Company Notes 2017.09.29

Kein Hing International Q1 FY2018 Results

…stronger customer demand for parts/metal components used in TV, fridge, printer and automotive industries.

…the impact from the overhead incurred by the new factory located in Hai Phong, Vietnam as it has yet to achieve the optimal production and sales, higher depreciation charge from new machines invested and the escalating labour costs as a consequence of constraints in labour supply in Malaysia Operation coupled with the wage inflation experienced in Vietnam Operation.


Poh Huat Resources Q3 FY2017 Results

…shipment to the US continued to gain strength following the successful launch of several ranges of panel-based bedroom sets in the previous quarters.

While orders from our North American importers remained strong, we noted a shift in the product mix to the middle and affordable segments of the market.

Our operations in Malaysia incurred higher raw material costs, particularly for boards, solid wood, hardware and finishing materials which have increased markedly over the last few months.

Competition in the market place has also turned keener as consumers demand for trendier and more competitively priced items. We have experienced downward pricing pressure on our products due to competition from other manufacturers. Furniture also has to cater for changing demographics particularly for millennials and younger families who have lower spending power and whom are more comfortable with online purchases and ready-to-assemble products. We have aligned ourselves to respond to these changes by working closely with our customers to develop trendier, market oriented products for the marketplace.


Bison Consolidated Q3 FY2017 Results

Operating expenses were higher in tandem with the increased business volume and the continuous outlets expansion by Bison which also entailed the recruitment of more talents.

Bison is on course in its new stores opening and during the nine-months period under review, there is a net increase of 44 outlets. Bison ended the third quarter with 338 outlets verses 276 as at 31 July 2016.


Comintel Q2 FY2018 Results

For SIMS segment, we will continue to re-organise and to mitigate losses through cost cutting amidst the softer demand experienced by SIMS segment over the past years.

For our renewable green energy project in Kuang, we have passed Initial Operation Date (IOD) with TNB. We expect to complete the Commencement Operation Date (COD) with SEDA in October 2017. Barring any unforseen circumstances, we are expecting the FiTCD (Fit-in-Tariff Commencement Date) to be in October or November 2017. We are hopeful with the commissioning of our advanced gasification green energy system at our Kuang plant, will open a new corridor for us to tap on quickly the vast potential of the demand for our green energy generation system in the region.


LKL International Q1 FY2018 Results

The Group’s venture into the distribution of medical devices in the current FY represents its strategic efforts to diversify its revenue stream within the healthcare sector to cater for evolving market requirements, and offer higher value products to enhance its product portfolios.


Superlon Q1 FY2018 Results

The lower profit before tax is mainly due to the decrease in total gross profit generated from lower volume of sales and higher cost of materials. The lower other income recorded and higher other operating expenses also contributed to decrease in net profit before tax.


VS Industry Q4 FY2017 Results

With the Group’s vertical integration capabilities, it has received substantially higher box-build orders from key customers, particularly during the second half of the financial year ended 31 July 2017. The trend of rising orders is expected to sustain going into the next financial year. To cope with the potential new orders from existing and new customers, the Group has added more production space by constructing a new factory cum warehouse.

On its operations in China, the Group’s Hong Kong-listed subsidiary, V.S. International Group Limited, has recently completed a Rights Issue raising proceeds of HKD105.8 million which shall be used to expand the operations in China and tap into its growing domestic sales.


A-Rank Q4 FY2017 Results

…due to a higher provision of income tax after the special export incentive brought forward had been fully utilised and there was an overprovision of deferred tax in the corresponding quarter last year.


George Kent Malaysia Q2 FY2018 Results

George Kent announced in September the securing of a tender to supply and deliver 650,000 water meters to the Water Supplies Department (“WSD”), Hong Kong. This is the second consecutive time the Group has been successful in the bid which was made under the Group’s subsidiary, George Kent International Pte. Ltd. George Kent will supply the DN15 Brass PSM-T water meter worth US$6.86 million (RM 28.72 million) to WSD within two years in 24 shipments.

To-date, George Kent is the only company that has successfully secured large water meter contracts consecutively from both Hong Kong and Singapore water authorities at the same time, which are renowned for their stringent standards in water meter evaluations


O&C Resources Q4 FY2017 Results

The Group has been facing challenges in its core business of manufacturing and marketing of condoms and baby products, in view of rising raw material prices and operational costs for the past few years. Taking cognizance of this, the Group has made efforts to improve our financial performance and position which include, among others, the Group’s acceptance of a construction contract which led to our Group’s diversification of business to include the construction business. At the same time of maintaining on the existing business undertakings, the Group has also expanded its initial foray in the construction business to include the property development business as well.


Kim Loong Resources Q2 FY2018 Results

As at 31 July 2017, the Group’s total planted area is 14,920 hectares. The age profile of mature area can be analyzed as follows: a) < 3 years (Immature) : 5%; b) 3 – 6 years (Young mature) : 13%; c) 7 – 15 year (Prime mature) : 28%; d) 16 – 20 years (Old mature) : 48%; e) > 20 years (Pre-replanting) : 6%

During the current YTD, the Group has carried out replanting of about 130 hectares.


Cypark Resources Q3 FY2017 Results

We plan to increase our investment in renewable energy projects and expect to have a bigger revenue contribution from the sales of green power. By year 2020, the Renewable Energy segment is expected to contribute more than
RM300 million of recurring revenue.

The launch of our country’s second bidding exercise for Large Scale Solar (LSS) by Suruhanjaya Tenaga in February 2017 has opened up more new opportunities for large, non-subsidised national RE scheme. Cypark currently has been given first right to undertake the turnkey EPCC, management & operation contract to develop 15MW (dc) solar plants by the winners of the first LSS tender.

We are also confident to secure more government contracts for landfill closures and new sanitary landfill projects. We believe that we have strong competitive advantage based on our solid track records of successful completion of 18
landfill closure projects covering total area of about 600 acres nationwide and our success in constructing and operating 1000 tpd sanitary landfill in Negeri Sembilan which is one of the country’s largest and most modern
facilities. We have also submitted many tenders and proposals worth more than RM2 billion and are optimistic that some of the tenders are at advance stage of negotiations which will be likely secured in 2017.

Perak Transit in transition to stronger growth path

“To develop a bus terminal is not easy as we must get approvals and land title from the state and federal authorities.” The land public transport commission often allows only one express bus terminal per council, according to Cheong. He noted that it was necessary to have one bus terminal as part of township development, for instance Kampar.

“We will concentrate on building more terminals instead of focusing on the express or stage buses and our petrol stations, as terminals are long-term assets with recurring income while the value of buses depreciates very quickly.”


Hai-O expects 1Q’s growth momentum to continue

The group plans to roll out new collections of shoes, bags, leatherwear, women’s accessories and eyewear under the “Infinence” brand name this year. The group has also allocated RM10 million for capital spending and has identified suitable shoplots and warehouses for further expansion in its East Malaysian distribution channels.

On overseas expansion, Hew said the group is exploring the Vietnamese market due to the large population there, though the decision to go in or not largely rests on whether the Vietnamese government approves direct-selling licence applications from foreign companies.

“We are discussing with our principal suppliers from China to work out trade settlements using alternative currencies such as renminbi,” he said, as some 40% of the group’s purchases are imports denominated in US dollar.


My EG’s GST monitoring launch set for end-2017

“However, it said all issues have been resolved. MyEG has so far installed 5,000 dongles in Klang Valley in F&B outlets and is targeting to install nationwide by year-end (our earlier target was June 2017).”

