Regional Notes 2018.03.30

China’s push for tech self-sufficiency threatens Asia’s exporters

But at the same time, there’s been a spike in sales to China of precision metal working machines and equipment for making chips from firms like Japan’s Yaskawa Electric Corp. With a Chinese state-backed fund gearing up to pour as much as $31.5 billion into homegrown semiconductor manufacturing, there’s potential for trade flows to start to shift.

Yet the direction is clear: Beijing is aiming higher and it has the resources to reach its destination. And that will mean difficulties for many companies around the region. “China, in a very short period of time, is rapidly going up the value chain,” said Gary Hufbauer, senior fellow and trade specialist at the Peterson Institute for International Economics in Washington, speaking from Taos, New Mexico. “They will produce the things that Korea and Japan are now producing, and Korean and Japanese firms have a big challenge to try to keep ahead on the technology.”


Uber pulls out of Southeast Asia, selling operation to rival Grab

The cease-fire marks a victory for Grab as well as SoftBank Group Corp., the biggest shareholder in both companies. Masayoshi Son’s firm is pushing to reduce competition in a Southeast Asian ride-hailing market forecast to reach $20.1 billion by 2025. Uber and Grab, together with two other SoftBank-backed ride-hailing firms — India’s Ola and China’s Didi Chuxing — provide about 45 million rides a day, according to SoftBank presentation material in February.


Regulators to ensure Grab-Uber deal will not erode competition

“We will ensure that no one single market player dominates the sector to the detriment of commuters and drivers,” an LTA spokesman said. The LTA added that it was reviewing a regulatory framework to license private-hire car operators “to keep the private-hire car and taxi industries open and contestable”.

The CCS said Singapore’s competition laws prohibit mergers that may result in a “substantial lessening of competition”, and indicated that it could “require the merger to be unwound or modified” to prevent an erosion of competition. It said it could also issue “interim measures” before it made up its mind.

The taxi company agreed in December to pay some $640 million for a 51 per cent stake in Uber’s Singapore rental car fleet. ComfortDelGro spokesman Tammy Tan said: “We are reviewing all aspects of the proposed tie-up with Uber Technologies, which is currently under review by the CCS.”

Pentamaster plans dividend in two years

“Currently, 50% of our exports go to mainland China, including to US-based multinational corporations located there. We expect the exports to rise to 60% in the near future. The business opportunity is great which is why we are expanding our facilities.”

“I think KWAP is seeing the potential in the future of technology we are in — 3D sensing. It is going to be used a lot in autonomous cars and electric vehicles. We have developed a 3D sensor testing capability to test the component that can be used in telco, automotive and smartphones.”

He said five years ago, PCB only focused on automotive handlers without test solutions, which “anyone could do”, so he built the handler with tester as a complete ecosystem to reduce competition.

“We are also looking to secure more IARM business from the US. We have secured a few now. This segment has a lot of growth potential because of Industry 4.0 where factories look to becoming fully automised. Our technical sales unit in Sunnyvale, US, would be able to discuss with clients regarding requests for quotations and proposals. Proximity to our clients is key, hence we see our US business growing. More so now with the US placing 30% tariff on raw materials which would make manufacturing in US expensive.”


US tariffs may hurt Malaysian technology firms

However, a report last Friday by Nomura highlighted US trade protectionism and a sharper-than-expected slowdown in China as bigger risks to the Malaysian economy, as exports account for 71% of GDP. “We estimated Malaysia’s ultimate exposure to the US — including via intermediate goods to China for assembly into final products destined for the US — at 10% of GDP, about half of which is in electronics products,” the research house said, adding that another 8% is exposed to China’s final demand.


Minimal impact on M’sia from US tariffs

This is because Malaysia’s trade exposure to both China and the US accounted for 25% of its total trade, she said, pointing out that Malaysia was impacted by Washington’s earlier move to impose tariffs on solar panels.

Malaysia is the largest exporter of solar cells and panels to the US, accounting for 24% of total US imports of the products last year. Meanwhile, the country’s steel and aluminium exports to the US of US$300 million in 2016 accounted for only 1.8% of total exports to the US.

In 2017, China was Malaysia’s second-largest export destination, constituting 13.5% or RM126.2 billion of total exports, while the US was the third-largest export destination, accounting for 9.5% or RM88 billion of Malaysia’s total exports.

Bank Negara cautions of severe property market imbalances

“Such (the purchase of non-residential properties) financing accounted for 26.1% of banks’ exposures to the property market or 13.5% of banks’ total outstanding loans. End-financing for the purchase of shops accounted for the bulk (40%) of banks’ exposures to non-residential properties or 5.4% of banks’ total outstanding loans. Exposures (via end-financing) to the office space and shopping complex segments, where oversupply is particularly acute, accounted for 3.2% of banks’ total outstanding loans,” it said.

Based on Bank Negara’s analysis, the incoming supply of 38 million square feet of new office space in Klang Valley is expected to drive vacancy rates to an all-time high of 32% by 2021 (1997: 5.1%; historical high in 2001: 25.3%), far surpassing levels recorded during the Asian Financial Crisis (AFC).

