Tuesday, March 12th, 2019

 

Slowing economy keeping US inflation under wraps

WASHINGTON, March 12 — US consumer prices rose for the first time in four months in February, but the pace of the increase was modest, resulting in the smallest annual gain in nearly 2-1/2 years. The report from the Labour Department today also…


EU expands tax blacklist to 15 countries, including UAE

BRUSSELS, March 12 — The European Union expanded its tax haven blacklist to 15 countries today, adding the United Arab Emirates and Bermuda over the objections of powerful member states such as Italy.The list was first drawn up in 2017 in the wake…


Matrix Concepts to raise RM147m to fund Indonesian joint venture

PETALING JAYA: Matrix Concepts Holdings Bhd is looking to raise up to RM147 million via a proposed placement to fund its share of equity participation in a proposed joint venture (JV) in Indonesia.

In a filing with Bursa Malaysia, the group said it plans to undertake a proposed placement of up to 75 million new shares representing 10% of the total number of issued shares of the company.

Based on the illustrative issue price of RM1.96 per placement share, the company will raise up to RM147 million, which will be used to fund the equity participation in a proposed JV between Matrix Concepts, PT Bangun Kosambi Sukses (BKS) and PT Nikko Sekuritas Indonesia (NSI).

To recap, the company announced in October last year that it had entered into a JV agreement with BKS and NSI to jointly venture into the construction and development of an Islamic Financial District located in West Kosambi Village in the Banten Province of Indonesia.

Under the JV agreement, an incorporated company in Indonesia namely PT Fin Centerindo Satu will be the JV company for the proposed JV.

Matrix Concepts will hold a 30% stake in the JV while BKS and NSI will hold 40% and 30% respectively.

The Islamic Financial District will be an integrated mixed development comprising commercial towers with office and retail components to be developed over eight years. The first phase is expected to be launched in the second half of 2019. The project has an estimated gross development value of US$500 million (about RM2.04 billion).

Maybank Investment Bank Bhd has been appointed as principal adviser and placement agent for the proposed placement which is expected to be completed by the first half of 2019.


S&P: Next global financial crisis won’t be as bad as in 2008-2009

PETALING JAYA: The next global credit downturn, if any, is unlikely to be as bad as the crisis in 2008-2009, said S&P Global Ratings.

“The stage is set for another global credit downturn, but the next crisis, if any, is unlikely to be as dramatic as in 2008-2009. While global debt levels are higher than a decade ago, contagion risk is lower,” said the rating agency, with reference to a special report titled “Next Debt Crisis: Will Liquidity Hold?”

In the report, which discusses the latest trends in the credit cycle and opines on whether there will be another full-blown crisis, S&P Global Ratings compared the debt-related metrics of corporates, governments and households with those recorded during the 2008-2009 global financial crisis.

“Global debt is certainly higher and riskier today than it was a decade ago, with households, corporates, and governments all ramping up indebtedness,” said S&P Global Ratings credit analyst Terry Chan.

“Although another credit downturn may be inevitable, we don’t believe it will be as bad as the 2008-2009 global financial crisis. That’s because the increased debt is largely driven by advanced-economy sovereign borrowing and domestic-funded Chinese companies, thus mitigating contagion risk,” he said.

Since the last global financial crisis, total global debt has surged by 50%, led by major-economy governments and Chinese non-financial corporates, while global debt-to-gross domestic product ratios have risen to more than 231% compared with 208% in June last year.

Despite higher leverage, the risk of contagion is mitigated by high investor confidence in major Western governments’ hard currency debt.

“The high ratio of domestic funding for Chinese corporate debt also reduces contagion risk, because we believe the Chinese government has the means and the motive to prevent widespread defaults,” said S&P Global Ratings.

Following a study on nearly 12,000 corporates globally, the rating agency found that the proportion of companies having aggressive or highly leveraged financial risk profiles has increased slightly to 61%.

It noted that the higher risk is partly driven by Chinese corporates, which now make up about two-fifths of debt categorised as aggressive and highly leveraged.

While contagion risk is lower than in 2008-2009, S&P Global Ratings warned that risks are elevated.

“Due to extremely low interest rates, the past decade has seen a migration of investor flows into speculative-grade and non-traditional fixed-income products. These markets tend to be less liquid and more volatile, and could seize in the event of a financial shock or panic,” it said.

Even within the investment-grade arena, there is also now a much higher issuer concentration in the “BBB” rating category, with issuer ratings trending down globally over the past decade, it noted.

Other risk areas include derivatives, exchange-traded funds, private debt, leveraged finance and certain types of infrastructure. About 80% of leveraged loans outstanding are now “covenant-lite”, indicating protection for investors has decreased, and this is up from 15% a decade ago.

