Ayer Molek buys backs land, after selling it 10 yrs ago

KUALA LUMPUR: The Ayer Molek Rubber Company Bhd is buying back 41.65 acres of PLANTATION [] land in Segamat, Johor from Empang Setia Sdn Bhd, which it had sold to 10 years ago.

Ayer Molek said on Monday, Oct 24 it had signed a sales and purchase agreement with Empang Setia to acquire 41.65 acres of land for RM670,000 cash consideration.

To recap, on Oct 31, 2001, it had sold 43.97 acres of the land to Empang Setia for RM770,000.

However, in February 2006, part of the land measuring about 2.32 acres was subsequently acquired by the government, reducing the land area to 41.65 acres.

CMSB explains US$50m increase in smelting plant costs

KUALA LUMPUR: CAHYA MATA SARAWAK BHD [] the cost to build the manganese and ferro silicon smelting plant increased from US$450 million to US$50 million due to an increase in higher engineering and machinery costs.

In an announcement to Bursa Malaysia, Monday, Oct 24, it said the increase in costs was attributed to " additional engineering, procurement, CONSTRUCTION [] management and indirect costs (EPCM) of US$9.2 million, insurance of US$2 million, last mile electricity connection worth US$3.8 million and a conveyer belt worth US$35 million".

It was responding to a Bursa Malaysia Securities query over the higher costs for the project.

To recap, on Thursday, Oct 20, CMSB announced the signing of two MoUs between its unit Samalaju Industries Sdn Bhd and OM Materials (S) Pte Ltd, a unit of OM Holdings Limited for the plant with an annual capacity of about 600,000 tonnes in Samalaju, Sarawak.

CMSB also said the parties were still negotiating the terms of the raw material supply agreement, including the duration for the supply.

"Barring unforeseen circumstances, it is anticipated that the Raw Material Supply Agreement will be concluded by the first quarter of 2012,” it said.

CMSB anticipated that negotiations with the off-takers would be concluded by the second quarter of 2012.

KLCI off day’s best as investors lock in gains

KUALA LUMPUR: Blue chips closed off their day’s best on Monday, Oct 24 as investors decided to lock in some of the gains as they awaited firmer news from the euro debt resolution at Wednesday’s summit.

At 5pm, the KLCI was up 11.19 points or 0.78% to 1,450.02, but off the day’s best of 1,462.06. Turnover was 1.24 billion shares valued at RM1.31 billion. Advancing counters beat decliners nearly three to one, with 556 gainers to 203 losers and 254 stocks were unchanged.

Among key regional markets, Reuters reported that the Hang Seng Index closed up 4.14% at 18,771.82. The China Enterprises Index of the top mainland companies listed in Hong Kong climbed 5.4% to finish at 9,717.65. The Shanghai Composite Index closed up 2.29% at 2,370.33

Hong Kong shares recorded their best daily performance in two weeks on Monday, led by mainland energy and materials plays that suffered the brunt of recent bearishness on China, but gains came in low turnover, suggesting a lack of conviction.

Japan’s Nikkei 225 added 1.9% to 8,843.98, South Korea’s Kospi 3.26% to 1,898.32 and Singapore’s Straits Times Index 1.79% to 2,760.95.

At Bursa Malaysia, investors, which had been hammered by the volatile market sentiment, decided to be prudent and take profit after the sharp gains.

Lower priced shares and penny stocks attracted attention, pushing the turnover to new levels in recent weeks. Investors would want to await for solid confirmation of measures to resolve the euro debt crisis before putting in more money into equities.

Consumer stocks were among the top gainers, with BAT chalking up gains of 54 sen to RM44.98, Dutch Lady 34 sen to RM19.34, GAB 20 sen to RM10.64.

Genting rose 27 sen to RM10.02 with 2.98 million shares done while Genting Malaysia eight sen to RM3.75. The other top gainers were PacificMas, up 21 sen to RM3.58, LPI 20 sen to RM12.70 while among PLANTATION []s ChinTek added 17 sen to Rm8.21 and Batu Kawan 16 sen to RM15.50.

Surprisingly on the top losers’ list was HL Bank, down 22 sen to RM10.36 but HLFG gained 12 sen to RM11.40.

Court nod for HL Islamic Bank to take over EONCap Islamic Bank

KUALA LUMPUR: Hong Leong Islamic Bank Bhd has been give the court approval for it to take over the entire business of EONCap Islamic Bank Bhd with effect from Nov 1, 2011.

HL Islamic Bank said on Monday, Oct 24 the High Court had granted the vesting order for the transfer of the entire business including all assets and liabilities of EONCap Islamic Bank.

Following the vesting, EONCap Islamic Bank will become a dormant company.

Hong Leong Bank group managing director Yvonne Chia said: "With the granting of the vesting order by the High Court, we are now one step closer towards celebrating Malaysia’s first vesting of an Islamic bank.”

Chia said as it would only take effect from Nov 1, it would continue to be business-as-usual for customers and business associates of both banks until further notice.

DiGi 3Q earnings 1.08% higher at RM292.4m

KUALA LUMPUR: DIGI.COM BHD []’s earnings rose just a marginal 1.08% to RM292.44 million in the third quarter ended Sept 30, 2011 from RM289.31 million a year ago as it was affected by higher depreciation and amortisation while average revenue per user (ARPU) dipped.

It said on Monday, Oct 24 that revenue increased by 12.6% to RM1.52 billion from RM1.35 billion due to an increase in data revenue. Earnings per share were 37.6 sen compared with 37.20 sen a year ago. Depreciation and amortisation was RM306.08 million in 3QFY11 compared with RM196.69 million a year ago.

DiGi declared an interim single-tier tax exempt dividend of 37 sen per share for financial year ending Dec 31, 2011 on Dec 8. It declared dividends of 50 sen last year.

On the revenue, it said it was boosted by an increase in data revenue; particularly from the combined 89% growth for both mobile internet and broadband revenues, over-and-above higher revenues from the 1.4 million subscriber net additions and higher take-up of handset bundles.

“Current quarter ARPU of RM50 (2010: RM53) reflects the year-to-date trend,” it said.

DiGi said for 3Q2011, earnings before interest, tax, depreciation and amortisation (EBITDA) and EBITDA margin of RM708.3 million and 46.6% respectively improved significantly. In 3QFY10, EBITDA and EBITDA margin were RM593.8 million and 43.9% respectively.

Chief executive officer Henrik Clausen said there was a continued strong growth in its data revenue, from a larger subscription base of 9.6 million customers. This was driven by product offerings aimed at encouraging new data users through attractive smart plans and handsets.

“We have also continued to strengthen the foundation of our data network to support future increase in mobile Internet adoption and traffic. Our network modernisation efforts remain a high priority for the Company, and we aim to further improve our capability in the areas of coverage, capacity, quality and efficiency to support mobile data growth by putting in place a brand-new LTE-ready network by the end of 2012,” Clausen said.

For the nine-months, its earnings increased just 1.67% to RM860.16 million from RM845.97 million while revenue climbed 11.1% to RM4.418 billion from RM3.976 billion.

DiGi said the solid revenue growth was mainly due to higher traffic revenue from a larger subscription base of 9.6 million customers (2010: 8.2 million).

“Higher traffic revenue in the current financial period came primarily from higher data revenue. All data revenue streams showed good improvements in the period under review. In particular, contributions from mobile internet and broadband which rose 113% to RM452.2 million (2010: RM212.3 million),” it said.

As for the ARPU, it said the decline to RM50 (2010: RM53) in the financial period ended Sept 30, 2011, was mainly from lower spending of newly-added customers, competitive price pressure, and lower domestic interconnect revenue in tandem with the reduction in regulated mobile termination rate effected from July 2010.

Scientex’s mixed property offerings to withstand slowdown

KUALA LUMPUR: Scientex Bhd, a major stretch film producer which has gone big into property development, has mixed property offerings to mitigate a potential slowdown in the sector, said managing director Lim Peng Jin. It has projects worth RM2.1 billion in outstanding gross development value (GDV).

Scientex has offerings in the affordable segment, a category major developers such as S P Setia Bhd and Mah Sing Group Bhd are shifting into in view of the larger untapped demand there.

The company’s volume products in Pasir Gudang and Kulai in Johor, said Lim, feature affordable double-storey terrace houses within the price range of RM110,000 to RM150,000 a unit. “Our property offerings for the mass market are typically within the price range of the ‘My First Home Scheme’,” he said.

The Shah Alam-based company is also “adding more value” to its high-end property offerings on growing concerns over potential weakening demand for such properties, he said.

“We believe that some key pull factors for high-end property are concept, location and potential capital appreciation,” he told The Edge Financially Daily recently.

“We have incorporated these elements into our projects, such as our niche high-end offering in Skudai, Johor, which offers eco-friendly elements and is strategically located within Iskandar Malaysia.”

Lim said the company is 'adding more value' to its high-end property.

Malaysia’s property market has come under pressure lately, with the government introducing policies to curb speculation in real estate. Banks, meanwhile, have also tightened loan approvals for new properties as well as widened the valuation discount on secondary properties.

The negative sentiment is exacerbated by the current global economic uncertainties, mainly driven by concern over the weakening US economy and the ongoing euro sovereign debt crisis.

Scientex saw operating profit contribution from its property division overtake its manufacturing unit for FY11 ended July 31. Property contributed RM62 million or 63% of the group’s total operating profit of RM97.4 million with the remaining RM35.4 million from the manufacturing of stretch film and strapping band.

This came despite property contributing less to the group’s total revenue. Revenue from the property unit made up 27%, or RM218.56 million, of Scientex’s total revenue of RM804.02 million. This translated into an operating profit margin of 44.5% for Scientex’s property business, which is considered lucrative given its wide offerings between high-end and volume products.


According to TA Securities, Scientex’s property division currently has enough landbank with a total GDV of RM2.1 billion to keep the company busy until 2019.

“Scientex has also shown defensiveness in its property division with an almost full take-up of its developments,” the research house said in a recent note. “In addition, its high-end property developments command a strong 35% to 45% margin.”

On the manufacturing business, Lim does not foresee a slowdown in demand for its main products, stretch film and strapping band, as they are used across various industries.

“That said, this business is susceptible to fluctuations in raw material prices, mainly resin,” he said. “Our mitigation strategy would therefore be to continue improving our cost efficiency by expanding our production capacity to achieve economies of scale and target to reduce per unit costs.”

Scientex has plans for further expansion in production capacity in Pulau Indah, Klang.

