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1 ddo18 WEDNESDAY, AUGUST 26, FBM KLCI KLCI FUTURES STI RM/USD CPO RM OIL US$ GOLD US$ Subscribe NOW! 3 months for RM30 (or more if you like) NAJIB ANNOUNCES SPECIAL ECONOMIC Singapore goes to polls early 2 CORPORATE & MARKET 5 KLCI takes a breather CORPORATE & MARKET 6 Forex loss trims TM s 2Q earnings CORPORATE & MARKET 8 CIMB retains top spot in equity, bond sales COMMITTEE GENERAL NEWS 18 Bersih 4.0 rally illegal TUESDAY, SEPTEMBER 8 Making a difference in 11 the community INTERNATIONAL BUSINESS 23 PBoC injects 150b yuan as intervention drains funds This digital copy is brought to you by INTERNATIONAL NEWS 26 Suu Kyi confident of winning if elections are free and fair To ensure continuation of Malaysia s growth momentum. Gho Chee Yuan has the story on Page 4.

2 ddo18 WEDNESDAY, AUGUST 26, FBM KLCI KLCI FUTURES STI RM/USD CPO RM OIL US$ GOLD US$ Subscribe NOW! 3 months for RM30 (or more if you like) NAJIB ANNOUNCES SPECIAL ECONOMIC Singapore goes to polls early 2 CORPORATE & MARKET 5 KLCI takes a breather CORPORATE & MARKET 6 Forex loss trims TM s 2Q earnings CORPORATE & MARKET 8 CIMB retains top spot in equity, bond sales COMMITTEE GENERAL NEWS 18 Bersih 4.0 rally illegal TUESDAY, SEPTEMBER 8 Making a difference in 11 the community INTERNATIONAL BUSINESS 23 PBoC injects 150b yuan as intervention drains funds INTERNATIONAL NEWS 26 Suu Kyi confident of winning if elections are free and fair To ensure continuation of Malaysia s growth momentum. Gho Chee Yuan has the story on Page 4.

3 2 WEDNESDAY AUGUST 26, 2015 DIGITALEDGE DAILY For breaking news updates go to ON EDGE TV Hartalega has yet to benefit from weakening ringgit TM mulls raising capex to 30% of total revenue The Edge Markets Sdn Bhd ( M) Level 3, Menara KLK, No 1 Jalan PJU 7/6, Mutiara Damansara, Petaling Jaya, Selangor, Malaysia Publisher and Group CEO Ho Kay Tat Editorial For News Tips/Press Releases Tel: Fax: Senior Managing Editor Azam Aris Executive Editors Kathy Fong, Jenny Ng, Siow Chen Ming, Surinder Jessy, Ooi Inn Leong Associate Editors R B Bhattacharjee, Joyce Goh, Jose Barrock, Vasantha Ganesan Editors Cindy Yeap, Kang Siew Li Assistant Editors Adeline Paul Raj, Tan Choe Choe Chief Copy Editor Halim Yaacob Senior Copy Editors Lam Seng Fatt, Melanie Proctor Copy Editor Evelyn Chan Art Director Sharon Khoh Design Team Cheryl Loh, Valerie Chin, Aaron Boudville, Aminullah Abdul Karim, Yong Yik Sheng, Tun Mohd Zafian Mohd Za abah, Noorain Duasa Asst Manager-Editorial Services Madeline Tan Corporate Managing Director Au Foong Yee Deputy Managing Director Lim Shiew Yuin Advertising & Marketing To advertise contact GL: (03) Fax: (03) Chief Marketing Officer Sharon Teh (012) General Manager, Digital Media Kingston Low (012) Senior Sales Managers Geetha Perumal (016) Fong Lai Kuan (012) Peter Hoe (019) Gregory Thu (012) Senior Manager, Integration Shereen Wong (016) Head of Marketing Support & Ad Traffic Lorraine Chan (03) Ad Traffic Asst Manager Roger Lee (03) Operations To order copy Tel: / 8033 Fax: Putrajaya renames special task force Team not probing into 1MDB, says AG s Chambers KUALA LUMPUR: Putrajaya is keeping a special task force investigating money-related crimes under a new name, but it will not handle investigations into the debt-laden 1Malaysia Development Bhd (1MDB) and its related companies, the Attorney-General s (AG s) Chambers said yesterday. The AG s Chambers said the National Revenue Recovery Enforcement Team (NRRET) is a rebranded version of the previous task force that was first formed in NRRET is not a new task force but is a rebranding of the previous special task force that has been in existence since 2011, the AG s Chambers said in a statement yesterday. NRRET is not in any way involved with any investigations involving 1MDB and its related companies. The AG s Chambers said the aims of NRRET remain the same, which is to assist the government in dealing with evasion of custom duties and tax by individuals and corporate bodies, smuggling activities, misuse of subsidised goods, illegal outflow of funds, and acts of corruption. It said the NRRET comprised the AG s Chambers, Royal Malaysian Police, the Malaysian Anti-Corruption Commission, Bank Negara Malaysia, the Inland Revenue Department, Royal Malaysia Customs Department, Ministry of Domestic Trade, Cooperatives and Consumerism, and the Companies Commission of Malaysia. NRRET primarily streamlines Singapore goes to polls early SINGAPORE: Singapore will hold a general election on Sept 11, more than a year before a deadline for the next polls, the office of Prime Minister Lee Hsien Loong said yesterday, seen riding the feel-good factor of the city-state s 50th birthday. Analysts have said the People s Action Party (PAP), which was founded by the prime minister s father, the late Lee Kuan Yew, and has ruled since six years before independence in 1965, will be keen to tap national pride the Aug 9 celebrations generated and improve on its performance in the last election. In 2011, the PAP won its lowest ever share of the vote with many people unhappy about the cost of living and immigration. Those issues will again be at the forefront of debate when candidates from the PAP and opposition parties head to campaign rallies across the affluent city state. The next general election had to be held by January 2017, but there had been speculation in the media and political blogs that it would be called early. Soon I will be calling elections and coordinates the integrated multi-agency enforcement actions with regards to the aforementioned issue, said the AG s Chambers in the statement. The team was rebranded after AG Tan Sri Mohamed Apandi Ali was named to the job last month. Critics had spoken out against Apandi s appointment as head of NRRET, saying that country s top prosecutor should not be part of the investigation team. They had said that the AG, who is the public prosecutor overseeing criminal prosecution, should never be part of any investigating team, adding that a prosecutor s role was only to review investigation papers and decide whether there was sufficient evidence to charge persons under applicable laws. The Malaysian Insider The skyline of Singapore s financial district and Marina Bay. Singapore will hold a general election on Sept 11, more than a year before a deadline for the next polls. Photo by Reuters to ask for your mandate, to take Singapore into this next phase of our nation-building, Lee said in his annual speech as part of the National Day celebrations. The legacy of Lee Kuan Yew, Singapore s first prime minister, who died on March 23, will be fresh in the minds of voters and the PAP will be keen to convince people it is best placed to ensure Singapore s success over the next 50 years. The elder Lee oversaw the city state s rapid rise from a British colonial backwater to a global trade and financial centre and his death triggered a flood of tributes. In his lifetime, Lee drew praise for his market-friendly policies, but also criticism at home and abroad for his strict controls over the press, public protest and political opponents. Under Lee, political opposition and independent media were not allowed to flourish in the same way as the economy, a state of affairs that persists to this day. Singapore was placed 153 out of 180 countries in the latest World Press Freedom Index. Reuters IN BRIEF Kejara demerit points system to make comeback soon PUTRAJAYA: The Kejara demerit points system for traffic offenders that was suspended for a comprehensive review is expected to be implemented after the study is completed by year end. Transport Minister Datuk Seri Liow Tiong Lai said the new aspects being studied for Kejara included the non-redemption of demerit points after the settlement of summonses. He said the new Kejara system should continue with relevant improvements under the current situation. Earlier, the settlement of traffic offence summons led to a deduction of demerit points... but this will not have an effect on the delinquent motorist. I feel that in serious traffic offences, the driver should be given demerit points... regardless of whether he or she settles the China s premier says no basis for more yuan weakness BEIJING: Chinese Premier Li Keqiang said yesterday there was no basis for the yuan currency to weaken further and the exchange rate would be maintained at a basically stable level, state media reported. Li made the comments in talks with Bakytzhan Sagintayev, Kazakhstan s first deputy prime minister who was visiting Beijing, the official Xinhua news agency said. The exchange rate would be kept basically stable at an adaptive and equilibrium level, Li said. The People s Bank of China, the central bank, shocked global financial markets on Aug 11 by devaluating the currency by almost 2%. Li yesterday described the move as an appropriate response to developments in international financial markets, Xinhua reported. AFP US shares rally after five straight losses on China woes NEW YORK: US stocks surged in opening trade yesterday, joining European equities in rallying after a five-day streak of losses left US indices in correction territory. About 15 minutes into trade, the Dow Jones Industrial Average stood at 16,173.33, up points (1.90%). The broad-based S&P 500 gained (2.04%) to 1,931.79, while the tech-rich Nasdaq Composite Index jumped (2.40%) to 4, points. All 30 members of the Dow were in positive territory, with especially strong gains for Apple (+5.1%), JPMorgan Chase (+3.8%) and Procter & Gamble (+2.9%). Yesterday, the dollar also gained against other currencies and oil prices rose. AFP Stock rout costs China s richest man US$3.6b in one day BEIJING: China s richest man lost US$3.6 billion (RM15.3 billion) in a single day after global stock markets tanked and Chinese markets erased all their gains for the year. Wang Jianlin, chairman and founder of property and entertainment company Dalian Wanda, lost more than 10% of his total wealth on Monday, according to the Bloomberg Billionaires Index, which tracks the world s richest people. Wang was the biggest loser at the end of trading on Monday, according to the index, which updates at the end of each day. AFP summons or not, he said. Liow was speaking to reporters after launching the Road Transport Department Merdeka Expedition with the 1RTD Youth Squad in conjunction with the 2015 National Day at the ministry here yesterday. Bernama


