Islamic Finance Malaysia

Friday, 23 May 2014

Malaysia: FGV to issue US$1b sukuk

EXPANSION DRIVE: Conglomerate in midst of choosing banks for the exercise, say sources

PLANTATION giant Felda Global Ventures Holdings Bhd (FGV) is considering selling more than US$1 billion (RM3.21 billion) of dollar-denominated exchangeable Islamic bonds (sukuk), said three people with knowledge of the deal.
    According to them, the bonds will be issued later in the year to finance its expansion drive.
    "FGV is in the midst of choosing banks for the potential offer. It wants to raise cash to buy up more companies to support its existing businesses, albeit cautiously," the sources said.
   Part of the proceeds will be used for potential acquisitions of additional landbank in Southeast Asia and Africa  by 2015 for planting oil palm and rubber.
    FGV raised more than RM11 billion by selling shares on the local stock exchange in 2012. Its initial public offering (IPO) was the second-largest in the world, after Facebook,  that year.
     A portion of the IPO exercise's proceeds was used for capital expenditure to increase efficiency as well as extension of capabilities, plantation acquisitions, expansion of downstream activities and other working capital requirements.
    For fiscal year 2013, FGV's net profit surged 21.72 per cent to RM980.99 million despite the tough economic conditions. Revenue for the full year was RM12.6 billion.
     Its cash and near cash as at end-December stood at RM5.02 billion.
    FGV plans to acquire new businesses and increase plantation acreage and crude palm oil (CPO) production to achieve its revenue target of RM100 billion.
    The company manages 853,000ha of plantations in Malaysia and Indonesia.
    Last year, the company produced 3.21 million tonnes of CPO and it plans to increase production to more than four million tonnes.
    President and chief executive officer Mohd Emir Mavani Abdullah told Business Times recently that FGV aims to manage more than one million hectares of plantations.
    He said to be a RM100 billion turnover company, FGV would need to grow by eight times.

(Business Times / 23 May 2014)
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Thursday, 22 May 2014

Malaysia: Religious council introduces online zakat payment system

IPOH: The state Islamic Religious and Malay Customs Council has introduced a system which enables zakat (tithe) payments to be done online.

The system, e-PZB, was launched by state secretary Datuk Seri Abdul Puhat Mat Nayan at Dewan Bankuet of the State Secretariat building here recently.
The council's chief executive officer Dr Amiruddin Muhamed said with the online system, there is no reason for the people to shy away from paying zakat.
"With the system, you just need to register with us and we will take care of the rest," he said.
Amiruddin said with the online system, one could even pay RM10 for zakat.
"The system eliminates red tape."
Amiruddin said the council needed to increase its zakat collection as more poor people in the state are waiting for assistance.
Citing an example, Amiruddin said the council built 300 homes for the poor last year and this year the number would be increased to 400 units.
"The cost to build the homes has also increased from RM35,000 to RM38,000 for two-bedroom units while the cost to build three-bedroom homes had increased to RM44,000 from RM40,000," said Amiruddin.
Besides homes for the poor, Amiruddin said the council also had 51 other assistance.
Those facing problems to sign up with the system can call the council at 05-208 4000.
Puhat said the number of people paying zakat in the state was relatively small. He hoped the number of people paying zakat would increase through this online system.

(New Straits Times / 22 May 2014)

