Trans Resources awarded RM38m jobs

Trans Resources Corporation Sdn Bhd (TRC) has been awarded two development contracts worth RM38.080 million from Putrajaya Holdings Sdn Bhd.

In a filing to Bursa Malaysia today, TRC's parent company, TRC Synergy Bhd
said the contract was received on Nov 25, in the form of Letter of Award (LOA).

The first contract is for the proposed development of 14 units of two-storey
terrace houses and 14 units of two-storey semi-detached housed at Sub-Precinct 14-3, Precinct 14, Putrajaya.

The second is for the proposed development of 72 units of two-storey terrace
houses at Sub-Precinct 14-6A, Precinct 14, Putrajaya.

TRC said, the project will contribute positively, to the earnings per
share of the Group in the future. -- 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.

'Tin producers may cut output on price'

The slump in tin prices may result in 20 per cent of global producers cutting output, according to Mohammad Ajib Anuar, chief executive officer of Malaysia Smelting Co, the world’s second-biggest producer.

“Twenty percent of the world’s producers will go out of business at the current price level,” Anuar said in an interview in London today. Their production costs are US$20,000 to US$25,000 a metric ton, he 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.

Hap Seng acquires 35pc stake in Hap Seng Star

Hap Seng Consolidated Bhd's (HSCB) wholly-owned unit, Hap Seng Auto Sdn Bhd, has signed a sale and purchase agreement with Great Horizon Ltd (GHL).

In a filing to Bursa Malaysia today, HSCB said, Hap Seng Auto would acquire
GHL's entire shareholding of 11.725 million ordinary shares of RM1 each,
representing 35 per cent of the issued and paid-up share capital in Hap Seng
Star Sdn Bhd, for RM41.38 million cash.

HSCB said upon completion of the proposed acquisition, Hap Seng Star would

become HSCB's wholly-owned unit and the company would be able to fully
consolidate the profit contribution from its automotive division. -- 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.

Parkson plans 24 more outlets in 2012

Parkson Retail Asia Ltd, the Singapore-listed unit of Parkson Holdings Bhd, plans to open 10 new stories in Southeast Asia next year, Managing Director Alfred Cheng said in an interview in Kuala Lumpur today.

Parkson Retail Group Ltd, the group’s Hong Kong-listed unit, will open as many as 14 more outlets in China, including four this month, he 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.

AirAsia refutes claims of a bigger KLIA2

The fued between AirAsia Bhd and Malaysia Airports Holdings Bhd (MAHB) took a turn for the worse when the low-cost carrier today refuted claims by the airport operator that AirAsia was the main reason for the cost of the new low-cost terminal, or KLIA2, to increase substantially.

In a statement here today, the low-cost carrier also said it did not ask for
a bigger KLIA2. AirAsia has called for a press conference tomorrow at its headquarters in Sepang to refute MAHB's claims of asking for a bigger KLIA2.

The budget carrier also provided copies of two official letters sent by
AirAsia to MAHB and vice versa to prove that it should not be blamed for the
price tag of KLIA2 to almost double.

AirAsia, MAHB's biggest customer, said its chairman, Datuk Abdul Aziz Abu
Bakar, had in a letter on November 2009 to MAHB managing director Tan Sri Bashir Ahmad Abdul Majid, cautioned that the location of KLIA2 at KLIA West was not suitable and would cause construction costs to soar.

"The site will definitely be more expensive than the planned budget of RM2
billion," AirAsia said, adding it had also estimated for MAHB that the
construction cost will increase to RM3.6-RM3.9 billion.

In a separate letter dated Aug 9 this year, Bashir had written to AirAsia X
chairman, Tan Sri Rafidah Aziz, claiming that the proposed KLIA2 would be
sufficient to handle 30 million passengers per annum.

"This figure has never been officially changed by AirAsia or MAHB since Aug
9, 2011," AirAsia said, in refuting claims made by MAHB in an article entitled
"Why KLIA2 has to be bigger" posted on its website.

According to the article, MAHB claimed that AirAsia had been the one to
estimate that passenger traffic at the new terminal would reach 28.7 million by
2015, 45.3 million by 2020 and 60.3 million by 2025.

AirAsia chief executive officer, Tan Sri Tony Fernandes, had also dismissed
MAHB's justifications for doubling the cost of KLIA2 from its original RM2
billion estimate in 2009 to RM3.9 billion currently.

AirAsia had mentioned in a letter that the airline should not be held
accountable for cost over-runs arising from the incorporation of these needs.

The airline also refuted MAHB's claim that it had asked for a
fully-automated baggage handling system (BHS), which is believed to have caused delays in construction, saying it had only asked for a semi-automated BHS.

"The MAHB board had unilaterally decided on a fully-automated BHS to
accommodate 45-60 million passengers, which was again not agreed to by
AirAsia," it said.

AirAsia said its request for a 3,000-metre runway had been based on its
original requirement to MAHB to cater to the wide-bodied Airbus A330 aircraft,
which were operated by Air Asia X.

Later, the airline said, MAHB has since shortened the runway length to 2,750
metres, which can only cater to the A320 aircraft, without consulting AirAsia.

"As such, this should not be considered as an additional request/requirement
from AirAsia as the original plan has always been for a 3,000-metre runway. "Therefore, no additional cost should be incurred," 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.

Malaysian Airports unveils KPIs for 2012

Malaysia Airports Holdings Bhd (MAHB) has set the targets of achieving earnings before interest, tax, depreciation and amortisation of RM822 million; a return on equity of 10.42 per cent; and top 5 worldwide ranking for KL International Airport as its headline key performance indicators (KPIs) in 2012.

In a filing to Bursa Malaysia today, MAHB said, the headline KPIs were set
based on its strategic plans and long-term targets that were developed under its Five-Year Business Direction (2010-2014) planning initiative.

MAHB said the headline KPIs were also set based on the assumption that there
would not be any significant changes in the prevailing economic and political
conditions, as well as the present legislation and/or government regulations.

"These headline KPIs shall not be construed as forecasts, projections or
estimates of MAHB or representations of any future performance," it said.

On the outlook of the aviation industry, MAHB said, it believed that 2011
would end on a double-digit passenger growth of approximately 10 per cent.

It said globally, there were still fears of economic weakening, especially
in Europe and to a certain extent in the US. "Oil price is also predicted to be on an uptrend. The possibility of another economic downturn remains," it said.

The airport operator said it expected to achieve an overall growth of 6.6
per cent in passenger movements in financial year 2012 based on the expected
gross domestic product of 5-6 per cent and assuming world economic environment would remain reasonably stable.

