Thursday, 27 October 2011

Market Commentary

The FBM KLCI index gained 13.13 points or 0.90% on Thursday. The Finance Index increased 1.10% to 13291.33 points, the Properties Index up 2.60% to 962.46 points and the Plantation Index rose 1.43% to 7492.46 points. The market traded within a range of 14.29 points between an intra-day high of 1474.27 and a low of 1459.98 during the session.

Actively traded stocks include MBFHLDG-WA, SAAG, HIBISCS-WA, HARVEST-WA, HARVEST, DUTALND, DUTALND-WA, UEMLAND, TIGER and TMS. Trading volume increased to 1877.17 mil shares worth RM2413.17 mil as compared to Tuesday’s 950.64 mil shares worth RM1075.97 mil.

Leading Movers were GENTING (+31 sen to RM10.30), IOICORP (+16 sen to RM5.26), PBBANK (+14 sen to RM12.62), GAMUDA (+20 sen to RM3.37) and PCHEM (+12 sen to RM6.31). Lagging Movers were GENM (-4 sen to RM3.73), MAXIS (-3 sen to RM5.29), PLUS (-2 sen to RM4.39), DIGI (-2 sen to RM31.60) and KLK (-2 sen to RM20.60). Market breadth was positive with 689 gainers as compared to 165 losers. -- JF Apex Securities Bhd

Hibiscus to venture into oil and gas E&P

KUALA LUMPUR: Hibiscus Petroleum Bhd will make its first acquisition since listing on July 25 as a special-purpose acquisition company (SPAC) by proposing to acquire 35% of Lime Petroleum Ltd, which owns three exploration concessions in the Middle East for US$55 million (RM172.2 million) in cash.

The acquisition will be done in two parts. The first is via a share subscription agreement to be entered with Lime Petroleum for approximately 76.9 million new shares or 27.2% equity stake in the enlarged capital of Lime Petroleum for US$50 million cash. Second is the purchase of a 7.8% equity stake of the enlarged Lime Petroleum from one of the major shareholders, Rex Oil & Gas Ltd, through a share purchase agreement for US$5 million.

“Once both agreements are finalised, Hibiscus will hold a 35% equity stake in the enlarged Lime Petroleum for a cash consideration of US$55 million. A further US$5 million is payable to Rex Oil & Gas when commercial oil delivery is declared,” Hibiscus managing director Dr Kenneth Pereira said on Tuesday.

The additional US$5 million payable to Rex Oil & Gas is because it owns the proprietary technologies used by Lime Petroleum in surveying and discovering potential resources in an oil and gas (O&G) block. But Lime Petroleum holds the licence to the technologies which Hibiscus will be able to tap, said Pereira.

Through the acquisition of a strategic stake in Lime Petroleum, Hibiscus is poised to gain from the three concessions already secured by the former in the Middle East, namely exploration blocks totalling 1,200 sq km and 1,600 sq km offshore Ras al-Khaimah and Sharjah in the United Arab Emirates (UAE), and 16,900 sq km of exploration block offshore Oman.

“These are exploration agreements that have been given to Lime Petroleum. Of the three, one is in Oman, which is a big block with huge potential, and the others are in the UAE. We expect to get another one by the time we finalise the acquisition. We will get four or maybe more,” said Hibiscus chairman Zainul Rahim Mohd Zain.

Pereira (left) and Zainul at Hibiscus' press conference on Tuesday.

“The oil and gas block offshore Oman is so massive, which is equivalent to the size of Johor. That’s how big 16,000 sq km really is,” added Pereira.

None of the three blocks has started production and there are no estimates of how much of proven reserves of oil and gas the blocks possibly contain.

Hibiscus said based on an independent assessment, the net unrisked and net risked recoverable resources from the three concessions are 1,711.6 million barrels of oil equivalent (mboe) and 200.7 million mboe respectively. Net risked recoverable resources refer to internal estimates of volumes of natural gas and oil that are not classified as proven reserves but are potentially recoverable through exploratory drilling or additional drilling or recovery techniques. Net unrisked refers to estimates without factoring in the risk of extracting the oil and gas.

The valuation of Lime Petroleum concessions was arrived based on a number of factors. First, an indicative fair valuation of Lime Petroleum conducted by a third party of between US$51 million and US$57 million; second the future prospects of Lime Petroleum with its participating interests in the three concessions; and third the subscription by Schroder & Co Banque SA of shares in Lime Petroleum on Sept 9 of US$0.65 per share, which is higher than Hibiscus’ subscription price of US$0.56 per share.

Hibiscus had raised RM234 million from its IPO a few months ago through private placement and balloting of the shares issued. As an SPAC, Hibiscus is obligated to place at least 90% of its IPO proceeds in a trust account, and utilise at least 80% of the money to acquire businesses.

Zainul said through the acquisition of Lime Petroleum, Hibiscus will become an operational exploration and production (E&P) player in a very short time. Hibiscus will manage the day-to-day operations of Lime Petroleum and is appointed the project manager of the E&P works in the subsequent oil fields.

“Instead of investing in one concession, we have managed to invest in a company that has three assets in two countries, which are Oman and the UAE. The concessions are in a proven oil and gas producing region and the deal also gives us exclusive access to proprietary technology that increases our chances of finding oil and gas accumulations,” said Zainul.

On when the company will strike its first oil in the concession blocks, Pereira said if the deal gets through with the authorities and the shareholders by March next year, the company could start drilling in August or September 2012 and potentially to book its commercial value by March 2013.

If the deal goes through, Hibiscus’ IPO proceeds will be reduced to about RM40 million, according to Zainul. The company could still raise another RM175 million via warrants conversion by shareholders. The warrants were given free with the shares issued in the IPO. In the next three years, Hibiscus could still tap RM215 million in cash for development of the projects in Oman and the UAE.

However, Hibiscus intends to list Lime Petroleum as soon as it gets the deal through. Any additional expenditure needed to fund the exploration works in future could be made through Lime Petroleum. After the acquisition of Lime Petroleum, Hibiscus will become a public-listed company and could raise funds in anyway possible.

