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FBM KLCI 1839.29
8.07
KLCI FUTURES 1846.00
7.50
STI 3287.54
5.97
RM/USD 3.3410
CPO RM2252.00
56.00
OIL US$82.16
0.66
GOLD US$1144.60
23.10
PP 9974/08/2013 (032820)
PENINSULAR MALAYSIA RM1.50
THURSDAY NOVEMBER 6, 2014 ISSUE 1833/2014
FINANCIAL
DAILY
MAKE
BETTER
DECISIONS
www.theedgemarkets.com
‘Ex-treasurer of Vivekananda Ashram
is CEO of developer company’
14 H O M E
4 HOME BUSINESS
Earnings for airline,
construction,
property firms to
outperform in 3Q
4 HOME BUSINESS
1MDB says has filed
its FY14 accounts
with SSM
6 HOME BUSINESS
PetDag 4Q results
likely to disappoint
15 H O M E
MoF to take legal
g
action against
NFCorp
22 F E AT U R E
The Volcker Rule’s
unintended
consequences
by
u
o
y
o
t
t
h
g
u
o
r
b
s
i
y
p
o
c
l
a
t
This digi
FBM KLCI 1839.29
8.07
KLCI FUTURES 1846.00
7.50
STI 3287.54
5.97
RM/USD 3.3410
CPO RM2252.00
56.00
OIL US$82.16
0.66
GOLD US$1144.60
23.10
PP 9974/08/2013 (032820)
PENINSULAR MALAYSIA RM1.50
THURSDAY NOVEMBER 6, 2014 ISSUE 1833/2014
FINANCIAL
DAILY
MAKE
BETTER
DECISIONS
4 HOME BUSINESS
Earnings for airline,
construction,
property firms to
outperform in 3Q
4 HOME BUSINESS
1MDB says has filed
its FY14 accounts
with SSM
6 HOME BUSINESS
PetDag 4Q results
likely to disappoint
15 H O M E
MoF to take legal
action against
NFCorp
22 F E AT U R E
The Volcker Rule’s
unintended
consequences
‘Ex-treasurer of Vivekananda Ashram
is CEO of developer company’
14 H O M E
T HUR SDAY N OVEM B ER 6 , 2 0 14 • TH EEDGE FI N AN C I AL DAI LY
2
For breaking news updates go to
ON EDGE T V
Percentage
of urban
population in
M’sia to rise to
75% in 2020
IMF’s growth
rate cut
contributed to
patchy economic
recovery, says
fund manager
The Edge Communications Sdn Bhd
(266980-X)
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Govt offers RM3b
more for assets
So as to help Selangor govt take over water concessionaires
BY CYNTHIA BLE M I N
KUALA LUMPUR: The federal government has allocated an additional RM3 billion to help the Selangor
government take over the state’s
water concessionaires, said Energy,
Green Technology and Water Minister Datuk Seri Dr Maximus Ongkili.
However, the minister revealed
that the master agreement signed
by the federal government with the
previous Selangor state administration cannot be disclosed — as per
the advice of the Attorney-General
— because the agreement contains
elements that have yet to be finalised.
“This includes price negotiations
with the concessionaires by Selangor
themselves,” he told reporters at the
Parliament lobby yesterday.
Ongkili noted that some of these
companies are listed on the stock exchange and have to be answerable
to shareholders and so it would not
be wise to create more speculation
by disclosing the document.
He said one of the concessionaires had yet to call for an annual
general meeting. On the additional
money that the federal government
is setting aside for the Selangor government to buy over the concessionaires, Ongkili said it is based on the
premise that “Langat 2 [Water Treatment Plant] must go on”.
“The federal government told Selangor that if you want water this time
we will help you (Selangor). You negotiate with the concessionaires under my supervision on a willing-buyer-willing-seller [basis],” he said.
The minister said the discussion
with Syarikat Pengeluar Air Selangor
(Splash) had not been finalised yet
but had confidence in new Selangor
Menteri Besar Mohamed Azmin Ali
to settle the issue.
TA R I F F T O R E M A I N U N T I L L J U N E 2 0 1 5
KUALA LUMPUR: The current
electricity tariff will be maintained
until June 2015, said Energy, Green
Technology and Water Minister
Datuk Seri Dr Maximus Ongkili.
The government will also defer
increasing the price of piped gas,
which means Petroliam Nasional
Bhd (Petronas) will have to forego
RM836 million in revenue from
July this year to June 2015, he said.
“To ensure the tariff is maintained up till June 2015, the government will manage [absorb]
the cost of RM1.683 billion for
fuel and generation costs by using
savings generated through the renegotiated power purchase agreements with the first generation
independent power producers
and maintaining the current price
of piped gas supplied by Petronas
to the electricity sector,” he said.
The electricity tariff in Peninsular Malaysia is determined through
the incentive-based regulation
framework and the imbalance cost
pass-through (ICPT) mechanism
implemented in January 2014, he
said. The ICPT allows the government to review the tariff every six
months based on changes in costs.
Ongkili said the ICPT cost from
January to June was RM465.93
million, while the cost from July
to December is RM382.03 million,
totalling RM847.96 million for
this year or an increase in tariff
rate by 1.62 sen/kWh. — by Cynthia Blemin
“We have yet to meet. Let him
settle down and I [will] wait for his
call if he wants to talk. It is up to Selangor to offer. I only provide the fund
for them or whatever is required.”
Ongkili was responding to Mohamed Azmin’s comment in an
English daily recently which said
Attorney General Tan Sri Abdul Gani
Patail must explain why Putrajaya refused to declassify the water restructuring agreement, which is protected by the Official Secrets Act 1972.
It was previously reported that
the Selangor government had made
a final offer of RM9.65 billion to take
over the four concessionaires in the
state and three of them, namely Puncak Niaga (M) Sdn Bhd, Konsortium
Abbas Sdn Bhd and Syarikat Bekalan
Air Selangor Sdn Bhd, had agreed to
the deal for a collective RM7.8 billion.
Only Splash was against Selangor’s buyout offer.
“The RM9.65 billion is just for the
loans and bonds that are owed by
all these companies,” said Ongkili,
noting that the sum is actually not
sufficient for some of these concessionaires to service their loans.
As to whether RM9.65 billion is
a ceiling, Ongkili said, it depends
on whether all the concessionaires
agree to let go of their concessions
to the buyer, which is the Selangor
government, or through state-owned
Kumpulan Darul Ehsan Bhd or a
separate entity that will be formed.
“At the moment we have only
prepared RM3 billion, [but even] if
it is not enough, Selangor may not
want money from the federal government [because] they may have
their own money to buy,” he said.
End of US QE is actually good for world economy
BY IAN CAM P BE LL
LONDON: It’s long been the big
question. What happens when US
Federal Reserve’s quantitative easing (QE) ends? Central bankers may
find the answer troubling. Ending
the Fed’s injections of freshly created money could well prove difficult for addicted investors and
the wealthy, but good for global
consumers, especially the poor,
and for global growth.
The debate on the pros and cons
of QE will not end soon. The aim of
the policy has been to spur growth
in part by pushing up the prices of
financial assets. The rise in Japanese
stocks last Friday after the Bank of
Japan expanded its QE programme
shows how well it works at that.
But ultra easy Fed monetary pol-
icy has had unhelpful side effects.
By weakening the dollar and encouraging speculation, it helped
fire up the price of oil and other
commodities. With global investors’
most influential source of QE gone,
that stimulus has been removed.
The Brent crude oil price is down
by about 20% from its over-US$100
(RM334) highs of late June and the
Thomson Reuters CRB commodity
index by 13% over the same period.
These price falls in the vitals of
everyday life are like big tax cuts
in both emerging economies and
developed ones. For all consumers,
and especially for poorer ones, this
matters a lot. The United Nations
Food and Agriculture Organization
reports global food prices fell by
2.6% in September. They’re down
by 6% in a year, taking them to their
lowest since 2010. This will help
keep inflation and interest rates
down in emerging economies.
Lower prices also matter in
wealthier countries. Cheaper commodities mean consumers’ incomes
will go further. For example, the US
Energy Information Administration
forecasts that average household
expenditures for heating oil will
be 15% lower this winter than last.
The awkward reality with QE is
that it remains experimental. In
theory, ever more money is the
answer to sluggish growth. In practice, it may have slowed recovery
down. More cautious intervention
by central banks looks wiser and
more equitable. As the not-so-distant past shows, making markets
bubble doesn’t lead to sustainable
growth. — Reuters
IN BRIEF
Oil falls below US$82
on weak Chinese data
LONDON: Brent oil dropped to a
new four-year low below US$82
(RM273.88) a barrel yesterday,
a fifth straight day of losses, as
weak economic data from top
energy consumer China intensified worries about demand
as a global supply glut grows.
Services sector growth in China
weakened in October as new
business cooled, a private survey
showed, coming just days after
data revealed sluggish factory
growth. Brent fell 75 cents to
US$82.05 a barrel by 0913 GMT,
having earlier reached the day’s
low of US$81.63, its weakest level
since late 2010. US crude fell 43
US cents to US$76.76 a barrel,
rebounding off a low of US$75.84
hit in the previous session after
data showed US crude stocks
unexpectedly fell. — Reuters
Asia’s richest man
buys 60 aircraft
HONG KONG: A property flagship led by Asia’s richest tycoon
Li Ka-shing said yesterday it
plans to buy up to 60 passenger jets in a series of transactions that amount to more than
US$2.5 billion (RM8.35 billion).
The Hong Kong businessman
made his first major foray into
the aviation industry in August
by announcing plans to buy
into Irish aircraft leasing group
AWAS Ltd, and the new purchases expand his investments
into a field that can yield stable
and long-term cash flow, analysts have said. The company
confirmed yesterday that the
total number of jets was around
60. — AFP
East Timor kicks judges
out over tax case
MELBOURNE: East Timor has
ordered five foreign judges out
of the country after a court
ruled in favour of US oil and
gas producer ConocoPhillips
in cases tied to US$236 million
(RM788.24 million) in disputed
tax assessments. ConocoPhillips operates the Bayu Undan
gas field in the Timor Sea between East Timor and Australia.
The young country, which won
independence from Indonesia
in 2002, had hired international
judges and prosecutors to beef
up its judicial system, but Prime
Minister Xanana Gusmao has
been unhappy about the rulings on the tax cases, among
other issues. — Reuters
Thai central bank leaves
rate unchanged
BANGKOK: Thailand’s central
bank left its benchmark interest rate unchanged yesterday,
as expected, but said there was
still room to cut rates if needed
as economic growth slows. The
Bank of Thailand (BoT) said it
would cut its economic growth
forecasts this year and next, but
noted exports were poised to
gradually pick up next year with
the global recovery. The BoT’s
monetary policy committee
voted 6-1 to hold the one-day
repurchase rate at 2% for a fifth
straight meeting. — Reuters
4 HOME BUSINESS
Airline, construction, property firms to outperform in 3Q
BY L I EW JI A TEN G
KUALA LUMPUR: As the July to
September earnings season picks
up steam, companies in the airline, construction and property sectors are expected to deliver stronger-than-expected results, while
earnings for plantation firms will
likely be flattish, said analysts.
JF Apex Securities Bhd head of
research Lee Chung Cheng said
airline companies and small- to
medium-cap property developers
are likely to experience positive
earnings surprises in the September quarter.
“Airline stocks such as AirAsia
Bhd may benefit from the recent
drop in global oil prices, which
will result in lower fuel expenses,”
he told The Edge Financial Daily.
According to Lee, small- to medium-cap property companies
which have handed over more
housing units to their buyers could
outperform in this earnings season,
thanks to their strong unbilled sales.
However, the earnings performance of large-cap property firms
are expected to fall within expectations, he added.
Lee also sees exporters such as
furniture makers, semiconductor
companies and wood-based product manufacturers benefiting from
the stronger US dollar.
He expects overall results of
companies to be largely in line
with expectations.
“Judging from the corporate
earnings in the first half this year,
we expect a single-digit [earnings]
growth for the full year,” said Lee.
Mercury Securities Sdn Bhd
head of research Edmund Tham
reckoned that falling crude palm
oil (CPO) prices could affect the
earnings performance of plantation companies.
“I think the corporate earnings
of plantation firms will remain flat
in this (July to September) quarter.
Unlike global oil prices, you can
feel the impact [of lower CPO prices] within a few months,” he said.
Tham takes a contrarian stance
on the property sector, expecting
large-cap property companies to
perform better this earnings season.
“There is a lot of supply in the
property market and you need to
have the right pricing. But with a
strong brand name, larger property
developers can add about 10% to
20% to their house prices,” he said.
Anbound Research Centre (Malaysia) Sdn Bhd analyst Fung Vun
Ket does not expect any company
or sector to outperform in the September quarter.
“The earnings performance of
MAS’ biggest trade union
backs alternative proposal
Jentayu Danaraksa’s plan will avert the laying off of 6,000 workers
BY C H ESTER TAY
& C Y NTHI A B L EMIN
KUALA LUMPUR: Malaysian Airline System Bhd’s (MAS) influential
and biggest trade union, the Malaysian Airline System Employees’ Union (Maseu), has given its backing to
an alternative proposal by Jentayu
Danaraksa Sdn Bhd. This will avert
the need to lay off 6,000 MAS workers as stated in Khazanah Nasional
Bhd’s rescue plan for the loss-making
national carrier.
Jentayu Danaraksa, a newly setup financial advisory firm comprising bumiputera professionals
who specialise in aviation, corporate finance and capital markets, is
headed by former MAS managing
director and chief executive officer
Tan Sri Abdul Aziz Abdul Rahman
as its chairman.
On Aug 29, 2014, Khazanah announced a 12-point plan to resuscitate the national airline which
would see a reduction of 6,000 jobs
across the board from its existing
workforce of 20,000.
In a letter dated Nov 3, 2014, to
Prime Minister Datuk Seri Najib
Razak and seen by The Edge Financial Daily, Maseu stated that
it had discussions with representatives of Jentayu Danaraksa on the
alternative proposal and agreed in
principle on the company’s value
propositions as opposed to Khaz-
All eyes will be on MAS’ extraordinary general meeting today, in which minority
shareholders will decide whether to accept or reject its privatisation. Photo by
Shahrin Yahya
anah’s 12-point plan.
“We are in full support of Jentayu
Danaraksa’s proposal and hope that
Datuk Seri [Najib] seriously considers Jentayu Danaraksa’s proposal
for the sake of our union members’
future and well-being,” said Maseu
in the letter, signed by its secretary-general Ab Malek Ariff.
When contacted by The Edge Financial Daily yesterday, Ab Malek
declined to comment.
Jentayu Danaraksa’s major shareholder and director Feriz Omar confirmed that a proposal had been
submitted to Najib and Khazanah,
which “complements Khazanah’s
12-point plan”.
“We have identified areas that
need to be emphasised which
are critical success factors to turn
around MAS even under a new entity,” he said.
Feriz declined to provide further
details of Jentayu Danaraksa’s proposal to Najib and Khazanah, except
that “several corporate transactions
will be taken, which are in line with
international policies signed by the
Malaysian government, and most of
the Asean countries”.
“Part of the overall proposal entails acquiring some strategic assets
of MAS,” he said.
According to Feriz, the company
is of the view that these identified
strategic assets, which are still profitable, can utilise the skills of the
6,000 MAS workers to be laid off.
Khazanah’s RM6 billion recovery
plan for MAS involves migrating
“relevant” operations, assets and
liabilities from MAS to a new entity,
and the required workforce will be
about 14,000, 30% or 6,000 lower
than the current 20,000.
“We have submitted the proposal and Maseu’s letter to the Prime
Minister’s Office and are waiting for
their response,” Feriz said.
He believes that the alternative
proposal will be beneficial to MAS
stakeholders as the team under Jentayu Danaraksa that drafted it is
equipped with the relevant knowhow. The team includes Shukor Yusof, who had served as an aviation
analyst in US ratings agency Standard & Poor’s for over 13 years.
According to the company’s website, Jentayu Danaraksa’s other directors include former Transport
Ministry secretary-general Datuk
Seri Zakaria Bahari, Radimax Group
Sdn Bhd group chief executive Datuk Abdul Rahim Mohd Zin and
former PriceWaterhouseCoopers
senior partner and executive director Daruis Zainuddin.
All eyes will be on MAS’ extraordinary general meeting today, in
which minority shareholders will
decide whether to accept or reject
its privatisation.
1MDB says it has filed FY14 financial statement with SSM
KUALA LUMPUR: 1Malaysia Development Bhd (1MDB) issued a
one-line statement yesterday, saying it had filed its financial year 2014
ended March 31 (FY14) statement
with the Companies Commission
of Malaysia (SSM).
However, a check with the regulator showed that the accounts
were still not available for public
viewing.
The sovereign wealth fund was
responding to a report by The Edge
Financial Daily yesterday that its
FY14 accounts had still not been
submitted to the SSM by the time
the regulator’s office closed at 4pm
on Tuesday.
The daily pointed out that this
was despite the fact that Prime Minister Datuk Seri Najib Razak, who is
the chairman of the advisory council of 1MDB, told Parliament that its
two subsidiaries — 1MDB Energy
(Langat) Sdn Bhd and 1MDB Real
Estate Sdn Bhd — would file their
audited FY13 and FY14 accounts
by Oct 31.
Malaysian companies, which still
focus on the external markets, will
be affected due to weaker global
economy,” he said.
Fung concurred with Tham that
plantation companies will underperform in the September quarter,
no thanks to the lower CPO price,
significant slower exports to China, as well as the weaker fresh fruit
brunch output.
Fung expects companies in the
aviation sector to continue to underperform, save for AirAsia, which
has seen positive contribution from
the Visit Malaysia Year 2014, especially its domestic and regional
flights in the Asean market.
YTL Power’s
Jordan project
appoints EPC
contractor
BY B E N S H A N E L IM
KUALA LUMPUR: YTL Power
International Bhd’s 30%-controlled Attarat Power Co (APCO)
is one step closer to finalising the 554mw oil shale-fired
power plant in Jordan, following
the signing of an engineering,
procurement and construction
(EPC) contract earlier this week.
Coincidentally, the company’s share price has risen over
19% in the past two months,
hitting a peak of RM1.63 on
Tuesday, the highest since
April. YTL Power’s share price
cooled to RM1.59 as of yesterday’s closing.
According to various reports, APCO has signed on
China’s Guangdong Power
Engineering Corp (GPEC) as
the EPC contractor to build the
oil shale plant that is due to be
completed in the second half
of 2018, with construction expected to start next year.
The contract was signed following APCO’s finalised negotiations with the Jordan government for a 30-year power
purchase agreement signed
last month, with an option for
a 10-year extension.
YTL Power’s partners for the
project, which is scheduled to
start generating electricity for
local consumption in the second half of 2018, are Estonia’s
Eesti Energia AS, which holds
65%, and Jordan’s Near East
Investments Co, which has 5%.
Foster Wheeler AG will provide the circulating fluidised
bed boiler island, Siemens AG
will supply the steam turbine
generator and Worley Parsons
Ltd will provide the plant design for the project.
YTL Power’s share price performance has been lacklustre
over the past year after it failed
to secure any new power projects in Malaysia, while its Yes
4G mobile broadband business
continues to drain funds.
However, the company announced a surprise 10 sen dividend in mid-September.
6 HOME BUSINESS
PetDag results likely to disappoint
Crude oil prices expected to continue to slide and affect 4Q results
BY WEI LY NN TA NG
KUALA LUMPUR: Petronas Dagangan Bhd (PetDag), which announced disappointing third-quarter results yesterday — its fourth
straight declining quarter — is unlikely to stir much excitement with
its upcoming fourth quarter ending
Dec 31, 2014 (4QFY14) as crude oil
prices are expected to continue to
slide, said analysts.
They noted that the Mean of
Platts Singapore (MOPS) prices —
the benchmark fuel oil price for
PetDag’s products and the crucial
thing to watch out for that decides
the company’s earnings and margins outlook — will result in more
losses in 4QFY14.
“We expect more MOPS losses in
4Q14 as crude oil prices continue to
fall. We also expect higher product
costs due to more unfavorable timing differences with MOPS prices...
Overall, 4QFY14 results will [likely]
be lacklustre,” Tan Kee Hoong, analyst with Alliance DBS Research,
told The Edge Financial Daily.
MOPS prices mostly affect PetDag’s retail segment — which contributed 47.8% to group revenue
for the nine months of its financial year 2014 (9MFY14) — as this
would reduce subsidies received
by the group. “Taking the cue from 3QFY14
results, 4QFY14 [profits] will probably be worse than 3Q, assuming
oil prices keep falling until the end
of the year,” said Kenanga Research
analyst Teh Kian Yeong.
In PetDag’s 3QFY14 results note,
management also opined that the
remainder of the year is expected
to be challenging, as the downward
trend of oil prices is expected to
continue.
Global oil prices, which remained
around US$105 (RM350.70)-US$110
per barrel in the first half of the year,
have trended downwards since June.
As at the time of writing yesterday,
Brent oil dropped to a new four-year
low of below US$82 a barrel, as weak
economic data from top energy consumer China intensified worries
about demand as a global supply
Petronas Dagangan Bhd
RM
35
Vol (mil)
8
6
30
4
25
RM19.94
2
20
15
0
May 7, 2013
Nov 5, 2014
glut grows, said a Reuters report.
PetDag’s 3QFY14 net profit
plunged 29.1% on-year to RM160.4
million from RM226.2 million; revenue was marginally lower at RM8.23
billion, compared with RM8.41 billion, due to a 4% drop in sales despite a 2% increase in average selling price.
Its cumulative 9MFY14 net profit also fell, sliding 24.2% on-year
Two EGMs called to safeguard
minority shareholders’ interest
BY GHO C H EE Y UAN
KUALA LUMPUR: Protasco Bhd has
clarified that there will be two
extraordinary general meetings
(EGMs) held as requisitioned under
the Special Notices announced on
Oct 27 and Oct 30 for the benefit of
its minority shareholders.
In a statement yesterday, Protasco said the two EGMs have been
scheduled for Nov 26 and 28 respectively. The first EGM is to remove
two of its non-executive directors,
Tey Por Yee and Ooi Kock Aun. Two
Protasco substantial shareholders, UOBM Nominees (Tempatan)
Sdn Bhd and Tan Heng Kui who
collectively hold a 10.51% stake,
want to remove Tey and Ooi.
The second shareholders meeting, which is called by Tey, is to
remove the company’s managing
director Datuk Seri Chong Ket Pen
from his post.
In the latest development, Protasco said a board meeting was held
last Friday, and had decided that
the requisition filed on Oct 27 was
in order and consequently resolved
as required by law to convene the
EGM on Nov 26.
“This board meeting had originally been called at the request of
Tey and Ooi by a notice dated Oct
23. Due to the lack of quorum if
called on Oct 27 as they proposed,
the meeting was set for Oct 31,” it
said.
Protasco stressed that the notice
was a basic request to call a board
meeting, and did not refer to any
alleged wrongdoing on the part of
Tey called the second shareholders
meeting to remove the company’s
managing director. Photo by Sam Fong
Chong or any specific matters to be
put on the agenda.
“Chairman Tan Sri Dr Hadenan
Abdul Jalil by his letter dated Oct
24 requested more details for the
agenda, but neither Tey nor Ooi
responded,” Protasco said, adding that the duo did not present
evidence of their allegations, contrary to their recent statements to
the media.
“Tey, who owns and controls Kingdom Seekers Ventures
Sdn Bhd, also had not presented
to the Board any evidence of these
accusations prior to the company’s legal suit announced on Sept
22, or prior to filing his own derivative action in court on Oct 28,”
Protasco said.
Protasco said the Board will continue to act in the best interests of
the company and minority shareholders as it has always done.
To recap, Protasco’s shareholder
saga began when Protasco filed a
legal suit against Tey, Ooi and PT
Anglo Slavia Utama Tbk to claim
back US$22.2 million (RM73 million) it had paid in its foiled attempt
to buy a 63% stake in oil and gas
outfit PT Anglo Slavic Indonesia.
Protasco claimed in a filing with
Bursa Malaysia that naming Tey
and Ooi as defendants in the suit
was premised on the breach of their
fiduciary and statutory duties, including the duty to disclose their
interests in the transaction, conspiracy to defraud Protasco and
the “making of secret profit”.
In defending himself in the suit,
Tey, who owns 16.68% of Protasco,
had alleged that Chong had gained
some RM10 million from two Protasco’s Indonesia investments.
He said Protasco through its subsidiaries had paid a total of RM16
million to PT Goldchild Integritas for bitumen and coal trading
with Indonesia. Of this RM16 million, RM10 million was channelled
back to RS Maha Niaga Sdn Bhd,
whose shareholders are senior
management executives of Protasco.
Tey filed a derivative action
against Protasco and its senior
management, through his private
vehicle Kingdom Seekers Ventures,
for the return of RM10 million to
Protasco and general damages it
purportedly suffered.