According to TA Securities, Scientex is raising production capacity to 120,000 tonnes, or a 20% increase by FY12 that would make Scientex the fifth largest stretch film producer in the world. The company also plans to increase its strapping band production capacity to 24,000 tonnes by the end of this year, or 50% growth.

“We have begun to introduce thinner gauge film with superior technology, that reduces the usage of raw materials yet maintains the same quality and functionality of films,” said Lim.

Scientex’s manufacturing business could face foreign exchange (forex) risk as 80% of its products are exported and 65% of its purchases are denominated in the US dollar.

“Fortunately for us, both our export sales and purchases of raw materials are denominated in the US dollar, which acts as a natural hedge against forex fluctuations,” said Lim.

The ringgit has recently weakened rates against the US dollar in tandem with the strengthening of the greenback against the euro. The ringgit was trading at 3.15 against the US dollar last Friday.

Scientex’s net profit for FY11 rose 28% to RM77.25 million from RM60.32 million a year earlier, while revenue increased 15.7% to RM804.02 million from RM694.82 million. Earnings per share rose to 35.9 sen from 28 sen previously.

The company has a relatively healthy balance sheet, with virtually zero net gearing as at July 31, 2011. Cash flow remains strong with net cash generated from operating activities rising 41.4% to RM110.53 million for FY11 from RM73.14 million a year earlier.

Scientex’s current share price of about RM2.20, which gives the company a market capitalisation of RM506 million, is on par with its net asset value of RM2.17 as at July 31. The stock is trading at a historical price-earnings ratio of 6.1 times based on its earnings per share of 35.90 sen for FY11.


This article appeared in The Edge Financial Daily, October 24, 2011.

Stocks to watch: Decisive debt resolution crucial

KUALA LUMPUR: The performance of markets, including Bursa Malaysia, in the week ahead will hinge on a decisive debt resolution by European officials.

Markets are hoping that the European Council meeting will deliver a comprehensive programme of measures to address the European financial crisis.

Affin Investment Bank head of retail research Dr Nazri Khan expects the FBM KLCI to trend moderately higher this week, but the strength would be determined by the measures to resolve the European debt crisis.

“We notice that the global equities are moving beyond the stalled European debt talks and have shown a slight risk-on attitude late last week,” he said.

Nazri expects comments from France and Germany on the debt crisis resolution via leveraging bailout funds and recapitalising troubled banks to relieve investors.

“While there are scant specifics on the solution, we expect the details to be released in the EU summit to produce more equity strength. We therefore believe the reaction to the eurozone contagion threat may have been slightly exaggerated and that diminished risk concerns could be a positive factor this week,” he said.

As for Malaysia, he said the easing inflationary pressures and the signing of a five-year agreement on Malaysia-China joint development programme to be broadly supportive for local stocks.

“Further, we anticipate the strong floods in Thailand to divert some foreign investment to selective local sectors especially tourism, healthcare and automotive sectors. Finally, we expect the early corporate results to kickstart a mild year-end rally,” he added.

However, Nazri said he expects more volatile trading and he is still cautious on a longer term prospects as the underlying economic fundamentals for the US and Europe remain unchanged.

Over the last two weeks, local funds had been providing the direction for the market but he was concerned global economic conditions could enter into a double dip. Instead, he urged investors to wait to pick fundamentally strong, well-managed companies with strong defensive qualities at lower prices.

Among the stocks to watch are Tenaga Nasional Bhd (TNB), Maxis Bhd, Tanjung Offshore Bhd, Daibochi Plastic and Packaging Industry Bhd and SILK Holdings Bhd.

TNB will announce its financial results for the fourth quarter (4Q) ended Aug 31 but analysts expect it to record another quarter of losses as the shortage of gas supply from Petroliam Nasional Bhd (Petronas) forced it to burn the more expensive oil and distillate.

RHB Research Institute has maintained its “underperform” call on the power company with an unchanged indicative fair value of RM4.74 based on unchanged target CY12 price-to-earnings ratio of 12 times.

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

TNB has proposed to issue RM5 billion in Islamic debt notes to finance the development of the 1,010MW coal-fired power plant in Manjung, Perak. The tenure is 28 years.

Meanwhile, Maxis expects significant gains from the provision of 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 arrangement also includes long-term evolution sharing, depending on the availability of the spectrum and technology.

Tanjung was awarded a RM27 million contract by Petronas Carigali Sdn Bhd to provide three offshore support vessels for up to two primary years. Tanjung said its unit Offshore Services Sdn Bhd was awarded the contract on Oct 20.

Daibochi’s net profit fell 5.8% to RM4.54 million in 3Q ended Sept 30 from RM4.82 million a year ago mainly due to a lower contribution from the property segment.

Its revenue declined 5.2% to RM67.66 million from RM71.42 million mainly due to lower sales in the packaging segment. Earnings per share was lower at 6.04 sen compared with 6.4 sen. It declared an interim dividend of three sen per share.

SILK’s unit Jasa Merin (M) Sdn Bhd was awarded a contract extension worth RM23.5 million by Petronas Carigali Sdn Bhd to provide an anchor handling tug supply vessel.

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 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.


This article appeared in The Edge Financial Daily, October 24, 2011.

InsiderAsia’s model portfolio - 452

Trading in global stocks remained volatile last week as investor sentiment swung back and forth from upbeat to concerns on developments in the eurozone, which continued to hog the spotlight.

Spillover positive momentum sent stocks to a strong start at the beginning of last week.

Investor confidence was boosted by the sense of urgency shown by European leaders leading to expectations that a comprehensive solution would be unveiled by yesterday’s summit.

The market was abuzz with speculation on the various measures that would be introduced. An unconfirmed news report suggested that the firepower for the bailout fund, the European Financial Stability Facility (EFSF), would be raised to as high as €2 trillion (RM8.7 trillion) — high enough to stem contagion to the larger, troubled economies of Italy and Spain.

Concerns, however, resurfaced mid-week after Germany tempered expectations for a quick fix. Additionally, confidence was taken down a notch after rating agency Moody’s cut Spain’s and several of the country’s banks credit ratings. It also placed France’s triple-A rating on a negative outlook on concerns that rising bailout costs will hurt the country’s fiscal position.

Calls for a bigger haircut for Greek debts, too, are causing some backlash from the private sector. Under a voluntary agreement, first mooted back in July, bond holders have accepted a 21% haircut via a debt swap exercise. But European officials are now looking at a much larger haircut, of at least 50%, if Greece’s debts are to be reduced to a sustainable level.

The banks are also unhappy with the industry-wide recapitalisation plan currently on the discussion table.

The timeline for the comprehensive package shifted slightly by the week’s end as it became clear that deep divisions remained between Germany and France on the best course forward.

A second summit is now scheduled for Wednesday, at the latest, giving officials several more days to hammer out an agreement.

On the other side of the Atlantic, the latest batch of economic data showed that the world’s largest economy is still growing, albeit at an anaemic pace. Nevertheless, investors cheered that the numbers were not as bad as expected and as a whole did not point to an imminent recession. US corporate earnings for 3Q11 so far have been a mixed bag. Companies are by and large cautious on the outlook but not pessimistic.

China’s most recent data showed further cooling in the country’s economy. GDP for 3Q11 dropped to 9.1%, down from 9.5% in 2Q11 and 9.7% in 1Q11 on government tightening measures and the slowdown in global demand.

Despite some misgivings, most market observers believe that the government will successfully engineer a soft landing for the economy.

As a whole, sentiment for risky assets held up comparatively well last week even though bellwether indices in key Asian markets ended mostly in the red. Investors are keeping faith that a solution for the eurozone crisis will be found and that the world will avoid a double dip recession, at least for now.

We expect trading in the current week to continue to be directed by events in Europe, with all eyes on the outcome of the second summit.

The FBM KLCI swung between gains and losses throughout the week, reflecting uncertainties in the global financial market. The benchmark index eventually closed at 1,438.8 points last Friday on a small 3.6-point loss for the week. Last week’s losses broke the index’s three-week winning streak.

Trading volume improved. The daily trading volume on the local bourse rose to nearly 1.48 billion shares on average, up from the daily average of about 1.06 billion shares in the immediate preceding week.

Trading value was, however, lower as much of the trading interest was focused on lower liners — a shift from the bigger cap blue-chip stocks that we have seen previously.


Portfolio review
Stocks in our model portfolio underperformed the benchmark index last week. Total market value for our basket of 17 stocks was down 0.51% to RM368,520, compared with the FBM KLCI’s smaller 0.25% loss.

Seven stocks in our portfolio closed with gains last week while eight ended lower and two traded unchanged. Some of the notable gainers were Bumi Armada Bhd (+4.3%), Pantech Group Holdings Bhd (+1.1%) and Al-Aqar KPJ REIT (+0.9%). Genting Bhd (-1.5%), MyEG Services Bhd (-1.6%), DiGi.Com Bhd (-1.3%) and Media Chinese International Ltd (-4.3%) were among the bigger losers for the week.

Including our cash holdings, for which no interest income is imputed, our total portfolio value was down by 0.29% to RM647,733. Last week’s losses pared our model portfolio’s cumulative returns since inception to 304.8% on our initial capital of just RM160,000.

Nevertheless, we continue to outperform the FBM KLCI, which was up by about 122.5% over the same period.

Our cash holdings remain substantial, accounting for 43% of our total portfolio value.

The relatively high percentage is primarily for prudence’s sake — reflecting our cautious stance on the market outlook in the near term.

Our total profits are very substantial at RM487,733, of which RM399,053 has already been realised from previous share sales.

We kept our portfolio unchanged last week and will continue to monitor market developments.


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 24, 2011.

TNB 4QFY11: Another miserable quarter?

Tenaga Nasional Bhd (Oct 21, RM5.46)

Maintain hold at RM5.55 with revised target price of RM5.90 (from RM6.60): We believe that the upcoming 4QFY11 results scheduled on Friday will 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). We maintain our “hold” call, with a lower target price of RM5.90 (from RM6.60) after imputing the impact of gas supply issues. We favour the price-earnings ratio methodology and continue to apply TNB’s long-term average of 13 times on FY12 forecast earnings to derive our target price.

We estimate TNB will report a loss of RM230 million for 4QFY11, which is slightly better than the RM478 million core net loss achieved in 3QFY11. Gas supply disruption will force TNB to burn oil and distillates, and we estimate this to add RM1.2 billion to cost (versus RM1.4 billion in 3QFY11). The 2% base tariff increase in June will add RM160 million to RM170 million in additional revenue (one full quarter of impact) but it is insufficient to offset the impact of higher fuel costs.

