Lingui 1Q net loss RM28m on decline in biological assets

KUALA LUMPUR (Nov 3): Lingui Developments Bhd posted net loss of RM28.06 million in the first quarter ended Sept 30, 2011 versus net profit of RM39 million a year ago as it was adversely affected by losses in fair value of biological assets.

It said on Thursday that revenue increased by 19.1% to RM435.01 million from RM365.05 million. Loss per share was 4.25 sen compared with earnings per share of 5.91 sen.

It registered an operating profit of RM19.46 million compared with RM9.59 million a year ago.

“The group recognised a loss from changes in fair value of biological assets of RM25.9 million as the softwood log prices soften at the end of financial quarter under review compared to immediate preceding financial quarter,” it said.

Lingui said similarly, due to lower crude palm oil price during the financial quarter under review, the group’s share of the losses from changes in fair value of biological assets of an associate involved in oil palm PLANTATION [] was RM16.3 million.

Quill 3Q earnings slightly higher

KUALA LUMPUR (Nov 3): QUILL CAPITA TRUST [] earnings rose nearly 1.4% to RM9.39 million for the period ended Sept 30, 2011 from RM8.68 million a year ago, due to rental rates of certain PROPERTIES [].

It said on Thursday revenues increased 8.2% to RM17.63 million from RM17.39 million. Earnings per share were 2.41 sen compared to 2.22 sen.

Quill Capita said that the increase in profits were due to increases in rental rates of certain properties as well as lower property operating expenses.

For the first nine months ended Sept 30, 2011, profit rose 1.6% to RM26.25 million from RM24.45 million a year ago. Revenue rose 7.3% to RM52.76 million from RM51.93 million.

Dayang's order book hits RM1.5b

Sarawak-based oil and gas services provider, Dayang Enterprise Holdings Bhd (DEHB), expects further growth after chalking up successful quarters on strong order book of RM1.5 billion until 2016.

Its executive chairman, James Ling, said the company, listed on the Main Market of Bursa Malaysia in 2008, recorded a strong second quarter on Petronas Carigali deal.

"The primary enabler of DEHB's success is Petronas’ Vendor Development Programme, a programme aimed at providing local contractors with incentives and the confidence to increase their capital base," he said in Kuching today

Sarawak’s only homegrown Petronas-registered contractor grew parallel to the rise in the state’s oil and gas business, and its share prices hovered around RM1.75 this week.

He said DEHB’s success and accomplishments over the past 30 years were mainly due to the support and guidance from Petronas Carigali, Shell and Murphy Oil.

The programme also allowed DESB to expand its business and become a competitor in the international and local markets, he said.

Ling said DEHB qualified for the programme by bringing in Bumiputera partners.

DEHB started in 1980 as a hardware and manpower supplier with a capital of only RM10,000, four employees and 100 offshore workers.

Today it is a thriving enterprise providing maintenance services, fabrication operations and hookup and commissioning services with 300 employees and 1500 workers deployed to its offshore operations.

Riding on the wave of its success, DEHB then established Fortune Triumph Sdn Bhd in 1999, a unit providing rental equipment and machinery to the players in the oil and gas industry.

DEHB set up DESB Marine Services Sdn Bhd in May 2005, a unit involved in the chartering of marine vessels, including floating accommodation and catering. -- Bernama

ARK Resources uplifted from PN17 from Friday

KUALA LUMPUR (Nov 3): ARK RESOURCES BHD [] will be uplifted from the Practice Note 17 with effect from Friday, Nov 4.

A Bursa Malaysia circular said on Thursday the company had regularised its financial condition and did not trigger any of the criteria under the PN17 classification of the Main Market Listing Requirements of Bursa Malaysia Securities Bhd.

Yeo Hiap Seng 3Q earnings double to RM8.27m

KUALA LUMPUR (Nov 3): Yep Hiap Seng (Malaysia) Bhd’s earnings rose 104% to RM8.27 million in the third quarter ended Sept 30 from RM4.05 million a year, as it benefited from better sales, less bad debts write off and gain on disposal of machinery.

It said on Thursday revenue increased by 26.5% to RM147.12 million from RM116.27 million as sales for Malaysia, Indonesia and Singapore including the export market grew by 18%, 368% and 8% respectively.

“The increase in sales is mainly due to more advertising and promotion activities undertaken during the Hari Raya festive period,” it said.

Earnings per share were 5.42 sen compared with 2.65 sen a year ago.

For the nine-month period, its earnings surged 363% to RM20.02 million from RM4.31 million while revenue increased 11.9% to RM414.86 million from RM370.70 million.

Tomypak 3Q earnings up 12% to RM3.40m

KUALA LUMPUR (Nov 3): TOMYPAK HOLDINGS BHD []'s earnings rose 12.21% to RM3.40 million for the quarter ended Sept 30, 2011 from RM3.03 million a year ago, due to higher sales.

It said on Thursday revenues increased 25.8% to RM54.73 million from RM43.49 million. Earnings per share were 3.14 sen compared with 2.80 sen. The group announced dividends of 1.50 sen compared to 1.40 sen a year ago.

Tomypak said the higher earnings and turnover was due to a 19% increase in sales volume achieved in the period. However, profit after tax was slightly weaker due to an increase in raw material prices.

For the first nine months ended Sept 30, 2011, profit fell 21.11% to RM9.17 million from RM11.65 million a year ago. Revenue rose 19.30% to RM160.87 million from RM134.84 million.

Megasteel eyes steel import duty?

KUALA LUMPUR: Megasteel Sdn Bhd is believed to be lobbying for a 15% levy on steel imports across the board from non-Asean countries, according to industry sources.

“If this proposal goes through, it will irreparably damage the (downstream) steel industry in Malaysia. Why would anyone want to do business in Malaysia?” said an industry source.

Industry sources are not happy with Megasteel’s new proposal, which they claim will tax imports of all steel products, even those not produced by Megasteel.

A unit of the Lion group’s flagship Lion Corp Bhd, Megasteel is the country’s sole manufacturer of flat steel products, producing hot rolled and cold rolled coils.

Bursa Malaysia-listed Lion Corp owns 79% of Megasteel while another Lion group listed entity, Lion Diversified Bhd, holds the remaining 21% stake.

To recap, Megasteel had in May filed a safeguard petition to seek an additional 35% import duty on hot rolled coils (HRC), which would bring the total duty payable on HRC up to 60%.

The new proposal of a 15% import duty is not in the nation’s interest, the source said.

“Almost every industry uses steel. It is used in the automotive industry, in manufacturing and construction. Everyone will lose out if this goes through.”

A player from the steel industry who supports the liberalisation of the steel industry told The Edge Financial Daily, “Protectionism is very unhealthy. We must look at the whole value chain, the growth of the whole industry and protect everyone’s interests. Not just the well-being of one company.”

The Edge Financial Daily was unable to reach the International Trade and Industry Ministry for comment on the progress of the discussion on the proposed levy.

The country's sole manufacturer of flat steel products, Megasteel Sdn Bhd is believed to be lobbying for a 15% levy on steel imports across the board from non-Asean countries.

Global conditions of late have been unfavourable to Megasteel, noted an analyst.

“While iron ore prices have fallen, steel prices have fallen even further. Megasteel’s costs may have fallen giving them some reprieve but overall, their net margins would have fallen,” said the bank-backed analyst.

“The fall in prices has been due to softening demand. China, for example, has been slowing down its property market, which has in turn reduced appetite for steel used for construction. Manufacturing has also been slowing down in tandem with poor global economic conditions.”

He pointed out that Megasteel continued to make losses despite the lack of competition due to safeguards by the government and Megasteel’s monopoly.

“Megasteel has not been profitable even though there has been a 25% levy on HRC, its primary product. Also, Megasteel is essentially the sole HRC producer in Malaysia. This could be indicative of its uncompetitive cost structure.

“Furthermore, Megasteel uses the the electric-arc furnace, which produces lower grade steel products.

“If the proposed import tariffs on steel do not go through, Megasteel may not be able to compete with imports,” noted the analyst.

The situation is further exacerbated by the fact that Megasteel’s products are mostly sold in the local market.

An industry player said: “Nobody wants Megasteel to suffer. We want Malaysia to have its own steel makers. We just want the industry to be fair. A 15% levy on all steel imports will cripple the industry. A solution will need to be discussed across the value chain that can benefit everyone.”

“Unfortunately, it doesn’t seem like Megasteel is ready to talk,” the industry source added.

Megasteel is undertaking a RM3.2 billion blast furnace project that will be able to produce about 2.07 million tonnes of liquid hot metal a year, of which 1.57 million tonnes could be converted into slab for sale on the open market.

“They are trying to rope in foreign partners and secure a loan from Chinese bankers, but the economic climate is not conducive,” said an analyst.

If global economic conditions worsen, Megasteel could be affected by a collapse in demand for steel, which will drive steel prices down.

“Given the present situation, unfavourable global economic conditions will have an adverse impact on Megasteel,” the analyst added.

He also noted that Megasteel has a high level of debt.

A summary of Megasteel’s financial information for the year ended June 30, 2010 revealed it had liabilities of RM4.06 billion and RM146.6 million in accumulated losses.

Meanwhile, Lion Corp reported a net loss of RM45.1 million for 4QFY11 ended June 30 compared with a net profit of RM60.4 million a year ago.

That brought full-year net loss to RM234.4 million, more than double FY10’s loss of RM112.8 million.


This article appeared in The Edge Financial Daily, November 3, 2011.

Harvest Court rallies to six-year high

KUALA LUMPUR: Harvest Court Industries Bhd’s share price surged by over 20% with some 54.23 million shares changing hands, making it the third most actively traded stock on Bursa Malaysia yesterday.

The share price of the wood-based product manufacturer climbed 23.7% or 9.5 sen to finish at 49.5 sen — the highest level since July 2005. The counter started on a soft note, sliding to an intra-day low of 39.5 sen amid the cautious sentiment in the broader market. But it reversed the downward trend in the afternoon trading session.

Harvest Court has been in the limelight of late. The stock has surged in value by more than five times from eight sen since the beginning of last month. The spike in its share price prompted the stock exchange to query it on unusual market activity (UMA) on Oct 17, when its share price jumped 41% to 20.5 sen from 14.5 sen the day before. Subsequently, Harvest Court has been on a rally.

