PETALING JAYA: Tadmax Resources Bhd reported a net profit of RM4.45 million for the third quarter ended Sept 30, 2018 compared with a net loss of RM19.82 million a year ago, driven by the property business segment.
In a filing with Bursa Malaysia, the group said its property business reported a pre-tax profit of RM8.43 million during the quarter. It was the only segment that reported a profit during the quarter.
Revenue for the quarter rose 79.20% to RM46.17 million from RM25.76 million a year ago, due mainly to contribution from the property business segment, which in turn was attributed to the higher percentage completion achieved by its Mizumi Residences project in Kepong.
For the nine-month period, the group's net profit plunged 90.34% to RM2.66 million from RM27.56 million a year ago while revenue jumped 86.36% to RM120.22 million from RM64.51 million.
Moving forward, Tadmax said the final quarter of the financial year ending Dec 31, 2018 will see contribution from the continued progress and performance of Mizumi Residences, which has already been 80% taken up.
However, the group said the energy business will not contribute to its near-term profitability as it would take about four years before commercial operation begins. Submission of the final technical and commercial proposal was made to the Energy Commission on July 31, 2018.
Recall that the company had entered into a heads of agreement on Sept 14, 2018 with Selangor government-linked Worldwide Holdings Bhd and Korea Electric Power Corp, which is expected to augur well for the group's power plant project in Pulau Indah.
As for the industrial supplies business, the group said the anticipated reduced activity in the construction market will be a challenge for the segment's revenue growth potential for the rest of 2018 and next year.
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PETALING JAYA: The new taxes proposed in Budget 2019, such as tax on imported services, real property gains tax (RPGT) and departure levy, are seen to contribute insignificantly to the government's revenue, according to Malaysian Rating Corp Bhd (MARC).
The new revenue-generating measures were meant to buffer government coffers against the drop in income following the abolishment of the goods and services tax.
The rating agency said in a report that it believes the new tax measures are not too robust and will not have an adverse impact on private consumption and business spending.
“Having said that, their contribution to overall revenue will not be too significant. This is reflected in the projected tax revenue growth of only 0.8% in 2019, which is well below the annual pace recorded between 2010 and 2018 (6% on a compound annual growth rate basis),” it said.
The overall revenue projection for 2019, however, is boosted by a one-off special dividend by Petroliam Nasional Bhd (Petronas) of RM30 billion, it added.
As contributions from the new taxes will take time to fully materialise, MARC said it expects the government to temporarily rely on oil-related income especially at a time when crude oil prices are relatively high.
Moving forward, it expects the government to continue seeking other avenues to broaden its revenue base.
Meanwhile, MARC said the notable increase in budget deficit projections is in line with its estimates of 3.5% to 3.8% for 2018 and 3.4% in 2019.
It opined that the deficit target of 3% of gross domestic product (GDP) is achievable by 2020 if average crude oil prices remain above US$60 per barrel and real GDP growth remains on its trajectory of 4.5%–5.5% in the next two years.
However, in the longer term, MARC said, the budget deficit trajectory will hinge on the continuing prudent management of operating expenditure (opex) and additional sustainable income streams that the government could introduce.
According to the Ministry of Finance's Medium-Term Fiscal Framework, government revenue will continue to surpass opex, leaving an average positive balance of roughly RM4.3 billion a year.
“Hence, the budget deficit is anticipated to trend down to 2.8% in 2021. This target looks realistic in our view,” MARC added.
Apart from that, MARC said it expects that Malaysia's medium-term financial liabilities will also hinge on the government's decision to fulfill its election pledge to abolish tolls.
Meanwhile, other measures in Budget 2019, such as those for the capital market, will further assist funding needs and are positive for the overall economy. These include double tax deduction incentives for additional expenditure incurred on the issuance of sukuk under the principles of Ijarah and Wakalah, as well as that incurred on the issuance of retail bonds and sukuk which have been extended for three years.
Overall, MARC opined that Budget 2019 broadly meets the competing needs of fiscal consolidation while attempting to address the aspirations of the people.
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PETALING JAYA: While Budget 2019, the first under the Pakatan Harapan government, has delivered a clearer policy direction that reinforces foreign investors' confidence, the higher fiscal deficit is a threat to Malaysia's sovereign credit ratings, say analysts.
Inter-Pacific Securities Sdn Bhd head of research Pong Teng Siew told SunBiz that the rating agencies are always “very mindful” of the deficit position, when Malaysia is grappling with big financial constraints with expenses growing rapidly than revenue expansion.
“Over the past 10 years, expenses have grown 9.4% per annum, which is about three times the 3.4% revenue growth.”
Sunway University Business School's Professor of Economics Dr Yeah Kim Leng said the the immediate concern is that high fiscal deficit may have negative implications on the market.
“The government is adopting a 'soft approach' in fiscal consolidation, some investors may react negatively to it.”
Malaysia's fiscal deficit is estimated to rise to 3.7% this year, significantly higher than the initial estimate of 2.8% due to the previously unbudgeted items such as RM1 billion interest servicing cost for 1Malaysia Development (1MDB) debts and RM3.9 billion goods and services tax (GST) refunds, among others. However, a gradual reduction could be seen at 3.4%, 3% and 2.8% for 2019, 2020 and 2021, respectively.
Yeah said though high fiscal deficit is a negative, it is likely to be offset by sustained economic growth of close to 5% in 2019 as well as fiscal management to reduce the debt level.
Saying that deficit is just one metric in determining a country's credit profile, he noted that the enhancement of spending efficiency, reduction of consumption and leakages will add to the growth momentum.
UOB Bank senior economist Julia Goh sees high fiscal deficit targets as a temporary diversion and does not steer away from the path of fiscal consolidation.
“As for Malaysia's sovereign ratings risks, we view the risks to be quite balanced. Positive ratings factors including efforts to restore public finances, improve transparency and governance standards. However negative factors are the higher headline fiscal trajectory, execution risks and revenue uncertainties.”
Pong believes foreign investors are convinced by the changes and reforms that the government has undertaken to address the weaknesses.
“I think the effort to reduce fiscal deficit will be well received by foreign investors, particularly when more investors are moving out from China to the Southeast Asian markets, including Malaysia due to trade war tensions.”
Calling it “unusual circumstances”, Pong said the RM30 billion special dividend from Petroliam Nasional Bhd (Petronas) should not jeopardise the oil major's expansion plans, especially exploration projects.
Yeah believes the special dividend from Petronas is premised on high oil price without posing any risk to it, but it shows that the government is still dependent on oil revenue. Having said that, the positive part is more innovative measures have been introduced to enhance the government coffers albeit raising a small amount of money.
Meanwhile, Moody's Investors Service's vice-president/senior analyst of sovereign risk group Anushka Shah said new tax revenues and spending cuts may place the country back on the path of fiscal consolidation over the medium term, and improved transparency and a focus on inclusive growth will be credit positive if sustained over time.
“However, in the near term, wider deficits and a heightened reliance on volatile oil-related revenues, including through Petronas dividends, will weaken the fiscal profile.”
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KUALA LUMPUR: Bursa Malaysia Bhd achieved a higher profit after tax and minority interest (PATAMI) of RM172.2 million for the nine-month financial period ended Sept 30, 2018 (9M2018), an increase of 2.6 per cent from RM167.8 million reported in the same period a year ago. The growth in PATAMI was primarily due to higher operating […]