However, Chong has denied all
the allegations.
to RM501.1 million from RM660.4
million, despite marginally better
revenue at RM23.96 billion from
RM24.89 million, as its retail segment reported lower operating margins of 3.2% versus 5.3% in the previous corresponding period. In a research note yesterday,
CIMB Research said it expects a
decent 4QFY14 as year-end travel
spurs petrol and jet fuel sales, even
as it noted that PetDag’s 9MFY14
net profit had “missed the mark”.
Its analyst Norziana Mohd Inon
said PetDag’s retail expansion is
set to continue, with management
targeting 30 new stations this year.
It started FY14 with 1,069 petrol
stations and opened 16 stations in
the first half of the year.
“By year-end, the bulk of the
company’s RM500 million annual
capex (excluding RM200 million set
aside for operations in the Philippines, Vietnam and Thailand) will
be spent on widening its domestic
retail network,” Norziana remarked.
But Kenanga’s Teh, while acknowledging that volume will pick
up in 4QFY14 and will contribute
to top-line growth, cautioned that
margins may still be depressed —
particularly from the retail segment
— again, due to the sliding oil prices. Alliance DBS’ Tan, however,
said PetDag’s sales volume, which
has been growing at a single-digit
percentage, “does not help much”,
citing the MOPS losses of RM70.5
million incurred in 3Q alone, which
is already one-third of PetDag’s operating profit of RM230.7 million.
As at yesterday, Bloomberg data
showed five research houses had
less than optimistic views on PetDag’s stock, with “underperform”,
“market perform”, “fully valued”, “sell”,
and “hold” calls with target prices
ranging from RM14.80 to RM20.80.
PetDag was the top loser on Bursa Malaysia yesterday, shedding 56
sen or 2.73% to close at RM19.94,
giving it a market capitalisation of
RM19.8 billion. However, research
houses are expected to come up
with revised earnings forecasts and
target prices today after an analyst
briefing yesterday.
IFCA MSC 3Q net profit soars 406%
BY C H E S T E R TAY
KUALA LUMPUR: Integrated
software provider IFCA MSC Bhd
saw its net profit jump more than
fivefold to RM8.53 million for the
third financial quarter ended Sept
30, 2014 (3QFY14) from RM1.56
million a year ago, contributed by all business units, notably
its goods and services tax (GST)
compliance upgrade business.
Revenue for 3QFY14 rose 68.7%
to RM25.75 million. For the ninemonth period, its net profit increased more than sevenfold to
RM11.95 million from RM1.64
million a year ago, while revenue
was up 53% to RM58.06 million.
“Overseas business (for
9MFY14) grew 63.6% to RM16.4
million, while Malaysia’s grew
49% to RM41.6 million (from
the year-ago period),” IFCA MSC
said in a filing with Bursa Malaysia yesterday.
IFCA MSC said its GST com-
AS HIGHLIGHTED BY
Stocks With Momentum
pliance upgrade business accounted for 14% or RM8.4 million
of total revenue.
“This is a reflection on the GST
implementations [that] are just
beginning to roll out. The rollout speed will accelerate, just
as orders will continue to grow
rapidly,” it added.
IFCA MSC was picked as one
of TheEdge Research’s Stocks with
Momentum on Oct 24.
“With the GST-implementation date drawing near, companies would need to upgrade or
purchase GST-accredited software to adapt to the new regulation,” The Edge Research said.
RTO of Bina Goodyear falls through
BY C H E S T E R TAY
KUALA LUMPUR: The proposed
reverse takeover exercise (RTO)
of Bina Goodyear Bhd has fallen
through.
In a filing with Bursa Malaysia yesterday, Bina Goodyear
said Trinity Group Sdn Bhd had
“considered and decided” not to
resume negotiation on the proposed RTO.
The RTO was part of Bina
Goodyear’s regularisation plan,
which included proposals for a
capital restructuring exercise, a
share exchange to be carried out
between the company and a special purpose vehicle company,
and a rights issue. Bina Goodyear in early September signed a
heads of agreement with Trinity
Group to facilitate the new regularisation plan.
In a separate filing with the
exchange last month, Bina Goodyear declared that its external
auditor had issued a disclaimer
opinion on its financial statements for the year ended June 30.
THU RSDAY N OV E MB E R 6, 2014 • T HEED G E FINA NCIA L DAILY
HOME BUSINESS 7
s Sunway stake
Palm oil industry needs GIC’
disposal ‘timely’
urgent expansion
BY Y E N N E FO O
To raise yield to meet global demand in 2018
BY MEENA L A KSHA NA
KUALA LUMPUR: The palm oil
industry, with its current slow expansion in Southeast Asia, faces a
major challenge in meeting global
demand for oils and fats by 2018,
said Oil World executive director
Thomas Mielke yesterday.
“If we do not accelerate (oil palm)
planting and replanting in Southeast
Asia, and if we do not raise yields to
possible levels, then we will face a
challenge to meet global demand in
2018/2019,” he told the Oils and Fats
International Congress 2014 here.
A rough estimate by Oil World
projects that an additional 32 million tonnes of palm oil will have to
be produced to satisfy global demand by 2025, he said.
“When we look at the rate of Indonesian palm oil growing expansion, it makes us very nervous,” he
said, adding that the reasons for the
slow expansion in Southeast Asia
is lack of land as well as the nega-
tive campaign directed by non-governmental organisations against
palm oil.
Mielke said it would be detrimental to be hemmed in by negative
sentiments or perceptions against
palm oil as it is a huge contributor
in satisfying the global demand for
oils and fats, which is more than that
for any other vegetable fat.
The drivers for increasing demand for oils and fats are growth
in population and increasing urbanisation, which have led to an
increase in the middle class and
income growth, as well as more demand for biofuels, he noted.
China and India, the world’s largest importers of palm oil, are facing
a huge demand problem with lack
of land for oil seed planting, he said.
“In China, oil seed production
is decreasing because acreage is
decreasing, but demand is rising.
In India, it is the same. They are
importing close to 70% [of their] oil
requirements,” he added.
Mielke said world demand for oils
and fats has been growing at an average 7 million tonnes a year over the
past two years and global demand
is roughly projected to increase by
93.5 million tonnes by 2025.
PT Smart Tbk president director Daud Dharsono said Indonesia
currently has 10.01 million ha of oil
palm plantations that produce 28.4
million tonnes of palm oil, and that
the country plans to expand them
to 13.074 million ha by 2025.
This, he said, will result in the
production of 50.15 million tonnes
of palm oil, with 23.7 million tonnes
for export.
Daud said Indonesia’s expansion
plans will see an addition of 350,000
ha per year from next year onwards,
with a gradual decline to 150,000 ha
per year by 2025. The congress is jointly organised
by the Malaysian Oil Scientists’ and
Technologists’ Association and Oils
& Fats International, in collaboration
with the Malaysian Palm Oil Board.
KUALA LUMPUR: Analysts are “not
overly concerned” about Singapore
sovereign wealth fund GIC Pte Ltd’s
(GIC) decision to let go of its stake
in Malaysian conglomerate Sunway
Bhd (Sunway) that is worth more
than RM400 million, viewing it as
a timely profit-taking move.
An analyst with a local investment bank said it would be “a
bit silly” for GIC not to realise its
gains from investing in Sunway after holding on to the shares since
“the early days”.
“If you look at it from the seller’s perspective, it is a question of
how much more GIC can gain in
incremental value if it continues
to hold on to its Sunway stake for
the next couple of years versus how
much gain GIC will be realising
when it sells all of its shares now,”
she explained.
“I think it would be a bit silly for
GIC not to take profit at this point
when the share price has gone up
many folds from its investment in
the early 1990s and [as] Sunway’s
assets are being listed one by one,”
she added.
She said GIC started reducing its
stake in Sunway after it started to
“spin off ” some its most valuable
assets by listing its business arms
separately on Bursa Malaysia.
In 2010, Sunway listed Sunway
Real Estate Investment Trust and
injected its collection of shopping
malls, hotels and office towers
into it.
In September 2014, Sunway Bhd
proposed the listing of its construction unit Sunway Construction Sdn
Bhd on Bursa Malaysia by the second quarter of 2015.
A secondary reason for GIC’s
decision to pull out of the Malaysian property-cum-construction
player is the exposure both of the
companies have in the Iskandar
Malaysia development in Johor.
“GIC and Sunway both have
huge exposure to the Iskandar
Malaysia development. By selling
its stake in Sunway, GIC is actually limiting that exposure and that
makes sense too,” she said.
8 HOME BUSINESS
MISC to gain if Petronas
changes LNG strategy
National oil company may sell four new builds as it relegates ship ownership
BY Y EN N E FOO
KUALA LUMPUR: MISC Bhd, a
62.7%-owned subsidiary of Petroliam Nasional Bhd (Petronas), will
have much to gain if the national
oil company abandons its strategy
to directly own its fleet of liquefied
natural gas (LNG) vessels.
In a report yesterday, CIMB Research is of the view that Petronas
may sell four LNG new builds it
ordered in 2013 as it relegates ship
ownership to “low priority”.
Gan Jian Bo, an analyst with
CIMB Research, said Petronas may
be changing its ship ownership strategy to directly order LNG vessels,
revealed in August 2013, because its
hands are full with LNG projects in
Malaysia and overseas which offer “a
lot better” internal rate of return (IRR).
“Petronas is very busy with several projects. They have the Refinery and Petrochemical Integrated
Development (Rapid) project in
Malaysia, the Gladstone LNG project in Australia and one in Canada
with Progress Energy,” Gan told The
Edge Financial Daily.
Gan estimates that LNG projects would typically offer IRR of
12% to 15%, compared with the
high single-digit returns from the
shipping business.
“If Petronas does sell these vessels to MISC, Petronas will likely
charter these ships from MISC to
meet its shipping requirements in
Bintulu and other ongoing projects
like FLNG1,” said CIMB Research.
“The inclusion of four new longterm LNG charter contracts with
Petronas will help mitigate MISC’s
LNG earnings decline, since six of
its LNG ship charters expire in 2014
to 2017,” it said.
This is timely as Petronas’ four
new vessels are slated for delivery in
2016 and 2017 and will be earnings
accretive from 2017. The new ships
also come with the option to procure
four additional LNG vessels, which
could be passed on to MISC. With
that view, CIMB Research made an
“add” call on MISC’s stock at RM6.90
MISC Bhd
RM
8
RM7.27
7
6
5
4
Nov 6, 2013
Nov 5, 2014
and gave it a target price of RM8.22.
MIDF Research said Petronas’
change of strategy is “logical” as
it does not have the expertise to
manage LNG vessels.
“Petronas ordered the four LNG
new builds after its attempt to privatise MISC failed to ensure that
there will be no interruption in the
LNG transportation services,” an
analyst from MIDF Research told
The Edge Financial Daily.
“Petronas does not have the expertise to manage these assets and
had to engage MISC to manage the
construction of the new ships. Selling the ships to MISC would make
sense,” he said.
He added that the shipping expert would also have the financial
muscle to acquire the four vessels
from Petronas, having strengthened
its balance sheet after the sale of its
50% stake in Gumusut-Kasap Semi
Floating Production System (L) Ltd
to Petronas Carigali Sdn Bhd in 2013.
To recap, Petronas had in August
last year announced that it had decided to buy its own LNG vessels,
after it failed to privatise MISC. Two
months later, the group awarded the
contract to build four LNG vessels,
with the option to order an additional four LNG vessels, to South Korea’s
Hyundai Heavy Industries Co. At the
same time, MISC was engaged to
provide project management and
technical consultancy services for the
construction of the new LNG ships.
Zeti: Demographic shifts post new challenges
KUALA LUMPUR: Demographic
shifts, especially rapid urbanisation,
provide a new context of challenges in pursuing meaningful financial education strategies to achieve
effective and responsible financial
management in communities, said
Bank Negara Malaysia governor
Tan Sri Dr Zeti Akhtar Aziz (pic).
She said Asia had experienced
the most rapid demographic change
in the world in the recent two decades and several of its economies
had to face new challenges, including slower population growth, rapid
ageing, intensification of urbanisation, and the consequences of
increasing life expectancy.
She said Asia’s urban population is projected to grow to 56%
in 2030 from 43% in 2010 and rise
further to 64% in 2050. Accompanying this is the growth of mega
cities with populations exceeding
10 million, she added.
Asia’s urban population is projected to
grow to 56% in 2030 from 43% in 2010
and rise further to 64% in 2050, says
Zeti. Photo by Shahrin Yahya
Zeti said this in her opening
keynote address at the 11th CitiFT Financial Education Summit
2014, on, “Expanding Opportunity Through Financial Capability:
Urban Innovations and Partnership” yesterday.
She said it is recognised that economic growth and development, no
matter how stellar, will fade when
inequality sets in and income disparities widen. “Hence, balanced
growth is an important imperative
for socio-economic progress.
“To address this, inclusive growth
has gained prominence among policymakers in the region, and this
needs to be further reinforced by
strategies targeted at preparing individuals to be well equipped to adjust to new economic, financial and
social realities that confront them.
“A lack of awareness of different
types of financial products, low level of confidence and poor knowledge of how products work, are
barriers to financial inclusion and
become more acute in increasingly complex and technology-driven
financial systems,” she said.
According to Zeti, financial education as such, has an important
role to break such barriers and this
will require more innovative approaches, broader partnerships
and deeper understanding of social attitudes.
She said the commitment to
financial education should be a
natural extension of the financial
industry’s commitment to a professional and ethical conduct of
business, and strategies need to
be accompanied by a strong focus
on developing a robust consumer
protection regime.
Citibank Bhd chief executive officer Lee Lung Nien said the bank
through its financial education efforts since 2003, has supported the
central bank’s efforts in addressing
the local financial capability gap
and has contributed US$2 million
(RM6.7 million) in Citi Foundation
grants. — Bernama
Mitrajaya lands RM401.88m condo job from UEM Sunrise
BY SURIN MURUGIAH
KUALA LUMPUR: Mitrajaya Holdings Bhd has secured a RM401.88
million construction project from
a unit of UEM Sunrise Bhd.
In a filing with the local bourse
yesterday, Mitrajaya said its unit
Pembinaan Mitrajaya Sdn Bhd
has been awarded the project to
build the main buildings and external works for two blocks of a
condominium in Mont Kiara, Kuala Lumpur.
The group said the contract is
expected to be completed by Aug
2, 2017 and is expected to contribute positively to its future earnings.
Earlier in the day, Hong Leong
IB Research (HLIB Research) ini-
tiated coverage on Mitrajaya with
a “buy” rating and target price of
RM1.52, saying the group’s order
book of RM1.3 billion implied a
superior revenue cover of six times.
It said Mitrajaya has RM2 billion
in tenders, and another potential
contract by year-end, adding that
it expects strong take-up for the
group’s Wangsa 9 development.
“Earnings to double this year,
three-year compound annual
growth rate at 40%. Initiate with
a ‘buy’, RM1.52 target price (55%
upside), our top small-cap construction pick,” it said in a note to
its clients.
“At current price, investors are
getting its land at 48% discount
and all its core business for free,”
MHB 3Q
revenue surges
20.04% to
RM539.79m
from RM449.67m
BY G H O C H E E Y UA N
KUALA LUMPUR: Malaysia
Marine and Heavy Engineering Holdings Bhd (MHB), a
66.5%-owned subsidiary of
MISC Bhd, saw its net profit for
the third quarter ended Sept 30
of financial year 2014 (3QFY14)
increase 7.3% to RM39.09 million from RM36.43 million a
year ago, even though contributions from both its offshore and
marine segments were lower.
Revenue for 3QFY14 surged
20.04% to RM539.79 million
against RM449.67 million a year
ago. Earnings per share (EPS)
rose to 2.4 sen compared with
2.3 sen in 3QFY13.
For the nine months ended Sept 30 (9MFY14), however, MHB’s net profit declined
15.7% to RM113.45 million from
RM134.58 million a year ago.
Revenue grew marginally by
1.38% to RM2.19 billion from
RM2.15 billion in 9MFY13.
EPS was lower at 7.1 sen
compared with 8.4 sen in
9MFY13.
In a filing with Bursa Malaysia yesterday, MHB said its
offshore segment registered
higher revenue due to progress attained from the ongoing SK316 and Malikai TLP projects, but the operating profit
is relatively lower with fewer
projects undertaken.
Its marine division’s 3QFY14
revenue came in lower against
the corresponding quarter last
year on lower value of repair
work for liquefied natural gas
vessels and rigs/special vessels.
On prospects, MHB said operationally, good progress has
been attained with the two projects in MMHE East and MMHE
West yards, that is, the TLP Malikai and SK316.
“The group is still recognising some residual revenue and
profit from some of the recently
completed or delivered projects, subject to securing approval of outstanding variation
orders from the respective clients,” it said.
For its offshore business
segment, MHB said it has won
some new fabrication contracts
that would contribute positively
to the group’s performance in
the coming financial year.
“Concurrently, the group is
also actively bidding for new
domestic and international projects where aggressive
competition is expected with
participation of regional and international companies,” it said.
As for the marine business
unit, MHB said it faces stiff competition from increased vessel
repair capacity in the region,
but “medium-term prospects
remain favourable as the continued growth in the number of
shipping vessels would provide
a growing need for dry docking
and marine repair services”.
DPS Resources Bhd
DPS is involved in manufacturing rubber
wood furniture components as well as providing kiln drying services.
DPS’ share price has risen 45% since August
on the back of rising volume — it closed at 14.5
sen on November 4. Nevertheless, the company’s underlying fundamentals remain weak.
The company has been in the red since
2010, though losses are narrowing — net loss
for FYMar2014 totalled RM 333,966. Despite
registering a profit in 1QFY15, there is yet
DPS RESOURCES BHD
(ALL FIGURES IN RM MIL)
concrete evidence of a turnaround. Investors should note that although the company
was profitable for the first three quarters of
FY14, losses in 4QFY14 wiped out all these
profits and tipped the company back to being loss-making.
The stock is trading at 0.5 times its book
value of 31 sen, with an annualised P/E ratio
of 23.3 times based on its 1QFY15 profit. The
company has a market capitalisation of only
RM38 million.
Valuation factor *
1.20
Fundamental factor **
0.35
Trailing 12m P/E (x)
416.09
Trailing 12m PEG (x)
P/NAV (x)
0.46
Trailing 12M Dividend yield (%)
Market capitalisation (RM mil)
38.28
Shares outstanding (ex-treasury) mil 264.00
Beta
1.71
12-month price range
0.09 - 0.18
*Valuation factor — Composite measure of historical return & valuation
**Fundamental factor — Composite measure of balance sheet strength &
profitability
Note: A score of 3.0 is the best to have and 0.0 is the worst to have
AmFIRST Real Estate Investment Trust
AMFIRST, a real estate investment trust
(REIT), may appeal to investors seeking
stable, above-average yield, especially in
current low interest rate environment. The
company distributed 7.35 sen per unit in FY
March 2014, translating into an attractive
yield of 7.5%.
AmFIRST has exposure to the office,
retail and hotel sectors in the Klang Valley
and Melaka with a total net lettable area of
2.78 million sq ft. The company manages
nine properties including Menara AmBank,
The Summit Subang USJ and Bangunan
AmBank Group. Overall occupancy rate
stood at 84.8% as at June 30, 2014, down
from 88.1% in the previous quarter. Gearing stood at 35%.
The stock is trading at a 20% discount to
its net asset value of RM1.22 per share. Its
share price weakness could be due to challenging outlook for the office market, as a
result of supply and demand imbalances.
Valuation factor *
3.00
0.60
13.87
P/NAV (x)
0.80
7.50
672.67
Beta
0.26
12-month price range (RM)
0.88 - 0.99
profitability
Careplus Bhd
CAREPLUS was picked up by our momentum
algorithm for the second time this month, after
the sharp spike in volume for the past two days.
The stock price has risen 7.14% to a threeyear high of RM 0.525 since we first picked
it up on October 31 while the FBM KLCI has
decreased by 0.42% in the same time frame.
The core business of Careplus is manufacturing of latex examination gloves under its
own Rubbercare and Guardian brand names,
ST O C KS W I T H M O M E N T U M 9
Financials
Turnover
EBITDA
Interest expense
Pre-tax profit/(loss)
Net profit/(loss) - owners of company
Fixed assets - PPE
Total assets
Shareholders’ fund
Gross borrowings
Net debt/(cash)
DPS RESOURCES BHD
RATIOS
DPS (RM)
Net asset per share (RM)
Turnover growth (%)
Net profit growth (%)
Net margin (%)
ROE (%)
ROA (%)
Current ratio (x)
Gearing (%)
Interest cover (x)
AMFIRST REAL ESTATE INVESTMENT TRUST
Financials
Gross revenue
Property operating expenses
Net property income
Interest expense
FV gains/(loss) on investment properties
Income available for distribution
Investment properties
Total assets
Total unitholders’ funds
Gross borrowing
AMFIRST REAL ESTATE INVESTMENT TRUST
RATIOS
Distribution per unit (RM)
Earnings per unit (sen)
Revenue growth (%)
Income avail for dist growth (%)
Net property income margin (%)
Manager’s fee ratio (%)
ROA (%)
ROE (%)
Gearing (%)
CAREPLUS BHD
as well as third party labels. The company also
sources nitrile and vinyl gloves from third party
manufacturers, processes and repacks them
under its brand names and private labels, as
it does not manufacture these gloves.
Careplus has been borrowing for capacity
expansions. Fixed assets grew from RM20.7
million in 2011 to RM78 million at end-June
2014 while gearing has risen to 105%. No dividend was paid in the last financial year.
Valuation factor *
0.30
0.60
43.06
(3.33)
P/NAV (x)
2.65
123.38
Beta
0.57
0.30-0.53
profitability
Financials
Turnover
EBITDA
Interest expense
Fixed assets - PPE
Total assets
Gross borrowings
Net debt/(cash)
CAREPLUS BHD
RATIOS
DPS (RM)
ROE (%)
ROA (%)
Turnover growth (%)
Net margin (%)
Current ratio (x)
Gearing (%)
Interest cover (x)
FY12
31/3/2012
FY13
31/3/2013
FY14
31/3/2014
LATEST 1QFY15
30/6/2014
80.4
(35.3)
5.0
(48.9)
(45.6)
129.3
142.0
110.0
51.4
50.8
37.8
(19.8)
3.6
(28.5)
(31.0)
85.7
101.8
77.8
39.1
39.0
38.3
5.9
2.3
(1.4)
(0.3)
97.3
97.4
82.3
36.3
36.2
10.5
1.9
0.3
0.4
108.2
109.2
82.7
34.7
34.4
FY12
31/3/2012
FY13
31/3/2013
FY14
31/3/2014
ROLLING 12-MTH
0.42
(31.33)
(56.78)
(34.38)
(27.16)
1.04
46.19
(7.09)
0.29
(53.03)
(82.15)
(33.04)
(25.45)
1.18
50.06
(5.51)
0.31
1.47
(0.88)
(0.42)
(0.34)
0.78
43.96
2.55
0.31
(11.78)
0.22
0.11
0.09
1.05
41.60
4.63
FY12
31/3/2012
FY13
31/3/2013
FY14
31/3/2014
LATEST 1QFY15
30/6/2014
98.0
32.1
65.9
19.7
12.2
40.0
1,179.8
1,198.5
617.8
550.0
109.8
35.6
74.2
19.9
5.1
46.9
1,277.2
1,297.6
836.9
426.4
112.8
36.3
76.5
19.2
12.3
50.3
1,301.9
1,314.1
849.9
429.1
27.5
10.0
17.5
4.9
10.7
1,305.3
1,328.3
836.4
460.4
FY12
31/3/2012
FY13
31/3/2013
FY14
31/3/2014
ROLLING 12-MTH
0.09
9.32
1.44
10.66
-4.21
67.24
8.16
3.56
6.54
45.89
0.07
7.70
1.22
12.05
17.32
67.56
8.07
3.76
6.45
32.86
0.07
7.32
1.24
2.74
7.13
67.80
8.17
3.85
5.96
32.65
0.07
7.07
1.22
0.20
10.74
66.71
8.36
3.76
5.83
34.66
FY12
31/1/2012
FY13
31/1/2013
FY13
31/12/2013
LATEST 2QFY14
30/6/2014
47.2
4.0
0.2
2.9
3.1
20.7
36.3
30.4
6.1
(0.4)
97.4
8.7
1.4
2.8
3.0
66.0
74.7
42.9
43.2
31.8
129.1
11.4
2.3
2.8
1.3
76.4
84.3
43.6
56.1
49.3
35.2
4.7
0.7
2.2
1.6
77.9
83.5
46.4
53.9
48.8
FY12
31/1/2012
FY13
31/1/2013
FY13
31/12/2013
ROLLING 12-MTH
0.1
14.0
11.7
12.8
(48.9)
6.6
4.1
16.7
0.2
8.1
5.4
106.2
(5.4)
3.1
1.2
74.1
6.4
0.2
2.9
1.6
32.5
(57.2)
1.0
1.1
113.1
4.9
0.2
6.5
3.6
5.4
(13.0)
2.2
1.1
105.2
5.7
1 0 I N V E ST I N G I D E A S
S TO C K S W I T H L I K E L I H O O D O F C O R P O R AT E E X E R C I S E
Berjaya Land Bhd
CONTINUING our discussion on conglomerate Berjaya Group, we take a closer look at
another subsidiary — Berjaya Land Berhad.
