Edge Weekly: More upside seen for tech stocks

From The Edge Malaysia
11th July 2014

AS developed markets’ demand for electronic gadgets gradually improve, the share prices of some Malaysian semiconductor players that have long established relationships with global electronics manufacturers have also outperformed the FBM KLCI. Nevertheless, analysts remain positive on the outlook for the sector.

The Semiconductor Industry Association (SIA) reported global semiconductor sales of US$26.34 billion in April, representing the 12th consecutive month of year-on-year increase — a trend that is expected to continue throughout this year and the next. In that month, the semiconductor industry showed an 11.5% growth from the previous corresponding year, with sales in the Americas showing the biggest increase.

Ten Pitfalls of Strategic Failure

From The Edge Malaysia
18th March 2014

IN the 20 or so years that I have worked as a consultant I have seen employers craft robust strategies only to see them fail because they did not anticipate the most obvious pitfalls. In my book Making Your Strategy Work: How to Go From Paper to People I have tried to explain what these are and how to avoid them. Here is my top ten derived from over 100 interviews with CEOs globally.

Emotional business

The first stumbling block is about the team around you. Having a strategy is useless if your team does not understand it, agree with it or is incapable of implementing it. The rubber always hits the road when we talk about people. Having the right people in the right place is therefore critical. A mediocre team can run the best strategy aground or deliver sub-optimal results at best. Companies should first hire the best people possible and then motivate them to implement the strategy.

The somewhat related second strategic failure is overconfidence. While you need to be confident about your strategy a little bit of paranoia is healthy. Companies can overestimate the value of their business model, customer base and ways of doing things. Video rental chain Blockbuster is an example of a business that failed to move with the times and saw its business model collapse. The message here is simple - be ruthlessly honest and receptive to new ideas / models or you may wake up one day and find your business gone.

Pay attention to the environment

Third: failure to move with speed and pace. Companies often lull themselves into a false sense of security and can be slow to react. There is little upside in procrastinating once you recognise the reality of a situation. And when the news is bad, acting sooner is better than later. Bad news seldom improves with age.

Fourth: succumbing to the short-term. Companies are under pressure to show returns and impress shareholders. Marks & Spencer (M&S) fell prey to this in the late 1990s when it announced its target of becoming the first U.K. retailer to generate annual profits of £1bn. The announcement had the desired effect on the share price but eroded the company’s long-term hold on the market. Rivals snatched market share and by 1999 a profit warning was on the wall. It was not until 2008 that M&S was once again able to deliver a profit of £1bn. It is essential, therefore, to stay on track and prioritise long-term investment over short-term gains.

Tong Kooi Ong blogs: Anxious period of uncertainties

From The Edge Malaysia
6th Feb 2014

THIS week, The Edge Malaysia carried a special report, The State of The Nation. It addresses the various issues of what you need to know about the economy, stock market and politics today.

Here are a few highlights:

1. There is no imminent or immediate economic crisis. However, the risk bandwidth has widened substantially.

2. Malaysia has a grace period of up to two years to successfully reform, rejuvenate and implement its transformation policies. These include widening its tax base, reducing subsidies, cutting wastages and leakages in government spending, instilling fiscal discipline, improving its current account surplus and increasing private sector competitiveness by eradicating rent-seeking and monopolistic practices.

Highlight: Genting’s expansion leaves little cash for dividends

From The Edge Malaysia
5th Feb 2014

"If it continues to succeed, the investments put in today could be the seeds for future bumper crops. For now, though, chances are that rich dividends will not be in the horizon for some years to come as the group puts its money to work."

UNLIKE the regular consumer companies with sizeable cash flows, the Genting group has hitherto chosen to return relatively little cash in dividends to its shareholders.

Instead, the billions made by its flagship hilltop casino resort and its four-year-old cash cow in Singapore are channelled to grow other casino resorts.

Billions of ringgit have been spent and committed to expanding the “Resorts World” brand across the globe since the success of Resorts World Sentosa in 2010, and indications are that billions more will be spent in Genting’s bid to make its mark abroad.

Not everyone is complaining, though. In fact, some analysts see opportunity amid the cash needs.

