Friday, 4 November 2011

Melati Ehsan awarded RM298m public housing project

KUALA LUMPUR (Nov 4): MELATI EHSAN HOLDINGS BHD []’s unit Pembinaan Kery Sdn. Bhd. has accepted two contracts from the Housing and Local Government to undertake two housing projects worth RM298 million.

It said on Friday, the first project valued at RM88.10 million, was to design and build 500 units of flats and the ancillary works for public housing in Kuala Lumpur. The contract period is 30 months.

The second project, worth RM215.90 million, was to build 1,600 flats and ancillary works, also under the public housing scheme in Kuala Lumpur. The second contract is over 36 months.

Melati said Kery was required to execute the formal contract with the ministry in due course subject to the terms and conditions of the letters of award.

“The project is expected to contribute positively to the earnings per share of Melati for the current financial year ending Aug 31, 2012 and the subsequent financial years during the contract period,” it said.

Malaysia Smelting Corp 3Q net profit RM41.81m, but outlook cautious

KUALA LUMPUR (Nov 4): MALAYSIA SMELTING CORPORATION [] Bhd posted net profit of RM41.81 million in the third quarter ended Sept 30, 2011 compared with net loss of RM37.05 million a year ago where there was impairment provision for goodwill of RM73.63 million.

MSC said on Friday that revenue increased by 25.9% to RM907.04 million from RM719.96 million. Earnings per share were 41.80 sen compared with loss per share of 49.40 sen.

It posted a 121.7% increase in pre-tax profit of RM51.91 million before unusual items from RM23.41 million. This was due to higher profits from its tin mining and smelting operations in Malaysia and Indonesia mainly due to an improved operating performance and higher average tine prices.

There was an impairment provision for goodwill arising from acquisition of subsidiaries totaling RM73.63 million.

“However, for the current year is expected the operating environment to be difficult and challenging due to the weaker demand for commodities due to prevailing global economic slowdown and on-going uncertainty in the global finance markets,” it said. However it expected to remain profitable in the fourth quarter.

For the nine-month period, it recorded net profit of RM106.39 million versus net loss of RM58.20 million in the previous corresponding period. Revenue increased by 25.2% to RM2.497 billion from RM1.994 billion.

It said for the nine-month period in 2010, the impairment provision for goodwill arising from acquisition of subsidiaries was RM121.63 million.

Nestle posts flat 3Q earnings of RM110m on higher raw materials

KUALA LUMPUR (Nov 4): Nestle (Malaysia) Bhd posted net profit of RM110 million in the third quarter ended Sept 30, 2011 marginally lower from the RM113.18 million a year ago as profit margins were affected by higher prices of key raw materials

It said on Friday that operating profit was RM143.16 million, up 3.8% from RM137.83 million. Revenue rose 18.2% to RM1.171 billion from RM991.07 million, boosted by strong domestic and exports sales. Earnings per share were 46.91 sen compared with 48.27 sen.

“The good domestic growth performance was noted for all categories and some with double digit especially for milks, coffee and beverage, confectionery as well as Nestle liquid drinks. The encouraging sales were further driven by higher demand during the fasting month, followed by Hari Raya celebrations,” it said.

Nestle added the sustained economic growth in the region helped drive the group's export performance. The increase demand for coffee creamers and soluble coffees within the Asean region contributed to the strong double digit export growth.

However, escalating prices of key raw materials consumed by the group such as coffee beans, cocoa powder, skimmed milk powder and palm oil have negatively impacted the gross profit margin which reduced by 230bps, despite increasing by 10.3% in absolute terms.

For the nine-month period, its earnings rose 4.8% to RM369.23 million from RM352.14 million. Its revenue increased by 14.6% to RM3.51 billion from RM3.06 billion driven by both domestic and export sales.

KLCI snaps three-day losses, up 15 pt

KUALA LUMPUR (Nov 4): Blue chips snapped their three straight days of losses on Friday, with the FBM KLCI surging on late buying of selected stocks in line with the positive European and key regional markets.

Reports said Greece had scrapped its referendum plan while the European Central Bank’s move to cut interest rates had helped shore up investors’ risk appetite.

Greek Prime Minister George Papandreou bowed to cabinet rebels and agreed to step down and make way for a negotiated coalition government if his Socialists back him in a confidence vote on Friday, government sources told Reuters.

The KLCI closed up 15.14 points or 1.04% to 1,477.51. Turnover surged to 2.30 billion shares valued at RM1.51 billion. The broader market was firm with advancers beating decliners 591 to 194 while 248 stocks were unchanged.

Japan’s Nikkei 225 rose 1.86% to 8,801.40, Hong Kong’s Hang Seng Index jumed 3.12% to 19,842.79, Shanghai’s Composite Index 0.81% higher at 2,528.29, Taiwan’s Taiex 1.92% to 7,603.23, South Korea’s Kospi 3.13% to 1,928.41 and Singapore’s Straits Times Index 1.36% to 2,848.24.

At Bursa Malaysia, the strong export numbers for September also supported investors’ appetite for equities.

DiGi rose the most, up 82 sen to RM33.30, Tasek 60 sen to RM8.30, Nestle 50 sen to RM50, HLFG 40 sen to RM11.80 and Dutch Lady 32 sen to RM20.28 while RHB Cap added 24 sen to RM7.53 and MISC 21 sen to RM6.89.

Genting advanced 44 sen to RM10.80, pushing the KLCI up 3.77 points while CIMB’s 17 sen gain to RM7.36 nudged the index up 2.93 points while a 16 sen gain by Tenaga to RM5.88 enabled the index o chalk up 2.0 points.

Harvest jumped 23.5 sen to 87.5 sen with 94.51 million shares and the warrants 16.5 sen to 75 sen with 110.49 million units as speculators ignored Bursa Malaysia Securities Bhd’s query over the unusual market activity regarding its shares and warrants.

F&N posts 4Q net profit of RM66.2m, dividend 62c

KUALA LUMPUR (Nov 4): Fraser & Neave Holdings Bhd (FNHB) posted net profit of RM66.21 million in the fourth quarter ended Sept 30, 2011 , down 85.7% from the RM462.31 million a year ago due to a gain on RM382.03 million from the divestment of its glass container business a year ago.

It said on Friday revenue rose just 0.5% to RM995.46 million from RM990.25 million a year ago which had included revenue from the sale of Ampang development project of RM54 million. Earnings per share were 18.44 sen compared with 129.70 sen. It proposed a final single tier dividend of 47 sen per share together with a special single tier dividend of 15 sen.

For the financial year ended Sept 30, its net profit was RM383.13 million, down 44.8% from RM695.29 million a year ago that included the RM382 million gain on divestment of the glass business. Its revenue rose 7.6% to RM3.915 billion from RM3.637 billion.

FNHB said operating profit from continuing operations rose 14% to RM443.80 million from RM389.30 milion despite higher input costs and sugar subsidy withdrawal in Malaysia.

“It marks another new record and the 11th consecutive year of steady growth for the group,” it said.

FNHB chief executive officer Datuk Ng Jui Sia said: “Despite current challenges that we are facing in terms of higher input costs and the global economic and financial uncertainties, our core business in food and beverages remains strong, with solid growth from soft drinks and broad-based growth in dairies Thailand.”

Ng said the soft drinks division recorded all-time sales record of 69.8 million cases whilst maintaining market share. Revenue was up 16% to RM1.84 billion from RM1.59 billion last year due to good growth from the core brands and promising performance of new products. Operating profit surged 41% to RM274 million from RM194 million.

As for the dairies division, its registered lower volume due to the numerous price increases to offset the higher sugar costs. As for the dairies Thailand, he said FNHB achieved a broad-based domestic volume growth of 9%.

“We made greater inroads into Indochina with a 40% growth and started to move to Vietnam with the appointment of a local distributor,” he said

Commenting on the prospects, Ng said in the absence of Coca-Cola products, the soft drinks division will see an immediate fall in sales volume in the new financial year.

However, he was added the division has focused on deepening and widening its product portfolio over the last few years to prepare for this eventuality.

As for dairies products in Malaysia, he expected it to remain soft, due to the continuation of the selective sugar subsidy policy and volatility in raw material prices globally.

Ng also said in the first half of FY2012, he said the dairies division would be moving to the RM350 million Pulau Indah plant which would increase operating costs in the short term but lead to long term benefits of increased productivity.

He added once operations started in December 2011 or January 2012, the group would be able to crystallise a deferred tax asset of RM76 million in relation to the halal hub tax incentive.

As for the dairies plant at Rojana, Thailand, he said it had temporarily ceased operations due to the massive floods.

“We expect production to recommence approximately three to five months after flood waters recede. To mitigate disruptions to the marketplace and customers, we have plans to ship products from outsourced manufacturing locations.

“We have in place an all risk insurance policy for the business in Thailand. The total sum insured is Baht 5 billion and the indemnity period is for twelve months.”

Ng pointed out the group’s overall results would be bolstered by the non-operating items of deferred tax income.

Fresh impetus for some

PETALING JAYA: The emergence of new, politically connected shareholders and directors appears to be giving fresh impetus to selected small counters on Bursa Malaysia amid the current weak market sentiment.

The companies that have seen politically linked figures come on board in recent months include Harvest Court Industries Bhd, Envair Holding Bhd and Sanichi Technology Bhd.

The three counters, two of which are listed on the ACE Market, saw significant price movements on high trading volume in recent weeks. What is interesting is that all three companies made losses in their last financial years.

Mohd Nazifuddin Najib, the son of Prime Minister Datuk Seri Najib Razak, was appointed a non-executive director of Harvest, which was lifted from its PN17 status in December 2009, at the end of October.

Nazifuddin is also chairman of Sagajuta (Sabah) Sdn Bhd, best known as the developer of the 1Borneo mall in Kota Kinabalu, Sabah. Sagajuta has several ongoing projects including 1Sulaman and 1Likas in Kota Kinabalu, and 1Gateway in Klang. Its controlling shareholder and managing director is Datuk Raymond Chan Boon Siew.

Both Chan and Nazifuddin joined Harvest’s board on Oct 28 after Chan emerged as a substantial shareholder of Harvest 10 days earlier, when he acquired 23.808 million shares, or a 13.85% stake, at 20 sen per share.

