Monday, 31 October 2011

Market Commentary

The FBM KLCI index gained 10.07 points or 0.68% on Monday. The Finance Index increased 0.55% to 13494.2 points, the Properties Index dropped 0.10% to 965.87 points and the Plantation Index rose 0.94% to 7565.3 points. The market traded within a range of 17.57 points between an intra-day high of 1493.28 and a low of 1475.71 during the session.

Actively traded stocks include JCY, MAA, ZELAN, JCY-CD, OLYMPIA, IRCB, BORNOIL, MBFHLDG-WA, TMS and KURASIA. Trading volume decreased to 1331.98 mil shares worth RM1581.95 mil as compared to Friday’s 1877.90 mil shares worth RM2295.28 mil.

Leading Movers were CIMB (+11 sen to RM7.57), IOICORP (+11 sen to RM5.25), TENAGA (+12 sen to RM5.98), GENTING (+16 sen to RM10.76) and PBBANK (+10 sen to RM12.72). Lagging Movers were YTL (-2 sen to RM1.49), GAMUDA (-3 sen to RM3.40), HLBANK (-3 sen to RM10.60), TM (-1 sen to RM4.24) and PETDAG (-2 sen to RM16.30). Market breadth was positive with 426 gainers as compared to 318 losers.-- JF Apex Securities Bhd

FBMKLCI ends 0.7pc higher

The FTSE Bursa Malaysia KLCI Index rose 0.7 per cent to 1,491.89, its fifth day of gains and the highest since August 18.

The gauge advanced 7.6 percent this month, the first advance since June and the steepest increase since July 2009. - Bloomberg

MMC targets Gas Malaysia IPO price RM2.20 per share

KUALA LUMPUR (Oct 31): MMC Corp Bhd is on track to list its subsidiary, Gas Malaysia Bhd, by December this year despite market volatility and global economic uncertainty putting a dampener on markets.

MMC finance director Anwar Syahrin Ajib said on Monday that Gas Malaysia’s initial public offering (IPO) could be RM2.20 per share, which was the top end of the indicative offer price.

"We think we are going to get that price for a few reasons like the performance of the company and benchmark against other similar companies," Anwar told reporters after MMC's extraordinary general meeting (EGM) here.

MMC chairman Datuk Wira Syed Abdul Jabbar Syed Hassan said the Gas Malaysia listing was expected to attract investor attention despite market conditions as investors would be looking to mop up the shares for dividend yield.

The two MMC officials however declined to comment on the future listing of the group's units, Malakoff Bhd and Johor Port Sdn Bhd.

At the EGM, MMC shareholders approved the group's proposed listing of Gas Malaysia.

Can KLCI break through 1,500 points?

KUALA LUMPUR: Can the October rally extend into November, after chalking up gains of 8.35% over the month and breaking through the psychologically important 1,500? Or is the rally losing steam?

Based on Bursa Malaysia stock market data, the FBM KLCI is up 114.3 points from Oct 3’s 1,367.52 to end 1,481.82 last Friday. For past week, the KLCI was up 30.9 points or 2.19%.

The October performance was the strongest since the selldown in late June, as investors picked up equities after European officials hammered out the €1 trillion (RM4.33 trillion) rescue package to mend Europe’s debt woes, especially Greece.

On Wall Street, stocks closed out a fourth week of gains in quiet fashion last Friday, edging higher as the market took a breather after rallying 3% on Europe’s deal to stem its debt crisis.

The Dow Jones industrial average gained 22.56 points, or 0.18%, to 12,231.11. The Standard & Poor’s 500 Index added 0.49 of a point, or 0.04%, to 1,285.08. The Nasdaq Composite Index shed 1.48 points, or 0.05%, to 2,737.15.

OSK Research director of research Chris Eng said it is possible although the rally does look as though it is running out of steam.

He said for the KLCI, the rally thus far has been quite steep although slightly lagging the global average.

On the outlook for Greece, he said Greece could avoid default in the short term.

“However, Europe is still faced with the problem of cutting deficits from almost everyone except Germany. The risk of a mild recession is still there,” he said.

As for investors, he remained “neutral” on the market and said investors should buy below 1,300 and sell above 1,533. Eng’s advice is for investors to remain defensive.
Affin Investment Bank head of retail research Dr Nazri Khan believes the KLCI is likely to trend higher this week on stronger global risk appetite following twin Europe-US catalysts last week.

He said the positive factors were the long awaited plan to resolve the European debt crisis and the stronger than expected US third quarter economic growth (registering the fastest quarterly GDP in a year).

“Going forward next week [this week], we expect investors to price in stronger US/European economy as well as the reduced banking crisis risk in both continents, pushing the KLCI to a possible 1,524 level (KLCI’s high made in 2008 before the subprime crisis),” he added.

Nazri said given the KLCI has gained 13% from its October low and MSCI Asia Pacific index has gained 8.1%, there were highly probable signs that intermediate bottom has been in place and the traditional year-end rally has started, which is likely to last till before Chinese New Year 2012.

He cited positive local corporate earnings (for example Public Bank Bhd, Malaysia Airports Holdings Bhd (MAHB), Supermax Bhd) and good average daily volume above one billion shares.

Nazri said there was across-the-board sectoral strength in the trading service, plantation and finance indices and weekly gains in economically-sensitive oil and palm oil to sustain the KLCI rebound in the near term.

“As for strategy next week [this week], we are recommending our investors to gradually accumulate blue-chip leaders especially those in the fast growth service sector (such as Genting Bhd, Media Prima Bhd, MAHB and AirAsia Bhd).

Among the stocks to watch today are Tenaga Nasional Bhd, Envair Holdings Bhd, SILK Holdings Bhd and Malayan Flour Mills Bhd (MFM).

TNB announced a 4Q net loss of RM453.9 million, the second consecutive quarter of losses, and expected the current financial year to be very challenging.

Though investors anticipated TNB would report losses, their concerns were whether it could work out the gas supply issue and a definite compensation from Petroliam Nasional Bhd (Petronas).

However, the lack of assurance from Petronas could weigh on the share price, especially after TNB president and CEO Datuk Seri Che Khalib Mohamad Noh said last Friday no decision had been reached as yet.

Envair has received a letter of intent from Zai Corporate Finance Ltd, an investment banking firm based in London, to subscribe for up to 30% of its new ordinary shares of 10 sen each at the market issue price.

SILK chairman Datuk Mohd Azlan Hashim has said he is confident the company would be able to return to profitability in a couple of years as traffic volume picks up for its tolled highway operations and an improvement in the marine support services.

Malayan Flour Mills could be getting ready for the next stage of growth, having announced a series of corporate exercises in May and signing an agreement in October that would see it step into the Indonesian market, according to The Edge weekly.

This article appeared in The Edge Financial Daily, October 31, 2011.

Faber Group gets 6-month HSS extension

Faber Group (Oct 28, RM1.78)

Maintain buy with fair value RM2.57: Last Thursday, Faber Group announced that its wholly-owned subsidiary Faber Medi-Serve Sdn Bhd (FMS) had received a letter dated Oct 27, 2011 from the Public-Private Partnership Unit of the Prime Minister’s Department, stating that FMS will continue with the existing Hospital Support Services (HSS) concession for an interim period of six months from Oct 28 or until the signing of a new concession agreement for privatisation of HSS with the Ministry of Health, whichever is the earlier, subject to the prevailing terms and conditions of the concession. The six-month interim extension is not to be considered as binding on the government.

The announcement did not come as a surprise as we had anticipated earlier that renewal of the concession would be delayed beyond the expiry date of the existing agreement. The six-month extension closely resembles a similar experience involving Pharmaniaga with regard to the renewal of its pharmaceutical distribution concession in late 2009.

At that time, Pharmaniaga got a six-month extension, during which it was still negotiating the renewal terms and conditions. Based on Pharmaniaga’s experience, we do not rule out the possibility of the negotiations between Faber and the government stretching beyond the extension period. Nevertheless, we are of the view that this development is favourable as it indicates that there is high chance of Faber securing the renewal of its existing concession.

We reiterate our view that despite the delay, Faber will eventually get its concession renewed, going by its strong 15-year track record since the concession started on Oct 28, 1996. We maintain our “trading buy” recommendation on Faber, with an unchanged fair value of RM2.57, based on sum-of-parts valuation. This valuation is based on the assumption that the concession will be renewed for another 10 years based on the same terms and conditions in the existing concession. — OSK Research, Oct 28

This article appeared in The Edge Financial Daily, October 31, 2011.

Parkson Holdings: PRA’s new pricing benchmark

Parkson Holdings Bhd (Oct 28, RM5.65)

Maintain buy call with lower target price of RM6.55 from RM7.45: Parkson Retail Asia Limited (PRA) is slated for listing on the Main Board of Singapore Exchange (SGX) on Thursday.

The IPO will involve a total offering of 147 million PRA shares comprising 80 million new shares and 67 million vendor shares (with an option to add 22 million vendor shares for over-allotment) from Parkson Holdings (PHB) and PT Mitra Samaya (MS) at S$0.94 per share.

This will raise S$138 million (RM341 million), lower than the initially speculated S$300 million to S$500 million possibly due to the prevailing market uncertainties. The IPO price values PRA at S$636 million based on an enlarged share base of 677 million, implying 13 times S$48 million earnings in FY12F.

Post-listing of PRA, PHB’s stake will be diluted to 67.6% (from 90.1%) assuming the over-allotment option is exercised, prompting us to trim our FY12F earnings by 4.9% and FY13F by 5.3% to account for the earnings leakage to minority interests and incremental interest income from the IPO proceeds of RM185 million.
We are maintaining our FY12F/FY13F net profit for PRA at S$48 million and S$61 million.

This translates to a two-year compound annual growth rate of 28%, backed by healthy same store sales growth of 5% to 20% and the addition of six new stores per year over the next one or two years.

We cut our target price for PHB to RM6.55 (from RM7.45) after imputing: (i) PHB’s 51.5%- owned Hong Kong-listed subsidiary Parkson Retail Group Ltd’s (PRG) new TP of HK$11.46 (from HK$13.15); and (ii) reduced stake of 67.6% (from 90.1%) in PRA.

We have also assumed a 15% holding company discount for both listed subsidiaries, which is narrower than the 20% discount previously attached to PRG given PHB’s new corporate structure of having double exposure to two listed subsidiaries now.

