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After QSR, more companies to postpone IPOs?

PETALING JAYA: Faced with heavy sell-off in the local bourse, the initial public offering (IPO) market has been weak this year. Looking at the current situation, the recent postponement of QSR Brands (M) Holdings Bhd IPO may indicate that this is not the best timing for new listings.

Association of Corporate Finance Advisers chairman Datuk Wan Asmadi Wan Ahmad told SunBiz that based on the current performance of the local market, those seeking valuation premium from the listings are expected to postpone their IPOs as the valuations may not meet the parameters expected by the IPO candidates.

Just over a week ago, QSR and its shareholders decided to re-time its IPO following discussions with its bankers. The IPO could have raised as much as RM2 billion but it was postponed as potential investors balked at its valuations. If it had gone ahead, QSR would have been the biggest IPO in Malaysia in about two years.

Wan Asmadi, who is also DWA Advisory Sdn Bhd managing principal, said for Main Market listing, IPO candidates will always be there but they are more likely to proceed when the market situation improves.

“Large main market listings would need to attract cornerstone investors, asset management companies and retirement funds as their target investors and thus market appetite of these funds managers would need to be carefully gauged before launching of any listing. As for the ACE and LEAP markets, the takers would be mostly private investors, including high net worth and sophisticated investors that may look for good upside especially in the current market situation,” he explained.

Nonetheless, he said an IPO remains a viable alternative for candidates seeking to raise funds and enhancement of equity capitalisation, especially for ACE and LEAP Markets, which cater more to small and medium enterprises.

“We expect last year’s trend to continue to this year and more IPOs will be launched in the second half of this year, hopefully when the situation is more certain and positive economically,” said Wan Asmadi.

Bursa Malaysia has seen five listings on the ACE Market and the LEAP Market this year, raising RM112.66 million so far. This compares with 22 IPOs last year which raised RM633.12 million. There were 11 listings on the LEAP Market, nine on the ACE Market and only two on the Main Market in 2018, namely Mi Equipment Holdings Bhd and Techbond Group Bhd.

Upcoming listings are Smile-Link Healthcare Global Bhd (tomorrow) and TT Vision Holdings Bhd (May 9), both on the LEAP Market.

IPOs in the Main Market pipeline include the likes of HPMT Holdings Bhd, Leong Hup International Bhd, UWC Bhd and AME Elite Consortium Bhd.

Meanwhile, IPOs in the ACE Market pipeline are Tashin Holdings Bhd, Mattan Bhd, Greatech Technology Bhd, SDS Group Bhd, Mestron Holdings Bhd, I-Stone Group Bhd, Kim Hin Joo (Malaysia) Bhd, Spring Art Holdings Bhd, MTAG Group Bhd and Solarvest Holdings Bhd, among others.

Prime Minister Tun Mahathir Mohamad has said the government was considering listing state-owned entities on the stock market as part of efforts to reduce debt and liabilities.

During the tabling of Budget 2019 last year, Finance Minister Lim Guan Eng had also mentioned the government’s plans to set up an airport real estate investment trust for the “securitisation” of government assets.

An investment banker who declined to be named said the IPO market remains positive as interest in IPOs has increased compared with last year, based on enquiries from companies indicating their interest to list.

“You may not see a mega IPO like QSR but there is more interest from the smaller companies compared with last year,” the corporate financer of an investment bank said, noting that the number of companies going for listing on the Main Market and the ACE Market this year should be higher than last year.

He explained that there is always more interest for listing on the ACE Market and the LEAP Market compared to the Main Market and this is not something worrisome.

“We shouldn’t just focus on big IPOs. We should also focus on the smaller companies where we can help them to raise funds to help them to grow their business to the next stage, which is also important for the capital market.”

He said there is more and more interest for IPOs now following the revival of the East Coast Rail Link project, a sign that things are better compared to previously where projects were under review and there was no clear direction from the government.


