FBM KLCI 1693.

43

2.51

KLCI FUTURES 1697.50

8.00

STI 2844.21

4.77

RM/USD 4.1350

CPO RM2611.00

1.00

OIL US$39.44

0.70

GOLD US$1232.20

1.20

PP 9974/08/2013 (032820)
PENINSULAR MALAYSIA RM1.60 (INCLUSIVE OF 6% GST)

THURSDAY MARCH 17, 2016 ISSUE 2126/2016

FINANCIAL
DAILY
MAKE
BETTER
DECISIONS

www.theedgemarkets.com

Fed seen holding rates steady

PA G E 2

5 HOME BUSINESS

Ranhill under
pressure on first
trading day
7 HOME BUSINESS

UMW Holdings
at risk of being
removed from
FBM KLCI
8 HOME BUSINESS

Red Senas QA
Thailand,
likely in Thailand,
Indonesia and Msia
16 H O M E

Sapura Resources to hive off

education assets to
Ekuinas for RM247m
s the

y, it'
l
s
u
o
i
Ser

!
t
r
a
Get smt

x
I will persevereyour ne
despite attacks,
Find

rty
propeou need
y

e
@
m
o
h rty.com

e
p
o
r
P
e
g
d
E
e
Th
says Najib

Y
L
N
O

The price tag

tagg is
is nearly
nearrly RM56m
RM
M56m above
above the
the companys
companys
market
market value.
va
alue. S
Supriya
upriya S
Surendran
urenpdorratanl h
has
as tthe
he sstory
tory o
on
n Page 4.

18 C O M M E N T

London could lose

its euro trading if
UK leaves EU

Xxx.
Xx has the story on
Page x.

19 W O R L D B U S I N E S S

Economists cut
Spore growth
forecasts

Sharp rebound in Puncak Niagas share

price sparks speculation about next move
4 HOME BUSINESS

T HU R SDAY M ARC H 17, 2 0 16 TH EEDGE F I N AN C I AL DAI LY

For breaking news updates go to

www.theedgemarkets.com

ON EDGE T V
www.theedgemarkets.com

Ranhill lists
but no ones
biting

Fed seen holding

rates steady
As it balances concerns about global economys health
BY HOWARD S C HNE I DE R

The Edge Communications Sdn Bhd

(266980-X)

Level 3, Menara KLK, No 1 Jalan PJU 7/6,

Mutiara Damansara, 47810 Petaling Jaya,
Selangor, Malaysia
Publisher and Group CEO Ho Kay Tat
EDITORIAL

For News Tips/Press Releases

Tel: 03-7721 8219 Fax: 03-7721 8038
Email: eeditor@bizedge.com
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 Editor Melanie Proctor
Copy Editors Evelyn Chan,
Tham Yek Lee, Tham Kid Cheng
Art Director Sharon Khoh
Design Team Cheryl Loh,
Valerie Chin, Aaron Boudville,
Aminullah Abdul Karim,
Yong Yik Sheng, Tun Mohd Zaan
Mohd Zaabah, Noorain Duasa
EDITORIAL ADMINISTRATION

Manager Katherine Tan

Assistant Manager Madeline Tan
Senior Coordinator Maryani Hassan
CORPORATE

Managing Director Au Foong Yee

Deputy Managing Director
Lim Shiew Yuin
ADVERTISING & MARKETING

To advertise contact
GL: (03) 7721 8000
Fax: (03) 7721 8288
Chief Marketing Ocer
Sharon Teh (012) 313 9056
General Manager, Digital Media
Kingston Low (012) 278 5540
Senior Sales Managers
Geetha Perumal (016) 250 8640
Fong Lai Kuan (012) 386 2831
Peter Hoe (019) 221 5351
Gregory Thu (012) 376 0614
Creative Marketing
Chris Wong (016) 687 6577
Head of Marketing Support & Ad Trac
Lorraine Chan (03) 7721 8001
Email: mkt.ad@bizedge.com

WASHINGTON: The US Federal

Reserve (Fed) is expected to hold
interest rates steady as it balances continued concerns about the
health of the global economy with
fresh signs that domestic inflation
is starting to rear its head.
That dilemma was captured in
economic data early yesterday.
Consumer prices, excluding the
volatile gasoline and food components, rose in February at the
fastest annual rate in nearly four
years, while wages remained stagnant and industrial production fell.
The central bank, which hiked
rates in December for the first time
in nearly a decade, sounded a cautious note at its last policy meeting
in January, amid a sell-off on financial markets, weaker oil prices and
falling inflation expectations.
The Feds latest policy statement,
due to be released at 1800 GMT
along with updated economic pro-

TheEdgeProperty.com
Managing Director Au Foong Yee
Editor Lam Jian Wyn
Contributing Editor Sharon Kam
Assistant Editor James Chong
MARKETING & ADVERTISING

Account Director
Sharon Chew (012) 316 5628
BUSINESS DEVELOPMENT

Senior Manager Elizabeth Lay

ported yesterday that its Consumer Price Index continued to be

dragged down last month by low
gasoline prices. But prices for less
volatile goods rose a healthy 2.3%
in the 12 months through February,
the largest gain since May 2012.
The Fed cant stay on the sidelines for much longer, Steve Murphy, US economist for Capital Economics, wrote in an analysis of the
latest inflation data.
The European Central Banks decision last week to further ease monetary policy also may make the Fed
more confident that action has been
taken to underpin growth in Europe,
helping ensure a stalling of the global growth drag on the home front.
Given that the US economy is
continuing to grow and create jobs
at a respectable pace, analysts said
the Feds policy-setting committee
is likely to judge the risks as having
become more balanced, paving the
way for rate hikes later this year.
Reuters

UKs Osborne misses debt target

LONDON: British Finance Minister George Osborne said yesterday
he would miss a target for bringing
down public debt this year, but
stuck to his plan to get the public
finances back into the black by the
end of the decade.
Osborne, whose chances of becoming prime minister are tied to
the fortunes of the economy, also
announced sharply lower growth
forecasts, blaming the slowdown
in the global economy and weak
productivity growth at home.
Delivering an annual budget
statement to parliament, Osborne
said the outlook for the economy
would be worse if Britons voted
to leave the European Union at a
referendum in June.
The countrys official budget fore-

Osborne says his latest plans still foresee

a budget surplus by the end of the decade
equivalent to 0.5% of GDP. Photo by Reuters

casters had said a Brexit could have

negative implications for activity via
business and consumer confidence
and might result in greater volatility
in financial and other asset markets.
Britains economy was on track

to grow by only 2% this year, much

slower than the 2.4% forecast in November, and by 2.2% in 2017, down
from Novembers 2.5% estimate.
Osborne conceded he would
miss a target he set for himself as
the budget forecasters said public
debt would rise this year as a share
of gross domestic product (GDP).
Before last years national election, Osborne announced a new
fiscal charter, which committed the
government to bringing down the
debt ratio each year and to turning
the budget deficit into a surplus by
the 2019/20 financial year.
Osborne said his latest plans still
foresaw a budget surplus by the end
of the decade equivalent to 0.5% of
GDP, despite the slower economic
growth outlook. Reuters

US factory production rises for a second month

BY MICHELLE JAMRISKO

OPERATIONS

To order copy
Tel: 03-7721 8034 / 8033
Fax: 03-7721 8282
Email: hotline@bizedge.com

jections, will show how comfortable policymakers are in proceeding

with the gradual rate hike path they
embraced late last year.
In January, the Fed deferred altogether from characterising the risks
facing the US economy and its own
policy outlook, as unease grew over
the potential spillover from slowing
economies in China and Europe.
But a recent batch of strong US
economic data, including unexpectedly faster job growth in February, has eased fears that those
foreign headwinds, and the tighter
financial conditions they sparked,
could derail the US economy.
The unemployment rate at
4.9% in February is near the level
many Fed officials believe represents full employment.
Inflation also has shown signs
of stabilising, with one measure
published by the Dallas Fed rising
to 1.9%, just shy of the Feds medium-term 2% target.
The US Labor Department re-

WASHINGTON: Factory production

rose in February for a second month,
boosted by demand for business
equipment and indicating US manufacturing may be starting to stabilise.
The 0.2% increase in output followed a 0.5% gain in January, data
from the US Federal Reserve (Fed)
showed yesterday. It marked the
first back-to-back advance since
March-April 2015. Total industrial
production dropped 0.5% as utility
output plunged by the most since
March 2007.

US factories might be catching

a break from a modest climb in
energy prices even as they battle
US dollar appreciation in a bid to
regain momentum after months of
malaise. Manufacturing is struggling to re-accelerate amid tepid
global growth thats holding back
the US economy, a reason Fed policymakers will probably refrain from
raising interest rates at the conclusion of their two-day meeting.
Manufacturing output, which
accounts for about 12% of the economy, was projected to rise 0.1% last
month, according to the Bloomberg

survey median. Total industrial production was forecast to decline 0.3%.

Capacity utilisation, which
measures the amount of a plant
that is in use, fell to 76.7% in February from 77.1% the prior month.
Manufacturing capacity was unchanged at 76.1%.
Business equipment production
climbed 0.6% for a second month,
while the output of consumer durable goods increased 0.3% after
a 1.5% gain in January. Factories
turned out more primary metals,
computers and machinery last
month. Bloomberg

IN BRIEF
Denmarks central bank
cashes in on speculative
currency attack
COPENHAGEN: Denmarks central bank made hundreds of millions of dollars fighting back currency speculators last year. The
bank was forced to ratchet up
foreign reserves and slash rates
early in 2015 to keep its currency peg intact after Switzerlands
decision to jettison its franc cap
fed conjecture the Danes might
follow. In the event, Denmark
prevailed, even booking a handsome profit from the turmoil.
Danmarks Nationalbank made
about two billion kroner (RM1.24
billion) in profit from transactions focused on defending the
krones peg to the euro, it said
yesterday. Bloomberg

UK pay growth edges up,

unemployment
rate stays low
LONDON: Unemployment in
the United Kingdom held at its
lowest rate for a decade and wage
growth ticked higher as the labour market continued to improve. Wage growth excluding
bonuses climbed to 2.2% in the
three months through January,
the Office for National Statistics
said in London yesterday. Economists had forecast a pickup to
2.1% from 2% in the fourth quarter. Jobless rate fell by 28,000,
leaving the rate at 5.1%, the lowest since early 2006. Once again
the latest quarterly figures show
continuing high employment levels but no significant pickup in
earnings growth, said ONS statistician Nick Palmer. Bloomberg

Volatility hurting UBS

wealth-management
performance
ZURICH/FRANKFURT: UBS
Group AG chief executive officer Sergio Ermotti said the
wealth-management units
performance failed to fully recover in the first quarter from
the previous three months with
challenging conditions continuing into this year. Market
volatility has also affected our
wealth management clients, and
while client activity has recovered somewhat from the lows
we saw in the fourth quarter,
transaction-based revenues have
not rebounded to levels typically
seen in previous first quarters,
Ermotti said at a conference in
London yesterday. Bloomberg

Thailand nes executives

for insider trading
BANGKOK: Thailands market
regulator said yesterday it had
fined executives at several firms
for insider trading amid unprecedented pressure from international and Thai investors for
corporate governance reforms.
The Securities and Exchange
Commission (SEC) in Thailand
is seeking harsher penalties under Thai law for financial crimes.
A scandal over corporate governance erupted in December
when one of the countrys largest
companies, CP All, kept executives in their positions after the
SEC fined them record amounts
for insider trading. Reuters

T HU R SDAY M ARC H 17, 2 0 16 TH EEDGE F I N AN C I AL DAI LY

4 HOME BUSINESS

Sapura Resources to sell

education assets to Ekuinas
The RM247m price tag is nearly RM56m above the companys market value
BY SU PRI YA SU RENDRAN

KUALA LUMPUR: Sapura Resources Bhd (SapRes), which is controlled by tycoon Tan Sri Shahril
Shamsuddin, is proposing to sell
its education assets to Ilmu Education Group Sdn Bhd, the education
arm of government-owned private
equity firm Ekuiti Nasional Bhd
(Ekuinas), for RM246.99 million,
to focus on growing its property
and aviation businesses.
SapRes should pocket about
RM314.99 million, cash, from the
deal, inclusive of a RM68.01 dividend from a proposed reorganisation of one the units it is selling.
Interestingly, the price tag for
the assets is about RM55.74 million
above its market capitalisation of
RM191.25 million, according to the
closing price of its shares at RM1.37
yesterday, which slipped one sen
or 0.72% from Tuesday.
The deal is also the first under
Ekuinas new chief executive officer
Syed Yasir Arafat Syed Abd Kadir,
the private equity firms former
managing partner (investment),

who took over the position beginning this month as his predecessor Datuk Abdul Rahman Ahmad
retired on Feb 29.
In a bourse filing yesterday,
SapRes said the education assets it
is disposing of are its 49% interest
in APIIT Sdn Bhd, 49% stake in Asia
Pacific University Sdn Bhd (APU),
and 37.61% stake in Asia Pacific
Institute of Information Technology Lanka (Pvt) Ltd (APIIT Lanka).
The total disposal consideration comprises RM58 million for
APIIT, RM161.99 million for APU,
and RM27 million for APIIT Lanka.
Ilmu currently owns 51% of APIIT
and APU (APIIT Education Group),
which it bought from SapRes in
2011 for RM102 million.
Prior to the stake disposals, there
will be a proposed reorganisation,
which will involve the disposal by
APIIT to Ilmu of its entire interest
in Asia Pacific Schools Sdn Bhd
(APS) for RM138.8 million.
Thereafter, APIIT will declare
dividends to its shareholders (Ilmu
and SapRes), whereby Ilmu and
SapRes will be entitled to dividends

of RM70.79 million and RM68.01

millon respectively.
Subsequently, APIIT will undertake a bonus issue of 2.5 million new
APIIT shares to its shareholders.
SapRes said it had entered into
a conditional share sale agreement
with Ilmu in relation to the disposals. Under the deal, Ilmu has undertaken that should it sell any or
all of its shares in APIIT, APS, APU
and APIIT Lanka to a third-party
buyer within 18 months after the
proposed disposals are completed, it will first offer the shares to
SapRes, whereupon SapRes has 60
days to consider the offer.
This undertaking, however, will
cease to apply if Ilmu is listed or
has registered the prospectus for
its listing on any recognised stock
exchange, or if Ekuinas stake in
Ilmu falls below 51%.
SapRes is expected to realise a
one-off pro forma gain of about
RM192.2 million, based on its audited financial statements ended
Jan 31, 2015.
The group intends to use
RM144.6 million (58.5%) of the

sale proceeds for repayment of bank

borrowings, while RM90.8 million
(36.8%) will be channelled into future expansion and general working capital requirements, RM6.98
million (2.8%) will be set aside for
a proposed special dividend, while
the remainder will be for estimated
disposal expenses.
As for the RM68.01 million in
dividends that it will get from APIIT
under the proposed restructuring,
the group said it will use that for future expansion and general working
capital requirements.
SapRes said it is more value-accretive to the group in the long run to
use the funds from the disposals to
concentrate on growing its property business, namely its Lot 91 Kuala
Lumpur City Centre development,
as well as its aviation business.
The Lot 91 development, located
in Jalan Kia Peng, entails the construction and development of an
office tower, a convention centre
and a retail podium.
SapRes expects the proposed
disposals to be completed by the
third quarter of this year.

Puncak Niagas rebound sparks speculation

BY MEENA L A KSHANA

KUALA LUMPUR: Puncak Niaga

Holdings Bhds share price staged a
strong rebound in the past two days
and sparked speculation about the
companys next move now that it
has disposed of its water assets, and
its new oil and gas (O&G) venture
has fallen through.
It is known that Puncak Niaga
needs to have a core business to
fill the vacuum after the divestment
of its water assets to the Selangor
state government for RM1.55 billion cash last year.
Speculation has it that an asset
injection by controlling shareholder

Tan Sri Rozali Ismail is likely.

Yesterday, Puncak Niaga, which
had been on a downhill since
mid-November, saw its share price
jump as high as 15.25%, or 18 sen,
to a days high of RM1.36. It closed
at RM1.31 yesterday. The leap in its
warrant, Puncak Niaga-WB, was
even bigger, as it soared 19 sen or
42% to close at 64 sen yesterday.
Puncak Niaga handed over its
subsidiaries, Puncak Niaga (M)
Sdn Bhd and Syarikat Bekalan Air
Selangor Sdn Bhd, to the state governments Pengurusan Air Selangor
Sdn Bhd in October last year.
The group then announced that
it would be earmarking RM1 billion

of proceeds from the sale of its water assets to fund further expansion
into the O&G sector or venture into
oil palm plantation.
However, with depressed crude
oil prices, the O&G venture seemed
to have hit a snag. Puncak Niaga
said in the results announcement
that it had implemented a rightsizing exercise for its O&G division
to trim staff and operational costs
to minimal levels as the company
reviews its position in the sector.
For the full year, Puncak Niagas
net profit slid 73.6% to RM65.58
million or 15.58 sen per share in
financial year 2015 (FY15), from
RM248.38 million or 60.51 sen

per share in FY14, while revenue

dropped 69% to RM188.69 million
from RM606.64 million in FY14.
The group saw its loss before tax
widen sharply to RM152.4 million
in FY15, compared with RM8.9 million in FY14, due to lower revenue
in the O&G segment, impairment
losses on goodwill and assets, and
higher operating costs in the construction segment.
The groups cash and bank balances stood at RM378.55 million
as at Dec 31, 2015, while loans and
borrowings stood at RM71.2 million. It declared a special dividend
of RM1 per share late last year after
the divestment.

Customs
completes audit
of Hiap Tecks
subsidiaries
BY G H O C H E E Y UA N

KUALA LUMPUR: Hiap Teck

Venture Bhd, which is among
six public-listed steel companies that have been raided by
the Royal Malaysian Customs
Department last month, said
the enforcement body had completed the audit of its two subsidiaries.
Customs has completed its
audit in respect of the two subsidiaries, and customs has returned all documents taken into
custody and released all bank
accounts of a subsidiary frozen
for the purpose of the audit,
the steel maker announced in
its filling with Bursa Malaysia.
It added that there had been
no material effects on the operations of the group arising from
the customs audit.
Other affected public-listed
companies are Southern Steel
Bhd, Ann Joo Resources Bhd,
Wah Seong Corp Bhd, Amalgamated Industrial Steel Bhd and
Prestar Resources Bhd.
Recall that The Edge Financial Daily last month reported
that more than 10 steel companies, including four public-listed companies, were raided
by customs officers and policemen.
One day after the report, Hiap
Teck confirmed the raid. It said
customs had taken custody of
certain documents of two of its
subsidiaries and frozen a bank
account of one of the two subsidiaries for purposes of audit
and investigation.
In an earlier announcement
to Bursa, Hiap Teck said it was
seeking legal advice.
The industry-wide raid that
was carried out in a high-handed
manner has caught frak. The Malaysian Iron and Steel Industry
Federation has lodged a complaint to the finance ministry
about harsh treatment of its
members.
It is learnt that the raid was
mainly on checking the inventory of hot-rolled coils a key input for steel products produced
by downstream players.