We keep our sum-of-parts valuation of RM2.2 billion (RM3.25 per share or S$1.33 per share) for PRA, valuing it at 16.5 times CY12F earnings. Our valuation implies a 41% upside potential to PRA’s IPO price of S$0.94. Based on current market capitalisation of PHB and its share of PRG’s market capitalisation, PRA is valued at only RM0.37 per share. — Hwang DBS Vickers Research, Oct 28

This article appeared in The Edge Financial Daily, October 31, 2011.

Sime Darby still booming, Bucyrus looms

Sime Darby Bhd (Oct 28, RM8.90)

Maintain hold call with unchanged target price of RM8.36: We recently visited one of Hastings Deering’s (a 100%-subsidiary of Sime Darby) branch office in Queensland, in a mining town called Mackay.

After the visit, we are upbeat over Hastings’ prospects with earnings projected to sustain double digit growth in the near term.

Its ongoing negotiations with Caterpillar Inc (CAT) on Bucyrus International Inc’s distribution assets in Australia may prove timely with several new and bigger coal mines scheduled to open in the near future.

We make no change to our earnings forecasts (pre-Bucyrus distributorship).

We also retain our “hold” call with an unchanged target priceof RM8.36 based on 16 times FY13 price earnings ratio.

The acquisition of Bucyrus by CAT in July is highly complementary as there is minimal overlap in the existing product offerings.

With Bucyrus, CAT’s addressable market (under Hastings) for the mining sector in Australia will grow to 75% from 23%.

Hastings therefore stands to benefit with a wider range of surface mining and underground mining equipment to offer to its clients; galvanising its competitive advantage as a one-stop centre.

Asked to comment on the key challenges Hastings faces, management mentioned the impact of a potential slowdown in global economic growth. New equipment sales were affected by the 2008/09 global financial crisis.

The other challenge that could derail the company’s growth plan is the shortage of skilled labour to provide timely and quality service to clients. To address that, Hastings recently opened an A$8 million (RM26 million) new training centre in Brisbane that can accommodate about 150 new trainees a year (with the existing 450 students).

While Hastings remains tight-lipped over the initial investment cost for the Bucryus distributorship, our back of-the-envelope estimates suggest at least RM537 million.

This estimate may prove conservative if the eventual amount of inventories to be held turns out to be significantly higher, given Bucyrus’ relatively more expensive equipment which can cost as much as US$200 million (RM612 million) for a single piece of machinery; equivalent to an A380 Airbus.

While earnings contribution from Bucyrus may be relatively small to Sime in the near term, the long-term prospects of this new dealership is great especially if it extends to China’s Xinjiang province which has 29 times Australia’s coal reserves. Details of the Bucryus dealership are expected in FY12. — Maybank IB Research, Oct 28

This article appeared in The Edge Financial Daily, October 31, 2011.

MAS’ 3Q11 operating statistics seasonally weak

Malaysian Airline System Bhd (MAS) (Oct 28, RM1.48)

Maintain buy with target price RM1.80: In 3Q11, the number of passengers MAS carried fell by 4.5% quarter-on-quarter (q-o-q), mainly dragged down by domestic routes, which fell by 9.7% q-o-q. Although movement is seasonally weaker in 3Q on a year-on-year (y-o-y) basis, the number of passengers carried grew by only 1% to 3.3 million boosted by a 3.6% increase in international routes, but offset by a 3.8% drop from the domestic segment.

The drop in the domestic segment is mainly due to increased competition from rival AirAsia, which has been steadily capturing more market share from MAS. Load factor in 3Q11 was relatively flat on a q-o-q basis, but fell by 3.1 percentage points y-o-y to 76% as its total capacity per available seat kilometres (ASK) grew by a sharper 6.3% compared with a 2.7% growth in revenue per passenger kilometre (RPK).

In 9M11, MAS’ load factor was relatively flat at 75.8% as demand grew in tandem with capacity expansion at 9%. Again, demand for international routes outpaced domestic routes, growing by 10.3%, offsetting the 4.1% drop in domestic routes. Demand for cargo in 3Q11 continued to be weak on the back of the economic slowdown in the developed economies. Y-o-y, despite a cut in capacity by 12.7%, load factor deteriorated by 2.9% points to 68.9%, as MAS’ load tonne per kilometre (LTK) fell by a sharper 16.3% y-o-y.

For 9M11, total demand for cargo fell by 14.7% ahead of the 5.8% cut in capacity. This has led to a 7.1 percentage point drop in load factor to 68%. In comparison with its regional peers, the performance of MAS’ cargo division was clearly weaker. SIA’s cargo demand grew by 3% y-o-y in 9M11 while Cathay Pacific’s fell by only 2.8% y-o-y.

In 3Q11, jet fuel price averaged US$125 (RM382) per barrel, some 40% higher than the US$88 per barrel average in 3Q10. With a moderating operating statistic performance coupled with higher jet fuel prices, we continue to expect MAS’ 3Q11 results to be in the red. Over the past several months, despite crude oil prices easing below US$100 per barrel, the price of jet fuel has remained high at US$125 per barrel as the crack spread widened to between US$30 to US$40 per barrel.

The range mirrors the trough level in 2008. Our earnings model imputes jet fuel assumption of US$115 and US$120 per barrel for FY11 and FY12. There is no change to our earnings forecast. Also intact is our “buy” recommendation premised on the group’s transformation and restructuring potential. Target price is unchanged at RM1.80 based on a price-to-book value multiple of 1.8 times.

We believe earnings-wise, MAS has likely hit the bottom in 1H11, barring a resurgence in oil price. In an effort to cut costs, MAS has already taken various measures including managing its capacity by cutting loss-making routes and merging flights. — Affin IB Research, Oct 28

This article appeared in The Edge Financial Daily, October 31, 2011.

InsiderAsia’s model portfolio

Global stock rebounded strongly last week on the back of positive developments in the eurozone and better- than-expected economic data in the US. The closely monitored Dow Jones Industrial Average added almost 400 points in the first four trading days of the week.

Bellwether indices in key Asian markets too closed sharply higher. The Hang Seng Index surged 11.1% while benchmark indices in Singapore and Japan closed 7.1% and 4.3% higher, respectively.

Reflecting the renewed investor confidence in riskier assets, stocks on the local bourse too traded on a stronger footing. The FBM KLCI finished in positive territory for four straight trading days. The benchmark index ended 43 points higher for the week at 1,481.8.

Trading volume also inched slightly higher, picking up strongly in the last two trading days for the week. The daily trading volume on the local bourse rose to nearly 1.49 billion shares, on average, up from the daily average of just under 1.48 billion shares in the immediate preceding week.
Positive momentum from last week may spill over into this week.

The rescue plan agreed by the eurozone members last week may not carry much details but it is widely seen as a step in the right direction — and will provide the framework for officials to work on in the comings weeks and, likely, months.

Representatives of the private bondholders have agreed to a voluntary 50% haircut, much deeper than the earlier proposed 21% reduction. This is projected to cut Greece’s debt to GDP ratio to about 120% by 2020, instead of more than 160% under the July proposal. The lower debt service costs will alleviate some of the country’s financial strain and buy more time for the government to implement the necessary structural reforms.

Investors also cheered plans to leverage on the remaining funds available in the European Financial Stability Facility (EFSF). Officials estimate that the firepower of the EFSF can be boosted up to €1 trillion (RM4.3 trillion) under the two suggested options. The first will see a first-loss guarantee on new bonds issued and under the second option, its resources will be used to seed special purpose vehicles that will attract private and sovereign wealth funds.

Lastly, European banks are required to boost their holdings of safe assets to 9% of total capital, to buffer against debt provisions and losses in the debt crisis fallout. It is estimated that some €106 billion will be needed for the recapitalisation exercise, although details are sketchy as to where the money will come from.

Indeed, leaders of the eurozone have put no additional money on the table. The proposed boost to the EFSF depends on the region’s ability to attract private investors and sovereign wealth funds, of which there is currently no indication of success. It also remains to be seen if the initial loss insurance will be sufficient to bring down borrowing costs for troubled countries like Italy and Spain.

Even if all goes to plan, it will take years to pare debt levels and repair government fiscal positions. Meanwhile, economic activities in the eurozone have slowed considerably in recent months and will likely stay weak for sometime with the ongoing austerity programmes.

In the other key development, US’ GDP grew 2.5% in 3Q11, much better than the anemic 0.4% in 1Q11 and 1.3% in 2Q11. The improved figure allayed concerns that the world’s largest economy will fall back into recession, at the least for now.

The biggest question is whether the growth is sustainable amid high unemployment and stagnate income growth. Market observers remain divided on the issue.

For the moment, stock markets are rallying on the premise that the global situation is not as bad as it could be. Nevertheless, with the outlook still hazy, a healthy dose of caution is warranted. There is a good chance that we may not have seen the last of market volatility.

Portfolio review
Stocks in our model portfolio underperformed the benchmark index last week. Total market value for our basket of 17 stocks was up by 2.11% to RM376,310, compared with the FBM KLCI’s 2.99% gain.

Fifteen stocks in our portfolio closed with gains last week while two ended lower and one traded unchanged. Some of the notable gainers include Media Chinese International (+8%), Genting (+8.7%), Pantech (+4.3%) and Quill Capita Trust (+3.9%). At the other end, DiGi (-0.3%) and BSDREIT (-1.4%) were the only two losers for the week.

Including our cash holdings, for which no interest income is imputed, our total portfolio value was up by a lesser 1.2% to RM655,523. Last week’s gains boosted our model portfolio’s cumulative returns since inception to 309.7% on our initial capital of just RM160,000. We continue to outperform the FBM KLCI, which was up by about 129.1% over the same period, by some distance.

Our cash holdings remain substantial, accounting for 43% of our total portfolio value. The relatively high percentage is, primarily, for prudence sake. Despite the strong rebound so far this month, we are still cautious on the market outlook.

Our total profits are very substantial at RM495,523, of which RM399,053 has already been realised from previous shares sales. We kept our portfolio unchanged last week.

Note: This report is brought to you by Asia Analytica Sdn Bhd, a licensed investment adviser. Please exercise your own judgment or seek professional advice for your specific investment needs. We are not responsible for your investment decisions. Our shareholders, directors and employees may have positions in any of the stocks mentioned.

This article appeared in The Edge Financial Daily, October 31, 2011.

MBf surges as CEO raises stake

PETALING JAYA: Rumours MBf Holdings Bhd will be taken private have begun to swirl again. The company was one the most actively traded stocks in October, with its largest shareholder and CEO Tan Sri Dr Ninian Mogan Lourdenadin acquiring MBf shares and warrants on the open market.

