FBM KLCI 1720.68 2.32 KLCI FUTURES 1717.50 4.50 STI 3423.38 36.79 RM/USD 4.1380 CPO RM2635.00 7.00 OIL US$62.39 0.17 GOLD US$1278.40 3.10 IJM Corp to build RM500m office tower in TRX 3 HOME BUSINESS FINANCIAL DAILY www.theedgemarkets.com MAKE BETTER DECISIONS PP 9974/08/2013 (032820) PENINSULAR MALAYSIA RM1.50 WEDNESDAY NOVEMBER 22, 2017 ISSUE 2538/2017 4 HOME BUSINESS 2 5 HOME BUSINESS 6 HOME BUSINESS 7 HOME BUSINESS 12 HOME MIER raises Malaysia’s 2017 growth forecast to 5.6% Zimbabwe’s Mugabe resigns, ending four decades of rule Sabah planters will continue to feel the heat from El Nino AirAsia CEO hints at strong quarters but frustrated with low valuation Boustead Plantations 3Q profit surges more than 15 times Moratorium on new varsity campuses No U-turn on luxury property project freeze, says Johari 4 HOME BUSINESS It claims they abused their powers in takeover of state’s water industry. Supriya Surendran has the story on Page 2. PUNCAK NIAGA SUES THE EDGE FILE PHOTO Khalid, Azmin and Selangor govt for RM14b Tan Sri Rozali Ismail ENTER NOW!
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KUALA LUMPUR: In a follow-up to a heads of agreement (HoA) between Yinson Holdings Bhd and a Japanese consortium in July this year, the two parties have signed a conditional share purchase agreement (SPA) to establish sale of a 26% stake in Yinson’s African unit for US$117 million (RM484.38 million).
Back in July, Yinson signed the HoA with Sumitomo Corp, Kawa-saki Kisen Kaisha Ltd, JGC Corp and the Development Bank of Ja-pan to sell the stake in Yinson Pro-duction (West Africa) Pte Ltd, with the shareholding price expected to be between US$104 million and US$117 million.
In a fi ling with Bursa Malaysia yesterday, Yinson, whose share price hit an all-time high of RM4 recently, said that its wholly-owned unit Yinson Trillium Ltd has inked the SPA for the stake sold to the es-
Yinson lands US$117m deal for26% stake in Ghana FPSO
tablished consortium, Japan Sank-ofa Off shore Production Pte Ltd, with the four Japanese fi rms acting as the purchaser guarantors.
Yinson Production is currently chartering its fl oating production storage and offl oading (FPSO) unit to Eni Ghana Exploration and Pro-duction Ltd for a fi rm charter pe-riod of 15 years since beginning of this year, with fi ve yearly extension options by Eni Ghana.
Th e price took into consideration Yinson Production’s discounted cash fl ow from the 15-year Ghana FPSO charter, its charter rate, and the company’s capital structure.
“Th e discount rate is within the range of the cost of equity based on the unlevered beta of companies of similar activities.
“Th e board is of the view that the discounted cash fl ow method is a more appropriate valuation method for Yinson Production (West Africa) compared with other methods such
as price-to-book and price-earnings multiple, given that the unit, which owns the Ghana FPSO, has a fi rm long-term contract,” said Yinson.
Proceeds from the stake sale will be used by Yinson for capital expenditure (RM100.21 million), re-payment of borrowings (RM208.78 million), working capital and ex-penses for the exercise.
With the proceeds, the company expects to reduce its net gearing to 0.79 times, from 1.15 times presently.
At the same time, Yinson said it can continue to participate in the prospects of the Ghana FPSO project with its eff ective 74% stake in the company.
“Th e strategic partnership with four established and prominent institutions provides a tremendous opportunity to build a long-term relationship with each other, on which the parties may potentially leverage as a consortium to bid for future projects,” it added.
KUALA LUMPUR: Perbadanan PR1MA Malaysia said over half of the total available PR1MA hous-ing units in the market have been taken up by homebuyers from the middle-income group, signifying positive feedback from the target market.
PR1MA said as at last Wednes-day, 12,640 units of PR1MA homes had been sold, with an estimated gross development value of RM3.16 billion — more than 50% of the 25,132 units currently available for sale.
It said this in a press release is-sued yesterday in response to a local daily’s report on Monday, alleging
Saying PR1MA homes unaff ordable is not true — PR1MAPR1MA homes, between RM100,000 and RM400,000, are out of reach of the average Malaysians. Th e report said PR1MA had only managed to sell 11,944 of the 141,661 units it was building, and that this “is a telling sign that many in the country are unable to aff ord a house”.
PR1MA said there are 141,161 units now under various stages of construction, but not all are open for sale. “It is misleading to con-clude that less than 10% of PR1MA units have been sold to date. Before we can sell our homes, we must fi rst obtain the authorities’ approval. Not all of the homes under con-struction can be sold,” it said.
“In fact, PR1MA projects have been well received in key locations.
For example, the PR1MA @ Jalan Jubilee in Bukit Bintang is over-subscribed by 27 times. A total of 224 units or 42% of the 542 units up for sale were taken up in only three days during the last weekend.”
PR1MA’s aff ordable pricing has allowed Malaysians to own a home in a prime location, in Kuala Lum-pur City Centre, it said. It is now targeting to sell 16,250 units by year end through PR1MA Open Day, its nationwide roadshow.
“We wish to highlight PR1MA is committed to delivering homes with lifestyle and community con-cepts for homebuyers from the mid-dle-income group with a household income of between RM2,500 and RM15,000 a month,” it added.
KUALA LUMPUR: Puncak Niaga Holdings Bhd, controlled by tycoon Tan Sri Rozali Ismail, has fi led a RM14 billion lawsuit against Selan-gor Menteri Besar Datuk Seri Mo-hamed Azmin Ali, his predecessor Tan Sri Abdul Khalid Ibrahim and the state government over the take-over of the state’s water industry.
Puncak Niaga claims Abdul Khalid and Mohamed Azmin had abused their powers by threat-ening to cause, or attempting to cause, the federal government to invoke the use of the Water Servic-
Puncak Niaga sues Khalid, Azmin and Selangor for RM14bIt claims they abused their powers in takeover of state’s water industry
es Industry Act 2006 to force a take-over of the state’s water industry.
Th e Selangor government is vi-cariously liable for the acts of Ab-dul Khalid and Mohamed Azmin, Puncak Niaga said in a fi ling with Bursa Malaysia yesterday.
Puncak Niaga is claiming dam-ages, interest on damages and costs of the diff erence between the value of PNSB Water Sdn Bhd [formerly known as Puncak Niaga (M) Sdn Bhd] and the Syarikat Bekalan Air Se-langor Sdn Bhd (Syabas) at RM2.08 billion to RM2.35 billion, and the actual purchase consideration of RM1.55 billion under the share pur-
chase agreement dated Nov 11, 2014 between Puncak Niaga and Pengu-rusan Air Selangor Sdn Bhd.
Th e company is also claiming for loss of business opportuni-ties, locally and abroad, totalling RM13.5 billion.
Puncak Niaga said after sever-al attempts to eff ect personal ser-vice since Oct 31, its solicitors have managed to serve the sealed writ of summons and the statement of claim dated Oct 27. Abdul Khalid was served, via his solicitors, on Nov 2, Mohamed Azmin on Nov 21, and the Selangor government on Nov 6, it said. Th e matter has been fi xed
for case management at the Shah Alam High Court on Nov 28.
Th e disposal of PNSB and Syabas, part of the Selangor’s water indus-try consolidation, was completed on Oct 15, 2015 for RM1.55 billion. According to Puncak Niaga’s 2015 annual report, the net cash infl ow from the sale was RM1.44 billion.
Th e water assets’ consolidation is still ongoing as the takeover of Syarikat Pengeluar Air Selangor Sdn Bhd has not been completed. Puncak Niaga’s share price closed down 0.5 sen or 0.75% at 66.5 sen yesterday, with a market capitali-sation of RM297 million.
LONDON: Th e more than dou-bling of Tencent Holdings Ltd’s share price this year has grant-ed it entry to an illustrious club. It beat Jack Ma’s Alibaba Group Holding Ltd to become the fi rst Chinese technology stock to break the US$500 billion (RM2.07 tril-lion) market value barrier and may climb further. — Bloomberg
HARARE: Robert Mugabe re-signed as Zimbabwe’s president yesterday, shortly after parliament began an impeachment process to end his nearly four decades of rule.
Th e 93-year-old clung on for a week after an army takeover and expulsion from his own ruling Zanu-PF party, which also told him to leave power.
Wild celebrations broke out at a joint sitting of parliament when Speaker Jacob Mudenda announced Mugabe’s resignation and suspended the impeachment procedure.
Th e origin of Mugabe’s sud-den downfall lies in rivalry be-tween members of Zimbabwe’s ruling elite over who will succeed him, rather than popular protests against his rule.
Th e army seized power after Mugabe sacked Zanu-PF’s favour-ite to succeed him, Emmerson Mnangagwa, to smooth a path to the presidency for his wife Grace, 52, known to her critics as “Gucci Grace” for her reputed fondness for luxury shopping. — Reuters
Tencent beats Alibaba to join US$500b club
Zimbabwe's Mugabe resigns, ending four decades of rule
H O M E B U S I N E S S 3WEDNESDAY NOVEMBER 22, 2017 • THEED G E FINANCIAL DAILY
IJM Corp to build RM500m offi ce tower in TRXWorks are expected to be completed by December 2018
BY W O N G E E L I N
BY S A N G E E T H A A M A RT H A L I N G A M
KUALA LUMPUR: IJM Corp Bhd is developing a RM500 million offi ce tower in the Tun Razak Exchange (TRX) here.
Th is follows a share sale and pur-chase agreement signed yesterday, which sees IJM Corp acquiring Fair-view Valley Sdn Bhd, a subsidiary of TRX City Sdn Bhd that is build-ing a 27-storey purpose-built offi ce building in the TRX. TRX City, whol-ly-owned by the fi nance ministry, is the master developer of the upcom-ing international fi nancial district.
IJM Corp’s construction division, IJM Construction Sdn Bhd, is cur-rently undertaking the construction of the offi ce tower, including the substructure and superstructure works. Th e works are expected to be completed by December 2018.
Th e investment cost of RM500 million includes the cost of land for the building, which will be paid over a two-year period.
In a joint statement yesterday, IJM Corp and TRX said the Grade A, Leadership in Energy and Envi-ronmental Design Gold-certifi ed offi ce building, built on a 1.18-acre
KUALA LUMPUR: Dialog Group Bhd’s net profi t nearly doubled to RM160.93 million in the fi rst fi nan-cial quarter ended Sept 30, 2017 (1QFY18) from RM81.34 million a year ago, on the back of a fair value gain on investment properties at RM65.6 million.
Th is follows the acquisition of the remaining 45% stake in a jointly con-trolled entity, Centralised Terminals Sdn Bhd, which has been renamed as Dialog Terminals Sdn Bhd, in the current quarter under review.
Earnings per share rose to 2.86 sen in 1QFY18 from 1.54 sen in
(0.48ha) land with a gross fl oor area of about 560,000 sq ft, will be Pru-dential Assurance Malaysia Bhd’s new Malaysian headquarters.
"It will house all of Prudential’s life insurance and asset manage-ment businesses under one roof," they added, noting the building is purpose-built to support Pruden-tial’s wide-ranging businesses’ re-quirements.
Prudential, together with its four related companies, have agreed to a lease for a term of 15 years. Current-ly, it has secured tenants for 84% of its net lettable area.
BY A D A M A Z I Z
IGB shareholders say yes to takeover by Goldis
KUALA LUMPUR: IGB Corp Bhd shareholders yesterday approved the proposed takeover of the group by Goldis Bhd, despite some dis-satisfaction over the RM3 share valuation.
At a high court-convened meet-ing held at IGB’s Mid Valley City property, 286 shareholders hold-ing 176.56 million shares voted in favour of Goldis’ bid, while 148 shareholders owning 1.17 million shares voted against it. Th e total value of the votes cast for the bid was 99.34% of all shares held by the shareholders.
During the meeting, sharehold-ers asked many questions on the offer price which they claimed did not consider the intangible value of IGB.
“There were [also] concerns over the history of IGB, particu-larly its goodwill,” Goldis chief investment offi cer Colin Ng told reporters after the meeting.
Assuring the shareholders, Ng said IGB managing director Datuk Seri Robert Tan and other board members would stay on upon the takeover.
“He (Tan) formed both IGB and Goldis, and Goldis used to be Tan & Tan Developments Bhd, before it took over the listing. So history is there,” he said.
Ng said the group would form an integration committee to over-see the takeover, and expects busi-ness to run as normal.
He said the scheme was pro-posed to fl atten the structure and consolidate both IGB and Goldis into a much bigger group, particu-larly as both the groups’ shares are “steeply undervalued”.
When the scheme is completed in February next year, IGB would be delisted, while Goldis would assume the IGB Bhd name, though it would read as ‘Ipoh Goldis Ber-satu’.
Goldis — the single largest shareholder of IGB with a 73.73% stake — had proposed on Feb 23 to acquire the rest of the shares it does not already own at RM3 per share. Its fi rst takeover bid was made in 2014.
Shareholders can choose to be compensated in three ways — 100% in cash; 30% in cash (90 sen per share) and 70% in Goldis shares; or 12% in cash (36 sen) and 78% in seven-year new redeema-
ble convertible cumulative pref-erence shares (RCCPS) in Goldis at RM3.28 each.
Th e RCCPS has a one-for-one conversion rate and pays a prefer-ential dividend of 4.3% per annum.
IGB shares closed up three sen or 1.05% at RM2.88 yesterday, with a market capitalisation of RM3.93 billion, while Goldis shares settled unchanged at RM2.94, valuing it at RM1.8 billion.
Separately, IGB Corp yesterday reported a 58% drop in net profi t to RM62.62 million for the third quarter ended Sept 30, 2017, from RM146.11 million a year earlier when the group benefi ted from a one-off gain of RM136.2 million from the sale of a hotel in My-anmar.
Revenue dropped 20.02% to RM259.71 million from RM324.71 million, no thanks to lower con-tributions from its property devel-opment and hotel arms.
Cumulative net profi t for the fi rst three quarters was almost fl at at RM254.17 million, compared with RM254 million a year ago. Pre-tax profi t was down 15% year-on-year (y-o-y), said the group.
Cumulative revenue fell 12% y-o-y to RM761.08 million from RM867.43 million, dragged by lower contributions from three core divisions, namely property development, hotel and invest-ments, mitigated by a higher top line from both commercial and retail segments under its property investment division.
“Based on the results achieved for the nine months to Sept 30, 2017, the board is cautiously op-timistic that the performance for the group for FY17 (fi nancial year 2017) will be satisfactory,” it said.
Dialog 1Q earnings nearly double on fair value gain1QFY17. Quarterly revenue also climbed 19.1% to RM778.66 million from RM653.55 million.
On prospects, Dialog said it re-mains confi dent that its business model is well structured and can withstand the current oil price vol-atility and currency movements.
“Barring any unforeseen circum-stances, the group is optimistic that its performance will remain strong for the fi nancial year ending June 30, 2018,” it said.
“Th e construction of Phase 2 of the Pengerang Deepwater Terminal in Johor is on schedule. We are also securing new potential partners for Phase 3, which will include the de-
velopment of industrial land and more petroleum and petrochemical storage terminals,” it said.
Th e group added that it is plan-ning to expand Langsat Terminal (Th ree) in Tanjung Langsat, Johor into a 300,000 cu m storage facili-ty, which is in line with its strategy to grow sustainable and recurring income thereby further enhancing shareholders’ value in the long term.
“In the upstream sector, the group is actively developing new reserves from the existing contracts. At the same time, the group is also on the lookout for viable production assets, which may become available for possible acquisition,” it added.
Malakoff 3Q profi t up 25% with compensation from legal disputeBY W O N G E E L I N
KUALA LUMPUR: Malakoff Corp Bhd’s net profi t rose 25% year-on-year (y-o-y) in the third quarter ended Sept 30, 2017 (3QFY17) to RM64.18 million from RM51.51 million, mainly from compen-sation received from the settle-ment of a dispute between its
90%-owned subsidiary Tanjung Bin Power Sdn Bhd (TBP) and IHI Corp Japan.
Higher contribution from Tan-jung Bin Energy Sdn Bhd (TBE) also boosted earnings for the quar-ter, Malakoff said in its quarterly result fi ling with Bursa Malaysia.
Revenue climbed 20% y-o-y to RM1.82 billion from RM1.51 bil-
lion, mainly due to higher appli-cable coal price registered by both TBP and TBE. Its income statement showed other income rose seven times to RM138.55 million from RM19.24 million.
For the first nine months of FY17, net profi t was almost fl at at RM266.23 million compared with RM265.23 million a year ago
— though revenue climbed 22% to RM5.34 billion against RM4.38 billion — mainly as cost of sales grew 29% to RM4.11 billion.
“Th e results for FY17 will be af-fected by the lower capacity pay-ment in the revised Segari Energy Ventures Sdn Bhd’s power pur-chase agreement commencing July 1, 2017, but will be partly off set by
compensation received from set-tlement of dispute between TBP and IHI,” said Malakoff .
Looking forward, Malakoff said the group will continue with its strategic initiatives to achieve fu-ture sustainable growth while fo-cusing on plant effi ciencies and cost management. It expects its FY17 results to remain satisfactory.
Fairview Valley, as an approved developer under TRX developer incentives, is entitled to a 70% tax exemption on income from the sale or rental of properties in the TRX for fi ve assessment years.
IJM Corp chief executive offi cer and managing director Datuk Soam Heng Choon said the latest deal marks a signifi cant milestone for the group to invest in and develop a quality investment property, in line with its strategy to grow its recurring income asset portfolio.
To date, TRX said it has signed global property and infrastructure group Lendlease to jointly develop the Lifestyle Quarter; HSBC Malay-sia, Prudential Malaysia and Affi n Bank Bhd for offi ce towers; Indo-nesia’s leading property develop-er Mulia International to develop the Signature Tower plot; Lembaga Tabung Haji and WCT Bhd for res-idential plots; and global leader in water management Veolia Water Technologies as the water treatment and recycling concessionaire.
IJM Corp shares closed un-changed at RM3.07 yesterday, with a market capitalisation of RM11.18 billion.
Deal marks signifi cant milestone for the group to invest in
and develop a quality investment property,
in line with its strategy to grow
its recurring income asset portfolio.
Ng: The group would form an integration committee to oversee the takeover, and expects business to run as normal. The Edge fi le photo
4 H O M E B U S I N E S S WEDNESDAY NOVEMBER 22, 2017 • THEEDGE FINANCIAL DAILY
KUALA LUMPUR: Th e government is not making any U-turn concern-ing the freeze on approvals to devel-op properties above RM1 million, said Second Finance Minister Da-tuk Seri Johari Abdul Ghani.
“I would like to categorically state there is no such thing as [a] U-turn, or turning back or recon-sidering [the decision for now]. Th e freeze order that we have issued re-mains,” Johari told reporters on the sidelines of the National Econom-ic Outlook Conference yesterday.
On Monday, Works Minister Da-tuk Fadillah Yusof said the govern-ment will give the green light for the development of shopping complex-es, offi ces, serviced apartments and condominium units above RM1 million “on a case-by-case basis”, prompting some to speculate that it is a U-turn on an earlier decision.
“Th e headline as if the govern-ment is making a U-turn is incor-rect,” said Johari. “I personally called Fadilah last night (Monday night) and clarifi ed to him that this [freeze] is a directive and decision by the cabinet.
“No one can make a U-turn on
the cabinet’s decision. Not myself and not even Fadilah,” he added.
On whether the freeze is indefi -nite, Johari said: “Th e government is looking into it (the timeline) and study the number of unsold units.”
He said the freeze on luxury prop-erty developments will not be ret-rospective and affect developers granted approvals to develop luxury property projects prior to Nov 1.
“Th ose who are building hous-es worth less than RM1 million, by all means, please proceed as the government recognises the need for aff ordable houses.”
As for the industry’s feedback, including those from the Real Estate and Housing Developers’ Associ-ation (Rehda), Johari said: “So far, I have yet to hear their views. But let’s listen to what they have to say fi rst. Th e government will allow all developers to proceed with housing developments worth RM1 million and below.”
In a prompt response, Rehda yesterday urged the government to reconsider the new ruling, saying it will be impractical to build property below RM1 million, particularly in certain areas of the country where land prices are high.
“Further, in certain locations across the city, there is still de-mand for high-end property and [the] free market should prevail,” the association said, adding that it wants further clarifi cation from the authorities on the new ruling.
Since the implementation of var-ious property cooling measures in 2014, Rehda said not many develop-ers had undertaken developments of properties above RM1 million.
Th e main reason for an oversup-ply of such properties is the mis-match between supply and demand.
“As the voice for private develop-ers in Malaysia, Rehda has always advocated the need for compre-hensive data to establish demand and supply of property in the right location. Th e availability of data will help give a more accurate picture of where the most demand is located, and which areas require less, thus preventing [an] oversupply,” it said.
Rehda said it is calling for the government, particularly Bank Ne-gara Malaysia, National Property Information Centre and the urban wellbeing, housing and local gov-ernment ministry, to work together in utilising and streamlining the data available.
“Th ese timely data will tremen-dously assist developers and rel-evant industry players in making proper and informed decisions con-cerning their development projects.”
Rehda also pointed out that de-spite the income per capita of Malay-sians in general improving by about 46% since 2010, this has not been refl ected in the average Malaysian’s disposable income and purchasing power due to the rising cost of living.
“Th is is the fundamental reason why many Malaysians cannot af-ford to purchase property as their household debt is high,” it said.
Rehda is also calling for more incentives to attract more private developers to build affordable housing, reduce unnecessary com-pliance cost to help lower devel-opers’ cost of doing business, and remove restrictions on various types of unsold completed properties.
“Stamp duty waivers, especially in the aff ordable housing catego-ry, would also go a long way in as-sisting buyers. In addition, Rehda supports the proposal to repurpose completed offi ce spaces and retail lots as it may help to mitigate the high number of the said property segments,” it said.
KUALA LUMPUR: Th e Malaysian Institute of Economic Research (MIER) has raised its growth fore-cast for the Malaysian economy this year to 5.6% — from 5.4% previous-ly — driven by domestic demand.
Th e revision was made in view of the recovery in manufactur-ing, while trade was gaining mo-mentum, further strengthened by
stronger investment activities and buoyant fi nancial markets, its ex-ecutive director Emeritus Professor Dr Zakariah Abdul Rashid told the National Economic Outlook Con-ference 2018-2019 here yesterday.
Come the fourth quarter, busi-nesses may see brighter prospects, especially for the manufacturing sector, as local sales, prices, export orders and production are expected to improve, he said.
On the contrary, it expects con-sumer sentiments to remain wary of jobs and incomes due to a soft income outlook, fewer job openings as well as price pressures.
In the third quarter, the Busi-ness Conditions Index fell from 114.1 points to 103.1, mainly at-tributable to poor manufacturing sales, a slowdown in production, besides lower domestic and ex-port orders.
Malaysia’s Consumer Sentiments Index also retreated 3.6 points quar-ter-on-quarter to 77.1 points.
In view of the improvements in domestic demand and cost-push pressure, resulting from higher oil prices and a continued depressed ringgit, MIER expects the infl ation rate for 2017, as measured by the consumer price index, to average higher at 3.8%, compared with 2016’s 2.1%.
KUALA LUMPUR: Wage increments in Malaysia may not keep pace with the country’s gross domestic prod-uct (GDP) growth at a rate expect-ed under the 11th Malaysia Plan (11MP), said the Malaysian Insti-tute of Economic Research (MIER).
According to its executive direc-tor Emeritus Professor Dr Zakariah Abdul Rashid, the wages or com-pensation of employees (CE)-to-GDP ratio is unlikely to meet its target of 40% by the 2020 deadline.
“We won’t achieve it (CE/GDP ratio target) at the rate we are go-ing currently. Our productivity level
isn’t fast enough right now,” Zaka-riah told reporters on the sidelines of the National Economic Outlook Conference 2018-2019 yesterday.
In 2015, the government under the 11th Malaysia Plan outlined its aim to increase wages or CE from 32.5% of GDP then, to 40% by 2020.
Th e latest data shows the CE-to-GDP ratio hovering around 35%, which Zakariah considered low.
“If we want to increase our salary and wages, we have to increase our productivity, especially if we want to really embrace the fourth industrial revolution (Industry 4.0),” he said.