Maybank aims to disburse RM85 billion mortgages, SME loans in next three years

KUALA LUMPUR: Malayan Banking Bhd (Maybank) plans to disburse RM50 billion in mortgages and RM35 billion in SME loans in the next three years, said group president and CEO Datuk Abdul Farid Alias.

“Our approval rate for mortgage is 80% and the industry’s approval rate is 70%. The industry has been supporting the borrowers, especially those who needs to find a home,” he told a press conference after its AGM here today.

The bank disbursed RM12.2 billion in mortgages last year.

Its current loan size for the SME segment consists of RM24 billion from business banking and RM17.1 billion from retail SME.

This comes as the government has urged banks to be more flexible in lending arrangements, amid complaints about access to lending among local investors.

At the Invest Malaysia 2019 last month, Finance Minister Lim Guan Eng asked banks to be more flexible in terms of lending arrangements as there were many complaints of banks being conservative, given that they recorded huge profits last year.

Maybank achieved a record FY18 with a net profit of RM8.11 billion and wants to ensure that it remains well equipped to withstand any economic headwinds that may arise in the coming year.

On provisions and impairments, Farid said these are carried out according to the Malaysian Financial Reporting Standards 9, with validation from auditors and regulators.

“We gave a guidance on the group’s net credit charge-off of about 40bps for 2019. Last year, the guidance was 40-45bps but we had recoveries and achieved better. From the group’s perspective, we haven’t changed our guidance,” said group CFO Datuk Amirul Feisal Wan Zahir.

Farid said it will plan the bank’s growth strategy against its expectation of how the economies in its major markets Malaysia, Indonesia and Singapore will perform.

He said Malaysia is projected to see gross domestic product growth of 4.7%, Indonesia 5.1% and Singapore 1.8% this year, driven by domestic demand. It is assuming that net external demand is going to be muted due to the US-China trade dispute.

“We should be able to grow based on the growth in the countries. Inflation is still low and asset quality is stable in all three markets, so the condition to do well relative to this environment is there,” explained Farid.

To support Maybank’s continued growth, five priority areas have been identified for this year namely, driving income growth, ensuring better productivity, managing asset quality, sound liquidity & capital management as well as digitalisation.

On the proposed additional capital requirement for domestic systemically important banks (D-SIB), Farid said Maybank’s capital is adequate and “within expectation”.

Bank Negara Malaysia is seeking public consultation on the proposed designation of D-SIBS and the implementation of higher loss absorbency requirements for them.


Brokers must adopt greater digitalisation to attract younger investors, says Guan Eng

KUALA LUMPUR, April 9 — Stockbrokers must adopt greater digitalisation to appeal to the younger generation of investors and raise public participation in the stock market, says Finance Minister Lim Guan Eng. He said in today’s world where almost…


Genting Malaysia’s Equanimity buy a negative surprise

PETALING JAYA: Genting Malaysia Bhd’s (GENM) acquisition of the Equanimity super yacht for US$126 million (RM513.9 million) is a negative surprise for analysts, who are not convinced by the group’s explanation that the acquisition could strengthen its competitive edge.

CGS-CIMB Research said GENM does not have experience managing super yacht and cruise liners.

“We view this news negatively as GENM is not in the superyacht and cruise liner business,” it said in a research note today.

GENM’s share price retreated today to close 3 sen or 0.9% lower at RM3.25 on 5.61 million shares done.

Genting Group’s cruise liner business is managed by Genting Hong Kong. GENM claimed that the acquisition of Equanimity will allow the group to differentiate itself from its competitors and provide a unique and competitive edge for its premium customer business.

“While we agree this could help to boost the VIP business, the impact may not be material considering that the super yacht can only fit 50+ passengers, which includes 31 crew members. Meanwhile, GENM would have to incur additional costs in the form of higher depreciation charges, maintenance and upkeep cost and interest income loss,” said PublicInvest Research.

