Company Notes 2018.03.23

AirAsia in talks to set up Myanmar airline

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

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

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


Apex Healthcare goes into e-commerce

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

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

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

Are REITs a good buy now?

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

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


Airbnb collaboration with Malaysia previews taxes on Internet economy

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

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


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

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


Malaysia tells tech entrepreneurs to give it a second look

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

Company Notes 2018.02.16

CSC Steel Q4 FY2017 Results

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


Hexza Q2 FY2018 Results

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

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


Weida Q3 FY2018 Results

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

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

Elsoft to ship more test equipment in first half-year

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


Wegmans aims to boost exports after doubling capacity

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

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

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

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


Ninja Van to use funds raised to boost Malaysian ops

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

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

Singapore may start taxing Amazon and Lazada

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

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


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

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

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


‘Home ownership is not for everyone’

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

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

Curated Insights 2017.11.12

(Guardian: Apple secretly moved parts of empire to Jersey after row over tax affairs)
(BBC: Paradise Papers: Apple’s secret tax bolthole revealed)
(Apple: The facts about Apple’s tax payments)

“US multinational firms are the global grandmasters of tax avoidance schemes that deplete not just US tax collection, but the tax collection of almost every large economy in the world.”

“Apple claims to be the largest US corporate taxpayer, but by sheer size and scale it is also among America’s largest tax avoiders … [It] should not be shifting its profits overseas to avoid the payment of US tax, purposefully depriving the American people of revenue.”

One theory is that AOE “bought” the rights owned by ASI taking advantage of an incentive called capital allowance. This means that if a multinational buys its own intellectual property through an Irish subsidiary, the cost of that purchase will generate many years of tax write-offs in Ireland.


This is how Amazon could invade the pharmacy business

Drug delivery would also add to the value of Amazon Prime membership. Customers who pay the $99-per-year price for Prime membership are its most loyal customers, and Amazon is constantly looking for ways to increase the value of membership to keep shoppers from using competitors.

In generics especially, there are numerous markups along the way that Amazon could eliminate or pare back to capture market share.

Amazon already owns wholesale distribution licenses in at least 13 states and could build its own pharmacy business from scratch, restructuring the drug supply chain in the process. For now, these wholesale licenses may be part of Amazon’s business-to-business sales effort, which would focus on hospitals, doctors’ offices and dentists. In the longer term, however, the drug-distribution licenses could be the first step in building a hub-and-spoke model for drugs that could eventually serve consumers.

There are thousands of different drugs and dosages with prices that vary widely among drugstores and insurance plans. This makes it hard for patients to know when they are getting the best deal.


Tesla hits bumps in pursuit of mass market

Potential problems uncovered include workers in its Fremont plant manually operating robots that should be automated, several cost overruns and delays from suppliers because of late changes to design specifications, and difficulties sequencing parts once they arrive at the plant leading to a large number of unfinished vehicles coming off the line.

 

In multiple instances, the company shipped cars from the factory that lacked key parts such as computer modules, digital displays, or even seats. These parts were flown to Tesla-owned dealers, who then assembled them into the vehicle before completing the shipments to customers, according to several people familiar with the practice.


 

Apple acquired InVisage with well over 100 patents on quantum dot technology for advanced cameras and beyond

Apple’s acquisition of InVisage is very exciting as iPhone cameras are becoming a key feature to keep their smartphones ahead of the pack. Advancing video will be very exciting to see come to the iPhone and beyond. Between the advances in Quantum Dot technology and depth cameras, they have expertise in many markets that Apple could tap into over time.

Why AI is the ‘new electricity’

The U.S. and China lead the world in investments in AI, according to James Manyika, chairman and director of the McKinsey Global Institute. Last year, AI investment in North America ranged from $15 billion to $23 billion, Asia (mainly China) was $8 billion to $12 billion, and Europe lagged at $3 billion to $4 billion. Tech giants are the primary investors in AI, pouring in between $20 billion and $30 billion, with another $6 billion to $9 billion from others, such as venture capitalists and private equity firms.

Where did they put their money? Machine learning took 56% of the investments with computer vision second at 28%. Natural language garnered 7%, autonomous vehicles was at 6% and virtual assistants made up the rest. But despite the level of investment, actual business adoption of AI remains limited, even among firms that know its capabilities, Manyika said. Around 40% of firms are thinking about it, 40% experiment with it and only 20% actually adopt AI in a few areas.

The reason for such reticence is that 41% of companies surveyed are not convinced they can see a return on their investment, 30% said the business case isn’t quite there and the rest said they don’t have the skills to handle AI. However, McKinsey believes that AI can more than double the impact of other analytics and has the potential to materially raise corporate performance.


Why multi-cloud is the next big thing in technology

Why has cloud become so indispensable to so many companies? Because pretty much every company has become a software company, and they all need to deliver their software faster and to more people than ever before.

Avoiding lock-in and saving cost; Differentiation; responding to cloud vendor pressure; resiliency, redundancy, performance and data sovereignty; M&A and consolidation; access to resources.

A recent survey by RightScale found that 85% of enterprises now have a multi-cloud strategy, up from 82% in 2016. This creates immense opportunities for startups that can help companies work seamlessly across various different cloud providers. Startups that promise cloud neutrality – not being locked into one particular vendor – will have significant advantage in this new battlefield.


A decade after DARPA: Our view on the state of the art in self-driving cars

Developing a system that can be manufactured and deployed at scale with cost-effective, maintainable hardware is even more challenging. We are innovating across the sensing hardware and software stack to lower costs, reduce sensor count, and improve range and resolution. There remains significant work to be done to accomplish these conflicting objectives and get the technology to reliably scale.

Testing stochastic systems requires a significant number of repetitions generated by real-world data for it to be representative. That means we must gather millions of miles of road experience to teach the software to drive with confidence. (Imagine needing to drive millions of miles to get your driver’s license!) But not all miles are created equal, so “accumulated miles” is not an expressive enough metric to track progress. Think of it this way: The skills you acquired learning to drive in a quiet Midwestern town will not translate should you find yourself driving in the heart of Manhattan.

We’re still very much in the early days of making self-driving cars a reality. Those who think fully self-driving vehicles will be ubiquitous on city streets months from now or even in a few years are not well connected to the state of the art or committed to the safe deployment of the technology. For those of us who have been working on the technology for a long time, we’re going to tell you the issue is still really hard, as the systems are as complex as ever.


How many robots does it take to fill a grocery order?

The U.K.’s biggest online grocer hit a milestone this year: Ocado Group Plc put together an order of 50 items, including produce, meat and dairy, in five minutes. Fulfilling a similar order at one of the company’s older facilities takes an average of about two hours. The secret: a fleet of 1,000 robots that scurry about a warehouse snatching up products and delivering them to human packers.


Thanks to Wall St., there may be too many restaurants

There are now more than 620,000 eating and drinking places in the United States, according to the Bureau of Labor Statistics, and the number of restaurants is growing at about twice the rate of the population.

“Everybody thinks their brand has what it takes to succeed in the marketplace. You look at a location that looks good, but everybody is looking at the same place and they all come in, and the result is you get oversaturation.”

Sales at individual chain restaurants, compared with a year earlier, began dropping in early 2016, analysts reported. A majority of restaurants reported sales growth in just four of the last 22 monthly surveys from the National Restaurant Association. Before that, most restaurants had reported growth for 20 consecutive months, from March 2014 through October 2015, the survey found. As Americans work longer hours and confront an ever-growing array of food options, they are spending a growing share of their food budget — about 44 cents per dollar — on restaurants.

The shuttering of restaurants could have a major impact on the labor market. Since 2010, restaurants have accounted for one out of every seven new jobs, and many restaurateurs complain that it has become increasingly difficult to hire and retain workers.


Menu prices will tell the future of inflation

Take a company like the Cheesecake Factory. In its third-quarter earnings report back in 2013, when the labor market was looser, labor costs represented 32.1 percent of revenue. Operating margins were 8.2 percent. Fast forward to the third-quarter earnings report this year. Labor costs had risen to 34.9 percent of revenue, and operating margins had shrunk to 6.2 percent. In its conference call, the company guided wage growth in 2018 to 5 percent, in line with many of its peers. As labor pressures have eaten into margins and profits, perhaps not surprisingly, the company’s stock is flat over the past four years.

Lucky for the restaurant industry, even while labor costs have been rising, food costs have been falling. Cheesecake Factory’s cost of sales as a percentage of revenue has fallen to 22.9 percent, from 24.0 percent in the third quarter of 2013. Without this, margins would be even lower.

The cost of eating out has been going up at a rate of only 2.4 percent per year, less than wage growth in the industry.

Jeff Bezos’s guide to life

On raising kids: Jeff and his wife let their kids use sharp knives since they were four and soon had them wielding power tools, because if they hurt themselves, they’d learn. Jeff says his wife’s perspective is “I’d much rather have a kid with nine fingers than a resourceless kid.”

…decided “the best way to think about it was to project my life forward to age 80” and make the decision that “minimized my regrets. You don’t want to be cataloguing your regrets.” And while you might feel remorse for things you did wrong, he said more often regrets stem from the “path not taken” like loving someone but never telling them. “Then it was immediately obvious” that he should leave to start Amazon. “If it failed, I would be very proud when I was 80 that I tried.”

On space entrepreneurship: The key to opening the opportunities of space is reducing the price of getting objects out of Earth’s gravity. “We have to lower the cost of admission so thousands of entrepreneurs can have startups in space, like we saw with the Internet”, noting how web companies exploded in popularity as infrastructure costs came down.


