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Showing posts with label Employees Provident Fund. Show all posts
Showing posts with label Employees Provident Fund. Show all posts

Thursday 30 November 2017

EPF investment income rises 5.13% in Q3 to RM12.95 bil, has benefited from overseas equities

The Employees Provident Fund (EPF) reports an increase in quarterly investment income to RM12.95 billion for the third quarter ended Sept 30, 2017 (Q3 2017), despite recorded net impairment of RM791.55mil in the third quarter, more than double the impairment made a year earlier. The EPF posted a 74% surge in investment income to RM11.8bil in the first quarter and a 36.6% growth to RM11.51bil in the second quarter.

KUALA LUMPUR: The Employees Provident Fund (EPF) today reported an increase in quarterly investment income to RM12.95 billion for the third quarter ended Sept 30, 2017 (Q3 2017), up 5.13 per cent, from RM12.32 billion recorded during the same period last year.

“The EPF’s overall portfolio performance has benefited from the rally in overseas equities markets in the third quarter of 2017,” Investment Performance, Deputy Chief Executive Officer (Investment) Datuk Mohamad Nasir Ab Latif said today.

He said the pension fund did not see similar returns from the domestic equities market as the FBM KLCI performance was flat compared with other markets, which recorded between two and five per cent growth.

The EPF recorded a net impairment of RM791.55 million, in the quarter under review, in accordance with the Malaysian Financial Reporting Standards (MFRS 139), and this was higher compared with RM349.59 million recorded in the same quarter last year, he said in a statement today.

This is due to the higher provision recorded for domestic equities in the telecommunications and oil and gas sectors.

In the third quarter of 2017, equities, which made up 41.86 per cent of EPF’s total investment assets, contributed RM7.91 billion of income or 61.09 per cent of the total investment income.

The income recorded was 12.75 per cent higher than RM7.02 billion recorded in the corresponding quarter in 2016, he said.

As at September 2017, a total of 50.45 per cent of EPF’s investment assets were in fixed income instruments which recorded an income of RM4.49 billion, equivalent to 34.63 per cent of the total quarterly investment income, said Mohamad Nasir.

Out of the RM4.49 billion, Malaysian Government Securities & Equivalent recorded RM2.17 billion in the third quarter of 2017, an increase of 10.96 per cent or RM213.98 million, from RM1.95 billion recorded in the same quarter in 2016, in line with the growth of the portfolio.

Loans and bonds, however, generated lower investment income of RM2.32 billion compared with RM2.56 billion in the same quarter last year, he said.

Investments in Money Market Instruments and Real Estate and Infrastructure each represented 3.53 per cent and 4.16 per cent of total investment assets, and contributed an investment income of RM274.27 million and RM263.83 million, respectively, in the third quarter of 2017.

“Our current investment in money market instruments is above the targeted three per cent under the Strategic Asset Allocation due to the ongoing regulatory restrictions in new overseas investments.

Over the long-run, the EPF must continue to expand our foreign assets portfolio as it is key to our diversification and allows us to meet our return targets,” said Mohamad Nasir.

As at Sept 30, 2017, the EPF’s overseas investments, which accounted for 30 per cent of its total investment asset, contributed 48 per cent to the total investment income during the quarter.

Diversification into different asset classes in various countries and currencies had helped the EPF to record higher income for the quarter, despite a significant difference in market performance, globally.

Out of the total RM12.95 billion investment income for the third quarter of 2017, a total of RM860.83 million was allocated for Simpanan Shariah, which derived its income solely from its portion in Shariah assets, while RM12.09 billion income was allocated for Simpanan Konvensional, which is generated by its share of both Shariah and non-Shariah assets, he said.

The value of EPF investment assets reached RM771.20 billion, a 5.48 per cent or RM40.09 billion increase from RM731.11 billion, as at Dec 31, 2016.

Out of the total investment assets, RM370.10 billion or 48 per cent, were in Shariah-compliant investments and the balance in non-Shariah assets.

“We still have one more quarter before the year-end and we are confident that our diversification into various asset classes will enable us to meet our real dividend target of at least two per cent above inflation over a three-year rolling period, for both Simpanan Shariah and Simpanan Konvensional,” he added.

The EPF posted a 74% surge in investment income to RM11.8bil in the first quarter and a 36.6% growth to RM11.51bil in the second quarter.

Source: BERNAMA

Related Links:


Highest EPF dividend in two decades - Nation







EPF 2Q investment income rises 37% to RM11.5b | The Edge Markets

 

 

 

1 Malaysian Ringgit equalsvv0.24 US Dollar

Chart of exchange rate values over time





Malaysian Ringgit Forecast - Trading Economics

https://tradingeconomics.com/malaysia/currency/forecast
The Malaysian Ringgit is expected to trade at 4.20 by the end of this quarter, according to Trading Economics global macro models and analysts expectations.

