Petronas among firms eyeing stake in India’s Bina oil refinery

MUMBAI: Malaysia’s Petroliam Nasional Bhd (Petronas) and a consortium led by Japan’s JXTG Holdings Inc are among the companies interested in buying a stake in India’s Bina oil refinery, a source close to the matter said.

The Bina plant in central India, capable of processing 156,000 barrels per day (bpd) of crude oil, is operated by Bharat Oman Refineries Ltd (BORL), a 50-50 joint venture between Oman Oil Co and state-run Bharat Petroleum Corp Ltd (BPCL).

“There are a new set of companies who have approached BPCL for a stake in its Bina refinery,” said the source, who asked not to be identified as the discussions are private.

BPCL plans to double the capacity of the refinery in next five years and build a petrochemical complex that would require an investment of about 500 billion rupees (RM30 billion), the source said.

Bharat Petroleum did not respond to a request for comment. Petronas and JXTG were not immediately reachable for comment.

After initially investing in the 120,000 bpd plant Oman Oil did not take part in the first round of expansion. India allowed BPCL in 2016 to issue debt instruments of up to 30 billion rupees to be converted into equity of BORL to fund the initial expansion to 156,000 bpd.

Oman Oil is now considering whether to invest in a second round, the source added.

Even if Oman takes part in this expansion its overall stake would not translate to a 50% share as it had not funded the previous expansion, the source said.

BPCL wants to retain a 50% share in the plant, leaving room for a new partner, the source added.

The Middle Eastern company will finalise what stake it wants to hold in the expanded capacity in about three months and the rest will be sold off, the source added.

Global oil producers are vying to gain entry into India to profit from strong gasoline and petrochemical demand due to the rising disposable income of its 1.3 billion population.

A consortium led by Russia’s Rosneft acquired a controlling stake in Nayara Energy , formerly known as Essar Oil, for nearly US$13 billion in 2017, while Saudi Aramco is also in talks to acquire a minority stake in Reliance Industries’ refining, marketing and petrochemical business.

India, the world’s third-biggest oil importer, plans to raise its refining capacity by 77% to about 8.8 million bpd by 2030 to meet rising fuel demand, Prime Minister Narendra Modi’s government had said earlier.

BPCL had earlier held discussions with Kuwait Petroleum International and US oil giant Exxon Mobil Corp.

source https://www.thesundaily.my/business/petronas-among-firms-eyeing-stake-in-india-s-bina-oil-refinery-AY1177200

Khazanah’s M+S sells office, retail assets to Allianz Real Estate, Gaw Capital for S$1.575 billion

KUALA LUMPUR: M+S Pte Ltd, in which Khazanah Nasional Bhd has a 60% stake, is disposing of its entire stake in Ophir-Rochor Commercial Pte Ltd (ORC) to Allianz Real Estate and real estate private equity firm Gaw Capital Partners for S$1.575 billion (RM4.725 billion).

The selling price equates to S$2,570 (RM7,725) per square foot of net lettable area.

“With the office and retail assets performing well beyond expectations, we are delighted that the proposed transaction of S$1.575 billion at a record price for this area has presented the opportunity to maximise returns for our shareholders,” M+S’ CEO Kemmy Tan said in a statement.

ORC, a wholly owned subsidiary of M+S, is the developer and owner of Duo Tower and Duo Galleria, the office and retail portion of Duo, a mixed-use development, which also includes Duo Residences and the Andaz Singapore hotel, in central Singapore.

She said M+S, which would continue to own the hotel Andaz Singapore, looked forward to working alongside the powerful combination of Allianz Real Estate and Gaw Capital Partners, who have impressive global track records in real estate management and development, to further reinforce Duo as an attractive place for global business and travellers.

“Duo provides an unparalleled live-work-play environment and is poised to establish itself as one of Singapore’s major business hubs. It will be an excellent addition to our global 24x7 cities office portfolio,” said Allianz Real Estate’s Asia-Pacific CEO Rushabh Desai.

“This exciting transaction with Allianz Real Estate marks a great step forward in our flourishing partnership with the group. Duo has enormous potential, given its fantastic location and connectivity, and this marks an important milestone for Gaw Capital in the Singapore real estate market,” he said.

The Duo development is situated in the Ophir-Rochor corridor in Singapore, right next to the heritage district Kampong Glam, and was designed by acclaimed architect Ole Scheeren.

Duo Tower consists of 20 floors of prime Grade-A office space occupied by prestigious MNCs and leading local companies, while Duo Galleria is a retail mall that connects directly to the Bugis MRT station, an interchange for the Downtown and East West lines.

Over the course of the last three years of operations, M+S has steadily grown and sustained a vibrant community of tenants, retailers, homeowners, shoppers and hotel guests at Duo.