It said KLIA2 construction would continue to be a priority and with the
projected passenger growth, MAHB expected a challenging but profitable year
ahead. -- 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.

Hiap Teck eyes 50% profit from Kemaman mill

Hiap Teck Venture Bhd (HTVB) expects its integrated steel mill in Kemaman, Terengganu to contribute 50 per cent to the group’s profit by 2014 due to the strong demand in the region.

By 2014 onwards, roughly 50 per cent of the group’s profit will come from
the mill when it starts operations, with the remainder derived from its existing
subsidiaries, said its executive director Low Choong Sing.

HTVB and China Shougang Group (CSG) have formed a joint-venture company,
Eastern Steel Sdn Bhd, to build a steel mill in Kemaman. It will be based at the Kemaman Heavy Industrial Park, a project in the East Coast Economic Region to boost heavy industry activities in Kemaman.

“Currently, steel imports to Asia are worth four million metric tonnes (MT),
mainly from Commonwealth of Independent States (CIS) and Ukraine,” he said at the media briefing before the the mill's groundbreaking ceremony here today.

Low said shipments from Ukraine to Malaysia take between 45 to 60 days with
the freight cost at US$60 per tonne.

A mill in Kemaman will be a logistic advantage as it is near Thailand,
Vietnam, Cambodia, the Philippines and Indonesia, which are less than one day
shipment time, he said.

“We are not looking only at the local market, but also at the Asian market.
The shipment time is faster and the freight cost is lower. “With the tie-up with CSG, we believe our products will have a competitive advantage,” he said.

Low said of the annual production of 700,000 MT in the first stage of phase
one of the mill, about 60 per cent will go to the domestic market and the
remaining 40 per cent to the Asian market.

Terengganu Menteri Besar Datuk Seri Ahmad Said officiated the ceremony. Also present were HTVB chairman Tan Sri Alwi Jantan, CSG chairman Zhu Jimin
and China's ambassador to Malaysia Chai Xi. -- 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.

Hiap Teck's unit awarded iron ore mining right

Kemaman (Dec 5): HIAP TECK VENTURE BHD []'s 55% owned Eastern Steel Sdn Bhd has been granted a mining licence by the Terengganu state government to mine iron ore on an area of 600 acres near Bukit Besi.

Speaking after the symbolic ground breaking ceremony on Monday, the state's chief minister Datuk Seri Ahmad Said said that the mining concession would allow Eastern Steel to mine the area, which has estimate reserve of 40 to 50 million ton of iron ore, until the end of its mining life.

According to Ahmad Said, Eastern Steel was the second company that had been awarded the mining license, out of the four that were made available, so far.

“This is one of the incentives that the state government gives to encourage Eastern Steel to invest in steel milling business here, on top of building the infrastructure to improve accessibility and logistic,” he said.

Perwaja Holdings Bhd, which also has a steel operation in the state, was the first company to be awarded the mining right.



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.

SapuraCrest Q3 pre-tax profit rises to RM136.4m

SapuraCrest Petroleum Bhd's pre-tax profit for the third quarter ended Oct 31, 2011 rose to RM136.4 million from RM100.072 million in the same quarter last year. Revenue, however, fell to RM745.757 million from RM1.015 billion previously, the company said in a filing to Bursa Malaysia here today.

For the nine months ended Oct 31, 2011, it posted a pre-tax profit of
RM397.195 million on the back RM1.996 billion in turnover. SapuraCrest said the increase in pre-tax profit during the quarter was due to higher contribution from marine services division.

Meanwhile, in a separate filing, the group said its wholly-owned unit, TL
Offshore Sdn Bhd, has incorporated a wholly-owned subsidiary in Bermuda --
SeaBras Sapura Holdco Ltd.


Concurrently, SeaBras Sapura Holdco also incorporated two wholly-owned
subsidiaries in Bermuda, TL Offshore PLSV1 Ltd and TL Offshore PLSV2 Ltd, of
which their activities were vessel owning and vessel chartering, it said.

The group said the incorporation of new subsidiaries was not expected to
have any material effect on its earnings and net assets for financial year
ending Jan 31, 2012. -- 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.

SapuraCrest 3Q net profit up 51.6% to RM83.13m

KUALA LUMPUR (Dec 5): SAPURACREST PETROLEUM BHD [] net profit for the third quarter ended Oct 31, 2010 rose 51.6% to RM83.13 million, due mainly to higher contribution from marine services division.

The company said on Monday that its revenue for the quarter fell by 26.5% to RM745.8 million from RM1.02 billion in 2010 consistent with clients’ planned activities for the quarter.

Earnings per share rose to 6.51 sen from 4.30 sen a year earlier, while net assets per share was RM1.

For the nine months ended Oct 31, SapuraCrest’s net profit jumped to RM233.71 million from RM158.77 million in 2010, on the back of revenue RM1.99 billion.

“Barring any unforeseen circumstances, the directors expect the group to achieve improved results for the financial year ending Jan 31, 2012,” 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.

Sanichi Tech queried

Bursa Malaysia Securities Bhd today issued an unusual market activity (UMA) query to Sanichi Technology Bhd following a sharp increase in the price and high volume in the company's shares.

Sanichi's shares, which opened at 11.5 sen, gained 8.5 sen or 74 per cent to
20 sen at closing today with 1,194,519 lots changing hands.

Meanwhile, the company, in a reply to the bourse operator, said that it was
not aware of any corporate developments relating to the company and its
subsidiaries that may have contributed to the UMA. -- 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.

Bursa Securities queries Sanichi over unusual market activity

KUALA LUMPUR (Dec 5): Bursa Malaysia Securities Bhd has issued an unusual market activity over the trading of SANICHI TECHNOLOGY [] BHD []'s shares recently.

The regulator said on Monday the query was over the sharp rise in price and high volume in Sanichi’s shares.

Sanichi rose 73.9% or 8.5 sen to close at 20 sen with 119.4 million shares done.



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.

TRC Synergy unit secures RM38.1 million job in Putrajaya

KUALA LUMPUR: TRC SYNERGY BHD [] has secured a contract worth RM38.1 million from Putrajaya Holdings Sdn Bhd for the development of terrace and semi-detached houses in Putrajaya.

TRC Synergy said on Monday that its wholly owned subsidiary, Trans Resources Corporation Sdn Bhd would develop 86 units of two storey terrace houses and 14 units of two storey semi-detached houses in Precint 14, Putrajaya.

