Tuesday, 1 November 2011

KL shares end lower on profit-taking

KUALA LUMPUR: Share prices on Bursa Malaysia ended sharply lower today on profit-taking amid the uncertainty in the short-term market outlook, dealers said.

The FBM KLCI fell 16.25 points, or 1.1 per cent, to close at 1,475.64, after opening 7.76 points lower at 1,484.13.

The benchmark index hovered between 1,474.61 and 1,485.9 as continuous selling pressure dragged it into negative territory.

Dealers said the market started the new trading month on broadly weaker sentiment led by the consumer and services sectors.

The manufacturing sector was also affected after the release of weak manufacturing figures from China.

China's purchasing managers index for October fell to 50.4 in October from 51.2, reflecting the slow pace of China's manufacturing expansion.

TA Securities senior technical analyst, Stephen Soo, said the market has reached 'overbought' position after a strong rally, so profit-taking was not a surprise.

"The investors also took their cues from Wall Street's losses due to weak leads from European markets as Greece government announced that the country would hold a referendum on a new aid package," he told Bernama here today.

The overall market sentiment was negative with losers led gainers by 583 to 198 while 213 counters were unchanged, 476 untraded and 20 others suspended.

Trading was moderate with a volume of 1.19 billion shares worth RM1.29 billion compared with 1.33 billion shares worth RM1.58 billion yesterday.

The Finance Index fell 60.83 points to 13,433.37, Industrial Index eased 33.40 points to 2,692.24 and the Plantation Index dropped 80.34 points to 7,484.96.

The FBM Emas decreased 116.61 points to 10,052.71 and the FBM 70 Index declined 148.39 points to 10,806.78.

The FBMT100 fell 114.42 points to 9,873.79 and the FBM Ace Index slipped 48.07 points to 3,983.37.

Among losers, Panasonic Manufacturing fell 32 sen to RM19.70, Litrak dropped 17 sen to RM3.47 and Innoprise Plantations slipped 15 sen to RM1.35.

Of the actives, GPRO rose 5.5 sen to 24.5 sen, MBSB-Wa increased half sen to 91 sen and Maxbiz gained three sen to 12 sen.

Among top gainers, F&N rose 20 sen to RM17.20, Hong Leong Bank increased 12 sen to RM10.72 and Jaya Tiasa added 11 sen to RM5.82.

In heavyweights, Maybank gained one sen to RM8.37, CIMB lost eight sen to RM7.49 and Sime Darby was down five sen to RM8.85.

Volume on the Main Market decreased to 916.54 million shares valued at RM1.25 billion from 1.06 billion shares valued at RM1.54 billion on Monday.

Turnover on the ACE market increased to 166.23 million units worth RM27.52 million from 156.02 million units worth RM26.49 million previously.

Warrants slipped to 107.83 million shares valued at RM10.16 million from 111 million units valued at RM8.38 million yesterday.

Consumer products accounted for 64.55 million shares traded on the Main Market, industrial products 212.6 million, construction 47.63 million, trade and services 271.32 million, technology 36.63 million, infrastructure 16.4 million, finance 136.63 million, hotels 458,600, properties 91.7 million, plantation 28.79 million, mining 33,000, REITs 2.49 million and closed/fund 27,000. - Bernama

Pharmaniaga posts RM15.6m Q3 profit

KUALA LUMPUR: Pharmaniaga Bhd has recorded a pre-tax profit of RM15.646 million for the third quarter ended Sept 30, 2011 compared with RM15.405 million in the previous corresponding quarter.

Its revenue rose to RM371.432 million from RM334.337 million.

For the first nine months, Pharmaniaga delivered an improved pre-tax profit of RM56.818 million compared with RM48.163 million while turnover rose to RM1.153 billion from RM1.002 billion.

In a statement today, Pharmaniaga Chairman Tan Sri Lodin Wok Kamaruddin said though the third quarter results were modest in nature, it resulted in a significant improvement in profit before tax as well as turnover on a nine-month basis.

"As we look to close the final quarter of this financial year we hope to see further gains to our bottom line.

"What is most important is that we are strengthening systems, working at ways to improve cost management, aligning synergies particularly with the recent acquisition of Idaman Pharma Manufacturing Sdn Bhd.

"Moving forward, we are optimistic of domestic growth while we expect to see regional growth in the foreseeable future," he said. - Bernama

MAS' CFO to end tenure year-end

KUALA LUMPUR: Mohd Azha Abdul Jalil will end his tenure as the Chief Financial Officer (CFO) of Malaysia Airlines at year-end.

He will remain with the company until Dec 31 to ensure a smooth handover for seamless business continuity, said the national carrier in a statement today.

Mohd Azha joined the national carrier in July 2007 as Senior General Manager – Finance, and contributed significantly to the implementation of its Business Transformation Plan from January 2008.

He was appointed CFO of Malaysia Airlines in September 2009.

Malaysia Airlines said among his achievements in the national carrier was consolidating and outsourcing of the Europe finance back-office in 2007, and raising RM2.7 billion for the company through a rights issue last year.

Mohd Azha had been instrumental in raising aircraft financing worth approximately RM4 billion for 36 various new aircraft, under the fleet renewal programme.

Malaysia Airlines took delivery of its first new aircraft in late 2008.

He was also responsible for implementing an integrated Enterprise Resource Planning (ERP) system which will cut-over from the start of 2012.

Prior to joining Malaysia Airlines, Mohd Azha worked in a major oil and gas company for 17 years. - Bernama

Kuok Brothers to buy out Jerneh Asia

KUALA LUMPUR: Jerneh Asia Bhd’s major shareholder, Kuok Brothers Sdn Bhd, has launched a conditional takeover offer of the former in a move that could provide a quicker way to wind up matters at the cash-rich company that has been without a core business since last year.

In a filing with Bursa Malaysia yesterday, AmInvestment Bank Bhd said Kuok Brothers is offering RM1.45 cash per share for all remaining Jerneh Asia shares it does not own and for all new Jerneh Asia shares which may be issued arising from the exercise of the outstanding warrants.

Kuok Brothers, which holds a direct 37.71% stake in Jerneh Asia, is also looking to acquire the remaining 2.96 million warrants for 45 sen apiece.

According to the announcement, Kuok Brothers and persons acting in concert (PACs) hold a combined 41.81% equity interest in Jerneh Asia, comprising 102.02 million shares.

Kuok Brothers and PACs, however, do not hold any warrants.

The PACs are Ophir Holdings Bhd, PPB Group Bhd, Dalex Investments Ltd, Jerneh Asia chairman Datuk Lim Chee Wah, former Jerneh Asia executive director Tan Yew Jin, TYJ Sdn Bhd and Datuk Musa @ Ayob Saad.

Based on a back-of-the-envelope calculation, Kuok Brothers — the family vehicle of tycoon Tan Sri Robert Kuok — will have to fork out about RM207.19 million for the deal.

To boost its offer, Kuok Brothers affirmed that its offer would not fail due to insufficient financial capacity, adding that each shareholder who wishes to accept the offer will be fully paid in cash.

Kuok Brothers’ directors include Kuok Khoon Chen, Kuok Khoon Ho, Kuok Khoon Ean and Kuok Oon Kwong.

The substantial shareholders of Kuok Brothers include PPB Corporate Services Sdn Bhd (10.72%), Kuok Hock Swee and Sons Sdn Bhd (8.84%), Kuok Foundation Bhd (8.4%), Nicka Enterprise Sdn Bhd (8.4%) and Kota Johore Realty Sdn Bhd (6.26%).

Kuok Brothers also noted Jerneh Asia shareholders may face delays in receiving the proceeds from Jerneh Asia’s proposed disposal of its major assets, capital distribution exercise and subsequent winding-up exercise.

“Hence, the offeror intends to undertake the offer to provide Jerneh Asia shareholders and warrant-holders an opportunity to realise their investment earlier compared to the capital repayment and winding-up,” AmInvestment Bank said.

Kuok Brothers also said it does not intend to maintain Jerneh Asia’s listing status.

To recap, Jerneh Asia has been without a core business after selling its 80% equity interest in Jerneh Insurance Bhd to ACE INA International Holdings Ltd last December for RM523.2 million cash.

Jerneh Asia was earlier in talks to acquire Sabah-based property developer Sagajuta (Sabah) Sdn Bhd, whose flagship project is the massive 1Borneo mixed development in Kota Kinabalu.

However, the deal recently fell through after Jerneh Asia and Sagajuta’s 60% shareholder, Generasi Cipta Sdn Bhd, failed to reach a consensus on the terms of the proposed acquisition.

Shortly after the discussions ceased, Sagajuta’s managing director Datuk Raymond Chan Boon Siew surfaced in timber manufacturing firm Harvest Court Industries Bhd after acquiring a substantial 13.85% stake.

Meanwhile, an analyst opined that Kuok Brothers’ offer price for the remaining shares in Jerneh Asia is a fair offer which offers shareholders the convenience of skipping Jerneh Asia’s proposed route of asset disposal and capital repayment, which would involve a lengthy company dissolution process.

Jerneh Asia’s shareholders’ funds stood at RM760.47 million as at June 30, 2011. Subsequent to that date, the company saw the conversion of 42.04 million warrants in July and the payment of RM443.65 million in dividends in August.

According to the analyst’s calculations, Jerneh Asia’s pro forma shareholders funds as at June 30, after incorporating the warrant conversion and deducting the dividend payment, would work out to be about RM384.07 million or RM1.55 per share.

However, the analyst noted that Jerneh Asia’s assets includes a sum of about RM63.86 million invested in associate companies, which works out to be about 25.9 sen per share.

“The investment in associates is less liquid and could take a while to sell. So, Jerneh Asia’s net asset value less its investments in associate works out to be RM1.29 which is below the offer price of RM1.45 per share,” said the analyst.

“There are also some residual assets which may be difficult or sell, as well as liquidation expenses in a winding-up process ... so the amount offered by Kuok Brothers is very fair,” he added.

“The Kuok family has been very transparent in its aim from the start to return Jerneh Asia’s cash back to shareholders as quickly as possible. This is the fastest option after the Sagajuta deal fell through,” he said, adding that the offer was slightly above the estimated capital repayment of between RM1.36 and RM1.41 per share as stated in Jerneh Asia’s circular to shareholders dated June 13.

