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EPF generates investment income of RM5.5b in 3Q
Written by Joseph Chin
Thursday, 03 December 2009 19:45
KUALA LUMPUR: The Employees Provident Fund (EPF) generated investment income of RM5.50 billion in the third quarter of 2009, up RM696.32 million or 14.51% above the RM4.80 billion in the second quarter.
The EPF said on Thursday, Dec 3 that on a year-over-year basis, 3Q investment income rose by 52.71% from RM3.60 billion a year ago.
Equities continued to contribute significantly to the EPF’s investment income, growing 34.67 per cent from RM1.74 billion earned in Q2 2009 to RM2.34 billion in Q3 2009.
“The continued rally in the stock market has helped to boost EPF investment income for the quarter. Provided that market recovery continues with no unforeseen disruptions till the year end, members can expect a higher dividend for 2009 compared to that of the previous year,” said EPF chief executive officer Tan Sri Azlan Zainol.
The EPF said loans and bonds' contribution increased 4.07% to RM1.89 billion from RM1.81 billion in 2Q. This was due to the regaining momentum and confidence in Malaysia’s corporate bond market, and in line with the EPF’s low risk policy to invest only in high-grade companies with credit ratings of AAA or AA.
It recorded an income of RM1.14 billion from investments in Malaysian Government Securities, up 2.54% from RM1.11 billion in 2Q.
Income from PROPERTIES [] rose 2.69% to contribute RM21.37 million for 3Q from RM20.81 million in 2Q.
However, returns generated from money market instruments declined 7.38% to RM87.31 million in 3Q from RM94.27 million in 2Q.
The EPF’s total fund size is RM361.09 billion compared with RM353.93 billion in 2Q.
The Employees Provident Fund (EPF) says contributors can expect a higher dividend this year if the market recovery continues smoothly for the remaining period.
"The continued rally in the stock market has helped boost EPF investment income in the third quarter," its chief executive officer Tan Sri Azlan Zainol said in a statement issued yesterday.
The EPF generated investment income of RM5.5 billion in the third quarter of 2009, up 14.51 per cent, or some RM696.32 million, from the second quarter.
Equities continued to contribute significantly to its investment income, increasing 34.67 per cent to RM2.34 billion in the third quarter from RM1.74 billion in the second quarter.
Another major contributor was loans and bonds, which rose 4.07 per cent to RM1.89 billion from RM1.81 billion.
This was attributed to the regaining momentum and confidence in Malaysia's corporate bond market and the EPF's low-risk policy of investing only in high-grade companies with credit ratings of "AAA" or "AA".
Third quarter income from the EPF's investments in Malaysian Government Securities and properties was up 2.54 per cent to RM1.14 billion and 2.69 per cent to RM21.37 million respectively.
However, returns from money market instruments declined 7.38 per cent to RM87.31 million.
Year-on-year, third quarter investment income was a 52.71 per cent increase from RM3.6 billion.
Overall, the EPF's fund size currently stands at RM361.09 billion compared with RM353.93 billion in the second quarter.
EPF net buyer in banking stocks
Written by Yong Yen Nie
Monday, 14 December 2009 11:41
KUALA LUMPUR: The Employees Provident Fund (EPF) has re-emerged as a net buyer in most domestic banking stocks, especially large-capped ones since November 2009, a significant shift from its net selling activities in the period prior starting in April this year.
According to latest filings on Bursa Malaysia, EPF has raised its stakes in MALAYAN BANKING BHD [] (Maybank) and CIMB Group Holdings Bhd to 808.7 million shares or 11.4% and 462.22 million or 12.9%, respectively.
A month earlier, EPF held 788.25 million shares or an 11.1% stake in Maybank and 441.68 million shares or a 12.3% stake in CIMB.
Prior to this, the statutory pension fund had pared down its holdings in Maybank and CIMB from April this year. At end-April, it had held 887.77 million shares or a 12.5% stake in Maybank and 623.48 million shares or a 17.4% stake in CIMB.
EPF also picked up PUBLIC BANK BHD [] (PBB) shares in November, raising its interests to 474.93 million shares or 13.4%, compared with 461.54 million shares or 13.1% at end-October.
