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Lower dividend from Petronas not a concern

PETALING JAYA: An expected lower dividend payout by Petroliam Nasional Bhd to the government next year from the RM54 billion this year is not a cause of concern for economists.

“A return to normal levels of dividend contribution from Petronas is not expected to be an issue, as the special dividend payout of RM30 billion (for 2019) was meant to offset a one-off RM37 billion Goods and Services Tax and income tax refunds,” TA Securities head of research Kaladher Govindhan told theSun.

For the first half of 2019, the Malaysian state-owned oil company reported a dated Brent crude price of US$66.02 per barrel (pb), a 6.4% drop from the realised price of US$70.56 pb reported for 2018.

In the previous budget, the government forecast an average oil price of US$70 per barrel (pb) and according to market consensus, for every dollar difference in the realised oil price will translate into a RM300 million difference to the government’s budget.

Kaladher said even if the Brent crude price were to drop to US$63 pb, this would translate into a shortfall of RM2.1 billion, which is not a big impact.

His view is shared by Sunway University Business School Professor of Economics Dr Yeah Kim Leng.

Yeah explained that the special dividend was an one-off item and the government is not expected to further burden Petronas with another special dividend as it would interfere with the oil major’s capital expenditure, which it requires to sustain growth.

“However, in the event of a sharper-than-expected slowdown in the global economy, we do not rule out the possibility of a dividend from Petronas to assist the government to pump prime the Malaysian economy,” said Yeah.

World Bank president David Malpass has said that the global economy is poised to decelerate more than previously estimated, with the pile of negative-yielding debt indicating growth will be slower in the future.

Yeah foresees Brent crude to trade within the US$65-70 pb range for the year and is hopeful that it would provide a sufficient revenue for Budget 2020.

For the upcoming budget, he stressed the importance for the government to deliver improved fiscal deficit numbers to prove Malaysia’s commitment to tackle the deficit.

“If there is a shortfall in the budget, the gap could be addressed by other government-linked companies or through the selling of government assets, which will not affect Malaysia’s long-term fiscal sustainability,” said Yeah.


Lower dividend from Petronas not a concern

PETALING JAYA: An expected lower dividend payout by Petroliam Nasional Bhd to the government next year from the RM54 billion this year is not a cause of concern for economists.

“A return to normal levels of dividend contribution from Petronas is not expected to be an issue, as the special dividend payout of RM30 billion (for 2019) was meant to offset a one-off RM37 billion Goods and Services Tax and income tax refunds,” TA Securities head of research Kaladher Govindhan told theSun.

For the first half of 2019, the Malaysian state-owned oil company reported a dated Brent crude price of US$66.02 per barrel (pb), a 6.4% drop from the realised price of US$70.56 pb reported for 2018.

In the previous budget, the government forecast an average oil price of US$70 per barrel (pb) and according to market consensus, for every dollar difference in the realised oil price will translate into a RM300 million difference to the government’s budget.

Kaladher said even if the Brent crude price were to drop to US$63 pb, this would translate into a shortfall of RM2.1 billion, which is not a big impact.

His view is shared by Sunway University Business School Professor of Economics Dr Yeah Kim Leng.

Yeah explained that the special dividend was an one-off item and the government is not expected to further burden Petronas with another special dividend as it would interfere with the oil major’s capital expenditure, which it requires to sustain growth.

“However, in the event of a sharper-than-expected slowdown in the global economy, we do not rule out the possibility of a dividend from Petronas to assist the government to pump prime the Malaysian economy,” said Yeah.

World Bank president David Malpass has said that the global economy is poised to decelerate more than previously estimated, with the pile of negative-yielding debt indicating growth will be slower in the future.

Yeah foresees Brent crude to trade within the US$65-70 pb range for the year and is hopeful that it would provide a sufficient revenue for Budget 2020.

For the upcoming budget, he stressed the importance for the government to deliver improved fiscal deficit numbers to prove Malaysia’s commitment to tackle the deficit.

