Wednesday, 17 December 2014

MMC-Gamuda JV firm to spend over RM100m on tunnel boring machines

IPOH (Dec 17): MMC Gamuda KVMRT (T) Sdn Bhd (MGKT) will spend over RM100 million on refurbishing and upgrading its tunnel boring machines.

The 50:50 joint venture firm of MMC Corp Bhd and Gamuda Bhd is the underground work package contractor for the MRT project Line 1.

MGKT's head of tunneling Ng Hau Wei said the refurbishment and modification works of the tunnel boring machines are in preparation for its next tunneling job.

"We estimate the amount of direct works will cost over RM100 million," he told a media briefing here at their refurbishment plant.

He said the works included the storage and preservation of the boring machines.

According to Ng, MGKT will partner German firm Herrenknecht AG to undertake the necessary works for 10 tunnel boring machines, the same ones which were deployed for MRT Line 1.

Under the agreement, Herrenknecht AG will collaborate with local steel works and heavy engineering specialist Waiko Engineering Works Sdn Bhd to jointly carry out the machine refurbishment works.

Ng foresees the tunneling business in the Southeast Asia region will grow and he said MGKT is looking for more tunneling jobs.

"It is defintely growing if you look at Malaysia and Singapore, and even at Hong Kong. We hope the trend will be positive from now on," he said.

Gamuda erases losses amid downgrades on weaker property sales

KUALA LUMPUR (Dec 17): Gamuda Bhd erased losses after falling as much as 0.8% earlier on analyst downgrades. The earnings and target share price downgrades were subsequent to builder and property developer Gamuda's first quarter earnings report to Bursa Malaysia yesterday.

Today, Gamuda shares increased three sen or 0.6% to RM4.83 at 10:28 am after falling as much as four sen to RM4.76.

Yesterday, Gamuda said net profit rose 12% to RM185.85 million in the first quarter ended October 31, 2014 (1QFY15) from RM165.48 million a year earlier.

Revenue for 1QFY15 improved to RM569.64 million from RM486.12 million. Gamuda declared an interim dividend of six sen per share.

Today, TA Securities Holdings Bhd wrote in a note while Gamuda's 1QFY15 income was within expectation, TA had reduced its FY15 to FY17 earnings forecast for Gamuda by 7% to 7.6%.  

TA also cut its target price for Gamuda shares to RM4.81. This compares to RM5.17 previously, according to TA , which maintained its “sell” call on the stock.

According to TA, it had downgraded its Gamuda earnings forecast in anticipation of lower property sales.
"Its property sales slumped to RM240mn. Unbilled sales dropped to RM1.5bn from RM1.7bn a quarter ago.

"We cut our property sales assumptions for FY15/FY16/FY17 from RM1.84bn/RM1.65bn/RM1.7bn to RM1.0bn/RM1.2bn/RM1.3bn in line with the weaker-than-expected property sales," TA said.

TA also noted that besides Gamuda’s project delivery partner role in Malaysia's mass rapid transit (MRT) project, Gamuda had only one construction project in hand.

According to TA, Gamuda has an outstanding order book of RM1.8 billion, which could last until 2016.
“Should there be any delay in KVMRT (Klang Valley MRT) line 2 or lack of new construction project awards, we foresee an earnings gap in construction division in FY16. This may pose downside risks to the share price,” TA said.

Supermax recovers slightly after Monday’s tumble

KUALA LUMPUR: Shares of Supermax Corp Bhd recovered slightly yesterday after closing at its lowest level since October 2011 — but not nearly enough to scrape back what was lost on Monday after its founder and chief executive officer Datuk Seri Stanley Thai was charged by the Securities Commission Malaysia with alleged insider trading offences.

The glovemaker recovered slightly its losses but still closed the day with a 0.62% decline, in heavy trading.
Supermax-17Dec2014_theedgemarketsThe stock rebounded to hit an intraday high of RM1.73 before ending the day at RM1.61, with 10.91 million shares exchanging hands. Its market capitalisation stood at RM1.09 billion.

