Sunday, February 10th, 2019


IMF chief says ready to support Pakistan after meeting PM Khan

ISLAMABAD, Feb 10 — International Monetary Fund chief Christine Lagarde today met Pakistani Prime Minister Imran Khan and assured him that IMF stands ready to support his country. The meeting took place on the sidelines of the World Government…

IMF warns of global economic ‘storm’ as growth undershoots

DUBAI, Feb 10 — The International Monetary Fund today warned governments to gear up for a possible economic storm as growth undershoots expectations.    “The bottom-line — we see an economy that is growing more slowly than we had…

F&B outlets get bigger bite in shopping malls

PETALING JAYA: Shopping malls are now allocating a higher percentage of their tenant mix (more space) to food & beverage (F&B) retailers, partly because competition from online platforms has impacted other types of retailers such as fashion, according to a market research and consulting firm.

“Traditionally, F&B made up less than 20% of a mall’s tenant mix, but can go up to 40% nowadays,” Stratos Consulting Group Sdn Bhd managing director Tina Leong told SunBiz.

She said with the tenant mix now consisting of more F&B, this means that malls will need to design or renovate in such a way as to cater to the specific technical requirements that F&B retailers have, for example provisions for water, grease traps, storage, waste disposal and daily delivery.

“F&B as a segment itself has become the anchor for some malls,” said Leong.

She said malls that have a high F&B tenant mix include the refurbished 3 Damansara (formerly Tropicana City Mall), which now has more F&B compared to before. Similarly, Paradigm Mall in Petaling Jaya has refurbished its lower ground floor, which now consists of more F&B than previously.

Sunway Velocity Mall general manager centre management Danny Lee said F&B makes up 27% of the mall’s tenant mix currently, and that it is targeting to have F&B reach 30%.

“Naturally, F&B is doing better compared to others,” Lee said.

Meanwhile, Leong noted that having more or certain types of F&B can also be part of experiential retailing.

“For example, people nowadays, especially millennials, appreciate and are willing to spend on meals or drinks with friends and family, within nicer ambience restaurants or cafes, due to the memorable experiences this create.”

She said to continue to draw shoppers (rather than them shopping online), more shopping malls are looking at creating engaging “experiences” for their customers. Experiential shopping simply means making the physical act of spending money more than simply handing over cash in exchange for goods and services.

“More grocery stores are incorporating food and wine bars where people can enjoy a meal or a drink as well as a social experience before or instead of shopping,” said Leong, adding that some retailers have also integrated augmented reality into their stores, for example Starbucks Reserve Roastery in Shanghai and US-based fashion brand Reformation.

Examples of experiential shopping are malls that have attractively themed or landscaped spots on every floor, where one can stop to take photographs with their friends or family, such as Aeon Mall Kuching. Some community malls in Bangkok, Thailand, have incorporated spaces for pet parks, children’s sand pits and jogging tracks.

“Another recently opened mall, Kiara 163 in Mont Kiara, has incorporated the ‘experiential’ element into their mall design, with a central garden and water features for people to relax. Apart from design features, other ways of creating memorable shopper experiences are through interesting or unique events, activities, decorations, pop-up stores, technological innovations and customer service,” explained Leong.

She said some of the major major malls have been doing this all along, such as Suria KLCC and Pavilion Kuala Lumpur that usually have attractive and unique festive decorations.

“What is different is that nowadays, the customer experience aspect is becoming a focal point. It has become more important as malls and retailers try to attract and retain shoppers in the midst of competing options such as online shopping,” said Leong.

Axiata’s RM2.16b Ncell deal tax bill downside for headline profit and share price

PETALING JAYA: Axiata Group Bhd’s RM2.16 billion tax bill for the Ncell Pte Ltd buyout deal came as a negative surprise to analysts, who warned that the group’s headline profit and share price could react negatively to the news.

On Friday, the counter tumbled as much as 20 sen or 5.13% to RM3.70 before closing 17 sen or 4.36% lower at RM3.73 on 14.22 million shares done.

Nonetheless, Axiata told Bursa Malaysia on Friday that it has not received the judgment and order of the Nepal Supreme Court in relation to the tax bill.

PublicInvest Research said although it has always been wary of Axiata’s exposure to high regulatory risk at its regional operating units, this came as a negative surprise to the research house as the tax issues with Ncell were thought to have been resolved following the advance deposit payment of Rs13.6 billion (RM563.6 million) by Axiata to the Nepalese tax department in 2017.

Including late payment fees and fines, it estimated that the total amount could be Rs66 billion (RM2.35 billion). However, it is believed that Ncell has already paid tax instalments totalling Rs21 billion. This means the outstanding amount could be Rs40-45 billion (RM1.4 billion-RM1.6 billion).

