Tuesday, January 22nd, 2019


India likely to target about US$11b from state asset sales in 2019/20 FY, say sources

NEW DELHI, Jan 22 —The Indian government is likely to seek to raise about 800 billion rupees (RM46.4 billion) through the sale of state-owned assets in the next fiscal year, beginning April 1, two government sources with direct knowledge of budget…

Sapura Energy raises RM4b from rights issue

KUALA LUMPUR, Jan 22 — Sapura Energy Bhd (Sapura Energy) has raised about RM4.0 billion from its rights issue exercise which closed on Jan 16, 2019.The group received 8.138 billion of valid acceptances and excess applications for its rights shares…

Stay or exit by March 1, SC tells digital asset operators

KUALA LUMPUR: Digital asset operators can exit the Malaysian market during the transitional period till March 1 if they think their business is not viable here, said the Securities Commission Malaysia’s (SC) executive director of innovation, digital and strategy, Chin Wei Min.

The SC, which was tasked with regulating digital assets, has prohibited digital asset platforms from accepting new investors during the transitional period until March 1 and no person can conduct any initial coin offering (ICO) activity without prior authorisation.

Chin said this transitional period allows digital asset operators to think about the feasibility of their business in Malaysia, and whether they want to continue or exit.

“They can also wind down their business and if they decide not to continue, they should return the money and assets to their respective investors,“ he told a media briefing here today.

Chin said there are many digital asset exchanges operating in Malaysia and in a week it has identified those exchanges not on the reporting institutions’ (RI) list.

“The RI list has more than 47, this is public information, you can add on a few more.”

“We have more than 50,000 active accounts (in exchanges) in Malaysia. Suffice to say, there are many investors out there,“ he added.

Chin stressed that existing platform operators have until Friday to identify themselves to the SC, beyond which the regulator reserves the right to take action.

He said guidelines for digital assets, including those for ICOs and digital asset exchanges, are expected to be launched by the end of March.

However, Chin disclosed that the ICO guidelines will be geared towards a disclosure regime.

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

Chin said digital assets are prescribed as securities only if they meet or fulfil characteristics of securities.

“It is not blanket ‘everything is securities’. The reality is you need to show that you are using the token as fundraising … and there are several characteristics. The other is, when you buy, sell or exchange, if you expect a return, then it falls under the definition of securities.”

Sapura Energy rights issue 18.5% undersubscribed

PETALING JAYA: Sapura Energy Bhd’s rights issue exercise saw an undersubscription rate of 18.51% after its share price fell below its rights issue price of 30 sen.

However, it still managed to raise about RM4 billion as the remaining 1.85 billion unsubscribed rights shares will be fully taken up by the joint underwriters, namely, Maybank Investment, CIMB Investment Bank and RHB Investment Bank.

Sapura Energy said in a statement today that it received 8.14 billion of valid acceptances and excess applications for its rights shares with warrants, representing a subscription rate of 81.5%.

Successful applicants of the rights shares will be given warrants on the basis of one warrant for every 10 rights shares subscribed.

For its Islamic redeemable convertible preference shares (RCPS-i), the group saw just above 100% of valid acceptances and excess applications.

Permodalan Nasional Bhd and its associated funds have emerged as the single largest shareholder with 40% shareholding in Sapura Energy.

Sapura Technology Sdn Bhd will become the second largest shareholder with a direct and indirect shareholding of 16.3%. Meanwhile, the minority shareholders will hold 42.2% in Sapura Energy.

In tandem with the rights issue, Sapura Energy will be forming a 50:50 strategic partnership with Austria’s OMV Aktiengesellschaft, which will result in the group receiving cash proceeds of up to US$975 million (RM4 billion).

Proceeds from both the rights issue and the proposed strategic partnership with OMV will be used to repay the group’s borrowings and for working capital.

Upon the completion of both exercises, Sapura Energy’s gearing ratio is expected to drop significantly from 1.74 times to 0.62 times.

On Bursa Malaysia today, Sapura Energy closed down 1.75% at 28 sen on volume of 254.29 million shares.

Singapore telco M1’s suitors Keppel and SPH say they won’t raise offer price

SINGAPORE: Singapore conglomerate Keppel Corp and Singapore Press Holdings (SPH) said today they will not raise their offer price to gain majority control of mobile operator M1 Ltd, a move that could put pressure on Axiata Group, M1’s single largest shareholder.

Keppel and SPH, which together control 34.3% of Singapore’s smallest mobile operator, said in September they would offer S$2.06 (RM6.25) per share for majority ownership of M1 in a bid to support its falling share price and restructure the firm to better compete against sector rivals.

“The offeror wishes to announce that it does not intend to increase the offer price of S$2.06 in cash per offer share under any circumstances whatsoever,” Keppel and SPH said in a regulatory announcement issued by their jointly-owned holding company.

