Monday, January 14th, 2019


Securities Commission: Digital assets subject to anti-money laundering, counter-terrorism rules

KUALA LUMPUR, Jan 14 — Those dealing in digital assets will be required to put in place anti-money laundering and counter-terrorism financing rules, cyber security and business continuity measures as per Securities Commission’s (SC) latest…

Pound hits seven-week high on eve of vital Brexit vote

LONDON, Jan 14 — The British pound today hit a seven-week high against the dollar as UK Prime Minister Theresa May delivered an upbeat speech on the eve of a key Brexit vote which she is expected to lose, dealers said. Sterling bounced as high as…

Citigroup profits up but revenues dip in Q4

NEW YORK, Jan 14 — Lower expenses helped boost Citigroup's fourth-quarter earnings but heavy volatility dented revenues in some trading divisions, the bank reported today. Citigroup, the first US banking giant to report results, said…

Aussie dollar, yuan fall on concerns about China slowdown

LONDON, Jan 14 —The Australian dollar and kiwi dollar, gauges of global risk appetite, fell today on fears of a slowdown in China’s economy prompted by a contraction in Chinese exports. Market sentiment swung negative after data showed that…

FGV expects RM150m savings this year

PETALING JAYA: FGV Holdings Bhd, which hopes announce its new group CEO in the next few days, expects to save at least RM150 million this year from plugging leaks and addressing inefficiencies, said its chairman Datuk Wira Azhar Abdul Hamid.

In a letter to shareholders today, Azhar said operational processes are being improved as part of its transformation plan and the improvements include intensifying crop recovery, cost reduction in estates, implementing mechanisation and enhancements of agricultural practices.

FGV’s new management team is almost fully in place with the appointment of a new group CFO, chief procurement officer, COO of the plantation operations and chief human resource officer.

Azhar said FGV’s fresh fruit bunch (FFB) yield for 2018 is forecasted at 16.9 MT/ha, whereas the industry average for Malaysia is 19 MT/ha. This year, it expects to close the gap with yields at 19.4 MT/ha.

For 2018, the group expects average crude palm oil (CPO) production cost (ex-mill) at RM1,666 per MT and for 2019, it is targeting average CPO production cost at RM1,469 per MT.

“FGV will correct its legacy issues and restore operational integrity. It is estimated that at an average CPO price of RM2,500 per MT, FGV should be able to earn profit before tax of RM1 billion a year. All shareholders, especially Felda will stand to benefit,” he said.

He said in the last few months, one of the startling revelations is the scale of leakages and inefficiencies that have permeated the company. He said FGV may be losing millions of ringgit a year due to inefficient procurement processes.

“Several initiatives are being implemented including a group-wide review of procurement policies and practices. We are also reviewing our capital structure and financing costs. Additionally, the group is looking at rightsizing our manpower requirements,” he added.

On the issue of replanting, he said it is a legacy issue that will be corrected over the next few years. FGV still has about 33,000ha of land with trees that are above 30 years old.

Azhar said the depletion of FGV’s financial resources was evident when it impaired a total of RM788 million in the third quarter of 2018. Moving forward, the group will now decide how best to extract some value from some of its assets and investment.

The group is also rectifying its internal organisational structures to maximise shareholder value and reviewing certain underperforming joint ventures.

In addition, FGV has identified several non-core businesses and assets with an estimated value of RM350 million for disposal. It has also identified several areas for the development of strategic alliances or partnerships to capitalise on its strengths and plug capacity gaps.

Azhar noted that a culture change in FGV is long overdue. He said the group has identified the human resource gaps and priorities, and will put in place a people building programme.

“Over the last 12 months or so, several changes have been made to the board. With the new board in place and several new members of senior management taking over the reins of key portfolios in the company, I am confident that FGV will be able to address the issues and challenges that we are facing,” he said.

Property prices likely to continue downtrend: PropertyGuru

PETALING JAYA: Property prices in the country are likely to continue their downtrend for at least the first half of the year (1H19), despite improving consumer sentiment and proactive government policies announced in the Budget 2019, online property company PropertyGuru said.

It said in a statement that this is validated by the company’s Market Index, which shows that asking prices of homes in Malaysia continue to show a 2.3% drop year-on-year.

The Market Index is an analysis of over 250,000 property listings aggregated and indexed.

PropertyGuru said its online portal, which has over 1.3 million Malaysians searching for properties, has seen a surge of interest in the following property hotspots identified in the various states of Kuala Lumpur, Selangor, Penang and Johor.

While there has been a dip in asking prices, it said the demand for properties in Kuala Lumpur is still strong with the most popular and highly searched areas being Bangsar, Mont Kiara and Cheras.

