Sunday, 31 December 2017

(The Star) Hill train service resumes, much to visitors’ delight

GEORGE TOWN: Thousands of visitors excitedly thronged the popular Penang Hill as if to make up for lost time.

The crowd made a beeline to use the funicular train service which resumed yesterday after it was disrupted for nearly two months when the tracks were damaged due to landslides.

Self-employed Will Tan, 30, said he was delighted that the hill train service was back.

“I took the opportunity to bring my family here since we missed the cool fresh air up here.”

Welcome return: Passengers disembarking from the funicular train at Penang Hill.

“It’s so picturesque up here. We’re here on a New Year holiday for four days. We arrived yesterday and will be leaving on New Year’s Day,” she said, adding that it was their first visit to Penang.

Her father, Dr Pichet, said they were enjoying Penang and all of her attractions so far.

The Penang Hill funicular train service was disrupted when the tracks were damaged due to landslides caused by the storm on Nov 4 and 5.

Chief Minister Lim Guan Eng, in his speech, said Penang Hill was badly affected due to 194 landslides at different segments on the hill.

He stressed that the landslides at Penang Hill were not due to development, but rather a natural disaster.

(The Star) Employers may face challenges, say experts

PETALING JAYA: The new year will be a challenging one for the local workforce but the country’s labour laws are sufficient to safeguard both employees and employers, according to experts.

Malaysian Employers Federation (MEF) executive director Datuk Shamsuddin Bardan said 2018 will be a trying time for many bosses with escalating costs.

“With all the added costs of doing business, employers will be very hard-pressed,” he said, adding that the global market was also not looking promising.

He said times could be tougher for fresh graduates as bosses would want to keep things lean.

On a brighter note, Shamsuddin said the forecast of 100,000 job openings in the middle of 2018 augured well with many people retiring upon reaching the age of 60.

He advised fresh graduates to learn new skills and to be “flexible”.

Labour law expert Datuk Thavalingam Thavarajah (pic) said that both employees and employers were well-protected by labour laws.

“We have sufficient laws to ensure the rights of both employee and employer are protected, from issues such as medical benefits to security of tenure,” he said in an interview.

Thavalingam said labour laws were “tight” to limit abuse and ensure compliance.

“For example, if bosses don’t pay for maternity leave, they will be fined.

“So going into 2018, you know that you have this legislation in place and the workforce can be assured of a fair deal,” he said.

In terms of downsizing and retrenchment, he said employers needed to justify the move first.

He said the management would usually implement cost-cutting measures before starting any retrenchment process.

MTUC secretary-general J. Solomon said the move towards digitalisation should not be used as a justification for employers to retrench workers.

He urged bosses to make an effort to prepare their workers for the challenges ahead.

“Real effort must be taken by employers to prepare and redeploy their workforce for Industry 4.0,” he said, adding that ill-preparation in ushering digitalisation could widen income and social inequalities.

Saturday, 30 December 2017

(The Star) Biggest local international furniture fair in March

MUAR: With the biggest Malaysian International Furniture Fair (MIFF) just eight weeks away, show organiser UBM Malaysia and strategic partner Muar Furniture Association (MFA), held a pre-exhibition symposium and dinner for industry players in the southern region.

The packed affair held at SKT Banquet Hall was to update MIFF exhibitors who will be showcasing their products at the new Malaysia International Trade and Exhibition Centre (MITEC) during MIFF 2018, a leading industry event in South-East Asia from March 8 to11.

Nearly 200 representatives from about 100 furniture companies in Muar and Batu Pahat attended the event. They included major exporters such as Poh Huat Furniture Industries, Chuan Heng Furniture Products, Ivorie International, Favourite Design, Mobilia Design, Sin Wee Seng Industries and SSH Furniture.

MIFF 2018 will be the biggest in its 24-year history and feature a record 600 companies from at least 12 countries. The trade show to be held in MITEC and Putra World Trade Centre will expand by 25% to reach 100,000 square metres with a new tagline “Design Connects People”.

“The overwhelming response to our gathering today reflects the excitement of the exhibitors over the new MITEC venue and their expectations of high quality support and service from us again. Many of them are major long-term exhibitors of MIFF and the rest are young companies that look to MIFF as their platform to build a global export base,” said MIFF general manager Karen Goi.

“It was an opportune time to update the exhibitors of the preparations for the 2018 show, especially of the extensive international marketing programme to attract more buyers and the hassle-free logistics at MITEC to ensure exhibitors can fully concentrate on serving visitors.”

She attributed the success of the pre-exhibition event to the collaborative partnership between MIFF and MFA led by its president Koh Chon Chai.

MIFF founder and chairman Datuk Dr Tan Chin Huat and UBM Asean business managing director M Gandhi were also present.

Koh mentioned the success of collaborative partnership between MIFF and MFA in his speech at the symposium and dinner in Muar, Johor.

The purpose-built MITEC is the new landmark for the exhibition industry in Malaysia and will host several new MIFF attractions, namely designRena, a curated lifestyle setting showcase featuring 80 top Malaysian manufacturers, Muar Hall, Sofa Hall, International Hall, Millennials@Design gallery and MIFF Timber Mart.

Muar is well known as the furniture capital of Malaysia, the world’s eighth largest furniture exporter. The township accounts for over 40% of Malaysia’s furniture exports, which are renowned the world over for top quality wood products.

(The Star) Boom time for hotels in Penang

The influx of tourists during the year-end holidays has been a boon to hotels in Penang, with many reporting good occupancy rates.

Local travellers, as well as those from neighbouring countries and booming markets like China and Europe make up the bulk of numbers.

Hotel Equatorial Penang, which has the most rooms for a single property in the state at 662, saw occupancy rise to between 80% and 90% earlier this month.

Its assistant marketing communications manager Gillian Tan said December is normally a peak period with increased numbers of holidaymakers.

Tourists (in purple) admiring the architecture of Masjid Kapitan Keling.

