Investment & Market Trends

KUALA LUMPUR: Tune Protect Group Berhad’s (“Tune Protect” or “Group”; TUNEPRO, 5230) financial results for the second quarter of the financial year 2024 (“2Q24”) were affected by one-off impairments from the Group’s subsidiary Tune Protect Ventures (“TPV”) and its associate company, Tune Protect Thailand (“TPT”), and abnormally high fire losses. Insurance revenue also declined 6.7% year-on-year (“YoY”) which led to a Loss Before Tax (“LBT”) of RM10.3 million. How Kim Lian (“How”) Tune Protect Group’s Chief Executive Officer elaborated further on the key factors affecting the Group’s 2Q24 financial performance.   Normalised numbers, excluding one-off impairments and claims   “The Group’s profitability was impacted by the one-off impairments from TPV of RM3.0 million, as well TPT of RM4.9 million. Our net claims incurred were also higher as we experienced two abnormally large fire losses in 2Q24, contrary to 2Q23 where we had benefitted from the better-than-anticipated claims experience from the Tenang Personal Accident (“Tenang PA”) scheme, which had since been discontinued,” said How.   Consequently, the Group’s combined ratio increased by 9.9% YoY due to the higher net incurred claims and attributable expenses. Increased acquisition cost ratio also contributed to the increase in the Group’s combined ratio, partially offset by a lower reinsurance ratio.   “The lower reinsurance ratio was due to the Group’s gradual exit from the Large Industrial Risk business leading to savings in reinsurance premiums. If we were to remove the anomalies mentioned above from the equation, overall, the Group would have recorded a slight Profit Before Tax (“PBT”) of RM1.5 million,” added How. Tune Protect Group (RM’mil)            2Q24 2Q23 YoY 1H24 1H23 YoY Insurance revenue 95.4 102.3 -6.7% 190.0 224.3 -15.2% Net incurred claims and attributable expenses (50.9) (39.8) 28.1% (108.0) (87.8) 23.0% Amortisation of insurance acquisition cash flow (34.9) (36.6) -4.7% (66.9) (68.9) -2.9% Allocation of reinsurance premiums (14.5) (21.2) -31.4% (29.3) (57.0) -48.6% Net insurance service result (4.9) 4.8 >-100% (14.2) 10.4 >-100% Combined ratio 105.2% 95.3% 9.9% 107.5% 95.4% 12.1% Total investment income 7.0 8.7 -19.7% 16.4 18.0 -8.9% Total other income and expenses (7.3)     (2.5) >100% (11.7) (12.6) -7.0% Share of results1 (5.0) 2.0 >-100% (4.8) 1.0 >-100% Profit/(loss) before tax (10.3) 13.0 >-100% (14.3) 16.8 >-100% Profit/(loss) after tax (10.1) 11.2 >-100% (14.0) 14.4 > -100% Notes: Share of results of an associate (TPT) and a joint venture company (TP EMEIA) Amounts presented may not foot due to rounding.   Stable investment performance and strategy   The Group maintains a conservative investment strategy while looking for opportunities to enhance its overall investment returns. Moving forward, it plans to progressively increase its investment into Low-Risk Unit Trust Funds, with underlying investment predominantly in Malaysian Government Securities, Government Investment Issues, and Government Guaranteed Corporate Bonds.   “The Group’s investment performance in 1H24 has been stable and we expect more of the same in 2H24. We will be rebalancing some of our money market or fixed deposits into Malaysian government guaranteed bond funds where we are aiming for a reallocation mix of 2% in deposits and 98% in low-risk unit trust funds by the end of 2024,” said How.   Capitalising on market gaps and opportunities   The Group is reprioritising its efforts in the Travel segment with various initiatives in key growth areas such as championing the regional travel ecosystem. For example, it is focused on increasing the take-up rate (“TUR”) through existing distribution channels, such as AirAsia.   “Through in-depth analysis of our current Travel business, we acknowledge that more can still be done to address the gaps in the take-up rate for the Group’s airline business such as AirAsia. Now that we’ve seen where the gaps are, we will be actively rolling out various initiatives to increase the take-up rate and grow our Travel business further,” said How.   To capitalise on various market gaps and opportunities identified by the Group, there are exciting plans to optimise the airline market by seizing new opportunities based on flight durations and meeting the demands of customers with new products based on certain behaviours and lifestyles.   For medium-haul flights, there are opportunities to reprice bundled products to be more competitive by offering better product benefits. For international short-haul flights, the Group is benchmarking the affordability of insurance relative to air tickets and premiums to airfare ratio. It is conducting some experiments to increase the TUR by adjusting prices to match affordability.   “We are also actively looking at addressing market needs with unique new products. For example, for budget-conscious non-tourists we plan to offer gadget protection at low premiums on top of our travel insurance. For eventgoers and concertgoers, we plan to offer event protection at affordable premiums. For affluent travellers, we plan to offer cancellation insurance,” explained How.  