Coincidentally, the share price rally started when businessman Datuk Raymond Chan Boon Siew, who owns Sagajuta (S) Sdn Bhd, bought into the company. Chan bought his stake from the company’s managing director Ng Swee Kiat.

After Ng’s divestment, Chan submitted a put option agreement to Affin Bank Bhd to acquire its 18.3% stake in Harvest Court at 20 sen per share.

Sagajuta is the developer of the 1Borneo and 1Sulaman developments in Kota Kinabalu, Sabah. The company had been in talks with Jerneh Asia Bhd for a possible asset injection into the latter. However, the deal fell through.

Chan, who currently holds a 13.38% stake, is also managing director of Sagajuta and he is now a non-executive director of Harvest Court.

The company also drew attention when it announced the appointment of Nazifuddin Najib, the son of Prime Minister Datuk Seri Najib Razak, as a non-executive director. Nazifuddin is also a director of Sagajuta.

Last Thursday, Chan’s appointment to Harvest Court proved useful as the company’s wholly-owned subsidiary, Harvest Lumber Sdn Bhd secured a two-year contract worth RM7.03 million to supply door leaves for the 1Sulaman and 1Likas projects in Kota Kinabalu, Sabah.

Harvest Lumber also bagged a RM6.1 million contract with Husham Trade Company, based in Turkey, according to filings with Bursa Malaysia.

The company slipped into losses for FY10 ended Dec 31. It incurred a net loss of RM2.7 million on revenue of RM6.43 million. In the first six months of 2011 the company was in the red with losses of RM678 million. This was an improvement as the group recorded a loss of RM1.35 billion for the same period in the corresponding period last year.


This article appeared in The Edge Financial Daily, November 3, 2011.

Rafidah: No monopolistic practices in AirAsia-MAS tie-up

KUALA LUMPUR: AirAsia X Bhd chairman Tan Sri Rafidah Aziz and former Malaysian Airline System Bhd (MAS) chairman Tan Sri Munir Majid gave a reassurance that the MAS-AirAsia tie-up would not result in monopolistic behaviour between the two carriers following their share swap.

Rafidah told the press conference of the Malaysia-Europe Forum, of which she is patron, that the share swap agreement between the shareholders of the national carrier and the low-cost carrier would not result in behaviour that would violate anti-trust laws.

“The collaboration has to be within limits of anti-trust laws that prevail around the world. We [Malaysia] will have our own competition law soon.

“We cannot breach the antitrust laws in countries we [MAS and AirAsia] fly to. Nobody should have any undue worries, because of the limitations that are there [overseas],” said Rafidah.

The Malaysian Competition Commission is currently reviewing the possible impact of the MAS-AirAsia collaboration on the local market. It will advise both airlines and will provide MAS and AirAsia with guidelines to follow.

Munir said: “Antitrust laws don’t only make companies liable. Directors themselves are liable. We [MAS and AirAsia] are guided by lawyers specialising in anti-trust laws.”

On the issue of Khazanah Nasional Bhd buying a stake in Air-Asia X, Rafidah said: “With AirAsia X, Khazanah is intending to buy some percentage of shares. Valuation and due diligence are being done, so I won’t comment further. This process is a private deal.”

“It’s up to Khazanah if they want to buy. The board will decide if the price is good,” she said.

She was critical of the lack of discourse between the management of MAS and its employees.

“The management of MAS must have dialogue with all levels of employees,” said Rafidah, urging MAS management to diffuse the growing tension with the workers’ unions.

Over 15,000 MAS staff had threatened a picket when the MAS-AirAsia swap was unveiled in early September.

Not too far from home, Qantas flights were grounded last week as conflict between the Australian carrier’s unions and management escalated.


This article appeared in The Edge Financial Daily, November 3, 2011.

Leader’s board accepts buyout offer from H’ng family

KUALA LUMPUR: The board of Leader Universal Bhd has accepted the offer from substantial shareholder HNG Capital Sdn Bhd to acquire the group’s entire business and undertakings including assets and liabilities for RM480.1 million.

In a filing with Bursa Malaysia yesterday, AmInvestment Bank Bhd said Leader’s board — excluding the interested directors — had decided to accept HNG Capital’s offer subject to the execution of a definitive conditional sale and purchase agreement.

“Accordingly, the board (other than the interested directors) does not intend to seek alternative bids,” AmInvestment Bank said.

To recap, HNG Capital had on Oct 17 offered to acquire Leader Universal’s business and undertakings, including assets and liabilities, for a total consideration of RM480.1 million, which will be settled by cash and debts. HNG Capital is to satisfy 85.6% of the total purchase consideration via RM410.94 million cash with the remaining 14.4% in the form of a RM69.16 million debt due to Leader.

HNG Capital is the vehicle of the H’ng family, that has a 14.4% stake in Leader, which is primarily involved in manufacturing wire and cables for the telecommunications and power industry.

The H’ng family will not be entitled to the cash distribution of RM410.94 million to be made to shareholders, who will receive RM1.10 cash per share.

The deal values Leader’s business at 8.6 times annualised earnings for FY11 ending Dec 31 of RM55.83 million.


The offer price of RM1.10 per share is lower than Leader’s net asset value of RM1.36 per share as at June 30 but is a 30.95% premium to its closing share price of 84 sen before the offer was announced.

Leader shares had chalked up gains a week before HNG Capital’s offer was announced, surging 18.3% over a week from 71 sen on Oct 7 to 84 sen on Oct 14.

Its shares surged 17.3% or 14.5 sen to 98.5 sen on Oct 18, a day after a suspension of the trading of the shares was sought, pending the offer announcement.

This was the steepest one-day gain for Leader shares in over 10 years.

The stock closed yesterday unchanged at 95.5 sen with 1.27 million shares traded.

The group’s board had appointed AmInvestment Bank and OCBC Advisers (Malaysia) Sdn Bhd its main adviser and financial adviser for the proposals, while Kenanga Investment Bank Bhd was appointed the independent adviser to advise the non-interested directors and Leader shareholders as to whether they should vote in favour of the proposals.


This article appeared in The Edge Financial Daily, November 3, 2011.

Masterskill shares surge despite downgrade

KUALA LUMPUR: Masterskill Education Group Bhd shares surged on high volume yesterday, even as a research house downgraded the stock and the broader market fell.

Shares of the private nursing and healthcare eduction provider ended the day 10 sen or 7.75% higher to RM1.39 and saw 6.64 million shares traded, almost twice the previous day’s volume. The increase came after the stock stayed stagnant for four days at RM1.29.

Masterskill shares have fared poorly since the the company was listed early last year, due to a combination of worries about government loan funding for students and lower student intakes, as well as heavy selling by two foreign funds. From an IPO price of RM3.80, the stock plummeted to an all-time low of RM1.06 on Oct 3, 2011.

Since then, the stock has made a slow and steady recovery, with some attributing it to the emergence of key investors in the group and others to the fact that the stock has been oversold.

On Oct 5, Siva Kumar s/o M Jeyapalan emerged as a substantial shareholder of the education group after acquiring 41.2 million shares or a 10.05% stake. Its shares closed at RM1.09 that day.

Siva Kumar’s optimism, however, is not shared by OSK Research. It downgraded the stock to “neutral” from “trading buy”.


One of the reasons it gave for the downgrade was the decrease in student intake due to increasing competition from other health education providers.

“Our previous concerns of Masterskill potentially succumbing to heightening competition now seem well founded as our ground checks indicate that new enrolments in the supposedly major student intake period from September to mid-October is likely to have fallen to the tune of ‘a few hundreds’”, it said.

“We attribute this to aggressive marketing by some of Masterskill’s peers as industry players strive to fill places arising from capacity expansion.

“We are revisiting our model and slashing our earnings per share forecasts by 25% for both financial years 2011 and 2012 as we see earnings pressure in the next few quarters as competition intensifies”, the report added.

The research house has revised down its fair value to RM1.30 from RM1.91, some 6.5% lower than yesterday’s closing price.

Masterskill will be releasing its 3QFY11 results in mid-November and OSK Research expects some potential negative surprises. However, yesterday’s rally suggests some investors are taking a different view.


This article appeared in The Edge Financial Daily, November 3, 2011.

Market Commentary

The FBM KLCI index lost 8.58 points or 0.58% on Thursday. The Finance Index fell 0.93% to 13151.05 points, the Properties Index dropped 1.36% to 941.04 points and the Plantation Index down 0.63% to 7471.31 points. The market traded within a range of 20.81 points between an intra-day high of 1473.45 and a low of 1452.64 during the session.

Actively traded stocks include KBUNAI, HARVEST-WA, TEJARI, HARVEST, IRIS, COMPUGT, TEJARI-WA, INGENS, SAAG and PATIMAS. Trading volume increased to 1755.13 mil shares worth RM1140.07 mil as compared to Wednesday’s 1564.93 mil shares worth RM1693.74 mil.

Leading Movers were GENTING (+10 sen to RM10.36), DIGI (+18 sen to RM32.48), UMW (+7 sen to RM6.82), YTL (+1 sen to RM1.50) and BAT (+20 sen to RM46.20). Lagging Movers were CIMB (-12 sen to RM7.19), TENAGA (-14 sen to RM5.72), AXIATA (-6 sen to RM4.80), MAYBANK (-6 sen to RM8.22) and IOICORP (-6 sen to RM5.08). Market breadth was negative with 226 gainers as compared to 524 losers.-- JF Apex Securities Bhd

Faber’s short extension suggests undercurrents

KUALA LUMPUR: Faber Group Sdn Bhd was handed a lifeline last Thursday when it received an interim extension of its long-running concession on the day before expiration. However, the short-term extension of only six months, or until a new deal is signed whichever is first, could suggest undercurrents in the industry when it comes to the awarding of such concessions.

Faber’s wholly owned subsidiary, Faber MediServe Sdn Bhd, a hospital support services (HSS) provider, received the letter from the Public-Private Partnership Unit of the Prime Minister’s Department.

According to analysts, all three concession holders were asked to submit by Oct 3 this year their request for proposal (RFP) to the Health Ministry and Economic Planning Unit for the renewal of their concessions. Faber is one of the country’s three HSS providers, the others being Pantai Medivest Sdn Bhd and Radicare (M) Sdn Bhd. Faber’s concession was for 15 years, starting from Oct 28, 1996.