Lourdenadin had increased his shareholding in MBf to 84.55% as at Oct 21, just shy of the 90% threshold to compulsorily acquire the remaining shares and take the company private.

He had also raised his warrants holdings in MBf to 73.13% on that date. On Oct 27 though, he sold 10 million warrants, paring his stake in warrants to 69.36%

The stock was among the heaviest traded on the local bourse on Oct 3 with 72.1 million shares changing hands. On Oct 10 46.8 million shares changed hands, Oct 21 (57.3 million) and Oct 22 (56.9 million).

Its warrants topped the active list on Oct 26, with 81.18 million warrants traded. The price of the warrants closed at 18 sen last Friday, with 44.8 million units traded.

MBfs’ share price has been on an upward trend since Sept 23, gaining 53.6% to close at 86 sen last Friday, still close to its year high of 90 sen.

The recent purchases by Lourdenadin might have triggered interest in the stock and renewed speculation that he may be looking at privatising the company.

“He could make a general offer to mop up all the shares he does not own in MBf. However, the price must be right because minority shareholders would want a good price, and he needs to acquire at least 90% of the shares he does not own to compulsorily acquire the rest and delist MBf,” said a market observer.

The Edge weekly reported on Oct 10 that Lourdenadin was buying up MBf shares, which triggered the speculation that he might want to take the group private by acquiring shares until his direct and indirect shareholdings breach 90%, after which MBf could request a suspension of its shares and subsequently delist them.

However, MBf announced on Oct 10 that it had not received any proposal for privatisation by Lourdenadin. The announcement said Lourdenadin had also informed MBf’s board of directors that he had not initiated any move to privatise the company as at Oct 10.

Lourdenadin’s intention to privatise MBf is certainly not new. In January 2010, he attempted to privatise the company, offering 65 sen per share.

The offer was rejected by minority shareholders as they deemed the offer too low. At that time, he held 79.12% of MBf. He has since raised his stake to 84.55% on Oct 21. The shares are parked under different investment holding companies.

The bulk of the shares are parked under Tor Pvt Ltd, which was incorporated in Singapore with 40.74% of MBf’s shareholdings, followed by Nadin Holdings Sdn Bhd with 21.17%.

Impact Action Sdn Bhd holds another 13.82% of the group’s shares while Market Share Investment Ltd, an investment holding company incorporated in the British Virgin Island has 8.82% of the shares.

With such a tight float, MBf is in non-compliance with Bursa’s public shareholding spread requirements.

Bursa Malaysia has instructed MBf to rectify its public shareholding spread. It is estimated that around 13% of the group’s shares are currently free-floated on the open market, compared with 16.3% as at July 28, 2011 and well below the 25% required under Bursa’s listing requirements.

What is more puzzling is that no action has been taken against MBf so far by Bursa Malaysia as the market regulator. Despite rejecting MBf’s appeal to extend the deadline for the company to rectify its shareholding spread from May 31 to Dec 31 this year, Bursa has not taken any of the actions it can on MBf.

According to MBf, since Bursa has rejected its appeal to extend the deadline for it to rectify its public shareholding spread, the capital market regulator could either “take or impose a breach of paragraph 8.02(1) of the Main Market Listing Requirement (MMLR) any type of action or penalty pursuant to paragraph 16.19 of the MMLR,” or suspend the trading in MBf securities.

According to a merchant banker, Lourdenadin can keep on acquiring MBf shares through his investment holding companies as the obligation to rectify the shareholding spread lies with MBf the company, and not Lourdenadin as a shareholder, although he holds the majority of the shares.

As a mid-cap company with market capitalisation of slightly more than RM400 million, MBf has substantial assets. Apart from the profitable credit card business that is synonymous with the company, the group also has plantations, properties and retailing businesses in Malaysia, Fiji, Papua New Guinea, Tonga and China, among others.
Even after rallying to 86 sen, the stock is still trading well below its net assets per share of RM1.72 as at June 30.

For the six months to June 30, MBf’s net profit rose 91% to RM87.48 million, or 15.35 sen per share, from RM45.8 million previously.

This article appeared in The Edge Financial Daily, October 31, 2011.

EcoFirst poised for new growth phase

KUALA LUMPUR: EcoFirst Consolidated Bhd has finally got its motor running after seven years of being in the red.

The Main Market-listed company, which has just turned around with a net profit of RM8.67 million for its financial year ended May 31 (FY11), is poised to chart a new chapter of growth, said group CEO and executive director Datuk Tiong Kwing Hee.

Among the new developments in the company are the revival of the long abandoned retail mall in Segamat, Johor; new property development projects — The Academia at South City Plaza and Taipan commercial centre at Ipoh — and its venture into iron ore mining in Indonesia, according to Tiong.

“There is a lot of potential for growth now. Even with the current global economic uncertainties, we will not be affected. When I took over (EcoFirst in 2009), the company was all below ground. Then I brought it to above ground and the only way to go next is up,” he told The Edge Financial Daily in a recent interview.

Established in 1973 and formerly known as Kumpulan Emas Bhd, EcoFirst is a diversified group with business in property, construction, agriculture, network marketing and mineral resources.

While the past decade has been anything but golden for the group, it is now forging a new identity and business direction with a new CEO — and with some results to boot.

Indeed, the company recently made new headway under the helm of Tiong. It resumed construction of a retail mall in Segamat that it had abandoned for almost nine years, said Tiong.

Branded as 1Segamat, the complex is expected to open for business in December 2011 and will become a major revenue contributor to the group in the future, he added.

“With the 1Segamat project coming on-stream, I foresee revenue contribution from property management to the group will go up to 40% (from the current 25%) in the next financial year,” said Tiong, adding that the retail mall could fetch a valuation of up to RM80 million when it is completed.

“Once an anchor tenant is secured, we will get about 85% to 90% occupancy rate. And the income will come in three months after it opens (in December). We don’t collect rental in the first three months to give our tenants a boost in confidence,” he said.

Situated near the Segamat bus station and taxi terminal, 1Segamat complex comprises three shopping levels with a gross area of 450,000 sq ft and two levels of car park.

The complex has secured an occupancy rate of 75%, with tenants that include Lotus Five Star Cinema, Popular bookstore and Watson’s personal care store, said Tiong.

According to him, EcoFirst spent a total of some RM34 million to develop the only mall in Segamat.

In addition, the company plans to revamp its South City Plaza at Seri Kembangan and bring the retail mall to the next level with the construction of two blocks of 13-storey serviced apartments and commercial space named The Academia to attract a bigger crowd to the mall.

“The take-up rate (for The Academia) is good. We have also recently signed an agreement with UPM (Universiti Putra Malaysia) to place up to 3,000 of its overseas students to live here,” Tiong said, adding that the company would start to recognise profit from the development starting FY12.

“The GDV (gross development value) of The Academia is around RM100 million to RM120 million and we expect to gross in some RM40 million. The profit will be used to repay borrowings and plough back to redevelop South City Plaza,” he said.

Tiong said the construction of The Academia is expected to be completed by the middle of next year and EcoFirst plans to invest some RM10 million to build a 12-hall cineplex in the existing mall.

“We have talked to a few parties and Lotus (Five Star Cinema) says it can guarantee drawing a total of 60,000 visitors a month. With the 12 halls, South City Plaza would house one of the biggest cinemas in the south of Kuala Lumpur,” he said.

The Academia aside, EcoFirst’s wholly owned subsidiary Curah Bahagia Sdn Bhd is currently developing a commercial property project — Taipan @ Ipoh Cybercentre — with a GDV

of some RM300 million, which will keep the company busy for another three years.

Profit contribution from Curah Bahagia is expected to come in during FY12.

Meanwhile, EcoFirst’s construction arm has recently been short-listed as one of the contractors for the upgrading works of army camps in Malaysia.

“We are confident of getting three or four of the 100 camps,” he said, adding that the upgrading of one camp could amount to some RM20 million. EcoFirst’s construction arm currently makes up some 25% of its total revenue, according to Tiong.

One of the noteworthy developments of EcoFirst’s business plans is its recent venture into mineral resources business.

Its wholly owned subsidiary Opal Horizon Sdn Bhd had on Aug 5, 2010 entered into a co-operation agreement with CV Geo Mineral Resources for the exploitation of an iron ore mine in South Kalimantan, Indonesia.

The mining operations started last month after the machinery and processing equipment were installed and commissioned in July 2011, according to EcoFirst’s notes accompanying its announcement to Bursa Malaysia.

“We only spent some US$1 million to buy the mines with all the machinery being installed. We think within a year of operations, we can get back our money and the balance in the years to come is all profit. But we will just stop there, we are also looking at other mines too,” said Tiong.

In terms of its network marketing division, he said the unit is in midst of developing and commercialising some health products such as black garlic. Its agro-biotechnology unit is currently exploring the planting of organic agarwood on its 1,000-acre farm in Desaru, Johor.

All in all, Tiong said the group would use its internally generated funds to finance its business plans as much as impossible without resorting to borrowings.

EcoFirst had disposed of its then 19.86% stake, comprising 17.69 million shares, in education services provider SEG International Bhd (SEGi) for RM30.6 million cash in March 2010 to part-repay its borrowings. In retrospect, the timing of the sale was bad for EcoFirst, as SEGi’s shares surged some 10 times just months later as the education company started to turn around strongly.

At as May 31, EcoFirst had RM105.39 million long-term borrowings, RM27.63 million short-term borrowings and RM3.45 million cash, translating into a net debt of RM129.57 million. Based on its shareholders’ fund of RM118.62 million, the company’s net gearing amounted to some 1.09 times.

The company made a net profit of RM8.68 million for FY11 versus a net loss of RM41.4 million for FY10 on the back of 18.5% increase in revenue to RM24.98 million from RM21.07 million. Earnings per share was 1.38 sen versus loss per share of 6.36 sen previously.

EcoFirst closed at 15 sen last Friday, which was some 17.8% discount to its net asset per share of 18.25 sen as at May 31. At this price the company has a market capitalisation of RM97.5 million.

With the upcoming business developments, things could be a bit hectic for EcoFirst to digest. But it will be interesting to see how this company that has just returned to profitability after seven years of struggling in the red can chart new growth ahead.

This article appeared in The Edge Financial Daily, October 31, 2011.

