July, 2019


S&P affirms TNB’s BBB+ rating

PETALING JAYA: S&P Global Ratings affirmed its ‘BBB+’ rating on Tenaga Nasional Bhd (TNB) following the latter’s proposed reorganisation, which will result in two new wholly owned subsidiaries for its retail and generation business except for its transmission and distribution assets.

According to the ratings agency, the proposed reorganisation will have no material impact on TNB’s credit profile, based on its assessment of the company and all its subsidiaries on a consolidated basis.

“We expect TNB’s financial leverage, as measured on an adjusted funds from operations (FFO) to debt basis, to remain 16-17% over the next three years,” it said in a statement today.

From its calculation, the tax and transaction cost resulting from the proposed reorganisation remains above S&P’s downside trigger of 15%.

“In addition, we continue to assume that TNB is likely to benefit from its status as a government-related entity, providing two notches of uplift to the rating.

“The stable outlook on TNB reflects our expectation that the company will maintain its operating and financial performance over the next 12-18 months,” it added.

The ratings agency anticipates that TNB will be able to pass on any under- or over-recovery of fuel costs through tariff adjustments or savings from power purchase agreements.

Moving forward, it estimates that the Malaysian power company’s capital expenditure will be about RM10 billion over the next 12 months.

“We may downgrade TNB if the company continues to make aggressive debt-funded investments in generation projects, faces higher fuel costs than we expect without tariff relief, or encounters lower demand for power than we estimate,” said S&P.

It said that a downgrade trigger could be the ratio of FFO to debt staying at or below about 15% over a prolonged period.

Besides that, the agency said it might lower its rating if the group’s relationship with the Malaysian government changes materially or believes that the likelihood of extraordinary government support has diminished.

“However, we see a low possibility of both scenarios over the next 12-24 months,” it added.

On the other hand, S&P said it could raise the rating if the timely implementation of tariff reforms results in a more transparent and defined tariff regime that would meaningfully ease the pressure of increasing fuel costs and margin volatility on TNB and sustainably improve the stability of the company’s profitability.

It might also upgrade TNB’s rating if its financial performance improves sustainably, such that the ratio of FFO to debt is above 23%.

“A more favorable view of the likelihood of extraordinary government support would also be positive for the rating.”

TNB was the second biggest gainer on the bourse today, rising 1.47% or 20 sen to close at RM13.82 with 14.63 million shares done.

KLIA Aeropolis DFTZ to be completed by June next year

KUALA LUMPUR: The KLIA Aeropolis Digital Free Trade Zone (DFTZ) development is expected to be completed by June 2020.

Cainiao KLIA Aeropolis Sdn Bhd CEO Johnson Chen said the project, which is currently 50% completed, is expected to be operational by September 2020.

“Once the project is completed, it would enable logistics and our business partners to export more products to China and outside the region,” he said on the sidelines of the Alibaba Cloud Summit Malaysia today.

In 2017, Malaysia Airports Holdings Bhd (MAHB) signed an agreement with Cainiao Smart Logistics Network (Hong Kong) Ltd and MA Elogistics Sdn Bhd.

Cainiao HK and MA Elogistics had completed their subscription of shares in the joint-venture company, Cainiao KLIA Aeropolis Sdn Bhd at 70% and 30% respectively.

MAHB also announced that its wholly owned subsidiary, Malaysia Airports (Sepang) Sdn Bhd has entered into a sublease annexure of a 24.28ha land in Bandar Lapangan Terbang Antarabangsa Sepang with the lease of 30 years.

The site is set to be the world’s first e-world trade platform outside China with the development cost of over RM200 million.

The KLIA Aeropolis is expected to receive an additional RM700 million worth of investment once it is fully operational.

Chen said the site developed by them totalling 100,000 sqm (10ha) will have cargo and warehouse facilities.

“We have engaged with traditional logistics players such as GDex, online shopping platform Lazada, and have strong collaboration with MAHB and Malaysia Digital Economy Corporation,” he said.

Advancecon awarded RM84m earthworks job

PETALING JAYA: Advancecon Holdings Bhd has secured a 34-month contract valued at RM83.8 million to carry out earthworks and civil engineering works for Setia Alamsari (South) in Bangi, Selangor, via its subsidiary, Advancecon Infra Sdn Bhd.

“Supporting yet another of SP Setia’s township projects over the next few years ensures continued productivity and resource optimisation both in terms of machineries and manpower that will eventually lead to higher earnings in the future,” Advancecon group CEO Datuk Phum Ang Kia (pix) said in a statement yesterday.

He said the group’s earthworks and civil engineering works for Setia Alamsari in Bangi will bring its outstanding order book value to over RM790 million, with revenue visibility for at least 24 months.

Under the contract, Advancecon will undertake the construction and completion of site clearing, earthworks, retaining walls and associated infrastructure works with an estimated duration of 34 months from Aug 1, 2019.

The contract is set to contribute positively to the group in the financial years ending Dec 31, 2019 till 2022.

