Felda to use 350,000ha land in IPO

Malaysia’s Federal Land Development Authority (FELDA) will inject 350,000 hectares of plantation land into its commercial arm’s listing which will take place by mid-2012, its chief said on Friday, in what is likely to be the country’s biggest IPO next year.

Felda Global Group’s listing, which is expected to raise between RM5 billion-RM6 billion (US$1.6 billion-US$1.9 billion), is drawing drawn wide interest at a time when appetite for initial public offerings has been hit by market volatility.

Analysts have also said the IPO could be a political landmine for the government amid criticism that it would sideline FELDA settlers, a key vote bank for Prime Minister Datuk Seri Najib Razak.

Felda Global Group managing director Datuk Sabri Ahmad declined to estimate how much the IPO would raise but said it would exclude the half million hectares of land belonging to the settlers’ cooperative.

"Tanah peneroka (settlers’ lands) are not touched at all,” Sabri told Reuters in an interview.

“The settlers’ land will continue to be their land, but we will continue to buy and process their crop.”

In addition, the co-operative would be one of the key shareholders of the listed entity, he added.

Felda Global’s listing is part of the authority’s plan to monetise its assets, after it earlier floated its sugar arm MSM Malaysia Holdings Bhd.

Prime Minister Datuk Seri Najib Razak announced FELDA Global’s listing in his recent budget speech earlier this month, saying it would create another blue-chip plantation firm and attract investors to the local bourse.

Local blogs have said the Felda Global listing would raise about RM5 billion-RM6 billion, overtaking oilfield services provider Bumi Armada’s US$858 million IPO earlier.

Sabri, a palm oil industry veteran, said Felda Global Group aimed to become a global agribusiness firms similar to the likes of US based Archer-Daniels-Midland Co , Bunge Ltd and Cargill Inc .

Sabri said the proceeds from the IPO would be used to expand Felda Global’s core business in Southeast Asia, which include cultivating and processing oil palm, rubber and sugar cane.

“We will later look at Africa and Brazil but we will focus on Southeast Asia first,” he said.

Local media said the selection of investment banks for the IPO was ongoing.

Sabri declined to comment on the bank selection process. He said Felda Global would be among the ten largest companies listed on the Malaysian stock exchange .

At present, the 10th largest company in Malaysia is power producer Tenaga Nasional Bhd with a market value of about US$9.6 billion. - Reuters

UOA Development shares extend rebound

KUALA LUMPUR: Shares in UOA Development Bhd have begun to recover after slumping up to 55% from its initial public offering price.

Investor interest has been gaining momentum in the last week as heavy trade buoyed the stock, which saw its volume peak at 39.9 million shares last Thursday.

UOA Development re-emerged on the top actives list yesterday, and was the fifth most actively traded stock with 35.43 million shares changing hands. It added 19 sen or 12.6% to close at RM1.70 yesterday.

“The stock sank due to the broader decline in the equity market. Property stocks tend to be hit the hardest as they have a higher beta and are more sensitive [to changes in the market],” an analyst with Affin Investment Bank told The Edge Financial Daily.

The stock, which listed on the Main Market on June 8, had plunged to a low of RM1.16 at end-September following months of steady decline. While the stock has since rebounded 46.6% from its lows, its current price is still 34.6% lower than its IPO price of RM2.60.

Affin Investment has maintained its “buy” call and target price of RM2.07 for the stock, a 20% discount to its revalued net asset value (RNAV).

“UOA Development may have been harder hit (relative to its peers in the industry) as there is a common misconception that the company has a heavy reliance on its Bangsar South development,” said the analyst.

According to the research house, the company currently has six projects under development across Kepong, Bangsar South, Segambut, Setapak and the KLCC area.

“Bangsar South does provide strong support to its earnings and sales though the company has several standalone projects too,” said the analyst.


Together, these projects have an estimated gross development value of RM2.07 billion. The company recently entered into a sale and purchase agreement to acquire a 9.8-acre (3.97ha) parcel of land in Kepong for RM72.8 million.

“We are neutral on the proposed acquisition as we think the acquisition price of RM170 psf is reasonable, and we believe there is a ready demand for new residential properties in the Kepong locality,” said Affin in a report issued earlier this week.

The company had gross cash and equivalents of RM368.37 million, with minimal borrowings of RM20.88 million as at end-June.

Director David Khor told the media that the recent purchase was part of five or six projects planned for next year.

The company recorded RM533 million in sales for 1HFY11, as it saw a higher contribution from its residential segment than its commercial segment. Contribution from its residential segment rose to 59% from 25%.

This article appeared in The Edge Financial Daily, October 21, 2011.

REITs attractive in turbulent market

KUALA LUMPUR: As market volatility drive investors toward defensive stocks, real estate investment trusts (REITs) have come under renewed interest as investors look to reduce risk of capital loss and seek stable returns.

Among the Malaysian REITs that have seen better days since the global market selldown in early August are Sunway REIT (SunREIT), Axis REIT and CapitaMalls Malaysia Trust (CMMT).

The three REITs have seen higher volumes traded since late July with their respective unit prices hitting their peak in August, while still maintaining high level of interests recently.

This appears to coincide with the weak and volatile sentiment in markets worldwide that drove investors to the sidelines.

Yesterday, CMMT’s share price closed at RM1.30 (RM1.95 billion market cap), up from about RM1.02 in the beginning of the year. CMMT is a purely retail properties-based REIT while SunREIT’s portfolio comprises retail, hospitality and office properties.

SunREIT and Axis REIT closed yesterday at RM1.14 and RM2.46, respectively, giving them a market cap of RM3.07 billion and RM924.7 million. The former had gained about 10.7% year-to-date (YTD) while Axis was up about 3.8% YTD.

At yesterday’s prices, CMMT and Axis were traded at about 6% and 7.1% annualised yield for FY11 ending Dec 31, while SunREIT was priced at 5.8% historical yield for FY11 ended June 30.

Nevertheless, not all REITs have fared well, with some registering a drop in their unit prices YTD. While lower unit prices could mean higher dividend yield, note that some have returned flat or lower dividend payments.

Hektar REIT, which owns several small malls, saw its unit price falling 6.7% YTD to close at RM1.26 yesterday. While its annualised dividend yield was widened to 7.93% for FY11 ending Dec 31, its dividend payment for 1HFY11 was flat at five sen per unit.

The unit price of hospital-backed REIT Al Aqar KPJ REIT meanwhile has also fallen about 4.5% YTD to RM1.07 yesterday. The REIT recently distributed 5.17 sen as the first income distribution for FY11 ending Dec 31, despite earlier proposing to pay 3.3 sen.

UOA REIT, which owns several office blocks, had hit a six-month high of RM1.48 on July 26 before market pressures pushed down its prices to RM1.33 yesterday, falling about 11.3% YTD. UOA’s 1HFY11 dividend has dropped to 4.89 sen (annualised yield of 7.4%) from 5.15 sen previously.

Analysts stress that the two most important factors to consider when evaluating the prospects of a REIT are the property segment it occupies and its proposed expansion plan to grow value and dividend returns.

REITs backed by office properties are currently not the flavour of the month due to the oversupply of office spaces and consequently, an expected pressure on earnings growth.

Instead, many analysts prefer retail REITs particularly those that own quality retail malls in good locations.

Although retail REITs are still relatively attractive, analysts warn that this segment could in the longer term face higher supply and increased competition for tenants.

“Retail spaces should see some incoming supply but it will still be a better bet than office REITs,” said a property analyst.

Axis REIT has also been featured as analysts’ top picks for REITs who like its mix of office and industrial real estate.

“Aside from the industrial properties which we like, Axis REIT is secured by strong tenants and have an aggressive expansion plan,” said the analyst.

Maybank IB Research analyst Wong Wei Sum noted that some REITs are currently looking attractive due to their more stable income stream and dividend yield at an average of 6% to 7%.

Nevertheless, as REITs return to focus, a fund manager pointed out that the increased interest can mostly be attributed to funds but not retail investors.

“Retail investors largely lack an understanding of REITs but REITs is quite useful to have in your portfolio when the market is unpredictable,” he said.

This article appeared in The Edge Financial Daily, October 21, 2011.

BAT’s profit down slightly for 9MFY11

PETALING JAYA: British American Tobacco (M) Bhd (BAT) recorded slightly lower net earnings for the nine-month period ended Sept 30, 2011 at RM538.97 million, down by RM9.42 million from RM548.39 million during the same period last year. Revenue, however, increased to RM3.14 billion from RM3 billion last year.