Currently, Lime Petroleum has US$30 million cash available with a potential further injection of US$7.15 million by Petroci Holdings Ltd, the state-owned corporation of Ivory Coast, as it is one of the shareholders in Masirah Oil Ltd, which owns the Oman concession block. Masirah is 74%-owned by Lime Petroleum, but Petroci could increase its stake from 26% to 65% of Masirah through an exiting call option agreement with Lime Petroleum.

From the US$30 million available, US$22 million will be utilised for the drilling of wells in offshore blocks in Ras al-Khaimah in UAE, with another US$4 million for seismic exploration in the blocks offshore Oman.

The proposed acquisition of Lime Petroleum by Hibiscus is subject to the approval by the Securities Commission and its shareholders.

This article appeared in The Edge Financial Daily, October 27, 2011.

AP Land EGM adjourned on discrepancy

RAWANG: Asia Pacific Land Bhd’s (AP Land) EGM ended mid-way on Tuesday following a discrepancy in the company’s circular to shareholders, pertaining to the proposed offer from 34%-owned shareholder Low Yat Holdings Sdn Bhd (LYH) to buy all the assets and liabilities of AP Land for RM305.2 million or 45 sen per share.

Shareholders will have to meet again on Nov 8 to decide if they want to accept the offer made on Jan 11 this year, once corrections have been made.

The discrepancy stems from an inconsistency between AP Land audit committee’s findings and the directors’ recommendation.

The audit committee found the offer price to be a reasonable premium on the last transacted price on Jan 10 but agreed with independent adviser MIDF Amanah Investment Bank Bhd that from a financial point of view the deal was “not fair” due to the large discount on the net assets per share.

The directors’ recommendation however stated, “our board (save for the interested directors) is of the opinion that the proposed disposal is fair and reasonable and in the best interests of AP Land and its non-interested shareholders.”

While the offer was at an 8% premium to AP Land’s closing price of 41.5 sen prior to the announcement, it is a 57% discount to the adjusted audited net assets per share of RM1.04 as of Dec 31, 2010.

Lya: At the end of the day, it is up to the minority shareholders to decide what they want.

The Minority Shareholder Watchdog Group’s (MSWG), which was present at the meeting, pointed out the contradiction.

MSWG general manager of corporate services Lya Rahman told The Edge Financial Daily, “MSWG sought clarification from the board the reason behind the difference in opinion between the board and the audit committee with regard to the fairness of the proposed disposal, as the majority of the disinterested board comprised the members of the audit committee.”

Lya said the disinterested directors informed the shareholders they had expressed their opinion that the proposed disposal was not fair and acknowledged the so-called discrepancy could be due to an error in the circular to shareholders under the directors’ recommendation.

“As the discrepancy was material which could influence the voting for the proposed disposal, MSWG proposed and insisted that the EGM be adjourned to be fair to the shareholders in particular those who have filed their proxies and made decisions based on the recommendations by the disinterested directors,” Lya explained.

Lya declined to comment on the fairness of the deal to minority shareholders but said, “At the end of the day, it is up to the minority shareholders to decide what they want.”

According to her, the offeror LYH needs only 50% plus one share from those who attend the EGM (apart from LYH) to push the deal through, and not 75% because the proposal was made before the change in the takeover rule.

“Attendance was low perhaps due to the EGM’s venue. Furthermore, they [the minority shareholders] were very passive,” she added.

Some 60 shareholders turned up for the EGM. Several shareholders said the venue Tasik Puteri Golf and Country Club was inconvenient due to its remote location.

Lya said questions during the EGM revealed that the directors of AP Land had not asked LYH to increase the offer. When contacted, AP Land declined to comment.

AP Land’s stock closed at 41.5 sen, slipping 1.5 sen on Tuesday.

This article appeared in The Edge Financial Daily, October 27, 2011.

Banks cautious over outlook next year

Banking sector
Maintain underweight: We visited Malayan Banking Bhd (Maybank), Public Bank Bhd and AMMB Holdings Bhd and attended a small group meeting held by CIMB Group Holdings Bhd. We sense cautiousness with respect to the outlook ahead with words and phrases such as “challenging”, “uncertain”, “lack of visibility” being used to describe next year’s outlook. CIMB sounded the most bearish while Public Bank remained optimistic its loan growth would continue to outpace the industry.

With just over two months remaining to the year, 2011 targets were kept unchanged. While the Economic Transformation Programme (ETP) is expected to play a key role in driving growth next year, thus far, the impact from larger ETP projects has yet to kick in. As for the investment banking (IB) pipeline, 3QCY11 was still healthy but the banks were mindful that weakening macro conditions ahead could put a dent in capital market activities. Finally, the banks were unanimous that at this juncture there are no signs of stress on asset quality.

Maybank: While management was comfortable with the loan-to-deposit ratio (LDR) of 90.1% as at end-June 2011, it admitted that asset growth ahead could be crimped if not matched with deposit growth. Already, Maybank is now less keen to match rates offered by some competitors while we understand that the message has been communicated to the overseas subsidiaries that they will need to raise their own funding to grow assets.

CIMB: While it’s still early days, CIMB likes the Philippine market due to the potential growth ahead and given that CIMB does not have a presence there. Preference is for a controlling stake. Meanwhile, the IB pipeline has been reasonably healthy, although equity market-related activities have been rather weak.

Public Bank: The bank’s LDR of 87% to 88% is not expected to affect loan growth. Continuous efforts will be made to grow core deposits to keep LDR manageable. For Basel III, management thinks Bank Negara Malaysia is unlikely to impose capital requirements that are more stringent than the 9% Common Equity Tier-1 required by the Monetary Authority of Singapore, so the group is unlikely to need any fundraising over the next 12 months.

AMMB: With the employment of its third generation score cards and risk-based pricing, AMMB does not target any particular income segment but is willing to lend as long as the customer is willing to pay. AMMB believes the balance sheet is well-positioned such that the impact of any rate increase or decrease would be largely neutral to the group.

We maintain our “underweight” call on the sector. — RHB Research Institute, Oct 25

This article appeared in The Edge Financial Daily, October 27, 2011.

Another sweet quarter for DiGi

DiGi.Com Bhd (Oct 25, RM31.62)
Maintain neutral with revised fair value of RM31.10 from RM28.60: DiGi continued to experience strong data growth and commendable expansion in voice revenue, aided by the Hari Raya Aidilfitri celebrations. The 9MFY11 results were slightly ahead of our expectations, prompting us to tweak upwards our FY11/FY12 earnings forecast by 1% to 4%.