Peak farmland, peak timber, peak car travel, peak child

About 1970 a great reversal began in America’s use of resources. Contrary to the expectations of many professors and preachers, America began to spare more resources for the rest of nature, first in relative and more recently in absolute amounts. A series of decouplings is occurring, so that our economy no longer advances in tandem with exploitation of land, forests, water, and minerals. American use of almost everything except information seems to be peaking, not because the resources are exhausted, but because consumers changed consumption and producers changed production. Changes in behavior and technology liberate the environment. – Nature Rebounds, Jesse Ausubel

Curated Insights 2017.11.05

This company’s robots are making everything and reshaping the world

Earlier this year, during one of Fanuc’s rare open houses, Vice President Kenji Yamaguchi told investors that about 80 percent of the company’s assembly work is automated. “Only the wiring is done by engineers,” he said. And when you have lots of efficient robots making your other robots, you can sell those robots more cheaply—about $25,500 for a new Robodrill. (You can find a well-used older model on EBay for $8,500.) Volkswagen Group, for instance, pays about 10 percent less for Fanuc robots than it paid for ones it previously purchased from Kuka AG, a German company.

Fanuc manages to offer these savings while maintaining 40 percent operating profit margins, a success that Yamaguchi also traced to the company’s centralized production in Japan, which is made possible, even though most of its products are sold outside the country, by the 243 global service centers that keep its robots operational. The company even profits from its competitors’ sales, because more than half of all industrial robots are directed by its numerical-control software. Between the almost 4 million CNC systems and half-million or so industrial robots it has installed around the world, Fanuc has captured about one-quarter of the global market, making it the industry leader over competitors such as Yaskawa Motoman and ABB Robotics in Germany, each of which has about 300,000 industrial robots installed globally. Fanuc’s Robodrills now command an 80 percent share of the market for smartphone manufacturing robots.

Orders from the U.S., though, are dwarfed by those from China—some 90,000 units, almost a third of the world’s total industrial robot orders last year. Sales to China amounted to about 55 percent of the $5 billion Fanuc’s automation unit generated in the fiscal year ended March 2017. The International Federation of Robotics estimates that, by 2019, China’s annual industrial robot orders will rise to 160,000 units, suggesting Fanuc will be insulated from any slowdown in the world’s second-largest economy. Yoshiharu told investors at his most recent Q&A session in April that the company expects demand in China to outstrip supply even after Fanuc opens a factory next August in Japan’s Ibaraki prefecture. The facility will be dedicated solely to keeping up with Chinese demand.

The result of Nishikawa’s insight was the Fanuc Intelligent Edge Link and Drive, or Field. The system, introduced in 2016, is an open, cloud-based platform that allows Fanuc to collect global manufacturing data in real time on a previously unimaginable scale and funnel it to self-teaching robots.


Apple should shrink its finance arm before it goes bananas

Apple does not organise its financial activities into one subsidiary, but Schumpeter has lumped them together. The result—call it “Apple Capital”—has $262bn of assets, $108bn of debt, and has traded $1.6trn of securities since 2011.

Since Jobs died, its assets have risen by 221%, twice as fast as the company’s sales, reflecting Apple’s huge build-up of profits. Its investments are worth 32% of Apple’s market value, and its profits (investment income, plus gains on derivatives, less interest costs) have been 7% of Apple’s pre-tax profits so far this year. It is also sizeable compared with other financial firms. Consider four measures: assets, debt, credit exposure and profits.

In 2011 a majority of its assets were “risk-free”: cash or government bonds. Today 68% are invested in other kinds of securities, mainly corporate bonds, which Apple says are generally investment grade. The shift may explain why Apple’s annual interest rate earned on its portfolio (2%) is now higher than that of the four other Silicon Valley firms with money mountains, Microsoft, Alphabet, Cisco and Oracle. In total, they still have 66% of their portfolios squirrelled away in risk-free assets.

Its foreign operation swims in cash while its domestic one drowns in debt. Profits made abroad are kept in foreign subsidiaries. That way Apple does not pay the 35% levy America charges when earnings are repatriated. Some 94% of Apple Capital’s assets are “offshore” and cannot be tapped for ordinary purposes. The domestic business must do the hard work of paying for dividends and buy-backs. Its profits are not big enough to cover these, so it borrows. Domestic net debts have risen to $92bn, or five times domestic gross operating profits. Each year Apple must issue $30bn of bonds (including refinancing), similar to the average of Wall Street’s five largest firms.


To understand the benefits of tax reform, start by understanding Apple’s taxes

Now we have the numbers that answer the basic question: What accounts for the difference between what Apple pays and the official 35% rate? Page 56 of its 10K shows the numbers. Once again, if Apple had faced the full 35% rate, it would have paid $21.46 billion in federal taxes (as well as another $990 million to the states). Instead, it paid $10.444 billion in cash, and accrued $5.241 billion in U.S. tax owed on foreign profits, but deferred to be paid later. That’s the total of $15.685 billion that it booked in tax expense on its income statement. The difference between that number and the approximately $21.5 billion it would have paid at the 35% rate is the almost $5.6 billion exclusion for “indefinitely invested foreign earnings.”

Surprisingly, companies such as Apple with an extremely large proportion of foreign sales, could actually pay more U.S. taxes in cash each year under the current proposals. That’s because elimination of deferrals and the exception for reinvested earnings would sent more money to the Treasury even at the far lower minimum rate.

 

Google’s profits are exploding because the web is massive

The bigger the web grows, the more valuable Google becomes. And, with more than one billion websites in the world and more than 4 billion people with regular access to the Internet, finding your needle in that haystack is the fundamental problem of Internet use. As the tech writer Ben Thompson wrote, “Google is the king of aggregators because, when information shifted from scarcity to abundance, discovery became the point of leverage, and Google was better at discovery than anyone.”

Second, the migration of attention from print and television to the internet—both desktop and mobile—has created a advertising duopoly for Google and Facebook. As these slides from the last Kleiner Perkins internet presentation show clearly, mobile is the future of media attention and Facebook and Google’s share of digital ad revenue is growing faster than the rest of the industry combined.


How Google’s quantum computer could change the world

Early next year, Google’s quantum computer will face its acid test in the form of an obscure computational problem that would take a classical computer billions of years to complete. Success would mark “quantum supremacy,” the tipping point where a quantum computer accomplishes something previously impossible. It’s a milestone computer scientists say will mark a new era of computing, and the end of what you might call the classical age.

That potential is a result of exponential growth. Adding one bit negligibly increases a classical chip’s computing power, but adding one qubit doubles the power of a quantum chip. A 300-bit classical chip could power (roughly) a basic calculator, but a 300-qubit chip has the computing power of two novemvigintillion bits—a two followed by 90 zeros—a number that exceeds the atoms in the universe.

Volkswagen AG is testing quantum computers made by Canadian firm D-Wave Systems Inc. In March, the companies said that, using GPS data from 10,000 taxis in Beijing, they created an algorithm to calculate the fastest routes to the airport while also minimizing traffic. A classical computer would have taken 45 minutes to complete that task, D-Wave said, but its quantum computer did it in a fraction of a second.

Such a complex and expensive setup means that Google and its peers will likely sell quantum computing via the cloud, possibly charging by the second.


Google has a new plan for China (and it’s not about search)

Rather than another splashy product launch, Google’s latest China strategy is a grassroots effort focused on getting developers in the country trained and hooked on its AI building blocks. It’s similar to the way business software startups get employees using their services before corporate IT departments notice. Once the tools become popular, companies often accept the technology and sign up for full service.

It’s hard to find a place as fertile for AI as China. The country has one of the fastest growing TensorFlow developer communities in Asia, despite the fact that Google’s cloud services are unavailable there. The Chinese government has made AI a national priority. Scores of Chinese companies are deploying machine-learning systems — AI software that automatically adjusts to data — to update banking services, identify faces in crowds and control drones.

Beijing-based Wang Xiaoyu said TensorFlow was a vital tool for her podcast startup CastBox.FM. Developing her own tools would’ve required a team of 20 expensive machine-learning specialists. Instead, she turned to TensorFlow and hired a single Chinese PhD graduate with TensorFlow experience capable of producing the same results. Her company is now worth about $60 million with more than 8 million users downloading her app.

Ricky Wong, an investor who often works in China, analyzed the location of the first 5,000 developers to access the tools and found more came from Beijing than all of Silicon Valley.


Tech goes to Washington

I still believe that, on balance, blaming tech companies for the last election is, more than anything, a convenient way to avoid larger questions about what drove the outcome. And, as I noted, the fact is that tech companies remain popular with the broader public.

What this hearing highlighted, though, is the degree to which the position of Facebook in particular has become more tenuous. The fact of the matter is that Facebook (and Google) is more powerful than any entity we have seen before. Magnifying the problem is that, over the last year, Facebook has decided to “take responsibility”, and what is that but a commitment to exercise their control over what people see?

More broadly, it is hard to escape the conclusion that tech companies have been unable to resist the ring of power: the end game of aggregation is unprecedented control over what people see; the only way to handle that power without risking the abuse of it is a commitment to true neutrality. That Facebook, Twitter, and Google — which, by the way, holds just as much if not more power than Facebook, but without the attendant media scrutiny — have committed to fixing the Russian problem is itself more problematic than those urging they do just that may realize.

Inside Fort Botox, where a deadly toxin yields $2.8 billion drug

Scientists differ over how much of the toxin would be required to inflict massive damage. Data on the topic is scarce, and that may be intentional. But a study published in 2001 in the Journal of the American Medical Association said that a single gram in crystallized form, “evenly dispersed and inhaled, would kill more than 1 million people.” Experts are divided over what it would take to effectively weaponize the toxin, but the mere possibility of a botulism bomb has the U.S. government on edge. That puts Allergan in a remarkable position. The government’s vigilance enhances the company’s own secrecy, and together they give Botox a near-monopoly that is almost unassailable. Allergan says Botox has more than 90 percent of the market for medical uses of neurotoxins and 75 percent of the market for cosmetic uses.


Gene therapy helped these children see. Can it transform medicine?

Spark’s product, named Luxturna, is designed to help a subset of LCA sufferers with a mutation in a gene known as RPE65 — who number about 6,000 in northern America, Europe and the other developed markets the company hopes to enter. But its approval would have much broader implications for the way we fight sickness and disease. 

