Challenging year ahead seen for secondary residential properties (2009)

By Star Biz

It will continue to be challenging in 2009 for the secondary residential property market as buyers continue to adopt a wait-and-see stance on property purchases due to the global economic slowdown, property experts said.

The degree of softening in property sales would depend on the severity of the economic downturn next year, they said.

Regroup Associates Sdn Bhd executive director Paul Khong acknowledged that the secondary residential property market has been quite slow as potential buyers have been holding off decisions on house purchases. “This has significantly impacted the property market especially in the current quarter,” he told StarBiz.

“The quiet period is expected to continue through to the first quarter of 2009 after all the holidays are over.” S.K. Brothers Realty (M) Sdn Bhd general manager Chan Ai Cheng said buyer sentiment had taken a beating due to the current economic uncertainties.

“It’s a waiting game for buyers. There are even ‘aborted’ cases where buyers have placed an earnest deposit to purchase a property and subsequently pulled out from the transaction, in the hope that prices will come down further or in search of fire-sales while others are uncertain of their job stability and postponing the purchase commitment,” she said.

Nevertheless, Hartamas Real Estate Sdn Bhd managing director Eric Lim is anticipating stable to moderate growth due to bargain hunting in certain segments of the secondary property market, especially landed residential property. “(However) the market for properties that are purchased for investment and speculation will be slower,” he acknowledged.
The agency experienced a 20% to 30% drop in sales in the second half of the year versus the corresponding period of 2007. “This is quite substantial for us. Sentiment is still not good,” Lim noted.

CH Williams Talhar & Wong Sdn Bhd managing director Goh Tian Sui concurred. “The last two to three months have been quite bad – enquiries and sales activities have dropped. Owners are more open to negotiations in pricing,” he said. The prices of certain secondary residential properties could also face more pressure next year due to a lack of demand and an increase in supply of completed projects.

Citing an example, Regroup’s Khong said the situation for high-end condominiums in the KLCC and Mont Kiara areas were getting critical and there would be more pressure on rental and capital values as many of the projects in the vicinity would be completed within the next one or two years.

“Supply will be mounting on a monthly basis as demand continues to be low and this will eventually translate into lower capital values and rental.

“An easy 15% to 20% shed in values are envisaged for this sector generally,” Khong said.
The asking prices for middle-class residential properties in general, for example, terrace houses in good locations such as Sri Hartamas, Bandar Utama and even Taman Tun Dr Ismail, had already been adjusted 5% to 10% lower to reflect current market conditions, Khong said.
Khong & Jaafar Sdn Bhd managing director Elvin Fernandez noted that prices of high density condominiums with a low occupancy rate in not-so-choice locations were about 10% lower now compared with a year ago.

“Although prices have softened, it is still difficult to sell such properties,” he said.

YTL Power a BUY?

By Star Biz

YTL Power International Bhd’s proposed purchase of Singapore’s PowerSeraya Ltd looks unattractive from the earnings record of the latter. It was announced on Tuesday the YTL Power group will purchase the entire equity of PowerSeraya, owner of two power stations that has 25% of Singapore’s electricity generation capacity.

The price for PowerSeraya is S$3.4bil (RM8.09bil) and the assumption of a S$200mil debt that owner Temasek Holdings Ltd owes the former. As the debt is owed to a company that will become YTL Power’s wholly-owned subsidiary, it is believed the debt can be cancelled.
The acquisition is expected to be completed in the first half next year and in its first full year of contribution in 2010, PowerSeraya is projected to produce a net profit of RM76mil, YTL Power said. That translates into an earnings per share contribution of 1 sen for YTL Power, the company added.

That sounds miniscule for an investment outlay of S$3.4bil. It should be noted, however, that PowerSeraya’s net profit was much higher at S$218.3mil for its year ended March 31 (FY08). The reason for the wide fluctuation in its profitability is not known.

It could be due to factors such as scheduled maintenance shutdown at a certain period. PowerSeraya’s earnings in FY08 would be a return of 6.4% on YTL Power’s purchase price. The free cashflow from PowerSeraya should exceed that because depreciation, a large non-cash item, would have been deducted to arrive at the profit figure.

In addition, PowerSeraya is constructing two 379MW cogeneration units that will be operational in 2010, which will expand its revenue-generating capacity. Power project investments are premised on free cashflow of the acquired assets being used to repay loans taken to finance the acquisition.

YTL Power said the PowerSeraya purchase will be funded by S$1.15bil from the former’s cash reserves and S$2.25bil from a loan.

Outlining a scenario, an investment banker told StarBiz yesterday that if YTL Power took a 10-year loan for S$2.25bil, half of that would be repaid in five years from PowerSeraya’s own cashflow. At that time, S$1.125bil of debt would have been repaid and become equity for the YTL Power group.

In 10 years, the entire loan would have been repaid and YTL Power would then own PowerSeraya with the entire debt repaid. Effectively, YTL Power would have gained an equity value of S$2.25bil by then.

That’s a huge sum in equity value, although it’s not an acquisition primed for high growth. The objective is steady, assured wealth creation. Furthermore, YTL Power is not getting PowerSeraya at a distressed sale price because Temasek is not in any form of distress. The word on the street is the internal rate of return (IRR) - the return to be earned on invested capital - for PowerSeraya is about 10% or in the low teens.

For a richer IRR in the mid-teens, YTL Power will have to trawl further afield for distressed asset sales which, no doubt, it is working on.

Petronas revenue still up!

By the edge

Despite falling oil prices, national oPeil company Petroliam Nasional Bhd (Petronas) continued to chalk up an impressive growth in net profit on the back of higher average prices of the commodity.

Petronas posted a 46% year-on-year growth in net profit to RM42.68 billion for the first half (1H) of its financial year ending March 31, 2009 from RM29.27 billion, after paying tax expense of RM20.5 billion.

Revenue was sharply higher at RM157.2 billion versus RM102.8 billion a year ago. Pre-tax profit soared nearly 49% to RM63.26 billion from RM42.57 billion previously. Higher earnings boosted Petronas’ cash pile to RM124.6 billion from RM113 billion as at March 31. The group’s other liabilities, however, shot up 47% to RM112.8 billion from RM76.9 billion in the previous corresponding period.

The surge in Petronas’ profit did not come as a surprise given the 64%, or US$49.50 (RM179.68), jump in the average price of Tapis crude to US$126.48 per barrel during the six months under review. The average price of the commodity was US$76.64 in the corresponding period last year.

Tapis crude is the benchmark for Petronas’ production.

However, the national oil company which contributes over 40% of the government’s coffers in the form of petroleum taxes and dividend, is likely to see lower profits in the second half of its financial year in tandem with the drastic drop in crude oil prices since July when the worldwide commodity boom collapsed.

The average price of Tapis fell to US$74.77 in October, down 30% from US$106.92 in September. Yesterday, Bloomberg Asia-Pacific Tapis crude oil spot price was US$50.03 per barrel. The current level is the lowest since January 2005. The price has plunged 67% from the peak of US$153 in mid-July.

The last financial year, ended March 31, 2008, was a record year of profit for Petronas. The operating environment has since turned harsh, for on top of the meltdown in crude prices, the weakening ringgit and increase in production costs will further erode the group’s profitability.
According to Petronas president Tan Sri Mohd Hassan Marican, every 10-sen fall in the ringgit against the US dollar will take away about RM2.5 billion from the group’s profit.
The US dollar has strengthened substantially in recent months due to its standard currency status. The greenback has appreciated to RM3.628 against the ringgit, up almost 13% from the US$3.21 level in July.

International operation is Petronas’ biggest revenue contributor, generating RM68.9 billion or 44% of total revenue, followed by exports with RM56.7 billion or 36%, and domestic opertation, RM31.5 billion or 20%. But domestic operation, including exports, is still the most profitable due mainly to the lucrative production-sharing contracts it has with international oil majors for exploration and production (E&P) activities.

Giving a breakdown, the oil business, including refined petroleum products and crude oil trading, is the most profitable division, accounting for 40% or RM25.7 billion of the company’s operating profit. Gas is the second biggest profit-earner, contributing RM20.8 billion or 32.5% to group operating profit. Next comes E&P with 19% or RM11.9 billion.

