Company Notes 2017.12.08

SCGM Q2 FY2018 Results

The Group foresees the new Kulai factory targeted to be completed in the fourth quarter of current financial year ending 30 April 2018 will contribute positively to its future revenue and net profit following the expansion of its production capacity and installation of new production lines.

Cautious response to Top Glove buy

There is so much upside to the new deal in the making, considering the surgical gloves business offers higher margins due to its product quality, technology and the research and development involved in its production. It is also a market that has high barriers to entry that confront many glove players in a rapidly growing global healthcare industry.

“Our indicative US dollar cost of funding range from 2.5% to 3%, whereas ringgit borrowings cost is at 4.5% to 4.8%, a difference of around 1.5% – which translates to around RM19mil savings per annum,” he says. Therefore, a dollar loan will give us a perfect natural hedge, in the event of currency fluctuations. Ringgit borrowings, may result in mismatch due to the inflow of sales proceeds in dollars,” he elaborates.

“New expansions that has kicked off in the last few years will start generating cash and this will improve our cash flow in FY18. This will be more than sufficient to meet our organic expansion capex of around RM200mil to RM250mil.”


Kelington set to be lifted by gases

The contract, which involves on-site supply of nitrogen gas to a photovoltaic cell manufacturer in Malaysia, will provide a long-term revenue of about RM20mil over a period of ten years.

“We started our operations seventeen years ago to provide ultra high purity (UHP) gas delivery solutions to the electronics and semiconductor industry, which is still our mainstay business. Given our long-built experience and expertise in the field, it is relevant for us to penetrate the industrial gas segment in order to provide an end-to-end service. The venture into the industrial gas segment is a step in the right direction as it is synergistic with our existing core business. In fact, our clients consist of electronic manufacturers who utilise gases in their manufacturing processes.”

Kelington plans to invest up to RM60mil to build a carbon dioxide gas purification plant, which is anticipated to contribute revenue from FY19. “The new venture complements our existing project-based business model of providing engineering services which are usually completed within six to 12 months. In the coming years, demand for liquid carbon dioxide is expected to grow further on the back of rising demand in the food and beverages industry as well as the upcoming roll-out of large infrastructure and construction projects.”


More build-to-suit projects to come — Axis REIT

With limited “Grade A” assets in the market, allowing REITs to embark on build-to-suit projects will enable Axis REIT to create their own “Grade A” assets, said Leong, adding that the promoters of the REIT were previously “builders of industrial assets”. As REITs are only allowed to develop up to 15% of their portfolio, Leong said Axis REIT cannot proceed with redeveloping Phase 2 of the Axis PDI Centre as Phase 1 already takes up about 10% of their assets under management (AUM). Currently, the Phase 2 of Axis PDI Centre is still generating income as a storage yard for cars.

Over 12 years, the REIT’s portfolio has grown from five properties to 39 properties comprising 7.6 million sq ft and 132 tenants, with a total AUM of RM2.25 billion in size. “The yields for our property are pretty good. Overall our portfolio [yield] is almost 9% [per annum],” said Leong. The REIT is targeting to reach RM3 billion in AUM next year, and is looking at yield-accretive acquisitions. With the conclusion of a private placement two weeks ago that raised RM178.75 million, Leong said the exercise will enable Axis REIT to reduce their gearing to 29% from their current 36%. “[With] that, we will be able to allow more breathing space to provide a war chest for Axis REIT for growth next year,” said Leong.


Pensonic now at a crossroads, says CEO

“We have to allocate resources for future businesses to seek transformation in the next five to 10 years. Being in the home appliances segment, we missed out on the mobile phone and personal computer wave in the 1990s till 2000s. We want to make sure we don’t miss out on this digital age, particularly the IoT and wearables segment, which is why we have a consortium with some industry players to come up with a product or concept for the future.”