As at 2016, the nation’s average productivity level stood at RM78,200
— largely determined by extreme value contributions from the min-ing and quarrying sector.
Sectors, such as agriculture and construction, performed below aver-age, while manufacturing was more than RM100,000, the data reveals.
However, these three sectors each refl ect a productivity level of below RM120,000, paling in com-parison with the mining and quar-rying sector, which exceeded the RM1 million mark.
Excluding the mining and quar-rying sector, Malaysia’s average productivity level was merely RM66,600 — far from the govern-ment’s target of RM92,300, which
is to be met by 2020.Besides productivity, he ex-
plained that there is also a substan-tial need to address labour skills.
As at 2016, only less than 30% of labour belonged to the high-skilled category, he said, which he believes should be improved, especially as the nation moves up the value chain in preparation for Industry 4.0.
All in all, Zakariah noted that there is still a “healthy” and grad-ual growth in household income, supporting his view that the target-ed benchmark of the CE-to-GDP ratio is not impossible to achieve. However, it will take a long time to reach that target.
Johari: No U-turn on luxury property project freezeRehda urges reconsideration, saying free market should prevail
BY W O N G E E L I N
BY C H E S T E R TAY
Heineken Malaysia 3Q earnings up 15.7% on stronger sales
KUA L A LU M P U R : B re w e r Heineken Malaysia Bhd’s net profi t for the third quarter end-ed Sept 30, 2017 (3QFY17) came in at RM65.87 million, up 15.7% from RM56.92 million record-ed in the corresponding three months last year.
Revenue was at RM509.59 mil-lion for 3QFY17, up 32.4% year-on-year (y-o-y) from RM384.82 million.
In a fi ling with Bursa Malay-sia, Heineken Malaysia said the stronger profi t was driven by vol-ume growth as the market re-covered from volume impact as a result of price increases that occurred in July 2016, and a fa-vourable brand mix.
Its top line also got a boost from the launch of its new main-stream cider brand Apple Fox in August and the commencement of sale of locally brewed Strong-bow Apple Ciders.
In the first nine months of FY17, net profi t grew 4.6% y-o-y to RM176.4 million from RM168.6 million, while revenue rose 1.1% to RM1.31 billion from RM1.3 billion.
Moving forward, Heineken Malaysia managing director Hans Essaadi said his team remains cautious about consumer sen-timent, which is still subdued and adversely impacted by rising costs of living and high excise duties on beer.
Daya Materials bags RM124.43m job in Penang
KUALA LUMPUR: Daya Materi-als Bhd has bagged a RM124.43 million contract from TPC (Ma-laysia) Sdn Bhd (TPC Malaysia) to undertake expansion of a manu-facturing facility in Kawasan Per-industrian Bebas, Fasa 3, Bayan Lepas, Penang.
In a fi ling with Bursa Malaysia yesterday, Daya said its 51%-owned subsidiary Daya CMT Sdn Bhd had accepted a letter of award from TPC Malaysia for the proposed expansion.
Th e scope of works includes building a four-storey factory building, an elevated link bridge connecting to the existing facto-ry, a two-storey cafeteria/kitch-en, locker and breakout build-ing expansion, and a hazardous waste store.
Th e duration of the contract is for 14 months from Nov 13.
Daya said the contract is ex-pected to contribute positively to the future earnings of the group.
EDITOR’S PICKS FROMtheedgemarkets.com
MMMM
Wage-to-GDP ratio target ‘not achievable’ by 2020 — MIERBY TA N X U E Y I N G
BY TA N X U E Y I N G
MIER raises Malaysia’s 2017 growth forecast to 5.6%
BY S U L H I A Z M A N & C H E S T E R TAY
H O M E B U S I N E S S 5WEDNESDAY NOVEMBER 22, 2017 • THEED G E FINANCIAL DAILY
Sabah planters will continue to feel the heat from El NinoTh e rest of the nation sees minimal production, earnings impact
BY A D E L A M EG A N W I L LY
BY N E I LY S YA F I Q A H E U S O F F
KUALA LUMPUR: Malaysian Resources Corp Bhd’s (MRCB) third-quarter (3Q) net profit dropped 4.4% to RM28.09 mil-lion or 1.28 sen per share, from RM29.39 million or 1.49 sen per share a year earlier, partly due to higher expenses.
The group’s financial state-ments for the quarter ended Sept 30, 2017 showed that its expenses doubled to RM1.06 billion from RM470.53 million previously.
Quarterly revenue more than doubled to RM1.13 billion from RM551.22 million and was main-ly derived from its engineering, construction and environment division.
MRCB said the bulk of the di-vision’s revenue was contributed by infrastructure projects, and the ongoing construction of property development projects, as well as several commercial buildings for clients in Johor, power transmis-sion-related construction pro-jects in Peninsular Malaysia, and other civil engineering projects in the Klang Valley.
BY A D A M A Z I Z
KUALA LUMPUR: Plastic in-jection mold manufacturer Denko Industrial Corp Bhd has signed a conditional share sale agreement (SSA) with its larg-est shareholder and executive chairman Datuk Seri Foo Chee Juan and a person connected to him, to buy rival Integrated Manufacturing Solutions Sdn Bhd (IMS) for RM1.19 billion.
Th e SSA follows a heads of agreement inked on Oct 23 be-tween Denko as the buyer and Foo and Datuk Fong Chiu Wan, both co-owners of IMS, said Denko in a fi ling yesterday.
Th e related party transaction, said Denko, will be satisfi ed via the issuance of 107 million new shares and 925.1 million rights of allotment of new Denko shares at RM1.15 apiece.
The price per share is at a 9.5% discount to the vol-ume-weighted average market price of Denko shares for the fi ve-day period ended Oct 20 of RM1.2707 per share.
Th e purchase consideration is based on a 15 times multiple of IMS’ profi t after tax (PAT) for its fi nancial year ended March 31, 2017 (FY17). “Th e acquisi-tion price-earnings ratio (PER) multiple represents a discount of 12.28% to the simple average PER multiple of the compara-ble companies,” said Denko.
IMS made RM79.13 million in PAT for FY17, on the back of RM1.81 billion in revenue.
C o n c u r r e n t l y , F o o’s
Denko inks deal for RM1.19b merger with rival IMS
99.99%-owned Oregon Technology Sdn Bhd — which holds a 50.22% stake in Denko and which will be designated by Foo and Fong to re-ceive part of their shares and rights of allotment under the IMS acqui-sition — will place out up to 232 million Denko shares to third-party investors to be identifi ed.
Th e proposed placement is to ensure Denko complies with the public spread requirement fol-lowing the acquisition. Th e two exercises will see Denko’s public shareholding spread reduced to 25.08% from 49.78% now.
Foo emerged as the largest shareholder of Denko via Oregon Technology following the latter’s takeover off er for Denko in Feb-ruary at 55 sen a share.
Post-acquisition, post-place-ment and upon exercise of the rights of allotment, Oregon Technology’s stake in Denko will be trimmed to 36.38%, while Foo will have 42.37% — of which 5.57% will be directly held — and Fong will have 32.97%.
Meanwhile, Denko announced that it returned to the black in the second quarter ended Sept 30, 2017 with a net profit of RM269,000, as opposed to a net loss of RM18,000 a year ago, as manufacturing contribution im-proved as its tooling subsegment suff ered lower losses and Indone-sian operations booked stronger gross profit. Revenue strength-ened 28% to RM28.95 million from RM22.7 million.
Trading of Denko shares, sus-pended from 4.25pm yesterday to make way for the announcement, resumes today.
KUALA LUMPUR: Lingering eff ects of the scorching El Nino weather phenomenon, which have aff ected oil palm players’ production and earnings in this part of the world since 2015, will continue to aff ect plantation players, specifi cally for those who only have estates in Sabah.
“Th e impact of El Nino comes in two waves. The second wave began in the third quarter of this year (3Q17), which led to a year-on-year (y-o-y) decline in Sabah’s production,” MIDF Research sen-ior analyst Alan Lim told Th e Edge Financial Daily over telephone.
According to the Malaysian Palm Oil Board, crude palm oil production for Sabah in 3Q17 (July to September) declined 7.2% to 1.33 million tonnes from 1.43 million tonnes in the same period last year. Overall production for Malaysia, however, grew 8.3% y-o-y to 5.42 million tonnes from fi ve million tonnes.
“Th e decline in Sabah’s palm oil production goes against the trend in Malaysia’s overall production. Th e eff ects of El Nino are still there (Sa-bah). Hence, we expect companies purely concentrated in Sabah to
post lower FFB (fresh fruit bunch) production fi gures and earnings in their latest quarterly fi nancial results,” Lim said.
“However, for those whose plan-tations are spread across other parts of the country namely Peninsu-lar Malaysia and Sarawak as well as Indonesia, we foresee minimal impact on both production and earnings,” he said.
Companies with full exposure to Sabah include IJM Plantations Bhd, TSH Resources Bhd and Hap Seng Plantations Holdings Bhd.
On Monday, Hap Seng Planta-tions said its net profi t for the third fi nancial quarter ended Sept 30, 2017 fell 39% y-o-y to RM25.9 mil-lion from RM42.7 million, on lower sales volume of CPO and palm ker-nel (PK), and lower PK selling price. Revenue shrank 29% to RM113.58 million from RM160.17 million.
IJM Plantations and TSH Resourc-es have not released their respective third-quarter fi nancial results.
Still, Lim gave assurance that the declining trend in FFB pro-duction in Sabah is temporary, as the rise in CPO yield in October (up 7.4% y-o-y to 506,176 tonnes from 471,408 tonnes) signalled the
easing impact of El Nino.“Weaker earnings for 3Q17 from
Sabah planters are expected but 4Q17 should register stronger fi g-ures as production already began improving in October. Th e impact will be minimal as we have entered the last leg of El Nino,” Lim said.
Meanwhile, Inter-Pacifi c Securi-ties research head Pong Teng Siew said the fall in Sabah planters’ per-formance was not only due to El Nino eff ect but also other factors like India’s imposition of higher import duty on CPO and the Euro-pean Union’s (EU) restrictions on palm oil imports, which aff ected CPO prices.
“Output from Sabah planters fell below expectations, based on 3Q17 fi gures. Th e eff ects of El Nino have actually peeled off in other regions but for Sabah, they intensifi ed. Th at said, the negatives are peeling off as El Nino is making way for La Nina,” Pong said.
“But it’s not just El Nino to blame. Th ere are other factors as well such as future CPO prices. With recent developments in India and the EU, the foreseen impact on Malaysia, particularly Sabah, is not favourable,” he added.
MRCB 3Q net profi t falls4.4% on higher expenses
MRCB said net profi t for the cu-mulative nine months ended Sept 30, 2017 fell 21.9% to RM61.92 mil-lion from RM79.28 million a year earlier, though revenue climbed 75.5% to RM2.42 billion from RM1.38 billion.
Th e group attributed the encour-aging growth in revenue to the en-gineering, construction and envi-ronment division, whose revenue jumped 236.7% to RM1.61 billion during the period. Th e division’s op-erating profi t rose 365.7% to RM46.5 million, helped by an improvement in operating margins, which increased year-on-year to 2.9% from 2.1%.
Th e group said its property de-velopment and investment divi-sion recorded a 9.6% decrease in revenue to RM660.7 million in the January-September period, large-ly due to the completion of Sen-tral Residences in KL Sentral and Easton Burwood development in Melbourne, as well as new pro-jects still being in the early phase of construction.
Shares in MRCB closed down 2.5 sen or 2.5% to 97.5 sen, with a market capitalisation of RM4.28 billion.
BY S A M A N T H A H O
KUALA LUMPUR: Gabungan AQRS Bhd has received a letter of intent (LoI) from KotaSAS Sdn Bhd to build 1,004 landed homes in Kota Sultan Ahmad Shah, Kuantan, Pa-hang, valued at RM189.22 million.
With the addition of the project,
BY N AV E E N T H U K R A L , E M I LY
C H O W & G AV I N M A G U I R E
SINGAPORE: Malaysian palm oil futures will likely fall a further 2%-3% after India, the world’s biggest buyer, raised its import duties to the highest in a dec-ade, top industry analyst Dorab Mistry said yesterday.
Malaysian palm oil futures slid for a third consecutive ses-sion yesterday to their weakest since mid-August at RM2,612 ringgit a tonne, hit by worries that India’s surprise move late last week to raise duties on edi-
Mistry: Malaysian palm oil prices seendropping further on India import duty hike
ble oil imports would hit demand.“We saw price reaction to In-
dia’s move on Monday; Malay-sian palm oil futures are likely to fall further by around 2%-3% as the market adjusts to the duty in-crease,” Mistry told Reuters.
India lifted the import tax on crude palm oil to 30% from 15%, and increased import tax duty on refi ned palm oil imports to 40% from 25%.
Indian oilseed crushers had been struggling to compete with cheaper imports from Indonesia, Malaysia, Brazil and Argenti-na, reducing demand for local rapeseed and soybeans, which
have been trading below govern-ment-set prices in the physical market and angering farmers.
But the move is now likely to boost local oilseed processing ac-tivity, hitting imports, said Mistry.
He estimated Indian edible oil imports would decline from earli-er estimates by 100,000 tonnes to 150,000 tonnes a month between December and February.
India’s edible oil imports are likely to drop to 15.5 million tonnes this year, down from an earlier estimate of 15.9 million tonnes, analysts said following the Indian tax hike. — Reuters
Gabungan AQRS gets LoI for RM189m construction jobGabungan AQRS’ outstanding order book amounts to RM2.77 billion.
In a fi ling with Bursa Malay-sia yesterday, Gabungan AQRS said its wholly-owned subsidiary Gabungan Strategik Sdn Bhd had received the LoI from KotaSAS to appoint Gabungan Strategik as a turnkey contractor to undertake
the construction works.The project will be divided
into four phases, with Phase 1 to commence in 2018 and complete after two years. Phase 2, 3 and 4 will commence in 2019, 2020 and 2021 respectively and will also complete after two years after commencement.
6 H O M E B U S I N E S S WEDNESDAY NOVEMBER 22, 2017 • THEEDGE FINANCIAL DAILY
AirAsia CEO hints at strong quartersBut Fernandes is frustrated with analysts over how they perceive the value of the airline’s stock
BY A D E L A M EG A N W I L LY
BY S A M A N T H A H O
BY E M I R Z A I N U L
BY S YA H I R A H S Y E D J A A FA R
KUALA LUMPUR: Star Media Group Bhd posted its highest-ever quarterly earnings in the third quarter ended Sept 30, 2017 (3QFY17) thanks to a divestment gain of RM206.86 mil-lion, but analysts remain wary of the impact of the continued decline in print advertising expenditure (adex).
AmBank Research said the Con-sumer Sentiment Index (CSI) fell from 80.7 in the second quarter of 2017 (2Q17) to 77.1 in 3Q17, due to deteriorating household income and concerns about rising infl ation.
Using the CSI as a gauge for con-sumer spending, it believes Star Media could continue seeing de-clines in both adex rates and vol-ume, particularly in print.
As such, it said the group’s pros-pects appear “unexciting” due to the continuous decline in newspaper cir-culation, amid increasing availability
Analysts still wary of Star Media’s falling adexof digital content, a subdued adex outlook, weak consumer sentiment and lack of growth component after selling Cityneon Holdings Ltd. Never-theless, AmBank Research upgraded its rating on the media group from “hold” to “buy”, saying the selldown on the stock has been overdone.
TA Research too views the drop in print adex a key concern, after noting that the newspaper’s adex fell 21.7% year-on-year (y-o-y) as at September this year, due to a shift towards digital platforms.
While economic numbers have been positive, the eff ects have not been fi ltered through to consumers, as evidenced by the retreating CSI.
“Priorities will be placed on its digital transformation strategy, to reduce dependence on adex. dim-sum.my, its video-on-demand ser-vice, has reported encouraging data. However, the venture will likely be loss-making for the foreseeable fu-
ture,” TA Research said in a note. It is maintaining a “sell” call on the group.
Star Media’s net profi t jumped to RM230.29 million in 3QFY17 from RM11.31 million a year earlier. With-out the divestment gain, the group’s quarterly profi t before tax (PBT) was RM13.6 million, while its PBT for the nine months ended Sept 30, 2017 (9MFY17) surged to RM227.47 mil-lion from RM6.99 million a year ago.
But the company’s quarterly reve-nue dipped 14.8% y-o-y to RM130.88 million from RM153.62 million.
As for 9MFY17, the group’s net profi t jumped to RM245.44 million from RM70.47 million in 9MFY16, while its cumulative revenue slid 18% to RM391.39 million from RM477.06 million, mainly on lower revenue contribution from print.
Star Media shares closed un-changed at RM1.37 yesterday, after 2.14 million shares were traded. Its share price hit its lowest in over
eight years at RM1.35 last Friday.MIDF Research, on the other
hand, is raising its FY17 and FY18 earnings estimates for Star Media to RM37.4 million and RM42.1 million respectively, on better profi t margin assumption for the broadcasting and television business segments, and lower depreciation and amortisation.
It said Star Media’s cash reserve jumped 41.1% to RM705 million as at end-September from RM500 million as at 4QFY16, after the dis-posal of Cityneon.
Even after paying off a fi rst in-terim dividend and special divi-dend totalling 36 sen per share or RM265.7 million, it said the group’s cash reserve would remain sizea-ble at RM439.4 million or 59.5 sen per share, which would enable Star Media to maintain its commitment to delivering attractive dividend yield. As such, it upgraded its call on the group to “buy” from “sell”.
KUALA LUMPUR: Trading of Sime Darby Bhd shares will be suspended on Nov 27 to facilitate the distribution of shares under the group’s de-merger exercise.
The last day of trading of Sime Darby shares before the implementation of the distri-bution is on Friday, the group said in a filing with Bursa Ma-laysia yesterday.
On Monday, Sime Darby shareholders approved the demerger exercise in an ex-traordinary general meeting. It involves the creation of two additional listed com-panies — Sime Darby Plan-tation Bhd and Sime Darby Property Bhd — besides Sime Darby, and the distribution of shares in the two new en-tities to existing Sime Darby shareholders.
Sime Darby said that upon completion of the distribu-tion, the entitled sharehold-ers will hold Sime Darby Plantation and Sime Darby Property shares in the same proportion as their share-holdings in Sime Darby.
Sime Darby shares will re-sume trading on the day of listing of Sime Darby Plan-tation and Sime Darby Plan-tation, which is tentatively to take place on Nov 30.
Sime Darby’s share price closed two sen or 0.11% low-er at RM8.97 yesterday, giv-ing a market capitalisation of RM61.07 billion.
Sime Darby shares to halt trading on Nov 27
KUALA LUMPUR: Press Metal Alu-minium Holdings Bhd, the largest aluminium smelter in Southeast Asia, posted a 25.5% increase in net profi t to RM154.38 million in the third quarter ended Sept 30, 2017 (3QFY17) from RM123.04 million a year ago, mainly due to higher metal price and strengthening of the US dollar against the ringgit.
However, the company’s earn-ings per share fell to 4.14 sen in 3QFY17 from 9.42 sen in 3QFY16 due to an increase in the number of shares following a share split and bonus issue last year.
Quarterly revenue surged 22.4% to RM2.128 billion from RM1.739 billion a year ago.
Th e group also declared a third
Press Metal posts record net profi t in 9MFY17, pays 1.5 sen dividendinterim dividend of 1.5 sen per share, amounting to RM56.2 mil-lion, for FY17, payable on Dec 29.
For the cumulative nine months ended Sept 30, 2017 (9MFY17), the group has posted a record net profi t of RM452.6 million, up 24.5% from RM363.68 million a year ago, mainly due to additional production output generated by its Samalaju Phase 2 smelting plant and higher metal price.
Revenue for 9MFY17 jumped 30.1% to RM6.02 billion from RM4.63 billion in 9MFY16.
Going forward, Press Metal group chief executive offi cer Tan Sri Paul Koon expects the group to benefi t from the current higher metal price barring unforeseen cost increases.
“We are moving on to a two-pronged strategy by enhancing margins through higher volume
of value-added products, while managing rising raw material cost.
“We are now targeting to increase contribution of value-added products
from 30% to 50% by end-2018. Th is will entrench our position directly with end users to strengthen our position and branding in the long run,” he said in a statement yesterday.
Koon also said its joint venture with Sunstone Development Co Ltd in China for the manufacturing of pre-baked carbon anodes will help address rising carbon cost come FY18.
“Our inaugural bonds issuance has put us on a stronger fi nancial footing to consider suitable growth opportunities both upstream and downstream.
“Being the largest aluminium smelter and extruder in Southeast Asia, we are the best proxy for mul-tiple industries exposure due to the wide application of aluminium from construction, transportation, electri-cal to consumer products,” he said.
3Q
FY16 FY17
4Q 1Q 2Q 3Q
Press Metal’s quarterly earnings
Net profit (RM mil)
Revenue (RM mil)
0
20
40
60
80
100
120
140
160
180
1,700
1,800
1,900
2,000
2,100
2,200
KUALA LUMPUR: AirAsia Bhd group chief executive offi cer (CEO) Tan Sri Tony Fernandes has hinted that the third quarter ended Sept 30, 2017 (3QFY17) was a strong quarter for the low-cost carrier and that 4QFY17 results are proving to be even better than 3QFY17.
According to its preliminary op-erating statistics released on Nov 3, the airline fl ew 9.89 million pas-sengers in 3Q of 2017, a rise of 12% over the 8.83 million passengers fl own in 3Q of 2016.
“Th ird quarter strong[,] fourth [quarter] very strong ... Ancilliary and joint venture business [a] huge value,” Fernandes said in his per-sonal Twitter account yesterday.
However, he expressed frustra-tion with analysts over how they
perceive the value of the airline’s stock, which has remained at a rath-er low valuation.
“I’m baffl ed at how analysts val-ue us,” he tweeted, maintaining that dividends are strong. It had paid a dividend of 12 sen per share totalling RM401.02 million for the fi nancial year ended Dec 31, 2016.
AirAsia is due to release its 3Q results on Nov 29.
Bloomberg data showed that out of the 24 analysts covering the stock, 16 recommend to a “buy” for the stock, fi ve say “hold” and three recommend a “sell”. Th e consensus 12-month target price is RM3.59.
Year to date, AirAsia’s share price has risen 87 sen or 37.7% to close at RM3.18 yesterday, giving it a market capitalisation of RM10.66 billion. Th e closing price gives it a price-earnings ratio (PER) of 6.06 times.
Comparatively, its long-haul, low-cost affi liate AirAsia X Bhd has a PER of 17.76 times, while Singa-pore Airlines Ltd trades at 27.29 times its PER.
AirAsia’s 2Q net profi t fell 57.2% to RM146.52 million from RM342.12 million a year ago, which was large-ly in line with consensus forecasts. While analysts are maintaining a positive outlook on its earnings potential for the coming quarters, they expect AirAsia’s bottom line to see a year-on-year (y-o-y) decline.
Th e consensus forecast for AirA-sia’s net profi t in 3QFY17 is expected to fall 16.6% to RM295 million com-pared with RM353.9 million a year ago, according to Bloomberg data.
Th is is despite a predicted in-crease in revenue to RM2.46 billion in 3QFY17, Bloomberg data showed. Th e company’s quarterly revenue
rose 46.5% y-o-y to RM2.38 billion in 2QFY17.
Kenanga Research analyst Lum Joe Shen pointed to AirAsia’s planned consolidation of region-al units as a possible dampener of earnings for FY18.
He also doesn’t see the pro-posed initial public off erings by AirAsia’s Indonesian and Philip-pine arms providing signifi cant lift to its earnings.
PT Indonesia AirAsia is target-ed to be listed by year end, while Philippines AirAsia Inc is likely to be listed next year, Fernandes said in Manila last week.
Meanwhile, the proposed dis-posal of a 49% stake in its ground handling business, Ground Team Red Sdn Bhd, to Singapore’s SATS Ltd is expected to result in a one-off gain of RM365.7 million.
In a note to clients dated Oct 31, CIMB Research raised its target price for AirAsia to RM3.67 from RM3.51, highlighting that the move is expected to boost its 4Q bot-tom line.
However, the research house noted that AirAsia may incur higher operating costs in the future as it would have to engage in commer-cial contracts with the new joint venture company, Ground Team Red Holdings Sdn Bhd.
Aviation-related stocks unfortu-nately appear to be an unpopular sector among fund managers.
“Th e prices of such stocks can swing for non-fundamental reasons such as jet fuel prices and the spread of contagious diseases [from country to country]” Inter-Pacifi c Securities Sdn Bhd head of research Pong Teng Siew told Th e Edge Financial Daily.