According to the announcement posted on Bursa Malaysia’s website yesterday, the lower profit is believed to be due to its higher cost of sales of RM2.02 billion or 64.5% of its revenue, up from RM1.87 billion or 62.1% of the group’s total revenue during the corresponding period last year. Profit margin was lower during the period at 17.2% from 18.2% previously.

Gross profit decreased by 2% during 9MFY11 to RM1.12 billion from RM1.14 billion recorded during the same period last year. This decline was attributed to the lower volume and loss of margin from the 14-stick pack, partially offset by higher net pricing and increased contract manufacturing volumes. Operating expenses were lower at RM376.3 million from RM395.4 million previously.

“During the period, the group changed its distribution model from company-owned distribution to exclusive third party distributorships for three of its biggest areas; the Klang Valley, Penang and Johor Bahru. This decision resulted in organisational restructuring which includes a voluntary separation scheme (VSS) and reorganisation of certain employees.

The financial impact of RM12 million as a result of this organisational restructuring has been recognised in 3Q11,” BAT stated.

The group has managed to increase its market share to 60.6% of the total cigarette market up to August this year, which is an increase of 0.6% compared with the same period last year.

In August alone, the group’s market share stood at 62% of the total cigarette market, up from 58.7% in January 2011, due to stronger enforcement by the authorities to curb sub-value for money cigarettes selling at lower than the government mandated minimum price.

“Dunhill, the largest cigarette brand in the market, supported by the launch of its capsule products, was the key driver behind the group’s performance, growing by 0.8 percentage points compared with the same period last year to register a market share of 44.1% for year-to-date August 2011,” the group stated.

Despite the lower net earnings in 9MFY11, the group said its profit outlook for 2011 has improved against the previous quarter as no excise duty hike was announced at the tabling of Budget 2012. Analysts initially expected the government to increase the duty for cigarettes and other tobacco products next year, in order to reduce its fiscal deficit.

“However, the prevailing high incidence of illicit cigarette trade and pricing activities of certain sub-value for money brands selling below the government mandated minimum price remain a concern. The support of the government in addressing this concern is vital,” BAT said.

Earnings per share decreased to RM1.89 per share from RM1.92 during the corresponding period last year. However, the board of directors has declared a third interim dividend of 60 sen per share, tax exempt under the single-tier tax system, amounting to RM171.3 million in respect of FY11 ending Dec 31. For 9MFY11, total dividends proposed/declared amounted to RM2.10 per share compared with RM1.77 previously.

BAT’s share price closed flat yesterday from Tuesday’s closing price of RM43.60. It has lost some 4.17% of its value since Jan 3, 2011 when it was traded at RM45.49. It touched its

year-to-date low at RM42.98 on Sept 23, and has since increased by 1.44% to yesterday’s closing price.

This article appeared in The Edge Financial Daily, October 21, 2011.

Rubber glove stocks rally on lower latex prices

KUALA LUMPUR: Investors flocked to rubber glove counters yesterday as the FBM KLCI continued to slide on weakening global economic sentiments.

The bellwether FBM KLCI index lost 9.07 points to close at 1,441.18 points, but rubber glove manufacturers bucked the trend and were among the top gainers on the local market yesterday.

Supermax Corp Bhd strengthened 9% or 27 sen to RM3.22 while Latexx Partners Bhd and Adventa Bhd gained 14 sen each to RM1.63 and RM1.67 respectively.

Top Glove Corp Bhd and Hartalega Holdings Bhd added one sen each to RM4.13 and RM5.51 respectively while Kossan Rubber Industries Bhd moved up eight sen to RM2.80.

Investors flocked to these counters as headwinds came to an end with latex prices falling from the all-time high of RM10.93 per kg in April to close at RM7.99 per kg yesterday.

Analysts also noted that the strengthening greenback against most currencies and softening supply have brought glove makers back in favour. The ringgit weakened to 3.129 yesterday against the US dollar from 2.939 seen on July 27.

Given the improving factors, glove makers are expecting better profitability moving forward.

Top Glove announced on Tuesday that it is expecting 20% revenue growth for FY12 ending Aug 31 on the back of growing demand and new capacity. For FY11, Top Glove’s net profit fell 54% to RM115.2 million, dragged down by high latex prices and the strong dollar.

Top Glove is currently adding new production lines that would increase its total capacity to 42 billion gloves per annum. Its chairman Tan Sri Lim Wee Chai had forecast latex prices falling to RM7 per kg in the next three to six months, depending on weather conditions.

Lim’s view is echoed by Supermax executive chairman and group managing director Datuk Seri Stanley Thai who said latex prices are expected to retreat further to between RM6 and RM6.50 per kg in 1QFY12.

Thai said global demand and consumption would continue to grow next year at between 8% and 12% per annum, considering gloves are recession-proof as they are used in the healthcare sector.

An analyst noted that investors view rubber glove stocks as defensive counters during bearish market conditions.

“Whether in times of recession or not, the healthcare sector will always have demand for gloves. As such, investors flock to these counters especially given the lack of opportunities in the market,” said OSK Research analyst Jason Yap.

Based on Bloomberg data, Hartalega had 10 “buy” calls and one “neutral” call with a median target price of RM6.98. There were no “sell” recommendations on the stock.

Top Glove had nine “sell”, eight “neutral” and four “buy” calls, with a median target price of RM4.02. Kossan had a median price of RM3.26 with seven “buy” and eight “neutral” recommendations.

Supermax had four “buys”, two “sells” and six “neutrals” with a median target price of RM3.49. Adventa attracted one “buy” and “sell” each and two “neutral” calls, with a median price of RM1.64.

This article appeared in The Edge Financial Daily, October 21, 2011.

Kencana expanding its yard capacity

Kencana Petroleum Bhd (Oct 20, RM2.55)

Maintain buy at RM2.51 with fair value of RM3.54: We maintain our “buy” call on Kencana Petroleum with an unchanged fair value of RM3.54, pegged to a CY12 price-earnings ratio (PER) of 22 times to the merged Kencana-SapuraCrest Petroleum Bhd earnings.

The Edge Financial Daily reported that Kencana is in talks with unidentified parties to acquire over 130 acres of land beside its main fabrication yard in Lumut, Perak. One of its neighbours is Lumut Maritime Terminal Sdn Bhd, which is jointly-owned by Integrax Bhd and the Perak government.

Kencana’s fabrication yard currently measures 192 acres. This means that the yard could be potentially increased by 68% to 322 acres. But this will still be smaller than Malaysia Marine and Heavy Engineering Sdn Bhd’s combined yard space of 502 acres, including the proposed acquisition of Sime Darby’s 130-acre yard in Pasir Gudang.

Assuming land acquisition at RM20 psf, the entire cost could easily reach RM100 million, which is the guidance from management on Kencana’s capital expenditure programme. After the merger with SapCrest, this could mean that the combined net gearing could reach one times.

The purpose of the land expansion is to create depth in the group’s fabrication capability and enable a streamlined process which will lead to efficiencies of scale. But the group’s existing yard is only 50% to 60% utilised based on the group’s current order book. This means that Kencana is confident of securing significant fresh orders by early next year.

Kencana is said to be in talks with unidentified parties to acquire
over 130 acres beside its main fabrication yard in Lumut.

We still view the group’s order book prospects as bright, given Petroliam Nasional Bhd’s spending programme of RM300 billion over the next five years, which includes enhanced oil recovery and marginal field jobs. Among its many domestic

developments, Petronas’ RM15 billion fast-track project to develop gas reserves from a cluster of fields in the North Malay basin, off Peninsular Malaysia, is expected to translate into another round of fresh contracts soon.

Oil and gas online new portal Upstream recently reported that Petronas is negotiating with Kencana and SapCrest to fabricate and install two wellhead platforms for the Bunga Dahlia and Teratai fields, connected to nine fields in Blocks PM301 and PM302 and in the Bergading contract area.

Separately, we understand that Petronas Carigali Sdn Bhd could be opening up for tender three central processing platform projects, each worth over RM1 billion, for the Dulang, Semarang and Bokor oil fields.

The stock currently trades at an attractive CY12F PER of 17 times, below its 2007 peak of 22 times. — AmResearch, Oct 20

Slow construction progress to hurt Ann Joo’s earnings

Ann Joo Resources Bhd (Oct 20, RM2.11)

Maintain neutral at RM2.12 with target price of RM2.16: Ann Joo Resources is expected to announce its 3QFY11 results in November. We are expecting it to record lower 3QFY11 net profit by 7% to 10% against its 2QFY11 net profit of RM35.5 million.

