15 banks shortlisted for Felda Global IPO

Felda Holdings Bhd has shortlisted 15 investment banks to undertake the listing exercise of Felda Global Ventures, says Chairman Tan Sri Abdul Samad.

"The final decision will be made this week," he told reporters after a briefing on the subsidiary's initial public offering (IPO) exercise.

It is believed four investments banks, two local and two international are required to handle the IPO which would be among the top ten listing exercise undertaken in the country.

Hua Yang 2Q net profit surges to RM13.89 million

KUALA LUMPUR: HUA YANG BHD net profit for the second quarter ended Sept 30, 2011 surged to RM13.89 million from RM4.31 million a year earlier, due mainly to steady CONSTRUCTION [] progress and better sales.

The company said on Wednesday, Oct 19 that its revenue for the quarter more than doubled to RM76.13 million from RM35.63 million in 2010.

Earnings per share jumped to 12.87 sen from 3.99 sen in 2010, while net assets per share was RM2.23.

For the six months ended Sept 30, Hua Yang’s Net profit rose to RM25.38 million from RM9.22 million in 2010, while revenue surged to RM137.88 million from RM72.85 million.

Reviewing its performance, Hua Yang said the sales achieved during the quarter under revised was 119% higher year-on-year with total unbilled sales of RM395.24 million, giving it improved earnings visibility in the remaining period of FY2012.

On its current year prospects, Hua Yang said that with the steady growth, strong demand and sales for the six months of FY2012, the company was optimistic of posting improved results for the remaining period of the year.

KLCI rebounds but regional markets stay cautious

KUALA LUMPUR: The FBM KLCI rebounded on Wednesday, Oct 19 and closed 0.72% higher as gains at select blue chips including Tenaga and Genting Malaysia.

The FBM KLCI rose 10.31 points to 1,450.25.

Gainers beat losers by 641 to 162, while 210 counters traded unchanged. Volume was 1.69 billion shares valued at RM1.21 billion.

Regional markets, however, mostly pared down their earlier gains as investors remain pessimistic over the outlook of the global economy.

Although European stocks edged higher on optimism that policymakers would take major steps at a to solve the festering Eurozone debt crisis, Asian investors became wary after Moody's cut Spain's sovereign ratings by two notches.

Also, Hong Kong's government said it expects economic growth in the territory to be affected by weaker exports, with gross domestic product anticipated to grow at lower end of its own forecast range.

At the regional markets, Hong Kong’s Hang Seng Index close 1.29% higher at 18,309.22, South Korea’s Kospi was up 0.93% to 1,855.92 and Japan’s Nikkei rose 0.35% to 8,772.54.

Meanwhile, the Shanghai Composite Index fell 0.25% to 2.377.51, Singapore’s Straits Times Index down 0.16% to 2,720.21 and Taiwan’s Taiex shed 0.08% to 7,353.37.

Among the gainers on Bursa Malaysia, HLFG added 30 sen to RM11.58, Malayan Flour Mills up 28 sen to RM7.64, MISC and Dutch Lady added 24 sen each to RM6.73 and RM19.14, PPB and Tenaga 20 sen each to RM16.70 and RM5.55, Genting Malaysia 19 sen to RM3.69, while IJM Corp and DKSH added 18 sen each to RM5.39 and RM1.72.

JCY was the most actively trade counter with 58.2 million shares done. The stock jumped 12.5 sen to 58 sen.

Other actives included Systech, HWGB, Hubline, Harvest Court, Asiapac and Tiger.

Decliners included BAT, Chin Teck, KLK, GAB, DiGi, MBM Resources, Panasonic, Parkson, Utusan and Lysaght.

Tenaga may report 2012 as full-year loss

Tenaga Nasional Bhd, Malaysia’s biggest power producer, may report next year a full-year loss for the first time in more than a decade because of rising costs.

The company this month will post a second, straight quarterly loss as its rising fuel bill is hurting margins, Chief Executive Officer Che Khalib Mohamad Noh said yesterday in an interview. The Kuala Lumpur-based utility is scheduled to report fourth-quarter earnings and 2011 annual profit on Oct. 28.

Tenaga reported in July its first quarterly loss in almost three years of RM440.2 million after having to pay higher prices for oil and distillate as state oil company Petroliam Nasional Bhd cut supplies of low cost subsidized natural gas because of maintenance work.

Tenaga may have to borrow to fund operational expenses for the first time as its cash holdings are dwindling, Che Khalib said. “We have to incur an additional cost of RM400 million every month to use the alternative fuel,” Che Khalib Mohamad Noh said. “We are crying for help. If the situation isn’t resolved, Tenaga will report a loss in 2012.”

