Regional Notes 2018.04.27

Grab’s acquisition of Uber Southeast Asia drives into problems

Go-Jek won’t, of course, take all the Uber alums, but these conditions certainly put it in a good position to cherry pick critical new hires to fill out its business outside of Indonesia. Other Grab rivals, including well-funded logistics startup NinjaVan, food delivery companies Deliveroo and FoodPanda, bike-sharing startups, and even the likes of Facebook, WeWork, Google and Netflix are understood to have hastily arranged interviews with Uber’s departing Southeast Asia staff in a bid to suck up new talent. That’s precisely the scenario that Grab is trying to avoid.

Integrating the ‘unbanked’ into a cashless society

In Malaysia, the population of the unbanked stood at 8% or two million of the country’s 24 million adults, according to Bank Negara Malaysia (BNM) in its Financial Stability and Payment Systems Report 2017. While this may seem small in comparison to regional neighbours such as Indonesia and the Philippines whose unbanked make up more than half the population, there is still a need to address this segment if Malaysia aims to be a full-fledged cashless society.

Lotte Chemical Titan sees no margin pressure ahead

“Our business is a margin game. As long as there is demand coupled with a limited supply, our margin will be maintained. Currently, there is limited supply capacity, and there are no new plants coming on stream until 2019.”

The group is looking to build a naptha cracker with a capacity of one million tonnes, next to its existing plant in Merak, Cilegon, Banten province of Indonesia. The mega project, estimated to cost between US$3 billion and US$4 billion, will take about three to four years to complete. Indonesia remains a crucial market for the group, as it is a net importer of petrochemicals backed by a huge population of nearly 300 million.

“When we sell in Indonesia and Malaysia, we enjoy a slight premium over international prices. [So] we are looking at duplicating our Malaysian facilities in Indonesia, and increasing the capacity as well.”

Hap Seng to buy Mercedes’ commercial vehicle business

Hap Seng said it and MBM will jointly undertake a stock take in respect of the fixed and current assets to determine the final purchase consideration. The group opines that the proposed acquisition will enable it to participate in the wholesale distribution of Mercedes-Benz and Fuso commercial vehicles in a growing domestic market.

On completion, Hap Seng Trucks will be responsible for handling the import, assembly, wholesale distribution and after-sales services of Mercedes-Benz and Fuso commercial vehicles in Malaysia. However, the business transfer is conditional upon Hap Seng obtaining the licence to import complete knocked down components from the international trade and industry ministry, which is required to carry on the business.

Nestle Malaysia hopeful to achieve RM400m sales from new products in 2018

Last year, the food and beverage manufacturer’s new products launches contributed about RM380 million sales. Hofbauer pointed out the company’s sales target contribution from new products would derived about 10 per cent of its domestic sales. Hofbauer said Nestle will also be allocating RM180 million in capital expenditures to grow its culinary and confectionery products as well as to enhance infrastructure manufacturing.

Currently, domestic consumption contributes about 80 per cent of Nestle Malaysia’s sales, while remaining 20 per cent for export market. “We export to over 50 countries including in the Middle East and South East Asia to Nestle’s affiliates,” he said, noting that the export value constitutes about RM1 billion. Nestle Malaysia manufactures and markets more than 500 halal products and the country is the biggest Halal producer for Nestle.

PetDag upgrading petrol stations and opening 15 new stations

The company, which has a capital expenditure of RM300mil for the year, has seen its previous and ongoing promotions boost fuel and non-fuel sales, with its retail segment continuing to be its highest revenue contributor.

“We have the largest network in Malaysia today with about 1,045 stations. The key focus for us will not be to grow the network much, although we are looking at opening 10 to 15 new stations. We are focusing more on upgrading our existing stations and particularly our convenience stores to boost sales. In 2017 and moving into 2018, we already have initiatives to assist dealers face the challenging market. We are revising the licence fee, providing better royalty programmes and offering better sales incentives for our dealers.”

“The volatility (in crude oil and pump prices) impacts working capital and gains or losses on inventory. To manage this, we are pushing for ultimate efficiency in managing inventory – our inventory holding days are now between four and four-and-a-half days.”

In the commercial segment, the company holds about a 70% share of Malaysia’s aviation jet fuel market, and recently secured deals with three more international airlines.

Intraday short selling measures claims first victim – Unisem

“To a certain extent, perhaps IDSS would exaggerate the downward pressure on stocks, but it won’t be severe. Regulated short selling (RSS) has already been in the Malaysian market for a while. In the latest measure, Bursa Malaysia further allows the PDT to do IDSS, which simply means they need to close out their positions within the day.”

RSS involves borrowing shares of a company’s stock and selling it with the hope it can be bought back at a later date at a lower value. Meanwhile, naked short selling involves betting that the stock will go down in price without actually borrowing the stock or finding out if there is available stock to borrow in order to short it. This can cause further volatility or leave a stock open to manipulation. RSS was banned in Malaysia in September 1997, but was reintroduced in 2007. Investors can participate in RSS so long as they have a stock borrowing and lending agreement approved by the Securities Commission.

