Reports » Malaysia

Malaysia stock market and companies daily report (September 10, 2012)

Contributed by Shares Investment

Malaysia Likely To Meet Current Deficit Target
The Malaysian government is expected to achieve its deficit target of 4.7 percent of gross domestic product (GDP) which is believed to be upheld throughout 2013 despite the challenging economic environment. The government would also likely introduce a series of reforms in 2013 after the 13th general elections, according to Alliance Research’s response to Standard & Poor’s (S&P), warning of downgrades for Malaysia. The reforms would include the subsidy rationalisation plan, which would streamline the prices of petroleum products in line with global crude oil prices. Also, goods and service tax (GST) may come in, effectively by end of 2014, although the government has been stressing delays of implementation. Latest data indicated the ratio of federal government debt to GDP reached 51.8 percent at end-2011 and estimated to hover around 53 percent for the current year. However, actual data could come in lower than expected, given the improved revenue amid stronger-than-expected GDP and better revenue collection as well as improved subsidy levels following easing commodity prices.
Significance: S&P had recently warned a potential sovereign credit rating cut for Malaysia, if the government did not undertake reforms to cut spending to reduce its fiscal deficits. Last month, Fitch Ratings’ report noted that Malaysia had yet to present a convincing plan to tackle the twin fiscal threats of its federal budget deficit and federal debt.

Petronas Warns of Dismal Earnings
Petroliam Nasional (Petronas ) struggled to match last year’s earnings after second-quarter profit fell 34 percent to RM12.8 billion ringgit in the quarter ended 30 June 30 from RM19.4 billion a year earlier. Revenue dropped 3 percent to RM70.7 billion, also hurt by a production shutdown in South Sudan. Lower profits will dampens Petronas’ efforts to simultaneously maintain its annual dividend to the government, while investing more on exploration and acquisitions to reverse an output slump. The company has paid RM30billion to the government in each of the past three financial years. It will gradually switch to a dividend pay-out ratio of 30 percent of profit to reflect broader oil industry practices, and further plans to spend a record RM300 billion over five years to replenish the country’s maturing reserves. Meanwhile, the company expects zero production from operations in Sudan due to the dispute between North Sudan and South Sudan weighing in on its operations.
Significance: Petronas president and chief executive officer warned of the challenging year ahead for the oil and gas giant as it has to grapple with lower oil prices, RM28 billion-a-year of subsidies, and capital expenditure as well as royalty payments to the government.

Brahim’s Earnings To Soar With Sugar Ops In 2015
Brahim Holdings’ earnings pipeline would be less reliant on airline catering and food and a beverage (F&B) business by 2015, once its sugar business kicks off. The company expects greater earnings to surge by 2014 onwards as it starts to sell refined sugar, commercially marketed under the Borneo Sugar brand. Brahim’s net profit for the FY2011 grew 42.4 percent to RM9.37 million on higher revenues of RM184.46 million. Some 75 per cent of the earnings were driven by in-flight catering services at the Kuala Lumpur International Airport while the rest was from its F&B operation. Brahim’s is aiming to dominate the sugar market in Sabah and Sarawak via its 60 per cent unit, Admuda Sdn Bhd. which has a licence from the Ministry of International Trade and Industry (Miti) to manufacture refined sugar and molasses for the two states. The company targets to complete building the refinery by December 2013 so operations can begin by 2014.
Significance: Malaysia’s sugar market is currently controlled by Felda Global Ventures Holdings’ unit MSM Malaysia Holdings and Central Refinery, which makes the licence awarded to Admuda the third by Miti in 37 years. Braham’s initial target is to control 30 percent of the sugar market in Sabah and Sarawak.