IOI, Dutaland rescind RM830m land deal

IOI Corporation Bhd and Dutaland Bhd have agreed to mutually rescind the sale and purchase agreement (SPA) for the proposed acquisition of 11,977.91ha of oil palm plantation land for RM830 million.

IOI said its unit Sri Mayvin Plantation Sdn Bhd and Dutaland's Pertama Land and Development Sdn Bhd had entered into a deed of rescission with immediate effect in a move to resolve all issues and disputes relating to the SPA.

"The parties are released from all obligations and liabilities in connection with the SPA and neither party shall have any further claim against the other in respect thereto," it said in a filing to Bursa Malaysia today.

IOI said following from the execution of the deed of rescission, OSK Trustees Bhd, the stakeholder jointly appointed by the parties, will proceed to refund the RM83 million deposit earlier paid by Sri Mayvin together with all interest accrued to Sri Mayvin.

In a separate statement, Dutaland said the rescission is not expected to have a material effect on the earnings, net assets and gearing of the company for the financial year ending June 30, 2012.

Dutaland said it would continue to manage the properties to generate positive returns. -- Bernama

KLCI closes higher, boost from Eurozone but worries linger

KUALA LUMPUR (Nov 9): The FBM KLCI extended its gains led by key blue chip stocks and positive sentiment from some developments in the Eurozone despite uncertainties from Italy.

The FBM KLCI rose 9.18 or 0.62% to close at 1,489.64, pushed up by key blue chip stocks including Axiata, Sime Darby and GENTING BHD []. Volume surged to 2.66 billion shares valued at RM1.808 billion. Gainers led losers 562 to 222, while 267 counters remained unchanged.

Key regional markets ended higher with Hong Kong's Hang Seng Index closing 1.71% higher at 20,014.43, Japan's Nikkei 225 up 1.15% to 8,755.44, Shanghai Composite Index 0.84% to 2,524.92, South Korea's Kospi up 0.23% to 1,907.53. Only Singapore's Straits Index closed down 0.19% to 2,861.17.

Later in the day, European stocks dropped on Wednesday following a short-lived rally that had been sparked by Italian Prime Minister Silvio Berlusconi's pledge to step down, as simmering fears over the country's debt pile kept investors on edge.

Global lender HSBC featured among the biggest losers, down 4.7% after posting a drop in underlying profits, hurt by lower investment banking income and a surge in bad debts in the United States.

At Bursa Malaysia, KLCI-linked stocks which provided the support were Axiata, up 13 sen to RM4.96 to push the index 2.54 points. Sime Darby added 12 sen to RM8.92 adding 1.67 points to the index and Genting 14 sen to RM11 to add 1.20 points to the index.

Dr Nazri Khan, head of retail research at Affin Investment Bank said: "The market will be well supported in the next few weeks due to lags in the market."

He said the immediate support levels for the KLCI should be sustained at 1,500 by the end of the week with the next support level at 1,450 for the next few weeks.

Volume, he said, will remain huge, in excess of one billion shares traded in as investor confidence returns to the market after recent fragile sentiments.

Nazri said developments in the Eurozone and China will be a great boost for the index.

"Main catalysts for this upbeat trend is the absence of the Greek referendum, the future resignation of Italian President Berlusconi and the anticipation of an easing of monetary policy in China as a result of the lowest recorded inflation in five months," he added.

At Bursa Malaysia, top gainers included Dutch Lady up 50 sen to RM21.00, BAT 40 sen to RM46.60, United PLANTATION []s 30 sen to RM17.88, and both NPC and Panasonic Malaysia up 24 sen to RM2.22 and RM19.36 respectively.

"Professionally speaking, I think that certain (big cap) stocks are a bit expensive, maybe that is why investors have turned to penny stocks," Nazri said.

He added that between November till Chinese New Year (typicaly in February) especially in Chinese dominated indices like Malaysia, Singapore, Hong Kong and Taiwan, he has seen a keen interest from investors in penny stocks over this period. "It’s a sort of feel good factor," he added.

Harvest Court Industries rose 27 sen to fresh multi-year highs of RM1.45 and Harvest-WA 21 sen to RM1.26 in very active trade, prompting Bursa Securities to caution investors over the sharp increase in price and volume.

Emico jumped 19.5 sen to 39.5 sen and Emico-WA 23 sen to 30 sen in active trade. Hibiscus-WA added 5.5 sen to 47 sen with 161.97 million units done while the shares rose 19.5 sen to 39.5 sen.

Among top losers were Focus Lumber down 17 sen to 63 sen while F&N and Batu Kawan shed 8.0 sen each to RM17.44 and RM15.92 respectively.

IOI Corp, Dutaland rescind RM830m oil palm estate deal

KUALA LUMPUR (Nov 9): IOI Corp Bhd and DUTALAND BHD [] have agreed to mutually rescind the sale and purchase agreement over the disputed RM830 million oil palm PLANTATION [] deal.

IOI Corp said on Wednesday that its unit Sri Mayvin Plantation Sdn Bhd and Dutaland’s Pertama Land & Development Sdn Bhd had entered into a deed of rescission in a move to resolve all issues and disputes relating to the SPA that involved 11,977.91 ha (29,597.42 acres).

“With immediate effect whereupon the parties are released from all obligations and liabilities in connection with the SPA and neither party shall have any further claim against the other in respect thereto,” it said.

IOI Corp said following from the execution of the deed of rescission, OSK Trustees Bhd, being the stakeholder jointly appointed by the parties, will proceed to refund the deposit earlier paid by Sri Mayvin pursuant to the terms of the SPA together with all interest accrued thereon to Sri Mayvin.

To recap, on Oct 25, IOI Corp terminated its proposed acquisition of the land from Dutaland, citing the cancellation was “due to non-compliance of certain terms and conditions”.

However, in a separate statement, Dutaland said it did not accept the reasons for termination of the sales and purchase agreement and directed the stakeholder, OSK Trustees Bhd not to remit the deposit of RM83 million, which was the 10% deposit paid.

Deleum inks deal with Petronas Tech

Deleum Bhd, a Malaysian oil and gas services provider, said it signed a commercialization agreement with Petronas Technology Venture Sdn Bhd for so-called solid deposition treatment technology.

This is a thermo-chemical treatment for problems with organic deposits on wells, pipelines and processing equipment, Deleum said in an e-mailed statement 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 advanced 0.6 per cent to 1,489.64, rising for a third day.

Cuscapi, a Malaysian software provider, fell 2.2 per cent to 44.5 sen after pricing its private placement at 43 sen a share, below the two-week average share price of 44.7 sen.

Hibiscus Petroleum Bhd, a Malaysian oil and gas industry investor, rose 2 per cent to 78 sen. The company was asked by the Kuala Lumpur stock exchange to explain a recent jump in its share price and trading volume. The stock increased 18 per cent yesterday. Hibiscus last month agreed to buy a 35 per cent stake in Lime Petroleum Plc for US$55 million.

KPS Consortium, which makes and trades paper products, rose 6.8 per cent to 31.5 sen as it plans to buy an office and a warehouse for RM9.8 million (US$3.15 million).

Kumpulan Jetson, a Malaysian builder, jumped 8.8 per cent to RM1.36, the most since March 23. The company plans to pay RM11 million to buy Asian Corporation Ltd, which owns Jetson Yangzhou, a maker of anti-vibration products for China’s car market.

Sanichi Technology Bhd, a Malaysian precision moulds and toolings company, increased 5.6 per cent to 9.5 sen, the highest close since Aug. 4. Sanichi confirmed that a German company called Protev had completed the first phase of a due diligence before buying a stake in the group.

Yung Kong Galvanising Industries Bhd, a manufacturer of steel products, dropped 4.6 per cent to 41.5 sen after reporting a net loss in the third quarter of RM4.7 million (US$1.5 million), compared with a profit of RM1.8 million a year earlier. -- Bloomberg

Market Commentary

The FBM KLCI index gained 9.18 points or 0.62% on Wednesday. The Finance Index increased 0.19% to 13282.17 points, the Properties Index up 0.90% to 959.54 points and the Plantation Index rose 0.37% to 7586.04 points. The market traded within a range of 9.53 points between an intra-day high of 1490.74 and a low of 1481.21 during the session.

Actively traded stocks include HIBISCS-WA, TEJARI, ASUPREM, DATAPRP, EMICO, HIBISCS, COMPUGT, GPRO, JCY and JCY-CD. Trading volume increased to 2677.72 mil shares worth RM1818.10 mil as compared to Tuesday’s 1812.89 mil shares worth RM1538.64 mil.

Leading Movers were AXIATA (+13 sen to RM4.96), SIME (+12 sen to RM8.92), GENTING (+14 sen to RM11.00), PETCHEM (+7 sen to RM6.48) and CIMB (+4 sen to RM7.36). Lagging Movers were KLK (-6 sen to RM21.14), GENM (-1 sen to RM3.86), AMMB (-1 sen to RM5.83), UMW (-2 sen to RM6.85) and HLFG (-2 sen to RM11.88). Market breadth was positive with 562 gainers as compared to 222 losers.-- JF Apex Securities Bhd

‘Top heavy’ MAS faces uphill task

KUALA LUMPUR: Malaysian Airline System Bhd (MAS) is expected to remain in the red for 3QFY11 ended Sept 30. Analysts do not rule out the likelihood of further losses in the coming quarters.

Apart from volatile fuel costs, one of MAS’ biggest problems is said to be its staff costs.

Some analysts noted that while MAS has cut its unprofitable routes and flight frequencies over the years to reduce costs, this will not boost earnings if the national carrier still has to maintain a big pool of staff.

A recent report by OSK Research said it expects MAS to continue cutting capacity, notably on Asean and domestic routes as demand for full-service travel on these routes declines.

“Frankly, MAS is already in survival mode and must make hard decisions; take drastic action and trim fat,” said an analyst with an investment bank.

In the latest annual report for FY10 ended Dec 31, MAS reported staff costs of RM2.16 billion for its 20,000-strong workforce. That works out to an average cost of about RM108,000 per employee, compared with revenue per employee of RM670,000 for the year.

Interestingly, MAS’ staff strength has gone to 20,000 from 19,094 in FY08 despite its efforts to cut routes and frequencies to certain parts of the world.

Across the causeway, Singapore Airlines Ltd (SIA) had 22,282 employees with available passenger capacity of 108 billion seats per km, against MAS’ capacity of just 50.8 billion seats per km.