Pensonic has put together a team to focus on the e-commerce platform and is spending about RM500,000 for the infrastructure, Nelson said. Moving forward, its 700 retailers nationwide will also double up as pickup centres for customers, he said. On smart products, he said some 10 categories of appliances have been identified for value adding, where the group will incorporate the aspect of IoT into the products, which will take into account the evolving needs of customers.


Ajinomoto eyes 50% sales growth in two years

“Ajinomoto Thailand, Vietnam and Indonesia are already experienced in diversification, so Malaysia can leverage from their know-how when pursuing this,” Yamamoto said at a briefing on the group’s first half results yesterday.

This year’s performance, Yamamoto said, will be driven by strong sales from its consumer to business segment, supported by product diversification efforts and pricing strategy. But she cautioned that rising production cost could limit its near-term profit growth.

Saudi Arabia is a major export market for Ajinomoto, followed by the United-Arab Emirates and Oman, among other markets in the Middle-East.


GDex expects mid-teen growth in FY18 revenue, says MD

However, stiff competition and the group’s ambition to expand “aggressively” both domestically and regionally over the next few years are likely to add further pressure to the courier service provider’s margins, he said.

This will include allocating between RM30 million and RM50 million per annum for capital expenditure (capex) over the next two years to double its handling capacity, which currently stands at 120,000 parcels a day.

Outside Malaysia, the group only has a presence in Indonesia via its subscription to PT Satria Antaran Prima’s convertible bonds, which it has until 2021 to exercise. Although Teong foresees the local courier industry consolidating in the near future, he said GDex will focus on organic growth in Malaysia instead of considering further acquisitions.


Astro to invest RM100m in JV

“The JV will extend Astro’s online presence among the Malay-language audience, propel its combined monthly unique visitors to approximately 10 million, and is in line with its goal to build Nusantara and Islamic content verticals. In pursuit of our journey of reinvention, Astro is embracing change brought about by digital and mobile while staying true to our core as a consumer-first company. Regionally, we will forge complementary win-win partnerships, as well as identify strategic and opportunistic investments for our growth portfolio, as well as giving us a seat at the table to learn from value creators and disrupters of the future.”


Gamuda says construction supply chain ‘overstretched’

Local contractors may face cost pressures from a tightening supply chain in the years to come as mega infrastructure projects begin rolling out.

Though Gamuda has been touted as one of the biggest potential beneficiaries of the East Coast Rail Link (ECRL) project, Lin observed that “foreign funding usually comes with foreign participation”. “In an ironic sense, foreign participation can actually help ease the pressure on the [local] supply chain. But [these projects] will miss out on the benefits of localisation,” he said, adding that the government will have to weigh these factors in making any decision.


Acoustech exits audio business

“The disposal of the unprofitable audio segment will allow the group to focus on and utilise its resources solely for its core segment — property development. The divestment will eliminate any further erosion of the group’s profits that may result from the audio segment’s poor performance.”

“The proposed acquisition will allow the group to consolidate its supply channel and improve efficiency, resulting in longer-term cost savings and to ensure continuous supply of speaker units. By consolidating the supply chain, our group is expected to maintain better quality management and expand the future range of products that it can market to its customers. Currently, the board does not expect additional financial commitment to maintain FPT’s business. [However,] the management expects that further investments in FPT will help generate returns in the longer run through cost savings and faster turnaround for production requests. Therefore, Formosa Prosonic’s management expects FPT’s prospects to be favourable in the longer term based on the anticipated improvement in global demand for consumer electronic products.”

Move over tech. Here come Southeast Asia’s builders

With at least $323 billion in infrastructure spending in the pipeline in Southeast Asia and potentially more expected over the next few years, 2018 could well shape up as the year of builders’ stocks from Indonesia to the Philippines that have been the laggards in a broader market rally this year.

“Infrastructure has been under invested whether it’s clear water, clean air, energy, roads, ports, railways, education, health care — so there are tons of opportunities.”