BLand is involved in hotel, resort, recreation development and vacation timeshare
as well as property investment and development. It also has a 41% stake in Berjaya
Sports Toto, which we have discussed previously (refer TEFD October 4, 2014). Some
of the notable hotels within its stable are
the Berjaya Times Square Hotel and Berjaya Langkawi Resort in Malaysia as well as
Berjaya Eden Park in London.
The company’s earnings have been erratic from year to year despite steadily increasing revenue. For instance, net profit
fell from RM73 million in FYApril2012 to
RM33 million in FY13 before recovering to
RM105 million in FY14. Based on trailing
12-mth earnings, the stock is now trading
at a hefty P/E of 109 times. Unless the com-
pany can boost earnings considerably, and
hence driving P/E multiples lower, upside
for the stock may be limited.
However, the stock is trading at 0.8 times
its book value of RM1.08. This suggests that a
feasible alternative to enhance shareholder
value is to spinoff some of its assets.
One possibility is to set up a real estate
investment trust (REIT) consisting of its
myriad hotels/resorts. Currently, there is
only one other hospitality-focused REIT
on Bursa Malaysia, under the YTL Group.
This would allow BLand to unlock the
value of its hotels while still retaining control over them — and raise some cash at the
same time. The latter could, in turn, bolster
working capital for the development of its
landbank in the Gombak and Johor areas
— thereby creating further value for shareholders. These landbank is carried at book
and has not been revalued since 1997.
Valuation factor *
1.20
0.55
107.88
(1.54)
P/NAV (x)
0.77
0.90
4,141.20
Shares outstanding (ex-treasury) mil 4,989.39
Beta
0.19
0.79 - 0.88
profitability
BOUGHT DATE
T O N G ’S
MOMENTUM
P O RT F O L I O
THE FBM KLCI fell for the third consecutive
day on Wednesday, amid mixed sentiment
in key regional markets.
Market breadth was negative with 251
gainers as compared to 576 losers. Sentiment for the broader market was affected
by the fall in oil and gas counters such as
SapuraKencana Petroleum and Petronas
Dagangan.
Brent crude oil hit a three-year low of
$82.08, its weakest since October 2010. This
came after Saudi Arabia unexpectedly cut
the price of oil sold to the US.
Investors are also cautious after disappointing US trade data may have reinforced
expectations of sluggish global economic
growth.
My portfolio value decreased by 0.75%
to RM 106,116, roughly in line with FBM
KLCI’s decline of 0.44%, while total returns
for the portfolio declined from 6.9% to 6.1%.
The portfolio started on 8 July 2014 with a
capital of RM100,000. Since then, it has outperformed the FBM KLCI by 8.9%, and has
registered an annualised return of 18.4%.
Total profits currently stand at RM 6,116.
The only gainer for the portfolio on
Wednesday was HIL Industries, up 4.5%.
The stocks that lost ground were IQ Group
(-3.8%), Sunway (-3.6%), and Crescendo
(-1.1%).
BERJAYA LAND BHD
FY12
30/4/2012
FY13
30/4/2013
FY14
30/4/2014
LATEST 1QFY15
31/7/2014
Income statement
Turnover
EBITDA
Depreciation and amortisation
EBIT
Associates
Interest income
Interest expense
Extraordinary gain/(loss)
Balance sheet
Fixed assets - PPE
Biological assets
Intangibles & goodwill
Cash and equivalents
Total current assets
ST borrowings
Total current liabilities
Total assets
Long term borrowings
4,195.6
687.6
109.3
578.3
3.1
42.8
173.1
37.2
488.4
73.4
4,246.6
654.2
104.7
549.5
(11.2)
35.6
154.2
41.7
461.4
33.0
5,021.3
753.8
100.2
653.5
(14.6)
37.5
183.7
42.6
535.2
104.6
1,410.8
164.7
23.6
141.1
(5.1)
10.3
42.2
28.3
132.4
39.7
1,857.8
5,457.3
845.4
2,233.8
625.4
1,262.3
10,612.5
5,225.3
1,791.6
1,840.0
5,464.0
761.7
2,271.2
1,587.1
2,250.8
10,040.2
5,203.6
1,213.6
2,179.0
5,570.4
998.1
3,602.3
1,246.5
2,658.9
11,372.4
5,358.5
2,322.4
2,151.0
5,571.2
1,036.1
3,686.3
1,401.0
2,852.7
11,207.3
5,375.6
2,136.7
BERJAYA LAND BHD
RATIOS
FY12
30/4/2012
FY13
30/4/2013
FY14
30/4/2014
ROLLING 12-MTH
0.01
1.04
1.41
0.73
3.43
(16.46)
1.74
1.76
30.07
3.97
0.01
1.05
0.63
0.32
1.21
(54.99)
0.77
1.00
39.18
4.24
0.01
1.08
1.98
0.98
18.24
216.71
2.08
1.35
47.97
4.10
0.01
1.08
0.72
0.36
26.75
(70.11)
0.71
1.29
46.53
3.50
DPS (RM)
ROE (%)
ROA (%)
Turnover growth (%)
Net margin (%)
Current ratio (x)
Gearing (%)
Interest cover (x)
QUANTITY
BOUGHT PRICE
RM
BOUGHT VALUE
RM
CURRENT PRICE
RM
CURRENT VALUE
RM
GAIN / LOSS
RM
GAIN / LOSS
2,000
5,700
5,100
11,000
3,000
3,900
10,400
5,400
3,000
2.44
0.88
2.82
0.75
2.72
2.52
0.765
1.850
3.450
4,880.0
4,987.5
14,382.0
8,195.0
8,160.0
9,828.0
7,956.0
9,990.0
10,350.0
4.65
0.87
2.73
0.87
2.73
2.44
0.81
1.76
3.23
9,300.0
4,930.5
13,923.0
9,515.0
8,190.0
9,516.0
8,372.0
9,504.0
9,690.0
4,420.0
(57.0)
(459.0)
1,320.0
30.0
(312.0)
416.0
(486.0)
(660.0)
90.6%
(1.1%)
(3.2%)
16.1%
0.4%
(3.2%)
5.2%
(4.9%)
(6.4%)
Shares held:
KSL Holdings Bhd
Willowglen MSC Bhd
Crescendo Corporation Bhd
Willowglen MSC Bhd
Crescendo Corporation Bhd
Teo Seng Capital Berhad
Hil Industries
IQGroup
Sunway
10-Jul
1-Oct
1-Oct
17-Oct
17-Oct
3-Nov
4-Nov
4-Nov
4-Nov
Total
Shares bought:
No shares were bought today.
.
Total shares held
--------------78,728.50
--------------- --------------82,940.5
4,212.0
--------------78,728.5
--------------- --------------82,940.5
4,212.0
5.4%
Shares sold:
No shares were sold today.
Cash balance
23,175.4
Realised profits / (losses)
1,903.9
Total Portfolio Returns
Annualised returns for portfolio
100,000.00
106,115.9
6,115.9
6.1%
18.4%
Portfolio Beta
Risk adjusted returns for portfolio
Performance Comparison
FBM KLCI
At portfolio start:
FBM KLCI Emas
At portfolio start:
0.942
19.6%
1,892.7
13,163.7
Current:
Current:
1,839.3
12,767.6
Change
Change
(2.8%)
(3.0%)
Relative portfolio
outperformance
8.9%
9.1%
This is a personal portfolio for information purposes only and does not constitute a recommendation or solicitation or expression of views to influence readers to buy/sell any stocks.
Portfolio started on 8 July 2014 with RM100,000.
BP PLASTICS HOLDING BHD
I N S I D E R A S I A’S S T O C K P I C K
BP Plastics Holding Bhd
BP Plastics is one of the leading producers of
industrial plastic packaging bags and stretch
film in the country. It produces a combined
60,000 metric tonnes of cast and blown films
annually, catering to a customer base of more
than 800 companies in over 35 countries.
Cast film has superior stretching, puncture
resistance and load-retention properties and
are mainly used for industrial purposes. Blown
film can be turned into plastic bags according
to specifications, tailored to suit packaging
needs of the food and beverage (F&B) sector.
Edge Research rates this company a 2.05
out of 3 on fundamentals and 2.4 out of 3 in
terms of valuation attractiveness.
The stock is currently trading at trailing
12-month P/E of 13.29 times — low relative
to its 20.1% earnings growth over the same
period. It is priced at just about book value
of 84 sen per share. That’s lower than valu-
I N V E ST I N G I D E A S 1 1
ations of peers such as SLP Resources Berhad — price-to-book ratio of 1.9 times and
trailing 12-month P/E of 15.2 times — and
SCGM Berhad, whose shares are priced at
2.4 times book and 14 times P/E.
Plastic packaging companies are seen as
beneficiaries of falling crude oil prices — the
cost for raw materials, such as resin, are closely
correlated to that of oil.
BP Plastic’s sales picked up strongly in 1H14,
expanding by 38.1% y-o-y, while net profit grew
31.4% to RM6.4 million over the same period.
Moving forward, the recovery in major export
markets will spur demand in plastic packaging. Recent weakening of the ringgit would
also help boost export revenue.
The company has a solid balance sheet
with net cash of RM34.2 million. Dividends
totaled 5 sen per share in 2013, translating
into attractive yield of 5.9%.
Valuation factor *
2.40
2.05
13.29
0.66
P/NAV (x)
1.00
7.02
155.17
Beta
0.31
0.57 - 0.94
profitability
Income statement
Turnover
EBITDA
Depreciation and amortisation
EBIT
Associates
Interest income
Interest expense
Extraordinary gain/(loss)
Balance sheet
Fixed assets - PPE
Biological assets
Intangibles & goodwill
Cash and equivalents
Total current assets
ST borrowings
Total current liabilities
Total assets
Long term borrowings
BP PLASTICS HOLDING BHD
RATIOS
DPS (RM)
ROE (%)
ROA (%)
Turnover growth (%)
Net margin (%)
Current ratio (x)
Gearing (%)
Interest cover (x)
FY11
31/12/2011
FY12
31/12/2012
FY13
31/12/2013
LATEST 2QFY14
30/6/2014
222.2
22.9
7.0
15.9
1.6
0.0
17.5
15.5
220.3
20.1
8.4
11.7
1.3
0.0
13.0
9.7
241.0
20.7
8.3
12.4
1.2
0.0
13.5
10.1
75.5
6.2
2.1
4.1
0.2
4.3
3.2
76.1
60.2
114.6
9.6
31.3
159.4
148.1
-
71.7
39.9
121.4
31.6
161.4
150.5
-
68.0
50.0
129.6
3.7
33.9
163.7
153.6
-
64.5
34.2
116.1
16.2
164.5
154.8
-
FY11
31/12/2011
FY12
31/12/2012
FY13
31/12/2013
ROLLING 12-MTH
0.04
0.82
10.65
9.90
0.64
(9.36)
6.99
3.66
525.60
0.04
0.84
6.47
6.02
(0.85)
(37.77)
4.38
3.83
547.15
0.05
0.85
6.64
6.21
9.41
4.52
4.19
3.82
2,551.33
0.06
0.84
7.66
7.18
29.34
20.10
4.14
7.15
1,198.36
1 2 B R O K E R’S C A L L
Dayang Enterprise
slowly accumulating
shares in Perdana
BAT facing bigger
challenge from
illegal cigarettes
THE EDGE FILE PHOTO
British American Tobacco
(M) Bhd
(Nov 5, RM67.86)
Maintain “reduce” with a higher target price (TP) of RM63.40:
British American Tobacco (BAT)
announced that it has raised its
cigarette selling prices by RM1.50
per pack effective Nov 5, 2014.
This is subsequent to the government’s off-budget initiative to increase the excise duty on tobacco
by 12% (or up 3 sen per stick) to
28 sen per stick.
Although we had previously
expected an excise duty hike, the
quantum of the hike was higher
than expected as we only factored
in a moderate increase of 1.5 sen
per stick in our forecasts.
BAT’s Dunhill and Kent brands
will now retail at RM13.50 (from
RM12) per pack while its value-for-money brands such as Pall
Mall and Peter Stuvyesant will now
sell at RM12 (from RM10.50).
Given the pricier cigarettes, we
believe that the proliferation of illegal cigarettes would heighten as
consumers turn to cheaper alternatives. Note that the illicit cigarette
market grew to 39% (from 35%) of
the total industry volume (TIV)
in October to December after the
price hike back in September 2013.
That said, given: i) more strin-
British American Tobacco (Malaysia) Bhd
FYE JUNE (RM MIL)
Revenue
Ebitda
Pre-tax profit
Net profit
EPS (sen)
PER (x)
Core net profit
Core EPS (sen)
Core EPS growth (%)
Core PER (x)
Net DPS (sen)
Dividend yield (%)
EV/Ebitda (x)
Chg in EPS (%)
Affin/Consensus (x)
2012
2013
2014E
2015E
2016E
4,364.8
1,124.8
1,054.4
797.7
279.4
24.3
797.7
279.4
10.9
24.3
272.0
4.0
17.6
-
4,517.2
1,182.4
1,105.4
823.4
288.4
23.6
823.4
288.4
3.2
23.6
282.0
4.1
16.8
-
4,608.4
1,315.0
1,235.1
926.3
324.4
21.0
926.3
324.4
12.5
21.0
317.0
4.7
15.0
1.7
1.0
4,511.7
1,276.0
1,201.6
902.1
315.9
21.5
902.1
315.9
(2.6)
21.5
307.0
4.5
15.4
2.8
1.0
4,355.2
1,233.2
1,163.5
873.6
306.0
22.2
873.6
306.0
(3.2)
22.2
297.0
4.4
15.9
0.6
1.0
Source: Company, Affin Hwang estimates
Dayang Enterprise Holdings Bhd
(Nov 5, RM2.80)
Maintain “buy” with lower target price (TP) of RM4.52:The first
tranche of the private placement
proposed by Dayang Enterprise
(Dayang) was completed on Oct
1 for 52.1 million shares.
The initial proposal was to
place out 82.5 million shares,
which are 10% of the fully paidup capital as of Sept 3, 2014 —
the date of the proposal. Note
that the placement price was also
set at RM3.37 instead of the initial RM3.69. The first tranche has
raised RM175.6 million.
In our Sept 11, 2014 report —
Dayang Enterprise: 3 Possible Ways
To Use Placement Proceeds, we
highlighted three possible scenarios in which Dayang could utilise
its proceeds: i) accumulate more
shares in Perdana Petroleum (Perdana) (Buy, TP: RM2.20), ii) ramp
up capacity for engineering, procurement, construction and com-
missioning (EPCC) jobs; and iii)
purchase deepwater-capable marine assets.
Dayang has been slowly accumulating Perdana shares during
the recent market selldown and
currently owns 26.6% of Perdana
shares.
On the EPCC bids, we gather from our channel checks that
Dayang has been bidding and preparing for an EPCC job related to
an enhanced oil recovery off the
coast of Sarawak.
In light of the enlarged share
base and a larger stake in Perdana, we update our model and take
the opportunity to lower our TP to
RM4.52 (from RM4.80), based on
a 16 times of financial year 2015
forecast price-earnings ratio.
We lift our earnings forecast
marginally and reiterate “buy” on
Dayang, which is a local premier oil
and gas service provider with an excellent track record, in our view.—
RHB Investment Bank, Nov 5
gent efforts by the government to
curb smoking; and ii) higher average
selling prices (ASPs) which would
further aggravate the illegal market,
we are downgrading our financial
year of 2014 to financial year of 2016
(FY14 to FY16) TIV to contract 4% to
10% for FY14 to FY16 (from a softer
contraction of 2% to 8%).
We cut our volume assumption
for BAT by 2% to 9% but input in the Dayang Enterprise Holdings Bhd
ASPs resulting in a 1.7% to 2% up2011
2012
grade to our FY14 to FY16 forecasts. FYE DEC (RM MIL)
382
401
Overall, we maintain our “re- Total turnover
duce” rating on BAT with a slight- Reported net profit
83
101
ly higher TP of RM63.40 (from Recurring net profit
83
101
RM62.40).
22.7
21.8
Recurring net profit growth (%)
Despite its decent dividend yield
0.10
0.12
of 4% over the next three years, risk Recurring EPS (RM)
0.07
0.07
reward is unfavourable, given that DPS (RM)
29.2
24.0
the group is operating in a fairly Recurring PER (x)
4.64
4.06
matured sector with no immedi- P/BV (x)
ate rerating catalysts in the medi- P/CF (x)
24.4
24.8
um term.
2.3
2.3
Dividend yield (%)
Key risks to our view include: i) EV/Ebitda (x)
16.9
13.2
stronger-than-expected sales vol18.6
18.1
ume growth; and ii) lower-than-ex- Return on average equity (%)
net cash net cash
pected operating expenses. — Affin Net debt to equity (%)
Our vs consensus EPS (adjusted) (%)
Hwang Capital, Nov 5
2013
2014F
2015F
553
938
1,104
149
212
252
120
212
252
19.0
76.2
18.5
0.15
0.26
0.31
0.07
0.13
0.15
20.1
11.4
9.6
3.64
2.48
2.20
15.6
15.4
10.4
2.3
4.4
5.2
9.9
6.9
5.9
23.6
25.8
24.2
3.1 net cash net cash
1.3
5.2
Source: Company data, RHB
Petronas Gas 3QFY14 slightly below expectations
Petronas Gas Bhd
(Nov 5, RM21.80)
Maintain market “perform”
with a revised target price (TP)
of RM21.24/sum-of-parts (SoP):
The nine months of financial year
2014 (9MFY14) earnings came in
slightly below our expectations as
the 9MFY14 net profit of RM1.27
billion made up 71% of our FY14
full-year estimates and 74% that of
market consensus.
The main discrepancies between
our estimates and actual results
were: i) the absence of Kiminas
independent power plant (IPP)’s
earnings which already started operations in end-second quarter of
2014 (2Q14); and ii) overestimating
of gas processing earnings by us.
A 20 sen net dividend per share
(NDPS) was declared in 3QFY14,
(ex-date: Oct 18, 2014; payment
date: Dec 8, 2014), bringing 9MFY14
NDPS to 40 sen which was higher
than the 15 sen paid in 9MFY13.
Despite revenue growing 2%,
3QFY14 net profit fell 4% quar-
ter-on-quarter to RM418.6 million from RM435.3 million, mainly
driven by lower gas transportation,
utilities and regasification terminal
(RGT) earnings where the segmental profit before tax (PBT) declined
by 4%, 19% and 11% respectively.
This was partly due to higher
cost of revenue and other operation
expenditure. On the other hand,
gas processing earnings were fairly
flattish, which grew slightly by 1%
as revenue grew 1% as well.
Year-on-year, 3QFY14 net earnings rose 10% as revenue grew proportionally. This was mainly attributed to the new Gas Processing
Agreement and Gas Transportation Agreement (GTA) that took
effect in April 2014, which drove
the earnings of gas processing and
gas transportation units higher.
In addition, the utilities segment
also reported higher earnings thanks
to higher off-take by customers.
However, RGT posted lower earnings on lower revenue coupled with
higher depreciation charges.
Year-to-date, 9MFY14 core earn- Petronas Gas Bhd
ings jumped 16% from RM1.09 billion in 9MFY13, mainly due to RGT FYE DEC (RM MIL)
2014E
2015E
2016E
as the terminal was only started Turnover
4,587
5,011
5,167
at end-2Q13. While the gas trans- Ebit
2,368
2,531
2,595
portation unit benefited from the
PBT
2,361
2,526
2,591
GTA, earnings of gas processing
(NP)
1,771
1,894
1,944
Net
profit
declined due to higher depreciation
1,771
1,894
1,944
on plant rejuvenation and revamp Core net profit
programme.
1,727
1,826
1,897
Consensus (NP)
Petronas Gas’ FY14 earnings are Earnings revision (%)
(1.4)
(0.3)
(0.7)
expected to reach a new high, mainly Core EPS (sen)
89.5
95.7
98.2
propelled by the full-year contribu- Core EPS growth (%)
19.1
7.0
2.6
tion from the Melaka RGT and the
62.7
67.0
68.8
NDPS (sen)
start of Kimanis IPP at end-2Q14.
5.46
5.74
6.04
Although there is still no pro- BV/Share (RM)
(RM)
5.46
5.74
6.04
NTA/Share
gress on the Lahad Datu RGT, the
Melaka RGT and IPP mentioned Core PER
24.4
22.8
22.2
above together with the Refin- PBV (x)
4.00
3.80
3.61
ery and Petrochemicals Integrat- Price/NTA (x)
4.00
3.80
3.61
ed Development (Rapid) RGT in Gearing (%)
Net cash
Net cash
Net cash
Pengerang would be the next earn2.9
3.1
3.2
Dividend yield (%)
ings catalysts for Petronas Gas.
Source:
Kenanga
Research
We have cut FY14 to FY16 forecasts slightly by 1% to 2% on: i)
Kimanis’ IPP earnings to start in
Post-earnings revision, our new
Risk includes the delay in the
4Q14; and ii) fine-tuning other seg- TP is now RM21.24/(SoP) from commencement of Lahad Datu
ments’ assumptions.
RM21.54/SoP share previously.
RGT. — Kenanga Research, Nov 5
B R O K E R’S C A L L 1 3
IOI Corp may face
selling pressure if
syariah status goes
IOI Corp Bhd
(Nov 5, RM4.89)
Maintain sell with target price
of RM3.97: There is a high probability that IOI Corp (IOI) could
be stripped of its syariah status
at the upcoming end-November
2014 review.
This is due to its smaller asset
base after the demerger of its property division, which resulted in IOI
potentially breaching the conventional debt-to-total assets ratio requirement (to stay below 33%).
Stripping aside unrealised foreign exchange market translation
loss of RM142 million arising from
its US dollar debt exposure, we expect IOI to post a core profit after
taxation and minority interest of
RM328 million for the first quarter
of financial year 2015 (1QFY15)
(down 31% year-on-year [y-o-y],
down 38% quarter-on-quarter
(q-o-q)), or 26% of our FY15 forecast, within our expectation.
Operationally, IOI’s 1QFY15
earnings should be driven by its
still healthy upstream plantation
operating profit of RM276 million
(up 16% y-o-y, down 2% q-o-q).
The main surprise could emanate
from its resource-based division
as the industry’s refining margin
remained thin during the quarter
while oleo-chemical prices also
dipped in tandem with the lower
IOI Corp Bhd
FYE JUNE (RM MIL)
2013A
Revenue
13,516.5
Ebitda
2,791.2
Core net profit
1,659.6
25.8
Core FDEPS (sen)
(9.2)
Core FDEPS growth (%)
15.5
Net DPS (sen)
19.0
Core FD P/E (x)
2.3
P/BV (x)
3.2
Net dividend yield (%)
12.6
ROAE (%)
7.1
ROAA (%)
14.2
EV/Ebitda (x)
32.3
Net debt/equity (%)
2015E
2016E
2017E
12,664.1 13,366.2
2,376.3 1,971.3
1,549.4 1,246.8
24.0
19.3
(6.9)
(19.5)
20.0
9.7
20.4
25.4
5.2
4.7
4.1
2.0
15.7
19.6
7.9
8.0
15.8
17.8
58.6
48.3
2014A
13,800.0
2,061.3
1,316.2
20.4
5.6
10.2
24.0
4.3
2.1
18.8
8.2
16.8
38.1
13,948.1
2,086.3
1,338.9
20.8
1.7
10.4
23.6
4.0
2.1
17.5
8.1
16.4
28.7
Source: Maybank IB
crude oil price.
There is considerable downside risk to IOI’s current share
price this end-November 2014 if
IOI drops off the Hijrah Syariah
and Emas Syariah indices given
at least 2% of IOI share base will
need to change hands within days
of the review.
Even without the review, IOI
is pricey at about 25 times 2015
price-to-earnings (PER) ratio. The
stock lacks short-term catalysts
post its demerger with IOI Properties Group Bhd. Against a smaller
balance sheet with a net gearing
of 59% (as at June 30 2014), a tepid
projected three-year FY14 to FY17
fresh fruit bunch output compound
annual growth rate of 2.4% and no
property development potential
to boost earnings, valuations are
steep at about 25 times FY15 PER
and RM154,000 enterprise value
per planted hectare (vs the sector’s about RM60,000), based on
our estimates.