Drugs are designed to fight illnesses by cajoling the body, opening up one biological pathway or closing down another. Gene therapy takes a different approach, replacing the faulty or missing DNA that is causing the disease in the first place and helping the body fix itself. Because it tackles the illness at its biological root, it could offer a one-time treatment for an array of genetically driven conditions that have either had poor options or none at all, from haemophilia and Parkinson’s to Huntington’s disease, cystic fibrosis and myriad rare diseases. It opens up the possibility of that thing still so elusive in modern medicine: a cure. 


Patient deaths show darker side of modernized Chinese medicine

Having struggled for decades to rein in the sector, regulators have recently begun pushing for an overhaul of Chinese medicine injections, seeking to weed out unsafe and ineffective products. But the process could take up to a decade, given the complexity of these intravenous pharmaceuticals.

Still, due to the history of lax regulation, many injectables based on Chinese medicine haven’t been evaluated in strict scientific clinical trials. That means the reactions they set off in the body aren’t fully known. Chinese medicine is based on centuries of practical experience. But it is traditionally taken orally, which gives the digestive system a chance to shield patients from harmful chemicals. Injecting the concoctions into the bloodstream can heighten side effects.


This budget airline is buying seaplanes to reach areas others can’t

SpiceJet Ltd. is in talks with Japan’s Setouchi Holdings Inc. to buy about 100 amphibious Kodiak planes that can land anywhere, including on water, gravel or in an open field. The deal, valued at about $400 million, would help SpiceJet capitalize on Prime Minister Narendra Modi’s ambitious plan to connect the vast nation by air without waiting for billions of dollars in upgrades to colonial-era infrastructure.

India’s airlines handled 100 million domestic passengers last year, making it the No. 3 market behind China and the U.S. To handle growth, India will need at least 2,100 new planes worth $290 billion in the next 20 years, Boeing Co. estimates.

“The basic logic for this is that in India, we need last-mile connectivity,” Singh said. “The amphibian plane opens up a lot of areas, creates a lot of flexibility.”

“High-end tourists use amphibious aircraft at exotic locations all over the world,” said Amber Dubey, a New Delhi-based partner and India head of aerospace and defense at KPMG. “There’s no reason why it can’t be successful in India.”


This doctor turned $15,000 into a $1.6 billion beauty empire

“We focus on mid-end customers because they’re the biggest group of people,” said Suwin, who trained as a doctor before becoming an entrepreneur. “The high-end segment is small and very competitive.”

In mainland China, Beauty Community sells through online channels including Alibaba Group Holding Ltd.’s Tmall platform. The country’s beauty market is forecast to grow at an average of 9 percent a year until 2020, outpacing the 5 percent expansion expected in Thailand, according to Euromonitor.

Beauty Community is the ninth biggest company in Thailand’s cosmetics industry, with a 3.1 percent share of a fragmented market, according to Euromonitor. L’Oreal leads, with 12 percent, followed by direct sales company Better Way (Thailand) Co. and Estee Lauder Cos. The firm aims to have 450 shops domestically in the next three years, under brands such as Beauty Cottage and Beauty Buffet.


Debating where tech is going to take finance

The point of most innovations in consumer finance has been precisely to reduce its presence in our lives: Instead of talking to a bank teller to get money, you use an ATM. Instead of physically walking into a broker’s office to talk about which stocks to buy, you buy index funds through a web page. Or, now, you click to enroll in an app and it does all of your asset-allocating and stock-picking and tax-harvesting and so forth for you. I think that a lot of financial technology is heading in the direction of perfecting that vanishing act, so that in 20 years you’ll just think about financial things less than you do now.

The EU’s definitive defeat: digital tax plans and a declaration of surrender to Silicon Valley

The EU has a huge competitiveness issue already, and due to the eurozone’s lack of innovation, especially in its Mediterranean member states, the sovereign-debt crisis is never going to be resolved. The European Central Bank is, in some ways unlawfully, keeping Europe’s south afloat and will do so for some more time, but at some point there will be a crisis of unprecedented proportions–either an acute and dramatic crisis or an extended depression from which the eurozone as an economic area won’t really recover.

By now the EU appears to have given up on its ambitions for the digital economy. Instead, its focus is on a new tax that could lead to a full-blown trade war with the U.S. and would definitely harm European companies and consumers in the end.

There are structural reasons for which the EU not only lacks major players like Apple and Google but why it’s highly unlikely that any of its startups will, as an independent company, ever reach that level.

Unfortunately, the Commission’s tax initiative has drawn support even from normally libertarian, free-market and fiscally conservative parties such as Germany’s FDP, whose secretary-general said last week that she wants to impose higher taxes on the likes of “Apple, Google, and Facebook.”


China’s critical role in technology and geopolitics

There are 214 private companies in the world valued at $1 billion or more, known as unicorns. Slightly more than half (108) are,as you would expect, based in the United States, but 55 are in China, with the remaining 51 located in other countries throughout the world. Of the top ten unicorns, China has four (including numbers two and three) and the U.S. has six. China’s innovation has been engineering-based rather than science-based and it is consumer-focused and efficiency-driven. Baidu, Alibaba and Tencent together represent 16% of world net digital advertising revenue and 20% of world net mobile Internet ad revenue. Google and Facebook are the leaders with a combined 43% of net digital and 51% net mobile ad revenue.

China’s investment in research goes beyond information technology. Prior to 2010, the country committed almost $10 billion to research with biotechnology a focal point. The Chinese biotech industry has been growing at 30% and is valued at over $10 billion today. There are more than 580 biopharma companies. Chinese scientists have transformed normal adult cells into embryonic stem cells and produced live mice from these lab-produced cells. There are two major state funding sources – the State High-Tech Development Program and the Basic Research Program. China is the third largest filer of patents, after the United States and Japan.

An issue of concern for many investors is the level of Chinese debt, which has risen from 149% to 269% of GDP over the past decade. Increasing debt has accounted for two percentage points of China’s 7.25% growth from 2012 to 2016. There is also the worry that there are a number of non-performing loans on the books of the banks and “shadow” banks, but the adverse effects of these has been deferred by the country’s growth.


The conventional view of China’s problems may be all wrong: Q&A

If migrants are allowed to live and settle in cities and they spend as much as normal Chinese, the savings rate would fall. Consumption would increase by 2 or 3 percentage points of GDP, which is the entirety of the trade surplus.

What’s unique in China and doesn’t happen anywhere else is this migrant worker phenomenon. In any other country, you don’t have a hukou policy. Hukou is a link to savings, and then links to global trade surpluses. That’s a real strange link. This never would have been a logical way of thinking about it in any other country.

If you liberalize hukou, it reduces pressure to save. It increases your incentive or opportunity to consume. This increases demand for resources. It doesn’t require credit expansion or generation or stimulus. Therefore, you have GDP growth without debt buildup, which is exactly what you need. It’s a simple reform with tremendous impact. Allow people to live in Beijing and Shanghai where jobs pay more, and productivity will be higher.


Backlash against Chinese products ramps up in India

Two-way trade statistics tell the tale. India’s deficit with China has ballooned nine-fold over a decade to $49 billion in 2016 as China’s manufacturing edge stacks the odds against Prime Minister Narendra Modi’s three-year-old ‘Make-in-India’ program. The result: India’s current account deficit is worsening again, threatening the outlook for an economy already straining under the fallout of a snap ban on high-value notes a year ago and a new sales tax.

“The imbalanced trade relationship reflects the fact that India’s manufacturing sector remains strongly underdeveloped. Unless it is able to develop its manufacturing sector so that it can produce a large share of the growing demand for goods in its economy, India’s economic growth will be constrained by rising current account deficits and/or inflation and their consequences.”

“No one is capable of competing with the Chinese.”


Abandoned land in Japan will be the size of Austria by 2040

A private research group headed by a former government minister today warned that the area (link in Japanese) of vacant land and homes could by 2040 be as big as Japan’s northernmost island of Hokkaido—about 83,000 sq km (32,000 sq miles), or the size of Austria. The area is currently about 41,000 sq km, slightly bigger than Japan’s southern island of Kyushu.

Hiroya Masuda, the former minister who chaired the group, warned in a 2014 book that about 900 cities, towns, and villages in Japan would be extinct by 2040.

Singapore is finding it harder to grow, literally

By filling the sea along its coasts with imported sand, the tiny island nation has expanded its physical size by about 24 percent since 1960, according to data from the Singapore Land Authority.

The government has plans to continue expanding its land size and said in a 2013 proposal that it expects to increase its land size to 296 square miles by 2030 to further support economic and population growth.

Supersized family farms are gobbling up American agriculture

Farms with $1 million or more in annual sales—only 4% of the total—now produce two-thirds of the country’s agricultural output, the largest portion since the U.S. Agriculture Department’s census began tracking the statistic in the ’80s.

Three-quarters of America’s farmed cropland is controlled by 12% of farms, USDA data show. The number of million-dollar-plus revenue farms more than doubled between 1992 and 2015, while the ranks of smaller farms, with revenue between $350,000 and $999,999, fell by 5%, as farmers get older and have a hard time making consistent profits. USDA researchers, in a December report, said consolidation is likely to continue.

An average farm household in the Colby area needs income of at least $50,000 annually to get by, said Mr. Wood, the agricultural economist, which has become harder to generate from a smaller farm. “The big guys can cover their costs and have money left over to grow,” Mr. Wood said. Smaller farms, he said, “are going to struggle.”

Company Notes 2017.11.03

Globetronics Technology Q3 FY2017 Results

The Group expects to see significant improvement in business and volume loadings for all our major product portfolios for the rest of the year 2017. This will enable the Group to register a stronger financial performance for the rest of the FY.

The Group will continue to focus on escalating up the value chain and riding on the R&D initiatives in new products design and development with our key customers. This initiative is expected to result in the manufacturing of additional new products in the year 2018.


