YTL Corp posts lower 1Q earnings on mobile broadband division

KUALA LUMPUR (Nov 17): YTL CORPORATION BHD []’s earnings fell 9.7% to RM251.8 million (US$80.5 million) in the first quarter ended Sept 30, 2011 from RM278.9 million (US$89.1 million) a year ago.

It said on Thursday the lower earnings due to loss incurred in the nascent ‘Yes’ mobile broadband division. The group revenue grew 3.1% to RM4.543 billion from RM4.405 billion but pretax profit declined 15% to RM530.1 million from RM623.8 million.

YTL Group managing director Tan Sri Francis Yeoh Sock Ping said: “The 2012 financial year has shown a promising start, with revenue increasing marginally over the same period last year, owing predominantly to the group’s multi-utility businesses.”

He said the lower net profit was due to a loss reported in the nascent ‘Yes’ mobile broadband division operated by a subsidiary of YTL Power, which started commercial operations about a year ago.

“This is not unexpected given the nature of the business and the front-end loaded capital outlay required to build our nationwide network, and we expect our 4G operations to continue to pick up steam and begin recording a profit once the necessary scale has been reached,” he said.

Yeoh said the group’s cement and other utility divisions continued to perform steadily.

YTL Power’s revenue grew 4.4% for the quarter to RM3.636 billion due mainly to better performance of its merchant multi-utility businesses.

Its net profit attributable to shareholders fell 9.7% to RM246.2 million from RM272.9 million last year, due mainly to the loss incurred in the group’s mobile broadband operations.

As for YTL Cement, its revenue increased 17.6% to RM544.7 million from RM463.0 million. Its earnings rose 4.4% to RM75.8 million from RM72.6 million last year, although higher production costs and the increase in electricity tariffs impacted the division’s profit.

YTL Land reported a fall in revenue to RM3.4 million from RM14.0 million last year, whilst net profit fell to RM2.9 million from RM3.2 million, attributing the decline from timing differences of project launches by subsidiaries and increased operating expenses.

It said that it had on Nov 4 completed the acquisition of shares in eight companies and parcels of land in Bidor as part of the restructuring exercise of the YTL Group’s property development business.

As for YTL e-Solutions, revenue increased to RM20.8 million from RM9.2 million while net profit rose to RM9.0 million from RM2.2 million last year, with the improvements arising mainly from fee income derived from a spectrum sharing agreement in relation to the Group’s 2.3GHz Worldwide Interoperability for Microwave Access spectrum.

Starhill REIT recorded revenue of RM8.0 million and realised income of RM15.4 million in the quarter.



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CBIP 3Q net profit up 18.4% to RM27.37m

KUALA LUMPUR (Nov 17): CB INDUSTRIAL PRODUCT HOLDING [] Bhd net profit for the third quarter ended Sept 30, 2011 rose 18.4% to RM27.37 million from RM23.11 million a year earlier, due mainly to the improvement in the PLANTATION [] segment due to the increase in FFB yield and prices of palm products.

It said on Thursday, Nov 17 that revenue for the quarter jumped 65.4% to RM135.86 million from RM82.14 million in 2010.

Earnings per share was 20.17 sen compared to 17.52 while net assets per share was RM2.60.

For the nine months ended Sept 30, CBIP’s net profit surged to RM73.26 million from RM48.14 million in 2010, on the back of an increase in revenue to RM328.86 million from RM231.54 million.

Reviewing its results, CBIP said the improved performance by the associates and jointly controlled entity which was in the plantation business also contributed to the increase in the group’s profit before taxation.

“In view of the progress in the implementation of the projects secured in hand and the expected improvement by the plantation segment, the board expects the group to achieve satisfactory results for the financial year ending Dec 31, 2011,” it said.


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MMHE earnings up 3.2% to RM80m but revenue halves

KUALA LUMPUR (Nov 17): Malaysia Marine and Heavy Engineering Holdings Bhd reported a 3.2% increase in net profit to RM80.22 million in the quarter ended Sept 30 from RM77.71 million a year ago though its revenue had fallen by more than half.

According to its statement to Bursa Malaysia, its revenue during the quarter fell 54.7% to RM463.09 million from RM1.022 billion. Its earnings per share were 5.0 sen compared with 5.80 sen.

“The group profit before taxation of RM100.40 million was comparable against the corresponding quarter's profit before tax of RM101.5 million. In the current quarter, engineering and CONSTRUCTION [] segment (including the profit from the jointly controlled entity for Turkmenistan Block 1 Phase 1 project) has contributed to better performance. However, marine repair and conversion segment has recorded lower profit,” it said.

MMHE said group profit before taxation of RM100.4 million was 4.2% higher than the RM96.4 million recorded in the preceding quarter due to the engineering and construction and marine repair and conversion segments.

In the nine-month period from January to September, its earnings fell 15.2% to RM159.51 million from RM188.28 million in the previous corresponding period. Revenue slumped 35.2% to RM1.420 billion from RM2.195 billion.

MMHE had on March 2 announced the change of financial year end from March 31, to Dec 31. The first new financial year would end on Dec 31, 2011 with a shorter nine-month period from April 1 to Dec 31.

On the outlook, it expected the engineering and construction segment to perform favourably through successful execution of projects-in-hand and recently secured contracts. As for the marine repair and conversion segment, MMHE expected it to remain satisfactory.



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Tan Chong 3Q net profit rises 10.6% to RM54.56m

KUALA LUMPUR (Nov 17): TAN CHONG MOTOR HOLDINGS BHD [] net profit for the third quarter ended Sept 30, 2011 rose 10.6% to RM54.56 million from RM49.34 million a year earlier, due mainly to favourable foreign exchange rates.

It said on Thursday, Nov 17 that revenue for the revenue for the quarter rose to RM905.36 million from RM871.59 million in 2010.

Earnings per share was 8.36 sen compared to 7.56 sen in 2010, while net assets per share was RM2.77.

For the nine months ended Sept 30, Tan Chong’s net profit rose to RM185.1 million from RM177.67 million in 2010, on the back of an increase in revenue to RM2.98 billion from RM2.67 billion.

Reviewing its performance, Tan Chong said its nine months results showed improved top and bottom-line despite the Japan earthquake that disrupted the global supply chain after March 2011.

The company said the cost to income ratios increased with the first year of consolidation of Nissan Vietnam Ltd (NVL) which had yet to break-even after taking into account translation losses in a weaker Vietnamese Dong against a stronger denominated ringgit (its reporting currency) and initial costs incurred for regional expansion and upgrade of existing facilities.

On its current year prospects, Tan Chong said that after two back to back disasters during FY2011, there had been considerable dislocation in supply chains from Japan to Thailand.

The company however said it had sufficient inventories after the earthquake in Japan and before the floods in Thailand.

“Although Q4 is challenging with specific model shortages - by pacing sales and developing alternate sources of auto component supply, our inventory buffer can last long enough for production to quickly catch up with end demand.

“In the near term as momentum unravels, the group continues to build upon its position towards market share gains in the long term,” it said.



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Kossan 3Q net profit falls 17.2% to RM23.64m

KUALA LUMPUR (Nov 17): KOSSAN RUBBER INDUSTRIES BHD []'s net profit for the third quarter ended Sept 30, 2011 fell 17.2% to RM23.64 million from RM28.55 million a year earlier, due mainly to higher cost of latex.

The company said on Thursday, revenue for the quarter, however, improved marginally to RM278.53 million from RM275.63 million. Earnings per share were 7.39 sen compared to 8.93 sen a year ago, while net assets per share was RM1.50.

Kossan declared a first interim dividend of three sen per share tax-exempt for the financial year ending Dec 31, 2011 to be paid to on Dec 20.

For the nine months ended Sept 30, Kossan’s net profit fell 24.2% to RM67.54 million from RM88.94 million, despite revenue increased just 1.9% to RM810.59 million from RM794.89 million in 2010.

Reviewing its performance, Kossan said the pre-tax profit margin increased from 9.67% to 11.17% in the current quarter mainly due to lower cost of natural latex which dropped an average of 10.20% from RM 9.87 to RM 8.91 in the current quarter.

On its prospects, Kossan said with the recent drop in rubber prices coupled with higher demand for both technical rubber products and gloves, the company was positive over its performance in the coming quarters.



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TSH Resources 3Q net profit surges 89% to RM34.47m

KUALA LUMPUR (Nov 17): TSH RESOURCES BHD []'s net profit surged 89% to RM34.47 million in the third quarter ended Sept 30, 2011 from RM18.24 million a year ago, underpinned the strong performance of its palm and bio-integration segment.

The company said on Thursday t its revenue for the quarter rose 27.5% to RM273.15 million from RM214.26 million in 2010. Earnings per share rose to 8.41 sen from 4.45 sen in 2010, while net assets per share was RM2.06.

For the nine months ended Sept 30, TSH’s net profit jumped 131% to RM94.39 million from RM40.83 million in 2010 while revenue increased by 29.2% to RM855.69 million from RM662.22 million in 2010.

Reviewing its performance, TSH said its palm and bio-integration business segment continued to yield good results due to higher crop production arising mainly from higher yield and increase in mature PLANTATION [] field in Indonesia.

