Maybank sees tough year ahead with NIM compression

KUALA LUMPUR: Malayan Banking Bhd (Maybank) is expecting a challenging FY20 ending Dec 31, due to external and internal political disruptions, the US-China trade war and uncertainty over the length of the Covid-19 outbreak.

Speaking to the media at the group’s financial briefing today, group president and CEO Datuk Abdul Farid Alias said Maybank is expecting a potential compression on its net interest margin (NIM) of up to five basis points this year.

“We also see a cost-to-income ratio between 46-47%, a net credit charge of 45-50 basis points including the initial impact from the Covid-19 outbreak and an return on equity between 10-11% on slower economic growth and a lower interest rate environment,“ he said.

For FY19, Maybank saw a marginal reduction in its NIM by six basis points to 2.27% from 2.33% in FY18.

Elaborating further on the impact seen from the Covid-19 pandemic, Abdul Farid said the overall exposure of the group’s loan portfolio to sectors vulnerable to the effects of Covid-19 is less than 10%.

“That said, the impact is real. There will be some impact to our earnings but that is hard to quantify. I’m hoping for a V-shaped recovery and for the situation to be contained soon,“ he said, noting that it is too early to say how much in terms of loan reliefs has been disbursed to affected customers.

Meanwhile, on the expected rate cut in the Overnight Policy Rate (OPR), Abdul Farid said it would have an effect on the group’s NIM.

“We have many other tools to mitigate the impact so as the year goes we’ll see how certain variables play out,“ he said.

source https://www.thesundaily.my/business/maybank-sees-tough-year-ahead-with-nim-compression-CA2057217

Thai tycoons in fray as Tesco sets bid deadline for $9 bln Asia business-sources

SINGAPORE: British retailer Tesco has asked bidders to submit binding offers for its Asian business by Friday, in a deal that will see Thai billionaires fight for an asset valued at up to $9 billion, sources with direct knowledge of the matter said.

The bidding is shaping up as a battle between Dhanin Chearavanont's Charoen Pokphand (CP) Group, Central Group, controlled by the Chirathivat family, and beer-and-property magnate Charoen Sirivadhanabhakdi's TCC Group, they said.

Tesco's Asian operations comprise some 2,000 supermarket outlets and convenience stores in Thailand, where it is one of the biggest retail players, and 74 stores in Malaysia.

"This is a very competitive process pursued by serious bidders. Looking at the deal size and financing perspective, most large banks are involved," said one banking source who did not want be identified as the information is confidential.

Antitrust concerns could pose a challenge to some bidders as Thailand's antitrust office said last month that the deal should not violate anti-monopoly laws.

Tesco will review the bids and is set take a decision next month, the sources said.

The three Thai groups did not immediately respond to a Reuters query. There was also no response from Tesco, outside office hours.

Britain's biggest retailer said in December it started a review of its Asian operations, made up mainly of the Thai and Malaysian operations, after receiving interest.

In the six months to Aug. 24, Tesco's Thai and Malaysian businesses together generated sales of 2.56 billion pounds ($3.3 billion) and operating profit of 171 million pounds.

The sources said that though the tycoons are taking a long-term view of Tesco's Thai business, their bids are likely to factor in the impact of the coronavirus outbreak, which has curbed near-term growth estimates for the country.

Regionally, Thailand is considered one of the most vulnerable economies to the virus outbreak due to its heavy reliance on Chinese tourists and China trade.

Still, Tesco's business offers bidders a chance to scale up their portfolio significantly. "How often do you get these assets in Thailand? And financing is so cheap," said another source.

For Central Group, Tesco's stores would bulk up its supermarkets and convenience business, while offering CP Group a chance to buy back the supermarket chain it sold to Tesco during the Asian 1997/98 financial crisis.

CP owns cash-and-carry Siam Makro, which operates some 130 stores and over 10,000 7-Eleven convenience stores under CP ALL.

Sirivadhanabhakdi's TCC Group, through Berli Jucker , already owns the country's second-largest hypermarket operator Big C Supercenter.

