Complete Logistic to buy remaining Guper stake for RM13.6m

KUALA LUMPUR (Nov 8): COMPLETE LOGISTIC SERVICES BHD [] (CLSB) has proposed to acquire the remaining 40% stake in its subsidiary Guper Integrated Logistics Sdn Bhd for RM13.60 million cash.

CLSB said on Tuesday, it would acquire 1.20 million Guper shares from the vendors RM13.60 million cash through internally-generated funds and/or borrowings, if required.

At present Guper is a 60.0%-owned subsidiary and upon completion of the proposed acquisition, Guper will be a unit of CLSB.

“As the business of Guper is already on-stream, the Proposed Acquisition is not expected to give rise to any additional financial commitment from CLSB other than the consideration to be satisfied through borrowings, if any,” it said.

Guocoland in RM30m acquisition deals

KUALA LUMPUR (Nov 8): GUOCOLAND (MALAYSIA) BHD [] (GLM) has proposed to acquire PJ City Development Sdn Bhd for a cash consideration of RM29.78 million.

It said on Tuesday, it had the acquisition involved 5.00 million shares of PJ City from GuoLine Asset Sdn Bhd.

PJ City’s core business is property development and property investment activities. Based on its audited financial statements for FY ended June 30, 2011, PJ City recorded profit after tax of RM4.75 million while its net assets were RM38.61 million.

PJ City also owns two parcels of land in Section 32 in Petaling, Selangor. GLM said after the completion of the proposed acquisition, it intends to develop commercial office buildings and corporate factories on the land.

GLM also proposed to acquire PJ Corporate Park Sdn Bhd from MPI Holdings Sdn Bhd for a cash consideration of RM258,000

Cypark Resources exec vice chairman sells 3.97m shares

KUALA LUMPUR (Nov 8): CypARK RESOURCES BHD [] executive vice chairman Siow Kwang Khee disposed of 3.97 million shares on Nov 3.

A filing with Bursa Malaysia on Tuesday showed he disposed of 2.5 million shares in the first transaction and 1.47 million shares in the next transaction.

Following the disposal of the shares, his direct stake was reduced to 10.50 million shares or 7.24%.

MPI posts net loss RM9.63m in 1Q

KUALA LUMPUR (Nov 8): MALAYSIAN PACIFIC INDUSTRIES [] Bhd (MPI) posted net loss RM9.63 million in the first quarter ended Sept 30, 2011 compared to net profit RM25.84 million a year earlier.

Reviewing its performance on Tuesday, Nov 8, MPI said the loss was due mainly to lower revenue in all its business segments and weakening US dollar.

Its revenue for the quarter fell to RM315.61 million from RM370.45 million in 2010.

Loss per share per share was 4.97 sen compared to earnings per share of 13.36 sen, while net assets per share was RM3.89.

MPI declared an interim dividend of 5 sen per share tax exempt, to be paid on Dec 8 this year.

On its outlook, MPI said it anticipated that its business prospects would remain challenging fof the financial year ending June 30, 2012, given the current softening in demand and the uncertain macro-economic outlook.

Hartalega 2Q earnings dn 2%, sees challenging times

KUALA LUMPUR (Nov 8): Harlatega Holdings Bhd earnings fell 2% to RM46.13 million in the second quarter ended Sept 30, 2011 from RM47.01 million a year ago as it was impacted by high raw material prices.

It said on Tuesday that with the sharp increase in nitrile material price and recent high volatility of US dollar, challenging time is ahead.

“In view of the current economic condition and competition, the contraction of profit margin in current year is within our expectation,” it said.

Hartalega said revenue rose 24.5% to RM229.54 million from RM184.31 million. At the profit before tax level, it dipped 2.4% to RM59.55 million from RM61.02 million. Earnings per share were 12.68 sen compared with 12.96 sen. It declared an interim dividend of 6.0 sen per share.

The significant increase in revenue is in line with the group’s continuous expansion in production capacity and increase in demand, it said.

“However, the increase in raw material prices of both natural and nitrile latex prices has resulted in the operating profit before other operating expense/income margin reduced to 28.5% from 32.3% for the current quarter compared with the corresponding quarter.

“The profit before tax margin reduced to 25.9% from 33.1% due to the above mentioned reasons and the recognition of net unrealised loss in foreign exchange and changes in fair value in forward foreign exchange contracts of RM8.65 million in the current quarter compared with a net unrealised gain of RM1.58 million in the corresponding quarter,” it said.

Hartalega said the inventory level has increased from RM64.7 million as at March 31, 2011 to RM114.5 million as at Sept 30, 2011 due to increase in raw material prices and also as a result of the group’s stocking up of raw materials.

“The group targets to keep higher inventories to reduce pressure on meeting growing sales demand,” it said.

For the first half, its earnings increased 13.9% to RM100.90 million from RM88.56 million a year ago. Its profit before tax rose 13.5% to RM130.22 million from RM114.78 million. Its revenue was 26.7% higher at RM448.91 million from RM354.27 million.

On the outlook, Hartalega said the switching from natural rubber to nitrile glove has gather momentum in Europe and demand is growing rapidly.

“We expect the nitrile glove demand will continue to grow by 30% for calendar year 2011 and our group is well positioned to take advantage of such demand growth. In addition, we are also targeting the emerging market and have set up a distribution company in China.

“Currently more producers are switching their production facilities to produce nitrile glove and we may see some overcrowding of nitrile gloves producers. With the sharp increase in nitrile material price and recent high volatility of US dollar, challenging time is ahead. In view of

the current economic condition and competition, the contraction of profit margin in current year is within our expectation,” it said.

KLCI tapers down as regional markets slip

KUALA LUMPUR (Nov 8): The FBM KLCI gave up most of its gains on Tuesday, Nov 8 as most key regional markets turned red on some mild profit taking, with persistent concern over Europe's debt crisis keeping investors cautious.

The FBM KLCI tapered down in the afternoon session and closed 0.20% or only 2.95 points higher at 1,480.46.

The index had earlier climbed to its intra-day high of 1,489.91.

Gainers led losers by 408 to 329, while 279 counters traded unchanged. Volume was 1.81 billion shares valued at RM1.54 billion.

At the regional markets, Japan’s Nikkei 225 fell 1.27% to 8,655.51, South Korea’s Kospi lost 0.83% to 1,903.14, Taiwan’s Taiex slipped 0.27% to 7,600.79 and the Shanghai Composite Index shed 0.24% to 2,503.84.

Meanwhile, Singapore’s Straits Times Index rose 0.64% to 2,866.52 and Hong Kong’s Hang Seng Index ended flat at 19,678.47.

On Bursa Malaysia, DiGi was the top gainer and rose 70 sen to RM34; F&N added 38 sen to RM17.52, Harvest Court 30.5 sen to RM1.18,Malaysia Smelting Corp 23 sen to RM4.20, Dutch Lady 22 sen to RM20.50, United PLANTATION []s, KLK and DKSH added 20 sen each to RM17.58, RM21.20 and RM2.10 respectively, while Favelle Favco added 19 sen to RM1.28.

Among the decliners, Nestle lost 50 sen to RM49.50, Cocoaland fell 20 sen to RM2, Parkson 14 sen to RM5.50, Shell 10 sen to RM9.50, Aeon and Lysaght lost nine sen each to RM7 and RM1.69, while Tahps, Ann Joo, KPJ and Panasonic fell eight sen each to RM4.15, RM2.02, RM4.03 and RM19.12 respectively.

The actives included Karambunai, Sanichi, Hibiscus, JCY, Palette, Focus and Compugates.

Market Commentary

The FBM KLCI index gained 2.95 points or 0.20% on Tuesday. The Finance Index fell 0.21% to 13284.84 points, the Properties Index dropped 0.17% to 952.63 points and the Plantation Index rose 0.14% to 7546.89 points. The market traded within a range of 13.10 points between an intra-day high of 1489.91 and a low of 1476.81 during the session.

Actively traded stocks include HIBISCS-WA, KBUNAI, SANICHI, HIBISCS, JCY, HARVEST-WA, JCY-CD, PALETTE, FOCUS and COMPUGT. Trading volume decreased to 1812.89 mil shares worth RM1538.64 mil as compared to Friday’s 2302.61 mil shares worth RM1512.49 mil.

Leading Movers were DIGI (+70 sen to RM34.00), PETCHEM (+10 sen to RM6.41), AXIATA (+4 sen to RM4.83), GENTING (+6 sen to RM10.86) and KLK (+20 sen to RM21.20). Lagging Movers were CIMB (-4 sen to RM7.32), IOICORP (-4 sen to RM5.17), MAYBANK (-1 sen to RM8.22), YTL (-1 sen to RM1.48) and TENAGA (-1 sen to RM5.87). Market breadth was positive with 408 gainers as compared to 329 losers.-- JF Apex Securities Bhd

Focus on defensive, ETP stocks

KUALA LUMPUR: Defensive stocks and companies involved in the Economic Transformation Programme (ETP) should be on investors’ radar screen following Europe’s continuous inability to resolve the debt crisis.

