CIMB Thai posts 92% jump in Q1 net profit to 325m baht

PETALING JAYA: CIMB Thai Bank PCL recorded a consolidated net profit of 325 million baht (RM42.2 million) for the first quarter (Q1) ended March 31, an increase of 92.4% compared with the same period a year ago.

This was mainly attributed to a 3.4% growth in operating income and a 17.4% drop in provisions, partially offset by a 8.2% increase in operating expenses.

CIMB Thai acting president and CEO Omar Siddiq said operating income rose 3.4% to 3.5 billion baht from an increase of 4.3% in net interest income, mainly from loan expansion and higher interest income on investments.

Other operating income rose 3.4% from an increase in gains on sale of non-performing loans (NPLs) and higher gains on trading and foreign exchange transactions.

Its net interest margin over earning assets stood at 3.31% in Q1 2019 against 3.98% in Q1 2018, resulting from higher cost of funds.

As at March 31, total gross loans stood at 230.9 billion baht, an increase of 1.4% from Dec 31, 2018.

Deposits stood at 235 billion baht, a slight increase of 0.3% from 234.3 billion baht as at end of December 2018. The modified loan-to-deposit ratio rose to 98.3% compared to 97.2% as at Dec 31, 2018.

“The gross NPL stood at 10 billion baht, with a stable gross NPL ratio of 4.3%, unchanged from Dec 31, 2018. CIMB Thai continues to exercise high credit risk underwriting standards and risk management policies. The bank also focuses on improving productivity and monitoring collection,” it said in a statement.

CIMB Thai’s loan loss coverage ratio increased to 109.5% as at March 31 from 107% at the end of December 2018. As at March 31, total provisions stood at 11 billion baht, translating to a 5.4 billion baht excess over the Bank of Thailand’s reserve requirements.

Total consolidated capital funds as at March 31 stood at 48.1 billion baht. The BIS ratio stood at 18.9%, of which 13.8% comprised Tier-1-capital.


BAT awaiting approval for ‘alternative’ products launch

PETALING JAYA: British American Tobacco Bhd (BAT) is currently awaiting approval for its tobacco heating product (THP) and its flagship product Glo from the tobacco control sector and department director-general of health under the Health Ministry.

“We have submitted our application to the relevant authorities in December last year, the price of our THP will be subject to the regulatory bodies,” said BAT managing director Erik Stoek at a media briefing today.

He expects some consumers to adopt the risk reduced tobacco product as the vapour produced product has less harmful chemical compared with conventional cigarettes.

““The industry estimates that the global THP market to grow to £5 billion (RM27.1 billion) in the next four to five years,” he said.

In Malaysia, BAT’s competitor Phillip Morris Malaysia Bhd was the first big tobacco firm to introduce such product.

In addition, BAT is also conducting a pilot project to produce unprocessed tobacco product in East Malaysia.

“At the moment, we are two weeks in with our project, Dunhill HTL cigarillos in East Malaysia, which retails for RM9 for a pack of twenty.”

Stoek said affordability is one of the key factors in combating illicit cigarettes in Malaysia. A research by Nielsen ICS estimates that the volume share of illicit cigarette stands at 60%.

He estimates that the profit of illicit cigarette to be RM1.2 billion compared with RM700 million recorded by the legal trade. The prevalence of illicit cigarette was one of the decision for the company to close its Virgina Park factory in Petaling Jaya in 2016.

Currently, BAT is in its first year of full import business model, with 98% of their products manufactured in Indonesia. It has managed to reduce the lead times by ten days for finished goods and prepaid excise duties, from 26 days to 16 days and 21 days to 11 days, respectively.

However, the company retains a factory in Johor with an annual production capacity of 100 million sticks.

“The factory is in operation since December last year and it is a means to retain our manufacturing license. Should the situation with illicit cigarettes improve, we might expand our manufacturing capacity in Malaysia,” said Stoek.

