Author: Pei Ling

Malaysia Khazanah To Split Assets Into 2 Funds As Portfolio Value Erodes

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© Nikkei Markets

KUALA LUMPUR (Mar 05) — Khazanah Nasional said Tuesday it will split its assets into two funds after the value of its portfolio eroded in 2018, dragging the investment holding arm of the Malaysian government into its first pre-tax loss in a decade.

The company will separate its investments with CIMB Group and Axiata Group among others in the so-called commercial fund, Managing Director Shahril Ridza Ridzuan said in a media briefing. Holdings such as in Telekom Malaysia and Tenaga Nasional will be placed in “strategic fund,” he said. 

The commercial assets will diversify revenue sources for the country, while the strategic assets are expected to generate long-term economic benefits for Malaysia, he said. “We needed to restructure the assets to better meet our mandate and objectives.”

The company is targeting return of 3% above consumer price index on five-year rolling basis for commercial fund portfolio, Shahril said. The strategic fund, meanwhile will aim for return equivalent to 10-year Malaysian government bond yield on a five-year rolling basis and “measurable economic benefits.”

Since sweeping to power in last year’s shock election outcome in May, Prime Minister Mahathir Mohamad has criticized Khazanah for deviating from its so-called initial goal of supporting local enterprises. He appointed Shahril as the new managing director after Azman Mokhtar resigned in July along with the entire board to help an orderly transition under the new government.

The Mahathir-administration, burdened with massive debt, in part arising from multi-billion dollar scandal at state investment fund 1 Malaysia Development Bhd, is relying on hefty dividend payouts from state-run enterprises such as Khazanah and Petroliam Nasional to help fix the government’s strained finances. 

Last year, Khazanah’s realizable asset value fell 13% to 136 billion ringgit ($33.36 billion). Net worth adjusted, Khazanah’s preferred measure of portfolio value after stripping out liabilities and net transfers to the government, declined 22% to 91 billion ringgit.

Khazanah also suffered pre-tax loss amounting to 6.27 billion ringgit due to fewer divestments, reduced dividend income and higher impairments, amid weak capital market conditions. The company booked 7.3 billion ringgit in impairments and 1.4 billion ringgit divestment gains last year.

Following the change in its entire leadership, Khazanah has reviewed and revalued some of its investments in 2018. “The organizational restructuring we are currently undertaking will enable us to execute and deliver on our role of growing Malaysia’s long-term wealth, beginning from this year,” Shahril said. He is confident of returning to profitability this year as Khazanah sharpens focus on executing its portfolio rebalancing strategy, investing 60% in equities, 30% in private companies and 10% in property investments, while strengthening its financial position. 

Apart from listed entities, Khazanah also owns stakes in a mix of privately-held companies that range from national flag carrier Malaysia Airlines to film studio Pinewood Iskandar. It has also invested in semiconductor manufacturer Silterra and Themed Attractions Resort & Hotels that owns Legoland in Malaysia. 

– By Gan Pei Ling
– Edited By Jason Ng

Malaysia QSR Brands’ IPO Plan On Schedule, Targeting Listing By 1H-Managing Director

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© Nikkei Markets

KUALA LUMPUR (Feb 28) — Malaysia’s fast food chain operator QSR Brands (M) Holdings Bhd is on track to return to Bursa Malaysia within the first half of 2019, its Managing Director Mohamed Azahari Kamil said Thursday.

“As far as the IPO is concerned, we are on target. The IPO will proceed as scheduled. We’re finalizing the documentation to submit to the regulators,” he said at a news conference.

QSR submitted a draft prospectus to the Securities Commission Malaysia in October. It said last year the company aims to raise 2 billion ringgit via the IPO.

QSR expects to open 24 more KFC restaurants in Malaysia this year, Azahari said. The KFC franchisee currently operates 820 restaurants in Malaysia, Singapore, Brunei and Cambodia. 

– By Gan Pei Ling
– Edited By Abhrajit Gangopadhyay

Malaysia’s Metrod Holdings To Invest Over MYR1.1 Billion In Selangor Copper Pant

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© Nikkei Markets

KUALA LUMPUR (Feb 25) — Malaysia’s Metrod Holdings will invest over 1.1 billion ringgit ($270.24 million) in a new copper manufacturing plant in Selangor, its president said Monday. 

“The new plant will raise copper rod output capacity to over 300,000 metric tons per year,” Rajan Mittal said at the launch of the new facility. 

The copper rod manufacturer expects its total sales to double in the next three years with the launch of the new plant, he added. The unaudited total sales value for 2018 is about 2.5 billion ringgit, he said.

“I’m confident we’ll be able to double our sales in the next three years,” he said. 

– By Gan Pei Ling
– Edited by Sayantika Bhowal

Malaysia Still In Talks With China To Cut East Coast Rail Link Project Cost- Mahathir

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© Nikkei Markets

KUALA LUMPUR (Feb 25) — Malaysia is still in talks with China to reduce the construction cost of the suspended East Coast Rail Link, Prime Minister Mahathir Mohamad said Monday.