Seagate benefit for JCY and Dufu

KUALA LUMPUR: Malaysian hard disk drive (HDD) component makers, which supply mainly to Seagate Technology plc, could well take pole position in the HDD industry after rival Western Digital Corp (WD) was beaten out by the flooding in Thailand.

And with a global HDD shortage looming, higher prices are likely to boost margins down the entire value chain, providing some relief for component suppliers hit by low prices and poor margins.

In particular, Malaysia’s JCY International Bhd and Dufu Technology Corp Bhd could well become the prime beneficiaries of having Seagate as a client, said industry observers.

“In fact, orders have been coming in as people are taking advantage of the higher prices they can fetch amid the potential shortage of supply [of HDDs] in the next few months,” said the industry observer.

He said prices of HDDs and components are expected to increase in view of the disrupted HDD supply chain that will in turn hit original equipment manufacturers (OEMs) such as IBM, Dell and EMC in the coming months.

Press reports from Thailand suggest that prices of HDDs have increased by 20% to 25% in the past two weeks.

For an industry where margins are thin, this could provide a big boost to earnings, even if overall volume declines.

An analyst noted that it is not easy for HDD producers to switch component suppliers quickly, due to product qualification issues. As a comparison, Seagate’s net profit margin was 5% in the latest quarter. In the June 2011 quarter, Dufu was just marginally profitable while JCY posted losses.

In contrast, Notion VTec Bhd will likely be most affected by the floods, with a double whammy for both its HDD and camera divisions, as its HDD sales are mostly to WD and its Thai factory has stopped production. Its sole camera client, Nikon Corp Ltd, has also shut its operations in Thailand due to the floods.

To recap, the global HDD sector has been hard hit by the flooding in Thailand because a huge portion of the supply chain is situated in the country’s worst hit areas.

WD recently announced a halt to its production in Thailand. Malaysian HDD component makers that had operations in that country, such as Eng Teknologi Holdings Bhd and Notion VTec, followed suit.

WD CEO John Coyne the company’s December quarter revenue will fall 60% from a year ago since the company has a high concentration of factories in the flooded areas in Thailand. Some 60% of its HDDs are produced in Thailand, and reports estimate it will take four to six months to resume normal production.

Seagate, on the other hand, issued a press release recently announcing that its manufacturing facilities in Thailand are fully operational.

Analysts expect WD’s market share to fall while Seagate gains, as the latter’s production facilities remain largely unscathed.

“Seagate expects its December quarter units to be 45 million, implying a 12% quarter-on-quarter (q-o-q) decline. In contrast, WD guided to a 58% q-o-q decline in units. We believe the stark contrast in relative deterioration in units [or production volume] could prop up shares of Seagate,” JP Morgan said in a research note on Oct 21.

With JCY’s operations largely unscathed by the flooding in Thailand, the company could well stand to benefit from more orders coming from Seagate, said industry observers.

But JCY could still face some cost pressure going forward, said an analyst.

“The tighter supply could perhaps help to push up [JCY’s] average selling price [ASP], but still they have input and labour costs to address,” said the analyst.

The company posted a net loss of RM31.86 million for 3QFY11ended June 30, against a net profit of RM55.6 million the same period a year ago, on the back of a 17.8% drop in revenue. Net losses for the nine-month period totalled RM11.89 million or 0.6 sen per share.

JCY attributed the lower profitability to higher raw material prices, inventory provision resulting from the depreciating US dollar and slow moving stocks.

In addition, it said a labour shortage affected production and increased the direct cost of labour, according to notes accompanying its announcement to Bursa Malaysia.

The lower revenue was mainly due to the lower ASP, lower volume of shipments and depreciating US dollar against the ringgit, said JCY.

JCY shares have rebounded off their lows to 57 sen, and are trading above its net assets per share of 41.6 sen as at June 30, 2011. The stock is down 64.4% from its initial public offering price of RM1.60 in February 2010.

Things haven’t been smooth sailing for Dufu either during the quarter ended June 30, 2011.

Dufu, whose operations are in Penang and Southern China, saw its net profit slump to RM154,000 for its 2Q ended June 30, 2011 from RM605,000 the same quarter last year mainly due to the appreciation of the ringgit against the greenback and increase in raw material prices.

This weaker profitability came despite revenue rising marginally to RM31.81 million during the quarter from RM29.71 million a year ago.

For the six months to June 30, 2011, Dufu chalked up a net profit of RM532,000, or 0.44 sen per share, down from RM4.5 million a year ago.

On an asset valuation basis though, Dufu appears attractively priced. It closed at 33 sen last Friday, less than half its net assets per share of 74.6 sen as at June 30, 2011.

The recent strengthening greenback against the ringgit could help ease some cost pressure for both companies, although how they could contain other cost factors and the impact of the floods on volume sales remain uncertain.

But with Seagate as a major client, with operations that remain largely intact and higher HDD prices on the horizon, JCY and Dufu could be well positioned to gain some benefit from the tighter supply of HDDs going forward.

This article appeared in The Edge Financial Daily, October 31, 2011.

Market cap of GLCs rises to RM312b

KUALA LUMPUR (Oct 31): The market of government linked companies (GLCs) undergoing the GLC Transformation Programme (GLCT) has gone up to RM312 billion, says Deputy Finance Minister Datuk Donald Lim Siang Chai.

The total collective returns to shareholders of this group of GLCs have also gone up by an annual 14 per cent as of October 14 this year since the GLCT was initiated in May 14, 2004.

"This rise in returns for the group is also up by 1.5 per cent when compared with companies not within the group," he said in his reply to a question from Dr Dzulkefly Ahmad (PAS-Kuala Selangor) at the Dewan Rakyat here on Monday.

Lim said a total of four companies in the group also saw a rise in their key perfomance index (KPI) by 72 per cent last year compared with 64 per cent in 2009.

However, several GLCs also recorded a drop in their financial performances due to external factors not within their control such as higher oil and raw materal prices, he said.

These GLCs have taken various measures to face these problems including joining forces with their competing companies and the private sector as well as planning their market sector.

Replying to an additional question from Dr Dzulkefly, Lim said that in order to avoid the problem of "overcrowding" in the domestic market, GLCs with potential have been advised to venture into larger overseas markets.

"Malaysia's population is only 28 million compared with Asean's 600 million, and such a big market will provide our GLCs a wider market. We are advising them to not only look at Asean but also markets like China."

To a question from Datuk Idris Haron (BN-Tangga Batu), Lim said the foreign consultant appointed to helm the GLCT had helped to implement the programme well and had successfully raised the GLCs' businesses.

"We had looked at expertise when appointing the CEO and the directors of the GLCs, and from time time, we will continue to appoint experts and many more talents from outside the country to serve our GLCs," he added. - Bernama

KL shares lower at midafternoon

Share prices on Bursa Malaysia were lower at midafternoon today, dragged down by heavyweights led by Petronas Dagangan and RHB Capital, dealers said.

As at 3pm, the benchmark index declined 0.98 point to 1,480.84, after opening 2.84 points higher at 1,484.66.

Dealers said investor sentiment was dented by negative movement on regional markets following weaker US equities market overnight.

Petronas Dagangan and RHB Capital fell 12 sen each to RM16.20 and RM7.55, respectively.

Decliners led advancers by 373 to 277 while 266 counters were unchanged, 554 untraded and 19 others suspended. Trading was moderate with a volume of 757.43 million shares worth RM713.9 million.

The Finance Index fell 17.87 points to 13,402.72, Industrial Index was down by 5.75 points to 2,708.91 and the Plantation Index decreased 1.14 points to 7,493.54.

The FBM Emas lost 10.94 points to 10,106.42 and the FBM 70 Index declined 40.5 points to 10,919.15. The FBMT100 dropped 13.03 points to 9,922.96 and the FBM Ace Index slipped 37.14 points to 4,035.81.

Of the active counters, JCY International gained four sen to 61 sen, Integrated Rubber rose a sen to 20 sen and MAA Group added three sen to 51 sen.

Among heavyweights, Maybank fell one sen to RM8.34, CIMB rose two sen to RM7.48 and Sime Darby declined four sen to RM8.86. -- Bernama

Malaysia to woo investors with blueprint

Malaysia is expected to be a leading destination for investors with the implementation of the corporate governance blueprint early next year, said Malaysian Institute of Corporate Governance vice-president Margaret Chin.

She said investors are looking at a country with the most sophisticated corporate governance framework.

"With the implementation of the blueprint, investors will feel safe as their assets are protected all the time in many ways.

"We also have good people to implement the blueprint and certainly if we do it very fast, we will be ahead to attract more foreign direct investments to our country," she told reporters on the sidelines of the institute's workshop entitled "Scrutinising Financial Statement Fraud and Detection of Red Flag For Directors and Officers of PLCs and Government Regulatory Agencies," in Kuala Lumpur today.

The blueprint, launched by Second Finance Minister Datuk Seri Ahmad Husni Mohamad Hanadzlah on July 8, provides the action plan to raise the standard of corporate governance in Malaysia by strengthening self and market discipline and promoting greater internalisation of the culture of good governance.

It focuses on six connected themes of the corporate governance ecosystem namely shareholder rights, the roles of institutional investors, boards, gatekeepers and influencers, disclosure and transparency as well as public and private enforcement.

Attended by 150 directors, the seminar is focused on enhancing participants' understanding and knowledge of fraud schemes and creating awareness as well as detecting and recognising the red flag well in advance to prevent a disaster.

She said to avoid fraud from occurring, directors must give sufficient attention to a whistleblower who will come forward to expose fraudulent acts in a company.

"One major initiative to avoid fraud is whistleblowing, without information from a whistleblower you won't have exposure on such big cases like the Enron scandal," she added.

A whistleblower is a person who tells the public or someone in authority about alleged dishonest or illegal activities (misconduct) occurring in a government department, a public or private organisation, or a company. -- Bernama

Tenaga off day’s low, CIMB says worst over

KUALA LUMPUR (Oct 31): Shares of TENAGA NASIONAL BHD [] were off their day’s low of RM5.70 on Monday as analysts believed the worst was over for the power company.

At 3.05pm, it was down four sen to RM5.82. There were 2.25 million shares done at prices ranging from RM5.70 to RM5.85.

CIMB Equities Research said the worst was over for Tenaga as a higher gas allocation in FY12 would boost its earnings.

The research house said this was offset by the lack of a complete fuel cost pass-through mechanism, which means that Tenaga has to absorb coal costs above US$85 a tonne and was susceptible to gas supply shocks.