Malaysia has allocated 210 billion ringgit ($51.6 billion) for projects in the 2018 budget of which 73 percent will go rail and public transport. About 55 billion ringgit allocated to East Coast Rail Link, 50 billion-60 billion ringgit given to Kuala Lumpur-Singapore High Speed Rail and 40 billion ringgit to phase 3 of the mass rapid transit system. Rail, affordable housing, roads and water infrastructure are major segments that will benefit from government’s spending next year, Sharizan Rosely, an analyst at CIMB wrote in a report dated Oct. 30. General election due by August 2018. Biggest construction companies: Gamuda Bhd., IJM Corp. Bhd., Sunway Construction Group Bhd., Malaysian Resources Corp. Bhd.


Klang Valley retail occupancy rate at 5-year low

“As of 3Q17 (third quarter of 2017), total retail stock in [the] Klang Valley stood at 61 million sq ft and estimated pipeline supply for those under construction is currently estimated at 16 million sq ft, comprising 23 projects. This implies an overall growth of 26% to current stock. In recent years, we have witnessed a mall closure in Petaling Jaya, and increasing occupancy stress, low footfall and retailers’ turnover, in some of the newer [and older] malls, matched by slower or worse, no rental growth and [an] increasing need to provide for tenants’ incentives.”

“Some of the newer malls have been struggling to establish market share that is getting more fragmentary and diminishing. “Construction of [the] mass rapid transit network has spurred a wave of transit-oriented developments, and more retail space supply can be expected along the train ride, resulting in overlapping catchments and intensified competition. It is and will continue to be very much impacted by the ongoing structural changes in the market, and not a normal supply-demand disequilibrium, that in the past could be resolved through the passage of time, rising affluence and population.”


Gas price hike to raise steel makers’ costs by RM200m a year

The average natural gas base tariff will be revised upwards by RM3.85 per MMBtu or 14.23% from RM26.46 per MMBtu to RM30.90 MMBtu for the non-power sector, including steel producers, in Peninsular Malaysia from Jan 1 to June 30, 2018. In addition to this, under the new gas cost pass-through (GCPT) mechanism, a surcharge of RM1.62 per MMBtu will apply to all tariff categories due to the higher liquefied natural gas price against the reference price in the base tariff during this period. This translates to an average effective tariff of RM32.52 per MMBtu across all categories, at an average increase of RM6.06 per MMBtu or 22.90%.


A lift for small developers

Smaller property developers will no longer need to just rely on bank financing to ease their cash flows. They can monetise upfront from the cash flows of their billings via a bond issue which potentially takes away businesses from banks.

“This will disrupt property financing in Malaysia, especially for bankers depending on businesses from small developers. Typically, developers need to wait for the three-year construction period before they are able to collect their portion of the development cash flows. For the smaller developers, liquidity is a huge issue.”


Ensure Chinese investments offer locals high-skilled jobs too

But to Wan Saiful, while MCKIP promises high-value investments and to grow the Malaysian economy, the immediate jobs created there have been mostly low-skilled construction jobs. Further, he thinks future jobs will likely be factory-based and that it is uncertain how locals can be transitioned into higher-level jobs once investors leave.

Likewise, he said tens of thousands of jobs have been created for locals in Africa via Chinese investments. “However, these have mostly been low-skilled,” he added. Citing a 2014 academic survey, he said among the 400 companies that invested in 40 African countries 80% to 97% were low-skilled roles which were occupied by locals.

Company Notes 2017.10.06

iCapital.biz Q1 FY2018 Results

For top-down/market-timing investors, while Malaysia’s economic growth prospects for the next 12-18 months look bright, there are potential headwinds in the form of an elevated inflation rate, an uncertain political landscape and further US monetary tightening.

Bison ventures into food production

“There is increasing demand for convenient access to retail stores that offer a variety of quality products and services. Therefore, these JVs are in line with Bison’s growth and expansion strategy.”