The development has become an icon in Bugis and has been instrumental in injecting greater vibrancy and cultural diversity to the area by ushering in multinational office tenants, fresh retail concepts and the internationally renowned Andaz Singapore hotel which has a global client-base.

“M+S has done a fantastic job developing the Duo office and hotel complex and has successfully leased the building to a full roster of world class tenants.

“As M+S will continue to hold the hotel portion of the complex, we look forward to working together to enhance the asset and ride on the continued growth of the Bugis area as a new leisure and business district.” said Kenneth Gaw, president and managing principal at Gaw Capital Partners.

According to the statement, Allianz Real Estate acts on behalf of several Allianz Group companies, while real estate private equity firm Gaw Capital Partners acts on behalf of a sovereign wealth fund separate account.

source https://www.thesundaily.my/business/khazanah-s-m-s-sells-office-retail-assets-to-allianz-real-estate-gaw-capital-for-s-1-575-billion-IY1177129

Shareholders of Leweko advised to accept takeover offer

PETALING JAYA: Leweko Resources Bhd shareholders have been advised to accept the unconditional mandatory takeover offer of 18 sen per offer share and one sen per offer warrant by Rengit Capital Sdn Bhd.

In its independent advice circular, independent adviser UOB Kay Hian Securities (M) Sdn Bhd (UOB Kay Hian) said that the offer is “not fair” but “reasonable” and recommends that shareholders accept the offer.

UOB Kay Hian said the offer is “not fair” as the daily market prices of Leweko shares are higher than the share offer price for 72.93% of the total market days over the past two years up to the LFTD.

As at the LPD, the share offer price represents a discount of 16.28% to the last transacted price of 21.5 sen per Leweko share and a discount of 13.38% to 17.92% over the five-day and one month VWAP of Leweko shares.

“Although the share offer price represents a premium over the historical VWAPs up to LFTD, we view that the market prices of Leweko shares since the LFTD would serve as a more meaningful reference for our evaluation on the fairness of the offer as these market prices would reflect the most recent market perception of the group, given the entry of a new shareholder and the offeror’s intention to maintain the listing status of Leweko,” it said.

The 18 sen per share offer price is also lower than the estimated fair value per Leweko share ranging from 23.5 sen to 24.4 sen, representing a discount of between 23.4% and 26.23%.

Assuming full exercise of the warrants into new Leweko shares, the share offer price is still lower than the diluted estimated fair value for the entire equity interest in Leweko shares ranging from 22.6 sen to 23.3 sen, representing a discount from 20.35% to 22.75%.

In addition, the warrant offer price of one sen per offer warrant is significantly lower than the closing prices of Leweko warrants since its listing on the Main Market of Bursa Malaysia in September 2015 up to the LFTD.

According to UOB Kay Hian, the warrant offer price represents a discount of 85.01% to 89.47% over the five-day, one-month, three-month, six-month and one year VWAP of the Leweko warrants up to the LFTD.

As at the LPD, the warrant offer price represents a discount of 84.62% to the last transacted price of 6.5 sen per Leweko warrant on July 22, 2019.

However, the offer is considered “reasonable” as it provides an exit opportunity to shareholders, especially those holding large blocks of offer securities, to realise their investment.

UOB Kay Hian said Leweko shares and warrants are relatively illiquid with an average monthly trading volume-to-free-float of the Leweko shares and warrants up to the LFTD of 0.94% and 2.5% respectively, which are lower than the average monthly trading liquidity of KLPRO index of 8.59%.

Hence, although Rengit Capital intends to maintain the listing status of the company, shareholders may have limited opportunities or may take longer to dispose their offer securities in the open market after the closing date.

Last month, Rengit Capital acquired a 50.47% stake and 93.58% warrants holding in Leweko for RM30.18 million, triggering an unconditional mandatory takeover offer for the rest of the shares and warrants in the company.

source https://www.thesundaily.my/business/shareholders-of-leweko-advised-to-accept-takeover-offer-AX1176741

‘Innovative financing schemes will push up house prices’

PETALING JAYA: The rise of innovative financing schemes for the property market will lead to higher house prices and home buyers strapping themselves with mortgages that they cannot afford, said Hong Leong Investment Bank (HLIB) Research.

HLIB Research analyst Andrew Lim, who attended the HiHOME Property Conference 2019 held last Thursday, said that house prices in Malaysia appear to be categorised as unaffordable and have been worsening over the past years as the growth of median house prices surpassed the growth of annual median income.

“With regards to the recent increase in innovative financing schemes to support the sluggish market, we believe it does not solve the fundamental issue as this will not only further push house prices up, but also encourage home buyers to undertake mortgages beyond their affordable means,” he said in a report on Monday.