We believe IOI will suffer some
de-rating and be under strong selling pressure if its syariah status
is dropped. — Maybank IB Research, Nov 5
Mitrajaya offers
superior earnings
growth
Mitrajaya Holdings Bhd
(Nov 5, RM1.01)
Initiate buy with target price
(TP) of RM1.52: Mitrajaya has
successfully grown its job wins
from less than RM100 million per
annum during financial year 2008
to 2010 (FY08 to FY10) to over
RM500 million currently. New job
wins year-to-date (YTD) are at a
record RM547 million, surpassing
last year’s high of RM501 million.
Mitrajaya’s order book of RM1.3
billion implies a strong cover of 6
times FY13 construction revenue,
vis-à-vis the sector average of 2.1
times. Its order book profile is
also relatively “young” with 75%
comprising jobs that were secured
less than a year ago, mitigating
cost overrun risks.
Backed with RM2 billion in
outstanding tenders, Mitrajaya
aims to hit an order book target
of RM1.5 billion by year-end, implying that another RM200 million
worth of jobs are forthcoming.
These tenders are mainly
building works for developers,
both private and government related.
Budget 2015 announced the
implementation of the light rail
train (LRT) Line 3 (RM9 billion).
We view Mitrajaya as a potential beneficiary via station works
(RM720 million to RM960 million)
given its experience with the ongoing LRT extensions.
Mitrajaya will soon be launching the Wangsa 9 condominiums
(gross development value [GDV]:
RM650 million) in Wangsa Maju.
We expect encouraging take-up
rates given its strategic location
(opposite Wangsa Walk Mall) and
LRT connectivity (Sri Rampai LRT
station 150m away).
Other divisions. These include
(i) its South Africa investment
which is a low risk and debt free
self-sustaining model of selling
land and (ii) 51% stake in Optimax, Malaysia’s largest standalone
eye specialist, which recently returned to the black.
Risks include execution risk,
rising material prices, project implementation delays, weak property market and political risks.
We expect FY14 core earnings
to almost double to RM48 million
(up 92% year-on-year [y-o-y]) and
FY15 to see a record RM60 million
(24% y-o-y).
Our forecast implies superior
three-year earnings compound
annual growth rate of 40%.
Mitrajaya is an under researched hidden gem, which offers superior earnings growth at
cheap valuations of 8 times and
6.5 times FY14 to FY15 price-toearnings ratio and decent yields
of 3% to 5%.
Our TP is based on 10 times
FY15 earnings, in line with our
target valuation parameter used
for small-cap contractors.
For an alternate valuation perspective, at current market capitalisation, investors buying Mitrajaya would be getting its land
at a 48% discount to market value
and all its core business of construction, property development
and Optimax (not to mention a
golf course in South Africa) for
free! — Hong Leong Investment
Bank, Nov 5
Petronas Dagangan hit by higher opex and product costs
(Nov 5, RM19.94)
Maintain fully valued with target price (TP) of RM18: Petronas Dagangan Bhd (PDB) booked
RM160.4 million in net profit in
the third quarter of financial year
2014 (3QFY14) (down 29% yearon-year [y-o-y], down 14% quarter-on-quarter [q-o-q]), taking the
nine-month (9MFY14) profit to
only RM501 million (down 24%
y-o-y). This is below our and consensus expectations.
Earnings were dragged by: (1)
higher product cost due to unfavourable timing differences with
the Mean of Platts Singapore
(MOPS) prices, and (2) higher operating expenditure (opex) arising
from the group’s aggressive expansion plan.
Its retail segment posted a lower
operating profit of RM98 million
in 3QFY14 (down 56% y-o-y, down
32% q-o-q) due to higher product
costs arising from the unfavourable timing differences with MOPS
prices.
The latter is used to compute
the subsidies receivable by PDB,
and falling oil prices in 3Q would
have reduced the subsidies received. The subsidies are normally
netted off the cost of goods sold in
the income statement.
Retail revenue was healthy in
3QFY14, growing 5% y-o-y driven by higher average selling price
(ASP) and sales volume for motor
gas (up 3% y-o-y).
Commercial revenue fell 8%
y-o-y to RM4.28 billion in 3QFY14
due to lower sales volume (down
6%) and lower ASP (down 2%).
Despite this, segmental operating profit surged to RM133 million (up 47% y-o-y, up 37% q-o-q).
This was mainly driven by higher
gross margin as a result of lower oil
prices (ASP fell only 2% y-o-y but
Brent prices fell 16%), and lower
opex (down RM14.6 million y-o-y).
With oil prices set to continue
to fall in 4Q, PDB’s retail segment
profit might continue to be pressured by unfavourable timing differences with MOPS prices.
Meanwhile, the government
remains committed to the subsidy
rationalisation programme with
a new scheme expected to come
FYE DEC (RM MIL)
Turnover
Operating profit
Ebitda
Net pft (pre ex)
EPS (sen)
EPS pre ex (sen)
EPS gth (%)
EPS gth pre ex (%)
Net DPS (sen)
BV per share (sen)
PER (x)
PER pre ex (x)
EV/Ebitda (x)
Net div yield (%)
P/Book value (x)
Net debt/Equity (x)
ROAE (%)
2013A
2014F
2015F
2016F
32,342
1,107
1,428
812
81.7
81.7
(3)
(3)
61.5
482.2
25.1
25.1
14.5
3.0
4.3
0.0
16.9
33,156
1,068
1,416
774
77.9
77.9
(5)
(5)
58.4
498.7
26.3
26.3
14.7
2.8
4.1
0.1
15.9
34,736
1,128
1,502
813
81.8
81.8
5
5
61.4
519.9
25.1
25.1
14.0
3.0
3.9
0.1
16.1
36,367
1,187
1,589
852
85.8
85.8
5
5
64.3
542.1
23.9
23.9
13.3
3.1
3.8
0.1
16.1
Source: Company, AllianceDBS, Bloomberg Finance L P
into effect in mid-2015.
The potential withdrawal/reduction of subsidies for certain
segments of the population could
reduce demand for motor gas.
PDB’s commercial segment
could see a drop in aviation fuel
sales (67% market share in Malaysia) next year, when Malaysian
Airline System Bhd (MAS) starts
the restructuring process. Aircraft
movement at the Kuala Lumpur
International Airport Main Terminal Building dropped by 7% y-o-y
in 3QFY14.
Expectations are for MAS to
rationalise capacity further, which
will continue to dampen demand
for aviation fuel.
We retain our “fully valued”
rating on PDB with a TP of RM18
pending the analyst briefing, as we
see limited catalysts amid earnings
risks. Valuation is also expensive
at 25 times for FY15F price-toearnings ratio.
Retail margins may be pressured as crude prices continue to
trend down. Product costs would
remain high as falling oil prices
would lead to unfavourable timing differences with MOPS prices.
Management remains committed to expanding its network by 20
to 30 outlets annually. We concur
with the management that this
would benefit the group in the
long run, but the aggressive expansion plan could drive up opex
and start-up losses. There will be
concerns about the sustainability
of margins. — Alliance DBS Research Sdn Bhd, Nov 5
14 H O M E
Tribunal’s decision a win for Malaysia
ZICOlaw says it allows development of KTM land parcels to go ahead
BY TEN GKU N OOR SHAM SIAH
TEN GKU A B D U L LAH
SINGAPORE: A recent decision by
the Permanent Court of Arbitration
on issues relating to development
charges under the Points of Agreement (PoA) on former Malayan
Railway (KTM) parcels of land in
Singapore was a favourable result
for Malaysia, Knowledge Management ZICOlaw partner Paul Subramaniam said.
He said the land swap deal enabled the two countries to break the
impasse on the relocation of the
Tanjung Pagar Station in Singapore,
belonging to KTM, to Woodlands.
Subramaniam noted that Prime
Minister Datuk Seri Najib Razak
and his Singapore counterpart Lee
Hsien Loong had in 2010 agreed
that the Tanjung Pagar site and
KTM parcels of land in Kranji,
Woodlands and Bukit Timah in
Singapore would be exchanged for
land in Ophir-Rocher and Marina
South, also in Singapore.
The Kranji, Woodlands and Bukit
Timah sites were to be developed
by a company called M+S Pte Ltd, a
60:40 joint venture between Khaz-
anah Nasional Bhd and Singapore’s
Temasik Holdings.
“The agreement between the two
prime ministers was underlined in
the PoA. However, a dispute then
arose over the interpretation of the
PoA as to whether Singapore could
impose the standard land development charge on the three sites
estimated at S$1.4 billion [RM3.61
billion),” Subramaniam told Bernama.
The issue was referred to the
Permanent Court of Arbitration by
both the parties involved.
On Oct 30, the court concurred
with Malaysia’s interpretation of the
PoA and ruled that Malaysia would
not have to pay all or any land development charges for the Kranji,
Woodlands and Bukit Timah sites
to Singapore.
“It is a victory for Malaysia in
that sense, but more importantly,
it allows the development, which
had stalled due to the differences
in the interpretation of the PoA
between Malaysia and Singapore,
to go ahead.
“As had been stated, the development would benefit both countries through the Khazanah Na-
sional and Temasik Holdings joint
venture vehicle, M+S Pte Ltd,” Subramaniam said.
ZICOlaw produces publications on updates of legal regulatory changes, comparative analysis of laws, and legal and business
perspective updates in Asean.
ZICOlaw is an integrated network of independent legal and related professional service providers
in the region with operations in
Australia,Cambodia, Indonesia,
Laos, Malaysia, Myanmar, Singapore, Thailand and Vietnam. —
Bernama
‘Ex-treasurer of ashram is CEO of developer company’
BY TERENC E FERNANDEZ
& V SH A NKA R GANESH
KUALA LUMPUR: The proposed
development of the 110-year-old
Vivekananda Ashram site in Brickfields is courting new controversy
following a revelation that the chief
executive officer of the developer,
F3 Capital Sdn Bhd, was a senior
office bearer of the Ashram Committee.
Documents made available to
The Edge Financial Daily reveal
that as at Jan 29 this year, K Vignesh Naidu was holding the post of
honorary treasurer of the ashram’s
management committee, while he
is also a director of F3 Capital.
Appointed to the F3 Capital
board on April 2, 2004, Vignesh,
41, is a substantial shareholder with
one million shares.
F3 Capital’s other directors, who
also hold one million shares each,
are Quah Huat Hock and Low Kim
Lan, both aged 53. Its balance sheet
from 2013 shows a net profit of over
RM700,000.
Committee officials were tightlipped but it is understood that Vignesh stepped down as treasurer in
March, before tenders were called
for the ashram’s redevelopment.
However discussions and deliberations for the development
of the site for a 23-storey serviced
apartment have been ongoing for
a while.
This is the third attempt to develop the ashram site, in what its
trustees say is a dire need to ensure
cash flow to sustain its activities,
which include primarily education
and cultural programmes. Its balance sheet shows it has RM213,000
in cash and a staff strength of just
two. The ashram has a membership
of 90 people which, according to
sources, has remained stagnant
for years.
A signboard outside the premises announces a proposal to convert
the land use from “institution” to
“commercial”.
Vivekananda Ashram supports
four schools: SJK (T) Vivekananda
in Brickfields, both the Vivekananda primary and secondary schools
in Kuala Lumpur and SJK (T) Tham-
01
03
01. A notice board outside
Vivekananda Ashram
announcing development
plans.
02
boosamy Pillai in Sentul.
After the last attempt to sell the
land for RM15 million 10 years ago
the ashram was locked up with few
activities taking place in the current building, which was erected
in 1934.
The development plan — which
boasts Veritas Designs as its architect
— shows an eight-storey car park
that cantilevers over the ashram.
The plan illustrates what the
ashram trustees have been saying — that the ashram and the
121-year-old statute of Swami
Vivekananda will not be touched.
Only the hostel and multipurpose
hall behind the ashram will make
way.
However, opponents of the redevelopment say the 110-year old
ashram’s main building may not
withstand the enormous construction that will take place over it.
Among the chief concerns is that
piling for the 23-storey building
would surely weaken the historic
building and this may precipitate
its collapse.
The trustees’ contention that
funds are needed for the schools
under their purview has also been
challenged by Deputy Education
Minister P Kamalanathan, who said
the government had given RM6
million to SJK (T) Vivekananda
Brickfields, SJK (T) Vivekananda
PJ, and SMK Vivekananda over the
last two years.
The funds were given by cheques
made out to the Vivekananda Ashram trust — and verified by the
02
A banner outside
Vivekananda Ashram
highlighting the cause.
03
Nazri signing a petition to
save Vivekananda Ashram.
trust’s own statements of accounts
made available to The Edge Financial Daily.
“Allocations amounting to RM3
million were issued in 2012, and
another RM3 million in 2013,” Kamalanathan said.
An additional RM20,000 was
given to SJK (T) Vivekananda PJ
for upgrading works.
Kamalanathan said SJK (T)
Thamboosamy Pillai in Sentul will
receive RM2 million soon, for the
building of an extra block.
Nazri lends support to
preserving Vivekananda Ashram
Tourism and Culture Minister Datuk Seri Mohamed Nazri Abdul
Aziz, meanwhile, said the board of
trustees had rejected the National
Heritage Department’s application
to gazette the place as a heritage
site in 2008.
“They did try [to gazette it] but
it was a pity that the trustees were
not in favour of it,” Nazri was quoted as saying.
Nazri, who signed a petition to
save the ashram when he visited the
site yesterday, said he would advise
the board of trustees to consider
conserving the building.
He also said that emphasis must
be given to old buildings in the
country and buildings above 100
years old should be preserved.
The National Heritage Department had also confirmed that the
trustees did not consent to the gazetting and because of that, the
building is not covered by the National Heritage Act 2005.
The department said the local
authority must give planning permission before any development
can be carried out. In the case of
heritage buildings, it said the local
authority must consult the heritage
department before giving planning
permission.
While no financial figures have
been put on the project value, it is
estimated that the gross development value (GDV) of the project
is in the region of RM60 million.
Ashram officials declined to reveal more or how much the institution will receive from the development.
Vivekananda Ashram chairman
Tan Sri Dr K Ampikaipakan declined comment, saying a statement will be issued soon to correct
misconceptions about the project.
Vignesh could not be reached for
comment but is quoted in an Oct
16 report in The Star as saying that
F3 Capital would provide enough
parking bays for the development,
in line with Kuala Lumpur City Hall
(DBKL) requirements.
“We will also surrender a sizeable portion of the land to City Hall
to cater to any future road-widening
projects,” he said in his capacity as
F3 Capital CEO.
“Bear in mind that the project
is residential and not commercial,
hence it will not attract traffic to
the area,” he was quoted as saying.
H O M E 15
MoF to take legal action against
NFCorp for loan default
‘Government should recover principal sum and losses incurred on interest’
BY C Y NTHI A B L EMI N
KUALA LUMPUR: The Ministry of
Finance (MoF) will initiate legal action against National Feedlot Corp
Sdn Bhd (NFCorp) for failing to repay the soft loan it received for its
cattle-breeding project. The soft loan
was made to NFCorp after it was
awarded a contract to undertake
cattle breeding for the government’s
National Feedlot Centre (NFC).
“The loan amounting to RM250
million to NFCorp has to be repaid
between 2012 and 2028,” said Prime
Minister Datuk Seri Najib Razak, who
is also the finance minister.
“Until Sept 30, 2014, a sum of
RM34.98 million [principal] had been
recovered in 2012 and 2013, while
the instalment repayment for 2014
which matured on Jan 9, 2014, has
yet to be paid,” he said in Parliament.
As a result, the government recommended that a notice of non-pay-
Rafizi: I hope the government does not
sweep this under the carpet because it is
the people’s money. The Edge file photo
ment be issued to NFCorp on May 5,
2014, and the firm was granted a 90day period to comply with the notice,
said Najib. NFCorp had again failed
to settle the outstanding amount.
Following this, the government
issued a notice in the event of default
to terminate the agreement on Sept
4, 2014, and take legal action, he said.
Najib said this in his written reply to Shah Alam MP Khalid Abdul
Samad and Pandan MP Rafizi Ramli,
that was made available yesterday.
Abdul Khalid asked Najib in Parliament on Tuesday to reveal the
status of the loan recovery process.
NFCorp, which is owned and operated by Wanita Umno chief Datuk
Seri Shahrizat Abdul Jalil’s family,
has been in the news after PKR secretary-general Rafizi Ramli revealed
that it had used the loan money to
buy luxury condos. Earlier, the Auditor-General’s Report had stated that
the government’s NFC had failed to
meet its milestones.
On March 12, 2013, Shahrizat’s
husband Datuk Seri Dr Mohamad
Salleh Ismail, in his capacity as a director of NFCorp, was charged with
criminal breach of trust or CBT for
using RM9,758,140 of the loan money to part finance two units of condominiums in Kuala Lumpur and
transferring RM40 million into the
account of National Meat and Livestock Corp Sdn Bhd in 2009.
Mohamad Salleh, who is also NFCorp executive chairman, has maintained that not all the RM250 million
soft loan from the government was
utilised, and the company was in fact
still servicing the loan.
He argued that the purchases of
high-end condominiums were investments to reap profits to service
the loan. Rafizi said at the Parliament
building yesterday that the government should not only recover the
principal of the soft loan but also
losses incurred on the 2.5% interest
that was not collected from NFCorp.
“I hope the government does not
sweep this under the carpet because
it is the people’s money,” he said,
noting that the amount has come
to between RM50 million and RM60
million in interest rates since the loan
was given to NFCorp in 2006.
‘Delineation will benefit the people’
BY SA L AWATY SU PA R DI
KUALA LUMPUR: The delineation
of electoral boundaries needs to be
expedited as many constituencies
have experienced distinct demographic changes over the years,
especially in the urban areas.
For some observers, a lapse of
10 years since the last delineation
exercise is too long and would impact the people.
Universiti Teknologi Malaysia
(UTM) geostrategy lecturer Professor Dr Azmi Hassan said that within
10 years, many parliamentary and
state constituencies especially in
the urban areas had seen demographic changes due to population
increase, with some areas having
over 100,000 voters.
“When this happens, some areas
have so many residents but have
only one elected representative
to serve them. Hence, a situation
exists where the elected representative cannot serve them effectively,” he said.
Azmi said a delineation exercise would see new parliamentary
and state constituencies created,
therefore more elected representatives need to be chosen to carry
the people’s voice more effectively.
“Most importantly, the Election
Commission (EC) needs to ensure
that the delineation of electoral
boundaries will result in increased
parliamentary and state seats in
odd numbers, as even numbers
can cause difficulties when there’s
a general election or a political conflict,” he said.
Azmi said the EC should speed
up the delineation exercise for the
good of the people, as election law
stipulates that delineation of electoral boundaries should be carried
out every eight years, while the last
one was done in 2003.
Universiti Utara Malaysia (UUM)
political and international studies
lecturer Md Shukri Shuib opined
that with delineation, the elected
representatives could better focus
on their constituencies with a small
area to cover and smaller number
of voters to serve.
“When an area is smaller, the
‘wakil rakyat’ will be able to visit
more villages and go to more locations to meet the constituents,
as well as to monitor the area’s development in a more comprehensive manner.
“In Sabah and Sarawak, for example, there are constituencies
that are vast in size but have a small
electorate. The huge area makes it
difficult for the elected representative to cover every location.
Md Shukri, however, did not deny
that the EC faces a difficult challenge
in undertaking the delineation exercise as the Barisan Nasional ruling government had constraints in
getting a two-thirds majority in the
Dewan Rakyat to pass the EC report
for delineation to be carried out.
In this regard, he hopes the opposition parties will set aside political differences and support the
proposed delineation exercise in
the interest of the people.
Political analyst Professor Dr
Hoo Ke Ping said if the delineation
of electoral boundaries is not done,
there would be constituencies with
more than 150,000 voters each in
the next few years.
Hoo suggested that the EC increase the number of parliamentary
seats by between 10% and 15% or
by between 25% and 30% in anticipation of a population increase
in the years to come. — Bernama
Bersih wants indelible ink trial judge investigated
BY L EE SHI - I A N
KUALA LUMPUR: The court martial of Major Zaidi Ahmad should
be postponed until a full investigation is completed into the court’s
presiding officer who was allegedly
biased against the accused, election
watchdog Bersih 2.0 said yesterday.
In a statement, it said the military
court comprising a five-man panel
should be immediately dissolved,
and a new panel formed if the presiding officer was found guilty of
being biased.
“Following this revelation by
Zaidi’s defence, the military court
should be dissolved as fairness has
been compromised,” the coalition
said. Bersih 2.0 also said the charges against Zaidi should be dropped
and the 45-year-old Royal Malaysian
Air Force officer be reinstated to his
previous position.
“This is not an issue to be taken
lightly as the hearing against Zaidi
appears to be prejudiced due to an
unfavourable comment posted by
presiding officer Colonel Saadon
Hasnan,” Bersih 2.0 said.
Zaidi’s legal counsel Mohamed
Hanipa Maidin said yesterday the
military court hearing his client’s
case should be dissolved because
Saadon was biased against the accused. Saadon responded to a news
report by saying that Zaidi should be
a rubber tapper if he didn’t like being
in the military.
He allegedly made the comment
using a Facebook account under the
name Saadon Tson. The comment
was in response to an article “Peguam: Kesalahan Mejar Zaidi hanya
kerana berani” (Lawyer: Major Zaidi
charged for being courageous) published by Malaysiakini in its Bahasa
Malaysia section on Oct 20, 2014.
Mohamed Hanipa said that under
normal circumstances, a judge could
be recused but in this case, Saadon
made the comment before the military court had called Zaidi to enter
his defence. The court on Oct 27 fixed
yesterday for Zaidi to enter his defence. The five-member panel then
decided to hand the matter to the
court martial’s convening authority,
as it was the only body that could decide if the panel should be dissolved.
If the convening authority decided
that proceedings should continue,
the trial will resume on Nov 24. —
The Malaysian Insider
PTPTN to go
ahead with
blacklisting
debt dodgers
on CCRIS
BY MD IZ WA N
KUALA LUMPUR: Despite opposition, the National Higher
Education Fund (PTPTN) is
going ahead with its plan to list
higher-education loan defaulters on Bank Negara Malaysia’s
credit record, the central credit
reference information system
(CCRIS).
The education fund said yesterday that the listing will be
implemented in stages, with
the first stage, targeted at recovering RM1.23 billion borrowed
from 1998 to 2010.
Education Minister II Datuk Seri Idris Jusoh (pic) had
warned early last month that
graduates who have defaulted on their study loans would
be listed in the central bank’s
credit record.
He said this was because
some borrowers had taken advantage of PTPTN’s flexible
policy and refused to make any
repayments.
On Aug 21, 2013, the cabinet scrapped the same plan to
list PTPTN defaulters in CCRIS
after the proposed move was
criticised by both Barisan Nasional and Pakatan Rakyat.
PTPTN chairman Datuk
Shamsul Anuar Nasarah said
during the first stage, 173,985
defaulters who are said to owe
a total of RM1.23 billion, will be
included in the system, as they
had never made any effort to
repay their loans.
“It was a decision that had to
be taken by PTPTN, as we have
no other way,” said Shamsul,
who is also an Umno supreme
council member.
He said PTPTN had to take
drastic steps in view of the lack
of funds and bad repayment
record of borrowers.
“Despite various incentives,
and opportunities, there are
still borrowers who failed to
carry out their obligations to
pay back their loans,” Shamsul
said. — The Malaysian Insider
16 H O M E
M’sia, Netherlands
pledge to find
MH17 perpetrators
Both committed to getting to the bottom of the incident
PUTRAJAYA: Malaysia and the
Netherlands pledged to continue
working closely together to bring
the perpetrators of the flight MH17
tragedy to justice.
Prime Minister Datuk Seri Najib
Razak said this was the commitment that both governments had
agreed on and it was time to ensure
this was achieved.
“We can count on [Netherlands
Prime Minister] Mark Rutte for his
friendship and cooperation. We look
forward to working together and find
out what really happened to the plane
beyond any doubt, and more importantly who were responsible for the
incident,” Najib said in his remarks at
a special session with the Malaysian
team involved in the MH17 recovery
operation here yesterday.
Present was Rutte, who is on an
official visit to Malaysia.
Najib expressed his thanks to
Rutte and the Dutch government
for their support and leadership role
in ensuring that victims of MH17
were brought back to their families.
The prime minister noted that
there was a silver lining in the tragedy with the affected countries becoming even closer together.
Malaysia Airlines flight MH17
crashed in eastern Ukraine on July
17 as it was flying from Amsterdam
to Kuala Lumpur with 283 passengers and 15 crew members on board.
The Boeing 777-200 aircraft is
believed to have been shot down
in the troubled country. There were
193 Dutch nationals and 44 Malaysians among the people on board,
and the remains of all Malaysian
victims have been identified.
Rutte said both countries and
Australia have been “working so
well together” and hope the cooperation will continue for the upcoming months or years to get to
the bottom of the incident.
He said there are still nine victims who have yet to be identified.
“We want to get to the number of
298. We hope we can get there and
we will do our utmost,” he said.
Rutte said he believed that everyone affected by the MH17 tragedy
would never forget what had happened, but hoped they would continue to forge stronger ties together.
