Public Bank to launch PB Growth Sequel Fund

KUALA LUMPUR (Nov 14): Public Bank is launching the PB Growth Sequel Fund (PBGSQF) on Tuesday, an equity fund which invests in mostly Malaysian equities by focusing on sectors including financial, communications, industrial and consumer sectors.

It said on Monday, the objective of the fund – which will be managed by Public Mutual -- is to achieve capital growth over the medium- to long-term period by investing in index-linked companies, blue chip stocks and companies with healthy growth prospects that are listed on Bursa Securities

PBGSQF will invest in companies with reasonable earnings growth prospect over the medium- to long-term to maximise the growth potential of the fund.

To achieve increased diversification, PBGSQF may invest up to 30% of its net asset value (NAV) in selected foreign markets which include Singapore, Taiwan, South Korea, Japan, Hong Kong, China, Thailand, Indonesia, the Philippines, Luxembourg and other permitted markets.

The equity exposure of PBGSQF will generally range from 70% to 98% of its NAV.

The initial issue price of PBGSQF is 25 sen per unit during the 21-day initial offer period from Tuesday to Dec 5. The minimum initial investment for the fund is RM1,000 and the minimum additional investment is RM100.



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Malton buys land for RM105m, projected GDV of RM500m

KUALA LUMPUR (Nov 14): MALTON BHD [] is acquiring land measuring 56.05 acres in Ulu Kelang for RM105 million for a residential project with an estimated gross development value of RM500 million.

In a filing to Bursa Malaysia Securities Bhd on Monday, Nov 14, Malton said that its wholly owned subsidiary Gapadu Harta Sdn Bhd had entered into a sale and purchase agreement with Ukay Spring Development Sdn Bhd to acquire the land.

It said the land was located in a maturing residential area with established neighbouring developments such as Ukay Perdana, Taman Zooview, 20trees, Taman Melawati, Wangsa Maju and Taman Setiawangsa and its accessibility to various major highways such as the Kuala Lumpur Middle Ring Road 2, Duke Expressway and Ampang-Kuala Lumpur Elevated Highway was also taken into consideration.

Malton said the acquisition would be financed by internal generated funds and/or bank borrowings.

The company said the proposed development would comprise residential bungalows, semi-detached houses, medium cost apartments, low medium cost apartments and low cost apartments with an estimated gross development value of RM500 million.

“The acquisition, which will increase the land bank for development, is in line with the expansion plan of the core business activities of Malton Group (“Malton and its subsidiaries”) which are property development and CONSTRUCTION [].

“The Acquisition is expected to contribute to the medium and long term profitability and growth of Malton group,” it said.



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Bursa Securities queries Flonic

KUALA LUMPUR (Nov 14): Bursa Malaysia Securities Bhd has issued an unusual market activity query to ACE Market-listed FLONIC HI-TEC BHD [], which was the most actively traded counter on Monday, Nov 14.

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

Flonic added half a sen to 28 sen with 35.29 million shares traded.



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Bursa Securities queries DPS Resources

KUALA LUMPUR (Nov 14): Bursa Malaysia Securities Bhd has issued an unusual market activity query to DPS RESOURCES BHD [], which was the most actively traded counter on Monday, Nov 14.

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

DPS rose 17.5 sen to 31 sen with 266.4 million shares traded.



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Proton, 1MRT amicably settle “Lotus”, “Team Lotus” issue

KUALA LUMPUR (Nov 14): The legal dispute in the English Courts involving PROTON HOLDINGS BHD [] and 1 Malaysia Racing Team Sdn Bhd (1MRT) with regards to the “Lotus” and “Team Lotus” brands has been amicably settled.

In a filing to Bursa Malaysia Securities Bhd on Monday, Nov 14, Proton said the parties had agreed to the settlement terms earlier this month.

“The terms of the settlement are confidential but the deal sees the "Lotus" brand reunited under the sole ownership of Group Lotus.

“This includes the rights to the "Lotus" and "Team Lotus" names in Formula 1 motor racing,” it said.

It said 1MRT would race in the 2012 Formula 1 season under the name "Caterham F1 Team" and will use a "Caterham" chassis.

“The deal also sees a working relationship established between the parties and they will work together on future projects in the automotive field,” said Proton.



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KLCI closes firmly higher

KUALA LUMPUR (Nov 14): The FBM KLCI closed firmly higher on Monday, Nov 14 in line with key Asian markets, while European markets opened on a generally more positive tone.

The FBM KLCI rose 10.12 points to close at 1,478.87.

Gainers led losers by 647 to 193, while 246 counters traded unchanged. Volume was 2.85 billion shares valued at RM1.89 billion.

Financial markets on Monday greeted the appointments of technocratic leaders in euro zone debt hot spots Italy and Greece with cautious optimism, boosting stocks.

Italy's president appointed former European Commissioner Mario Monti on Sunday to head a new government with the task of restoring market confidence in the euro zone's third largest economy, whose debt burden is too big for the bloc to bail out.

Meanwhile in Greece, Lucas Papademos, a former European Central Bank vice president, has been sworn in as prime minister and is under pressure to implement radical reforms.

At the regional markets, Hong Kong’s Hang Seng Index rose 1.94% to 19,508.18, the Shanghai Composite Index added 1.92% to 2,528.71, Taiwan’s Taiex gained 2.15% to 7,525.65, South Korea’s Kospi rose 2.11% to 1,902.81, Japan’s Nikkei 225 was up 1.05% to 8,603.70 and Singapore’s Straits Times Index rose 1.4% to 2,830.14.

On Bursa Malaysia, DiGi was the top gainer and was up 74 sen to RM34.52; Dutch Lady gained 50 sen to RM21.50, Harvest Court 48 sen to RM2.13, United PLANTATION []s 40 sen to RM18.30, Panasonic 36 sen to RM19.36, TSH Resources 35 sen to RM3.80, while PPB and BAT gained 28 sen each to RM16.90 and RM45.98.

DPS was the most actively traded counter with 266.4 million shares done. The stock jumped 17.5 sen to 31 sen.

Other actives included DBE Gurney, Karambunai, SYF Resources, Tiger and Compugates.

Decliners included LPI Capital, BLD Plantations, Quality Concrete, Tasek, Taliworks, P.I.E. and Konsortium.



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Market Commentary

The FBM KLCI index gained 10.12 points or 0.69% on Monday. The Finance Index increased 0.16% to 13173.4 points, the Properties Index up 1.31% to 963.95 points and the Plantation Index rose 1.69% to 7646.38 points. The market traded within a range of 6.75 points between an intra-day high of 1484.88 and a low of 1478.13 during the session.

Actively traded stocks include DPS, INGENS, DBE, KBUNAI, SYF, DPS-WA, DBE-WA, TIGER, COMPUGT and INGENS-WA. Trading volume increased to 2849.36 mil shares worth RM1885.20 mil as compared to Friday’s 2068.34 mil shares worth RM1230.49 mil.

Leading Movers were IOICORP (+13 sen to RM5.17), TENAGA (+11 sen to RM5.86), DIGI (+74 sen to RM34.52), GENTING (+12 sen to RM10.70) and GENM (+9 sen to RM3.88). Lagging Movers were CIMB (-4 sen to RM7.18), AMMB (-2 sen to RM5.72) and MAXIS (-1 sen to RM5.30). Market breadth was positive with 647 gainers as compared to 193 losers.-- JF Apex Securities Bhd



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Super premium airline only an idea

KUALA LUMPUR: Group CEO of AirAsia Tan Sri Tony Fernandes today refuted news reports that he is planning to firm up the commencement of operations of a new super-premium regional airline called Caterham Jet.

It is only an idea, he told reporters here.

"There is no Caterham as what is reported in the press," he explained.

However, he said, the idea of a new super-premium airline not yet available in the Asean market is a good one.

He added that any involvement of such a super-premium airline, which will provide a more business-friendly and hassle-free service than conventional airlines, will lead to Malaysia Airlines.

With the collaboration between AirAsia and Malaysia Airlines, he said, it would be beneficial for the Malaysian aviation industry as both airlines would stand to benefit from the collaboration.

He said it would also help both airlines to expand and be profitable.

Foreign news wires, quoting unnamed aviation sources, reported that Fernandes plans to start a new regional super-premium airline called Caterham Jet to compete with Australian carrier Qantas.- Bernama



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Poultry stocks start to hatch?

KUALA LUMPUR: Poultry companies are not the first thing that typically come to mind when someone is looking for a stock to buy. Long viewed as unexciting and small with volatile earnings, the sector has largely been shunned by investors.

Sentiment was further dented by outbreaks of bird flu. But there are good reasons to change that perception. Many poultry stocks are trading at low single digit multiples and below book value. Add an ongoing industry consolidation, the end of bird flu and rising chicken and egg prices, the bigger companies may end up much more profitable as economies of scale set in. This could well trigger a re-rating of the sector.