Fernandess Indian roots may help skirt air rules

HYDERABAD: Malaysian airline tycoon Tan Sri Tony Fernandes, chief
executive of budget carrier AirAsia
Bhd, said he had applied for a special version of Indian citizenship,
a status that may allow him to fully
own his local unit and skirt some
aviation rules that restrict foreigners.
There will be a big party when I
get my approval, he told reporters
in the southern Indian city of HyFilepic of shoppers at a market place in
Ahmedabad, India. I will be the same as
everyone else, says Fernandes. Photo
by Reuters

derabad yesterday, where he was

attending an air show. I will be the
same as everyone else.
If India grants the special citizenship to Fernandes, 51, he may
be able to fend off rivals who say
AirAsia is violating foreign ownership rules by fully controlling the
local unit even though its allowed
to hold only up to 49%.
Becoming an overseas citizen
of India may clear the path for the
British-educated chief executive
officer to acquire, in his personal
capacity, 100% of the venture he
now shares with Tata Group and

a private investor.
This whole foreign thing is bizarre for me, Fernandes, whose
parents are from India, told reporters. Whats important? Is it creating
jobs, [or] is it creating investments,
increasing tourism?
The Malaysia-listed carrier started its India operations in June 2014,
intensifying competition in an air
travel market where operators had
racked up US$10 billion in losses over
the past seven years. AirAsia (India)
Pvt Ltd is a joint venture between
AirAsia, Tata Sons Ltd and Telestra
Tradeplace Pvt Ltd. Bloomberg

T HU RSDAY MA RC H 17, 2016 T HEED G E FINA NCIA L DA ILY

HOME BUSINESS 5

Ranhill under pressure

on first trading day
Stock closed at RM1.01 with 48 million shares changing hands
BY KAMARUL ANWAR

KUALA LUMPUR: Utility company Ranhill Holdings Bhds shares

faced persistent selling pressure
on the first trading day. It slipped
to an intraday low of RM1 nearly 17% below its retail public offer
price of RM1.20.
The stock closed at RM1.01 with
48 million shares changing hands.
It seems a lacklustre debut for
Bursa Malaysias biggest initial
public offering (IPO) so far this
year. Ranhill Holdings president
and chief executive Tan Sri Hamdan Mohamad, in commenting
on the stocks performance after
it opened 10 sen lower earlier yesterday, said that market sentiment
is now soft.
But hopefully, investors [will]
come back, said Hamdan who
controls a 33.52% stake in Ranhill.
On its operations, Hamdan said
Ranhill Holdings is looking to tri-

ple the capacity of its industrial

wastewater business in China to
1,000 million litres per day (MLD)
in three to five years, while aiming
to increase its power plant capacity size to 1,000MW from 380MW
currently.
It is an aggressive target that
would require heavy capital expenditure (capex) in the next five
years. But Ranhill Holdings chairman Tan Sri Azman Yahya said that
its wastewater business is one that
requires partnership, so the capex
burden on Ranhill is reduced.
The issue of funding is important. But in the case of our
[wastewater] business, its expertise lies in design, manufacturing
and commissioning. And we can
always find equity partners for a
treatment plant in China, said
Azman.
Ranhill Holdings initially targeted to raise RM637.5 million
from its IPO after the reverse take-

Ranhill Holdings Bhd (Intraday)

RM
1.20

Vol (mil)
1.6
IPO price

1.15

1.2

1.10
0.8
1.05
0.4

RM1.01

1.00
0.95

March 16, 2016

9am

March 16, 2016

5pm

over of Symphony House Bhd at

RM1.70 per share. The retail portion was undersubscribed. Subsequently, the offer price was reduced to RM1.20.
About 70% of its IPO proceeds

will be used to repay bank borrowings, and 18% for working capital.
And we [just] listed. So, previously (before the IPO), there was
never an issue with sourcing for
funding or looking for partners,
said Azman.
Hamdan said that Ranhill Holdings industrial wastewater business in China is the only Malaysian
company in the business.
Other Malaysian companies
deal with either potable water or
municipal wastewater business.
And those businesses are already
controlled by state-owned enterprises there, he said.
Given Chinas recent stringent
requirements on environmental
control, Ranhill Holdings industrial wastewater business is in a
growing market, said Hamdan.
Currently the business makes up
about 10% to 15% of the group
revenue, he said.
While its water treatment op-

eration in Johor is still the biggest

earnings contributor, Hamdan
said he hopes the industrial wastewater and energy businesses will
be the growth engine of Ranhill
Holdings.
Currently, its industrial wastewater segment in China has a capacity of 340MLD in four provinces. Hamdan said Ranhill Holdings
is also working with a company
in Thailand to tap into the Indochina markets.
On its electricity operations,
Ranhill Holdings is still positive
on Sabah, where it has two 190MW
combined cycle gas turbine plants
there. Given the states development needs, Hamdan sees potential in powering up the east coast
of Sabah.
In Sandakan alone, it needs
at least 300MW now. We are
looking at Sandakan and Lahad
Datu (as potential expansion
locations.

T HU R SDAY M ARC H 17, 2 0 16 TH EEDGE F I N AN C I AL DAI LY

6 HOME BUSINESS

FGV: Zhong Ling buy will boost our downstream presence

KUALA LUMPUR: Felda Global
Ventures Holdings Bhd (FGV) is
confident that its latest venture, the
planned acquisition of a 55% stake
in Zhong Ling Nutril-Oil Holdings
Ltd, valued at RM976.25 million,
will boost its presence in high-margin downstream activities.
In a statement yesterday, group
president and chief executive officer Datuk Mohd Emir Mavani Abdullah said the intended investment

had cleared all necessary due diligence in accordance with FGVs investment and governance policies.
The financial and tax due diligence that FGV has performed
covers Zhong Lings financials. All
subsidiaries under Zhong Ling have
been audited annually in accordance with Chinas regulations, he
said.
Emir said Chinas increasing demand potentials are an attractive

prospective market for expansion

of FGVs downstream capabilities, particularly in the consumer
packed goods business.
The strong demand for blended cooking oil in China is also anticipated to provide an avenue for
FGVs palm-based products in the
massive Chinese market.
Ultimately, the group will be
able to penetrate further downstream palm-based products such

as margarine, shortenings and food

processing ingredients, he said.
Emir said FGV views Zhong Ling
as a strong local partner for the
companys downstream expansion
in China not only because of its
solid brand and deep market insights but also for it being ranked
10th in the retail cooking oil market in China.
Zhong Ling will be a firm avenue
for distributing our palm oil products,

Top Glove targets 20% to

30% sales growth for FY16
Its 2Q net profit surges 86.6% to RM104.61m
BY B I L LY TOH

KUALA LUMPUR: Top Glove Corp

Bhd has targeted a sales growth of
20% to 30% for the financial year
ending Aug 31, 2016 (FY16). The
glove maker is also eyeing one or
two merger and acquisition (M&A)
opportunities amid intensified
competition in the nitrile glove
segment as major industry players
expand their capacity.
Managing director Lee Kim
Meow welcomed the stronger competition, saying the more efficient
player will stand out.
Top Glove has been focusing a
lot on improvements in efficiency
with continuous upgrading of existing production lines, [our] newest
factory equipped with advanced
technology production lines, and
improvement in manpower efficiency with automation and re-engineering, he said in a conference
call yesterday after the company
announced its second quarter ended Feb 29, 2016 (2QFY16) results.
The improvement in efficiency
could be seen from the rise in the
average number of gloves produced
by each employee per year. The output in FY15 was 3.76 million pieces

per employee against 3.08 million

pieces per employee in FY13, a
growth of 22.08%.
In the first half of FY16 (1HFY16),
it improved further to 3.84 million
pieces per employee while the industry only managed 2.5 million
pieces, Lee said.
Top Glove, the worlds largest
maker of natural rubber gloves, earlier announced its 2QFY16 results
that saw net profit surge 86.6% to
RM104.61 million or 8.36 sen per
share, from RM56.07 million or 4.51
sen per share in 2QFY15. Revenue
rose 21.3% to RM693.86 million,
from RM572.25 million previously.
Lee said the outlook is optimistic based on the growth in 1HFY16,
whereby there was a 31% growth
in sales to RM1.49 billion from
RM1.14 billion in 1HFY15. Net profit, meanwhile, more than doubled
to RM232.96 million from RM104.75
million in 1HFY15.
While the competition in the
nitrile glove segment has grown,
Top Glove is confident that the demand is still very good and the double-digit growth could be sustained.
The group is resilient to external economic turmoil as 80% of
our products are for the medical

Lee: The group is resilient to external

economic turmoil as 80% of products
are for the medical sector. Photo by
Patrick Goh

sector, Lee added.

Lee also mentioned that there
will be minimal impact from the
hike in the minimum wage. Given
that labour costs represent about
10% of expenses, the 10% hike in
the minimum wage will translate
into an increased cost of about 1%.
The ongoing improved automation
will offset the effect of the hike, he
added.

While there has been an increase

in the price of raw materials recently, Lee said, there will not be a rise
in the average selling price unless
the upward trend is definite. This
is to ensure there will be minimal
interruption for our customers, he
said in reply to a question during
the conference call.
On its M&A opportunities, Lee
said that the group is always open
to M&As and is in negotiations
at this stage. He added that the
company should be able to acquire one or two glove companies
this year.
In the conference call, Lee also
said that the secondary listing of
Top Glove on the Singapore Exchange will give shareholders
the option of transferring their
shares to Singapore to trade and
vice versa.
He is optimistic that this will enhance Top Gloves investor reach
and diversify its investor base.
The listing in Singapore is expected to be around the end of
June tentatively.
At the close of trade yesterday,
Top Glove shares were down by 12
sen or 2.26% to RM5.20 with 8.017
million shares traded.

MOST VIEWED STORIES ON

theedgemarkets.com

Bisons IPO oversubscribed by 6.94 times

BY MEENA L A KSHANA

KUALA LUMPUR: Bison Consolidated Bhds initial public offering

(IPO), under which 15.5 million
shares were made available for
applications by the Malaysian
public, has been oversubscribed
by 6.94 times.
In a press statement yesterday, the convenience store operator said it received 6,754 applications for 123.17 million IPO
shares available for public subscription, representing an over-

subscription rate of 6.94 times.

A total of 3,800 applications for
52.84 million IPO shares were received for the bumiputera category,
which represents an oversubscription of 5.82 times, while under the
public category, 2,954 applications
for 70.33 million IPO shares were
received for an oversubscription
of 8.07 times, the statement read.
Bison said the balloting of successful applications was conducted yesterday afternoon, and that all notices
of allotment for the IPO shares will
be mailed to successful applicants

on or before March 28, 2016.

It was reported on March 4 that
Bison planned to raise RM89 million from its IPO, which comprises
80.61 million shares 62.31 million for institutional offering, and
18.3 million for retail subscription.
Of the 18.3 million shares, 15.5
million IPO shares were available
for application by the Malaysian
public, of which 50% were allocated
to bumiputera investors and 50%
under the public category.
The remaining 2.8 million IPO
shares were reserved for subscrip-

tion by eligible persons, Bison said.

Both the final prices for the institutional and retail portions of the
IPO have been fixed at RM1.10 per
share. While institutional offering
represented 20.1% of its enlarged
issued and paid-up capital, the
retail portion represented 5.9%.
Bison managing director Dang
Tai Luk had said the group planned
to use RM50 million of the IPO
proceeds to fund 115 new store
openings by October 2017. Bisons listing is tentatively slated
for March 29, 2016.

which is our main intention, he said.

As part of its transformation
strategy and aggressive growth
plans, FGV has identified the Chinese market as a key pillar of revenue enhancement for the group.
The company plans to strengthen its position in China, the largest
importer of edible oils, through a
strategic acquisition of a stake in
a well-known local player, it said.
Bernama

Vivocom said to
nalise RM1.5b
worth of jobs by
end-September
BY Y IMIE YO N G

KUALA LUMPUR: ACE Market-listed Vivocom International

Holdings Bhd is said to be in the
midst of finalising some RM1.5
billion worth of contracts over
the next six months, according
to CIMB Investment Bank Research (CIMB Research).
This was a big positive surprise, in our view, as combined
with RM600 million in new contract wins announced so far,
and assuming it secures RM800
million to RM1.6 billion from
[the] Gemas-JB (Johor Baru)
double-tracking project, our
forecast of RM3 billion worth
of contract wins in 2016 should
be met or even surpassed, said
CIMB Research in a note yesterday.
The note was issued pursuant to a meeting that Vivocom
executive director, Choo Seng
Choon, had with 13 fund managers at CIMB Singapore.
Previously known as Instacom Group Bhd, Vivocoms
share price has been trending
upward since Sept 18 last year,
as the group shifts away from
being a telecommunications
tower builder to a construction
company.
The counter surged to a multi-year high of 34 sen on Nov
20 and Nov 24 last year, from
eight sen on Sept 18, an increase
of 325%, though it pared some
gains subsequently. Yesterday, it
closed unchanged at 26.5 sen after some 16.1 million shares were
traded, giving it a market capitalisation of RM655.94 million.
According to CIMBs report,
Vivocom, in explaining its competitive advantage and superior margins versus other listed
construction companies, has
emphasised that it runs a negotiated-tender business model, with two main focus segments: as a subcontractor to
China Railway Construction
Corp Ltd (CRCC) and as a main
contractor to non-CRCC-related jobs.
It retained its add rating
on the stock, with a target price
of 67 sen, adding that potential
rerating catalysts are contract
win announcements and strong
first quarter ended March 31,
2016 results.

T HU RSDAY MA RC H 17, 2016 T HEED G E FINA NCIA L DA ILY

HOME BUSINESS 7

UMW Holdings risks

drop from FBM KLCI
As its market capitalisation shrinks more than a quarter
Multi-billion market cap
evaporates

Net profit/loss (RM mil)

12

300

Market cap (RM bil)

RM

15

200

12

100

10

7.54

8.97

8.6

11.44

12.06

12.03

6
3

2014

Dec 31

June 30

2015

March 16

fourth quarter earnings.

Its net profit for FY15 came in
below consensus expectations.
The group swung to a net loss
of RM38.93 million compared to
a net profit of RM651.97 million
in FY14 due to RM337.7 million
impairment loss, while revenue
slipped 3.4% to RM14.41 billion in
FY15 from RM14.93 billion in FY14.
Going forward, Wong expects
UMW Holdings to continue to face
deteriorating market conditions for
its automotive and O&G (including
valued business) divisions.
Toyota had raised prices across
all its car models in Malaysia last
year. Wong expects its margin on
the automotive segment to remain
weak this year because of stiff competition plus high marketing and
distribution costs.
He said the full-year impact of
a weaker ringgit against the US
dollar will also weigh down the
earnings.
On UMW Holdings automotive
segment, Wong said its 51%-owned
Toyota has set a lower target of

March 31

2015

Dec 31

2014

Sept 30

RM6.50

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Sept 30

-300

13.46

-200

11.89

-100

11.85

RM10.22

June 30

KUALA LUMPUR: UMW Holdings

Bhd is likely to drop from the list of
30 component stocks of the FBM
KLCI as its market capitalisation
has shrunk more than a quarter
over the past year, no thanks to
the continued decline in its share
price since August 2014.
UMW Holdings share price
closed at RM6.50 yesterday, its
share price shedding nearly 38%
from RM10.38 a year ago.
In a report yesterday, Hong Leong Investment Bank Research
(HLIB Research) said UMW Holdings is at risk of being excluded
from the FBM KLCI constituents as
its free float market capitalisation
has dropped to 38th spot, lower
than the minimum 36th spot in
the upcoming review on June 30.
According to HLIB analyst Daniel Wong, UMW Holdings' share
price is unlikely to recover much
and climb above the 36th spot
as there were lack of near-term
catalysts.
UMW Holdings was hard hit
by a double whammy soft auto
sales and the downturn in the oil &
gas (O&G) sector after the oil rout.
Already, UMW Holdings has
dropped from most analysts recommendation list. Among the 17
analysts who track the group, seven has a hold recommendation
on the stock, while 10 have a sell
call on the stock, according to
Bloomberg.
Analysts have slashed their
earnings forecasts for the financial year ending Dec 31, 2016
(FY16) by 20% to 50%, while
FY17s was trimmed 28% to 40.5%
after the release of the groups

Double whammy drags

UMW into losses

March 31

BY GH O C H EE Y UA N

2016

87,000 sales (including 2,000 sales

from Lexus) for FY16 as compared
with FY15s 95,900 sales (including
2,100 sales from Lexus).
Meanwhile, he expects UMW's
38%-owned Perusahaan Otomobil
Kedua Sdn Bhd (Perodua) likely to
perform weaker in FY16 despite
a higher sales target of 216,000
units versus 213,300 last year, given
lower revenue mix and full-year
impact from the ringgit depreciation in FY16.
On the O&G segment, Wong
said the weak oil price at US$30
to US$40 per barrel has affected
the profitability of 55.7%-owned
UMW Oil & Gas Corp Bhd and the
O&G valued business.
Wong also raised concerns
about UMW Holdings affordability of dividend payments as a
result of the poor earnings.
He said the total dividend for
UMW in FY15 was 20 sen, which is a
near record low for the past 10 years.

Muhibbah seeking
construction opportunities
in Myanmar, Indonesia
BY TA N S IE W MUN G

PHNOM PENH: Muhibbah Engineering (M) Bhd is looking to expand

its construction business into Myanmar and Indonesia following its
successful experience in Cambodia.
We are always looking for new
markets. We see Myanmar and Indonesia as good markets [with]
good opportunities, said the construction firms co-founder and
managing director Mac Ngan Boon.
Mac was speaking to the media
yesterday at the sidelines of the 20th
anniversary celebration of Cambodias international airports and
launch of a new terminal extension.
Muhibbah owns a 21% effective
stake in Cambodia Airports, which
manages all three international airports in the country (Phnom Penh,
Siem Reap and Sihanoukville). Cambodia Airports major shareholder
is French-based Vince SA, Europes
largest construction company.
We are more of an international
player now, so we dont stop looking for new businesses [abroad],
said Mac, adding that Muhibbah is
open to participating in concession
opportunities.
The group, he said, is prepared
to venture together with Vinci in
other airport projects provided they
are of the right size.
According to an Alliance Research report dated March 1, the
21% stake in the concession could
be worth RM677 million based on
an annual passenger traffic growth
of 5% until 2040.
When the tourism industry improves, the aviation business will
grow as well, he said, pointing out
that passenger arrivals in the three
airports have more than tripled to
6.5 million since Cambodia Airports
started managing them in 1995.
Meanwhile, with the slowdown in
the global construction business, the
group is hoping to maintain its revenue and bottom line for the financial
year ending Dec 31, 2016 (FY16) by

getting more projects in Malaysia.