The good performance was also partly attributed to mill operation which continued to show high efficiency, hence able to generate a higher oil extraction rate, it said.

The company said its cocoa manufacturing segment reported a lower profit due to lower production and unfavourable cocoa butter price.

As for the wood products segment, TSH said the increased loss was attributable to the decline in sale volume and gross margin and downsizing of overseas operations.

Commenting on its prospects, TSH said the subdued consumer sentiments and spending trends in Europe would restrain recovery of export market of the wood products segment.

The company said it was now exploring opportunity in South Asia Region and aimed to win more local installation projects to turnaround the Wood segment.

TSH said with the high Indonesia bean price due to export tax and increase in grinding of bean in Indonesia, the cocoa manufacturing segment faced a very competitive business conditions.

Combined with the low cocoa butter ratio and lower selling price, the cocoa manufacturing segment’s performance in the coming months will continue to be challenged by the volatile demand and supply of its finished products in the global market, it said.

In the palm and bio-integration business segment, TSH said palm oil prices were stabilising at around 2,900 to RM3,000.

“Despite macroeconomic development in Europe and the US which may limit the upside of the CPO prices, the fundamental demand for this crop remains strong due to its inherent competitiveness.

“Given the aforesaid situation, with the palm oil prices maintaining at current level and with increased hectarage coming into maturity, the group is expected to achieve a satisfactory level of profitability,” it said.



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Stocks to watch: TSH, Tradewinds Plantations, WCT, MMHE, YTL

KUALA LUMPUR (Nov 18): The flurry of corporate results could help provide the direction of the market on Friday despite the external factors from the eurozone which are weighing down sentiment.

Among the stocks which could also see trading interest is IOI Corp, which will announce its results. Maybank Investment Bank Research aid the first quarter earnings for the period ended Sept 30 were expected to be weaker on-quarter.

“Sentiment may be dampened by huge forex translation loss of c.RM230m in 1QFY12 following a weaker ringgit,” it said on Thursday.

Bank Negara Malaysia will announce the third quarter GDP performance later Friday and also provide an outlook for the economy going forward.

Stocks to watch are TSH RESOURCES BHD [], Tradewinds PLANTATION []s Bhd, WCT BHD [], Malaysia Marine and Heavy Engineering Holdings Bhd and YTL Corp and the group of companies.

TSH Resources's net profit surged 89% to RM34.47 million in the third quarter ended Sept 30, 2011 from RM18.24 million a year ago, underpinned the performance of its palm and bio-integration segment.

Its revenue for the quarter rose 27.5% to RM273.15 million from RM214.26 million in 2010. Earnings per share rose to 8.41 sen from 4.45 sen in 2010, while net assets per share was RM2.06.

For the nine months ended Sept 30, TSH’s net profit jumped 131% to RM94.39 million from RM40.83 million in 2010 while revenue increased by 29.2% to RM855.69 million from RM662.22 million in 2010.

Tradewinds Plantations' earnings jumped 96% to RM98.80 million in the third quarter ended Sept 30 from RM50.29 million a year ago, as it benefited from higher prices and production of palm products.

Its revenue increased 39.6% to RM333.54 million from RM238.84 million while earnings per share were 15.7 sen compared with RM238.84 million.

Tradewinds Plantations said for the nine months ended Sept 30, its earnings increase 130.4% to RM237.51 million from RM103.07 million while revenue rose 46% to RM899.26 million from RM615.67 million.

WCT Bhd reported a 28.5% increase in earnings to RM38.29 million in the third quarter from RM30.56 million a year ago, mainly due to higher contribution from the civil engineering and CONSTRUCTION [] division.

Its revenue was marginally higher by 1.3% to RM361.97 million from RM357.14 million. However, the third quarter’s revenue and net profit were lower when compared with the second quarter where the revenue was RM376 million and earnings at RM38 million.

For the nine-month period, the earnings rose 15.3% to RM114.48 million from RM99.26 million in the previous corresponding period. Revenue, however, declined 17.1% to RM1.053 billion from RM1.270 billion.

MMHE reported a 3.2% increase in net profit to RM80.22 million in the quarter ended Sept 30 from RM77.71 million a year ago. However, its revenue during the quarter fell 54.7% to RM463.09 million from RM1.022 billion.

In the nine-month period from January to September, its earnings fell 15.2% to RM159.51 million from RM188.28 million a year ago. Revenue slumped 35.2% to RM1.420 billion from RM2.195 billion.

YTL CORPORATION BHD []’s earnings fell 9.7% to RM251.8 million (US$80.5 million) in the first quarter ended Sept 30, 2011 from RM278.9 million (US$89.1 million) a year ago. It said the lower earnings were due to loss incurred in the nascent ‘Yes’ mobile broadband division.

The group revenue grew 3.1% to RM4.543 billion from RM4.405 billion but pretax profit declined 15% to RM530.1 million from RM623.8 million.



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KL shares end sharply lower

At 5 am today, there were 344 gainers, 378 losers and 288 counters traded unchanged on the Bursa Malaysia.

The FBM-KLCI was at 1,465.47 down 11.37 points, the FBMACE was at 4,266.45 up 20.38 points, and the FBMEmas was at 10,061.02 down 58.80 points.

Turnover was at 1.585 billion shares valued at RM1.175 billion. - Bernama



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Market Commentary

The FBM KLCI index lost 11.37 points or 0.77% on Thursday. The Finance Index fell 0.74% to 13073.88 points, the Properties Index dropped 0.04% to 971.44 points and the Plantation Index down 0.77% to 7628.12 points. The market traded within a range of 11.33 points between an intra-day high of 1476.80 and a low of 1465.47 during the session.

Actively traded stocks include COMPUGT, DPS-WA, SUMATEC, DPS, MALTON-WB, HIBISCS-WA, SUMATEC-WA, FRONTKN, FRONTKN-WA and MALTON. Trading volume decreased to 1585.71 mil shares worth RM1175.42 mil as compared to Wednesday’s 2031.51 mil shares worth RM1468.73 mil.

Leading Movers were PBBANK (+8 sen to RM12.68), PETCHEM (+4 sen to RM6.25), DIGI (+6 sen to RM34.82), UMW (+4 sen to RM6.60) and AMMB (+1 sen to RM5.66). Lagging Movers were CIMB (-19 sen to RM6.87), IOICORP (-14 sen to RM5.09), GENTING (-20 sen to RM10.68), MAYBANK (-9 sen to RM8.30) and TENAGA (-9 sen to RM5.65). Market breadth was negative with 344 gainers as compared to 378 losers.-- JF Apex Securities Bhd



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Fajarbaru 1Q earnings slump 63% to RM1.53m

KUALA LUMPUR (Nov 17): Fajarbaru Builder Group Bhd’s earnings fell 63% to RM1.53 million in the first quarter ended Sept 30, 2011 from RM4.16 million a year ago.

It said on Thursday revenue was however, increased by 96.8% to RM55.17 million from RM28.03 million but earnings per share fell to 0.92 sen from 2.64 sen.

Its trade and other receivables rose to RM61.35 million from RM48.77 million on June 30.

Of the RM55.17 million in revenue, all of it was from the CONSTRUCTION [] businesses which resulted in pre-tax profit of RM2 million.



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KLCI closes lower, blue chips weigh

KUALA LUMPUR (Nov 17): The FBM KLCI extended its losses on Thursday, Nov 17 as external uncertainties weighed on investor sentiment at most key regional markets, although some of the Asian markets rose slightly on bargain hunting.

Meanwhile, European shares fell early on Thursday, tracking Wall Street lower, after ratings agency Fitch warned that the outlook for U.S. banks could deteriorate if the euro zone sovereign debt crisis is not resolved soon, according to Reuters.

The FBM KLCI fell 11.37 points to close at 1,465.47.

Losers edged gainers by 378 to 344, while 288 counters traded unchanged. Volume was 1.59 billion shares valued at RM1.17 billion.

At the regional markets, Hong Kong’s Hang Seng Index fell 0.76% to 18,817.47, the Shanghai Composite Index lost 0.16% to 2,463.05 and Singapore’s Straits Times Index fell 1.04% to 2,778.25.

Meanwhile, South Korea’s Kospi rose 1.11% to 1,876.67, Japan’s Nikkei 225 added 0.91% to 8,479.63 and Taiwan’s Taiex was flat at 7,387.81.

On Bursa Malaysia, BAT was the top loser and fell 70 sen to RM46.30; Harvest Court shares fell 45 sen to RM1.04 while its warrants lost 38 sen to 89 sen, Proton down 21 sen to RM3.32, Genting 20 sen to RM10.68, CIMB 19 sen to RM6.87, IOI Corp 14 sen to RM5.09, Magni 13 sen to RM1.15, AirAsia 11 sen to RM3.80 while MISC fell 10 sen to RM6.69.

Compugates was the most actively traded counter with 63.8 million shares done. The stock was unchanged at 8 sen.

Other actives included Sumatec, DPS Resources, Malton shares and warrants, Frontken and Hibiscus warrants.

