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1 ddo19 THURSDAY, AUGUST 27, FBM KLCI KLCI FUTURES STI RM/USD CPO RM OIL US$ GOLD US$ Chinese authorities escalate blame game 20 Subscribe NOW! 3 months for RM30 (or more if you like) CORPORATE & MARKET 3 Ringgit weakens more but Bursa recoups lost ground CORPORATE & MARKET 5 Sime Darby explores options to reduce gearing to 30% NAJIB NAMES FINANCIAL MOVERS TO ECONOMIC COMMITTEE CORPORATE & MARKET 6 HLBB in good stead to steer through rough waters Datuk Seri Nazir Razak Tan Sri Nor Mohamed Yakcop Tan Sri Azman Mokhtar Datuk Abdul Farid Alias 27 The 2016 Bentley Mulsanne Speed is like driving a cloud PROPERTY SNAPSHOT 9 IJM Land s Kalista Seremban 2 sees take-up rate of 47% GENERAL NEWS 15 Analyst: PAS seeks to stop exodus to splinter group Tan Sri Andrew Sheng Len Tao Datuk Seri Saw Choo Boon Tan Sri Mohamed Azman Yahya Datuk K Yogeesvaran Datuk Seri Dr K Govindan This digital copy is brought to you by Professor Datuk Noor Azlan Ghazali Execution is key to success of newly set up body, say economists. Supriya Surendran has the story on Page 3.

2 ddo19 THURSDAY, AUGUST 27, FBM KLCI KLCI FUTURES STI RM/USD CPO RM OIL US$ GOLD US$ Chinese authorities escalate blame game 20 Subscribe NOW! 3 months for RM30 (or more if you like) CORPORATE & MARKET 3 Ringgit weakens more but Bursa recoups lost ground CORPORATE & MARKET 5 Sime Darby explores options to reduce gearing to 30% NAJIB NAMES FINANCIAL MOVERS TO ECONOMIC COMMITTEE CORPORATE & MARKET 6 HLBB in good stead to steer through rough waters Datuk Seri Nazir Razak Tan Sri Nor Mohamed Yakcop Tan Sri Azman Mokhtar Datuk Abdul Farid Alias 27 The 2016 Bentley Mulsanne Speed is like driving a cloud PROPERTY SNAPSHOT 9 IJM Land s Kalista Seremban 2 sees take-up rate of 47% GENERAL NEWS 15 Analyst: PAS seeks to stop exodus to splinter group Tan Sri Andrew Sheng Len Tao Datuk Seri Saw Choo Boon Tan Sri Mohamed Azman Yahya Datuk K Yogeesvaran Datuk Seri Dr K Govindan Professor Datuk Noor Azlan Ghazali Execution is key to success of newly set up body, say economists. Supriya Surendran has the story on Page 3.

3 2 For breaking news updates go to ON EDGE TV Penang s secondary market prices to go up 15%-20% Analyst: Businesses less upbeat but recession still far off 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: MDB denies deal with Ipic is off Slams Singapore s Business Times report KUALA LUMPUR: 1Malaysia Development Bhd (1MDB) yesterday denied that its restructuring deal with International Petroleum Investment Co (Ipic) was off, insisting that it remained engaged in discussions with the Abu Dhabi firm. The debt-ridden state investment firm said it was disappointed with claims by Singapore s The Business Times that its deal with Ipic was cancelled, calling the report unprofessional and unnecessary. 1MDB strongly denies this unproven allegation. We in fact confirm that 1MDB remains engaged in discussions with Ipic to conclude the transaction per the terms as officially announced by Ipic to the London Stock Exchange on June 10, MDB is disappointed that a hitherto respectable and licensed publication such as Singapore s [The] Business Times appears to carry a story based solely on unproven remarks by an unnamed individual. Such speculative reporting, which has no grounding Heart attack for Khir Toyo after jog SHAH ALAM: Former Selangor menteri besar Dr Mohamad Khir Toyo suffered a heart attack yesterday morning when he collapsed after returning from a jog around his home in Section 7 here yesterday morning, said online portal SuaraTV. A source from his office said Mohamad Khir, better known as Khir Toyo, passed out at home at 9am. A family member summoned an ambulance. The source added that after receiving treatment at Selayang Hospital, Khir Toyo was referred to the National Heart Insitute in the federal capital for further checks. See related story on Page 14 As of 6pm, his condition had stabilised and he could talk but is still in the ward for more checks, the source said. Today, the Federal Court is scheduled to deliver its verdict on Khir Toyo s appeal against his conviction and 12-month jail sentence for using his position as Selangor menteri besar to obtain land and a bungalow from Ditamas Sdn Bhd in Bernama KUALA LUMPUR: Haze at an unhealthy level was recorded as at 11am yesterday in Seri Manjung, Perak, according to the portal of the Department of Environment. It said that the Air Pollutant Index (API) was 101 in Seri Manjung. Forty-one other areas in the country had a moderate API reading, among them Universiti Sains Malaysia (97), Port Klang (97) and Shah Alam (95). Moderate API reading was also registered in Bakar Arang (97), Batu Muda (96), Petaling Jaya (95), Samarahan (94), Seberang Jaya 2 (91), Banting (90), Kuala Selangor, Cheras and Putrajaya (all 89), Sekolah Kebangsaan Jalan Pegoh, Ipoh, (both 86), Nilai (84) and Seremban (84). Kuching (82), Prai (81), Taiping (79), Jalan Tasek in Ipoh (78), Muar (77), the Historical City of Melaka (75), Bukit Rambai (75), Sri Aman (75), Pasir Gudang (73), Larkin Lama (73), Port Dickson (72), Alor Setar (66), Sarikei (66), Balok Baru (65) and Jerantut (62) also had a moderate API reading. Similarly, the API reading was moderate as well for Tawau (62), Sibu (62), Langkawi (61), Kuala Terengganu (61), Labuan (61), Keningau (58), Kota Kinabalu (54), Bintulu (54), Tanjung Malim (52) and Kangar, Kota Linggi and Sekolah Menengah Kebangsaan Tanjung Chat (all 51). Bernama in the facts, is clearly unprofessional and unnecessary, the company said in a statement yesterday. The Singapore business daily claimed in a report yesterday that Ipic may pull out of its plan with 1MDB to help restructure the Finance Ministry-owned firm s US$3.5 billion (RM14.83 billion) debt, less than three months after the agreement was sealed. The report said Ipic and its subsidiary Aabar Investments, which have dealt with 1MDB in the past, are now having second thoughts over the agreement. The deal is as good as off, it quoted a source as saying. 1MDB president and group executive director Arul Kanda Kandasamy had previously said that the initial RM1 billion payout by Ipic was a business transaction between the two companies, and said that it was neither a loan nor a bailout. This is a business transaction, not a loan, not any kind of debt and not a bailout. It is an initial payment as part of a broader agreement to comprehensively address the various financial asset and liability transactions between Ipic, Aabar and 1MDB, further details of which will be announced in due course, Arul Kanda said. It was reported then that the funds would be paid by June 4, to be used for early repayment of a US$975 million syndicated loan led by Deutsche Bank due in September. The agreement is part of 1MDB s rationalisation plan, unveiled in May, to reduce its overall debt levels, Putrajaya said. In its statement yesterday, 1MDB said it remained focused on the plan as proven by its various announcements made on the binding term sheet executed with Ipic, the shortlisting of selected bidders for monetisation of Edra Energy and the ongoing sale process for Bandar Malaysia. We reaffirm our commitment to the success of the rationalisation plan and will continue to issue official progress updates on a regular basis, it said. The Malaysian Insider Unhealthy air quality Southeast Asian firms grapple with foreign debt worries BY EVELINE DANUBRATA & ANSHUMAN DAGA JAKARTA/SINGAPORE: Indonesian and Malaysian companies with foreign currency debts may be forced to raise equity funds at steep discounts and restructure debt as the ringgit and the rupiah have weakened to 17-year lows, bankers and company executives say. As businesses expanded overseas and took advantage of cheap debt, foreign currency borrowings of 100 large Southeast Asian firms reviewed by Standard & Poor s ballooned to around a third of the total debt last year from just 16% in For nearly 40% of those companies, foreign currency debts now make up more than half of the total debt, doubling the number four years ago. Rights issues are the only way out in a market correction like this. There are going to be a lot of these, said a senior capital markets banker at a Western bank in Singapore. Refinancing requirements are most prominent in Indonesia. Indonesian poultry feed firm PT Malindo Feedmill Tbk plans to sell around US$51 million (RM million) worth of new shares to pay some loans including US dollar debt. But its shares fell 5% on Tuesday to below the indicative offer price, increasing uncertainty over the funding plan. In Malaysia, plantation firm Sime Darby Bhd, which completed its US$1.7 billion acquisition of Papua New Guinea-based New Britain Palm Oil Ltd this year, said it is looking at ways to strengthen its balance sheet. Local media earlier reported the firm planned a RM6 billion ringgit rights issue to pay down foreign debt. Deeply discounted rights issues backed by major shareholders could be back, said the head of an emerging markets-focused investment bank, adding these would typically have to be at discounts of about 25%. There s a worry for Indonesian and Malaysian companies, but most companies that issued [US] dollar bonds are fairly big, and as long as they have access to onshore liquidity, they should be fine, said Jeffrey Yap, chief investment officer of Ark One, a credit-focused hedge fund. Axiata Group Bhd, Malaysia s biggest mobile operator by market value, plans to restructure a US$590 million loan in Indonesia into a rupiah-denominated partial sukuk to reduce its exposure to forex volatility. And telecoms firm PT Indosat Tbk is seeking to reduce the US dollar portion of its debt to 20%- 30% this year from around half, Andromeda Tristanto, investor relations officer, told Reuters. It may take out new bank loans and restructure existing debt. That said, few big US dollar bonds are due imminently or showing signs of a major default, and the situation for companies is not as bad as it was in the Asian financial crisis. Reuters

4 CORPORATE & MARKET 3 Najib names financial movers to economic committee Execution is key to success of newly set up body, say economists BY SUPRIYA SURENDRAN Ringgit weakens more but Bursa recoups lost ground BY GHO CHEE YUAN KUALA LUMPUR: The ringgit continued to slide against the US dollar yesterday to a fresh 17-year low of before closing at China s move to cut interest rates and bank reserve requirement to stimulate the world s second-largest economy exerted downward pressure on regional currencies, including the ringgit. Soft crude oil prices added pressure to the ringgit amid concerns about the Malaysian government s dependency on oil revenues, in addition to political uncertainties. Against the Singapore dollar, the ringgit closed at yesterday, compared with Tuesday s closing of The ringgit was valued at KUALA LUMPUR: Datuk Seri Nazir Razak, head of Malaysia s second-largest bank, who has openly voiced his concern over the ringgit s slide against the US dollar, has been named to a newly set up committee dealing with restoring confidence in the capital markets. According to news reports yesterday, Prime Minister Datuk Seri Najib Razak has appointed Minister in the Prime Minister s Department Datuk Seri Abdul Wahid Omar to lead the Special Economic Committee (SEC), which was announced by Najib on Tuesday. Apart from Abdul Wahid and Nazir, who is chairman of CIMB Group Holdings Bhd, other big names in the new committee that Najib unveiled yesterday include Khazanah Nasional Bhd deputy chairman and former second finance minister Tan Sri Nor Mohamed Yakcop, Khazanah managing director Tan Sri Azman Mokhtar, Association of Banks in Malaysia chairman Datuk Abdul Farid Alias, who is also chief executive officer (CEO) at Malayan Banking Bhd, and China Banking Regulatory Commission chief adviser Tan Sri Andrew Sheng Len Tao. Joining them are Symphony Life Bhd chief executive Tan Sri Mohamed Azman Yahya, RAM Holdings Bhd CEO Datuk Seri Dr K Govindan, Universiti Kebangsaan Malaysia vice-chancellor Professor Datuk Dr Noor Azlan Ghazali and Federation of Malaysian Manufacturers president Datuk Seri Saw Choo Boon. Najib said several officers from the Finance Ministry, Bank Negara Malaysia, the International Trade and Industry Ministry, the Securities Commission Malaysia and the Prime Minister s Office would also be included in the committee line-up. The SEC will look at shortand medium-term strategies to strengthen the country as confidence among global investors ebbs. The committee will meet weekly or more frequently if needed to assess and propose urgent steps. The first meeting is expected against the euro after touching a low of in early trade. Year to date, the local currency has weakened 20.75% against the greenback. As at 5.43pm yesterday, Brent crude edged up 0.03% to US$43.23 (RM179) per barrel, while US crude was down 0.05% to US$39.30 per barrel. On Bursa Malaysia, bargain-hunters emerged to pick up beaten-down stocks, lifting the FBM KLCI by points or 1.05% to close at 1, points yesterday. The benchmark index was supported by gains in Tenaga Nasional Bhd, whose share price rose 48 sen or 5% to RM11.02 after falling to a fresh low of RM10.36 on Monday. In the derivatives market, the KLCI futures contracts (FKLI) were Adequate supply of common foreign currencies BY SUPRIYA SURENDRAN KUALA LUMPUR: There is an adequate supply of common foreign currencies in the market to meet current demand and cater for seasonal ones, such as during the height of the hajj pilgrimage period, said the Malaysian Association of to be held next week. Bernama reported Najib as saying that the SEC will report directly to him, and that he will scrutinise the current issues, such as the ringgit s value, maintaining the stability of the financial industry and improving confidence in the capital markets. The Economic Planning Unit will serve as the secretariat of the SEC, led by the unit s deputy director-general Datuk K Yogeesvaran. Najib was also reported as saying that the new committee is merely a short-term solution, and that it will only be operational until the global economy bounces back. Economists said execution would be the key to the success of the SEC. Hong Leong Investment Bank Research economist Sia Ket Ee sees the committee facing the challenge of ensuring that its proposed recommendations are in line with government policy. Execution of the proposed strategies by the committee will be key, as well as ensuring that these strategies are consistent with also higher, but they were at a discount to the cash market, indicating a bearish sentiment. For spot month, the KFLI gained 11 points or 0.71% to 1,567.5 points; September contracts gained five points to 1,543 points; and December contracts settled at 1,505 points, up barely one point. HLIB Research wrote in a note yesterday that China s latest rate cut, which reflected the severity of China s economic slowdown, could lead to further devaluation of the yuan. China is Malaysia s second top trading partner. With the cut in benchmark interest rates, we expect the yuan to experience further devaluation pressure, given [the] narrowing of interest rate differentials. In this regard, we reiterate our government policy and procedures, he noted. Sia is of the view that the composition of the committee members is a good mix, considering that it has bankers, government officials, academicians as well as corporate leaders working together. The government has made a good choice in deciding the members of the SEC, as they are renowned for their expertise in economic matters, and will be able to provide constructive feedback to the prime minister on the country s economic issues, said Sia. An economist at RHB Research said only time would tell whether the new committee is able to restore confidence among international investors in the country. I am pretty sceptical about the committee s ability to regain international investors confidence as it will need to tackle issues like [the] narrowing of the fiscal deficit, consolidating public funds, minimising leakages and [stabilising] our balance of payments, and this will require a long period of time, he said. view that [the] yuan devaluation is negative for Malaysia due to increased competition for Malaysian exporters, who are enjoying the benefits of [the] ringgit depreciation but fear China s slowdown further pressuring global commodity prices, the firm added. Nevertheless, HLIB does not expect Bank Negara Malaysia to follow the rate-cut pressure as domestic growth outlook remains resilient. A cut in overnight policy rate at this juncture will send [a] wrong signal as ringgit sentiment is already fragile, while investors may perceive that [the] authorities have begun to worry about [the] growth outlook and are willing to sacrifice currency stability to safeguard growth, the firm explained. Money Services Business. The association governs money-changing, remittance and wholesale currency businesses that support the retail money-changing sector. In its statement yesterday, it said there are currently over 350 licensed money changers with over 1,500 outlets throughout Malaysia providing currency exchange services. The public is advised to exchange their currencies with licensed money changers in Malaysia before travelling abroad. Any member of the public facing difficulty in purchasing the required foreign currencies may contact the association at (03) , it said. Genting s net profit slumps on impairment and investment losses BY GHO CHEE YUAN KUALA LUMPUR: Genting Bhd s net profit slipped nearly 82% to RM67.91 million or 1.83 sen per share, no thanks to a RM380 million loss stemming from portfolio investment in Singapore and impairment. Quarterly revenue was slightly lower at RM4.17 billion against RM4.41 billion a year ago, due to lower contribution from Genting Singapore Plc, as well as its plantation and property divisions. Resorts World Sentosa in Singapore was hit by unfavourable global VIP premium business and a rolling win percentage. For the cumulative six months of financial year 2015 (1HFY15), Genting saw its net profit sliding 20.9% to RM million, or 18.5 sen per share, compared with RM869.6 million or sen per share last year. Revenue for 1HFY15 came in lower at RM8.54 billion, down 6.15% from RM9.1 billion in 1HFY14. No interim dividend was declared for the period. Meanwhile, Genting Malaysia Bhd, which is 49.3%-owned by Genting, announced that its net profit fell 9.24% to RM million or 4.07 sen a share for the second quarter of FY15, compared with RM million or 4.49 sen a share last year. This was due to higher pre-opening expenses for both Resorts World Birmingham and the Genting Integrated Tourism Plan development, as well as higher depreciation and amortisation charges. Quarterly revenue rose 4% to RM1.98 billion from RM1.91 billion a year earlier on better contribution from the United States operations. The integrated resort operator declared an interim single-tier dividend of 2.8 sen for the current quarter under review, payable on Oct 22. For 1HFY15, Genting Malaysia s net profit fell 3.21% to RM million or sen per share from RM million or sen per share in 1HFY14. Revenue for the period grew 3.55% to RM4.08 billion against RM3.94 billion previously. Going forward, Genting Malaysia said it continues to be cautious about the near-term outlook for the leisure and hospitality industry, but remains positive on the longer term. Genting s share price has been on a downhill, falling from RM9.20 in May to a low of RM6.60 on Monday. It closed at RM6.64 yesterday. Meanwhile, Genting Malaysia s share price has also retreated from this year s high of RM4.60 in April to RM3.80 early this week. It finished at RM3.91 yesterday.