“We also had many big tour and conference groups throughout the year, while numbers of international corporate travellers from America, Germany, the United Kingdom, the Netherlands and Italy are also picking up," she said.

Sister properties G Hotel Gurney and G Hotel Kelawai recorded a combined average occupancy rate of over 90% for its total 520 rooms, according to communications director Christina Tan.

She said the hotels had been averaging 85% throughout the year, with a large portion being corporate travellers.

The surge in December is typical, said Christina, as leisure travellers come in for the year-end holidays.

“In fact, we were fully booked for five days, including the recent Christmas weekend,” she said, adding that many were from Singapore and America.

The 232-room Eastern and Oriental (E&O) Hotel had an average occupancy rate of 87% in December, though the numbers have been steady throughout the year.

E&O Group hospitality and lifestyle director Michael Saxon said a large percentage of their guests were Australians, Britons and local Malaysians.

Tourists exploring George Town on trishaw.

“Domestic tourism improved this year, as the weakening Ringgit made a stay home vacation more attractive. The mainland Chinese market is also growing and shows huge potential.

“Malaysia, and in particular Penang, is also a favoured destination among Europeans as it is affordable and safe, besides having wonderful weather, people and food,” Saxon said.

Malaysian Association of Hotels Penang Chapter chairman Khoo Boo Lim said its 80-plus members recorded steady occupancy rates averaging a little over 60% until November.

This translates to an average increment of 4.23% compared with that of 2016, with the highest being in May, June and October with rises of 7.37%, 7.33% and 6.64% respectively.

State Tourism Development committee chairman Danny Law Heng Kiang said the upturn was also seen at the Penang International Airport.

He said a total of 5,342,089 arrivals were recorded between January and September this year, a rise of 8.67% compared to the same period in 2016.

By end of December, the figure is expected to top out at an estimated 7,100,000 arrivals, compared to 6,700,000 for the whole of 2016.

“Hospital statistics also show a total of 187,376 foreign patients, which brought in revenue of RM259.3mil in the first six months of this year, compared to 175,216 patients and revenue of RM131.7mil the same period last year.

“Cruise calls to Swettenham Pier are also rising. We've had 125 calls up to September this year, with more coming in now as Westerners escape the winter season.

“The final number for 2017 is set to exceed the 136 total calls we had for 2016, putting Penang top in Malaysia.

“By comparison, Port Klang had only 78 cruise calls as of September,” Law said in a press conference at Komtar yesterday.

(The Star) Sporting a hole-in-one view

Located at the heart of the Sultan Abdul Aziz Shah Golf & Country Club (SAASGCC) in Shah Alam, Vila Elemen is a residential development that is the epitome of luxury and sophistication.

The housing development consists of 30 bungalows and 24 semi-detached villas with structural designs that reflect a contemporary lifestyle and provide a 270-degree golf course view.

It features five different bungalow designs and one semi-detached design with built-ups ranging between 3,200sq ft and 6,500sq ft.

The houses feature top quality finishing and fittings, complete with design lines that blend practicality and style.

The new development is also a five-minute drive from popular shopping centres, including Aeon Shah Alam, Plaza Alam Sentral, SACC Mall as well as Giant and Tesco hypermarkets.

Medical centres such the Darul Ehsan Medical Centre and Selangor Specialist Centre are a short distance from the development.

Families who like reading would be happy to know that Raja Tun Uda Library is located right in front of the residential area.

The development comprises a clubhouse in SAASGCC with a full range of facilities that offer residents a well-balanced lifestyle.

It also boasts stringent security features with 24-hour surveillance.

Vila Elemen is approximately 30km away from the Kuala Lumpur International Airport, while the Sultan Abdul Aziz Shah Airport in Subang Jaya is a mere 10-minute drive away.

The residential area has easy access to the New Klang Valley Expressway, Guthrie Corridor Expressway, Federal Highway, North-South Expressway Central Link and Jalan Subang.

For details, call 012-677 4184 or visit

(The Star) Unresolved property issues going into 2018

A property freeze to resolve the current oversupply is a short-term measure. What is needed are clear cut policies for the sector, property consultants say.

They say a better approach would be for developers, lending and banking institutions and approving authorities to provide financing and approval based on project feasibility and marketability.

This prerequisite should apply to private and public sector housing agencies because the glut in residential, office and retail space straddles both sides of the divide.

Khong & Jaafar group of companies managing director Elvin Fernandez says: “A freeze is not the real answer. It is a short-term measure.”

Elvin says a freeze penalises those who need a building in a particular location. He was responding to the government freeze on residentials costing RM1mil and above in certain locations and the freeze on office and mall space.

Elvin says there was a time after the Asian Financial Crisis (1997/98) when these market/feasibility studies were prerequisites before developers receive their financing. Over time, banks and developers question the need for this and it was eventually done away with.

It was viewed as a cost but such studies also provided information a project’s feasibility, he says.

Property consultant CBRE|WTW managing director Foo Gee Jen says Bank Negara mandated such studies more than 10 years ago for projects of a certain size.

“A project has to meet certain targets before launch. These prerequisites helped towards a healthy market,” Foo says. These studies were later done away with because of cost.

“Banks must commission the study. It has to be done independently and it cannot be a mere rubber-stamp,” he says.

On the glut of unsold and unoccupied small offices home offices (SoHos), Foo says this is another area that the Government needs to look into. These units cost less than RM1mil but this does not mean they won’t impact the market.

“SoHos and similar developments may sell well, but what percentage of them are occupied?”

Many young – and older – buyers put their faith in them because they were “affordable comparatively”.

While there is room for shoe-box sized units in certain locations, these should not flood the market, Foo says.

Essentially a shelter, housing has taken on a new meaning, hence the push by developers for SoHos and the like, and investors lapped this up.

Such units do not cost RM1mil. But as Foo asks: “What are their utilisation rate?”

A drive by some of these completed projects may be able to provide an answer. Or ask the auctioneers.

