Monday, March 4th, 2019


US stocks gain on reports of trade deal progress

NEW YORK, March 4 — Wall Street stocks rose early today on reports the US and China are close to a major trade agreement that would roll back some of the tariffs imposed in recent months. About 15 minutes into trading, the Dow Jones Industrial…

Sime Darby Plantation makes downstream push via new subsidiary

KUALA LUMPUR, March 4 — Sime Darby Plantation Bhd (SDP) sees its downstream business’ contribution to bottom line to increase to 25 per cent in the next three to four years with the setting up of new subsidiary, Sime Darby Oils Sdn Bhd (SDO)….

MIEA: Extend Home Ownership Campaign perks to secondary market

PETALING JAYA: The Malaysian Institute of Estate Agents (MIEA) has urged the government to extend the incentives offered during the Home Ownership Campaign (HOC) to first-time home buyers looking to buy from the secondary market.

“MIEA is very appreciative of the fact that the Finance Ministry has introduced new programmes to stimulate the primary market by focusing on first-time home buyers, however it is critical that we should not close the door to first-time property buyers by limiting incentives to only properties offered by developers,” it said in a statement today.

MIEA said that the stamp duty exemption on instrument of transfer, which has been extended from Jan 1 to June 30 this year for properties ranging from RM300,001 to RM1 million, be made available for first-time home buyers of secondary properties.

It also urged the government to offer the stamp duty exemption on instrument of transfer for loans up to RM1 million during the same period to this category of buyers.

“There are significantly more varieties of homes at affordable prices for first-time home buyers within the secondary property market. Based on this premise, we should allow for the exemption of stamp duties to cover the purchase of homes within the secondary market by first-time buyers,” it added.

MIEA has suggested that a “Rent & Buy Programme” be set up for this category of buyers, through a special vehicle or banks to help them in two areas namely funds for a down payment and loan eligibility.

“We also request Bank Negara Malaysia to study and implement a fair and equitable loan approval and streamlined process for first time buyers and/or set up a special revolving fund to fund these buyers.

“This will allow for a shift in the dynamics of the property market, not only allowing for the disposal of ‘overhang’ properties but also unsold completed projects that are vacant,” it said.

According to the National Property Information Centre, 80% of all residential property transactions nationwide are from the secondary market while the primary market makes up the remaining 20%.

As such, MIEA said that the secondary market is the “bedrock” of the property sector, which sustains the real estate market and provides the thrust for its sustained growth.

It also urged the government to provide support to the real estate fraternity and real estate firms to modernise through technology and digitisation, and proposed that a tax exemption be given to those who are keen to invest in digitisation.

Retailers cry foul over commission cuts by Digi

PETALING JAYA: Bhd’s move to cut the commission rate by a whopping 50% has sparked anger among the retailers who threatened to boycott the sale of Digi SIM cards and prepaid top-ups.

It is learnt that the prepaid margin has been cut drastically to 3.2% from the initial 6%, effective March 1. The notice was issued on Feb 28.

Pictures of retailers showing “No to Digi” and “Digi products temporarily not available” at their stores have gone viral on social media.

Some retailers claimed that the commission cuts have exert pressure on their business due to the low margins.

Attempts to reach Digi were unsuccessful.

For the fourth quarter ended Dec 31, 2018, Digi’s prepaid revenue fell 12.6% year-on-year (yoy) and 2.4% quarter-on-quarter (qoq) to RM815 million, along with weaker non-internet prepaid subscriber base and moderated average revenue per user of RM30.

Its prepaid internet subscribers climbed up to 6.7 million while internet revenue increased 2.8% yoy and 2.5% qoq to RM409 million or 50.2% of prepaid revenue, although challenged by intense data price competition and abundance data offers in the market.

Meanwhile, non-internet prepaid revenue traced lower due to a combination of moderating demand for legacy voice and messaging services coupled with steady conversions to postpaid.