While such providers are typically given extensions about a year prior to the concession expiration date, Faber’s extension was handed to it on the very last day, and the extension was only six months at that. For a group which had such a long concession agreement at 15 years, it is surprising that such a strong track record was not rewarded with another long-term agreement.

Equally surprising is the fact that Faber is a member of UEM Group, which in turn is owned by Khazanah Nasional Bhd. Such affiliations would usually mean that the concession to provide HSS to public hospitals would be awarded on a more timely note and for a longer period.

Different analyst reports suggest different takes on the extension.

OSK Research remained optimistic. In its last research report, released on Oct 28, it indicated it was not surprised by the short-term and last-minute extension as the experience was shared by Pharmaniaga in 2009 when its concession tenure to distribute pharmaceuticals was extended by six months, before it was renewed for 10 years.

The research house said there is a good chance the group will secure the renewal of its existing concession based on its previous 15-year agreement.

RHB Research, however, wasn’t as optimistic. The research outfit downgraded Faber to “underperform”. The report said as in Pharmaniaga’s case, Faber’s negotiations with the government could drag on for up to a year and the new terms of the concession renewal are uncertain.

Besides the 79 hospitals covered by Faber in Perlis, Kedah, Penang and Perak, the group also owns concession rights to hospitals in Sabah and Sarawak.

RHB Research highlighted a potential issue regarding concessions in Sabah and Sarawak, where a new HSS provider could emerge.

It did state that Faber would have a good chance of being able to negotiate a 51% stake in joint ventures there should new parties emerge, due to the established infrastructure of Faber MediServe in those states.

Rumours have been swirling over the past year that some parties are eyeing parts of Faber’s lucrative concession, particularly in Sabah and Sarawak. The rumours gained credence as the extension of the concession dragged on.

Analysts also anticipate subcontracting jobs going to Faber as the new players might not have the expertise and experience for the project.

OSK Research in a note dated Oct 6 wrote: “East Malaysia would still contribute to Faber’s earnings although the margins may be lower.”

Faber gained five sen, or 3.03%, to close at RM1.70 yesterday, while trading volume increased by 57% to 1.74 million shares. The stock has fallen from a 12-month high of RM3.01 in November 2010.


This article appeared in The Edge Financial Daily, November 3, 2011.

FBMKLCI ends 0.6pc lower

The FTSE Bursa Malaysia KLCI Index fell 0.6 per cent to 1,462.37, its third day of losses and its lowest close since October 25. - Bloomberg

Guinness 1Q net profit up nearly 43%

KUALA LUMPUR: Guinness Anchor Bhd (GAB) posted RM55.21 million in net profit for its 1QFY12 ended Sept 30, up 42.6% from RM38.69 million a year ago due to higher sales and share gains in the domestic malt liquor market.

GAB’s revenue also rose to RM444.6 million from RM366.6 million last year, an increase of 21.2%. Its earnings per share also rose from 12.81 sen in the same period last year to 18.28 sen.

Its revenue rose 27.5% compared with the preceding quarter.

The brewery added that the first quarter (1Q) ending Sept 30, for seasonal reasons, traditionally had higher sales compared with the fourth quarter (4Q) ending June 30.

At the pre-tax profit level, there was 95% increase to RM73.6 million, due to the factors and the non-recurrence of one-off costs incurred in 4Q of FY11.

In its filing with Bursa Malaysia, GAB managing director Charles Ireland said the company’s growth has enable it to increase its investments in Malaysia.

“Over the past decade, our investments in marketing, promotions, dealer incentives and retail partnerships have all increased in tandem with our financial performance.


“With these results it is clear that the investments are producing excellent returns. Besides that, our contributions to tax and duty have also risen significantly during our 10 consecutive years of growth,” said Ireland, adding that a key aspect of GAB’s growth strategy is making investments in initiatives that improve organisational efficiency.

Last July, the company embarked on a RM40 million project, Project Quantum, to upgrade its information technology infrastructure which aims to enhance the company’s business processing capabilities to world-class standards.

Ireland also said 1Q also saw strong growth from GAB’s leading brands.

“Tiger Beer’s exceptional growth in the first quarter means it may now be the largest beer brand in Malaysia in terms of volume and sales value. Guinness and Heineken have also shown impressive double-digit growth. It’s really great to start the year with all three brands performing phenomenally well,” he said.

GAB’s 1QFY12 revenue could be attributed to major marketing campaigns of their leading brands such as Tiger Street Football, Arthur’s Day and Heineken Rainforest Music Festival. Tiger Street Football’s semi-finals and finals drew close to 10,000 viewers, while the Arthur’s Day Celebration was attended by over 20,000 Guinness fans.


This article appeared in The Edge Financial Daily, November 3, 2011.

Mah Sing explores Thai JV for Icon City mall

KUALA LUMPUR: Mah Sing Group Bhd is exploring a potential partnership with Thailand’s Central Pattanna Pcl to develop a shopping mall within the former’s Icon City project.

Mah Sing said its wholly owned subsidiary, Sierra Peninsular Development Sdn Bhd, yesterday inked a memorandum of understanding (MoU) with Central Pattana to explore a potential joint venture or partnership to develop and manage the shopping mall.

In a filing with Bursa Malaysia yesterday, Mah Sing said the potential collaboration represents a strategic opportunity for it to venture into commercial and retail property investment and management, which will complement its core property development business.

“The potential joint venture with Central Pattana, Thailand’s largest retail developer, is expected to bring greater vibrancy and further uplift the overall development appeal of Icon City,” it added.

Icon City is Mah Sing’s flagship commercial project in Petaling Jaya with a gross development value (GDV) of RM3.2 billion.

According to Mah Sing, preliminary plans for the retail mall have earmarked an estimated gross floor area of over one million sq ft. The retail mall is part of Icon City’s second phase development, which includes a hotel, serviced residences, boutique offices and office towers.

Launched in July, Icon City’s first phase comprised shop offices, retail lots, small office versatile offices and serviced residences.

As for the investment structure, Mah Sing said the matter will be further discussed subject to due diligence, in-depth feasibility studies and board approval of both companies.

The MoU is valid until formal agreements are entered into by the parties within six months, with an automatic three-month extension or further extensions as may be mutually agreed upon.

In a separate announcement, Mah Sing said the conditions precedent fulfilment period for its Pekeliling flats redevelopment project had been extended by one month.

In August, Mah Sing had secured the development rights for the 1.65ha site along Jalan Tun Razak and Jalan Pahang, with a potential GDV of RM900 million.

Mah Sing’s wholly owned unit Grand Pavillion Development Sdn Bhd had entered into a joint venture agreement with Asie Sdn Bhd and the latter’s unit, Usaha Nusantara Sdn Bhd, to develop a niche project called M Sentral there.


This article appeared in The Edge Financial Daily, November 3, 2011.

Hong Leong Bank offers VSS to staff

KUALA LUMPUR: Hong Leong Bank Bhd has embarked on a voluntary separation scheme (VSS) as part of its consolidation exercise towards growing its newly enlarged entity.

The scheme is offered strictly on a voluntary basis and is open to all permanent employees of Hong Leong Bank and MIMB Investment Bank.

“The exercise is to consolidate its position as a fully integrated financial group as the banking industry landscape has evolved and the level of competition is becoming more challenging and intense,” said Hong Leong Bank managing director Yvonne Chia in a statement yesterday.

She added that the scheme was introduced to enhance productivity and efficiency within the bank while honouring the wishes of employees to further their studies, change their work environment, start up business, retire early and pursue personal interests.

According to Chia, the scheme offers a financial package computed based on factors including the length of service or months to retirement, basic salary and staff categories.

The VSS payment formula is based on a VSS multiplicand that ranges from 1.4 (for executives) to 1.6 (for non-executives) multiplied by the length of service (capped at a maximum of 22 years) multiplied by the basic salary or 50% of total monthly salary until retirement, whichever is lower.

“In addition, the bank is also offering medical relief of up to RM1,000 reimbursable for six months from the date of separation, continuation of housing and motor vehicle loans at staff preferential rates for 12 months from the date of separation,” said Chia, adding that the final approval would be strictly based on business and operational requirements while applicants will be notified by Nov 28.

Applications for VSS must reach the bank’s group HR department by 5pm on Nov 21.

Hong Leong Bank completed its RM5.06 billion acquisition of the assets and liabilities of EON Capital Bhd on May 6, resulting in the former’s current enlarged entity.


This article appeared in The Edge Financial Daily, November 3, 2011.

Planning for future power needs

The impetus for the independent power producer (IPP) programme in Malaysia in the early 1990s was several as noted in an article by Jeff Rector entitled “The IPP Investment Experience In Malaysia”. “Malaysia’s economic expansion created a surging need for power” in terms of industrialisation and continued foreign direct investment (FDI) into the country.

Tenaga National Bhd’s (TNB) monopoly on generation was dismantled following a massive blackout in 1992 and the IPP programme was aggressively pushed forward to “restore an adequate safety margin of capacity and to ensure that the country could meet its anticipated future power needs”.

However, the new capacity “grossly overshot demand growth” and several months before the Asian financial crisis struck Malaysia, Peninsular Malaysia had almost 50% surplus capacity.

The five successful investors of the first wave of IPPs appeared to be well connected with the government and did not necessarily possess experience in the power sector. All five IPPs were gas-fuelled, sourced from domestic natural gas resources supplied by Petroliam Nasional Bhd (Petronas), and financing for the IPPs was also completely domestic with the Employees Provident Fund (EPF) being a key uptaker of the bonds that were issued. It is said these five consortia were guaranteed returns of 20% and that their actual returns were even higher.

The power purchase agreements (PPAs) signed between TNB and the IPPs upon the government’s decision to allow for independent power generation in the country are protected under the Official Secrets Act and as such are not available for public scrutiny despite many calls for transparency.

What is known is that the agreements are of a long-term nature on a “take or pay” or fixed pay charges basis such that TNB incurs payment obligations regardless of whether the power generation capacity is utilised optimally. It appears that the fuel cost risk was borne entirely by TNB and the terms of the PPAs strongly favour the IPPS.