This bumps up our fair value on the stock to RM31.10 (from RM28.60) based on 5.5 times FY12 enterprise value over earnings before interest, tax, depreciation and amortisation (EV/Ebitda) and 9.5% weighted average cost of capital (including the 65 sen capital distribution to be paid in 1H12). DiGi is our preferred Malaysian telco dividend pick alongside Telekom Malaysia Bhd.

At 81%, 76% and 75% of our estimates, consensus core earnings (excluding the one-off early medium-term notes (MTN) redemption charge in 2QFY11 of RM16.6 million) and revenue forecasts, DiGi’s results slightly beat our expectation but were in line with street forecasts. The key takeaways were: (i) the continuing strong voice revenue growth of 2% quarter-on-quarter (+2.8% q-o-q in 2QFY11), supported by steady RPM and a higher subs base (+3.5% q-o-q); and (ii) robust 40.4% year-on-year (y-o-y) growth (+10.4% q-o-q) in non-voice revenue, raising data revenue contribution to 30% of mobile revenue (28% in 2QFY11) as DiGi benefited from the aggressive promotions of its mobile internet plans.

Ebitda margin widened 80bps q-o-q to a record 46.6%, bringing year-to-date (YTD) margin to 46.1%, ahead of our FY11 forecast of 44.8%. An expected 100% payout from net profit translates into an interim dividend of 37 sen per share, payable on Dec 8. (YTD dividends per share (DPS): RM1.10).

DiGi expects to capture a bigger slice of the mobile broadband market by narrowing its coverage gap (currently 50%) with that of its competitors (80%) and with progressively stronger smartphone take-up (currently 18% of its subs base). It estimates smartphone penetration in Malaysia at about 20% and sees that some 40% of handsets sold in 2011 will be smartphones. We contrast this with Singapore, which has a significantly higher smartphone penetration of more than 50% (80% of handsets sold are smartphones).

Management expects the outcome of the re-farming of the 900Mhz spectrum to be known within the next six to 12 months and is awaiting a directive from the telco regulator.

DiGi is back loading RM100 million of FY11 capital expenditure to FY12 due to the delays in the commencement of its network swap under the two-year network modernisation exercise. This results in a lowered capex guidance of RM550 million (against RM650 million) for FY11 while capex for FY12 is raised to RM800 million from RM700 million. The high single digit revenue growth guidance has been maintained, implying a more tepid revenue growth of 6% to 8% y-o-y in 4QFY11 given the higher base of smartphone sales in 4Q10. Given the stronger results, we raise our core profit forecast for FY11 by 4% and for FY12 by 1%, after modelling in a stronger Ebitda margin for the respective years. — OSK Research, Oct 25

This article appeared in The Edge Financial Daily, October 27, 2011.

Proton seeks Chinese partner

Proton Holdings Bhd (Oct 25, RM2.63)
Maintain hold with unchanged fair value: We maintain our “hold” rating on Proton with an unchanged fair value of RM2.60 per share based on 0.5 times adjusted FY12F net tangible assets of RM5.30 per share. Proton and Chinese auto company Hawtai Motor Group Ltd (Hawtai) have signed a memorandum of understanding (MoU) to explore collaboration in product development with the aim of expanding Proton’s presence in the Chinese market.

Proton and Hawtai will evaluate the establishment of a joint venture (JV) company in China to invest in joint new product development including joint design and development cost sharing. Proton says Hawtai is looking at manufacturing the Proton Exora MPV and the upcoming Proton P3-21A (Persona replacement set to debut in 2012) sedan in China. The two companies will explore the development of new models together in a later phase.

The JV will also be responsible for vendor sourcing and component development work with local Chinese vendors. This will hopefully allow Proton to tap into low-cost vendors in China and explore cross-supplying components from Malaysian vendors to China and vice versa. Beijing-based Hawtai can make about 200,000 vehicles, 300,000 engines and 300,000 automatic transmissions a year.

Since 2002, Hawtai has cooperated with Hyundai Motors to manufacture Chinese-market versions of the Hyundai Matrix, Hyundai Santa Fe and Hyundai Terracan. The JV ended late-2010 and it would appear Hawtai is in need of a new technology partner. Hawtai has repeatedly acquired foreign technologies, including engine and transmission technologies. Both of Hawtai’s sedan models use Mitsubishi’s 4G63 and 4G69 Mitsubishi innovative valve timing electronic control system (Mivec) engines. We do not rule out the Proton-MMC Bhd JV on engine development being involved with Hawtai if the Proton-Hawtai JV comes through.

We leave our forecasts unchanged at this juncture as details are still too sketchy. Feasibility studies will take three months before any deal is cemented. Additionally, the size of Proton’s stake in the JV is still unclear. Main positives will be in: (i) shared vehicle development cost which typically ranges between RM500 million and RM1 billion; and (ii) cost competitive component sourcing from China.

Over the next 12 months, Proton’s earnings prospects remain challenging given: (i) losses from the restructuring of Lotus; (ii) slowing domestic sales — Proton has no waiting list except for the Exora; and (iii) heavy price discounting as Japanese marques strive to regain market share. — AmResearch, Oct 25

This article appeared in The Edge Financial Daily, October 27, 2011.

Plantation sector not spared global headwinds

Plantation sector
Maintain neutral: As demand for palm oil is not immune to the slowing of global economic growth, we are pruning our 2012/13 crude palm oil (CPO) price forecasts by 9% to 12% on the heels of GDP downgrades. This reduces our earnings numbers by up to 24%.

We upgrade our rating for one stock and downgrade two stocks, which leaves our sector rating at “neutral”. Though the sector lacks catalysts, selected stocks have priced in the concerns and look attractive. Our picks remain Wilmar International Ltd, Golden Agri Resources Ltd, PT SIMP Indofood Plantations and Indofood Agri Resources Ltd.

Factoring in lower GDP growth, we pare down our CPO price forecasts by 12% to US$880 (RM2,754) per tonne for 2012 and by 9% to US$910 for 2013 while keeping our 2011 forecast of US$1,100. This translates into a 20% price decline in 2012 and a 3% uptick in the following year. Prices may weaken because of higher stocks as well as lower demand. Supply of edible oils could outstrip demand by around 0.7 million tonnes in 2011/12 even if demand growth keeps up with the historical 10-year average of 5.8 million tonnes.