OWG’s waterfall resort development terminated by Johor govt

PETALING JAYA: Only World Group Holdings Bhd’s (OWG) 70%-owned subsidiary Kota Tinggi Resorts Sdn Bhd (KTR) has agreed to surrender the vacant possession of a waterfall project in Johor “at the request of the state government”, which could result in a write off of RM1.4 million.

The privatisation agreement between KTR and the state government will also be terminated, according to OWG’s filing with Bursa Malaysia.

“As at the date of this announcement, the handover of the project had been completed on March 3,“ the group said.

The privatisation agreement, dated March 30, 1992, entailed that the state government of Johor would lease the area known as Air Terjun Kota Tinggi, Kota Tinggi, Johor (waterfall) for a period of 30 years to KTR and KTR would develop the waterfall into a tourist resort complex and facilities.

KTR had proceeded to develop and completed the project by building a hotel/chalet, restaurant, water pool and slides, upgrading the safety measures and improving other amenities (F&A).

OWG expects the mutual termination to have a financial impact on the group as the project contributed 1.2% and 2.5% to its total revenue and profit before taxation for the financial year ended June 30, 2018.

“Further, there may be a write-off of equipment and inventories estimated at RM1.4 million resulting from the handover of the project,“ OWG said.

KTR is principally engaged in the operation of a resort and a food service outlet at the project. Its shareholders are OWG (with 70% equity interest) and Datuk Paduka Tengku Putra Bin Tengku Azman Shah (with 30% equity interest). Its directors are Tan Sri Koh Cheng Keong and Puan Sri Chew Lean Hong.

Following the termination of the agreement, both KTR and the Johor government will have no claims whatsoever against each other in respect of all matters arising from the privatisation agreement.

Hibiscus to start drilling of Anasuria side-track well in H1

PETALING JAYA: Hibiscus Petroleum Bhd’s jointly-controlled operating company, Anasuria Operating Company Ltd (AOC), is on track to execute the Guillemot A GUA-P1 side-track well at the Anasuria Cluster concession in the first half of 2019.

The GUA-P1 side-track well is a planned production enhancement project targeted to unlock about 1.7 million barrels of oil from its current net 2P (proven and probable) oil reserves, and is an opportunity to re-enter the existing GUA-P1 wellbore and potentially drain additional volumes of hydrocarbons.

The group said in a statement today that AOC signed a rig sharing agreement on Feb 28 with Ping Petroleum UK Ltd, whereby AOC will assume the services of the Stena Spey semi-submersible offshore drilling unit for a minimum of 45 days to drill the GUA-P1 side-track well.

The Stena Spey drilling rig is owned and operated by Stena Spey Services Ltd, a subsidiary of Stena Drilling Ltd.

It was chosen based on the certainty of the rig’s delivery schedule, strong track record in the UK North Sea, crew competence and good health, safety and environment record.

“The GUA-P1 side-track project follows the successful drilling of the GUA-P2 side-track project which was completed in the third quarter of 2018 and has since contributed to enhanced production in the Anasuria Cluster,” said Hibiscus Petroleum managing director Dr Kenneth Pereira.

“The GUA-P1 side-track project will be funded from internally generated funds and is part of a series of production enhancement projects which are targeted to increase net production to 5,000 barrels of oil per day by FY2020. We are working closely with our partners and service providers to safely deliver the successful execution of the GUA-P1 side-track project,” he added.

As AOC’s appointed well operator, Petrofac will be responsible for drilling the GUA-P1 side-track project and for all the existing wells in the Teal, Teal South and Guillemot A fields.

Fourth-quarter 2018 corporate earnings among worst in recent years

PETALING JAYA: Corporate earnings of Malaysian stocks in the fourth quarter of 2018 (4Q18) were among the worst seen in recent years with large-cap companies turning into a drag.