5 4 CORPORATE & MARKET Mah Sing trims sales target for 2015 Developer also scales back launches amid softer market BY CHESTER TAY KUALA LUMPUR: Mah Sing Group Bhd, the country s second-largest property developer by sales value, has revised down its sales target for 2015 by a third to RM2.3 billion from RM3.4 billion, owing to the softer market conditions. The group is also scaling back its launches for the year to RM2 billion from an earlier estimate of RM3.4 billion. In a statement yesterday, Mah Sing said the revisions were made after observing that homebuyers were taking the wait-and-see approach. It now estimates the temporary weak sentiment to last more than the originally expected six to nine months. In a filing with Bursa Malaysia, the group noted the current market outlook has been affected negatively by the rising cost of living resulting from the implementation of the goods and services tax, coupled with the weakening ringgit. It said this is further amplified by the tightening of loans by banks, and global financial and economic uncertainties, which have dampened confidence. To mitigate the impact of the challenging environment, Mah Sing said it will continue to be disciplined and prudent in its business development decisions, balancing growth and stability. Mah Sing also said it will not proceed with the acquisition of 88.7 acres (35.9ha) of land in Puchong, Selangor, for RM656.9 million. As such, the sale and purchase agreement (SPA) has been rescinded. Accordingly, Mah Sing said all balance monies paid by its wholly-owned unit MS Lakecity Sdn Bhd to the vendor after deducting 1% of the purchase consideration or RM6.6 million as commitment fee and agreed liquidated damages will be returned to MS Lakecity free of interest within 60 days after the rescission of the SPA. Mah Sing previously announced in August last year that the proposed buy initially expected to be completed in the second half of this year was for a mixed-use development with an estimated gross development value (GDV) of RM9.3 billion. As the development would be developed over 10 years, with revenue contribution estimated to commence only in 2016, the rescission of the SPA is not expected to have a material effect on the earnings of Mah Sing in the near term. Any medium- to long-term impact would be mitigated through the development of its existing land bank and/or new land acquired in the future, said the group. Nevertheless, Mah Sing said the remaining GDV of RM26.4 billion the bulk of which is at the planning and introductory stage and unbilled sales of RM4.8 billion will provide it with growth and earnings visibility for the next six to eight years. On the gross proceeds of RM million raised from a rights issue with warrants, of which RM262.8 million was earmarked for part payment of the Puchong land, Mah Sing said the balance amount of RM256.2 million after deducting the RM6.6 million payable to the vendor has been proposed to be reallocated for other potential land acquisitions and/or property development activities. It will be seeking the approval of its shareholders at an extraordinary general meeting to be convened on the variation of the utilisation of the proceeds from the rights issue with warrants. Yesterday, Mah Sing posted a 3.9% increase in net profit for its second quarter ended June 30, 2015 (2QFY15) to RM90.49 million, from RM87.07 million a year ago, mainly due to higher work progress and sales from the group s ongoing development projects. However, earnings per share was lower at 3.77 sen in 2QFY15 compared with 4.53 sen in 2QFY14 as Mah Sing s share base had expanded after the rights and bonus issues earlier this year. Revenue for 2QFY15 expanded 10.7% to RM million (2QFY14: RM million). For the six-month period (1HFY15), Mah Sing s net profit grew 10.8% to RM million or 8.34 sen a share (1HFY14: RM million or 8.92 sen a share), while revenue rose 16.1% to RM1.56 billion (1HFY14: RM1.35 billion). Mah Sing said its focus on further strengthening its business fundamentals, both operationally and financially, is to position itself for future opportunities and the delivery of steady, sustainable performances over the longer term. MOST VIEWED STORIES ON UMW Holdings 2Q net profit halves BY CYNTHIA BLEMIN KUALA LUMPUR: UMW Holdings Bhd warns of tough times ahead after the group announced that its net profit slid nearly 52% to RM68.4 million for the second quarter ended June 30, 2015 (2QFY15) from RM million in the previous corresponding period. The diversified group is cautious that outlook for the rest of FY15 would be challenging. In its quarterly report, it said the weakening ringgit would affect its operating costs and profit margins in the auto division, while declining crude oil prices would exert downward pressure on time charter rates for oil rigs, which are in oversupply now. The group s earnings per share contracted to 5.86 sen for 2QFY15 from sen a year ago; revenue dropped 12% to RM3.49 billion (2QFY14: RM3.97 billion). In a filing with Bursa Malaysia yesterday, UMW Holdings said the auto segment recorded revenue of RM2.73 million in 2QFY15 compared with RM2.9 million in 2QFY14 as Toyota s vehicles faced stiff competition. The weakening of the ringgit has also affected negatively impacted the segment s profit, it added. Its equipment segment saw a lower revenue of RM353.6 million from RM453.8 million in 2QFY14. It added that the oil and gas segment s revenue of RM183.4 million for 2QFY15 was down 23% against RM238.8 million in 2QFY14, on lower charter rates and utilisation of some assets. For the cumulative six months, UMW Holdings net profit declined 38% to RM million from RM million previously, while revenue slipped 11% to RM6.73 billion. Naza TTDI to develop residential project in Kwasa Damansara BY SANGEETHA AMARTHALINGAM GEORGE TOWN: Naza TTDI Sdn Bhd has bagged a contract from Kwasa Land Sdn Bhd, a wholly-owned unit of the Employees Provident Fund, to develop a residential project dubbed Project R2-1 on a 12.7-acre (5.14ha) piece of land in Kwasa Damansara, Kuala Lumpur. In a statement, Kwasa Land managing director Datuk Mohd Lotfy Mohd Noh said an independent evaluation panel had opined that the bid by Naza TTDI offered a good net present value return on Kwasa Land at RM88 million or RM160 per sq ft. The bid by Naza TTDI delivered on the desired criteria was set by Kwasa Land. The independent evaluation panel is confident that the proposed contemporary living concept and the pricing strategy best meet market expectations, he added. A thematic park, contemporary designs, private green courtyards and recreational club facilities were key highlights in Naza TTDI s residential development proposal. Both Naza TTDI and Kwasa Land have up to 60 days to finalise and sign a development rights agreement for Project R2-1. Kwasa Land is the master developer of the 2,330-acre Kwasa Damansara township. Under Project R2-1, more than 1.8 acres have been allocated for a central park. Weak retail sentiment drags Parkson into the red in 4Q BY GHO CHEE YUAN KUALA LUMPUR: Parkson Holdings Bhd, whose share price touched a nine-year low yesterday, has swung into losses in the fourth financial quarter ended June 30, 2015 (4QFY15), on lower retail sales and loss on exceptional items. It posted a net loss of RM90.95 million or 8.75 sen per share compared with a net profit of RM26.76 million or 2.56 sen per share last year, according to the department store retailer s filing with Bursa Malaysia.This is despite revenue for 4QFY15 rising 5.2% to RM million from RM million last year, largely from slightly better figures from China, Vietnam, Myanmar and Indonesia. The group told Bursa Malaysia yesterday its retailing division registered a weaker set of results for FY15 with revenue increasing only marginally by 4% to RM3.64 billion while operating profit contracted by 41% to RM190 million compared with a year ago. Parkson said its operation in Malaysia saw samestore sales (SSS) contracting 4.5% for FY15 as consumer sentiments were affected by the rising cost of living and the depreciating ringgit. Operating loss for the three months ended June 30, 2015, was mainly due to the deleveraging of operating expenses resulting from sluggish sales performance as consumers have front-loaded their spending prior to the implementation of the goods and services tax (GST) on April 1, it said. Meanwhile, the group s operations in China remained challenging on the back of generally weak discretionary spending and rising competition, especially from online On prospects, Parkson said the economic slowdown and the rise of the e-commerce sector in China are expected to persist for some time. Photo by Kenny Yap retailers. The negative SSS growth and new stores initial losses have resulted in Parkson China reporting a lower operating profit of RM128 million against RM223 million recorded a year earlier, it said. In Vietnam and Myanmar, its SSS contracted 5% amid weaker spending. In Indonesia, Parkson delivered a strong SSS growth of about 8% but this was offset by new stores costs, which resulted in a loss for the latest quarter and year to date. For the full year, Parkson s net profit plunged 69% to RM42.84 million or 4.06 sen per share against RM million or 13 sen per share in FY14, while revenue rose 5.4% to RM3.74 billion against RM3.55 billion last year. On prospects, Parkson said the economic slowdown and the rise of the e-commerce sector in China are expected to persist for some time. But it sees opportunities from the growing purchasing power of the young and affluent middle to upper class which could accelerate domestic consumption. Given the group s nationwide network, strong vendor relationships and adaptability to market changes, Parkson believed it is well positioned to embrace these opportunities in China.

6 CORPORATE & MARKET 5 Sime Darby explores options to reduce gearing to 30% Debt-to-equity ratio swells to 58% after NBPOL acquisition BY AHMAD NAQIB IDRIS KUALA LUMPUR: Sime Darby Bhd, whose earnings were hit hard by weak commodity prices, is exploring options to pare down its borrowings as its debt-to-equity ratio swelled to 58% after the acquisition of New Britain Palm Oil Ltd (NBPOL) in March. We have not come up with a plan yet, it is still a work in progress. But definitely we are working on strengthening our balance sheet. The intention is to come up with a gearing ratio that is a bit more palatable for ourselves and our stakeholders, said the conglomerate s president and group chief executive Tan Sri Mohd Bakke Salleh at a press briefing after the release of its quarterly financial results. Currently our gearing ratio is 58% as at June 30, only before then it was 38%, before the acquisition of NBPOL. If we can bring it to anywhere between 30% and 35%, that would be a lot more desirable, he explained. The group yesterday announced lower quarterly and annual earnings as the weak crude palm oil (CPO) and coal prices had taken a toll on its profits. Sime Darby s net profit slipped 17% to RM million for the fourth financial quarter ended June 30 (4QFY15), from RM1.19 billion in the previous corresponding period. Revenue, however, was Mohd Bakke: If there are any opportunities for synergistic mergers and acquisitions, Sime Darby will consider them. Photo by Sam Fong higher at RM12.86 billion against RM12.56 billion previously. Its annual net profit fell sharper in the financial year ended June 30, 2015 (FY15), down 31% to RM2.31 billion from RM3.35 billion in the previous year. Revenue was marginally lower at RM43.7 billion versus RM43.9 billion the year before. The board has declared lower dividend of 19 sen per share for 4QFY15, bringing the total annual dividend to 25 sen per share for FY15, compared with 30 sen in the previous corresponding quarter and 36 sen for FY14. Mohd Bakke holds a bearish outlook on CPO prices, anticipating the edible oil to trade between RM1,900 and RM2,000 per tonne up to end-september. Beyond that (end-september), it s difficult to predict, because of the uncertain outlook, he added. He said the weakness in CPO prices had impacted the performance of Sime Darby s plantation division, as prices averaged lower during the quarter at RM2,242 per tonne. The group s industrial division registered a sharp decline in profit by 48.5%, due to the weak results in the Australasia region which shrank by 62%, no thanks to the slump in coal prices and major mining companies slashing capital expenditure and deferring scheduled maintenance because of slump in coal prices. Asked if the group is looking to expand its operations, Mohd Bakke said if there are any opportunities for synergistic mergers and acquisitions, Sime Darby will consider them. It s not all doom and gloom currently, even in bad times, there will be opportunities to pick up new assets or to enter into strategic collaborations with other players, he said. Anything that complements Sime Darby s five core businesses would be considered, he added. Sime Darby s share price has fallen from the year s peak of RM9.50 in February to a low of RM7.02 on Monday. The stock rebounded yesterday to go up 33 sen or 4.6% to RM7.45, bringing its market capitalisation to RM44.22 billion. No bright spot yet on the horizon for O&G players BY LEVINA LIM KUALA LUMPUR: After a temporary lull in the second quarter of the year, global oil prices have continued to drop, casting a haze of pessimism over the oil and gas (O&G) industry, which has once again sent O&G stocks tumbling. To date, such counters ranked among the top losers on the local exchange with oil drilling rig and offshore support vessel (OSV) players being the hardest hit, said analysts as Brent crude slid to its lowest since February at less than US$43.09 (RM182.62) per barrel yesterday. Worst earnings hits, to me, are [oil drilling] rig and OSV players as they tend to have high gearing and will suffer from the greatest quantum of rate reduction, said UOB Kay Hian oil and gas analyst Kong Ho Meng. From a share price perspective, the entire O&G sector is on a book value de-rating, so long as oil prices continue to decline, he added. Icon Offshore Bhd, being the largest pure-play OSV provider in Malaysia, suffered a 61.1% decline in its share price year to date to close at 29 sen yesterday, wiping out over half of its market capitalisation to RM million. This month alone, it shrank 25.6% from Aug 1. The tumbling crude oil prices have caused oil majors like Petroliam Nasional Bhd to reduce their capital expenditure and exploration O&G stocks on a slippery slope and production activities as well as cut earnings estimates. This has had a negative impact on O&G service providers like UMW Oil & Gas Corp Bhd (UMW-OG) and Perisai Petroleum Teknologi Bhd. UMW-OG announced weaker-than-expected financial results for the six months ended June 30, 2015 on weaker revenue as a result of lower utilisation of its drilling rigs and low charter rates. And should crude oil prices remain at current levels, O&G players with substantial amount of assets like rigs and barges will get into financial trouble, said one O&G analyst. When oil prices were high, there had been a lot of speculative investments on jack-up rigs. Some have ordered these rigs without securing a contract, he explained, noting that O&G players who have done so are finding it difficult to charter out rigs to potential clients. They will not be able to charter out these rigs, he told digitaledge DAILY. In comparison, O&G companies with long term contracts and greater exposure to the production segment, or are involved in floating production storage and offloading (FPSO) like Yinson Holdings Bhd, are looking good. That s because FPSOs are under long-term contracts and are therefore not subjected to fluctuation of oil prices, he said. CHANGE SINCE MARKET SHARE PRICE YTD CHANGE (%) AUG 1 (%) CAPITALISATION Petronas Gas RM RM41.04 bil Petronas Dagangan RM RM20.66 bil Sapura Kencana Petroleum RM RM8.87 bil Dialog Group RM RM7.58 bil Bumi Armada 81 sen RM4.63 bil Yinson Holdings RM RM2.787 bil UMW Oil and Gas Corp 93 sen RM1.96 bil Uzma RM RM mil Icon Offshore 29 sen RM mil Petra Energy 94 sen RM mil

