Company Notes 2018.03.09

Pentamaster targets two sectors

“The powertrain system of automobiles is generating the demand for semiconductor test equipment. The improvements in advanced safety, convenience and comfort systems are the other factors driving the growth of the semiconductor content in automobiles. The Asia-Oceania region has the most market share of vehicle production and sales due to the growth of the Chinese automotive market. We are spending RM45mil on two manufacturing facilities this year. About RM35mil is for the Batu Kawan facility that would also produce IARM solutions on top of test equipment for the medical equipment and automotive industries. The remaining RM10mil is for the extension of our current plant in Bayan Lepas that would serve as a research and development centre and warehouse.”


Infrastructure jobs, exports set to lift Eita’s growth

“Part of the reason for this is that the MRT1 (Klang Valley mass rapid transit’s Sungai Buloh-Kajang line) project was completed last year. We’ve just got (contracts for) the MRT2 (Sungai Buloh-Serdang-Putrajaya line) but we think contributions will only come in for FY19.”

“We still aim to achieve 50% of the total revenue in our export markets but it depends on some of the projects that we are getting as the infrastructure projects could be lumpy. What’s more important is the growth seen in the export numbers over the last few years.”

In the longer term, Eita sees the lift and escalator maintenance services as an important segment. Currently, the group does maintenance work for over 90% of the lifts and escalators supplied, and the job only contributes about RM20 million or less than 10% of Eita’s topline.


PIE seeks to penetrate medical, auto, aerospace sectors

“We try not to be in the 3C industry — consumer electronic, communication such as smartphones, and computer because these are high-volume products with short life cycles. We cannot cope with that [type of business]. On the other hand, models for barcode scanners [of which PIE does testing under its contract EMS segment] do not change much. The volume is also not high, but they command a reasonably good profit margin — higher than the 3C products.”

Some 98% of PIE’s revenue comes from manufacturing, which consists of contract EMS for box-build, semi box-build and barcode scanners, raw wire and cable, and cable assembly and wire harness. The remaining 2% is from its trading segment.

“More workers would be needed when more orders come in later this year, but I will think about it then. Labour shortage is a constant problem, but for now I have managed to overcome the severe shortage. Also, because we increased the capacity at our Thailand plant, we hope to circumvent labour issues in Malaysia because there is no worker shortage problem there. As for raw material shortage, the impact is not so great now because the situation has recovered slightly.”


Top Glove wants to trim dependency on foreign workers

The world’s largest glove maker aims to reduce the ratio of foreign workers to locals to 50%, from 75% presently, over the medium term, according to Top Glove information technology general manager Chee Yih Tzuen. “Our total workforce is about 14,000 currently and the industry is competitive, so we have to do it (cut foreign workers) immediately,” he said on the sideline during the group’s factory tour yesterday.

Top Glove managing director Datuk Lee Kim Meow said labour traditionally constitutes about 10% of the group’s cost of production.

Asia’s online shopping boom is making it harder to track inflation

Malaysia’s statistics department estimates 87% of Malaysians use internet daily; 80% of those users seek information on goods, services.

“Big data” initiative created to explore online pricing and inflation.

Statistics department also now has unit dedicated to compiling indicators to measure e-commerce.


Malaysia disagrees with IMF over currency management, once again

“We continue to have strong concern on the Fund’s inflexibility to be receptive and open to new approaches and policy instruments needed to maintain stability and promote financial market development,” Juda Agung, an IMF executive director representing Malaysia along with other Southeast Asian countries, said in the report. Our authorities are also deeply concerned with staff’s lack of understanding of the domestic context which can diminish the Fund’s role as trusted adviser.”

Malaysia has a well-documented history of turning down the fund’s assistance during the 1997 crisis. The government implemented capital controls at the time, which were first panned, but much later acknowledged by IMF officials as being ahead of the curve.

