Enhancing Capabilities to Grow Asset Management Solutions

Investing for the future has always been a key driver to achieving greater success and security in life. But how do investors get their money to work harder without having to work hard themselves?

Through smart asset management like fixed income, unit trusts, equities and more, investors can look forward to maximising their returns while minimising risks on their investments. Today, in the era of globalization and greater liberalization of guidelines as well as the advent of internet and financial technology, investment opportunities are abound. Whether it is diverse, consistent, dynamic or innovative funds, investors always seek out trusted and credible financial institutions for their investments.

This paradigm shift of industry dynamics demands greater attention, agility and adaptability for asset managers to overcome challenges and seize opportunities, from changes in business models, client relationships, distribution to investment capabilities, and other operational processes.

In this respect, Maybank Asset Management Group (MAMG) has mapped out a clear 2020 vision that will enhance its capabilities to achieving greater growth in asset management solutions, and positioning itself towards being Asia’s preferred powerhouse in providing investment solutions.

It is most befitting, looking at Malaysia’s asset management industry which has charted a tremendous growth, totalling RM667.88 billion as at 31 December 2015, as reported by the Securities Commission Malaysia. These include equities, fixed income securities, money market placements, unit trust funds, private equities and others.

Setting the pace

Nor’Azamin bin Salleh, group chief executive officer of the Maybank Asset Management Group has aspiration for MAMG to eventually become the preferred asset management solution provider in Asia. Thus, it will create the key foundation to enter into global reciprocal partnerships that will entice global clients such as pension and sovereign wealth funds.

Clients will also have more diverse options in financial solutions. But the challenge here is how does MAMG set itself apart from the increasing competition to deliver clients’ needs?

“We focus on service excellence and long-term, holistic advice,” Azamin reiterates as he speaks about MAMG’s qualified and experienced group of fund managers in giving personalised attention to each client’s risk profile, investment objectives and consistent superior performance.

“We will always engage clients in managing their expectations which can be fairly dynamic in certain market cycles,” he adds.

Three-prong strategy

MAMG’s 2020 vision takes heed of Malaysia’s Economic Transformation Program (ETP) which aspires to become a vibrant, regional asset management hub in which ETP targets total assets under management (AUM) of RM1.6 trillion by 2020.

And to support this goal, these three key strategies will be adopted:

1. Retain and grow its client base across traditional assets (Equities, fixed income, money market)
2. Grow its alternative business (private equity and specialised funds)
3. Expand the capacity and capability in providing investment solutions via strategic partnerships with leading investment firms in North Asia, Middle East and also the developed countries.

Investors can look forward to an exciting first half of 2016 as they can now invest in some key funds from a trusted and reliable financial institution like MAMG. These include:0

• Maybank Bosera Greater China ASEAN Equity-I Fund (registered and distributed in Singapore)
• Akshayam Asia Fund (managed in Singapore and registered in Dublin)
• and Maybank Bluewaterz Total Return Bond Fund (managed in Singapore and registered in Dublin)

More new fund offerings are being planned including a collaboration with Hastings Asset Management in Australia for an infrastructure fund, to be distributed in Malaysia, Australia and Europe.

A changing landscape

New trends have emerged to change the landscape of asset management in Asia. Among them are asset management to be more prominent in capital raising and deployment; alternatives like private equity, real estate and infrastructure to be part of mainstream investment classes; fee models are being transformed; domination of regional and global distribution platforms; and emergence of a new breed of global players as the industry advances with technology.

MAMG recognises these trends and sets itself to be a game-changer in its 2020 plan. It has established offices in key markets and has local and foreign mandates with pension and sovereign wealth clients. MAMG offers traditional private equity fund and an absolute return fund now which will give consistent returns amid challenging economic conditions. It also operates off a single platform at the front end while outsourcing its back-office operations.

Plans are underway to secure more partners and forging mutual arrangements with foreign firms to promote the regionalisation of investment flows. A more diverse product range is in the plan, such as infrastructure, credit/financing and real estate.

