Petronas Net Profit Came In 16% Higher
Petronas reported a 16 percent rise in 3Q13 net profit, aided by higher demand for crude oil and an unexpected return to production in South Sudan. Net profit in the July to September period rose to RM14.5 billion from RM12.5 billion a year ago. Higher production levels and foreign exchange gains are expected to boost results for FY13. Petronas’ total domestic and international production in the third quarter reached 2.1 million barrels of oil equivalent (boe), up from 1.9 million a year ago, as it resumed operations in South Sudan and ramped up output in Malaysia, Iraq and Canada. For 9M13, production was up 6 percent from the corresponding year ago period.
Significance: Importantly, Petronas has not decided a plan for its $850 million deal to buy a stake in two Brazilian offshore oil blocks, controlled by the ailing Brazilian oil and gas company, OGX, as it is still pending a court decision on OGX’s bankruptcy filing.
Mah Sing 9M13 Earnings Up 19.8%
Mah Sing Group reported 9M13 earnings and revenue increased by 19.8% to RM209.9 million and 7.6% to RM1.4 billion, respectively, mainly attributed to the increasing contribution from mixed developments and improved profit margin as a result of better product mix. To date in 2013, the group has embarked on five land deals with a combined gross development value of approximately RM9 billion, exceeding its FY12 landbank of RM7.4 billion by 21 percent. “Buyers are digesting the new measures to be implemented, especially the real property gains tax, the removal of the developer interest bearing scheme, increase of floor price for foreign purchasers and the implementation of the goods and services tax in 2015,” said Mah Sing group managing director Tan Sri Leong Hoy Kum. “We believe demand will still be strong for property buyers who are buying to own or buying to invest for long-term rental income,” he added further.
Significance: Mah Sing’s share price has fallen 6.8 percent from RM2.35 to RM2.19 since the announcement of Budget 2014, however, Leong believes the group is among the less affected property developers.
Moody’s: IOI’s Property Spin-Off Presents Long-Term Benefits
IOI Corporation announced the de-merger of its property arm into a separate-listed company, IOI Properties Group in May 2013. The group will receive cash proceeds of about RM1.9 billion plus cash settlement of intercompany balances with the property division for the divestment. The de-merger is expected to be completed in January 2014 after regulatory approvals. Moody’s Investor Service (MIS) said the de-merger will be beneficial in the long-term because IOI will be able to focus on growing its plantations and resource-based manufacturing divisions, which are highly cash-generative. Moreover, the income generated from these activities will no longer be used to fund large-scale property developments.
Significance: Following the de-merger, IOI’s cash on hand will swell and the focus will be on its liquidity position as IOI’s operating margin will see a greater correlation with crude palm oil prices after the loss of the property development segment.