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No more 30% Bumiputera equity rule in 27 services sub sectors… The Government removed the 30% Bumiputera equity requirement for the 27 services sub-sectors (see table in last page for details) with ...

No more 30% Bumiputera equity rule in 27 services sub sectors… The Government removed the 30% Bumiputera equity requirement for the 27 services sub-sectors (see table in last page for details) with immediate effect in line with the ASEAN trade liberalisation and efforts to boost the services sector. Long overdue move... The decision came as no surprise and was somewhat long overdue as the liberalization of the non-financial services sector was mentioned in the first and second economic stimulus packages, but minus the details until yesterday’s announcement. In addition, it reflects the Government’s effort to address the long-standing issue of the New Economic Policy (NEP). … and logical next step in the country’s development i.e. further promote services sector as source of growth, output, employment and investment… Long-term trends show the growing importance of the services sector in the economy as summarized in the table below. We liken this liberalization of services sector to the opening up of the manufacturing sector in the late 80s that catalysed Malaysia’s industrialization from a commodity-based economy. A long-term positive, but not market moving. We do not believe this liberalization offers a direct advantage to any of the listed companies we cover. However, should it attract meaningful foreign investment, the new firms may intensify competition for existing players in these service sectors. Importantly, this liberalisation puts the new administration in a positive light with investors, as the Bumiputera equity ruling has been viewed as a sacred cow by locals but an obstacle by potential investors.

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    30% Scrapped 30% Scrapped Document Transcript