The incoming supply of 140 new shopping complexes by 2021 across Klang Valley, Penang and Johor is expected to worsen the oversupply condition in this segment. In 2016, major states such as Penang, Klang Valley and Johor already had higher retail space per capita (10.5, 8.2 and 5.1 square feet per person, respectively) relative to regional cities such as Hong Kong and Singapore (3.6 and 1.5 square feet per person, respectively). This will continue to exert downward pressure on occupancy rates and rentals.


Malaysians’ income weighed down by low-wage foreign workers

“In Malaysia, our salaries and wages are low, as half of the working Malaysians earn less than RM1,700 per month and the average starting salary of a diploma graduate is only about RM350 above the minimum wage. The low-income segment of Malaysian households face many challenges with regard to their income level. Since 2014, the bottom 40% (B40) population’s income expanded by 5.8% on an annual basis. However, expenditure grew at a faster pace of 6%, reflecting the rising cost of living. It is high time to reform our labour market by creating high-quality, good-paying jobs for Malaysians,” he said at a media briefing after the release of the central bank’s 2017 annual report here yesterday.

From 2011 to 2017, the share of low-skilled jobs in Malaysia increased significantly to 16% compared with only 8% in the period of 2002 to 2010. Apart from that, local economic sectors that rely on foreign workers such as agriculture, construction and manufacturing also suffer from low productivity.

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 2017.11.17

United Plantations Q3 FY2017 Results

In the U.S., the soy bean harvest is in full swing and weather has been favorable, hence, the U.S. soy bean production is expected to be historically high due to the increased planted acreage in combination with good yields. In South America, the soy bean plantings are delayed in Argentina due to excessive moisture and in the northern part of Brazil due to dry conditions, however, at time of writing it’s still too early to ignore an expected South American bumper crop. The increase in soy bean production is therefore expected to have a negative impact on prices during 2018 as global vegetable oil stocks are expected to recover from current levels


Hovid Q1 FY2018 Results

Preceding quarter’s revenue was affected by lower sales and products being out-of-stock as they were depleted during the period when the manufacturing licences were revoked, and production not being able to run optimally due to insufficient workers during the initial months subsequent to the reissuance of the manufacturing licences. In comparison, production for all plants are operating at 24 hours a day during the current quarter to deliver the back-orders received during the period the licences were revoked.


Ranhill Holdings Q3 FY2017 Results

As for the International Environment sector, our strong partnership with SIIC has resulted in reducing the project loans’ interest with an average interest saving of approximately 1%. The joint venture is now poised to commence exploring new opportunities for industrial waste water concession contracts and other potential water related works in China and other South East Asia countries under the One Belt One Road initiative. 


Scicom MSC Q1 FY2018 Results

The BPO division has taken the following actions to mitigate the impact from clients’ change in strategy: a. Cost mitigation – The BPO division is mitigating its cost structure on two major fronts, namely controlling operations cost and enhancing utilization of the Group’s fixed asset base. For the current financial quarter under review as an indicator, direct contribution increased slightly to 30.5% as compared to 29.3% for the preceding financial year ended 30 June 2017; b. Extensive build up in sales pipeline Leveraging on Scicom’s track record and experience in multilingual contact centre management, Scicom’s business development team has been actively participating in new tenders with estimated contract value of approximately RM105 million. The management further expects to substantially successfully convert outstanding tenders from the above pipeline to commence operations and contribute to the Group’s bottom line by the fourth quarter of the current FY.


Apex Healthcare Q3 FY2017 Results

Steady revenue growth was achieved across all business units, with increased contributions from pharmaceutical sales to the Government sector and contract manufacturing services

During the quarter, the Group’s pharmaceutical manufacturing operations secured certification for compliance with European Union Good Manufacturing Practice, opening future growth opportunities.


Paramount Corporation Q3 FY2017 Results

…following the completion of the Sale and Leaseback agreement with Alpha REIT to dispose of the Sri KDU campus under its asset-light strategy which generated a gain on disposal of RM77.8 million. With the completion of the Sale and Leaseback agreement with Alpha REIT, as part of its asset-light strategy,
the Group would continue to explore opportunities to enter into similar ventures in future.

With the enlarged K-12 segment, comprising Sri KDU and REAL Education which offer premium and more affordably priced alternative private and international schools respectively, Paramount Education is now able to reach a wider segment of the K-12 market. Sri KDU’s mark of excellence in quality education continues to prevail in the market. Following the success of PISA in 2012, Sri KDU International School achieved the International School Quality Mark (ISQM) Gold Award this year, the first in Malaysia and third in Asia to procure this award.


Eastern & Oriental Q2 FY2018 Results

In the past months we are beginning to see more enquiries and bookings for our existing projects in STP1 namely Andaman and Tamarind. Besides selling down our inventory to improve our cash position and net gearing levels, we are heartened by the numerous unsolicited interest in our non-core assets which we have identified for disposal.