Last Friday, the FBM KLCI snapped its three straight days of losses, surging 15.14 points or 1.04% to 1,477.51 on late buying of selected stocks.

News reports highlighting the eurozone’s repeated failure to tackle its debt crisis are catapulting the bloc towards recession, raising the spectre of dangerous spillovers to the rest of the world economy.

UOB Kay Hian Malaysia Research head Vincent Khoo said there were earlier concerns abut the contagion effect from Greece but he believed this could be under control.

“On the other hand, a recession in Europe is inevitable but this has not been fully reflected in the equities market as yet,” he said.

As for Malaysia, he said the research house has a two-pronged approach for investors. The first is to focus on defensive stocks and the second on ETP companies.

Khoo said market sentiment was also boosted by prospects of the general election.

“UEM Land will benefit from the Iskandar development projects, MRCB (Malaysian Resources Corp Bhd) from the development of the Rubber Research Institute land (RRI land in Sungai Buloh) while Gamuda Bhd would benefit from the Mass Rapid Transit project,” he said.

Other defensive counters investors could focus on are telecommunications, numbers forecast operators and consumer stocks.

Merger and acquisition activities in the near future could spice up the market, with great anticipation in the financial and gaming sectors.

Other stocks with recent corporate news are Melati Ehsan Holdings Bhd, Fraser & Neave Holdings Bhd, Malaysia Smelting Corp Bhd and Nestle (M) Bhd.

Melati Ehsan unit Pembinaan Kery Sdn Bhd has accepted two contracts from the Housing and Local Government for two housing projects worth RM298 million in Kuala Lumpur.

Fraser & Neave posted a 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 where there was a gain of RM382.03 million after selling its glass container business.

It proposed a final single tier dividend of 47 sen per share together with a special single tier dividend of 15 sen.

Malaysia Smelting posted a net profit of RM41.81 million in the third quarter ended Sept 30, 2011 against a net loss of RM37.05 million a year ago where there was an impairment provision for goodwill of RM73.63 million.

Nestle posted a 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.

Its operating profit was RM143.16 million, up 3.8% from RM137.83 million. Revenue rose 18.2% to RM1.17 billion from RM991.07 million, boosted by strong domestic and export sales.


This article appeared in The Edge Financial Daily, November 8, 2011.

The Edge Billion Ringgit Club - Kuala Lumpur Kepong Bhd

Kuala Lumpur Kepong Bhd (KLK) traces its origins back to 1906 when the Kuala Lumpur Rubber Co Ltd was set up in London to oversee 600ha of rubber plantations in Malaysia. In 1960, the company changed its name to Kuala Lumpur Kepong Amalgamated Ltd (KLKA), and through various acquisitions, its landbank had then increased to 29,843ha.

KLK was incorporated in 1973 and under a scheme of reconstruction took over the assets and liabilities of KLKA. The move to bring its domicile back to Malaysia was initiated by KLK’s founder, the late Tan Sri Lee Loy Seng.

Today, KLK is a large multinational in plantation, manufacturing, property development and retailing. The group has a landbank in excess of 250,000ha. While plantations remain its core business, KLK has expanded downstream into resource-based manufacturing, in particular oleochemicals and rubber processing. It also owns premium toiletries brand Crabtree & Evelyn, which is retailed in 28 countries.

KLK CEO Tan Sri Lee Oi Hian shares with The Edge Financial Daily his strategies and dreams for the company.

TEFD: What are the company’s strengths and advantages?
Lee: We are one of the pre-eminent plantation companies because of our established regional footprint in both Malaysia and Indonesia. Currently, our plantation landbank is located in Peninsular Malaysia (71,692ha), Sabah (40,359ha) and Indonesia (139,126ha).

We have a strong and experienced management team with core competencies required by our various business segments. Our plantation division is a beneficiary of the excellent agriculture research undertaken by KLK’s agronomic team that has been instrumental in developing our agricultural best practices and improving our productivity through high-yielding planting materials and tissue culture.

Lee: We will strive to be the preferred producer and supplier of
sustainable and innovative oil palm and rubber products.

KLK is one of the largest producers of basic oleochemical and derivative products ranging from fatty acids, glycerine, fatty alcohols, methyl esters and methyl ester sulphonates. The oleochemical plants are located in Malaysia, Europe and China with industry-leading operating efficiencies and are highly cost competitive. We have also developed a strong distribution network which has a good customer base covering key markets.

Our successful vertical integration of our upstream oil palm plantation operations with our downstream oleochemical operations has created significant and sustainable synergies for the KLK group.

What have been the major achievements of the company in the past four years?
We have been able to increase our annual fresh fruit bunch production to 3.2 million tonnes (FY10) from 2.4 million tones (FY07) through a concerted replanting programme in Malaysia and the expansion of our landbank in Indonesia.

Our plantation landbank increased to 251,196ha in FY10 from 203,322ha in FY07 and our yield per mature ha over the past four years has been consistently higher than the industry average. Coupled with rising crude palm oil prices spurred by strong demand, plantation revenue increased to RM3.5 billion in FY10 from RM2 billion in FY07.

We are pleased to have secured RSPO certification for our entire operations in Sabah, making available close to 180,000 tonnes of certified sustainable palm oil in the market. We are now pursuing the same certification for all our operating centres in Malaysia and Indonesia.


We have significantly increased our oleochemical footprint during this period. The oleochemicals division has been able to increase its production capacities organically through acquisitions, plant expansion and de-bottlenecking of existing operations. With these measures, manufacturing revenue has grown to RM3.3 billion in FY10 from RM2 billion in FY07.

Net profit for the KLK group has grown to RM1.012 billion in FY10 from RM694 million in FY07. This is an impressive compounded annual growth rate of 13% per annum over the period.

What are the major challenges your company faced over the years and how did you overcome them? Is there anything else you would have done differently?
One of the major challenges facing KLK over the years is the need to increase its plantation landbank and address the issue of the shortage of labour. With the shortage of suitable plantation land in Malaysia, KLK decided to expand its landbank in Indonesia due to its vast agriculture potential, proximity and cultural similarity. KLK benefited from being one of the first movers in Indonesia and has since grown its Indonesian operations to achieve its objective of increasing yields and productivity.

The lack of skilled plantation labour is a problem faced by the entire plantation industry. To meet this challenge, KLK has developed a programme to upgrade housing and amenities for its plantation employees, and skills through training. In line with this, we have our corporate social responsibilities to ensure that the local community benefits in tandem with the growth of the group.

Rising cost driven by inflation is another challenge faced by the plantation industry. Efficiency and improved productivity mitigate rising costs. We have improved oil palm cultivation by investing significantly in agriculture research which has resulted in the use of tissue culture technology to produce better clonal planting materials. We have also improved our yields through responsible best agricultural practices.

The challenges faced by our oleochemicals division are improving its market share and profitability. In pursuit of becoming a global leader in oleochemicals, KLK has increased its production capacity and efficiency to achieve better economies of scale and at the same time, increasing its distribution network. Significant investment has been made to have the entire infrastructure in place to achieve these targets.

How is the company positioning itself within the industry? What are your strategies to grow market share and your plans for the future?
Being a responsible global player in the palm oil industry, KLK aims to secure sustainability of its upstream and downstream plantation operations. Currently, KLK ranks among the top three plantation companies in Malaysia. Our short-term target is to grow our total plantation landbank to 300,000ha. The KLK group targets new oil palm plantings of 10,000ha per annum to ensure future production growth is sustainable.

KLK aims to establish its oleochemicals operations as a major global player. We have a considerable advantage, in terms of competitiveness and cost efficiency, over our competitors as we are a vertically integrated manufacturer with the supply chain sourced from our plantation operations. Our oleochemicals operation has a strong in-house team which is able to leverage on future opportunities.

We will continue to enhance our production value chain for our plantation and oleochemicals businesses. Further land acquisitions in Indonesia and other parts of the world are being explored to increase the group’s plantation landbank. Selective and complementary oleochemicals acquisitions will further help consolidate our position as a global leading oleochemicals producer.

What is your dream for your company? How would you like to see it in 10 years’ time?
The fact that KLK has been operating successfully for more than a century is a culmination of the vision of its founders, the sustainable policies and practices implemented by the management and the good working relationship between shareholders and all stakeholders. We therefore believe in continuing with these principles which have guided us all these years.

We will strive to be the preferred producer and supplier of sustainable and innovative oil palm and rubber products, as well as palm-based oleochemical products and derivatives. In addition, we shall explore all opportunities to expand our landbank beyond its current geographic reach.

We will also increase our oleochemical product portfolio where there are synergies. Leveraging on the strategic location of our landbank in Peninsular Malaysia, we will take further steps to enhance our property development business so that it will be a major contributor to the KLK group’s profits in time to come.