According to Lim, one of the speakers at the conference highlighted the positives of renting compared with owning a home.

When compared to developed countries, Malaysia has a lower household home rental proportion of 33% compared with 49% in Germany, 42% in the US and 38% in the UK 38%.

The low proportion in Malaysia could be attributed to the stigma of renting a home which is still apparent in Malaysia, despite the numerous benefits of renting, such as lower monthly commitment and better flexibility.

“An example given was using a house priced at RM900,000 in SS2, Petaling Jaya, whereby renting the house will cost about RM2,000 per month vis-a-vis monthly instalments amounting to about RM3,700 per month.

“Note that this has not taken into account the huge down payment required when purchasing a house, maintenance cost, renovation cost and others. By renting a home, households will also have the mobility to reside in different locations over the years and additional time to research on potential neighbourhoods before committing to a mortgage,” said Lim.

HLIB Research maintained its forecasts and “neutral” stance on the property sector, despite having five “buy” calls out of the eight companies under its coverage, due to the absence of near-term catalysts to warrant a re-rating in its sector call.

However, it does not rule out a possible mild recovery of interest towards the sector given the trough valuations.

Its top pick for the sector is Sunway Bhd, an underappreciated property-construction conglomerate with mature investment properties, growing trading and quarry division and potential listing of healthcare business. It has a “buy” call and RM2.18 target price on the stock.

Meanwhile, its small-cap pick is MB World Group Bhd, with a “buy” call and RM2.75 target price. It said that the company has first-mover advantage to capture the spillover effect from the growth in the RAPID project in Pengerang and Desaru Coast.

source https://www.thesundaily.my/business/innovative-financing-schemes-will-push-up-house-prices-EX1176723

Streamyx price cuts seen as negative for TM

PETALING JAYA: The price cuts announced by Telekom Malaysia Bhd (TM) for its Streamyx plan is a negative for the company, due to the impact on earnings and costs, said analysts.

Over the weekend, TM said it would reduce the price of its 8Mbps Streamyx plan from RM160 a month to RM69 for existing customers, while new customers would get the plan for RM89.

The company is also exploring various solutions such as fibre and wireless connectivity to upgrade the speed of Streamyx customers who are still on its copper network. TM said the migration will be done gradually until 2021, with 70% of its Streamyx customers expected to enjoy Unifi services by end-2020.

“Currently, TM has 872,000 Streamyx subscribers with issues arising when its Unifi customers are able to enjoy lower prices at faster speed compared to Streamyx that is, 30Mbps at only RM79,” said PublicInvest Research.

“While some Streamyx customers have been upgraded to Unifi where there is fibre connection, others could only be upgraded to 4-8Mbps as the infrastructure is still running on the obsolete copper network,” it said in its report.

It said that wireless broadband would be a quick solution for TM, but the take-up rate could be low, as it involves significant upfront cost to customers due to the need to purchase a router that costs RM565 per unit. Alternatively, customers would have to commit to a lock-up period and pay higher monthly fees.

“As we have earlier factored in lower Streamyx prices in our earnings model, our FY19-21 forecasts remain unchanged. Although TM has performed well delivering lower costs in 1Q FY19, we do not expect this to be sustainable,” it added.

It said that TM could incur additional cost over time in order to upgrade and replace its copper network by 2021, although it is also seeking funding support from the government in providing high speed broadband to underserved areas.

“For areas where TM is unable to migrate customers to high speed network, we see risk of competitors (namely, Tenaga Nasional Bhd) taking away market share,” it said.

It maintained its target price of RM3.60 on TM but downgraded the stock to “underperform” due to a downside potential of 14%.

Meanwhile, CLSA Research has cut its 19-21CL earnings by 5-11% and lowered its target price to RM4.90 from RM5.20 previously, while retaining its “buy” rating on TM due to its cost cutting efforts, potential re-inclusion in the FBM KLCI and on upside to its dividend policy.

“We expect the impact of reduced prices to be heavier during the initial years, but diminish as more subscribers upgrade to higher-priced Unifi services (entry level plan at RM79 per month) when available. It targets to phase out the copper network by 2025,” said CLSA Research.

In its report, it noted that TM will seek government support for implementation, utilising existing funding to deliver improved broadband services to underserved areas.

“We believe the USP fund could come into play, where telcos are required to contribute 6% of their weighted net revenue. Based on the 2017 USP annual report, the total contribution to the fund amounted to RM1 billion; it had a total of RM8 billion in short-term deposits,” it said.

CLSA Research does not expect the cut in Streamyx prices to derail TM’s share price performance and the stock remains its top pick.