The company said the project would contribute positively its future earnings.



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 Commentary

The FBM KLCI index gained 0.93 points or 0.06% on Monday. The Finance Index fell 0.11% to 13278.7 points, the Properties Index up 0.20% to 957.32 points and the Plantation Index rose 0.64% to 7877.08 points. The market traded within a range of 5.35 points between an intra-day high of 1492.71 and a low of 1487.36 during the session.

Actively traded stocks include PROTON-CG, SANICHI, PROTON-CH, DRBHCOM-CG, COMPUGT, DRBHCOM-CF, DPS, MBFHLDG-WA, DPS-WA and UTOPIA-WA. Trading volume increased to 2329.37 mil shares worth RM1333.67 mil as compared to Friday’s 1708.70 mil shares worth RM1357.53 mil.

Leading Movers were AXIATA (+9 sen to RM4.99), TENAGA (+8 sen to RM5.72), GENTING (+6 sen to RM10.92), BAT (+100 sen to RM48.10) and TM (+5 sen to RM4.43). Lagging Movers were SIME (-14 sen to RM8.98), DIGI (-3 sen to RM3.70), YTLPOWR (-4 sen to RM1.86), PBBANK (-2 sen to RM12.66) and MAYBANK (-1 sen to RM8.29). Market breadth was positive with 407 gainers as compared to 337 losers.



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 marginally higher

Shares of the following companies had unusual moves in Malaysia trading. Stock symbols are in parentheses and prices are as of the 5 p.m. close in Kuala Lumpur. The FTSE Bursa Malaysia KLCI Index rose 0.93 points, or 0.1 per cent, to 1,489.95.

DRB-Hicom Bhd, an automotive, construction and property group, rose 10 per cent to RM2.20, its steepest gain since July 26. The company may have shown interest in acquiring a stake in national carmaker Proton Holdings Bhd from the country’s state investment fund, the Edge newspaper reported.

Glomac Bhd, a property developer, jumped 4.9 per cent to 86 sen, its highest close since Aug. 5. Second-quarter profit surged 50 per cent to RM23.8 million (US$7.6 million) from a year earlier, it said in a statement.

Lion Corp, a steel producer and builder, dropped 5.3 per cent to 18 sen, its lowest close since Oct. 11. The company may issue new shares to raise RM950 million to settle debt owed by its 79 per cent-owned Megasteel Sdn Bhd subsidiary, Lion said in a statement.

Proton Holdings Bhd, the state-controlled carmaker, soared 24.7 per cent to RM4.50, its steepest increase since Sept. 7, 1998. The Edge newspaper reported that Khazanah Nasional Bhd. may ask for bids for its 43 per cent stake in Proton.

Tenaga Nasional Bhd, the country’s biggest power producer, gained 1.4 per cent to RM5.72, set for its highest close since Nov. 16. The company signed a 25-year agreement to buy electricity from Malakoff Corp’s Tanjung Bin power plant when completed in 2016. Tenaga also agreed to sell Malakoff coal for the plant, the power company 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.

KLCI closes higher but gains limited on cautious sentiment

KUALA LUMPUR (Dec 5): The FBM KLCI rose marginally higher on Monday as Asian markets closed mixed, with sentiment lifted by Italy's unveiling of austerity steps, and expectations Ireland will do the same in a new budget to be announced later in the day.

World stocks and demand for German government bonds rose on Monday as confidence grew European leaders would make big strides in solving the euro zone's debt crisis at a crucial summit this week, according to Reuters.

The FBM KLCI gained 0.93 point to close at 1,489.95.

Gainers led losers by 407 to 337, while 303 counters traded unchanged. Volume was 2.33 billion shares valued at RM1.33 billion.

At the regional markets, Hong Kong’s Hang Seng Index gained 0.73% to 19,179.69, Japan’s Nikkei 225 added 0.60% to 8,695.98 and South Korea’s Kospi rose 0.36% to 1,922.90.

Meanwhile, the Shanghai Composite Index fell 1.16% to 2,333.23, Taiwan’s Taiex lost 0.60% to 7,098.08 and Singapore’s Straits Times Index shed 0.26% to 2,766.23.

On Bursa Malaysia, shares of automotive players PROTON HOLDINGS BHD [] and DRB-HICOM BHD [] rose after the Edge weekly reported that state investment arm Khazanah Nasional Bhd was likely to ask for proposals from interested parties for its stake in the carmaker.

Citing industry sources, the Edge said Khazanah had made overtures and put out feelers to the market, seeking proposals from existing car players on a business plan with regard to Proton.

Khazanah is the largest shareholder in the national car company with a 42.74% stake.

Proton was up 89 sen to RM4.50 while DRB-Hicom added 20 sen to RM2.20.

Other gainers included BAT that rose RM1 to RM48.10, Nestle 60 sen to RM53.20, CBIP 28 sen to RM4.63, United PLANTATION []s and Toyo Ink 26 sen each to RM18.36 and RM1.86, Tradewinds Plantations 25 sen to RM4.42 and Batu Kawan 22 sen to RM17.10.

Among the losers, IJM Corp fell 21 sen to RM5.57, Manulife 19 sen to RM2.90, HELP and Parkson 16 sen each to RM1.62 and RM5.68, Sime 14 sen to RM8.98, Petronas Dagangan 10 sen to RM17.20, Bursa and MAHB nine sen each to RM6.60 and RM6.06, while RHB Capital lost eight sen to RM7.35.

The actives included Proton, Sanichi, DRB-Hicom, Compugates and DPS Resources.


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.

Moneychangers’ woes over new Act

PETALING JAYA: Moneychangers have raised concerns over the new act that requires industry players to increase their paid-up capital by up to 20 times.

Under the new Money Services Business Act 2011 (MSBA) guidelines, which came into force on Dec 1, moneychangers with annual turnover of more than RM100 million must have a minimum paid-up capital of RM2 million, a far cry from the previous requirement of just RM100,000.

Those with more than RM30 million annual turnover are required to have a minimum paid-up capital of RM500,000 while those with less than that are required to have RM300,000 in paid-up capital.

Abdul Hamid Abdullah, managing director of Bestrate Sdn Bhd, the country’s leading moneychanger, told The Edge Financial Daily that such requirements will put many smaller players at risk of losing their business.

There are 801 licensed money changers, 38 remittance service providers and two currency wholesalers in the country. The industry is said to have a turnover of RM5 billion a year.

“I strongly welcome the Compliance Act (MBSA) but some players are very concerned about this requirement. The definition of turnover is also arguable.