Supermax shares fell 32 sen or 16.5% to close at RM1.62 on Monday, following news that Thai, his wife and sister-in-law were charged in the Kuala Lumpur Sessions Court with handing a broker non-public information about a higher-than- expected hit to the bottom line of Supermax’s former associate APL Industries Bhd, of which he was an investor.

According to, Supermax’s valuation score stood at 1.20, on a scale of 0 to 3, with 3 suggesting a company gives higher-than-market-average returns and is trading at a lower-than-average valuation.

Its fundamental score stood at 1 on a scale of 0 to 3, with 3 suggesting that it is profitable and has a strong balance sheet.

Supermax’s stock also has a volatility rate of 2, which measures the volatility of a stock based on its share price movements relative to the whole market over a period on a scale of 1 to 5, with 1 being the least volatile.

This article first appeared in The Edge Financial Daily, on December 17, 2014.

Malaysia's Mah Sing among Nomura top picks in Asean

PETALING JAYA: Property developers Mah Sing Group Bhd and Thailand’s Quality Houses (QH) are Nomura Research’s Asean property yield picks that are expected to offer above-average yields and dividend growth in 2015 and 2016. 

In a report on Asean property, it identified three out of the 28 property stocks, including 11 real estate investment trusts (Reits), that it covered which fulfilled two conditions. 

The conditions are that the stock’s 2015 forecast dividend yields would be higher than the market’s as well as the sovereign 10-year bond yield, and that the dividend per share (DPS) or unit (DPU) is projected to grow faster than the market in 2015 and 2016 forecasts.

It said that the report “aims to identify candidates amongst property stocks under our coverage in Asean for income-focused investors that are still looking for dividend yield ideas.”

Setting a RM3 target price for Mah Sing with a “buy” call, Nomura said its 2015 forecast yield was 5% versus the KLCI’s 3.6% and Malaysia’s 10-year bond yield of 4.2%. 

Additionally, it said Mah Sing’s forecast DPS for 2015 and 2016 were projected to grow 22.2% and 27.3% respectively, versus the KLCI’s 6.8% and 7.2% respectively.

“The projected growth in dividend is underpinned by unbilled sales of RM4.8bil, which should drive earnings to expand 22% (compound annual growth rate) over financial years 2013 to 2016 forecast,” it said.
As for QH, which has a target price of 4.40 baht and a “buy” call, Nomura said it had a projected 2015 forecast yield of 4.8% versus Stock Exchange of Thailand’s (SET) 3.4% and Thailand’s 10-year yield of 2.8%. 

Its DPS is projected to grow 12.5% and 16.7% in 2015 and 2016 versus the SET’s 11.4% and 12% respectively, underpinned by high earnings visibility due to resilient real demand for landed housing.

Nomura noted that Sunway Reit was its third stock that met the two conditions but retained its “neutral” call as it believed the robust DPU growth forecast in 2015 and 2016 was already largely reflected in the unit price. 

It also noted that none of the Singapore Reits it covered managed to qualify on account of overall pedestrian DPU growth in 2015 and 2016 forecasts (average 1.5% to 1.6%).

Meanwhile, RHB Research downgraded the Malaysian property sector to “neutral”, expecting property transaction volumes to decline 3% to 5% in 2015 on the back of slower economic growth and a high loan rejection rate.
It also anticipated 
property prices to remain flat as developers would have difficulty passing on incremental costs during weakening demand, while all parties would be likely to adopt a wait-and-see stance as the impact of the goods and services tax kicked in. 

“For the stocks under our coverage, we estimate new sales to drop by an average 10% to 20% year-on-year (y-o-y) versus -25% y-o-y in 2014 and +41% y-o-y in 2013,” it said. 

RHB Research maintained “buy” on Tambun Indah Land with a reduced target price of RM2, noting that affordable housing players should fare better while the company’s fundamentals remained solid with zero gearing.

It downgraded Eastern & Oriental, UEM Sunrise and UOA Development to “neutral” with respective target prices of RM2.27, RM1.65 and RM1.84 respectively. 