This is the million ringgit question. The latest indication from Petronas is by end-October, and assuming the repairs are completed, it will recover 150 mmscfd back into the gas line. TNB’s allocation will be at least half of the recovered amount (75 mmscfd) and this will ramp up the total natural gas flow to TNB to 1,100-1,120 mmscfd, which should be sufficient for FY12 needs.


We estimate a base tariff hike of 1.0% to 1.5% in December, the next review date, based on fuel cost movements in the last six months. However, doubts linger whether the government will allow a hike given the impending general election. A 1% base tariff increase in December may lift our FY12 earnings forecast by RM188 million (7.6%).

We think TNB’s short-term outlook is dire, as 1QFY12 will continue to be loss making and will only be substantially profitable if the gas supply reverts to normal level (more than 1,150 mmscfd). We imputed these parameters and lowered our net profit forecasts: FY11 (37%), FY12 (11%) and FY13 (6%). — Maybank IB Research, Oct 21


This article appeared in The Edge Financial Daily, October 24, 2011.

Tan Chong confident production unaffected by Thai floods

KUALA LUMPUR: Tan Chong Motor Holdings Bhd is confident that the floods in Thailand will not adversely impact its production of Nissan cars for the near term.

“We assemble our cars but normally the business approach is to keep two to three months’ stock,” said Datuk Dr Ang Bon Beng, executive director of Edaran Tan Chong Motor Sdn Bhd, a subsidiary of Tan Chong.

Tan Chong has the mandate to distribute and manufacture Nissan cars in Malaysia, with its unit Edaran Tan Chong Motor, the trading and marketing arm for Nissan products.

However, if Thailand does not recover in the next two to three months, Tan Chong could have problems sourcing parts which in turn could lead to the group being unable to produce and deliver cars to customers on time, Ang said.

Ang added that he has confidence in the Nissan recovery team members as they have been working with Nissan Thailand to address the situation at hand.

He said if the Nissan team was able to handle Japan’s tsunami and earthquake in March, then the task force would have little difficulty in resolving this problem efficiently and effectively.

Ang: The business approach is to keep two to three months' stock.

There are also other alternatives, such as sourcing parts from China, Japan or Asean countries, Ang added.

For the first six months ended June, Tan Chong posted a net profit of RM130.54 million on RM2.07 billion in revenue. The company’s earnings per share (EPS) stood at 20 sen.

In the corresponding period of FY10, Tan Chong registered a net profit of RM128.33 million from RM1.8 billion in sales. Tan Chong’s EPS for the first six months of FY10 was 19.66 sen.

“We are seeing stability and consistency in terms of CKD (completely knocked down) deliveries for the first time since the disaster in Japan,” it said.

“With most of the bad news behind us and the economy indicating stability, if not mild acceleration, consumers are returning to showrooms even without an increase at incentive levels,” Tan Chong said.

Ang made these observations after launching the new Nissan Livina X-Gear, the first CKD B-segment crossover car, last Friday.

He is bullish on sales of the X-Gear to date. Since the first launch in mid-September, the company has received orders for 1,500 units, above Edaran Tan Chong Motor’s expectations of between 500 and 600 units, Ang added.

Edaran Tan Chong Motor plans to penetrate at least 5% of the B-segment market with the introduction of this car, said Ang.

The group also plans to increase its overall total industry volume (TIV) market share next year to 6.7%, from the current 5.7%, and will open no fewer than 10 showrooms in the next five years throughout Malaysia.

Tan Chong ended trading last Friday unchanged at RM4.46.


This article appeared in The Edge Financial Daily, October 24, 2011.

Short-term impact on local auto makers from floods

KUALA LUMPUR: There will be a short-term impact, though not a severe one, on the local automotive sector resulting from the protracted flooding in Thailand.

“We do not foresee this will heavily impact the industry over the midterm given the availability of alternative suppliers in the country’s non-affected areas,” OSK Research said in a report last week.

The research house said the areas in Thailand affected by the floods accounted for 10% of the country’s total production and the supply of critical components to the auto sector remained sturdy. It expects production to normalise in two months.

According to OSK Research, the flooded provinces house nearly 40 auto parts suppliers and car manufacturers affected are Honda Motor Corp, Mitsubishi and Toyota.

OSK Research remains bearish on the domestic automotive sector due to an expected change in overall consumer sentiment.

“Consumers are starting to become more cautious on big-ticket item purchases and if this persists, new model launches will unlikely spur growth for automakers,” it said.

OSK Research downgraded the auto sector to “underweight” from “neutral”, with a “sell” rating for UMW Holdings Bhd, Tan Chong Motor Holdings Bhd and Proton Holdings Bhd.

CIMB Research said although there was no interruption to the supply of vehicles to Malaysia, it cautioned investors to monitor the situation.

“There is no guarantee that deliveries will not be affected if the floods worsen. The Malaysian auto sector has had a very bumpy ride this year, which was hit by supply chain snags and the stronger US dollar. We advise investors to stay on the sidelines until there is clarity on the Thai situation,” said CIMB, adding that there is a risk to sales and earnings projections if the floods worsen, leading to an output jam.


This article appeared in The Edge Financial Daily, October 24, 2011.

Five companies pre-qualify for tunnelling package

Construction sector

Recommend overweight: The Edge Financial Daily reported that five companies have pre-qualified for the Klang Valley mass rapid transit (MRT) tunnelling contract. Tender documents were to be given out on Friday.

The MMC-Gamuda JV are the only local parties that have been pre-qualified. The other parties are China’s Sinohydro Group Ltd, South Korea’s SK Holdings as well as two other contenders from Japan and China. The financial daily also reported that other Malaysian companies which had earlier expressed interest were IJM Corp Bhd and UEM Group.

The final bidders shortlisted for this job are given three months to make their submissions for the contract. The tunnelling works form the single largest component of the Sungai Buloh-Kajang MRT line reportedly to cost about RM20 billion. The tunnelling portion is estimated at RM7 billion.

We are not surprised by this news. Following submissions by year-end, we expect the crystallisation of the tunnelling award in March or April next year.

We believe the MMC-Gamuda JV stands a strong chance of bidding for this job. Apart from being involved in the submission of the original MRT route, the JV has also been accorded a first right of refusal option to match competing bids under a “Swiss Challenge”.

Furthermore, we understand that the JV — having 50% bumiputera equity representation — would have up to 7.5% price advantage compared with 2.5% and 5% for other bidders, depending on the level of Malaysian participation in the various consortiums. But, we believe bidding margins may be more competitive than earlier envisaged. Machinery and equipment form a large chunk of tunnelling works. Our survey has revealed that Sinohydro could well emerge as a main competitor for the MMC-Gamuda JV.

We gather that the Chinese parties will likely use their own machinery at one third the cost of that from Germany that the MMC-Gamuda JV is reportedly to be considering.

In any case, we believe that the excitement surrounding the MRT tunnelling contract has been largely priced in for Gamuda.

Instead, we reckon investor attention would probably gravitate to identifying the proxies for the elevated packages worth a combined RM12 billion. We understand that tenders for the first package linking Taman-Maluri to Plaza Pheonix are out. Based on track record, major contenders could include IJM Corp, UEM Group, Malaysian Resources Corp Bhd, WCT Bhd and Loh & Loh Corp Bhd. — AmResearch, Oct 21


This article appeared in The Edge Financial Daily, October 24, 2011.

Petronas Chemicals sees fear of uncertainty

Petronas Chemicals Group Bhd (Oct 21, RM6.01)

Maintain neutral at RM6.04 with target price of RM5.60: Outlook for the petrochemical industry remains unclear on global economic uncertainty. Petronas Chemicals (PetChem) is greatly exposed to the external risks given its high earnings sensitivity to the global macroeconomic situation. Exports accounted for 58% of its FY11 total revenue. China alone contributed 18%. A potential hard landing in China is likely to affect PetChem’s earnings.

The betas of petrochemical stocks are generally high. PetChem was badly hit during the recent market selloff (Sept 26), when its share price tumbled 17.5% compared with the FBM KLCI’s 9.6%. Downsides are expected to be more severe especially if we are in a secular bear market, which is a likely scenario.

We expect PetChem’s 3QCY11 results, due next month, to remain weak on sequential quarter comparison. We reckon that this is attributed to the extended methane gas curtailment, which limits production particularly from the fertiliser and methanol (F&M) segment, and the slowdown in olefins and derivatives (O&D) demand.

Prices of certain O&D have retreated 15% to 26% from this year’s high, reflecting softening demand. In 3QCY11, average price of ethylene, propylene, polyethylene and polypropylene was lower quarter-on-quarter (q-o-q) at US$1,086 (RM3,432) per tonne (12.2% q-o-q), US$1,480 per tonne (1.6% q-o-q), US$1,524 per tonne (4.3% q-o-q ) and US$1,536 per tonne (4.7% q-o-q) respectively.

However, ammonia and urea prices remain favourable gaining 1.5% q-o-q and 22.9% q-o-q to US$574 and US$503 per tonne. Note that profit contribution from the F&M segment increased to 24% in 2QCY11 compared with only 14% in 1QCY11. Higher product price may mitigate the negative impact of production disruption.

We do not foresee significant catalysts to boost PetChem’s valuation and share price in the near term. As such, we maintain our “neutral” call with unchanged target price of RM5.60, ascribing a multiple of 12.8 times.

The targeted price-earnings ratio is already a premium to PetChem’s peers’ average of 8.5 times considering its higher profit margin and cheaper feedstock.

We believe further downsides are cushioned by: (i) PetChem’s net cash position of 79 sen per share; and (ii) Easing in selling pressure as we understand that PetChem’s foreign shareholdings are in the low teens now, declining from the high teens early this year. — MIDF Research, Oct 21


This article appeared in The Edge Financial Daily, October 24, 2011.

WCT acquiring freehold agricultural land in Serendah

WCT Bhd (Oct 21, RM2.38)

Maintain market perform at RM2.33 with fair value of RM2.08: WCT is acquiring a 172.7ha piece of freehold agricultural land in Serendah, Selangor, from Furqan Business Organisation Bhd/Danaharta Nasional Bhd for RM38.4 million cash. At RM38.4 million or RM2.04 psf, the pricing is at a 17% premium to the valuation of RM33 million or RM1.75 psf as appraised in April this year.