The core net profit for the financial year ended Aug 31, 2011 was 5% below CIMB Research’s forecast and 10% above consensus.

“We fine-tune FY12-13 EPS and introduce FY14 numbers. We raise our target price (1.1x P/BV) after rolling it over to end-2012. Our target price also goes up from RM6.00 to RM6.47. Still a HOLD,” it said.

Hock Seng Lee bags RM90m deal

Sarawak-based Hock Seng Lee Berhad (HSL) has secured a new rural water treatment plant project in the Sarawak Corridor of Renewable Energy (Score) worth RM90.28 million, its managing director Datuk Paul Yu Chee Hoe said today.

He said the contract period for the project, to be constructed in Samalaju 60 km north of Bintulu, one of the three growth nodes along the central coastline, would be 17 months with site possession scheduled for next month.

"The project marks the infrastructure and marine engineering specialist's first successful tender result for a project to be directly awarded by the Regional Corridor Development Authoriy (Recoda) and we hope there will be more," he said in a statement in Kuching.

He said the project scope includes substantial mechanical and electrical works, earthworks, drainage and retaining structures, piling, piping and construction of the treatment plant and associated works.

These involve the construction and commissioning of a pump house, chemical house, aerators, flocculation tanks, sedimentation tanks and other filtration process facilities, he said.

Designated as the state's new heavy industry hub, Samalaju is a growing township that has seen a recent influx of foreign investors engaged in metal-related production while Recoda is responsible for spearheading, managing and promoting the Score development. -- Bernama

REDTone deputy chairman ups stake

KUALA LUMPUR (Oct 31) : REDTONE INTERNATIONAL BHD []’s non-independent non-executive director cum deputy chairman Datuk Wira Syed Ali Syed Abbas Al Habshee saw his indirect interest increase to 130 million shares or 28.58%.

A filing with Bursa Malaysia on Monday showed that Indah Pusaka Sdn Bhd, in which he is deemed interest, acquired 12 million shares on Oct 25 for RM3.3 million. The shares were acquired at an average price of 27.5 sen in a direct deal.

The filing said he was deemed interested due to his interest in Indah Pusaka via Tema Juara Sdn Bhd pursuant to Section 6A of the Companies Act, 1965.

The company’s website said Syed Ali was appointed to the board of REDtone on July 28, as the deputy chairman.

Markets take a breather, KLCI down 4 pts

KUALA LUMPUR (Oct 31): Key regional markets including Bursa Malaysia took a breather on Monday, as investors used the excuse of the surge in the US dollar against the yen to take profit.

The markets had rallied last week after European officials hammered out a deal to rescue Greece. As for the FBM KLCI, it is up 114.3 points from Oct 3’s 1,367.52 to end 1,481.82 last Friday. For last week, the KLCI was up 30.9 pts or 2.19%.

At 12.30pm, the FBM KLCI was down 4.04 points or 0.27% to 1,477.78. Turnover was 637.07 million shares valued at RM526.29 million. There were 261 gainers, 334 losers and 263 stocks unchanged.

Reuters reported Asian shares fell and precious metals slipped on Monday as the dollar spiked to a three-month high against the yen following Japan's intervention, prompting investors to book profits after last week's rally.

The dollar rose more than 4 percent against the yen to above 79 yen, hours after briefly falling to a record low of 75.31 yen since World War II. The dollar index as measured against six major currencies rose 1.3 percent.

Hong Kong’s Hang Seng Index lost 1.14% to 19,791.74, South Korea’s Kospi fell 1.05% to 1,909.21, Singapore’s Straits Times Index 1.30% to 2,868.01, Japan’s Nikkei 225 0.18% to 9,034.45, Shanghai’s Composite Index 0.53% to 2,460.41 and Taiwan’s Taiex Index 0.35% to 7,589.10.

US light crude oil fell 90 cents to US$92.42, crude palm oil third month futures RM31 to RM2,940 while the ringgit weakened against the US dollar to 3.0750 from the previous close of RM3.0697.

At Bursa, among the heavyweights, Tenaga fell 11 sen to RM5.75 after posting losses in the fourth quarter while RHB Cap gave up 11 sen also to RM7.56. As for GENTING BHD [], investors took profit after the strong run-up in the share price.

Nestle was the top loser, down 60 sen to RM49.80, Petronas Dagangan 14 sen RM16.18 and IJM 13 sen to RM5.70.

Hard disk drive manufacturer JCY rose four sen to 61 sen with 40.77 million shares as it was expected to benefit as its competitors were affected by the severe flooding in Thailand. JCY-CD rose two sen to 8.5 sen.

Loss-making Zelan added 2.5 sen to 38 sen on news that it has received a letter of intent from Mudajaya Corporation Bhd to undertake civil works valued at RM300 million for a power plant expansion in Johor.

Among the gainers were Choo Bee, up 33 sen to RM1.75, DiGi 32 sen to RM31.82 while F&N rose 24 sen to RM17.02. Supermax extended its gains on the positive outlook for the glove maker, with the shares up 21 sen to RM3.77 while Latexx rose 12 sen to RM1.88 and the warrants 13 sen to RM1.44.

Hock Seng Lee secures RM90.28m Sarawak project

KUALA LUMPUR (Oct 31): Hock Seng Lee has secured a RM90.28 million contract from the Sarawak Public Works Department for a water treatment plant.

The company said on Monday it had received the letter of acceptance on Oct 28 from the department for the new water treatment plant, reservoir and associated facilities for the proposed Samalaju water supply in Bintulu.

“The scope of works for the project includes mechanical and electrical works, earthworks, drainage and retaining structures, piling, piping and CONSTRUCTION [] of the water treatment plant itself and associated works. The works will be due to be completed by April 2013,” it said.

Hock Seng Lee said the contract was expected to contribute positively to the earnings and net assets of the group for the financial years ending 2012 to 2013.

OCBC cuts Malaysia GDP forecast to 4.7%

Singapore-based OCBC Bank has revised downward, Malaysia's gross domestic product (GDP) forecast for 2011 to 4.7 per cent from 5.8 per cent, in view of weakening export growth going into the year-end.

OCBC economist Gundy Cahyadi said the country's GDP could slide further to as low as 3.8 per cent next year on a moderating global economy which show signs of extending into 2012.

"An extended global soft patch would directly hit the more export oriented economies in the region, and include the likes of Hong Kong, Singapore, Taiwan, Malaysia and South Korea," he said in a statement today.

He said though Malaysia's export growth came in higher than expected at 10.9 per cent year-on-year in August, held up by commodity exports, the bank did not see it as a reversal of trend.

"This is especially with imports of intermediate goods clearly tilted towards the downside," he added.

Gundy said credit growth which has eased off in the past couple of months and the deteriorating employment situation, is clearly an indication that the moderation in export earnings, has weighed on Malaysia's domestic demand. --Bernama

HLISB completes Islamic bank vesting

Hong Leong Islamic Bank (HLISB) has completed Malaysia's first vesting of an Islamic Bank with EONCAP Islamic Bank Bhd (EIBB), following the recent integration between its parent-bank, Hong Leong Bank Berhad and EON Bank Berhad.

"Our teams have worked tirelessly to ensure a speedy integration to allow us to realise synergy value from this unprecedented, trailblazing corporate exercise," said HLISB chief executive officer, Raja Teh Maimunah Raja Abdul Aziz.

In a statement here today, HLISB said all former EIBB branches will be re-designated as Hong Leong Islamic Bank branches. This, effectively allows customers from both banks, to conduct banking transactions at all branches.

It said payment and transaction instruments issued by the former EIBB, which include cards, cheques and bank drafts, will remain valid until further notification.

HLISB said the bank will also feature an enhanced suite of Shariah-compliant products and services, as a result of putting together the best features and benefits offered by both banks.

"With today’s historic integration milestone achieved, we have much to look forward to as a strong and united Hong Leong Islamic Bank," Raja Teh added. -- Bernama

KL shares end morning session lower

Share prices on Bursa Malaysia ended the morning session lower today on selling pressure after recent gains, led by Petronas Dagangan, dealers said.

At 12.30pm, the 30-stock index was 4.04 points lower at 1,477.78, pulled down mostly by loses in selected heavyweights, although it opened 2.84 points higher at 1,484.66 this morning.

They said the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) moved in line with the weaker trend on key equity indices on Wall Street which closed between -0.1 per cent and +0.2 per cent.

HwangDBS Vickers said the markets possibly imply waning investor optimism on the European debt bailout plan, which thus far still lacks actionable details.

"Some investors are standing on the sidelines waiting for a fresh catalyst," it said, adding, the FBM KLCI's immediate support level is seen at 1,475.

The benchmark index has gained three per cent over the last four trading days, HwangDBS said.

Meanwhile, volume stood at 637.1 million shares worth RM526.3 million with losers leading gainers 334 to 261 with 263 others unchanged and 612 untraded.

The Finance Index fell 21.16 points to 13,399.43, the Plantation Index declined 6.71 points to 7,487.97 and the Industrial Index lost 10.12 points to 2,704.54.

The FBM Emas Index decreased 29.811 points to 10,087.55, the FBM Mid 70 Index fell 51.07 points to 10,908.58 and the FBM Ace Index declined 32.03 points to 4,040.92.

Among active stocks, JCY International rose four sen to 61 sen while Integrated Rubber Corp and Borneo Oil, was up 1.5 sen each to 20.5 sen and 42.5 sen respectively.

For the heavyweights, Maybank fell one sen to RM8.34 and Sime Darby fell five sen to RM8.85 but CIMB improved two sen to RM7.48. -- Bernama

KL shares open higher in early trade

Share prices on Bursa Malaysia opened higher in early trading today, boosted by rising appetite in riskier assets, dealers said.

After 30 minutes of trading, the benchmark FTSE Bursa Malaysia KLCI was up 0.08 of a point to 1,481.9, after opening 2.84 points higher at 1,484.66.

The Finance Index rose 41.22 points to 13,461.81, the Plantation Index added 3.33 points to 7,498.01 but the Industrial Index lost 5.57 points to 2,709.09.

The FBM Emas Index improved 1.199 points to 10,118.56, the FBM Mid 70 Index fell 3.051 points to 10,956.6 and the FBM Ace Index declined 12.57 points to 4,060.38.

Gainers led losers 187 to 117 while 178 counters were unchanged, 988untraded and 19 others suspended. A total of 164 million shares worth RM113.3 million were traded.