“Also, if a company with a paid- up capital of RM100,000 can make 10 to 20 times its share base in a day, which comes up to over RM350 million turnover a year, how can we justify the need for RM2 million in paid up capital?” he said in a phone interview last Friday.

Hamid, the founder and adviser to licensed remittance company Remit Master Sdn Bhd, said companies will be given up to two years to comply with the new capital requirements.

There are other new requirements attached to the share capital size.

Hamid said under the new guidelines, the smaller moneychangers (with RM300,000 in paid up capital) are not allowed to set up branches.

Only the ones with a minimum of RM500,000 in paid up capital can establish up to five branches, while those with paid up capital of at least RM2 million can have unlimited branches.

But the crux of the matter, which is what moneychangers have been discussing with Bank Negara Malaysia (BNM), is the definition of “turnover”.

The moneychangers say “turnover” should be counted as only one side of a transaction that is being carried by them, while BNM has not clearly spelled out what its definition is.

Smaller moneychangers could be at risk of losing their business under the new Money Services Business Act 2011 requirements.

Hamid also said the definition of “fit and proper” in the MSBA guidelines is not clear and is subjective, unlike the Capital Markets Services Act, that governs the securities and fund management industry.

“In hindsight, it looks like Bank Negara [Malaysia] has too much discretionary power over the industry,” he said.

He said perhaps the central bank should apply the paid up capital requirements only to new players, and suggested that those who have a track record should be given the flexibility to remain status quo on their capital base.

“However, my advice to moneychangers is to take this opportunity to change mindset and operate on a more professional level like the banks -- or we will be changed,” he said.

Moneychangers have also been required to complete a tedious application process to reapply for their licences as the MBSA takes effect.

Owners whose licences will expire in two years need to submit the form by Dec 31, 2011, while those whose licences will expire in more than two years will need to submit by March 31, 2012.

With its enactment, the regulation of all existing licensed moneychangers, non-bank remittance service providers and foreign currency wholesalers will fall under the purview of the MSBA and all players are required to apply for a new licence under the Act.

“Bank Negara did the right thing to bring professionalism into the industry. We still need to submit our monthly and yearly reports but under the new act, unlike before, we are now required to share our business plan, reveal personal details of our CEO and compliance officer and so on,” said another moneychanger based in Kuala Lumpur.

Applicants would need to furnish the central bank information on their bank loans or mortgages as well as interest in family businesses. Applicants would also need to describe how they will fund the minimum capital requirements to operate the moneychanging business.

If any additional capital requirement and working capital are funded through borrowings, the applicant is required to provide cash flow projections for the next three years.

Under the old act, the company must have a paid up capital of RM100,000 to get into the money changing business, and the directors must take a “competency” exam, which covers basic industry knowledge. If successful, the applicant will be awarded a five-year licence and pay an annual fee of RM500.

Another operator said the new act has limited impact on moneychangers, but would provide more scrutiny and increase competition in the remittance businesses, which are largely owned by foreigners.

“Under the new act, even moneychangers can remit up to RM50,000 per day per client,” he said. For any transaction worth more than RM20,000, the client would have to declare his name and identity card number, he added.

“There may be clients reluctant to share such personal information, but it’s just a matter of educating them. The details are only for record’s sake, and this record will only be used as reference whenever Bank Negara decides to audit our company. We are not obliged to submit these records because there is no requirement to do so,” he said.

Given the income generated by the money exchange business, it is understandable that many would want to get into it.

An operator in Kuala Lumpur said he made a net profit of close to RM10,000 the last month.

“At Masjid India, the money exchange operators make the same figure per day while the ones at Bukit Bintang may be making the same amount in just hours!” he added.

The new legislation was recently passed in Parliament and follows the repeal of the Money Changing Act 1998, the Payments Systems Act 2003 and the Exchange Control Act 1953, to enable a single, uniform regulatory framework for licencees, instead of the three separate laws.

According to BNM, it has already briefed the players in the market and plans to launch a re-licensing exercise.

With the new Act, BNM has wider enforcement powers to take early action against non-compliance or breaches of regulatory requirements. It also enables the players to expand their current scope of activities to provide a wider range of services that can include moneychanging, remittance and/or wholesale currency services under a single licence.

The central bank says the new Act supports the development of a more dynamic, competitive and professional money services business industry, while strengthening safeguards against money laundering, terrorist financing and illegal activities.

“The Act introduces strengthened prudential requirements, focusing in particular on ensuring the effective oversight and control of the conduct and operations of licensed entities to safeguard the integrity of, and confidence in the money services business industry,” BNM said.

“This includes strengthened fit and proper requirements for shareholders, directors and chief executive officers of licensed entities, and financial and operational requirements that reflect the size and scope of business of an entity.”

The enactment of the new Act comes almost two years after BNM revoked 41 moneychanging licences in 2009 under the Money-Changing Act 1998.

It said a number of the moneychangers had contravened Section 30 of the Act, which prohibits moneychangers from transferring funds outside Malaysia, whether on their own behalf or on behalf of third parties.

The issue came to light when it was reported that several VIPs had used the services of moneychangers to transmit money abroad. One high profile case involved the Negri Sembilan Menteri Besar Datuk Seri Mohamad Hassan who was alleged to have transferred RM10 million to the United Kingdom through moneychangers.


This article appeared in The Edge Financial Daily, December 5, 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.

Stocks to watch: Investors’ eyes on Europe

KUALA LUMPUR: Key regional markets, including Bursa Malaysia, will focus on the make-or-break European Union summit this Friday where EU leaders will discuss more measures to resolve the debt crisis.

Ahead of the summit, the leaders of France and Germany are expected to meet today to hammer out a framework to put forward to the summit if more aggressive steps are needed and how to leverage the eurozone’s bailout fund.

Last Friday, the FBM KLCI closed in positive territory as some key regional markets reversed their earlier losses, but gains remained muted as investor sentiment stayed cautious.

Week-on-week, the KLCI was up 57.45 points to end at 1,489, touching the key 1,500 briefly. Market capitalisation increased by RM39.59 billion to RM1,269.59 billion.

Dr Nazri Khan, Affin Investment Bank head of retail research, said while short-term momentum might be slightly overbought, the KLCI has possibly priced in all the potential negative news it needs to digest.

“As for technicals, we see the bulls having the upper hand with all oscillators pointing up accompanied by heavy trading volume [KLCI rallied more than 30 points in a single daily session last week suggesting strong buyers underneath].