“We also expect the company to benefit from selling the compulsory foreign workers’ insurance to the employers. MyEG said it will ensure the welfare of foreign workers, by making sure their salaries are paid and there is no worker abuse by the employers.

“In the next one year, MyEG is targeting to place out 100,000 foreign workers. In our earnings forecast, we assume a more conservative average of 5,000 foreign workers monthly or 60,000 foreign workers annually.

“This would help MyEG generate an average annual revenue of RM60mil. We assume 50% net profit margin for the matching services (in line with the 50% net profit margin from existing foreign worker services) and an annual net profit of RM30mil.”


Asia File to spend RM30mil on foodware production

“We spent about a year to research the demand for disposable foodwares and found the domestic market to be strong. We have invested in the raw materials which we were able to purchase at a very good price. This will enable us to sell competitively and generate good profits.”

…the new products would be marketed under the ABBAWARE.

Lim said that while there was familiarity with the raw materials used in production, the sales and marketing for the products would be a new uncharted area to explore.

Hidden taxes, forex rules deter German business from Malaysia

Hidden taxes, which include non-deductible taxes on refurbishment, maintenance, legal services, and company vehicles, add to the overall corporate tax rate, said MGCC president Peter Lenhardt. “If you look at the cost of refurbishment, there is a tremendous impact on the bottom line of any business, so a lot of them don’t see any reason to spend on maintenance,” he told reporters at the launch of the AHK World Business Outlook 2017.

Lenhardt added that another economic risk which is not unique to Malaysia is the lack of qualified labour. He noted that there is a lack of industrial involvement in vocational training which creates a gap where the workforce is not fully trained to operate in high tech facilities.


Taxmen set their sights on digital economy

“Their profits are subject to corporate income tax as long as the operations are carried out [here]. In short there are no specific corporate rules for taxing the digital economy. The same treatment applies to both the digital and traditional economy. For foreign companies they would only fall within the ambit of Malaysia’s CIT if they have a taxable presence or a permanent establishment here, for example having personnel in Malaysia who are performing the services here.”

“The key determinant would be where the transfer of ownership of the goods take place. [If] it is in Malaysia and the value of the goods exceeds RM500,000 per year, then the foreign company is required to register [for GST] in Malaysia. [If] the goods are imported into Malaysia via air courier services, and [if] the value of the goods does not exceed RM500, then the goods are given relief from GST. Therefore where consignments are kept below RM500, Malaysians can buy goods from overseas which are not subject to GST, and if the goods exceed RM500, this would be collected by the courier service before or upon delivery.”


Taxing digital economy players a daunting task?

“For example, when you buy a product from a foreign e-commerce provider, you use your credit card and the money goes to an offshore bank account, and if the goods sent to Malaysia are not subject to customs duty at the point [of delivery], then the income that the foreign provider makes from providing the goods or services goes overseas, perhaps in [the] Cayman Islands or [the] Netherlands where they may have tax breaks. So that income leaves Malaysia and the foreign company providing the service is not present in Malaysia, so they are not subject to Malaysian income tax. When it comes to GST, there may be a supply of goods and services, but when you have hundreds of thousands of consumers [purchasing goods or services] through digital platforms, [it becomes difficult to track]. So how do you impose tax? [One possibility] is since most of the purchases are done through credit card, they may come up with a new mechanism where the credit card company collects tax due on the goods or services on behalf of the government.”


BNM to implement NSFR ‘no earlier than 2019’

“The NSFR, which complements the liquidity coverage ratio (LCR) that was phased in since 2015, looks for banks to have the liquidity to support their business in the longer horizon. It will help strengthen the liquidity management of the financial system.”

“In addition to that, we are aware of the level of competition in the market today which would encourage the banks to remain competitive with respect to their product offerings, as well as the pricing of their products. We don’t think it (NSFR) will be a factor that could change the pricing of the loans.”

Curated Insights 2017.09.24

Ferrari bets racetrack wins will lead to showroom sales

Ferrari’s financial success over the past 15 years has “been achieved on the back of Formula One,” the CEO said in March, adding that the company couldn’t afford many more losing seasons without suffering financially.

But there is little empirical evidence that winning races translates into increased sales. AllianceBernstein, a wealth manager, argues Ferrari doesn’t need Formula One. “There can’t be a soul on earth who doesn’t know that Ferrari makes fast red cars, with excellent technology and that it has a motor sport heritage,” AllianceBernstein wrote in a report last month, adding that Lamborghini, Porsche and other high-end brands have no trouble selling cars despite being absent from Formula One for many years.

While Ferrari doesn’t reveal its estimates for the financial and promotional benefits it derives from Formula One, Mercedes said that in 2016 it got the equivalent of $3 billion in advertising value from the team.

For years, the company limited its sales to no more than 7,000 cars annually to stoke demand. Now, Mr. Marchionne plans to raise that limit to 10,000 in the coming years, while also moving Ferrari into new areas such as home furnishings and technology products.


Liu Qiangdong, the ‘Jeff Bezos of China’, on making billions with JD.com

It was just three years ago that China overtook the US as the largest e-commerce market — but last year China’s total online retail transactions hit an estimated $750bn, nearly double the figure in the US. Most analysts predict China’s online retail market will more than double again by 2020, by which time Chinese online purchases are expected to exceed those of the US, UK, France, Germany and Japan combined.

The contradiction between Alibaba’s much larger market share and profits but smaller revenues is explained by the rivals’ different business models. Like Amazon, JD.com controls most of the supply chain and delivers goods from its own warehouses directly to customers, so it counts online sales as revenues. Alibaba, by contrast, is essentially an internet platform and payment system for other companies and individuals selling to consumers online and earns the bulk of its revenue from advertising.

“I was the first and only stall in that market to put price labels on everything and give official receipts; from day one I never sold any counterfeits and I soon had the best reputation,” he says. “A lot of rich people in China cannot sleep well because they did too many wrong things but I never made any dirty money ever so I can sleep very well.”

What’s the true TAM of search?

To truly appreciate the nature of information distribution, we need to think in a broader context and challenge some assumptions: what if “online advertising”, or even “advertising” is not the right way to measure the TAM (total addressable market) for the search engine business?

If we correctly define the role of search engines, we can see that what they are really designed to address is actually something much broader – “search cost”. Search cost is the biggest component of what economists label as “friction cost” in an economy and it can exist and be addressed in many different forms.

All of that excess rent is a form of marketing that brands and retailers pay to address “search cost”. In a purely online environment, the physical location is disintermediated and what companies would otherwise pay in excess rent in an offline setting would presumably get re-allocated in the form of Amazon commissions or Google keyword ads.

Actually, most of the time, new technological developments have a tendency to shrink the TAM as technology is usually deflationary (the search engine being an exception), so be careful when you see IR slides of tech companies where management takes an estimate of the market size today and declares that number as their company’s financial destiny – it most likely overstates the actual TAM.


Google Travel is worth $100 billion — even more than Priceline

Our estimate of $11.2 billion in Google travel revenue in 2016 would mean that travel accounted for 13 percent of Google’s total Google Segment revenue and 12 percent of the company total (includes the so-called other bets part of the business). Google’s total Google segment operating margin is in the low 30s, but the core AdWords business is likely much higher (meta would likely be in the 25 percent range).

