Published July 17, 2009

Crucial victory for Anwar in sodomy trial

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(KUALA LUMPUR) Malaysian opposition leader Anwar Ibrahim won a key ruling in his sodomy trial yesterday, forcing the prosecution to hand over evidence including video footage and medical reports.

Mr Anwar: Says there is still no certainty that he would get a fair trial

The High Court ordered government lawyers to produce witness statements and reports from doctors who examined Mr Anwar's accuser, 24-year-old Mohamad Saiful Bukhari Azlan, who was an aide in his office.

Mr Anwar welcomed the decision but said there was still no certainty he would get a fair trial.

'I would say that we are glad with this particular judgement but we have to go through the processes. Because of past experience, we cannot be too presumptive,' he said.

He also said he was concerned that the court had denied the defence team access to DNA specimens, and criticised the prosecution's plans to file an appeal on the decision to release evidence, saying it was a delaying tactic.

The 61-year-old opposition leader faces a maximum sentence of 20 years' imprisonment if he is convicted of the charges, which he says are a conspiracy to frustrate his political ambitions. An earlier sex conviction was overturned in 2004, allowing him to go free after six years in jail.

His opposition alliance stormed onto the political scene in landmark elections last year, winning control of five states and a third of seats in parliament in an unprecedented result against the Barisan Nasional coalition.

Human Rights Watch this week called on Malaysia to drop the 'politically motivated' charges. 'This trial is a bald-faced attempt to permanently remove an opposition leader from Malaysian politics,' said the US-based group's deputy Asia director Elaine Pearson.

Mr Anwar's defence team also plans to pursue two other applications - to throw out the case altogether, and to have the prosecutors removed - before the trial itself can get under way. -- AFP

Published July 17, 2009

Manufacturing sales in M'sia dip 26% in May

But the RM36.6b amount is 2.2% higher than in April, shows Mier data

By PAULINE NG
IN KUALA LUMPUR

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MALAYSIA'S manufacturing sales sagged almost 26 per cent in May to RM36.6 billion (S$14.9 billion) from a year ago. But their value was 2.2 per cent higher than in April.

With the general slump persisting, the Malaysian Institute of Economic Research (Mier) suggests, another RM8 billion may be required in stimulus spending to mitigate a sharper contraction in the economy, which it now projects to shrink 4.2 per cent this year, instead of 2.2 per cent.

The number of employees in the sector continues to decline. In May, it was 935,761 - almost 78,000 or 7.7 per cent lower than a year ago. Compared with April, the number of workers employed was 7,710 or 0.8 per cent lower.

The figures for the first five months of 2009 are telling. The sales value of manufactured goods plunged more than a quarter to RM177 billion - RM62.2 billion down from RM240 billion in the same period last year. On the jobs front, the sector employed 77,600 fewer workers.

With Malaysia already in a technical recession, the government may have little option but to loosen the purse strings if economic recovery is anaemic, Mier executive director Mohamed Ariff said in a presentation on the economy yesterday.

Having announced two stimulus packages amounting to RM67 billion over 2009-2010, Prime Minister Najib Razak is reluctant to increase spending, especially as the budget deficit is expected to hit 7.6 per cent of gross domestic product this year, and going beyond 8 per cent next year. Spending an extra RM8 billion would swell the deficit closer to 10 per cent and put the country's sovereign ratings at further risk.

Of the RM60 billion allocated in the second package, only a quarter or RM15 billion is direct spending - an amount that Mr Ariff believes could be insufficient, especially if it is not quickly and efficiently implemented. Potential leakages are another area of concern, and even though RM7 billion of the initial spending package has been allocated, most businesses say that the effects have not been apparent.

Mier said that recent moves to liberalise the services sector and policy changes to bumiputra quotas that make listings and corporate and real estate transactions less restrictive would not have an immediate impact, but could attract more investors when the global economy recovers. On a brighter note, Mier's indices show that the changes have significantly boosted consumer and business sentiment.

Although the rate of decline eased slightly in some sectors in May, Mier said, monthly indicators were 'still losing momentum markedly'.

