Axis REIT 9M16 below expectations

KUALA LUMPUR — Axis Real Estate Investment Trust (Axis REIT)’s 9M16 realised net income (RNI) of RM67.1 million came in below Kenanga Research’s expectations at 66%, as the local research house had expected stronger quarters ahead from new asset contributions and stronger reversions and occupancy.

Its first nine months (9M16) gross distribution per unit (GDPU) of 6.15 sen was also below expectations (66%) while Axis REIT announced the disposal of Axis Eureka.

“We are lowering FY16-17 expected earnings to RM93.2 million and RM103.2 million, and reiterate our ‘market perform’ call with a reduced target price of RM1.71 (from RM1.80), based on a +1.85 percentage point yield spread to our 10-year Malaysian Government Securities (MGS) target of 3.6%,” Kenanga Research analyst Marie Vaz said in a report published yesterday.

Distribution-wise, an interim dividend of 2.05 sen was declared (which includes a 0.07 sen non-taxable portion).

Year-on-year, 9M16 RNI fell 3.9% due to higher operating costs (+15.1%) and higher financing costs (+6.4%), for the acquisition of Beyonics i-Park Block A, B, C and D, on the back of flattish gross rental income (GRI) of +0.6%.

“Meanwhile, quarter-on-quarter RNI was flattish at (+0.3%) on the back of flattish GRI (+0.5%) and higher financing cost (+1.0%).

Axis REIT also announced the disposal of Axis Eureka, a four-storey office building in Cyberjaya, for a total cash consideration of RM56.1 million to Malaysian Qualifications Agency. The net gains on disposal of RM1.2 million will be distributed back to shareholders upon completion, likely in FY17, translating to an additional 0.11 sen (1.1% of Kenanga’s FY17 expected gross distribution per share of 9.8 sen).

“Axis Eureka has been recording below-average occupancy at 59% while its contributions to earnings is not significant (<2.5% to FY17 expected GRI). All in, we are neutral to mildly positive on this disposal.

“The REIT is also finalising the completion of the acquisition for two industrial assets, namely a warehouse facility located at Pasir Gudang, Johor (RM33 million) and an industrial complex in Rawang, Selangor (RM42 million), which we have already imputed to accrete mostly in FY17 expected earnings,” Vaz said.

She is maintaining the house’s ‘market perform’ call on Axis REIT as she sees no convincing near-term catalysts while foreseeable downside risks have been accounted for. Additionally, the group lacks strong distribution per unit (DPU) accretive catalysts as recent acquisitions and disposals have been mainly neutral to mildly positive to DPU (<5%).

“More exciting catalysts for its DPU are needed to re-rate the stock. That said, Axis REIT is highly institutionalised and is also one of the very few shariah-compliant Malaysian RTEITs which we believe will help to offer some downside risk protection,” Vaz said.

Nazir to chair 
regional council

HANOI — CIMB Group chairman Datuk Seri Nazir Razak has been appointed as the inaugural chair of the World Economic Forum’s (WEF) Regional Business Council (RBC) which launched yesterday. Through the RBC, 55 heads of major companies have joined forces to promote public-private cooperation on the most pressing issues facing Southeast Asia.

The RBC — launched at the WEF’s Mekong Region Meeting in Hanoi — is made up of 25 Asean businesses and 30 global companies, and will focus on areas such as building infrastructure, promoting cross-border trade and investment in Asean, developing a digital economy, examining the future of jobs and industry in the region, and championing the principles of inclusive growth.

“Together with my fellow committee members, the RBC will strive to give its best towards enhancing public-private partnership to uplift Asean’s socio-economic progress, as many of the biggest challenges in Asean can be overcome by getting business and government working well together.

“WEF — given its deep relationships with business, governments, international organizations, academia and subject-matter experts — is also a great platform for Asean companies to better capitalise on opportunities to collaborate and engage with Asean governments, as well as with the rest of the world,” said Nazir.

Among the first initiatives to be launched by RBC next year is a strategic infrastructure programme that promotes the concept of “blended finance” through both public and private capital.

touch-button-interface

Digital impact being felt by majority of Asian CIOs

SINGAPORE — Businesses across Asia are responding to the threat posed by digital disrupters like Uber and Airbnb, a trend that poses significant challenges for chief information officers (CIOs), international IT solutions and managed services provider Logicalis revealed in a new study.