Among the gainers, Amway and Nestle rose 28 sen each to RM9.32 and RM49.50, Panasonic 26 sen to RM19.76, Dutch Lady 20 sen to RM22.70, DKSH 16 sen to RM2.20, Petrol One 11 sen to RM1.15, Metrod 10 sen to RM1.95, while BLD PLANTATION []s and Jaya Tiasa rose eight sen each to RM6.80 and RM6.40.



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UEM, EPF and govt strike a deal

KUALA LUMPUR: Toll rates on several expressways will increase by smaller amounts from 2016, once the proposed takeover of PLUS Expressways Bhd by UEM Group Bhd and the Employees Provident Fund Board (EPF) materialises.

At the same time, the concession period for several expressways will be extended.

This is in broad strokes the conclusion of the negotiations between the government and UEM and the EPF.

The hike in the toll rate for the North South Expressway (NSE), NSE Central Link (ELITE), Malaysia-Singapore Second Crossing (Linkedua),and Butterworth-Kulim Expressway (BKE) will be reduced and fixed at 5%. The first increase will take place in 2016 and revisions will be done every three years. Rates for the Penang Bridge will remain until expiry of the concession agreement.

The expiry date of all five concessions will be standardised at Dec 31, 2038, together with the NSE and Linkedua, without further extensions. The duration of the concession for ELITE was originally till 2030, BKE (2026) and the Penang Bridge till 2021.

To reduce the financial burden on the government, UEM and EPF have agreed to waive the outstanding balance of compensation to PLUS of RM2.9 billion as at Dec 31 last year, besides another RM3.6 billion in compensation for the five-year toll rate hike freeze between 2011 and 2015.

Prime Minister Datuk Seri Najib Razak announced the freeze on toll rates for four expressways -- NSE, ELITE, Linkedua, and BKE, last year.

Under the current toll structure, rates at the NSE, ELITE and Penang Bridge are revised upwards by 10% every three years, while the BKE toll hike is 15% to 25% every five years and Linkedua’s rates are revised upwards by 25% within a similar time frame.

EPF capital market department head Rohaya Mohammad Yusof (left) and UEM Group Bhd group managing director and CEO Datuk Izzaddin Idris shake hands at the conclusion of negotiations on the government proposed acquisition of the assets and liabilities of PLUS Expressways Bhd.

PLUS owns and operates 973km of highways across Malaysia, stretching from the Thai border to Singapore. The company’s portfolio also includes the New Klang Valley Expressway, Federal Highway Route 2, and Seremban-Port Dickson Highway.

Datuk Izzadin Idris, UEM group managing director and CEO, told a news conference at the end of negotiations with the government that the decisions represent a “milestone” and a win-win deal for all interested parties.

Izzadin said the reduction in the toll hike will benefit the man in the street and at the same time ensure that PLUS has sufficient cash flow to finance its capital needs. The money is crucial for the maintenance of its infrastructure which amounts some RM800 million annually.

“We have to maintain about 4,000 slopes along the NSE. We are preserving the NSE, a key national asset that forms the backbone of Peninsular Malaysia’s road infrastructure.

“Collection from the modest increase in toll rates [post-2016] and the limited extension will allow us to maintain the current standard of roads and services,” Izzadin said, adding that the decision to waive the compensation for PLUS will strengthen the government’s balance sheet.

Rohaya Mohammad Yusof, who heads the EPF’s capital market department, said the pension fund hopes to achieve an internal rate of return of at least 10% from its investment in PLUS. This translates into a dividend yield of 5% to 6% from its investment in the highway operator.

In October 2010, UEM and EPF made a joint offer to acquire the business and undertakings of PLUS, including its entire assets and liabilities for RM23 billion or RM4.60 a share. The yet-to-be completed exercise is being undertaken via PLUS Malaysia Sdn Bhd in which UEM holds 51% and the EPF 49% equity interest.

UEM, a wholly-owned subsidiary of state-owned investment arm Khazanah Nasional Bhd, currently owns 38.5% of PLUS. The EPF has a 12.4% stake in the highway operator.

In December 2010, PLUS grabbed headlines again when it received a rival offer of RM5.20 a share from Jelas Ulung Sdn Bhd. The directors of Jelas Ulung -- Ibrahim Mohd Zain and Ghazali Mat Ariff -- had reportedly obtained financing from BOCI Asia Ltd, a unit of Bank of China Ltd to fund its proposed takeover.

In January 2011, PLUS decided to accept the offer from UEM and the EPF after the acquirers paid a RM50 million cash deposit. Jelas Ulung’s offer was rejected as the offerer’s proposal failed to comply with the conditions announced by PLUS.

PLUS shareholders approved the UEM/EPF offer at an adjourned EGM a month later.

Under the exercise, the businesses of PLUS’ concession companies -- Projek Lebuhraya Utara-Selatan Bhd, ELITE, Linkedua and Konsortium Lebuhraya Butterworth-Kulim will be transferred by way of novation to Projek Lebuhraya Usahasama Bhd, a special purpose company wholly owned by PLUS Malaysia.

PLUS Malaysia will also acquire Penang Bridge Sdn Bhd under the proposed takeover.

Having finalised the revised concession agreements with the government, PLUS will proceed with the distribution of its cash to shareholders via a proposed special dividend and selective capital reduction. Apart from the acquisition price of RM4.60 a share, the company will pay an additional dividend of 2.13 sen a share to shareholders, translating into a total payout of RM106.6 million.

PLUS will be subsequently be delisted. Izzadin said there are “no plans at this stage” to relist the company in the future.

With the exit of PLUS from the equities market, he said investors can still participate in the company’s growth story by subscribing to new bonds issued by the firm. He did not elaborate, only indicating that the company is looking at selling up to RM33 billion worth of bonds to finance its capital needs.

Bloomberg, quoting sources, reported that PLUS is planning to issue RM30 billion worth of Islamic bonds to finance its expansion plans under the company’s new shareholders. It was reported that the debt instruments may be issued either at the end of this year or early next year.


This article appeared in The Edge Financial Daily, November 17, 2011.



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AMMB cuts profit growth forecast

KUALA LUMPUR: AMMB Holdings Bhd revised downward its earnings growth forecast for the fiscal year ending March 30, 2012, to between 10% and 12% from 14% on expectation of lower economic growth than previously estimated.

In a media briefing on the group’s results for its first half year ended Sept 30 (1HFY12) yesterday, the group revealed its target profit after tax and minority interest (PATMI) growth of 10% to 12% for FY12.

For 1HFY12, PATMI rose 15.7% to RM811 million from RM701 million in the previous corresponding period.

Group managing director Cheah Tek Kuang said even if the GDP growth rate comes in at 4.5%, which is lower than the government’s estimation of 5% to 6% for this year, the group’s business could still thrive.

“For the first half of the year, results were very good but in second half we think it may weaken a bit, but on average, we think 10% growth in profit is achievable,” he said.

Ganesh Kumar Nadarajah, group general manager of investor relations and planning, said the downward revision in its profit growth is due to the lower-than- expected GDP growth in the first half year and other external headwinds.

“Although the government has announced a slew of projects under the Economic Transformation Programme (ETP), some of these projects have not yet been implemented. The uncertainty in the global economy has also impacted demand for Malaysian exports as well. I think we have to be a little bit more cautious,” he said when contacted by The Edge Financial Daily.

Cheah: On average, we think 10% growth in profit is achievable.

The growth in PATMI was supported by broad-based earnings contributions as the group embarked on a diversification exercise to increase contributions from fee-based and non-interest income, and growing its current account savings account (CASA) deposits and loans by targeting profitable and viable segments.

AMMB said total income grew by 9.6% to RM2.17 billion for 1HFY12 against RM1.98 billion a year ago. This increase was driven by higher non-interest income growth of 31.7% year-on-year (y-o-y) to RM810 million from RM615.2 million, while its net interest income slipped to RM1.36 billion from RM1.37 billion a year ago.

Gross loans, including Islamic financing sold to Cagamas Bhd, rose 6.4% to RM74.6 billion during the period under review.

According to group CFO Ashok Ramamurthy, generally the growth rate of gross loans is around twice the growth rate of the country’s GDP.

“Even though the consensus is that Malaysia’s GDP growth this year would come closer to 5%, which would mean that gross loan growth would come around 10%, the group has a more conservative target of maintaining it at around 7%,” he said.

Retail lending continued to be concentrated on viable and profitable segments, rising 2.8% y-o-y to RM46.9 billion.

Non-retail lending grew at a higher rate of 13.2% with business loans up by 20.4% to RM15.2 billion during the period under review compared with RM12.6 billion in the previous corresponding period. Corporate loans grew by 13.5% to RM12.9 billion from RM11.3 billion recorded during 1HFY11.

“Non-retail portfolio has been growing faster compared with retail loans, resulting in an increased non-retail loans composition of 37% compared with 35% a year ago. Overall, variable rate loans continued expanding and now make up 53% of AMMB’s total portfolio,” said Cheah.

On the group’s short-term outlook, Cheah said AMMB will be cautious while staying aligned to its medium-term aspiration to become Malaysia’s preferred banking group with international connectivity, as measured by customer satisfaction, sound financial performance, and well diversified and sustainable growth.

He said the group will leverage on its international connectivity especially with its 25% shareholder Australia and New Zealand Banking Group (ANZ) via the roll-out of the AmBank-ANZ Get Set solutions and ANZ’s signature priority banking in Malaysia.

