Monday, 31 July 2017

(NST) 4FINGERS to open 20 outlets in Malaysia over next five years

KUALA LUMPUR: 4FINGERS, a Singaporean chain of fast casual restaurant, is looking at opening 20 outlets in Malaysia over the next four to five years.

With its fourth store in Malaysia recently launched in Berjaya Times Square, the company have ambitious growth and expansion plans, both in Malaysia and in Asia Pacific.

"We are certainly exploring the right, accessible areas where our chicken will be in demand," 4FINGERS CEO Steen Puggaard told NST Business via email.

In just four years, 4FINGERS has grown from one to 21 outlets across Asia Pacific, namely in Malaysia, Australia, Singapore and Indonesia.

With the demand for its chicken, 4FINGERS is planning to take its recipe global, with expansion plans to Europe and US.

"We have invested RM3.2 million in the first four outlets. We are currently searching for the right leases to meet Malaysia’s growing demand for great fried chicken.

"We also have customers who are asking for 4FINGERS to be delivered to their doorstep, and are exploring having a delivery service as well to serve more folks," he said.

To a question on poultry supply and in terms of pricing, quality and delivery, Steen said the company rotate its suppliers depending on their ability to be consistent in ensuring a steady supply of chickens with the right quality and for the right price.

(NST) (Update) Malaysia, Singapore to sign bilateral agreement on Rapid Transit System this December

ISKANDAR PUTERI: Malaysia and Singapore will sign a bilateral agreement on the Rapid Transit System (RTS) in December this year, paving the way for the rail passenger link between the republic and Johor Baru.

Minister in the Prime Minister’s Department Datuk Seri Abd Rahman Dahlan said the matter was agreed during the Joint Ministerial Committee for Iskandar Malaysia (JMCIM) meeting here today.

"We welcome the good progress of commercial, technical and regulatory discussions and look forward to the signing of the bilateral agreement by December 2017.

"Among the issues discussed at the meeting were Malaysia's request to become the dominant shareholder in the operator of the RTS with a 51 per cent stake rather than both countries having a 50 per cent stake each.

"This is a matter of practicality because the operator would operate more effectively with one party having the majority stake.

"We also made the request considering that Keretapi Tanah Melayu Bhd (KTMB) would be halting its KTM Tebrau shuttle service once RTS is operational," Rahman told reporters.

He said Singapore, in principal, has agreed to the request but they wanted to discuss it with their Mass Rapid Transport rail system operator SMRT Corp Ltd first.

Rahman said the RTS was expected to commence passenger service by December 31, 2024.

The RTS will help improve connectivity between the two countries as it will connect Johor Baru to the Thomson line of the republic’s Mass Rapid Transport system.

The rail line will provide an alternative mode of transport that will cater to the 80,000 to 100,000 people who use the Causeway daily.

Also present during the JMCIM was Johor Menteri Besar Datuk Seri Mohamed Khaled Nordin.

The Singapore government was represented by its Coordinating Minister for Infrastructure and Transport Khaw Boon Wan and Minister for National Development Lawrence Wong, along with senior government officials from both countries.

Rahman said both governments agreed to a split of 61:39 on the concession fee for the RTS that will be paid to the two countries with Singapore receiving the majority of the fee.

"Singapore is receiving the majority of the fee because the cost of infrastructure development in the republic would be higher as it involves building underground stations," said Rahman.

He said after the recovery of the cost for the infrastructure development, Malaysia have asked for the concession fee to be split equally among the two countries but Singapore wants the ratio to be maintained.

"Our argument is that once the costs have been recovered, the fee would be pure earnings so it is only fair that it is split equally. We have a good argument on this matter," said Rahman.

On another matter, Rahman said Malaysia welcomed Singapore's plans to upgrade the customs, immigration and quarantine facilities at the Woodlands Checkpoint which would increase overall clearance capacity and ease congestion.

"We hope they would undertake this project soon as this would enable KTM to increase the frequency of its Tebrau shuttle service from the current 26 daily trips to 36 daily trips.

"Previously, when we requested to increase the frequency, they would decline because of the congestion at the Woodlands Checkpoint," said Rahman.

(NST) Future-proofing retail industry vital for SMEs, says MDEC chief

KUALA LUMPUR: Future-proofing the Malaysian retail industry is an important task as it is the largest segment within the small and medium enterprises’ (SMEs) market.

Malaysia Digital Economy Corporation (MDEC) chief executive officer Datuk Yasmin Mahmood said she was heartened by the growth of Malay-sian SMEs’ online presence to 26 per cent last year from seven per cent in 2014.

She said an e-commerce academy tailored to the industry would be launched later this year.

Yasmin added that the digital world had gone through tremendous innovation over the decades and was moving even faster today.

“We now live in this hyper-connected world where the level of innovation in fields such as artificial intelligence, robotics, nanotechnology, data analytics and the Internet of Things is ‘fast and furious’.

“ Because they are all interconnected through the power of the Internet, and through the massive improvement in computing power, they are disruptive at levels and at a pace we have not seen before,” she told the Malaysia Retail Chain Association’s retail conference recently.

