The Sun

External uncertainties to weigh on Bursa Malaysia next week

KUALA LUMPUR: Bursa Malaysia will likely trend lower next week amidst uncertainty over the outcome of the United States-China trade talks.

Phillip Capital Management senior vice-president (investment) Datuk Dr Nazri Khan Adam Khan said the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) was now ripe for a pullback towards a lower support level range of 1,700-1,710 points.

“Investors have their fear levels heightened with the March 1 deadline nearing, as it could potentially lead to the United States increasing tariffs on US$200 billion worth of Chinese products, which could be avoided if the two economic powerhouses of the world reach a consensus.

“However, a stronger ringgit, rising commodity prices and a positive outcome from the China-Malaysia negotiation on the East Coast Rail Link (ECRL) should cap any temporary weakness in the local equities market,” he told Bernama.

Nazri Khan said strong economic cooperation between Malaysia and China had resulted in both countries resuming talks on the ECRL project to reach a win-win outcome, and a positive conclusion would boost the infrastructure sector as a direct result of growing confidence of local and foreign investors.

From a technical perspective, he said, the FBM KLCI chart showed an encouraging momentum, with the bullish bias remaining strong above the 1,700-level and the immediate strong resistance being at 1,750 points.

During the week, the FBM KLCI recorded a bullish pattern in line with regional equities and breached the 1,700 level on Tuesday as investors were optimistic that the latest round of trade talks between China and the United States would lead to a deal to resolve their tariff war.

The FBM KLCI last rose above the 1,700 level on Nov 26 last year, when it hit 1,701.99.

On a Friday-to-Friday basis, the benchmark FBM KLCI settled 32.59 points higher at 1,721.42.

The FBM Emas Index was 252.23 points higher at 12,002.50, the FBMT 100 Index increased 245.98 points to 11,858.88 and the FBM Emas Shariah Index jumped 289.51 points to 11,953.11.

The FBM 70 surged 387.27 points to 14,415.46 and the FBM Ace Index rose 68.89 points to 4,715.48.

Sector-wise, the Financial Services Index gained 208.16 points to 17,840.72, the Plantation Index increased 77.67 points to 7,413.10 and the Industrial Products and Services Index inched up 4.90 points to 168.03.

Weekly turnover rose to 15.75 billion units worth RM12.61 billion from 14.85 billion units valued at RM9.78 billion.

Main Market volume declined to 10.84 billion shares valued at RM11.56 billion from 11.05 billion shares valued at RM8.99 billion.

Warrants turnover increased to 3.10 billion units worth RM683.63 million from 2.27 billion units worth RM480.02 million.

The ACE Market volume improved to 1.80 billion shares valued at RM366.49 million from 1.52 billion shares valued at RM305.71 million.

The gold futures contract on Bursa Malaysia Derivatives is likely to extend its downtrend next week, pressured by the optimism over the US-China trade talks.

Phillip Futures Sdn Bhd dealer Chang Hui Ying said demand for gold was expected to remain subdued as the precious metal was largely used as a safe-haven asset amid political uncertainty.

“Besides, the gold price is also anticipated to be weighed by the US Federal Open Market Committee’s (FOMC) Jan 30-31 meeting minutes released on Thursday,“ she told Bernama.

Chang said the FOMC minutes, which showed that the US economy remaining strong, were also likely to continue prompting investors to dump safe-haven assets like gold and opt for riskier assets.

She added that the local gold futures were also likely to be influenced by the benchmark New York Commodity Exchange (Comex) gold futures’ performance next week.

For the week just ended, the local gold futures were traded higher in the first three days but succumbed thereafter to finish the week lower, mainly hampered by the hawkish FOMC minutes and positive trade talks progress.

On a Friday-to-Friday basis, spot month February 2019 and March 2019 added 28 ticks to RM173.60 per gramme, respectively, while April 2019 and May 2019 were each 23 ticks higher at RM173.65 and RM173.75 per gramme, respectively.

