Malaysia’s CIMB-Led Bank Merger More Difficult After EPF Vote Barred

Kuala Lumpur. A decision by Malaysia’s bourse to bar a key shareholder in CIMB Group Holdings and two other lenders from voting on their planned merger has given minority investors more clout and thrown doubt on the deal’s prospects.

Seeking to create Malaysia’s biggest bank with a market value of more than $20 billion, the three have proposed a complex deal structure widely seen as aimed at blocking potential objections from Abu Dhabi-based Aabar Investments – the second-largest shareholder in one of the lenders, RHB Capital.

The deal’s success would have been all but assured if state pension fund Employees Provident Fund (EPF), which bankers have said is in favor of the merger, had been granted a waiver to rules that prevent it from voting because it has substantial stakes in all three banks.

The refusal to grant the waiver was seen as plus for corporate governance in Malaysia, but CIMB may now scramble to appease Aabar and other minority shareholders.

“Aabar will feel emboldened, particularly given the outright attempt to circumvent its interests,” Kevin Kwek, a senior analyst at Sanford C. Bernstein, wrote in a research note, adding that the deal’s valuations would likely be rejigged.

Kwek said the chances of the deal being dropped had also climbed but that he did not see it as the most likely scenario as CIMB had few options to grow bigger and Malayan Banking (Maybank) was likely waiting in the wings to woo RHB.

EPF slapped

The EPF, which owns about 14.5 percent of CIMB, 41 percent of RHB and 65 percent of the third bank Malaysia Building Society, failed in its argument that the interests of its 14 million members were at stake.

“There are no adequate justifications that the potential conflict of interests involving EPF has been eliminated or sufficiently mitigated,” a Malaysia Building Society statement quoted the bourse as saying.

Shares in all three banks were suspended on Tuesday pending the announcement. Trade will resume on Thursday as Wednesday was a public holiday in Malaysia.

The bourse was also quoted as saying that the EPF had had prior knowledge of the deal talks before they were disclosed. The EPF said in September that it had not been part of any of the discussions about the proposed merger.

More power

There has been much market speculation that Aabar, which owns around 21 percent of RHB, will seek terms more favorable to itself. Aabar has repeatedly declined to comment on the merger.

With the EPF barred from voting, Aabar’s voting rights increase to around 36 percent. If it joined forces with RHB’s third-largest shareholder OSK Holdings, the two would have a combined voting power of 53 percent.

OSK Holdings, a small financial group built by veteran broker Ong Leong Huat, is involved in property investment and equity financing. OSK officials did not respond to requests for comment.

If the deal does go through, it would give birth to a banking group with assets totaling around $190 billion, surpassing Maybank and making it Southeast Asia’s fourth-biggest bank.

Under the complicated structure submitted to the central bank for approval, RHB will issue shares to acquire the much larger CIMB but CIMB shareholders will own 70 percent of the merged entity.

According to Malaysian listing rules, RHB only needs to gain the approval of 50 percent of its shareholders if it is the acquirer. If CIMB bought RHB, then it would need to gain approval from 75 percent of the seller’s shareholders.

http://thejakartaglobe.beritasatu.com/business/malaysias-cimb-led-bank-merger-difficult-epf-vote-barred/

Link Net Shareholders Said to Raise $450 Million in Stake Sale

Link Net’s biggest investors raised about $450 million after they cut the size of their offering of shares in the Indonesian Internet service provider, people familiar with the matter said.

CVC Capital Partners, First Media and other investors sold about a 30 percent stake in Link Net at 6,000 rupiah per share, below the bottom end of a marketed range, the people said. They had offered about a 40 percent stake at 6,200 rupiah to 6,700 rupiah per share, according to an Oct. 13 exchange filing.

The shareholders reduced the size of the deal due to market volatility, the people said, asking not to be named as the details are private. The Link Net sale came amid a global market rout that’s wiped $2.4 trillion off the value of equities in the previous month on concern that economic growth is slowing in Europe just as the US Federal Reserve winds down stimulus.

Goldman Sachs Group and Credit Suisse Group were the joint global coordinators for the offer, people with knowledge of the matter said earlier. CIMB Group Holdings, Ciptadana Securities, BNP Paribas and Deutsche Bank are also working on the sale, according to the people.

