28 September 2010

Bakun Dam - Malaysia or Sarawak?

- Putrajaya agrees to sell the multi-billion RM Bakun Hydroelectric Dam
- No power transmission to peninsular as a result which could span 670km and costing RM9bn
- Cabinet has agreed on the Sarawak's government's proposal


Multi-billion question: At what price?
- Official overall cost of project is RM7.3bn (not yet factor in cost overruns, compensation for delays & interest)
- Speculate price tag RM8bn, but, Sarawak was expecting a mere RM6bn only

Why such a BUYing impulse?
Sarawak said the state needs the electricity generated to power up its SCORE corridor, which still do not has concrete investment yet. However, Kuching deny there will NO power glut by stressing the demand is there to meet soon.

21 September 2010

6 Key Takeaways from ETP open day

Key Takeaway from Economic Transformation Programme (ETP):
  



Transforming Klang River to River of Life ?

Funding ?

Throughout the presentation, this sentence keeps on repeating to remind us... So did here...
 
Source: www.pemandu.gov.my

18 September 2010

Understanding REITs

What is a Real Estate Investment Trust (REIT)?
A REIT is a collective investment scheme that invests primarily in income-producing real estate assets such as shopping centers, offices, warehouses and hotels. To qualify as a REIT, a fund must have most of its assets and income tied to real estate investment and must distribute at least 90% of its total income to unit holders annually. In Malaysia, REITs are exempted from corporate tax if it distributes at least 90% of its total income.

Who is unit holders?
Every investor (like us) who invest into REITs are called unit holders, and entitled to receive income distributions (dividend).


Why invest in REITs?
REITs typically provide high income distribution (currently, 6-10% annually) plus the potential capital appreciation. Comparing 3-4% fixed deposit rate, REITs dividend yield is definitely better.

How to invest in REITs?
One can buy units in any REIT, which is listed on Bursa Malaysia, just like normal stocks trading.

Differences between REITs and Unit Trust?
Direct vs Indirect investment. Almost the same.

How often REITs makes an income distribution?
It depends on respective REITs, usually semi-annually or quarterly.

What is the Tax treatment of unit holders?
Withholding tax will be deducted for distributions made to the following categories:

Risks involved in Malaysia REIT...
- Low liquidity
- Unfavorable interest rate environment
- Deflation and Devaluation of assets

Finance Malaysia's view:
Generally, REIT is suitable for everyone (young, experienced, rich, resourceful, professional...) because it is an hassle-free exposure to real estate investment. Finance Malaysia hopes that more players will join the REIT bandwagon in Malaysia, such as IGB (Mid Valley City), IOI Corp, and even AEON's Jaya Jusco.

Coming next...
- More on M-REIT
- 5 rules of thumb on MREIT investing

16 September 2010

Why Great Eastern chose KATM as its partner?

Referring to previous article "Issuance of New Family Takaful Licenses" on 1st September 2010, many people are skeptical about Great Eastern's (GE) partner -- Koperasi Angkatan Tentera Malaysia (KATM). Given the other 3 new consortium which partner with banks, I am not surprise by those reactions.

To recap, the 4 new family takaful licenses:
  1. AIA with Alliance Bank
  2. Ambank with Friends Provident Fund (UK)
  3. ING with Public Bank and Public Islamic Bank
  4. GE with KATM
KATM, the country's Armed Forces multi-purpose cooperative, is however, no stranger to the insurance industry and it is a substantial shareholder of PacificMas with 16.4% stake. Meanwhile, Pacific Insurance Bhd is a wholly-owed subsidiary of PacificMas. (See picture below to see the GE-KTAM relationship)


Why with KATM?
KATM has 140,000 members which could be a huge market for GE to tap into. Another reason is that GE has to look into it's agents rice-bowl as well, if GE was to tied up with a local bank. Instead, GE dive into the 'blue ocean' where KATM is an untapped market of their existing agents. Other than that, this kind of partnership is well-isolated from political view, as KATM is not a company and it was not linked with government either.

Going forward...

Business Times had reported almost a year ago that Great Eastern had roped in former Prudential BSN Takaful Bhd chief executive officer Mohamad Salihuddin Ahmad to head its Islamic insurance operations.

Great Eastern would have a clear head-start compared to the other new takaful operators come next year and its reputation itself would give its an extra mileage.

Great Eastern is the largest insurance group in Singapore and Malaysia, with assets of S$48.5 billion (RM112 billion) as at February 10 2010 and 3.8 million policyholders in both countries.

On 30th August 2010, PacificMas saying it plans to sell its entire stake in Pacific Insurance Bhd to Fairfax Asia Ltd (Canadian company) subject to Bank Negara Malaysia's approval.

12 September 2010

Again, Malaysia falls in competitiveness

The 2010-2011 Global Competitiveness Report placed Malaysia 26th among 139 economies, from 24th out of 133 countries in the previous report. The report was released by the World Economic Forum (WEF) recently.
 
 
According to the report, Malaysia's position has been on a declining trend in the past three years since its 21st position in 2008-2009.
 