Dang said some RM50 million worth of investment will be going into building the five-level food processing factory in Rawang, which is targeted to start operations in the first quarter of 2019. “[A selection] of products will be available on a trial and research basis, but the full scale of [offerings] will be rolled out in the first quarter of 2019, which is when the food processing facility will be fully operational.”

“This FY, we have grown our ready-to-eat food business from 8% to 11% of our revenue contribution. Upon the commencement of the first year of production, we expect it to grow to about 15% of our revenue.”


Bison ups the ante

A five-level factory with a built-up area of more than 130,000 sq ft will now be constructed. It is located 500 metres from Bison’s current distribution centre, which augurs well for management and logistics efficiencies. The 100% halal manufacturing facility is targeted to supply 150 stores in 2019, and will have a full supply capacity of up to 600 stores.

GK, a Tokyo Stock Exchange-listed company, is one of the largest in-flight meal caterers in Japan, supplying to 38 airlines, and also owns a restaurant chain operation with more than 400 stores in and out of Japan. On the other hand, Ryoyupan is one of the top-five players in the Japanese bakery industry and the biggest on Kyushu Island.


The rise and rise of JF Technology

“Demand for microchips is not only dependent on consumer spending, which drives the smartphones and computer sales. Now there is emerging demand from the automotive and IoT (internet of things) sectors.”

JF Technology is involved in the design and manufacture of test probes and test sockets for the semiconductor industry. For one, testing equipment such as test probes and sockets are wear-and-tear products that need to be changed frequently. For another, semiconductor giants such as Texas Instruments that designs chips would constantly develop new products regardless of market conditions. As a test socket design and manufacturer, JF Tech provides customised solutions for the chips developer to test their products. Once the chip prototype is acceptable, it will then goes into high volume manufacturing (HVM).

“We believe Zigma product would be a game changer for the company, as well as the testing industry. This is because Zigma product has a different approach, which it avoids wear on the board and make the testing process more efficient.” He says that the law suit has affected the company’s sales in the US and profitability. JF Tech generates about 65% of its sales from the overseas market. Foong says that the company is currently operating at 40% of its capacity, as such JF Tech is unlikely to pump any new capital expenditure for few years.


SunCon, WCT, Gabungan AQRS bag LRT3 contracts

SunCon announced to Bursa Malaysia yesterday that it had been awarded a RM2.18 billion contract, boosting its outstanding order book to RM6.5 billion — the highest ever since its inception. The contract is SunCon’s fourth elevated rail project, its largest single project in 36 years. The scope of work includes 9.2km of viaduct works, construction of six stations, and the design and building of an iconic cable-stayed bridge over the Klang River.


United Malacca confident of finalising Sulawesi land buy

“The first priority is to plant stevia and coconut, followed by cocoa and coffee, which are subject to the land topography and soil type.”

At the same time, Tan also said the development of the Central Sulawesi land is expected to incur higher capital expenditure, which could result in lower dividend payments compared with the previous years.


MAHB: Five new airlines coming to KLIA

“I just come back from the World Routes Forum 2017 in Barcelona, Spain where multiple discussion were had and I am hopeful that at least five more new airlines will join us next year. As you know, we are always actively looking for partners and new airlines to come join us, for 2017 we already saw eight new airlines joining us and since everything in aviation is seasonal, we are not expecting any more new airlines for the rest of the year.”

“Our original (growth) forecast (for passenger volume) was at six per cent this year but we have revised that to eight per cent, and I believe we may end up at some 90 million this year for Malaysia as a whole. For airports, we have the volume but we need more capacity (upgrading) for airports infrastructure and that’s something that the government has to look into.”


KLIA Aeropolis to see RM500m investment in next two years

The 60-acre (24.28ha) Aeropolis, which is part of the Digital Free Trade Zone (DFTZ) launched by the government in March this year, will also house Alibaba Group’s e-commerce hub for Southeast Asia. Malaysia Airports Holdings Bhd and Alibaba’s logistics arm, Cainiao Network, will be jointly establishing the trans-shipment hub there.