The Logicalis Global CIO Survey 2016, which polled 101 CIOs in Asia and 708 CIOs worldwide, found that the digital transformation of business is gathering pace, with 80% of companies in Asia now digitally enabled to some extent. This number is slightly higher and closely aligned with global findings, where 73% of companies are digitally enabled.

Overall, the study found that digital adoption confirms to an innovation bell curve: The digitally enabled innovators or digital disrupters account for 6% of businesses in Asia (7% globally).

Early adopters make up 21% of businesses in Asia (22% globally). The early majority accounts for 53% of firms in Asia (45% globally), while 20% (22% globally) fall into the late majority.

“The results clearly indicate that digital transformation is already impacting organisations and we are seeing IT decisions increasingly being distributed throughout the business rather than being held centrally by IT (departments).

“CIOs will have to work closely with line of business employees, who are now more tech savvy, to drive innovation and deliver better business outcomes,” said Logicalis Asia chief executive officer James Tay.

He said in time, IT departments will become internal service providers and digital enablers. CIOs in Asia have shown that they are as similarly prepared as their global counterparts to embrace the transformation and reshape their roles.

 

Big challenges for CIOs

 

This rapidly changing environment does indeed pose big challenges for CIOs, as the survey has found. CIOs have, for instance, less control over IT spending than ever before-but they make 50% of spending decisions or less.

CIOs also face the threat of business lines buying technology without involving IT departments at all. The proportion reporting that this happens often, very often or most of the time has impacted about a third, or 37% of CIOs in Asia (39% globally).

One result of this loss of control is a move away from centralised IT, with more and more CIOs now operating in ‘distributed’ IT environments. This decentralisation of IT, a natural extension of ‘shadow IT’, is no longer seen as subversive and is now seen as a positive and essential element of digital transformation.

For example, a vast majority (84%) of CIOs in Asia — similar to 83% globally — report that line of business departments now employ IT people whose role is to support business function-specific software, applications and cloud services (ie. shadow IT departments) and CIOs seem content to work with them. About a fifth or 21% (22% globally) work with ‘shadow IT departments’ on a daily basis and 43% do so at least weekly, compared to 41% of CIOs globally.

Together, the combination of internet of things, distributed IT and the increased pervasion of apps into the very core of the business — along with an ever-evolving threat landscape — represent a perfect security storm. As a result, the CIOs surveyed cited security as the biggest challenge related to the increased use of cloud services.

About three quarters or 72% (78% globally) pointed to security as a challenge, with related issues like data sovereignty (37% in Asia ; 47% globally) and local data regulations ( 26% in Asia ; 37% globally ) among the top-6 CIO concerns.

Looking at security threats in more detail, 52% of CIOs in Asia (61% globally) expect the prevalence of increasingly sophisticated threats to be the number one issue for the next 12 months, while issues like ransomware and corporate extortion were highlighted by about two-thirds (63%) of the CIOs, compared to 56% globally.

The sheer range of issues facing CIOs in Asia as a result of digital transformation means the pressure to hand off day-to-day technology management, and just focus on strategy and to reframe IT departments as internal service providers is greater than ever.

In response, CIOs are increasingly seeking partner-led and delivered services. This year, about a quarter (21%) of CIOs in Asia (24% globally) outsource most of their IT (more than 50% outsourced), and the number outsourcing none or just 10% of their IT has fallen dramatically — respectively, to 7% (9% globally) this year from 29% (13% globally) in 2015 and to 9% (19% globally) this year from 14% (26% globally) in 2015.

“As digital innovation accelerates, the winners will create new customer experiences and make faster and better decisions through smarter collaboration. They can also scale their organisations by creating new digital business models and revenue streams securely.

“CIOs and IT leaders can play a leading role in enabling that innovation, drawing on skills from insightful partners to help shape their businesses and lead their sectors through the application of digital technologies,” Tay said.