Lay Hong Q2 FY2018 Results

The entry of NH Foods Ltd into the Company as a substantial shareholder recently has marked a major step forward for the Company’s chicken product manufacturing business in the form of new product development and market penetration.

The Company is on track with its planned expansion to increase our production capacity. Our egg production now stands at approximately 2.3 million eggs per day to date and is expected to grow to our target. At the same time, our broiler capacity will increase to cater to new requirements in our food processing taking into consideration our JV with NH Foods Ltd.

The Company is constantly reviewing its strategies and will capitalize on the strength of NH Foods to take the Company to greater heights. A new joint venture company under the name of NHF Manufacturing (Malaysia) Sdn Bhd has been set-up and is now actively working on its plant set-up and product development. As at to-date, a total of 11 products have been launched and the response has been encouraging. The Company is continuously researching on viability of new products to be developed and introduced to our production line. It is expected that new products will be launched in future.

A piece of industrial land in Selangor Halal Hub, Pulau Indah has been identified for the plant to be set up and is currently working on the factory and machinery layout. This is expected to be the site for the JV with NH Foods. Works to acquire and build the said factory is progressing in a timely manner in accordance to our planned timeline.


Evergreen Fibreboard Q3 FY2017 Results

The increase in revenue was mainly contributed by commercial run of new Particle Board Plant in Segamat and higher average selling price as the Group emphasis more on high premium products as well as impact from weakening of Malaysian Ringgit against US Dollar.

The slight decrease in profit was mainly caused by higher log and glue cost, couple with higher repairing and upgrading cost incurred on the stoppage line in Thailand plant.


Ge-Shen Corporation Q3 FY2017 Results

The Group is still looking towards factory expansion across the subsidiaries to increase factory space and manufacturing assets in order to, amongst others achieve higher sales, improving cost structure and gain economies of scale. The construction and renovation of the new facilities in Vietnam is in progress despite some delays and expected to complete by beginning of 2018. Total capital expenditure is expected to increase due to higher building specifications and factory facilities investment and is expected to improve the cost structure and increase production capacities in the Vietnam subsidiary in the long
run.


Vitrox Corporation Q3 FY2017 Results

…contributed from the increase in revenue recorded for Automated Board Inspection (ABI) and Machine Vision System (MVS). The increase was mainly due to higher demand from widen customer base and positive acceptance of our products.


Aemulus Holdings Q4 FY2017 Results

Aemulus continues to create growth through innovation and leadership in the ATE markets for semiconductor devices. The launching of our new RF tester, Amoeba 7600-S combines our latest technology with scalability. We believe that the technology is going to be able to serve the smartphone and tablet market well especially in the Far East region. Based on the current business trend, demand for ATE from the smartphone and tablet segments as well as the enterprise storage segment is expected to continue into 2018. The group is expecting revenue growth to further accelerate in the fiscal year 2018, led by ATE sales growth in the Far East region with US region complementing it.


Pentamaster Corporation Q3 FY2017 Results

The higher revenue recorded was mainly due to increase in sales from automated equipment and smart control solution system segment which was partially offset by the decrease in sales from automated manufacturing solution segment.


IFCA MSC Q3 FY2017 Results

To further accelerate innovation and growth within the property sector, IFCA has initiated an accelerator program with a primary focus to create greater value and solutions for the property sector together with the start-up community. In this program which is specifically focused on prop-tech, IFCA will review potential prop-tech start-ups for opportunities for investment and partnership to bring new solutions and business models into the market.


Century Logistics Holdings Q3 FY2017 Results

Following the ongoing synergy process, the Group also intends to tap on the extensive network and infrastructure of its major shareholder, CJ Logistics Group. The Group is currently setting up the necessary infrastructure to roll-out its parcel delivery operation and expects to commence the operation by the first quarter of year 2018.


Kejuruteraan Asastera Q3 FY2017 Results

To (i) grow its market share in Malaysia by increasing tendering activities, focusing on affordable housing sector and geographical expansion; (ii) strengthen its capabilities by growing its mechanical engineering services segment; and (iii) diversifying its revenue stream by providing maintenance services including upgrading, expansion, refurbishment, retrofitting and renovation projects.

Hartalega to launch ‘game-changer’ gloves next year

“Bacteria coming into contact with the glove surface will be exposed to the anti-microbial activity which, in independent testing, has achieved up to a five-log (99.99%) kill within five minutes of contact. We have successfully conducted production trials and further clinical studies are planned to quantitate the benefits of using antimicrobial medical examination gloves in clinical settings.”


Spritzer eyes export markets, to place out stake to Singapore fund

“We think that growth domestically has become a bit saturated now. So, it is a good move to explore overseas markets. The partnership with Dymon Asia Private Equity will take us to new markets and expand the business even further. They can help us with the export markets and bring the brand to overseas markets especially in the countries that they are already in. To start from scratch will be an uphill challenge and this partnership is a good way to do it. Dape would like to give its industry experience and broad networks to support Spritzer.”