For example, it took the radio 38 years to garner 50 million listeners but the Angry Birds online game took only 35 days to get the same result, said Yasmin.

The Internet is also disrupting business models that rely on the ownership and control of physical infrastructure.

“The largest taxi company in the world, Uber, owns no taxis and physical assets. The largest accommodation provider, Airbnb, owns no real estate.

“In the retail sector, the largest, most valuable retailer is Alibaba, and it owns no inventory. Nevertheless, it’s disrupting the brick-and-mortar retailers.

“Digital innovation is an opportunity first and foremost, but also a threat if not embraced.

“You may think that online, there is no personalised customer experience and assistance, but artificial intelligence and related software called ‘bots’ are able to converse with customers on various platforms,” she added. 

(NST) Kampung Baru residents must embrace progress, development: DPM

Kuala Lumpur: Kampung Baru must embrace the development and progress that is taking place all around it, but without shedding the Islamic as well as Malay spirit and identity which have made their homes in the over 100-year-old urban village.

Deputy Prime Minister Datuk Seri Dr Ahmad Zahid Hamidi said this during the launch of Residensi Rah here today.

"When we are surrounded by development and skyscrapers, will (Kampung Baru) be left behind if (it does) not make an effort to develop (itself)?" he said.

Zahid said the government has made several amendments to rules, regulations and acts to ensure that Kampung Baru landowners’ rights are safeguarded to encourage development in the area.

He further advised residents of the village not to hold on to or be overly nostalgic about glories of the past.

"The old must love the new and the new must respect the old. This should be the spirit of Kampung Baru's development," he said.

Zahid said he hopes that the settlement's residents and other parties will support developers so that Kampung Baru's face matches the developments in its surrounding areas.

On another matter, Zahid said that it is important to determine whether the slew of mosques currently sprouting in Kampung Baru is functional, and if they are being used to spread knowledge that is in keeping with the Islamic spirit.

"We don't just want physical development with many people coming to these mosques. How about the content and meaning of these institutions?" he said after the Residensi Rah launch.

Construction of the condominium in Kampung Baru, which began mid last year, is expected to be completed in May 2019.

It involves a land area of 3,310 sq meters and was built at a cost of RM145 million, which includes the RM25 million cost for land acquisition.

(NST) Bursa poised for year-end rally

BURSA Malaysia is set to end the year on a high note, driven mainly by strong exports, a turnaround in banking and property-related counters as well as prospects of further investments from China.

Against a benign economic backdrop of moderate growth, gradual interest rate hikes and mild inflation, Affin Hwang Asset Management Bhd equity strategies and advisory head Gan Eng Peng said Asian markets, including Malaysia, were poised to stage one of their best rallies this year.

“For the first time in five years, there is also a positive earnings revision for Asian markets, with earnings per share being revised upwards between 15 and 20 per cent this year.

“Growth in corporate earnings continue to be underpinned by improving macro-optimism and rebound in the region’s growth with strong exports.

“Spearheaded by a more outward-looking China, this Asian growth-led renaissance is expected to positively spill over to other markets in the region, including Malaysia,” he said.

Gan said while markets were consolidating in the short-term during the summer trading lull period, Affin Hwang viewed this as a normal market correction, especially after a decent run in the year thus far.

“The rally is not over per se, it is just taking a breather,” he said.

Gan said the worst might be over for banking and property- related counters as the sectors looked poised for a turnaround this year.

After two to three years of softness in the property market, Gan said he believed these counters were due for a late cycle-upturn.

“While we do not expect much price improvement, we do expect better volumes to come through on better sales.

“With the general election looming, we believe there is also an incentive for the government to loosen lending policies, including real property gains tax and stamp duties, as 60 per cent of household wealth is tied to property, giving the sector a boost,” he said.

On the banking sector, Gan said there was a potential re-rating catalyst for the counter with the improving business environment.

“Banks are leveraged to the economy and with improving fundamentals and positive macro data, the rest of the sector should catch up on more attractive valuations and better earnings growth,” he added.

(NST) WMG Holdings eyes projects worth RM1.3 billion following Bursa listing

KUALA LUMPUR: Sabah-based property developer WMG Holdings Bhd plans to launch RM1.3 billion in new projects over the next few years, following its debut on the main market of the Bursa Malaysia today.

WMG’s share price opened two sen higher to 50 sen from its offer price of 48 sen.

The listing of WMG on the main board marks the completion of a reverse takeover of the Tekala Corp Bhd. Upon its listing, existing public shareholders of Tekala now hold about 31.3 per cent of WMG, while the vendor holds 56.3 per cent.

Group managing director Quek Siew Hau said the new projects will comprise both residential and commercial properties, and will add to WMG’s current projects with an estimated gross development value (GDV) of RM445.1 million.

“The listing is timely for us, allowing us not only to tap into the capital market for future land banking opportunities, but to also raise our corporate profile as we plan to undertake about RM1.3 billion worth of pipeline projects.

“The long-term prospects of the property development market in Sandakan and Kota Kinabalu look promising, spurred by government spending on infrastructure projects in the state, such as the Pan Borneo Highway, which passes through Kota Kinabalu and Sandakan.