Pikom calls for swift broadband speed increase

KUALA LUMPUR — The National ICT Association of Malaysia (Pikom) called for the swift implementation of the increase in broadband speed to 20 megabytes per second nationwide.

Pikom chairman Chin Chee Seong said in a statement: “While allocations of RM1 billion have been made to ensure that broadband speed hits 20 megabytes per second nationwide, we hope the implementation will be swift.”

He said the announcement of higher broadband speeds at existing prices and plans to reduce prices at double the speeds is long overdue.

“This is the right step but the government’s decision to not make ICT goods and services zero rated under the Goods and Services Tax is a missed opportunity to really benefit almost all Malaysians.

“Today, these are necessities that everyone uses and providing some form of subsidy or relief would have gone a long way in helping the man on the street,” he said.

Chin also welcomed the facility for public servants to RM5,000 for smartphone purchase once every three years.

Additionally, Pikom is positive on the RM2,500 lifestyle tax relief for various items including smartphones and tablets and broadband purchase.

The ICT association has been calling for the current relief to be extended to include smartphones and available at a closer interval.

“This is a welcome move but the amount should be higher considering the typical Malaysian family, especially for urban families.

“It is a good move all the same and will certainly help the middle income M40 group,” he said.

The focus on e-Commerce and startups also bode well for the industry as it will serve as a catalyst for further growth.

Singapore 3Q16 Bad loans banks Bloomberg

Bad loan charges to hit Singapore’s three biggest banks

SINGAPORE — Singapore’s three largest banks are poised to report higher impairment charges for loans to the struggling oil and gas industry and weaker interest margins when they post third-quarter earnings in coming days.

DBS Group Holdings Ltd is expected to lead the increase in impairment charges of S$255 million (US762.4 million) for the period, a 43% jump from a year earlier, according to Goldman Sachs Group Inc.

DBS, Singapore’s largest bank by assets, and Oversea-Chinese Banking Corp (OCBC) will probably report a second consecutive quarterly profit decline, while United Overseas Bank Ltd (UOB) may post a 10% drop, analyst estimates compiled by Bloomberg News show.

Lenders are setting aside more money for loan losses tied to the oil and gas industry, which has been hurt by lower energy prices. Bank profits have also come under pressure from a weakening domestic economy and a slump in the Singapore interbank offered rate — one of the benchmarks for local interest rates — to a one-year low, which has curbed the amount lenders charge for loans.

“Dark clouds are still hanging over the oil and gas sector, which is going to add a negative feel to the banks,” said Jeremy Teong, a banking analyst at Phillip Securities in Singapore. “Net interest margin weakness will become pronounced given this year’s drop in Sibor.”

OCBC will report its September quarter results on Oct 27, followed a day later by UOB. DBS is due to publish its numbers on Oct 31.

Net income at DBS and OCBC fell 2.6% and 2.2%, respectively, from a year earlier according to the average of six analysts’ estimates compiled by Bloomberg. UOB may report a 10% drop, according to five estimates.

Goldman Sachs analyst Melissa Kuang estimates OCBC’s impairment charges increased 3.4%, while UOB’s jumped almost 7%, according to a report earlier this month. The emergence of more oil and gas-related nonperforming loans will cause lenders’ bad-loan ratios to “rise modestly,” Fitch Ratings said in a separate note.

Still, the banks are “securely positioned” to withstand further asset-quality deterioration because of “their disciplined underwriting standards and healthy provision buffers,” Fitch said.

More Singaporean companies tied to the oil and gas industry are facing difficulty repaying debt as demand for their services falls. Swissco Holdings Ltd, which supplies rigs and support vessels to oil and gas explorers, signaled last week that it may be in default due to its failure to pay interest due earlier this month. Companies including KS Energy Ltd and AusGroup Ltd have sought more lenient repayment conditions from their debt holders.

Charges for oil and gas loans gone sour dragged on bank earnings in the second quarter (2Q) as DBS’s profit dropped 6% as provisions for troubled energy-services firm Swiber Holdings Ltd overshadowed gains in interest and fee income, while OCBC, Singapore’s second-largest bank, reported a 15% profit decline.