This is due to:

i) higher input costs aggravated by a weakened ringgit against the US dollar and an increase in scrap prices by 27% year-on-year (y-o-y ) during the quarter;
ii) slower revenue growth attributed to weak domestic demand following slower construction activities during Ramadan and Hari Raya Aidilfitri.

Ann Joo’s domestic market contributes roughly 60% of its top line with the remaining 40% from the export market. We believe Ann Joo’s export market rebounded in 3QFY11 as long steel demand resumed after the political unrest in the Middle East and North Africa and post-Japan earthquake. Due to Ramadan and Hari Raya, domestic sales are unlikely to be higher in 3QFY11.

Management has hinted that the RM650 million blast furnace project is likely to take off next year instead of this year. This has no impact on our projections as we will not impute any contribution until the blast furnace begins production.

We reaffirm our expectation that local steelmakers’ exports will continue to be weak for the rest of this year due to mounting concerns over the global headwinds which will affect top line growth and margins. Billet and steel bar prices continue to fall. Billet prices have fallen 4.3% and steel bars by 3.4% in the last two weeks alone. Billet is now US$667.50 (RM2,090) per tonne and bars US$705.

We would not be surprised if Ann Joo, one of the country’s major steel players, sees weak earnings in 4QFY11 due to the decline in prices and demand.

At this juncture, we are maintaining our “neutral” recommendation with a target price of RM2.16 pending the announcement of its 3QFY11 results. We set Ann Joo’s target price by pegging its FY12F earnings per share of 36 sen to a price-earnings ratio of six times, which is one standard deviation below its five-year average PER. — MIDF Research, Oct 20

Sunny days ahead for Sunway

Sunway Bhd (Oct 20, RM2.26)

Maintain buy at RM2.30 with fair value of RM3.31: While investors are generally positive on the company’s prospects, the main concern is uncertain macro outlook for the economy and the property sector.

Sunway expects the property market to soften over the next six months but it believes that the accommodating interest rate environment and demographic factors will continue to sustain fairly good demand.

With the Sunway City-Sunway Holdings merger completed in late August, Sunway is still in the process of integrating the group’s businesses, which it expects to complete by 2012. We gather that there are several projects in the pipeline involving collaboration between its property development and construction divisions. We believe it should reap cost synergies and value add for the propery division.

Based on management’s guidance, we are trimming our earnings forecast for FY11 by 4.4%, taking into account the one-off merger cost of about RM20 million and the higher finance cost arising from the RM900 million loan taken to finance the cash portion of the merger.

Sunway expects 2HFY11 earnings to be stronger than in 1HFY11, fuelled by higher progress billings from its property development division and higher revenue recognition by its construction division.

We maintain our “buy” recommendation on Sunway. It is our top pick among mid- to big-cap property companies, due to its attractive valuation and relatively defensive earnings from its property investment segment. Adding to the stock’s appeal is the strong order book replenishment in its construction division. — OSK Research, Oct 20

Daibochi Plastic’s earnings dip 5.8%

KUALA LUMPUR: Daibochi Plastic and Packaging Industry Bhd’s net profit fell 5.8% to RM4.54 million in the third quarter ended Sept 30, 2011 from RM4.82 million a year ago mainly due to a lower contribution from the property segment.

It said on Friday, Oct 21 this was in line with the lower percentage of completion recognised for the current reporting period as compared to a year ago.

Daibochi said its revenue declined 5.2% to RM67.66 million from RM71.42 million mainly due to the reduction in the sales in the packaging segment. Earnings per share were lower at 6.04 sen compared with 6.40 sen. It declared an interim dividend of 3.0 sen per share.

For the nine-month period, earnings rose nearly 1% to RM14.16 million from RM14.03 million in the previous corresponding period.

However, the group’s profit before tax of RM18.00 million decreased by 1.9% from RM18.36 million due to a decline in the packaging segment. Profit from the property segment more than doubled to RM2.96 million from RM1.16 million.

Revenue rose 8.4% to RM208.52 million from RM192.28 million due to increased sales in both the packaging and property development segments.

Maxis in landmark 3G network sharing with U Mobile

KUALA LUMPUR: Maxis Bhd is providing its 3G radio access network to U Mobile Sdn Bhd under the country’s first landmark network sharing and alliance agreement for an initial period of 10 years.

The companies said in a joint statement on Friday, Oct 21 this arrangement also included long-term evolution (LTE) sharing, depending on the availability of the spectrum and TECHNOLOGY [].

Maxis and U Mobile said the collaboration was a milestone in the local telecommunications industry in the sharing of active telco systems and operating frequency spectrum.

They added the collaboration extended beyond the existing physical infrastructure sharing which has been practised for long time between operators in the industry.

Maxis said the collaboration would provide it with a significant new source of revenue and also enhance the utilisation of its network in areas which were currently underused.

Maxis chief executive officer, Sandip Das said: “As an industry leader in the country, this collaboration is significant for Maxis as it reflects our commitment to promote non-duplication of infrastructure.

“Active sharing results in greater cost savings which in turn translates to increased direct revenue for both companies. More importantly it allows us to focus on providing innovative services and giving more value to customers, while having the benefit of doing all these in a more environmentally friendly manner,” he said.

Sandip said over 54% of Maxis’ base stations sites was shared with other operators.

As for U Mobile, this collaboration enabled it to speed up its 3G network rollout by four to five times while achieving significant cost-savings through network sharing with Maxis.

However, the shared locations would exclude urban market centres, such as Klang Valley, Penang, Johor Bahru and Ipoh, where U Mobile is committed to continue providing high speed mobile broadband services.

U Mobile chief executive officer Dr Kaizad B. Heerjee said this active radio access network with Maxis set a new benchmark in the industry.

“This mutually beneficial partnership with Maxis will accelerate the expansion of our current 3G footprint to more than 4,000 3G sites in Malaysia by early-2013,” he said.

Proton, China’s Hawtai plan tie-up for product devt

KUALA LUMPUR: PROTON HOLDINGS BHD [] plans to collaborate with China’s Hawtai Motor Group to set up a joint venture (JV) company there as part of Proton’s strategy to make China as one of its major manufacturing hub, especially for left-hand-drive vehicles.

Proton said on Friday, Oct 21 said its unit, Proton Marketing Sdn Bhd, had signed the memorandum of understanding to invest in product development and vendor sourcing. It would also look into joint designing and development cost sharing.

“The JV will also be responsible for vendor sourcing and component development work with local Chinese vendors. This will allow Proton to tap into the competitive cost base vendors in China and explore the potential of cross-supplying components from local Malaysian vendors to China and vice-versa,” it said.

The MoU was signed between Proton group managing director, Datuk Seri Syed Zainal Abidin Syed Mohamed Tahir and Hawtai executive president Hou Haijing. The signing was witnessed by Prime Minister Datuk Seri Najib Tun Razak, China senior government officials in Nanning.

Proton said the collaboration would be for 10 years once the definitive agreement was signed.

“The MoU and potential of a long term relationship with Hawtai is in line with efforts to establish China as one of Proton's major manufacturing hubs especially for left-hand-drive vehicles,” it said.

Dayang unit secures contract extension from Murphy

KUALA LUMPUR: DAYANG ENTERPRISE HOLDINGS BHD []’s unit has secured a contract extension from Muphy Sabah Oil Co Ltd and Murphy Sarawak Oil Co Ltd to provide topside major maintenance services for Murphy Production Operations.

In a filing Friday, Oct 21, Dayang said the value of the contract secured by its unit Dayang Enterprise Sdn Bhd ranged approximately RM50 million to RM100 million over the duration of the contract.

It said the contract would be effective from Nov 19, 2011 until Nov 18, 2012.

Dayang however said that the contract was a "call-up contract" made up of work orders, which would be awarded at the discretion of Murphy during the duration of the contract.

It said the value of the work orders were based on the contract schedule of rates.

Dayang said the contract extension was expected to contribute positively to its for the financial year ending Dec 31, 2011 and the subsequent financial periods within the duration of the contract extension.

Tenaga plans RM5b Islamic debt notes for Manjung plant

KUALA LUMPUR: TENAGA NASIONAL BHD [] has proposed to issue RM5 billion in Islamic debt notes to finance the development of the 1,010 MW coal fired power plant in Manjung, Perak.