H O M E B U S I N E S S 7WEDNESDAY NOVEMBER 22, 2017 • THEED G E FINANCIAL DAILY
KUALA LUMPUR: Supermax Corp Bhd saw its fi rst-quarter net profi t jump 42.8% year-on-year on im-proved effi ciency and productivity after refurbishing its older pro-duction lines and streamlining of work processes.
Its net profit rose to RM27.9 million in the three months end-ed Sept 30, 2017 (1QFY18) from RM19.54 million a year ago. Earn-ings per share grew to 4.19 sen from 2.89 sen. Quarterly revenue rose 16% to RM312.02 million from RM269 million in 1QFY17.
In a fi ling with Bursa Malaysia yesterday, Supermax attributed the higher quarterly revenue to a higher average selling price of its products in response to increased raw mate-rial prices, as well as a stronger US dollar versus the ringgit.
Moving forward, Supermax said global demand for natural rubber
and nitrile gloves remains strong with awareness in healthcare con-tinuing to rise, increasing regula-tion of the healthcare sector and higher healthcare spending in the public and private sectors driving growth in demand. Th ese positive factors continue to augur well for its business and the industry as a whole, it added.
“The Chinese government’s concerted eff orts to clamp down on the vinyl glove industry in Chi-na [have] also proven to be a boon for natural rubber and nitrile glove producers as demand has shifted to them. Th e clampdown is due to highly polluting vinyl glove plants which do not comply with China’s environmental regulations,” it said.
“In line with our continuous im-provements, we are refurbishing, rebuilding and modernising our older manufacturing plants to gain maximum effi ciency in our produc-tion capabilities,” Supermax added.
KUALA LUMPUR: Th e fi rst phase of regional logistics hub Digital Free Trade Zone (DFTZ), the fi rst outside of China for the world’s largest retailer Alibaba, has begun operations, said Transport Min-ister Datuk Seri Liow Tiong Lai.
“DFTZ is the No 1 digital plat-form outside of China,” Liow said when launching the Anjung Tinjau observation deck at Kuala Lum-pur International Airport (KLIA).
“It will benefit over 1,900 of our local small and medium en-terprises (SMEs),” he reiterated. “DFTZ’s initial phase is already in operations in KLIA Aeropolis.”
The transport minister also called for more innovation in the transportation sector, noting that economic opportunities are in-creasingly linked to mobility.
DFTZ’s fi rst phase is a ware-housing facility near KLIA oper-ated by Pos Malaysia Bhd. For-merly a cargo terminal, it is now
a full-fl edged storage facility for e-commerce with automated sort-ing and pick-and-pack systems, according to reports.
Th e facility will serve Lazada, Southeast Asia’s largest e-com-merce player. Alibaba controls 83% equity in Lazada.
Offi cially launched on Nov 3, DFTZ was fi rst mooted in Budget 2017. By 2025, Putrajaya expects the DFTZ to create 60,000 jobs and generate US$65 billion in trade value.
Focusing on SMEs, Putrajaya expects the DFTZ to boost the SMEs’ share of the national gross domestic product, from below 40% to over 60% eventually. Th e government previously said it hoped to attract 8,000 SMEs’ to participate in the DFTZ by 2018.
Its second phase, a 24ha facil-ity jointly developed by Malay-sia Airports Holdings Bhd and Alibaba’s logistics arm Cainiao Network, is slated to begin op-erations in 2020.
KUALA LUMPUR: FBM KLCI has turned out to be the worst Asian equity gauge so far this year, with less than 5% growth. An undetermined election date isn’t helping either.
Even as it received the most foreign infl ows this year in South-east Asia, the nation’s benchmark measure has continued to lag be-
hind all its major regional peers from Hong Kong to India, some of whose gauges have rallied more than 25% this year.
Malaysia is due for a gener-al election by August 2018, but there’s been speculation that Prime Minister Datuk Seri Najib Razak may call it sooner to capi-talise on a feel-good budget and an opposition in disarray.
“There are some uncertain-
ties weighing down the market, but there are also positive fac-tors such as oil, strong exports and the solid economic growth supporting it,” Areca Capital Sdn Bhd chief executive officer Danny Wong Teck Meng said by phone. Still, with earnings season in full swing, some sur-prises could provide catalysts for a more positive sentiment, he added. — Bloomberg
Boustead Plantations 3Q profi t upTh e company declares 10 sen dividends, proposes bonus issue
KUALA LUMPUR: Th e works min-istry is in the midst of fi nalising the compensation to be paid to the con-cessionaire of the Eastern Dispersal Link (EDL) in Johor for the loss of revenue when the toll is scrapped from January next year.
Th e EDL is owned by Malaysian Resources Corp Bhd (MRCB), which has been trying to dispose of the highway for over a year.
Works Minister Datuk Seri Fadil-lah Yusof said certain criteria must be taken into consideration in fi nal-ising the matter to ensure a win-win
situation for all parties involved.“We are not trying to protect the
concessionaire’s interest, but more on the investment, so the govern-ment, the users and investors will not be at the losing end,” he said when winding up the debate on the Supply Bill 2018 at the committee stage for his ministry at the Dewan Rakyat sitting here on Monday.
Fadillah said the fi ndings from the social impact survey on the tak-ing over of the EDL, as well as the public feedback, would also be tak-en into account to ensure a win-win
situation for all parties involved.Prime Minister Datuk Seri Najib
Razak, when tabling the Budget 2018 on Oct 27, announced the scrapping of tolls at Batu Tiga, Shah Alam and Sungai Rasau in Selangor; Bukit Kayu Hitam, Kedah; and those on the EDL.
On Oct 27, MRCB announced on Bursa Malaysia that in reference to Najib’s announcement on the EDL, it would make the necessary announcement upon receipt of fur-ther details from the government. — Bernama
Works ministry fi nalising compensation to EDL concessionaire
Liow: DFTZ’s fi rst phase up and running
Supermax 1Q net profi t up 43%
BY S U R I N M U R U G I A H
BY K H A I R I E H I S YA M A L I M A N
BY C H E S T E R TAY
KUALA LUMPUR: Boustead Plan-tations Bhd’s net profi t leapt more than 15 times to RM562.42 million in the third quarter ended Sept 30, 2017 (3QFY17) from RM37.36 million a year ago, primarily due to gains re-alised on disposal of land amounting to RM554.87 million. Earnings per share grew to 35.15 sen from 2.34 sen.
Quarterly revenue, however, fell 8% to RM183.43 million in 3QFY17, from RM199.33 million in 3QFY16, on lower share of results from associates.
Th e group also declared a third in-terim dividend of three sen per share and a special dividend of seven sen
per share for the fi nancial year end-ing Dec 31, 2017, payable on Dec 19.
For the cumulative nine months (9MFY17), net profit jumped 3.5 times to RM628.8 million from RM177.5 million a year ago. Reve-nue rose 6% to RM541.93 million from RM511.23 million.
In a statement yesterday, Boust-ead Plantations vice-chairman Tan Sri Lodin Wok Kamaruddin said the strong earnings growth was also sup-ported by better selling prices for palm products.
The average crude palm oil (CPO) selling price for 9MFY17 was RM2,871 per tonne, up 16% from RM2,475 per tonne in 9MFY16. Av-
erage palm kernel price rose 8% to RM2,478 per tonne. Fresh fruit bunch (FFB) production increased 5% to 696,668 tonnes, mainly as a result of improved yields after the El Nino weather phenomenon in the fi rst half of the year.
Average oil extraction rate for 9MFY17 was 20.9% and kernel ex-traction rate was 4.3%, slightly lower than the same period last year.
“Going into the last quarter of the year, we have seen improved FFB yields in Peninsular Malaysia and Sabah, but this may be hampered by erratic weather and labour shortage, along with diffi cult ground condi-tions in Sarawak,” Lodin said.
“Malaysia’s export growth was also weaker than expected due to stiff competition from Indonesia, which caters to price-sensitive markets such as China and India.”
Lodin said despite these challeng-es, CPO prices have outperformed expectations as the recovery in pro-duction was not as strong as expected post El Nino.
“It is anticipated that favourable CPO prices will remain supportive with upward potential, if CPO pro-duction fall short of expectations. Robust global demand and comfort-able stock levels are also expected to support CPO prices.”
On the group’s proposed acqui-
sition of 11,600ha of plantation land in Sabah, Lodin said it is on track for completion. “Due to this positive out-look, we are confi dent that prospects will remain positive for the group.”
To improve liquidity of the stock and further reward shareholders, Boustead Plantations is proposing to undertake a bonus issue of 640 million new bonus shares on the basis of two bonus shares for every fi ve existing Boustead Plantations shares held by shareholders on an entitlement date that will be deter-mined later.
The proposed bonus issue of RM320 million is expected to be completed by 1QFY18.
Malaysia becomes Asia’s worst stock market as election loomsBY C H O O N G E N H A N
8 ST O C KS W I T H M O M E N T U M WEDNESDAY NOVEMBER 22, 2017 • THEEDGE FINANCIAL DAILY
www.theedgemarkets.com
Stocks with momentum were picked up using a proprietary algorithm by Asia Analytica Data Sdn Bhd and fi rst appeared at www.theedgemarkets.com. Please exercise your own judgement or seek professional advice for your specifi c investment needs. We are not responsible for your investment decisions.
Our shareholders, directors and employees may have positions in any of the stocks mentioned.
P RO P E RT YSHARES in CCM Duopharma Biotech Bhd (fundamental: 1.7/3, valuation: 2/3), which triggered our momentum algorithm yester-day for the fourth time this year, closed seven sen or 3.12% higher at RM2.31, with a market capitalisation of RM641.61 million.
Th e counter saw 336,700 shares traded, higher than its 200-day average volume of 66,213 shares. CCM Duopharma is principally involved in the manufacturing, distributing,
importing and exporting of pharmaceutical products and medicines.
In its third quarter ended Sept 30, 2017, the company’s net profi t jumped 80% to RM11.41 million from last year’s RM6.34 million.
Th e company’s quarterly revenue improved 44% year-on-year to RM115.38 million from RM80.30 million, mainly due to higher de-mand from the public health sector via ten-ders and supply of traded specialty products.
SHARES in Xian Leng Holdings Bhd (funda-mental: 1.8/3; valuation: 0.3/3), which trig-gered our momentum algorithm yesterday for the fi fth time this year, closed up two sen or 3.17% at 65 sen, with a market capitalisa-tion of RM51.71 million.
Th e counter saw 2.12 million shares done, versus its 200-day average trading volume of 226,482.5 shares.
Xian Leng’s core activity is the commer-cial captive breeding of Asian Arowana and other ornamental fi shes. It also trades in a range of aquarium accessories, fish
feed and medication.For its second fi nancial quarter ended July
31, 2017, Xian Leng narrowed its net loss to RM428,000 from RM2.04 million a year ago, mainly because the previous year provided for an impairment loss on property, plant and equipment of RM1.1 million.
Th e company’s quarterly revenue rose 22% year-on-year to RM3.01 million from RM2.35 million, mainly on higher sales of imported fi sh food products and gold fi shes, despite lower contribution from stingray fi shes be-cause of lower prices.
SHARES in Zecon Bhd (fundamental: 0.75/3, valuation: 1.5/3) triggered our momentum al-gorithm yesterday for the fi fth time this month.
Zecon closed down 4.5 sen or 5.66% at 75 sen, after 8.95 million shares were traded versus the counter’s 200-day average volume of 470,339 shares. Th e group’s market capi-talisation stood at RM98.26 million.
Th e group is principally involved in con-struction, infrastructure, toll concession and property development.
On Monday, Zecon said the signing of
an agreement to sell a 49% stake in its whol-ly-owned unit Zecon Medicare Sdn Bhd for RM155 million had been delayed to a yet-to-be-fi xed date. No reason was given for the postponement.
Zecon Medicare inked a concession agree-ment in 2013 with the education ministry and Universiti Kebangsaan Malaysia (UKM) to build a RM606 million children’s specialist hospital at UKM, via a public-private partner-ship on a build, lease, maintain and transfer concept.
HONG KONG: An unidentified buyer paid HK$132,000 (RM69,947) per sq ft for a luxury fl at in Hong Kong’s exclu-sive Th e Peak neighbourhood, making it Asia’s most expensive apartment by area, according to Knight Frank LLP.
The buyer shelled out more than HK$1.16 billion on Monday for two ad-jacent apartments at No 8 Mount Ni-cholson, said Wheelock Properties Ltd. Th e record was set by the smaller of the two, which sold for HK$560 million. Th e project is a joint venture with Nan Fung Development.
Hong Kong’s property market is run-ning red-hot across land, commercial and residential buildings. Soaring home prices have put the city in bubble-risk territory as local and foreign investors pile in, making a “mild correction” like-
‘Luxury HK apartment breaks Asia price record’BY F R E D E R I K B A L FO U R
BY B E I J I N G M O N I TO R I N G D E S K
& YAW E N C H E N
China to step up property market regulation to avoid bubble risk — CCTV
*Valuation score - Composite measure of historical return & valuation**Fundamental score - Composite measure of balance sheet strength& profitabilityNote: A score of 3.0 is the best to have and 0.0 is the worst to have
*Valuation score - Composite measure of historical return & valuation**Fundamental score - Composite measure of balance sheet strength& profitabilityNote: A score of 3.0 is the best to have and 0.0 is the worst to have
ZECON BHD Valuation score*Fundamental score**TTM P/E (x)TTM PEG (x)P/NAV (x)TTM Dividend yield (%)Market capitalisation (mil)Shares outstanding (ex-treasury) milBeta12-month price range
1.500.757.43
(0.13)0.87
-104.16131.02
0.270.54-0.80
*Valuation score - Composite measure of historical return & valuation**Fundamental score - Composite measure of balance sheet strength& profitabilityNote: A score of 3.0 is the best to have and 0.0 is the worst to have
CCM DUOPHARMA BIOTECH BHD (-ve)
XIAN LENG HOLDINGS BHD (-ve)
ZECON BHD (-ve)
BEIJING: China will step up fi nancial reg-ulation and crack down on speculation in the property market to stabilise prices and fend off bubble risks, state television CCTV reported yesterday, signalling re-newed eff orts to rein in risks from a rapid build-up in debt in the economy.
Th e remarks from regulators at the People’s Bank of China, the ministry of housing and urban-rural development and the ministry of land and resources during a joint work meeting in central China’s Wuhan laid out short-term tasks to be achieved in real estate, CCTV said.
China’s housing market has seen a near two-year boom, giving the econo-my a major boost but stirring fears of a property bubble, with the government taking strong measures since late 2016 to curtail speculative purchases.
Despite eff orts by Chinese authori-
ly, according to the UBS Global Real Es-tate Bubble Index. Secondary residential prices have climbed 11% in the past 12 months, according to Centaline Prop-erty Agency.
“For many high-net-worth individu-als, Mount Nicholson is a way to invest,” said Th omas Lam, head of valuation and consultancy at Knight Frank.
Such purchases also highlight the ex-treme diff erences between rich and poor in Hong Kong, which is the world’s least aff ordable city to buy a house. It would take 2,745 years worth of the entire medi-an annual income of HK$204,000 to buy the record 4,242 sq ft property in Th e Peak.
“Th e wealth gap has increased a lot,” said Cusson Leung, head of research for Hong Kong property and conglomerates at JPMorgan Chase & Co. “Th e people on the street and the people on Th e Peak are separated by 2,745 years.” — Bloomberg
ties to curb speculation in the housing market, property prices have continued to climb although at a slower pace. New home prices rose at a slightly faster pace in October after gains held steady the previous month.
Th e regulators said China would pre-vent funds from being illegally channelled into the property market, and ensure capital allocation between real estate and other industries was balanced.
Th e three central government enti-ties also told provinces to stick to their tightening measures and be consistent in policy, warning against lax regulation that could lead to big fl uctuations in the market and a build-up in fi nancial risks.
“[We] must not tolerate any thinking that we can sit back and relax,” the reg-ulators said, according to CCTV.
China will also improve its manage-ment of the land market and prevent cases of high land prices pushing up property prices, CCTV said. — Reuters
A fi lepic of one of the apartments at No 8 Mount Nicholson. The record was set by the smaller of the adjacent apartments, which sold for HK$560 million. Photo by Bloomberg
1 0 B R O K E R S’ C A L L / T E C H N I C A L S WEDNESDAY NOVEMBER 22, 2017 • THEEDGE FINANCIAL DAILY
Technical rebound in a bearish trend expected
Petra Energy seen poised for better prospects ahead
BY B E N N Y L E E
Daily FBM KLCI chart as at November 17, 2017.
The market contin-ued to fall on weak sentiment despite a stronger ringgit and crude oil prices. The market was cautious
about third-quarter financial re-sults announcements and hence there was a decline in trading vol-ume. The FBM KLCI fell to its low-est in eight months last week and declined 1.2% in a week to 1,721.66 points last Friday. Yesterday, the index closed at 1,720.68 points.
The average daily trading vol-ume fell from 3.1 billion shares two weeks ago to 2.6 billion shares last week. However, the average daily trading value increased from RM2.5 billion to RM2.6 billion. This indicates that more high-er-capped stocks, which are pre-ferred by institutional market par-ticipants, were being traded.
Foreign institutions were sell-ing despite a stronger ringgit last week. Net selling from foreign institutions was RM297 million, while net buying from local insti-tutions and retailers was RM148 million and RM149 million re-spectively.
For the FBM KLCI, only three out of 30 counters ended up high-er in a week. Th e top gainers for the week were Petronas Dagangan Bhd (+8.4% in a week to RM23.42), Malayan Banking Bhd (+0.4% to RM9.22) and British American To-bacco (M) Bhd (+0.3% to RM39.52). Th e top decliners were Petronas Gas Bhd (-6.5% to RM16.64), YTL
Petra Energy Bhd(Nov 21, 80 sen)Retain neutral recommendation with an unchanged target price (TP) of 95 sen: Petra Energy Bhd’s nine months of fi nancial year 2017 (9MFY17) results saw a rise in rev-enue to RM341.8 million (+25.5% year-on-year [y-o-y]), while core loss improved to RM17.9 million (+7.6% y-o-y). We are maintaining our “neutral” recommendation on Petra Energy with a TP of 95 sen pegged at a 10 times price-earnings multiple on our FY18 earnings per share of 9.5 sen.
We do believe the group is poised for better prospects ahead, in scopes of hook-up and com-missioning (HUC) and engineer-ing, procurement, construction and commissioning contracts, which has previously been de-layed due to the lower oil price environment, and which should see restarts with Brent oil price
CorrectionWith reference to the article entitled “Vietnam power plant project a catalyst for MRCB-Quill REIT” published in Th e Edge Financial Daily yester-day, there is no Vietnam power plant project under the MRCB-Quill REIT portfolio as was stat-ed. Th e error is regretted.
levels expected to now average around the US$60 (RM248.40) per barrel level.
Revenue for the services divi-sion in the third quarter of FY17 (3QFY17) recorded RM136.8 million (+92.1% y-o-y), resulting from high-er activities in HUC and the topside major maintenance contract with Petronas Carigali Sdn Bhd.
Albeit this, the division saw a loss of RM29.1 million in 3QFY17 from weaker margins, excluding the one-off effects of gains on disposal of property, plant and equipment of RM11.3 million, and provision for impairment on re-ceivables of RM4.8 million for a piece of land sold in Shah Alam.
Revenue for the marine as-
Corp Bhd (-6.2% to RM1.21) and Hong Leong Financial Group Bhd (-4.3% to RM15.98).
Global markets were generally bearish last week. However, Hong Kong’s Hang Seng Index contin-ued to climb to a fresh 10-year high. In Asia, China’s Shanghai Stock Composite Index fell 1.5% in a week, leading the pack. France’s CAC 40 led the western market decline with a 1% fall.
The greenback was weak. The US dollar index, which measures the US dollar against major cur-rencies, declined from 94.4 points to 93.7 last Friday. The ringgit strengthened against the US dollar
from RM4.19 to RM4.16 to a US dollar last Friday.
Crude oil snapped a five-week gain last week for a correction and gold prices rallied on a weak US dollar. Brent crude oil declined 1.4% in a week to US$62.72 per
barrel last Friday. The Commodi-ty Exchange gold price increased 1.5% to US$1,294.40 (RM5,358.82) an ounce. Locally, crude palm oil futures fell 3% to close at RM2,712 per tonne last Friday on increas-ing supply worries.
After falling to break above the immediate resistance level at 1,750 points for the past three weeks, the FBM KLCI turned bear-ish and broke below the immedi-ate support level at 1,733 points to continue its bearish trend.
Technically, the index re-mained bearish below the 30- and 200-day moving averages. Furthermore, the index is below
the Ichimoku Cloud indicator and the cloud is expanding down-wards. This indicates a strong and clear bearish trend. Also, a bearish trend channel has been formed to define the support and resistance levels of the down-trend. The momentum of the cur-rent bearish trend is strong. The Relative Strength Index and mo-mentum oscillator are declining, and this indicates a strong bear-ish momentum. Furthermore, the index is trading at the bottom band of the expanding Bollinger Bands, and the moving average convergence divergence indica-tor continues to decline. Howev-er, these indicators also indicate that the FBM KLCI is technically oversold.
Based on the chart, the next support level for the bearish trend is at 1,705 points based on the 50% Fibonacci retracement level of the bullish trend that has started since the beginning of this year.
However, the index may stage a technical rebound as it is oversold. Th e trend may still continue to be bearish towards 1,705 points if the index fails to overcome the immedi-ate resistance level at 1,733 points, which was the previous immediate support level.
The above commentary is sole-ly used for educational purpos-es and is the contributor’s point of view using technical analysis. The commentary should not be construed as investment advice or any form of recommendation. Should you need investment ad-vice, please consult a licensed in-vestment advisor.
sets division grew to RM68.7 mil-lion (+79.4% y-o-y) in 3QFY17, from higher vessel utilisation in the quarter. Th is translated into a positive profi t before tax (PBT) of RM400,000, versus a PBT loss of RM10.8 million in 3QFY16.
Th e production and develop-ment division recorded a high-er PBT of RM14.2 million (+8.5% y-o-y) in 3QFY17, supported by lower fi nance costs from full settle-ment of borrowings for the Kapal, Banang and Meranti small fi eld risk service contract (KBM Cluster RSC).
Petra Energy’s 30% stake in the KBM Cluster RSC, however, was lower at RM9.6 million in 3QFY17 (-34.7% quarter-on-quarter) fol-lowing its routine maintenance in the quarter, but is expected to boost production flow from 4QFY17.
For the interim, the group is still expected to experience higher costs and narrowed margins from
rebasing of industry costs and rates during the lower oil price peri-od, thus resulting in our adjusted FY17F (forecast) earnings estimate by over 100%.
Our revenue has been increased by 21% to account for strong-er-than-expected work orders for FY17F. Petra Energy’s current or-der book stands at RM1.5 billion to last up to 2022, with a tender book at RM1 billion. — PublicIn-vest Research, Nov 21
The average daily trading volume
fell from 3.1 billion shares two weeks ago to 2.6 billion shares
last week.
B R O K E R S’ C A L L 1 1WEDNESDAY NOVEMBER 22, 2017 • THEED G E FINANCIAL DAILY
Daibochi has fi rst-mover advantage in Myanmar Sunway Construction
Group Bhd(Nov 21, RM2.40)Maintain buy with a target price of RM2.67: Sunway Construction Group Bhd’s (SunCon) earnings for the fi rst nine months of fi -nancial year 2017 (9MFY17) of RM106 million (+16% year-on-year [y-o-y]) were slightly be-low expectations, accounting for 65.1% and 70.7% of our and consensus full-year forecasts respectively.
SunCon’s 9MFY17 revenue of RM1.3 billion (+7% y-o-y) came in strong as a result of better-than-expected construc-tion revenue of RM1.21 billion (+16.9% y-o-y), influenced by improvement in the higher pro-gress billings rate.
Moving forward, we reckon that clinching the bus rapid transit (BRT) project from Klang to Kuala Lumpur would be a game changer for SunCon as this provides earn-ings upside to our assumptions.
Notably, its return on asset is 8.2% above the weighted average cost of capital of 6.7%, indicating the company is pushing hard to improve its asset effi ciency and reduce its liabilities. — MIDF Re-search, Nov 21
BRT job win seen as game changer for SunCon
Daibochi Plastic andPackaging Industry Bhd(Nov 21, RM2.23)Maintain reduce with a higher target price (TP) of RM1.88: Dai-bochi Plastic and Packaging In-dustry Bhd’s revenue for the fi rst nine months of fi nancial year 2017 (FY17) rose 0.8% year-on-year to RM283 million and its quarterly revenue exceeded RM100 million for the fi rst time ever. Higher raw material cost was off set by lower waste and better operational effi -ciency. Th e third interim dividend per share (DPS) of 1.15 sen was in line with our expectations. Year-to-date DPS is at 3.47 sen or 63% net dividend payout ratio.