“We have highlighted earlier that although Axiata is able to deliver higher core earnings growth owing to its footprint in high-growth developing markets, this latest development would also mean that Axiata is exposed to higher regulatory and investment risks in these markets,“ it said.

It added that its core earnings forecasts remain unchanged but headline profit could see a sharp decline should Axiata be compelled to pay this capital gain tax in FY19.

Kenanga Research said the tax bill may lead to negative knee-jerk reactions over the short-term. Besides, the group may also potentially provide for some non-core impairments related to its legacy equipment.

“We made no changes to our FY18-19 earnings forecasts. Reiterate outperform call in view of its relatively decent valuation coupled with a stronger Celcom and earnings recovery at XL; but with a lower target price of RM4.50 after lowering our Ncell’s targeted earnings multiplier to 5.0 times to account for the higher regulation risks ahead in Nepal.”

Kenanga Research said should Axiata comply with the Supreme Court’s order and deposit the entire Rs66 billion, it will raise the estimated FY19 gross debt/ebitda and net debt/ebitda ratios to 2.4 times/1.7 times (versus 2.1 times/1.5 times previously).

The research house believes its reported patami (profit after tax and minority interest) for FY18 may be overstated given Axiata is expected to provide for impairments in the upcoming 4Q18 result, which is set to be released on Feb 22. The impairment is believed to be related to the modernisation and technology change in certain markets and thus leading to some legacy equipment made redundant.

Having said that, it believes Axiata’s full-year core patami estimate of RM912 million remains intact.

“Bargain-hunting opportunity could potentially arise on any share price weakness due to the recent hiccup. We advocate investors to start accumulating the share at RM3.70 level.”

‘Impressive’ inflow of foreign funds into Bursa

KUALA LUMPUR: Foreign investors were net buyers in the Malaysian equity market, pumping in RM138.6 million last Monday and Thursday, compared with RM146.8 million recorded during the previous week.

Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the inflow of foreign funds was quite impressive despite external uncertainties.

“Perhaps, expectation that the US Federal Fund Rate will reach a peak of 2.5% may have driven funds from abroad to look at emerging market assets.

“Global prospects were also quite weak based on the recent Global Purchasing Managers’ Index (PMI) for the manufacturing sector which fell to 50.7 points in January from 51.5 points in December 2018,” he told Bernama.

However, Mohd Afzanizam said US labour markets remained strong, following the release of better-than-expected non-farm payroll data for January coupled with higher wages which could prompt the US Federal Reserve to resume monetary tightening measures should inflation continues to rise.

“If that happens, it may have an impact on capital flow and currency markets,” he added.

Meanwhile, MIDF Research analyst Adam M Rahim said the month of January 2019 saw foreign net inflow of RM1.03 billion, the first monthly net inflow since September 2018.

He said weekly increase in average daily traded value, which jumped 21% to remain above RM1 billion for the second week running, was only evident among foreign investors.

For the just-ended holiday-shortened week, there were no major corporate announcements as the local market was closed for two days to usher in the Chinese Lunar New Year which fell on Feb 5.

On Friday, the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) ended 2.99 points higher at 1,686.52.

Phillip Capital Management Malaysia senior vice-president (investment) Datuk Dr Nazri Khan Adam Khan opined that the small improvement in the fund flow indicated that Malaysia was catching up with other countries such as Indonesia, the Philippines and Thailand.

He said sentiment remained cautious, amid lingering concern following headwinds from trade tensions and global growth.

“The government should encourage more foreign investors to invest in the country as this will propel the inflow of foreign funds into our country,” he said.

On Feb 8, Finance Minister Lim Guan Eng said international investors were confident in Malaysia’s economic potential as well as the government’s ability to drive the economy forward.

He said Malaysia remained an attractive investment destination with investors, especially with the government’s commit-ment to the competency, accountability and transparency principles under Prime Minister Tun Dr Mahathir Mohamad’s leadership.

Lim led a delegation from his ministry on a three-day roadshow from Feb 6-8 to meet Japanese investors and senior government officials in conjunction with the upcoming issuance of the Samurai bond.

As for the ringgit’s outlook, Nazri Khan said the local note was expected to trade at 4.00 against the US dollar next week boosted by mild buying.

“We stay slightly bullish on the ringgit in anticipation of further losses in the US dollar next week,” he said.

On Friday, the ringgit ended at a seven-month high of 4.0670/0720 against the US dollar, a level last seen on July 20, 2018, when it stood at 4.0600/0630.