AmInvestment Bank also noted that Kuok Brothers’ offer of RM1.45 per share was a 7.41% premium over Jerneh Asia’s five-day and one-month volume weighted average price (VWAP) of RM1.35 sen.

The offer price is also a 6.62% premium over Jerneh Asia’s closing price of RM1.36 yesterday, prior to the announcement of the Kuok Brothers’ offer.

As for the warrants, AmInvestment Bank noted that the 45 sen offer for the warrants was calculated based on the difference between the Kuok Brother’s RM1.45 per share offer and the warrants’ RM1 exercise price.

This puts the offer price for the warrants at a 9.76% premium over its five-day VWAP, 12.5% premium over the one-month VWAP and a 9.76% premium over the warrant’s last closing price of 41 sen yesterday.

This article appeared in The Edge Financial Daily, November 1, 2011.

JCY and Dufu surge on Seagate’s new dominance

KUALA LUMPUR: Malaysian hard disk drive (HDD) component manufacturers, JCY International Bhd and Dufu Technology Corp Bhd, saw a surge in buying interest in the two stocks in anticipation of major structural changes in the HDD sector following the Thai flooding.

Both JCY and Dufu are expected to benefit from the improved positioning of their main customer Seagate Technology plc following the flooding in Thailand. Seagate’s main competitor, Western Digital Corp (WD), the current top HDD producer in the world, has closed its operations because of the floods. But Seagate’s Thai manufacturing facilities, on the other hand, are unaffected by the floods and remain in operation, and Seagate is expected to overtake WD in production over the next few months.

JCY’s share price gained 3.5 sen or 6.1% to close at 60.5 sen, while trading volume surged five times to 52.13 million shares. It was the local bourse’s most actively traded stock. Dufu added three sen or 9.1% to 36 sen, with a volume of 6.83 million shares, a 14-fold increase from just 473,100 shares last Friday.

Seagate’s improved position also means that JCY and Dufu could take advantage of the potential global shortage of HDD. Also, the higher prices of parts could increase margins along the entire HDD value chain.

Industry observers expect the prices of HDDs and components to increase as a result of the disrupted HDD supply chain which will in turn hit original equipment manufacturers (OEMs) such as IBM, Dell and EMC in the coming months.

Seagate’s future prospects will be revealed today at a press conference by BS Teh, the group’s Asia Pacific and Japan senior vice-president and managing director, as he provides updates on Seagate’s Malaysian operations as well as the market outlook for the HDD industry.

With reports from Thailand already indicating prices of HDDs have increased by 20% to 25% in the past two weeks, both JCY and Dufu could see better prospects compared to their recent lacklustre financial performances.

JCY posted losses for its 3QFY11 ended June 30 due to a combination of lower selling prices, smaller sales volume and a weaker US dollar.

For its 2QFY11 ended June 30, Dufu’s net profit fell 75% year-on-year from RM605,000 to RM154,000, which it attributed to the strengthening of the ringgit as well as higher raw material prices.

Shares in Notion VTec Bhd, another HDD component player, gained just three sen or 1.8% to RM1.69 on a thin volume of 20,000 shares.

The Edge Financial Daily had noted in an article yesterday that in contrast to JCY and Dufu, Notion will likely be most affected by the Thai floods. Notion’s HDD sales are mostly to WD, while its sole camera customer, Nikon Corp Ltd, has also shut its operations in Thailand due to the floods.

This article appeared in The Edge Financial Daily, November 1, 2011.

Gas Malaysia on track for 4Q listing, says MMC

KUALA LUMPUR: MMC Corp Bhd is on track to list its subsidiary Gas Malaysia Bhd by December despite market volatility and global economic uncertainty dampening investor sentiment.

MMC finance director Anwar Syahrin Ajib told reporters yesterday that the group is still sticking to its year-end target to list Gas Malaysia though the deal is dependent on fulfilling certain conditions imposed by the Securities Commission (SC) and wider market conditions.

Anwar also said Gas Malaysia’s IPO could garner up to RM2.20 per share, which was the top end of its indicative offer price range.

“We think we are going to get that price for a few reasons, such as the company’s performance and by benchmarking it against other similar companies,” Anwar said after the MMC EGM yesterday.

MMC shareholders voted in favour of the proposed listing of Gas Malaysia.

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

Syed Abdul Jabbar also said the prospectus is scheduled to be launched late this month.

Anwar (left) and Syed Abdul Jabbar after the EGM yesterday.

Anwar and Syed Abdul Jabbar declined to comment on the future listing of the group’s other units, Malakoff Bhd and Johor Port Bhd.

To recap, the SC had on Oct 7 granted conditional approval for Gas Malaysia’s proposed listing on the Main Market with several conditions. The first is that Gas Malaysia is to execute a new gas supply agreement with Petroliam Nasional Bhd (Petronas) prior to the registration and issuance of its listing prospectus.

Additionally, the terms of the new agreement must not have a material adverse impact on Gas Malaysia’s business operations and future profitability.

Second, the SC requires Gas Malaysia to rectify any non-compliance with regard to petrol stations built on land not designated for such use within 12 months from the date of the SC’s letter of approval for the listing.

The third condition is that Gas Malaysia is to allocate at least 12.5% of its enlarged issued and paid-up share capital to bumiputera investors at the point of listing.

Gas Malaysia’s shareholders are MMC-Shapadu Holdings Sdn Bhd (55%), Tokyo Gas-Mitsui & Co Holdings Sdn Bhd (25%), Petronas Gas Bhd (20%) and Petronas, holding one special share.

To facilitate the listing, Gas Malaysia shares will be subdivided to increase the company’s paid-up capital from 642,000 shares to 1.284 billion shares. Its shareholders will then offer for sale 333.84 million shares, representing 26% of Gas Malaysia’s enlarged paid-up capital.

Some 303.49 million shares (23.64%) will be offered to institutional investors and bumiputera institutional investors while the remaining 30.34 million shares (2.36%) will form the retail offering portion for the public and eligible directors and employees.

This article appeared in The Edge Financial Daily, November 1, 2011.

The Edge Billion Ringgit Club - Mah Sing Group Bhd

Incorporated in 1991, Mah Sing Group Bhd is one of Malaysia’s leading developers. With numerous international and domestic awards, the group has established a strong brand in medium to high-end landed residential properties, commercial projects including office buildings, shops, retail and SoHo as well as industrial projects. It also has a profitable plastic business, which was the original core business of the group before it diversified into property development. The group has about 34 projects across Malaysia.

Group managing director and CEO Tan Sri Leong Hoy Kum shares with The Edge Financial Daily his strategies and dreams for the company.

TEFD: What are the group’s competitive strengths and advantages?
Our competitive strengths include being versatile, having a strong brand, being innovative and being able to cater for various market segments.

Versatility. Mah Sing is one of the few developers in Malaysia to offer a wide range of products comprising residential (catering for a wide range of customers, from medium to high-end developments, both landed and high-rise with built-up areas from 500 square feet), commercial (office, retail and shops) and industrial properties. Our wide ranging product offerings help the group identify and roll out different products in different phases of the economic cycle (see table).

Quick turnaround strategy. The group ensures a short period between land purchases and launches for fast cash flow generation to maximise shareholders’ return.

Strong research and development team. We conduct in-depth study of market needs. The team is able to identify new trends that appeal to the market. For instance, in the residential segment, we identified the trend and appeal of superlink, semi-detached and bungalow developments in a gated-and-guarded environment with facilities. In the commercial space, we popularise en bloc sales in the primary market (The Icon Jalan Tun Razak — West Wing and East Wing, and Apex Tower, Southgate). For the industrial segment, the group identified the opportunity for niche semi-detached industrial properties in the Klang Valley which resulted in the brisk sales for our iParc 1, 2 and 3

Strong branding. The group has built a strong brand name over the years, delivering quality products on a timely basis that meet the needs of end buyers.

Leong is inpired by Li Ka Shing and aims to make Mah Sing the Cheung Kong of Malaysia one day.

Innovative and fresh concepts, adaptable to changing market demands. Our product development team continuously work on innovative products based on market feedback obtained by our research and development team. While presenting fresh concepts, we ensure that practicality is given paramount importance.

Quality and services. Mah Sing has a strong quality control and quality assurance team that ensures all our projects meet and exceed stringent quality standards. We are also adopting international best practices in ensuring quality and have sought CONQUAS (Construction Quality Assessment System) certification by BCA Singapore (Building and Construction Authority) for all new residential projects. We also have the distinction of being the first and only developer accorded the CONQUAS award for an office building in Malaysia, namely The Icon Tun Razak which was completed in 2009.

Strong balance sheet and earnings sustainability. We had low net gearing of 0.32 times as at March 31, 2011. This provides us with the capacity to gear up for landbanking. Our present combined remaining gross development value and unbilled sales are about RM14 billion which should provide earnings sustainability for another five to seven years.

Geographical diversification. Domestically, Mah Sing has developments in the three main growth corridors of the Klang Valley, Johor and Penang. It is also looking at opportunities abroad in China, Vietnam, Singapore and Australia.

What are the group’s achievements in the past four years?
Our revenue doubled from RM573 million in 2007 to RM1.11 billion in 2010, while net profit increased nearly 50% from RM81 million in 2007 to RM118 million in 2010. Our number of projects nearly tripled, from 13 projects in 2007 to 34 in 2011. We have maintained a consistent dividend payout of a minimum of 40% of net profit since 2006. Mah Sing has garnered both local and international awards and accolades for its projects as well as recognition for its performance as a leading property developer.

How is the group positioning itself within your industry? What are your strategies to grow or gain market share?
Mah Sing is a premier lifestyle developer and our expertise is in innovative product development, high quality finishing and timely delivery of products that surpass our buyers’ expectations. We are also one of the very few developers in the country to offer a full and complete range of properties, namely residential, commercial and industrial products. Hence, we are positioning ourselves as a one-stop centre where properties are concerned.

We will continue to offer properties in good locations, with concepts and designs that meet buyers’ needs. In 2007, we achieved sales of RM727 million and doubled that to RM1.5 billion in 2010. Moving forward, we aim to gain more market share, starting with a RM2 billion sales target for 2011.

We are committed to raising the bar to continuously improve our concepts, designs and also strive to create iconic buildings and developments. We will also continue to run our business well, grow our revenues, profits and returns to shareholders, as well as adopt good corporate governance.