Meanwhile, borrowing costs have slumped this year as the local dollar strengthened, causing the three-month Singapore interbank offered rate to fall by 0.6 percentage point in the July-September period. Lenders price their domestic loans in part on interbank rates.

DBS’s net interest margin, a measure of profitability based on interest income, may drop to 1.75% in the third quarter, from 1.78% a year earlier, Aakash Rawat, an analyst at UBS Group AG in Singapore, said in an Oct 13 report.

OCBC’s margin probably shrank 2 basis points to 1.64%, while UOB’s may have fallen 13 points to 1.64%, Rawat estimates.

Singapore’s weaker economy is also weighing on credit growth, with total loans at banks operating in the city declining 1.6% in August from a year ago, according to preliminary data from the Monetary Authority of Singapore. The contraction was mostly in sectors including financial institutions and manufacturing, while consumer loans continued to grow, the data show.

Gross domestic product fell an annualised 4.1% in the 3Q from the previous three months, the Ministry of Trade and Industry said Oct 14. Manufacturing contracted at an annualised rate of 17.4% — the worst quarter-on-quarter pullback since 3Q of 2012. — Bloomberg

Ratan Tata steps in as Tata board ousts Mistry

MUMBAI — Ratan Tata, patriarch of one of India’s most influential families, will take over as interim chairman of Tata Sons after the salt-to-software conglomerate’s board ousted Cyrus Mistry, who had sought to shake up the firm’s management.

Tata, who had stepped down as chairman and was replaced by Mistry in late 2012, will head the group for four months while the company seeks a replacement.

The board said in a statement on Monday it was decided “it may be appropriate to consider a change for the long-term interest of Tata Sons and Tata group”.

While the board gave no detailed reason for the change, some media reports said there has been discontent with some of Mistry’s actions, including asset sales.

The 48-year-old has been trying to shake up the US$100 billion (RM416 billion) company by changing the management structure to bring in new faces at senior levels.

He has also battled issues on a number of fronts in recent months, including a costly settlement with Japanese telecom operator NTT Docomo and the sale of Tata Steel’s loss-making UK business.

Britain’s vote in June to exit the European Union was a big setback for the steel sale, which Tata has now put on hold.

Brexit has also cast a shadow over Tata Motors’ luxury car unit Jaguar Land Rover (JLR), which has a large UK manufacturing base. Tata Motors’ quarterly profit halved as the pound slumped following the Brexit vote, and JLR’s chief executive officer warned that some customers in Europe, its biggest market, no longer wanted to buy British cars.

Mistry’s shock exit took many by surprise, though analysts and investors saw Ratan Tata’s appointment as interim chair as a way to ease concerns.

“The impact will be a little softer with Ratan Tata taking over,” Gaurang Shah, analyst at Geojit BNP Paribas, told BTVi television.

The board made its decision at a lengthy meeting on Monday, with six of the nine members backing the ousting of Mistry, said one source who was not authorised to publicly discuss the matter, and did not want to be identified. Two members abstained. Mistry, who could not vote, remains a board director.

The source also said that Mistry’s departure was deliberated over months and was a result of a difference of opinion between him and the board, without elaborating on the differences. The source also said that Tata was disbanding the group executive council — a team of core advisers that Mistry had formed

Unlike his predecessor, Mistry has stayed away from the limelight, limiting his speeches to company events.

His style of doing business also differed from Ratan Tata’s, who spent billions of dollars acquiring global companies like steelmaker Corus and Jaguar Land Rover.

In a rare interview last month, in Tata’s in-house magazine, Mistry admitted the challenges facing some of the Tata group companies would “entail hard decisions on pruning the portfolio”. — Reuters

rockbro5

Time to Rock, Bro!

THE long-awaited third and final instalment of Mamat Khalid’s Rock! films, Rock Bro! will hit
cinemas tomorrow.

Rock Bro! — starring Pekin Ibrahim, Soffi Jikan, Datuk Hattan, Khir Rahman and Azmi Bahron — tells the journey of Rimba Bara, a fictional rock band that was famous in the late 1980s.

With humour and bittersweet drama, the hard reality of trying to make it big in the 1980s is brought to life from the point of view of Jijoe (Khir).