Spritzer will build a single-storey automated warehouse adjacent to its current bottling plant with a built up area of about 105,820 sq ft. “The new warehouse will have an automated storage and retrieval system. The existing warehouse is operated manually and almost fully utilised now. The current warehouse will not be able to cater to our needs should inventory levels rise,” said Chuah.


MAHB dismisses competition fears in Istanbul

Some analysts believe that MAHB’s wholly-owned Istanbul Sabiha Gokcen International Airport (ISG) has benefited from the current Ataturk Airport’s space constraints as the latter is surrounded by urban areas, constraining cost-effective expansion. As such, the upcoming new airport may draw passenger traffic from ISG once it begins operations.

“We believe that both the new airport and ISG have two different markets to serve, especially considering that ISG is ideally located on the Asian side of Istanbul,” MAHB told The Edge Financial Daily. “It is strategically positioned not only as the airport serving the Asian side of Istanbul, but also as a de facto city airport, serving the whole of Istanbul. “Aside from that, ISG’s resilience compared to Istanbul Ataturk Airport during the geopolitical tensions in 2016 proved that travellers had a strong preference for our airport,” the airport group added.

It may also help MAHB reduce its exposure to lingering risks in Turkey while returning to its original intention of being a partner of ISG instead of fully owning it.


Scicom to expand digital space presence

“If you talk to anybody who has a proposition, it’s going to be an online proposition. We have all the infrastructure [for that], from building the application to doing the mobile apps to the payment gateways. So there is a huge market there [as] the future will be all e-commerce and because we have this unique set of skills where we understand customer relationship management, customer fulfilment, technical support, payment gateways, mobile apps, [and] application development — this makes all the difference. We can’t just be a call centre anymore, it doesn’t pay.”

“The strategy is to make e-government solutions a major contributor down the line, primarily as the margins are better, contract terms are longer and typically every year business increases as the population increases, so you would always have natural growth.”

“The trick is to get one new big business every year; that’s how you maintain your growth momentum. I wouldn’t necessarily agree there would be an impact; I think we have lots and lots of business in the pipeline; it’s just a matter of time to conversion.”


Mikro MSC to tap IoT to keep earnings growth momentum

“When we talk about new products, it is related to existing offerings. It’s more like an upgrade with new features, maybe with some elements of IoT. Rather than a stand-alone system, it will be an integrated system … everybody wants to have all these features but the pricing must be at a level that is right for businesses and our customers.”

Presently, the group commands about 50% of the local market share and has seen its business in Vietnam gain traction. Yim said Asean’s and Malaysia’s infrastructure growth stories are positive for Mikro MSC since its digital meters, relays and power factor regulators are used in high rises, as well as in mass rail transport systems being developed in the region.

In FY18, the group expects to complete its move to its new factory in Shah Alam — which it bought for RM11.7 million. The move is expected to cost it another RM5 million, including for the purchase of new equipment and machinery. “It gives us the opportunity to introduce new automation and other capacity that we could not do in the past as we have a larger space now,” Yim added.

Property market will be badly hit in 2018, says expert

Cheong pointed out that the RM12.26 billion is only from the primary market, which includes launches by developers. It does not include the secondary market, which is house owners seeking to sell their homes.

Cheong said this “generous payment mode” exists because developers are finding it hard to sell off their new properties. He said they are in danger of losing their bridging finance from banks if they fail to sell at least 40% of the total units. The bridging finance is used by developers to support their construction.

“This is where the danger starts. I predict if this continues, markets will crash within 24 to 30 months because consumers do not have the financial capacity to buy properties any more. Furthermore, developers who started building two years ago are expected to flood the market further with their units…So about RM16 billion of properties are waiting for buyers. But there is no demand. The reason is that people don’t have the money.”


Industrial property set to gain

The rapid growth of e-commerce, especially in Asia-Pacific, is creating new high-value assets that are now coming on stream. The industrial segment is a highly under-invested sector, as stock availability remained tight while rental rates had been on the rise over the past two years (over 30%).

The e-commerce boom will be a looming threat to retail malls, while the rapidly-growing office supply will continue to put rents under pressure. To tackle the challenges faced by the retail REITs, malls are shifting towards providing more lifestyle and food and beverage offerings, as opposed to just brick and mortar.


Will AIA, Great Eastern, Prudential list on Bursa?

There are 23 general insurers and 14 life insurers in Malaysia. Market share is more evenly distributed in the general insurance segment in terms of 2016 annualised gross earned premium, with local players comprising 52.1% and foreign players accounting for 47.9%. However, foreign names dominate the life insurance sector, with total market share of 81.7% in 2016 vs. the 18.3% of local insurers. AIA, Great Eastern and Prudential have a combined market share of 66.7% (in terms of gross earned premium).

Company Notes 2017.07.21

Pentamaster in a filing with Bursa Malaysia

The three units will be injected into PIL for a collective RM86.78 million, which will be satisfied via the issuance of 999 PIL shares to Pentamaster.

