Monday, 5 December 2016

(The Edge Financial Daily) Outsourcing, a bright spot amid the gloomy chatter


KUALA LUMPUR: Global business services (GBS), more commonly known as the shared services and outsourcing industry, is one of Malaysia’s brighter spots in the current slower growth environ-ment, according to Outsourcing Malaysia (OM).

While news of weak consumer sentiments, slower sales, companies downsizing, and earnings being slashed dominate headlines this year as global and domestic headwinds persist, the outsourcing industry created 6,000 new jobs for the Malaysian economy year to date.

According to OM, the local GBS industry is expecting to see between 10% and 15% growth in the next five years as more and more companies turn to outsourcing here.

The industry, which achieve a revenue of US$4 billion last year, is expected to create about 6,000 to 8,000 new jobs next year, said OM chairman Cheah Kok Hoong in a recent interview with The Edge Financial Daily.

According to consulting advisory firm PricewaterhouseCoopers, many companies have already outsourced their IT and back-office functions or established shared services centres for major business processes.

As globalisation and the advancement of technology enable new ways of doing business, corporations around the world are now outsourcing core activities such as research, product development, and tax and legal services.

The move stems from a rising awareness that it is not a way of cutting cost, but one to obtain strategic advances.

Malaysia, which has been consistently ranked third by global management consulting firm AT Kearney in their Global Services Location Index since 2004, has the potential of becoming a GBS hub, said Cheah.

The index, which measures financial attractiveness, people skills and availability, and business environment, also saw Malaysia staying firmly in the third place in its 2016 edition, just after India and China.

It also doesn’t hurt that Malaysia is ranked No 18 in the World Bank’s Ease of Doing Business Report, and No 14 in the IMD World Competitiveness Ranking 2015.

Still, the industry faces the issue of lack of talent, one that is critical enough to jeopardise the industry’s future growth, said Cheah.

“As an industry player, we know we had to do something,” said Cheah, who is also the group chief executive officer and director of ICT solutions and services provider Hitachi Sunway Information Systems Sdn Bhd.

After all, OM’s main objective is to promote and develop Malaysia’s GBS industry for high-value outsourcing. Naturally, its focus — supported by founding partner Malaysia Digital Economy Corp (MDEC) — is to enable both buyers and providers to work together on addressing outsourced service needs.

As such, he said OM — an industry initiative spearheaded by prominent GBS leaders, which is also a chapter of the National ICT Association of Malaysia (Pikom) — is trying to bridge the talent gap, and among its initiatives is the Graduate Employability Management Scheme (GEMS-SSO).

A joint initiative by OM, MDEC, and TalentCorp Malaysia Bhd (TalentCorp), the GEMS-SSO is aimed at providing industry exposure to final-year university students prior to graduation. The programme was co-funded by TalentCorp together with industry partners from the GBS sector.

Since the programme’s inception in 2014, over 250 final-year students have been trained and successfully placed as interns and subsequently absorbed by the industry.

Besides producing home-grown talent for the industry — though the number is still insufficient due to limited funding — the programme has directly addressed the issue of local graduates being unemployed.

This is vital as up to 31% — approximately 130,000 — of Malaysia’s unemployed are graduates or those with a tertiary education, according to the 2014 Labour Force

In the meantime, Cheah said, OM continues to engage with local universities to give feedback on talent development. The OM, he added, is in the midst of developing a long-term solution to address the talent gap problem, which includes a project management leadership course, though he did not elaborate.

(The Edge Financial Daily) Earnings continue to bleed in 3Q

(Subtitle) Analysts expect 2016 profits to contract but see hope in 2017


KUALA LUMPUR: The third-quarter results reporting period came to an end recently, and the figures remain disappointing, prompting analysts to project a negative growth for 2016 earnings. Most analysts, however, are hopeful of a gradual recovery in 2017.

“Overall, it’s not going to be a very good year this year, but we expect to see recoveries in 2017,” JF Apex Securities Bhd head of research Lee Chung Cheng told The Edge Financial Daily.

Lee said the domestic sales sector, such as the retail business and food and beverage business, will not see a recovery soon and domestic economic growth is still not good. But export-oriented counters could see some surprises. Kenanga Investment Bank Bhd noted that earnings on the whole did not register a growth for the third quarter of calendar year 2016 (3QCY16).