Over the past year, poultry-related stocks have proven to be fairly resilient compared to the general market. Many, particularly those mainly involved in egg production, have hatched some good returns despite the weak broader market, as their earnings in recent quarters have shown a marked improvement.

Using as a benchmark the FBM KLCI, which fell by 3.9% to 1,468.75 last Friday from 1,528.01 a year ago, poultry stocks have performed relatively well.

Year-to-date Huat Lai Resources Bhd has gained 45.3%, Farm’s Best Bhd (38.6%), TPC Plus Bhd (18.8%), Teo Seng Capital Bhd (14.1%), CAB Cakaran Corp Bhd (11.1%), Lay Hong Bhd (2.3%), LTKM Bhd (0.5%), QL Resources Bhd (0.3%), while Leong Hup Holdings Bhd has shed 4.2%.

Most poultry counters are trading at a low price-earnings ratio (PER), below book value and have small market capitalisations.

Seven stocks, Teo Seng, Huat Lai, Farm’s Best, CAB Cakaran, Lay Hong, Leong Hup, and LTKM are trading at single digit PER, as low as 3.35 times for Farm’s Best, while seven stocks are trading below their book values. This makes them attractively priced yet fairly defensive stocks in an uncertain market.

“It would not be surprising if they become acquisition targets,” said an industry observer, adding that they have shown good growth over the last few years and there have been increasing mergers and acquisitions in the sector.

Among the names to watch, industry observers say, are Teo Seng, Huat Lai, Lay Hong, LTKM and Farm’s Best, as these stocks are trading at low PER and price-to-book valuations (P/BV).

As economies of scale improve through expansion, M&A or improved efficiency, earnings will expand and their already low PER could decline.

Market observers think Teo Seng deserves a look as the company has an excellent profit track record, unlike many of its peers, having chalked up compound annual growth rate (CAGR) for revenue and net profit of 9.2% and 20.8% since it was listed in 2008. Despite being one of the best performing stocks within the sector, its valuations are still low with a trailing PER of 5.31 and P/BV ratio of 0.93 times.

Another poultry company to note is Huat Lai, the country’s largest egg producer, which also chalked up the largest stock performance gains among its peers. Its stock has returned 45.3% over the past year and is still trading at a low trailing PER of 3.72 and decent P/BV of 1.34 times. Although its net profit in the past five years has been shaky, many say that once its proposed acquisition of TPC goes through, synergies should smoothen things out.


Under the new parentage of QL Resources, the fourth largest egg producer, Lay Hong has a more promising outlook coupled with good earnings growth in the past few years. Although its stock returned a mere 2.3% in the past 52 weeks, its reasonable PER of 5.62 times and P/BV of 0.71 times should still appeal to investors.

Investors seeking a company with recent good growth might want to consider LTKM, the fifth largest egg producer. Its CAGR from 2007 to 2011 came to 15.2% for revenue and 31% for net profit. It was trading at a trailing PER of 5.1 times and had a P/BV of 0.63 times.

Also deserving a mention is Farm’s Best, with its diverse range of poultry-related operations and recent expansion. The stock has returned 38.6% over the year, trades at a trailing PER of only 3.35 and at half book value. It has recently entered into two sales and purchase agreements to acquire two broiler farms, which will increase its broiler production by about 6% and is expected to contribute about RM16 million in annual revenue from 1Q12 onwards.

Positive industry outlook
On a macro perspective, the poultry industry has an encouraging long-term outlook given the strong demand for its products, coupled with increasing prices and Malaysians being one of the biggest consumers of eggs in the world.

The number of table eggs produced in Malaysia has grown 49.69% from 5.72 billion in 2000 to 8.57 billion in 2010, according to data from the Federation of Livestock Farmers’ Associations of Malaysia (FLFAM).

While the annual growth of 4.12% is modest, it has outpaced the country’s population growth of about 2.02% annually.

As for egg consumption, Malaysia ranks as one of the highest globally with an average consumption per capita of 320 eggs annually, compared with 250 in the US.

The majority of eggs produced are consumed domestically, but there is also growing demand for exports, which accounted for 14% of total production in 2010, according to an article in the November 2011 edition of Poultry International. The bulk of these exports went to Singapore (63.9%), while the remaining markets include Indonesia and Hong Kong.

Despite the billions of eggs produced, producers reportedly enjoy a gross margin of only one sen an egg, on average.

According to the article, the annual ex-farm price per egg was 30 sen in 2010 with production costs running at 29 sen. This puts the value of 2010’s egg production at RM2.57 billion, but with implied gross profit of only RM85 million.

Given the slim margins, poultry players appear, since late last year, to be positioning themselves to achieve higher economies of scale through M&A.

And it is a game where the biggest and most efficient players make the money, and the smaller ones are either loss-making or being weeded out.

Indeed, the slew of recent M&A is creating some excitement in the sector, throwing the spotlight on undervalued companies and triggering consolidation exercises that may well produce stronger, more profitable and potentially exciting players.

It is also noteworthy that egg prices have been on the rise this year, especially over the last month, which should be positive for margins. According to the Federation of Livestock Farmers’ Associations of Malaysia, the price of ex-farm Grade A eggs has risen by 16.7% from 30 sen per egg in early October to 35 sen on Nov 14.

M&A galore
For a sector that’s normally quiet, there has been a relatively large number of M&A over the past year.

It started in August 2010, with QL Resources Bhd buying a 23.29% stake in Lay Hong Bhd for RM48.55 million.

Last month, Huat Lai proposed to acquire a 35.65% stake in TPC for RM8.08 million.

Interestingly, the stakes of Lay Hong and TPC were sold by the same company, London Biscuits Bhd (Lonbisco) -- a confectionery maker.

In between, there was Leong Hup Holdings (an integrated poultry operator) and Emivest Bhd (mainly involved in livestock feed), receiving an offer in November 2010, totalling RM426 million from a major shareholder, Emerging Glory Sdn Bhd, to acquire all their assets and liabilities.

According to a news report last month, Leong Hup has still not decided when it will call an EGM to deliberate on the proposed takeover, but it could likely have it in the last quarter of the year or 1Q12.

Integration: Vertical or horizontal?
Interestingly, when Lonbisco bought into Lay Hong and TPC in Nov 2006 and Feb 2010, its rationale then was to ensure an adequate, regular and continuous supply of eggs at a “controlled price” to meet its ongoing expansion plans. Lonbisco is a manufacturer of cakes and confectionery.

It did not provide a rationale for disposing of its stakes but industry observers believe that the investments did not provide effective synergies.

According to an analyst, unlike Lonbisco, Huat Lai and QL will enjoy cohesive synergies as they are acquiring companies which have similar operations to their own.

He said the companies will achieve synergies from raw material sourcing arrangements, supply chain networks and operational efficiency.

The synergy between Lonbisco and the poultry companies, he explained, may not have been that effective because eggs, although a major ingredient in London Biscuit’s products, did not account substantially for its product costs.

In contrast, the analyst said, KFC Holdings (M) Bhd is an example of a synergy that worked well. He said KFC restaurant’s main product, chicken, accounts for a large part of its product costs and is backed by the company’s fully integrated poultry operations.

KFC’s wholly-owned subsidiary, Ayamas Integrated Poultry Industry Sdn Bhd, is involved in breeder and broiler farms, hatchery, and feedmill. KFC also has wholly-owned subsidiaries that have plants for processing and further processing poultry.

KFC’s integrated poultry operations in 2010 had an inter-segment revenue of RM287.88 million, which accounted for 35% of the segment’s total revenue of RM821.28 million.

The total revenue for KFC’s integrated poultry operations has grown by 16.5% annually from 2006 to 2010.

Given that margins in the egg business are slim, it would therefore make better sense for players to merge and gain economies of scale, rather than food producers acquiring them for vertical integration.


This article appeared in The Edge Financial Daily, November 14, 2011.



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Market to trend higher, but sentiment to remain cautious

KUALA LUMPUR: The FBM KLCI is expected to trend moderately higher today in line with the positive close on Wall Street last Friday. The statement by Prime Minister Datuk Seri Najib Razak that the general election would not be held this year put an end to weeks of speculation, which was described by analysts as providing some clarity to a nervy local market.

US stocks rose, ending higher for the week after the Italian Senate’s approval of economic reforms gave investors some relief from worries about the eurozone’s debt crisis.

The Dow Jones Industrial Average was up 2.19% to 12,153.68, the Standard & Poor’s 500 Index rose 1.95% to 1,263.85 and the Nasdaq Composite Index added 2.04% to 2,678.75.

Affin Investment Bank Bhd head of retail research Dr Mohd Nazri Khan said Najib’s statement is to be taken as positive for the market as it provides for more clarity and less volatility.