In addition, it is reported that the unit cost of electricity purchased from IPPs in some cases was nearly double TNB’s own generation cost. And although the PPAs are regarded as bipartite agreements, many accounts state that there was a “strong government presence” during the contracting phase. The government had and still maintains a golden share in TNB.

One of the IPP projects was the Bakun hydropower dam, expected to generate 2400MW and provide electricity supply to Peninsular Malaysia from Sarawak via undersea cables. The project was originally awarded in 1994 to a Sarawakian timber tycoon who did not have any prior experience in dam construction.

Razaleigh: A relatively lower profit margin should therefore be negotiated with these IPPs in the interest of the nation.

Vast tracts of forest were already cleared of timber and people were moved from their native customary homes when the Asian financial crisis struck, causing the project to be shelved. Compensation reportedly in the region of a billion ringgit was paid to the concessionaire. The project has been subsequently revived, incurring massive cost overruns.

Today there is a lack of clarity as to whether the original goal of the dam to supply electricity to the peninsula will be realised, and if so, at what cost, both financial and environmental. The Bakun dam was included in Transparency International’s Monuments of Corruption Global Corruption Report 2005.

As TNB is required to purchase a pre-determined amount from the IPPs at fixed costs, when demand falls, as was the case during the 1998 economic crisis, TNB faced over-production and had to put a stop to its own power generating plant, resulting in both inefficiency and loss of profitability.

Additionally, “a higher than necessary cost of power resulted in financial losses to the government controlled utility, higher prices to consumers, and arguably an inefficient allocation of society’s resources”. Against this, however, is the fact that “timely expensive power is a far superior outcome than blackouts that discourage FDI and domestic investment and stunt economic growth”.

Whilst this is arguably true, the type of FDI that is attracted should also be considered. For example, with Bakun, the power is expected to be used in aluminium smelting plants. Apart from the numerous environmental concerns this poses, this arguably fails to fit into our plans of becoming developed by 2020, a high income nation with skilled workers. Aluminium smelting is considered a sunset industry in many developed countries.

In light of the increase in electricity tariff to the consumer (average 7%) resulting from gradual reduction of fuel subsidy amidst an increase in global fuel prices, and potential future tariff increases, the following is to be studied:

a) The impact on the economy especially in terms of the direct and indirect inflationary pressures this presents;

b) The impact in terms of purchasing power to different segments of the Malaysian society;

c) Is this the appropriate time to remove subsidies when the global economic pressures are already resulting in inflationary pressures in the country, or are there other concerns such as the high electricity supply reserve margin or leakages due to corruption/patronage that should be addressed first to remove the shortfall in finances?

d) What would be an adequate reserve capacity? What are the costs/benefits of operating at the current considerably high reserve capacity and is it feasible to continue this in the future? Are there special circumstances in Malaysia that warrant this high reserve capacity which incurs both capital and operating costs?

e) How should the additional profits that Petronas makes with the subsidy removal be invested for the national interest?

f) Can this tariff increase be assuaged by the proposed feed-in-tariff for renewable energy and if so, to what extent?

g) Do the circumstances of this increase present opportunities which the nation should seize, for example, to move towards cleaner electricity production and efficiency in electricity use as well as reduction in wasteful spending/consumption? Is enough being done to optimise this, and what are the expected positive outcomes?

It is encouraging to see that Malaysia is one of the six Asean countries that have agreed that member countries should use peak demand management measures to cope with the uptrend in regional power consumption.

Measures that have been employed in other countries include providing “subsidies to industries and businesses that use electricity during off-peak hours so as to reduce the government’s massive financial burden of having to invest in power-reserve capacities”.
What are the measures that Malaysia is considering to manage peak electricity demand?

h) Is the tariff increase expected to contribute towards achieving Malaysia’s aspiration of reducing carbon emissions intensity of GDP by up to 40% of 2005 levels by 2020 as announced by the prime minister in 2009? If so, what is its anticipated impact?

i) How would coal prices be affected by the rise in oil and gas prices? There appears to have been a “sympathetic” increase in coal prices already; should this trend continue, would the public be subjected to further tariff rises given the move towards coal making up a greater portion of the energy mix under the fuel diversification policies? Would this be in line with the country’s carbon emission reduction aspiration?

In order to answer at least some if not all these questions comprehensively, a transparent analysis of what has occurred in the past in terms of the IPP agreements is required. Such an analysis is expected to show:

a) If there was an incremental cost to TNB as a result of the IPP agreements and if this was reasonable or excessive. If excessive, what proportion of this cost was passed on to the consumers? In other words, could the nation have enjoyed the same tariffs with gas subsidies being lower if TNB was not burdened with these excessive incremental costs?

b) If there was an incremental cost, was it justified? For example, was this an appropriate price to pay for power supply security and hence reasonable?

c) What was the analysis conducted to warrant the high reserve margin of about 40% and what analysis in terms of scenario planning and cost/benefit analysis was undertaken to justify this high reserve?

In other words, was such a high reserve planned for, in which case, what is its justification? Or, could better planning have enabled TNB to lower operational costs and hence electricity tariffs? It is interesting to note that neighbouring countries like Thailand operate at reserves of around 22% which is already considered relatively high. In other words, how much savings would TNB have made without being encumbered with payments for this high reserve margin?

Would it have made a difference if TNB was not obligated with contractual payments to IPPS, partly as a result of this high reserve capacity, or would the costs of potential electricity supply uncertainty outweighed any such savings?

d) What was the actual cost of encouraging consumers to use more electricity (to absorb the excess that TNB was obliged to pay for regardless of the reduction in demand) as was reported during the fall in demand during the Asian financial crisis? Subsidised gas would have been in a manner of speaking “wasted” to meet this artificial demand.

A related issue is to examine to what extent this oversupply of electricity and TNB’s payment obligations to the IPPs resulted in disincentives to promote electricity savings/efficiency even after the financial crisis ended, which in turn consumed more subsidised gas than necessary.

Did this again give an inaccurate picture of electricity demand for the future which was then met by more capital costs being expended in building power plants?

e) To what extent did the IPPs, especially the first generation producers, benefit from the decision to allow IPPs into the business of power generation? What was the cost/benefit to the nation of operating on a closed private negotiations basis?

Are accounts that despite being private sector players, the IPPs operations are not optimal and rely on the fuel price subsidy to mask their inefficiency justified?

f) What is the true cost/benefit of the Bakun dam project to the public? Who were the gainers, who were the losers, and what are the financial as well as other costs such as environmental, loss of native cultural rights, impact on ecological services? What are the benefits of this project?

g) Did we produce cheap energy for the right reasons? Have we formulated cohesive policies to ensure this? Were the benefits distributed equitably, particularly to benefit the lower income groups or did the rich receive a disproportionate size of the benefit?

Did we attract “good quality” FDI which brought rise in local income, technology and raised quality of life across different ‘income stratas or “bad quality” FDI which increased disparity in income, damaged the environment and quality of life and trapped us in the resource curse.

Taking an honest look at these issues will allow Malaysia to learn from the earlier experience in future undertakings and guide future decision-making in managing and meeting electricity demand. Making the findings public will instill a much desired sense of confidence in the ability of the system to be accountable to the electorate.

This is especially so at a time when managing energy/electricity security is required to not only be met in a cost-efficient manner, but also to effectively meet the challenge of depleting resources and limiting carbon emissions to address global warming.

In meeting our future electricity demands, an open and transparent tender process for future IPP arrangements is imperative. This will allow for more competitive pricing of electricity while also meeting requirements for clean, secure and sustainable energy sources.

Additionally, future arrangements with existing IPPs, especially those of the first generation should take into account the fact that they would have fully amortised their capital cost and already enjoyed considerably high profits.

A relatively lower profit margin should therefore be negotiated with these IPPs in the interest of the nation, which could translate to unit cost savings for consumers.

Overall, Malaysia should take a holistic and integrated approach in planning for future electricity supply that includes not only security of supply at affordable costs, but also issues that affect development such as income distribution and sustainability as well as issues of growing concern such as environmental degradation and carbon emissions.

In achieving a robust framework within which this can be done, we must learn from the successes and mistakes of the past. Transparency and openness are critical elements in enabling us to do so.


This article appeared in The Edge Financial Daily, November 3, 2011.

Lafarge a strong proxy to construction sector

Lafarge Malayan Cement Bhd (Nov 2, RM6.90)
Maintain buy with revised target price of RM7.60 from RM7.85: As the largest cement producer in the country, Lafarge is undoubtedly a proxy to, and a major beneficiary of, the high-growth construction sector, which should see robust activity once projects under the Economic Transformation Programme (ETP) take off.

In addition, we expect its share price to be supported by its decent net dividend yield of 5%. Maintain “buy” with a marginally lower target price of RM7.60 (RM7.85 previously) on 17 times 2013 price earnings ratio (PER) as we roll forward valuations after trimming earnings forecasts by 11% per year.

Results for 3QFY11 are due to be released in the third week of this month. Earnings are likely to mirror 2QFY11 (net profit: RM77 million) on flattish sales volume, given the Hari Raya Aidilfitri festivities in 3QFY11. Margins are expected to match 2QFY11 as both net average selling prices (ASP) and coal cost were stable.

While electricity tariff was raised by 8% in June this year, the overall impact is minimal as electricity makes up 20% of production cost, hence, we estimate the net impact to be only a 2% increment in its electricity bill. At flattish sequential 3QFY11 net profit, we estimate 9MFY11 net profit to hit RM207 million (-4% year-on-year).


As it stands, coal prices are off about 16% from their high this year. Accounting for 40% of production cost, we estimate that every 1% decline in coal cost contributes to a 0.8% increase in earnings for Lafarge. With the prospect of slower global economic growth into 2012, coal prices could potentially slip further, which in turn would have a positive impact on LMC’s bottom line.

Price competition has picked up of late, and as a result we are imputing a lower market share of 38% (-2 percentage points) for Lafarge. This in turn results in a 4% downward revision of its sales volume.

Overall, however, we expect Lafarge to weather the situation well with its strong cash pile and with an annual free cash flow generation of more than RM400 million (against an annual dividend payout of RM290 million), we expect the company to be able to sustain a dividend per share of 34 sen to 36 sen over the next two years, which translates into prospective net dividend yields of more than 5%. — Maybank IB Research, Nov 2


This article appeared in The Edge Financial Daily, November 3, 2011.