The utility giant said on Friday, Oct 21 it would establish an Islamic securities programme of RM5.0 billion in nominal value through an independent special purpose company, Manjung Island Energy Bhd.

“The proposed Islamic securities programme will have a tenure of 28 years from the date of first issue, which is expected to be in November 2011,” it said.

Tenaga said the proceeds would be used to purchase certain Shariah-compliant leasable assets from TNB Janamanjung Sdn Bhd, a unit of Tenaga.

SILK unit gets RM23.5m contract extension from Carigali

KUALA LUMPUR: SILK Holdings Bhd’s unit Jasa Merin (Malaysia) Sdn Bhd has been awarded a contract extension worth RM23.5 million by Petronas Carigali Sdn Bhd to provide one Anchor Handling Tug Supply Vessel.

In a filing on Friday, Oct 21, SILK said the primary three-year contract had been extended for a further period of 12 months commencing 4 October 2011.

It said the contract extension was expected to contribute positively to its earnings for the financial year ending July 31, 2012.

Melewar Industrial Group plans rights issue to raise RM27.4m

KUALA LUMPUR: MELEWAR INDUSTRIAL GROUP BHD [] has proposed a two-call rights issue of up to 151.17 million rights shares to raise RM27.46 million.

It said on Friday, Oct 21 the rights issue would be at an indicative issue price of RM1 per rights share on the basis of two rights shares for every three existing shares held on an entitlement date to be determined later.

However, its substantial shareholders Melewar Equities (BVI) and Melewar Khyra Sdn Bhd were seeking an exemption from undertaking a mandatory take-over offer due to the increase in their interests in the voting shares following the rights issue.

Melewar Industrial Group said the proposed rights issue was the most appropriate to raise funds while potentially enhancing the company's capital base.

It said the corporate exercise would recapitalise the shareholders’ equity base and enable the group to raise the necessary funds to meet its working capital requirements.

The company would also be able to raise funds without incurring interest expenses as compared to bank borrowings.

Based on the indicative issue price of RM1, the indicative first call of 50 sen per rights share, the theoretical ex-rights price of the shares was 52 sen, a discount of 3.85% to the five-day weighted average market price of the shares of 54 sen.

Tanjung Offshore gets Carigali contract worth RM27m

KUALA LUMPUR: TANJUNG OFFSHORE BHD [] has been awarded a contract worth RM27 million by Petronas Carigali Sdn Bhd for the provision of three units of offshore support vessels (OSVs) for up to two primary years.

In a statement Friday, Oct 21, Tanjung said its unit Offshore Services Sdn Bhd had been awarded the contract on Oct 20.

It said the contract for the three units of OSVs was for a primary period of between three months to two years effective October and November 2011, respectively.

“In the event the contract is renewed during the option period, the contract charters will be determined at the then charter rate,” it said.

Tanjung said the contract was expected to contribute positively to its earnings for the financial years ending Dec 31, 2011 to Dec 31, 2013.

KLCI plunges 70 pts due to trades keyed by broker

KUALA LUMPUR: Trades keyed in on select FBM KLCI stocks by a broker led to the index plunging 70 points late in the afternoon session on Friday, Oct 21.

However, the index recovered and closed 0.16% or 2.35 points lower at 1,438.83, weighed by losses at select blue chips.

An official from Bursa Malaysia Securities Bhd in an e-mailed statement confirmed that the drop of the index at 4.41pm on Friday was due to trades keyed in by the said broker.

Among the stocks that fell steeply before paring down losses were KLK, DiGi and PPB.

On Bursa Malaysia, gainers edged losers by 366 to 323, while 278 counters traded unchanged. Volume was 1.25 billion shares valued at RM1.09 billion.


Regional markets closed mixed, as most pared down losses and some even closed in positive territory, while European shares rose on hopes decisions to resolve the region's debt crisis would emerge from meetings held by European leaders.

The Shanghai Composite index closed 0.60% lower at 2,317.28 and Japan's Nikkei 225 shed 0.04% to 8,678.89.

Meanwhile, South Korea's Kospi rose 1.84% to 1,838.38, Singapore's Straits Index gained 0.68% to 2,712.41 and Hong Kong's Hang Seng edged up 0.24% to 18,025.72.

Among the major losers on Bursa Malaysia, Genting PLANTATION []s fell 28 sen to RM7.30, Genting down 25 sen to RM9.75, AIC 19 sen to RM1.13, MAHB 18 sen to RM5.52, Parkson 14 sen to RM5.36, HLFG and Malayan Flour Mills down 12 sen each to RM11.28 and RM7.33, UOA Development 11 sen to RM1.59, PPB 10 sen to RM16.70 and Tenaga nine sen to RM5.46.

Gainers included BAT that rose 84 sen to RM44.44, Tasek 25 sen to RM7.80, CMSB 17 sen to RM2.09, UMS 15 sen to RM1.78, Faber 14 sen to RM1.74, Fiamma 13.5 sen to RM1.13, while BLD Plantations and Cocoaland added 12 sen each to RM6.32 and RM2.05.

The actives included TMS, IRCB, GPRO, Harvest Court, MAA and Zelan.

Few Malaysia sectors to gain from Thai flood

OSK Research believes that certain sectors in Malaysia would benefit from the destruction that has followed the severe flooding in Thailand.

The worst flooding in 50 years in Thailand starting from end-July, has so far struck 62 of the country's 76 province in the north, northeast and central region.

In a research note today, OSK Research said as the situation prolongs in Bangkok, tourists and medical tourists may cancel travel plans and instead seek alternative destinations, such as Malaysia.

"We see both AirAsia and Malaysia Airlines benefiting from the diversion of tourist destinations. Malaysia Airports Holdings Bhd could also benefit from higher passenger numbers should tourists divert to Malaysian destinations.

"If their experience in Malaysia is good, this could boost the longer term attractiveness of the country, even after the floods subside in Thailand," it said.

Meanwhile, OSK Research said Malaysian consumer companies would get a short term lift, as they would also be asked to take up the slack in food and beverage production, as Thai factories take some time to resume production.

Additionally, it said the technology and automotive sectors would also benefit, following the extensive damage to their Thai facilities, with total reconstruction efforts estimated at between RM10.1 billion and RM17.2 billion.

"For the long term, both sectors are seen to benefit as potential investors would consider Malaysia, as an alternative investment destination given that the country experiences fewer natural disasters," it added.

The research firm said companies offering services to set up new technology-based manufacturing plants may also reap benefits over the longer term.

Notion rises on possible new contracts

Shares of Malaysian hard disk drive components maker Notion Vtec Bhd rose as much as 3.8 percent on Friday on hopes that the disruption of supply caused by Thai floods could boost demand for its products.

The company makes most of its components in Malaysia.

“We understand the impact of the flood is minimal on Notion VTec because its Thailand plant contributes less than three percent of group revenue,” HwangDBS Vickers Research said in a recent note.

“This might be an opportunity for Notion to gain new contracts from multinational companies in Thailand which supply chain has been affected.”

Notion shares were trading up 3.8 percent at RM1.65 each at 11:06 am compared to the broader market’s 0.1 percent fall. -- Reuters

Energy Commission explains bidding process for Tanjung Bin plant

KUALA LUMPUR: The Energy Commission said the bidding process for the 1,000 MW coal-fired power plant in Tanjung Bin, Johor, had to be carried out five years ahead of the commercial operations in 2016 due to the large scale of the plant.

It said on Friday, Oct 21 the development and CONSTRUCTION [] of the power plant required a minimum of five years on a brownfield site and seven years on a greenfield site.

“Greenfield development will require a longer period to undertake the full environmental impact assessment, detailed site identification and assessment including public consultation,” it said in a statement.

Other factors were the site preparation, reclamation and soil investigation and the construction of new transmission and interconnection facilities, coal handling and other common facilities, it said.

The commission had sought to clarify DAP Member of Parliament for Petaling Jaya Utara, Tony Pua’s statement on the project, which had appeared in the local newspapers.

“Based on the projected economic growth, failure to award such a project on time to achieve commercial operation in early 2016 will result in potential brownouts in the country. Hence, the brownfield site option was chosen for the bidding process,” it said.

The project to develop and operate the plant was awarded to Malakoff Corporation Bhd’s subsidiary Transpool Sdn Bhd.

The commission said there was a competitive restricted bidding process which was held from Nov 15, 2010 to April 15, 2011. The project was crucial to meet Peninsular Malaysia’s power demand in 2016 after the submarine cable plan lining to the Bakun hydroelectric project was cancelled.