“The focus should be on longer-term catalysts from cost improvement and a potential FBM KLCI re-inclusion. Upside to dividends is a positive wildcard to push a re-rating further,” it said.

source https://www.thesundaily.my/business/streamyx-price-cuts-seen-as-negative-for-tm-AX1176705

Bursa records largest weekly foreign net outflow in six weeks

PETALING JAYA: Foreign funds sold RM53.4 million net of local equities on Bursa Malaysia last week, marking the largest weekly foreign net outflow in six weeks.

According to MIDF Research, the bourse had a rough start to the week as foreign funds sold RM45.8 million net on Monday, coinciding with the 0.2% drop in the local bourse despite positive developments from the international trade front.

In its fund flow report, MIDF Research noted that US President Donald Trump had, on Monday, met with chief executives of tech companies and agreed on making timely decisions on Huawei Technologies.

International investors made a return on Tuesday, acquiring RM50 million net of local equities but moved to the sidelines on Wednesday, selling RM5.6 million net ahead of the European Central Bank’s (ECB) meeting which would likely signal further easing.

“Thursday then saw the highest level of foreign net buying for the week at RM58.3 million, lifting the local bourse by 0.3% to close at 1,657 points. The foreign net inflow was in conformity with other regional peers namely South Korea, Taiwan, Thailand and the Philippines after US equities climbed to record highs overnight,” said MIDF Research.

The research house said Friday turned out to be hectic, as foreign net selling surged above RM100 million to RM110.3 million, a level not seen in 10 trading days.

“Much of the scepticism on Friday was stoked by the dovish signal hinted by the ECB as it is preparing to cut short-term interest rates and possibly restart its giant bond-buying programme to buffer the eurozone economy,” it added.

With two more trading days left, July is set to be a month of foreign net inflow as international investors have so far bought RM254.8 million net of local equities.

On a year-to-date basis, the foreign net outflow from Malaysia stands at RM4.41 billion. In contrast, the other six Asian markets monitored by MIDF Research (Korea, Thailand, Indonesia, India, Taiwan and the Philippines) have seen a foreign net inflow so far for the year with India having the largest.

source https://www.thesundaily.my/business/bursa-records-largest-weekly-foreign-net-outflow-in-six-weeks-YX1176670

MIER unveils economic progress, cost of living indices

KUALA LUMPUR: The Malaysian Institute of Economic Research (MIER) launched its Genuine Prosperity Index (GPI) and the Cost of Living Indicator (CLI) on Monday, which is expected to be published in the fourth quarter of the year.

MIER said the GPI, which is more popularly known as the Genuine Progress Indicator, is meant to measure economic welfare of a country by economic progress, social wellbeing and environmental impact.

“The gross domestic product (GDP) is a very useful measure of economic size and growth but it was not designed to measure true progress, wellbeing or prosperity,” it said.

MIER said that the GDP does not separate costs from benefits and distinguish between welfare enhancing activities and harmful activities.

“In addition, it also emphasises national income average and ignores income distribution as well as pollution and depletion of natural resources,” it added.

The institute noted that the GPI was developed due to the need for a national measure on whether Malaysia is moving on the path of sustainability and prosperity beyond that which is conveyed by the GDP.

Based on historical data, MIER calculated that on a per capita basis, Malaysia’s GPI in 1990 is estimated at RM4,421, which increased to RM14,222 in 2016, representing an annual growth rate of 4.29%.

On the other hand, GDP figures for 2016 was RM35,000 with an annual growth rate of 2.98% over the same period.

“Sustainable welfare in Malaysia has grown even faster than per capita GDP. Nevertheless, if GDP was used as a proxy for welfare it has actually overestimated genuine welfare by as much as 146%,” it said.

Separately, MIER announced that it has undertaken a feasibility study and business, investment and financial planning for a national electric car company on behalf of a private investor.

“Our findings and business will be presented to the Prime Minister and it will be up to him to decide if this would be named as the third national car company,” said MIER chairman Tan Sri Kamal Salih.

He said that the group plans to proceed as a local electric car manufacturer even if it is not chosen as the third national car company and that the investor has earmarked RM5 billion for the venture.

Kamal said the electric car project is one of the seven high technology sector projects that would transform the Malaysian economy, as identified by MIER.

The other projects are solid state hydrogen, 5G national roll out, biojet fuel from palm oil, agrodome technology, hyperloop freight transport and gold equity plan.

On Monday, MIER signed a memorandum of understanding (MoU) with its strategic partner Elenvi Otomotif Sdn Bhd for a proposed development of a 400-acre manufacturing facility in Enstek Industrial Park, Negri Sembilan.

The institute also signed a number of MoUs relating to the seven high technology sectors it has identified.

source https://www.thesundaily.my/business/mier-unveils-economic-progress-cost-of-living-indices-YX1176652