SIA’s revenue per employee was S$660,308 (RM1.6 million) and cost per employee stood at S$99,560 for FY11 ended March 31.

Compared with MAS’ partner AirAsia Bhd, the figures appear more alarming. While MAS’ revenue of RM13.41 billion was 3.4 times higher than AirAsia’s RM3.95 billion, its total staff costs were six times higher. Moreover, MAS’ average staff cost per employee was some 41% higher than the low-cost carrier’s.

New CEO Ahmad Jauhari Yahya has the unenviable task of turning the national carrier around and steering it out of turbulence.

AirAsia’s staff costs totalled RM360.79 million for its 4,702 staff in FY10 ended Dec 31, which translated to an average cost of RM76,762 per employee.

Some quarters may argue that this is not a fair comparison as one is a budget airline and the other a full-service carrier.

Malaysian Airlines System Employees Union (MASEU) secretary-general Ab Malek Ariff said the national carrier is “top heavy”. He believes that if MAS were to chop jobs, it should start from the top.

“If anything, I believe it is top heavy. MAS has about 2,000 employees of executive manager level and above for its 18,000 staff of supervisor and below,” he told The Edge Financial Daily.

“That is roughly a 10-to-one ratio of staff to executive managers, and that number is much too high. If MAS needs to trim, it will have to be at the top,” he said.

MASEU represents 15,000 MAS employees.

“We were told at a recent town hall meeting with management that there would be no trimming [of staff] yet. If MAS wants to lay off staff, they can do so through a mutual separation scheme [MSS], but they will have to pay compensation,” said Malek.

Some analysts believe MAS’ large workforce is not isolated to top management alone, citing that the carrier has 15 pilots per aircraft compared with the industry average of about 10.

Analysts said it is hard to believe that MAS, as a government-linked company, will make a decisive move to heavily trim staff, although many agree this a bitter pill it has to swallow.

With the ballooning losses, an analyst said MAS’ cash pile might be enough to last for just another two quarters of losses.

“MAS does have a significant cash pile, but the cash is meant for renewing its ageing fleet. Its current pace of losses is unsustainable,” the analyst told The Edge Financial Daily.

Any MSS could put a strain on MAS’ balance sheet, although it has a cash balance of RM1.58 billion, said analysts.

The national carrier implemented a voluntary separation scheme in 2006 aimed at laying off 3,000 to 5,000 staff. The scheme was expected to cost RM850 million. However, there was lukewarm response to the scheme, with only 4,500 employees opting for it.

Labour issues have proven to be one of the most challenging problem for all airlines, including MAS.

Australia’s national carrier Qantas has been battling with unions over a possible restructuring to cut 1,000 jobs from its workforce of 32,500.

Strikes escalated in length and intensity since July, at a huge cost to the world’s 10th largest carrier as result of hundreds of cancelled flights. The industrial dispute reached its peak when management implemented a complete lockout on Oct 29 only to resume flights on Oct 31 after an Australian court intervened.

The lockout is estimated to have cost Qantas A$20 million (RM64 million) a day.

MAS has been mostly mum on its turnaround plans since the collaborative agreement with AirAsia was signed, noted several industry analysts.

It is learnt that MAS’ new CEO Ahmad Jauhari Yahya will be revealing his game plan to turn around the struggling airline in about two weeks, when MAS releases its third quarter results on Nov 22.

Rationalisation of the workforce is expected to be one of the highlights of its turnaround plan.

Will the national carrier take a different path to get out of the turbulence? Jauhari and the new board certainly have their work cut out for them.


This article appeared in The Edge Financial Daily, November 9, 2011.

F&N hit by double whammy

KUALA LUMPUR: Fraser & Neave Holdings Bhd (F&N) seems to be hit by double whammy for current FY12 ending Sept 30.

The beverage group’s contract with Coca-Cola expired in September. It will feel the full impact on its earnings for current FY12 and Coca-Cola will emerge as its rival to fight for market share.

In addition, the company has to cease operations temporarily in Thailand due to the massive floods. That will take a toll on its earnings as well.

F&N announced an annual net profit of RM383.1 million, down nearly 45% from RM695.2 million in FY10, despite its revenue rising 8.3% to RM3.9 billion from RM3.6 billion.

The company saw net profit for its 4QFY11 ended Sept 30 plunge 85% to RM66.2 million from RM462.3 million, while its operating profit fell 33.8% to RM65.3 million from RM98.7 million.

Going forward, analysts expect a poorer set of results from F&N for FY12 considering the expiry of the Coca-Cola contract, which last contributed 26% of its soft drinks sales.

F&N noted in its result announcement last Friday that its soft drinks division will see a lower sales figure given the absence of Coca-Cola products. Its soft drinks division accounted for nearly half of its FY11 revenue of RM3.9 billion.

“In the absence of Coca-Cola products, the soft drinks division will see an immediate fall in sales volume in the new financial year. The division has focused on deepening and widening its product portfolio over the last few years in preparation for this eventuality,” it said.

Its soft drinks division recorded an all-time high when sales volume soared 12.2% year-on-year to 69.8 million cases in its FY11 ended Sept 30.

With the absence of Coca-Cola and Sprite, F&N aims to raise the sales of its existing core products, comprising 100 Plus and Seasons drinks, drive Red Bull numbers and to rely on the launch of two new products — Citrus and Zesta.

CIMB Research commented that it would take time for these initiatives to make up for the shortfall caused by the Coca-Cola void.

CIMB maintained its ‘underperform’ call on F&N. The rating was kept despite F&N’s core net profit coming in 5% above CIMB’s forecast, and the “surprise special” year-end dividend declared by the company.

Maybank IB Research highlighted that the termination of the partnership with Coca-Cola will depress F&N’s FY12 earnings.

Revenue and profit from 100 Plus have surpassed that of the company’s previous Coca-Cola products, said Maybank.

However, Maybank noted that the company faces a challenging year ahead with the emergence of The Coca-Cola Company as a competitor in the local market. Another concern for F&N’s future earnings is the disruptions to its Thailand operations. This segment contributed 25% to the company’s revenue and 12% of its operating profit in FY11.

F&N’s dairy plant in Rojana Industrial Park, Thailand halted production due to the floods since early last month. The company expects it will require three to five months to return to its normal capacity after the floods have receded.

F&N is insured for a total sum of five billion Thai baht (RM500 million) for an indemnity period of one year.

AmResearch has downgraded the stock to a “hold” from “buy” and reduced its fair value to RM16.75 from RM20.40. “Notwithstanding F&N’s solid long-term fundamentals backed by an established earnings delivery track record and a strong brand equity, we are downgrading the stock to a ‘hold’ due to limited upside potential on our revised fair value, post our earnings revision,” said AmResearch.

Despite the gloomy outlook on F&N, the stock closed 38 sen higher at RM17.52 on Bursa Malaysia yesterday. It was second on the top gainers list.


This article appeared in The Edge Financial Daily, November 9, 2011.

Sunrise unveils RM1.3 billion project in city centre

KUALA LUMPUR: Sunrise Bhd, a wholly-owned unit of UEM Land Holdings Bhd, has unveiled plans for its new landmark project, Angkasa Raya, which has an estimated gross development value of RM1.3 billion and is poised to be the group’s new flagship development.

Situated at the intersection of Jalan Ampang and Jalan P Ramlee, directly across the Petronas Twin Towers, the building will be on the 1.59-acre site of the former Wisma Angkasa Raya, which was demolished in August 2011.

“There are obviously challenges in the world and the property market now but we believe that this building will not only be iconic in Malaysia but also the world over. Everywhere in the world, the primest of prime properties will always be sought after,” said Datuk Tong Kooi Ong, chairman of Sunrise at the unveiling of the building’s design yesterday.

Tong, who is also on the board of UEM Land, added that the development is scheduled to be launched in the fourth quarter of 2012. At a construction cost of more than half a billion ringgit, work will start early next year and the development is expected to complete in 2016.

Despite the global economic uncertainty, Tong is confident Angkasa Raya will perform well.

Standing at 268 metres with 65 floors, the development will integrate a Grade A premium office, a luxury hotel with over 200 five-star suites, over 280 high-end serviced residences, signature retail spaces and three sky levels.

(From left) Tong, UEM Land Holdings Bhd MD/CEO Datuk Wan Abdullah Wan Ibrahim, UEM Group MD/CEO Datuk Izzaddin Idris and Scheeren.

“With the unobstructed view of the Petronas Twin Towers and the KL skyline, it offers a unique dinning experience.,” said Ong Chou Wen, general manager of projects, Sunrise.

Designed by renowned architect Ole Scheeren, founding principal of architecture firm Büro Ole Scheeren, the building comprises five distinct elements — three floating elevated tower blocks and two multi-level zones of open horizontal slabs.

The challenge, said Scheeren, was to design a building that is both respectful to and harmonious with the Petronas Twin Towers, and yet with a very different idea and qualities of architecture.

“The design of Angkasa Raya was inspired by Malaysia’s multicultural and diverse society. It proposes a new model of urban and cultural inclusiveness,” he said.

The offices, designed in alignment with sustainable architectural principles, are targeted at multinational companies, while the high-end serviced residences are sized from 500 to 2,000 sq ft.

The development is aiming for a Green Building Index certification. In line with its green practices, the tower facades are clad with modular aluminium sun-shading, geometrically optimised and carefully oriented to reduce solar heat gain.


This article appeared in The Edge Financial Daily, November 9, 2011.

AP Land adjourns EGM to Nov 15

KUALA LUMPUR: Asia Pacific Land Bhd (AP Land) has postponed the adjourned EGM to next Tuesday to seek shareholder approval to sell the company’s assets and liabilities to its major shareholder Low Yat Holdings Sdn Bhd.

The Oct 26 EGM was adjourned to yesterday due to a discrepancy in the company’s circular to shareholders relating to Low Yat’s proposed offer to buy the core business of AP Land for RM305.2 million or 45 sen per share.

Low Yat is the single largest shareholder of AP Land, holding 34% equity interest, and it is leading the management. There was an inconsistency between the 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 is “not fair” due to the large discount on the net assets per share.

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

After the meeting was adjourned, AP Land informed Bursa Malaysia later on the same day that the board had told shareholders at the meeting that it was of the opinion the offer by Low Yat was “not fair but reasonable” after taking into account the advice of Maybank Investment Bank Bhd.

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

The Minority Shareholder Watchdog Group told the media earlier that the discrepancy was material and could influence the voting on the proposed divestment.