Given a margin profile that is likely above Priceline and digital ad spend growing more than 20 percent per year, the value of the travel business would warrant a similar price-to-sales multiple as Priceline; off of 2016 results, Priceline trades at over 8x revenue. As mentioned earlier, using a 7x multiple on our estimated 2017 numbers for Google, the Google travel business could be worth as much as $100 billion or 15 percent of Google’s $650 billion market cap.

Online travel companies would like to diversify away from Google, but no other digital marketing tool offers the same commercial intent of a Google search.


Gaming sector primer

The gaming sector is the most attractive industry I see today due to: relative low price point and inelasticity; highly addictive products; cyclical defensive; ability for some to capture consumer surplus; consistent high margins and ROE. The downsides are: difficulty in developing new IP; high rate of reinvestment.

Imagine being able to sell $5 worth of coca cola to someone and $5000 worth to someone else, suddenly the need to build a massive horizontal distribution platform is terribly wasteful and your efforts are better spent capturing a smaller share of premium clients, which is made possible by the internet and ubiquitous mobile phones.

Today the gaming sector in China is dominated by mobile due to the ubiquitous nature of phones compared to the lack of platform penetration of console and to a lesser extent PC games. As a result, the two Chinese companies which dominate the gaming space, Tencent and Netease, which together control arond 80% market share, were able to leapfrog the traditional console/pc game market and focus largely on mobile and are in my opinion global leaders at the art of capturing consumer surpluses.


The death of (many) brands

Companies with a trusted brand could earn excess economic returns so long as the cost of building the brand costs less than the premium consumers were willing to pay for a product due to the brand. Because brands have historically be very durable (notice the global brands that were built in the 1950 are still dominate today), they created an economic moat that caused these companies to generate outstanding returns for shareholders.

Costco leverages their scale to identify high quality, good value products and deliver them to consumers. This process reduces the value of brands and allows Costco customers to confidently buy non-brand products or products with limited brand recognition. In this way, Costco has managed to earn excess economic returns, even while selling the products in their stores at close to cost.

Now, however, the era of search cost brands is coming to an end. The moats are being breached. Over the long term, we do not believe that these types of brands will provide a significant competitive advantage to their owners and the companies will be forced to compete directly on quality and value instead of earning a return for selling reduced search costs.


China’s electric car push lures global auto giants, despite risks

From high-speed trains to wind turbines, China has long prodded American, European and Japanese companies to hand over their know-how in exchange for access to its exciting new market. Then Chinese companies have used that knowledge and lavish government support to take on foreign rivals. China wants the big players to share their electric car knowledge, too. The foreign automakers face new Chinese regulations that put heavy legal pressure on them to transfer electric-car technology to their local partners.

The joint ventures alone may not make China a leader in electric cars. G.M., Volkswagen and other major automakers have made regular cars with Chinese partners for decades, and China had hoped its automakers would learn how to make their own worldbeating brands. Instead, Chinese automakers grew comfortable making Chevrolets and Volkswagens for local drivers. Only recently have foreign automakers begun exporting Chinese-made cars to buyers back home.

More broadly, global automakers feel that they must grow in a country that has become the world’s largest car market, one almost as big as the American and European markets combined.


Materialize.X is using machine learning to disrupt the $300B engineered wood industry

A lot of engineered wood is created using an adhesive called urea-formaldehyde, which has recently been labeled by the FDA as a toxic carcinogen…The startup has created a patented non-toxic adhesive to serve as an alternative to urea-formaldehyde. Materialize.X plans to license to chemical companies, or engineered-wood manufacturers so they can make the adhesive on site, the method for making this adhesive.

…created software that uses machine learning to take in all those variables and make slight changes to the manufacturing process that can greatly improve the quality of the final product. Examples of these changes are adjusting the amount of adhesive used or increasing the pressure in the bonding process depending on the variables listed above.


The new Texas gold rush: Buying sand for fracking

Texas energy producers have typically bought the millions of pounds of sand that each well requires from mines located far from their drilling fields. After oil prices collapsed in late 2014, though, cost-conscious drillers reconsidered their well designs and recipes for the slurries they blast underground to unleash fuel from shale formations. Many West Texas drillers discovered that they could replace sand they had been shipping from mines 1,300 miles away in Wisconsin with finer grades found in dunes nearby. Doing so eliminates rail costs that sometimes are equal to or more than the sand itself.

The prospect of tens of millions of tons of Permian sand coming to market could drive down sand prices that have been rising nationally, Mr. Handler said. Analysts say that prices rose to as much as $45 a ton earlier in the year, from as little as $15 a ton last year.

Hedge-fund manager Daniel Loeb is among those betting that sand stocks will fall further. In an April letter to his Third Point LLC investors, Mr. Loeb cited the “important shift” from special sand mined in the Midwest to abundant sand within drilling basins, including West Texas.

Superpower India to replace China as growth engine

The number of people aged 65 and over in Asia will climb from 365 million today to more than half a billion in 2027, accounting for 60 percent of that age group globally by 2030, Deloitte said in a report Monday. In contrast, India will drive the third great wave of Asia’s growth – following Japan and China — with a potential workforce set to climb from 885 million to 1.08 billion people in the next 20 years and hold above that for half a century.

“India will account for more than half of the increase in Asia’s workforce in the coming decade, but this isn’t just a story of more workers: these new workers will be much better trained and educated than the existing Indian workforce,” said Anis Chakravarty, economist at Deloitte India. “There will be rising economic potential coming alongside that, thanks to an increased share of women in the workforce, as well as an increased ability and interest in working for longer. The consequences for businesses are huge.”


Why machine learning funds fail

The complexities involved in developing a true investment strategy are overwhelming. Even if the firm provides you with shared services in those areas, you are like a worker at a BMW factory who has been asked to build the entire car alone, by using all the workshops around you. It takes almost as much effort to produce one true investment strategy as to produce a hundred. Every successful quantitative firm I am aware of applies the meta-strategy paradigm. Your firm must set up a research factory where tasks of the assembly line are clearly divided into subtasks, where quality is independently measured and monitored for each subtask, where the role of each quant is to specialize in a particular subtask, to become the best there is at it, while having a holistic view of the entire process.


The case for & against cryptocurrencies (for those tired of all the noise)

The strongest cases for the existence of cryptocurrencies in my mind include: (1) allowing for a decentralized Internet in which value is accrued to infrastructure, protocols and applications that serve market needs; (2) allowing electronic trade across actors who may not know or trust each other without middlemen who take a heavy toll / tax on the transaction; (3) allowing for (the potential of) a more stable currency than one’s own government for citizens who may live under despotic or irresponsible regimes.

The simple case against cryptocurrencies includes three completely related factors: (1) powerful governments who won’t tolerate the loss of monetary control or illegal activities; (2) societal pressure to regulate cryptocurrency will increase as more people are duped, as more fraud is discovered, as more hacks occur and as more market participants collaborate to manipulate the value of the currencies themselves; (3) erosion of trust as first-time cryptocurrency participants get duped, lose money and develop skepticism for the asset.

There is a fascinating story in “The Ascent of Money” by Niall Ferguson in which Ferguson describes how the modern corporation emerged. About 400 years ago merchants from the Netherlands were sending ships to Asia in search of spices widely desired in Europe. More than 50% of all ships that sailed wouldn’t return so groups of people banded together and formed the Dutch East India Company to share the risks and the rewards of their conquests.