The group saw its FY15 net profit rise 5% to RM85.58 million from
RM81.55 million in FY14, while
revenue fell 7.5% to RM1.6 billion
from RM1.73 billion.
Amid the challenging outlook
for the oil and gas (O&G) industry,
we are lucky that our business is
quite broad. We think that [one]
sector is able to mitigate the downturn in [another] sector, that is our
advantage, Mac said.
On the move by Petroleum Nasional Bhd to cut its capital expenditure, Mac said it is expected to affect every player in the O&G sector.
But he sees the Refinery and Petrochemical Integrated Development
(Rapid) project in Pengerang, Johor
as a mitigation factor.
The group has so far won RM860
million worth of projects from Rapid.
We continue to pick up downstream projects. Thats what we can
do to mitigate the costs of upstream
O&G business, he said.
Mac believes infrastructure projects in Malaysia are sufficient to enable industry players to go through
the downturn in the next few years
while waiting for overseas markets
to stabilise.
The Malaysian government has
embarked on a number of major
projects and hopefully we [can] take
advantage of some of these, he said.
Mac also sees its construction
business in Malaysia as a natural
hedge against the reverse trend in
the ringgit-US dollar exchange rate.
The business transactions of
Cambodia Airports and Muhibbahs 61%-owned crane business
unit Favelle Favco Bhd are conducted
using US dollars. They account for
about 60% of the groups revenue.
Muhibbahs financial director
Shirleen Lee Poh Kwee said the
group benefits when the US dollar
strengthens against the ringgit, but
the impact wont be drastic when
the trend reverses, as projects like
Rapid are still ringgit-denominated.

T HU R SDAY M ARC H 17, 2 0 16 TH EEDGE F I N AN C I AL DAI LY

8 HOME BUSINESS

Red Senas QA
likely in Thailand,
Indonesia and Msia
It is engaging with regional M&A specialists, says CEO
BY Y I MI E YONG

PETALING JAYA: Red Sena Bhd, Malaysias first food and beverage (F&B)
special-purpose acquisition company (SPAC), said Thailand, Indonesia
and Malaysia are the top three countries it is looking at in undertaking its
qualifying acquisition (QA).
We have been covering different
countries over the years. In terms of
strong potential, Thailand, Indonesia, Malaysia, then maybe Vietnam,
[the] Philippines in that particular
order, said the SPACs chief executive
officer Joseph Tan Eng Guan when
asked if the company had decided
on any particular country to source
its QA from.
If you look at the population size
and F&B business development, you
will naturally come to this kind of
order as well, he told reporters after Red Senas first annual general
meeting yesterday.
Listed on Dec 10 last year, Red
Sena previously said it is eyeing op-

Tan: Whatever happened to the other SPACs

is irrelevant to us. Photo by Kennya Yap

portunities in Malaysia, Thailand,

Indonesia, the Philippines, Vietnam
and Singapore.
Tan, who previously served as
chief financial officer of Fraser &
Neave Holdings Bhd, said Red Sena
is still in the stage of identifying and
screening potential assets for its QA.
The company is currently engaging
with regional merger and acquisition
(M&A) specialists.
Over the next few months, we
hope to hear more feedback from

them, he said, adding that the company had yet to talk to any party.
Tan was also asked if Red Sena
would speed up its acquisition process following the recent failure of
another SPAC, CLIQ Energy Bhd, in
obtaining the Securities Commission
Malaysias approval to extend the
deadline to complete its QA.
Whatever happened to the other
SPACs is irrelevant to us, he replied,
adding that three years are sufficient
for Red Sena to complete its QA.
Red Senas initial public offering
raised RM400 million, of which 92%
(RM368 million) will be placed in a
cash trust account to acquire operating companies or assets in the
branded packaged F&B business.
The trust value per share of Red
Sena is 46 sen. Tan said the six-month
interest rate offered for the cash in
its trust account is 4.4%.
Shares in Red Sena closed 1.25%
lower at 39.5 sen yesterday, with a
market capitalisation of RM395 million.

Axiata prices US$500m sukuk

for Ncell acquisition
BY SURIN MURUGIAH

KUALA LUMPUR: Axiata Group Bhd

has successfully priced its 10-year
US$500 million (RM2.07 billion)
sukuk (sukuk issuance), which will
be issued via its wholly-owned Malaysian-incorporated special-purpose vehicle, Axiata SPV2 Bhd.
The sukuk issuance is the third
issuance under Axiatas multi-currency sukuk issuance programme,
with an aggregate nominal value of
US$1.5 billion (or its equivalent in
other currencies), established on
July 17, 2012.
Proceeds from the sukuk issuance
will be used to fund the proposed
acquisition of Nepalese phone carrier Ncell Pte Ltd, said Axiata in a
statement yesterday.
The sukuk issuance has been assigned ratings of Baa2 and BBB
by Moodys Investors Service Inc and
Standard & Poors Ratings Services
respectively.
Axiata said the sukuk issuance,
which will be listed on Bursa Malaysia
(under the Exempt Regime) and the
Singapore Exchange, is structured
based on the syariah principle of
wakala, whereby the underlying assets are 100% airtime vouchers, representing an entitlement to a specified
number of airtime minutes on the

mobile telecommunications network of subsidiaries of Axiata for

on-net calls.
Axiata said the book-building
exercise commenced with an initial price guidance of US Treasuries
(UST) +2.6% area.
It said demand for the sukuk issuance led to a final price guidance
of UST +2.45% area, and 0.05% at
Asian close/London mid, with books
in excess of US$1.4 billion.
Axiata said the sukuk issuance
was finally priced at the tight end
of the final price guidance, with a
final book of over US$900 million
orders, representing a bid-to-cover ratio of over 1.8 times and a final
yield of 4.357%.
The issuance by Axiata attracted
interest from a diverse group of Islamic and conventional investors,
comprising asset management
companies, financial institutions,
insurance companies and sovereign
wealth funds, with participation from
64 accounts.
Axiata president and group chief
executive officer Datuk Seri Jamaludin Ibrahim said the strong participation of international investors in
this sukuk issuance is validation of
Axiatas solid fundamentals.
We are pleased that investors are
supportive of our aspirations as a

regional telecommunications champion. This sukuk issuance, the third

drawdown off Axiatas US$1.5 billion
multi-currency sukuk issuance programme, continues to demonstrate
Axiatas ability to access the debt capital markets as it saw strong cross-border participation from a wide and
diverse base of investors, with 71%
from Asia, 11% from Europe and 18%
from [the] Middle East.
Charting a new benchmark, we
have taken this opportunity to build
Axiatas curve with a 10-year issuance maturing in 2026, in line with
our long-term strategy and growth
plans. Axiata will continue to look
towards opportunities in the capital
markets to strengthen our capital
base, he said.
Jamaludin said that through Ncell,
Axiata will be entering the fast-growing brownfield market of Nepal, with
a controlling stake in its No 1 telecom
operator.
As a rare and opportunistic asset, Ncell would be immediately accretive to Axiatas financials when
consolidated.
At the same time, Axiatas regional footprint will expand to a total of
10 countries in Asia, strengthening
its position to further unlock shareholder returns and sustain long-term
growth, he said.

Maybank named Best Private

Banking Services in Malaysia
BY ME E N A L A K S H A N A

KUALA LUMPUR: Malayan Banking Bhd (Maybank) has been

named the Best Private Banking
Services in Malaysia by a global
wealth management poll undertaken by Euromoney involving
more than 400 private banks in
over 69 countries.
In a statement, Maybank said
it had clinched the title under the
13th Euromoney Private Banking
and Wealth Management Survey
2016 for the fourth consecutive
year and seventh time.
The title comes in addition
to recognitions received by the
bank in 11 other categories in the
survey.
Maybank claimed the top spot
in commercial banking capabilities; research and asset allocation
advice; philanthropic advice; SRI/
social impact investing; succession planning advice; and trusts,
innovative technology client experience and back office systems.
Maybank was also ranked
the top in three categories of
net-worth-specific services, which
measure the amount of assets
managed by banks.
The bank emerged No 1 in
the category of ultra-high-networth clients (with managed assets of more than US$30 million
[RM124.2 million]), high-networth clients (US$5 million to
US$30 million) and super affluent clients (US$1 million to US$5
million).
Euromoneys 13th annual private banking and wealth management survey provides a qualitative
and quantitative review of the
best services in private banking
by region and area of expertise.

Today, we are among

the leaders in this
business in Southeast
Asia, with total assets
under management
averaging at a growth
rate of 14.33% in the
last ve years.
Maybank community financial services Malaysia head Datuk
Hamirullah Boorhan said the recognitions reinforced Maybanks
position as the leading wealth
management provider in Malaysia, in terms of service and product offerings.
This is the first time in our history that we have topped 12 categories of the Euromoney Awards
in Malaysia, and among the best
for innovative technology for client experience in Asia, he said.
Hamirullah said wealth management was a key component of
Maybanks retail banking business
and was a segment growing at an
annual average rate of about 10%
over the last five years.
Today, we are among the
leaders in this business in Southeast Asia, with total assets under management averaging at a
growth rate of 14.33% in the last
five years, he said.
Maybanks premium banking
services are now present in Malaysia, Singapore, Indonesia, the
Philippines, Cambodia and Brunei through an extensive network
of over 130 private wealth and premier wealth centres and lounges
strategically located in the region.

Creador to invest RM1b in consumercentric eld over next ve years

KUALA LUMPUR: Malaysian private equity firm Creador plans to
invest RM1 billion in the country over the next five years and
in the consumer-centric field.
Its founder and chief executive officer Brahmal Vasudevan
said the firm is looking for different types of consumer-centric
investments, including retail,
education, business information
and business services.
He was speaking at the media
launch of Creadors new pharmacy chain, RedCap, here yesterday.
It is a great time to invest as
the market is down; valuation is
cheap and there are not many
competitors, Brahmal said.
After investing in different
business lines, such as CTOS,
GHL, Bonia, OldTown White
Coffee and 7-Eleven, the equi-

ty firm is now looking at other

areas to invest and of interest to
Malaysian consumers.
The company does not, however, plan to venture into commodity businesses, such as
crude palm oil, and oil and gas.
With 80% of Creadors capital
coming from outside Malaysia,
the firm has this year invested
RM100 million in India, another
RM100 million in RedCap and
RM250 million in three upcoming investments.
For RedCap, the RM100 million will be used to buy the initial
industry platform and for the
opening of new stores to reach
300 over the next three years,
said Brahmal.
RedCap has opened 25 stores
to date and hopes to exceed the
100th mark this year. Bernama

Correction:
IN the article entitled CPO export duty augurs well for downstream
sector that was published in The Edge Financial Daily yesterday,
it was written that Indonesias export duty on palm oil is US$450
per tonne. The term should be levy and the amount is US$50 per
tonne. The error is regretted.

T HU RSDAY MA RC H 17, 2016 T HEED G E FINA NCIA L DA ILY

ST O C KS W I T H M O M E N T U M 9
Stocks with momentum were picked up using a proprietary algorithm by Asia Analytica Data Sdn Bhd and rst appeared at www.theedgemarkets.com.
Please exercise your own judgement or seek professional advice for your specic investment needs. We are not responsible for your investment decisions.
Our shareholders, directors and employees may have positions in any of the stocks mentioned.

M3 TECHNOLOGIES (ASIA) BHD (-ve)

THE rarely traded shares of M3 Technologies (M3Tech) (fundamental: 1.55/3; valuation: 0.3/3) triggered our momentum alert
for the first time yesterday, rising as much as
10.71% to 15.5 sen before easing to close at
15 sen sen, still up 7.14%, with 14.32 million
shares traded.
The company released its financial results
for the second quarter ended Dec 31, 2015
(2QFY16) on Feb 29. Revenue for the quarter grew 31.9% to RM11 million, from RM8.3
million a year ago. However, net loss widened
55.8% to RM1.2 million, from RM798,000 in
2QFY15.
Quarter-on-quarter, net loss nearly tripled
from RM424,000, despite flat revenue. The
higher loss was attributed to foreign currency
fluctuation and lower profit margins from the
Trading and Distribution segment, in order
to maintain competitiveness.
M3Tech has been aggressively selling its
new products i3Displays and Getsnapps platform both overseas and locally. According
to the company, feedback was encouraging
and the products generated positive results
M3 TECHNOLOGIES (ASIA) BHD

in 2QFY16. Going forward, it will continue to

maintain the momentum to increase growth
in the coming quarters.
The company also has new software products in the pipeline, which will be rolled out
to its other subsidiaries by 3QFY16.
Meanwhile, it is continuously restructuring and rationalising some subsidiaries, e.g.
Indonesia, Thailand and China, to ensure
efficient use of resources with a view of long
term success.
M3Tech is a mobile value added services
provider, and is involved in the delivery and
settlement of mobile messaging and data
services, including SMS, MMS and WAP. It
is connected to more than 175 mobile operators around the world.
Last Wednesday, M3Tech announced that
it has collaborated with Indonesias largest
mobile operator, Telkomsel, to launch T-Bike
Smart Assistant for Motorcycles (T-Bike) on
March 3. A machine-to-machine initiative,
T-Bike allows vehicle owners to monitor,
guide, and control their motorcycles directly
from a smartphone.
Valuation score*
0.30
1.55
Fundamental score**
TTM P/E (x)
TTM PEG (x)
1.01
P/NAV (x)
TTM Dividend yield (%)
27.27
Market capitalisation (mil)
194.76
Shares outstanding (ex-treasury) mil
0.75
Beta
0.11-0.22
12-month price range
*Valuation score - Composite measure of historical return & valuation
**Fundamental score - Composite measure of balance sheet strength
& protability
Note: A score of 3.0 is the best to have and 0.0 is the worst to have

SCIENTEX BHD (+ve)

SHARES of Scientex (fundemental: 1.7/3; valuation: 1.5/3) was up by 4 sen or 0.36% to close
at RM11.24 on the back of heavy trading of
1.24 million shares compared to its 200-days
average volume of 173,558 despite the lack
of any new announcement. Since the end of
last year, the share price has risen by 16.8%.
For the first quarter of the financial year
ended 31 October 2015 (1QFY16), the groups
net profit more than doubled to RM60.85
million from RM30.27 million in the corresponding period a year ago. Its revenue also
registered an increase of 27.73% to RM550.6
million from the RM431.07 million reported
in 1QFY15.
In its manufacturing segment, the improved performance was attributed to the
higher contribution from the industrial and
consumer packaging products, as well as
the contribution from the newly acquired
Scientex GreatWall Ipoh Sdn Bhd (SGW
Ipoh). Better profit margins and contribution from SGW also helped to improve profit

SCIENTEX BHD

for the manufacturing segment.

Its property segment also recorded an
improve revenue of 43.14% to RM158.6 million from RM110.8 million in the preceding
corresponding quarter, attributed mainly to
progress sales recognition from the completion of The Garden Residences development
in Pasir Gudang, Kulai, Senai and Malacca.
On its current financial year prospect, the
group said the recent acquisition of SGW
Ipoh has started to produce results as its
revenues and profits contribute positively
to the top and bottom lines of the Groups
post acquisition.
For the property segment, it will continue to remain focused on affordable homes
in its projects after the successful launch of
this category of properties in Pasir Gudang,
Johor, in May 2015.
The stock is currently trading at a trailing P/E of 13.42 times and is 2.51 times its
book value, with a market capitalisation of
RM2.55 billion.
Valuation score*
1.50
1.70
Fundamental score**
13.43
TTM P/E (x)
0.51
TTM PEG (x)
2.52
P/NAV (x)
1.96
TTM Dividend yield (%)
2,534.91
Market capitalisation (mil)
Shares outstanding (ex-treasury) mil 226.33
0.78
Beta
6.41-11.26
12-month price range
*Valuation score - Composite measure of historical return & valuation
**Fundamental score - Composite measure of balance sheet strength
& protability
Note: A score of 3.0 is the best to have and 0.0 is the worst to have

HOME BUSINESS

Mah Sing says time

to shop for land as
rebound in Malaysia seen
KUALA LUMPUR: Mah Sing Group Bhd
said it is ready to buy more land after holding back in 2015 as the company predicts
a rebound in Malaysias property sales in
the second half of the year.
The nations third-largest property developer by sales is seeing signs of renewed
confidence from consumers as they move
beyond negative reports on the currency
and political development, said group
managing director Tan Sri Leong Hoy
Kum in an interview. The company has
a record RM1.4 billion cash pile for land
acquisitions, he said.
The market has stabilised, Leong said
at his office in Kuala Lumpur on Tuesday.
Every weekend is shopping time for me
and sometimes I charter a helicopter to
look at land the size of 500 acres (202ha)
to 1,000 acres.
Mah Sing shares have risen more than
7% from a 2013 low on Feb 4. The stock
tumbled 12% in 2015, the biggest annual drop since 2008, compared with a
7.6% slide in the Bursa Malaysia Property Index.
Malaysian homebuilders have struggled
since 2013, when the government started imposing stricter lending rules after
cheap credit fuelled a buying frenzy and
helped contribute to record household
debt in the nation. Mah Sing is lobbying
the government for more incentives to
boost property transactions, Leong said.
Implementation of the goods and services tax, last years slump in the ringgit to
a 17-year low and concerns over mounting
debt at state investment company 1Malaysia Development Bhd (1MDB) worsened

sentiment among buyers last year amid the

biggest housing glut in a decade.
We have reached the bottom of a downturn, and it will recover in the medium term,
Leong said. The bad news like 1MDB and
the ringgit have already been digested, I
dont see anymore bad news coming out.
It is back to work for everyone to focus on
economic growth.
The ringgit has rebounded 3.8% this year,
making it the third-best-performing currency in Asia.
Mah Sings rivals are seeing brisk sales.
Earlier this month, Eco World Development
Group Bhd sold 85% of its apartment project
outside of Kuala Lumpur. At Sime Darby Bhd,
one of the nations largest conglomerates,
almost all of its 341-unit development was
snapped up in one day.
To be sure, earnings are unlikely to rebound anytime soon. Companies on the
Bursa Malaysia Property Index are projected
to report a 52% drop in profit, the only industry group out of 10 to post earnings decline in the next 12 months, data compiled
by Bloomberg show.
Mah Sing is on track to reach its RM2.3
billion sales target in 2016 and anticipates
selling more medium-range to high-end
properties next year with the greatest potential in Kuala Lumpur, Leong said. The
company wants to replenish its land bank
after it halted such purchases last year for
the first time since 2005.
I know very well about all the good
land in Kuala Lumpur, Leong said. When
the weather is bad and turbulent, you better dont fly. Now the skies are clearer.
Bloomberg