The value of Chan’s stake has since tripled, with the stock closing at 64 sen yesterday as investors anticipate he may inject Sagajuta’s assets into Harvest was awarded a contract by Sagajuta for the supply of door leaves for some RM7.03 million.

Chan’s entry into Harvest follows the abortion of earlier plans to inject Sagajuta into Jerneh Asia Bhd.

About a week prior to Chan and Nazifuddin’s appointments, the company received an unusual market activity (UMA) query from Bursa Malaysia on Oct 17.

In response, Harvest said it is unaware of other developments, apart from the discussions between managing director and shareholder Ng Swee Kiat and Affin Bank Bhd for the proposed purchase the entire shares and warrants held by Affin in Harvest.

The query, however, did not stop Harvest shares from rising further, especially after the two appointments.

The counter reached a new high yesterday of 64 sen, a 760% premium to its recent low of 7.5 sen on Sept 26, 2011. The counter gained 334% year-to-date (YTD) compared with 509% in the last three months on an average daily trading volume of 8.34 million.

It is worth noting that for the whole of last year, Harvest posted a net loss of RM2.82 million from a net profit of RM12.16 million a year ago.

While the company posted a net profit of RM168,000 in 2QFY11 ended June 30, it is still in the red for the nine-month period with a net loss of RM678,000.

Envair, meanwhile, appointed Mohd Anuar Mohd Hanadzlah, the brother of Second Finance Minister Datuk Seri Ahmad Husni Mohd Hanadzlah executive director.

The loss-making Envair, which manufactures, sells and services clean air and containment facilities, made headlines recently when it unveiled plans to sell two million barrels of light crude oil per month to a Chinese company for a five-year period, in a deal worth some US$182 million (RM573 million) per month.

Envair was asked by Bursa Malaysia to clarify the deal. This was one of a number of queries from the exchange on Envair’s announcements since Oct 13 that it wanted to venture into the oil and gas business.

The company has also announced that ZAI Corporate Finance Ltd, a London-based investment banking firm, was interested in subscribing to up to 30% of its share base under a private placement exercise. There have been no updates on this development.

Envair posted a net loss of RM290,000 in 2QFY11 ended June 30 and a net loss of RM816,000 for the nine-month period. For the whole of FY10 ended Dec 31, it made a net loss of RM5.38 million.

Envair shares gained some 204% over the three months on an average trading volume of 1.26 million. YTD the counter put on some 407% to settle at 35 sen yesterday.

ACE Market-listed Sanichi Technology Bhd saw the emergence of Datuk Mohd Wira Dani Abdul Daim, son of former finance minister Tun Daim Zainuddin, as a new substantial shareholder three months ago.

Wira Dani recently bought 10 million shares or 6.12% of the loss-making precision moulds and tools maker for RM6 million or six sen per share. The transacted price was about 20% below the market price 7.5 sen at the time.

Sanichi’s share price shot up by as much as 10% after Wira Dani bought into the company in early August.

But over the recent three months, Sanichi lost over 47% to close at 5 sen yesterday. It reached its 52-week high on Aug 4, 2011 at 11.5 sen and its low of 3.5 sen on Dec 22, 2010.

Sanichi is still in the red with a net loss of RM14.93 million in FY11 ended June 30 on the back of RM9.44 million revenue.

Also notable are two counters that have seen significant movement in their share prices of late: GPRO Technologies Bhd and DVM Technology Bhd.

Interestingly, the reason behind the price movement of both companies appears to be centred around one individual: Christian Kwok-Leun Yau Heilesen.

The movement in its share price prompted Bursa Malaysia to query GPRO Technologies earlier this week.

In response, GPRO said it was not aware of any activity that may have contributed to the unusual price movement and yet, the counter settled at 23.5 sen yesterday, translating into about 200% gain YTD.

To recap, GPRO, whose market capitalisation is barely RM24 million, saw the emergence of Heilesen as a new major shareholder, when he bought 38.23 million shares or a 15.29% stake in the ACE Market-listed IT firm recently.

Heilesen acquired the shares on the open market for RM3.25 million or 8.5 sen each in early September. At current prices, the value of his stake has appreciated nearly three times.

This is the second ACE Market - listed loss-making company that Heilesen has bought into in less than two months. The first was DVM, which he later sold down in less than three weeks in August.

Heilesen made news last month when he bought into DVM and requested an EGM to remove four directors from the company’s board. However, he sold down his stake barely two weeks after the share purchase.

To recap, Heilesen, a Danish national, and Raymond Yip Wai Man from Hong Kong emerged as substantial shareholders in DVM via the acquisition of its shares on the open market. Both had a combined interest of close to 20% in the company before selling down their stakes.

While the duo were picking up shares on the open market, the company’s single largest shareholder, Datuk Goh Kian Seng, was paring down his stake to 5.05%.

DVM closed at 7.5 sen yesterday, an increase of more than 40% YTD, but down 73.2% from its recent high just three months ago.

It reached a high on Aug 2, 2011 of 28 sen, which was a 409% premium to its record low of 5.5 sen last November.

This article appeared in The Edge Financial Daily, November 4, 2011.

Misif against Megasteel’s proposed 15% levy

KUALA LUMPUR: The Malaysian Iron and Steel Industry Federation (Misif) is opposing Megasteel Sdn Bhd’s proposed reduction in import duty from the existing 25% to 15% or RM300 per tonne, whichever is higher, on all flat steel products combined with the abolishment of duty exemption.

“Misif, after consultation with its members, rejected Megasteel’s proposal and has conveyed its position to Miti (Ministry of International Trade and Industry) during the meeting between Miti and Misif,” the steel association said in a statement.

Misif was responding to The Edge Financial Daily’s front page report yesterday.

Flat steel products include hot rolled coil, cold rolled coil, coated sheets, pipes and tubes.

Misif president Chow Chong Long told the financial daily that there would be both winners and losers should the proposal go through.

The reduction in duty from 25% to 15% would be welcomed, but the abolishment of duty exemption could be detrimental to many sectors of the downstream flat steel players.

Exporters and steel players that depend on imported steel grades which are not produced locally could be adversely affected.

To allow exporters to remain competitive, Megasteel has proposed to have a duty drawback principle implemented for re-exporters.

“While the duty drawback system will reduce the possibility of abuse by importers, it adds a big financial burden to the exporters,” Chow said.

On the other hand, he pointed out, “The duty drawback will have an impact on the cash flows of businesses. They will have to pay more upfront for their raw materials and wait until they actually export the goods to reclaim the duty paid.”

“Megasteel, being the sole producer of hot rolled coil (HRC), is also a major part of the flat steel value chain and Misif would like to see a win-win solution for the upstream, mid stream and downstream,” he added.

It is important to note the current levy of 25% and Megasteel’s proposal will only affect imports from non-free trade agreement nations (NFN). Since Malaysia is part of the Asean Free Trade Agreement (Afta), imports by Asean members are not taxed.

Chow added that the biggest concern for Malaysian steel producers is China, which has become a threat since the Asean-China FTA.

MIDF Research released a report on Lion Industries Corp Bhd in which it downgraded the steel player to a “trading sell” on the expectation of negative earnings growth this year and weak industry fundamentals.

Lion Industries is the holding company of Megasteel.

The report entitled “The lion is trapped” revised the target price for Lion Industries down to RM1.12, below its closing price of RM1.53 yesterday.

The stock has fallen 24.26% year-to-date compared with the FBM KLCI’s 5.09% decline.

MIDF expects negative earnings growth due to the declining price trend for long steel products and slowing demand in both domestic and export markets.

“Currently, long steel prices are trending downwards with both billet and bar prices having declined 6.2% month-on-month and 9% m-o-m respectively,” the report said.

It also pointed out that contractors which use steel products for construction have also adopted a wait-and-see approach, keeping their inventories low on the expectation of a further decline in steel prices.

The blast furnace joint venture (JV) proposed in March by the Lion Group worth RM3.22 billion has yet to materialise, it added.

Partners of the JV, which include Lion Forest (20%), Lion Industries (29%) and Lion Diversified (51%), are on hold pending shareholders’ approval for a corporate guarantee on a RM2.3 billion loan from China Construction Bank

Shareholders were initially supposed to meet to approve the guarantee of the loan facility earlier this year on March 3. On Monday, the group announced that the date would be extended to March 2 next year.

This article appeared in The Edge Financial Daily, November 4, 2011.

MHB wins RM1.4b ExxonMobil job

KUALA LUMPUR: Malaysia Marine and Heavy Engineering Holdings Bhd (MHB) has clinched a contract from ExxonMobil Exploration and Production Malaysia Inc as part of the Tapis enhanced oil recovery (EOR) project to the tune of RM1.4 billion.

In a filing with Bursa Malaysia yesterday, MHB said the contract was signed by its wholly-owned subsidiary Malaysia Marine and Heavy Engineering Sdn Bhd with ExxonMobil.

“The scope of work under the contract includes procurement, fabrication, testing, load-out, transportation, installation and commissioning of the integrated Tapis R offshore platform deck, as well as two inter-platform bridges,” said the statement, adding the contract is expected to contribute positively toward the group’s future earnings.

The Tapis EOR project is expected to be completed by end-2013.

This article appeared in The Edge Financial Daily, November 4, 2011.

Maybank’s Wahid appointed Emac co-chairman

KUALA LUMPUR: Malayan Banking Bhd president and CEO Datuk Seri Abdul Wahid Omar has been appointed co-chairman of the Institute of International Finance’s (IIF) Emerging Markets Advisory Council (Emac).

Maybank noted in a statement yesterday that Wahid takes over from KV Kamath who steps down from EMAC to resume his new role as chairman of Infosys Technologies, India.

The Emac comprises 40 senior executives of major financial services firms in emerging markets and it advises the IIF board. The IIF is a global association of financial services firms with over 440 member institutions.

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

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

In addition, he is also the vice-chairman of the Institute of Banks Malaysia and a member of the investment panels of Lembaga Tabung Haji and Kumpulan Wang Persaraan.

This article appeared in The Edge Financial Daily, November 4, 2011.

Karambunai shares back on active list

KUALA LUMPUR: Shares of Karambunai Corp Bhd, which is controlled by casino owner Tan Sri Dr Chen Lip Keong, have been actively traded in the past two days.