“We welcome the government’s commitment in tackling this problem, especially with the increase of penalty related to illicit cigarette. The fine of RM100,000 and six months jail term show that the government is serious in their enforcement,” he added.

Last year, the authorities raided 325 outlets involving a total of 100 million cigarettes.


Astro inks US$360m deal with Measat for 12 transponders

PETALING JAYA: Astro Malaysia Holdings Bhd as signed an agreement with Measat Communication Systems Sdn Bhd (MCSSB) for the utilisation of transponder capacity on the MEASAT-3d (M3d) satellite for US$360 million (about RM1.49 billion) cash.

In a filing with Bursa Malaysia, the group said it has also signed an agreement with Measat International (South Asia) Ltd (MISAL) for the early termination of an earlier agreement for the utilisation of transponder capacity on the MEASAT-3b (M3b) satellite. MCSSB and MISAL are wholly owned subsidiaries of Measat Global Bhd.

These are deemed as related party transactions as Tan Sri Ananda Krishnan is major shareholder of Astro and Measat Global.

Under the first agreement, MCSSB will supply Astro’s wholly owned subsidiary Measat Broadcast Network Systems Sdn Bhd (MBNS) with 12 transponders on the M3d satellite for 15 years.

The US$360 million was calculated based on a utilisation fee of US$2 million per year per transponder for 15 years. After taking into account fixed and variable discounts of US$9 million each, the fees amount to US$342 million. MBNS will fund the fees from internally generated funds and/or borrowings.

Meanwhile, the second agreement is for the early termination of an agreement dated April 12, 2018 entered into between MBNS and Measat International (South Asia) Ltd (MISAL) for the utilisation of transponder capacity on the M3b satellite.

At present, MBNS is leasing 42 transponders on Measat satellites for its required transponder capacity to provide direct-to-home (DTH) and Internet access services to its subscribers.

“However, the lease for 12 transponders on the M3 satellite and six transponders on the M3a satellites will expire on Feb 22, 2022 and July 20, 2024 respectively. After the expiry, MBNS will only have the use of transponders on one operational satellite that is, the M3b satellite,” said Astro.

The new agreement will allow MBNS to use the transponder capacity on the M3d satellite, which is expected to be launched in 2022.

“In addition, with the improvement in video compression technology, it is expected that the 12 transponders on the M3d satellite will be able to replace the 18 existing transponders on the M3 and M3a satellites,” it added.

Astro said that the proposed early termination will allow MBNS to terminate the lease of the six transponders on the M3b satellite which it no longer requires.

To recap, the M3b 2018 agreement involves the lease of six transponders on the M3b satellite for a period of 12 years up to June 11, 2030, for a total fee of US$22.5 million. Following the early termination, the US$8 million fee which was scheduled for payment on July 1 will be deferred until the termination date where the amount will be deducted from the refund sum.


Glove sector downgraded as challenges grow

PETALING JAYA: PublicInvest Research has downgraded the glove sector to “underweight” on the back of a more challenging operating landscape for the glove makers in near term.

This is due to additional capacity coming on stream and average selling pressure (ASP) pressure on latex gloves due to growing competition from Thailand.

Share prices of the glove makers under its coverage have seen price-to-earnings (PE) contraction with Top Glove Corp Bhd, Hartalega Holdings Bhd and Kossan Rubber Industries Bhd retracing by more than 18% year-to-date.

Despite the recent selloff, the research house said the sector is still trading at unattractive PE valuations and could potentially contract closer to historical average of 21-26 times.

It has also cut the sector’s FY19-20F earnings forecasts by 3-14% and downgraded its rating on Hartalega and Top Glove to “underperform” while Kossan is maintained at “neutral”.

PublicInvest Research said the global consumption of rubber gloves has always been growing at a steady rate of 8-10% annually.

“The previous vinyl gloves disruption in 2016/17 has led to glove makers expanding their capacity more aggressively in order to satisfy the sudden surge in demand for latex and nitrile gloves due to the impact of substitution effect.”