SWS Capital Q4 FY2017 Results

The acquisition of ELE enabled the Group to diversify into the manufacturing and trading of plastic wares, utensils, and goods. In view of the favorable prospects of the plastic wares division, the Board believes that the ELE Acquisition is an attractive business venture. The Group is exploring business complementation between dining sets division and plastic wares division for enlargement of products base.


DKSH Malaysia Q3 FY2017 Results

The client and customer portfolio remains well diversified and supported by strong sales, marketing and distribution infrastructure with a capillary reach. With a scalable business model, the Group offers a comprehensive portfolio of services along the entire value chain, customized and tailor-made to clients’ specific needs. Furthermore, operational risk management processes and controls, supported by an industry leading IT system, continue to support the existing businesses as well as new clients.

Two market trends additionally support a positive medium-to-long-term outlook for the Group. Firstly, the growing middle class in Malaysia supports the demand for consumer goods and healthcare products. Secondly, manufacturers increasingly focus on core competencies and seek specialized service providers in order to grow the market for and with them.


Sasbadi Q4 FY2017 Results

The PBT for the preceding FY’s corresponding quarter included a bargain purchase gain of RM4.315 million arising from the acquisition of 100% equity interest in United Publishing in August 2016. In addition, the LBT for the current financial quarter was mainly attributed to the drop in revenue, coupled with higher operating costs recorded by the Group mainly due to the consolidation of the United Publishing Group’s full quarter’s results, impairment loss on trade receivables, and increased interest expense arising from higher gearing.


Kronologi Asia Q3 FY2017 Results

By product category, the Enterprise Data Management (“EDM”) infrastructure technology segment continued to dominate the Group’s revenue, amounting to RM97.230 million or 95.67% of total revenue, with Managed Services making up the balance.

The Group’s performance for the nine (9) month ended 30 September 2017 (“9M 17”) has already exceeded that of the whole of the financial year ended 31 December 2016 (“FY2016”) both in terms of revenue and net profit. A major factor behind the increase has been the full consolidation since 4 October 2016 of Quantum Storage (India) Pte Ltd [QSI] (previously a 20%-held associate). The contribution from QSI is expected to contribute steadily to the Group for the rest of the year. In view of these factors, the Group expects its financial performance in FY2017 to be better than that of FY2016.

Subsequent to the quarter under review, the Group announced on 9 October 2017 that it has proposed to acquire the entire share capital of Quantum Storage (Hong Kong) Limited. The acquisition could expand the Group’s market presence in North Asia, namely Hong Kong and Taiwan, which potentially serve as gateways to Greater China. The Group believes that upon regulatory and shareholder approval, this acquisition will contribute to revenue and profit, especially from FY2018.


SLP Resources Q3 FY2017 Results

Towards year end, we expect to receive more orders from customers to cater the festive spending habits. Going forward, with our on-going capacity expansion plans, engaging and finalising with brand-owners on new projects, we expect to see further positive growth in revenue.

Drones, clones and chocolate could be the answer for palm oil planter

A lack of plantation workers means fruit can’t be harvested on time, lowering extraction rates and oil quality. United Malacca uses mechanical grabbers to collect fruit bunches, a typically laborious task in hot and humid conditions. It’s also mechanized fertilizer and herbicide application while drones are used for aerial surveillance.

United Malacca plans to diversify into crops including cocoa, coffee, coconut and stevia in Indonesia, Benjamin said, as it seeks to mitigate risks from being an upstream business and capture rising demand for those commodities. The company acquired a 60 percent stake in PT Wana Rindang Lestari to help widen its earnings base and reduce its dependency on palm oil.

United Malacca is also betting that its young trees will boost profits into 2019, according to Benjamin. Oil palms typically start producing fruit at the age of three, with yields peaking when trees are between 10 years and 18 years old then gradually declining, he said. Most of United Malacca’s trees are about nine to ten years of age, he said.


Econpile all ready for big infra jobs

“It’s a cycle. Transportation infrastructure is the market focus right now. When all these infrastructures are in place, it may again encourage property developments, particularly in areas surrounding the facilities.”

The company is slowly moving away from smaller-scale substructure contracts, having accumulated better capacity and experience to undertake larger-scale ones. It allocates an average RM20 million per year for capital expenditure to size up its fleet of machinery — together with research and development efforts — to improve their processes and equipment, and to provide training for employees.

Econpile has some of the largest and most advanced piling equipment in the country. They are kept in a seven-acre (2.83ha) workshop in Bukit Beruntung, Selangor, and are manned by some 120 mechanics — that’s to a quarter of Econpile’s 500-strong workforce.

“We have constantly improved our fleet size and technical capabilities to take on bigger jobs. This year, we broke the record for the deepest pile works in Malaysia, 110m deep with 3m diameter at a high-rise site in Jalan Ampang. We also own one of the biggest drilling rigs in Asia by capacity, and there are just five [such] units in the world. But with such a size, it means its fleet does better if it concentrates on one location without having to be moved too often, like it will have to be for small contracts. That will save on logistics costs.”


Pelangi mildly affected by new textbook policy

On Oct 5, the education ministry announced that it would be using imported English textbooks in schools from next year onwards as part of the ministry’s move to implement the new Common European Framework of Reference for Languages-aligned curriculum.

“In terms of [the] impact on Pelangi, it would be a loss of opportunity that we would not be able to go into English textbooks, but in terms of open market sales, we are still not so much affected.”

The group’s main revenue driver is its publishing segment in Malaysia, with a 74% contribution, while its printing business contributes 11% and other segments 3%. Publishing revenue from its overseas markets, such as Thailand, Indonesia and Singapore, contribute 12% to the group’s overall revenue.


Rising cost of packaging materials to impact F&B firms

“Rising paper price is a concern to F&B players as this will contribute to a higher cost for packaging. Our channel check with an industry player confirms that as of this year, there were already two rounds of price increases by suppliers of packaging materials of about 2% to 3% increases each time.”

“Despite the rising raw material prices as well as packaging cost, on average product prices only increase marginally about 0.5% y-o-y starting from June this year. From this observation, we conclude that while F&B players need to increase product prices, the rising input costs were mostly absorbed for now as it is necessary to maintain market share in the current environment.”

Malaysia, Australia probe data breaches as millions exposed

As the scale and frequency of major hacking attacks increases, companies and governments have come under intense pressure to shore up their cybersecurity. Only about 2 percent of corporate data is encrypted today, International Business Machines Corp. said in July.

Malaysia, with a population of 32 million, has a mobile penetration rate of 134 percent as of March this year, according to government statistics. Almost 80 percent of the 42.8 million subscriptions as of the first quarter are pre-paid accounts.


Malaysia ranks seventh in number of family-owned businesses, says Credit Suisse

“Our research seems to suggest that investors are not too concerned about the level of ownership but rather how involved the family owners are in the daily running of the business. This seems to be at the core of the success of family-owned companies in our view,” Klerk added.

The report also revealed that the financial performance of family-owned companies is superior to that of non-family-owned businesses. Revenue and Ebitda growth is stronger, Ebitda margins are higher, cash flow returns are better and momentum in gearing is more moderate. The report finds that family-owned companies in Asia Pacific ex-Japan have traded at a premium relative to non-family-owned companies since 2006, recording a 10-year average of 8%.

“Malaysia’s Press Metal is among the top 50 family-owned companies globally with market capitalisation above US$2 billion in terms of average revenue growth since 2014,” said Credit Suisse.


Budget 2018: EPF panelist warns of rising expenditure and shrinking tax revenue

“The allocation for the health ministry this year is about RM27bil and this is going to increase in double digit rates over the next 30 years. We need to pay for that if we want to maintain the healthcare system that we currently have. Being Asian, we think that families will take care of the aged, but the family support system is disappearing, and eventually, this situation will entail support from the government.”

“I think as far as load on government finances is concerned, pension is going to be the number one issue over the coming years. Even if we reform the pension system today, there would be a transition period of about 50 to 60 years. We will still be paying pensions for today’s civil service, 60 years from now.”


Tax officials to knock on more doors

“[In a nutshell,] the application of the tax regime is going to be tougher in order to raise the revenues. I think it will be a rigorous implementation of the existing laws by both the IRB and customs [and] there will be greater scrutiny of taxpayers by both authorities.”


Young Muslims catch a $100 billion travel bug

Millennial Muslims — those aged between 18 and 36 — are projected to spend more than $100 billion annually on traveling by 2025, almost double last year’s figure, according to a report from Mastercard and Muslim travel website HalalTrip. All age groups belonging to the religion are expected to spend around three times that much.

The next popular holiday spots are Japan, Thailand and Australia, non-Muslim countries where tourism is a key engine of economic growth. Some are starting to recognize the opportunities.

The number of Muslim international travelers is expected to grow to 156 million by 2020, partly due to the growth of the religion’s population: it’s expected to reach nearly 3 billion worldwide by 2060, a 70 percent jump from 2015, according to the report. Come 2030, almost a third of the world’s population aged 15-29 is forecast to be Muslims.

Company Notes 2017.10.27

British American Tobacco Q3 FY2017 Results

The Group registered market share decline from 54.5% in the second quarter of 2017 to 53.9% in the third quarter of 2017. Dunhill, the biggest Premium brand in legal market, registered 38.4% market share in the third quarter of 2017 (-0.6% versus previous quarter). The decline is mainly due to the prevailing high level of illegal cigarette incidence at 56.1% as of August 2017 (Source: Consumer Track by Kantar Research Agency) as well as the growth of a lower price segment within the legal market.

In relation to the cessation of the manufacturing operations announced on 17th March 2016, the Group has further recorded a one-off restructuring expenses of RM7.9 million as of year to date September of 2017 which consisted of on-going cost of the project, outplacement programs and one off expenses associated with the storage and transfer of unprocessed leaf and raw materials.