Weekly turnover narrowed to three lots worth RM52,330 from four lots valued at RM68,820 in the previous week, while open interest widened to 23 contracts from 22 contracts previously.— Bernama


Holding costs, forex losses hit E&O’s Q3 earnings

PETALING JAYA: Eastern & Oriental Bhd (E&O) suffered a net loss of RM8.80 million in the third quarter ended Dec 31, 2018 compared with a net profit of RM21.98 million a year ago due to holding costs and unrealised foreign exchange (forex) losses.

In a filing with Bursa Malaysia, the group said its operating profit of RM50.18 million during the quarter was dampened by unrealised foreign exchange loss of RM11.74 million and holding costs of RM44.55 million payable for the option to purchase land which was not exercised.

Revenue for the quarter fell 22.58% to RM256.95 million from RM331.90 million a year ago due to lower revenue contribution from the property and hospitality segments.

Excluding the holding cost and unrealised forex losses, the group said its recurring pre-tax profit for the quarter would have been RM91.6 million, 10.39% higher than RM82.9 million recorded a year ago.

For the nine months ended Dec 31, 2018, net profit fell 61.60% to RM24.15 million from RM62.89 million a year ago while revenue fell 9.25% to RM636.34 million from RM701.22 million a year ago.

“As at Dec 31, 2018, we achieved a lower net gearing of 0.39 times compared with 0.58 times as at Dec 31, 2017 and our cash balance is RM98 million higher year-on-year at RM727.8 million while our total bank borrowings reduced by 13.66% to RM1.5 billion,” said E&O managing director Kok Tuck Cheong.

For the property development segment, the group recorded cumulative sales of about RM251 million during the quarter, representing a 6.45% growth year-on-year. The group also reduced its inventory level by 28.37% to RM232.4 million.

The group had recently proposed a private placement of new shares and also a rights issue of shares with warrants.

“While the group’s financial position is as strong as ever with net gearing of 0.39 times, the proposed equity raising will put the group on even stronger footing as we prepare for our next growth trajectory. As such, E&O’s fundamentals remain intact and we are committed and confident of our prospects going forward,” said Kok.


CCM’s Q4 earnings jump more than seven-fold

PETALING JAYA: Chemical Company of Malaysia Bhd’s (CCM) net profit for the fourth quarter ended Dec 31, 2018 jumped more than seven times to RM8.63 million from RM1.19 million a year ago due to savings in finance cost of RM2.6 million pursuant to the group’s de-gearing exercise.

In a filing with Bursa Malaysia, CCM said the preceding year’s profit also included the voluntary separation scheme cost amounting to RM5.5 million. The group had also recorded an income tax expense of RM13.93 million a year ago.

Revenue for the quarter fell 8.03% to RM100.46 million from RM109.23 million a year ago due to lower revenue from the chemicals division, which fell 9.3% due to lower average selling prices of its chlor-alkali products on the back of fluctuation in chemical commodity prices.

For the financial year ended Dec 31, 2018, net profit fell marginally to RM25.71 million from RM25.92 million a year ago while revenue rose 6.81% to RM395.94 million from RM370.71 million a year ago.

The group recommended a final single tier dividend of 2 sen per share for FY18, to be paid on June 14, 2019 subject to shareholders’ approval.

In FY18, the group completed two major divestments of its non-core assets which raised a total proceed of RM249.2 million, that was used to pare down its borrowing and strengthened its gearing position from 1.67 times in 2017 to 0.60 times as at end of 2018.

The continuous de-gearing exercise has also contributed to a reduction in finance cost by 18% compared with 2017. The group expects to pursue its expansion and growth strategies now with a stronger financial position.

In line with its strategic plan, the group will focus its efforts on expanding its two core businesses namely chemicals and polymers divisions, both of which will pursue new opportunities to increase market share.