Company Notes 2017.12.22

Berjaya Sports Toto Q2 FY2018 Results

H.R. Owen recorded a decrease in revenue of 8% as compared to the previous year corresponding quarter primarily due to drop in sales from the new and used cars sector during the current quarter as a result of softening demand in the United Kingdom car market as well as the product life cycle of the car models available for sale. It recorded a pre-tax loss of RM4.0 million as compared to pre-tax profit of RM5.1 million reported in the previous year corresponding quarter mainly due to the decrease in revenue and also lower profit margins earned from certain new car sales during the current quarter under review.


Top Glove Q1 FY2018 Results

The improved results followed strong demand growth stemming from developed and emerging markets, where glove demand is rapidly on the rise. Further contributing to demand was the disruption in vinyl glove supply following China’s strict enforcement against polluting industries which benefited both natural rubber and nitrile glove sales. Internally, new capacity coming onstream, as well as continuous improvement initiatives in terms of automation, better production lines and cost-saving were also instrumental in contributing to the strong performance.


Poh Huat Resources Q4 FY2017 Results

In line with the sustained demand for furniture in the US market, our operations continued to enjoy strong orders from customers from the US for both the office and home segment. In particular, shipment of our new ranges of panel based home products from our Malaysian operations to the US has rammed up over the last 12 months as our efficiency improves. In Vietnam, we also commenced shipment of several newer ranges of bedroom sets for which production runs is expected to smoothen over the next few months. Overall the Group expects this trend to continue for the remaining financial year.


Comfort Gloves Q3 FY2018 Results

Nitrile glove now accounts for 61% of Malaysian rubber glove export. As overall demand for nitrile gloves increases, the market is seeing increase segmentation and differentiation leading to an increase demand for specialty gloves. Through dedication to process rationalization and improving operational agility, the Group is confident in capturing greater market share and strengthening margins. The Group is confident that meeting customer expectations and continuous innovation will strengthen our position as the bespoke specialty glove manufacturer.

CAB Cakaran set to fly even higher after record year

Next year, Chuah said the group intends to increase broiler meat capacity to about 7.5 million birds per month, and up to 11 million birds a month for day-old chick. “We will not expand for the sake of expanding. For the broiler business, expansion is not an issue as long as we got the money and the land. But the key question is whether the demand is there,” he said.

Chuah said CAB has budgeted a sum of about RM50 million as capital expenditure for FY18, to upgrade the group’s facilities and machinery. “These upgrades are meant to cater for additional market demand. If we want to grow on a larger scale, we will have to look into the existing market, so we are also on the lookout to buy medium or smaller broiler businesses, especially those businesses that have no second generation successors,” he said.

“The construction will take about 12 months to complete and contribution will likely begin in 2019. We are targeting 4.5 million birds per month for the broiler and three million eggs per day for the layer in 2019. We currently hold 10% of the joint venture, and over the next five years, we have an option to increase our stake to 30% based on the inception price. In that way we don’t have to incur so much expenditure now.”


Kulim plant to boost Osram’s output to near market-leader’s level

“For more than one decade, Osram has been a strong number two in the market for opto semiconductors for lighting with a market share of more than 8%. With our new capacities in Kulim, the gap to the number one (Nichia Corp) will shrink further.”

“In our opto-semiconductor business, we have reached an operating margin of more than 28% before the opening of our new fabrication plant (in Kulim). Our target for the coming years is between 25% and 29%. Of course, the cost factor in Malaysia plays a role but our venture in Kulim is more about raising capacity for a still growing demand.”

“The market continues to be dominated by the replacement of traditional lighting with efficient LED lighting, while the LED share in the automotive segment is growing rapidly in interior lighting, and headlights. We also are developing exciting technologies for autonomous vehicles and using our LED chips; we are enabling new technologies for vehicle sensing, orientation and navigation. Our horticulture lamps are designed to grow leafy greens and herbs in a controlled environment, ensuring plants receive the best light to grow to their fullest potential with improved flavour.”


Techfast to source chemical products from China’s Tecore

Cape and Oriem will be Tecore’s Malaysian business partners to engage in the supply and sale of Tecore’s products, including clear epoxy molding compound and silicone phosphor film.

Techfast said Cape and Oriem will sell these products to its customers, which are multinational companies that engage in the LED business.