What are the group’s plans for the future?
In the coming years, the group will proceed with its three-pronged strategy. We will continue with our niche, quick turnaround development model for our residential, commercial and industrial series as it is profitable and cash-generative. With our low net gearing, we target to acquire a large tract of strategic land bank over the next two years. In the future, we shall explore overseas expansion to drive future earnings growth.

What is your dream for your company? How would you like to see it in 10 years?
My vision is to be a regional developer. We would like to continue with our branding locally and hopefully someday, our brand will penetrate other parts of the world. This is what we wish for as we are looking at bringing value to the house buyers, improving the quality of life and enhancing their lifestyles. We are a dynamic company and seek continuous improvement. Ultimately, we want to leave a legacy of excellence.

I am inspired by business luminaries like Li Ka Shing and aim to make Mah Sing the Cheung Kong of Malaysia one day.

This article appeared in The Edge Financial Daily, November 1, 2011.

Malaysia Airlines CFO to end tenure on Dec 31

KUALA LUMPUR (Nov 1): MALAYSIAN AIRLINE SYSTEM BHD [] (MAS) chief financial officer Mohd Azha Abdul Jalil is resigning from the national carrier after a 4 ½ year stint to pursue new challenges and personal goals.

MAS said on Tuesday he would remain in the company until Dec 31, 2011 to ensure a smooth handover for seamless business continuity.

He joined MAS in July 2007 as senior general manager – finance, and contributed significantly to implementation of its business transformation plan since January 2008. He was appointed CFO in September 2009.

“Among his achievements in the national carrier were consolidating and outsourcing of the Europe finance back-office in 2007, and raising RM2.7 billion for the Company through a rights issue in 2010.

“Mohd Azha has been instrumental in raising aircraft financing worth approximately RM4 billion for 36 various new aircraft under the fleet renewal programme of which Malaysia Airlines took delivery of its first new aircraft in late 2008.

“Mohd Azha is also responsible for implementing an integrated Enterprise Resource Planning (ERP) system which will cut-over from the start of 2012,” it said.

Prior to joining MAS, he worked in a major oil and gas company for 17 years.

Puncak Niaga sells debt notes to PAAB for RM328m

KUALA LUMPUR (Nov 1): PUNCAK NIAGA HOLDINGS BHD [] is selling all its Puncak Niaga (M) Sdn Bhd (PNSB) debt note to Pengurusan Aset Air Bhd (PAAB) for RM328.12 million.

Puncak Niaga said on Tuesday it had signed a conditional sale and purchase agreement with PAAB’s special purpose vehicle – Acqua SPV Bhd – to sell all its redeemable, unsecured, coupon bearing notes.

PAAB is a unit of the Minister of Finance Inc, which was set up in May 2006 to restructure the water services industry in the country.

To recap, PNSB had issued the debt notes of up to RM546.87 million in May 2001 and the notes were issued solely to Puncak Niaga.

On Nov 20, 2011, Puncak Niaga had in turn issued redeemable, secured, coupon bearing notes of up to RM546.87 million in nominal value and the proceeds were used to subscribe for the notes issued by PNSB.

The holders of the Puncak Niaga notes can exercise a put option to Puncak Niaga to repurchase all or some of these notes on the put date on Nov 18, 2011.

Puncak Niaga also has a call option to redeem all outstanding notes at the outstanding notes at the full amount. The outstanding principal amount including the fifth mandatory partial repayment of RM54.68 million amounted to RM328.12 million.

Sunway REIT 1Q net profit at RM43.86m

KUALA LUMPUR (Nov 1): Sunway Real Estate Investment Trust (SunREIT) posted net profit of RM43.86 million in the first quarter ended Sept 30, 2011 on the back of RM95.04 million.

It said on Tuesday that earnings per share were 1.64 sen. It proposed an interim income distribution of approximately 100% of the realisable income amounting to RM47.1 million or 1.75 sen per unit. This amount includes surplus cash arising from 50% manager's fee payable in units of RM2.7 million.

SunREIT said the revenue of RM95.04 million was an increase of 31.2% or RM22.60 million from the RM72.44 million a year ago.

“The initial portfolio of eight PROPERTIES [] and Sunway Putra Place contributed to the increase by RM14.4 million and RM8.2 million respectively,” it said.

SunREIT said the retail properties from the initial portfolio had contributed an increase of RM9.8 million compared to 1Q2011 mainly due to flow through of rental revision from Sunway Pyramid Shopping Mall whereby approximately 1.1 million sq. ft. was renewed towards the end of September 2010 with a rental reversion of 16.3% for the three-year term.

The hotel properties from the initial portfolio’s performance was RM3.7 million higher compared to 1Q2011 mainly attributable to continued strong support from the commercial group for event such as corporate meetings, corporate long stays and Commercial FIT.

Sunway REIT property income up 27.2pc

KUALA LUMPUR: Sunway Real Estate Investment Trust (Sunway
REIT) recorded a 27.2 per cent jump in its net property income to RM70.3 million for the quarter ending Sept 30, 2011 over that of the previous corresponding period, said its manager Sunway REIT Management Sdn Bhd.

The company attributed the strong performance to the higher contributions from the initial portfolio of eight assets and Sunway Putra Place of RM9.7 million and RM5.3 million respectively.

Sunway REIT’s net realised income rose by 15.1 per cent to RM44.2 million in the same period from that of the previous corresponding period.

Overall, Sunway REIT has performed better by RM5.8 million after taking into account the net loss of RM1.8 million by Sunway Putra Place due to no income contribution from Sunway Putra Hotel in the first quarter of its current financial year.

Sunway REIT secured full control and possession of Sunway Putra Place including the hotel on Sept 28 2011, and the manager expects positive contribution for the financial year ending June 2012.

The manager announced distribution per unit of 1.75 sen for the first quarter of its current financial year, representing an increase of 15.9 per cent compared to the previous corresponding period. This translates into an annualised distribution yield of 6.3 per cent based on Sunway REIT’s closing price of RM1.11 on Sept 30, 2011.

Sunway REIT Management chief executive officer Datuk Jeffrey Ng said: “We are positive on the prospect of the portfolio for this financial year amidst headwinds in the external environment. With the full possession and control of Sunway Putra Place, the focus now is to turn around the property and reposition the property into a must-visit destination for local visitors and foreign tourists."

"We are confident that upon the completion of the refurbishment exercise, the asset will enjoy a quantum leap in income as well as capital appreciation in the asset value," he added. - Bernama

Shell Q3 pre-tax loss widen to RM200.06m

KUALA LUMPUR: Shell Refining Co (FOM) Bhd's pre-tax loss for the third quarter ended Sept 30, 2011 rose to RM200.06 million from RM26.40 million in the same period of 2010.

Its revenue, however, rose to RM3.07 billion from RM2.65 billion previously.

In a filing to Bursa Malaysia today, Shell said the main contributing factors to the quarter's performance were weak refining margins and lower production.

Its chairman, Anuar Taib, said the refining margins were expected to improve in the fourth quarter with possibly stronger mogas demand.

"However, we will continue to take every opportunity to optimise margins," he said. - Bernama

Unisem 3Q net profit slides 89% to RM5.27m

KUALA LUMPUR (Nov 1): UNISEM (M) BHD []’s earnings fell 89.7% to RM5.27 million in the third quarter ended Sept 30, 2011 from RM51.53 million a year ago and cautioned demand for the group’s products and services to remain weak for the next quarter due to global economic uncertainty.

It said on Tuesday that revenue dropped 22.2% to RM288.19 million from RM370.69 million. Earnings per share were 0.78 sen compared with 7.64 sen.

“The decline in revenue and profit was principally attributable to the depreciation in the US$/RM exchange rate, as compared to the rates that prevailed in the corresponding period last year as well as reduction in overall group sales volume,” it said.

For the nine-month period, its profit fell 84.1% to RM22.38 million from RM141.21 million in the previous corresponding period. Revenue declined 16.1% to RM887.68 million from RM1.059 billion.

DiGi on track to distribute RM500m to shareholders

KUALA LUMPUR: DIGI.COM BHD [] is expected to distribute about RM509 million to its shareholders by the first half of 2012 under the proposed capital distribution.

It said on Tuesday, its unit DiGi Telecommunications Sdn Bhd had issued 100,000 redeemable preference shares (RPS) to DiGi.

The RPS will be redeemed by DiGiTel on March 7, 2012. Upon redemption of the RPS, DiGi will receive about RM509 million and is expected to distribute such amount (less expenses) to DiGi shareholders by the first half of 2012.

SapuraCrest says secures US$1.4b Petrobras project

KUALA LUMPUR (Nov 1): SAPURACREST PETROLEUM BHD [] says its unit TL Offshore Sdn Bhd has secured a US$1.5 billion contract from Petróleo Brasileiro S.A. (Petrobras).

It said on Tuesday that TLO was awarded a contract to charter and operate three pipe laying support vessels for US$1.4 billion.

SapuraCrest said one of the vessels would be built in Brazil and the two others outside Brazil.

“Revenue from the award is expected to be generated by the fourth quarter of 2014. The award will have no effect on the issued and paid-up share capital of the company and is expected to contribute positively to the group's net assets and earnings for the financial year ending Jan 31, 2015 and beyond,” it said.

KL shares lower at mid-afternoon

Share prices on Bursa Malaysia remained lower at mid-afternoon today as the FTSE Bursa Malaysia KLCI (FBM KLCI) failed to sustain its position, sliding due to profit-taking activities, dealers said.

As at 3.10pm, the benchmark index declined 11.21 points to 1,480.68, after opening 7.76 points lower at 1,484.13.

Volume stood at 740.35 million shares worth RM663.38 million, with losers leading gainers 453 to 190 with 233 others unchanged and 594 untraded.

The Finance Index fell 62.48 points to 13,431.72, the Plantation Index declined 51.82 points to 7,513.48 and the Industrial Index lost 18.5 points to 2,707.14.

The FBM Emas Index decreased 75.261 points to 10,094.06, the FBM Mid 70 Index fell 94.29 points to 10,860.89 and the FBM Ace ndex declined 7.13 points to 4,024.31.

Among active stocks, GPRO added 5.5 sen to 24.5 sen, Maxbiz gained 4 sen to 13 sen and MBSB-Wa rose 1 sen to 91.5 sen.