EPF used to hold a 14.8% stake comprising 523.76 million shares in PBB but had pared down its stake in the banking group since end-August this year.
It also accumulated more AMMB HOLDINGS BHD [] shares and held a 13.4% stake or 405.35 million shares in the banking group as of end-November, compared with 395.38 million shares or 13.1% a month earlier.
EPF had been a net seller in AMMB shares since July. As at end-June, EPF had held 451.57 million shares or a 15% stake in AMMB.
Banking analysts said EPF was seen to be turning its focus on banking stocks, given the improved indicators in the financial sector and stronger expectations of an improved economic outlook in 2010.
A banking analyst with a local research house said several research houses had made overweight calls on the sector following banks’ better-than-expected financial results for the quarter ended Sept 30, 2009.
“With the anticipation of a stronger economy next year, EPF would want to have an investment strategy that benefits the most from the recovery,” she told The Edge Financial Daily last week.
The banking analyst added that while there was still some upside left in the banking stocks, most of them were approaching the target prices.
“(Nevertheless), we believe buying activities for banking stocks will continue for the first half of 2010, underpinned by stronger economic trends, while profit-taking would be more pronounced by June next year,” she said.
EPF had also accumulated shares in other mid-capped banking stocks, filings on Bursa Malaysia showed.
According to filings last Friday, EPF had raised its interests in HONG LEONG BANK BHD [] to 177.28 million shares or 11.2% from 171.32 million shares or a 10.8% stake at end-October.
The pension fund had also increased holdings in ALLIANCE FINANCIAL GROUP BHD [] (AFG) to 235.9 million shares or 15.24% at end-November from 226.02 million shares or 14.6% a month earlier. Filings showed EPF has been accumulating shares in AFG since end-June.
EPF slightly pared down holdings in EON CAPITAL BHD [] to 83.4 million shares representing 12.03% at end-November from 83.62 million shares or 12.06% a month earlier.
Recent Bank Negara Malaysia statistics showed that the decline in loans growth had bottomed in October, following a faster loans expansion of 7.5% year-on-year (y-o-y) compared with 7.2% in September this year.
In a report, ECMLibra Investment Research said the improving loans growth corresponded with a gradual recovery in economic conditions, as shown by a 1.2% contraction in gross domestic product (GDP) for the third quarter of 2009 (3Q09), which was healthier than 1Q09’s and 2Q09’s contraction of 6.2% and 3.9%, respectively.
“Going by the lending indicators, it would seem that there has been some pent-up demand for credit, as shown in the double-digit y-o-y changes in the applications and approval numbers.
“Net NPL (non-performing loans) ratio on a three-month basis remained unchanged at 2.1%, but has improved to 1.5% on a six-month basis (from 1.6% previously),” it said.
The research house added that the banking system’s capitalisation remained stable with risk-weighted capital ratio and core capital ratio of 14.5% and 13%, respectively.
This article appeared in The Edge Financial Daily, December 14, 2009.
The group is expected to make a gain of RM171 million from the sale of properties that house its banking operations.
CIMB Group is selling up to 65 properties that house its banking operations to the Employees Provident Fund (EPF) for RM302.4 million in a related-party sale and leaseback deal.
The group, in an announcement yesterday, said the sale will raise cash for CIMB Bank's working capital, reduce its risk-weighted assets by the book value of the properties and reduce its property risks.
The group is expected to make a gain of RM171 million from the sale.
The properties are currently used to house CIMB Group's banking business operations such as branches and offices.
The sale and leaseback deal will be not be its first.
It sold and leased back its current head office, Bangunan CIMB, and Menara Bumiputra-Commerce.
In late 2007, CIMB group managing director and chief executive officer Datuk Seri Nazir Razak said it was mulling over a third sale and leaseback exercise on some buildings as part of its plan to manage capital more efficiently.
The EPF is a major shareholder in CIMB Group, while Nazir is a member of the pension fund's investment panel. He abstained from voting on the deal.
SINGAPORE: The Employees Provident Fund (EPF) will be forced to buy more Islamic bonds this year as the Government cuts conventional note sales to the state-run pension manager, according to Royal Bank of Scotland Group Plc (RBS).