Net profit for the second quarter (2Q) ended Sept 30 was RM381.6 million, up 10.7% from RM344.6 million a year ago, the group said in its announcement to Bursa Malaysia yesterday.

It attributed the improved 2Q earnings to net impairment writeback on financial investment of RM17.7 million as opposed to net impairment loss of RM45 million, higher other operating income and net income from Islamic banking business by RM33.6 million and RM27.5 million respectively.

Higher earnings from net income from insurance business of RM49.7 million and net interest income of RM524.8 million also contributed to the improvement in earnings for the 2Q, it added.

AMMB declared a dividend per share of 6.6 sen.


This article appeared in The Edge Financial Daily, November 17, 2011.



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Healthcare stocks buck downtrend on Bursa

KUALA LUMPUR: Healthcare providers TMC Life Sciences Bhd and KPJ Healthcare Bhd bucked the downward trend on Bursa Malaysia yesterday, rising 1.7% and 19.3% respectively. The FBM KLCI closed almost unchanged yesterday at 1,476.84 points.

TMC Life closed up eight sen or 19.3% to 49.5 sen, the highest since April 29. It reached an intraday high of 51.5 sen, marginally higher than its closing price with 42.3 million shares traded.

KPJ, the largest listed healthcare player in Malaysia, was up seven sen or 1.7% to close at RM4.15.

Earlier in the week, The Edge Financial Daily had reported on the possibility of KPJ and TMC Life becoming beneficiaries of Singapore’s Central Provident Fund’s (CPF) Medisave scheme. The report highlighted that the Singapore government’s move was an opportunity for healthcare providers in Malaysia to capture a bigger pie of a rapidly growing market share.

Currently, only 12 Malaysian hospitals are on CPF’s approved list for Medisave funds. KPJ, which has more than 20 hospitals in its stable and with a number of them in Johor, is a potential beneficiary of this scheme should it bid to be included in the list of hospitals. Khazanah Nasional Bhd’s plan to list Parkway Pantai Ltd, reportedly raising as much as US$2 billion (RM6.3 billion), in the first half of next year may be another catalyst for healthcare counters.

Khazanah owns 70% of Integrated Healthcare Holdings Sdn Bhd, which in turn owns 100% of Parkway Pantai. Parkway Pantai operates 16 hospitals throughout Asia, mostly in Singapore and Malaysia, and plans to add eight more in Singapore, Malaysia, Vietnam, China, India and the United Arab Emirates. Parkway Holdings came under Khazanah’s fold after a takeover tussle with India’s Fortis Healthcare Ltd. The deal valued Parkway Holdings at US$3.5 billion.

The 30% block in Integrated Healthcare, which holds other healthcare-related assets aside from Parkway Pantai, was sold to Japan’s second largest trader Mitsui & Co in April for RM3.3 billion, which effectively valued the healthcare group at RM11 billion.

Last week, Singapore billionaire Peter Lim announced a joint venture with the Johor royal family to build a RM4.6 billion medical hub and marina city in Johor Baru. The project is aimed at supporting the increasing demand and the government’s aspiration for Malaysia to become a major healthcare tourism destination by 2020.

The medical hub will be managed by a division of Thomson Medical, Thomson International Health Services, which is based in Singapore. Lim is the largest shareholder of Thomson Medical and Bursa-listed TMC Life.


This article appeared in The Edge Financial Daily, November 17, 2011.



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Takeover rumours lift Proton to 5-month high

KUALA LUMPUR: Proton Holdings Bhd shares rallied to a five-month high after rumours of a possible takeover by billionaire Tan Sri Syed Mokhtar’s DRB-Hicom Bhd and the Naza Group resurfaced.

Proton’s share price reached an intraday high of RM3.63, bucking the downward trend on Bursa Malaysia. At the closing bell, it closed at RM3.53, up 10% or 32 sen, the highest since June 17. Its share price began to move on Tuesday when it jumped 18% to RM3.21 from RM2.70.

The rumour mill is currently rife with speculation that there has been renewed interest by DRB-Hicom as well as the Naza Group to acquire Proton. Both DRB-Hicom and the Naza Group are involved in the manufacturing and distribution of cars.

The former is mainly involved in the manufacture, assembly, distribution and sale of motor vehicles, motorcycles and special-purpose vehicles with brands like Honda, Isuzu, Suzuki and Mitsubishi under its belt.

The latter assembles brands such as its own Naza, Kia and Peugeot, and is the main importer and distributor of luxury automotive brands such as Ferrari and Brabus.

It is known that Khazanah Nasional Bhd, the government’s investment holding arm, has long been trying to exit or find a strategic partner for Proton, in which it holds a 42.74% stake. At present, Khazanah has no board representation in the national carmaker.

Group Lotus, which is 100% owned by Proton, is also rumoured to be a takeover target by DRB-Hicom.

In 2006 and 2007, Khazanah was in negotiations with Volkswagen AG, the European auto giant, to acquire a stake in Proton, but the talks broke down in late 2007.

DRB-Hicom had previously approached Proton in 2009 and formally submitted a bid to buy 32% of Proton shares. After the talks with Proton broke down, Volkswagen partnered instead with DRB-Hicom in late 2010 to assemble and manufacture Volkswagen vehicles in Malaysia.

Since then, no material announcements have been made on the progress of DRB-Hicom’s takeover bid.

Naza was also earlier rumoured to be interested in Proton, but appeared to have since shifted focus to its Volkswagen tie-up and property ventures. With no further corporate developments in Proton, the rumour mill also died down — until recently.

“At this juncture, they (DRB-Hicom) aren’t looking to acquire any companies,” said an analyst at a bank-backed research house which recently met with the group’s management.

“The market is also hearing speculation that DRB-Hicom may want to take over Group Lotus, which is 100% owned by Proton,” the analyst added.

DRB-Hicom officials contacted by The Edge Financial Daily declined to comment on the matter.

Proton made a net profit of RM155.6 million on revenue of RM8.97 billion for FY11 (ended March), lower than the previous year, where it reported a net profit of RM218.9 million on revenue of RM8.23 billion.

Its net assets per share stood at RM9.86 as at June 30, placing the stock’s price-to-book ratio at 0.36 times.


This article appeared in The Edge Financial Daily, November 17, 2011.



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Malton profit rises on higher income recognition

KUALA LUMPUR: Property developer Malton Bhd saw its 1QFY12 net profit more than double due to a higher recognition of income from its ongoing projects and the launch of Amaya Maluri.

Net profit for 1Q ended Sept 30 rose to RM12.1 million from RM5.54 million the previous year while revenue improved 44.3% to RM99.2 million from RM68.7 million.

Earnings per share rose to 2.9 sen from 1.59 sen, while net assets per share stood at RM1.33.

The company’s property development segment generated 66% or RM65.7 million in total revenue, followed by construction and project management, and property trading.

Earnings from construction and project management segment improved year-on-year due to progress in external projects.

Malton said its ongoing developments, Amaya Maluri and Bukit Rimau Shops, are expected to contribute positively to its current financial year.

The company proposed a final dividend of 0.85 sen less tax, and a final tax exempt dividend of 1.15 sen per share for its FYE June 30, 2011.

With the completion of the company’s rights issue of RM139.34 million nominal value seven-year 6% redeemable convertible secured loan stocks in early July, the group is expected to save interest costs arising from retirement of borrowings with higher interest rates and enhance its earnings through acquisitions of new land in strategic growth areas such as the Klang Valley, Penang and Johor for future development, it added.

Malton shares eased one sen to 69 sen on heavy volume of 23.43 million shares yesterday.

Early in the day, the stock hit a three-month high of 72.5 sen before easing on profit-taking.


This article appeared in The Edge Financial Daily, November 17, 2011.



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Prospects of expansion to Laos boosts Maybank

KUALA LUMPUR: Malayan Banking Bhd’s (Maybank) share price rose 12 sen or 1.45% to close at RM8.39 yesterday, up from RM8.27 with 5.49 million shares traded on news of its expansion plans in Southeast Asia.

CEO Datuk Seri Abdul Wahid Omar revealed yesterday in an interview with Dow Jones Newswires that Maybank is in talks with regulators in Laos to acquire a banking licence which will allow it to open a branch there, sending its share price upwards.

He said Maybank will use newly acquired Kim Eng Holdings Ltd’s brand and presence to launch commercial banking operations in Thailand.

However, he added that regulators have indicated that the lender won’t be able to open a Thai bank before 2014.

Wahid told Dow Jones, Maybank is targeting 40% of its profit from outside Malaysia by 2015 from 23% currently, and will expand in countries such as Vietnam, Cambodia and Indonesia.

“It is our belief that if we want to remain relevant it is important for us to have presence in all Asean countries come 2015,” Wahid said.

“The idea behind being there is that there will be greater intra-regional trade and investment ... therefore our customers will be doing business across the region.”

Maybank has branches in 14 markets, including Singapore, Pakistan, Indonesia and the Philippines.

The counter rose as high as RM8.52 during intraday trade yesterday.


This article appeared in The Edge Financial Daily, November 17, 2011.