 

Maxis Q3 FY2017 Results

Demand for data continued to grow with 6.0 million 4G LTE users (3Q16: 4.1 million) and an average usage of 7.4GB per month (3Q16: 4.4GB). This was supported by the increase in smart-phone penetration which stood at 80.3% against 73.7% on a blended basis. The Group continued to lead the market with its expanded 4G LTE network at 89% population coverage, enabling customers to enjoy high speed and unmatched digital experience. In addition, the Group recorded an all-time high touch point net promoter score of +52 in the current quarter compared to +41 in Q3 2016.

 

Bursa Malaysia Q3 FY2017 Results

Bursa Malaysia-i , as the world’s first fully integrated end-to-end Shariah-compliant investing platform, will continue to intensify its efforts to promote Shariah investing in the market. Meanwhile, trading activities in Bursa Suq Al-Sila’ (“BSAS”) continues to record improvements. Bursa Malaysia will continue with its efforts to expand BSAS reach in new regions such as North Africa and Central Asia.

Bursa Malaysia recorded a significant milestone with the launch of the Leading Entrepreneur Accelerator Platform (“LEAP”) Market in July to assist small and medium enterprises (“SMEs”) to raise funds from the capital market for their business expansion. The LEAP Market went live on 3 October with the successful listing of Cloudaron Group Berhad.


Gadang Holdings Q1 FY2018 Results

On-going projects i.e. RAPID package 301 and 402, KVMRT V206 and TRX are executed on a fast track basis to optimise on cost saving and design effectiveness. With the latest award of Cyberjaya Hospital in August 2017, the outstanding order book of the Division has increased to RM1.98 billion.


Public Bank Q3 FY2017 Results

The Group’s Common Equity Tier I capital ratio, Tier I capital ratio and total capital ratio stood at a healthy level of 11.7%, 12.4% and 15.4%. The Group’s liquidity position also remained stable and healthy with Loan to Fund ratio standing at 88.6% as at 30 September 2017.

Tan Sri Teh said, “The Public Bank Group has always focused on asset quality in the pursuit of business growth. Thus, the Group has been able to sustain its stable asset quality even in challenging times. As at the end of September 2017, the Group’s gross impaired loan ratio of 0.5% continued to remain the best in the domestic banking industry.”


Lotte Chemical Titan Q3 FY2017 Results

Overall market started off moderately in Q3 2017 after the Hari Raya holidays. Market demand rebounded by late July following the Chinese government’s announcement to ban importation of plastic scrap by end of 2017. The capacities taken offline caused by Hurricane Harvey in United States had temporarily affected supply from United States, especially to Latin America. The market was briefly lifted up as concern on the supply disruption from US lingered. Meanwhile, supply from other regions was reportedly diverted to Latin America to fill the void.

Group plant utilization was lower at average 77% compared to average 92% in corresponding quarter. This was mainly due to statutory routine turnaround (every 5-6 years) for Cracker 1 plant in Malaysia and Indonesia polyethylene plants load was reduced during the quarter due to poor polyethylene economics as a result of tight ethylene supply and high cost.


Texchem Resources Q3 FY2017

The revenue recorded for YTD Q3 2017 was RM192.2 million against RM164.3 million in YTD Q3 2016. The Restaurant division incurred pre-tax loss of RM1.6 million against pre-tax profit of RM4.3 million in YTD Q3 2016 mainly due to closure costs of RM5.2 million arising from cessation of business by a subsidiary and losses from new concept restaurants.


Suiwah Q1 FY2018 Results

The Manufacturing division experiences high prospect projects entering commercialization stage during the past few months. The Group foresees continuous growth in the flexible electronics sphere. The new expansion project at Batu Kawan has also taken off and the rate of construction work is progressing in accordance with the milestone target. The Group will continue its mission to create and add values to all customers, employees, and shareholders by delivering innovative, competitive and quality interconnect technology solutions.


WZ Satu Q4 FY2017 Results

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 outlook of this sector is promising with the Group benefiting from Government expenditure in infrastructure.

Full restoration of plant may take up to 1 year, says Notion VTec (filing to Bursa Malaysia)

It has affected more than 552 Computer Numeric Control (“CNC”) machines and Work-in-Progress (“WIP”) goods and the Quality Control “QC” building but not the rear building and the surface treatment plants are good and operational.

Notion has adequate insurance coverage – RM350 million for property damage, RM217 million for business interruption up to 18 months. The preliminary estimate of the loss is about RM150 to 200 million. Once we gain access to the site we shall be able to assess the extent of damage and provide a more accurate estimate of loss.

At this moment, the Company estimates the affected segments are the camera, Hard Disc Drive top clamps and automotive parts but the Company will re-commence production in Factory 3 using any spare capacity that Notion has as well as sourcing and renting suitable CNCs and if needed, rent additional floor space to meet current and new customers’ requirements. It is not easy to outsource to other machinist companies as it requires safety certification and approved vendor which will take time. Notion is committed to restoring the orders to the customers’ requirement.

The immediate effects of this outage in this affected Plant are about 50 to 60% of the Company sales revenue but with the fast recovery plan, Notion will have restored 75% of the outage progressively within 5 months and the balance within another 3 months. But of course, the full restoration of structure and Certificate of Fitness may take up to a year.

 

Comintel to give special cash dividend after sale of subsidiary (filing to Bursa Malaysia)

The buyer is Aurelius Holdings Sdn Bhd, a newly incorporated investment holding company, where Comintel executive director Loh Hock Chiang is also a shareholder of Aurelius. As at 29 August 2017, Loh holds direct interest of 0.07% in Comintel. Comintel’s CEO of Comintel’s manufacturing segment Lee Chong Yeow is also a shareholder of Aurelius.

Comintel said the proposed disposal will give the company the opportunity to unlock and realise the value of its investments in BCM Electronics. BCM, which is involved in electronics manufacturing services, provides turnkey manufacturing services. Comintel said “there is limited leverage to further increase the competitive edge of the electronics manufacturing services (EMS) and EMS-related industries.” If Comintel is unable to continue to maintain the competitiveness of the EMS business, there could be adverse impact of potentially losing its key customers to its competitor’s, the filing said.


Thriving Top Glove believes growth is sustainable

“We are very fortunate to operate in a growing industry. Not only demand for medical gloves is growing but even the food industry, such as in the restaurants and supermarkets, is using a lot of gloves, especially disposable gloves. Demand is growing, so growth is definitely sustainable. To grow by 10% a year in any industry is very good and we have been growing for the past 30 years.”

“Margins over the past 15 years is about the same, which is about 10% for net profit margins. I think these margins are reasonable. Profit margins, which are too high at 30%-40% in the manufacturing industry, won’t last. You will invite competition when your margins are too high. Margins which are too low will affect the industry as it cannot grow well. I think net profit margins at the 10% level is sustainable and will likely continue for the next 10 to 20 years.”

“On average, our revenue per worker per year is about RM250,000. This figure is better than an electronics factory, which is about RM200,000. Some 10 years ago, we were only at RM150,000. So we have improved a lot, much more than an electronics factory.”

Surgical gloves are thicker than the normal gloves due to requirements during surgery. It also requires more raw materials per piece to manufacture. Top Glove presently only produces 2% of surgical gloves compared to its total product mix by sales quantity. “It is certainly good to consider expansion in terms of acquisition for surgical gloves. We are No. 1 in terms of examination gloves and rubber gloves that is exported from Malaysia. When it comes to surgical gloves, we are at No. 4 or 5. It is also in our plans to tap into the growing market of surgical gloves.”


This little known Malaysian stock has surged 400%

“The margins are beautiful,” Yap, 61, said in an interview at the company’s headquarters on the outskirts of Kuala Lumpur, referring to the Manno tie-up. Clients in those sectors are willing to pay more for quality machined parts, such as shoulder screws used to secure protective casings for sensitive equipment, he said.

The company, which supplies its mold-cleaning rubber sheets to about 70 percent of Malaysia’s chipmakers, is expanding into markets like Taiwan and China after winning clients including Chinese chip-testing company Tianshui Huatian Technology Co. “There’s a reason why we control the market here, and Tianshui as a client is a testimony to our capabilities,” Yap said. The manufacturing process may seem simple, but “it’s difficult to replicate,” he said, adding that there’s plenty of room to expand in those countries: while they require about 180 tonnes of rubber-cleaning sheets per month, Techfast currently only supplies about 12 tonnes.

Still, for Yap, the share-price surge is just the start. He says he plans to return 40 percent of the company’s net income to shareholders starting this financial year, up from 26 percent in 2016. The “big leap” in profit will be in 2018, he said.


Favelle Favco’s next phase of growth

Although the decline in oil prices for the past three years has not deterred the company’s growth, Favelle’s orderbook replenishment is slowing down. This is because more than 60% of its business is in the offshore oil and gas (O&G) cranes. As such, diversification has been part of the company’s plan. Presently, it has an orderbook of RM536mil, halved from its orderbook in 2014 of RM1.02bil. Earnings wise, the company saw its net profit grew marginally to RM32.3mil in the first half ended June 30, 2017, from RM31.3mil a year ago.

Favelle says it has inked a heads of agreement to acquire 70% stake each in Exact Automation Sdn Bhd, Sedia Teguh Sdn Bhd, Exact Analytical Sdn Bhd and Exact Oil & Gas Sdn Bhd. These companies are primarily involved in the provision of engineering services, industrial automation solutions, and specialised equipment mainly for the O&G industry.

It is worth noting that Favelle has about 40 years experience in the crane business. With the O&G sector starting to gain traction as crude oil prices continue to stabilise, it is timely for Favelle to embark on its next phase of growth.


Higher capacity boost for Hartalega

The world’s largest nitrile glove maker, which has been enjoying an average year-on-year revenue growth of 28% for the last 13 years, has attributed the stronger growth to the expansion of its production capacity.

At an investment of RM2.2bil, the NGC will comprise six state-of-the-art manufacturing plants housing 72 of the most technologically advanced production lines in the industry. Upon completion, the NGC will see Hartalega’s total installed capacity increase substantially to 42 billion pieces per annum from the current 29 billion pieces. Over the next five years, Hartalega aims to have an average growth of 15% per annum in terms of manufacturing output via capacity expansion.