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Wednesday, 29 January 2014

Malaysia Taxes Spur Indonesian Oil-Palm Sukuk

Bumitama Agri is joining Indonesian oil-palm planters selling sukuk in Malaysia to take advantage of the nation’s tax breaks and to tap its record Shariah-compliant banking assets.
The company set up a 2 billion ringgit ($599 million), 15- year Islamic bond program for investment and refinancing, according to a Jan. 21 stock exchange filing.
Singapore-listed Golden Agri-Resources, which has operations in Indonesia, was the last producer of the commodity to sell ringgit-denominated sukuk in July, paying a coupon rate of 4.75 percent for 2018 securities.
They yielded 4.91 percent on Jan. 24. Malaysia, whose Shariah-compliant banking assets more than doubled in the past five years to 543 billion ringgit, provides tax incentives for agricultural bonds as part of an effort to reinforce its position as a global Islamic hub.
Corporate issuance of sukuk in Indonesia rose almost 18 percent in 2013 to 2.2 trillion rupiah ($179 million), trailing the $14 billion in Malaysia, data compiled by Indonesia’s Financial Services Authority and Bloomberg show.
“We’re getting a fair bit of enquiries from Southeast Asian plantation firms,” Mohd Effendi Abdullah, head of Islamic markets at Kuala Lumpur-based AmInvestment Bank, the nation’s third-biggest Shariah-compliant debt arranger in 2013, said in a phone interview yesterday. “Islamic bonds are ideal for such companies because they can use the assets and the agricultural income to back the offering.”
Tax deduction
To encourage the issuance of agricultural-based sukuk, Prime Minister Najib Razak said in his September budget speech that taxes on expenses and stamp duties on such debt would be waived for four years through 2015. The securities pay returns on assets to comply with the Koran’s ban on interest.
Indonesia’s First Resources has also tapped the nation’s Islamic investors. The Singapore-based palm-oil firm sold 600 million ringgit of five-year securities in July 2012 at a coupon rate of 4.45 percent and they were paying 4.39 percent yesterday, Bursa Malaysia data show.
Golden Agri, the world’s second-biggest planter of the commodity after Malaysia’s Sime Darby Bhd., issued its first sukuk in November 2012.
The 1.5 billion ringgit of five-year notes paid a coupon of 4.35 percent and were yielding 4.85 percent on Jan. 24. Both securities are rated AA2 by RAM Rating Services, the third-highest investment grade.
Yields on AA-rated corporate debt sold in Malaysia climbed four basis points, or 0.04 percentage point, in 2014 to 4.45 percent as of Jan. 21, the highest level since June 2012, according to a central bank index.
‘Naturally compatible’
“Plantations and most other cash-crop commodities businesses are naturally compatible with Shariah-compliant financing structures,” Alhami Mohd Abdan, Kuala Lumpur-based head of international finance and capital markets at OCBC Al- Amin Bank said in an e-mail interview yesterday. “The sukuk market, and particularly the investor base in Malaysia, is very familiar and comfortable with” such issuance, he said.
Bumitama is tapping the market just as global borrowing costs are climbing amid stimulus tapering by the Federal Reserve.
Emerging-market sovereign bond yields advanced 15 basis points this year to 6.25 percent, the highest level since Sept. 13 and above the 2013 average of 5.47 percent, according to JPMorgan Chase & Co.’s EMBI Global Index.
The Bloomberg-AIBIM Bursa Malaysia Corporate Sukuk Index, which tracks the most-traded local-currency notes issued in the world’s biggest market for the debt, fell 1 percent this year to 104.120 after gaining 2.8 percent in 2013.
Bumitama’s bonds are rated AA3 by RAM Ratings, one level lower than those of Golden Agri and First Resources.
The issuance will be the company’s first and adds to a 5.5 trillion rupiah outstanding loan that comes due in 2018, according to data compiled by Bloomberg.
Market Depth Offerings of ringgit-denominated Islamic debt total 2.1 billion ringgit this year, compared with 181 million ringgit in the year-earlier period, according to data compiled by Bloomberg.
Other Southeast Asian oil-palm growers have also turned to Malaysia for funding via the sukuk market. Noble Group Ltd., which is listed on Singapore’s stock exchange, issued 300 million ringgit at a coupon rate of 4.3 percent in January 2013.
The three-year securities yielded 4.61 percent when last traded on Jan. 22, Bursa Malaysia data shows.
Malaysia’s Kuala Lumpur Kepong Bhd. sold 1 billion ringgit of 10-year notes in 2012 at 4 percent and they were paying 4.7 percent on Jan. 27. Islamic bonds aren’t actively traded because investors tend to hold them until maturity due to their relative scarcity compared with conventional bonds.
“For sukuk, Malaysia is one of the better places as we have the infrastructure in place, while market depth and liquidity aren’t an issue,” Lam Chee Mun, a Kuala Lumpur-based fund manager at TA Investment Management overseeing 680 million ringgit, said in a telephone interview yesterday. “If you think you want international investor participation, especially Islamic funds, you’d have to think of Islamic rather than conventional financing.
(Jakarta Globe / 28 Jan 2014)
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Tuesday, 28 January 2014