Slowing economic growth hurts global demand for edible oils in several ways: (i) Biodiesel usage (11% of total demand) is sensitive to crude oil price, which is correlated to GDP growth; (ii) Governments could reassess or withdraw biodiesel mandates or incentives to reduce government spending; and (iii) Speculative money may flow out of commodities, leading to a sharp fall in prices in times of economic uncertainty.

We forecast a milder CPO price decline of 12% for 2012 than 2008/09’s 28% as the scenario today is different. Slower growth of palm supplies in 2012, rising disposable incomes in Asia, fears of potential crop damage due to La Nina weather phenomenon and ample liquidity in the financial system are the key positives that sets today’s fundamental CPO price outlook apart from 2008’s.

We have taken into account the new export tax for Indonesian palm products into our new CPO selling price forecasts for Indonesia.

Oil World’s (OW) projection for edible oil demand to outstrip supply may be ambitious given the possibility of a mild recession in the European Union. OW expects world consumption to rise by seven tonnes in October 2011 to September 2012, above the 10-year average of 5.8 tonnes. It will outstrip the projected rise in supply by 6.7 tonnes, higher than the previous season’s 5.7 tonnes and 10-year average of 5.9 tonnes. If demand grows in line with the 10-year average of 6 tonnes, supply could exceed demand for the first time since 2009.

Biodiesel demand (10.5% of edible oil consumption) has been growing at an average rate of 2.7 tonnes over the past four years. But incremental demand started slowing down in 2009 due to waning support and lower crude oil price. It revived this year after the renewal of the US biodiesel credit and higher mandates in Brazil and Argentina. Incentives for biodiesel may be reassessed if global economic growth slows sharply and reduces fiscal expenditure or if there is renewed criticism of biofuel policies’ impact on food prices. — CIMB IB Research, Oct 25

This article appeared in The Edge Financial Daily, October 27, 2011.

KL shares bullish at midafternoon

Share prices on Bursa Malaysia remained positive at midafternoon today, lifted by gains in banking, plantation and telco counters, dealers said.

As at 3.00pm, the benchmark index advanced 12.83 points to 1,470.63.

Maybank, Axiata and Kulim added two sen each to RM8.29, RM4.86 and RM3.48, respectively while CIMB earned one sen to RM7.27, Digi increased four sen to RM31.66 and IOI advanced 14 sen to RM5.24.

Meanwhile, CI Holdings Bhd plans to conclude the disposal of its beverage subsidiary, Permanis Sdn Bhd, to Japan's Asahi Group Holdings Ltd within one or two weeks, for an acquisition price of RM820 million.

Via the disposal, the company will realise more than 11 times, its initial purchase consideration of RM72 million in 2004.

The company's share price rose two sen to RM4.91 after opening one sen better at RM4.90.

The Finance Index rose 118.90 points to 13,266.04, the Industrial Index was up by 11.44 points to 2,696.46 and the Plantation Index increased 88.45 points to 7,475.01.

The FBM Emas rose 107.05 points to 10,035.24 and the FBM 70 Index improved by 180.851 points to 10,839.53. The FBMT100 rose 102.65 points to 9,853.71 and the FBM Ace Index added 44.37 points to 4,018.06.

Gainers thumped losers by 546 to 168 while 205 counters were unchanged, 547 untraded and 26 others suspended. Trading was at 1.169 billion shares worth RM1.342 billion.

Of the active counters, Dutaland fell 6.5 sen to 54.5 sen, The Media Shoppe was flat at 9.5 sen, UEM Land rose 12 sen to RM2.11 and SAAG Consolidated earned half-a-sen to seven sen.

Among heavyweights, Sime Darby declined two sen to RM8.83, Petronas Chemicals earned 12 sen to RM6.31, Maxis flat at RM5.32 and Tenaga Nasional rose 14 sen to RM5.92. -- Bernama

Tenaga sukuk oversubscribed 4.7 times

Malaysia’s national power producer Tenaga Nasional Bhd’s RM4.85 billion (US$1.55 billion) Islamic sukuk attracted RM23 billion worth of subscriptions and was priced 3.8-4.9 percent, IFR reported on Thursday.

IFR, a unit of Thomson Reuters, said the AAA-rated sukuk was divided into 16 tranches, and pricing was “at or below the tight ends of final guidance”.

The bonds were issued via Manjung Island Energy, an special purpose vehicle set up to partially fund the construction of a mew coal-fired power plant in the Malaysian state of Perak. -- Reuters

CIH to conclude Permanis disposal in 2 weeks

KUALA LUMPUR: C.I. Holdings Bhd (CIH) expects to conclude the disposal of its beverage subsidiary Permanis Sdn Bhd (Permanis) to Japan's Asahi Group Holdings Ltd (Asahi) within one or two weeks and expects to pay a minimum of RM4 per share in the form of special dividend to its shareholders.

On July 21, CIH signed an agreement with Asahi for the disposal of Permanis for an acquisition price of RM820 million in cash, representing 70 million shares.

Group managing director Datuk Johari Abdul Ghani said CIH is now looking to acquire a company with potential but weak management, adding that CIH is not in a rush to buy a company.

"At this moment, I think we will distribute a minimum of RM4 to shareholders back so that will leave about RM200 million over.

"So with that money we will try (to acquire a new business), but if we cannot find anything concrete in the future, we may distribute back to shareholders in the form of capital repayment or special dividend," he told reporters after the company's annual general meeting here today.

Meanwhile, chairman Datuk Seri Abdul Ghani Abdul Aziz said in the annual report the company expects its core earnings to be driven primarily by the tap and sanitary ware division after the proposed disposal.

"The tap and sanitary ware division has grown to become a materially-sized and profitable business with revenue of RM43.49 million and net profit before tax of RM8.42 million in the financial year ended June 30, 2011," he added.

Permanis, which is PepsiCo Inc's bottler in Malaysia, has a distribution network of about 40,000 outlets nationwide and contributes up to 90 per cent of CIH’s net profit with the remainder coming from its tap and sanitary ware division.