This article appeared in The Edge Financial Daily, November 8, 2011.

Harvest Court eyes recycling company

PETALING JAYA: Harvest Court Bhd is close to acquiring a new business which involves converting agricultural waste into paper, industry sources say.

The asset being injected into Harvest is believed to be a company called 1Green Enviro Sdn Bhd, which is linked to its substantial shareholder Datuk Raymond Chan, according to sources.

A filing with the Companies Commission of Malaysia shows that 1Green Enviro was established on Nov 12, 2010 of which Paramount Billion Sdn Bhd owns 93%. Paramount may be a vehicle of Chan, who directly owns only one share in 1Green Enviro, although this is not confirmed.

Chan also sits on 1Green Enviro’s board together with Mohd Nazifuddin Najib, the son of Prime Minister Datuk Seri Najib Razak.

1Green Enviro is in the business of converting raw, empty palm oil fruit bunches into paper, which it claims is much cheaper than using pulp and corrugated cartons.

The valuation of 1Green Enviro that will be injected into Harvest is not known. Harvest’s current core business is processing sawn timber and making timber doors.

Should the proposed acquisition of 1Green Enviro materialise, it would be a much different scenario from earlier speculation that Chan was mulling over injecting Sagajuta (Sabah) Sdn Bhd, the developer of 1Borneo mall in Kota Kinabalu, into Harvest.


Sagajuta has several ongoing projects including 1Sulaman and 1Likas in Kota Kinabalu, and 1Gateway in Klang.

Interstingly, Nazifuddin is also the chairman of Sagajuta.

Chan bought a 13.83% stake in Harvest shortly after the abortion, after due diligence, of a proposal to inject Sagajuta into Jerneh Asia Bhd, which was then looking for a core business.

Industry observers note that a speculation over asset injection into Harvest has helped fuel the rally of the company’s share price, apart from the emergence of a prominent figure, Nazifuddin, on the board as non-executive director.

Little-known Harvest is now a star performer on Bursa Malaysia. While many stocks are still regaining their lost ground after the heavy selldown in September, Harvest’s share price has leaped over 10 times in less than a month to 87.5 sen last Friday from 8.5 sen on Oct 13. Year-to-date, the counter has jumped 573% to its six-year high of 87.5 sen.

In terms of financials, Harvest slipped into the red for FY10 ended Dec 31, posting a net loss of RM2.81 million or loss per share of 1.68 sen, compared to a net profit of RM12.16 million or earnings per share of 31.45 sen.

Revenue fell sharply to RM6.42 million from RM9.23 million the year before.

Harvest attributed the poor financial performance to lower sales volume due to the upgrading of machinery, inefficiency of new workers and new designs.
The company manufactures timber products and exports them to India and the Middle East.

For 1HFY11 ended June 30, Harvest’s net loss narrowed to RM678,000 from RM1.35 million in the previous corresponding period.

Judging by the share price performance, the asset injection seems to be expected to give a big boost to the company’s earnings. 1Green Enviro has yet to set its earnings track record as it is only a year old.

It will be interesting to see how the asset injection will help to boost the company’s earnings and justify the sharp spike of Harvest’s share price. Harvest was queried by Bursa Malaysia on the movement of its share price last Friday, the second query to the company from the exchange since Oct 17.

In its reply to the first query, Harvest pointed out that the company’s managing director Ng Swee Kiat’s stake would rise to 35.05% from 16.78%, triggering a takeover offer for all the shares in Harvest if he is able to buy the 18.3% stake held by Affin Bank Bhd.

Ng sold part of his stake to avoid a mandatory general offer before he submitted a proposed put option agreement to Affin to acquire the bank’s 18.3% stake in Harvest at 20 sen per share.

The offer price was later revised to 25 sen per share. It is not known if Affin Bank has had sold its shares to Ng. To the latest query by Bursa last Friday, Harvest responded that it was unaware of any developments that might have contributed to the unusual market activity.

The queries did not stop Harvest shares from rising further.

Although there were no changes in shareholding filed at press time, sources said Nazifuddin might have purchased between two and three million shares or up to 1.7% of Harvest during early trade last Friday.

Both Nazifuddin and Chan joined Harvest’s board on Oct 28. Chan acquired 23.808 million shares, a 13.85% stake, at 20 sen per share.

The value of Chan’s stake in Harvest has more than tripled since mid-October, with the stock closing at 87.5 sen last Friday.


This article appeared in The Edge Financial Daily, November 8, 2011.

Analysts mixed on possible year-end rally

PETALING JAYA: The local stock market performed better in October than in the previous months in which its performance had been dragged down since July. The benchmark FTSE Bursa Malaysia KLCI increased by 8.35% from September, prompting the question whether the market has started its year-end rally.

Since reaching a multiple-year high of 1,594.74 on July 8, the index had been on a downtrend and dropped 16.49% in its value as at Sept 26 — the lowest point in the year. This is a period of 52 trading days between July 8 and Sept 26.

Since then, it had rebounded to hit 1,491.89 on Oct 31. The index settled at 1,477.51 last Friday, an increase of 10.94% since Sept 26 but 7.35% lower than the high on July 8. It is 3.65% lower from its opening of 1,518.91 points at the start of the year.

According to Dr Nazri Khan, head of retail research at Affin Investment Bank Bhd, the year-end rally has started, based on the performance of the benchmark index in October and he expects it to be extended until the end of the year.

He believes that the rally was supported by increased investor confidence. This is because external factors, such as the sovereign debt crisis in Europe and the sluggish economic data in the United States that have adversely affected investor sentiment since the middle of the year, have subdued.

“The external economic environment has become calmer now,” he said. “The European governments, especially Germany and France, are seen to be on a more united stand on what they need to do to tackle the debt crisis and stop it from spreading from Greece to other larger European economies such as Italy,” Nazri said.

“The scrapping of the Greek referendum with regard to accepting the bailout package agreed at the eurozone summit last week has also given the market some certainty, at least in the short term,” he said. “Now the whole of Europe can focus on Italy because if the latter becomes like Greece, the implication will be much worse as Italy’s economy makes up almost 12% of Europe’s,” he added.

The US economic data has also provided some fresh breath to investors, said Nazri. US first-time jobless claims fell last week to 397,000 from a revised 406,000, while new orders for goods from factories unexpectedly rose in October.

According to Nazri, the year-end rally could even be attributed to supportive internal “feel good” factors such as the coming festive seasons — Christmas in December and the Chinese New Year in January next year.

Another internal factor that could prolong the rally well into early 2012 is the anticipated general election which political analysts and observers alike speculate it to be held in the first quarter next year. The Umno general assembly to be held in mid-December could trigger more speculation on the general election.

An analyst with a foreign bank told The Edge Financial Daily that the rebound seen starting in October would still be volatile until the end of the year. She said even though buying interest has certainly returned, the question is how long can this last.

“If you look at the Greek situation, when it was announced that a referendum would be held with regard to the bailout plan, the market was spooked and investors were selling down. Later in the same week, when there was not going to be any referendum, suddenly the market started to go up again,” she said, indicating that the rebound is going to be volatile.

She said the so-called year-end rally does not necessarily happen every year and the factors supporting those rallies are a coincidence. The market still needs new catalysts to start a long upward run.

“Hypothetically, if the market could go up, it could go down as well. So we are not yet bullish on the stock market to extend the upward trend seen in October well into the end of the year. We predict that the market would still be volatile and end the year at 1,520 points,” the analyst added.


This article appeared in The Edge Financial Daily, November 8, 2011.

Kossan expands into non-rubber products

KUALA LUMPUR: Kossan Rubber Industries Bhd is embarking on a multi-pronged strategy for its next phase of growth. It involves the expansion of its glove manufacturing business and diversification into non-rubber products to create synergy.

The company plans to grow its annual glove production capacity by 42% to 17 billion pieces in the next two years, a crucial move to expand its product range and tap new markets. It is also seeking mergers and acquisitions (M&A) to grow its non-rubber product portfolio and diversify its income base.

Datuk Lim Kuang Sia, managing director and CEO, said Kossan, which currently has an annual glove capacity of 12 billion pieces, will build new factories and refurbish existing ones to increase output.

“We always prepare for tomorrow,” Lim told The Edge Financial Daily in an interview. Kossan already has 13 factories in Klang, of which 10 are for glove production, while the remaining three are for technical rubber products (TRP).

The 10 glove factories, with a total of 160 lines, have a combined annual capacity of 12 billion gloves. For now, natural rubber gloves make up 55% of total capacity while nitrile or synthetic rubber gloves constitute the balance of 45%.

For comparison, world rubber glove demand is seen at some 150 billion pieces this year, and is expected to register an annual growth of 8% to 10%. Malaysia is the world’s largest rubber glove producer, with about 60% of the global market.

Lim: Kossan's plans include the construction of two new factories
- each dedicated to surgical land nitrile gloves - in Klang.