Daibochi has revised its divi-dend policy to exclude the earnings from its Myanmar joint venture (JV) from distributable income — it will now pay at least 60% of net profi t excluding earnings from Myanmar. Our FY17 to FY19 DPS forecasts already assume 60% net dividend payout ratio excluding Myanmar
JV earnings. We understand the company is not allowed to take out money from the Myanmar JV over the next two years.
Daibochi’s 60%-owned Myan-mar JV started operations in the
third quarter of FY17 (3QFY17) and the JV recorded RM6.5 mil-lion revenue and RM1.95 million profi t before tax (PBT) in the quar-ter. Th e Myanmar PBT margin was 29% compared with only 9% for
Daibochi’s Malaysia operations. Myanmar’s higher PBT margin al-lows the company to do the low-er-profi t-margin business in Malay-sia, which Daibochi did not want to do in the past. In 3QFY17, the Myanmar JV contributed 19% of the group’s PBT, which was quite an achievement in its fi rst quarter of operations.
We remain long-term positive about Daibochi’s move to Myanmar. Th e company has the fi rst-mover advantage in this country. Myan-mar currently does not have many multinational corporations (MNCs) but we believe it would only be a matter of time before more MNCs set up operations in Myanmar. Dai-bochi has been working with major MNCs in the region and as such, we believe the Daibochi JV has a strong chance of getting the MNC business in Myanmar.
We maintain our earnings per share forecasts but raise our TP to RM1.88 as we roll forward to FY19. — CIMB Research, Nov 20
INVITATION TO CONSIGNMALAYSIAN & SOUTHEAST ASIAN PAINTINGS, DRAWINGS & SCULPTURES
1 2 H O M E WEDNESDAY NOVEMBER 22, 2017 • THEEDGE FINANCIAL DAILY
Freeze on new varsity campusesTh ere are enough universities and colleges locally, says Idris Jusoh
PUTRAJAYA: Th e higher education ministry has imposed a moratorium on the opening of new campuses by local or foreign universities, said Higher Education Minister Datuk Seri Idris Jusoh.
“No more building or opening of new campuses,” he told report-ers here yesterday concerning the number of foreign universities that have opened campuses in Malaysia this year, after celebrating Heri-ot-Watt University Malaysia’s suc-cess as the International University of Th e Year by the Times and Sun-day Times Good University Guide 2018.
Idris said the ministry had decid-ed to impose the moratorium be-cause there are enough universities and colleges locally. “Only if you are in the top 100 in the world, we (the ministry) are willing to consider. Or
if you can convince the cabinet,” he said, adding that there are 400 private colleges and universities in the country.
Despite the moratorium, Idris is optimistic that Malaysia is on the right track to be the regional hub of higher education with 200,000 foreign students by 2020.
He said the target is achievable as Malaysia has been the choice of students from many countries, es-pecially in student exchange and transfer programmes.
For example, he said, the num-ber of Heriot-Watt University’s stu-dents in the UK who transferred to the Heriot-Watt University Malay-sia campus increased from 30 last year to 80 who would be arriving in January.
Idris said the ministry is mulling the possibility of collaborating with
Heriot-Watt University for students from local public universities to spend a semester at Heriot Watt University Malaysia campus.
For a start, the collaboration will involve Heriot-Watt and Universiti Kebangsaan Malaysia. “Such collab-oration aims to give local students exposure to foreign universities and improve their English. Th e fee struc-ture will be made aff ordable to local students,” he added.
Heriot-Watt University Malaysia chief executive offi cer Professor Mushtak Al-Atabi said Heriot-Watt’s success as the International Uni-versity of the Year is due to its “Go Global” programme allowing its students from any of its three cam-puses in Scotland, Dubai or Malay-sia to transfer as long as their aca-demic programmes are off ered at their campus of choice. — Bernama
KUALA LUMPUR: Th e communi-cations and multimedia ministry has sufficient experts and tools in place for the public to verify whether their personal data had been breached or compromised, said Deputy Communications and Multimedia Minister Datuk Seri Jailani Johari.
He said the public should refer to the ministry’s agencies such as the Personal Data Protection De-partment (PDPD) if they realised their personal information had been leaked.
“We have an agency called the
Personal Data Protection Depart-ment, which sets guidelines for the data user and service provider,” he told reporters after launching the World Access and Interconnect Forum 2017 here yesterday.
“PDPD’s main responsibility is to enforce and regulate personal data protection in Malaysia and it focuses on processing personal data in commercial transactions and preventing the misuse of per-sonal data.”
Jailani said this when asked whether the government would set up a portal to help Malaysians
check whether their personal in-formation had been leaked online, similar to the sayakenahack.com verifi cation website created recently by local tech blogger Keith Rozario.
According to a news article, say-akenahack.com is to enable the public to check if their personal data had been stolen. It was re-ported that more than 46 million mobile users’ data in Malaysia had been leaked since 2014.
However, the Malaysian Com-munications and Multimedia Com-mission (MCMC) later blocked the website.
Jailani said apart from PDPD, the MCMC as the nation’s Internet regulator and the ministry’s website Sebenarnya.my for news verifi ca-tion are sufficient in addressing cybersecurity concerns.
On the World Access and In-terconnect Forum 2017, he said it brought together industry experts and academics to share knowl-edge on the subject of access and interconnection and also to dis-cuss technology, entrepreneurship and business. He hopes the forum would strengthen the industry lo-cally and abroad. — Bernama
Jailani: Enough experts to handle data breaches
‘Muslim countries must commit to fi ghting terrorism’
KUCHING: Malaysia has called for fi rm commitment from Mus-lim countries in dealing with terrorism and violent extremism.
The continued death toll and destruction in Iraq and Syria, Daesh attack on Mara-wi, the Philippines, and hu-manitarian tragedy in Rakhine state, Myanmar, are examples of issues requiring strong re-sponses, said Prime Minister Datuk Seri Najib Razak.
“Th e scale of suff ering and strife that has taken place can-not be allowed to go unchecked. As Muslims, we are enjoined to fi ght injustice and evil — this is a sacred duty that we are tasked with,” he said at the 13th World Islamic Economic Forum (Wief) here yesterday.
Also the Wief Foundation pa-tron, Najib said Muslim coun-tries have a role to play in dealing with the challenges. He added that Malaysia’s eff orts to help re-solve the Rohingya’s plight had begun to yield positive results.
Th e prime minister also said Myanmar State Counsellor Aung San Suu Kyi, at the recently con-cluded Asean Summit in Manila, the Philippines, had expressed her commitment to finding a solution to the crisis in Rakhine.
Najib further revealed that nations at the summit made a commitment to curtail the threat of terrorism and violent extremism through sharing of information and law enforce-ment cooperation.
“Th ese are measures Malay-sia has long called for, and I am pleased that our eff orts at fi ght-ing Daesh have been recognised around the world,” he said.
Najib noted much of the Muslim world lacks invest-ments in quality education, a huge challenge for the ummah (community).
He said a country must equip its young people with thinking skills of the high-er order, “so they would be open-minded, creative, inno-vative and ready to adapt to the jobs yet to exist”. — Bernama
DOWN MEMORY LANE ... Visitors to the Kuala Lumpur International Airport (KLIA) viewing a diorama depicting Malaysian culture at Anjung Malaysia, the airport’s latest attraction launched yesterday. Anjung Malaysia aims to introduce Malaysia to the world by showcasing local traditions and cultures at KLIA as well as create a sense of homecoming for Malaysians. Photo by Bernama
Flood relief for Allianz policyholdersKUALA LUMPUR: Flood vic-tims in the northern region have been given a helping hand from Allianz Malaysia. After extending a RM50,000 dona-tion to Malaysia International Search and Rescue for distribu-tion of relief items in Penang and Bukit Mertajam, Allianz Malaysia is helping to expe-dite claims negotiations and waive stipulations for a quicker process of claims, the insur-ance fi rm said in a statement. “All Allianz home insurance policyholders whose homes have been aff ected by the fl ood can come to the Allianz Gen-eral’s Claims Caravan to file their claims. We would then assign our adjusters to survey the said property and expedite the claims process,” said Allianz Malaysia Bhd chief executive offi cer Zakri Khir.
‘School curriculum to be reviewed every fi ve years’ KUALA LUMPUR: Th e govern-ment will review the primary and secondary school curricula every fi ve years for improve-ments and to remain relevant with the times. Deputy Educa-tion Minister Datuk P Kama-lanathan said yesterday the existing curricula emphasises knowledge acquisition, prac-tical elements, practice, ap-preciation and enculturation. Kamalanathan also said only 0.12% of the 5.1 million primary and secondary school students nationwide are involved in acts of moral decadence or social problems, such as gambling, stealing, threatening teachers and other students, extortion and gangsterism. — Bernama Challenge to CJ appoint-ment to be heard on Dec 7KUALA LUMPUR: The High Court has set Dec 7 to hear the leave application for a judicial review against Tun Md Raus Sharif’s appointment as chief justice (CJ) and additional Fed-eral Court judge. Counsel Na-dzratun Naim Hammad Azi-zi representing the applicant, Parti Amanah Negara assistant secretary Abang Ahmad Kerdee Abang Masagus, told reporters that High Court Judge Datin Azizah Nawawi set the date in chambers after the case was mentioned before her yester-day. — Bernama
‘Bloc voting shows democracy at work’ KUALA LUMPUR: The bloc vote on the Supply Bill 2018 at the committee level for the domestic trade, cooperatives and consumerism ministry in Dewan Rakyat on Monday shows democracy in the coun-try is alive and well. Minister in the Prime Minister’s Depart-ment Datuk Seri Azalina Oth-man Said said all members of parliament should respect the decision as the process was conducted in accordance with the Standing Orders of the De-wan Rakyat. — Bernama
I N BR I E F
1 4 C O M M E N T WEDNESDAY NOVEMBER 22, 2017 • THEEDGE FINANCIAL DAILY
Impeachment is worth the wait for Zimbabwe
lion) bond that matured last month even though it is a profi table com-pany with 15% operating margins. It just could not refinance fast enough.
Th e yield on government debt due in a decade stabilised at 3.96% on Monday, but that is probably the calm before the storm. China’s debt market lacks proper credit ratings and is best described as a large sausage stuff ed with good and bad meat. Of the some 1,500 notes of publicly traded companies covered by the nation’s four main credit-rating fi rms, 70% are scored AA or above, and 60% are AAA. As recently as June, Dandong Port was at a respectable AA.
As Bloomberg has noted, Chi-na is unlikely to want benchmark yields to spike much higher. But here is the problem with bonds: of-ten bought with leverage, they can sell off quickly when risk aversion grips. What is more, asset manag-ers will have to list their WMPs at market value rather than at cost, meaning any bond-market cor-rection could snowball into worse much faster.
With these new rules, Beijing risks opening a Pandora’s box of new problems. — Bloomberg
1) Last seen in October 2014.
China risks opening a Pandora’s box of new problems
Following the rules to remove a dictator like Mugabe sends a powerful signal
BY S H U L I R E N
When you get rid of your dicta-tor, is it im-portant to fol-low the rules? That delicate
question is dominating the tran-sition-in-progress in Zimbabwe, where long-time president Robert Mugabe has refused to step down despite the demands of the public, the army and his own political party.
Th e counterintuitive answer is that it actually is worthwhile to show obedience to the rule of law, even when the person being over-thrown has not and does not. Fol-lowing the rules sends a message that the future regime wants to re-spect the law. If the Zimbabwean people, who have had 37 years of Mugabe, can wait a few more weeks to remove him lawfully, the delay will have been worth it.
Th e events in Zimbabwe have been fascinating, not least because they have not followed the usual pat-tern of dictator removal. Ordinarily, dictators remain in power until seri-
IN attempting to head off a Bernie Madoff moment, China has set the stage for an even deeper bond market rout.
Ten-year government note yields last week hit the psychologically important 4% level (1) as investors braced for sweeping rules to curb risks in the country’s US$15 trillion (RM62.1 trillion) asset-manage-ment industry (see chart — Did Someone Shout Rout?)
Caving into social pressure, banks in China have been bailing out wealth-management products (WMP) that have gone bad. Th at is not going to be allowed come June 2019. If an off ering defaults, issuers or manager cannot use their own funds to prop it up or roll the product over into a new one. Th ose found violating the new conditions will be fi ned.
Th ere will also be big changes to the types of debt off erings WMPs themselves can invest in.
Beijing has deemed that inter-est rates paid by WMPs are too high. Many are short term — only 7% have a maturity longer than one year, according to CICC Re-search — and most yield around 4% to 5%.
To ensure those juicy returns
BY N O A H F E L D M A N ous cracks appear in their authority — after which they crumble fast.
In this way, the fall of a dictator is like bankruptcy as described by Ernest Hemingway in Th e Sun Also Rises: “’How did you go bankrupt?’ Bill asked. ‘Two ways,’ Mike said. ‘Gradually and then suddenly.’”
The combination of a gener-al appearing on television to an-nounce the transition, the largest protest in the country’s history and the general sense that Mugabe is fi nished ought to have moved the transition from the gradual stage to the sudden.
Mugabe, at 93, cannot realistical-ly expect to continue to hold power. By now it is also clear that he will not be able to transfer power to his wife, as he apparently intended to do. Yet Mugabe has not abdicated his position — and he has not yet been removed by force.
Th e main explanation seems to be the strong desire of the relevant actors to follow a legal script, so they can continue to claim, as they have from the beginning, that their coup is not really a coup at all.
And Mugabe, for his part, has been taking advantage of this de-sire for a semi-orderly transition. After the ruling political party, the
Zanu-PF, purported to expel him from the party, Mugabe insisted in a speech that he would preside over the party congress meant to convene Dec 12. According to the Zanu-PF party constitution, the head of the party can (arguably) only be removed by a vote of the full party congress — not by the leadership of the central commit-tee that voted Mugabe out.
Th e party also lacked the legal authority to remove Mugabe from the presidency. Consequently, the central committee voted to direct the party whip to commence impeach-ment procedures against Mugabe on Tuesday if he has not resigned by then.
Exploiting the fact that no one with formal legal authority to re-move him from the presidency has yet acted, Mugabe has not (as of this writing) agreed to step down. It would appear that he intends to let the im-peachment process go forward. It could potentially go fast, or it could take several weeks. Most important, given the composition of Parliament, Mugabe can only be removed from offi ce with the active participation of
the opposition. And the opposition can be expected to try to extract some promises of power-sharing from the Zanu-PF leadership.
Given Mugabe’s canny skill at resisting removal using procedural barriers, it will be very tempting for the military and the politicians alike to force him out without respect for the formal procedures. If they did, it is unlikely that too many other countries would object, or that many Zimbabweans would raise a ruckus.
One effect of autocracy and one-party rule is that it tends to weaken the idea that constitution-al niceties must always be observed. What is more, the democratic ideal that the people should be able to re-move a de facto dictator would also seem to point in favour of rapid and direct action.
But that perspective would be a mistake. Zanu-PF and the military and the Zimbabwean people would be much better served by a legal process than by an effi cient one.
Admittedly, following proce-dures in overthrowing a dictator is a form of hypocrisy. But hypocrisy is the tribute that vice pays to vir-tue, as the old maxim has it. In this case that means, by showing even a hypocritical respect for procedural
forms, the coup plotters are doing something to enforce the value of procedural regularity in constitu-tional government.
In practice, if the coup plotters take their time and follow the forms, they are sending a meaningful signal to the public and the world that they care to some degree about consti-tutional values and the rule of law. Sending the signal is not free for them, because they have to pay the cost of tolerating Mugabe in power after they have declared him fi nished.
Th is constitutional respect does not guarantee that the next leader of Zimbabwe will truly respect the rule of law, or that meaningful political reform will stem from the Zanu-PF. But it does subtly increase the like-lihood that, when future confl icts arise between political expediency and constitutional rights, the new leadership will be open to respect-ing those rights, if only as a matter of cost-benefi t analysis.
It is time for Mugabe to go, his-torically speaking. But if the dictator ekes out a few more days or weeks in the name of constitutional pro-cedures he himself was traditionally willing to violate, that will actually be a meaningful victory for democracy and the rule of law. — Bloomberg
on the front end, asset managers have had to move ever further up the yield curve on the back end, buying higher-risk, longer-term securities. As a result, more than 15% of banks’ WMP funds are in so-called “non-standard debt prod-ucts,” which have tenure of up to three years.
Under the new rules, any WMPs that invest in non-standard debt, like debt-for-equity swaps that are less liquid than stocks or bonds, must have at least the same ma-turity as the underlying obligation.
In addition, only funds raised via private placements can invest in non-standard debt; funds sold to the general public are restricted to buying liquid instruments, such as shares or debentures.
Th ese broad changes come at a sensitive time, and raise the ques-tion of whether companies in China can cope with the dual challenge of rising interest rates and tighter liquidity.
China’s wealth-management industry may be fraught with mor-al hazard but it is a key source of
funding for the private sector, espe-cially when fi rms fi nd themselves cut off from regular fi nancing chan-nels such as bank loans. WMP pro-ceeds have funded many a property project, which helps explain why shares of China Vanke Co tumbled as much as 4% in Hong Kong on Monday.
Sudden liquidity tightening can also result in nasty surprises.
Dandong Port Group Co, which manages China’s largest trading harbour with North Korea, default-ed on a 1 billion yuan (RM620 bil-
See related story on Page 20
W O R L D B U S I N E S S 1 5WEDNESDAY NOVEMBER 22, 2017 • THEED G E FINANCIAL DAILY
Japan transport ministry sets up task force on fi nal vehicle checksTOKYO: Japan’s transport min-istry has set up a task force to examine the fi nal inspection process for vehicles sold in the domestic market, after the dis-covery of improper procedures at Nissan Motor Co and Subaru Corp. Recent revelations that the two automakers had failed to comply with fi nal inspection procedures for decades, with inspectors without proper cer-tifi cation signing off on checks, have resulted in major vehi-cle recalls in Japan and raised questions on the effi cacy of the inspection process. “We want to ensure more traceability and transparency in the fi nal vehi-cle inspection process,” Kenichi Hayashi, deputy director of the ministry’s type approval and recall division, said yesterday. — Reuters
China debt surge seen weakening defence against fi nancial crisisTOKYO: China’s debt is poised to soar over the next fi ve years, severely reducing the chances the nation can avoid a fi nancial crisis. Bloomberg Economics economists Fielding Chen and Tom Orlik estimate China’s total debt will reach 327% of gross do-mestic product (GDP) by 2022, double the level in 2008. Th at will put China among the most indebted countries in the world. “Th e rapid growth and high lev-el of China’s debt have already placed them in the danger zone for a fi nancial crisis,” said the economists in a note published yesterday. “Adding debt equiva-lent to almost 70% of GDP in the next fi ve years wouldn’t mean a crisis is inevitable, but it would severely reduce the chances of avoiding one.” — Bloomberg
Indonesia sells 5.95trillion rupiah of Islamic bondsJAKARTA: Indonesia’s fi nance ministry sold 5.95 trillion rupi-ah (RM1.82 billion) of Islamic bonds at an auction yesterday, above the indicative target of fi ve trillion rupiah, its fi nanc-ing and risk management of-fi ce said. Th e weighted average yield for Islamic T-bills matur-ing in May 2018 was 5.02857%, higher than 4.99917% in the previous auction on Nov 7. Th e project-based sukuk maturing in May 2019 had a weighted av-erage yield of 5.82993%, lower than the 5.87243% yield in the last auction. — Reuters
China’s Tencent overtakes Facebook in market valueBEIJING: China’s social media and video game giant Tencent overtook Facebook in market value yesterday as investors sent the company soaring to the top fi ve list of the world’s biggest fi rms. Tencent shares, traded in Hong Kong, have doubled in value this year as the tech company’s earnings have repeatedly outmatched analysts’ expectations. — AFP
I N BR I E F
Ping An on the riseChina insurer is No 2 to Berkshire Hathaway
BY Z H A N G D I N G M I N
& PAU L PA N C K H U R S T
BY L I A O Y U -YA N G & K UA N - L I N L I U
BY TA S S I A S I PA H U TA R
BY K AT R I N A H A M L I N
BEIJING/HONG KONG: A surge in Ping An Insurance (Group) Co shares this year has made it the world’s sec-ond-largest insurer by market value after Berkshire Hathaway Inc. And the rally may not be done yet.
Shares in the Chinese insur-er, which more than doubled this year to boost the company’s market valuation to about US$208 billion (RM861.12 billion), jumped yester-day to a new record after its chief fi nancial offi cer Jason Yao told re-porters that the fi rm’s technologi-cal prowess was underrated. Ping An’s valuation has much room to
increase as the company gradually spins off Internet technology units for their own listings, Yao said on Monday in Shenzhen, where the company held its Investor Day.
Optimism surrounding Ping An’s business prospects ahead of its in-vestor meetings helped propel a 14% advance in the shares since last Th ursday. Th e shares rose 5.8% to HK$83.80 (RM44.38) in Hong Kong amid a broader rally for fi nancial stocks, and are the best performers this year on the 46-company Hang Seng China H-Financials Index.
Saddled in the past with a so-called “conglomerate discount”, because of its integrated fi nancial services model, Ping An has come
to be viewed more positively by an-alysts on signs that the approach is working. Nomura Holdings Inc said in a note yesterday that it had raised the target price on Ping An shares to HK$92.22 — a more than 10% increase from current levels — citing the company’s strength in technology, such as artifi cial in-telligence, big data and biometrics.
After spending heavily on tech-nologies in the past few years, Ping An is entering “harvest time” as investments enhance its fi nancial services, tech products bring in new revenue, and potential spin-off s of units create additional val-ue for shareholders, Yao said on Monday. — Bloomberg
JAKARTA: An Indonesian court or-dered Goldman Sachs Group Inc to pay 320.8 billion rupiah (RM98.09 million) in damages to the found-er of PT Hanson International, for what was ruled to be an “illegal transaction” to buy shares in the property developer.
Th e New York-based fi rm must
Goldman ordered to compensate Indonesia tycoonreturn the Hanson shares to Ben-ny Tjokrosaputro, Judge Achmad Guntur said in the South Jakarta District Court yesterday. Th e judge also rejected a US$1 billion (RM4.14 billion) counterclaim the US bank fi led last year against the tycoon, who alleged that a Hanson stake held by Goldman was improperly obtained.
“We are surprised and disappoint-ed at today’s (yesterday) ruling by
the South Jakarta Court and will be appealing it at the earliest opportu-nity,” said Edward Naylor, a Hong Kong-based spokesman for Goldman. Tjokrosaputro declined to comment when reached on his mobile phone.
Th e ruling marks the second set-back this year for a prominent US bank as a result of its dealings in Indonesia. In January, the country barred government entities from do-
ing business with JPMorgan Chase & Co after its analysts made a “bearish” call on the local stock market. Th e fi nance minister signalled last month that Indonesia may lift the ban.
Goldman Sachs International, a London-based unit, had sought the dismissal of Tjokrosaputro’s plea, saying it’s the legal owner of the Hanson shares, court fi lings show. — Bloomberg
TAIPEI: Th e latest data from Tai-wan’s Ministry of Economic Aff airs Investment Commission indicates that the number and value of in-ward and outward investments in-volving countries targeted by the government’s New Southbound Policy saw year-on-year (y-o-y) increases in the first 10 months of 2017.
According to data released by the commission on Monday, there were 107 investment projects in related countries from January to October.
Th is fi gure represents a 1.5% in-crease in the number of projects for
Taiwan touts rise in New Southbound Policy investmentthe same period of last year, while the amount invested was NT$3.484 billion (RM480 million), represent-ing a 99.51% y-o-y increase.
Countries that saw the highest increases in investment include Australia, Thailand, the Philip-pines, Malaysia and Indonesia, all of which saw more than 100% y-o-y increases.
On the flip side, New South-bound Policy targeted countries have also stepped up their invest-ments in Taiwan. Whether from Taiwanese living abroad or foreign nationals, investment from these countries was US$229.35 million (RM949.51 million) for the first
10 months of the year, marking a 22.85% y-o-y increase, with 462 investment projects.
Th e countries with the conspic-uous y-o-y increases in investment in Taiwan include Malaysia, India, Indonesia and Singapore.
