Company Notes 2018.03.23

AirAsia in talks to set up Myanmar airline

…in talks with a potential partner to open an airline serving Myanmar, in a move that would help the low-cost carrier cover up to 95% of the Southeast Asian travel market.

“Once you’ve covered Vietnam and Myanmar, you’ve got all the big (Southeast Asian) populations. Vietnam — we’re talking about October, we’ve had great support from the Vietnam government and we have a great partner. My team are very bullish. It’s not going to be a big airline there, because the airport infrastructure is not there. But it is 50 million people and it will develop over time.”

“The biggest asset is our data,” Fernandes said. “While southeast Asian companies like (Indonesian ride-hailing company) Grab have to go out and spend a fortune to build that brand and data, we have 89 million customers travelling with us every year and we have data going back 18 years. We’re more than an airline — that’s the message for 2018. (Like) Amazon is more than a bookseller.”

Apex Healthcare goes into e-commerce

“[At full capacity,] SPP Novo is designed to increase our solid production capacity by up to three times, but we will be fitting out with approximately double the capacity upon commissioning by [the] end of 2018,” said Kee.

He added that about RM130 million of its revenue is derived from the manufacturing segment, and about half of this is from solid products. A back-of-the-envelope calculation suggests that if Apex doubles its solid product capacity, the group may see an increase in its solid product sales to RM130 million.

“For Europe, we are working on contract manufacturing opportunities,” said Kee, noting that the group is in the midst of evaluating merger and acquisition targets, as well as joint-venture opportunities in Europe and other developed markets. “The EU GMP certification will enable the group to stay ahead of the game, ensuring the best quality of its products,” he added.

Are REITs a good buy now?

According to Bloomberg data, the average dividend yield for the 18 listed REITs on Bursa Malaysia, as of yesterday, stood at 6.14%. In comparison, the 10-year Malaysian Government Securities’ (MGS) yield has been held at 3.9% to 4% since Bank Negara Malaysia’s key rate hike in January. MGS is the typical benchmark to which investors use to compare REITs, which are seen as a comparatively riskier investment.

But analysts told The Edge Financial Daily the rising average REIT yield is more reflective of a decline in share prices, rather than being driven by growth in distribution per unit (DPU). Hence, investors seeking to buy on weakness should consider REITs on a case-by-case basis.

Airbnb collaboration with Malaysia previews taxes on Internet economy

The San Francisco-based home-sharing company is moving to finalize a deal with tax authorities, which will apply a new tourism tax of RM10 ($2.55) per night to Airbnb members who rent out five rooms or more. The tourism levy presages an agreement on goods and services taxes.

But Southeast Asia’s third-biggest economy will start collecting tax from Airbnb hosts with at least five rooms, whether in one or multiple properties. Airbnb typically signs what it calls voluntary collection agreements with governments to transfer hotel and tourism tax payments from its members to the authorities. The decade-old company said it has transmitted half a billion dollars’ worth of such taxes to more than 340 jurisdictions globally.

Divestment appetite in Southeast Asia more than doubles, says EY survey

“More than two-thirds (68%) said that their decision to divest was directly influenced by the evolving technological landscape. About half (51%) of Southeast Asian companies said that the need to fund new technology investments will make them more likely to divest — using the proceeds to improve operating efficiency (79%), and address changing customer needs (87%) in their core businesses,” said EY in a statement today.

Malaysia tells tech entrepreneurs to give it a second look

Still, Malaysia lags behind its neighbors in drawing investments. Singapore attracted $7.2 billion in tech startup capital from 2012 through September 2017, the most in Southeast Asia, according to CB Insights. Indonesia pulled in $4.6 billion, while Malaysia got $1.3 billion during the same period.

Curated Insights 2018.03.18

Remember to look up at the stars and not down at your feet. Try to make sense of what you see, and wonder about what makes the universe exist. Be curious. And however difficult life may seem, there is always something you can do, and succeed at. It matters that you don't just give up. -- Steven Hawking (1942-2018)

An Apple R&D bonanza

Much of this focus mantra is driven by the fact that Jony Ive and his Industrial Design group oversee Apple’s product vision and the user experience found with Apple products. With only 20 or so members, Jony and team can only do so much at any given moment. In a way, Apple’s organizational and leadership structure serve as safeguards preventing Apple from spreading itself too thin and doing too much. Instead of trying to expand the design team in order to work on more products, Apple’s strategy appears to be to do the opposite and place bigger bets on a few products.

These bigger bets come in the form of owning the core technologies powering Apple devices. Apple wants to reduce dependency on others. We are quickly moving to the point at which every Apple product will be powered by core technologies developed in-house. Such a reality would have been a pipe dream just a few years ago. Apple believes this strategy will give them an advantage in the marketplace. It’s a new twist to the Alan Kay line about “people who are really serious about software should make their own hardware.” We are moving to the point at which companies serious about software should design their own silicon. Having $285 billion of cash on the balance sheet gives Apple the freedom to pursue this ambitious goal. It is this motivation to control more of the user experience while pursuing new industries to enter that is driving the remarkable increase in Apple R&D expenditures.

Apple goes from villain to coveted client with this Finnish firm

Created through a merger of Sweden’s Stora AB and Finland’s Enso Oyj in 1998, the company has spent billions shifting from the declining paper business — as people increasingly switched to digital from printed newspapers — to focusing on innovative wrappings made from tree and plant fibers. More than a third of its sales now come from consumer board and packaging solutions, up from a fifth two decades ago.

Apple has undergone its own shift, away from plastic packaging. For its recent iPhone 8 launch, Apple used a fiber-alternative instead of the polypropylene wrap around the power adapter. The packaging for the iPhone 7 used 84 percent less plastic than the previous version.

Intel fights for its future

“…Broadcom is already an Apple parts supplier, and it wouldn’t want to jeopardize a good relationship with a negotiation over royalties. The exact percentage that Qualcomm charges in royalties is of the utmost importance to a standalone Qualcomm…But for a merged Broadcom-Qualcomm, the exact amount of the royalty would be less important than a good working relationship with Apple.”

If the dispute is settled, Intel loses its wireless modems deal with Apple. No mobile CPUs + no modems = nothing of substance. Broadcom would be in charge — they would hold all the cards.

Google wants to impose order on India’s street address chaos

Google is tackling the project as part of its own search for the next billion users. Non-standard addresses now increase the costs of running all types of commerce from ride-hailing to online retailing and food delivery. Plus Codes — in a ‘6-character + city’ format — can be generated and shared by anyone on Google Maps, while apps that use location services can incorporate those codes on their own platforms. And a user can enter the Plus Code into searches to call up a location. Google Maps is also adding voice navigation in six more Indian languages, after introducing Hindi three years ago.

WhatsApp could shake up digital payments in India

At stake is an Indian digital payments market that Credit Suisse Group AG estimates could be worth $1 trillion within five years and has homegrown and global players jostling for dominance. WhatsApp joins Google, Alibaba-backed Paytm, a unit of local e-commerce leader Flipkart and dozens of others already vying for customers as smartphone adoption surges. Mobile payments caught fire at the end of 2016 when the government’s demonetization temporarily took 86 percent of all paper currency out of circulation to tackle corruption.

“WhatsApp is likely to change the digital payments scenario by cannibalizing other wallets’ users and adding new converts,” said Satish Meena, an analyst at Forrester Inc. “Its base of 200 million users, a daily active usage that’s about 20 times higher than Paytm’s, and the fact that Indian users spend a lot more time on WhatsApp than even on parent Facebook has huge advantages,” said Meena.