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Dialog’s 1QFY11 net up 34%

KUALA LUMPUR: Dialog Group Bhd’s net profit for its first quarter ended Sept 30 rose 34.5% to RM44.54 million from RM33.09 million the year before even as revenue increased 35% to RM355.2 million from RM263.08 million.

The company attributed its improved performance to higher contribution from its operations in Australia and New Zealand. The consolidation of Fitzroy Engineering Ltd, a fabrication and multi-disciplined engineering company based in New Zealand, was also a major contributor to the increase, Dialog said.

Its Malaysian operations saw revenue rise 5% during the quarter as sales of specialist products and services were higher.

Contribution from its Asian operations rose significantly with higher revenue from specialist products and services recorded in various countries including Brunei, Oman, India, China and Indonesia. However, revenue from Singapore fell 35% due to lower plant maintenance works undertaken.

Earnings per share rose to 2.26 sen from 1.69 sen.

Dialog said the ongoing expansion of tank terminals in Tanjung Langsat, and the development of an independent deepwater terminal in Pengerang are expected to bring in short- to medium-term contributions from engineering and construction activities.

That’s on top of the long-term recurring income stream it will see when the tank facilities begin operating.

Dialog added that it is investing in upstream oil and gas opportunities, including the development and production of petroleum under the small field risk service contract.

“The group continues to grow its technical services, such as specialist products, engineering, procurement, commissioning and construction, and plant maintenance services,” the company said.

Dialog closed one sen higher to RM2.40 yesterday with 2.1 million shares traded.


This article appeared in The Edge Financial Daily, November 17, 2011.



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Penny stocks still in play despite Harvest Court’s fall

KUALA LUMPUR: Harvest Court Industries Bhd tumbled 30% on thin trade as trading curbs kicked in yesterday after a one-day suspension, but penny stocks continued to dominate activity on the local bourse. Yesterday’s top 20 most active were penny stocks and 70% of them ended the day with gains.

“With Harvest labelled a designated stock, we expected the wind to be taken out of the sails of other penny stocks. But based on today’s [yesterday’s] trading, that is not the case,” said OSK head of research Chris Eng.

Earlier, there were concerns that investors would drop other penny stocks on fear that trading curbs will be imposed on more counters, given that lower-liners were sold down in May 2006 after Iris Corp Bhd stocks and warrants were declared designated securities following a meteoric rise. Observers say buyers of penny stocks might have been emboldened by the fact that Bursa Securities’ decision on Harvest Court late Monday evening and the similar action on Iris, are more than five years apart.

Sharp price increases were seen in several lower liners, including TMC Life Sciences Bhd, Tricubes Bhd and Compugates Holdings Bhd, which were all among yesterday’s most active counters. Among the three, Tricubes’ share price gains were the highest at 57.6% to 26 sen, followed by TMC Life Sciences’ 19.3% gain to 49.5 sen. Compugates, yesterday’s most active stock with over 79.9 million shares done, gained 6.7% to 8 sen.

Even so, Eng wouldn’t put too much stock in the possibility of any fundamentally-empty stock running for long.

Eng says any selldown in penny stocks in the near future should not impact the broader market.

“There did not appear to be a fundamental reason as to why penny stocks started to rally recently and end-retail investors have not been aggressively trading in these penny stocks. As such, if there is a selldown in penny stocks in the near future, it should not have an effect on the broader market,” Eng said.

While a run-up in penny stocks, had in the past signalled that a market rally is nearing the end of a cycle, experts reckon this may not be the case here.

“In the financial markets, hindsight is always 20:20 [perfect]. There may have been other factors in the past that are not present in the current markets, such as the bull run in the 1990s when speculation was at its peak,” said a local research head. “Since each company operates independently and speculation has cooled down relative to how it was in the 1990s, a fall in penny stocks will probably not cause a selldown in the general market,” he said.

Whatever the case, it remains to be seen if Harvest Court will continue its slide today, after trading between a thin one-sen band of between RM1.49 and RM1.50. Buyers need to make upfront payments when buying designated securities and have a free balance of securities before selling them.

To recap, Harvest Court’s share price had skyrocketed 28 times or 2,740% over seven weeks and gained a whopping RM371.2 million in market capitalisation in the process before the trading curbs were imposed. Yesterday’s 64 sen dip to RM1.49 at the closing bell wiped out RM115.6 million in market cap to RM269.17 million — still a distance from it’s RM13.5 million worth at 7.5 sen apiece on Sept 27.

Interestingly its volume of 724,000 shares yesterday, is now close to the daily activity it saw before volumes spiked to as much as 94.5 million shares, or over half its share base, at one point.


This article appeared in The Edge Financial Daily, November 17, 2011.



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Tricubes to collect summonses for PDRM, stock surges 58%

KUALA LUMPUR: Tricubes Bhd, which manages the 1Malaysia email, announced yesterday it had secured a contract from Polis Diraja Malaysia (PDRM) to handle the payment of and enquiries about traffic summonses, leading to a surge in its stock price.

The group, which provides identity authentication technology, said it had received a letter of award from the police force appointing it as the collection agent of traffic summonses via automated teller machines and for enquiries about summonses through the short messaging system.

Subsequently, the group’s share price jumped to its highest in six months by 75.8% to 29 sen, from its previous close of 17.5 sen.

The stock ended the day at 26 sen, up 9.5 sen or 57.8% with a hefty 64.4 million shares changing hands. It was also the fourth most active stock on Bursa Malaysia.

Tricubes also announced that one of the company’s directors and major shareholder Khairun Zainal Mokhtar had requested to trade the company’s securities during the closed period.

Tricubes is currently under a closed period, pending an announcement of its financial results for the second quarter ended Sept 30, 2011.


This article appeared in The Edge Financial Daily, November 17, 2011.



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Bumi Armada jumps 5%, to join MSCI Equity Index

KUALA LUMPUR: Oil and gas service provider Bumi Armada Bhd rose 5% to RM4.02 yesterday, following news that it will be added to the MSCI Equity Index.

In a statement following its semi-annual index review on Tuesday, MSCI Inc said Bumi Armada’s addition, effective Nov 30’s close, is not at the expense of existing constituents as there will be no deletions.

Finishing seventh on yesterday’s top gainers list, Bumi Armada closed at RM3.99, rising 16 sen or 4.18% for the day with over 16.12 million shares done. With a current market capitalisation of RM11.7 billion, it is among Malaysia’s largest stocks by market capitalisation.

Just four months ago, on July 21, Bumi Armada made a strong debut in a volatile market, selling 878.5 million shares at RM3.03 apiece to raise RM2.66 billion.

Its IPO was one of the largest this year, alongside MSM Malaysia Holdings Bhd and UOA Development Bhd.

The stock was highest at RM4.33 on July 22.

Seven brokerage houses are calling the stock a “buy” against six with “hold” and none saying “sell”, according to Bloomberg data. At the time of writing, price targets ranged from OCBC Investment Research’s RM3.36 to HwangDBS Vickers’ RM5 apiece.


This article appeared in The Edge Financial Daily, November 17, 2011.



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News in brief

Selvarajah still Permanis CEO
KUALA LUMPUR: Erwin Selvarajah is still CEO of beverage-maker Permanis Sdn Bhd that has just been sold to Japan’s Asahi Group, CI Holdings Bhd (CIH) said in a statement yesterday to clarify an earlier announcement.

On Nov 11, CIH announced 41-year-old Selvarajah’s resignation as its CEO, following the change in Permanis’ ownership.

Formerly wholly owned by CIH, Permanis — the maker of beverages like Pepsi, Gatorade and Tropicana in Malaysia — is sold to Asahi for RM820 million, of which 88% or RM724.2 million will be distributed to CIH shareholders.

Selvarajah has been Permanis’ CEO since 1999, and had only been CIH’s CEO for 15 months from Aug 25 last year. Selvarajah has a 2.99% stake in CIH.


Xingquan locks in RM333m sales
KUALA LUMPUR: China-based Xingquan International Sports Holdings Ltd locked in 670 million yuan (RM333 million) in sales of its Gertop brand of shoes, apparels and accessories at its recent Spring/Summer 2012 sales fair in Quanzhou, Fujian province.

That’s up 10.7% from that booked at the same event last year, it said in a statement yesterday. The orders would boost the top line for FY ending June 30, 2012, it said.

Xingquan is slated to release results for 1Q ended Sept 30, 2011 next week. Its FY11 audited net profit was 216.6 million yuan on the back of 1.5 billion yuan in sales.


Esthetics prices rights at 8.7% premium
KUALA LUMPUR: Esthetics International Group Bhd has priced its warrant-sweetened two-for-five rights issue of 52.8 million shares at 50 sen apiece, a 8.7% premium to its five-day volume weighted market price of 46 sen.

Entitlement dates for the rights that comes with a similar number of warrants, exercisable at 50 sen each, will be determined at a later date.


This article appeared in The Edge Financial Daily, November 17, 2011.



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Alliance 2Q profit up 18% y-o-y to RM121m

KUALA LUMPUR: Alliance Financial Group Bhd posted a net profit of RM120.95 million for 2QFY12 ended Sept 30, 18.3% higher than RM102.27 million achieved in the same period last year.

