business growth


Maxis on track to hit RM10b service revenue by 2023

KUALA LUMPUR, April 26 — Maxis Bhd is on track to achieve an annual service revenue of RM10 billion by 2023 from the current RM8 billion. Interim chief executive officer Gokhan Ogut said Maxis had started its five-year transformation journey that…

Maxis Q1 earnings down 22%

PETALING JAYA: Maxis Bhd’s net profit for the first quarter ended March 31, 2019 fell 22% to RM409 million from RM523 million a year ago attributable to the decline of wholesale revenue due to the termination of the network sharing agreement, continued investment in FibreNation and mobilisation of the enterprise business growth opportunities.

Revenue was flat at RM2.23 billion compared with RM2.24 billion in the previous year’s corresponding quarter.

Its board of directors has declared a first interim single-tier tax-exempt dividend of 5.0 sen per share.

Maxis said there are a few key items impacting the group in 2019, including the impact of changes to a major wholesale network sharing agreement in Q119 and Q219, dilution in fibre average revenue per user from the new competitive priced plans and the cost of customer migration initiative coupled with the increase in cost to serve; as well as the increase in cost of business from the Sales & Service Tax.

Its guidance for the financial year ending Dec 31, 2019 remains unchanged.

It expects service revenue and earnings before interest, tax, depreciation and amortisation to decline by low single digit and mid-single digit respectively; core network capital expenditure to be around RM1 billion plus capex supporting new growth opportunities in broadband and enterprise business (around RM1 billion over three years); and operating free cash flow (excluding upfront spectrum fee assignment) at a similar level to year 2018.

The group is implementing a significant change in strategic direction building on its strong mobile base to deliver its internal annual service revenue target in excess of RM10 billion by 2023.

Takaful Malaysia first-quarter net profit jumps 38%

PETALING JAYA: Syarikat Takaful Malaysia Bhd registered a net profit of RM96.4 million for the first quarter (Q1) ended March 31, 2019, a 37.8% jump from RM70 million in the same period last year.

The group attributed the improvement in profit to a higher Wakalah fee income arising from business growth in the family takaful.

Revenue for the quarter under review stood at RM918.2 million, 23% higher than the RM746.2 million registered in the same quarter a year ago.

Takaful Malaysia’s family takaful business generated a gross contribution of RM502.9 million in Q1’2019, a 55% jump from RM324 million in Q1’2018, underpinned by higher sales from credit related products.

Meanwhile, its general takaful business delivered a gross contribution of RM204.2 million in Q1’2019, an increase of 12% compared with RM182.4 million in Q1’2018. The growth was attributed primarily to its fire class.

Despite business sentiments remaining cautious in 2019, Takaful Malaysia expects the takaful industry to outperform the conventional insurers in view of the strong demand in the takaful products.

“Takaful Malaysia is poised to further expand its market share in 2019. To sustain its market leading position, the company will continue with its innovative strategies via the implementation of its digital strategy, introduction of online solutions, expansion of its distribution capabilities, strategic partnerships with leading Islamic banks and Brand awareness initiatives.”

To support business growth and customer centricity, the group will continue its digital strategy to build the full digital ecosystem and to expand the business focus beyond credit-related business to reach out to the wide retail customer base of major partner banks.

Stock markets ‘checked out’ ahead of Easter break

LONDON, April 18 — Stock markets were mixed today as investors wound down their positions before the Easter break, with positivity surrounding China-US trade talks and healthy Chinese growth failing to fire much buying activity. After Wall Street…

Singapore small businesses trail Asean neighbours, survey shows

KUALA LUMPUR, April 10 — Small businesses in Singapore grew less strongly than their counterparts in South-east Asia, despite growing at their strongest pace in three years in 2018 and outperforming other developed economies like Australia, Hong…

Analysts turn cautious on banking

PETALING JAYA: In line with the central bank’s view of heightened downside risks in 2019 emanating from external uncertainties, analysts have turned cautious on the banking sector’s core net earnings growth in 2019.

Affin Hwang Capital currently pencils in a growth rate of 2.5% year-on-year against a stronger growth rate of 6.9% year-on-year as seen in 2018.

“We continue to see higher earnings downside risks arising from deposit competition within the sector itself, of which will drive up funding costs and erode bank’s net interest margin,“ the research house said in a report today.

It said market participants are currently worried about a potential cut in the overnight policy rate (OPR), of which will be negative for the banking sector earnings in the near term before the downward repricing effects of deposit start to kick-in in the next six to 12 months.

Despite that, Affin Hwang believes that the banking sector is underpinned by sound asset quality (as implied by a gross impaired loan ratio of 1.45% as at January), of which is also underscored by the high debt-servicing capacity of the business sector.

On the asset quality of household debts, it said the decline in aggregate impairment ratio to 1.2% (2018) from 1.4% (2017) implies that banks continue to be watchful of unproductive growth of household credits (especially for unsecured lending) and exercise stringent approvals only for borrowers with sound debt-servicing capacity.

It maintained its neutral stance on the sector, noting that business and consumer outlook in 2019 will be dampened by external uncertainties and a lack of domestic catalysts.

“For 2019, we have a loan growth target of 5%, against a higher target of 7-8% set by some key banking players in the industry. On a more positive note, our strong economic fundamentals – resilient consumer spending, business growth and low unemployment rate, are holding up. We expect consumer sentiment and business activities to gradually improve in 2H19 as trade tension may dissipate.”

Kenanga Research said loans growth will remain to be moderate, but valuations seem more attractive with most of the banking stocks under its coverage being rated as outperform except for CIMB, Hong Leong Bank Bhd, Public Bank and RHB Bank Bhd which are at market perform.