“On the surface, the 4Q18 reporting season looked better; 26% of companies in our universe (121 companies under coverage) reported earnings that were ahead of our expectations, a marked increase of 16% in 3Q18,” said Affin Hwang Capital in a report today.

It noted that companies whose earnings that disappointed shrank to 31% from 48% in 3Q18, implying that a higher number of companies delivered a better set of earnings after the successive disappointments in the previous quarters.

However, a review of the larger-cap companies (27 of 30 under its coverage) showed a higher number of companies reporting poorer performances with 33% of the companies registering earnings below expectations while a smaller proportion registered earnings above expectations.

“Being heavyweights, the impact of this disappointment was significant. Cumulative 4Q18 core earnings fell a sharp 23% year on year (yoy) or 14% quarter on quarter (qoq), one of the largest ever quarterly earnings contractions in recent years,” said Affin Hwang Capital.

In 4Q18, only 40% of the 20 sectors under coverage managed to deliver yoy earnings growth with telcos, transport and utilities being the key heavyweight sectors that were a drag, contributing a combined RM3.1 billion qoq decline in 4Q18 earnings.

Post 4Q18 results season, the earnings per share (EPS) growth rate for stocks under Affin Hwang Capital’s coverage has shrunk to -4.5% and for the FBM KLCI companies -0.6%. This makes 2018 the fourth year of frail corporate earnings over a five-year period from 2014 till 2018.

Its current market earnings growth forecast is 6.7% and 4.2% for 2019 and 2020. For the FBM KLCI companies, this growth is at a lower 3.8% and 2.9% for 2019 and 2020, implying weaker earnings growth for the larger-cap companies.

“Nevertheless, we are of the view that the larger-cap company earnings will better hold up in 2019 considering that their 2018 earnings were distorted by a lot of bulky items that may not recur,” it added.

Due to the lack of major catalysts, it expects the FBM KLCI to continue to trend sideways over the near term, maintaining its neutral rating on the FBM KLCI and year-end 2019 target of 1,810 points.

“We would, however, recommend investors position themselves in the large-cap stocks and favour sectors that are still delivering growth on a yoy basis,” it added.

Meanwhile, CGS-CIMB has lowered its FBM KLCI earnings growth forecast to 5% for 2019 from 6%, but maintained its growth projection of 6% for 2020. Its 2019 FBM KLCI earnings growth projection of 5% is below Bloomberg consensus, which forecasts a 6% growth.

“This is lower than the 6% core net profit growth rate we estimated before the 4Q18 results season, as we adjust for the downgrades in earnings forecasts for several big-cap names like Axiata, Tenaga, Petronas Gas and Maxis,” it said in its report.

In 4Q18, only 18% of the 127 companies actively covered by CGS-CIMB reported results that were above expectations while the percentage of companies with results below expectations rose to 39% from 38% in 3Q18.

“The high ratio of earnings disappointment suggests that Malaysian corporates are facing a challenging operating environment due to local and external (US-China trade war, rising rates) factors,” it said.

Although its revision ratio improved to 0.46 times during the quarter versus 0.29 times in the previous quarter, the 4Q18 revision rate stood out for being among the lowest historical revision ratios for 4Q, matching 4Q12’s revision ratio.

Market earnings for stocks under its coverage fell in 4Q18 at a higher rate of 7.5% yoy due to lower earnings from the agribusiness, aviation, construction, oil and gas and telco sectors. Corporate earnings under its coverage fell 2.1% in FY18 due to lower sales, provisions for receivables and weaker profit margins.

CGS-CIMB maintained its end-2019 FBM KLCI target of 1,638 points with no change to its top three picks namelym Dialog, Astro and MPI.

Pasukhas dropped PT BDP deal on due diligence issues

PETALING JAYA: Pasukhas Group Bhd said the termination of its proposed acquisition of PT Bangun Daya Perkasa (PT BDP) was due to issues related to the due diligence review.

In a filing with Bursa Malaysia, the group said that certain issues relating to the due diligence review could not be resolved to the satisfaction of the company, thus the parties mutually agreed to terminate the deal.