“If there is a shortfall in the budget, the gap could be addressed by other government-linked companies or through the selling of government assets, which will not affect Malaysia’s long-term fiscal sustainability,” said Yeah.


Lower dividend from Petronas not a concern

PETALING JAYA: An expected lower dividend payout by Petroliam Nasional Bhd to the government next year from the RM54 billion this year is not a cause of concern for economists.

“A return to normal levels of dividend contribution from Petronas is not expected to be an issue, as the special dividend payout of RM30 billion (for 2019) was meant to offset a one-off RM37 billion Goods and Services Tax and income tax refunds,” TA Securities head of research Kaladher Govindhan told theSun.

For the first half of 2019, the Malaysian state-owned oil company reported a dated Brent crude price of US$66.02 per barrel (pb), a 6.4% drop from the realised price of US$70.56 pb reported for 2018.

In the previous budget, the government forecast an average oil price of US$70 per barrel (pb) and according to market consensus, for every dollar difference in the realised oil price will translate into a RM300 million difference to the government’s budget.

Kaladher said even if the Brent crude price were to drop to US$63 pb, this would translate into a shortfall of RM2.1 billion, which is not a big impact.

His view is shared by Sunway University Business School Professor of Economics Dr Yeah Kim Leng.

Yeah explained that the special dividend was an one-off item and the government is not expected to further burden Petronas with another special dividend as it would interfere with the oil major’s capital expenditure, which it requires to sustain growth.

“However, in the event of a sharper-than-expected slowdown in the global economy, we do not rule out the possibility of a dividend from Petronas to assist the government to pump prime the Malaysian economy,” said Yeah.

World Bank president David Malpass has said that the global economy is poised to decelerate more than previously estimated, with the pile of negative-yielding debt indicating growth will be slower in the future.

Yeah foresees Brent crude to trade within the US$65-70 pb range for the year and is hopeful that it would provide a sufficient revenue for Budget 2020.

For the upcoming budget, he stressed the importance for the government to deliver improved fiscal deficit numbers to prove Malaysia’s commitment to tackle the deficit.

“If there is a shortfall in the budget, the gap could be addressed by other government-linked companies or through the selling of government assets, which will not affect Malaysia’s long-term fiscal sustainability,” said Yeah.


Malaysian manufacturing to post modest growth in second half of 2019

PETALING JAYA: The manufacturing sector is expected to see modest growth in the second half of 2019 (2H19) amid economic uncertainty after survey data highlighted challenging manufacturing conditions in August.

The IHS Markit Malaysia Manufacturing Purchasing Managers’ Index (PMI) recorded 47.4 in August, a fractional decline from July’s 47.6, signalling tough demand conditions and rising cost pressures. Nevertheless, the outlook improved to the most optimistic for nearly six years, encouraging firms to expand their workforces for the first time in three months.

TA Securities chief economist Shazma Juliana Abu Bakar opined that the PMI will not surpass the 50-point threshold this year, given the uncertain demand from the external side.

“The survey indicated slight optimism among respondents but if you look at the uncertain economy, I don’t think it will remain robust in 2H19. GDP is going to be around 4.3-4.6% in 2H19 so we expect a bumpy road ahead. As for manufacturing, it (growth) is going to be modest in 2H19,” she told SunBiz.

“As long as the trade war between China and US is not solved, we still continue to see rising downside risks especially from the external side. But it will be buffered from the domestic side.”

She added that the government will come up with measures to overcome further slowdown in the Malaysian economy during Budget 2020.

“We don’t rule out the possibility of another rate cut in 2H19. We’re worried about the economic conditions, but we don’t think it will be a recession. We don’t think it will come to that level (recession) so soon,” said Shazma.

Bank Negara Malaysia is expected to hold its Monetary Policy Committee meeting next Thursday.


GPP Resources gets Bursa’ nod for LEAP Market listing

PETALING JAYA: GPP Resources Bhd has received approval from Bursa Malaysia for its listing on the LEAP Market.