For the heavyweights, Maybank decreased 1 sen to RM8.35, CIMB fell 8 sen to RM7.89 and Sime Darby declined 3 sen to RM8.87. -- Bernama

Minimal impact on auto firms

KUALA LUMPUR: The Bank of Japan’s intervention to cap the sharp appreciation on the yen against the US dollar is not expected to have significant impact on Malaysian automotive companies, said analysts.

After the intervention (for the third time this year), the yen settled around the 78.00-level at press time.

The Japanese currency soared to nearly three-month high at the 79-level in early Tokyo trading yesterday compared with last week’s closing of 75.8 against the greenback before the Japanese government’s intervention.

Yesterday, against the ringgit, ¥100 strengthened to RM3.9371 at press time. The yen has appreciated nearly 4.5% against the ringgit since last Wednesday when ¥100 was equivalent to RM4.1211.

Japan’s Finance Minister Jun Azumi was quoted as saying that the Japanese government intervened unilaterally in the foreign exchange market yesterday to counter speculative moves that did not reflect the health of the Japanese economy.

According to Ahmad Maghfur Usman, an analyst at OSK Research, most automotive companies will only experience marginal cost reductions in imports from a weakening yen.

“UMW Holdings Bhd and Tan Chong Motor Holdings Bhd would be less affected as their costs are primarily denominated in the US dollars,” he told The Edge Financial Daily.

Perodua stands to benefit most from the yen's weakening as its payables are largely dominated in yen.

UMW and Tan Chong, the distributors of Japanese vehicles Toyota and Nissan respectively, import mostly from Thailand. The completely-knocked down (CKD) and completely built-up (CBU) car imports from Thailand are transacted in US dollars, he said. UMW’s exposure to the yen is through its 23.6% stake in Perusahaan Otomobil Kedua Sdn Bhd (Perodua), he added.

Proton Holdings Bhd is another auto company which will unlikely experience a large impact as its cost exposure in yen is less than 10%, he said.

According to an analyst at TA Securities, 20% of Proton’s bill of material (BOM) costs in 2010 were exposed to currency fluctuations. Of that 20%, 7% was from the yen, 11% from the US dollars and the remaining from nine different other currencies, the analyst said.

Perodua, analysts said, is the only auto company to benefit most as its payables are largely denominated in yen.

Apart from the automotive industry, a tumbling yen will also benefit companies such as Tenaga Nasional Bhd (TNB), which has large debts denominated in the currency.

Perodua, analysts said, is the only auto company to benefit most as its payables are largely denominated in yen.

Apart from the automotive industry, a tumbling yen will also benefit companies such as Tenaga Nasional Bhd (TNB), which has large debts denominated in the currency.

A stronger ringgit against the yen would mean that TNB would have to fork out less to pay interest on its debts.

TNB had RM5.46 billion of debts denominated in yen and RM2.91 billion in the US dollar as at Aug 31, it said in its notes to its 4Q financial statements. On that date, TNB had RM19.05 billion worth of debt obligations, of which RM10.66 billion or 56% were ringgit-based borrowings.

On the movement of the yen, economists believe that if it continues to weaken, the trend will only be for the short-term.

“In the period of a few weeks to three months, the yen will likely go to about 75 against the US dollar,” Affin Investment Bank’s head of retail research Dr Nazri Khan told The Edge Financial Daily.

Another economist, Jason Fong of RAM Holdings Bhd, said that in the short-term, the yen is expected to exhibit some degree of volatility, “as traders try to speculate on the timing and the degree of intervention by Japanese policy makers for short-term currency gains”.

In the medium- to long-term, Fong said the yen is expected to face some upward pressure. “This is due to the extra easy liquidity conditions in the US — a prolonged near-zero interest rate policy and the Federal Reserve’s extraordinary measures such as the recent ‘Operation Twist’,” he told The Edge Financial Daily.

“Increased global risk aversion may also weaken the yen as investors seek a safe haven in US dollar-denominated assets, which occurred during the end of August,” he said.

Fong said more frequent policy interventions in the currency market could likewise weaken the yen. “A depreciation in the currency would cause investors to accumulate losses and may prevent further speculation in the yen,” he said.

This article appeared in The Edge Financial Daily, November 1, 2011.

Market Commentary

The FBM KLCI index lost 16.25 points or 1.09% on Tuesday. The Finance Index fell 0.45% to 13433.37 points, the Properties Index dropped 1.87% to 947.79 points and the Plantation Index down 1.06% to 7484.96 points. The market traded within a range of 11.29 points between an intra-day high of 1485.90 and a low of 1474.61 during the session.

Actively traded stocks include GPRO, MBSB-WA, MAXBIZ, MBSB, JCY, MBSB-CA, AIRASIA, HIRO-WA, SUMATEC and SUMATEC-WA. Trading volume decreased to 1193.45 mil shares worth RM1293.60 mil as compared to Monday’s 1331.98 mil shares worth RM1581.95 mil.

Leading Movers were PBBANK (+4 sen to RM12.76), HLBANK (+12 sen to RM10.72), MAYBANK (+1 sen to RM8.37), PETGAS (+4 sen to RM13.14) and KLK (+4 sen to RM21.10). Lagging Movers were GENTING (-36 sen to RM10.40), IOICORP (-16 sen to RM5.09), TENAGA (-17 sen to RM5.81), GENM (-16 sen to RM3.69) and CIMB (-8 sen to RM7.49). Market breadth was negative with 198 gainers as compared to 583 losers.-- JF Apex Securities Bhd

HSL clinches RM90m S’wak water treatment plant job

KUALA LUMPUR: Hock Seng Lee Bhd (HSL) has secured a RM90.28 million water treatment plant project within the Samalaju enclave from the Sarawak government.

In a statement to the exchange yesterday, HSL managing director Datuk Paul Yu Chee Hoe said the job scope included mechanical and electrical works, earthworks, drainage, retaining structures, and piling and piping jobs.

“This contract marks HSL’s first successful tender result for a project to be directly awarded by Recoda (Regional Corridor Development Authority) and we hope there will be more to come,” Yu said. Recoda is spearheading the development of the Sarawak Corridor for Renewable Energy (Score), one of Malaysia’s five economic growth corridors.

According to Yu, the water treatment plant project will see the construction of pump and chemical houses, aerators, flocculation and sedimentation tanks, and filtration process facilities. The 17-month project is due for completion by April 2013.

He said site possession for the water treatment facility is expected to take place this month. The project, which brings the builder’s orderbook to RM1.7 billion, is anticipated to contribute positively to HSL’s earnings and net assets for the financial years ending Dec 31, 2012 to 2013, according to Yu.

HSL’s financials have improved. Net profit rose 22% to RM38.56 million in the first half year ended June 30 from RM31.52 million a year earlier while revenue was up 34% to RM272.51 million from RM203.66 million. The debt- free company had a cash pile of RM133.83 million as at June 30.

Covering 70,709 sq km with a population of over 600,000, Score is located in the central region of Sarawak. The enclave is rich in energy resources such as hydropower, coal and natural gas that will spur the growth of energy-intensive sectors in the state.

Designated as the new heavy industry hub for Sarawak, Samalaju is seen as a growing township where foreign investors engaged in metal-related production have set up operations. These include Japan-based Tokuyama Malaysia Sdn Bhd and Singapore’s OM Materials and Asia Minerals Ltd which have signed power purchase agreements with Sarawak Energy Bhd.

According to news reports, the Sarawak government has decided to set up a state port at Samalaju to serve industries located in Score. It was reported that Bintulu Port Holdings Bhd had received a letter of intent from the Sarawak government to submit a detailed proposal to build, own and operate a new seaport within the Samalaju enclave.

Meanwhile, Yu said rural water supply is an area the company is keen to pursue as it can leverage on its marine engineering skills and technical capabilities.

“Rural water treatment and supply is an area of great potential for HSL and it is a rewarding field given that a safe, reliable water supply has a positive impact on raising the living standard and protecting the health of our fellow Sarawakians while encouraging commerce and industry.

“We seek to have a strong presence in infrastructure projects for Score and procuring this project after an open tender exercise, demonstrates HSL’s ongoing competitiveness in sophisticated engineering and construction activities,” he said.

Prior to the Samalaju water project, HSL had last August signed a subcontract agreement with AF Construction Sdn Bhd to undertake a rural water supply project in Sibu.

The project is worth RM45.7 million.

HSL closed three sen higher to RM1.45 yesterday. Its net assets per share stood at 67 sen as at June 30.

This article appeared in The Edge Financial Daily, November 1, 2011.

Envair to supply 2m barrels light crude oil to China firm monthly

KUALA LUMPUR: Envair Holdings Bhd will supply two million barrels of light crude oil monthly for 60 months to a China-based company.

In its statement to Bursa Malaysia yesterday, Envair said it had received a letter of intent from An Hong Shenzhen on Oct 28 confirming the purchase of two million barrels of light crude oil monthly for 60 months with options of extensions and rollovers as well as possible increase of volume.

“The directors will discuss the terms including the pricing of the light crude oil with An Hong and upon the finalisation of these terms a definitive agreement will be signed and an announcement will be made in due course, including the financial effect of the supply of light crude oil on the company,” said the announcement.

This article appeared in The Edge Financial Daily, November 1, 2011.

Magna Australia served with rescission notice

KUALA LUMPUR: Magna Prima Bhd’s wholly owned subsidiary Magna Prima Australia Pte Ltd (Magna Australia) has been served with a rescission notice by Yucai Australia Pte Ltd.

In a filing with Bursa Malaysia, Magna Prima said its subsidiary was served with a rescission notice yesterday in view that Magna Australia had defaulted in the performance of its obligation under the contract by failing to pay the balance purchase consideration, the adjusted apportionable outgoings and the relevant interest payable to Yucai as stipulated by Oct 28.

On Aug 5, Magna Australia entered into a conditional contract of sale with Yucai to purchase a property for A$26 million in cash (RM84 million).

The said property is a 2,763-sq m freehold land held under Certificate of Title Volume 11145 Folio 423, together with improvements, including the development project thereon located on 218-236 A’Beckett Street, Melbourne, Australia.

Magna Prima said Yucai intends to exercise its rights under the contract unless the default is remedied within 14 days of the service of the notice and the legal cost of A$440 (inclusive of GST) and interest on the amount due at the rate of 16.5% per annum are all paid within the period.