The group said Cape and Oriem’s services also include product evaluation testing, customer demand information collation and customer supply chain co-ordination on behalf of Tecore as its local business partners.

e-Conomy SEA spotlight 2017: Unprecedented growth for Southeast Asia’s $50B internet economy

There will be 330M monthly active internet users by year-end 2017, adding over 70M new users since 2015 at 13% CAGR. In Southeast Asia, mobile is the internet, as more than 90% of Southeast Asia’s internet users are on smartphones. It is hard to overestimate the absolute prominence of mobile as the access point and driver of Southeast Asia’s internet economy. Users in Southeast Asia are incredibly engaged, spending an average of 3.6 hours per day on mobile internet,1 more than in any other region in the world.

We estimate that Southeast Asia’s internet economy will reach $50B in 2017. Growing at 27% CAGR, it has outpaced the 20% 10-year CAGR projected in Google-Temasek e-Conomy SEA and is on a solid trajectory to exceed $200 B by 2025. All sectors of the internet economy have experienced solid growth in 2017. Online travel reached $26.6B led by growth in airline and hotel online bookings. Online media touched $6.9B driven by online ads and gaming. E-commerce and ride hailing have been under the spotlight growing the fastest at over 40% CAGR, capturing consumers’ preferences with evolving business models, and attracting the majority of the investments in the region. As a result, they are the focus of Google-Temasek e-Conomy SEA Spotlight 2017.

GLCs are crowding out private investment — IDEAS

“An often-cited concern relates to the preferential treatment that they receive with respect to government procurement. They could also enjoy various other benefits, including direct subsidies, concessionary financing, state-backed guarantees, and exemptions from antitrust enforcement or bankruptcy rules. Hence, GLCs find it easier and more profitable to increase investment in sectors which they already have a significant presence — a level of involvement usually made possible by their special and preferred status to begin with.”

“The results revealed that when GLCs account for a dominant share (60% or more) of revenues in an industry, investment by private firms in that industry is significantly negatively impacted. Conversely, when GLCs do not dominate an industry, the impact on private investment is not significant.”

Company Notes 2017.12.08

SCGM Q2 FY2018 Results

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

Cautious response to Top Glove buy

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

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

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


Kelington set to be lifted by gases

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

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

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


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

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

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


Pensonic now at a crossroads, says CEO

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

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


Ajinomoto eyes 50% sales growth in two years

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

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

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


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

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

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

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


Astro to invest RM100m in JV

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


Gamuda says construction supply chain ‘overstretched’

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

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


Acoustech exits audio business

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

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

Move over tech. Here come Southeast Asia’s builders

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

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

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


Klang Valley retail occupancy rate at 5-year low

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

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


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

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


A lift for small developers

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

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


Ensure Chinese investments offer locals high-skilled jobs too

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

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

Company Notes 2017.12.01

GHL Systems Q3 FY2017 Results

The Group has successfully deployed since 2015, its TPA merchant acquiring tie-ups with CIMB (physical merchants) and Global Payments (online and physical merchants) and in 2016, additional tie-ups with Alipay (Thailand) and RCBC group (Philippines). GHL group has commenced merchant acquiring for Alipay in Malaysia in 2Q17 and AFPI (Beep card) in Philippines for merchant acquiring in expected in 4Q17. The group remains optimistic of further developing TPA as a key growth engine for the group given the changes in the payment landscape as e-payments gain further traction as driven by not only regulatory directives but also positive changes in consumer preferences towards e-payments.


JHM Consolidated Q3 FY2017 Results

The declined in revenue was mainly due to worldwide components shortage and extended lead times in the supply chain.

The average inventory turnover days has reduced from 53 days to 39 days as a result of the continuing efforts of the Group in improving the inventory turnover efficiently.

Despite of facing the worldwide shortage of raw materials, particularly the passives, the Group’s outlook remains strong and bright with the growing acceptance of LED lamps in automotive market.


