☕️ Olympics: Win Malaysia a gold medal, walk home with at least RM2.16 mil of cash + property + SUV

1. MARKET SUMMARY 📈

2. NUMBERS AT A GLANCE 🔢

Today’s about most Asians’ favourite asset (but not ours) - properties

If you are considering property investments, perhaps you might want to consider Real Estate Investment Trusts (REIT) - think property, but listed on the stock exchange. RHB Research estimates the average yield for the sector to be 6.1% for the financial year 2025 compared to Malaysian government bond yields of 3.65% to 3.85%. The sector could be more attractive should there be rate cuts by the central bank. Typically, each REIT is focused on a specific sub-sector of property - industrial, malls, office etc. There will be an influx of 1.5 mil sq feet of collective retail space by H2 2025, namely from Pavilion Damansara Heights (Phase 2) and 118 Mall.
Learn: FAQs on REITs (Bursa)

Now, if you are seriously considering, perhaps office space is something to think twice. KL market recorded a vacancy rate of 28.7% in Q2 2024, though it’s a slight improvement from almost 30% in Q1 2024. International property consultancy Knight Frank forecasts that KL’s prime office rental and vacancy rates will remain unchanged and stable for the coming 12 months. Currently, rental rates for prime offices in KL stand at about RM7 per sq feet per month. An additional supply of new office space of 1.08 mil sq feet will be developed in KL in the next 12 months. Simple economics - more supply, stagnant/declining demand, rental rates go down.

In the west, private equity investors have USD400 bil of dry power to scoop up distressed commercial real estate (CRE), of which 64% or USD250 bil set aside for the North American market. CRE values have been on a decline in the US, dropping by 7.5% in the fourth quarter, the steepest drop recorded in 13 years as high interest rates and remote working trends continue to batter the property market. The industry is also facing a wall of debt renewal as about USD1.1 tril CRE loans have to be refinanced this year at higher interest rates or lower valuations.

3. IN MALAYSIA 🇲🇾

PR Crisis Management 101: The MRT Corp, Non-HRD Corp playbook

1 - You do not attack the media
After HRD Corp issued a letter of demand (LOD) against The Edge for exposing HRD Corp, its officials, and employees to “odium, ridicule, contempt, and public scandal which has undoubtedly tarnished the professional reputation of HRD Corp” and its appointed officials and employees, HRD Corp made a fast u-turn with its LOD. HRD Corp has done so after being instructed by the Human Resources Minister Steven Sim. According to Sim, he disagreed with HRD Corp’s action, an agency under his purview, as he believes in freedom of the press.

2 - You get the minister to defend you
Unlike Steven Sim who seemed unwilling to throw his body into the battle to defend HRD Corp, Transport Minister Anthony Loke is more than happy to cover MRT Corp’s bottom even though MRT Corp is not under Loke’s ministry purview (wholly-owned by MOF). In the case of MRT Corp, Loke stated that there is no issue with MRT Corp’s unsustainable financial status as the debt liability in the form of construction costs is guaranteed by the government, paid by the ministry and ensured by the Finance Ministry so that there is continuous repayment.

3 - You do not let your ex-employee fuel the flames
Former HRD Corp chief operating officer who was sacked in May, Ariff Farhan Doss, told the media that he was blocked from meeting with two different human resources ministers - V Sivakumar and Steven Sim - to warn them of the troubles at HRD Corp. Ariff believed that he was unfairly dismissed from the company due to his statement to the bipartisan parliamentary Public Accounts Committee (PAC) on alleged mismanagement at HRD Corp. Responding to Ariff’s statement, Steven Sim said no instruction had been given to block anyone from meeting him and individuals that want to meet him just need to sabar and wait for his/her turn.

There’s no smoke without fire.

Winner bonanza for Malaysian Gold Medallist winner
Sports Minister Hannah Yeoh announced that apart from the RM1 mil reserved for our gold medallist in the Paris Olympics, whoever wins gold in Paris will also receive an RM1 mil luxury serviced apartment in Setia Alam after the Sports Ministry’s Road to Gold (RTG) committee received the offer from property developer Top Residency. Apart from an apartment and cash prize, gold medal winners will also be handed the keys to a Tiggo 8 Pro sports utility vehicle, thanks to Chery Malaysia. Basically, if you win gold for Malaysia, you get everything you need to live a decent life until you die. Malaysia has yet to win a gold at the Olympics. The closest we have been to clinching a gold was on 8 occasions, where three of the failed attempts were from Lee Chong Wei who won three silver medals in badminton.

A good day for the unicorns in Malaysia

• Carsome has bagged an RM100 mil financing facility from AmBank that will provide more liquidity for the company to boost future growth. According to Carsome, with that loan, the company will be able to streamline certain stages of the used car trading process to provide a better user experience to its customers.

• Another unicorn has been born in Malaysia as ALPS Global Holding Bhd is the newest member of the unicorn club and the first biotech company to achieve that status. ALPS is expected to be listed on Nasdaq in the fourth quarter of 2024 with an enterprise value of approximately USD1.6 bil. Weirdly, the names of the co-founders, founder and CEO were not mentioned in the article.

Dewan Rakyat is on a roll today

• The lower house of the Parliament, Dewan Rakyat has passed five separate bills touching on the matters of amending customs, excise, free zones, sales and service tax laws that will make the Forest City property development area a duty-free zone, joining the likes of duty-free islands such as Labuan, Langkawi, Tioman and Pangkor. This news is timely as this King’s coronation ceremony happens this weekend - Sultan Ibrahim is a stakeholder in the Forest City project.