“Ongoing initiatives under the Sabah Development Corridor Blueprint and the tourism boom also augur well for the economic development of the state, which will boost demand for properties,” he told reporters here.

Founded more than 30 years ago, WMG has a track record of completing projects with a GDV of RM2.2 billion in Sandakan and Kota Kinabalu.

(NST) Live sharks to be the stars at Manukan Aquarium Centre

KOTA KINABALU: Sabah Parks have taken the initiative to upgrade a building at Pulau Manukan here into an aquarium centre to educate the public about marine biodiversity.

Its director, Dr Jamili Nais, said the centre was part of the government’s efforts in shark conservation. 

“The main attraction at the aquarium will be live sharks, including blacktip reef sharks.

“This is in line with the government’s recent announcement that marine parks will serve as shark sanctuaries,” he said during the soft launch of the new attraction in Pulau Manukan here recently.

These sanctuaries will be set up at more than two million hectares in marine parks, including Tunku Abdul Rahman Marine Park here, Tun Mustapha Marine Park in Kudat, and Tun Sakaran Marine Park in Semporna.

The state government is in favour of a ban on shark finning as the species contributed significantly to the tourism industry.

On average, 55,000 divers come to Sabah yearly and 80 per cent of them came to see live sharks in the sea.

The year-long activity contributed more than RM300 million in tourism receipts.

Jamili said the centre would be opened to the public in September, adding that the entrance fee would be waived for a year.

The 0.01ha centre, which costs RM100,000, was mostly built by the staff of Sabah Parks.

(The Edge Financial Daily) Crescendo sees better earnings in FY18

KUALA LUMPUR: Crescendo Corp Bhd expects its property development division to lift earnings higher in the current financial year ending Jan 31, 2018 (FY18).

The group nearly quadrupled its net profit to RM70.31 million in FY17 from RM17.69 million in FY16, mainly due to higher property sales. Revenue jumped 30.7% to RM254.36 million from RM194.57 million for the previous year.

Crescendo chairman and managing director Gooi Seong Lim said the group had lined up several properties in Johor for launches, with a total gross development value (GDV) of some RM300 million in FY18.

They comprise 881 affordable housing units, together with 268 units of mid-market landed homes and 36 units of shop offices.

Crescendo has a higher GDV target for FY18, compared with the previous year’s GDV of RM288 million, which comprised eight units of mid-market landed homes, 70 units of various sizes of factories ranging from terrace to detached factories, and 248 units of affordable housing.

“Property sales [for FY18] should come in better than the FY17 numbers,” Gooi told The Edge Financial Dailyin a telephone interview. Gooi is a major shareholder of Crescendo, with a 70.6% stake as at April 21, 2017.

While acknowledging that Johor’s property market sentiment had been soft, Gooi said Crescendo was not worried at all, adding that it was ever “positive and optimistic”.

“The major concern in regard to demand is primarily in the high rise residential market segment. However, we are embarking on landed developments there comprising not only residential units but also factories and shop offices which enjoy better margins,” he added.

Gooi also noted that demand for medium-cost landed homes in Johor Baru remains good because many Johoreans are employed in Singapore and hence are qualified for end-financing schemes.

Other factors underpinning his optimism about the southern state’s property market are a good rental market, prime location and improvement in the residential market.

“Property investors will also be keen to buy our tenanted industrial properties because they can get a high return on their investment,” Gooi said, adding that the rental market for industrial properties in Johor is expected to be “good as it can cater for industrialists who are currently not ready to enter into purchase commitments”.

Gooi added that an oversupply of high-rise developments, together with a weaker ringgit, have shifted demand to landed residential and more affordable properties.

“Demand for landed residential and more affordable properties will improve in view of better economic growth and active developments within Iskandar Malaysia,” he said.

For the first financial quarter ended April 30, 2017 (1QFY18), Crescendo’s net profit fell 32.5% to RM4.36 million from RM6.46 million a year ago, while revenue slipped 0.9% to RM47.85 million from RM48.29 million in 1QFY17.

The group blamed the weaker first-quarter performance to a change in the sales mix with a higher proportion of residential property sales which have a lower margin compared with commercial and industrial properties.

Crescendo currently has unbilled sales of RM180 million which Gooi expects the group to recognise over the next two financial years.

“We do not expect the gearing to increase significantly in the near future, and our financial footing remains resilient in challenging times,” he said.

The group is also planning to launch four major projects consisting of residential units, factories, landed shoplots and affordable houses under the Johor affordable housing scheme with a combined GDV of RM457 million over FY18 and FY19.

Gooi said Crescendo’s land bank currently stands at 2,763 acres (1,118ha), of which 1,443 acres or 52% are located within a 75km radius of the Johor city centre.

“We are unable to estimate the total potential GDV that can be generated from the land, as a large part of the land bank development and building plans has not been finalised yet,” said Gooi.

However, the group has no plans to replenish its land bank for now.

On its construction business, Gooi said Crescendo has no extensive expansion plan to expand it further as it is seen as complementary to its property development business.

Gooi said around 80% of the group’s construction order book comes from in-house projects, while the remaining 20% is from external projects.