Azmin calls for meeting between
SIS and Mais over fatwa
BY A NI SA H SHU KRY
SHAH ALAM: Selangor Menteri
Besar Mohamed Azmin Ali has
proposed that Sisters in Islam (SIS)
hold a meeting with the mufti of
Selangor and the Selangor Islamic Religious Council (Mais) on the
state fatwa branding the group as
deviant.
The menteri besar said he had
sought clarification on the fatwa
during a Nov 3 meeting of the Selangor Royal Council after reading
SIS’ media statements.
“From the clarification given by
the mufti and Mais at the meeting
in Dewan Di-Raja Selangor, I proposed with the consent of Tuanku
Sultan that the mufti of Selangor
and Mais hold a meeting with SIS
in order to avert confusion and
misunderstanding.
“I hope that such consultation
and meeting, conducted without
rancour or ill-will, will help bring
about an atmosphere of harmony as
enjoined by Islam,” said Mohamed
Azmin in a statement yesterday.
SIS filed a judicial review against
the fatwa last Friday after stumbling
across it on the Malaysian Islamic
Development Department’s website on Oct 20.
The fatwa, which was gazetted
in Selangor in July, declared SIS
and any other similar organisation
that promotes religious liberalism
and plurality as being deviant to
the teachings of Islam.
In addition, any publication that
promotes liberal and pluralistic
We have no problems
meeting with Mais.
We are waiting for
the invitation.
religious thinking will be declared
unlawful and confiscated.
SIS named the Selangor Fatwa
Committee, Mais and the state government as respondents.
In response, SIS programme
manager Suri Kempe said the
non-governmental organisation
welcomed the dialogue with the
state religious authorities.
“We have no problems meeting
with Mais. We are waiting for the
invitation. We have yet to receive
a formal invitation. Of course, we
are open to the dialogue,” she told
The Malaysian Insider.
Suri said she hoped the dialogue
would result in the withdrawal of
the fatwa and revocation of its gazetting.
“But so far, on our end, nothing’s changed and there’s been no
development. But we are looking
forward to the meeting and are
keen on discussing with them the
work we do,” she said.
Suri said SIS had engaged with
the National Fatwa Council before
in 2012, in which the organisation
shared its findings from their polygamy studies to encourage syariah
law reform.
“But there’s been no follow-up
on that. We didn’t see any attempt
to change the system. So we’ll see
how it goes with this meeting,” she
said.
On Saturday, Mohamed Azmin reportedly said the decision
by the state authorities on the fatwa should be respected, prompting
SIS to criticise him and demand an
explanation.
“With all due respect, what does
it even mean to ‘respect’ the fatwa?
Perhaps he can enlighten us on
the definition of ‘liberalism’ and
‘pluralism’,” Suri said on Sunday.
Yesterday, Mohamed Azmin said
fatwas are not under his purview
as the menteri besar.
“It should be noted that I am
not a member of the Fatwa Committee of Selangor and fatwas are
not within the jurisdiction or purview of the office of the menteri
besar,” he said.
PKR de facto chief Datuk Seri
Anwar Ibrahim told reporters on
Sunday that the National Fatwa
Council should allow public space
for differing views on Islam.
“My position is that there must
be an avenue for people to agree to
disagree and to continue to have
discussions in a proper forum,”
Anwar said after giving a speech at
the Muslim democrats’ conference
dinner in Petaling Jaya.
SIS is challenging the fatwa on
constitutional grounds and the
group said it is legally entitled to
challenge what restricts its constitutionally guaranteed fundamental
liberties. — The Malaysian Insider
Rutte (left) and Najib shaking hands following their joint press conference in Putrajaya
yesterday. Photo by Bernama
“I see many people here who have
helped in the first week and afterwards to do what was necessary to
bring back the remains and personal
belongings, in making a start to finding out who was behind this and to
bring them to justice,” he said.
Also present were Defence Minister Datuk Seri Hishammuddin
Hussein, Transport Minister Datuk
Seri Liow Tiong Lai, Department
of Civil Aviation director-general
Datuk Azharuddin Abdul Rahman
and other officials.
Commenting on his flight from
the Netherlands on Malaysia Airlines flight MH19, Rutte described
the airline as the “best connection”
between Amsterdam and Kuala
Lumpur.
MH19 is the new call sign for the
Amsterdam-Kuala Lumpur route,
replacing the ill-fated MH17.
“This [flight] gives a special
meaning to the fact that MH17 was
scheduled to arrive at the same time
almost three months ago. It brings
memories to take this flight,” he said
at a joint press conference following
the special session. — Bernama
Hijab is big business online
BY SURAIYA JAMIL
KUALA LUMPUR: The “hijab”
or Muslim head covering is big
business in Malaysia these days.
It is worn for reasons of modesty, but the plethora of hijab
available today makes them a
fashion statement as well.
Online sellers do very well in
Malaysia, marketing their items on
Facebook or Instagram. The online
stores are available 24 hours, every
day of the year, giving physical business set-ups a run for their money.
Further boosting business for
online hijab sellers is the number of celebrities who have taken
on the head covering, modelling
them on television, in fancy magazines and on billboards.
Online hijab storeowners only
need a smartphone or laptop to
update their collection and interact
with customers wherever they are.
Some may have reservations
about buying clothing items online. There is the chance that the
on-screen colour varies from the
real item, and sometimes, specifications may differ too.
However, many find the
trade-offs worth it. Customers
can browse through the stores at
their own location and convenience. They do not have to put up
with traffic jams, lack of parking
space, or long lines at the cashier.
Furthermore, payment is just a
few clicks away.
It is apparent to many that
there is big money in the business. Every other day new online
hijab stores are mushrooming.
Twenty-nine-year-old Rabiah
Wan Zulkifli knows that compe-
The ‘hijab’ or Muslim head covering is
big business in Malaysia these days.
Photo by life4-fashion.blogspot.com
tition is stiff but believes there
is still room for her business,
Raudah Wide Shawl.
“I’m not bothered by the number of online hijab sellers these
days, as this gives me an idea of
what the buying trend is.
“There are so many choices today that cater to so many differing
tastes. Sellers now also upload
online hijab tutorials to give potential buyers ideas on the many
ways to style their hijab”, she said.
When asked if her business
would stand the test of time, as
many others were also marketing
similar styles, Rabiah said she believed that there was something
for everyone.
She provides added value to
her offerings by providing free
shipping and keeping up with
the latest trends.
The business is not Rabiah’s
primary source of income as she
is working as a flight attendant
in a major airline. However, she
does not find it a problem to make
time to develop her business.
“I take all challenges in stride”,
she said. — Bernama
18 C O M M E N T
The BoJ and ECB sit-com
It is about being trapped in a situation, with little control over one’s destiny
BY JAMES SAFT
T
he Bank of Japan’s move
into hyperdrive may
succeed or it may fail,
but it will at the very
least serve to cushion
the inevitable disappointment over whatever the European Central Bank does today.
The BoJ last Friday traded in its
monetary policy bazooka for a munitions dump, moving to increase
its balance sheet purchases by an
amount equal to 15% of Japan’s annual output. At the same time the
BoJ is tripling its purchases of equities and will focus its bond buying
on longer-dated bonds.
In an ‘unrelated’ move Japan’s
US$1.2 trillion (RM4.008 trillion)
government pension fund said it
would double its holdings of Japanese and foreign equities while
slashing Japanese government
bond allocations.
This complex policy mix had a
simple set of impacts in financial
markets; driving down the value
of the yen, while driving up global
equities, especially those in Japan.
What is also simple, and a bit
convenient, is the way in which
Japan has ‘foamed the runway’ for
the ECB, which will today announce
its latest policy decision.
The ECB has been a sort of foil to
the BoJ in recent years, under-active
and stingy where its Asian counterpart is bold, verging on jumpy. To
be fair, the ECB is hamstrung by the
inadequacy of European structural
arrangements, as is the BoJ’s effectiveness by Japanese demographics.
Struggling with falling inflation
expectations, the ECB has attracted criticism for an inadequate response, so far refraining from outright purchases of government
bonds, though it has introduced efforts, like buying structured bonds,
aimed at getting credit flowing.
Engaged in a battle over QE with
Germany’s Jens Weidmann, ECB
chief Mario Draghi risks under-delivering today, with many expecting
a certain amount of big talk com-
bined with a strategy of giving the
host of measures already in place
time to work.
While on the one hand the risk
is that the euro strengthens a bit
given the comparison of Japanese
and euro area monetary policy, the
fact that Japan is adding amply to
global liquidity is a gift to Draghi
and the ECB.
The chances of a run on either
weak eurozone banking shares or
the government bonds of weaker
eurozone states must be held to
be lower today than had the BoJ
held steady.
What is most striking is how utterly in character the actions of the
main central bank players are.
Central banks, in their way, are
like sitcom characters: satisfying
and funny, but without much evidence of learning or character development. They seem to remain
terrifyingly true to type, and though
those types may be caricatures they
contain much which is true. The BoJ
is the ineffectual striver, working terribly hard but to little actual impact.
Here’s a central bank with a
money printing press which can’t
even inflate a bubble, much less
(and this is a tad unfair given Japan’s shrinking population) restart inflation. Remember that even
though the BoJ had previously supported Japanese stocks in an unprecedented way, shares in Tokyo
were recently trading on the same
sort of valuation they fetched before
the introduction of Abenomics.
We’ve been through year-after year of deflation in Japan and
though the BoJ has led the way in
innovation, it does not have a sterling record of success.
The ECB is quite the opposite, the
curmudgeon of central banks. With
the exception of Draghi’s “whatever it takes” gambit in the face of the
euro crisis, it has, perhaps due to
opposition within, been positively
grudging in how it has offered support since the financial crisis. If ever
there was a central bank likely to tell
trick-or-treating kids to “get off of
my lawn” it would be the ECB, and
it would be Weidmann shouting at
the children from the steps.
The Fed, for its part, is the harried
parent who has confused social media with real life, in this case thinking how many ‘likes’ it gets from the
stock market is a prime measure of
success. We don’t know quite what
the Fed will do, but we can be pretty sure it will be supportive of asset
prices, if not successful in creating
jobs and a modicum of inflation.
The Fed isn’t so much a candy
store as an ice-cream truck, whose
jingly music makes investors salivate and stock indices rise.
Perhaps the lesson here is that
all three central banks are a tad
trapped: the tools they have may
not be well suited to the job at hand.
Meanwhile, the real work involves
politics, and the consent of the governed, endeavours far harder than
buying bonds.
Situation comedy, as seems to
be the case with central banks, is
about being trapped in a situation, with little control over one’s
destiny. — Reuters
James Saft is a Reuters columnist.
The opinions expressed are his own.
Spy chiefs launch operation Twitter-Facebook
BY L EONI D B ERSHIDSKY
THERE is no doubt that Robert
Hannigan, the newly-appointed
chief of the UK’s electronic intelligence, GCHQ, wants social networks such as Facebook and Twitter
to cooperate more closely with his
agency. The big question is why he
wants to tell them that in public.
GHCQ has usually been an especially secretive service: Hannigan’s
predecessor, Iain Lobban, was its
first head to speak publicly, and
that just because he was called on to
testify in Parliament. Hannigan took
the unprecedented step of writing
a newspaper article, for Financial
Times, to say that “the largest US
technology companies that dominate the Web” are “in denial” about
their role in fostering terrorism.
Hannigan’s underlying argument — he writes that Islamic
State uses social networks mainly
for propaganda, appealing to recruitable youths with its uncanny
tech and media savvy, and that
it’s better than its predecessors at
securing its communications — is
banal: numerous news stories have
been written about it, and someone
who hasn’t read them will miss the
GHCQ chief’s piece, too.
What’s more interesting is that it
comes on the heels of a major speech
by James Comey, director of the US
Federal Bureau of Investigation, repeating some of his arguments as
if the two intelligence chiefs were
speaking from the same book.
We need assistance and cooperation from companies to comply
with lawful court orders, so that
criminals around the world cannot
seek safe haven for lawless conduct.
We need to find common ground.
GCHQ and its sister agencies,
MI5 and the Secret Intelligence Service, cannot tackle these challenges at scale without greater support
from the private sector.
Some have suggested there is a
conflict between liberty and security. I disagree. At our best, we in
law enforcement, national security, and public safety are looking
for security that enhances liberty.
When a city posts police officers at
a dangerous playground, security
has promoted liberty — the freedom to let a child play without fear.
As we celebrate the 25th anniversary of the spectacular creation
that is the worldwide web, we need
a new deal between democratic governments and the technology companies in the area of protecting our
citizens. It should be a deal rooted in
the democratic values we share. That
means addressing some uncomfortable truths. Better to do it now than
in the aftermath of greater violence.
It is probably safe to say that
Western intelligence chiefs have
embarked on an uncharacteristic
publicity campaign with the ostensible goal of getting tech companies
to cooperate with them.
For some reason, they are no
longer happy with the old way of
pushing through legislation, and
court decisions, favourable to the
intelligence community: Presenting their arguments behind closed
doors to the sympathetic audience
of politicians and judges who often
believe it is their duty to uphold
national security.
The intelligence chiefs also seem-
It seems that intelligence services
and tech giants — which have denied
cooperating with the NSA and its sister
agencies — are playing a media game
designed to convince the public that
there is tension between them.
ingly scorn the age-old practice of
covertly recruiting people, including
corporate executives, to their cause.
Why the sudden shift? Have legislators suddenly turned unfriendly, and are tech executives some
new breed of radical idealists who
cannot be persuaded in private to
cooperate?
Call me a cynic, but I don’t believe in any of this. Intelligence services do not need the help of the
general public in enlisting all the
cooperation in fighting terrorism
that they need. In fact, Hannigan
says the public is already on his
side, unlike the tech companies.
I suspect most ordinary users of
the Internet are ahead of them: they
have strong views on the ethics of
companies, whether on taxation,
child protection or privacy; they do
not want the media platforms they
use with their friends and families
to facilitate murder or child abuse.
They know the Internet grew out
of the values of western democracy, not vice versa. I think those
customers would be comfortable
with a better, more sustainable relationship between the agencies and
the technology companies.
Indeed, the public has known
of the tech companies’ cooperation with the Internet giants from
National Security Agency leaker
Edward Snowden’s revelations, but
the social networks’ audiences just
kept growing.
Snowden’s warnings haven’t
even discouraged Islamic State from
using Facebook and Twitter to advertise itself. Intelligence services’
meddling has been accepted as an
inevitable evil or dismissed as only
targeting criminals, just as Comey
and Hannigan would like. Their
arguments are not likely to make
people love them rather than just
accept them, so that cannot be the
publicity campaign’s goal, either.
Rather, it seems most likely that
the intelligence services and the tech
giants — which have denied cooperating with the NSA and its sister
agencies — are playing a media game
designed to convince the public that
there is tension between them.
Moves such as Facebook’s newly instituted support for the Tor
anonymous network are part of this
game, in which the networks try to
convince the public they are safe to
use, and the spies complain loudly about being left out in the cold.
It’s an invitation to terrorists and
other criminals to join the fun, to
believe they can be clever enough
to escape close observation. The FBI
and the GCHQ definitely don’t want
terrorists to dive into the Deep Web
after Facebook and Twitter officially agree to cooperate: They will be
that much harder to track down.
The spying game is long-term
and ritualistic, and the intelligence
chiefs’ complaints and tech companies’ denials are an important new
ritual which we will see played out
more and more often.
I just hope nobody takes it seriously enough to introduce tougher
censorship on the social networks:
Analysing propaganda is sometimes
the only way to pick up grains of real
information, as the intelligence services well know. — Bloomberg View
20 FO CU S
T HU
How best to move the market
Singapore Exchange CEO Magnus Böcker is trying to stave off a persistent decline in trading volumes
BY JOA N N G
For 1QFY15 ended September, SGX
reported an 8% decline in revenue
to S$169 million. Photo by Samuel
Isaac Chua/The Edge Singapore
M
agnus Böcker
harboured ambitions of becoming a race
car driver when
he was a boy. After being hit by a car at the age of 11,
however, he received an insurance
payout amounting to the “equivalent of a couple of hundred dollars”,
which he invested in shares of three
companies: an investment firm, a
company in the garment industry,
and a manufacturer. The stocks delivered a decent return, and Böcker
found himself on his way to a career
in financial markets.
“I don’t think, in all fairness, I
was at all close to becoming a race
car driver,” he says. “But at a very
early stage, when I was probably
around 10, that’s when I got interested in stocks. I learnt a lot about
companies and how stocks worked.
And, I had my first job when I was
15, helping out at the bank. I did
extra time when I was off school.
So I had an interest in the equity
market that goes way back.”
Now, as chief executive officer
of Singapore Exchange, Böcker is
trying to get local investors to share
his enthusiasm for stocks. Over the
past year, SGX has organised seminars at its offices on Shenton Way,
in the heartlands and at tertiary
educational institutions to drum
up interest in the stock market. It
hosts online training programmes
for investors on its SGX Academy
website. It has launched an investor
portal called My Gateway, which
provides market updates and product guides. Most recently, it has
partnered with S&P Capital IQ to
offer investors free access to fundamental information about locally-listed stocks. StockFacts includes
consensus recommendations for a
stock, and how it ranks on measures such as capital efficiency, price
momentum and earnings quality.
The results of this concerted
effort to attract retail investors
have been mixed, though. For
the 12-month period ended May,
the number of Central Depository (CDP) accounts increased by
a hefty 23% or 68,000 to 1.6 million in total. Also, some 844,000 of
those accounts — more than ever
before — had stock holdings. Yet,
for 1QFY15 ended September, SGX
reported an 8% decline in revenue
to S$169 million (RM437 million).
It was the third consecutive quarter
that it reported a y-o-y decline in
revenue. Earnings declined 16%
to S$78 million during the quarter.
Revenue and earnings were hit by
a 27% decrease in securities daily
average traded value (SDAV) to
S$1 billion as the securities market
volatility halved to 6% from 14% a
year earlier.
As market volumes dry up, SGX
is facing mounting criticism from
its various stakeholders. Retail investors have complained that the
local market lacks quality companies and that the authorities have
not done enough to deter market
manipulation and insider trading.
Retail brokers are of the view that
SGX is injuring their livelihoods by
reducing settlement periods and introducing collateral requirements.
Meanwhile, small- and mid-cap
companies think the exchange is
not doing enough to help them. A
group of them recently banded together to form the Small and Middle
Capitalisation Companies Association (SMCCA) to argue against the
new minimum trading price of 20
cents and some proposed changes
that will give SGX greater enforcement powers.
Taking the long-term view
Böcker is taking the criticism in his
stride. “We really appreciate that
there is a debate going on about
how best to develop the market,”
he says. “And we are listening. Rest
assured that we will always look into
[any feedback] and see if there is any
merit in it, if there is anything that
we should consider when we make
changes. But there is no doubt that
we need to make some changes.”
Indeed, changes are already being made. Earlier this year, SGX
introduced circuit breakers to assure investors of continued safety
and transparency even under volatile market conditions. The circuit breakers are triggered when
a potential trade is matched at a
price that is over 10% away from
the reference price.
This was followed by new order
types aimed at offering investors
flexibility and convenience. For
instance, market orders and market-to-limit orders are now available throughout the trading session
instead of only during the opening
and closing routines. Market orders are orders executed immediately at current market prices.
Market-to-limit orders ensure execution for at least a portion of
the order while avoiding the risk
of getting the order fully filled at a
price that is too far away from the
last-traded price for the remaining
portion of the order.
Clearing fees have also been
reduced and settlement charges
standardised. And, beginning Jan
19, the standard board lot size of
listed securities will be reduced
from 1,000 units to 100 units. This
will make certain blue chips more
affordable for retail investors. “All
these things we do to transform
the market are primarily to build a
more sustainable market, to build
a market that has the trust of the
investors,” Böcker says. “We want
a market that has integrity and is
transparent, fair and orderly.”
More changes are afoot, and
they are also more contentious.
Over the next year, SGX will transition towards having a minimum
trading price of 20 cents as a continuing listing requirement. This is
expected to address risks associated
with low-priced securities and to
improve overall market quality. The
Monetary Authority of Singapore
(MAS) and SGX are also proposing
that brokerage firms impose minimum collateral on their customers
for trading in both SGX-listed and
foreign-listed securities in order
to reduce the credit risk exposures
of market participants. And SGX
intends to shorten the settlement
cycle from three days to two by
2016. These two latter measures
are expected to enhance the robustness and resilience of the securities market.
Brokers have argued that trading
volumes, already at very low levels,
will dry up as a result of these new
rules. And some companies, presumably worried that their stocks
will fall out of favour, have also protested. In fact, some investors too
have voiced disagreements.
However, Böcker says that his
primary consideration is not to
simply drive a resurgence in trading volumes of penny stocks. “We
are here to protect investors. We are
here to ensure the integrity of the
market. And we are here to see that
companies can raise money. Those
are my three most important things.
Liquidity of the market is secondary. Others may have liquidity or
the turnover as their prime objective of what they do. And I have no
problem with that,” he says.
In fact, SGX itself has a transaction-driven revenue model and
would suffer just as badly if trading
volumes fell further. But Böcker has
no intention of giving up long-term
gains for short-term ones. “My business model, long-term, will never fly unless I have the trust of the
investors: the trust that we have a
market that is transparent and has
clear rules.”
Better market quality
While trading volumes may be falling, Böcker argues that SGX’s attractiveness as a trading and listing
venue has not suffered. In fact, by
some standards, it has actually improved. “From what we have done
over the last year, there is a better
quality in the market today than
a year ago. The turnover is lower. But turnover isn’t necessarily
something that makes the market
of a high quality. You can have a
high-quality market, where spreads
are tight, where there is depth of
liquidity, where you can buy and
sell when you want to,” he says.
“That is what has happened since
we introduced market makers and
liquidity providers. Soon, we will
have smaller board lot sizes and a
minimum trading price. A lot of the
changes we are doing are in order
to create that quality market. If we
have the quality of the market, I’m
convinced that over time, we will
have the volume that gives us the
position I think we deserve.”
Earlier this year, the exchange
introduced incentives for market
makers and liquidity providers to
improve both bid-ask spreads and
market depth. The bid-ask spread
is the difference between the best
price of a buyer and the best price of
a seller for a particular stock. Smaller spreads indicate that buyers are
able to buy at prices closer to their
bids and sellers are able to sell at
prices closer to their asking prices.
Market depth is a measure of how
many shares can be transacted at the
best prevailing bid and offer price.
As at end-September, the incentive programme had drawn 21
participants. Since its introduction
in June, 22 out of 34 index stocks
saw a narrowing of spreads. Improvements ranged between 2%
and 19%. Meanwhile, 26 out of 34
index stocks saw an improvement
in market depth. Improvements
ranged between 6% and 101%.
Also, Böcker points out that
pockets of the market continue to
attract investor interest. In 1QFY15,
stocks with a price range of more
than S$5 saw a 6% increase in their
SDAV. In comparison, stocks priced
at less than 20 cents saw a 64% decline in their SDAV. By sector, the
real estate investment trusts (REITs)
have also seen more than their fair
share of trading. REITs currently
account for 6.4% of the total market
capitalisation but make up about
10% of trading value this year.
Chew Sutat, executive vice-president at SGX, says that many retail
brokers and investors have misconceptions about the quality of the local market. “In terms of volatility in
the Singapore market, there’s only
so much I can do. However, I think
the beta and the volatility don’t tell
the whole story. And that’s one of
the things that we are spending a
lot of time on with our brokers,” he
says. Over the past few weeks, SGX
has been holding roadshows at the
offices of local brokerage firms to
dispel myths, generate buzz and
answer questions.
Among other things, Chew has
been pointing out opportunities
within the local market that brokers
are probably missing. “There are
so many opportunities internally.
You think Thailand is great? Indonesia is great? Malaysia is great?
But Thai Beverage, Jardine Cycle &
Carriage and IHH Healthcare outperformed the respective indices.
And it’s news to many of them.”
Over a one-year period, shares
of ThaiBev have returned 43% including dividends while the Stock
Exchange of Thailand Index has
returned 10.9%. Shares of Jardine
C&C have returned 11.7% versus
the 11.2% return of the Jakarta Stock
Exchange Composite Index. Locally-listed shares of IHH have returned 17.2% while the FTSE Bursa
Malaysia Kuala Lumpur Composite
Index has returned just 3.4%.
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T HURSDAY N OV E MBE R 6, 2014 • T HEED G E FINA NCIA L DAILY
FO CU S 21
SGX’s derivatives business continues to thrive
Attracting interest
The issue, then, is really in the penny stock category. And indeed, it
would appear that the grievances
of the SMCCA are real given the
sharp decline in trading interest in
this segment of the market. Chew
also points out that nearly all of the
trading in stocks with prices below
20 cents is done by retail investors.
Meanwhile, in the S$5 and above
category, retail participation is just
20%. The reduction of board lot
sizes next year may increase participation in the latter category.
But there remains the question
of how to improve interest in the
small- and mid-cap stocks.