Overall, although Chinese in-vestment and foreign investment in Taiwan have both seen a y-o-y decline — of 16.87% and 46.33% re-spectively — the New Southbound Policy, which was rolled out after President Tsai Ing-wen took offi ce in May last year, has proven its ef-fectiveness at increasing investment between Taiwan and the targeted countries. — CNA
HONG KONG: BYD’s stock al-most doubled this year as China accelerated its electric vehicle (EV) drive. Its chairman Wang Chuanfu is targeting a revenue of one trillion yuan by around 2025. Yet earnings at the Warren Buff ett-backed carmaker are fl ag-ging, and the road looks crowded with rivals. To outpace them, BYD could return to its roots.
BYD is known for electric cars and buses, but the fi rm started out as a battery factory. Today, it is the world’s largest battery maker, according to Bernstein Research, enjoying the low-est production costs in the in-dustry. Controlling this supply chain helped improve margins and build market share for its own-brand autos in China, where BYD made up almost a third of EV sales last year, research by Fitch shows.
Yet BYD is struggling to capi-talise on this advantage. Its ver-tically integrated model means the battery business must grow in sync with EV volumes, a tricky balancing act given volatile car sales. Cuts to subsidies for EVs this year resulted in disappoint-ing earnings — net profi t fell by 23.8% for the fi rst nine months, compared with a year earlier. At the same time, policies pushing EVs are encouraging rapid mar-ket entry.
Doubling down on batteries might be the answer. Th e com-pany could expand production capacity to sell more of them to other automakers. If China fol-lows through on threats to ban gas guzzlers, there will be guar-anteed demand. And providing this particular part may be more profi table than selling the whole. Many electric carmakers struggle to break even, but an operating profi t margin of 20% is feasible for battery makers, analysts say. Th e company told Reuters that it is exploring this idea, and is even considering the possibility of a spin-off for its battery unit.
Th ere’s no time to lose. Rival battery-maker CATL is plotting aggressive expansion, funded by an upcoming US$2 billion (RM8.28 billion) listing. Last year, CATL tripled production capabilities for lithium-ion car batteries, and it plans capacity of 50GWh by 2020, compared with 6.8GWh today. — Reuters
Buff ett-backed BYD could use a battery ram
1 6 F O C U S WEDNESDAY NOVEMBER 22, 2017 • THEEDGE FINANCIAL DAILY
Asean equity markets are up 20% year to date, in US dollar terms, according to a Nov 13 report by Morgan Stanley Re-search equity strategists Sean Gardiner and Aarti Shah. That
is not a bad show, but it masks differences among the various countries. Singapore has rebounded from a weak 2016, while expecta-tions of reform have prevailed in the Philip-pines. However, markets such as Indonesia, Thailand and Malaysia have faced “discon-nects between improving macro climates and stagnating to deteriorating micro factors”, the report says.
This fragmented landscape presents a unique set of challenges to Asean equity fund managers. Th e performances of the various Asean equity funds available to retail investors here vary widely too. On a year-to-date basis, the best performer this year is the Templeton Asean Fund A (acc) USD, up 25.3%. Th e worst performer is the Legg Mason Martin Currie Southeast Asia Trust Class A (SGD) Acc, up 4.9%. Even over longer periods of three and fi ve years, the diff erences in performance are quite signifi cant. However, when considered over a longer-time frame, the better- performing funds do stand out.
Th e best performer, in terms of annualised fi ve-year returns, is the JPMorgan Asean Eq-uity Fund. Launched in 2009, the A (acc) USD share class of the fund had generated 4.8% in fi ve-year annualised returns as at Nov 14. It is also the best performer on a three-year basis, with an annualised return of 4.2% over that period.
According to Pauline Ng, head of Asean, emerging markets and Asia-Pacifi c equities at JP Morgan Asset Management, both ge-ographical and sector-specifi c factors have contributed to the fund’s performance. “Over the fi ve-year period, positive stock selection across markets, with the strongest contribu-tion coming from Th ailand and Indonesia, as well as our structural underweight to Ma-laysia, drove the fund’s outperformance,” Ng says. “Contributions at the sector level were also broad-based, with fi nancials, industrials and consumer leading the board.”
Other funds that have produced good long-term returns include the LionGlobal South East Asia Fund SGD Class, which has generated an annualised return of 4.2% over the past fi ve years, BGF Asean Leaders Fund Class A2 USD (3.9%), United Asean Fund (2.6%) and the Fidelity Funds — Asean Fund A-USD (2.4%). Th ese funds have a relatively high percentage of their portfolios in fi nancials, infrastructure plays and consumer stocks.
In banks we trustConfi dence in the banking sector is a recur-ring theme across many Asean funds. In the JPM, Lion Global Investors (LGI) and Fidel-ity funds, fi nancial plays comprised 40.3%, 37.8% and 33.3% of holdings, respectively, as at Sept 30. Common names among their top holdings are Singapore’s DBS Group Hold-ings and United Overseas Bank, Th ailand’s Kasikornbank and Indonesia’s Bank Rakyat Indonesia (BRI).
JPM’s Ng is optimistic about growth pros-pects for the Asean banking sector. “We are overweight fi nancials as we see good risk-re-
JPM’s Ng is optimistic about growth prospects in the Asean banking sector.
Fidelity’s Kwek notes that Asean countries are seeing positive growth in both real and nominal GDP.
LGI’s Soh says as affl uence grows, smartphone penetration rates are also likely to go up.
JP MORGAN ASSET MANAGEMENT ALBERT CHUA/THE EDGE SINGAPORE SAMUEL ISAAC CHUA/THE EDGE SINGAPORE
Amundi Funds Equity Asean A2U-C 15.8 17.9 -2.3 -1.2BGF Asean Leaders Fund Class A2 USD 24.9 27.3 1.8 3.9CIMB FTSE Asean 40 ETF 21.1 24.5 0.3 1.5 Fidelity Funds — Asean Fund A-USD 21.0 21.5 0.7 2.4Fullerton Lux Funds — Asean Growth Class A (USD) 15.0 14.8 -1.4 NAJPMorgan Funds — Asean Equity Fund A (acc) USD Class 23.9 25.7 4.2 4.8Legg Mason Martin Currie Southeast Asia Trust Class A (SGD) Acc 4.9 5.2 -5.8 -1.2LionGlobal South East Asia Fund SGD Class 13.8 18.4 1.7 4.2Nikko AM Asean Equity Fund USD Class A 19.3 18.4 NA NAONE STOXX Asean Select Dividend Index Fund 16.8 22.2 NA NATempleton Asean Fund A (acc) USD 25.3 25.0 NA NAUnited Asean Fund 14.3 18.1 1.3 2.6All data as at Nov 14
Source: Morningstar
ward and a better earnings outlook for the next 12 to 18 months,” she says. On Singapore banks, in particular, she adds: “We like Singa-pore banks as we see an earnings and returns recovery story. Valuations are still reasonable and there is scope for improving returns to shareholders over the medium term, as capi-tal has been building up as a result of the low loan growth in the past few years.”
Gillian Kwek, equities portfolio manager at Fidelity, notes that Asean countries are see-ing positive growth in both real and nominal GDP, which means that the region’s banking sector “off ers one of the better opportunities around the world”. She adds: “Th e countries here also have good balance sheets, so we are not concerned about systematic risk. Th e lev-erage, by and large, is quite low, other than in Th ailand, which is seeing high corporate debt.” Along with the Singapore banks, she also likes Indonesia’s Bank Central Asia (BCA), which comprised 3.5% of her fund as at Sept 30.
“It’s a privately owned bank and has a strong deposit franchise. It also has a proven track record,” she says. “Th e management is very risk-averse and cautious, but at the same time, they invest a lot in technology in the branch network and the deposit franchise, so it’s very well-positioned. Comparatively, the state-owned banks’ loan deposit ratios are high. So if there is a loan pickup, it would
be banks with high liquidity such as BCA that would benefi t.”
Soh Chih Kai, director of Asian equities at LGI, is similarly confi dent about BCA’s growth trajectory, with the stock comprising 3.8% of the LGI fund’s holdings as at Sept 30. He also likes Indonesian banks that cater specifi cally to homebuyers. BRI, for instance, is a “leader in microlending” with an “unparalleled net-work” in rural areas that has captured over half of the market share and is diffi cult for competitors to replicate, he says.
Soh also likes Bank Tabungan Negara (BTN), which positions itself as a market leader in low-cost mortgages. “Th e Indonesian gov-ernment is a big promoter of low-cost housing. Th ey are trying to provide more homes because there is a lack of supply,” he says, noting that the Indonesian government is introducing a new programme, Tapera, for Indonesians to fi nance their housing. “Th e government is going to roll out this programme hopefully by next year. So this will help BTN as well.”
Middle-class momentumSoh’s optimism on Indonesian banks fi ts into a broader theme touching the Asean region’s growing middle class. “Th e banks don’t just lend money to businesses for working capital purposes, but also provide consumer loans for mortgages, automotives, personal loans
and credit cards,” he says. He cites data from McKinsey showing that as of 2010, about 67 million households across Asean were recog-nised as being part of the “consuming class”, that is, they have incomes exceeding the level at which they can make signifi cant discretion-ary purchases. McKinsey predicts that this number could double to 125 million by 2025.
In line with this, Soh is also optimistic about the future of convenience chain stores in the region. He likes Th ailand’s CP All, which operates the 7-Eleven convenience stores in the country. Th e penetration of convenience stores in Th ailand is still not as high as those in Japan and Germany, he says. “Th e company will continue to grow through store expansion.”
As affl uence grows, smartphone penetra-tion is also likely to go up, Soh says. As such, he is also optimistic about the prospects of tel-ecommunications companies. “Even though the mobile penetration in Asean has been quite high now, if you look at the sub-segment of smartphone penetration, it is still below 60%. As e-commerce and social media get more widespread, there’s going to be a need for more data. So communication companies are the ones that will provide the bandwidth.”
Along with consumer stocks and telcos, Soh is betting on real estate plays. In Singapore, the LGI fund is invested in City Developments
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F O C U S 1 7WEDNESDAY NOVEMBER 22, 2017 • THEED G E FINANCIAL DAILY
BY E R I C B A LC H U N A S
BY J E F F R E Y TA N
and UOL Group. “We like them because they have been seeing strong recovery and recent pre-sales,” he says. “Th ese two companies have good land banks that will be able to benefi t from the recent upturn in the property cycle we are seeing in Singapore.”
JPM’s Ng says although consumption in some major Asean markets has been weak, a recovery appears to be on the horizon. “Con-sumption in Indonesia and Th ailand has been lacklustre over the past year or so due to poor farm income, cuts in government handouts and higher administered prices. We believe these headwinds are receding and growth should recover from here,” she says.
Road builders and tech disruptorsInfrastructure is another major theme of the Asean growth story, says JPM’s Ng. “Indonesia and Th ailand have embarked on infrastructure investment over the past few years, which set the stage for sustainable economic growth over the medium term,” she says. Commenting on Indonesia, she adds: “In the three years of [President] Joko Widodo’s administration,
his government has built about 2,600km of roads and spent an amount equivalent to 10 years of the last administration’s.” Simi-larly, the Th ai government has aggressively awarded MRT and rail projects over the past 12 months, Ng adds.
Long-term trends such as China’s One Belt and One Road (Obor) initiative may make in-frastructure an even more exciting space for Asean equities. In a Nov 3 report, Maybank Kim Eng Research analysts Chua Hak Bin and Lee Ju Ye say a “step-up in infrastructure in-vestment will complement [a] trade-sparked private investment recovery” in the region. In-frastructure investment is likely to be relatively high in Malaysia, the Philippines and Vietnam.
Fidelity’s Kwek has already invested in a company that is developing industrial parks in Indonesia. “So when more investments go into Indonesia, as the country tries to build more factories as import substitution and for export as well, I think the company will benefi t from that,” she says.
LGI’s infrastructure plays include Airports of Th ailand, which Soh says holds a monopo-listic position and also serves as a “gateway”
to the rapidly developing Mekong region.Finally, the fund managers agree that tech-
nology is likely to become an important com-ponent of their portfolios. Ng reckons that e-commerce and other emergent technolo-gies will “create new risks and opportunities” for existing players.
One tech-centric small-cap that Fidelity’s Kwek likes is ViTrox Corp, a Malaysian manu-facturer of automated vision inspection sys-tems and equipment for the semiconductor and electronics packaging industries. “It’s been doing really well because of [printed cir-cuit boards] getting smaller. Th is company’s founders have been [investing] in R&D and [the company] grew rapidly in the past three years. Th ey are taking on the bigger competi-tors in the North Asian space, and have been doing quite well, doubling capacities. I am quite positive about [their growth],” she says.
Interest to growGeographically, the fund managers are watch-ing Vietnam as the country gradually opens up to foreign investments. JPM’s Ng already has a small holding of 1.1% in the country, but
remains “very selective” about picking stocks there. “We focus on companies that have long-term industry leadership positions in their area, for example in growth sectors such as consumer goods and fi nancial services. We anticipate an interesting IPO pipeline of new opportunities,” she says.
Overall, the fund managers expect inter-est in Asean equity funds to grow. Soh notes that the region has a proven track record — weathering crises such as the Asian Finan-cial Crisis, the outbreak of SARS in 2003 and various political cycles.
Fidelity’s Kwek reckons this resilience has allowed Asean equities to stand out. “When I fi rst started [working with] Asean-related funds in 2006, they were almost like the poor cousin of Asian equities. Nobody wanted to look at Asean,” she says. “But now it’s quite diff erent, because Asean has proven itself over the past 10 to 15 years. Since the Asian Financial Crisis, balance sheets [have been] healthy and you are talking about 5% to 6% of GDP growth — among the highest in the world. If you are an emerging market investor, you defi nitely have to look at Asean.” — Th e Edge Singapore
FROM PREVIO U S PAGE
China’s Obor initiative makes infrastructure an even more exciting space for Asean equities
It’s not ETFs that need testing, it’s investors
THE latest misdirected attack on ex-change-traded funds (ETFs) centres on the assumption that they have not been tested in times of severe market stress. Th e issue has taken on more relevance as many brace for a correction in equities with the long bull run leaving valuations stretched.
Th is is yet another claim that can easily be refuted with some data, but I get why the myth exists. ETFs have received a lot of me-dia coverage lately, so they probably seem new to many people. But they have been around for 25 years. Since then, there has been some US$210 trillion of ETF shares traded, according to the New York Stock Exchange. With an estimated average trade size of about US$22,000, that breaks down to just under 10 billion individual trades. In terms of customers served, those are Mc-Donald’s-level numbers. ETFs have survived the bursting of the Internet bubble, Sept 11, 2001, the worst fi nancial crisis since the Great Depression, fl ash crashes, the Federal Reserve-induced “Taper Tantrum” of 2013, the UK’s Brexit, Donald Trump’s surprise presidential election win and all sorts of mi-nor market spasms and exchange glitches. Th e structure is durable.
To be sure, there have been some hiccups, namely the fi rst hour of trading on Aug 24 when stock trading halts forced ETFs to trade at discounts because of a so-called market plumbing issue that has been resolved. Even so, only about 3% of the US$240 billion of ETF volume had issues. So, historically, we are looking at maybe 30,000 trades that had known issues out of 10 billion.
Th at is not to say ETFs are perfect or there will not be issues in the future, but in gener-al, investors have had a good experience. In fact, the more the attacks escalate, the faster the fl ows seem to come in because money tends to fl ow to where it is treated best. Th e US$254 billion (RM1.05 trillion) SPDR S&P 500 ETF Trust, known by its ticker symbol of “SPY”, is a good example. Th e ETF usually sees about US$17 billion of its shares traded daily, but that can rise substantially on active days. Volume reached US$98 billion on Aug 24, a record for any equity. It has also traded more than US$60 billion during some of the worst days of 2008. By comparison, an av-
erage of about US$3 billion shares of Apple change hands each day.
SPY is emblematic of all ETFs in that trading is most active when markets crack. Th at is why 2008 still remains the biggest year in terms of volume for ETFs, even though ETFs only had a third of the assets they have now. Th eir performance during the stresses of 2008 is a big reason many investors — including some of the most sophisticated institutions — either began or ramped up their usage of ETFs. In fact, SPY took in US$39 billion in new cash in 2008 — a record for fl ows that still stands.What is also notable is that about 90% to 95% of ETF volume is just the ETF shares them-selves and does not involve the underlying securities via creation and redemption ac-tivity. In other words, they provide a liquidity buff er for stocks, which is why the US Secu-rities and Exchange Commission suggested they be created back in 1988 as a solution to what went wrong in the crash of 1987.
No doubt ETFs will experience a bad day just like any other investment vehicle, but the notion that ETF investors will be stuck when the rest of the market is trading is false based on the data. Th ere will be times when markets are in a sort of paralysis and noth-ing is trading, but that is not specifi c to ETFs. Bad days are bad for everyone.
Th is brings us to more important ques-tions: Are ETF investors ready to be tested? Are long-term investors who use ETFs for their low cost and tax effi ciency prepared for a sell-off and properly diversifi ed? Will they sell out of an ETF just because they can? Lack of discipline can wipe out the cost savings provided by an ETF and then some. Learn-ing and practising the art of doing nothing is the next leg of this investor enlightenment era — the current being controlling costs.
Th e media does not help things by tend-ing to refer to a potential sell-off as some kind of disaster instead of simply part of a normal cycle. There is nothing wrong with a sell-off, especially for long-term investors. Sell-off s are part of life like fl at tyres or getting a cold. It is not a one-way street. And even if the Standard & Poor’s 500 dropped 20% in the next three months, it would still be up 73% in past fi ve years.ETFs are ready for the next storm, but are investors? — Bloomberg
Singtel’s dividend disappoints, but ad unit is Ebitda-positive
THE special dividend declared by Sin-gapore Telecommunications on Nov 9 was a disappointment to the market. Shareholders were expecting a bumper payout following the successful divest-ment of a 75% stake in NetLink NBN Trust, which completed an IPO in July.
However, Singtel approved a payout of only three Singapore cents (9.15 sen) a share — amounting to S$500 million of the S$2.3 billion in proceeds from the divestment. Th e remainder of the proceeds will be used for spectrum payments and growth investments, according to the company. Singtel also declared an interim dividend of 6.8 Singapore cents a share, representing a payout ratio of 60% of underlying net earnings in the half-year period end-ed Sept 30.
In a note dated Nov 10, RHB Re-search Institute Singapore says Sing-tel could have rewarded sharehold-ers more handsomely given the telco’s strong balance sheet and free cash fl ow of more than S$2 billion. Th e last time Singtel had paid out a special dividend was in FY11, when it had a pile of cash generated by healthy operations here and overseas.
Singtel performed well in 1HFY18, thanks to improved performance across all its businesses. Total revenue rose 3.7% y-o-y to S$2.6 billion, from S$2.5 billion a year ago, while earnings al-most doubled to S$3.8 billion, from S$1.9 billion previously.
“Our 1H results have been achieved against a tougher business backdrop, a testament to the strength of our core and digital businesses. Digital and ICT services now account for 25% of our revenue, refl ecting positive momentum in our digital transformation. Our dig-ital marketing arm Amobee has scored more customer wins and is gaining strong momentum in Asia,” says Sing-tel Group CEO Chua Sock Koong in a Nov 9 statement.
Th e company’s digital businesses grew the fastest as revenue surged 89% y-o-y in the half-year period, says Sing-
tel. Digital ad unit Amobee delivered strong revenue growth and reported its fi rst earnings before interest, taxes, de-preciation and amortisation (Ebitda) of S$11 million in 2Q. It broke even in the preceding quarter.
Amobee has expanded relationships with agencies such as Dentsu Aegis and added new companies such as HSBC Holdings and Ascendas to its customer base. Its performance was also enhanced by the acquisition of Turn, an adtech company, which was completed in April.
Singtel continues to invest in its digital business units. Its mobile over-the-top streaming service HOOQ, for instance, launched an initiative called the HOOQ Filmmakers Guild this year to develop local talent and meet subscribers’ grow-ing demand for local content. HOOQ has since co-produced pilot episodes for six films with budding Asian filmmakers as part of this initiative. Singtel’s digital businesses also consist of data analyt-ics unit DataSpark and venture capital fund Innov8.
DBS Group Research says these in-vestments in new businesses should not impact Singtel’s ability to keep up its div-idend payments. “Singtel is far ahead of its peers in digital transformation,” ana-lyst Sachin Mittal writes in a note dated Nov 9. “While many telcos struggle with their regular dividends, Singtel on top of its regular dividends is in a position to invest S$1 billion in growth companies without exceeding net debt-to-Ebitda of two times as per our estimates.” In the next fi ve years, Mittal reckons Singtel’s investments in its ICT and digital busi-nesses could pay off . He sees these busi-nesses contributing 40% of the company’s total revenue.
Moody’s Investors Service, however, is concerned about pressures on the compa-ny’s cash. “Singtel’s commitment towards high shareholder payouts — coupled with its high [capital expenditure] and spectrum payments — has resulted in negative free cash fl ow [based on Moody’s defi nition] since 2015, and the situation will continue to pressure its cash fl ow metrics,” the credit rating agency says in a Nov 10 statement. — Th e Edge Singapore
1 8 W O R L D B U S I N E S S WEDNESDAY NOVEMBER 22, 2017 • THEEDGE FINANCIAL DAILY
Merkel’s weakness could give Europe strength
‘WPP agrees to Bain’s tender off er for Japan partner Asatsu-DK’
Altice shares fall after bank cut rating on stockPARIS: Altice shares fell yester-day, after Bank of America Mer-rill Lynch cut its rating on the telecoms and cable group to “neutral” from “buy”, with the investment bank citing the im-pact of lower expectations for Altice’s French business. Altice shares were down 4.5% at €8.13 (RM39.49) in early session trad-ing, with the stock down by near-ly 60% since the start of 2017. Altice has been hit by concerns about its large debt burdens of around €50 billion — greater than its stock market value of around €10 billion — while the slide in its stock price worsened after weak third-quarter results published at the start of Novem-ber. — Reuters
BHP, Vale get more time to settle Samarco claimSYDNEY: Mining giant BHP said yesterday it had been given more time by a Brazilian court to negotiate the settlement of a massive claim over the fatal Sa-marco mine collapse. Samarco, co-owned by BHP and Brazil’s Vale, is facing a 155 billion reals (RM196.76 billion) legal claim for clean-up costs and damages after the 2015 tragedy in which 19 people died in one of Brazil’s worst environmental disasters. “[Th e] 12th Federal Court has approved, an additional 150 days, ending on April 20, 2018, for the parties to continue ne-gotiations for the settlement of the public civil claims,” BHP said in a statement. — AFP
Bitcoin drops after theft of cryptocurrency tetherHONG KONG: Bitcoin fell the most in a week after the com-pany behind cryptocurrency tether reported a US$31 million (US$128.34 million) theft. Th e amount was taken from the Tether Treasury wallet on Sun-day and sent to an unauthor-ised bitcoin address, according to an announcement on the company’s website yesterday. Th e stolen tokens will not be redeemed, and the company is trying to prevent them from entering the ecosystem, it add-ed. Bitcoin dropped as much as 5.4%, the most since Nov 13. It was last trading 1.6% weaker at US$8,117. — Bloomberg
‘Advanced’ cyberattack targets Saudi ArabiaRIYADH: Saudi authorities said Monday they had detected an “advanced” cyberattack targeting the kingdom, in a fresh attempt by hackers to disrupt govern-ment computers. Th e govern-ment’s National Cyber Security Centre (NCSC) said the attack involved the use of “Powershell” malware, but did not comment on the source of the attack or which government bodies were targeted. “Th e NCSC has detect-ed a new Advanced Persistent Threat that is targeting Saudi Arabia,” it said in a statement, adding that the attack sought to infi ltrate computers using email phishing techniques. — AFP
I N BR I E FAT&T, US to battle in court over Time Warner mergerSuit stretches the very idea of antitrust law beyond breaking point, says Stephenson
LONDON: Good sometimes comes from bad. The collapse of German coalition talks on Mon-day, after the Free Democrats (FDP) walked out of discussions led by Chancellor Angela Merkel, definitely looks inauspicious. Pro-longed political uncertainty in Europe’s biggest economy will delay reforms that would better protect the eurozone against the next downturn or crisis. But a wholesale revamp of the single currency area will in the end be easier if Merkel does not have to pander to a party that opposes regional fiscal integration.