It said the property types that are most searched in these three areas are condominiums, followed by apartments and townhouses, noting the reason for high-rises being the most preferred property type in Kuala Lumpur may be due to the more affordable entry price points.

In terms of the price bracket, PropertyGuru said many are searching below the RM300,000 bracket which is not feasible for the locations that are preferred, since many of these locations are priced above the affordability range.

The company said demand for properties in Selangor continues to be high despite declining prices, with properties in Petaling Jaya, Shah Alam, and Subang Jaya topping the list in this order.

It said properties that are most searched for in these areas are condominiums, followed by apartments and two-storey terrace houses, with many looking at transit-oriented development properties.

Digital assets come under Securities Commission’s purview

PUTRAJAYA: Effective tomorrow, digital currencies and digital tokens (collectively known as digital assets) are prescribed as securities and will be regulated by the Securities Commission Malaysia (SC).

In a statement today , Finance Minister Lim Guan Eng said the Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019 will come into force tomorrow.

The offering of such instruments, as well as its associated activities, will require authorisation from the SC and need to comply with the relevant securities laws and regulations.

“The Ministry of Finance views digital assets, as well as its underlying blockchain technologies, as having the potential to bring about innovation in both old and new industries. In particular, we believe digital assets have a role to play as an alternative fundraising avenue for entrepreneurs and new businesses, and an alternate asset class for investors,“ Lim said.

The SC will put in place the relevant regulatory requirements for the issuance of initial coin offerings (ICOs) and the trading of digital assets at digital asset exchanges in Malaysia. This framework is expected to be launched by the end of Q1 2019.

Any person offering an ICO or operating a digital asset exchange without SC’s approval may be punished, on conviction, with imprisonment not exceeding 10 years and fine not exceeding RM10 million.

Financial regulators have been keeping a tight rein on digital currencies and have previously emphasised that digital currencies are not legal tender in Malaysia.

Most SMEs unaware of Islamic financing options

PETALING JAYA: A recent survey conducted by Bank Negara Malaysia revealed that almost 60% of small and medium enterprises (SMEs) are not aware of the availability of Islamic business financing facilities.

“Indeed, most SMEs adopted conventional financing. Some may still have the misconception that Islamic finance is only for Muslims. Today, we hope to dispel this and create more awareness about what Islamic finance is and has to offer,” Bank Negara Malaysia (BNM) assistant governor Adnan Zaylani Mohamad Zahid said in his welcoming speech at the inaugural Islamic Finance Rendezvous Series hosted by the Penang state government today.

According to him, Islamic banking assets stood at RM874 billion or 30.4% of total banking assets as at end September last year, with an annual growth of 10% over the past three decades.

At the end of the third quarter last year, takaful contributions amounted to RM1.7 billion with market penetration at 15%. Adnan said that growth of Islamic finance in Malaysia has been resilient and supportive of social and economic developments.

“What underlies this growth is the robust foundation and building blocks that the government and BNM, together with the industry, have worked towards, namely in infrastructure development, institution building, robust regulatory framework and product development. We are now at a stage where we view that the foundations are solid and the industry is ready to deliver solutions to meet your needs,” he added.

Adnan said there is now a wide ranging spectrum of Islamic financial products to meet the needs of businesses such as supply chain finance, which enables businesses particularly SMEs, to leverage on the creditworthiness of their anchor suppliers or buyers who are mainly multinational companies, to obtain financing at a more affordable rate which may not be possible through direct approach with banks.

There is also coverage in takaful products at competitive prices, which for example include coverage for loss or damage to goods shipped on all types of conveyances from manufacturing to trading while the Investment Account Platform (IAP) offers more competitive financing terms and variations in financing structures for ventures. To date, the IAP has supported eight ventures worth RM161.3 million.

In addition, there is sukuk as an alternative form of financing for businesses, such as green sukuk for green businesses. To date, five green sukuk have been issued by Malaysian solar companies to finance solar power projects, amounting to RM866.8 million since July 2017.

“At the national level, the government is indeed supportive of the role of Islamic finance as an important tool to assist businesses and SMEs to flourish. Developing Islamic finance and the growth of SMEs are key national strategies, as reflected in the recent 2019 Budget,” said Adnan.

He said the SME Shariah-Compliant Financing Scheme of RM1 billion was established to strengthen SMEs by offering lower financing costs with a 2% reduction in financing rate.

“Sukuk issuers also benefit from the three year extension of the double tax deduction for additional expenditure incurred for sukuk issued under Ijarah and Wakalah principles. Other cost savings for sukuk issuers include reduction in professional fees relating to due diligence, drafting and preparation of prospectus; and various fees charged by Securities Commission Malaysia and Bursa Malaysia,” he added.

Foreign funds turn net buyers on Bursa – after nine weeks of selling

PETALING JAYA: Foreign funds mopped up RM25.5 million net of local equities last week, bringing an end to the nine weeks of foreign net selling on Bursa Malaysia.

