrictive policies on foreigners, the property oversupply issue is expected to persist. Note that in 1H2018, properties priced below RM1 million accounted for 93% of total unsold residential property inventory.

“We expect the housing market to remain challenging in the near term, unless there is a meaningful surge in household income, decline in house prices or more positive measures are introduced,” it said.

Although lower property prices are possible, developers would be at the losing end if they were to lower prices at the expense of profit margins to spur new property sales demand or remove rebates/freebies to protect margins, which could result in weaker new sales.

“Even if new house prices are cut by 20%, we think the prices would still be unaffordable for the B40 households. Instead of focusing on increasing affordable housing supply and ownership, we believe a better way to approach the housing glut is to increase Malaysians’ household income in a meaningful way,” it said.

CGS-CIMB maintained its “neutral” call on the sector with an estimated dividend yield of 3% on average in 2019.

Sime Darby Property Bhd remains its top pick as the company has shown continuous improvement in its property development division and new property sales since its demerger in November 2017.

“We believe the group’s healthy balance sheet and massive land bank are advantages in addressing the change in future product demand,” it said.

VS Industry upgraded to ‘buy’ after recent sell-off

PETALING JAYA: AmInvestment Bank has upgraded VS Industry Bhd (VSI) to a “buy” call as it believes the recent sell-off offers opportunities for investors to accumulate VSI shares, premised on its long-term prospects tied to solid execution track record, despite short-term prospects being dampened by a string of headwinds.

“Despite the expectations of declining order flow for its key customer, we understand that the group is currently in various stages of discussion with more than five prospective multinational corporation customers to secure new orders that would fill the excess capacity in its facilities,“ the research house said in a report today.

VSI’s profit warning last month spooked the investors, sending the stock to a low of 63 sen from its recent high of RM1.59. It closed 2.04% higher at 75 sen today on 18.23 million shares done.

It had said that the second-half financial performance will be affected by the anticipated lower sales order.

At the recent AGM, VSI managing director Datuk Gan Sem Yam had shared that the ongoing US-China trade war has opened up opportunities for VSI through receipts of enquiries from US MNCs looking to shift or diversify their manufacturing bases to Southeast Asia.

“We concur that VSI is well-equipped to take on these opportunities given its new facilities with 300,000 sq ft combined production space, which include a 120,000 sq ft factory and new 180,000 sq ft factory.

“Furthermore, VSI continues to undergo cost rationalisation exercise to streamline its operations in China in light of uncertainties from the US-China trade war, higher operating costs and intense competition faced,“ AmInvestment Bank said.

The research house added that VSI boasts a healthy balance sheet with its net asset per share standing at 84 sen with net gearing of 0.2 times as at Oct 31, 2018. At the current price, VSI is trading at nine times its price-earnings ratio (PE), way below its two-year historical average PE of 19 times.

“All in, we believe VSI’s fundamentals remain intact and recommend a buy on weakness.”

Despite the rating upgrade, AmInvestment Bank has lowered VSI’s fair value to RM1.04 from RM1.31, pegged to a lower 2019 forecast PE of 14 times (previously 15 times) amid the anticipated order slowdown in 2019 and reduced market capitalisation.

“We cut our FY19-FY21 forecasts further by 6-15% mainly on account of lower printed circuit board assembly revenue tied to reduced contribution from VSI’s key customer in 2HFY19.”

MARC affirms ‘AAA’ ratings on Putrajaya Holdings sukuk

PETALING JAYA: Malaysian Rating Corp Bhd (MARC) has affirmed its “AAA” ratings on Putrajaya Holdings Sdn Bhd’s (PJH) three sukuk programmes.

The sukuk programmes are the RM370 million sukuk musharakah programme (due 2030); RM3 billion sukuk musharakah programme (due 2032); and RM1.5 billion sukuk musharakah medium-term notes (MTN) programme (due 2033).

“The ratings affirmation is mainly premised on PJH’s stable and sizeable rental income from the Malaysian government as the principal lessee of government buildings in Putrajaya under long-term lease-and-sublease agreements. The ratings also incorporate the credit strength of PJH’s government-linked major shareholders and its developmental track record as the master developer of the federal administrative centre in Putrajaya,“ MARC said in a statement.

The stable ratings outlook reflects MARC’s expectation that PJH’s credit profile would remain commensurate with the ratings and will receive continued support from its key shareholders.

As at end-October 2018, PJH had delivered 40 government building projects with a total gross built-up area of 37.5 million sq ft under the lease-sublease arrangement with the government. It currently has only one ongoing government building construction project, the Parcel F development in Putrajaya.

This project, which is being undertaken by its wholly owned subsidiary Putrajaya Bina Sdn Bhd, comprises nine government buildings and is nearing completion. The Parcel F project will generate an additional annual lease rental of about RM216 million for the group.

The rating agency said while government building projects under the lease-sublease arrangement provide assured rental streams, its non-government development projects continue to face challenging conditions given the prevailing weak property market.

“Nonetheless, PJH is less reliant on these projects to meet its financial obligations. Its annual lease rental income of about RM1.4 billion is more than sufficient to meet principal repayments of between RM500 million and RM685 million per year over the next five years.”

As of end-September 2018, the take-up rate for ongoing residential projects remained moderate, albeit with some improvement, at 42.8% (9M2017: 37.3%). During the year, PJH also launched its third Perumahan Penjawat Awam 1Malaysia (PPA1M) project in Putrajaya.

World stocks near 4-week high on US-China trade optimism, oil climbs

LONDON, Jan 9 — World stocks extend their gains to hit a near-four week high and oil prices rose today on optimism that the United States and China may be inching towards a trade deal, soothing fears an all-out trade war could hit a slowing global…

Ancom, Nylex say business as usual after Siew Ka Wei arrest


[email protected]

PETALING JAYA: Ancom Bhd and its subsidiary Nylex (Malaysia) Bhd have assured that business is as usual after the arrest of Datuk Siew Ka Wei in relation to a RM100 million tourism contract which was awarded before the 14th general election.

Siew is Ancom executive chairman and Nylex managing director.

Ancom and Nylex told Bursa Malaysia that they had convened an emergency board meeting yesterday afternoon to assess the implications of the matter on the business operations, shareholders and other stakeholders who may be affected directly and indirectly and to determine the possible course of action to be taken.

“The board wishes to inform the shareholders and other stakeholders that the operations of the group remain unaffected by the event. The group’s various operating units have been and are under the care of the various unit heads with proven track record,“ said both Ancom and Nylex.

Ancom’s share price declined 2 sen or 4.08% to 47 sen yesterday on 1.40 million shares done, while Nylex closed 2 sen or 3.08% lower at 63 sen with 504,200 shares changing hands.

Ancom is a diversified group with businesses in agricultural and industrial chemicals, polymer, logistics, information technology and media. Meanwhile, Nylex is involved in in the chemicals, plastics and polymers businesses.

Bursa Malaysia reverses earlier gains to end lower

KUALA LUMPUR, Jan 9 —The FTSE Bursa Malaysia KLCI (FBM KLCI) reversed earlier gains to close lower today but overall market breadth was positive as investors continued to nibble on penny stocks and selective heavyweights, said a dealer. At 5 pm,…

Business as usual, Ancom says after executive chairman’s remand

KUALA LUMPUR, Jan 9 — It’s business as usual for Ancom Berhad after its executive chairman, Datuk Siew Ka Wei, was remanded for four days to assist in a Malaysian Anti-Corruption Commission probe into his tenure as Tourism Malaysia chairman, the…