Friday 4 May 2012

Malaysia's Minimum wage’s benefits and effects

Minimum wage’s benefits are plenty

I HAVE been waiting for a reason to talk about a pizza delivery man I met in a lobby of an condominium while waiting for a lift to arrive. It was in the evening and he was delivering pizza to one of the residents. I struck a conversation about his job, his salary and his aspirations, and got enough from the chat to get his views that the decent salary he was making was insufficient.

The young man claimed he was making RM2,200 a month whizzing through traffic, despite the weather, to send piping-hot pizzas to customers from between 10am and midnight.

He said that after sending back money to his parents in Pahang and paying for his lodging and expenses to live in Kuala Lumpur, the salary was just not enough. Furthermore, the job was wearing him down and he wants to do something else, but is finding it hard to get a new skill with the demands of his current job and the obligations he has.

His story will resonate with many others who are struggling to make ends meet, and whatever little assistance they get will surely be welcome. That small bit of help though came for millions of Malaysians by way of a new minimum wage the Government announced on April 30.

Workers in Peninsular Malaysia were promised a floor wage of RM900 a month and those in Sabah, Sarawak and Labuan RM800 a month. The minimum wage will take effect six months from the time the law is gazetted to allow industries to make adjustments to comply with the new law. Non-professional services companies with fewer than five employees will be given a further six months to make their adjustments.

The higher minimum wage will benefit a reported over three million private-sector employees and the net effect economists have calculated is a negligible increase in unemployment and a small drop in investments.

Economic growth and the investments that will take place and the promise of new jobs will be more than enough to offset those small impediments.

One drawback many can expect is higher prices. You can bet employers will pass on the higher staff costs to customers, but the quantum should be kept in check given the competition that exists in business.

The benefits, though are plenty.

The higher wage that almost a third of the workforce will benefit from will be a boost to the economy, which in recent years has been driven by consumption.

The higher wages will also manifest in other benefits for workers. A higher base salary will mean higher contributions to the Employees Provident Fund (EPF) and the extra will go some way to shore up the retirement savings of many Malaysians.

Companies will see an increase in their payments to the EPF, but with productivity having risen 6.7% per year over the past 10 years and companies making a lot more money than before judging by profits announced by listed companies and tax collection by the Government, they can afford to pay a little more for their workers without diving into bankruptcy.

With a third of the workforce soon enjoying a higher base salary, the increased income will go some way to satisfy the requirement of banks under the new responsible lending guidelines.

Under the new loan criteria, banks will look at the basic salary and decide whether a person can afford a loan. With higher salaries, maybe that will be enough for low salaried people to qualify for a loan to get the small car or home they need.

The minimum wage will help those in need. It might help those like the pizza delivery man if the minimum salary together with allowances are fixed. It is a start that many Malaysians will be thankful.

Deputy news editor Jagdev Singh Sidhu needs to get a lucky charm ahead of this weekend's FA Cup final.

Minimum wage effects manageable


Effects of the minimum wage policy are expected to be manageable and unlikely to have a significant impact on companies, with rubber glove manufacturers seen to be the hardest hit, analysts said.

UOB KayHian Research head Vincent Khoo said there will be no significant wage rise for most listed companies, especially given the flexibility for the floor wage to include allowances and benefits, hence no wage restructuring is required.

"However, small and medium enterprises in particular, may still be impacted by higher overtime and there may be an upward cascade effect for some listed companies."

In terms of sector, he said glove manufacturing remains the most impacted but the effect should be significantly softened with the incorporation of some allowances into wage calculations.

"Minimum wages would lower industry profits by as much as over 10% as a significant portion of the industry's staff force earn only RM600 to RM700 a month before allowances and benefits."

Consumer companies emerge as the winner as overall demand for fast-moving consumer goods should improve with higher disposable income among low-wage earners.

"We expect manufacturers to raise product prices during the implementation grace period to maintain profitability," Khoo said.

Affin Investment Bank economist Alan Tan said: "The direct effect of a minimum wage increase will result in increases in the relative prices of goods produced. However, even if minimum wages were to lift prices (especially in low-wage industries), we expect the inflationary impact to be manageable, as the minimum wage is set at a relatively low level, which will not raise production costs and overall price level significantly.

"Overall, we expect the broader economic effects of minimum wage in the country on company profits, prices, and inflation, to be manageable and unlikely to have a significant impact on the economy."

However, CIMB Research said higher wages will release pent-up consumption, albeit with some inflationary impact.

"Our view is that an appropriate minimum wage could over time achieve a big push, which is moving the low-wage, low-consumption and informal labour market to a high-wage, high-consumption and formal labour market."

For rubber glove makers, HwangDBS Vickers Research said staff costs would increase by 17-22% while earnings could fall by 5-19% .

"We expect the additional staff costs to be passed to customers over time, but in the immediate term, we expect earnings and margins to be dampened."

It said Hartalega Holdings Bhd is the least affected while Top Glove Corp Bhd would be most affected.