Under an exclusive franchise, Permanis produces world-renowned brands such as Pepsi, Mirinda, 7-Up, Gatorade, Lipton, Tropicana and Evervess. It also manufactures its own brands of drinks under the Chill, Excel, Frost, Bleu and Shot trademarks, according to its website. - BERNAMA

AirAsia rises to RM4, highest since early August

KUALA LUMPUR: Shares of AIRASIA BHD [] rose to RM4 on Thursday, Oct 27, its highest since early August, in line with the fresh optimism in regional equities markets.

At 4.09pm, it was up five sen to RM3.93. There were 22.03 million shares done at prices ranging from RM3.90 to RM4.

Following the run-up in the share price, UOB Kay Hian Malaysia Research downgraded the low-cost carrier to HOLD from BUY.

The research house said the share price had run up by 33% since its upgrade on Oct 5 and exceeded its target price of RM3.70 (unchanged).

“Our target price is based on 7.5 times EV/EBITDA and adjusted for the value of its Thai and Indonesian associates. Recommended entry price is RM3.22,” it said.

CIH may pay RM4 per share as dividend from Permanis sale

KUALA LUMPUR: C.I. HOLDINGS BHD [] (CIH) expects to conclude the disposal of its beverage subsidiary Permanis Sdn Bhd (Permanis) to Japan's Asahi Group Holdings Ltd (Asahi) within one or two weeks and expects to pay a minimum of RM4 per share in the form of special dividend to its shareholders.

Group managing director Datuk Johari Abdul Ghani said on Thursday, Oct 27 CIH was looking to acquire a company with potential but weak management.

"At this moment, I think we will distribute a minimum of RM4 to shareholders back so that will leave about RM200 million over.

“So with that money we will try (to acquire a new business), but if we cannot find anything concrete in the future, we may distribute back to shareholders in the form of capital repayment or special dividend," he told reporters after the AGM.

On July 21, CIH signed an agreement with Asahi for the disposal of Permanis for an acquisition price of RM820 million in cash, representing 70 million shares. - Bernama

SC approves PDS plans to raise RM15.9b in 3Q

KUALA LUMPUR: The Securities Commission Malaysia (SC) approved all 15 applications for ringgit-denominated private debt securities (PDS) in the third quarter of 2011.

It said on Thursday, Oct 27 the PDS proposals were to raise a total of RM15.9 billion. These schemes were part of the 23 applications for corporate proposals in 3Q, comprising of eight equity proposals and 15 PDS proposals.

“Out of the eight applications for equity proposals considered, three were approved (consisting of two IPOs and one share offering) while five were rejected owing to non-compliance with the SC's Equity Guidelines (consisting of three IPOs, one restructuring proposal and one proposed transfer from the ACE Market to the Main Market),” it said.

The SC said the two IPOs approved during in 3Q would have a combined potential market capitalisation of RM190.10 million and would raise RM59.03 million.

No AirAsia, MAS flights to Thailand cancelled

The floods in Thailand do not affect the Malaysia Airlines (MAS) and AirAsia flights to the land of the white elephants.

The spokesperson from both the airline companies, when contacted by Bernama today, said that so far, there had been no cancellation of flights to Thailand because of the floods.

They said the reason being that both the airline companies do not fly to the Don Muang Airport, which is closed since Tuesday when its landing strip was submerged in flood water.

Instead, the MAS and AirAsia flights used the Suvarnabhumi Airport, which is not affected by the floods.

The closure of the Don Muang Airport, which is the second largest airport in Bangkok, has resulted in many flights to be delayed.

The floods which hit Thailand is said to be the worst in 60 years. --Bernama

Hibiscus jumps on stake acquisition

Hibiscus Petroleum Bhd rose to a record in Kuala Lumpur trading after it agreed to buy a 35-percent stake in Lime Petroleum Plc for US$55 million.

The stock climbed 2.2 percent to 69 sen as of the midday trading break in Kuala Lumpur, set to close at its highest level since its debut on July 25. -- Bloomberg

Maxis offers child locator solution

Maxis Bhd, Malaysia's leading integrated communications service provider, today announced its official partnership with KiddyTrack Sdn Bhd and the launch of KiddyTrack's first-of-its kind child locator solution.

This innovative GPS/GSM child locator solution is powered by Maxis' Managed Machine-2-Machine (M2M) technology and leverages on the company's strength as the country's widest 3G service provider.

KiddyTrack provides its users a device to locate their loved ones by sending a simple text message, and the system would then send a Google map link that shows the location of the child being tracked with an accuracy of five metres.

The device and accompanying technology could also monitor the location of the elderly, employees, pets, vehicles and valuables.
Subscribers can get the KiddyTrack Service Plans for RM60 a month for the 24-month plan or RM68 for the 12-month one.

For more information, log on to - Bernama

KL shares sharply higher at midday

Share prices ended the morning session higher today in line with the positive movement on regional markets as investors took fresh leads following progress on the eurozone debt plan, dealers said.

At 12.30pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) advanced 15.01 points to 1,472.81, after opening 3.75 points higher at 1,461.55.

The benchmark index moved between a high of 1,473.20 and fell to a low of 1,459.98.

Dealers said investors took cue from the decision by European leaders for a 50 per cent haircut by private sector investors in Greek bonds and boosted the firepower of the eurozone rescue fund to US$1.4 trillion.

"This gives some hope to players as the Greek Prime Minister also said Greece would able to return to the bond markets sooner than 2021, the year in which it is expected to do so, by the International Monetary Fund," a dealer said.

The Finance Index rose 124.61 points to 13,271.75, the Industrial Index added 21.69 points to 2,706.71 and the Plantation Index advanced 98.15 points to 7,484.71.

The FBM Emas gained 112.109 points to 10,040.30, the FBMT100 increased 110.37 points to 9,861.43 and the FBM Ace Index added 29.75 points to 4,003.44, while the FBM 70 Index increased 161.41 points to 10,820.09.

Advancers led decliners by 489 to 189 while 234 counters were unchanged, 594 untraded and 26 others suspended.

Trading was firmer with a total volume of 984.32 million shares worth RM1.073 billion.

Of the active counters, Dutaland fell 6.5 sen to 54.5 sen, The Media Shoppe was flat at 9.5 sen, UEM Land rose 12 sen to RM2.11 and SAAG Consolidated earned half-a-sen to seven sen.