Amazon turbocharged Audible’s domination of audiobooks

Audible accounts for about 41 percent of all audiobooks sold, including digital and physical formats, according to researcher Codex Group LLC. Amazon also sells audiobooks directly through its website and, with Audible, accounts for more than half the market. Audible doesn’t disclose financial information, but says its annual subscriber growth is in double digits. Most customers pay $15 for a monthly subscription that comes with a single audiobook. (A la carte, they often cost more than $20.) The company’s library includes 400,000 titles.

How Amazon’s bottomless appetite became corporate America’s nightmare

For many companies, perhaps what’s scariest is that Amazon has lots of room to grow, even in retail. In the U.S., more than 90 percent of all retail sales still happen in physical stores. In some big categories, including home furnishings, ­personal-care products, toys, and food, the brick-and-­mortar numbers are even higher. As the share of online shopping continues to increase, Amazon seems likely to benefit the most. It’s responsible for roughly 44¢ of every dollar Americans spend online, and it’s now mixing in retail stores.

Amazon is far from invulnerable. All the same old red flags are there—a puny 2.7 percent e-commerce profit in North America, massive outlays to establish delivery routes abroad—but few are paying attention. Anyone buying a share of Amazon stock today is agreeing to pay upfront for the next 180 years of profit. By one measure, it’s generating far less cash than investors believe. And its biggest risk may be the fear of its power in Washington, New York, and Brussels, a possible prelude to regulatory crackdown.

Netflix’s secrets to success: Six cell towers, dubbing and more

Why Netflix almost never goes down. The company’s service achieved an availability rate of 99.97% in 2017, according to Netflix engineering director Katharina Probst. Part of that is due to the fact that Netflix learned from outages early on, and now uses Amazon’s AWS data centers across three regions. When one of those regions does go down, Netflix automatically redirects all of its traffic to the two other regions.

In fact, the company even tests this fall-back regularly by just taking a region offline itself — something the company calls chaos engineering. “We intentionally introduce chaos into our systems,” explained Probst. Up until recently, it took Netflix up to an hour to successfully redirect all requests in case of such a massive failure. More recently, the company was able to bring that time down to less than 10 minutes.

Amex to woo retailers with biggest fee cut in 20 years

At a presentation for investors in New York last week, the company said the global average of the fees it charges merchants — known as its discount rate — would decline five or six basis points this year, to about 2.37 per cent. Each basis point is equivalent to about 11 cents of earnings per share, said Don Fandetti of Wells Fargo Securities.

The fee cuts for 2018, which are about double previous guidance, are the latest sign of competitive and regulatory pressures on the biggest US consumer finance company by market value. American Express is facing questions from Wall Street about competition from US banks, which use the rival payment networks Visa or MasterCard. Big-spending Americans have flocked to premium cards issued by banks.

SoftBank looks to invade Wall Street’s turf

Until recently, SoftBank’s fledgling investment arm was little more than a group of analysts in Tokyo and London sifting through possible deals. Buying Fortress provided the group with a template to use as it moved to becoming an actual institution, with a formal investment committee, compliance department, trading desk and investor relations unit. The new entity is now 1,000 people strong.

How China’s Huawei killed $117 billion Broadcom deal

Huawei uses Broadcom’s chips in networking products such as switches that direct data traffic between connected computers. Qualcomm also works with Huawei. The two said on Feb. 21 they completed testing on technology that advances faster 5G mobile services. Under one envisioned scenario, wireless carriers may be forced to turn to Huawei or other Chinese companies for cutting-edge telecoms gear. That’s unacceptable for a U.S. government that, concerned about the security of Huawei’s gear, has already blocked the sale of the Chinese company’s smartphones on American carriers’ networks.

Government officials and industry executives have long harbored suspicions that the closely held Huawei works primarily for Chinese government interests, especially as it sells increasing amounts of critical telecoms infrastructure to Europe, Africa and the Middle East.

WordPress is now 30 per cent of the web

Public data recorded that WordPress’s share of the top 10 million websites had ticked over from 29.9 per cent to 30 per cent. The firm put some context on that data by noting that 50.2 per cent of the world’s websites don’t run a content management system (CMS) at all. That means WordPress has over 60 per cent share among websites that do run a CMS. That’s a dominance few products in any category can claim. It’s also notable that WordPress has nearly ten times the market share of its nearest competitor, Joomla, which has 3.1 per cent share of all websites and 6.3 per cent of the CMS-using population.

Share buybacks work better in theory than in practice

The top 20 companies in terms of buybacks accounted for almost 50 percent of total expenditures.

The main problem with buybacks is that effects of bad decision-making don’t become clear until much later. To paraphrase Jeff Macke, stock buybacks are an allocation decision that has a hypothetical value to shareholders, but a real explicit value to option-holding executives. These people are supposed to be managing companies for the long term but get compensated over the short term. This misalignment if incentives should be a concern. It does seem like those with a vested short-term interest in stock prices put a thumb on the scale away from investments or dividends and towards buybacks.

Diving into the detail, the top culprit was Biotech companies, with 97% of biotech IPOs in the loss making camp. Second place, no prizes for guessing, was Technology companies at 83%. But interestingly enough that left 'all other companies' at 57% - which is actually a record high.

What’s the biggest trade on the New York Stock Exchange? The last one

Last year, 26% of all trading activity on the NYSE’s flagship exchange took place in the last trade of the day, up from 17% in 2012, exchange data shows. Last year, trades at the close accounted for more than 8% of trading volume in S&P 500 stocks, nearly four times what it was in 2004, according to Credit Suisse .

At least $10 billion worth of shares are traded in the NYSE’s closing auction on an average day, with a final tally of stock prices typically listed by 4:05 p.m.

A fund manager such as Vanguard, for instance, might need to buy millions of shares at a time. Making such a big purchase in the middle of the day could dry up supply, causing the price of the stock to jump—bad for Vanguard. By waiting to trade at a time when there are millions of shares being bought and sold, the risk of moving the price is reduced, saving Vanguard money.

Last year, the NYSE collected $87 million—45% of its net revenue from the exchange’s core stocks-trading business—from trading at the close, according to the research firm Equity Research Desk. The NYSE’s maximum fees for trading at the close have gone up 16% over three years, according to regulatory filings.

Is the US stock market overvalued? Depends on which model you ask

The Fed model was valid during the period from 1958 to 2010. Since after 2010 there has been no relationship between the stock’s earnings yield and the bond yield, the Fed model cannot be used to judge whether the US stock market is overvalued. In other words, the Fed model cannot support the high current CAPE ratio on the grounds of the low-rate environment.

The Shiller model is over-simplistic. It is justified only on the grounds that there is an empirical inverse relationship between the CAPE value and the subsequent stock market return over horizons ranging from 10 to 15 years. What is less known about the validity of the Shiller model is that it has forecasting power only for real returns.

The other serious problem with the Shiller model is that it cannot be successfully used to time the market. If the investor believes in the validity of the Shiller model, this investor should buy the stocks in the early 1970s. However, in this case, the investor would be highly disappointed because the stock prices had been decreasing till the early 1980s. Similarly, if the investor uses the Shiller model, this investor would sell stocks in the early 1990s, missing out on huge net gains over the full bull/bear cycle.

Pozen Priorities

“The common practice we found among the highest-ranked performers in our study wasn’t at all what we expected. It wasn’t a better ability to organize or delegate. Instead, top performers mastered selectivity. Whenever they could, they carefully selected which priorities, tasks, meetings, customers, ideas or steps to undertake and which to let go. They then applied intense, targeted effort on those few priorities in order to excel.”