On the likelihood of diversification to rubber products, he said the company would not undertake such an exercise. “We don’t plan to diversify. This is because our profit margin is double than the industry average. Furthermore, we have the competitive advantage in terms of strength and there is good potential for future growth in the glove business.”


Caring to launch digital platform

“We want to streamline all our channels, from our [present] bricks and mortar stores and e-commerce store to a website and mobile app, for our customers’ convenience in enjoying a seamless shopping experience. Customers can order products and have them delivered to their doorstep, or if they want to save on courier charges, they can order online from home and pick up their products from our outlets three days after.”

As of Aug 31, 2017, the group operated a total of 110 pharmacies, Chong said, adding that it plans to open 10 to 12 new outlets a year.

“We are conducting surveys and studies on locations in the east coast of Peninsular Malaysia, Sabah and Sarawak to prepare for our expansion there. Last month, we opened [a branch] in Kuantan and in December, we will open a branch in Kota Baru. We have identified a site in Sabah where we plan to open [an outlet], hopefully in six months. [Our aim] is to be a complete national player,” said Chong.


Nationwide Express sees Airpak buy as growth catalyst

The acquisition of Airpak, Rosilawati said, fits in with the group’s strategy of expanding its business-to-consumer (B2C) or consumer-to-consumer segments, which currently account for just 5% of Nationwide’s revenue. The bulk of its revenue is derived from serving business-to-business (B2B) customers.

While Airpak’s courier business is seen as complementary to Nationwide’s existing operations, the acquisition of MTR is geared towards the group’s diversification, expansion, and long-term sustainability, she said.


MAHB on connectivity goal

“By having Alibaba here, the programme would help startup to establish e-commerce and transaction and payment. When you have access to global market, the growth rate of e-commerce would be in a single-digit but once the ecosystem is implemented, it will quickly jump into high double-digit.”

“Commercial airlines have the opportunity to carry e-commerce cargo, which in turn would boost airlines profitability and good for the airport. Thus, airlines would also look at other opportunities to either same or introduce new destinations.”

“The aviation industry is about inbound foreign direct investments. For example Boeing and Airbus will save 40 per cent of their new aircraft deliveries over the next 10 years in Asia. Aircraft manufacturers need to move a lot of those activities in Asia to serve their customers. They need to open up more MRO centres.”


ES Ceramics seeks new revenue streams

“We want to further diversify our portfolio to include complementary new products within the dipping industry. It does not help that key glove makers have been expanding so aggressively over the years. There is a price competition because some players are hungry. Why? Maybe they have increased capacity, but utilisation has not caught up.”

On its part, ES Ceramics has diversified from producing moulds for different glove types — examination, household, industrial and specialty — to include breathing bags and balloons as well. Wong did not reveal the latest products that ES Ceramics is looking to include in its list, noting that discussion is still at its infancy stage.

“We do not have the advantage of some manufacturers who can purchase turnkey machinery [to adopt automation]. Our machinery needs to be modified and tested. For that, we need engineers. But some engineers are from fields that are relevant to our operations, and some are inexperienced. We have been hiring and firing, that has caused our staff costs to increase slightly, but that will stabilise when the right team is established to speed up the adoption.”

“Right now, our factories are not applying automation at a significant level,” said Wong. The group is currently focusing on less critical parts of the manufacturing line to allow for more room for modifications. “The first objective is to make sure automation can work before it is being applied across the board. Only then can we look at improving quality,” he said, without giving a timeline for the adoption to be meaningful to ES Ceramics’ financial performance.


Perodua has no plan to introduce EVs in Malaysia yet

Daihatsu holds a 20% stake in Perodua and is also the latter’s technology and technical partner.

“I would rather we focus on our bread-and-butter internal combustion engine (ICE), which is energy efficient and can still be used in Malaysia. What we’re doing now is looking at how we can realise the full potential of this engine in terms of fuel consumption. Until such time we cannot improve on it anymore — that is, once it already reaches its full potential — then only we’ll consider EVs.” Zainal said it does not make sense for Perodua to venture into EVs now as the infrastructure that is needed to support such technology, such as charging stations, is not yet widely available in Malaysia.

He explained that the government’s policy on EVs is two pronged — to try to bring down the cost of EV production by allowing lithium-iron batteries to be produced in Malaysia, and to install more charging stations nationwide. He said there are currently 230 charging stations being installed and it is expected that by 2020, there will be 1,000 stations.


Pensonic eyes IoT market

“We have not committed ourselves to a time frame for the IoT project. But we can safely say that we are committed to the project, which is now part of five-year business strategy. The Malaysia IoT Consortium (MyIoTC) is looking into creating an IoT ecosystem so that it could better tap into the IoT business opportunities worldwide, leveraging on the members’ respective strengths and area of specialisation.”

On the local front, Weng Khak said the company has been granted nationwide MYTV set-top box (decoder) distributorship in anticipation of Malaysian television broadcasting going digital in 2018. “The decoders would be a required item to receive television signals for continued access to Free-to-Air TV channels. The management is of the view that this distributorship would contribute to the group’s revenue in the short to medium term.”


Top Glove’s Lim buys 10.24% of Tropicana

The transaction price was not disclosed in the filing with the stock exchange. Based on yesterday’s closing of 93 sen, Lim’s 10.24% stake will cost him RM139.6 million.

“Over the years, Tropicana has proven itself by delivering high-quality and iconic projects to its customers. With my business experience, and regional as well as international contacts, I hope to contribute positively in moving Tropicana up the value chain.”


TMC to expand bed capacity to 1,100 in five years

“We are hoping to achieve this target if, and only if, we manage to complete the expansion of our capacity at Tropicana Medical Centre, as well as get the health ministry’s go-ahead to kick-start the Iskandariah Hospital in Johor. Most importantly for us is to expand our current facilities first, as we bank on the growing local population and increasing demand for medical services. Gradually, I am hoping the facility in Kota Damansara will reach to 600 beds by 2020.”

The construction of the additional facilities on a six-acre (2.43ha) land in Kota Damansara, serving a neighbouring population expected to increase soon to 200,000, will take three years to complete and cost around RM300 million. The centre’s overall weekly utilisation rate is 60%.

“We are also planning to open a fertility centre in East Malaysia. Hopefully, this will garner more interests from the locals and tourists. We recently celebrated the delivery of the 1,000th baby born via the in-vitro method. Obviously, this business is doing well.”


TNB’s net profit could fall by RM1b p.a. if 2% tariff mark-up removed, says CIMB Research

Under the IBR framework RP1 (2014-2017), TNB’s return on its transmission and distribution (T&D) assets is 7.5%, said CIMB Investment Bank Bhd in a note to clients today. However, its actual average tariff is about 2% higher than the base tariff set by the IBR due to higher electricity consumption by the commercial sector.

“As such, when the regulator revises the IBR parameters for RP2 starting in 2018, the allowable return may be lowered and we see potential earnings risk as it may no longer enjoy the additional 2% tariff,” said its analyst Ngo Siew Teng.

“Assuming TNB is only allowed to earn a 6.5% return (its weighted average cost of capital based on CIMB estimates) on its T&D assets and the 2% mark-up in tariff is entirely removed, we estimate that TNB’s net profit could be lowered by as much as RM1 billion per annum. This, plus the risk of a higher effective tax rate, may lead to a RM2 billion reduction in TNB’s annual net profit,” she added.


Plywood prices on uptrend

“Delay of shipments is about three to four months now, and port inventories are down in Japan while the demand continues to be strong. Plywood mills operate with very little log inventories. Also quality logs are hard to come by now,” revealed International Tropical Timber Organisation (ITTO) report in its latest issue. Reduced supply volume and higher export prices will continue.

“Floor base plywood demand has been shifting to domestic softwood plywood. Demand for softwood plywood is brisk mainly by large precutting plants. August softwood plywood production was high at 254,700 cu m, 10.8% more than August last year. It is a fact that domestic plywood is now more than imported plywood in Japan but imported plywood is absolutely a necessary product for Japan. But in the coming years, the (Japanese) market would not accept any product without traceability of forest certificate.”

“In Indonesia, 40% of total harvest is now planted timber and in Sarawak, share of planted timber in total harvest will be more than 50% in five years.”

Tax laws must not be complicated

Seah noted that the government had in recent times amended the laws after losing out in court disputes with taxpayers. The CTIM, she added, supports amendments that are made for tax laws to stay relevant to current trends and to maintain their original intent. “However, amendments [made] after the loss of a tax case are often drafted with a very wide scope to cover any imaginable circumstances and they [the amendments] sometimes unintentionally affect other taxpayers and put them in a difficult position,” said Seah.

Seah said policymakers should have guidelines and implementation plans ready to be rolled out immediately after amendments are proposed. Similarly, for all the rulings, Seah opined that the effective date should not be on a retrospective basis.

To avoid hiccups in implementation, communication between different government agencies and policymakers is essential to enable harmonisation of laws whenever there are changes or implementation of new rulings.

Curated Insights 2017.10.08

Alibaba’s Cainiao fee potential huge, loss ‘negligible’?

Most investors know Cainiao for its data and software business. This has been a critical element behind the success of BABA and eCommerce adoption in China, addressing several friction points in the logistics supply chain. Key issues include China not having a reliable postal code system and the systems dependence on paper weigh bills. Data is scattered, non-standardized and assets are highly fragmented (over 90% of logistics vehicles in China are owned by individuals). Cainiao’s Data Intelligent Network was built to utilize data and technology to coordinate resources across a vast supply chain. In just a three year time frame, adoption of eShipping labels has grown from single digits to +70% and is approaching ubiquity. This is enabling real-time data and tracking across the entire delivery chain…”

“… While Cainiao is seeing tremendous growth providing fulfillment services to merchants, we see potential for an Fulfillment By Amazon (FBA)/Prime-like flywheel with closer alignment of Cainiao and Tmall. We estimate that Amazon.com charges merchants 16% of GMV [gross merchandise value] on average for FBA services, compared to Tmall commissions at 2.2% of reported GMV last year…”


Amazon’s war to the door

Even without mass purchases of jets, trucks and couriers, the package preparation and delivery process is growing more expensive for the company. Amazon’s fulfillment costs — the company’s spending on packaging-and-distribution centers and related expenses – were $8.87 billion in the nine months ended Sept. 30, or 12.4 percent of the company’s net sales in the period. In 2012, they were 10.5 percent of net sales. Amazon’s costs for shipping are also creeping up, from 8.4 percent of revenue in 2012 to 11.7 percent in the three months ended Sept. 30.