"Based on our estimates, Hartalega's salary costs could rise by RM10 million a year, an increase of 17% and this would lower the 2013 estimated net profit by 5%. For Top Glove, staff costs could rise as much as RM39 million (an increase of 22%), denting 2013 earnings by 19%. Meanwhile, we estimate Kossan Rubber Industries Bhd's annual salary costs to increase by RM18 million (a rise of 17%) and net profit to fall by 13%."

However, it said that if fixed allowances or cash payments are allowed in the calculation for minimum wages, the impact will be softened.

It maintained a hold on Top Glove at a target price of RM4.80 and Hartalega (RM7.70) and Kossan (RM3.30).

Affin Investment Bank said rubber glove makers have indicated that they will most likely reduce or re-categorise certain allowances to help offset the increase in their workers' basic salary.

Ee Ann Nee
sunbiz@thesundaily.com


Glove makers to gain from wage rule in long run


PETALING JAYA: While the new minimum wage will dent glove makers’ earnings in the near term, it is expected to be beneficial for the industry in the long run, CIMB Research said.

“It will encourage glove makers to reduce their use of low-skilled labour and improve their manufacturing processes by using more advanced technology and methods.

“Also, we believe that wage inflation will make the smaller glovemakers less competitive and catalyse consolidation in the sector. This will strengthen the positions of the large glove makers, favouring those with more efficient processes such as Hartalega (Holdings Bhd),” the brokerage said in a note to clients.

On Monday, Prime Minister Datuk Seri Najib Tun Razak announced the details of the country’s wage floor for the private sector, with the monthly benchmark set at RM900 for Peninsular Malaysia and RM800 for Sabah, Sarawak and Labuan.

This translates to an hourly rate of RM4.33 and RM3.85 respectively.

Some analysts say the new minimum wage rule may encourage glove makers to reduce their use of low-skilled labour and improve their manufacturing processes by using more advanced technology and methods.

The policy applies to all workers in the private sector, save for those in domestic services, but it will only take effect six months after the Minimum Wages Order is gazetted.

The law, which will be reviewed every two years, affords some flexibility to employers as they can absorb a certain amount of allowances and fixed cash payments in calculating the new wages.

According to CIMB Research’s forecasts, the minimum wage could shave some 1% to 7% off glove makers’ financial year 2013 core net profit, but the brokerage has kept its “neutral” rating for the sector and estimates for the companies under its coverage as they may yet find ways to mitigate the impact of higher staff costs.

Other research houses have also maintained their ratings pending further clarification from the companies and the actual gazetting of the law.

Among the glove makers, Hartalega is the least affected by the setting of a wage floor due to its highly automated production facilities and high margins relative to its peers.

“We believe Hartalega will emerge the strongest from the higher wages as its operations are already lean and management is working hard to further automate its manufacturing process.

“With the highest margins (lowest post-tax cost base), technologically advanced manufacturing process and an aggressive eight-year expansion plan, Hartalega has the most wiggle room in the sector to price gloves competitively and gain market share,” CIMB Research said.

Management was aggressively working on further automating the stripping and packaging portions of its manufacturing process to reduce the use of low-skilled labour and optimise operating expenditure, it added.

CIMB Research said Top Glove Corp Bhd would be the hardest hit as a result of low margins and an oversupply for its gloves that could take two to three years to work off.

“We believe it would be challenging for management to pass on the cost of the minimum wage to customers. This would put further pressure on margins and Top Glove’s high-volume low-price model.”

Top Glove shares have reflected this, with the counter losing 13 sen, or 2.72%, to RM4.65, making it one of the day’s top losers.

In contrast, Kossan Rubber Industries Bhd and Supermax Corp Bhd dipped one and two sen respectively to RM3.24 and RM1.87 yesterday, while Hartalega was unchanged at RM7.80.

For Supermax, CIMB Research said the manufacturer was ramping up nitrile production to 53% of capacity by financial year 2013. This could help curb rising staff costs, the brokerage added, as the cash cost of producing nitrile gloves was 20% lower than natural rubber.

Kossan, meanwhile, is poised to tap on the growth in China, where glove usage is a mere two gloves per person per annum versus 50 in Europe and 96 in the United States. Kossan entered the market in financial year 2012 via its 53%-owned Cleanera HK Ltd.

Moving forward, HwangDBS Vickers Research expects the additional staff costs to be passed on to customers over time.

Affin Investment Bank, in a report, also noted that Top Glove had previously said it would likely pass on 80% to 90% of the higher costs by increasing prices, which could prompt other glove makers to do the same. - The Star Business

Related post:
Malaysia's minimum wage, and its implications 

Wednesday 4 January 2012

Banks tighten lending rules amid uncertainty



By DANIEL KHOO danielkhoo@thestar.com.my

KUALA LUMPUR: The competitive environment for loans by banks will likely abate in the months ahead despite a general slowdown of loan growth which is expected this year, analysts said.

This is because banks in Malaysia are also expected to put their own interest first and extend loans to the consumer sector more cautiously given the uncertain backdrop amid the economic turmoil in the US and eurozone.