The original cost of the super yacht was US$250 million and was handed over to the Malaysian government in August 2018 pursuant to the US Department of Justice’s asset recovery operations as part of its probe into 1Malaysia Development Bhd (1MDB) funds.

Finance Minister Lim Guan Eng revealed that the government has spent over RM14.2 million to maintain the yacht over the last eight months.

Assuming the worst-case scenario whereby the Equanimity does not generate any revenue contribution over the next few years, CGS-CIMB estimates GENM FY19-21 earnings per share (EPS) could fall by 3.4-5%.

“However, we maintain our EPS forecasts for now until we have clarification of GENM’s future business plans for Equanimity.”

The research house opined that the deal will have minimal impact on GENM’s balance sheet as net debt will rise to RM2.28 billion or 0.12 times net gearing. As at end Dec-18, GENM had RM1.77 billion of net debt or 0.1 times net gearing.

CGS-CIMB is maintaining a “hold” call on GENM with an unchanged target price of RM3.25.

“Re-rating catalysts are the opening of the new outdoor theme park in 2019F and positive earnings contribution from Equanimity while de-rating catalysts are the new theme park failing to open in 2019 and losses from Equanimity.”

Given GENM’s large cash pool of about RM8 billion, PublicInvest Research believes the group could easily finance the acquisition with its internally generated cash.

“Based on our estimate, this could result in a 5-7% decline in our FY19-21 net profit forecasts if we were to factor in the impact of loss of interest income, additional depreciation cost and maintenance cost for the super yacht.”

PublicInvest Research is maintaining its “underperform” rating on GENM with an unchanged target price of RM2.70.


Financial institution’s loan growth grows at average of 8.74pc from 2009-2018

KUALA LUMPUR, April 4 — The loan growth of the banking institutions grew at an average of 8.74 per cent from 2009 to 2018, the Dewan Rakyat was told today. Finance Minister Lim Guan Eng said this shows that financing facilities are available to…


Bank Negara revises 2019 GDP growth forecast lower to 4.3-4.8%

KUALA LUMPUR: Given the persistent external headwinds emanating from, among others, the US-China trade spat and the Brexit deadlock, Bank Negara Malaysia (BNM) sees more downside risks in the domestic economy, projecting a gross domestic product (GDP) growth of 4.3% to 4.8% for 2019.

This is lower than the government’s earlier projection of 4.9% during the tabling of Budget 2019. Last year, the economy grew 4.7%.

Governor Datuk Nor Shamsiah Mohd Yunus said the revised GDP growth projection was due to slower global economic expansion, which has been revised downwards.

At a media briefing today in conjunction with the release of the BNM Annual Report 2018, she said domestic demand will remain the anchor of growth on the back of continued expansion in private sector activity.

However, private consumption growth is expected to moderate to 6.6% this year, while private investment is projected to register a stronger expansion of 4.9%.

Public consumption is projected to expand at a moderate pace of 1.2% and public investment is estimated to decline 7.1%.

Despite an expected slower economic growth in 2019, Nor Shamsiah opined that it will not dampen consumers’ sentiment and private consumption will always hold up as the bulk of the consumption is spent on daily necessities.

On the supply side, all economic sectors will continue to grow in 2019 with the services and manufacturing being the key contributors.

Nor Shamsiah believes the global economy will not fall into a recession and the external growth will continue to support Malaysia’s export growth, which is estimated to expand 3.4% this year compared with 6.8% in 2018.

The current account balance is projected to remain in surplus, albeit narrowing to 1.5% to 2.5% of gross national income.

Commenting on monetary policy, Nor Shamsiah said the central bank has been closely monitoring developments and will focus on supporting economic growth.

“Any adjustment to the OPR does not immediately suggest that there are risks to growth as we are not a growth-targeting central bank,” she said, referring to the Overnight Policy Rate.

Nor Shamsiah also alleviated market concerns over deflation seen in the first two months of the year, reiterating that there is no collapse in demand conditions.