Real estate, as an asset class, has served the previous generations well. It can also serve the younger generation well as it did their parents.

But the unconventional way central bankers worldwide have gone about tackling the 2008 financial crisis has distorted the global financial system.

The high property prices in Malaysia today – and in other economies around the world – is a result of that distortion.

The returns the sector gave the previous generations may not be repeated for some time. This impacts developers, investors, local authorities and lenders and, most important of all, property owners and buyers. — By Thean Lee Cheng

(The Star) Taking stock of property sector

It has been a decade since the 2008 financial crisis. The economies of most developed countries are steady, though not strong. Property prices are generally high in both the developed and developing world with a shift and clamour for more affordable housing.

Malaysia is going through what other countries are experiencing. In the midst of all these, for the first time in years, interest rates are finally rising. US and Japanese unemployment rates are the lowest in 17 and 24 years, respectively.

In the midst of this world economic and financial drama, real estate has risen in status as an asset class. And this is particularly obvious in Malaysia given how properties have been viewed, speculated and traded, and the youthfulness of some buyers this past decade. So it is natural to wonder how residential prices will hold as interest rates return to normal.

But it is in the commercial sector – office and retail space – that the real worry lies moving forward.

Just as Malaysia’s Federal Constitution provides the basis how the state should evolve over time and generations, no matter who is in power, a national property policy provides direction for the sector in the overall scheme of things.

As 2018 rounds the corner, maybe now is as good a time as any to take stock how the sector needs to be managed considering its links to the financial and lending sector.

Says Khong & Jaafar group of companies managing director Elvin Fernandez: “Malaysia lacks an overall property policy, and one is sorely needed in the housing market.

“Because land is a state matter, it is not easy to put into place an overall policy. In countries where you don’t have a federal system, it would be easier.

“This is a constraint on the development of a national housing policy that would otherwise evenly administer housing issues,” he says.

This constraint means more thought and efforts are needed to make this happen.

“A central concept that must be in this housing policy – to be part of the overall property policy – is that house prices must have a relationship with household income over the long term.

“It cannot be one totally ignorant of the other. This must be the final aim in this relationship between prices and household income. And that is how the overall policy must be administered – in terms of compliance cost, the need to control cost through industrial building systems (IBSs) in order to bring down costs and to reduce the risks in the system,” he says.

The policy must have a clear rationale for compliance cost and the policy writers must know how costs of complying with the various authorities at the state levels add to the cost of the end product (which are then borne by buyers).

Policy writers must also know how compliance costs – when it goes out of control – impacts the price of the end product.

This is the cost imposed by various local authorities at the state level.

But there is also a cost at the national level and this is the cost in the industry, although there are ways to bring that down; the use of IBSs being one of them.

Therefore, there is the need to balance the local and the national level costs and this leads to the third factor – reducing overall risk.

All this can help to bring down cost in the housing industry over the longer run, says Elvin.


While the policy should enable cost to come down over the longer term, it must also take into account population growth.

Bank Negara reported unsold and unutilised units of 130,690 units, which include small offices home offices (SoHos) and developments in this genre which are built on commercial land as well as unsold units during construction.

The National Property Information Centre (Napic) reported an overhang of 20,876 units, and excluded SoHos and similar genre. It defined overhang as unsold units which are certified fit for occupation.

SoHos and the like can also be rather speculative in nature and the last several years saw a proliferation of these units. Developers cut the units small in order to bring down the absolute price and marketed them as flexibile office/home units.

A property consultant who declined to be named says SoHos is another area that needs closer scrutiny.

Although developers may be able to market them successfully, its utilitisation rate is poor.

There must be a more productive use of money, he says.

Having removed this non-mainstream form of housing from the residential overhang and unsold units during construction, “the picture is not as bad as painted,” says Elvin.

“There is also inherent strength in housing. Prices are generally sticky on the downside and does not tumble because it is owned by a diverse group of people.

Bank Negara’s macro-prudential policies have also put paid to speculative pressures.

“So the picture is not as bad as painted,” he says.

Office space

The office space market, however, can be quite worrying, particularly in Kuala Lumpur.

It is “substantial” and it is “still growing,” says property consultancy VPC Alliance director James Wong. Malaysia’s total office space is 169.37 million sq ft, and 126,35 million sq ft in Greater Kuala Lumpur, at the close of 2017.

If 20% is vacant, this equals 33.87 million sq ft in Malaysia, and 25.27 million sq ft in Greater Kuala Lumpur.

“This is alarming,” says Wong in an email.

What is particularly of concern, he says, are low occupancies among new office buildings in the outskirts of Kuala Lumpur and in Putrajaya.

There is a planned supply of about 9.14 million sq ft at end of the first half of 2017, compared 4.32 million sq ft in 2012.

Napic’s planned supply takes only into consideration projects which have been issued development orders (DO) while there are a lot of projects, particularly in the Klang Valley, where the DOs have not been issued.

So the planned supply is actually “understated” to a large extend. This is where the danger lies, both Wong and Elvin say.

When there is a large supply like what the country has today, there will be pressure on rental rates.

There is a relationship between value of a building and rental. The value is driven by rental.

Over a five-year period, office rental in the city grew marginally.

(The Star) Investing in infrastructure projects

When Mah Sing Group Bhd embarks on a project, the property developer is always finding ways to enhance the value of its developments.

One of those ways, says group managing director Tan Sri Leong Hoy Kum, is to invest in additional infrastructure developments for its projects.

“Infrastructure investment is important for a location to thrive. It connects people to entertainment and food, connects residents to their homes, and connects workers to their jobs,” he tells StarBizWeek.

Among the company’s latest infrastructure developments is the interchange at its maiden township project, Southville City, in Bangi. Slated for completion by the first quarter of 2018, Leong says the interchange will help minimise travel-time to the township.