Ironies of luck

If risk is what happens when you make good decisions but end up with a bad outcome, luck is what happens when you make bad or mediocre decisions but end up with a great outcome. They both happen because the world is too complex to allow 100% of your actions dictate 100% of your outcomes. They are mirrored cousins, driven by the same thing: You are one person in a 7 billion player game, and the accidental impact of other people’s actions can be more consequential than your own.

In investing, a huge amount of effort goes into identifying and managing risk. But so little effort goes into doing the same for luck. Investors hire risk managers; no one wants a luck consultant. Companies are required to disclose risks in their annual reports; they’re not required to disclose lucky breaks that may have led to previous success. There are risk-adjusted returns, never luck-adjusted returns.

Here’s why Stephen Hawking never won the Nobel prize in physics

It takes decades to build the scientific equipment to test theoretical discoveries; to put this into context, Einstein’s theory of gravitational waves in space, which he first proposed in the 1920s, was only recently proven in 2016.

One of Hawking’s most important finds was “Hawkings Radiation,” the theory that black holes are not completely black after all, but emit radiations that ultimately cause them to disappear. The issue is, the technology needed to observe this radiation will take years and cost millions before Hawking’s theory can ever be verified.

Company Notes 2018.03.16

UMW to takeover MBM Resources and raise its stake in Perodua

MBM Resources is involved in the distribution and dealership of major international and local vehicle brands in Malaysia such as Perodua, Daihatsu, Hino, Mitsubishi, Volkswagen and Volvo, as well as the manufacturing of automotive parts.

Assuming full acceptance of UMW Holdings’ proposed mandatory offer for MBM Resources, the company’s effective interest in Perodua will increase from 38% to 60.6%. The completion of the deal with PNB Equity Resources will increase its stake in Perodua to 70.6%.

“The proposed acquisitions are consistent with the company’s strategy to enhance its core businesses in the automotive, equipment and manufacturing and engineering segments. It will allow the company to further improve its prospects in the automotive segment via leveraging on Perodua’s strength in the national car segment, coupled with the company’s existing presence in the non-national car segment via the Toyota marque,” it added.

GDEx to grow C2C business

Teong elaborated that plans earmarked for MBE Malaysia will revolve around increasing efficiencies of the company, which include forming a digitised platform, improving accessibilities, and potentially become package drop points for GDEx.

“Following the completion of MBE’s acquisition, which is expected to be by the end of this quarter or early next quarter, we intend to roll out one new MBE outlet per month. As for GDEx, we have targeted to open 20 new branches this year, and are considering to market our products through re-sellers,” said Teong.

The retail delivery services or C2C segment remians a relatively untapped segment in the local logistics industry. For illustration purposes, the C2C segment in Japan, considered a mature market, makes up an estimated 15% of the nation’s logistics market. Currently, the retail delivery operations in GDEx contribute less than 2% of total turnover.

Hartalega focuses on organic growth, adds new plant

“No M&A and no targets have been identified at this moment. We are purely on organic growth and our focus is to grow our business as there are plenty of opportunities in the glove manufacturing distribution.”

“We plan to sell our antimicrobial gloves globally but the first launch will be in Europe in May this year, while we prepare the document for submission to the FDA. The FDA submission is a milestone for us because it gives credibility to our products. Once we get FDA approval and certification, it will be a good testimony for our products.”

Proton taps into Geely’s advanced auto technology

Geely is targeting to ramp up production to a whopping 400,000 cars in 10 years to penetrate the domestic, regional and global markets.

Bumiputera vendors, salespersons as well service centre operators should take cognizance of the intense competition in the global automotive industry. It is imperative that they upgrade to sales, service, spare parts and spray painting (4S) service centres so as to benefit from Geely’s endeavour to create the infrastructure for the supply of competitively-priced auto components.

Malaysian companies should develop strategies now to reap CPTPP benefits, says HSBC

“Perhaps the biggest benefit, the deal will eliminate most tariffs between member countries, and where tariffs are maintained, cuts will be significant. For instance, the tariff on New Zealand beef exports to Japan will fall to 9% from 38.5% today, when the deal enters into force,” Sill said quoting studies.

Collectively, the improvements meant some 500 million people in 11 countries would have access to greater and cheaper choice of goods and services. “Combining over US$10 trillion of economic output — about 13.5% of the world’s GDP — these nations offer bright prospects to the business community too,” he added.

Company Notes 2018.03.09

Pentamaster targets two sectors

“The powertrain system of automobiles is generating the demand for semiconductor test equipment. The improvements in advanced safety, convenience and comfort systems are the other factors driving the growth of the semiconductor content in automobiles. The Asia-Oceania region has the most market share of vehicle production and sales due to the growth of the Chinese automotive market. We are spending RM45mil on two manufacturing facilities this year. About RM35mil is for the Batu Kawan facility that would also produce IARM solutions on top of test equipment for the medical equipment and automotive industries. The remaining RM10mil is for the extension of our current plant in Bayan Lepas that would serve as a research and development centre and warehouse.”

Infrastructure jobs, exports set to lift Eita’s growth

“Part of the reason for this is that the MRT1 (Klang Valley mass rapid transit’s Sungai Buloh-Kajang line) project was completed last year. We’ve just got (contracts for) the MRT2 (Sungai Buloh-Serdang-Putrajaya line) but we think contributions will only come in for FY19.”

“We still aim to achieve 50% of the total revenue in our export markets but it depends on some of the projects that we are getting as the infrastructure projects could be lumpy. What’s more important is the growth seen in the export numbers over the last few years.”

In the longer term, Eita sees the lift and escalator maintenance services as an important segment. Currently, the group does maintenance work for over 90% of the lifts and escalators supplied, and the job only contributes about RM20 million or less than 10% of Eita’s topline.

PIE seeks to penetrate medical, auto, aerospace sectors

“We try not to be in the 3C industry — consumer electronic, communication such as smartphones, and computer because these are high-volume products with short life cycles. We cannot cope with that [type of business]. On the other hand, models for barcode scanners [of which PIE does testing under its contract EMS segment] do not change much. The volume is also not high, but they command a reasonably good profit margin — higher than the 3C products.”

Some 98% of PIE’s revenue comes from manufacturing, which consists of contract EMS for box-build, semi box-build and barcode scanners, raw wire and cable, and cable assembly and wire harness. The remaining 2% is from its trading segment.

“More workers would be needed when more orders come in later this year, but I will think about it then. Labour shortage is a constant problem, but for now I have managed to overcome the severe shortage. Also, because we increased the capacity at our Thailand plant, we hope to circumvent labour issues in Malaysia because there is no worker shortage problem there. As for raw material shortage, the impact is not so great now because the situation has recovered slightly.”

Top Glove wants to trim dependency on foreign workers

The world’s largest glove maker aims to reduce the ratio of foreign workers to locals to 50%, from 75% presently, over the medium term, according to Top Glove information technology general manager Chee Yih Tzuen. “Our total workforce is about 14,000 currently and the industry is competitive, so we have to do it (cut foreign workers) immediately,” he said on the sideline during the group’s factory tour yesterday.

Top Glove managing director Datuk Lee Kim Meow said labour traditionally constitutes about 10% of the group’s cost of production.

Asia’s online shopping boom is making it harder to track inflation

Malaysia’s statistics department estimates 87% of Malaysians use internet daily; 80% of those users seek information on goods, services.

“Big data” initiative created to explore online pricing and inflation.

Statistics department also now has unit dedicated to compiling indicators to measure e-commerce.