“It is quite normal to be more cautious as dark clouds gather over the horizon. However, I don't expect the slowdown to be as bad as it was back in 2009 when the sub-prime crisis hit the US,” said a banking analyst from one of Malaysia's top three banks by market capitalisation.



“Given the state of the global economy, it is timely that Bank Negara imposes stricter rules on lending to continue to keep lending activities in the country at a healthy state. A healthy banking system will only ensure a healthy economy,” the analyst added.

Bank Negara's more stringent revised lending rules came into effect on Jan 1.
Show-and-tell: Data released by Bank Negara showed that loan growth in November 2011 moderated further to 12.8% from a 13.1% and 13.8% growth in October and September 2011 respectively >>

Effective this year, the debt service ratio of a loan applicant is calculated based on the person's net income rather than gross income, which means the calculated income of the applicant is based on his or her take home salary after tax deduction and Employees Provident Fund contribution.

The softening competition for loans also means that loan growth is likely to slow further from the preceding two months.

Data released by Bank Negara showed that loan growth in Nov 2011 moderated further to 12.8% year on year (yoy) from a 13.1% and 13.8% yoy growth in October and September 2011 respectively.

CIMB Investment Bank's analyst Winson Ng had in a report on the sector outlook said that there was still a downside to the industry's loan growth even though it had declined for the two months.

“We are projecting total loans growth of 12-13% for 2011, followed by a softening to 9-10% in 2012 when consumer loans are expected to increase 10-11% and business loans are expected to advance by 8%-9%,” Ng said in his report.

Despite the apparent slowdown in loan growth, Maybank Investment Bank said that the scenario might not be as bad as it seems because there was a pick-up in loan applications and approvals, with a slight improvement in spreads in November 2011.

Maybank analyst Desmond Ch'ng said that the total system loan growth in 2012 was expected to slow further to 9.4% while loan growth was expected to be at 12.4% in 2011.

Meanwhile, RHB Investment Bank said in a report that Bank Negara could resort to cutting interest rates should global economic conditions deteriorate further and that it expected Bank Negara to employ a more proactive approach to “begin cutting interest rates sooner rather than later.”

RHB said that based on its sensitivity analysis, the Alliance Financial Group Bhd and Malayan Banking Bhd would be more adversely impacted by a cut in interest rates due to their higher proportion of variable-rate loans.

Saturday 31 December 2011

2012, a new year’s field of wishes


A new year’s field of wishes

ON YOUR OWN by TAN THIAM HOCK

TODAY is the last day of 2011. Congrats for having survived another business year. Hope you have stayed healthy too.

As an entrepreneur, based on a scale of one to 10, have you had a good year? Moderate year? Or just another year that you would like to forget? What are your wishes for 2012 and beyond?

What if I start an entrepreneur wish list that I will send to our dear Prime Minister? Would you support me and write to me the one wish that you think should be included in the list? But please do not send me letters or post cards as I have no intention of physically delivering the sack loads to Putrajaya. It is bad for my poor back and also my golf swing which will then go from bad to worse.

And no long messages or long winded explanations either. He is a very busy man. If possible, keep it to one word. That should catch his attention.

If you are still uncertain on how to approach the one word, perhaps, I can be of some help. For instance, we will have an acronym eWISH1M which is one Malaysian entrepreneur wish. Then, from the dictionary, just pick one word and I am sure his circle of advisors and strategists will be able to analyse it from many different angles, some of which even you are not aware of. Here is an example:

To our dearest YAB PM eWISH1M “field”



If his super smart advisors interpret field as an expanse of open or cleared land suitable for pasture or tillage or playing, then he will recognise the wishes of the people to preserve the few green lungs and playing fields left in Klang Valley. Instruct the State Economic Development Corporations and and Government-Linked Companies to forego the development and profit potential and leave open fields alone.

Maybe one of the advisors will realise that fields like Rubber Research Institute of Malaysia, Sg Buloh should have been earmarked for low cost housing. Maybe it is possible to build three bedroom high rise apartments at a cost of RM 150,000 (no land cost) to cater to the needs of the poor.

What they deemed as valuable land should be used to house a valuable workforce that will feed the needs of the commercial capital of Malaysia. No poor man can afford a minimum RM400,000 house that will be built on this rubber field.

Malaysian entrepreneurs of all races are asking for a level playing field. Where opportunities are not hijacked by the privileged few. Why should a small retailer under the Economic Transformation Plan, have to borrow RM60,000 to revamp his store so that he can survive the onslaught of foreign hypermarkets when under the Government Transformation Programme (GTP), a very successful local multi millionaire retailer be given RM40mil to open retail stores? The GTP should be helping the needy, not the greedy.

On the field of expertise, the PM should be worried when the Employee's Provident Fund (EPF) second their chief investment officer (CIO) to manage a bank when the CIO should be managing our RM400bil savings. Like the other sovereign funds Khazanah Nasional Berhad and Permodalan Nasional Berhad, EPF should stick to their field of expertise which is fund investment and not fun management.