“This interchange will allow easy access to the area and it drastically reduces the driving distance into Southville City and its neighbouring districts such as Dengkil, Sepang, Semenyih, Bangi, by approximately 6km if compared to the current access via Bangi toll and 4km for North bound via Putra Mahkota exit.”

He adds that the completion of the interchange will bring more vibrancy to Southville City, as more new shops open for businesses.

“Once completed, the interchange will attract reputable business and service entities such as clinics, malls and various retail companies to carry out operations and benefit from increased visibility. Businesses will also benefit from the ready catchment of residents in Savanna Executive Suites and Avens Residence.”

HSR boost: Leong says the HSR will enhance the connectivity and accessibility of Southville City.

Leong says Mah Sing envisions Southville City to be a sustainable development that stems from population growth, interconnectivity of society, transportation, facilities and economy.

“This infrastructure upgrading will provide easy access into the development, thus enhancing its connectivity with adjoining areas and other major cities. This will in turn create attraction for investments to start flowing in and further progress will start taking shape within the project.”

Leong says the investment into the interchange was “significant”.

“We know that infrastructure investment is a powerful engine for growth, so this is why we will always provide our buyers with the best living conditions that place a strong emphasis on accessibility and connectivity, thus enhancing the value of the project.”

Southville City is a freehold masterplanned township with a gross development value (GDV) of RM11.1bil.

Leong says Mah Sing has plans to capitalise on Southville City’s strategic location, making it a tourism hub in the future.

“The township sits in between Seremban/Nilai and KL. Southville City would be the ideal place for incoming tourists as it is the first stop from the airport.”

Leong also highlighted that an upcoming High Speed Railway (HSR) transit station for Putrajaya, just 7km away from the township, will be completed in 2026.

“It will definitely enhance the connectivity and accessibility of Southville City. This will enable the residents to enjoy an improved travel experience and shorter travel time to Singapore. The connectivity will also enable businesses to be more productive and access a broader marketplace.”

He says the group is investing in infrastructure developments for other projects as well.

“For our Icon City project in Petaling Jaya, we have developed a slip road and an elevated U-turn ramp from Lebuhraya Persekutuan 2 (Federal Highway) westbound to KL, with direct access into Icon City. It was completed in 2016 and is currently in use.”

“For our M Vertica development in Cheras, we are also proposing to develop an elevated ramp straight to the parking space of M Vertica.”

Leong says the group has also constructed a road in and out of its Southbay development in Penang, which directly connects to the Lim Chong Eu Expressway.

“This expressway is currently being extended to Southbay’s area as part of Penang’s upgrading work to improve connectivity. Upon completion, users can directly access to Georgetown.

“We are also upgrading Jalan Muzium Perang by widening it to a two-lane road so residents can have an alternative road to access to the expressway. We will also develop a new circulation road within the township to improve accessibility to Southbay Plaza,” he says.

Down south in Johor, particularly its Meridian East development, Leong says Mah Sing is developing a connecting road into the Tanjung Langsat – Cahaya Baru Toll Connecting Highway, which forms part of the Senai Desaru Expressway.

“The connecting road comprises an egress and ingress into the Tanjung Langsat-Cahaya Baru Toll Connecting Highway which will allow traffic to flow between the Jalan Kong Kong and Masai area to Tanjung Langsat and Pasir Gudang.”

Leong says Mah Sing is also developing an access road from Johor Baru East Coast Highway to its Meridin Bayvue development in Johor.

“This is a new additional plan that we have put in motion to enhance the connectivity for our buyers and the surrounding communities.”

Adding upgrades to its developments helps boost the value of its properties, says Leong.

“Infrastructure development is an integral part of our plan. We will always invest in facilities, amenities and infrastructures to enhance the lives of our customers.

“The value of properties tends to appreciate over time. Obviously, a good location will command higher value. But with infrastructure upgrades and good public transportations within the vicinity, it will help to increase the value of the property and also properties in neighbouring areas.”

As at Nov 30, Mah Sing has 2,131 acres of land bank with remaining GDV and unbilled sales of RM28.3bil.

Last week, the company announced that it plans to increase its land bank in the Klang Valley to 75% from the current 66%. This year, the group acquired two land parcels in the Klang Valley and one in Bukit Mertajam.

(The Star) Potential stocks joining club

Stock picking is already difficult. Predicting the next stock that would go into the RM10bil club in the next three to four years is even harder.

We started the mission with choosing stocks that are already valued at RM3bil to RM7bil. The second screening process was to look at companies with direct exposure to consumer business.

Companies that are dependent on the Government for jobs were too-risky bets because four years is a long time in politics, let alone business.

We came out with four stocks that we think would double or triple their market capitalisation in the next three to four years.

Property stocks are not in favour now. However, the industry will make a comeback because of the self-correcting mechanism that is embedded in the sector.

In an industry that is driven purely by commercial factors of supply and demand, the market would find a way of weeding out weak players. Only the stronger property developers with strong brand names would remain in the next four years.

In this respect, Eco World Development Bhd stands out as among the better property players. It has a strong brand name and a team with a proven track record. Its major shareholder, Tan Sri Liew Kee Sin, is the biggest name in the property market in recent years.

Eco World has about 5,000 acres of undeveloped land with an estimated gross development value of RM74bil. Its sales target for 2017 is RM4bil and next year, it is expecting a higher mark.

Next year, analysts have forecast Eco World to register a growth in profit to RM170mil on the back of a turnover of RM3.86bil. The following year, they are expecting the profit to be about RM350mil.

Maybank Investment predicts that in 2020, Eco World should hit a profit of about RM500mil on the back of a turnover of about RM6bil.

The additional factor that differentiates Eco World from the others in the industry is its 27% stake in Eco World International Bhd (EWI), the developer that focuses on overseas projects. The exposure to EWI gives Eco World the extra to ride through the current weak sentiment in the local property market.

At the moment, Eco World has a market capitalisation of RM3.26bil based on its share price of RM1.36.