5 4 CORPORATE & MARKET WEDNESDAY AUGUST 26, 2015 DIGITALEDGE DAILY Special economic committee to be set up To ensure continuation of Malaysia s growth momentum BY GHO CHEE YUAN KUALA LUMPUR: Prime Minister Datuk Seri Najib Razak announced that a new economic committee to maintain the country s growth momentum will be established in the face of what he described as uncertain and challenging times. Najib, who is also the finance minister, said the slump in prices of petroleum and other commodities had posed challenges to the national revenue, according to The Malaysian Insider. The committee s objective is to ensure Malaysia s growth momentum will continue for some time and be able to generate prosperity in the rather uncertain and challenging times, he said at the launch of the National Tax Conference here yesterday. He did not elaborate, but said that details of the committee would be announced shortly. Najib also said he was aware of the state of the domestic economy and global financial sentiment, and that he had been meeting with key stakeholders, including Bank Negara Malaysia governor and chairman of the Securities Commission Malaysia for briefings. He said such meetings will continue in the coming weeks, adding that he is frequently updated by representatives from a broad section of our economy. Separately, Bernama reported Najib as saying that Malaysia is faced with a global economic scenario that is facing pressure from factors beyond its control, with no country immune to the effects. While external factors are beyond our control, the government will try to ensure that the people are not burdened by what is happening. Najib said the new economic committee would meet every day if necessary to monitor and propose additional steps that need to be taken to stabilise the country s economy. The government will try its best; we hope the situation can be resolved soon. While external factors are beyond our control, the government will try to ensure that the people are not burdened by what is happening, he said. At a separate event, CIMB Asean Research Institute chairman Tan Sri Munir Majid said he welcomed the the setting up of the special committee, but stressed that it must be critical enough in making recommendations and should not be in denial in identifying the real causes that led to the economic downturn. Setting up the committee is only the first stage, Munir told reporters yesterday, adding that it has to come out with recommendations immediately, given the pressing condition now. Citing the revised budget as an example, Munir said the current crude oil prices had plunged below the government s projection of US$50 (RM212.50) to US$60 per barrel. The committee has to come out with a mitigation plan to address the issue, he added. On the weaker ringgit, Munir said it was caused by multiple reasons, including the country s domestic political turmoil. [The] weakening ringgit provides Filepic of a money changer in Mid Valley Megamall, Kuala Lumpur. After falling to another new low of , the ringgit finally strengthened some 1.1% to end at yesterday. Photo by Haris Hassan an opportunity for medium-term investors who are planning to invest in the country. However, in view of the current political noise, they (potential investors) may have switched to Indonesia, whose politics are relatively stable, he told reporters yesterday. He was speaking after CIMB Asean Research Institute and Asean Business Club jointly launched the third set of Lifting-The-Barriers Reports, a series of white papers for Asean ministers to effect real changes and accelerate Asean s integration. Besides slumping oil prices due to an expected supply glut, the past few weeks have seen the local currency, together with local equities, routed amid global uncertainties and a shock yuan devaluation. Shrinking international reserves, high foreign holdings of government bonds and high external debts continue to make the ringgit one of the most vulnerable currencies in Asia (excluding Japan) to external shocks, the digitaledge DAILY reported on Monday, quoting analysts who expect the local currency to decline to as much as 4.26 against the greenback by end-september. On the same day, the local currency fell to a fresh 17-year low and closed at Yesterday, after falling to another new low of , the ringgit finally strengthened some 1.1% to end the trading hours at The benchmark FBM KLCI, which breached the 1,600-point mark on Aug 14 and has largely floated in a sea of red in the past week as it plummeted to as low as 1, last Friday, rose 31.8 points or 2.8% yesterday to close at 1,563.94, as investors bargain-hunted for beaten-down Malaysian shares amid US stock futures gains. Nazir voices concern about ringgit s free fall KUALA LUMPUR: Esteemed banker Datuk Seri Nazir Razak yesterday weighed in on concerns about Malaysia s financial market performance as a result of the free fall of the ringgit and its impact on the nation s economy, saying that power people must refrain from saying stupid things which will worsen the situation. Posting a picture of a fallen bronze bull on his Instagram account, the CIMB Group Holdings Bhd chairman asked if the animal is dead or wounded. Dead or wounded? China will determine, but a new normal [of relative values] will prevail for most emerging markets. Accept and adjust quickly. Meanwhile, capital is super sensitive; bad news and bad signs amplify, so power people must avoid saying stupid things, he wrote. However, he did not elaborate on who are the power people or what are the stupid things. The term bull is usually associated with a positive performance in the stock market. The ringgit has been Asia s worst performer in the past one year, with many attributing its poor performance to the worsening global out- look, China s surprise devaluation of the yuan, plunging commodity prices and the current political scandal linked to Nazir s brother, Prime Minister Datuk Seri Najib Razak. Najib is facing intense scrutiny over a US$700 million (RM2.6 billion) donation from an unknown Middle Eastern donor into his personal accounts, while at the same time, state investment firm 1Malaysia Development Bhd (1MDB) is facing multiple probes into its alleged financial irregularities. The country is also suffering from a perception of interference by Najib s administration when Tan Sri Abdul Gani Patail was abruptly replaced as attorney-general, while the Malaysian Anti-Corruption Commission offices were raided, with its officers detained for questioning by police over alleged leaks of information related to 1MDB. The ringgit rout continued as markets opened yesterday, falling to a record low of 3.08 against the Singapore dollar. The currency is also at a 17-year low against the greenback, opening yesterday at per US dollar. The ringgit was pegged at 3.80 against the US dollar from September 1998 to The Malaysian Insider FGV awaiting BNM, MoF approvals BY SUPRIYA SURENDRAN KUALA LUMPUR: Felda Global Ventures Holdings Bhd (FGV) has confirmed that it has not paid Rajawali Corp a US$174.5 million (RM million) refundable deposit, which is meant to serve as a down payment for its proposed US$680 million acquisition of a 37% stake in PT Eagle High Plantations Tbk. FGV chief executive officer Datuk Mohd Emir Mavani Abdullah (pic) confirmed that the deposit had not been paid, as it was pending approval from the relevant authorities, namely Bank Negara Malaysia (BNM) and the Ministry of Finance (MoF). We have not paid the deposit yet for Eagle High, as we are awaiting approval from BNM and [the] MoF [for the cash to be transferred], he said when contacted by the digitaledge DAILY. To recap, FGV on June 12 announced that its wholly-owned subsidiary Felda Global Ventures Kalimantan Sdn Bhd had signed a heads of agreement (HoA) with Rajawali for the acquisition, and it was understood then that FGV Kalimantan was to pay the US$174.5 million refundable deposit upon acquiring all BNM approvals. The deposit courted controversy as it formed 25.7% of the acquisition price and only a HoA had been signed. In a report yesterday, CIMB Research said that based on its teleconference session with FGV, it is understood that FGV is in the midst of finalising its confirmatory due diligence of Eagle High, and is negotiating the terms of a conditional sale and purchase agreement, which it aims to sign no later than Oct 31. We cut our sumof-parts based target price to reflect our concern about the recent sharp decline in Eagle High s share price, said CIMB Research. The research house revised its target price for FGV to RM1.15 from RM1.50 previously, and maintained its reduce rating on the stock. MIDF Research also revised its target price for FGV to RM1.30 from RM1.60 previously, with a neutral call. We have reduced our target price to RM1.30 after changing our valuation method to one times price-to-net tangible assets (P/NTA). This is due to our belief that [the] share price downside could be captured by the land value of FGV, and hence our P/NTA method, said MIDF Research. BIMB Securities Research revised its target price for FGV to RM1.03 from RM1.61, based on FGV s weak set of financials reported. The weak results have prompted us to revise down our FY15 (financial year 2015) and FY16 earnings further by 35% and 41%, respectively, as we adjust for lower crude palm oil prices of RM2,200 per tonne from RM2,300 previously, as well as [lower] oil extraction rates as the drought and floods last year have had an impact on its production, said the research house. On Monday, FGV reported a 69.7% drop in its net profit to RM46.08 million for the second quarter ended June 30, 2015, from RM million a year ago, on weaker crude palm oil prices. This was despite reporting an 8.1% increase in revenue for the quarter to RM4.19 billion from RM3.87 billion. FGV shares fell one sen or 0.83% to close at RM1.20 yesterday, with a market capitalisation of RM4.45 billion.

6 WEDNESDAY AUGUST 26, 2015 DIGITALEDGE DAILY CORPORATE & MARKET 5 KLCI takes a breather The market could be in for more volatility and losses in the near term BY SUPRIYA SURENDRAN KUALA LUMPUR: The stock market took a breather yesterday as investors sought out bargains after the previous day s 2.7% dive, but market analysts caution that this spike is probably not sustainable. The FBM KLCI staged a rebound yesterday, led by Petronas Chemicals Group Bhd (+7.81%) and Axiata Group Bhd (+5.52%), with a gain of 31.8 points or 2.08% to settle at 1, points at the closing bell. Analysts said stocks rose in a technical rebound after falling almost 3% in the previous session, but more volatility is seen following weak corporate earnings in the June quarter and concerns over China s economy and US interest rate hike. The stock market is also under pressure from low oil prices, which have fallen 22% year to date (YTD) to US$43.92 per barrel yesterday. Among Malaysia s blue chips, major oil and gas player SapuraKencana Petroleum Bhd was the biggest decliner among the KLCI component stocks, falling 1.34% to close at RM1.47. A remisier with a local investment bank doesn t expect the KLCI to retain its growth momentum, at least not in the near future. He said the gain in the KLCI was in tandem with the US markets, as all the three major Wall Street indices were up. The Dow Jones industrial average rose points or 2.02% yesterday, while the S&P 500 gained points or 2.26%, and the Nasdaq Composite added points or 2.86% in early trade yesterday. The performance of US equities on Monday gave some positive indication that the US markets may recover; hence, that was probably the reason why the benchmark index gained some positive traction today (yesterday), the remisier told digitaledge DAILY. However, on whether this positive momentum in the FBM KLCI is sustainable... it all boils down to the performance of the The FBM KLCI staged a rebound yesterday to settle at 1, points at the closing bell, after plunging 2.7% in the previous day. The Malaysian Insider file photo ringgit, which on the contrary, is not having the greatest run right now, he added. The ringgit had weakened by 20% to trade at against the US dollar yesterday from on Jan 1 and during the same period the ringgit had also weakened by 13% against the Singapore dollar at YTD, crude palm oil (CPO) prices also fell by 26% to RM1,829 per tonne yesterday as output outweighed demand, dragging down the share price of plantation companies such as United Plantations Bhd (-3.73%), Felda Global Ventures Holdings Bhd (-0.83%) and Boustead Plantations Bhd (-0.81%). According to Bloomberg, the benchmark CPO futures contract tumbled as much as 2.8% to close at RM1,863 per tonne yesterday, its lowest since February Aviation stocks on Bursa Malaysia were not spared as AirAsia Bhd was down 5.43% to close at 87 sen yesterday, while AirAsia X Bhd s share price slipped 3.12% to 15.5 sen. Malaysia Airports Holdings Bhd shares closed down 0.9% to RM4.41. On a brighter note, telecommunications counters such as DiGi. Com Bhd was up 5.05% to end the day at RM5.20, Axiata up 5.52% to RM6.12 and Telekom Malaysia Bhd up 4.68% to RM6.48. Over on the banking side, RHB Capital Bhd closed the day 3.95% higher to RM6.31, while CIMB Group Holdings Bhd closed up 2.16% to RM4.72 yesterday. Southeast Asian stock markets also rebounded yesterday, with Singapore Straits Times Index climbing 1.51%, Jakarta (+1.56%), the Philippines (+0.6%) and Bangkok s SET index (+1.75%). Puncak Niaga s 2Q earnings unchanged at RM59.54m BY MEENA LAKSHANA KUALA LUMPUR: Puncak Niaga Holdings Bhd s net profit slipped 0.6% year-on-year to RM59.54 million or sen per share in the second quarter ended June 30, 2015 (2QFY15), compared with RM59.9 million previously, on lower revenue from its oil and gas segment. Its revenue dropped 59.4% to RM65.45 million in 2QFY15 from RM million a year ago, its filing with Bursa Malaysia showed. For the first half ended June 30 (1HFY15), Puncak Niaga s net profit rose 17.7% to RM million or sen per share, compared with RM million or 26 sen per share in 1HFY14. Revenue in 1HFY15 declined 24.9% to RM million from RM million previously. Excluding the profit net of tax from discontinued operations reported by the group, the group recorded a loss before tax of RM15.9 million, compared to a profit before tax of RM3.2 million in 2QFY14. The discontinued operations referred to the business involved in the water restructuring exercise in Selangor. For 2QFY15, net loss from Puncak Niaga s continuing operations amounted to RM13.3 million, compared to a net profit of RM2.8 million a year ago. Net loss from continuing operations narrowed to RM14.6 million in 1HFY15 from RM23.6 million a year ago. The group is intensifying efforts to secure more projects for its transportation and installation operations of offshore facilities under the ongoing Pan Malaysia Package B contract with Petroliam Nasional Bhd, from 2014 to It is also looking to expand its operations into areas related to its core business, both locally and abroad, and exploring opportunities in new business sectors like oil palm plantation.

7 6 CORPORATE & MARKET WEDNESDAY AUGUST 26, 2015 DIGITALEDGE DAILY Forex loss eats into TM s 2Q earnings Yet the telco is not planning to restructure any debt BY CHONG JIN HUN & CHESTER TAY KUALA LUMPUR: Telekom Malaysia Bhd s (TM) second quarter ended June 30, 2015 (2QFY15) net profit slid 1% year-on-year (y-o-y) to RM from RM million, largely on foreign exchange (forex) losses from borrowings, due to the ringgit slump against the greenback, while operating and finance costs increased. Thus, earnings per share (EPS) fell to 5.69 sen from 5.97 sen in 2QFY14. However, TM group chief financial officer Datuk Bazlan Osman said the national telecommunications company is not planning any debt restructuring or refinancing of its foreign currency-denominated debt as merely a small portion of it is unhedged. We do not have any plans to restructure or refinance our debt now, because only 12% or US$200 million (RM851 million) of our US dollar debts are not hedged, he told reporters yesterday during a media briefing after releasing the group s 2QFY15 results. Moreover, these (12%) debts expire in 2025, which is 10 years from now, he said. Bazlan also revealed that 25% of the group s RM6.88 billion total debts are foreign currency-denominated, but only the said 12% are exposed to forex fluctuations IJM expects satisfactory FY16 BY AHMAD NAQIB IDRIS KUALA LUMPUR: IJM Corp Bhd expects to perform satisfactorily for the current financial year ending March 31, 2016 (FY16), driven mainly by its construction division, which has an outstanding order book of RM7 billion. IJM (fundamental: 1.1; valuation: 0.8) chief executive officer (CEO) Datuk Soam Heng Choon said its construction segment would be driven mainly by its West Coast Expressway (WCE) project and the New Deep Water Terminal (NDWT) project in Kuantan Port. We have a current outstanding order book of RM7 billion, and most of the projects are in their early days. The WCE just commenced work, and the NDWT project in Kuantan started work in April, Soam told reporters after the group s annual and extraordinary general meetings yesterday. He said the WCE job, valued at RM2.83 billion, will contribute to THE EDGE FILE PHOTO Bazlan: Only 12% or US$200 million of our US dollar debts are not hedged. as the rest had been hedged accordingly. The weakening ringgit has resulted in TM bearing about a RM14.5 million forex loss in its latest quarterly results. The group recorded a forex gain of RM7.1 million a year ago. Also affecting the quarterly earnings was the consolidation of the operational loss of newly acquired subsidiary Packet One Networks (M) Sdn Bhd, which resulted in its operating profit before finance cost dropping 16.3% y-o-y to RM547.5 million, aside from the fact that last year s results included negative goodwill from the acquisition of a wholly-owned unit. Revenue for 2QFY15, however, rose to RM2.84 billion from the group s performance up to 2019, while the NDWT will contribute RM1.1 billion over the next two years, starting in the third or fourth quarter of FY16. Meanwhile, the group is also tendering for RM15 billion worth of construction projects, and is aiming to bid for works like the Klang Valley Mass Rapid Transit Line 2, the light rail transit extension project and the Pan-Borneo Highway, among others, when tendering starts. For the property sector, the group maintains a challenging outlook due to the tightening of lending policies enforced by Bank Negara Malaysia, which has translated to lower sales for IJM, and the general dampened sentiment. Its sales in the first quarter ended June 30, 2015 were slightly more than RM300 million, and it sees a lower undisclosed sales target for FY16, compared with FY15 s target of RM1.8 billion. However, the group is still aiming for some RM1.2 billion worth of RM2.82 billion mainly due to higher revenue from Internet, multimedia and non-telecommunication services. Internet and multimedia services registered [a] higher revenue by 14.3% to RM831.2 million in the current quarter from RM726.9 million in the same quarter last year, TM said in its quarterly report to Bursa Malaysia yesterday. TM declared a dividend of 9.3 sen a share for the quarter under review, payable on Sept 23. Cumulatively, TM s first half of FY15 (1HFY15) net profit fell 19.7% to RM million (EPS: 9.16 sen) from RM million (EPS: sen) for the same reasons. Revenue was, however, 3.2% higher at RM5.61 billion versus RM5.44 billion in 1HFY14. TM group chief executive officer Tan Sri Zamzamzairani Mohd Isa said the group s 1HFY15 capital expenditure (capex) of RM686 million accounted for 12.2% of its revenue. Of the total capex, RM428 million was spent during 2QFY15. Taking into consideration the group s high-speed broadband phase two and long-term evolution roll-outs, the group expects to incur up to 30% of its annual revenue as capex for FY15, Zamzamzairani said. Without them, FY15 capex could be about 20% of its annual revenue. gross development value launches in the next six months. On plantation operations, Soam said for every RM100 fluctuation in crude palm oil (CPO) prices, this would translate to an impact of about RM11 million to RM12 million on the group s profit before tax. IJM Plantations Bhd CEO Joseph Tek said the outlook for CPO prices is bearish in the short term, expecting prices to be above RM2,000 per tonne for FY16. On IJM s exclusion by Norway s Government Pension Fund Global from its portfolio on environmental concerns, Soam said IJM does not agree with the fund that said IJM s practice was environmentally damaging. He said IJM already had a road map in place to get its plantation mills in Indonesia certified by the Roundtable on Sustainable Palm Oil, and the International Sustainability Carbon Certification for its mills in Malaysia. MOST VIEWED STORIES ON UMW Oil & Gas warns of low oil price impact on FY15 performance BY SANGEETHA AMARTHALINGAM GEORGE TOWN: UMW Oil & Gas Corp Bhd (UMW-OG) saw its net profit plunge 92.6% to RM4.46 million or 0.21 sen per share for the second quarter ended June 30, 2015 (2QFY15) from RM60.31 million or 2.79 sen per share a year ago, on lower contributions from both the drilling services and oilfield services segments. Revenue for 2QFY15 dropped 23.2% to RM million from RM million in 2QFY14. Overseas operations contributed 50.5% of the group s revenue in 2QFY15. In a filing with Bursa Malaysia yesterday, UMW-OG said 94.8% of the group s overall revenue was derived from the drilling services segment in 2QFY15, which was a decline of RM53.4 million or 23.5% over 2QFY14. The reduction was due to lower time charter rates, lower utilisation of some of our assets in 2QFY15, and translation gains from the appreciation of the US dollar to the ringgit, it said. The decrease was also due to the additional operating expenses from its new offshore premium jack-up rig, UMW Naga 7, which has yet to secure a contract. In the oilfield services segment, reduced revenue was recorded from the oil country tubular goods (OCTG) threading and repair services operations in Labuan and China. For the cumulative six months BY MEENA LAKSHANA KUALA LUMPUR: Carlsberg Brewery Malaysia Bhd saw its net profit dip 20.8% to RM31.71 million or sen per share for the second quarter ended June 30, 2015 (2QFY15) from RM40.04 million or 13.1 sen per share on impairment loss of the disposal of its 70% stake in Luen Heng F&B Sdn Bhd. Revenue for 2QFY15, however, rose 13% to RM million from RM million in 2QFY14. The group also declared an interim dividend of five sen per share for the financial year ending Dec 31, 2015 (FY15), payable on Oct 9. The weaker 2QFY15 earnings results dragged its net profit for the six months (1HFY15) by 14.5% lower to RM78.94 million or sen per share from RM92.37 million or sen per share in 1HFY14. This was despite revenue increasing 3.7% to RM million in 1HFY15 from RM million in 1HFY14. In a statement yesterday, Carlsberg Malaysia managing director Henrik Juel Andersen said discounting the Luen Heng F&B disposal impairment loss, net profit dipped marginally by 0.6% to RM93.3 million in 1HFY15. Our (1HFY15), UMW-OG posted a 67.9% decline in net profit to RM36.61 million from RM million in 1HFY14. Revenue for 1HFY15, however, rose 14.2% to RM million from RM million in 1HFY14 on improved revenue contributions from the drilling services segment. Overseas operations contributed 58.7% of the group s revenue for the sixmonth period. UMW-OG warned that its performance for the financial year ending Dec 31, 2015 (FY15) will be adversely affected by the current low oil prices. It noted that the financial performance of the drilling services segment for the remaining period of 2015 is expected to be significantly affected in terms of revenue and profit. With oil prices remaining low and showing little sign of recovery in the near future, major oil and gas companies continue to trim drilling budgets and postpone drilling plans. Time charter rates remain under pressure in a highly competitive environment where rig supply far outnumbered demand. Rigs utilisation for the remaining period is expected to deteriorate further as more rigs are completing their existing contracts, it added. The performance of the oilfield services segment is also likely to be negatively affected by the current oil price cycle as demand for OCTG threading and repair services is expected to decline in 2HFY15. Carlsberg revenue up 13%, pays five sen dividend for FY15 operating performance in 2QFY15 partly reflects the post-goods and services tax (GST) trade restocking in Malaysia, but also shows our ability to grow our businesses despite unfavourable external factors in both Malaysia and Singapore, he said. In Malaysia, we are experiencing subdued consumer spending as the Consumer Sentiment Index fell to a five-year low in 2QFY15, while the weakening ringgit negatively impacted our cost base. Our Singapore business has shown significant growth in the first half of the year, and we expect this trend to continue as effective commercial strategies and successful integration of MayBev Pte Ltd remains a key growth driver for the group, Andersen said. Bracing for uncertainties in the remaining half of 2015, Andersen said the group has put in place plans to increase consumption of its products in the marketplace, deliver higher returns on commercial investments and optimise its cost base. We are hopeful that the government will not impose a further increase in beer excise tariff in the forthcoming Budget 2016 in view of the prevailing post-gst challenging environment. he said.