The stock soared 41% to 20.5 sen — the highest closing since end-May — on Wednesday with 130 million shares changing hands. However, the stock retreated to 19 sen yesterday, down 1.5 sen or 7.7% on a trading volume of 140 million shares.

Despite the sharp jump on its share price, Bursa Malaysia did not query Karambunai on unusual market activity.

There have not been any recent corporate announcements. The group declined to comment when asked by The Edge Financial Daily. The latest filings with Bursa Malaysia also show no indication as to what might be driving investors’ interest on the stock.

In April this year, Karambunai announced the Karambunai Integrated Resort City (KIRC) project under the Economic Transformation Programme (ETP). The project, expected to generate a Gross National Income (GNI) contribution of RM9.319 billion, will create around 11,000 jobs by 2020.

The resort development project will be handled by a consortium consisting of Prism Crystal Enterprises Ltd and Karambunai’s major shareholder Chen and group of companies together with the landowners Karambunai and Petaling Tin Bhd.

The group has been loss-making for four financial years in a row.

For FY11 ended March 31, Karambunai incurred a net loss of RM372 million on revenue of RM125.3 million. This was a regression for the company as the year before, its losses amounted RM43 million with revenue of RM139.7 million. Its net assets per share was 34 sen as at June 30, 2011.

This article appeared in The Edge Financial Daily, November 4, 2011.

SC, Bursa probe MAS-AirAsia shares swap

KUALA LUMPUR: The Securities Commission (SC) and Bursa Malaysia are investigating the swap deal between Khazanah Nasional Bhd and Tune Air Sdn Bhd in Malaysian Airline System Bhd (MAS) and AirAsia Bhd shares.

According to Bernama, Deputy Finance Minister Datuk Dr Awang Adek Hussin told the Dewan Rakyat yesterday 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. We need to look into this matter thoroughly,” he said in reply to Wee Choo Keong (Ind-Wangsa Maju).

Wee had asked if the ministry had instructed the regulators to look into allegations of insider trading between MAS and AirAsia and failing to make relevant announcements prior to the swap deal.

The deputy minister stressed that if there is evidence of wrongdoing, the Malaysian Anti-Corruption Commission (MACC) could also be called in to investigate.

Under the swap deal announced in August, Tune Air and Khazanah, major shareholders of AirAsia and MAS, had agreed to swap their shares. After the swap, Tune Air now owns 20.5% equity interest in the national carrier, while Khazanah holds a 10% stake in the low-cost carrier.

The SC and Bursa Malaysia are investigating the share swap deal between Khazanah Nasional Bhd and Tune Air Sdn Bhd in Malaysian Airlines System Bhd and AirAsia Bhd shares to see if there was insider trading, Deputy Finance Minister Datuk Dr Awang Adek Hussin to the Dewan Rakyat yesterday.

The Employees Provident Fund is the common substantial shareholder of the two carriers. The EPF owns 10.2% of AirAsia and 10.44% of MAS.

Apart from the share swap, MAS and AirAsia had also entered into a comprehensive collaboration framework (CCF) to “establish a framework to explore the possibilities of mutual cooperation”.

Under the CCF between MAS, Khazanah has an option to acquire a 10% equity stake in AirAsia X.

AirAsia founder Tan Sri Tony Fernandes, who is also the carrier’s CEO, and deputy CEO Datuk Kamarudin Meranun are now non-independent and non executive directors of MAS.

The swap deal raised many eyebrows. At the time of the announcement in early August, AirAsia stock was trading near its record high of RM4.14 and MAS was near its 10-year trough of below RM1.50.

AirAsia’s share price was the star performer among the regional aviation stocks before the swap was announced. It climbed from RM2.50 in March to a record high of RM4.14 in late July.

MAS succumbed to heavy selling pressure following the announcement of its massive quarterly loss of RM242.3 million for 1QFY11 ended March 31, against a net profit of RM310 million in the previous corresponding period, on slightly lower revenue of RM3.19 billion.

AirAsia closed at RM3.78 yesterday and MAS ended at RM1.41.

This article appeared in The Edge Financial Daily, November 4, 2011.

Goldman Sachs unloading MyEG shares

KUALA LUMPUR: Goldman Sachs has been selling down its stake in MyEG Services Bhd since mid-September, selling over 11 million shares. Prior to the selldown, Goldman Sachs had been acquiring shares in the country’s dominant government-to-consumer e-services provider for the better part of the year.

The US investment bank built up its stake to 47.204 million shares or 7.86% in September, before aggressively paring it down since Sept 20, when it sold 163,400 shares. A number of sales followed later that month and throughout October.

The latest disclosures show it sold six million shares on Oct 27 and 456,100 on Oct 31, paring its stake down to 36.14 million shares or 6.02%, as at end-October.

That suggests Goldman Sachs had sold 11.06 million shares in a period of just over a month.

It isn’t clear who acquired the shares, and the selldown has not depressed MyEG’s share price.

The stock has traded within a tight range of 59 sen and 65.5 sen in the past month. It ended 0.5 sen higher at 62.5 sen on heavy volume of 6.13 million shares yesterday.

This article appeared in The Edge Financial Daily, November 4, 2011.

Lingui posts RM28m 1Q net loss

KUALA LUMPUR: Lingui Developments Bhd posted a net loss of RM28.1 million for 1QFY12 ended Sept 30, compared with a net profit of RM39 million a year earlier. Revenue was up 19% year-on-year to RM435 million.

In its notes to Bursa Malaysia, the timber company attributed the net loss to changes in fair value of biological assets less estimated point-of-sale costs of RM25.9 million, foreign exchange differences amounting to RM15 million, and losses in associates and joint-controlled entities of RM8.6 million.

Lingui also noted that it saw lower sales of its timber products during the quarter.

Lingui sold 186,501 cubic metres of hardwood logs at an average price of RM484 per cu m during the quarter. “Prices for hardwood logs achieved by the group remain stable due to tight log supply and relatively robust demand from India and China,” it said. It also sold 133,188 cu m of softwood logs at RM299 per cu m, and 55,910 cu m of plywood at RM1,902 per cu m.

Lingui posted an operating profit of RM19.5 million in the quarter compared with RM9.6 million a year earlier.

At the company AGM yesterday, managing director Yaw Chee Ming said Lingui is planning to invest RM143 million in FY12 for timber replanting efforts, infrastructure and upgrading of equipment. He said Lingui is looking at replanting 10,000ha to 15,000ha of its Sarawak timber plantation in FY12.

“Our hardwood trees mature between eight and 10 years. We have planted some 30,000ha and hope to replant up to 15,000ha,” he said, adding that replanting costs RM4,000 to RM5,000 per ha.

Lingui chairman Chan Hua Eng (left), Yaw (centre) and director Tan Sri Amirsham A Aziz at the AGM yesterday.

Lingui is planning to invest in and upgrade its machinery to cope with the worker shortage in Indonesia.

On its softwood plantations in New Zealand, Yaw said Lingui plans to increase its harvest to 800,000 cu m per year in the next two to three years, with the upgrading of infrastructure and amenities.

“We are investing between RM8 million and RM12 million to build roads and other infrastructure that will help increase our harvest,” he said. Lingui harvested 520,000 cu m of softwood for FY11.

On its outlook, Yaw said hardwood prices have softened and are expected to maintain at current levels given the stable demand from China and India. “Demand for hardwood from India has been quite stable despite concerns of inflation. Demand from China has remained stable although there was a slight decline,” said Yaw.

He added that plywood prices have already peaked on speculation on the rebuilding in Japan after the March 11 disaster. “The price has eased since. We expect prices to pick up again once the rebuilding in Japan begins and the stock depletes,” said Yaw.

Analysts are expecting the rebuilding in Japan to begin next year, which would increase demand for plywood. Lingui exports 60% of its plywood to Japan.

For FY11, Lingui posted RM191.7 million in net profit on the back of RM1.65 billion in revenue. It has 721,00ha of forest concessions in Sarawak and 35,000ha of forest plantations in New Zealand. It also has an associate stake in Glenealy Plantations (Malaya) Bhd.

Lingui’s stock has fallen 40% in the last six months to a low of RM1.10 before closing at RM1.54 yesterday.

This article appeared in The Edge Financial Daily, November 4, 2011.

Iris in talks with Chinese partners

KUALA LUMPUR: ACE Market-listed Iris Corp Bhd is engaging in preliminary discussions with its Chinese partners with regard to a food waster to fertiliser technology project.

In a reply to a query by Bursa Malaysia on an article in a Chinese daily that the group had formed a consortium to invest in a wastewater treatment plant in China, Iris denied having formed any such consortium nor signed any MoU with regard to the reported project.

“Iris wishes to clarify that it is currently engaging in preliminary discussions with its Chinese partners with regard to a “Food Waste to Fertiliser Technology” project.

“As at the date of this announcement, Iris has not signed any MoU in relation to the said project and will make the appropriate announcement to Bursa on its further development,” said the statement.

The Chinese daily in its article reported Iris had formed a consortium with 65% stake holding in a wastewater treatment plant in China with a 30-year concession and an NPV up to 150 million yuan (approximately RM72.44 million).

It was also reported that Iris Envirowerkz Consortium has signed an MoU with Zizhao Environment Protecting Industry Development Company last week which was witnessed by the Prime Minister Datuk Seri Najib Razak and Deputy International Trade and Industry Minister Datuk Mukhriz Mahathir.

This article appeared in The Edge Financial Daily, November 4, 2011.

GAB eats into rival’s market share

KUALA LUMPUR: Guinness Anchor Bhd (GAB) could have overtaken Carlsberg Brewery Malaysia Bhd with its product, Tiger beer, eating into its competitors’ market share.

“The current market share for Tiger is in the mid-30s [percentage]. I can tell you that Tiger, for the last four years, has been growing more rapidly than the overall market, and therefore increasing its market share,” GAB managing director Charles Ireland said at a press conference yesterday after the brewery’s 47th AGM.

GAB’s other beers with strong performances include its Guinness and Heineken brands.

The group chalked up a nearly 43% growth in net profit to RM55.2 million for 1QFY11 ended Sept 30 from RM38.7 million in the previous corresponding period.