“We’re not suffering from deflationary pressure. Deflation occurs when price declines are broad based. More than 50% of goods in the CPI basket are experiencing increase in prices. The decline in headline inflation is solely due to transport cost and high base effect.”

Headline inflation, as measured by the CPI (Consumer Price Index), is projected to increase 0.7% to 1.7% this year. The CPI declined by 0.4% and 0.7% in January and February, respectively.

On Finance Minister Lim Guan Eng’s call for banks to be more flexible in lending, Nor Shamsiah does not see banks tightening lending, evidenced by the highest ever loan disbursement growth of 7.3% in 2018 against 5% in 2017.

Malaysia’s external debt stood at RM924.9 billion as at end-2018 or 64.7% of GDP, higher than the RM885.2 billion (65.4% of GDP) as at end-2017, mainly due to the increase in interbank borrowings and corporate loans to finance investment activity as well as valuation effects following the weakening of the ringgit.

“Under the baseline projection, external debt will decline to 56% of GDP by 2023 facilitated by continued account surplus and economic growth, faced against the adverse shocks of external debt that will rise above the baseline projection but remain manageable due to Malaysia’s debt profile and external buffers,” Nor Shamsiah explained.


Foreign funds net buyers, RM90.2m net inflow into Malaysian equities

KUALA LUMPUR, March 24 — Foreign funds were net buyers with the local bourse recording a total net inflow of RM90.2 million between March 18 and March 21 versus total net outflow of RM472.2 million recorded in the same period in the previous week….


Bursa Malaysia dragged down by heavyweight banking stocks

PETALING JAYA: The local bourse bucked the regional trend and skidded 20.55 points or 1.22% today as the market was bogged down by heavy selling in banking stocks amid the US Federal Reserve’s dovish outlook.

The FBM KLCI closed at an intraday low of 1,663.66 points against Wednesday’s closing of 1,684.21.

Market breadth was negative with losers beating gainers 547 to 302. A total of 2.96 billion shares valued at RM2.15 billion were traded.

The Financial Services Index tumbled 225.12 points or 1.29% to 17,219.51 points.

Among the top losers on Bursa Malaysia were Public Bank Bhd, Hong Leong Bank Bhd and AMMB Holdings Bhd, which fell 60 sen, 46 sen and 14 sen to RM23.86, RM20.34 and RM4.47, respectively.

Malayan Banking Bhd and CIMB were down 7 sen and 6 sen to RM9.40 and RM5.33, respectively.

Inter Pacific Research Sdn Bhd head of research Pong Teng Siew told SunBiz that the Fed’s dovish stance on the benchmark rates is causing some consternation among the investors about banking stocks as Bank Negara Malaysia (BNM) is likely to lower the Overnight Policy Rate.

“This is because if the lending rate drops, the banks’ lending margins could possibly become slightly weaker,” he said.

Rakuten Trade Sdn Bhd head of research Kenny Yee Shen Pin concurred, saying that the Fed’s dovish stance on the benchmark rates provides room for BNM to look into the possibility of a rate cut to support Malaysia’s economic growth and in turn the stock market may see a boost from easing monetary policies.

“This would provide further impetus to sustain economic growth and also the equity markets. However, global growth remains a concern,” he said in a research note.

Pong opined that any rate cut will depend on the country’s economic performance, such as gross domestic product growth.

“At this moment, I think the interest rates are quite adequate to maintain economic growth. I don’t think it has reached the point where BNM feels pressure to lower interest rate yet,” he added.

Additionally, Pong said Finance Minister Lim Guan Eng’s recent remarks on the possible imposition of windfall taxes on banks if they continue on being conservative in lending also contributed to the sell-off in banking stocks.

Lim, however, has clarified that the government has no intention to impose such taxes on banks.

Meanwhile, Pong pointed out that Malaysia stands to benefit from the Fed’s dovish stance it provides room for the ringgit to strengthen further given the weakening of the US dollar, and thus help to lower the inflation rate.