“Sometimes an election can heighten market fluctuation as was seen in the run-up to the Sarawak election in April this year,” he said.

He said the FBM KLCI is likely to trend moderately higher towards the 1,500 level this week on more European economic optimism, adding that he sees positive market breadth with important local sectoral indices such as financials, trading services, technology and small caps making a firmer comeback.

“As long as the FBM KLCI stays above the 1,460 level, the short-term uptrend remains intact, favouring more upside to follow,” he said.

Nazri said given the strength seen in warrants and small-cap stocks, the local market is to be less concerned over the European debt crisis but more inclined towards the bullish local year-end festive mood all the way towards Chinese New Year.

While the threat of an economic slowdown is real, recent speculative plays and good market volume confirm that local sentiment will be resilient during volatile times, he said.

Traders should therefore use temporary weakness to ride the potential year-end rally, he said.

“As for the moment, we are pegging 1,500 and 1,530 as the major resistance while 1,460 and 1,430 as the major support for the local benchmark.

“As for the downside risk, we believe any new talk of radical overhaul and breakup of the European Union may unsettle investors and create a fresh wave of volatility in global financial markets,” he said.

On the strategy this week, Nazri recommended that traders accumulate high-yield and defensive small-cap stocks in the telco and utilities sectors (such as Yi Lai, Signature, NCB Holdings and Century Logistics) which may rebound further after a deep correction in the previous months.

MIDF Research head Zulkifli Hamzah said the local equity market is currently in a period of uneasy equilibrium, but added that foreign investors appear to be keeping faith in the Malaysian market and have been gradually accumulating since early October.

“There were net buyers again last week. Yet, local investors are circumspect of the fact that remains a large overhang of foreign liquidity in the system that can decide to eject overnight,” he said.

Among the stocks that could be in focus today are Dijaya Corp Bhd, Ivory Properties Group Bhd, Kimlun Corp Bhd, KPJ Healthcare Bhd and oil and gas-related counters.

Dijaya and Ivory inked a joint-venture agreement to develop mixed residential and commercial properties in Penang with a gross development value of RM10 billion.

The two companies said the development will be completed over the next eight years and will comprise residential, shopping mall, hotel, office suites, office towers, retail spaces and an open mall with a boulevard.

Construction of the first phase is scheduled to begin next year, they said last Friday.

Kimlun secured a contract worth RM68 million to build serviced apartments in Iskandar Malaysia in Johor. It said last week that its wholly-owned subsidiary Kimlun Sdn Bhd had accepted the letter of award for the contract from Grand Action Sdn Bhd.

KPJ is buying four plots of land in Klang, Selangor for RM23.76 million cash as part of its plans to build a specialist hospital.

It said last Friday the four plots are situated within a mixed development undertaken by Sazean known as “Sazean Business Park”, and that Sazean will make an application to convert the category of the land it is buying from agricultural to building/commercial.

Petroliam Nasional Bhd and Shell Malaysia last week signed heads of agreement for new enhanced oil recovery projects offshore Sabah and Sarawak, a development which may boost the oil and gas support services-related counters.


This article appeared in The Edge Financial Daily, November 14, 2011.



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CIH still on acquisition trail

KUALA LUMPUR: Shopping for an acquisition is still on the cards for CI Holdings Bhd (CIH) even though the company will return the bulk of its gains from the disposal of Permanis Sdn Bhd to shareholders, said head of corporate finance, strategy and development Syed Khalil Syed Ibrahim.

“We will retain some of the funds to acquire a new core business, though we are very prudent about this and we want to find good investment decisions,” Syed Khalil told The Edge Financial Daily.

About 88% or RM724.2 million of the RM820 million paid by Asahi Group Holdings Ltd for Permanis will be distributed back to shareholders, the company said in an announcement to Bursa Malaysia last Thursday. Shareholders of CIH will see a gain of RM5.10 per share.

News of this sent the stock soaring to an intra-day high last Friday of RM5.30 — its highest level since June 2000. It eased to end the day at RM5.22, up 6% from its close last Thursday. Trading volume jumped 510% to 1.99 million shares last Friday from 326,200 shares the day before.

The RM724.2 million is nearly a third more than the minimum RM568 million, or RM4 per share, which was mentioned by the company previously.

“We wanted more time to see the deals that were likely to materialise in the short term, but we could not find a suitable business and we don’t want to rush into anything,” said Syed Khalil.

He declined to comment further on which industries the company is exploring specifically. Though CIH has yet to narrow its choice for its next core business to any specific sector, it has excluded the oil and gas, and property sectors due to lack of expertise.”

The company has proposed to distribute RM653.2 million through a special cash dividend of RM4.60 per share. It also proposed a payout of RM71 million or 50 sen per share to shareholders in the company’s records.

Syed Khalil noted that the decision to pay out RM724.2 million was also to avoid CIH being placed under Practice Note 16 (PN16) status by Bursa Malaysia, in which a listed company has cash or short-term investments making up at least 70% of its total assets.

The company would then be asked to submit a regularisation plan to be approved and implemented within a certain timeframe, failing which its shares could be suspended and subsequent delisted.

Syed Khalil said distributing the bulk of the gains is a move to reassure shareholders.

“Shareholders prefer that we return the money to them as there is less uncertainty (on their end) and it is better than us holding the money. We also want to maintain their support so the next time we enter a deal they are more likely to follow us. This is a long-term approach for us,” he said.

Following the distribution to shareholders, the remaining RM95.8 million will be retained as cash equivalents or directed towards short-term investments in reducing the company’s net debt position to RM13.8 million from RM109.6 million.

The amount may be used to fund future purchases.

“Depending on potential future acquisitions, we may need to raise additional capital through equity or debt,” he said.

A market observer said reducing the size of the company’s cash pile will result in a lower risk of bad or loss-making acquisitions being made.

“In the long run, it will benefit CIH,” he said.

An analyst from OSK Research said the company’s track record with Permanis proved that it is capable of growing a small company purchased with a minimal investment.

Permanis was acquired in 2004 for RM7.2 million and sold at 11.4 times its original price tag, while its revenue grew from RM248.1 million in FY05 to RM479.9 million in FY10.

However, the analyst encourages investors to wait and observe CIH’s next move.

“It might be risky to invest now. We recommend investors see what kind of new business CIH acquires. Moreover, it will take time for CIH to realise solid earnings from the new venture,” said the analyst.

She added that the company’s remaining core business has been volatile in its earnings.

CIH subsidiary, Doe Holdings Sdn Bhd, which manufactures taps and sanitaryware, has seen revenue fall in the three quarters leading up to June 30.

For its 4QFY11, it generated RM9.91 million in turnover.

This was a flat performance year-on-year and a decline of 7.3% from the previous quarter.

OSK has downgraded the stock to a “neutral” and lowered its fair value to RM5.10 from RM5.66 previously.

In an announcement to Bursa Malaysia last Friday, CIH announced the resignation of Erwin Selvarajah as CEO of Permanis, effective Nov 11. It noted that Selvarajah’s resignation was subsequent to the recent change in shareholding of Permanis and its group of companies, from CIH to Asahi.

CIH announced that it had received the full proceeds from the disposal last Friday, marking the completion of the exercise.

It added that it had made an application to Bursa seeking a waiver from the classification of the affected listed issuer under PN 16.


This article appeared in The Edge Financial Daily, November 14, 2011.



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S P Setia founder hopes spirit continues

KUALA LUMPUR: When S P Setia Bhd received the notice of take- over by Permodalan Nasional Bhd (PNB) over a month ago, Wong Chee Kooi was one of the first people the property firm’s chief Tan Sri Liew Kee Sin called. Wong founded the property developer 37 years ago.

Now in his late 60s, Wong established Syarikat Pembinaan Setia Bina Sdn Bhd, which evolved into S P Setia, in 1974. He is an industry veteran and remains active in property development.

Like all other shareholders and employees, Wong, who still holds a minor stake, is closely monitoring the developments in the company, more so after PNB moved to tighten its grip on S P Setia.

“When PNB launched the take- over, Liew called me out of respect. As a co-founder of S P Setia, I have concerns about whether PNB can continue to grow the company,” he told The Edge Financial Daily.

On Sept 28, PNB launched a takeover bid after the shareholding of the government-linked asset management firm and its parties acting in concert had increased their stake to 33.16% from 32.99% previously, following the purchase of an additional stake on the open market.

PNB is offering RM3.90 per share and 91 sen per warrant in S P Setia. The takeover offer caught many by surprise, including Liew. This is not a privatisation exercise, PNB said it will maintain the listed status of S P Setia after the takeover.

Some argue that the offer is not attractive, considering that S P Setia’s estimated net asset value is higher than RM5 per share.

A view of S P Setia's award-winning project, Setia EcoPark, in Shah Alam.