Among active stocks, Borneo Oil rose 43 sen to two sen, The Media Shoppe was flat at nine sen while Zelan added three sen to 38.5 sen.

For heavyweights, Maybank earned two sen to RM8.37, CIMB improved three sen to RM7.49 but Sime Darby lost two sen to RM8.88. -- Bernama

Genting up, NY casino sees US$800m revenue

Genting Bhd rose to its highest level in almost three months after its Malaysian casino operator said the Resorts World Casino New York is expected to generate US$800 million in revenue next year.

Genting climbed 1.1 percent to RM10.72 at 9:16 a.m. local time in Kuala Lumpur trading, set for its highest close since Aug. 4.

Genting Malaysia added 1.1 percent to RM3.84. -- Bloomberg

Tenaga slides on quarterly loss

Tenaga Nasional Bhd, Malaysia’s biggest power producer, fell the most in almost two weeks after it posted a second straight quarter of losses as higher fuel costs eroded margins.

The stock slid 1.9 percent to RM5.75 at 9:01 a.m. local time in Kuala Lumpur, set for its steepest drop since Oct. 18. -- Bloomberg

Envair hits 4-year high on ZAI stake buy

Envair Holding Bhd jumped to its highest in more than four years after saying ZAI Corporate Finance Ltd plans to buy as much as 30 percent of new shares in the Malaysian air pollution control systems provider.

The stock surged 10 percent to 42.5 sen at 9:04 a.m. local time in Kuala Lumpur, set for its highest close since May 2007. -- Bloomberg

Zelan climbs on getting award letter

Zelan Bhd, a Malaysian builder, rose to its highest level in almost three months after it received a letter of intent for RM300 million of subcontract works for a power plant project from Mudajaya Corp.

The stock climbed 8.5 percent to 38.5 sen at 9:09 a.m. local time, headed for its highest close since Aug. 1. The contract is subject to Mudajaya’s group being appointed as main contractor. -- Bloomberg

Zelan climbs on news it may get RM300m job

KUALA LUMPUR (Oct 31): Shares of loss-making ZELAN BHD [] rose on Monday on news that it has received a letter of intent from Mudajaya Corporation Bhd to undertake civil works valued at RM300 million for a power plant expansion in Johor.

At 9.35am, it was up 2.5 sen to 38 sen. There were 7.46 million shares done.

The FBM KLCI fell 0.78 of a point to 1,481.04. Turnover was 184.71 million shares valued at RM127.30 million. There were 188 gainers, 137 losers and 182 stocks unchanged.

Last Friday, Zelan said Mudajaya confirmed its intention to subcontract part of the civil works for the CONSTRUCTION [] of the 1,000 MW Tanjung Bin coal fired power plant in Johor.

However, this was subject to the consortium, comprising of Alstom, Mudajaya and Eversendai Corp Bhd, being appointed the main engineering, procurement and construction contractor (EPCC) by Malakoff Corporation Bhd for the power plant expansion.

In the first quarter ended June 30, 2011, it posted net losses of RM8.04 million on the back of RM12.80 million in revenue. As at June 30, the group’s current liabilities of the exceeded the current assets by RM206.42 million.

Envair up on proposed take-up of placement shares

KUALA LUMPUR (Oct 31): Shares of Envair Holdings Bhd rose in active trade on Monday after an investment banking firm based in London to subscribe for up to 30% of its new ordinary shares.

At 9.21am, it was up four sen to 42.5 sen. There were 5.90 million shares done.

The FBM KLCI was up 2.32 points to 1,484.14. Turnover was 130.45 million shares valued at RM85.91 million. There were 185 gainers, 80 losers and 154 stocks unchanged.

The ACE Market-listed company received a letter from Envair has received a letter of intent from Zai Corporate Finance Ltd (ZAICF), to subscribe for up to 30% of its new ordinary shares of 10 sen each at the market issue price.

Tenaga down after 4Q losses, OSK trims earnings

KUALA LUMPUR (Oct 31): Shares of TENAGA NASIONAL BHD [] fell on Monday after it announced fourth quarter net loss of RM453.90 million, the second consecutive quarter of losses while OSK Research trimmed its earnings forecasts by 8% and 7% for FY12 and FY13 accordingly.

At 9.08am, Tenaga was down 10 sen to RM5.76. There were 317,900 shares done.

The FBM KLCI rose 1.47 points to 1,483.29. Turnover was 71.11 million shares valued at RM47.61 million. There were 149 gainers, 40 losers and 128 stocks unchanged.

Last Friday, Tenaga reported that at the operating level, the power company reported operating losses of RM248.80 million due to higher fuel costs of coal and utilisation of oil and distillates after the gas curtailment by Petroliam Nasional Bhd.

For the full year ended Aug 31, 2011, its net profit plunged 84.3% to RM499.50 million from RM3.20 billion in FY10. Revenue was 6.2% higher at RM32.20 billion compared with RM30.32 billion.

OSK Research said Tenaga’s results were within its expectations although below consensus. This was because the utility company had to generate electricity from expensive oil and distillates as it continued to be plagued by gas supply problems.

“Going forward, Tenaga only expects this issue to be resolved in mid-2012 when the Melaka LNG plant is completed. For now, it is seeking compensation from Petronas for the additional fuel cost it has had to incur owing to the gas shortage.

“We trim our earnings forecasts by 8% and 7% for FY12 and FY13 accordingly. Our DCF based FV is intact at RM6.24 and we maintain our NEUTRAL call,” it said.

OSK Research maintains Overweight on O&G sector

KUALA LUMPUR (Oct 31): OSK Research is maintaining its overweight stance on the oil and gas sector and its top picks are Kencana (Buy, FV: RM3.17) and Dialog (Buy, FV: RM3.66).

It said on Monday, with an improving global economic outlook and crude oil price having gone back to around US$90/barrel, it believes that O&G activities will gradually pick up, which would then benefit all O&G service providers through better utilisation rates and higher sales/unit or services/hour rates.

“On the local front, we expect the industry to be in for more marginal oilfield developments as well as the increasing need for brownfield services to boost O&G production while waiting for the commencement of deepwater activities on a large scale after pre-development preparations are completed,” it said.

CIMB Research has technical sell on Faber Group

KUALA LUMPUR (Oct 31): CIMB Equities Research has a technical sell on Faber Group at RM1.78 at price-to-book value of 1.4 times.

It said on Monday, that since it featured Faber as a technical buy stock on Oct 12, prices rallied to a high of RM1.91 before consolidation took place.

“The run-up stopped near the 61.8% FR level. Friday’s bearish Marubozu pattern also indicates that the stock may have peaked in the immediate term.

“Indicators are showing signs of exhaustion. MACD histogram bars are losing pace while RSI has also hooked downward,” it said.

CIMB Research said sellers at the 200-day SMA need to be respected. Any rebound towards RM1.82-1.91 is an opportunity to take profit. Put a buy stop at RM1.95.

CIMB Research has technical buy on Perisai

KUALA LUMPUR (Oct 31): CIMB Equities Research has a technical buy on PERISAI PETROLEUM TEKNOLOGI [] at 64.5 sen at which it is trading at a FY12 price-to-earnings of 5.9 times and price-to-book value of 1.7 times.

It said on Monday, Perisai broke out of its triangle resistance last Friday and it believed this would be a prelude to more upside ahead.

“If we are right, the next upleg should lift prices towards 67 sen to 70 sen. The 200-day SMA is also a magnet for prices,” it said.

CIMB Research said the technical landscape is improving. MACD signal line has returned to the black while RSI is rising towards the upper band of the neutral zone.

“Risk takers may start to nibble now. However, always put a stop at below the 61.5 sen level. A fall below 57.5 sen would negate this bullish view,” it said.

CIMB Research has technical buy on Perdana Petroleum

KUALA LUMPUR (Oct 31): CIMB Equities Research has a technical buy on Perdana Petroleum at 70.5 sen at which it is trading at a FY12 price-to-earnings of 9.0 times and price-to-book value of 0.6 times.

It said on Monday, Perdana Petroleum broke out of its downtrend channel last week.

“We expect the bulls to take charge from here. If prices can continue to hold steady above the resistance-turned-support trend line, there is a good chance that prices may re-rate towards 74.5 sen and 79 sen,” it said.

CIMB Research said the rebound from its 55 sen low also lifted prices above its 30-day and 50- day SMAs. This, together with the rising MACD and RSI indicators, bode well for the stock.

“Any pullback is an opportunity to accumulate. However, always put a stop at between 69.5 sen and 67.5 sen depending on one’s risk appetite,” it said.

CIMB Research: Worst is over for Tenaga

KUALA LUMPUR (Oct 31): CIMB Equities Research said the worst is over for TENAGA NASIONAL BHD [] as a higher gas allocation in FY12 will boost its earnings.

It said on Monday that this was offset by the lack of a complete fuel cost pass-through mechanism, which means that Tenaga has to absorb coal costs above US$85/mt and is susceptible to gas supply shocks.

“FY8/11 core net profit was 5% below our forecast and 10% above consensus. As expected, there was no final dividend. We fine-tune FY12-13 EPS and introduce FY14 numbers.

“We raise our target price (1.1x P/BV) after rolling it over to end-2012. Our target price also goes up from RM6.00 to RM6.47. Still a HOLD,” it said.

RHBCap to test resistance level

SENTIMENT on Bursa Malaysia continued to strengthen last week, spurred by the strong technical rebounds on the New York and Asian stock markets, particularly Hong Kong and Tokyo.

The FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) continued to stay above the key 1,450-point level for the entire week, trading between a low of 1,448.12 on Tuesday and a high of 1,488.20 on Friday, a range of 40.08 points. The benchmark index closed at 1,481.82, posting a week-on-week gain of 42.99 points, or 2.99 per cent.

Among other indices, the FTSE Bursa Malaysia Small Cap Index gained 318.19 points, or 2.85 per cent, to 11,501.27 and the FTSE Bursa Malaysia ACE Market Index advanced 112.46 points, or 2.84 per cent, to 4,072.95.

On the foreign front, New York staged yet another follow-through rebound. The Dow Jones Industrial Average soared 3.58 per cent over the week to end at 12,231.11 on Friday.

The S&P 500 index, a broader indicator of the market, gained 3.78 per cent, to 1,285.08 and the tech-stock heavy Nasdaq Composite Index advanced 3.78 per cent to 2,737.15.

