Company Notes 2018.01.12

AirAsia Group may relist M’sian ops to unlock value

“There is nothing to prevent us from listing some shareholdings in AirAsia Bhd [in the future]. What we are creating now is a vehicle (AAG) where some people may want [exposure to] the Malaysian risk or some people may want [exposure to] the group’s risk.”

“That (listing Malaysia AirAsia) is a potential plan. Ideally, we really want to convert all the interest [in all subsidiaries and associates] into one economic unit. So, let’s assume 51% of foreign associate shares could be swapped for AirAsia Group shares and that requires a lot of work such as legal [requirements], but now we have a vehicle to start working towards that.”

“This is also to enable our investors to understand the group better going forward. We hope to consolidate all of Asean’s businesses very soon, [with] Thailand being the next, hopefully, and then we will also give investors individual profit and loss statements, so that they can look at them. This is the first step of combining AirAsia into one economic unit [towards] our dream of creating a single public holding company, and aligning all shareholders.”

Note that Thai AirAsia Co Ltd is 55%-owned by Stock Exchange of Thailand-listed Asia Aviation PCL (AAV). AirAsia Bhd has an effective interest of 45% in Thai AirAsia and 49% in Indonesia AirAsia (IAA). Plans are in the works to list 39.9%-owned AirAsia Philippines Inc this year.


CIMB cuts stake in asset management firms

The group announced yesterday that it had entered into sale and purchase agreements to divest a 20% stake in CIMB-Principal Asset Management Bhd (CPAM) to Principal International (Asia) Ltd (PIA) and a 10% stake in CIMB-Principal Islamic Asset Management Sdn Bhd (CPIAM) to Principal Financial Services Inc (PFI).

“CIMB is expected to recognise a gain on disposal of about RM950mil and a Common Equity Tier 1 (CET1) ratio improvement of about 18 basis points upon completion of the proposed divestment,” it said in a filing with Bursa Malaysia. The group’s CET1 ratio stood at 120% as of Sept 30, 2017.


Ta Ann to buy 30.39% stake in SPB for RM170mil

“The proposed acquisition is consistent with the company’s plan to further expand its oil palm plantation business and gain larger market access in Sarawak,” Ta Ann said.

Ta Ann said its planted area would likely be enlarged by about 23%, given the group’s 30.39% stake in SPB.


Malaysia airports hit record 96.54 million in 2017, driven by international traffic

For the entire year of 2017, passenger traffic at the 39 airports in Malaysia improved 8.5% to a record 96.54 million from 88.98 million in 2016. International passenger movements grew 14.1% to 49.4 million passengers over 2016, while domestic traffic rose 3.2% y-o-y to 47.14 million. MAHB said this is the second highest increase in absolute passenger numbers achieved in the last 20 years.

On prospects, MAHB said Malaysia passenger traffic in 2018 is expected to grow at 6.3%, with international and domestic passenger traffic growing at 8.3% and 4.2% respectively.

“The growing travelling local population, combined with [the] increase in the per capita income, will further support air travel growth,” it said, adding that passenger growth prospects for SGIA in 2018 is expected to remain moderate.


SCGM sales strong on demand for ‘lifestyle’ packaging

Having invested RM153 million in the two new factories, Lee said he is confident the group’s output would steadily increase, allowing SCGM to cater to export markets, which the group wants to place more focus on. The group’s revenue is currently contributed by a 70:30 ratio from the domestic and export markets respectively. Moving forward, as it taps into new markets, the group intends to shift the ratio to 60:40, said Lee.

“This sort of demand for pre-cooked or frozen food is still very new in Malaysia. It’s not something that people are familiar with. If you look at Family Mart today, many of its customers are Caucasians, foreigners or tourists rather than locals. They are already accustomed to the novelty of microwaveable food or ready-to-eat food sold at stores such as this. “We believe, moving forward, the demanding lifestyle and commitment of the middle-aged population will gear towards this trend rather than cooking at home. If you look at Hong Kong, it has a 70% takeaway rate. Singapore is about at a 30%-40% rate,” said Lee.