7 6 CORPORATE & MARKET HLBB in good stead to steer through rough waters Bank posts fairly good results despite challenging environment BY MEENA LAKSHANA KUALA LUMPUR: Hong Leong Bank Bhd (HLBB) is in a good position to ride out tough times in a volatile market, its group managing director Tan Kong Khoon said yesterday. Tan said the bank posted a "fairly good set of results" for the financial year ended June 30, 2015 (FY15) despite a challenging operating environment, and is in good stead to weather the tougher challenges which lie in wait. We foresee rough waters ahead... but we are in a very good position. We have a very strong, robust loan-to-deposit ratio and our loan growth momentum is going in the right direction, meeting industry growth, he told a news conference to announce the bank's fourth quarter (4QFY15) and FY15 full-year results yesterday. As at June 30, 2015, HLBB's loan-to-deposit ratio stood at 80.9%, while gross loans and financing expanded by 8.9% year-onyear (y-o-y) in 4QFY15 to RM113.4 billion HLBB posted 14.4% growth in net profit to RM million in 4QFY15 from RM million on improved net interest income, impairment write-back reflective of improved asset quality, and profit contribution from associates. Revenue grew 3.4% to RM1.04 billion in 4QFY15 from RM1.01 billion in 4QFY14. The bank also proposed a final dividend of 26 sen per share for FY15, bringing total dividends for the year to 41 sen per share. For FY15, HLBB s net profit grew 6.3% to RM2.23 billion from RM2.1 billion in FY14, while revenue grew a marginal 0.7% to RM4.07 billion from RM4.04 billion in FY14. Moving forward, Tan said the bank is confident of meeting the industry's target for loan growth of 8% to 9% in FY16. For our loan-to-deposit ratio, we want to keep it under 82%, he said. Tan also said the bank is open to acquisitions but is prudent on its expansion plans, adding that it will consider opening more branches in high-growth countries like Cambodia if its branches are able to monetise their presence there. The bank has five branches in Cambodia and four in Vietnam as at end-fy15. Tan also said the bank will be focusing on its growth areas of transaction and wealth management. HLBB chief financial officer Foong Pik Yee said the bank is targeting to keep its return on assets at the present 1.2% level. She also said capital expenditure for FY16 will be maintained at RM250 million to RM300 million, with most of the funds geared towards digitisation and improvement of the bank's services. HLBB shares closed up 0.78% to RM12.92 yesterday, with a market capitalisation of RM23.24 billion. Selangor Dredging in conservative mode BY AHMAD NAQIB IDRIS KUALA LUMPUR: Selangor Dredging Bhd (SDB) will take a conservative stance and focus on selling its existing inventory for the next six months to one year, in view of the prevalent challenging economic outlook. SDB managing director Teh Lip Kim said the challenging environment has resulted in dampened sales, as buyers adopt a wait-and-see approach in purchasing properties. The economy has been challenging over the last six months and it will continue to be challenging over the next one year. Sales have been very slow over the last couple of months. Over the last couple of weeks, with regard to the ringgit s fall and other factors, a lot of people are holding on to their money, she told reporters after the group s annual general meeting yesterday. However, Teh said SDB had been lucky as most of the group s projects about 70% to 80% were already sold. What we will be doing in the next six months to a year is selling our inventories, which amount to RM90 million. These are basically projects that we have sold 70% to 80%, and we re looking to sell off the balance 20% to 30%, she said. They include SDB s By The Sea Teh says the challenging environment has resulted in dampened sales as buyers adopt a wait-and-see approach in purchasing properties. Photo by File Batu Ferringhi in Penang, and Dedaun in Kuala Lumpur. We ll [also] be concentrating on the private preview of The Cube, which is in SqWhere (Sungai Buloh), which has seen 90% sales of the SoVos (small office/virtual office) a year ago, said Teh, adding that the private preview of The Cube s serviced apartments will be held next year. Hence, the gross development value (GDV) of SDB s launches for the next six months to a year will total a modest RM250 million. Meanwhile, SDB chairman Eddy Chieng Ing Huong said the conserv- ative stance notwithstanding, the group s financial position is still strong, which allows the group to be opportunistic in replenishing its land bank. We still have unbilled sales of RM540 million... and approximately RM200 million in cash at this point in time. With a total asset base of close to RM1.5 billion, I think the company is still in a good position. While we remain conservative, we [also] remain opportunistic in terms of acquiring land. The fact that we bought the Seri Kembangan land shows that, said Chieng, referring to the three pieces of land the group acquired earlier this year for its Casona Luxury Homes project. The group is also actively looking to increase its land bank as prices are now more reasonable, Teh said. Besides Malaysia, SDB is also looking for land in Singapore, where the group has completed and fully sold four projects, while its Village project in Pasir Panjang, which is still under construction, is now 95% taken up. Teh said property prices in Singapore have come down by about 20% to 25%, with land prices becoming more reasonable and feasible for development purposes. SDB fell 0.5 sen or 0.5% to close at 91.5 sen, with a market capitalisation of RM million. NEWS IN BRIEF Tambun Indah Land to launch RM300m worth of projects in 2H BY CYNTHIA BLEMIN KUALA LUMPUR: Tambun Indah Land Bhd plans to launch two new projects in mainland Penang with a combined gross development value (GDV) of RM300 million in the second half of Raintree Park 2 comprises duplex villas, double-storey terraces and semi-detached houses with RM205 million in GDV; while Avenue Garden features 17-storey serviced apartments with 312 units worth RM95 million in GDV. The high take-up rate of 89.2% across our ongoing projects of RM1.2 billion, especially in the challenging environment, demonstrates the sustained demand for affordable properties in mainland Penang," its managing director Teh Kiak Seng said in a statement yesterday. Encouraged by this, Teh expressed his optimism that the new launches would be taken up positively by prospective buyers. Tambun Indah is also expected to start reaping rental income from GEMS International School next BY SANGEETHA AMARTHALINGAM KUALA LUMPUR: IHH Healthcare Bhd s second quarter ended June 30, 2015 (2QFY15) net profit rose 9% from a year earlier on higher revenue from its existing global hospitals. Lower taxes and minority interest also supported profit growth. In a filing with Bursa Malaysia yesterday, IHH (fundamental: 1.65; valuation: 0.7) said net profit rose to RM million in 2QFY15 from RM209.1 million. Revenue increased to RM2.09 billion from RM1.87 billion. IHH said the better performance was attributed to its organic growth of existing operations and the commencement of operations at the Acibadem Atakent Hospital in Turkey, Pantai Hospital Manjung in Perak and Gleneagles Kota Kinabalu in Sabah. For the six months, IHH reported a rise in net profit of RM million from RM million a BY GHO CHEE YUAN month, which will complement the billings from its property development segment. Tambun Indah yesterday reported a 32.8% decline in net profit for the second quarter ended June 30, 2015 (2QFY15) to RM17.09 million or 4.05 sen per share, from RM25.44 million or 6.34 sen per share a year ago, on the back of lower revenue of RM60.01 million compared with RM million in 2QFY14. For the six-month period (1HFY15), the group's net profit fell 7.4% to RM47 million or sen per share from RM50.73 million or sen per share a year ago. Revenue was lower at RM million in 1HFY15 compared with RM million in 1HFY14 due to timing of revenue recognition. As at June 30, 2015, the group's unbilled sales amounted to RM408.1 million, which will contribute positively to the group's earnings for the next two to three years. Tambun Indah shares closed unchanged at RM1.43 yesterday, with a market capitalisation of RM million. IHH s 2Q profit grows 9% on better performance from hospitals year earlier. The group registered a RM4.1 billion in revenue compared with RM3.62 billion. IHH managing director and chief executive officer Dr Tan See Leng said the acquisition of Continental Hospitals in India had further widened its footprint in that key market. We will continue to explore opportunities in key high-growth markets while keeping a firm hand on our diversified operations and pipeline of beds coming on stream, Dr Tan said. On the outlook, IHH expects its capacity to reach more than 10,000 beds before 2017, with the expansion of existing facilities through new developments and selective acquisitions. The group also expects preoperating and start-up costs to partially erode profitability in the initial stage. IHH shares closed one sen or 0.2% higher at RM5.71, with a market capitalisation of RM46.95 billion. SC's Capital Markets Malaysia names Azhar Zabidi as new CEO KUALA LUMPUR: Capital Markets Malaysia, the capital markets promotion arm of the Securities Commission Malaysia (SC), has appointed Azhar Zabidi as its chief executive officer, with effect from Sept 1, Azhar will lead promotional efforts to advance the international profile of the Malaysian capital markets for investment and fundraising opportunities, according to Capital Market Malaysia s statement yesterday. It said Azhar has nearly 20 years of experience in investment banking, serving various domestic and international financial institutions including RHB Investment Bank Bhd, CIMB Investment Bank Bhd, HSBC Bank and Bank of America Merrill Lynch. Capital Markets Malaysia promotes the country s value proposition across various segments of the Malaysian capital market and serves as a platform to ensure consistency and coordination between various stakeholders of the capital market in promoting the offerings and expertise of the market, and through different communication channels.