Dufu Technology Q3 FY2017 Results

We expect sales to continue to remain favorable towards end of 2017 as our major product is driven by the growth in high-capacity nearline HDDs as well as stabilization of client storage demand. The long-term future of HDDs are likely rests with high capacity HDDs, particularly in data centers serving cloud storage applications. The demand for high capacity storage drives, enhanced performance, and lower storage cost is set to rise. Global internet penetration, the rise in e-commerce in emerging markets, and the current trend for high-resolution media standards are the likely drivers for the continuing rise in global data storage demand.


Perak Transit Q3 FY2017 Results

The outlook of integrated public transportation terminal operations segment is expected to the favourable driven by the Group’s plans for expansion in other part of Perak, whereby the construction of the Terminal Kampar has commenced and it is on schedule. It is expected to be completed by 4th quarter of 2018. In addition to Terminal Kampar, the Group’s plans include similar integrated public transportation terminal in Bidor and Tronoh. As of this juncture, the Group is unable to determine the construction cost for the terminals to be built as the construction project is still at its preliminary stage and the approvals for construction have yet to be obtained from the relevant authorities. In this regards to the status of the Bidor and Tronoh lands, the acquisition of the lands are pending completion subject
to the fulfilment of the condition precedent as announced on 19 January 2017 (Bidor), 18 September 2017 (Bidor), 28 March 2017 (Tronoh) and 27 November 2017 (Tronoh) respectively.

The Group’s bus operations segments outlook is also positive driven by Stage Bus Service Transformation programme as the operation runs all the 19 approved routes since September 2016 with 45 express buses fully delivered in March 2017.


Pos Malaysia Q2 FY2018 Results

The Group’s prospects remain positive as our business continues to be largely driven by the strong e-Commerce growth in Malaysia and we are optimistic that the establishment of the Digital Free Trade Zone (DFTZ) will drive cross-border e-Commerce volume, especially for Malaysian small and medium enterprises (SMEs). This is expected to be positive for the prospects of our e-Commerce related businesses, namely our courier, eFulfilment, air cargo logistics and international mail business.

On the digital front, we are looking to introduce digital services that are relevant to our customers as digitalisation and demographic changes have encouraged us to be more innovative in providing services that suit the changing lifestyle needs of the Malaysian public, especially the younger generation. Accordingly, we expect to launch our Digital Mailbox product in early 2018 that will provide a range of digital services catering to mobile lifestyles. We are confident that our Digital Mailbox will, over time, become a key digital product offering.


EG Industries Q1 FY2018 Results

The Group is in the midst of construction of the IPC hub and expects to begin its IPC operations in December 2017. With the commencement of IPC operations, the Group is expected to obtain more competitive raw material prices through larger scale of procurement activities to maintain its competitiveness in global Electronic Manufacturing Services (“EMS”) market.


CAB Cakaran Q4 FY2017 Results

The integrated poultry farming and processing division’s performance in the next quarter may be moderately affected by the lower average selling price of broilers but will be mitigated by the lower cost of feeds. The recent strengthening of the Malaysian Ringgit and the world wide over supply of corn and soya, has contributed to the lower cost of feeds.

The value added food products manufacturing and trading division’s performance will be impacted by the continuous losses at Farm’s Best Food Industries Sdn. Bhd.. Management expects the performance of this division to show improvement after the measure undertaken to improve operational efficiency as well as the upgrading of facilities are completed over the next few months.


Ta Ann Q3 FY2017 Results

Performance for the palm oil sector is expected to remain as the main profit contributor in the coming quarter. For timber sector, the underperformance is due to the low logs production in compliance with the certification exercise as well as the restricting logs export quota of 20% that took effect in July 2017.

Given to the low plywood inventory in Japan coupled with the infrastructure construction works for the coming Olympics which has accepted the Company plywood products for the said construction works, we expect the timber market to rebound.


OCK Group Q3 FY2017 Results

The Group aims to grow its recurring revenue business via build-own-and-lease and acquiring existing tower sites operators in ASEAN. For our tower leasing business expansion, the Group is leveraging on its established presence in ASEAN and its vast experiences in building telecommunication infrastructures and site maintenance of telecommunication infrastructure. The build-own-and-lease business model is based on building, owning and leasing back the tower sites to telecommunication operators over a long-term period.