KUB still seeking buyer for A&W Malaysia

KUB is currently in an extended franchise agreement with A Great American Brand until June 2019. Under the agreement, KUB is obliged to open 25 new A&W restaurants in three years, which will bring the total number of A&W restaurants in Malaysia to 52 by the end of 2019. Although KUB is committed to honouring the contract, Abdul Rahim said it is on a capital rationalisation phase as it embarks on a strategic plan to refocus its business activities on three core sectors, namely energy, information and communications technology (ICT), and agro.

“We don’t want to end up like in Thailand where we lost the franchise licence [to operate A&W restaurants there]. It’s better to sell it when we still have the rights so that the buyer can consider that in their [offer] price,” he said.


Mydin puts Sam’s Groceria stores up for sale

Ameer estimated the grocery business to be worth RM50 million. The planned sale comes on the heels of the disposal of its loss-making MyMydin convenience store business in April last year. It also discontinued the Kedai Rakyat 1Malaysia (KR1M) stores in October 2017. “We decided to sell Sam’s Groceria after realising that the stores’ patrons are mainly local Chinese and expatriates. (However,) we do not sell liquor, wine, beer or pork at our stores and thus, we have been unable to meet our customers’ needs,” he told The Edge Financial Daily.

Ameer said currently, Mydin Holdings has 62 stores under its portfolio excluding Sam’s Groceria. According to Mydin Holdings’ website, Sam’s Groceria is positioned as a premier urban grocer and 60% of its products are fully imported brands. It opened its first flagship store in Gurney Paragon Mall in 2013.

A check with the Companies Commission of Malaysia revealed that Sam’s Groceria Sdn Bhd is also loss-making. It posted a net loss of RM27.49 million on revenue of RM63.16 million in FY16. Accumulated losses stood at RM42.05 million as at March 31, 2016. Sam’s Groceria also has RM101.8 million in total liabilities, of which RM84.54 million are current.

Company Notes 2017.07.14

Lonpac Insurance in a filing with Bursa Malaysia

The Malaysian general insurance industry registered a reduction of 2.7% in gross written premium for the first quarter of 2017. With the implementation of Phase 2 of the Liberalisation Framework effective 1st July 2017, whereby motor insurance for comprehensive cover and third party fire and theft will be detariffed, we expect Lonpac to face stiffer competition in the second half of the year as insurers operating in the new liberalised environment scramble to build
their respective market share.

 

Malaysia Airports in a filing with Bursa Malaysia

1H17 passenger traffic registered 9.5% growth with 61.7million passengers. International traffic grew by 13.0% while domestic grew by 6.8%.

Malaysia passenger traffic grew by 13.5% in June 2017. International traffic grew by 17.2% while domestic traffic grew by 10.0%.

KLIA Main Terminal and klia2 both registered double digit growth with 11.0% and 19.1% respectively over June 2016 passenger numbers.

 

Postpaid + Prepaid
Cost Management

Digi.com in a filing with Bursa Malaysia

…our 4G LTE and LTE-A network coverage reached 86% and 45% of the population nationwide, supported by 9,000 LTE sites and 8,000 km of fiber network.

Our data traffic delivery continued to show healthy 1.4 times growth year-on-year as 4G subscribers surged to 66% of total smartphone subscribers from 43% a year ago.

We will further capitalise on Digi’s robust 4G Plus network, now enhanced with LTE 900Mhz, VoLTE and VoWiFi capabilities to strengthen our products and services offering and to drive new opportunities from enterprise business and solutions.


Zhulian in a filing with Bursa Malaysia

We also look forward to improving the contribution from the MLM segments especially from our Thailand and Myanmar markets in order to drive growth momentum for overall Indochina market once we materialise our plan to enter Cambodia and Laos market. The Group will continue to adopt rationalisation in our business operations.

Top-brass change part of revamp — Malaysia Smelting

“The process of relocation is a major decision and will take much planning and time. The Butterworth smelter has been operational for over 100 years and a technology upgrade in our overall smelting process would be beneficial for the business. The Port Klang plant which was acquired last year will be retrofitted into a world-class tin-smelting facility, before we commence the licence application process [for the plant].”