EasyJet annual profi t drops 30%
BY J U N KO F UJ I TA
BY S WA H A PAT TA N A I K
BY S A R A FO R D E N , D AV I D
M C L AU G H L I N & S C OT T M O R I T Z
WASHINGTON/NEW YORK: A defiant Randall Stephenson told antitrust enforcers that AT&T Inc would see them in court after the Department of Justice (DoJ) sued to block the company’s US$85.4 billion (RM353.56 billion) bid to buy Time Warner Inc.
Th e lawsuit “stretches the very idea of antitrust law beyond the breaking point”, Stephenson, AT&T’s chief executive offi cer, said at a brief-ing on Monday. He left the door open for negotiations to fi nd a way for the deal to pass federal muster — but reiterated that he would not sell CNN to appease Washington, whether the deal was influenced by President Donald Trump or not. AT&T’s attorney, Daniel Petrocelli, said the company is prepared to go
TOKYO: Advertising company WPP plc has agreed to a US$1.35 billion (RM5.59 billion) tender off er from Bain Capital LLC for Japanese peer Asatsu-DK Inc, of which it owns 25%, an about-face that heralds an end to a soured partnership.
A draft statement from Bain seen by Reuters yesterday showed WPP had agreed to the off er that it ini-tially rejected last month. Bain and WPP told Reuters yesterday that no agreement had been signed. Th ey declined to comment further.
Th e tender off er was scheduled to close yesterday, but the draft statement showed Bain had ex-
to trial in as few as 60 days.It would then be up to a judge to
determine whether the combination of AT&T and Time Warner would give the new entity too much pow-er in the fast-changing media land-scape, as Makan Delrahim, the new head of the DoJ’s antitrust division, contends.
If the matter goes to court, AT&T will surely press for a decision be-fore April 22, the date before which the two companies can walk away without penalty, said Jonathan Chap-lin, an analyst with New Street Re-search. “AT&T is certainly willing to fi ght this.”
Th e legal challenge — the fi rst major antitrust enforcement action to be brought by the Trump admin-istration — dealt a blow to a tie-up that appeared to be sailing towards approval as recently as a month ago. Th at was before Delrahim was ap-
pointed to his post.“Th is merger would greatly harm
American consumers,” he said on Monday. “It would mean higher monthly television bills and fewer
of the new, emerging innovative options that consumers are begin-ning to enjoy.”
Delrahim had pushed for a sale of either Time Warner’s Turner Broad-casting division, which owns cable channels including CNN, TNT and Turner Sports, or DirecTV, the satel-lite provider AT&T bought in 2015.
Stephenson said he was surprised at the turn of events. “When we an-nounced this deal, the best legal minds in the country agreed that this transaction would be approved since our companies don’t even compete with each other,” he said. Th e DoJ’s action “defi es logic and is unprec-edented”. — Bloomberg
Stephenson speaking at the press conference in New York City, US, on Monday. He has reiterated that he will not sell CNN to appease Washington. Photo by Reuters
tended the off er until Dec 6.ADK shares jumped more than
5% to ¥3,660 (RM134.64) yesterday as investors bet on the likelihood of the tender off er succeeding.
ADK had asked WPP to sell its stake to the US private equity fi rm, to end a two-decade alliance which it said failed to produce synergy. But London-based WPP objected to the price Bain had off ered, say-ing the deal undervalued its busi-ness partner.
WPP sought a higher off er and this month filed for arbitration, seeking a declaration that ADK’s planned termination of their busi-ness alliance was invalid, and that ADK had no right to request or re-
quire WPP to sell its shares.But the draft statement showed
WPP would withdraw arbitration and injunction proceedings if the tender off er succeeds. It did not detail reasons for WPP’s change of position. WPP also agreed to sell its ADK stake to Bain for ¥3,660 per share, unchanged from the initial off er, the draft statement showed.
Other ADK shareholders such as London-based fund manager Silchester International Investors LLP and Hong Kong-based activ-ist hedge fund Oasis Management Co Ltd have also said Bain’s off er was too low.
Bain is seeking an ADK stake of at least 50.1%. — Reuters
LONDON: EasyJet’s annual net profi t slumped by almost one third on strong competition and a Brex-it-fuelled slump in the pound, the British no-frills airline revealed yesterday.
Profi t after tax slumped 30% to £305 million (RM1.67 billion) in the 12 months to Sept 30 compared with a year earlier, EasyJet said in an earnings statement.
Heavy falls in the value of the pound made US dollar-priced jet fuel more expensive. At the same time, however, a relatively low oil-price environment resulted in air-lines cutting ticket prices, ramping up competition across the industry.
EasyJet pointed to “an aggressive pricing environment which saw [its] net ticket revenue per seat fall by 7.8% at constant currency”. — AFP
The FDP had wanted to run Germany’s finance ministry in the mooted “Jamaica coalition”, which would have included Merkel’s Christian Democrats, its CSU sis-ter party, and the Greens. In such a coalition, the FDP, which has strict views on fiscal policy in Ger-many and abroad, would probably have opposed French President Emmanuel Macron’s push for a eurozone budget, viewing it as an unacceptable step to German taxpayers subsidising other mem-bers of the single currency club.
Merkel has several political options that may be better for Europe. One is to try to form an-other grand coalition with the
Social Democrats (SPD), more favourably disposed to ideas of deeper integration. But the SPD may be too scarred by the politi-cal price it has paid at the ballot box for past coalition policies. An easier choice might be for Merkel to form a minority government, possibly with the Greens, and then depend on parliamentary support from the SPD and others to pass key policies.
Even this potentially unstable grouping would be more propi-tious for eurozone reform than a government that includes the FDP. Winning parliamentary ap-proval for closer fiscal coordi-nation among members of the
single currency club would not be easy, but with the FDP in the government it would probably be a non-starter.
Any of these contortions is preferable to new elections. There is no guarantee that another ballot would result in a markedly differ-ent outcome, and some fear the far-right Alternative for Germany may benefit from gridlock among the mainstream parties. The Ger-man economy is resilient enough to withstand a period of political uncertainty. For Europe, a weak government willing to counte-nance closer fiscal integration in the eurozone may be better than a strong one that will not. — Reuters
W O R L D B U S I N E S S 1 9WEDNESDAY NOVEMBER 22, 2017 • THEED G E FINANCIAL DAILY
Amsterdam, Paris win post-Brexit EU agencies Both results were decided by drawing lots from a fi shbowlNEW YORK: Later this month,
the Bank of England will pub-lish the results of new stress tests on the UK banking sys-tem. With Britain facing the risk of a disorderly exit from the European Union (EU), the exercise is even more impor-tant than usual.
A so-called cliff-edge Brex-it is looking more likely. This could cause a sizable fall in gross domestic product, a sharp drop in the value of sterling, and a steep increase in interest rates.
If the new tests show that banks have too little capital to withstand such a scenario, the regulators will need to insist on prompt corrective action.
The British economy has already slowed, and there may be worse to come — which could tempt super-visors not to press too hard. They might fear, in particu-lar, that lenders would re-store their capital ratios by shedding assets rather than adding equity (which would dilute the interest of their ex-isting owners). If that hap-pened, it would add to the short-term downward pres-sure on growth, and be partly self-defeating.
There is no real dilem-ma here. The central bank should not compromise when it comes to the safety of the banking system — and, in fact, it does not need to. It could force banks to make good any capital shortfall by raising equity rather than by curbing loans. And, should the need arise, it could sup-port demand by keeping monetary policy loose.
It is to be hoped that the UK comes to an agreement with the EU that allows an orderly departure, so that this worst-case scenario never comes to pass. In that event, supervisors could relax their earlier demands. Until then, the purpose of the stress tests is to expose risks — and pre-pare for them. — Bloomberg
NEW YORK: Roche Holding AG, facing pressure in Europe as cheaper biosimilars of its three biggest cancer medicines chew away at its revenue, sued to block Pfi zer Inc from selling a copy of its breast-cancer drug Herceptin in the US.
Pfi zer’s proposed biosimilar, as copycat versions of complex biologic drugs are known, would infringe 40 patents, Roche’s Genentech unit said in a com-plaint fi led last Friday in federal court in Wilmington, Delaware. Roche also wants compensation for lost sales if Pfi zer launches its product before patents relat-ed to Herceptin expire, as some will begin to do in 2019.
Th e suit is Roche’s fi rst in the US involving a biosimilar version of Herceptin. Genen-tech, which is based in Basel, Switzerland, is trying to pro-tect a drug that earned 2.5 bil-lion Swiss francs in US sales in 2016. Th at was 5% of Roche’s annual revenue, according to Bloomberg data.
Herceptin, which the US Food and Drug Administration (FDA) approved in 1998, uses an antibody called trastuzumab to target the mechanism that makes certain types of breast cancer especially aggressive. About a quarter of the 2.8 mil-lion US women with breast can-cer have the aggressive form of the disease, a diagnosis that Ro-che said was once considered “eff ectively a death sentence”.
Pfizer is seeking FDA ap-proval of its version of Hercep-tin, called PF-05280014.
“We will respond in court at the appropriate time,” Pfi zer spokesman Th omas Biegi said. “We’re committed to making this important treatment op-tion available to physicians and patients.”
Roche is leaning on new drugs such as the multiple scle-rosis therapy Ocrevus to drive growth as its three most lucra-tive drugs — the cancer-fi ght-ing trio of Herceptin, Rituxan and Avastin — face competition from biosimilars or newer treat-ments. Th e company could lose almost US$4 billion in sales to the cheaper versions of the three drugs in 2020, Sanford C Bern-stein & Co said in April. Roche has said that competition for its two bestselling medicines, Ritux-an and Herceptin, will probably start to have an impact on reve-nue in 2018. — Bloomberg
Preparing Britain’s banks for a disorderly Brexit
Roche sues Pfi zer to block biosimilar of cancer drug Herceptin
BY G A B R I E L A B A C Z Y N S K A
& A L A S TA I R M A C D O N A L D
BRUSSELS: Amsterdam and Paris have won the right to host two Eu-ropean Union (EU) agencies that must leave London because of Brex-it after an extraordinary ministerial meeting in Brussels, Belgium that left both results decided by draw-ing lots from a fi shbowl.
Th e European Medicines Au-thority (EMA), a key element in the continent’s healthcare industry, will go to Amsterdam,which tied with favourite Milan; the European Banking Authority (EBA) will go to
RIYADH/DUBAI: Wealthy Saudi Arabians are seeking to restruc-ture their businesses to ring-fence assets in case authorities widen their declared crackdown on cor-ruption, according to three people with knowledge of the matter.
Several family groups and busi-nessmen who aren’t implicated in the purge are talking to local banks and international law fi rms about how to structure their companies to make it harder for the kingdom to confi scate or seize assets, the peo-ple said, asking not to be identifi ed because the discussions are private.
One option could be to split as-sets between more than one hold-ing company, one of the people said, though it’s not clear how suc-cessful these plans could be be-cause the government is closely scrutinising business activity in the kingdom as part of the crackdown, he said. Talks are also tackling ways to protect overseas assets by mov-ing them to off shore centres such as the Cayman Islands, he said.
Th e discussions refl ect the fear
MUNICH: Uber Technologies Inc has agreed to buy 24,000 sport utility vehicles (SUVs) from Volvo Cars to form a fleet of driverless autos, a signal that the company remains committed to autono-mous cars under newly appoint-ed chief executive officer (CEO) Dara Khosrowshahi.
T h e XC 9 0 s, p r i c e d f ro m US$46,900 (RM194,166) at US
Paris, winner in the lucky dip over Dublin, which won some sympa-thy votes due to the pain Brexit is causing Ireland.
Among other big losers was Frankfurt, whose rivalry with Par-is to displace London as the EU’s main fi nancial centre once Britain leaves the bloc in 2019 took a hit when it fi nished a distant third in the three-way, second-round vote for the EBA, which sets rules for testing the resilience of EU banks.
Also licking wounds from a se-cret ballot that tested friends and rivals in a race for lucrative spoils were the ex-communist countries
of eastern Europe, which complain they host few of the EU’s 40-odd agencies due to joining late.
Among winners were the EMA and its 900 staff , many of whom had said they might quit if posted to the poorer east, a threat that had raised concern about disruption in drug approvals.
Diplomats expressed astonish-ment that the EBA also went to a tie, obliging Matti Maasikas, the Es-tonian minister chairing the meet-ing, to dip his hand in for a second time to pick one of two balls from a fi shbowl produced by offi cials for the day. — Reuters
Saudi billionaires said to seek shielding assets amid purgeBY G L E N C A R E Y, A R C H A N A
N A R AYA N A N & A L A A S H A H I N E
among many wealthy Saudis that the unprecedented purge, seen by many as an attempt by Crown Prince Mo-hammed Salman to tighten his grip on power, is set to widen. Dozens of offi cials, princes and billionaires, including Prince Alwaleed Talal, the global investor whose Kingdom Holding Co owns stakes in com-panies such as Citigroup Inc, have already been targeted.
Th e purge, however, is likely to reduce already sluggish private in-vestment, hitting economic growth in 2018, according to economists.
“Lower levels of corruption, if achieved, could encourage more investment, but the impact of this is only likely to materialise over the long run, not immediately,” said Ziad Daoud, a Dubai-based analyst with Bloomberg Economics. — Bloomberg
A view of Riyadh. The purge is likely to reduce already sluggish private investment, hitting economic growth in 2018, according to economists. Photo by Bloomberg
Uber expands driverless-car push with deal for 24,000 Volvo SUVsBY E L I S A B E T H B E H R M A N N dealers, will be delivered from
2019 to 2021 in the first commer-cial purchase by a ride-hailing provider, Volvo said in a state-ment on Monday.
San Francisco-based Uber will add its own sensors and software to permit pilotless driving.
Uber’s order steps up eff orts to replace human drivers, the biggest cost in its on-demand taxi service.
The autonomous fleet is small compared with the more than
two million people who drive for Uber but reflects dedication to the company’s strategy of devel-oping self-driving cars. Last year, Uber agreed to use 100 XC90s for self-driving tests in Pittsburgh and later struck a deal to include autonomous vehicles from Daim-ler AG’s Mercedes-Benz in its network at some point.
But the status of the project was unclear after Alphabet Inc’s driverless car division Waymo
sued Uber this year, claiming the ride-hailing company stole trade secrets, and the US Department of Justice opened an inquiry into the matter.
Uber has said it didn’t use stolen information. Shortly be-fore taking over as CEO in Sep-tember, Khosrowshahi said Uber must focus on the core business, which raised questions about the costly self-driving programme. — Bloomberg
BY F E R D I N A N D O G I U G L I A N O
& C L I V E C R O O K BY C H R I S TO P H E R YA S I E J KO
The suit is Roche’s fi rst in
the US involving a biosimilar version
of Herceptin.
2 0 W O R L D WEDNESDAY NOVEMBER 22, 2017 • THEEDGE FINANCIAL DAILY
Trump declares N Korea state sponsor of terrorismHe promises a rapid escalation of US Treasury sanctions against Pyongyang
BY D AV E C L A R K
& A N D R E W B E AT T Y
Multinational air and sea search continues for Argentine vessel
Last contactwith navy command:Wednesday,November 15
Reported amechanical breakdown
Missing submarine
Sources: Argentine navy, Inti
Ushuaia
Mar del Plata
FalklandIslands(Malvinas)
Searchzone
Departure
Destination
500 km
A R G E N T I N AA R G E N T I N A
CHILECHILE
BUENOS AIRES
Name: S-42 ARA San Juan
Class: TR-1700
Built: Germany (1985)
Propulsion: Diesel-electric
Speed:
Submerged: 25 knots (45 kph)
Surface: 27 kph
Depth: 250 metres
Crew: 44
65 m
Armament: SST-4 torpedoes, mines
WASHINGTON: President Don-ald Trump on Monday declared North Korea a state sponsor of terrorism even as his top diplomat said Washington has not given up hope of a negotiated end to the nuclear stand-off with Kim Jong-un’s regime.
Trump promised a rapid esca-lation of US Treasury sanctions against the North after adding its name to a terror blacklist previ-ously led by Iran and Syria.
“Should have happened a long time ago. Should have happened years ago,” Trump said.
He cited the death of a US student who had been held in a North Korean jail and the assas-sination by nerve agent of Kim’s elder half-brother on foreign soil as reasons for the move.
However, Secretary of State Rex Tillerson said sanctions and diplo-macy could still pressure Kim into talks on nuclear disarmament.
“We still hope for diploma-cy,” he said, adding that punitive measures were already having a significant impact on Pyongyang’s economy.
There was no immediate reac-tion from North Korea, but an ed-itorial in the ruling party newspa-per Rodong Sinmun ahead of the
announcement described Trump as a “mentally deranged money grabber” who was leading the US down an “irretrievable road to hell”.
The White House has said it will not tolerate the North’s test-ing or deployment of an intercon-tinental ballistic missile (ICBM) capable of carrying a nuclear war-head to US cities.
Experts believe Pyongyang is within months of such a thresh-old, having carried out six nuclear tests since 2006 and test-fired sev-eral types of missiles, including multi-stage rockets.
Japan said it “welcomes and sup-ports” Trump’s announcement.
But there was a more restrained response from South Korea.
Seoul’s foreign ministry said the US measure was “part of the international community’s com-mon efforts to bring North Korea to the path of denuclearisation through strong sanctions and pressure”.
Some analysts warned of a pos-sible backlash.
“North Korea will consider it as a thing next to a declaration of war,” Professor Yang Moo-jin of the University for North Korean Studies in Seoul told AFP.
“There is a possibility that it may retaliate by test launching an ICBM in the near future.” — AFP
Embattled Mugabe will cast a long shadow over ZimbabweBY C A R O L RYA N
LONDON: Robert Mugabe will cast a long shadow over Zimba-bwe. Th e 93-year-old ruler, who is refusing to step down after the military seized power fi ve days ago, is likely to be impeached af-ter nearly four decades in power. He bequeaths an economy in dire need of reforms. Th e most important — luring back foreign investment and restoring trust in a dysfunctional currency system — will happen over years, not weeks.
Mugabe’s mismanagement of the African country’s economy has left a visible mark. Th e 80 billion per cent infl ation seen at the end of 2008 and 52% drop in gross domestic product (GDP) in the decade up to 2008 are exam-ples. Seizing white-owned farms in the early 2000s undermined property rights, while savaging the country’s relations with the West kept many international companies away. Foreign direct investment was just US$320 mil-lion in 2016, according to World Bank data. Cambodia, which has a similar sized population to Zimbabwe, had investment of US$2.3 billion last year.
A successor to Mugabe — possibly his former deputy and new leader of the ruling ZANU-PF party, Emmerson Mnan-gagwa — can easily avoid such visibly bad decisions. Th ey can make encouraging noises to-wards institutions like the In-ternational Monetary Fund and World Bank. But they will still inherit an economy that is bro-ken. Reckless money printing and the creation of pseudo-cur-rencies not backed up by foreign reserves means faith in the cur-rency system is low. Zimbabwe ranks 154th out of 176 countries in Transparency International’s Corruption Perception Index.
Th e most immediate chal-lenge for Mugabe’s successor is to do what all new regimes must: build popular support. Wise gov-ernment spending can help. But Mugabe’s method, spending 90% of revenue on civil service sala-ries and generous perks for war veterans, cannot continue. Basic social services and the country’s infrastructure, among the best in southern Africa in the 1990s, have suff ered from underinvest-ment, and domestic debt is al-ready 25% of GDP.
Over time, the most durable change would be to create in-stitutions that people trust, par-ticipate in, and are prepared to fund with their taxes. Approxi-mately 95% of total employment takes place in the informal mar-ket. Th at is a problem shared by developing countries in Africa and beyond, and fi xing it could take a generation. But by getting rid of Mugabe, Zimbabwe may at least remove some barriers that stand in the way. — Reuters
BY AU K K A R A P O N N I YO MYAT
BANGKOK: Th ailand is seeking to prosecute ousted prime minister Th aksin Shinawatra for graft under a law that allows politicians to be tried in absentia, an offi cial said yesterday, months after Th aksin’s sister was sentenced to jail in her absence.
Th ailand is divided broadly be-tween those backing Th aksin and his sister, former prime minister
Th ailand seeks to prosecute Th aksin in absentiaYingluck Shinawatra, whose gov-ernment was removed in a 2014 coup, and the elite in the capital, Bangkok.
A former commerce minister and member of Yingluck’s Puea Th ai Party that was ousted in the coup said the planned prosecu-tion of Th aksin was politically mo-tivated.
Th e former telecommunications tycoon was ousted in a 2006 coup and has since lived in self-imposed
exile to avoid a graft conviction in 2008 he says was politically mo-tivated.
Separate cases against Thak-sin, including graft cases in 2008 and 2012, had to be suspended until he returned to Thailand for trial.
But an amendment to the law in September makes it possible for politicians to be prosecuted in their absence.
The 2008 and 2012 cases in-
volved Thaksin’s alleged conflict of interest in a telecoms conces-sion and suspected abuse of pow-er.
“Public prosecutors put in a re-quest to the supreme court today (yesterday) to proceed with the two cases without presence of the accused, in accordance with the new law,” Wanchart Santikunchorn, a spokesman for the offi ce of the attorney-general, told reporters. — Reuters
BY C A R LO S R E Y E S
& E I TA N A B R A M O V I C H
MAR DEL PLATA (Argentina): Th e wire fence at the Mar del Plata naval base was dotted on Monday with emotional messages holding out hope for word from the 44 Argen-tine submariners lost in the South Atlantic for fi ve days.
Outside the base 400km south of Buenos Aires, the mood was tense but still somewhat optimistic.
Ships and aircraft from seven countries are searching 24 hours a day through storms that have continued to rage at sea.
“Courageous Men and Wom-en of the Navy: Our Hearts have Stopped Beating Until You’re Home,” read one banner, careful-ly handwritten.
Most of the crew live in this sea-side South Atlantic city.
About 100 relatives of the miss-ing were at the base getting crisis medical and counselling support, around the clock. Th ey tried to stay calm and keep hope alive.
President Mauricio Macri met with them to try to rally spirits.
Families of missing Argentine submarine crew cling to hope
“Be strong Daddy. Your family is waiting for you,” read one sign, alongside religious posters and some handwritten prayers.
Media are not allowed on the base.
The submarine had been re-turning from a routine mission to
Ushuaia, near the southernmost tip of South America, to Mar del Plata.
It is one of three submarines in the Argentine fl eet. — AFP
F E AT U R E 2 1WEDNESDAY NOVEMBER 22, 2017 • THEED G E FINANCIAL DAILY
Tesla keeps scaring other automakersIts cars are faster, while its innovations force the competition to play catch up
BY B A R RY R I T H O LT Z
Last Friday, Tesla Inc founder and chief ex-ecutive officer Elon Musk introduced the company’s new elec-tric-powered tractor
trailer. The “Semi” goes 800km after a charging process, uses Te-sla’s semiautonomous driving sys-tem, with lane keeping and au-tobraking. The truck has a lower centre of gravity than traditional haulers, dramatically reducing rollover risk; its dynamic torque distribution lowers the chance of jack-knifing. Musk has promised the truck “will not break down for a million miles”.
Th at wasn’t the big news. Musk, in a very Steve Jobs-like “Oh, and one more thing” moment, intro-duced the Tesla Roadster. The US$200,000 (RM828,000) all-wheel-drive supercar goes from 0 kilo-metres per hour (kph) to 100 kph in a mind-blowing 1.9 seconds, making it the fastest production
car ever. Oh, and it tops out at more than 402 kph.
Why does speed matter? Au-tomakers have been sponsoring racing teams since the beginning of the automobile. Manufacturers have seen the merit in the “Win on Sunday, Sell on Monday” market-ing formula; recent studies back up those beliefs. Fast halo cars are aspirational vehicles created for shoppers. Many Chevy buyers spend time gawking at the slick new Corvette in the showroom; most end up buying sport-utility vehicles (SUVs) or ordinary sedans. Many of the styling cues from halo cars trickle down to more pedestrian vehicles, as does the latest auto-motive technology, such as anti-lock-braking systems, suspension improvements, aerodynamics and turbo chargers.
Two years ago, I suggested that Musk create such a halo car: “Put a sexier body on the Model S — low-slung, fat tyres, gull-wing doors and steal share from Ferrari, Lamborghini, McLaren, Porsche,
Bentley and Bugatti.” Minus the gull-wings, the new roadster is all that and more.
When Musk fi rst rolled out the Tesla Model S P100 “Ludicrous Mode” in 2015, reports noted that “60 miles (100 kph) per hour in 2.8 seconds is crazy fast”. For a frac-tion of the cost, the fi ve-passenger, four-door sedan was competitive compared with the likes of Lam-borghini, Bentley and Porsche. It was not long before videos of the Tesla Model X P90D Ludicrous — a bulbous, ungainly SUV — was shown smoking a Ferrari F430 in a drag race.