Scomi Engineering committed to

completing KL Monorail expansion
SEPANG: Scomi Engineering Bhd is
committed to completing the RM494
million Kuala Lumpur Monorail expansion project, said chief executive officer
Rohaida Ali Badaruddin.
To date, she said, the provider of
public transportation solutions in the
rail and commercial vehicle industries
has completed 82.9% of the works, of
which the remaining is to deliver the
other six trains.
Works are in progress and we intend
to complete the project. It is Malaysian-made and it is a good product, she
said after the handover of Mobile Command Post and Hazmat equipment by
Scomi Engineering to Malaysia Airports
Holdings Bhd here yesterday.
She said the company has almost
completed the monorail expansion project, which includes the signalling system, upgrade of the stations, five sets of
trains in operation currently, one train
in testing stage and another six trains
still in manufacturing process.
Asked if the company is facing cash
flow problems, Rohaida said: As far as
Im concerned, we have good potentials
and technology and we should look after
the organisation and make sure it grows.
The principal contract was signed in

2011 with Prasarana Malaysia Bhd, the

operator of monorail and light rail transit
lines in the Klang Valley.
Scomi Engineering was contracted to
deliver 12 sets of new four-car monorail
trains, construct a new depot and install
a new signalling system as well as to upgrade the Kuala Lumpur monorail stations,
including the electrical and mechanical
systems for RM494 million.
According to Prasarana, the second
supplemental contract required Scomi
Engineering to deliver 10 sets of the fourcar train, including seven sets for revenue
service, by Dec 31, 2015.
To date, only six sets have been delivered, of which five sets are currently
in revenue service. On Scomi Engineerings overseas ventures, Rohaida said, the
company is eyeing opportunities of up to
RM20 billion worth of projects.
We are actively looking at the opportunities, including partnering other companies in the country we penetrated. We are
eyeing RM20 billion in value of overseas
projects, she added.
Rohaida listed Thailand, Turkey and
Sri Lanka among the countries as well as
the African continent, but added that it
would take about three to four years to
realise the projects. Bernama

1 2 P R O P E RT Y S NA P S H

T HU R SDAY M ARC H 17, 2 0 16 TH EEDGE F I N AN C I AL DAI LY

T
FREE
transaction
data

latest
classied
listings
news

analytics

trend
analysis

and more

Source: TheEdgeProperty.com

Whats hot in Bangsar?

Bangsar top 5 condominiums/apartments

Today, we look at price growth and indicative asking rental yields

for non-landed homes in Bangsar. From analysis of transactions by
TheEdgeProperty.com, the average transacted price for these properties
in the secondary market was sustained at RM765 per sq ft in 1Q2015, up a
mere 0.1% y-o-y.
Overall, capital values in Bangsar have remained stable. The top performers
were the older mid-end properties. The highest relative price growth can be
found at Jamnah View, with the average price up 23% to reach RM898 psf in
the 12 months to 1Q2015. The 1-bedroom units here have begun to surpass
the RM1,000 psf threshold.
Contessa (19%) and Tivoli Villas (16.5%) built in the 1990s by Bandar Raya
Developments Bhd have remained popular due to their good maintenance
and timeless designs.
Rental rates as observed in June 2015 from asking rentals range from about
RM2.50 psf to RM3.00 psf for the older properties, while the newer ones can
command rents up to RM4.00 psf.
Indicative annual rental yields are decent ranging from 3.8% to 6.5% per
annum. The highest yields can be found at the older properties within
Bangsar Hills.
The upcoming Pusat Bandar Damansara MRT Station will be located at the
end of Jalan Maarof. Condominiums located within walking distance are likely
to benefit most such as Bangsar Puteri, Menara Bangsar and Sri Penaga.

by average price annual growth

Source: TheEdgeProperty.com

Top 5 condominiums/apartments in Bangsar with highest indicative asking rental yield

The Analytics are based on the data available at the date of publication and may be subject to revision as and
when more data becomes available.

Shadow lending for Chinese home

down payments prompts crackdown
BY JU N LU O & ZHANG DINGM IN

SHANGHAI/BEIJING: When Fu
Songtao found his ideal home in the
suburbs of Shanghai, he faced the
typical problem of would-be homebuyers: Coming up with enough
cash for a down payment. So Fu
turned to an online solution. His
property agent offered him a zero-interest loan, funded entirely online by peer-to-peer (P2P) lenders,
that covered almost half his deposit.
Everybody I know took out
these loans, said Fu, a 29-yearold employee of a state-owned enterprise, who borrowed 380,000
yuan (RM240,120) a year ago, with
interest payments to lenders subsidised by the property agent, for
his three million yuan apartment,
and has seen its value increase to
3.3 million yuan since. If you can
borrow like that, why not?
The lending platform of his
real estate agency, E-House China Holdings Ltd, is one of Chinas
hundreds of P2P lenders allowing
homebuyers to seek down-payment
loans online. Total P2P borrowing
for home deposits reached 924 million yuan in January, more than
three times the level of last July,

A man walking past a property poster outside luxury apartment blocks in central
Beijing, China. Lending for property down payments, a phenomenon all but unheard of
a year ago, has prompted plans by the government to halt such borrowing. Photo by
Reuters

according to Shanghai-based data

provider Yingcan Group.
Lending for property down
payments, a phenomenon all but
unheard of a year ago, has now
prompted plans by the government to halt such borrowing. The
response underscores the stakes as
shadow banking leverage creeps
into Chinas housing market a
development similar to the margin
financing that fuelled last years
stock market bubble, but with potentially more damaging consequences.

Down-payment financing
would definitely cause risks to the
financial system, similar to the subprime crisis in the US, said Hu
Xingdou, an economics professor at
the Beijing Institute of Technology.
China has learnt a lesson from the
US sub-prime crisis. The Chinese
government understands that it
has to solve problems like housing and overcapacity. At the same
time, it cant bring further risks to
the financial system, as the banks
already have a lot of bad debt.
Peoples Bank of China deputy

governor Pan Gongsheng said at a

press conference on Saturday that
down-payment loans offered by developers, real estate agents, and P2P
lenders not only raised the leverage
of homebuyers, they also undermined the effectiveness of macroeconomic policies and increased risks
to the financial system and property
markets. The central bank together
with other government departments
will soon start a campaign to clean
up such activities, he said.
New rules being drafted by the
central bank, the China Banking
Regulatory Commission and other bodies would bar developers,
P2P networks and other non-banks
from offering down-payment loans.
Banks would be required to scrutinise mortgage applications and
reject those with deposits funded
by loans. First-time homebuyers
in most Chinese cities are required
to put down a minimum deposit
equivalent to 20% of the value of
their home.
A clampdown will bring an end
to a business in which real estate
brokers and others have tapped into
Chinas massive shadow-banking
sector to facilitate property sales.
Bloomberg

MOST READ ON

TheEdgeProperty.com
Construction of MRT
line 2 to proceed

Grabbing
opportunities to grow
Oxleys high-stakes
game
Eupes Novum South
Bangsar 70% units
booked since launch
Federal territories
get 39,416
aordable homes
IJM Land to launch
nal block of
Kalista 2 and 2-storey
super linked houses
in 2Q2016

T HU R SDAY M ARC H 17, 2 0 16 TH EEDGE F I N AN C I AL DAI LY

14 B R O K E R S C A L L

UMWs Toyota sets lower

sales target for FY16
UMW Holdings Bhd
(March 16, RM6.50)
Maintain sell with an unchanged
target price (TP) of RM5.50: UMW
faces deteriorating market conditions for its automotive and oiland-gas divisions. Its 51%-owned
Toyota has set a lower sales target
of 87,000 units (including 2,000
units from Lexus) for financial year
2016 ending Dec 31, 2016 (FY16),
compared with FY15s 95,900 units
(including 2,100 units from Lexus).
Among its new launches for 2016
are the Hilux in the second quarter of 2016 (2Q16), Innova (3Q16),
Fortuner (3Q16) and upgraded Vios
(launch date unconfirmed). With
the expected lower sales volume
and continued competitive market,
margins are likely to stay weak (despite increased prices) in FY16 due
to high marketing and distribution
costs, as well as the full-year impact
from a weaker ringgit against the
US dollar (FY16 to be 4.10/USD
versus FY15s effective 3.90/USD).
Its 38%-owned Perodua is likely
to perform weaker in FY16 despite a
higher sales target of 216,000 units
(versus FY15s 213,300 units), given
a lower revenue mix and the fullyear impact from the ringgit depreciation in FY16. Perodua is expected to launch its new sedan by the
second half of 2016 to boost sales.

UMW Holdings Bhd

FYE DEC (RM MIL)

Turnover
Ebitda

2015A

2016E

2017E

2018E

14,499

13,305

13,971

14,499
1,511

1,340

1,082

1,311

Pre-tax profit

266

568

787

970

Rpt. net profit

-39

219

331

426

Norm. net profit

254

219

331

426

Norm. EPS (sen)

21.8

18.8

28.3

36.5

PER (x)

30.9

35.8

23.8

18.4

Book value (RM)

5.5

5.5

5.5

5.5

P/BV (x)

1.2

1.2

1.2

1.2

Net dividend yield (%)

3.0

4.5

5.6

5.6

50.2

26.7

36.8

46.3

ROE (%)

3.9

3.4

5.1

6.6

ROA (%)

1.5

1.3

1.9

2.4

Net gearing

Consensus
EPS (sen)

31.6

39.4

42.9

% diff

-40.6

-28.1

-14.9

Source: HLIB

The weak oil prices at US$30

(RM124.20) to US$40 per barrel
have affected the profitability of
55.7%-owned UMW Oil & Gas Corp
Bhd (UMWOG) and the oil-andgas-valued business, due to weak
demand and pricing.
Concerns arise on dividend payments due to the weaker cash flow

from the automotive division as well

as UMW potentially extending an
inter-company loan to UMWOG to
restructure its short-term loan obligation of RM2.3 billion (as at December 2015). Furthermore, UMW
will have to start spending its capital
expenditure for a new manufacturing plant (commencing operations

by 2017) for fan cases for Boeing 787.

Total dividend for FY15 was 20 sen
(RM233.6 million), a near-record
low for the past 10 years.
Furthermore, UMW is at risk of
being removed from FBM KLCI list
of 30 counters by the next review in
June 2016. UMWs free float market
capitalisation is listed at 38th spot
(lower than the minimum 36th spot).
Due to lack of near-term catalysts,
UMWs share price is unlikely to perform and climb above the 36th spot.
Risks include prolonged tightening of banks hire purchase rules,
slowdown in the Malaysian economy affecting car sales, global automotive supply chain disruption,
appreciation of the US dollar and
plunge in crude oil prices and slowdown in oil-and-gas exploration.
Among the positives are control of
the largest market share in Malaysias
total industry volume with leading
brands Toyota, Lexus and Perodua
and investment in new business
segment, while the negatives include
slump in crude oil prices affecting
demand and charter rates for jackup rigs, tightening of banks lending
rules and intense competition from
rival automotive marques.
We maintained sell with an
unchanged TP of RM5.50. Hong
Leong Investment Bank Research,
March 16

Datasonics contract extensions in the offing

Datasonic Group Bhd
(March 16, RM1.37)
Maintain buy with an unchanged
target price (TP) of RM1.87: Datasonic Group Bhd is looking to secure
RM800 million to RM1 billion worth
of contract extensions and new jobs
in 2016, which coupled with the recent passport chip job win, would
likely propel earnings to a new high in
2017. As such, we continue to advise
investors to accumulate the stock.
MyKad contract renewal is forthcoming as the existing one is set to
expire by mid-2016. Management
is working on a potential renewal
by proposing the next-generation
national identification card. We
expect an official award by June.
Based on an average selling price
(ASP) of RM17.50 per MyKad and
RM4 per MyKad consumable, the
renewals could be worth RM250
million to RM260 million.
For its existing provision of data
pages for Malaysian passports, Datasonic had an outstanding order
book of 3.2 million copies as at December 2015. With the remaining
balance set to be fully exhausted by
the first quarter of 2017 (1Q17), the
group is negotiating a five-year contract extension of 13 million to 13.5
million copies. We estimate that
this potential contract extension is
worth RM370 million to RM390 million, based on an existing RM28.40

Datasonic Group Bhd

FYE MARCH (RM MIL)

2014

2015

2016F

2017F

2018F

Total turnover

292

229

203

250

292

Reported net profit

85

58

53

80

108

Recurring net profit

85

58

53

80

108

Recurring net profit

growth (%)

92.1

(32.4)

(8.2)

50.3

35.6

Recurring EPS (RM)

0.12

0.04

0.04

0.06

0.08
0.04

DPS (RM)

0.03

0.02

0.02

0.03

Recurring PER (x)

11.1

30.2

32.9

21.9

16.2

P/BV (x)

5.31

7.81

7.00

5.95

4.95

P/CF (x)

14.2

19.5

17.7

20.2

16.2

Dividend yield (%)

2.4

1.2

1.6

2.1

2.8

EV/Ebitda (x)

13.0

8.6

18.8

22.0

16.8

Return on average
equity (%)

55.1

28.8

22.4

29.4

33.5

Net debt to equity (%)

56.4

38.3

13.7

1.2

net cash

Source: Company data, RHB

ASP. We expect an official award to

take place in 3Q16.
To complete its national passport
offerings, Datasonic is finalising its
discussions with the government
for the provision of the passport
book. We expect the official award
to take place by end-March. We believe the official commencement
date is likely to coincide with its
passport chip contract, which is
on Dec 1, 2016. Our checks with

sources indicate that the contract

would cover 13 million to 13.5 million copies to be procured over a
five-year tenure at a total value of
RM210 million to RM230 million.
Beyond that, Datasonic is eyeing
to roll out its security camera solution in the Klang Valley after having installed close to 600 cameras
in Penang for local municipalities.
Management is looking to install
3,000 cameras and to set up sur-

veillance centres for the municipalities involved. The contract could

be worth RM100 million to RM120
million. In addition, management
intends to penetrate into other national security-related projects,
possibly in neighbouring countries,
over the medium term. For a start,
the group is eyeing potential joint
ventures to bid for security-related projects in Indonesia. This, if it
materialises, could be even more
lucrative than its current home
market in Malaysia, given Indonesias population size of close to
260 million.
Key risks include potential
delays in renewals of its existing
MyKad and passport data-page
contracts, and further delays in finalising the long-anticipated passport booklet contract.
Given the appealing upside of
over 45%, we maintain our buy
call with our TP unchanged at
RM1.87 (based on 25 times financial year 2017 forecast price-earnings ratio). We used discounted
cash flow (DCF) (based on an 8.1%
weighted average cost of capital
and 1.5% terminal growth rate) as a
corroborative methodology and derived a valuation range of RM1.29 to
RM2 (depending on the scenario).
Our TP falls into this DCF-derived
valuation range. RHB Research
Institute, March 16

Dayangs
subsidiary
Perdana
proposes sukuk
issuance
Dayang Enterprise
Holdings Bhd
(March 16, RM1.29)
Maintain market perform with
an unchanged target price
(TP) of RM1.43: On Tuesday,
Dayangs subsidiary Perdana Petroleum Bhd proposed a sukuk
issuance up to RM650 million.
The first issuance will be guaranteed by Danajamin Nasional
Bhd pursuant to an Al-Kafalah
facility. Amount up to RM630
million will be used for refinancing outstanding borrowings undertaken for the purchase of certain charged vessels, and RM20
million will be used to defray the
fees and related expenses for the
sukuk issuance. The unutilised
balance, if any, will be used as
working capital subject to a maximum amount of RM40 million.
This is not a surprise to us as
management had already guided the sukuk issuance earlier
and had aimed to complete the
issuance by April this year. We
gather that the sukuk is rated
AAA and has an initial tenure
of five years, but it is extendable up to 12 years. Post-sukuk
issuance, the interest rate is expected to stay the same at 6%,
but refinancing of the US dollar-denominated loan will reduce its foreign-exchange risk in
the future given that Perdanas
revenue is mainly denominated in ringgit. Furthermore, we
believe this will also improve
its short-term cash flow position as Dayang will only have
to pay RM90 million per annum
for the first four years (versus
RM209.9 million of short-term
borrowings in the fourth quarter
of 2015 [4Q15]), and the remaining RM290 million to be repaid
at the end of the fifth year.
Order book stood at RM3.8
billion in 4Q15, which is expected to last until 2018. We foresee Dayangs earnings to come
under pressure after consolidating Perdana into the group
in the near term in view of the
challenging local offshore-supply-vessel market with demand
likely to come off as oil and gas
activities are slow at this juncture. Dayang aims to turn around
Perdana by reducing its breakeven utilisation, vessel redeployment and other cost optimisation measures. Timing risks are
still present for its hook-up and
commissioning (HUC) projects,
which account for a significant
portion of the groups revenue
contribution as its oil major
clients seek to defer contracts
partially to later years in lieu of
uncertainty in crude oil prices.
We maintain our market
perform call. TP is maintained
at RM1.43, which is pegged to
calendar year 2016 10 times
price-earnings ratio. Risks
include slower-than-expected work orders for HUC contract, and lower-than-expected
margins. Kenanga Research,
March 16

THU RSDAY MA RC H 17, 2016 T HEED G E FINA NCIA L DA ILY

B R O K E R S C A L L 15

BAT raises retail price

by 16 sen per stick
British American Tobacco
(Malaysia) Bhd
(March 16, RM55.04)
Maintain sell with unchanged
target price (TP) of RM56. The
recent price hike in November was
driven by the substantial increase of
12 sen per stick in the excise duty.
The increase was four times higher if we compare with the previous
hikes of three sen per stick in 2013
and 2014. As such, British American Tobacco (Malaysia) Bhd (BAT)
increased its retail selling price by
16 sen per stick across its brands,
including sub-premium brands,
to compensate for the decline in
volume and protect its margins.
However, the ratio between
BATs selling price increase and
the hike in the excise duty is only
1.3 times, which is lower compared
with 2.5 times in 2013 and 2014.
We believe this is to accommodate
weak consumer spending due to the
current high debt-to-GDP (gross
domestic product) ratio, which is
constraining discretionary income
and the risk of down trading.
Domestically, the group manufactured 8.2 billion sticks in financial year 2014 (FY14) and 7.2 billion