Alam Flora seen lifting Malakoff’s FY19 earnings by 4%

PETALING JAYA: Malakoff Corp Bhd’s acquisition of Alam Flora is expected to improve its earnings by 4% in financial year ending Dec 31 (FY19) based on an earnings contribution of five months, according to AmInvestment Bank.

On a full-year basis, Alam Flora would increase Malakoff’s FY20 net profit by 10% and boost Malakoff’s fair value from 85 sen per share to about 94 sen a share, AmInvestment analyst Gan Huey Ling said in a note last Friday.

According to Gan, the research house will upgrade Malakoff’s FY19 earnings forecast if the RM944.6 million acquisition of 97.4% of Alam Flora from DRB-Hicom Bhd is completed by the third quarter of 2019 (Q3FY19).

Recently, Malakoff announced that the cut-off date for the fulfilment of the conditions for the acquisition has been extended to July 31.

“We have assumed Malakoff’s gross dividend per share to be 3.5 sen for FY18 and 4 sen for FY19. These translate into decent dividend yields of 4.2% for FY18 and 4.8% for FY19. Implied net dividend payouts are 93% for FY18 and 100% for FY19,” she added.

The research house maintained its “hold” recommendation on Malakoff with an unchanged discounted cash flow-based fair value of 85 sen per share. Its fair value of 85 sen per share implies an FY19 price earnings (PE) of 21.2 times and FY20 PE of 20.7 times.

Going forward, Malakoff has scheduled 100 days of maintenance shutdowns for the Tanjung Bin Energy (TBE) power plant in FY19.

As these are scheduled outages, Gan said the group will still receive capacity payments from Tenaga Nasional Bhd in FY19.

“We gather that there has not been any unplanned outage at the power plants in 4QFY18,” she said.

However, she said TBE power plant’s earnings may still be slightly affected as the rectification works for the voltage regulator, which started in early September, was only completed at the end of October 2018.

Recall that there were unplanned outages at the TBE power plant, GB3 power plant and KEV (Kapar Energy Ventures) power plant in Q3FY18.

Gan also noted that Malakoff is negotiating with General Electric, which is the main contractor, on the compensation for the unplanned outages at the TBE power plant.

She said the compensation would not be able to make up for the loss in capacity payments. However, Malakoff is hoping to extend the warranty period for the equipment and parts and/or receive compensation to cover the cost of repair or rectification works.

Previously, Malakoff’s target was to achieve the stipulated power purchase agreement threshold unplanned outage level of 6% by February 2019.

However, due to the numerous unplanned outages in Q3FY18, the timeline has been shifted to September 2019.

AT Systematization acquires 9% stake in Trive Property

PETALING JAYA: AT Systematization Bhd’s (ATS) unit AT Precision Tooling Sdn Bhd (ATP) has subscribed 213.3 million placement shares of Trive Property Group Bhd equivalent to a 9.09% stake for RM2.92 million cash or 1.37 sen per share.

ATS told the stock exchange that the placement price represents a 9.87% discount to the five-day volume weighted average price of Trive shares of 1.52 sen.

Trive’s share price closed half a sen or 25% lower at 1.5 sen last Friday on 502,200 shares done, while ATS shares were unchanged at 5 sen with 1,000 shares changing hands.

Listed on the Main Market of Bursa Malaysia, Trive and its subsidiaries are principally involved in the trading of solar panels and related products as well as property development, construction and property development.

ATS said the group intends to look into opportunities to capitalise on the new relationship with Trive, including the potential of sourcing solar panels and certain solar products for periodic maintenance of its existing solar photovoltaic plants or for future expansion/construction of additional solar photovoltaic plants.

“This will help to support its plan to expand its solar energy business in the future and the group may look to Trive for the supply of solar panels and related products at reasonable pricing to support the construction of new solar photovoltaic plants,” it added.

Gushing profits for oil majors on crude price

PARIS, Feb 10 — The world’s top energy companies booked enormous profits last year thanks to higher oil prices and keeping a tight lid on spending, even if that risked limiting their medium-term production capacity. The five “supermajors”…

Renault denounces Nissan over Ghosn investigation, says report

PARIS, Feb 10 — Lawyers for French carmaker Renault have criticised their Japanese alliance partner Nissan for its handling of an internal probe into the Carlos Ghosn scandal, a Sunday newspaper has reported. In a letter to Nissan dated January…

RM138.6m in foreign funds flow into equity market this week

KUALA LUMPUR, Feb 10 — Foreign investors were net buyers in the Malaysian equity market, pumping in RM138.6 million between Monday and Thursday, compared with RM146.8 million recorded during the previous week. Bank Islam Malaysia Bhd chief…