Even though it is quite intoxicating to act as powerful entrepreneurs when you are not, the supreme fund managers of our sovereign wealth and pension funds should realise that they are accountable to the citizens of Malaysia who are shareholders and stakeholders in the wealth of the nation.

In addition to fielding winnable candidates for the coming elections, the PM should appoint intelligent and capable field generals as ministers. Generals who can lead the nation into international economic battlefields not shrieking racial rhetorics in local fields. Generals who can field any MACC question and know what their family is up to. INTELLIGENT1Minister should be your next mission should you agree to accept your reappointment as PM-1.

Corporate Malaysia Inc operates like magnetic fields where greedy entrepreneurs are drawn to inept politicians and corrupt officials. Either you lead the field or you leave the field. Those in power reap the fields. Losers are sent to the killing fields.

And I will end my message to our dear PM with a plea Restore HONOUR1M.

Unfortunately, this might just be one word too many for his super smart advisors to comprehend. And wishful thinking on my part. Final reality check.

On a personal note, I have written on issues outside the field of entrepreneurship and as such will leave the field to the real writers.

It had started out as a challenge from the ever gracious CEO of Star Publications (M) Bhd and thanks to him, I now have a better appreciation of responsible journalism. And how not being able to write freely on issues close to your heart can be detrimental to your golf swing and your soul.

Many thanks to friends who texted and emailed their support. To those who wrote to me for all the right reasons, you kept me going week after week. Much appreciated.

To all eWannabes, Good luck.

To all entrepreneurs, Happy New Year.

The writer is an entrepreneur who hopes to shares his experience and insights with readers who want to take that giant leap into business but are not sure if they should. Email him at thtan@alliancecosmetics.com

Biz Talk 2011-12-17 Currency integration questioned (Video)

Biz Talk 2011-12-17 Currency integration questioned CCTV News - CNTV English

Sunday 2 October 2011

What’s PNB up to a takeover bid on Setia ? Leave it to the real businessmen!



A QUESTION OF BUSINESS By P. GUNASEGARAM  p.guna@thestar.com.my

Permodalan Nasional Bhd's surprise bid for SP Setia raises more questions than answers

IT must be great to have so much firepower at your fingertips. But it is also a huge responsibility. How do you get your target and keep it intact at the same time? It's the old question of having your cake and eating it too.

That's a dilemma that not just Permodalan Nasional Bhd (PNB) but many government-linked companies (GLCs) face. They have the money to buy over property companies but if they don't do it right, they stand the risk of losing the people behind these companies.

If the worst happens the staff leave, the company is unable to undertake its projects, quality of houses and other developments drop, launches get less imaginative, public perception deteriorates, and, ultimately, value gets destroyed.

By seeking to own the golden goose body and soul, it is sometimes killed. Occasionally, there is in the corporate world a very thin line between protecting and enhancing your investments and making a wrong move which may send their value plummeting down, if not immediately, in time.

The latest episode (see our cover story this issue) has raised eyebrows not least because of the manner in which PNB has made its bid for one of most respected and admired property companies in Malaysia, SP Setia.

PNB already has about a 33% stake in SP Setia but is seeking to raise this stake to over 50% by offering RM3.90 a share, about an 11% premium over the closing price before the announcement of its notice of takeover. It offered 91 sen per warrant, a premium of nearly 100%.

It has had its stake of just under 33%, the point at which a general takeover offer is triggered under the takeover code, since 2008 but pushed this to just over trigger point on Tuesday and announced its intention for a takeover the following morning.

The offer is conditional upon PNB getting control of SP Setia. PNB also announced its intention of keeping SP Setia listed by ensuring a shareholding spread even if it got more than 90% of the offer shares.



Initial calculations based on 75% control and acquisition of all warrants indicate that the takeover could cost PNB over RM3 billion, a lot of money for most private investors in Malaysia but a mere drop in the ocean for PNB which has over RM150 billion under management.

It's the second largest fund manager in the country after EPF which is twice as big with over RM300 billion in funds. But PNB is probably the largest equity investor in the country because of a much higher proportion of funds invested in equity. There is hardly a major listed company in Malaysia in which PNB does not have a stake.

The big puzzle is why has PNB launched this takeover offer which could potentially affect adversely the value of its quarry? What was PNB fearing? Was it just a matter of increasing its stake in a depressed market which undervalued SP Setia's assets or was there something else? And why did it not consult with senior management and shareholders even after its notice of takeover?

At this stage one can only conjecture on the answers and make educated guesses.

But first, what's wrong if PNB took a majority stake? Previously SP Setia had PNB as a major but not a majority shareholder. PNB did not intervene in management and had two board representatives. If the SP Setia board put up a proposal for shareholder approval, PNB cannot by itself stop it if other shareholders supported it. They include the Employees Provident Fund (EPF) with 13.4%, SP Setia president and CEO Tan Sri Liew Kee Sin with 11.26% and Kumpulan Wang Amanah Persaraan or KWAP with five per cent.