Ireland attributed the growth to various reasons including “excellent brand performers, a really nice mix of products and solid cost control”. He did, however, admitted his group’s gain over GAB’s competitor. “[The growth was] partially at the expense of our competitor. It was a mix of different reasons. We took additional market share,” he said.

Additionally, he said GAB’s change in sales also contributed to the success. “We reduced export duty free volumes this quarter and we saw tremendous [overall] growth, and really good growth in Heineken and Guinness... those brands are good for our mix.”

Ireland says speculative purchases ahead of Budget 2012 led to the sales growth.

Other reasons for the year-on-year growth include Budget 2012 being unveiled earlier than Budget 2011 a year ago. Ireland said speculative purchases ahead of the budget (due to fears of higher taxes) were seen more in first quarter sales than in the second quarter.

While Budget 2012 did not include any hike in sin taxes, Ireland said the group would not be “breathing a big sigh of relief and just thinking that is the end of the conversation for another year”. He said taxes are already very high and Malaysia is currently the second highest country in the world in terms of beer excise duties.

GAB finance director Mahendran Kapuppial said that overall its net profit margin, which was 12.4% in the latest quarter, was “very healthy”. However, he said there are challenges ahead for the group, including commodity prices.

“We have a global tie-up with Asia Pacific Brewery (APB) (GAB’s parent company)... so we ride on those purchases as a synergy to mitigate any increases,” said Mahendran. GAB’s ties with APB provide access to bulk purchases of key ingredients such as aluminium and wheat.

Mahendran said GAB will try to combat future fluctuations in commodity prices by raising prices, which it did in FY11.

“We also do short-term hedging on currencies,” he said.

Ireland said while the group could expect to see a softening demand in the quarters ahead due to high commodity prices, there would be some quarters which could see better margins. Seasonal distortion due to festivities sometimes impacts the group’s margins as much strategic pricing takes place during the period, he explained.

Research houses have varied opinions on GAB’s strong performance.

Maybank Investment Bank Research yesterday raised its recommendation for GAB to a “buy”. “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, we upgrade our call to a “buy” with a marginally higher target price of RM11.50 (from RM11.30) on raised earnings,” it said.

CIMB Research gave GAB a “neutral” recommendation because it said that “there are no near-term catalysts in sight for the group”. However, it added that “the stock’s solid dividend yields of 5% should provide support to its share price”. The report also said even though Budget 2012 did not include an excise duty hike, CIMB Research does not rule out the possibility of an off-budget duty increase next year.

Affin Investment Bank downgraded GAB from “buy” to “add”, taking into account its recent stock price gain. It said since Budget 2012, “GAB’s share price has rebounded strongly by 14% to RM10.74, narrowing the gap to our target price of RM11.92 to less than 15%.”

The stock rose 20 sen or 2% to RM10.94 on volume of 147,300 shares yesterday.

This article appeared in The Edge Financial Daily, November 4, 2011.

Yeo Hiap Seng 3Q net profit doubles

KUALA LUMPUR: Yeo Hiap Seng Bhd’s (YHS) net profit has doubled to RM8.27 million for 3QFY11 ended Sept 30 from RM4.05 million a year earlier.

The beverage manufacturer’s revenue rose 27% to RM147.13 million from RM116.28 million. Earnings per share came in at 5.42 sen against 2.65 sen in the previous corresponding period.

The sharp jump in YHS’ earnings was mainly due to the one-off RM4.11 million gain from liquidation of a subsidiary during the quarter under review.

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

Its sales for Malaysia, Indonesia, and Singapore plus other countries grew year-on-year by 18%, 368% and 8% respectively during the quarter, YHS said.

For the nine-month period ended Sept 30, net profit surged by 363% to RM20.02 million from RM4.32 million a year earlier, while revenue rose by 12% to RM414.86 million from RM370.7 million.

“The improved profitability in the quarter and year-to-date was due to better sales, less bad debts write-off and gain on disposal of machinery,” YHS said.

For the nine-month period, sales from Malaysia accounted for 76.3%, Indonesia 6.3% and Singapore/other countries 17.4%.

“Yeo’s brand sales in Malaysia grew by 12%, Indonesia sales grew by 227% and Singapore/export sales grew by 18%,” YHS said of its year-to-date results.

It is noteworthy that over the past seven years, the earnings that have been achieved so far is YHS’ best cumulative nine months results, in terms of net profit.

YHS has a clean balance sheet that sits on a net cash pile of RM22.8 million with no borrowings.

Shares in YHS closed four sen lower to RM1.71 yesterday, giving it a market capitalisation of RM262.57 million. Its stock has gained 16.3% year-to-date and traded between a 52-week high of 2.04 sen and a low of 1.40 sen.

This article appeared in The Edge Financial Daily, November 4, 2011.

Quill Capita posts 8.3% jump in profits

KUALA LUMPUR: Quill Capita Trust (QCT), which is managed by Quill Capita Management Sdn Bhd (QCM), posted RM9.4 million net profit for its 3QFY11 ended Sept 30. This is an increase of 8.3% from RM8.6 million a year ago due to higher rental income contribution from properties and lower property expenses.

Its revenue also saw a slight increase to RM17.6 million from RM17.3 million in the same period last year while its earnings per unit is at 2.41 sen, up 8.6% from 2.22 sen.

QCT’s year-to-date nine-month net profit stood at RM26.2 million compared with RM25 million in the same consolidated period last year. Revenue also rose by 1.6% to RM52.7 million from RM51.9 million.

“Our active asset management strategies have ensured income stability through securing lease renewals. To date, we have secured renewals as well as signed new tenants for our leases due in 2011.

“Looking ahead, we are confident that despite current market uncertainties, QCT will be able to continue to deliver stable returns to its unit holders in 2011,” said QCM chairman Datuk Mohammed Hussein in a statement to Bursa Malaysia yesterday.

Hussein also said the government’s decision to grant a five-year extension on the concessionary withholding tax rate of 10% on dividends for non-corporate institutions and individual unit holders is expected to aid the development and maintain the attractiveness of the Malaysian REIT industry.

The statement also said QCT has secured commitments for its new commercial paper (CP) of RM118 million to refinance its existing CP of a similar amount, due on Nov 30, 2011, which completes all its financing requirements in 2011 and 2012. This new debt will expire on Sept 5, 2016.

“For the remaining months of the year, QCM will continue to focus on proactive asset management strategies to improve tenant relations and to continue its effort to enhance the quality of its properties.

“QCM will also continue to adopt prudent capital management strategies, as well as to look out for potential yield accretive acquisition opportunities,” noted its announcement to Bursa Malaysia.

This article appeared in The Edge Financial Daily, November 4, 2011.

KKB Engineering — Growing with Score

KKB Engineering Bhd (Nov 3, RM1.72)
Maintain buy with revised fair value of RM2.20 from RM2.83: The presence of KKB plus Samalaju Industrial Park’s attraction to investors given its good basic infrastructure, available water supply and huge capacity to supply electricity at competitive pricing, we expect some sizeable contracts to come KKB’s way in FY12 and FY13.

While we like the company’s solid balance sheet and potential to reap enormous earnings from the Sarawak Corridor of Renewable Energy (Score), we maintain our “buy” recommendation but revise lower our fair value to RM2.20 on incorporating lower earnings arising from the temporary slowdown of contracts flow this year, and on applying a more conservative 8 times price earnings ratio (PER).

Having clinched its first job in Samalaju via a water supply project in Bintulu worth RM196 million as well as the contract to carry out earthworks for OM Materials, KKB is positioned to make its presence felt in Samalaju Industrial Park. As the company has been pre-qualified to construct plants for Tokuyama, Asia Mineral Ltd, OM Materials and Press Metal’s investments in Samalaju, we expect it to secure more sizeable contracts here in the near term.

Phase 1 of the company’s expansion plan involves doubling the fabrication capacity of its new deepriver front yard to 30,000 tonnes per annum. This has just been completed while construction of a jetty to facilitate access to Sungai Sarawak is still in progress. Phases 2 and 3 are scheduled to be completed by 2014. By then, KKB’s earnings would rise to another level, boosted by the additional fabrication capacity and logistics advantage from the deepwater front and jetty

The developments in Score slowed down in 1H to make way for the state elections. Nevertheless, we are seeing a pick-up in contracts flow of late and KKB recently secured some contracts, although these are small. We believe that Score projects will be revived in FY12 given that the construction of most plants in Samalaju will kickstart next year.

We remain positive on KKB’s progress although its share price is down 21% from its 2011 peak in tandem with the market-wide correction. As we like the company’s strong balance sheet and good track record, we maintain our “buy” recommendation. However, we prefer to lower our estimates for the next two years and slash our PER parameter to 8 times from 10 times, for a new fair value of RM2.20. — OSK Research, Nov 3

This article appeared in The Edge Financial Daily, November 4, 2011.

Be prepared for profit taking

We were wrong on October as we had expected the market to retrace towards the lows hit in late September. Instead, global markets rallied on hopes that the European sovereign debt crises could be resolved through loan haircuts and the European Financial Stability Facility (EFSF).

For November, given the previous month’s sharp rally, we expect some pullback in global markets, with Malaysia being no exception. Barring the announcement of a general election, we remain defensive on the Malaysian market and would advocate a “buy” only if the FBM KLCI retraces towards 1,300 points, while we may call a “sell” if the market heads towards 1,533. We are “neutral” for now, with our defensive top 5 “buys” all maintained.

Rebound catches strategists on the wrong foot
October 2011 proved to be one of the best October months ever for global markets as indices in the US and Europe gained over 10% during the month. The rally, which began early in the month, caught most strategists flat-footed as earlier expectations were for a continued market meltdown. The rally was triggered by hopes that European leaders would be able to resolve the sovereign debt crisis.

While there appears to be a resolution in the form of a 50% debt haircut by banks and the agreement to leverage up the EFSF, we still see poor fundamentals in Europe as most countries are still plagued by weak economic growth and budget deficits.

Malaysia is ripe for profit taking
While Asian markets generally rebounded less than their Western counterparts, Malaysia put on a good show by climbing 7.5% in October and came in fourth among its regional peers.

Nonetheless, as with global markets, we feel the October rally was overdone and there is a strong possibility that markets worldwide may pull back somewhat in November, especially given that there are still concerns on Europe.