Expectations are that the Genting group would have a local listing for each of its foreign operations — once they are sizeable enough to stand on their own — to realise some value as well as create a new vehicle to tap the capital markets for further expansion. Such was the case for Genting Singapore plc and Genting Hong Kong Ltd’s associates Travellers International Hotel Group Inc (which houses Resorts World Manila) and Norwegian Cruise Line Holdings Ltd (NCL), which listed on Nasdaq last January.

This is why market watchers expect Genting Bhd and its 49.3%-owned Genting Malaysia Bhd to eventually pool their US-based assets for a combined listing.

Investment: REIT attraction for long-term investors

From The Edge Malaysia
28th Jan 2014

A SCALE back of the US Federal Reserve’s bond-buying programme and the possibility of rising interest rates have reversed investor sentiment on real estate investment trusts (REIT), sending prices tumbling. Going ahead however, as yields begin to rise, there could be some decent buying opportunities emerging in the sector for investors willing to take a longer view.

With yields in excess of 6% for some mall REITs and 7% for office REITs, there is only a small opportunity cost from holding REITs while taking a medium-term view. At the same time, there is room for upside through capital gains.

Malaysia's consumption tax collectors seek to dethrone cash

From The Edge Malaysia
31st Oct 2013

KUALA LUMPUR (Oct 31): Malaysia's new consumption tax is a boon to IT companies that stand to win infrastructure contracts and fees - provided they can convince people to switch to electronic payments in a country where 91 percent of transactions are in cash.

The 6 percent goods and services tax (GST) that Prime Minister Najib Razak announced in his annual budget speech on Friday is aimed at narrowing a budget gap that is expected to hit 4 percent of gross domestic product this year.

Cash payments are harder for tax collectors to track, so the government is encouraging e-payments as a way to reduce costs and improve efficiency.

For companies such as Censof Holdings Bhd and GHL Systems Bhd that specialise in creating electronic payment and software systems, the initial benefit will likely come well before the tax is implemented in April 2015.

Silver Bird will cease to be syariah-compliant

From The Edge Malaysia
9th October 2013

KUALA LUMPUR: Financially troubled SILVER BIRD GROUP BHD will be categorised as a non-syariah-compliant company beginning next month. It has failed to meet a criterion of the new set of rules for syariah counters set by the Securities Commission Malaysia (SC).

Under the new rules, which take effect on Nov 1, a company’s cash and debts in conventional accounts cannot be more than 33% of its total assets in order to meet syariah standards. In terms of revenue, companies are only allowed to derive 5% to 20% from the various types of businesses which are non-syariah compliant such as gambling and brewers. The SC had announced the new rules in June last year.

More syariah-compliant companies are expected to face the same issue as Silver Bird. Currently, some 801 companies listed on Bursa Malaysia meet the existing standards.

With the new set of rules, syariah-compliant investment funds will be given a six-month grace period to realign their stock portfolios. This sparks concern that those stocks which could be reclassified as non-syariah compliant will succumb to selling pressure as institutional investors rejig their portfolios.

Pre-Budget KLCI

From The Edge Malaysia
5th Oct 2013

KUALA LUMPUR (Oct 5): The pre-budget rally on the local FBM KLCI that is generally expected a week or so before the tabling of Malaysia’s Budget may be short lived this year if the US budget and debt crisis continues, according to Affin IB vice president and head retail research Dr Nazri Khan.

In an email reply to theedgemalaysia.com last Friday, Nazri said assuming big positive impacts on key beneficiaries (likely winners construction, consumer, power & oil gas stocks) and minimal negative impacts on other sectors (likely losers banking & PROPERTIES stocks), the FBM KLCI should trend towards a range of between 1,800 and 1,820 points before Budget 2014 on Oct 25.

Overbuilding of mega projects could affect sectors

From The Edge Malaysia
12th Sep 2013

KUALA LUMPUR: The overbuilding of mega projects, such as the Tun Razak Exchange, the RM5 billion Warisan Merdeka Tower and the Rubber Research Institute land development in Sungai Buloh, could negatively affect the banking, property and real estate investment trust (REIT) sectors.

CIMB Research, in a recent note, said without the solid backing of fundamental demand, the overbuilding of commercial real estate could result in painful long-term issues.