To recap, Pasukhas’ wholly owned subsidiary Pasukhas Energy Sdn Bhd (PESB) had in June 2017 proposed to acquire 92.5% stake of PT Tenaga Listrik Gorontalo (PT TLG), a subsidiary of PT BDP. PT TLG operates a 2 x 12.5 MW coal power plant in Sulawesi Utara.

PESB proposed to modify the transaction structure after reviewing the terms of transaction, and proposed to acquire 100% equity interest in PT BDP instead.

In December 2017, PESB said it had obtained a letter of offer from PT BDP shareholders for the proposed acquisition for US$1.37 million per MW.

However, Pasukhas said last week that the approval letter entered into between PESB and PT BDP for the acquisition of 92.5% equity interest held by PT BDP in PT TLG, and the letter of offer from PT BDP shareholders have been terminated via letters issued to the parties involved.

EPF: No plans to adjust contribution rates

KAJANG: The Employees Provident Fund (EPF) is not planning to adjust employees and employers’ monthly contribution rates anytime soon, in view of the rising cost of living as well as cost of doing business.

“I wouldn’t hastily increase or decrease (the rates) because I think a lot of study needs to be done before we actually look into this,” EPF CEO Tunku Alizakri Alias told reporters after unveiling “Belanjawanku – Expenditure Guide for Malaysian Individuals and Families” here today.

He said an increase in contribution rates would generally mean less take-home pay for the employees and at the same time would affect employers’ cost of doing business.

“There are always implications,” he added, noting that the current employer and employee contribution rates of 12% and 11% respectively are already the fifth highest in the world.

From EPF’s perspective, Alizakri said, the government should rather implement an in-depth study in terms of employees’ salary and wages, taking into account the costs of living as well as the data provided for the newly launched Belanjawanku guidelines.

According to EPF’s website, for employees who receive wages/salaries of RM5,000 and below a month, the portion of employee’s contribution is 11% of their monthly salary while the employer contributes 13%.

For employees who receive wages/salary exceeding RM5,000 a month, the employee’s contribution of 11% remains, while the employer’s contribution is 12%.

Meanwhile, Alizakri said the underlying motivation for developing Belanjawanku guidelines is the problem of low financial literacy, rising cost of living and over-indebtedness among Malaysians.

The guidelines, which is developed based on the actual spending patterns on common goods and services by urban households in the Klang Valley, was created to help Malaysians in terms of their personal and family budgeting.

Asked to update on the airport tax dispute between AirAsia Group and Malaysia Airports Holdings Bhd (MAHB), Alizakri disclosed that EPF has met up with AirAsia and will be meeting with MAHB soon, without elaborating further.

“We are pleased that they have taken our comments very positively,” he added.

Last December, MAHB sued both AirAsia and AirAsia X for a total of RM36.1 million for refusing to collect the additional RM23 passenger service charges per passenger at klia2.

Aturmaju, PSSB plan RM78m lifestyle project

KUALA LUMPUR: Aturmaju Resources Bhd’s (ARB) wholly-owned subsidiary ARB Development Sdn Bhd (ARBD) has entered into a memorandum of understanding (MoU) with Perkasa Selalu Sdn Bhd (PSSB) for the development of an intelligence modern lifestyle project in Selangor worth RM78 million.

A filing with Bursa Malaysia shows that PSSB engages ARBD as system, engineering, procurement, commissioning management on the project. ARBD is also fully responsible for the financing of the smart home engineering system integration, procurement, and commissioning of the project.

PSSB is principally involves in investment in real property and housing development business.

ARC CEO (investment & technology) Datuk Larry Liew said the trend of embracing the Internet of Things technology in the development of projects is inevitable.

“It is no longer location that will determine whether a project is sellable or not. Instead, it is the unique offerings that comes with a project that will be the key catalyst,“ he said a statement.