“The next upside resistance should come in at the 200-day moving average of 1,500 followed by the 2008 high near 1,530 points. Short-term supports, meanwhile, are seen at last week’s low near 1,440 followed by November’s low near 1,420,” he said.

As for the just ended quarterly corporate results, UOB Kay Hian Malaysia Research said 3Q results were largely within expectations and advised investors to accumulate on weakness.

“The first quarter of 2012 should present thematic plays like election and Economic Transformation Programme (ETP) beneficiaries,” it said.

UOB Kay Hian Research said its current top stock picks include Sime Darby Bhd and Telekom Malaysia Bhd. For 1Q12, it expects ETP beneficiaries to outperform, including Gamuda Bhd, Malaysian Resources Corp Bhd (MRCB) and UEM Land.

“We expect oil and gas stocks to come into play with the award of Petroliam Nasional Bhd’s (Petronas) risk sharing contracts. Proton is also on our radar now, as a beneficiary of government-linked company (GLC) mergers and acquisition activities,” it said.

RHB Research Institute believes local equities will still be held hostage to external developments. It pointed out concerns over the eurozone economy and the immense challenges likely to keep markets on a volatile trajectory in the foreseeable future.

“While global equities have priced in a lot of bad news on the euro debt crisis as well as macroeconomic uncertainty in the US and China, investors’ risk perceptions can still change very quickly should the situation turn out to be worse than expected,” it said.

RHB Research revised its end-2011 KLCI target back to 1,450, based on 14 times 2012 earnings per share, although it views that the market will likely be range bound between 1,450 and 1,550 points.

Among the stocks which could see trading interest are Glomac Bhd, Mah Sing Group Bhd, Tan Chong Motor Holdings Bhd and Fibon Bhd.

Glomac’s net profit for 2QFY12 ended Oct 31, 2011 rose 50% to RM23.78 million from RM15.88 million a year ago, underpinned by ongoing projects particularly Glomac Damansara, Glomac Cyberjaya, Saujana Rawang and Bandar Saujana Utama.

Its revenue for the quarter, however, declined 4.3% to RM134.83 million from RM140.89 million, due to the completion of two projects, Glomac Tower and Glomac Galleria.

Mah Sing’s proposed joint development of 4.08 acres of prime land in Jalan Tun Razak/Jalan Pahang, Kuala Lumpur, received a setback when the conditions were not met. However, Mah Sing said it would explore options to move ahead on this.

The project is a niche development, M Sentral, with an estimated gross development value of RM900 million. It is part of the RM9 billion, 58-acre riverside urban regeneration project.

The Edge weekly reported that Tan Chong Motor Holdings Bhd, which invested nearly US$45 million (RM141 million) in Nissan Vietnam Co Ltd since acquiring a controlling stake in the company last year, is optimistic that it will reach breakeven earlier than anticipated.

Fibon, a chemical compounds producer, is poised to enter a new phase of growth with the upcoming launch of its new switchboard Fibon LogiCube.


This article appeared in The Edge Financial Daily, December 5, 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.

Band aid but structural problems remain

Tenaga Nasional Bhd (TNB) has been given a lifeline by the government and Petroliam Nasional Bhd (Petronas) in order to deal with its mounting fuel bill. Much has already been reported about TNB’s fuel worries, with Petronas curtailing gas supplies during the maintenance of its plants.

Last Thursday, TNB announced that it had received a letter from the government outlining a fuel cost sharing mechanism in order to address the increased cost borne by the national power provider. In the announcement, it was stated that TNB, the government and Petronas would equally shoulder the RM3.1 billion additional fuel burden.

Earlier on, TNB CEO Datuk Seri Che Khalib Mohamad Noh had hinted about a possible cost sharing mechanism between the national power player and Petronas as the utility sank deeper into the red. This was the result of higher operational costs incurred due to the need to run its gas-powered plants on more costly fuel oil and distillate as well as importing power from Singapore and Thailand.

Although there is no question that this will help alleviate TNB’s troubles somewhat, it is just a band aid. It is clearly a short-term measure, which does not fix the underlying weaknesses plaguing the sector.

The main issue that still remains to be resolved is a pass-through formula. As long as TNB is not allowed to pass the increasing cost of fuel to its customers, this issue will keep cropping up time and time again. Even raising tariffs is not the solution as it, like the fuel cost sharing mechanism lifeline, is only a stopgap measure.

Another question that should be asked is the role of the independent power producers (IPPs) in all of this. When it became clear that the gas shortage was getting to a critical stage, in an unprecedented move, TNB and the IPPs sent a joint letter to the government asking for a solution.

This likely stemmed from the fact that running their gas turbines on fuel oil and distillate in the long-term would shorten the life of their machines, which would mean higher maintenance costs down the road.

One question that arises is why the independent power producers have not been asked to share the burden of increased fuel costs.

But why have the IPPs not been asked to share the burden of increased fuel costs?

According to an industry observer, the cost sharing arrangement was probably undertaken because the situation had got to the point where immediate action was needed.

“Going to the IPPs may slow the process down since they are all in the private sector and some of them are listed companies. Since this plan is between government entities, it would get implemented faster,” said the industry observer.

The national power provider acknowledged how critical the situation was in its announcement to Bursa Malaysia, stating: “In view of the urgency of the matter and the critical financial situation facing TNB, the company will be liaising as soon as possible with the relevant parties to implement this mechanism.”

Earlier on, Che Khalib had warned that if nothing is done, TNB would be facing a possible full-year loss for FY12, the first time that has happened in more than a decade.

However, once the pressure on TNB has been eased somewhat, perhaps the government might explore the possibility of asking the IPPs to foot part of the bill as well.

In the end, given that TNB is still the sole offtaker for all the power produced in the country, it would be in the interest of the IPPs as well to keep the country’s power machinery going.

However, sceptics will undoubtedly point out that some of the IPPs may bristle at paying because they feel TNB is inefficient.

Hence, one of the proposals being floated is for MyPower Corp, an entity set up by the government to facilitate change in the power industry, to unbundle TNB’s accounts.

The argument goes that by separating out the generation, transmission and distribution units, it would help to improve transparency as well as identify the problem areas.

However, all of this will not happen if there is no political will to back it.

While analysts are positive on the move by the government, most acknowledge that it is a short-term measure. OSK Research pointed out that while the three parties would share the costs for the period between January 2010 and October 2011, there is no mention whether the cost sharing extends forward.