Tenaga shares were up 0.6 per cent at RM5.38 on the Malaysian stock exchange. They have retreated 20 per cent this year, underperforming the benchmark index’s 4.9 per cent decline. The company is third-worse performing stock this year on the benchmark FTSE Bursa Malaysia KLCI Index.

The utility is set to market its 4.85 billion Islamic bonds on Oct. 24 to finance the expansion of a coal-fired power plant in Perak, north of Kuala Lumpur, he said.

JCY active, up in afternoon session

KUALA LUMPUR: JCY International Bhd shares were actively traded in the afternoon session on Wednesday, Oct 19 as the hard disk drive manufacturer was viewed by investors as less affected from the severe flooding in Thailand which had impacted other players.

At 3.20pm, JCY rose 11 sen to 56.5 sen with 42.65 million shares done.

The floods in Thailand have forced the shutdown of the facilities some of the Malaysian HDD makers with operations in that country.

An analyst with MIDF Research said while JCY’s plant located in Saraburi, Thailand was also affected, it was possible that the impact was not as significant.

“Looking at their latest quarterly result, Malaysia accounts for 76% of its revenue, while the rest are lumped together as others and individually fall below the 10% threshold of a reportable segment.

“So with the flooding in Thailand affecting HDD makers there, it could redirect some of the demand towards Malaysia based manufacturer such as JCY to fill in the gap,” he said.

Muted gains at most Asian markets

KUALA LUMPUR: The FBM KLCI remained in positive territory at the mid-day break on Wednesday, Oct 19, lifted by gains at select blue chips including the Genting group while a firmer ringgit and improvement in crude palm oil futures provided some buying support.

At 12.30pm, the KLCI was up 0.35% or 5.01 points to 1,444.95 but off the morning's best of 1,449.90. Gainers led losers by 514 to 131, while 217 counters traded unchanged. The buying was mostly on lower liners and penny stocks as reflected by the surge in volume but value was half of the turnover. Volume was 935.02 million shares valued at RM510.81 million.

The ringgit strengthened 0.73% to 3.1123 versus the US dollar; crude palm oil futures for the third month delivery rose RM24 per tonne to RM2,859, crude oil slipped 18 cents per barrel to US$88.16 while gold gained US$2.30 an ounce to US$1,660.15.

However, the gains at key regional markets were relatively muted as investor sentiment remains tepid, with conflicting news flow on the global economic health sapping confidence. Asian investors became wary after Moody's cut Spain's sovereign ratings by two notches.

Further, Hong Kong's government expects economic growth in the territory to be affected by weaker exports, with gross domestic product anticipated to grow at lower end of its own forecast range.

Financial Secretary John Tsang told reporters in Beijing late on Tuesday that exports to the United States and Europe had declined substantially in recent months, according to Reuters.

"We forecast growth of 5-6% (for 2011). I believe it will be near the lower end of the range," Tsang said when asked if there were any revisions to the official full-year GDP forecast, it said.

At the regional markets, Hong Kong’s Hang Seng Index was up 1.25% to 18,302.83, Japan’s Nikkei 225 edged up 0.26% to 8,764.60, Singapore’s Straits Times Index added 0.23% to 2,730.93 and the Shanghai Composite Index edged up 0.06% to 2,385.03. Taiwan’s Taiex fell 0.57% to 7,317.86 and South Korea’s Kospi was down 0.01% to 1,838.77.

On Bursa Malaysia, Genting Malaysia rose 18 sen to RM3.68 and GENTING BHD [] added eight sen to RM10.06 ahead of the opening of the Resorts World Casino New York City (RWNY) on Oct 28, October 2011.

Other gainers included HLFG that rose 18 sen to RM11.46, CI Holdings and Kencana 13 sen each to RM4.77 and RM2.55, Teck Guan, Petronas Dagangan and AirAsia 12 sen each to RM1.18, RM16.22 and RM3.70, while Dutch Lady and Aeon rose 10 sen each to RM19 and RM7.

Among the losers, Batu Kawan fell 30 sen to RM15, Nestle 26 sen to RM49.10, MBM Resources 19 sen to RM3, APM Automotive and Lafarge Malayan Cement 12 sen each to RM4.67 and RM7.15, Parkson 11 sen to RM5.54, Lysaght and DiGi 10 sen each to RM1.70 and RM31.80, while Hong Leong Bank lost eight sen to RM10.64.

The actives included HWGB, Asiapac, Hubline, Harvest Court, Tiger, Trinity and JCY.

Bursa 3Q net profit jumps 39.4% to RM38.61m on higher revenue

KUALA LUMPUR: BURSA MALAYSIA BHD [] net profit for the third quarter ended Sept 30, 2011 rose 39.37% to RM38.61 million from RM27.71 million a year earlier, driven mainly by higher revenue.