• Dewan Rakyat also passed the Medical (Amendment) Bill 2024 which will put smiles on doctors as all the power to recognise specialist qualifications, training institutions, and training programswill be given solely to the Malaysian Medical Council (MMC). Universities will no longer need the Malaysian Qualifications Agency (MQA) accreditation for their postgraduate medical programs to be recognised by the MMC. So, in a way, there will be no such issue with the parallel pathway program that started back in 2014.

4. AROUND THE WORLD 🌎

If AI can pump the semicon industry, Trump can take it down
Donald Trump could very well be the one who pops the AI. bubble. Taiwan chip giant TSMC saw its shares drop 2.4% following a call by recently-almost-assassinated presidential hopeful Donald Trump for Taiwan to pay the US for its defence, saying Taiwan “takes about 100% of our chip business”. There is currently no formal defence agreement between the two nations, though the US is bound by law to provide Taiwan the means to defend itself. Taiwan Premier Cho Jung-tai responded that the two nations had good relations despite the lack of formal ties.

Trump’s statement led to a cascading effect on the shares of chipmakers, with Nvidia dropping 3.1%, ASML falling 8%, and the broader market dropping 4% overall. This was also affected by reports of possible tighter restrictions on the supply of advanced technology to China, with the US considering the use of the most severe trade curbs available if companies were to continue providing access to advanced semiconductor technology to China. Interestingly enough, Trump is supporting TikTok as a potential ban draws near, claiming the need for competition in the US.

The power behind Trump’s words following the almost-assassination is clearly shown by these market effects, considering the US Commerce Department plans to award Taiwan chipmaker GlobalWafers up to USD400 mil to “significantly increase” the production of silicon wafers in the US. The award will take the form of government grants and will establish the first US production of 300mm wafers for advanced semiconductors in the states of Texas and Missouri. The hope is that the grants will support a USD4 bil in planned investments by GlobalWafers in the two states with the construction of new manufacturing facilities and the creation of 2,580 jobs.

How close is almost-assassinated? This close, based on a new visualisation:

Corporate Deals: 2 retail brands - one got saved, one got acquired

• The one that got saved - The Body Shop
  The new owners include cosmetics group Aurea, led by Mike Jatania and former UBS Group banker Paul Raphael. The acquisition of the cosmetics retailer is expected to be completed in the coming weeks as due diligence is currently being conducted. The new management team will be led by former Molton Brown CEO Charles Denton, who will be completing the bailout. This follows The Body Shop dropping into administration in February earlier this year when it closed 75 shops and axed 489 jobs. The Body Shop was founded in 1976 and entered into administration in February, 3 months after private equity firm Aurelius bought the brand from Brazilian cosmetics conglomerate Natura & Co for USD269 mil. Let’s see if InNature Bhd, the Bursa-listed operator of The Body Shop in Malaysia will pop today.

• The one that got acquired - Supreme
  Giant French-Italian eyewear maker EssilorLuxottica (EL), who owns Ray-Ban and Oakley, will be paying USD1.5 bil in cash for New York fashion streetwear brand Supreme from VF Corp, who previously acquired the brand in 2020 as part of a USD2.1 bil deal. Brand founder James Jebbia said the deal would allow Supreme to “focus on its brand, products, and customers”. The fashion brand played on hype marketing with limited edition products and collaborations with celebrities and other fashion brands. This includes the Supreme Brick (yes, just a brick with Supreme printed on it), which retailed for USD30 at launch and is now priced at about USD204.
  Come back to EL - this is quite a fascinating company that generated about EUR23.4 bil in revenue in FY2023, nearly 13.4k corporate-owned stores under various brands across the world (see below) and its stranglehold on the eyewear industry is just insane.

  

  Page 13 | Source: EL

Short

1. Grand Hyatt Bangkok deaths: Cyanide found
   After post-mortem examinations, doctors reported finding cyanide in the blood of the six Vietnamese nationals who died in a suite at the Grand Hyatt Erawan in Bangkok. Police now suspect one of the dead, driven by debt, was behind the poisoning, but have not identified who the mastermind was.

2. Paris mayor takes Seine dip to prove river's cleanliness ahead of Olympics
   Mayor Anne Hidalgo said the water was “pleasant” and that it was “fresh but not cold” when she had her swim a week before the opening of the Paris Olympics next week. The Seine will be the venue of the swimming leg of the triathlon as well as the open-water swimming events. The river had been failing water quality tests until the start of July, despite a USD1.5 bil investment to prevent sewage leaks into the river. Here’s hoping the water quality holds out. See for yourself here.

3. New blackmailers in town - fake restaurant reviewers
   The criminals are threatening a flood of fake one-star reviews unless they are paid thousands of pounds, some from GBP2,000 to GBP2,500. The restaurateurs, Andy Sheridan and Sam Morgan, have since reported the matter to Google, Action Fraud, and TripAdvisor. The submission or commission of fake reviews is illegal under the Digital Markets and Competition and Consumer Act.

5. FOR YOUR EYES 📺

1. More and more Bumiputera students are enrolling in SJKC, with nearly 1 in 5 SJKC students in 2020 being non-Chinese, according to the Ministry of Education. Hear some of these non-Malaysia-Chinese parents voicing their reasons for sending their kids to Chinese national schools.

2. Check out Mongolia’s Paris Olympic attire. Royalty feels - full reveal here. Malaysia had the honour of being featured as the “cheapest” in this video by the South China Morning Post. Take some time out and scroll to the comments, especially from @zevil89. Anyhow, style no style, may Malaysian athletes be able to convert Malaysia’s elusive Olympic gold medal (and the millions that come with it).

3. Intelligence is overrated.