For any property company, apart from excellent location of its land bank and low holding costs, execution of property projects is key towards being profitable. To this end, Eco World has crafted partnerships with large funds such as the Employees Provident Fund to reduce its holding cost on land.

It has a proven track record for execution. So it should see growth in the next few years.

MyEG Services Bhd

Can we imagine life without MyEG Services Bhd?

It is pretty much entrenched in our lives, and also one solid reason why we feel this service provider will be joining the RM10bil club soon.

Since its listing in 2007 when it started off with a market capitalisation of some RM138mil (at the end of the first day trading), the stock has multiplied by some 58 times to its current market capitalisation of RM8.07bil.

Earnings have been been equally impressive.

Just looking at the last five years – the company has delivered a compounded annual growth rate of 45.1% on its profits and 36.8% on its revenue.

While valuations may be relatively high (MyEG trades at about 34 times price-earnings), it is also delivering above-average returns.

For the financial year ended June 30, 2017, MyEG registered a net profit of RM201.51mil on turnover of RM371.6mil, indicating a margin of about 54.22% on its business.

All this started when its founder Wong Thean Soon saw a big opportunity to improve government services. In 2000, he launched MyEG Services Sdn Bhd to better manage the interactions Malaysian citizens have with their Government in areas such as immigration, licensing, utilities and tax payments.

These include vehicle road tax and drivers’ licence renewal and foreign workers’ permit renewal.

While many may quibble that MyEG has succeeded because of its government contracts, MyEG has in fact diversified into commercial solutions some three years ago.

Presently, some 70% of its revenue comes from the commercial segment. Hence, the bulk of its revenue isn’t coming from the Government anymore. Furthermore, this shows that its commercial segment is growing at a rapid rate.

Wong has told StarBiz before that MyEG leveraged on the fact that it is a provider of government services to build a strong level of trust and credibility among its users.

Also, MyEG achieves success by doing things differently. The company couples new enabling technologies with its dataset to the industries that it is expanding into.

“Many traditional industries continue to be disrupted by the ever-evolving network effect of the Internet. By applying data analytics to these different sources of data, we are able to provide differentiated services,” Wong said earlier this year.

From a business of providing easy payment schemes for customers purchasing consumer durables, Aeon Credit has grown into a semi-financial services company.

Today, apart from its easy-payment schemes, the company has expanded into issuing credit cards, offering personal finance schemes and insurance through its 64 branches and service centres as well as 12,000 participating merchants nationwide.

The strength of Aeon Credit is the growth of is credit card services where it currently has four million card members. Its parent company in Japan – AEON Financial Service Co Ltd – is one of the biggest credit card issuers and a leading consumer credit provider in Japan with 26.69 million members.

Aeon Credit has positioned its branches at all major towns in the country to capture the anticipated rise in consumption. Its target market is consumers from the lower-middle-class group that are currently underserved due to the stringent conditions of conventional banks.

It is Aeon Credit’s quick approvals that helps it grow market share. For instance, auto financing and personal finance segments of its business registered strong double-digit growth in the financial year ended Feb 28, 2017.

A research firm has forecast Aeon Credit’s topline and bottom line to grow steadily in the next few years. Affin Hwang Capital has forecast profit to hit RM260mil in 2018 and go beyond RM300mil in 2020.

The research house has also said that Aeon Credit may be ripe for a re-rating due to its ongoing digital transformation efforts such as e-wallet and mobile wallet offerings for its customers. Affin Hwang said that such efforts could be a game-changer for the credit company.

Apart from local operations, Aeon Credit has also expanded to India where it registered loses in the financial year ended February 2017. However, India is one of the growth markets in Asia and not many finance companies listed in Malaysia have exposure to that segment of the market.

The main driver of the company is Dr Chia Song Kun, a former Universiti Teknologi Mara lecturer in Mathematics. He swapped his maths books to build a family business anchored by marine products.

QL Resources has been showing steady growth in its business throughout the years and today, the activities are anchored on marine products, livestock farming and palm oil plantations. It is the largest producer of surimi in Asia and one of the biggest producer of poultry eggs in the country with 3.2 million eggs per day.

Its poultry egg business has spread out through Asean and to Hong Kong while its plantations are in Sabah and Kalimantan, Indonesia.

In April 2016, QL Resources took the strategic move to go into the retail store business by teaming up with FamilyMart, the world’s second largest convenience store chain after 7-Eleven.

Research house Affin Hwang Capital has predicted that the FamilyMart business will break even earlier than anticipated – in 2020 instead of 2022.

QL Resources plans to open 40 to 50 more stores in the Klang Valley by 2019. The stores are strategically located in places with high footfalls such as office blocks, universities and shopping malls.

Industry executives say that the retail outlets are the missing piece in QL Resources’ value chain of production.

“With the FamilyMart stores, it has better control over the pricing of its products. For instance, its processed food products, which are popular, is slated to see marginal increases in price next year,” says an executive.

In 2017, QL recorded a profit of RM196mil on a turnover of RM3bil. The bottom line is expected to increase by 50% to about RM300mil by 2020. By then, its market capitalisation should cross the RM10bil-mark.

Critics say that QL Resources’ price-earning multiple of 30 times makes it among the expensive consumer-food companies. However, not many have a growing retail chain to command better pricing.

(The Star) Companies which drop out of ivy league

There are many reasons why a company loses its competitive edge.

They run out of cash, overgear, sell a product nobody wants, execute poorly or offer no real value to the client or market.

Many times, companies fail simply because they offer no real differentiation in the market.

However, more often than not, it is always an issue of leadership – yes, the failure of the boss or founder of the company.

In business, unlike politics, the bottom line matters.

A company does well because it sold a winning product. That is the decision made by the CEO.

If a company fails because it sold a product that became an absolute flop – that is also on the CEO.

The CEO is accountable for these decisions.

It is true that a company may already have a profitable business model or a poor strategy. But that does not happen automatically. That happens because of something, and that something is typically the boss of the company.