This is amongst the first examples of the modern corporation. The company brought back spices and reaped profits that went back into building more ships and sailing back to Asia. The company didn’t distribute the profits to individual shareholders who instead were issued the modern form of a share certificate for their ownership. Because they couldn’t monetize this ownership they started selling shares of their ownership to others, thus perhaps the first stock market and transaction dating back to the early 1600s.

No sooner did people start selling shares in these companies than market speculators started spreading false stories about merchant ships being sunk or about large spice conquests to drive up or down the price of these stocks through false information and manipulation. So oversight became necessary to establish trust in the value of these assets.


What Jamie Dimon got wrong about bitcoin and tulips

Mackay confused two distinct eras. He reports stories from around 1610 about high prices paid for individual bulbs. What he failed to realize is that people were not paying for single flowers, but for the entire breeding stock — or a significant portion of it — of popular new tulip varieties. People have continued to pay higher inflation-adjusted prices for new tulip and lily bulbs to this day.

A quarter century later, a futures market grew up around fractional interests in low-priced, ordinary tulip bulbs. In premodern Europe investment returns were very high, 20 percent or 30 percent per year on low risk investments, but laws and customs prevented anyone not in the merchant class from taking advantage.

Holland accidentally created a loophole by allowing contracts for fractional interests in tulip bulbs for the convenience of the industry. These were needed because the price of popular new bulbs was higher than even rich individuals could afford. In the early 1630s ordinary people discovered that these contracts could serve as money to support business and investment. These contracts then became “monetized,” as happens to all assets used as bases for monetary activity. That means their value decoupled from the use value of the underlying asset and became determined by demand for money services.

By 1637, contracts for fractional interests of low-priced tulip bulbs had risen to 20 times the price of the actual bulbs, reflecting the explosion of economic activity they stimulated. In February 1637, the market collapsed; six weeks later it was outlawed.


What Jamie Dimon is missing about Bitcoin

It’s no secret that Bitcoin and other digital currencies may dramatically fall in value at any time. How can an asset whose value jumps by 20 percent some days, and which no one can accurately value, plausibly not also suffer huge declines? But that’s a long way from Bitcoin being a worthless fraud.

Of course, fiat currencies like the dollar have the backing of a sovereign nation. Digital currencies are obviously far more speculative, have been around for only a few years, and don’t have a government’s underlying support. But almost all currencies today are conjured up from nothing — the euro didn’t even exist 20 years ago — and their value is largely dependent on trust.

His firm conjured up its own currency: Chase Ultimate Reward points, its credit card loyalty program. Millions of customers have accumulated billions of points, trusting in Chase’s promise that this currency can be converted into cash or used for travel and other delights. And they hope that Chase won’t unilaterally choose to devalue them…

But new use cases for digital currencies are just starting to take shape. They are now being used to create value in the way that Silicon Valley has traditionally done so: regulatory arbitrage. Ride-hailing got its start avoiding onerous taxi medallion costs; Airbnb avoided hotel taxes and regulations; and YouTube played fast and loose with copyright rules.

Company Notes 2017.09.22

Scientex Q4 FY2017 Results

…the startup cost for its biaxially oriented polypropylene (“BOPP”) and cast polypropylene (“CPP”) plants as well as lower product margins due to penetrative pricing.

The new stretch film manufacturing facility in Phoenix, Arizona in the United States is expected to have a commercial rollout by first quarter of calendar year 2018. It forms part of the pivotal and strategic move by the Group to be close to its customers and its sources of raw materials as well as access to other new customers in the region.

With the commissioning of its BOPP and CPP plants as well as the increased capacity of its Ipoh plants, the Group’s strategy is to focus on volume based converter market within Southeast Asia and Asia Pacific regions by developing sales networks with new distributors and wholesalers. The Group is confident that by optimising the production output, the operation costs will be better managed, hence improving its operational margins.


Adventa Q3 FY2017 Results

The revenue generation is still insignificant in comparison with the other businesses but the quantum of improvement in revenue (increased by 1,023%) is encouraging. The long period of regulatory approvals in the different countries weigh down revenue growth. The number of treatments is expected to increase sharply upon completion of the required approvals.


Haio Enterprise Q1 FY2018 Results

The overwhelming response from its newly launched fashion wear –Hijabs during the quarter had added on to the revenue. Wider usage of social media and marketing digital platform efficiently have facilitated the leaders to reach out to younger group of entrepreneurs. Hence, the new members recruitment which increased by more than 40% as compared to preceding year’s corresponding quarter had also contributed higher sales for the division.

The MLM division will continue to collaborate with a well known local designer to roll out more fashion wear and related products, and other trendy lifestyle range of products.

Elsoft sees slower earnings growth for 2017

The slowdown in demand was due to lower orders from smart devices as there is no new development in terms of technical specifications in the light emitting diode (LED) flash used in 2016 versus 2017.

“However, we are in a niche market; we design the equipment specifically made for our customers. We are a niche player. Our margin is higher, so we have to work harder in the second half.”

Elsoft is also developing a solution for depth sensing or 3D sensing, an infrared sensing and emitter for the smart devices and automotive segments. It also plans to add value to its automated test equipment (ATE) products by tying up with a mechanical design company.

“We are good at electronics and software but lagging in mechanical design. The ATE segment features two areas, the tester and the machine. Even though we are doing both now, I feel our machine is not good enough. If we can sell a product that is good in every part, then it’s excellent. We want to offer better solution for our customers. We want the ‘okay’ segment to be better.”


Warisan TC’s travel arm goes online

“The good thing is that we have been in the [tourism] business for the past 55 years, and we are not a small player in Malaysia when it comes to corporate travels. So we want to [leverage on] our existing customer base. Imagine a client with 3,000 employees — we want to approach their staff to use our services when it comes to leisure travel as well.”

“We are different from other players in the sense that our bundled products have more value as compared to buying them individually. So consumers can get more value when they buy everything together and they only have to deal with Mayflower Online for peace of mind on their whole trip — that is our goal. We are not looking to just be a [pure] marketplace where we have to rely on agents to come in and contribute the products. We offer our own products and we take ownership of them to take care of the customers. We’re not just a platform where we are not sure who the suppliers are or how their services are like.”


E&O to sell five more non-core assets

The five non-core assets, E&O managing director Kok Tuck Cheong said, are the Straits Quay Mall, properties in Gertak Sanggul, Kemensah Heights, The Peak, and the retail space of its 80%-tenanted St Mary project. According to E&O’s latest annual report, the aforementioned properties’ net book values totalled approximately RM546 million as at March 31, 2017.

“Keeping a mall is not necessarily our core business,” Kok said, giving confirmation of rumours of the group’s plan to dispose of its seven-year-old, loss-making Straits Quay Mall in Penang.


Columbia Asia: Our business model can keep healthcare costs lower

“When you build big hospitals, you end up incurring a lot of structural costs, maintenance costs, utility bills, manpower costs and so on. All that is a cost that has to be transferred somewhere. The question is where does it get transferred to? The patients’ bills,” said Tan, adding that patients’ claims from insurers would then inflate costs.

Tan said another way to control costs is in cutting down the average length of stay of a patient, which he believes Columbia Asia has achieved with better and more efficient care of patients, citing increased technological use as a main driver of this efficiency. “There’s a tendency [for hospitals] to have a key performance indicator that talks about filling up its occupancy rate. So, if you don’t have enough patients walking in, you tend to keep current patients longer, when, in actual fact, they should be at home with their families. From a hospital’s perspective, when you keep them longer, you incur extra costs.”