Fitch affirms Malaysia’s ‘A-’ rating, with stable outlook

PETALING JAYA: Fitch Ratings has affirmed Malaysia’s long-term foreign-currency issuer default rating (IDR) at ‘A-’ with a stable outlook.

The rating agency said the ‘A-’ rating reflects higher growth rates than the peer median and a net external creditor position which is supported by steady current account surpluses and large external assets.

However, it said the rating is constrained by high government debt, low per capita income levels and weak standards of governance relative to rating peers.

Meanwhile, Fitch sees downside risks to the government’s 2019 deficit target, which is based on an optimistic oil price assumption of US$70 per barrel and above Fitch’s forecast of US$65 per barrel.

The 2019 budget targets a deficit of 3.4% of gross domestic product (GDP) in 2019 and 3% of GDP in 2020.

However, Fitch assumes that expenditure cutbacks will offset any revenue shortfall, and forecasts a general government deficit of 3.4% of GDP in 2019 (current ‘A’ median -1.7%), in line with the authorities’ target.

Nevertheless, Fitch said substantial non-oil revenue measures would be required for the government to meet its medium-term deficit targets unless oil prices recover, posing a risk to the fiscal outlook in Fitch’s opinion.

It forecasts general government debt-GDP to stabilise at around 62% in 2019 and 2020, above the current peer median of 49%.

“Our debt numbers include officially reported committed government guarantees. Beyond the fiscal risks outlined above, there are risks to debt containment from contingent liabilities related to public-private partnerships which may migrate to the sovereign balance sheet as the government continues to improve the transparency of public finances,” it said.

Fitch expects growth to slow to around 4.5% in 2019 and 2020 from 4.7% in 2018, on weaker export performance and slowing investment activity, but to remain above peers.

Meanwhile, Fitch said outlook for exports is uncertain because of trade tensions between the US and China and its expectations for low oil prices.

However, it said private consumption is likely to remain supportive of growth due to favourable labour market conditions and the government’s plans to disburse income tax and GST refunds of around RM37 billion during the year.

The growth outlook is subject to downside risk, as elsewhere in the region, from the slowdown in China and a further escalation of trade tensions with the US, it added.

Additionally, Fitch expects the current account surplus to narrow further in 2019 as demand for some key exports such as electronics, oil and liquefied natural gas is likely to stay weak.

The current account surplus declined to 2.3% of GDP in 2018 from 3% in 2017 on weaker exports of electronics and commodities.

Foreign-currency reserves fell in 2018 to US$101.4 billion (4.8 months of current external payments; current peer median 4.3 months) as Bank Negara Malaysia intervened during the year to dampen depreciation pressures.

However, Fitch said reserves have picked up subsequently as pressures on emerging markets subsided.

Meanwhile, it forecasts the banking sector’s performance to remain broadly stable despite some softening in growth and pockets of asset-quality risk in some sectors.

“Profitability among Fitch-rated banks should hold up well, and bank balance sheets to remain generally sound – which should help the sector weather unexpected shocks.

“The sector’s common equity Tier 1 ratio and liquidity coverage ratio of 13.1% and 143%, respectively, at end-2018 indicated healthy capital and liquidity positions in aggregate,” it added.


Axiata’s FY18 results clouded by accounting adjustments

PETALING JAYA: Axiata Group Bhd suffered a net loss of RM1.66 billion in the fourth quarter ended Dec 31, 2018 compared with a net profit of RM24.73 million a year ago due to one-off asset written-off/accelerated depreciation of obsolete assets and equipment decommissioned from network modernisation projects.

In a filing with Bursa Malaysia, the group said revenue for the quarter rose marginally to RM6.27 billion from RM6.26 billion a year ago. At constant currency of Q4 2017, revenue grew 5.6% attributed to operating companies in Malaysia, Sri Lanka and Cambodia.

In Malaysia, revenue grew 11.7% to RM1.92 billion underpinned by higher device revenue from one-off “100,000 free smartphone” special campaign for selected long-term loyal customers during the quarter.

