Hong Leong Bank Q1 profit jumps to RM407m

Hong Leong Bank Bhd, a Malaysian lender controlled by billionaire Quek Leng Chan, said first-quarter profit rose to RM407.1 million from RM257.2 million a year earlier.

Revenue climbed to RM916.7 million in the three months ended Sept 30, from RM539.8 million a year ago, according to an exchange filing in Kuala Lumpur today. -- Bloomberg



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

IJM expected to post stronger H2 results

IJM Corp Bhd is expected to post stronger second half of financial year 2012 (2HFY12) results, said HwangDBS Vickers Research Sdn Bhd in a research note.

HwangDBS Vickers said IJM's second quarter financial year 2012 (2QFY12)headline net profit was RM75 million, which was within its and consensus' forecast, excluding the RM32 million foreign exchange loss on a US dollar loan for its infrastructure unit.

It said the key earnings drivers in the quarter under review were plantations and property which contributed a combined 71 per cent of group pre-tax profit, while manufacturing profit grew by 22 per cent quarter-on-quarter to RM39 million.

"We expect earnings to accelerate in 2HFY12 as works progress," it said. HwangDBS said IJM remained its sector pick and a 'buy' with target price intact at RM8.70.

Meanwhile, Hong Leong Investment Bank Research (HLIB) said IJM has an outstanding construction order book of RM3.8 billion comprising RM3.2 billion (local projects) and RM600 million (two Indian highway projects).

In a note today, HLIB Research said, going forward, the property division would benefit from Canal City project in Shah Alam.

The initial phase of the project, slated to be launched in calendar year of the third quarter of 2012, has a gross development value of RM250 million for middle market housing segment, it said.

HLIB, however, maintained a 'hold' call on the company with a revised target price of RM5.76.

"Although we like IJM for being professionally run, we believe that the company's fundamentals have already been reflected in its share price," it said. -- Bernama



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

RHBCap Q3 net profit rises to RM376m

RHB Capital Bhd said third-quarter net income rose to RM376.4 million from RM351.4 million a year earlier, according to a statement to the Kuala Lumpur stock exchange today.

Revenue climbed to RM1.76 billion from RM1.61 billion, it said. -- Bloomberg



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

JCY posts lower pre-tax profit

JCY International Bhd's pre-tax profit for the financial year ended Sept 30, 2011, fell to RM14.723 million from RM180.619 million previously. Revenue for the 12-month period was also down to RM1.671 billion from RM2.033 billion in the last financial year.

In a filing to Bursa Malaysia today, the company said for its fourth quarter ended Sept 30, it recorded a pre-tax profit of RM26.4 million versus a pre-tax loss of RM31.8 million, last year.

Revenue for the quarter was also up 11.3 per cent to RM439.917 million from RM474.708 million in the last fiscal year.

"The recent devastating floods in Thailand affected a number of hard disk drive (HDD) vendors and component suppliers, resulting in a global shortage of HDD supply.

"JCY's factory in Saraburi, Thailand, was fortunate to have avoided the flooding and able to maintain its production at full capacity," the company said.

JCY International added that barring any unforeseen circumstances and factors beyond its control within the HDD supply chain, the company is optimistic that an improvement in the HDD average selling price (ASP) and opportunity to capture additional global market share due to the worldwide shortage of HDD components, will enable the group to achieve a favourable result for the coming quarters. -- Bernama



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

KPJ Healthcare 3Q earnings up 14%to RM34.5m

KUALA LUMPUR (Nov 29): KPJ HEALTHCARE BHD [] recorded a 14% increase in its earnings to RM34.49 million in the third quarter ended Sept 30 from RM30.23 million a year ago.

It said on Tuesday, the profit before taxation for the current quarter has increased by 11.1% to RM47.9 million from RM43.1 million a year ago.

“The increase is in line with the increase in revenue of the hospitals,” it said, adding that revenue rose at a slower pace of 9% to RM476.02 million from RM436.48 million. Its earnings per share were 5.66 sen compared with 5.65 sen. It declared an interim dividend of 2.5 sen per 50 sen share.

For the nine-month period, its earnings rose 6.4% to RM92.16 million from RM86.64 million in the previous corresponding period. Its revenue rose 13.2% to RM1.384 billion from RM1.222 billion.

“Based on the positive performance for the current financial period, the board of directors is confident that the group will achieve better performance in comparison to the previous year,” it said.



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

Hong Leong Bank 1Q earnings up 58.3% to RM407.1m on-year

KUALA LUMPUR (Nov 29): HONG LEONG BANK BHD []’s earnings rose 58.3% to RM407.11 million in the first quarter ended Sept 30, 2011 from RM257.20 million a year ago following the consolidation of the enlarged group after the acquisition of EON CAPITAL BHD [].

It said on Tuesday that revenue increased by 69.8% to RM916.73 million from RM539.78 million while earnings per share were 27.98 sen compared with 17.72 sen.

HL Bank group managing director and chief executive Yvonne Chia said the banking group started the financial year ending June 30, 2012 on a sound note.

“Quarterly net profit after tax crossed the RM400 million threshold, closing at RM 407 million for the first quarter ended Sept 30, 2011. Against the corresponding quarter last year, net profit rose 58% as we fully consolidate the earnings of the merged banking group starting this quarter.

“The results are broadly in line with the market’s consensus earnings estimates for the group. With the merger, the enlarged, more diversified earnings performance enhances the group’s resilience and profit sustainability as we move into a more moderate economic environment,” she said.

Chia said the banking group’s gross loan book expanded 1.4% quarter-on-quarter, led by a 3.3% and 2.9% on-quarter growth in loans for the purchase of residential and non-residential PROPERTIES [] respective.

Loans for the purchase of transport vehicles rose 1.2% on-quarter while loans to SMEs expanded 2.1% in the same period. Working capital loans retreated marginally reflecting seasonality patterns.

"The revenue base has expanded in tandem, with net income coming in at RM 917 million, up 70% against the same period last year. Net interest income itself rose 72%, while non-interest income grew by 50%. Net income from the Islamic banking business doubled against the same period last year.

“Overall, the revenue base has not only significantly strengthened but also more resilient and diversified. The treasury business has been affected by the volatile movements in the yield curve,” Chia added.



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

RHB Capital’s 3Q earnings edge up 7.1% to RM376.4m

KUALA LUMPUR (Nov 29): RHB CAPITAL BHD [] recorded a 7.1% increase in its earnings to RM376.73 million from RM351.35 million a year ago on lower allowance for impairment on loans, financing and other losses which was reduced to RM29.64 million from RM174.25 million a year ago.

According to notes to its accounts on Tuesday, its earnings were also boosted by income from Islamic banking business at RM120.43 million compared with RM84.24 million a year ago.

RHB Capital’s revenue increased by 9.6% to RM1.761 billion from RM1.606 billion while earnings per share were 17.20 sen compared with 16.30 sen.

For the third quarter, the group recorded a profit before taxation of RM492.1 million, 6.8% lower as compared to RM528.2 million recorded in the quarter ended 30 June 2011.

“The lower profit before taxation was mainly due to lower other operating income by RM100.7 million, higher impairment losses on other assets by RM29.7 million, higher other operating expenses by RM28.3 million and lower net interest income by RM7.3 million, partly offset by lower allowance for impairment on loans, financing and other losses by RM92.3 million and higher income from Islamic Banking business by RM37.5 million,” it said.

For the nine-month period, its earnings rose 10.8% to RM1.153 billion from RM1.040 billion in the previous corresponding period while its revenue rose at a stronger pace of 16.7% to RM5.185 billion from RM4.441 billion.

Its profit before tax of RM1.532 billion was 11% higher versus the RM1.375 billion. The higher profit before taxation was mainly due to higher net interest income by RM144.4 million, lower allowance for impairment on loans, financing and other losses by RM117.7 million, higher income from Islamic banking business by RM50.2 million, higher other operating income by RM34.6 million and lower impairment losses on other assets by RM14.7 million. It was, however, partly offset by higher other operating expenses by RM204.8 million.

RHB Capital said annualised return on equity was at 14.6% and return on assets at 1.1%.

“Net interest income increased by 7.5% to RM2.1 billion on the back of strong loans growth of 13.0%. However, margins remained under pressure given the intensified competition on the pricing of both loans and deposits, as well as the impact of lower yield credit risk free public sector loans and financing on book,” it said.

RHB Capital also said margins were affected by several increases in Overnight Policy Rate (OPR) and Statutory Reserve Requirement (SRR) over the past 12 months.

The banking group said other operating income grew by 4.5% from previous year to RM798.3 million, mainly due to higher foreign exchange gains, service charges and fees, and brokerage income, partially offset by higher revaluation loss on derivatives which was undertaken to hedge the fixed rate loans and financing portfolio of the group.