The 11 per cent drop in industrial output in May was narrower than the 18 per cent year-on-year fall in January. But exports have yet to show signs of stabilising - in May, the dive was almost 30 per cent. Foreign direct investment has also fallen off the cliff, totalling just RM4.2 billion as at May - a tenth of the RM46 billion netted last year.

Mier anticipates global recovery to be gradual or U-shaped and has downgraded Malaysia's growth next year to 2.8 per cent, from 3.3 per cent. Malaysia expects the economy to contract between 4 and 5 per cent this year.

Published July 17, 2009

Horizon brightens for property groups

By KALPANA RASHIWALA

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THE outlook is more sanguine, as listed property developers get ready to announce their financial results for the six months ended June 30. The strong pick-up in private home sales in the past five months - and a nascent recovery in prices - is providing cheer, contrasting with the gloom that lasted until the early part of 2009 after the financial meltdown.

ION Orchard: An amendment to FRS 40 requiring investment properties under construction to be valued could have bottomline implications on developers of projects like ION Orchard

JP Morgan analyst Christopher Gee is tracking 'if developers' own outlooks and strategies have changed as a result of the upturn in home sales and general economic prospects'.

Against a brighter horizon, some concerns prevalent among property analysts six months ago have lessened. The pressure on developers to write down the values of their Singapore residential sites has abated. So too has the risk of buyers who bought on deferred payment schemes (DPS) not completing their purchases.

'The secondary market is getting more active, so it should be easier for DPS buyers to sell their properties before the projects receive Temporary Occupation Permit,' says DMG & Partners Securities analyst Brandon Lee.

Macquarie Securities research head Soong Tuck Yin says an interesting development to watch out for is an amendment to Financial Reporting Standard FRS 40 requiring that investment properties under construction be valued, and the increase or decrease be taken to the income statement.

The change took effect at the start of this year, and with many major listed companies doing valuations at half-year and full-year, there could be bottomline implications for the likes of CapitaLand for its ION Orchard mall and Vista Xchange at one-north for instance; and Keppel Land for its Ocean Financial Centre and Marina Bay Financial Centre projects, Mr Soong suggests.

Before the rule change, these companies were required to state only their completed investment properties at fair value. KPMG Singapore's head of real estate Yap Chee Meng explains: 'In the past, investment properties under construction were carried at cost unless there was impairment. Financial Reporting Standards now require these to be fair-valued where the fair-value model is used for investment properties, and where the fair value can be reliably determined.

'For Singapore, this was effective from Jan 1, 2009. I would expect property companies to start reflecting it in their income statements from this current reporting season (the quarter ended June 30), as property companies normally revalue their investment properties once or twice a year.'

Analysts say City Developments' bottom line is unlikely to be affected by the change to FRS 40 as it currently accounts for all its investment properties using the cost model.

For other listed developers that use the fair-value model, there is also the issue of how aggressively they will write down valuations of completed investment properties, particularly office blocks. 'Asset write-downs, especially for commercial assets, have not materialised in a meaningful way,' says CIMB-GK analyst Donald Chua. 'With rents and occupancies falling, it will be interesting to see if property groups devalue their assets more aggressively this reporting season.'

Mr Gee, however, notes that the policy of stating investment properties, completed or otherwise, at fair value affects a developer's accounting bottomline - but does not have any real cashflow impact.

As for profit from residential projects, Mr Soong says that strong home sales by developers lately will translate into profits to be recognised, although for projects in the initial stage of construction, earnings may be booked only in the current second half or next year.

CIMB-GK's Mr Chua expects developers' latest report cards to show declines in gearing ratios. Some of the bigger boys have recapitalised through rights issues, he says. Smaller players should also be able to use proceeds from strong home sales recently to pare debt.

A key thing to monitor in H2 is whether residential sales momentum continues. Mr Chua is keeping tabs on 'prices and take-up rates at the high end and the level of foreign demand, especially as we draw closer to the opening dates of the integrated resorts'. 'It may be interesting to see if projects on Sentosa Cove are released closer to the end of the year.'

