Company Notes 2018.01.26

iCapital.biz Q2 FY2018 Results

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

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

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


UCrest Q2 FY2018 Results

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

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


CapitaLand Malaysia Mall Trust Q4 FY2017 Results

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


Pensonic Q2 FY2018 Results

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

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

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


Suiwah Q2 FY2018 Results

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

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

GHL to offer Alipay services in Philippines

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

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

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

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


Texchem to open 80 more Sushi King outlets by 2021

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

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


Mexter’s healthcare business takes off

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

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


IoT solution is Mikro MSC’s new growth driver

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

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


Saudee’s food service revamped

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

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

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

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


Perodua, Proton to be hit most by lending guidelines

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


Ireka joins China firms to explore driverless rail transit

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

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


Stronger ringgit good for F&N as net importer

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

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

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


iPay88 online transactions hit RM6.6bil

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

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

US tariffs to hit Malaysia PV exporters most

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

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

Company Notes 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.

Company Notes 2017.08.04

Malaysia Airports Q2 FY2017 Results

MAHB’s network of airports (including Istanbul SGIA) recorded 61.7million passengers in YTD 2017, representing a growth of 9.5% over YTD 2016. International traffic improved by 13.0% while domestic passengers traffic increased by 6.8%. Correspondingly, aircraft movements improved by 3.1% with international and domestic aircraft movements increasing by 4.5% and 2.3% respectively.

The improvement in passenger growth is driven by a new level of growth contributed by visa relaxation measures for China and India, new additions in the local travelling population, increase in Umrah travel, competitive fares as well as favourable exchange rate for foreign tourists.

The increase in demand was adequately supported by increase in airlines’ seat capacity. Seat capacity supply estimates for the second half of 2017 indicate a 6% growth over the second half of 2016, setting the tone for a solid year for passenger growth.


Lotte Chemical Titan Q2 FY2017 Results

…the decrease in the sales volume due to the decrease in production volume attributable to unplanned water interruption by Syarikat Air Johor in April 2017 and lower sales due to festive holiday in June 2017. Partially offsetting the effects of the decrease in sales volume on Group revenue was a 19.0% increase in average selling price.


Lotte Chemical Titan takes nosedive

While the group had disclosed the water supply disruption in its IPO prospectus, the significance of the impact was not made clear as analysts did not expect the incident would have taken a heavy toll on its profit.

“After this year, the maintenance and turnaround work — which is done every five years or so — will be completed. LCT’s refining margin is a bigger factor but the expectation is that margins should be maintained next year.”


United Plantations Q2 FY2017 Results

The main risk for a lower production than initially anticipated is mainly continued labour shortages, in relation to especially the workforce assigned to crop harvesting and evacuation, which undoubtedly will have a negative impact on all plantations companies during the forthcoming peak crop expected in July-Sep 2017.

…with historically high U.S. soy bean plantings that took place in early 2017 and which will be harvested from September onwards, there may likely be a large recovery in global vegetable oil stocks. Whilst this would put a lid on further upwarad momentum on prices, the weather across the farming regions of the U.S. will be a significant price driver during the coming quarter and must be a factor closely watched.


Texchem Resources Q2 FY2017 Results

…unfavorable sales mix in industrial division; cessation of a loss making subsidiary in China in Q4 2016 in polymer engineering division; lower pre-tax loss due to better operating environment and cost management in food division; closure costs arising from cessation of business by a subsidiary and losses from new concept restaurants in restaurant division…


Palette Multimedia Q4 FY2017 Results

After the successful launch of iMedic in Malaysia, Palette in partnership with HSC Hospital has started a patient recruitment campaign. In addition, development has started on the next phase of iMedic software targeted at smaller clinics and individual medical practitioners. This will be a multi platform solution offering iMedic’s unique features to a market segment that at the moment only has access to old style clinic management systems. It is anticipated this development will be completed by Q4 2017. Further development is also ongoing with software being developed to integrate a wider range of medical devices and IOT sensors into the iMedic platform.


Key Asic FY2017 Quarterly Results

…working on the variation of K-card that allows 2-way communications for medical equipment uses. This technology would connect such equipment to the service provider directly and remotely through internet cloud. The significant of this 2-way communications would potentially save time, cost and life for people that require the services of service provider on regular basis. One of the specific example of such medical device is CPAP (Continuous Positive Airway Pressure) machine for those with sleep apnea problem. We are currently working with Sefam (a French Company) and u-wish (a Taiwan Company) to bundle our Kcard with their CPAP machine. The Group has started to supply to u-Wish to be bundle with their CPAP machine. In addition, the Company through its subsidiary in Taiwan has successfully market our K-card solution to a fitness company. Although the revenue contribution is not yet significant, but it does show the potential of our chip.


Fraser & Neave Q3 FY2017 Results

Input costs in the near to mid term for F&B Thailand and F&B Malaysia are expected to increase following the uptrends in packaging cost, milk powder and sugar prices.


SLP Resources Q2 FY2017 Results

…higher costs of raw materials mainly caused by higher average prices of plastic resins in the current quarter. The unfavourable conversion of selling prices in USD for the export sales due to strengthening of MYR had also contributed to the lower PBT…

…to strengthen operational and financial performance by continuing the implementation of a series of process improvement and ongoing expansion plans to achieve better overall operational and cost efficiency.

CCM to demerge from CCM Duopharma to improve capital structure

With direct ownership in chemical and polymer coating, as well as the pharmaceutical company following the completion of the proposed distribution and capital reduction, the entitled shareholders of the company can manage their investment exposure or rebalance their portfolio in each of these businesses independent of each other according to their individual investment objectives.

As the purpose of undertaking the internal reorganisation is to facilitate the proposed distribution and capital reduction, CCM will seek an exemption from the Securities Commission from the obligation to undertake the mandatory offer.