It is true too that a company can only do well if it has a strong team. It is pointless to have a great CEO and lousy staff. Again, this is a people issue.

It has also been pointed out that many CEOS are experts at their trade but not entirely savvy when it comes to financial issues.

Hence, their bad judgement may initially go unnoticed, thanks to the strong financial position of the company. That won’t last though. The music will stop, and soon enough, the flaws and financial holes will start to show.

So, businesses don’t fail. But people do.

Below we look at the four companies that have been pushed out of the RM10bil market-cap family over the last four years.

Mall anchors were in vogue even as recent as 10 years ago. It attracted traffic and drew shoppers. Fast forward today, with technology and e-commerce, and mall base retailing is fast losing its place in the market.

The feel and facade of Parkson retail outlets hasn’t changed very much from 20 years ago. The product offering also appears dated.

Not surprisingly over the last four years, its net profit has dropped from RM238.2mil in financial year 2014 (FY14) to a loss of RM120.9mil in FY17. Look at its four-year price chart and it is almost a straight line headed south. At its share price of roughly 52 sen today, the stock has a market cap of some RM554.95mil.

Parkson Holdings Bhd (PHB) started off as a high flyer. Incorporated in 1982, its initial growth was phenomenal as it opened stores across Asia and benefited from the rise in a growing middle-class consumer.

Then the Internet came. In China, especially, the Chinese retail market has seen an unprecedented evolution and experienced one of its most challenging periods.

Retailers have had to contend with cooling economic growth, the rapid rise of e-commerce, and new spending mindsets and ever changing behaviour of customers

The Internet is not the only culprit, as millennials are replacing boomers as the biggest consumer segment. Not only are millennials lower-income consumers but many would rather spend on holidays than apparels.

PHB was listed on the Main Market of Bursa Malaysia Securities on Oct 28, 1993.

It is an investment holding company with stakes in Parkson Retail Asia (PRA) and Parkson Retail Group Ltd (PGRL), listed on the Singapore Stock Exchange and Hong Kong Stock Exchange, respectively.

PRA operates a total of 69 department stores in Malaysia, Vietnam, Indonesia and Myanmar. Under the Parkson brand, it has 46 stores in Malaysia, seven in Vietnam, two in Indonesia and one in Myanmar.

In Indonesia, it has 13 stores under the brand of Centro Lifestyle Department Store.

Meanwhile, PRGL is one of the premier retail operators in China with 49 department stores covering 36 major cities.

Parkson isn’t giving up though. In its 2017 annual report, it says the retailing business is one which requires continuous reinvention and adaptation to meet consumers’ expectations.

“The group has taken many proactive and innovative steps in executing its transformation strategies, both online and offline, and we have seen some real and very encouraging progress,” it says.

Enough has been said about the world’s second-largest palm oil company, Felda Global Ventures Holdings Bhd (FGV).

There was so much hope when it first made its debut on Bursa Malaysia in June 2012. At that time, both the local and international media were busy celebrating the world’s second-largest initial public offering (IPO) for that year at US$3.1bil, second only to Facebook Inc’s US$16bil.

The listing, with its market capitalisation of almost RM20bil, was the peak for FGV. It has been on a downhill since then, with the plantation giant being clouded by governance issues mainly because of an acquisition spree that started after it was listed.

Now, fast forward five years later, and how things have changed.

While Facebook’s share price is close to its all-time high, FGV is jarringly at the opposite end. FGV has erased nearly RM14bil off its market capitalisation and is now only capitalised at some RM6.28bil. Its cash pile has also dwindled from more than RM5bil to RM1.45bil as of Sept 30, 2017.

Apart from poor financial results, it has been hit by allegations of corruption, management changes, acquisitions that were too expensive and organisational restructuring.

Its expensive acquisitions were one of the main issues. FGV went on an aggressive acquisition trail – between January 2013 and 2016, it completed seven acquisitions. The president and CEO during this period was Datuk Mohd Emir Mavani Abdullah and the chairman Tan Sri Isa Samad. The company has had three CEOs over the last four years.

The poor management in FGV was one of the key issues which ultimately saw its cornerstone investor, Employees Provident Fund, making a full exit in early 2017.

What was most disturbing for investors was that these acquisitions did not translate into a higher profit. In fact, FGV’s net profit has been fast sinking from the financial year ended Dec 31, 2013 (FY13), when it raked in RM982.25mil, to a meagre RM31.47mil in FY16. As of the nine months to FY17, this has improved to RM67.15mil.

But back to its core business of plantations, the root of the problem was in its old trees, or plants that are 20 years old and above. That currently made up some 40% of the group’s total planted land bank of 332,000 ha.

The group’s current average tree age profile is roughly 15.8 years, which also makes it less productive. While management is now addressing this issue, the progress is slow and the results still remain to be seen.

Just as the global oil and gas (O&G) industry is gradually recovering, Sapura Energy Bhd’s dismal earnings this year has indeed surprised many in the market.

In the first nine months of its financial year 2018 (FY18), the integrated O&G services company continued to be in the red for the second consecutive quarter, with a net loss of RM1.4mil.

According to CIMB Research, Sapura Energy’s core net loss was almost four times higher than its previous loss forecast.

Precipitated by the uninspiring results, the share price has fallen to a three-year low currently. In fact, the stock has tumbled by nearly 66% from its year-to-date high of RM2.08 in April 11.

In its heyday prior to the oil price plunge, Sapura Energy, formerly known as SapuraKencana Petroleum Bhd, was Asia’s largest provider of O&G services by market capitalisation.

The company was worth RM30bil then but is now reduced to a market capitalisation of RM4.25bil.

What has gone wrong for the country’s largest O&G service provider?

The group’s two core operations – engineering and construction as well as drilling – have been suffering significant losses, while even the exploration and production division, which should have fared better in a higher crude oil price environment, registered a sharp drop in earnings.

UOB Kay Hian in a report points out that Sapura Energy’s low utilisation of rigs is a concern.