“We are happy with our first half performance, which reflects the results of the strategic initiatives undertaken over the last 18 months in upgrading capabilities and systems to deliver earnings and value creation across our franchise in consumer and SME banking,” said Sng Seow Wah, group CEO of Alliance Bank Malaysia Bhd.

The group’s revenue rose by 5.9% to RM314.6 million for its second quarter from RM296.98 million in the corresponding period last year, raising operating profit by 6.7% to RM171.37 million from RM160.57 million.

For the quarter, net interest income saw a marginal improvement of 1% to RM175.98 million from RM174.16 million in the same period last year, whereas net income from its Islamic banking business grew by 11.6% to RM65.53 million from RM58.73 million.

For the six months to Sept 30, Alliance’s net profit increased 17.6% to RM250.51 million, or 16.4 sen per share.

Alliance said in a statement it anticipates the challenging external global environment to moderate growth, and increasing competition within the industry to further compress margins.

“The group is confident that it will be able to report satisfactory results for the current financial year ending March 31, 2012, as the business strategies that had been implemented will enable the group to further diversify its revenue streams, strengthen its operational and risk management infrastructure as well as customer service,” said Sng.

Net assets per share rose to RM2.32 as at Sept 30 compared with RM2.17 a year ago.

The group’s total gross loans grew by RM1.06 billion or 4.7% to RM23.50 billion as at Sept 30 from RM 22.44 billion at the same time last year, which the group attributed to the expansion in housing loans and small and medium enterprises (SME) lending.

Housing loans and financing grew by 2.9% to RM8.57 billion as at Sept 30 up from RM8.33 billion in the previous year. However, housing loans this year made up 36.5% of the group’s gross loans, down from last year’s 37.1%.

Loans to small and medium enterprises (SME) grew by 5.8% to RM5.06 billion, making up 21.5% of total gross loans as at Sept 30, up from RM4.78 billion last year.

Loans to individuals rose to RM12.62 billion representing 53.7% of total gross loans, an increase of 2.2% from RM12.35 billion in the previous year.

Gross impaired loans as a percentage of gross loans declined by 0.7 percentage points to 2.6%, compared with last year’s 3.3% as gross impaired loans fell 18.9% year-on-year (y-o-y) from RM741.32 million to RM601.26 million.

At the same time, the loan-to-deposit ratio fell to 77.3% as at September 2011, as compared with 82.8% a year ago, as deposits expanded by 15.3%.

This improvement was attributed mainly to expansion in customer deposits by RM4 billion or 15.3% y-o-y to RM30.4 billion, due primarily to deposits mobilised from business enterprises.

The group’s risk-weighted capital ratio remained strong at 15.83% with core capital at 11.9% at end-September.

Sng said: “The group’s capital ratios are well above the regulatory requirements as well as the requirements under Basel III, as the group continues to proactively manage its capital position to ensure that the capitalisation level is sufficient to meet its growth aspirations.”

Alliance’s shares were traded unchanged at RM3.50 on volume of 452,500 shares yesterday.


This article appeared in The Edge Financial Daily, November 17, 2011.



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Al-Hadharah Boustead REIT sees 44% rise in 3Q net profit

KUALA LUMPUR: Al-Hadharah Boustead REIT, the country’s only Islamic plantation-based real estate investment trust, continued to see gains from recent acquisitions as its 3QFY11 net profit rose 44.7% to RM27.2 million from RM18.8 million last year.

It said additional rental from the newly acquired Taiping Rubber Plantations and Sutera Estates contributed to an increase in its fixed rental income, which rose 12% year-on-year to RM49.1 million from RM43.6 million.

Additionally, its performance-based profit sharing more than doubled to RM28.1 million from RM11.6 million in the previous year.

“We are pleased with the results for the year to date. Clearly there is a greater usage of palm oil particularly among established markets in Asia. The REIT is expected to benefit from this strong demand given that crude palm oil prices should remain within a favorable pricing range,” said chairman Tan Sri Lodin Wok Kamaruddin in a media statement.

The company expects a satisfactory performance for the remainder of the year as its performance-based profit sharing remains at healthy levels and crude palm oil (CPO) prices stay strong.

Overall rental income in the quarter rose 44.7% to RM27.2 million from RM18.8 million last year.

Net asset value per unit remained at RM1.42.

For 1HFY11, the company distributed RM25.07 million or 4 sen per unit.

It earlier distributed RM34.5 million, or 6.8 sen per unit, for FY10.

“With our strong dividend payout track record and the healthy movement of our unit price, we are confident investors will benefit from their investments in the REIT despite current capital market conditions,” said Lodin.

The REIT ended 1 sen higher at RM1.48 yesterday on a thin volume of 3,000 units traded.


This article appeared in The Edge Financial Daily, November 17, 2011.



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Nilai Resources gets offer to buy land from major shareholder

KUALA LUMPUR: Nilai Resources Group Bhd has received an offer to buy LK Prisma Sdn Bhd, which owns a 418.2-acre piece of land, forming part of the Seremban Utara township development, for RM118.4 million.

The related-party offer was made by Lapangan Kota Sdn Bhd, a company owned by Datuk Dr Gan Kong Seng, who is Nilai Resources executive chairman and major shareholder, with a 54.93% stake.

The consideration was based RM6.50 per square foot (psf) for the land, which has been approved for residential, commercial, institution or industry use.

The sale of LK Prisma is conditional on approval being obtained from Nilai Resources’ board of directors and shareholders.

Nilai Resources saw its net loss widen to RM1.06 million in 1HFY11 from RM426,000 a year ago, while revenue fell 7% to RM67.01 million from RM72.2 million.

For its second quarter ended June 30, its net loss shrank to RM954,000 from RM1.98 million a year ago while revenue improved 21% to RM35.3 million.

The company is involved in property development, hospitality, education, landscaping and quarrying.

Its property development segment contributed 35% of its 1HFY11 revenue and held RM409.9 million in assets as of June 30.

As at end-June, it held RM21.2 million in cash and had RM69.9 million of borrowings.

Shares in the company rose to a more than 10-year high when it reached RM1.80 on Nov 3.

It ended 12 sen lower to RM1.38 yesterday.

The stock has gained some 56.8% year-to-date, but is trading below its book value of RM3.51.


This article appeared in The Edge Financial Daily, November 17, 2011.



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Premium beer next growth driver for Carlsberg

KUALA LUMPUR: Carlsberg Brewery (M) Bhd expects its premium beers to account for 40% of its revenue within the next three to five years, once it starts brewing them in-house, said managing director Soren Ravn.

Currently, Carlsberg’s mainstream beer accounts for around 80% of its revenue but premium beers will be a key criteria for future growth, he said after the company’s third quarter results briefing yesterday.

Its brands such as Hoegaarden and Kronenbourg have a market share of close to 20% in the premium beer segment, according to Ravn.

“My stretch [market share] target is 50% in the premium beer segment,” he said, adding that the target is expected to be achieved in five years.

From 2007 to 2010, Ravn said Carlsberg increased its market share in the premium segment by 14%.

Carlsberg currently imports its premium beer brands. Ravn said the company will only start to see significant contributions from its premium beers when its starts to brew them in-house.

“We are getting the volume growth now from premium beers but to translate that into a big chunk of our earnings we need to get the production here,” he said.

By brewing the beers locally, Carlsberg will save on logistics costs and an exemption on the RM5 per litre import duty, said Ravn.

He said the company should be producing two premium beer brands within 12 months.

Ravn and models posing with Carlsberg brands.

According to Ravn, Carlsberg has an annual production capacity of 150 million litres.

On production costs, he said malt, which accounts for 30% of Carlsberg’s raw material costs, has seen prices increase by 30% to 35% this year. Carlsberg expects to hedge 80% to 85% of its 2012 malt requirements by year-end, he added.

Ravn said the beer industry is resilient and will not be severely affected by an economic downturn.

For its 3Q ended Sept 30, Carlsberg reported a 43.3% jump in net profit to RM48.85 million from RM34.09 million a year ago, due to stronger sales and better margins. Its revenue rose 21.9% to RM401.66 million from RM329.49 million.

For the nine-month period ended Sept 30, its net profit grew 25.4% to RM128.81 million from RM102.75 million a year ago, while revenue improved by 10.8% to RM1.15 billion from RM1.04 billion previously.

Ravn attributed the strong 3Q results to the successful 2011 global Carlsberg brand packaging change and consumer promotions under the tagline “That Calls for a Carlsberg”, which is now aligned in 140 countries.

According to calculations by The Edge Financial Daily, pre-tax profit margins for Carlsberg for 3Q rose to 17.16% from 14.21% in the previous corresponding period.

In a research note on Nov 10, CIMB increased its target price for Carlsberg to RM8.10 from RM7.10.

However, the research house remained “neutral” on Carlsberg because of risks from higher raw material costs and a possibility of an off-budget duty hike.

It said these “negatives” will be balanced by higher margins from Carlsberg brewing its premium beers in-house.

It said the brewery might raise selling prices by 3% to 4% to pass on the higher cost to consumers. The small price increase should have a minimal impact on sales, it added. It expects a total industry growth of 3% to 4% for the beer sector in 2012.