In short, MAMG with its strategic intent to enhance its investment capabilities with on-the-ground market intelligence and expertise as well as expanding its regional distribution capabilities to market products cross-border is well poised to becoming the next preferred Asia investment solution provider.

The Maybank Asset Management Group is backed by one of the largest banks in the ASEAN region. It is also one of the pioneers in the local asset management industry with over 30 years of experience specialising in Asian markets. Today, MAMG has RM15.9 billion in total asset under management (56% conventional and 44% Shariah-compliant) catering to all types of investors including corporate and institutions, high net-worth individuals and mass retail.

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Islamic Wealth Management: A Growing Trend

1. Maybank Islamic offers a comprehensive Islamic Financial Advisory Solutions

Islamic Wealth Management has gained popularity among customers in recent years as a tool to effectively manage their wealth and at the same time generating good returns. It covers all stages of one’s wealth management cycle from accumulation, protection to distribution. Islamic Banking institutions provide financial advisory solutions to ensure their clients’ income and assets are invested and managed prudently.

In Maybank Islamic, we assist the clients to achieve their goals in creating and maximizing their wealth. Achieving these goals would require the appropriate range of products and services under four key goals of wealth management: investment and wealth accumulation, retirement and retirement income, wealth and lifestyle protection and distribution of wealth.

Maybank Islamic’s products and services

• Wealth creation through Deposit, Investment Account, Property Financing and other Islamic retail financing products.
• Our Islamic Wealth Management solution consists of various types of Shariah compliant investment products with different risk-rewards profiles.
• The preservation of wealth is through Takaful and the distribution of wealth is through Gifts (Hibah), Waqaf, Wasiat and Trusts.

The increased number of High Net Worth Individuals (HNWIs) and Affluent in Malaysia of late means, there is an increasing demand for wealth management services.

As at December 2015, Maybank Islamic has achieved 36% Islamic composition in term of Islamic HNW and Affluent Total Financial Asset (TFA) to overall Group HNW and Affluent TFA.

In the last financial year, Maybank Islamic has seen a strong growth in wealth management business and going into 2016, it continues to see an increasing number of HNW and Affluent clients making up its client base and also a further increase in AUM.

Innovation and Achievements

The introduction of Investment Accounts by Islamic banks arose from the enactment of the Islamic Financial Services Act 2013 (IFSA) by Bank Negara which distinguishes Investment Accounts from Islamic Deposits.

This differentiation allows customers to enhance their understanding of the product offerings by the Islamic Banking Institutions and are able to make an informed decision when making their choices in where best to invest.

In July 2015, Maybank Islamic had launched a Mudarabah Investment Account (IA) product which offers a new investment avenue with a strong value proposition and unique features to cater for a wider range of customer segments.

The IA is key milestone for Maybank Islamic, and further distinguishes the Bank from the competition with a strong value proposition for its customers.

Maybank Islamic’s IA offers customers potentially higher and more stable returns i.e. between 4 and 5 % per annum and the response so far has been very encouraging, having managed to attract both existing and new customers.

When investing in this account, customers can also take assurance of the Bank’s strong AAA ratings from both RAM and MARC, backed by an effective and robust risk management framework for all the bank’s products.

As at the end of December 2015 the IA fund has grown to RM17.6 billion for a period of only five months since its launch – a positive indicator that investors are always on the lookout for an opportunity to earn higher returns compared with the traditional deposits.

To further develop this new product offering, Bank Negara together with a few selected industry players has initiated a new shariah-compliant initiative in 2015, called the Investment Account Platform (IAP), and Maybank Islamic is one of the pioneer banks participating in this initiative.

The IAP provides opportunities to investors in financing entrepreneurial activities and developing viable SMEs. It also acts as a platform to attract institutional and individual investors including high net worth individuals to invest in the Islamic financial market.