Home buyers defaulting on purchases or returning options issued on high-end projects sold in the past month will also be on his watch-list.

DMG's Mr Lee expects developers to launch more mid and prime sector projects in H2 and to start buying residential sites again, 'especially those with drying land banks'.

JP Morgan's Mr Gee said stockmarket investors are looking out for sustained increases in physical property prices and upgrades in revalued net asset values for listed property groups.

Published July 17, 2009

MAS posts $9.2b loss - its first ever

Investment losses in FY08 mostly from its equity portfolios

By ANNA TEO

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(SINGAPORE) The Monetary Authority of Singapore (MAS) has not been spared the ravages of the global financial crisis - the central bank posted its first ever loss of $9.2 billion at the close of its 2008 financial year in March, largely from declines in its equity portfolios.

The $9.2 billion loss amounts to about 3.5 per cent of MAS's average total assets, and compares with profits of $7.44 billion in the preceding FY07 and $3.85 billion in FY06, MAS managing director Heng Swee Keat disclosed yesterday at a media conference on its FY2008 annual report.

'This severe crisis has therefore pared back about 80 per cent of the gains in the preceding two years,' he said, adding that the extent of loss had been mitigated as MAS had raised the liquidity profile of its portfolio in the early part of 2008 in the face of greater uncertainties.

And, with the broad upturn in financial markets after the end of the financial year in March, the valuation of MAS's foreign assets has improved and more than half of the losses have been recovered, Mr Heng said.

As at March 2009, MAS's total assets amounted to about $265 billion, of which some $255 billion, or 96 per cent, were in 'foreign assets'.

The foreign assets included some $31 billion in bank balances and deposits, and $223 billion in securities, including treasury bills, bonds and equities.

Mr Heng told the media that MAS's investments are in highly liquid assets, mostly bonds, with a small exposure to equities in the developed markets such as the United States, Europe and Japan.

Its investment losses in FY08 stemmed mostly from its equity portfolios.

'The unprecedented global financial crisis has weighed heavily on financial markets worldwide, leading to severe declines in valuation across many asset classes amidst heightened market volatility,' Mr Heng noted. MAS's investments were no exception.

Published July 17, 2009

MAS to look at how FIs pay staff, manage risks

Regulator will focus on new products but says primary responsibility rests with firms

By CONRAD TAN

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(SINGAPORE) The Monetary Authority of Singapore will review how the boards of banks and life insurers here manage risks and set pay policies, MAS managing director Heng Swee Keat said yesterday. This is to strengthen the corporate governance of financial firms.

Mr Heng: Board and management must ensure controls and processes are implemented robustly

MAS will also step up its supervision of financial institutions (FIs) in the sale of investment products, following an outcry by people who bought structured notes linked to Lehman Brothers thinking they were safe investments, only to suffer heavy losses when the bank collapsed.

Mr Heng rejected suggestions that MAS should shoulder part of the blame for the scandal, in which some investors said they were misled by sales staff into buying the notes.

'Operational lapses' uncovered by MAS's investigation of the sales and marketing practices at the 10 financial firms that sold the notes were the responsibility of the companies' boards and senior executives, he said.

'MAS's supervision cannot replace the primary role of the board and senior management to ensure that controls and processes are implemented robustly by all their staff.

'We will therefore scrutinise the steps being taken by board and senior management to ensure fair dealing by the financial institution with its customers.'

Mr Heng said this will include due diligence before a product is approved for sale, as well as pay and incentive structures for sales and advisory staff, and their training and supervision.

But MAS needs to be careful not to create an 'overly legalistic and combative relationship' with the firms it regulates, he added.

In future, the regulator will focus on new products when they are launched, he said. 'We would like to see financial institutions organise educational initiatives in partnership with independent experts, when they launch products with features or structures that are new to the market.'

As part of a broader review of existing corporate governance guidelines for local banks and insurers, MAS will look at how effectively their boards manage risk, Mr Heng said.

