Tuesday, May 7th, 2019


‘ECRL may boost GDP growth by 2.7%’

PETALING JAYA: MIDF Research estimates the revised and revived RM44 billion East Coast Rail Link (ECRL) project to contribute 2.7% to Malaysia’s economic growth.

“However, the full estimated GDP contribution will depend on the pace of spillover effects to other economic sectors,” the research house said in its thematic report on ECRL.

MIDF noted that moving forward, the railway project would affect economic expansion through both direct and indirect medium in the long run, partly by jobs creation, opening-up new areas, foreign direct investment, increase external trade activities and strengthening domestic demand.

It highlighted that there is a high output multiplier for railway investment as for each ringgit investment, it will generate RM2.05 of output to total economic activity.

However, it has a low value-added multiplier of only 33 sen, which means for every RM1 spent, it will only reward the Malaysian economy in terms of value-added by less than 50 sen.

“Nevertheless, we opine the investment in railway (ECRL) will spur economic growth and development in Malaysia amid of the strong output multiplier effects.”

With ECRL, MIDF believes it will generate more economic activities in other sectors hence shifting to a less government-reliant economy, in line with Prime Minister Tun Dr Mahathir Mohamad’s idea to downsize the public sector over a period of time through industrialisation amid increasing burden towards the nation’s financial health.

Apart from that, the research house sees possible spillover effects on ports from the ECRL, with Port Klang and Kuantan Port being the main beneficiaries.

“Despite the rerouting of the ECRL from Gombak to Negri Sembilan, we opine that this should not heavily impact the flow of freight traffic. We still believe that travel time taken from Shenzhen, China via Kuantan Port and ECRL to Port Klang could be reduced by slightly more than a day instead of passing by the Straits of Malacca.”

MIDF also sees ECRL having the potential to further spur Malaysia’s oil and gas industry as it links Malaysia’s financial hub in the west with the country’s oil and gas hub in the east.

“The ECRL will allow for human capital and goods to be easily transported from west to east, thus allowing for greater connectivity of goods from Port Klang to Kertih and Kemaman.”

Currently, the only mode of transportation from west to east is via road.

US warns India against retaliatory duties over scrapping of trade privileges

NEW DELHI, May 7 — Any retaliatory tariff by India in response to the United States’ planned withdrawal of some trade privileges will not be “appropriate” under WTO rules, US Commerce Secretary Wilbur Ross warned today. The comments, made to…

Porsche fined €535m over diesel cheating

FRANKFURT AM MAIN, May 7 — German sports car maker and Volkswagen subsidiary Porsche will pay a €535-million (RM2.49 billion) fine over diesel vehicles that emitted more harmful pollutants than allowed, Stuttgart prosecutors said today. “The…

KLCCP profit up slightly in Q1, declares 8.8 sen dividend

PETALING JAYA: KLCCP Stapled Group recorded a net profit of RM183.96 million for the first quarter ended March 31, a slight increase of 1.8% from RM180.67 million registered in the corresponding quarter of the previous year, underpinned by stronger contribution from the retail and management services segments.

It also recorded a modest increase of 2.4% in revenue to RM353.45 million from RM345.11 million.

For the quarter under review, the group declared an interim dividend of 8.8 sen or a total dividend payment of RM158.9 million.

In a filing with the stock exchange, KLCCP said the increase in profit before tax for the office segment was mainly due to the lower expenses and higher recovery of utility charges at Menara ExxonMobil.

Suria KLCC and the retail podium of Menara 3 Petronas representing the retail segment of the group recorded a 4.7% growth in PBT, thanks to higher rental rates and improved occupancy as well as higher income from the mall’s internal digital advertising.

However, its hotel business saw a loss before tax of RM392,000, mainly due to lower demand in banqueting and higher depreciation in the fully refurbished rooms.

For the year ahead, KLCCP expects the overall performance will remain stable primarily on the back of long-term office tenancy agreements.

The performance of the retail segment is expected to be slightly impacted in the following quarters as the mall is undergoing reconfiguration to refresh its offerings with more specialty shops and food outlets so as to improve its competitiveness which is expected to augur well in the long term, it said.

The group also expects its hotel operations to continue to operate under challenging market conditions.

KLCCP’s share price rose 6 sen to RM7.60 today.

Miti expects April trade figures to improve

KUALA LUMPUR: Malaysia’s trade figures for April are expected to improve despite the worsening global trade tensions, particularly between the US and China, said International Trade and Industry Deputy Minister Dr Ong Kian Ming.

“There was a slight drop overall in Malaysia’s import and export performance, but we also take note that the trade decline in February was much larger than March, when we look from a year-on-year comparison, and March has improved compared to February.

“That may indicate that the trade figures may improve in April,” he told a press conference after launching Semicon Southeast Asia 2019 today.

Ong elaborated that the latest remarks by US President Donald Trump on the trade negotiations would not affect Malaysia’s actual trade volume in the short term.

“For further impacts on Malaysia, we will wait and see what’s the actual policy announcement from a tariff perspective from the US and Chinese governments,” he said.

Market reaction is very short-term and if tomorrow China and US announce a positive resolution, the market will be up, he said.

