growth potential


BCM Alliance ventures into dairy business

KUALA LUMPUR: BCM Alliance Bhd is diversifying into the dairy business segment via the proposed acquisition of a controlling 51% stake in Foodict Maker Sdn Bhd, Malaysia’s main distributor of China’s largest dairy player.

A filing with Bursa Malaysia shows that BCM has entered into a letter of intent for the acquisition of new and existing shares, representing 25% and 26% of the enlarged equity interest in Foodict respectively.

Foodict is the main distributor of Yili’s products in Malaysia. Yili is China’s largest dairy company and offers the most comprehensive range of products such as yogurt, ice cream, liquid milk, milk beverage, milk powder, health drinks and cheese. It is also listed on the Shanghai Stock Exchange, with a market capitalisation of 174 billion renminbi (RM102 billion).

Besides distributing Yili’s products, Foodict is also engaged in the sale and distribution of health food and supplements, hair and body care products.

BCM Alliance managing director Liaw Chong Lin said the exercise marks the beginning of its investment into non-core areas. The entry into the fast-moving consumer goods sector is in line with the management’s strategies to grow its recurring income and diversify its revenue streams.

“Yili has vast growth potential moving forward and the company intends to go big into the Malaysian dairy market, supported by its financial strength. This is a positive catalyst for Foodict given its strong association with Yili. Yili will provide the full support for the products’ market entry and marketing efforts in Malaysia. Essentially, the more Yili grows, the more Foodict will grow as well,” Liaw said in a statement.

BNM Governor: Malaysia needs reforms to prepare for the future

KUALA LUMPUR: Malaysia needs to urgently embark on a structural reform to rebuild the country’s strengths and prepare for the future, said Bank Negara Malaysia Governor Datuk Nor Shamsiah Mohd Yunus (pix).

She said the reform should begin with addressing the country immediate economic vulnerabilities and complemented by efforts to raise longer-term growth potentials.

Among the vulnerabilities are enhancing Malaysia’s fiscal position, reducing imbalances in the property market and strengthening household resilience to ensure sustainability of future growth, he added.

“Today, with the global landscape changing more rapidly than ever, with rising protectionism and political efficacy, continued implementation of the structural reform will be paramount for Malaysia to secure a strong foothold in the future,“ she said at Malaysian Economy Symposium at Parliament House here today.

The inaugural symposium themed “Present and Future” was jointly organised by the Office of the Speaker of Dewan Rakyat, the Backbenchers Council and the Parliamentary Caucus on Reform and Governance.

Nor Shamsiah said Malaysia must interact fast in introducing reforms to reduce the current economic complexity by creating high-value jobs, extend domestic linkages, develop new and bolster existing economic cluster, and improve inclusivity.

To develop new and bolster existing economic clusters, she said the country needs to intensify efforts to accelerate investment in the downstream environment sectors such as mining and agriculture and look into the possibility of creating new and sustainable products in existing economic clusters such as palm oil and petroleum.

“We must also remain steadfast to introduce initiatives to support the development and modernisation of digital economy,” she said, adding that this entails a comprehensive intervention to enable business and households to generate income.

She also noted that the Malaysian economic environment is likely to become highly challenging in the immediate term, impacted by a challenging global environment and external headwinds with the ongoing trade dispute affecting Malaysia’s exports with growth to moderate in the range between 4.3 per cent and 4.8 per cent this year.

However, she emphasised that the Malaysian economy remains resilient, with inherent strength working in favour to weather the challenges.

“One of our strengths is multiple engines of growth that is further complimented by a broad export base,“ she explained.

Furthermore, she said Malaysia’s financial system remains stable with banks being well positioned to respond to credit demand from businesses and households.

Financing activity continued to facilitate economic activities with total loan disbursement from January to May this year totalling to RM527 billion, with 14.1 per cent higher than average loan disbursement from 2014 to 2018, she said.

“But higher repayment of RM537 billion during the same period led to lower outstanding loan growth.

“Given the moderate economic growth, it was also natural for the demand in financing to be slower as reflected in a lower loan application growth.

“Nonetheless, moving forward, the strength of credit is expected to remain stable in forthcoming (months) with the banks targeted loan growth of 6.0 to 7.0 per cent this year,“ said the Governor.

For small and medium enterprises (SMEs), she said beyond financing and financial assistance, more needs to be done to elevate the policy.

It is critical to uptake the initiative to enhance the productivity of SMEs by encouraging firms to engage in more higher value-added activities and utilisation of higher automation in their operations, she said.

SME productivity stood about 37.1 per cent of gross domestic product despite high financing support of 53.1 per cent of total business loans.

In comparison, Malaysia’s SME contribution to GDP was rather low compared with that of other countries such as Indonesia (60.6 per cent), China (60 per cent) , Japan (54.5 per cent), the United Kingdom (51 per cent), and Thailand (42.3 per cent), she added.