The board has, in fact, invited competing bids for the shares in S P Setia immediately after PNB made its takeover move. As at Oct 12, no competing bid had been made.

But to Wong, who helped build S P Setia from scratch from a RM70 million construction company, money is not the sole consideration.

“Price is not the only factor in deciding whether or not investors should hold on to their S P Setia shares. The key question is, can PNB grow S P Setia further without the current management?” said Wong.

PNB has made its intentions clear to keep the current management at the helm, including Liew, who is described as one of the most prolific entrepreneurs and CEOs in the country.

Three weeks after the takeover offer, PNB’s president and group chief executive Tan Sri Hamad Kama Piah Che Othman assured the investing public that Liew will continue to lead S P Setia as its CEO.

The statement stressed that the existing management team would also continue to manage the company with “the same high professional standards and spirit of excellence”.

But the statement has not eased all the concerns over the company’s prospects over the long run.

Wong sees S P Setia as a company managed by professional manager, pointing out the fact that Liew only holds 11.3% equity interest.

Wong expects Liew to remain with S P Setia at least for the short term. However, he points out that it could be just a matter of time before Liew passes on the baton to his successor.

Wong hopes that whoever replaces Liew will continue Liew’s aspirations for the company — just Liew carried on Wong’s when he took over some 15 years ago.

Wong said he has no plans to come back to the corporate scene, adding that his focus now is to grow his privately owned business together with his sons.

“Experience is one thing, but values are what I can ultimately impart, to help my sons on their learning curve. It is very difficult to do that when you are running a public listed company as your commitment is mainly to your shareholders,” he said.

The total gross development value of Wong’s family-owned L&H Property Development Sdn Bhd is estimated at some RM300 million, of which the bulk comes from its Jaya One project.

According to Wong, L&H projects have done well so far. In fact, the buyers of his properties in Jaya One are mostly S P Setia customers.

Although Wong has been out of the corporate scene for a while, his entrepreneurial spirit has kept him busy with his own projects at an age when most people would want to enjoy their retirement.

Since he relinquished his management position in S P Setia, Wong has seldom attended shareholder meetings.

However, this time could be different. He will make it a point to attend the upcoming EGM that will be convened to seek shareholders’ approval on the proposed takeover offer, which will determine the future prospects of S P Setia.

“My sense of loyalty is synonymous with the company’s name, isn’t it?” he quips.


This article appeared in The Edge Financial Daily, November 14, 2011.



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Choice of some egg players

Teo Seng Capital Bhd
One of the best performing poultry stocks is Teo Seng, the third largest egg producer in the country.

Closing at 48.5 sen last Friday, the counter has gained 14.1% over the past year. It had a market capitalisation of RM97 million and a trailing price-earnings ratio (PER) of 5.31 times. Its book value at end-June was 52 sen, placing the stock at a price-to-book ratio of 0.93 times.

An integrated poultry company, Teo Seng produces 2.2 million eggs daily and is involved in layer farming, manufacturing and marketing of paper egg trays, animal feeds and distribution of animal health products.

Since its listing on the then Second Board of Bursa in 2008 until 2011, Teo Seng has chalked up compound annual growth rates (CAGR) for revenue and net profit of 9.2% and 20.8%.


For its 1QFY12 ended June, Teo Seng’s net profit increased year-on-year (y-o-y) to RM4.76 million from RM4.19 million previously, while its revenue grew to RM61.28 million from RM43.72 million.


Huat Lai Resources Bhd and TPC Plus Bhd
Among the next best performers were Huat Lai and TPC Plus. Industry observers say that once Huat Lai’s acquisition of TPC Plus goes through, both companies will enjoy better financial results from better economies of scale.

Last month, Huat Lai proposed to acquire a 35.65% stake in TPC Plus for RM8.08 million from London Biscuits Bhd.

Huat Lai, with a trailing PER of 3.72 times and market capitalisation at RM185.6 million, was up by 45.3% to RM2.15 from a year ago. It is trading 34% above its book value of RM1.61 as at end-June.

An integrated poultry operator, Huat Lai is Malaysia’s top egg producer with a daily output of three million eggs, while TPC, which focuses on eggs, produces 500,000 eggs daily.

Huat Lai’s revenue has been on an upward trend over the past five years, reaching RM611.76 million in 2010 from RM220.25 million in 2006.

However, its profit trend has been inconsistent, but results were promising in the last two years.

Huat Lai returned from a net loss of RM8.96 million in 2006 to a net profit of RM2.12 million in 2007, before going into the red again with a net loss of RM12.56 million in 2008 and then returning to a net profit of RM10.4 million in 2009 and RM24.59 million in 2010.

TPC had a decent share price increase of 18.8% from a year ago to 28.5 sen last Friday. It had trailing PER of 17.27 times and market capitalisation of RM22.8 million — one of the smallest among poultry counters. As at end-September, its book value was 39 sen.

TPC was loss-making from FY06 to FY09. But, for the 18 months from Jan 1, 2010 to June 30, 2011 (TPC changed its FY from Dec 31 to June 30, this year), the company posted a revenue of RM73.55 million and net profit of RM605,000.


Farm’s Best Bhd
Farm’s Best’s stock was up by 38.6% from last year, closing at 79 sen last Friday. The company has enjoyed strong earnings in the past few quarters and has a trailing PER of 3.35 times and a relatively small market capitalisation of RM43.87 million. The stock is also trading at less than half its book value of RM1.58, as at end-June.


Farm’s Best has poultry operations spanning hatchery operations, feed, poultry processing, medications and vaccines, and food products (nuggets, burgers, sausages and so on).

It recently entered into two sale and purchase agreements to acquire two broiler farms in Negri Sembilan.

The two farms have a total capacity of 400,000 birds and are expected to produce about 2.2 million broilers a year, which will increase Farm’s Best’s broiler production by about 6%, the company told TEFD.

Annual revenue from the farms is expected to be about RM16 million and contributions will be from 1Q12 onwards.

Farm’s Best said its live broiler sales and processed poultry accounted for about 97% of its revenue with the rest coming from egg production.

For its 2QFY11 ending June, it reported a 103% y-o-y increase in net profit to RM4.24 million from RM2.09 million previously. Revenue climbed 16.5% to RM94.92 million from RM81.5 million a year ago.

Revenue and net profit for the first six months of 2011 stood at RM189.38 million and RM7.25 million, respectively.

Notably, Farm’s Best’s net profit for the first half of 2011 has more than doubled compared with the full year’s total for 2010.

The company returned to the black in 2010 with a net profit of RM3.6 million from a loss of RM4.64 million in 2009, although revenue declined to RM331.16 million from RM346.34 million.

The improved results were due to the softened prices of imported feed, it said.


CAB Cakaran Corp Bhd
CAB is mainly involved in integrated poultry farming and processing. Its stock has climbed 11.1% since last year to close at 35 sen last Friday.

It traded at a trailing PER of 4.13 times and had a market capitalisation of RM46.1 million. As at end-June, its book value was 71 sen.

After climbing out from a net loss of 10.73 million in FY06 ending Sept 30, CAB’s financial results have been promising.

For its FY10, its net profit increased y-o-y to RM7.7 million from RM22,828 previously, while revenue increased to RM508.15 million from RM494.42 million, due to higher average ex-farm price of broilers and better cost management, said the company.

Also due to better profit margins in broilers, CAB in its 3QFY11 ending June, posted a 107.5% increase in net profit to RM4.44 million from RM2.14 million a year ago. Revenue dipped marginally to RM122.29 million from RM123.05 million previously.

Its poultry operations accounted for almost 90% of revenue in 2010. It also has operations in restaurant & franchising and marine products manufacturing but these divisions suffered losses in 2010 with pre-tax losses of RM180,000 and RM400,000, respectively.


Lay Hong Bhd
Lay Hong is the fourth largest egg producer at 1.5 million eggs daily. Its stock increased slightly by 2.3% since last year to close at RM1.79 last Friday.

It has a market capitalisation of RM88.9 million and traded a trailing PER of 5.6 times.

Its book value at the end of June was RM2.53.


The company has reported consecutive y-o-y increases in net profit and revenue since FY08. For the FY11 ended March, it reported a 43% y-o-y increase in net profit to RM14.76 million from RM10.33 million. Revenue increased to RM423.11 million from RM388.75 million last year.

An integrated poultry company, Lay Hong is mainly involved in the production of eggs, broiler breeding and farming and feedmill activities. In Aug 2010, QL Resources Bhd bought a 23.29% stake in Lay Hong Bhd for RM48.55 million, or RM1.05 per share, from London Biscuits Bhd.


QL Resources Bhd
Integrated and diversified agriculture player QL Resources is highly regarded by analysts and won The Edge Billion Ringgit Club’s “Company of the Year” award for 2011.