Lim said Kossan’s immediate plans include the construction of two new factories — each dedicated to surgical and nitrile gloves — in Klang.

These plants will add another two billion gloves to Kossan’s existing capacity, translating into 14 billion gloves a year by June 2012, he said. The surgical glove plant will have a capacity of 600 million pieces while the nitrile facility will have an output of 1.4 billion gloves.

Lim said these factories will involve a capital expenditure of some RM60 million which could be equally shared between the manufacturing facilities. Kossan’s factories, which are about 90% utilised, are interchangeable for natural rubber and nitrile glove production.

By 2013, its annual glove capacity is expected to reach 17 million gloves, helped by the manufacturer’s 200 production lines by then, said Lim. Nitrile gloves are expected to account for 60% of capacity while natural rubber gloves will make up the remaining 40%.

Lim said Kossan focuses on high-end gloves for the medical and non-medical sectors as this segment has a higher barrier of entry. He said the company intends to grow its portfolio from mainly medical examination gloves, to include surgical, cleanroom, sterilised and special application gloves.


Product diversification via M&A is seen as a crucial component of Kossan’s growth strategy. Lim said the company might acquire more companies dealing in non-rubber products such as face masks for the medical sector and antistatic wipes for the semiconductor industry.

He said these potential M&A must create synergy for Kossan, adding that the company’s healthy balance sheet will enable it to undertake such exercises. As at June 30 this year, Kossan had cash of RM84 million against borrowings of RM146.28 million, translating into net debt of RM62.28 million or net gearing of 0.13 times. The company’s shareholders’ funds stood at RM486.06 million.


Last June, Kossan acquired a controlling 51% stake in Hong Kong-based Cleanera HK Ltd for US$3.06 million (RM9.52 million). Cleanera manufactures cleanroom products such as masks, wipes and gloves.

“Inorganic growth can help us grow faster,” said Lim, who expects Kossan to achieve 15% revenue growth in FY12 ending Dec 31. This follows an expected weaker performance in the current year.

Estimates by analysts polled by Bloomberg indicate that Kossan will register net profit of RM105.53 million and revenue of RM1.23 billion for FY11. This compares to FY10 net profit and revenue of RM113.38 million and RM1.05 billion.

With consensus earnings per share of 32.7 sen for FY11, the stock, at RM2.83, is trading at a price-earnings ratio of a low 8.9 times.

Kossan’s latest results have weakened. In 1HFY11ended June 30, the firm saw its net profit fall 27% to RM43.89 million from RM60.39 million a year earlier, though revenue rose 2% to RM532.06 million from RM519.26 million.

While the company benefited from higher selling prices for its products, costlier natural rubber — its main raw material — crimped its bottom line, the company said in notes accompanying its financials.

Natural rubber accounts for some 60% of the glove producer’s costs. Over the last six months, the rubber price reached a high of RM10.01 a kg on April 27 and a low of RM7.94 on Oct 24.

Natural rubber prices have recently fallen along with other commodities due to concern over global a recession. This, along with the strengthening US dollar, should ease cost and margin pressures, but demand and overcapacity concerns remain.

Kossan’s glove division accounted for 87% of its revenue during the first half, while TRP made up the remaining 13%, according to the firm. Its gloves are entirely exported while about 60% of its TRP are sold abroad.

Kossan’s external transactions are done in US dollars. Hence, the company will lose out if the ringgit strengthens against the greenback, which was the trend for much of this year until the last two to three months when the financial market rout started.

Over the last six months, the ringgit traded at a high of 2.939 against the US dollar on July 27, and a low of 3.2048 on Oct 3.

From those lows, the ringgit gradually strengthened to 3.11 last Friday.

Economists said the weakening of Asian currencies, including the ringgit, against a firmer US dollar in recent weeks is a short-term phenomenon as global investors flocked to the greenback as a safe haven and unwind their US-dollar carry trades.

However, in the longer run, it is anticipated that Asian currencies will regain their strength against the US dollar given the prevailing growth and interest rate differential between emerging and advanced economies. The US dollar is also expected to weaken due to the country’s weak fiscal and trade balance dynamics, they said.

Kossan’s Lim said considering that Thailand is a rival glove exporter, a slower appreciation in the value of the baht against the US dollar compared to the ringgit could result in less competitive pricing for Malaysian-made gloves.

“(However) the impact is mild compared to latex prices,” he said. According to Lim, latex has a greater influence on average selling prices of gloves than other cost components.

Kossan’s TRP segment is worth watching. Lim said the division is expected to register up to 15% growth in annual turnover, as the company embarks on strategic partnerships with its customers in the US who are also TRP manufacturers.

The collaboration will essentially help Kossan secure a wider geographical reach for its TRP, especially in the global automotive sector, he said. The company’s TRP portfolio also includes components for the marine, construction and aerospace sectors.

Lim said Kossan is assessing the feasibility of acquiring rubber plantation land in Malaysia and Cambodia. The company is considering offers from Cambodia. Any acquisitions would merely be a form of investment to diversify the company’s income base.

“Technically, it will not have anything to do with our glove operations,” he said.

Kossan shares ended three sen higher at RM2.83 last Friday, giving the company a market capitalisation of RM904.85 million. The stock has declined 11% this year against the FBM KLCI’s 2% fall, and has slumped 17% from a high of RM3.40 on March 31, 2011.


This article appeared in The Edge Financial Daily, November 8, 2011.

Removal of duty exemptions to block import loopholes

KUALA LUMPUR: Megasteel Sdn Bhd has defended its proposal to the Ministry of International Trade and Industry to impose import tariffs on steel products, saying that “the proposal to reduce the import duty and replace duty exemption with duty drawback covers the entire flat steel sector and will help all flat steel producers to compete more effectively”.

The Edge Financial Daily reported last week that Megasteel had proposed a 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.

In an emailed statement, Megasteel clarified that flat steel in the proposal referred to hot-rolled coils or HRC (HS codes 7208 & 7211), cold-rolled coils or CRC (HS codes 7209 & 7211), coated coils like galvanised iron, electro-galvanised and coloured sheets (HS codes 7210 & 7211) and lastly pipes and tubes (HS codes 7304, 7305, 7306 & 7307).

“There should be the consideration that duty exemption will not be granted with the reduction in duty in order to plug the loopholes in the current system whereby there is rampant importation of HRC, CRC, coated coils and pipes on a duty-free basis from many non-Asean countries into Malaysia,” the company said last Friday.

In justifying the increased protectionism, Megasteel said following the termination of the safeguard petition for HRC by Megasteel, the government agreed to explore other options to assist the local flat steel products industry. To-date, it said five licences to produce HRC have been issued, but only Megasteel has implemented its project.

Megasteel has proposed that a duty-drawback system be reinstated, instead of duty exemption, to assist manufacturers that import and process for re-export.

“The duty-drawback system is time tested and being used by other industries and can be in the form of cash or bank guarantee. For the industries that will not be granted duty exemption, the impact will be minimised with additional measures to assist them,” Megasteel argued, but did not provide specifics on the additional measures.

“Of the one million tonnes of HRC imported into Malaysia last year, about 400,000 tonnes were from Taiwan, 200,000 tonnes from Japan and about 100,000 tonnes from South Korea. Of these imports, about 70% are within the range that we can produce,” said Megasteel, citing a report by the Malaysian Iron and Steel Industry Federation at a recent steel conference.

“The effect of the withdrawal of duty exemption on industries will be minimal if every effort is made to use local materials,” Megasteel said.

Megasteel is 78.9%-owned by Lion Corp Bhd with the balance held by Lion Diversified Holdings Bhd. Lion industries Corp Bhd has substantial holdings in both Lion Diversified and Lion Corp.


This article appeared in The Edge Financial Daily, November 8, 2011.

Tomypak has good defensive qualities

Tomypak Holdings Bhd (Nov 4, RM0.98)
Maintain outperform with revised target price of RM1.67 from RM1.52: Tomypak’s 3QFY11 earnings resurgence should continue over the next few quarters. The strong demand for its products during these uncertain times is affirmation of the defensive nature of its business. Adding to its appeal is its net dividend yield of 6% to 8%.

Despite being 82% of our full-year forecast when annualised, 9MFY11 core net profit was within expectations as 4Q should be a stronger quarter. Our target price, based on 6.2 times CY13 price earnings ratio or a 30% discount to Daibochi’s target PER, rises with its rollover to end-2012. We reiterate our “outperform” call.

Bouncing back in 3QFY11 Tomypak experienced a strong earnings recovery. Earnings before interest, tax, depreciation and amortisation (Ebitda) for 3QFY11 jumped 30% quarter-on-quarter as the Ebitda margin ticked up 3.1% points q-o-q to 13.3%.

But net profit advanced by only 21% q-o-q due to a higher tax rate of 26%. The tax rate should return to the early teens in the next quarter due to new reinvestment incentives. Raw material prices were stable in 3QFY11, which was not the case in 2QFY11 when crude oil prices had gone as high as US$115/barrel.