The research house expects Carlsberg to post a net profit of RM151 million for FY11 and RM163 million for FY12. It expects revenue to come to RM1.419 billion in FY11 and RM1.516 billion in FY12.

CIMB expects gross dividends of 32 sen and a dividend yield of 4.51% for FY12.


This article appeared in The Edge Financial Daily, November 17, 2011.



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Ramunia explains ONGC decision

KUALA LUMPUR: Ramunia Holdings Bhd and its joint venture partner declined to re-tender for a US$190 million (RM602 million) contract with India’s Oil and Natural Gas Corp Ltd (ONGC) due to the long delay in the issuance of the notice of award. The contract was for the construction of up to 10 wellhead platforms.

Ramunia clarified to Bursa Malaysia yesterday that the Ramunia-SEW consortium decided not to participate as ONGC had delayed the notice of award from Sept 2, 2011 to Nov 11, 2011, despite the fact that the consortium was the lowest compliant bidder as declared on Aug 30, beating five other international consortia and one disqualified bidder.

Ramunia had announced on Monday that the consortium would not be participating in the re-tender exercise for the WO-16 cluster and SB-14 wellhead platform project after receiving a new invitation from ONGC to participate in a short re-tender of the project.

Ramunia said in April that Ramunia Fabricators Sdn Bhd had signed a memorandum of understanding with SEW Infrastructure Ltd (India) and in July it announced that the Ramunia-SEW consortium was to bid for this job. If Ramunia had won the job, it would have marked Ramunia’s re-entry into India after a two-year hiatus.

Ramunia was blacklisted by ONGC over issues with a US$685 million field development job in 2008. The two-year blacklist ended in May.


This article appeared in The Edge Financial Daily, November 17, 2011.



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CI Holdings’ numbers sour on higher costs

CI Holdings Bhd (Nov 16, RM5.23)
Downgrade to neutral at RM5.28 with revised fair value of RM5.59 (from RM5.66): CIH’s 1QFY12 net profit (Permanis Sdn Bhd and DOE Industries Sdn Bhd) sank 37% to RM7.3 million year-on-year (y-o-y). When annualised, this is below our previous full-year forecast (disposal not factored in) of RM41.3 million. The weaker-than-expected results were due to: (i) the increase in sugar price after the subsidy on sugar was removed in January 2011; (ii) higher finance costs due to additional financing for new assets; and (iii) delays in completion of various developers’ projects amid softening demand owing to uncertain global economic conditions and the tightening of property loan regulations to curb speculation. By operation division, continuing operations (DOE + CIH) sales slipped 17.3% and bottom line slipped into a net loss while Permanis’ top line was higher by 7.4% but bottom line was down 33%. DOE sales were impacted by delays in completion of property development projects while Permanis sales got a boost from the Hari Raya Aidilfitri promotion campaign.

Permanis’ gross profit margin dipped two percentage points (pps) y-o-y to 38.1%, largely due to the withdrawal of the sugar subsidy, while DOE’s gross profit margin improved marginally by 0.4 pps to 26.4%. However, Permanis’ operating profit shrank by a larger 3.2% y-o-y to 7.5% on higher operating expenses and lower operating income in addition to higher cost of sales, whereas DOE’s margin dipped 7.6 pps to 2.6% mainly due to the recognition of a foreign exchange gain in the previous year. DOE’s lower profit was also due to the fact that expenses at the holding company level were solely borne by DOE. When normalised, DOE’s 1QFY12 net profit totalled about RM500,000.


While there are numerous acquisition proposals involving various industries on CIH’s table, the company has ruled out industries such as construction, oil and gas, plantation and biotech where technical know-how is required. Management hopes to identify an acquisition target within 12 months. We are cutting our FY12/FY13 earnings forecasts by 18.2% to 23% to RM18.5 million and RM6.1 million respectively to incorporate the weaker results from DOE and Permanis, as well as higher interest income based on management’s timeline guidance. We are downgrading the stock to “neutral” given the less than 10% upside. — OSK Research, Nov 16


This article appeared in The Edge Financial Daily, November 17, 2011.



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Perdana Petroleum proposes private placement

Perdana Petroleum Bhd (Nov 16, 79.5 sen)
Maintain trading buy at 83.5 sen with target price of RM1.09: Perdana Petroleum has proposed to undertake a private placement of new shares, representing up to 10% of its existing issued shares. As at end-October, the company had an issued share base of 450.1 million and outstanding warrants of 61.4 million. If none of the outstanding warrants is exercised, the company may place out up to 45 million new shares. If all the outstanding warrants are exercised, it may place out up to 51.1 million new shares.

Assuming a placement price of 75 sen per share (representing a 4.2% discount to its five-day volume-weighted average price (VWAP), Perdana Petroleum may raise up to RM38.4 million of gross proceeds (or RM33.8 million under a minimum case scenario). The company intends to utilise the proceeds for working capital.

The corporate exercise is within market expectation and Dayang Enterprise Holdings Bhd (not rated) is purported to be the placee. To recap, on Oct 6, 2011, Perdana Petroleum announced in response to an article in The Edge weekly, Dayang may buy into Perdana Petroleum, that it was in exploratory/informal discussions with Dayang on strategic collaboration. During the discussion, the matter of financing was raised and Perdana Petroleum indicated that one of the ways the company may raise funds was to undertake a private placement. Dayang had indicated that it was interested in acquiring a strategic stake in the company.

We are neutral on the proposal. While the placement will be dilutive to earnings, we believe roping in Dayang is a decent strategic move and the cash proceeds (assuming placement price of RM0.75) will help lower the company’s net gearing ratio from 0.42 times to 0.33 times, thereby reducing its funding pressure. — Affin IB Research, Nov 16


This article appeared in The Edge Financial Daily, November 17, 2011.



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Next generation patrol vessels to pick up BHIC’s dismal FY11

Boustead Heavy Industries Corp Bhd (Nov 16, RM2.80)
Maintain buy at RM2.84 with revised fair value of RM4.30 (from RM5.20): We maintain our “buy” call on Boustead Heavy Industries Corp (BHIC) with a lower fair value of RM4.30 per share (against an earlier RM5.20), based on a 20% discount to our revised sum-of-parts value of RM5.39 per share. Our fair value implies an FY12F price-earnings ratio (PER) of 13 times, a 35% discount to its four-year average of 20 times.

We have cut FY11F earnings by 85% due to further provision of RM50 million for cost overruns and late delivery charges in the delivery of two accommodation crane barges to Swire Pacific Offshore Operations and two 7,000 deadweight tonne oil carriers to Sealink International. BHIC’s 9MFY11 net profit of RM9 million (-85% year-on-year) came in below expectations, accounting for only 14% of our FY11F earnings of RM67 million and 50% of street estimate’s RM18 million.

We have cut FY12F/FY13F earnings by 14% and 48% respectively on potentially slower recognition of the next generation of six patrol vessels (with a potential value of over RM8 billion). This is likely to be awarded soon, possibly during the Langkawi International Maritime and Aerospace exhibition on Dec 6 to 10. The sixth and final patrol vessel (KD Selangor) of the first generation batch was delivered on Dec 28, 2010 and BHIC received a letter of intent for the second generation in October last year. The delay in the letter of award stemmed from prolonged technical evaluations with overseas parts and equipment suppliers.

Assuming 30% of the second generation patrol vessels are subcontracted to the group’s wholly-owned Boustead Penang Shipyard, this could raise the estimated net order book from RM1.2 billion to RM4 billion, five times FY11F revenue. Other contracts could be: (i) new maintenance contracts for the first two patrol vessels; (ii) two new patrol vessels worth RM1 billion for the Malaysian Maritime Enforcement Agency; and (iii) commercial charters for three novated Gagasan chemical carriers, one secured last week with a Japanese charterer.


Despite a 24% increase in revenue to RM150 million, BHIC suffered a RM2 million loss in 3QFY11 largely due to RM30 million in additional cost overruns and late delivery charges from Swire Pacific Offshore Ltd’s two accommodation crane barges, which are expected to be completed in March and June 2012, and Sealink’s two oil carriers (one delivered last month and another this month).

The stock currently trades at an FY12F PER of eight times, 57% below its four-year average, a bargain for the sole military yard in the country with massive order book prospects. — AmResearch, Nov 16


This article appeared in The Edge Financial Daily, November 17, 2011.



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That calls for a Carlsberg cheer

Carlsberg Brewery (M) Bhd (Nov 16, RM7.26)
Maintain buy at RM7.09 with fair value of RM8.30: Carlsberg Brewery brewed a sequentially higher net profit of RM49 million for 3QFY11. Results for 9MFY11 came in well within both our, and market expectations, at 84% and 85% of full-year estimates.

The group recorded a solid top line growth of 16% quarter-on-quarter (q-o-q), in line with the strong malt liquor market (MLM) consumption trend seen in industry player Guinness Anchor Bhd.

This was led mainly by: (i) seasonal pre-budget speculative trade loading activities in Malaysia; (ii) higher revenue from increased beer sales volume from 100%-owned Carlsberg Singapore which grew 7% quarter-on-quarter (q-o-q) and; (iii) higher contribution of RM2 million from associate Lion Brewery Ceylon plc.