It warned that further external risks might put a dampener on business sentiments with softer demand and applications with higher risk perceived lowering approval rates. The dampening credit demand might be exacerbated by an increase in corporate bonds as upside pressure on interest rates lessens.

Meanwhile, AmInvestment Bank maintained its “overweight” call on the sector due to the anticipation of global liquidity into emerging markets from a slowdown in normalisation of the US monetary policy that is widely expected.

“The fund inflows are expected to benefit share prices of banking stocks which are liquid, offering decent dividend yields with banks still expected to deliver positive growth in earnings despite challenging conditions,“ it said.

Financing not main constraint to SMEs’ business growth

PETALING JAYA: Financing is not the main constraint to small and medium enterprises’ (SMEs) business growth, but factors associated with operating and business conditions, namely increasing competition, fluctuating demand, rising input costs as well as labour costs.

In its Financial Stability and Payment Systems Report, Bank Negara Malaysia (BNM) said according to a survey it conducted last year, difficulty in accessing sufficient financing was ranked low, second to last out of the nine constraints identified by SMEs.

Findings from the survey revealed that financing barriers faced by SMEs are mainly related to documentation, costs as well as business viability.

SMEs that experienced rejections of their financing applications cited insufficient documentation, cash flow to meet repayments and non-viable business plans as the main reasons for rejection.

About 46% of the respondents stated that the financing products offered by financial institutions did not meet their business needs due to high financing costs, insufficient financing amount and onerous documentation requirements.

The average financing rate that respondents were willing to pay was 3.88%, well below the average lending rates to SMEs of 6.18% at the time of the survey (Q2 2018).

The challenges raised by businesses in the survey point to opportunities for improvements in the on-boarding process of financial institutions (including documentation requirements) and financial management capabilities of SMEs to enhance their creditworthiness, it added.

A total of 1,529 SME businesses participated in the survey. The survey is part of the central bank’s ongoing efforts to promote continued access to financing for SMEs.

RAM sees slower growth for takaful industry this year

PETALING JAYA: RAM Ratings expects general takaful contributions to expand at a slower pace of 6-7% while family takaful new business growth is expected to decelerate to 7-9% this year.

The credit rating agency said general takaful contributions will see slower growth with the progressive impact of tariff liberalisation and moderating economic growth.

Family takaful new business growth, on the other hand, will be hit by weaker consumer sentiments and rising cost of living concerns.

“Despite near-term moderation, the long-term growth prospects for the industry remain anchored by Malaysia’s supportive demographics, low penetration rates and awareness initiatives targeted at the Muslim-majority mass market,” it said in a statement today.

RAM Ratings has a stable outlook on the Malaysian takaful industry for 2019.

Last year, general takaful contributions rose 8% to RM2.8 billion with all major business lines charting growth. Motor took the lead with a 13.4% growth, followed by medical and personal accident coverage with 7.3% growth, and fire plans with 1.4% growth.

RAM Ratings said the lack of significant catalysts for motor sales and property transactions may limit growth going forward.

“In the previous environment of fixed pricing, the unique ability of general takaful operators to offer cashback incentives to customers from takaful fund surpluses was a source of product differentiation.

“This competitive advantage has been curtailed with risk-based pricing, as all general insurers and takaful operators can now offer upfront reductions of premium or contributions for ‘favourable’ risks,” it noted.

Meanwhile, family takaful new business contributions grew 13.1% to RM4.9 billion last year, spurred by the growth of ordinary family products. However, the sector’s profitability was affected by soft investment conditions.

“An anticipated moderation in private consumption growth may tamper with near-term demand, but the recently announced mySalam national health protection scheme which provides takaful coverage to the B40 lower-income group may act as a catalyst for future purchases of individual protection plans. The family takaful penetration rate is currently low, at about 15%,” it said.

According to RAM Ratings, the takaful sector in Malaysia represents a small 17% of the combined insurance and takaful segment’s total premiums and contributions. Upcoming regulatory changes for the industry include enhancements to the existing Takaful Operational Framework.

For family takaful operators, revisions to investment-linked product guidelines will take effect in 2020. These revisions aim to ensure high standards of governance and better safeguards for consumers.

As at end-June 2018, the combined general and family takaful sector’s capital adequacy ratio stood at 227.5% compared with 213.7% as at end-December 2017, above the minimum regulatory requirement of 130%.

BFood Q3 earnings boosted by Starbucks, Kenny Rogers

PETALING JAYA: Berjaya Food Bhd (BFood) saw a net profit of RM8.98 million for the third quarter ended Jan 31 compared with a net loss of RM10.85 million a year ago, mainly due to higher profit contributions from its Starbucks operations in tandem with the higher revenue achieved as well as improved performance from the Kenny Rogers Roasters (KRR) Malaysia’s operations in the current quarter, with the absence of loss arising from the disposal of the group’s KRR operations in Indonesia.

It registered a 9.8% increase in revenue to RM180.54 million from RM164.44 million in the previous year’s corresponding quarter, mainly underpinned by the same-store-sales growth recorded by Starbucks as well as additional Starbucks cafes operating in Malaysia in the current quarter under review.

BFood has recommended a third interim dividend of 1.0 sen dividend per share for the quarter under review, payable on April 26.

For the nine-month period, BFood’s net profit jumped over 73 times to RM22.26 million from RM304,000 in the previous year’s corresponding period, while revenue rose 6% to RM508.50 million from RM479.61 million.

“The renewed consumer confidence level coupled with the group’s expansion plans will fuel the group’s business growth. This augurs well for the group’s operations going forward,” BFood said.

Stable outlook for insurance sector in 2019, says RAM Ratings

KUALA LUMPUR, March 14 — RAM Rating Services Bhd (RAM Ratings) is maintaining a stable outlook on the local insurance industry for this year with general insurance premiums expected to stay stagnant in view of the progressive impact of tariff…