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

KLIA2 to cost RM3.9 bln, ready by April 2013

KUALA LUMPUR (Nov 29): The upgrading of facilities at KLIA2 are expected to increase the total cost to build the airport to RM3.9 billion and it would be operational by April 2013.

Its managing director Tan Sri Bashir Ahmad said the KLIA2 would enable MAHB to handle about 45 million passengers yearly compared with the earlier estimate of 30 million.

In a statement to Bursa Malaysia, MAHB said the KLIA2 would have a “larger terminal footprint now standing at 257,000 sq metres, 68 contact stands and enhanced systems in place”.

The airports operator said KLIA2 is one of the largest privately funded projects and will spur the local economic growth and employment opportunities.

MAHB said KLIA2 is built as a national infrastructure asset to cater to the needs of the airlines, government, public and the airport.

It also said due to the appeals by the public especially people with restricted movements, elderly people, expectant mothers, and children, MAHB said aerobridges would be installed at KLIA2.

“As the cost works out to be only 25 sen per passenger, the public has indicated that they are willing to pay for the use of aerobridges,” it said.



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

JCY records turnaround with 4Q net profit of RM26.4m

KUALA LUMPUR (Nov 29): Hard-disk drive manufacturer JCY International Bhd posted net profit of RM26.44 million in the fourth quarter ended Sept 30, 2011, boosted by higher shipments and a favourable US dollar exchange.

It said on Tuesday that the fourth quarter financial performance was a turnaround from the net loss of RM25.18 million a year ago. Revenue dipped 1.5% to RM439.92 million from RM474.71 million while earnings per share were 1.29 sen compared with loss per share of 1.23 sen.

JCY said when compared with the third quarter, its revenue rose 11.3% while profit before tax of RM26.4 million was also a turnaround from the pre-tax loss of RM31.8 million in the third quarter.

For the 12-month period, its earnings plunged 92% to RM14.55 million from RM173.76 million in the previous financial year. Its revenue fell 17.8% to RM1.671 billion from RM2.033 billion.

Elaborating on the fourth quarter performance, it said the increase in turnover was due to the overall increase in revenues arising mainly from increases in the shipment quantity and favourable US dollar exchange rates.

“The cost of sales decreased despite the increase in the overall sales due to efficient cost management and improvement in output through the better yield and improvements in operational efficiency,” it said.

JCY group chairman Dr Rozali Mohamed Ali said the results were satisfactory given the challenging business environment.

“We are very comfortable with our improvement in the operational efficiency, and we will continue to focus our efforts in improving our yields to maintain our sustainable profit improvement for the next financial year,” he added.

JCY is fortunate as its facilities in Thailand were not affected by the recent flooding. JCY continues to operate at full capacity in Thailand.

Rozali said JCY was taking a number of steps to increase its output from its factories in Malaysia and elsewhere, including restructuring its production output and product mix, and accelerating its expansion for its plants in China.

“We will continue to work closely with our key customers to meet their requirements for our HDD components over the next few quarters.

“However, the biggest challenge facing JCY in Malaysia continues to be shortages of its work force which constraints its output. JCY has increasingly implemented automation for its production and this has resulted in the improvement of its output yield recently,” he said.




Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

KLCI off day’s high as buying stalls on Europe’s woes

KUALA LUMPUR (Nov 29): Blue chips closed off their day’s high on Tuesday as investors locked in some gains after a two-day rally in European shares came to a halt though most key regional markets were able to hang on to their gains.

The FBM KLCI closed 13.17 points or 0.92% higher to 1,444.72. Turnover was 1.30 billion shares valued at RM1.56 billion. The broader market was firmer with 471 gainers, 273 losers and 272 stocks unchanged.

Reuters reported European shares fell on Tuesday morning as concern about possible ratings agency downgrades added to pressure on euro zone policymakers battling to resolve the region's debt crisis.

The euro slipped from highs ahead of an Italian bond auction and widespread scepticism over whether European policymakers will be able to prevent debt contagion.

Among the regional markets, Japan’s Nikkei 225 rose 2.3% to 8,477.82, South Korea’s Kospi 2.27% to 1,856.52, Taiwan’s Taiex 1.30% to 6,988.65, Hong Kong’s Hang Seng Index 1.21% to 18,256.20, Shanghai’s Composite Index 1.23% higher at 2,412.39 but Singapore’s STI fell 0.23% to 2,688.10.

Crude palm oil third-month futures rose RM16 to RM3,085 per tonne while the ringgit was firmer against the US dollar at 3.1817 versus the previous close of 3.1832.

At Bursa Malaysia, CIMB rose 31 sen to RM7.05, pushing the index up 5.34 points while Genting’s gains of 48 sen to RM10.50 nudged the index up another 4.11 points. Tenaga rose 10 sen to RM5.44.

Financial stocks were among the winners, with AMMB adding 28 sen to RM5.92, Public Bank 12 sen to RM12.52 and Maybank seven sen to RM8.02.

Nestle and BAT added 50 sen each to RM51.40 and RM45.90 while F&N rose 26 sen to RM18.16. Aeon Credit added 28 sen to RM5.88 and AEON 25 sen to RM7.05.

Sumatec was the most active with 76.57 million shares done, shedding three sen to 28 sen as investors took profit after its announcement about the production sharing contract at an oil field near the Caspian Sea. Sumatec-WA fell 2.5 sen to 15.5 sen.

Petronas Gas fell the most, down 26 sen to RM13, Bursa 12 sen to RM6.36 and TM 11 sen to RM4.25. Harvest fell 18 sen to 79 sen and Harvest-WA 17 sen to 55 sen.



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

KL shares close higher

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

The FTSE Bursa Malaysia KLCI Index rose 0.9 per cent to 1,444.72. The market was shut yesterday for a public holiday.

Malaysian Resources Corp, a property developer, rose 2.7 per cent to RM1.94, the most since Nov. 11. Third-quarter net profit rose to RM10.7 million from RM3.7 million a year earlier, it said in a statement.

MISC Bhd, Malaysia’s biggest shipping group, climbed 2.1 per cent to RM5.92. MISC said it intends to sell its entire fleet of 16 container vessels within about six months as it exits unprofitable cargo-box operations.

Sarawak Plantation Bhd, an oil-palm grower, added 2.2 per cent to RM2.30. Third-quarter net profit more than doubled to RM23.4 million, it said in a statement.

Time dotCom Bhd, a fiber-optic capacity provider, gained 3.9 per cent to 67 sen, its biggest increase since Nov. 9. Third-quarter net profit almost doubled to RM40.7 million from RM20.9 million a year earlier.

Wellcall Holdings Bhd, a rubber-hose maker, climbed 2.5 per cent to RM1.25, the steepest gain since Oct. 5. Wellcall proposed a special interim dividend of 3.5 sen a share, it said in a statement. -- Bloomberg



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

CMMT considering rights issue

KUALA LUMPUR: CapitaMalls Malaysia Trust (CMMT), a unit of Singapore’s CapitaLand Ltd, is considering a rights issue to boost its coffers as it seeks to bulk up on more retail assets here.

Sharon Lim, CEO of CMMT’s manager, CapitaMalls Malaysia REIT Management Sdn Bhd (CMRM), said the REIT is engaging regulators and merchant bankers to assess the feasibility of a cash call, having already done two rounds of unit placements that raised a total of RM483.55 million this year.

“We have always looked at the possibility of doing a rights issue,” she told The Edge Financial Daily in an interview, adding that the exercise allows it to tap funds from its existing retail and institutional unitholders.

To be sure, making a cash call amid current market uncertainties risks putting off existing unitholders, especially retail investors who may be less keen on forking out more money. “People invest in property trusts for the generous dividends. It is likely they would not like cash calls, which means they need to fork out money instead of getting dividends,” said a market observer.

That said, it is likely that if CMMT decides to make a rights issue, the decision would come with plans that would demonstrate the REIT’s ability to deliver even better returns to unitholders in future. “It is not likely to be a pre-emptive cash call. I’d expect them to have some plans in place to tell unitholders,” the observer added.

If it happens, the rights issue would be CMMT’s first since its IPO in July 2010. Notably, while the issuance of new units in placements dilutes the stakes of existing holders, the exercise could bring strong institutions to its list of unitholders. The Government of Singapore Investment Corp, for instance, emerged as a substantial unit holder in CMMT in October after acquiring 5.64% of CMMT via a private placement, filings with Bursa Malaysia showed.

Lim declined to specify growth targets for CMMT’s total asset base, only indicating that its parent CapitaLand‘s expansion strategy entails doubling its asset size every three to five years. Using that as a benchmark, CMMT could see its assets double to about RM5.6 billion within five years.