“We believe TNB will still have to generate power from alternative fuels up to January 2012,” said OSK. The research house also estimated that as a result of the fuel sharing, there would be a one-off writeback of RM1.73 billion, which would mean that TNB’s “other” fuel costs in FY12 would drop from RM1.1 billion to RM368 million.

There is some good news on the horizon for TNB. According to a report by AmResearch, it is expecting gas supply, while not fully back to normal, to be 10% above the 950 mmscfd registered during 2HFY11.

“Notwithstanding the ongoing gas shortage, the Economic Planning Unit had earlier given assurance that TNB will secure 1,250 mmscfd in 2008 to 2011 and 1,350 mmscfd next year onward. Hence, we expect Petronas, which will now share a third of the additional fuel cost, to speedily resolve its upstream problems,” said AmResearch.

While TNB has now been given some breathing space, it is uncertain how long this measure will help to keep the company’s head above water.

One thing is for certain, the government should not be complacent and wait too long before finding a more permanent solution.


This article appeared in The Edge Financial Daily, December 5, 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.

Sanbumi MD increases stake in fellow timber player Permaju

KUALA LUMPUR: Something appears to be brewing between two unrelated and generally thinly traded stocks — Sanbumi Holdings Bhd and Permaju Industries Bhd.

The former’s major shareholder has been building up a sizeable stake in the latter, leading to speculation that this may lead to an alliance between the two companies.

Both Sanbumi and Permaju share a common business interest in timber and both companies are loss-making.

The typically illiquid stock of Permaju saw relatively large movements of its shares traded off market last week.

On Nov 29, Sanbumi managing director Datuk Chua Tiong Moon bought an additional 3.63 million shares in Permaju at 29 sen a piece for RM1.05 million in a married deal.

This brought his total shareholdings to 12.99 million shares or a 6.91% stake in Permaju, making him the third largest shareholder behind brothers Tan Sri Chai Kin Kong and Datuk Chai Kin Loong, who have 10.95% and 7.35% direct stakes in the company respectively.

On the next day (Nov 30), 4.5 million Permaju shares were exchanged in an off-market cross trade at the same price of 29 sen. These shares were sold by Kin Kong, Kin Loong and other family members.



In contrast, Permaju’s 30-day volume traded average is just 7,077 shares.

Permaju’s biggest shareholder Kin Kong had reduced his stake from 13.7% on April 22 to 10.94%, and on Sept 28 selling most of the 7.64 million shares in the open market.

Kin Kong also disposed of 2.9 million Sanbumi shares, reducing his stake to 4.99% with a total of 8.694 million shares.

It appears that Chua has been building up his stake in Permaju, possibly buying up the Chai brothers’ shares.

It is unclear what Chua’s motive is, although there could be a synergy between the two companies’ timber businesses.

Permaju and Sanbumi have a market capitalisation of RM58.78 million and RM47.31 million respectively.

Permaju has two core businesses in timber and automotive. While Permaju’s timber segment accounted for a majority of the group’s assets, its automotive division contributed almost 10 times the revenue compared with timber.

Permaju’s timber business which has 59.41% of the group’s assets at RM140.84 million only contributed RM14.09 million in revenue or 8.94% of their full-year revenue ended Dec 31, 2010. The timber segment incurred a loss of RM5.35 million overall.

Its automotive segment which contributed 90.98% of its 2010 revenue, accounted for 46.44% of the group’s total assets in the same period.

Permaju executive chairman Datuk Rahadian Mahmud Mohammad Khalil wrote in the 2010 annual report, “The group’s timber log trading activity is to be further rationalised and to cease if the trading environment remains unhealthy.”

Permaju has RM16.96 million worth of timber concession rights in Pahang and Kelantan and Sanbumi’s principal activities through its subsidiaries are saw milling, manufacture of downstream timber products, timber log and timber product trading.

For the group’s 3Q results ended Sept 30, Permaju incurred losses of RM5.02 million, with its timber business offering weak revenue return to assets.

The timber business which has RM123.24 million in assets or 53.54% of the group’s total assets only contributed RM4.75 million in revenue or 3.72% of the group’s total for the quarter and incurred an overall loss of RM276,000.

In the same quarter, Permaju’s automotive segment with RM114.06 million in assets (49.54% of total assets) contributed RM122.66 million to the group’s top line or 96.19% of total revenue with a loss of RM2.26 million.

Sanbumi chalked up net losses of RM5.24 million for the nine months to Sept 30.

Both stocks are trading at a similar 0.36 times price-to-book ratio. Their net assets per share stood at 84 sen and 70 sen respectively as at Sept 30.

Permaju’s share price closed at 30 sen unchanged while Sanbumi gained 0.5 sen to 25 sen last Friday.


This article appeared in The Edge Financial Daily, December 5, 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.

New shareholders emerging in Lion Corp?

KUALA LUMPUR: Some interesting shareholding changes could be in the offing at Lion Corp Bhd, the steel manufacturing arm of the Lion Group helmed by Tan Sri William Cheng Heng Jem.

Last Friday, 543 million shares, representing almost 28.6% equity interest in Lion Corp, crossed in three large blocks of 349 million shares, 105 million shares and 89 million shares, at 21 sen apiece or about RM114 million.

Interestingly, Bloomberg recorded the transactions slightly after 5pm, when the market closed.

It appears then, that the off-market transactions may have been timed to avoid affecting the share price or speculation in Lion Corp shares during trading hours, or that it may have been a rushed transaction. The transactions were also timed just ahead of an announcement of a major debt settlement scheme the same evening.

Lion Corp closed last Friday unchanged at 19 sen, meaning the sale was at a slight premium of 10%.

While some were speculating on the entry of a foreign party into Lion Corp, others brushed it aside as possibly the transfer of shares by one entity to another by controlling shareholder Cheng.

A market observer noted that internal restructuring has been a common feature within the Lion Group in the past, as the group sought to streamline its diversified businesses, pare down debts and remove cross-shareholding structures.

Malaysia's only flat steel producer, Megasteel was set up at a cost of RM3.2 billion, which could explain its high debt levels.

As at end-October this year, Cheng had control over slightly more than 77% of Lion Corp shares and was the only substantial shareholder in the company. This also means that no other party could have sold such a big block of shares in Lion Corp.

Senior personnel of Lion did not comment, with some saying they were not aware of what was happening.

Market watchers speculate that a Chinese party is entering into Lion Corp, possibly to assist in its main asset, Megasteel Sdn Bhd, the country’s only integrated flat steel mill, producing hot rolled and cold rolled coils.