Liow said 20 of the world’s top 25 freight forwarders will have operations in the Aeropolis.

“It is estimated that a 20% increase in ICT investment will result in around 1.4% GDP growth for Malaysia,” Liow added.

Fitch expects Malaysian banks to offer higher rates on longer-term FDs

The NSFR metric focuses on a 12-month timeframe and is likely to encourage banks to compete more aggressively for even longer-tenor deposits, and shift towards long-term wholesale debt funding.

The ratings agency noted that Bank Negara Malaysia (BNM) has said that more than three-quarters of Malaysian banks have an NSFR that meets the minimum requirement, which will be set at 100%.

The banking sector’s loan/deposit ratio of 89% and liquidity coverage ratio (LCR) of 133% at end-August 2017 indicate that the system’s aggregate funding and liquidity are reasonably healthy.


KWAP mulls investment in Alibaba Group

“We have an asset allocation and, at the moment, investment in the tech space is still well below the asset allocation limit. We are trying to limit it to no more than 1% of our asset allocation in the tech space. At the moment, it’s just US$70 million (RM296.1 million). Our fund size is over RM100 billion.”

“KWAP has only ventured into the tech space recently. Two years ago, we invested in Uber. We have another two more tech funds that we have invested in. This is part of our familiarisation with the industry. So far, to date, we have put in about US$70 million: US$30 million with Uber and another US$40 million with two tech funds … we can do a bit more and we would like to have more involvement in this space. We have learnt a lot along the way and, with that, I think we can step up and make more productive investments moving forward.”


Property lending rule from 1997 is still relevant

“IBs, in demanding for this guideline to be ‘scrapped’, are taking a short-term view and should consider the long-term systemic implications of an over-exposure to the property sector and not narrowly focus on their own commercial gains. We should not be oblivious to the many lessons learnt from the Asian and global financial crises,” Bank Negara said in the statement.

The guideline, introduced on April 1, 1997, is for all commercial, Islamic and investment banks. In short, it stipulates that a bank’s credit facilities — meaning all forms of lending, including the issue of guarantees, private debt securities and commercial papers — to the BPS should not exceed 20% of its total outstanding loan base. Compliance to this requirement is calculated on a quarterly basis.


World Bank warns M’sia of pockets of risks

The World Bank in its semi-annual review of the region’s developing economies pointed out that the ongoing adjustments to the rising costs of living amid continued fiscal consolidation and elevated household indebtedness could weigh on the strength of private consumption in Malaysia. These deficits are especially worrying in cases where public debt is also high or rising. It is a combination of the two that poses risks to fiscal sustainability as the combination narrows governments’ policy space for responding to shocks.


World Bank sees currency risk in Malaysia

Monetary authorities need to be prepared to tighten their policy stance if capital outflows prompt currency weakness. In the case of depreciation pressures in China, authorities should allow greater adjustment through relative prices and closely monitor financial sector vulnerabilities as monetary policy further tightens.

Company Notes 2017.08.25 (Part 2)

Amway Malaysia Q2 FY2017 Results

…driven by positive momentum among Amway Business Owners (ABOs) and higher qualifiers in response to the 40th anniversary sales and marketing programmes. Notwithstanding this, the Group revenue has shown a general decline in light of softer consumer confidence levels.


FACB Industries Q4 FY2017 Results

The bedding operation in Malaysia recorded lower profit before tax as a result of declined revenue and gross profit margin which was affected by higher raw material costs. The stainless steel fittings operation’s reduced loss before tax was attributable to better average selling price. Loss in associates in China was mainly due to impairment loss on plant and equipment in the power business.


WCE Holdings Q1 FY2018 Results

The West Coast Expressway (WCE) Project involves the development of a 233 kilometres tolled highway from Banting, Selangor to Taiping, Perak (including 40 kilometres of highway to be constructed later). The WCE Project is a build-operate-transfer project with a concession period of up to a maximum of 60 years. The total project cost is approximately RM5,900 million and revenue from toll collections from certain sections are expected to commence late 2018. The Construction Commencement Date was set on 25 August 2014. Currently, the construction is ongoing. The Company is also participating in the construction of the WCE as the IJMC-WCEHB Joint Venture has been appointed as the Turnkey/Engineering and Procurement Contractor for the WCE highway project.