British American Tobacco (Malaysia) Bhd

FYE DEC (RM MIL)

Revenue
Ebitda
Depreciation
& Amortisation
Ebit
Net finance cost
EI
PBT
Adjusted PBT
Taxation
MI
Net profit
Core net profit
EPS (sen)
DPS (sen)

2014

2015

2016F

2017F

2018F

4,796.0
1,279.4

4,581.5
1,279.8

4,422.0
981.9

4,670.3
1,089.2

4,740.3
1,125.9

(45.0)
1,234.4
(13.2)
0.0
1,218.8
1,218.8
(316.8)
0.0
902.0
902.0
315.9
309.0

(39.6)
1,240.2
(6.7)
0.0
1,231.0
1,231.0
(320.9)
0.0
910.1
910.1
318.7
312.0

(36.5)
945.4
(11.7)
0.0
933.5
933.5
(224.0)
0.0
709.5
709.5
248.5
241.0

(33.5)
1,055.7
(9.8)
0.0
1,044.5
1,044.5
(250.7)
0.0
793.9
793.9
278.0
269.7

(30.9)
1,095.0
(6.4)
1.0
1,085.1
1,084.1
(260.4)
1.0
825.6
824.6
288.8
280.1

Source: TA Securities

sticks in FY15, a decline of 13%. Over

the past three years, for every one
sen per stick hike in BATs selling
price, its domestic volume contracted by an average of 121 million sticks
per year. We attribute the volume
drop to the migration to the illicit
market. From June to August last
year, the volume of illicit cigarettes

increased 0.2 percentage point quarter-on-quarter. This suggests that

consumers are substituting legal
cigarettes with cheaper alternatives
(RM4 to RM5 per pack).
Moving forward, we believe the
government will continue to increase excise duty. This is supported
by the World Health Organization

Gamuda top buy, SCG top midcap pick in construction sector

Construction sector
Reiterate positive. Following the
award from Pan Borneo Highway
Sarawak (PBHS), we expect further
awards from other key infrastructure
to boost the positive sentiment in the
construction sector. Major awards
from the Klang Valley mass rapid transit Line 2 (KVMRT 2) are expected in
March and April, two to three months
ahead of the timeline. Its total value
could exceed the initial estimate of
RM28 billion, which would be a positive surprise to construction players
via higher-than-expected job wins. We
reiterate positive on the construction sector with Gamuda as the top
buy and SCG the top mid-cap pick.
A slew of tenders for the PBHS,
KVMRT 2, Klang Valley light rail transit Line 3 and the other major highways (Dash, Suke, WCE, Central Spine
Road) are ongoing and expected to be

awarded in 2016. Following the recent

PBHS award of some work packages,
the KVMRT 2 could be the next key
project to start rolling out major jobs
earlier than expected.
The total cost of the KVMRT 2
could be higher at RM30 billion to
RM33 billion than the initial estimate
of RM28 billion.
The RM28 billion accounted for
a longer underground tunnel, and
more underground stations compared with KVMRT 1. Also, it imputed a 10% increase in overall cost

IJM Corp
Gamuda
Cahya Mata Sarawak
WCT Holdings
Sunway Construction
Hock Seng Lee
Eversendai Corp
Kimlun
Source: Maybank IB Research

MKT CAP
(US$ MIL)

RATING

PRICE
(LC)

TP
(LC)

UPSIDE
(%)

2,959
2,756
1,283
492
482
292
134
125

Hold
Buy
Hold
Buy
Buy
Buy
Buy
Hold

3.39
4.70
4.90
1.63
1.53
1.98
0.71
1.70

3.60
5.65
4.60
2.30
1.65
2.25
0.90
1.50

6
20
(6)
41
8
14
27
(12)

21.2
17.0
19.0
14.5
12.9
13.5
9.3
10.3

19.5
16.1
17.8
13.4
12.1
11.1
9.4
11.2

P/B (X)
16E
17E

DIV YIELD (%)

16E
17E

1.4
1.8
2.4
0.7
3.6
1.5
0.5
1.0

2.2
2.6
2.1
2.6
2.7
1.1
0.9
2.6

1.3
1.7
2.2
0.7
3.0
1.3
0.4
1.0

without air conditioners, and ultimately all public areas by 2020.

With these restrictions, we believe
that contraction in volume is inevitable.
Future earnings are expected
to contract by an average of 2.1%
over the next three years. This
would likely take away valuation
support and render the stock less
attractive when compared to other high-yielding consumer stocks
in our view.
We maintain our revenue forecasts of -3.5%/5.6%/1.5% for FY16/
FY17/FY18 respectively, assuming
a sales volume decline of -14.4%/7.9%/-4.9% in the same periods. We
reiterate our sell recommendation
on the stock with unchanged TP of
RM56. TA Securities, March 16

TRC Synergy Bhd

per kilometre. Recent estimates are

for the total cost to exceed the initial
RM28 billion as bidders are mandated to budget for safety costs and impute higher imported material and
equipment costs due to the weakened ringgit. The impending foreign
worker levy hike would increase manpower cost.
Upside to job win forecasts
MMC-Gamuda would be the biggest beneficiary as the potential winner of the KVMRT 2 underground
works, given that the value could
be significantly higher versus RM8
billion under the KVMRT 1. As for
the elevated packages, the existing
KVMRT 1 players are in a stronger
position to win KVMRT 2 jobs. Job
win values could exceed expectations
too if they clinch the more challenging
packages. Maybank IB Research,
March 16

PER (X)
16E
17E

Framework Convention on Tobacco Control, which seeks an excise

duty on cigarettes to be 70% of retail price. Currently, the excise duty
is 47% of the current selling price.
The government is planning to
introduce plain packaging for all
tobacco products. Generic or plain
packaging requires manufacturers
to print only the brand name, in
addition to health warnings and
toxic constituents, among others.
At the moment, Australia is the
only country implementing plain
tobacco packaging.
The government is also looking to impose a smoking ban in
all hotels nationwide by the end
of the year, with the ban expanded
to include other public areas such
as recreational parks, restaurants

TRC Synergy eyeing more jobs

Construction sector
STOCK

Filepic of a BAT employee with boxes of cigarettes. The government is planning to

introduce generic packaging for all tobacco products.

2.2
2.6
2.3
2.6
2.9
1.3
0.9
2.4

FYE DEC (RM MIL)

2014A

2015A

2016F

2017F

2018F

CAGR (%)

Revenue
Operating profit
Pre-tax profit
Net profit
EPS (Sen)
PER (x)
DPS (Sen)
Dividend yield (%)

814.9
12.7
11.3
3.6
0.7
53.4
0.0
0.0

770.4
37.8
38.4
30.7
6.4
6.3
1.0
2.5

850.1
37.6
25.4
19.1
4.0
10.1
1.0
2.5

818.9
44.5
31.4
23.5
4.9
8.2
1.0
2.5

897.8
47.0
33.0
24.7
5.1
7.8
1.0
2.5

2.0
29.9
23.9
47.0
47.0
-

Source: Company, PublicInvest Research estimates

TRC Synergy Bhd

(March 16, 39.5 sen)
Maintain neutral with unchanged target price (TP) of 39
sen. TRC Synergy revealed that it
might potentially nail more jobs
this year, potentially from the mass
rapid transit (MRT) Line 2 and
light rail transit (LRT) Line 3 rail
links, Pan Borneo Highway Sarawak, and other highways such as
Suke and Dash. The competition
will be stiff, with most contractors bidding for the same jobs.
However, we believe the groups
experience in working on earlier
phases of LRT/MRT projects could
give it an added advantage. Financial year 2015 (FY15) was quiet
in terms of job replenishments
with only RM176 million worth
secured. Separately, it announced
that it secured a contract worth
RM88 million for a subcontract
to develop the new Kuala Lumpur
Air Traffic Control Centre at Kuala
Lumpur International Airport and
other locations, which would in-

crease its outstanding order book

to RM1.2 billion.
As for property, its Ara Damansara mixed-development project
is to be deferred to end-2016, with
the development order expected
by the third quarter of calendar
year 2016. The mixed development in Ara Damansara has a combined gross development value
in excess of RM1 billion with the
first phase estimated to be worth
RM300 million.
Elsewhere, its property development project worth RM293 million secured in December last year
could be launched by the second
half of 2016.
With the new job win, the
groups current outstanding order book is worth RM1.2 billion.
As for construction progress of
its jobs, we understand that the LRT
and MRT jobs are mostly completed. We assume a job replenishment
rate of some RM500 million per
year. Public Investment Bank
Bhd, March 16

T HU R SDAY M ARC H 17, 2 0 16 TH EEDGE F I N AN C I AL DAI LY

16 H O M E

I will persevere despite

attacks, says Najib
Gives assurance that he and his BN colleagues will not lose focus
KUALA LUMPUR: Prime Minister plementary question from Tan Sri
Datuk Seri Najib Razak gave his Annuar Musa (BN-Ketereh) in the
assurance that he and his Barisan Dewan Rakyat here yesterday.
Nasional (BN) colleagues will conAnnuar, in his supplementatinue to persevere and focus on runry question, had asked
ning the administration regardless
whether Najib realof political attacks against the
ised that he was faccoalition.
ing pressure and that
No matter what the attacks
a hate campaign
are, we (BN) should not lose
had been launched
direction. Do not lose our foagainst him as the
cus. We are still committed to
prime minister.
implementing our plans
if we wish to succeed
and be recognised
at the international
Najib says he is not
level, he said when
surprised by what is
replying to a suphappening to him.

PAS announces
pact with Ikatan
for GE14
KUALA LUMPUR: PAS has announced the establishment of a
new bloc with Parti Ikatan Bangsa
Malaysia (Ikatan) in their preparations for the 14th general election (GE14).
However, the pact has yet to
be named.
PAS president Datuk Seri Abdul
Hadi Awang said a joint secretariat
would be set up between PAS and
Ikatan with the top leadership of
both parties to draft and discuss
the agenda of cooperation.
We do not want the opposition coalition to take extreme action and burden the people as we
found that opposing in that way
cannot solve problems.
If we want to oppose, it would
not be done recklessly. There
should be advice with good proposals ... and whatever the government has done well, we will
support; whatever that is not good,
we will advise ... that is our stand,
he told reporters after announcing
the pact at the PAS headquarters
here yesterday.
Also present were Ikatan president Tan Sri Abdul Kadir Sheikh
Fadzir and PAS secretary-general Datuk Takiyuddin Hassan,
as well as the top leadership of
both parties. When asked about
the cooperation of PAS with PKR
in Selangor, Abdul Hadi said it is
going on as usual.
He also welcomed other political parties, which accept its concept of cooperation. Abdul Kadir
said the new pact would strengthen
a political agenda, which is more
open, mature and prosperous. He
also rejected allegations that Ikatan
is relatively a novice trying to ride
on the popularity of PAS, when PAS
as the pillar party is as strong as
Umno to resolve the issues of the
people and country. Bernama

Najib said he was aware and

was not surprised by what was
happening to him, and would remain committed to implementing
the economic plan that had been
drawn up.
If we continue to persevere and
remain consistent, sooner or later
the people will appreciate the efforts
taken by the government, he said.
Najib also explained the difference between what he was facing
and what had happened to former
prime minister Tun Dr Mahathir
Mohamad.
When Tun Mahathir became
prime minister, there were also
many things (criticisms) hurled

at him, such as mahazalim (very

cruel), mahafiraun (tyrant) and
others, but now he sits together with
the opposition, he said.
Najib said he is responsible to
the people and would answer all
the allegations thrown at him when
the investigation into 1Malaysia Development Bhd (1MDB) had been
completed.
I leave it to the Public Accounts
Committee on 1MDB and the RM2.6
billion; there is even a process specified by the relevant agency. There
is nothing to be worried about because the accountability process
will continue to be maintained,
said Najib. Bernama

Accusations in foreign media will

not impact inflow of investments
KUALA LUMPUR: The accusations
being made in the foreign media will
not impact the sentiment of foreign
investors or the inflow of investments into the country, said Prime
Minister Datuk Seri Najib Razak.
In reality, what is important are
the facts surrounding the countrys
achievements, which show a continuous inflow of foreign investments,
with the Malaysian economy being
among the high achievers globally.
The issues being highlighted
by the foreign media are orchestrated, he told the Dewan Rakyat
here yesterday.
He was answering a supplementary question from Tony Pua
(DAP-Petaling Jaya Utara) on the
measures being taken to overcome
the negative coverage by the global
media, which have been highlighting domestic issues, including those
surrounding 1Malaysia Development Bhd and the RM2.6 billion

donation to the prime minister.

The DAP lawmaker alleged that
the issues had brought about a negative impact on foreign investors.
Najib, who is also the finance
minister, said the issues raised
would be clarified, and the process had been handed to the Public Accounts Committee and other
related parties.
So, there is nothing to be concerned about as the accountability
process will definitely be implemented for the country, he added.
Najib said Malaysia, which is
among the foremost trading nations in the world, had a strategic
position in the global and regional
trade architecture.
Malaysias participation in the
Trans-Pacific Partnership agreement and other free trade agreements (FTAs) such as the Regional
Comprehensive Economic Partnership (RCEP) will benefit the coun-

try, particularly from the aspect of

enhancing foreign trade.
The RCEP is a key FTA being
negotiated by 10 Asean member
countries with six other countries
with which the regional grouping
has FTAs, namely Australia, China, India, Japan, New Zealand and
South Korea.
Najib said Malaysia is among the
key investors in Asean with local
companies having invested widely in
sectors such as banking, plantations,
hotels and tourism, the aviation industry, manufacturing, utilities and
infrastructure.
He said the Asean economic integration will not just benefit Malaysia, but also the other member
countries.
Malaysia hopes to see Asean becoming a progressive and high-income region, with a good quality of
life, while enjoying sustained peace
and prosperity. Bernama

Hisham: Only
Supreme Council
can decide on
Muhyiddin,
Mukhriz
KUALA LUMPUR: Only the Umno
Supreme Council has the power to
decide on the expulsion of Umno
deputy president Tan Sri Muhyiddin
Yassin and Jerlun Umno division
head Datuk Seri Mukhriz Mahathir,
who have been suspended from
their party positions.
Umno vice-president Datuk Seri
Hishammuddin Hussein said although he had received many calls
for the expulsion of both party leaders, who were involved in the Mahathirs declaration, only the Umno
Supreme Council could make the
decision.
I also received calls and requests
not only from members, of the Supreme Council, but also grass-roots
members, and I have said that the
important thing regarding this matter is party discipline.
I think that will be an issue that
will be discussed in the Supreme
Council meeting where only the
Supreme Council has the power
to make the decision.
Until the Supreme Council says
and deliberates, that matter is still
not decided, he said at a media
conference at the Parliament lobby
here yesterday.
In another development,
Hishammuddin, who is also the
defence minister, said he was still
seeking confirmation on the latest
information received on the expansion and building of the military
capabilities of China in the South
China Sea.
He said the matter would be
discussed with Australian Defence
Minister Marise Payne during her
visit to Kuala Lumpur next Monday
(March 21), together with other
security issues.
We get information from various quarters concerning the military assets placed on the islands
and these need to be verified, he
said.
Muhyiddin said Malaysia must
also get the stand of the Philippines
and Vietnam, which have direct
links to the issue on the duplicating
claims, following the change in the
position of the defence ministers in
both countries. Bernama

Michelle Yeoh appointed UNDP goodwill ambassador

KUALA LUMPUR: Award-winning
action heroine Tan Sri Michelle Yeoh
(pic) has been appointed United
Nations Development Programme
(UNDP) Goodwill Ambassador.
The Malaysian-born actress will
focus on raising awareness and
mobilising support for the recently
launched Sustainable Development
Goals. I want to be there for all those
who are left behind in this world,
whether its because they are born
poor, born a woman or born in an
area affected by devastation.
As UNDP Goodwill Ambassador,
I want to do all I can to help people
overcome barriers and have a shot

at a better life, in a safer world, on

a healthier planet, the UNDP said
in a statement, citing Yeoh at a press
conference held at the UNDP headquarters in New York on Tuesday.
Yeoh, having personally experienced the deadly earthquake that
struck Nepal in April 2015, when she
was visiting the country, intends to
leverage her influence as an actress
and advocate to shine a spotlight on
disaster recovery efforts in Nepal and
beyond. UNDP administrator Helen
Clark expressed excitement in welcoming the energetic and passionate
actress to the global UNDP family.
This is a critically important year

for development and for [the] UNDP,

as we challenge ourselves and the
world to implement the new global
goals, Clark stated.
Yeoh, internationally acclaimed
for her roles in a James Bond film as
Bond Girl in Tomorrow Never Dies
and in Ang Lees multiple Academy
Award-winning Crouching Tiger,
Hidden Dragon, is indeed equally renowned for her advocacy and
philanthropic efforts.
Her previous engagements concerning development issues include
appointments as global ambassador for Live to Love and the Make
Roads Safe campaign in 2012, ad-

BERNAMA

vocacy during the Zero Discrimination Campaign or UNAIDS in 2013,

and a Live to Love humanitarian aid
trip to Nepal this year. Bernama

THU RSDAY MA RC H 17, 2016 T HEED G E FINA NCIA L DA ILY

Decision to
detain MP
unlawful, says
lawyer
PUTRAJAYA: The decision to
arrest and detain Seputeh member of parliament (MP) Teresa
Kok Suh Sim in 2008 under the
now repealed Internal Security Act 1960 (ISA) was unlawful,
the Court of Appeal here heard
yesterday.
Koks counsel, S N Nair, submitted before a three-member
bench that there was overwhelming evidence negating
allegations against his client, but
the police proceeded to arrest
and detain her. He said the police should have called her for
questioning to inquire about the
allegations without effecting the
warrant of arrest on her.
Nair said the High Court judge
did not weigh whether the respondents had produced sufficient particulars, and material evidence as proof of Koks activities
to justify her arrest and detention.
Kok is appealing against the
High Courts dismissal of a civil suit she filed against former
home minister Tan Sri Syed Hamid Albar, then inspector-general of police Tan Sri Musa Hassan,
DSP E Kim Tien and the Malaysian government, in which she
was claiming damages over her
arrest and detention, allegedly
over the azan (call for Muslim
prayer) issue.
In her statement of claim, Kok
said she was arrested at 11.15pm
on Sept 12, 2008, and was detained for two hours. She said
she was informed at 2am the
next day she was being detained
under Section 73 (1) of the ISA on
the grounds that she had taken
part in activities that could cause
tension and racial clashes.
She was detained for seven
days.
On April 22 last year, the
High Court in Kuala Lumpur
dismissed Koks suit and ordered
her to pay RM50,000 costs to
the respondents. Senior federal
counsel Lailawati Ali, representing the respondents, argued that
the High Court had rightly held
that Koks detention was lawful.
It was sufficient for the respondents to show that there was
information received by them
pertaining to activities allegedly committed by Kok in order to
justify her arrest and detention,
she added.
Justice Datuk Abang Iskandar
Abang Hashim, who chaired the
panel, deferred the courts decision to a date to be fixed later.
Bernama

H O M E 17

No jurisdiction to
probe spending
Of any political party during elections, says EC chairman
KUALA LUMPUR: The Election
Commission (EC) has no jurisdiction to investigate any political party for allegedly overspending during
elections, said its chairman Datuk
Seri Mohd Hashim Abdullah.
He said the powers of the EC are
only against the candidates contesting and within the campaign
period only.
What is raised by party members for election spending is a party matter, which does not concern
the EC.
This is because the proceedings of a registered party on party
expenditure are under the Societies
Act and so on, and do not come
under election legislation, he said

in a statement yesterday.
The statement was in response to
a report made by Tanjong member
of parliament (MP) Ng Wei Aik and
Rasah MP Teo Kok Seong against
Barisan Nasional for allegedly
spending more than the maximum
amount permitted, claiming that
overspending is an offence under
the Election Offences Act 1954.
The report was submitted by
the MPs to the EC headquarters
on Monday.
Mohd Hashim said the commission needs to be careful so as not to
overstep its jurisdiction and not to
trespass upon the authority of other
bodies, which have the powers to
investigate comprehensively.