“Unless the breach is remedied and interest and costs paid in accordance with the rescission notice, Yucai may exercise its rights under the contract, including without limitation, terminating the contract.

“The board of Magna Prima is currently deliberating on the next course of action and further announcement will be made in due course in relation to the proposed acquisition,” said the group.

This article appeared in The Edge Financial Daily, November 1, 2011.

MBSB 3Q net profit jumps 134% to RM95m

KUALA LUMPUR: Malaysia Building Society Bhd (MBSB) posted a 134% increase in its earnings to RM95.08 million for the third quarter ended Sept 30 from RM40.51 million a year ago.

In an announcement yesterday it said revenue increased 72% to RM372.67 million from RM215.77 million and earnings per share was 10.88 sen compared with 5.79 sen.

“The strong earnings posted for 3Q11 were mainly due to the increase in retail assets with Personal Financing-i continuing to grow by about 98% in terms of gross loans,” it said.

MBSB said it provided Personal Financing-i to government servants with attractive packages and was also boosted by the bundling of will writing and takaful products.

MBSB said for the nine-month period ended Sept 30, its earnings climbed 81.3% to RM241.6 million from RM133.21 million. Revenue hit RM1 billion, an increase of 78.7% from RM561.02 million.

MBSB said pre-tax profit grew 142% to RM327.06 million from RM134.96 million, which contributed to improved basic earnings per share of 27.65 sen and annualised return on equity of 45%. On a quarterly basis, the group recorded a net profit of RM95.1 million for 3Q11 compared with 2Q net profit of RM78.2 million.

Its net assets per share stood at 86 sen as at Sept 30. MBSB closed four sen higher yesterday to RM1.77.

This article appeared in The Edge Financial Daily, November 1, 2011.

Pestech seeks listing on Main Market

KUALA LUMPUR: Pestech International Bhd, an integrated electric power technology company, is seeking listing on the Bursa Malaysia Main Market.

According to its prospectus, the company intends to undertake a public issue of 12.88 million shares of 50 sen each, of which six million shares are for the public, 5.37 million for eligible directors, employees, other Pestech group contributors and 1.5 million for identified investors.

The company, which has been involved in the system design, engineering and infrastructure segment of the power transmission and distribution industry since 2000, has RM50 million in authorised capital and base of 100 million shares.

For FY10 ended Dec 31, Pestech pulled in a profit after taxation of RM11.49 million, a marked increase from FY09 profit of RM3.58 million.

Frost & Sullivan’s study showed that Pestech gained a market share of 4.5% in Peninsular Malaysia and Sabah in 2010.

Pestech will also offer for sale 8.59 million existing shares, with 6.46 million shares allocated by way of placement to bumiputera investors approved by the Ministry of International Trade and Industry (Miti), and 2.13 million shares via placement to identified investors.

Any of the offer shares not subscribed by Miti-approved bumiputera investors will be made available for application by the bumiputera public as part of the IPO balloting process.

Following that, any shares reallocated but not taken up by the bumiputera public shall be made available for application by the public or by private placement to identified investors.

The prospectus was filed on the Securities Commission (SC) website and did not state how much Pestech intends to raise.

Bank Islam is the principal adviser, underwriter and placement agent for the listing and arrived at the IPO price (which was not specified) after taking into consideration Pestech’s financial history, future expansion plans in international markets such as Cambodia, Sri Lanka, Papua New Guinea, Ghana, Brunei and Tanzania, and prevailing market conditions.

Proceeds from the IPO will be utilised to repay bank borrowings, for business expansion, working capital and to cover listing expenses.

This article appeared in The Edge Financial Daily, November 1, 2011.

Kencana riding on O&G boom

Kencana Petroleum Bhd (Oct 31, RM 2.59)
Maintain hold with raised target price of RM2.50 from RM2.44: We met up with Kencana Petroleum Bhd recently, and we are turning more positive on its earnings outlook. The targeted additional order book replenishment for FY13 is 25% higher than our forecast. More details shared on the risk sharing contract (RSC) revealed that downside is capped at a 12% unlevered internal rate of return (IRR).

1QFY12 results will incorporate three months’ contribution from recently acquired Allied Marine & Equipment Sdn Bhd (AME). AME is expected to post higher-than-expected earnings.

Kencana will prospect for the next marginal field, only after the merger with SapuraCrest Petroleum Bhd, which is expected to be completed by 1Q12.

The Berantai gas field, we estimate, yields a minimum 12% unlevered IRR, through cost recovery via fabrication and engineering works done by Kencana for the marginal gas field. We also understand that the returns could go as high as 18% unlevered IRR if Kencana manages to meet the scheduled delivery time and expected production rates from the gas field. Peak production is expected in 2013.

Kencana’s existing order book is valued at RM2.2 billion. The engineering, procuring and construction (EPC) segment accounts for more than 56% of its existing order book. Kencana has a tender book of RM10 billion and 50% to 60% of the tenders are in overseas international markets.

There are still 25 marginal field lines up and 10 are ready for development. Only two marginal fields, thus far, have been given out to Kencana-SapuraCrest and Dialog Group Bhd.

Other domestic projects in the pipeline include 22 new shallow water blocks and six deepwater blocks. Petronas has also allocated RM3 billion for maintenance and hook- up jobs over the next three years. Kencana is the biggest offshore maintenance and hook-up player in Malaysia.

Tender rigs fabricated by Kencana, the KM-2 and KM-3, will be completed on April 13 and July 13. One of the rigs will be reserved for jobs in Malaysia and the other overseas. The rigs have yet to be contracted out and bids usually take place when nearing completion.

Current debt to equity levels of 0.5 times is not alarming for an oil and gas services provider. Kencana is still in a net debt position despite having RM800 million in cash.

Kencana’s gross profit margins have risen from just 11% to 25% in the last six years. Its margins, which are almost twice that of Malaysia Marine and Heavy Engineering, are attributable to better cost management and lower subcontracting requirements.

We raise our target price to RM2.50 from RM2.44, which is based on a 16 times price earnings multiple to FY12 earnings. Our entry price is RM2.10. The award of more marginal fields would boost Kencana’s intrinsic value.

Kencana and SapuraCrest could be undertaking more M&A exercises after the merger. They are planning another major corporate exercise in three years. — UOB Kay Hian Research, Oct 31

This article appeared in The Edge Financial Daily, November 1, 2011.

Softer advertising expenditure in September

Media sector
Maintain underweight

As expected, September’s gross advertising expenditure (adex) for TV and print media combined showed a sequential monthly contraction of 18.1%, following the bumper August adex (due to Hari Raya and Merdeka festivities), according to Nielsen Media Research (NMR). On year-on-year (y-o-y) basis, adex growth moderated to 5.1% in Septemebr (August: +9.7% y-o-y).

Print: Bearing in mind the ad rate hike effective January 2011, the print media showed positive y-o-y growth of 7% in September, although it has moderated (August: +14.1% y-o-y). On a month-on-month (m-o-m) basis, the print media contracted 21.2%, surprisingly due to the Malay dailies’ 37.5% m-o-m contraction. Prior to September, the Malay dailies’ adex growth has been quite strong since February, with a monthly sequential growth of 15.5%, compared with English (8.5%) and Chinese (5.8%) dailies.

Media Chinese International Ltd’s (MCIL) newspapers recorded stronger y-o-y numbers across the board, compared with other Chinese dailies. Star Publications (M) Bhd had a relatively decent month as adex grew 1.8% y-o-y (-7.1% m-o-m).

TV: TV adex in September moderated further since July with only 2.9% y-o-y growth (August: +4.4% y-o-y), mainly supported by strong numbers from TV3 and 8TV. Collectively, adex for Media Prima’s channels held up quite well with 8.6% y-o-y growth (-12.1% m-o-m). In comparison, TV1 and TV2 combined recorded -27.5% y-o-y growth (-26.5% m-o-m).

For the remainder of 2011, we expect adex growth to moderate further due to lack of festivities or big events and a high base effect in 4Q10. Looking at 2008 elections, a snap election before 2012 will have a positive though not significant impact on the 2011 adex. Also, global economic uncertainties have resulted in advertisers being more prudent on ad spend. Year to date, adex grew 11%. For now, we maintain our projected 2011 adex growth of 9%, and expect adex growth to slow down to 3.6% in 2012.

The risks include: 1) stronger-than-expected consumer spending and demand (and hence, adex), possibly due to a faster-than-expected recovery in the global economy, among others; 2) lower-than-expected newsprint/content costs; and 3) stronger-than-expected ringgit vs the US dollar.

No change to our earnings forecasts. Maintain “underweight” on the sector. We believe the sector lacks catalysts as adex growth may weaken further if a double-dip global economic recession materialises. Historically, we note that the GDP multiplier effect on adex growth weakens (potentially deteriorating by as much as half) when GDP growth softens. — RHB Research, Oct 31

This article appeared in The Edge Financial Daily, November 1, 2011.

TNB lighting the path to FY12

Tenaga Nasional Bhd (Oct 31, RM 5.98)
Maintain neutral with revised target price of RM6.47 from RM6: The worst is over for TNB as a higher gas allocation in FY12 will boost its earnings. But this is offset by the lack of a complete fuel cost pass-through mechanism, which means that the power utility firm has to absorb coal costs above US$85 (RM262)/tonne and is susceptible to gas supply shocks.

FYAugust/11 core net profit was 5% below our forecast and 10% above consensus. As expected, there was no final dividend. We finetune FY12-13 earnings per share (EPS) and introduce FY14 numbers. We raise our target price (1.1 times price per book value (P/BV) after rolling it over to end-2012. Still a “neutral”.

FY11 revenue rose 6.2% due to a 3.1% year-on-year (y-o-y) increase in electricity sales in Peninsular Malaysia, a 2% net tariff hike on June 1, and a 15% tariff increase in Sabah on July 15. But core net profit (ex-FX losses) plunged 72.7% to RM693.6 million as operating costs excluding depreciation surged 21.7% to RM27 billion. This resulted from higher coal cost (+21.2% y-o-y) in price to US$106.9/mt; +6.2% y-o-y in consumption to 18.9 million mt and oil cost to compensate for the shortage of gas. The shortage resulted in an FY11 fuel mix of 45% gas, 44% coal, 6% hydro and 5% oil instead of the optimal 58% gas, 33% coal and 9% hydro. Hence earnings before interest, taxes, depreciation and amortisation (Ebitda) plunged 36.1% y-o-y to RM5.2 billion.