Some minorities find the offer price of 45 sen per share way too low compared with AP Land’s net assets per share of RM1.04. Furthermore, some quarters pointed out the company’s landbank in Rawang could soon appreciate in value in view of the government’s mass rapid transit project, which is expected to improve the accessibility from the city centre to the suburban areas in the Klang Valley.

According to property valuer Khong & Jaafar, the undeveloped parcel of land in Rawang is worth RM349.2 million, compared with Low Yat’s offer price of RM305.2 million for all the assets in AP Land including plots of land in Penang, China and Japan as well as plantations.

On the flip side, if the minorities were to hold onto their shares in AP Land, there is no certainty the company’s share price would ever climb above RM1.

Some see this as a opportune time to exit, considering AP Land shares have mostly been trading below 40 sen since 2008.

In terms of financials, AP Land has been loss-making since FY09 ended Dec 31. Its net loss widened to RM5.79 million for the 6MFY11 ended June 30 from RM1.25 million in the previous corresponding period. Revenue shrunk substantially to RM44.4 million from RM62.2 million.

A point to ponder is that Low Yat, which has run the company for decades, is keen to buy out the asset rich but loss-making business now.


This article appeared in The Edge Financial Daily, November 9, 2011.

No end to Masterskill’s PTPTN worries

KUALA LUMPUR: Masterskill Education Group Bhd may see more woes ahead. The group was dealt another setback when the National Higher Education Fund (PTPTN) proposed to reduce loans for students studying at higher educational institutions.

It was reported over the weekend that PTPTN chairman Datuk Ismail Mohamed Said said the corporation had decided to make the cut as there was a large pool of borrowers and loan defaults. He reportedly said loans will continue to cover education and tuition fees, but not living expenses, and will commence in 2013.

Ismail was later quoted as clarifying that it was a proposal and that the final decision would be made by the government.

Potential cuts in funding or disbursement of PTPTN loans have long been a major worry for Masterskill as about 95% of its students depend on them. These concerns started emerging last year on reports that PTPTN saw a rising number of defaults which could limit future funding for these loans.

The concerns and foreign selling have driven the stock sharply lower since the fourth quarter last year and lately there is renewed buying interest.

Last week, Masterskill’s stock jumped from RM1.29 on Monday and Tuesday to RM1.39 on Wednesday before closing at RM1.36 on Friday on heavy volume.

Masterskill faces prospects of lower enrolment figures as competition for tertiary students heats up.

The increase in investor interest was a result of speculation on the emergence of Siva Kumar s/o M Jeyapalan as a substantial shareholder of the education group after acquiring 41.2 million shares, or a 10.05% stake, on Oct 5. The stock has also fallen sharply from its IPO price of RM3.80 last year.

The renewed interest is despite the fact that analysts have raised concerns about the prospects of lower enrolment numbers as competition to attract tertiary students heats up.

OSK Research reported last week that “new enrolments in the supposedly major student intake period from September to mid-October are likely to have fallen to the tune of a few hundreds”.

If the proposal is accepted, then the change in loan policy could possibly mean lower student intakes in the future for Masterskill, CIMB Research said in its report yesterday.

“PTPTN recently reduced the loan eligibility for healthcare-related courses from RM60,000 to RM45,000, which is lower than Masterskill’s RM52,000 average three-year course fees for diploma in nursing,” said the report. “As the RM45,000 does not include coverage for student expenses, it should not have a revenue impact on the group. But the decision to stop loans on expenses, though not immediate, is likely to dampen student enrolment.”

Leveraging on such sentiment, the research house lowered its price-to-earnings ratio (PER) target for the group to 7.6 times from 8.7 times, with a reduced price target of RM1.46 from RM1.71. It maintained a “neutral” recommendation on the stock.

Even though the report did not strike out a possible mild rebound in student numbers in the fourth quarter, the 2HFY11 earnings are unlikely to surpass that of 1HFY11 “due to the continued impact of a higher lecturer and staff cost”.

The 1HFY11 results were already lower than previously. Revenue was at RM139.47 million, 9.5% lower year-on-year (y-o-y), than the RM154.15 million posted last year. Net profit fell 30.42% y-o-y to RM34.17 million from RM49.11 million.

CIMB Research has cut its FY11 to FY13 student numbers forecast for Masterskill by 1% to 5% to between 17,000 and 19,000. It expects student growth to be 6%-7% (compared with 8%-9% previously) for the next three years.

CIMB also said in the report the recent share price rebound is “not sustainable” and expects the upcoming 3QFY11 to be weaker quarter-on-quarter.

Masterskill’s 3Q financial results are expected to be released next week (Nov 18) and investors will be waiting to know the group’s plans on how to tackle the PTPTN issue and student growth uncertainties.


This article appeared in The Edge Financial Daily, November 9, 2011.

Hartalega 2Q net profit at RM46 million

KUALA LUMPUR: Hartalega Holdings Bhd has registered a 2% drop in net profit for its second quarter ended Sept 30 to RM46.1 million from RM47.1 million in the previous corresponding period. Revenue was higher by RM45.23 million or 24.5% at RM229.54 million compared with RM184.31 million a year ago.

The group told Bursa Malaysia yesterday its gross profit margin was reduced to 26% from 33% due to increases in raw material prices of both natural rubber and nitrile.

It added that the lower earnings for 2Q were compounded by the recognition of net unrealised loss in foreign exchange and mark to market changes in fair value in forward foreign exchange contracts of RM8.7 million, compared with a net unrealised gain of RM1.6 million in the previous corresponding quarter.

For the six-month period, Hartalega’s net profit increased 13.88% to RM100.9 million against RM88.6 million a year ago.

The group also registered higher revenue of RM448.9 million, a 27% growth compared with RM354.3 million previously. According to a statement, the increase is a result of the group’s continuous expansion in production capacity and constant improvement in manufacturing efficiencies.

The group said it plans to construct next to its existing plants in Bestari Jaya a new facility for which the building plan is still pending approval from the local authority. Hartalega said it added new advanced high-capacity glove production lines to its plant 5 which start operations by February.


Managing director Kuan Kam Hon said the group’s earnings were within expectations, given the increase in raw material costs for nitrile gloves, compounded by the unrealised foreign exchange loss due to adverse fluctuations of the dollar.

“The actual amount of any loss or gain will depend on the future movements of the US dollar rate. However, we are confident that the impact will be mitigated by an increase in revenue and operating profit arising from the weaker ringgit.

“In fact, if we normalise our profit before tax to remove the impact of unrealised foreign exchange losses, the normalised PBT would be RM68.3 million compared with last year’s normalised PBT of RM59.4 million, representing a growth of 15%,” he said.

He added that on a six-month comparative analysis between the corresponding fiscal years, there have been significant improvements to the group’s bottom line and top line despite adverse conditions affecting the glove manufacturing sector.


This article appeared in The Edge Financial Daily, November 9, 2011.

GuocoLand to spend RM30m on acquisitions

KUALA LUMPUR: GuocoLand Malaysia Bhd (GLM) is planning to acquire the entire equity interest in PJ City Development Sdn Bhd and PJ Corporate Park Sdn Bhd for RM30.04 million.

“The proposed acquisitions are not expected to have any material effect on the earnings of the GLM group for the financial year ending June 30, 2012.

However, the proposed acquisitions are expected to contribute positively to the earnings of the GLM group in future years,” GLM told Bursa Malaysia yesterday.

GLM also said it would spend RM29.79 million for the proposed acquisition of the entire equity interest of five million shares in PJ City from GuoLine Asset Sdn Bhd. GuoLine initially spent RM5 million on its investment in PJ City.

The group will spend RM258,000 to acquire the entire equity interest of 20 million shares in PJ Corporate from MPI Holdings Sdn Bhd (MPIH). The original cost of investment in PJ Corp by MPIH was RM265,000.

PJ City, which deals primarily in property development and property investment, recorded a net profit of RM4.75 million for FY11 ended June 30, and its net assets was RM38.62 million. PJ Corp posted a net loss in FY11 ended June 30 of RM9,648 while its net assets was at RM249,303.

GLM’s major shareholder is Hong Leong Co (M) Bhd (HLB) through GLL (M) Pte Ltd. HLB is also a major shareholder of GuoLine and MPIH. Tan Sri Quek Leng Chan, a director of GLM and a name well associated with HLB, is deemed a major shareholder of GLM, GuoLine and MPIH.


This article appeared in The Edge Financial Daily, November 9, 2011.

MBSB aims for balanced portfolio for sustainability

KUALA LUMPUR: Malaysia Building Society Bhd (MBSB) is looking to maintain a well-balanced portfolio in terms of gross loans in order to ensure the sustainability of its business.

MBSB wants its gross loans to be composed equally of personal finance, mortgage, and corporate loans.

For 3QFY11 ended Sept 30, MBSB’s gross loans were composed of personal finance (44%), mortgage (32%), corporate (23%), and wholesale (1%) loans.

“At the end of the day, I am looking at a balanced portfolio of at least a third each [in personal finance, corporate, and mortgage loans],” CEO Datuk Ahmad Zaini Othman told an analyst briefing yesterday.

“That kind of sustainability is important for MBSB [for] its long-term survival and having [the] ability to earn consistent income moving forward,” he said.

Zaini is expecting MBSB to reach a balanced portfolio in 12 to 18 months. But he said this time frame will depend on factors such the landscape of its competitors.

Personal financing, he said, will continue to be a major contributor to the company’s revenue and growth.

Zaini says personal financing will continue to be a major contributor to its revenue and growth.

For 3Q, MBSB’s personal financing loans grew by 98%, due to more attractive terms, including bundling loans with will writing and takaful products. Its mortgages contracted by 2.1% and corporate loans by 11.2%.

Zaini said if he is taking a short-term view of MBSB, “a very narrow, shallow and selfish view”, as he described it, he would just push personal financing.

“But if you look at the sustainability of the entity itself, that is not the way to do it,” he said.

Asked what regulatory procedures are involved if MBSB converts to a commercial bank, Zaini said Bank Negara Malaysia would engage MBSB’s intention and it will probably follow the Dafia, rather than the Bafia, regulatory framework.

Dafia is the Development of Financial Institutions Act, which regulates development banks, and Bafia is the Banking and Financial Institutions Act, which regulates commercial banks and other financial institutions.

He said the central bank will also look at what MBSB’s gaps are in terms of capital assets, operations, business, and management.

Zaini said over the last three years, he has been trying to push MBSB to operate within the spirit of the central bank.