He said the issue raised by the

MPs had been raised by other parties earlier, such as PKR which took
the commission to court.
The High Court decision favoured the EC and there was no
violation of powers by the EC in
handling the 13th general election, he said.
Mohd Hashim said apart from
that, election petitions were filed
by the contesting candidates and
the courts had made the decisions
on these.
The EC has gone through the
legal process of elections and the
interested parties had also obtained
justice in the Election Court, he
said. Bernama

Hot spell to abate by April

KUALA LUMPUR: The unbearably
hot and dry weather brought by El
Nino is expected to abate by April.
Malaysian Meteorological Department director-general Datuk Che
Gayah Ismail said the inter-monsoon
season which begins then would
restore humidity and lower the temperature.
El Nino, which swept over the
country in December and January,
is a phenomenon caused by rising
temperatures over the east and central surface of the Pacific Ocean in
the equatorial region, which occurs
every two to seven years, he said.
Universiti Kebangsaan Malaysia
climatology and oceanography expert Prof Dr Fredolin Tangang said
the phenomenon is in the descending phase.
We have an extraordinarily hot
spell during this phase, particularly
this month, he said, adding that
northern Peninsular Malaysia, northern Sarawak, Sabah and southern
Philippines would experience extremely dry and hot weather during
the phase.
Commenting on the hot spell,
the science, technology and innovation ministry said in a statement the
temperature could likely reach 40C.
It cited Chuping, Perlis, which recorded a reading of 39C three days
ago. However, the highest reading

the North Exercise (Raad al Shamal)

was by invitation of Saudi Arabia.
The training was held in northern Saudi Arabia, while Yemen is
located at Saudi Arabias southern
border. Obviously, this exercise had
nothing to do with the current military campaign in Yemen.
Malaysia supports efforts to com-

New PAS alliance wont

benet opposition, says
Guan Eng
GEORGE TOWN: DAP secretary-general Lim Guan Eng
has dismissed the new alliance
between PAS and Parti Ikatan
Bangsa Malaysia (Ikatan), saying
it will not work out to the oppositions advantage. It will not
bring any changes to the nation
if they are not inclusive, continue
to be firm in fighting corruption
and capable of delivering good
governance, he told reporters
here yesterday. Earlier in the
day, PAS president Datuk Seri
Abdul Hadi Awang announced
that the partys new pact with
Ikatan would act more as an issue-based pressure group that
would engage the government
instead of opposing for the sake
of opposing. Bernama

Energy Commission not

involved in
energy saving card
KUALA LUMPUR: The Energy
Commission (ST) has refuted
allegations it endorsed an energy-saving device in the form
of a card, which could reduce
electricity bills by up to 35%. The
commission regretted the action
of irresponsible parties in abusing STs logo to lure consumers into buying the product via
social sites. In this regard, ST
stressed that action can be taken
against any quarters for abusing
the commissions logo. ST reminds consumers that the most
effective way to save electricity
usage is through efficient use
of energy, it said in a statement
here yesterday. Bernama

Foreign workers sent

home RM34.75b last year

An irrigation canal in Alor Setar, Kedah, turns bone dry as a result of the hot spell that
has hit the country. Photo by Bernama

in the countrys history was 40.1C,

recorded also in Chuping in 1998.
The statement said the sweltering
weather could trigger a heatwave,
which poses risks such as heatstroke.
As for water supply, the level at
all main dams in the country is still
holding out.
National Water Services Commission chief executive officer Datuk
Mohd Ridhuan Ismail said current
water production and consumption
are not yet at a worrying stage.
Currently, we have no plans to
carry out water rationing, he said.
In Shah Alam, the water level

at the seven dams in Selangor remained, as of Tuesday, at more than

70%.
Lembaga Urus Air Selangor in its
portal stated that the water level at
the Langat dam stood at 70.16%, and
the Sungai Selangor dam at 86.51%.
The water level at the Semenyih
dam was at 85.32%, with the Klang
Gates dam at 80.98%, the Sungai
Tinggi dam at 88.21% and the Tasik
Subang dam at 97.51%.
Water-level readings last Friday
showed the Sungai Labu off-river
storage at 57.66%, and the Batu dam
at 83.36%. Bernama

Malaysia not in pact to fight in Yemen and Syria, says Hisham

KUALA LUMPUR: Malaysia has never
been involved in any military cooperation to combat extremist groups in
Yemen and Syria led by Saudi Arabia,
Dewan Rakyat was told yesterday.
Defence Minister Datuk Seri
Hishammuddin Hussein said the Malaysian Armed Forces (ATM) initial
participation in the recent Thunder of

IN BRIEF

bat militancy, but [the] ATM is not

willing to be directly involved with
military operations in Yemen., he
said in reply to Tian Chua (PKR-Batu) in Dewan Rakyat.
Hishammuddin said to be a credible military force in this region, the
ATM is always looking for opportunities to train its personnel in various

multi-terrain situations.
At a press conference at the Parliament lobby, Hishammuddin said
Malaysias participation in the North
Thunder exercise was not tabled in
Parliament for discussion as it was
a normal exercise and the ATM had
planned to conduct 41 more exercises this year. Bernama

KUALA LUMPUR: The total remittance volume sent home by

foreign workers from Malaysia increased 23.2% to RM34.75 billion
in 2015 from RM28.21 billion in
2014, the Dewan Rakyat was told
yesterday. Deputy Finance Minister Datuk Johari Abdul Ghani
said Indonesia was the top recipient from 2011 to 2015, followed
by Bangladesh, Nepal, India and
the Philippines. The remittances grew from 17.1% in 2011 to
23.2% in 2015, he said. The total remittance volume jumped
to RM28.21 billion in 2014 from
RM22.7 billion (2013), RM18.4
billion (2012) and RM15.7 billion
(2011). Bernama

Fake awards mastermind among eight held

IPOH: Eight persons including
the mastermind behind the issuance of dubious state awards
and titles in Perak were detained
by police in an Ops Anugerah
operation mounted since Feb 16.
State police chief Datuk Seri Abdul Rahim Hanafi said the suspects, aged between 35 and 63,
were nabbed in different states.
The eight were tracked down in
Johor, Kuala Lumpur, Perak and
Penang by Perak police and Bukit
Aman police. They were arrested
under the Prevention of Crime
Act 1959, he told a media conference after a police function
here yesterday. Bernama

T HU R SDAY M ARC H 17, 2 0 16 TH EEDGE F I N AN C I AL DAI LY

18 C O M M E N T

London could lose its euro

trading if UK leaves EU
Its future status as Europes financial capital a key factor in the Brexit debate
BY MA RK GI L B ERT

ondons future status as

the financial capital of
Europe is a key factor in
the debate about whether the United Kingdom
(UK) should leave the
European Union (EU). It would be
a mistake for either side of the argument to underestimate quite how
aggressively Londons competitors
would attempt to wrest trading revenue away from the UK capital should
the June 23 referendum vote in favour of whats known as Brexit.
Tim Martin, the chairman of UK
pub operator JD Wetherspoon, is a
supporter of abandoning the EU.
In a letter accompanying his companys earnings report last week,
Martin suggested an amicable divorce was likely: Clearly, if the UK
decides to leave the EU, it would be
in the economic and other interests
of this country and our European
neighbours to have friendly relations,
strong business links, including free
trade and, I believe, free movement
of labour.
That view is very likely too optimistic. The aftermath of an
anti-EU decision would be anything
but friendly, not least because Germany and France in particular would
seek to deter other countries from
contemplating life outside of the

Union. The world of finance would

offer an irresistible opportunity for
the euro core to make an example of
Britain by attacking the crown jewel
of the UK economy.
London has more than 40% of
the global market for currency trading. Almost half of the worlds interest-rate swaps business takes place
in the City, as does a third of European equity trading. And although
the UK has successfully challenged
efforts to migrate euro-denominated trading and settlement to eurozone countries, that position might
be hard to sustain after a Brexit a
point former Bank of France governor Christian Noyer made forcefully
earlier this month:
It is already very difficult for euro
members to accept that our currency is largely traded outside the currency area, beyond the control of
the European Central Bank (ECB)
and of euro area institutions such
as market regulators. That can be
acceptable only if, and as long as,
the UK is a member of the EU, and
accepts the involvement of, and cooperation with, the European regulatory agencies.
Its not the first time political and
economic differences with the rest
of Europe have threatened to diminish the Citys standing. Back in
1991, the talk was all about an artificial currency called the European

currency unit (ecu), the forerunner

of the euro, which was starting to
gain traction in fixed-income and
derivatives markets. So the Bank of
England (BoE) did a clever thing:
It issued 2.75 billion ecu of 10-year
bonds at an interest rate of 9.125%
(yes , back in the olden days government bonds had yields close to double digits rather than below zero).
It was the biggest security available in the currency, cementing Londons role as the centre for ecu trading and paving the way for it to be
the dominant market for the euro
(even though Britain wasnt joining
the common currency, much of the
technical work about its introduction
was done by the BoE prior to the ECB
coming into existence). If Britain
hadnt been in the EU, though, that
trick might have been a lot harder
to pull off.
If Europes coalition of the willing is successful in introducing a
Tobin Tax on securities trading, London may benefit, although the 10
countries still trying to introduce
the levy have failed so far to reach an
agreement. But if the EU succeeds
in building a capital markets union,
creating a seamless cross-border
arena for small- and medium-sized
enterprises to raise money by selling equities and bonds rather than
relying on bank financing, then its
hard to see how London could at-

tract that market away from either

Paris or Frankfurt.
Rather than remaining concentrated in London, Brexit may mean
European trading splinters across
several cities. Germanys Deutsche
Boerse AG is in the midst of trying to
merge with London Stock Exchange
Group. The combined entity would
be the biggest equities exchange in
Europe, so its not hard to envisage euro-denominated stock trading migrating to Frankfurt. It would
also have the worlds largest clearing
house for swaps, which could also
spur more of that business to move
to Frankfurt.
The biggest manager of new corporate bonds in Europe, meantime,
is HSBC, a bank thats already flirted
with moving its headquarters out of
London and which has said it might
move 1,000 bankers to Paris if the EU
splits. If you combine HSBCs 35 billion (RM160.7 billion) of corporate
bond underwriting with third-placed
BNP Paribass 25 billion and fifthplaced Societe Generales 21 billion,
you can just about see how almost a
fifth of company fundraising could
end up in France. And if a post-crisis
market for complicated derivatives
ever comes into vogue, the mathematical/engineering bent of much
of the top-tier talent at French investment banks may well steer that
renaissance.

Bloomberg View contributor

Jean-Michel Paul argued in October that Luxembourg would be a
surprisingly strong competitor for
some City-based financial services
in the event of Brexit. Maybe, but I
view Paris as the prime contender
by far. Deutsche Banks recent woes
suggest Germany regulators dont
have much appetite for hosting an
expansion in investment banking
in Frankfurt; and while I have a lot
of banking contacts whove done a
sojourn in Paris, I cant think of one
whos worked in Frankfurt.
The future geography of European trading will depend mostly on
the rules that are enacted after an
EU divorce. A French government
thats been at the forefront of the
Europe project for decades and
which saw euro trading slip through
its fingers in the past quarter century will seize this once-in-a-generation opportunity to drag euro
trading away from London as aggressively as it can. By pushing for
regulations which dictate that euro
securities have to be regulated in
euro countries, France can emerge
triumphant in the battle to be the
dominant financial capital of a newlook Europe. Bloomberg View
Mark Gilbert is a Bloomberg View
columnist.

Puerto Ricos tumble over a fiscal cliff

BY MI C H EL L E KASKE
& MA RTI N Z B RAUN

PUERTO Rico has the population of

Oklahoma and an economy smaller
than Kansas. It also has more debt
US$70 billion (RM289.8 billion)
than any US state government
except California and New York.
This fact and the reasons behind
it help explain why the territory has
tumbled over a fiscal cliff, and why
the resulting dismay extends to investors far beyond the Caribbean
island. Its a tale of financial mismanagement, Wall Street complicity and good intentions gone awry.
After admitting in 2015 that it
was unable to pay its borrowings,
Puerto Ricos government began
talks with creditors and turned to
Washington for help. In January it
proposed a voluntary plan to slash
the debt load almost in half by repaying 39 to 72 US cents on the dollar.
Two commonwealth agencies
defaulted in August and January,
and the island faces a US$2 billion
bill for principal and interest payments on July 1. Washington lawmakers are considering setting up
a control board to supervise the
islands finances. Theyre also de-

bating whether to allow Puerto Rico

and its agencies access to US bankruptcy laws to restructure debts under court supervision, an option
not now available to US territories.
In December, the US Supreme
Court said it would consider whether Puerto Rico can reinstate a local
law that would give its utilities additional leverage in talks with lenders.
Puerto Ricos plight affects most
people with a mutual fund invested in the municipal bond market.
Unlike the bonds of most states and
municipalities, Puerto Ricos are
exempt from local, state and federal taxes everywhere in the United
States. As a result, they are held by
about half of open-end muni funds.
The competitive advantage made
it easy for Puerto Rico to double its
debt in 10 years by selling bonds to
plug annual budget deficits and pay
for operating expenses the same
combination that brought New York
City to the brink of bankruptcy in
the 1970s.
Wall Street smoothed the islands
path to fiscal debacle, reaping more
than US$900 million in fees to manage Puerto Ricos US$126.6 billion
of bond sales since 2000. After the
US territory adopted a sales tax in

2006, investment banks worked with

officials in San Juan to create new
bonds backed by a portion of the
proceeds.
These helped the government,
which employs more than a quarter
of the workforce, put off cuts. Puerto
Rico, ceded to the US in 1898 after
a war with Spain, has a special tax
status that dates to 1917 and the
passage by the US Congress of the
Jones-Shafroth Act. It has relied on
tax breaks to drive economic development, attracting pharmaceutical,
textile and electronics companies.
The US phased out the incentives from the mid-1990s to 2006,
contributing to the loss of 80,000
jobs. Since 2006, the islands economy has contracted every year except one and its poverty rate is now
almost double that of Mississippi,
the poorest state. The population,
now about 3.5 million, is shrinking
and forecast to reach a 100-year
low by 2050.
Republican lawmakers say a control board could make the politically
unpalatable decisions Puerto Rico
needs to repair its public finances.
The island-wide government pays
for schools and education items
normally handled by local communi-

BLOOMBERG

ties in the states and agencies that

provide water and electricity are intertwined with the territorys funding.
Its already closed scores of
schools and proposed tightening
an inefficient tax collection system,
though critics say it hasnt done
enough. The Obama administration
and Puerto Ricos Governor Alejandro Garcia Padilla say federal oversight must be paired with a plan to
give the island access to an orderly
bankruptcy process that would help

cut its liabilities and avoid protracted litigation.

Bond investors and insurers oppose the move because it could force
them to take losses; the conservative
Heritage Foundation characterises it as a bailout. Theres concern
that allowing Puerto Rico to use a
court-ordered reorganisation without a control board would fail to
address the islands budget imbalances and overdue financial reports.
Bloomberg View

THU RSDAY MA RC H 17, 2016 T HEED G E FINA NCIA L DA ILY

W O R L D B U S I N E S S 19

Li: Economy will not have a hard landing

BEIJING: Chinas economy will not
have a hard landing, Premier Li
Keqiang said yesterday, despite
widespread fears that the government will have difficulty managing
slowing economic growth.
We have long-term confidence
in the Chinese economy and this
confidence isnt without a foundation, Li told once-a-year annual press conference at the end
of the annual session of the Communist-controlled legislature.
As long as we persist with reform and opening up, Chinas economy wont have a hard landing.
Chinas rubber stamp parliament approved an economic road
map for the next five years and a

Japans major
rms oer
smaller 2016
pay rises
BY TETSU SH I K A JIM OTO

TOKYO: Japanese blue-chip

firms yesterday announced
wage hikes far below last years
increases, a blow to the Abenomics stimulus policy at a
time when fears of a deepening global slowdown and jittery
markets are denting business
sentiment.
Bellwether Toyota Motor
Corp and some other leading
manufacturers agreed to raise
base pay for a third year in a
row, under public pressure from
Prime Minister Shinzo Abe.
Toyota agreed to a monthly base wage rise of 1,500
(RM54.80) half of the unions
demand and far below the
4,000 gain given a year ago.
Other automakers also offered
smaller hikes. A Toyota official
quoted Akio Toyoda, company
president, as saying about the
smaller increases that the tide
has changed over the business
environment.
Unions had tempered their
demands, reflecting the tougher environment. Still, companies response at the key annual shunto wage negotiations
was well short of the demands.
With the economy close to another recession due to weak
consumer spending, Abe has
been counting on wage hikes
to drive a virtuous growth cycle led by higher incomes and
increased consumer spending
and business investment.
Many companies are making record profits, so I expect
wage hikes will be realised
firmly, Chief Cabinet Secretary
Yoshihide Suga told reporters
early yesterday.
Analysts found the increments disappointing.
A ripple effect from wage
hikes at major firms will be limited on small firms and contract
workers despite labour shortages, said Hisashi Yamada, chief
economist at Japan Research
Institute. This wont boost the
economy. Reuters

charity law just before Li spoke.