Malaysia disagrees with IMF over currency management, once again

“We continue to have strong concern on the Fund’s inflexibility to be receptive and open to new approaches and policy instruments needed to maintain stability and promote financial market development,” Juda Agung, an IMF executive director representing Malaysia along with other Southeast Asian countries, said in the report. Our authorities are also deeply concerned with staff’s lack of understanding of the domestic context which can diminish the Fund’s role as trusted adviser.”

Malaysia has a well-documented history of turning down the fund’s assistance during the 1997 crisis. The government implemented capital controls at the time, which were first panned, but much later acknowledged by IMF officials as being ahead of the curve.

Company Notes 2018.03.02

Techfast Q4 FY2017 Results

All the machines that have been purchased for the military and aerospace projects have been commissioned and are operational. Current work-in-progress are on track and the machines are expected to contribute positively to the sales turnover and hence the bottomline of the SCF business segment for the financial year ending 31 December 2018.

Following on the announcement of the agreement signed with Tecore Synchem, Inc. on 19 December 2017 for the supply and sale of Tecore’s products, the project has now commenced. Samples of Tecore’s products have already been submitted to two of Cape and Oriem’s customers, which are multinational companies, for evaluation and testing.

Thong Guan Industries Q4 FY2017

For the financial year 2018, the group has planned to commission more stretch film production line as well as PVC food wrap lines, two more production lines. With the additional capacity coming on stream in year 2018, the Group is optimistic to continue its upward trend in sales volume and profitability.

IQ Group Q3 FY2018 Results

As explained in the previous quarter’s Commentary on Prospects, we anticipate that similar performance conditions will remain throughout the remainder of this financial year, i.e. with reduced sales due to some delays in new product launches. However, as previously explained, going forward thereafter we anticipate positive performance as various new product launches roll out in FY18/19. Relationships with our global customer base remain very strong and we are blessed with considerable current and future
opportunity from both established and new business relations.

As stated in our prior report, the current volume of product development requirements is good from a new business perspective, but challenging from a resource and timing standpoint. However, following the structural changes within IQ’s R&D resources we are facilitating an acceleration of our new product development capabilities as we go forward.

This FY has proved to be very much a transitional year for IQ, but the future prospects and opportunities are positive from both an ODM and Own Brand perspective and we remain excited about the future.

Bonanza returns for AirAsia co-founders

“The special dividends will always continue because we have many [non-core] assets that can [be] monetised,” said Fernandes, adding that these assets include a 25% stake in online travel agency AAE Travel Pte Ltd, a joint venture with Expedia Southeast Asia Pte Ltd, logistics, cargo and food businesses.

On the back of envelope calculation, the low-cost carrier is getting some RM4.32 billion in cash from all the divestments. Excluding the sum for debt repayment, AirAsia has a sizeable cash pile for dividend payment.

Fernandes and Kamarudin are deemed to have interest in AirAsia through Tune Live and Tune Air Sdn Bhd. Tune Live, equally owned by the duo, holds a 16.73% stake in AirAsia, while Tune Air owns a 15.45% stake. Fernandes controls 48.33% equity interest in Tune Air, while Kamarudin 40.23%, and Abdel Aziz @ Abdul Aziz Abu Bakar holds the remaining 10.94% stake. Tune Live and Tune Air are the largest shareholders of AirAsia.

GDex buys retail postal firm MBE for RM5.5mil

GDex believes that the proposed acquisition is a very strategic move for the group to venture into the retail delivery service sector. MBE Malaysia’s 92 outlets would strengthen GDex’s current network of 79 branches nationwide. MBE Malaysia’s outlets are mainly operating in business districts and shopping malls, which provide great accessibility to business, retail and e-commerce customers.

Fresh growth driver of SKP Resources

With the in-house PCBA capability, SKP Resources is expected to enjoy a wider profit margin and earnings growth will be broadly in line with other EMS players. SKP Resources currently sources PCB parts from other EMS players.

SKP Resources’ in-house PCBA capability could eventually turn into an integrated one-stop EMS service provider and enhance the group’s chances of bagging more contracts from its major customers, commented Kenanga Investment Bank Bhd analyst Desmond Chong in his latest financial result review last Friday.

Notion VTec optimistic about 20% revenue growth

Notion VTec executive chairman Thoo Chow Fah told The Edge Financial Daily that he hopes to see the automotive segment grow by 30% to 40%, and the HDD segment to grow by 5% to 10% this year. Besides that, he said Notion VTec is currently working to secure at least two new clients from Singapore, to provide parts for the contract manufacturers, involving the production of scanners. “We hope to sign the deal with these two potential clients within the next two months,” he said.

In its filing with Bursa Malaysia last Friday, the company said the fall in revenue was mainly attributable to reduction in sale orders following the fire, where HDD, auto and engineered products posted lower sales of 4%, 26% and 14% compared with the preceding quarters respectively. The Oct 20 fire broke out, apparently from a ventilation fan, spreading to the roofing, at its manufacturing plant in Jalan Haji Salleh in Klang. The company said the fire affected more than 552 computer numerical control (CNC) machines and work-in-progress goods, and also the quality control building. Instantly, Notion VTec’s production capacity was down by 40%.

“We have torn down the building, and are currently in the phase of rebuilding a new factory, which should take us to another nine months or so. In the meantime, we have rented four factories nearby as well as utilising all the space we have in our other factories in Johor and Thailand to reach our production level,” Thoo said, adding that the new plant is expected to be fully operational by 2019.

Labour shortage weighs on earnings of HeveaBoard

“During the quarter under review, we had as low as 1,500 workers and this had impacted us as we needed more workers to start our new factory [which was completed in August last year]. This resulted in a backlog of orders to fulfil, which impacted our production efficiencies,” Yoong told The Edge Financial Daily via an email response. Currently, HeveaBoard has about 1,900 workers.

“The management highlighted that the group hedges its 40% sales proceeds to mitigate the risk of forex fluctuations. With the recent sharp rally in the ringgit against the US dollar, that is, from as high as 4.40 in the fourth quarter of 2017 to the current 3.90, the management acknowledged that the negative impacts on the group are unavoidable with the time lag of about two to three months for the group to partially price in the forex factor to customers,” said Lee.

Company Notes 2018.02.16

CSC Steel Q4 FY2017 Results

Driven by increasing prices of steel making raw materials such as iron ores and coking cokes, coupled with China’s continued efforts in shutting down its rudimentary and polluting steel mills, steel prices are expected to remain firm at least until the first half of 2018. However, steel market for the second half of 2018 becomes less predictable and very much dependent on the actions to be taken by Trump Administration on the outcomes of section 232 investigation. The Group expects business volume for the first quarter of 2018 to be impacted by Chinese New Year festivities and the rest of 2018 to remain challenging as the Malaysia steel markets continue to be liberalized and new steel mills come on stream within ASEAN countries taking advantage of the unimpeded access to markets within ASEAN under
the ASEAN Free Trade Agreement.

Hexza Q2 FY2018 Results

Our resins segment is expected to continue to operate in a challenging environment due to higher raw material prices that may affect our profit margin. Nevertheless, we will work on passing on incremental cost to customers to cushion the impact of higher raw material prices.

Our ethanol segment will feel the full year impact of the excise duty hike in October 2016, which has affected sales of our potable alcohol. We will continue to intensify our marketing efforts and work on increasing sales of higher margin products.

Weida Q3 FY2018 Results

The Group’s polyethylene culverts are increasingly being accepted by both the government sector in road construction projects, and the private sector especially oil palm plantations for drainage infrastructure.