Among heavyweights, Maybank and CIMB added two sen each to RM8.29 and RM7.28 respectively, Sime Darby was flat at RM8.85 and Petronas Chemicals earned 10 sen to RM6.29. - Bernama

Tenaga sells RM4.85b Islamic bonds

Malaysia’s Tenaga Nasional Bhd sold RM4.85 billion (US$1.5 billion) of Islamic bonds maturing in five to 20 years at yields between 3.80 percent and 4.90 percent, according to the company’s chief executive officer.

The Islamic bonds, or sukuk, which pay returns from assets that comply with the religion’s ban on interest, were sold in 16 portions and were priced at the lower end of the initial yield guidance, Che Khalib Mohamad Noh said in an interview in Kuala Lumpur today.

“The sukuk drew about RM23 billion in orders at the close of the offer on Oct. 25,” said Che Khalib. “We are extremely happy with the yields and the oversubscription rate.”

Proceeds from the sale by Malaysia’s biggest power producer will be used to finance the company’s coal-fired plant in the northern state of Perak, he said. -- Bloomberg

RHBCap rise on eurozone, merger hopes

Malaysia’s RHB Capital Bhd shares rose as much as 4.9 per cent on today as investors, buoyed by positive news from developments in the Eurozone, returned to the market.

RHB shares were particularly attractive among financials because it is presently undergoing negotiations with OSK Holdings Bhd to takeover the latter’s brokerage business.

“We are expecting results of the negotiation next month,” a local analyst told Reuters.

“However, the market has mixed reaction about the deal, which we suspect will be priced at between 1.9-2.2 times book value.”

The analyst could not be named as she was not authorised to speak to the media.

RHB shares were up 4.6 per cent to RM7.70 (US$2.461) per share as at 0321 GMT compared to the broader market’s 0.8 per cent rise. - Bernama

Markets up on EU plan to contain euro zone crisis

KUALA LUMPUR: Asian markets rallied on Thursday, Oct 27 after euro zone leaders struck a deal to contain the euro crisis, with the key indices up between 1% and 1.7%.

At 12.30pm, the FBM KLCI was up 14.86 points or 1.02% to 1,472.66. Turnover was 984.32 million shares valued at RM1.07 billion. There were 489 gainers, 149 losers and 234 stocks unchanged.

Japan’s Nikkei 225 rose 1.7% to 8,896.92, Hong Kong’s Hang Seng Index added 1.74% to 19,399.03, South Korea’s Kospi 1.31% to 1,919.16 and Singapore’s Straits Times Index advanced 1.7% to 2,817.10.

Reuters reported euro zone leaders struck a deal with private banks and insurers to accept a 50% haircut on their Greek government bonds under a plan to lower Greece's debt burden and try to contain the two-year-old euro zone crisis.

Under the deal, the private sector agreed to voluntarily accept a nominal 50% cut in its bond investments to reduce Greece's debt burden by 100 billion euros, cutting its debts to 120% of GDP by 2020, from 160% now.

Crude palm oil third-month futures rose RM39 to RM2,990 per tonne while Brent jumped US$1, or 0.9%, to US$109.91 a barrel and U.S. oil added US$1.56, or 1.7%, to US$91.76 a barrel.

At Bursa Malaysia, IOI Corp rose 18 sen to RM5.28 after it cancelled its RM830 million land purchase deal with Dutaland.

Dutaland fell 6.5 sen to 54.5 sen with 30.34 million shares done while Dutaland-WA lost three sen to 10 sen with 22.74 units done.

Hibiscus-WA rose 1.5 sen to 30.6 sen while the shares added 1.5 sen to 69 sen after its decision to buy a stake in Lime Petroleum Ltd for a total of US$55 million.

MBM Resources rose two sen to RM3.09 on a possibility it might buy a stake in Hirotako.

Among the major gainers in the morning session was Supermax, after analysts upgraded its outlook. It rose 36 sen to RM3.62. BLD PLANTATION []s was the top gainer, up 57 sen to RM6.90.

Among index-linked stocks. BAT added 40 sen to RM45.30, RHB Cap 35 sen to RM7.70, HLFG 30 sen to RM11.78, Genting 27 sen to RM10.26 while MISC rose 19 sen to RM6.99, Tenaga and HL Bank 18 sen each to RM5.96 and RM10.54.

Among the decliners were Ewein, down 22 sen to 86 sen, JFTech 17 sen to 13 sen, Ibraco and Lafarge 13 sen each to RM1.20 and RM6.99.

MBM Resources keen on Hirotako stake?

KUALA LUMPUR: Auto parts manufacturers MBM RESOURCES BHD [] is believed to be keen to acquire a stake in HIROTAKO HOLDINGS BHD [], which makes car safety restraint equipment including seat belts, analysts said.

Trading in Hirotako was suspended from 9am to 5pm on Thursday, Oct 27.

Hirotako’s pre-suspension price was 88 sen.

In its second quarter ended June 30, 2011, it posted net profit of RM12.67 million on the back of RM75.17 million in revenue. Its net asset per share was RM1.15 and it had RM77.54 million cash and cash equivalents.

However, concerns could be its high receivables of RM61.08 million as at June 30, 2011 up from RM39.41 million as at Dec 31, 2010.

Hiro-Dapat Holdings Sdn Bhd is the largest shareholder with 39.948 million shares or 22.85%. Hirotako group managing director Datuk Kuan Peng Ching @ Kuan Peng Soon is deemed interest in the stake via Hiro-Dapat.

KL shares higher at midmorning

At 10.30 am today, there were 349 gainers, 116 losers and 209 counters traded unchanged on the Bursa Malaysia.

The FBMKLCI was at 1,467.52 up 9.72 points, the FBMACE was at 4,009.13 up 35.44 points, and the FBMEmas was at 9,999.59 up 71.40 points.

Turnover was at 526.437 million shares valued at RM495.794 million. - Bernama

Damansara slides on no asset injection plan

Damansara Realty Bhd, a Malaysian property developer, fell to a one-week low after saying its board hasn’t considered a proposal for the “potential injection” of assets into the company by its parent.

The stock slid 1.8 percent to 80.5 sen at 9:10 a.m. local time in Kuala Lumpur, set for its lowest close since Oct. 20. -- Bloomberg

Dutaland falls most in 28 months

Dutaland Bhd, a Malaysian plantation and property group, dropped the most in 28 months in Kuala Lumpur trading after IOI Corp scrapped an agreement to buy the company’s oil palm land for RM830 million.