According to Lion Corp’s annual report, it has almost 79% equity interest in Megasteel, via its wholly owned unit Limpahjaya Sdn Bhd, while an additional 21% is held by Lion Diversified Holdings Bhd, another company controlled by Cheng.

News reports have linked Cheng with Chinese giants Baosteel Group Corp and with Taiwan-based China Steel Corp (CSC), looking to take over some of his assets, largely to assist Megasteel, but there has been little news lately.

Megasteel has been plagued with high borrowings. For its FY10 ended June, Megasteel posted a profit after tax of RM98.04 million from RM3.53 billion in revenue. However, the company had negative reserves amounting to RM146.56 million.

The company had non-current assets amounting to RM2.8 billion and current assets worth RM1.71 billion. On the other side of the balance sheet, it had current liabilities amounting to RM3.28 billion while its non-current liabilities stood at RM785.41 million.

According to its website, Megasteel was set up at a cost of RM3.2 billion in Banting, Selangor, which could explain the high debt levels. It has an electric arc furnace utilising scrap iron and hot briquetted iron with an annual production capacity of 3.2 million tonnes.

Part of Cheng’s grand plan includes the setting up of a blast furnace, which will considerably reduce his operating costs, produce higher quality steel, and make Megasteel a viable business.

However, the cost of setting up a blast furnace, which Lion began in 2008 and is still being built in Banting, Selangor, is estimated to be around US$1 billion (RM3.13 billion).

Hence Cheng’s need for a foreign party to come in, as the funds obtained are likely to be ploughed back into Megasteel for the blast furnace. Other than Megasteel, other steel assets under the Lion group include the flagship Amsteel Mills Sdn Bhd, Antara Steel Mills Sdn Bhd which operates in Pasir Gudang, Johor, Bright Steel Sdn Bhd as well as a hot briquetted iron plant in Labuan.

Amsteel Mills, Antara and Bright Steel all focus on long steel products, generally used in construction.

Cheng and Megasteel have also been at loggerheads with downstream steel players.

Earlier this year Megasteel’s petition for the government to impose an additional 35% duty on imported hot rolled coil, over and above the existing duty of 25%, thus making the import tax on hot rolled coil steel 60%, was quashed.

This new import duty, if imposed, would have worked as a protection mechanism for Megasteel, the only flat steel producer in the country.

The current deal is that downstream industry players are required to acquire their flat steel products from Megasteel, and can only source elsewhere or import if the required items are not manufactured by Megasteel.

Early last month, The Edge Financial Daily reported that Megasteel had petitioned the government to impose a 15% import tariff on all flat steel products, a move that the downstream players opposed.

Interestingly enough, last Friday night, Lion Corp announced a proposal to issue up to 950 million of RM1 par value shares, as part of a proposed debt settlement scheme, as well as a capital reconstruction exercise.

The company explained that the RM950 million was specifically for Megasteel’s creditors, who would receive shares in Lion Corp, on a basis of 20 sen for every RM1 owed.


This article appeared in The Edge Financial Daily, December 5, 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.

Second Premium Outlets in the pipeline

JOHOR BARU: Genting Plantations Bhd and US property giant Simon Property Group Inc last week opened the doors to Southeast Asia’s first premium outlet retail mall, Johor Premium Outlets (JPO), after working on the project for more than three years.

JPO is owned and operated by Genting Simon, a 50:50 joint venture between Genting Plantations unit Azzon Ltd and Simon Property Group’s outlet division, Premium Outlets.

When JPO matures, Genting Simon Sdn Bhd general manager Jean Marie Pin Harry said there are plans to establish another Premium Outlets store for the Malaysian market in the near future.

“We will be looking for future sites but that is subject to the outcome of feasibility studies. We will announce the details in due course,” Jean Marie told The Edge Financial Daily in an interview last week.

He declined to pinpoint the potential location of the future site but Premium Outlets’ 69 other stores worldwide tend to be located near major tourist attractions and/or metropolitan areas with good connectivity.

For now, Genting Simon’s main focus is to get the first JPO off the ground and to draw in the crowds, following the soft launch of the retail mall last Thursday.

The JPO is slated for an official opening on Sunday.

JPO is an open strip mall that houses individual boutiques for designer fashion labels and brands.

During a visit by The Edge Financial Daily to JPO last Friday, we found a constant stream of visitors at the mall, many of whom appeared to be Johoreans and some Singaporeans.

Prime Minister Datuk Seri Najib Razak is scheduled to officially open JPO on Dec 11.

JPO is an open strip mall that houses individual boutiques for designer fashion labels and brands where off-season products are sold at discounted prices.

The brands available include Burberry, GAP, Coach, Nike, Samsonite, Royal Selangor and Zegna. It currently has 55 retailers with the remaining six stores to be opened soon.

JPO sits on 45 acres of land and has a gross lettable area of 190,000 sq ft in retail space.

Genting Simon has also penciled in space for future expansion of JPO should the need arise, Jean Marie said.

For Genting Simon, Johor is the ideal spot to open Premium Outlet’s first Southeast Asian store given the southern state’s proximity to Singapore.

“If you look at retail markets in the region, the number one market is Japan, followed by South Korea and the next is Singapore.

“We look at Malaysia and Singapore as a combined market for retail, so this is the logical place to be,” Jean Marie said, adding that Premium Outlets already has multiple stores in Japan and South Korea.

According to Jean Marie, JPO’s target clientele is mainly Singapore visitors and international tourists, apart from Malaysian shoppers.

He declined to comment on the projected number of annual visitors to JPO and the expected earnings contributions to Genting Plantations.

Maybank IB Research previously estimated that JPO will contribute net profit of between RM7 million to RM11 million a year to Genting Plantations from 2012 to 2014.

Jean Marie: We look at Malaysia and Singapore as a combined market for retail.

This constitutes less than 5% of the group’s overall bottom line, the research house added.

Additionally, JPO is strategically located between Genting group’s two resorts — Resorts World Genting, about 3½ hours’ drive away from JPO, and Resorts World Sentosa in Singapore which is about an hour’s drive away.

“There is significant cross traffic between Kuala Lumpur and Singapore, as well as both resorts. If tourists are on their way and want a place to shop, this is it.

“Promotions for JPO will go hand in hand with those of the two resorts,” Jean Marie said.

In a recent note, Maybank IB Research said JPO could leverage on visitors to Singapore and Iskandar Malaysia due to its close proximity.

Nevertheless, Maybank IB Research observed that JPO could face challenges in attracting foreign tourists as the designer brands offered seem fewer than other premium outlets.