“Crescendo will be cautious in tendering external construction contracts and will be selective to reduce the cash flow risk. The construction sector is currently very competitive and the margin has been trending down to [the] current 7% level compared with more than 10% in the past,” he added.

On Crescendo’s two educational institution businesses, namely the Crescendo International College (CIC) and the Crescendo-HELP International School (CHIS) in Ulu Tiram, Johor, Gooi said CIC saw its student population grow to a record 1,007 students in FY17, thanks to the college’s successful roll-outs of new diploma programmes.

“[The] student population at CIC is expected to grow by a single-digit percentage this year,” he said, adding that the purpose-built campus has the capacity to accommodate up to 2,000 students at any one time. “Crescendo has no immediate plans to upgrade CIC to university college status as yet.”

As for CHIS, a joint venture with local private education services provider HELP International Corp Bhd, Gooi said the school commenced its operation in February this year, with a student population numbering 200 currently.

“We expect the student intake to be higher in this September 2017 intake and the student population at the school is expected to be doubled as we move along,” he said, adding that Crescendo is also mulling to venture into the preschool education segment in the near future.

Crescendo shares closed four sen or 2.48% higher at RM1.65 last Friday, bringing a market capitalisation of RM366.2 million.

(The Edge Financial Daily) PKNS delays REIT plan to 2019

(Subtitle) The proposal has been weighed down by a challenging rental market


KUALA LUMPUR: The Selangor State Development Corp, better known as PKNS, has postponed its initial target of establishing a real estate investment trust via its property investment unit PKNS Real Estate Sdn Bhd (PKNS RE) by 2018 to 2019, while it continues to look for good buys to raise PKNS RE’s total asset value to
RM1 billion.

“The proposal to set up a REIT is an ongoing process, as many building owners are grappling with the challenging rental market,” PKNS chief executive officer (CEO) Noraida Mohd Yusof told The Edge Financial Daily in an interview.

“As for PKNS RE, they will need to improve their yield and at the same time scout for good assets, while waiting for the rental market to recover,” added Noraida, who is also currently chairing PKNS RE.

In 2015, this paper reported, quoting PKNS RE general manager Fakru Radzi Ab Ghani, that PKNS was looking to put its commercial property assets, which included the Shah Alam Convention Centre (SACC) Mall and Menara PKNS Petaling Jaya, into a REIT and list it on Bursa Malaysia within three years.

Now, Fakru Radzi, who is now PKNS RE CEO, said the new timeline to establish the REIT within the next two years is just a preliminary target as the country’s rental market is going through a challenging cycle, affected by many macroeconomic factors.

“The macroeconomic factors are affecting many building owners and we see tenants cutting jobs, and eventually relocating their business. Building owners used to be able to raise rental rates by 10% to 15% in the past, but today, to even raise the rate by 5% is a big challenge,” Fakru Radzi said in a recent phone interview with The Edge Financial Daily.

“As such, many building owners are willing to keep the current rental rates and will move to raise the rates when economic prospects further improve,” he added.

According to the Asia Pacific Real Estate Market Outlook 2017 for Malaysia, the Klang Valley market will continue to be a tenants’ market with no fluctuation in rental expected, while building owners will be more aggressive in attracting tenants.

“Overall, rental rates continue to remain flattish [but] investment prospects remain firm, driven by the depreciated currency which will favour foreign investment activities in Malaysia,” according to the report, which was published by real estate firm CBRE-WTW.

Ideally, Fakru Radzi said PKNS RE wants to increase its total asset value to RM1 billion before establishing the REIT.

“We own six assets, which are currently valued [at] close to RM700 million. To be more ready, we are looking for more good-quality assets — perhaps Grade-A office space — in prime areas,” he said.

One of the six assets is Menara Worldwide, a 25-storey office tower in Bukit Bintang. The remaining five comprise retail malls spread across Shah Alam, Bangi and Petaling Jaya.Fakru Radzi said PKNS RE is still flush with ample liquidity and can take up another round of strategic acquisitions worth a total RM300 million, and that it has plenty of room to accommodate debt-funded buys.

PKNS RE’s gearing currently stood at 20%, and lower than 32% of the average gearing of comparable REITs with similar asset value that are listed on Bursa Malaysia, he said.

“This means we [can accommodate] strategic acquisitions, as well as asset enhancement programmes,” he noted.

Meanwhile, Fakru Radzi said PKNS RE will be diversifying its income pool by venturing into vehicle-parking management via its wholly-owned unit Park
Here Sdn Bhd.

“We are looking at the possibility of acquiring a suitable parking asset in the central region of Selangor. This will complement our rental business, and provide a recurring revenue stream,” he said.

Going forward, Fakru Radzi expects its assets to generate a stable rental yield of around 5% to 6% this year, in line with the average market forecast of 6% that was projected by the Malaysian REIT Managers Association.

“When PKNS RE establishes the REIT, the assets will be valued and the yield may range between 5.5% and 6%. Still, we won’t be complacent, and will continuously perform asset enhancement to increase future yield,” he added, noting that PKNS’ retail assets have an average occupancy rate of more than 95%, while its office asset is 75% occupied.