The sale price represents a 16 percent discount to Link Net’s last close before the offer. Two calls to the company’s head office in Jakarta weren’t answered.

http://thejakartaglobe.beritasatu.com/business/link-net-shareholders-said-raise-450-million-stake-sale/

Indosat Sets Lower Capital Spending for 2015 as It Completes Network Modernization

Jakarta. Indosat, Indonesia’s third-largest mobile-phone operator, is setting aside a lower amount for capital expenditure in 2015 as it completes modernization of its major network, according to its chief executive.

Capital expenditure of Rp 7 trillion to Rp 7.5 trillion ($580 million to $622 million) for next year is lower than the Rp 8 trillion for 2014, Indosat president director Alexander Rusli said on Thursday.

He declined to specify the source of financing for next year’s capital spending plan.

Andromeda Tristanto, investor relations officer at Indosat, previously said that Indosat was completing a total of $450 million in revolving loans from seven banks. Indosat had planned to use the loans to refinance its debt, help finance its capital expenditure for 2015 and pay for the general operating expenses.

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nternet, Data Give a Boost to Telkom’s 9-Month Profit

Jakarta. Telekomunikasi Indonesia, the country’s largest telecommunications company, announced rising net income on Monday, as its top executive departed to take a ministerial position in the new government.

The state-controlled company, known as Telkom, posted a 3.5 percent increase in profit to Rp 11.4 trillion ($946 million) in net income during the January-to-September period, up from Rp 11.1 trillion in the same period last year, on the back of rising revenue from its Internet and data services.

Telkom’s total revenue rose 7 percent to Rp 65.8 trillion, according to the company’s statement to the Indonesia Stock Exchange on Monday.

Revenue from Internet and data services alone, though, rose 15 percent to Rp 26.9 trillion.

This was the last financial statement from Telkom president director Arief Yahya, who was inaugurated on Monday as tourism minister in President Joko Widodo’s Working Cabinet.

Arief oversaw Telkom’s expansion over the past two years, expanding the company’s operations to Malaysia, East Timor and Australia.

Arif Prabowo, vice president for public relations at the company, said Telkom was now waiting for a decision from the government on Arief’s replacement.

“The company will ensure that strategic and operational plans will continue,” Arif said.

Telkom plans to triple its spending on broadband Internet access infrastructure to Rp 45 trillion in 2015, up from Rp 15 trillion this year, as part of an effort to connect most Indonesian households to broadband networks by 2019.

Still, news of growth in Telkom’s profit seemed insufficient to make up for the negative sentiment from its president director’s departure.

Telkom shares closed 2.3 percent lower on the Indonesia Stock Exchange on Monday at Rp 2,805, dragging the benchmark index down by 0.96 percent.

http://thejakartaglobe.beritasatu.com/business/internet-data-give-boost-telkoms-9-month-profit/

LG Electronics Says to End Production of Plasma Display TVs

Seoul. South Korea’s LG Electronics said on Tuesday that it will end the production of plasma display televisions by end-November in order to focus its efforts on liquid crystal display and OLED televisions.

LG Electronics said in a regulatory filing the decision reflects a decline in demand for plasma televisions. The move was widely expected as LCD TVs have become the mainstay product in the global market.

Samsung SDI, sister company of LG’s TV rival Samsung Electronics, also said in July that it will shut down its plasma panel production business by Nov. 30 due to the decline in overall demand.

Reuters

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Medco Posts 5% Decline in 9-Month Profit

Jakarta. Medco Energi Internasional, the largest listed oil and gas company in Indonesia, booked a 5 percent decline in its profit, as the decline in its costs cannot offset falling sales, the company said in a filing to the stock exchange on Wednesday.

Medco’s reported net income of $9.5 million in January-September period from $10.0 million in the same period a year ago. The company’s total cost of sales and other direct costs declined by 2.75 percent to $353 million.

However, the company’s total sales and other operating revenues declined nearly 10 percent to $552 million. Medco’s oil and gas exploration and production businesses contributed about 94 percent of this figure.

Oil and gas companies, including Medco, have been coping with falling global crude oil prices, which have impacted sales.

According to the filing, Medco’s net oil and gas sales declined by 9.75 percent to $518 million.

In a separate statement sent by the company on Wednesday, it announced that it sold 41 million barrels of oil-equivalent (mmboe) from Jan. 1 to Sept. 30 this year. The company did not provide figures for the corresponding period last year.