On the local front, the 3QFY11 results season may see some construction companies carry out kitchen-sinking exercises while plantation companies may post reduced profit on lower crude palm oil (CPO) prices.

While we continue to remain “neutral” on the market for now, we take note of the volatility and highlight the levels which are good for trading. If the market were to drop towards 1,300 points, there would be increased upside to our 1,466 fair value for 2012 and we would advocate a “buy into weakness” strategy.

On the other hand, as the market rises towards our 1,533-point projected market high, there may be increasing risk of a retracement, in which case we would advocate a “sell into strength” strategy.

While October’s top buys disappointed — apart from AirAsia Bhd — we retain all five companies for November given the strong risk of a market pullback after the sharp rally in October. We also expect all five companies to post decent enough results.

Best October since 1987?
The rebound caught strategists on the wrong foot. While the FBM KLCI hit its low towards the end of September, many other markets around the world hit bottom in early October. In fact, there was much doom and gloom surrounding world markets, with many forecasting that markets would continue to fall to new lows in the month.

The month did indeed start off badly but with expectations running high that a resolution to Greece’s sovereign debt would be reached in Europe on Oct 26, markets began to rally in the first week of October itself. With US economic data coming in surprisingly strong with 2.5% GDP growth in 3Q and the US corporate results season still looking positive, optimism of an early resolution to Europe’s problems saw markets rallying globally.

In fact, October was the best month ever in terms of percentage gains and point gains for both the Dow Jones Industrial Average and the S&P 500 indices, which jumped more than 11% each. The rally in Europe was also just as strong as the DAX rose more than 13% during the month.

While it does appear as if Greece is not about to default in the short term after banks agreed to a 50% haircut and the EFSF was geared up to €1 trillion (RM4.3 trillion), the longer-term problems of anaemic growth and budget deficits continue to plague Europe.

Asian markets’ rebound less strong
While Asia’s markets were the hardest hit in September, they still rebounded less in October, with many of the markets only seeing single-digit rebounds during the month compared with the double-digit gains in Europe and the US.

Of course, Asia’s fundamentals were not that great, as floods inundated Thailand and Indochina, typhoons hit the Philippines and a fire broke out at an oil refinery in Singapore at the end of September.

Leading the rebound was Hong Kong, with total returns of 12.95%, followed by the Philippines at 8.4% and South Korea at 7.9%. Laggards were Japan (+3.3%), China (4.6%) and Taiwan (+5.1%). Year-to-date performances saw the Philippines still in the lead with a total return of 6.5% followed by Indonesia at 4.4%.

Our call for continued weakness in the Malaysian market in October proved incorrect as it actually outperformed most of its regional peers, especially towards the end of the month.

While its peers slipped towards month-end, the FBM KLCI continued to charge ahead right up till the end of the month. In terms of the major news during the month, the most significant was the unveiling of Budget 2012 on Oct 7.

While lacking in cheer for the middle class or the broader market, the budget was perceived to be an election budget as it gave a number of goodies to the poor, including one-off cash handouts, the abolishment of school fees, civil servants’ pay hike and the continuation of subsidies.

Of course, the question remains whether all of these goodies can be sustained in the long run given the continued deficit but the focus of Budget 2012 may have been somewhat shorter term in nature. Also, the impact of Thai floods on Malaysian companies, both good and bad effects, was the focus of much of the month, given the severity of the Thai floods.

Cyclicals bounce back
Smaller cyclical stocks in the finance, oil and gas, construction and property sectors rebounded the most during the month as expected after their severe beating in previous months. However, property counters were also the worst hit, with names such as S P Setia Bhd and KLCC Property Holdings Bhd among the top 20 losers. Also losers were Proton Holdings Bhd and UMW Corp Bhd on fears the Thai floods would impact their operations given the large number of autoparts companies hit by the floods.

As mentioned, after their severe selldown in the past months, small caps saw a strong rebound in October as investors traded and looked for value.

For October, our advice that it was probably too late to sell proved correct given the market rally. Even among our calls, despite our continued “neutral” call on the overall market, value emerged for a number of stocks given the selldown in the previous two months. As such, we had more upgrades than downgrades in our earnings universe.

Outlook: Beware of profit taking
The market has indeed been volatile. Global equity markets including the FBM KLCI have been swinging wildly since the start of August, with the index going through a 386-point swing from Aug 1 through its closing low of 1,332 points on Sept 26 before rebounding to current levels.

While our calls were perfect at that time, we would at least like to think these have provided investors some form of correct guidance. We had downgraded the Malaysian market to a “neutral” on Aug 8 when the FBM KLCI was at 1,524 points. On Sept 26, while still feeling that the FBM KLCI had room to fall further, we recommended that investors not fear a recession but instead begin to “bottom nibble”, although we had mistakenly not called for aggressive “bottom fishing”.

Our call is still “buy” at 1,300, “sell” at 1,533 points. Over the past three months, given the market volatility, we have often been asked what the market’s entry and exit levels should be. Our advice has been to “buy” when the FBM KLCI fell below 1,300 points and to “sell” when it broke above the 1,533. We retain this piece of advice going forward. Nonetheless, we caution that these figures are not cast in stone and that investors may consider “buying on weakness” as the market approaches 1,300, and “selling on strength” as the market climbs towards 1,533.

The significance of these levels
Our 1,466-point fair value for the FBM KLCI in 2012 is derived from:

• 11.4% FBM KLCI corporate earnings growth in 2012
• Application of a 13.5 times price earnings ratio (PER) on the FBM KLCI earnings per share (EPS)
• Our expectations are that earnings growth could be cut to 5% in 2012 which would imply a PER of 14.5 times, below historical average PER of 16.5 times

Our 1,533-point “sell” trigger level is derived from:
• 2011 year-end target for FBM KLCI or expected high
• Half way point between 2011 fair value of 1,605 and 2012 fair value of 1,466 points
• Slightly above the FBM KLCI level when we downgraded our call

Our 1,300-point “buy” trigger level is derived from:
• 13% upside to our 2012 FBM KLCI fair value of 1,466 points
• Equivalent to a PER of 12 times based on current earnings growth projections

Despite the wild swings in the FBM KLCI, we retain our “neutral” view on the market and maintain our top 10 defensive “buys”. This is because we are not positive on the fundamental outlook. Despite the potential resolution of the sovereign debt crisis in Europe, we continue to see the whole continent remaining in a difficult position between the flagging economic growth that should require stimulus and budget deficits that have required the cutting in spending.

As such, we feel that there is still a risk of recession in Europe. While the US is not in such bad shape, there still appears to be a lack of catalysts to truly spur growth going forward.

While some have called for a major selldown on the market, we are not that negative either. We see Malaysia still avoiding a recession with the Economic Transformation Programme, if it truly kicks off in a major manner in 2012 to help spur domestic growth through infrastructure spending. Also, Asia as a whole should be able to still avoid a recession. Finally, there is still room for the general election to provide some short-term trading opportunities.

Remain defensive and beware of profit taking
Looking at the performance of our top 10 defensive “buys” since Aug 6, six out of 10 have outperformed the FBM KLCI and we continue advocating them. For November, given that the markets have rallied so strongly in October and broke above our 2012 fair value, we advocate a cautious stance as profit taking might set in.

Top “buys” maintained
Our October “top buy” call was a washout. As we had expected the market to turn south in October, we had maintained our top 5 defensive buys during the month. Unfortunately all except AirAsia disappointed given the market’s rebound.

However, since we expect profit taking to set in for November, we are maintaining the same defensive stock list of Axiata Group Bhd, Petronas Gas Bhd, Telekom Malaysia Bhd, AirAsia and KPJ Healthcare Bhd. We expect these five companies to report relatively resilient earnings as well during the 3Q11 results reporting season.

This article appeared in The Edge Financial Daily, November 4, 2011.

Market Commentary

The FBM KLCI index gained 15.14 points or 1.04% on Friday. The Finance Index increased 1.02% to 13284.84 points, the Properties Index up 1.23% to 952.63 points and the Plantation Index rose 1.01% to 7546.89 points. The market traded within a range of 9.42 points between an intra-day high of 1477.51 and a low of 1468.09 during the session.

Actively traded stocks include KBUNAI, HARVEST-WA, HARVEST, SANICHI, PALETTE, SAAG, ENVAIR, SYSTECH, IPOWER and FOCUS. Trading volume increased to 2302.61 mil shares worth RM1512.49 mil as compared to Thursday’s 1755.13 mil shares worth RM1140.07 mil.

Leading Movers were GENTING (+44 sen to RM10.80), CIMB (+17 sen to RM7.36), TENAGA (+16 sen to RM5.88), IOICORP (+13 sen to RM5.21) and DIGI (+82 sen to RM33.30). Lagging Movers were KLK (-14 sen to RM21.00), AXIATA (-1 sen to RM4.79) and GAM (-3 sen to RM3.36)). Market breadth was positive with 591 gainers as compared to 194 losers.-- JF Apex Securities Bhd

Parkson lowers FY12/FY14 profit forecasts post PRA listing

Parkson Holdings Bhd (Nov 3, RM 5.58)
Maintain buy with lower target price RM7.15 from RM7.97: Parkson Retail Asia (PRA) was listed on the Main Board of the Singapore Stock Exchange (SGX) yesterday.

Details of the IPO are as follows: (i) Issuance of 80 million new PRA shares and 67 million existing PRA shares under the offer for sale programme (total: 147 million shares) at a price of S$0.94 per share. The over-allotment option of 22 million shares has also been subscribed/purchased, bringing the total number of offered PRA shares to 169 million; (ii) Overall, the IPO will raise S$158.9 million (RM391.2 million), while the offer price values PRA at S$636.7 million (based on an enlarged share base of 677.3 million shares). We estimate that Parkson Holdings Bhd’s (PHB) share of the IPO proceeds amount to S$77.5 million.

Our calculations imply that prior to the listing, the market was pricing PRA at a mere 6.3 times CY12 price earnings ratio, far below PHB’s CY12 PER of 13.5 times and and Parkson Retail Group’s (PRG) 17.2 times.

Based on: (i) our CY12 net profit forecast of S$44 million; and (ii) PRA’s IPO price of S$0.94 per share, PRA is valued at a much higher CY12 PER of 14.4 times. This is, in our opinion, a fairer valuation given PRA’s exposure to the growing regional consumer market. In 2012, PRA will be launching two new stores in Vietnam, three in Malaysia and two to three new stores in Indonesia.