“So far, tin prices have remained strong in 2017 at an average market price of approximately US$20,000 per tonne, from average tin prices of US$17,900 per tonne in 2016 and US$16,000 per tonne in 2015. Rising tin prices will have a more direct impact [on] the profitability of our tin mining division and a lesser impact on the profitability of our tin smelting division.”

“A key initiative to achieve this would be to upgrade our furnaces to that of the latest Top Submerged Lance (TSL) type which is a much more efficient process, in terms of costs and environmental care. The new TSL furnace will enable us to have an even more comprehensive and efficient smelting process and may also be expanded to handle a larger volume of feed materials, using oxygen enrichment.”


Takeover offers for KUB and Wang-Zheng ‘not fair and not reasonable’

“Based on the sum-of-parts valuation method, we have derived the estimated fair value for the entire equity interest in KUB of RM885.11 million or a fair value per KUB share of RM1.59.”

“The offer price of RM1.14 per share is not fair, taking into account that it is lower than our estimated range of value of between RM1.16 and RM1.39 per Wang-Zheng share…also represents a discount of 25.49% to the last traded price as at the latest practicable date (LPD).”

…taking into account that both KUB and Wang-Zheng shares are relatively liquid and will remain traded on the Main Market of Bursa, shareholders will have the opportunity to realise their investments in the open market after the closing date (though there is no assurance the shares will continue to trade at current price and volume levels after the closing date).


Lotte Chemical Titan dips below IPO price

“At this moment, the spread from the conversion of polyolefin into feedstock naphtha is still at US$700 per tonne. This is a very comfortable [level] for us.

“Oil prices [have] traded between US$30 and US$60 per barrel over the last three years. We believe that there will be no sudden spike in the pricing in the next two years, and we are comfortable with anything below US$60 per barrel.”

“We believe the market can absorb [the supply] of polyolefin products, and independent market researchers share a similar view.”


Lotte’s chemical reaction

Back when Lotte took the unit private, the global economic recovery was driving strong demand for the raw materials used to make plastic and synthetic fibers used in everything from appliances to automobiles. But as the years went on, Lotte Chemical did almost nothing to expand capacity — unlike its global competitors — despite having ample cash.

In the absence of investment, revenue growth slowed. Lower prices for inputs such as oil have helped prop up profit but as the sales outlook for products like cars weakens, demand for Lotte’s offerings has waned. Meanwhile, raw material prices have declined and overcapacity in China is further pressuring the industry.


Alliance says it can go it alone

“As far as we know, nobody is courting us [or] said anything about wanting to come in [and] takeover. Nothing is in the pipeline as far as we know, but we don’t know what the shareholders are doing. They could have something at their level but we have no clue.”

“Like every other bank, [the group will make] a one-time adjustment in FY18 but we don’t anticipate this adjustment to be very large as we already have a 1.2% [of total loans] regulatory reserve that has been booked to buffer the impact.”

…the adoption of MFRS 9, which will change the provisioning methodologies from incurred loss to expected loss, is expected to lead to higher credit costs for banks as they will have to make provisions for new loans upon adoption.


Tencent’s WeChat Pay seeks licence for local payment services in Malaysia

If approved, users in Malaysia will be able to link their local bank accounts to WeChat Pay and pay for goods and services in ringgit.

At present, WeChat Pay can be used at over 130,000 shops in 13 foreign markets — including in the United States, Europe and Japan — and supports 10 currencies.

“The short-term target is still Chinese tourists. The priority is nearby countries most frequented by them, such as those in Southeast Asia.”


Najib announces four more services to be GST zero-rated

1. Pescribed services performed in connection with goods for export where the service is supplied to overseas customers.

2. Prescribed services supplied in the Free Zones, including Licenced Manufacturing Warehouses (LMW), to overseas customers.

3. Research and development services provided for overseas customers.

4. Non-recurring expenditures incurred as engineering expenses including tools and machinery used in the manufacturing process of goods.


BNM maintains OPR at 3%

“The Malaysian economy performed better than expected in the first quarter of 2017. Growth was lifted by stronger domestic demand, with additional impetus from exports.”

“Banking system liquidity remains sufficient with financial institutions continuing to operate with strong capital and liquidity buffers. The growth of financing to the private sector has improved, consistent with the pace of economic activity.”