Company Notes 2017.08.11

PIE Industrial Q2 FY2017 Results

With increasing orders from existing customers and on-going new projests with potential customers, the Group foresees a steady grow of revenue in the year 2017, while the drastic fluctuation of Ringgit Malaysia against USD, labour and eletronic components shortage will continue to be the main factors to affect the Group’s future revenue and earning. The Group will continue to strengthen its vertical integration of manufacturing capability and maintain sufficient manufacturing capacity to cater to outsourcing orders from new and existing customers.

Hartalega Q1 FY2018 Results

The significant increase in profit mainly due to increase in sales volume and average selling price, strengthening of USD and improvement in operation efficiency.

The demand for rubber gloves remains in resurgent mood with demand supply dynamics in healthy balance. The nitrile wave continues with 60% of Malaysian rubber glove export denominated by nitrile gloves. Hartalega NGC’s capacity growth is on track to meet the increasing demand for rubber gloves. We have completed commissioning of NGC Phase 1 comprising Plant 1 and 2 in early 2016 and have completed Phase 2 Plant 3 in June 2017. We will begin commissioning of the first production line at Plant 4 in August 2017 and the remaining production lines will be commissioned progressively. Plant 4 is scheduled to complete in 1st quarter of calendar year 2018. The progressive commissioning of Plant 4 is expected to contribute further to Group earnings.

Unisem Q2 FY2017 Results

…improved profit margin arising from higher USD sales achieved coupled with the appreciation of USD/MYR exchange rate.

Tien Wah Press Q2 FY2017 Results

…impacted by the cessation of its Australia’s printing operations announced on 15 June 2017, the Group has recorded a one-off redundancy expenses of RM20.3 million and an impairment loss of machinery of RM11.0 million.

The group continues to review our current footprint, while focusing on the growth opportunities in Indonesia and Dubai.

Hektar REIT Q2 FY2017 Results

Hektar is expected to complete the acquisition of 1Segamat Shopping Centre in September 2017. The Asset Enhancement Initiative (“AEI”) at Landmark Central in Kulim, Kedah is expected to complete by end September 2017. Both exercises are expected to contribute positively to Hektar.

MISC Q2 FY2017 Results

In addition to production cuts, drawdown of crude oil and products inventory continue to dampen demand for petroleum tankers in the immediate term. Freight rates are also being pressured by high fleet growth in 2017.

The LNG shipping market continues to be affected by newbuilds delivery and expiry of older vessel charters, which has depressed spot rates.

Daibochi Plastic and Packaging Q2 FY2017 Results

…saw a double-digit increase in raw material costs compared to the corresponding six months period in the previous year, in line with higher global crude oil prices and a weaker MYR versus the USD. The rise in raw material costs was however mitigated by continued improvement in wastage control, and enhanced operations efficiency following an increase in new foreign worker hires since January 2017.

Daibochi Packaging (Myanmar), which is 60%-owned by the Group, produces consumer flexible packaging for Myanmar’s fast moving consumer goods (FMCG) industry, and is expected to contribute positively to the Group’s performance from the third quarter of 2017 and onwards.

…completed the qualification process with an MNC in Indonesia to supply one of its key F&B brands, and is currently conducting trial production runs.

Boustead Heavy Industries Q2 FY2017 Results

The commercial shipbuilding, looks set to continue to come under pressure from low demand for ships, tonnage overcapacity, tight financing, low oil prices and uncertain economic global outlook. This will continue to put pressure on shipyards which are already reeling from thin order books and cancelled deliveries.

MRCB-Quill REIT Q2 FY2017 Results

The office market in KL is expected to be stagnant for 2017. The accumulative supply of office space in KL City, KL Fringe and Beyond KL increased by 1.46 million sq. ft. to 96.4 million sq. ft. (4Q 2016: 94.97 million sq. ft.) with completion of 5 office buildings. Overall occupancy rates in all areas have dropped, with KL City decreased by 2.3% to 80.8%. Although KL Sentral and Mid Valley City/ Bangsar saw an increase of 1.3% and 0.4% respectively, the overall occupancy rate in the KL Fringe experienced a 0.4% decline to 91.2%. In Beyond KL(Selangor), overall occupancy dropped 1.3% to 78.1%.

The 1Q 2017 average rents in KL City and KL Fringe recorded declines compared to previous quarter at RM6.04 psf and RM5.69 psf, while 1Q 2017 average rents for Beyond KL remained stable at RM4.13 psf. Outlook for the office market in Kuala Lumpur will remained lackluster with continued pressure on both occupancy and rental rates as more new supply is anticipated to enter the market.

The overall occupancy rate of Purpose-Built Retail centres in Penang was relatively stable, which was in the region of 69% to 72% in the past 5 years. Retail malls in the Penang Island continued to outperform those in Seberang Perai, of which the former registered average occupancy rate of about 80% whilst the latter at about 60%. The high occupancy of the island, is attributed to the rather good retail sales mainly from the relatively large working population as well as tourists. Gross rentals for the ground floor of selected prime retail malls in Penang Island commanded higher rental rates compared to those in Seberang Perai, of up to RM22 per sq. ft per month.

Public Bank game changer

…a shareholder who had bought 1,000 Public Bank shares in 1967 (the year it was listed) and held on to them, would be holding 148,938 shares as at end-2016 valued at RM2.94mil. In addition, that shareholder would have received a total gross dividends of RM1.2mil.