“So at the end of the day, if MBSB does decide or is chosen to go into a Dafia landscape, the closing of the gap is a lot easier,” he said.

For 3QFY11, MBSB posted a 134% jump in its earnings to RM95.08 million from RM40.51 million a year ago. Its revenue rose 72% to RM372.67 million from RM215.77 million and earnings per share was 10.88 sen compared with 5.79 sen.

As at Sept 30, its loan-to-deposit ratio was 107%. Its annualised return-on-equity (ROE) for 3QFY11 stood at 45.14%, compared with 31.3% in 2010.

MBSB’s deposits from customers grew to RM13.5 billion for 3Q compared with RM12.1 billion in 2Q. It held RM14.46 billion in loans, advances and financing with RM1.05 billion in shareholders’ funds. At end-2010, loans totalled RM10.7 billion while shareholders’ funds stood at just RM381.12 million.

MBSB has trimmed its net non-performing loan (NPL) ratio to 11% in 3Q, compared with 12.2% in 2Q. Zaini expects the net NPL ratio to come to a single digit next year.

For the cumulative nine months ended Sept 30, MBSB’s revenue of RM1 billion surpassed its annual revenue of RM769.94 million in 2010. Its cumulative net profit of RM241.61 million also surpassed its 2010 annual net profit of RM146.03 million.

On MBSB’s upcoming 4Q, Zaini said it will set a new benchmark for MBSB to start a new year in 2012.

MBSB shares closed three sen lower to RM1.74 yesterday. In a report note on Nov 1, OSK Research had a “buy” call on MBSB with a target price of RM2.70.


This article appeared in The Edge Financial Daily, November 9, 2011.

Complete Logistics plans to fully acquire Guper

KUALA LUMPUR: Guper Logistics Sdn Bhd is set to become a wholly owned subsidiary of Complete Logistics Services Bhd (CLS) if the proposed acquisition by CLS is approved.

In its proposal to Bursa Malaysia, CLS plans to acquire 1.2 million ordinary shares in Guper, or 40% equity interest, from Banjaran Unggul Sdn Bhd (BUSB), an investment holding company. CLS currently owns 1.8 million shares in Guper.

“The purchase consideration for the proposed acquisition of RM13.6 million was arrived at after taking into consideration the expected potential net profit contribution from Guper for FY12 ending March 31 of about RM6.8 million and at a price-earnings ratio (PER) of five,” CLS said in its statement to Bursa.

CLS also expects the proposed acquisition to enhance its profitability through Guper’s land-based logistics services, which include haulage, forwarding and warehousing. The group also owns and operates the Nilai Inland Port.

According to CLS, Guper contributed RM25.7 million (28.1%) to its consolidated revenue for FY11 ended March 31. Out of CLS’s net profit attributable to ordinary shareholders, Guper contributed RM2.9 million, or 74.4%.

The purchase consideration will cost CLS RM13.6 million, which the group said in its announcement it will satisfy in cash, through internally-generated funds and borrowings, if required. CLS also said that because Guper’s business is already “onstream”, the proposed acquisition is not expected to give rise to any additional financial commitment from CLS besides satisfying the consideration.

CLS recently made another purchase from BUSB. On Oct 11, CLS announced that it had entered into a share sale agreement with BUSB for a 65% stake in Ecocentre Sdn Bhd. This represents 65,000 ordinary shares and had a total cash consideration of RM242,000. Ecocentre’s business primarily involves processing and trading recycled products, trading of tyres, lubricants and related products, and provision of tyre maintenance services.

CLS closed last Friday at 34 sen with 5,000 shares traded. This was a 2.7% dip from its closing price of 35 sen on Nov 1.


This article appeared in The Edge Financial Daily, November 9, 2011.

Duo seeks removal of Focus Dynamics exec chairman

KUALA LUMPUR: Two shareholders of Focus Dynamics Technologies Bhd are seeking to remove executive chairman Datuk Manan Md Said with immediate effect.

The company noted in an announcement yesterday 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 a director of the company.

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


This article appeared in The Edge Financial Daily, November 9, 2011.

Sanichi suspended, trading resumes today

KUALA LUMPUR: Trading in the shares of Sanichi Technology Bhd was suspended from 3.12pm yesterday and will resume today.

The company was queried by Bursa Malaysia yesterday 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 shareholders are not aware of any of the following that may have contributed to the unusual market activity.”

The company later confirmed that Projektarbelt Technische Beratung Venretung International (Protev) has completed its first phase of due diligence of Sanichi and was expected to conclude phase two early 2012.

The shares rose 0.5 sen to nine 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 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.


This article appeared in The Edge Financial Daily, November 9, 2011.

MPI 1Q results disappoint

PETALING JAYA : Malaysian Pacific Industries Bhd (MPI) recorded a net loss of RM9.6 million in its first quarter ended Sept 30 (1QFY12) compared with a net profit of RM25.8 million during the previous corresponding quarter. Revenue was down 14.8% year-on-year to RM315.6 million for 1QFY12.

According the company’s announcement to Bursa Malaysia yesterday, the loss recorded during the quarter was due to lower revenue recorded across all business segments and the strengthening of the ringgit against the US dollar.

The board noted that it anticipates business prospects to remain challenging for the financial year ending June 30, 2012, given the current softening in demand and uncertain macro-economic outlook.

The board has declared an interim dividend of five sen per share tax exempt for 1Q.


This article appeared in The Edge Financial Daily, November 9, 2011.

Harvest shares, warrants heavily traded

PETALING JAYA: Shares and warrants in Harvest Court Industries Bhd remained the most active stock on Bursa Malaysia yesterday, continuing the climb from an unknown company to a star performer on the local bourse. This is despite the company’s reminder to investors to trade cautiously with regard to its shares and warrants.

Harvest denied a report in The Edge Financial Daily yesterday which said the company might be close to acquiring a privately held company, 1Green Enviro Sdn Bhd, which is involved in converting agricultural waste into paper. 1Green Enviro is linked to Harvest’s new substantial shareholder Datuk Raymond Chan Boon Siew.

“The company wishes to announce that there was no discussion on the asset injection. This is subject to rumours and reports and the board would like to remind members of the public to trade (with) precaution, based on the fundamentals and announcements made by the company,” it said in a statement.

Harvest’s share price surged 30.5 sen or 34.9% over last Friday’s closing price of 87.5 sen to RM1.18 per share, while its warrants closed 30 sen higher to settle at RM1.05.

Both the shares and warrants were the third and fourth largest gainers respectively yesterday, after DiGi.Com, which topped the list with a 70 sen gain and Fraser & Neave Holdings Bhd adding 38 sen.

Based on yesterday’s closing price, the company’s stock is now trading at 6.79 times book value based on its net tangible assets per share of 17 sen.

This outpaced the FTSE Bursa Malaysia Emas Index, which is trading at 1.8 times book value. To date, the stock has increased by 807.69% from Jan 3 when it closed at 14.5 sen. The FBM Emas Index, on the other hand, shed 3.83% year-to-date to close at 10,089.64 yesterday.

Chan has raised his stake in the company to 16.81% or 28.898 million shares, according to a filing by Harvest with Bursa Malaysia.

The filing showed that Chan acquired 5.09 million shares on Nov 4 at an average price of 84.9 sen in the open market, representing about 2.96% of the company’s total shareholdings. Chan was appointed to the board on Oct 28 after he acquired 23.808 million shares or a 13.83% stake on Oct 18 at 20 sen per share.

Interestingly, Prime Minister Datuk Seri Najib Razak’s son Mohd Nazifuddin Najib also picked up Harvest shares on Nov 4. It was noted that Nazifuddin acquired 2.04 million shares or a 1.19% stake at an average price of 84.5 sen on Nov 4.

Nazifuddin together with Chan joined the Harvest board on Oct 28.


This article appeared in The Edge Financial Daily, November 9, 2011.

Hartalega shows good operating numbers

Hartalega Holdings Bhd (Nov 8, RM5.46)
Maintain buy at RM5.41 with target price of RM6.80: Results for 2QFY12 (due yesterday evening) are likely to meet expectations with commendable operating numbers, though likely partially mitigated by some mark-to-market foreign exchange loss. We see long-term value in the stock on the nitrile glove growth story and its compelling CY12 price-earnings ratio (PER) valuation of just 8.6 times. Moreover, the stock offers a potent combination of both growth (three-year net profit compound annual growth rate of 15%) and yield (2012 net dividend yield of 5.3%). Hartalega remains our top pick in the glove sector with a target price of RM6.80.

We expect the group to post a 2QFY12 core net profit of RM54 million to RM56 million (flattish quarter-on-quarter [q-o-q], +17% year-on-year [y-o-y]; before mark-to-market forex losses), lifting 1HFY12 net profit to around RM110 million (+24% y-o-y), meeting 53% of our full-year forecast. We expect volumes to rise slightly q-o-q (by about 3% to 4%) following the retrofitting of Plant 4. Margins, however, are likely to contract q-o-q, for the group absorbed the bulk of the rise in raw material prices (natural butadiene rubber [NBR] cost: +13% q-o-q) to ensure competitive pricing.

The group has around US$73 million (RM228.5 million) worth of forex forward contracts at an exchange rate of RM3.04 to RM3.07, with the bulk expiring in March 2012 (4QFY12). As at end 2QFY12, the ringgit stood at 3.19 per dollar and has tapered off to 3.11 presently, hence the loss will only widen should the rate rise above RM3.19 in March 2012. Even with the forex loss, Hartalega’s 1HFY12 results will still be broadly in line with our forecasts and consensus.


The price of its key input, NBR, has fallen sharply by 18% month-on-month to US$1.70 per kg and is 11% cheaper than latex now. However, we do not expect significant margin improvement in the sequential quarters, for management would likely defend market share via a competitive average selling price, in view of the new capacity-led competition in the nitrile segment. Separately, sales of nitrile gloves remain strong in Europe, for they are still 10% to 20% cheaper than latex PF gloves.

We expect the group to meet our 9% y-o-y earnings growth for FY12. We also expect Hartalega to declare a first interim dividend upon the release of the results (2QFY11: four sen per share). Hartalega offers both growth and defensiveness with its net dividend yield of 5.3%. Our RM6.80 target price is based on discounted cash flow and it implies just 10.8 times CY12 PER and nine times CY13. — Maybank IB Research, Nov 8


This article appeared in The Edge Financial Daily, November 9, 2011.

