By Lawrence Yong
Listed below are highlights from a special report from Maybank IB Research, the equity research team from Malaysia’s leading bank, from the two-day InvestMalaysia conference which ended last Friday:
Now in its 9th year, Invest Malaysia is organised annually by Bursa Malaysia.
Maybank IB said that the core takeaway was Prime Minister Najib Abdul Razak’s “reaffirmation of the economic, government and political transformations required to build a sustainable economy, based on Malaysia’s policy stability, economic resilience and corporate strength.”
Maybank IB was especially impressed by Khazanah Nasional’s performance as given by the fund’s managing director Azman Mokhtar. Khazanah Nasional is a strategic investment vehicle parked under the Ministry of Finance, and has stakes in more than 50 companies.
It said that Khazanah’s move to “establish itself as a sovereign development fund rather than a sovereign wealth fund” by taking on the role of an active shareholder in government linked-corporations (GLCs) were among the many factors behind the fund’s success.
Khazanah reported that its net worth of adjusted portfolio value has grown to about RM96 billion now, a compounded annual growth rate (CAGR) of 13% from mid-2004 to May 2013. Legacy investments, which made up about 40% of Khazanah’s portfolio, have grown an average 6% a year. New discretionary investments, which made up about 60% of its portfolio, have grown 21% a year.
Some 18 listed Malaysian companies made propositions to investors by highlighting their key financial strategies. Maybank IB said that from these presentations, it has reiterated its calls to ‘buy’ the stocks of Astro, Mah Sing, Malaysia Airports Holdings (MAHB), Perisai Petroleum, SP Setia, Sunway, Top Glove and WCT.
“Interesting takeaways include AirAsia’s reiteration that Malindo Air is not a threat, MAHB’s statement that the KLIA2 capex will not exceed RM4 billion, and Felda Global’s current evaluation of more than 20 proposals in various countries, implying that an M&A is imminent,” Maybank IB research team noted.
AirAsia’s Andrew Littledale (chief financial officer) said:
Malindo Airways is neither a competitor nor a threat to AirAsia. When probed further during the Q&A session, the CFO stated that AirAsia’s 2Q13 results will show a minimal negative impact on yields.
Astro’s Rohana Rozhan (CEO) said :
Malaysia’s TV viewership currently comprises 6.7 million households. This is expected to expand to 7.7 million in the next five years. Astro is the only broadcaster with infrastructure comprehensive enough to hit all households, thanks to its satellite and fiber optic base tie ups with Time and Maxis.
Astro was also prepared for new competition, from ABN and Netflix.
Felda Global Ventures (FGV) Holdings’ Mohd Emir Mavani Abdullah (CEO Designate) said:
Armed with RM6.2 billion cash (as of March 2013), FGV is currently evaluating over 20 proposals in various countries comprising both greenfield and brownfield assets, and hinted at an imminent acquisition.
Maybank estimated that FGV is able to borrow another RM7.5 billion for mergers and acquisitions (M&A), this brings FGV’s potential M&A war chest to over RM13 billion.
Malaysia Airports Holding (MAHB)’s Vinnie Chong, head of investor relations said:
Management is unable to provide the definite start date for KLIA2; it states that it is waiting for the main contractor to provide the date. But management has hinted that the opening date will be in 2014.
Maybank said that they assume that KLIA2 may commence operations in April 2014 in their earnings forecasts. The KLIA2 capital expenditure, which has more than doubled, would not exceed RM4 billion.
IOI Group’s Lee Yeow Chor (group executive director) said:
Over the next three years, IOI Corp expects to launch property projects with a combined gross development value (GDV) of around RM16 billion, about 60% of which is in Malaysia, 25% in Singapore, and 15% in China.
If the high speed rail connecting KL and Singapore materialises, IOI Corp may stand to benefit owing to its over 1,000 acres of property land bank in Ayer Keroh, Malacca, where a stop has been proposed.
Perisai Petroleum Teknologi’s Zainol Izzet Ishak (managing director) said:
Perisai expects its floating production storage offloading (FPSO) unit Arunothai to hit first gas by July 22 and contribute to earnings from 3Q13. Contrary to earlier expectations, Perisai will equity account the profits from its 51%-owned FPSO operation instead of consolidating the earnings. The FPSO entity will be treated as a jointly controlled entity (JCE) with equal shareholders’ terms. While this would result in lower reported revenue, the company’s net profit is unchanged.
Perisai is confident of securing a charter extension from TLO for its pipelay barge, known as Enterprise 3 (E3), which will expire in June 2013. The company expects to secure a drilling rig contract for its Pacific 101 jack-up rig by end-2013, prior to its delivery in June 2014. Its second rig is expected to be ready by June 2015.
Mah Sing’s Steven Ng (executive director) said:
Management remains bullish on the Klang Valley, which will be boosted by a better transit system – MRT/LRT lines and the KL-Singapore high-speed rail. Also, the population is expected to grow to 10 million by 2020 (+43%).
SP Setia’s Teow Leong Seng (executive director & CFO) said:
Management is confident of achieving its record FY13 sales target of RM5.5 billion with the successful launch of its Battersea Power Station project in London (Circle West) which is posted about RM3.4 billion sales or 95% sold. Construction work will start in July 2013 and the project’s first phase is due to be completed in 2017.
Maybank said that SP Setia also confirmed that co-founder and CEO Liew Kee Sin could leave before his contract expires in 1Q15. Retaining staff could be the biggest challenge for the new management.
Sunway Group’s Jeffrey Cheah (executive chairman) said:
Focus was on the group’s upcoming Sunway Iskandar Malaysia development. The project with about RM30 billion GDV, comprises 70% residential and 30% commercial mix and is expected to be launched by end-2013/early 2014. Management is seeking to attract buyers comprising 50% locals and 50% foreigners for this development.
Phase 1 of Sunway Iskandar Malaysia will comprise office suites, a retail podium and serviced apartments. GDV is estimated at RM350 million while selling prices will start from RM700 per square foot (psf).
Top Glove Corp’s Lim Wee Chai (chairman) said:
Top Glove has budgeted a capex of RM3.8 billion over the next 15 years. Investments will be on: 40 new factories with new technology (RM3.1 billion), new IT, computerisation and e-learning facilities (RM100 million), a corporate building (RM150 million), and plantations (RM450 million).
Management is seeing increasing glove demand from MNCs in North America, which now accounts for 29% of total sales versus a year ago. It is also seeing much demand coming from China and India. It expects sales growth of about 15% per year over the next five years.
WCT’s Chong Kian Fah (head of Corporate & Finance) said:
Sales have started to pick up again after the 13th general election. Management has maintained its RM775 million sales target for 2013 (2012: RM666 million).
The delayed opening of the Gateway Mall is due to the delays in construction at KLIA2. The concessionaire (WCT has a 70% stake) may consider giving rebates to the signed-on tenants (72% of the space has been let out). WCT expects the Gateway Mall to open in 4Q13. Tenant fit-out works have begun.
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