GPP is involved in businesses that are related to the use of biomass to produce renewable energy and oil palm trunk (OPT) products.

According to its executive chairman Tan Tiam Aik, the proposed listing involves an excluded issuance of 15.60 million new shares to selected sophisticated investors, representing 10.06% of the enlarged share capital at an issue price of 28 sen per share.

“We expect to raise gross proceeds of approximately RM4.37 million via an excluded issue to selected sophisticated investors from the LEAP listing,” he said in a press release today.

Based on the enlarged share capital of 155.12 million shares, GPP is expected to have a market capitalisation of RM43.43 million upon listing.

GPP said it has allocated RM1 million (22.89%) from the gross proceeds raised on capital expenditure, to purchase new machineries and equipment to cater for the group’s current and future operations of oil palm trunk (OPT) products business.

Some RM1.32 million (30.17%) will be utilised as working capital for marketing and promotional activities as well as to finance the group’s day-to-day operations; RM500,000 (11.45%) for research and development, while the remaining RM1.55 million (35.49%) to defray listing expenses.

Tan elaborated that the group’s subsidiary Green Energy Resources (M) Sdn Bhd will develop biogas plants which use various types of biomass such as palm oil mill effluent, synthetic gas, food waste and animal manure as feedstock to produce renewable energy.

“The group will continue to leverage on the growth in the palm oil industry to continue to grow its renewable energy and OPT products segments, which uses organic waste produced from the palm oil industry to serve as feedstock and raw materials for its business,” he added.

TA Securities Holdings Bhd is the approved adviser, continuing adviser and placement agent for the listing, while Qwantum Capital Sdn Bhd is the financial adviser.


GPP Resources to raise RM4.37m from LEAP Market listing

PETALING JAYA: GPP Resources Bhd is looking to raise RM4.37 million from its listing on the Leading Entrepreneur Accelerator Platform (LEAP) Market of Bursa Malaysia Securities Bhd next month.

GPP is involved in businesses that are related to the use of biomass to produce renewable energy and oil palm trunk (OPT) products.

The listing involves an excluded issuance of 15.6 million new shares to selected sophisticated investors, which represents 10.06% of the enlarged share capital, at an issue price of 28 sen per share.

Based on the enlarged share capital of 155.12 million shares, it is expected to have a market capitalisation of RM43.43 million upon listing.

Of the proceeds raised, RM1 million (22.89%) will be used as capital expenditure to purchase new machineries and equipment to cater for the group’s current and future operations of OPT products business; RM1.32 million (30.17%) as working capital for marketing and promotional activities as well as to finance the day-to-day operations; and RM500,000 (11.45%) for research and development.

GPP executive chairman Tan Tiam Aik said in a statement that the acquisition of various machineries and equipment will support the group’s effort to increase automation for its OPT products segment and its business expansion.

“These machineries and equipment are expected to increase automation, improve production efficiency and gradually increase our annual production capacity (for OPT products segment) from 20,100 m3 to 30,000m3,” he added.

Meanwhile, GPP, via its subsidiary Green Energy Resources (M) Sdn Bhd will develop biogas plants which use various types of biomass such as palm oil mill effluent, synthetic gas, food waste and animal manure as feedstock to produce renewable energy.

“Such development enables us to offer a wider range of products to our customers as well as to tap into a wider market, thus allowing us to further grow our business and expand our revenue stream,” said Tan.

TA Securities Holdings Bhd is the approved adviser, continuing adviser and placement agent for the listing, while Qwantum Capital Sdn Bhd is the financial adviser.


MCOM shares soar 10.71% on Leap Market debut

KUALA LUMPUR: LEAP Market debutant, MCOM Holdings Bhd, saw its share price surged 10.71% or three sen to 31 sen, at the opening this morning.

At 10.30 am, the share price stood at 31 sen, with 30,500 changing hands.

In a statement today, the digital marketing solutions provider said it planned to penetrate the Cambodian market and increase the automation level for its mobile advertising platform, following the listing exercise.