The closing date was extended to Feb 18 from Feb 4. M1 has a total market value of S$1.92 billion.

Malaysia’s Axiata, which holds a 28.3% stake in M1, said in September the offer should reflect the accurate future value of M1, inclusive of an acceptable control premium and consistent with market standards.

Axiata said at the time it was working with an adviser and was reviewing its options. Reuters cited a source as saying Axiata viewed the offer price as “inadequate”.

In response to a query from Reuters, Axiata said it would not comment on today’s statement. “Axiata will make any necessary announcements as required and in due time,” it said.

Since the September announcement, M1’s shares have rallied 26% to trade at S$2.05 today but are little changed over the past two years and have lost 49% from a record high of S$3.99 in early 2015.

Mobile telecoms competition is heating up in Singapore, with Australia’s TPG Telecom planning to launch a new service after winning a licence to become the city-state’s fourth telecom operator. Analysts consider M1 to be the most vulnerable to new competition.

In July 2017, Axiata, Keppel and SPH had considered, and then called off a strategic review of their M1 shareholding, which sources said was due to a lower-than-expected offer from external parties.

K-One to rake in RM30m sales from dental water flosser contract

PETALING JAYA: K-One Technology Bhd is estimated to rake in RM30 million sales from its three-year contract with an US-based multinational firm to manufacture dental water flosser for the consumer market.

K-One told Bursa Malaysia that its wholly owned subsidiary K-One Resources Sdn Bhd has ratified a manufacturing agreement with the customer manufacture a certain model of the undisclosed dental water flosser for consumer use.

The customer generated sales revenue of US$ 3.8 billion in 2017. Its dental water flosser is said to be the number one dental water flosser brand in the US and is sold to about 80 countries worldwide.

K-One said tooling is expected to commence in the first quarter of 2019 which will be followed by manufacturing of the products at the end of the subsequent quarter.

“ The manufacturing of the said product is forecasted to generate sales averaging approximately RM10 million per year, commencing this year, for an initial period of 3 years,” it added.

Tech sector forecast to see slower growth ahead

PETALING JAYA: Hong Leong Investment Bank (HLIB) Research anticipates slower growth in the technology sector due to downside risks in the macro environment coupled with waning data trends.

However, it expects automotive and Internet of Things (IoT) to take the forefront while smartphone takes a backseat.

The research house said in a note today that for the first 11 months of 2018 (11M18) global semiconductor sales were outstanding after growing 16%, thanks to the explosive growth of memory followed by discrete and optoelectronics.

As for 2019, consensus is projecting 3% growth for that segment.

“However, we see further downside to this projection considering the US-China trade conflict, stagnant smartphone demand, industry-wide inventory adjustment and weaker memory prices,” HLIB said.

The automotive sector is expected to be the major growth driver for global technology industry supported by its development towards full autonomy.

The equipment industry remained solid with billings increasing 11% in 11M18, supported by heavy investments in all regions except Taiwan.

“However, year-on-year growth has been on a snail’s pace for the past five months, translating into a significant deceleration from past 20 consecutive months’ double-digit growth rates,” the research house explained.

According to SEMI, this reflected the near-term weakening demand for personal computers, mobile phones and servers as well as pulled back investments in response to recent softening of memory prices.

“This is in line with its expectation of expansion in capital spending not outpacing sales growth on the long run and potentially lead to industry-wide overcapacity,” said HLIB.

The research house also highlighted that local semiconductor players may experience strong demand to support the disrupted global supply chain should the procurement levy and technology transfer restriction from US take effect.

Note that China sources substantial fabrication equipment from US players for its expansionary semiconductor industry towards the “Make in China 2025” vision. Vice versa, US fabless semiconductor players outsource their product fabrication and some are produced in China.

With strong greenback, HLIB expects tech firms to be marginally boosted thanks to their US dollar-denominated sales while partly offset by the US dollar cost items.

It estimates the ringgit to be weaker in FY19 with at full-year average of RM4.20 against US dollar.

Nonetheless, pricier commodities, compounded by stronger US dollar projection, will exert pressures on margins for traditional packaging.

Maintaining a “neutral” call on the sector, HLIB displayed a cautious stance in the absence of near-term catalyst as it expects global sales and capital spending to grow moderately.

As for stock picks, it gave Frontken a “buy” call at a target price of RM1.05 on the back of bullish global semiconductor market outlook, robust fab investment, leading edge technology, oil and gas recovery and strong balance sheet.

Prestariang says won’t challenge SKIN termination

PETALING JAYA: Prestariang Bhd said it does not have the intention to challenge the government’s decision to terminate the RM3.5 billion Immigration Department’s National Immigration Control System (SKIN) project.