As the balloting started in the
Great Hall of the People in Beijing,
a voice boomed over a loudspeaker
asking delegates to press the voting
device. Thousands of arms in suit
jackets reached across the tables
simultaneously.
Votes at the National Peoples
Congress are normally overwhelming approvals of measures decided long in advance by the ruling
Communist party. There were 2,778
yes votes for the 13th Five Year
Plan, or 97.27% of the total, the official Xinhua news agency reported,
and 2,636 in favour of the charity
law 92.49%.
The five-year plan, a blueprint

Australia dumps backpacker tax over farm,

Asia export concerns

for economic and social development, pledged to grow the worlds

second-largest economy by an average of at least 6.5% a year over the
2016 to 2020 period. Such plans
are a legacy of Chinas command
economy era, but still guide policymakers at all levels of government. AFP

Li: We have long-term

condence in the
Chinese economy and
this condence isnt
without a foundation.
Photo by Reuters

Economists cut Spore

growth forecasts
While downgrading view on exports and manufacturing activity
SINGAPORE: Economists lowered
their forecasts for Singapores 2016
growth and inflation compared with
three months ago, while downgrading their view on exports and manufacturing activity, a central bank
survey showed yesterday.
The median forecast of 24 economists surveyed by the Monetary
Authority of Singapore (MAS) was
for gross domestic product (GDP)
to grow 1.9% in 2016, down from
2.2% expected in the previous MAS
survey published in December.
As reflected by the mean probability distribution, the most likely outcome is for the Singapore
economy to grow by between 1%
and 1.9% this year, below the 2%

to 2.9% range reported in the last

survey, the MAS said.
The government now expects
full-year GDP growth of 1% to 3%
this year.
Economists median forecast
for non-oil domestic exports was
growth of 0.2% for all of 2016, down
from the previous forecast of a 1.5%
expansion. The manufacturing sector was seen likely to shrink 2.7% in
2016, worse than the previous median forecast of a 1.2% contraction.
The MAS survey showed that
economists expect GDP growth
in the first quarter to come in at
1.6% year-on-year (y-o-y), down
from 1.8% expected in the previous survey.

Singapores advance estimate of

January to March GDP is due to be
released next month. In the fourth
quarter of 2015, GDP expanded
1.8% y-o-y, while expanding at an
annualised 6.2% from the previous quarter.
Economists also lowered their
inflation forecasts for 2016, according to the median forecasts in the
MAS survey. The headline consumer inflation rate was seen at -0.2%
y-o-y in 2016, down from 0.5% in
the December survey.
MAS core inflation, the focus
of monetary policy, was expected
to come in at 0.8% in 2016, down
from 1% expected in the previous
survey. Reuters

South Korea unemployment at six-year high

BY CHRISTINE K I M

SEOUL: South Koreas unemployment rate in February spiked to its

highest in six years due to a holiday
disrupting the job market, government data showed yesterday, adding to concerns over the health of
the economy.
The unemployment rate in February in seasonally adjusted terms
jumped to 4.1%, Statistics Korea
data showed, up from 3.5% in January. This was the highest since a
4.2% rate seen in February 2010.
Statistics Korea blamed the spike
on the Lunar New Year holiday,
which fell early in the month. The
rise in unemployment followed the
termination of temporary jobs that
had been created for the holiday.
The jobless rate for all age
groups rose except those in their
early 20s and 50s. Middle-aged Koreans have continued to re-enter
the job market since last year due

Yoo: We do recognise the

importance of improving the job
market and will be announcing new
measures soon. Photo by Reuters

to a sluggish economy.
Some young Koreans were more
able to find jobs after graduating
from university in February, the
data showed.
We will not be downgrading

IN BRIEF

our employment rate forecast just

from this batch of data, as it does
not confirm a downward trend. We
do recognise the importance of improving the job market though and
will be announcing new measures
soon, Finance Minister Yoo Il-ho
told reporters on the sidelines of
an event in Seoul.
In non-seasonally adjusted
terms, the jobless rate last month
stood at 4.9%, also the worst in
six years.
A separate statement from the finance ministry said the government
planned to announce new measures in April to boost job creation
for young Koreans and women. It
did not provide details. Reuters

SYDNEY: Australia yesterday

walked back from a planned
tax hike on foreign travellers who work in the country, following concerns from
farmers that their supply of
backpacker labour at harvest times may dry up and
undermine Australias ambitions of being Asias delicatessen. Australian fruit exports
are set to hit a record A$2.27
billion (RM7.01 billion) next
season, up 10% from the previous 2014/2015 season, and
backpackers on working holiday visas make up the bulk of
fruit pickers during harvests.
Under the policy, foreign travellers on working holiday visas would have been required
to pay tax of 32.5% on every
dollar earned, when previously they paid no tax on income
up to A$18,000, the same as
locals. Reuters

BoJs Kuroda says central

bank has room to cut rates
to around -0.5%
TOKYO: Bank of Japan (BoJ)
governor Haruhiko Kuroda
said there is room to slash interest rates to around minus
0.5%, countering a growing
suspicion that public criticism over Januarys decision
to adopt negative rates will
prevent him from pursuing
the policy. Speaking in parliament, Kuroda said he cannot
indicate which policy tools
the BoJ would use in case it
decides to expand stimulus
again as the decision would
depend on economic conditions at the time. Of course,
theres a possibility that we
will decide to cut interest
rates further, Kuroda said.
Reuters

Bank Indonesia seen

cutting key interest rate
JAKARTA: A slim majority in a
Reuters poll expects Indonesias central bank, under pressure from the government to
help lift economic growth, to
cut its benchmark interest rate
again today. The decision will
be announced shortly after a
policy meeting of the Federal
Reserve, which is widely expected to keep US rates steady.
Bank Indonesia cut the key
rate by 50 basis points at policy meetings in January and
February. Reuters

Nobel Prize winner urges

Japan to delay tax hike
TOKYO: Nobel Prize-winning
economist Joseph Stiglitz yesterday urged Japan to postpone a planned tax hike,
warning that boosting the
tariff could hurt the debt-hit
economy as global markets
slump. The comments come
as Japanese Prime Minister
Shinzo Abe mulls postponing the consumption tax hike
ahead of summer elections, in
a possible about-face from a
previously repeated pledge to
carry it out. AFP

T HU R SDAY M ARC H 17, 2 0 16 TH EEDGE F I N AN C I AL DAI LY

20 W O R L D B U S I N E S S

LSE to merge with

German rival

IN BRIEF
Moodys revises outlook
for Saudi banks to
negative on oil slump

The companies are valued at US$30.5b, creating a European titan

BY JOHN D ET RI XHE

LONDON: Deutsche Boerse AG

and London Stock Exchange (LSE)
Group plc agreed to merge, a deal
that would create a titan of European trading as long as rival suitors
dont upend the agreement and
regulators give it their blessing.
LSEs equity holders will own
45.6% of the enlarged group, while
Deutsche Boerse stockholders will
get the remaining 54.4%, according to a statement yesterday. The
two companies announced on
Feb 23 that they were negotiating
a deal. The companies are valued at
US$30.5 billion (RM126.3 billion).
Theyre being very, very careful
to position this as a merger and a
merger of equals, said Scott Moeller, a professor of corporate finance at Londons Cass Business
School and a former investment
banker. Its very close to being
what a textbook merger of equals
would look like.

VWs Europe
market share
continues slide
as recalls start

Filepic of the outside of the London

Stock Exchange building in the City
of London. LSEs equity holders
will own 45.6% of the enlarged
group, while Deutsche Boerse
stockholders will get the remaining
54.4%. Photo by reuters

The companies predicted they

would have cost savings, or synergies, of 450 million (RM2.07
billion) each year after the deal is
completed. Companies typically
have to spend double their forecast annual savings from synergies
in the first year or two of the deal.

Chinas ZTE said to appeal US

export ban after lobby efforts fail
BY STEV E S TEC K LO W
& JOEL SCH EC TM AN

BY TOM L AVELL

FRANKFURT: Volkswagen
AG lost market share in Europe for the sixth month in a
row as the German carmakers diesel emission scandal
pushed buyers to the likes of
Fiat Chrysler Automobiles
NV, Mercedes-Benz and Ford
Motor Co.
Volkswagens brands accounted for 24% of new auto
registrations in February versus 25.4% a year earlier, the
European Automobile Manufacturers Association, or
ACEA, said yesterday in a
statement. Industrywide sales
jumped 14% to 1.09 million
vehicles, while two-month
registrations increased 10%
to 2.19 million autos.
Volkswagen is recalling
8.5 million diesel cars in Europe to fix engines designed
to cheat on emission tests.
Sales growth at the VW brand
was only about one-third of
the industry-wide increase in
February, and its deliveries
have lagged behind the markets gains since the scandal
came to light in September.
Daimler AGs Mercedes, Ford
and Fiat were the main beneficiaries, bolstered by sport
utility vehicles. Bloomberg

That means they have to come up

with cash to save money later on.
This is the third time that the
German exchange group has sought
to buy LSE since the turn of the
century. Previous attempts failed
in 2000 and 2005. The agreed tie-up
between the London- and Frank-

furt-based firms is also the biggest

deal between market operators
since Intercontinental Exchange
Inc bought NYSE Euronext in November 2013.
The chief executive officers
(CEO) have so far succeeded where
their predecessors had failed at
least twice previously. The dealmakers, Deutsche Boerse boss
Carsten Kengeter and LSE chief
Xavier Rolet, share a Wall Street
pedigree with stints at Goldman
Sachs Group Inc. Kengeter will be
the CEO of the combined company, while Rolet will step away.
Bloomberg

LONDON/WASHINGTON: Chinas ZTE Corp will appeal tough

US export restrictions imposed
last week, according to a person
familiar with the matter, after
the telecom equipment makers
costly lobbying effort failed to allay concerns about its business.
The US Commerce Department imposed restrictions on US
suppliers providing crucial components to ZTE for alleged Iran
sanctions violations, a move likely
to disrupt its global supply chain.
The US Department of Commerce and ZTE Corp are in ongo-

ing discussions, a senior Commerce Department official told

Reuters. These discussions have
been constructive, and we will
continue to seek a resolution.
How long the appeal process
might take remains unclear. It
usually takes a year or more for
export curbs to be removed for
a company, but Washington can
act more quickly.
ZTE, also a top smartphone
maker, declined to comment on
its appeal plans or about its lobbying efforts.
In statements following the
imposition of the restrictions,
ZTE said it was actively facilitating communications with the

US governmental department to
search for a solution.
Since coming under fire in
2012 for alleged deals with sanctions-hit Iran and possible links
to the Chinese government and
military, ZTE has ramped up its
spending on Washington lobbyists.
ZTE lobbyists contacted lawmakers in both houses of Congress, the Department of Homeland Security, the Department of
Commerce, the State Department
and the National Security Agency
to discuss matters such as cyber
security, supply chains and trade
relations, according to the lobby
documents. Reuters

Foxconn seeking guidance on Sharps 4Q

BY JR W U & M AK I KO YAM AZ AK I

TAIPEI/TOKYO: Foxconn has completed its due diligence on Japans

Sharp Corp through the end of 2015,
but is seeking guidance from the
loss-making electronics maker on
its latest quarterly performance, a
person familiar with the matter said.
Foxconn, formally known as
Hon Hai Precision Industry Co, is
finalising a takeover of Sharp, estimated to worth nearly US$6 billion
(RM24.8 billion) and marking the
largest purchase of a Japanese tech

firm by a foreign company.

But a signing of the deal may
not happen this week, two people familiar with the matter told
Reuters, speaking on condition of
anonymity due to the sensitivity
of the matter.
A Sharp spokesman said that
both companies are working hard
to reach a satisfactory agreement
as soon as practically possible and
have not set a signing date.
Investors are edgy about the
deals prospects after a last-minute hitch last month over potential

liabilities at Sharp and the display

makers shares slid 9% yesterday.
Foxconn, the worlds largest contract maker of electronic goods and
a major supplier to Apple Inc, is
waiting for auditors and accountants of Sharp to confirm whether
the liabilities it has uncovered in its
due diligence through the end of
2015 is in the right ballpark, one
person said.
It is also seeking guidance from
Sharps team about its latest quarterly performance, the person said.
Reuters

DUBAI: Moodys Investors Service changed its outlook for

Saudi Arabias banks to negative from stable on the expectation that bad loans will rise
over the next 12 to 18 months
because of low oil prices and a
decline in government spending. Non-performing loans will
rise to about 2.5% of total loans
over the period, from a very
low average 1.4% in September 2015, Olivier Panis, a
vice-president at the rating
firm, said in a statement yesterday. Banks will also remain
exposed to loan defaults owing to their persistently high
single-party exposures, the
analyst said. Bloomberg

Japan Post: Bank unit

chief Nagato to replace
Nishimuro as CEO
TOKYO: Japan Post Holdings
Co said yesterday it had chosen Japan Post Bank Co president Masatsugu Nagato to
replace Taizo Nishimuro as
head of the holding company.
Nishimuro, 80, was hospitalised last month for unspecified
tests. He will remain a director of Japan Post Holdings, it
said. Nagatos appointment is
effective April 1. Nagato, 67,
started his career at Industrial Bank of Japan, now part of
Mizuho Financial Group, and
has also served as chairman
of Citibank Japan and deputy
president of Fuji Heavy Industries Ltd. Reuters

Telstra hires former

Nokia, Optus execs in
technology push
TOKYO: Telstra Corp hired
former Nokia chief executive
officer (CEO) Stephen Elop to
a newly created technology,
innovation and strategy position as Australias biggest
telecommunications company
seeks global growth. Elop, 52,
will be responsible for strategy as the company seeks to
be a world-class technology company and report to
CEO Andrew Penn, Telstra
said yesterday. The carrier also
named Kevin Russell, the former head of the consumer
business at second-ranked
Optus, as group executive retail. Bloomberg

FleetCor buys Brazilian

STP in US$1b deal
NEW YORK: US FleetCor Technologies, which provides special payment services for businesses, announced a US$1.05
billion (RM4.35 billion) deal
on Tuesday to buy the Brazilian electronic toll payments
company Servicos e Tecnologia of Pagamentos (STP). FleetCor, known for fuel cards and
other special payment products and services, will pay for
the STP transaction with a
combination of cash and debt,
the company said in a statement. The deal is expected to
close in the third quarter of
this year. AFP

THU RSDAY MA RC H 17, 2016 T HEED G E FINA NCIA L DA ILY

W O R L D 21

More Russian warplanes leave Syria

BY MA X D EL A N Y
& L AYA L A B OU RA HAL

MOSCOW: A second group of Russian warplanes flew out of Syria

yesterday in line with Moscows
decision to withdraw most of its
forces, as US Secretary of State
John Kerry prepared a rare trip
to Moscow to discuss the conflict.
SU-25 combat aircraft and IL-76
transport planes pulled out of Russias Hmeimim base in Syria, the defence ministry said in a statement.

EU leaders
push migrant
plan ahead of
Turkey summit
BRUSSELS: European leaders
launched a charm offensive to
win backing for a migrant deal
with Turkey yesterday, seeking
to heal rifts between member
states on the eve of a key summit
with Ankara.
European Union (EU) president Donald Tusk warned on
Tuesday that hard work lay ahead
to finalise the deal, after Cyprus threatened to derail it over
long-standing disagreements
with Turkey.
Tusk held talks in Nicosia in
an attempt to win Cyprus backing for the proposal, which has
been hailed as a game-changer
for European countries buckling
under the wave of new arrivals.
EU and Turkish leaders last
week agreed a tentative plan that
would see new migrants landing
in Greece sent back to Turkey.
For each Syrian refugee returned,
the EU would resettle one from a
Turkish camp.But there has been
a growing pushback against the
deal, with both France and the
Czech Republic warning against
attempts by Turkey to blackmail Europe.
Cyprus has expressed reservations, not least because longtime adversary Turkey expects
the accord to further its EU
membership bid and ease visa
requirements in the passport-free
Schengen area. Top United Nations officials on refugees and
human rights have also questioned whether the plan would
be legal. Tusk said it is not an
easy task to make the proposal
legally sound and acceptable to
all 28 EU members. AFP

The departure follows that of

a first group of aircraft which arrived back in Russia on Tuesday
to a heros welcome.
Washington said on Tuesday
that the earliest indications are
that the Russians are following
through on the surprise withdrawal.
The pullout has spurred hopes
for peace talks in Geneva aimed
at ending Syrias five-year conflict.
United Nations envoy Staffan de
Mistura described the withdrawal

as a significant development for

the talks, after the regime and rebel
delegations submitted road maps
for a political solution.
We hope [this] will have a positive impact on the progress of the
negotiations, he said.
Kerry said on Tuesday he would
hold talks with Russian President
Vladimir Putin to try to take advantage of this moment, which he
described as the best opportunity
in years to end the bloodshed.
He is expected to go to Moscow

IN BRIEF

some time next week after a trip

to Cuba.
In a shock move, Putin ordered
the main part of Russias forces out of Syria on Monday, but
pledged to keep some air and naval bases in the war-torn nation.
A senior official said strikes
would also continue against terrorist targets, and a monitoring
group said Russian aircraft had
struck the Islamic State group
around the ancient city of Palmyra. AFP

Two closer to White

House nominations
Narrowing field in the race for the White House

US elections
November 8, 2016

Two Democrats and three Republicans are left in the running

REPUBLICANS

Hillary CLINTON

Donald TRUMP

Age: 68
Ex-secretary of state,
Ex-senator for New York,
former First Lady

N Marco RUBIO
AW 44
Senator, Florida
Cuban-American,
conservative

Bernie SANDERS
74
Independent Vermont
senator, self-styled
Democratic socialist

R
HD

WI

TH

WI

WN 53
Governor of N. Jersey,
former prosecutor,
advocates tax reform

A
DR

TH

WI

WI

N Mike HUCKABEE
AW 60
Former governor
of Arkansas, TV host,
Baptist preacher

R
HD

BY M ICHAEL MATHE S
& ANDR EW BEATTY

CLEVELAND: Hillary Clinton took

a monumental step toward clinching the Democratic partys White
House nomination on Tuesday,
while Donald Trumps seemingly
unstoppable rush to victory hit a
bump in Ohio.
Trump won key Republican primaries in Illinois, North Carolina and
Florida where he thumped home
state Senator Marco Rubio, who immediately announced he was sus-

John KASICH

45
Senator, Texas
Ex-lawyer
Cuban-American

N Ben CARSON
AW 64
Retired
neurosurgeon

R
HD

WI

63
Governor of Ohio
A fiscal and social
moderate

N Jeb BUSH
AW 63
Son of one president,
brother of another,
ex-governor of Florida

R
HD

WI

Carly FIORINA

Chris CHRISTIE

Martin O'MALLEY

WN 53
Ex-mayor of Baltimore,
former governor
of Maryland

A
DR

Ted CRUZ

69
Billionaire real estate
tycoon, TV personality

WN 61
Former CEO of
Hewlett-Packard

A
DR

TH

WI

WI

N Rand PAUL
AW 53
Senator, Kentucky
Libertarian

R
HD

pending his presidential campaign.