Box-Pak Malaysia Q2 FY2017 Results

The main challenge faced by the Group in the current financial year is the sharp and continous increase in paper cost (since the end of 2016) and the rising competition in Malaysia and Vietnam. Since the end of the previous financial year, average cost of the main paper materials used by the Group has increased by more than 8% and is expected to increase further.

The Vietnam government has in August 2017 announced further increase in minimum wage in Vietnam of approximately 6.5%-7.0%, effective 1 January 2018.


Uchi Technologies Q2 FY2017 Results

There were no significant changes to the cost structure where material consumption made up the highest percentage of the Group’s expenditure at 55%, followed by employee benefit expense at 26%, depreciation and amortization at 8%.


Pelikan International Q2 FY2017 Results

The discontinuation of printer consumable business and the point of sale services will cut the losses contributed by these business units to the Group going forward. The Group shall continue to enjoy higher sales in the next quarter from the “back to school” peak season in Europe. This was already apparent in July sales in the key German markets whereby the sales were much higher than planned.


MBM Resources Q2 FY2017 Results

Although the Division’s alloy wheel plant continued to incur losses in current quarter, its quantum has lessened as various measures taken thus far are showing effect.

The market environment is expected to remain challenging in the coming quarters. Among the factors would be intense competition, uncertainties in the industry environment and strict hire-purchase approvals. The Group will continue to improve the production efficiency at its manufacturing plants and to secure higher volume to achieve more sustainable margin. Cost structure review and new model launches by Perodua and Volvo in the coming quarters are expected to contribute positively to the Group’s performance


Matrix Concepts Q1 FY2018 Results

Additionally, the Group‟s investment properties comprising Matrix Global Schools and d‟Tempat Country Club have attracted increasing patronage, as reflected in its revenue uptrend since the previous financial year ended 31 March 2017 (FY2017). Together with the newly commenced 34-acre X Park and d‟Sora Boutique Business Hotel, as well as potential future investments, these properties would position Bandar Sri Sendayan as a leading community-focused township that aims to provide wholesome living experience for everyone.


Chin Hin Group Q2 FY2017 Results

The Company had on 18 July 2017 entered into a conditional share sale agreement (“SSA”) with the vendors of Atlantic Blue Sdn Bhd (“Atlantic Blue”) for the proposed acquisition of 45% equity interest in Atlantic Blue from the Vendors (“Sale Shares”) for a total cash consideration of RM24.75 million (“Proposed Acquisition”). Atlantic Blue controls approximately 10% of the market share of solar projects in Malaysia, by way of mounting over 30 MW of solar panels on rooftops for residential and industrial buildings across the country. The Proposed Acquisition will enhance the group’s solar income stream. Moreover, the Proposed Acquisition were pursued on the premise of Profit Guarantees on the Target Companies’ profit after taxation of RM20 million within 24 months from the date the purchase consideration is satisfied.


WCT Holdings Q2 FY2017 Results

The Engineering & Construction Division of the Group is expected to continue to build on its strong order book, after having secured a few new contracts amounting to approximately RM2 billion in the last financial year ended, backed by the Government’s emphasis on infrastructure development and spending. With a higher proportion of infrastructure related jobs, the Group expects the overall construction margin to improve.


OldTown Q1 FY2018 Results

As at 30 June 2017, the Group has a total of 231 café outlets; 191 in Malaysia, 9 in Singapore, 26 in Indonesia, 1 in Australia, 3 in China and 1 in Hong Kong.

We market, sell and distribute our products under OLDTOWN brand name in approximately 17 countries…For FYE 2018, we expect strong growth from export market driven by China, Australia, USA, Indonesia and Philippines.