“Should the project be part-funded by government-guaranteed bonds and fail, the losses would hit the government’s balance sheet and exert further pressure on the overall public debt,” said the research house.

In addition, there will be an oversupply of office space, leading to depressed rentals and yields as well as wastage of strategic land resources. The research house is also concerned that the financial sector might see its non-performing loans ratio rise as borrowers default on their loans.

Ivory Properties unit to buy/rehabilitate Plaza Rakyat for RM400m

From The Edge Malaysia
6th September 2013

"Ivory Properties said it intends to revise the development plans of the project, which encompasses a comprehensive and integrated residential, commercial and transportation hub."

KUALA LUMPUR (Sept 6): Ivory PROPERTIES Group Bhd announced that its 65% unit Ivory Place Sdn Bhd is buying the property assets of the abandoned Plaza Rakyat project in Kuala Lumpur for RM400 million.

Masteel sanguine on domestic steel demand

From The Edge Malaysia
4th Sep 2013

LOCAL steelmakers reported a mixed bag of results for the second quarter of 2013 (2Q13). While Malaysia Steel Works (KL) Bhd (Masteel; 91 sen) and Southern Steel Bhd reported improved earnings, Ann Joo Resources Bhd, Perwaja and Kinsteel Bhd saw profit deteriorate from 1Q13. This could be attributed to a combination of factors such as differences in capacity and utilisation, product range as well as gearing levels.

Steel bar prices in the domestic market have been relatively resilient year-to-date, averaging between an estimated RM2,100 and RM2,200 per tonne, thanks to sustained local demand while raw material prices have softened slightly.

Masteel fared comparatively well. Turnover was marginally down year-on-year (y-o-y) at RM342.3 million, due to lower average selling prices for steel products, but was 3.7% higher from 1Q13, thanks to stronger volume demand. Domestic sales improved quarter-on-quarter (q-o-q), picking up the slack in exports in 2Q13.

Pre-tax profit saw an outsized decline, by 42.5% y-o-y to RM10.9 million, from RM18.9 million in 2Q12. The company attributed this to lower selling prices coupled with higher raw material costs in the latest quarter.

Favelle Favco powers on in China

From The Edge Malaysia
4th Sep 2013

FAVELLE Favco Bhd, a 61.78% owned unit of Muhibbah Engineering Bhd, began manufacturing cranes in China last year and is optimistic about its operations there, despite concerns that the country is facing a credit crunch.

The company's deputing managing director and CEO Mac Chung Hui tells The Edge that he is positive the company can secure plenty of work in mainland China.

"What we read in the papers is a little bit different from what we see on our side … nevertheless, we are monitoring the situation closely," says the 35-year-old.

A credit squeeze in China has raised fears about a slowdown in the world's second-largest economy, given its dependence on debts to finance massive projects and to fuel growth.

Favelle Favco started operations in China in February last year and delivered its first crane in 4Q2012. It is looking to deliver up to 15 tower cranes a year from its operations in China, which would add up to RM100 million a year, depending on the size of the crane ordered.

Genting proposes special cash dividend of 50 sen/share, restricted issue of warrants

From The Edge Malaysia
29th Aug 2013

KUALA LUMPUR (Aug 29): GENTING BHD  has proposed to declare a special interim cash dividend of RM0.50 less 25% income tax for every Genting share held.

In conjunction with this dividend payment, the mainly gaming group has also proposed to undertake a restricted issue of warrants to provide shareholders with an option to reinvest some or all of the net dividend back into the company through the subscription of warrants.

The warrants are to be issued at RM1.50 per unit, on the basis of one warrant for every four Genting shares held.

PPB expects “good” 2013 results, seen paying higher final dividend

From The Edge Malaysia

27th Aug 2013

KUALA LUMPUR (Aug 27): PPB Group Bhd said today it expects to achieve “good” results for its full financial year in 2013, supported by domestic demand and flour milling expansion overseas.

It also expects profit contribution from its 18.33%-associate company, Wilmar International Ltd of Singapore, to continue to account for 65%-70% of PPB’s total profit.

“On the whole, PPB Group’s operations are expected to perform well in 2013; nonetheless the overall financial results would depend substantially on Wilmar’s business performance for the year,” said Leong Choy Ying, chief financial officer of PPB Group, at a briefing for the media and analysts today.