Prior to that, in late 2013 Maybank Islamic became the first Islamic bank in Malaysia to provide offshore property financing facilities in foreign currency which offers high net worth and affluent clients opportunities in property investment in Britain. It allows Malaysian citizens and permanent residents to invest in offshore properties with the convenience of taking on the financing locally in Malaysia.

2. A Value Proposition for all

Staying true to our mission of humanising financial services, Maybank Islamic provides a holistic suite of segment driven offerings with differentiated services. As a recognition of our effort in serving the communities we won the “Best Private Bank for Islamic Services” at The Banker Global Private Banking Awards 2015.

Due to the growing trend and demand for Islamic Wealth Management, Maybank Islamic will continue its effort to develop various Shariah investment instruments to meet our customers’ needs. The ethical values embedded in these products and services make them appealing to everyone, regardless of race and religion.

Moving forward, Maybank Islamic foresees a huge potential and an opportunity for it to tap into and penetrate new markets for this high end segment.

Our mission is to be a leading Shariah bank that can offer exclusive Shariah Advisory to our clients and provide business referrals for comprehensive cross-border wealth accumulation offerings.

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Dematic Ups Its Presence And Investment In The Region

How do apparel companies with high volumes of orders move its shipments across continents?

Likewise, how do home furniture establishments keep up with the increasing consumer demands whilst driving cost efficiencies in terms of storage and handling?

With an integrated automated supply chain powered by comprehensive real-time technology, material handling has become more flexible, responsive, and agile to deliver goods to consumers on demand.

Glen Borg, CEO of Dematic ASEAN/ANZ, speaking in Kuala Lumpur at the recent Bloomberg TV Malaysia Breakfast Series, addresses the needs of companies to take advantage of its innovative material handling systems.

“Dematic has a strong understanding of the industry trends and drivers in Asia Pacific that require companies to adapt and invest in material handling systems in order to remain competitive, particularly in the face of ever-increasing consumer demands, and the rising Asian middle class’ desire for high-quality food and customer service levels,” he says.

According to the Future Market Insights 2014-2020 report, the global material handling market is dominated by the Asia Pacific region which is estimated at 30-40% of the global market value.

Capitalizing on such opportunities, Dematic has stepped up its efforts to expand its network in Asia Pacific with a new office in Thailand and investing in even greater human capital across the region.

Borg adds, “Dematic established a presence in ASEAN in 1971, opening our first office in Singapore in 1986. Due to our track record of success and a growing demand in the region, we have since expanded into Malaysia, Philippines, Indonesia, Korea, and recently Thailand.”

As one of the world’s leading material handling and logistics solution providers, Dematic sees the necessity to invest further and boost its integrated automated technology, software, and services to optimize the supply chain for the benefit of its customers. In fact, material handling has gone beyond improving customer service, reducing inventory, shortening delivery time, and lowering overall handling costs in manufacturing, distribution, and transportation.

The global material handling market is expected to grow at a CAGR between 3-6% from 2014-2020, and Asia Pacific is poised to continue its dominance in global material handling market, according to the Future Market Insights report.

In this respect, Borg concludes, “Dematic is committed to leveraging its global expertise and local presence to continue its investment and expansion in ASEAN.”

Khazanah Renews MD Azman Mokhtar contract to another three years

In a media statement yesterday, Khazanah Nasional Bhd announced it has renewed the employment contract of its managing director, Tan Sri Azman Hj. Mokhtar, for another three-year term effective June 1, 2016 to May 31, 2019. Azman continues to assume his current position on 1st June 2004.

During his tenure, one of his key tasks is to help in the restructuring of national carrier, Malaysia Airlines, which was privatised and delisted in December last year.

Azman is also the chairman of Iskandar Investment Berhad and Axiata Group Berhad and holds various Board memberships which include Yayasan Khazanah, Jadwa Investment of Saudi Arabia, Board of Trustees of Asia Business Council and Khazanah Research Institute.

Prior to his appointment in Khazanah, he was the managing Director and co-founder of Binafikir Sdn Bhd and head of department in Saloman Smith Barney Malaysia and Union Bank of Switzerland in Malaysia.