On average, raw materials account for 70% to 75% of Tomypak’s production cost and most of its raw materials are derivatives of crude oil. The crude oil price is currently around US$90 per barrel.

Tomypak declared a 1.5 sen tax-exempt dividend per share (DPS) in 3QFY11, which was within expectations. This takes year-to-date DPS to 4.3 sen. What do we think? The worst appears to be over. If the EU crisis worsens and the US economy deteriorates, the crude oil price could tumble over the next few quarters, which should benefit Tomypak.

Product demand remains strong as most of its customers are either local or from within Asean. The company was unscathed by the 2008 financial crisis and we see no reason why it should be any different this time.

Investors should accumulate this stock for its defensive qualities. Some 90% of its sales come from the resilient food and beverage sector and downside is capped by its 6% to 8% net dividend yields. — CIMB IB Research, Nov 4


This article appeared in The Edge Financial Daily, November 8, 2011.

Padini Holdings: The clothes maketh the brand

Padini Holdings Bhd (Nov 4, RM1)
Initiating coverage with buy at target price RM1.40: Padini is one of the country’s most profitable retail companies with seven main brands, catering for virtually all segments of the local market, making it a resilient proxy to the retail industry.

It had an estimated brand value of RM244.7 million (37 sen per share) and figured consistently in Malaysia’s Top 30 Brands from 2007 to 2009. The group derives revenue from 45 single brand stores (23% of FY11 revenue), 22 multi-brand concept stores (43%), 140 consignment counters in various department stores (13%) and 13 Brands outlets (10%) based on our estimates.

Padini’s Brands Outlet — which focuses on high-volume fast-selling garments at low prices — has been its main revenue growth driver (+85% compound annual growth rate (CAGR) over FY07 to FY11).

We expect this trend to continue in the near term, in line with the group’s growth strategy to venture into captive markets (townships and isolated areas) that lack mainstream fashion outlets.

Sales of other brands should remain resilient, buoyed by rising affluence, attractive pricing and fashionable products. For FY12, we expect Padini to open three Brands Outlets, one multi-brand concept store, and three single brand outlets in selected shopping malls.


At its current price, Padini is cheaper than its peers, trading at a 45.6% (7.4 times) discount to its CY12 average (13.6 times). Earnings per share (EPS) has grown 48% (four-year CAGR) from FY07 to FY11 with a clean, net cash balance sheet.

Return on equity (ROE) will be attractive over the next few years at 23% to 28%, having improved from 24% (FY06) to 29% (FY11). Padini paid out at least 30% of profit as dividends over the last three years, peaking at 49% of net earnings in FY10 (about 4% dividend yield).

We initiate coverage with a RM1.40 target price pegged to 10 times CY12 EPS of 13.6 sen, driven by growth in Padini’s value segment and expanding tourism and retail sectors. — Hwang DBS Vickers Research, Nov 4


This article appeared in The Edge Financial Daily, November 8, 2011.

QSR’s Tom Yum Crunch spices up a busy 4Q

QSR Brands Bhd (Nov 4, RM5.65)
Maintain outperform with revised target price of RM8.30 from RM7.22: Crowd favourite Tom Yum Crunch returns after seven years to a hot and spicy response, feeding into KFC’s mouth-watering same-store sales growth (SSSG) 0f 12% in October. Pizza Hut is playing catch-up in the delivery segment and the group is making further headway in India.

We raise our target price as we roll it forward, still pegged to 17.8 times forward price earnings ratio (PER), the average valuation of bigger peers. A further rise in average ticket prices, success in new markets and accelerated share buyback underpin our “outperform” call.

We are confident that Tom Yum Crunch will enable QSR to meet our FY11 SSSG target of 5% for both Pizza Hut and KFC. This will be the group’s best SSSG performance since FY09. We wasted no time in joining the queue at a KFC restaurant to welcome the return of Tom Yum Crunch.

During its debut in 2Q04, the wonder product helped KFC’s quarterly SSSG hit an unprecedented 44%. Just like the first round, the product did not disappoint and has generated a lot of buzz, contributing to KFC’s 12% SSSG in October.

We applaud QSR’s latest initiative to drive Pizza Hut’s transactions across the delivery segment where it is lagging behind Domino’s. QSR has rolled out a new type of dough and a new distribution channel called Pizza Hut Delivery (PHD).

PHD guarantees delivery within 30 minutes for 5km-radius catchment areas and offers free delivery and net prices to compete more effectively with Domino’s.

We are encouraged by KFC India’s progress so far. Monthly sales average RM350,000 to RM400,000 per outlet, substantially higher than the average of RM270,000 per outlet recorded by KFC Malaysia’s operations.

A wide array of products that cater for vegetarians and non-vegetarians is bringing in the traffic and a staggering SSSG of 20%. Similar to the Malaysian operations, the average ticket price has been on the uptrend, hitting RM14 in 2Q11 compared with RM13.50 in 1Q11 and RM12 in 4Q10. — CIMB IB Research, Nov 4


This article appeared in The Edge Financial Daily, November 8, 2011.

Protev completes part of Sanichi due diligence

KUALA LUMPUR (Nov 8): Projektarbelt Technische Beratung Venretung International (Protev) has completed its first phase of due diligence of SANICHI TECHNOLOGY BHD [].

Sanichi, whose shares were voluntarily suspended from 3.12pm on Tuesday, later confirmed Protev had completed the first phase was expected to conclude phase two early 2012.

The company was earlier queried by Bursa Malaysia Securities over the unusual market activity in the trading of its shares.

In its earlier response, Sanichi said: “After having made due enquiries with the directors and major shareholders, the company wishes to advise that, to the best of their knowledge and belief, the directors and major shareholder are not aware of any of the following that may have contributed to the unusual market activity.”

The shares rose 0.5 sen to 9 sen with 81.29 million units done before trading was suspended.

On Aug 4, Sanichi said Protev had started its due diligence amid market talk was that Protev could be keen to take a major stake in the ACE Market-listed company.

It had on June 8 said it had signed a memorandum of understanding with Protev.

Sanichi suspended, trading resumes Wednesday

KUALA LUMPUR (Nov 8): Trading in the shares of SANICHI TECHNOLOGY BHD [] has been suspended from 3.12pm on Tuesday and will resume on Wednesday.

The company was earlier queried by Bursa Malaysia Securities over the unusual market activity in the trading of its shares.

In its response, Sanichi said: “After having made due enquiries with the directors and major shareholders, the company wishes to advise that, to the best of their knowledge and belief, the directors and major shareholder are not aware of any of the following that may have contributed to the unusual market activity.”

The shares rose 0.5 sen to 9 sen with 81.29 million units done before trading was suspended.

iDimension’s 5m new shares oversubscribed 6.09 times

KUALA LUMPUR (Nov 8): iDimension Consolidated Bhd’s public offer of five million new shares to the Malaysian public was oversubscribed by 6.09 times.

The company said on Tuesday there were 1,218 applications for 35.55 million shares with a value of RM13.46 million shares from the public.

It also said the 35 million shares under its placement exercise had been placed out.

'Tenaga may need to raise debt'

Tenaga Nasional Bhd may need to increase its debt to fund its working capital if the government fails to offer an interim solution to share the burden of higher fuel costs.

Moody's Investors Service, in its special commentary today, said the national utility company has estimated that it was incurring an added RM300 million a month for an additional RM1.2 billion in such costs in the fourth quarter of this year.

"Any rise in Tenaga's debt will have a negative impact on its credit profile for financial year 2012. "Nevertheless, despite rising pressure on interest coverage, the utility firm's rating still has sufficient headroom for higher leverage before it reaches the downgrade trigger of 60 to 65 per cent leverage," it said.

TNB has been tapping its cash reserves to fund higher needs for working capital. As a result, its cash at hand fell to RM3.9 billion from RM6.3 billion as of Aug 31, 2011 as compared to three months earlier.

The overall leverage remained adequate with adjusted debt to capitalisation at 53 per cent as of Aug 31. The research house said gas supplies are expected to improve after Petronas completed its construction of a Mobile Offshore Platform Unit (MOPU) at Bekok C early October and shortages will ease further after a regasification terminal begins operations in July next year.

"Although acute shortages will diminish, the overall shortfall will not disappear. Tenaga expects to receive in financial year 2012 an average allocation of natural gas of 950-1,050 million metric standard cubic feet per day (mmscfd) -- an amount still below its required levels for full operations," it said.

It said its rating and stable outlook for TNB assuming that the gas shortage will gradually diminish over the near term and the government would likely decide on an appropriate cost-sharing mechanism over the next six to eight months to compensate TNB's added costs. -- Bernama

Focus Dynamics rises to 18-month high

Focus Dynamics Technologies Bhd, a Malaysian electric products maker, rose to an 18-month high in Kuala Lumpur trading after saying two shareholders were seeking the removal of Chairman Manan Md Said from the company’s board.