“[Inflation] is not [necessarily] about whether your panadol is 10 sen or 20 sen, it’s about how you manage your patients effectively and efficiently. And, we like to believe that we [show a good example in providing] effective and efficient healthcare,” said Tan.

Govt incentives needed to protect margins — Rehda

“Our margins are becoming smaller and smaller. I was talking about 17% to 18% last year. Now, a lot of developers are talking below 15% or 16% [gross profit margin]. Margins are being sqeezed.”

For example, steel prices in Malaysia and Thailand are similar, at about RM1,700 per tonne. But no thanks to the levy imposed by the government, Malaysian contractors are paying up to RM2,800 per tonne.


BNM hits out at rigid interpretation of economic indicators

Citing Moody’s External Vulnerability Indicator — a measure of short-term external debt by remaining maturity over reserves — which was used in the article, BNM said: “These short-term external debts are not a material risk.

“Most of it is accounted [for] by the banking sector, reflecting banks’ operations. Correspondingly, banks have placements abroad to mitigate currency and maturity mismatches,” the bank added.

BNM said short-term debt included inter-company loans which the bank said are subject to “flexible and concessionary terms”, as well as trade credits which “are usually backed by export earnings, which do not entail a claim on international reserves”.


GST collection could exceed RM42b target, says customs director-general

“For example, one of the requirements for GST is service providers need to have a place of supply, or a permanent establishment in Malaysia, and if their place of supply is elsewhere other than Malaysia, it becomes a bit difficult to tax, so we are looking into this. To tell you the truth nobody really knows how big the monster is out there, once we amend the law and look at the details we will know, it runs into several billions. We will be in consultation with industry players on this, and we hope to be able to [table] the amendment at the next parliamentary seating,” said Subromaniam.

Subromaniam shared that at present, there are 453,000 companies that have registered for GST. Out of this number, approximately 100,000 companies were small scale companies which had annual turnover of less than RM500,000, but had registered for GST voluntarily. These companies had registered so that they can claim input taxes, and also the bigger companies tend to not want to deal with [smaller companies] that have not registered for GST,” he said.

Curated Insights 2017.09.17

Apple’s real advantage is what’s inside the new iPhones and Watch

“If you look at the Android smartwatches that have cellular, they are literally twice the size.”

The iPhone 8 and X have the new A11 Bionic chip, which enables all sorts of clever image processing, augmented reality and artificial intelligence tasks. That gives Apple a big advantage in the AR market, which Morgan Stanley estimates could be worth $404 billion over the next three years.


Steve Jobs’ legacy & the iPhone X

The FaceID is a perfect illustration of Apple’s not so secret “secret sauce” — a perfect symbiosis of silicon, physical hardware, software, and designing for delight. Their abilities to turn complex technologies into a magical moment is predicated on this harmonious marriage of needs.

Controlling your own destiny is a smart business strategy and Apple isn’t the only one doing it. Today Google and Facebook are designing and producing their own highly optimized hardware for networking and data centers, mostly because the industry vendors like Cisco Systems made gear that had to fit the needs of many companies. Google is designing its own chips — especially to conduct resource hungry machine learning and artificial intelligence tasks.

It all starts with Silicon. Unlike software which can be written, discarded and rewritten at a rapid clip, the law of reality makes it hard for a chip to be designed, tried and manufactured at scale. So in a sense, Apple’s chip and hardware teams have to peer almost two-to-four years into the future, predict what could be possible, what they can make possible and then make it work.


Alibaba’s Jack Ma sets his sights on a new target

“Today if you look at the volume of the packages generated from our platform, it is about 55 million a day and we strongly believe that this can go grow to 1 billion, some years later. The size of the retail business in China is about 30 trillion yuan ($4.6 trillion). The question is, how do you redefine smarter package delivery? You don’t have to get the package and fly it from one warehouse to another city for a 200-kilometers delivery. You can deliver from the store nearby. It still creates a lot of new packages shipped, but very conveniently. So, today, all these logistics systems should be integrated into the commerce system.”


Meet the Earth’s largest money-market fund

Fueled by contributions from some 370 million account holders, the fund, known as Yu’e Bao—which means “leftover treasure”—has grown rapidly to manage $211 billion in assets. It is more than twice the size of the next largest money-market fund, a U.S. dollar liquidity fund managed by J.P. Morgan Asset Management, according to data from Morningstar Inc. Yu’e Bao’s assets doubled in the past year alone, and the fund now makes up a quarter of China’s money-market mutual fund industry.

Data reviewed by The Wall Street Journal indicates Tianhong boosted Yu’e Bao’s returns in recent years by increasing its allocation of funds to financial instruments with longer maturities. Such assets, however, tend to be less liquid than bank deposits and lower-yielding investments. About 40% of Yu’e Bao’s investments mature in under 60 days, versus over 60% four years ago, according to Tianhong’s reports.

Tianhong said it has various measures in place to prevent a liquidity crunch and believes the “probability of mass redemption is very low.” It said most of the fund’s customers have fairly small holdings of around $590 on average.


China fossil fuel deadline shifts focus to electric car race

The world’s second-biggest economy, which has vowed to cap its carbon emissions by 2030 and curb worsening air pollution, is the latest to join countries such as the U.K. and France seeking to phase out vehicles using gasoline and diesel. The looming ban on combustion-engine automobiles will goad both local and global automakers to focus on introducing more zero-emission electric cars to help clean up smog-choked major cities.


France drives EU tax blitz on revenues of US tech giants

Currently, US technology groups such as Apple and Facebook are taxed in Europe based on profits rather than total revenues. Many of these companies have angered European tax collectors and voters for years by using EU governments’ disparate tax codes to record profits in jurisdictions with the lowest effective rates, meaning that some companies have been able to pay little or no tax in countries where they have billions in sales.

We still don’t really know what CRISPR does to human embryos

Genome editing works by breaking DNA, and letting a cell’s natural repair mechanisms fix it. This is usually quite haphazard, and precise repairs were thought to be rare.


What machines can tell from your face

Although faces are peculiar to individuals, they are also public, so technology does not, at first sight, intrude on something that is private. And yet the ability to record, store and analyse images of faces cheaply, quickly and on a vast scale promises one day to bring about fundamental changes to notions of privacy, fairness and trust.

China’s government keeps a record of its citizens’ faces; photographs of half of America’s adult population are stored in databases that can be used by the FBI. Law-enforcement agencies now have a powerful weapon in their ability to track criminals, but at enormous potential cost to citizens’ privacy.


I’m not sold on self-driving cars

Even if self-driving cars do become ubiquitous, the benefits aren’t certain — as an overview from the Victoria Transport Policy Institute points out. Consider traffic. Freed from driving, people might demand more luxurious vehicles, in which they can work or even sleep. The added amenities will take up more space on the road, while the comfort will encourage people to take bigger trips and endure longer commutes. They might even prefer to move more slowly, to avoid unexpected accelerations that could wake them up or tip over a wine glass. Empty cars might circle endlessly to avoid parking charges. The potential result: more miles driven, more congestion and increased emissions.


Your next meal depends on 14 choke points in the world’s food supply transport chain

As the share of the world’s population with insufficient food supply has fallen from 52 per cent in 1965 to 3 per cent in 2005, most gains have come not through improved food production at home and self-sufficiency, but through increased trade; nearly 1 billion people worldwide now rely on international trade to meet their food needs.

While China is a key driver of increasing stress on the global food supply system, it is ironically not among the most vulnerable – not just because it has worked hard to diversify its food supply sources, but because it stands alone in investing serious money in improving the food supply chains on which it so heavily depends.