Malaysia planned to lower total sovereign sales to RM40.5bil in 2010 from RM52bil while maintaining the same number of Islamic bonds sales as in 2009, it said Dec 21.
It will also reduce conventional bond auctions and cut private placements to the EPF to two from eight in a bid to shrink state debt.
“The sharp reduction in private placements to the EPF in 2010 will clearly put the competition pressure back on the demand side,” Chia Woon Khien, emerging markets analyst at Edinburgh-based RBS, said in a note to clients e-mailed yesterday.
Malaysia is the world’s biggest market for Islamic bonds, known as sukuk, and may enable individuals to trade syariah-compliant debt on its bourse as part of a plan to attract new investors. — Bloomberg
Global sukuk sales rallied to US$20.2bil last year from US$14.1bil in 2008 after jumping to a record US$31bil in 2007 amid a surge in Arab oil wealth, according to data compiled by Bloomberg.
Sukuk are asset-based securities that pay a profit rate instead of interest, which is prohibited by syariah.
Malaysia is planning six sukuk sales this year, the same as last year, starting this month with 3½-year bonds and ending in November with a 10-year issue, according to a calendar published on Bank Negara website.
The calendar doesn’t provide details on the amount to be raised at each sale. — Bloomberg
EPF trims holding in AFG
Written by The Edge Financial Daily
Tuesday, 19 January 2010 00:31
KUALA LUMPUR: The Employees Provident Fund (EPF) is trimming its shareholding in ALLIANCE FINANCIAL GROUP BHD [] (AFG), which has been in the limelight lately due to the spat between its CEO Datuk Bridget Lai and its board.
Since last month, the pension fund has sold 21.41 million shares in AFG, reducing its stake in the company to 13.13% from some 14% previously.
Filings to Bursa Securities indicated that the shares, sold between Dec 10, 2009 and Jan 11, 2010, were transacted via the portfolio managers for the pension fund — CIMB-Principal Asset Management Bhd, Mayban Investment Management Sdn Bhd and Nomura Asset Management (M) Sdn Bhd.
Following the sale, the EPF now owns 203.33 million shares in AFG, whose single largest shareholder is the Singapore government investment arm Temasek Holdings Pte Ltd with 29.06%.
Yesterday, shares of AFG, which owns Alliance Bank Malaysia Bhd, fell one sen to close at RM2.51, giving it a market capitalisation of RM3.89 billion. The stock had dropped from a high of RM2.79 in late December to a low of RM2.41 last Monday since news of the internal probe into several of the banking group's top executives, including Lai, surfaced during the last week of 2009.
The counter had declined 7.4% so far this year, underperforming the FBM KLCI's 1.98% gain as the internal probe and the lack of disclosure on the incident have sparked concerns over the possible financial impact on AFG's earnings, if any, and its prospects going forward.
In a statement to the exchange on Jan 12, Alliance Bank said the internally driven investigation which was assisted by an independent external auditor, was a policy-prescribed procedure, and was expected to be finalised within two to three weeks.
Lai, who was appointed group CEO of Alliance Bank in September 2005, is currently on voluntary leave to facilitate investigations. She is effectively still the group chief executive of the bank. In the interim, Choo Joon Keong is the appointed relief officer in charge.
Alliance Bank said that while the investigations were being carried out, the bank was bound by legal and regulatory constraints and had to ensure that legitimacy of responses took precedence over disclosure and timeliness
Wednesday February 10, 2010 EPF’s 2009 payout will be better
Raison D'etre - By Risen Jayaseelan
But don’t hope for an ang pow
THANKS largely to a stellar stock market performance in 2009, the Employees Provident Fund (EPF) should be declaring a decent dividend for last year soon. And thanks too to low interest rates, the pension fund’s dividend payments is going to look good, when measured against the fixed deposit rates.
It is likely that the difference between what the EPF declares and prevailing FD rates will be more than 2 percentage points, which will leave many contributors comfortable with the thought that their EPF savings are giving them higher returns than what their cash in the bank is earning.
Recently, EPF chairman Tan Sri Samsudin Osman hinted that the dividends to be announced next month would be better than the 4.5% announced for the year before. He said this was due to “the local share market’s stable position and good investment returns.”