Hap Seng Consolidated Q2 FY2017 Results

Automotive Division will have 10 autohauses in the second half of 2017 with the opening of another 2 new autohauses in Iskandar, Johor Bahru and Puchong South. These 2 new autohauses together with the Bukit Tinggi, Klang autohaus that was officially opened in April 2017 would enable the division to expand further its market coverage and contribute positively to its future performance.


Bintulu Port Q2 FY2017 Results

The handling of LNG vessel calls and cargoes will still be Bintulu Port main revenue contributor. Other cargoes that would contribute to the positive growth in 2017 include palm oil, palm kernel and containerized cargoes.

Samalaju Industrial Port was ready for commencement of Phase 1 operation from 1st June 2017 and is expected to contribute positively towards the revenue growth of the Group. The cargoes include among others Alumina, Manganese Ore, Silica Quartz and Coke.

Though there will be growth in terms of revenue, the expenditure to be recognised relating to amortisation of lease concession assets, other concession infrastructures and equipment as well as the SUKUK finance charges at Samalaju will give a downward impact on the overall performance of the Group.


Kelington Group Q2 FY2017 Results

The Group continues to enjoy a healthy orderbook replenishment rate. Year-to-date, the Group has clinched new projects worth approximately RM180 million. Including the orderbook carried forward from the previous year, the Group has an orderbook on hand of RM342 million, of which RM205 million remains outstanding. The progress billing of the outstanding orderbook will contribute positively to the Group’s financial performance.

Over the longer term, the newly established Industrial Gases division will be positively impacted by the recently secured long-term 10-year contract with a major photovoltaic manufacturer. Contribution from this contract is expected to commence in the next financial year ending 31 December 2018. The Group aims to grow this business further, which will add a stable and recurring income stream to the Group.


Yee Lee Q2 FY2017 Results

Our aerosol can business segment’s profit margin was also affected by the increase in tin plate prices where the full cost of the increase was not immediately passed on to their customers.

The higher selling price of cooking oils and sales of the Ribena and Lucozade products have offset the substantial drop in sales of other beverages such as bottled water and energy drinks.

Although the sales of tea was higher in this quarter, the sales volume is still insufficient to cover its plantation costs.

On 11 August 2017, our principal, Suntory Beverage and Food Malaysia Sdn Bhd has voluntarily recalled five flavour of Ribena Concentrate products with specified expiry dates due to suspected exposure to air during bottling process that may potentially deteriorate in quality earlier than the expiry date. Others ready-to-drink Ribena products are not affected. Based on its brand reputation and quality commitment, the Board foresees that this recall is a temporary setback and sales of these affected products will normalise once the recall has been completed. All the products recall expenses will be borne by the principal.


Gabungan AQRS Q2 FY2017 Results

The revenue for the current quarter was mainly from the work progress for the Sungai Besi – Ulu Kelang (SUKE) Highway, PR1MA Homes in Kuala Kuantan, Gambang, Pahang and Pusat Pentadbiran Sultan Ahmad Shah (PPSAS).

The Group’s monetization programme through the disposal of its selected landbank, aimed to improve the Group’s working capital position and to repay bank borrowings, will significantly reduce its finance cost and lower its total borrowings by the end of 4Q17. From 1Q18 onwards, the Group expects finance cost to reduce drastically.

The Group envisions to further increase the Construction Order Book by another RM1 billion to RM1.4 billion by the end of the Financial Year 2017 which will continue to contribute to the Group’s revenue and profit sustainability.


Uzma Q2 FY2017 Results

The joint venture between Uzma Energy Venture (Sarawak) Sdn. Bhd. and EQ Petroleum Developments Malaysia Sdn. Bhd. (the “Contractors”) had achieved first oil from Tanjung Baram Fields (as disclosed in note (v) below) on 18 August 2015. Pursuant to the Small Field Risk Service Contract signed with Petroliam Nasional Berhad, the Contractors are responsible for incurring costs for development and production of petroleum from the Tanjung Baram Fields, and will be reimbursed for the costs incurred. The Contractors will also receive remuneration fee, linked to performance variables, for a contract period of nine years.