International commentators claiming that China’s US$20 billion investment this year in overseas ports is an expression of military muscle and expansionism miss the point. Investment in ports like Djibouti and Gwadar – along with the other 42 ports worldwide that Chinese companies have invested in – has much more to do with securing stable food and energy supplies than anything more sinister.

Company Notes 2017.09.15

Bermaz Auto Q1 FY2018 Results

…partly caused by the Mazda CX-5 run-out programme as more sales incentives were given for this model since the preceding quarter in anticipation of the new CX-5 model to be launched in October this year.

…continue to remain disciplined and will focus on driving sales at its standard selling prices with value offerings as this augurs well for the Mazda brand image and popularity in the longer term. The Group is optimistic that the new CX-5 to be launched in October 2017 will help to improve the unit sales as well as the profit contribution from associated companies for the second half of the financial year.

…cautious on the potential impact of the new excise duty expected to be introduced in early 2018. This impact may be mitigated to a certain extend as brought forward purchases of CX-5 and CX-9 from Mazda Japan is expected to be made prior to 1 January 2018.


Berjaya Food Q1 FY2018 Results

The Group expects Starbucks to maintain its revenue growth momentum, and the price adjustment in the previous financial year is expected to mitigate the negative impact from the fluctuating Ringgit Malaysia. In addition, the operational and menu rationalisation of KRR will also have a potential to yield positive results for the brand moving forward.

IOI Corporation divests 70% equity stake and retains 30% stake in IOI Loders Croklaan in a new business partnership with Bunge

During the fourteen years since IOI acquired Loders, Loders has grown from having three processing plants to seven plants in Europe, North America and Asia, and earnings have nearly quadrupled during this period. IOI has positioned Loders as a leading palm-based specialty fats player which supplies its products to nearly all major MNC food companies. In order to sustain its significant growth and better serve its multinational customers, Loders will need to expand its processing plant footprints to regions such as South America and South Asia, and offer more varied product offerings including seed oil–based products. In IOI’s assessment, the faster and more effective way to do so is by leveraging on Bunge’s existing plant assets in these regions and Bunge’s established integrated supply chain in seed oils.

After the transaction, IOI will still play an important role in Loders given our expertise in palm oil sourcing and our business experience in the fast-growing Asia Pacific Region. IOI will have two representatives on Loders’ five-member Board of Directors and our representatives will also be involved in key management decisions taken by Loders. IOI will continue to be a major supplier of palm oil and palm products to Loders after the transaction.


NTPM expanding tissue paper plants

The expansion would increase the group’s production capacity to 170,000 tonnes per year by end-2018 from 110,000 tonnes currently. The bulk of the expenditure will be to increase the production capacity of our plant in Ho Chi Minh to 50,000 tonnes a year from 10,000 tonnes presently.

“Due to the increase in pulp prices, we have to raise the selling price for our tissue products by 3% to 5%.” Pulp prices have increased to around US$700 per tonne this year from US$500 year ago.


Censof growing quietly and steadily

Censof’s entire stake of 17% in DNex is worth more than its entire market capitalisation. Based on DNex closing price of 47.5 sen, Censof’s stake is worth about RM141.6mil. Censof has been cutting down its stake in DNex and could be divesting more in the near future. In August 2016, Censof disposed of a 7.3% stake in DNeX and its entire 19.6% holding of warrants for RM32.3mil to pare down the groups borrowings.

Rubber glove prices may increase by 9% to 12%, says MARGMA

The (Hurricane Irma) devastation has caused the prices of Butadiene, an important material in the production of Nitrile Latex, to soar as its production has been severely affected.

“Another cost component that has a runaway effect on the industry is the shortage of paper. This shortage has pushed packing material prices up by 15% already and it looks like [it’s] moving up again. The lack of readership of newspapers and magazine is causing the lack of feedstock to cupboard and cartons processing.”


PLUS receives takeover offer from Maju Holdings

Maju’s indicative offer implies a total enterprise value in excess of RM36 billion for PLUS. Other significant details divulged by sources familiar with the offer include Maju’s plan to freeze toll rates for 20 years until the end of the concession period.

The offer’s other strengths include the acquisition reducing the government’s contingent liabilities by RM30 billion, and Maju is said wanting to forfeit the government’s compensation of about RM900 million owed to the toll road operator, a result of toll hikes not implemented.

PLUS has five concessions…All PLUS Malaysia’s concessions end in December 2038.

PLUS paid an RM815 million dividend to its parent Khazanah in FY15. As at end-Dec 31, 2015, PLUS had non-current assets amounting to RM30.22 billion, and current assets of RM3.26 billion. It had long-term debts of RM31.27 billion and current liabilities of RM1.56 billion.


Port Klang business hit as key firms shift operations to Singapore

“Only Kuantan Port has Chinese equity so far because it also aids Beijing’s South China Sea claims. Other infrastructure plans have either not taken off or are only loans, or worse, just Chinese companies winning construction deals.”

The new alliance agreements’ biggest impact on Klang was the loss of transshipment volumes – goods stored before being shipped to their final destination – from giants United Arab Shipping Company (UASC) and France’s CMA CGM. This could total up to 2 million TEU annually. UASC has now merged with Germany’s Hapag-Lloyd, making it part of THE Alliance, while CMA CGM is the biggest company in the rival Ocean Alliance.

Both groups, which handle nearly half the world’s shipping capacity, started realigning in April, resulting in more than half of Klang’s Asia-Europe calls being shifted to Singapore, said industry officials. CMA CGM and Cosco have naturally gravitated to Singapore as both have major investments there. PSA saw a 9.6 per cent jump in the second quarter to 8.5 million TEU.

Among the world’s top 20 ports, Klang was one of only two, the other being Tanjung Pelepas on the south coast of Johor, to see a drop in volume in the first half of this year.


China investments transforming Malaysia

With the entry of our corporations, Malaysia has become a new leader in certain sectors and there is significant improvement in some industries.

In the case of ECRL, PM has announced that at least 30% of the civil engineering work will be awarded to local contractors. The electrified double-tracking railway line linking Gemas with Johor Baru will see 50% of the civil construction works awarded to local players.

Curated Insights 2017.09.10

You are the product

What this means is that even more than it is in the advertising business, Facebook is in the surveillance business. Facebook, in fact, is the biggest surveillance-based enterprise in the history of mankind. It knows far, far more about you than the most intrusive government has ever known about its citizens. It’s amazing that people haven’t really understood this about the company. I’ve spent time thinking about Facebook, and the thing I keep coming back to is that its users don’t realise what it is the company does. What Facebook does is watch you, and then use what it knows about you and your behaviour to sell ads. I’m not sure there has ever been a more complete disconnect between what a company says it does – ‘connect’, ‘build communities’ – and the commercial reality. Note that the company’s knowledge about its users isn’t used merely to target ads but to shape the flow of news to them. Since there is so much content posted on the site, the algorithms used to filter and direct that content are the thing that determines what you see: people think their news feed is largely to do with their friends and interests, and it sort of is, with the crucial proviso that it is their friends and interests as mediated by the commercial interests of Facebook. Your eyes are directed towards the place where they are most valuable for Facebook.


WhatsApp announces free Business app, will charge big enterprises

Businesses will only be able to contact people who have provided their phone number and agreed to be contacted by the business over WhatsApp…the enterprise solution will initially be free but it does plan to charge businesses. Some functionality that will be offered by the Business app and enterprise solution includes the ability to create a verified profile with info like address, description, and hours, plus “Features for helping manage customer chats like away messages for when businesses are not able to respond at the moment.

