…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.
…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.
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.
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.
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.
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.
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.
…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 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
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.
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.
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.
“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.”
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.
“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.”
“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, 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.
“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.”
“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.”
“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.”