CMMT now has four retails properties in its portfolio which is includes The Mines
shopping centre in Selangor and Sungei Wang Plaza in Kuala Lumpur.

She also pointed out that CMMT would grow via organic means apart from acquisition of more retail properties. Organic expansion is in the form of refurbishment of existing properties to maximise rental income.

With the inclusion of the East Coast Mall, CMMT now has four retail properties in its portfolio which includes Gurney Plaza in Penang, Sungei Wang Plaza in Kuala Lumpur and The Mines shopping centre in Selangor. Following its latest unit placement and asset acquisition, the property trust’s total asset base is now valued at some RM2.8 billion, compared with about RM2.1 billion when it was listed on the Bursa Malaysia Main Market last July.

On existing malls, CMMT had refurbished Gurney Plaza where car park lots were converted into new shops. It had also renovated Sungei Wang Plaza and The Mines.

Geographical diversification features prominently in CMMT’s expansion. Looking ahead, Lim said the property trust is considering acquiring retail assets in Sabah, Sarawak and Johor. That is provided the target properties can offer sustainable rental income and growth prospects within a good catchment area.

Of interest is CMMT’s strategy of acquiring malls not only in prime areas such as the Klang Valley and Penang but also in smaller towns. A case in point is the recent purchase of East Coast Mall in Kuantan, Pahang. In less prime locations, Lim said CMMT would opt to acquire a key retail centre which is seen as” the mall” frequented by locals within the area.

In terms of targeted returns from the properties it acquired, CMMT is expecting net property income (NPI) yields of between 6% and 7%, derived from dividing its NPI by the market value of its properties, Lim said.

On annual growth, she said CMMT aims to grow its distributable net profit and dividend per unit (DPU) by between 4% and 5% a year, which is higher than the country’s inflation rate. But that’s a conservative target assuming that the property trust embarks purely on organic growth.

CMMT, which pays dividends on a semi-annual basis, is targeting a DPU payout of not less than 7.46 sen in the current year ending Dec 31. It intends to distribute 100% of its distributable income in FY11.

The property trust had paid out cumulative DPU of 3.9 sen for the first nine months of the year, translating into an annualised figure of 7.8 sen. This works out to a 5.7 % yield based on its closing price of RM1.35 last Friday, which valued CMMT at RM2.38 billion. CMMT has gained 21% this year versus the FBM KLCI’s 6% decline.

As at Sept 30, CMMT had debt obligations of RM839.8 million compared with total assets of RM2.57 billion, translating into a gearing of 33%. With the inclusion of the RM310 million East Coast Mall, CMMT’s total assets have increased to about RM2.8 billion, which bring gearing down to 29%. That gives it some headroom to gear up, should it choose to, given a debt ceiling of 50% of total assets.

Lim said CMMT would still be comfortable with a gearing of 40%. And should its debt level near the prescribed 50% limit, she said the property trust would issue new equity to raise funds to lower its gearing.


This article appeared in The Edge Financial Daily, November 29, 2011.



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

Market sentiment to be defensive

KUALA LUMPUR: The current uncertainties in the US and Europe are expected to continue to impact market sentiment regionally and in Malaysia, where the FBM KLCI is down 4% month-on-month.

OSK Research director Chris Eng said investors should continue to be defensive for now.

“Our 2012 KLCI fair value remains at 1,466,” he said adding that recent earnings are generally poor though the research house is still compiling details.

For November, stock market data shows the FBM KLCI is down 4% or 60.34 points from 1,491.89 on Oct 31 after it closed at 1,431.55 on Nov 25.

Bursa Malaysia’s market capitalisation was reduced by RM38 billion to RM1.23 trillion from RM1.268 trillion during the period.

Among the stocks with recent corporate news are Guinness Anchor Bhd (GAB), Media Chinese International Ltd (MCIL), Sime Darby Bhd, Malaysian Resources Corp Bhd (MRCB), IJM Corp Bhd and Kulim (M) Bhd.

GAB plans to issue up to RM500 million in debt notes which will provide it with an alternative source of financing and enable it to effectively plan and manage its funding costs and requirements, it added.

The Edge weekly reports that MCIL, a newspaper publisher with the most Chinese titles in the world, has jumped onto the non-print media bandwagon and is scouting for opportunities in TV and radio.

Stocks with recent corporate results are Sime Darby, MRCB, IJM Corp and Kulim.

Sime’s first quarter net profit jumped 63.9% to RM1.07 billion from RM654.74 million a year ago, boosted by stronger results for the plantations and industrial divisions.

MRCB’s net profit for 3QFY11 ended Sept 30 jumped 191% to RM10.72 million from RM3.68 million a year ago, due mainly to higher contribution from its revenue recognition of ongoing and encouraging strata office sales of property development projects at Kuala Lumpur Sentral.

IJM Corp’s 2Q earnings fell 35% to RM74.77 million from RM115.13 million a year ago as it was impacted by unrealised foreign exchange translation losses on US dollar loans.

Kulim’s earnings slumped 39.9% to RM171.07 million in 3QFY11 ended Sept 30 from RM284.65 million a year ago following the disposal of its oleochemicals group that recorded a profit of RM156 million last year. For the nine-month period, its net profit increased 23% to RM444.46 million from RM361.21 million.

However, its declaration of a single-tier interim dividend of 20% will provide some support for the stock.

Kulim’s related companies, KFC Holdings (Malaysia) Bhd and QSR Brands Bhd also recorded a decline in earnings due to higher commodity prices.

KFCH reported a 12.2% decline in its 3Q earnings to RM33.52 million from RM38.2 million a year ago as it was affected by higher food, commodity and energy costs.

QSR’s earnings fell 10.5% to RM22.22 million in 3QFY11 ended Sept 30 from RM25.33 million a year ago, as its margins were affected by inflationary pressures including commodity costs.


This article appeared in The Edge Financial Daily, November 29, 2011.



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

BIMB Holdings Bhd

Incorporated on March 20, 1997, BIMB Holdings Bhd (BHB) is a Main Market-listed investment holding company that operates along Islamic principles and whose core subsidiaries are pioneers in various Islamic financial services including banking, takaful and stockbroking.

BHB’s core subsidiaries are Bank Islam Malaysia Bhd (51%-owned), Syarikat Takaful Malaysia Bhd (65.22%-owned) and BIMB Securities Sdn Bhd (100%-owned).

Its key markets are Malaysia and Indonesia.

Group managing director and CEO Johan Abdullah shares with The Edge Financial Daily his strategies and dreams for the company.

TEFD: What are the company’s competitive strengths and advantages?
Johan: In Islamic banking, we have established our brand equity — we won the platinum award for Best Islamic Financial Services from Reader’s Digest Trusted Brands Award for three consecutive years i.e. 2009, 2010 and 2011.


We are the largest Islamic banking franchise, with 117 branches and 968 self-service terminals. We also have a strong controlling shareholder, i.e. Lembaga Tabung Haji, robust capital adequacy at more than 15%, strong liquidity position with current account savings account (CASA) ratio at 40%, and a competent and experienced management team.

Where takaful is concerned, we have an established branch network as well as extensive distribution channels.

We also have an array of innovative products — enhanced by the two successful business models which are the Mudharabah (profit sharing) and Wakalah (appointing agent) model. Takaful Malaysia takes pride in being the only takaful company, steadily offering a 15% no claim rebate payment to all general and selected family takaful product participants, if no claims are incurred within the coverage period, and depending on the company’s performance.

In stockbroking, we have the only full- fledged Islamic stockbroking firm in Malaysia that provides end-to-end syariah-compliant products and services.

Johan wants to position BHB to be the leader in global Islamic financial services.

What have been the major achievements of the company in the past four years?
Bank Islam launched its new corporate identity in 2007. In 2008, it recorded its highest profit of RM308.27 million in 25 years. That year, it also launched its first Islamic structured and capital protected funds, An Najah NID-I, the first syariah-based structured product with healthcare as the investment theme.

The following year, it won several awards — Reader’s Digest Platinum Trusted Brand Award 2009 for Islamic Financial Services and Best Mixed Asset MYR Balanced Islamic Fund in conjunction with The Edge-Lipper Malaysia Fund Awards 2009 for Bank Islam’s ASBI Dana Al-Munsif managed by BIMB Investment Management Bhd.

Last year, we launched several new products and won various awards, including the Platinum Award for Best Islamic Financial Services — Reader’s Digest 2010 Trusted Brands Award.

We also launched Waheed-i, the first ringgit fixed-term deposit product based on the syariah contract of Wakalah, and the Islamic pawn-broking business (Ar-Rahnu) in Kelantan, with two outlets to date. We aim to increase to five outlets by end of 2011.

Bank Islam was also joint lead manager, joint book runner and syariah adviser for the RM10 billion Aman MTN Sukuk, with a participation of RM200 million.

