☕️ MAS parent MAG on track to achieve 1st full-year net profit since 2014

1. MARKET SUMMARY 📈

The most powerful man in the world may just be the Federal Reserve chair Jerome Powell. Markets went up after Powell hinted that the US central bank may now be finished with the most aggressive tightening cycle in four decades, as interest rates were not raised during the policy meeting on Wednesday. Federal Open Market Committee (FOMC) left its benchmark rate unchanged in the range of 5.25% to 5.5%.

2. NUMBERS AT A GLANCE 🔢

The fertility rate in Malaysia dropped to its lowest in 50 years in 2022 — 1.6 children per woman aged 15 to 49, compared to 4.9 in 1970. It’s a worrying statistic as it is below the replacement level of 2.1 children. The number of live births totalled 423,124, a decrease of 3.8% compared to 2021. Chief statistician Mohd Uzir Mahidin revealed that more male newborns were recorded than females in 2022, with 218,345 and 204,779, respectively.

2.69 mil Scoville Heat Units — the heat of Pepper X, making it the spiciest chilli pepper in the world crowned by Guinness World Records, dethroning the Carolina Reaper chilli pepper after 10 years. The heat level is measured in Scoville Heat Units (SHU). A habanero pepper typically hits 100,000 SHU. Breeder and grower Ed Currie created both record-breaking peppers. It took a decade for Currie to cultivate Pepper X. You can watch three chilli connoisseurs take a go at Pepper X at the end of the newsletter.

USD20 bil (in today’s prices) — the money-making machine of the James Bond franchise. Ian Fleming’s 14 James Bond books have sold over 100 mil copies. The first Bond movie was “Dr. No” in 1962 (Sean Connery), launching what would become the longest-running and one of the most valuable film franchises of all time.

3. IN MALAYSIA 🇲🇾

Covid-19 vaccine, ventilators sh*tshow continues

• The Public Accounts Committee (PAC) has given the Health Ministry two months to respond to five recommendations in its report on the irregularities of the government procurements during the COVID-19 pandemic. Among the recommendations is to reexamine the warranty status of the 136 ventilators purchased, to implement the immediate use of excess PPE boots before they expired and to ensure proper documentation for transactions, including at times of emergency.

• Among the irregularities that the PAC found was that the 136 ventilators purchased during the pandemic did not come with a warranty and were deemed ‘not fit for purpose’. Ministry of Health’s Secretary General Chen Chaw Min revealed to the PAC that the ventilators did not come with warranties as they needed to plead to the suppliers to sell them the ventilators due to the high competition for medical equipment at that time.However, Pharmaniaga Logistics Sdn Bhd (PLSB), the party that purchased the ventilators on behalf of the ministry, told PAC that the ventilators did have a two-year warranty and recommended IDS Medical Systems (M) Sdn Bhd (IDSMED) to activate the warranties. However, not all suppliers could be reached to provide maintenance for the ventilators. All in all, RM20.12 mil was spent to purchase the 136 ventilators, of which 104 were unusable.

• PAC also stated that the ventilators purchased when Dr Adham Baba was then health minister were done without a written agreement between the Ministry of Health and PLSB. This situation made it more difficult for Putrajaya to take action over the supply of defective ventilators.

The Defence Minister told servicemen to be ready for everythingDefence Minister Mohamad Hasan told the members of the Malaysian armed forces to stay vigilant during their posting in South Lebanon as part of the UN peacekeeping mission in that region. At this moment, the situation in the region is quite tense due to the ongoing Gaza onslaught and skirmishes in the Golan Heights area bordering Israel and Lebanon.

However, Mohamad urged the Malaysian peacekeeping forces stationed there to remain professional and follow the rules at all times. The new batch of the Malaysia peacekeeping force, dubbed Malbatt 850-11, consists of 854 Malaysian armed forces officers and personnel, 30 Brunei armed forces members, and a civilian staff from the Defence Ministry, will replace Malbatt 850-10 that already served in the region for the past year.

On the logistics front, Tony Fernandes makes an appearance — AirAsia Bhd has been awarded an RM29.7 mil contract by MINDEF to perform passenger charter and ancillary services (e.g. accommodation, cargo) in relation to the deployment of Malaysian Battalion 850 UNIFIL to Beirut, Lebanon. AAB will operate 12 return charter flights, 4 times a year (RM2.48 mil per round trip) for a period of 3 years. AAB, however, wouldn’t be performing this service. It will instead sub it out to related company AirAsia X Bhd and take a 3% commission of RM891,108. Why not MINDEF go straight to AAX and save taxpayers RM891k? The contract was won through a tender process and participants must possess a valid registered account with the Ministry of Finance, which AAX does not have.

Of trains and airports

• Transport Minister Anthony Loke told the Parliament that Putrajaya is examining the implementation model of the proposed Kuala Lumpur-Singapore High-Speed Rail (HSR) project, which includes the determination of a new financing model. At the moment, MyHSR Corp, on behalf of the Government, is in the midst of the RFI (request for information) process, which received responses from multiple companies.

• Malaysia Aviation Group (MAG) group managing director Captain Izham Ismail said that policymakers and industry players need to sit down and discuss the Subang Airport Regeneration Plan (SARP) so that the redeveloped Subang Airport does not cannibalise Kuala Lumpur International Airport (KLIA) in the future. The groundbreaking of the SARP project is expected to be in 2025.On a separate matter, Izham announced two pieces of good news regarding MAG. According to him, MAG is en route to be in the black, full year, for the first time since the airliner was privatised back in 2014. Recently, MAG recorded a net profit of RM1.146 bil in 4Q2022. For the full year that ended Dec 31, 2022 (FY2022), the group managed to narrow its net loss for the year by 79% to RM344 mil from RM1.65 bil in FY2021. The second piece of good news - in-flight meal services will be fully restored by Nov 15.