“The recently concluded 3QCY16 results reporting season continued to be disappointing, and has reinforced our earlier view that a broad-based earnings growth story is still missing,” it said in a report.

In 2QCY16, Kenanga estimated an average decline of 6.4% and 1.6% for financial year 2016 (FY16) and FY17 earnings for its core coverage, but following a disappointing 3Q, the research house has more aggressive downgrades on its earnings to an average contraction of 8.5% and 3.8% for FY16 and FY17 respectively. In line with that, the FBM KLCI earnings growth estimates have also been revised lower again from a growth of 1.6% to a contraction of 4% for FY16 as well as a lower growth of 6% for FY17 from an initial estimate of 7.2% earlier.

Kenanga also said that low expectations in the oil and gas sector made the sector a perfect target for bottom fishing as the reward-to-risk ratio becomes attractive along with signs of improvement in crude oil prices.

CIMB Investment Bank Bhd has also cut market earnings forecast by 3% for CY16 and 4% for CY17 in view of the uninspiring results for 3QCY16.

“Following our EPS (earnings per share) revisions, we now project KLCI earnings to fall 4% before recovering by 8% in 2017. [The] consensus also pared down its 2016 KLCI earnings growth forecast to 3% from 4% as at end-August,” it said.

Edmund Tham, head of research at Mercury Securities Sdn Bhd, shared over a telephone interview that the downside was largely expected, especially with the downgrade revision seen this year.

Inter-Pacific Securities Sdn Bhd research head Pong Teng Siew, who appears somewhat more optimistic, said that the earnings reported were largely in line with his expectations, and that 3QCY16 was actually not as bad as the previous quarter.

Public Investment Bank Bhd agrees that there would be more substantive earnings recoveries in 2017 as it views the recent lower earnings as less intense compared with previous figures.

“Serial underperformers, the oil and gas (O&G) sector, were the major dampener again with a host of companies missing expectations. The healthcare, consumer and rubber glove sectors were also surprising misses as cost pressures took a bigger hit than expected while the media sector succumbed to weak conditions as advertising expenditure slowed,” it said before pointing to an abating decline in earnings as an encouraging sign moving forward.

MIDF Investment Research, another local research house, offered a more balanced view, saying 3QCY16 slightly lagged expectations. It said the aggregate reported earnings of the KLCI’s 30 constituents totalled RM14.25 billion in 3QCY16, which was down 2.3% quarter-on-quarter but up 19.6% year-on-year (y-o-y).

The research report also noted that sectors like automotive, building material, consumer, finance, and media showed earnings contraction when compared with 2QCY16.

As with most research houses, TA Securities Holdings Bhd expects CY16 earnings to contract by 1.2% y-o-y, mainly dragged by the automotive, O&G, property, power and utilities and telco sectors, and partly cushioned by better earn-ings from banking, gaming, plantation and transportation.

“For CY17, earnings are projected to expand at a rate of 7.4% y-o-y, mostly on the assumption that [the] economic cycle and commodity prices will gradually recover, benefiting sectors such as automotive, banking, construction, property and plantation,” TA Securities said in its report.

It added that the market may remain volatile in 2017 due to rate hike expectations in the US, and the impending inauguration of US President-elect Donald Trump on Jan 20, 2017, which may lead to drastic changes in US trade and foreign policies that could have a damaging impact on Asian economies, including Malaysia.

“While maintaining a defensive stance [on utilities, telco and gaming], investors should also nibble undervalued plays that would benefit from [a] weaker ringgit (technology and manufacturing), multibillion domestic infrastructure projects (construction), and targeted investments from government-linked funds in small- and medium-caps,” it said.