Tesco completed this week its exit from China with the 275 million pound sale of its joint venture stake to state-run partner China Resources Holdings. - Reuters

source https://www.thesundaily.my/business/thai-tycoons-in-fray-as-tesco-sets-bid-deadline-for-9-bln-asia-business-sources-EB2056798

RHB Bank declares record dividend payout of 50.1% as FY19 net profit up 7.7%

PETALING JAYA: RHB Bank Bhd posted a net profit of RM621.01 million in the fourth quarter ended Dec 31, 2019, 9.8% higher compared with RM565.43 million in the same quarter a year ago, mainly due to higher net fund based and non-fund based income as well as the absence of one-off impairment on other non-financial assets.

The bank’s revenue grew 3.37% to RM3.42 billion from RM3.31 billion previously.

It has proposed a final dividend of 18.5 sen per share, bringing the total dividend to 31 sen per share for the year with the highest ever payout ratio 50.1%.

For the full-year period, RHB posted a net profit of RM2.48 billion, up 7.7% from RM2.31 billion in the previous year, thanks to higher net income, lower expected credit losses (ECL) for loans and higher writeback of impairment losses for financial assets.

Revenue was up 6.6% to RM13.53 billion from RM12.69 billion.

RHB said gross fund based income increased 5.2% on the back of a 4.3% increase in gross loans and financing, whilst funding and interest expense rose 9.2% due to the impact from the OPR hike in January 2018 and higher deposit base. As a result, net fund based income grew marginally by 0.4% to RM4.96 billion. Net interest margin for the financial year was 2.12%.

Non-fund based income rose 14.7% to RM2.14 billion, contributed largely by higher net trading and investment income, higher insurance underwriting surplus and higher capital market related fee income.

Allowances for credit losses was RM278.5 million, 9.0% lower than the previous year, primarily due to lower ECL on loans and higher ECL writeback on other financial assets. Full year credit cost improved to 0.18% from 0.19% a year ago.

Its common equity tier-1 and total capital ratio after the FY2019 final dividend stood at 16.27% and 18.59% respectively.

RHB’s gross loans and financing expanded 4.3% to RM176.2 billion supported by growth in all businesses, notably in mortgages and SME segment.

Gross impaired loans ratio improved to 1.97% from 2.06% a year ago with gross impaired loans at RM3.48 billion as at Dec 31, 2019. Loan loss coverage stood at 107.9%.

The group expects loans and financing growth for the local market to moderate slightly to 3.6%, supported by a resilient household sector.

“We expect 2020 business outlook to remain challenging. With the recent OPR cut and potentially further cuts, our net interest income would be adversely impacted. We are strengthening our efforts to mitigate any possible adverse effects to our asset quality,“ RHB group managing director Datuk Khairussaleh Ramli said in a statement.

source https://www.thesundaily.my/business/rhb-bank-declares-record-dividend-payout-of-501-as-fy19-net-profit-up-77-YB2056735

China’s surging small-cap stocks stir bubble fears as Beijing ramps up support

SHANGHAI/HONG KONG: A surge in small-cap Chinese stocks, fueled by government stimulus measures to support the virus-hit economy, is triggering fears of a repeat of the boom that preceded the 2015 market crash.

China has injected massive funds into the banking system, cut interest rates and encouraged lenders to extend cheap loans to limit the financial fallout from the coronavirus epidemic, which has hit businesses hard, from retailers to manufacturers.

Shenzhen's tech-heavy start-up board ChiNext has jumped 13.1% this month through Wednesday, far outpacing the 1.7% gain in China's blue-chip CSI 300 index.

A broader index of tech shares including start-ups and more established names such as ZTE has gained 14%.

"This is already a bubble. It's a game of the greater fool," said Shen Shikai, an investor who has been managing money pooled from his friends for over a decade.

"The economy has stalled for two months, and companies' first-quarter earnings will be ugly. Why on earth are stocks trading at such a level?"

ChiNext is trading at 59 times last year's earnings, up from roughly 30 a year ago and 47 at end-2019. In New York, the Nasdaq is trading at 26.5 times trailing earnings, according to Refinitiv data.

Fan Huang, head of wealth management at Deutsche Bank (China) Ltd, said the central bank's monetary easing was "directly contributing to investors' speculative activities."

