KUALA LUMPUR (Oct 6): Based on corporate news flow and announcements today, stocks in focus tomorrow (Wednesday, Oct 7) could include: CIMB, MyEG, AirAsia, IGB Corp, Ecofirst Consolidated, Aeon, Boilermech, Opcom and Merge Energy.
International rating agency Moody's Investors Service (Moody's) has downgraded the baseline credit assessment (BCA) and adjusted BCA of CIMB Group Holdings Bhd’s subsidiary, CIMB Bank Bhd, due to weaker capitalisation compared to its domestic and regional peers.
Moody's said it expects further pressure on asset quality from slowing operating conditions, which will weaken the bank's profitability and ability to improve capital levels, resulting in a downgrade to baa2 from baa1.
It added that CIMB Bank’s Common Equity Tier 1 ratio on a consolidated basis, declined to 9.6% at end-June 2015, from 10.1% at end-2014, as a result of poorer profitability and higher regulatory capital deductions under the Basel III transitional rules.
The credit rating agency added that the ratio is lower than its domestic peers and the average of Moody's rated banks in Malaysia, which stood at 11.2% as at June 2015.
Moody's expects economic conditions in Thailand and Malaysia to slow down over the next 12 to 18 months, which will in turn weaken the banking sector and CIMB Bank's revenue growth, as well as increase downside risks to its asset quality and credit costs.
The one-notch downgrade of CIMB Bank's adjusted BCA resulted in the downgrade of CIMB Bank Islamic's adjusted BCA also to baa2, from baa1.
Meanwhile, Moody’s has affirmed CIMB Bank's A3/P-2 local and foreign currency deposit ratings, and its A3 foreign currency senior unsecured debt ratings, the bank's A3/P-2 foreign currency issuer ratings, and (P)A3 foreign currency senior unsecured medium-term note (MTN) rating.
"This high support is driven by the bank's significant domestic market shares of banking system deposits (1H15: 11%) and the 47% government stake in its parent holding company held through Employees Provident Fund (17.2%) and Khazanah Nasional Bhd (29.5%)," Moody's added.
The Malaysia Competition Commission (MyCC) has proposed a financial penalty of RM307,200 on MyEG Services Bhd (MyEG), after it was found MyEG had abused its dominant position in the provision and management of online foreign workers' permit renewal applications, by selling mandatory insurance policies.
In a statement today, MyCC said MyEG had infringed Section 10 of the Competition Act 2010, after it was found that the company applied different conditions to equivalent transactions with other trading parties, to the extent that may harm competition.
The commission started a probe into the private company earlier this year, following complaints filed by numerous parties.
Its investigations found MyEG had harmed the level of competition in the selling of mandatory insurance policies (Foreign Workers Insurance Guarantee; Foreign Workers Hospitalization and Surgical Scheme; and Foreign Workers Compensation Scheme) for its online permit renewal applications, as MyEG is also competing against other insurance companies in the market.
MyCC also proposed to impose an additional penalty of RM15,000 for each day that MyEG fails to comply with two prescribed remedial actions, namely the termination of the existing agency agreements relating to the mandatory insurances — and not to enter into similar nature of agency agreements — and to provide an efficient gateway to all insurance companies selling the mandatory insurances, which allow them to compete at the same level.
Meanwhile, MyEG, in a filing to the Bursa Malaysia, clarified that at this juncture, MyCC’s proposed decisions are not final.
“The management will review the proposed decisions with our external legal counsel, and will submit a written representation and will make an oral representation to MyCC within the specified period of time, to defend against the allegations made by MyCC,” it said.
On aviation sector, AirAsia Bhd’s Japan unit AirAsia Japan Co Ltd has been granted the Air Operator’s Certificate by the Civil Aeronautics Act by Ministry of Land, Infrastructure, Transport and Tourism, under the air transport business, Japanese Aviation Law Article 100.
AirAsia Japan is scheduled to commence operations from their base at Chubu Centrair International Airport in Aichi prefecture to Shin-Chitose Airport in Sapporo, Sendai Airport in Sendai, and Taiwan Taoyuan International Airport in Taipei in Spring 2016.
On a separate matter, AirAsia is taking full control and ownership of Tune Money Sdn Bhd, which would improve the low-cost carrier's top line and ancillary revenue.
The group has entered into a share sale agreement with Tune Money International Sdn Bhd (TMI) today, to buy 81 million shares representing 60% stake in Tune Money Sdn Bhd and 22 redeemable preference shares that are currently held by TMI for RM6.36 million or 3.8 sen per share or RM150,000 per RPS in Tune Money Sdn Bhd.
The acquisition will be financed by internally-generated funds. TMI is expected to re-pay advances extended to TMI by Tune Money, by next Tuesday (Oct 13).