“One of the biggest concerns
that the SMCCA raised was that the
minimum share price was not necessarily going to help them. What
they say is not entirely unfounded.
The biggest issues for members of
that group, the small- and midcap companies, are how to attract
institutional investors, to get more
research analysts to cover their
stocks, to make sure there’s a wider following amongst investors,”
Chew says.
Now that there is a formal association, Chew thinks SGX will
be able to work with the members
to see what more can be done in
order to generate interest. But he
does believe higher stock prices
will be helpful. “As the data has
told us, a move into higher price
bands is one way to attract more
institutional investors. Then the
value of the company, their market
cap, will grow in tandem with the
growth of their business.”
Chew also points out that SGX
in fact does more than most other
exchanges around the world to promote investor interest in the stock
market. “As a market operator, we
have gone way beyond any of the
exchanges in the rest of the world.
StockFacts is a wonderful demonstration of that. We offer it free.”
At the same time, Chew says,
other stakeholders need to do their
part too. The information on StockFacts is provided by S&P Capital IQ,
a financial information provider
that is part of McGraw Hill Financial. It does not provide brokerage
research but it does provide investors with consensus estimates and
ratings for stocks that are covered
by at least three brokerages. Unfortunately, even this may not be
enough.
“The top 150 stocks in the Singapore market by turnover represent
92% of total transaction volume in
the last year. And of those, a good
57 have less than three research
houses covering them. And actually
38 of them don’t have any coverage,” Chew says. “So I can provide
the tool, I can aggregate the information, but I think it’s also very
important, for the issuers themselves, and for the brokers, to be a
part of this. The turnover and the
interest in the market is not just the
exchange’s responsibility.”
Despite the limited interest,
Böcker says SGX will continue to
Attractively valued
SGX appears cheaper than several of its regional and international peers
COMPANY
MARKET CAP PRICE CHANGE YTD (%) EST PER (TIMES) DIVIDEND YIELD (%)
Singapore Exchange
WHERE IT’S LISTED
PRICE
Singapore
S$6.91
S$7.4 billion
-4.8
21.8
4.1
ASX
Australia
A$35.4
A$6.9 billion
-3.7
17.3
7.2
25
Bursa Malaysia
Malaysia
RM8
RM4.3 billion
-0.4
21.9
4.0
20
Hong Kong HK$169.40 HK$197.9 billion
31.0
37.8
2.1
US US$205.41 US$23.3 billion
-8.7
23.7
1.3
UK
21.3
19.1
1.6
Singapore Exchange
Vol (mil)
30
Price (S$)
8.0
7.5
Hong Kong Exchanges
and Clearing
Intercontinental
Exchange
London Stock
Exchange Group
The Nasdaq OMX
Group
US
£19.37
US$41.82
£6.7 billion
US$7.1 billion
5.1
14.5
1.4
Source: Bloomberg
Improving tradeability
More than a third of the Straits Times Index and MSCI Singapore Index constituents have seen a narrowing of spreads and an improvement in market depth since
the introduction of incentives for market makers and liquidity providers in June
BID-ASK SPREADS (BPS)
JAN-MAY JUNE-SEPT CHANGE
Thai Beverage
87.29
76.75
TURNOVER 6-MONTH
DAILY AVERAGE VALUE
-10.54
12,975,834
Noble Group
45.15
36.41
-8.74
32,790,458
SIA Engineering Co
30.40
24.62
-5.78
2,148,352
Hutchison Port Holdings Trust
75.64
69.97
-5.68
13,191,974
Jardine Cycle & Carriage
32.46
27.55
-4.91
9,762,525
Diverging interests
Trading in penny stocks has fallen significantly
while blue chips attracted investors
SDAV by price range (S$ mil)
-64%
-43%
-20%
+6%
488
390
383
257
BEST DEPTH VALUE (S$)
JAN-MAY JUNE-SEPT CHANGE
TURNOVER 6-MONTH
DAILY AVERAGE VALUE
Thai Beverage
3,368,826
5,951,583 2,582,757
12,975,834
Hutchison Port Holdings Trust
4,283,367
6,620,964 2,337,598
13,191,974
Global Logistic Properties
3,135,251
4,628,905 1,493,654
31,704,244
CapitaLand
2,570,435
3,669,800 1,099,365
25,613,378
Ascendas REIT
2,774,947
3,715,171
940,224
13,980,560
272
220
174
62
<S$0.2
S$0.2-S$1.0 S$1.0-S$5.0
>S$5.0
Sources: SGX
Source: SGX
encourage the listing of smaller
companies. “The number of smalland medium-sized companies is
very important to SGX. And I can
envisage over the years to come, we
will welcome even more small- and
medium-sized companies to our
market,” he says, adding that the
Catalist board may play an important role in this. “The Catalist board
has, I think, been doing very well.
And the interest from the SMEs has
been growing rapidly. We also see
that now we have more investors
investing in the Catalist board.”
Turnover velocity on the Catalist
hit 133% for the first nine months
of this year, versus 34% for the
Mainboard. There have been more
Catalist listings this year and most
of them are now above their IPO
price.
Winning in contestable areas
Even as SGX’s securities market
languishes, however, its derivatives
business has continued to thrive.
This year, revenue from the derivatives business surpassed revenue
from the securities business for the
first time. And, SGX has become a
market leader in some of the product categories it offers. “Interestingly, in areas of our business that are
normally seen as more contestable, we are actually winning,” says
Chew. “If you look at the market
shares we have for India, Taiwan,
Japanese futures and so on, we
have between 20% and 70% market share, which is significant for
a little red dot in Southeast Asia.”
On Oct 20, SGX launched renminbi futures on its platform. “A lot
of people in Singapore didn’t take
notice of it but it was featured extensively in North Asia,” says Chew.
He points out that 1.1 billion yuan
(RM601.4 million) in notional value
was traded on the first day. “Hong
Kong always claims to be the offshore centre for renminbi. They
had the product for 18 months.
We were, on day one, three to four
times their volume. So, where we
are competing, where we are able
to offer value to our customers, we
are able to provide services that
are distinctive, and to hub it out
of Singapore.”
SGX recently acquired the remaining 51% of Energy Market Co
that it did not already own. Böcker
says he will tap on EMC’s strengths
to create and launch more energy-backed derivatives. “EMC today, as the operator of the electricity spot market, knows a lot about
the electricity market and the energy market here, and about how
a deregulated energy market can
be developed. That gives us the
capabilities to do more products,
whether that is in electricity futures,
or gas futures. The team within
EMC is very knowledgeable. We
will combine their knowledge with
our knowledge of futures and of the
trading members.”
SGX maintains dividend
Böcker has plenty of experience in
building up a derivatives exchange
business. In 1986, he joined OMX,
the Swedish exchange and technology company, where he worked
his way up to the position of CEO.
Among other things, he oversaw
the acquisition of an international
derivatives business from Norwegian power derivatives exchange
Nord Pool. “It started in the same
way: by adding other products to it,
with clearing services, then going
into a broader region.”
Böcker eventually helped oversee the merger of OMX with Nasdaq in 2007. Prior to joining SGX in
December 2009, he was president
of The NASDAQ OMX Group. Now,
as the local derivatives market continues to grow, Böcker figures that
SGX will be able to maintain its
dividend despite the weak securities trading volumes. For 1QFY15,
SGX has declared its regular base
dividend of four cents per share.
“We have the base dividend as part
15
7.0
10
S$6.91
6.5
5
6.0
0
Nov 4, 2011
Oct 29, 2014
of our strategy. And I think many
shareholders appreciate the yield
from us and we take it very seriously,” Böcker says. “And remember
that the earnings per share (EPS)
was a little bit more than 7.3 cents.
The board saw no need to change
the base dividend.”
Based on its close on Oct 29 at
S$6.91, SGX now has a hefty dividend yield of 4%. That is higher
than the market average of the STI
component stocks, and other major exchanges. SGX also trades at
21.9 times its estimated earnings,
making it cheaper than several of
its peers. Nevertheless, most analysts rate it a “neutral” or “hold”.
“We believe SGX’s efforts to
transform the securities market
will take time. We expect market
volumes to remain subdued in the
near term, especially since 2Q is
seasonally the weakest,” says CIMB
Research in an Oct 21 report. It
has a price target of S$7.12 on the
stock. OCBC Investment Research,
meanwhile, sees no drivers to raise
its FY15 projections. It is expecting
EPS to dip from 30 cents to 29.3
cents. And DBS Group Research
analyst Lim Sue Lin has cut her
earnings forecast by 11% this year
and 15% next year to account for
“a persistently challenging outlook”. She has accordingly cut her
price target to S$6.95 from S$7.05
previously.
Böcker is unfazed by the lukewarm analyst opinion on SGX. “I’ve
been in this business for nearly
30 years. I think we’re here for the
long run, not to make short-term
decisions. I am, of course, always
disappointed when things don’t
develop as we had hoped for. But
mostly, I’m very proud of the team
we have at SGX,” he says. “Look
at our futures business: the size
of it, the consistent growth we’ve
had, the number of clients we have.
We’re building up what we’re doing in Hong Kong and China, in
Europe through our London office,
and in Japan out of Tokyo. The list
is long. We’ve been able to deliver
a lot of things.”
Still, as far as brokers and local
investors are concerned, the real
challenge Böcker faces is to build
an equities market that attracts a
new generation of young investors.
— The Edge Singapore
22 F E AT U R E
BoJ bond vault may
resemble a black hole
Debt keeps falling in, never to escape, or so investors want to believe
BY A NDY MU KHERJEE
T
he Bank of Japan’s (BoJ)
bond vault is starting
to resemble a black
hole: debt keeps falling in, never to escape.
At least, that’s what investors want to believe. If their expectations change, the consequences for
Japan’s bond market could be ugly.
The BoJ already owns Japanese
government bonds (JGBs) worth
¥200 trillion (RM5.9 trillion), or
24% of all public debt in issue. Last
week, it raised its annual bond-buying target from ¥50 to ¥80 trillion.
Assuming public spending remains
stable, another 7% of all outstanding JGBs will succumb to the central
bank’s gravitational pull next year. If
yen printing continues at this pace,
the BoJ could own half of Japan’s
government bonds by 2018.
The BoJ could dial down asset purchases when inflation approaches its 2% target sometime
in 2016. Even then, however, it will
own JGBs equivalent to 70% of Japanese gross domestic product (GDP).
Shrinking its balance sheet will be
very difficult.
To see why, assume the BoJ decides to reduce its JGB holdings to
12% of GDP — the level it held back
in 2007. It could do so by selling
bonds, or by not reinvesting the
proceeds of maturing debt. Either
way, some other investors would
need to buy bonds worth 3% of
GDP annually for 20 years.
To prevent these investors from
demanding very high — and potentially destabilising —– yields to step
into the breach, Japan’s government
would have to curb borrowing. But
cutting social security or raising
the consumption tax beyond next
year’s planned increase to 10% will
be politically contentious. Besides,
simultaneous fiscal and monetary
tightening could send Japan’s consumer economy into a near-permanent funk.
A more rational bet is that Japan’s ageing society won’t encounter much inflation. A sustained rise in wages has so far
proved elusive. The central bank
won’t need to sell government
debt and the BoJ’s vault will turn
into a black hole. The bonds that
go into it won’t pop out again;
and those that remain in private
hands will stay in a pricey orbit.
Right or wrong, that is the bet
investors are making. — Reuters
The Volcker Rule’s unintended consequences
BY JU SSI KEPPO
THE most profound change in banking regulations since the global financial crisis has been the Volcker Rule,
passed four years ago as part of the
Dodd-Frank Act in the United States.
The rule aims to reduce imprudent risk-taking among banks by
restricting their business models
and prohibiting risky activities, so
as to increase financial stability.
Banks are banned from proprietary
trading and are required to limit
their investments in hedge funds
and private equity.
While full compliance is not required until next year, major affected bank holdings in the US have
announced reconfigurations of
their business models, shutting
down proprietary trading desks
and selling shares in hedge funds.
However, despite the compliance announcements, the effect
of the Volcker Rule is dubious as
there is a long list of exemptions.
Banks can still take risks in
many ways such as increasing
their leverage or risks in their
trading and banking books, or
decreasing the hedging of their
banking books. We cannot assume that a decrease in the trading book or its particular activities
lowers a bank’s overall risk.
Regulators may also find it difficult to differentiate between prohibited and permitted activities,
such as trading on behalf of customers, market-making or hedging.
However, despite the compliance announcements, the effect of the Volcker Rule is dubious as there is a long list of exemptions.
Photo by Bloomberg
As a result, the overall risk levels
of affected banks could very well
remain unchanged.
Based on my research with
co-author Josef Korte, this is indeed the case — while the banks
most affected by the Volcker Rule
have reduced their trading books
much more than others, there has
been no corresponding reduction
in risk-taking because the affected
banks use their remaining trading
accounts less for hedging.
Possibly because of the continuing trading activities, the banking
book risks have fortunately not, or
at least not yet, risen significantly.
Thus, while the banks are at least
closer to complying with the rule,
they have so far been able to keep
their overall risks unchanged.
In addition, if the reduction of
bank risk is an objective of the rule,
our findings suggest that the Volcker Rule has so far not led to its
intended consequences.
These effects are not necessarily
surprising.
Banks make profits by taking
risks, and if regulators prevent them
from taking risks in one way, these
financial firms simply do it another way since risk-taking incentives
have not changed.
In another paper, my co-author
Sohhyun Chung and I found that
this risk-shifting with the Volcker
Rule has unintended consequences:
they decrease banks’ equity values
and raise their default profitability.
To be fair, the final rule book for
the Volcker Rule has only recently
been published, and it is not yet
fully binding on banks.
However, our studies have identified serious risks in the Volcker Rule.
US regulators may want to analyse further possible implementation risks and unintended consequences, so as to increase banking,
and thereby financial, stability, because the rule is expensive for both
banks and regulators.
Jussi Keppo is associate professor of
decision sciences and co-director of
the Master of Science (Business Analytics) programme at the National
University of Singapore Business
School. This article was first published on the school’s Think Business portal (thinkbusiness.nus.edu).
Alibaba
delivers
chunky
growth,
but at a cost
BY J O H N FO L E Y
AFTER pulling off the largest
share offering in history, Alibaba Group Holding Ltd has raised
expectations through the roof.
The Chinese e-commerce
group came close to meeting
them on Tuesday with quarterly
results — its first as a public company — revealing a 54% annual
growth in revenue. That may justify the 50% run-up in its shares
since September.
But profitability has slipped,
and the company’s explanation
doesn’t offer much comfort.
Alibaba is mostly moving in
the right direction. It is squeezing
more out of mobile consumers,
who now account for 36% of its
transactions, and keeping 1.87%
of what they spent on its sites.
That’s up from 1.49% in June, and
makes a slight fall in the company’s take from desktop users
easier to bear.
Alibaba’s Amazon-like Tmall
site is also growing at twice the
speed of consumer-to-consumer
site Taobao. That’s encouraging,
since suppliers who sell on Tmall
pay more than those on its more
downmarket sibling.
Lift up the hood, though, and
things look less reassuring. Alibaba’s operating margins fell from
43% in June to 26%, their lowest
in three years after stripping out
a one-off payment to shareholder
Yahoo Inc in 2012.
Much of the drop came from
equity given to retain employees after the initial public offering. But even under the company’s preferred earnings measure,
which excludes stock payments,
net profit margins fell 5.9 percentage points.
One reason is that Alibaba
spent more on promotion. Another is that new investments in
things like web browsers and car
navigation systems boost growth
but bring lower returns than the
core business.
They’re reminiscent of the
zealous investments that dragged
down earnings for the likes of
Facebook Inc and Amazon.com
Inc. The Chinese group has wide
margins to play with, but also
masses of cash to fritter: US$14.4
billion (RM48 billion) at the end
of September.
Alibaba says its goal is to attract customers and make them
spend more, rather than to increase profits or monetisation
rates.
But that in itself could be a
problem. It makes buying sales
growth at the expense of earnings
too tempting.
Moreover, it’s a reminder that,
in the Alibaba hierarchy, shareholders follow customers and
employees.
Investors may tolerate that while
top-line growth is rapid, but they
ought not forget it. — Reuters
W O R L D B U S I N E S S 23
Toyota expects record profit
Weaker yen a boon to Lexus, SUV sales
BY CRAIG TRUDELL
& M A SATSU GU HORI E
TOKYO/OSAKA: Toyota Motor
Corp, Japan’s biggest automaker, predicted it will make a record
profit for a second year, as a weaker
yen boosts the value of high-profit Lexus luxury models and sport
utility vehicles (SUVs) sold abroad.
Net income for the year ending in March may reach ¥2 trillion
(RM58.49 billion), up from its previous forecast of ¥1.78 trillion, the
Toyota City, Japan-based company
said yesterday in a statement. The
carmaker made an unprecedented
profit of ¥1.82 trillion last fiscal year.
President Akio Toyoda steered
the company founded by his grandfather back to industry-leading profits even before it became a leading
beneficiary of Japan central bank
stimulus aimed at defeating deflation. The monetary easing has driven
the yen down to a near seven-year
low, which should help the automaker rack up more earnings from
record SUV sales in the United States
and improve the competitiveness of
its expanding Lexus line-up.
“The impact of the yen’s depreci-
A new Highlander being unveiled at the New York Auto Show in March 2013. The Highlander and RAV4 SUVs are part of a consumer
shift from cars in the US as gasoline prices fall. Photo by Reuters
ation is big on automakers’ earnings
results,” Takashi Aoki, a Tokyo-based
fund manager at Mizuho Asset Management Co, said by phone before
Toyota’s statement. “For Toyota, it
could only be a benefit.”
Toyota rose 0.1% to ¥6,808 at the
close in Tokyo before the company
announced earnings.
Toyoda, 58, has called for a period
of sustainable growth for the company after years of over-expansion
leading up to his becoming president
LabCorp deal tests positive for
value destruction
BY ROB ERT C Y RA N
NEW YORK: Laboratory Corp
of America’s US$6.1 billion
(RM20.37 billion) deal for Covance tests positive for value
destruction. The strategic logic
behind adding the clinical trial
outsourcer to the firm that checks
patients’ blood and other fluids
is hazy. Shareholders’ financial
diagnosis is damning, too. They
swabbed some US$700 million
off LabCorp as cost cuts fell far
short of the 32% premium paid.
There’s very little revenue overlap between the two — LabCorp
estimated the figure at less than 3%
of its businesses. While that means
antitrust won’t be a concern, it also
limits the scope for reducing expenses. The companies figure there
are US$100 million of estimated
savings. These are worth perhaps
US$700 million to shareholders
today, once taxed, capitalised and
discounted for the three years it’ll
take to realise them. That covers
just half the US$1.4 billion sweetener LabCorp is paying for control.
Executives are hoping that
greater revenue will make up
the shortfall. Considering where
healthcare appears to be going,
that general premise holds some
water. Doctors are increasingly
being paid based on how patients
fare, rather than the number of
people treated. LabCorp already
has a taste of this model under
the US Affordable Care Act. Obamacare has increased the number
Obamacare has
increased the number
of patients with
insurance, but is
squeezing prices paid
per test.
of patients with insurance, but is
squeezing prices paid per test.
The idea is that owning Covance will allow LabCorp to inject
more into its top line by combining and then acting on the data
generated by labs and clinical trials. One example would be to offer
patients who test positive for a rare
disease the chance to participate
in a trial for a potential treatment.
Another would use practical lab
work and theoretical results from
clinical trials to determine which
LabCorp patients are most likely
to have a heart attack.
It’s an appealing vision, but
combining two completely different businesses is hard. Doing so
while simultaneously shifting focus
to new services, some of which
don’t exist yet, is even tougher.
Meanwhile, new start-ups, such
as ultra-rapid and cheap testing
firm Theranos, are threatening to
upend the testing business. Until
LabCorp can show there’s merit to
its vision of healthcare, investors
are right to regard the deal as an
overpriced foible. — Reuters
in 2009. That year, Toyota reported its
first operating loss in more than seven decades and began recalling millions of vehicles for problems related
to sudden unintended acceleration,
blemishing its quality record.
While Toyota has fallen behind
competitors including VW in markets such as China, it’s keeping pace
with an expanding US market by
making small investments to boost
production of models such as the
Highlander SUV built in Indiana.
The Highlander and RAV4 SUVs
are part of a consumer shift from cars
in the US as gasoline prices fall below
US$3 (RM10) a gallon for the first time
in almost four years. In August, RAV4
deliveries outnumbered those of the
Corolla compact, the highest-volume
model in Toyota’s history.
Lexus’ US deliveries have
climbed 14% this year through October, outpacing Bayerische Motoren Werke AG’s BMW and Daimler
AG’s Mercedes-Benz. — Bloomberg
LG, Google strike
patent-sharing deal
SEOUL: LG Electronics said yesterday it had signed a long-term
cross-licence deal with Google as
the South Korean firm tries to expand its smartphone business.
The deal covers patents on a
“broad range of products and technologies” that already exist and will
be filed in the next 10 years, the
two firms said in a joint statement.
Samsung — LG’s home rival and
the world’s top smartphone maker
— earlier struck a similar deal with
Google in January.
“LG values its relationship with
Google, and this agreement underscores both companies’ commitment to developing new products
and technologies that enhance con-
sumers’ lives,” said J H Lee, executive vice-president and head of
LG’s intellectual property centre.
Almost all of LG’s popular smartphones, tablet computers and smartwatches are powered by Android
software made by the US tech giant.
LG — the world’s fourth-largest
smartphone maker — struggled for
years with sluggish sales after making a late entry into the market. But it
recently showed signs of revival with
its flagship G3 smartphones, while its
bigger rival Samsung saw profits sag.
LG earlier reported an 87% jump
in third-quarter net profit as the
previously loss-making handset
unit saw profits surge in a big turnaround. — AFP
BoJ bent on hitting price goal
BY LE I K A K I HARA
& S TANLE Y WHI TE
TOKYO: Bank of Japan (BoJ) governor Haruhiko Kuroda, who last
week stunned global financial markets by expanding a massive monetary stimulus programme, said the
central bank is ready to do more to
hit its 2% price goal and recharge
a tottering economy.
Kuroda stressed the BoJ is determined to do whatever it takes to
hit the inflation target in two years
and vanquish nearly two decades
of grinding deflation.
“There’s no change to our policy of trying to achieve 2% inflation
at the earliest date possible, with a
roughly two-year time horizon in
mind,” the central bank chief said
in a speech at a seminar yesterday.
“There are no limits to our policy tools, including purchases of
Japanese government bonds,” he
said in response to a question from
a private analyst after the speech.
— Reuters
IN BRIEF
Saudi prince calls for sovereign fund as oil slides
JEDDAH: Saudi Arabia should
set up a sovereign wealth fund
to protect itself from sliding oil
prices by earning higher returns from its foreign reserves,
Saudi billionaire Prince Alwaleed Talal said on Tuesday.
He urged the government last
month to do more to protect
the economy of the world’s
top oil exporter from the slide,
and on Tuesday recommended that officials put most of
the kingdom’s official savings
in a new fund. “The budget of
the kingdom of Saudi Arabia
depends 90% on oil ... I’ve already said that this is a huge
mistake,” said the prince, one of
the kingdom’s most prominent
businessmen and international
investors. — Reuters
BHP to export ultralight
oil, testing US crude ban
SYDNEY: Mining giant BHP
Billiton said yesterday it plans
to ship ultralight oil from the
United States without the government’s explicit permission
in a move that will test a fourdecade-long ban on crude
exports. The Anglo-Australian miner said the processed
condensate, an ultralight oil,
would be exported from its Eagle Ford operations in south
Texas. The decision came just
months after the US allowed
two Texas-based companies to
export condensate amid growing pressure on the government
to end its ban on unrefined exports introduced in the 1970s
as an energy security measure.
— Reuters
Shipping lines apply Ebola clause to fend off risks
LONDON/NEW YORK: As
Ebola persists in West Africa, shipping lines and traders
are tweaking their contracts
to protect themselves if the
disease puts crews at risk of
infection or prevents vessels
calling at affected ports. Ebola has not yet forced ports to
close, but uncertainties about
the spread of the virus are
adding to legal and financial
concerns for those involved in
shipping oil, cocoa and minerals from the region. Iron ore
miners have already been hit
by logistics problems exacerbated by the Ebola outbreak.
— Reuters
GE takeover of Alstom
energy assets approved
PARIS: France’s Economy Minister Emmanuel Macron yesterday authorised the sale of some
of Alstom’s energy assets to
General Electric, formalising a
multi-billion-dollar deal signed
in June, his ministry said in a
statement. “Emmanuel Macron ... today (yesterday) gave
his authorisation to General
Electric for the realisation of its
investment project in France
with Alstom and the creation
of an industrial alliance between the two groups in the
energy sector,” the statement
said. — AFP
W O R L D B U S I N E S S 25
Indonesia 3Q GDP grows
at slowest pace in 5 years
Expansion has trended lower since 2010 peak as exports hit by weak global demand
BY GAYATRI SU ROYO
& N ILU FA R RI ZK I
JAKARTA: Indonesia’s gross domestic product (GDP) grew 5.01% in the
third quarter from a year earlier, its
slowest in five years, highlighting the
challenge that new President Joko
Widodo or Jokowi faces trying to
turn around Southeast Asia’s largest economy.