Frontken Q2 FY2017 Results

While the Group’s subsidiary in Indonesia is one out of four companies that possess an API certification to enable it to carry out repairs and rectification works or tender for projects from large oil companies for blowout preventer repairs, we are concerned that the overall operations in that country will continue to be impacted by the oil and gas downturn, coupled with lower than expected GDP growth and weakened consumer spending.


Kian Joo Can Factory Q2 FY2017

Average cost of paper rolls used by the Group has increased by more than 8% and is expected to increase further. Cost of aluminium materials has also increased in tandem with the aluminium price quoted on London Metal Exchange. Cost of tin plate has also increased.

The revision in minimum wage rate in Malaysia (since July 2016) and Vietnam (since January 2017) has increased the production cost of the Group. The Vietnam government has in August 2017 announced a further increase in minimum wage by approximately 6.0% – 7.0%, effective January 2018. The prospect of possible implementation of employment insurance in Malaysia may add further burden to the escalating production cost.


Country Heights Q2 FY2017 Results

The health division, GHHS Healthcare, which have a combined western and eastern practices continues to be the key opinion leader in the preventive healthcare industry. GHHS Healthcare will focus on raising its platform to be perceived as a centre for medical tourism with increased international health tourists especially from the Indonesian market and a new focus on the China market.


PPB Group Q2 FY2017 Results

On the back of rising world prices for wheat, the outlook for the flour business is expected to be challenging. However, we are confident that stronger flour demand in the second half of the year would mitigate the margin erosion pressure. Amidst a competitive and changing industry landscape, the animal feed business is difficult although the division is expected to maintain its performance given a bullish broiler market. In summary, the Grains and agribusiness segment performance will be affected by the aforesaid factors.


Sunway Construction Group Q2 FY2017 Results

The Group’s outstanding order book amounts to RM4.3 billion with RM1.0 billion new order book as at end June 2017. The tender book value is now more than RM14 billion with majority of jobs tendered under the civil/infrastructure division. In addition, SunCon at present is in discussion with our parent company for several potential projects.

Call for GDP to be measured in USD

“The GDP grew 5.8% in the second quarter of 2017 (2Q17) … but it grew in ringgit. If we calculated in [the] US dollar, it would be about -3.3% because the ringgit has devalued by 9%.”

“We do business in the world market, so we must bench up. [In order] to become a developed country, [the] GDP should be based on the dollar, not ringgit. As such, our per capita in dollars is not growing.”

“The statistics show good export in 2H17 because of a weaker ringgit which means we become more cost-efficient, and labour and operation costs become cheaper. However, that is not so good. We must be competitive, efficient and productive. We have [a] quality product to compete to gain market share but ringgit devaluation is not our effort, so it is not a good way to gain market share.”


Measuring GDP in USD not relevant or appropriate

“In other words, the GDP reflects only the changes in the quantity of goods and services produced in the country. This compilation of GDP is consistent with international standards as stipulated by the World Bank and International Monetary Fund. The department of statistics’ surveys and compilations are wide-ranging and inclusive of all sectors of the economy.”

“In view of this internationally-accepted standard, I wish to point out that [the] GDP measured in US dollars is not relevant for a matured and sophisticated economy like Malaysia, nor is the GDP measured in USD appropriate for an economy that is not dollarised in any sense. In any economy that is ‘dollarised’, there would be a loss of policy independence and flexibility, hence undermining a nation’s sovereignty.”

Maybank eyes RM160m spending from Amex gold card

“Our credit card billings have an average of RM3 billion monthly, driven by a total of 1.9 million customers in the credit card segment.” Maybank is the leading credit card issuer in Malaysia with more than 20 per cent market share as at July 2017.

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