Pure electric cars such as the Roadster have several inherent per-formance advantages, most no-tably an immediate peak torque and a single-gear transmission. That’s a large part of the reason why these cars tend to beat their gasoline-powered competitors in drag races.
To be fair, the US$200,000 F430 was produced between 2004 and 2009, so it isn’t Ferrari’s latest,
greatest speed ship. That would be the LaFerrari, the company’s US$1.4 million flagship model. It has a 6.3-litre V-12 engine, with an electric-hybrid drive, and makes an enormous 949 horsepower. That translates into 0 kph to 100 kph in 2.6 seconds. In other words, LaFerrari owners pay an extra US$1.2 million for the opportunity to be beaten by the new Roadster.
On the same day Musk was rolling out his Roadster, the Wall Street Journal reviewed the brand new 2018 Porsche 911 GT2 (at US$325,250 as tested) and ques-tioned: “Is this the fastest streetcar ever?” Th e answer, 0 kph to 100 kph in 2.7 seconds, was almost. How-ever, within six hours, when the Tesla Roadster was introduced, it wasn’t close. Perhaps the Porsche Mission E will prove to be more competitive.
Other supercars are suff ering similar fates. Th e US$1.3 million McLaren P1 hits 100 kph in 2.7 seconds; its tweaked versions can reach 100 kph in 2.4 seconds. Th e
Porsche 918 Spyder, at US$847,000, goes 0 kph to 100 kph in 2.6 sec-onds. A six-fi gure upgrade shaves a few tenths of a second off that time, but not enough to beat a car that costs three-quarters of a mil-lion dollars less.
If these supercars can’t beat the Tesla, perhaps the next generation of “hypercars” can: Aston Martin’s Valkyrie and Mercedes-AMG Pro-ject One each costs about US$3 million. Undeniably beautiful and extremely limited in production, these spectacular cutting-edge cars in present form will be slower than the Tesla Roadster.
Th e speed crown matters to au-tomakers. As we noted earlier this week, most of the major auto man-ufacturers have been frightened by Tesla into embracing hybrid and/or electric vehicles. How suc-cessful Tesla is as a car company is almost beside the point and is surely open to extended debate. However, it had forced the rest of the industry into following its electric lead. — Bloomberg
BY A R A D H A N A A R AV I N D A N
& M I YO U N G K I M
SOFTBANK Group’s multibillion dollar investment in Uber Tech-nologies Inc opens up the possi-bility of combining it with other ride-hailing assets the Japanese group owns in a consolidation of a rapidly growing business across Asia, industry sources say.
Uber Technologies Inc said on Nov 12 a planned deal with a con-sortium led by SoftBank and Drag-oneer Investment Group was mov-ing forward. Th e consortium plans to inject US$1 billion (RM4.14 bil-lion) to US$1.25 billion into Uber, and buy up to 17% of existing shares in a secondary transaction.
SoftBank has also been a big in-vestor in Uber’s rivals across Asia, including Southeast Asia’s Grab, China’s DiDi Chuxing and India’s Ola, as it strives to achieve founder Masayoshi Son’s vision of a future driven by artifi cial intelligence and interconnected devices.
At the same time, ride-hailing companies have been competing fi ercely across Asia to attract riders and drivers, with discounts and promotions that have driven down profi t margins.
“SoftBank will play a consoli-dating role,” said a source close to Singapore-based Grab. “SoftBank as a board director in both companies (Uber and Grab) would fundamen-tally change the conversation.” Th e source declined to be named due to the subject’s sensitivity. SoftBank and Grab declined to comment for this story.
At US$68 billion, Uber is the most highly valued venture-backed
SoftBank funding may spur Uber to rethink Southeast Asia marketcompany in the world. However, the lofty valuation has heavily hit Uber’s bottom line, which the fi rm has said is necessary to establish itself in new markets.
“Doing a deal and combining the two businesses in Southeast Asia make a ton of sense,” said the source close to Grab.
“He (Uber’s chief executive of-fi cer or CEO) cuts his losses and gets a stake in the business that is from his perspective more than just ride-sharing,” the source said, referring to Grab’s foray into oth-er markets for digital or cashless payments.
Any deal will likely be similar to the one Uber struck with DiDi last year, where it took a stake in the Chinese company and pulled out its own business, the source said.
‘Overcapitalised’ marketIt’s not clear whether SoftBank has discussed or proposed any deal with Grab, with Uber’s directors. Th e SoftBank investment in Uber has not yet been fi nalised. Uber declined to comment but pointed to a statement by Uber’s new CEO Dara Khosrowshahi at the New York Times DealBook conference earli-er this month, saying the compa-ny “is in a very strong competitive position” in every market he has learned about.
“To the extent that we have a competitor and as we’re spending the same amount on incentives, we tend to gain [market] share because our product, or brand, or services are just better.”
However, Khosrowshahi ac-knowledges the challenges Uber faces in Southeast Asia, saying the
market is “overcapitalised at this point”.
“We’re going in, and we’re lean-ing forward. But I’m not optimistic that market is going to be profi table any time soon,” he said.
People close to the SoftBank and Uber deal told Reuters that many stakeholders would like to give the competition in Southeast Asia more time to play out, given the region’s appeal of cheap labour and a growing middle-class with disposable incomes.
However, shutting down Uber’s Southeast Asia operations to cut losses would enable the firm to “print money”, making for a much more palatable initial public off er-ing, said an Uber investor, declining to be named. Uber says it plans a stock market listing in 2019.
While many tech fi rms go pub-lic without a profi t, Uber’s level of loss — US$645 million in the sec-ond quarter of 2017 — could be alarming to some investors. Vin-nie Lauria, a founding partner at venture capital fi rm Golden Gate Ventures, which has invested in over 30 fi rms across Asia, said he,
Khosrowshahi acknowledges the challenges Uber faces in Southeast Asia, saying the market is ‘overcapitalised at this point’. Photo by Reuters
too, thinks Uber will pull out of Southeast Asia.
“I can’t say with certainty, but I feel fairly confi dent that after this (SoftBank-Uber) transaction, we would see Uber sell their Southeast Asian operations to Grab or DiDi.”
Grab was the top-ranked ride-hailing app in combined monthly active users on iPhone and Android phones in the fi rst half of 2017 in Malaysia, the Philippines, Singapore, Th ailand and Vietnam, according to mobile data analytics fi rm App Annie. In Indonesia, Go-Jek outranks Grab and Uber.
Executive churn After folding its China business into DiDi last year, Uber sharpened its focus and resources on India and
Southeast Asia, the latter a prom-ising market of nearly 650 million people, many of whom are young and tech-savvy.
However, Uber has struggled in Asia, having run-ins with some local regulators, including more recently in the Philippines, and seeing a slew of exits by senior ex-ecutives in Indonesia, Malaysia, Vi-etnam and India. Last week, Uber said its chief of policy for India and South Asia had quit in another blow to the fi rm’s eff orts to improve relationships with governments.
Uber’s recently appointed chief business officer of Asia Pacific Brooks Entwistle told Reuters that he is looking at the long term in Southeast Asia. His priority: to col-laborate closely with regulators, fi ll senior positions and partner with traditional taxi companies, he said.
Meanwhile, Grab, bolstered by its fi nancing from Softbank and DiDi, has expanded from ride-hailing to other digital payment solutions as it looks to use its platform for fi nancial
services such as lending. — Reuters
22 live it! W E L L B E I N G . T H E A R T S . W I N E + D I N E . S T Y L E + D E S I G N . L E I S U R E
WEDNESDAY NOVEMBER 22, 2017 • THEEDGE FINANCIAL DAILY
PersonalASSISTANTC O M P I L E D BY C L A R I EC E L EO N G
W O R K . L I F E . B A L A N C E
CATCH American trombonist and sing-er-songwriter Q Sound at Kyo Kuala Lum-pur tonight. The Julliard graduate has per-formed with the likes of Sheila Majid and Zainal Abidin, and has had several sold-out performances in the Dewan Filharmonik Pet-ronas’ Happy Hour series. The artist embraces many genres of music, including jazz, funk, soul and electro. Q Sound plays at Kyo every Wednesday from 9pm onwards. Admission charges include one drink and are priced at RM40 until 1am, and RM60 after 1am. For reservations or enquiries, call (012) 921 1730 or email [email protected].
PUT your secret bartending skills to the test at Rock Bottom Changkat. Buy three half pints at RM45 and have a go at tapping your own glass. You’ll want to aim for perfection, for each perfect pour will be rewarded with a complimentary bottle of Guinness Bright. Take the challenge tonight or tomorrow night at 7pm to 11pm. Rock Bottom Changkat is located in Changkat Bukit Bintang, Kuala Lumpur. For bookings or more information, call (019) 690 3266.
CHECK out Foremula, one of Ara Daman-sara’s newest eateries. The menu at the café boasts an interesting marriage between fl a-vours of the East and the West, most nota-bly in its laksa pasta and its kimchi burger. For those who’ve always dreamed of trying the Krusty Krab’s Krabby Patty, Foremula’s soft shell crab and fried mantao might just hit the spot. Even if you aren’t hungry, the café’s simple yet chic ambience makes it a great place to just get that midday caff eine boost. Foremula is located in Dana 1 Com-mercial Centre, Jalan PJU 1A/46, Petaling Jaya, Selangor. Opening hours are 10.30am to 7.30pm, from Mondays to Saturdays. For more information, visit www.foremula.com.
A painstakingly curated exhibition featuring one of the biggest collection of Ferraris and Ferrari memorabilia ever bought together under one roof
outside of Maranello, Italy, opened its doors last week.
To mark the marque’s 70th anniversa-ry, “Ferrari: Under the Skin,” features a collection of 70 classic and contemporary Ferraris with a combined value of £140 million (RM766.18 million) including an exact replica of the very fi rst Ferrari ever made, the 1947 125 S, alongside original sketches and correspondence.
There are collections of handwritten letters from Enzo Ferrari himself, plus his driving licence, as well as a collec-tion of trophies won by the company across numerous racing disciplines. In fact, the depth, quality and rarity of the cars and automotive artifacts on show is so great that the collection is equal only to the exhibit in Ferrari’s own museum.
Other extraordinary cars on display include the 166MM, the car that won the Mille Miglia and Le Mans in 1949; the 1962 250 GTO — considered the
Get under the skin of
Ferrari at the London
Design Museum
holy grail of classic Ferraris and a car that changes hands in private sales and at auction for upwards of US$30 million (RM124.2 million); plus the only ever factory-built Ferrari Testarossa Spider (convertible), commissioned by Fiat chief Gianni Agnelli.
Th e exhibition, which runs until April 2018, also charts the company’s success as an endurance and F1 team with several major racing cars on show; visitors will get a chance to get up close to Michael Schumacher’s Ferrari F1-2000 in which he won the 2000 F1 driver’s champion-ship and the 250 GT Berlinetta passo corto (SWB) in which Sir Sterling Moss won the 1960 Tourist Trophy.
“I think I speak on behalf of millions of ambitious people of all ages that we have all at some point had delicious dreams of owning a Ferrari,” said Sir Terence Conran, founder of the Design Museum, of the exhibition. “Th e brand itself has become a worldwide symbol of design success, whether it is their road models or Grand Prix cars.”
Th is too is an ongoing theme within the show. A host of the vehicles on show belong to the rich and famous. Pink Floyd drummer and avid classic Ferrari racer Nick Mason has donated his own F40 for the duration of the show and celeb-rity chef Gordon Ramsey is loaning the Design Museum his personal Ferrari LaFerrari Aperta — currently the com-pany’s most technically advanced and rarefi ed machine.
Alongside celebrity cars, celebrity client correspondence and photographs from Miles Davis, Clint Eastwood, Peter Sellers, Sammy Davis Jr and Brigitte Bar-dot, among others, will also be on display.
But as well as celebrating brand pow-er, this exhibition is a serious attempt to understand what makes a Ferrari spe-cial from a design perspective. Th ere-fore, the Design Museum has managed to get ahold of a number of offi cial clay and wind tunnel models used to devel-op some of the company’s most striking road cars, plus wooden master models over which body panels would have been meticulously hand formed.
When displayed alongside initial sketches and correspondence, the idea is to show a design road map from initial concept to fi nished car and to explore how the company has changed its ap-proach over the years to building dream machines.
“Ferrari represents an ideal case study in design and development,” said co-cu-rator Andrew Nahum. “Ferrari uses the subtle and often unseen techniques of automobile design, but with the utmost care and precision. Th e exhibition pro-vides an insight into the history and prac-tice of the whole private world of auto-motive design.”
Conran added: “Th e Ferrari story is truly one of the great adventure stories of the industrial age and I am very proud we are able to tell it at the Design Muse-um.” — AFP
ITALIAN ICON
A Ferrari F1 2000 (right) on display at the ‘Ferrari: Under the Skin’ exhibition at the Design Museum in London. £140 million worth of Ferrari cars are featured in the major new exhibition to mark the 70th anniversary of Ferrari. Photo by AFP
live it! 23
W E L L B E I N G . T H E A R T S . W I N E + D I N E . S T Y L E + D E S I G N . L E I S U R E
WEDNESDAY NOVEMBER 22, 2017 • THEED G E FINANCIAL DAILY
FOOD BY A L E S S A N D R A M I G L I A C C I O
Touring Fico Eataly World, a magical kingdom of pasta
BOLOGNA, nicknamed la grassa — “the fat one” — for its wealth and edible delicacies, is located in Italy’s Emilia Romagna region, the birthplace of tortellini, Parmesan, prosciut-to, and balsamic vinegar. Foodies have long hopped on the two-hour train from Rome to hunt down the fl avours nestled in the pic-turesque city and nearby hillside villages.
But now, you no longer need to fi nd these delights on your own. Starting this November, you can tap vast swathes of Italy’s food cul-ture at Bologna’s Fico Eataly World, or Fico for short. (Th e acronym stands for “Fabbrica Italiana Contadina”, which roughly translates into “italian farming factory”, but also collo-quially means “cool” or “attractive”.)
And cool it was, even to a pack of jaded local and foreign journalists visiting just before the opening last Wednesday. We were herded around the theme park’s 25 acres (10.12ha) of food stands, farmland, and exhibits by Fico’s very own Willy Won-ka, Oscar Farinetti. He’s the ever-optimistic and hyperactive founder of Eataly, whose franchises stretch from New York to Tokyo, including one that recently opened in Los Angeles. Th ink of them as high-end megas-tores of Italian food and kitchenware. Fico is Farinetti’s next step in his mission to bring farmers closer to consumers (and make a buck at it).
Farinetti led us through a great L-shaped hall, dotted with stalls, restaurants, and work-shops. You could walk around aimlessly and let it all sink in, or follow a path, either on foot or on one of the hundreds of new over-sized Bianchi tricycles, which had wooden
baskets to help you shop. Gesturing at the gleaming bikes, Farinetti couldn’t help him-self: “Isn’t this Fico?”
He waved frantically at an entire wall made of biodiverse apples (1,200 kinds), then boasted about having Europe’s largest over-head solar panel installation. His produce was fresh from nearby farms, and there was livestock on location, which you could visit if you wandered outside the shopping area into the orchards. Th e animals, as well-groomed as house pets, included nine diff erent types of cows and a rare black-and-white-striped variety of pig Eataly was trying to preserve.
Guests could pose for pictures under an In-stagram-friendly arch made of tomato-sauce cans or got pulled into one of the park’s “rides”, artistic multimedia experiences dedicated to our relationship with such things as fi re, sea, wine, and the future. In the fi re exhibit, I stood in the middle of an imaginary hearth complete with hologram fl ames and a 360° video show-ing shadows of prehistoric humans.
But the main attraction was the food. You could watch olive oil and pasta being made, or sip local wines and beer while you observed the various stages required to age prosciutto and cheese. (It was a thrill a min-ute.) I stopped at a wooden counter where delicate slices of prosciutto were being cut by Massimo Pezzani and tried his “liberated salami”, which was free of preservatives. It was a magical, tasty world where the train — a tiny people-mover that mimiced Italy’s Frecciarossa fast trains — actually ran on time. Th ere was even a post offi ce to ship things home.
Farinetti said he aimed to have about six million visitors a year, two million of them foreigners. Fico chief executive offi cer Tiziana Primori said she expected Fico to break even at US$94 million (RM389.16 million) a year.
So far, Italians I have spoken to seem lukewarm about the project; after all, they can watch pasta being made at home. But the shopping and restaurants are an en-ticement, and some are charming enough for date night. Others are great for families.
Farinetti said he was inspired by his vis-its to Disneyland and Americans’ ability to turn anything into a multiplatform brand that printed money. Th e impression as one reached the cash registers at the end of the open space, however, was of a giant food-ie Ikea. It was all very sleek and cool, from the architecture and design to the gleaming fruits and vegetables. And it was delicious! But the impersonal massiveness of it was hard to obscure.
As I headed out to catch the fast train back to Rome, which was about 25 minutes late, I peered down Bologna’s streets at people heading home for dinner. Some were on bikes, but not Bianchis. Some tote groceries, probably bought at less-glamorous locations. And though many looked considerably less chirpy than Farinetti’s optimistic farmers, I thought I would prefer to step into those streets and revel in Italy’s imperfections.
But I live in Italy, and that may skew my viewpoint. So far, Farinetti seems to have done a good job whetting the world’s ap-petite. — Bloomberg
01. Fresh pasta by kilogram.
02. A kiosk selling wine — and tables to enjoy it at.
03. Venchi chocolates.
04. The entrance to Fico Eataly World Agri-Food Park in Bologna, Italy.
05. Fico boasts of having Europe’s largest overhead solar panel installation.
06. A special edition Bianchi shopping bike customers
can use to tool around.
01
02 03
04
05
06
2 4 S P O RT S WEDNESDAY NOVEMBER 22, 2017 • THEEDGE FINANCIAL DAILY
Sharapova named in fraud probeShe is under investigation by Indian police after the collapse of a housing project
Max stabilityin manoeuvresand difficultconditions
Useful in rougher seas
Stable sailing mode
Source : Emirates Team NZ
Flying yachtsAmerica’s Cup 2021: AC75 class
Twin canting T-foils
Monohull
Bigger, faster, single-hulled giantswill fly over the water on foils
Race set for:Auckland, New ZealandMarch 2021
Can be loweredto provide extra lift,roll control
Return to the traditional single hull,after the use of catamarans Ballasted to provide
righting-moment, roll stability
leeward
loweredto provide lift,enable foiling
Raised out of water formaximumlever-arm,reduce drag
windward
Normal sailing mode
Bothfoils down
Dock configuration
NEW DELHI: Five-time Grand Slam champion Maria Sharapova is under investigation by Indian police for cheating and criminal conspiracy after the collapse of a luxury housing project that she endorsed, a lawyer said yesterday.
Th e fi rm behind the develop-ment is alleged to have taken mil-lions of dollars from homebuyers before the project folded.
Piyush Singh, a lawyer repre-
senting one of the buyers, told AFP that police had fi led initial charges of cheating and criminal conspiracy against Sharapova as part of a wider case against the firm Homestead Infrastructure Development.
Th e 30-year-old tennis star trav-elled to India in 2012 to launch the luxury high-rise apartment com-plex — named Ballet by Sharapova — which prospective buyers were
told would house a tennis acad-emy, a clubhouse and a helipad.
The website of the project quotes Sharapova as saying her goal was to “make the owners feel like they own something special and diff erent”.
“Any celebrity who endorses any product technically becomes an agent for that company. No one would have invested in the project if Sharapova’s name was
not there,” said Singh. The project in Gurgaon — a
satellite city of the capital New Delhi — was supposed to be ready in 2016 but, Singh said, construc-tion work was abandoned after builders collected millions from homebuyers.
Police were not immediate-ly available for comment on the case, which is being heard in a Delhi court.
Calls to the developers also went unanswered. Sharapova has not commented on the case.
Th e former world No 1 made almost US$30 million in 2015, ac-cording to Forbes, with US$23 mil-lion of that coming from endorse-ments like the project in Gurgaon.
She has had a stop-start sea-son since her controversial return to the game in April, following a 15-month doping ban. — AFP
WELLINGTON: The yachts com-peting for the next America’s Cup will be bigger, faster, single-hulled giants that fly over the water on foils, like the catamarans seen in recent regattas, Team New Zea-land (TNZ) said yesterday.
The New Zealanders, who won the Auld Mug from Team USA in Bermuda in June, get to dictate rules for the next America’s Cup in Auckland in March 2021.
As expected, TNZ’s design vi-sion released yesterday opted for a return to traditional monohulls, rather than the catamarans used in the past two editions.
But, crucially, the hi-tech monohulls retain the ability to “foil” — using movable, carbon-fi-bre wings which fold down to lift the boat’s hull from the water when racing.
Foiling makes the boat look like it is flying and dramatically increases speed, providing spec-tacular visuals that boosted inter-est in the 2013 and 2017 regattas.
The feature has never been used previously on America’s Cup monohulls.
“It’s a completely new con-cept of boat which we’re pretty excited about,” TNZ design chief Dan Bernasconi told Radio New Zealand.
“A complete change from the cats (catamarans) that we raced in Bermuda but I think it’s going to be pretty cool.”
The 2021 yachts, called AC75s, are also 75ft (23m) long, much bigger than the 50ft AC50 vessels that competed in Bermuda.
TNZ chief Grant Dalton said the increased size did not mean they would be slower. — AFP
Foiling monohulls for America’s Cup 2021
MONTREAL: Calgary’s bid for the 2026 Winter Olympic Games needs further evaluation by the local au-thority to the tune of C$2 million (RM6.46 million), according to rec-ommendations presented to the city council on Monday.
The Calgary Bid Exploration Committee said it “remains scep-tical” of a potential bid from the west Canadian town, which hosted
the Winter Games in 1988.In a series of recommendations,
the panel added that the munici-pal, provincial and federal govern-ments should invest in facilities for the Games given the “long-term benefi ts for the community,” ac-cording to documents presented at the meeting.
Th e committee said the feder-al government should cover se-
curity costs — while operational costs should be covered by “tick-et sales, sponsorship, broadcast rights, IOC (International Olym-pic Committee) contributions and other earned revenues,” as op-posed to taxpayers.
It also called for the creation of a “fi nancial structure” by the local authority to carry debt incurred as a result of the Games.
Council members have demand-ed guarantees from the federal and provincial governments about their level of involvement in an applica-tion that could require a budget of C$25 million to C$30 million.
At this stage, Alberta’s provin-cial government has not made a decision.
“Th ey haven’t said no,” Calgary mayor Naheed Nenshi said. — AFP
Calgary Winter Olympics bid needs more work — committee
BY A M I M I YA Z A K I & L I N D A S I EG
FUKUOKA/TOKYO: A probe into an assault by a sumo grand champion against a junior wrestler threatens to stain the image of Japan’s ancient national sport just as its popular-ity was recovering from previous scandals and a shrinking fan base.
While some wrestlers say the harsh conditions that can breed violence in the closed, hierarchical sumo world have improved in the decade since a teenage wrestler was beaten to death, the new incident shows the path to reform remains a rocky one.
“Certainly, it’s not as widespread as before,” said sumo commenta-tor John Gunning by email, before adding: “Th e ‘reforms’ were really only distributed guidelines ... Very little in the way of practical eff orts to change the culture.”
Mongolian “yokozuna” (grand champion) Harumafuji apologised last week after media reported he had pounded junior wrestler Takanoiwa with his bare fi sts and a beer bottle while drinking at a restaurant-bar with other wrestlers last month.
Th e 33-year-old Harumafuji was angered when he noticed the young-er wrestler checking his smart phone while he was being chastised for hav-ing a bad attitude, the reports said.
Conflicting reports have emerged about what took place and how serious Takanoiwa’s inju-ries were. However, he is not taking part in an ongoing tournament due to a fracture, concussion and oth-er injuries, according to the Japan Sumo Association (JSA).
A JSA offi cial told reporters on Sunday that Harumafuji had admit-ted hitting the 27-year-old Takanoi-wa but it remained “still uncertain” whether he had used a beer bottle in the assault.