“The internal reorganisation will facilitate a more efficient group structure by way of promoting a better segregation of business responsibilities and operations for Pentamaster’s existing automated solution business and its other smart control solution system business. This will in turn enable the management of the automated solution business and smart control solution system business to efficiently allocate resources and focus on their respective businesses. In addition, the internal reorganisation will also facilitate PIL to act as the listing entity for the proposed listing.”


Icapital.biz in a filing with Bursa Malaysia

With another rate hike expected in the coming months and the Federal Reserve’s plan to unwind its US$4.5 trillion balance sheet, this is confirming what I wrote in the said commentary – “With the US economic recovery remaining intact, one can expect the normalisation of her monetary policy to proceed at a pace faster than in 2015 and 2016.” Again, we hope that investors are prepared for this in a calm manner

…in a reflection of the uncertain global economic conditions created by the US-led 2008 global financial crisis, the Bank of Italy recently advertised for 30 junior positions with an annual salary of €28,000 and it received 85,000 applications – nearly 3,000 candidates for each post. With Italy’s youth unemployment close to 40% and the overall level at 11.3%, steady jobs are in huge demand. The trouble in Italy is that, once an employee is hired, it is hard for a company to get rid of them no matter how incompetent they might be. How Italy and other European nations got into such a devastating mess deserves deep research by the government and policymakers.


Capitaland Malaysia Mall Trust in a filing with Bursa Malaysia

The decrease was mainly due to negative rental reversions from Sungei Wang Plaza as it continues to be temporarily affected by the ongoing Mass Rapid Transit works and the closure of BB Plaza. Lower gross revenue was recorded for The Mines mainly due to lower rental rates and occupancy whilst lower gross revenue in Tropicana City Property was mainly due to lower occupancy at the office tower. The decrease was mitigated by better performance from Gurney Plaza and East Coast Mall on the back of higher rental rates achieved.

As the competition in the market place heats up with the opening of new shopping malls – of which many are located in the Klang Valley – in the second half of this year (2H 2017), the Manager expects the operating environment to remain challenging. As CMMT’s malls are largely focused on day-to-day necessity shopping, they have proven resilient through economic cycles in the past and should continue to do so. The Manager also expects the recent commencement of the Sungai Buloh-Kajang Mass Rapid Transit line to benefit Sungei Wang Plaza in the long term.


Maxis in a filing with Bursa Malaysia

…added 41k new subscriptions, achieving the highest net additions following the revamp of the flagship MaxisONE plan. The Power of ONE campaign which enabled subscribers to own a wide range of devices for RM1 continued to attract high ARPU customers. As a result, the Group has grown its MOP subscription base to 1.9 million with monthly ARPU of RM120, which is higher than the blended ARPU of RM102.

Prepaid ARPU was stable at RM42 per month supported by continuous growth in mobile Internet revenue…Hotlink FAST base has now surpassed 1.8 million subscriptions with monthly ARPU of RM44.

Customer demand for data continues to grow strongly, supported by the rising consumption of social media, increasing availability of TV and video on mobile devices and better user experience on mobile network.

Blended smart-phone penetration stood at 79% against 70% in the same period last year. Blended data usage grew more than double in the last 12 months and is now at 5.0GB/month. The Group’s expanded 4G LTE network, with a nationwide population coverage of 89% on a comparable peer basis, continued to be an important differentiator for customers to enjoy high speed unmatched digital experience.


Westports in a filing with Bursa Malaysia

Due to the ongoing changes in the container shipping industry, we expect our container throughput to be lower when compared to the previous year by between seven percent and twelve percent.

The second phase of Container Terminal 8, consisting of a 300-metre wharf and supporting terminal operating equipment and facilities, have just been completed and are expected to be commissioned into service soon. The total terminal handling capacity would then be increased to 12.5 million TEUs.

Construction work continues at the first phase of Container Terminal 9, consisting of a 600-metre wharf, and is expected to be completed by December 2017.


Syarikat Takaful Malaysia in a filing with Bursa Malaysia

For the year 2017, Takaful Malaysia will continue to emphasize the four core areas of customer reach, operational agility, cost competitiveness and stakeholder confidence to increase its overall market shares and continuously improving shareholders’ value… promote its unique proposition of rewarding a 15% Cash Back to its General Takaful customers for no claims during coverage period.


British American Tobacco (Malaysia) in a filing with Bursa Malaysia

Illegal cigarettes incidence for the same period has increased by about 16% from 50.0% in the first half of 2016 to 57.9% in May 2017. This was driven by the price gap between legal and illegal cigarettes and current macroeconomic factors that are impacting consumer spending power…in line with volume decline and the cessation of contract manufacturing for exports as of 31st December 2016.


TAS Offshore in a filing with Bursa Malaysia

Indonesia is expected to export about 30 million metric tons of bauxite alone in 2017 as a consequence of the easing on export ban of unprocessed mineral ores by the Indonesian government. This may call for the demand for vessels required for such activities.


WZ Satu in a filing with Bursa Malaysia

For civil engineering and construction segment, the Group not only accumulated an order book to last for the next two to three years but also the Group is confident that its order book will grow beyond the run-off rate. The current order book of RM1.0 billion will ensure the Group is kept busy for the coming financial year and beyond.