The EPF must be enjoying some decent (albeit paper) gains because of last year’s stellar performance of the stock market. And that, in turn, means it will likely report higher net earnings for 2009 compared with 2008.
To recap, the EPF had to provide a net allowance of the diminution in the value of its investments of a whopping RM3.9bil for 2008. This was possibly the highest provisioning that the EPF has had to do for its investments and most of this is believed to be related to the 2008 global stock market crash.
To be noted is that this was a mere provision, which means that the EPF did not actually “lose” that amount of money but because of prudent accounting principles, it had to “mark to market” the value of its investments.
Logic will dictate that considering stock markets had rebounded in 2009, that the reverse will happen i.e. the EPF will have the opportunity for some hefty writebacks of the market value of its investments.
This in turn will mean a better net income figure and that in turn will mean higher dividends. The EPF has historically given out just about all of its net income through dividends to its contributors.
But beyond the writebacks, there’s not much more to be expected from the EPF in terms of its earnings growth. Indeed, analysts reckon that it would be very difficult for the pension fund to sustain payouts above 5% in the coming years. That’s because of the following facts:
·While weak equity markets will continue to hurt EPF over the near term, over the longer term, the fund’s performance will also be determined by the returns it gets from investing in low-risk assets such as government bonds.
·The EPF had allocated a quarter of its more than RM360bil investment funds for higher yielding government papers. But as these higher yielding notes expire, the fund must purchase new issues which will now come with lower returns.
·Another big chunk of EPF holdings is in highly-rated corporate bonds and low-risk guaranteed loans.
However, the global economic turmoil has cut the supply of new bonds coming into the market.
Cheaper lending rates had also reduced interest income from loans given out.
It is worth noting that under the law, EPF has to maintain a dividend rate of at least 2.5% annually. The dividend must come from income generated from its investments.
Note: The assumed FD rate is the 12 month average FD rate in Malaysia.
l Deputy news editor Risen Jayaseelan reckons that while many contributors would still feel that their EPF dividends should be higher than what they are, we should be reminded that the EPF’s foremost principle is capital preservation and with that comes lower returns due to its lower risk investments.
The Employees Provident Fund (EPF) has made an offer to buy the rest of property group Malaysian Resources Corp Bhd (MRCB) (1651) at RM1.50 each after it triggered the general offer (GO) rule.
Under the takeover rules, once an investor has more than 33 per cent of a listed company, it must make an offer to buy the remaining shares.
The EPF triggered the GO after it bought shares not taken up by existing MRCB shareholders under a renounceable rights issue to raise up to RM566 million, MRCB said in a statement to Bursa Malaysia.
Before this, it had about 32 per cent of MRCB. The EPF had promised to buy all of the rights shares, priced at RM1.12 apiece, to ensure that MRCB has the funds to expand.
The EPF exercised its rights to buy 171.47 million rights shares not taken up, raising its stake to 33.78 per cent, or 461.52 million shares.
MRCB shares closed 6 sen higher to RM1.47 yesterday.
However, the GO will only happen if the pension fund gets more than half of MRCB.
EPF, in a statement issued through RHB Investment Bank Bhd yesterday, said it does not intend to delist MRCB.
The fund would also rectify MRCB's public shareholding spread if it plunges below the minimum 25 per cent requirement as a result of the offer.
If this happens, EPF stressed that it will still maintain a more than 50 per cent interest in the construction and property firm.
A source said the price was fair because it is a slight premium to the market price and if the premium is too big, too many shareholders would accept it, and it could jeopardise MRCB's listing status if the public spread falls below 25 per cent.
The average fair value of 10 analysts tracked by Bloomberg was RM1.57. Six out of them had fair values of more than RM1.50.
"The EPF believes strongly in the business opportunity of MRCB," the source said.
MRCB made a net profit of RM34.6 million for the year to December 31 2009 as against a loss of RM56.6 million in 2008. The loss was mainly due to a big finance charge due to the early payment on a bond.
Revenue for the full year was up 17 per cent to RM921.6 million.
The group is confident its revenue will cross the RM1 billion mark for the first time in 2010 while profits would also rise significantly, it said when releasing its financial results on February 24.
The group's flagship development is the Kuala Lumpur Sentral.