(The Star) Rumawip to be built in Putrajaya soon

Putrajaya is set to have a new Federal Territories Affordable Housing (Rumawip) development, said Federal Territories Minister Datuk Seri Tengku Adnan Tengku Mansor.
“Currently, Putrajaya only has 1Malaysia Civil Servants Homes (PPA1M) and the People’s Housing Project (PPR) flats as affordable housing.
“But, hopefully, we will develop Rumawip in Putrajaya soon,” he said at a balloting session for the 1Malaysia People’s Housing Programme (PR1MA) Cyberjaya lakefront project on Dec 3.
Perbadanan PR1MA Malaysia launched its balloting process with a three-day exhibition during the Umno General Assembly 2016 at Putra World Trade Centre.
The balloting sessions involved the PR1MA landed property projects in Perak, Sabah and a highrise in Cyberjaya, which has 1,932 units and facilities such as nursery, swimming pool, outdoor gym, and multipurpose hall.
According to Perbadanan PR1MA Malaysia chief executive officer Datuk Abdul Mutalib Alias, there were 8,736 applicants for the Cyberjaya project alone.
“Units are sold from RM270,000 with 90% of applicants aged below 40, 47% single, and 42% were female applicants.
“So it shows a young profile of applicants, mainly people working within the Cyberjaya area.
“But we organised the balloting event for the public to get to know where the other projects are as well as understand the distribution and balloting process,” he said.
He added that the procedure was overseen by Deloitte Malaysia to ensure transparency and stringent security. The balloting sessions can be streamed through a live video feed via its Facebook page.
A mobile application called PR1MA app, launched on Dec 1, had also been set up to facilitate communication between applicants and the corporation using smartphone devices.
“Potential and existing applicants can follow the progress of the PR1MA developments and their locations through the app,” he said.
PR1MA homes are priced between RM100,000 and RM400,000 with projects nationwide with a directive to build 500,000 homes for middle-income individuals and families.

Approximately 1.3 million Malaysians have registered with PR1MA that has a total of 268,993 units ready and approved as of November, and 111,267 more are under construction.

(The Star) Nestle remains optimistic on M’sia

KUALA LUMPUR: Nestle (M) Bhd is emerging as a strong and formidable food giant after 104 years in Malaysia with a substantial investment of about RM1.1bil over the last five years.
After forging a strong presence in the country since 1912 and embarking on an aggressive new product innovations several years ago, the Malaysian unit of Switzerland-based Nestle S.A. is now ready to roar and further engage the hearts and minds of Malaysians.
Its managing director Alois Hofbauer said Nestle Malaysia has invested substantially in manufacturing capabilities over the last five years and would continue to invest in product categories and new launches next year.
“Malaysia was also selected to be one of Nestle’s global procurement hubs to meet the needs of this region, together with hubs in Switzerland and Panama,” he told Bernama.
The hub, Hofbauer said, is slated to be launched in early 2017 in Selangor.
It would provide a range of services, including the management of procurement for specific raw materials, packaging, indirect materials and other services, he said.
“The hub will also support markets with managing local expenditure and will create high-income jobs in Malaysia,” he said.
Hofbauer said Malaysia is an attractive investment destination based on long-term fundamentals, good strategic location and abundant resources.
“After 104 years in Malaysia, we are gaining the trust of the people and consumers millions of times every day and delivering quality products such as Milo with more than six million cups served every day,” he said.
Hofbauer said the other best selling product in Malaysia, Maggi Chili Sauce, is also a huge sensation as the chilies are of the highest quality and handpicked from Kelantan farmers. “We will continue to concentrate on our existing collaborations with chilli farmers from Kelantan.
“Our products are not always the cheapest but in terms of quality, health and nutrition, they are the best in the market,” he said.
According to Hofbauer, Nestle Malaysia employs over 5,000 people and produces more than 500 halal products with made-in-Malaysia leading brands such as Milo, Maggi and Nescafe. “We have eight manufacturing facilities in Malaysia located in Selangor, Negri Sembilan, Sarawak and Perak,” he said.
All Nestle Malaysia’s manufacturing facilities, he said, are halal-certified, supplying the domestic market as well as exporting high quality made-in-Malaysia halal products to over 50 countries.
Hofbauer said Nestle Malaysia has also made great effort to improve the nutrition value of its products with the sugar content in the Milo drink cut by 20% last year and the salt content of its Maggi curry reduced by as much as 30%.
He said the new innovative products, such as the Maggi Oatmee, which has the lowest salt content of any instant noodle, was also introduced to meet global health concerns in line with the food giant pledge to meet standards set by the World Health Organisation.
Hofbauer said product innovation by continuously delivering quality products with superior taste would continue to fuel growth, especially in a volatile market environment as volatility in oil prices and commodities would persist.
He said the secret to Nestle Malaysia’s success in sustaining its earnings over the years is innovation in bringing new products and offerings as well as renovating products that have been existence for many years in line with consumer needs.
Hofbauer revealed that today, Nestle Malaysia is not just innovating products but is also innovating business model to provide cost-effective business solutions and deliver affordable products in the market.
“As part of our long-term strategy from the start, we knew that we need to look at making our internal systems more efficient to deliver the savings needed,” he said.
Hofbauer said Nestle Malaysia has been able to harvest big savings through the groups productivity-improvement platform, which focuses on eliminating wastes and delivers continuous investment in productivity gains as well as incremental improvements.
“This has enabled us to harvest big savings of RM129mil in 2013, RM134mil in 2014 and RM188mil in 2015, which were reinvested into the brands, he said.
By reinvesting the savings, he said, Nestle could give more value to the consumers.
After delivering a set of respectable financial results for the nine months ended 2016, Hofbauer said, Nestle Malaysia is cautiously optimistic of its earnings outlook next year.
For the nine months ended Sept 30, 2016, pre-tax profit increased to RM685.02mil from RM609.03mil in the same period last year.
Hofbauer, an Austrian, is optimistic on the future outlook of Malaysia with its strategic location in Asia and being an important halal hub for the Nestle group globally.

