PETALING JAYA: K-One Technology Bhd is estimated to rake in RM30 million sales from its three-year contract with an US-based multinational firm to manufacture dental water flosser for the consumer market.
K-One told Bursa Malaysia that its wholly owned subsidiary K-One Resources Sdn Bhd has ratified a manufacturing agreement with the customer manufacture a certain model of the undisclosed dental water flosser for consumer use.
The customer generated sales revenue of US$ 3.8 billion in 2017. Its dental water flosser is said to be the number one dental water flosser brand in the US and is sold to about 80 countries worldwide.
K-One said tooling is expected to commence in the first quarter of 2019 which will be followed by manufacturing of the products at the end of the subsequent quarter.
“ The manufacturing of the said product is forecasted to generate sales averaging approximately RM10 million per year, commencing this year, for an initial period of 3 years,” it added.
PETALING JAYA: Hong Leong Investment Bank (HLIB) Research anticipates slower growth in the technology sector due to downside risks in the macro environment coupled with waning data trends.
However, it expects automotive and Internet of Things (IoT) to take the forefront while smartphone takes a backseat.
The research house said in a note today that for the first 11 months of 2018 (11M18) global semiconductor sales were outstanding after growing 16%, thanks to the explosive growth of memory followed by discrete and optoelectronics.
As for 2019, consensus is projecting 3% growth for that segment.
“However, we see further downside to this projection considering the US-China trade conflict, stagnant smartphone demand, industry-wide inventory adjustment and weaker memory prices,” HLIB said.
The automotive sector is expected to be the major growth driver for global technology industry supported by its development towards full autonomy.
The equipment industry remained solid with billings increasing 11% in 11M18, supported by heavy investments in all regions except Taiwan.
“However, year-on-year growth has been on a snail’s pace for the past five months, translating into a significant deceleration from past 20 consecutive months’ double-digit growth rates,” the research house explained.
According to SEMI, this reflected the near-term weakening demand for personal computers, mobile phones and servers as well as pulled back investments in response to recent softening of memory prices.
“This is in line with its expectation of expansion in capital spending not outpacing sales growth on the long run and potentially lead to industry-wide overcapacity,” said HLIB.
The research house also highlighted that local semiconductor players may experience strong demand to support the disrupted global supply chain should the procurement levy and technology transfer restriction from US take effect.
Note that China sources substantial fabrication equipment from US players for its expansionary semiconductor industry towards the “Make in China 2025” vision. Vice versa, US fabless semiconductor players outsource their product fabrication and some are produced in China.
With strong greenback, HLIB expects tech firms to be marginally boosted thanks to their US dollar-denominated sales while partly offset by the US dollar cost items.
It estimates the ringgit to be weaker in FY19 with at full-year average of RM4.20 against US dollar.
Nonetheless, pricier commodities, compounded by stronger US dollar projection, will exert pressures on margins for traditional packaging.
Maintaining a “neutral” call on the sector, HLIB displayed a cautious stance in the absence of near-term catalyst as it expects global sales and capital spending to grow moderately.
As for stock picks, it gave Frontken a “buy” call at a target price of RM1.05 on the back of bullish global semiconductor market outlook, robust fab investment, leading edge technology, oil and gas recovery and strong balance sheet.
KUALA LUMPUR: Malaysia’s gross domestic product (GDP) is forecast to grow at 4.9% this year, boosted by a tax refund programme and continuous support from consumer demand, said an economist.
Standard Chartered Bank chief economist (Asean and South Asia) Edward Lee Wee Kok said the GDP growth would be higher than the 4.7% estimated for 2018.
He said the tax refund was worth 2.5% of the GDP and could provide a massive fiscal boost even in an economically cautious environment.
“Assuming half of it (the tax refund) goes to individuals and a very cautious amount of 10% to be taken out for consumption, that is still easily worth around 0.1% to 0.2% of GDP,” he told reporters at a briefing on 2019’s economic outlook today.
Lee said another factor that would contribute to better GDP growth this year would be the mining sector’s recovery.
“There was a disruption in the mining sector last year that took off about 0.2% growth,” he said.
Meanwhile, Lee said consumer demand remained GDP’s main growth pillar and would be supported by a healthy labour market, favourable tax changes and a minimum wage increase.
He said the reintroduction of the sales and service tax to replace the goods and services tax implied an estimated 0.5% to 1% of GDP worth of fiscal receipts returned to the government.
“A new standardised minimum wage of RM1,100 introduced on Jan 1, will also support consumer spending,” he said.
However, Lee said net external demand was projected to be less supportive this year amid slower growth in major economies and ongoing trade tensions between the US and China, adding that Malaysia as a small and open economy would be negatively affected by declining external demand.
Nevertheless, the economist said a prolonged US-China trade dispute could benefit Malaysia in the medium term from supply chain movement out of China.
“We (Malaysia and China) sell a lot of similar products to the US and countries that tend to benefit (from the supply chain movement) are those that are already exporting to the US because the supply chain is already in existence.
“So, I do expect more orders from the US to come as an indirect positive effect from the trade war,” he said.
Lee said Malaysia was the third most successful country after Vietnam and Mexico in terms of attracting supply chain movement away from China.
“However, it will take time before we see the positive impact as it involves investment decisions,” he added.
KUALA LUMPUR: China will likely remain as Malaysia’s largest trading partner, looking at the current trend, said Deputy International Trade and Industry Minister Dr Ong Kian Ming.
He said even with the spectre of the US-China trade war looming, Malaysia-China trade continued to grow at a higher rate compared with other trading partners.
In a statement today, Ong said from January to November 2018, Malaysia’s total trade rose 6.2% as compared with the same period in 2017, contributed by 6.9% growth in exports and 5.3% rise in imports.