Its shares rose 18.2 per cent to 13 sen at 3:14 p.m. local time, set for their highest close since April 29, 2010. -- Bloomberg

KL shares lower at mid-afternoon

Share prices on Bursa Malaysia retreated from earlier advances at mid-afternoon today, as sentiment turned cautious with the deepening debt woes in Italy, dealers said.

The broader Asian bourses showed a mixed performance underlined by cautious trading, as the Europe debt contagion spread to Italy.

As at 3.00 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) was 3.03 points higher at 1,480.54. It had opened 5.77 points higher at 1,483.28.

The Finance Index declined 6.57 points to 13,278.27 and the Plantation Index lost 14.97 points to 7,531.92 but the Industrial Index gained 14.63 points to 2,716.33.

The FBM Emas Index advanced 16.26 points to 10,088.41, the FBM Mid 70 Index perked 10.84 points to 10,853.60 and the FBM ACE Index increased 30.49 points to 4,230.43.

Gainers beat losers 346 to 281 with 283 counters unchanged, 562 untraded and 21 others suspended. Turnover stood at 1.116 billion shares worth RM817.043 million.

For the actives, Karambunai Corp gained one sen to 21.5 sen, Sanichi Technology rose half-a-sen to nine sen, Harvest Court Industries warrants gained 29 sen to RM1.04 and Focus Dynamics Technologies increased two sen to 13 sen.

Among heavyweights, Maybank lost one sen to RM8.22, CIMB Group Holdings slipped three sen to RM7.33, Sime Darby increased two sen to RM8.82 and Petronas Chemicals Group added one sen to RM6.32. -- Bernama

Harvest: Chan buys 5m more shares

Harvest Court Industries Bhd, said Raymond Chan raised his stake in the Malaysian timber company and manufacturer by acquiring 5.1 million shares.

He paid an average 84.9 sen per share in the open market on Nov 4, according to an exchange disclosure in Kuala Lumpur today.

Chan is already the group’s second-biggest shareholder, according to data compiled by Bloomberg. - Bloomberg

2 shareholders seek to remove Focus Dynamics exec chairman

KUALA LUMPUR (Nov 8): Two shareholders of FOCUS DYNAMICS TECHNOLOGIES [] Bhd are seeking to remove the current executive chairman Datuk Manan Md. Said with immediate effect.

The company said on Tuesday that Lean Mun Huat and Lee Fong Peng, who own not less than one-tenth of Focus Dynamics shares, had requisitioned for an EGM to remove Manan as chairman.

They had requisitioned that Lean be appointed as a director of the company.

They said if such an EGM was not called within the time frame provided for in the Companies Act 1965, they would proceed to convene a meeting to pass the resolutions.

Chan ups stake in Harvest Court

KUALA LUMPUR (Nov 8): HARVEST COURT INDUSTRIES BHD []’s substantial shareholder Datuk Raymond Chan Boon Siew has raised his stake in the company to 16.81% or 28.898 million shares.

A filing with Bursa Malaysia on Tuesday showed that he acquired 5.09 million shares on Nov 4 at an average price of 84.9 sen from the open market. The shares represented a 2.96% stake.

On Oct 28, the timber manufacturing company appointed Chan as a non-independent, non-executive director.

He is also the managing director of the Sagajuta group of company – a post he held since 1995. Chan was appointed managing director of 1Green Enviro Sdn Bhd in 2011.

AirAsia advances on warrants nod

AirAsia, Asia’s biggest budget carrier, rose 1.3 per cent to RM3.85.

AirAsia won approval to issue warrants to Malaysian Airline System Bhd.

The two airlines agreed in August to a share swap. - Bloomberg

KL shares bullish at midday

Share prices on Bursa Malaysia sustained the positive momentum at midday today, in tandem with overnight gains on Wall Street, dealers said.

The dealers also said persistent buying interest, which followed last Friday's uptrend, helped sustain the market momentum.

This is despite the mixed performance of regional Asian markets as sentiment turned cautious with the deepening debt woes in Italy.

The FTSE Bursa Malaysia KLCI (FBM KLCI) was 8.14 points higher at 1,485.65. It had opened 5.77 points higher at 1,483.28.

The Finance Index rose 39.54 points to 13,324.38 and the Plantation Index added 10.53 points to 7,557.42 and the Industrial Index gained 19.60 points to 2,721.30.

The FBM Emas Index advanced 47.67 points to 10,119.82, the FBM Mid 70 Index perked 37.15 points to 10,879.91 and the FBM ACE Index increased 64.05 points to 4,263.99.

Gainers beat losers 380 to 214 with 265 counters unchanged, 613 counters untraded and 21 others suspended. Turnover stood at 954.5 million shares worth RM683.1 million.

For the actives, Karambunai Corp gained one sen to 21.5 sen, Sanichi Technology rose one sen to 9.5 sen, Harvest Court Industries warrants gained 30 sen to RM1.05 and Focus Dynamics Technologies increased 1.5 sen to 12.5 sen.

Among heavyweights, Maybank rose two sen to RM8.25, CIMB Group Holdings gained one sen to RM7.37, Sime Darby increased four sen to RM8.84 and Petronas Chemicals Group added six sen to RM6.37. -- Bernama

AP Land adjourned EGM on Nov 15

KUALA LUMPUR (Nov 8): AP Land Bhd’s adjourned EGM will be held on Nov 15 at the Tasik Puteri Golf & Country Club, Kundang, Selangor.

A company statement on Tuesday said the EGM was to consider and if thought fit, passing with or without modifications the relevant resolutions in the notice of adjourned EGM.

To recap, on Oct 26, the EGM ended mid-way following a discrepancy in the company’s circular to shareholders, pertaining to the proposed offer from 34%-owned shareholder Low Yat Holdings Sdn Bhd (LYH) to buy all the assets and liabilities of AP Land for RM305.2 million or 45 sen per share.

The discrepancy was due to an inconsistency between AP Land audit committee’s findings and the directors’ recommendation.

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

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

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

KLCI pares down gains at mid-day

KUALA LUMPUR (Nov 8): The FBM KLCI pared down some of its gains at the mid-day break on Tuesday, Nov 8 in line with the overall cautious sentiment at key regional markets as issues in Europe remain unresolved, with Greece struggling to pick a new leader and Italy still mired in debt.

The FBM KLCI was up 8.21 points to 1,485.72 at the mid-day break.

Gainers led losers by 380 to 214, while 265 counters traded unchanged. Volume was 954.5 million shares valued at RM683.1 million.

The ringgit weakened 0.07% to 3.1306 versus the US dollar; crude palm oil futures for the third month delivery rose RM5 per tonne to RM3,025, crude oil added seven cents per barrel to US$95.59 while gold fell US$2.55 an ounce to US$1,792.55.

At the regional markets, Hong Kong’s Hang Seng Index rose 0.65% to 19,804.91, the Shanghai Composite Index gained 0.48% to 2,521.95 and Singapore’s Straits Times added 0.21% to 2,854.09.

Meanwhile, Japan’s Nikkei 225 fell 0.80% to 8,696.68, South Korea’s Kospi lost 0.21% to 1,915.11 and Taiwan’s Taiex shed 0.07% to 7,616.41.

On Bursa Malaysia, DiGi gained 80 sen to RM34.10, F&N 42 sen to RM17.56, Dutch Lady 32 sen to RM20.60, Harvest Court 29.5 sen to RM1.17, Malaysia Smelting Corp 27 sen to RM4.24, Petronas Dagangan and BAT 24 sen each to RM16.32 and RM46.42, while Malayan Flour Mills and KLK rose 22 sen each to RM7.55 and RM21.22.

Karambunai, which earlier this morning said the increase in price and trading volume in its securities over the past three trading days was due to pure speculative activity, was the most actively traded counter in the morning session.

The stock rose one sen to 21.5 sen with 102.3 million shares done.

Other actives included Sanichi,Harvest Court shares and warrants, Focus, Flonic, Palette, Compugates and HWGB.

Decliners included Cocoaland, Ta Ann, Panasonic, Aeon, PacificMas, MBM Resources and Kulim.

Moody's maintains Baa1 rating for Tenaga

KUALA LUMPUR (Nov 8): Moody's Investors Service has maintained its Baa1 rating with a stable outlook for TENAGA NASIONAL BHD [], as the shortage in gas -- the key component for its generation of electricity -- continues.

In a statement Nov 8, Moody’s said since 2Q11, Tenaga had been burning oil and distillates, which cost about five times more than gas, to replace the gas shortfall and generate its required level of electricity.

Alvin Tan, a Moody’s analyst said the rating agency was maintaining its current rating and outlook because it expects timely intervention by the Malaysian government, the largest shareholder of both Tenaga and its gas supplier, Petroliam Nasional Bhd.

Tan was speaking on the release of a Moody's special comment on the impact of the shortage on Tenaga.