Malaysia's most valuable brands 2008

By the edge

For the second year running, Maybank has been ranked as Malaysia’s most valuable brand with a brand value of RM9.3 billion in a valuation study commissioned by 4As (the Association of Accredited Advertising Agents Malaysia) and The Edge.

The Malaysia’s Most Valuable Brands (MMVB) 2008 study, conducted by leading brand consultancy Interbrand, also ranked Public Bank, with a brand value of RM6.8 billion, as Malaysia’s second most valuable brand, followed by CIMB, with a brand value of RM6.3 billion.
The three banks, together with Genting (RM4.5 billion), Parkson (RM4.2 billion), and Celcom (RM3.9 billion), make up the six most valuable brands. All six had a brand value that exceeded US$1 billion (RM3.6 billion) each.

The total brand value of Malaysia’s 30 Most Valuable Brands was RM61.8 billion, up from RM56.6 billion last year. The top 30 brands were honoured at a gala event here last night. The guest of honour, Tan Sri Amirsham Abdul Aziz, Minister in the Prime Minister’s Department, handed out the awards.

“Brand valuation is a step in the right direction. Brands build trust. With the economic situation, branding has become even more important,” said Amirsham.
According to the study, despite a small drop of 3% in value, Maybank still tops the league table. Its acquisition in Indonesia has not affected the results as the study was based on year-end 2007 financials.

Datuk Seri Abdul Wahid Omar, president and CEO of Maybank who received the award last night, said he was happy with the ranking even though the brand value had decreased slightly. “So as we move forward locally, we will aim for the Maybank brand to be recognised, not only in Malaysia, but also in the Southeast Asian region.”

On the other hand, CIMB’s mergers and acquisitions in 2006 and its unifying brand strategy saw its brand value jump 83% to RM6.3 billion from RM3.4 billion last year, the highest increase among the top 30.

“This is a testament to our investment over the last year, We will continue with our long-term strategy as it has proven effective,” said Effendy Shahul Hamid, head of group corporate communications, CIMB Group.

The brand value of DiGi, which moved up one notch from No 10 last year, grew 35% despite a highly competitive and licence-restricted marketplace, said Interbrand in a press release issued yesterday.

Maxis is not in the rankings this year as it has been delisted from Bursa Malaysia. One of the criteria for MMVB is that the brands must be owned by listed companies as the study is based on publicly available information. Brands must also be consumer-facing and Malaysian-owned or originated.

National icon Proton saw the biggest fall in brand value of 37%, causing it to drop from No 23 last year to No 28 this year. The study noted that Perodua’s brand value now stands at more than 15 times that of Proton.

Interbrand’s methodology values brands in the same way that other corporate assets are valued, on the basis of how much the brands are likely to earn for their owners in the future. “Interbrand uses a combination of analysts’ projections, financial reports, and its own analysis to arrive at a net present value of those earnings,” said Interbrand group CEO Jez Frampton.
Interbrand noted that global turbulence roiling the markets had not fully impacted, except for falling margins and the increase in provisioning in general. The brand risk factor has also increased, it added.

4As president Datuk Vincent Lee said the study put Malaysia among the few Asian countries that currently recognised the value of brands as business and economic assets. “It helps the growth of business and celebrates the true heroes of economic value generation, the brand builders of a nation,” he added. Ho Kay Tat, managing director and editor-in-chief of The Edge, said the study “creates a platform for discussing the role of brand-building, ensuring business health and earnings continuity”.

“Through all this (economic turmoil) it has been very clear that brands are a powerful driver of recovery. Fundamentally, brands are there to enable consumers to choose. They mark out one offer from a company from somebody else’s. They are the reason why people will buy, and the reason why people will repurchase. They are a driver of demand,” said Frampton at a press conference earlier.

This year, three new brands made it to the top 30 — Sin Chew (No 27), Jobstreet.com (No 19) and Ogawa (No 29). Jobstreet.com is the first online brand to make it into the list.

Market slump takes RM21b toll on unit trust funds

By Biz Times

THE sharp falls in the equities market have cut the total value of unit trust funds by RM21 billion in the first nine months of the year.

The value dropped 12 per cent to RM148 billion from RM169 as at December 31 2007.
However, Federation of Malaysian Unit Trust Managers (FMUTM) president Tunku Datuk Ya'acob Tunku Abdullah said the percentage of the current net asset value (NAV) had grown to represent 19.31 per cent of Bursa Malaysia Securities' market capitalisation. At the end of last year, the percentage was 15.32 per cent. This means that the price reduction for shares held by the funds was not as great as the overall market's.

A total value of RM335.61 billion in market capitalisation had been wiped out from the local bourse between December 2007 to September 2008. "Our benchmark (for the NAV percentage) will be 20 per cent by year-end," he told reporters after his welcoming note at the annual convention of unit trust consultants in Kuala Lumpur yesterday.

Based on the Morningstar Fund table as at October 17 2008, the Malaysian equity funds posted losses of 29.36 per cent compared to global equity funds which saw losses of 40.07 per cent over a year. Tunku Ya'acob said there would not be a slowdown in fund launches but a change in the type of new funds is anticipated. "We will see more aggressive-type funds such as distress asset funds, which will pick up cheap assets. However, subscription to the funds may be affected," he said.

Conventional funds launched for the first nine months of 2008 had increased by 40 to 407 compared to funds launched in 2007. Islamic-based funds have also risen by 16 to 144.
While the redemption rate of funds has increased slightly, the level remains low due to strong saving habits practised by Malaysians, said Tunku Ya'acob.

FMUTM technical chairman Tan Keah Huat said unit trust investors should continue investing especially when prices are weak to enjoy the upside when markets recover.
He expects an increase in net inflows for existing funds since purchasing more units at a lower price will lower the average price paid for all units. On FMUTM's ongoing initiative, it has appointed Mesdaq-listed Rexit Bhd to develop an e-Unit Trust system, which will shorten investors' application process for unit trust purchases using EPF (Employees Provident Fund) savings. "The manual process takes roughly two weeks and with this automation system, it should not take longer than six days," said Tunku Ya'acob.

The system should be in place by the first quarter of 2009. FMUTM will also introduce a fund volatility factor early next year for all funds with a three-year record and above.

What's happenin with gold prices??

By The Star

Gold prices shot up in aftermarket trading Thursday after stocks plunged again, sending investors scrambling for safe places to put their money. Silver also rose.

Gold for December delivery jumped $32.30 to $918.80 in electronic trading on the New York Mercantile Exchange, after earlier closing $20 lower at $886.50.

Investors bought up gold, a traditional safe-haven asset, after fears of a deepening financial crisis sent U.S. stocks tumbling in a late-session swoon.

The Dow Jones industrial average fell 679 points.

Gold has been on the upswing in recent days as panic ripples through world markets, touching off a desperate search for safe-alternative investments.

The precious metal is an attractive investment in times of crisis because it's known for holding its value.

Silver prices also jumped, with the December contract adding 30.5 cents at $12.18 an ounce, after earlier settling 10.3 cents higher at $11.875.

December copper rose 5.1 cents to settle at $2.406 a pound.

In energy markets, crude oil closed at its lowest level in a year as falling demand for energy outweighed news that the Organization of Petroleum Exporting Countries will hold an emergency meeting to discuss oil's downward slide.

Light, sweet crude for November Delivery fell $1.81 to settle at $86.62 a barrel on the New York Mercantile Exchange, the lowest closing price since Oct. 15, 2007.

In aftermarket trading, prices edged below $85, a key technical level that traders say could signal another plunge.

In agriculture markets, grain prices traded mixed on the Chicago Board of Trade.

Wheat for December delivery fell 3.25 cents to settle at $6.0475 a bushel, while December corn rose 10.75 cents to settle at $4.3825 a bushel.

November soybeans rose 16 cents to settle at $9.80 a bushel.

Air Asia is betting high, take note share holders

By Biz Times

AIRASIA, the region's biggest budget carrier, is making a risky bet.

As soaring fuel prices have forced other airlines to cut back, shed jobs and ground planes, AirAsia is doing the opposite: increasing flights, adding routes and boosting capital investment.
Last month, it even gave away a million free seats (although passengers still had to pay taxes and fuel surcharges). The seven-year-old company is aiming to fill the vacuum as other airlines reduce capacity, betting that more travellers will opt for budget flights amid a global economic downturn.