It was also ranked joint leader as an Islamic principal dealer by Bank Negara Malaysia. RAM assigned Bank Islam A1/P1 rating with a stable long-term outlook
Takaful Malaysia launched the first series of Wakalah products — Takaful mySinar, Takaful myImpian, Takaful myMedicare and Takaful myRawat — in 2008. In 2009, it launched CSR Takaful myJalinan umbrella brand for all CSR initiatives, and unveiled a new corporate logo for its 25th anniversary.

Last year, it won various awards and was awarded membership in The Edge Billion Ringgit Club.

Last year also saw the launching of its retail strategy — Agency Provident Fund (APF), 3-tier agency structure and 3-tier products (Takaful myInvest, Takaful myGemilang, Takaful myGraduan — and Takaful myCare Centres. This year, we launched our first online family product — The First Life Plan, and Takaful mySME solutions.

As for BIMB Securities, it obtained approval from the Securities Commission to operate as a “1+1” stockbroking firm, which entails the provision of expanded activities almost similar to that of an investment bank.

What are the major challenges your company faced over the years and how did it overcome them?
The first challenge is that sustained improvements in core subsidiaries’ performance are not reflected in BHB’s market price to create value-gains for BHB’s shareholders.

To overcome this, BHB has actively embarked on an investor relations initiative to enhance BHB’s visibility to analysts and the investment community.

The second challenge is competition for talents with the right skill-set, particularly with the entry of highly-capitalised multinational players.

To retain talents, we revised our compensation and benefits structure to be on par if not better within the financial industry. We will be looking into strategic hiring, specifically recruitment of expatriates for critical positions. We are also taking advantage of the new BNM initiatives and guidelines on recruitment of Islamic finance professionals. We have also started to consider other types of employment, not limited to permanent and fixed-term contract by engaging talents for specific projects to overcome the shortage of skills in the market.

At group level, cost-income (C/I) ratio remains high compared with the indstry average. The challenge is to bring C/I ratio down by rationalising costs whilst expanding business to sustain long-term growth, where majority of financial groups, especially those that operate dual financial services i.e. Islamic and conventional, have the ability to leverage more effectively on their respective groups’ common infrastructure and support services, leading to a greater cost efficiency.

The BHB group’s relatively high C/I ratio is mainly due to the continuous building of business capacity, improvements on information technology and enhancement of risk infrastructure within Bank Islam and Takaful Malaysia, significant investment in human capital to attract and retain talent within the group with the right expertise and skill set, and significant promotional expenses such as rebranding exercise and commission to agents to build sustainability of income over the medium and long term.

Moving forward, the BHB group expects to stabilise its C/I ratio at the current level, where its revenue growth is targeted at 21.6% for the financial year ended Dec 31, 2010 (as announced to Bursa Malaysia).

The fourth challenge is increasing standards for regulatory capital requirement under the forthcoming Basel III whereby banking institutions are required to maintain a higher Tier 1 capital, including a capital conversion buffer and a counter-cyclical buffer.

At present, BHB’s main focus is on its Internal Capital Adequacy Assessment Process (ICAAP), which is to further improve its risk weighted capital ratio under the Capital Adequacy Framework for Islamic Banks (CAFIB) and core capital ratio, to be above 13% and 10% respectively.

The fifth challenge is in the takaful sector: the lack of awareness on takaful among the general public; people’s perception that takaful is only meant for the Muslims; lack of trained human capital, capable and professional agents to market the products; lack of skilled and in-depth knowledgeable human resource in technical areas, such as product development, actuary and investment, especially in our syariah-compliant business.

To tackle these issues, the company has intensified its efforts to constantly educate Malaysians on takaful.

To grow the agency force, the company had on March 4, 2010 launched the APF, which is a form of retirement scheme for our agents.

How is the company positioning itself within your industry? What are your strategies to grow or gain market share?
In Islamic banking, we seek to establish an extensive network of branches, and expand electronic delivery channel that would enhance our reach to customers.

We continuously develop new financial solutions and product offerings that suit the ever-evolving customer needs, benchmarked to international standards.

We have also adopted a “Reshaping the Balance Sheet Strategy 2011” to accelerate business financing growth while sustaining the existing consumer financing momentum.

With the unveiling of its new logo in November 2009, Takaful Malaysia is positioning itself as the new and improved syariah-compliant company that is modern, young and energetic. It has right-sized its overall operations and restructured its branch network.

To strengthen our market presence, we introduced three new family takaful products: Takaful myGraduan, Takaful myInvest and Takaful myGemilang.

To increase our market share, we will grow our agency force to 2,000-strong by the end of this financial year.

In stockbroking, BIMB Securities is positioning itself as the only full-fledged Islamic stockbroking firm in Malaysia.

What are your company’s plans for the future, short-term and long-term?
Being the pioneer of Islamic banking, takaful and stockbroking solutions, the brand and customers’ loyalty towards BHB is of pivotal importance to ensure long- term business relevancy and market share control within the industry. Constant developments and innovations in the areas of products and services, delivery channel network, IT systems and customer experience are important to pave the way forward to compete in this market.

What is your dream for your company? How would you like to see it in 10 years?
To be the leader in global Islamic financial services.


This article appeared in The Edge Financial Daily, November 29, 2011.




Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

Telcos facing faster decline from voice

KUALA LUMPUR: While Maxis Bhd and Axiata Group Bhd have yet to announce third quarter (3Q) earnings, analysts reckon numbers will show data revenue gaining prominence over the money made from traditional voice services.

“The third quarter is very much a seasonal quarter as a result of the number of public holidays during the period. However, the main trend that is being seen so far is that revenue from voice continues to decline. Although this is expected, the rate at which the decline is occurring is faster than expected,” said an analyst.

As more of the telco revenue comes from data, the need for more spectrum and capital expenditure to upgrade infrastructure would become more pressing.

Maxis is expected to see some margin pressure as revenue from its voice segment continues to decline.

“This means that the government may come under pressure to announce the award of more spectrum to the players, more specifically the LTE/4G spectrum, soon.

Originally, the award was expected to come at the end of October, however now most are predicting it to happen during the first half of next year,” said an industry observer.

At the moment, the exact allocation of the 180 MHz LTE/4G spectrum is still up in the air as lobbying from industry players intensifies.

To recap, the nine companies that are in the running for the spectrum are Celcom Axiata Bhd, Maxis Broadband Sdn Bhd, DiGi Telecommunications Sdn Bhd, U-Mobile Sdn Bhd, Asiaspace Sdn Bhd, Packet One Networks (M) Sdn Bhd (P1), REDtone Marketing Sdn Bhd, YTL Communications Sdn Bhd and Puncak Semangat Sdn Bhd.

Although the LTE/4G spectrum will only be available for use from 2013 onwards, given the sensitivity of the subject, most of the telcos are adopting a “wait and see” approach before making a firm commitment on the matter.

This need for data has also sped up the trend of collaboration between the players with several partnerships taking place this year such as the network collaboration agreement between Celcom and DiGi. More recently, Maxis entered into an active 3G radio access network sharing agreement with U Mobile.

One of the first companies to launch a LTE/4G trial was Maxis, which successfully concluded a test during the middle of last year. For its upcoming 3Q results, analysts are expecting the numbers to fall within expectations, but there is a possibility that revenue from its voice could see a sharper-than-anticipated drop.

“Maxis is expected to see some margin pressure as revenue from its voice segment continues to decline. The company has been seen as having lost some of its postpaid market share to its competitors DiGi.Com and Celcom Axiata,” said an analyst.

While Maxis expects to see some contribution from its newly launched home broadband segment towards the end of the year, analysts are expecting the portion to still be small given its slightly later-than-expected rollout. To clarify, Maxis entered the home broadband business when it signed an agreement with Telekom Malaysia Bhd to ride on the latter’s high-speed broadband backbone.

“The segment is still only expected to contribute within the medium term,” said the analyst. However, analysts are also expecting Maxis’ upcoming results to show a greater proportion of its revenue to come from non-voice related segments, close to 50%, which is the highest in the industry.

Axiata’s results would largely depend on how well its unit Celcom performed during the quarter. This is given that its other big earnings contributor, Indonesian PT XL Axiata Tbk, had announced flattish 3Q numbers due to increased spending to boost its data network.


This article appeared in The Edge Financial Daily, November 29, 2011.



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

KNM falls below psychological level of RM1

PETALING JAYA: Investors may want to monitor the movement of KNM Group Bhd shares this week after they fell below the crisis level of RM1.28 and psychological level of RM1 last Friday.

The oil and gas counter ended at 97 sen last Friday, which was the lowest since March 2006, with 20.86 million shares changing hands.

OSK Research in a recent technical analysis said the next strong support level could be seen at 85 sen.