8 WEDNESDAY AUGUST 26, 2015 DIGITALEDGE DAILY ORGANISER POWERED BY 7 GOLD SPONSORS SILVER SPONSOR BRONZE SPONSOR OFFICIAL TV & RADIO OFFICIAL DRINK Corporate Malaysia runs for education REGISTER TODAY! ENTRY FORMS AND DETAILS AT OR CALL The Edge Education Foundation (TEEF) has applied to the Ministry of Finance for relief from the levy of GST on donations received for The Edge Kuala Lumpur Rat Race. However, TEEF is still awaiting confirmation of this. Unless TEEF is successful in obtaining relief from the levy of GST, the income tax exemption receipt issued by TEEF under sub-section 44(6) of the Income Tax Act, 1967 will reflect the total amount of donation/sponsorship monies paid LESS 6% GST. Additionally, should the Ministry of Finance not grant relief from the levy of GST, the total donation amount shall be treated as inclusive of GST.

9 8 CORPORATE & MARKET WEDNESDAY AUGUST 26, 2015 DIGITALEDGE DAILY CIMB retains top spot in equity, bond sales Says it has been No 1 for six of last eight years in global sukuk space BY MEENA LAKSHANA KUALA LUMPUR: CIMB Investment Bank Bhd retained its pole position in Bloomberg s lead arranger table year-to-date (YTD), with RM9.27 billion of stock sales and a table share of 29.5%. Its nearest rival came in 13.8% lower in terms of equity capital raising, with a 15.7% market share. In a statement yesterday, CIMB said it was also the top arranger of ringgit bonds as at Aug 24, 2015 its 10th year running facilitating 52 issuances worth RM8.62 billion and capturing a 23.8% market share. The investment bank also held the top spot among arrangers of Asean domestic bonds and global sukuk YTD, according to the Bloomberg Underwriter Global Sukuk League Table. As a regional leader, CIMB BY YIMIE YONG KUALA LUMPUR: Contrary to expectations, glove maker Hartalega Holdings Bhd the world s largest nitrile glove maker with a 12.5% synthetic glove market share presently has yet to benefit from the current slump of the ringgit against the US dollar as the company hedged its proceeds three to six months earlier. Hartalega chairman Kuan Kam Hon admitted that the company was not fast enough in its hedging to benefit from the weakening of the ringgit as it is difficult to predict the movement of the local currency due to volatility in the currencies market amid political uncertainties in the country. We hedge all our proceeds in accordance to our budget, he told BY CYNTHIA BLEMIN KUALA LUMPUR: Scomi Group Bhd saw its net profit fall 14.2% to RM9.73 million or 0.63 sen a share for the first financial quarter ended June 30, 2015 (1QFY16), from RM11.34 million or 0.73 sen a share a year ago, largely on lower profit from its oilfield service operations and losses posted by its marine services division. Revenue for 1QFY16 fell 8.3% to RM379.9 million from RM million for 1QFY15. A detailed overview of CIMB Investment Bank s rankings is tabled below RANK MARKET SHARE (%) VOLUME (BILLION) Malaysian Ringgit Bonds RM8.62 ASEAN Domestic Bonds USD4.37 Global Sukuk USD3.23 MIST Equity Capital Markets 2, USD2.68 Malaysian Equity Capital Markets RM9.27 Source: 1. Bloomberg Underwriter league tables (year-to-date as at 24 August 2015) 2. Dealogic (year-to-date as at 24 August 2015) 3. MIST means Malaysia, Indonesia, Singapore and Thailand collectively maintained its long-standing position by being No 1 in the Bloomberg Underwriter League Table for Asean domestic bonds as at Aug 24, 2015, with 127 issuances totalling US$4.37 billion (RM18.57 billion), capturing a 13.6% market share in the region, said CIMB. CIMB also cemented its leadership among underwriters of global sukuk YTD, with a 14.4% market share and deals totalling US$3.23 billion. In the global sukuk space, CIMB has been No 1 for six out of the last eight years and top two for the last eight consecutive years and yearto-date, it added. On the equity front, CIMB said it ranked the top in the Dealogic Malaysia, Indonesia, Singapore and Indonesia (MIST) Equity Capital Markets (ECM) league table ranking YTD, having successfully led and marketed deals which raised a total of US$2.68 billion. Hartalega yet to benefit from falling ringgit reporters after the company s annual general meeting yesterday. He also expects to see unrealised foreign exchange (forex) losses for the second quarter ending Sept 30, 2015 (2QFY16) as the ringgit fluctuates more compared with the first quarter. Kuan said the company had already reported unrealised fair value losses of about RM5 million for 1QFY16. He said this is in contrast with the perception that exporters will have substantial forex gains due to the weakening of the ringgit. Furthermore, he added that the glove market is reactive to any cost differences arising from forex or lower raw material costs. Hence, any cost savings will almost be immediately passed on to customers. Kuan said exporters prefer stability in the currency, so that they can predict and project their earnings better. Despite the volatility in the currencies market amid slowing China economy and political uncertainties in Malaysia, Kuan expects the company to register better performance for FY16. He said shareholders can still expect slightly higher dividends for FY16 as he expects to see growth in the group s earnings. The new capacity from Plant 1 and 2 of the Next Generation Integrated Glove Manufacturing Complex (NGC) in Sepang was sold immediately, he added. Kuan said Plant 3 and 4 will start commissioning in the middle of The glove maker is expected to sell 16 billion pieces of gloves in FY16, CIMB consistently topped the Dealogic Malaysia ECM league table for the last 10 years. CIMB has also retained the top position in the Dealogic and Bloomberg MIST ECM league table ranking over the past 10 years, raising US$55.08 billion of equity capital since 2005, it said. Despite economic indicators pointing towards a softer outlook for the region caused by internal and external headwinds, we see growth opportunities in selected segments and markets across the region this year, said CIMB Group Holdings Bhd group chief executive officer Tengku Datuk Zafrul Tengku Abdul Aziz in the statement. CIMB Group (fundamental: 1.05; valuation: 2.25) shares closed 2.16% higher at RM4.72 yesterday, with a market capitalisation of RM40.07 billion. compared with the current 12 billion pieces. Kuan forecast that demand for gloves will still be strong in the next three years, with annual growth of between 6% and 8%. To recap, Hartalega is embarking on an ambitious eight-year plan to complete its NGC in Sepang, which will see an average growth of 15% annually in capacity. The first two plants of NGC are now operational, with 14 production lines commissioned to date and more coming on stream progressively. Once all 72 production lines are operational by 2021, the NGC will up the group s total capacity to 42 billion. Hartalega shares closed six sen or 0.74% lower at RM8.02 yesterday, with a market capitalisation of RM6.58 billion. Oilfield, marine services drag Scomi Group s 1Q earnings In a statement yesterday, Scomi said the weaker results for 1QFY16 were mainly because of the general slowdown in the oil and gas as well as marine segments, where several new projects were postoned as customers scaled down their operations. Rig counts were also significantly lower in Malaysia, Indonesia and West Africa. In its filing with Bursa Malaysia, Scomi said its oilfield services division recorded a slightly lower revenue of RM283.8 million for 1QFY16 from RM288.5 million for 1QFY15, due to lower drilling activities. Its transport solutions division also saw lower revenue of RM46.4 million (1QFY15: RM48.4 million), mainly due to lower value of works done. Its marine services division, meanwhile, posted a loss of RM2.4 million (1QFY15: profit of RM3.3 million) on lower revenue due to lower tonnage carried and less shipments. Going forward, Scomi chief financial officer Zarof Abu Bakar said the focus remains on more cost-control measures and marketing new products to maintain profitability. To date, [our] oilfield services and marine services have collectively secured a total of US$140 million (RM595 million) in new contracts for 2015, increasing the group s order book to US$1 billion, he said. The strengthening of the US dollar has a positive impact on our earnings as approximately 90% of our revenue is in that currency. TSH Resources 2Q net profit down 80% to RM7.08m BY MEENA LAKSHANA KUALA LUMPUR: TSH Resources Bhd saw its net profit tumble 80% to RM7.08 million or 0.53 sen per share for the second quarter ended June 30, 2015 (2QFY15), from RM35.38 million or 2.63 sen per share a year ago, on lower crude palm oil (CPO) prices, lower fresh fruit bunch (FFB) production and foreign exchange differences. Revenue for 2QFY15 declined 31.7% to RM million from RM million for 2QFY14. In a filing with Bursa Malaysia, TSH said its palm division saw lower operating profit of RM32.2 million for 2QFY15 due to lower FFB yield of 153,963 tonnes (2QFY14: 162,675 tonnes). The group also dealt with a lower average CPO price of RM2,107 per tonne in 2QFY15, compared (2QFY14: RM2,463 per tonne). TSH said the lower FFB yield was caused by the lagged impact of drought in Kalimantan, Indonesia in 2014, while the average CPO price was dented by sustained weak demand from China and India. For the six-month period (1HFY15), its net profit fell 84.7% to RM13.52 million or one sen per share, compared with RM87.55 million or 6.51 sen per share for 1HFY14, while revenue declined 30% to RM million from RM million. TSH said CPO prices are likely to remain at the current RM2,000 level on China s weak economy, and an ample supply of palm oil as well as other competitive vegetable oils. But it remains optimistic about the long-term prospects of the palm oil industry and would continue to focus on its oil palm planting programme in Indonesia, and further expand its plantation land in Malaysia and Indonesia. Clarification TSR Capital Bhd has clarified that since the incorporation of the property and construction group, the shareholders with a controlling interest in TSR are Tengku Datuk Mustapha Tengku Mohamed and his nephew. They are also the founders of the group. In a statement yesterday, TSR said the duo s effective interest is 24.88% of TSR s total issued share capital as at yesterday. It was clarifying a report entitled RMAF s Butterworth base relocation scrapped? that was published in the digitaledge DAILY on Monday, which stated that its deputy chairman Tan Sri Lim Kang Yew controls the group with a 33.69% stake. Tan Sri Lim Kang Yew s effective interest in TSR is 7.94% as at Aug 25, Lim only became a substantial shareholder of TSR effective April 15, 2014, the group said.


