Jumaat, 25 April 2014

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The Star Online: Business

Palm oil biodiesel programme to cover all of Malaysia by July

Posted: 25 Apr 2014 09:00 AM PDT

MALAYSIA's B5 biodiesel programme will be fully implemented nationwide this July – three years after the initial phase launch in the central region in the Peninsula.

The B5 biodiesel is a blend of 5% palm oil or palm methyl ester (PME) and diesel. For this palm biodiesel initiative, the PME requirement for the entire B5 programme is estimated at 500,000 tonnes per year to support both the subsidised and non-subsidised sectors in the country.

This initiative is also envisaged to effectively reduce domestic palm oil inventory to below one million tonnes, and provide a floor price to support CPO prices at RM2,000 per tonne, says Malaysian Palm Oil Board (MPOB) senior research officer Yung Chee Liang at a recent palm oil conference.

The B5 implementation was launched in phases, starting with the central region (Putrajaya, Kuala Lumpur Selangor, Selangor and Malacca) between June and November 2011. Next was the southern region (Johor) in July last year, followed by the northern region (Perlis, Kedah, Penang and Perak) in October, the eastern region (Kelantan, Pahang and Trengganu) in January, and finally, Sarawak, Sabah and Labuan this July to complete full national coverage.

Meanwhile, the B5 programme has been fully implemented among the subsidised sectors such as retail stations, fleetcard, skid tanks and fisheries in the central region since Feb 15, 2012.

As at November last year, some 35 depots nationwide with in-line blending facilities had been set up by the Government together with participating petroleum companies, namely Petronas Dagangan Bhd, Shell Malaysia Trading, Petron (formerly Esso Malaysia Bhd), Boustead Petroleum Marketing and Chevron Malaysia Ltd.

Yung says there is a need to install more in-line blending facilities at another 26 depots for the full implementation of B5 nationwide. There are currently over 1,500 retail stations in the central and southern regions selling the B5 biodiesel, he adds.

On pricing, Yung says further subsidy from the Government would be expected to ensure the price of B5 is similar to that of diesel.

Another issue to tackle is the need to finance the construction of in-line blending facilities for petroleum companies.

For full implementation of B5, Yung expects an estimated RM300mil for in-line blending facilities for 35 petroleum depots or terminals, while additional subsidies may be required when the main PME feedstock – crude palm oil (CPO) – price is higher than that of diesel.

At the same time, it is important for on time completion of the blending facilities, as well as to iron out the challenges of logistics and supply in Sabah and Sarawak.

B7, B10 and B20

The Government is also considering the introduction of a higher biodiesel blend B7 in the near term and studying the prospects of the B10 and B20 biodiesel programmes.

Yung says the action plans for B7 and B10 would include experts' consultation, revision of Malaysian Standards (MS), engine warranty issue and full implementation.

For B10, the revision of MS will include the diesel fuel blending up to 10% of PME which is in accordance with the Euro 2M specifications. To this end, MPOB will need to carry out a consumer study, material compatibility test, quality test of B10 and testing of engine components.

In the works right now are the Palm Biodiesel Incentive Scheme, B10 and B20 trial projects on MPOB vehicles, B10 on Peugeot cars and B10 on Alam Flora vehicles.

MPOB is also looking into B10 to be tested on KL City Hall vehicles, the fishery sector, defence and military vehicles, B10 for KTM trains and for burning of olein at Tenaga Nasional Bhd's power generator plants, says Yung.

On PME supply, the Government has issued 60 biodiesel manufacturing licences with total annual capacity of 6.50 million tonnes as at September last year.

Yung points out that 21 biodiesel plants have been commissioned since 2006 with total production capacity of 2.96 million tonnes per year.

In January to September last year, there were only 12 biodiesel plants in operation with total annual capacity of 1.22 million tonnes.

Biodiesel orders

Malaysian Biodiesel Association (MBA) vice president U.R. Unnithan tells StarBizWeek that the Government biodiesel mandate on B5 and the strong possibilities of expanding the working perimeters to B7 and other higher biodiesel blends are positive developments for MBA members.

The MBA represents 22 local and foreign biodiesel manufacturers, which have invested over RM2.2bil in the country since 2008.

For Peninsular Malaysia alone, Unnithan says MBA expects the subsidised sector such as retail stations, fleet cards, skid tanks and fisheries to take up about 250,000 tonnes annually while the non-subsidised sector about 100,000 tonnes annually.

"With Sabah, Sarawak and Labuan being roped in by this July for the B5 programme, we foresee an additional 70,000 tonnes being taken up by the subsidised sector there while for the non-subsidised about 80,000 tonnes," he adds.