(The Edge Financial Daily) Developers’ shrinking unbilled sales not quite a concern

(Subtitle) Most analysts believe sales may pick up albeit at a slower pace moving forward


KUALA LUMPUR: The contraction in unbilled sales in the past one year may not pose that much of a concern to property developers’ earnings.

The decline in unbilled sales is quite a surprise, said analysts who track the domestic property sector, as the smaller figures are mainly due to the delay of new launches after the puncture of the property boom in 2015. However, most of them concur that things are unlikely to get worse, instead sales may pick up albeit at a slower pace moving forward.

HLIB Research property analyst Lee Meng Horng said that the declining level of unbilled sales recorded by most developers today are reflective of the softer market conditions in 2015 and 2016.

“Many property developers held back launches in 2015 and 2016, and when they don’t launch they don’t sell, hence the replenishment of unbilled sales was not there.

“For this year most developers have guided on a flat growth in sales, barring a downturn in their forecasts, I don’t think the declining levels of unbilled sales are indications of a deteriorating property market,” he told The Edge Financial Daily.

Kenanga Investment Bank head of equities research Sarah Lim Fern Chieh opined that investors should not look at unbilled sales alone.

“As long as unbilled sales visibility remains close to one year in general and also assuming that developers can maintain flattish sales over the next couple of years, it would mean steady earnings trajectory over the next few years.

“For example, looking at the overall sector, if you talk about good days of 2013 to 2014 we saw our universe average unbilled sales visibility peak at 1.5 years, and currently now, based on our average estimates, it is about 1.1 years,” she told
The Edge Financial Daily.

Property developer Hua Yang Bhd has reported unbilled sales halved to RM204.31 million as of June 30, 2017 from RM410.07 million in June last year. Hua Yang’s earnings took a beating.

The company’s net profit plunged nearly 93% to RM1.72 million for the first financial quarter ended June 30, 2017, while its quarterly revenue contracted 62.5% to RM47.94 million.

The group explained that the lower profitability was because its new launches were at preliminary stages of construction, and had yet to contribute significantly.

In its review on the company dated July 14, Kenanga Research noted that Hua Yang’s unbilled sales of RM204 million would only last for another one to two quarters.

“We opine that Hua Yang should be more aggressive in driving its sales from its launched projects, which have received slow response from the market,” said Kenanga Research.

Year to date, Hua Yang’s share price fell by 24% to 86 sen last Friday. Kenanga Research had an “underperform” call on Hua Yang, with a target price (TP) of 95 sen. The research outfit noted that it does not rule out the potential of a cash call if Hua Yang acquires the remaining 70% stake in Magna Prima Bhd in the future.

Lim said that some bigger property players, such as S P Setia Bhd that have overseas contributions, may have distorted unbilled sales visibility due to timing of contributions from their overseas developments as sales are only recognised on a completion basis, rather than progressive billings as done so here.

“For the bigger players such as S P Setia, you may see a massive build-up in unbilled sales over a period of time and they may drop sharply upon delivery of certain overseas projects, so for the bigger players with overseas exposure their unbilled sales may not be truly representative of their real earnings visibility,” she said.

For S P Setia, which is in the midst of taking over its sister company I&P Group Sdn Bhd from its controlling shareholder Permodalan Nasional Bhd for RM3.65 billion cash, its unbilled sales stood at RM7.84 billion as at March 31, from RM8.6 billion a year ago.

In a June 23 note, HLIB Research said it remained positive about the proposed acquisition of I&P Group given the attractive acquisition price which is revised net asset value-accretive. The firm had a “buy” call on S P Setia with a TP of RM4.

Axis REIT Managers Bhd head of investments and Malaysian Institute of Estate Agents immediate past president Siva Shanker said that though it is too soon to say whether there will be a residential property market upturn this year from the “nightmare years” of 2015 and 2016, the situation has definitely improved compared with previous years.

“I am constantly talking to estate agents and property players out there every single day and the feedback I get from them is they are busier now than they were last year.

“Although much of that busyness hasn’t translated into sales, usually the market starts buzzing before the sales come in. I think 2017 would be a flattish year in terms of property sales, while 2018 and 2019 should improve barring any unforeseen circumstances,” he said.

National Property Information Centre data from 2001 to 2016 indicated that 2012 had the highest number of residential property transactions during the 16-year period at 272,669 units worth RM67.76 billion.

In terms of value of transactions recorded, 2014 was the highest with 247,251 units worth RM82.06 billion transacted.

Both volume and value declined in 2015, with 235,967 units transacted at RM73.47 billion, and this fell further in 2016 to 203,064 units transacted at a total of RM65.57 billion.

While unbilled sales are shrinking, many developers are seeing rising inventories on their balance sheets — an indication of unsold units piling up.

As the inventories are properties and not machinery, taking them off the balance sheet is not as simple as a write-off — they would need to be sold.

Rising number of unsold units raises concern about whether this would affect their cash flow.

One bank-backed analyst opined that it does have cash flow implications, but pointed out that developers would be able to find ways to sell the inventories.