“Although the company is actively pursuing contracts, the likelihood of near-term contract win is unclear and unlikely in the immediate term, even though there is demand for 14 tender rigs up to 2020,” it says.

Moving forward, as Sapura Energy tries to return into profitability, cashflow is an important condition for the company in these trying times.

As no immediate lumpy loan repayments are needed and capital expenditure plans are already budgeted for, the group should be able to navigate through the currently-challenging environment.

Sapura Energy believes profits will recover in time and that its current performance is rather temporary.

For this to happen, the group needs to see a recovery in contract wins and a higher-than-expected drilling rig utilisation.

UMW Oil & Gas Corp Bhd

The low oil price environment in the last few years has not been kind to UMW Oil & Gas Corp Bhd (UMW-OG).

The O&G services company has been in the red since FY15 and its share price has trended downwards to a multi-year high.

Over the last one year, the stock has fallen by nearly 66% and this has effectively reduced its market capitalisation to RM2.5bil.

To recap, UMW-OG’s market capitalisation once peaked at nearly RM10bil in October 2014.

However, the company seems to be gradually exiting the dark clouds following its first quarterly profit in two years, recently.

In the third quarter of FY17, the company’s rig utilisation rates have improved to 90% from 26% in the first quarter. This was on the back of the stabilisation of crude oil prices owing to the Organisation of Petroleum Exporting Countries’ production cut.

The gradual but continuous increase in oil price is pushing UMW-OG above the waters.

With the benchmark Brent oil price stabilising above US$50 per barrel for almost a year and breaching US$60 per barrel in late October 2017, more upstream activities in the O&G sector can be seen.

Given the gradual improvement in the overall sector, analysts are now more positive on UMW-OG’s prospects.

Hong Leong Investment Bank (HLIB) Research says that in 2018, at least 12 jack-up rig contracts would be needed in the Malaysian market.

“This is positive for UMW-OG being one of the only two local players in the industry.

“We believe the company stands a fairly good chance to secure sufficient amount of contracts to replenish its order book,” it adds.

Now, the bigger question is, can UMW-OG’s upward momentum be sustained, moving forward?

This largely depends on the possible strengthening of the crude oil price, apart from UMW-OG’s alternative business strategy to cushion itself from the volatility in the O&G sector.

Perhaps, going the Dialog way, which is to increase footprint in the downstream segment, could help to strengthen UMW-OG both financially and operationally.

(The Star) The RM10bil club

There are a select few companies which have grown their valuation to surpass RM10bil. Here we highlight the journey of those who have grown into that size over a four-year period as well as those which have dropped out of that benchmark in that time.

Also highlighted are four companies likely to grow into the RM10bil club in the next four years.

New entrants into the RM10bil club

The “RM10bil market capitalisation” club remains exclusive to a handful of public-listed companies on Bursa Malaysia.

Among them are Malayan Banking Bhd (Maybank), Tenaga Nasional Bhd, Public Bank Bhd and Petronas Chemicals Group Bhd, spanning across various sectors such as finance, telecommunications and others.

Over time, very few companies have crossed the RM10bil-mark. In the same time, those already on the list have also seen their market capitalisation grow.

To put it into perspective, earlier in June, Maybank became the first company listed on the bourse to breach the RM100bil market capitalisation level.

Data compiled by StarBizWeek shows that there are 42 listed entities on the Malaysian bourse currently, which are part of the exclusive RM10bil club.

This represents only less than 5% of the total 921 companies listed on both the Main Market and Ace Market.

Small in number as they are, the “RM10bil market capitalisation” club controls nearly 65% of Bursa Malaysia’s total market capitalisation of RM1.89 trillion.

These companies have grown over the years, driven by strong fundamentals and stellar management.

Of course, these listed entities were also subjected to market volatility and myriad unforeseen circumstances, similar to other companies on the bourse.

However, it was due to persistent efforts and savvy management that these companies have continued to strengthen their footprint in the RM10bil club.

As greater liquidity flows into the domestic capital market, the list will only grow bigger. It is worth noting that more companies are slowly striding towards the RM10bil-mark.

They include the likes of Top Glove Corp Bhd, Sime Darby Property Bhd, Fraser & Neave Holdings Bhd and Batu Kawan Bhd.

Over the last four years, four more large-cap companies have joined the league, as elaborated below:

Dialog Group Bhd is one of the rare few that survived the debilitating plunge of the global oil price. Despite the challenging market conditions, the group has continued to record resilient earnings and share price growth over the years.

From a market capitalisation of RM55mil when it was listed in 1996, Dialog has grown to more than RM14bil today. In fact, its market capitalisation was at RM11bil only three months ago.

Just as when many other oil and gas (O&G) companies are struggling to survive in the sluggish crude oil price environment, Dialog’s bottom line has grown at a compound annual growth rate of almost 20% since 2014.

The success mantra? Greater downstream diversification.

Contrary to many O&G service providers in Malaysia which serve primarily in the upstream segment, Dialog’s businesses span across upstream, midstream and downstream sectors.

The company continues to strengthen its footprint in the midstream and downstream segments, especially with its Pengerang Deepwater Terminal (PDT) which is located just next to Petronas’ Refinery and Petrochemical Integrated Development project.

With the development of PDT, the engineering, procurement, construction and commissioning activities continue to be the main drivers of Dialog’s earnings.

Apart from that, the group also aims to penetrate further into the tank terminal business. In September, Dialog took full control of its tank farm and terminal facilities in Tanjung Langsat, Johor, via the acquisition of the remaining 45% stake in Centralised Terminals Sdn Bhd from MISC Bhd.

These strategies work well to buttress Dialog’s performance regardless of the oil price volatility in the upstream segment. PDT, which is currently undergoing capacity expansion, is expected to anchor the group’s long-term earnings growth.

Stronger participation in the tank terminal business will also bolster Dialog’s recurring income, as the company seeks to establish sustainable revenue streams.