4Q core net loss came in at RM158 million, not as bad as our and consensus expectations. This was due to accrued revenue of RM292 million for the quarter. We believe the market was expecting a 4Q net loss of RM400 million to RM500 million as the management had indicated that the 4Q could exceed 3Q’s net loss of RM440 million.

We believe that earnings will rebound in FY12 as TNB’s gas allocation will improve, resulting in lower oil and distillate use. We estimate a tripling of FY12 net profit. TNB indicated that it expects to receive an average natural gas allocation of 1,100-1,150 million metric standard cubic feet per day (mmscfd) (2H11 average: 950 mmmscfd) in FY12 because of additional gas from the Bekok-C natural gas field and less maintenance work by Petroliam Nasional Bhd (Petronas).

During the results conference call with CEO Datuk Seri Che Khalib Mohamad Noh and CFO Mohamed Rafique, TNB said the government has accepted a proposal to raise the coal pass-through price from US$85/tonne to US$105-US$110/tonne. The company indicated that it will raise overall electricity tariffs by 4% and the company’s annual revenue by RM1.4 billion.

However, it is unclear when this will be implemented. Instead of changing tariffs on an ad hoc basis, we believe that a complete cost pass-through mechanism for all fuels is necessary to reduce earnings volatility and enhance TNB’s appeal to the market. Currently, only the cost of gas is completely passed through to consumers.

TNB is currently procuring its coal requirements for FY12. It has been able to buy bituminous coal from South Africa at a discount of up to US$1/tonne to index prices due to the expectations of a milder winter. The management is expecting a coal price of US$110/tonne in FY12 in line with our regional coal price forecast.

We gather that the construction of Petronas Gas Bhd’s (PetGas) regasification terminal (RGT) in Malacca is on track. The undersea piling works are complete. The contractor (Muhibbah Engineering Bhd) is constructing the jetty at the shipyard and will soon transfer it to the offshore site.

Overall, the project is 50% complete. Outstanding works include the laying of a gas pipeline (3km offshore and 30km on land) from the terminal to PetGas’ pipeline network. The completion of the RGT will help Petronas meet its commitment to supply 1,350 mmscfd of natural gas to the power sector from FY12 onwards.

TNB indicated that a proposal has been submitted to the government for Petronas to compensate TNB for the additional cost of generating electricity arising from the shortage of gas (below 1,250 mmscfd or RM2.1 billion for FY11). The company said it has not asked the independent power producers (IPP) to chip in and that only Petronas is being asked to compensate TNB.

Despite TNB’s comments, we gather that some IPPs are working on a proposal to compensate TNB for the gas shortage. We understand that the compensation may not be a direct payment to TNB and we believe it could tie in with the extension of the first-generation IPPs’ power purchase agreements (PPA) that begin expiring in 2015.

Note that TNB favours the expiry of the first-generation IPPs’ PPAs and the construction of new power plants. However, if attractive terms can be negotiated for an extension instead of new builds, TNB may have to take the pragmatic but less glamorous approach and implement the more economical option. — CIMB IB Research, Oct 31

This article appeared in The Edge Financial Daily, November 1, 2011.

Petronas sticks to contract policy with O&G service providers

Oil and gas
Maintain overweight

Last Friday, Bernama reported that there is no change in Petroliam Nasional Bhd’s (Petronas) licensing policy related to companies engaged in Malaysia’s upstream oil and gas (O&G) industry. The report said that under the Petroleum Regulation 1974, both local and foreign companies wishing to commence or even carry out any business or services related to Malaysia’s O&G upstream operations must apply for a licence from Petronas.

The clarification was made following The Edge report last week that such a licence may not be required going forward in bidding for local O&G jobs.

First, we note that Petronas has embarked on a long-term plan to nurture the local O&G service providers, with the first few being Kencana Petroleum Bhd, SapuraCrest Petroleum Bhd and Dialog Group Bhd, which have been awarded marginal oilfields to expose these companies to upstream O&G activities.

Second, we understand that most of the local O&G service providers currently have spare capacity as O&G activities have slowed compared with before the global economic recession in 2008 when their capacity was mostly tailored to local needs.

Noting this spare capacity, it may not make economic sense for Petronas to get resources from the non-local O&G services providers whose capacity is mostly built to meet the requirements of their own countries or regions of operation.

Finally, this licensing requirement does not prevent foreign companies from participating in Malaysia’s O&G sector as what is required is a partnership with a local licence holder. In fact, such participation facilitates the transfer of technology and helps enhance the competence of the local companies while at the same time allowing the foreign companies to benefit from the development of the country’s resources.

Our top picks are Kencana (“buy”, fair value (FV): RM3.17) and Dialog (“buy”, FV: RM3.66). With an improving global economic outlook and the crude oil price having gone back to around US$90 (RM277)/barrel, we believe that O&G activities will gradually pick up, which would then benefit all O&G service providers through better utilisation rates and higher sales/unit or services/hour rates.

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

We gather that the ratio between shallow water and deepwater O&G production is still at 70:30 but over time, the deepwater portion will pick up after all the easy O&G finds deplete.

Hence, we think Petronas is now preparing the local O&G supporting services providers for marginal oilfield (shallow water) developments first before embarking into the more challenging terrain (deepwater). — OSK Research, Oct 31

This article appeared in The Edge Financial Daily, November 1, 2011.

RHBCap — from prey to predator

RHB Capital Bhd (Oct 31, RM 7.70)
Maintain buy with target price of RM9.60: The potential merger of RHBCap and OSK’s investment banking business (OSK IB) would create the largest broker in town. We estimate the merged entity’s market share will swell to 15% (trading value) and 17% (trading volume).

RHBCap could tap OSK’s entrenched retail channel (750 remisiers and dealers) to distribute equity and debt products, while grabbing its niche position in the capital markets. OSK IB’s growing presence in Indonesia (1% to 2% market share in equity and debt) is also coveted.

RHBCap has three months (from Bank Negara Malaysia’s approval on Oct 13) to strike a deal with OSK IB. Based on OSK IB’s RM1.25 billion net asset value as of Dec 10 and ascribing 1.5 to 2 times book value (BV) as target M&A multiple, the deal would cost RHBCap RM1.9 billion to RM2.5 billion. If we exclude the two buildings in Jalan Ampang (OSK’s head office, RM227 million net book value [NBV]), the price tag could drop to RM1.5 billion-RM2 billion.

We suspect the consideration would involve cash plus RHBCap shares so that OSK IB’s core management team continues to play a significant role in the merged outfit. Our analysis shows that if RHBCap opts for cash:shares route (60:40), there would be mild positive impact on earnings per share (EPS) but if funding is skewed towards shares, we expect EPS dilution. Return on equity (ROE) would be diluted slightly by 1.6%.

Maintain “buy” and RM9.60 target price based on the Gordon growth model and assuming 5% growth, 11% cost of equity and 16% ROE. Our target price implies 1.7 times FY12F BV. RHBCap’s fundamentals have not changed and it remains one of the cheapest banks in the sector. Its current valuation (1.3 times FY12 BV) has reverted to pre-M&A excitement levels stirred by Malayan Banking Bhd and CIMB Group Holdings Bhd. — Hwang-DBS Vickers Research, Oct 31

This article appeared in The Edge Financial Daily, November 1, 2011.

The lure of waterfront homes in Penang

YTL Land & Development Bhd has yet to launch Shorefront Residences, its luxury project in Penang. Yet, within the first week that the project was open for registration through its website, the developer received more than 1,000 sign-ups. “We have already received enquiries from Singaporeans,” says Datuk Yeoh Seok Kian, executive director of YTL Land & Development.

The high level of interest from Singaporeans “was expected”, says Yeoh, given their “familiarity with and affinity for Penang”, which have translated into property investments on the island. “It’s especially more so now that Penang has established itself as the most-sought-after property market in Malaysia, as evidenced from its staggering growth in property offerings and prices,” says Yeoh.

Shorefront Residences is located in George Town, next to the historic Eastern & Oriental (E&O) Hotel in Penang and fronting the sea. It is expected to be launched by year-end, but anticipation is running high. “It is YTL’s first project in Penang and widely expected to set a new benchmark in the luxury segment,” says Jason Teoh, director of property consulting firm Henry Butcher Malaysia.

The freehold Shorefront Residences is a six-storey development with just 75 duplex apartments. There are only two units on each level, with sizes ranging from 3,000 to 4,300 sq ft each. Every apartment has private lift access, with some units enjoying private gardens and pools. The design architect is Singapore-based RT+Q, which has designed many private homes and condominiums in Singapore as well as Malaysia.

The development was designed to maximise the sea views from every unit, be it from the outdoor lanai or private garden, explains Yeoh. The swimming pool, including private pools, and water features are designed as infinity pools “to carry through a seamless continuation of the sea and the property”, he adds.

The pricing of Shorefront Residences has yet to be confirmed. However, market speculation is that it’s likely to be benchmarked against similar properties in the luxury segment, such as Selangor Dredging Bhd’s maiden residential project in Penang, the 138-unit By the Sea, located in the Batu Ferringhi area in the north of Penang island. By the Sea had a soft launch in September, and average selling price is RM1,200 psf (S$484). To date, five units at By the Sea have been sold.

The interest in Penang property can be seen from the turnout at the Penang Property Showcase in Singapore in September organised by Malaysia Property Inc (MPI). A straw poll at the seminar also showed that quite a number of Singaporeans had purchased properties in Penang recently.

In the face of rising inflation, investors are looking to preserve their capital by investing in something that will appreciate over time, says Datuk Lee Kah Choon, chairman of the executive committee of InvestPenang and director of Penang Development Corp (PDC), who was in Singapore for the Penang Property Showcase. “And that’s why for the last few years, there has been a steady stream of investors coming to Penang,” he adds.

Investors tend to adopt a value-for-money approach when considering Malaysian property vis-à-vis Singapore real estate. “The most luxurious property in Penang today is priced at RM1,200 to RM1,500 psf, which is equivalent to S$600 psf,” says Lee. “What can you buy in Singapore for that price? Something located in the suburbs. So, there’s a big gap between Penang and Singapore prices today.”