9 8 CORPORATE & MARKET MSM: Cheaper raw sugar not enough to offset ringgit s fall Even if it boosted profits, says country s largest sugar producer BY CHESTER TAY KUALA LUMPUR: MSM Malaysia Holdings Bhd, the country s largest refined sugar producer, said while lower raw sugar prices boosted profits in the first half of this year, they are not enough to offset the impact of the weaker ringgit against the US dollar. Net profit for the six months ended June 30, 2015 jumped 11.2% to RM million from RM million a year ago, partly due to lower raw sugar costs of 6%. Global raw sugar prices are expected to decline further in the next one to two months. We like that because the bulk of our imported raw sugar are transacted in US dollars, MSM president and group chief executive officer Datuk Dr Sheikh Awab Sheikh Abod told reporters after signing Aemulus upbeat over September listing BY AZRIL ANNUAR KUALA LUMPUR: Aemulus Holdings Bhd, en route to list on the ACE Market of Bursa Malaysia on Sept 15, is unfazed by current market conditions and is confident its largely exports-driven niche business will keep the semiconductor testing company strong. Chief executive officer Ng Sang Beng said as the stock market s volatility is beyond the company s control, it will stay focused on strengthening its business. He noted that as of April 2015, 60% to 65% of the group s revenue was derived from exports, where it stands to benefit from the current ringgit slump against the US dollar. It s my job to focus on technology and to come up with a better product [to] compete and grab market share. We don t want to focus on short-term volatility but in long-term business [viability], Ng told reporters after launching Aemulus prospectus yesterday. Aemulus chief financial officer Kan Ky-Vern said most of its components are manufactured in Malaysia, so it will still be able to control its margins. The bulk of our components comes from Malaysia. We have relatively fat margins and the benefits outweigh the costs, said Kan. an agreement relating to the group s third refinery in Tanjung Langsat, Johor yesterday. However, the fall in the ringgit s value is greater. Raw sugar prices have dropped about 13% in the past year, but the ringgit has weakened by about 23%, he said. To mitigate the impact of the ringgit depreciation, Sheikh Awab said MSM is proposing to traders to make its future payments in ringgit rather than in US dollars. That is why we need to venture into the upstream business (and) source (raw sugar) internally [by owning sugar cane plantations], he added. MSM plans to invest up to US$130 million (RM551.2 million) in the upstream business in Indonesia should it win a tender for the development of a mill there. Sheikh Awab said the group is confident of bagging the project BY CHEN SHAUA FUI KUALA LUMPUR: Despite present economic uncertainties and currency volatility, particularly in Asia, Tune Insurance Holdings Bhd (Tune Ins) is maintaining its double-digit growth projection for its top-line in the financial year ending Dec 31, 2015 (FY15). Tune Ins chief executive officer Junior Cho said the group remained optimistic because empirical data on its forward sales indicate that double-digit growth seems reasonable. This is coupled with strong double-digit growth for the first half of the year, with its general insurance outpacing the industry average in Malaysia, and its travel insurance BY YIMIE YONG KUALA LUMPUR: Citibank Bhd raised RM217,941 in aid of Nepalese children and their families impacted by the earthquakes in their country, and handed a cheque for that amount to the United Nations Children s Fund (Unicef) yesterday. The funds were raised during Citibank s recent 10th Global Community Day, Citibank s flagship volunteer programme, when its Malaysian team held a charity family day, said Citibank in a statement. from its Indonesian counterpart, which involves the refurbishment and development of a 20ha sugar cane plantation. We are proposing a BOT (build-operate-transfer) model. We will bring in experts to refurbish the mills and improve the refineries because their yields are getting low, he said. The (final) investment amount will depend on the development. For a 500,000-tonne capacity refinery, I would expect an investment of US$130 million. We also need to refurbish the existing mills there, so these would have to be decided at a later stage, Sheikh Awab said. He noted that apart from MSM, four foreign companies are also bidding for the project from Indonesian state-owned plantation company PT Perkebunan Nusantara. Earlier at the signing, Sharkara International was appointed as The cheque was presented by Citibank chief executive officer Lee Lung Nien to Unicef s private sector fundraising and partnerships chief Richard Beighton in a private ceremony yesterday. The [funds] provided for critical relief such as medicines, food, hygiene kits and safe water, said Lee. Beighton said Citibank contribution was the largest corporate aid raised here to help Unicef ensure the children of Nepal were well provided for and back in school. the principal contractor for MSM s Tanjung Langsat refinery. Sharkara is an affiliate of Thailand s Sutech Engineering Co Ltd. The contract spans two years, and is valued at US$95.7 million. Sheikh Awab said MSM has spent RM90 million in cash for the acquisition of the 50.6-acre (20.47ha) land for the new refinery, while the entire project will involve an investment of US$259 million, including the costs for initial production. The new refinery is expected to be fully operational in the third quarter of 2017, and poised to increase MSM s production capacity by two million tonnes of refined sugar annually. The group s current capacity is 1.1 million tonnes. Sheikh Awab believes the refinery would reduce the group s overall cost of production by half at full capacity. Tune Ins resolute on double-digit growth achieving over 20% top-line growth. We remain confident because we look at our forward sales as an indicator of what the second half is going to look like. [Still], it s hard not to ignore what is going on the political uncertainties, the gloomy economic outlook, the volatility of the currencies in the region. [But] in terms of where we stand right now, we remain confident of our outlook, Cho told reporters after the group s extraordinary general meeting (EGM) yesterday. However, the group s venture in Indonesia faced a setback when it terminated on Monday its conditional agreement to buy a majority stake in Indonesian insurer PT Asuransi Staco Mandiri for billion rupiah (RM22.9 million). But it doesn t change our strategy for Indonesia and Asean. This (the acquisition) would have been a catalyst to expedite our expansion in Indonesia, but it does not preclude us from pursuing a venture in Indonesia. We are looking at other strategic acquisitions, Cho added, but did not elaborate. Cho said the group has also been in talks with full service airlines and low-cost carriers for collaborations, but nothing has come of it to date. Cho said the current take-up rate of travel insurance is rather small, with only 22 out of 100 flight passenger buying it. Hence, Tune Ins is segmenting different types of products to cater to the various needs of the remaining market. Citibank raises RM217,941 for the children of Nepal TNB signs supplemental PPA with Jimah East Power BY CHEN SHAUA FUI KUALA LUMPUR: Tenaga Nasional Bhd (TNB) has signed a supplemental power purchase agreement (PPA) with Jimah East Power Sdn Bhd that governs obligations of the parties to sell and purchase electricity generated from the coal-fired power plant in Jimah, Negeri Sembilan. In a filing with Bursa Malaysia yesterday, Tenaga said the supplemental PPA governs the obligations of the parties to sell and purchase the daily available capacity and, to the extent despatched, the net electrical output generated by the facility for 25 years in accordance with the agreed terms. The supplemental PPA is expecting commercial operation dates of June 15, 2019 and Dec 15, This follows the execution of the share sale and purchase agreement between TNB and 1Malaysia Development Bhd (1MDB) for the acquisition of a 70% stake in Jimah East for RM47 million on July 3. Prior to that, TNB and JEP had on July 22, 2014 executed a PPA for the development of two 1,000mw coal-fired power plants in Jimah. Certain commercial terms, dates and project parameters are required to be amended as a consequence to the changes required for the project, arising from the above acquisition, TNB said in the filing. It added the signing of the supplemental PPA will not have any effect on its issued and paid-up share capital, but will have a positive impact on TNB s earnings over the tenure of the project. TNB s move in buying the stake in Jimah East did not sit well with investors, as there was concern that the acquisition was tantamount to a bailout for the debt-laden 1MDB. TNB s share price has declined 13% since the announcement of the acquisition. It settled at RM11.02 yesterday for a market capitalisation of RM62.1 billion. Lee (right) handing over a mock cheque to Beighton in a private ceremony in Kuala Lumpur yesterday.

10 PROPERTY SNAPSH T 9 What s hot in Tropicana/South Sunway Damansara? Tropicana/South Sunway Damansara top 5 condominiums/apartments by average price annual growth Source: Today, we look at price growth and indicative asking rental yields for nonlanded residences in the Tropicana and South Sunway Damansara area. Prices on the secondary market here are strong, mirroring that of adjoining Kota Damansara. A major catalyst is the Tropicana Gardens project, which includes an MRT station and a mall, where residences were launched at over RM1,000 per square foot (psf). Properties located closest to Tropicana Gardens are Casa Indah 1 and 2, Opal Damansara and Cita Damansara, which have seen a sharp increase in prices. In the middle-class segment, Opal Damansara and Casa Indah 1 both recorded strong gains in average transacted prices. The average price psf at Opal Damansara grew 28.4% y-o-y to RM579 in the 12 months to 3Q2014. At Casa Indah, average prices grew 21.3% to RM627 psf. Lower and mid-priced apartments also displayed strong capital gains, with Permai up 24.3% to RM202 psf and Bayu Puteri up 18.8% to RM470 psf. From an observation of asking rental prices observed as at June 2015, the Damai Apartments generate the highest indicative asking yields (9.3%) due to its low capital prices (RM155 psf) and compact unit sizes (typically 670 sq ft for a 3-bedroom unit). The average asking monthly rental here is RM1,035 for a unit, or RM1.21 psf. In the middle-class segment, Mutiara Oriental commands higher yields due to its facilities offered, with an asking yield of 5.6%. Generally, properties in the area have an asking annual yield of above 4%, and monthly rental rates of around RM2 psf. The Analytics are based on the data available at the date of publication and may be subject to revision as and when more data is made available to us. Top 10 condominiums/apartments in Tropicana/South Sunway Damansara with highest indicative asking rental yield by average price annual growth 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: Top 10 Condominiums/Apartments in Tropicana/South Sunway Damansara with Highest Indicative Asking Rental Yield Average Average Asking Average Asking Transacted Price Monthly Rent Monthly Rent No. of Indicative Asking Project Name (RM/psf) (RM) (RM/psf) Listings Rental Yield Damai Apartment 155 1, % Permai Apartment % Mutiara Oriental 459 2, % Sunway Sutera Condominium 498 2, % Tropicana Grande 722 8, % Riana Green 541 2, % Casa Indah , % Cita Damansara 498 2, % Bayu Puteri Apartment 470 1, % Casa Tropicana 561 2, % IJM Land s Kalista Seremban 2 sees take-up rate of 47% BY NATALIE KHOO PETALING JAYA: The first block of the Kalista Seremban 2 executive apartments launched by IJM Land Bhd in July is seeing a take-up rate of 47%, said IJM Land central region senior manager for property development Hoo Kim See. The project with a gross development value of RM153 million will be developed on 8.7 acres (3.52ha) of freehold land. The 314 units of apartments have builtups ranging from 926 sq ft to 1,268 sq ft, and come with two parking bays. Prices range from RM291,800 to RM614,800. Monthly maintenance fees are 20 to 25 sen per sq ft. We believe Kalista 2, comprising 522 units spread over two tower blocks, will continue to have appeal [to potential buyers] given the affordable prices Hoo told theedgeproperty. com. Some of the amenities that Kalista 2 residents will be able to enjoy are the sky lounges, elevated swimming pool and gymnasium. IJM Land is offering financing for married couples buying their first home of up to 100% + 5% under the Youth Housing Scheme tailored for Malaysian youths to obtain mortgage financing facilities. The loan will cover the full purchase price of a home, capped at RM500,000, for 35 years or until the borrowers are 65 years old, whichever is earlier. Meanwhile, the additional 5% of the purchase price is intended to cover the mortgage reducing term assurance or mortgage reducing term takaful, which will ensure that the homes are paid for should anything happen to the buyer. To be eligible for this scheme, buyers must be married, between 25 and 40 years old, Malaysian citizens, with household income not exceeding RM10,000 per month and first-time house buyers. The second block of Kalista 2 is yet to be launched. An artist s impression of the Kalista Seremban 2 executive apartments. Govt to use volatility financing to help low-income group own homes JOHOR BARU: The government may introduce volatility financing to assist the low-income group own homes, said Minister in the Prime Minister s Department Datuk Seri Abdul Wahid Omar. Speaking to reporters after opening the 27th National Public Sector Accountants Conference on Tuesday, he said the government had discussed the approach at the recent Economic Council meeting. However, he said, the matter must be studied further before its implementation. Actually, volatility financing access exists in the banking sector. We just have to make sure the amount of loans they can take from the banking institution is low so that they can afford to repay, he said at the Johor International Convention Centre here. Abdul Wahid was asked to comment on a survey conducted by Khazanah Research Institute (KRI) on medium-cost houses, which were said to be 4.4 times the annual household income. According to KRI, an affordable house should be three times the median annual household income. Abdul Wahid said the government was also aware that most houses built by the private sector were targeted at the higher-income group. However, he said, the public should look at the overall picture as the government also provided affordable homes through the Ministry of Housing and Local Government, Syarikat Perumahan Negara Bhd and the 1Malaysia People s Housing Corp. We have several approaches. Last week, we were informed by Prime Minister Datuk Seri Najib Razak at the National Housing Council meeting to monitor the situation, he said. The two-day conference, attended by 455 public accountants, was organised by the Malaysian Public Sector Accountants Association, with the support of the Accountant-General s Department. Bernama

11 10 STOCKS WITH MOMENTUM 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. THE MEDIA SHOPPE BHD (-ve) THE Media Shoppe (TMS) (Fundamental: 1.85/3, Valuation: 0.9/3) triggered our momentum alert for the second time yesterday, climbing another 7.1% to a 1-year high of 15 sen on heavy volume. Listed on the ACE Market, TMS provides integrated web-based IT applications and solutions; it also trades IT and ICT products. The former segment has been loss-making while the latter accounted for 95% of its revenue in TMS has been loss-making since 2007, though net loss narrowed to RM1.7 million in 2014 from RM5.4 million in For 1H2015, revenue was 22.2% lower at RM91.5 million, while net loss widened to RM3.6 million from RM1.6 million in 1H2014. According to digitaledge DAILY (August 21, 2015), TMS single largest shareholder, Master Knowledge Sdn Bhd, intends to inject property projects into the company to strengthen its earnings. To that effect, Dato Low Liong Kian and Tan Tzu Pin who have extensive working experience in the construction industry joined TMS board as executive director and non-executive director respectively on August 17. Dato Low and Tan collectively hold a 27.66% stake in TMS via Master Knowledge after the latter acquired more shares through the open market on Tuesday. TMS subsequently acquired Exonion Sdn Bhd, a dormant property development firm for RM2 on August 18. The company would undertake its maiden mixed development comprising office lots and condominiums in Kemaman, Terengganu. The project, slated for completion in the next 2 to 3 years, will fall under the affordable range. Despite the venture into the property sector, the IT business would still remain as its main income driver. Earlier, the company completed its share capital reduction and share consolidation exercise it now has million ordinary shares of 10 sen each. The stock trades at 0.86 times book. THE MEDIA SHOPPE BHD (ALL FIGURES IN MYR MIL) FY12 31/12/2012 FY13 31/12/2013 FY14 31/12/2014 FY2015Q1 31/3/2015 Income Statement Turnover EBITDA (3.7) (3.2) 1.0 (0.3) Depreciation EBIT (4.4) (4.8) (0.9) (0.9) Associates Interest income Interest expense Extraordinary gain/(loss) Pre-tax profit (4.2) (4.4) (0.4) (0.8) Net profit - owners of company (4.2) (5.4) (1.7) (1.3) 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 THE MEDIA SHOPPE BHD Valuation score* 0.90 Fundamental score** 1.85 TTM P/E (x) - TTM PEG (x) - P/NAV (x) 0.86 TTM Dividend yield (%) - 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 THE MEDIA SHOPPE BHD RATIOS 31/12/ /12/ /12/2014 DPS ($) Net asset per share ($) ROE (%) (17.17) (9.43) (2.35) (4.05) Turnover growth (%) Net profit growth (%) Net margin (%) (5.36) (2.36) (0.67) (1.14) ROA (%) (16.39) (9.31) (2.33) (4.02) Current ratio (x) Gearing (%) Interest cover (x) (39.75) (53.87) FY12 FY13 FY14 ROLLING 12-MTH young. smart. unstoppable IS ONLINE

12 INVESTING IDEAS 11 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-todate, 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 LATITUDE TREE HOLDINGS BHD 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 RM7.45 yesterday. However, the stock is still inexpensive, trading at a trailing 12-month PE of 10.0 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 9.4 times and Homeritz at 12.7 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 pretax 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. Insider Asia will feature a new stock pick on every alternate day. 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 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) FY12 FY13 FY14 ROLLING 12-MTH

