Corporate Malaysia facing higher policy, regulatory risks
KOTA KINABALU: Corporate Malaysia, especially regulated businesses is generally facing higher policy and regulatory risks, AmInvestment Bank Investment Bank Bhd (AmInvestment Bank) opined in its second half of 2018 (2H18) strategy and outlook report.
According to AmInvestment Bank, the government has already put on hold the multi-billion Kuala Lumpur-Singapore high-speed rail (HSR) and MRT 3, and reviewing the East Coast Rail Link (ECRL), on grounds of fiscal prudence.
“This has resulted in loss of potential order books for Gamuda Bhd (Gamuda), Malaysian Resources Corporation Bhd, YTL Corporation Bhd and HSS Engineers Bhd,” the research firm said.
“Also, as the new administration pushes for better deals for the rakyat as promised in its election manifesto, it has terminated the monopoly to import rice by Padiberas Nasional Bhd (Bernas).”
AmInvestment Bank recapped the other rakyat-centric proposals that have been made known include doubling the broadband speed at half the price (which will hit Telekom Malaysia Bhd)
This has resulted in loss of potential order books for Gamuda, Malaysian Resources Corporation Bhd, YTL Corporation Bhd and HSS Engineers Bhd. AmInvestment Bank
and raising the minimum wage in the private sector to RM1,500 (from RM920 to RM1,000 currently) which will hurt planters, manufacturers and food and beverage (F&B) operators
The research firm also noted that passenger service charges (PSC) at the airport will be determined in accordance with the quality of its facilities, which will impact Malaysia Airports Holdings Bhd.
AmInvestment Bank further recapped that to keep the living cost in check, the government has reintroduced fuel subsidy (pump prices of RON95 petrol and diesel being kept at RM2.20 per litre and RM2.18 per litre respectively), while the electricity tariff for the domestic sector has been maintained for 2H18 despite the higher gas and coal costs.
“The saving grace is that Tenaga Nasional Bhd (Tenaga) has been given the green light by the government to raise the electricity tariff for the non-domestic sector in 2H18 n accordance with the Imbalance Cost Pass-Through (ICPT) mechanism to pass on the higher fuel cost to non-domestic end users.
“This will mitigate the so-called ‘under-recovery’ of fuel cost which accumulates in Tenaga’s books.”
As for the expropriation of toll roads, AmInvestment Bank said that if this happens, it will hurt construction companies with toll road concessions such as Gamuda and IJM Corporation Bhd.
“While toll road concessionaires are entitled to compensation in the event of expropriation, our analysis shows that for the successful toll roads especially, the compensation (which is generally calculated based on a pre-determined return on equity) amounts to only a fraction of the discounted cash flow (DCF) value of the toll roads.”