Malaysia: Labuan IBFC allocates US$1m to promote Islamic wealth management

KUALA LUMPUR (Jan 28, 2014): The Labuan International Business and Financial Centre (Labuan IBFC), which aims to continue attracting high net worth individual in Malaysia and South East Asia, has allocated US$1 million (RM3.3 million) to promote Islamic wealth management, said its CEO Saiful Bahari Baharom.
"I see good demand in the market. It is gaining momentum, but it really depends on the growth of the economy. Muslim high net worth individuals want to have Syariah solutions," Saiful told reporters after a memorandum of understanding between Labuan IBFC and the Global University of Islamic Finance (INCEIF) here yesterday.
Saiful Bahari hopes that the collaboration with INCEIF will help raise awareness on Islamic wealth management globally particularly through industry-driven research.
He said the partnership will benefit both Labuan IBFC and INCEIF in terms of pooling their resources to conduct more research into understanding Syariah issues in wealth management.
"We hope to feature the findings from this research into an annual journal focusing on wealth management. At the moment, there is no journal point of reference for Islamic wealth management," he said.
Saiful Bahari said the research topics proposed will cover key components of Islamic wealth management, including Syariah-compliant wealth acquisition, risk management, Islamic wealth preservation and wealth distribution.
At the moment, he said there is no industry wide knowledge of Islamic wealth management and there is a need for experts in this area.
He said Labuan IBFC expects the number of foundations to grow by 100 this year compared to over 100 in 2013.
According to him, Labuan IBFC offers a wide range of wealth management tools suitable for high net worth individuals, family offices and other wealth managers needing a range of structures offering efficient wealth transfer, dynastic planning and inheritance management.
Under the 2010 law, he said Labuan is now one of the few common law jurisdictions offering investors a choice of common law trusts and civil law foundations, propelling the jurisdiction to the forefront of international wealth planning.
(The Sun Daily / 28 Jan 2014)
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Thursday, 16 January 2014

Malaysia: Brunei’s Takaful growth pushes ahead its Islamic finance ambitions

KUALA LUMPUR, Jan 15 — Assets held by the Islamic insurance (takaful) sector in Brunei recently have grown significantly while those of conventional types of insurance have been declining, a report from the country's central bank showed.
The monthly report from Brunei's monetary authority, known as AMBD, said that in the year ended Sept. 30, takaful assets rose 21 per cent to 425 million Brunei dollars (RM1.102 million). Conventional insurers saw a drop of 1.3 per cent in assets during the same 12-month period.
The fast-growing takaful sector indicates Brunei is progressing toward its goal of having Islamic financial products account for up to 60 per cent of total banking assets in five years, compared with 40 per cent at present.
At end-September, Brunei's takaful market accounted for 33 per cent of total insurance assets, up from 29 per cent a year earlier, according to the AMBD report.
Brunei, which has Southeast Asia's highest per-capita income after Singapore, aims to compete in Islamic finance with regional powerhouses Malaysia and Indonesia. That is part of a strategy to wean itself off dependence on oil reserves, which are expected to run out in about two decades, and diversify Brunei's economy.
Brunei, Malaysia and Indonesia have the largest potential for retail Islamic banking in Southeast Asia. The combined population of the three Muslim-majority countries is nearly 280 million.
Although insurance assets have seen rapid growth in Brunei in the past decade, industry players say there is still poor awareness about insurance among its population. Brunei has four takaful operators.
Assets of Indonesian takaful firms grew 43 per cent to 13.1 trillion rupiah (RM3.61 billion) during 2012, from 9.15 trillion rupiah a year earlier, data from that country's regulator showed. Takaful firms accounted for 2.3 per cent of Indonesia's total industry assets.
A proposed law in Indonesia that requires takaful firms to be spun off into standalone entities could, when enacted, spur mergers in that market. 
In July, Malaysia declared new rules for takaful firms to separate life and general business lines, a move observers said could spur buy-outs of smaller operations.

(The Malay Mail Online.Com / 15 Jan 2014)
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