With over 1.3 billion monthly users and 1 billion daily users, WhatsApp has reached the massive scale necessary for it to earn significant revenue even from light advertising. Its Snapchat Stories clone WhatsApp Status now has 250 million daily users, and could host vertical video ads between friends’ content the way Instagram does. It could also insert display ads into the inbox like Facebook Messenger.

Apple can thrive in connected home despite Amazon, says Barclays

Google’s strength is around Cloud, ML and getting better at NLP. The reduction in error rates from Voice search from the mid-20%’s to low single digit % of queries over the last three years speaks to this strength […] Amazon is leading device market share today, and has the greatest Voice dataset to work with, but it needs to catch up to Google in NLP and ML (machine learning) in order to secure its position as the leading player longer term. We feel comfortable that Amazon will get there given their strength in cloud with AWS and long history in machine learning at Amazon.com (recommendation engine, etc).

Apple’s Connected Home strategy is focused on the company’s ability to leverage its software ecosystem (namely iOS) while maintaining its established position within its massive loyal user-base. This is an interesting approach when compared to Amazon and Google, which seem to be putting more emphasis on AI-powered speakers as the center of their Connected Home strategies. While we believe that AI-powered speakers could be used to drive incremental sales for Amazon, and gather additional data for Google, we wonder whether these devices can really be the center of the Connected Home in their current form. For Apple, we believe the iPhone will provide a natural control panel for the Connected Home due to its user-friendly interface and constant presence with the user. We note, despite the rapid growth of the Amazon Echo, Apple’s Siri still runs on significantly more devices. For context, we estimate that Apple’s installed base of devices is now much larger than 1 billion, including more than 700 million iPhones, compared to an estimated 20M+ Echo and Echo Dot units sold by Amazon at the end of 2016.


Chip prices keep rising, could crimp demand, says JP Morgan

…is that all upstream and downstream component makers guided continued blended ASP increases across memory, rechargeable battery, MLCC, camera modules and even PCBs. Among major components, SEMCO remained the most optimistic on continued MLCC price increase in the next 6-9 months under moderate supply growth from Japanese suppliers. Contents growth at dual-cam seem to be more based on volume growth rather than specification upgrades and we confirmed progress/ interest from both corporates/investors on 3D sensing potentially used for more than facial recognition and multiple brands.

We need to stop pretending that the autonomous car is imminent

We could start to see more interest in electric vehicles as second cars that are used primarily for short errand trips around town, but then we run into pricing concerns because few people want to spend more for a second car than their primary vehicle. Plus, the costs and potential impact on the electric grid as consumers start to install in-garage charging systems — yet another expense associated with electric cars — are potential concerns.

Beyond physical safety are the cybersecurity concerns. As has been discussed by many before, enormous potential threats are opened when the connectivity necessary to build and run autonomous cars is put into place. The notion of hacking when it comes to automobiles moves from an annoyance to a life-threatening concern.

…the ability for cars to communicate with each other and other elements of the transportation infrastructure (stoplights, road signs, etc.), commonly referred to as V2V (vehicle-to-vehicle) and V2I (vehicle to infrastructure).

…concerns about regulatory standards, insurance liability and other legal issues that could dramatically slow down deployments…

A simple design flaw makes it astoundingly easy to hack Siri and Alexa

Using a technique called the DolphinAttack, a team from Zhejiang University translated typical vocal commands into ultrasonic frequencies that are too high for the human ear to hear, but perfectly decipherable by the microphones and software powering our always-on voice assistants. This relatively simple translation process lets them take control of gadgets with just a few words uttered in frequencies none of us can hear.

The first is that voice assistants actually need ultrasonics just to hear people well, compared to analyzing a voice without those high frequencies…The second is that some companies are already exploiting ultrasonics for their own UX, including phone-to-gadget communication…User-friendliness is increasingly at odds with security.


Tiny changes can have big implications

Slow changes — both improvements and deteriorations — get magnified over time. But over short periods of time, they are barely noticeable for most people. Cognition, says Charlie Munger, misled by tiny changes involving low contrast, will often miss a trend that is destiny.

One big lesson that I have learnt over the years is that I should never talk to, or rely upon, the management of a company when worrying about risks of disruption. Apart from the fact that they have too much financial and emotional investment in the game, the management of a company is just too close to data which will turn out to be noise in the long run.

More data does not always lead to more insights. Often less is better. In fact, when one is thinking about disruption (or gradual improvements in the competitive advantage of a business), investors who are somewhat detached as compared to insiders and industry analysts, and who have learnt much after reading evolutionary biology and history of not just businesses but civilisations, are likely to be in a much better position to identify important changes that are hidden in daily, weekly, quarterly, or even annual financial statements.


Sheryl Sandberg just gave some brilliant career advice. Here it is in 2 words

“I think the most important thing we’ve learned as we’ve grown is that we have to prioritize,” said Sandberg. “We talk about it as ruthless prioritization. And by that what we mean is only do the very best of the ideas. Lots of times you have very good ideas. But they’re not as good as the most important thing you could be doing. And you have to make the hard choices.”

Company Notes 2017.09.08

SCGM registers RM5.6m net profit

“We have witnessed eight consecutive quarters of double-digit growth in domestic sales of thermo-form packaging, not only because of higher demand from retailers following the ban on polystyrene packaging, but also because of its relative low-cost and space-saving in storage.

“Our upcoming new plant in Klang Valley, which is on track to commence by the end of this month, will be well-positioned to capture the demand from Central and even Northern Peninsular Malaysia.”

The group has allocated RM20 million in capital expenditure for machinery. With five thermoform machines and two extruders, the Klang Valley factory would have a production capacity of 5 million kg per annum.


Axiata unit makes its biggest deal

Axiata Group Bhd’s subsidiary edotco Group Sdn Bhd is buying more than 13,000 telecommunications towers in Pakistan for US$940 million (about RM4 billion) to strengthen its position as one of the world’s independent tower companies.

With its existing portfolio of over 26,000 towers owned and operated across six countries, the deal will effectively place edotco as the eighth largest independent tower company in the world and second largest multi-country tower operator globally.


Fajarbaru wants a slice of action in current construction boom

“We will continue to tender for construction projects. But you see, jobs coming from the property development side will be passed on to our construction arm and [will] keep it busy for years to come.”

…“has a good chance” of getting its hands on the anticipated 37km light rail transit 3 project which connects Bandar Utama to Klang, and that it had tendered for five contracts under the RM9 billion project, including for the development of a depot, viaduct and stations.

“By possessing these machines, this also makes Fajarbaru one of the few private organisations to own such equipment, giving us a significant competitive advantage in the bidding of new construction and maintenance jobs for rail-related projects in the future.”

Fajarbaru’s unbilled order book currently stands at about RM400 million and it is expected to last the group for at least two more years, according to its finance director Charles Tan. Its tender book, which consists of railway, infrastructure and building projects, now stands at about RM4 billion.

…the timber segment will “continue to generate significant contributions to the group’s revenue, on the back of stable average prices of timber products”.

Money changing biz in Malaysia expected to hit RM80b this year, says association

“Many tourists are still coming into Malaysia judging by the flight arrivals, also there is a high turnover in the money changing business from Malaysians who work in Singapore and Brunei, who convert their [higher denomination] currencies here.”