Against the going rate, even if we are to assume an efficiency (i.e. percentage of saleable land) of 50%, an effective land price of RM4.08 psf is still very much at the low end of the asking price range of RM4 to RM6 psf for comparable land parcels in the same area. The acquisition will increase WCT’s net debt and gearing of RM236.5 million and 0.17 times as at June 30 to RM274.9 million and 0.2 times that is still highly manageable. WCT intends to develop an integrated township on the land. Based on the rule of thumb that land cost makes up 10% to 15% of gross development value, we estimate that the GDV is RM300 million to RM400 million.

We are neutral on the latest development by WCT. While WCT is acquiring the land at a reasonable price, given the relatively remote location, we do not expect the development to take off in a major way over the short to medium term.

Forecasts are maintained as we do not expect meaningful contribution from the development within our forecast period.

Risks to our view include: (i) New contracts secured in FY11 to FY13 coming in below our target of RM1.5 billion per annum; and (ii) Escalation in input costs.

We have turned positive on the construction sector as there is now even more urgency for the government to expedite the rollout of various public projects to pump prime the local economy to shield it against the increased risk of the global economy slipping into a double dip recession. Indicative fair value for WCT is RM2.08 based on 12 times fully diluted FY12 earnings per share of 17.3sen, in line with our benchmark one-year forward target PER of 10 to 14 times for the construction sector. — RHB Research, Oct 21


This article appeared in The Edge Financial Daily, October 24, 2011.

BAT a yield seeker’s haven

British American Tobacco (M) Bhd (Oct 21, RM44.44)

Maintain hold at RM43.60 with target price of RM46.60: 3Q11 net profit came in at RM176.3 million (+3.3% year-on-year [y-o-y] but -4.3% quarter-on-quarter); 9M11 net profit of RM539 million made up 73% of our full-year estimate of RM735.2 million. This is slightly below expectations due to a one-off cost of RM12 million to restructure its distribution model.

3Q11 revenue grew 11.2% (y-o-y to RM1.1 billion lifted by a 3% growth in volume to 2.3 billion sticks, mainly driven by pre-budget trade loading. Excluding this, volume fell 1.4% y-o-y and revenue only increased 2.2% led by higher net pricing.

The overall market share posted a steady increase to 62% as of August 2011 led by its premium (market share: 72.3% versus 3Q10 71.6%) and value-for-money (VFM) (market share: 43.7% versus 3Q10 41.5%) segments. Earnings before interest and tax (Ebit) margin was lower at 22.1% (versus 3Q10: 22.8%; 2Q11: 24.1%) mainly due to the one-off restructuring cost.

We think an exemption from an excise tax hike in the recent Budget 2012 may help to stabilise the legal cigarette volume in 4Q11 while suppressing the rampant illicit trade. According to the March to May 2011 survey, illicit market share was high at 37.3% (versus 2010: 36.3%). However, the risk of excise tax remains as the government could increase it anytime without coinciding with the budget speech as seen in 2010.


BAT declared a third interim dividend per share of 60 sen net, bringing year-to-date DPS to RM2.10 (versus 9M10: RM1.77). This represents a 111.2% dividend payout versus our full-year assumption of 106% or RM2.69, implying a potential final DPS of about 59 sen in 4Q11, given its cash pile of RM318.5 million (RM1.12 per share) as at end-September versus historical levels of about RM200 million (70 sen per share).

We have trimmed FY11E earnings by 1.2% to account for the one-off restructuring cost for the distribution model. Maintain “hold” on BAT with a discount dividend model-based target price of RM46.60. — HwangDBS Vickers Research, Oct 21


This article appeared in The Edge Financial Daily, October 24, 2011.

JobStreet looks for silver lining

KUALA LUMPUR: In an economic slowdown the last thing one thinks of is changing jobs or increasing headcount. And that could be a worry for online recruitment firm JobStreet Corp Bhd.

As prospects of a global economic slowdown in 2012 loom large, JobStreet is facing concerns that its earnings could be impacted from weaker business sentiment and a soft job market.

In recent months, concerns over lower recruitment advertisements have pushed JobStreet’s share price down by some 20% to a six-month low of RM2.30 on Oct 7, from the previous levels of RM2.80 to RM2.90. The stock has since rebounded slightly to end last week at RM2.50.

JobStreet chief financial officer Greg Poarch acknowledges that the global sentiment has turned more negative since August.

Though there is an increasing likelihood of a worldwide economic slowdown next year, Poarch pointed out that many economists are still predicting reasonable economic growth for Malaysia in 2012.

Indeed, even as some economists doubt the government’s GDP growth projection of 5% to 6% for 2012, there is consensus that Malaysia could still record GDP growth of under 5%.

In an email interview with The Edge Financial Daily, Poarch said JobStreet is still confident that it will continue to do “relatively well” in 2012 as companies continue to compete for talent.

“Ultimately, Malaysia’s biggest problem is that the job market lacks talent. We believe it is still a priority issue for many companies rather than short-term dips in the global economy.

“Companies are still struggling to hire people and we believe many companies will start to look at down periods as a good opportunity to hire quality talent before the competition does,” Poarch said in the interview.

Poarch acknowledges that the global sentiment has turned more negative since August.

JobStreet’s online advertising site, JobStreet.com, has over 1.9 million registered jobseekers in Malaysia alone.

Malaysia is JobStreet’s main geographical segment, contributing over 60% of the group’s earnings and turnover. It also has presence in Singapore, the Philippines, Indonesia and is in the process of developing a presence in Thailand, India and Japan.

Earlier, JobStreet said demand for recruitment advertising services remained solid in 2H11, though it did not rule out a possible slowdown due to global economic uncertainty.

“JobStreet will focus on sustaining and increasing long-term shareholder value although profitability may be negatively impacted in the short term,” the group cautioned in the notes to its latest financial results.

JobStreet’s performance for FY11 ending Dec 31 will still depend on sustained economic growth, a competitive environment and the group’s ability to grow sales and investment performance, the group said.


For 2QFY11 ended June 30, JobStreet’s net profit rose 20.14% to RM13.35 million from RM11.11 million a year ago driven by higher sales from higher recruitment activities.
Pre-tax profit grew 12.51% to RM17.7 million from RM15.73 million a year ago on the back of 21.8% revenue growth to RM36.22 million from RM29.74 million a year ago.

During the quarter, JobStreet’s operating expenses increased by 26.4% due to higher staff costs and marketing expenses, the group said in the notes to its financial results.

Earnings per share was 4.2 sen and net assets per share was 59 sen as at June 30.

Quarter-on-quarter, JobStreet’s net profit climbed 18.26% to RM13.35 million from RM11.29 million while revenue grew 7.73% to RM36.22 million from RM33.62 million in the preceding quarter.

For the six-month period, JobStreet’s net profit grew 24.64% to RM24.64 million from RM19.8 million while revenue increased 21.76% to RM69.85 million from RM57.36 million a year ago.

Analysts said JobStreet is on track to meet net profit forecasts of between RM47 million and RM48 million in FY11, with JobStreet’s 1HFY11 profit of RM24.6 million constituting roughly half of the full year forecast.

However, analysts are less upbeat on JobStreet’s earnings prospects in FY12 and FY13, with two research houses calling “hold” on its stock and one with a “sell” call.

In a recent note, HwangDBS Vickers Research cautioned that JobStreet’s earnings in the next two years could face downside risks, and had slashed JobStreet’s forecast earnings for FY12 and FY13 by 20% to 21%.

The lower earnings projection for FY12 was based on the assumption that job advertisements could fall 14% y-o-y instead of an earlier projection of 15% growth while earnings before interest, tax and amortisation (Ebita) margin could be squeezed to 41% from 43%, HwangDBS Vickers Research said.

“Historically, JobStreet’s revenue correlated strongly with GDP with each 1% growth in GDP raising revenue by 3% to 5%.

“The current monthly average of 23,000 job advertisements for 3QFY11 may not be sustainable in 2012,” the research house said in a report dated Oct 4.

Nevertheless, JobStreet’s share price could be supported by its high net cash backing and prospective 3% net dividend yield for FY12, HwangDBS Vickers Research said.

As at June 30, 2011, the company had net cash and equivalents of RM83.06 million, which translates into 25.5 sen per share. That accounted for 43% of its net assets per share of 59 sen.

HwangDBS Vickers also pointed out that Malaysia, JobStreet’s core market, currently appears less vulnerable to external turbulence as it is supported by the government’s Economic Transformation Programme (ETP), which aims to create 3.3 million new jobs by 2020.

Still, macro-economic challenges exist, and JobStreet is also facing higher competition and lower pricing for job postings from its main regional competitor, Hong Kong-based JobsDB Inc, which operates online recruitment websites in Southeast Asia, Australia and China.

JobStreet’s single largest shareholder is Australia-based recruitment website SEEK Ltd, which held a 22.3% stake as at May 9, 2011.

SEEK’s 69%-owned subsidiary, SEEKAsia Ltd, however, also holds an 80% stake in JobsDB.

In July, SEEKAsia increased its shareholding in JobsDB to 80% from the 60% block it acquired in December last year.

Poarch said JobStreet will continue to compete with JobsDB by leveraging its competitive advantage in Southeast Asia, ensuring quality customer service and keeping costs low.

Earlier this month, HwangDBS Vickers Research downgraded JobStreet to a “hold” while revising downwards its 12-month target price to RM2.30 from RM3.60 due to moderate growth prospects.

OSK Research, meanwhile, reiterated its “sell” call on JobStreet’s stock at a revised fair value of RM2.10 based on a forward price-earnings ratio of 13 times for FY12.

According to OSK Research, JobStreet is currently trading at a FY12 PER of 18 times, which the research house said is unjustified given the gloomy global economic outlook which is likely to dampen hiring sentiment.

Poarch shrugged off the valuations attached to JobStreet’s stock, saying, “We will just focus on building a strong, sustainable business and let the market decide the valuation”.


This article appeared in The Edge Financial Daily, October 24, 2011.

Are weak IPOs worth another look?

KUALA LUMPUR: Many of this year’s initial public offering (IPO) stocks have been among Bursa Malaysia’s worst performers — but are they now worth another look?

Interest certainly appears to be returning to them, as investors are starting to take notice of stocks that have fallen under the radar and are offering good bargains.

In the past 1½ weeks, stocks such as UOA Development Bhd, MSM Malaysia Holdings Bhd and Petronas Chemicals Group Bhd have regularly dominated either the top actives or gainers lists, while others like Oldtown Bhd and Benalec Holdings Bhd have bounced well off their lows on high volume.

Many of the newly listed stocks slumped after their debuts. Fuelled by weak market sentiment, they have fallen more than the general market due to a high number of short-term investors, such as venture capitalists, high net worth placees and short-term institutional funds, exiting these stocks, said industry observers.