It is now constructing new buildings like the Shell headquarters at 348 Sentral, Nu Sentral mall and KL Sentral Park. All of them are being developed under the certification of Malaysia's Green Building Index, LEEDS and BCA Greenmark
EPF offers RM1.50 per MRCB share
Written by Ellina Badri & Melody Song
Thursday, 04 March 2010 11:12
KUALA LUMPUR: The Employees Provident Fund (EPF) is making a conditional takeover offer for the shares it does not already own in Malaysian Resources Corporation Bhd (MRCB) at RM1.50 cash apiece, after it triggered the general offer (GO) following its subscription of 171.47 million MRCB rights shares late last year.
In an announcement yesterday, MRCB said following its subscription of the rights shares, EPF’s shareholding in the government-linked property and construction company rose to 33.78% or 461.52 million shares of RM1 each, from 32% previously. The GO trigger is 33%.
MRCB, which is reputed for the KL Sentral development here, said it would appoint an independent adviser for the purposes of the offer. EPF also has holdings in other property and construction firms such as S P Setia Bhd and WCT Bhd.
In the notice of EPF’s conditional takeover offer, RHB Investment Bank Bhd, the merchant banker for the deal, said as a result of the fund exceeding the 33% level, it was obligated to extend the offer to acquire all the remaining MRCB shares not already owned and all new shares that may be issued prior to the close of the offer arising from the exercise of outstanding options granted pursuant to MRCB’s employee share option scheme.
“The offer price for each offer share is RM1.50 and will be satisfied in cash,” it said, adding that the offer document would be despatched to shareholders within 21 days.
It added that EPF intended to maintain MRCB’s listing status, and would explore various options to rectify the company’s public shareholding spread should the takeover result in the spread falling to less than 25%.
The rectification of the shortfall in its public shareholding spread would, however, be subject to EPF retaining an equity interest of more than 50%, RHB said.
“It is a compliance thing rather than anything else; it is not a privatisation exercise. EPF does not intend to take the company private. They want to continue supporting the company and see capital appreciation and will continue their listing,” a source said.
MRCB had, in December, undertaken a one-for-two rights issue at RM1.12 a share to raise up to RM541 million, increasing its capital to 1.37 billion shares from 907.63 million.
In addition to taking up its subscription, EPF had also underwritten the rights issue to ensure the company would receive the maximum level of funds it sought, which it is to use mainly to increase its land bank.
At RM1.50, EPF would be paying a 5% premium above the volume weighted average price in the last two months, or a total of RM1.38 billion for the remaining 917.9 million shares. The closing date for the offer is expected at the end of the month.
While shareholders who trigger a GO may apply for a waiver of the offer, conditions of the waiver include a requirement that the holder must not have traded in the company’s shares in the past six months.
Given EPF’s role as a fund, however, it had traded in MRCB shares within that timeframe, and hence was not eligible for a waiver.
On another note, the fund is not expected to exercise increased influence over MRCB’s management decisions and it already has three representatives on the company’s board. “They (EPF) will continue allowing the professionals to run the company,” a source said.
The source also said the fund did not feel the need to offer a large premium as it was not a privatisation bid.
Kenanga Research head Yeonzon Yeow said the GO was expected, given EPF had crossed the 33% GO threshold, although the fund was not expected to maintain a high shareholding level after the completion of the exercise.
“Prime Minister Datuk Seri Najib Razak had said in his budget speech how government-linked companies should sell down their stakes to increase liquidity in the market. EPF being a majority shareholder in MRCB would be going against the grain.
“However, with this I foresee a share placement, as EPF would have to do this in order to be in line with government directives,” Yeow told The Edge Financial Daily.
He added the offer price was not “extremely high” from yesterday’s closing price of RM1.47.
“I think the price is well within expectations, and think shareholders who are willing to let go of their shares should accept the GO,” he said.
Meanwhile, CIMB Research analyst Terence Wong also said the offer price was fair, adding the research house’s own target price for MRCB’s stock was close to the offer price, although it had a “neutral” recommendation on the stock.
“In recent months, the share price has hovered at the RM1.40 level. It is up to shareholders whether they find the returns attractive and decide to take up the offer or not,” he said.
This article appeared in The Edge Financial Daily, March 4, 2010.