Evergreen Fibreboard still weak despite better 2H

Evergreen Fibreboard Bhd (Nov 8, 91.5 sen)
Maintain neutral at 96.5 sen with revised fair value of 85 sen (from RM1.25): EFB experienced its worst quarter since 2010 in 1QFY11. The company continued to be hemmed in by flat selling prices and costlier raw materials. However, it managed to raise the selling prices of medium density fibreboard (MDF), which contributes more than 85% of revenue. The prices of 2.5mm thick MDF stood at US$270 (RM845) per cu m in January 2011 while 18mm MDF was at US$245. In July, EFB raised the price of 2.5mm thick MDF by 11.1% to US$300 per cu m while 18mm thick MDF was priced 12.2% higher at US$275. We believe the price increases, which were agreed to by EFB’s customers, will contribute to a better 2HFY11 than 1H. However, the company decided to not continue raising its product prices in August to ensure that it remains competitive.

We are forecasting a better 2HFY11 in terms of net profit given the drop in raw material prices as well as higher selling prices. But we are lowering our full-year FY11 net profit forecast to take into account its poor 1HFY11 results, weaker customer demand and higher year-on-year prices of raw materials. We are cutting our net profit estimate by 16.1% to RM58.2 million from RM69.4 million previously although we anticipate a better 3QFY11 quarter-on-quarter. For FY12, our revenue forecast is nudged down by 1.6% to RM944.9 million from RM960.4 million, while the projected net profit is reduced by 19.1% from RM77 million to RM62.3 million.


EFB will need a catalyst to propel its earnings in FY11 and FY12. We feel that the company’s earnings will still be weighed down by high raw material costs and stiff competition. Hence, we are valuing the stock at a lower seven times FY12 earnings per share (from nine times), from which we derive a fair value of 85 sen, which is in line with its five-year average historical price-earnings ratio. — OSK Research, Nov 8


This article appeared in The Edge Financial Daily, November 9, 2011.

Perisai’s prospects look good despite Garuda delay

Perisai Petroleum Teknologi Bhd (Nov 8, 62.5 sen)
Recommend outperform at 63 sen with revised target price of RM1.45 (from RM1.60): We learned from our recent meeting with managing director Izzet Ishak that the Garuda Energy (L) Ltd deal is now expected to be concluded in December, three months later than expected, because the conversion of Garuda’s mobile offshore production unit (MOPU) took longer than expected. We therefore lower our FY11 EPS by 26% as we remove the RM12.5 million net profit imputed in our numbers. However, we take comfort in the fact that the MOPU has started servicing its 2+1+1 contract at the Bekok C field. Contributions should start flowing into Perisai’s books in 1Q12.

The delay results in an earnings per share (EPS) downgrade for FY11 only. Our target price also drops as we roll it forward and use our CY13 target market price-earnings ratio of 12.6 times instead of our CY12 PER of 14.5 times. Fleet expansion and potential marginal field jobs support our “outperform” call.

We are pumped about Perisai’s prospects. Contributions from Garuda may come through later than expected but Perisai has started to reap the benefits of last year’s restructuring. In August, the company completed the RM45 million acquisition of a 51% stake in Intan Offshore Sdn Bhd. The Intan and Garuda acquisitions underpin our expectations of record net profits in FY12 and FY13 and a robust three-year EPS compound annual growth rate (CAGR) of 112%. The 209% EPS surge in FY11 will be Perisai’s first earnings growth in four years.


We advise investors to accumulate this undervalued stock aggressively. Its EPS CAGR is hard to beat and the stock offers the most share price upside in our oil and gas portfolio. Despite this, FY12/FY13 times PERs are under six times, making Perisai the cheapest stock in the portfolio. Potential marginal field contracts, which may require MOPUs, add to the attraction. — CIMB Research, Nov 8


This article appeared in The Edge Financial Daily, November 9, 2011.

Nestle managing input cost inflation

Nestle (M) Bhd (Nov 8, RM49.50)
Maintain neutral at RM50 with revised target price of RM47.35 (from RM46.90): Nestle’s 9MFY11 net profit rose 4.9% year-on-year (y-o-y) to RM369.2 million. It is in line with our but above consensus estimates, accounting for 78.8% and 81.4% of the full-year figures. No dividend was declared for this quarter.

Nestle’s 9MFY11 revenue registered a double-digit growth of 14.7% y-o-y to RM3.5 billion against the preceding year’s RM3.1 billion. The good performance was boosted by better growth in domestic and export sales. Input costs still remained at high levels for Nestle at RM671.1 million (+15.9% y-o-y). The main culprit still lies in the rising prices of raw materials such as coffee beans (+15.8% year-to-date). The escalating raw material prices have also led to a lower earnings before interest and tax (Ebit) margin of 0.9 percentage points.

The encouraging sales were boosted by higher aggregate demand due to the festive season, fasting month and Hari Raya Aidilfitri as well as benefiting from the round of price increases on selective products in May. Contrary to that, net profit on a sequential basis dropped slightly to RM110 million (-2.8% y-o-y) from RM113.2 million due to a higher-than-expected effective tax rate.

The rise in raw material prices still remains the biggest challenge to Nestle. The surge in commodity prices will put further pressure on its input costs. However, it is worth noting that Nestle will closely monitor the movement in commodity prices, improve operational efficiencies and cost savings to avoid having to pass on the costs to consumers.

On Nestle’s annualised earnings, our forecast fell slightly behind at 4.9% y-o-y mainly due to its higher-than-expected robust business anchored by price hikes on selected products. Therefore, we fine tune our earnings forecast by +4.5% for FY11 and +7% for FY12.

The earnings revision has lifted our discounted cash flow target price to RM47.35 (previous RM46.90) with weighted average cost of capital of 8% (previous WACC of 7.6%). We like Nestle for its defensive nature. From an earnings perspective, Nestle’s FY12 price-earnings ratio of 22.5 times is considered expensive compared with its peers such as F&N (18.9 times PER), Nestle SA (15.4) and Cerebos Pacific (12.4). However, we still expect Nestle to outperform the KLCI during troubled times. We think it’s an attractive stock given its high dividend yield of 4.4%. Therefore, we maintain our “neutral” recommendation on Nestle. — MIDF Research, Nov 8


This article appeared in The Edge Financial Daily, November 9, 2011.

MHB gets RM1.4b ExxonMobil job

Malaysia Marine and Heavy Engineering Holdings Bhd (Nov 8, RM6.09)
Maintain neutral at RM6.09 with fair value of RM6.60: Last week, Malaysia Marine and Heavy Engineering Holdings Bhd (MHB) said its 100%-subsidiary, Malaysia Marine and Heavy Engineering Sdn Bhd (MMHE), had signed a contract worth about RM1.4 billion as part of the Tapis Enhanced Oil Recovery (EOR) project with ExxonMobil Exploration and Production Malaysia Inc. The scope of work includes procurement, fabrication, testing, load-out, transport, installation and commissioning of the integrated Tapis R offshore platform deck as well as two inter-platform bridges. This project is expected to be completed by end-2013.

The Tapis field lies about 190km off Terengganu at a depth of 64m. It produces an extra light and low-sulfur crude which once served as the benchmark for pricing oil cargo in Australia, Indonesia and Vietnam. According to our secondary research, this field is one of seven mature offshore fields that ExxonMobil (78%) and Petroliam Nasional Bhd (Petronas — 22%) have agreed to develop as part of a 25-year production-sharing contract (PSC) finalised in June 2009. The other six fields are Seligi, Guntong, Semangkok, Irong Barat, Tebu, and Palas, which are also covered by the PSC for the provision for the deployment of EOR and further drilling to boost production output.

The installation of facilities on this platform is scheduled to commence in 2QCY13, with Tapis EOR targeted for commencement at end-2013. The Tapis R topside is an 18,000-tonne integrated deck with facilities for gas compression, water injection and production separation. It also has living quarters to accommodate up to 145 personnel. This platform will be connected by bridge to the existing Tapis B platform and a new riser platform, Tapis Q, which we understand is also being constructed by MMHE. It is estimated that about 2,600 personnel will be involved in various aspects during the peak period for activity. This Tapis EOR project is also one of the Entry Point Projects announced by Prime Minister Datuk Seri Najib Razak under the Economic Transformation Programme (ETP).

We are positive, but make no change to our FY11/FY12 earnings because we had earlier assumed some order book replenishment for the company.

Our fair value for the stock remains unchanged at RM6.60, based on a price-earnings ratio of 23 times FY12 earnings per share. We like MHB’s market leadership in Malaysia via its three core businesses of heavy engineering and construction, marine conversion and marine repair. Also, securing this most recent RM1.4 billion contract is solid proof of the unfailing support from Petronas and its PSC contractors. To date, the group’s order book and tender book remain strong at above RM4 billion and RM5 billion. — OSK Research, Nov 8


This article appeared in The Edge Financial Daily, November 9, 2011.

Konsortium Transnasional’s 32m new shares to list Thursday

KUALA LUMPUR (Nov 9): KONSORTIUM TRANSNASIONAL BHD []’s 32 million new shares will be listed on Thursday, Nov 10.

A circular on Wednesday said the new shares resulted from the conversion of irredeemable convertible secured loan stocks (ICSLS).

The tenure of 4% three-year loan stocks 2007/2010 were extended from June 26, 2010 to June 25, 2013. The conversion is 62.5 sen for one converted share.

RAM Ratings sees Alliance Bank’s profits improving in FY12

KUALA LUMPUR (Nov 9): RAM Rating Services Bhd says Alliance Bank Malaysia Bhd’s pre-tax profit to be on track towards a better showing in fiscal 2012 after recording healthier pre-tax profit of RM596.10 million in FY ending March 30, 2011.

It said on Wednesday the ongoing progress in its asset quality had aligned Alliance Bank’s gross impaired-loan ratio - 3.0% at end-June 2011 - with the industry average.

RAM Ratings said the banking group's credit-cost ratio is forecast to come in at a healthy 0.30% in FY March 2012, with full provisions made on its exposure to collateralised loan obligations.

“In the absence of such impairment losses, the group recorded a healthier pre-tax profit of RM596.1 million in FY March 2011, and appears on track towards a better showing in fiscal 2012,” it said.

RAM Ratings reaffirmed the bank’s long- and short-term financial institution ratings at A1 and P1, respectively.

Concurrently, the A2 rating of the group’s RM1.5 billion subordinated medium-term notes issuance programme (2011/2026) (subordinated notes) had also been reaffirmed. Both long-term ratings have a stable outlook.