“The RM1.28 low in 2009 is a crucial level for KNM. First of all, it was the bottom for KNM’s share price during the global financial crisis.


“Second, the price was again supported by the RM1.28 level in September 2010, which provided the base to eventually propel it to the RM3.28 level. When the bottom for a major previous bear market is violated, this implies significant weakness,” it added.

KNM shares took a beating last week after the company announced a net loss of RM116.29 million in the third quarter ended Sept 30 versus a net profit of RM56.09 million in the previous corresponding quarter.

The worse earnings were due to a one-off provision for foreseeable losses of about RM90 million and over RM50 million in credit impairments. Revenue for the quarter rose 6% to RM445.18 million from RM418.36 million.

For the nine-month period ended Sept 30, KNM recorded a net loss of RM86.42 million from a net profit of RM110.57 million a year ago. Revenue increased by 19% to RM1.4 billion from RM1.17 billion.

KNM had announced a dividend policy to distribute at least 50% of its net profit, with effect from financial year ending Dec 31, 2012.

Based on its segmental analysis, KNM derived most revenue and profits from Europe over the nine-month period. In fact, only operations in Europe were profitable while the company incurred losses in Asia and the Americas.

KNM was recently put under the spotlight after Bursa Malaysia slapped eight of its directors with fines of RM25,000 each for breaching the Main Market listing requirements in relation to a proposed takeover exercise made on Feb 4, 2010.

On that date, KNM had received a takeover offer from BlueFire Capital Group Ltd, an entity controlled by KNM managing director and major shareholder Lee Swee Eng, and two foreign partners GS Capital Partners VI Fund LP and Mettiz Capital Ltd.

The offer was for KNM’s entire business and undertakings for RM3.5 billion or 90 sen per share. But the company failed to disclose certain material conditions in the offer, including the issuance of redeemable convertible preference shares (RCPS) to satisfy the takeover.

Most recently, KNM tied up with Lukoil Uzbekistan for a US$72 million (RM230 million) contract to construct a booster compressor station on the Khauzak-Shady plot.

However, even this latest contract failed to excite analysts.

HwangDBS Research said the contract is still at the early stages. While KNM’s outstanding order book remains at RM5.5 billion, the financial close for its Peterborough project (RM2.2 billion) and Octagon project (RM700 million) has not been secured yet.

Excluding these contracts, KNM’s order book of RM2.6 billion does not provide good earnings visibility, according to HwangDBS.

It downgraded KNM to fully valued and cut its target price to 70 sen, based on 10 times FY12 ending Dec 31 earnings per share.


This article appeared in The Edge Financial Daily, November 29, 2011.



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

Challenges remain at MISC’s tanker business

KUALA LUMPUR: Analysts are positive on MISC Bhd’s move to exit its liner business, but they remain cautious on the group’s tanker operations which have been bleeding losses as well.

Analysts said MISC’s tanker business was the next largest drag to earnings after the liner division, and the situation is expected to persist until next year. The tanker division incurred about RM270 million in pre-tax losses for the six-month period ended Sept 30.

“The tanker division would likely remain challenging given that global tanker fleet growth will peak in 2012,” AmResearch said in a note last Friday.

OSK Research also noted the unbalanced demand and supply situation could persist for another one or two years, which would depress freight rates for MISC’s tanker business.

MISC says the cessation of the liner business would cost the group a US$400 million one-time loss and would throw MISC into the red for FY11 ending Dec 31.

“Meanwhile, the expected peak in winter rates may not even materialise as it is unlikely that rates will hit a seasonal high if the market is experiencing an imbalance,” it said.

For the cumulative six-month period, MISC’s net profit fell 67.1% to RM262 million while revenue declined 11.5% to RM5.63 billion.

MISC said the cessation of the liner business would cost the group a US$400 million (RM1.28 billion) one-time loss and would throw MISC into the red for FY11 ending Dec 31. The shipping company would incur US$30 million in costs, due to penalty charges for cessation of services and payment for retrenchment.

MISC is expected to exit the liner business by June 30, 2012 and will also dispose of all its liner-related assets.

Despite that, analysts welcomed the move as MISC had been dragged down by its liner business for the past three financial years despite a turnaround plan last year. MISC said the liner business had incurred US$789 million in losses for the past three financial years.

“We are positive on MISC exiting the liner business, which has dragged the group down with losses totalling US$120 million this year. With the losses to be fully provided for this year, we estimate that this could potentially stop the bleeding in the division from 2HFY12 onwards,” said OSK Research.

OSK Research added that MISC could raise at least US$315 million from the vessel disposals.

Nevertheless, it downgraded its FY11 revenue forecast by 13%, and core earnings by 26% to RM451.5 million given the depressed rates.

“We expect MISC to book in losses of RM804 million after factoring in the exceptional provisions of US$400 million arising from the cessation of its liner business,” it said.

Similarly, Kenanga Research downgraded its FY11 earnings forecast by 26% to RM401.8 million, excluding the US$400 million one-off cost.

It said MISC would likely post lower earnings due to higher bunker costs and lower charter rates for the petroleum and chemical tanker divisions.

Kenanga has an “underperform” call on MISC with a fair value of RM6.05.

OSK Research and AmResearch are more optimistic and upgraded their calls to “buy” with target prices of RM7.23 and RM7.40 respectively.

“We are positive on this development given the elimination of losses from the liner division, which we had earlier estimated at between RM300 million and RM600 million for FY12-FY13. As a result, we have raised FY12-FY13 core earnings by 3% and 5%,” said AmResearch.

OSK Research noted that MISC would start replenishing cash in FY12 after disposing of its container segment, which would bolster profit margins and lower its depreciation expenses.

“Axeing the liner business will help enhance FY12-FY13 profit by RM172 million (24%) and RM226 million (21%),” it said.

MISC was among the top losers last Friday, shedding 33 sen to close at RM5.80.


This article appeared in The Edge Financial Daily, November 29, 2011.



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

Maybank aims to become leading regional wholesale banking group

SINGAPORE: With the acquisition of Kim Eng Holdings Ltd, Malayan Banking Bhd (Maybank) is aiming to become the region’s leading wholesale banking group with operations across all key market segments in Southeast Asia by 2015.

The acquisition of the Singapore-based brokerage gives Maybank a strong presence in the investment banking scene in Southeast Asia, especially in Thailand, the Philippines and Indonesia. It also adds to Maybank’s extensive presence in the retail and commercial banking sector in Malaysia, Singapore, Indonesia and the Philippines, said CEO Datuk Seri Abdul Wahid Omar.

The group will be able to undertake bigger initial public offerings (IPOs) in the region, he said.

Wahid: The acquisition of Kim Eng gives Maybank a strong presence in the investment banking scene in Southeast Asia.

Zafrul, as CEO of Maybank Kim Eng, will oversee its global activities.

“This transaction is more than just the merging of two entities. Our strengthened position and significant footprint across the region, together with the talents and expertise of our new team, will lead the expansion of our business. We will also be able to compete aggressively and play a leading role in the regional capital markets,” said Wahid.

With the addition of Kim Eng, Maybank’s investment banking business now boasts more than RM1.2 billion in combined annual revenue. The group has also set a target to earn 40% of its total group pre-tax profit from its international operations by 2015.

Prior to the acquisition of Kim Eng, Maybank was seen as lagging behind local rival CIMB Group Holdings Bhd in terms of its regional presence, especially in the investment banking sector, despite being bigger than CIMB in terms of market capitalisation and total assets.

Maybank has a significant presence in four of the key markets in the region in terms of retail and commercial banking. Besides its 386 branches domestically, Maybank has 344 branches in Indonesia through its subsidiary Bank Internasional Indonesia, 50 branches in the Philippines, 22 in Singapore and two direct branches in Vietnam and another 122 branches via An Binh Bank, an associate unit of the group.

“The merger with Kim Eng gives us immediate presence in Thailand ... as you know Kim Eng in Thailand is the number one broker and with Kim Eng embracing Maybank’s corporate identity it will give us brand presence in Thailand, and I think that will pave the way ... for our commercial and retail banking operation in Thailand,” said Wahid.

Tengku Zafrul Tengku Aziz, CEO of Maybank Investment Bank Bhd (Maybank IB), said the investment bank will now focus on growing the business, especially in the area of asset management where it has almost S$20 billion (RM49 million) of assets under management in its Singapore operation. In Thailand and the Philippines, the group has S$100 million of assets under management, said Zafrul.

“In terms of asset management, we already have a strong presence in Singapore, as well as in the Philippines and Thailand. What we are planning to do is to look at expansion in Indonesia. For the other countries, we are looking at a two-stage approach. Once we have established ourselves in these countries then we will start looking at expanding in their jurisdictions,” said Zafrul.