“Back in Europe, ‘Yesterday Once More’ is the favourite song, but here in Asia and Malaysia, people believe that tomorrow is going to be a better day and are expanding positively into the future,” he said. — Bernama

(The Star) Lazada to help merchants develop more engaging customer experience

PETALING JAYA: Online shopping platform Lazada is looking forward to assist more merchants maximise their sales through a more engaging customer experience.
“The company has been around just over four and half years and I would describe the first two years as a period of getting the basics right from building the infrastructure, getting the logistics capabilities, amongst a few others.
“The second phase was for us - opening up the market place and the third phase starting from early this year is for us to really become part of digital economy eco-system and be a partner to the merchants rather than just being an e-commerce platform,” said Lazada Group chief executive officer Maximilian Bittner in a recent press conference.
Bittner explains that Lazada is not just a platform to sell products to customers but has evolved to provide the assistance to merchants through its infrastructure to scale on the logistics, delivery, technology and a more engaging customers’ experience.
It’s all on how can we make life easier for the merchant and allow them to grow as a brand.
“Yes, on one end we have big global brands like Loreal and Samsung but for the lesser known brands or products we help the merchant in creating a conducive environment to educate the customers.
“For example, let’s say we have a brand that sells eyeliners, we will try to educate the consumer on what is the right colour for their skin tones or how do you put on the eyeliner
“Customers will have social experiences with advice from key opinion leaders on videos. In many ways, this creates an entertaining shopping experience for online shoppers.
“The wonderful thing being a e-commerce platform is there is no limitation,” he said.
Lazada is currently available online in six countries - Indonesia, Malaysia, Thailand, Vietnam, Philippines and Singapore where Malaysia is the fastest growing market in the last six months in terms of sales.
“Malaysia is fast catching up behind the two biggest markets in Indonesia and Thailand.
“The explosion of growth in Malaysia since middle of this year is reflected in its small stock-keeping units (SKU) reaching to 10 million currently. We have reached a point where people can just find whatever they are looking for on Lazada.
“The fact that we want to constantly want to add new merchants and assortments is key for us,” said Bittner.

Lazada Malaysia chief executive officer Hans-Peter Ressel said the 10 million SKUs reflected a growth of two to three-fold in the last 12 months. “The key for us is to make it easier for sellers to reduce the time from the moment they apply to the point where they could actually sell,” he said.