It said on Wednesday, Oct 19 that revenue for the quarter increased by 23.68% to RM107.31 million from RM86.76 million in 2010.

Earnings per share was 7.30 sen compared to 5.20 sen in 2010, while net assets per share was RM1.56.

For the nine months ended Sept 30, Bursa’s net profit rose to RM114.82 million from RM83.26 million in 2010, on the back of a 25% increase in revenue to RM324.47 million from RM259.14 million a year earlier.

On its prospects, Bursa said the Malaysian equity market had been adversely affected in the third quarter by the negative impact from the developments in the Eurozone and the United States.

Bursa said that going forward, market volatility was likely to persist, and there could be further downside risk to the market, with external events continuing to influence sentiment on the local bourse.

“Despite the global uncertainties, Bursa remains committed in its efforts to make the Malaysian equity and derivatives markets more attractive and vibrant.

“To this end, the group will continue to focus on infrastructure efficiency, new product proliferation, market education and opportunities for strategic alliances,” it said.

Genting Malaysia rises as it preps New York opening

KUALA LUMPUR: Genting Malaysia Bhd and Genting shares advanced on Wednesday, Oct 19 as the gaming group prepares to open the Resorts World Casino New York City (RWNY) on Oct 28, October 2011.

At 11.11am, Genting Malaysia was up 18 sen to RM3.68 with Genting gained eight sen to RM10.06.

RHB Research in a note Oct 19 said it was positive that RWNY was opening on schedule, and said it expects RWNY to contribute positively to earnings in the medium term.

The research house however said that the project cost had risen to US$580 million (from US$500 million previously), as the size of the racino had increased to include a third floor where the Central Park Events Center was.

RHB Research highlighted that it had yet to impute earnings contributions from this racino into our forecasts, but said that based on its relatively conservative estimates, this racino was expected to add about 10% p.a. to Genting Malaysia’s (GM) net profit.

“We believe that as its earnings potential become clearer to investors, this could result in earnings upgrades for the stock and valuations would therefore look more attractive.

“No change to our forecasts and our SOP-based fair value of RM3.90. Maintain Outperform,” it said.

Regional markets rise on Eurozone rescue hopes, but scepticism remains

KUALA LUMPUR: The FBM KLCI edged higher at mid-morning on Wednesday, Oct 19 as Asian markets advanced, but gains were limited as investors remained cautious over the mixed news flow emerging from Europe.

Wall Street received a jolt in the final hour of trading yesterday after the UK Guardian reported that France and Germany had agreed to increase the size of Europe's rescue package to more than EUR2 trillion ($2.7 trillion).

However, the report was almost immediately contradicted by Dow Jones Newswires, which said that European officials were still debating the size of the bailout fund and reports that an agreement has been reached to leverage it to EUR2 trillion are "totally wrong."

Asian investors were also wary after Moody's cut Spain's sovereign ratings by two notches.

The FBM KLCI was up 7.44 points to 1,447.38 at 10am, lifted by gains at select blue chips.

Gainers led losers by 420 to 58, while 133 counters traded unchanged. Volume was 437.9 million shares valued at RM211.98 million.

At the regional markets, Hong Kong’s Hang Seng Index rose 1.56% to 18,357.76, Japan’s Nikkei 225 was up 0.61% to 8,795.46, Singapore’s Straits Times Index up 0.55% to 2,739.75, the Shanghai Composite Index gained 0.44% to 2,393.95, South Korea’s Kospi up 0.28% to 1,844.07 while Taiwan’s Taiex was flat at 7.359.72.

Maybank Investment Bank Bhd head of retail research and chief chartist Lee Cheng Hooi in a note to clients Oct 19 said that due to the US markets’ firmer tone last night, the local index could be volatile today.

He said that some minor local buying activities could keep the local market slightly firmer today.

Among the top gainers at mid-morning were Batu Kawan, PPB and Airasia that rose 20 sen each to RM15.50. RM16.70 and RM3.87 respectively, KLK up 16 sen to RM20.86, IJM Corp and MMHE each to RM5.36 and RM6.10, Tradewinds 14 sen to RM8.69, Kencana and Genting Malaysia 13 sen each to RM2.55 and RM3.63, while UMS added 12 sen to RM1.74.

Asiapac was the most actively traded counter with 26.2 million shares done. The stock added 1.5 sen to 11 sen.

Other actives included Harvest Court, HWGB, IRCB, RedTone and GPRO.

Among the losers at mid-morning were Nestle, Lafarge Malayan Cement, Lysaght, Digi, Lay Horng, Cepco, Parkson and Maxis.

Fajarbaru rises on RM166.4m medical suite job

KUALA LUMPUR: Fajarbaru Builder Group Bhd shares rose on Wednesday, Oct 19 after it secured a RM166.4 million contract for the CONSTRUCTION [] of Ampang 210 Medical Suite in KL.