The growing emphasis on environmental sustainability and green technology also bodes well for the Group. Over the years, the Group has significantly grown and enhanced its human and engineering capital, via active involvement and collaboration with a network of established international organisations. The Group has been successfully playing, and will continue to play, the role as a provider of environmental engineering solutions; such as in the field of water and wastewater treatment, septic sludge treatment and renewable energy.

Elsoft to ship more test equipment in first half-year

“Most of the orders come from the smart device segment, followed by the automotive and general lighting industries. They will go to customers in the Asia-Pacific. For the first half of 2017, about 60% of the orders were for the automotive segment. The shipment for the first half of 2017 was about RM30mil. However, the first quarters of 2016, 2017, and 2018 had proven to be unusual.”

Wegmans aims to boost exports after doubling capacity

The completion of Wegmans’ new plant, slated for 4Q19, is projected to increase the group’s annual production capacity to 960,000 units of chairs and 380,000 units of tables for the dining room, living room and bedroom, according to the IPO prospectus.

Wegmans aims to start exporting its products to more European countries besides expanding its presence in existing markets following the increase in its capacity, said the group’s executive director Collin Law at the launch of the group’s prospectus yesterday.

“For FY16, approximately 98.42% of revenue and 9.53% of purchases were denominated in US dollars,” Wegmans said. The remaining sales and purchases were recorded in ringgit.

An 84.22% foreign composition of its workforce may also squeeze Wegmans’ margins going forward as it had to pay the new levy for foreign workers since Jan 1.

Ninja Van to use funds raised to boost Malaysian ops

“At present, we have 200 points which are all located in the Klang Valley,” said the group’s country head for Malaysia Adzim Halim. We plan to establish footholds in Johor Baru, Penang, Melaka, Negeri Sembilan and Kuantan. We’re looking to improve our sorting capacity by at least four times what it is now by investing in an automated parcel-sorting machine.”

A quick check on Ninja Logistics Sdn Bhd’s financial statements show that the company’s revenue for financial year 2016 (FY16) soared more than five times to RM6.77 million from RM913,589 in FY15. However, its loss after tax widened to RM6.09 million in FY16 versus RM1.07 million in FY15.

Singapore may start taxing Amazon and Lazada

BMI Research projects the region’s six biggest economies will boost e-commerce to $64.8 billion in 2021 from $37.7 billion last year, while Credit Suisse Group AG estimates that online shopping growth could outpace that of traditional retailers by six to 10 times over the next few years.

The Customs Department in Malaysia has been talking about plans around taxing foreign e-commerce players for months. While nothing is in hand yet, BMI Research’s Singh sees Malaysia following Singapore’s lead with a 6 percent levy on these online providers.

Chinese tourists are taking over the Earth, one selfie at a time

China already accounts for more than a fifth of the money spent by outbound tourists, twice as much as the next-biggest spender, the US, according to the United Nations World Tourism Organization. And the Chinese have barely started — only around 5% of them even have passports, and the government is issuing about 10 million new travel documents every year.

The shift is transforming the region, unleashing more than US$100 billion in infrastructure spending for bigger airports and jet fleets, new railways, hotels and theme parks. The effects of this boom include soaring property prices, stress on the environment and an avalanche of apps and innovations that reimagine the way we experience the world.

‘Home ownership is not for everyone’

“Home ownership is not for everyone. There’s not a single country in the world that has 100% home ownership. Usually, you have a home ownership penetration of about 75%, and the rest are rentals for various reasons. Some can afford to be homeowners but by choice want to be renters. Some cannot yet afford to be homeowners because they are at the start of their careers. We should, therefore, approach housing with a range of solutions rather than a specific one-size-fits-all policy that doesn’t help everyone equally.”

“If you start subsidising from the onset before fixing the way the housing system addresses factors such as access to financing, all you would be subsidising are the inefficiencies of the market. Fix the problem first. This would then enable governments to use the same amount of money typically used to subsidise housing to reach a much larger number of people.”

Company Notes 2018.02.09

Daibochi Plastic and Packaging Industry Q4 FY2017 Results

Daibochi is optimistic on achieving strong growth in the financial year ending 31 December 2018 as both Daibochi Malaysia and Daibochi Myanmar are expected to perform strongly. The Group is expecting several new export contracts to drive Daibochi Malaysia’s performance in 2018, comprising contracts to Indonesia as well as the Australia and New Zealand (ANZ) region.

In the first quarter of 2018 (1Q18), Daibochi Malaysia secured a new contract with a multinational customer (MNC) to supply flexible packaging to the ANZ region. The Group’s sales, technical and operations teams collaborated closely with the MNC particularly for its fast-moving consumer goods (FMCG) brand, and target to commence supply by the second quarter ending 30 June 2018. This marks the entry into a new product line for Daibochi Malaysia, thereby strengthening its value proposition to MNCs.

Daibochi Malaysia is also working towards commencement of flexible packaging supply to another two MNCs for their food and beverage and FMCG brands in Indonesia.

Meanwhile, Daibochi Myanmar is expected to deliver stellar growth in 2018, as it is actively pursuing new customers in Myanmar’s F&B and FMCG sectors. Additionally, Daibochi Myanmar aims to leverage its low-cost and geographical advantage to secure export contracts from costsensitive customers in various Southeast Asian countries.

Daibochi Myanmar will also tap into the Southeast Asia flexible packaging market. With our Myanmar operations securing the ISO 9001:2015 and Hazard Analysis and Critical Control Point food safety management system certifications since October 2017, together with the approval from the Myanmar Investment Commission in December 2017 to export out of the country, Daibochi Myanmar would now seek to enter qualification with MNCs to support their regional expansion programmes.

Bursa Malaysia Q4 FY2017 Results

The introduction of the stamp duty exemption for exchange-traded funds and structured warrants effective from 1 January 2018, is expected to enhance trading and vibrancy in the equity market. Bursa Malaysia will continue with its initiatives to enhance the breadth and depth of the ecosystem, amongst others, through the digitalisation of services, liberalisation of rules framework and greater diversification of the investor base to ensure that the Malaysian equity and derivatives markets are attractive and vibrant.

Datuk Seri Tajuddin added, “Our initiatives put in place over the years have built a strong foundation that has placed us on a firm footing to capitalise on new opportunities. In 2017 alone, the Exchange launched the Islamic Selling and Buying Negotiated Transaction and made a revision in the tick rule to provide market participants with greater price flexibility in performing regulated short selling. We will continue to work closely with our intermediaries to improve liquidity and increase trading activities. Similarly, we will expand our marketing efforts to build a strong IPO pipeline and look forward to rolling out our initiatives aimed at widening our products and services to create a conducive capital market
ecosystem for all market participants.”

Tasek Q4 FY2017 Results

The Board expects the intense pricing competition to continue to the next quarter and affect the Group’s performance. Construction works on the Government’s infrastructural projects of the MRT2 (SSP Line) and the LRT3 (Bandar Utama – Klang Line) are expected to improve demand for cement for this year. However, the soft property market is expected to continue to weigh down the demand for cement.

Focus Lumber Q4 FY2017 Results

We foresee the price of logs hovering at this level based on the current market supply and demand as well as our cost in securing logs supply. Operating environment is very challenging if the Ringgit Malaysia remains strong throughout the next financial year. However, selling price in US dollar which is increasing recently has partially offset these negative impacts.

Hartalega Q3 FY2018 Results

Nitrile glove now accounts for 61% of Malaysian rubber glove export.

Hartalega aims to launch its anti-microbial gloves in Europe by second quarter of 2018 and is working on securing Federal Drug Administration (FDA) approval to enter the US market. We will price this new product competitively to encourage better take up.