We ascribe a PER target of 16 times for PRA, representing a 19% premium to PHB’s CY12 PER of 13.5 times. We believe the premium is justified, given PRA’s regional presence and strong Asean growth opportunities, particularly within Indonesia and Vietnam and the present investment holding company status of PHB.

Coupled with: (i) the stake dilution in PRA from 90.1% to 67%; (ii) a lower PER target of 23 times (previously, 25 times) for PRG, to reflect the weaker global market sentiment; (iii) a higher holding company discount of 20% (previously, 10%) and; (iv) raising our net cash balance, our sum-of-parts-based target price of RM7.97 is lowered to RM7.15.

Despite the downgrade, there is still 30% upside to the current share price of RM5.50. Maintain “buy” on PHB, for its exposure to both PRG and PRA. — Affin Investment Research, Nov 3

This article appeared in The Edge Financial Daily, November 4, 2011.

Mah Sing enhancing franchise value of Icon City

Mah Sing Group Bhd (Nov 3, RM 1.99)
Maintain hold with target price RM1.76: The potential joint venture (JV) with Thailand’s largest retail developer Central Pattana to develop and manage the shopping mall in Icon City, Petaling Jaya, should enhance the marketability of the RM3.2 billion project.

We make no change to our earnings forecasts and RM1.76 target price (based on 40% discount to RM2.94 revised net asset value). We maintain a “hold” on Mah Sing Group in anticipation of slower property sales going forward with the peaking of the property cycle.

Mah Sing has entered into a memorandum of understanding with Central Pattana Public Co Ltd to study the possibility of jointly developing and managing the more than one million sq ft retail mall in Mah Sing’s Icon City project (comprising retail lots, hotel, retail mall, offices, and serviced apartments).

Central Pattana is a property development and management company that specialises in developing shopping centres, office towers and related real estate projects in Thailand. It is the largest retail developer in Thailand with 16 shopping centres, six office buildings, two hotels and two residential projects in Thailand, including Central Plaza, Central World and Central Festival.

It the JV materialises, will add vibrancy to and enhance the marketability of Icon City. The potential JV will also allow Mah Sing to tap its partner’s expertise in managing commercial properties, complementing its existing development businesses. Mah Sing has not decided if Icon City shopping mall will be kept as investment property or outright sales.

Icon City has received strong take-ups since its July 2011 launch. Its i-SoVo (SoHo; RM800 to RM900 psf; 751sq ft and 1,094 sq ft) and 30 jewels (seven to eight- storey shops fronting main road; RM780 psf) experienced brisk sales with 96% to 97% take-up. Its Gourmet street (F&B shop lots; RM1,200 psf; launched in July) take-up is about 40%. The recent soft launch of its Phase 1a serviced apartments also received strong response.

All 120 serviced apartments (RM940 psf) are booked. — Maybank IB Research, Nov 3

This article appeared in The Edge Financial Daily, November 4, 2011.

No surprise from CMMT, Axis REIT

CapitaMalls Malaysia Trust (CMMT) was among the first real estate investment trusts (REIT) to report 3Q11 earnings. The trust continues to fare well, with distributable income for the year to date slightly ahead of the forecast made in its prospectus for listing back in July 2010.

Gross revenue totalled RM57.8 million in the latest 3Q11, including contributions from the extension of Gurney Plaza. Acquisition of the latter was completed at end-March this year. Income available for distribution for the quarter stood at RM29.8 million, bringing the total for the year to date to RM85.6 million.

Contributions from all three shopping malls in CMMT’s portfolio were steady. Occupancy ranged from 98.4% for Sungei Wang Plaza to 98.6% for Gurney Plaza and 99% for The Mines. The average occupancy in 3Q11 stood at 98.7%, not varying much from the 98.7% to 99.1% recorded in 1Q11 to 2Q11 respectively. The trust also maintained positive rental reversion of about 6.7% for leases renewed so far this year.

Gross yield for CMMT estimated at 6%
At the current pace, CMMT is on track for our estimated income distribution totalling roughly 7.85 sen per unit for the year, of which 3.9 sen per unit has already been paid earlier. CMMT will trade ex-entitlement for another distribution of 2.83 sen per unit on Nov 8. The total distribution translates into a gross yield of about 6% at the prevailing unit price of RM1.31 — a fairly attractive return compared with prevailing bank deposit rates.

Earnings for REITs are fairly defensive, although they are still exposed to economic cycles to varying degrees depending in part on the type of properties (and their locations) in the portfolio. For instance, well-managed shopping malls carry relatively lower risks, compared with say, the commercial office market, which may suffer on forecasts of excess supply. Consumer spending, on the other hand, is expected to stay quite resilient.

CMMT is managed by a joint-venture company between CapitaMalls Asia, which is listed on the Singapore Stock Exchange and one of Asia’s largest shopping mall developers, owners and managers, and Malaysian Industrial Development Finance Bhd.

Premium for size and liquidity
The trust’s three investment properties — with net lettable area of more than two million square feet — are valued at RM2.43 billion. Its book value stood at RM1.06 per unit (after taking into account the as yet unpaid income distribution for 3Q11). Thus, at the current price, CMMT is trading at more than 1.2 times book value.

We believe this premium is attributable in part to its relative size and liquidity. It is the largest listed retail-focused REIT on the local bourse with assets and market capitalisation that are second only to Sunway REIT.

CMMT is in the midst of acquiring the East Coast Mall in Kuantan for RM330 million. The acquisition is slated for completion by end-2011. The four-storey mall with net lettable area of about 440,000 sq ft was completed in 2008 and currently has occupancy of about 97%. The acquisition will be funded by the issuance of 262 million new units priced at RM1.26 each.

We forecast that CMMT will be able to maintain income distribution at roughly 7.9 sen per unit in 2012, assuming a 100% payout based on our forecast earnings and enlarged units in circulation.

Axis continues to expand portfolio
Axis REIT, on the other hand, has a slightly more diversified portfolio of assets with properties in the office, logistics and retail warehouses as well as office/light industrial segments.

Axis has been among the most active REITs in terms of expanding its portfolio. From the initial five properties (on its listing back in August 2005), its portfolio now consists of 27 properties valued at a combined RM1.26 billion with an average occupancy of 96.8% in 3Q11.

A total of five properties were acquired in 2010, including two logistics warehouses in Seberang Prai, Tesco Hypermarket in Johor, Axis PDI Centre and Axis Technology Centre.

For the current year, Axis completed the acquisitions of a logistics warehouse in Johor and an office building in Cyberjaya for RM81.3 million and disposed of the Axis North Port Logistics Centre for RM14.5 million.

It is currently in the midst of finalising the purchase of another logistics warehouse in Seberang Prai valued at RM59 million as well as a sale and leaseback of a three-storey office block and logistics warehouse from DHL Properties for RM48.5 million. With several other properties under assessment, we expect the trust will stick to its strategy of expanding portfolio in the foreseeable future.

Following the recent acquisitions, gearing has risen to 38.2% as at end-September, up from about 31.3% since its last placement exercise in 3Q10. To bolster its balance sheet and fund future purchases, Axis is planning to issue up to 75.2 million new units.

Gross yield estimated at 6.5%
We estimate income distribution to total roughly 17.2 sen per unit for the current year based on 100% payout, of which 13 sen has already been paid in the last three quarters. That translates into a gross yield of roughly 6.5% at the prevailing unit price of RM2.63. Axis is currently trading at about 1.34 times its book value of RM1.96 as at end-September.

Note: This report is brought to you by Asia Analytica Sdn Bhd, a licensed investment adviser. Please exercise your own judgment or seek professional advice for your specific investment needs. We are not responsible for your investment decisions. Our shareholders, directors and employees may have positions in any of the stocks mentioned.

This article appeared in The Edge Financial Daily, November 4, 2011.

Glenealy Plantations still a bargain

Glenealy Plantations (Malaya) Bhd (Nov 3, RM5.80)
Maintain buy with fair value RM7.25: Glenealy registered strong year-on-year (y-o-y) growth both at the top and bottom line, although this performance was slightly weaker on a sequential basis amid declining crude palm oil prices and fresh fruit bunch (FFB) production.

The company’s earnings and production came in within expectations, with FFB production rising by a healthy 12.8% y-o-y. The stock remains cheap, especially in terms of enterprise value (EV) per planted ha, being the least expensive among plantation companies within our coverage from this viewpoint. Maintain “buy” with a fair value of RM7.25.

Glenealy’s 1QFY12 earnings made up 27.3% of our full-year FY12 forecast, soaring by 156.5% y-o-y but rising at a softer 1% sequentially. Revenue surged 68.2% y-o-y but declined by 6.7% quarter-on-quarter (q-o-q) despite the positive sequential CPO sales volume growth as the company’s realised prices fell 6.7%.

As FFB production had historically skewed towards 1HFY12, our expectations of CPO prices weakening in 2HFY12 should see Glenealy’s earnings in the second half account for less than half of our full-year earnings estimates. Our current projected FY12 average CPO price is RM2,950 per tonne, lower than the RM3,107 achieved so far.

Glenealy’s FFB production slipped 2.9% q-o-q after experiencing a strong 20.1% sequential growth in the previous quarter. Nonetheless, production rose 12.8% on a y-o-y basis, which is in line with our 10.9% growth estimate.

Even though production is entering a traditional upcycle, the q-o-q decline may have been partly due to the month of Ramadan in August, during which the availability of labour for harvesting was somewhat affected. Some 60% of the company’s FFB comes from Sabah, where production could have been hit by the tail-end effects of the drought in 1QCY10.

We are keeping our FY12 and FY13 forecasts unchanged. Glenealy’s share price has been well supported despite the current economic headwinds, partially owing to its low beta and dry trading volume. Along with its strong balance sheet and cheap EV per planted ha of US$5,800 (RM18,270), we maintain our “buy” call, with a fair value of RM7.25, based on 12 times FY12 price-earnings ratio. — OSK Research, Nov 3

This article appeared in The Edge Financial Daily, November 4, 2011.

Malaysia chip sector to gain from Thai flood

Malaysia's semiconductor industry will likely gain from the continuous floods in Thailand, a research house said today.