At 9.52am, Fajarbaru added four sen to 96 sen with 14,000 shares done.

The company said on Oct 18 that its unit Fajarbaru Builder Sdn Bhd would jointly undertake the project with Aztabina Sdn Bhd.

RHB Research in a note Oct 19 said that this was the first key contract Fajarbaru had secured in FY06/12, boosting its outstanding construction orderbook by 32% from RM524 million to RM690 million.

Assuming EBIT margin of 8-10%, the contract will fetch RM13.3 million - RM16.6 million EBIT over the construction period, said the research house.

“Forecasts maintained as we have assumed Fajarbaru to secure RM250 million worth of new jobs in FY06/12.

“Fair value is RM1.13. Maintain Outperform,” it said.

CIMB Research maintains Sell on Top Glove

KUALA LUMPUR: CIMB Equities Research maintains its Sell rating on Top Glove Corp, earnings outlook and RM3.29 target, based on a 13.05 times forward price-to-earnings.

It said on Wednesday, Oct 19 that capacity glut continues to overhang the glove sector and it could take two to three years to absorb the excess supply.

“Although Top Glove’s earnings have probably bottomed, consensus numbers imply an unachievable 49% on-quarter rise in net profit,” it said.

CIMB Research said that consensus earnings downgrades will follow. Though a turnaround is near, the share price is still ahead of its fundamentals, it added.

“We do not concur with the upbeat view on natural rubber (NR) latex price that was voiced during the surprisingly well-attended briefing. Top Glove indicated that NR latex prices could fall to RM7 a kg in three to six months, which we view as unlikely since rubber trees are approaching the wintering period (February to April) when natural rubber production halves,” it said.

The research house said even though Top Glove is deferring capacity of 1.2 billion pieces per annum  by seven months, overcapacity is still an issue. Top Glove thinks that industry supply exceeds demand by 10-20%. Assuming demand growth of 8%-10% per annum, it could take two to three years for demand to catch up with supply.

“Though a stronger ringgit is positive, we gathered that Top Glove probably booked a forex loss in September as receivables were locked in at the Augiust 2011 rate of RM2.95-RM3.10,” it said.

CIMB Research said despite Malaysia’s gas shortage, Top Glove’s capacity expansion of 6.3 billion pieces by May 2012 will not be affected. The company will use biomass as fuel, reducing its dependence on subsidised gas.

Asian markets mixed on Spain downgrade

KUALA LUMPUR: Asian markets were mixed in Wednesday's early trade as investors remained cautious following a downgrade on Spain's credit ranking.

Moody's Investors Service said late Tuesday it downgraded Spain's government bond ratings to A1 from Aa2. At 9.15am, the benchmark FTSE Bursa Malaysia KL Composite Index (FBM KLCI) was up 8.75 points to 1,448.69.

As for regional markets, Tokyo's Nikkei 225 was up 0.52% to 8,787.20 while Hong Kong's Hang Seng Index gained 1.61% to 18,367.38.

Shanghai's A index was down 0.01% to 2,383.33 while Taiwan's Taiex Index rose 0.27% to 7,379.29.

Seoul's Kospi Index gained 0.28% to 1,844.02, with Singapore's Straits Times Index gaining 0.71% to 2,744.08.

Nymex crude oil lost 10 cents to US$88.24 per barrel. Spot gold gained US$6.70 to US$1,664.55 per ounce. The ringgit was quoted at 3.116 to the US dollar.

No tax hikes for brewers

Brewery stocks Guinness Anchor Bhd and Carlsberg Brewery Malaysia Bhd were given a boost, being spared a tax hike in Budget 2012. The last time the sector was slapped with higher taxes was back in 2005, with a net increase of about 8%. Given that Malaysia’s tax on beer is now the second highest in the world, the absence of a hike this year was within market expectations.

Total industry volume sales for beer and stout fared well last year, rebounding a strong 12% after a slight contraction in 2009. Demand grew through the first six months of this year and is expected to continue expanding going into 2012, albeit at a slower pace compared with that of last year. This bodes well for the earnings outlook for both local brewers.

Steady earnings growth forecast
Carlsberg’s turnover grew 5.6% in 1H11 to RM752.7 million on the back of both volume and price increases. Net profit was up a stronger 16.5% from the previous corresponding period to RM80 million. This is after taking into account higher-than-usual advertising and promotions expenses as well as additional costs for the new bottle related to the company’s global rebranding exercise in 2Q11, which resulted in lower 2Q11 margins compared with the first three months of the year. But we expect these expenses to normalise in 2H11.