AirAsia 3QFY11 results preview

AirAsia Bhd (Nov 2, RM3.85)
Maintain neutral with target price RM3.45: AirAsia is scheduled to release its 3QFY11 results on Tuesday. Based on its July to September operating statistics, we expect 3QFY11 figures to come in flat on a quarter-on-quarter (q-o-q) basis but higher year-on-year (y-o-y).

In 3QFY11, AirAsia carried 4.3 million passengers, 3% lower q-o-q but 7.6% up y-o-y. Load factor in 3QFY11 fell marginally by 3.7 percentage points to 77.9% as available seat kilometres (ASK) expanded at a faster rate than revenue passenger kilometres (RPK). For 9MFY11, the number of passengers carried rose to 13.1 million (+13%), or 73% of our full-year forecast of 18 million passengers. Load factor improved by 6.4% to 79.9%, as RPK expanded at a faster pace of 17% y-o-y, compared with the 7.7% increase in ASK.

The positive impact from the improvement in operating statistics will be partially offset by the spike in jet fuel prices. In 3QFY11, the average jet fuel price was US$125 per barrel, some 45% higher than the US$87 per barrel average in 3QFY10. Although the price has eased from the peak of US$140 per barrel, it remains high at around US$120 per barrel, as the crack spread continues to widen from an average of US$10 per barrel to about US$40 per barrel currently.

We make no changes to our average jet fuel assumptions of US$110 per barrel in FY11 and US$115 per barrel in FY12 and FY13. Given the slower global growth and continued de-leveraging risk, we think there is downside potential of jet fuel cost.


In 3QFY10, AirAsia’s ancillary income per pax was RM44, some 14% lower than 2QFY11’s RM50. AirAsia targets to grow this to RM60 per pax, driven by its joint ventures; Internet travel portal Expedia and Canada’s CAE for flight training. The collaboration with MAS is expected to lead to cost savings through various divisions including engineering and maintenance of aircraft, academy facilities and supply of meals.

Last week, AirAsia received consent from its financiers to transfer five of its aircraft to Indonesia AirAsia (IAA) (51%-owned). The financing facilities shall also be restructured to reflect the aircraft transfer. The total consideration for the transfer of the five aircraft is approximately RM550.8 million.

The one-off disposal gain from the transaction is about RM49.7 million, which translates into two sen per share. This will be reflected in its 4QFY11 earnings.

We are positive on this development as it indicates a step closer to the listing. IAA is targeted to list in 2012. — Affin IB Research, Nov 2


This article appeared in The Edge Financial Daily, November 3, 2011.

Another financing deal for Puncak Niaga

Puncak Niaga Holdings Bhd (Nov 2, RM1.19)
Maintain buy with fair value RM1.82: Puncak Niaga informed Bursa Malaysia on Tuesday that its wholly-owned subsidiary, Puncak Niaga Sdn Bhd (PNSB), has entered into a conditional sale and purchase agreement (SPA) with Acqua SPV Bhd to sell its entire holdings of PNSB redeemable, insecured, coupon bearing notes (JNA notes) to Acqua for a total consideration of RM328.1 million.

Separately, Puncak Niaga said its newly acquired wholly-owned subsidiary, Global Offshore (M) Sdn Bhd (GOM), had accepted syndicated credit facilities from OCBC Bank (M) Bhd and Hong Leong Bank Bhd.

The credit facility, amounting to RM546.9 million, was issued by Puncak Niaga on Nov 20, 2001. It allows note holders to exercise a put option to the company to repurchase all or some of their notes, which fall due on Nov 18, 2011. Puncak Niaga also has a call option that gives the company the right to redeem all outstanding JNA notes at the full outstanding principal amount on the call date. The outstanding principal amount of the notes, including the fifth mandatory partial repayment of RM54.7 million, is RM328.1 million.

We welcome the move to restructure the notes that will push forward the mandatory annual redemption total of RM54.7 million at the original repayment period from 2011 to 2016 to November 2016 to 2019. Already, the group’s cash flow is strained amid the prolonged tussle with the Selangor government over the tariff hike and other issues.

Nonetheless, the extended repayment period under the new arrangement will incur a much higher coupon rate of 5.68% per year compared with the previous 2.5% up to Nov 2011 and 3.5% per year thereafter, causing its financing costs to bloat. Acqua is a wholly-owned subsidiary of Pengurusan Aset Air Bhd (PAAB).

OCBC Bank and Hong Leong Bank have granted GOM a US$43.9 million (RM137.4 million) revolving credit, a RM20 million letter of credit (sub-limit), an up to RM50 million bank guarantee and an up to RM95 million foreign currency exchange line. The credit facilities effectively give this new kid on the block a major boost to participate in the lucrative oil and gas (O&G) business.

We understand from Datuk Hashim Mahfar, Puncak Niaga managing director, at the company’s last analyst briefing that GOM expects to benefit from Petroliam Nasional Bhd’s O&G capital expenditure projects, namely offshore installation and construction (OIC) in the area of replacing old O&G pipelines, platforms and so on.

GOM and SapuraCrest Bhd are the only two players in this segment in Malaysia. Hashim sees RM400 million to RM500 million worth of contracts from Petronas annually over the next four to five years.

We are generally positive on the JNA notes refinancing and syndicated credit facilities obtained by GOM. While the earlier expected participation in Indah Water Konsortium Sdn Bhd’s (IWK) potential privatisation is still pending, we see a good “trading buy” opportunity in Puncak Niaga, especially if its share price drifts down further. We are also keeping our “fair value” of RM1.82, derived from 0.7 times FY11 book value, which was the benchmark number before IC Interpretation 12 adjustment. — OSK Research, Nov 2


This article appeared in The Edge Financial Daily, November 3, 2011.

Sime, Sunway to co-develop Iskandar

Conglomerate Sime Darby Bhd and Sunway Group's property division are likely to jointly develop townships in Iskandar Malaysia in Johor, industry sources said today.

The source said the government was allocating land for the joint development and that the companies were buying the concession land at a good rate.

It is also understood that both companies would sign a memorandum of understanding in the next few weeks.

The source said that such collaboration between government linked companies (GLCs) and the private sector was best for the future development of Malaysia.

The joint development could be a strong message for Malaysian companies to forge relations with GLCs and play their part in the next stage of the country's development. - Bernama

AmResearch may raise Q3 GDP estimate

AmResearch is likely to raise its third quarter GDP estimate to between 4.5 and 5 per cent from its earlier range forecast of 4 to 4.5 per cent.

"In line with the recent developments in the manufacturing and exports, we reaffirm our call that the latest GDP number would remain much stronger than the second quarter," said the firm's economic research director, Manokaran Mottain.

The third quarter GDP numbers would be out on Nov 18.

In Amresearch's Economic Update today, Manokaran said the country's industrial output would still surprise the market again in September amidst continued global economic woes.

"We estimate the overall Industrial Production Index (IPI) would have remained at healthy levels of around 4.0 per cent," he said. - Bernama

KL shares sharply lower at midafternoon

Share prices on Bursa Malaysia slipped further midafternoon as selling of heavyweights pulled the benchmark index lower, led by PPB Group, dealers said.

At 3pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) was 15.03 points easier at 1,455.92 after opening 7.84 points lower at 1,467.8.

Dealers said buying interest remained weak in line with regional markets on renewed concern over the European debt crisis.

Losers led gainers 477 to 188 while 252 counters were unchanged, 553 untraded and 23 others were suspended.

Volume stood at 1.24 billion shares worth RM667.3 million.

The Finance Index gave up 124.34 points to 13,150.04, the Plantation Index shed 115.55 points to 7,403.46 and the Industrial Index lost 32.84 points to 2,658.17.

The FBM Emas Index decreased 96.94 points to 9,943.29, the FBM Mid 70 Index fell 91.15 points to 10,752.68 but the FBM Ace Index added 12.66 points to 4,042.56.

Among active stocks, Karambunai eased two sen to 18.5 sen but Tejari gained one sen to 8.5 sen and Harvest-Wa added seven sen to 52 sen.

For heavyweights, Maybank slipped six sen RM8.22, CIMB lost 12 sen to RM7.19 and Sime Darby lost eight sen to RM8.70. -- Bernama

MMHE gets RM1.4b ExxonMobil M'sia job

Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE) has secured the RM1.4 billion Tapis Enhanced Oil Recovery (EOR) project from ExxonMobil Exploration and Production Malaysia Inc (EMEPMI).

The contract from the subsidiary of Exxon Mobil Corporation is for the construction and installation of the main structure for the Tapis R topside, which is the main structure of the Tapis EOR project.

EMEPMI chairman and president, Hugh W Thompson said the contract was part of the company's long-term commitment to work closely with PETRONAS and their co-venture partner PETRONAS Carigali to develop Malaysia’s full energy potential."

"This project will be an historic milestone for both EMEPMI and PETRONAS Carigali as it will be one of the largest offshore EOR projects in Southeast Asia," he said before the contract signing ceremony here today.

"We take seriously our responsibility to PETRONAS and to the country to ensure that we continue to run our operations safely and reliably in order to deliver the nation’s daily oil and gas supply," he said.

Meanwhile, MMHE’s managing director and chief executive officer Dominique de Soras said being awarded the Tapis R project was proof of MMHE’s capability and reliability in the oil and gas engineering and construction sector.

This platform would facilitate ExxonMobil’s efforts to enhance its production from this mature field, he added.

The installation of facilities is scheduled to commence in second quarter 2013 with start-up for Tapis EOR targeted for year-end 2013.

The Tapis R topside is an 18,000 metric tonnes integrated deck that includes facilities for gas compression, water injection and production separation, as well as living quarters to accommodate 145 personnel.

The integrated deck will be installed using a float-over method by MMHE, while ExxonMobil’s technology, project management and operational leadership will be applied over the life of the project to maximise economic recovery.

The Tapis R lies in a water depth of 64 metres and is located 200 kilometres offshore Peninsular Malaysia.

An estimated 2,600 personnel will be involved in various aspects during the peak activity period for the tapis fabrication project.

The Tapis R platform will be connected by bridge to the existing Tapis B platform and a new riser platform, Tapis Q, which is also being constructed by MMHE.