Although default risks have been low in recent years, S&P Global Ratings said this could change as money costs increase and global economic growth tapers.

The rating agency’s economists recently revised their assessment of the risk of a US recession in the next 12 months to 20-25% from 15-20% late last year.

“A perfect storm of realised risks across geographies and asset classes could trigger a systemically damaging downturn. This downside scenario reflects an increased reliance on global capital flows and functioning secondary market liquidity,” said S&P Global Ratings analyst Alexandra Dimitrijevic.


Shutting down Malaysia Airlines an option, says former Khazanah MD

PETALING JAYA: Shutting down Malaysia Airlines Bhd may be an option that can be considered, said former Khazanah Nasional Bhd managing director Tan Sri Mohd Sheriff Mohd Kassim (pix) in view of the heightened scrutiny on the loss-making national carrier.

“Maybe that (close down Malaysia Airlines) is an option for the government to consider,” he told reporters at the Malaysian Strategic Financial Outlook Forum organised by the Asian Strategy & Leadership Institute here today.

Sheriff, who is PLUS Malaysia Bhd chairman, concurred with the view that the country needs to re-examine whether it still needs a national carrier.

“We should look into it whether we really need (a national carrier). Malaysia Airlines has been bailed out not just once but two or three times before. And never successful. After each bailout, it’d be alright for two to three years, then (it’ll) start again. It’s not easy to be profitable,” he said.

Prime Minister Tun Dr Mahathir Mohamad said today the government is seeking solutions to keep Malaysia Airlines flying as the national carrier, adding that it is a serious matter to shut down the national airline and will nevertheless study as to whether it should shut down, sell or refinance it.

Analysts are also not convinced that Malaysia Airlines would be able to turn around its loss-making business anytime soon, as weakness in consumer sentiment suggests continued sluggishness in the local tourism industry.

Malaysia Airlines announced recently that it incurred lower losses last year, but it did not disclose the amount. Its total revenue for 2018 was 1% higher than 2017, while overall load factor stood at 78%. Revenue average seat per kilometre also saw a marginal increase of 2.0% due to improved pricing segmentation.

Malaysia Airlines was taken private by Khazanah as part its turnaround programme in 2014. Khazanah had injected investments worth RM6 billion to support the airline’s turnaround plan with the aim of returning it to profitability by late 2017 and to relist the company thereafter.

Early last year, Khazanah said it expected the airline to return to profitability in the first half of 2019.

Nonetheless, Malaysia Airlines remained the major drag of Khanazah as the airline accounted for half of its RM7.3 billion impairments last year.

The sovereign wealth fund recorded a pre-tax loss of RM6.3 billion last year, the first annual loss since 2005, bogged down by higher impairments, lower dividend income and fewer divestments.

Earlier, during the plenary session on government-linked investment companies (GLICs) and government-linked companies (GLCs), Sheriff said GLCs that need to be looked closely are statutory bodies and those of the state governments as they are highly criticised.

“As you know, every chairman of Mara is a politician. Every chairman of Felda is a politician. It’s up to the government to change that.

“We should re-examine the state and statutory bodies. They should not get involved in GLC activities. They are developmental agencies and they should concentrate on developmental activities, not commercial activities,” he said.

Sheriff opined that there is also a need to reform the GLICs and GLCs.

“There should be serious discussion whether we need so many GLCs. The governance standards should be improved and we should make sure that there is no political interference in the running of GLCs,” he said.


PKNM, Dayang Enterprise, Main Velocity ink MOU for O&G venture

MELAKA, March 12 — The Malacca State Development Corporation via its subsidiary, PKNM Sdn Bhd, has signed a memorandum of understanding (MoU) with Dayang Enterprise Sdn Bhd and Main Velocity Sdn Bhd to venture into the oil and gas (O&G)…


KESM’s earnings plunge in Q2

PETALING JAYA: KESM Industries Bhd’s net profit for the second quarter ended Jan 31 plunged 95.76% to RM474,000 from RM11.18 million a year ago due to a 78% drop in other income during the quarter.

In a filing with Bursa Malaysia, the group said that other income was lower during the quarter due to lower gain on disposal of machinery spares of RM300,000 and absence of government grant of RM300,000.

During the quarter, interest income rose 78% following higher placements of short-term deposits while raw materials and consumables used and changes in inventories of finished goods and work-in-progress rose 59% to support the increased electronic manufacturing services (EMS) revenue from new customers.

Employee benefits expense was lower by 12% following the alignment of staff costs to operational requirements while other expenses were lower by 5% due to lower management fees as well as lower repairs and maintenance as a result of lower revenue from burn-in and testing services.