Scicom Q2 FY2018 Results

Over the course of the year, whilst the BPO division did not lose any major clients, the revenue contribution for some of these key clients decreased. The primary driver was an adverse change in market conditions for these multi-national clients. As a result, there has been a corresponding drop in customer interactions which led to a subsequent decrease in billable headcount. However Scicom does not expect this situation to deteriorate further with our current clients and the management further expects to increase revenues on the successful conversion of a healthy pipeline built over the last 12 months.

Hup Seng Industries Q4 FY2017 Results

Stronger market demand for biscuits mainly contributed to the positive growth in sales. Export sales of biscuits grew by 6% mainly from China market. Domestic sales grew by 5% mainly from modern channel.

Escalating input cost eroded margin growth of the Group despite an improvement in turnover. Higher promotional expenses and other operating costs including fuel costs also depressed the profit performance.

Salutica Q2 FY2018 Results

The touch enabling functionality application to other various industry segments such as automotive and electronic appliances will be one of the segment which our Group will continue to focus in order to generate additional revenue stream, albeit at a slower pace. Meanwhile, the development of healthcare related products under in-house brand FOBO is still ongoing.

Tasco Q3 FY2018 Results

However, as our recent acquisition of Gold Cold Transport was fully financed via bank borrowings, our bottom line was significantly impacted by higher finance costs. In that respect, the Group would be evaluating the various ways and available options, in order to mitigate this situation in the medium term. Going forward, the downside risks for the Group would continue to be rising operational costs (in particular, relating to manpower and fuel costs), higher interest costs due to aforesaid reason, and keen competition for cargo in our traditional core businesses. We will continue to maintain our strategy to focus on servicing our customers with innovative logistics solutions and expand our logistics capacity when it is beneficial to our shareholders’ value.

JHM anticipates boost from new orders in 2H18

JHM designs and develops MECs that are used in subsegments of the electronic component industry, and electronic devices like digital cameras, mobile phones, personal digital assistants and automobile lightings. In both the automotive and aerospace segments, it manufactures, among others, MECs for the production of high brightness light-emitting diodes (LEDs).

“Although we have orders to fulfil in the automotive segment, we are being hampered by the material shortage, including for passive components like resistors and capacitors, which are being bought up by big players. So, we have money to buy, but we are not able to do so. In any case, we expect the situation to recover in the second half of this year,” Tan said.

“We are also aggressively working to penetrate the Japanese and European markets. In Japan, we have met with one of the biggest automotive light makers there, who is satisfied with our capability and set-up. We are now waiting for them to give us the request for [a] quote. In March, we will be allowed to bid for two projects. If our price is good for them, we will go for maximum production, meaning FY18 would end on a very good note,” he said.

“Mace has a good customer base, including multinational corporations. We intend to tap and expand our printed circuit board and assembly (PCBA) business. Since we are already in the PCBA business, Mace’s contribution will help stabilise our business, instead of the group having to depend only on the LED automotive segment,” he said.

The PCBA business is part of the automotive segment (which generates 80% of its revenue). Meanwhile, some 12% of its turnover comes from industrial products, under which JHM makes box builds for vending machines and fan controllers. The remainder of the group’s turnover comes from its telecommunications segment.

Fernandes: India to be a big market for AirAsia X

“Super proud of the turnaround happening at AirAsia X. We need to finish off cleaning up the balance sheet in the fourth quarter, but we are going to have a good year in 2018. We are now taking the very good value (Airbus) 330 to fill our capacity before moving to the next generation of aircraft, either the (Airbus) 330 neo or (Boeing) 787. I am very, very bullish on AirAsia X.”

“Stars lining up, ringgit strengthening and oil going down as we predicted. There is just too much oil and with shale, fuel demand will continue to go down.”

Scicom to develop tourism management system for Cambodia

In a stock exchange filing today, the company said the project period is five years, with an option to extend for two more years. “The anticipated revenue from this contract is predicted on the number of air travellers to and from the Kingdom of Cambodia,” it said, but did not indicate the estimated value of the project. It expects the project to contribute positively to the earnings and net assets per share of the company going forward.

Company Notes 2018.02.02

Lotte Chemical Titan Q4 FY2017 Results

The delivery of Polyolefin products in China and Malaysia is expected to be slightly reduced by the Lunar New Year festive holidays. However, the demand from other SEA countries is expected to remain stable. Olefins and Derivative is expected to be better in view of upcoming regional crackers turnaround from March 2018 and active restocking by China supported by higher derivative margins for Styrene Monomer and Ethylene Glycol.

Can a $1.2 Billion casino lure Asian tourists to the Catskills?

Empire Resorts is not technically part of the Genting group, a conglomerate that operates cruise ships, manufactures paper and runs palm oil plantations in addition to its hotel and casino businesses. Instead, a private investment company controlled by Lim owns more than 90 percent of Empire shares. Last year, Empire reached an agreement to use Genting’s Resorts World brand and participate in its Genting Rewards Alliance loyalty program in exchange for a single-digit percentage of net revenue, according to an Empire filing with the Securities and Exchange Commission.

Kim Teck Cheong is here to stay, says Lau

“I’m very positive [about our growth] as we are now in [the] consolidating stage and even though the profitability may not recover as fast as what I would want it to, at least I know I have a plan and direction for the company. I’m not running away, I’m still around, I’m still the same person and I’m still working on it and I think shareholders should ride with me,” said Lau. Our customers have demonstrated they are supportive of us [with the contracts offered].”

As of end-FY17, the group had 7,355 sale and distribution points covering over 84 districts, of which it distributes more than 200 third-party brands for 37 brand owners. The distribution of third-party brands contributes about 90% to the group’s revenue, while the remaining 10% is contributed by its own line of frozen, dry and bakery products under its Orie, Bamble and Creamos brands. The group’s revenue is contributed mostly from its Sabah operations at 68%, followed by Sarawak at 23%, Brunei 5% and Labuan 3%.

Better earnings visibility, prospects for Cypark

Listed on the Main Market of Bursa Malaysia in 2010, from a pure construction player, Cypark has today transformed itself into an integrated environmental engineering and technology provider, which Daud deemed it as “resilient to any other economic cycle”. Daud highlighted that the company had undergone a business transformation shortly after its listing. Cypark had diversified into environmental engineering and solutions, renewable energy — WTE and solar, as well as green technology.

“We have to stay competitive and be innovative with our products as even big companies such as Petronas, MRCB, and Malakoff want to enter this industry,” said Daud, adding that Cypark will be replicating the floating solar plant model, and it aims to bring down the cost of making it by 10%. Due to the scarce availability of land, Daud opined that Cypark wants to offer something that is very sustainable. “As a tropical country, we are blessed with a lot of reservoirs and they have no economic use,” said Daud. Hence, Cypark had offered to lease the space from the reservoirs, from the local authorities, and dams to place its floating solar plant.

PeterLabs aims to execute tech-based portfolio this year

“Fatfish Ventures is a technology venture group and it invested in PeterLabs to enhance our value through its network and resources. Fatfish Ventures is the master of adding value. Fatfish Ventures knows how it can identify the technology trend, the major consumer behaviour trend and invest in the major trend which could help the company.”

TMC Life Sciences on acquisition trail

TMC needs to grow in size in order to achieve greater economies of scale, and that an acquisition of a complementary business would better enable such a goal.

Quek said that the group is planning to finance between 30% and 40% of the RM1.2 billion Thomson Iskandar Medical Hub in Vantage Bay, Johor. The hospital, which will be equipped with an initial 500 beds, is expected to be completed in 2020.