The film follows Rimba Bara’s journey as they make it as a popular rock band — including their trials and tribulations, and the politics of the music industry at the time — right up to the band’s tragic demise.

“It lets the audience travel back in time to see how it all started,” Khir said.

“Rock music is close to my heart and it is magical.”

Rock Bro! also tells a love story that brewed between Jijoe and rock queen Ella, played by newcomer Amy Juliet.

Amy said she was delighted to play the iconic singer, adding that Ella is a role model who worked hard to find her mark.

“I admire Ella because of her down-to-earth ways and good rapport with fans,” Amy said.

Amy has always wanted to be an actress, and being cast as Ella is her biggest challenge.

“All this while, I’ve been cast in supporting roles. I’m glad that this role landed on my plate.”

Asked about the challenges while filming, Amy admitted she was nervous as this was her first major role in a film.

“I was nervous especially during scenes with great actors like Pekin, Soffi and Khir,” she said.

“I spent hours watching Ella on TV, in concerts as well as in movies like Hanya Kawan.”

Pekin, meanwhile, said he had to bring a depth to his character this time around, as the character is broodier compared to the last two installations.

He plays Rimba Bara’s guitarist Slash (inspired by Slash from Guns ‘N Roses) and had little dialogue in the first two films Rock! and Rock Oooo!

“Slash is hot-tempered. And the pressure on Rimba Bara did not make things any better,” Pekin said.

Pekin said his biggest challenge in the film was playing songs made popular by Search, Mega and Lestari.

“I’m not a professional musician, so playing the lead guitar for the songs was tiring. I only had a month to memorise the songs.”

Pekin said it was a bittersweet experience when filming wrapped up.

Rock Bro! is the last of the series so it is natural for me to be sad. You can’t help but be emotional about it.”

Aside from the cast, keep an eye out for 80s rockers who make cameo appearances in the film, including Man Kidal, Yan of Lefthanded and Black of Wings.

palestinian films

Happenings

Palestinian films

Saturday and Sunday

MAP@Publika, Solaris Dutamas

WHAT better way to shed light on a humanitarian crisis than through fi lm? The Kuala Lumpur Palestine Film Festival returns with films such as Speed Sisters, Oversized Coat, The Curve and The Voice of Condor. Admission is by a minimum donation of RM10 per film. For details, call 03-6207 9732.

Halloween time

Friday-Sunday

Resorts World Genting

IT’S that time of year again when Halloween party themes abound and at Resorts World Genting, fun and horror go hand in hand at three venues — Genting Club, Cloud 9 and Patio. The Halloween party is themed “Fright Night” and begins at 9pm. Admission is RM100 inclusive of two drinks. For more information, call 03-2718 1118 or visit www.rwgenting.com.

Rocking it

Saturday

Sepang International Circuit

DON’T miss Scorpions, The Darkness, Wolfmother (pic), Wings and Muzza’s Mayhem in action. Rockaway Festival’s Rockaway Weekender has become a one-day event due to scheduling conflicts. For refunds, email ask@livescape.asia. Tickets are from RM98 to RM378. For details, visit rockawayfest.com or call 03-8027 0658.

Wine 101

Saturday

Art Printing Works, Jalan Riong, Bangsar

WINE Fiesta features more than 15 winemakers and 100 wines from wineries around the world with event partners Taps Beer Bar, Pulp, Yeast, Bottega Mediterranean and others. Tasting prices begin from RM108. Learn more at www.apw.my or call 03-2282 3233.

Zentai fun

Sunday

Findars, Jalan Panggong,

Kuala Lumpur

LIVE out your superhero-in-askintight-suit fantasy or express yourself as a performance artist at this weekend’s zentai walk. For those new to zentai, it’s a Japanese term for skin-tight garments that cover the entire body made using nylon and spandex blends. Admission is free. For details, call 012-350 1844.