The living room of one of the 75 duplex apartments at YTL's Shorefront Residences.

Every apartment at Shorefront Residences gets direct sea views.

Potential investors checking out new condominiums offerings at MPI's Penang Property Showcase in September.

And that’s attracting Singaporean buyers. A Singaporean investor who requests anonymity says he likes Malaysian property and has been actively investing there for the last 2½ years. In that span of time, he has purchased five properties, three of which are condo units in Penang. “I’m a sucker for panoramic ocean views, and in Penang, you can get views far superior to Sentosa Cove or Keppel Bay for the price of an HDB flat,” he says. He likes freehold condos with large units, mainly four-bedroom apartments or penthouses in the prime locations.

According to the Singaporean investor, the capital gains on his Malaysian portfolio amount to just under 50% to date. There have been many offers from buyers, he says, but he has rejected all of them. “I’m sort of a collector. So, I just buy them to keep and stay in whenever my family and I visit.” He intends to double his portfolio in Malaysia, with Kuala Lumpur being “a high priority”.

Penang is very popular with foreign investors. “Although in absolute terms, Selangor is ahead, in terms of FDI [foreign direct investment], we’re still No 1,” says PDC’s Lee. “The government is keen on making Penang a location of choice for tourists and investors,” he adds. “Overall, Malaysia is doing relatively well within the Asean region.”

Penang’s economy is based on services such as banking, logistics and manufacturing. Total investments into the state amounted to RM12.2 billion last year, which topped the charts in Malaysia for highest recorded inflow of investments.

“Singaporeans have been the largest investors in Malaysia,” says Kumar Tharmalingam, CEO of MPI. “It’s quite common for Singapore to be a base for many purchasers, including foreigners, and Malaysians working in Singapore. There’s also been a surge in interest in Malaysian property among mainland China investors. They are looking at opportunities outside their country, and [Malaysia] is one of their investment options.”

The top foreign buyers of Penang real estate are Singaporeans, followed by Indonesians, Britons and what Henry Butcher’s Teoh calls “the Penang diaspora from all over the world”. Purchases by foreigners make up only about 2% of total property transactions in Malaysia, including Penang, notes Teoh.

However, the “Penang diaspora” — people from Penang but now living and working elsewhere, for instance, in major cities such as London, New York, Paris, Singapore and Shanghai — contribute to a significant number of overseas buyers. “They come back to Penang quite regularly, during special occasions such as Chinese New Year, Christmas or Qingming, and that’s when they buy property,” says Teoh. “So, the best time for developers to launch properties for sale is during these festive seasons.”

According to Teoh, some of the Penang diaspora buy a property in Penang as a retirement option, while others who have made money overseas are looking to buy something for their parents to upgrade their lifestyle. “When they convert their overseas currency, be it US dollar, pound sterling or Singapore dollar, into ringgit, they can buy a lot in Penang,” adds Teoh.

Even during the 2008/09 global financial crisis, the Malaysian property market proved to be relatively resilient, notes Henry Butcher’s Teoh. “Although GDP growth was in negative territory, the property sector wasn’t affected at all,” he says. “In 2010, we saw a historic high of RM1 billion worth of property transactions in Malaysia, including Penang. And based on transactions in 1H2011, we expect to see another 20% growth this year.” — The Edge Singapore

This article appeared in The Edge Financial Daily, November 1, 2011.

Bursa Securities queries GPRO over high volume

KUALA LUMPUR (Nov 1): Bursa Malaysia Securities has queried CPRO Technologies Bhd over the unusual market activity (UMA) in the trading of its shares.

It had on Tuesday issued an UMA query on the sharp increase in price and high volume in GPRO's shares.

At 4.36pm, GPRO is up 5.5 sen to 24.5 sen. Turnover was 46 million shares, at prices ranging from 18.5 to 25.5 sen.

RM10b ETP investments realised

Some RM10 billion in investments under the Economic Transformation Program (ETP) over the past one year have been realised, constituting 64 per cent of the RM15 billion in investments committed for the year, chief executive officer of the Performance Management and Delivery Unit (Pemandu) Datuk Seri Idris Jala said today.

He also said that Entry Point projects (EPPs) were progressing well. A total of 70 out of the 131 EPPs or 53 per cent have taken off.

"As some EPPs have multiple projects, we now have 97 projects which are in various stages of implementation," he said in a media briefing in conjunction with the ETP having completed its first 12 months.

The ETP, launched by Prime Minister Datuk Seri Najib Tun Razak in October 2010, aims to transform Malaysia into a high income nation by 2020. -- Bernama

Malaysia Q3 economic growth improves: Zeti

Malaysia’s central bank governor Zeti Akhtar Aziz said on Tuesday there was likely to be improvements in third quarter economic growth thanks to strong trade and domestic consumption.

“There were improvements in the third quarter but we will see to what extent the improvements are — whether it is more than 4.5 percent or whether it is closer to five percent,” Zeti told reporters in the Malaysian capital.

“From indicators of trade, that we saw, consumption demand and government implementation of some projects — these are all positive trends. And financing continued to be quite strong during the quarter,” she added.

Malaysia is set to announce its third quarter gross domestic product data on Nov 18. -- Reuters

Scomi sells businesses in Mexico

Scomi Group Bhd is disposing of its drilling waste management assets and businesses to National Oilwell Varco, Inc.'s subsidiaries for RM107.293 million (US$25.035 million).

The business was held by Scomi Oiltools, Inc (Soinc) and Scomi Oiltools De Mexico, S.DE R.L DE C.V (SMEX), both held indirectly via a 76.08 per cent subsidiary, Scomi Oilfield Ltd, Scomi said in a filing to Bursa today.

The bulk of the proceeds from the disposal would be used to repay borrowings.

Scomi said the disposals were in line with its ongoing business strategy to rationalise and streamline existing assets by exiting from volatile markets and to re-focus on Asia, a stable and growing market.

Going forward, the company expects the business strategy to bring in stable earnings.

In addition, Scomi, via Scomi Oilfield, is repositioning itself in Malaysia by increasing its products and services portfolio within the upstream oil and gas industry.

The company expects to capture a share of these markets given the increase in Petroliam Nasional Bhd's oil and gas-related activities in Malaysia. -- Bernama

BNM assessing growth, inflation risks

KUALA LUMPUR (Nov 1): Bank Negara Malaysia is carefully assessing growth and inflation risks to ensure the country's growth is sustainable in the medium term.

BNM governor Tan Sri Zeti Akhtar Aziz said on Tuesday the "conditions were dynamic" and it was pivotal to strike a balance when assessing growth and inflation prospects here in the next three years.

"We are looking at both," Zeti told reporters on the sidelines of the Asian Central Banks' Watchers Conference 2011.

On growth prospects in Asia, she said the region would still see growth, albeit slower compared to a year earlier.

Zeti said Asia was expected to post economic growth of some 7% in 2011, spurred by domestic consumption. This comes against a weaker external trade landscape due to slower growth in developed markets in the US and Europe.

Scomi Group to exit US, Mexico, sells US$35m assets

KUALA LUMPUR (Nov 1): SCOMI GROUP BHD [] is exiting its business in the US and Mexico following the proposed disposal of its drill waste management assets in those countries for US$35 million (RM107 million) as it seeks to refocus on Asia.

The company said on Tuesday the assets would be disposed of to National Oilwell Varco, Inc’s subsidiaries.

Scomi Group said the proposed disposals are in line with Scomi Group’s ongoing business strategy to rationalise and streamline its existing assets by exiting from volatile markets to re-focus on Asia, a stable and growing market. “Going forward, it is expected that that this business strategy will give stable earnings,” it said.

Scomi Group said it was repositioning itself in Malaysia by increasing its products and services portfolio within the upstream oil and gas industry and is expected to be able to capture a share in these markets given the increase of oil and gas related activities of Petroliam Nasional Bhd in Malaysia.

It said its subsidiary Scomi Oiltools Inc was selling its drilling waste management assets and business for US$25.03 million (RM76.74 million) to National Oilwell Varco, L.P.

Another subsidiary, Scomi Oiltools de Mexicos was selling certain assets used in its drilling waste management business to National Oilwell Varco Solutions S.A. de C.V. for for US$9.96 million (RM30.548 million).

Supermax plans 1-for-1 bonus issue, share buy-back

KUALA LUMPUR (Nov 1): SUPERMAX CORPORATION BHD [] had proposed a corporate exercise involving a one-for-one bonus issue and also to buy back up to 10% of its paid-up share capital.

The company said on Tuesday, the bonus issue of 340.07 million new shares would be credited as fully paid-up on the basis of one bonus share for every one existing share held on an entitlement date to be determined later.

“After due consideration, the board is of the view that the proposed bonus issue is the most appropriate avenue of rewarding the existing shareholders of the company while at the same time enhancing the company's share capital base,” it said.

Supermax said the proposed bonus issue will increase the company's issued and paid-up share capital to a level which would be more reflective of its current scale of operations and assets employed.

Supermax also proposed to buy back up to 10% of its issued and paid-up share capital at any point of time.

It said the proposed share buy-back, if implemented, would enable it to utilise any of its surplus financial resources, which is not immediately required for other uses, to purchase its own shares from the market.

“The proposed share buy-back is expected to stabilise the supply and demand, as well as the price of the Supermax shares,” it said.

KL shares easier at midday

Share prices on Bursa Malaysia ended the morning session lower today, led by the manufacturing and services sectors following weak data from China, dealers said.

At 12.30pm, the 30-stock index was 7.71 points lower at 1,484.18, after opening 7.76 points lower at 1,484.13, as continuous selling pressure pulled the index into negative territory.

Dealers said China's purchasing managers index for October, a key indicator of manufacturing activity, declined for the first time in three months.

It fell to 50.4 in October from 51.2, reflecting the slow pace of China's manufacturing expansion.

HwangDBS Vickers said the weakness became more pronounced with investors cautious over weak leads from European markets.

Greek Prime Minister George Papandreou has pledged to put the European Union's agreement on financing for Greece to a referendum.

"We expect the benchmark FBM KLCI to not be spared the bearish external sentiment. The index should come under selling pressure today, possibly retreating towards its immediate support level of 1,475," the research house said.