His other credentials include serving various public service organizations which include  Performance Management and Delivery Unit (PEMANDU), executive committee of Malaysia International Islamic Financial Centre (MIFC) and Governance Council of Agensi Inovasi Malaysia.

A fellow chartered certified accountant and chartered financial analyst, he holds his M.Phil in Development Studies from Darwin College, University of Cambridge and a post-graduate diploma in Islamic Studies from the International Islamic University.

 

STAR WARS: Profits Awaken With Ticket and Merchandize Sales

The force is strong indeed for Star Wars: The Force Awakens as it makes its debut in cinema with rave reviews, and by reaping profits from its marketing programs and sales of merchandize. This new Star Wars movie brings to mind that Disney has truly made the right investment decision to buy over Lucasfilm Ltd for US$4 billion three years ago. Experts claimed the movie could make over US$2.7 billion in profits.

The ticket pre-sales which hit over US$100 million are an early indication that Star Wars: The Force Awakens is poised for more success. If industry pundits were correct, then movie could reap in US$229 million in US and Canadian theaters in its opening weekend. This figure would top this year’s US$208.8 million record debut set by Jurassic World and the US$760.5 million domestic record of 2009 box-office hit, Avatar.

Will Star Wars: The Force Awakens beat the worldwide US$2.79 billion ticket record set by Avatar? Well, one thing is certain; Star Wars movie fever has started in Malaysia, and hundreds of die-hard fans have even camped outside a cinema here. Checks on the cinema ticket online sales also show rapid ticket sales and full house viewing.

STAR WARS Mania

Apart from the ticket sales, the sound of money seems to be ringing for Star Wars­ – about US$1 billion in revenue from home entertainment, TV and merchandize royalties, according to analyst forecasts. Prior to the movie debut, one could have seen the countless Star Wars-related marketing tie-ins, trailers, advertisements and events.

From Uniqlo’s T-shirts, Maxis, Subway’s combo promotion, Band-Aid adhesive bandages, Cover Girl lipsticks, Nestle coffee, Toyota, Honey Stars cereal to exclusive Royal Selangor Star Wars merchandize, the Star Wars fever is unstoppable!

Even Google has jumped into the bandwagon, enabling surfers to choose the Dark Side or Light Side skin for every Google product, from Google Maps to Gmail. In Japan, there is also a Star Wars-themed plane, the All Nippon Airways Boeing 787-9 Dreamliner: R2-D2 ANA Jet while Disney itself ran a public relations campaign by placing 500 Stormtroopers at The Great Wall of China.

Priceless Treasures

Back home, Royal Selangor has unveiled its Star Wars collection which includes cufflinks, flashdrives, 8-inch figurines of Princess Leia, Han Solo, Darth Vader and 4-inch figurines of Yoda, Stormtrooper, Boba Fett plus a Death Trinket Box. Above all is the star attraction, the RM3,000 “Return of the Jedi” diorama. A smart business move indeed. After all, Star Wars’ memorabilia have known to fetch big sums of money.

Just take a look at these: A replica of a 2007’s “Star Wars: A New Hope” Stormtrooper could cash in US$8,125; a 1978’s Luke Skywalker doll was sold for US$25,000, far above its estimated US$18,000. At an auction in Sotheby’s, Star Wars memorabilia fetched over US$500,000 from die-hard Star Wars fans.

Hence, obviously, Star Wars: The Force Awakens is poised to see more profits awaken, and a force to be reckoned with – at the box-office. Oscar nominations next?

Major MMC Capex Set To Boost Ports Operations

Prospects of MMC Corporation Bhd’s (MMC) ports – Johor Ports (JPort) and Tanjung Pelepas (PTP) – are expected to remain positive following a budgeted capex of RM700 million for FY 2016.

Following a visit by MIDF Research’s team to catch up with the management of both JPort and PTP, analyst Tay Yow Ken was informed that the capex will generally focus on reinvigorating aged port equipment.