Four main areas affecting Malaysia ranking:
  1. Higher education and training
  2. Institutions
  3. Technological readiness, and
  4. Labour market efficiency
Meanwhile, among the 22 Asia-Pacific countries, Malaysia was ranked at 8th position ahead of China, Thailand, India, Indonesia, the Philippines and Pakistan.




Recommendations made by WEF:
  • Improve its higher education system, especially increasing enrolment rates at the secondary and tertiary levels.
  • Prepare to convert into an innovation-driven country where companies compete through innovation, producing new value-added and different goods using the most sophisticated production processes.

In terms of technological readiness, Malaysia is lagging behind with 57.6% internet users and 6.1% broadband internet subscribers only. (Hopefully, YTL can rolled out it's WiMax as scheduled this coming November)
 
.                                                                                                                 .
 
From my observation, Malaysia are lacking in terms of people, people who can drive Malaysia to become a high-income nation. The mindset of our people MUST change, and MUST change it fast, and MUST change it correctly to rectify the problems which plaguing our nation from moving ahead in this 21st century.
 
* Finance Malaysia strongly believe that the successfulness of 1 nation is determined by every1 of us.
 
Source: Business Times, World Economic Forum websites

05 September 2010

Developing Pudu Prison

When government announcing their intention to develop the controversial Pudu Prison site, questions popped up on who is the developer(s)?

Since then, UDA Holdings Bhd is awarded by government to spearhead the lucrative project, speculating other prominent developers also will come into the project as joint-developer. Etc, Mah Sing group, Berjaya, and YTL Corp. However, according to UDA chairman Datuk Nur Jazlan Mohamed, UDA ultimately will be the master developer anyway.


History of UDA

TheStar: The interest surrounding UDA is, to some extent, due to its original mandate given by the Government. Originally a government agency, UDA was formerly known as Urban Development Authority. It was set up in 1971 to promote planned urban development and to elevate bumiputra economic participation in urban areas.

The Pudu prison site is not Malay reserve land. Even then, the bumi factor has cropped up. It is on this note that UDA chairman Datuk Nur Jazlan Mohamed drew some conclusions between property development and bumiputra ownership.

“We must have a mix (in ownership) to do justice to the land value. This is a project for the country. I don’t want to put a figure to it (ownership mix), but there must be a mix,” he tells StarBizWeek.


Personal Opinion

Undeniably, this is a multi-billion land, if it was developed properly. Planning is crucial to make the project successful, unlock the full potential value of the land, and integrating the it to the surrounding area which comprises Berjaya Times Square, Sungai Wang Mall, and whole stretch of Jalan Bukit Bintang. Traffic spill over is almost guaranteed given the presence of Malls and LRT station situated nearby.

In fact, the bumi issue should not be raised up as this is not a Malay reserve land, if we want to achieve the objectives stated above. It must be planned and developed in an open-minded way, without touching on race issue, and instead, should focus on the demand of the targeted group - businessman.

Tips to UDA:
There is a overly crowded commercial area nearby (across the LRT line), where there is an over-demand of commercial lots for whole-sale business, which are fetching a very, very, very high rental rates now. All you need is just to build a bridge, linking it to your site, catering for their business and you sure can get the spill-over rental effect. Think about it.

01 September 2010

Issuance of New Family Takaful Licences


Following the announcement made on 27 April 2009 on the issuance of two family takaful licences under liberalisation of the financial services sector, Bank Negara Malaysia has received several strong applications for the family takaful licences.


Given the more favourable prevailing economic conditions since the announcement and the vast potential to further enhance the insurance penetration rate in Malaysia and in the region, there are tremendous growth opportunities for the insurance and takaful industry in supporting the requirements of the economy. In view of these considerations and the strength of many of the applicants, there is an opportunity to allow more players in the Malaysian takaful sector. In relation to this, the Minister of Finance has approved the granting of two family takaful licences in addition to the two licences that have been announced earlier. Bank Negara Malaysia therefore wishes to announce that the Minister of Finance has approved the issuance of the four family takaful licences pursuant to the Takaful Act 1984 to the following joint ventures:
  • American International Assurance Berhad (70%) and Alliance Bank Malaysia Berhad (30%);
  • AMMB Holdings Berhad (70%) and Friends Provident Group plc, UK (30%)
  • ING Management Holdings (Malaysia) Sdn Bhd (60%), Public Bank Berhad (20%) and Public Islamic Bank Berhad (20%); and
  • The Great Eastern Life Assurance Company Limited (70%) and Koperasi Angkatan Tentera Malaysia Berhad (30%);

In assessing the applications, Bank Negara Malaysia has taken into consideration the applicants' financial soundness and resilience, track record, expertise, business plan and contribution towards financial sector development in Malaysia. The new family takaful operators have strong value propositions that will further enhance the development of the family takaful industry in Malaysia, in particular in penetrating untapped areas of business within the family takaful industry including microtakaful, medical and retirement products. They will also contribute strongly towards reinforcing Malaysia's position as an international Islamic financial hub.


Bank Negara Malaysia
1 September 2010
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