Meanwhile, volume stood at 584.83 million shares worth RM501.87 million, with losers leading gainers 394 to 193 with 241 others unchanged and 642 untraded.

The Finance Index fell 42.91 points to 13,451.29, the Plantation Index declined 26.82 points to 7,538.48 and the Industrial Index lost 11.53 points to 2,714.11.

The FBM Emas Index decreased 54.21 points to 10,115.11, the FBM Mid 70 Index fell 73.72 points to 10,881.46 and the FBM Ace Index declined 0.37 of a point to 4,031.07.

Among the active stocks, Maxbiz gained four sen to 13 sen, MBSB-Wa rose three sen to 93.5 sen and GPRO added four sen to 23 sen.

Among the heavyweights, Maybank increased one sen to RM8.37, CIMB fell nine sen to RM7.84 and Sime Darby decreased four sen to RM8.86. -- Bernama

Tenaga faces gas shortage for 2-3 mths more

SINGAPORE: Malaysian energy utility Tenaga Nasional Bhd will have to deal with gas shortages for another two to three months, the country’s energy minister said on Tuesday.

“We have to grapple with this issue for the next two to three months. It is a maintenance issue rather than a complete lack of gas,” Malaysia’s Minister of Energy, Green Technology and Water Peter Chin said on the sidelines of the Singapore International Energy Week conference.

Tenaga has been buying more expensive fuel oil to replace natural gas for electricity generation, which its chief executive has said cost the company an additional RM2.1 billion (US$684 million) in fuel costs for the second half of 2011. -- Reuters

Tenaga faces gas shortage for 2-3 mths more

SINGAPORE: Malaysian energy utility Tenaga Nasional Bhd will have to deal with gas shortages for another two to three months, the country’s energy minister said on Tuesday.

“We have to grapple with this issue for the next two to three months. It is a maintenance issue rather than a complete lack of gas,” Malaysia’s Minister of Energy, Green Technology and Water Peter Chin said on the sidelines of the Singapore International Energy Week conference.

Tenaga has been buying more expensive fuel oil to replace natural gas for electricity generation, which its chief executive has said cost the company an additional RM2.1 billion (US$684 million) in fuel costs for the second half of 2011. -- Reuters

Markets off to cautious start in November

KUALA LUMPUR (Nov 1): Markets kicked off the first trading day of November on a cautious note, with most key regional bourses in the red, as investors worried about a slowdown in global economy and slow progress in the European debt crisis.

At 12.30pm, the FBM KLCI fell 8.01 points or 0.54% to 1,438.88. Turnover was 584.83 million shares valued at RM501.86 million. There were 193 gainers, 394 losers and 241 stocks unchanged.

Japan’s Nikkei 225 fell 1.19% to 8,881.02, Hong Kong’s Hang Seng Index 1.41% to 19,584.69 and Singapore’s Straits Times index 0.66% to 2,836.93.

US light crude oil fell 79 cents to US$92.40, crude palm oil futures for third month delivery shed RM8 to RM2,945 per tonne. The ringgit weakened to 3.1013 to the US dollar.

OSK Research, in its market outlook, said for November, given the previous month’s sharp rally, it expects some pullback in global markets with Malaysia being no exception.

“Barring the announcement of a General Election, we remain Defensive on the Malaysian market and would advocate a Buy if the KLCI retraces towards 1,300 while we could call a Sell on the market if it rises towards the 1,533. Neutral for now with defensive Top 5 Buys all maintained,” it said.

Genting was the top loser, down 24 sen to RM10.52, dragging the KLCI down 2.05 points while CIMB fell nine sen to RM7.48, pushing the index down another 1.55 points.

LPI fell 22 sen to RM13, Panasonic Malaysia 22 sen also to RM19,48, Bursa 12 sen to RM6.67, AirAsia 11 sen to RM3.79 and Petronas Chemicals 10 sen to RM6.35.

Maxbiz was the most active, up four sen to 13 se, with 29 million shares done, prompting query from Bursa Malaysia Securities.

MBSB added four sen to RM1.81, MBSB-WA three sen to 93.5 sen and MBSB-CA two sen to 17 sen after the strong set of third quarter results.

DiGi was the top gainer, adding 40 sen to RM32.10 as investors sought dividend stocks, F&N added 10 sen to RM17.10 while Jerneh Asia rose six sen to RM1.42 after it received a takeover offer from its major shareholder Kuok Brothers Sdn Bhd.

Jerneh Asia climbs on Kuok Brothers’ takeover plan

KUALA LUMPUR (Nov 1): Shares of JERNEH ASIA BHD [] advanced on Tuesday after it received a takeover offer from its major shareholder Kuok Brothers Sdn Bhd.

At 11.53am, Jerneh Asia was up six sen to RM1.42.

The FBM KLCI fell 7.5 points to 1,484.39. Turnover was 517.93 million shares valued at RM432.07 million. Declining stocks beat advancers 380 to 181 while 226 stocks were unchanged.

Kuok Brothers offered to buy the remaining 58.19% stake, which it does not own, for RM1.45 a share. At RM1.45, this is nine sen above Monday’s close of RM1.36 while the warrants ended at 40 sen.

Kuok Brothers and the parties acting in concert directly hold 102.02 million shares or 41.81% of Jerneh Asia.

Malaysia export commodities surpass RM113b

The total export of Malaysia's commodities and commodities-based products in 2011 is expected to increase from RM113 billion, last year, said Deputy Minister of Plantation Industries and Commodities, Datuk Hamzah Zainudin.

He said the total exports will grow in tandem with the competitive price of the Malaysian commodities and an increasing demand for its commodities-based products, worldwide.

"From January to August this year, total exports stood at RM93.4 billion, compared to the RM73.4 billion recorded for the same period last year.

"Malaysia has the competitive edge in terms of pricing, variety of commodities and commodities-based products.

"Due to this, Malaysia's total exports can surely do better than what was registered last year," he said after launching the commemoration of the successful mandatory implementation of the B5 fuel programme in the central region, here today.

Hamzah said palm oil and palm oil-based products, as well as rubber and rubber-based products, continued to be the main driver of exports, with a contribution worth RM54.86 billion and RM21.66 billion for the first eight months of this year, respectively.

He added that cocoa and cocoa-based products registered a growth in exports to RM2.822 billion for the first eight months compared with RM2.738 billion, last year.

Meanwhile, he said only the timber and timber-based products sub-sectors exports dwindled slightly, but the demand was always there.

"Malaysia has a variety of commodities-based products and this enables the demand for the products and raw commodities to remain stable. This automatically increases the export and benefits the country.

"The timber and timber-based products sub-sectors registered RM13.234 billion from January-August this year, against the RM13.946 billion recorded for the same period last year," he added.

Tobacco and pepper contributed RM646.39 million and RM154.54 million for the first eight months of this year against the RM701.83 million and RM119.67 million respectively for the same period of 2010, Hamzah said.

"The decrease in tobacco export is a result of an intended effort by the government," he said. -- BERNAMA

Maxbiz surges, prompting sharp gain query

Maxbiz Corp, a Malaysian furniture maker, surged to an eight-month high, prompting the Kuala Lumpur stock exchange to query the company for the “sharp” increase in its share price.

The stock gained 44 per cent to 13 sen at 11:21 a.m. local time, set for its highest close since March 1. It’s the most active stock on the exchange with 26.5 million shares traded. - Bloomberg

Bursa Securities queries Maxbiz over unusual market activity

KUALA LUMPUR (Nov 1): Bursa Malaysia Securities Bhd has queried MAXBIZ CORPORATION BHD [] over the unusual market activity regarding its share price and trading volume.

It said on Tuesday the query was due to the sharp increase in the price and high volume of the company’s shares recently.

Bursa Securities said investors should take note of the company’s reply to the query which will be posted on Bursa Malaysia’s website under company announcements when making their investment decision.

At 11.27am, the share price was up four sen to 13 sen and it was the most active with 26.68 million shares done.

KL shares lower at mid-morning

Share prices on Bursa Malaysia turned lower at mid-morning today on profit taking in key heavyweights, led by Genting, dealers said.

At 11am, the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) declined 8.15 points to 1,483.74, after opening 7.76 points lower at 1,484.13.

Losers led gainers 345 to 155 while 210 counters were unchanged, 760 untraded and 20 others suspended.

A total of 399.54 million shares worth RM317.6 million were traded.

The Finance Index fell 30.7 points to 13,463.5, the Plantation Index declined 43.32 points to 7,521.98 and the Industrial Index lost 11.63 points to 2,714.01.

The FBM Emas Index decreased 56.761 points to 10,112.56, the FBM Mid 70 Index fell 76.87 points to 10,878.31 and the FBM Ace Index rose 8.28 points to 4,039.72.

Among active stocks, investment holdings company Maxbiz Corp, which has been issued an unusual market activity (UMA) query by Bursa Malaysia, rose four sen to 13 sen, GPRO Technologies added 3.5 sen to 22.5 sen and MBSB gained three sen to RM1.80.

For the heavyweights, Maybank rose one sen to RM8.37, CIMB fell eight sen to RM7.49, Sime Darby lost four sen to RM8.86 and Genting declined four sen to RM3.81. -- BERNAMA

OSK Research maintains FV for Hock Seng Lee at RM1.61

KUALA LUMPUR (Nov 1): OSK Research is maintaining its fair value for Hock Seng Lee at RM1.61 after the company secured a RM90.28 million contract from the Sarawak Public Works Department for a water treatment plant.

HSL received the letter of acceptance on Oct 28 from the department for the new water treatment plant, reservoir and associated facilities for the proposed Samalaju water supply in Bintulu.

OSK Research on Tuesday including this recent win, it estimates that HSL has secured close to RM250 million worth of jobs year-to-date.

“Management maintains that it would be able to hit the full-year target of RM400 million, which is in line with our assumption,” it said.

The research house said a slew of projects are in the pipeline for implementation in Sarawak under the SCORE initiative, including a technical training school (RM250 million), a 600MW coal-fired plant in Balingan, the 1,000 MW Baram hydro dam, the Samalaju-Tg Manis rail link and various rural road networks.

“Maintain BUY, RM1.61 FV. As the total job wins are still within our RM400 million replenishment target for FY11, we maintain our earnings forecast for HSL. Our FV of RM1.61 is based on 10 times FY12F earnings, which is in line with its one-year forward PER mean,” it said.
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