However, Unnithan claims that not all of the MBA members are getting consistent orders from the petroleum companies which participate in the B5 programme. In fact, only eight to 10 members are getting orders from companies such as Petronas, Shell Malaysia, Petron, Boustead Petroleum and Chevron Malaysia.

Unnithan says this could be due to the on-going due diligence process being carried out by the petroleum companies on the respective biodiesel producers prior to their PME being verified as fit for use in the in-line blending facilities at their respective depots/terminals.

"Normally the due diligence process will take about two to three months to complete as the export track record, quality, capacity, ISO system of quality, etc, will need to be carefully vetted," he explains.

Unnithan says Malaysia exported about 175,000 tonnes of biodiesel last year which is quite a reasonable volume compared to 2012 figures.

However, he says biodiesel export for this year is still vague as the biodiesel discount export parity to diesel fuel may not be so good given the price of CPO is currently seen rising to above RM2,600 per tonne.

In another development, Unnithan concurs that there is a trend among cash rich plantation companies lately to acquire "idle" biodiesel plants in Malaysia.

"I believe the Government's latest commitment in its biodiesel mandates is seen as an attractive investment venture for oil palm planters which already have the main feedstock for the production of PME.

"Therefore, I will not be surprised more such acquisitions will take place this year as plantation companies are finally beginning to realise that biodiesel can provide a safe avenue and act as a good buffer to support the CPO price in case of oversupply," says Unnithan.

All it needs is a strong government mandate and incentives to support the domestic biodiesel programme, similar to the biofuel mandates undertaken by the US, Europe, Brazil, Argentina and Indonesia, he adds.

Mobius: Malaysia can compete

Posted: 25 Apr 2014 09:00 AM PDT

Templeton Emerging Markets Group executive chairman Mark Mobius has no qualms about Malaysia overcoming competition from its South American emerging market rivals.

"If I were South American, I would be more concerned (about Malaysia)," he quips.

Mobius was responding to a question about Malaysia's prospects under the Trans-Pacific Partnership Agreement (TPPA), in an interview with StarBizWeek at the Franklin Templeton Investments Asia Investor Forum 2014 in Tokyo, Japan.

The 77-year-old emerging markets expert and advocate believed there was nothing for Malaysia to fear about joining the agreement, stating that the country has good fundamentals and was competitive in its own right.

"I'm surprised that Malaysia would be worried about competitiveness as Malaysia can easily compete with these countries," he says, referring in particular to the manufacturing sector. "They would probably be complementary."

Mobius says there are many trade ideas the emerging market countries under the TPPA could pursue, such as Malaysia supplying processed rubber.

"In fact, the whole of South-East Asia should join the TPPA as a block. Any trade between Asia and the Pacific would be very good; it makes a lot of sense because a lot of things are happening in the Pacific."

The TPPA is a free trade agreement currently negotiated between 12 nations - Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, United States, Singapore, Vietnam and Japan.

Among the concerns raised about the TPPA have been market access, investor-state dispute settlement, labour, environment, tobacco, medicine, intellectual property rights, state-owned enterprise issues.

International Trade and Industry minister Datuk Seri Mustapa Mohamed has said last week that Malaysia will negotiate in the national interest even if US President Barack Obama does not receive wide-ranging powers known as a trade promotion authority to push for a trade pact from the US Congress.

Aside from the South American countries involved in the TPPA, Mobius adds that Panama and Colombo were thriving markets to note as well.

On Malaysia's progress since Mobius began investing in the country in the 1980s, he says the market has "progressed very far and done a terrific job".

"We have increased our investments in Malaysia and we have a number of funds we're managing for investors in Malaysia itself."

Mobius is happy with the way the market has developed here, opening the doors to pension funds to be invested in equities and providing opportunities for foreign fund managers to come in and work.

"Vis-a-vis Singapore, Malaysia's weaker currency means it has good opportunities to attract foreign investments.

"That's why Johor is on a swing."

Mobius believes both Malaysia and Singapore are complementary economic partners.

"Singapore doesn't have the land and the lower labour costs which they have found in Malaysia while Malaysia can get the high-tech resources from Singapore."

Emerging from a slump

Mobius, who has been invested in the emerging markets for over 40 years, predicts the emerging markets would rebound from a sluggish performance last year. The avid bicyclist points out that these markets have already outperformed the developed markets so far this year.

"It is a sign that money is flowing this way - back into emerging markets.

"Bear markets don't last. Historically, bull markets last longer than bear markets," he says during his presentation on emerging markets.

2013 saw investors moving out of emerging markets to developed markets like the United States where the economy recuperated from the global financial crisis.