Medco has other businesses, including coal mining and provision of services for the oil and gas sector.

The filing said Medco’s revenue from coal sales fell 2.15 percent to $25.5 million, while its revenue from services declined 21.5 percent to $8.6 million.

Medco is controlled by the Panigoro family and it operates nine oil and gas blocks in Indonesia. It also operates overseas, including in Libya, Oman, Papua New Guinea, Tunisia, Yemen and in the Gulf of Mexico off the US coast.

Medco on Wednesday also provided an update on the progress in its oil and gas business locally and overseas.

It said the company has succeeded in its exploration activities to find new reserves of oil and gas in Sumur Hijau 2, which is part of the South Sumatra production sharing contract (PSC) block.

Medco is also owns a 30 percent stake in Pertamina-Medco Tomori, which is developing Senoro gas field at Senoro-Toili block in Sulawesi.

Lukman Mahfoedz, Medco president director and chief executive, said in Wednesday’s statement that the project completion of the Senoro gas field stood at 87 percent.

Once completed, the project aims to commercialize the 167.66 million barrels of oil equivalent of gas reserves in the block.

Medco shares rose 0.26 percent to close at Rp 3,870 per share on the Indonesia Stock Exchange on Wednesday.

http://thejakartaglobe.beritasatu.com/business/medco-posts-5-decline-9-month-profit/

XL Axiata Files Shock Loss After Rising Costs

Jakarta. XL Axiata, Indonesia’s second-largest mobile phone operator by users, posted a Rp 901.2 billion ($74.5 million) loss in the first nine-month of this year, a huge swing from the Rp 917 billion in profit in the same period last year, the company said in a filing to the Indonesian stock exchange.

XL, majority owned by Malaysian telecommunication company Axiata Group, posted a 10.9 percent increase in its revenue in the period, but it wasn’t enough to offset the drag of its rising costs.

XL’s infrastructure expenses increased 43.5 percent to Rp 6.3 trillion.

This has put pressure on XL’s operating profit, which declined by 89.5 percent to Rp 138.13 billion.

XL’s net foreign exchange loss has also increased to Rp 935.5 billion up from Rp 714.6 billion.

The company has made efforts to reduce expenses and lower its maintenance costs, including selling telecommunication towers, to enable it to focus on its mobile telecommunication businesses.

The company has signed an asset purchase agreement to sell 3,500 communication towers to Solusi Tunas Pratama, a telecommunication infrastructure company in a Rp 5.6 trillion deal.

According to the agreement, the sale is expected to be finalized at the end of the year and Solusi Tunas Pratama will pay off the transaction entirely in cash.

XL will be left with a remaining 6,500 towers after the sale.

XL Axiata has previously said that it was planning to use funds from the tower sale to refinance its $865 million debt that it used to acquire a stake in smaller mobile phone operator Axis Telekom Indonesia in March.

http://thejakartaglobe.beritasatu.com/business/xl-axiata-files-shock-loss-rising-costs/

OPPO Plans $30m Indonesia Plant

Singapore. Chinese smartphone maker OPPO Technologies will start work on a $30 million assembly plant in Indonesia in March next year, following its entry into the country last year.

The plant will be located near Tangerang, Banten, with the capacity to manufacture up to 500,000 smartphones per month, according to OPPO Indonesia chief executive Jet Lee.

“The plant will make phones only for Indonesia, because the Indonesian market is so big,” Lee said after the launch of OPPO’s new phones — the R5 and theN3 — in Singapore on Wednesday.

With the opening of its local branch last year, OPPO has seen a 6.5 percent market share in Indonesia, selling around 200,000 smart phone units monthly.

Next year, the smartphone manufacturer aims to sell as many as 300,000 units per month, Lee said.

With a youthful demographic and an expanding middle class, Indonesia has been the main attraction in the Southeast Asia region to many technology companies, such as OPPO.

With a price tag of $649, the new N3 is equipped with a motorized rotating camera as its hallmark feature, highlighting OPPO’s attempt to make its mark in mobile photography.

The smartphone manufacturer first has introduced the rotating camera feature last year with its N1 model.

The R5 phone meanwhile, is only 4.85 millimeters thick — the slimmest smartphone in the world, OPPO says — fitted with a 13 megapixel camera on the back and a 5 megapixel camera on the front.

The R5 will be commercially available in Indonesia in November, while the N3 will follow in December, according to OPPO Indonesia’s Jet Lee.