Aside from higher selling prices and volume sales, we expect the better 1H11 margins were also due in part to synergies from its acquisition of Carlsberg Singapore. Sales from the latter accounted for just under a quarter of the company’s total sales in 1H11.

Volume sales for the company’s range of premium brands, including Hoegaarden and Kronenbourg, have been registering strong growth and will remain one of its key drivers for future growth, even though the segment is still small relative to overall sales.

We estimate net profit will total RM153.3 million this year, up 15% from a year ago, equivalent to 50.1 sen per share. We expect profit to grow further to about RM157 million in 2012.

The more modest growth expectations for next year are based on the assumption of higher raw material prices such as malt barley, which would be partly offset by the 3% to 4% increase in selling prices since April 2011. After peaking in July 2008, barley prices fell to a low in September 2009 but have since rebounded strongly — now trading some 25% higher than this time last year.



Carlsberg: Attractive valuations and yields
At the prevailing price of RM6.90, Carlsberg shares are trading at fairly attractive valuations relative to other high-yielding consumer stocks of roughly 13.8 times 2011 and 13.4 times 2012.

The company had net debt of about RM50 million as at end-June. Recall that the acquisition of Carlsberg Singapore in 2009 depleted the company’s cash hoard. But in the absence of major capital expenditure going forward, we expect its cash position will rebuild on the back of steady cash flow from operations. This could translate into a gradually higher dividend payout ratio over the longer term.

Between 2003 and 2007, prior to the acquisition, the company had been paying some 109% of annual net profit, on average. The payout dropped to 35% in 2008 and 51% in 2009, before rising back to 100% in 2010. Assuming a 70% payout ratio for 2011/12, gross dividends are estimated to total 46.8 sen and 47.9 sen per share for the two years. That will earn shareholders higher-than-market average net yields of about 5.1% to 5.2% at the current share price.

Guinness: Maintains market share gains
Guinness too reported solid growth in its last financial year ended June 2011. Turnover was up 9.6% year-on-year to RM1.49 billion while net profit increased by an outsized 18.8% to RM181.4 million.

The margin expansion was attributed to higher volume sales, selling prices, improved efficiency as well as cost savings. Like Carlsberg, Guinness’ latest 4QFY11 earnings were dampened by additional costs, in this case to restructure its distribution channels. But the exercise should result in greater efficiency going forward.

The company has been doing very well over the past few years, gaining market share with its stable of brand names including Tiger, Guinness, Heineken and Anchor. It is now estimated to have roughly 59% share of the local beer and stout market, up from roughly 46% a decade back.

We forecast earnings will grow further to RM190.9 million and RM201.4 million in FY12 and FY13. At the current price, Guinness shares are trading at roughly 16.8 and 15.9 times our estimated earnings for the two years.

While its valuations are higher than Carlsberg’s, we expect the company’s dividend yields to be better, based in part on the strength of its balance sheet.

Dividend payout averaged a steady 88% from FY07 to FY11
Guinness was sitting on cash totalling almost RM180 million as at end-June, or about 60 sen per share, with zero borrowings. The strong balance sheet and expected steady earnings and cash flow from operations will ensure the continuation of its generous dividend payout policy. Over the past five years, Guinness’ dividend payout has averaged at a steady 88%.

In line with the stronger earnings, the company raised total net dividends to 54 sen per share, equivalent to a payout of 90% of profit for FY11. The stock will trade ex-entitlement for final dividends of 44 sen per share on November 11.

Assuming a similar payout going forward, net dividends are estimated at 57 and 60 sen per share in FY12 and FY13. That translates into attractive yields of 5.4% to 5.7% for shareholders at the prevailing share price of RM10.60.


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 19, 2011.

OSK Research maintains Sell on Eng Tek, FV RM1.24

KUALA LUMPUR: OSK Research is maintaining its Sell call on Eng Teknologi at a revised fair value of RM1.24 based on 0.6 times FY12 price to net tangible asset, down from 0.7 times previously.

It said on Wednesday, Oct 19 that although the share price has retraced by some 15% since its last downgrade two days ago, it believes investors will turn even more cautious as the current flood in Thailand is not showing any signs of subsiding.

“We foresee further downside risks should the flood situation persist, which could compel the bankers of TYK Capital’s privatisation offer to have second thoughts over the proposal,” it said.

On Tuesday, Engtek released an official statement on Bursa Malaysia regarding its Thailand operations amid existing floods in the Ayutthaya province.

The management has confirmed that operations in both its Rojana and Hi-Tech Industrial Park were suspended, while production in other facilities were also experiencing disruptions as their major customers in Thailand are situated in the flood-hit areas.

“The announcement did not come as a surprise as we highlighted previously that all five industrial estates in Ayutthaya have been confirmed to be inundated by water by the Thai army. Given the significant presence of most HDD component manufacturers within the flood-hit province, we continue to expect the negative developments to take its toll on the entire HDD component supply chain,” it said.