Its share price only increased marginally by 0.3% since last year to close at RM2.93 last Friday, but it has been enjoying double-digit growth for the past decade. In its first 10 years as a listed company — from 2000 to 2010 — the company achieved a 10-year average return on equity (ROE) of 23% as well as a 23% annual gain in its share price.

At current prices, the stock is trading at a trailing PER of 18.8 times and has a market capitalisation of RM2.44 billion. Its book value as at end-June was 92 sen.

QL is the second largest producer of eggs in Malaysia with a production of 2.7 million eggs daily. The livestock division accounted for roughly 56% or RM991.03 million of its total revenue in FY2011.

The company’s other activities are surimi or fish paste manufacturing and palm oil.

QL’ s growth over the past five years has been impressive. Its CAGR from 2007 to 2011 for revenue and net profit was 12.3% and 18% respectively.

For FY11, it posted net profit of RM124.55 million on revenue of RM1.78 billion.


Leong Hup Holdings Bhd
Leong Hup Holdings’ (LHH) stock fell by 4.2% to RM1.60 from a year ago. It had a market capitalisation of RM283.3 million and a trailing PER of 5.2 times. Its book value at the end of June stood at RM2.37.

One of the industry’s largest and oldest players, LHH is the biggest day-old chick producer and also the biggest broiler distributor in Malaysia, industry sources say.

Its key activities are breeding and rearing of parent stocks, broiler day-old chicks, contract farming, slaughtering and processing of broiler chickens and retailing.

LHH also has a 27.74% effective ownership in Teo Seng, according to its 2011 annual report.

LHH has a 0.62% direct stake in Teo Seng, while its 51% owned subsidiary, Advantage Valuations Sdn Bhd has a 51.12% stake in Teo Seng.

For FY11 ended March 31, LHH’s revenue rose 18.4% to RM1.35 billion from RM1.14 billion in FY10. Net profit climbed by 40.4% to RM47.91 million from RM34.12 million previously.

For its 1QFY12 ended June, LHH reported a y-o-y jump in net profit to RM14.2 million from RM10.05 million previously. Revenue increased to RM420 million from RM294.8 million a year ago.


LTKM Bhd
Closing at RM1.89 last Friday, LTKM’s share price was up only by a marginal 0.5%. But its share price has been rising and more than doubled since 2009.

LTKM had a trailing PER of 5.1 and a market capitalisation RM82 million last Friday. It was trading 37% below its book value of RM3 (as at end-June).


With operations predominantly in egg production, LTKM is Malaysia’s fifth largest egg producer with an output of 1.2 million eggs a day.

In the period from 2007 to 2011, its CAGR for revenue and net profit was 15.2% and 31%.

The company is also involved in the mining and trading of sand, and manufacturing and sale of processed glass.

But both activities accounted for less than 3% of its FY11 revenue.

In its FY11 ending March, LTKM posted a net profit of RM16.01 million on the back of RM150.49 million in revenue.

For its FY10, its net profit increased to RM7.7 million from RM22,828 previously, while revenue increased to RM508.15 million from RM494.42 million, which the company attributed to higher average ex-farm price of broilers and better cost management.


This article appeared in The Edge Financial Daily, November 14, 2011.



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InsiderAsia’s model portfolio - 455

Global financial markets were subjected to harrowing daily swings over the past two weeks, as developments on the Europe debt crisis kept investors on a nervous edge.

Investors had earlier breathed a sigh of relief and cheered a rescue plan by eurozone members for Greece and plans to leverage on the remaining funds available in the European financial stability facility.

Representatives of the private bondholders have agreed to a voluntary 50% haircut, much deeper than the earlier proposed 21% reduction. This is projected to cut Greece’s debt to GDP ratio to about 120% by 2020, instead of more than 160% under the July proposal.

However, the euphoria quickly evaporated after Greece threatened a U-turn, with its Prime Minister George Papandreou announcing his decision to put the European bailout deal to a popular referendum. This was later aborted and the prime minister stepped down, but not without damaging confidence and sending financial markets into a tailspin.

Concerns over the European debt crisis later shifted to Italy, the eurozone’s third largest economy, and which holds US$2.6 trillion (RM8.2 trillion) of debt compared with Greece’s US$500 billion. Soaring Italian bond yields prompted fears of a default.

Towards the end of last week, financial markets regained some stability.


With Greece having appointed Lucas Papademos as the prime minister and Italy expected to appoint a new government headed by economist Mario Monti, investors are hoping that both countries will have measures to strengthen their economies, although the debt crisis is probably not by far over.

Amid a volatile external environment, local investors turned their attention to penny and retail stocks in the last two weeks on speculative buying interest. Many counters, notably Harvest Court, chalked up spectacular gains.

While the interest in these penny stocks and lower liners has livened up an otherwise dull market, investors should also note that they carry high risks. Many of these stocks are loss-making and the gains are not supported by fundamentals.

Over the last two weeks, the FBM KLCI lost a total of 13.1 points or 0.9% to close at 1,468.8.

Portfolio review
Stocks in our model portfolio outperformed the benchmark index in the last two weeks. Total market value for our basket of 17 stocks was up by 0.42% to RM377,900, compared with the FBM KLCI’s 0.9% loss.

Seven stocks in our portfolio closed with gains, six with losses and four stocks were unchanged in the past two weeks. DiGi was the biggest gainer, up 7.2% as it announced a capital management and repayment plan. This was followed by Pantech warrants (+4.3%) and Media Chinese International (+3.7%). The losers were led by Masteel and its warrants, down 8.5% and 5.5% respectively.

Including our cash holdings, for which no interest income is imputed, our total portfolio value was up by a lower 0.24% to RM657,113. Last week’s gains boosted our model portfolio’s cumulative returns since inception to 310.7% on our initial capital of just RM160,000. We continue to outperform the FBM KLCI, which was up by about 127.1% over the same period, by some distance.

Our total profits are very substantial at RM497,113, of which RM399,053 has already been realised from previous shares’ sales.

We kept our portfolio unchanged last week.


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


This article appeared in The Edge Financial Daily, November 14, 2011.



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Plantations — Rooted by weather risk

Plantations
Maintain underweight. The lower-than-expected palm oil stocks at end-October will reinforce the current strength in crude palm oil (CPO) price, the root cause of which is worries over weather uncertainties. But we do not expect the weather concerns to be sustained beyond 1Q12 when La Nina is expected to go away.

We continue to expect CPO prices to trend lower in 2012 as prices will start to reflect the impact of slower global growth on demand. Also unchanged is our underweight rating on the Malaysian planters due to their more expensive valuations. Sime Darby remains our top pick.

October palm oil stocks fell 1.6% month-on-month (m-o-m) to 2.1 million tonnes, 2% below our forecast and 4.5% below consensus forecasts. The deviation came from higher-than-expected exports resulting from the attractive pricing of palm oil relative to soyabean oil during the period.

The lower-than-expected stockpile and concern that La Nina could disrupt oil palm harvesting during year-end monsoon could support near-term CPO price. But the weather risk premium on price may start to decline when La Nina subsides after 1Q12.

We maintain our view that CPO price will trend down in 2012 due to a potential slowing of demand growth on the back of lower biodiesel demand and improved weather conditions in South America. We are keeping our 2011 CPO price forecast of RM3,200 per tonne.

For 2012, we continue to expect it to decline 16% to RM2,700 before recovering by 4% to RM2,800.

We continue to underweight the Malaysian planters due to their rich valuations against regional peers, rising cost pressures and potential earnings risks for planters with exposure to the downstream business in Malaysia due to rising competition from its Indonesian peers. We like Sime Darby in Malaysia. Our top big-cap sells are IOI Corp Bhd and KL Kepong Bhd. — CIMB IB Research, Nov 11


This article appeared in The Edge Financial Daily, November 14, 2011.



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More job-flow visibility ahead at Eversendai

Eversendai Corp Bhd (Nov 11, RM1.60)
Maintain buy with target price RM2.17: Adjusting for one-off IPO expenses, 9M11 net profit of RM87 million (+44% year-on-year [y-o-y]) was within expectations, at 71% of our full-year forecast and 74% of consensus. Job-flow prospects remain bright, coming from key pump-priming markets where projects are populist demand-driven and have lower timing risk.

We maintain our 2012/13 forecasts but trim our 2011 earnings per share (EPS) forecast by 3% as we impute for the IPO expenses. The stock trades at low valuation of 8.7 times 2012 price earnings ratio (PER). Maintain “buy” and target price of RM2.17 (12 times 2012 PER).

Despite a stronger outstanding order book (+8% quarter-on-quarter) 3Q11 revenue of RM254 million was flattish q-o-q (+15% y-o-y) on: (i) absence of variation orders recognised in 2Q11; and (ii) slower construction activities during the Ramadan and Hari Raya Aidilfitri period.