'This will include a review of the board's role in setting remuneration policies to manage risks effectively.'

But the review of compensation practices is unlikely to result in anything as drastic as pay caps for senior executives at banks here.

Teo Swee Lian, MAS deputy managing director in charge of prudential supervision, stressed that the review will cover how boards set banks' pay policies for all staff, not just senior executives.

'I really don't think there are large gaps here, but we want to make sure our banks follow best practices,' she said.

The review comes after the international Financial Stability Board (FSB) published a set of principles in April for 'sound compensation practices intended to reduce incentives towards excessive risk taking that may arise from the structure of compensation schemes'.

The FSB said then the boards at many financial firms 'viewed compensation systems as being largely unrelated to risk management and risk governance'.

It said pay practices at large financial firms were a contributing factor to the financial crisis, as generous bonuses tied to short-term profits led some staff to take excessive risks.

Published July 16, 2009

Merapoh to go ahead with refinery project

It secures private equity financing and pledge by CNPC to take up products

By PAULINE NG
IN KUALA LUMPUR

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A MALAYSIAN-LED consortium yesterday said it is ready to proceed with a planned US$10 billion two-train oil refinery in Kedah, having secured private equity financing and a 20-year commitment by China National Petroleum Company (CNPC) to take up more than half of the refined products.

When completed in 2013-2014, the refinery in the district of Yan would be Malaysia's largest given its total capacity of 350,000 barrels per day (bpd), said Nazri Ramli, chairman of Merapoh Resources Corporation, at the signing of a memorandum of agreement between the company and the Kedah state government yesterday.

Mr Nazri announced the private equity investors, Hong Kong Beijing Star Ltd and Winson Investment Ltd, would invest US$5 billion each in privately held Merapoh - the licensee for the multi-crude refinery project - in return for a 40 per cent stake, with the balance 20 per cent to be held by Merapoh's current shareholders.

Little is known of the firms, but Mr Nazri stressed the Chinese national oil company had committed to taking 200,000 bpd while Winson had agreed to market the balance 150,000 barrels.

Merapoh is in talks with Saudi Arabia's Aramco and it is likely be the main feedstock supplier, he revealed, with Iran likely to be a secondary supplier. Supply agreements are expected to be inked in a month.

Given their role in the project, CNPC and the crude supplier would subsequently be offered equity in Merapoh, Mr Nazri said. CNPC officials were not present at the ceremony.

Subsidiaries of South Korea's SK Group have been appointed to construct and commission the project, and to operate and maintain the refinery which would be built on 263ha of land - 344ha reclaimed - stretching along 4km of the Kedah coastline at the Sungai Limau Hydrocarbon Hub. Thirty per cent of the works would be awarded to local contractors.

Under the plan, the crude oil would be received offshore at Yan, and transferred along a 20km pipeline, refined and then piped back to vessels offshore to be uploaded.

Of late, Malaysia has seen an explosion of interest in setting up oil & gas terminals in the country, those in the pipeline including one in Tanjung Agas in Pahang, another by a Qatari group in Manjung, Perak and one or two bunkering projects in Johor.

Previously, there had also been reports that a unit of tycoon Syed Mokhtar Al-Bukhary was interested in setting up a 200,000-bpd refinery in Kedah to process oil from Iran. Little has been heard since then.

Asked if the market could support so many projects, Mr Nazri replied: 'The most important thing is the off-take and feed stock.'

Merapoh has received the licences and permits for the project and Kedah Chief Minister Azizan Abdul Razak yesterday assured the state government would support it. Merapoh's corporate website states under incentives and allowances received, all capital expenses in the first five years are allowed tax relief.

Mr Azizan said the northern state, which is positioning itself as a hydrocarbon hub, aimed to attract US$80 billion in investments, and that when completed, the Merapoh refinery was expected to net the state over RM200 million (S$81.4 million) in revenue.

Published July 16, 2009

Design Studio bags $27m contract in Abu Dhabi

The deal boost the company's order book to $193.5m

By VEN SREENIVASAN

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INTERIOR fitting-out specialist Design Studio Furniture Manufacturer has clinched a $27.03 million contract for one of the largest urban development projects in Abu Dhabi.