11 10 CORPORATE & MARKET WEDNESDAY AUGUST 26, 2015 DIGITALEDGE DAILY Cliq Energy to move ahead with QA Despite the ongoing rout of oil prices and the ringgit BY GHO CHEE YUAN KUALA LUMPUR: Special-purpose acquisition company (SPAC) Cliq Energy Bhd will proceed with its acquisition of two oil fields in Kazakhstan, despite the ongoing rout of oil prices and the ringgit. Speaking to reporters after its annual general meeting yesterday, Cliq Energy managing director and chief executive officer Ahmad Ziyad Elias shared his belief that the current oil price is near to bottoming-out, thus now is perfect timing for the SPAC to embark on its acquisition. We have no time to look for alternatives, Ziyad said, referring to the Cliq Energy s deadline for SPAC s qualifying acquisition (QA) before April 9 next year, as per SPAC guidelines under the Securities Commission Malaysia (SC). The SPAC was listed on Bursa Malaysia on April 10, 2013, and it has to complete its QA within 36 months of its listing. On March 25 this year, Cliq Energy entered into a conditional sale and purchase agreement to acquire a 51% stake in a special-purpose vehicle (SPV), comprising the two oil-producing field assets in Kazakhstan, from Phystech Firm LLP for US$117.3 million (RM433.5 million). The SPV will then be listed on the KUALA LUMPUR: Malaysia s Islamic bond investors are fleeing longerdated sukuk as accelerating inflation adds to the risk of outflows amid a global emerging-market sell-off. The difference in yields between 2025 syariah-compliant securities and three-year debt widened 14 basis points (bps) this year to an average of 67 in August, the most since May Data last week showed July s inflation rate was the highest in 11 months, while foreign ownership of bonds in Malaysia fell to the lowest since Longer-dated borrowing costs will rise further as the US Federal Reserve (Fed) prepares to raise interest rates, CIMB Group Holdings Bhd and Asian Finance Bank Bhd predict. Offerings of Islamic bonds in Malaysia dropped to a five-year low in 2015 as an 18% plunge in the ringgit and a collapse in oil prices made it hard to gauge earnings prospects. Investors are shortening their duration ahead of the Fed s rate hike, Ahmad Ziyad: Low oil price is a good time for us to start the business, as the cost of operation will also be low in tandem. Photo by Suhaimi Yusuf Kazakhstan Stock Exchange. Based on the current exchange rate the ringgit is in a 17-year low range against the dollar and was quoted at at the time of writing yesterday the acquisition s price now approximates RM million. At the same time, Brent crude was trading at US$43.08 per barrel, while US crude was at US$38.78 per barrel, after hitting a 16-year low earlier. Ahmad Ziyad said the SPAC has also conducted a sensitivity test based on a crude oil price of US$40 per barrel, and found that the deal is still profitable. The oil price will definitely rebound as oil is a neccessity to everyone, he said. Malaysian sukuk curve steepens as inflation adds to outflow risk said Nik Mukharriz Muhammad, fixed-income analyst at CIMB Investment Bank Bhd, a unit of Malaysia s second-biggest lender by assets. The fall in the currency, oil prices and the political concern in the country are also not helping. Yields on 10-year ringgit-denominated syariah-compliant notes climbed 16bps this year to 4.43%, near a record 4.44% reached in December 2013, while those on three-year sukuk increased 2bps to 3.77%, Bank Negara Malaysia indices showed. The gap between the two is sometimes referred to as the yield curve and the difference for conventional debt has averaged 78bps in August. Higher borrowing costs have led to reduced sukuk issuance by Malaysian companies. Offerings of securities that pay returns on assets to comply with Islam s ban on interest fell 27% to RM30.1 billion so far in That s the least since 2010 when sales were RM11 billion at this point Ahmad Ziyad also cited the recent PetroChina International Kazakhstan s agreement with Tethys Petroleum Ltd to explore the feasibility of a long-term and mutually beneficial cooperation in natural gas and crude oil deliveries, as an example that there are still opportunities for business in the current slump. Low oil price is a good time for us to start the business, as the cost of operation will also be low in tandem, he said. Ahmad Ziyad said Cliq Energy had submitted an application to the SC on Aug 3 on its QA, and is awaiting approval from the regulator. An extraordinary general meeting will be convened to obtain shareholders approval, following which, a shareholders agreement will be inked between Cliq Energy and Phystech Firm. The [oil fields ] first-year capital expenditure requirement of US$30 million will be met through an injection by Phystech Firm. Of that amount, US$14.7 million will be its commitment and the balance of US$15.3 million is to cover Cliq Energy s funding requirement, he added. Cliq Energy targets to break even in three years. As at March 31, 2015, the company s internal funds amounted to RM million. of the year. Consumer prices climbed 3.3% in July from a year earlier, more than the median 2.9% predicted by economists in a Bloomberg poll and 2.5% in June. Malaysia s central bank forecast in March that inflation would average 2% to 3% in Overseas investors cut holdings of sovereign and corporate notes by 2.4% in July to RM206.8 billion, official data showed. They reduced the amount of Islamic sovereign notes they held to RM8.2 billion, from RM9.8 billion in June and a record RM10.9 billion in May. The pull-out by foreign investors is contributing to the pickup in yields, Norlia Mat Yusof, chief investment officer at Etiqa Insurance & Takaful, said last week. We have been gradually reducing our position in sukuks that are more than 10 years because we expect yields to rise further, Zulkiflee Mohd Nidzam, head of foreign exchange and bond trading at Asian Finance Bhd, said last Friday. Bloomberg NEWS IN BRIEF Bintulu Port 2Q net profit slips 31.6%, pays four sen dividend BY CHESTER TAY KUALA LUMPUR: Bintulu Port Holdings Bhd s net profit slid 31.6% for the second quarter ended June 30, 2015 (2QFY15), to RM20.82 million or 4.53 sen a share from RM30.44 million or 6.62 sen a share a year ago, as expenditure rose by RM8.6 million mainly due to the amortisation of lease concession assets and depreciation expenses recognised for assets capitalised since the second half of Revenue also fell 5.1% to RM million in 2QFY15 from RM million in 2QFY14. The group attributed the decrease in 2QFY15 revenue to lower cargo, including liquefied natural gas (LNG) and break bulk cargo. Despite weaker results, Bintulu Port declared a second interim dividend of four sen for the financial year ending Dec 31, 2015, payable on Oct 8. This brings its cumulative dividend for the year to 10 sen, against 12 sen in the previous corresponding period. For the six-month period (1HFY15), Bintulu Port saw its net profit drop 21.2% to RM56.3 million or sen a share compared with RM71.47 million or sen a share a year ago, while revenue declined 1.7% to RM million from RM million in 1HFY14. On the current year s prospects, the group said although there is an increase in dry bulk cargo, the market is expected to be challenging in 2015 due to the softness in LNG cargo, containerised cargo and timber-based products. Asean needs single capital market, says Maybank Kim Eng MANILA: Developing a single capital market in the Association of Southeast Asian Nations (Asean) is crucial as it would create greater financial connectivity within the region in all aspects, including banking and investment. Maybank Kim Eng group chief executive officer John Chong said being a single production base market would bode well for companies in the member countries as it would bring their businesses to the next level. A single capital market is going to be positive as we can connect people who have the capital and people who are in need of it. We will be an intermediary between two parties. As for Maybank (Malayan Banking Bhd), regional connectivity is our strength and this will help link our clients with business opportunities within Asean, he said on the sidelines of the Invest Asean 2015 here yesterday. Chong said the move to develop a single market was in line with the Asean Economic Community s objective of a free flow of goods, services, skilled labour, investment and capital in the region. Maybank is the only Asean bank with on-the-ground operations in all Asean countries, having over 1,100 branches. Maybank Kim Eng, the investment banking arm of Maybank, has a presence in 10 countries worldwide. Bernama BIMB gets three-day extension to submit 2Q financial results KUALA LUMPUR: BIMB Holdings Bhd, which wholly owns Bank Islam Malaysia Bhd, has been granted a three-day extension by Bursa Securities to submit its financial results for the second quarter ended June 30, 2015 (2QFY15). In a filing with Bursa Malaysia yesterday, BIMB (fundamental: 2.7; valuation: 2.2) said Bursa Securities, vide its letter dated Aug 24, had approved and given the group an extension of up to three market days upon receipt of the approval from the relevant authority for the submission of its 2QFY15 financial results. The group submitted an application letter last Thursday to Bursa Securities requesting for the extension. This is not the first time that BIMB had asked Bursa Securities for an extension to submit its financial results. In February this year, the group also requested for an extension to submit its financial results for the fourth quarter ended Dec 31, For 1QFY15, BIMB posted a 9.9% increase in net profit to RM135.7 million from RM million a year ago, on the back of an 11.3% jump in revenue to RM million from RM726.9 million in 1QFY14. On May 26, the group noted that its Islamic banking business is expected to sustain its growth momentum, albeit with a cautious stance, taking into consideration the current economic condition. The Edge Research s fundamental score reflects a company s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.

12 WEDNESDAY AUGUST 26, 2015 DIGITALEDGE DAILY CORPORATE & MARKET 11 Making a difference in the community Maybank: Pushing ourselves further Maybank teams share a common goal of not only wanting to complete the race for charity but also to push ourselves further than what is expected. All proceeds from the race will be given to charity, as it is in line with our mission of humanising financial services, says John Wong Tze Yow, managing director of transaction banking, group global banking. Head of international tax, global tax Maybank, Josephine Tan Lin Ti, thinks large corporations should reach out to and assist social activists who are self-financing their activities so that the latter can spend more time on charitable work rather than on advertising and publicity. We should also focus more on raising funds for cancer research in Malaysia, she adds. First-time runner Mikael Bienn I Tan (Mako) felt motivated to join the race after listening to memorable stories from colleagues who took part in previous years. The relationship manager for Maybank Philippines Inc, who regularly takes part in triathlons and recently completed the Ironman Philippines 70.3 on Aug 2, believes the concept of running for charity is a good way to promote good health, while at the same time assisting the local community to raise funds for charity. It is better than merely asking for money, as it includes not only giving funds but joining fellow citizens in doing something for a cause, Mako says. EY runs for education Ernst and Young Malaysia (EY Malaysia) has been involved in various education programmes and The Edge Kuala Lumpur Rat Race is another touchstone for the auditing firm. EY Malaysia partner Robert Yoon says the firm is working with The Edge Education Foundation to spearhead the Programme For After Class Enrichment (PACE), launched in April 2013, whereby EY employees serve as mentors to underperforming disadvantaged students. Our people help them to develop literacy and numerical skills and inspire them to complete their secondary education, he says. Yoon adds that EY Malaysia has been a corporate sponsor of the American Malaysian Chamber of Commerce s Young Enterprise Program since The programme involves EY staff advising and guiding students through the WCT does its bit through sport programme I am proud and honoured to be able to represent my company again and make a difference in the community, says WCT Holdings Bhd chief financial officer Chong Kian Fah, as he looks forward to taking part in The Edge Kuala Lumpur Rat Race for the fourth time. WCT always aims to enhance the well-being of local communities through activities, sport, education and training. He adds that the gathering CEOs and representatives from the top management at the race will create greater awareness of charity among companies. WCT has been carrying out corporate responsibility programmes, and the most notable among them is WCT KIDDS, a community sport development programme that provides schoolchildren between the whole business cycle from startup, selling shares to build capital, budgeting and market research to production, marketing and financial reports. Yoon says this will be his fourth turn at the Rat Race. I love to run, especially for charity, and being able to meet new people as well as catch up with old Rat Race buddies is really awesome. Donning her shoes again is EY senior executive director Leong ages of 9 and 12 the opportunities to learn and grow through team sport. Participants are able to learn WCT s core values, engage in sport activities and pick up basic sporting skills through basketball and football coaching sessions conducted in OUG, Petaling Jaya, Shah Alam and Klang, says Chong. WCT KIDDS is fully funded by the company. May Lee, who will run alongside Yoon in the CEO Race. The motivating factor for me is being able to represent EY for a good cause, with the wider community and other CEOs. EY Malaysia s mixed team comprising Alex Lam, Cheong Chen Keong, Hor Mei Ping, Megat Solleh Azlan and Tham May Wai are preparing for the race by exercising, running and eating healthily. Chief engineer Supramaniam Rasappen, who will be taking part in the race for the second time, says he is looking forward to the event as many participants will be donning funny costumes. The loud cheers from the excited and energetic crowd will motivate me to complete the race, he says. I usually take part in such events to stay healthy and have fun. The Edge Kuala Lumpur Rat Race 2015 collection (as at Aug 21, 2015) COMPANY NAME AMOUNT (RM) TOTAL TEAMS Aberdeen Asset Management Sdn Bhd 18, Affin Hwang Asset Management Bhd * 66, CIMB Investment Bank Bhd 32, Deloitte 18, DKSH Malaysia Sdn Bhd 18, Eco World Development Group Bhd * 66, EY Malaysia 18, Feruni Ceramiche Sdn Bhd ** 44, Fraser & Neave (Malaya) Sdn Bhd 32, Gamuda Land Sdn Bhd 32, Genting Malaysia Bhd 18, Glomac Bhd 18, Hartalega Sdn Bhd 18, IOI Group 18, Ireka Corporation Bhd 18, K&N Kenanga Holdings Bhd 18, Khazanah Nasional Bhd 32, KNM Group Bhd 32, KPMG 18, Lafarge Malaysia Bhd 32, Land & General Bhd **** 18, Matrix Concepts Holdings Bhd ** 44, Maybank 60, Merchantrade Asia Sdn Bhd 32, Microlink Solutions Bhd 18, MKH Bhd 18, Naza TTDI Sdn Bhd 32, Nestlé Products Sdn Bhd 18, PricewaterhouseCoopers (PWC) Malaysia 18, REDHA Youth 18, S P Setia Bhd 32, Tanjong Management Services Sdn Bhd 18, Top Glove Corporation Bhd 18, Trinity Group Sdn Bhd 18, Tropicana Corporation Bhd 18, UDA Holdings Bhd 18, Vistage Malaysia Sdn Bhd *** 32, WCT Holdings Bhd 18, Total 1,014, * Part of Powered by and Partnered by ** Part of Gold Sponsorship Package *** Part of Silver Sponsorship Package **** Part of Bronze Sponsorship Package