Net profit fell q-o-q to RM26 million (-22% q-o-q, +25% y-o-y), largely due to the recognition of RM4 million IPO expenses and the absence of variation orders. Net profit (ex-IPO expenses) margin of 11.9% (-1.3 percentage points q-o-q, +2.3pps y-o-y) was 1pps above 1Q11’s 10.9%.

Expect a stronger 4Q11. We believe Eversendai’s earnings will stage a rebound, driven by its high-value and advanced stage projects, Cleveland Clinic, Gate District, NDIA III, Naqilat and Worli.

Additionally, we expect another RM500 million worth of jobs (at least) to be secured in the next three months to lift the quarterly earnings momentum. Job flow will come from local power plant expansion projects (Janamanjung, Tanjung Bin) and structural steelworks in the Middle East. We estimate that Eversendai’s outstanding order book stands at RM1.5 billion as at end-September 2011.

Imputing for the IPO expenses, our 2011 EPS forecast is trimmed by 3%. We maintain our 2012/13 forecasts as 62% of our 2012F RM1.2 billion revenue forecast (+13% y-o-y) is already in hand, based on the current order book.

Eversendai continues to stand out among the local construction peers due to its geographical diversification and superior margins. — Maybank IB Research, Nov 11


This article appeared in The Edge Financial Daily, November 14, 2011.



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Unfavourable forex trends hit MBM’s associate contributions

MBM Resources Bhd (Nov 11, RM3.09)
Maintain underperform with fair value RM2.70: MBM Resources’ 3Q11 results disappointed, coming in below our and consensus estimates. Net profit of RM35.3 million rose 67.3% quarter-on-quarter (q-o-q) and 3.3% year-on-year (y-o-y), taking cumulative 9M11 earnings to RM94.8 million (-16.1% y-o-y) which amounted to 71% of our previous 2011 estimate. The main reason for the deviation was weaker-than-expected associate contributions arising from unfavourable yen exchange rates that squeezed profit margins.

Overall earnings for the quarter improved sequentially on the back of a 10.3% q-o-q improvement in total industry volumes (TIV). Recall 2Q11 earnings were negatively affected by earthquake-related supply constraints and the transition to the new Myvi model (launched on June 15) that resulted in associate contributions falling 46.9% q-o-q and 50.9% y-o-y to just RM16.9 million.

With 3Q11 Perodua sales jumping 41.2% q-o-q to 47,719 units and Hino truck sales up 7.5% q-o-q to 1,545 units, associate earnings rebounded to RM29.4 million (+73.5% q-o-q and +10.4% y-o-y) although this was below expectations as a result of unfavourable yen exchange rates that negatively affected margins at 23.6%-owned associate Perodua.

MBM’s core auto distribution business performed broadly in line with expectations with Daihatsu and Hino truck dealership sales volumes recording a 13.6% y-o-y decline in sales while Perodua car dealership volumes declined 7.2% y-o-y.


Federal Auto dealership of Volvo, Volkswagen and Mitsubishi vehicles rose 57.3% y-o-y implying gains in dealership market shares as TIV for the three marques only rose 29.3% y-o-y.

We trim MBM’s 2011 earnings estimate by 3.4% after cutting estimates at Perodua. After tweaking our assumptions, 2012 earnings are raised by 1.3% and 2013 by 2.1%.

Upside risks include stronger car sales, favourable forex trends and reduced competition.

We revise our fair value estimate to RM2.70 (from RM2.65) following our earnings revisions, derived from ascribing an unchanged five times target price-earnings ratio (PER) to 2012 earnings. Our “underperform” recommendation is unchanged.

MBM’s proposals to sell 20% in Daihatsu (M) Sdn Bhd and takeover of Hirotako Holdings remain pending. We remain cautious on prospects for the auto sector given the backdrop of rising global macroeconomic uncertainties and escalating downside risks to equity valuations. — RHB Research, Nov 11


This article appeared in The Edge Financial Daily, November 14, 2011.



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Benalec landing down south with oil hub and marine park

Benalec Holdings Bhd (Nov 11, RM1.35)
Maintain buy with revised fair value RM2.85 from RM2.22: We maintain our “buy” call on Benalec Holdings Bhd and raise our fair value from RM2.22 per share to RM2.85 per share — based on our revised sum-of-parts value under our base case assumption for its new ventures in Johor.

Benalec has announced to Bursa Malaysia it has secured the rights to reclaim and own two large tracts of prime seafront land — at Tanjung Piai (3,485 acres or 1,410.3ha) and Pengerang (1,760 acres) on the southern tip of Johor.

The group is leveraging its core competencies in marine construction to create strategically located land with a water depth of more than 15m for the oil and gas and maritime industries.

These transformational deals — leveraging highly industrialised developments — will be very significant over the next 10 to 15 years.

In the immediate term, Benalec’s primary focus will be on the 2,000 acres under Phases 1 and 2 in Tanjung Piai. Its development potential as an oil and gas hub is high due to its strategic location within the busy Straits of Malacca and close proximity to Singapore.

Tanjung Piai is earmarked to complement the vibrant petrochemical hub on Jurong Island, which is already overcrowded. The key success factors are land arbitrage, deepwater depth (more than 20m deep), easy access for very large crude carriers (VLCC) and a large hinterland. In gauging the potential development value of Tanjung Piai, the latest land cost in Jurong Island is about S$116 (RM285) per sq ft.


But, the litmus test is in securing off-takers for the land. This will act as the primary catalyst for Benalec’s share price, we believe. Construction on Phase 1 is scheduled to commence by end-2Q12, as we expect the group to secure a major off-taker that would act as a trailblazer sometime soon.

We are not unduly concerned about the funding for Phases 1 and 2 of Tanjung Piai (estimated at RM400 million through a mixture of new debt/equity) that will likely be partly used for the payment of land premiums. The reclamation would be executed in stages once Benalec has secured off-takers without stretching its cash flows.

We have raised FY13F/FY14F net profit forecasts by 21% to 23%, anchored on our base case assumptions of 2,000 acres in Tanjung Piai, pre-tax margins of 28% to 30% and a higher new order book target of RM0.9billion to RM1billion (+12% and +25%).

Benalec is a cheaper but early-stage play on the repositioning of south Johor as an emerging oil and gas hub. Valuations are compelling at FY12F/FY14F price-earnings ratio of only five times. — AmResearch, Nov 11


This article appeared in The Edge Financial Daily, November 14, 2011.



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Challenging outlook for Century Logistics in 4Q

Century Logistics Holdings Bhd (Nov 11, RM1.70)
Maintain market perform with fair value RM1.60: Century Logistics’ 9MFY12 net profit of RM24.1 million accounted for 75% of our and consensus full-year estimates. The Port Authority of Johor has ordered several floating storage units (FSU) operating in Pasir Gudang to depart. This is mainly to improve the access route to the area for two major projects, including the new Petroliam Nasional Bhd refinery and petrochemical integrated development project in Pengerang.

This brought Century’s total FSU operations down to six from nine (two remain in Pasir Gudang, three are in Port of Tanjong Pelepas and one is in Batu Pahat). Although we understand Century is poised to obtain a licence to place another FSU in PTP, the setback will likely affect the ship-to-ship segment in 4Q11. It is unlikely the other two FSUs will be placed in PTP as it is at capacity.

The third party logistics (3PL) segment continues to garner strength for Century, as we understand it has just recently secured a new contract for a leading steel company. This follows its recent contract from Celcom Axiata Bhd for storage and distribution which started in September.

Furthermore, we believe it could benefit from Fraser & Neave Holdings Bhd’s (F&N) plans to increase operations in Malaysia following the Thai floods. Century currently handles the logistics and distribution for F&N’s dairy products (including raw materials) within Malaysia. Note that 3PL is the main revenue contributor (55% to 60% of total revenue).


Our fair value estimate is lowered to RM1.60 per share (from RM1.68) based on six times FY12 earnings per share (EPS) of 26.7 sen, in line with our benchmark one-year forward price-earnings ratio (PER) for the transport and logistics sector.

We remain cautious on transport and logistics companies but we believe the risk of a slowing global economy is partly mitigated by Century’s focus on the fast-moving consumer goods market both in Malaysia and countries in Asia where demand is expected to remain resilient. We maintain our “market perform” call on the stock. — RHB Research, Nov 11


This article appeared in The Edge Financial Daily, November 14, 2011.



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AirAsia sees good Q4 earnings: Fernandes

Malaysia-based budget carrier AirAsia said today it expected to post good fourth quarter earnings, with its business largely unaffected by the floods in Thailand and the global economic slowdown.

“We’re going to have a great fourth quarter,” AirAsia chief executive Tan Sri Tony Fernandes told reporters.

