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.