The Tapis EOR project is being developed under the terms of the 2008 production Sharing Contract with PETRONAS and it has been earmarked as one of the Entry Point Projects by Prime Minister Datuk Seri Najib Tun Razak under the Malaysia Economic Transformation Programme early this year. - Bernama

SC, Bursa launch probe on MAS-AirAsia deal

The Securities Commission (SC) and Bursa Malaysia have launched an investigation into the swap deal between state investment arm Khazanah Nasional Bhd and Tune Air Sdn Bhd of shares in Malaysian Airline System Bhd (MAS) and AirAsia Bhd.

Deputy Finance Minister Datuk Dr Awang Adek Hussin told the Dewan Rakyat today that the probe would also look into the possibility of insider trading.

"It will take time because it involves many accounts and a huge value.

"In this matter we need to look into it thoroughly," he said when winding-up the debate on the Supply Bill 2012 on the ministry's behalf today.

He said if the probe by the SC and Bursa Malaysia found evidence of insider trading, the Malaysian Anti-Corruption Commission (MACC) could also be invited to investigate.

Under the deal announced in August, Tune Air and Khazanah -- the major shareholders of AirAsia and MAS respectively -- agreed to swap their shares which resulted in Tune Air holding 20.5 per cent equity interest in full service carrier MAS and Khazanah holding 10 per cent equity interest in budget airline AirAsia. - Bernama

Maybank president Abdul Wahid is EMAC co-chairman

KUALA LUMPUR (Nov 3): MALAYAN BANKING BHD [] president and chief executive officer Datuk Seri Abdul Wahid Omar has been appointed co-chairman of the Institute of International Finance’s (IIF) Emerging Markets Advisory Council (EMAC).

Maybank said on Thursday Abdul Wahid takes over from K.V. Kamath who steps down from EMAC to resume his new role as chairman of Infosys Technologies, India.

The EMAC comprises of 40 senior executives of major financial services firms in emerging markets and it advises the board of directors of the Institute of International Finance.

The IIF is a global association of financial services firms with over 440 member institutions.

Abdul Wahid said he was looking forward to working with EMAC members around the world to address compelling financial issues and “ensure that our institutions play our role in driving continued growth of the industry, especially in such challenging times”.

He is currently chairman of the Association of Banks in Malaysia. He is also chairman of Malaysia Electronic Payment System Sdn Bhd and director of Cagamas Holdings Bhd.

He is also the vice chairman of the Institute of Banks Malaysia, and a member of investment panels of Lembaga Tabung Haji and Kumpulan Wang Persaraan (KWAP).

Dayang, with RM1.5b order book, seeks more contracts

KUCHING (Nov 3): Sarawak-based oil and gas services provider, DAYANG ENTERPRISE HOLDINGS BHD [] (DEHB), expects further growth after chalking up successful quarters on strong order book of RM1.5 billion until 2016.

Its executive chairman, James Ling, said on Thursday the company, listed on the Main Market of Bursa Malaysia in 2008, recorded a strong second quarter on Petronas Carigali deal.

"The primary enabler of DEHB's success is Petronas' Vendor Development Programme, a programme aimed at providing local contractors with incentives and the confidence to increase their capital base," he told Bernama here Thursday.

Sarawak's only homegrown Petronas-registered contractor grew parallel to the rise in the state's oil and gas business, and its share prices hovered around RM1.75 this week.

He said DEHB's success and accomplishments over the past 30 years were mainly due to the support and guidance from Petronas Carigali, Shell and Murphy Oil.

The programme also allowed DESB to expand its business and become a competitor in the international and local markets, he said.

Ling said DEHB qualified for the programme by bringing in Bumiputera partners.

DEHB started in 1980 as a hardware and manpower supplier with a capital of only RM10,000, four employees and 100 offshore workers.

Today it is a thriving enterprise providing maintenance services, fabrication operations and hookup and commissioning services with 300 employees and 1500 workers deployed to its offshore operations. - Bernama

Petronas: Projects will benefit Sabah

Petronas is confident that its multi-billion ringgit key projects planned for Sabah will provide tremendous opportunities for present and future generations of Sabahans.

General manager of Petronas Sabah and Labuan Regional office, Joseph Podtung, said these projects will transform the landscape of Sabah’s oil and gas industry into a vibrant oil and gas centre in the region.

“These mega projects will cost billions and will not only boost Sabah’s oil and gas industry but also generate employment and spin-off opportunities for all the rakyat to enjoy,” he said.

Podtung however said Petronas’ mega projects in Sabah are not just about providing opportunities but also require the readiness of the local industry to fully grab them.

“Capacity and capability require time to develop, and it is worth noting that the expected benefits and spin-offs will only materialise in the long term.

“Based on Petronas' experience in Kerteh and Bintulu, it took decades for these places to be what they are today,” he said.

Podtung was presenting an overview of Petronas' activities in Sabah at the two-day Sabah Oil and Gas Industries forum, organised by the Sabah Oil and Gas Contractors Association (SOGCA) here today.

He said Petronas’ efforts in developing Sabah’s oil and gas resources have generated substantial revenues, allowing the national petroleum company to pay the state petroleum royalty totalling RM6.8 billion since 1976, while its total investment to date was RM63 billion.

“Our ongoing exploration and development activities in the state have resulted in steadily growing production of oil and gas, contributing to a steady increase in petroleum royalty paid to Sabah.

“All these royalty payments contribute significantly to the state’s fiscal revenue, which in turn will benefit the rakyat,” he said.

On Petronas' key projects in Sabah, Podtung said the Sabah-Sarawak Integrated Oil and Gas Projects (SSIOGP) will be the cornerstone of an integrated oil and gas master plan for Sabah.

He said the SSIOGP comprises the development of oil and fields offshore Sabah, an onshore oil and gas receiving, storage, processing and export terminal or Sabah Oil and Gas Terminal (SOGT) in Kimanis, and the Sabah-Sarawak Gas Pipeline (SSGP).

“The three upstream projects, Gumusut-Kakap, Kebabangan Cluster and Kinabalu NAG, will collectively require Petronas and its partners to invest around RM28 billion.

“Once complete, these projects will contribute 125 kbpd oil and 750 mmscfd of natural gas to Sabah’s total oil and gas production,” he said, adding gas production is relatively small and challenging to commercially monetise given the resources are scattered and require significant development costs.

“As such, it is critical to secure the highest prices possible for this gas to ensure we are able to maximise the value and royalty (payment) to the state.

“Because of that, SOGT and SSGP are critical enablers to ensure that oil and gas are monetised on a commercially viable basis,” he said.

Podtung said Petronas' plan to build a RM4.6 billion Ammonia-Urea plant in Sipitang (SAMUR) will definitely provide tremendous spin-off opportunities for the local down-stream small-and-medium industries and enterprises (SMIs/SMEs).

“Fertilisers from this facility will be exported to lucrative overseas markets, but a sizeable volume will still be made available to serve the state’s rapidly growing agricultural sector.

“Ammonia can also be used for various end applications such as textiles, melamine and adhesives, creating opportunities for enterprising Sabahans to venture into these businesses.

“This in turn will create more jobs and spur greater economic activity,” he said. -- Bernama

Maybank CEO to co-chair finance panel

Malayan Banking Bhd's (Maybank) president & chief executive officer Datuk Seri Abdul Wahid Omar has been appointed co-chairman of the Institute of International Finance’s (IIF) Emerging Markets Advisory Council (EMAC).

In a statement today, Maybank said Abdul Wahid would succeed K.V. Kamath, who stepped down from EMAC to resume his new role as chairman of Infosys Technologies India.

"I am honoured to join the team and look forward to working with EMAC members around the world to address compelling financial issues to ensure that our institutions play the role in driving continued growth of the industry, especially in such challenging times," Abdul Wahid said.

EMAC comprises 40 senior executives of major financial services firms headquartered in emerging markets and it advises the board of directors of the IIF.

The IIF is a global association of financial services firms with over 440 member institutions.

The announcement was made recently in Washington by Ibrahim Dabdoub, group chief executive officer, National Bank of Kuwait, Maybank said.

In welcoming Abdul Wahid, Dabdoud underlined the importance of further strengthening the voice and representation of Asian financial institutions in the council as a recognition of the growing role of Asia in the world’s economy and global financial system.

Abdul Wahid is currently chairman of the Association of Banks in Malaysia and chairman of Malaysia Electronic Payment System Sdn Bhd.

He is a director of Cagamas Holdings Bhd, vice chairman of the Institute of Banks Malaysia and a member of investment panels of Lembaga Tabung Haji and Kumpulan Wang Persaraan. -- Bernama

KL shares slump at midday

Share prices on Bursa Malaysia ended the morning session lower today on continued selling pressure but selective buying limited losses, dealers said.

At 12.30pm, the benchmark FTSE Bursa Malaysia KLCI was 11.59 points lower at 1,464.05, after opening 7.84 points lower at 1,467.8.

The index hovered between 1,454 and 1,473.45.

HwangDBS Vickers Research said major equity indices on Wall Street rebounded between 1.3 per cent and 1.6 per cent overnight, boosted by stronger US economic fundamentals.

The US Federal Open Market Committee said that the country's economy had strengthened in the third quarter and policymakers were ready to employ new tools if required to promote a stronger economic recovery.

As a result, the benchmark FBM KLCI will probably rise to challenge the immediate resistance level of 1,475 moving ahead, the research house said.

Meanwhile, losers led gainers 417 to 298 while 244 counters were unchanged, 601 untraded and 23 others suspended.

A total of 1.1 billion shares worth RM538.52 million were traded.

The Finance Index fell 86.84 points to 13,187.54, the Plantation Index declined 86.05 points to 7,432.96 and the Industrial Index lost 18.46 points to 2,672.55.

The FBM Emas Index decreased 62.33 points to 9,977.9 and the FBM Mid 70 Index fell 62.73 points to 10,781.1, but the FBM Ace Index rose 36.35 points to 4,066.25.

Among active stocks, Karambunai fell two sen to 18.5 sen but Tejari gained half-a-sen to eight sen and Harvest-Wa added 6.5 sen to 51.5 sen.