“OPPO is committed to provide the best mobile photography technology quality,” Sky Lie, general manager of OPPO Technologies’ overseas mobile phone business, in Singapore, said on Wednesday.

“With the two new products, you can see that we do have the most cutting-edge technology for smartphones.”

The smartphone manufacturer has also partnered with a German camera maker to ramp up the camera hardware for its new products.

OPPO was established in 2004 as an electronic household device manufacturer, launching its line of smartphones seven years later.

http://thejakartaglobe.beritasatu.com/business/oppo-plans-30m-indonesia-plant/

Samsung Seeks Smartphone Revamp to Arrest Profit Slide

Seoul. Samsung Electronics on Thursday said it would revamp its smartphone line-up to take on competitors in the rapidly growing mid-to-low range segment, after third-quarter earnings set it on course for its worst year since 2011.

The global smartphone leader’s market share declined in annual terms for the third straight quarter in July-September, lagging Apple in the premium market and overtaken by rivals like Lenovo Group and Xiaomi at the bottom end, research firm Strategy Analytics said.

Executives said the South Korean giant would overhaul its lower-tier line-up to boost price competitiveness and use higher-quality components to set its devices apart, after it announced its worst third-quarter profit in more than three years.

“The mid-to-low end market is growing rapidly, and we plan to respond actively in order to capitalise on that growth,” Samsung Senior Vice President Kim Hyun-joon said during a conference call with analysts.

Samsung said its third-quarter operating profit fell by an annual 60.1 percent to 4.1 trillion won ($3.9 billion), matching its guidance issued earlier this month.

While the company expects profits to pick up in the fourth quarter on strong demand for televisions and memory chips, analysts still expect Samsung to record its worst annual operating profit in three years.

Profit for the mobile division fell 73.9 percent to 1.75 trillion won in the third quarter, its worst performance since the second quarter of 2011.

Samsung spent most of the quarter without launching a new flagship device, and continued to struggle in the mid-to-low tier markets against cheaper and value-packed offerings like Xiaomi’s Redmi 1S.

Robert Yi, Samsung’s head of investor relations, said the firm would launch new mid-tier models in the fourth quarter, although he didn’t specify what features they would have.

Samsung expects average selling prices for handsets will rise in the fourth quarter due to an increase in premium smartphone sales, namely of the Galaxy Note 4, and as demand picks up in the holiday shopping season.

Analysts say Samsung will likely have to sacrifice margins to protect its market share. Cheaper phones are expected to drive global smartphone market growth in coming years, meaning a general trend of lower average selling prices.

Samsung’s chips division was a bright spot, recording a 2.26 trillion operating profit for the July-September quarter to mark the highest earnings since the third quarter of 2010.

Reuters

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Nintendo to Develop ‘Quality of Life’ Device to Track Sleep, Fatigue

Tokyo. Japanese video game maker Nintendo will develop a device to measure a user’s fatigue and map their sleep, Chief Executive Satoru Iwata said on Thursday, the first offering from the company’s newly created healthcare division.

The device will be developed with US firm ResMed, which currently makes products to treat sleep disorders, and will be available in the financial year ending March 2016.

“By using our know-how in gaming… to analyze sleep and fatigue, we can create something fun,” Iwata said.

Nintendo, better known for its Mario video game franchise and Wii and Wii U consoles, has said it expects its healthcare division to turn a profit in 2015/2016. The company already offers fitness games on its Wii console, played with a motion sensor controller.

According to an image Iwata shared at a media conference, the device will be about the size of a hand and can be placed on a user’s bedside table. It will use microwave transmission sensors to track sleep, with the data collected used to help users cultivate healthy sleeping habits.

Iwata refused to discuss the company’s sales expectations for the new device beyond saying that it may be offered via a subscription service rather than a one-off purchase.

“We only start something new if we think we will be able to create a big market, but as I’m not able to discuss pricing plans and other details today I don’t think there’s much point in giving a figure for our projected scale,” he said.

The device was launched a day after Nintendo reported an unexpected quarterly profit, after hit games gave a boost to sales of its Wii U console.

Shares in Nintendo rose as high as 7.7 percent when they opened on the Tokyo stock exchange. They then pared gains to close the morning session up 0.7 percent, slightly outpacing the benchmark Nikkei index, which rose 0.5 percent.

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