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Gamuda (GAM MK)
by Chew
Hann Wong
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Share
Price:
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MYR4.81
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Target
Price:
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MYR5.55
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Recommendation:
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Buy
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Earnings
recovery in motion
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Gamuda’s 1QFY7/17 net profit was a slightly short as we
over-estimated the initial pace of the KVMRT 2 works. That said,
forward quarters should see pick up as the works start to feature. We
lower our FY17 net profit forecast by 5%, keep FY18-19. Our RNAV-TP of
MYR5.55 is intact. We are still positive; the stock remains as our top
BUY pick for the sector.
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FYE Jul (MYR m)
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FY15A
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FY16A
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FY17E
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FY18E
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Revenue
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2,399.9
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2,121.9
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2,970.2
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3,889.8
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EBITDA
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638.0
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548.5
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710.3
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824.3
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Core net profit
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682.1
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626.1
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680.5
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761.0
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Core EPS (sen)
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28.9
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26.0
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28.1
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31.4
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Core EPS growth (%)
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(6.6)
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(10.2)
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8.2
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11.8
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Net DPS (sen)
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12.0
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12.0
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12.0
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12.0
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Core P/E (x)
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16.6
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18.5
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17.1
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15.3
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P/BV (x)
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1.8
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1.7
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1.6
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1.5
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Net dividend yield (%)
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2.5
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2.5
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2.5
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2.5
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ROAE (%)
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11.6
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9.5
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9.5
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10.0
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ROAA (%)
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5.8
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4.6
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4.7
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5.1
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EV/EBITDA (x)
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23.4
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29.0
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22.9
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19.9
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Net debt/equity (%)
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47.9
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55.2
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54.3
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51.9
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Chew Hann Wong
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Adrian Wong
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Share
Price:
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MYR3.06
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Target
Price:
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MYR3.15
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Recommendation:
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Hold
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STM sales weaken
again
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Core earnings and dividends disappointed due largely to
higher-than-expected prize payouts. Also, we note that the Sports Toto
Malaysia (STM) sales growth YoY in 1QFY4/17 (+4% YoY) did not recur in
2QFY17 (-6% YoY). Competition from illegal operators and weak consumer
sentiment continue to weigh on STM sales. We maintain our earnings and
dividend estimates which already reflected FY17 STM sales/draw to ease
2% YoY but the prize payout ratio to normalize going forward.
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FYE Apr (MYR m)
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FY15A
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FY16A
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FY17E
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FY18E
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Revenue
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5,283.6
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5,563.2
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5,499.6
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5,562.9
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EBITDA
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566.4
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508.6
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515.4
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520.6
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Core net profit
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343.5
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306.2
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316.1
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325.9
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Core EPS (sen)
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25.5
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22.7
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23.5
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24.2
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Core EPS growth (%)
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(0.6)
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(11.0)
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3.3
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3.1
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Net DPS (sen)
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21.5
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19.0
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20.5
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21.0
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Core P/E (x)
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12.0
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13.5
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13.0
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12.7
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P/BV (x)
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6.0
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5.4
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5.1
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4.9
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Net dividend yield (%)
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7.0
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6.2
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6.7
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6.9
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ROAE (%)
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55.1
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42.3
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40.3
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39.4
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ROAA (%)
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15.6
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12.6
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12.3
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13.1
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EV/EBITDA (x)
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8.3
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8.8
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8.7
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8.5
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Net debt/equity (%)
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35.0
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35.5
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28.5
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21.3
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SECTOR RESEARCH
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Upgrade to POSITIVE
by Thong
Jung Liaw
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We upgrade the sector to POSITIVE, ahead of its
cyclical recovery, on an improving risk-reward outlook. In our view,
the sector has bottomed. We see two major catalysts. Firstly, OPEC
and non-OPEC’s move to cut output will accelerate the demand-supply
rebalancing of the oil market and spur capex/activities growth.
Secondly, we foresee multiple benefits to Malaysia’s O&G
operations should Saudi Aramco’s plan to invest a 50% stake in
PETRONAS’ RAPID project materialize. For that, we lift earnings
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MACRO RESEARCH
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Of politics & policies
by Chew
Hann Wong
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Trump’s policies will be closely watched in 2017.
There are also key political events in Europe to contend with, amid
the rising tide of inward-looking nationalism and populism,
de-globalisation and protectionism. Political developments and events
have policy implications, and we see four key global themes. We
expect a mild pick-up in growth as real GDP is expected to be at
+4.4% in 2017. With external headwinds to remain dominant driving
volatility, we maintain a defensive strategy.
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Chew Hann Wong
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Suhaimi Ilias
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Trade rebounded in Nov 2016 as exports grew +8.2% YoY
(Oct 2016: -9.2% YoY) and imports expanded +9.4% YoY (Oct 2016: -6.1%
YoY). The trade surplus narrowed to +SGD4.92b (Oct 2016: +SGD5.63b).