Analysts say if it survives the industry slump, AirAsia could come out a winner with increased customer loyalty and a strong route network to catch the growth wave when good times return.
"They are reasonably well-positioned for the long run, but there's always a trade-off. It's a long-term decision, which will cause some short-term pain," said Damien Horth, Asia transport analyst at UBS AG in Hong Kong.

Of course, the strategy could also backfire badly.

Last month, AirAsia reported a 95 per cent plunge in its net profit for April-June quarter to RM9.42 million. But the company chalked that up mostly to a RM77 million foreign exchange loss from a weakened ringgit, not weakness in its underlying business.
Average load factor - the percentage of seats taken up in an airplane - dipped to a still relatively strong 76 per cent, from 80 per cent in 2007.

It has a cash reserve of about RM1 billion, but outstanding debts stand at RM5.4 billion, giving it a net debt position of RM4.4 billion. Debts are set to grow as it receives new planes.

Chris Eng, analyst with OSK Securities in Malaysia, said AirAsia's growth prospects may be curbed, while its joint ventures in Thailand and Indonesia are expected to remain in the red.
"It will be challenging but we believe AirAsia can survive," Eng said, citing its efficient regional network and good cost control.

EPF Malaysia is the eighth largest fund in the world

By Biz Star

Malaysia’s national pension fund, the Employees Provident Fund (EPF), was ranked the eight largest fund of its kind in the world with US$94.66bil.

This is according to the latest Watson Wyatt Global 300 survey conducted with Pensions & Investments, a US investment newspaper.

The list included the country’s Pension Trust Fund (KWAP), at 22nd spot with US$14.55bil.
Watson Wyatt Asia-Pacific investment consulting head Naomi Denning said in a statement that Asia-Pacific sovereign pension funds grew by about 20% to US$1.8 trillion in 2007.

“Sovereign pension funds in this region have seen tremendous growth in recent years, along with the rapid growth in assets of sovereign wealth funds,” she said.

She added that strong equity returns last year contributed to the boost in asset growth.
Denning said that among sovereign pension funds ex-Japan, funds that enjoyed growth of more than 30% from the previous year included China’s National Social Security Fund (up to 38th position from 69th), India’s Employees Provident Fund(from 88th to 68th), Singapore’s Central Provident Fund (from 32nd to 22nd) and Thailand’s Government Pension Fund (from 285th to 241st).

Booming of Setapak Jaya's property?

By Biz Star

Developer plans Plaza Crystalville project

PROPERTY developer Crystalville Sdn Bhd, which already has a number of projects within Sri Hartamas, aims to turn Setapak into a vibrant business hub with the development of Plaza Crystalville @ Setapak.

Comprising four blocks of three-storey shop offices, the development is targeted at business operators rather than conventional purchasers, said chairman Datuk Azman Mahmood. “The principle is to have the Sri Hartamas lifestyle in Setapak. We hope to get buyers who are owner-operators rather than investors because the former will move in and start businesses there and make the area more vibrant,” he told Starbiz.

“There is a tendency for investors to purchase the property but not move in. We want the area to be buzzing with commercial activities to make the place more attractive.” Built on 7.5 acres of leasehold land, Plaza Crystalville @ Setapak will comprise 52 shop office units with a starting price of RM1.4mil each. The development will also have 400 parking bays.

Plaza Crystalville @ Setapak is located at Jalan Genting Klang, intersecting Jalan Langkawi and Jalan Taman Ibukota. It is accessible from the Kuala Lumpur city centre via North-South Expressway and Middle Ring Road 2.

The project has a gross development value (GDV) of about RM100mil. Construction will begin next month and the project is slated for completion by end 2010.

To date, about 54% of the shop offices have been taken up since its launch in June. Azman said he was confident of a full take-up by October. “Thus far, about 97% of purchasers comprise restaurateurs and other business operators. “Although construction costs have gone up 18% and 25% in the past few months, we are not increasing the price of the shop offices,” he said.
Azman added that Setapak was an up and coming location and could be the “next Sri Hartamas”.
“Lots of amenities such as hypermarkets and departmental stores like Parkson and Tesco are coming up in Setapak. There is even a medical centre there. Plaza Crystalville @ Setapak will definitely add value to the area,” he said.

On another note, the company is confident of a full take-up for Phase 4 of its Subang Alam residential development project by year-end. The development, which has a GDV of about RM35mil, comprises 30 units of two-storey semi-dees and five units of two-storey bungalows.
Since having a private launch last month, almost 40% of Phase 4 has already been snapped up. Azman said two of the bungalows had also been booked.

Subang Alam is located in Taman Bunga Raya, which is within the fringe of Subang Jaya/USJ and Shah Alam. It is accessible via all the major highways.

Azman said the majority of purchasers were from the USJ area.

Prices of the semi-detached homes begin at RM960,000 while the prices of the bungalows start from RM1.1mil.

The Subang Alam project is being developed by Subang Alam Sdn Bhd. Crystalville and Subang Alam have common shareholders.

Crystalville specialises in shop office development while Subang Alam’s core business is in residential projects.

Lafarge to pay RM700m in dividends? A worth while stock?

By Biz Times

Higher cash dividends, special cash dividends and capital repayment by the cement producer cannot be ruled out over the next 12 months, say analysts
LAFARGE Malayan Cement Bhd (LMC), the country's largest cement producer, may pay up to RM700 million in special dividends within the next 12 months, analysts say.

"We have not factored any special cash distribution in our model, but do not completely rule out the exercise over the next 12 months," Nik-hadi Nik-mahmood, an equity analyst at Deutsche Bank, wrote in a report this week.

Such a move would be a boon to shareholders as LMC returned some RM125 million through dividend payments in its last financial year, including a 20-sen regular cash dividend paid in May.

The total payout came to about 43 per cent of LMC's net profit of RM287.82 million in 2007, a tad higher than its five-year dividend growth of 31.95 per cent.

UBS Warburg, which has a RM5 price target on LMC, expects the share price to be re-rated once there is further clarity of its capital management initiatives.
These would include higher cash dividends, special cash dividends and capital repayment.
LMC, some 62 per cent owned by the world's biggest cement producer Lafarge SA, is banking on a share placement exercise to raise fresh capital.

As at December 31 2007, LMC had about RM115 million in cash.
If the company does take the capital repayment route, it will be following in the footsteps of several foreign-controlled public-listed companies in Malaysia, such as Telenor ASA with DiGi.Com Bhd and Jardine Cycle & Carriage Ltd with Cycle & Carriage Bintang Bhd.
LMC has until the end of the year to comply with a rule by the Foreign Investment Committee whereby it will carry out a special issue of 161.88 million new shares to selected Bumiputera investors.

Analysts said the exercise could raise as much as RM800 million, with some RM100 million to be used for expansion, leaving the door open for a special dividend payment in the future.
"There is scope for a cash repayment of up to 82 sen a share. The Bumiputera shareholding spread requirement deadline is the catalyst for the exercise. The management plans to maximise dividend payments after meeting its capex (capital expenditure) and working capital requirements," Nik-hadi wrote in his report.

LMC's current dividend yield and price-to-earnings (PER) ratio are also pull factors, Kim Eng Research contends.

"Valuations are very decent and dividend yield is an attractive six per cent. It is trading at a PER ratio of 10 times, which by historical standards is low," Kim Eng's Yew Chee Yoon wrote in a report last week.

Air Asia: People will still want to fly

By Biz Times

BUDGET carrier AirAsia Bhd expects to resolve any outstanding issues it has over the Low-Cost Carrier Terminal (LCCT) charges in two weeks.Group chief executive officer Datuk Seri Tony Fernandes said he met with Malaysia Airports Holdings Bhd (MAHB) managing director Datuk Seri Bashir Ahmad on Monday to discuss the amount it owes the airport operator."I am optimistic that we can resolve this because it was a meeting of minds... the issue with MAHB is coming to an end," he said, but did not elaborate.Fernandes was speaking to reporters at the inaugural session of investPenang's "The CEO Speaks" series in Penang yesterday.