The ratings agency said the one-notch difference between the rating of the subordinated notes and Alliance Bank’s long-term financial institution rating mirrors the subordinated nature of the former to the Group’s senior unsecured obligations.

Alliance Bank is the smallest among the 8 domestic banking groups in Malaysia, with about 2% of the system’s outstanding loans and deposits. Nevertheless, it maintains a notable presence in consumer loans and lending to small and medium-sized enterprises, which together account for 76% of Alliance Bank’s loan book. The latter was one of the key drivers of its 4.8% loan growth in FYE 31 March 2011 (“FY Mar 2011”).

Notably, ongoing progress in its asset quality has aligned Alliance Bank’s gross impaired-loan ratio - 3.0% at end-June 2011 - with the industry average. Meanwhile, its credit-cost ratio is forecast to come in at a healthy 0.30% in FY March 2012, with full provisions made on its exposure to collateralised loan obligations.

In the absence of such impairment losses, the group recorded a healthier pre-tax profit of RM596.1 million in FY March 2011, and appears on track towards a better showing in fiscal 2012.

Alliance Bank’s strong deposit growth in FY March 2011, in contrast to its relatively modest loan expansion, had resulted in an improved loans-to-deposits ratio of 76.1% as at end-June 2011 (end-March 2010: 85.31%). However, this is expected to trend upwards as its lending momentum gathers pace.

The group’s tier-1 risk-weighted capital-adequacy ratio remained healthy at 11.3% as at end-June 2011 (end-March 2010: 11.1%).

Emico says unaware cause for unusual mkt activity

KUALA LUMPUR (Nov 9): Emico Bhd, whose shares and warrants had surged in active trade on Wednesday, said it was unaware of the reasons.

In its reply to Bursa Malaysia Securities, it said the board of directors, after making enquiries, was unaware for the factors causing the unusual market activity.

Emico said it was not aware of any corporate developments relating to the group’s business and affairs which had not been previously announced.

It also said it was unaware of any rumour or report concerning the business and affairs of Emico group that may account for the unusual market activity.

Sinaria arm buys land for RM6.5m

Sinaria Corp Bhd's wholly-owned unit Sunwish Venture Sdn Bhd has entered into a sale and purchase agreement for the acquisition of a 1.372ha piece of leasehold land in Sungai Buloh, Selangor.

In a filing to Bursa Malaysia today, Sinaria said the agreement was signed with vendors Chow Tin, Chow Sang and Chow Tuck Chor on Nov 8 for a total consideration of RM6.5 million, adding the lease on the land will expire in September 2055.

"The acquisition will facilitate the setting up of new warehousing and distribution channels by Sinaria group at the land to cater for its sales in the central and southern parts of the peninsula and to secure more market share for its products," it said.

The acquisition is expected to be completed by the fourth quarter of next year. -- Bernama

KL shares higher at mid-afternoon

Share prices on Bursa Malaysia sustained the uptrend at mid-afternoon today on continued buying momentum following the firmer overnight Wall Street, dealers said.

The dealers also said the improved sentiment on regional markets was driven by the latest news on developments in Italy's debt crisis.

News of Italian Prime Minister Silvio Berlusconi's impending resignation lifted confidence that a new leader will act more effectively to tackle the country's debt woes.

As at 3.46 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) was 5.69 points higher at 1,486.15 after opening 0.75 of a point better at 1,481.21.

The Finance Index gained 9.69 points to 13,267.28, the Plantation Index improved 15.51 points to 7,573.23 and the Industrial Index increased 12.69 points to 2,719.18.

The FBM Emas Index advanced 45.61 points to 10,135.25, the FBM Mid 70 Index perked 46.84 points to 10,903.55 and the FBM ACE Index advanced 27.69 points to 4,248.47.

Gainers beat losers 532 to 192 with 275 counters unchanged, 470 untraded and 21 others suspended. Turnover stood at 2.177 billion shares worth RM1.292 million.

Of the actives, Hibiscus Petroleum warrant gained 5.5 sen to 47 sen, Tejari Technologies rose half a sen to nine sen, Astral Supreme rose 1.5 sen to 19.5 sen and Emico Holdings increased 19.5 sen to 39.5 sen.

Among heavyweights, Maybank was unchanged at RM8.22, CIMB slipped one sen to RM7.31, Sime Darby added eight sen to RM8.88 and Petronas Chemicals Group earned three sen to RM6.44. -- Bernama

Emico queried as shares hit record high

Emico Holdings Bhd, a Malaysian maker of trophies, medallions and souvenirs, jumped the most on record, prompting the Kuala Lumpur stock exchange to query the “unusual” rise.

Its shares surged 110 per cent to 42 sen at 2.51 pm local time, with 82.7 million shares changing hands. - Bernama

Harvest Court jumps to record high

The share price of Harvest Court Industries Bhd, a manufacturer of high value-added timber finished products, jumped to a record 11-year high at midday today.

The counter leapt 27 sen to RM1.45, its highest level since September 5, 2000.

Harvest Court, last Friday, had informed Bursa that it is unaware of what contributed to an unusual market activity in the counter, in response to a query. -- Bernama

Flash: Bursa Securities queries Emico over unusual mkt activity

KUALA LUMPUR (Nov 9): Bursa Malaysia Securities Bhd has queried Emico Bhd whose shares have surged in heavy volume on Wednesday despite the absence of any fresh corporate news.

At 2.59pm, Emico-WA was up 27.5 sen to 34.5 sen with 11.02 million units done.

The shares rose 22.5 sen to 42.5 sen with 83.5 million units done.

Emico is the second day on Wednesday to be queried over the sharp increase in price and high volume of the company’s securities recently.

Earlier, Bursa Securities has queried Hibiscus Petroleum Bhd over the unusual market activity of its shares recently.

Malaysia targets to be world's largest rubber producer

KUALA LUMPUR (Nov 9): Malaysia is aiming to make a comeback as the world's largest rubber producer, with the opening of more PLANTATION []s in Sabah and Sarawak.

The Deputy Minister of International Trade and Industry, Datuk Jacob Dungau Sagan said the country used to be the number one producer globally in the mid 80s but was now in third spot.

Currently, Thailand is the world's number one in terms of production, followed by Indonesia.

"The government is placing emphasis on producing more rubber in Malaysia by not only concentrating on Peninsular Malaysia but also Sabah and Sarawak," he told reporters after opening the Fifth International Plastics and Rubber Trade Fair Malaysia (M-PLAS) 2011, here Wednesday.

During the tabling of the 2012 Budget last month, Prime Minister Datuk Seri Najib Tun Razak had announced an allocation for planting new areas with rubber trees as well as the rubber replanting scheme.

"This allocation will provide opportunities for smallholders to plant more rubber trees in the future," Jacob said.

He said looking at the price at the moment, the future for rubber is bright.

"The price will continue to rise, translating into more revenue for the country, while having a positive impact on smallholders," he added.

Meanwhile, the Malaysian Rubber Products Manufacturers' Association Executive Director Kong Ping Yee said the reason behind Malaysia's fall from the top spot in respect of rubber production, was the shift in interest towards downstream activities and higher returns from palm oil.

"We see the target to be number one again as something realistic, especially with more new rubber plantations coming up. Although at third spot in terms of production, we are quite strong in downstream activities," he added.

Earlier in his speech, Jacob said the rubber industry had contributed RM12.8 billion to the country's export earnings in 2010, and rubber products accounted for two per cent of Malaysia's total exports.

He said the Malaysian rubber products industry is made up of more than 500 manufacturers producing latex products, from tyres and tyre-related products, to industrial and general rubber products. - Bernama

Sinaria buys Sg Buloh land for RM6.5m for warehouse

KUALA LUMPUR (Nov 9): Sinaria Corporation Bhd is acquiring a piece of leasehold land in Sungai Buloh, Selangor for RM6.5 million to build a warehouse and distribution centre.

The company said on Wednesday, its unit Sunwish Venture Sdn. Bhd had signed a sale and purchase agreement with the vendors Chow Thin, Chow Sang and Chow Tuck Chor to acquire the land. The lease for the 1.37 ha site lease expires in September 2055.

“The acquisition will facilitate the setting up of new warehousing and distribution channel by Sinaria group at the land to cater for its sales in central and southern Peninsular Malaysia and to secure more market share for its products,” it said.

Sinaria said the new distribution would reduce the cost of distribution due to its central location where the transportation costs from Port Klang to the company's warehouses for imported goods will be lower in Sungai Buloh, Selangor than Sungai Petani, Kedah.

“The strategic central location will also enable the company to be more competitive in the market due to more competitive pricing from the lower transportation costs. Service level will also be better due to its proximity resulting in better market penetration,” it said.

Speculative interest in penny stocks rising

KUALA LUMPUR (Nov 9): Several penny stocks have surged, underpinned by rising speculative interest which has prompted queries from Bursa Malaysia Securities over the unusual market activities (UMA).

The latest on Wednesday was Hibiscus Petroleum Bhd which was issued an UMA. Emico Bhd, Sanichi TECHNOLOGY [], Dataprep and Harvest Courts Industries were among those which had risen sharply in very active trade.

At 12.30pm, the FBM KLCI was up 6.08 points to 1,486.54. Turnover was 1.60 billion shares valued at RM902.02 million shares. There were 441 gainers to 185 losers and 278 stocks unchanged.

Hibiscus-WA rose seven sen to 48.5sen with 127.28 million units done while the shares added 1.5 sen to 78 sen. Bursa Securities queried Hibiscus over the UMA of its shares recently.

Emico jumped 22 sen to 42 sen with 69 million shares done while the warrant surged 20.5 sen to 27.5 sen with 7.19 million units done. Investors should note that there are 11.13 million warrants in the market only.

The warrants, issued in December 2003, expire in 2013. The earlier conversion or strike price was RM1 but it was later revised to a one for one conversion after the strike price was reduced to zero.

Emico posted net profit of only RM82,000 in the second quarter ended June 30, 2011. It had accumulated losses of RM76.25 million as at June 30.

Sanichi, which resumed trading on Wednesday, rose one sen to 10 sen with 41.45 million shares done after announcing that Projektarbelt Technische Beratung Venretung International (Protev) has completed its first phase of due diligence.

Harvest jumped to a fresh new high of RM1.45, up 27 sen with 13.54 million shares done. The warrants added 20 sen to RM1.25.

Dataprep rose nine sen to 33 sen. It posted net loss of RM112,000 in the first quarter ended June 30, 2011.