“The fact that the US Fed has left the outlook for interest rates to be unchanged for the rest of the year makes it more likely that BNM may actually lower interest rates. Therefore, US dollar might weaken and with that, the pressure on ringgit will be less as the dollar weakens,” he explained.

The ringgit climbed to an eight-month high of 4.0545 against the US dollar. As at 5pm today, the Malaysian currency was trading 0.22% higher at 4.0625 against the greenback..


Be more flexible in lending or you may face windfall tax, Guan Eng warns banks

KUALA LUMPUR: The government has urged banks to be more flexible in terms of lending arrangements, amid complaints about access to lending among local investors.

“We want to ask the banks to be a bit more flexible in terms of lending arrangements because this is an issue whereby we get many complaints of the banks being very conservative. Banks last year recorded huge profits; some of them, their largest profits ever,“ said Finance Minister Lim Guan Eng.

“In Malaysia we don’t have windfall taxes for banks so I think it is time for you to start lending. Unless you prefer windfall taxes,“ he said at Invest Malaysia 2019 today.

He said interest from foreign investors, especially Japan, has improved and investment figures are encouraging but hopes that local investors will follow suit.

“We know there are certain issues they (local investors) are concerned about especially in terms of easier access to lending and also resolving the intake of foreign workers. Let me assure you that we are getting down to it, to make sure that these issues are overcomed and we hope that the investment among the local businessmen will pick up, in line with the increased confidence among foreign investors,“ he added.

Lim reiterated Prime Minister Tun Dr Mahathir Mohamad’s statement that there are no plans to introduce new taxes apart from those already outlined by the government.

“We are still fine-tuning the imposition of the sales and service tax (SST). There are two big takeaways. Firstly, the construction sector had a windfall … the construction services sector is exempted from paying SST and that should provide a significant boost to the construction sector,“ he said.

Secondly, private hospitals are exempted from the 6% service tax, a move which the government hopes will help reduce medical costs.

“We also hope that the private hospitals can reciprocate by reducing cost or at least retaining cost. Otherwise we may have to reconsider our decision to waive the imposition of service tax for private hospitals.

“We hope that private hospitals will respond, make sure costs are kept low so that we can attract not only more foreign patients but also reduce the burden of local patients,“ he said.

Meanwhile, Lim stressed that the special dividend from Petroliam Nasional Bhd (Petronas) is not to address the fiscal deficit but to pay goods and services tax (GST) and income tax refunds.

“Even this year, we are not relying on Petronas to reduce our deficit to 3.4% of GDP (gross domestic product). I think the real challenge will be next year, to reduce from 3.4% to 3%,“ he said.

However, he remains confident that the government will perform well on the back of continued growth of the economy, foreign investments that continue to come in and benefits of the institutional reforms that have been carried out.

During the tabling of Budget 2019, the government had announced a RM30 billion special dividend payment from Petronas to fully settle the outstanding income tax and GST refunds estimated at RM35.4 billion.


Guan Eng warns of windfall tax if banks not flexible in lending

KUALA LUMPUR: The government has urged banks to be more flexible in terms of lending arrangements, amid complaints about access to lending among local investors.

“We want to ask the banks to be a bit more flexible in terms of lending arrangements because this is an issue whereby we get many complaints of the banks being very conservative. Banks last year recorded huge profits; some of them, their largest profits ever,” said Finance Minister Lim Guan Eng (pix).

“In Malaysia we don’t have windfall taxes for banks so I think it is time for you to start lending. Unless you prefer windfall taxes,” he said at Invest Malaysia 2019 yesterday.

Lim said interest from foreign investors, especially Japan, has improved and investment figures are encouraging but he hopes that local investors will follow suit.

“We know there are certain issues they (local investors) are concerned about especially in terms of easier access to lending and also resolving the intake of foreign workers. Let me assure you that we are getting down to it, to make sure that these issues are overcomed and we hope that the investment among the local businessmen will pick up, in line with the increased confidence among foreign investors,” he added.