☕️ CIMB taking a RM281 mil potential hit and more arising from its double-crediting error that affected 11,800 customers

1. MARKET SUMMARY

2. NUMBERS AT A GLANCE

Only 592 flights flew out of Hong Kong for all of February, an average of only 21 a day, according to aviation data company Cirium. Pre-pandemic, the city saw more than 14,000 services taking off its airport almost every month.

RM10.3 million worth of drugs were seized in Op Tapis Khas (Series 2), a three-day special operation by PDRM conducted at 125 Felda settlements and 222 Hardcore Poor Housing Programme (PPRT) areas nationwide.

Between one to three million Ukrainians might try to leave their country in the coming weeks, according to UN agencies’ estimates. Many were headed west last week when the crisis started towards Poland. Poland set up eight reception points offering food, medical supplies and information along its border.

3. COVID-19 SUMMARY

• Selangor’s requirement of only allowing individuals who have taken the booster dose to perform the Friday prayer is based on the consent of the Sultan of Selangor Sultan Sharafuddin Idris Shah.

• Vaccinated New Zealanders returning to their country will not need to isolate effective Wednesday. Tourists are still not allowed to visit, but that could soon change as Prime Minister Jacinda Ardern said Monday her Cabinet was considering reopening the borders to tourists sooner.

In collaboration with Harvocart

4. IN MALAYSIA 🇲🇾

1. During the opening of the fifth and final session of the current Parliament term, the Yang di-Pertuan Agong has decreed the government to ensure that at least 50% of the country’s land area remains forested. According to WWF, about 54% of Malaysia’s land is covered by forests. Putting on the lens of self-interested parties, our cynicism interprets this decree as having another 4% more forests to profit from without violating the decree. Recently, Malaysiakini exposed how companies gamed environmental reporting loopholes to avoid publicising their Environmental Impact Assessment reports. 

2. World Bank’s (WB) threshold of an “ageing country” is 7% of the population aged more than 65 - Malaysia exceeded this threshold in 2020 and is now considered an ageing country. By 2044, WB estimated 14% of the population to be over 65, making Malaysia an “aged society”. The next level will be a “super-aged society” with 20% of the population above 65 and Malaysia is expected to hit this threshold in 2056. An ageing population coupled with longer life expectancy have many negative implications - slowing consumption due to reduction in population growth, more wealth and income transfers to dependent for the purpose of aged care, shrinking labour force and smaller tax base. For the sake of the country, be fruitful and multiply.

3. Some residents in Pasir Mas, Kelantan, described the flood that is hitting them now after continuous heavy rain for the past three days as the worst incident in 40 years. Drawing comparison to the 2014 flood that was 0.3m deep, this time around, the flood water level reached almost 2m. A household in Kelantanese took matters into their own hands and prevented floodwater from entering its compound.

4. If you were amongst the 11,800 people affected by CIMB’s recent double-crediting error, this incident has cost CIMB hundreds of millions in potential damages. The bank has undertaken a provision of RM281 mil for its financial year ended Dec 31, 2022, and potentially more provisions will be added in Q1 FY2022 but a smaller amount. That’s an average of RM23.8k per affected customer. The funds from the duplicate credit were drawn from the bank’s own money and it isn’t so straightforward for CIMB to claw it back given banking regulations and processes (it has to adhere to). The bank said the use of a third-party remittance service triggered this error without naming the service provider. CIMB’s current market cap stands at RM58.4 bil. 

5. Maxis Bhd’s wholly-owned subsidiary Maxis Broadband Sdn Bhd has received another tax bill from LHDN amounting to RM107 mil for the year of assessment 2020. This additional tax was for the disallowance of Maxis Broadband’s deduction of interest expense. For the same reason, Maxis was slapped with an additional tax bill of RM140 mil for YA 2016 and 2017 and RM230 mil for YA 2018 and 2019. Total additional tax bill to date LHDN is chasing for - RM477 mil. Maxis will initiate legal proceedings to challenge this tax notice. 

6. Dairy producer Farm Fresh Bhd launched its IPO prospectus yesterday, pricing its share at RM1.35, raising approximately RM1 bil and will have a market cap of RM2.5 bil. Other highlights on this company:

   1. This share price values the company at 69x its FY2021 profit of RM36.2 mil, but 36x its adjusted profit of RM69 mil, after removing one-off tax liability expenses. 

   2. Part of the proceeds of RM301 mil will be used for establishing a new manufacturing hub, dairy farm and integrated processing facility in Malaysia., the expansion of a production facility in Australia, regional expansion outside Malaysia, working capital as well as listing expenses. If you are wondering where the balance of RM700 mil of the proceeds is going, it’s going into some shareholders’ bank accounts. These proceeds are shares that are “offer for sale”, meaning existing shareholders selling their own shares to new investors. In other words, they are cashing out a cool RM700 mil. 