OSK Research said Thailand contributes 75% of Engtek’s sales. With a total 400-500 CNCs installed, Engtek’s two factories in the Ayutthaya province supply some 40% of its total production.

“While we believe management would attempt to mitigate any near-term production shortfall by increasing the production from its existing facilities in China, Philippines and Malaysia, we opine what is more of a concern here is that Thailand typically contributes 75% of its consolidated sales,” it said.

OSK Research said given the presence of almost all major HDD makers in the region, i.e. Western Digital, Seagate, Hitachi, and Toshiba.

The research house said due to the severity of the aftermath damage, the entire HDD supply chain is likely to be hit and we foresee downside risks not just on its Thai facilities but also its existing operations in the rest of the region. “Restoration to pre-flood production level would depend largely on how fast all the HDD component manufacturers can shift their respective production out of Thailand in the immediate term and how soon the flood in Thailand would subside in the near term,” it pointed out.

OSK Research said due to the fluidity of the situation with all of the flood-hit industrial parks sealed off by the Thai army as a precaution, the magnitude of losses suffered remains unknown at this point of time.

“Although we make no changes to our forecasts for now, we foresee a difficult 4Q11 given the widespread aftermath impact. Should the monsoon rains subside by the end of this month, realignment or replacement of machineries will take at least another two to three months and hence, we expect production to normalise only by 2Q12 in our base case scenario,” it said.

MAS will take over Firefly jets

PETALING JAYA: Firefly will continue to use its turboprop aircraft to operate short-haul services from Subang and Penang, while its jets will be taken over by Malaysia Airlines (MAS) and redeployed into MAS’ operations by Dec 4 for its short-haul premium full-service offering.

Firefly began offering jet services for connectivity to Sabah and Sarawak from the peninsula in November last year but the plan had been shelved after MAS entered into a share swap with rival AirAsia in August this year.

“The takeover of jet services is an important part of MAS group’s business realignment exercise and is prompted by the need to address network and fleet restructuring plans for short-haul jet services,” MAS Group CEO Ahmad Jauhari Yahya said in a statement.

The takeover also address the issue of continuing heavy losses incurred by the Firefly jet operations.

KLCI opens higher, but gains could be limited

KUALA LUMPUR: The FBM KLCI opened higher on Wednesday, Oct 19 in line with the positive overnight close at Wall Street, and the slight uptrend at key regional markets.

At 9.05am, the FBM KLCI added 9.09 points to 1,449.03, lifted by gains at select blue chips.

Gainers led losers by 220 to 19, while 74 counters traded unchanged.

Among the early gainers were KLK, Batu Kawan, IJM Corp, MMHE, DiGi, Sime Darby, MSM, Genting Malaysia, AirAsia and Bursa Malaysia.

Wall Street received a jolt in the final hour of trading yesterday after the UK Guardian reported that France and Germany had agreed to increase the size of Europe's rescue package to more than EUR2 trillion ($2.7 trillion).

However, the report was almost immediately contradicted by Dow Jones Newswires, which said that European officials were still debating the size of the bailout fund and reports that an agreement has been reached to leverage it to EUR2 trillion are "totally wrong."

At the Asian markets this morning, gains were limited, indicating investors remained caution over the newsflow from the US and Europe.

MBF in race against time on public share spread

Time is running out for MBF to comply with Bursa's public shareholding spread, even as Tan Sri Ninian Mogan Lourdenadin is busy snapping up shares in the open market.

Kuala Lumpur: Time is running out for MBF Holdings Bhd to comply with Bursa Malaysia's public shareholding spread, even as its major shareholder, Tan Sri Ninian Mogan Lourdenadin, is busy snapping up shares in the open market, fuelling speculation that he will make a second attempt in as many years to take the company private.

In July, the stock market requlator rejected an MBF application for more time to comply with the shareholding spread. MBF had asked for until year end to meet the requirement.

The minimum public spread in a listed entity is 25 per cent. As it stands, MBF's public spread is only about 14 per cent.

Mogan, however, isn't the only one buying MBF shares this year. Filings to the stock exchange showed that MBF's non-executive director Datuk Azizan Abdul Rahman had bought 160,000 MBF shares in the second half of this year to bring his shareholding in the company to 2.11 per cent.

Azizan is the second largest shareholder in MBF.

Mogan now owns 84.43 per cent in MBF, up from the 82.66 per cent he had on September 28. His stakes in MBF is now valued at more than RM380 million, based on the company's closing price yesterday.