The merger of Kim Eng and Maybank IB will enable the group to undertake bigger IPOs in the future, according to former Kim Eng CEO Ronald Ooi.

“There is very little overlap between Kim Eng and Maybank IB, the union of these two companies is to transform the merged entity into a regional company, not just individual company in an individual country but regional so we will be able to work as one. With that, hopefully we will have a much wider and broader proposition to our clients,” he said.

Kim Eng will now be known as Maybank Kim Eng and will adopt the tiger symbol as its new corporate identity. It will also embrace the yellow corporate colour of Maybank group.

Maybank Kim Eng also announced changes to its top management. Zafrul will be CEO of Maybank Kim Eng, overseeing the organisation’s global activities which cover 11 countries. Ooi will assume a new role as executive adviser to Maybank Kim Eng.

Eunice Ho will be chief financial officer of the Maybank Kim Eng investment banking group. She brings with her more than 30 years of general management experience in the securities, gaming and manufacturing industries. Shahrul Nazri Abdul Rahim will be appointed as the chief strategy officer of the merged entity.


This article appeared in The Edge Financial Daily, November 29, 2011.



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

Genting M’sia deals a relatively good hand

Genting Malaysia Bhd (Nov 25, RM3.85)
Maintain hold at RM3.86 with revised fair value of RM3.88 (from RM3.83): Genting Malaysia’s 9MFY11 results were within expectations. Its most recent acquisition of Fox Poker Club Ltd for £7.8 million (RM38.6 million) is not expected to contribute materially going forward.

Core net profit for 3QFY11 of RM396 million (+23% year-on-year, +14% quarter-on-quarter) brought 9MFY11 core net profit to RM1.2 billion (+13% y-o-y), at 78% of our full-year estimate. Excluding the Resorts World New York (RWNY) construction revenue, 9MFY11 revenue of RM5 billion (+32% y-o-y) was also within expectations at 76% of our 2011 estimate. No interim dividend was declared (2Q11: 3.8 sen less tax) — as expected.

Core net profit for 3QFY11 was 23% higher y-o-y not only due to maiden contributions from Genting UK but also higher VIP volume and win rate at Resorts World Genting (RWG). Core net profit for 3QFY11 was 14% higher q-o-q largely due to normalising VIP win rate at Genting UK. Genting UK acquired Fox Poker Club Ltd for £7.8 million cash. It holds a casino premises licence and operates a poker club in central London.

RWG’s earnings are expected to be stable while Genting UK’s earnings are expected to remain volatile. We expect RWNY, which opened on Oct 28 to add RM128.2 million or 8% to 2012 group net profit.

We tweak our discounted cash flow-based target price upward by five sen or 1% to 3.88 to account for the RM250 million that Genting Malaysia invested in Pan Malaysian Pools preference shares. On re-rating catalysts, there has been no progress in the liberalisation of the Florida gaming industry and introduction of table games at RWNY yet. Until then, we maintain our “hold” call on Genting Malaysia. — Maybank IB Research, Nov 25


This article appeared in The Edge Financial Daily, November 29, 2011.



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

A surprise loss at Ann Joo

Ann Joo Resources Bhd (Nov 25, RM1.90)
Downgrade to sell at RM1.98 with revised fair value of RM1.59 (from RM2.17): Ann Joo’s 3QFY11 net loss of RM24.5 million obviously shocked the market. The loss was mainly attributed to provision of diminution in inventory value amounting to RM37.9 million and unrealised foreign exchange losses of RM22.5 million, which we think were related to its operations. Apart from that, the weaker numbers were attributed to average selling prices (ASP) of its steel products having averaged down in 3QFY11, which shaved off margins.

While Ann Joo’s management appears to be cautious on the near-term outlook, we suspect the company may return to the black in 4Q as steel and raw materials prices have now recovered from the recent lows hit in October 2011. That aside, the ongoing government projects may to a certain extent help to support domestic long steel requirements plus regular contributions from the trading division. The management also confirmed that it finally hot commissioned its mini blast furnace last month but does not expect any interest expense and depreciation to kick in until full commercial operation.


Now that the new blast furnace is discharging 800 to 900 tonnes of hot metal a day, we suspect Ann Joo may start expensing the interest costs and depreciation incurred for this plant from as soon as 1QFY12. Our model shows an additional RM45 million in cost in the first year. As a new plant may take time to attain optimum efficiency and is highly reliant on outsourced metallurgical coke, this may limit the savings from conversion cost. All challenges considered, we are slashing our FY11 by 53.2% and FY12 by 38%.

As the company’s share price has now drifted far away from the ideal disposal price tag, we also see diminishing prospects for the proposed 10% to 15% stake sale of Ann Joo shares by the Lim family materialising anytime soon. Together with the shocking loss in 3QFY11, potential issues with the new blast furnace and poor industry outlook, we are downgrading Ann Joo to “sell” and pushing our price-to-book valuation to -1 standard deviation of its historical trading range to derive our new fair value of RM1.59. — OSK Research, Nov 25


This article appeared in The Edge Financial Daily, November 29, 2011.



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

Provisions for Thailand floods affect MNRB’s 1HFY12 claims ratio

MNRB Holdings Bhd (Nov 25, RM2.66)
Downgrade to underperform at RM2.86 with revised fair value of RM2.81 (RM3.40): MNRB’s 1HFY12 ending March net profit of RM37 million (-22% year-on-year [y-o-y]) was below our expectations, coming in at 28% of our full-year earnings forecast. The key variance to our forecast was the higher than expected 1H claims ratio for its reinsurance subsidiary, Malaysian Re of 65% (against our estimate of 60% for the full year).

The reason for the higher-than-expected claims ratio was due to provisions made in anticipation of the losses arising from the floods in Thailand. This resulted in MNRB’s claims ratio for 2QFY12 to be significantly higher y-o-y and quarter-on-quarter by 11 percentage points (ppt) and 13ppt respectively to 73%. This brought its 1HFY12 claims ratio to 65%. MNRB made a total provision of RM55 million for the expected losses, although we understand that MNRB is being conservative as the actual losses could be lower than the provisions. As such, there could be some writeback in the coming quarters.

However, given that the exact losses are still uncertain, we are increasing our claims ratio assumption for FY12 to 66% (from 60% previously) to be conservative. We are leaving our claims ratio assumption for FY13/FY14 unchanged at 60.5% per year.

The upside risks include: (i) stronger than expected premium growth; (ii) lower than expected jump in claims ratio; and (iii) mark-to-market gain on investments.

Our FY12 earnings forecast is reduced by 37.4% after increasing our claims ratio assumption for the year to 66% (from 60% previously).


We are now more cautious on MNRB’s earnings outlook given its increased claims ratio resulting from the expected losses from the Thailand floods. We had previously highlighted that MNRB’s international reinsurance treaties would have limited impact due to the capping of its losses, as was the case with the Japanese earthquake. However, it seems that even with the cap, the losses could still have a significant impact on MNRB’s earnings as indicated by the RM55 million provisions made (against Japanese earthquake of only about RM20 million). Unlike the losses arising from the Japanese earthquake, we believe MNRB’s exposure in Thailand is a lot more in volume. As such, we are wary that after further assessments of the losses in Thailand, MNRB might be further exposed to more losses in the coming quarters. We are therefore downgrading our call on the stock to “underperform” (from “market perform”) with a new fair value of RM2.81 (from RM3.40 previously) based on 0.6 times FY11 price-to-net tangible assets ratio. — RHB Research, Nov 25


This article appeared in The Edge Financial Daily, November 29, 2011.



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

Key catalysts falling into place for DRB-Hicom

DRB-Hicom Bhd (Nov 25, RM2)
Maintain outperform at RM2.08 with target price RM3.95: Results for 1HFY12 accounted for 51% of our full-year forecast. The auto division did surprisingly well as the Volkswagen relationship is already bearing fruit. Maintain “outperform” recommendation and target price based on 10% discount to revised net asset value.

A big surprise was the 18% year-on-year (y-o-y) rise in 1H operating profit from the auto division to RM99 million despite a higher than expected 12% fall in turnover. This was due to the high-margin business of facilitating the import of all VW completely built-up (CBU) units into Malaysia. This exposure to VW sales should escalate in 2HFY12 when the execution of the collaborative agreement with VW goes into full swing. The assembly of completely knocked down (CKD) units has started in Pekan and DRB-Hicom is expected to get a holistic share of the entire distribution business in Malaysia, which will go much further beyond the current handling of approved permits (APs) and logistics for VW. We have not factored any of this prospect into our FY12 forecast. Any event here would mitigate the anxieties over Honda Malaysia.