One must still note that the government-linked funds or GLFs already control over 51% of SP Setia. But with PNB alone poised to take over a 50% stake, feathers are being ruffled and questions are being asked as to what that means.

What would have been the ideal situation for SP Setia? Four factors would have contributed. An independent management, a good board which represented all parties, strong minority shareholders, and a diversified institutional base so that no shareholder dominated. The first three are pretty much in place but the fourth was not achieved because PNB had since 2008 been holding a stake of just under 33% and with two other GLFs, the stake came to over 50%. But was there a way of dispersing shareholding?

One deal being negotiated, it was reported, was for Sime Daby, a PNB company, to take a 20% stake through the issue of new shares in exchange for land banks. If it had come through, it would have helped to dilute PNB's shareholding. Still, Sime is related.

The underlying problem is this. GLFs and GLCs have lots of money and not many places to put them in. Good companies attract their attention but if they take control, and especially if they take management control as well, the move can destroy value.

Some of PNB's property purchase and privatisation acts in the past have not been particularly successful, if at all. The major reason is key staff leave after GLCs take control. That's a phenomenon that's happened quite a few times.

So far, PNB's stake in SP Setia had not been a problem. PNB had its two board representatives and it was quite satisfied with its stake. A balance seemed to have been reached with senior management, especially Liew who is also a major shareholder.

But that has been thrown askew with PNB's latest move. Part of the solution will be to convince the market that there will not be management interference unless things go wrong. But the only assurance of that is if stakes are far below 50%, perhaps not more than 30%.

PNB is primarily a passive investor. Thus its motivation should not be to stop dilution of its shareholding or moves to widen shareholding among companies it owns. Control should not be its primary aim.

Instead, it must focus on getting best value for its current stake, which may well be achieved by continuing to be clearly a passive investor. That's better than having a bigger stake in a less valuable company.  Perhaps it could have put its RM3bil in other investments. But it looks like it's a bit too late for that.

l Managing editor P Gunasegaram is plainly perplexed by PNB's bid to take over SP Setia. Any explanations?


Leave it to the real businessmen !

ON THE BEAT WITH WONG CHUN WAI

Questions are being raised as to why Permodalan Nasional Bhd is making a takeover bid on SP Setia, a reputable housing developer.

IT may not have caught the attention of ordinary Malaysians but it is a big story that is now the hottest topic among the business community.

Housing developer SP Setia is a reputable name that many Malaysians are familiar with because of the quality homes it builds.

It has also ventured outside Malaysia and made its presence felt in Vietnam, Australia, Singapore and even Britain.

The man at the helm of SP Setia is 52-year-old Tan Sri Liew Kee Sin, a down-to-earth bank officer-turned-developer.

Some would even say SP Setia is Liew Kee Sin and Liew Kee Sin is SP Setia.

Fiercely proud of his humble beginnings in Johor – his father was a lorry driver – the Universiti Malaya graduate wanted to study law but was offered economics instead.

SP Setia started off as a construction company – a syarikat pembinaan as conveyed in its initials SP.

Liew turned it into a big-time property developer when he injected two projects – Pusat Bandar Puchong and Bukit Indah Ampang – into the company in 1996.

Liew has faced many challenges but he is now looking at the biggest fight of his career – one that is heavily staked against him.

Permodalan Nasional Bhd (PNB), the country’s largest asset manager and owner of 33% of SP Setia, is making a bid to take over the company.

On Friday, PNB bought an additional 23.5 million shares in the open market for RM3.868 a share, just 3.2 sen shy of its proposed takeover price of RM3.90.

PNB, with a RM150bil cash chest, is seeking to raise its stake to over 50% with its RM3.90 offer, which is about an 11% premium over the closing price before the announcement of its notice of takeover.

Such a takeover bid is not unusual in the corporate world, and more so when Liew only has an 11.3% stake in the company.

Other major shareholders of SP Setia include the Employees Provident Fund (EPF) with 13.4%, Kumpulan Wang Amanah Persaraan with 5% and over 40% are in the hands of minority shareholders.
But the manner in which it was done has led to much unhappiness.

Despite having two PNB directors on the board, there was no courtesy of a verbal notification prior to the takeover move.

The general offer notice only reached the company on Wednesday at 8.30am, just before the market opened.

Some may argue that the element of surprise was for strategic reasons but there was still no call even after news broke out of the takeover bid.

In a nutshell, relations have been strained.

PNB has issued a statement saying it wishes to maintain the management team, which is known to be fiercely loyal to Liew, but no one is sure how events will unfold in the coming days.

However, questions have been raised as to why PNB is wanting to take over a company that is being run competently instead of remaining as a passive investor that is satisfied with good investment returns.

If the Government is actively pushing for the private sector to be the engine of growth, we have the right to ask why the GLCs are competing with the private sector.