Wall Street rallies on Europe, Apple falls late

NEW YORK: Stocks surged late in trading on Tuesday, Oct 18 as buyers latched onto another report of agreements to strengthen the euro zone's rescue fund to bid up stocks aggressively.

All three major indexes rose sharply after a Britain's Guardian newspaper said France and Germany will increase the euro zone's rescue fund to 2 trillion euros as part of a plan to resolve the sovereign debt crisis.

Investors and buyers piled into financial shares, which had started the day weak but gained momentum on the late news. Shares of Bank of America rose (BAC.N) 10.1 percent to $6.64 and trading volume for the Direxion Financial Bull 3X ETF (FAS.P) jumped to the highest since April 2010.

The development from Europe is "really what we had been rallying on for the past two weeks before Germany yesterday signaled that the issue wasn't quite resolved," said Larry Peruzzi, senior equity trader at Cabrera Capital Markets in Boston.

"But the direction of the market can easily reverse if we get something bad again from Europe."

Stocks may also be affected on Wednesday by Tuesday's late news from tech bellwether Apple Inc (AAPL.O).

Stock index futures sold off after the bell following weak quarterly results from Apple. Its shares lost more than 5 percent to below $400 in extended trade after the company reported a rare miss in quarterly results after sales of its flagship iPhone fell short of Wall Street expectations. The stock had closed up 0.5 percent at $422.24 during the regular session.

S&P 500 futures fell 6.3 points while Nasdaq 100 futures lost 18.75 points.

Bank of America shares on Tuesday had been lower after it reported a third-quarter profit but showed its main businesses struggled as income from lending and investment banking fell.

Goldman Sachs Group Inc (GS.N) added 5.5 percent to $102.25 after reporting a rare loss, but Goldman said it was moving to cut costs, including employee pay.

Trading picked up shortly after the Guardian report, with 3 billion shares exchanging hands in the final hour on the New York Stock Exchange, NYSE Amex and Nasdaq. A total of 8.86 billion shares traded for the day, above the year's daily average so far of about 8 billion.

"Any news out of Europe is a cue for people to jump in or get out of the market. There was a lot of short covering during the final hour," said Stephen Massocca, fund manager at Wedbush Morgan in San Francisco.

The Dow Jones industrial average .DJI ended up 180.05 points, or 1.58 percent, at 11,577.05. The Standard & Poor's 500 Index .SPX was up 24.52 points, or 2.04 percent, at 1,225.38. The Nasdaq Composite Index .IXIC was up 42.51 points, or 1.63 percent, at 2,657.43.

Shares of Yahoo Inc (YHOO.O) dropped more than 3 percent to $15.96 in extended trading after the company reported its net revenue and profit slipped in the third quarter.

But Intel Corp (INTC.O) shares rose nearly 5 percent to $24.54 after the company forecast quarterly revenue above Wall Street's expectations, defying concerns that the growing popularity of tablets and a shaky economy are eating into demand for personal computers.

The CBOE Volatility Index VIX .VIX, Wall Street's "fear gauge," was down nearly 5 percent but still remained elevated above 30.

Financial stocks were the top gainers. The KBW bank index .BKX advanced 5.6 percent.

U.S. homebuilder stocks were helped by strong homebuilder sentiment data, signaling improvement in the housing market.

Shares of KB Home (KBH.N) rose 11.6 percent to $7.02. - Reuters

Top Glove bullish on growth

KUALA LUMPUR: Top Glove Corp Bhd expects the current oversupply of rubber gloves in the global market to be absorbed over the next one to three years and is pushing ahead with its expansion plans.

“There is a 10% to 20% oversupply right now. This is due to the high demand over the past one to two years,” chairman Tan Sri Lim Wee Chai said.

“But this is a long-term business and we will continue to invest as demand for gloves is still growing at 8% to 10% every year,” he said.

He said at a media and analysts and fund managers' briefing here that Top Glove had set aside RM100mil for capital expenditure next year, mainly for research and development and marketing expenses. Top Glove is the world's largest glove manufacturer.

Top Glove intended to focus more on “market-driven” products rather than being “product-driven”, he said, noting that the company's plants were running at full capacity for high-demand products like nitrile gloves, while for the less-in-demand vinyl gloves, production was running at between 30% and 40% capacity.

Top Glove had targeted to grow its capacity to 463 production lines producing 41.55 billion gloves a year by May 2012 from the current 395 lines that could produce some 35.25 billion pieces per year, Lim said.

Top Glove made a net profit of RM26.1mil for its fourth quarter ended Aug 31, 42% lower than the RM45mil it posted a year earlier, largely due to volatile latex prices, a weaker greenback and oversupply in the industry.

The situation is looking better now with lower latex prices at RM8 to RM8.20 per kg from about RM11 per kg a few months ago coupled with a recovering greenback against the ringgit, according to Lim.