KUALA LUMPUR: Malaysia’s economy saw a robust expansion of 5.9% in the second quarter of 2024 (2Q 2024), exceeding earlier prediction of 5.8%, bolstered by resilient household spending, vigorous investment activities and a significant boost in tourism arrivals. Bank Negara Malaysia (BNM) Governor Datuk Seri Abdul Rasheed Ghaffour said the central bank views Malaysia’s growth as on track to end the year near the upper end of the 4%-5% forecast range. The country’s economy expanded by 4.2% in 1Q 2024, bringing the first half’s growth to an average of 5.05%. The gross domestic product (GDP) grew by 2.9% in 2Q 2023. “The 5.9% GDP growth in 2Q 2024 is the highest since 4Q in 2022,” he said. In terms of sectoral performance, Abdul Rasheed noted the services sector expanded by 5.9% in 2Q 2024 compared to 4.8% in 1Q 2024, contributed by broad-based improvement in customer and business-related services. The manufacturing sector increased by 4.7% in 2Q 2024 after recording an expansion of 1.9% in the previous quarter, driven by higher growth across export and domestic-oriented industries,” he said. On agriculture, Abdul Rasheed said the sector expanded to 7.2% in 2Q 2024 versus 1.7% in 1Q 2024, contributed by stronger production in the oil palm and fisheries subsector, while the construction sector recorded better growth of 17.3% in 2Q 2024 compared to 11.9% in 1Q 2024. This is supported by higher activities, particularly in the civil engineering and special trade subsectors. He added that the mining sector showed moderate growth of 2.7% after recording 5.7% in 1Q 2024, due to lower growth in the oil and gas subsector following production disruption in May. In a statement, Abdul Rasheed said growth in the second half of 2024 (2H 2024) will be driven by domestic spending with continued strong support from external demand. On the domestic front, BNM noted household spending will be underpinned by continued employment, wage growth and policy measures. The central bank said investment activities will be driven by progress in multi-year projects across private and public sectors. Catalytic initiatives announced in national master plans and the higher realisation of approved investments are also key drivers for investment activities. Externally, BNM opined that the ongoing global tech upcycle and continued strong demand for non-electrical and electronics goods will lift exports. It said that improvement in tourist arrivals and spending are expected to continue. BNM said upside risks to growth include greater spillover from the tech upcycle, robust tourism activities and foster implementation of existing and new investment projects. “Downside risks to Malaysia’s growth prospects stem from a downturn in external demand, an escalation in geopolitical conflicts and lower-than-expected commodity production,” it added. — BERNAMA

KUALA LUMPUR: Airbus is on track to deliver a backlog of 400 commercial aircraft comprising single-aisle and wide-body models to Malaysia within the contractual schedule. According to Airbus Executive Vice President International, Wouter van Wersch, Airbus has a global backlog of 8,500 aircraft and plans to produce 770 aircraft of all types in 2024. “At the same time, we are also working with our suppliers closely to mitigate and meet our scheduled wrap-up goals,” he said at a media roundtable with Airbus. Airbus said aircraft production was cut by 40% from 863 units in 2019 due to the Covid-19 pandemic but has steadily risen since, with production levels at 566 aircraft in 2020, 611 in 2021, 661 in 2022 and 735 in 2023. The plane manufacturer plans to ramp up production for its commercial aircraft, specifically a total of 14 for the A220 in 2026, 75 a month in 2027 for the A320 family and raise the production rate to 12 a month for the A350 passenger aircraft in 2028. “The pandemic was a big interruption (for us). We reduced production by 40% but we are (now) working to ramp up and increase our production rates. So that’s very positive,” van Wersch said. Demand has risen tremendously post-pandemic, with the recovery being driven by the Asia Pacific region, especially Malaysia, due to its strategic location in ASEAN. “We have a large supplier base in (Malaysia). We work with 14 companies, including Composites Technology Research Malaysia (CTRM), Spirit Aerosystems Malaysia Sdn Bhd and SME Aerospace Sdn Bhd,” he said, adding that the Malaysian supply chain is valued at about US$350 million per year. Currently, Airbus has over 280 commercial aircraft in service with Malaysian carriers, nearly 100 civil and military helicopters, 4 military transport aircraft and 2 satellites supporting national defence and development. Airbus aims to build new partnerships in sustainability as it sees significant potential for Malaysia to be a key source of feedstock in the region to produce sustainable aviation fuel (SAF), van Wersch said. “Current feedstocks being studied include sources such as algae oil and seaweed. We are also working on a wide range of projects in Malaysia, especially with the Aerospace Malaysia Innovation Centre to define potential opportunities in developing and enhancing decarbonisation,” he added. The company is also taking the lead to ensure a sustainable future for the industry based on several pillars, including replacing older aircraft with the latest generation, increasing production and use of SAF as well as ultimately introducing new energy sources such as hydrogen. — BERNAMA