(The Star) Loan growth seen flattish next year

PETALING JAYA: Loan growth in the banking system is projected to remain flattish at between 4% and 5% next year, fuelling pressure on banks’ earnings and asset quality, amid weaker business and consumer sentiment.
With growing economic uncertainty, a weaker ringgit and slumping commodity prices resulting in rising impairments, analysts are expecting a challenging outlook for the sector next year.
Banks generally have lowered their loan growth forecasts for this year in anticipation of a tougher economic environment.
This year, Malayan Banking Bhd has trimmed its loan growth target to 2%-3% from 8%-9% initially, and CIMB Group Holdings Bhd lowered its loan growth target to 6%-7%.
RHB Bank Bhd has also revised its loan growth to 4%-5% from 8% earlier.
OCBC Bank (M) Bhd CEO Ong Eng Bin (pic) told StarBiz that the bank expected loan growth for the sector to stay in the single digits next year.
“This is due to the challenging local and global economic outlook with lingering uncertainties on the recovery strength of China’s economy.”
He added the bank expected to round off the year with flat to lower single digit loan growth.
“The household and real estate sectors can be expected to be the mainstay of loans growth. Merger and acquisition opportunities are there in the corporate lending space, driven by attractive valuations in the stock market.
“Non-interest income will likely continue to grow faster than interest income given that wealth management, one of the fastest areas of profit growth for banks in recent years, still has not matured and will continue to grow as financial awareness and personal wealth improve,’’ Ong noted.
Meanwhile, RAM Ratings co-head of financial institution ratings, Wong Yin Ching, expects loan growth to pick up slightly to 5% next year as “the country’s gross domestic product (GDP) growth stages a delicate recovery to 4.5% from 4.2% in 2016.”
Credit expansion could also be supported by the new and more accessible end-financing scheme for home buyers under the 1Malaysia People’s Housing Programme (PR1MA) but that would depend on the speed of the rollout of the projects, she said.
Wong said “loan expansion is set to slow to around 4% in 2016, lower than our earlier projection of 6% (2015: 7.9%) as a result of weaker business and consumer sentiment.
“The steep slowdown in working capital loan growth and the small contraction in auto loans in recent months underscore this sentiment. Some banks have also become more cautious, placing more emphasis on asset quality preservation over growth.”
Malaysian Rating Corp Bhd (MARC) head of banking Sharidan Salleh said he expected loan growth to be relatively flat at about 4% in 2017 based on expectation of a flat economic growth.
GDP in 2017 is projected to grow at 4% compared to the expected 4.1% in 2016.
Other factors that will also affect loan growth are weak consumer sentiment and continued prudential measures on retail loans, he noted.
“We expect banking sector’s loan growth of about 4% to 4.5% for this year.
“For this year to date, monthly loan growth demonstrated declining trend on a year-on-year basis.
“In October, loan growth declined to 4.5% year-on-year (y-o-y) compared with 7.9% y-o-y in December 2015.
“The banking sector registered the lowest loan growth of 4.2% y-o-y in August and September,’’ added Sharidan.
UOB Kay Hian banking analyst Keith Wee said the research house was retaining its 2016 loan growth assumption at 4.5%.
Judging from the double-digit contraction in loan approval over the past 12 months, 2017 system loan growth would likely remain lacklustre at 4.5%-5%.
Total loans stood at RM1,493.4bil in October with growth inching upwards to 4.3% year-on-year (September: 4.2%) and 0.6% month-on-month, resulting in a 10 months annualised loan growth of 4.0%.
On asset quality, the rating agency does not expect the gross impaired loan ratio to rise beyond 2.0% at end-2017, from the current ratio of 1.65%, as Malaysia’s economic fundamentals remain sound.
Sharidan expects net interest margins (NIM) to stabilise in 2017.
“While competition for loans and deposits is still intense, we observed that some banks have increased the lending rates on certain segments particularly loan for purchase of vehicles, as the return profile do not commensurate with the risk profile of the segments.
“Some banks have also increased their base rate due to pressure on costs,’’ he noted.
Ong added that NIM would continue to be compressed from the lag effect of fixed deposits repricing vis-a-vis the base rate/base lending rate change of July 2016.
However, the downward trend would likely slow next year as banks take a more cautious risk-based return approach to lending in preparation for the more stringent provisioning requirements under MFRS 9 and higher capital requirements under full Basel III implementation in 2018.

A major factor that could affect NIM is the overnight policy rate (OPR), with a rising OPR stemming NIM compression, he said.