Net profit contribution from Honda Malaysia for 1HFY12 slumped 43% y-o-y as the unit was still getting back to full production after the Japanese earthquake and tsunami. However, the plant has been shut down due to the floods in Thailand. We expect the unit to break even for the full year.
The breakdown of 1HFY12 net profit met our expectations — 45% from the auto business, 18% from Bank Muamalat and 37% from concessions. There is no contribution from property yet. However, the unexpectedly high tax rate subdued what would have been a better than expected set of results. — CIMB Research, Nov 25


This article appeared in The Edge Financial Daily, November 29, 2011.



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

Lotus could be profitable by 2013: Proton

Lotus Group International Ltd, Proton Holdings Bhd’s loss-making British sports-car unit, could be profitable as early as 2013, Proton Managing Director Syed Zainal Abidin Syed Mohamed Tahir told reporters today in Shah Alam, near Kuala Lumpur.

No management buyout is “in place” at Proton, Syed Zainal said. -- Bloomberg



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

KL shares extend gains at mid-afternoon

Shares on Bursa Malaysia extended gains at mid-afternoon today amid good buying interest from fund managers in finance counters, dealers said.

At 3pm, the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) stood at 1,452.67, up 1.48 per cent or 21.12 points, lifted by financial stocks including CIMB, Maybank, AMMB and Public Bank. The key index had opened 6.22 points higher at 1,437.77.

A dealer said fund managers bought into financial stocks on hopes of recovery, with CIMB and AMMB rising 27 sen to RM7.01 and RM5.91 respectively, Maybank gained eight sen to RM8.03 and Public Bank rose 10 sen to RM12.50.

On Bursa Malaysia, trading was positive with volume at 846.41 million shares valued at RM895.24 million, with gainers outpacing losers 476 to 199 while 246 counters were unchanged.

The Finance Index surged 253.66 points to 13,037.24, the Plantation Index gained 54.11 points to 7,662.84 and the Industrial Index was 20.03 points higher at 2,617.12.

The FTSE Bursa Malaysia Emas Index jumped 129.82 points to 9,945.79, the FTSE Bursa Malaysia Mid 70 Index added 100.07 points to 10,795.98 and the FTSE Bursa Malaysia Ace Index rose 4.27 points to 4,136.27.

Among actives, Tiger Synergy was up half sen to 13 sen, Sumatec was unchanged at 31 sen while Sumatec-Warrants lost half sen to 17.5 sen.

As for heavyweights, Sime Darby gained 18 sen to RM8.84, Petronas Chemicals rose one sen to RM5.92, Axiata garnered seven sen to RM4.90 and Maxis up four sen to RM5.46. -- Bernama



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

Lotus gets over 300 sports car orders

Lotus Group International Ltd, the sports-car arm of Malaysia’s Proton Holdings Bhd, has received orders for more than 300 vehicles since opening its first showroom in China, the group said.

“Lotus is confident of its sales volume increasing further,” Proton said in a statement in Subang Jaya, Selangor today. -- Bloomberg



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

AWC pre-tax profit falls to RM13.8m

AWC Bhd's pre-tax profit for financial year ended June 30, 2011 fell to RM13.8 million from RM22.1 million in the same
period of 2010. Revenue declined to RM153.90 million from RM184.8 million previously, it said in a statement today.

Its group chief executive/managing director, Azmir Merican, said the results were satisfactory amid the challenges and uncertainties in the global political and economic landscapes during the period under review.

"We achieved our profitability targets despite lower revenue for the year," he said. He said all divisions remained profitable except the technology division which suffered a pre-tax loss of RM3 million.

"The impact of the adverse performance was somewhat moderated by the stronger performance of our facilities division, which achieved a pre-tax profit of RM6.5 million," he said.

Going forward, Azmir said, the group's immediate task was to strengthen the resilience of project-based income and the development of a healthy order book.

"Several key steps have been undertaken to address those issues, which included outlining a more structured and focused sales and marketing effort and the beefing up of the organisational infrastructure to meet the more demanding operating environment," he said.

Azmir said the company has identified four aims to guide the actions in the future. "They are: ensuring continued favorable results via the development of our business model; emphasise innovation at the core of what the company does; ensuring a more sustainable growth via the reduction of energy and natural resources consumption; and, harnessing of human talent and skills development," he said. -- Bernama



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

Eco Palm to invest RM820m in Pahang plant

Eco Palm Paper Sdn Bhd, a recycling based company, expects to invest RM820 million to set up a three-phase corrugated paper plant in Pekan, Pahang.

Managing Director Larry Yong said the company expects to see an annual revenue of RM875 million once the plant is fully completed by 2017.

"First phase of the plant will be completed in 2013 and 50,000 metric tonnes of paper will be produced annually," Yong told reporters before a contract signing ceremony with Jiangsu Jinwo Machinery Co Ltd here today. Berjaya Corp Bhd is the major shareholder of Eco Palm.

On the market for corrugated paper, Yong said it was expected to do well as it was an emerging market segment as there was a large demand for paper made from palm fiber.

He said among the major markets for the paper included Austalia, Japan and Europe, where the environmental regulations in the packaging industry were becoming more strict.

On the contract with Jiangsu Jinwo, he said Eco Palm signed the contract for RM65 million for them to design, manufacture and commission the corrugated paper plant.

He also said the plant, once completed, will raise the profile of Pekan as a production centre for tree-free paper while providing employment and training opportunities for the locals.

"It will also help reduce the depletion of natural resources and at the same time provide a clean solution for the disposal of palm oil by-products as approximately 18 million metric tonnes of empty fruit brunches are produced annually in Malaysia," he added.

Yong represented Eco Palm at the signing ceremony today while Jiangsu Jinwo was represented by its general manager, Fan Ganghua.

The event was witnessed by Pahang Menteri Besar Datuk Seri Adnan Yaakob and Berjaya Corp Bhd Chairman Tan Sri Vincent Tan.

In his speech earlier, Tan said the decision to invest in the project was influenced by the urgent need to move away from the traditional paper production process that uses wood based pulp.

"One of the major issues faced by the global pulp and paper industry is the diminishing supply of wood based pulp and the negative environmental effects of deforestation.

"It is therefore timely for Eco Palm to be able to fill the supply gap left by years of tree harvesting and at the same time help conserve our natural resources and environment," he said. -- Bernama



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

KL shares bullish at afternoon

Shares on Bursa Malaysia ended the morning session today on a bullish note with continued buying interest seen in selected heavyweights, dealers said.

At 12.30pm, the underlying FTSE Bursa Malaysia KLCI (FBM KLCI) gained 1.57 per cent or 22.45 points to 1,454 supported by gains in heavyweights, including CIMB, Genting, Maybank and Tenaga Nasional.

The key index had opened 6.22 points higher at 1,437.77 this morning.

A dealer said the positive local bourse was in tandem with key regional markets, following the firmer overnight close on Wall Street, as well as improved risk appetite on fresh optimism that Europe's debt crisis would be contained.

Furthermore, investor sentiment was buoyed by the robust US Thanksgiving weekend retail sales, the dealer also said, adding, the local bourse is likely to remain in positive territory today.

On Bursa Malaysia, the market breadth was positive with 450 gainers and 183 losers with turnover amounting to 654.64 million shares valued at RM724.88 million.

The Finance Index surged 268.55 points to 13,052.13, the Plantation Index jumped 54.79 points to 7,663.52 and the Industrial Index gained 17.82 points to 2,614.91. The FTSE Bursa Malaysia Emas Index perked 135.45 points to 9,951.42, the Malaysia Mid 70 Index increased 103.62 points to 10,799.53 and the FTSE Bursa Malaysia Ace Index was 19.36 points higher at 4,151.36.

Among actives, Sumatec rose 0.5 sen to 31.5 sen, JCY-Call Warrant was up 4 sen to 25 sen while Sumatec-Warrants declined 0.5 sen to 17.5 sen.

For the heavyweights, Maybank added 11 sen to RM8.06, Sime Darby jumped 18 sen to RM8.84 and CIMB surged 31 sen to RM7.05.-- Bernama



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

Proton 2Q earnings slump 76% to RM15.55m

KUALA LUMPUR (Nov 29): PROTON HOLDINGS BHD []’s earnings fell 76.4% to RM15.55 million in the quarter ended Sept 30, 2011 from RM65.92 million a year ago due to higher expenses incurred by the Lotus Group International Ltd.

It said on Tuesday that revenue was a marginal 1% higher at RM2.263 billion from RM2.240 billion a year ago while earnings per share were 2.8 sen compared with 12 sen.

However, the national car maker said the group posted higher pre-tax profit of Rm35 million compared to RM12 million in the first quarter.

“In the current quarter, the group experienced a higher total sales volume as compared to the immediate preceding quarter sale volume, driven by stronger demand for Proton’s higher margin models, namely the Exora and Inspira,” it said.