Why restaurants hate GrubHub Seamless

Seamless takes a percentage, not a flat fee, of the total food and beverage amount, even though its involvement is the same whether an order is for $10 or $250. When you search for restaurants on Seamless, you may have noticed that, in the default view, the results appear to be random, but they’re actually arranged by who paid what. The more results there are, the harder it is for a restaurant to stand out—which makes restaurants likelier to pay more to increase their exposure.

“Their sales rep makes it perfectly clear that you need to pay a minimum of 20% to exist, and the more you pay, the more you appear in the first pages. Even by paying over 30%, we’re only on the second or third page. So some restaurants pay even more than that! But we could feel the difference when we jumped from 15% to over 30%: We multiplied by 10 our orders from day 1. We don’t make money on Seamless, however. Thirty percent is our break-even point. But it’s helpful for marketing—maybe a customer will try us and then come back in person. I don’t know why anyone would pay anything other than the minimum, because what’s the point of paying 17% to get on the seventh page of results?”

Tech giants play the Game of Thrones

Facebook has pulled off this incredible hat trick with what is arguably the best acquisition in technology in the past 20 years, and that’s Instagram. At the time, people were saying that the child-CEO has really screwed up here and paid $1 billion for a company with only 19 people. By most standards, if you try to value Instagram now, it’s probably worth somewhere between $60 billion and $150 billion. So it has put an afterburner effect on the company, as has likely WhatsApp. They keep finding growth.

If we were to look at everything you have ever put in that search query box, we would probably come to the conclusion that you trust Google more than any priest, rabbi, boss, mentor, coach, professor. If something goes wrong with your kid, your whole world stops. You start praying and you look for some sort of divine intervention that sees everything and then sends you back an answer. Will my kid be all right? So you type “symptoms and treatment of croup” into Google. We trust Google more than any other entity. It is our god.

The way you identify an industry ripe for disruption is you look at whether the price increases are greater than inflation and justified with underlying innovation. The one industry that is most ripe for disruption is education. I think Apple’s roots in education give it unbelievable license to go into that business. I mean, my class generates $160,000 in tuition for each night I teach. They don’t pay me that much. My agent, NYU, takes a 97% commission on that. But when you think about that, it’s ridiculous, and it has some very negative outcomes for our society in the form of debt on young people. So what could Apple do to really change their role and to think different? Start the largest creatively driven low-cost university in the world.

Margrethe Vestager, the commissioner on competition in the European Union, seems to be the only regulator in the world who is levying real fines against these people. You are going to see the first $10 billion-plus fine against one of these four companies in the next 12 months, and it is going to come out of Europe. The real estate isn’t going up in Hamburg. It’s going up in Palo Alto. America gets a lot of the benefits of these four companies, with some of the downside. Europe gets all of the downside and not much upside. The war is going to start, as it has throughout history, on the continent of Europe.

 

Bulldozers can show you where the economy’s going before the official data do

It’s released around the tenth of each month, faster than almost any other economic data. For Japan, the figures have a good correlation with industrial production data, which shows the output and sales of the nation’s industrial giants like Toyota Motor Corp., Mitsubishi Heavy Industries Ltd., and Komatsu itself.

The company collects data from about 140,000 machines in operation in Japan, 110,000 in China, 50,000 in Europe and 70,000 in North America. Rival Caterpillar Inc collects the same kind of data but doesn’t disclose it due to its customer contracts, according to a company spokesperson in Japan.

“It does work as a reference point,” said Yoshikazu Shimada, an analyst at Tachibana Securities Co. in Tokyo who covers Komatsu. “It shows data on public sector works, and data on China especially affects the global economic overview. Komtrax is part of the data that shows you what state the world economy is in.”


Warren Buffett and truck stops are a perfect match

It was No. 15 on the Forbes list of America’s largest private companies, and the chain’s 750 locations across North America generate more than $20 billion of annual revenue.

In fact, gas-station chains are known to have the kind of stable, predictable earnings and business longevity (perhaps even in a self-driving-truck world) that Buffett seeks in takeover targets. Their margins on gas sales go up when oil prices drop. And as fuel margins became more volatile over the past year, the major chains have turned to acquisitions to gain scale and reduce that volatility, as well as spending to upgrade locations.

This is why it makes sense for Pilot Flying J to have the financial backing of Berkshire amid the competitive pressure. Alimentation Couche-Tard Inc., the owner of Circle K, has been scooping up convenience-store businesses in Europe and North America, such as CST Brands for $4.4 billion in a deal that closed in June. Earlier this year, Seven & i Holdings Co., owner of 7-Eleven, bought about 1,100 Sunoco shops and gas retailers to expand its U.S. footprint.

Will new tariffs dim the solar-power boom?

Solar power generates only a pittance of U.S. electricity—about 1%. But it’s growing at a furious rate, accounting for 39% of new electricity generation in the U.S. last year, more than any other source. From 2010 to mid-2017, the total installed solar capacity in the U.S. leaped from 2.3 gigawatts to 47.1 gigawatts, enough to power 9.1 million homes, according to the Solar Energy Industries Association, or SEIA, a trade group. That boom was fueled by government subsidies and a decline in the price of solar cells, which have dropped 40% since the start of 2015.

Petri says tariffs would do more harm than good because they will drive up cell prices. “Will that add jobs? Not likely,” he wrote. “High tariffs will just raise the prices of imported panels and kill installation jobs.” While the industry employs about 260,000 people, 65% of those are in installation or sales, according to a 2016 report issued by the nonprofit Solar Foundation. Only 38,000 work in manufacturing. Because of that imbalance, tariff opponents say it’s much more likely that tariffs will hurt overall U.S. employment than help it.

But couldn’t tariffs persuade Chinese manufacturers to shift production to the U.S., thus boosting employment? Petri is skeptical, particularly because the tariffs are temporary. Foreign manufacturers won’t spend money on building U.S. factories that will become obsolete so fast, he argues.

First Solar’s thin-film technology has always been cheaper than silicon, and the company is launching a new series of panels that will be even more cost-effective. If tariffs raise the price umbrella of competing silicon modules, First Solar can raise its own prices and still go to utility-scale developers and offer to rescue their stranded projects with its thin-film panels. Every penny of these price boosts would fall to its bottom line, and it could demand equity in those projects.


Europe hits Ireland over $15B in unpaid Apple taxes; Luxembourg liable for $294M in Amazon taxes

“Ireland has to recover up to 13 billion euros in illegal State aid from Apple,” she said, referring to this 2016 ruling on the tax issue for the most valuable tech company in the world, which Ireland had appealed. “However, more than one year after the Commission adopted this decision, Ireland has still not recovered the money, also not in part. We of course understand that recovery in certain cases may be more complex than in others, and we are always ready to assist. But Member States need to make sufficient progress to restore competition. That is why we have today decided to refer Ireland to the EU Court for failing to implement our decision.”

“Luxembourg gave illegal tax benefits to Amazon. As a result, almost three-quarters of Amazon’s profits were not taxed. In other words, Amazon was allowed to pay four times less tax than other local companies subject to the same national tax rules,” she said in a statement. “This is illegal under EU State aid rules. Member States cannot give selective tax benefits to multinational groups that are not available to others.”

Yes, You get wiser with age

Empirical studies have shown that older people are better than younger ones in terms of control over emotion, knowing themselves better, making better decisions that require experience, and having more compassion and empathy towards others.

There are quite a few strategies, and again, these are for successful physical aging, cognitive aging, psychosocial aging. There is strong evidence in favor of them. One is calorie restriction. Second is physical activity, exercise. Very important. Even people in wheelchairs can have some physical activity. Then there is keeping your brain active, do something that is somewhat challenging. Not too stressful, but somewhat challenging. There is socialization, an appropriate degree of socializing. Then comes attitude and behavior, resilience, optimism, compassion, doing things for others, volunteering activities. What they do is they give a purpose to life, and that makes you happier. And there are other strategies like meditation for reducing stress.

Company Notes 2017.09.29

Kein Hing International Q1 FY2018 Results

…stronger customer demand for parts/metal components used in TV, fridge, printer and automotive industries.

…the impact from the overhead incurred by the new factory located in Hai Phong, Vietnam as it has yet to achieve the optimal production and sales, higher depreciation charge from new machines invested and the escalating labour costs as a consequence of constraints in labour supply in Malaysia Operation coupled with the wage inflation experienced in Vietnam Operation.


Poh Huat Resources Q3 FY2017 Results

…shipment to the US continued to gain strength following the successful launch of several ranges of panel-based bedroom sets in the previous quarters.

While orders from our North American importers remained strong, we noted a shift in the product mix to the middle and affordable segments of the market.

Our operations in Malaysia incurred higher raw material costs, particularly for boards, solid wood, hardware and finishing materials which have increased markedly over the last few months.

Competition in the market place has also turned keener as consumers demand for trendier and more competitively priced items. We have experienced downward pricing pressure on our products due to competition from other manufacturers. Furniture also has to cater for changing demographics particularly for millennials and younger families who have lower spending power and whom are more comfortable with online purchases and ready-to-assemble products. We have aligned ourselves to respond to these changes by working closely with our customers to develop trendier, market oriented products for the marketplace.