Oil trade rose for the first time in 28 months (Nov 2016:+24.8% YoY;
Oct 2016: -5.4% YoY) as crude oil prices rose.
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Suhaimi Ilias
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Zamros
Dzulkafli
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NEWS
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Outside Malaysia:
China: Must curb speculation amid bubble, top official
says. China must do more to deflate a property bubble that expanded this
year by "strictly" controlling speculation while also stepping
up the fight to rein in excessive corporate borrowing, a top economic
official said a day after leaders announced plans for next year. "We
need to give a higher priority to preventing and controlling financial
risks," Yang Weimin, deputy director of the Office of the Central
Leading Group on Finance and Economic Affairs, said at a forum in
Beijing. "We need to defuse a flurry of risks, contain asset
bubbles, and improve oversight to ensure there won’t be a systemic
financial risk." (Source: Bloomberg)
Japan: Posts trade surplus for third month in November as
imports slump. Exports declined at the slowest pace since September 2015
as it fell by 0.4% YoY in November (forecast -2.3%), after declining 10%
YoY in October, according to finance ministry data released. Imports
declined 8.8% YoY (forecast -12%), following a 17% YoY drop the previous
month. Japan had a trade surplus of JP Y 536.1b (USD 4.5b) in November.
(Source: Bloomberg)
Crude Oil: Extends advance above USD 52/bbl as Libyan
output comeback stalls amid continuing tension in the OPEC member exempt
from agreed output cuts. Libyan oil-facility guards have backtracked on
an agreement to allow supply to flow from the El Feel and Sharara fields,
two of the country’s biggest, according to an engineer that operates El
Feel. Hedge-fund managers and other large speculators increased their
net-long positions on West Texas Intermediate to the highest since July
2014, U.S. Commodity Futures Trading Commission data showed. Brent for
February settlement gained to USD 55.58/bbl on the London-based ICE
Futures Europe exchange. (Source: Bloomberg)
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Other News:
Infrastructure: MYR16b Pan Borneo jobs awarded. Lebuhraya
Borneo Utara Sdn Bhd (LBU) has awarded all the 11 work packages under
phase one of the Pan Borneo Highway project on Sarawak’s side for a total
sum of MYR16.49b. According to LBU, 11 listed companies from Sarawak and
Peninsular Malaysia were among 20 firms that secured construction work
contracts. These listed entities together with their joint venture (JV)
partners bagged seven work packages worth MYR10.02b. Four other
privately-owned companies clinched the remaining four packages and share
construction contracts valued at about MYR6.47bil. Currently, site
clearing and earthworks of all the work packages are in progress. Also
being carried out by the relevant authorities is the acquisition of private
land and compensation to landowners affected by the highway project. The
entire project is scheduled for full completion by 2022. Phase two of the
project will cover Limbang Division in the northern tip of Sarawak which
borders Sabah. According to media reports, road construction under phase
two is expected to cover 102km from Sabah to Sungai Tujoh in Miri
Division which borders Brunei. (Source: The Star)
TMC Life Sciences: Medical hub in Iskandar to begin
operations by 2020. Part of the MYR5b Vantage Bay Healthcare City project
in Iskandar Malaysia, Johor, the group’s integrated medical hub called
Thomson Iskandar is expected to begin operations by 2020. Located just
off the Causeway linking Johor and Singapore, the medical hub will house
a 500-bed tertiary hospital, 400 special medical suites and related
health and wellness facilities. The private hospital operator’s executive
director and group CEO Roy Quek told reporters at a briefing last Friday
that construction of the 500-bed hospital would begin after the group
secured its final approval from the Health Ministry. Other than the
medical hub, the MYR5b project would comprise a teaching hospital,
medical school, and research and training institutions. The proposed
healthcare city is also where the health sciences university, TMC’s
maiden venture into education space in Malaysia, will be located. The
group signed a MOU with Thompson Medical Pte Ltd and University College
Dublin to jointly collaborate on health education in Malaysia and
Singapore. (Source: The Sun Daily)
Yee Lee Corp: Sees opportunities after oil subsidy
removal. The recent development by Putrajaya to remove subsidies for
palm-based cooking oil and the removal of production quota on existing
manufacturers has been seen as a catalyst for the company, however, it is
not without its risks. The producer of the “Red Eagle” brand of cooking
oil, has to step up in order to gain a larger market share, or possibly
risk losing its piece of the pie to competitors if it continues to stay
quiet. “This [subsidy removal] gives us opportunities to increase our
market share in the cooking oil segment we are in. previously, there was
a quota on how much we could produce, so it didn’t make a huge difference
to our market share whether we were aggressive or not,” group CEO Lim Ee
Young said in a recent interview. The subsidy removal was effective on
Nov 1- except for the 1kg poly bags. (Source: The Edge Financial Daily)
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