During the period, Malaysia-China total trade expanded by 8.5%, with an 11.3% increase in exports and 6.3% growth in imports.
He said Malaysia was also poised to attract more investments and benefit from import substitution as a result of the US-China trade war.
Ong said there were about 300 out of the top 500 Chinese companies listed by Fortune Magazine which had yet to invest in Malaysia.
“These are the companies that we want to entice to Malaysia by showing off our natural and strategic advantages as an investment location,“ he said.
From January to September 2018, approved manufacturing foreign direct investment (FDI) from China had already reached RM15.62 billion.
“More than 50% of the approved manufacturing FDI from Chinese companies came after the 14th General Election (in May 2018), showing that companies from China continue to demonstrate confidence in the Malaysian economy under the new government,“ he added.
He said a recent study by Nomura Global Economics ranked Malaysia as the top country, based on its aggregated Nomura Import Substitution Index scores, that could benefit in particular from the exports of electronic integrated circuits, liquefied natural gas and communication apparatus.
Meanwhile, the Economist Intelligence Unit projected Malaysia to be a beneficiary in diverted production and investment in the automotive, as well as information and communications technology products.
“While a prolonged US-China trade war would not be welcomed by a small and open economy like Malaysia, there are mitigating factors that will somewhat cushion the impact for us,“ Ong added.
KUALA LUMPUR: Malaysia’s central bank will likely keep its benchmark overnight interest rate unchanged at 3.25% at a policy review tomorrow, a Reuters poll showed.
All 11 economists surveyed foresaw Bank Negara Malaysia (BNM) keeping the policy rate on hold. The central bank’s last move was a year ago, when it raised the rate by 25 basis points.
Steady domestic growth, supported by strong consumer demand and sustained investments in automation, would likely keep the central bank from changing its key rate, according to a note by Standard Chartered.
“Our base case is that BNM will be comfortable remaining on hold if GDP growth is at 4.5-5%, as we expect,“ the bank said in its Friday note.
In November, BNM said growth “has bottomed and on upside going forward”, forecasting economic expansion of 4.8% in 2018 and 4.9% the following year.
Any increase in downside risks posed by the ongoing US-China trade war could persuade the central bank to ease monetary policy, said Julia Goh, a Malaysian-based analyst with UOB Bank.
“What we’re watching for is how much spillover this will have on our trade data, and how it will impact the domestic economy in terms of the labour market and consumption growth,“ Goh said.
“If the central bank emphasises more on downside risks from rising external headwinds and shows any inclination of dovishness, then the possibility of a cut rises.”
Malaysia last cut its policy rate in July 2016, when it was lowered to 3%.
Domestically, the government’s “marginally expansionary” fiscal policy, along with subdued inflation, should stave off a policy change this year, HSBC said in a research note on Friday.
Malaysia laid out an expanded budget for 2019, as Prime Minister Tun Dr Mahathir Mohamad’s government looked to boost revenue in a slowing economy while trying to clear large debts left by the previous government.
“We believe BNM’s next move is likely to be a cut in 2020 when fiscal policy turns more contractionary and as growth slows towards 4%,“ HSBC said.
Inflation has been subdued since Mahathir’s government removed an unpopular consumption tax in June and reinstated a narrower sales and service tax three months later.
Full-year 2018 inflation is seen coming in at 1.5-2.5%, before rising to a range of 2.5-3.5% in 2019.
KUALA LUMPUR: The ringgit closed lower against US dollar today dragged by lower oil prices, said a dealer.
At 6pm, the ringgit was quoted at 4.1300/1350 versus 4.1100/1150 recorded last Friday.
Declining oil prices and the overall sluggish commodity markets had cast a negative sentiment among traders, no thanks to the global uncertainty in the United Kingdom, the United States (US) and China.
“Investors are now adopting a wait-and-see attitude ahead of the upcoming trade talks between the US and China, as well as, developments surrounding the Brexit issue,” he said.
At the time of writing, benchmark Brent crude was down 1.42% at US$61.85 per barrel.
Overall, the ringgit traded lower against other major currencies.
It fell against the Singapore dollar to 3.0332/0389 from 3.0301/0342 on Friday and decreased slightly versus the euro to 4.6917/6982 from 4.6842/6903.
The local unit also declined vis-a-vis the Japanese yen to 3.7724/7780 from 3.7507/7559 previously, and depreciated against the British pound to 5.3335/3404 from 5.3179/3248 on Friday. — Bernama
PETALING JAYA: Muhibbah Engineering (M) Bhd’s 51%-owned Muhibbah Viccana JV has written to the Bintulu Port Authority to seek the reason for the termination of its supply base development project.
“The JV is currently in the process of ascertaining the financial and operational impacts and compiling the relevant claims as a result of this termination for discussion with Bintulu Port Authority. The JV is of the view that Bintulu Port Authority will grant fair compensation to the JV and should not result in adverse impact to the JV and the company,“ Muhibbah said in a stock exchange filing.
Last week, Muhibbah’s RM584.84 million contract for works at Bintulu Port in Sarawak was terminated by the Bintulu Port Authority.
The contract was awarded in April 2017 to Muhibbah Viccana JV.
The contract is for the design and build for the development of supply base wharf and associated works in the second harbour basin at Bintulu Port.
PETALING JAYA: Bank Negara Malaysia’s international reserves amounted to US$101.7 billion (RM420.6 billion) as at Jan 15, 0.3% higher than US$101.4 billion as at Dec 31, 2018.
“The reserves position is sufficient to finance 7.3 months of retained imports and is 1.0 time the short-term external debt,” BNM said in a statement.