13 12 PROPERTY SNAPSH T WEDNESDAY AUGUST 26, 2015 DIGITALEDGE DAILY What are developments priced like in Tropicana? Today, we continue our focus on Tropicana / South Sunway Damansara area by looking at average prices on a per square foot (psf) basis. Based on transactions analysed by, the average price psf of non-landed properties in the area was RM539 psf in 3Q2014, up 10.5% y-o-y. In the 12 months to 3Q2014, a majority (60.2%) of transactions fell within the RM401-RM600 psf range. Another 25.1% of transactions belonged to the RM601-RM800 psf range. In the review period, transactions of nonlanded residences in the secondary market have yet to breach the RM1,000 psf level, although this will likely change once Tropicana Gardens is completed, as primary prices there have exceeded that threshold. The most expensive addresses is Tropicana Grande, with an average transacted price of RM722 psf. Other pricey projects include Casa Indah 1 (RM627 psf), Opal Damansara (RM579 psf), Casa Tropicana (RM 561 psf) and Casa Indah 2 (RM555 psf). It is worth noting that the average price at Casa Indah 1 is biased upward due to the record sale of a 3-bedroom unit for RM1.05 million (RM780 psf) in August This development is located next to Tropicana Gardens and an upcoming MRT station. The least expensive developments are Damai Apartment (RM155 psf) and Permai Apartment (RM202 psf). With an average price of RM479 psf, Mutiara Oriental is relative cheap due to its less desirable address in Taman Bukit Mayang Emas. Completed in 1998, it is one of the only freehold condominiums in the Tropicana / South Sunway Damansara area. The Analytics are based on the data available at the date of publication and may be subject to further revision as and when more data is made available to us. For more of such information across Malaysia and Singapore, log on to the The one-stop portal for all your property needs, offers price and transaction records, trend analysis, research classifieds, and more all for FREE! Source: Tropicana/South Sunway Damansara top 5 most expensive condominiums/apartments by average price per square foot Source: Tropicana/South Sunway Damansara top 5 least expensive condominiums/apartments by average price per square foot Sydney homeowners join forces to cash in on property boom BY SWATI PANDEY Filepic of a newly completed apartment development in Sydney in June. Developers need at least 4,000 sq m of land for an apartment building, so owners who club together can command significant premiums. Photo by Reuters SYDNEY: When Ron Buxton bought his sprawling five-bedroom property in Sydney s Castle Hill for A$87,000 in 1979, his was one of only two houses on a dead-end street, ringed by orange groves. With Castle Hill now a bustling commuter suburb earmarked for rezoning, Buxton and his neighbours have clubbed together to offer their homes as a development block for apartments, banking on a multimillion-dollar payday thanks to a surge in Sydney house prices and an acute housing shortage. We started getting phone calls from agents and developers to help us sell the property but we decided we d help ourselves, Buxton, 73, said. We ll certainly get better than open-market individual sale. The trend has surged in the past year with homeowners increasingly taking the initiative themselves rather than waiting for approaches from developers, real estate agents say. Developers such as Stockland and Mirvac are also reaping the rewards, boosting profits as new apartments are snapped up. Sydney s population of 4.5 million people already spreads over 1,600 sq km, twice the size of New York City. With the population expected to rise by 100,000 a year for the next 20 years, urban planners say higher density living is key to providing enough housing. There is an affordability challenge and the only way to address that is supply. This is one of the ways that supply is starting to get freed up, Stockland chief executive officer Mark Steinert said. I think there will be more of this, he added, expecting the residential business to drive further earnings growth over the next five to six years. Approvals for multi-unit projects nationally climbed 28% in the past year to record highs, raising hopes that the extra supply will help dampen potentially dangerous house price rises. Developers need at least 4,000 sq m of land for an apartment building, so owners who club together can command significant premiums. Keiron Stedman, project marketing specialist at Ray White Castle Hill is grouping about 47 homeowners in Sydney s Hills District, one of the western suburbs popular with commuting workers, and now developers. If you sell together as one development parcel you can generally get a higher price... ultimately you can get double, triple or sometimes even five times your residential value by taking this approach, Stedman said. Reuters Special agency to monitor construction of affordable houses mulled PETALING JAYA: The government has proposed to set up a special agency to monitor the construction of affordable houses and People s Housing Project, said Housing and Local Government Minister Datuk Abdul Rahman Dahlan. He said the matter was to be brought up to the National Housing Council meeting scheduled for last Friday. Through this agency, we want to standardise the role between the federal and state governments in the issue of housing. This agency will be monitored by me, [the] ministry s secretary-general and board of directors comprising experts from the construction, property and housing agencies in the public and private sectors, he told a media conference after officiating at the 18th National Housing and Property Summit Earlier, in his opening keynote address, Abdul Rahman said 2015 is a challenging year for housing developers as many of the industry players are facing a slowdown in sales. Building houses during this challenging time is no walk in the park. Demand for residential property in Malaysia is set to slow further in 2015 as forecast by Moody s in its recent report published in Inside Asean. But still, the agency thinks that Malaysia s property risks remain manageable for financiers and developers, which are expected to remain resilient to possible shifts in sentiment and property prices, he said. Abdul Rahman said, however, government and private sectors could and would work closely together to overcome the tough times in the property and housing industry. We shall continue to be responsive to the private sector and create a positive business environment, therefore it will promote greater business and investor confidence in the industry, he said. Bernama Approval granted for 153,807 PR1MA homes to be built nationwide PUTRAJAYA: Government-owned Perumahan Rakyat 1Malaysia Bhd (PR1MA) has been given the nod to construct 153,807 housing units nationwide. Its chief executive officer Datuk Abdul Mutalib Alias said 24,923 units will be built in Penang; 18,171 in Melaka, 17,384 in Sabah, 16,328 in Selangor, 15,870 in Perak, 13,391 in Kedah, 12,860 in Johor and 8,022 in Negeri Sembilan. He said another 6,172 PR1MA homes will be built in Kuala Lumpur, 5,295 in Sarawak, 4,978 in Pahang, 4,876 in Perlis, 2,979 in Kelantan, 1,998 in Terengganu and 560 in Putrajaya. Currently, 41,587 housing units are being constructed while 112,000 are in the planning stage, he told a media conference last Friday. He said ballots for 26 projects comprising 60,000 units of houses will be cast at the end of this year. As of July, 1.2 million people had registered to own PR1MA homes, he said. Bernama

14 WEDNESDAY AUGUST 26, 2015 DIGITALEDGE DAILY STOCKS WITH MOMENTUM 13 This column is an analysis done by Asia Analytica Sdn Bhd on the fundamentals of stocks with momentum that were picked up using proprietary algorithm by Anticipatory Analytics Sdn Bhd and that first appeared at Please exercise your own judgment or seek professional advice for your specific investment needs. We are not responsible for your investment decisions. Our shareholders, directors and employees may have positions in any of the stocks mentioned. LII HEN INDUSTRIES BHD (-ve) LII Hen (Fundamental: 2.8/3, Valuation: 2.4/3) was first recommended by InsiderAsia on February 16 at RM3.53. The stock has since risen by a whopping 65.7% to close at RM 5.85 yesterday. By comparison, the FBM KLCI has fallen by 13.2% during the same period. Notably, shares of furniture makers have fared very well, thanks to the weakening ringgit which favours exporters. About 77% of Lii Hen s products are exported to America its single largest market. Its second largest market is Asia, contributing about 13% of sales. The company is backed by solid underlying fundamentals it is sitting on net cash, pays consistent and fairly generous dividends and delivers double-digit return on equity. Net cash stood at RM55.9 million or 93 sen per share at end-june, up from RM10.2 million at end On Monday, the company released a stellar set of 2Q2015 earnings results. Revenue surged 41.3% y-o-y to RM138.3 million while net profit increased an outsized 96.2% to RM12.7 million, due mainly to higher demand for its bedding products and foreign exchange gain of RM1.0 million. Lii Hen also declared a second interim dividend of 7 sen per share for 2015, which will go ex on September 7. Dividends totaled 13 sen per share for 1H2015, up from 7.5 sen per share in 1H2014. Last month, the company proposed a 1-for- 2 bonus issue of up to 30 million new ordinary shares, and a 1-for-1 share split. The share split will be undertaken after the issuance of the bonus shares. Upon completion of both exercises, which is expected by 4Q2015, outstanding shares will increase to 180 million. The company has consistently paid dividends, with payout ratio ranging from 30% to 50% of net profit. Dividends totaled 14.5 sen per share in 2014, yielding investors a net 2.48%. LII HEN INDUSTRIES BHD (ALL FIGURES IN MYR MIL) FY11 31/12/2011 FY12 31/12/2012 FY13 31/12/2013 FY2015Q1 31/3/2015 Income Statement Turnover EBITDA Depreciation EBIT Associates Interest income Interest expense Extraordinary gain/(loss) Pre-tax profit Net profit - owners of company Balance sheet Fixed assets - PPE Biological assets Intangibles & goodwill Cash and equivalents Total current assets ST borrowings Total current liabilities Total assets Shareholders' fund Long term borrowings LII HEN INDUSTRIES BHD Valuation score* 2.40 Fundamental score** 2.80 TTM P/E (x) TTM PEG (x) 0.19 P/NAV (x) 1.73 TTM Dividend yield (%) 3.57 Market capitalisation (mil) Shares outstanding (ex-treasury) mil Beta month price range *Valuation score - Composite measure of historical return & valuation **Fundamental score - 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 LII HEN INDUSTRIES BHD RATIOS 31/12/ /12/ /12/2013 DPS ($) Net asset per share ($) ROE (%) Turnover growth (%) (8.83) Net profit growth (%) (36.57) (17.26) Net margin (%) ROA (%) Current ratio (x) Gearing (%) Interest cover (x) FY11 FY12 FY13 ROLLING 12-MTH young. smart. unstoppable IS ONLINE

15 14 INVESTING IDEAS WEDNESDAY AUGUST 26, 2015 DIGITALEDGE DAILY BROUGHT TO YOU BY Note: This report is brought to you by Asia Analytica Sdn Bhd, a licensed investment adviser. Please exercise your own judgment or seek professional advice for your specific investment needs. We are not responsible for your investment decisions. Our shareholders, directors and employees may have positions in any of the stocks mentioned. INSIDER ASIA S STOCK OF THE DAY LATITUDE TREE HOLDINGS BHD THE persistent weakening of the ringgit vis-à-vis the USD augurs well for domestic exporters enhancing their earnings and competitiveness against global players. The ringgit, which fell 6.3% against the greenback last year, continued to slide amidst political uncertainties and external headwinds such as weak commodity prices and the impending US interest rate hike. Year-to-date, the ringgit has depreciated by 17.2% to 4.22, providing another boost to exporters. Furniture makers, especially those that are export-oriented, are one of the beneficiaries of the stronger USD. This is due to the fact that most of their sales are denominated in USD, while input costs are ringgit-based. Latitude Tree (Fundamental: 2.5/3, Valuation: 1.8/3), one of the largest rubberwood furniture manufacturers and exporters in Malaysia and Vietnam, was first featured by InsiderAsia on October 30, Since then, its share price has more than doubled to close at RM7.40 yesterday. However, the stock is still inexpensive, trading at a trailing 12-month PE of 9.8 times low relative to its earnings growth of 37.2% for 9MFYJune2015 and prospective double-digit growth for FY2016. By comparison, Poh Huat is trading at 10.0 times, Lii Hen at 11.0 times and Homeritz at 12.4 times. Latitude Tree exports over 99% of its products with the US taking more than 90% of its sales. Prospects for the company remain favourable as the US housing market continues to show signs of recovery. For FY2014, sales surged 31.9% to RM651.0 million, while pre-tax profit doubled to RM71.9 million. Despite achieving record-high sales and profits, Latitude Tree does not rest on its laurels. The company further expanded its upstream activities by acquiring a wood lamination factory for RM22 million. Additionally, it plans to spend RM40 million to increase the level of automation, thereby reducing reliance on low-skilled workers. With net cash of RM45.3 million and strong operating cashflow, funding should not be an issue. LATITUDE TREE HOLDINGS BHD (ALL FIGURES IN MYR MIL) FY12 30/6/2012 FY13 30/6/2013 FY14 30/6/2014 FY2015Q3 31/3/2015 Income Statement Turnover EBITDA Depreciation EBIT Associates (0.0) Interest income Interest expense Extraordinary gain/(loss) Pre-tax profit Net profit - owners of company Balance sheet Fixed assets - PPE Biological assets Intangibles & goodwill Cash and equivalents Total current assets ST borrowings Total current liabilities Total assets Shareholders' fund Long term borrowings LATITUDE TREE HOLDINGS BHD Valuation score* 1.80 Fundamental score** 2.50 TTM P/E (x) 9.76 TTM PEG (x) 0.26 P/NAV (x) 1.81 TTM Dividend yield (%) 1.17 Market capitalisation (mil) Shares outstanding (ex-treasury) mil Beta month price range *Valuation score - Composite measure of historical return & valuation **Fundamental score - 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 LATITUDE TREE HOLDINGS BHD FY12 FY13 FY14 ROLLING 12-MTH RATIOS 30/6/ /6/ /6/2014 DPS ($) Net asset per share ($) ROE (%) Turnover growth (%) 3.44 (4.67) Net profit growth (%) (21.10) Net margin (%) ROA (%) Current ratio (x) Gearing (%) Interest cover (x)