"We should see a reversal of that this year. Whether by the end of the year the trend would continue to be so, I don't know but it looks that way," he says.

Among the other major trend he sees in the emerging markets realm were the China and Hong Kong exchanges merging. While China is expected to undergo some challenging economic reforms that will see a lot of banks going under, people getting arrested, state-owned enterprises closing down as the government improves efficiency and resources allocation.

Other sweeping changes, he notes were deregularisation of industries reserved for the government allowing market access by private sector, as well as financial liberalisation which will see the private sector setting up financial institutions.

The property market in China will also be vibrant, as more citizens migrate from rural areas to the city.

"China is not slowing down. It is now at a single digit growth rate but in dollar value, this growth is bigger than the years before," he says.

Mobius is bullish on the consumer services sector in emerging markets, as purchasing power rises in these countries. Gross domestic product per capita growth has reached 45% in emergign markets between 2008 and 2013, while developed markets only scored a 3% growth.

He is also keen on the financial and technology sectors, where people are increasing able to access these services and innovations.

"Government debt in these markets is quite low but consumer debt in some countries may increase due to the rapid rise in credit card and consumer financing. So rapid that it's going to have problems along the way," he says, noting that the non-performing loans on the consumer side may increase.

He is also confident of the growth of internet-based businesses in the region where the absence of legacy technology allows emerging markets to adopt the latest solutions than in developed markets.

"Internet shopping is coming into its own globally, I don't see any let up there. And internet-shopping related businesses will grow", he adds, referring to delivery and payment companies.

The Templeton Emerging Markets Group projects a 12-month forward price-to-earnings (P/E) at 10.1 times for the emerging markets.

Developed markets' 12-month forward P/E is 14.8 times.

The 2014 emerging markets gross domestic product growth is expected at a average of 5.1%, compared to 1.8% in developed markets.

That said, Mobius cautions investors to be selective still about their investments in these markets using a bottom-up approach.

Mobile Net services boost DiGi Q1

Posted: 25 Apr 2014 09:00 AM PDT

PETALING JAYA: DiGi.Com Bhd reported solid growth for its first quarter ended March 31, 2014, with net profit rising 48% to RM485.16mil from RM328.65mil previously, driven by a strong boost in the usage of mobile Internet services.

Revenue for the period was RM1.72bil, 4.3% higher than the RM1.65bil achieved a year ago.

Chief executive officer Henrik Clausen said in a statement that the healthy growth in Internet revenue was fuelled by higher usage and a bigger customer base in the Internet segment.

"Our focus on making access to Internet services easy and relevant has encouraged stronger adoption among our 10.9 million customers, and an overall increase in new Internet customers within our base.

"The introduction of our 'Best For Internet' campaign offering flexible and bite-sized plans, comprehensive service bundles and unlimited access to selected digital services gave different customer segments customised options that better addressed their needs," DiGi said.

The company expanded its 3G high-speed packet access (HSPA+) footprint to 82% of the population, increased its long-term evolution or LTE sites in the Klang Valley, Johor Baru and Kota Kinabalu, and grew its fibre network to more than 4,100km.

"The company has committed to invest up to RM900mil in capital expenditure this year to strengthen its network position to deliver on its promise of the best Internet experience to more customers in Malaysia," DiGi said.

The telco giant's Internet customers grew 31.6% year-on-year (y-o-y) and 3.6% quarter-on-quarter (q-o-q) to four million. Internet revenue increased 41.1% to RM374mil compared with the corresponding quarter last year, contributing 24% to the group's overall service revenues.

DiGi further said that total subscribers increased 4.9% y-o-y, although q-o-q development was impacted by seasonal effects on churn and gross adds with continued pressure from levelling postpaid demand.

Prepaid service revenue surged 7.3% y-o-y, with 1.2% growth q-o-q on a normalised 92-day quarter. Postpaid service revenue remained rather flat y-o-y and inched lower versus the preceding quarter.

The company explained that the 2.7% q-o-q decline in postpaid services was mainly attributable to flat postpaid demand, seasonally lower voice and roaming traffic after the year-end travel peak.

Earnings before interest, tax, depreciation and amortisation stood at RM778mil, at a margin of 45%, mainly due to stronger service revenue and improved cost structure.

The positive financials demonstrated the sustainable benefits and synergies from a stronger network infrastructure and efficient asset base, the company said.

DiGi announced that it will pay a first interim tax-exempt dividend of 6.2 sen per ordinary share equivalent to RM482mil, or a 99.4% payout ratio, to shareholders on June 6, 2014.

Kredit: www.thestar.com.my

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