“The floods in Thailand have had minimal impact. We are lucky in Southeast Asia because if we were in Europe or the US
with mature markets, there’s not much growth.

In Southeast Asia, there are so many people who have yet to fly. AirAsia is due to report its earnings this month.

Fernandes declined to comment on a local media report that he would set up a new premium regional airline that would compete head-on with Qantas’ upcoming RedQ full-service carrier. - Reuters



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KL shares positive momentum continues

KUALA LUMPUR: Share prices on Bursa Malaysia continued with their positive momentum at mid-afternoon today, bolstered by active buying in key heavyweights, dealers said.

As at 3pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) was 13.82 points higher at 1,482.57, with gains mostly seen in IOI Corporation, Genting, Tenaga and Sime Darby.

To date, the benchmark index has moved between 1,478.13 and 1,484.88.

The Finance Index increased 55.88 points to 13,208.64, plantation Index advanced 128.15 points to 7,647.3 and the Industrial Index rose 28.45 points to 2,713.34.

The FBM Emas Index surged 99.729 points to 10,139.06, FBM Mid 70 Index jumped 119.01 points to 10,972.63 and the FBM ACE Index improved 28 points to 4,296.61.

Advancers led decliners by 536 to 177 with 252 counters unchanged, 517 untraded and 19 others suspended.

Turnover stood at 1.538 billion shares worth RM999.232 million.

For the actives, Ingens and Karambunai added two sen each to 7.5 sen and 20.5 sen respectively while Compugt was unchanged at 8.5 sen.

Among heavyweights, Maybank edged up three sen to RM8.27, Sime Darby rose 10 sen to RM8.99 and Petronas Chemicals Group added six sen to RM6.45.

IOI Corp surged 12 sen to RM5.16, Genting gained 20 sen to RM10.78 and Tenaga was up 13 sen to RM5.88.

CIMB, however, shed three sen to RM7.19. -- BERNAMA



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SYF Resources says in talks to jointly develop properties

KUALA LUMPUR (Nov 14): SYF RESOURCES BHD [] said it was currently in the final stage of negotiation to develop PROPERTIES [] on a joint venture (JV) basis, which it said may have accounted for the unusual market activity (UMA) involving its securities on Monday, Nov 14.

The company in a reply to an UMA query from Bursa Malaysia Securities Bhd said the landowners it was in talks with were mainly related parties.

It said on Nov 14 that details of the JV would be released immediately upon conclusion of the negotiations and the execution of the JV agreement.

“Apart from the said joint venture, there is no other corporate development relating to SYF Group’s business and affairs that has not been previously announced which may account for the unusual market activity,” it said.

SYF rose 15 sen to 82 sen with 31.94 million shares done while its warrants rose 25.5 sen to 60 sen with 27.4 million units done in the morning session today.

The company also said an article that had appeared on the Nov 13 edition of the Nanyang Siang Pau had claimed that there was a rumour in the market that the son of a high-ranking government official would be joining the company’s board.

SYF said that after the recent completion of its restructuring, the company had been sourcing for business opportunities that may contribute to its future growth.

“At the same time, the board will also seek to identify and appoint new members who have the ability and capacity to contribute in all aspects of the group’s operations and to ensure compliance with good corporate governance in the interest of the minority shareholders.

“Upon confirmation of any additional board appointment, if any, the necessary announcement will be made immediately,” it said.

SYF said other than the two disclosures, it was not aware of any other possible explanation to account for the unusual market activity.



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Maybank’s Q1 net profit up 25%

Malaysia’s Malayan Banking Bhd reported on Monday a 25 per cent increase in its first-quarter net profit to RM1.28 billion, riding on the region’s economic growth.

Malaysian banks have reported healthy earnings in recent quarters, thanks to steady economic growth in the region particularly in Malaysia, Singapore and Indonesia, but weakening global economic conditions could signal rough times ahead for the lenders.

“While we remain cautious of possible impact from any weakening in external demand and will be vigilant in our monitoring, we are cognizant of areas where growth remains strong,” Maybank’s chief executive Datuk Abdul Wahid Omar said in a statement.

Maybank, the country’s top lender, also warned that net interest margins, or the difference between what a bank pays out to depositors and what it takes in from making loans, remained under pressure, falling another 23 basis points to 2.46 per cent during the quarter.

Maybank said its revenue rose 21 per cent to RM6.1 billion while profit before tax was up by a quarter to RM1.8 billion for the three months to end-September 2011.

The bank said it attributed the improved performance to better all-round contributions from its business divisions, except insurance, which saw a significant decline of 72 percent from the previous quarter.

In July this year, the bank had announced a change in its financial year end, from June 30 to December 31.

The first new financial year would end on Dec 31 2011 with a shorter 6-month period from July 1 2011 to 31 Dec 2011. - Reuters



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Supermax, Top Glove up as latex prices fall

Supermax Corp rose to a four-month high in Kuala Lumpur trading and Top Glove Corp climbed after OSK Holdings Bhd said the two Malaysian glove-makers will benefit most from the recent drop in latex prices.

Supermax gained 1.3 percent to RM3.86 at 11:27 a.m. local time, set for its highest close since July 7.

Top Glove added 1.8 percent to RM4.50, the highest since Sept. 9.

The longer-term downtrend in latex prices is likely to be sustained, OSK wrote in a report today. -- Bloomberg



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KL shares higher at midday

Share prices on Bursa Malaysia remained in positive territory at midday today with investors continuing their buying activities, dealers said.

As at the end of the morning session, the FTSE Bursa Malaysia KLCI (FBM KLCI) rose 9.85 points to 1,478.6, with the barometer index moving between 1,478.13 and 1,484.88 during the whole trading session.

The Finance Index improved 26.61 points to 13,179.37, the Plantation Index surged 109.53 points to 7,628.68 and the Industrial Index was 28.13 points higher at 2,713.02.

The FBM Emas Index advanced 79.1 points to 10,118.43, the FBM Mid 70 Index jumped 114.67 points to 10,968.29 and the FBM ACE Index increased 30.09 points to 4,298.7.

Gainers beat losers by 507 to 176 with 248 counters unchanged, 551 untraded and 19 others suspended.

Turnover stood at 1.37 billion shares worth RM800.507 million.

For the actives, Ingens and Karambunai added two sen each to 7.5 sen and 20.5 sen respectively while Compugt was unchanged at 8.5 sen.

Among heavyweights, Maybank edged up one sen to RM8.25, CIMB shed two sen to RM7.20, Sime Darby gained 10 sen to RM8.99 and Petronas Chemicals Group added five sen to RM6.44. -- Bernama



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Maybank quarterly net profit up 25.1% to RM1.286b

KUALA LUMPUR (Nov 14): MALAYAN BANKING BHD [] net profit for the three months ended Sept 30, 2011 rose 25.1% to RM1.286 billion from RM1.028 billion a year earlier.

The banking group said on Monday, Nov 14 that its revenue for the quarter rose to RM6.07 billion from RM5 billion in 2010.

Earnings per share was 17.20 sen compared to 14.53 sen in 2010, while net assets per share was RM4.41.

Maybank had on July 11 this year announced the change of its financial year end from June 30 to Dec 31.

The first new financial year would end on Dec 31, 2011 with a shorter 6-month period from July 1, 2011 to Dec 31, 2011.

Reviewing its performance, Maybank said its net interest income for the period under review rose 5.6% or by RM99.1 million due mainly to growth in its loans and advances (excluding Islamic finance) of 17.8%.

It said income from Islamic Banking operations continued to grow, rising by 52.7% to RM516.3 million, on the back of growth in financing and advances of RM2 billion.

Maybank said net income from insurance business rose 11.2% to RM96.5 million due to higher takaful revenue account.

It said non interest income rose 28.1% to RM1.22 billion, while brokerage income rose by RM132.8 million.

On its outlook, Maybank said the loans growth in Malaysia was expected to be mainly driven by the rollout of the Economic Transformation Programme projects and domestic consumption.

It said credit demand in Singapore was anticipated to moderate with growth remaining broad based, while in Indonesia strong loans growth was expected to be sustained due to robust domestic demand.

“With continued pressure on narrowing margins, the group will continue to be selective in pursuing loans growth and will focus on sustaining asset quality through sound credit risk management policies and practices,” it said.

Maybank said that barring unforeseen circumstances, it expected to record better performance for the financial period ending Dec 31, 2011.



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KLCI stays positive at mid-day, but gains limited

KUALA LUMPUR (Nov 14): The FBM KLCI stayed in positive territory at the mid-day break in line with key regional markets, but sentiment appeared cautious as the 30-stock index pared down some of its gains.

The FBM KLCI was up 9.85 points to 1,478.60 at the mid-day break. The index had earlier risen to an intra-morning high of 1,484.88.