“The evaluation was conducted solely based on the technical and commercial aspects of the bid which, among other, include the proposed tariff for the entire duration of the 25-year concession,” it said.

It added the tariff and concession period had already been determined through the competitive bidding process.

WCT advances on land purchase, strong order book

KUALA LUMPUR: Share of WCT BHD [] rose to a high of RM2.46 on Friday, Oct 21 as analysts were positive on the outlook for the company following its 468-acre acquisition in Rawang, Selangor and its strong order book.

At 3.23pm, it was up seven sen to RM2.40. There were 3.04 million shares done at prices ranging from RM2.34 to RM2.46

WCT had has acquired the 468 acres in Rawang for RM38.4 million, which UOB Kay Hian Malaysia Research said implied land cost of RM1.88 psf, which was deemed fair even if converted to residential title assuming a 15%-20% premium.

The research house said the site would be for township development, focusing on affordable houses. It said the site could be next to the North South Expressway and about 10km north of the Rawang toll exit.

UOB Kay Hian Research said this acquisition would fit into WCT’s plan to expand its landbank and tap on the mass affordable homes.

It said the estimated gross development value (GDV) and product mix are too early to determine but judging from the relatively low land cost, it expected that the management was not in a hurry to roll out the development.

“WCT’s existing CONSTRUCTION [] orderbook stands at RM2.4 billion with a tender book of RM4 billion, consisting of two highways in Oman (RM2 billion), a five-star hotel in Bahrain (RM1 billion) and the remainder RM1 billion comes from domestic tenders.

“So far, WCT has won RM115 million worth of earthwork job for Vale, and we understand there is still RM800 million to RM900 million worth of earthwork contracts for the first 3,000 acres of land. Last but not least, WCT has two on-going letters of intent, namely, the Sabah Hospital (RM200 million) and KK Dam (RM2.8 billion),” it said.

UOB Kay Hian Research said there were no changes to its net profit forecasts of RM160 million and RM184 million for FY11 and FY12 respectively.

PNB buys more than 3m S P Setia shares

KUALA LUMPUR: Permodalan Nasional Bhd, which made a takeover offer for S P Setia Bhd, accumulated more shares of the property developer from the open market on Thursday, Oct 20.

A filing with Bursa Malaysia on Friday showed it bought 3.179 million shares for an average price of RM3.83. It also purchased 982,600 warrants at an average of 87.5 sen.

On Sept 28, PNB serve the notice of take-over offer on S P Setia to acquire the shares at RM3.90 each and 91 sen per warrant.

Genting, Tenaga weigh on KLCI

KUALA LUMPUR: Losses at blue chips including at Genting and Tenaga weighed down the FBM KLCI at the mid-day break on Friday, Oct 21 as most key regional markets slipped into the red, ahead of a meeting by European policymakers this weekend to resolve the eurozone debt crisis.

Tenaga fell after Maybank IB Research lowered its target price for the stock to RM5.90 (from RM6.60) and said the company’s upcoming 4QFY11 results scheduled on 28 Oct would be very weak due to insufficient gas supply that necessitates using oil and distillates as a fuel source to generate power (a significantly more expensive and money losing proposition).

The FBM KLCI shed 1.08 points to 1,440.10 at the mid-day break. Losers edged gainers by 262 to 254, while 264 counters traded unchanged. Volume was 626.79 million shares valued at RM446.14 million.

The ringgit weakened 0.87% to 3.1565 versus the US dollar; crude palm oil futures for the third month delivery gained RM9 per tonne to RM2,875, crude oil rose 22 cents per barrel to US$86.29 while gold was up US$5.70 an ounce to US$1,626.50.

Asian investors remained jittery after European leaders said they did not expect Sunday's meeting to give an all-cure solution to the euro zone's debt problems, with regional leaders still sharply divided over how to strengthen a euro zone rescue fund, according to Reuters.

France and Germany said in a joint statement on Thursday that the leaders will discuss in detail a comprehensive solution to the euro zone crisis at the summit on Sunday but no decisions will be adopted before a second meeting to be held by Wednesday at the latest, it said.

At the regional markets, Japan’s Nikkei 225 fell 0.20% to 8,665.16, Hong Kong’s Hang Seng Index shed 0.02% to 17,978.77, the Shanghai Composite Index lost 0.58% to 2,317.96 and Taiwan’s Taiex was down 0.26% to 7,225.80.

Meanwhile, South Korea’s Kospi pared down its gains and was up 0.70% to 1,817.69 and Singapore’s Straits Times Index was up 0.41% to 2,705.08.

On Bursa Malaysia, Genting PLANTATION []s fell 20 sen to RM7.38, Petronas Dagangan down 12 sen to RM16.16, Genting lost 11 sen to RM9.89, Nestle and PPB 10 sen each to RM49.20 and RM16.70, Malayan Flour Mills nine sen to RM7.36, Ta Ann, Southern Steel and MISC eight sen each to RM4.66, RM1.97 and RM6.62 respectively, while Tenaga fell seven sen to RM5.48.

Among the gainers this morning, BAT added 88 sen to RM44.48, Tasek 33 sen to RM7.88, Faber 26 sen to RM1.86, Dutch Lady 20 sen to RM19.20, Cepco 18 sen to RM1.91, CI Holdings 12 sen to RM4.90, while United Plantations and MSM added 10 sen each to RM17.30 and RM5.04.

The actives included TMS, IRCB, GPRO, MAA, JCY and AirAsia.

Tenaga drives record Malaysia sukuk sales

Tenaga Nasional Bhd’s planned Islamic bond offering, the second-biggest in Malaysia this year, will push the nation’s annual ringgit sukuk sales to a record.

The state-owned power producer will start marketing RM4.85 billion of Syariah-compliant ringgit debt next week to fund the construction of a coal-fired power plant in the northern state of Perak, Kuala Lumpur-based Chief Executive Officer Che Khalib Mohamad Noh said in a Oct. 18 interview. Companies have sold RM35.3 billion of local- currency sukuk this year, compared with the high of RM38.7 billion in 2007, data compiled by Bloomberg show.

Spending programs by Asian governments to build railways, roads and ports may help support sales of Islamic bonds, as they are backed by assets, Standard & Poor’s said in an Oct. 17 report. Tenaga’s project is part of Malaysia’s 10-year $444 billion economic transformation program.

“The momentum for sukuk sales in Malaysia should be good going into next year, given the pipeline of projects under the plan,” Michael Lau, head of debt markets at Kuala Lumpur-based Maybank Investment Bank Bhd., said in an interview yesterday. “The current low interest-rate environment will also encourage companies to refinance their debts.”

Indicative yields on Malaysia’s benchmark five-year local- currency Islamic bonds have dropped more than a percentage point since June 2008 to 3.49 percent on Oct. 19, Bank Negara Malaysia data show. The Bloomberg-AIBIM-Bursa Malaysia Sovereign Shariah Index, which tracks the most-traded government debt, was at 105.0030, near the record high of 105.0880 reached on Sept. 13. The gauge has advanced 3.9 percent this year. -- Bloomberg

Tenaga slips, worries mount on gas shortage

KUALA LUMPUR: Shares of Tenaga Nasional fell on Friday, Oct 21 on worries about an early resolution to its gas supply shortage which could push it deeper into the red in the fourth quarter ended Aug 31, 2011.

Tenaga fell eight sen to RM5.47 with 445,400 shares done. The FBM KLCI lost 1.99 points to 1,439.19. Turnover was 542.78 million shares valued at Rm347.91 million.

RHB Research Institute maintained its Underperform recommendation with unchanged indicative fair value of RM4.74 based on unchanged target CY12 PER of 12 times.

“Due to ongoing gas shortage from maintenance at Petronas’ LNG plants and delays for the Bekok C bypass, Tenaga will likely record a loss in 4Q, possibly close to that seen in 3Q (-RM460 million),” it said.

The research house said this was a result of Tenaga receiving only an average of 950 mmscfd of gas in 4Q, just marginally higher than the average 940 mmscfd received in 3Q.

“Whether Tenaga meets our FY11 earnings forecast of RM708 million (consensus: RM750 million), mainly depends on the full extent of unscheduled maintenance by Petronas in 4Q,” it said.

Tenaga reported a core net profit of RM801 million for 9MFY11. The initial guidance from Petronas was 17 days of scheduled maintenance.