WZS Misi Setia Sdn Bhd’s (“MISI”) investment in the Automated Pipe Spooling fabrication plant has kicked-off well and has led to successfully securing contracts in The Refinery and Petrochemical Integrated Development (“RAPID”) project. Since the previous reporting, MISI has secured additional works on top of existing contracts for RAPID projects. The above investment has come on stream and has been successfully translated into meaningful results as reflected and registered in the current quarter oil and gas segment result.


Saudee Group in a filing with Bursa Malaysia

…new products going to markets both locally and abroad. The Group has started collaboration with a few strategic partners to produce new halal food product to cater to the local and exports market. The product, manufactured under a patented technology, has a significant untapped market both locally and overseas.


Cycle & Carriage Bintang in a filing with Bursa Malaysia

The Mercedes-Benz trading operations recorded a loss primarily due to increased competitive intensity resulting in lower
unit sales, reduced margins and to a lesser extent higher operating expenses.

…with the model mix moving away from S-Class to the lower margin GLC-Class and E-Class. Margins suffered further due to strong competition in the premium car market.

Furniture exports keep growing

“The ban on rubberwood export would ensure sustainable supply to the furniture industry to achieve Natip’s RM16 billion target.”

“If we are allowed to employ five foreign workers for one local employee (5:1), we can expand faster but the home ministry wants to stick to the 3:1 ratio.”

“Malaysia wants to have a balanced policy by keeping the upstream players including the rubberwood sawn timber mills happy instead of helping the downstream value-added furniture industry. But Malaysia can export a quota of 100,000 cubic metres of rubberwood which would generate a total revenue of RM200 million to RM300 million. However, we hope the government would consider reducing the quota to 40,000 cubic metres.”

“Some manufacturers are thinking of Vietnam where there is sufficient labour and raw materials like acacia wood for use in our furniture. If the environment is not good, with unfriendly policies that impede growth, we might think of moving out of Malaysia.”


Mobile healthcare app to revive Palette’s earnings

The demand for mobile healthcare in Malaysia is not as good as in China at the moment, but we are targeting the locations that have higher tourism numbers such as Penang, Melaka, and Kuala Lumpur. We expect the whole mobile healthcare business segment to contribute about RM3 million to RM5 million in revenue…”

…it plans to diversify into traditional Chinese medicine (TCM) to expand its earnings base by acquiring a 51% stake in TCM, food and herbal supplements trader Genopharma Sdn Bhd (GSB) for RM1.53 million.


Prestariang sees strong growth from SKIN

“It is a government-led initiative, as the current system needs to be refreshed and rebranded because some of the technologies used are old and things have changed. It is considered as zero risk for the government through the build, operate, maintain and transfer method under the public-private partnership.”

Payment to Prestariang will commence upon full commissioning of SKIN, with an average annual payment of RM294.7 million for 12 years (from the fourth to the 15th year) during the maintenance and technical operations period.


Foreign insurers are said to plan US$2 bil of Malaysia deals

A sale of a 30% stake in Great Eastern Life Assurance (Malaysia) Bhd could raise about RM5 billion (US$1.2 billion), while the disposal of a similar stake in Prudential Malaysia Assurance Bhd would fetch at least RM3 billion.

Foreign insurers have until end of June 2018 to reduce their holdings in local firms to 70% at most. The country’s central bank has been weighing tougher enforcement of a cap on foreign ownership as it seeks to boost local participation in the industry.


Bank Negara: Housing loan criteria review won’t resolve affordable housing issue

“Housing affordability has not improved significantly where average national house prices remained at 4.4 times of median income (affordable range is 3.0 and below), with lower affordability recorded for some major states and urban cities. Housing developers, working together with authorities and relevant stakeholders, should therefore intensify efforts to reduce costs and accelerate supply.”


RAM: Malaysian ports throughput growth to “remain at low single digit”

“Malaysia’s throughput remained resilient in 2016, with container throughput recording a 10-year CAGR [compound annual growth rate] of 6% while that of cargo throughput came in at 5%. At the same time, Malaysia handled more than 25% of the containers passing through the Asean-5 nations, in other words Malaysia, Singapore, Thailand, Indonesia and the Philippines and accounted for 3% of world container traffic.”

“On that note, regional port expansion is under way in Singapore, Malaysia, Indonesia, Thailand and the Philippines, adding at least 100 million TEUs (20-foot equivalent units) of new container-handling capacity over the next 20 years, with most of this planned along the Straits of Malacca. Although the new capacity will provide opportunities in terms of scale, there is a possibility of running into a supply glut and an ultra-competitive situation if trade growth does not keep pace.”


Don’t get ‘punch-drunk’ over Belt and Road, Munir urges Malaysia

“We must not be overwhelmed by the sheer size of the Belt and Road and think that good things are going to happen automatically. We must look at which part of it will work for Malaysia, and inevitably for Asean.”