In Hong Kong, the stock market rebounded across the board and the Hang Seng Index advanced 11.06 per cent to 20,019.24.

Tokyo's benchmark index, the Nikkei 225, raced through the critical resistance of 9,000 points closing at 9,050.47 on Friday, up 4.28 per cent for the week.

On Bursa Malaysia, RHB Capital Bhd closed at RM7.67, a week-on-week gain of 54 sen, or 7.57 per cent.

The following are the readings of some of its technical indicators:

Moving Averages: RHBCap's daily price trend continued to stay above its 10-, 20- and 30-day moving averages. It continued to stay below its 50-, 100- and 200-day moving averages.

Momentum Index: Its short-term momentum index stayed above the support of its neutral reference line last week.

On Balance Volume (OBV): Its short-term OBV stayed above the support of its 10-day moving averages.

Relative Strength Index (RSI): Its 14-day RSI had since stayed above the 50 level. Its technical reading stood at the 57.84 per cent level at the market close on Friday.

Strong buying support for key heavyweight index-linked stocks, particularly higher-priced counters, components sent the FBM KLCI above its crucial support of level of 1,450 last week. Of the benchmark index's 30 component stocks, 26 ended higher.

Once again, heavyweight blue chips continued to dominate trading activities, reflecting the continued buying support by institutional investors.

Select heavyweight blue-chip counters were well supported by institutional buying. RHBCap was one of these counters.

Chartwise, RHBCap's monthly price trend staged a successful re-test of the support of its neckline. Its fast monthly MACD (Moving Average Convergence Divergence indicator) continued to stay below its monthly slow MACD.

Its weekly price trend staged a breach below its intermediate-term uptrend support (see RHBCap's weekly price chart B1:B2). Last week, its weekly price trend continued to stay below its intermediate-term downtrend (B3:B4).

RHBCap's daily price trend staged a technical breakout of its intermediate-term downtrend (see RHBCap's daily price trend C1:C2) last week and continued to stay above it at the market close on Friday.

Its daily fast MACD stayed above its daily slow MACD at the end of the week. However, its weekly and monthly fast MACDs continued to stay below their respective slow MACDs.

Its 14-day Relative Strength Index (RSI) stood at the 57.84 per cent level. Its 14-week and 14-month RSI were at the 44.55 and 54.85 per cent levels respectively.

Given the decisive technical breakout of its intermediate-term downtrend (C1:C2) last Thursday, it is envisaged that RHBCap's daily price trend is likely to stage a follow-through rebound this week. It is likely to rechallenge its immediate overhead resistance at the RM8.00-RM8.40 levels.

The subject expressed above is based purely on technical analysis and opinions of the writer. It is not a solicitation to buy or sell.

Plan to be Asian industry leader in paint binders

KUALA LUMPUR: Kuala Lumpur Kepong Bhd, the biggest shareholder in London Stock Exchange-listed Yule Catto & Co plc, has set its sights on being Asia's biggest paint binder supplier in the mid-term.

It is now Southeast Asia's largest supplier of paint binders, following the British firm's £10 million (RM49.4 million) purchase of Quality Polymer Sdn Bhd from Nippon Paint Malaysia.

Quality Polymer is now placed under Yule Catto's 70 per cent unit Revertex Malaysia Sdn Bhd.

Yule Catto is also the owner of the Synthomer Group, of which Revertex is a key part.

Paint is essentially made up of pigments, binders and solvents. A pigment gives the paint its colour and is mixed into a solvent. The binder in the paint, however, binds the pigment to the solvent to form a very thick liquid so that it can properly coat a surface.

In an interview with Business Times here, Synthomer Asia managing director Dr Brendan Catlow said: "The Quality Polymer purchase is just the beginning of our plans to expand across Asia.

"We aim to have more than 50 per cent of our sales from emerging markets by 2015. The only way to achieve this target is via major investments and acquisitions," he said.

On the size of Synthomer's war chest, Catlow declined to specify but said: "We have a very strong balance sheet."

On details of the recently-concluded Quality Polymer purchase, Catlow said: "We've been in talks with Nippon Paint for over a year before we finally agreed on the price. This acquisition is all about growth, not cost reduction. There's no voluntary separation scheme."

Quality Polymer, which employs 30 staff at its Pasir Gudang factory in Johor, chalks up an annual sales of some STG10 million.

With the addition of Quality Polymer's 15,000-tonne facility, Catlow said Synthomer's paint binder capacity in Asia now totals over 65,000 tonnes a year.

"Our binders are used in eight of top 10 global paint brands. In view of the increasing demand for paint binders in Southeast Asia, we're planning to set aside more investments to raise capacity at the Pasir Gudang facility. This will be carried out next year," he said.

According to the World Paint & Coatings Industry Association, the 10 most popular paint brands are AkzoNobel, PPG Industries Inc, Sherwin-Williams Co, DuPont Coatings & Color Technologies Group, ICI Paints, BASF Coatings AG, RPM International Inc, SigmaKalon Group BV, SACAL, Valspar Corp, and Nippon Paint Co.

Synthomer is not a newcomer to Malaysia, having been in business here for 75 years.

Apart from making paint binders, it is also the world's number one supplier of nitrile latex, catering to the needs of the top 10 rubber glovemakers in Southeast Asia.

Describing Synthomer's business, Catlow said: "Our polymers are used in a wide range of industries to create and enhance everyday consumer products.

"Whether you're reading a book, opening a pack of breakfast cereals, painting your kitchen, labelling an envelope, laying a carpet, tiling a bathroom, using hairspray or simply driving your car, you could be using a product that has been improved by our scientists," he added.

KL bourse expected to show upside resilience

Lower liner property counters like Hua Yang, Mah Sing and UOA Development should enjoy gains in the immediate term, given their strong upside bias, says a head of research

Shares on Bursa Malaysia climbed last week, lifting the blue-chip benchmark FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) to a two-month high on external strength following better-than-expected economic data and positive outcome from the EU finance ministers' summit on October 26.

The expansion of the euro-zone bailout fund to €1 trillion, agreement by bondholders to take a 50 per cent haircut on Greek debt and robust US economic growth collectively boosted global equities, due to relief over the decisive action taken by EU leaders to prevent a debt contagion.

Subsequently, the FBM KLCI surged 42.99 points, or 3 per cent to end the week at 1,481.82, with Genting Bhd (+85 sen), Tenaga (+40 sen), Sime Darby (+35 sen), CIMB (+27sen) and Petronas Chemical (+40 sen) contributing to 60 per cent of the index's rise.

The average daily traded volume and value increased marginally to 1.486 billion shares and RM1.77 billion respectively, compared with the 1.478 billion shares and RM1.32 billion average the previous week, as trading momentum focused on lower liner penny stocks while blue chips showed slowdown in buying interest.

Agreement on affirmative actions to resolve the euro debt crisis and the fact that the US gross domesticproduct (GDP) grew at a stronger 2.5 per cent annual rate in the third quarter compared to a mild 1.3 per cent expansion a quarter earlier allayed concerns about a double dip the US and raised appetite for risky assets last week.

Raising the bailout amount to €1 billion will provide more clout to deal with the recapitalisation of European banks while the 50 per cent haircut will provide Greece more breathing space to manoeuvre itself out from under the debt crisis.

Nevertheless, it is yet to be seen how these eurozone countries will contribute to the bailout fund without affecting their credit ratings with countries like Italy forced to pay a higher interest (indicating rising default risk) in a recent bond auction that underperformed expectations.

This is an important week as more details on the Euro bailout measures are expected to emerge after the meeting of Group 20 leaders in Cannes, France this Thursday and Friday.

There are also expectations that the US Federal Reserve will reveal more hints about the third quantitative easing when it meets over the next two days. It is unlikely for the central bank to launch a third quantitative easing (QE) in the immediate term with unwavering recent economic data and the absence of deflationary pressure.

The ISM manufacturing, factory orders, non-farm payrolls and unemployment data that will be released this week could shed more clues on US Fed's next action in coming months.

On the home front, the index, in the absence of any negative news externally, may continue to chalk some gains early this week albeit at a slower pace before consolidation sets in later as short-term technical indicators have turned increasingly overbought. Rotational plays into lower liners are expected to continue with many small cap plays in the construction, property, consumer and oil & gas sectors trading at attractive valuations.

Oil & Gas sector deserves a special mention with Petronas indicating 22 marginal fields are available for development and it is giving free hands to interested oil & gas players to submit proposals by 1Q2012 before awarding them in the next three months.

The merger between SapuraCrest and Kencana place them in a stronger footing to bid for more contracts in the future and undoubtedly both these stocks are trading at undemanding valuations. Petronas' admission would lead to more M&A activities in the sector where smaller players, which are trading at a single digit forward price-to-earnings ratio, will be forced to consolidate and improve their competitiveness.

Technical outlook
Spot month October KLCI futures contract traded on Bursa Malaysia Derivatives Berhad was up a huge 47.5 points week-on-week to 1,476.5, reducing to a 5.32-point discount to the cash index, compared to the large 9.83-point discount the previous Friday.

The local stock market climbed on Monday, copying regional strength on stronger-than-expected economic data from China and Japan and after European leaders moved closer to overhaul the region's sovereign debt crisis.

The key index gained 11.19 points to settle at 1,450.02, off an opening low of 1,449.10 and early high of 1,462.06. Stocks fell into profit-taking congestion mode the next day as investors stayed sidelined ahead of the Deepavali holiday break and await the conclusion of the EU finance ministers' summit on October 26.

Still, the FBM KLCI ended up 7.78 points at the day's high of 1,457.8 due to late spurts on select index heavyweights, and off a low of 1,448.12.

The local market rose on Thursday along with strong regional gains on hopes China may soon ease monetary policy to support economic growth and on reports European leaders have agreed on writing down Greek's debt.

The index rose 13.13 points to settle at 1,470.93, off a high of 1,474.27, on robust volume totaling 1.88 billion shares worth RM2.41 billion.

The market extended gains ahead of the weekend, fueled by the strong overnight rally on US and European markets following the expansion of the euro-zone bailout fund to ?1 trillion and robust US economic growth.

The index added 10.89 points to end the week at 1,481.82, off an early high of 1,488.2 and low of 1,478.15, as gainers edged losers by 470 to 338 on strong turnover of 1.88 billion shares worth RM2.3 billion.

Trading range for the FBM KLCI was 40.08 points last week, compared with the 94.3-point range the previous week caused by the sharp intra-day dip to extreme low of 1,371, due to late programme selling from a foreign broker the previous Friday.