CEO Ho Kim Hun said the company had set up the data centre and network operating centre in Phnom Penh, Cambodia in June 2018.

“We started offering Internet services in Cambodia in 2018, which will complement our existing digital marketing solutions.

“We believe this plan will not only increase our revenue stream, but also contribute to growth of the Internet infrastructure in Cambodia,“ he said.

On plans to increase the automation level of its mobile advertising platform, Ho said with the upgrade of the mobile advertising platform underway, he believed it would enhance the features of MCOM’s mobile advertising platform towards being fully automated, which subsequently allows for a fully automated interface between advertisers and publishers.

“Currently, our mobile advertising platform only allows customers to view settlement reports. To upload or modify new digital marketing campaigns, our customers need to send emails to our marketing personnel,“ he added.

To recap, MCOM was awarded a 30-year Internet service provider (ISP) licence and frequency licence by the Telecommunication Regulator of Cambodia in 2016.

It had leveraged on a local fibre optic cable provider’s infrastructure in Cambodia to roll out wired and wireless Internet services.

With these Internet service infrastructures, MCOM will be able to localise its digital marketing solutions to meet consumer needs in Cambodia through the analysis of Internet and mobile usage patterns in the country.

The Internet penetration rate in Cambodia was 34% in 2017 and the government aims to improve this to 70% by 2020.

Under the listing exercise, MCOM raised RM5.28 million via the placement of 18,856,000 shares in MCOM at 28 sen per share to sophisticated investors.

The company plans to utilise about RM2.90 million or 54.9% raised from the placement as capital expenditure to set up essential facilities to offer wired and wireless Internet services in Cambodia.

It will also utilise RM888,000 or 16.7% from the proceeds to increase the automation level in the company’s mobile advertising platform, as well as enhance its mobile advertising solution infrastructure.

TA Securities Holdings Bhd is the approved adviser, placement agent and continuing adviser for the placement and the LEAP Market listing exercise.

As a Malaysian Technology Development Corporation investee company, MCOM aims to be the leading digital marketing solutions provider, specialising in the mobile advertising platform and mobile payment solutions.


MCOM’s share rises 10.71pc on LEAP Market debut

KUALA LUMPUR, July 3 ― LEAP Market debutant, MCOM Holdings Bhd, saw its share price surged 10.71 per cent or three sen to 31 sen, at the opening this morning. At 10.30am, the share price stood at 31 sen, with 30,500 changing hands. In a statement…


TA Enterprise: Outlook remains challenging

KUALA LUMPUR: The outlook for TA Enterprise Bhd’s financial services business remains challenging this year, with foreign funds in selling mode and local institutions taking a wait-and-see approach.

Managing director and CEO Datin Alicia Tiah said local institutions are not ready to commit due to various factors including the change of government last year and external factors such as Brexit and the US-China trade tensions.

“They want to wait and see whether the market will find its bottom. So for financial services, definitely it is challenging but having said that, there will always be opportunities. If you’re a good fund manager, you can make use of this opportunity to cherry pick your stocks because there are still great companies in Malaysia that are doing well, especially export-oriented companies and I would say that when there is a crisis, there will always be opportunities. So it is important to be able to seize the opportunity at the right time,” she told reporters at its AGM today.

She said investors have the money but lack the confidence and will only commit if they are comfortable with the investments they are in. She noted that some of the unit trusts that the company is promoting have seen decent take-up rates.

TA Securities Holdings Bhd senior vice-president of research Kaladher Govindan said that the FBM KLCI is currently quite lethargic, due to the US-China trade tensions and weak corporate earnings within the domestic market.

He said the research house is expecting a contraction in corporate earnings this year, in line with the consensus.

“Next year, there will be growth. It’s not going to be phenomenal but it is going to be stronger, a high single-digit growth mainly coming from a low base factor. I’m looking at 9.2% earnings growth next year for KLCI’s 30 stocks from a contraction of 3.6% this year,” he added.