The stock slid 11 percent to 54 sen at 9:01 a.m. local time, set for its steepest decline since June 18, 2009. -- Bloomberg

YTL Corp rises on share buyback

YTL Corp, a utilities, cement and property group, advanced 1.3 percent to RM1.51 in Kuala Lumpur trading at 9.46am.

YTL spent RM29.4 million buying back 19.7 million shares, it said in a statement. -- Bloomberg

Worst is over for Supermax: OSK

Supermax Corp, a Malaysian glove - maker, rose to its highest level in almost three months after OSK Holdings Bhd said the worst is over for the company as demand for its products is poised to rebound.

The stock climbed 7.1 percent to RM3.49 at 9:21 a.m. local time, set for its highest close since Aug. 5.

Other glove - makers gained.

Top Glove Corp. added 1 percent to RM4.16, Kossan Rubber Industries Bhd gained 1.8 percent to RM2.83. -- Bloomberg

Trading of Hirotako suspended for corporate exercise

KUALA LUMPUR: Trading in the securities of HIROTAKO HOLDINGS BHD [] was suspended on Thursday, Oct 27 from 9am to 5pm

The company said the request for the suspension was pending an announcement of a “potential material corporate exercise involving the securities of Hirotako”.

Supermax advances, CIMB keeps Buy, TP RM4.38

KUALA LUMPUR: Shares of Supermax Corp Bhd advanced on Thursday, Oct 27 on the positive outlook for the glove maker while CIMB Equities Research maintained a Buy on the stock at a target price of RM4.38.

At 9.50am, it was up 16 sen to RM3.42 with 1.49 million shares done.

The FBM KLCI rose 5.24 points to 1,463.04. Turnover was 309.44 million shares valued at RM248.12 million. There were 226 gainers, 105 losers and 197 stocks unchanged.

CIMB Research said investors should accumulate Supermax shares. At just 8.7 times FY12 P/E, the stock was trading at half the valuation of Top Glove, making it a cheaper play on the sector where earnings have bottomed on the back of more stable rubber prices.

“A strengthening distribution platform will ensure that the world’s second largest glove maker emerges unscathed from the next one to three years of overcapacity.

“Also, we gather that a bonus issue may be in the works. Supermax’s results briefing left us feeling more positive about its prospects as it is beefing up its distribution platform,” it said.

RHB Research ups UEM Land fair value to RM1.65

KUALA LUMPUR: RHB Research Institute has raised the fair value for UEM Land to RM1.65 from RM1.40 but maintains its underperform rating.

It said on Thursday, Oct 27 that due to the growing presence of more “Singapore Inc.” in Johor in the midst of uncertain global economic environment, its optimism on the Iskandar development is revived slightly.

“We therefore narrow our discount to RNAV to 35% (from 45%) to derive our revised fair value of RM1.65 (from RM1.40),” it said.

On Tuesday, UEM Land announced that its 50:50 JV company with UM Land – Nusajaya Consolidated Sdn Bhd had inked two agreements with The Ascott Limited (under Capitaland).

The agreements were for Ascott to provide technical advisory services as well as manage and operate 204 units of service residences to be known as “Somerset Puteri Harbour” in Nusajaya upon its expected completion.

“We believe the strategic tie-up is via UM Land as Capitaland has a 21% stake in the company. This new Somerset will be Ascott first presence in Johor,” it said.

Hibiscus up, active on US$55m O&G acquisition

KUALA LUMPUR: Shares of Hibiscus Petroleum Bhd climbed in active trade as investors were positive of its acquisition of a stake in Lime Petroleum Ltd for a total of US$55 million.

At 9.13am, Hibiscus was up one sen to 68.5 sen with 7.08 million shares done. The warrants added 1.5 sen to 30.5 sen with 10.939 million units transacted.

The FBM KLCI rose 5.01 points to 1,462.81. Turnover was 118.18 million shares valued at RM98.65 million. There were 154 gainers, 61 losers and 115 stocks unchanged.

Hibiscus Petroleum had on Tuesday proposed to pay US$55 million for a 35% stake in Lime with interest in three companies that have concession rights in offshore oil & gas exploration assets in the Middle East.

The Lime Group is principally involved in the exploration and production activities in the oil and gas industry in the Middle East region.

Hibiscus said Lime Group’s assets are located in the Middle East, where extensive oil & gas infrastructure has been developed. It also said Lime Group’s assets are located in an area where several other oil and gas companies with significant financial and technical resources operate.

“These other companies include major integrated oil and natural gas producers and numerous other independent oil and natural gas companies and individual producers and operators. In the event that Lime Group has a successful exploration campaign, the assets could attract interest from these other companies as acquisition targets and/or for partnerships,” it said.

Dutaland falls after IOI ends RM830m land deal

KUALA LUMPUR: Shares of DUTALAND BHD [] fell at the start of trade on Thursday, Oct 27 as investors reacted negatively to IOI Corp’s decision to terminate the RM830 million land purchase deal.

At 9am, Dutaland was down 6.5 sen to 54.5 sen. There were 1.32 million shares done.

The FBM KLCI rose 3.75 points to 1,461.55. Turnover was 15.28 million shares valued at RM15.36 million. There were 77 gainers, 27 losers and 52 stocks unchanged.

On Tuesday, IOI Corp announced it terminated its proposed acquisition of 11,977.91 ha (29,597.42 acres) of oil palm PLANTATION [] land from Dutaland, citing “non-compliance of certain terms and conditions”.

However, Dutaland has rejected the reasons for the termination.

ECM Libra Research said that as Dutaland does not accept the termination, a legal suit may ensue.

“Dutaland was expected to make a profit of RM511 million from the sale of the land and they may seek a specific performance relief from the court for the transaction to be completed,” it said.

The research house said at the price of RM69,294 a hectare, many considered the purchase to be a pricey one. As such, some fractions of the market would perceive this to be a positive development.

ECM Libra Research said although the termination of the SPA is a setback to IOI’s plan to increase its fresh fruit bunches, it may allow the group to look for better opportunities elsewhere. However, this issue between IOI and Dutaland will have to be resolved first.