16 WEDNESDAY AUGUST 26, 2015 DIGITALEDGE DAILY BROKERS CALL 15 THE EDGE FILE PHOTO Boustead Holdings core net profit significantly lower FGV s net loss due to weaker sales volume, lower CPO price Felda Global Ventures Holdings Bhd (Aug 25, RM1.20) Maintain sell with a lower target price (TP) of RM1.03 from RM1.61: Felda Global Ventures Holdings (FGV) second quarter of financial year 2015 (2QFY15) core net loss of RM28 million came in below our full-year and consensus estimates. FGV registered a core net loss this quarter as it decreased by 88% year-on-year (y-o-y), due to weaker sales volume and lower crude palm oil (CPO) price (RM2,251 per tonne [MT] versus RM2,619 per MT in 2QFY14). Lower oil extraction rate (OER) of 20.5% was recorded during the quarter (versus 21% in 2QFY14). The earnings were further exacerbated by weaker margins from the fatty acid business packed products subdivision. However, the sugar business has seen some improvement (profit before tax [PBT] at an increase of 8% y-o-y) as it managed to reap better margins from lower production and refining costs. On a quarter-on-quarter (q-o-q) basis, it recorded a profit of RM16 million in the 2Q versus core net loss of RM44 million in the 1Q. This was attributed to the higher sales volume as well as lower estates and mill cost per MT of CPO produced. Aside from that, higher PBT (an increase of 20.6%) from its sugar division also contributed to the quarterly profit. The weak results have prompted us to revise down our FY15 and FY16 earnings further by 35% and 41% respectively as we adjust for a lower CPO price of RM2,200 (from RM2,300 previously) and OER rates as the drought and floods last year have had an impact on its production. As such, we reduce our TP to based on 16 times price-earnings ratio on FY16 earnings per share. Given the 17% downside to the stock, we maintain our sell recommendation. BIMB Securities Sdn Bhd, Aug 25 Boustead Holdings Bhd (Aug 25, RM3.90) Maintain hold with a lower target price (TP) of RM4.07 from RM4.40: Boustead Holdings first-half of financial year 2015 (1HFY15) core net profit of RM21.6 million (a decrease of 80.7%) came in significantly below our expectations, accounted for only 11.4% of our full-year forecast. Weaker-than-expected performance at Affin Holdings Bhd (on weaker-than-expected margin), weaker-than-expected performance at the heavy industries segment (arising from cost overruns on certain ship repair projects under Boustead Naval Shipyard Sdn Bhd), and higher-than-expected effective tax rate (38.5%; Our assumption: 25%). Boustead declared a second single-tier interim dividend per share (DPS) of five sen (entitlement date: Sept 18; payment date: Sept 30), bringing DPS year to date (YTD) to 10 sen. For the full-year, we are projecting total DPS of 18 sen, translating to a total dividend yield of 4.3%. YTD, 1HFY15 core net profit declined by 80.7% to RM21.6 million, mainly on the back of weaker palm product prices (crude palm oil: a decrease of Benalec Holdings Bhd (Aug 25, RM0.535) Maintain hold with a lower target price of 56 sen from 60 sen: Benalec Holdings financial year 2015 s (FY15) s core net profit made up 99% of our full-year forecast, but accounted for only 62% of consensus number. FY15 emerged as another subdued year, dragged down by delays in the recognition of land sale profits for its Melaka contracts. In terms of segmental performance, all divisions (land reclamation and vessel chartering) recorded operating losses except for its land disposal segment which benefitted from land sales in the first half of FY15 (1HFY15). We retain our RM30 million to RM40 million per annum assumed land sale profits for FY16 to FY18 given the over RM200 million worth of unrecognised land sales over the past 12 months.the absence of dividends was not a surprise. The potential recovery in Benalec s new land reclamation contracts in Tanjung Piai has been taking longer than expected. Although the environment impact assessment approval would open doors to other Boustead Holdings Bhd FYE DEC (RM MIL) 2014A 2015F 2016F 2017F Revenue 10,608 10,964 11,262 11,388 Operating profit PBT Net profit Core net profit Basic EPS (sen) Core EPS (sen) PER core (x) DPS (sen) Dividend yield (%) BVPS (RM) P/Book (x) Net gearing (x) Source: HLIB Research Benalec Holdings Bhd Y-O-Y % Q-O-Q % 4QFY15 4QFY14 Y-O-Y % PREV FYE JUN (RM MIL) 4QFY15 4QFY14 CHG CHG CUM CUM CHG FY15F Revenue (14.4) Operating costs (57.0) (48.2) (159.3) (195.6) (18.6) (198.8) Ebitda 2.5 (16.7) Ebitda margin (%) 4.1 (52.8) Depn & amort (3.3) (2.4) 34.8 (0.9) (12.4) (10.4) 19.3 (8.6) Ebit (0.8) (19.1) (95.7) (94.8) Interest expense (4.4) (1.2) ,066.1 (5.5) (2.9) 92.1 (4.3) Interest & invt inc Exceptionals (0.6) - nm nm (2.0) Pre-tax profit 2.9 (15.1) Tax (0.8) (0.6) 42.9 (194.7) (10.7) (11.1) (3.7) (12.9) Tax rate (%) 28.1 (3.8) (8.5) 25.2 Minority interests (0.1) 0.0 (2,580.0) (217.0) (0.0) 0.0 (223.1) (0.1) Net profit 2.0 (15.7) Core net profit 2.6 (15.7) EPS (sen) 0.2 (1.9) Core EPS (sen) 0.2 (1.9) Source: CIMB, Company reports 15%; palm kernel: a decrease of 18.6%) and a 4% decline in fresh fruit bunches production, which have in turn dragged earnings at the plantation segment; losses at the heavy industries segment; and a 13.5 percentage points (ppts) increase in effective tax rate. Year-on-year, the second quarter of financial year 2105 (2QFY15) core net profit plunged 90.6% to RM4.3 million, and the weaker results were due mainly to losses in the heavy industries segment, which more than offset improved earnings at the plantation division and Affin Holdings Bhd. The risk to our call is lower-than-expected revenue contributions from different divisions and/or margins falling short of expectations as well as relatively high gearing. FY15 to FY17 core net profit forecasts were cut by 19.4% to 39.5% largely to account for lower earnings forecasts for Affin Holdings, lower earnings assumption at the heavy industries segment, and a higher effective tax rate of 32% (to reflect the higher effective tax rate in 1HFY15). Rating maintained at hold. The positives still undervalued given the deep embedded values of the group, relatively high and quarterly net dividend yield, and a market yet to fully appreciate its hidden val- ues. The negatives relatively high gearing and complicated group, quarterly fluctuation in earnings and weak near-term earnings outlook. Sum-of-parts-derived TP cut by 8.3% to RM4.07 (at 20% holding company discount) to reflect lower TP for Affin Holdings and latest market prices for Boustead Plantations Bhd and Boustead Heavy Industries Corp Bhd. Hong Leong Investment Bank Bhd, Aug 25 Melaka contracts main support to Benalec s earnings alternative ventures, the initial potential size and scope is unlikely to be substantial, and will only contribute meaningfully to the group s earnings much later on. The main support to Benalec s earnings, at least over the next two years, would be its existing contracts in Melaka. The recognition of land sale gains of about RM60 million to RM80 million over the next one to two years should help to offset the potential impact of further delays in new ventures in Tanjung Piai. We advocate staying on the sidelines due to the lack of visibility on new ventures going into the second half of FY15. We believe any potential rerating window could be muted over the medium term, and prefer Muhibbah Engineering (M) Bhd. CIMB Investment Bank Bhd, Aug 25.

17 16 BROKERS CALL WEDNESDAY AUGUST 26, 2015 DIGITALEDGE DAILY NCB reports 1HFY15 net profit within expectations NCB Holdings Bhd (Aug 25, RM4.16) Maintain neutral with a higher target price (TP) of RM3.45 from RM2.70: NCB Holdings Bhd reported a net profit of RM390 million for the first half of financial year 2015 (1HFY15), which is within expectations, representing 51% of our and 53% of consensus fullyear forecasts. 1HFY15 net profit increased 146% year-on-year (y-o-y) to RM18.6 million due to a container throughput growth of 9% y-o-y to 1.35 million twenty-foot equivalent units, a decrease in operating expenses by 8% y-o-y and lower finance costs by 29% y-o-y. A dividend per share (DPS) of two sen was announced, making total DPS at seven sen year-todate (YTD). NCB s throughput growth normalised to an increase of 5% y-o-y in the second quarter of FY15 (2QFY15), compared with an increase of 12% y-o-y in 1QFY15, on exceptionally high container moves in 1QFY15. For 1HFY15, NCB still managed to handle an increase in throughput of 9% y-o-y, which we believe was due to the completion of Wharf 8a and higher moves by major customers. The management is targeting a FY15 throughput of 3.3 million (an increase of 28% y-o-y), but we are less bullish, forecasting a throughput of 2.9 million (an increase of 13% y-o-y). YTD throughput is within our estimates, making up 47% of our full-year forecast. For 1HFY15, Kontena Nasional Bhd saw an increase in loss before tax of RM19.5 million (an increase NCB Holdings Bhd FYE DEC (RM MIL) F 2016F Revenue* Ebit Pre-tax profit Net profit EPS (sen) EPS growth (%) (63.8) PER (x) Net dividend (sen) Net dividend yield (%) Source: MIDFR, Company of 18% y-o-y) as it exited loss-making businesses such as trucking and warehouse distribution, while also receiving fewer orders from oil and gas (O&G) customers. Positively, cost-cutting measures are bearing fruit with a 19% decrease in operating expenses. For the segment, the management is targeting to break even by mid-2016, which we believe could be challenging as the O&G sector remains subdued and the logistics business hard-pressed to turn a profit. The transport ministry has approved and gazetted Port Klang Authority s (PKA) application for a revision of container tariffs, which will bode well for NCB. The hike will occur in two phases, with the first in October at 15%, followed by the second in October 2018 at 15%, providing better leverage for ports operating within Port Klang to negotiate contracts with their clients as well as provide investors better visibility on earnings. The quantum of an increase of 15% (versus our estimate of 20%) for the initial tariff hike has minimal impact on our earnings forecast, as NCB will not be fully able to impose the higher rates immediately. We maintain our earnings forecast for FY15, but lower our FY16 earnings forecast by 2% as the quantum of the first-phase port tariff hike came in lower than expected. Our TP is based on a price-tobook ratio (PBR) of 1.15 times, which is the past three years average (from a PBR of 0.9 times previously, based on a 10% discount to book value). We have applied the average valuation currently due to better earnings visibility after the good growth seen in 1HFY15 net profit. Our TP of RM3.45 coincides with the weighted average price at which MMC Ventures Sdn Bhd has acquired NCB shares from MISC Bhd, PKA and Retirement Fund Incorporated since November We maintain our neutral call. The expansion of Wharf 8 (target completion: 2017) with a deeper draft to cater for ultra large vessels is on track, but this is partly offset by the weak logistics segment, with losses forecast at RM30 million to RM40 million for FY15 and FY16. MIDF Amanah Investment Bank Bhd, Aug 25 E&O posts weak 1QFY16 results on lower revenue Eastern & Oriental Bhd (Aug 25, RM1.47) Downgrade to fully valued with a lower target price (TP) of RM1.20 from RM2: Eastern & Oriental Bhd (E&O) reported core earnings of RM7.5 million for the first quarter of financial year 2016 (1QFY16) an increase of 123% quarter-on-quarter (q-o-q), a decrease of 60% yearon-year (y-o-y) after stripping out RM15.7 million unrealised foreign exchange gains. This only contributes 9% of our full-year forecast. The weaker-than-expected results were largely due to lower revenue (a decrease of 52% q-o-q, a decrease of 47% y-o-y) following the completion of two blocks of the Andaman Condominium project in 4QFY15, and most of its unbilled sales were booked under joint-venture projects. Net gearing rose to 63% as at June 2015, the highest in recent years, largely due to a slew of UK land bank acquisitions in FY15. E&O secured RM585 million sales in 1QFY16, mainly underpinned by the overwhelming response to the first block of the Tamarind executive apartment project Eastern & Oriental Bhd that is worth RM470 million in gross development value. It is on track to launch the second block of the Tamarind executive apartment, which has received strong registrations despite the weak sentiment. The listing of its UK property arm on the Alternative Investment Market of the London Stock Exchange will raise at least 36 million (RM million). E&O will then end up with a 30% stake in the UK entity. The 30.1 million amount due by the UK entity to E&O will also be settled as part of the proposed internal restructuring and initial public offering. E&O s pro forma net gearing could improve to 38%. We have revised down our TP to RM1.20 based on a wider 70% discount (from 50%) to a revalued net asset value of RM3.90 given looming headwinds in the property market. The management is sticking to its three-year cumulative profit target of RM450 million for FY14 to FY16, but the weaker sentiment could make this very challenging. AllianceDBS Research Sdn Bhd, Aug 25 FYE MARCH (RM MIL) 2015A 2016F 2017F 2018F Revenue Ebitda Pre-tax profit Net profit Net profit (pre ex.) EPS (sen) EPS pre ex. (sen) EPS growth (%) 22 (71) 53 5 EPS growth pre ex. (%) (47) Diluted EPS (sen) Net DPS (sen) BV per share (sen) PER (X) PER pre ex. (X) P/Cash flow (X) nm 7.8 nm EV/Ebitda (X) Net dividend yield (%) P/Book value (X) Net debt/equity (X) ROAE (%) Source: Company, AllianceDBS, Bloomberg Finance L.P. IOI Corp sees flat CPO prices in next three months IOI Corp Bhd (Aug 25, RM3.95) Downgrade to market perform with a lower target price (TP) of RM4.36 from RM4.50: IOI Corp Bhd s core net profit (CNP) of RM1.14 billion for financial year 2015 (FY15) exceeded the consensus forecast (RM1.06 billion) at 107%, but met ours (RM1.2 billion) at 95%. Note that we have excluded a foreign exchange loss of RM125 million for the fourth quarter of FY15 (4QFY15) from our CNP calculation as this was a non-cash item arising from translation losses on its foreign borrowings. A dividend of 4.5 sen was announced, bringing FY15 dividend to nine sen. However, this only made up 56% of our forecast 16 sen or a core dividend payout ratio of 50%, which was well below our expected 85%. Year-on-year, FY15 CNP declined 18% to RM1.14 billion as the downstream segment s profit was almost halved (a decrease of 47% to RM420 million) due to soft refining margins. The plantation segment s earnings before interest and tax (Ebit) also fell (a decrease of 15% to RM1.01 billion) as crude palm oil (CPO) prices declined 11% to RM2,220 per tonne, while fresh fruit bunch (FFB) growth was flat at 1% to 3.54 million tonnes. Quarter-on-quarter, 4QFY15 CNP declined 11% to RM238 million after excluding the RM43.2 million oneoff gain from a land disposal. Otherwise, the plantation segment s Ebit would have improved 23% to RM236 million on higher FFB production (an increase of 30% to 890,000 tonnes), while downstream Ebit was slightly lower (a decrease of 4% to RM99 million) due to slightly lower refining margins. For the plantation side, the management expects flat CPO prices in the next three months, which are below our forecast FY15 to FY16E (estimated) CPO prices of RM2,200 per tonne to RM2,400 per tonne. Nevertheless, our flat FFB growth outlook for IOI Corp at 1% (against the sector s average of 8%) could limit earnings upside. We maintain our FY16E numbers, and introduce our FY17E CNP forecast of RM1.34 billion. We also revise down both our FY16E to FY17E dividend payout ratios to 55% from 85% to reflect the sharply lower dividend payout ratio for FY15. We downgrade our call to market perform (from outperform ) due to the lacklustre near-term CPO outlook and IOI Corp s low FFB growth prospects, which are below the sector s average. We also opine that the lower-than-expected dividend payout may result in weak short-term sentiment, which may offset the upside on IOI Corp s potential reinclusion into the syariah-compliant list. We lower our TP to RM4.36 (from RM4.50) based on a lower forward price-earnings ratio (PER) of 22 times (from 23.1 times) on calendar year 2015 estimated earnings per share of 19.8 sen. Our target forward PER of 22 times reflects a lower standard deviation (SD) valuation at one (from 0.5 SD), which we believe is justified by the weak FFB growth prospects as well as substantially lower dividend payout expectations going forward. Risks to our call include lower-than-expected CPO prices and lower-than-expected margins for IOI Corp s downstream division. Kenanga Investment Bank Bhd, Aug 25