The renewed interest in IPOs was triggered on Oct 13, when UOA emerged from almost nowhere as one of the most actively traded stocks, closing 22 sen or 17.2% higher at RM1.50.

The stock again emerged as one of the most actively traded a week later last Thursday when it surged 19 sen or 12.58% to RM1.70.

Though ending last Friday lower at RM1.59, the stock has gained 37.1% since hitting a low of RM1.16 on Sept 27. Its net assets per share was RM1.35 as at June 30.

Even now, the stock is still 38.8% off its IPO price of RM2.60 when it was listed on June 8. During its lows, few had noticed that UOA had actually slumped more than 55.4%.

The Edge Financial Daily took a look at some of the best and worst performing IPOs this year, and which stocks may be of interest to investors.

As at last Friday, only eight out of 26 companies listed this year were winners.

The two biggest losers were MClean Technologies Bhd (-68.3%) and XOX Bhd (-69.4%), for fairly obvious reasons as their results have been less than impressive.

They were followed by UOA (-38.8%), Maxwell International Holdings Bhd (-34.3%), Oldtown (-12.8%), and Hibiscus Petroleum Bhd (-10%).

Listed on the ACE Market on May 10, MClean’s share price has dropped 68.3% to 16.5 sen from its listing price of 52 sen.


MClean, which provides precision cleaning services for hard disk drives, caused shock waves when it announced a net loss of RM190,000 just three weeks after its listing in May.

Another ACE Market-listed company, XOX tumbled 69.4% to close at 24.5 sen last Friday, compared with its offer price of 80 sen.

XOX also stunned when it reported a loss of RM1.66 million for 1QFY11 just a day before its debut. The loss sent its share price south by more than 35% on its debut. For its 2QFY11, XOX reported a net loss of RM2.92 million, due to higher selling and distribution expenses.

Value among major losers?
Not all of the IPOs that fared badly were due to their fundamentals, with UOA, Maxwell and Oldtown among those that could look attractive.

Affin Investment Bank has a “buy” call on UOA with a target price of RM2.07.

“We believe that value has emerged after UOA’s sharp share price correction,” it stated in an Oct 12 report.

UOA recently strengthened its landbank with the proposed acquisition of 9.8 acres of freehold land in Kepong for RM72.9 million or RM170 psf.

The report said it expects UOA’s other standalone residential projects such as Setapak Green and Sri Petaling and current unbilled sales of RM684 million to help sustain its medium-term earnings and dividend yield of over 5.5%.

China-based sports footwear designer and manufacturer Maxwell saw its share price close at 35.5 sen on Friday, down 34.3% from its IPO price of 54 sen in January.

While investors have been cautious of China-based companies in general, Maxwell appears to have a good earnings track record and high dividends to boot.
Between 2006 and 2010, Maxwell’s revenue and net profit saw a compound annual growth rate of 46% and 53% respectively.

For its first half this year, it had a cumulative revenue of RM157.34 million and net profit of RM26.99 million. With half-year earnings per share (EPS) of 6.75 sen, its annualised price-earnings ratio (PER) would be just 2.63 times.

Maxwell paid its maiden dividend of 3.35 sen net per share on Sept 28, representing a 9.4% net yield on its prevailing price.

Hibiscus, a special purpose acquisition company, was the first of its kind to be listed on Bursa Malaysia in July. It elicited some negative publicity then for its relatively high premium for what was essentially seen as a cash-rich shell company with management expertise.

From an IPO price of 75 sen though, Hibiscus’ share price has tumbled by 10% to 67.5 sen, above its cash per share of 58.6 sen. Hibiscus has three years from the time of listing to acquire a target company or asset, failing which it will be liquidated.

Meanwhile, despite the resilience of the food and beverage (F&B) sector, Oldtown saw its share price dip by 12.8% to RM1.09 from its IPO price of RM1.25.

Listed in July, the local coffee manufacturer and cafe operator is penetrating the China consumer market by opening its first two cafes in Guangzhou this month. Oldtown has set up a food processing centre in China and is targeting to open more outlets, especially in southern China, to achieve greater economies of scale. Although not rated, a report by OSK Research on Sept 20 valued Oldtown at 12.5 times FY11 EPS, which translates into a fair value of RM1.34.

Top performers: Are they still worth buying?
Some of the IPO stocks which had the best returns as at last Friday are Boilermech Holdings Bhd (+93.9%), Berjaya Food Bhd (BFood) (+71.6%), MSM Malaysia Bhd (+42.9%), Bumi Armada Bhd (+20.8%), and Benalec Holdings Bhd (16%).

Listed on the ACE Market on May 5, Boilermech has been the best performing IPO this year gaining 93.9% to 64 sen from its listing price of 33 sen. Still, the stock has fallen 35.7% from an all-time high of 99.5 sen in May.

A biomass boiler manufacturer, Boilermech is a 35% associate company of food and agriculture group QL Resources Bhd. It is primarily engaged in the manufacture of boilers for the plantation, manufacturing and food industries.

Boilermech’s performance, market observers said, was attributed to its strong parent, QL Resources and its exposure to the renewable energy sector.

The second best performer was BFood, which is mainly involved in the operations of Kenny Rogers Roasters (KRR) restaurants in Malaysia. The stock has climbed 71.6% to 87.5 sen last Friday from its IPO price of 51 sen.

With 68 restaurants, BFood plans to open another 15 KRR restaurants in FY12. Via a joint venture, it will also expand its KRR operations in Indonesia where it targets to open 12 stores by end-June 2012.

For its FY11 ended April 30, its net profit was up by 17% to RM10.2 million from RM8.68 million in FY10. Revenue grew by 19% to RM71.9 million from RM60.42 in FY10.

BFood has a clean balance sheet with net cash of about RM31.29 million and no borrowings as at end-July. It paid its first interim dividend of three sen in FY11, amounting to RM4.26 million, which translates into a payout ratio of 41.8% and net yield of 3.4%. BFood’s earnings for FY13 onwards will get a boost from the ongoing acquisition of a 50% stake in Berjaya Starbucks Coffee Co Sdn Bhd, which will be concluded in 1Q12. It targets to open 12 to 15 Starbucks outlets every year.

Last Friday, the stock had a historical PER of 12.4 times and market capitalisation of RM124.24 million. As a comparison, KFC Holdings (M) Bhd has a historical PER of 17.2 times and market capitalisation of RM2.697 billion.

MSM, the largest sugar refiner in the country, was listed at end-June with an IPO price of RM3.50. Its share price had gained 42.9% to RM5 last Friday, partly due to its small free float.

MSM has adopted a dividend policy to pay out at least 50% of its annual net profit. Assuming this payout level, annual dividends are estimated to be 20 sen per share in 2011/12, which translates into a net yield of about 4% at its closing price on Friday.

As at end-June, MSM had net cash of RM141.7 million, which will support future capital expansion. About RM320 million of the RM425 million proceeds from the IPO have been allocated for capital expansion over the next two to three years.

A report by OSK Research on Sept 27 had a “buy” call on MSM with a fair value of RM5.24.

Benalec worth watching
Analysts say Benalec is a stock worth watching, as the company is well-liked for its niche in land reclamation jobs where margins are high and competitors are few. Its land reclamation projects also provide Benalec with ample and low-cost landbank for property development.

Listed on Jan 17, the stock closed at RM1.16 last Friday, 16% above its offer price of RM1, but well below its year high of RM1.61.

Benalec is bidding for land reclamation projects with a combined estimated contract value of RM8 billion and has a large unbilled order book of RM590 million.

AmResearch and Kenanga Research have “buy” recommendations with a price target of RM2.22 and RM1.93 respectively.

Bumi Armada, an oilfield services provider, rose 20.8% to RM3.66 last Friday, compared with its listing price of RM3.03 in July.

In late September, Bumi Armada announced its wholly-owned unit Armada Balnaves Pte Ltd had signed a floating, production, storage and offloading contract with Apache Energy Ltd, Australia. Valued at about RM1.46 billion, the contract is expected to contribute positively to Bumi Armada’s revenue and earnings for FY11 ending Dec 31.


This article appeared in The Edge Financial Daily, October 24, 2011.

YTL Comms submits plan to roll out 4G in East Malaysia

YTL Communications Sdn Bhd (YTL Comms) has submitted its business plan to Malaysian Communications and Multimedia Commission (MCMC) to secure spectrum licences to roll out its Yes 4G mobile internet-with-voice service in Sabah and Sarawak.

Its chief executive officer, Wing K. Lee, said the company was currently awaiting feedback from MCMC. "MCMC will review the plan and give us the feedback," he told a media briefing here today.

He said the company launched its network in Terengganu recently as part of its effort to make access to its 4G service widespread in the East Coast of Peninsular Malaysia.

Lee said the company planned to add over 2,500 base stations by year-end and cover 85 per cent of the population in Peninsular Malaysia.

"Currently, we have 2,000 base stations in Peninsular Malaysia and our Yes network covers 65 per cent of the population," he said. He said with the deployment of more base stations, the number of YES subscribers was expected to increase to over 400,000 by year-end from 300,000 currently.

Lee said since the launch of Yes, YTL had carried over seven million minutes of voice calls, two million SMS and 825 terabytes of data traffic. "I am pleased that we enjoy a customer satisfaction rating of over 86 per cent currently," he said. -- Bernama

Supermax posts lower Q3 pre-tax profit

Supermax Corp Bhd posted a lower pre-tax profit of RM34.088 million in the third quarter ended Sept 30, 2011 as against the RM41.448 million recorded in the same quarter of last year.

In a filing to Bursa Malaysia today, the world’s second largest rubber gloves maker said revenue however, increased to RM271.419 million from RM235.104 million previously.

In a separate statement, Supermax's Executive Chairman and Group Managing Director Datuk Seri Stanley Thai said the better performance was due to increased sales for both natural rubber and nitrile latex gloves.

"Overall profit margins rose from 11.2 to 11.4 per cent as the group benefited from lower natural rubber latex prices and a relatively stable US:RM exchange rate environment," he added.

He said while Supermax is increasing the production output of nitrile gloves, the group has been maintaining its global manufacturing margins at between 11 and 15 per cent to be in line with global prices, especially gloves from China.

Supermax is also confident of achieving the full year profit after tax of between RM100 million and RM120 million for the current financial year.

"Demand for the industry remained resilient. We are expanding to step up production lines for additional capacity to reduce delivery lead time and improve profitability through higher efficiency and better productivity," Thai said.