Notion Vtec Q4 FY2017 Results

The auto braking plungers business is expected to have a double-digit growth in FY2018 especially in electric and hybrid cars. The production for the lifestyle consumer electronics segment will take to production as soon as possible as it is a high volume product. We have also made inroads to a major MNC production equipment maker in the semi-conductor space which has good prospects. The Group continues to invest in new technologies and diversifying its customer and industry bases.

Finally, due to the need to conserve cash in the light of the fire incident the Board has decided to defer any dividend payment for this and next quarter until things are back to normal.


IQ Group Q2 FY2018 Results

The Group’s first half year performance has been below expectations. Sales slowed during this period and performance was further impacted by some delays in the conclusion of new product sales. IQ is however blessed with considerable opportunity from both new and established business relations with on-going product development and related planned launches in the pipeline. The current volume of product development requirements is good from a new business perspective, but challenging from a resource and timing standpoint. We see that the current conditions will remain throughout the remainder of this financial year, but going forward thereafter we anticipate positive performance as the various new products are rolled out into the market. Improvements to IQ’s R&D structure are already implemented to accelerate results and to better position our speed to opportunity going forward.

Paper mill operations to boost BHS Industries’ earnings

As it stands BHS earlier this month signed a memorandum of understanding with China Nuclear Industry Huaxing Construction Co Ltd to jointly develop the second and third phases of the project. Phase 2 involves a factory with the capacity to produce 100,000 tonnes of box liner paper as well as 120,000 tonnes of corrugated paper. Meanwhile, Phase 3 will involve another factory with a capacity to produce 65,000 tonnes of tissue paper. Interestingly, Lim added that, “We are targeting to give the award on the final negotiation to the Chinese party for the main building of the factory (Phase 1 for 10,000 tonnes wood-free pulp and paper plant).”

Note that BHS has secured a five-year contract from the Malaysian government to publish past examination papers. It also disposed of a plot of land (from the 410-acre GTP project) for RM5.3 million to a third party to develop. The group is still looking for potential partners to jointly develop the project’s fourth and fifth phases. Phase 4 will involve the construction and development of a feed mill with production capacity of 30,000 tonnes of agro-feed using the microbial fermentation technology, as well as a fertiliser plant with a production capacity of 50,000 tonnes of fertiliser using the by-products produced from the biogas plant.

Phase 5 has been earmarked for light industries involving the construction and development of packaging and printing factories. Additionally, BHS is also looking to expand the GTP model to other states. The group signed a memorandum of understanding with Sarawak Land Consolidation and Rehabilitation Authority subsidiary Bau Palm Oil Mill Sdn Bhd (Bapom) on Nov 10 to jointly develop, implement and finance a waste management project to convert the palm oil biomass, which is supplied by Bapom into commercially viable products. On top of that, BHS is actively looking to develop a third GTP in Johor in the near future; a first step before spinning off the concept to other states as well. “We are targeting Johor as there are many palm oil mills over there,” explained Lim, adding that in the next four years the group could be looking at Indonesia for expansion as well.”

Printing and publishing remain the core business of the group, accounting for about 80% of its revenue in FY17. The remaining 20% came from park development and management activities. “[Revenue] contribution is mainly from our book printing and publishing [business] now, but you will soon see it overtaken by GTP Phase 1,” said Lim. He expects the revenue contributions to invert, with 80% of the revenue coming from GTP Pekan and 20% from the existing printing and publishing business.


Top Glove wants to buy Aspion for RM1.3bil to boost profits

Aspion is currently the second-largest producer of surgical gloves in the world, with an annual production of 1.4 billion pieces or an 18% market share. Lim said production at Aspion is projected to increase by another 1.6 billion pieces by 2019 due to the ongoing capacity expansion at its Kulim plant in Kedah. Top Glove has a 12% global market share in this segment, producing 665 million pieces a year. The surgical glove segment, prior to the acquisition, contributed about 5% of Top Glove’s revenue.