“I don’t think it’s a main point of worry at this juncture; usually there are ways for developers to take the inventories off the balance sheet, for example there could be related party sales transactions in the form of sales of the unsold units to directors,” he said.

Developers have long put the blame on tougher lending requirements from banks that have led to the slowdown in the property market, with calls to review housing loan criteria for potential buyers of affordable houses.

However, in a July 18 statement, Bank Negara Malaysia highlighted that the hindrance to home ownership was the affordability of homes, an issue which had yet to show significant improvement.

The central bank noted that the average national house prices remained at 4.4 times of the median income — the affordable range is 3.0 and below — with lower affordability recorded for some major states and urban cities.

It pointed out that RM40 billion of housing loans had been approved in the first five months of 2017 to more than 152,000 borrowers, and that three quarters of them were first-time house buyers. The approval rate for housing loans has also been stable at 74%, it said.

An analyst with a local investment bank said the core issue of housing loans isn’t approvals, instead it’s the margin of financing.

“I think the issue is more on getting the right margin of financing, for example a person who applies for a housing loan expects to get a loan that covers 90% of the house price, but the bank grants 85% and the person ends up forking out the remaining 5%, which for many people nowadays it is tough to do that and may delay them from going through with buying the house,” he said.

(The Star) Buyers to get money back

The Government will look after the interests of original buyers of the abandoned Plaza Rakyat project, assured Deputy Federal Territories Minister Datuk Loga Bala Mohan.

He explained that a clause was inserted in the sales and purchase agreement between the project’s new developer and Kuala Lumpur City Hall (DBKL) to safeguard original buyers.

Loga Bala said only when the issue of compensation to buyers was resolved, would the Government allow the project to start.

“DBKL is the one approving the plans and we will ensure that the new developer fulfils their obligations to the original buyers of the project.

“Having said that, the buyers should be reasonable in their claims and not expect the impossible,” Loga Bala said, adding that former buyers should be getting what they put into the project initially.

Loga Bala said he was informed that some buyers who bought units more than 20 years ago, wanted to be compensated at the current market price.

He added that DBKL and the new developer (as the landowner) did not have any legal obligation towards those original buyers.

The filepic on the left, taken in 2015, shows stagnant water collecting in the Plaza Rakyat compound.

“You can still purchase a unit from the project today but at the current market rate; the RM400,000 can be off-set against the new purchase price,” he said, adding that the original buyers would have to pay the difference between the initial buying price and current selling price.

Loga Bala advised buyers who were interested in purchasing units to contact the developer directly.

“They must understand that DBKL has already sold the land and has no further rights to it,” he said.

Since the beginning of January, about 104 of the 211 original buyers were issued offer letters by the new developer and the process is ongoing.

The new developer, Profit Consortium Sdn Bhd, signed a sale and purchase agreement with DBKL to take over the 6.2ha site for RM740mil in October 2015. RM40mil from the amount was allocated to resolve compensation issues.

premises is now drained of the water and cleaned up so the project is ready to be revived.

Lawyers acting for the new developer said DBKL and Profit Consortium had no legal obligation to pay as the sales and purchase agreement was signed between the buyers and previous developer Plaza Rakyat Sdn Bhd (PRSB) which had since gone bankrupt.

Plaza Rakyat was abandoned in 1997 after it was 30% completed as PRSB ran into financial difficulties during the 1997/1998 Asian financial crisis.

The Government decided to terminate PRSB’s contract in 2010, 12 years after the company abandoned the mixed-development project.

Subsequently, PRSB went into receivership and came under the administration of a consortium of lender banks.

Meanwhile, Loga Bala said Profit Consortium had applied for planning permission for their development.

“They have amended their previous plan. Their latest proposed plan features five skyscrapers,” he disclosed.

There will be a 96-storey tower, comprising 10-storey office space, 50-storey service apartments and 26-storey hotel.

The rest of the towers will be 70, 60, 58, and 52 storeys.

(The Star) AmBank gets serious about SMEs

KUALA LUMPUR: The AmBank Group, which is in the midst of a possible merger with RHB Bank Bhd, is fast-tracking its efforts to grow its small and medium-sized enterprise (SME) segment, as it believes it has become one of the most lucrative segments within the banking industry.

Christopher Yap is the person tasked to grow the lender’s SME segment housed under what it calls its business banking division.

“Regardless of the backdrop of the merger, AmBank continues to work towards strengthening its growth trajectory,” the 44-year-old told StarBiz in an interview.

AmBank currently has one of the smallest SME asset bases in the country. “We’re about number seven or eight,” said Yap, who is managing director of the business banking division.

On the whole, the banking group’s total asset size of RM134.8bil ranks it sixth among the country’s eight local banks. RHB Bank, at an asset size of RM236.7bil, is currently number four in the country.

If a merger of the two banks materialises, it would result in the country’s fourth-largest banking group, after Malayan Banking Bhd, CIMB Group Holdings Bhd and Public Bank Bhd.

In other words, it will bump AmBank up to number four but will not change RHB Bank’s ranking by asset size. However, at a combined RM371.5bil in assets based on latest available figures, the merged entity’s size will be very close to Public Bank’s RM380.05bil.