13 12 BROKERS CALL Wah Seong Corp Bhd Genting eyes 7% FFB growth rate in FY15 Genting Plantations Bhd (Aug 26, RM9.24) Maintain buy with a lower target price (TP) of RM10.13: Genting Plantations Bhd reported a net profit of RM40 million for its second quarter ended June 30 of financial year 2015 (2QFY15). The quarterly net profit dropped 42.2% year-on-year (y-o-y) and 24% quarter-on-quarter (q-o-q). By stripping out the forex loss from its US dollar-denominated borrowings, the core net profit for 2QFY15 stood at RM45.3 million, declining 33.8% q-o-q and 47.1% y-o-y on weaker performances in both its plantations and property segments. For the cumulative six months ended June 30 (6MFY15), the reported net profit of RM92.7 million was 45.6% lower y-o-y while revenue was 9.1% lower than a year ago. The 6MFY15 core net profit for the group after stripping out the forex loss was RM113.8 million, decreasing 31.9% y-o-y. The core net profit was below expectations by meeting only 32% to 34% of our and consensus expectations. The negative deviation can be attributed to the weaker-than-expected crop production. Profit before tax (PBT) of the plantations division dropped 23% y-o-y, owing to declining crude palm oil (CPO) prices, which was more than enough to offset the higher production of fresh fruit bunch (FFB) which grew 8.2% y-o-y. Average CPO selling prices in 2QFY15 dropped 16% to RM2,171 per tonne from RM2,583 per tonne a year earlier. On the other hand, Filepic of Genting Tanah Merah Estate, Johor. The group has declared a net dividend of 2.5 sen per share. Photo by Genting Plantations the PBT of the property division tumbled 76% y-o-y on softer property sales. The group s 2QFY15 core net profit dropping 33.8% is due to weaker performance in the plantations division, as the higher earnings contribution from Malaysian operations was offset by weaker contribution from Indonesian operations. The PBT of local operations increased 14% q-o-q,as FFB production improved on seasonal factors, mitigating the adverse impact of falling CPO prices. Meanwhile, Indonesian operations registered a weaker performance as heavy rainfall reduced FFB harvesting. On the other hand, PBT of the property division was down 87% q-o-q as divestment of the Genting Permaipura Golf Course Bhd s operations boosted the earnings of the division in the previous quarter. For cumulative 6MFY15, core net profit was 31.9% lower than a year earlier, mainly due to the weaker performance by the plantations division as FFB production was lower than expected while the property division reported a slight improvement in earnings. PBT of the plantations segment dropped 30.7% y-o-y on the back of lower CPO prices. CPO prices in 6MFY15 dropped 16% y-o-y to RM2,206 per tonne. Meanwhile, FFB production of the group was lower-than-expected, growing by a marginal 0.9% y-o-y as impact of the drought in the February to April period hurt crop production in Sabah estates. Nevertheless, management indicated production is recovering as the weather imrpoves, with management looking at a FFB growth rate of about 7% in FY15. The group has declared a net dividend of 2.5 sen per share. We slashed our earnings forecasts by 13% to 24% for FY15 to FY17 to factor in the weaker-than-expected FFB production. We maintain buy with a lower TP of RM10.13 based on sum-of-parts valuation. Our TP implies a price-earnings ratio (PER) of 21 times of its FY16 earnings per share. We continue to like Genting Plantations for its strong fundamentals. The group is reaping the fruit of its Indonesian ventures as its existing harvesting areas progress into higher-yielding brackets. This would translate into sustainable production growth going forward. JF Apex Securities Bhd, Aug 26 FYE DEC (RM MIL) 2014A 2015E 2016E Turnover 2, , ,068.4 Ebit PBT Net profit (NP) Core net profit Consensus (NP) Core EPS (sen) Core EPS growth (%) (14.1) 6.6 NDPS (sen) NTA/Share (RM) BV/Share (RM) Core PER Price/NTA (x) Gearing (x) Dividend yield (%) Source: Kenanga Research Wah Seong-Welspun JV to expand pipe business in India Wah Seong Corp Bhd (Aug 26, RM1.24) Maintain market perform with an unchanged target price (TP) of RM1.35: Wah Seong Corp Bhd recently announced that its wholly-owned subsidiary, Wasco Energy Ltd, had entered into a shareholders agreement with Welspun Corp Ltd to establish a new joint-venture (JV) company. The JV aims to combine their expertise in carrying out concrete weight coating of pipes in India. Wah Seong shall subscribe to a 49% stake in the JV company, with Welspun holding the remaining stake. Welspun is one of the world s largest steel pipe makers with manufacturing facilities in India, the United States and Saudi Arabia. We believe this JV will enable Wah Seong to further expand its footprint in India, while Welspun can leverage on its expertise in the concrete weight coating business. The Indian market accounted for 5.7% of its total revenue in The new JV company will then set up a concrete weight coating plant in Anjar, Gujarat, which is estimated to cost two billion rupees (RM127.5 million). Wah Seong s capital expenditure (capex) is expected to increase by RM62.5 million from 2015 to Its gearing would be hiked to 0.8 times from 0.7 times, assuming full-debt financing. As at first quarter ended March 31 of financial year 2015 (1QFY15), its order book stood at RM1.2 billion, of which close to 60% is from the oil and gas sector, with the balance coming from the renewable energy and industry trading divisions. Going forward, the pipe coating business will continue to be its main earnings driver. Tender book is guided to be RM5 billion with almost all being oil and gas-related projects. Further rerating may arise as the company is eyeing to bag the second project worth up to US$100 million (RM424 million) in Norway with Statoil, which also involves handling Polar-led pipes. Nonetheless, we believe it may not materialise in the near term as most oil majors are tightening their capex budgets. Hence, it is yet to be factored into our forecasts. We maintain our existing forecasts pending 2QFY15 results to be announced at the end of this month. Our TP is maintained at RM1.35, pegged to unchanged calendar year 2016 (estimate) price-earnings ratio (PER) of 9 times, which is consistent with small- to mid-cap valuations (7 to 10 times) in an industry downcycle. Risks to our call include securing fewer contracts than expected, and lower-than-expected margins. Kenanga Research, Aug 26 Carlsberg aims for bigger market share of its premium products Carlsberg Brewery (M) Bhd (Aug 26, RM11.16) Upgrade to add with an unchanged target price (TP) of RM13.22: Carlsberg Brewery (M) Bhd s second quarter ended June 30 of financial year 2015 (2QFY15) revenue rose 13% year-on-year (y-o-y), while core net profit increased 10% y-o-y. Revenue performance was good in Malaysia, rising 5.5% y-o-y due to higher restocking post-goods and services tax (GST) and its Singapore business (+32.2% y-o-y), while net profit declined due to a one-off impairment loss of RM12.5 million from the sale of Luen Heng F&B Sdn Bhd. Its Singapore operation continues to exhibit strength. There was also positive impact from the acquisition of MayBev Pte Ltd in April First half FY15 (1HFY15) net profit declined 15% y-o-y mainly due to higher raw material costs on the back of a stronger US dollar. The overall 1HFY15 earnings before interest and tax margin dropped 1 percentage point y-o-y to 14%. Management guided that it will continue to optimise its cost base and improve the market share of its premium products in 2HFY15 to counter the negative consumer sentiment. We do not expect further increases in the beer tariff in the upcoming Budget 2016 in October, given the challenging post-gst operating environment. On a quarter-on-quarter (q-o-q) basis, revenue fell 6.3% y-o-y and net profit declined 33% y-o-y. The poorer top line q-o-q was driven by its Malaysian operation (-15% due to the stronger Chinese New Year demand in first quarter), but this was mitigated by stronger Singapore sales (+20%). The q-o-q decline in the bottom line was due to lower revenue, impairment loss on disposal of Luen Heng and restructuring expenses. CIMB Research, Aug 26 Carlsberg Brewery (M) Bhd FYE DEC (RM MIL) 2QFY15 2QFY14 Y-O-Y % Q-O-Q % 2QFY15 2QFY14 Y-O-Y % PREV. FY15F CHG CHG CUM CUM CHG Revenue (6.3) ,671.6 Operating costs (346.5) (304.8) 13.7 (6.2) (716.1) (682.8) 4.9 (1,444.0) Ebit (6.9) (2.9) Ebit margin (%) (6.4) 13.6 Interest expense (2.0) (1.5) (2.9) (2.8) 2.2 (5.2) Interest & invt inc Associates contrib (28.8) Exceptionals (12.5) 0.0 n.m n.m (12.5) 0.0 n.m 0.0 Pre-tax profit (15.1) (29.2) (11.6) Tax (12.5) (12.1) 3.5 (12.3) (26.8) (27.9) (3.9) (60.3) Tax rate (%) Minority interests (0.4) (0.4) (2.9) (73.5) (1.9) (1.5) 27.9 (6.4) Net profit (20.8) (32.9) (14.6) Core net profit (13.8) (4.4) EPS (sen) (20.8) (32.9) (14.6) 0.70 Core EPS (sen) (13.8) (4.4) 0.70 Source: CIMB, Company reports

14 BROKERS CALL 13 Puncak Niaga remains optimistic about water asset disposal Puncak Niaga Holdings Bhd (Aug 26, RM2.51) Maintain neutral with a lower target price (TP) of RM3.16: Puncak Niaga Holdings Bhd s core pre-tax profit continues to be in the red for the second consecutive quarter. This is largely due to the operating loss registered by the oil and gas (O&G) segment that has widened to RM20.1 million. However, inclusive of the water segment (classified under discontinued operations), group net profit rose substantially by 17.7% year-on-year (y-o-y) to RM125.2 million. The O&G segment represented by its derrick lay barge business registered a second quarter ended June 30 of financial year 2015 (2QFY15) operating net loss of RM6.9 million compared to an operating profit of RM7 million in 2QFY14. The segment loss was attributable to lower activity levels and job opportunities, which can be seen from a decline in revenue of 87% y-o-y to only RM20 million in 2QFY15. The company remains optimistic that a final resolve for the water asset transfer can be achieved in To recall, the company on July 14 agreed with Pengurusan Air Selangor Sdn Bhd to extend the dateline for the fulfilment of the conditions precedent for the proposed water asset disposal to Sept 14, Due to the dismal performance of the group s O&G segment, we are revising our FY15 ending Dec 31 and FY16 core net profit earnings estimates downwards by 60.6% and 62.9% respectively. Puncak Niaga Holdings Bhd FYE DEC (RM MIL) F 2016F Revenue 3, , Profit from operations Pretax profit (8.9) Profit after tax after MI FD EPS (sen) Dividend (sen Dividend yield (%) Implied PER (x) Source: MIDFR Post completion of the disposal of water assets, the possibility of a special dividend of approximately RM1 per share remains. Although our total percentage returns far exceed our threshold level to warrant a buy recommendation, we are making an exception by maintaining our neutral stance on Puncak Niaga with a revised TP of RM3.16 per share. We are of the opinion that investors should remain invested in profit from the special dividend post completion of the water transfer exercise. However, the future of the company remains uncertain as its core businesses remain weak, especially its O&G segment, which largely relies on its derrick lay barge. MIDF Research, Aug 26 UMWOG s Naga 7 stays uncontracted, weighs on earnings UMW Oil & Gas Corp Bhd (Aug 26, RM0.93) Upgrade to hold with a lower fair value of 90 sen: We upgrade UMW Oil & Gas Corp Bhd (UMWOG) to a hold rating, but with a lower fair value of 90 sen per share (from RM1.75 per share previously), based on a 0.6 times financial year ending Dec 31, 2015 (FY15) price-to-book value (P/BV). We have also switched our valuation method from price-earnings ratio (PER)-based to P/BV-based, as it would be a better valuation yardstick to reassess the current sector downcycle. We note that this is strictly a valuation upgrade, given that the share price has collapsed way below book value at 0.6x P/BV more than two standard deviations below its historical mean of 2 times P/BV. Admittedly, the group earnings will remain weak in the coming quarters as the operating environment for rigs continues to be challenging, with oil and gas majors cutting down drilling budgets and deferring drilling plans. However, its balance sheet remains healthy at an estimated net gearing level of 0.5x, with no immediate signs of a cash flow crisis. We have cut our FY15 forecast earnings by 86%, as we lower our day rate and utilisation assumptions for UMWOG s jack-up rigs. We have also now assumed Naga 7 to remain uncontracted for FY15, while Naga 8, which is expected to be delivered in September 2015, will add a further strain to its earnings. On a similar note, we have reduced FY16/FY17 forecast earnings UMW Oil & Gas Corp Bhd FYE DEC (RM MIL) F 2016F 2017F Revenue 1, , ,327.0 Core net profit FD core EPS (sen) FD core EPS growth (%) 32.9 (87.9) DPS (sen) PER (x) EV/Ebitda (x) Div yield (%) ROE (%) Net gearing (%) Source: AmResearch, Company report Filepic of UMWOG s jack-up rig. by 53%/37%, respectively. UMWOG reported second quarter ended June 30 (2QFY15) net profit of RM4.5 million, bringing total first half of FY15 (1HFY15) earnings to RM36.6 million. This came in below expectations, accounting for only 17% of our estimates and 20% of consensus. The group s 1HFY15 net profit decreased by 68% year-on-year (y-o-y), mainly due to lower time charter rates re- ceived, lower utilisation of some of its assets due to routine inspections or idling between contracts, and the operating expenses of Naga 7 that saw its contract with Frontier Oil Corp (FOC) terminated earlier this year. UMWOG is still seeking an award for damages amounting to US$19.2 million (RM81.4 million) for early termination fees from FOC, following the latter s failure to arrange for a bank guarantee of US$5 million and an advance payment of US$15 million to charter Naga 7 for four months starting from February The outlook for UMWOG remains challenging in the near term as a slowdown in the oil and gas sector resulted in a continued downward pressure on day rates, which is exacerbated by an influx of uncontracted new builds. Furthermore, utilisation is expected to contract further as more rigs are completing their contracts this year. AmResearch, Aug 26 E&O s billing progress slower than expected Eastern & Oriental Bhd (Aug 26, RM1.49) Maintain buy with an unchanged target price (TP) of RM2.54: Eastern & Oriental Bhd s (E&O) net profit of RM23 million in the first quarter ended June 30, 2015 (1QFY16) represents only about 16% of the financial year ended March 31, 2016 (FY16) consensus forecast of RM150 million and our estimate of RM143 million. Billing progress on unbilled sales of RM900 million was slower than expected, but we expect billings to pick up in subsequent quarters. Unrealised foreign exchange (forex) gains of RM15.7 million and gains from the sale of its 50% stake in the Sungai Besi land boosted associate income to RM20.7 million. Exclud- ing the forex gains, core net profit was RM9 million in 1QFY16 compared to a RM2 million loss in the fourth quarter of FY15 (4QFY15). Revenue fell 47% quarter-on-quarter (q-o-q) in 1QFY15 due to the absence of land sale in Jalan Conlay in a joint venture with Mitsui Fudosan Asia Pte Ltd. Revenue was down 52% year-on-year (y-o-y) due to the completion of Quayside Andaman Condominium, which boosted revenue in 1QFY14. The fall in revenue and high fixed costs led to a loss before interest and tax of RM4 million in 1QFY16. We gather that pre-sales property achieved in 1QFY16 amounted to RM585 million. This was mainly driven by the successful launch of its Tamarind Tower A condominium with a gross development value of RM472 million (90% take-up rate). Planned launches include the Avira Garden Terraces Phase 2 and luxury condominium in Jalan Conlay in early E&O s revalued net asset value of 0.4 times was at a sharp discount to the sector average of 0.6 times. Imminent potential catalysts to drive a positive rerating would be the implementation of the RM27 billion Penang Transport Master Plan project and the appointment of a reclamation contractor for Phase 2A of its Seri Tanjung Pinang (STP2) project in 3QFY15. Key risks to our positive call are slow property sales and execution risk on the STP2 project. Affin Hwang Capital, Aug 25 Eastern & Oriental Bhd FYE MAR 31 (RM MIL) E 2017E 2018E Revenue Ebitda Pre-tax profit Net profit EPS (sen) PER (x) Core net profit Core EPS (sen) Core EPS growth (%) (37.2) 81.7 (12.5) Core PER (x) Net DPS (sen) Dividend yield (%) EV/Ebitda (x) Affin/Consensus (x) Source: Company, Affin estimates