ECM Libra Research keeps IOI TP at RM6.11

KUALA LUMPUR: ECM Libra Research continues to have a Trading Buy call on IOI Corp as crude palm oil (CPO) prices have already corrected and appear to be rising again.

The research house said on Thursday, Oct 27 while it doesn’t expect prices to strengthen significantly in the long term, there could nonetheless be some adjustment back to the RM3,000 a tonne level if more news on the La Nina emerges in the market in coming weeks.

However, it also said prices could also weaken further if there is more news on improving soybean supplies with ongoing South American plantings.

“Whatever the case, we view it to be a trading market at the moment and IOI makes for a good proxy given their healthy liquidity.

“Our target price of RM6.11 is unchanged based on FY12 P/E of 20.4x which represents mid-cycle valuation,” it said.

OSK Research reaffirms Buy on MAHB

KUALA LUMPUR: OSK Research is reaffirming its Buy call on Malaysia Airports Holdings Bhd (MAHB) with a discounted cashflow (DCF) derived target price of RM7.36.

It said on Thursday, Oct 27 MAHB reported commendable earnings, with its cumulative core net profit coming in line with its estimates but ahead of consensus.

OSK Research said topline growth was fuelled by higher passenger spending while its bottom-line got a boost from a higher utilisation rate and economies of scale.

“MAHB is likely to see a reduction in User Fees paid to the Government given the freeze on the airport operator’s proposed tariff hike, as the Government will pay compensation for the potential revenue loss,” it said.

The research house said in the pipeline are two more JV initiatives and a 50-acre development of a factory outlet.

“With its 9MFY11 earnings in line, we make no changes to our earnings at this juncture. We re-affirm our BUY call, with a DCF-derived target price of RM7.36, based on 9% WACC,” it said.

CIMB Research has technical sell on Bina Goodyear

KUALA LUMPUR: CIMB Equities Research has a technical sell on Bina Goodyear at 67 sen at which it is trading at a price-to-book value of 0.5 times.

It said on Thursday, Oct 27 that the recent countertrend rebound may have exhausted. Prices hit a snag at the 50-day SMA and the bears have since become more aggressive.

“If the 30-day SMA fails to hold, there is a high possibility that the 74 sen high is likely its near term peak.

“Indicators are beginning to show signs of exhaustion. MACD histogram bars are easing while RSI has hooked downward. The next support levels are 64 sen and 55.5 sen,” it said.

CIMB Research said traders should do well selling into strength, especially near the 72 sen to 74 sen resistances. It would only review its call if 74 sen is taken out.

CIMB Research has technical buy on Supermax

KUALA LUMPUR: CIMB Equities Research has a technical Buy on Supermax Corporation at RM3.26 at which it is trading at a FY12 price-to-earnings of 8.8 times and price-to-book value of 1.5 times.

It said on Thursday, Oct 27 thatthe rebound from its September’s low is still intact. Prices swung above its 30-day and 50-day SMAs to keep the bulls afloat.

“As long as the support trend line holds (now at RM3.00), we think the odds are slowly turning to the bulls. Next upswing is likely to push prices towards RM3.40 and RM3.60,” it said.

CIMB Research said the technical landscape remains positive. MACD signal line has returned to the black while RSI is above the 50pts mark.

“Any pullback is an opportunity to accumulate. However, put a stop at RM3.00 to limit downside risk,” it said.

CIMB Research has technical buy on MPHB

KUALA LUMPUR: CIMB Equities Research has a technical Buy on MULTI-PURPOSE HOLDINGS BHD [] at RM2.55 a share at which it is trading at a price-to-book value of 1.3 times.

It said on Thursday, Oct 27 that MPHB’s share price broke out of its resistance trend line on Tuesday. Prices also tried to take out its 50-day SMA along the way.

“We think the stock is ripe for a stronger rebound. If we are right, prices should edge closer towards RM2.70 and RM2.87.

“Technical landscape remains conducive. MACD signal line is about to turn positive while RSI is above the 50pts mark,” it said.

CIMB Research said traders with higher risk appetite may start to nibble now. However, it is important to keep stop tight at below RM2.50-RM2.44.

HDBSVR sees KLCI extending gains to 1,475

KUALA LUMPUR: Hwang DBS Vickers Research said there was no comprehensive plan to resolve the European sovereign debt crisis following a high-profile summit on Wednesday, Oct 26.

The research house said on Thursday while an agreement to recapitalise the European banks has been reached, no announcement was made on the write-down of Greece’s sovereign debt and the boosting of a rescue fund size for the region.

Still, key U.S. equity indices jumped between 0.5% and 1.4% Wednesday night due to better U.S. economic data and hopes that the European problems would be solved eventually.

“This may give a short-term boost to Asian equities today. Our Malaysian bourse will likely climb too with its benchmark FBM KLCI rising towards its immediate resistance target of 1,475,” it said.

Hwang DBS Vickers Research said among the stocks that could attract buying interest include Hibiscus Petroleum, which has proposed to pay US$55 million for a 35% stake in Lime with interest in three companies that have concession rights in offshore oil & gas exploration assets in the Middle East.

Stamford College to be delisted from Bursa

PETALING JAYA: Stamford College Bhd will be delisted from Bursa Malaysia after Bursa Securities rejected its application to extend further the deadline to submit its regularisation plan for approval.

In a filing with the exchange, the company said its securities would be removed from Bursa Securities’ official list on Monday next week.

Earlier this month, Stamford College made an application to extend the time to submit its regularisation plan by four months to Feb 4, 2012.

Last year, Bursa Securities had rejected the Practice Note 17 (PN17) company’s proposed regularisation plan which involved the acquisition of a steel manufacturing business.

The rejection was based on concern that the proposal was not sufficiently comprehensive to resolve all problems, financial or otherwise, that had caused Stamford College to trigger the PN17 criteria.

Bursa Securities said the group’s steelmaking business, which only began operation in February 2010, had yet to show that it was able to generate profits and positive cashflows or be proven to be a viable business.

Moreover, the steel manufacturing business depended highly on a single supplier and single customer, which was a related party, to sustain its business operations.

As for the core education business, there was uncertainty whether the profits to be generated from it would be able to sustain the group’s performance.

The company made a net loss of RM1.1mil on revenue of RM4.86mil for the second quarter ended June 30.
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