Both JP and PTP have budgeted capex for berth extension of RM200 million and RM500 million, respectively for FY2016. They will also be replacing older quay cranes and rubber-tired gantry in both ports to increase throughput capacity which are less expensive compared to berth expansions.

MIDF Research noted that JPort’s RM200 million capex will also involve refurbishing older warehouses operated by its logistics arm, JP Logistics, into multi-storey facilities with additional 300,000 to 600,000 sq ft of warehouse space.

Additionally, it will also partly address the issue of space scarcity with recent higher demand within the port vicinity as evident by JPort acquiring an additional 82 acres – 8km away from the immediate Johor Port Free Zone area – dubbed the Inland Port with Free Zone status.

“The expansion trail by JPort will enable it to handle the port facilities and lease its yard space for the construction of the Petronas Rapid Project,” Tay pointed out in a company update on MMC. “Also, it will benefit from increased ‘storage cargo’ volume due to PSA’s scarcity of storage area.”

Meanwhile, PTP will utilize part of its RM500 million budget on expanding its 400-500 meter long Northern Berth with additional capacity of 800,000 twenty-foot equivalent unit (TEU) due for completion in 2018.

Plans are in the pipeline to raise capacity by 3.4 million TEU by 2020 through phase 3A of PTP’s berth expansion programs. A further expansion to 4.05 million TEU by 2024 would be undertaken through phase 3B. Both these expansions are estimated to cost a combined RM5 billion spanning over 10 years involving reclamation, dredging and equipment purchases.

“The expansion program will enable PTP to ramp up capacity by +1.8 million boxes from its current 10.5 million TEU to 12.3 million TEU through improving efficiency,” rationalized Tay.

While the plans may seem ambitious, MIDF Research believes that the incoming capacity can be absorbed by new and existing customers. As it stands, PTP’s FY2015 utilization rate is estimated at a bustling 87%.

Meanwhile, JPort was awarded the port operatorship contract for the PETRONAS’ Refinery and Petrochemical Integrated Development (RAPID) project. It recently secured a four-year contract for the operation of the Material Offloading Facilities (MOLF) Jetty at Teluk Ramunia to receive containerized and break bulk cargo consisting of building materials for the RAPID complex construction.

All-in, MIDF Research has maintained a BUY stance for MMC with a target price of RM3.05. This takes into account that MMC’s ports could be listed as soon as 2H 2016, thus creating the largest listed port entity in terms of capacity at 18 million TEU (vs Westports Holdings Bhd’s capacity of 11 million TEU).

The research house further pointed out that MMC is undervalued as its current market capitalization of RM6.4 billion only priced in its port assets which means investors are effectively getting the power asset, engineering division and Johor land for free.

“Earnings contribution from energy arm is also steady while construction segment is enjoying healthy order book,” justified MIDF Research. “Our target price is based on our standard operating practice valuation, implying FY2016 price-earning-ratio (PER) of 19x and 1.3x price-to-book ratio (PBR).”

As at 4.45pm, MMC was down 3 sen to RM1.99 with 394,300 shares traded.

AmResearch: 10% Decline In Brent Crude Price Equals RM3.2b Oil Revenue Decline

A review of Budget 2016 is inevitable as every 10% decline in the Brent crude oil price, ceteris paribus, oil revenue is likely to reduce by RM3.2 billion from the initial revenue projection for 2016 while the budget shortfall could rise to 3.4%, according to AmResearch.

The research house is commenting on a statement by Minister in Prime Minister’s Department Datuk Seri Wahid Omar that the government will review Budget 2016 if oil prices continue to stay low.

Should global crude oil remain weak, contribution from oil revenue is likely to reduce which could be strenuous for the overall budget deficit in 2016. The government had planned for the Budget 2016 based on the assumption that Brent crude would average at US$48/barrel for 2016.

Based on the crude oil price assumption of US$48 per barrel for Brent, the government expects contribution from oil revenue to amount to RM31.7 billion in 2016 while budget shortfall could register at 3.1% of gross domestic product (GDP).