Size aside, a merger will probably also see some movements among key executives of the two banking groups. The two lenders have until the end of next month to discuss the merger deal on an exclusive basis.

Notwithstanding the changes a merger may bring, Yap feels that the SME market in Malaysia is “very big, if you do it right.”

To put things into perspective, according to him, the SME market in Malaysia currently has over RM300bil in assets, including in loans, reserves and investment securities.

“That’s how big the market is, but there is still plenty of upside.”

Yap, who formerly headed the SME division at Alliance Bank, wants to grow AmBank’s current SME segment to become among the top-four in the country by financial year ending March 31, 2020 (FY20).

While a merger will probably catapult it to this position faster than it currently hopes for, Yap is not taking any chances, for now.

Still, at its current position, the lender has much catching up to do, given that it is lagging on several fronts and not just from the SME perspective. He has done his calculations and said that in order for AmBank to achieve its top-four goal within the SME space - not taking into account a merger - it needs to grow its current asset base to reach at least RM25bil from RM12bil now.

AmBank’s business banking division was launched in April.

There are two segments within this division itself, namely, enterprise banking, which focuses on businesses with a turnover of less than RM50mil, and commercial banking, which taps into businesses with sales above RM50mil to RM150mil.

“Everything was housed under our wholesale unit before this, so there may have been some dilution in terms of the smaller customers.

“The creation of our business banking unit will focus on this segment, which covers anything with a turnover of RM150mil and below,” said Yap.

In order to achieve what it has set out to do, Yap’s division has laid out what it dubs its targeted lending programmes.

First is the enterprise lending programme, which focuses on the working capital and the flow business of SMEs. Second is premise financing and third is industrial hire purchase.

Such specifically segmented programmes, according to Yap, allows the bank to pre-screen its customers upfront, and by doing that, approval rates can go up to as high as 80%.

“What’s important for us are these lending programmes. For banks which do not have lending programmes, their speed to market is slower.”

According to him, once the necessary systems and workforce are ready within the division, the bank aims to approve working capital loans in six to seven days.

“For a simple equipment or business premise loan, we will try to approve within four days.”

According to Yap, the industry’s approval period is much longer.

“If you do not have a programme, we are talking about two to three weeks or even a month...”

Also in the current plan is to build 12 enterprise regions with 55 centres or business branches for SMEs that will cover 70% to 80% of the SME population nationwide.

“You must have your foot soldiers on the ground, so the relationship managers, the regional centres and the enterprise centres are important. That’s where we are hiring,” said Yap.

He said the SME space is divided into four segments, namely, sole proprietorships and partnerships, startups, small and mid-sized firms, and large SMEs.

“We want to go after the mid and large segments. These are the ones that give the highest margins. It’s a deliberate strategy.

“Growth will come from grabbing existing market share from competitors, as well as from fresh businesses,” he said.

“SMEs, when they grow bigger, cannot rely on one bank anymore...the most important is the service we grant to the customers.

“It’s the referrals from the existing customers that are important.”

Currently, within the SME segment, AmBank is at 2.2% for net interest margin (NIM) against the industry’s NIM of about 2%, while its non-performing loans (NPL) is about 0.6% against the industry NPL of 2.6%.

While the bank does not have industries that it targets specifically as potential customers, it has industries that it tends to avoid.

“We avoid garments as their margins are too small because of strong competition from China. We are also wary of hardware, mining and the quarry businesses. As for oil and gas, we are watching that very closely.”

(The Star) Malaysian market catching up with with regional peers

KUALA LUMPUR: The local stock market could have a few catalysts going for it in the second half of this year that may push it to catch up with the rest of the region

“We are still bullish on the stock market. The market has gone up by some 7% in the year to date in ringgit terms while in dollar terms it is up by about 12%.

“But when compared to the region, most of the markets in the region have gone up even faster, especially emerging markets, which have gone up by 23%,” CIMB Principal Asset Management Bhd chief investment officer Patrick Chang told StarBiz recently.

“We have been lagging (behind) in the last couple of months.

“What I’m hopeful of is a few catalysts such as second quarter numbers that hopefully will be better than the first quarter numbers. This will give some impetus for both foreign and local funds to put money back into the Malaysian market,” he said.

Chang also said that other catalysts included new contracts that could be announced under the One Belt One Road initiative such as the East Coast Rail Link.

“This will be a major catalyst as well for the construction sector,” he said.

He noted that one of the major sectors that it was overweight on is in the e-commerce and the logistics sector because retail e commerce sales as a percentage of total retail sales is only at 1% at present.

“This is low when compared to China which is at about 18% while some of the neighboring countries such as Singapore is at 2%.

“There are many effects from the rise in e commerce. Whether it will be the first or last mile or whether it will be in logistics companies, they will continue to do very well,” he said.

Chang is also “overweight” on the tourism industry due to the increased arrivals of tourists from China and this could be a major catalyst for some of the companies which are involved in this sector.

Moving forward, he said that the Malaysian market may eventually catch up with the gains seen in the rest of the region as money would eventually need to find a home.

“If the catalysts I mentioned materialise then it may happen.