With the expansion of its Tropicana Medical Centre in Kota Damansara from 200 beds to 600 beds, TMC hopes to see an increase in patients, especially as connectivity is improved to the hospital via the Kota Damansara mass rapid transit station and the completion of the Damansara-Shah Alam Elevated Expressway.

Malaysia’s capital will adopt ‘smart city’ platform from Alibaba

City Brain was first adopted by the government of Hangzhou, Alibaba’s home city, in 2016 to help run operations more efficiently. That’s quite a nebulous scope of work, but essentially the service pulls in all kinds of data — including video feeds, social media and traffic information — which is then processed to provide information that helps to manage daily activities. That could be responding to a traffic accident, or providing the data to redesign parts of the city to reduce vehicle congestion.

Company Notes 2018.01.26 Q2 FY2018 Results

The KLCI only includes the 30 largest companies in the Malaysian stock market. The only criterion for a stock to be included in the KLCI is the company’s market capitalisation, with no consideration given to the company’s fundamentals. This selection methodology is totally different from Berhad’s value investing strategy. Besides, the KLCI is a 100% equity only index, but Berhad’s is permitted to be 100% invested in equities or to be 0% invested in equities. GIPS or the Global Investment Performance Standards recommends that an appropriate benchmark must reflect the investment mandate, objective, or strategy of the portfolio.

Based on this, there is no suitable benchmark for Berhad considering its long-term absolute return objective and eclectic value investing strategy. Considering the nature of Berhad and how KLCI is constructed, I am of the opinion that the most appropriate benchmark would be the yield of the 5-year Malaysian government bond.

For the quarter ended 30th November 2017, the cash holdings of Berhad have fallen further as we have bought some shares. Finding attractive stocks to invest with sufficient margin of safety remains our focus.

UCrest Q2 FY2018 Results

Palette has moved into the medtech space with the significant investment made over the past few years on the development of imedic, the mobile health system. imedic enable patients to have wireless medical devices at home or anywhere, to regularly make measurement and upload the vital sign data to the Cloud. This would allow doctors from anywhere in the world to have access to the patient’s data 24×7 to review and provide online consultation to the patients. More than 15 devices have been developed to connect to imedic including CPAP machines for sleep apnea patients. The Company will continue to invest in the innovation and development of its next generation of imedic with extensive artificial intelligence (AI) technologies performing analytic on the “Big Data” of the patients and make useful recommendation of diagnosis and treatment plan to the doctors and patients.

The Company has effectively combined the latest innovative technologies: medtech, AI and Big Data in imedic. The power to be unleashed from these 3 technologies could be enormous.

CapitaLand Malaysia Mall Trust Q4 FY2017 Results

The decrease was mainly due to negative rental reversions from Sungei Wang (SW), as SW continues to be affected by the closure of BB Plaza. Lower gross revenue was recorded for The Mines (TM) mainly due to lower rental rates and occupancy whilst lower gross revenue in Tropicana City Property (TCP) was mainly due to lower occupany at the office tower and softer demand for promotional space at the mall. The decrease was mitigated by better performance from Gurney Plaza (GP) and East Coast Mall (ECM) on the back of higher rental rates and gross turnover rent.

Pensonic Q2 FY2018 Results

The Group is developing our Digital Customer Relationship Management. The objective of the platform is to provide customers with direct after-sales service solutions with easier online service calls, marketing automation, e-commerce, royalty programme and smart appliance management.

The Group has also started our e-commerce and partnership with various reputable marketplaces, as well as TV shopping channels. We have seen significant improvement in revenue. However, it is still minimal comparing to the total group revenue. With the e-commerce platform, we will be developing our Online-To-Offline commerce with our existing dealers to create a win-win business solution in this trending e-commerce market. We are expecting a full force digital marketing by end of the 2018.

On top of that, the Group is in the process of securing 2 new distributorships of electrical appliances brands from United Kingdom. These distributorships cover Malaysia and Singapore and is anticipated to contribute to Group revenue in mid to long term.

Suiwah Q2 FY2018 Results

The Group will continue to seek further opportunities to embrace Retail 4.0 (Industrial Automation) by leveraging technology and reinventing value add offerings, which we expect the momentum to be sustained going into 2018.

Manufacturing revenue was slow this quarter due to delay in some customers’ product launch. The new expansion project at Batu Kawan is progressing well and is as per schedule to be completed by next quarter.

GHL to offer Alipay services in Philippines

“The company started with Alipay in 2016 in Thailand and Malaysia in April 2017 and now with the Philippine market, GHL looked to expanding further to the region as Alipay’s key Asean partner.”

To date, GHL Thailand has enabled over 900 merchant acceptance points and GHL Malaysia has enable 5,400 acceptance points in the hotels, retail chain stores, convenience stores and F&B space which has high Chinese tourist foot traffic.

GHL said 810,807 tourists from China visited the Philippines during the first 10 months of 2017, compared to the whole of 2016, which totalled 675,663.

“With the implementation of the visa upon arrival programme in the Philippines, it is expected to grow further. This bodes well for Philippine businesses and merchants as Chinese tourists generally carry the Alipay mobile wallet.”

Texchem to open 80 more Sushi King outlets by 2021

“This year, the capital expenditure of the group is planned to be around RM35mil, of which RM30mil is for the restaurant division while the remaining RM5mil will go to the industrial and polymer engineering divisions. There are presently 19 Yoshinoya and Hanamaru restaurants nationwide. Subsequently, there will be 20 new Sushi King restaurants opened each year until 2021.” Konishi said the group would also this year set up five new Yoshinoya and Hanamaru restaurants, costing about RM750,000 each.

“The polymer engineering division makes semiconductor trays and packaging for hard-disk drive. There are plans to diverse into manufacturing products to support the medical device and life science industries.”

Mexter’s healthcare business takes off

“The healthcare industry is a comparatively stable market and is anticipated to compensate for business cycle fluctuations. Mexter has chosen mother-and-child-related healthcare services as its maiden focus in the healthcare segment as Malaysia has a relatively young demographic, which makes this sub-segment an attractive business proposition with good long-term viability”

“This would make Mexter the first listed company in Malaysia (and globally to the best of our knowledge) to have postpartum care as its primary business,” CIMB Research stated.

IoT solution is Mikro MSC’s new growth driver

The new IoT solution would be a preventive solution for its consumers, as the real-time data and information collected could indicate if there are any possible defects. “For example, if the heat being released is more than usual, it could be an indicator that some parts have aged or need replacements. This helps avoid any disruption to our customers,” Fong added.

“It has taken longer than we expected to move to the new factory due to some approvals [that needed to be obtained]. Nonetheless, we are looking to complete the move by the first half of this year. Once all the new machines and automation are set in the new factory, they will also help enhance the efficiency of our operation. All these will eventually add to the bottom line moving forward.”

Saudee’s food service revamped

“We cannot keep operating a business-as-usual mode and expect to see changes in our earnings,” said Chong. Early last year, the group pulled up its underrated food service segment — involving the supply of ready-to-eat food products to restaurant chains — a non-core unit under the FPP sector, which was given a new lease of life. Chong said the measures were put in place in the second half of FY17.

“People tell us to sell cheap, but we don’t want to be branded in that category. We had no choice but to refocus on food service. The original equipment manufacturing (OEM) and exports under the FPP segment would remain. We want to do premium products only,” he added.

Saudee is also in discussions with a distributor in Japan to expand its food service business there. The group only supplies one OEM brand to Japan. Chong said more than 90% of its revenue is derived from Malaysia, with the FPP and trading segments contributing equally. Within the FPP, Saudee’s “own brand” product section makes up almost 80% of the business unit’s revenue.

