A winner for Proton?

  • Business
  • Saturday, 27 Sep 2014

THE battle lines are drawn. The response so far to the new Proton Iriz has been good, with 17,000 people booking the car ahead of its launch.

The encouraging number of bookings is indication that the Iriz has struck a chord with the driving public. For Proton, it needs the car to reverse its flagging sales in order to produce 150,000 cars a year for it to be profitable.

It’s no coincidence then that the Iriz is targeted at buyers of Malaysia’s best-selling car – the Perodua Myvi.

The Myvi has been the leader in sales for a number of years, and since its launch about a decade ago, has remained the mainstay of Perodua’s sales with an annual production and sales of close to 100,000 cars. The Myvi has accounted for 50% of Perodua’s annual sales since 2006.

Proton’s gameplan appears to be offering a bigger car with better features than the Myvi at around the same price point. On paper, the car has all the ingredients to succeed as a sales winner for Proton. It now bears watching whether the momentum can carry forward to make the Iriz the winning model Proton needs to not only regain domestic dominance, but also, and more importantly, international sales.

The doors of liberalisation are slowly opening and the message sent to domestic car companies has been to buck up. The Iriz appears to be the first Proton model that gives a lot for the price point it is sold at.

Should the car find traction among car buyers in Malaysia, it is hoped that the Iriz would be able to be the export winner Proton has lacked ever since it was formed. Targeting the domestic market is a must, but the car must sell abroad too. How Proton executes its export-market strategy is equally important to show that the car maker is maturing as a company.

More than meets the eye 

THE resignation of three Nexgram Holdings Bhd directors, following a suit by Protasco Bhd against Nexgram founder Tey Por Yee, has raised some eyebrows within industry circles.

Observers are questioning the reasons for the directors resigning from Nexgram right away following the suit.

The directors in question are Leou Thiam Lai, Ungku Razak Ungku Rahman and Yap Siok Teng.

Nexgram, in announcing their resignations to Bursa Malaysia, said that they had resigned “because of the newspaper report on Protasco filing a legal suit against a director of the company”. It, however, did not elaborate.

Questions are being raised as to whether there is something else brewing in Nexgram which caused this succession of events.

Construction and property firm Protasco on Monday announced that it had launched a legal suit against Tey, as well as another Protasco director Ooi Kock Aun and Indonesia-based PT Anglo Slavic Utama, or PT ASU, claiming for a refund and/or for damages arising from the breach of contract between the parties.

The deal was supposed to provide Protasco with a profit guarantee of US$22mil (RM71mil) spread over four years and had been factored in as part of Protasco’s growth catalysts by analysts covering the company.

Tey emerged as a substantial shareholder in Protasco in late-2012 and remains one until now, although he has been selling some shares in the open market since July.

Notably, both Nexgram and Protasco are still engaged in preliminary discussions on a mixed development project in Cyberjaya.

Notwithstanding the slew of resignations at Nexgram, the company announced on Thursday that it had proposed to acquire a 70% equity interest in private company Top Symphony Sdn Bhd for RM24.8mil.

Nexgram, which started off as a mobile applications and platform provider, said the proposed acquisition would allow it to “participate in Fiji’s economic development and growth process, which is still currently in the early stages of development” and that the proposed deal would be financed by a combination of internal funds and/or bank borrowings.

Capping the easy money

HAVE property prices gone through the roof and is the average Malaysian being priced out of the market?

If you are in the “ay” camp, then the move by the Selangor government to impose restrictions on property purchases by foreigners is not only appropriate, but also about time.

These days, it is common to hear people complaining about how wages have stagnated, how much less the ringgit fetches and how property prices have simply run away.

A common refrain is that “at this rate, our grown-up kids would have to live with us”.

Mere anecdotal evidence? Hardly.

Bank Negara data shows house prices in Kuala Lumpur have been on the march after 2009, growing 12.2% in nominal terms in 2010 and 2011; 11.1% in 2012 and 14.4% in 2013. National prices are a little behind, but not by much.

According to a study by Sime Darby Property and Universiti Malaya, to be able to buy a home in the Klang Valley, you must have a household income of RM14,580.

And what about our wages?

A fresh graduate in the early 1990s could expect an average salary of RM1,500. Fast-forward 20 years later, and average pay – according to Jobstreet – has risen to just RM2,100. Hardly meteoric, is it?

In light of this, one would have to say that the move by the Selangor Government is timely.

There can be no denying that the ultra-easy monetary policies in the United States and Japan in the last few years, with trillions of dollars of newly minted money flooding the financial markets, have seen investors snapping up all sorts of emerging-market assets, including property.

And guess what?

Malaysia is among the Asian countries with the fewest barriers against foreigners with a voracious appetite for property, so says property consultant Knight Frank. Its Global Development Insight report for the third quarter of 2013 pointed out that Malaysia had “minimal restrictions” on foreign ownership, even as Asian nations heightened defences against foreign buying.

Foreign ownership may not be the sole reason for rising property prices, but anything that helps to stem the tide is surely welcome.

In the last few years, stock markets have soared, property prices have jumped and investors are understandably giddy. But the party won’t last. The Fed and Bank of Japan can’t print money forever.

Sooner or later, the funds flooding emerging markets will recede. Corrections would then be inevitable. The International Monetary Fund is even warning of a possible new housing crash.

In the meantime, buyers need to exercise discretion. If prices are too expensive, just sit tight.

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