“Recall in 3Q, Tenaga incurred an additional RM1.3 billion in fuel costs, due to 61 days of gas supply disruption (of which 51 days were due to unscheduled maintenance),” it said.

KL shortlists bidders for RM7b rail works

Malaysia has shortlisted five companies including China’s Sinohydro Group Ltd and Korea’s SK Holdings Co Ltd to bid for a RM7 billion tunnelling project for a railway line, a financial newspaper said on Friday.

A joint-venture between Malaysian construction groups Gamuda Bhd and MMC Corp Bhd has also been shortlisted along with two other unidentified companies from Japan and China, The Edge added citing unidentified sources.

Gamuda-MMC was awarded the management role of the project last December.

The tunnelling project is part of a US$11.5 billion mass rapid transit development — Malaysia’s single largest infrastructure job to date — which aims to alleviate traffic congestion in the nation’s capital.

A Gamuda spokesman had no immediate comment on the report while MMC could not be reached. -- Bloomberg

OSK Research cuts auto sector from neutral to underweight

KUALA LUMPUR: OSK Research has downgraded the auto sector from neutral to underweight following the impact from the severe floods in Thailand and it also trimmed the earnings for UMW and Tan Chong.

It said on Friday, Oct 21 the prolonged flood situation in Thailand’s Ayutthaya and Pathumthani province has enforced an extended shut down until Oct 28.

“Autoparts production from the flood stricken areas accounts for 10% of the country’s total production and we do not foresee this heavily impacting the industry over the mid-longer term given the availability of alternative suppliers in other areas not affected by the flood in Thailand,” it said.

OSK Research said over the longer term, it sees Malaysia benefiting on higher investments in the sector considering that Indonesia too is a natural disaster prone area.

“What is concerning to us is the possibly of seeing margin compression next year for automakers which are heavily relying on completely knocked down (CKD) imports from Thailand following the populist move to increase the minimum wage policy by the new ruling Government,” it said.

The research house trimmed earnings for UMW and Tan Chong by 11%-17% for FY12 and FY13 on expectations that CKD parts could increase by 10%-15% coupled by the depreciating ringgit versus the yen and US dollar.

OSK Research said it maintained its Sell and Fair Value recommendation.

“Noting that our larger caps are all Sells now; we downgrade our sector recommendation to Underweight from Neutral,” it said.

BAT up on interim dividend payout

KUALA LUMPUR: BRITISH AMERICAN TOBACCO (M) [] Bhd’s shares rose in early trade on Friday, Oct 21 after it declared an interim dividend tax exempt of 60 sen a share compared with 64 sen a year ago, as its earnings rose 3.3% to RM176.27 million in the third quarter ended Sept 30 from RM179.65 million.

At 9.05am, BAT was 12 sen to RM43.72 with 5,600 shares traded.

Its revenue increased by to RM1.104 billion from RM993.59 million, earnings per share were 61.70 sen compared with 59.80 sen.

Maybank IB Research in a note Oct 21 said that BAT's 9M11 recurring net profit of RM551 million (+0.5% y-o-y), post stripping off a one-off restructuring charge of RM12 million, accounted for 73.9% and 77.5% of our and consensus full-year forecasts respectively.

“Post the tax hike relief, we lower our 2011 total industry volumes (TIV) decline forecast from -5% to -2.5%.

“We continue to like BAT for its resilient premium market share but industry environment remains challenging. Maintain Hold at a higher DCF-based TP of RM45.10 (from RM43.30),” it said.

Maybank IB Research cuts Tenaga FV to RM5.90

KUALA LUMPUR Maybank Investment Bank Research has reduced TENAGA NASIONAL BHD []’s target price from RM6.60 a share to RM5.90.

It said on Friday, Oct 21 that it believes the upcoming 4QFY11 results to be released on Oct 28, will be very weak.

Maybank Research said was due to insufficient gas supply, it had to use oil and distillates as a fuel source to generate power, which is a significantly more expensive and money losing proposition.

“We maintain our HOLD call, with a lower target price of RM5.90 a share (from RM6.60 a share) after imputing the impact of gas supply issue. We favour the PER methodology and continue to apply Tenaga’s long term average of 13 times on FY2012 forecast earnings to derive our target price,” it said.

The research house estimated Tenaga will report a loss of RM230 million for 4QFY11, which is slightly better than RM478 million core net loss achieved in 3QFY11.

“Gas supply disruption will force Tenaga to burn oil and distillates, and we estimate this to add RM1.2 billion to cost,” it said.

Maybank Research said its new target price of RM5.90 is based on Tenaga’s historical average PER of 13 times (the valuation basis is unchanged).

“We think this is a fair valuation given that our secondary valuation method of price-to-book is below 1.0 times. It is very rare for a monopolistic utility company to be trading below book, and therefore that’s where we see supporting intrinsic value in Tenaga,” it said.

TH Plantations rises on firmer 3Q earnings

KUALA LUMPUR: TH PLANTATION []s Bhd’s shares advanced on Friday, Oct 21 after its earnings rose 53.8% to RM33.12 million in the third quarter ended Sept 30, 2011 from RM21.53 million a year ago as it benefited from higher prices for crude palm oil, palm kernel and fresh
fruit bunches.

At 9.05am, TH Plantations added five sen to RM2.04 with 25,500 shares traded.

Its revenue increased 37.7% to RM115.97 million from RM84.22 million. Earnings per share were 6.51 sen compared with 4.41 sen.

For the nine-month period, its earnings jumped 85.6% to RM87.12 million from RM46.93 million while revenue increased by 27.9% to RM303.73 million from RM237.44 million.

KLCI slips at mid-morning on mild profit taking

KUALA LUMPUR: The FBM KLCI extended its losses at mid-morning on Friday, Oct 21 as investors wary of the eurozone debt crisis took profit ahead of the weekend meeting of European leaders for signs of progress in resolving the region's debt crisis.

Asian shares were mixed, with most bourses gingerly clinging on to mild gains in thin trade.

The FBM KLCI slipped 1.84 points to 1,439.34 at 10am, weighed by losses at select blue chips.

Gainers edged losers by 173 to 167, while 196 counters traded unchanged. Volume was 358.72 million shares valued at RM161.34 million.

At the regional markets, Japan’s Nikkei 225 edged up 0.08% to 8,689.04, Hong Kong’s Hang Seng Index up 0.09% to 17,999.88, South Korea’s Kospi jumped 1.45% to 1,831.34 and Singapore’s Straits Times Index added 0.46% to 2,706.38.

Meanwhile, the Shanghai Composite Index shed 0.24% to 2,325.66 and Taiwan’s Taiex fell 0.28% to 7,224.10.

European leaders said they did not expect Sunday's meeting to give an all-cure solution to the euro zone's debt problems, with regional leaders still sharply divided over how to strengthen a euro zone rescue fund, according to Reuters.

France and Germany said in a joint statement on Thursday that the leaders will discuss in detail a comprehensive solution to the euro zone crisis at the summit on Sunday but no decisions will be adopted before a second meeting to be held by Wednesday at the latest, it said.

BIMB Securities Research in a note Oct 21 said that with Greece already choking on declining liquidity, the European leaders were still deliberating on the finer details of the bailout fund now estimated totalling €1.3 trillion.

Reassurance that more details would be revealed over the next 2 weeks had calmed the nervy investors as Wall Street managed to reverse earlier losses to close 37 points higher despite a sea of red over in Europe, it said.

Asian bourses also saw persistent profit taking as most ended in negative territory yesterday, it said.

“Domestically, the FBM KLCI was rather resilient with some late buying support ending the session 9 points down at 1,441.18.

“We reckon selling may be prevalent again taking cue from the shaky regional bourses. Next support level is seen at 1,430 level,” it said.

Meanwhile, Maybank Investment Bank Bhd head of retail research and chief chartist Lee Cheng Hooi in a note to clients on Oct 21 said due to the US markets’ mixed tone last night, there may be a shaky tone for the local index ahead of the weekend.

“Some profit taking activities could keep the local market softer today,” he said.

On Bursa Malaysia, PPB was the top loser at mid-morning and fell 22 sen to RM16.58; Genting PLANTATION []s fell 10 sen to RM7.39, Petronas Dagangan and DiGi lost 18 sen each to RFM16.10 and RM31.42, MISC and HLFG eight sen each to RM6.62 and RM11.32, Tradewinds Plantations six sen to RM3.19, Ajiya and Genting five sen each to RM1.63 and RM9.95, while Konsortium fell four sen to RM1.22.