15 14 GENERAL NEWS Rapid response team to be deployed to fight rising piracy Shipping and security experts welcome latest move SINGAPORE: Malaysia and Indonesia are deploying rapid reaction teams to combat a soaring number of attacks on merchant vessels in one of the world s busiest shipping choke points, a Malaysian admiral said. Over 70 ships have been attacked in the Strait of Malacca and the Singapore Strait, on the western side of the Malay Peninsula, this year, the highest number since at least 2008, including at least seven at the end of last week, according to security and anti-piracy groups. We have in general recommended that vessels proceeding to Singapore and passing Malaysian waters take appropriate security measures, said Michael Storgaard, spokesman for the world s biggest shipping firm Maersk Line. One of the ships attacked last week was the 106,043-deadweight-tonnage container ship Maersk Lebu. The surge of attacks has led the Malaysian Maritime Enforcement Agency (MMEA), or coastguard, to deploy a helicopter-equipped special task and rescue (Star) team in Johor Baru, First Admiral Maritime Zulkifili Abu Bakar, director of maritime matters in the MMEA s crime investigations department, told Reuters. The Malaysian and Indonesian navies are forming a similar rapid reaction force in the area, Zulkifili added. While the MMEA force would respond to robbery and hijacking incidents, team members would sometimes be deployed at merchant ships operated by Malaysian government-linked firms, he said. The Star team is in addition to the other MMEA personnel tasked to combat anti-piracy/sea robbery. I can t tell you the number of personnel, but [it is] formidable enough to undertake any anti-hijacking operations, the admiral said. Singapore, Indonesia and Malaysia already coordinate naval and police patrols in the Strait of Malacca and South China Sea, but they have been hampered by a lack of resources, while sheltered coasts and islands make it easy for robbers to operate. Shipping and security experts welcome the latest move, but urge a more active approach. There remains a need for a proactive, permanent security presence in the area during the hours of darkness, said Mark Thomas, Asia-Pacific regional manager at maritime security consultancy firm Dryad Maritime in Singapore. Southeast Asia has become the world s maritime armed robbery and piracy hotspot, registering 84 out of 106 global incidents in the first half of this year, the International Maritime Bureau said. Data from the Regional Cooperation Agreement on Combating Piracy and Armed Robbery against Ships in Asia show the most recent spate of attacks took place in Indonesian waters within 48 hours, suggesting a single group of attackers. Yet anti-piracy organisations and security firms draw a distinction between the attacks around Singapore, which security experts equated to maritime mugging, and violent piracy off the coast of Somalia, which was only reined in after concerted international efforts. In most of the attacks in the Strait of Malacca and the Singapore Strait, lightly armed robbers fled, either empty-handed or after stealing ship s stores, while pirates in Africa tended to be heavily armed, attacking larger ships and kidnapping crew. Shippers said the low level of violence and strict arms regulations in Southeast Asia meant it was difficult to employ armed guards. Instead, tougher on-board measures should be adopted, similar to those used in the Indian Ocean to ward off Somali pirates, including the fitting of barbed wire, locking all doors and better lookouts. Reuters National Day preparations in full swing KUALA LUMPUR: Preparations for this year s National Day celebration at Dataran Merdeka are going well and almost ready. Checks by Bernama yesterday found that the technical work seemed almost completed and the multistorey seats and a stage have been installed. Kuala Lumpur City Hall (DBKL) assistant engineer Hendra Hizad Abd Hamid said that 80% of the technical work had been completed, including the installation of more than 3,000 multistorey seats and a 108m-by-9m LED screen. He said the LED screen is the longest and largest ever used in any celebration in the country. The other 20% will only involve the final preparations including canvas and carpet installations, which will be done a day before the celebration, he told Bernama. The event is a collaboration between the Prime Minister s Office, DBKL, the Communications and Multimedia Ministry and the National Department of Culture and Arts. Bernama Dancers from the National Department of Culture and Arts rehearsing their performance for National Day at Dataran Merdeka yesterday. Photo by Bernama Bersih to press on even if key rally organisers barred BY V ANBALAGAN KUALA LUMPUR: The 34-hour Bersih rally will go on even if police obtain a restriction order to stop key organisers from being present in the vicinity of Dataran Merdeka, said a Bersih steering committee member. New Sin Yew said the peaceful gathering is not about Bersih but communicating to the government the legitimate grievances of the people. The rally is all about the people, and Bersih is merely facilitating the event, New told The Malaysian Insider. The constitutional lawyer said this in response to Bersih s plans should the police move in with restrictions against the main organisers just as they did to the Bersih 2.0 (2011) and Bersih 3.0 (2012) rallies. In the last rally in 2012, police obtained a court order to bar close to 100 people from entering the city s central business district. These people were barred under Section 98 of the Criminal Procedure Code as they were deemed to be a nuisance. Those who disobeyed the order were liable to a maximum six months imprisonment or a fine, or both, upon conviction. KUALA LUMPUR: Police are advising the public to stay away from the Bersih 4.0 rally planned to be held in the city centre this weekend because laws will be broken if it proceeds. Dang Wangi police chief, ACP Zainol Samah, said anyone participating in the rally which does not meet requirements under the Peaceful Assemblies Act 2012 risks being arrested. This is because the rally does not meet conditions under Section 11 of the Act for not getting permission from the owner of the venue (Dataran Merdeka) where it is to be held. Pursuant to this, police also wish to remind parents or guardians not to bring children to the assembly because this is an of- PUTRAJAYA: Jail or a free man, these are the scenarios awaiting former Selangor menteri besar Dr Mohamad Khir Toyo, today. The Federal Court is scheduled to deliver its verdict on Dr Mohamad Khir s final appeal against his conviction and 12-month jail sentence for using his position to obtain land and a bungalow unit. As this is his final appeal, if the Federal Court is in favour of him, he will be a free man; otherwise, he will have to serve his jail sentence from today. A five-member Federal Court panel chaired by Chief Judge of Malaya Tan Sri Zulkefli Ahmad Makinudin had reserved judge- But PKR members, including former opposition leader Datuk Seri Anwar Ibrahim and Mohamed Azmin Ali, the current Selangor menteri besar, were acquitted as the Court of Appeal held last year that the order was defective. New said Bersih would challenge the ex-parte order if it was served on them before the weekend. Such a move will be unconstitutional and an abuse of court process but the show will go on, no matter what, New said. He said a crowd of 300,000 was expected. We are highly motivated based on the donations and the sale of the Bersih T-shirts, he added. New said participants will gather at Brickfields, Pasar Seni, Sogo, the National Mosque and Dataran Maybank and would march towards the vicinity of Dataran Merdeka. The rally will begin at 2pm on Saturday and is expected to end just before midnight on Sunday. The electoral watchdog group is demanding reforms in the voter system, governance, freedom to protest, parliamentary democracy and the economy. The Malaysian Insider Police: Stay away from Bersih 4.0 D-Day for Khir Toyo fence under Section 20 (1)(c) of the same Act, he told a press conference at the Dang Wangi police headquarters here yesterday. Earlier, talks between the police and the organisers of the rally to call it off failed to reach any consensus. Zainol said the organisers were still stubborn about proceeding with the rally. Police had advised the organisers not to hold it at Dataran Merdeka because the organising committee of the National Day 2015 celebrations had sought prior permission to use the venue. Under Section 17(2)(a) [of the Peaceful Assemblies Act 2012] two rallies cannot be held at the same venue simultaneously, he said. Bernama ment on Dr Mohamad Khir s appeal after hearing the matter on Jan 19. The other judges on the panel were Justices Tan Sri Ahmad Maarop, Tan Sri Hasan Lah, Tan Sri Jeffrey Tan Kok Wha and Datuk Ramly Ali. On Dec 23, 2011, the High Court in Shah Alam found Dr Mohamad Khir, 49, guilty of obtaining for himself and his wife Zahrah Kechik, 47, two plots of land and a bungalow at Section 7, Shah Alam in 2007 from Ditamas Sdn Bhd through its director Datuk Shamsuddin Hayroni, and sentenced him to 12 months jail. Bernama

16 GENERAL NEWS 15 Visa waiver the right move, says Matta president KUALA LUMPUR: Waiving visas would be the right move to increase the number of Chinese tourists to Malaysia, said Malaysian Association of Tour and Travel Agents (Matta) president Hamzah Rahmat. He said this was not only the right thing to do but also a much needed shot in the arm for the country s ailing tourism industry, especially in the current situation with the depreciation of the ringgit. The number of Chinese tourists plunged 27.1% in the first quarter of 2015 from the same period last year. Obviously, Malaysia s loss is other countries gain, he said in a statement on Tuesday. He was responding to a recent local news report quoting Umno Youth executive committee member Armizan Mohd Ali as saying that the move to waive visas for Chinese tourists was not the right approach to increase the number of tourist arrivals from that country. The report also quoted Immigration Department enforcement director Zahari Abdul Aziz as saying the move might boost tourist arrivals from China, but there were those who came here to work and caused social ills. Hamzah raised the issue of why some quarters are paranoid about social ills when countries around the world welcome Chinese visitors with open arms. Anyone who is overly concerned about social ills should first scrutinise the elephant in the room, and that is the millions of undocumented workers in the country. In contrast, only 1,493 Chinese tourists were found to have overstayed last year and 612 involved in immoral activities. It is a miniscule figure against the 1,613,355 Chinese who visited Malaysia in Chinese tourists are the world s biggest spenders and they are known to empty the shelves of luxury stores in London, Paris, Rome and New York, he said. Hamzah said that apart from the four Asean nations Brunei, Indonesia, Singapore and Thailand which share borders with Malaysia, the largest numbers of visitors were from China and India. To attract even more, Matta has been advocating that they be allowed to enter and stay in Malaysia for up to 15 days without a visa. Bernama Analyst: PAS seeks to stop exodus to splinter group New Hope Movement needs to explain what it is fighting for BY ZULKIFLI SULONG KUALA LUMPUR: Gerakan Harapan Baru (GHB), or the New Hope Movement, is making waves with mass resignations from PAS divisions across the country, an analyst said. However, political analyst Datuk Dr Redzuan Othman of Universiti Malaya (UM) said this would not last and the group must focus on remaining at the front and centre in politics. They have succeeded in making waves, but they can t stop with that. They need to focus on their activities by explaining what they are fighting for, Redzuan told The Malaysian Insider. He said the resignations in PAS have left the party scrambling to stem the tide. PAS is panicking. That s why we are seeing a lot of responses from PAS, said Redzuan, the former director of the UM Centre for Democracy and Elections or UMcedel. PAS president Datuk Seri Abdul Hadi Awang had previously likened the splinter group to sulking children, and predicted that they would eventually return to the party s fold. He said their resignations had helped spring-clean the party and claimed he was happy with the turn of events. But PAS recent action indicates otherwise the party has gone on overdrive as it tries to counter the exodus. In its meeting last month, the Chinese tourists are the world s biggest spenders, known to empty the shelves of luxury stores in London, Paris, Rome and New York. Selangor PAS liaison committee decided to mount a membership recruitment drive to prove that many still wanted to join PAS. The committee decided that each PAS division in the state must recruit 500 new members, with every branch roping in at least 15 new members and each division committee member recruiting five. The campaign is to culminate in the Perhimpunan Istiqamah Hingga Kemenangan (Pihak 13.0) gathering on Sept 13, three days before GHB launches its new party, Amanah. Pihak 13.0 will be held in Banting, Selangor, to show that PAS is not affected by GHB, the meeting decided. GHB supporters have begun stepping down from their posts in PAS, but have remained as party members pending the formation of Amanah. It began with Kota Raja PAS last Wednesday, followed by the Shah Alam division members the same night, and Kelana Jaya on Sunday. In Johor, 91 committee members of the Gelang Patah division and its branches quit their posts on Sunday. Six committee members of Batu Gajah PAS resigned from their posts on Monday. They will remain as PAS members until their membership automatically terminates upon joining the new party, to be announced on Aug 31 and officially launched on Sept 16. The Malaysian Insider Nov 16 hearing of Anwar s bid for Ramli s testimony in sodomy review PUTRAJAYA: The Federal Court has set Nov 16 to hear Datuk Seri Anwar Ibrahim s application to admit former commercial crime investigation department director Datuk Ramli Yusuff s testimony as evidence in his sodomy conviction review bid. Federal Court deputy registrar Mohd Izzudin Mohamad fixed the hearing date after the matter came up before him for case management yesterday. Deputy public prosecutor Nadia Mohd Izhar, appearing for the prosecution, said the deputy registrar had also fixed Oct 26 for case management on the matter to enable the prosecution and defence to finalise documents related to the case. Anwar s counsel, Shahid Adli Kamarudin, who was also present in the case management proceeding, also confirmed the hearing and case management dates. However, the court has yet to set a date to hear Anwar s bid to review the Federal Court s decision in upholding his conviction for sodomy and fiveyear jail sentence. Anwar, 68, on June 10 this year, filed an application seeking Ramli s oral testimony to be accepted by the Federal Court and used as evidence at the hearing of his review application. In his notice of motion, Anwar said on May 27 this year, Ramli gave a sworn testimony at the Kuala Lumpur High Court in a civil suit which supported Anwar s defence that he was a victim of political conspiracy and fabricated evidence. He said the evidence provided by Ramli was important to establish that there existed a political conspiracy against him, which led to him being charged with sodomy. Anwar is serving a five-year sentence in the Sungai Buloh Prison for sodomising his former aide, Mohd Saiful Bukhari Azlan, 30. Bernama PM launches 1Malaysia Icons coffee-table book (From left) Transport Minister Datuk Seri Liow Tiong Lai, Deputy Prime Minister Datuk Seri Dr Ahmad Zahid Hamidi, Najib and Minister in the Prime Minister s Department Datuk Seri Azalina Othman Said looking at the 1Malaysia Icons coffee-table book after the launch in Putrajaya yesterday. Photo by Bernama PUTRAJAYA: Prime Minister Datuk Seri Najib Razak launched yesterday the 1Malaysia Icons coffee-table book for a television documentary of the same title in Perdana Putra, here. The 11 well-known personalities to be featured in the second season of the documentary over the RTM1 channel soon include the prime minister s wife Datin Seri Rosmah Mansor. Among the other eminent figures chosen for the documentary are Felda chairman Tan Sri Mohamad Isa Abdul Samad, former Olympic sprinter Tan Sri Dr M Jegathesan, fashion designers Datuk Zang Toi and Datuk Bernard Chandran, and celebrity chef Datuk Redzuawan Ismail, better known as Chef Wan. Also included are Alleycats frontman Datuk David Arumugam, cartoonist Lat (Datuk Mohammad Nor Khalid), well-known 80s singer Datuk Shake (Sheikh Abdullah Ahmad Bakhbereh), Mango Tree London restaurant founder Eddie Lim and singer-songwriter Yunalis Zarai, better known as Yuna. The documentary is aimed at inspiring the young generation to excel by exposing them to the achievements of those featured in various fields including politics, business, sports and entertainment. Bernama