Widening its shareholding base is one thing but controlling private companies will lead to speculation over its agenda, cause unnecessary concerns as well as send the wrong signals.

The whole exercise will cost PNB RM3bil, which is chicken feed to them, but there are political and economic ramifications that the country’s leaders should take note of.

It may not be such a grand scheme in the end for PNB if Liew decides to leave SP Setia and set up his own venture, and gets his senior management team to join him.

PNB may then find itself in a spot even after gaining control of the company.

No one would believe that there would not be interference from PNB, so let’s not kid Malaysian investors.

Civil servants who manage public funds should leave the business of running businesses and making money to the real businessmen.

Sunday 4 September 2011

Investing in properties beyond our shores





Stories by LIM CHIA YING chiaying@thestar.com.my

In the past, only wealthy Malaysians could afford to buy homes in London, New York and other world leading cities. Today, an increasing number of higher and middle income earners are buying properties abroad.

COMPANY director P.E. Chua bought his first foreign property four years ago, paying A$350,000 (RM1.1mil) for a house in Melbourne, Australia.

“My daughter was seven years old then and I was worried about the 6% annual inflation cost in Australian education. So I thought it would be a good idea to invest in a landed property there instead of another property in KL,” says the 44-year-old.

Chua, who has rented out the Melbourne house, says he has the option of either letting his daughter stay there once she starts her tertiary studies, which could be another six or seven years, or dispose of the property to offset her education costs.

Chua is among a growing number of local investors snapping up properties abroad, finding the prices almost at par with or even lower than those in Kuala Lumpur and Penang where prices have skyrocketed in prime locations.

Apart from Australia, Britain and the United States have also become real estate hotspots for Malaysian investors hoping to spread their property portfolio.

Real estate firms with international partners have been aggressively promoting new housing projects overseas, placing prominent advertisements in local newspapers. Every other weekend, a property showcase or seminar is taking place in the Klang Valley and the crowd that turns up is an indication of the interest shown by local investors to diversify beyond our shores.

Another investor, K. Devaraj (not his real name), says he bought a 600sf studio apartment in central London two years ago for £400,000 (RM1.9mil). He considers the invest­ment worthwhile as the price has since gone up.

“My son needed a place to stay while studying and I bought the place partially for investment,” he says. “I have no regrets as my son may just stay on even after his studies. So, it is likely I will keep the apartment for the long term.”

Like Devaraj, many Malaysian buyers are taking advantage of the current economic situation to pick up some good buys. The interest shown by individual investors is not surprising considering that our Employees Provident Fund has picked up premium British properties worth a total £634mil (RM3.1bil).

On Friday, Star Business reported that Lembaga Tabung Haji and Per­mo­dalan Nasional Bhd are also looking for premium properties for their yield, with London as their first choice, followed by Australian cities.

Henry Butcher Malaysia director Lim Eng Chong says that as local prices get higher for Malaysian buyers, overseas properties are deemed not so pricey any more.

“Apartments in London, for instance, can be quite affordable; in 2009, a unit may just cost £115,000 (RM721,041). The finishing is just as good, if not better than local properties,” he says.

“I think Malaysians have always had a disposable income but it is only in recent times that they have become more savvy.”

Jalin Realty International Pte Ltd chief executive officer Ian Chen concurs, noting that while Malaysians have invested overseas for some time, it is only in recent years that the pace has picked up.

“It makes financial sense for parents to buy a place where their children can stay while studying instead of renting a place. Some already have friends and relatives living in the foreign city, and they ask: why not invest in a unit too,” says Chen.

Established over 30 years ago, Jalin ventured into marketing overseas properties five years ago. Its core market is Australia, where it is partnering conglomerates like Lend Lease, Australand, Frasers Property and other boutique developers to market their properties.

In the United States, the credit crunch since 2008 has led to property prices plunging. With lower prices and a weakening dollar, the US property market has become attractive to foreign investors, among them Malaysians, according to international property investment firm Robert Douglas.

In some places, says its head of sales and marketing (Asia) K. Daniel, prices are so low that one can even pick up a three-bedroom house from RM150,000. A good suburb location would cost RM200,000 onwards compared to RM700,000 back in 2007.

“For that property price, you can get back a monthly rental of between RM900 and RM1,000. Most of our clients are from middle to high income Malaysians, well-educated, aware of the global economic situation, the currency market, have a good investment portfolio and are ready to diversify,” he says.

Henry Butcher Malaysia’s international real estate general manager and business development general manager Jazmine Goh points out that potential customers would usually have done some research themselves or have friends or relatives check out the site.

For first-time investors, she adds, there are rental management experts to assist in managing the property.
Chua admits to being cautious before buying any property. In his case, he relies on Jalin Realty to over­see his Australian investments as he cannot be there physically to handle them.

“Everything has worked out smoothly so far, with the rent banked into my account every month. There is also protection (insurance) against default by the tenant or damage caused and I feel I can better trust the property managers there than here,” Chua shares.

“Owners like us want peace of mind when it comes to rental returns.”