“I think it is a matter of time before latex, which made up 64% of costs in the last financial year, falls to RM7 per kg, hopefully within the next three to six months,” he said.

On the floods in Thailand, where the company sourced most of its latex needs, Lim said the floods were in the north of Bangkok and not south where most of the supply came. “It may have some effect but it will not be critical,” he said.

Lim said Top Glove hoped to grow its sales by 20% in its current financial year ending Aug 31, 2012.

Net profit margin should come in between 8% and 10% for the current financial year and beyond, he added.

For the full year ended Aug 31, Top Glove's net profit stood at RM113.1mil against RM245.2mil a year earlier on revenue of RM2.05bil compared with RM2.08bil previously.

Maxis owner billionaire Ananda Krishnan will not be investigated in M'sia

KUALA LUMPUR: The case filed against Malaysian tycoon and Maxis owner T. Ananda Krishnan by India's Central Bureau of Investigation (CBI) has no impact on Malaysia's telecommunications industry, says Deputy Information, Communications and Culture Minister Datuk Joseph Salang.

He said the Malaysian authorities would not conduct any investigation on the tycoon.

“At the moment it's only an investigation (by India's CBI). There will be no investigation on the Malaysian side as we have been very transparent in how we manage our telecommunications industry,” he said.

Salang was speaking to reporters after opening the Communications and Connectivity Futures 2011 forum on behalf of Information, Communications and Culture Minister Datuk Seri Rais Yatim.

Stocks to watch: MMHE, Boustead, CIMB, Pharmaniaga

KUALA LUMPUR: The selldown on Bursa Malaysia on Tuesday, Oct 18, in line with the regional markets, saw RM21.9 billion erased from the Malaysian stock market capitalisation, according to the stock market data.

The sharp pullback was expected to push investors to the sidelines on Wednesday, unless there was strong economic data from the US or Europe to restore confidence.

Analysts expect trading to be volatile on Wednesday with more downside pressure, if Wall Street extends its losses on Tuesday.

At Bursa Malaysia, the FBM KLCI fell 1.73% or 25.41 points to 1,439.94, weighed by losses including at PLANTATION []s and blue chip stocks. Losers hammered gainers 705 to 145 while volume was 1.36 billion shares valued at RM1.37 billion.

Sime Darby’s 25 sen decline to RM8.65, dragged the 30-stock index down by 3.47 points while CIMB’s loss of 18 sen to RM7.19 erased 3.10 points from the index. Tenaga fell 22 sen to RM5.35, giving up most of Monday’s gains, reduced the index by another 2.75 points.

On the regional front, Hong Kong’s Hang Seng Index tumbled 4.23% to 18,076.46, the Shanghai Composite Index lost 2.33% to 2,383.49, Singapore’s Straits Times Index fell 1.95% to 2,724.69, Japan’s Nikkei 225 was down 1.55% to 8,741.91, South Korea’s Kospi lost 1.41% to 1,838.90 and Taiwan’s Taiex shed 1.36% to 7,359.48.

At Bursa, stocks to watch on Wednesday are BOUSTEAD HOLDINGS BHD [], Pharmaniaga, Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE) and CIMB Group Holdings Bhd.

Boustead Holdings Bhd is seeking RM20.80 million in compensation after the Penang government decided not to approve the reclamation plans.

Boustead said the compensation amount was verified by independent consultants and it “is still in negotiation with the Penang Chief Minister and state government on the form of compensation to be paid to Boustead Holdings”.

In a separate announcement, Boustead reduced the offer price for PHARMANIAGA BHD [] shares by 5% from RM5.75 to RM5.46 under the restricted offer due to the prevailing market conditions.

It said the price of RM5.46 per Pharmaniaga share represented an attractive entry level cost into Pharmaniaga.

Boustead cited the relatively stable income stream for Pharmaniaga from the concession held by Pharmaniaga for the distribution of selected medical products to government owned hospitals and the growth prospects of the pharmaceutical industry in Malaysia.

MMHE’s unit has secured a contract for the Teluk gas development project by ExxonMobil Exploration and Production Malaysia Inc.

It said the scope of work included the CONSTRUCTION [] to commissioning of two top sides and two jackets to support the platforms.

CIMB Group Holdings Bhd’s subsidiary CIMB Thai posted net profit of 856.1 million baht (RM87.26 million) in the nine-months ended Sept 30, 2011, down 4.2% from 893.6 million baht in the previous corresponding period.

CIMB Thai, a 93.15% of CIMB Bank Bhd, reported on Tuesday, Oct 18 this was mainly due to one-off gains from the disposal of Sathorn building and certain subsidiaries in the corresponding period in 2010. “Should these items be excluded, the profit would have increased 149.2% year-on-year,” it said.