17 16 OPINION It s often a curse to be blessed In the case of commodities, it takes hard work to avert the dangers of over-exuberance BY JUSTIN FOX In 1976, Stanford political science graduate student Terry Lynn Karl paid a visit to Juan Pablo Perez Alfonso, the founder of the Organization of Petroleum Exporting Countries (Opec). Perez Alfonso s home nation, Venezuela, was in the midst of an oil-fuelled boom that was partly Opec s doing, but he wasn t celebrating. He asked Karl to study what oil was doing to his country, then offered these parting words: Ten years from now, twenty years from now, you will see. Oil will bring us ruin. Perez Alfonso, who also called oil the devil s excrement, was right about that, of course. He s still right 39 years later, with Venezuela in the throes of perhaps its worst economic crisis yet. It takes a special kind of misgovernance to mess things up as badly as Venezuela has even before the current oil price slump began last summer, it had been running fiscal deficits of more than 10% of gross domestic product (GDP) for several years. But with the price of oil and just about every other commodity slumping, lots of other commodity-exporting countries are finding themselves in a tough spot these days. Saudi Arabia, Bloomberg s Matthew Martin reports, is likely to run a budget deficit of almost 20% this year and is looking for outside advice on where to cut back. In Ecuador, Clifford Krauss and Rick Gladstone write in the New York Times, oil revenue has fallen by almost half since last year and tens of thousands of demonstrators pour into the streets every week, angered by the government s economic policies. Political tensions are also running high in Iraq and Nigeria, and while Russian President Vladimir Putin still boasts high approval ratings his country s economy is in a deep slump. Australia appears headed for its first recession in 25 years; Canada is probably already in one. Some of this is inevitable. Any place that profits from a major commodity boom is going to suffer from a hangover when prices plummet. This is largely due to an economic phenomenon that has come to be called the Dutch disease, after the Dutch economy struggled in the wake of a big natural gas discovery in The problem is basically that money flowing into the commodity distorts the country s economy, making it hard for other industries to stay internationally competitive. Still, nobody thinks Australia or Canada is headed for economic disaster or political crisis. For that to happen, Karl now a professor at Stanford concluded in her classic 1997 book The Paradox of Plenty, the commodity needs to take over the political system. In modern times the main commodity to do this has been oil, so Karl dubbed the phenomenon petrolisation. But she also described how gold and silver riches had pretty much the same effect on Spain in the 1500s. As money poured into Spain then and the oil exporters in the 1970s, government spending boomed. That was understandable. Less so was the fact that these governments kept increasing spending even as commodity revenues peaked. They had become addicted. Wrote Karl: Spending becomes the norm for rulers because resources are available, at least initially, and because more difficult tasks like building administrative authority take time and provide few immediate rewards. Indeed, spending becomes seen as the primary mechanism of stateness, as money increasingly is substituted for authority. The only Opec member that didn t succumb to this petrolisation in the 1970s was Indonesia, and the main reason seemed to be that the country s first president, Sukarno, had been such a profligate spender and borrower that the army general who ousted him in 1967, Suharto, became obsessed with keeping government spending in check and paying down foreign debt. As oil prices subsequently skyrocketed, that obsession kept Indonesia s economy relatively balanced. Economic austerity may often be a bad idea, but it turns out to be the perfect policy approach for a country experiencing a gigantic commodity boom. In Norway, which started producing oil in 1971, the initial instinct of the country s Labour government was to spend the riches. By the time production peaked in the 1990s, though, political give and take and a couple of financial crises had led to a much more conservative approach of running big fiscal surpluses (Norway last ran a government deficit in 1993, according to the International Monetary Fund) and salting the extra money away in a sovereign wealth fund. Norway made early mistakes similar to those of other oil exporters; it just had a strong and flexible enough political system that it was able to learn from and reverse them. Nowadays, the lessons of Indonesia and Norway are widely known. Lots of resource-rich countries and other jurisdictions put commodity earnings aside in sovereign wealth funds. But the temptation of a commodities boom is still hard to resist, especially when it s the first time. Consider Ghana, which after more than a decade of strong economic growth found itself in need of an IMF bailout in April. The culprit was oil, which was discovered off the country s coast in 2007 and began to be exported in late As Andrew Bauer and David Mihalyi of the Natural Resource Governance Institute explain: While it saved slightly less than US$500 million (RM2.12 billion) in oil revenues in two sovereign wealth funds from 2012 to 2014, the government borrowed approximately US$7 billion on international financial markets, at interest rates approximately 5% higher than the rate of return on sovereign wealth fund assets. The Ghanaian experience highlights the dangers of over-exuberance when new discoveries are made. For a country, a big commodity boom remains an extremely dangerous thing. It doesn t have to end in ruin, but it takes hard work to avert that fate. Bloomberg View The value of China s devaluation lies in its real motivation BY BENJAMIN J COHEN THIS week global financial markets nearly imploded. From East Asia to Western Europe, currencies swooned and equity prices tumbled all because of China s decision to allow a modest devaluation of its currency, the yuan. China s economy is on the brink of collapse, pessimists warned. A new era of currency wars is about to be unleashed, doomsayers chimed in. To call this an overreaction would be a gross understatement. Admittedly, the Chinese economy has been slowing, not least because of a sharp decline in the country s exports. And China s devaluation of the yuan could be viewed as an aggressive move to reverse the export slide and restore domestic growth a move that could prompt competitors in Asia and elsewhere to push down their exchange rates as well, triggering an all-out currency war. So, in this regard, investor fears were not without merit. But how serious was the threat? In reality, China s devaluation was puny by the end of the week, less than 5% in all. Compare that to the euro s 20% drop so far this year, or the yen s 35% dive since Japan embarked on its Abenomics reform programme in late 2012; it is clear that overblown headlines about the yuan s plunge were woefully misleading. Had China really wanted to grab a bigger share of world exports, it is hard to imagine that its policymakers would have settled for such a modest adjustment. China s real motivation seems to be more far-sighted. The devaluation advanced China s strategic goal of turning the yuan into an international reserve currency and, in the long term, into a credible global challenger to the US dollar. To this end, China has been campaigning for years to have the yuan added to the basket of currencies that determines the value of the Special Drawing Right (SDR), the International Monetary Fund s (IMF) synthetic reserve asset. As it stands, that basket includes the US dollar, the British pound, the euro, and the Japanese yen. If the yuan were added to this group of the world s leading currencies, it would gain considerable prestige, and central banks would undoubtedly increase their use of the currency as a reserve asset. According to the IMF, for a currency to be included in the SDR basket, it must meet two key criteria. The first that the issuing country must be among the world s leading exporters is not an issue: China already is the world s largest exporter. But the second criterion that the currency must be freely usable (widely used and widely traded) has proved to be a major stumbling block. Given tight government-imposed limits on foreign investors yuan purchases, as well as Chinese investors use of yuan to invest abroad, not many observers would describe the currency as freely usable. Indeed, just a couple of weeks ago, an IMF staff report concluded for precisely that reason, the yuan was not yet ready for prime time in the global economy. But China has been taking concerted steps to expand the use of the yuan, including signing swap agreements with more than two dozen countries, actively encouraging offshore markets for yuan deposits and bonds, and moving cautiously to open domestic capital markets. China currently is addressing another key factor holding back international use of the yuan: government control over the exchange rate. The yuan s exchange rate has historically been fixed daily by the People s Bank of China (PBoC), without regard to underlying market sentiment, and allowed to trade within very narrow limits. But China has now announced that market signals will henceforth guide its daily exchange-rate fixing. Assuming the PBoC follows through, China can more credibly claim that its currency is freely usable or at least that it is moving in that direction. Of course, not everyone is convinced yet. We must wait to see how the PBoC behaves in practice. But the IMF has certainly noticed, suggesting that a more market-determined exchange rate would facilitate SDR operations, in case the yuan were included in the currency basket going forward. That is quite a shift in tone from the earlier staff report. While much of the world was distracted by the putative threat of currency wars, China may have found a way to sneak its way into the SDR basket. At least for now, it seems that the country s long-term strategy for the yuan is on track. Project Syndicate Benjamin J Cohen is professor of International Political Economy at the University of California, Santa Barbara, and the author of Currency Power: Understanding Monetary Rivalry.

18 FEATURE 17 Four reasons why the Fed is wishy-washy about an interest rate hike BY MOHAMED A EL-ERIAN Tianjin deserves to be a Cuyahoga moment LAST Wednesday s highly anticipated release of the Federal Reserve (Fed) minutes of last month s policymaking meeting did little to answer whether the Fed will raise interest rates in September. Four factors are proving very confusing for Fed officials and have led them to keep their policy options wide open. First, the signals from the US economy are at odds with those from international markets: While far from unambiguous, especially given the weakness in inflation and wages, US economic readings tend to support a Fed rate hike as early as next month. But this isn t the case for the international data. Whether it s Europe and Japan or emerging markets, the numbers there clearly point to a weakening global economy, suggesting more policy caution. Second, the fragility of financial markets: The last few weeks have seen notable weakness in a growing number of areas. What started out as relatively localised disruptions in the oil market and emerging-market currencies have spread first placing pressure on corporate bonds and then on equities. Third, the extent to which the US economy s behaviour hasn t adhered to Fed models: The inaccuracy of Fed projections is bound to raise questions in the minds of central bank officials as to the robustness of their understanding of economic developments. The broader these questions are and the longer they persist, the more risk-averse Fed officials would be in embarking on a change. Fourth, the divergence in central bank policies: The Fed s deliberations on tightening stand in stark contrast to the stimulative stance of other central banks. This difference will probably intensify for the European Central Bank, Bank of Japan and People s Bank of China. Another consideration: China s currency devaluation earlier this month has put pressure on emerging-market currencies, making US central bankers uncomfortable about the risk of a rate increase that strengthens the US dollar, which could compromise US exporters ability to compete, undermining the country s economic lift-off. All in all, the Fed had no choice but to once again come across as wishy-washy. As such, it will remain non-committal until the very last moment before its September policy meeting. Bloomberg View Mohamed A El-Erian is chief economic adviser at Allianz SE. A few days after blasts, residents spot precipitation resembling snow flurries BY ROB COX A few days after a series of apocalyptic blasts shook Tianjin, residents of the city reported an odd precipitation resembling snow flurries falling from the sky. Last Monday, the streets near Binhai were covered in strange white foam. One Chinese journalist reported a stinging sensation from skin contact with the stuff. Tianjin s visible after-effects recall other environmental disasters where Mother Nature has reacted to the abusive behaviour of mankind. Recall the time in June 1969 when the Cuyahoga River, which divides Cleveland, Ohio, caught fire. That served as the tipping point for stringent regulation of pollution in the United States. Though there have been many calamities over the past few decades of China s great lurch forward, there are few clearer indications that industrialisation has crossed a line than images of a city blanketed by chemical snow in midsummer, or a watery tributary aflame. So, as the Chinese authorities sift through Tianjin s charred port for answers and bodies, it may be worth considering whether the People s Republic can learn from America. For a century, the Cuyahoga served as the conduit to Lake Erie for Cleveland s factories, refineries and sewers. The river was the urinal for John D Rockefeller s Standard Oil. Clevelanders used to joke that anyone who falls into the river does not drown, but decays. That all began to shift after June 22, 1969, when sparks from a train passing over a petroleum slick burst into flames. In the half hour before it was squelched, the fire charred a couple of bridges. The city s mayor filed a formal complaint with the state the next day. All of this might have come to naught if Time magazine hadn t featured the burning Cuyahoga on its cover, accompanied by an essay calling for action to reverse the decline of American rivers and lakes. By December the following year, Republican president Richard Nixon created the Environmental Protection Agency through executive order. The Clean Air and Clean Water Acts were passed by Congress. Thus began a crackdown that continues to this day of America s industrial titans, from General Electric to DuPont. Tianjin is worse than the Cuyahoga in so many ways. For starters, there s the extraordinary loss of life. Around 700 others were injured and 70 people remain unaccounted for. The explosions damaged 17,000 apartments, inciting rare public protests from residents demanding the government buy back their homes. Cyanide levels in the waters around Tianjin clocked in at 356 times acceptable limits. There are other important differences between it and that earlier, American conflagration that suggest a different outcome from the Tianjin debacle. For starters, Time was free to publicise the plight of America s environmental degradation in ways that would be unthinkable under Beijing s media control. That said, the profusion of images on Chinese social media may prove more impactful than one magazine s editorialising. China already has laws on its books that are as tough. Indeed, what Tianjin shows is the lax enforcement of those rules. That gets to the single biggest difference: In China, there are no bright lines between the industry, the government and the Communist Party. So long as business, the government and the party are one and the same, there is a real danger that Tianjin goes down in memory as an unfortunate accident, rather than as a Cuyahoga-like watershed moment capable of inspiring change. Reuters Corporate Japan gets jolt from SoftBank outsider BY WILLIAM PESEK THE word gaijin is used in Japan both to describe foreigners and to suggest their inability to truly understand Japanese culture. The term no doubt came to mind last Thursday, when the non-japanese president of the giant Internet firm SoftBank used his own money to place a big bet on the company. Nikesh Arora joined SoftBank in late 2014, after stints at Google and an eclectic mix of tech and finance jobs from Deutsche Telecom to Putnam Investments. The promotion last month of the 47-year-old Indian-born outsider to president confirmed founder Masayoshi Son s desire to expand beyond Japan s ageing, shrinking market and to flout the prevailing norms of corporate Japan. That became clearer last week, when Arora pledged to buy US$483 million (RM2.05 billion) of Soft- Bank shares in a personal bet on his ability to generate growth and profits this boosted SoftBank shares 2.2% last Thursday. Arora s purchase sends an important message to corporate Japan. For decades, Japanese chief executive officers have considered corporate governance a vague western construct that has little bearing on their leadership. Prime Minister Shinzo Abe has tried prodding executives to embrace global business practices. But, as recent scandals at Toshiba and Takata have shown, those efforts have been no match for a culture of corporate insularity. Japan s chieftains tend to view themselves as caretakers with a mandate to avoid unnecessary risks. Accordingly, they err on the side of avoiding conflict rather than making big interventions. As Arora s gesture shows, however, investors often react positively when corporate executives take personal and public risks. Will anyone in Japan follow suit? It s an interesting question for other Japanese start-up successes, including e-retailer Rakuten and clothier Fast Retailing (which sells the Uniqlo brand). At both of those companies, the founder owns an outsized stake and needs to soon groom a successor. Will they look globally for a replacement of the highest calibre, or will they promote from within, in typical Japanese fashion? In the context of corporate Japan, Rakuten s Hiroshi Mikitani and Tadashi Yanai of Fast Retailing are both considered mavericks. Mikitani has backed smaller start-ups and urged Abe s government to follow his lead; Yanai has expanded aggressively overseas, Arora has pledged to buy US$483 million of SoftBank shares in a personal bet on his ability to generate growth and profits. Photo by Reuters made English the company s official language and scrapped seniority-based promotions. Corporate reforms of this sort have consequences for the entire Japanese economy. Although Japan is technically short of workers, practices like lifetime employment and promotions tied to tenure mean few leave their jobs because they don t want to work their way up the ranks again. But, by the same token, employers don t feel pressure to boost their salaries. And because it s hard to be promoted out of turn or fire anyone, Japanese workers have zero incentive to think big or take risks, which hampers innovation and productivity. Foreigners don t have all the answers, but they are responsible for Japan s biggest corporate governance successes this year. It was Daniel Loeb, New York-based activist investor, who prodded secretive robot maker Fanuc to increase dividends and become more transparent. Earlier this month, when Loeb turned his sights on Suzuki, its shares surged US$2 billion in one day. Now, it s Arora s turn to shake things up. One question, of course, is where Arora will get the US$483 million he has pledged to spend on the company s stock. If he borrows the money from a Japanese bank many of which do business with SoftBank or own its shares it could raise questions about conflicts of interest. That would be doubly true if he borrows from Son. Still, there s no doubting that Arora plans to put his money where his mouth is and where his talents lie. It would be nice if Abenomics, the government s economic revival programme, could muster more of that risk-taking spirit. Bloomberg View William Pesek is a Bloomberg View columnist.