Speed

demons

Friday-Sunday

Sepang International Circuit

SECURE your seats for one of the biggest two-wheel motorsports events in Southeast Asia, the Shell Malaysia Motorcycle Grand Prix. Cheer on Malaysian riders Adam Norrodin, Khairul Idham Pawi and Hafi zh Syahrin. For details, call 03-8027 0658.

jagat

TIES THAT BIND

JAGAT

Astro Best

The early 1990s was a critical period for Malaysian Indians. They are forsaken by the estate owners, forced to move to the cities, and made to endure harsh circumstances. The story follows a mischievous 12-year-old boy named Appoy, and his relationship with his father Maniam, and his uncles — former drug addict Bala and local gangster Mexico.

HALLOWEEN WARS S5

Food Network (CH727) 10pm

Five teams of cake decorators, candy makers and pumpkin carvers battle to prove who is the best at spooky Halloween creations.

ORU NAAL KOOTHU

Box Office (CH241) 6pm

This movie addresses marriage from the perspectives of different people. The story is based on the director’s experiences and focuses on issues related to a wedding. Starring Dinesh Ravi and Mia George.

TANKED 6B (premiere)

Animal Planet (CH556) 9pm

The show returns to dunk viewers into the rowdy, family-owned business of Acrylic Tank Manufacturing (ATM), one of the country’s leading aquarium builders. ATM, led by brothers-in-law, business partners, best friends and rivals Wayde King and Brett Raymer, is housed in a state-of-the-art, cavernous facility located in the centre of Sin City.

PAKISTAN-UNREST-SOUTHWEST-20161024-220356_0001

Militants storm Pakistan police academy, kill 60

QUETTA (Pakistan) — Heavily-armed Islamist militants wearing suicide vests stormed a Pakistani police academy, killing at least 60 people and wounding dozens more, officials said yesterday, in one of the deadliest extremist attacks this year.

Three gunmen from a Pakistani Taliban-linked group burst into the sprawling academy, targeting sleeping quarters that are home to some 700 recruits, sending terrified young men fleeing.

“I saw three men in camouflage whose faces were hidden carrying Kalashnikovs,” one cadet told reporters. “They started firing and entered the dormitory but I managed to escape over a wall.”

The attack on the Balochistan Police College, about 20km east of provincial capital Quetta, began at about 11.10pm (4.10am in Malaysia) on Monday, with gunfire continuing to ring out at the site for several hours.

Balochistan province Home Minister Sarfaraz Bugtitold reporters there had been three attackers.

“They first targeted the watch tower sentry, and after exchanging fire, killed him and were able to enter the academy grounds,” he said.

Balochistan’s provincial government spokesman Anwarullah Kakar said 60 people had died, with 118 injured, mostly with minor wounds.

The head of the local hospital, Dr Fareed Sumalani, confirmed that their morgue had received at least 60 bodies.

Security was tight outside the academy yesterday morning, with media kept out of the building as a large contingent of security forces swept the area.

Major General Sher Afgan, chief of the paramilitary Frontier Corps in Balochistan, which led the counter-operation, said “the attack was over in around three hours after we arrived”.

He said communications intercepts showed the militants belonged to the al-Alimi faction of the Lashkar-e-Jhangvi militant group, which is affiliated with the Pakistani Taliban.

“They were in communication with operatives in Afghanistan,” he said. The group itself has not claimed the attack.

The area was plunged into darkness when the counter-offensive was launched, while security personnel threw up a cordon and ambulances zoomed in and out, taking the injured to hospitals. Military helicopters circled overhead.

Mineral-rich but impoverished Balochistan, Pakistan’s largest province, is beset by sectarian strife, Islamist violence and an on-off separatist insurgency which has lasted for decades.

The army has also repeatedly been accused by international rights groups of abuses in Balochistan, particularly against nationalists demanding autonomy and a greater share of the region’s resources.

In August, a suicide bombing at a Quetta hospital claimed by the Islamic State group and the Jamaat-ul-Ahrar faction of the Pakistani Taliban killed 73 people, including many of the city’s lawyer community who had gone there to mourn the fatal shooting of a colleague.

Pakistan has been battling an Islamist insurgency since shortly after it decided to ally with the US following its invasion of Afghanistan in 2001.

Monday night’s attack also came a day after separatist gunmen for the Baloch Liberation Army on a motorcycle shot dead two coast guards and a civilian and wounded a shopkeeper in a remote southwest coastal town in the same province. — AFP

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