Gainers included BAT, United Plantations, YTL Cement, WCT, Bursa, Dolomite, Airasia, Bina Goodyear and Notion Vtec.

The actives included TMS, IRCB, Ingenuity Solutions, Tejari, JCY and YGL.

Olympia rises on revised earnings

Olympia Industries Bhd, a Malaysian gaming company, rose in Kuala Lumpur trading after revising its full-year earnings following an audit.

The company said it now made a RM217,000 profit in the 12 months ended June instead of a RM3.9 million loss. Its shares rose 3.6 percent to 29 sen at 9:10 a.m. local time.

WCT advances in early trade

KUALA LUMPUR: WCT BHD [] shares rose in early trade on Friday, Oct 21 after Maybank IB Research maintained its Buy rating on the stock and said WCT's recent acquisition of a 189.3 ha piece of land in Rawang would positively allow it to diversify its property development business away from Klang, to an upcoming and growing piece of real estate in northern Klang Valley.

At 9.30am, WCT rose 12 sen to RM2.45 with 360,200 shares traded.

In a note Oct 21, Maybank Research said there is no indicative GDV just yet for WCT’s latest property development, adding that the research house’s earnings forecasts for WCT were unchanged for now.

“WCT remains a Buy with an unchanged SOP-based target price of RM3.08 (13x 2012 PER plus 20sen value enhancement from the KLIA IC2 concession),” said Maybank Research.

CIMB Research has technical buy on Adventa

KUALA LUMPUR: CIMB Equities Research has a technical buy on Adventa at RM1.67 at which it is trading at a FY12 price-to-earnings of 12.8 times and price-to-book value of 1.1 times.

It said on Friday, Oct 21 Adventa broke out of its bullish wedge pattern on Thursday. The run-up also lifted prices above its 50-day SMA.

“Looking at the chart, we think there is still room to the upside. Prices are likely to charge towards RM1.80 and RM1.93 in the near term. If these levels are taken out, the 200-day SMA (at RM2.08) will be the following target,” it said.

CIMB Research said the technical landscape is improving. MACD signal line has bounced off its lows while RSI has also hooked upward.

It added that risk takers may start to nibble now. However, always put a stop at below the RM1.60-1.54 levels, just in case.

ECM Libra Research maintains Hold on BAT

KUALA LUMPUR: ECM Libra Investment Research said BRITISH AMERICAN TOBACCO (M) [] Bhd’s 3QFY11 results came in within expectations, with core net profit increased by 3.3% y-o-y to RM176.3 million mostly due to trade loading in anticipation of an excise duty hike which did not materialise.

BAT declared a third interim net dividend of 60.0 sen per share.

In a note Friday, Oct 21, ECM Libra Research said BAT was fully valued at current valuation.

“Nonetheless, CY12 dividend yield of 5.2% remains attractive. Maintain Hold call.

“RM43.80 target price is unchanged based on a DCF valuation (WACC of 7.8%, longterm growth rate of 1.5%),” it said.

CIMB Research has technical sell on Media Prima

KUALA LUMPUR: CIMB Equities Research has a technical sell on Media Prima at RM2.37 at which it is trading at a FY12 price-to-earnings of 11.3 times and price-to-book value of 1.8 times.

It said on Friday, Oct 21 the recent rebound may have exhausted. Prices hit the 50% FR level and the bears have since re-surfaced.

It added that even if a stronger rebound were to take place, gains will likely cap at the 50-day and 200-day SMAs, at RM2.50 and RM2.62 respectively.

“Our strategy here is to unload on strength, especially near the stipulated resistance levels. On the downside, once the RM2.31 low is infringed, expect the next downleg to drag prices towards RM2.18 and RM2.00,” it said.

CIMB Research said indicators are showing signs of exhaustion. MACD histogram bars are rising at a slower pace while RSI has also hooked downward.

CIMB Research has technical sell on UEM Land

KUALA LUMPUR: CIMB Equities Research has a technical sell on UEM Land Holdings at RM1.94 at which it is trading at a FY12 price-to-earnings of 29.8 times and price-to-book value of 1.9 times.

It said on Friday, Oct 21 UEM Land had a good run after prices broke out of its wedge pattern. It hit a high of RM2.06 before consolidating near its 50-day SMA.

“Looking at the chart, we think this upswing is likely over for now as the rebound has reached the 38.2% FR level. Indicators are showing easing signs. MACD histogram bars are rising at a slower pace while RSI has hooked downward,” it said.

CIMB Research said traders should do well selling into strength. However, put a buy stop at RM2.10, just in case. On the downside, a break below its 30-day SMA (at RM1.85) will drag prices towards RM1.73 and RM1.62.

MHB confirms Telok fabrication contract

Malaysia Marine and Heavy Engineering Holdings Bhd (Oct 19, RM6.00)

Maintain buy at RM5.95 with fair value of RM9.90: We maintain our “buy” call on Malaysia Marine and Heavy Engineering Holdings (MHB) with an unchanged fair value of RM9.90 per share, based on an FY12F price-earnings ratio (PER) of 25 times — a 15% premium to Kencana Petroleum Bhd’s 2007 peak of 22 times.

MHB confirmed a Bloomberg report on Tuesday that it will be awarded a contract from ExxonMobil Corp to fabricate facilities for its Telok gas development in Malaysia. Production at Telok is expected to begin in 1Q 2013 to provide additional gas supply for the country’s power and industrial needs.

MHB’s scope of work includes the procurement, fabrication, load-out, offshore hook-up and commissioning of two topsides and corresponding two jackets for the platforms. The four-legged jackets with piles and conductors have an estimated weight of 3,900 tonnes each with pre-installed risers.

The Telok A and Telok B are gas satellite platforms with an estimated topside weight of 1,750 tonnes and 1,650 tonnes respectively. The gas production from these platforms will be tied back to the existing Guntong E gas platform. MHB did not provide any estimates for the contract value of this project but Bloomberg had reported that it could be over RM236 million.

The Telok project was announced in January by the prime minister, indicating that ExxonMobil and Petronas Carigali Sdn Bhd plan to invest over RM10 billion to rejuvenate mature facilities and undertake enhanced oil recovery activities in the Tapis and the Telok gas fields off Terengganu. Recall that ExxonMobil has already committed up to US$2.1 billion (RM6.5 billion) to rejuvenate seven oilfields in Malaysia — Tapis, Seligi, Guntong, Semangkok, Irong Barat, Tabu and Palas.


The contract value for the project is likely to be small compared with an upcoming fabrication job for the Tapis central processing platform, potentially around RM1.5 billion. With an order book of RM3.1 billion currently, MHB has secured RM1.2 billion in fresh contracts this year. As such, we maintain FY11F to FY13F earnings. The stock currently trades at an attractive FY12F PER of 15 times, below Dialog Group Bhd’s 20 times. — AmResearch, Oct 19

HDBSVR expects cautious mood on Bursa Malaysia

KUALA LUMPUR: Hwang DBS Vickers Research (HDBSVR) anticipates that a cautious mood will likely prevail on the Malaysian bourse on Friday, Oct 21.

It said on the chart, the benchmark FBM KLCI will probably swing sideways with a slight positive bias ahead but may struggle to overcome the immediate resistance level of 1,445.

”Essentially, sentiment is expected to be clouded by mixed signals from abroad. While there are talks that a larger rescue fund size is in the making to settle the European sovereign debt crisis, news that a subsequent meeting would now be held next Wednesday after a scheduled summit on this Sunday could suggest that a comprehensive plan may not be reached anytime soon,” it said.

HDBSVR said against the uncertain outlook, Gamuda and MMC shares will possibly be in the limelight on news their consortium is the only Malaysian company out of five parties which have been pre-qualified to bid for the MRT tunneling project.

Genting Malaysia: Start spreading the news

Genting Malaysia Bhd (Oct 19, RM3.69)

Maintain hold at RM3.50 with revised target price of RM3.72 (from RM3.70): Resorts World New York (RWNY) will open with more video lottery terminals (VLTs) and electronic table games (ETGs) than initially expected, offset by a higher-than-expected number of staff and capital expenditure. Therefore, our earnings estimates are relatively unchanged. We tweak our target price from RM3.70 to RM3.72 and maintain our “hold” call on Genting Malaysia.