JOHOR BAHRU: Malaysia must enhance its economic foundation and strengthen its resilience to shield the nation from the ripple effects of external forces, including geopolitical tensions. Prime Minister Datuk Seri Anwar Ibrahim said the government’s MADANI Economic Framework is carefully designed to ensure the smooth execution of its plans, but some exposure to global factors remains unavoidable. “We couldn’t have predicted the geopolitical shifts in the Middle East or the political changes unfolding worldwide. “That’s why reinforcing our domestic and internal strength is critical. This is our top priority and it’s essential that the people understand this,” Anwar said. He emphasised that building internal resilience requires commitment from leaders, civil servants, the private sector and the public. “If we have a strong domestic foundation, the impact from external pressures will be more manageable,” he said during a dialogue and forum on ‘A Year of MADANI Economic Achievements’ at the Southern Zone MADANI Rakyat 2024 programme. Anwar, who is also the Finance Minister, highlighted that the ongoing efforts to strengthen the economy resulted in an economic growth 5.9% in the second quarter of 2024 (2Q 2024), surpassing earlier forecasts. On the subject of targeted diesel subsidies, Anwar stressed that measure was implemented by the government to prevent leakage in government funds which have also benefited the rich as well as foreign nationals. He said the move was in line with the government’s efforts to reduce leakage of subsidies which have cost the government billions of ringgit and put a stop to diesel smuggling. “When we enforce the targeted diesel subsidies, people get upset. But the government must be responsible and do what is necessary. “If there are additional measures to ease the burden on the people, we will implement them. For instance, there are those who are entitled to RM200 but have not received it, so they must register with the Subsidised Diesel Control System (SKSD2.0) and we will ensure that they get it,” Anwar said. In his speech, the Prime Minister highlighted that Malaysia’s economic performance in 2Q 2024 had exceeded projections, driven by various initiatives and agendas implemented by the government under the MADANI Economic Framework. “All of this has bolstered investor confidence and as a result, the ringgit has become one of the strongest currencies in our region,” he added. — BERNAMA

KUALA LUMPUR: MIDF Amanah Investment Bank Bhd is maintaining its positive stance on the oil and gas (O&G) sector as the outlook for 2024 remains encouraging. However, the investment bank remained cautious about potential escalations in geopolitical tensions, significant production adjustments by the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) and the US Federal Reserve’s monetary policy. It anticipates brent crude oil prices to remain relatively stable within the range of US$77-US$84 per barrel in August 2024 (year-to-date 2024 (YTD24): US$83.51 per  barrel), buoyed by the geopolitical tensions and OPEC+ production cuts through tempered by lower demand from China. Meanwhile, natural gas prices are expected to decline in the near term due to oversupply, settling at US$2.10-US$2.35 per million British Thermal Units (MMBtu) (YTD24: US$2.24 per MMBtu) in August. “We are highly optimistic about the upstream division, given that its contractual work basis provides operational stability, despite brent crude oil prices slipping to a maximum threshold of 20%-25% below the current spot price. “This is on top of Petronas’ expected capital expenditure (capex) of RM50-RM60 billion in 2024,” it said. However, it noted that the short-term downside risks include the uncertainty in the demand for crude oil, geopolitical risks and the OPEC+ production cut decision following the drop in brent crude oil daily spot price to below US$80 per barrel since the last week of July 2024. Similarly, investment bank holds a positive view on the midstream sector, particularly the ship tankers and storage facilities on the back of relatively stable and elevated short-term and long-term charter rates across ship sizes. It added that the recent decline in crude oil and natural gas prices in late July 2024 is expected to benefit tanker operators as lower prices may encourage the mobilisation and storage of crude and refined petroleum products, allowing sellers to mitigate charter costs while buyers take advantage of restocking opportunities. “While we are generally neutral on the downstream sector, we continue to anticipate a recovery in demand for petrochemicals as well as the increase in demand for biofuels and renewable energy (RE),” it said. Looking ahead, the investment bank expects the O&G services and equipment (OGSE) subindustry to show improved performance in the first half of 2024 (1H 2024). The upstream division is expected to remain resilient, given the higher capex both globally and domestically (global capex: +24% year-on-year (YoY) to US$600 billion, Malaysia’s capex: +23.3% YoY to RM31.2 billion) and relatively stable brent crude oil prices. “Immediate downside risks are sudden escalation in geopolitical tension, drastic changes to OPEC+ supply cut and unfavourable RM/US$ exchange rates. “We forecast brent to reach an average of US$82 per barrel and Henvy Hub to average US$2.20 per MMBtu in August,” it added, As for the downstream sector, MIDF noted that while uncertainties in petrochemicals persist, the diesel rationalisation initiative has started to yield positive results for end buyers of refined petroleum products. Demand for Jet A1 and Mogas is expected to remain strong during the upcoming holiday and travel season, barring any changes to the RON95 subsidy as anticipated following the diesel targeted subsidy rollout. Additionally, the bank expects demand for sustainable fuels to surge, driven by the increase in biomass projects across the nation in 1H 2024. This shift will create new revenue streams for downstream players as they refine and distribute these alternative fuels. — BERNAMA