It noted that the capacity expansion planned during the vinyl disruption is expected to come in the market in the second half of 2019. This includes Thailand’s largest glove maker Sri Trang, which expects their production to increase to 23 billion pieces at the end of the year from the current capacity of 21.1 billion.

Overall, global supply for 2019 is expected to grow by 15% based on planned capacity, outpacing the demand growth of 8-10%.

Due to Thailand’s Sri Trang’s aggressive expansion plan and its product mix of 69% latex gloves and 31% nitrile gloves, PublicInvest Research expects it to have a stronger impact on Top Glove as latex gloves make up 49% of its product mix compared with the more nitrile-heavy glove players like Hartalega (95% nitrile, 5% latex) and Kossan (76% nitrile, 24% latex).

“We understand that Sri Trang has been cutting ASP in order to gain market share,” said the report.

In addition, Hartalega could be facing stronger ASP pressure due to its premium pricing and in the times of excess capacity, greater bargaining power is in the hands of buyers.

Hence, Hartalega may see margin compression in the coming quarters.


Seacera flags potential default on debts

PETALING JAYA: Tile manufacturer Seacera Group Bhd has warned that it is potentially headed towards a default on its payment obligations in the highly likely event that it will not be able to proceed with its settlement proposals in time.

In a filing with Bursa Malaysia, the company said if it is unable to complete the proposals in a timely manner, it will be headed towards default, and possibly cross default on all its outstanding banking facilities and corporate guarantees of the banking facilities, on the payment obligations amounting to up to RM81 million.

In addition, the company will not be able to declare that it is solvent as the board will not be able to form an opinion that the company will be able to pay all its debts as and when they fall due.

In the event of a default in payment and inability to provide the solvency declaration, the company will trigger Practice Note 17 criteria and will face possible suspension and de-listing as an affected listed issuer.

Earlier on Jan 16, the group announced the proposed settlement of RM31.31 million owed by Seacera and two of its subsidiaries namely Seacera Ceramics Sdn Bhd and Seacera Properties Sdn Bhd to certain creditors. The amount was to be settled via the issuance of 149.09 million new shares at 21 sen per share.

The group had also proposed a private placement of up to 126.34 million new shares representing 30% of the existing issued share capital, to be subscribed by potential investors. The proposed exercise was expected to raise gross proceeds of about RM24.64 million, of which RM20 million was to be used to repay bank borrowings.

The settlement agreements were subject to the approval of Seacera shareholders to be obtained on or before April 15 (cut-off date), which was subsequently extended by 20 days to May 6.

The company was to convene an EGM on April 16. However, its largest shareholder Datuk Tan Wei Lian initiated legal action to stop the company from proceeding with the proposed resolutions. A writ and an application for injunction was served on the company and the EGM was adjourned to a later date.

Tan, who holds a 16% stake, withdrew a notice to convene an EGM to remove two directors last week due to a “technical” issue. However, he is planning for an EGM again on May 15 to remove eight directors and appoint six new directors.

Following the injunction, the company will be blocked from proceeding with the proposals, which are imminent for it to immediately address its current cash flow position. Without the proposals, settlement creditors, financial institutions and other creditors may initiate legal proceedings which may include winding up petitions against the group to recover their ascertained/agreed debts.

The group will also be unable to finance its working capital requirements for its tiles plant operations and/or other overhead expenses, and has decided to permanently shut down its only tiles plant operations in Selayang.

Seacera said the permanent shut down may result in the group not having adequate level of operations to warrant continued listing on the bourse as well as financial impairment of up to RM24 million, which may affect its financial results for the financial year ending Dec 31.

In view of the developments above, Seacera expects its share price to be negatively impacted.

The stock fell 1.47% to 33.5 sen with 28.6 million shares done, making it one of the most actively traded stocks prior to the suspension in the trading of its shares at 3.30pm today. Trading in its shares resume tomorrow.