Genting Malaysia has announced that RWNY will open at 1pm local time on Oct 28 with 2,485 VLTs and ETGs and add 2,515 VLTs and ETGs by year-end for a total of 5,000. Genting Malaysia expects RWNY to generate up to US$800 million (RM2.48 billion) per year in gaming revenue, implying an average daily win per unit of US$440. We had expected only 4,525 VLTs and ETGs and average daily win per unit of US$400.

The company will hire 1,350 employees and has incurred US$580 million in net capex (US$830 million capex less US$250 million Empire State Development Corp construction grant). We had earlier expected only 1,150 employees and US$500 million in net capex. The higher-than-expected number of staff and capex are likely necessary to accommodate the 475 additional VLTS and ETGs.

After accounting for the above, save for the company’s higher average daily win per unit expectation of US$440, we leave our earnings estimates relatively unchanged. RWNY’s average daily win per unit will be publicly available as soon as the first week of November 2011 at the New York Lottery’s website. Until then, we leave our average daily win per unit assumption of US$400 unchanged.


To account for our revised estimates, we tweak our discounted cash flow-based target price upwards by two sen to RM3.72. Although we maintain our “hold” call, as we believe Genting Malaysia’s current share price already reflects RWNY, we foresee the opening as a test case of Genting Malaysia’s efforts to introduce table games at RWNY and destination resorts in Florida. Should RWNY be a roaring success, legislators in both states will likely accede to its efforts. — Maybank IB Research, Oct 19

Best year in the making for Kulim

Kulim (M) Bhd (Oct 19, RM3.39)

Maintain buy at RM3.38 with fair value of RM4.45: Management is now guiding for Papua New Guinea (PNG) production to come in at 1.650 million tonnes of fresh fruit bunches (FFB) for 2011, compared with 1.42 million tonnes three months ago. Combined with guided output from the Solomon Islands of 130,000 tonnes, New Britain Palm Oil should produce 1.78 million tonnes for 2011. This is close to our forecast of 1.79 million tonnes.

The group’s Malaysian estates should produce 659,000 tonnes of FFB this year, which should boost total production to 2.43 million tonnes.

New Britain Palm Oil has land reserves of 31,000ha. It is targeting new planting on 1,000ha in West New Britain and 2,500ha in Ramu on PNG’s main island for this year. The company is also targeting to replant on 500ha in West New Britain and 1,500ha on its Kula estate.

Previously lacking infrastructure that has now been put into place, the Kula estate on PNG’s main island is now being audited for the purpose of obtaining RSPO certification.


Acquisition of the first land parcel measuring 6,000ha from Johor Corp will be completed in December 2011 or January 2012. The acquisition of the second parcel measuring 7,000ha will only be completed in mid-2012.

We maintain our earnings forecast at RM501.3 million for FY11 and our “buy” on Kulim, the cheapest large-scale plantation company in Malaysia. — OSK Research, Oct 19

AirAsia, MAS pick independent advisers

KUALA LUMPUR: AIRASIA BHD [] and MALAYSIAN AIRLINE SYSTEM BHD [] (MAS) have each appointed their own independent advisers to advise the non-interested directors and the non-interested shareholders of each airline on the proposed warrants exchange.

AirAsia said on Thursday, Oct 20 that Maybank Investment Bank Bhd was appointed the the independent adviser for the low-cost carrier’s non-interested shareholders.

As for MAS, the board of directors had appointed AmInvestment Bank Bhd as the independent adviser to advise the non-interested shareholders of MAS.

To recap, on Aug 9, Tune Air will hold 20.5 of MAS and Khazanah Nasional Bhd will hold 10% of AirAsia under a share swap.

Khazanah has also proposed to acquire 10% of AirAsia X, with the value based on the latest closing price.

MAS and AirAsia are to issue free warrants to each others’ shareholders.

Under the exercise, MAS shareholders will get one AirAsia warrant for every 30 while an AirAsia shareholder gets one MAS warrant for every 10 AirAsia shares held.

Glove makers, UOA Development and JCY up despite cautious market sentiment

PETALING JAYA: A string of stocks managed to attract investor interest in an otherwise cautious market and they included glove counters, property firm UOA Development Bhd and hard-disk drive maker JCY International Bhd.

Analysts said the price of latex touched RM8 per kg yesterday, off its recent high of RM11 per kg in April, signalling a possible downtrend in the price of the commodity.

Latex makes up more than 60% of glove makers' costs and a decline in its price is welcome news for the industry.

At the close, counters like Supermax Corp Bhd and Adventa Bhd were up 27 sen and 13 sen to RM3.22 and RM1.67 respectively.

In the case of Latexx Partners Bhd, news of a possible takeover could also have been a catalyst.

Latexx, which rose 14 sen to RM1.63, has been speculated to be the subject of a takeover for a few weeks now after a first attempt in May failed due to issues related to pricing.

Meanwhile, dealers attributed interest in UOA Development, which reached a multi-month high of RM1.70 after rising 19 sen, to “pure market play”.

The stock, at this level, is still 35% down on its June initial public offering (IPO) price of RM2.60.

CIMB Research said in a report that UOA Development's poor share price performance since its listing gave investors a chance to accumulate the stock, adding that investors' realisation of the strong core earnings growth for 2011 to 2013 could spark a re-rating, along with robust sales or more land-banking activities.

Hard-disk driver maker JCY was also on the active list yesterday, finishing one sen lower at 57 sen after hitting an intra-day high of 61 sen. JCY gave up its gains after CIMB Research issued a “trading sell” call on it, seeing that the stock had hit the house's target price.

On Wednesday, the stock put on 28% due to expectations that it would receive more orders as the floods in Thailand affected its competitors.

Sentiment remained cautious in the broader market with 232 counters finishing higher while 500 ended lower.

The 30-stock FTSE Bursa Malaysia KL Composite
Index was down 9.07 points, or 0.63%, to 1,441.18 at the close, with most investors still feeling nervous about the uncertainties in the debt-laden West.

Concerns over slower growth in economic powerhouse China also continued to weigh on investor sentiment, analysts said.

Stocks to watch: TH Plantations, AirAsia, MAS, Kumpulan H&L

KUALA LUMPUR: Stocks on Bursa Malaysia could advance on Friday, Oct 21, following fresh positive economic data from the US while interest could continue to be focused on glove makers and selected stocks.

But overall market sentiment would be cautious, as sentiment always hinges on the volatile European and US economic data.

On Wall Street, stocks ended with modest gains on Thursday, shifting back and forth on incremental developments in Europe where leaders sought to reassure investors that a solution to the debt crisis would come soon.

Germany and France released a statement on Thursday saying leaders would now hold two summits to discuss the debt crisis, with a solution in place by Wednesday's second meeting.

The Dow Jones industrial average ended up 37.16 points, or 0.32 percent, at 11,541.78. The Standard & Poor's 500 Index was up 5.51 points, or 0.46 percent, at 1,215.39. The Nasdaq Composite Index  was down 5.42 points, or 0.21 percent, at 2,598.62.

At Bursa Malaysia, among the stocks to watch are TH PLANTATION []s Bhd, AIRASIA BHD [] and MALAYSIAN AIRLINE SYSTEM BHD [] (MAS)and Kumpulan H&L High-Tech Bhd.

TH Plantations’ earnings rose 53.8% to RM33.12 million in the third quarter ended Sept 30, 2011 from RM21.53 million a year ago as it benefited from higher prices for crude palm oil, palm kernel and fresh fruit bunches. Its revenue increased 37.7% to RM115.97 million from RM84.22 million. Earnings per share were 6.51 sen compared with 4.41 sen.

For the nine-month period, its earnings jumped 85.6% to RM87.12 million from RM46.93 million while revenue increased by 27.9% to RM303.73 million from RM237.44 million.

AirAsia and MAS have appointed their own independent advisers to advise the non-interested directors and the non-interested shareholders of each airline on the proposed warrants exchange.

Kumpulan H&L High-Tech’s 70% owned subsidiary in Thailand has temporarily ceased its operations there due to the severe floods.

H&L High-Tech Mould (Thailand) Co. Ltd. (H&LM) located at Bangpa-In Industrial Estate, Ayutthaya had halted its operations. H&LM manufactures metal parts for electronic and metal surface treatment.

BRITISH AMERICAN TOBACCO (M) [] Bhd’s earnings rose 3.3% to RM176.27 million in the third quarter ended Sept 30 from RM179.65 million. Its revenue increased by to RM1.104 billion from RM993.59 million, earnings per share were 61.70 sen compared with 59.80 sen. It declared an interim dividend tax exempt of 60 sen a share compared with 64 sen a year ago.