18 WEDNESDAY AUGUST 26, 2015 DIGITALEDGE DAILY GENERAL NEWS 17 Air quality in Tg Malim reaches unhealthy level Town had API reading of 101 yesterday, 37 other areas recorded moderate levels KUALA LUMPUR: The air quality in Tanjung Malim, Perak, recorded an unhealthy Air Pollutant Index (API) reading of 101 yesterday afternoon. According to the Department of Environment, as at 3pm, that was the only area with an unhealthy API reading while 37 other areas had moderate readings. Moderate API readings were recorded in two areas in the federal capital, namely Batu Muda (76) and Cheras (81), and also in Seri Manjong (54) in Perak. Four areas in Johor with moderate API readings were Kota Tinggi (55), Larkin Lama (64), Muar (83) and Pasir Gudang (72). Other areas with moderate API readings were Alor Setar (51) and Bakar Arang, Sungai Petani (82) in Kedah as well as Melaka City (82) KUALA LUMPUR: Malaysian lawyers will gather for an emergency general meeting (EGM) to discuss the state of the rule of law following the replacement of the attorney-general and transfer of several civil servants, including those probing the troubled state-investment firm 1Malaysia Development Bhd (1MDB) and RM2.6 billion in the prime minister s private accounts. The Bar Council, which represents close to 16,000 lawyers in the peninsula, has sent notice of the EGM to be held in Kuala Lumpur on Sept 12. A council member, who spoke to The Malaysian Insider, said the decision to hold the EGM was made at an emergency meeting last week. The council resolved to hold one in view of the grave situation as the rule of law and supremacy of the constitution have been cast aside, he said. He said the council was obliged and Bukit Rambai (86) in Melaka. In Negeri Sembilan, the three areas were Nilai (84), Port Dickson (82) and Seremban (79) while the affected areas in Pahang were to act and make the stand of the Bar clear in line with the objectives set out in Section 42 of the Legal Profession Act, which stipulates that the Bar must uphold the cause of justice without regard to its own interests or that of its members, uninfluenced by fear or favour. He said the Bar had always been at the forefront when the rule of law and administration of justice were sidestepped by those with vested interests, and a committee had been set up to draft the resolutions to be debated at the EGM. I believe our members are sensitive to what has happened over the last one month and will take a strong stand, he said. On July 28, then attorney-general Tan Sri Abdul Gani Patail was replaced by former Federal Court judge Tan Sri Mohamed Apandi Ali. Abdul Gani was heading the task force investigating 1MDB and money found in Datuk Seri Najib Razak s personal accounts. Balok Baru (60) and Jerantut (57). Three areas were affected by the haze in Penang Perai (51), Seberang Jaya 2 (76) and Universiti Sains Malaysia (62) while two affected spots in Sabah were Kota Kinabalu (51) and Tawau (59). In Sarawak, eight areas had moderate API readings: Bintulu (61), ILP Miri (54), Kuching (89), Miri (54), Samarahan (83), Sarikei (60), Sibu (61) and Sri Aman (77). Meanwhile, five areas in Selangor with moderate API readings were Banting (80), Kuala Selangor (59), Port Klang (80), Petaling Jaya (72) and Shah Alam (73), while moderate readings were also recorded in Kemaman, Terengganu (70) and the Federal Territory of Labuan (61). An API reading of between zero and 50 is categorised as good, between 51 and 100 (moderate), between 101 and 200 (unhealthy), between 201 and 300 (very unhealthy), and exceeding 300 (hazardous). Bernama Help for self-financing students on lower ringgit PUTRAJAYA: Higher Education Minister Datuk Seri Idris Jusoh has instructed Education Malaysia offices worldwide to offer assistance to self-financing Malaysian students following the depreciation of the ringgit. I understand the impact of the economic situation on the self-financing students and I sympathise with them, he said in a post on his BY V ANBALAGAN Haze shrouding the Perdana Putra building that houses the Prime Minister s Department in Putrajaya yesterday as API readings of moderate to unhealthy levels were recorded around the country. Photo by Bernama Facebook account. Idris posted that government-sponsored students would be unaffected because they received their allowances in US dollars or pound sterling. The sponsorships the students receive depend on their needs and do not change according to the exchange rate, he said. Idris said the government was absorbing the rising cost of channelling the sponsorship funds to banks abroad. This is the responsibility of the government as the sponsor, he said. In Kuala Nerus, Terengganu Education, Science, Technology and Special Functions Committee chairman Ghazali Taib said the Terengganu Foundation had provided an additional allocation of RM12.5 million this year for 45 sponsored students abroad. This is a 25% increase in the allocation from the foundation that hopefully can assist the 45 students to continue their studies. The students receiving the aid are in Jordan, Indonesia and the United Kingdom, he told reporters after officiating at the distribution of aid to overseas students here yesterday. Bernama Bar Council to hold EGM to debate rule of law issues On the same day, former Special Branch director Datuk Seri Akhil Bulat, who was nearing retirement and on leave, was replaced by Datuk Seri Mohamad Fuzi Haron, then Bukit Aman s management department director. On Aug 7, two Malaysian Anti-Corruption Commission (MACC) directors were transferred to the Prime Minister s Department with immediate effect, but the transfer was rescinded after 48 hours due to public pressure. Seven MACC officers were also called in for questioning by the police. The probe by the MACC was in relation to SRC International over a RM4 billion loan from the government pension fund (KWAP) to 1MDB and the subsequent transfer of RM42 million into Najib s personal bank accounts. The police have been probing MACC officers with regard to leaks from this investigation under Section 124B of the Penal Code for activity detrimental to parliamentary democracy. Bank Negara Malaysia governor Tan Sri Dr Zeti Akhtar Aziz on Aug 13 revealed that seven officers were also questioned by police over information leaks related to the 1MDB probe. On Aug 16, Barisan Nasional strategic communications director Datuk Abdul Rahman Dahlan told an English daily that Najib had to take out people after an alleged charge sheet against him emerged. Former officer in the Attorney-General s Chambers Jessica Gurmeet Kaur, who was recently arrested in connection with leaks in the 1MDB investigations, had her contract terminated last week. She is said to be preparing to challenge the authorities in court. In the latest case, former Special Branch deputy director Datuk Abdul Hamid Bador was issued a transfer order to a new security division in the Prime Minister s Department. The Malaysian Insider IN BRIEF US, German embassies to observe rally this weekend KUALA LUMPUR: The embassies of the United States and Germany in Kuala Lumpur said they will observe the Bersih 4 rally this weekend. In an , the US embassy said: The United States recognises the intended peaceful nature of this protest and supports the fundamental freedoms of expression, association and peaceful assembly. The German embassy said it supported freedom of expression and the right to peaceful assembly. Germany champions good governance, human rights and the rule of law, said a spokesman of the embassy. The high commissions of Canada and Australia declined to comment. The British High Commission could not be reached. Bernama Lenggeng assemblyman goes for out-of-court settlement SEREMBAN: The High Court here yesterday postponed to Sept 15 the bankruptcy case involving Lenggeng assemblyman Datuk Ishak Ismail. Judge Datuk Kamaludin Md Said fixed the date in chambers to allow Ishak to discuss with businessman Datuk Misran Sukadi for an out-of-court settlement. Misran s lawyer, Francis Peter, told reporters outside the court that Ishak had so far paid RM1.6 million of the RM2 million loan given to him by his client. The mount included RM300,000 paid by Ishak yesterday, he added. Bernama Police deny taser guns will be used at assembly KUALA LUMPUR: The police denied yesterday that they would use the Taser gun on participants of the Bersih 4.0 rally planned for the weekend. Deputy Inspector-General of Police Datuk Seri Noor Rashid Ibrahim said the police had the weapon and were distributing the guns to various levels of the security forces. The Taser gun can temporarily disrupt voluntary control of muscles or weaken an offender or criminal. However, the guns will not be used during the Bersih rally [this weekend]. Bernama Bar sets up legal team, hotline for Bersih 4 KUALA LUMPUR: The Bar Council has set up a team of lawyers to provide legal assistance to anyone likely to be arrested by police during the Bersih 4 rally, its president Steven Thiru said yesterday. He said rally participants can send their details, including their name, identity card number and the police station they are taken to (if known), via the short messaging system to two phone numbers provided. The contact numbers are (018) and (011) The Malaysian Insider