Fernandes presented a talk on "Branding: Jazzing Up Your Business", which was launched by Penang Chief Minister Lim Guan Eng.AirAsia is disputing the amount it owes MAHB because it believes that charges at the LCCT should be lower than the KL International Airport's main terminal.It was reported that the actual amount accumulated since 2002 varies from the RM60 million mentioned in some reports to up to RM110 million as reported in Parliament.The matter was reported to have been brought to the Finance Ministry to resolve."It is a bonus for us to clear that," Fernandes said, adding that the low-cost carrier business is a new one and therefore took a little longer for various parties to understand its operating concept.

Asked whether AirAsia is planning to settle its debts with MAHB, Fernandes said: "We have resolved whatever historical issues which are outstanding and will need further discussions on the future."On the business outlook for AirAsia amid rising fuel costs, Fernandes said: "Despite 24 airlines around the world going bust, I am optimistic that people will still want to fly and we will continue doing what we are doing and ride through the storm."

AirAsia jumps most in 3 years

By Biz Times

AIRASIA Bhd, Southeast Asia’s largest low-cost carrier, jumped the most in more than three years in Kuala Lumpur trading, leading airlines higher, after the price of oil fell to a six-week low.The carrier rose 8.7 per cent to RM1 at 1.30 pm. Qantas Airways Ltd gained 5.6 per cent to A$3.58 in Sydney. China Southern Airlines Co, Asia’s biggest carrier by passenger numbers, surged 10 per cent to HK$3.43 in Hong Kong.Oil fell to US$127.95 a barrel yesterday in New York, down almost US$20 from July 14’s record close, on forecasts that Hurricane Dolly would miss oilfields in the Gulf of Mexico. Lower oil prices help airlines by cutting the cost of jet fuel, most Asian carriers’ biggest expense.“The drop in crude oil prices is definitely driving gains in airlines today,” said Um Kyung A, a Seoul-based analyst at Shinyoung Securities Co. “Still, there’s long way to go for airlines to turn profitable.”

Korean Air Lines Co, South Korea’s largest carrier, gained 5.4 per cent to 47,900 won in Seoul. Air New Zealand Ltd rose 7 per cent to NZ$1.23 in Wellington. Malaysian Airline System Bhd, the country’s national carrier, jumped 4.8 per cent to RM3.50 in Kuala Lumpur.In Hong Kong, Cathay Pacific Airways Ltd, the city’s biggest carrier, gained 5.2 per cent to HK$15.48. Air China Ltd, the world’s biggest airline by market value, climbed 5.4 per cent HK$4.49. Singapore Airlines Ltd rose 3.4 per cent to S$15.78 in Singapore.Airlines PlungeAirAsia has plummeted 38 per cent this year amid concerns that a near doubling of jet-fuel prices and a weaker ringgit will crimp earnings. The Bloomberg Asia Pacific Airlines Index, which tracks 17 airline stocks, has plunged 39 per cent.Surging fuel prices have forced airlines across Asia to raise surcharges, cut services and ground planes in a bid to defend profits. Qantas said last week it would axe 1,500 jobs worldwide, cancel plans to hire new staff and ground as many as 22 aircraft. Korean Air expects to post a second-quarter operating loss, president Lee Jong Hee said on July 17.The price of jet fuel rose 0.5 per cent to US$165.20 a barrel yesterday in Singapore. That’s 9.2 per cent lower than July 3’s record close of US$181.85. - Bloomberg

Malaysia's 2008 growth forecast cut to 4.6pc

By Biz Times

THE Malaysian Institute of Economic Research (MIER) has cut its forecast for the country's economic growth to 4.6 per cent from 5.4 per cent this year amid rising inflation and political uncertainties."It is likely that growth which would exceed five per cent in the first half, would deteriorate in the second half of the year as the economy takes the hit from the knock-on effects of higher oil prices and slower growth of our trading partners," said executive director Professor Datuk Mohamed Ariff Abdul Kareem.Speaking at a briefing in Kuala Lumpur yesterday, he warned that the current political instability may put off stock market investors as well as tourists."We are still one of the better economies in the region - comfortable foreign reserves, high savings rate, potential strength of the ringgit, high commodity prices, sound banking system - all support the economy, but if we can do something about the political situation I think the economy can do better than it can."

Domestic demand will be propped up by government spending, which would partly cushion the blow from a faltering global economy.MIER expects the economy to improve next year, expanding by five per cent. However, this could change if a global recession affects commodity prices.Soaring food pries and the rise in global oil prices are weighing heavily on economic prospects."Even with the subsidy cut, the fiscal deficit may reach 3.5 per cent of GDP this year as oil prices have increased further, drastically reducing the savings from the subsidy revision. The government would still have to fork out RM18 billion or more for fuel subsidy due to the subsequent hikes."

Malaysia Banks will be biggest winners: Analysts

By Biz Times

BANKS will emerge the biggest winners from a proposed move to ease customers’ housing loan payments.

Banking analysts contacted yesterday said home financing is a major business for most major banks and extending the loan tenure by even a minimum of one year could bring more income for the banks.

However, not many customers will opt for this “aid” as a longer loan tenure means extra burden.
“As it is, the duration of mortgage loans is usually up until the borrowers are 60 to 65 years old, and by adding an extra five to 10 years to that is undesirable,” one analyst said.

He added that most banks have already put in place a mechanism to help their customers restructure their loans on a case-by-case basis.

One such bank is Malayan Banking Bhd (Maybank), which has welcomed the call by the government for banks to assist borrowers with payment plans.

“Although we have not advertised the additional financial assistance, we have been offering our customers the flexibility to restructure or reschedule their financing on a case-by-case basis to ensure they are able to continue to meet their financial obligations,” said Maybank chief executive officer Datuk Seri Abdul Wahid Omar.

He said the bank will continue to engage with its customers and monitor the current position with a view to providing additional financial advisory services to customers in need of such assistance.

Second Finance Minister Tan Sri Nor Mohamed Yakcop told the Dewan Rakyat on Wednesday that the Finance Ministry is in discussions with banks to reduce the monthly repayments for housing loans to lessen the financial burden of the lower-income group.

Another analyst admitted that such a scheme would most likely attract low-income earners with housing loans of RM100,000 and below.

“This new arrangement can help banks reduce their cost in managing possible non-performing loans by this group of income bracket,” he said

Fans camping out in Asia for new iPhone launch

By Biz Times

Seeking to be one of the world’s first to grab the new-generation iPhone, fanatical Apple fans around Asia are queuing up two days before its launch, not discouraged by rain or freezing temperatures.The July 11 launch will be the first chance for Asian consumers to own an iPhone, and related websites have been swamped with inquiries and early orders.In Japan, one of the world’s most advanced mobile markets, about 20 people were lined up outside Softbank Corp’s flagship mobile store in Tokyo yesterday morning, with a sign at the head of the queue reading “We Love iPhone”. “The big appeal (of the iPhone) is that this is an Apple product,” said Hiroyuki Sano, a 24-year-old graduate student who early on Tuesday arrived in rainy Tokyo from Nagoya, 360 km (225 miles) west of the capital, to be first in line.

He will turn 25 today while waiting to get his hands on the high-end version of the iPhone with 16 gigabytes of memory.Apple also offers an entry-level version with an 8 gigabyte memory.“I’ve told my professor I was going to go buy an iPhone, and he gave me permission,” said Sano, wearing a T-shirt with an Apple logo. “He is an Apple-lover too, and he sent me off cheerfully.” The long-anticipated 3G iPhone, which has faster Web links than its predecessor and supports third-party applications such as games and email, will debut in Japan, Hong Kong, Australia, and New Zealand on Friday as part of the global launch in 22 countries.The original iPhone was only available in the United States and Europe, and the next-generation model is expected to go on sale in 70 countries by year-end.

Softbank, Japan’s third-biggest mobile carrier, will start selling iPhones at its flagship store at 7 am on Friday and expand sales nationwide at noon.Targeting a far bigger market with its new iPhone, Apple slashed the handset price and is allowing carriers to subsidise the phone this time around, making it easier for users to bring home the device.Research firm Enterbrain said 6.7 per cent of 1,200 people it surveyed in Japan wanted to buy an iPhone immediately.