Th e aff air has grabbed headlines and upset fans, some of whom had been lured back to the sport af-ter the promotion of Japan-born Kisenosato to the highest rank in January. — Reuters
Japan’s sumo image stained
2 5
WEDNESDAY NOVEMBER 22, 2017 • THEED G E FINANCIAL DAILY
YEAR YEAR DAY DAY CODE COUNTER CLOSING +/– VOL VWAP* PE# DY MKT CAP HIGH LOW HIGH LOW (RM) (RM) (‘000) (RM) (X) (%) (MIL)
Bursa Malaysia Main Market YEAR YEAR DAY DAY CODE COUNTER CLOSING +/– VOL VWAP* PE# DY MKT CAP HIGH LOW HIGH LOW (RM) (RM) (‘000) (RM) (X) (%) (MIL)
Bursa Malaysia
KLSE COMPOSITE 1,720.68 2.32 0.14
KLSE INDUSTRIAL 3,160.64 16.67 0.53
CONSUMER PRODUCT 624.54 -0.83 -0.13
INDUSTRIAL PRODUCT 164.53 -0.55 -0.33
CONSTRUCTION 308.10 -2.93 -0.94
TRADE & SERVICES 227.16 0.15 0.07
KLSE FINANCIAL 15,937.73 -37.53 -0.23
KLSE PROPERTY 1,210.46 -3.04 -0.25
KLSE PLANTATION 7,919.31 30.68 0.39
KLSE MINING 571.45 -12.16 -2.08
INDICES CLOSE +/- %CHGTECHNOLOGY 38.23 -0.77 -1.97
MarketsG L O B A L M A R K E T S . B U R S A M A L A Y S I A E Q U I T Y D E R I V A T I V E S
WEDNESDAY NOVEMBER 22, 2017 • THEED G E FINANCIAL DAILY 2 9
Please refer to the Bursa Malaysia website for the prices of loan stocks, bonds and overseas structure warrants
Japan — Nikkei up on large-cap rally, automakers and banks shine
TOKYO: Japanese stocks rose yesterday after large cap stocks such as automakers and manufacturers of factory automation equipment rallied, while North Korean tensions supported defence-related shares. The benchmark Nikkei Share Average ended 0.7% higher to 22,416.48, while the broader Topix added 0.7% to 1,771.13. Automakers gained, with Toyota Motor Corp rising 1.4% and Subaru Corp adding 1.7%. Factory automation stocks also attracted buyers, with Fanuc Corp rising 1.8% and Keyence Corp gaining 1.7%. Banks joined the rally, with Mitsubishi UFJ Financial Group adding 1.2% and Mizuho Financial Group advancing 0.9%. Retail investors speculated that demand for defence-related equipment will increase after US President Donald Trump put North Korea back on a list of state sponsors of terrorism on Monday, lifting stocks such as Ishikawa Seisakusho and Howa Machinery by 9.3% and 17% respectively. Japan’s government and ruling coalition are putting the fi nal touches to an extra budget of ¥2 trillion to ¥2.5 trillion for the current fi scal year to March 2018, Kyodo news agency said yesterday. The government and the coalition of the Liberal Democratic Party and the Komeito Party are considering issuing ¥700 billion
in construction bonds to help fi nance the budget, it said, without citing sources. Following October’s big election win, Prime Minister Shinzo Abe’s cabinet has made plans to beef up childcare support, boost productivity at small- and medium-sized companies, and strengthen competitiveness of the farm, fi shery and forestry industries. Kyodo said a surplus from the previous fi scal year’s budget would also be used to fi nance the extra budget, but no issuance of defi cit-covering bonds was planned. Japan Tobacco Inc sparked takeover speculation yesterday by naming a new chief executive officer (CEO) who wants the world’s third-largest international tobacco maker to do more overseas acquisitions to offset falling cigarette sales at home. Shares in British tobacco company Imperial Brands, long seen as a likely target, rose as much as 4% after Masamichi Terabatake, the CEO-designate, told reporters: “If there are good deals, we would like to actively pursue them”. Terabatake, who has a background in deal-making, said after his promotion was announced that he was willing to take risks, adding that the scale of acquisitions “does not matter”. Two big issues facing Japan Tobacco are a geographic footprint too concentrated in low-growth markets Japan and Europe and competitive weakness in vaping. Buying Imperial would help both issues, analysts at Jefferies have long argued.
US — Wall Street ticks up, lifted by Verizon, chipmakers
NEW YORK: US stocks rose on Monday, with Verizon boosting the telecoms sector after the stock got an upgrade, while a deal in semiconductors lifted high-performing tech shares. With no major earnings or economic data scheduled this week, trading volumes were thin and expected to get even quieter leading up to the Thanksgiving holiday tomorrow and an early market close on Friday. Overall trading volume was the lightest in a month. Verizon boosted the telecom services sector of the S&P 500 Index with a 1.7% advance to US$46.20 after a Wells Fargo note highlighted the stock’s valuation and said it is “an attractive yield play.” Telecoms are down 17% this year, compared with a 15% advance on the S&P 500. “There’s a bounce in telecoms, which have been the worst group so far this year,” said Eric Kuby, chief investment officer at North Star Investment Management Corp in Chicago. “There’s always a chance that something disrupts the apple cart, but there’s very little news and a lot of people focusing on the football games and the turkey dinner,” he said, referring to the staples of the US Thanksgiving holiday. Cavium touched a record high of US$84.41
after larger rival Marvell said it would buy the company for about US$6 billion. Cavium shares were last up 10.8% at US$84.02 and Marvell shares rose 6.4% to US$21.59. The Semiconductor Index rose 1.2% and touched its highest level since the highs of the Y2K bubble. The Dow Jones Industrial Average rose 72.09 points or 0.31% to 23,430.33; the S&P 500 gained 3.29 points or 0.13% to 2,582.14; and the Nasdaq Composite added 7.92 points or 0.12% to 6,790.71. Small-cap stocks on the Russell 2000 rose 0.7%, outperforming the large-cap indices. Time Warner Inc shares slid after reports the US Department of Justice will sue to prevent AT&T from buying Time Warner. Time Warner ended down 1.1% at US$87.71. Health stocks were weighed by a 2% drop in Merck to US$54.10 and a 0.8% fall in Bristol-Myers after Roche announced positive trial results for a competing cancer drug. Advancing issues outnumbered declining ones on the New York Stock Exchange by a 1.5-to-one ratio; on Nasdaq, a 1.54-to-one ratio favoured advancers. The S&P 500 posted 42 new 52-week highs and three new lows; the Nasdaq Composite recorded 129 new highs and 28 new lows. About 5.67 billion shares changed hands in US exchanges, far below the 6.81 billion daily average over the last 20 sessions and the lightest since Oct 18. — Reuters
MarketsI N S I D E R M O V E S . T R A D I N G T H E M E S . E V E N T S . F O R E X
WEDNESDAY NOVEMBER 22, 2017 • THEEDGE FINANCIAL DAILY 3 0
Local events to watch out for today
While every eff ort is made to ensure accuracy, the information presented is not an exhaustive list and is not an offi cial record of shareholder fi lings. Direct and indirect share are combined due to space constraints. Readers who are interested should check the offi cial fi lings fi led with Bursa Malaysia. Note: * denotes Ace Market
AEON CO.(M) (895,400) STANDARD LIFE ABERDEEN PLC 266,588,800 16/11 AND ITS SUBSIDIARIES, UKASIA POLY (3,536,100) TAN SOON HUI 16/11ASTRO MALAYSIA 1,158,500 EMPLOYEES PROVIDENT FUND BOARD 313,093,700 16/11BIMB 27,150,000 LEMBAGA TABUNG HAJI 870,039,300 16/11BUMI ARMADA 1,000,000 EMPLOYEES PROVIDENT FUND BOARD 353,981,295 15/11CIMB GROUP 1,583,600 EMPLOYEES PROVIDENT FUND BOARD 1,267,794,113 3, 6, 7 9 & 10/11DIALOG GROUP (1,310,400) EMPLOYEES PROVIDENT FUND BOARD 647,530,750 15/11DIGI.COM 5,529,200 EMPLOYEES PROVIDENT FUND BOARD 1,076,316,709 14 - 16/11FRASER & NEAVE (1,000,000) AMANAHRAYA TRUSTEES 31,184,100 16/11 - SKIM AMANAH SAHAM BUMIPUTERAFRASER & NEAVE 1,070,700 EMPLOYEES PROVIDENT FUND BOARD 39,680,330 15/11IJM CORPORATION (5,497,300) EMPLOYEES PROVIDENT FUND BOARD 530,763,178 15/11INARI AMERTRON (1,583,200) KUMPULAN WANG PERSARAAN 181,847,050 16 & 17/11 (DIPERBADANKAN) INARI AMERTRON (1,757,800) EMPLOYEES PROVIDENT FUND BOARD 107,506,050 15/11IOI CORPORATION 1,031,300 EMPLOYEES PROVIDENT FUND BOARD 644,531,358 14 & 15/11IOI PROPERTIES GROUP (1,000,000) EMPLOYEES PROVIDENT FUND BOARD 311,513,743 15/11LINGKARAN TRANS KOTA (1,000,000) AMANAHRAYA TRUSTEES 38,994,000 16/11 - SKIM AMANAH SAHAM BUMIPUTERAMALAYAN BANKING 5,100,000 AMANAHRAYA TRUSTEES 3,843,529,013 16/11 - SKIM AMANAH SAHAM BUMIPUTERAMAXIS 2,430,100 EMPLOYEES PROVIDENT FUND BOARD 862,494,324 15/11MY E.G. SERVICES 962,800 KUMPULAN WANG PERSARAAN 221,714,350 16 & 17/11 (DIPERBADANKAN)PETRONAS CHEMICALS GROUP 4,349,600 EMPLOYEES PROVIDENT FUND BOARD 695,887,600 15/11S P SETIA (2,000,000) AMANAHRAYA TRUSTEES 779,294,321 16/11 - SKIM AMANAH SAHAM BUMIPUTERAS P SETIA (3,577,600) KUMPULAN WANG PERSARAAN 246,416,058 17/11 (DIPERBADANKAN)S P SETIA 3,048,124 EMPLOYEES PROVIDENT FUND BOARD 184,833,775 13 & 15/11SAPURA ENERGY (1,412,800) EMPLOYEES PROVIDENT FUND BOARD 677,047,844 15/11SIME DARBY (5,245,100) KUMPULAN WANG PERSARAAN 371,511,973 14 & 15/11 (DIPERBADANKAN) SIME DARBY 15,289,500 AMANAHRAYA TRUSTEES 2,760,000,000 10, 14 - SKIM AMANAH SAHAM BUMIPUTERA & 15/11SIME DARBY (12,734,500) EMPLOYEES PROVIDENT FUND BOARD 741,607,431 9, 10 13 & 14/11 SKP RESOURCES 8,431,200 KUMPULAN WANG PERSARAAN 96,518,600 16 & 17/11 (DIPERBADANKAN) TA WIN 3,925,000 TENGGARA KAPITAL 3,925,000 17/11TELEKOM MALAYSIA 1,902,100 EMPLOYEES PROVIDENT FUND BOARD 667,790,201 15/11TENAGA NASIONAL (4,535,700) KUMPULAN WANG PERSARAAN 327,203,925 16 & 17/11 (DIPERBADANKAN) V.S.INDUSTRY 2,997,700 KUMPULAN WANG PERSARAAN 71,950,700 17/11 (DIPERBADANKAN)WCT 949,600 LEMBAGA TABUNG HAJI 106,697,502 16/11
COMPANY SHARES ACQUIRED DIRECTOR/SUBSTANTIAL SHARES HELD TRANSACTION (DISPOSED) SHAREHOLDER AFTER CHANGE DATE
Insider moves (Filings on Nov 20, 2017)Insider Moves show what substantial shareholders are doing with their stakes, which could be a signal of their views on the company’s outlook.
Note: Run your fi nger down the left-hand side until you reach the country of origin you plan to exchange. Then move your fi nger until that line intersects with the vertical column of the currency you wish to buy. The fi gure is how much you will get. The above rates are subject to change and provided by Thompson Reuters.
Foreign exchange rates NZ EURO US SWISS BRIT CANADA BRUNEI S’PORE AUST M’SIA CHINA BANGL’H DENM’K UAE INA INDIA JAPAN NORWAY PHIL QATAR SAUDI SWEDEN THAI HK
This table shows stocks that are trading near their year low. This could suggest a build-up in selling momentum, or the possibility that bargain hunting could set in later.
This table shows stocks that are trading near their year high. This could suggest a build-up in buying momentum, or the possibility that profi t-taking activities could set in later.
Trading themes
Stocks closest to year high Stocks closest to year low
Filling the breach
• Deloitte TaxMax 2017, the 43rd series. Themed “One bold step in the right di-rection”, this year’s seminar will be at One World Hotel, Grand Ballroom, First Avenue, Bandar Utama City Centre, Petaling Jaya from 8am to 5pm.
• Malton Bhd’s annual general meeting (AGM) at Tropicana Golf and Country Resort, Jalan Kelab Tropicana, Petaling Jaya at 9am.
• Malaysian Genomics Resource Centre Bhd’s AGM at Th e Boulevard Hotel Kuala Lum-pur, Westside Room 1, Level 8, Mid Valley City, Lingkaran Syed Putra, Kuala Lumpur at 9.30am.
• Paos Holdings Bhd’s AGM at Best West-ern i-City Shah Alam, A-GF-01, Persiaran Multimedia, Citypark, i-City, Shah Alam at 10am.
• TA Global Bhd’s extraordinary general meet-ing at Wisma TA, Th ird Floor, Jalan SS 20/1, Damansara Utama, Petaling Jaya at 11AM.
• In celebrating the arrival of Huawei Mate 10 Pro on Friday, Huawei invites you to be among the fi rst in Malaysia to uncover the technology and Artifi cal Intelligence behind the unprecedented performance of the superphone at Level 32, Huawei offi ce, the Integra Tower, Th e Intermark Mall, Kuala Lumpur at 2.30pm.
• Key Alliance Group Bhd to present the of-fi cial launch of Progenet Cloud at Menara Lien Hoe, Lavo, Ground Floor, Persiaran Tropicana, Tropicana Golf and Country Club, Petaling Jaya from 3pm to 4.30pm.
• Lion Diversifi ed Holdings Bhd’s EGM at Lion Offi ce Tower, Meeting Hall, Level 16, Jalan Nagasari, Kuala Lumpur at 3PM.
• Vivo (M) is set to introduce a new mem-ber of the Vivo V series, the V7 at Zouk Kuala Lumpur, Main Room, Jalan Tun Razak, Kuala Lumpur at 4pm.
Iraq has stepped up its shipments of oil to refi neries in the US and India this year as Venezuela’s shipments to customers in both countries fell.
Gold to silver ratio
MarketsF U T U R E S . M O N E Y M A R K E T . C O M M O D I T I E S
3 1
WEDNESDAY NOVEMBER 22, 2017 • THEED G E FINANCIAL DAILY
Index futures
FUTURES FAIR VALUECONTRACT DAYS TO EXPIRY KLIBOR DIVIDEND FAIR VALUE
FUTURES ROLL OVER BID OFFER CLOSE
NOV/DEC -4.5 -5.5 -5.0
INDEX AND FUTURES OPEN CHANGE INCONTRACT LAST CHANGE VOLUME INTEREST OPEN INTEREST
Money market
Commodities
DEC/JAN -18DEC/FEB -55DEC/MAR -67JAN/FEB -37
CPO FUTURES INDICATIVE ROLL-OVER
CPO/SOYOIL FUTURES BASIS (USD)CURRENT -74.293 MONTHS AVERAGE -96.516 MONTHS AVERAGE -90.50
OPEN CHANGE INCONTRACT LAST CHANGE VOLUME INTEREST OPEN INTEREST
Palm oil may drop 3% as India raises import tax on edible oils
CPO prices react to various factors including soyoil prices, weather conditions and stockpiles. Open interest shows either increasing or decreasing market participation.
Oil steadies as caution sets in ahead of Opec meeting
METAL & PRECIOUS METALSTIN US$/TON KLTM 19,480 -70COPPER USC/IBS CMX 3.1110 0.0105GOLD US$/TROY OZ CMX 1,278.40 3.10PLATINUM US$/TROY OZ NYMEX 930.70 7.10PALLADIUM US$/TROY OZ NYMEX 987.20 4.75SILVER USC/TROY OZ CMX 16.97 0.12ALUMINIUM RMB/TON SHF 14,925 -80ZINC RMB/TON SHF 25,305 205
MONTH SETTLEMENT CHANGE VOLUME OPEN PRICE INTEREST
Klibor
Malaysian palm oil futures rose yesterday, reversing a slide to its weakest since mid-August earlier in the day, after top buyer India raised its import duties on vegetable oils. India lifted the import tax on crude palm oil to 30% from 15% and increased import tax duty on refi ned palm oil imports to 40% from 25%. The benchmark palm oil February contract on Bursa Malaysia Derivatives gained 0.2% or RM7 at RM2,635 a tonne. Earlier in the day, it slid to RM2,612 a tonne, its weakest since Aug 16. “Th e market is up on profi t-taking now, after seeing a downside for too long,” said a futures trader from Kuala Lumpur. Th e trader added that he expected the market to get some support from production, which has seen harvesting disruptions from year-end monsoon rains. Industry analyst Dorab Mistry said yesterday that Malaysian palm oil futures will likely fall a further 2% to 3% after India raised its import duties. India’s edible oil imports are likely to drop to 15.5 million tonnes this year, down from an earlier estimate of 15.9 million tonnes. “Primarily India’s move is impacting prices as it is seen as a drastic step,” said another trader. “Secondly, production is not reducing as had been expected.” — Reuters
REGION GRADE A GRADE B GRADE C OER (RM/TON) OER (RM/TON) OER (RM/TON)
(IN RM/TON) NOV’17 DEC’17 JAN’18
CPO DELD 2,556 NO TRADE NO TRADEPK EX-MILL 2,583 NO TRADE NO TRADECPKO DELD NO TRADE NO TRADE NO TRADERBD P.OIL FOB NO TRADE NO TRADE NO TRADERBD P.OLEIN FOB NO TRADE NO TRADE NO TRADERBD P. STEARIN FOB NO TRADE NO TRADE NO TRADE
MPOB Palm oil physical
Oil prices were only slightly fi rmer yesterday as traders looked ahead to a meeting next week at which major crude exporters are expected to extend production cuts but the prospect of rising US output capped gains. Brent crude oil was up 17 US cents at US$62.39 a barrel. US light crude was at US$56.57, up 15 US cents. Analysts said Brent oil was expected to fl uctuate in a narrow range, between US$61 and US$63, as the market awaited the outcome of the Opec’s meeting on Nov 30. Opec, together with a number of non-Opec producers led by Russia, has been restraining output this year in an eff ort to end a global supply overhang and prop up prices. At its meeting next week, the group is widely expected to extend the deal beyond its March 2018 expiry date. — Reuters
Commodities
pace since the fourth quarter of 2016, a Reuters poll showed last Friday. — Agencies
CPO & Open Interest
CPO RM/tonne Open Interest
Jan 6, 2008 Nov 21, 2017
10000
57500
105000
152500
200000
1200
1950
2700
3450
4200
(+7)2,635
CPO vs Soyoil
CPO RM/tonne Soyoil US$/Ibs
Jan 6, 2008 Nov 21, 2017
0.3451(RM3,148/tonne)
2,635(+7)
0.000
0.175
0.350
0.525
1100
2425
3750
5075
6400 0.700
Th e euro steadied yesterday after registering its biggest daily fall in the previous session as investors looked beyond Germany’s political impasse to focus on the eurozone’s still robust economy. With major currencies closeted in tight trading ranges in a lacklustre session in a holiday-shortened week, traders were wary of taking big bets. “Th e worst case scenario is that the German political process will take a little more time to resolve but markets are not expecting anything extraordinary to come out of this and the bigger picture is that the economy is performing well,” said Commerzbank currency strategist Esther Reichelt in Frankfurt. Th e single currency was fl at at US$1.1723 after falling 0.5% on Monday, its biggest daily fall since Oct 26. — Reuters
Euro steadies after big drop as markets look beyond politics
Th e FBM KLCI futures contracts on Bursa Malaysia Derivatives ended higher yesterday, tracking the stronger cash market. November 2017 advanced 4.5 points to 1,717.5; December 2017 added four points to 1,712.5; March 2018 and June 2018 rose 1.5 points each to 1,712.5 and 1,711.5 respectively. Turnover eased to 4,299 lots from Monday’s 4,425 lots, while open interest increased to 32,206 contracts from 31,259 contracts, previously. Th e underlying benchmark FBM KLCI fi nished 2.32 points higher at 1,720.68. Singapore shares rose slightly more than 1% yesterday on expectations that its economy grew at a faster pace than initially estimated, which may dispel worries that the affl uent city-state is too dependent on its tech products. Singapore’s economy is forecast to have grown 7.4% in July to September, the fastest
FBM KLCI futures end higher tracking stronger cash market
KUALA LUMPUR: Th e FBM KLCI climbed 2.32 points or 0.1% to 1,720.68 yesterday after Petronas Gas Bhd’s (PetGas) share price spiked in the fi nal trading minutes. Th e ringgit strengthened to a new one-year level against the US dollar at 4.1390. FBM KLCI-linked Petronas Gas added 48 sen to RM17.14 to become Bursa Malaysia’s top gainer. Across Bursa, decliners led gainers by 640 against 231 respectively. A total of 2.27 billion shares valued at RM2.37 billion exchanged hands. Inter-Pacifi c Securities Sdn Bhd head of research Pong Teng Siew said that market breadth across Bursa Malaysia was still rather negative as corporate earnings growth failed to attract investors. “It’s a continuity of trends,” Pong told theedgemarkets.com. In currency markets, the ringgit was traded at 4.1400 against the US dollar at 5.40pm. The ringgit had earlier appreciated to its strongest level in a year against the US dollar at 4.1390. Th e exchange rate yesterday was between 4.1390 and 4.1533. Over the last one year, the exchange rate was between 4.1390 and 4.5002 Asian shares rose yesterday. Japan’s Nikkei 225 rose 0.7%, while Hong Kong’s Hang Seng Index climbed 1.91%. Reuters reported that Asian stocks rose to a 10-year high yesterday as investors took heart from further evidence of strength in the global economy, while the US dollar hovered near a one-week high against its peers, thanks to higher US yields and a fl oundering euro. — by Adam Aziz
FBM KLCI up on PetGas spike; ringgit at 4.1390 versus US dollar
KLCI CHANGE CLOSE VOLUME POINTS (RM) (RM) ('000)PETRONAS GAS 1.56 0.480 17.140 605.3RHB BANK 1.06 0.160 4.880 563.7TELEKOM MALAYSIA 1.05 0.170 6.150 1155.6IHH HEALTHCARE 0.81 0.060 5.680 8252.4MAXIS 0.64 0.050 5.990 2604.8PPB GROUP 0.62 0.320 16.880 329.7TENAGA NASIONAL 0.56 0.060 14.880 26116.0IOI CORPORATION 0.41 0.040 4.480 1277.1MISC 0.37 0.050 7.240 779.1HAP SENG CONSOLIDATED 0.33 0.080 9.440 479.9IJM CORPORATION 0.00 0.000 3.070 3118.3DIGI.COM -0.38 -0.030 4.660 4910.2AMMB HOLDINGS -0.40 -0.080 4.160 1673.0CIMB GROUP -0.46 -0.030 5.950 7719.5PETRONAS CHEMICAL -0.66 -0.050 7.230 7905.8HONG LEONG BANK -1.07 -0.300 15.400 883.0SUB-TOTAL 4.45 OTHERS -2.13 GRAND TOTAL 2.32
STOCK VOLUME CHANGE CHANGE CLOSE HIGH LOW ('000) (%) (RM) (RM) (RM) (RM)
Table above is from Reuters Volume break 3x 5-day average volume, meaning the total number of shares traded for a particular counter on the previous trading day is more than triple the average volume for the last 5 trading days. The table captures the build-up of interest in these companies and is thus a gauge of market expectations for these counters.
UNUSUAL MARKET ACTIVITIES
* How stock price changes affected the index on the previous trading day
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Moving average - 20-dayKL Composite Index
Volume (’mil)
Jan 2, 2008 Nov 21, 2017
1,720.68(+2.32)
1,737.18
820.0
1122.5
1425.0
1727.5
2030.0
0
300
600
900
1711.0
1712.1
1713.2
1714.3
1715.4
1716.5
1717.6
1718.7
1719.8
1720.9
1722.0
17:1516:3015:3014:3012:4511:3010:309:308:45
Index pointKL Composite Index
KLCI futures1,717.50
(+4.50)
1,720.68(+2.32)
NOV 17 1,717.50 4.50DEC 17 1,712.50 4.00MAR 18 1,712.50 1.50
The family is one of life’s masterpieces. — George Santayana