It downgraded Glomac to “sell” with a lower target price of 88 sen (6.5% downside), as it believed management’s 2015 (April) new sales target of RM504mil was a tall order given new launches would likely be delayed into the first quarter.

Masterskill aborts RM75m property disposal

KUALA LUMPUR: Masterskill Education Group Bhd has aborted its plan to dispose of its Cheras, Kuching, Kota Kinabalu and Johor campuses, after its board was unable to mutually agree on a revised sale consideration based on the property valuation done by independent valuer Cheston International (KL) Sdn Bhd.

Cheston had ascribed an indicative market value of RM110.4 million for the properties, higher than the initial indicative sale consideration of RM75 million offered by the group’s major shareholder Siva Kumar M Jeyapalan.

It is understood that the deal was aborted due to the valuation being too high. In a Bursa Malaysia filing yesterday, Masterskill said it would seek alternatives to implementing its asset light strategy and raising funds for the group.

Siva Kumar first proposed to make an offer for the four campuses on Nov 6, and then lease them back to the group for 10 years, with the option to extend for another five years.

Following that, on Nov 10, education provider SMRT Holdings Bhd and Creador II LLC announced the proposed acquisition of a 32.9% equity interest in Masterskill belonging to Siva Kumar at 60 sen apiece.
The acquisition will be done together with Rahpia Ltd, a wholly-owned subsidiary of Creador. SMRT will take up a maximum of 23% interest in Masterskill while Rahpia will acquire the remainder of Siva Kumar’s stake.

Rahpia is an existing shareholder of Masterskill with a 16.26% stake while Creador founder Brahmal Vasudevan holds a 6.15% stake in SMRT. The stock shed 0.5 sen or 0.8% to close at 59.5 sen yesterday, with a market capitalisation of RM223.77 million.

This article first appeared in The Edge Financial Daily, on December 17, 2014.

Hai-O 2Q net profit falls 32% to RM7.17m on weaker wholesale and MLM earnings

KUALA LUMPUR (Dec 16): Hai-O Enterprise Bhd's net profit fell 32% to RM7.17 million in the second quarter ended Oct 31, 2014 (2QFY15) compared to RM10.54 million in the previous corresponding period, primarily because of lower profit from its wholesale and multi-level marketing (MLM) divisions.

However, it should be noted that there was an exceptional gain on disposal of a property amounting to RM600,000 in 2QFY14, its filings to Bursa Malaysia this evening showed.

Despite the weaker earnings, the group still declared an interim single-tier dividend of 4 sen per share.
The group recorded a revenue of RM57.73 million for the quarter under review, down 12% from RM65.6 million a year ago.
Segmentally, its MLM division saw a pre-tax profit decline of about 19% for the quarter due to drop in sales of "big ticket" items which had offset the higher contribution from "small and medium ticket" items.

Its wholesale division's external revenue was flat at about RM14 million compared to 2QFY14, but pre-tax profit for the division declined from RM3.4 million to RM950,000, mainly due to lower inter-segment sales to MLM division, coupled with lower revenue from its Chinese medicated tonic and tea. 

The weakening of the ringgit against the dollar has also resulted in higher import costs for the division, thus further eroding its profit margin.

Retail revenue also fell, although by a marginal 4% to RM9.8 million versus the previous year, while pre-tax profit declined from RM1.1 million to RM950,000 due to lower revenue.

Meanwhile, its cumulative nine months (1HFY15) net profit was at RM13.39 million, down 30.73% from 1HFY14's RM19.33 million, as revenue shrunk 10.62% to RM107.51 million from RM120.28 million, also primarily because of lower profit from its wholesale and MLM divisions. 

Moving forward, the group said it will re-look its current strategies to mitigate the negative impact that arise from the uncertainties in the current economy, plunging crude oil price, as well as the weakening of the ringgit against the US dollar. It foresees these phenomenons will continue to impact domestic consumers sentiments for the remaining half of the financial year. 

"The board of directors remains confident and is of the opinion that the group will continue to perform profitably in the next quarter," it added. 