Mr Lim: Says Design Studio's strong order book will enable it to achieve good results despite the recession

The latest contract to supply and install doors, kitchen, wardrobes and vanity cabinets for 868 apartments and townhouses in the luxurious Rihan Heights residential project in Arzana boosts the mainboard-listed company's order book to $193.5 million.

Design Studio is expected to commence work on the latest project during the last quarter of this year.

The new township is developed by Capitala, a joint venture between CapitaLand and Mubadala of Abu Dhabi. The US$6 billion development, comprising commercial and retail buildings, schools and other lifestyle amenities, is one of the largest urban developments in Abu Dhabi.

And this project adds to the list of prestigious projects in Abu Dhabi that Design Studio has clinched over the past year. Others include prominent hotels Marina and Crowne Plaza on Yas Island, which are on schedule for completion before the inaugural Formula One race in November 2009.

Elsewhere, Design Studio has also secured another residential project in Bangkok, 59 Heritage. Design Studio, which will supply kitchen cabinets to 169 units in this development, expects to complete this project by end-2009 or early 2010.

On the local front, the company has continued clinching numerous condominium fit-out projects including three residential developments, namely Quayside at Sentosa, Livia at Pasir Ris and Belle Vue at Oxley Road. Its order book for new local residential projects secured is $14.81 million.

Bernard Lim, executive chairman and CEO of Design Studio, said the strong order book would enable the company to achieve good results despite the current economic recession and weak business sentiment.

'Our competence to secure this contract in the largest urban development project in Abu Dhabi on top of the two hotels is an affirmation of the group's presence as a premier furniture manufacturer and a reputed brand name in the Middle East,' he added.

The company recently revealed record first-quarter earnings of $4.3 million - more than two times the year-ago period's $1.69 million. Its turnover for the January-March quarter rose 69 per cent to $22.67 million, from $13.41 million a year earlier.

Published July 16, 2009

Orders at Cosco worth US$298.7m cancelled

Delivery dates of three other vessels pushed back, says the company

By CHEW XIANG

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ORDERS worth US$298.7 million to build eight bulk carriers have been cancelled and the delivery dates for another three have been put back, Cosco Corp (Singapore) said yesterday.

Cosco says the cancellations and reschedulings are not expected to have a significant impact on net tangible assets or EPS for the year to Dec31.

The vessels - all bulk carriers of 57,000 deadweight tonnes - were ordered in 2006 by two subsidiaries of China Cosco Holdings, which shares the same parent as Cosco Corp. The orders were placed with a subsidiary of Cosco Corp's 51 per cent subsidiary Cosco Shipyard Group.

The contracts are considered interested-party transactions, the company said. The three vessels not cancelled will now be delivered between Aug 15 and Oct 31 this year, instead of between June and December last year.

Shipyards in China, the world's second-biggest shipbuilding nation, saw 152 orders scrapped in the eight months to May and may face more cancellations because of slumping global trade, according to the China Association of Shipbuilding Industry. Ships equivalent to about 4.39 million tonnes have been cancelled since October, the association said.

Cosco Corp has suffered its share of cancellations and delays. Last Friday, it said it has rescheduled the delivery dates of eight other bulk carriers following requests from two European shipowners. In May, one bulk carrier was cancelled and the delivery dates of another two vessels were put back after requests from a European shipowner. In February, delivery dates for three bulk carriers were rescheduled. In January, deliveries of 13 vessels were delayed and two orders were scrapped.

The latest cancellations will see Cosco Corp refund instalments already paid by buyers. In at least two recent cancellation cases, compensation has been paid to Cosco by would-be buyers.

Cosco said the transactions have been reviewed by the audit committee of its board, which found them to be on 'normal commercial terms' and not prejudicial to the company or its minority shareholders.