The report entitled “Tenaga Burns Oil -- And Cash -- As Gas Shortages Continue” was authored by Tan and Ivy Poon, a Moody's Associate Analyst.

"So far, Tenaga has absorbed the additional burden within its rating's financial parameters, which still have some headroom, but a prolonged imbalance in Malaysia's power sector and a lack of supportive measures from the government to relieve the burden could weigh on these metrics, and put pressure on the rating," said Tan.

In addition to continued governmental support, Moody's rating and stable outlook for Tenaga assume that (1) the gas shortage will diminish over the near term as new sources of supply become available; (2) the government will decide on an appropriate cost-sharing mechanism over the next 6-8 months to compensate Tenaga for its added costs; and (3) the negative impact on Tenaga's financial profile of having to use more-expensive oil and distillates will be temporary.

Tan said the shortage had been caused by an increased number of planned and unplanned maintenance outages at Petronas facilities and the shutdown of one of its gas plants since December 2010 due to a fire.

Tenaga, approximately 84.08% directly and indirectly owned by the Malaysian government, is the only vertically-integrated electric utility in the country.

With an installed capacity of 21,817MW as of August 2011, Tenaga accounts for approximately 47.4% of electricity generation in Peninsular Malaysia.

It is also the monopoly operator for the transmission and distribution of electricity in the country.

KLCI extends gains at mid-morning amidst cautious sentiment

KUALA LUMPUR (Nov 8): The FBM KLCI extended its gains at mid-morning on Tuesday, Nov 8 but trading remained relatively muted in line with the cautious sentiment at most key regional markets.

At 10am, the 30-stock index rose 11.99 points to 1,489.50, lifted by gains at select blue chips.

Gainers led losers by 316 to 103, while 185 counters traded unchanged. Volume was 442.79 million shares valued at RM265.13 million.

Meanwhile, Asian shares rose on Tuesday, but gains were capped by concerns that surging bond yields could stifle debt-ridden Italy's fund raising ability and throw the euro zone deeper into financial turmoil, while Greece struggled to pick a new leader, according to Reuters.

At the regional markets, Hong Kong’s Hang Seng Index added 0.52% to 19,779.38, Taiwan’s Taiex rose 0.70% to 7,675.10, Singapore’s Straits Times Index gained 0.59% to 2,865.08 and South Korea’s Kospi was up 0.17% to 1,922.45.

Meanwhile, Japan’s Nikkei 225 fell 0.27% to 8,743.15 and the Shanghai Composite Index shed 0.08% to 2,507.75.

BIMB Securities Research in a note Nov 8 said that Europe’s musical chair continued, adding now that Greece seemed to have its house in order with the imminent resignation of its Prime Minister, focus had shifted to Italy after its borrowing costs as reflected by its 10-year treasury yield which touched a record high of 6.68% yesterday (as compared to Greece’s 27.85%).

Italy has the second highest public debt versus GDP ratio of 119% in Europe after Greece’s 143%, it said.

Many believe Italy may also see a change in its Government hence the softer closing of most European bourses, it said.

The research house said trading on Wall Street was choppy yesterday before ending the session 85 points higher above the 12,000 mark, adding that regional bourses were generally weaker on Eurozone concerns.

“We would expect the FBM KLCI to open weaker today on a jittery market undertone.

“Nonetheless, we see the benchmark index to be range bound between the 1,460-1,480 levels,” it said.

On Bursa Malaysia, DiGi was the top gainer at mid-morning and was up 58 sen to RM33.88; KLK added 32 sen to RM21.32, BAT 30 sen to RM46.48, Harvest Court 26.5 sen to RM1.14, Petronas Dagangan 24 sen to RM16.32, Malaysia Smelting Corp 21 sen to RM4.18, Petronas Gas and PPB 20 sen each to RM13.34 and RM17.26, while MISC gained 19 sen to RM7.08.

Meanwhile, Bursa Malaysia Securities Bhd issued an Unusual Market Activity (UMA) query to SANICHI TECHNOLOGY [] BHD [] over the sharp rise in price and high volume of the company’s shares.

Sanichi was up 1 sen to 9.5 sen with 47 million shares traded.

Other actives included Harvest Court, Compugates, HWGB, Flonic and AsiaBio.

Decliners included Panasonic, PacificMas, KESM, Nilai, Batu Kawan, Tan Chong and Kulim.

KL shares firmer on buying interest

Share prices on Bursa Malaysia was traded higher, in early trade, in tandem with gains in regional Asian markets and overnight US stock markets, dealers said.

Dealers said persistent buying interest following last Friday's uptrend helped to sustain the market momentum.

As at 9.14 am, the FBM KLCI was 6.86 points better at 1,484.37 after opening 5.77 points higher at 1,483.28.

The Finance Index rose 54.26 points to 13,339.10 and the Plantation Index added 24.12 points to 7,571.01 and the Industrial Index gained 13.55 points to 2,715.25.

The FBM Emas Index advanced 44.13 points to 10,116.28, the FBM Mid 70 Index perked 43.37 points to 10,886.13 and the FBM ACE Index increased 60.48 points to 4,260.42.

Gainers beat losers 177 to 51, 131 counters unchanged, 1,113 counters untraded and 26 counters were suspended.

Turnover stood at 152.07 million shares worth RM86.02 million.

Among the actives, Harvest Court Industries warrant gained 23 sen to 98 sen, Sanichi Technology rose 1.5 sen to 10 sen, Harvest Court Industries increased 25.5 sen to RM1.13 and Asia Bioenergy was unchanged at 5.5 sen.

Among the heavyweights, Maybank rose four sen to RM8.27, CIMB Group Holdings gained one sen to RM7.37, Sime Darby increased six sen to RM8.86 and Petronas Chemicals Group added two sen to RM6.33. -- Bernama

Nestle declines on lower Q3 net profit

Nestle (Malaysia) Bhd, the local unit of the world’s biggest food company, fell the most in almost a week in Kuala Lumpur trading after reporting third- quarter net profit fell to RM110 million.

The stock dropped 1 percent to RM49.50 at 9:20 a.m. local time, set for its biggest decline since Nov. 2. -- Bloomberg

Malaysia Smelting gains on profit swing

Malaysia Smelting Corp, the world’s second-biggest tin producer, rose the most in almost three months in Kuala Lumpur trading after reporting a third-quarter profit of RM41.8 million following a loss a year earlier.

Its shares gained 4.5 percent to RM4.15 at 9:04 a.m. local time, set for their biggest increase since Aug. 11. -- Bloomberg

Harvest Court hits 9-year high

Harvest Court Industries Bhd, a Malaysian timber company and manufacturer, rose to the highest in more than nine years in Kuala Lumpur trading even after issuing a statement to say it can’t explain a recent rally in its share price.

The stock gained another 29.1 percent to RM1.13 at 9:14 a.m. local time today, set for its highest close since May 16, 2002.

It has rallied 179 percent over the past five trading days, according to data compiled by Bloomberg. -- Bloomberg

Karambunai cautions on price surge

Karambunai Corp, a Malaysian resort operator, said it can see no reason for a surge in its share price and trading last week.

The company said it was likely to have been “pure speculative activity” and cautioned investors to trade based on fundamentals, according to a Kuala Lumpur exchange filing today.

The stock rose 41 percent on Nov. 2 and 7.9 percent on Nov. 4 to end the week at RM20.5.

CIMB Research maintains Neutral on Masterskill

KUALA LUMPUR (Nov 8): CIMB Research is maintaining its Neutral outlook on Masterskill Education Group Bhd.

It said on Tuesday that the National Higher Education Fund Corporation’s (PTPTN) decision to stop giving student loans for expenses come 2013 will hit Masterskill’s student intake, which was already at a historical low in July-September 2011.

“Brace for poorer 3Q results. We cut our EPS after revising our assumptions for student numbers. Though we roll over our valuation horizon, our target price falls as we now apply a target P/E of 7.6 times (8.7 times previously), based on an unchanged 40% discount to our revised target market P/E. Maintain NEUTRAL,” it said.

Bursa queries Sanichi over price rally

Sanichi Technology Bhd, a Malaysian precision moulds and toolings company, rose to a three-month high in Kuala Lumpur trading, prompting the stock exchange to query the stock’s recent rally.

Its shares gained 17.7 percent to 10 sen at 9:22 a.m. local time, set for their highest close since Aug. 4.

Sanichi has doubled in value since Nov. 3. -- Bloomberg

Bursa queries Sanichi Technology

KUALA LUMPUR (Nov 8): Bursa Malaysia Securities Bhd has issued an Unusual Market Activity (UMA) query to SANICHI TECHNOLOGY [] BHD [] on Tuesday, Nov 8 over the sharp rise in price and high volume of the company’s shares.

At 9.15am, Sanichi was up 1.5 sen to 10 sen with 28.6 million shares traded.

Bursa had asked Sanichi to explain if the company was aware of any corporate developments, rumours or reports relating to its business and affairs that may account for the unusual market activity, or if there was any other possible explanation to account for the unusual market activity.