KL shares bullish at midday

Share prices on Bursa Malaysia sustained the uptrend at midday today in line with gains on regional Asian markets and a firmer overnight Wall Street, dealers said.

The dealers also said the improved sentiment on regional markets was driven by the latest news on developments in Italy's debt crisis.

News of Italian Prime Minister Silvio Berlusconi's impending resignation lifted confidence that a new leader will act more effectively to tackle the country's debt woes.

The FTSE Bursa Malaysia KLCI (FBM KLCI) was 5.98 points higher at 1,486.44 after opening 0.75 of a point better at 1,481.21.

The Finance Index gained 7.41 points to 13,265 and the Plantation Index slipped 6.02 points to 7,551.70 but the Industrial Index increased 13 points to 2,719.49.

The FBM Emas Index advanced 46.101 points to 10,135.74, the FBM Mid 70 Index perked 46.15 points to 10,902.86 and the FBM ACE Index advanced 18.61 points to 4,239.39.

Gainers beat losers 441 to 186 with 277 counters unchanged, 565 untraded and 19 others suspended. Turnover stood at 1.597 billion shares worth RM902.023 million.

Of the actives, Hibiscus Petroleum warrant gained seven sen to 48.5 sen, Tejari Technologies rose half a sen to nine sen, Astral Supreme rose two sen to 20 sen and Emico Holdings increased 22 sen to 42 sen.

Among heavyweights, Maybank rose one sen to RM8.23, CIMB slipped three sen to RM7.29, Sime Darby added eight sen to RM8.88 and Petronas Chemicals Group earned seven sen to RM6.48. 09/11/2011. - Bernama

Heavy trading of Emico shares, warrants surge

KUALA LUMPUR (Nov 9): Penny stock Emico Bhd attracted heavy speculative interest on Wednesday, with the shares and warrants surging despite any strong positive corporate developments.

At 12.10pm, Emico was up 16.5 sen to 36.5 sen with 52.67 million shares done. The warrants jumped 15 sen to 22 sen with 4.87 million units transacted. Investors should note that there are 11.13 million warrants in the market only.

The warrants, issued in December 2003, expire in 2013. The earlier conversion or strike price was RM1 but it was later revised to a one for one conversion.

Bursa queries Hibiscus on share price

Hibiscus Petroleum Bhd, a Malaysian oil and gas industry investor, was asked by the Kuala Lumpur stock exchange to explain a recent jump in its share price and trading volume.

The stock climbed 2.6 per cent to a record 78.5 sen at 11.32 am local time today, after jumping 17.7 per cent yesterday.

Hibiscus last month agreed to buy a 35 per cent stake in Lime Petroleum Plc for US$55 million. - Bloomberg

Cuscapi declines after share placement

Cuscapi Bhd, a Malaysian software provider, fell in Kuala Lumpur trading after pricing its private placement at a 4.4 percent discount to its recent average share price.

The stock fell 1.1 percent to 45 sen at 9:39 a.m. local time, set for its lowest close since Nov. 3. Cuscapi priced its placement at 43 sen per share. -- Bloomberg

KL shares bullish at midmorning

Share prices on Bursa Malaysia continued the uptrend at midmorning today in line with gains on regional Asian markets and a firmer overnight Wall Street, dealers said.

The dealers also said the improved sentiment on regional markets was driven by the latest news on developments in Italy's debt crisis.

News of Italian Prime Minister Silvio Berlusconi's impending resignation lifted confidence that a new leader will act more effectively to tackle the country's debt woes.

As at 11.22 am, the FTSE Bursa Malaysia KLCI (FBM KLCI) was 6.27 points higher at 1,486.73 after opening 0.75 of a point better at 1,481.21.

The Finance Index gained 24.18 points to 13,281.77, the Plantation Index rose 2.57 points to 7,560.29 and the Industrial Index increased 19.05 points to 2,725.54.

The FBM Emas Index advanced 44.971 points to 10,134.61, the FBM Mid 70 Index perked 42.38 points to 10,899.09 and the FBM ACE Index advanced 19.51 points to 4,240.29.

Gainers beat losers 387 to 170 with 274 counters unchanged, 638 untraded and 19 others suspended. Turnover stood at 1.085 billion shares worth RM636.8 million.

Of the actives, Hibicus Petroleum warrant gained nine sen to 50.5 sen, Tejari Technologies rose one sen to 9.5 sen, Hibiscus Petroleum gained 2.5 sen to 79 sen and Sanichi Technology rose 1.5 sen to 10.5 sen.

Among heavyweights, Maybank rose three sen to RM8.25, CIMB slipped one sen to RM7.31, Sime Darby added nine sen to RM8.89 and Petronas Chemicals Group earned seven sen to RM6.48. - Bernama

Bursa Securities queries Hibiscus over unusual market activity

KUALA LUMPUR (Nov 9): Bursa Malaysia Securities has queried Hibiscus Petroleum Bhd over the unusual market activity (UMA) of its shares recently.

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

At 11.33am, Hibiscus was up two sen to 78.5 sen. There were 49.43 million shares done at prices ranging from 78 sen to 84 sen.

Bursa Securities advised investors to take note of the company’s reply to the above UMA query which will be posted at Bursa Malaysia’s website under the company announcements, when making their investment decision.

AirAsia's boss may start new premium airline

Malaysia’s AirAsia chief Tony Fernandes will set up a new premium regional airline that will compete head-on with Qantas’ upcoming RedQ full-service carrier, the Malaysian newspaper reported today quoting unnamed sources.

The report said Fernandes’ new full-service-carrier will likely be called Caterham Jet and has yet to be granted an operating licence by the Malaysian government although it has secured Bombardier CRJ aircraft.

The report quoted a source as saying that the airline will propose to the government that it operates from the Subang airport near Kuala Lumpur and is targeted to start operations in May 2012.

“Some of the proposed routes include Bangkok, Jakarta and Singapore,” said the unnamed source.

Fernandes, who is team principal of Formula One racing outfit Team Lotus, in April purchased British sportscar manufacturer Caterham Cars.

AirAsia and Fernandes were not immediately available for comment. - Reuters

KL shares advance in early trade

Share prices on Bursa Malaysia were traded higher, in early trade, in tandem with the firmer overnight Wall Street and improved market sentiment in regional markets following latest news on developments in Italy's debt crisis, dealers said.

News of Italian Prime Minister Silvio Berlusconi's resignation lifted confidence that a new leader will act more effectively to tackle Italy's debt crisis.

As at 9.16 am, the FTSE Bursa Malaysia KLCI (FBM KLCI) was 8.02 points higher at 1,488.48 after opening 0.75 points better at 1,481.21.

The Finance Index gained 47.78 points to 13,305.37, the Plantation Index rose 5.94 points to 7,563.66 and the Industrial Index increased 16.71 points to 2,723.20.

The FBM Emas Index advanced 47.311 points to 10,136.95, the FBM Mid 70 Index perked 21.39 points to 10,878.10 and the FBM ACE Index advanced 36.82 points to 4,257.60.

Gainers beat losers 195 to 43 with 135 counters unchanged, 1,096 untraded and 19 others were suspended. Turnover stood at 237.8 million shares worth RM119.8 million.

Of the actives, Hibicus Petroleum warrant gained 11.5 sen to 53 sen, Sanichi Technology rose 1.5 sen to 10.5 sen, Hibiscus Petroleum added six sen to 82.5 sen and Tejari Technologies increased one sen to 9.5 sen.

Among heavyweights, Maybank rose two sen to RM8.24, CIMB increased three sen to RM7.35, Sime Darby added two sen to RM8.82 and Petronas Chemicals Group earned four sen to RM6.45.-- Bernama

KLCI rises but struggles to maintain gains

KUALA LUMPUR (Nov 9): The FBM KLCI extended its gains for the third trading day on Wednesday, Nov 9 in line with a generally positive sentiment at key regional markets following the firmer overnight close at Wall Street.

However, the benchmark index struggled to maintain some of its gain at mid-morning and was up 8.89 points to 1,489.35.

Gainers led losers by 332 to 100, while 195 counters traded unchanged. Volume was 594.47 million shares valued at RM334.93 million.

Asian shares rose and the euro steadied on Wednesday after Italian Prime Minister Silvio Berlusconi said he would resign, raising hopes the debt-ridden country would proceed with reforms to contain the euro zone's sovereign debt crisis from spreading, according to Reuters.

At the regional markets, Hong Kong’s Hang Seng Index jumped 2.48% to 20,166.60, the Shanghai Composite Index added 0.89% to 2,526.06, Japan’s Nikkei 225 gained 0.87% to 8,730.64, South Korea’s Kospi rose 0.79% to 1,918.25, Taiwan’s Taiex rose 0.42% to 7,632.73 and Singapore’s Straits Times Index edged up 0.39% to 2,877.73.

Maybank Investment Bank Bhd head of retail research and chief chartist Lee Cheng Hooi in a note to clients Nov 9 said that due to the US markets’ much firmer tone last night, there could be an initial rise for the FBM KLCI.

He said later profit taking activities could curtail the local market’s rise in the afternoon session.

“The Asian markets will still gyrate wildly despite a firm tone for the overnight American markets.

“As such, we advise clients to still trade with a short-term time frame locally,” he said.

On Bursa Malaysia, DiGi rose 44 sen to RM34.44, United PLANTATION []s gained 22 sen to RM17.80, Harvest Court 21 sen to RM1.39, Petronas Dagangan and PPB were up 14 sen each to RM16.34 and RM17.22, Bursa 12 sen to RM6.81, Axiata 11 sen to RM4.94 and MISC 10 sen to RM6.99.

Among the decliners, Lafarge Malayan Cement lost seven sen to RM6.92, Petrol One and F&N fell six sen each to RM1.04 and RM17.46, Ekovest five sen to RM2.50, while Mexter, KLK and GAB fell four sen each to 11 sen, RM21.16 and RM11.02 respectively.

The actives at mid-morning included Tejari, Sanichi, Hibiscus, JCY, Tebrau, Flonic and Hubline.

Genting fights Disney, South Beach

Genting Bhd’s plan for a US$3.8 billion casino-and-hotel complex along Miami’s Biscayne Bay has turned into a fight over gambling and jobs pitting the Malaysian developer against Walt Disney Co, local hoteliers, restaurant owners and betting parlors.