The edge: Market Preview- KLCI likely to remain below 1,700-level, external worries weigh

KUALA LUMPUR (Dec 17): The FBM KLCI is likely to remain below the crucial 1,700-point level today as global economic worries continute to weigh on international investor sentiment.

At the global markets, oil prices pared losses and global equity markets eased on Tuesday in roller-coaster trading as investors snapped up beaten-down energy stocks and wagered the Federal Reserve will be cautious amid the turmoil sparked by crude's collapse, according to Reuters.

Russia's huge emergency rate hike overnight failed to stabilize the ruble's decline, which jolted markets, and German Bund yields hit a new low as a collapse in Russian financial markets sent investors scurrying for top-rated assets, it said.

Meanwhile, U.S. stocks fell for a third day in a volatile session Tuesday, led by declines in consumer discretionary and technology shares, while another drop in the Russian rouble added to worries about the global economy.

Energy shares rebounded, keeping the S&P 500 and Dow mostly in positive territory until a bout of late-day selling took indexes lower. The S&P 500 moved more than 44 points from its high of the day to its low, while the CBOE Volatility index jumped 15.4 percent, according to Reuters.

AllianceDBS Research in its evening edition Tuesday said that dampened by the weak down close in the preceding day, the FBM KLCI had on Dec 16 traded lower to settle at the lowest low of a low of 1,673.94 as market participants continued to play on the selling side in anticipation of a lower market  (- 23.23, - 1.38%).

It said that in the broader market, losers outnumbered gainers with 572 stocks ending lower and 296 stocks finishing higher.

That gave a market breadth of 0.51 indicating the bears were in control, said the research house.

AllianceDBS Research said the benchmark index has lost 172 points over the past 14 market days (1,845 (27 Nov 2014) minus 1,673 (16 Dec 2014)) with 12 down closes and only 2 up closes.

It said following the down close on Dec 16, the market was expected to test lower ground again with immediate support seen at 1,670.

It said a fall below 1,670 would put pressure on the market down to the subsequent support zone between 1,600 and 1,610.

Indicator wise, the MACD is below the 9-day moving average line, it said.

“The analysis of overall market action on Dec 16 revealed that buying power was weaker than selling pressure.

“As such, the FBM KLCI would likely trade below the 1,673.94 level on Dec 17,” said AllianceDBS Research.

Aeon Credit posts higher earnings on bad debt recovery, processing fees

KUALA LUMPUR: Aeon Credit Service (M) Bhd’s earnings rose 12.1% to RM48.29mil in the third quarter ended Nov 20, 2014 from RM43.05mil a year ago, boosted by an increase in the bad debts recovered and AEON Big loyalty programme processing fee.

It said on Tuesday its revenue increased by 21.4% to RM216.21mil from RM178.03mil a year ago. Earnings per share were 32.50 sen compared with 29.9 sen.

For the nine months ended Nov 20, 2014, its earnings increased by 19.2% to RM152mil from RM127.53mil in the previous corresponding period. Revenue rose 29.2% to RM626.43mil from RM484.77mil.

Aeon Credit said total transaction and financing volume in the third quarter and nine months ended Nov 20, 2014 was RM848mil and RM2.559bil, a growth of 3.6% and 3.4% respectively from previous year corresponding period. 

“Higher growth was recorded for auto financing operations. The financing receivables as at Nov 20, 2014 was RM4.354bil, representing an increase of 29.5% from RM3.361bil in the previous year quarter ended Nov 20, 2013,” it said. 

Aeon Credit’s non-performing loans (NPL) ratio was 3.07% as at November 2014 compared to 2.02% as at November 2013. 

“Other operating income recorded of RM14.19mil and RM40mil for the third quarter and nine months ended Nov 20, 2014 was 64.6% and 46.6% higher than previous year corresponding period respectively. This is mainly contributed by increase in bad debts recovered and AEON Big loyalty programme processing fee,” it said.

Aeon Credit said receivables amounting to RM38.641mil and RM115.053mil (Nov 20, 2013: RM25.775mil and RM72.526mil) were written off against allowance for impairment losses on
receivables for the current quarter and nine months ended Nov 20, 2014 respectively.

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