For heavyweights, Maybank and Sime Darby lost three sen each to RM8.25 and RM8.75 respectively, and CIMB fell nine sen to RM7.22. -- Bernama

'Integrated Healthcare plans US$2b IPO'

Integrated Healthcare Holdings Sdn Bhd is planning an initial public offering that may raise up to US$2 billion after completing the purchase of a Turkish hospital chain, said two people with knowledge of the matter.

The company, controlled by Malaysia’s sovereign wealth fund Khazanah Nasional Bhd, asked banks to submit proposals for the IPO by tomorrow, said the people, declining to be named as the process is private. The sale will take place in the first half of 2012 in Singapore or Kuala Lumpur, they said.

Integrated Healthcare is in advanced talks to buy a majority stake in Turkey’s Acibadem Saglik Hizmetleri & Ticaret AS for about US$1 billion, one of the people said. Integrated Healthcare, Asia’s largest hospital operator, expects to reach an agreement on the acquisition next month, the person said.

In June last year, Kuala Lumpur-based Integrated Healthcare offered S$3.5 billion (US$2.7 billion) for the rest of Singapore’s Parkway Holdings Ltd, beating a rival bid for Fortis Healthcare Ltd. It also owns Pantai Hospitals Sdn Bhd, the second-biggest hospital operator in Malaysia, and has an investment in Apollo Hospitals Enterprise Ltd.

Khazanah spokesman Mohd Asuki Abas declined to comment on the IPO of Integrated Healthcare. Dow Jones reported on the IPO earlier today, citing unidentified people.

Mitsui & Co, Japan’s second-biggest trading company, said in April it will buy a 30 percent stake in Integrated Healthcare for RM3.3 billion (US$1 billion). The purchase made Mitsui the second-largest shareholder after Khazanah, which owns 70 percent.

Khazanah said the same month that it plans to list Integrated Healthcare as Malaysia’s government pushes state organizations to divest commercial holdings to attract foreign investors and boost stock market liquidity. -- Bloomberg

Bursa Securities defers delisting of Tricubes

KUALA LUMPUR (Nov 3): Bursa Malaysia Securities Bhd has deferred the decision to suspend and delist the securities of TRICUBES BHD [].

The stock exchange said on Thursday the deferment was made after the company submitted an application for more time to submit its regularisation plan.

At midday, the share price was up 0.5 sen to 16 sen.

Greek woes hammer stocks, KLCI dn 9.5pts

KUALA LUMPUR (Nov 3): Most key regional markets fell in the morning session on Thursday as investors worried about the fallout in the impasse between Greece and the EU as its debt rescue hung in a balance.

At 12.30pm, the FBM KLCI fell 9.56 points or 0.65% to 1,461,39, the third day of straight losses for the 30-stock index.

Turnover was 1.10 billion, mainly due to heavy trading in penny stocks like Karambunai, Tejari, Harvest and Compugates which totalled more than 310 units done.

The quality was however lower, valued at RM538.52 million. Declining stocks beat advancers 417 to 208 while 244 counters were unchanged.

Taiwan’s Taiex fell the most, down 1.54% to 7,481.67, Singapore’s Straits Times Index lost 1.16% to 2,801.75, South Korea’s Kospi 1.12% to 1,876.81 and Hong Kong’s Hang Seng Index 0.98% to 19,540.28.

Reuters reported the leaders of Germany and France told Greece on Wednesday it would not receive another cent in European aid until it decides whether it wants to stay in the euro zone. They also made clear that saving the euro was ultimately more important to them than rescuing Greece.

US light crude oil fell 96 cents to US$91.55 and the ringgit weakened against the US dollar to 3.1500.

Crude palm oil third-month futures fell RM14 to RM2,946 per tonne. The weakening CPO prices also weighed on PLANTATION [] stocks, which emerged as the top losers.

Kuala Lumpur Kepong fell the most, down 32 sen to RM20.78, Sarawak Oil Palms and PPB 28 sen each to RM4.18 and RM16.82 while Batu Kawan shed 24 sen to RM15.70 while IOI Corp declined six sen to RM5.08.

Tenaga fell 13 sen to RM5.73, dragging the index down by 1.63 points. Among finance stocks, CIMB’s decline of nine sen to RM7.22, pushed the index down 1.55 points, Maybank fell three sen to RM8.25 and Public Bank four sen to RM12.66. HLFG fell the most, down 24 sen to RM11.70.

Karambunai was the most active with 107.26 million shares done, down two sen to 18.5 sen. Tejari added 0.5 sen to eight sen with 61.19 million shares done. Compugates was unchanged at 6.5 sen with 45.82 million shares done.

However, Harvest extended its gains, rising to a fresh six-year high of 56.5 sen with 45 million shares done while its warrants rose 6.5 sen to 51.5 sen with 49.97 million units done.

Guinness Anchor was the top gainer, adding 16 sen to RM10.90 after posting a strong set of earnings, Carlsberg added six sen to RM7.01.

Lingui plans RM143m investment for FY2012

KUALA LUMPUR (Nov 3): LINGUI DEVELOPMENT BHD [] plans to invest RM143 million in FY2012 for timber replanting efforts, infrastructure and upgrading of equipment.

Its managing director Yaw Chee Ming said on Thursday the group is looking at replanting between 10,000 ha to 15,000 ha of its timber PLANTATION [] here for FY2012.

"Our hardwood trees mature between 8 to 10 years. We have planted some 30,000 ha and hope to replant up to 15,000 ha," he said after the group's AGM, adding replanting cost between RM4,000 to RM5,000 per ha.

Yaw also said Lingui plans to upgrade its machinery to cope with worker shortage from Indonesia.

On its softwood plantations in New Zealand, Yaw said Lingui plans to increase its harvest to 800,000 per cubic metre per annum in the next two to three years, with the upgrading of infrastructure.

"We are investing between RM8 million to RM12 million to build roads and other infrastructure that would help increase our harvest," he said.

Lingui has 25,000 ha of planted pine trees in New Zealand and harvested 520,000 cubic metres of softwood for FY2011.

Proton: Timely for Lotus to enter China mart

BEIJING: Proton Holdings Bhd hopes to tap the strong appetite of Chinese billionaires for luxury brands, and sell up to 400 units of the Lotus sport car in China.

Proton Holdings Bhd is the 100 per cent shareholder of the British sports car.

Group managing director Datuk Seri Syed Zainal Abidin Syed Mohamed Tahir said it is timely for Lotus to enter the Chinese market, and as the network of dealers expands, demand for Lotus sport cars will grow accordingly.

He was speaking to reporters at the grand opening of Lotus China's first showroom and the debut of the Lotus T123 and Evora GTE here last night.

Syed Zainal said he believes the Lotus sport will be able to penetrate the strong Chinese market and the country will eventually become a very big outlet for it.

"We need to seize the opportunity now. Before this, Lotus relied on Europe, the United States and Japan for sales but China is now the biggest market for cars globally.

"The Chinese appetite for luxury brands is very strong and they are willing to spend to be different," he added.

He said with the Lotus turnaround plan that focuses on producing better cars in the future and improving volume, not being in China would be wrong.

Syed Zainal said timing is very important and Lotus has the visibility for what products it has for now and in the future.

"This gives a lot of confidence, excitement and belief in the brand. The second factor is finding the right partner.

"The people we're working with here now have the experience of building luxury brands such as Bentley, Lamborghini and the Rolls Royce. We have a partner who is willing to work for long term," he added.

Meanwhile, the Evora GTE which is an upgraded version of the Evora in terms of performance and styling.

"It's even more lighter and powerful and was unveiled at the Frankfurt motor show two months ago," Syed Zainal said.

The second model, the T125 is basically a Formula 1 car that is supposed to be driven like a normal vehicle.

"It's not a car that you want to sell to any customer. What Lotus wants to offer to people willing to pay, is a car that looks and performs like a Formula 1 vehicle, but easier to handle and minus the sophistication. -- Bernama

Leader Universal jumps as board accepts offer

Shares of Malaysian wire and cable manufacturer Leader Universal Holdings Bhd rose as much as 4.7 per cent in early trading today after the company’s board of directors accepted a takeover offer from HNG Capital Sdn Bhd.

HNG Capital, a vehicle of Leader Universal’s major shareholder Hng Bok San, has offered RM1.10 per share to buy up all outstanding shares in the company for a total consideration of RM480.1 million.

Leader Universal shares were up 2.6 per cent to 98 sen apiece as at 9.54 am compared to the broader market’s fall of 0.66 per cent. - Reuters

AirAsia cut to 'underperform', stock falls

AirAsia Bhd, Asia’s biggest budget carrier, fell in Kuala Lumpur trading after the stock was cut to “underperform” from “market perform” at RHB Capital Bhd.

The stock dropped 1.3 percent to RM3.80 at 9:05 a.m. local time. -- Bloomberg

Guinness hits 9-month high on Q1 results

Guinness Anchor Bhd, a Malaysian brewer, rose to a nine-month high in Kuala Lumpur trading after it said fiscal first-quarter net income rose 43 percent from a year earlier to RM55.2 million.

The stock climbed 1.3 percent to RM10.88 at 9:01 a.m. local time, set for its highest close since Jan. 17. -- Bloomberg

Parkson Retail rises on Singapore debut

Parkson Retail Asia Pte Ltd, a unit of Malaysia’s Parkson Holdings Bhd., opened 12 percent higher at S$1.05 in its trading debut on the Singapore stock exchange.

The stock traded as much as 15 percent higher at S$1.08. -- Bloomberg

Zelan gains on winning varsity tender

Zelan Bhd, a Malaysian builder, rose in Kuala Lumpur trading after winning a tender to develop a university studies center.

Its shares gained 2.7 percent to 38.5 sen at 9:05 a.m. local time, set for their highest close since Oct. 31. -- Bloomberg

KL shares slump at midmorning

At 10.30 am today, there were 165 gainers, 377 losers and 219 counters traded unchanged on the Bursa Malaysia.

The FBM-KLCI was at 1,460.17 down 10.78 points, the FBMACE was at 4,057.66 up 27.76 points, and the FBMEmas was at 9,970.16 down 70.07 points.

Turnover was at 700.823 million shares valued at RM334.021 million. -- Bernama

Plantations weigh on blue chips

KUALA LUMPUR (Nov 3): PLANTATION []s weighed on blue chips on Thursday as the FBM KLCI extended its losses in line with the cautious regional markets.