AirAsia had purchased a 40% stake in Tune Money in January this year, with reported plans to list the company in five years.
The acquisition of the remaining 60% stake in Tune Money would improve AirAsia’s top line, as well as ancillary revenue.
Property developer IGB Corp Bhd's indirectly-owned unit, Harta Villa Sdn Bhd (HVSB), is selling a piece of freehold land measuring some 10.155ha in Ulu Kelang, Gombak, Selangor, to Ecofirst Development Sdn Bhd (EDSB), a wholly-owned unit of Ecofirst Consolidated Bhd, for RM62.8 million.
HVSB originally entered into an option agreement with EDSB on April 20, which granted EDSB the right to purchase the land at RM62.8 million.
No valuation was carried out on the land, according to IGB's announcement to Bursa Malaysia at the time.
As at Dec 31, 2013, the net book value of the land was RM39.4 million, based on the audited consolidated financial statements of IGB for the financial year ended Dec 31, 2013.
The group said that given the significant appreciation in the value of the land since it was first acquired in 1994 at a cost of investment of RM36 million, the disposal of the land (assuming the option is exercised by EDSB) represents an opportune time to realise a gain from the investment in the land, amounting to RM17.7 million to IGB Group.
Aeon Credit Service (M) Bhd (ACSB) recorded a net profit of RM48.49 million, on the back of RM228.7 million revenue in its second quarter ended Aug 31, 2015 (2QFY16), due to increased financing.
The group proposed a single tier dividend of 29.85 sen for the financial year ending Feb 29, 2016 (FY2016), with the ex-date being Oct 20 and entitlement date on Oct 22.
ACSB said the company’s revenue rose 9% in the second quarter under review. Its revenue grew 12% for cumulative six months ended Aug 31, 2015, as compared to the corresponding period ended Aug 20, 2014.
Total transaction and financing volume in the second quarter and six months ended Aug 31, 2015 had increased by 2.89% to RM892.6 million, and by 1.52% to RM1.737 billion respectively, compared to the corresponding period last year.
The financing receivables as at Aug 31, 2015 was RM4.908 billion, representing an increase of 19.3%, from RM4.115 billion on Aug 20, 2014.
Non-performing loans (NPL) ratio was 2.58%, compared to 2.65% last year.
Boilermech Holdings Bhd expects to see flat bottomline growth in its financial year ending March 31, 2016 (FY16) results, amid current economic uncertainties.
For FY15, Boilermech registered a net profit of RM39.2 million, up 26% year-on-year; revenue also rose 14.8% y-o-y to RM277.9 million.
Currently, the group has an orderbook of about RM300 million, which would keep Boilermech busy for the next 18 months. The group is also tendering for jobs valued at up to RM30 million.
The group’s managing director Leong Yew Cheong said the weakening ringgit is pressuring the group’s margin, as its business involves importing machines from Germany.
Boilermech had signed a 15-year partnership agreement with Australian-based Commonwealth Scientific and Industrial Research Organisations (CSIRO), together with a memorandum of understanding (MoU) with Jasa Aman Engineering Sdn Bhd.
The agreement entered with CSIRO gives Boilermech the exclusive rights to commercialise the CSIRO’s patented technology for palm oil mills, in order to enhance oil extraction efficiency.
Leong said the group hopes the partnership would improve Boilermech’s FY16 revenue, so as to be on par with FY15’s financials.
On the MoU which was inked between Boilermech’s wholly-owned subsidiary Boilermech Cleantech Sdn Bhd and Jasa Aman, Leong said it will potentially see Boilermech Cleantech being appointed the official, exclusive agent to market, sell, install and service the Prime brand steam turbine generator for industrial power generation projects in the Asia market.
“As the official agent for the Prime steam turbine generators, Boilermech will be able to offer a one stop solution for electrical power generation. We are currently working on a 10-year agreement, through this partnership,” he said.
Opcom Holdings Bhd has secured a RM67.8 million award by Telekom Malaysia Bhd to supply, deliver, install, test and commission the Line Plant Network project, from Oct 1 this year to Sept 30, 2018.
Opcom said its subsidiary, Opcom Cables Sdn Bhd, negotiated and accepted the letter of award from Telekom, which also includes associated civil works in Malaysia via schedule of rates.
The award was expected to contribute positively towards the group's earnings and net assets for the period of the award.
Merge Energy Bhd (MEB)’s wholly-owned subsidiary, Mewah Kota Sdn Bhd (MKSB), has secured a contract worth RM32.9 million from the East Coast Economic Region Development Council (ECERDC).
MKSB has received the letter of acceptance dated Sept 14, to build horizontal collector well and associated works for Loji Rawatan Air Kelar (Phase 1) for the Pasir Mas Halal Park in Kelantan.
The proposed project period is 78 weeks, with its expected completion date being March 27, 2017.
(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)