19 18 FEATURES Time to end love affair with China Apple should cut dependence on Asia giant, spread its attention more evenly among geographies BY LEONID BERSHIDSKY The stocks of most big tech companies are down 10% to 15% this month, but the erasure of 13% of Apple s market capitalisation may make the most sense. If China has awakened the bears, Apple, whose dependence on that market has increased significantly in recent years, is prime bear bait. Expansion into the Chinese market has been one of chief executive officer Tim Cook s signature achievements. In the first quarter of Apple s 2011 fiscal year a year before founder Steve Jobs died the company broke out data about its performance in Greater China for the first time: 9.2% of total revenue, 11.1% of operating income. By the third quarter of 2015, China accounted for 26.7% of revenue Europe brought in just 20.8% and 29.9% of operating profit, approaching the 35.9% Apple garners from the Americas, its home market. China accounted for 60% of Apple s revenue growth during that period. Our focus has very much been on China, Cook explained on an earnings call in April We wanted to understand that market and understand the levers there. The learning has never stopped, and it has affected some of the principles that were established under Jobs for example, his commitment to keeping the iphone s screen relatively small or the refusal to accept third-party software keyboards. Chinese consumers wanted Samsung-like big-screen smartphones, so Apple made the iphone 6 Plus. Sure enough, China is the biggest market for it, and Apple has routed Samsung there. Chinese users wanted a choice of keyboards, like on Android, and they got it. So did the rest of the world, of course, but it would have had to make do with just one keyboard had it not been for China. The same goes for golden phones, and now laptops, too. The next-generation iphone will apparently be available in an extra hue rose gold and that, too, is a nod to what Cook says will be Apple s biggest market some day. Still bullish on China On the most recent Apple earnings call, last month, Cook was asked whether he saw a threat in the recent disastrous performance of the Chinese stock market. He said that it could create some speed bumps in the near term but that he remained extremely bullish on China. He cited a McKinsey study that said the share of upper-middle-class households in China would increase to 54% in 2022 from 14% in So we re within that period at this moment, and you can see for all of us that travel there so much, with every trip you can see this occurring, Cook said. And so I think we would be foolish to change our plans. I think China is a fantastic geography with an incredible unprecedented level of opportunity there. He reiterated his commitment to China in an to CNBC s Jim Cramer on Monday, saying Apple saw strong growth there over the summer. The McKinsey study is from 2013, though, when China boosterism was much more fashionable than it is now. Since then, some international companies, primarily the owners of luxury brands, have discovered the downside of being big in China. According to Bain, the management consultancy, Chinese consumers now account for 30% of global luxury spending, but they are growing more price-conscious, so the Chinese luxury market is expected to shrink 2% to 4% in real terms this year. The recent corruption crackdown has also affected demand and driven the prices of luxury items down in China. This is directly relevant to Apple because, since China became a leading market, it has been turning into a kind of tech luxury or fashion company. Apple Watch, the only significant product launched under Cook, is more of a fashion accessory than a useful device, and it was initially marketed like a luxury product: People had to sign up for a demonstration at a boutique. Despite posting excellent numbers in China, Apple cannot miss the shift away from inexplicably expensive items toward more practical ones. In the second quarter of 2015, according to tech analysis firm Canalys, Apple dropped a notch in market-share rankings for smartphones in China. It is now in third place behind local producers Xiaomi and Huawei. Challenge posed by yuan The recent devaluation of the yuan poses another challenge: Should Apple accept thinner margins or risk losing even more sales to Xiaomi, Huawei and other budget competitors? Cook s company is, according to Bloomberg Industries, the most exposed to China of all non-chinese handset makers. While it will benefit from a reduction in its considerable yuan-based costs, the danger of market-share loss is potentially more dangerous given the competition s vigour and local knowledge. Apple s concentration on China has meant that it hasn t made much headway in other emerging markets. It has only a 3.7% share of handset shipments in Latin America, down from 4.8% in the final quarter of last year, and a 3.2% share in the Middle East and Africa, also down from the level at the end of It s growing in India, but from an extremely low base it has about 2% market share there. Like any dependence, Apple s love affair with China can easily become a drag on it performance if the Chinese economy settles into a pattern of lower growth and the country s consumers become less motivated by prestige than by rational concerns. We re seeing the first signs that this is happening. Apple has become too Chinese, and it s time for the company to spread its attention more evenly among geographies. Bloomberg View Leonid Bershidsky is a Bloomberg View columnist. Sharing a collective responsibility in eradicating dengue BY ADNAN JAHAYA RESIDENTS in elite neighbourhoods often keep to themselves and shy away from community activities, and the Taman Fern Grove neighbourhood in Cheras, near here, was no exception. However, this changed when news of the Aedes mosquito threat reached residents, leading them to revive the spirit of gotong-royong (communal undertaking). Taman Fern Grove Residents Association secretary T Ravishanker admitted that it was not easy to carry out something that was out of the norm in the neighbourhood. But they managed to pull it off with the cooperation of the Hulu Langat Health Office. After a series of gotong-royong that started in May, with 12 held so far, no dengue cases have been reported in the neighbourhood that has a multiracial population of about 500 people. Three dengue cases reported there in early 2015 had sparked concern, but residents are now sighing in relief with no new cases reported since. Working together The Taman Fern Grove Residents Association was formed five years ago under the leadership of Datuk Hod Parman to plan various activities for the residents well-being. The greatest challenge is gathering the residents together for gotong-royong activities despite their busy schedules, but Ravishanker said his hectic work life as managing director of Centium Software Sdn Bhd, an information technology outfit based in Cheras, did not stop him from rallying his neighbours. We cleaned the drains, cleared the bushes and beautified the landscape with trees. We wanted to eradicate all Aedes breeding grounds, he told Bernama as he showed off the neighbourhood. He is grateful for the fact that the residents have been united in their fight against dengue regardless of background or affiliations. Hulu Langat health education Ravishanker: We wanted to eradicate all Aedes breeding grounds. Photo by Bernama officer Zulkifly Musa s determination was also a contributing factor to the programme s success. When Zulkifly proposed the gotong-royong five months ago, Ravishanker took it as a challenge to get all the residents involved. And the challenge was not in holding just one, but 12 gotong-royong sessions, as suggested by Zulkifly, who was confident that the folks in Taman Fern Grove would respond well to his idea because everyone wants to live in a clean and healthy environment free from disease. Deploying extra help After setting a schedule for the gotong-royong session, Zulkifly mobilised personnel from the health office to conduct door-todoor checks on houses considered potential breeding grounds foraedes mosquitoes. Used tyres and pots with stagnant water are among the places that Aedes mosquitoes like to breed in. Currently, the Hulu Langat district has the second-highest number of dengue cases in Selangor after the Petaling district. According to records, the district with over 1.2 million residents recorded over 9,400 dengue cases from January to Aug 11, with a total of 20 deaths. Zulkifly is confident that the number of dengue cases and fatalities will decrease if residents work hard to fight the Aedes mosquito. Meanwhile, for the health education officer, working a seven-day week has become a norm, especially with the rise in dengue cases in the country. It makes me happy when Aedes breeding grounds are eradicated and I like to join in the gotong-royong for the sake of the people s well-being, he said. The cleanliness of a location or housing area is more significant if the neighbouring areas also practise cleanliness. This is because a household that breeds Aedes also puts its neighbours at risk. To date, 73,000 dengue cases have been reported nationwide since January, with Selangor having the highest number. Records show over 41,000 cases in Selangor, involving 92 deaths, up to Aug 11. Labuan recorded the lowest number of cases (two) with no deaths. Dengue statistics are most likely to spike should there be no efforts to eradicate the Aedes mosquito. Yet mosquitoes cannot solely be blamed for the dengue. It is up to the community and relevant agencies to do their best to stamp out Aedes breeding grounds and create an Aedes-free environment for all to enjoy. Bernama

20 INTERNATIONAL BUSINESS 19 Schlumberger, oilfield firm Cameron in US$14.8b deal BY SNEHA BANERJEE BENGALURU (India): Oilfield services company Schlumberger Ltd agreed to buy Cameron International Corp, which makes equipment used by oilfield services providers, in a deal valued at US$14.8 billion (RM62.7 billion) to cut costs amid weak drilling activity. Yuan shock gives carry-trade crowd worst year since 2008 BY YE XIE & LIZ MCCORMICK HONG KONG: China just gave investors one more reason to shun the most popular trading strategy in the US$5.3 trillion (RM22.46 trillion)-a-day currency market. Carry trades, or borrowing one currency cheaply to invest in a higher-yielding asset elsewhere, were already suffering the biggest losses since 2008 as the rout in emerging markets sent potential purchases tumbling. By cutting interest rates two weeks after its shock devaluation, China effectively crossed the yuan off investors shopping lists, too. Add to this a surge in volatility, carry traders are finding fewer and fewer ways to make money. JPMorgan Private Bank and the asset management unit of Bank of China both say the strategy s best days are behind it. A Deutsche Bank AG index tracking carry-trade returns has plunged 13% this year, on track for its worst annual decline since the 2008 financial crisis. Bloomberg BY LILIAN KARUNUNGAN SINGAPORE: Asian currencies have split along geographical lines in response to China s interest rate cut: In the north, they re rallying on optimism stocks will stop falling, while in the south fears of a weaker yuan are pushing them lower. Taiwan s dollar climbed 1.1% against the greenback as of 11.21am yesterday in Taipei and South Korea s won rose 0.7%. In Southeast Asia, Malaysia s ringgit dropped 0.9%; Indonesia s rupiah fell 0.4%; Thailand s baht lost 0.3% and the Philippine peso slipped 0.1%. Aimed at shoring up its plunging stock market, People s Bank of China s (PBoC) fifth interest rate cut since November and its lowering of banks reserve ratios are expected to put more downward pressure on the yuan. It has also deepened concern that the slowdown in the world s biggest consumer of raw materials may Cameron makes products, such as blowout preventers and valves, that control pressure at oil and gas drill sites. Schlumberger provides oil and gas producers with a full array of services from surveying a site to drilling and completing wells. The two companies combined their subsea businesses in November 2012 to create a joint venture CNOOC 1H profit plunges 56% Must rely on cost cuts and capital spending curbs for boost BY AIBING GUO BEIJING: CNOOC Ltd, China s biggest offshore oil and gas explorer, posted a 56% decline in profit for the first half of this year. Net income dropped to billion yuan (RM9.75 billion), or 0.33 yuan a share, from billion yuan, or 0.75 yuan, a year earlier, the Beijing-based explorer said in a statement to the Hong Kong stock exchange yesterday. That exceeded the 13.9-billion yuan average of three analyst estimates compiled by Bloomberg. CNOOC, which depends purely on oil exploration and production for revenue, is most exposed to oil s plunge this year and must rely on cost cuts and capital spending curbs to to drill in deeper waters. Besides cutting operating costs, the acquisition will also help Schlumberger streamline its supply chains and improve its manufacturing processes, chief executive Paal Kibsgaard said in a statement. The cash-and-stock offer values Cameron at US$66.36 per share, a boost profit, said Laban Yu, a Hong Kong-based analyst at Jefferies Group LLC. The strategy paid off last year, when it posted a surprise 6.6% profit increase. Brent crude has averaged about US$59 (RM250.16) a barrel in the first half of the year, down 45% from the same period in The benchmark for half of the world s oil this month slipped below US$45 for the first time since There isn t much CNOOC can do to improve earnings prospects in the second half if crude prices fail to rebound, Yu said before the earnings were released. Net production in the period rose 14% to 240 million barrels of oil equivalent. The development of the company in the future will be premium of 56.3% to Cameron s Tuesday close. Cameron s shares shot up to US$62.50 in premarket trading yesterday. Schlumberger s shares fell 1.4% to US$ Schlumberger has slashed 20,000 jobs this year alone and lowered its capital budget in an effort to maintain margins. Reuters driven by both production and economic efficiency instead of only by production volume, chairman Yang Hua said in the statement. We will emphasise economic production volume rather than focus solely on production growth. CNOOC s oil and gas sales fell to 77 billion yuan in the first six months from 117 billion yuan a year ago. CNOOC plans to increase production by as much as 15% this year, while cutting capital expenditure by as much as 35% to 70 billion yuan, the explorer said in February. The company in April reiterated its output target for this year of 475 million to 495 million barrels of oil equivalent this year, despite the plunge in crude prices. Bloomberg PBoC s easing highlights north-south divide in Asian currencies be worse than previously thought, which would be more bad news for Southeast Asian economies that depend on commodity exports. It s a vicious cycle. If you do monetary easing, you will have more depreciation expectations on the currency, said Andy Ji, a Singapore-based strategist at the Commonwealth Bank of Australia. The easing is not going to lift commodity prices. In North Asia, people are just looking at the early stabilisation of the equities markets. The Kospi index of shares in Seoul was up by the most in six weeks yesterday, while a gauge of Taiwanese stocks was steady following a 3.6% jump on Tuesday. PBoC s easing follows a surprise devaluation of the yuan on Aug 11, which spurred fears of a currency war in Asia as central banks sought weaker exchange rates to safeguard exports. The Chinese rate cut will put more downward pressure on rupiah and Indonesia s econom- China interest rate The central bank has cut benchmark interest rates five times since November 6.6 percent One-year benchmark rate Aug 2010 Aug 2011 Source : People s Bank of China Aug 2012 ic growth, said Harry Su, head of research at PT Bahana Securities in Jakarta. North Asia is doing a little bit Aug 2013 Aug 2014 Aug 2015 better because the Southeast Asian currencies are prone to fragile risk sentiment, said Commonwealth Bank s Ji. Bloomberg IN BRIEF Betfair and Paddy Power in 5b merger talks LONDON: Online gambling company Betfair and Irish rival Paddy Power said yesterday they had reached an agreement in principle on a 5 billion (RM33.24 billion) merger, marking the latest in a string of deals in the sector. The two firms said discussions were ongoing regarding some terms of the allshare merger that would create one of the world s largest online betting and gaming groups with revenues of over 1.1 billion. Under the terms, Paddy Power shareholders would own 52% of the group with Betfair shareholders owning the rest. Immediately prior to completion, Paddy Power shareholders would receive dividend of 80 million (RM million), the firms said. Reuters China central bank injects 140b yuan via SLOs BEIJING: China s central bank said yesterday it injected 140 billion yuan (RM92.5 billion) into the interbank money market via short-term liquidity operations (SLOs). The loans, which mature in six days, have an average interest rate of 2.3%, the People s Bank of China (PBoC) said in a statement on its website. The PBoC launched SLOs in 2013 to supplement its other monetary policy tools. The facility is mainly used to provide one- to three-day direct lines of credit to commercial banks, though loans with other maturities are occasionally used. Reuters Samsonite expects China sales growth to halve HONG KONG: Luggage maker Samsonite expects its China sales growth to halve in the second half of the year, its head said yesterday. China sales are expected to grow 15% to 16% on a local currency basis in the second half of the year and beyond, compared with nearly 30% growth in the first half, chief executive Ramesh Tainwala said. China, hit by slowing economic growth, accounts for about 10% of Samsonite s global sales. The company reported a 16.6% jump in sales in the first half of the year and an 8.9% rise in profit. Reuters Chinese smartphone market expected to cool SAN FRANCISCO: The once-hot smartphone market in China is expected to cool this year, growing a meagre 1.2%, according to a report released on Tuesday. The China smartphone market grew 19.7% last year and accounted for nearly a third of all new handsets shipped, according to the International Data Corporation s (IDC) Worldwide Quarterly Mobile Phone Tracker report. China clearly remains a very important market, said IDC programme director Ryan Reith. However, the focus will be more on exports than consumption as domestic growth slows significantly. AFP

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