Affin Research maintains Add to Nestle, TP RM51.95

KUALA LUMPUR (Nov 8): Affin Investment Bank Research is maintaining its ADD recommendation for Nestle with an unchanged target price of RM51.95.

It said on Tuesday it was maintaining its FY11-13 net earnings forecasts. It continues to advocate Nestle as a defensive stock.

Affin Research cited Nestle’s proven track record in effective cost management; high dividend yields of 4%-4.6%; strong growth prospects in the export markets, and the firm position its products have as a household staple.

“Maintain ADD, with a DDM-derived target price of RM51.95. Key risks to the stock are: 1) a sharp slowdown in consumer spending, and; 2) increased volatility in prices of Nestle’s key commodities,” it said.

RHB Research has underperform on CSC Steel, FV 90c

KUALA LUMPUR (Nov 8): RHB Research Institute has an underperform call on CSC Steel after its nine-month FY2011 net profit came in below expectations.

“We believe the variance vs. our forecast largely came from worse-than-expected margin contraction in 3QFY11 as a result of lower selling prices of its steel products,” it said on Tuesday.

RHB Research said the 3QFY11 net profit plunged 80.8% mainly due lower selling prices amid weak demand for its steel products.

“We are cutting our FY11-13 net profit forecasts by 8% to 32% largely to reflect lower selling prices of its steel products. Indicative fair value is reduced to 90 sen (from 98 sen) based on 7.0 times revised FY12 EPS of 12.9 sen,” it said.

The research house said the saving grace for CSC Steel is its strong balance sheet with net cash position of RM213.5 million, translating to 56 sen a share.

Unusual market activity due to speculation, says Karambunai

KUALA LUMPUR (Nov 8): Karambunai Corporation Bhd said the increase in price and trading volume in its securities over the past three trading days was due to pure speculative activity.

In a filing to Bursa Malaysia Securities on Tuesday, Nov 8, Karambunai said it was not aware of any corporate developments, rumours or reports relating to its business and affairs that may account for the unusual market activity.

“The Board of Directors of Karambunai is of the opinion that the unusual market activity is contributed by pure speculative activity and would like to caution members of public to trade in its shares based on the fundamentals of the company,” it said.

CIMB Research has technical buy on Supermax

KUALA LUMPUR (Nov 8): CIMB Research has a technical sell on Supermax Corp at RM3.62 at which it is trading at a FY12 price-to-earnings of 9.1 times and price-to-book value of 1.6 times.

It said on Tuesday the rebound has taken prices back up to retest the previous support turned resistance levels.

“At current levels, we believe that the upside is likely capped by its 200-day SMA and the downside risk is now higher compared to its potential ST return,” it said.

Technical landscape is starting to weaken with its MACD starting to rollover. Its RSI has also hooked lower from the overbought levels.

“Our strategy here is to unload on strength, especially near the RM3.80-RM4.00 resistances. Prices could soon pullback towards its uptrend support line RM3.28 and keen buyers should wait around those levels to accumulate. The key support remains at RM2.86,” it said.

CIMB Research has technical buy on Mulpha Intl

KUALA LUMPUR (Nov 8): CIMB Research has a technical buy on Mulpha International at 39.5 sen at which it is trading at a price-to-book value of 0.3 times.

It said on Tuesday Mulpha appears to be forming a short term bullish flag pattern, and this pattern suggests that prices are more likely to breakout of its long term downtrend resistance soon.

“MACD and RSI are flattening out but remained above the key support levels. This would increase the odds of another break upwards.

“The stock is a buy now with a stop placed below 38 sen, is 30-day SMA. The gap at 38 sen to 39.5 sen could also give the bulls some support. On the upside, resistance is seen at 42.5 sen and the gap at 45 sen to 46 sen. The 200-day SMA at 48 sen could also be tested,” it said.

HDBSV: Market to tread sideways

KUALA LUMPUR (Nov 8): Hwang DBS Vickers Research said the Malaysian stock market is expected to move sideways on Tuesday following the mixed performance of overseas bourses.

It said most regional stock exchanges ended weaker Monday – paced by Hong Kong (-0.8%), China shares listed in Hong Kong (-0.5%) and Korea (-0.5%) – when Bursa Malaysia was closed for a public holiday.

Meanwhile, key U.S. equity indices were up between 0.3% and 0.7% last night amid news that the European debt crisis would be brought under control in two years’ time.

“The mixed overseas performance will likely lead our Malaysian stock market to move sideways today. On the chart, the benchmark FBM KLCI may test the resistance-turned-support line of 1,475 ahead,” it said.

Among the stocks that could be in the limelight are: (a) Melati Ehsan, which has been awarded two contracts totaling RM298m to undertake housing projects; (b) Konsortium Logistik, after a business weekly said that its major shareholder may be looking to take the company private; and (c) Sanichi TECHNOLOGY [], following a local media report hinting that a German firm is close to acquiring a major stake in the plastic injection mould fabricator.

The rise of penny stocks on Bursa

Over the past two weeks, penny stocks have been dominating the top active lists. More importantly, a bulk of these active penny stocks have appreciated in prices.

Kuala Lumpur: Interest on penny stocks is on the rise again, a sign of renewed confidence among retail investors, said brokers and analysts.

Penny stocks are quoted securities that are trading below the RM1 mark. They are seen as studs in a bull market, as retailers clamour for action at the lowest possible cost.

Over the past two weeks, penny stocks have been dominating the top active lists. More importantly, a bulk of these active penny stocks have appreciated in prices.

Interest in penny stocks are mainly driven by retail investors' confidence, added participation of day traders and speculators and the willingness of brokerages to provide margins.


"It clearly shows the return of retail investors, which is also a sign of the return of confidence on the market," Jupiter Securities head of research, Pong Teng Siew, told Business Times on Friday.

Another analyst added that the rally in these penny stocks could be driven by recent gains on blue chip counters.

"Many blue chips have gained significantly over the past four weeks, resulting in a good run last month. A number of these stocks have now become 'expensive'. This may be why investors are now shifting their focus onto penny stocks," said an analyst from a local research house.

Among the top performing penny stocks over the past two weeks are Harvest Court Industries Bhd, which more than tripled from 27 sen to 87.5 sen; Connectcounty Holdings Bhd (+80 per cent); Sanichi Technology Bhd (+54 per cent); Karambunai Corp Bhd (+50 per cent); DVM Technologies Bhd (+18 per cent); GPRO Technologies Bhd (+15 per cent); XOX Bhd (+14 per cent); and Envair Holding Bhd (+10 per cent).

Retail investors' participation in stock market has also increased over the recent days.

So far this month, at least one-third of trades were done by local retail investors and last Thursday, most of the trades were done by retail investors (41.73 per cent local retail participation against 34.98 per cent local institution participation and 23.29 per cent foreign participation).

Data also showed that retail investors were net seller of about RM40 million worth of shares over the past week.

"This is normal, as most retail investors adopt short-term trading mentality, so the net sellers position may probably because they buy low, sell high," added Pong.

While the growing interest signifies the return of retail investors confidence, analysts remained uncertain if it could translate into a year-end mini-bull run.

"I think all signs are pointing to a short-term rally, but it is difficult to determine when it will start or end, or how long it will last," said the analyst who declined to be named.

Stocks to watch: Melati Ehsan , F&N, MSC, Nestle

KUALA LUMPUR (Nov 6): Malaysian stocks will have to take their cue from regional and Wall Street when trading resumes on Tuesday, Oct 8.

Investors will have to prepare for the crisis as the chaos in Europe is far from over. Greek Prime Minister George Papandreou won a parliamentary confidence vote early Saturday, which helped the cash-strapped country avoid snap elections that would have destroyed its bailout deal and turned up the flames on the euro zone's economic crisis.

Stocks to watch on Tuesday include MELATI EHSAN HOLDINGS BHD [], Fraser & Neave Holdings Bhd (FNHB), MALAYSIA SMELTING CORPORATION [] Bhd and Nestle (Malaysia) Bhd following the corporate results last Friday.

Melati Ehsan unit Pembinaan Kery Sdn Bhd has accepted two contracts from the Housing and Local Government to undertake two housing projects worth RM298 million in Kuala Lumpur.

Fraser & Neave 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 where there was a gain of RM382.03 million after selling its glass container business.

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 including the RM382 million gain on divestment of the glass business. Its revenue rose 7.6% to RM3.915 billion from RM3.637 billion.

MSC 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 an impairment provision for goodwill of RM73.63 million.

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.

Nestle 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.

Its 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.

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.

Meanwhile, The Edge weekly said there is little to indicate how Proton Holdings' recent MoU with Hawtai Motor Group will impact the national carmaker, especially since the outcome of its 2007 tie-up with Youngman Automobile Group remains uncertain.

As for GHL SYSTEMS BHD [], the group is looking to turn around its fortunes by banking on its strategic solutions business to drive future growth.