Opec’s extended output cuts no immediate catalyst for oil & gas stocks on Bursa

PETALING JAYA: The extended production cuts by the Organization of the Petroleum Exporting Countries (Opec) do not point to an immediate catalyst for oil and gas (O&G) stocks on Bursa Malaysia to rally.

BIMB Securities analyst Azim Faris Ab Rahim sees the extended cuts by Opec as a positive step to continue support the oil price and spur investment in offshore capital expenditure.

He said the trade conflict between the US and China had resulted in the threat of economic slowdown which would hamper oil demand growth. Hence, the supply must be “controlled” accordingly and justifying what Opec is doing.

“As oil price stabilises at US$60-70 a barrel, we do not see any immediate catalyst to O&G stocks. Nonetheless, this could lead to continuation of Petronas’ spending plan which is important for the O&G’s sector recovery over the long run,” he told SunBiz.

On Friday, Bursa Malaysia’s Energy Index lost 0.45% or 4.85 points to close at 1,068.02 points.

Brent crude futures settled at US$64.23 a barrel and West Texas Intermediate at US$57.51 a barrel last week.

Earlier in the week, Opec agreed to extend its production cuts by nine months to March 2020, aimed at supporting prices and soaking up excess supplies.

Azim said a key concern is that most O&G companies, particularly offshore support vessel players such as Dayang Enterprise Holdings Bhd, Perdana Petroleum Bhd and Barakah Offshore Petroleum Bhd, would still need to resolve debt legacy issues, and this would distract them from pursuing further growth.

“We still see upside potential to stocks with strong balance sheet and earnings growth potential (Hibiscus Petroleum Bhd and Yinson Holdings Bhd) and sector recovery play (Velesto Energy Bhd and Malaysia Marine & Heavy Engineering Holdings Bhd (MMHE)).”

BIMB is maintaining its 2019 average price forecast for Brent crude oil at US$65-70 a barrel. It is currently overweight on upstream stocks in its coverage (Hibiscus, Yinson, MMHE, Velesto) and neutral on downstream stocks (Petronas Chemicals Group Bhd, Petronas Dagangan Bhd, Lotte Chemical Titan Holdings Bhd).

Meanwhile, HLIB Research analyst Sean Lim believes oil prices may strengthen slightly in the second half of 2019 on Opec’s production cut agreement, but noted that upside is still capped by resilient US production growth and lingering uncertainty arising from the US-China trade war putting pressure to the overall demand growth.

“Therefore, any broad-based sector re-rating purely on crude prices are not sustainable. There are still legs for those who can deliver earnings and capable of turnaround. Avoid those which are highly geared and have yet to undergo restructuring,” said Lim.

It continues to favour maintenance players (both upstream and downstream) with strong earnings delivery such as Dialog Group Bhd and Dayang.

Lim said floating production storage and offloading tenders remain robust and Yinson is in good position to win several big contracts backed by its decent track record and good joint venture partner.

“Overall, we expect topline growth for services players as evident by better activities level guided in Petronas activities outlook 2019-2021 published last year. However, margins could be still tight as oil majors are still cost cautious and not willing to expand the rates significantly. Therefore, it really depends on their respective cost management and operating efficiency,” said Lim.

HLIB Research is keeping a neutral stance on the sector as it sees limited upside in oil prices.

“However, we believe that there is gradual improvement in the upstream space for the services players. Not overly bullish on broad-based sector but selectively on counters with selected thesis,” explained Lim.

Singapore’s big telcos face rude awakening, as the little guys get the last laugh

SINGAPORE, July 6 — Back in 2016, the three major Singapore telcos — Singtel, StarHub and M1 — held various meetings with investors and shareholders, reassuring them that a fourth telco would not be a threat to their businesses. They told the…

Saudi crown prince says to finalise US$533m privatisation deals this year, reports Asharq al-Awsat

RIYADH, June 16 — Saudi Arabia’s crown prince said today that the government will finalise privatisation deals worth 2 billion riyals (US$533 million) before the end of this year, according to an interview with the Saudi-owned Asharq al-Awsat…

Saudi crown prince says to finalise US$533m privatisation deals this year, reports Asharq al-Awsat

RIYADH, June 16 — Saudi Arabia’s crown prince said today that the government will finalise privatisation deals worth 2 billion riyals (US$533 million) before the end of this year, according to an interview with the Saudi-owned Asharq al-Awsat…

Bursa Malaysia enters blockchain-powered securities borrowing and lending

KUALA LUMPUR: Bursa Malaysia Bhd has embarked on a securities borrowing and lending (SBL) Proof-of-Concept (POC) – a first of its kind in Asean that explores the opportunities afforded by blockchain technology to develop greater transparency and address other operational challenges associated with the SBL market.

The project aims to ramp up efficiency, speed and capacity in securities lending supply and borrowing demand (lending pool).

Developed in partnership with the exchange’s technology partner Forms Syntron Information (HK) Ltd, a wholly-owned subsidiary of Shenzhen Stock Exchange-listed Shenzhen Forms Syntron Information Co Ltd, the POC will involve a diverse range of SBL market participants.