Revenue for the quarter fell 11.33% to RM81.11 million from RM91.47 million a year ago due to lower demand for burn-in and testing services, offset by higher revenue from rendering of EMS to new customers.

For the six months ended Jan 31, KESM’s net profit fell 86.19% to RM3.12 million from RM22.55 million a year ago while revenue fell 10.71% to RM162.66 million from RM182.18 million a year ago.

Moving forward, the group said it remains well positioned to weather through momentary market softening, despite the weaker performance due to tighter inventory control measures instituted by customers.

It noted that the broad indices of the semiconductor industry and the global growth are pointed towards a softening momentum while global economy for 2019 is projected to grow 3.5%, lower than 2018 by 0.2%.


Ekovest buys 23% of PLS Plantations, diversifies into oil palm

PETALING JAYA: Ekovest Bhd is acquiring a 23.42% stake in PLS Plantations Bhd from Serumpun Abadi Sdn Bhd (SASB), a company controlled by Ekovest executive chairman Tan Sri Lim Kang Hoo, for RM76.5 million cash or RM1 per share to venture into oil palm plantation business.

In a filing with Bursa Malaysia, Ekovest said the proposed acquisition is to transform the group into a larger listed conglomerate with a larger portfolio of diversified businesses, in line with the strategy to reduce reliance on its existing businesses in construction, property development and toll operations.

PLS Group, via its 70%-owned subsidiary Aramijaya Sdn Bhd, is involved in the management, operation and maintenance of Ladang Hutan Ulu Sedili, a forest plantation project measuring 35,223ha in Johor.

As at March 31, 2018, PLS Group has a total of 12,346ha of oil palm cultivation land with total planted area of 10,921ha.

The proposed shares acquisition also comes with a profit guarantee in respect of the actual aggregate audited profit after tax and minority interests of Dulai Fruits Enterprise Sdn Bhd for the financial years ending 2020, 2021 and 2022 of not less than RM10 million.

PLS holds 70% equity interest in Dulai through Brighthill Synergy Sdn Bhd.

The proposed acquisition is expected to be completed by the first quarter of 2019 and will be financed with internal funds.

On Bursa Malaysia today, Ekovest rose 0.85% to close at 59 sen, while PLS was down 2.1% to 95 sen.


Matrix to raise RM147m to fund Indonesian JV

PETALING JAYA: Matrix Concepts Holdings Bhd is looking to raise up to RM147 million via a proposed placement to fund its share of equity participation in a proposed joint venture (JV) in Indonesia.

In a filing with Bursa Malaysia, the group said it plans to undertake a proposed placement of up to 75 million new shares representing 10% of the total number of issued shares of the company.

Based on the illustrative issue price of RM1.96 per placement share, the company will raise up to RM147 million, which will be used to fund the equity participation in a proposed JV between Matrix Concepts, PT Bangun Kosambi Sukses (BKS) and PT Nikko Sekuritas Indonesia (NSI).

To recap, the company announced in October last year that it had entered into a JV agreement with BKS and NSI to jointly venture into the construction and development of an Islamic Financial District located in West Kosambi Village in the Banten Province of Indonesia.

Under the JV agreement, an incorporated company in Indonesia namely PT Fin Centerindo Satu will be the JV company for the proposed JV.

Matrix Concepts will hold a 30% stake in the JV while BKS and NSI will hold 40% and 30% respectively.

The Islamic Financial District will be an integrated mixed development comprising commercial towers with office and retail components to be developed over eight years. The first phase is expected to be launched in the second half of 2019. The project has an estimated gross development value of US$500 million (about RM2.04 billion).

Maybank Investment Bank Bhd has been appointed as principal adviser and placement agent for the proposed placement which is expected to be completed by the first half of 2019.


APFT receives another requisition to remove directors

PETALING JAYA: APFT Bhd has received another written requisition from shareholders seeking to remove three directors and appoint its finance and administration head as an executive director.

In a filing with Bursa Malaysia, the Practice Note 17 (PN17) company said it received a written requisition from five shareholders holding 10.23% stake in the company, to convene an EGM for the removal and appointment of directors.

The five shareholders are Florence Lim Hui Leng, Goh Kok Guan, Heng Yong Kang, Low Pit Koon and Goh Boon Soo @ Goh Yang Eng.

They are seeking to remove Laxmi Devi Murugan, Logonathan Vadivelu and Datuk Mohd Ismail Hamdan as directors and to appoint Siva Kumar Kalugasalam as an executive director with immediate effect.

APFT said it is seeking legal advice on the matter.

On Monday, the group said it received a written requisition from four of its shareholders holding 11.26% stake in the company, to convene an EGM for the removal and appointment of the directors named above.