“Note that total government revenue is expected to amount to RM225.7 billion (or +1.4% year-on-year) for 2016, driven by an increase in tax revenue,” AmResearch economist Patricia Oh Swee Ling pointed out in an economic update.

At the close of Thursday’s trading, the West Texas International (WTI) and Brent crude oil prices settled at US$34.95/barrel and US$37.06/barrel, respectively. These compare to Wednesday’s close for WTI at US$35.52/barrel and US$37.19/barrel for Brent.

“Elsewhere, we gather that exports of crude oil, liquefied natural gas (LNG) and petroleum products had contracted throughout this year,” revealed Oh. “As of year-to-date (YTD) October 2015, crude oil /LNG /petroleum products had posted a decline of -25.0% /-25.6% /-24.1% y-o-y, respectively.”

Despite the contraction for exports of petroleum in 2015, Malaysia’s total exports had advanced by 1.5% YTD. In particular, total exports accelerated by 8.8% and 16.7% during the recent months of September and October 2015, respectively.

Elsewhere, Wahid also reiterated that Malaysia’s fundamentals remain strong as the country has diversified resources, export markets and income streams from other industries besides oil and gas (O&G).

He further noted that the government would continue to support the growth of businesses and companies to ensure any potential impact on the economy would be cushioned should oil prices stay at the current low level.

“That said, growth in the manufacturing segment suggests that Malaysia’s GDP is likely to maintain a relatively stable growth in 4Q 2015,” projected Oh. “Malaysia’s healthy trade balance during the start of 4Q 2015 suggests that GDP growth in 4Q 2015 will be supported by the inflows through net trades in tandem with the positive development in the domestic front.”

Fixed Broadband Business To Drive TM’s Long-Term Growth

Two recent broadband projects worth RM3.4 billion secured by Telekom Malaysia Bhd (TM) are expected to positively boost the group’s earnings from 2018 onwards.

According to AllianceDBS Research, the broadband projects — with co-investment of RM1.1 billion from the government – would lead to an annual increase in capex of RM400 million in FY2016 to FY2017 (excluding the government’s portion).

“Funding is not an issue as TM’s gearing level is comfortable at 1.1x net debt-to-earnings before interest income tax, depreciation and amortization (EBITDA),” pointed out analyst Toh Woo Kim in a company update on TM. “Earnings for FY2016-FY2017 are expected to be trimmed by 2%-3% largely due to higher depreciation charges.”

The projects involved are the High-Speed Broadband Phase 2 (HSSB 2) to boost Unifi coverage valued at RM1.8 billion and the Sub Urban Broadband (SUBB) to improve Streamyx speed worth RM1.6 billion. The government’s involvement in the HSSB 2 is RM500 million while the SUBB is RM600 million.

“There should be positive earnings from FY2018 onwards following the acceleration of the Unifi network and uptick in Streamyx average revenue per unit (ARPU),” noted Toh.

All-in, AllianceDBS has optimistically maintained a BUY position for TM in view of the HSBB 2, SUBB and wireless services that would drive long-term growth for the group as it expands its high-speed broadband network coverage to more areas. Its trading projection with a revised discounted cash flow (DCF)-based RM7.80 implies 8.3x FY2016 enterprise value (EV)/EBITDA and 26x FY2016 forecast price-earnings (F PE)

 

Other Views

AmResearch: The research house noted that TM has already incorporated contributions from HSBB2 and SUBB, assuming net monthly subscriber additions of 11,000 for FY2016F-FY2017F. “This translates to the peaking of TM’s net gearing from 74% in FY2015F to 78% in FY2016F and subsequently decline to 73% in FY17F,” noted AmResearch.

The research house pointed out that the stock’s FY2016F PE of 25x is above its two-year average of 23x with fair dividend yields of 2%-3%.

As a whole, AmResearch maintained a HOLD stance on TM with a DCF-derived fair value of RM7.20/share, implying an FY2016F EV/EBITDA of 7.5x which is TM’s three-year average and half of Singapore Telecommunications Ltd’s 14x.