    • Equity Research PP11072/03/2010 (023549) Economics 23 April 2009 Services Sector Liberalisation Removal of 30% Bumiputera rule… No more 30% Bumiputera equity rule in 27 services sub sectors… Suhaimi Ilias The Government removed the 30% Bumiputera equity requirement for Suhaimi_ilias@maybank-ib.com the 27 services sub-sectors (see table in last page for details) with (603) 2297 8682 immediate effect in line with the ASEAN trade liberalisation and efforts to boost the services sector. Long overdue move... The decision came as no surprise and was somewhat long overdue as the liberalization of the non-financial services sector was mentioned in the first and second economic stimulus packages, but minus the details until yesterday’s announcement. In addition, it reflects the Government’s effort to address the long-standing issue of the New Economic Policy (NEP). … and logical next step in the country’s development i.e. further promote services sector as source of growth, output, employment and investment… Long-term trends show the growing importance of the services sector in the economy as summarized in the table below. We liken this liberalization of services sector to the opening up of the manufacturing sector in the late 80s that catalysed Malaysia’s industrialization from a commodity-based economy. A long-term positive, but not market moving. We do not believe this liberalization offers a direct advantage to any of the listed companies we cover. However, should it attract meaningful foreign investment, the new firms may intensify competition for existing players in these service sectors. Importantly, this liberalisation puts the new administration in a positive light with investors, as the Bumiputera equity ruling has been viewed as a sacred cow by locals but an obstacle by potential investors. Growing Importance of Services Sector to the Malaysian Economy 1970 1980 1990 2000 2008 Real GDP (% Share) 38.3 42.5 46.8 49.3 54.9 Employment (% Share) NA 45.1 47.2 51.3 58.8 1970s 1980s 1990s 2000-2008 Output Growth (% p.a.) 9.0 7.1 9.1 6.5 • RM50.1b of investments in the services sector was Others approved in 2008, with FDI accounting for 11% of the total. • RM102.1b exports of services in 2008 while imported services amounted to RM99.8bn, sustaining the first services trade surplus recorded in 2007. • According to WTO, Malaysia is among the 30 leading global exporters of services Source: BNM, Department of Statistics, Media Reports
    • Services Sector Liberalisation Expect further announcements on services sector liberalization, especially in banking/finance and related legal services… We understand that Bank Negara Malaysia (BNM) will also make some announcements on the liberalization of the financial services sector early next week, which could include the following: • Granting one or two more new licenses for foreign banks, possibly in the non-commercial banking areas like micro-finance or development finance. This is in line with the central bank’s “managed and sequenced” approach as opposed to the “Big-Bang” approach in banking sector liberalization to fit in with the national development agenda. • More aggressive liberalization measures for Islamic banking/finance to strengthen the international dimension of Islamic finance, especially in terms of product offerings, in line with the Malaysia as Islamic Financial Centre (MIFC) agenda. With regards to MIFC above, the legal profession will also be liberalised to allow up to five top international law firms with expertise in international Islamic finance to practise in Malaysia. However, these firms will only be allowed to offer legal services in international Islamic finance. Other key takeaways and initiatives mentioned during the announcement include: • To facilitate investments, a national committee for approval of investments has been created under MIDA to act as the focal point to receive and process investment applications in the services sector excluding financial services, air travel, utilities, economic development corridors, Multimedia Super Corridor (MSC) and Bionexus status companies and distributive trade. • The RM100m development fund established under the First Economic Stimulus will be mobilized to support the local services industry in capacity building and exports. The fund will be run by Malaysian Industrial Development Authority (MIDA), while Malaysia External Trade Development Corporation (MATRADE) is tasked to coordinate and spearhead all export promotion initiatives. 23 April 2009 Page 2 of 4
    • Services Sector Liberalisation Malaysia: Liberalised Services Sub-Sectors Sub-Sectors Activities • Consultancy services related to installation of computer hardware Computer & Related Services • Software implementation services – systems and software consulting services; systems analysis services; systems design services; programming services and systems maintenance services • Data processing services – input preparation servies; data processing and tabulation services; time sharing servies and other data processing services • Database services • Maintenance and repair services of computers • Other services – data preparation services; training services; data recovery services; and development of creative content • All veterinary services Health & Social Services • Welfare services delivered through residential institutions to old person and the handicapped • Welfare services delivered through residential institutions to children • Child day-care services including day-care services for the handicapped • Vocational rehabilitation services for the handicapped • Theme park Tourism Services • Convention and exhibition centre • Travel agencies and tour operators services (for inbound travel only) • Hotel and restaurant services (for 4 and 5 star hotels only) • Food serving services (for 4 and 5 star hotels only) • Beverage serving services for consumption on the services (for 4 and 5 star hotels only) • Class C freight transportation (Private carrier license – to transport own goods) Transport Services • Sporting services (promotion and organization services Sporting & Other Recreational Services • Regional distribution centre Business Services • International procurement centre • Technical testing and analysis services – composition and purity testing and analysis services, testing and analysis services of physical properties, testing and analysis services of integrated mechanical and electrical systems and technical inspection services • Management consulting services – general, financial (excluding business tax), marketing, human resources production and public relations services • Rental/leasing services of ships that excludes cabotage and offshore trades Rental/Leasing Services Without Operators • Rental of cargo vessels without crew (Bareboat Charter) for international shipping • Maritime agency services Supporting & Auxiliary Transport Services • Vessel salvage and refloating services Source: Media Reports 23 April 2009 Page 3 of 4
    • Services Sector Liberalisation Definition of Ratings Maybank Investment Bank Research uses the following rating system: STRONG BUY Total return is expected to exceed 20% in the next 12 months; high conviction call BUY Total return is expected to be above 10% in the next 12 months HOLD Total return is expected to be between above 0% to 10% in the next 12 months FULLY VALUED Total return is expected to be between -10% and 0% in the next 12 months SELL Total return is expected to be below -10% in the next 12 months TRADING BUY Total return is expected to be between 10-20% in the next 6 months arising from positive newsflow e.g. mergers and acquisition, corporate restructuring, and potential of obtaining new projects. However, the upside may or may not be sustainable Applicability of Ratings The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies. Some common terms abbreviated in this report (where they appear): Adex = Advertising Expenditure FCF = Free Cashflow PE = Price Earnings BV = Book Value FV = Fair Value PEG = PE Ratio To Growth CAGR = Compounded Annual Growth Rate FY = Financial Year PER = PE Ratio Capex = Capital Expenditure FYE = Financial Year End QoQ = Quarter-On-Quarter CY = Calendar Year MoM = Month-On-Month ROA = Return On Asset DCF = Discounted Cashflow NAV = Net Asset Value ROE = Return On Equity DPS = Dividend Per Share NTA = Net Tangible Asset ROSF = Return On Shareholders’ Funds EBIT = Earnings Before Interest And Tax P = Price WACC = Weighted Average Cost Of Capital EBITDA = EBIT, Depreciation And Amortisation P.A. = Per Annum YoY = Year-On-Year EPS = Earnings Per Share PAT = Profit After Tax YTD = Year-To-Date EV = Enterprise Value PBT = Profit Before Tax Disclaimer This report is for information purposes only and under no circumstances is it to be considered or intended as an offer to sell or a solicitation of an offer to buy the securities referred to herein. Investors should note that income from such securities, if any, may fluctuate and that each security’s price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from Bursa Malaysia Securities Berhad in the equity analysis. Accordingly, investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance. This report is not intended to provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the particular needs of persons who may receive or read this report. Investors should therefore seek financial, legal and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report. The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently verified by Maybank Investment Bank Bhd and consequently no representation is made as to the accuracy or completeness of this report by Maybank Investment Bank Bhd and it should not be relied upon as such. Accordingly, no liability can be accepted for any direct, indirect or consequential losses or damages that may arise from the use or reliance of this report. Maybank Investment Bank Bhd, its affiliates and related companies and their officers, directors, associates, connected parties and/or employees may from time to time have positions or be materially interested in the securities referred to herein and may further act as market maker or may have assumed an underwriting commitment or deal with such securities and may also perform or seek to perform investment banking services, advisory and other services for or relating to those companies. Any information, opinions or recommendations contained herein are subject to change at any time, without prior notice. This report may contain forward looking statements which are often but not always identified by the use of words such as “anticipate”, “believe”, “estimate”, “intend”, “plan”, “expect”, “forecast”, “predict” and “project” and statements that an event or result “may”, “will”, “can”, “should”, “could” or “might” occur or be achieved and other similar expressions. Such forward looking statements are based on assumptions made and information currently available to us and are subject to certain risks and uncertainties that could cause the actual results to differ materially from those expressed in any forward looking statements. Readers are cautioned not to place undue relevance on these forward- looking statements. Maybank Investment Bank Bhd expressly disclaims any obligation to update or revise any such forward looking statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events. This report is prepared for the use of Maybank Investment Bank Bhd's clients and may not be reproduced, altered in any way, transmitted to, copied or distributed to any other party in whole or in part in any form or manner without the prior express written consent of Maybank Investment Bank Bhd and Maybank Investment Bank Bhd accepts no liability whatsoever for the actions of third parties in this respect. This report is not directed to or intended for distribution to or use by any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. Published / Printed by Maybank Investment Bank Berhad (15938-H) (Formerly known as Aseambankers Malaysia Berhad) (A Participating Organisation of Bursa Malaysia Securities Berhad) 33rd Floor, Menara Maybank, 100 Jalan Tun Perak, 50050 Kuala Lumpur Tel: (603) 2059 1888; Fax: (603) 2078 4194 Stockbroking Business: Level 8, MaybanLife Tower, Dataran Maybank, No.1, Jalan Maarof 59000 Kuala Lumpur Tel: (603) 2297 8888; Fax: (603) 2282 5136 http://www.maybank-ib.com 23 April 2009 Page 4 of 4