Business

• Bank Negara Malaysia (BNM), in its last Monetary Policy Committee (MPC) meeting for 2023, has decided to maintain the overnight policy rate (OPR) at 3%. Despite calls from certain factions for BNM to raise the rate to rescue the falling Ringgit, BNM held strong. The last rate hike was in May when BNM increased the OPR by 25 basis points to 3%.

• Mitsui & Co Ltd increased its effective stake in Axiata Digital & Analytics Sdn Bhd (ADA) to 12.69% via a USD58 (RM275.6 mil) transaction, valuing it at USD550 mil (RM2.61 bil). ADA is Asia's largest independent data and AI company, which is owned by a holding company that is wholly owned by Axiata Group Bhd, Axiata Digital Services Sdn Bhd (ADS).

• PM Anwar Ibrahim, in a written reply to the Parliament, stated that the new luxury goods tax is in its final stages prior to its planned introduction in May 2024. As announced during the tabling of Budget 2024, the luxury tax will have a rate of between 5% to 10%.

4. AROUND THE WORLD 🌎

Israel’s atrocity continues - bombs Gaza’s largest refugee campIsrael’s air strikes targeted Gaza’s largest refugee camp, Jabalia, for the second time in 2 days, killing more than 50 people. According to the UN, the densely populated camp covers an area of 1.4 sq km, with some 116,000 registered refugees in the camp. Israel’s military said that it struck a Hamas command-and-control complex, killing a top Hamas commander and blamed Hamas for building its infrastructure “around and within civilians buildings, intentionally endangering Gazan civilians”. After the total blockade of Gaza by Israel, this air strike could add to the list of potential war crimes committed by Israel.

It took more than three weeks after the conflict erupted for US President Joe Biden to call for a pause. In his words - “I think we need a pause”. “Think” isn’t sufficient anymore at this stage to save the lives of innocent civilians.

The Prancing Horse’s profits keep zooming upSupercar maker Ferrari reported its third-quarter results yesterday. Despite the economic gloom and doom, there’s no shortage of demand from the uber-rich to get their hands on Ferraris. Some highlights of Ferrari’s Q3 results:

• Revenue increased 24% year-on-year (yoy) to EUR1.54 bil 

• Net profit shot up 46% yoy EUR332 mil, translating to a (fat) net margin of 21.6%

• Ferrari shipped 3,459 vehicles in Q3, up 9% yoy. For the 9 months ended Sep 30, Ferrari has shipped 10,418 vehicles, up 5% yoy.

• Ferrari’s 4 hybrid models accounted for 51% of total shipments in this period.

• Ferrari is on track to launch its first fully electric vehicle in Q4 of 2025.

You can own a piece of Ferrari - it’s listed on Borsa Italiana in Italy, with a market cap of EUR58.8 bil. Read Ferrari’s Q3 report here.

Deals

• Disney will take full control of streaming service Hulu for USD8.6 bil, acquiring the 33% stake from Comcast. The House of Mouse is exercising an option to buy Comcast’s stake that expires in January. In 2019, both companies agreed that Hulu would be worth at least USD27.5 bil. Hulu has about 48 mil subscribers compared to Disney’s own streaming service, Disney+, which has almost 162 mil subscribers, though Hulu is said to be the few profitable streaming platforms alongside Netflix. 

• Popular Holdings, the owner of the Popular bookstore chain, has been acquired by a Hong Kong investment company, ZQ Capital for an undisclosed sum. There are about 169 retail outlets in Singapore, Malaysia and Hong Kong and Popular Holdings’ other businesses include e-learning, publishing and property development. The bookstore chain has been operating in Singapore for nearly 100 years since 1924 and was listed in Singapore in 1997, which subsequently was privatised by its owners in 2015 for about SGD255 mil. 

Shorts

1. Putin’s way of gauging popularity — not through polling, but by faking his death and spreading rumours about it. The fake news of Russian President Vladimir Putin’s death was circulating last week. Ukrainian intelligence dismissed the rumours as a tactic the Kremlin is using to gauge Russian reactions - to look at how society - individuals, elite, media, Putin’s allies- would react to his death.  

2. Japan’s cabinet has approved a JPY17 tril (USD113 bil) stimulus package to cushion the economic blow from inflation. This spending will include temporary cuts to income and residential taxes as well as subsidies to curb gasoline and utility bills. This is expected to boost Japan’s GDP by an average of 1.2% over the next three years. Where’s the money coming from to fund this? What else - borrowing. Japan’s public debt is already more than twice its economy (>250%), the biggest among major economies.

Weekend read: Fixed vs. Growth: The Two Basic Mindsets That Shape Our LivesOne mindset limits and the other expands. The terms — fixed mindset and growth mindset — were first made popular by Stanford psychologist Carol Dweck through her book Mindset: The New Psychology of Success. The beliefs we carry about ourselves through either one of these mindsets greatly impact our professional and personal lives and, ultimately, our capacity for happiness (a life well lived). This is especially an important framework when it comes to parenting, too.

5. FOR YOUR EYES 📺

1. If you could travel back in time to 1950 and with USD100,000 to invest, definitely save this image in your head (you can’t be seen using a cellular phone in 1950, no 5G anyway).

2. The legends take on the spiciest pepper in the world.Signing out for the weekend! Hopefully, you will have an awesome waiter (if Michael Jackson was a waiter) serving you during your weekend dining!