Gainers led losers by 507 to 176, while 248 counters traded unchanged. Volume was 1.37 billion shares valued at RM800.52 million.

The ringgit strengthened 0.29% to 3.1329 versus the US dollar; crude palm oil futures for the third month delivery rose RM36 per tonne to RM3,171, crude oil added 12 cents per barrel to US$99.11 while gold gained US$3.63 an ounce to US$1,792.30.

At the regional markets, Hong Kong’s Hang Seng Index rose 2.4% to 19,595.61, the Shanghai Composite Index added 1.63% to 2,521.44, Taiwan’s Taiex was up 2.22% to 7,530.69, South Korea’s Kospi gained 2.06% to 1,901.85, Singapore’s Straits Times Index rose 1.78% to 2,840.58 and Japan’s Nikkei 225 was up 1.12% to 8,609.82.

On Bursa Malaysia, DiGi rose 74 sen to RM34.52, United PLANTATION []s added 70 sen to RM18.60, Dutch Lady 50 sen to RM21.50, Harvest Court 34 sen to RM1.99, BAT and PPB 30 sen each to RM46 and RM16.92, TSH Resources 26 sen to RM3.71 while Amway added 25 sen to RM8.90.

Among the decliners, Nestle fell 20 sen to RM48.80, BLD Plantations 14 sen to RM6.65, Petrol One Resources seven sen to RM1.05, while Teck Guan, Subur Tiasa, MTD ACPI, Ralco and Hoover fell five sen each to 65 sen, RM2.20, 47 sen, 50 sen and 41.5 sen respectively.

Ingenuity Solutions was the most actively traded counter with 113.2 million shares done. The stock added two sen to 7.5 sen.

Other actives included Karambunai, Compugates, Emico, SYF Resources, DPS and Connect.



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Bursa queries SYF on unusual mart activitiy

Bursa Malaysia Securities Bhd has issued an unusual market activity query, to SYF Resources Bhd today, due to the recent sharp increase in the price and high volume of the company's securities.

In a statement, Bursa Malaysia said: "Investors are advised to take note of the company's reply to the query which will be posted on Bursa Malaysia's website,
http://announcements.bursamalaysia.com, when making their investment decisions."

SYF counters opened higher at 70 sen today, as compared with 67 sen at closing last Friday with 25.9 million volume traded. -- Bernama



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UEM Land rallies on RHB upgrade

UEM Land Holdings Bhd, a Malaysian property developer, rose to a two-week high in Kuala Lumpur trading after RHB Capital Bhd upgraded the stock to “trading buy” with an increased fair value of RM2.38.

Its shares gained 1.4 per cent to RM2.15 at 9.25 am local time, set for their highest close since October 31.



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Bursa Securities queries SFY Resources

KUALA LUMPUR (Nov 14): Bursa Malaysia Securities Bhd has queried SYF RESOURCES BHD [] whose shares surged in heavy volume despite the absence of any fresh corporate news.

“We draw your attention to the sharp increase in price and high volume of your company’s securities recently,” it said on Monday, Nov 14.

At 10.45am, SYF rose 14 sen to 81 with 21.7 million shares done, while its warrants jumped 23.5 sen to 58 sen with 18 million units traded.



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KL shares higher at midmorning

At 10.30 am today, there were 424 gainers, 117 losers and 226 counters traded unchanged on the Bursa Malaysia.

The FBM-KLCI was at 1,481.01 up 12.26 points, the FBMACE was at 4,297.34 up 28.73 points, and the FBMEmas was at 10,128.56 up 89.22 points.

Turnover was at 862.306 million shares valued at RM326.671 million. - Bernama



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KLCI trends higher at mid-morning

KUALA LUMPUR (Nov 14): The FBM KLCI advanced at mid-morning on Monday, Nov 14 in line with the gains at key regional markets, and the higher close at Wall Street last Friday.

Asian stocks and the euro rose on Monday on hopes that new leaders in Italy and Greece will take decisive action to save their indebted nations from bankruptcy and fend off a wider financial meltdown in the euro zone, according to Reuters.

The FBM KLCI rose 11.53 points to 1,480.28.

Gainers led losers by 359 to 96, while 211 counters traded unchanged. Volume was 582.71 million shares valued at RM271.34 million.

At the regional markets, Japan’s Nikkei 225 rose 1.55% to 8,646.45, Hong Kong’s Hang Seng Index gained 2.21% to 19,560.18, the Shanghai Composite Index added 0.70% to 2,498.45, Taiwan’s Taiex rose 2.10% to 7,522.16, South Korea’s Kospi gained 1.99% to 1,900.55 and Singapore’s Straits Times index advanced 1.44% to 2,831.09.

BIMB Securities Research in a note Nov 14 said that although the clarity of both Greece and Italy had improved, the volatility of global equity markets remains high.

Investors’ sentiments was now running at high sensitivity to the Eurozone as outlook remains hazy with the slightest of uncertainty may well bring back the skepticism, it said.

Nonetheless at least for now, confidence was back with most major European bourses all charted positive gains on Friday, it said.

The research house said that as a consequence the Dow Jones Industrial Average also posted a strong comeback to breach the 12,000 mark again with a 259.89 point jump.

Regionally, it was a rather mixed Friday with the FBM KLCI ended 3.90 points lower to close at 1,468.75, just off the 1,470 immediate support level, it said.

“Looking ahead, we believe the current market consolidation to continue until we see more committed buying emerges.

“For now, we expect the benchmark index to retest the 1,490 resistance level over the immediate term,” it said.

Among the gainers on Bursa Malaysia, DiGi rose 62 sen to RM34.40, United PLANTATION []s 40 sen to RM18.30, Dutch Lady 30 sen to RM21.30, MAHB 28 sen to RM6.48, Harvest Court and TSH Resources up 24 sen each to RM1.89 and RM3.69, Genting Plantations and KLK 22 sen each to RM8.14 and RM21.12, while BAT was up 20 sen to RM45.90.

Ingenuity Solutions was the most actively traded counter with 66.95 million shares done. The stock gained 1.5 sen to 7 sen.

Other actives included Compugates, Hibiscus warrants, DPS, SYF and Flonic.

Decliners at mid-morning included HELP, IJM Plantations, LTKM, Sunchirin and CMMT.



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Dijaya, Ivory rise on RM10b Penang property venture

KUALA LUMPUR (Nov 14): DIJAYA CORPORATION BHD [] and Ivory PROPERTIES [] Group Bhd shares advanced on Monday, Nov 14 after the two companies signed a joint venture agreement to develop mixed residential and commercial properties in Penang with a gross development value of RM10 billion.

At 9.50am, Dijaya up seven sen to RM1.46 with 490,000 shares traded while Ivory gained 8 sen to RM1.08 with 4.32 million shares done.

In a joint statement Friday, Nov 11, the two companies said the development will be completed over the next eight years and would comprise of residential, shopping mall, hotel, office suites, office towers, retail spaces and an open mall with a boulevard.



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CIMB Research cuts WCT target price to RM3.30

KUALA LUMPUR (Nov 14): CIMB Research has cut its target price for WCT BHD [] to RM3.30 from RM3.99, and said investors should look beyond 2011, which may be a letdown in terms of project awards.

“We are cutting EPS for lower order book assumptions.

“Our target price falls because 1) we roll it forward and apply our revised target market P/E of 12.6x (14.5x P/E) to CY13 CONSTRUCTION [] earnings, and 2) double our RNAV discount to 20% for subdued project award prospects,” the research house said in note Nov 14.

CIMB Research said WCT’s project flows for 2012 were backed by the RM4 billion worth of jobs that the company had tendered for.

“This underpins our OUTPERFORM rating,” it said.



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Scomi climbs on debt revamp plan

Scomi Group Bhd, a Malaysian engineering group, rose to a three-month high in Kuala Lumpur trading after saying it plans to revamp its debt by selling US$100 million of Islamic debt.

It also plans to dispose of some waste management assets for US$35 million.

Its shares climbed 1.7 percent to 30.5 sen at 9:10 a.m. local time, set for their highest close since Aug. 17. -- Bloomberg



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Kimlun advances on building contract

Kimlun Corp, a Malaysian construction company, rose the most in ten days in Kuala Lumpur trading after it won a RM68 million building contract.

The stock climbed 2 percent to RM1.55 at 9:10 a.m. local time, set for its steepest increase since Nov. 4. -- Bloomberg



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Ivory, Dijaya rise on Penang venture

Ivory Properties Group Bhd had a record gain in Kuala Lumpur trading and Dijaya Corp rose after saying they will jointly develop a property project in Penang that may generate RM10 billion of sales.

Ivory jumped 13 percent to RM1.13 at 9:06 a.m. local time. Ivory also said it plans a bonus issue and rights offer, the company said in a statement. Dijaya added 1.4 percent to RM1.41. -- Bloomberg



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