For the six-month period, its net profit fell 86.6% to RM20.11 million from RM150.60 million while revenue slipped 0.7% to RM4.496 billion from RM4.530 billion.

Proton said pre-tax profit for the first six months of RM47 million was lower than the RM185 million a year ago.

“The lower profit was largely attributed to higher expenses incurred by Lotus Group, which was in line with the group’s effort in achieving Lotus Group’s long term business transformation plans,” it said.

Proton added the higher expenses at Lotus Group were partially offset by an increase in Proton’s domestic sales volume, which was 2% higher on-year.



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

Sumatec inks pact with Markmore Energy

Sumatec Resources Bhd, a Malaysian engineering group, said it signed an agreement with Markmore Energy (Labuan) Ltd for a proposed production-sharing contract by CaspiOilGas LLP.

The partners would develop and extract hydrocarbon in Kazakhstan’s Shelly Oil Field where CaspiOilGas is a concession holder, Sumatec said in a Kuala Lumpur stock exchange filing today. -- Bloomberg



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

BIMB Holdings posts RM16.31m net profit in 3Q

KUALA LUMPUR (Nov 29): BIMB HOLDINGS BHD [] posted net profit of RM16.31 million in the third quarter ended Sept 30, 2011, which was sharply lower from the second quarter’s RM62.84 million due to relatively lower net income, higher operating overheads.

It said on Tuesday that its revenue was RM481.31 million while earnings per share were 1.53 sen. This was a decline from the revenue of RM502.26 million in 2Q and EPS of 5.89 sen.

BIMB said the group's profit before zakat and taxation (PBZT) for the quarter under review of RM110.6 million declined by RM43.0 million or 28% compared to the PBZT of RM153.6 million in 2q.

“The decrease was mainly attributable to relatively lower net income, higher operating overheads and higher allowance for impairment on financing, advances and others,” it said.

Bank Islam Malaysia Bhd’s PBZT for 3Q11 of RM101.0 million was lower compared to 2Q by RM32.2 million or 24%. The decrease was due mainly to lower writebacks in impairment allowances by RM16.1 million and by both fund based and non-fund based income by RM13.5 million respectively.

For the quarter under review, SYARIKAT TAKAFUL MALAYSIA BHD [] (STMB) recorded a PBZT of RM 10.1 million which was RM11.7 million lower than the preceding quarter of RM 21.8 million. The decrease was mainly attributable to lower surplus transfers from Family Takaful and General Takaful. The lower surplus transfers was due to higher reserving for family takaful group products and the impact of poor performance of the equity market.

For the nine-month period, BIMB said its group net profit was RM130.52 million on the back of revenue of RM1.467 billion.

The group's PBZT of RM399.8 million for the nine months increased RM127.8 million or 47% over the previous corresponding period. Net profit attributable to the shareholders had improved by RM37.7 million or 41% to RM130.5 million.

“The higher profitability recorded for the nine months financial period ended Sept 30, 2011 was mainly due to higher operating results registered by the Group's subsidiaries, mainly Bank Islam Malaysia group and STMB group by 20% and 81% respectively.

“The growth in the Group's net income was driven by higher profit from continued growth in financing, higher non-fund based income and improved asset quality in Bank Islam (Bank Islam), as well as higher profit generated from Takaful businesses.

Bank Islam recorded a PBZT of RM342.0 million for the nine months ended 30 September 2011, an increase of RM101 million or 42% compared to the last corresponding period. The significant achievement translated into a return on equity (ROE) of 17.3% compared to 16.5% as at end December 2010. The Islamic banking system average ROE was 14.5% as at end December 2010. The return on assets (ROA) was 1.5% compared to 1.2% as at end December 2010. The Islamic Banking System average was 1.2% as at end December 2010.

BIMB said for the nine months financial period ended Sept 30, STMB recorded operating revenue of RM1.045 billion comprising RM892.5 million in gross contribution and RM152.6 million in investment income. The gross contribution was mainly attributable to Family Takaful group business and motor and fire class of business.



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

Proton H1 profit dips on Lotus' expenses

Proton Holdings Bhd recorded a lower pre-tax profit of RM47.524 million for the six months ended September 30, 2011 versus RM185.914 million chalked up in the corresponding quarter last year.

Revenue dwindled to RM4.496 billion, during the period under review, from RM4.530 billion raked in previously.

"The lower profit is largely attributed to higher expenses incurred by Lotus Group International Ltd, which is in line with Proton's effort to achieve Lotus's long-term business transformation plan," the national automaker said in a filing to Bursa Malaysia today.

Meanwhile, Proton said in statement today that Lotus has received orders for more than 300 vehicles since opening its first showroom in China. -- Bernama, Bloomberg



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

MISC to sell 16 container ships

MISC Bhd, Southeast Asia’s largest shipping line by market value, intends to sell its 16 container vessels within about six months as it exits unprofitable cargo-box operations.

The prices for the ships will depend on market conditions, the Kuala Lumpur-based company said in an e-mailed reply to Bloomberg News questions on Nov 27. Any vessels not sold in the period will be kept in “a short re-activation mode” until December 2012, including manning and maintenance, MISC said.

The shipping line will also look to sub-lease chartered-in vessels or return them to owners early, it said. The contracts on 10 of the company’s 14 chartered-in ships expire by the end of June. It didn’t say how long the other four contracts run.

MISC, controlled by Malaysia’s state oil company Petroliam Nasional Bhd, said last week it will exit container shipping after the unit accumulated US$789 million of losses in three years. The company garners less than 20 per cent of sales from the sector, with the remainder coming from tankers and energy- related businesses.

Only two of MISC’s 16 owned container vessels are able to carry more than 5,000 boxes, according to its website. The rest are smaller, reflecting the shipping line’s decision in 2010 to exit the Asia-Europe market and instead focus on intra-Asia routes.

The group also owns or leases 29 liquefied-natural gas ships, 83 petroleum tankers and 28 chemical tankers, according to its website.

The shipping line said on Nov 25 that it may take a US$400 million charge from closing the unprofitable container unit, which would contribute to an expected full-year loss.

The shares of MISC climbed 2.6 per cent, the biggest intraday increase since Nov 23, to RM5.95 at 11.46am today. The stock has declined 29 per cent this year, the biggest drop among the 30 stocks in the benchmark FTSE Bursa Malaysia KLCI Index. -- Bloomberg



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

Malaysia auto-parts makers eye India

A group of Malaysian auto-parts makers are scouting for Indian partners to export products for the country's burgeoning automobile sector.

At least five vendors are exploring prospects in two major Indian cities, Chennai (Tamilnadu), an emerging hub for global auto producers, and Pune in Maharashtra, to market their auto components.

"Malaysian companies are looking for market opportunities in India and also the right partner for joint ventures.

"Malaysia has quality auto products, while Indian companies are looking for other (sourcing) options and this is a good sign," Chennai-based Malaysia External Trade Development Corporation (Matrade) Commissioner, Shah Nizam Ahmad said.

The companies were on a specialised marketing mission for automotive parts and components to the two Indian cities from Nov 23-25.

Meanwhile, Mumbai-based Matrade Commissioner, Noraslan Hadi Abdul Kadir said the companies had managed to secure potential sales of RM18.8 million in both cities.

"Malaysia has the technology and what our companies need are local partners to export to the Indian market or even set up production here," he added.

India's auto component industry is estimated at nearly US$40 billion (RM120 billion), driven by the sharp rise in demand for passenger cars and utility vehicles.-- Bernama



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

BIMB records higher earnings

BIMB Holdings Bhd (BHB)'s profit before tax and zakat (PBZT) rose 47 per cent to RM399.8 million for the nine months ended Sept 30, 2011.

In a statement today, group managing director/chief executive officer Johan Abdullah said the higher profitability was mainly due to higher operating results reported by the group's main subsidiaries, Bank Islam Malaysia Bhd and Syarikat Takaful Malaysia Bhd Group (STMB).

Bank Islam recorded a PBZT of RM342 million, up 42 per cent from the same period last year, against a revenue of RM1.2 billion.
Meanwhile, Syarikat Takaful posted an operating revenue of RM1,045.1 million comprising RM892.5 million in gross contribution and RM152.6 million in investment income.

On prospects, Johan said the group would continue to leverage on Bank Islam's strong Islamic branding and competitive position to sustain core retail financing and deposit-investment businesses while Syarikat Takaful was expected to increase its market share by introducing new products, increasing agency workforce and strategic tie-ups with Islamic banks to market its banca takaful products.

Meanwhile, BHB also announced the adoption of a dividend pay-out policy of at least 50 per cent of the company's net profit attributable to shareholders.

It explained that the move was necessary to retain adequate reserves for future growth. -- Bernama



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.