His advice for first-time buyers is that they need to know their objective and reason for investing overseas. Such investments could be made in preparation for their children’s future education or if they plan to retire or migrate, he says.

But Chua cautions against buying to speculate.

“There’s the currency (fluctuations) and other calculated risks to take into consideration and tax rates to be wary of. Buyers should also have holding power to allow enough time for a property to mature. And most importantly, get a trustworthy agent,” he says.

“It can be worth it on a medium to long-term basis, but I would advise against a short-term commitment as property disposal overseas is not that straightforward.”

Chua regards overseas investments like his as affordable so long as it’s dollar-for-dollar and one does not convert.

Another investor, who wishes to be known only as Vincent, says it can be a hassle renting out a house in Malaysia.

“Good tenants are hard to find and you have to personally deal with problematic tenants who give you a headache,” says Vincent, who owns several properties in Australia.

“With overseas properties, you have property managers to handle the lease and there’s protection for owners. Also, I don’t think rental returns here are that good anyway, even in upmarket locales.”

Chen says a huge advantage about property buying in Australia is the reliability of property management there. Property owners need only engage property managers who will help to look for tenants and manage the rental collection and renewal of tenancy agreements.

“There’s also a landlord protection insurance that protects the landlord in the event of loss of rental (delinquency in rental repayment), property damage or theft by the tenant,” he adds.

“Owners can thus invest with peace of mind knowing that the property is protected and in good hands.”


M’sians buying up properties abroad thanks to lower exchange rates

By LIM CHIA YING sunday@thestar.com.my

PETALING JAYA: More Malaysians are snapping up properties overseas as they take advantage of the lower exchange rate in countries like Britain and the United States to spread their investments or shop for holiday homes.

A check with several major agents marketing international properties here showed that the number of Malaysian buyers has been climbing steadily over the last three years, peaking in the first half of this year.

With property prices in the Klang Valley and major cities and towns here soaring, those with cash to spare are turning their attention to properties in countries affected by the global economic crisis where prices have dropped.

Among the more popular investment spots are London and its surrounding districts as well as university towns in the US where there is a market for rentals.

Australia, despite its high exchange rate, is also popular due to the good investment returns and stable property market.

Henry Butcher Malaysia director Lim Eng Chong said Malaysian investors were getting more savvy and the buying trend was now heading towards a more global outlook.

“Malaysians and Singaporeans are now the biggest overseas market after the mainland Chinese for prime properties in London,” he noted.

Between January and August this year, the company sold over 100 properties in London, mostly new apartment units to Malaysian buyers. The properties were priced from 200,000 (RM965,382) to 2mil (RM9.65mil) each.

In 2009, about 100 properties were sold while some 150 were sold last year.

“Previously, there was interest but London was out of reach for many Malaysians. Then came the collapse of Lehman Brothers three years ago. The pound became cheaper, spurring more Malaysians to invest there. Many investors would already have enough (properties) on their plates locally, so they are now diversifying,” he explained.

Jalin Realty International Pte Ltd chief executive officer Ian Chen said about 50% of his clients buy homes for their children studying overseas while another 50% buy for investment or to keep as vacation homes.

“We are seeing many young Malaysian professionals investing in Australia, mainly to diversify their investment and to achieve early financial freedom. Australian properties provide much stability and consistenty in capital growth, with about 10% annual compounding growth,” Chen added.

He said sales had shot up 100% since the company ventured into the overseas market five years ago. Most of the properties sold ranged from AUD500,000 (RM1.57mil) to AUD800,000 (RM2.5mil).

International property investment firm Robert Douglas head of sales and marketing (Asia) K. Daniel said US properties in Michigan, Florida and Las Vegas were now popular, as they yielded high returns. Michigan and Florida were attractive because of their high student population which provided a ready market for rental properties.

“Malaysians usually buy to let (for rental returns). But if they wish to stay, there are no restrictions as long as they have the necessary visa, ” Daniel pointed out.

Malaysians who want to invest are advised to consider all aspects

By LIM CHIA YING sunday@thestar.com.my

PETALING JAYA: Malaysians who wish to invest in overseas properties have been advised do their homework first.

This is because they could be subjected to high government levies and taxes in cities where the properties are located, said Real Estate and Housing Developers’ Association Malaysia president Datuk Seri Michael Yam.

Yam also cautioned against buying for speculation, saying buyers had to consider currency risks.

They must also be aware that under a Bank Negara ruling, any large sum of money outflow must be reported and buyers should not have any borrowings with local banks.

Yam is however not perturbed over the global buying trend, saying it would not have much significance on the local property market as the primary homes for these investors would still be in Malaysia.

“While we try to attract foreign investors to invest here, we should not stop and discourage Malaysians from investing overseas,” he added.

Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector Malaysia president Choy Yue Kwong said properties in Britain, especially London, were now popular because of the relatively “low” pound.

“As long as the exchange rate is in our favour, Malaysians will continue to buy (properties overseas),” he added.