…China’s investments in Malaysia’s planned port and railway projects over the next two decades could be as much as RM400 billion or 32% of the country’s expected gross domestic product (GDP) in 2017.

Data from Malaysia Investment Development Authority (Mida) showed that China is currently the largest foreign investor in the country. In 2016, Mida approved a total of 33 China-led projects valued at RM4.8 billion, almost double 2015’s tally of 17 projects worth RM1.9 billion.


Nazir urges govt to scrutinise benefits of Chinese-led deals

“What are the lessons that we have learnt across the 60 countries that have experiences in negotiating with the public and private China. This year is the 20th anniversary of the Asian financial crisis. What caused it? It is the infrastructure debt. Isn’t there a risk? This (Obor) is going to create huge infrastructure debts in the 60 countries. Nobody will not dare not to repay China. Therefore, the risk will eventually end up in sovereign balance sheet and then we have a problem. If this happens in many countries, then we have an Asian problem. That is one caution that we need to bring to the table.”

Company Notes 2017.6.16

On earnings calls

Malaysia segment recorded higher profit before tax mainly due to higher sales orders from key customers, including the new box built orders from key customers. The new production lines that were commissioned earlier are now running at optimal capacity. – V.S. Industry in a filing with Bursa Malaysia

“Our clients are experiencing brisk sales growth with their new products, effective marketing campaigns and enhanced distribution channels. We will ride on our clients’ growth, supporting them in every step of the way with our integrated manufacturing capability to produce quality products in the quantity required by them on a timely basis.” – V.S. Industry MD SY Gan


Local competition was more intense with some distributors offering enormous cash incentives at an unprecedented level, thus putting further pressure on our strategy to sell at the full price offered with value added packages.

The contraction in profit margin was also partly caused by the Mazda CX-5 run-out programme as more sales incentives were given in anticipation of the arrival of the all-new model.

Demand for passenger cars is expected to be soft as the weak job market and uncertainty will likely cause customers to defer their purchases…will continue to focus on driving sales at full selling prices with value offerings as this will in the longer term augur well for the Mazda brand image and popularity.” – Bermaz Auto in a filing with Bursa Malaysia


Management undertook measures to curtail further losses in future such as the closure of non-performing restaurants and outlets. These measures led to impairment of fixed assets and intangible assets.

…expects Starbucks to maintain its revenue growth momentum, and the price adjustment in the previous quarter is expected to mitigate the negative impact from the fluctuating Ringgit Malaysia and poor results of KRR operations in Malaysia. – Berjaya Food in a filing with Bursa Malaysia


The decrease in licensing revenue was due to loss of content recovery for a sports channel. The decrease in subscription revenue was mainly due to lower package take-up.

…re-positioning its business with emphasis towards personalization, mobility and interactivity with customers, focusing on executing its key strategies on: (1) digitalising our legacy business; (2) rapidly scaling our digital ventures; (3) deepening strength in verticals and building a robust innovation pipeline… – Astro Malaysia in a filing with Bursa Malaysia


Shipment of furniture from our Malaysian factories increased substantially as a result of the coming on-stream of new products, including panel based bedroom models. Contribution from the panel based bedroom models for the US market increased to 20% from 5% previously.

Shipment of furniture from our Vietnamese operations was also higher in line with the improvement in the US economy and its efforts to ship higher value orders to the US. – Poh Huat Resources in a filing with Bursa Malaysia


…the increased business volume and the aggressive stance to invest more to upkeep its outlets and getting more talents to join its workforce for the expansion plan.

…is confident that Bison can maintain its competitive edge and position in the Convenience Store segment. Bison is in progress with its action plans. However, there is a delay in the commissioning of its distribution center in Johor Bahru due to the plan to enlarge and install a better-equipped facility. – Bison Consolidated in a filing with Bursa Malaysia


The strong engagement achieved brought in a fresh new wave of customers and additional referrals which were successfully converted into sales by many projects in the Klang Valley, Iskandar Malaysia and Penang. – Eco World Development in a filing with Bursa Malaysia

Interest in all three projects in the UK remain healthy bolstered by good construction progress on site and positive developments in the surrounding areas where the projects are located.

…will continue to seek out well-located development sites in London, Sydney and Melbourne where it has established a strong track-record and customer following to replenish its land bank. – Eco World International in a filing with Bursa Malaysia

“We will see profit recognition beginning in FY18 as handover commences in phases starting with London City Island and Embassy Gardens…Our plans for the second half of 2017 include the completion of the proposed acquisition of 80% of the issued capital in Eco World-Salcon Y1 Pty Ltd and the launch of the Yarra One development in Melbourne.” – Eco World International CEO Teow Leong Seng


The increase in revenue was due to higher ASP as a result of the increase in raw material costs although business volume was lower. – A-Rank in a filing with Bursa Malaysia


…has been incurring losses for the past 5 years as a result of softening demand for the fixed wing pilot training market in Malaysia mainly due to local major airlines cutting back on their training program for new pilots. Due to lack of business in the fixed wing pilot training, the mechanical engineering division which specializes in oil, gas and petrochemical has become the significant contributor in terms of revenue.” – APFT in a filing with Bursa Malaysia