WORLD’S FIRST Four New Zealanders with deck chairs, sleeping bags and a small tent started queueing on a chilly Tuesday night outside the Auckland shop of Vodafone, which will launch the iPhone at 12:01 am Friday, the first in the world.“I’m really just doing it to be able to say that I’m the first one in the world with one of these phones,” 22-year-old student Jonny Gladwell told the New Zealand Herald.Vodafone, New Zealand’s top mobile carrier, is selling the phone for as little as NZ$199 (US$150) in the country if consumers sign up for a two-year contract. Demand for pricing details was so heavy it crashed Vodafone’s New Zealand website on Tuesday.

In Hong Kong, Hutchison Telecom International was flooded by 60,000 online applications over the weekend from consumers who are hoping to grab one of just 500 phones on sale.A number of the more desperate would-be users pleaded online they needed the iPhone to appease demanding wives or stressed it was their birthday, according to Hong Kong media.The only woman in the Tokyo queue said she was securing places in line with her co-workers so that her company, Ubiquitous Entertainment Inc, can own iPhones and develop content for the device.

Despite the hype, analysts say Japan’s 108 million mobile subscribers who are already frequent users of Web browsing and email on 3G networks might not be easily wowed by the iPhone.Most of the people in the Tokyo queue told Reuters they plan to buy the device as their second cellphone.“We can expect certain demand from core Apple fans and others, but there will be users who would hesitate about buying the iPhone because of the high monthly charges of some 8,000 yen,” said Hironobu Sawake, a JPMorgan senior analyst in Tokyo.“Even though there will be other features that are more attractive than ordinary phones, the fact that the iPhone does not offer some features that are available on most handsets could turn off some users too,” he said.

AirAsia to take only profitable routes

By The Edge

Neither AirAsia Bhd nor its associate AirAsia X is jumping in at the chance of taking over all the unprofitable international routes that Malaysian Airline System Bhd (MAS) has given up in the last two years because some of those routes do not make commercial sense.

"We apply for routes that make sense to us, where we believe we can create new markets and offer consumers choice. It does not make sense to have our strategy being dictated by another airline's failures," AirAsia X chief executive officer Azran Osman-Rani told The Edge Financial Daily .

AirAsia X is the long haul budget carrier of AirAsia. He added that it also did not make sense to stop AirAsia X from flying on overlapping routes when foreign airlines were allowed to compete directly with MAS.

Azran was responding to comments by Transport Minister Datuk Ong Tee Keat that AirAsia was "welcomed" to apply for those routes cut by MAS.

Ong told the Dewan Rakyat in a parliament session yesterday that it was up to AirAsia to apply to take over the routes before the requests could be considered.

Those international routes deemed unprofitable by MAS include the Kuala Lumpur-Manchester, KL-Vienna, KL-Nagoya, KL-Xi'an, KL-Kolkata, KL-Padang, KL-Ahmedabad as well as Kuching-Perth, Kuching-Sydney, Langkawi-London and Penang-London flights.

Azran said except for the KL-London route, other European routes were not commercially viable, as its planes to be used for ultra-long haul destinations would not have enough seats to make those routes profitable.

It plans to use an Airbus 340 plane, which would have 390 seats for the KL-London route, which is expected to start commercial service early next year.

"What we want is trunk routes such as Sydney, Melbourne, New Delhi, Mumbai, Tokyo, Shanghai and Beijing, not those non-trunk routes that MAS has abandoned," Azran added.

He said it was vital to enable AirAsia to connect passengers on those trunk routes in order not to lose out to its low cost competitors such as Jetstar and Tiger Airways that were aggressively expanding their networks.

"Competition is biting at our heels. The government should make strategic decisions based on what is good for the country, not reactive to what MAS can or cannot do," Azran added.

Meanwhile, AirAsia chief executive officer Datuk Seri Tony Fernandes said the access to routes should be driven by the principle of safeguarding consumer interest to ensure that there were choices available and competition to keep airfares in check.

"Limiting access to any airline would deprive air travellers of choice and reasonable fares. The issue of non-competition between AirAsia and MAS should not arise because there is overwhelming concrete proof that all routes where our airlines compete, the overall market has grown by leaps and bounds

"MAS has also benefited as it is now making money in the domestic sector, whereby previously it was losing despite being the sole operator," he added.

Fernandes said it would also be a "travesty" to hold back AirAsia X from certain routes, while at the same time, Malaysia Airports was providing incentives to foreign carriers to fly routes that competed head-to-head with MAS.

"Moreover, history shows that these foreign carriers such as British Airways, Air France and now Jetstar have no loyalty to KLIA - retreating at the first sign of trouble," he added.

Inflation likely to hit 6-7pc in June 2008

By Biz Times

BASEL (Switzerland): Malaysia’s inflation is likely to have hit six to seven per cent in June and the central bank would take action on monetary policy in the event of generalised price increases, Bank Negara Malaysia Governor said yesterday.

In an interview, Tan Sri Dr Zeti Akhtar Aziz also said that domestic factors, including recent cuts in fuel subsidies, and a slower external economic environment could lower the growth rate below five per cent this year.

Costlier food and energy prices pushed Malaysia’s May inflation to a 22-month high of 3.8 per cent, even before the government raised domestic fuel prices in June.

“We expect inflation to rise, especially in the month of June following one of the adjustments by the government — the reduction in subsidies. Therefore, for the month of June, inflation is likely to be between six and seven per cent,” Zeti said here.

“We will monitor it very closely — whether this results in the pass-through to other consumer items and whether there are any second round effects like wage increases ... And the central bank will be prompted to take action in the event that it becomes a generalised price increase.”

Joining a growing rank of Asian countries unable to maintain hefty subsidies in the face of soaring oil prices, Malaysia raised petrol prices by 41 per cent this month and lifted diesel prices by 63 per cent as part of a broad reform of energy policy to prevent subsidies from eating up a third of its budget.

Zeti said when setting interest rates, Bank Negara had to assess effects of both higher inflation, as well as domestic and external factors moderating growth.

Zeti has said that the central bank had no immediate plan to hike interest rates if inflation tapers in the second half in line with its forecast.

The cost of borrowing has stood at 3.5 per cent — one of Asia’s lowest — for the 17th straight policy-setting meeting.

“Interest rate is an instrument of policy to deal with demand-driven inflation,” Zeti said.

“Our interest-rate policy is forward looking. We will look at what the risks are — upside risks to inflation and downside risk to growth as a result of a slower external environment, and as a result of a moderating impact of higher energy prices.”

Asked if investors were wrongly betting on a possible quarter- or half-point increase in interest rates, Zeti said:

“The market is assessing it, based on a price increase, and it is not wrong to assess that indeed prices are going to increase, based on the adjustment Malaysia has taken.”

Inflation is a problem vexing the broader Asia region’s policymakers.

Public Mutual to launch new Islamic equity fund

By the Edge

Public Mutual Bhd will launch a domestic Islamic fund, Public Islamic Optimal Growth Fund (PIOGF) on April 8 for investors who want an optimal combination of capital appreciation and income growth over the long term.

Its chairman Tan Sri Teh Hong Piow said PIOGF was an Islamic equity fund that sought to provide income and capital growth by investing in Syariah-compliant stocks which offer attractive dividend yields and growth stocks in the domestic market.

“PIOGF invests 50% of its equity investment in syariah-compliant growth stocks in the domestic market while the remaining 50% of its equity investment is invested in syariah-compliant stocks which offer attractive dividend yields,” he added.

The equity exposure of PIOGF will generally range from 75% to 95% of its net asset value. It is priced at 25 sen per unit during the 21-day initial offer period from April 8 to April 28. The minimum initial investment is RM1,000.

Air asia best in innovation

By Biz Times

AIRASIA Bhd has been recognised as one of the world's most innovative companies by Fast Company magazine, the only Asean brand and the only airline to make it to the "Fast 50" list.

Other notable companies include Google, Nike, Facebook, Apple, Disney, GE, BMW and IBM.

AirAsia ranked number 43 this year on the "Fast 50" list, announced in the March 2008 issue of Fast Company.

From green consumer-products phenomenon Method to 100-year-old Corning, which spends US$2 million (RM6.38 million) each workday on R&D, the list celebrates companies that are redefining the rules of business through new ideas.

Twelve of the 50 firms are based outside the US. Fifteen of them are based in and around the Silicon Valley.