As at 12.16pm, TM was traded down 3 sen to RM6.49 with 1,086,300 shares traded.

Malaysia Posts 15% Dip In Investments In 9M 2015

Malaysia attracted a total of RM153.2 billion worth of investments in the manufacturing, services and primary sectors for the first nine months of 2015, according to International Trade and Industry Minister Datuk Seri Mustapa Mohamed.

This was lower than the RM180 billion approved in the same period last year. The drop was mainly due to a big decline in the approvals for investments in the real estate sector from RM57.9 billion in the January‐September 2014 period to RM 21.0 billion in the corresponding period this year.

This is consistent with the softening in the property market. Approvals in the other sectors however, notably manufacturing, remained robust. “This indicates that investor confidence in Malaysia remains high despite the decline in global FDI (foreign direct investment) inflows and the challenging global economic environment,” Mustapa pointed out in a media statement.

The investments approved were in 3,727 projects and are expected to generate 139,720 job opportunities for Malaysians. Domestic investments of RM124.9 billion accounted for 82% of investments, with foreign investments making up the rest.

The services sector accounted for the largest share of the total investments, contributing 54.0% or RM82.7 billion, followed by the manufacturing sector with investments of RM67.7 billion or 44.2%, and the primary sector with approved investments of RM2.8 billion or 1.8%.

Zooming into the manufacturing sector, the Malaysian Investment Development Authority (MIDA) noted that a total of 522 projects worth RM67.7 billion were approved in January‐September 2015 compared with RM63.3 billion in 622 projects during the same period of 2014 (representing an increase of 7% in capital investments).

Regional Corridors attracted 43.5% of approved investments in the manufacturing sector for January‐September 2015. By value of investments in projects with approved Manufacturing License, the Sarawak Corridor of Renewable Energy (SCORE) registered the highest level with investments of RM10.6 billion, followed by Northern Corridor Economic Region (NCER) (RM6.6  billion),  Iskandar  Malaysia (RM3.3  billion), Eastern Corridor Economic Region (ECER) (RM1.8 billion), and the Sabah Development Corridor (SDC) (RM300 million).

 

Rayani Air To Join The Fray Of Malaysia’s Low-Cost Carriers

Malaysia will see the entry of another low-cost passenger airline with Rayani Air Sdn Bhd due to receive its air service license and air operator’s certificate from the Department of Aviation today.

The new entrant will compete head-on with established budget carriers in the likes of AirAsia Bhd and Malindo Air. For a start, Rayani Air will offer flights from klia2, Langkawi International Airport, and Kota Bahru’s Sultan Ismail Petra Airport.

Rayani Air has picked Langkawi as its aviation hub in its effort to attract more tourists to the resort island.

During its launch the Langkawi International Airport last November, the low-cost airline’s managing director Ravi Alagendrran revealed that a Boeing 737-400 would commence its Langkawi-Kota Bahru flight operation while another would begin the Langkawi-Kuala Lumpur destination.

“The company has allocated two planes for overseas flight operations next year,” noted Alagendrran.

According to various media reports, Rayani Air is the fourth airline in the world that imposes Sharia-compliant dressing code on each of its Muslim cabin crew after Royal Brunei Airlines (RBA), Saudi Arabian Airlines and Iran Air.

In addition, no alcoholic beverages or pork are served on board in accordance with Islamic dietary laws with prayers to be recited before every flight departure.

Rayani Air was previously based at the Malacca International Airport with its inaugural flight slated to take place in August this year. However, it subsequently shifted its base to the Langkawi International Airport in order to attract tourists to the resort island.

Affin Hwang Capital Research is neutral on the development. “While the new entry will create more competition and options for the customers, it may in the medium term potentially create further price competition within the market, hence capping yields amongst airlines,” the research house pointed out.

All-in, Affin Hwang Capital Research maintained its BUY rating on AirAsia with a fair value of RM1.85. “The logistic sector remains a NEUTRAL,” added the research house.