For the week, the FBM-EMAS Index advanced 310.41 points to 10,117.36, while the FBM-Small Cap Index climbed 318.19 points to 11,501.27, as lower liners in the construction, oil & gas and property sectors rallied to outperform the broader market.

The daily slow stochastics indicator for the FBM KLCI reissued a buy signal at the overbought zone early last week, confirming the buy signal from the oversold region on the weekly indicator.

The 14-day Relative Strength Index (RSI) indicator climbed higher to above the 60-point mark, while the 14-week RSI listed a positive reading just above 50.

Meantime, the daily Moving Average Convergence Divergence (MACD) trend indicator's signal line extended higher above the zero line to reinforce a bullish trend, while the weekly MACD signal line continued hooking up to suggest more upward momentum.

The 14-day Directional Movement Index (DMI) trend indicator will see the -DI line crossing back below the +DI line to trigger a buy signal on further strength, but the ADX line continued inching lower, confirming a trendless market.

Given the further improvement on momentum and trend indicators for the benchmark index, the local stock market should show upside resilience this week, even as short-term momentum becomes more overbought.

As such, profit-taking dips are likely to be shallow as investors should be more confident to return and bargain stocks, especially those in the construction, property and oil & gas sectors which have suffered losses in recent weeks.

Moreover, improvement on the eurozone debt situation following the decisive action taken by EU leaders to boost its rescue fund to €1 trillion as bondholders agreed to a relatively mild 50 per cent haircut on Greek debt, as well as stronger-than-expected US and Chinese economic data, should combine to boost sentiment further.

Hence, blue chips such as CIMB, Gamuda, Genting Bhd, RHB Capital and MMHE at current levels are good to accumulate for further upside potential in the medium term, while lower liner property counters like Hua Yang, Mah Sing and UOA Development should enjoy gains in the immediate term, given the strong upside bias after stock prices have been heavily and unfairly sold down in recent weeks.

On the other hand, investors should look to take profit or sell AirAsia and Supermax, since both register overbought RSI reading of above 70.

On the index, immediate resistance comes from 1,488, the 61.8per cent Fibonacci Retracement (FR) of the sell-off from the 1,597 record high of July 11 to the recent pivot low of 1,310 on September 26, matching last Friday's high.

A breakout going forward would see stronger resistance from the 100-day and 200-day moving averages at 1,495 and 1,512 respectively, being challenged, while the 76.4 per cent FR at 1,529 would act as a formidable upside barrier.

Immediate support on profit-taking dips will be at 1,454, the 50 per cent FR, with better retracement support at 1,420, the 38.2 per cent FR, followed by 1,400 and then 1,378, the 23.6 per cent FR.

The subject expressed above is based purely on technical analysis and opinions of the writer. It is not a solicitation to buy or sell.

Penang-based MNCs feeling heat of Thai floods

Some Penang-based multinational corporations with supply chains tied to Thailand have begun cutting back on production.

George Town: While the full effects of the massive floods in Thailand on Malaysian-based companies cannot be quantified yet, there appears to be mixed signals from industrialists in Penang.

While those who are not highly dependent on Thai firms for the supply of parts and components for their products - notably in the electronics and automotive sectors - seem unaffected, others with a deeply entrenched supply chain in Thailand are already feeling the heat.

Speaking to the Business Times on condition of anonymity, some Penang-based multinational corporations (MNCs) with supply chains tied to Thailand have begun cutting back on production. Others are scrambling to source alternative supplies of materials locally and elsewhere.

"The visibility of the supply chain for companies here is not known to many people and the long-term effects of the Thai floods to Penang is still not known," an industrialist said.

Malaysian American Electro-nics Industry chairman Datuk Wong Siew Hai said some members - like those in the hard disk drive industry - with high inventory levels of components and parts, may initially have a buffer and have time to work with other suppliers to meet continued demand, or grow their capacity locally.

"Given Thailand's position as a global supplier for hard disk drives, I would expect the lead-time to the end-product manufacturer to be extended," he said in an interview.

It is learnt that at least one Penang-based global electro-nics manufacturing services (EMS) provider has shut down one production line owing to a shortage of parts caused by the Thai floods.

Another EMS firm with ope-ration scattered in Penang and other Malaysian states said that it was not affected because its supply chain is concentrated in Malaysia and China.

"The situation in Thailand has minimal impact on our company as we have next to zero suppliers in Thailand," a company spokesman said.

Wong anticipates some hiring by Penang firms to occur as member companies with manufacturing presence in Thailand turn to Malaysia to grow their capacity.

"The multiplier effect on Penang is likely to spill down to small and medium industries such as machine suppliers," he noted.

Meanwhile, Penang Freight Forwarders Association president Krishnan Chelliah said: "Since the airport, seaport and access roads in Bangkok are now closed indefinitely, we are unable to assess the impact on our over 110 members yet.

"The transportation chain has definitely been crippled because of the floods and the issue will be discussed this coming week when council members of the Federation of Malaysian Freight Forwarders meet and we will have better visibility on the situation."

Glomac eyes land in Greater KL for integrated mixed projects

PETALING JAYA: Armed with a net cash position of RM361.6mil as at July 31, 2011, Glomac Bhd is on the lookout to buy small land parcels with fast turnaround and high gross development value potential in the Greater Kuala Lumpur area.

Group managing director and chief executive officer Datuk Fateh Iskandar Mohamed Mansor said negotiations were under way for some suitable sites to be developed into integrated mixed projects.

He said there were some “under-rated” sites where Glomac could use its expertise to enhance the land value through innovative infrastructure, branding, marketing and design.

“At the same time, this strategy will contribute to a solid balance sheet while keeping down the company's debt position,” he noted.

Glomac is also keen to participate in government land privatisation and is looking at some of the projects.

Based on a consistent growth in profit over the past three years, the company is confident of posting a double-digit growth in its earnings for its financial year ending April 30, 2012 (FY2012).

Glomac recorded a profit after tax of RM32mil for FY2009; RM41mil for FY2010; and RM63mil for FY2011.

“For FY2012, Glomac is looking to launch up to RM1.2bil in new projects comprising affordable housing units, medium to medium upper range of properties and commercial projects.

The developments slated for launch this year include projects in Glomac Damansara (RM250mil), Mutiara Damansara Residences (RM250mil), Glomac Utama Phase 1 (RM250mil), Glomac Cyberjaya 2 (RM100mil) and townships in Rawang, Sungai Buloh and Johor (worth a combined RM295mil).

“Having achieved RM100mil in sales for the first quarter ended July 31, Glomac is on track to achieve its sales target of RM500mil for FY2012,” he added.

The company raked in sales of RM418mil in FY11. As at July 31, it has unbilled sales of RM550mil.

Iskandar said Glomac's landbank of close to 404.68ha had an estimated GDV of RM3.8bil. The landbank will keep it busy for the next six to seven years, and he expects Glomac to undertake projects worth some RM600mil a year.

Glomac assistant general manager, group corporate communication and corporate marketing, Fara Eliza FD Mansor said the company would be unveiling its latest property projects at The Star Property Fair 2011 to be held from Nov 25 to 27 at the Kuala Lumpur Convention Centre.

The projects to be exhibited include Glomac Damansara, the company's flagship mixed development on 2.75ha fronting Jalan Damansara.

Fara said the project with a GDV of RM898mil, offered a hybrid mix of business and leisure property.

“Glomac Damansara Residences comprise two blocks of service apartments. The 356 apartments with built up of 876 sq ft to 2, 529 sq ft are priced from RM581,660, or around RM650 per sq ft. So far, 75% of the units have been sold,” she added.

Also sold are the five and eight-storey shop offices (GDV of RM54mil), and the 25-storey corporate tower office suites (GDV of RM171mil) which was sold en-bloc last year.

Glomac Damansara will also have a 16-storey office block and a boutique retail mall (with a total GDV of RM388mil) that will be launched later.

Fara added that the other projects to be showcased at the property fair will be Glomac Utama's double-storey shop offices and service apartments; Mutiara Damansara Residences, consisting of 299 units of 1,200 sq ft to 1,600 sq ft of freehold service apartment project; Sinaran@Suria Residen a gated and guarded development in Cheras and three to 41/2-storey shop offices at the RM250mil Glomac Cyberjaya 2 project.

Bursa likely to extend gains

TA Securities expects the positive sentiment globally will further help property and construction stocks to slightly recover after their recent losses.

STOCKS on Bursa Malaysia are likely to extend its gains this week, underpinned by the recent strong performance on Wall Street and news of an European plan to address Greece's debt issues.

The news are expected to bring cheer to the local market and help boost investors' appetite.

Investors will price in the stronger US and European economies as well as the reduced banking crisis risk in both continents in their investment strategy.

Wall Street held its gains from Thursday's big rally and ended with the fifth straight week of advances last week. As for Europe, it has expanded a bailout facility and recapitalise the region's biggest banks in efforts to rescue Greece.

At home, the uptrend news on the global front is expected to help push the benchmark FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) to a possible 1,524 level, the highest level recorded in 2008 before the subprime crisis.

The FBM KLCI was up 114.3 points from 1,367.52 on October 3 to end 1,481.82 last Friday. For last week, the main index was up 30.9 points, or 2.19 per cent.

Bursa Malaysia was closed on Wednesday for the Deepavali holiday.

TA Securities senior technical analyst Stephen Soo said the key index is expected to strengthen, boosted by rising appetite in riskier assets. "We foresee the positive sentiment globally will further help property and construction stocks to slightly recover after their recent losses," he added.

Despite the positive views, OSK director and research head Chris Eng warned that the market is still in defensive position and investors will remain cautious amid the uncertain global economic outlook.

"There is a possibility the market will dip if the index reaches the 1,500 level, due to selling pressure," he added.

Week-on-week, the FBM KLCI advanced 42.99 points to 1,481.82 against the previous Friday's closing of 1,438.83. Total volume declined 6.03 billion shares worth RM7.10 billion from 7.40 billion shares worth RM6.58 billion before.

Main Market turnover fell 4.67 billion units worth RM6.94 billion from 5.49 billion units worth RM6.362 billion previously.

Among stocks in focus this week are Tenaga Nasional after it announced a fourth-quarter net loss of RM453.90 million, the second consecutive quarter of losses, last Friday. Others include Tasek Corp Bhd, Cycle & Carriage Bhd and SILK Holdings Bhd.
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