"This is a feat we are very proud of, considering we are placed in the same platform as some of the most recognised brands in the world. We are humbled by this news as we've evolved from a Malaysian brand to an Asean brand within a short span of six years and to be recognised on the global front by the coveted Fast Company magazine, is indeed very rewarding," AirAsia group chief executive officer Datuk Tony Fernandes said in a statement.

Fast Company editors described AirAsia as "innovative down to its corporate bones".

"Most passengers think of it as one carrier, but it's actually a co-branded collection of several, a unique structure Tony Fernandes devised to allow AirAsia to set up hubs in three countries (Malaysia, Thailand, and Indonesia)," it said.

It also credited AirAsia for operating costs that are the lowest of any airline in the world, and so are its fares.

Previous awards won by AirAsia include "Airline of the Year 2007" by the Centre for Asia Pacific Aviation (CAPA) and the "Best Low Cost Airline in Asia" by Skytrax Research of London.

Fast Company's final 50 were selected from a list of 300 finalist companies. The magazine placed a high premium on companies that had demonstrated significant innovation over the past year. Actual rankings were determined by vote by a panel of editors and writers.

Fast Company is a monthly business magazine that reports on innovation, digital media, technology, change management, leadership, design and social responsibility. It was launched in November 1995 by Alan Webber and Bill Taylor, two former Harvard Business Review editors.

American O&G invest in IDR

By Star Biz

American oil and gas company Halliburton has opened a RM200mil manufacturing centre in the Iskandar Development Region (IDR).

The facility, spanning 20,000 sq m in Johor Technology Park, targets supply chain production and delivery capabilities across Halliburton’s completion and production division.

It is also the sixth eastern hemisphere-based manufacturing centre in the region, supplementing 16 existing production facilities across North and Latin America, Europe and Asia.

The Johor facility performs procurement and customer service activities as well as engineering, machining and product assembly primarily for customers in the Asia Pacific, Middle East, Africa and Europe Eurasia regions.

At present, the manufacturing centre has around 100 employees, with the headcount expected to exceed 250 by year-end.

Halliburton completion and production division president David King said the company was excited to launch a greater offering of its products and equipment to its customers in the region.

“The addition of the Johor facility is another step in our company’s strategic plan to concentrate more of our investment and supply chain resources to our key growth areas,” he said after the launch of the facility on Thursday.

Supply chain and management systems senior vice-president Len Cooper said the facility catered to Halliburton’s international customers while building regional supply networks that supported local economies.

Meanwhile, country lead for Central Asia, Rao Abdullah, said the company decided to invest in Johor given that the state was an economic development hub.

Halliburton plans to continue expand in the eastern hemisphere with a combined manufacturing and technology centre expected to open in Singapore later this year.

The group is one of the world’s largest providers of products and services to the energy industry.

Maybank buys Indonesia’s sixth largest bank

By Star Biz

Malayan Banking Bhd’s share price fell as much as 10.6% or 95 sen in early trade on Thursday on some investors’ concerns that it was paying a high price of RM8.6 bil for a 100% stake in PT Bank Internasional Indonesia Tbk.

It opened at RM8.40, down 55 sen. Within the first hour of trade, there were 14.81 million shares done at prices ranging from RM8 to RM8.45.

At 10am, it was trading at RM8.45, down 50 sen or 5.6%.

The KLCI fell points to 12.18 points to 1,233.24 as investors locked in gains, uninspired by the weak closing on Wall Street. US financial shares slid when concerns resurfaced that bank profits will take much longer than expected to recover from the housing slump. The Dow Jones industrial average closed down 109.74 points, or 0.88%, at 12,422.86.

On Maybank, OSK Investment Research said in a note to clients that the acquisition price was not cheap as based on the acquisition price.

“We must admit that the acquisition price is not cheap as based on the acquisition price, BII is essentially priced at 4.45 times and 61.5 times FY07 BPS and EPS, respectively, or 4.26 times and 33.0 times FY08 BPS and EPS,” it said.

However, it always believed that Maybank should expand its overseas presence in order to mitigate the saturated domestic market share.

“We believe the Indonesia banking sector offers more upside in the long-run as per the ratio of total outstanding loans-to-nominal GDP. However, due to the potential near-term profitability dilution, we have lowered our fair value to RM10.80 but maintain our BUY call,” it said.

On Wednesday, Maybank announced it wanted to take over Sorak Holdings Ltd, which has a 55.7% stake in PT Bank International Indonesia Tbk (BII), from Fullerton Financial Holdings and Kookmin Bank for RM4.8bil cash. It will later make a general offer for all BII shares it does not own. Starbiz reported that to some people, Maybank’s move to pay RM8.6bil, or 4.6 times book value, indicated how desperately the group wanted BII, Indonesia's sixth biggest bank.

The valuation is among the highest in the industry. The offer price is about 20% above Jakarta Stock Exchange-listed (JSE) BII's market price. The book value of 4.6 times is about double the average valuation among Indonesia's publicly traded banks.

The top four banks listed on JSE are currently trading at about 3.9 times. BII's net profit has been declining since 2004. For the year ended Dec 31, 2007, the bank's net profit fell to 404.7 billion rupiah (RM142mil) from 633.7 billion rupiah (RM222.3mil) in 2006.

Malaysia Tourism 2010

By Biz times

TOURISTS are expected to spend half of their money shopping in Malaysia by 2010, which will give the country its much sought after international shopping heaven status.

Tourism Malaysia calculates that tourists will be spending up to RM30 billion by then to buy anything from apparel and bags to watches and souvenirs.

It plans to promote the country more aggressively to achieve this goal, said Rosly Selamat, general manager of its Shopping Malaysia Secretariat.

"We need to make Malaysia more visible, especially in countries where the people love to shop," he told Business Times in an interview, adding that Thais, Indonesians, Koreans, Indians and Middle Easterners were among those keen to shop.

According to Rosly, Tourism Malaysia has proposed the lifting of duties on more items.

He said this would help promote Malaysia as a duty-free shopping destination and attract more tourists.

"There are still some items like apparel and jewellery ... removal of duties will help boost sales."

Rosly pointed out that Singapore and Dubai have the advantage of being tax-free for tourists.

Malaysia decided in 1999 to brand itself as a shopping heaven, competing against cities like Singapore, Hong Kong and Dubai - the long-established shopping destinations in Asia.

The then Ministry of Culture, Arts and Tourism decided that three nationwide sales would be held annually - in March, August and December - from 2000.

The ministry also gave itself four years, from January 2000 to December 2003, to become Asia's top shopping paradise.

However, eight years have passed and Malaysia has yet to catch up with Hong Kong, Dubai and Singapore as a shopping destination.

Tourism Malaysia has proposed the lifting of duties on more items as this will help promote Malaysia as a duty-free shopping destination

Gold hitting US$1,200 in three months

By Star Biz

US gold futures, which surged to a record US$1,001.50 on Thursday, is likely to breach US$1,200 an ounce within the next three months.

MIMB Investment Bank Bhd technical analysis manager Lee Cheng Hooi said gold could hit new highs this year on expectations of further Federal Reserve rate cuts and inflationary concerns.

“Based on monthly trends, gold prices are seen to be strong as investors see gold as a real and tangible asset and safe value haven amid economic uncertainties,” he added.

Aseambankers chief economist Suhaimi Ilias said gold was used as a hedge against the weakening dollar and inflationary pressures.

“History also proves that traditionally, gold is favoured during inflationary periods,” he said, adding that gold would continue its upward trend due to the volatility in the dollar.

TA Securities head of research Kaladher Govindan concurred that gold price, which was also driven by soaring crude oil prices that had scaled to a record US$111 a barrel, would continue to rise due to the weak US economy.

According to an AFP report, Asian economic giants China and India have also boosted demand for the precious metal, which is used in jewellery, dentistry and electronics.

“Gold, which is priced in dollars, becomes cheaper for buyers using other currencies when the US unit falls in value. The dollar slumped on Thursday against both the euro and yen as fresh credit jitters swept across global markets,” the report said.

The report added that gold price had risen by about 17% so far this year, spurred also by supply problems in the world's largest producer, South Africa.

“Stoppages by miners protesting unsafe working conditions and ongoing power cuts in South Africa have hampered supplies,” it said.