This was an amazing evening,
a buoyant Trump told supporters.
Were going to win, win, win and
were not stopping.
Rubios loss was a major setback
for Republicans trying to stop the bellicose businessman, whose populist
anti-immigrant, anti-Muslim stance
they fear will split the party.
The 69-year-old Trump was clinging to a narrow lead in Missouri with
nearly all of the votes counted, but
was denied a clean sweep by Ohio
Governor John Kasich, who carried

Jim GILMORE

WN 66
Former governor
of Virginia

A
DR

TH

WI

N Rick SANTORUM
AW 57
Former senator,
Pennsylvania

R
HD

WI

his home state, a key general election

battleground.
Trump may now struggle to reach
the 1,237 delegates necessary to avoid
a challenge at the partys nominating convention in July in Cleveland.
The bottom line after tonight: it
looks like Trump will not have a majority of delegates in July, said Paul
Beck, a professor of political science
at Ohio State University.
There were fewer problems for
Clinton, who defeated her rival
Bernie Sanders in Florida, North
Carolina, Ohio and Illinois. AFP

BRUSSELS: Belgian police killed a

suspect armed with an assault rifle
after four officers were wounded
on Tuesday in a raid on a Brussels
apartment linked to investigations
into Novembers Islamist attacks in
Paris, prosecutors said.
One or more people opened fire

on Belgian and French police officers

when they went to conduct what they
had expected to be a routine search
of an apartment in a suburban side
street in the south of the Belgian
capital. Some of those involved in
the Nov 13 bombings and shootings
lived or were based in the city.
Three officers, including a French
policewoman, were wounded and
a fourth was hurt during a subsequent exchange of fire. When police

stormed the building three hours

after the first raid, they killed an unidentified individual wielding a Kalashnikov a gun used by some of
the Islamic State militants in Paris.
Prime Minister Charles Michel
and members of his government told
a news conference police operations
were continuing. Police searched
more nearby buildings late in the
evening in the southern Brussels
borough of Forest but did not con-

BANGKOK: The United Nations

(UN) condemned insurgents in
Thailands deep south yesterday for seizing a hospital during a recent attack on security
forces in the violence-plagued
Muslim majority region. The assault was one of several smallscale but coordinated attacks
on Thai forces in the region
on Sunday night, following a
recent surge in violence by insurgents. More than 6,500 people mostly civilians have
been killed in a 12-year revolt
by rebels seeking greater autonomy from majority-Buddhist
Thailand, which annexed the
culturally distinct region more
than a century ago. AFP

N Korea sentences US
student to 15 years
hard labour
SEOUL: North Korea yesterday
sentenced an American student
who admitted stealing a propaganda banner from a hotel to 15
years hard labour for subversive
activities, state media said. The
judgement was handed down
on Otto Warmbier, a 21-year-old
student from the University of
Virginia, by North Koreas Supreme Court, the Norths official
KCNA news agency said. Observers said the harsh sentence
was likely a reflection of soaring
military tensions on the divided
Korean peninsula. AFP

First Zika case

contracted in Cuba

Brussels police kill gunman in Paris attack raid

BY ROBERT-JAN BARTUNEK,
P H I LI P B L ENKI NSOP
& C L EMENT ROSSI GNOL

PESHAWAR: At least 16 people

were killed and more than two
dozen wounded when a bomb
blew up inside a bus in Peshawar, the main city of Pakistans
insurgency-wracked northwest, officials said, with the toll
feared to rise. No group has so
far claimed responsibility for the
explosion, which took place as
the bus carrying mainly government employees was passing
through the crowded shopping
district of Saddar. But Pakistan
has been battling a homegrown
Islamist insurgency for more
than a decade, with groups such
as the Pakistani Taliban routinely carrying out attacks as part
of their struggle to overthrow
the government. Bomb disposal
officials said a four-kilogramme
improvised explosive device had
been planted near the buss gas
cylinder and appeared to have
been detonated remotely. AFP

UN condemns Thai
insurgents for seizing
hospital during attack

Trump may now struggle to reach 1,237 delegates

DEMOCRATS

Bus blast kills at least

16 in Pakistan, injures
over two dozen

firm Belgian media reports that they

were hunting two further suspects.
We have escaped a tragedy,
Michel said, noting that none of the
four wounded police officers was
seriously hurt.
Ministers said the presence of
French police at the scene was a coincidence not an indication that the
initial search had been expected to
provide a major break in the case.
Reuters

HAVANA: Cubas Health Ministry on Tuesday reported the

first case of Zika contracted in
the country, in a 21-year-old
woman living in central Havana
and who had not been overseas. Cubas four previous cases
of Zika all involved people who
had contracted the virus while
abroad. Cuba reported its first
case of Zika on March 2, making it one of the last countries
in the Americas to encounter
the virus. Reuters

22

T HU R SDAY M ARC H 17, 2 0 16 TH EEDGE F I N AN C I AL DAI LY

live it!

T HU

WELLBEING . THE ARTS . WINE+DINE . STYLE+DESIGN . LEISURE

adidas

A
Bottega Veneta

Gucci

Jimmy Choo

TH
for
to
sec
hil
cre
and
sop

and
of w
int
res
Fro
wo
Fer
Fus

sho
rie

SPORTING CHIC
Transforming the humble
sneakers into high fashion

fashion brands, even those that are not confined

to designing street wear only.
Salvatore
Ferragamo

BY SHALINI YEAP

ome say that sneakers find their origin in plimsolls that were popularised by beach-goers in late 18th century London. The lightweight canvas
topped rubber soled shoes was the
chosen form of footwear for visits to
the seaside, as they were not only affordable
but also comfortable to be worn on the sandy
beaches. Plimsolls kept feet cool in the summer
and dried quickly after a paddle in the sea. Over
the years, sneakers evolved to sportswear and
walking shoes.
Last year, the Brooklyn Museum in New York
showcased an exhibition dedicated to this evolution. Curated by Elizabeth Semmelhack, senior
curator at the Bata Shoe Museum, the exhibition
was divided into the different eras of sneakers.
There were some iconic sneakers on display,
including a replica of Michael Johnsons gold
spikes, which he wore at the 1996 Atlanta Olympics as well as the futuristic Special Forces Boot
that Nike produced for military use.
Today, sneakers are not only reserved for lazy
weekends or long walking trips when travelling.
Instead, the versatile sneaker has rose beyond
its humble beginnings, which was necessitated
by practicality, to become a runway staple and
fashion statement. Sportswear brands like adidas
are also attempting to bring forth innovation to
this form of footwear by incorporating technology such as the adidas Primeknit technology that
ensure comfort and best-fit of the sneakers, as
seen in its latest NMD collection.
While remaining a practical choice for many,
sneakers are becoming more and more fashion forward, available in materials other than
the conventional rubber and canvas as well as
sporting bold colours and designs. It is not uncommon to see sneakers on the runway of high

Louis Vuitton

Sporting Luxury
Proving that fashion and comfort can indeed go
hand in hand, these footwear options are your
go-to for effortless style. Louis Vuitton slip-ons
and colour-blocked high-tops from Hermes both
promise comfort without compromising on style.

Gucci

Audacious palette and pattern

The choice of footwear is one way to make a fashion statement and sneakers that come in a variety of colours and designs make for an interesting
accessory. Jimmy Choos Mens SS16 collection,
for example, is a medley of form and function,
resulting in a modern hybrid of the conventional
sneakers. It also features glitter-sprinkled and psychedelic designs for the adventurous fashionista.

Comme Des Garons

and Nike

P
A
C

Signature Designs
Sneakers are no longer limited to being canvas
shoes with rubber soles as fashion labels explore
a variety of materials and designs. Some brands
do so by incorporating their signature motifs in
the sneakers they design. For instance, Guccis
selection of sneakers for men combine the brands
monogram with various colours in a classic hightop cut sneaker collection. Bottega Veneta, on the
other hand, features its intrecciato weave leather
in the brands sneakers for men and women.

Fashion label and celebrity collaborations

Comme Des Garons and Nike recently collaborated
to come up with the Blazer, featuring an all-black
leather upper with white added to the midsole and
fans of these brands can opt between the high top
and low designs. This is not CDGs first collaboration with Nike or other sneaker-related brands
for the matter. Prior to this, the Japanese fashion
label partnered with ubiquitous Converse Chuck
Taylor. Meanwhile, adidas revisits its iconic adidas
originals by partnering celebrities like Rita Ora and
more recently, Kanye West, for its Yeezy Boost line.

T HURSDAY MA RC H 17, 2016 T HEED G E FINA NCIA L DA ILY

live it! 23
WELLBEING . THE ARTS . WINE+DINE . STYLE+DESIGN . LEISURE

TIMEPIECES

BY SU ANN Q UAH

Art of fusion
THE year 2016 marks yet another accomplishment
for Hublot as the fine watchmaker expands its wings
to the heart of Kuala Lumpur in Suria KLCC. The
second boutique in Malaysia, the first being in Starhill Gallery, the stores design was inspired by the
creation of a beautiful space that is both evocative
and welcoming with the use of simple, elegant and
sophisticated materials.
Hublot is headed by chairman Jean-Claude Biver
and chief executive officer Richard Guadalupe, both
of whom are responsible for turning the Hublot brand
into a genuine success story with timepieces that represent the symbols of a constantly evolving tradition.
From watch wizardry and revolutionary materials to
world-class collaborations such as Fifa World Cup and
Ferrari, Hublot characterises itself through the Art of
Fusion philosophy, bringing tradition into the future.
The Hublot KLCC store boasts a special animated
showcase which provides a unique interactive experience of all the latest Hublot timepieces available.

This display is an element central to the Art of Fusion

theme that the Hublot DNA focuses on. Upon entering the boutique, a subtle interplay of materials and
designs provides a luxurious and elegant ambience
to the boutique, with intertwined panels in shades of
grey and black separating sections of the boutique.
A built-in display window, named the Million Dollar
Wall, captures the clients attention by highlighting
limited collection timepieces shown to the best of
their advantage.
Further inside the boutique, a private lounge area
separated by Hublot monogram panels will welcome
one to relax within the sophisticated ambience of the
store while appreciating the brands flagship collections such as Big Bang, Classic Fusion, King Power
and Spirit of Big Bang.
Eight years ago when Hublot opened its first store
in Kuala Lumpur, it was the first Hublot boutique to
be opened in Asia and only the third boutique to be
opened in the world.

PICK OF THE DAY

TRY out the Milo Gula Melaka Cashew granola from
Signature Snack. This sweet and chocolate tasting
granola is infused with Malaysian flavours containing
both milo and gula Melaka aside from the regular oats
and cashew mix. This healthy snack is made entirely
from natural ingredients without preservatives. The
granola mix is available in full size snack pouch weighing 150g. Sign up for a monthly subscription of snacks
for RM79.90 at www.signaturesnack.com.

Personal
ASSISTANT
CO MPI L ED BY HA NNAH M ER ICAN

WORK. LIFE. BALANCE

CATCH Frisky Rooftop Bars Movies Under

the Stars series which will be showing the
lm Remember tonight. The lm follows a
fellow Auschwitz survivor, who currently lives
in a nursing home, who goes in search of the
person responsible for the death of his family. With the help of another survivor and a
hand-written letter, they try and track down
the person they knew from their days at the
concentration camp. Remember stars Christopher Plummer and Bruno Ganz. Admission
is free and the lm starts at 9.30pm. Frisky
Rooftop Bar is located at 4A Lorong Yap Kwan
Seng, Kuala Lumpur. For more information,
visit www.facebook.com/FriskyBarKL/.

HEAD to Shalini Ganendra Fine Art gallery to

see the exhibition Returned The Stars Look
So Dierent by Malaysian artist Ru Yi Tan.
The exhibition explores the use of colour as
a concept that relates to space, history, culture and living creatures. Tans work has been
shown in Japan and Italy, and it ranges from
sculpture installations to collages and photography. The gallery is open from Tuesdays
to Saturdays from 11am to 7pm. The exhibition
is until March 30. Shalini Ganendra Fine Art
is located at 8 Lorong 16/7B, Petaling Jaya.
Find out more at www.shaliniganendra.com.

TUCK into a set lunch at Cedar on 15 at Impiana KLCC Hotel. While enjoying a panoramic
view of the city, diners have the exibility of
choosing the number of courses they want,
including soup, salad, main course and dessert. Main courses feature chicken, sh, pasta,
lamb and vegetarian dishes, among others.
The three-course meal is priced at RM34.90
and the four-course at RM44.90. Cedar on 15
is located at Impiana KLCC, 13 Jalan Pinang,
Kuala Lumpur. To make a reservation, call
(03) 2147 1111.

T HU R SDAY M ARC H 17, 2 0 16 TH EEDGE F I N AN C I AL DAI LY

24 F E AT U R E

Lesson for Japan

It can learn from South Korea about corporate governance
BY CHRI STOPH ER LANGNER

heres one thing Japanese Prime Minister Shinzo Abe could

learn from a Korean
woman: respect
for minority shareholders, that is. President Park
Geun-hyes push for better corporate governance at the nations
largest conglomerates is bearing
fruit, and exciting some of the
worlds biggest investors.
Last week, Samsung Electronics, by far the biggest member
of the countrys US$1 trillion
(RM4.14 trillion) Kospi stock index, adopted a proposal to allow
non-chief executive officers to
take up the chairmans role for
the first time, while Hyundai Motor pledged to strengthen transparency. The moves drew praise
from Mark Mobius, the executive
chairman of Templeton Emerging Markets Group at Franklin
Resources. Across the strait, only
1% of Japans Topix 500 companies have good board structures,
Jefferies analyst Zuhair Khan said
in a note on Tuesday.
Among Khans conclusions:
fewer than 5% of Japanese com-

panies have a majority of outside

directors, and only 2% have outside chairmen, or nomination,
audit and compensation committees headed by an outsider. There
are also more academics and
retired bureaucrats on boards
in Japan than there are finance
professionals, accountants or
strategy consultants combined.
Despite a history of accounting
scandals, still only 10% of companies have an outside director
with an accounting background
and barely 25% of boards have a
director with a legal background,
he wrote.
Forget diversity, too.
As Bloomberg Gadflys Andy
Mukherjee recently noted, Japan Incs lack of gender variety
in top corporate jobs is by far the
worst in the Group of Seven nations. Maybe that explains why
the Topix is down 14.6% over the
past decade on a US dollar basis,
making it one of the worst performers among developed-nation
exchanges. Adding in dividends,
the index returned 3.4%, lagging
almost all other advanced economies.
Theres no doubt that within
the developed world, Japan has

the worst governance metrics (see

chart).
Japan is actually doing better than South Korea in one area
its boards have more women,
just. But at 2.7% versus 2.3%, the
participation of females in corporate decision-making is so small
in both countries that comparing
them seems wrong.
Besides, South Korea elected
a female leader and shes already
changing the general attitude toward transparency. Perhaps thats
what Japan needs, a woman in
power.
One thing is for sure, Japanese
investors continue to nurse losses
in spite of negative interest rates
and multiple measures to spur
economic growth. Maybe its time
for Abe to direct an arrow towards
corporate governance. Structural
reform is badly needed, and it has
to start from the top. Bloomberg
Christopher Langner is a markets
columnist for Bloomberg Gadfly. He previously covered corporate finance for Bloomberg,
and has written for Reuters/IFR,
Forbes, The Wall Street Journal
and Mergermarket.

Singapores Uber disruption fades

BY A N DY MUK H E R J E E

JUST 12 months ago, it looked like Singapores taxi business was going to be
turned on its head. But the threat of
disruption from ride-sharing apps is
no longer worrying investors.
It seems the moment for the likes of
Uber and Grab has passed. ComfortDelGro, the islands biggest conventional
taxi company, is powering away, with
analysts estimates of its profit margin
among the most bullish for companies
on the MSCI Asia Pacific Ex-Japan index (see chart).
According to Nomura, weekly incentives for Uber drivers in the city
are down 43% from the third quarter
of 2015. Uber and GrabCar, the two
chauffeured car services, now have a
7% market share, the brokerage estimates. And growth is slowing.
Instead of enlisting more disillusioned vproperty brokers as drivers,
these companies are probably focusing more on profitability, which means
giving their existing fleets more opportunities to benefit from surge pricing.
Indeed, the battle for market share is
losing momentum pretty much everywhere in Asia. China is drawing up
regulations that will balance the interests of both traditional and online
ride-hailing companies, according to
a report this week by the South China
Morning Post.
In Indonesia, shares in Express
Transindo, the archipelagos second-biggest taxi company by market
value, have almost doubled since Dec
31, helped by a 29% rise on Monday
amid speculation that the government
might block Uber and Grab.

The stock, which still trades one

standard deviation below its five-year
average price-earnings ratio, has gained
from a drop in fuel prices and a revival
in investor confidence, despite being
downgraded last week by local rating
company Pefindo, which still expects
more intense competition from the
likes of motorcycle-hiring service GoJek. Such fears may be overdone.
In India, Uber drivers incentive
payments have already come down
quite significantly, and both Jakarta
and Mumbai are building subway systems. New Delhi has started experimenting with keeping half the citys
cars off the roads on certain days to
tackle pollution.
Granted, emerging Asian nations
will probably take years to expand public transport to a point where it can seriously curb demand for private rides.
But in Singapore, change could come
fairly quickly. The government is making lumpy investments in the citys infrastructure.
In five years, total spending has risen
66% and the target is to bump that up
by a further 50% by the end of the decade to S$30 billion (RM89.9 billion), or
almost 6% of gross domestic product. A
chunk of that will go towards improving
the islands public transport network,
which doesnt augur terribly well for cab
demand but may give a boost to ComfortDelgros train and bus operations.
That being the case, its just as well
app-based services are stopping short
of creating a permanent glut of for-hire
vehicles. Maybe the next big threat will
be self-driving cars. Until then, Asias
conventional taxi-hailing companies
might be worth a ride. Bloomberg