MIDF Research, in its research note, said the redirection of demand from Thailand towards Malaysia's semiconductor players from Thailand may have a positive impact on the industry.

"This may give a boost to the sector in the short term, but possible slack in global demand continues to be a worry. Additionally, the upside will be limited due to the time needed for qualification of new products," it said here today.

The research house said it remains 'neutral' on the semiconductor sector. While several industry indicators are pointing towards lowering demand towards the end of 2011 and into 2012, there remain ares of growth such as smartphone and tablets that will moderate the impact, it added.

According to a recent news report, Nielsen Malaysia said a study showed that tablet computer and smartphone markets are set to increase exponentially by the middle of 2012, with tablet ownership reaching 75 per cent of digital consumers from 18 per cent currently, and smartphones rising to 89 per cent from 48 per cent. -- Bernama

F&N Q4 profit tumbles to RM66.2m

Fraser and Neave Holdings Bhd, a Malaysian beverage maker, said profit in the fourth quarter ended Sep. 30 fell to RM66.2 million from RM462.3 million a year earlier, according to a company statement in Kuala Lumpur today. -- Bloomberg

KL shares close higher

Shares of the following companies had unusual moves in Malaysia trading. Stock symbols are in parentheses and prices are as of the close in Kuala Lumpur.

The FTSE Bursa Malaysia KLCI Index rose 1 per cent to 1,477.51, snapping a three-day drop. The gauge slid 0.3 per cent this week. The market will be shut on Nov. 7 for a public holiday.

ARK Resources Bhd, a builder, surged 55 per cent to 52 sen, its steepest gain since June 2, after it said it has completed a restructuring and restored its finances.

Lingui Developments Bhd, a timber, plantations and property group, dropped 7.1 per cent to RM1.43, the most since May 25, 2010, after reporting a RM28.1 million first-quarter loss.

Malaysian Marine and Heavy Engineering Holdings Bhd, the rig-building arm of MISC Bhd, rose 2 per cent to RM6.09. The company signed a RM1.4 billion contract to install an offshore platform deck with bridges for ExxonMobil Exploration and Production Malaysia Inc, it said in a statement. MISC added 3.1 per cent to RM6.89.

Yeo Hiap Seng (Malaysia) Bhd, a beverage maker, jumped 4.7 per cent to RM1.79, its biggest increase since Aug. 15. Third-quarter profit doubled from a year earlier to RM8.27 million, it said in a statement.

Genting Bhd, a casino and plantations group, added 4.3 per cent to RM10.80, the highest close since Aug. 3. Indonesia has approved a development plan for the Ande-Ande Lumut oil field operated by unit of Genting, according to Energy and Mineral Resources Minister Jero Wacik.

Tomypak Holdings Bhd, a plastic packaging company, advanced 3.2 per cent to 98 sen, its highest close since July 27, after third-quarter profit rose to RM3.4 million, from RM3.03 million a year earlier. -- Bloomberg

Harvest Court queried on sharp price hike

Bursa Malaysia Securities Bhd today issued an Unusual Market Activity (UMA) query on Harvest Court Industries Bhd (Harvest), following a sharp increase in the price and high volume of the company's securities recently.

As at 3.22pm, Harvest's share price had gone up by 28.91 per cent or 18.5 sen to 82.5 sen from 64 sen. The volume traded was 736,178 units.

In a statement today, Bursa Malaysia said the UMA query has been posted on its website,, under the classification of "Listing Circular".

Bursa Malaysia also advised investors to take note of the company's reply to the UMA query, which will be posted on Bursa's website under company announcements. -- Bernama

Sunway not in talks with Sime on Iskandar job

Sunway Bhd today said it is not involved in any discussion with conglomerate Sime Darby Bhd to jointly develop townships in
Iskandar Malaysia, Johor.

Nevertheless, as a leading property and construction company, Sunway said it is constantly on the lookout for property development opportunities locally and abroad.

"We will keep our shareholders appropriately notified through timely announcements made to Bursa Malaysia Securities Bhd," it said in its filing to the exchange in Kuala Lumpur.

It was Bernama reported yesterday that the two companies were likely to jointly develop townships in Iskandar Malaysia.

Quoting industry sources, the report said the government was allocating land for the joint development and that the companies were buying the concession land for a good price.

The sources said it was also understood that both companies would sign a memorandum of understanding in the next few weeks, and that such a collaboration between government-linked companies (GLCs) and the private sector was best for Malaysia's future development.

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.

Joint development between GLCs and the private sector was also stressed by Deputy Prime Minister Tan Sri Muhyiddin Yassin in building a sustainable and inclusive economy and drive Malaysia towards developed nation status by 2020. -- Bernama

Lingui falls after 1Q net loss of RM28m

KUALA LUMPUR (Nov 4): Shares of Lingui Developments Bhd fell on Friday after the timber-based company reported net loss of RM28.06 million in the first quarter ended Sept 30, 2011.

At 3.28pm, it was down 11 sen to RM1.43 with 1.99 million shares done.

The FBM KLCI rose 8.52 points to 1,470.89. Turnover was 1.81 billion shares valued at RM962.08 million. There were 548 gainers, 169 losers and 224 stocks unchanged.

Lingui had on Thursday it registered an operating profit of RM19.46 million compared with RM9.59 million a year ago.

However, it made a net loss of RM28.06 million versus net profit of RM39 million a year ago as it was adversely affected by losses in fair value of biological assets.

Lingui 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.

Sunway not in Iskandar Devt township talks with Sime

KUALA LUMPUR (Nov 4): Sunway Bhd has clarified that it is not involved in any discussions with Sime Darby Bhd for a joint development of a township in Iskandar Malaysia.

It said on Friday that as a leading property and CONSTRUCTION [] company, it was constantly on the lookout for property development opportunities both locally and abroad.

Sunway issued the statement to Bursa Malaysia to clarify an article on on Nov 3 that both parties would jointly develop Iskandar Malaysia.

OSK maintains 'neutral' call on steel stocks

OSK Research is cutting its fair value for steel firms across the board, citing their below average outlook amid the volatile market as a factor.

The steel stocks are currently offering limited price upside, the research house said, adding that it has placed a "neutral" call on most counters, except Perwaja Holdings Bhd and Kinsteel Bhd.

For Perwaja and Kinsteel, it has maintained its 10 per cent discounted cash flow valuation for the potential iron ore mine as well as "buy" and "trading buy" recommendations, respectively.

Although no official agreement has been signed to date, Menteri Besar of Terengganu was reported to be ready to consent to Perwaja’s application to mine ore in Bukit Besi.

OSK said the sluggishness in the economy also suggested that its earlier anticipated mergers and acquisitions in the sector might now take longer to materialise.

News that Lion Group is liquidating its steel assets has dragged on following a series of negative developments in the European Union and United States, it said.

"Although negotiations are ongoing and there are at least four interested buyers, we suspect the conclusion of such deal may be delayed as buyers may take up their time in bargaining for better pricing amid a weak economic backdrop," OSK said.

OSK also said that the possibility of the Lim family selling 10 - 15 per cent stake in Ann Joo is fading as the share price has fallen too far from the ideal price tag.

The research house is also generally bearish on steel demand, which may potentially be dampened by a weak economic outlook but believes that Asia’s steel market may hold up better than in other parts of the world.

On the local front, various government mega projects to be rolled out under the Economic Transformation Programme will boost the country’s steel requirements, particularly long steel products.

OSK also foresees the Mass Rail Transit (MRT) and the 100-storey Warisan Merdeka as the two projects that may substantially spur steel demand. -- Bernama

KL shares higher at mid-afternoon

Share prices on Bursa Malaysia were higher at mid-afternoon, backed by buying interest from fund managers, dealers said.

At 3.20pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) was 9.45 points higher at 1,471.82 after opening 8.48 points higher at 1,470.85.

Gainers led losers 548 to 162 while 223 counters were unchanged, 539 untraded and 21 others suspended. Volume stood at 1.8 billion shares worth RM930.22 million.

The Finance Index rose 80.61 points to 13,231.66 and the Plantation Index added 18.08 points to 7,489.39 while the Industrial Index gained 14.07 points to 2,692.77.

The FBM Emas Index advanced 72.35 points to 10,043.63, the FBM Mid 70 Index surged 93.89 points to 10,843.55 and the FBM Ace Index jumped 178.84 points to 4,223.47.

Among active stocks, Karambunai added 2.5 sen to 21.5 sen, Harvest-Wa rose 14.5 sen to 73 sen and Sanichi rose 3.5 sen to 8.5 sen.

As for the bluechips, Maybank gained one sen to RM8.23, CIMB added nine sen to RM7.28 and Sime Darby earned three sen to RM8.79. -- Bernama

Malaysia CPO stockpiles may climb 4.2%

Palm oil stockpiles in Malaysia probably rose to 2.21 million metric tons in October, gaining to the highest level in almost two years and nearing a record, as output beat exports, according to a Bloomberg News survey.

Inventories in the second-largest grower climbed 4.2 percent from 2.12 million tons in September, according to the median estimate in the survey of three analysts and two plantation companies this week. Stockpiles were 1.8 million tons a year earlier, according to the Malaysian Palm Oil Board, which is scheduled to publish the official estimates on Nov. 10.

Rising reserves may weigh on prices that lost 24 percent from a 35-month high in February, while curbing profits at producers including Sime Darby Bhd. and PT Astra Agro Lestari. Cheaper edible oil may further cut global food costs that fell 4 percent last month, according to a United Nations gauge.

This “may bring prices down,” Arhnue Tan, a senior analyst at ECM Libra Financial Group Bhd., said by phone from Kuala Lumpur yesterday. “Anything close to 2.2 million tons is near historical highs,” she said.

Palm oil for January delivery gained 0.8 percent to RM3,001 (US$961) per ton on the Malaysia Derivatives Exchange at 12:05 p.m. in Kuala Lumpur. So far this year, most-active prices have lost 21 percent on increased production.

The forecast figure for October’s stockpiles would be the highest since December 2009, when they totaled 2.24 million tons. Inventories reached a record 2.27 million tons in November 2008, according to data from the board on Bloomberg that runs to 1989. -- Bloomberg

Flash: Bursa Securities queries Harvest Courts over price surge, volume

KUALA LUMPUR (Nov 4): Bursa Malaysia Securities Bhd has queried Harvest Courts Industries Bhd over the unusual market activity regarding its shares and warrants.