Aspion’s Kulim plant houses the company’s most recent technology and research and development centre. It also has manufacturing facilities in Kluang, Johor and Kota Bahru, Kelantan, catering mainly for examination gloves. Aspion owns cutting-edge technology, namely, its Finessis surgical glove which is known to be the only technology capable of reducing the number of viruses (such as HIV) transferred in cases of percutaneous injury.


EG Industries allocates RM30mil for plant expansion

Group chief executive officer and executive director Alex Kang said the expansion, to be funded through bank borrowings and internally generated funds, was to cater to the strong enquiries from customers for box-build contracts, reiterating the company’s stronger proposition in this segment.

“Not only has our box-build segment improved, but also our printed circuit board assembly (PCBA) segment as it remains the main revenue generator for EG Industries.”


Kim Teck Cheong Consolidated to realise its investments in FY19

In March, KTC acquired a 60% equity interest in Grandtop Marketing Sdn Bhd for B$600,000, which is principally engaged in the business of distribution of CPG in Brunei. He said the group plans to further invest in its infrastructure in FY18 — albeit with a smaller allocation — to take advantage of opportunities as they arise. He added that KTC is currently in talks with five to six notable third-party CPG brands in Sabah and Sarawak, which may come on stream in FY18.


Freight Management sees 10% growth in FY18 profit

“There is no such thing as saturation in the market as there are no more avenues to grow. There will always be customers who are looking for improvements in service. We just have to take advantage of our strength to gain market share.”

The sea freight segment will remain the group’s core business. “We have always been very strong in our sea freight segment, so it’s only natural that we try to keep building and growing this particular segment.”

On the group’s e-commerce segment under 65%-owned FM Hubwire Sdn Bhd, Chew said although there is an opportunity to grow, the loss-making business remains a challenge as it is a relatively new area for the group. “We started this about a year ago, but honestly the business has not really gained traction. We are exploring ways to boost the business. Although it may take a while, if we don’t get involved now it will be too late later. It is a challenge now, but we have the resources [to sustain it],” he said. The group, he added, hopes to see some traction in the business by end-FY18, and to turn a profit by FY19.

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 2017.6.23

On earnings calls

The outlook for crude oil prices remains uncertain. The trend of prolonged low levels of capital spending is expected to continue and poses significant challenges to the industry. – Sapura Energy in a filing with Bursa Malaysia


The outlook in the O&G sector remains challenging and uncertain due to protracted oversupply. Overall global economic conditions remain challenging, with higher downside risks. – Yinson in a filing with Bursa Malaysia


On the back of encouraging demand, Superlon is looking to expand its capacity by setting up a new factory in Vietnam (“Factory 4”)…plans to invest approximately USD 4 million for the expansion plans and is targeting for Factory 4 to commence production in the FY2019. The new factory would enable Superlon to strengthen its presence and support its customers in Vietnam and neighbouring countries. – Superlon in a filing with Bursa Malaysia


With the anticipation of more states to ban the use of polystyrene as food packaging in Malaysia in response to the ongoing regulatory ban of non-environment friendly products, the demand for the plastic food trays and other degradable food packaging products is expected to increase in the near future. – SCGM in a filing with Bursa Malaysia


…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. – Comintel in a filing with Bursa Malaysia


In the rubberwood furniture segment, demand for processed materials and components are not expected to grow as furniture manufacturers do not anticipate any significant uptick in export demand. In addition, the industry is increasingly sourcing for cheaper alternative substitutes such as chipboards and also tropical timber-based materials. – SYF Resources in a filing with Bursa Malaysia


Lucenxia, the home dialysis business is still going through regulatory and trial stages in different part of the country and region. This period of regulatory registration was underestimated and took much longer than estimated. – Adventa in a filing with Bursa Malaysia


“…anticipates a good performance this year from the steady earnings of expressway concessions division and the ramping up of works for KVMRT Line 2. The property division’s performance is expected to be stronger in the next few quarters due to the launches of several new projects in Malaysia and overseas.” – Gamuda in a filing with Bursa Malaysia


On corporate development

“Capital expenditure depends largely on the type of feedstock used to generate energy from waste. Going forward, we would like to focus on solving the challenges faced with municipal solid waste.