Local exports decreased 0.5% to RM84 billion in March 2019 from a year earlier as the nation sold less electrical and electronic products and commodity-based items.

The country’s trade in February 2019 declined by 7.2% to RM122.15 billion compared to February 2018.

Ong said in the long term, the unsettled tensions between the two big economies would not be positive for Malaysia as the country is highly dependent on trade with them.

“Any negative effects on trade between the US and China will have a long-term negative impact on Malaysia’s trade in total. We hope for a positive conclusion so that this tariff war can be avoided,” he added.

Meanwhile, Malaysian Investment Development Authority CEO Datuk Azman Mahmud said the agency is looking at approved investments worth RM13 billion in the electrical and electronics segment for 2019.

“The figure is based on domestic and foreign investments and whether the trade tensions between the US and China is still an ongoing issue, but we can’t predict the future,” he said.

Axiata and Digi on a roll

PETALING JAYA: Shares of Axiata Group Bhd and Digi.com Bhd rallied as much as 18.3% and 11.5% on positive sentiment towards their merger deal.

Axiata’s share price surged as much as 74 sen to a seven-month high of RM4.78 before closing 60 sen or 14.9% higher at RM4.64 on 38.17 million shares changing hands.

Digi, meanwhile, soared as much as 52 sen to RM5.04, the highest in the past one year. At market close, the stock gained 28 sen or 6.2% to RM4.80 on 36.88 million shares done.

On Monday, Axiata and Digi’s parent company Telenor announced that they are in the talks to merge Asian operations.

While this deal is positive for both Axiata and Digi, AmResearch expects the potential synergies and cost savings to have a higher boost to Axiata, which currently trades at an EV (enterprise value) /Ebitda (earnings before interest, taxes, depreciation and amortisation) of only 5 times, less than half of Digi’s 12 times.

“Additionally, the merged entity’s expanded financial leverage comes from Digi’s low gearing which could subsequently impact the merged entity’s dividend policy,” it said in a research note today.

HLIB Research concurred, saying that Axiata is expected to gain more given that the proposed corporate exercise allows it to crystalise the true value of its assets.

As for Digi, it opined that the consolidation with Celcom may lead to short-term indigestion due to the huge duplications in terms of assets (towers, infrastructure) as well as human capital.

“We do not discount that the merger may lead to asset impairments and one-off restructuring costs. However, we are still positive on the amalgamated Digi-Celcom over the long run.”

However, AmResearch is uncertain if the Malaysian Communications and Multimedia Commission and current political regime would approve this proposal given that a merger would reduce the level of competition at the expense of consumers’ choice and pricing alternatives.

“We reiterate our view that such an extensive restructuring exercise could be hindered by the respective country’s regulatory oversight.”

HLIB pointed out that Malaysia is the only overlapping market in this proposed deal. The combination of Celcom and Digi will lead to a largest telco with revenue and subs market share of 35% and 47%, respectively and potentially attract scrutiny from the perspective of anti-competition. Together, they will also hold 43% of the operating TDD airwave in the market.

“Axiata may end up with conflicting stakes in Grameenphone (via MergedCo) and Robi who are top one and two competitors in Bangladesh. Other Robi shareholders, namely Bharti (25% stake) and NTT Docomo (6.3% stake), may not favour this scenario.”

HLIB is maintaining a neutral call on the telco sector, adding that the telco sector remains stable supported by resilient domestic demand with dependable dividend yield being a plus point in a volatile market.

PublicInvest Research has upgraded Digi to “trading buy” as it believes the deal would be positive to DiGi, while Axiata is kept “neutral”.

Nonetheless, the research house said the merger between Celcom and DiGi is negative to Maxis as the merged unit is expected to overtake Maxis to become the leader in Malaysia’s mobile segment.

The merged entity will be an unlisted arm though there are plans for a public offering within the next few years.

“In our opinion, DiGi and Axiata should ultimately be privatized once the merged entity is listed,” said PublicInvest.

BHP faces US$5b claim over 2015 Brazil dam failure

LONDON, May 7 — Anglo-Australian mining giant BHP is facing a landmark, US$5 billion (RM20.75 billion) damages claim in England for being “woefully negligent” in the run-up to a 2015 dam failure that led to Brazil’s worst environmental…

Lufthansa eyes Thomas Cook’s Condor with buyout offer

FRANKFURT AM MAIN, May 7 — European airline giant Lufthansa said today it had offered to buy carrier Condor from British parent company Thomas Cook, opening a new chapter in its fast-paced growth through buyouts. “We have made a non-binding…

MIDF: Overnight Policy Rate to remain at 3.0pc for 2019

KUALA LUMPUR, May 7 — MIDF Research expects no further change to the overnight policy rate (OPR) for the rest of the year on anticipation of less pressure from both domestic and external fronts. It said as long as gross…

Aussie surges after central bank holds rates; yuan stabilises

LONDON, May 7 — The Australian dollar surged today after the country’s central bank held interest rates at a record low, while currency markets stabilised following US President Donald Trump’s threat of additional tariffs on Chinese goods….