Ramasamy said the wholesale currency business, which recorded transactions totalling RM10.6 billion in 2016, is also expected to grow by approximately 40%. However, he noted that remittances are expected to drop by about 7% this year. Total transaction value of remittances had dropped 1.9% to RM34.4 billion in 2016, compared to RM34.9 billion in 2015.

According to BNM’s Financial Stability and Payment Systems Report 2016, the total amount of Money Services Business (MSB) transactions in Malaysia, consisting of money changing, wholesale currency and remittance totalled RM118.5 billion in 2016, up 14.7% compared to RM103.3 billion in 2015.

Curated Insights 2017.09.03

Google, IBM primed for a quantum computing leap, says Morgan Stanley

The immediate advantage is speed: “To sort a billion numbers, a quantum computer would require 3.5 million fewer computing steps than a traditional computer and would find the solution in only 31,623 steps.” Other problems, many having to do with computing physics, become possible on quantum machines, the authors write, whereas they might never be possible on traditional binary computing devices.

We think the high-end compute platforms could see a transition post 2025, similar to how steam engines coexisted with combustion engines and electric motors for decades before being decommissioned. In the medium term, we see incremental demand for FPGAs and GPUs (possibly benefiting Xilinx, nVidia, and maybe Intel) as more supercomputers from Atos and Fujitsu are developed to simulate the behaviour of quantum computers. If quantum computers eventually do become ubiquitous, then the growth of high-end computing systems that emulate them could be affected, hence limiting the valuations of those stocks, but this is more a post 2020 event, in our view.

The size of the market will also depend on the business model used (one-off hardware sales vs. cloud-based, the latter being the most likely, in our view, as the hardware needs to run at a very low temperature (below 1 degree Kelvin) in a very stable radio frequency environment, and as such is more likely used as a shared asset).


Vuitton knows fashion is a money pit—and keeps throwing money in it

High-end clothes are famously unprofitable. The expense of producing collections, staging shows, and displaying apparel in boutiques wipes out the clothing’s potential profit, says luxury analyst Luca Solca of Exane BNP Paribas. He estimates Vuitton loses more than €100 million ($118.1 million) a year on ready-to-wear, which generates less than €450 million of the brand’s $8 billion to $9 billion in annual sales.

Runway shows can create an aura around the brand that helps sell more-profitable items, Som says. With Vuitton, that’s handbags; with Chanel International DB, it’s perfume, which Som estimates accounts for 70 percent of revenue at the privately held luxury house.

Vuitton is the world’s most valuable luxury label, according to consultancy Interbrand, which pegs its brand value at $24 billion, almost twice that of runner-up Hermès International.

Harvey has made the world’s most important chemical a rare commodity

Texas alone produces nearly three-quarters of the country’s supply of one of the most basic chemical building blocks. Ethylene is the foundation for making plastics essential to U.S. consumer and industrial goods, feeding into car parts used by Detroit and diapers sold by Wal-Mart Stores Inc.

With Harvey’s floods shutting down almost all the state’s plants, 61 percent of U.S. ethylene capacity has been closed, according to PetroChemWire. Production may not return to pre-storm levels until November, according to Jefferies.

Ethylene and its derivatives account for about 40 percent of global chemical sales, said Hassan Ahmed, an analyst at Alembic Global Advisors. The U.S. accounts for one of every five tons on the market, and ethylene plants globally were running nearly full out to meet rising demand before Harvey, he said.

Prices for ethylene-derived products, meanwhile, have begun to show signs of the looming shortage. Polyethylene prices globally have begun to climb on the expectation that U.S. exports will be slashed, IHS said.


How the three-tiered beer distribution system works

As of April 2008, 35 states now permit some form of direct wine sales to the consumer. It only accounts for about 2% of the wine sales in the United States, but there is huge opportunity in this market. The distributors see this as a direct challenge to their place in alcohol commerce. Craft brewers would love this access to the consumer, and some states are starting to permit it in small quantities. If everyone can sell directly to the consumer, there is no need for distributors.

Budweiser dominates in world sales, and was the number one selling beer in the world until recently. Part of the reason for their success is it is much easier for Budweiser to penetrate foreign markets than it is for foreign beers to penetrate the American market. The most likely reason InBev pursued the purchase of Budweiser was to gain better access to the distributors, not for the “great taste” of Budweiser.

Corruption now exists at the distributor level. Powerful distributors determine which beers make it to the shelves. For example, Bell’s Brewery in Michigan gave up trying to penetrate the Chicago market and pulled out of Illinois completely.

Markets are becoming more open for wine, so it is a matter of time before the beer producers demand the same treatment. The distributors will fight for their existence, but the US government may have already signed their death warrant with world trade treaties. No matter what happens, eventually the path beer takes to your glass may change.


Switch to renewables won’t end the geopolitics of energy

In the world of fossil fuels, this curse has generally applied to big producers of oil and gas. In a world heavier on renewables, the curse will probably not be so relevant for producers of power. Rather, we may see this curse surface in countries rich in the materials required to produce the components that make renewable energy possible.

China provides approximately half of the indium consumed globally today, whereas the Democratic Republic of the Congo is the source of more than half the world’s cobalt. The big producers of lithium, another material essential for the production of batteries, are Argentina, Australia, Chile and China. Yet Bolivia’s large untapped reserves of lithium could catapult it into this league in the future. Tellurium is not a rare-earth mineral, but it is another key component of solar panels. The U.S. has imported most of this material from Canada, but relies to some extent on Belgium, China and the Philippines.

The U.S., too, is rich in many of these resources; the U.S. Geological Survey estimates that the United States possesses 13 percent of global rare-earth reserves, 14 percent of global tellurium deposits, and 3 percent of the world’s indium reserves.

The majority of the world’s cobalt reserves are believed to be in the Democratic Republic of the Congo. Thus it would benefit U.S. policymakers to look at the African country as not only a humanitarian crisis and failed state, but as a more pressing a strategic priority.

More than a third of those ages 18 to 34 say they can’t go without Amazon, according to comScore’s 2017 US Mobile App Report. Gmail and Facebook ranked second and third. That bodes well for Amazon, especially as millennials age and grow their earnings power.


The case for a breakfast feast

A recent review of the dietary patterns of 50,000 adults who are Seventh Day Adventists over seven years provides the latest evidence suggesting that we should front-load our calories early in the day to jump-start our metabolisms and prevent obesity, starting with a robust breakfast and tapering off to a smaller lunch and light supper, or no supper at all.

The group issued a scientific statement emphasizing that skipping breakfast — which 20 to 30 percent of American adults do regularly — is linked to a higher risk of obesity and impaired glucose metabolism or diabetes, even though there is no proof of a causal relationship.


The complete guide to not going to college

Adopt a different attitude right now: Understand that the most important kinds of education have nothing to do with degrees. If you think you’ll benefit from hours of scholarly debate about niche topics, by all means go to college; but if you already know that you won’t, there are hundreds of high-paying jobs that don’t require you to waste your time.

Companies, particularly those in Silicon Valley, are progressively looking away from transcripts and extracurriculars. Google, in particular, truly couldn’t care less about what school you attended; it only wants to know if you can a) solve problems, b) lead, and c) offer the company something different. IBM says that about 10-15% of its new hires don’t have a college degree. And in Google’s view, the experience of going to college can sometimes even detract from a candidate’s qualifications—serving as only an “extended adolescence.”

If you have an idea, and believe in it, take a risk, and work hard at it.