Florida lawmakers will take up bills in January to allow three casino licences in Miami-Dade County and Broward County to the north for companies investing at least US$2 billion. Ellyn Bogdanoff, the Fort Lauderdale Republican sponsor of the Senate measure, said it has only a 50 percent chance of passing. Governor Rick Scott, also a Republican, said he’ll consider any measure that’s “fair” and “locally decided.”

Genting, whose 10,000-room Casino de Genting in Malaysia is the world’s largest by number of accommodations, began buying about US$500 million of Miami properties even before the bills were filed. The first was the 14-acre bayfront site of the Miami Herald newspaper for US$236 million in May. Las Vegas Sands Corp and MGM Resorts International said they’re also looking.

So-called destination resorts, such as the 5,200-room complex Genting proposes, may bring Florida as many as 100,000 jobs, said Jessica Hoppe, the company’s general counsel. That may help Scott fulfill a campaign promise to create 700,000 positions over seven years in a state where the unemployment rate was 10.6 percent in September, 1.5 percentage points higher than the national average at the time.

Three Rejections

Florida voters rejected casino permits three times since 1978 in statewide referendums. Now, two factors may favor them: a decision by the First District Court of Appeal on Oct. 6 that may dispense with a state ballot and a Florida economy that’s seen tax revenue decline almost 15 percent since fiscal 2006.

Diverting gamblers from the Caribbean, Las Vegas and Atlantic City, New Jersey, would boost the US$63 billion tourist industry, proponents say. Florida is trying to recover from the fourth-steepest decline in economic health of any state over the past five years, according to Bloomberg Economic Evaluation of States Index data.

“What you’re talking about is capturing a market of high - end Venezuelans, South Americans, Latin Americans, Western Europeans that love coming to Miami,” Representative Erik Fresen, a Miami Republican who sponsored the House casino bill, said in an interview in Tallahassee, the capital.

Florida isn’t the only state considering casinos as they try to close fiscal 2013 deficits. The projected gaps are an estimated US$46 billion, according to a June 17 estimate by the Washington-based Center on Budget and Policy Priorities, which advocates for low-income families.

States at Work

Massachusetts lawmakers are working on bills that would allow three resort-style casinos. Illinois Governor Pat Quinn supports elements of a bill for five casinos in his state. In New York City, Genting’s casino at the Aqueduct racetrack in Queens, which opened Oct. 28, estimates it will contribute US$350 million a year to the state for education.

Florida already allows gambling at seven casinos run by the Seminole Tribe and one by the Miccosukee Tribe of American Indians. It also permits poker at horse and greyhound tracks, jai-alai frontons and other sites. Slot machines are offered at five places in Miami-Dade and Broward.

Competition from operators such as Genting will cost Florida millions in lost revenue from the tribe, say the Seminoles, whose headquarters is in Hollywood, north of Miami. -- Bloomberg

Sanichi jumps on Protev diligence

Sanichi Technology Bhd, a Malaysian precision moulds and toolings company, rose to a three-month high in Kuala Lumpur trading after confirmed that Germany’s Projektarbelt Technische Beratung Venretung International, or Protev, had completed the first phase of due diligence before buying a stake in the group.

The stock rose 16.7 percent to 10.5 sen at 9:08 a.m. local time, set for its highest close since Aug. 4. -- Bloomberg

Yung Kong falls on Q3 loss

Yung Kong Galvanising Industries Bhd, a Malaysian manufacturer of steel products, fell the most in more than six weeks in Kuala Lumpur trading after reporting a third-quarter loss of RM4.7 million.

The stock dropped 5.8 percent to 41 sen at 9:21 a.m. local time, set for its biggest decline since Sept. 23. -- Bloomberg

HDBSVR sees mild upside for KLCI

KUALA LUMPUR (Nov 9): Hwang DBS Vickers Research (HDBSVR) expects the FBM KLCI to move with a marginal upward bias on Wednesday.

It said the KLCI, after swinging up and down inside an intra-day range of 13.1-points on Tuesday, it could pull away from the immediate support level of 1,475.

“This follows positive external developments overnight with some progress being made in Italy and Greece to keep the eurozone financial rescue plan on track. In reaction, major U.S. equity indices rose between 0.8% and 1.2% at the closing bell,” it said.

HDBSVR said in terms of share price actions on our local bourse today, aviation companies MAS and AirAsia may come under the limelight after a daily paper reported that a new super-premium full-service carrier could take off in May 2012, which then would raise the competition in the industry.

Penny stock Sanichi TECHNOLOGY [] will likely see active trading when trading resumes after it announced that German firm Protev – which is keen to buy a stake in the company – is expected to conclude Phase 2 of the due diligence in early 2012.

MPI dips in early trade on challenging outlook

KUALA LUMPUR (Nov 9): MALAYSIAN PACIFIC INDUSTRIES [] Bhd (MPI) shares declined in early trade on Wednesday, Nov 9 after the company said it anticipated that its business prospects would remain challenging for the financial year ending June 30, 2012, given the current softening in demand and the uncertain macro-economic outlook.

MPI slipped into the red for first quarter ended Sept 30, 2011 due mainly to lower revenue in all its business segments and weakening US dollar.

At 9.10am, MPI fell 10 sen to RM3.20 with 4,500 shares traded.

MPI said in Nov 8 that it posted net loss RM9.63 million in 1Q compared to net profit RM25.84 million a year earlier.

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.

HDBSVR cuts DRB-Hicom TP to RM3.45

KUALA LUMPUR (Nov 9): Hwang DBS Vickers Research (HDBSVR) has a Buy on DRB-Hicom but reduced the target price to RM3.45.

It said on Wednesday it had reduced the FY12F-FY14F earnings after factoring in lower earnings from Honda Malaysia due to the Thailand flood, back loading contribution for Deftech contract, and trimmed Alam Flora’s earnings.

“Our target price is now RM3.45, at 20% discount to sum-of-parts,” it said.

CIMB Research has technical buy on Digistar at 42.5 sen

KUALA LUMPUR (Nov 9): CIMB Equities Research has a technical buy on Digistar Corporation at 42.5 sen at which it is trading at a price-to-book value of 1.9 times.

It said on Wednesday Digistar broke out of its consolidation triangle on Tuesday on rising volume.

“There is a good chance that prices may re-rate higher and retest the 47.5 sen to 48.5 sen resistance next. The following resistance is 53.5 sen,” it said.

CIMB Research said the technical landscape is improving with its MACD histogram turning positive again while RSI has also hooked upwards.

“However, to prevent a bull’s trap, traders should place a stop below 40 sen just in case. This breakout run should be quick and strong,” it said.

CIMB Research has technical sell on IJM at RM5.71

KUALA LUMPUR (Nov 9): CIMB Equities Research has a technical sell on IJM Corp Bhd at RM5.71 at which it is trading at a FY 12 price-to-earnings of 17.8 times and price-to-book value of 1.5 times.

It said on Wednesday that similar to Gamuda, IJM has also rebouned back towards its previous support turned resistance levels of RM5.65-RM6.00.

“We would not be surprised if prices reverse and head lower from here. Both indicators still look fairly positive, suggesting that the rebound has not ended. Here, we would be sellers at a higher level as the upward momentum is still rising,” it said.

CIMB Research saidselling near the RM5.90 to RM6.00 levels would be preferable. Closing beneath the RM5.48 would likely increase the odds that prices are headed towards RM5.00 and below.

CIMB Research has technical sell on Gamuda

KUALA LUMPUR (Nov 9): CIMB Equities Research has a technical sell on GAMUDA BHD [] at RM3.36 at which is it is trading at a FY 12 price-to-earnings of 14.0 times and price-to-book value of 1.9 times.

It said on Wednesday the current rebound from its RM2.63 low have taken prices back up towards its previous support now resistance levels. Tuesday’s tweezer top pattern is also negative for the stock.

“MACD is beginning to flatten out while its RSI is now trending lower. Both suggests possible near term weakness. A close beneath the recent swing low of RM3.24 would likely confirm the reversal,” it said.

CIMB Research said selling near current levels would be a good idea. Any rebound towards RM3.45-RM3.55 is a bonus. Any close below RM3.24 levels would mean that the next support at RM3.03 and even RM2.80 could be tested.

Hartalega Q2 profit falls on high costs, forex loss

KUALA LUMPUR: Glove maker Hartalega Bhd's net profit fell marginally in the second quarter due to the increase in raw material prices of both natural and nitrile latex prices.

The company was also hit by unrealised loss in foreign exchange and changes in fair value in forward foreign exchange contracts.

The company recorded RM46.1 milllion net profit for the quarter ended September 30 2011, compared to RM47.1 million previously.

It expects growing demand for nitrile rubber, as opposed to natural rubber, to bolster its financial performance this year.

"The group is confident that global demand for nitrile gloves will grow by 30 per cent in 2011 and we are indeed well positioned to take advantage of such growth prospects," Hartalega managing director Kuan Kam Hon said in a statement yesterday.

Hartalega cautioned, however, that more glove makers were switching to nitrile glove production facilities, potentially overcrowding the market with nitrile glove producers.

The sharp increase in nitrile material price and recent high volatility of the US dollar would mean challenging times ahead.

Hartalega said it will continue to implement its expansion plan to reduce lead times to meet demand and capitalise on the expected increase in demand.

Hartalega will expand its Plant 5, by building two new advanced high capacity glove production lines. They are slated for commissioning by February 2012.

"We also plan to construct a new plant next to our existing plants in Bestari Jaya of which the building plan is still pending approval from the local authority," the company said in its notes to accounts.

Revenue for the period was 25 per cent higher to RM229.5 million from RM184.3 million previously due to continuos expansion plans and increase in demand.

The inventory level increased from RM64.7 million as at March 31 2011 to RM114.5 million as at September 30 2011 due to increase in raw material prices and also as a result of the company's stocking up of raw materials.

The company aims to keep higher inventories to reduce pressure on meeting growing sales demand.

TNB may have to increase debt: Moody's

Any rise in TNB's debt will have a negative impact on its credit profile for financial year 2012, says Moody's

KUALA LUMPUR: Tenaga Nasional Bhd (TNB) 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 yesterday, said the national utility company had 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 TNB'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 per cent to 65 per cent leverage," it said.

TNB had 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 August 31 2011 as compared to three months earlier.

The overall leverage remained adequate with adjusted debt to capitalisation at 53 per cent as of August 31.

The research house said gas supplies are expected to improve after Petronas completed its construction of a mobile offshore platform unit at Bekok C early October and shortages will ease further after a regasification terminal begins operations in July next year. - Bernama