Bison Consolidated Q3 FY2017 Results

Operating expenses were higher in tandem with the increased business volume and the continuous outlets expansion by Bison which also entailed the recruitment of more talents.

Bison is on course in its new stores opening and during the nine-months period under review, there is a net increase of 44 outlets. Bison ended the third quarter with 338 outlets verses 276 as at 31 July 2016.


Comintel Q2 FY2018 Results

For SIMS segment, we will continue to re-organise and to mitigate losses through cost cutting amidst the softer demand experienced by SIMS segment over the past years.

For our renewable green energy project in Kuang, we have passed Initial Operation Date (IOD) with TNB. We expect to complete the Commencement Operation Date (COD) with SEDA in October 2017. Barring any unforseen circumstances, we are expecting the FiTCD (Fit-in-Tariff Commencement Date) to be in October or November 2017. We are hopeful with the commissioning of our advanced gasification green energy system at our Kuang plant, will open a new corridor for us to tap on quickly the vast potential of the demand for our green energy generation system in the region.


LKL International Q1 FY2018 Results

The Group’s venture into the distribution of medical devices in the current FY represents its strategic efforts to diversify its revenue stream within the healthcare sector to cater for evolving market requirements, and offer higher value products to enhance its product portfolios.


Superlon Q1 FY2018 Results

The lower profit before tax is mainly due to the decrease in total gross profit generated from lower volume of sales and higher cost of materials. The lower other income recorded and higher other operating expenses also contributed to decrease in net profit before tax.


VS Industry Q4 FY2017 Results

With the Group’s vertical integration capabilities, it has received substantially higher box-build orders from key customers, particularly during the second half of the financial year ended 31 July 2017. The trend of rising orders is expected to sustain going into the next financial year. To cope with the potential new orders from existing and new customers, the Group has added more production space by constructing a new factory cum warehouse.

On its operations in China, the Group’s Hong Kong-listed subsidiary, V.S. International Group Limited, has recently completed a Rights Issue raising proceeds of HKD105.8 million which shall be used to expand the operations in China and tap into its growing domestic sales.


A-Rank Q4 FY2017 Results

…due to a higher provision of income tax after the special export incentive brought forward had been fully utilised and there was an overprovision of deferred tax in the corresponding quarter last year.


George Kent Malaysia Q2 FY2018 Results

George Kent announced in September the securing of a tender to supply and deliver 650,000 water meters to the Water Supplies Department (“WSD”), Hong Kong. This is the second consecutive time the Group has been successful in the bid which was made under the Group’s subsidiary, George Kent International Pte. Ltd. George Kent will supply the DN15 Brass PSM-T water meter worth US$6.86 million (RM 28.72 million) to WSD within two years in 24 shipments.

To-date, George Kent is the only company that has successfully secured large water meter contracts consecutively from both Hong Kong and Singapore water authorities at the same time, which are renowned for their stringent standards in water meter evaluations


O&C Resources Q4 FY2017 Results

The Group has been facing challenges in its core business of manufacturing and marketing of condoms and baby products, in view of rising raw material prices and operational costs for the past few years. Taking cognizance of this, the Group has made efforts to improve our financial performance and position which include, among others, the Group’s acceptance of a construction contract which led to our Group’s diversification of business to include the construction business. At the same time of maintaining on the existing business undertakings, the Group has also expanded its initial foray in the construction business to include the property development business as well.


Kim Loong Resources Q2 FY2018 Results

As at 31 July 2017, the Group’s total planted area is 14,920 hectares. The age profile of mature area can be analyzed as follows: a) < 3 years (Immature) : 5%; b) 3 – 6 years (Young mature) : 13%; c) 7 – 15 year (Prime mature) : 28%; d) 16 – 20 years (Old mature) : 48%; e) > 20 years (Pre-replanting) : 6%

During the current YTD, the Group has carried out replanting of about 130 hectares.


Cypark Resources Q3 FY2017 Results

We plan to increase our investment in renewable energy projects and expect to have a bigger revenue contribution from the sales of green power. By year 2020, the Renewable Energy segment is expected to contribute more than
RM300 million of recurring revenue.

The launch of our country’s second bidding exercise for Large Scale Solar (LSS) by Suruhanjaya Tenaga in February 2017 has opened up more new opportunities for large, non-subsidised national RE scheme. Cypark currently has been given first right to undertake the turnkey EPCC, management & operation contract to develop 15MW (dc) solar plants by the winners of the first LSS tender.

We are also confident to secure more government contracts for landfill closures and new sanitary landfill projects. We believe that we have strong competitive advantage based on our solid track records of successful completion of 18
landfill closure projects covering total area of about 600 acres nationwide and our success in constructing and operating 1000 tpd sanitary landfill in Negeri Sembilan which is one of the country’s largest and most modern
facilities. We have also submitted many tenders and proposals worth more than RM2 billion and are optimistic that some of the tenders are at advance stage of negotiations which will be likely secured in 2017.

Perak Transit in transition to stronger growth path

“To develop a bus terminal is not easy as we must get approvals and land title from the state and federal authorities.” The land public transport commission often allows only one express bus terminal per council, according to Cheong. He noted that it was necessary to have one bus terminal as part of township development, for instance Kampar.

“We will concentrate on building more terminals instead of focusing on the express or stage buses and our petrol stations, as terminals are long-term assets with recurring income while the value of buses depreciates very quickly.”


Hai-O expects 1Q’s growth momentum to continue

The group plans to roll out new collections of shoes, bags, leatherwear, women’s accessories and eyewear under the “Infinence” brand name this year. The group has also allocated RM10 million for capital spending and has identified suitable shoplots and warehouses for further expansion in its East Malaysian distribution channels.

On overseas expansion, Hew said the group is exploring the Vietnamese market due to the large population there, though the decision to go in or not largely rests on whether the Vietnamese government approves direct-selling licence applications from foreign companies.

“We are discussing with our principal suppliers from China to work out trade settlements using alternative currencies such as renminbi,” he said, as some 40% of the group’s purchases are imports denominated in US dollar.


My EG’s GST monitoring launch set for end-2017

“However, it said all issues have been resolved. MyEG has so far installed 5,000 dongles in Klang Valley in F&B outlets and is targeting to install nationwide by year-end (our earlier target was June 2017).”

“We also expect the company to benefit from selling the compulsory foreign workers’ insurance to the employers. MyEG said it will ensure the welfare of foreign workers, by making sure their salaries are paid and there is no worker abuse by the employers.

“In the next one year, MyEG is targeting to place out 100,000 foreign workers. In our earnings forecast, we assume a more conservative average of 5,000 foreign workers monthly or 60,000 foreign workers annually.

“This would help MyEG generate an average annual revenue of RM60mil. We assume 50% net profit margin for the matching services (in line with the 50% net profit margin from existing foreign worker services) and an annual net profit of RM30mil.”


Asia File to spend RM30mil on foodware production

“We spent about a year to research the demand for disposable foodwares and found the domestic market to be strong. We have invested in the raw materials which we were able to purchase at a very good price. This will enable us to sell competitively and generate good profits.”

…the new products would be marketed under the ABBAWARE.

Lim said that while there was familiarity with the raw materials used in production, the sales and marketing for the products would be a new uncharted area to explore.

Hidden taxes, forex rules deter German business from Malaysia

Hidden taxes, which include non-deductible taxes on refurbishment, maintenance, legal services, and company vehicles, add to the overall corporate tax rate, said MGCC president Peter Lenhardt. “If you look at the cost of refurbishment, there is a tremendous impact on the bottom line of any business, so a lot of them don’t see any reason to spend on maintenance,” he told reporters at the launch of the AHK World Business Outlook 2017.

Lenhardt added that another economic risk which is not unique to Malaysia is the lack of qualified labour. He noted that there is a lack of industrial involvement in vocational training which creates a gap where the workforce is not fully trained to operate in high tech facilities.


Taxmen set their sights on digital economy

“Their profits are subject to corporate income tax as long as the operations are carried out [here]. In short there are no specific corporate rules for taxing the digital economy. The same treatment applies to both the digital and traditional economy. For foreign companies they would only fall within the ambit of Malaysia’s CIT if they have a taxable presence or a permanent establishment here, for example having personnel in Malaysia who are performing the services here.”

“The key determinant would be where the transfer of ownership of the goods take place. [If] it is in Malaysia and the value of the goods exceeds RM500,000 per year, then the foreign company is required to register [for GST] in Malaysia. [If] the goods are imported into Malaysia via air courier services, and [if] the value of the goods does not exceed RM500, then the goods are given relief from GST. Therefore where consignments are kept below RM500, Malaysians can buy goods from overseas which are not subject to GST, and if the goods exceed RM500, this would be collected by the courier service before or upon delivery.”


Taxing digital economy players a daunting task?

“For example, when you buy a product from a foreign e-commerce provider, you use your credit card and the money goes to an offshore bank account, and if the goods sent to Malaysia are not subject to customs duty at the point [of delivery], then the income that the foreign provider makes from providing the goods or services goes overseas, perhaps in [the] Cayman Islands or [the] Netherlands where they may have tax breaks. So that income leaves Malaysia and the foreign company providing the service is not present in Malaysia, so they are not subject to Malaysian income tax. When it comes to GST, there may be a supply of goods and services, but when you have hundreds of thousands of consumers [purchasing goods or services] through digital platforms, [it becomes difficult to track]. So how do you impose tax? [One possibility] is since most of the purchases are done through credit card, they may come up with a new mechanism where the credit card company collects tax due on the goods or services on behalf of the government.”


BNM to implement NSFR ‘no earlier than 2019’

“The NSFR, which complements the liquidity coverage ratio (LCR) that was phased in since 2015, looks for banks to have the liquidity to support their business in the longer horizon. It will help strengthen the liquidity management of the financial system.”

“In addition to that, we are aware of the level of competition in the market today which would encourage the banks to remain competitive with respect to their product offerings, as well as the pricing of their products. We don’t think it (NSFR) will be a factor that could change the pricing of the loans.”