Affin Hwang Investment Bank Bhd, CIMB Investment Bank Bhd, Citibank Bhd, Kumpulan Wang Persaraan (Diperbadankan) and Malacca Securities Sdn Bhd are collaborating with Bursa Malaysia and Forms to drive the development of the blockchain-enabled lending pool to suit the industry’s specific needs, cost and efficiency pressures.

Bursa Malaysia CEO Datuk Muhamad Umar Swift said across different markets, empirical studies show that short selling helps provide additional liquidity and improves price efficiency.

“The growth potential of Malaysia’s SBL market makes it a prime candidate where the power of blockchain technology can create a considerable impact. The collaboration also benefits the wider industry through new knowledge, insights and practical experience in harnessing digital innovation to support and drive the growth of the capital market.”

The initiative also opens the possibility for Bursa Malaysia to undertake deeper explorations in blockchain technologies to address other operational challenges prevalent to SBL activities in Malaysia and discover more opportunities to drive end-to-end functionalities such as market interest discovery, trade capture and collateral management.

Bursa Malaysia takes first step into blockchain-powered SBL

KUALA LUMPUR, May 6 — Bursa Malaysia Bhd has embarked on a securities borrowing and lending (SBL) Proof-of-Concept (POC) that explores the opportunities afforded by blockchain technology to develop greater transparency and address other…

Draw up national strategy plan to revitalise private investments, SERC urges govt

KUALA LUMPUR: The Socio-Economic Research Centre (SERC) has urged the government to draw up a National Investment Strategy Plan to revitalise private investments, which are critical to sustain economic growth.

SERC executive director Lee Heng Guie said reinvigorating private investment is a key priority to sustain economic growth, raise future growth potential, create high income jobs and increase exports.

He said government policies should focus on how to improve competitive edge, which kind of economic policies should be adopted and mapping up the voyage to higher and more sustainable economic growth.

“For the short term, policies should focus on some quick fixes that we can look into to enhance our investment climate,” he told reporters at a briefing on SERC’s quarterly economy tracker today.

Lee said an example of a quick gain for the government is tourism, citing the Visa on Arrival requirements for tourists from China and India which may be relaxed.

He said policymakers need to focus on reforms that will help Malaysia catch up with its regional peers in terms of supply of skilled and creative workforce, adapting to a rapid shift in technological advancement, state-of-the-art infrastructure, industrial development as well as good governance and best business practices.

Lee said the National Investment Strategy Plan must have equal emphasis on direct domestic investment, especially for small and medium enterprises and high quality foreign direct investments.

SERC recommends that the government examine factors restraining business investment decisions, such as economic and investment prospects, domestic policy uncertainty, regulatory and investment policies and the “crowding out” effect from the participation of government-linked companies (GLCs).

Lee applauded the government’s effort to remove ineffective GLCs, which he said would free up resources for public use and provide more room for the private sector.

“The most important function of private investment determinant is profitability, cost of capital, rate of return, equity return to investment and opportunities. People want to know where are we heading,” he said.

He said the government needs to be an effective facilitator by creating the right environment for investments while continuing to invest in sectors that will raise the economy but stressed that the government has limitations as it needs to contain its debt.

“The new government says it needs three years to fix the economy so the private sector has to step up to fill up the void or else the overall economy will be affected,” he said, adding that the private sector should not be overly cautious as the economy is still growing, albeit not as strong as expected due to the government’s transition period.

“The private sector needs to take the lead and step up. Don’t always rely on the government to kick start investments. The government’s role is to create a conducive environment,” he said.

AirAsia drops Vietnam joint venture, to seek other opportunities

PETALING JAYA: AirAsia Group Bhd has scrapped its joint venture (JV) plan to set up a low-cost carrier (LCC) n Vietnam with local partners.

The group told Bursa Malaysia that its wholly owned subsidiary AirAsia Investment Ltd, together with Gumin Company Ltd and Hai Au Aviation Joint Stock Company had amicably agreed to terminate and release each other from all obligations under the transaction agreements in relation to the proposed joint venture in Vietnam, effective April 17, 2019.

Despite the termination, AirAsia stressed that it remains interested in operating a low-cost airline in Vietnam due to its favourable geographical location, expanding aviation market and overall growth potential.

“The termination of the joint venture is not subject to the approval of the company’s shareholders and is not expected to have any financial impact on the net assets or gearing of the company.”

AirAsia first announced its intention to establish an LCC in March 2017 and a memorandum of cooperation was signed in December 2018.

AirAsia Group CEO Tan Sri Tony Fernandes had said Vietnam is one of the last remaining countries with a large population within the region that AirAsia is not in.

AirAsia is already the largest foreign airline group in Vietnam by capacity, currently operating to five destinations in the country, including its latest addition of Phu Quoc.

Its shares gained 1 sen or 0.4% to close at RM2.48 today with 8.08 million shares changing hands.