Now, as crude oil price is gradually recovering, Dialog seems to be well on track to benefit from the O&G sector’s upturn.

Eleven research houses have “buy” calls on the stock, while five others recommend “hold”.

Press Metal Aluminium Holdings Bhd

The year 2017 has been extremely positive for South-East Asia’s largest aluminium smelter.

China’s move to impose restrictions on industrial output turned out to be a boon for Press Metal, as aluminium prices rose to multi-year highs.

Currently, the three-month aluminium spot contract on the London Metal Exchange is hovering at US$2,241 per tonne, a six-year high.

Given the strengthening of aluminium prices, Press Metal registered a 24.5% higher net profit at RM425.6mil on a year-on-year basis in its first nine months of FY17.

Its smelting operation has continued to run at full capacity and the trend is likely to prolong, driven by the strong demand from its buyers.

The group’s three smelting plants – in Mukah and Samalaju Phases 1 and 2 – cumulatively has a smelting capacity of 760,000 tonnes per annum.

Share price-wise, Press Metal is one of the best performing large-cap stocks in 2017, hitting a record high this year.

Over the last 12 months, the counter has surged by nearly 236% to RM5.37, bringing its market capitalisation to RM20.58bil currently.

The Main Market-listed aluminium extrusion firm has also been included in the MSCI Malaysia Index and the benchmark FBM KLCI in the past two months.

Currently, two research houses have “buy” calls and two others have “hold” on Press Metal.

Underpinned by the group’s promising prospects, RHB Research has upgraded its earnings estimates by 13% to 33% for the financial years 2018 and 2019.

Moving forward, Press Metal could register significant logistics cost reductions following the commissioning of the Samalaju Port in Sarawak, which is next to its smelting plant.

In its published note, RHB Research says Press Metal is expected to cut inland logistics and shipping costs, given its proximity to the Samalaju Port.

“Increased value-added production may also help to enhance the group’s profitability,” it says.

Overall, with the continued increase in global aluminium prices and prolonged weakness of the ringgit, Press Metal is likely to witness yet another bullish year ahead.

At the end of the day, consistent and good financial results and credibility speaks the loudest.

That is exactly what Hap Seng Consolidated Bhd has been achieving over the past four years – actually way before that. Not surprisingly, over a four-year period, it has been achieving double-digit returns on equity (ROE). For its financial year ended Dec 31, 2016 (FY16), it achieved ROE of 18.23%.

Earnings wise, Hap Seng recorded RM588.26mil in FY13, and as of FY16, this has almost doubled to a stunning RM1bil. Against its revenue of RM4.89bil in FY16, this is a profit margin of 20%. Fancy that for a company with a market capitalisation of RM23.95bil.

Also, the company regularly rewards shareholders with dividends, as it has a policy of paying out not less than 50% of profit after tax. Hence over a five-year period, dividends have been growing at a rate of 30.63%.

It helps too that in 2016, Hap Seng was added to the FBM KLCI main index which tracks the performances of the 30 largest companies.

Since its incorporation in 1976, Hap Seng has grown and now diversified into six core businesses – plantations, property investment and development, credit financing, automotive, fertilisers trading and building materials.

Last year, the group expanded its building materials division with the acquisition of Malaysian Mosaics Sdn Bhd, a reputable tiles manufacturer.

Currently, the group’s businesses are largely in Malaysia which accounted for 82.3% of its total revenue in FY16.

However, the group is growing its presence in Asia – particularly in Singapore, Indonesia and China – through the fertilisers trading and building materials businesses.

So how did it manage to consistently deliver strong profits? It is back to basics, really – it simply focuses on its core businesses where it has built its core competencies and strong market presence over the years.

Nonetheless, Hap Seng is always on the lookout for potential acquisitions of new assets or opportunities for strategic alliances with other similar businesses.

More importantly, it embraces good practices in all of its segments – as cheesy as this may sound, this is how it has successfully build a prominent market presence and strengthens customer relationships. Customers trust Hap Seng.

Thirdly, it is prudent – it always focuses on improvements in operational efficiency and cost-savings initiatives to enhance the profitability and marketability of its products and services.

Trailblazing was its theme for 2017. And rightly so too. From a relative nothing glovemaker less than 20 years ago, and in a market filled with big players, Hartalega beat the odds to become the largest nitrile glove producer in the world today.

Over the last four years, it has consistently been growing and surpassing targets.

From a net profit of RM233mil in FY14, it has grown to achieve RM283.3mil as of FY17.

While it is a mixture of values that gives it a market capitalisaton of RM17.84bil today, a lot can be attributed toward its vision – which is to be the number one glove company that produces and delivers the best and most innovative gloves in the world.

It also wants to be recognised as a caring company to the community and environment.

While there are many reasons for its success, the largest breakthrough for Hartalega came from its invention of the nitrile gloves.

It started off with a single-line operation back in 1988, and business was growing without much pomp until it commenced research and development (R&D) on elastic thin nitrile gloves in 2002.

In 2005, Hartalega became the inventor of the world’s first lightweight nitrile glove, and suddenly this caused a demand shift from latex to nitrile gloves all over the globe.

Today, it is the largest producer of nitrile gloves in the world, capable of manufacturing 30 billion gloves a year and is progressively expanding to 42 billion in 2020. Its workforce has also expanded to 6,600 people across eight manufacturing facilities.

Hartalega acknowledges that all this would not have been possible without its deep-rooted commitment towards innovation.

Innovation is the cornerstone of the group’s success, and thus R&D is fundamental to Hartalega.

“Our pole position in the glove manufacturing sector is based on our innovative products, state-of-the-art manufacturing facilities and advanced proprietary technology.

“Hartalega’s continued technological innovations help ensure our gloves are manufactured with equal emphasis on efficiency and quality; a key reason why we are trusted as the OEM (original equipment manufacturer) for some of the world’s biggest brands,” says Hartalega in its 2017 annual report.