   3. It has secured 30 cornerstone investors, the most ever in a Malaysian IPO to date. 

   4. From FY2019 to FY2021, the group’s compound annual growth rate (CAGR) was 65.9%, from RM178.2 mil to RM490.5 mil. As for its profit, its CAGR was 14.9%, from RM27.4 mil in FY2019 to RM36.2 mil in FY2021. 

   5. It is the second-largest player in the ready-to-drink (RTD) milk category, with a market share of 18%.

   6. It is the market leader in the chilled RTD milk segment, with a market share of 42%.

   7. IT is the third-largest player in the yoghurt category, with a market share of 11%.More details on Farm Fresh in its IPO prospectus here. 

5. AROUND THE WORLD 🌎

Ukraine Crisis Update

1. The Bank of Russia raised the interest rate from 9.5% to 20% after the ruble sank 30% after new Western sanctions. The collapse in value erodes the currency's buying power and could wipe out the savings of ordinary Russians — the last thing that Putin wants is for its citizens to retaliate.

2. Russia has banned its residents from transferring money abroad as part of measures to prop up the ruble. It covers both companies and individuals, barring anybody from sending cash to a foreign account. Guess which cryptocurrency went up? Good ol’ bitcoin.

3. Binance said it wouldn’t block all Russian accounts but only the accounts of Russian individuals who have been sanctioned despite Ukraine’s request. Another crypto exchange, Kraken, has echoed similar tunes as the exchange said it could not freeze the accounts of its Russian clients without a legal requirement to do so.

4. Norway says its massive sovereign wealth fund — with USD1.3 trillion of assets under management — will dump its Russian investments following Russia’s invasion of Ukraine. The Norges Bank Investment Management NBIM had about USD3 bil invested in Russian equities at the end of 2021.

5. BP is dumping its 19.75% stake in Russia's state-backed oil giant Rosneft, ending the 30-year partnership. BP will bear the cost of USD25 billion in non-cash charges by the end of the first quarter.

6. President Vladimir Putin’s counter against the West’s financial sanctions — nuclear weapons. The president ordered the defence minister and the chief of the military’s general staff to put the nuclear deterrent forces in a “special regime of combat duty”.

7. Ukrainian and Russian delegates sat down Monday for the first direct negotiations between the two countries — Ukraine’s demands were an immediate ceasefire and the withdrawal of Russian troops from Ukraine. No breakthroughs as the shelling continued.

Other news

1. Singapore’s Court of Appeal has dismissed a challenge against a 2020 High Court decision to ban sex between men. The gay rights campaigners appreciate that the law is not actively enforced, but it still denies members of the gay community their rights.

2. All 28 production lines of Toyota in Japan will be suspended because of a “system malfunction” that a domestic supplier suspects is a cyberattack. Kojima Industries Corp. said its system could not communicate properly with Toyota or monitor production. No indications of when the problem will be fixed.

3. Other than decentralisation or NFTs — the blockchain has been adopted by another industry — car manufacturers. Carmakers in China are adopting decentralised digital ledger technology to slash costs. How does blockchain help? Reduce paper usage. Liuzhou-based SAIC-GM-Wuling expects to use 10 million fewer sheets of paper annually — USD2.5 mil to be saved per year.

4. United Nations climate panel warned climate change is upon us, and humanity is far from ready. Failure to contain global warming within 1.5 degrees Celsius (2.7 degrees Fahrenheit) of pre-industrial temperatures will deliver irreversible damage to the planet. The report highlighted climate change is expected to push 40 million more people into extreme poverty by 2030. The only way out — adapting to the conditions of a warmer world, the report says. The world needs to finance new technologies and institutional support.

5. Turkey's economy bounced back from the COVID-19 pandemic to grow 11% last year, but that’s the only good news. Economists see a sharp slowdown this year as inflation surges following the lira's crash and with the Ukraine crisis set to impact Turkey’s tourism sector gravely — about a quarter of Turkey's tourists are Russian or Ukrainian.

6. Amazon’s Kindle has a new competitor — meet Huawei’s MatePad Paper, the company’s first e-reader device. Huawei is hoping to boost its consumer division which has been hurt by US sanctions that have crippled its smartphone business by launching non-phone products. It also launched two mobile PCs — MateBook X Pro and MateBook E.

6. FOR YOUR EYES 👁👁

1. First snowfall on Mount Kinabalu in 29 years, with the last 2 recorded in 1975 and 1993.

2. Black holes - from an idea to reality

3. We have never seen so many cats in one place ever. This place is a cat sanctuary in Syria.