Arbitration court awards Zelan RM299.8m

PETALING JAYA: Zelan Bhd has been awarded RM299.85 million from the International Court of Arbitration for its legal proceeding against Meena Holdings LLC in relation to the Meena Plaza mixed use development project in Abu Dhabi, the United Arab Emirates.

The group told Bursa Malaysia in a filing that the court has decided in favour of its wholly owned subsidiary Zelan Holdings (M) Sdn Bhd (ZHSB) in the dispute and ruled that ZHSB’s termination of contract is valid.

“Accordingly, the Arbitral Tribunal of the International Court of Arbitration, International Chamber of Commerce has awarded ZHSB the sum of AED256.14 million (RM287.87 million), pre-award interest of AED52,963.71, parties’ cost of AED8.4 million and ICC costs of arbitration in the sum of US$585,000 (RM2.41 million),” it said.

ZHSB was also awarded post-award interest on the sum of AED256.14 million, parties’ costs and ICC costs of arbitration at the rate of 9% per annum after the date of arbitration award until full payment by Meena Holdings.

To recap, the arbitration proceeding was initiated in August 2016 over breaches and defaults pursuant to the building contract for procurement, construction and completion of Package 2 Main Construction Package of Meena Plaza.

Zelan is now seeking advice from its solicitors on the enforcement of the arbitration award with the purpose of recovering the awarded sums.

Sterling steadies after four-day decline, with Johnson in Northern Ireland

LONDON, July 31 — Sterling steadied today after four days of losses, rising 0.2 per cent against the dollar, but it was on track for its biggest monthly decline since November 2016 after investors scrambled to price in growing no-deal Brexit…

Press Metal secures more power for expansion

PETALING JAYA: Press Metal Aluminium Holdings Bhd, the largest aluminium producer in Southeast Asia has entered into a power purchase agreement (PPA) with Syarikat SESCO Bhd, a wholly owned subsidiary of Sarawak Energy Bhd, to secure more power for capacity expansion in Sarawak.

The PPA signed today provides long-term access of up to 500MW of electricity for a 15-year period with 300MW to commence first drawdown by October 2020 and the balance 200MW to be made available on a reasonable endeavour basis by SESCO.

With this, Press Metal plans to construct a proposed third aluminium smelter in Samalaju Industrial Park, Sarawak, which will potentially increase its total smelting capacity up to 1.08 million tonnes per annum upon full power drawdown, from the current 760,000 tonnes per annum. This will further enhance Press Metal’s position as the region’s largest integrated aluminium producer and a key global player in this industry.

Commenting on the power allocation and proposed expansion, group CEO Tan Sri Paul Koon said it is grateful for the opportunity to increase its participation into the Sarawak Corridor for Renewable Energy.

“With this, we will commence construction of the third smelter on our existing landbank at Samalaju Industrial Park, which will share common facilities with two of our other existing phases.”

He added that it has a proven track record of commissioning its smelters on schedule and is confident of repeating this for its new smelter. The total investment cost of the project will be similar to its previous phases and it may tap into the debt market to fund its expansion.

“Aluminium being the emerging metal of choice with its green characteristics has the potential to further replace traditional materials. The long-term prospects are promising as we foresee wider applications across multiple industries,” said Koon.

RM19.6b investments in Selangor manufacturing

SHAH ALAM: Selangor has chalked up investments worth RM19.656 billion for the manufacturing sector from April last year to March this year, the state legislative assembly was today.

State Investment, Industry and Trade, Small and Medium Industries Committee chairman Datuk Teng Chang Khim (pix) said of the total, RM8.637 billion was domestic investment while the rest was foreign investment.

Teng said Invest Selangor Berhad had allocated RM20.592 million, from Jan to Dec 2018 and RM7.11 million from Jan to June 2019 to carry out investment-related programmes in Selangor.

The programmes included International Business Summit 2019, the development and training of entrepreneurs as well as overseas investment missions and participation in local and foreign exhibitions, he said.

“Invest Selangor also organised dialogue programmes with investors, factory visits and arranged meetings with investors in case of any problems,” he said.

Pintaras Jaya clinches Singapore contracts

PETALING JAYA: Pintaras Jaya Bhd has secured nine new piling contracts with a total value of S$51 million (about RM156 million) in Singapore.

In a filing with Bursa Malaysia, the group said that the contracts were awarded to its wholly owned subsidiary in Singapore, Pintary International Pte Ltd through its wholly owned subsidiary Pintary Foundations Pte Ltd.

The nine new projects will commence in July and August this year, with contract periods varying from two to six months.

FGV to remain as major shareholder of MSM

KUALA LUMPUR: FGV Holdings Bhd will maintain its status as the major shareholder of sugar company MSM Malaysia Holdings Bhd even if it were to enter into strategic collaborations that involve share disposal.

Group CEO Datuk Haris Fadzilah Hassan said the company is open for discussion that could further strengthen MSM business but would like to remain as the major shareholder as it believes demand for food and energy would continue to grow.