“The domestic demand in Malaysia is expected to be well-supported by resilient consumer and business spending… Regionally, expansion of the group’s flour milling capacity in Indonesia and Vietnam is progressively coming on-stream to supply additional volume in those markets,” she added.

Highlight REITs lose lustre as bond yields rise

From The Edge Malaysia
26th Aug 2013

KUALA LUMPUR: Real estate investment trusts (REITs), the darling of risk-averse investors a year ago, are losing their lustre as investors switch to government debt papers, the Malaysian Government Securities (MGS).

This comes as the yields of MGS rise with the outflow of funds following the US Federal Reserve’s impending move to reduce its asset purchase that has been in place since 2009.

An Affin Investment Bank Bhd analyst told The Edge Financial Daily that when REITs were the flavour of investors, the gap between MGS and REIT yields was apparent.

“Back when government bonds yields were at 3%, they were about 100 to 150 basis points lower than REIT yields. Now, the difference is not that much. Investors who are looking for REIT stocks now are only buying for acquisition growth,” the analyst said.

Long-term prospects for Parkson still good

From The Edge Malaysia
14th Aug 2013

GRANTED, the lacklustre growth of China's retail and consumer market has pulled Parkson Holdings Bhd's earnings down so far this year, but the medium to long-term prospects for the group, especially its China operation, are still good.

Briefly, department stores in China are facing challenges from the slowing economy, rising wage costs and heightened competition, not to mention the advent of online shopping.

While not that many analysts are excited about Parkson, with at least two out of three calling a "hold" on the stock, the sheer size of China's consumer market cannot be ignored. Plus, Parkson's share price has declined 19.83% to RM3.80 from a year ago.

According to Affin Investment Bank analyst Mandy Teh, China's retail market will recover by the second half of the year at the very least. Meanwhile, Parkson's plan to expand selectively and close non-performing stores on the mainland will reflect on the group's earnings going forward.

Glove makers gaining from demand

From The Edge Malaysia
5th Aug 2013

IN 2012, Malaysia exported about 100 billion pieces of rubber gloves, approximately 63% of the world' supply, to more than 180 countries. here are glove makers in other countries such as Thailand and Indonesia,but locally listed Hartalega Holdings and Top Glove Corp are the global market leaders for nitrile and latex gloves respectively.

The bulk of the demand comes from hospitals, hence the healthcare industry is an important one for glove makers. This burgeoning industry is expected to hit US$3 trillion by 2015, on the back of growing health awareness, increased spending on healthcare in emerging markets and the occurrence of new infectious diseases.

Costlier land the price of growth

From The Edge Malaysia
2nd Aug 2013

IN recent years, escalating prices for residential property, especially landed homes in traditional hot spots such as Petaling Jaya, coupled with improving road transport, have seen Malaysians buy homes further away from the Kuala Lumpur city centre.

One such suburb is Rawang, which is located northwest of KL and is part of the Gombak district, under the supervision of the Selayang municipal council. It had started as a small tin-mining town, consisting of only a few rows of shophouses, but today, it is slowly but surely turning into a residential hot spot.

Saft on wealth - Buffet and the rest of us

From The Edge Malaysia
Written by Reuters
27 Aug 2012

Aug 23 (Reuters): I don't know how to put this but ... Warren Buffett is awesome, and you and me, we almost certainly are not.

A new study aiming to get at the source of the legendary investor's outperformance demonstrates that his approach, which turned a dollar in 1976 into $1,500 today, is relatively simple: Use modest, cheap leverage to buy high-quality, cheap and safe shares.

Two of gold price's three legs looks wobbly

From The Edge Malaysia
By Clyde Russell, Reuters
22 Aug 2012

IF you want to know why the gold price has stagnated in the past few months, look no further than the World Gold Council's latest report that shows demand is at its lowest in more than two years.

In fact, so rapid has been the decline in gold demand since last year's record price in September that if there is a surprise, it's that the price has held up as well as it has.

Since the start of the second quarter, gold hasn't been above US$1,680 (RM5,260.92) an ounce, but it also hasn't dropped any lower than US$1,527 and the current price around US$1,603 is around the mid-point of its recent range.