In a Feb. 24 blog post, he urged investors not to forget the lessons of the 2015 market meltdown. That crash wiped more than $5 trillion in capitalisation off the Shanghai and Shenzhen markets, with ChiNext losing half its value within months.

Li Shoushuang, a capital markets lawyer at Dentons, called on the government to cool the market by introducing capital gains tax on share trading - something Beijing has always avoided.

"China's stock market is not a barometer of economic health. Rather, it's a barometer of liquidity," he said.

Some investors, however, believe the rally has solid footing, based in large part on Beijing's drive to make China more technologically self-sufficient as it battles the United States over trade.

Others are also pointing to an expected innovation boom in 5G, the fifth-generation wireless technology.

"If you look through the lens of China's great economic transformation over the next 3-10 years, you'll realize we're just at the starting point of a big bull (market)," said Wen Xunneng, a Shanghai-base hedge fund manager. "Don't fight the trend."

Adding to the fervour, mutual fund managers have been aggressively pitching tech-focused products.

Hwabao WP Fund Management Co's flagship technology ETF has seen its assets under management nearly double this year to over 14 billion yuan ($2 billion).

Huang Yue, fund manager at Guotai Fund Management Co, was promoting products via an online roadshow on Tuesday that invest in the semiconductor, telecommunication, and computer industries.

"It's true that valuation of chip stocks is near historic highs. But we also expect to see a big jump in earnings."

Bubble believers have pointed to particular share jumps as signs that markets have grown too frothy.

Shares in Jiangsu Xiuqiang Glasswork Co have tripled this month on speculation that the glass maker will enter into a tie-up with Tesla. The company says it's unaware of any factors that pushed up its stock.

Last week, cleaning robot maker Beijing Roborock Technology jumped 85% in its STAR Market debut after an initial price offering (IPO) oversubscribed more than 3,000 times.

"With all the millions and millions of Chinese on lock-down, more people have more time to dabble in the stock markets," said Grizelda Lee, head of discretionary portfolio management, Asia, Indosuez Wealth Management, referring to strict public health measures to contain the virus.

Daily trading volume in Shenzhen - home to many smaller firms - hit an all-time high on Tuesday, surpassing that of blue-chip and large-cap heavy Shanghai market.

Rocky Fan, economist at Sealand Securities, said regulators appeared to be tolerating speculation as a booming market will help already-listed companies raise fresh funds.

He cautioned against calling it a bubble, however, saying lower interest rates were also making stocks more attractive.

"You only know it's a bubble after it bursts." - Reuters

source https://www.thesundaily.my/business/china-s-surging-small-cap-stocks-stir-bubble-fears-as-beijing-ramps-up-support-YB2056540

StanChart posts strong results but coronavirus, economic headwinds to hamper profit growth

HONG KONG/LONDON: Standard Chartered booked a robust 46% jump in annual profit but warned a key earnings target would take longer to meet as the coronavirus epidemic adds to headwinds in its main markets of China and Hong Kong.

The epidemic could lead to a rise in bad loans, it said but did not provide specific guidance on the potential impact. Rival HSBC Holdings said last week it could face loan losses of up to $600 million if the virus outbreak persists into the second half of the year.

"The outbreak of the novel coronavirus comes with unpredictable human and economic consequences," Chief Executive Bill Winters said in a statement.

Noting that lower interest rates were also putting pressure on net interest income, StanChart said it would take longer to achieve its goal of a 10% return on tangible equity (RoTE) previously targeted for 2021.

The bank, which makes the bulk of its revenue in Asia, posted a pretax profit of $3.7 billion for 2019. Although that was slightly below an average forecast of $3.9 billion, it marked the steepest profit growth since 2017 when the bank posted a six-fold rise.

Hong Kong's economy has been hit hard, first by anti-government protests and now by the virus as tourist arrivals slump and residents steer clear of shops. Many employees, including those at StanChart, are working from home.

The bank said its provisions for expected losses from Hong Kong bad loans rose by $46 million in the second half of last year.

Analysts and bankers have warned that lenders which derive a large part of their earnings from Hong Kong face at least two quarters of worsening asset quality and slowing loan growth as the virus outbreak hits trade and consumer banking.