By December 2018, Top Glove is projected to have 31 glove factories, 628 production lines and a production capacity of 59.7 billion gloves per annum. It will also continue to explore synergistic M&A and JV, as well as new set-ups, particularly in closely related industries such as nitrile latex factory, packaging materials (glove inner boxes) and condom factory, towards enhancing shareholder value.” – Top Glove in a filing with Bursa Malaysia


On corporate development

…is considering the pursuit of a separate listing of its automated solution business on the Main Board of the Stock Exchange of Hong Kong Limited…will undertake a reorganization of its subsidiaries involved in the automated solution business and these subsidiaries will continue to remain as subsidiaries of Pentamaster upon completion of the proposed listing. – Pentamaster in a filing with Bursa Malaysia


“It has to be [listed] eventually as we need funds and a listing will be a way to marshal funds from the market. We want to expand overseas as well, but we need a strong brand first…We won an award that puts us on par with Mount Elizabeth Hospitals in Singapore, which has helped with our branding.

“It will take a couple of years, although we could list now if we wanted to, because we have the track record. But it might not give us the value that we want so we’d rather wait for a few years.” – Sunway chairman Jeffrey Cheah during AGM


…despite management’s efforts to reorganise Anzpac’s remaining lithography printing business in its non-tobacco customers, the Board is of the view that Anzpac’s business is no longer viable or sustainable. – Tien Wah Press in a filing with Bursa Malaysia


On regional properties & construction

“We look forward to working with our partner Hongkong Land on this exciting new development, which will bring office space of the highest quality to Singapore’s premier Central Business District.” – IOI Properties CEO Lee Yeow Seng

“Our new joint venture allows Hongkong Land to expand its portfolio of prime commercial properties in Marina Bay and demonstrates our long-term confidence in the Singapore property market. We are delighted to partner with IOI Properties to deliver the exceptional levels of design, construction and management that our tenants expect.” – Hongkong Land CEO Robert Wong


“We are open to opportunities overseas. If there is a good point to go abroad, then why not? But we are not in a hurry as we have enough land bank in Malaysia to keep us busy.

“You need to have deep pockets and really understand the market well. At the moment, the outlook for foreign [property] markets may not be very bullish than it was before although I would say it is healthy.

“Seeing the current slowdown in the property market, it’s a good opportunity for us to lock in more land as there is less competition among developers, which means we have more choices in terms of location.

“We have enough [cash] to readily acquire more land so it does not make sense for us to merge with anybody. When you merge with another developer, you must have a good rationale, whether it’s to improve cash flow, increase land bank or leverage on others’ expertise.

“It is not easy to manage a construction arm. So what we do is we have qualified contractors come back [to us] with better terms and costing, while we manage our own staff. If you have your own construction division and it doesn’t perform well, you will end up with higher costs than what you would incur if you subcontract work instead.” – Mah Sing MD Leong Hoy Kum


“…venturing outside the Klang Valley because the yields are better. Also, it is a tough market to find a property that meets our criteria. The Klang Valley has become a saturated location [in terms of the retail market].

“…that the asset must have opportunities for further value creation in the future through the creation of an additional lettable area in the long term.” – Hektar REIT asset manager Hisham Othman


“For Singapore’s manufacturing segment, we don’t foresee it to be very material because the deep tunnel sewerage system — the megaproject in Singapore — the award will likely be at the beginning of next year. For this year, I think Malaysia is going to overshadow Singapore in terms of order replenishment.” – Kimlun CEO Sim Tian Liang


On staying competitive with better efficiency

“Yes, there are short-term benefits from a weak ringgit, but it also leads to a situation where customers would ask for a reduction in prices and the competition from the market [becomes more intense]. Volatile movements in the ringgit are therefore not good for business.

“I would say being more efficient in production to stay ahead of the competition is a better driver for glove makers, rather than a weak ringgit.” – Careplus CEO Lim Kwee Shyan


“We want to be more efficient with our operations. Our working culture is to be more efficient, [to be able to] understand the market and expand our business…I think it’s a better way than waiting for a problem to arise as problems are always there. We need to make sure that we run faster than our competitors.” – Luxchem CEO Tang Ying See


On Malaysia tourism tax

“Local hotel operators are dealing with an environment of low occupancy rate for the past two years [and] hotel operations would be [further] affected if Malaysians cut down traveling frequency.

“Those who are registered may represent only 15% of all the hotels, so the tax would create an uneven level playing field.” – Deloitte Malaysia partner Senthuran Elalingam


“…traveling to Sarawak was already expensive as compared to Bali, Hong Kong and Taiwan, with travelers having to fork out RM1,145 for one way or RM2,000 for a return flight ticket from KL to Sibu…But one can fly from KL to Bangkok return at only RM409, making it difficult to promote Sarawak due to such a high fare.” – Malaysian Association Hotels (Sarawak chapter) honorary secretary-general John Teo Peng Yew