Consequently, earnings before interest, taxation, depreciation and amortisation (Ebitda) fell 21.7% to RM466.2 million. The lower Ebitda combined with one-off assets written off/accelerated depreciation amounting to RM358.4 million resulted in a net loss of RM216.7 million compared with a net profit of RM264.5 million a year ago.

Excluding the one-off adjustment, the Malaysian operations recorded a net profit of RM141.7 million during the quarter.

In Sri Lanka, total revenue was stable at RM678.3 million. At constant currency of Q4 2017, revenue grew 15% on the back of strong data revenue underpinned by higher 3G data usage while Ebitda grew 10.2% to RM273.4 million.

At constant currency of Q4 2017, Ebitda grew 25.8% but higher depreciation and foreign exchange translation loss resulted in a net loss of RM900,000 compared with a net profit of RM86.3 million a year ago.

In Cambodia, revenue and Ebitda grew 16.3% and 15.8% respectively due to strong growth of data revenue despite the price war and adverse regulatory impact. At constant currency, revenue and Ebitda grew 15.9% and 15% respectively. Net profit stood at a record RM75.3 million.

For the financial year ended Dec 31, 2018 (FY18), the group reported a net loss of RM5.03 billion compared with a net profit of RM909.48 million a year ago while revenue fell 2.12% to RM23.89 billion from RM24.40 billion a year ago.

The group declared a tax exempt dividend under single tier system of 4.5 sen per share in respect of FY18. Full year dividend declared for FY18 is 9.5 sen.

The Dividend Reinvestment Scheme will apply to the dividend, whereby shareholders will have the option to elect to reinvest the whole or part of the dividend into new Axiata shares.

Axiata president and group CEO Tan Sri Jamaludin Ibrahim said its results at a glance can be alarming and misconstrued as it is almost all due to non-cash items that are purely accounting treatments as opposed to some fundamental performance but the underlying performance is very strong.

“To be specific, due to the massive accounting adjustments especially the reclassification of our Indian asset into the balance sheet, Idea performance will no longer drag our profitability. In fact, there are now more upsides given our belief in the long-term future of the merged company,” he said in a statement.

“Additionally, the 2G and other legacy network write-offs are expected to result in D&A savings of around RM150 million per year, hence, correspondingly improve our profitability,” he added.

He said the group is confident of a promising 2019 given the huge tail wind from the momentum from the operational successes across the group and the strong balance sheet from the M1 sale of RM1.65 billion as well as its RM5.1 billion cash balance.


Malakoff Corp nearly triples earnings in Q4

PETALING JAYA: Malakoff Corp Bhd saw its net profit nearly triple to RM85.48 million for the fourth quarter ended Dec 31, 2018 (Q4), from RM29.7 million in the previous corresponding quarter.

This was due to improved contribution from Tanjung Bin Energy (TBE) coal plant, lower depreciation of C-inspection costs, operation and maintenance costs, net finance costs coupled with higher contributions from associates investments, the group said in Bursa Malaysia filing today.

Revenue for the quarter increased 5.2% to RM1.89 billion, compared with RM1.79 billion in the same quarter a year ago primarily due to higher energy payment recorded from Tanjung Bin Power and TBE coal plants on the back of higher applicable coal price.

For the full year, its net profit declined 7.26% to RM274.43 million, from RM295.93 million a year ago, while revenue slightly up by 3.1% to RM7.35 billion, from RM7.13 billion previously.

On its prospects, Malakoff said it is currently exploring opportunities in the renewable energy sector particularly on hydro, biogas and waste-to-energy, in line with the government’s greater push for renewable energy.

The group said it will also be participating in the government’s open tender for the third round of the 500MW large scale solar (LSS3) projects, which was announced recently.

Based on the foregoing, the group expects performance to remain satisfactory for the financial year ending Dec 31, 2019, it added.

As at 2.35pm, the group’s share price up 1.71% or 1.5 sen to 89 sen with 4.62 million shares changing hands.