The termination of the concession agreement for the SKIN project came into effect today, according to the group’s filing with the stock exchange today.

This comes after it received a letter from the government dated Dec 11 to terminate the project by way of expropriation.

“Following clarification with the government, the parties have mutually agreed that the termination of the concession will take effect on Jan 22,” Prestariang in a stock exchange filing.

The group reiterated that its unit Prestariang SKIN Sdn Bhd (PSKIN) is not in default of the concession agreement.

Prestariang noted that it respects the government’s decision to exercise its rights to terminate the concession by expropriation in accordance with the terms of the concession agreement.

“PSKIN is entitled to compensation in accordance with the formula set out in the concession agreement, for which it is currently in discussions with the government to settle amicably in the interests of both parties,” it added.

Prestariang’s share price has been dragged by news of SKIN termination. Its stock fell 7.35% to close at 31.5 sen today with 13.16 million shares done.

Tax refunds to boost GDP this year: Economist

KUALA LUMPUR: Malaysia’s gross domestic product (GDP) is forecast to grow at 4.9% this year, boosted by a tax refund programme and continuous support from consumer demand, said an economist.

Standard Chartered Bank chief economist (Asean and South Asia) Edward Lee Wee Kok said the GDP growth would be higher than the 4.7% estimated for 2018.

He said the tax refund was worth 2.5% of the GDP and could provide a massive fiscal boost even in an economically cautious environment.

“Assuming half of it (the tax refund) goes to individuals and a very cautious amount of 10% to be taken out for consumption, that is still easily worth around 0.1% to 0.2% of GDP,” he told reporters at a briefing on 2019’s economic outlook today.

Lee said another factor that would contribute to better GDP growth this year would be the mining sector’s recovery.

“There was a disruption in the mining sector last year that took off about 0.2% growth,” he said.

Meanwhile, Lee said consumer demand remained GDP’s main growth pillar and would be supported by a healthy labour market, favourable tax changes and a minimum wage increase.

He said the reintroduction of the sales and service tax to replace the goods and services tax implied an estimated 0.5% to 1% of GDP worth of fiscal receipts returned to the government.

“A new standardised minimum wage of RM1,100 introduced on Jan 1, will also support consumer spending,” he said.

However, Lee said net external demand was projected to be less supportive this year amid slower growth in major economies and ongoing trade tensions between the US and China, adding that Malaysia as a small and open economy would be negatively affected by declining external demand.

Nevertheless, the economist said a prolonged US-China trade dispute could benefit Malaysia in the medium term from supply chain movement out of China.

“We (Malaysia and China) sell a lot of similar products to the US and countries that tend to benefit (from the supply chain movement) are those that are already exporting to the US because the supply chain is already in existence.

“So, I do expect more orders from the US to come as an indirect positive effect from the trade war,” he said.

Lee said Malaysia was the third most successful country after Vietnam and Mexico in terms of attracting supply chain movement away from China.

“However, it will take time before we see the positive impact as it involves investment decisions,” he added.

China to remain Malaysia’s largest trading partner: Miti

KUALA LUMPUR: China will likely remain as Malaysia’s largest trading partner, looking at the current trend, said Deputy International Trade and Industry Minister Dr Ong Kian Ming.

He said even with the spectre of the US-China trade war looming, Malaysia-China trade continued to grow at a higher rate compared with other trading partners.

In a statement today, Ong said from January to November 2018, Malaysia’s total trade rose 6.2% as compared with the same period in 2017, contributed by 6.9% growth in exports and 5.3% rise in imports.

During the period, Malaysia-China total trade expanded by 8.5%, with an 11.3% increase in exports and 6.3% growth in imports.

He said Malaysia was also poised to attract more investments and benefit from import substitution as a result of the US-China trade war.

Ong said there were about 300 out of the top 500 Chinese companies listed by Fortune Magazine which had yet to invest in Malaysia.

“These are the companies that we want to entice to Malaysia by showing off our natural and strategic advantages as an investment location,“ he said.

From January to September 2018, approved manufacturing foreign direct investment (FDI) from China had already reached RM15.62 billion.

“More than 50% of the approved manufacturing FDI from Chinese companies came after the 14th General Election (in May 2018), showing that companies from China continue to demonstrate confidence in the Malaysian economy under the new government,“ he added.

He said a recent study by Nomura Global Economics ranked Malaysia as the top country, based on its aggregated Nomura Import Substitution Index scores, that could benefit in particular from the exports of electronic integrated circuits, liquefied natural gas and communication apparatus.

Meanwhile, the Economist Intelligence Unit projected Malaysia to be a beneficiary in diverted production and investment in the automotive, as well as information and communications technology products.

“While a prolonged US-China trade war would not be welcomed by a small and open economy like Malaysia, there are mitigating factors that will somewhat cushion the impact for us,“ Ong added.