Cosco said the total value of its interested-party transactions with its parent company and associates totalled $579.8 million as at June 30, excluding the most recently cancelled vessels. The cancellations and reschedulings are not expected to have a significant impact on net tangible assets or earnings per share (EPS) for the year to Dec 31, it said.

In May, Cosco reported an order book of US$7 billion at March 31, with progressive deliveries up to first-half 2012. It posted a net profit of $33.15 million for the three months to March 31, down 60 per cent from the same period last year. Sales were flat at $714.4 million.

Cosco shares jumped eight cents or 7 per cent to $1.22 yesterday on volume of 28.4 million units.

Published July 16, 2009

StarHub's new CEO has his work cut out By WINSTON CHAI Email this article Print article Feedback TERRY Clontz's appointment as StarHub CEO in 1999 came at a time when the local telecommunications sector was ringing in a sea change with the dawn of market liberalisation. A decade on, the firm's change-of-guard again coincides with a new era of competition, and the stakes are just as high for former M1 chief Neil Montefiore. In anointing its new chief executive, StarHub has clearly opted for a safe bet by roping in a seasoned deckhand to steer the course when Mr Clontz retires in January next year. StarHub's former president Mike Reynolds would arguably have been the first choice had he not left to take over as CEO of New Zealand's third mobile operator 2degrees. With the telco sector on the cusp of sweeping changes, it needed someone who could promptly get up to speed and Mr Montefiore naturally fits the bill. Having taken over the reins at M1 three years before StarHub even came into the picture, he is well attuned to Singapore's competitive landscape and regulatory nuances. In addition, StarHub can expect to glean some insights into the inner workings of a rival and possibly uncover its Achilles heel by poaching the former M1 helmsman. While it is clear what Mr Montefiore brings to the table, it is what he doesn't that has raised a fair share of market eyebrows. Culturally, StarHub displayed a more brazen competitive approach under Mr Clontz's stewardship. It went tit-for-tat with SingTel on all fronts from mobile to pay-TV and broadband services. M1 on the other hand, was more conservative and defensive while Mr Montefiore was at the helm. More importantly, M1's business is anchored on consumer mobile services, a segment which makes up one-fourth of StarHub's overall business portfolio. With Singapore's cellphone penetration already at a sky-high level of 133.8 per cent, the mobile sector is already teetering on the brink of saturation. The prerogative now among all three operators is to drive the uptake of new mobile data services - a task which Mr Montefiore may not be all that familiar with, given his priority in the past decade was primarily about increasing mobile subscriber share. StarHub's two other cash cows are cable TV and broadband, businesses that are also foreign to its incoming chief. The dynamics of negotiating exclusive content agreements, and the intricacies of being an Internet service provider are things that Mr Montefiore will need to learn quickly, though time may not be on his side. Like its counterparts, StarHub is being threatened on all fronts. Its cable television business is facing competition from SingTel's mio TV offering. The latter's pay-TV foray is hardly denting StarHub's market share for now. However, it does throw a spanner in the works when it comes to bidding for content; the bruising bidding war between StarHub and SingTel for last season's English Premier League (EPL) broadcast rights is a salient reminder. Both companies are again going head-to-head this year - a move that will inevitably jack up costs at a time when subscribers are tightening their purse strings. In addition, new pay-TV rivals could emerge once Singapore's fibre-optic network is in place in end-2012 as breakneck broadband speeds will allow television programmes to be easily streamed to consumers. The same applies to Internet services as the government's open-access mandate levels the playing filed and allows new entrants to have access to the country's broadband pipes at the same price as incumbents. While new competitors may throw their hat into the ring, the biggest thorn in StarHub's side will continue to be SingTel. In this regard, having the former M1 chief as its new front man could be the harbinger of a closer alliance against the country's dominant telco; after all, the duo had already joined hands to bid for the contract for building Singapore's fibre-optic network in 2008. M1 is also using StarHub's cable Internet platform to power its current broadband offerings. Given their recent track record, perhaps a full-fledged union could eventually be in the making to stem the surging red tide. And having a face that is familiar to both companies would certainly smoothen the way for any consolidation.