“Our system powered by thermal decomposition is suitable because it is modular, decentralised and need not be large. It costs about US$5-7 million per megawatt to install, which is dependent on the waste composition and moisture content.” – Comintel ED Loh Hock Chiang


“Manufacturing condoms is quite similar to making rubber gloves and we already have the technology. The profit margin is much higher than glove manufacturing. Our competitive advantage is our market size. We currently have 195 countries in coverage, 3,000 customers, and [use] advanced technology.” – Top Glove chairman Lim Wee Chai


“PRG’s green initiative features three stages — the first being the installation of charging stations in various areas within Sunsuria City.

“The second stage will include installing more EV charging stations at prospective locations within the Klang Valley, and the final stage includes locations beyond the first and second stages, depending on the demand.

“Going forward, we do not discount the possibility to work with highway operators, petrol stations, mall owners, car dealers, national airports and commercial buildings for such initiative.” – PRG MD Alex Wee Cheng Kwan


Superlon targets a payout ratio of at least 30% of its audited consolidated profit after taxation attributable to shareholders for each financial year, after excluding non-operating income that is capital in nature. – Superlon in a filing with Bursa Malaysia


The new stretch film manufacturing facility in Phoenix, Arizona in the U.S. is expected to have a commercial rollout by end of 2017. It forms part of the pivotal and strategic move by the Group to be close to its customers and its sources of raw materials as well as access to other new customers in the region.” – Scientex in a filing with Bursa Malaysia


Assuming that the proceeds from the sale were utilised to pare down borrowings, the annual savings in interest is expected to be approximately RM4.6 million based on an average interest rate of approximately 5.5% per annum. – E&O in a filing with Bursa Malaysia


On regional infrastructure

The outlook of the construction industry remains encouraging as it continues being driven by government-led initiatives and spending, in particular projects such as highways and other public infrastructures. – Advancecon in a prospectus filing with Bursa Malaysia


“Central government funding for infrastructure, an area that we have traditionally viewed as notably inadequate in Indonesia, jumped by over 20% in the latest 2017 budget, and it now stands at 2.5 times what was allocated just three years ago.” – Bina Puri ED Matthew Tee


“We manage to clear the hiccups related to land compensation issues, weather and site conditions, government red tape, regulation changes and so forth…Notwithstanding the increased budget owing to delayed construction, the power plant remains an attractive investment with reasonably good returns.” – Sarawak Cable CEO Aaron Toh Chee Ching


On raw material prices

“This [nearly 30%] surge in waste paper prices is caused by the producers in China. When international prices go up, it will somehow affect the local prices. This year’s pricing is quite volatile compared with the last five to eight years.” Muda deputy MD Lim Chiun Cheong


Management’s comments on future prospect

“The market is very tough as shopping malls in the Klang Valley are mushrooming. Our intention of selling the mall remains the same…if the price is right. Discussions with interested parties are still ongoing…But all of a sudden, many other property companies started coming up with the same product, leading to the excess supply which we see in the market today.” – JAKS Resources senior GM Steven Ang


“This is our bread and butter. We have experience in this [metering] industry, we have our regular customers and the business continues to grow. Last year, we expanded to Nepal, and we are going to India as well. We are exporting to 43 countries currently.” – George Kent chairman Tan Kay Hock


“Even low-cost houses have air conditioners. So, the production cost of air conditioners has come down but demand has increased, especially in markets such as India — it’s huge.” – Alcom MD Heon Chee Syong

Company Notes 2017.6.16

On earnings calls

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

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


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

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

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


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

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


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

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


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

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


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

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


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

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

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

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


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


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


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


On corporate development

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


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

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


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


On regional properties & construction

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

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


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

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

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

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

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


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

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


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


On staying competitive with better efficiency

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

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


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


On Malaysia tourism tax

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

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


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