On the local front, Datuk Andrew Kam Tai Yeow, chairman and chief executive of London-listed Malaysian gold miner Peninsular Gold Ltd, said the overwhelming global demand for gold bode well for the local gold mining industry.

The company has invested RM60mil in the East Coast Economic Region to build a plant in Raub, Pahang. The plant, expected to start production soon, will be able to extract 85% of the gold residue left in mine tailings.

“We would consider increasing our investment as we see a lot of potential, going forward,” he said.

However, trading in local jewellers such as Poh Kong Holdings Bhd and DeGem Bhd was thin despite the recent spike in gold price.

An analyst attributed this to the local political situation and global volatility.

The upward trend in gold price would not necessarily translate into higher share prices for gold jewellers; instead investors preferred to invest in the commodity itself, the analyst added.

Yeah man, quickly go to yr nearest Poh Kong! i'm not joking man!

Air Asia future and goals

By Star Biz

AirAsia is not a beverage, yet Datuk Tony Fernandes, who has been instrumental in building the low-cost airline, believes that the AirAsia brand can become as popular as Coca-Cola.

His wish is to see the AirAsia’s name plastered across billboards and banners in travel offices around the globe, even on watches and football stadiums, in six years.

A recent article described Coke as “truly a model of marketing power as its image has transcended national borders to cultural barriers to reach almost everyone on earth”.

“I would like the AirAsia brand to be as big as Coca-Cola,” Fernandes, the group CEO of AirAsia, told StarBiz in an interview recently.

“Given fair competition, we can be as big or even bigger than Singapore Airlines (SIA) too.

“We can be, and it is my goal that we, AirAsia, become bigger than SIA, and carry more passengers than SIA.”

He is using SIA as the benchmark as it is a well-recognised global airline brand although the national carrier, Malaysia Airlines, has for several years been winning accolades for having the world’s best crew.

But in terms of brand reach, Fernandes prefers the market reach to be as big as that of Coke.

“Even before AirAsia can fly to Europe, it was already flying Europeans and other nationalities around Asia and that just goes to show that our brand is spreading all over.

“AirAsia is a strong brand and an airline that has managed to create a market for itself. It has gone beyond Malaysia’s borders and would continue to carry the Malaysian flag to more countries,” he said.

Today, AirAsia flies 90 routes and to 47 destinations, has a fleet of 67 aircraft and has ordered 175 new aircraft in the hope of becoming as big as Ryanair. It employs nearly 5,000 people.

Ryanair, according to its website, was set up in 1985 and is today Europe’s largest low-fare airline. This year, Ryanair will carry 52 million passengers on 645 low-fare routes across 26 European countries.

By the end of March, Ryanair will operate a fleet of 163 new Boeing 737-800 aircraft and has placed firm orders for 99 more new aircraft to be delivered over the next five years. The airline employs 5,000 people.

AirAsia's sister company, AirAsia X, is a long-haul low-cost carrier which began flying passengers last November. Its first destination was Australia's Gold Coast and the airline has now added Hangzhou to its network.

More destinations are on its route map but the airline needs to get new planes before it can start operating more routes. It wants to reach out to as far as London to connect Asians to Europe and vice-versa.

AirAsia was incorporated in 1983. It started off as a joint venture between Hicom Holdings Bhd and Mofaz Air Sdn Bhd but only took to the skies in November 1996 after a two-year delay.

The idea of setting up a second airline for Malaysia was to offer travellers new destinations to complement MAS' regional services. But it did do as expected and was sold to Tune Air Sdn Bhd in September 2001 for RM1.

The deal was completed five days before the Sept 11 attacks that threw the aviation sector into a tailspin. Many people had then wondered if Fernandes and his friends, who were from the music industry, knew how to operate an airline amid turbulent times. Not long after that, the Severe Acute Respiratory Syndrome outbreak also shook up the aviation sector.

Tune Air’s strategy was tactical. It re-launched the brand and used red as a base coat. The airline lured travellers by offering several hundreds free seats. Low-cost travel was a new thing then and the promoters of AirAsia just knew how to get people excited with its low, and at times zero, fares.

Many first timers flew with AirAsia and this speaks volumes of the airline's tagline “Now, everyone can fly.” With AirAsia, Malaysians had the choice to travel cheap and it is no a surprise that one planning a holiday would ask: “Does AirAsia fly there?''

AirAsia, as a brand, has gone beyond cities to towns and small villages. Today, it links many Asian cities to Kuala Lumpur. Soon, it will be linking Europe, India and the Middle East to Malaysia.

Entering the Singapore market was a major coup for the airline, which initially had no future in the republic. Today, it provides the linkage for many travellers from Singapore and via Singapore to Malaysia and Asia at low fares.

Giving away free seats and dropping fares to very low levels has helped the brand spread. Encouraging travellers to book online has allowed many to book seats from remote cities anywhere in the world.

Fernandes said many new routes and destinations were on the cards. “We will fly to Amritsar and London soon,” he promises.

Many AirAsia billboards and banners will be put up in other countries but will the AirAsia brand eventually come close to the omnipresence of the Cocal-Cola name?

A lot of work lies ahead of AirAsia as the clock starts ticking.

KL share market slumped

By Biz Times

MALAYSIAN shares plunged 9.5 per cent today in a session marked by a one-hour trading suspension as surprise weekend election results shook the stock market, dealers said.

Trading was halted when the stock market fell 10 per cent during the day, after the Barisan Nasional coalition lost its two-thirds majority in parliament.

It was the biggest decline in a decade, since stocks dived 21 per cent in a single session at the height of the Asian financial crisis in September 1998.

Bursa Malaysia said the stock market was suspended between 2.58 pm and 3.58 pm, when the 10 per cent drop triggered a failsafe.

The losses continued when trading resumed, but by the end of the session the Kuala Lumpur Composite Index had recovered slightly and closed down 123.11 points to 1,173.22.

Yeah Kim Leng, group chief economist with RAM Holdings Bhd, said the dramatic fall, which was also compounded by fears of a US recession, had been much steeper than anticipated.

“I only expected the bourse to dive by five per cent Monday,” he said.

Dealers said there was some element of panic selling but that volume was still manageable and that the selldown was confined to blue chips and big caps.

The worst-hit sectors were construction, services and property.

Declining stocks overwhelmed advancers 905 to 26, with 62 stocks unchanged and 435 counters untraded. Trading volume totalled 1.2 billion shares, valued at RM3.2 billion.

The construction sub-index plunged 15.8 per cent or 40.7 points to 217.41 while the property sub-index dived 9.2 per cent or 77.4 points to 761.93. The services sub-index tumbled 9.7 per cent or 16.94 points at 157.36.

Yeah said the bourse was expected to head south for the next few days but that it would later rebound.

“The Barisan Nasional is still in power and the country’s economic fundamentals remain intact,” he said.

Among construction and property stocks, Malaysian Resources Corp sank 66 sen or 34.0 per cent to RM1.27 and Equine Capital dived 72 sen or 50.4 per cent to 71 sen.

National power company Tenaga tumbled 1.30 sen or 15 per cent to RM7.35, while Telekom Malaysia shed 95 sen or 8.7 per cent to RM9.95.

Singapore invest in citigroup?

By The Edge

Investment guru Jim Rogers believes US bank stocks could fall further and predicts Singapore’s state investors will lose money on their multi-billion dollar investments in Citigroup and Merrill Lynch.

“I’m shorting investment banks on Wall Street,” Reuters reported the long-time commodities bull as saying yesterday at a launch event for ABN AMRO certificates linked to commodities.

“It grieves me to see what Singapore is doing. They are going to lose money,” he added, referring to investments by Government of Singapore Investment Corp and Temasek in Citigroup, Switzerland’s UBS and Merrill Lynch.

Rogers, an American who co-founded the Quantum Fund with billionaire George Soros in the 1970s, now lives in Singapore as he wants his four-year-old daughter to learn Mandarin.

Rogers, who also writes investment books, said Wall Street had to work off 10 years of excesses and predicted that losses linked to risky mortgages will eventually spread to credit card bills, student loans and other debt.

Meanwhile, Bloomberg quoted Rogers as saying that crude oil prices would go up much higher, but “how high I don’t know”.