Currently, the group is at an advanced stage of its expansion plan to grow its surgical glove capacity 10-fold. The new lines are expected to be ready by year-end and would enable Supermax to tap into the highly lucrative market.

"This new capacity is expected to contribute US$10.1 million in additional profits to the group next year," Supermax said.

The board of directors has also declared an interim dividend of six per cent tax exempt, amounting to RM10.2 million to be paid on December 8, in respect of the financial year ending December 31, 2011. -- Bernama

KL shares higher at mid-afternoon

Share prices on Bursa Malaysia maintained the uptrend at mid-afternoon today, weighed on by gains from bluechips led by British American Tobacco (BAT), MISC, Hong Leong, Genting and Digi.

As at 3.01pm, the benchmark index advanced 18.44 points to 1,457.27. BAT rose 40 sen to RM44.84, Hong Leong added 30 sen to RM11.58, Genting advanced 29 sen to RM10.04 and Digi earned 22 sen to RM31.80.

"Investor sentiment was prompted by the better movement on regional markets following positive progress on the Eurozone debt crisis," a dealer said.

The Finance Index rose 116.35 points to 13,197.47, the Industrial Index was up by 47.45 points to 2,684.76 and the Plantation Index increased 70.02 points to 7,389.95.

The FBM Emas added 119.56 points to 9,926.52 and the FBM 70 Index improved by 101.06 points to 10,641.77.

The FBMT100 rose 116.81 points to 9,744.97 and the FBM Ace Index gained 60.11 points to 4,020.60.

Advancers led decliners by 518 to 155 while 242 counters were unchanged, 546 untraded and 23 others suspended. Trading was moderate with a total volume of 853.4 million shares worth RM772.8 million.

Of the active counters, Time DotCom rose three sen to 60 sen, The Media Shoppe and Karambunai gained half-a-sen each to 10.5 sen and 14 sen respectively while Ramunia Holdings added one sen to 39.5 sen

Among heavyweights, Maybank advanced 10 sen to RM8.35, CIMB rose two sen to RM7.21 and Sime Darby added 15 sen to RM8.70 with Petronas Chemicals gaining 14 sen to RM6.15. -- Bernama

Supermax slips after fall in 3Q earnings

KUALA LUMPUR: Shares of SUPERMAX CORPORATION BHD [] fell to a low of RM3.17 on Monday, Oct 24 after its net profit fell 18.9% to RM30.91 million in the third quarter ended Sept 30, 2011.

At 3.38pm, it was down six sen to RM3.19. There were 1.28 million shares done at prices ranging from RM3.17 to RM3.28.

The glove maker said the weaker earnings were due to the impact of higher natural rubber and nitrile latex prices.

Allthough profitability was lower than last year, it was seeing positive signs for a rebound after recording a second consecutive quarter of core profit growth.

It said natural rubber latex prices fell from a high of RM10.87 per kg wet in April 2011 to RM7.91 as at Oct 21.

Maxis up, RHB Research keeps fair value at RM5.65

KUALA LUMPUR: Maxis Bhd shares rose in afternoon trade on Monday, Oct 24, but the gains were outpaced by other key KLCI stocks, though analysts were positive on the telco’s tie up with U Mobile to provide its 3G radio access network (RAN).

At 3.01pm, Maxis rose nine sen to RM5.34. There were 831,500 shares done at prices ranging from RM5.30 and RM5.37.

RHB Research Institute said it was positive on the tie-up which would stretch an initial period of 10 years and cater for long-term evolution (LTE) when the spectrum becomes available.

Maxis and U Mobile entered into an agreement to share Maxis’ 3G radio access network (RAN), for an initial period of 10 years and will cater for long-term evolution (LTE) when the spectrum becomes available.

“Details were vague, but we are positive on the move as a means to help maintain Maxis’ industry leading EBITDA margin of 50% in the medium term through capex and opex savings,” it said.

RHB Research said the active sharing arrangement could help Maxis mitigate margin erosion arising from subscriber acquisition costs related to its new Home Services. Besides that, Maxis will also likely generate some roaming revenue on a net basis given its wider 3G network coverage.

“We however believe that both companies may not gain as much as the RM2.2bn capex and opex combined savings that Celcom and DiGi are targeting through passive sharing over 10 years, given that Maxis and U Mobile do not have significant overlap in 3G coverage, except in mainly urban areas such as the Klang Valley and Johor Baru.

“Also, U Mobile does not have a nationwide 2G network, relying instead on an existing domestic 2G network roaming arrangement with Celcom, which will expire by Sep 2013.

“DCF fair value maintained at RM5.65. As a defensive play with purely domestic mobile operations, we maintain our Outperform call on Maxis amid global external uncertainties,” it said.

Maybank ties up with India’s Axis Bank for remittance services

KUALA LUMPUR: Malayan Banking Bhd expects 15% growth in remittances for its Maybank Money Express (MME) service following its tie-up with Axis bank of India to introduce remittance services to beneficiary accounts in India.

Maybank said on Monday, Oct 24 this service offered competitive service charge to its customers and it also reduced the time taken for remittances from Malaysia to India compared to conventional remittance method (Swift) which took about two days to reach the beneficiary.

Maybank deputy president & head, community financial services, Lim Hong Tat said the tie-up with Axis Bank “speaks volume” about the potential from the large number of remitters to India from Malaysia and vice-versa.

“We expect this new service to strengthen Maybank’s foreign remittance segment for which we currently have a 36 % overall outward remittance value amongst the banks and we are targeting it to grow 15% by June 2012,” he said.

The new remittance service is an extension of the existing facilities offered by Maybank Money Express service. The service offers straight-through remittances to intended beneficiaries holding accounts with Axis Bank or any of the 78,000 National Electronic Funds Transfer (NEFT)-enabled branches of over 100 other banks in India.

For individual customers, there is a limit of RM10,000 per customer, per day for remittance via Maybank. Maybank Money Express currently serves nine countries which include Indonesia, Vietnam, Pakistan, Nepal, the Philippines, Cambodia, Brunei, Singapore and India.

India is the largest remittance receiving country in the world, receiving inward remittances of more than US$55 billion in 2009 to 2010.

FBMKLCI rises 1.3pc at midday

Share prices on Bursa Malaysia continued the uptrend at midday today, in line with the positive movement on markets regionally, dealers said.

The market also took cue from the positive signs emerging from the plan to contain the eurozone's sovereign debt crisis, a dealer said.

At the end of the morning session, the FTSE Bursa Malaysia KLCI (FBM KLCI) advanced 18.97 points to 1,457.80.

The benchmark index moved between a high of 1,462.06 and a low of 1,449.10.

The Finance Index rose 115.43 points to 13,196.55, the Industrial Index edged up 50.63 points to 2,687.94 and the Plantation Index added 88.92 points to 7,408.85.

The FBM Emas rose 121.35 points to 9,928.30, the FBMT100 added 118.68 points to 9,746.84 and the FBM Ace Index improved 67.82 points to 4,028.31 while the FBM 70 Index increased 96.31 points to 10,637.02.

Advancers led decliners by 508 to 143 while 226 counters were unchanged, 584 untraded and 23 others suspended.

Trading was moderate with a total volume of 754.23 million shares worth RM648.31 million.

Of the active counters, Time DotCom rose four sen to 58 sen, The Media Shoppe gained half-a-sen to 10.5 sen, Karambunai and Ramunia Holdings added one sen each to 14 sen and 40 sen, respectively.

Among heavyweights, Maybank advanced 10 sen to RM8.35, CIMB rose one sen to RM7.20 and Sime Darby added 16 sen to RM8.71 with Petronas Chemicals gaining 14 sen to RM6.15. -- Bernama

Dayang jumps on maintenance job win

Dayang Enterprise Holdings Bhd, a Malaysian oil and gas services provider, rose the most in a week after receiving an extension of a maintenance services contract valued at as much as RM100 million.

The stock gained 2.9 per cent to RM1.75 at 10.41 am local time in Kuala Lumpur trading, set for its steepest increase since October 17. - Bernama

Buy Axis REIT shares: OSK

Axis Real Estate Investment Trust (REIT) is expected to issue sukuk bonds worth RM300 million in the near-term to refinance its short-term debt, extend its debt expiry profile and lock in lower interest rate.

As at Sept 30, Axis REIT short-term debt stood at RM340 million, with RM198 million due this year.

However, it is likely REIT may draw down a portion first, given the revolving credit due to the maturity in 2011, and planned unit placement, HwangDBS Vickers Research said in a statement today.

"At 38.2 per cent gearing (Sept 30) based on total asset value, the company could still take on around RM151.1 million in debt before hitting the 50 per cent threshold.

"This is unlikely as impending capital management exercises should supplement its existing funding for asset acquisition purposes and bring it to a more comfortable low around 30 per cent level," it said.

The research firm maintained its "buy" call on the REIT and reduced the target price by 15 sen to RM2.75 from RM2.90.
-- Bernama

OSK maintains 'buy' call on Ajiya

OSK Research Sdn Bhd has lowered Ajiya Bhd's net profit forecast by 12.1 per cent and 11 per cent for the financial years 2011 (FY11) and 2012, respectively.

"Ajiya reported nine-month FY11 results that were below our forecast," OSK said in a research note today.

It said Ajiya's revenue and net profit dwindled quarter-on-quarter by 14.5 per cent and 62.1 per cent, respectively, due to slower sales and rising raw material costs.

The research firm said the company continued to face challenges of rising input costs.

Despite lowering the net profit forecast, OSK maintained the positive view on Ajiya for FY12. It also maintained its "buy" recommendation with a lowered fair value (FV) to RM1.94 from RM2.17.

OSK said: "We still think Ajiya is a "buy", given the still significant price upside to our FV, and we still think it should benefit from the projects under the Economic Transformation Programme, which the company has been gearing up for since earlier this year." -- Bernama

OSK keeps 'buy' call on Pos

OSK Research is maintaining its "buy" recommendation on Pos Malaysia Bhd, given the group's positive synergies with DRB-Hicom Bhd and its collaboration with Bank Muamalat Malaysia Bhd.

OSK Research said in a research note today: "We maintain our earnings forecast at this juncture because we believe the group will be unveiling more collaboration efforts with DRB-HICOM going forward."

The research firm said the tie-up with Bank Muamalat and Uni-Asia Life Insurance would boost Pos Malaysia's retail service and it would leverage on DRB's Kuala Lumpur Airport Services (KLAS) to enhance its PosLaju courier services.