At 10.12am, the FBM KLCI fell 13.38 points to 1,457.57. Turnover was 631.64 million shares done valued at RM260.62 million. There were 138 gainers, 320 losers and 206 stocks unchanged.

Among the plantations, KLK fell 40 sen to RM20.70, Sarawak Oil Palms 26 sen to RM4.20, PPB and Batu Kawan 14 sen each to RM16.96 and RM15.80.

Other decliners were BAT, down 48 sen to RM45.52, DiGi and HLFG 24 sen each to RM32.06 and RM11.70 while Petronas Dagangan shed 20 sen to RM16.

OSK Research: Stronger rebound in banks crucial for sustained rally

KUALA LUMPUR (Nov 3): OSK Retail Equities Research said on Thursday an improvement in the relative strength of banking stocks is paramount for a sustained rebound for the FBM KLCI.

It said the broad market had staged a respectable rebound since reaching a low on Sept 26. The benchmark FBM KLCI managed to regain slightly more than 62% of the July-September decline, which is a respectable feat given the extent of the drop.

OSK Research pointed out that banking stocks also rebounded in tandem given their high weighting in the benchmark index.

“But many may not notice the relatively weak rebound of banking stocks compared to that of the benchmark. Therefore, an improvement in the relative strength of banking stocks is paramount for a sustained rebound for the FBM KLCI,” it said. In its Thursday report, it identified banking stocks which may lead the market on its recovery path and vice versa.


Maybank:

OSK Research said Maybank showed much promise at the early phase of decline that started in July.

The stock was able to hold above the 10-month support level at RM8.40, which translates into outperformance in its relative strength line of August-September.

However, its performance deteriorated after breaking below the support level, as shown by the downward sloping relative strength line for the whole of October.

A break below the one-year support level could see the continuation of the underperformance of this stock. The price trend is similarly weak although not as pronounced as its relative strength line.

The series of lower highs since April is unbroken and a close below RM8.20 should see the continuation of the price weakness.

Strong support is expected at RM7.50, the 52-week’s lowest close, above which a break should see the test of the May 2010 low of RM7.00.



CIMB

CIMB is one of the stocks that are hit hardest since the broad market sell-off began in July. The failed test of the all-time high heralded the start of a reversal in its market outperformance since early-2009.

Its relative strength line even broke below the March low. Despite having made a short-term higher high since 26 Sept and trading above the 50-day MAV line, the stock’s relative strength has stayed flat and well below the broken support.

The October price retracement was also weak as it clawed back only 38% of the July-September decline at RM7.50.

A close below the two-week low of RM7.15, also a Fibonacci retracement of the July-September decline and where the 50-day MAV lies, should see a return in selling and a possible continuation of its underperformance.

Watch out for the share price to test the recent low of around RM6.50 and if violated, the stock may trade at as low as RM6.00, which is the low of February 2010.

However, another break above RM7.50 may see a return of its outperformance, provided that its relative strength line breaks above the broken March support.


Public Bank

Similar to Maybank, Public Bank managed to stave off the early selling pressure of July/August.

But that took a turn after the stock broke the February-low and the subsequent rebound off the Sept 26 low underperformed the benchmark.

This is not too different from the relative strength performance from January-July. One marked difference is that the relative strength peak in September was higher than that of January, indicating a possible uptrend should the relative strength line make a higher low.

This displays the stock’s more defensive nature versus the other two big-cap banks, and the possibility of a faster recovery once the broad market downtrend ends.

The price trend is, nonetheless, weak judging from the lower lows since January, and a close back below RM12.50 should see a continuation of the downward movement, with support expected near the recent low of RM11.50.

But watch out for a return in buying as the stock may lead the sector on a price uptrend.



Alliance Financial Group

The stock has been unexciting, at least in relative strength terms, as illustrated by its sideways move up to June.

However, things changed in July when the stock broke above the resistance level, both in terms of price and relative strength.

The share price has retraced subsequently but its relative strength line stays at a high level, and had even made higher lows.

This puts the stock in a strong position to rally once the benchmark trend weakness is over.

Note that the stock broke its four-month downtrend two weeks ago and its 50-day MAV is pointing up. Its price support and resistance levels are clear at RM3.00, RM3.20, RM3.60 and RM3.80.

From the widest point of the trading range, the share price may even test RM4.60 should the RM3.80 resistance level be broken.

However, a break below RM3.00 should see it heading lower. This should also see a breakdown in its relative strength line.

Expect support at the May and Feb 2010 lows of RM2.60 and RM2.40 respectively.

FBM KLCI down in early trade

KUALA LUMPUR: The FBM KLCI was traded lower in early trade on Thursday, dipping 7.39 points or 0.5% to 1,463.56 at 9.10am, taking no cues from the gains seen on Wall Street overnight.

Despite opening at 0.92 points higher, the local index barometer succumbed quickly to bearish sentiments as investors took profit.

HwangDBS Vickers Research said in its market preview that the benchmark FBM KLCI will probably rise to challenge the immediate resistance level of 1,475 ahead, amid a steadier external backdrop that may lift share prices on the local stock market today.

Major equity indices on Wall Street rebounded between 1.3% and 1.6% overnight, boosted by stronger U.S. economic fundamentals.

Regional peers were mostly down with Taiwan's Taiex Index shedding 0.51% to 7,559.78 while Seoul's Kospi Index dipped 0.65% to 1,885.65.

Nymex crude oil lost 73 cents to US$91.78 per barrel. Spot gold fell US$5.98 to US$1,732.63 per ounce.

The ringgit was quoted at 3.1516 to the US dollar.

Maybank Research upgrades Guinness to Buy

KUALA LUMPUR (Nov 3): Maybank Investment Bank Research has upgraded GUINNESS ANCHOR BHD [] to a Buy with a marginally higher target price of RM11.50 (from RM11.30) on raised earnings.

It said on Thursday that GAB’s first quarter net profit for the period ended Sept 30 (1QFY12) of RM55.2 million (+42.7% YoY, 89.9% QoQ) were broadly above expectations.

Maybank Research said revenue hit a new record of RM445 million and margins expanding further.

“What is positive is that Guinness would appear to be gaining market share in the malt liquor market and with decent gross yields of about 5.6% in FY12 to boot, we upgrade our call to a Buy with a marginally higher target price of RM11.50 (from RM11.30) on raised earnings,” it said.

The research house said the 1QFY12 net profit accounted for about 26% of its full-year forecast and this is fairly strong, considering the fact that 2Q and 3Q are typically the seasonally better quarters for earnings. 1Q12 revenue growth was an impressive 21% YoY (+27% QoQ) to RM444.6m (+21.3% YoY, +27.5% QoQ).

Blue chips in the red in early trade

KUALA LUMPUR (Nov 3): Blue chips fell in early trade on Thursday, as sentiment continued to stay cautious in line with regional markets despite the firmer overnight close on Wall Street.

At 9.10am, the FBM KLCI was down 7.28 points to 1,463.67, extending its losses for the third consecutive day. Turnover was 183.34 million shares valued at RM71.31 million. Losers led gainers 108 to 99 while 151 counters were unchanged.

DiGi fell the most, down 30 sen to Rm32, HLFG 26 sen tp RM11.68, PetGas 14 sen to RM12.96 while Sime and Tenaga gave up eight sen each to RM8.70 and RM5.78.

Maybank, CIMB and AirAsia fell five sen each to RM8.23, RM7.26 and RM3.80 while Genting retreated four sen to RM10.22.

Analysts expect poor third quarter for AirAsia and MAS

PETALING JAYA: Both AirAsia Bhd and Malaysia Airlines (MAS) are not expected to report significant improvements to their financial performance in the third quarter, owing to the high cost of jet fuel, according to research analysts.

“It should be another bad quarter for MAS. AirAsia is also not likely to see stellar results,” said a bank-backed analyst.

He said that while the third quarter was seasonally a better period for MAS, it would be impacted by the high cost of jet fuel and also lower demand from full-service carrier passengers against a gloomy outlook for the global economy.

“We foresee further capacity cuts by MAS, notably on the domestic and Asean routes, given lower demand for full service travel,” said OSK Research in a report last month.

Both AirAsia and MAS had noted in their second-quarter reports, via Bursa Malaysia filings, that the outlook for the second half of 2011 would be challenging due to high jet fuel cost.

MAS recorded a net loss of RM769mil for the first half of the year, which was more than triple its net loss of RM224.68mil a year earlier. It also attributed its RM526.68mil net loss in the second quarter to higher fuel cost.

MAS suffered a second-quarter loss despite its total operating revenue increasing by 8.5% year-on-year to RM3.43bil.

“In response to the tough operating environment, MAS is moderating its short-term capacity growth,” the carrier said in August.

MAS added that other measures such as the implementation of fuel surcharges and improvement of its revenue management were expected to yield some benefits in the second half of 2011 but would not be adequate to offset the impact of high jet fuel price.

Meanwhile, AirAsia's net profit of RM276.2mil for the first half of the year represented a 34.7% dip compared with the RM423mil net profit a year earlier.

AirAsia's second-quarter net profit of RM104.3mil represented a 47.6% drop year-on-year.

The budget carrier suffered a dip in second-quarter profit despite its revenue increasing by 15.2% year-on-year to RM1.1bil.

“The introduction of a fuel surcharge during the second quarter is expected to mitigate, but not fully offset, the effect of higher fuel prices during the second half of the year,” AirAsia said.

Affin Investment Bank said in a report that third-quarter figures for AirAsia would be flat on a quarter-on-quarter basis but higher year-on-year, based on the budget carrier's July to September operating statistics.

The report noted that in the third quarter, AirAsia carried 4.3 million passengers, which was 3% lower quarter-on-quarter but 7.6% higher year-on-year.

“AirAsia's improvement in operating statistics would be partially offset by the spike in jet fuel prices. In the third quarter, the average jet fuel price was US$125 (RM391) per barrel, some 45% higher than the US$87 (RM272) per barrel average a year earlier,” the report said.

It also said its 2011 passenger growth forecast of 12% to 18 million was achievable as the October to December period was seasonally the strongest quarter due to the festive and holiday season.

“In addition, the collaboration with MAS, coupled with the potential re-branding of Firefly as a premium short-haul carrier, will reduce the fierce competition between the two airlines, and this is supportive of demand and yield,” the report said.