“If the price is right, then we’ll continue. Right now we have not agreed on the price,” he said at a news conference after launching a manufacturing plant in Selangor.

“Our hope is to spend less money,” said Mahathir.

Under current contract terms including interests on a 30-year loan from China, Malaysia would be spending up to 140 billion ringgit ($34.4 billion) on the project.

“We’ll be saddled with interests. We cannot afford that. Therefore, we’re trying to reduce cost or we may have to postpone.”

– By Gan Pei Ling
– Edited By Abhrajit Gangopadhyay

Malaysia Axiata Upbeat On 2019 Operations After Swinging To 4Q Loss

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© Nikkei Markets

KUALA LUMPUR (Feb 22) — Malaysia’s biggest wireless carrier Axiata Group Friday forecast strong operating earnings this year as it exited some of the non-core businesses in India and Singapore, and wrote off legacy technology assets.

Over the past several months, Axiata has been selling non-core assets as it sharpened focus on key operating markets such as Indonesia and Malaysia, and digital business. Last year, it exited the bleeding Indian venture Idea Cellular after the Aditya Birla Group-backed company merged its operations with the local unit of Britain’s Vodafone amid cut-rate competition.

Last week, Axiata sold its 29% stake in Singapore’s M1 to conglomerate Keppel Corp and Singapore Press Holdings for 1.65 billion ringgit ($404.6 million) amid stiff competition and high capital expenditure requirements. The company also booked a gain of 126.5 million ringgit from the sale.

Axiata, which has operations across multiple countries in Asia, said its immediate emphasis is to “shifting gears” towards profitable growth and cash generation.  

Across geographies, the operating companies are focusing on higher profit as against revenue growth, the company said. Axiata expects operating earnings this year to expand 5%-to-8%. That’s sharply higher than 2% increase it eked out in 2018. It expects revenue to grow between 3% and 4% in 2019, after posting a 2.1% decline to 23.89 billion ringgit last year. 

The company also plans to spend 6.8 billion ringgit in capital expenditure this year. Of this, about 2 billion ringgit will be spent to expand operations in Indonesia and close to 1 billion ringgit in Malaysia, its Chief Financial Officer Vivek Sood told reporters at a news conference.  

The strong outlook came after Axiata posted a fourth quarter net loss on a one-off asset write-off. Net loss for the fourth quarter ended Dec. 31 totaled 1.66 billion ringgit, compared with a net profit 24.73 million ringgit a year ago. Revenue marginally grew to 6.27 billion ringgit. 

Axiata said it has written off some legacy technology worth 1.82 billion ringgit, primarily in its Indonesian unit XL and Malaysian arm Celcom as part of network modernization exercise.

The company also proposed a higher full-year total dividend of 9.50 sen per ordinary share, taking the total dividend pay-out ratio to 85% in 2018.

“Barring unexpected and external factors, we are confident we will have a promising 2019,” said Chief Executive Jamaludin Ibrahim.

To be sure, Axiata is facing challenges in some of its key markets such as Nepal, where earlier this month, the top court ordered the company and its unit NCell to pay capital gains tax amounting to 2.16 billion ringgit. The tax claim stems from Axiata’s 2015 purchase of the operator from TeliaSonera Norway.

The company acknowledged the concerns surrounding a possible tax liability. “In the absence of official notification, our parties to the litigation continue to await the full judgment to gain more clarity and we will provide an update upon receiving the order,” it said.

The company also warned that it remains “cautious of the challenging industry and macro landscape,” with heightened regulatory and competitive environment expected in some of the geographies. 

– By Gho Chee Yuan and Gan Pei Ling
– Edited by Dhanya Ann Thoppil

Malaysia Duopharma Hopes To Get MYR10 Mln GST Refund This Year-Managing Director

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© Nikkei Markets

KUALA LUMPUR (Feb 20) — Malaysian pharmaceutical company Duopharma Biotech, formerly called CCM Duopharma Biotech, hopes to get 10 million ringgit ($2.45 million) in goods and services tax refund this year, the group managing director said Wednesday.

“There are still questions to be resolved with the Finance Ministry,” Leonard Ariff Abdul Shatar told reporters in Selangor after a shareholders’ meeting. “Hopefully it will occur within 2019.”

Meanwhile, the company is banking on a stronger ringgit to boost earnings this year, Leonard said.

“A stronger ringgit is better for our industry. Apart from salaries and packaging, our raw materials are imported. It’s all denominated in USD. We have a good start of the year with the ringgit appreciating,” he added.

Earlier Wednesday, the company’s shareholders approved Duopharma Biotech’s name change following a demerger from its parent company Chemical Company of Malaysia Bhd (CCM Bhd).

Leonard said the company expects to launch a new drug in April after it secured the government’s approval on Feb 7. 

The company typically allocates about 3% of its annual revenue towards research and development, he added. 

– By Gan Pei Ling
– Edited By Abhrajit Gangopadhyay