OSK Research also highlighted the potential for DRB to unlock the value of the five land plots owned by Pos Malaysia through redevelopment.

The research firm said it is maintaining the "buy" call on Pos Malaysia with a fair value (FV) of RM4.12. -- Bernama

Supermax 3Q earnings slump 18.9% to RM30.91m

KUALA LUMPUR: SUPERMAX CORPORATION BHD []’s net profit fell 18.9% to RM30.91 million in the third quarter ended Sept 30, 2011 from RM38.11 million a year ago, affected by the higher natural rubber and nitrile latex prices.

It said on Monday, Oct 24 although profitability is lower than last year, “we are seeing positive signs for a rebound after recording a second consecutive quarter of core profit growth”. It said natural rubber latex prices fell from a high of RM10.87 per kg wet in April 2011 to RM7.91 as at Oct 21.

Supermax’s revenue was however higher at RM271.42 million, up 15.4% from RM235.10 million from a year ago. Earnings per share were 9.09 sen compared with 11.24 sen. It declared a dividend of 3.0 sen per share.

It added the higher revenue was because it benefited from a full quarter contribution from new lines commissioned in the final two weeks of the corresponding quarter last year.

For the nine-month period, earnings fell 42.5% to RM77.86 million from RM135.44 million. Revenue rose 8.7% to RM750.71 million from RM690.58 million.

However, it expected earnings to range between RM100 million and RM120 million for the financial year ending Dec 31, 2011.

IOI expects stronger earnings for FY end June 2012

KUALA LUMPUR: IOI CORPORATION BHD [] expects its financial performance for the current financial year ending June 30, 2012 (FY2012) to be better than FY2011.

Its group executive director Datuk Lee Yeow Chor said on Monday, Oct 24 the optimism was based on the improved profitability in its resources based manufacturing division, underpinned by lower crude palm oil prices.

At midday, CPO for third month delivery was up RM10 to RM2,892 per tonne.

Optimism returns to markets, KLCI up nearly 20 pts

KUALA LUMPUR: Key regional markets notched up gains of between 0.35% and 3.92% at the midday break on Monday, Oct 24 as optimism returned to the market on hopes of a solid resolution to the euro zone debt crisis on Wednesday.

At 12.30pm, the FBM KLCI rose 1.32% or 19.32 points to 1,458.15. Turnover was 754.23 million shares valued at RM648.31 million. Advancing counters beat decliners 506 to 143 while 226 stocks were unchanged.

US light crude oil rose 77 sen to US$88.17 while Brent crude rose above US$110, crude palm oil futures rose RM10 to RM2,893 and the ringgit was firmer at 3.1300 to the US dollar.

Reuters reported investors are riding high on hopes that Wednesday's meeting of euro zone leaders to discuss their final decisions on the debt issue would yield even more positive results. However, sharp differences remain over the size of losses private holders of Greek government bonds will have to accept.

Hong Kong’s Hang Seng Index rose 3.92% to 18,731.74, South Korea’s Kospi 2.82% to 1,890.15, Taiwan’s Taiex 2.67% to 7,448.05 and Singapore’s STI 1.99% to 2,766.37 while Japan’s Nikkei 225 gained 1.7% to 8,226.13. Shanghai's Composite Index inched up 0.35% to 2,325.30.

At Bursa Malaysia, local funds were seen nibbling on selected blue chips, including Petronas related stocks and Genting.

Genting rose 27 sen to RM10.02, pushing the index up by 2.31 points while Sime Darby added 16 sen to RM8.71, nudging the index by 2.22 points while IOI Corp’s gains of 12 sen to RM5.12 (1.78 points to the index).

MISC rose 31 sen to RM6.95, PetGas and PetDag 18 sen each to RM13.28 and RM16.38.

Among consumer stocks BAT was the top gainer, rising 42 sen to RM44.86, Dutch Lady 30 sen to RM19.30 and Nestle 18 sen to RM49.48. Other major gainers were HLFG, which added 32 sen to RM11.60 and DiGi 22 sen to RM31.80.

The most active was MBF Holdings-WA, up 3.5 sen to 14 sen with 69.92 million units done. Time dotCom rose four sen to 61 sen and the call warrants TimeCom-CA 0.5 sen to two sen.

PNB buys nearly 3.5m S P Setia shares

KUALA LUMPUR: Permodalan Nasional Bhd (PNB) raised its stake in S P Setia Bhd with the purchase of another 3.469 million shares and 1.206 million warrants in the open market last Friday, Oct 21.

Maybank Investment Bank said on Monday, Oct 24 that PNB ought the 3.469 million shares at an average price of RM3.82 sen. It bought the 1.206 million 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.

Mid-day markets continue upward trend

KUALA LUMPUR: Markets continued its uptrend at mid-day, with all regional bourses trading in the positive.

On the global scene, markets held their breaths as the world waits at the edge of its seat for the apex of the European Union (EU) two-leg summit this Wednesday.

Key indices in the United States climbed between 1.5% and 2.3% on Friday, rallying in expectations of a comprehensive plan to counter the EU sovereign debt crisis.

In its market preview for today, HwangDBS Vickers Research said that “we reckon that the benchmark FBM KLCI will probably trade sideways with a slight positive bias. However, we think the benchmark index is unlikely to break through the immediate resistance level of 1,445”.

It added that counters Damansara Realty Bhd and Dayang Enterprise Holdings Bhd may expect movements today following reports that Johor Corp is looking to inject some of its property assets into its subsidiary Damansara Realty while Murphy Sarawak has awarded Dayang a contract extension estimated at RM50mil to RM100mil.

The FBM KLCI at mid-day trade was at 1459.61 points, up 1.44% with 754.23mil shares traded valued at RM648.31mil. 508 counters gained and 143 lost while 226 remained unchanged.

Top gainers were British American Tobacco (M) which gained 42 sen to RM44.86; Hong Leong Financial Group Bhd, which rose 32 sen to RM11.60 and MISC Bhd which climbed 31 sen to RM6.95.

Top losing counters were Stone Master Corporation Bhd which slid 19.5 sen to RM0.30; Warisan TC Holdings Bhd which shed 10 sen to RM2.21 and UMW Holdings Bhd which dipped 10 sen to RM6.70.

On the regional level, Singapore's Straits Times Index was up 1.98% at 2765.99; Hong Kong's Hang Seng Index rose 3.92% to 18731.74; Seoul's Kospi Index gained 2.81% to 1890.04; Shanghai's A share index dipped 0.35% to 2325.30 and Tokyo's Nikkei 225 was 1.83% better at 8837.51.

Nymex crude oil was quoted at USD88.17 per barrel. Spot gold was USD1644.90 per ounce while silver was USD31.49 per ounce.

The ringgit was quoted at 3.1366 to the USD and 4.3486 to the euro.

Genting Malaysia price estimate raised

Genting Malaysia Bhd rose in Kuala Lumpur trading after its share-price estimate was increased at UOB Kay-Hian Holdings Ltd, which cited its overseas earnings growth prospects.

The stock climbed 1.1 percent to RM3.71 at 9:31 a.m. local time, set for its highest close since Oct. 13.

The share estimate was raised to RM3.95 from RM3.79, UOB-Kay Hian wrote in a report today. -- Bloomberg

Damansara Realty gains most in 28 months

Damansara Realty Bhd, a Malaysian builder and property developer, rose to its highest level in more than 28 months after The Edge reported that its parent Johor Corp may transfer property projects to the company.

The stock gained 6.7 percent to 88 sen at 9:16 a.m. local time in Kuala Lumpur trading, set for the highest close since June 16, 2009. -- Bloomberg

Blue chips power ahead 22 pts

KUALA LUMPUR: Blue chips, led by Sime, Petronas stocks and Genting powered ahead in the first hour of trade on Monday, Oct 24 as investors were optimistic about the plan to contain the euro zone's sovereign debt crisis.

At 10am, the FBM KLCI was up 22.40 points or 1.56% to 1,461.23. Turnover was 330.95 million shares valued at RM223.96 million. The broader market displayed the positive outlook, with 395 gainers, 68 losers and 158 stocks unchanged.

The ringgit was firmer against the US dollar, up 0.0120 to RM3.1365. US crude oil was up 25 sen to US$87.65.

Key regional markets rallied, with the MSCI Asia Pacific Index up 1.7%. Hong Kong’s Hang Seng Index opened up 3.1% to 18,584.46 and Singapore’s Straits Times Index added 1.59% to 2,755.51 while Shanghai’s Composite Index gained 0.66% to 2,332.51. Japan’s Nikkei 225 rose 1.36% to 8,797.02.

Petronas Gas rose 30 sen to RM13.40 and PetDag 20 sen to RM16.40 while MISC added 20 sen to RM6.40.

BAT was the top gainer, adding 46 sen to RM44.90 while HLFG gained 38 sen to RM11.60 and Sime 29 sen to RM8.4 and DiGi 28 sen to RM31.86. Genting climbed 21 sen to RM9.96 and Genting PLANTATION []s to RM7.48.

CIMB Equities Research, in its technical analysis of the KLCI, said the 30-stock index went into a consolidation phase last week. Index hit a high of 1,465 but succumbed to profit taking by the end of the week.

“This week, we expect the market to remain sideways, possibly between the 1,430-1,465 levels. A break either way will influence its next immediate term trend. If the 50-day SMA (1,437) fails to hold, then the bears would have an upper hand.

“Otherwise, there is still a possibility that the index may charge towards 1,465 again. If this level is taken out, then the 61.8% retracement of the July-September downtrend at 1,487 will be its next target to beat,” it said.

Tanjung Offshore rises on Petronas unit job

Tanjung Offshore Bhd, a Malaysian oil and gas services provider, rose the most in two weeks in Kuala Lumpur trading after winning a RM27 million charter contract from Petronas Carigali Sdn Bhd.

The stock gained 4.2 percent to 87.5 sen at 9:00 a.m. local time, set for the largest gain since Oct. 11. -- Bloomberg

Silk advances on winning contract extension

Silk Holdings, a Malaysian oil and gas services provider, rose to a seven-week high after it won a RM23.5 million contract extension for the supply of an anchor-handling tug to Petronas Carigali Sdn Bhd.

The stock gained 8 percent to 27 sen at 9:03 a.m. local time in Kuala Lumpur trading, set for its highest close since Sept. 2. -- Bloomberg

CIMB Research has technical buy on Tomypak

KUALA LUMPUR: CIMB Equities Research has a technical buy on Tomypak Holdings at 91.5 sen at which it is trading at a FY12 price-to-earnings of 3.7 times and price-to-book value of 0.5 times.