Growth in the G20 economy has
trended lower since a peak in 2010 as
exports suffered from weak global demand, while a wide current-account
deficit plus political uncertainty in an
election year has unnerved investors.
“We doubt that growth will slow
much further from here, but we
don’t expect it to rebound either,”
said Gareth Leather, an economist
at Capital Economics, adding that
exports are likely to remain weak.
Exports were 0.7% lower in
the third quarter from a year ago,
following from a fall of 1.04% in
the second quarter.
Imports were down 3.63% in the
third quarter from a year ago, after
a 5.02% fall in the second quarter.
Elected in July and sworn in late
last month, Jokowi has pledged to
boost economic growth to 7% on
average during his five-year-term.
In the previous quarter, GDP
grew slightly quicker at 5.12%, but
was also the slowest rate since the
third quarter of 2009.
During July to September, invest-
ment rose 4.02% in the third quarter from a year ago, and down from
the second quarter rate of 4.53%. It
had been growing twice as fast two
years ago.
Growth in private consumption,
which accounts for more than half
of the GDP, decelarated slightly.
The data also showed that growth
in manufacturing and several services sector slowed, most notably trade,
transport and communication, and
financial services. — Reuters
Filepic of a SoftBank store in the Ginza district in Tokyo. SoftBank has been unable to stem customer losses at Sprint since paying
US$22 billion for the US carrier last year. Photo by Bloomberg
SoftBank’s first profit drop in
9 years checks Son’s ambitions
BY PAV EL ALP E Y E V
& TAKASHI AM ANO
TOKYO: SoftBank Corp is forecasting its first profit drop in nine
years as billionaire Masayoshi Son’s
goal of creating the world’s largest
wireless carrier stalls on losses at
Sprint Corp.
Operating profit will be about
¥900 billion (RM26.3 billion) in the
year ending March, Tokyo-based
SoftBank said on Tuesday. That’s
10% below its previous forecast
and compares with ¥1.09 trillion
reported a year earlier.
Son’s strategy of financing international deals with earnings from
Asia is coming under pressure as
Japanese subscriber growth slows
with all three national carriers offering Apple Inc’s iPhone. SoftBank,
the biggest shareholder in Alibaba Group Holding Ltd, has been
unable to stem customer losses at
Sprint since paying US$22 billion
(RM73.5 billion) for the US carrier
last year.
“SoftBank has totally overestimated the cash flow situation at
Sprint,” said Amir Anvarzadeh, a
manager of Japanese equity sales
at BGC Partners Inc in Singapore.
“This is probably one of the worst
times to be in the wireless business because of the global pricing
pressure, the smartphone market
maturing very quickly and voice
revenues getting chilled.”
SoftBank’s operating profit in
the three months ended September
was ¥259 billion, missing the ¥301
billion average of six analyst estimates compiled by Bloomberg. Net
income was ¥483.1 billion, receiving a boost from the initial public
offering of Alibaba.
SoftBank owns more than 30% of
China’s largest e-commerce operator. The company may have to use
the stake, which is valued at about
US$80 billion, to help finance a
turnaround at Sprint, according to
BGC Partners. — Bloomberg
HKEx 3Q profit climbs, Shanghai link launch date not known
BY L AWRENC E WHI T E
HONG KONG: Hong Kong Exchanges & Clearing Ltd (HKEx)
posted a 6% rise in third-quarter
profit as trading volumes climbed
ahead of a proposed trading link
with Shanghai, but said it did not
know when the delayed scheme
would be launched.
Upcoming property
launches expected over
next 6 months
SINGAPORE: Bartley, Upper
Serangoon View, Yishun and
Sims Drive will be where some
of the major property launches
are expected over the next six
months, The Straits Times reported. The projects include
Botanique at Bartley, Kingsford
Waterbay at Upper Serangoon
View, North Park Residences in
Yishun and Sims Urban Oasis
at Sims Drive, said a report.
Botanique at Bartley is being
developed by UOL and has 797
units. Projects with over 1,000
units include Kingsford Waterbay developed by Kingsford
Development as well as GuocoLand’s Sims Urban Oasis.
Another large project, Marina
One developed by Temasek
Holdings and Khazanah Nasional Bhd has already been
launched.
Reits band together to
form new industry
association
HK business
activity drops
most in 3 years
on protests
HONG KONG: Activity in Hong
Kong’s private sector fell by its
biggest margin in three years
in October, a private survey
showed yesterday, offering
a first glimpse of the impact
pro-democracy protests are
having on the economy and
signalling a further slowdown.
The monthly Purchasing
Managers’ index (PMI) in
Hong Kong’s private sector
compiled by HSBC/Markit
fell to 47.7 in October — its
strongest pace of deterioration
in operating conditions since
September 2011 — from 49.8
a month ago.
Sub-indices measuring new
orders and output led the decline with a number of companies surveyed attributing
the drop to recent political
protests that have blocked key
roads and hurt business activity for more than a month.
“The slowdown in economic activity in Hong Kong deepened in October as orders and
output fell at an accelerated
pace,” John Zhu, HSBC’s economist in Asia, said.
A reading above 50 in the
business survey indicates an
expansion in activity while one
below that threshold points to
a contraction. — Reuters
IN BRIEF
The world’s second-largest listed stock market operator reiterated
that while it had completed preparations, the scheme, seen as a milestone in the opening up of China’s
capital markets, had not received
regulatory approval.
The launch had been expected
on Oct 27 and the Hong Kong Securities and Futures Commission had
also said it is ready. Charles Li, chief
executive of the bourse, said last
month he could not clarify which
agency in Beijing is responsible for
giving the green light.
Some market watchers believe
the launch date might have been
postponed due to China’s dismay
over pro-democracy protests in
Hong Kong, which have paralysed
parts of the financial centre.
Lack of clarity on how capital
gains tax will be applied is also hindering the launch of the scheme.
The trading link could boost
the average daily value of trading
on the bourse by around 38% to
HK$93 billion by 2015, according to estimates by BNP Paribas.
— Reuters
SINGAPORE: A number of real
estate investment trusts (Reits) and other market players
have banded together to form
a Reit industry association, The
Straits Times has found out.
The news of the association is
on the back of proposals from
the Monetary Authority of Singapore (MAS) in early October
to shake up the S$63 billion Reit
sector in Singapore, which is
the biggest in Asia after Japan.
The Reit Association of Singapore has nine members in its
executive committee, which
includes large Reit sponsors
such as Mapletree, CapitaLand
and Keppel.
More SMEs paying on
time with tighter checks
and controls
SINGAPORE: More credit checks and tighter lending
controls have led to more companies paying on time, DP SME
Commercial Credit Bureau was
quoted by The Straits Times
on Tuesday, according to new
findings. Using a tool called the
Days Turned Cash National Average (DTC), the bureau found
that Singapore small and medium enterprises (SMEs) took an
average of just 36 days to pay
their debts in the third quarter.
The DTC measures the number
of days a company takes to pay
its creditor.
Valuetronics posts
second-quarter profit of
HK$36.3m
SINGAPORE: Mainboard-listed
Valuetronics Holdings, which
designs and manufactures for
leading consumer electronics
brands said net profit for the
three months ended Sept 30
was HK$36.3 million (RM15.6
million), a fall of 8.4% from the
previous year, The Straits Times
reported. Revenue was down
0.7% to HK$627.6 million. Revenue for the six months was up
0.9% at HK$1.25 billion while
net profit was 3.7% lower at
HK$70.2 million.
26 WORLD
Tough road ahead for Obama
Republicans seize US Senate in what is seen as a rebuke to the US president
BY STEVE H OL L AND
& JOHN WH I T ESIDES
WASHINGTON: Republicans rode
a wave of voter discontent to seize
control of the US Senate yesterday,
dealing a punishing blow to President Barack Obama that will limit
his legislative agenda and may force
him to make a course correction for
his last two years in office.
The Republican rout was wide
and deep in what was bound to be
seen as a sharp rebuke to Obama,
who has lurched from crisis to crisis all year and whose unpopularity
made him unwelcome to Democratic
candidates in many contested states.
The Republicans also strengthened their grip on the House of
Representatives. When the new
Congress takes power in January,
they will be in charge of both chambers of Congress for the first time
since elections in 2006.
The Republican takeover in the
Senate will force Obama to scale
back his ambitions to either executive actions that do not require
legislative approval, or items that
might gain bipartisan support, such
as trade agreements and tax reform.
UK to end training
of Libyan troops
early after sex
attacks
Republican
supporters cheering
as a giant TV screen
displayed the results
of the Senate race
in the US midterm
elections in Denver,
Colorado yesterday.
Photo by Reuters
It will also test his ability to compromise with newly empowered
political opponents who have been
resisting his legislative agenda since
he was first elected. And it could
prompt some White House staff
turnover as some exhausted members of his team consider departing
in favour of fresh legs.
Obama, first elected in 2008 and
said Obama would seek common
ground with Congress on areas like
trade and infrastructure.
“The president is going to continue to look for partners on Capitol
Hill, Democrats or Republicans, who
are willing to work with him on policies that benefit middle-class families,” White House spokesman Josh
Earnest said on Tuesday. — Reuters
Hong Kong students fine-tune
plan to take protest to Beijing
BY CLAR E B ALDWI N & DI ANA C HAN
LONDON: The first wave of Libyan army cadets being trained in
Britain will be sent home early,
British Defence Secretary Michael Fallon said on Tuesday, after five were charged over a series
of sex attacks on local residents.
Two cadets have been charged
with raping a man in Cambridge
on Oct 26, Cambridgeshire Police
said. Three more were charged
with sexual assaults on women
in Cambridge the same day, police said. Two of the men pleaded
guilty at Cambridge Magistrates’
Court last week.
Cambridgeshire Police said it
had also received nine reports of
sexual assaults on Oct 17.
Britain played a key role
in the Libyan revolution that
overthrew Muammar Gaddafi
in 2011, mounting an air campaign against Gaddafi’s forces.
But Libya has failed to build
up its security forces and disarm
rebel militias since then, leaving the country on the brink of
chaos. It is split between rival
factions, with two governments
vying for legitimacy and Amnesty
International accusing all sides
of war crimes.
To help rectify the Libyan military’s shortcomings, Britain has
been training the group of more
than 300 Libyan cadets in basic
infantry skills and military leadership in Bassingbourn, near
Cambridge. — Reuters
again in 2012, called Democratic
and Republican leaders of Congress
to the White House last Friday to
take stock of the new political landscape. He watched election returns
from the White House, and saw
little to warm his spirits.
Before the election results, the
White House had signalled no major changes for Obama. Officials
HONG KONG: Students calling for
full democracy for Chinese-ruled
Hong Kong are hoping to take their
protest to Communist Party rulers
in Beijing and are expected to announce details of their new battle
plan today.
The move signals a shift in the
focus of the protests in the former
British colony away from the Hong
Kong government which has said
it has limited room for manoeuvre.
But China is highly unlikely to
allow any known pro-democracy
activists into Beijing, especially if the
trip coincides with this weekend’s
Asia-Pacific Economic Cooperation
(Apec) forum in Beijing.
“I think one of the ways we can
solve this problem is to go to Beijing
personally and have a direct dialogue
with Beijing officials on this matter
since the [Hong Kong] government
claims that all decisions have to be
passed up to the NPC,” Alex Chow,
leader of the Hong Kong Federation
of Students (HKFS), said last week,
referring to China’s parliament, the
National People’s Congress.
The protesters blocked key roads
leading into three of Hong Kong’s
most economically and politically
important districts for weeks. The
campaign drew well over 100,000
at its peak and hundreds remain
camped out at the main protest
site in Admiralty, home to government offices and next to the main
financial district.
Pro-Beijing groups have increasingly criticised the impact the protests are having on business. Data on
business conditions in the city’s private sector economy released in the
HSBC Purchasing Managers’ Index
(PMI) show the strongest pace of deterioration in October in three years.
The chairman of the pro-Beijing
Democratic Alliance for the Betterment and Progress of Hong Kong,
Tam Yiu-chung, said on Tuesday
he would help convey the students’
message to Beijing if they stopped
occupying key roads, broadcaster
RTHK reported. — Reuters
Australia to step up Ebola fight in Africa
BY LINCOLN FE AS T
SYDNEY: Australia will fund an Ebola treatment clinic in Sierra Leone,
Prime Minister Tony Abbott said
yesterday, responding to pressure
from the United States and others
to do more to tackle the deadly
outbreak at its West African source.
Australia last week became the
first developed nation to issue a
blanket ban on visas from the three
most Ebola-affected countries —
Sierra Leone, Guinea and Liberia
— sparking widespread criticism.
Australia will provide A$20 million
(RM58.08 million) to staff a 100-bed
treatment centre that will be built by
Britain and run by Aspen Medical, a
private Australian company.
“We anticipate about 240 staff
required to do the job,” Abbott told
reporters in Sydney. “Most of them
will be locally engaged. Some will
be international and it’s quite possible, even likely, that some will be
Australian.”
Australia had already committed
around A$18 million to fight the
outbreak of the virus, but had been
called on by US President Barack
Obama, opposition lawmakers and
medical bodies such as Doctors
Without Borders to do more.
“There are many Australians who
wish to volunteer to use their skills,
committed and capable doctors
and nurses who wish to help in
the fight against Ebola,” opposition
leader Bill Shorten.
“However, we believe that the
government, whilst this is a welcome,
overdue step, has not gone as far as
it should to help tackle the scourge
at the source.” — Reuters
IN BRIEF
Japan court orders
US$500,000 damages
for overwork suicide
TOKYO: A Japanese court has
ordered a restaurant chain and
two personnel to pay more
than half a million dollars
damages to the family of a
man who killed himself after
being forced to work nearly
200 hours overtime a month.
Tokyo District Court said the
president of Tokyo-based
Sun Challenge, a steak house
chain, and another official
had been culpable in failing
to stop the unidentified employee from working excessive
hours. “With only one holiday given to him every several
months, the psychological load
of prolonged work and power
harassment caused his mental
disorder,” said presiding judge
Akira Yamada, according to a
Kyodo News report on Tuesday. — AFP
Fugitive Mexican mayor
suspected in abduction
of 43 students captured
MEXICO CITY: Mexican police on Tuesday captured Jose
Luis Abarca, a fugitive former
mayor, and his wife suspected
of being the probable masterminds behind the abduction
of 43 student teachers feared
massacred in September, officials said. Police working with
a local drug gang in the southwestern city of Iguala abducted
the students after clashes there
on the night of Sept 26, seriously undermining President
Enrique Pena Nieto’s claims
that Mexico has become safer
on his watch. Jose Luis Abarca, who at the time was mayor
of Iguala, and his wife, Maria
de los Angeles Pineda, were
captured by federal police in
a house in Mexico City early Tuesday and were being
questioned by prosecutors,
a government official said. —
Reuters
Canadian man seeks
Elizabeth Gallagher
for world travel
OTTOWA: A Canadian man
is offering free plane tickets
to a female compatriot to fly
“around the world”, but on one
condition — his fellow traveller must be called Elizabeth
Gallagher, the BBC reported.
Jordan Axani broke up with his
girlfriend, Elizabeth Gallagher,
in March and needs someone
with the same name who can
use the tickets.
Pictures show North
Korea’s Kim walking
without stick
PYONGYANG: North Korea’s
top newspaper carried pictures yesterday of leader Kim
Jong-Un walking without a
stick, apparently showing he
has recovered from either an
injury or surgery to his leg.
Rodong Sinmun, the official
daily of the state’s ruling Korean Workers Party, carried a
photo of a smiling Kim walking
without the cane he was seen
using last month. — AFP
live it! 27
WELLBEING . THE ARTS . WINE+DINE . STYLE+DESIGN . LEISURE
Zen TODAY
Temptation is a woman’s weapon and man’s excuse.
— H L Mencken
In open scenarios where
diners and kitchen staff
could see each other,
customer satisfaction rose
17% higher compared with
meals in which neither
group could see the
other. Likewise, service
also turned out to be 13%
faster. Photo by AFP
Transparent is
TASTIER
Open kitchens produce better food, according to a Harvard study
W
ant to be assured of
a good meal? Dine
at a restaurant with
an open kitchen, as
a new Harvard study
has found that food
tastes better when chefs and diners can
see each other.
For their research, featured in the November issue of Harvard Business Review,
scientists rigged a cafeteria with iPads
and live-streamed images of the kitchen
and dining spaces to cooks and diners,
under four different scenarios.
In the first, diners and cooks were blind
to one another. In the second, diners
could see the cooks; in the third, diners
were visible to the cooks; and in the last,
both diners and cooks were able to see
one another.
Results showed that when diners and
kitchen staff could see each other, customer satisfaction rates rose 17% higher
compared with meals in which neither
group could see the other. Likewise, service also turned out to be 13% faster.
Presumably, the results indicate that
putting a face to the person who will
eventually be tucking into their meal,
as well as the ability to see the person
cooking it, makes the dining experience
more personable.
“We’ve learned that seeing the customer can make employees feel more appreciated, more satisfied in their jobs, and
more willing to exert effort,” explained
lead researcher Ryan Buell in the magazine.
In fact, not only did customers give
higher ratings in an open-kitchen scenario, but observers tasked with taking
notes and timing service noted that the
4.98
quality of the cooking likewise improved.
For example, when researchers turned
on the screens so that chefs could see
their customers, the staff made eggs to
order more often, rather than cooking
them on the grill in advance — and by
extension, overcooking them.
“We found that reciprocity plays a
much bigger role than stress or accountability,” Buell said.
“This is more about gratitude — which
is a powerful force. Cooks constantly
said how much they loved seeing their
customers.” — AFP
128.98
28
live it!
T HU
Personal
ASSISTANT
COMPI L ED BY CAR M EL DOM INIC
WORK. LIFE. BALANCE
Bit
Thi
her
wit
bre
du
hou
of f
ser
ket
bu
Ra
Pri
SHUNZA, the American singer-songwriter
known for her velvety voice and love
ballads, will be collaborating with The
Red Groove Project, a multinational funk,
jazz, groove band from Shanghai, for a
one-night-only show on Saturday at the
Genting International Convention Centre’s
Grand Ballroom 1-4, at 8.30pm. Ticket
prices start at RM80. Don’t miss out on
a night of soul-rending jazz melodies.
For more details, log on to http://www.
rwgenting.com/en/entertainment/2014/
shunza/index.htm
01
Housing
CALLING all art aficionados, collectors
and connoisseurs! Kuala Lumpur Lifestyle
Art Space is holding its 12th edition of
the art auction on Saturday at Connexion
@ Nexus, Bangsar South at 4pm. There
will be a variety of art masterpieces from
the greatest modern and contemporary
artists to emerging artists in Malaysia and
the region. A sneak peek is available to
those interested from now till the day of
the auction at the KL Lifestyle Art Space
at 150 Jalan Maarof, in Bangsar, Kuala
Lumpur. For further enquiries on the
auction, contact Lydia Teoh (019) 2609 668
or Shamila (019) 3337 668 or visit http://
www.kl-lifestyle.com.my/
BURROWED within Ampang’s natural
forest reserve, Tamarind Springs offers
diners a contemporary Indochinese
cuisine experience in Kuala Lumpur.
Tamarind Springs’ elegant décor,
infused with traditional and rustic Asian
furnishings, adds to its warm and cosy
ambience. Some of the must-try dishes
are the Vietnamese pan-fried pesto and
snakehead fish roe crisp and the Phnom
Penh Wagyu beef lok lak with lime and
black pepper. The menu is pork free.
For more information, call (03) 4256
9300 or (03) 4256 9301 or visit http://
tamarindrestaurants.com/tamarindsprings.html
EUROPE
The Apartment Downtown reopens its doors with a new dining concept
BY C A R ME L D O MIN IC
N
ewly reopened eatery The
Apartment Downtown in
KLCC recently unveiled an
exciting new look and an
even more exciting menu.
The eatery first opened its
doors in 2008. From its previous offering
of a typical mix of Asian and Western cuisine suited for restaurants, it now features
19 dishes with a European-style dining
concept. The twist is that it is infused with
Asian flavours and may raise many eyebrows. Still, one should dare to dive into
the unknown to be pleasantly surprised,
just as I was.
Choose from the selections of appetisers
that range from RM17 to RM40, soups, and
main courses of pasta, Western or Asian
meals, priced between RM25.90 for the
vegetarian pasta peperonata and RM134.90
for the Wagyu striploin. Then there are of
course desserts, which cost from RM15 for
a choco-pumpkin pie or an apple-and-pear
pie to RM18.90 for baked chocolate pudding or a slice of carrot cake.
At a recent invitation to review the improved menu, The Edge Financial Daily was
privileged to sample some of The Apartment
02 Downtown’s offerings:
So
sam
The
bu
wit
tas
dry
as
as y
it d
mi
bal
als
ma
Ra
Pri
Sa
The
rell
cuc
len
gre
cou
ele
the
cor
boi
cle
it u
Ra
Pri
T HURSDAY N OV E MBE R 6, 2014 • T HEED G E FINA NCIA L DAILY
live it! 29
03
01
The
in
an
an
nu.
its
ing
uires
ing
ith
yento
ed,
ers
nd
ian
the
.90
e of
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ear
ud-
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ent
04
Bites: Fried herb and potato dumpling
This vegetarian appetiser is filled with fresh
herbs like thyme, oregano and parsley, mixed
with potato and deep fried to perfection. The
breadcrumbs used to deep fry the elongated
dumplings are made in the restaurant’s inhouse bakery, so customers can be assured
of freshness and quality. The dumplings are
served with grilled banana ketchup. The
ketchup mainly tastes of the tomato sauce,
but hints of banana are definitely there.
Rating: 3.5/5
Price: RM16.90
01. The Apartment Downtown
in KLCC recently underwent
a makeover. Photos by The
Apartment
Soup: Pumpkin soup with coconut
sambal
The combination is unusual to say the least,
but my curiosity paid off. The soup is thick
with pumpkin goodness and seasoned to
taste. The real kicker is the aftertaste the
dry coconut sambal leaves on the palate —
a sweet-spicy flavour. Though not as spicy
as you would expect a normal sambal to be,
it does bring a hint of spice to an otherwise
mildly sweet, creamy option. The dry sambal elevates the flavour of the dish. This is
also a vegetarian dish and can double as a
main meal if eaten with bread.
Rating: 4/5
Price: RM15.90
05. Greek mac and cheese.
Salad: Polenta, tomato and basil salad
The star of this dish is the buffalo mozzarella, tossed with cherry tomatoes, capers,
cucumber, basil, anchovies and crispy polenta that come dressed with shallot vinaigrette. Polenta is not very common in this
country, so I was excited to try it. The added
element of polenta in this salad is to give
the green bowl a crunch. Polenta is actually
corn that has been pounded into mush or
boiled into porridge. For this dish, the chef
cleverly bakes the smashed polenta and cut
it up into small squares.
Rating: 5/5
Price: RM25.90
05
02. To suit its new improved look,
the restaurant introduced new
tastes to its menu.
03. Pumpkin soup with coconut
sambal.
04. Moroccan beef burger.
06. Greek-style lamb cutlets.
Sandwiches: Moroccan beef burger
The medium-rare patty (you can opt for it
to be well done) is spiced with traditional
Moroccan spices like coriander, cumin,
turmeric and black pepper. The generous
helping of meat is placed on toasted brioche bread, topped with a sweet salsa relish, beef bacon, roasted capsicum, perfectly
grilled Portobello mushrooms (that gives
a smokiness to the burger) and completed with a lemon-mayonnaise sauce. The
sweet potato fries on the side are addictive if eaten on their own but they are even
better when dipped in the restaurant’s own
crème fraiche.
Rating: 4.5/5
Price: RM36.90
panied the meat is an impeccable pairing
because the sharp taste of the vinegar plays
off the seasonings from the lamb. The chef
says the sweet cherry tomatoes are flown
in from Holland and are served grilled with
the vines intact. The crumbed slice of eggplant adds a slight crunch to the dish while
the Greek yogurt cools the palate down and
completes the dish.