(The Star) Malaysia Airlines bookings jump

PETALING JAYA: Malaysia Airlines Bhd (MAS) has benefitted from a combination of aggressive marketing strategy and the adjustment in passenger service charges (PSC) for flights within the Asean region.
Forward bookings at MAS for the next six months are 50% more than a year ago, said its group chief executive officer Peter Bellew.
“The airline has had tremendous group booking enquiries from the Asean region, spiking by almost 400%,” he said.
Apart from an aggressive sales campaign by the airline over the past months, Bellew said the “equalisation” of the PSC has had an even better impact than expected on the airline”.
The new PSC charges come into effect on Jan 1, with uniform charges for all Asean destinations at RM35 in both the KL International Airport (KLIA) and KLIA2.
It replaces the old structure where it is RM65 for all international travels, which includes Asean, at KLIA and RM32 in KLIA2, which is positioned as an airport for low-cost carriers.
“We are seeing great forward bookings and our loads are good ... this would be a great boost for us and Malaysian tourism,” he said in response to queries from StarBiz.
Although the forward bookings are encouraging, yields are depressed, a worldwide conundrum given the intense competition. The weaker ringgit will have an impact on the airline, as will the stronger US dollar, as most of its costs are in dollars.
“Yields dipped slightly in the third quarter, but this is something affecting most airlines. We expect this to improve in the fourth quarter,” Bellew said.
“We do expect heightened competition with over-capacity in the market, with both players (AirAsia Bhd and Malindo Air) bringing in extra aircraft into Malaysia. This would be good for the customers, but would put pressure on the airlines,” he added.
MAS’ yields for the third quarter ended Sept 30, 2016 was 21.75 sen, down from 22.5 sen in the second quarter, despite passenger revenues for the third quarter rising 12% over the second quarter, led by aggressive sales campaigns.
The yield has a direct impact on the bottom line of the airline operations.
Traditionally, the fourth quarter is the best quarter for airlines, but the ringgit’s weakness has been intense after Nov 8.
Bellew said the weaker ringgit would have an impact on airline operations and would be made worse by the keen competition in the Malaysian market.
“The volatility of the dollar is a major concern, given that most of our costs are in US dollars. However, the lower cost of fuel, which we have hedged as much as possible, will balance out the rise of the US dollar,” he said.
“We will have to be extra diligent and focused on costs in 2017, but we remain cautiously optimistic.”
MAS had hedged about 60% to 70% of jet fuel requirements for 2017 at US$65 a barrel.
“We have been working hard on fuel management and efficiency, implementing initiatives that will ensure optimised consumption of fuel both in the air and on the ground.
“These include improved flight speeds, weight on the aircraft and the uploading of fuel. This is one of the many initiatives we are working on. Any savings will always be passed on to our customers,” said Bellew, without elaborating.
He expects unit costs to fall by a further 3% in financial year 2017.
Bellew joined the airline as its chief operating officer a year ago, and was appointed group CEO in July. He is also group CEO of MAS’ parent, Malaysia Aviation Group Bhd.
Asked how the three months have been, Bellew said the company has made good progress and the aggressive sales and marketing campaigns had resonated with customers.
“Passengers vote with their feet and our forward bookings in the next six months, up by 50% from a year ago, show that we are on the right track”.
“I am an impatient man and I do wish things could have moved faster. There is still a long way to go but with the progress we have seen in the quarter, I remain optimistic,” he said.
MAS, which was taken private by Khazanah Nasional last year after years of chalking up losses, is expected to record a lower loss this year. However, the restructuring efforts that has gone into the airline since being taken private is expected to turn the airline profitable next year.
Last week, he shared the airline’s quarterly statistical performance for the three months ended Sept 30, 2016.
Passenger loads improved system-wide from 69% in the second quarter to 79% in the third quarter. It was 74% in the third quarter of 2015. However no profit and loss numbers were dislosed.
Bellew hopes to bump up passenger loads to 80% next year. From January to September, the airline carried 10.1 million passengers, and for full-year 2016, he is looking at 14 million, and over 15 million for 2017.
The airline’s market share on its only long-haul route to London, which suffers from intense competition, has seen a 15% increase to 59% in September from 49% in May.
Passenger revenue was 12% higher in the third quarter over the previous quarter, and a reduced net operating level loss of 7% compared to the second quarter.

However, on-time performance was significantly lower at 68% in the third quarter from 82% in the second quarter due to several internal and external factors.