“We draw your attention to the sharp increase in price and high volume of your company’s securities recently,” it said on Friday.

Bursa Securities advised investors to take note of the company’s reply to the unusual market activity query which would be posted on the stock exchange website under the company announcements.

At 2.54pm, Harvest-WA was up 17.5 sen to 76 sen with 78 million units done while the shares added 19.5 sen to 83.5 sen with 70 million shares transacted.

Sunway not in talks with Sime on Iskandar job

Sunway Bhd today said it is not involved in any discussion with conglomerate Sime Darby Bhd to jointly develop townships in Iskandar Malaysia, Johor.

Nevertheless, as a leading property and construction company, Sunway said it is constantly on the lookout for property development opportunities locally and abroad.

"We will keep our shareholders appropriately notified through timely announcements made to Bursa Malaysia Securities Bhd," it said in its filing to the exchange in Kuala Lumpur.

It was Bernama reported yesterday that the two companies were likely to jointly develop townships in Iskandar Malaysia.

Quoting industry sources, the report said the government was allocating land for the joint development and that the companies were buying the concession land for a good price.

The sources said it was also understood that both companies would sign a memorandum of understanding in the next few weeks, and that such a collaboration between government-linked companies (GLCs) and the private sector was best for Malaysia's future development.

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.

Joint development between GLCs and the private sector was also stressed by Deputy Prime Minister Tan Sri Muhyiddin Yassin in building a sustainable and inclusive economy and drive Malaysia towards developed nation status by 2020. -- Bernama

Market snaps 3-day losses, boost from DiGi, Genting

KUALA LUMPUR (Nov 4): The local stock market was broadly higher at midday on Friday, following encouraging regional bourses while September’s stronger exports should bolster buying sentiment in the meantime. DiGi and Genting were among the major gainers.

At 12.30pm, the FBM KLCI was up 8.09 points to 1,470.46, snapping its three straight days of losses following the Greek debt rescue impasse. Turnover was 1.43 billion shares valued at RM673.89 million. Advancing counters beat decliners 524 to 126 while 200 stocks were unchanged.

Among the regional markets, Japan’s Nikkei 225 rose 1.42% to 6,762.94, Hong Konmg’s Hang Seng Index surged 3.31% to 19,880.34, Taiwan’s Taiex 2.09% to 7,615.90 and South Korea’s Kospi 2.89% to 1,924.76 while Singapore’s Straits Times Index advanced 1.6% to 2,855.

Reuters reported that Asian shares rose more than 2% and the euro steadied on Friday on hopes Greece will abandon a proposed referendum on a European Union bailout, but investors remained cautious over a confidence vote scheduled for later in the Greek parliament.

In Malaysia, September’s exports hit RM58.68 billion, up 16.6% from a year ago. Almost all major sectors recorded increases in exports in September. Total exports in September rose RM8.36 billion, of which 50% was from the manufactured exports.

DiGi was the top gainer, up 68 sen to RM33.16, Genting 26 sen to RM10.26, RHB Cap 16 sen to RM7.45 and Tasek 14 sen to RM7.84.

ARK Resources jumped after it was lifted from the Practice Note 17 classification. Its shares rose 19 sen to 52.5 sen and the warrants 16 sen to 36 sen.

Among the decliners were Lingui, down 11 sen to RM1.43 after posting losses. PLANTATION []s stocks fell, with KLK and BLD Plantations down 10 sen each to RM21.04 and RM6.60 while IJM Plantations gave up five sen to RM2.63.

CIDB seeks tax cuts for heavy machinery

The Construction Industry Development Board (CIDB) is negotiating with the Treasury on possible tax cuts for heavy machinery used in the construction industry, a move which will further boost efficiency in the sector.

Its chief executive Datuk Seri Dr Judin Abdul Karim said the move would also help the industry in lessening its dependency on foreign workers who number two million to date.

"We are discussing with the Finance Ministry on how we can reduce the tax for heavy equipment. Under the Economic Transformation Programme (ETP), one area of transformation we are looking at is the (construction) industry to move towards more mechanisation," he told reporters after an MoU signing.

Currently, the tax on heavy equipment is considered high in the region, with more than 20 per cent as opposed to other Asean countries. Singapore imposes only five per cent tax.

"We hope to get results by February, so we can announce it at the International Construction Week (ICW) 2012," he said.

On the industry outlook for next year, Dr Judin said the outlook would be bullish for the industry, driven by the steady momentum from implementation of entry point projects (EPPs) under the ETP.

He said the growth would also be driven from Sabah's oil and gas projects and Sarawak's energy projects.

"We are looking at about RM92 billion worth of projects next year as compared with RM85 billion expected this year," he said.

Earlier, Dr Judin signed a memorandum of understanding with AMB Exhibitions, a smart partnership which will see AMB as CIDB's official international construction exhibition co-organiser for ICW 2012.

ICW 2012, to be held at Kuala Lumpur Convention Centre, is expected to gather some 250 local and foreign exhibitors from 23 countries.

The event, which will provide latest outlook and potential projects locally and abroad for industry players, will be held from February 13 to 17 next year. -- Bernama

Malaysia's exports rise 16.6pc, beats forecast

Malaysia’s exports grew at the fastest pace in more than a year in September on higher sales of electronics and commodities, an acceleration that may ease as a weakening global economy curbs demand for goods.

Overseas shipments climbed 16.6 per cent to RM58.68 billion (US$18.8 billion) from a year earlier after gaining 10.9 per cent in August, according to a trade ministry statement today. The median estimate of 18 economists in a Bloomberg News survey was for a 12.1 per cent gain.

The pick-up in exports may be short-lived as Europe’s debt crisis and a faltering US recovery hurt demand for Asian goods, raising dangers for regional growth and prompting central banks from Australia to Indonesia to cut interest rates. The worst floods in almost 70 years in neighbouring Thailand have also led to supply disruptions for companies including Apple Inc and Toyota Motor Corp.

“Trade growth has remained healthy despite volatile global sentiment and market turmoil,” Daniel Wilson, an analyst at Australia & New Zealand Banking Group Ltd in Singapore, said before the report. “Looking ahead, supply chain disruptions stemming from Thailand’s floods will place downward pressure on trade growth.”

Liquefied natural gas sales climbed 45.2 per cent, shipments of crude petroleum fell 10.9 per cent and palm oil surged 37 per cent. Exports of electrical and electronics items by companies such as Unisem Bhd gained 2.6 per cent from a year earlier.

Thailand makes about a quarter of the world’s hard-disk drives and serves as a production hub for Japanese carmakers and electronics firms.

“Electrical and electronics exports to Thailand for October and November 2011 are expected to decline owing to the flood situation in the country,” the trade ministry said in today’s report.

Malaysia’s imports rose 12.9 per cent in September from a year earlier to RM49.05 billion. The trade surplus narrowed to RM9.63 billion from RM10.98 billion in August. -- Bloomberg

PacificMas board accepts RM450m offer from OCBC Capital

KUALA LUMPUR (Nov 4): PACIFICMAS BHD []’s board of directors has accepted the offer from OCBC Capital (Malaysia) Sdn Bhd to acquire its units and subsidiaries for RM450 million.

It said on Friday the board except for the interested directors -- Datuk Ahmad Zahudi Salleh, George Lee Lap Wah, Jeffrey Chew Sun Teong and Wong Ah Wah and Tan Sri Nasruddin Bahari -- had resolved to accept the offer.

“Accordingly, the board (save for the interested directors and Nasruddin) does not intend to seek other alternative bids,” it said.

To recap, OCBC Capital had on Oct 17 proposed to acquire 100% of Pac Lease Bhd, PB Pacific Sdn Bhd, PacificMas Fidelity Sdn Bhd and PacificMas Capital Sdn Bhd and 85% in Pacific Mutual Fund Bhd.

The purchase consideration would be RM450 million to be satisfied by the payment of RM164.23 million cash on completion and RM285.76 million as the mount due and owing by OCSB to PacificMas payable at a later date.

OCBC Capital confirmed it has sufficient financial resources for the cash portion.

OCBC Capital is a unit of Singapore-listed Oversea-Chinese Banking Corporation Ltd.

Market snaps 3-day losses, boost from DiGi, Genting

KUALA LUMPUR (Nov 4): The local stock market was broadly higher at midday on Friday, following encouraging regional bourses while September’s stronger exports should bolster buying sentiment in the meantime. DiGi and Genting were among the major gainers.

At 12.30pm, the FBM KLCI was up 8.09 points to 1,470.46, snapping its three straight days of losses following the Greek debt rescue impasse. Turnover was 1.43 billion shares valued at RM673.89 million. Advancing counters beat decliners 524 to 126 while 200 stocks were unchanged.

Among the regional markets, Japan’s Nikkei 225 rose 1.42% to 6,762.94, Hong Konmg’s Hang Seng Index surged 3.31% to 19,880.34, Taiwan’s Taiex 2.09% to 7,615.90 and South Korea’s Kospi 2.89% to 1,924.76 while Singapore’s Straits Times Index advanced 1.6% to 2,855.

Reuters reported that Asian shares rose more than 2% and the euro steadied on Friday on hopes Greece will abandon a proposed referendum on a European Union bailout, but investors remained cautious over a confidence vote scheduled for later in the Greek parliament.

In Malaysia, September’s exports hit RM58.68 billion, up 16.6% from a year ago. Almost all major sectors recorded increases in exports in September. Total exports in September rose RM8.36 billion, of which 50% was from the manufactured exports.

DiGi was the top gainer, up 68 sen to RM33.16, Genting 26 sen to RM10.26, RHB Cap 16 sen to RM7.45 and Tasek 14 sen to RM7.84.

ARK Resources jumped after it was lifted from the Practice Note 17 classification. Its shares rose 19 sen to 52.5 sen and the warrants 16 sen to 36 sen.

Among the decliners were Lingui, down 11 sen to RM1.43 after posting losses. PLANTATION []s stocks fell, with KLK and BLD Plantations down 10 sen each to RM21.04 and RM6.60 while IJM Plantations gave up five sen to RM2.63.
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