StanChart also said it had approved a buyback of up to $500 million worth of shares starting shortly and will review the potential for making a further capital return upon the completion of the sale of a stake in Indonesian lender Permata.

Its Hong Kong shares extended morning gains to be up 2.5% in the afternoon trade after the results.

Winters won plaudits from StanChart investors for his first three years at the helm when he patched up the lender's battered balance sheet and tackled an internal risk culture that had grown reckless.

The bank last year embarked on a new three-year plan to double its returns and dividends by cutting $700 million in costs and boosting income.

Winters' pay fell 6% to 5.93 million pounds, after he and Chief Financial Officer Andy Halford agreed to a reduction in their pension allowance following pressure from investors who criticised them for enjoying greater benefits than the wider workforce. - Reuters

source https://www.thesundaily.my/business/stanchart-posts-strong-results-but-coronavirus-economic-headwinds-to-hamper-profit-growth-IB2056486

Datasonic sees Q3 profit doubling after Bursa query

PETALING JAYA: Datasonic Group Bhd, which was queried by Bursa Malaysia yesterday over a sharp fall in its share price, saw its net profit for the third quarter ended Dec 31, 2019 double to RM20.18 million from RM9 million a year ago, thanks to higher revenue from the supply of smart cards, passports and provision of personalisation services, as well as lower finance costs.

Revenue jumped 32.1% to RM74.97 million from RM56.76 million. Of this, RM57.7 million or 77% of the group’s revenue was derived from the supply of smart cards, passports and provision of personalisation services.

The group has declared a third interim dividend of 1 sen per share, amounting to RM13.5 million.

For the nine-month period, Datasonic’s net profit surged 92.9% to RM48.05 million from RM24.91 million in the same period a year ago, while revenue grew 20.5% to RM196.29 million versus RM162.84 million previously.

On prospects, the group said the management continuously negotiates for better competitive pricing for purchases of the required materials and services from suppliers coupled with the prevalent cost control initiatives.

“The order book as at Dec 31, 2019 was in the vicinity of RM611 million which would have a positive impact on revenue generation in future operations,“ it said.

Despite the economic challenges and uncertainties prevailing in the business environment with potential impact globally, the board is cautiously optimistic that the results for the financial year ending March 31, 2020 to be better than that achieved in the previous financial year.

At 3pm, Datasonic’s share price was trading 17 sen higher at RM1.21 with 101.86 million shares changing hands, the third most actively trade stock on Bursa.

source https://www.thesundaily.my/business/datasonic-sees-q3-profit-doubling-after-bursa-query-BB2056407

TA Global minority shareholders cry foul over privatisation offer

KUALA LUMPUR: The minority shareholders of TA Global Bhd have expressed their dissatisfaction over the conditional general offer to delist the property firm at 28 sen per share.

Over 20 investors and remisiers were present at the TA Global’s “Privatisation”: Implication to Minority Shareholders forum organised by the Minority Shareholders Watch Group (MSWG) today.

One investor opined that the 28 sen offer price is a slap in the face of minority investors as it does not reflect the value of the shares.

According to MSWG’s calculation, it represents a 74.5% or 82 sen discount on the counter’s revised net asset value of RM1.10 per share

Apart from the cash offer, TA Global shareholders can opt for the share swap option based on an exchange ratio of 0.4211 new TA Enterprise shares to be issued at an issue price of 66.5 sen each for every offer share surrendered.

“If they take share swap, indirectly get to enjoy both TA Global’s growth through TA Enterprise given that TA Enterprise will have both stockbroking and property businesses,“ MSWG CEO Devanesan Evanson said at the forum.

On February 12, TA Enterprise co-founder and chairman Datuk Tiah Thee Kian proposed to privatise TA Global by acquiring the remaining 39.83% stake he does not own in TA Global.

MSWG also cautioned that the proposal could trigger a mandatory general offer in TA Enterprise, if 16% of TA Global shareholders opt for cash settlement.

This is because Tiah had said that he will inject fund into TA Enterprise to finance the privatisation of TA Global.

source https://www.thesundaily.my/business/ta-global-minority-shareholders-cry-foul-over-privatisation-offer-FB2056241