“We believe that the demand for food and energy will always be growing, so we like to stay in this food business as sugar also is part of the food business,” he told reporters after witnessing the signing of a memorandum of understanding (MoU) between FGV Palm Industries Sdn Bhd’s, Biotek Dinamik Sdn Bhd and Sime Darby Energy Solutions Sdn Bhd today.

The MoU is to produce bio-compressed natural gas from waste biogas generated from palm oil mills effluent ponds.

Haris Fadzilah said any collaboration entered into by MSM would be aimed at utilising the refining capacity of MSM refineries, as well as opportunities for overseas market.

“While we have the capacity of 2.2 million tonnes (per annum), the demand in Malaysia is about 1.6 million tonnes (per annum). So you can see there is opportunity for us to serve the domestic and find opportunities to expand overseas,” he said.

He said among the targeted overseas markets are China, India and Indonesia which are the world’s top sugar consumers.

MSM, 51%-owned by FGV, currently holds 60% of the sugar market share in the country, while the rest falls under Central Sugars Refinery Sdn Bhd.

Commenting on the board of directors’ remuneration fee impasse, Haris Fadzilah said the discussion is still ongoing between the directors and major shareholders.

“Once the board and shareholders have something concrete, we will issue a statement on this,” he said.

The directors are also committed to turnaround the company despite the fee impasse, he said, adding that,“ I commend them for their commitment.”

At FGV’s 11th annual general meeting (AGM), which was held last month, major shareholders voted against three resolutions on the FGV directors’ remuneration.

The resolutions are to approve payment of directors’ fees amounting to RM2.55 million, in respect of the financial year ended Dec 31, 2018, payment of a portion of directors’ fees to non-executive directors up to an amount of RM1.18 million from June 26 until the company’s next AGM, and payment of benefits to non-executive directors from June 26 until the next AGM.

Shareholders also voted against a resolution that gives authority to directors to allot and issue shares pursuant to Section 75 of the Companies Act 2016.

The Federal Land Development Authority (Felda) is FGV’s largest shareholder at 33.7%, while Koperasi Permodalan Felda Malaysia Bhd and the Armed Forces Fund Board hold 5.25% and 1.25%, respectively.

Lotte’s profit hit by lower selling prices

PETALING JAYA: Lotte Chemical Titan Holding Bhd’s net profit for the second quarter ended June 30, 2019 fell 66.72% to RM104.85 million from RM315.03 million a year ago due to lower product selling prices, which led to a margin squeeze.

“The lower selling price is mainly due to diversion of polyolefin supply from the US into the Southeast Asia region as a consequence of the US-China trade war as well as softening of global economic growth,” it said in a filing with Bursa Malaysia today.

The group said other factors such as higher distribution expenses, lower foreign exchange gain and share of loss from associates also affected its earnings for the quarter.

“Higher distribution expenses arose from increase in sales volume, higher unit distribution cost and increase in royalty expenses by RM8.9 million. This is partially offset by higher insurance proceed received/receivable of RM45.7 million for furnace damage claim as compared to RM31.2 million for gas turbine claim in the second quarter last year,” it added.

Foreign exchange gain for the quarter was lower by RM38.3 million while share of result from associates reduced by RM19.9 million, due to loss on fair value changes in interest rate swap entered by Lotte Chemical USA Corporation and borrowing costs incurred for project financing.

In addition, effective tax rate rose from 12% to 24% due to the absence of claimable reinvestment allowance.

Revenue for the quarter fell 6.52% to RM2.13 billion from RM2.28 billion a year ago due to lower average product selling price, partially offset by the increase in sales volume which was driven by improvement in production quantity compared with a year ago.

Overall production quantity increased due to commissioning of new PP3 plant in the third quarter last year, while average plant utilisation rate improved from 82% to 89% in the second quarter this year.

For the six months ended June 30, 2019, net profit fell 71.27% to RM160.68 million from RM559.22 million a year ago while revenue fell 4.29% to RM4.30 billion from RM4.49 billion a year ago.

Moving forward, the group expects the petrochemical industry to remain challenging with the economic headwinds arising from unresolved global trade tensions and volatility in the global crude oil market.

“The petrochemical market is a long-term play. The industry as a whole is bracing for a very challenging period amid various global market uncertainties. Nevertheless, our company is expected to ride through current market down-cycle given our healthy financial position,” said its president and CEO Dr Lee Dong Woo.

Lee said the group’s LINE project in Indonesia is progressing with the completion of the front-end engineering design study in the fourth quarter of 2018 and a final feasibility study in the first quarter this year.

He said the configuration and specification of the project has been determined, and the appropriate project structure and funding are currently undergoing final review while work for land preparation on project site has started.

The group expects project tendering and construction to commence by year-end or early 2020. The project will significantly increase the group’s production capacity upon completion by 2023.

“Over the next five years, the advancement of our company’s growth plan will result in capacity expansion, affirming our position as a top-tier petrochemical company in Southeast Asia,” Lee said.