According to MIDF Research, foreign net outflow stood at RM86.3 million on Monday, the highest in nine trading days while the local bourse gained 0.56% to close at 1,679 points.

On Tuesday, the level of foreign net selling eased slightly to US$75.9 million while Wednesday was the turning point for the week as foreign investors bought RM16.4 million net, snapping three days of foreign selling.

“This was in conformity with other Asian peers that we track such as Taiwan, South Korea, Indonesia and the Philippines. The return of foreign investors to Malaysia was inevitable amidst the regional upbeat sentiment from the three-day discussion between the US and China,” it said in its fund flow report.

Foreign investors gradually increased their holdings on stocks listed on Bursa thereafter until the foreign net buying level reached RM106.7 million on Friday itself, marking the highest daily foreign net inflow in nearly a month.

MIDF Research said that much of the support came not only from the progress in US-China trade relations, but also the advance in Brent crude oil prices amid growing optimism over the Organization of the Petroleum Exporting Countries (Opec) production cuts.

“So far in 2019, foreign funds bought RM7.2 million net or US$1.9 million net of local equities. In comparison to the other two Asean peers we monitor, namely the Philippines and Indonesia, Malaysia has the lowest foreign net inflow on a year-to-date basis. Meanwhile, Thailand is the only Asean peer with a foreign net outflow amounting to US$175.7 million,” it said.

It noted that the participation rate among the various group of investors saw a stark improvement across the board to reach a healthy level. For instance, the average daily traded value (ADTV) for foreign investors jumped by more than 80% for the week to reach RM1.2 billion, the highest in six weeks.

Affin Hwang starts coverage on Press Metal with ‘buy’ call

PETALING JAYA: Affin Hwang Capital has initiated coverage on Press Metal Aluminium Holdings Bhd with a “hold” rating and a 12-month target price of RM4.69.

“Press Metal is the largest integrated aluminium smelter and extruder in Southeast Asia. We like the company for its competitive cost advantage coupled with its potential expansion both upstream and downstream in the aluminium supply chain,” it said in its report.

It projected a 2017-2020 earnings per share compounded annual growth rate of 7% on the back of better product mix and improved cost management while highlighting the group’s low-cost advantage, stable profit margin and strong management team.

“Being the only aluminium smelter to be listed in Malaysia, we believe there is also a scarcity premium that is reflected in the current market valuation for the stock. Apart from that, Press Metal’s inclusion as an index component stock for both the FBM KLCI and MSCI since end-2017, and high institutional shareholding will support the share price,” it said.

In its report, Affin Hwang Capital noted that Press Metal signed 25-year power purchase agreements with Sarawak Energy for its plants’ electricity supply, which provides long-term sustainable electricity with 1.5% tariff increments per annum, ensuring fixed energy costs.

Press Metal consumes about 1,200 MW daily to run its smelters in Samalaju and Mukah, with an annual smelting capacity of 640,000 MT and 120,000 MT respectively.

After suffering damages to its plant and machinery due to a state-wide power outage in 2013, the company adopted multiple measures to mitigate the effects of power outages, including installing a bypass system which takes less than an hour to restart operations.

The company also benefits from an income tax exemption under the 15-year pioneer status awarded in 2013 to its 80%-owned subsidiary Press Metal Bintulu (PMB), which runs the smelters in Samalaju.

Press Metal’s effective tax rate is expected to remain low at about 9-10% in 2018-2020 based on the tax exemption on 100% of PMB’s statutory income derived from the production of aluminium products.

Press Metal, which aims to expand upstream in the supply chain to better manage the cost and supply of its main raw materials, is looking to acquire existing upstream assets that can synergise with its midstream business, which is positive for the group given the volatility in raw material prices.

The group has also locked-in a smaller portion (less than 50%) of its annual alumina requirement for 2019 at a slightly higher price as a percentage of LME aluminium prices compared with 2018.

“In the event that alumina prices increase faster than aluminium prices, Press Metal has the option to buy alumina at the price agreed in the contract, cushioning the impact of higher alumina prices,” said Affin Hwang Capital.

Meanwhile, its proposed acquisition of 50% stake in Japan Alumina Associates would enable the group to secure 230,000 MT of alumina or 15% of its annual alumina requirement. In addition, the group has secured 50% of its carbon anode requirement of 300,000 MT per annum through its joint venture with Sunstone in China.

“In our view, capacity expansion is limited in the near future given limited energy availability. Hence, earnings growth will likely come from better product mix. Press Metal is targeting to raise value-added aluminium products capacity to 60% of total capacity in 2019. This should contribute positively to the bottom line as value- added aluminium products enjoy better margins compared with standard P1020 ingots,” it said.