He noted that Malaysia’s valuations are on the high side, with price-to-earnings ratios at about 16.1 times currently, compared with the region’s average of about 14.7 times.

“If foreign investors don’t come back in a big way, market will remain where it is currently. If things remain status quo, I’m looking at 1,700 points by year-end,” he said.

Kaladher said corporate earnings would improve eventually, driven by government projects, especially some of the big ticket items which were postponed earlier and are likely to be launched next year, providing some positive news flow.

“Some of these projects are already there but the awards should kick in next year. That should pave the way for the market to rebound,” he added.

He said the market is looking at the tail-end of the downside now and may see a bottom this year, and rebound next year, in time for the government to launch those projects.

As for the ringgit, TA Securities is expecting an average of 4.10 against the US dollar this year.


‘White Knight’ Delta buys stake in Korean Air parent, dampens activist threat

SEOUL/CHICAGO: Delta Air Lines bought a small stake in Korean Air Lines Co’s parent company and said it wants to increase it to 10%, giving a boost to the management of South Korea’s top carrier that seeks to thwart a local activist fund’s challenge.

Shares of the parent, Hanjin Kal Corp, tumbled 15 percent on Friday, as Delta’s move dashed investor hopes of a battle to control the family-run group that had driven up shares since the death of patriarch Cho Yang-ho in April.

Korean Air, which has a joint venture with Delta since last year, said on Friday it believes Delta’s 4.3 percent stake buy intends to ensure the ‘stable management” of the company and support for its leadership.

Should the No. 2 U.S. carrier raise its stake to 10% in Hanjin Kal, the airline’s founding family and its allies will have a total stake of 39%, versus the 16% stake held by the activist fund, Korea Corporate Governance Improvement (KCGI).

“Delta played a role as a white knight for Hanjin,” said Choi Nam-gon, an analyst at Yuanta Securities.

“Now it would be impossible for KCGI to take control of the group. The stake buy removes the chance of a management battle at Hanjin Group,” he said.

KCGI said in a statement that if Delta’s investment decision intends to “simply defend the management rights of the controlling family members, this would go against the honour and principles that it has built so far.”

It proposed Delta, backed by U.S. investor Warren Buffett, work together to eliminate inefficiencies and improve management transparency at the Hanjin Group.

Korean Air shares fell 2.6% and its budget affiliate Jin Air Co Ltd rose 0.2% in the wider market that was down 0.3%.

KOREAN AIR SUCCESSOR

Korean Air has been plagued in recent years by a series of scandals involving its founding family members.

In April, the tycoon suddenly died at age 70, just weeks after shareholders decided to end his 27-year tenure on the airline’s board, in a show of growing shareholder activism in Asia’s fourth-biggest economy that has long been dominated by family-owned conglomerates.

The group subsequently appointed his only son Walter Cho, 43, as CEO and chairman, but the company has yet to inform regulators about a definitive succession plan. He and his two sisters have small stakes in Hanjin Kal, in which the late Cho has a 17.8% stake.

Against that backdrop, KCGI raised its stake to nearly 16%, fueling speculation about an impending ownership battle at the conglomerate.

Delta Chief Executive Ed Bastian said earlier this month he had “a lot of confidence” in Walter Cho, noting their friendship had gone back 20 years.

“The investment demonstrates Delta’s commitment to the success of its joint venture with Korean Air,” Delta said in a statement. The venture includes 290 U.S. destinations and over 80 in Asia.

The U.S. airline did not disclose how much it paid for the 4.3% stake. It also did not say who it bought the stake from or when it may raise it to 10 percent.

Atlanta-based Delta has been growing internationally both through joint ventures – which allow airlines to coordinate fares and schedules while building a presence in new markets – and direct equity investments, which help airlines align their respective strategies.

Delta also owns stakes in Grupo Aeromexico, Air France KLM, China Eastern, Brazil’s Gol and Virgin Atlantic, and has been negotiating a stake in Alitalia.

Shares in Delta closed down 0.7% at $55.97 in New York on Thursday.