19 18 GENERAL NEWS WEDNESDAY AUGUST 26, 2015 DIGITALEDGE DAILY Bersih 4.0 rally illegal Federal Court denies Jawi leave to appeal decision on bookstore raid Organisers fail to meet condition in Peaceful Assembly Act 2012 KUALA LUMPUR: The planned Bersih 4.0 public gathering this weekend in the federal capital is illegal as the organisers have failed to meet a condition in the Peaceful Assembly Act Kuala Lumpur police chief Datuk Tajuddin Md Isa said based on Section 9 of the Act, the organisers must obtain the permission of the owners of the venues where they planned to hold the rally, Bernama reported. However, Kuala Lumpur City Hall (DBKL) has stood firm on not allowing the rally to be held in the city, particularly Dataran Merdeka and Dataran DBKL and the surrounding areas. We will take stern action [against the rally participants] under the existing legal provisions. We have laws, so respect the laws, he said at a joint news conference with Kuala Lumpur mayor Datuk Mohd PUTRAJAYA: The Natural Resources and Environment Ministry is reviewing the National Biodiversity Policy to include the importance of and challenges to the growing ecotourism industry. Its deputy minister Datuk Hamim Samuri said the policy balances the need for conservation and introduces several targets for sustainable tourism. He said in order to improve the Amin Nordin, here yesterday. Tajuddin said police have no problem assisting the rally organisers if they fully follow the law and hold the planned rally in a closed area such as a stadium, as suggested by Mohd Amin. Mohd Amin said DBKL was prepared to allow the organisers to use Titiwangsa Stadium, which is under the care of DBKL, for the rally or to assist them apply to the National Sports Council for use of the National Stadium in Bukit Jalil or to Permodalan Nasional Bhd for the Merdeka Stadium. The Malaysian Insider reported that there is an insatiable demand for the Bersih T-shirts. Despite printing 35,000 pieces, the supplier ran out of the yellow material to produce them, the rally organiser Bersih 2.0 said. There has been a long queue since yesterday morning outside the Bersih 2.0 office in Petaling Jaya, with scores hoping to get their hands on the last 5,000 pieces on sale. In my years of working with Bersih 2.0, I ve never seen T-shirts selling this fast or this kind of overwhelming support from Malaysians. We can t print any more as the supplier has run out of yellow cloth and the last batch is expected to be sold out within the next hour, Bersih 4.0 secretariat manager Mandeep Singh told The Malaysian Insider yesterday. The office had to be closed over the weekend after the T-shirts ran out of stock. On Monday morning, they restocked 3,000 T-shirts and within 40 minutes, they were out of the large-sized ones. On average, 200 T-shirts were being sold every hour, and more than 2,000 pieces were sold at the end of Monday. Raja Mohamed Affandi (left) receiving the green beret from the Sultan of Johor during the golden jubilee parade of the Special Operations Regiment at Kem Iskandar yesterday. Photo by Bernama value of ecotourism sites and conservation efforts, the policy also indicates the need for sites to be internationally recognised, under the Unesco World Heritage, Ramsar Convention for wetlands of international importance, Man and Biosphere Programme or East Asian-Australasian Flyway Partnership. For parks or ecotourism sites to be self-sustaining, they must be able to generate income through various sources such as entrance or conservation fees and activity fees. One way to achieve this is to increase the yield from the existing foreign visitors, many of whom have expressed willingness for higher park entrance fees if the offerings of ecotourism sites are enriched with a unique experience. Hamim said this at the Roundtable Dialogue on Sustainable Bersih 2.0 chairman Maria Chin Abdullah said it had initially ordered 10,000 T-shirts but had to increase their order due to demand. The Bersih T-shirt is sold at RM20, which means the organisers would have collected RM700,000 for the 35,000 T-shirts sold. Maria also revealed yesterday that Bersih had amassed RM1.5 million in contributions from the public, believed to be more than three times the amount received for the Bersih 3.0 rally in This amount far exceeds our initial budget of RM200,000 which was based on shoestring estimates and our sense of the economic hardship Malaysians are enduring, she said. She vowed that Bersih will show its accounts to declare the expenditure of the donations once the rally is over. Bernama/The Malaysian Insider Johor Sultan urges govt to address current situation MERSING: The Sultan of Johor, Sultan Ibrahim Sultan Iskandar wants the government to promptly address the current unstable political and economic situation. He said the drop in the value of ringgit is a major issue which has to be addressed immediately before the people lose their confidence in the government. I am aware of the grievances and complaints of my people. Indeed, in my position as the ruler, I cannot interfere in the political affairs; but as the ruler, it is my responsibility to ascertain the living condition of the people is good and prosperous, he added. Government leaders too, he said, should undertake their responsibilities honestly for public interest and not with vested interest. Sultan Ibrahim, who is the Commander of the Special Operations Regiment, said this in his speech at the regiment s 50th anniversary parade at Kem Iskandar here yesterday. Also present were the Tunku Mahkota of Johor Tunku Ismail and the Tunku Panglima of Johor Tunku Abdul Rahman. Others present included Defence Minister Datuk Seri Hishammuddin Hussein, Johor Menteri Besar Datuk Seri Mohamed Khaled Nordin, Malaysian Armed Forces chief General Tan Sri Dr Zulkifeli Mohd Zin and army chief General Tan Sri Raja Mohamed Affandi Raja Mohamed Noor. Sultan Ibrahim advised members of the Special Operations Regiment to not be involved in any political parties to uphold the good image of the regiment. Those who want to join politics, they can leave the uniform, he added. He also hit out at some military officers and others who wear the honorary badge and wing at all times, adding that insignias are to be worn only at certain events. The sultan also said he hoped the Defence Ministry would accommodate the needs of the regiment as the team is in the front line in incidents involving the country s sovereignty and peace. For example, the need for a swimming pool for training and water activities at the Iskandar Camp (Kem Iskandar) which has yet to materialise, he added. Bernama National Biodiversity Policy to reflect ecotourism challenges Practices in Ecotourism, here yesterday. He said that six recognised ecotourism sites have attracted over one million foreign tourists each year. The sites are Kuala Gandah Elephant Conservation Centre, the National Park in Pahang, Tioman Island, Royal Belum State Park, Kinabalu Park and Gunung Mulu National Park. Bernama PUTRAJAYA: The Federal Territory Islamic Religious Department (Jawi) and two others cannot appeal to the Federal Court on a ruling which declared unlawful its action in raiding a Borders bookstore and seizing Irshad Manji s controversial books three years ago. This followed a decision by a three-member panel chaired by Chief Justice Tun Arifin Zakaria, which dismissed the application for leave to appeal by Jawi, the Home Minister and Minister in the Prime Minister s Department in charge of Islamic religious affairs. The application was dismissed on grounds that the three legal questions posed by the appellants did not fulfil the threshold requirement under Section 96 (a) of the Courts of Judicature Act 1964 to be given leave. That section states that an appellant must show that the legal questions posed for the Federal Court to determine are novel. The decision of the High Court and Court of Appeal raises important issues of law. We are not saying the decision was right or wrong, said Arifin, who sat on the panel with Federal Court judges Tan Sri Suriyadi Halim Omar and Tan Sri Ahmad Maarop. Earlier in the proceedings, Arifin questioned how the court could proceed to determine the questions of law since there were no charges against Berjaya Books Sdn Bhd merchandising general manager Stephen Fung Wye Keong and Nik Raina Nik Abdul Aziz, the store manager for Borders bookstore at The Gardens in Mid Valley City. Nik Raina was given a discharge not amounting to an acquittal by the Syariah Court on Feb 26 this year on a charge of disseminating and distributing, by way of selling, Irshad Manji s book entitled Allah, Liberty and Love, which was deemed un-islamic. Jawi appealed against the decision, but subsequently withdrew its appeal on June 23. Jawi conducted a raid at the bookstore on May 23, 2012, and subsequently Nik Raina was arrested and charged at the Syariah Court on June 19, On June 18, 2012, Borders filed for leave to commence a judicial review on the legality of the raid, the process and prosecution of Nik Raina at a time when there was no ban of the publication. The High Court subsequently granted leave for Borders to commence judicial review proceedings against Jawi s action in raiding the store and seizing several of Irshad Manji s books at the bookstore in the Gardens mall. Bernama

20 WEDNESDAY AUGUST 26, 2015 DIGITALEDGE DAILY OPINION 19 Asia should call truce on currency war Policymakers need to understand that devaluations aren t a cure-all BY WILLIAM PESEK The Finance Secretary of the Philippines has a message for Asian policymakers tempted to follow China s lead by devaluing their currencies: Don t do it. We must be mindful of the trade-offs involved in using the exchange rate as a trade tool to boost competitiveness, Cesar Purisima said on Sunday. Chinese exchange-rate officials probably have a thing or two to say about trade-offs. Since its surprise devaluation on Aug 11, Beijing has been struggling to keep the yuan from outright free-fall. On Monday, Shanghai stocks tumbled a further 8.5%. China perfectly encapsulates Purisima s point: The short-term benefits of a weaker currency pale in comparison to the costs. If Asian policymakers are feeling any lingering doubt, here are four further reasons they should resist the urge to devalue. Rising debt-servicing costs. A key reason that China s devaluation has been a meager 3% is the Kaisa factor. In April, that Shenzhen group became the first Chinese developer to default on dollar-denominated debt. Since then, very few borrowers have missed bond payments (in part because Beijing forbade it). But if the yuan suddenly plunged, President Xi Jinping s government and global financial markets wouldn t be able to control the subsequent wave of defaults. The same goes for neighbouring economies like Indonesia and Malaysia that have gorged on overseas loans in recent years. As of July, companies in those countries, together with their governments, had sold more foreign-currency debt this year than they did in all of That s becoming a clear vulnerability with the ringgit and rupiah down 18% and 12% respectively this year. One-way-bet risk. Vietnam and Kazakhstan have already tried to shore up their exports by devaluing, and analysts suspect Thailand will be next. But in a weak global File pic of Purisima. For years, Purisima and the Philippine central bank governor have been under pressure from exporters to devalue the peso. Photo by Reuters economy, slashing currency rates amounts to pushing on a string. Asia s two biggest economies China and Japan are sputtering to the point that their consumers will be of little help to exporters elsewhere in the region. Europe is, at best, walking in place, or at worst destined for a renewed crisis. And while the United States economy is stable, a mix of stagnant wages and high household debt limits its ability to help revive Asia s exporters. The bigger risk is that lower currencies will invite investors to test how far officials will let the slide continue, as seen during the 1997 Asian financial crisis. Capital outflows would be far riskier than a few quarters of weak export growth. That s especially true for Asia s weakest countries, where currency reserves may prove inadequate to withstand speculative attacks. At the moment, Indonesia s reserves (about US$107 billion [RM455 billion]) are only enough to cover seven months of imports; Malaysia s are enough for 7.5 months. Torpedoed confidence. Asia has come a long way over the last 18 years in terms of preventing market panic. Financial systems are stronger, governments more transparent and so-called macro-prudential limits on capital flows can shield economies from market turmoil. But Asian policymakers should also embrace the benefits of a rising currency. A strong exchange rate attracts long-term capital flows, not just hot money from investors looking to make a quick buck. It also contains inflation, reduces government debt burdens, allows companies to borrow at lower rates and encourages entire economies to move upmarket, from sweatshops to start-ups. The Philippines is an unlikely case in point. For years, Purisima and central bank governor Amando Tetangco have been under pressure from exporters to devalue the peso. Instead, the government concentrated on putting its fiscal house in order, which won investment-grade ratings from credit agencies and lowered the government s borrowing costs. That freed up money to invest in infrastructure, education and poverty reduction. One big reason to be optimistic about Asia s 12th biggest economy is that Purisima is still refusing to devalue. Less urgency for reform. For all the progress made since the 1997 Asian financial crisis, Asia has yet to abandon its addiction to exports. That s an untenable position as two big threats China s slowdown and the prospect of Federal Reserve rate hikes hit the region simultaneously for the first time in 21 years. In 1994, the Alan Greenspan Fed began doubling short-term rates over a 12-month period. That triggered hundreds of billions of dollars of bond-market losses; it also set in motion a crisis that three years later would topple the economies of Indonesia, South Korea and Thailand. That was also the year when China last devalued, which increased pressure on neighboring economies to follow suit. Today, Washington and Beijing are positioning themselves in similarly worrisome fashion. Fed chair Janet Yellen wants to move US borrowing costs a step or two away from zero, while Xi has been devaluing the yuan as part of a desperate bid to stabilise China s listing economy and plunging stock market. The rest of Asia would be in a far better position to ride out today s storm if they d done something in the years since the last crisis to diversify their growth engines. Instead, they opted for the sugar high of weak currencies. Asian policymakers need to understand that currency devaluations aren t a cure-all and if they pursue trade-offs, as Purisima warns, there s no avoiding their downsides. Bloomberg View William Pesek is a Bloomberg View columnist. Why oil-producing countries keep on pumping BY LEONID BERSHIDSKY THE big oil-producing countries keep on pumping, even though prices are at a six-year low: Don t they know they re only making things worse? Chances are they do each has its own reasons to continue but this won t go on forever. Someone will blink in the next year or so, most probably United States shale producers. In the US, the crude oil price has dipped below US$40 (RM170.2) a barrel. Brent, the European blend, trades below US$45. Still, output from the Organization of Petroleum Exporting Countries (Opec) increased to 31.5 million barrels per day (bpd) in July. Production in Saudi Arabia, Iraq and Venezuela are at or near the highest level in a year. Russia, now the biggest crude producer in the world, increased its output by 1.3% year-on-year in January through July, and is pumping 10.6 million bpd. US production has dipped slightly in recent weeks, to 9.3 million bpd from the June peak of 9.6 billion bpd, but it s still substantially higher than a year ago, when prices were more than twice as high. The simplest explanation for this phenomenon is that the producers need the cash; the lower the price, the more they need to sell to maintain revenue. Among the trio of top oil producers Russia, Saudi Arabia and the US this need-for-cash argument works best for Russia. Last year, as crude prices began to tank, it quickly floated its currency. Since then, the rouble has devalued in lockstep with oil, so that every extra barrel sold produces the same revenue in roubles, which is the currency of the government s budget. As a result, Russia has no reason to cut production, even if it probably will suffer a future decline in output, because its major oil companies have sharply reduced investment.the Saudis haven t unpegged the riyal from the US dollar, so selling more oil at lower prices doesn t make much economic sense for them. They are convinced, however, that it makes strategic sense. Although the first onslaught on the US shale producers has proved ineffective, they are determined to press on. It is becoming apparent that non-opec producers are not as responsive to low oil prices as had been thought, at least in the shortrun, the Saudi central bank said in its latest stability report, adding: The main impact of the current lower prices has been to cut back on developmental drilling of new oil wells, rather than slowing the flow of oil from existing wells. This requires more patience on Opec oil producers and a willingness to maintain steady production until the demand catches up with the current supply levels. The risk for the Saudis is that they have misjudged US shale. Last year, investment banks estimated breakeven costs for major US shale plays at more than US$60 a barrel, but a recent Bloomberg Industries analysis suggests this was inaccurate. Analysts had underestimated the ability of tight oil producers to cut costs and apply new technologies to increase output per rig. The US Energy Information Administration says production per rig has significantly increased in the past year, for all of the country s shale areas. That, however, was only to be expected in a price war. The Saudis couldn t have hoped that their US rivals would just roll over and won t be deterred by this show of resilience. Besides, they have reason to believe that new technology and cost-cutting weren t the only reasons US shale hasn t buckled. The hedges are a big part of the explanation why US companies have maintained production levels, but most will run out by the end of this year. US drillers will find it difficult to pay back their combined US$235 billion of debt. By then, the added technological and financial efficiency unleashed this year will have peaked. To predict who is going to gain ground in this drawn-out price war, it s worth assessing the protagonists arsenals. Apart from US$672 billion of international reserves (a cushion that shrank 8.5% between January and June), the Saudis still have the devaluation card up their sleeve. When Kazakhstan belatedly followed Russia in abandoning its dollar peg last week, Prime Minister Karim Massimov predicted that Saudi Arabia and some of its Gulf neighbours would also have to float their currencies to deal with the new reality of crude prices. And the Saudi financial system has other untapped resources: the country doesn t currently even collect income tax; it pays out huge energy subsidies that could be cut; and its government debt is just 1.6% of gross domestic product, leaving lots of room to borrow. King Salman may not want to throw those reserves into a price war with US shale, of course, but he has them. By contrast, all that protects American frackers is their ability to innovate and drive costs down. This year has shown that ability is not to be underestimated, but it is surely finite at any rate, US production has stopped growing. In those circumstances, it s understandable that the Saudis are unwilling to accept defeat. Saudi Arabia won t be satisfied with another temporary rebound in oil prices, such as the one that occurred last spring: Their US competitors would just increase output again. They must inflict permanent damage by demonstrating to investors that with shale, they can t bet on any kind of predictable return. So far, the (probably overblown) threat of Iran s return to global oil markets is helping the Saudis with this task, but it s a long-term gamble and the situation is volatile. The Saudis may be temporarily thwarted by production decreases in those oil economies unable to hold their corners in the price war. Lost production in these countries may send prices up again slightly, giving US frackers a little more breathing space. But until either the US shale industry or Saudi Arabia has triumphed, the onlookers even big ones like Russia won t be able to benefit from higher oil revenue. Bloomberg View Leonid Bershidsky is a Bloomberg View columnist.

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