“Commodities are going to go higher because there’s just not enough. The dollar’s weakness is the icing on the cake for commodities.”

On stocks he was buying, Rogers said: “I have been buying Chinese shares, water treatment, power generation and tourism. I plan to buy more shares in China. I bought more Taiwan this week. I’m buying the renminbi, Swiss Francs and the yen.”

“Inflation is going to get worse and you have to be prepared for higher prices of everything. Higher prices always eat into demand patterns but that’s part of the cycle,” he said.

Analysts expect slower corporate earnings growth mainly because of a global economic slowdown and inflation 2008

By Biz Times

THE recently concluded reporting season saw most of the country's top 100 listed companies posting solid numbers, thanks to bright results by lenders, oil and gas service companies, palm oil producers, and property and construction firms.

A closer look at the top 25 companies by market capitalisation showed that five registered lower net profits in their quarterly results, while three posted lower earnings in their cumulative financial results. None, however, made losses.

Analysts, in general, were happy to see the results of Malaysia Airlines and Public Bank, while those of Malayan Banking, Puncak Niaga, YTL Power and conglomerate Sime Darby were below expectations.

"Most of the companies under our coverage are either above or within our expectations," MIMB Investment Bank research head Pong Teng Siew said.

However, analysts expect slower earnings growth this year, due mainly to a global economic slowdown and inflation.

"We expect companies under our coverage to grow by about 10 per cent this year, slightly below the 12. 2 per cent growth in 2007," said Pong.

The good news is that the weaker earnings estimates do not apply across all industries. Companies involved in steel, plantation, and oil and gas are seen as major beneficiaries.

Steel companies are expected to benefit from ceiling price adjustments and demand from China, plantation firms to see better numbers helped by higher crude palm oil prices, and multi-billion-ringgit jobs to be up for grabs by oil and gas firms this year.

Construction companies are also expected to see earnings growth as many major infrastructure projects under the Ninth Malaysia Plan (9MP) have yet to be awarded.

"We expect the award of contracts to take place after the elections, which are critical in meeting the objectives of the 9MP," Kenanga Investment Bank said in a report.

Foreign investment coming into Malaysia?

By Biz Times

BRITAIN'S Newcastle University will set up its first international branch campus within the Iskandar Development Region (Iskandar), putting the price of medical studies within reach of Malaysians.

South Johor Investment Corp Bhd (SJIC), the promoter of Iskandar, said the university will offer degree courses in medicine and bio-medicine studies.

"While the university's Iskandar campus is expected to be completed in 2011, the target date for the first intake of students will be for September 2009," SJIC said in a statement.

Higher Education Minister Datuk Mustapa Mohamed handed over the letter of invitation to the university's dean of International Medical Education professor Reg Jordan in Johor Baru yesterday.

Mustapa said students could get a Newcastle University medical degree at about half the cost of doing so in the UK.

"The cost for completing a course in the UK is currently about RM1 million for a five-year programme," he said.

According to SJIC, the Newcastle University will be housed in the Iskandar region under its EduCity concept.

EduCity is a fully integrated education hub where all the educational disciplines will come together in one location.

"EduCity serves to provide a platform for facilities from world-renowned universities to work together within a multi-varsity university environment," SJIC said.

SJIC will develop the campus, accommodation and recreational facilities for EduCity, and is currently finalising the design of the campus. Infrastructure work is expected to commence in the third quarter this year.

Do u think all the corridors proposed by our malaysia prime minister Abduallah Ahmad Badawi will succeed? hahaha...

Unit Trust in Malaysia

By the Edge

The Securities Commission (SC) is streamlining regulations governing the unit trust industry to enable benchmarking against international standards and enhancement of fund management while spurring the growth of the industry.

Its chairman Datuk Zarinah Anwar said the revised guidelines, to be issued on March 3, would make it easier for fund managers to develop the necessary capabilities to improve their global fund management skills to meet investor expectations for better returns from its investments.

Within the investment management industry, Zarinah said unit trust funds were the largest contributor to assets under management, with the number of funds in operation growing 26% in 2007 to 495, of which some 128 were Islamic funds.

The Malaysian unit trust funds, which hold a 45% share of the local equity market, the largest share among Asean bourses, saw its net asset value (NAV) grow 39% to RM169.4 billion last year, while total investments abroad grew 79% to RM15.16 billion, representing 10% of assets under management.

Speaking at The Edge-Lipper Malaysia Fund Awards 2008 here yesterday, Zarinah said the SC would allow the dissemination to investors of an abbreviated version of an interim report on a fund’s performance.

“We want to make it easier for investors to track their investments. However, the full version of the interim report must still be prepared, made available upon request and posted on the unit trust manager’s websites.”

The revised guidelines include the removal of prescriptive investment restrictions, such as a limit on exposure to options and futures, which would be replaced with prudential limit for investments in derivatives.

“This allows more flexibility to fund managers to transact in derivatives other than for risk management purposes. It would also allow unit trust managers to launch new products that predominantly invest in derivatives,” she said.

To increase domestic fund managers’ competitiveness in the region, Zarinah said SC’s approval for fund managers venturing into foreign markets would be removed on condition that the markets fulfil certain criteria, such as their home regulator being a member of the International Organisation of Securities Commission (IOSCO).

She also said cash borrowing restrictions would be lifted to allow for redemption requests without the need to dispose of assets in a fund’s investment portfolio, which could affect the interest of the remaining unit holders.

Asked on the SC’s move to revise its unit trust regulations, ING Funds Bhd chief executive officer Steve Ong said: “This would help local fund managers to respond better to market needs and market volatility because investments today are moving very fast.”

“As we are looking at different asset classes and investment structures, this move towards relaxing guidelines and restrictions would give fund mangers the option to structure more product solutions for customers.”

On the issue of wholesale funds, the SC would allow cash borrowing for investment purposes as wholesale fund investors were more sophisticated and receptive to higher levels of risk, Zarinah said.

“The relaxation to borrow cash for investments will provide greater flexibility for fund managers to meet investor’s expectations,” she said, adding qualified investors (institutions) for the fund would be expanded, allowing trust asset investors with more than RM10 million to invest in wholesale funds.

SC revises guidelines to boost unit trust industry!

The Great potential of rubber in Malaysia

By Biz Times

MALAYSIA exported RM5.88 billion worth of rubber gloves in 2007, the fifth consecutive year of rising exports, despite challenges of profit erosion from the weakening US dollar and costlier shipping.

Malaysia maintained its position as the world’s biggest rubber glove exporter, churning out some 40 billion pieces last year.

“Last year’s rubber glove exports added another RM430 million to RM5.88 billion,” said Plantation Industries and Commodities Minister Datuk Peter Chin Fah Kui.

“This is a very good achievement considering our rubber glovemakers had to contend with the devaluing of the US dollar and costlier freight rates,” he told Business Times.

The rubber industry has been the pillar of Malaysia’s economy since colonial times and continues to contribute to export earnings, employment and income generation.

Spurred by the government’s industrialisation drive in the 1980s, Malaysia became the world ’s No.1 exporter of rubber gloves, catheters and latex thread.

In a separate interview, Malaysian Rubber Glove Manufacturers Association (Margma) president Oon Kim Hung expressed confidence of a reasonably good growth this year despite the impending price hike in natural gas.

Rubber gloves manufacturing is among the heavy users of natural gas.

An increase in natural gas pricing will hit manufacturers twice — once through natural gas and secondly via electricity tariffs — as the power sector is expected to pass through the added costs to industrial consumer s.

Asked how rubber glovemakers will cope with the prospective burden, Oon replied: “We ’ve submitted our appeal to the government to consider that any increase in gas prices be implemented on a staggered basis. ” “Rubber glove prices will go up as raw material and fuel costs escalate. Depending on whether all 48 Margma members are selling forward or via spot contracts, consumers are informed of costlier natural rubber and transportation and freight costs,” he said.

Another challenge lies in the possibility of the slowdown in the US economy having a negative impact on Malaysian exports.

Oon said American hospitals will continue to buy from Malaysia because medical gloves are a necessity.

“Even hospitals in developing countries like China, India and Vietnam are starting to buy our rubber gloves,” Oon said.

*I always believe there is great potential for rubber industry in M'sia with our tropical weather! hehe.. Go Durex! lolx..