“We are chopping the volume of trading tremendously because we don’t believe in that so much. It has incurred losses in the past. It gives revenue but not profit. We cannot control forex … it is unpredictable. We have to buy food products with cash. We have no time to react to forex [fluctuations]. It is like a hedging gambling business, which we don’t want to engage much in,” he said.

Perodua, Proton to be hit most by lending guidelines

“The continued high rejection rate for loan approvals will still be among the most difficult challenges not just for consumers but car companies,” MAA president Datuk Aishah Ahmad told a media briefing. “Excluding luxury vehicle sellers, as their markets have the money to easily buy their products, it’s the local players which will be affected the most.” Aishah pointed out two prevailing issues which could reinforce more stringent lending practices, namely the implementation of the Malaysian Financial Reporting Standards 9 (MFRS 9) since Jan 1, 2018, as well as the high household debt levels.

Ireka joins China firms to explore driverless rail transit

CRRC UT president Gu Yifeng said the ART system, developed by China-based CRRC Group, is already operating in Zhuzhou, China and the company intends to make Malaysia a springboard to the rest of Southeast Asia. “Why we chose Ireka? From what we have seen, Ireka has been in the construction industry for the past 50 years and it has a strong technical capability, focusing on professionalism,” he told a news conference after the MoU signing ceremony yesterday. Our investment in Ireka was a good start for both companies to create a synergistic collaboration and investment. If the Malaysian market requires us to invest more, we will definitely do so.”

“Construction still accounts for almost 90% of our turnover and our outstanding order book currently stands at about RM400 million, which should keep us busy for two years.”

Stronger ringgit good for F&N as net importer

“A stronger ringgit is definitely good for the group and its overall business. For example, we import a lot of dairy products, especially raw materials, from several foreign countries and transactions are predominantly done in the US dollar.”

“The first quarter [ended Dec 31, 2016 or 1QFY17] was a bit tough for us as it was the peak [of raw material costs]. But now, we can breathe a little.”

“Our products are for the masses and for that reason, we believe increasing prices are the last thing will consider. As it is, sugar prices are moderating, so increasing prices is not on the cards.”

iPay88 online transactions hit RM6.6bil

“In the month of January 2017, we recorded a little less than two million mobile-type online payments. Moving onward to December 2017, in that month alone this number shot up to 3.5 million mobile online transactions.”

“More shoppers are now accessing the shopping sites using a mobile (device) than a desktop. iPay88 statistics show that the trend of m-Commerce has been changing since 2015. In the first quarter of 2015, desktop transactions doubled mobile transactions. Subsequently in the first quarter of 2016, mobile transactions were on par with desktop transactions.”

US tariffs to hit Malaysia PV exporters most

Malaysia has emerged as the largest exporter of PV cells and modules to the US with a market share of 25% by value and 30% by capacity in 2016, benefiting from the fall in China’s share from a peak of 59% in 2011 to 21% in 2016 after the US imposed anti-dumping and countervailing duties in 2012. The US government alleges that China’s PV manufacturers evaded these tariffs by subsequently shifting PV production to countries like Malaysia, Singapore, Germany and South Korea.

“UN Comtrade data shows outbound shipments of PV products to the US comprised 1.1% of Malaysia’s total exports in 2016. According to a Malaysia Investment Development Authority (MIDA) survey in 2016, 89% of Malaysia’s total PV production was exported.”

Company Notes 2018.01.19

Sasbadi Q1 FY2018 Results

The higher revenue recorded by the Digital & Network Marketing Division ws due to our network marketing/direct sales business continuing to gain momentum. The higher revenue recorded by the Print Publishing Division was due to better performance arising from more timely publishing and introduction of new titles to the market coupled with higher revenue from new textbook contracts with the MoE.

edotco Malaysia eyes higher market share

edotco, a 62.4%-owned subsidiary of Axiata Group Bhd, owns about 4,000 telecommunication towers and manages another 5,000 towers for its customers in Malaysia through its wholly-owned unit edotco Malaysia Sdn Bhd.

According to a 2016 industry report by TowerXchange, edotco Malaysia had the third-largest tower count in the country, at 3,600 as at end-2014, after YTL Communications Sdn Bhd’s 5,000 towers and Maxis Bhd’s 3,800 towers. DiGi.Com Bhd, which ranked fourth in the report at the time, had 3,400 towers, followed by the combined portfolio of 3,200 towers owned by 14 state-backed tower companies (towercos).

Suresh said the Malaysian telecom tower industry has been growing consistently at a pace of between 1,000 and 2,000 towers per year. “In the last few years, this pace of industry growth was probably okay. But given the increasing investment in 4G by [mobile network] operators, perhaps it can accelerate a little bit over the next one or two years. Data growth is really driving the change, basically customers want more and more what we call ‘infill’ to boost capacity on top of existing coverage. These infills or towers as we call them could be a lamp pole, a camouflaged structure or maybe a signboard. In Kuala Lumpur we can only [affix new small cell antennas] on lamp posts or street furniture now, and no longer build a tower,” he added.

BCM eyes earnings growth

Cypress supplies medical devices to 220 pharmacy retail outlets, 48 medical equipment dealers and two wholesale medical equipment dealers, with notable names like Caring Pharmacy, Multicare Health Pharmacy, and RedCap Pharmacy.

The acquisition of Cypress also comes with a profit guarantee of RM600,000 for the first year.

Being in the distribution space, BCM Alliance is subjected to risks of short-term contracts. For example, distribution agreements and service contracts generally have short tenures, averaging at one to two years. However, BCM Alliance banks on its track record, having been a long term distribution partner to several brands, with some partnerships established for 14 to 15 years, like Hitachi Medical.

Additionally, under the Medical Device Act 2012 (Act 737), clients who purchase medical devices from distributors are mandated to seek after sales services from the same distributor. Hence, BCM Alliance is further protected from competition by third party service providers and is ensured of renewed service contracts. “This act is enforced beginning January 2018, and also applies to the trade of certified and registered medical devices. This weeds out the sale of substandard and uncertified medical devices, particularly in the pharmacy market,” says Liaw.

Battersea Power Station stake sold as part of $2.2 billion deal

Surveys identified “significantly worse” asbestos risk in the power station building and the cost of removing it was “substantially higher than originally envisaged”, the developer said in a separate letter to the borough council last year. The complexity of restoring the chimneys and additional foundation works also increased costs, it said.

Construction work on the building is due for completion in 2020 and about a quarter of the space will be leased to Apple. Most of the 250 apartments included in the property have already been sold.

Stronger ringgit a boon to healthcare sector

The strengthening ringgit is also a boon. “For the past few quarters, the operating costs for healthcare providers have shot up due to the higher US dollar against the ringgit, which has left healthcare operators with higher cost for medical consumables. Therefore, with the improving ringgit, we opine this will help stabilise an otherwise increasing cost of operations for healthcare providers,” said MIDF Research.

Should this government-backed national health insurance system become a reality in Malaysia, private healthcare operators in the country are poised for a major step-up in revenues and profits, according to AmInvestment Bank Research’s Ng. “Under a national health insurance system, theoretically, citizens can choose between seeking treatments in a public or private hospital. While a patient seeking treatment in a private hospital will still incur a higher cost versus a public hospital, the general price differential between the two hospitals should narrow,” he said.

“The local private healthcare sector has an added catalyst, that is, medical tourism backed by its highly competitive medical charges and hospitalisation costs [versus those in developed countries], a generally English-speaking population as well as various incentives provided by the government,” it added.