Rating: 5/5
Price: RM70.90
Main: Greek-style lamb cutlets
This dish that comes with three perfectly cut
lamb cutlets truly needs no description. If I
had one issue, it was that three cutlets were
not enough. I was left yearning for more
because the well-done meat was soft and
tender. The balsamic vinegar that accom-
Pasta: Greek mac and cheese
In their efforts to put a twist to traditional
and rustic dishes, this simple pasta dish has
been improved by leaps and bounds with
the addition of Greek spices, fresh dill and
feta cheese into the recipe. To give it more
texture, fried spinach leaves that are tossed
06
PICK OF THE DAY
AFTER years of research, L’Oréal Paris’ scientists have discovered that
ageing goes beyond the surface. With time, age leaves traces on skin, and
they are harder and harder to repair. Through the Revitalift range, skin
cells are regenerated to form a healthier barrier and to repair existing
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for its repairing properties. It works alongside two other powerful Revitalift ingredients — the L’Oréal Paris exclusive Dermalift, known to help
stimulate skin’s natural lifters synthesis and restructure skin’s fibre network, and Pro-Retinol A, a well-known ingredient that helps to stimulate
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PA++ (RM51.90), Night Cream (RM54.90), Eye Cream (RM46.90) and Revitalift Intensive Repairing Essence (RM79.90), can be found at all L’Oréal
Paris counters nationwide.
with parmesan cheese and breadcrumbs
are placed on top of the dish to allow diners
to experience a burst of flavour and texture
all in one bite.
Rating: 4/5
Price: RM30.90
Dessert: White and dark chocolate trifle
This dish is, quite simply, made out of chocolate, both dark and white that are layered
alternatively. This is the dessert to have if
you have had a long and tiring day. The
rich chocolate will melt in your mouth and
its smoothness is equivalent to silk. It’s a
perfect end to the day, especially with the
feel-good endorphins that will run through
your system.
Rating: 5/5
Price: RM16.90
3 0 S P O RT S
Rodgers says stars could
be benched for Chelsea
He warns no one’s spot is guaranteed
BY KI ERA N C A N NING
MADRID: Liverpool boss Brendan
Rodgers warned some of his star
players their place in the side for
the visit of Chelsea on Saturday is
far from assured after a battling
performance by their understudies in a 1-0 defeat to Real Madrid.
Rodgers controversially dropped
captain Steven Gerrard, Mario Balotelli and Raheem Sterling to the
bench among seven changes from
the side that lost 1-0 to Newcastle
on Saturday.
Karim Benzema’s first-half
goal was enough for the European champions to seal their place
in the Champions League last 16
with a 12th consecutive victory in
all competitions.
Liverpool and Real Madrid players jump for a ball during their Champions League
However, after a disappointing Group B match at Santiago Bernabeu stadium in Madrid on Tuesday. Photo by Reuters
start to the season, Rodgers was
heartened by the performance of
his side and claimed some of those
“Tonight [Tuesday] gives me great said. “We haven’t been consistent
who started have played themselves food for thought. It wasn’t players enough for too many players to be
into contention to face the Premier rested as such, we played the team in the team as guaranteed starters.”
League leaders at the weekend.
we thought could get the result,” he
Basel’s 4-0 thrashing of Lu-
Dortmund need
Euro form in
Bundesliga,
says Klopp
Wenger slams sloppy Arsenal
after Euro meltdown
BY STEV EN G RI FFI THS
DORTMUND: Jurgen Klopp
says Borussia Dortmund must
use their dazzling Champions
League displays to fix their
nightmare Bundesliga form
after reaching the last 16 in
Europe on Tuesday.
Dortmund brushed off five
consecutive defeats in the German top flight to romp to a 4-1
Champions League win at
home to Galatasaray on Tuesday to go five points clear at the
top of Group D.
Alongside Real Madrid,
they are one of the first teams
into the Champions League’s
knockout stage despite the
worst start to a Bundesliga
season in the club’s history.
Bizarrely, Dortmund have
now picked up nearly double
the points, 12, in their four
Champions League matches
than the seven they have from
their 10 Bundesliga matches.
Klopp says they must use
the confidence-boosting win
over Galatasaray to break
their losing streak when they
host high-flying Borussia Moenchengladbach on Sunday.
“I told the lads to enjoy this,
it’s important,” said Klopp.
“We’ve got to feel the good
things from this win, there are
five days until the next game.”
— AFP
dogorets Razgrad in the other game
in the group on Tuesday leaves
Liverpool three points adrift of the
Swiss champions in the race to join
Madrid in the last 16.
Liverpool travel to Bulgaria to
face Ludogorets next time out and
Rodgers is hoping to set up a winner
takes all clash with Basel at Anfield
on matchday six.
Real coach Carlo Ancelotti
backed the five-time winners to
still make it through and insisted his side wouldn’t take things
easy on Basel and Ludogorets in
their remaining two games in the
group.
As well as securing their passage
to the knockout phase, Madrid were
also boosted by the return of Gareth Bale from injury after a fivegame lay-off.
The Welshman was introduced
as a substitute for the final half hour
and looked lively as he struck the
crossbar and forced Simon Mignolet into a fine save from a dipping
free-kick. — AFP
LONDON: Arsene Wenger launched
a scathing attack on his Arsenal
flops after they blew a three-goal
lead in a 3-3 draw against Anderlecht that left them still waiting to
book their place in the Champions
League last 16.
Wenger’s side were on course
to qualify for the knockout stages
of Europe’s elite club competition
for the 15th successive season after Mikel Arteta’s penalty and fine
strikes from Alexis Sanchez and Alex
Oxlade-Chamberlain put them in
complete control by the 58th minute.
But the Gunners’ creaky defence
was brutally exposed by Anderlecht in a remarkable finale that
saw the unheralded Belgians score
three times in the last 29 minutes
through Anthony van den Borre’s
double and Aleksandar Mitrovic’s
stoppage time header.
Wenger was furious with the
way his players squandered their
advantage and he said: “We had a
poor defensive performance from
the first until the last minute. We
never looked comfortable and we
got punished.
“There was a bit of bad luck because their first goal was clearly
offside but we never looked good
enough defensively. Across the
pitch we were very poor.
“It was a combination of fatigue
and switching off. We dropped off
and were always open. We didn’t
stop the crosses or the long balls.
“It is very disappointing. Maybe
subconsciously we underestimated
Anderlecht at 3-0. In the Champions League you need to be at your
best mentally and we weren’t.”
The woeful meltdown leaves
Arsenal with virtually no chance of
finishing top of Group D — which
was Wenger’s original target — and
instead they face a fraught fight
just to reach the knockout stages.
They hold a five point lead over
third placed Anderlecht, but host
group leaders Borussia Dortmund
on Nov 26 knowing a defeat against
the Germans would send them to
Galatasaray needing a result in a
notoriously hostile environment.
— AFP
Report: FBI used US soccer chief to spy on FIFA
NEW YORK: Chuck Blazer, once the
most powerful man in US football,
was an FBI informant used to spy
on FIFA, the New York Daily News
reported.
Blazer, who is now suffering
from cancer, secretly recorded
conversations with officials he
arranged to meet at his London
hotel during the 2012 Olympics,
the report said.
The FBI pressured Blazer into
working for them from 2011 be-
cause he failed to pay income taxes
on millions of dollars he made as
a leader of CONCACAF, football’s
governing body for North and Central America and the Caribbean,
said the report published at the
weekend.
Those he invited to the meetings
in London included Russia’s 2018
World Cup organising committee chief Alexei Sorokin and Frank
Lowy, head of the Australian 2022
bid, but it is not known whether
they actually met Blazer.
Blazer was the “whistle-blower”
in the Caribbean vote buying scandal that resulted in the resignation
or expulsion of his longtime CONCACAF colleague Jack Warner and
FIFA vice-president Mohamed Bin
Hammam in 2011.
Blazer himself resigned from
FIFA’s executive committee in 2013
after a CONCACAF audit found he
had received millions of dollars in
undeclared commissions. — AFP
IN BRIEF
Sagnol courts
controversy
BORDEAUX: Bordeaux coach
Willy Sagnol on Tuesday insisted that comments he made
about African players had
been misinterpreted as leading anti-racism campaigners
called for action to be taken
against him. Sagnol, the former
Monaco, Bayern Munich and
France full back who took over
as coach of Bordeaux in the
summer, indicated that African
players lacked “intelligence”
and “discipline” in an interview with the Bordeaux newspaper Sud-Ouest as he said the
scheduling of the Africa Cup of
Nations puts him off signing
players from the continent. A
statement released by his club
said that “Willy Sagnol is angry
and incredulous at the erroneous and shortened interpretation of his comments”. — AFP
Wanderers unconcerned
about Al-Hilal grouses
SYDNEY: Western Sydney Wanderers coach Tony Popovic is
unconcerned about Al Hilal’s
complaints over the refereeing of the Asian Champions
League final which it caled a
“black spot” in refereeing history. Wanderers became the first
Australian team to win Asia’s
most prestigious club title when
a 0-0 draw in Riyadh last Saturday gave them a 1-0 aggregate
win over two legs. “That’s not
really a concern for us,” Popovic told reporters yesterday.
“Over the 180 minutes in two
games, they didn’t score a goal.
We did and we’re the champions.” — Reuters
Hope Solo’s domestic
violence trial delayed
KIRKLAND (Washington): The
domestic violence trial of US
women’s football star Hope
Solo was delayed on Tuesday
after a judge in Washington
state ruled that her attorney
had not had adequate interview access to the two family members she is accused of
assaulting. Solo has pleaded
not guilty to striking her sister and nephew during a June
dispute at her home. Her trial,
was delayed until Jan 20 after
a judge found that her attorney should be allowed to interview the family members with
a court stenographer present.
— Reuters
Cannavaro takes over
from Lippi at Guangzhou
BEIJING: Italy’s World Cup winning-captain Fabio Cannavaro
will replace his former national team coach Marcello Lippi
in charge of Chinese champions Guangzhou Evergrande
for next season, the club announced yesterday. Lippi, 66,
said he would be moving into
a technical director’s role for
the remainder of the three-year
contract he signed in February.
Lippi will retain the title “head
coach” while Cannavaro will be
“executive head coach” and be
responsible for the day-to-day
running of the team. — Reuters
S P O RT S 3 1
Berdych still searching
for his ‘chosen one’
First choice Lendl did not want to commit
BY PRI T HA SA RK A R
PARIS: Ivan Lendl might be “way
too busy” to be his mentor but Tomas Berdych has not given up the
dream of jumping on the “super
coach” bandwagon.
If he needs any pointers on how
to carve out a successful coaching relationship with a grand slam champion, the players’ lounge at the 02
Arena is the place to be during the
ATP World Tour Finals which start
on Sunday.
Should Berdych decide to hang
out in the area, he could find the
place buzzing with the presence
of no less than five “super coaches”.
Three years after Andy Murray
pulled off a coup by hooking up
with eight-time grand slam champion Lendl, the super coach seems
to have become a “must-have” accessory for many of the top players.
Eighties rivals Boris Becker and
Stefan Edberg have become familiar sights in the locker rooms after
they were lured back into the dayto-day grind of Grand Slam tennis by Novak Djokovic and Roger
Federer respectively.
Goran Ivanisevic and Michael
Chang will also be in London to
oversee the progress of ATP Finals
debutants Marin Cilic and Kei Nishikori, while Murray’s “chosen one”
is now Amelie Mauresmo.
Berdych’s desire to draft in Lendl
to his coaching set-up was an obvious one — with both hailing from
the Czech Republic — but the man
who guided Murray to Olympic glory and two grand slam titles simply
could not commit to a full-time job
with the world No 7.
“We had a meeting when I got
back from Shanghai. It didn’t work
out because Ivan decided he’s not
able to give the full amount of the
weeks that he would like to give,”
Berdych told Reuters in an interview
in the run-up to the season finale.
Berdych has already drawn up
a shortlist of champions he would
like to work with, but after the talks
with Lendl failed to produce the
desired effect the 2010 Wimbledon runner-up is keeping tightlipped about his possible targets.
— Reuters
Khan preps for
Alexander, eye
on bigger things
LOS ANGELES: Amir Khan (pic)
sees his Dec 13 welterweight bout
against Devon Alexander as a
springboard to bigger things, but
that doesn’t mean he’ll take the
US southpaw lightly.
“Obviously it’s going to catapult
the winner to bigger fights,” Khan
said on Tuesday at a Los Angeles
press conference to promote the
bout at the MGM Grand Garden
Arena in Las Vegas. “Alexander
wants the big fight, I want the big
fight against [Floyd]Mayweather,
[Manny] Pacquiao.
“First of all I have to get through
this fight in good style. I’m not
looking past this fight.”
Khan is coming off a victorious welterweight debut in May,
when he looked impressive in a
unanimous decision over former
champion Luis Collazo.
Khan, 29-3 with 19 knockouts,
has been training in Oakland, California, with Virgil Hunter since
September. — AFP
LONDON: England all-rounder Ben
Stokes said on Tuesday he wants to
see attention turned to the team’s
World Cup chances rather than the
ongoing fall-out from Kevin Pietersen’s autobiography. Former England
batsman Pietersen, effectively sacked
after the team’s return home from
their 5-0 Ashes thrashing in Australia
in 2013/14, created a furore with the
publication of his autobiography in
which he criticised ex-coach Andy
Flower and several current players.
Pietersen alleged that a group
of senior players including bowlers
James Anderson and Stuart Broad
instigated a “bullying culture” where
Berdych celebrating his victory against Peter Polansky of Canada, in their men’s
singles match at the French Open tennis tournament in May. Photo by Reuters
they demanded apologies from less
experienced teammates who made
fielding errors. This prompted a series of claims and counter-claims
and while the hype surrounding
Pietersen’s book has started to die
down, many of his more controversial points may well be aired again
ahead of England’s seven-match
one-day international series in Sri
Lanka, which starts later this month.
But Stokes said he hopes the focus will return to on-field matters
ahead of a tour which marks the start
of England’s lead-in to next year’s
one-day World Cup in Australia and
New Zealand.
“One major thing that I reckon is
that it’s taken the eye off the cricket
side of things, it’s been focused on the
book rather than the amount of stuff
we’ve got coming up,” Stokes told
Sky Sports News on Tuesday. “We’ve
been focused on what we’ve got coming up in the next six months and I
think the reports can suggest that
everything has been based around
the book rather than the cricket.”
In the midst of England’s wretched tour of Australia, Stokes was given
his Test debut and was one of the few
players to enhance his reputation
with a maiden century in Perth. He
said that as a junior player he had not
been privy to any discussions surrounding Pietersen on tour but that
he had no qualms with the atmosphere in the dressing room. — AFP
ODIs the perfect pick-me-up for Australia
SYDNEY: A disappointed Michael
Clarke arrived home from United
Arab Emirates yesterday, eager to
shake off Australia’s Test series loss
to Pakistan and begin his side’s World
Cup build-up in a one-day international (ODI) series against South
Africa. Clarke’s side were hammered
by Pakistan in the two-Test series,
losing the first game in Dubai by
221 runs and second in Abu Dhabi
by 356 runs for a first series loss to
Pakistan in two decades.
The 33-year-old captain also
Injured Anderson
ruled out of Sri Lanka
cricket tour
LONDON: James Anderson has
been ruled out of England’s
one-day international series
in Sri Lanka as he continues
his rehabilitation from a knee
injury, the England and Wales
Cricket Board (ECB) said in
a statement on Tuesday. The
32-year-old pace bowler, who
picked up the injury earlier this
year, will not take part in the
seven-match series and will be
eased back into action before
next year’s World Cup in Australia and New Zealand. “James
Anderson has been ruled out of
the upcoming one day tour to
Sri Lanka to continue his rehabilitation on a pre-existing left
knee injury,” the ECB said in a
statement. — Reuters
Federer and Wawrinka
head up Swiss Davis
Cup team
Stokes wants focus back on cricket
BY JULIAN GUY E R
IN BRIEF
struggled with the bat — 57 runs in
four innings — but he was keen to refocus his attentions to the five-match
series against the Proteas, who are
the top-ranked one-day side.
“I’m extremely disappointed with
our results,” Clarke told reporters at
Sydney airport. “I’m more disappointed with my personal performances. But we have had a couple
of days to think about things and
in a week’s time we have a really
important one-day series against
South Africa. I guess I see that as a
positive with the quick turnaround.
We’re back on the field. I know it’s
a different format but in Australian
cricket, winning is what’s important.”
Clarke, Australia’s best batsman
for the last three years, was taken
aback at having to field a question
over whether his captaincy is in jeopardy. “I think my performances over
the past five years have been consistent and I think my captaincy’s been
pretty consistent over that period as
well. So hopefully I’m not judged
just on two test matches.” — Reuters
PARIS: World No 2 Roger Federer and No 4 Stan Wawrinka will
head up the Swiss team in the
final of the Davis Cup against
France this month. The duo will
be joined for the Nov 21 to 23
final in Lille, northern France,
by Marco Chiudinelli and Michael Lammer, team captain
Severin Luthi announced on
Tuesday. The singles rubbers
will feature the in-form Federer,
eliminated in the quarter-finals
of the Paris Masters by Canadian Milos Raonic, and Wawrinka, who opened the season
with victory in the Australian
Open. — AFP
NFL’s Peterson avoids
jail with plea deal
CONROE: Minnesota Vikings
running back Adrian Peterson will avoid jail time after
reaching a plea agreement with
prosecutors on Tuesday in the
child abuse case against him.
Peterson, 29, was facing felony charges of reckless or negligent injury to a child after he
was accused of whipping his
four-year-old son with a tree
branch. He pleaded no contest to a charge of misdemeanor reckless assault and Texas
judge Kelly Case said during
a scheduled pre-trial hearing
the deal had been approved.
Peterson was fined US$4,000
(RM13,360) and ordered to perform 80 hours of community
service. — AFP
Rafter gets top job at
Tennis Australia
SYDNEY: Two-time Grand
Slam champion and former
world No 1 Pat Rafter was appointed yesterday as Tennis
Australia’s new director of performance. The role is effectively
the most powerful within the
nation’s professional tennis
ranks, with Rafter reporting
directly to Tennis Australia
chief Craig Tiley. “I would like
everyone to know that I am not
coming into this role early next
year saying that I have all the
answers. Far from it. I am going
to take my time, listen, watch
and learn.” — AFP
3 2 S P O RT S
Melbourne Cup deaths spark calls for change
MELBOURNE: The death of Melbourne Cup favourite Admire Rakti
reignited calls yesterday for a ban
on whips as initial autopsy results
showed the champion Japanese galloper suffered acute heart failure.
Admire Rakti, a seven-year-old,
collapsed and died in his stall after
fading badly on the final stretch of
Australia’s premier race on Monday,
won by Germany’s Protectionist.
Another runner, Araldo, was put
down after injuring a hind leg when
spooked by a flag being waved in
the crowd as he returned to the
mounting yard.
The Coalition for the Protection of Racehorses, which says 125
horses died on Australian tracks
between Aug 1 last year and July
31 this year, said horses were being
pushed too hard and called for a
ban on the use of whips by jockeys.
“We believe that pushing horses beyond their physical limits
through use of the whip, and racing horses while under-developed
at two years of age, are significant
factors as to why horses break down
on the racetrack,” spokesman Ward
Young said.
“We’re calling on the racing industry to start running whip free races
and phase out two-year-old racing.”
Animal welfare group RSPCA
said the deaths were a “stark reminder” of the damage the sport
can have on horses.
Racing Victoria’s chief veterinarian Brian Stewart denied excessive
whipping was a factor in Admire
Rakti’s death. He told SEN radio yesterday that initial autopsy results
conducted at the University of Melbourne showed that Admire Rakti
suffered from heart failure. — AFP
Araldo (left) which was ridden
by Dwayne Dunn being spooked
by a patron waving a flag as
the horses return to scale after
racing in the Melbourne Cup.
Photo by AFP
Scott ready to pounce
in absence of McIlroy
Forty of the top 50 players in the world are at the only WGC event played outside US
BY A ND REW B OTH
SHANGHAI: World No 2 Adam
Scott is ready to take advantage of
the absence of Rory McIlroy at the
US$8.5 million (RM28.39 million)
WGC-HSBC Champions tournament starting here today.
Australian Scott is part of a stellar field that includes 40 of the top
50 players in the world at the only
World Golf Championships event
played outside the US.
The 2013 Masters champion has
only played once since the American
season ended in mid-September,
a jetlagged tie for 38th at the Japan
Open last month which followed a
surfing holiday in Costa Rica.
But after a week of dedicated
practice back home in Queensland
last week, Scott is raring to go again.
He acknowledges that McIlroy’s
(From left) Justin Rose of England, Bubba Watson and Rickie Fowler of the United
States, Scott and Kaymer attend a photo call for the WGC-HSBC Champions golf
tournament on the Bund in Shanghai on Tuesday. Photo by Reuters
late withdrawal — to prepare for a
court case over a dispute with his
former management company — is
a blow to the event, but understands
that every player has to deal with
off-course issues from time to time.
After all, Scott himself skipped
this event last year to recharge for a
busy year-end campaign in Australia.
Scott, who was surpassed at the
top of the world rankings by McIlroy in early August, acknowledges that his chances of victory are
helped without the presence of the
Northern Irishman. “Selfishly, [his
missing] opens up the field a little
bit this week,” he said.
US Open champion Martin Kaymer agreed. “It’s definitely a loss for
the golf tournament, but it’s still a
very, very strong field to beat,” said
the German. “One player, usually
it doesn’t make a difference, but
when you talk about the No 1 in
the world, of course you think, OK,
one player less to beat and a good
one less to beat.”
McIlroy is not the only big name
missing this week.
Tiger Woods is also absent as he
continues to rehabilitate from back
surgery, while fellow American Dustin Johnson will not defend his title
as he deals with personal issues.
But the tournament, in its 10th
year, appears firmly established and
it no longer relies on the presence
of a single superstar.
“The golf course is beautiful, the
atmosphere is great and the weather is perfect,” Masters champion
Bubba Watson said under a blue,
cloudless sky. — Reuters
Bubba wants to shed bad boy image
BY DA N I EL H I CKS
SHANGHAI: Double US Masters
champion Bubba Watson turned
36 yesterday and said he needs to
turn over a new leaf after admitting his mother scolds him over his
behaviour on and off the course.
Watson, who won his second
green jacket at Augusta in April to
add to his 2012 triumph, told reporters at the WGC-HSBC Champions at Sheshan that he still has his
“bad moments” and that his mother
was among his fiercest critics.
“Obviously I believe in myself.
I believe I can perform at a better
level,” he told a press conference
ahead of this week’s U$8.5 million
(RM28.39 million) event known as
“Asia’s Major”.
“I think I scratched the surface
a little bit last year, still had my hiccups, still had my bad moments,
still had my bad press,” he said of
a season in which he won the Masters, the Northern Trust Open and
had eight top-10 finishes.
As with most bad boys, he takes
more notice when it is his mother,
Molly Marie Watson, who is wagging the finger.
“She tells me that I’m not being
good. She tells me I should smile
more and not be so angry. Pretty
much what the media says. I guess
she could write for the media, too,”
he said.
Watson famously upset the European Tour at the 2011 Open de
France, one of the tour’s most prestigious events, by blaming everyone
from officials and marshals to fans
for him missing the cut.
He also angered the French
nation by complaining of being
homesick after his first round and
referring to the Arc de Triomphe in
Paris as “an arch, whatever, I rode
around in a circle”.
Watson is fully aware that he is
a divisive character and said yesterday that where his behaviour is
concerned he needs to improve
“all of it”.
“Any time that somebody writes
bad press, the only way I’m going
to improve as a human being, improve as a husband, improve as a
dad, is when you get people that
call you out,” he said.
Among other misdemeanours
that have turned fans against him
were launching into a tirade against
his caddie that was caught on TV
microphones after a triple bogey at
the US PGA Tour’s Travelers Championship in June 2012. — AFP
IN BRIEF
European Tour chief
O’Grady to step down
SHANGHAI: The most powerful
man in European golf, George
O’Grady, confirmed yesterday
he is stepping down as chief executive of the European Tour.
O’Grady, in Shanghai ahead of
the WGC-HSBC Champions
event which begins today, said
he had asked the European
Tour’s board of directors to start
the process of appointing his
successor. The European Tour
said in a statement it would
make no further comment on
the appointment process until the season-ending DP Tour
Championship in Dubai in two
weeks’ time. — AFP
Paris Olympic bid could be
boosted by public funding
PARIS: Although France has
not decided if it will bid to host
the 2024 Olympic Games, the
country’s Olympic Committee
(CNOSF) is already planning
a public funding operation to
finance a possible candidacy
for Paris. The CNOSF will say
in January whether it wants
to enter the race for the 2024
Games before French president
Francois Hollande makes the final decision before September.
“There are strong possibilities
[that we want to run],” CNOSF
president Denis Masseglia told
reporters on Tuesday. — Reuters
South Korea, Netherlands
ink skating accord
SEOUL: Short track powerhouse
South Korea and speed skating masters the Netherlands
have agreed to share expertise
in the winter sports to boost
their medal hopes at the 2018
Pyeongchang Olympics. The Korea Skating Union (KSU) said on
Tuesday it had signed the agreement with its Dutch counterpart
at South Korea’s presidential office. In a statement, the KSU said
the idea had first been floated
at the Sochi Olympics, where
the Dutch won eight of the 12
speed skating gold medals up
for grabs. — Reuters

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