It said on Monday, Oct 24 Tomypak may have bottomed out at the 86 sen level. Recent rebound lifted prices above its downward slopping resistance trend line and this could be seen as a prelude to more upside ahead.

“If prices can continue to hold above its 30-day and 50-day SMAs, there is a good chance that prices may re-rate towards 97 sen to 99.5 sen levels. The 200-day SMA is also a magnet for prices.

CIMB Research said traders may start to nibble now. However, it cautioned that traders should be prepared to cut loss if the 86 sen level is violated. A slight setback is its thin trading volume.

CIMB Research has technical sell on Malton

KUALA LUMPUR: CIMB Equities Research has a technical sell on Malton at 58 sen at which it is trading at a price-to-book value of 0.4 times.

It said on Monday, Oct 24 the rebound from its 39 sen low may have exhausted.

“Prices went close to challenge the 61.8% FR level but the bears were strong here. As a result, the candles have fallen back below its 200-day SMA,” it said.

CIMB Research said if it is right, the stock is consolidating in a bearish flag pattern. This is usually a downtrend continuation pattern. Hence, any rebound towards 60 sen to 62 sen may be a good opportunity to take profit.

“Technical landscape is showing signs of exhaustion. MACD signal line is poised for a negative crossover while RSI has hooked downward. Support is seen at 55 sen and 50.5 sen. Put a buy stop at 62.5 sen,” it said.

CIMB Research has technical buy on Landmarks

KUALA LUMPUR: CIMB Equities Research has a technical buy on Landmarks at RM1.11 at which it is trading at a price-to-book value of 0.3 times.

It said on Monday, Oct 24 the rebound from its September’s low was sharp. Prices pushed above its 30-day SMA to hit a high of RM1.16 before consolidating in a flag pattern.

“Looking at the chart, we think this uptrend is not over yet. Once the 50-day SMA is taken out, buying momentum should pick up again,” it said.

CIMB Research said the indicators are progressing well. MACD signal line has bounced off its lows while RSI is above the 50pts mark.

“Traders with higher risk appetite may start to nibble now. However, always put a stop at below the RM1.05 level. On the upside, once the 50-day SMA is taken out, the following resistance levels are RM1.16 and RM1.25,” it said.

KLCI charges ahead in early trade

KUALA LUMPUR: Stocks on Bursa Malaysia charged ahead in early trade on Monday, Oct 24, with the FBM KLCI up more than 14 points, underpinned by DiGi and banks, as investors’ sentiment was bolstered by the firmer regional markets as Europe’s debt crisis seemed to have make some headway.

At 9.14am, the KLCI rose 14.54 points to 1,453.37. Turnover was 134.70 million shares valued at RM71.25 million. Gainers swarmed losers 293 to 31 while 87 stocks were unchanged.

Reuters reported Asian stocks rose on Monday and the euro gave back some of the gains it made last week after euro zone leaders made some progress towards a strategy to tackle the region's debt crisis. Traders are now waiting for final details expected to be unveiled later this week.

At a summit on Sunday, European Union leaders neared agreement on bank recapitalisation and on how to use the European Financial Stability Facility to stave off bond market contagion.

At Bursa, BAT rose 36 sen to RM44.80, DiGi 22 sen to RM31.80, Genting PLANTATION []s 19 sen to RM7.49 and GENTING BHD [] 15 sen to RM9.90.

Among Petronas-linked stocks PetGas gained 20 sen to RM13.30 and Petronas Chemicals 13 sen to RM6.14. AMMB rose 17 sen to RM6.02 and Hong Leong Bank 12 sen to RM10.70.

CIMB Research maintains Overweight on O&G sector

KUALA LUMPUR: CIMB Equities Research said most local oil and gas players are strong enough to hold their ground should a change in Petroliam Nasional Bhd' licensing system result in more foreign competition.

“But marginal companies could see their piece of the pie getting smaller and the race for contracts get even tougher. Pending further details, the sector remains an Overweight,” it said on Monday, Oct 24.

CIMB Research said also intact are all its stock recommendations, earnings forecasts and target prices.

“Our top picks are Petronas Dagangan for the big caps and Perisai for the small caps,” it said.

OSK Research maintains trading buy on Pantech

KUALA LUMPUR: OSK Research is maintaining a trading buy on Pantech Group Holdings at 57 sen. Its last closing price was 57 sen.

It said on Monday, Oct 24 Pantech’s 1HFY12 numbers came in below its estimation and only made up 35% of its full year earnings projection.

“But we still remain positive on its development as we can see improvement from its manufacturing division indicating the stainless steel pipe mill is progressing on the right track,” it said.

OSK Research said the negative market sentiment and weakening economy backdrop prompted it to slash down its valuation parameter to 5.0 times FY12 EPS from 7.0 previously.

“Nevertheless, we still maintain our Trading BUY recommendation as we believe that Pantech’s performance will improve in 2HFY12,” it said.

Asian stocks up on EU summit hopes

HONG KONG: Asian stocks rose on Monday, Oct 24 and the euro gave back some of the gains it made last week after euro zone leaders made some progress towards a strategy to tackle the region's debt crisis.

Traders are now waiting for final details expected to be unveiled later this week.

At a summit on Sunday, European Union leaders neared agreement on bank recapitalisation and on how to use the European Financial Stability Facility to stave off bond market contagion.

Sharp differences remain, however, over the size of losses private holders of Greek government bonds will have to accept. Final decisions were deferred until a second summit on Wednesday.

For financial markets, concerns over the festering euro-zone debt crisis are likely to outweigh other data this week that include third-quarter GDP from the United States and earnings reports from Chinese banks.

Asian stocks outside Japan saw more choppy, low-volume trading but ended up 0.4 percent on the week last Friday. It was up 0.8 percent in early trade on Monday. Turnover on the Hong Kong exchange fell to its lowest since May.

In Japan, the Nikkei rose 1.4 percent in early trade. A strong yen , which rose to a record high against the dollar on Friday, is likely to cap gains and keep Japanese stocks trading in a range.

The euro dipped 0.4 percent to $1.3843 , giving back some of Friday's 0.8 percent gain. Markets were still clinging to hopes that European policymakers were moving a step closer to finding a credible solution to Europe's sovereign debt crisis.

Commodity currencies, usually sold off in times of market stress, also held steady. The Australian dollar stood at $1.0334 , versus New York's $1.0331.

"It doesn't feel to me like we're going to see a big risk rally, but we could easily see this deal done, risk remains relatively well supported, especially if we start thinking of things like another Fed quantitative easing, that'll help keep market focused on a weaker U.S. dollar," said Greg Gibbs, strategist at RBS in Sydney.

In commodities markets, brent crude for December delivery was trading up 0.2 percent while spot gold extended Friday's gains slightly and was trading at $1642.29 an ounce. - Reuters

Hibiscus Petroleum securities suspended

KUALA LUMPUR: Trading in the securities of Hibiscus Petroleum Bhd was voluntarily suspended from 9am on Monday, Oct 24.

A Bursa Malaysia circular said the suspension was at the request of the company pending an announcement.

HDBSVR: KLCI to see slight positive bias

KUALA LUMPUR: Hwang DBS Vickers Research said while all eyes will be on the European Union summit climax on Wednesday, Oct 26, it reckons that the benchmark FBM KLCI will probably trade sideways with a slight positive bias on Monday.

“However, we think the benchmark index is unlikely to break through the immediate resistance level of 1,445,” it said.

HDBSVR said on Wall Street, Key US indices climbed between 1.5% and 2.3% last Friday, rallying ahead of the EU’s two-leg summit amid expectations that the summit will lead to a comprehensive plan to fight the region’s deepening sovereign debt crisis.

At Bursa Malaysia, among the counters that will likely attract added interest today include: (a) DAMANSARA REALTY BHD [], after the media reported that Johor Corp is looking to inject some of its property assets into the 58%-owned subsidiary; and (b) Dayang, following its announcement that it has been awarded a contract extension from Murphy Sarawak, estimated at RM50 million to RM100 million.

Bigger network for Asia Media

Asia Media Group's first step in the plan to launch the terrestrial digital TV station is to launch the "out-of-home service".

Puchong: Asia Media Group Bhd, the country's largest transit-television network operator, plans to launch a terrestrial digital TV station by as early as the first quarter of next year, said its controlling stakeholder Datuk Ricky Wong Shee Kai.

"We have started testing works in Puchong and Shah Alam early this month, and have allocated as much as RM50 million in capital expenditure next year to help us with the launch in the Klang Valley," Wong told Business Times in an interview at his office.

Wong, who owns slightly more than 45 per cent of Asia Media, is also the chief executive officer of the company.

"A partial launch will be done in the first quarter, and by the second quarter, we should be in full swing," said Wong.

He said the first step in the plan to launch the terrestrial digital TV station is to launch the "out-of-home service".

"Out-of-home service means that people who use public transport such as the Rapid buses and the city's rail service will be able to watch live TV," said Wong.

Currently, Asia Media operates transit TV services for the city buses, but most of the feed are pre-recorded, with the content coming from third parties.

"We will be recruiting as many as 100 people - (newscasters, talk show hosts, technical support people) and plan to rent a studio in Damansara for the live TV version," said Wong, adding that by going live, Asia Media is hoping to rake in more advertisement dollars.

Asia Media is expecting to bring in as much as RM50 million next year from advertisements alone.

Wong said most of the shows will be in English and Bahasa Malaysia, with content coming directly from Asia Media. "We will be focusing on news-based items as well as talk shows," said Wong, adding that the company also has a licence to operate a radio network.

"The radio network will focus mainly on the Chinese market," said Wong.

He added that while the live show concept is new to Southeast Asia, it has been successfully operated in countries such as Japan, Taiwan and Korea.

"We can also operate a subscription-based as well as free-to-air terrestrial digital TV, but we have to be realistic," said Wong.

According to Wong, apart from the cost, finding the right content is the major drawback, pulling the company away from this path.

"We are committed to spend RM500 million over a 10-year period to bring the out-of-home terrestrial digital TV station to areas outside the Klang Valley such as Ipoh, Penang and Johor ... so it will be taxing for us to fight on two fronts," said Wong.

He said Asia Media does not want to expand for the sake of expanding. "We only want to do so if it keeps us profitable," said Wong, adding that he is confident Asia Media will post a pre-tax profit of about RM15 million this year.

Last Friday, Asia Media said for the nine months ended August 30 2011, the firm's pre-tax profit stood at RM11.74 million versus RM8.13 million in the same period a year ago.