“The MSCI emerging markets are up by more than 20% now while we are up by some 13%. In the month to date MSCI EM is up 5% while Malaysia is flat. People are just waiting for catalysts,” he said

He said that historically, Malaysia has never been a cheap market due to trapped liquidity in the country, which will always cause valuations to be higher.

The Malaysian market, represented by the benchmark FTSE Bursa Malaysia KL Composite Index, is presently trading at close to 16 times historical earnings.

(The Star) Encorp in spotlight

KUALA LUMPUR: After getting strategic shareholders to come into Iris Corp Bhd, Felda has shifted its focus to improving the performance of Encorp Bhd and Barakah Offshore Petroleum Bhd.

Felda chairman Tan Sri Shahrir Abdul Samad said he hoped to see changes in Encorp with a view that the property group further improve on its performance and returns.

“We are also open to strategic shareholders that are able to add value to the company,” he added.

Felda owns 70.82% stake in Encorp through its subsidiary Felda Investment Corp Sdn Bhd (FIC). FIC also has a 8.9% stake in oil and gas company Barakah Offshore Petroleum.

Analysts had said Encorp shares were too tightly held by FIC. It was reported that Felda paid RM1.55 per share or RM306.11mil for the block in 2014.

As of last Friday, Encorp share price was traded at 69 sen with a market capitalisation of RM192.3mil.

The group was profitable in FY2016, registering a net profit of RM28.53mil on the back of revenue of RM360.82mil.

According to Shahrir, Felda was also making good progress with the major restructuring of FIC.

It is also undertaking assets reorganisation of FIC’s investments in Iris Corp, an IT solution provider company.

FIC has a 19.39% stake in Iris.

Shahrir noted that nine new credible board members have been appointed to oversee the full operations of FIC group.

FIC is principally involved in property development, hospitality and other strategic investments.

He said Iris and Encorp would see similar changes in its board of directors and management team line-up.

Since taking over the helm of Felda in January, Shahrir has ordered the resignation of the entire FIC board to better facilitate with the reorganisation of the company.

“The new FIC board will have the mandate to re-assess all these investments including assets which have not been able to generate good returns.

“We also have a view to sell off some of these non-performing investments,” Shahrir told StarBiz.

For loss-making Iris, the restructuring came about with the emergence of two new influential directors, Datuk Paul Poh and Datuk Rozabil Abdul Rahman via the completion of a private share placement this month.

In June, Iris had placed out 224,718,405 new shares at 14 sen each to raise proceeds of RM31.46mil.

Based on the recent announcement, Poh and Rozabil indirectly own 224,718,405 shares in the company, which is the entire number of shares issued during the private placement.

Sources pointed out that both Poh and Rozabil took up the entire placement shares via investment vehicle Caprice Development Sdn Bhd.

Iris shares were trading at 26 sen to 28 sen when FIC bought it for over RM130mil. They are currently trading at 17 sen.

Last month, Iris wrote down RM161mil for its non-core businesses and reported a loss of RM292mil for its fourth quarter ended March 31, 2017.

In February, Shahril was also reported as saying that Felda plans to sell several of its properties in London. It has one four-star hotel and two student hostels there.

In Malaysia, it owned Merdeka Place in Kuching and a hotel in Port Dickson.

On Felda Global Ventures Holdings Bhd (FGV) acting chairman Tan Sri Sulaiman Mahbob’s recent remark that FGV is revisiting some of its past investments and considering whether to dispose of its underperforming assets, Shahrir said Felda would likely buy back some of these non-core assets owned by FGV.

“Why not, since some of these assets belong to Felda prior to the FGV listing?” he said without identifying the assets.

Sulaiman had said that FGV is re-evaluating its past acquisitions in plantations and other non-core businesses which do not benefit the group in the long run as their returns were not up to the mark.

(The Star) ‘Ride shares help MRT service’

KUALA LUMPUR: Malaysia has achieved another major public transport milestone with the legalisation of e-hailing services following the recent launch of the first MRT line, said Transport Minister Datuk Seri Liow Tiong Lai.

“We’re moving into the digital era. We’re confident of more efficient services with the legalisation of e-hailing services,” he told reporters after opening the 45th annual gene­ral meeting of the Young Malaysians Movement at Vivatel here.

“The MRT is another important milestone for the country.

“I’m confident that our public transport will be further enhanced with these new services and modes,” he added, when commenting on the amendments to the Land Public Transport Act 2010 and Commercial Vehicles Licensing Board Act 1987 passed by the Dewan Rakyat on Thursday.

The amendments, once gazetted, make it compulsory for e-hailing drivers under providers like Uber and Grab to go for medical check-ups and periodic vehicle inspections, and have insurance policies like regular taxi drivers.

The amendments also protect e-hailing drivers from assault or hindrance when working.

Liow said e-hailing drivers provide last-mile transportation like taxis and buses, which is important to help Malaysia achieve its target of 40% public transport modal share by 2030.

He added that the country was on track to meet the target with the construction of more rail lines.

He said the second and third MRT lines should be completed by 2022 and 2027 while the Kuala Lumpur-Singapore High Speed Rail and the East Coast Rail Link should be ready by 2023 and 2025.