(The Star) Economic boost: Lower ringgit prompts tourists to flock to M’sia

GEORGE TOWN: The lower value of the ringgit has brought more tourists to the country. Hotel rooms are heavily booked and helping to bring foreign currency into the local economy.
Hotels in Penang, especially those in the city, are seeing almost 80% to 90% occupancy rates.
The year-end school holiday season brought in a good number of outstation crowds to the city hotels.
Tourists from Singapore are flocking to the beach hotels along Tanjung Bungah and Batu Ferringhi.
Cititel Penang, The Wembley Penang and Cititel Express communications manager Karen Chee said both the Wembley and Cititel Penang, which jointly have 866 rooms, had an occupancy of 71% while Cititel Express’ rooms were fully booked yesterday.
“The occupancy rate of the three hotels is between 80% and 100% over the next few weeks,” she said yesterday.
Gurney Drive’s G Hotel is experiencing an 80% occupancy rate.
“The year-end business has been fairly good,” said its director of rooms Syahreezal Kamaruddin.
The holiday season also brought in Malaysians and tourists to popular spots such as the Botanical Gardens, Penang Hill and popular shopping spots such as Armenian Street and Little India.
Malaysian Association of Hotels (Penang Chapter) chairman Khoo Boo Lim said the weaker ringgit has brought in many Singaporeans to the city and beach hotels.
The same situation is also happening in Johor Baru.
Pulai Springs Resort marketing communications manager Charlotte Monterio said there were more Singaporean families choosing to stay at the hotel for the school holidays due to their superior currency.
“They usually come here for shopping and to visit the theme parks,” she said.
Thistle Johor Baru Hotel assistant director of sales M. Viki said the hotel was seeing a steady inflow of Chinese guests who were mostly investors after projects like Forest City began taking place in Iskandar Malaysia.
Malaysians from Kuala Lumpur chose to stay in Johor Baru to visit Legoland Malaysia or to go to Uni­versal Studios in Singapore, she said.
Renaissance Hotel was fully booked for the holiday season since last week, said its marketing communications manager Hezrin Ali.
“Although there are more Singa­po­reans, domestic tourists still make up most of our guests,” he said.
More Singaporeans are also heading to Malacca with rooms fully booked, said Malaysian Asso­ciation of Hotels (Malacca Chapter) chairman Abu Hassan Ismail.
“Johor folks are also contributing to the high occupancy rate. Even budget hotels are enjoying brisk sales. The trend will continue until the Lunar New Year,” he added.

Abu Hassan said the proximity of Singapore to Malacca, apart from the similar culture and gourmet destinations, also lured them to come here.

(The Edge) KPJ Healthcare exiting Hospital Penawar

KPJ Healthcare Bhd
(Dec 2, RM4.17)
Maintain neutral call with an unchanged target price of RM4.05:
KPJ Healthcare Bhd has entered into a sale and purchase agreement with Dr Mohd Adnan Sulaiman and Azizan Sulaiman for the disposal of its 30% equity stake in Hospital Penawar located in Johor Baru.

Dr Adnan and Azizan are the major shareholders of Hospital Penawar holding a combined 70% equity stake in the hospital. The disposal involves the sale of 720,000 shares for a total cash consideration of RM2.21 million to the aforementioned purchasers. The disposal is expected to be completed within a three-month period.

We recall that back in May 2012, KPJ was served with a lawsuit by the major shareholders of Hospital Penawar. This was on the grounds that KPJ had breached the joint venture (JV) agreement between the two parties with the construction of KPJ Pasir Gudang Specialist Hospital, which offered the same services as Hospital Penawar and posed competition to the latter due to the close proximity of the two hospitals.

In July 2013, the Johor Baru High Court ordered KPJ to pay RM70.4 million in damages to Hospital Penawar for breaching its JV agreement.

However, in December 2013, the decision was overturned by the same court after KPJ submitted an appeal against the earlier ruling, thus winning the lawsuit.

We view that the equity stake disposal is in the best interest of KPJ.

Putting aside the lawsuit, this disposal will allow KPJ to focus on its wholly-owned companies for better management and decision-making.

Additionally, the disposal will also result in a consolidated KPJ group of hospitals whereby operations under a single entity for various operational, financial and corporate structures will allow further enhancement in efficiency in the aforementioned areas within the group.

We understand from management that cash proceeds from the disposal will be used for its working capital requirement and general corporate purposes.

We have made no changes to our fi nancial year ending Dec 31, 2016 (FY16) and FY17 earnings forecasts. — MIDF Research, Dec 2