Despite a higher effective tax rate (five percentage points [pps] q-o-q), 3QFY11 net profit surged 58% compared with the preceding quarter. Earnings before interest, tax, depreciation and amortisation (Ebitda) margin was up five pps q-o-q, largely attributed to: (i) better margins from Carlsberg Singapore at 25% against 13% (2QFY11) and (ii) productivity gains from initiatives undertaken within Carlsberg’s supply chain, as well as cost efficiencies from improved sales and marketing. Recall, Carlsberg invested in a new packaging design and introduced new large bottles as part of its global rebranding exercise in the preceding quarter.


Similar to past years, no dividend was declared for this quarter. Our net dividend per share forecast of 30 sen per share (yield: 4%) is premised on a dividend payout of 60%, in line with management’s guidance of 50% to 70% per year. The group declared an interim dividend of five sen per share (less 25% tax) in 2Q.

Carlsberg’s earnings growth will be firmly underpinned by increased demand on the back of greater advertising and promotions, namely the UEFA European Cup in 2012, of which the group is the official sponsor, as well as higher revenue contributions from its strengthening portfolio of imported/premium beers.

As it is, sales of recently launched “Kronenbourg 1664” and “Kronenbourg Blanc” French beers continue to gain further traction. Premium beers make up circa 10% of group revenue. Higher beer volumes would serve as a decent buffer against higher input costs in FY12F. We are not too concerned as major input costs, namely malting barley and hops, are some 24% off year-to-date peaks.

Maintain “buy” on Carlsberg with an unchanged discounted cash flow-based fair value of RM8.30 per share. — AmResearch, Nov 16


This article appeared in The Edge Financial Daily, November 17, 2011.



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New opportunities for APM Automotive in 2012

APM Automotive Holdings Bhd (Nov 16, RM4.40)
Upgrade to market perform at RM4.44 with revised fair value of RM4.50 (from RM4.20): APM is due to announce its 3QFY11 results after market close today. We are looking for a quarterly net profit of about RM32 million, flat year-on-year (y-o-y) but up about 14% q-o-q. This follows a relatively lacklustre 2QFY11 caused by the combined effects of the supply disruption from the Japan earthquake and the amendments to the Hire Purchase Act that resulted in delays in vehicle registrations. A sequential improvement in earnings is expected given the 10.3% q-o-q recovery in total industry volumes (TIV) during the September quarter that was prompted by the good market response to the launch of the new Myvi by Perusahaan Otomobil Kedua Sdn Bhd (Perodua) in mid-June. The new Myvi helped to lift Perodua’s (APM’s largest customer) sales 41.2% q-o-q during the September quarter. APM’s overseas revenue, mainly from Indonesia and Australia, should improve as a result of the normalisation of component supplies. In particular, APM’s Indonesian business looks to be in a sweet spot with domestic auto sales heading for another record year after a 17.5% y-o-y increase in TIV to 659,857 units for the nine months to September.

APM recently announced two new joint venture agreements (JVA) with the International Automotive Components Group (IAC) to manufacture automotive interior plastic components and systems for domestic and multinational original equipment manufacturers (OEMs) in Malaysia (60%) and Thailand (40%). Associate contributions from the Thai JV will only begin in 2013 given the 18-month lead time. APM will also supply components to DRB-Hicom Bhd for its completely knock-down (CKD) Volkswagen project. In the longer term, APM is well-positioned to reap the benefits of increased efforts by OEM auto manufacturers to geographically diversify and improve their supply chain redundancies after the natural disasters experienced by Japan and Thailand this year.


Our 2011 forecast is unchanged although 2012 estimates have been raised 6.6% and 2013 by 10% after factoring in contributions from the new JVs with IAC. Key risks include lower car sales and unfavourable forex trends.

We upgrade our call on the stock to “market perform” (from “underperform”). Our fair value estimate is RM4.50 (from RM4.20) derived from applying a 6.5 times target price-earnings ratio to 2012 earnings (unchanged). Our target PER is a 16% discount to the five-year average PER of 7.8 times that we consider to be fair, given the 5.8% 2010/13 earnings compound annual growth rate. — RHB Research, Nov 16


This article appeared in The Edge Financial Daily, November 17, 2011.



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A relatively subdued quarter for CIMB

CIMB Group Holdings Bhd (Nov 16, RM7.06)
Maintain sell at RM7.10 with target price of RM6.80: CIMB’s 9MFY11 net profit of RM2.86 billion (+9.7% year-on-year) was broadly within expectations at 73% of our full-year forecast and consensus. What is positive is that management remains vigilant in the current uncertainty and continues to enhance its capital base. We do expect CIMB’s valuation premiums to the sector to narrow amid volatility in the capital markets and high foreign shareholding. We maintain our “sell” call with an unchanged target price of RM6.80 (1.8 times 2012 price-to-book value, return on equity (ROE): 15.1%).

Pre-tax profit for 3Q remianed flat quarter-on-quarter (q-o-q). There were no major surprises across the business segments. Net interest margin (NIM) contracted three basis points (bps) q-o-q to 3.12%, partially offsetting a 4.6% q-o-q expansion in loans. Non-interest income (+6% q-o-q) was bolstered by investment gains, which compensated for a 15% q-o-q decline in fee income.

Year-to-date loan growth of 10% (15% annualised) was ahead of our expectations, but this was driven primarily by strong overseas lending (+27% YTD), while domestic lending has been subdued (+2% YTD). Management remains cautious about lending to hire purchase and SMEs, and has been selective of its corporate clients on the domestic front. We look to a moderation in loan growth to about 12.4% for 2012 from 13.9% in 2011, but expect stronger domestic loan growth to compensate for a moderation abroad.

Management’s cost-cutting initiatives appear to be bearing fruit, with expenses up just 2% q-o-q — the target is to cut the group’s cost/income ratio to 50% by 2013 (56% in 3Q). Management continues to see a healthy pipeline for investment banking/Treasury. The group has no exposure to the eurozone save for some derivatives collateralised by cash. On the flip side, absolute non-performing loans ticked up (+1% q-o-q) as did credit charge costs (23 bps in 3Q against 19 bps in 2Q).

Management’s ROE target this year of 17% is unlikely to be achieved, with 9MFY11’s ROE coming in at 16%, in line with our estimates. We forecast a lower ROE of 15% in 2012. Our forecasts are maintained, with expectations of moderate growth in 2012 on the back of lower non-interest income contributions. — Maybank IB Research, Nov 16


This article appeared in The Edge Financial Daily, November 17, 2011.



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Maxis expects a stable line

Maxis Bhd (Nov 16, RM5.34)
Maintain neutral at RM5.32 with target price of RM5.50: Maxis is expected to release its 3QFY11 results around Nov 30. We expect its 9MFY11 net profit to register circa 73% to 75% of our full-year estimate. This translates into a growth of between 2.4% and 5.2% y-o-y or RM1.7 billion to RM1.8 billion. We believe earnings growth will be supported by a rebound in overall revenue, higher non-voice revenue contribution and improvement in earnings before interest, tax, depreciation and amortisation (Ebitda).

We expect Maxis to register a 9MFY11 revenue of RM6.7 billion which translates into a rebound of 1.5% y-o-y from the 1.2% y-o-y decline in 1H11. We opine that the revenue rebound will be due to higher usage due to the festive season seen in 3QFY11.

From recent trends, we anticipate non-voice revenue will continue to increase its contribution to circa 44% of total revenue. In 9MFY10, non-voice revenue contribution to total revenue was 36.5% while it was 42.4% in 1H11. The growth in non-voice mobile revenue is expected to be due to advanced data service and wireless broadband. Wireless broadband subscribers are expected to increase by circa 5.0% quarter-on-quarter to register 656,000 subscribers.

We are expecting an Ebitda improvement of 3% y-o-y to RM3.3 billion in 9MFY11 on the back of lower direct expenses and lower operating expenses due to efficient cost control. This means Ebitda margin maintains at around the 50% level.


We like the fact that there was average revenue per user (ARPU) improvement across all of the segments in the last quarter, where postpaid, prepaid and wireless broadband ARPU improved by 2.9% q-o-q, 5.9% q-o-q and 3.3% q-o-q to RM108, RM36 and RM63 respectively. For 3QFY11, we are expecting ARPU to continue improving due possibly to higher minutes of use from the festivities.

With new entrants beginning to make a presence felt in an already saturated market, we expect Maxis will face challenges to maintain its position as market leader. Although it is expected to register a good performance in 3QFY11, this will be in line with the overall industry trend. Maxis has seen its market share among the top three (Maxis, Celcom Bhd and DiGi.Com Bhd) declining in recent quarters, excluding the market share of the others such as mobile virtual network operators. However, we believe that data revenue will increase in contribution, moderating any pressure.

With the 3QFY11 results pending, we are maintaining our FY11 forecast and our “neutral” recommendation on Maxis. Judging by recent trends, we are not discounting another interim dividend of eight sen for 3QFY11, with total dividend for FY11 to yield 7.5%. Our target price of RM5.50 is based on dividend discount model, with a weighted average cost of capital of 8%. — MIDF Research


This article appeared in The Edge Financial Daily, November 17, 2011.



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