It pointed out a longer-term risk given that two more premium outlets are being planned for Sepang and Penang by 2020 under the Economic Transformation Programme (ETP).

Nevertheless, analysts opine that JPO will enhance the value of Genting Plantations’ remaining 6,670 acres of land in Kulaijaya where the group has its Genting Indahpura development.

According to a brief description on the ETP website, Genting Indahpura will feature a hotel, international water theme park and retail outlets.

In a Nov 24 note, OSK Research said the opening of the JPO and a new highway interchange has already helped to boost property prices at Genting Indahpura.

OSK Research said that shoplots are now sold at about RM560,000 each from RM300,000 to RM350,000 earlier this year.

Based on OSK Research’s calculations, Genting Plantations’ landbank in the Kulaijaya area is worth about RM1.6 billion.

This is based on valuing Genting Plantation’s 6,437-acre oil palm land at RM5 psf and 237-acre development land at RM21 psf.

Jean Marie concurs that JPO serves as an icon to draw interest and development to Genting’s land in Johor.

“This is a 100% greenfield. It was a palm jungle. There was nothing here. [JPO] is an attraction to bring tourists here,” he said.


This article appeared in The Edge Financial Daily, December 5, 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.

One-year reprieve from IAS 41 for planters

KUALA LUMPUR: Public-listed plantation companies have the option of deferring the adoption of International Accounting Standard (IAS) 41 Agriculture for another year, according to the Malaysian Accounting Standard Board (MASB).

The accounting body said this last month when it announced a new MASB approved accounting framework, the Malaysian Financial Reporting Standards (MFRS Framework).

The issuance was made in conjunction with MASB’s plan to converge with International Financial Reporting Standards (IFRSs) in 2012.

The MASB said the MFRS Framework is to be applied by all other than private entities starting Jan 1, with the exception of entities that are within the scope of MFRS 141 Agriculture and IC Interpretation 15 Agreements for Construction of Real Estate (IC 15). MFRS 141 is the equivalent of IAS 41.

This is to accommodate potential changes as the International Accounting Standards Board is planning to issue a new standard that would subsume IC 15 and is like to amend IAS 41.

“If you want to adopt it, you can. But if you choose not to, that gives you a respite of one year. By the time the revised standard is out, you can adopt the new standard, but if not, you won’t be in compliance with IFRS even though you are in compliance with Malaysian standards,” Lee Kok Wai, partner at Crowe Horwath, explained.

“Companies may choose to go ahead or defer one year. MASB gave its views at the National Standard Setters meeting in New York in March with the hope that the standard would be amended. MASB achieved its objective by putting a review of this standard,” said James Chan, a partner at Crowe Horwath.

Lee: By the time the revised standard is out, you can adopt the new standard.

Chan: MASB achieved its objective by putting a review of this standard.

Loh: You have IAS 2 on inventories which cover fruit but exclude the producers - the trees.

Loh Kam Hian, audit partner at KPMG, explained that IAS 41 came about from the need to have a standard for each line of asset and liability reported in the statement of financial position.

“Where do biological assets come in? You have IAS 2 on inventories which cover fruit but exclude the producers — the trees. You will find IAS 16 for fixed assets but again this excludes forest assets.”

“So there’s a gap, there was no standard governing the bearer, the biological assets. Hence IAS 41 to bridge the gap,” said Loh.

Malaysian plantation companies, which have been using the historical cost method in valuing their biological assets, had previously voiced concern about the implementation of IAS 41. IAS 41 requires companies involved in agriculture activities, for example livestock farming, oil palm planting and even timber harvesting, to fair value their biological assets at each balance sheet date.

While the cost method is simple, fair valuation requires judgement in the assumptions applied in the financial model, for example the discount rate, the growth rate, the life expectancy of the assets, among others, to arrive at the assets’ fair value.

To account for the fair value of oil palm trees for example, one would need to determine their market value.

“Is there an active market available, if not, you try to find approximates from similar recent market transactions. When you do not have approximates, you need judgement when you prepare the present value of expected cash flow of the asset,” Loh added.

This requires expertise and additional costs for the preparers of financial statements as independent external valuers are often engaged for this exercise.

Sime Darby Bhd, which owns more than 500,000ha of oil palm estates in Malaysia, Indonesia and Africa, has commenced an assessment of the implication of IAS 41 on financial statements. The valuation methodology was determined and enhanced in consultation with a professional firm of valuers.

As assumptions change with market conditions, the bottom lines of companies will also be affected.

“Results will be quite volatile because values go up an down due to the various variables. The cost method as currently used is much more predictable in that way,” Loh said.

Aside from the element of subjectivity and risk of volatility in companies’ bottom lines, Chan said the judgement calls made by the preparer may also lead to open disagreements with the auditor.

“Auditors are required to challenge and question the preparer and conduct a stress test. If the basis used is not reasonable then there is bound to be disagreement which may lead to qualified accounts,” he explained.

From a practical standpoint, TH Plantations Bhd CFO Mohamed Azman Shah Ishak said for a company with vast oil palm estates in different locations, with differing age profiles and soil conditions, arriving at the fair value may require pages of assumptions, which may only confuse users.

A Sime Darby spokesperson said that given its large planted area, the biggest challenge in implementing IAS 41 is gathering and managing source data relevant for the purpose of valuation of biological assets and the preparation of discounted cash flows to the lowest cash generating unit which is on a field-by-field basis. Source data refers to past historical financial and operational records, projected selling prices, field maps, soil classification, projected financial and operational performance, rainfall statistics, the spokesperson added.

“Furthermore in the event that an external professional valuer is required to determine the fair value of the biological assets periodically, this is likely to be an additional recurring cost,” she said.

Azman questioned whether knowledge of the market value of the biological assets of a company would serve the needs of a long-term investor.

“Because you’re not going to realise it, the company is a going concern which will continue to operate. If you have an intention to sell it, then I want to know the value but otherwise, I just want to know the value it can give me as a going concern not if it’s realised,” he said.

Financial practitioners added that dividends paid by companies are not based on their intrinsic value but on value realised year by year. When the bottom lines reflected in financial statements under fair valuation predominantly comprise unrealised profit, it should be noted that they may not necessarily have the cash flow to pay dividends.

Despite the concerns, Sime Darby said IAS 41 will introduce a new concept of recognising profit upfront in the plantation industry.

“Plantation companies are likely to show a windfall profit in the initial year of planting when biological assets are fair valued. However, the profit would be on a decreasing trend in subsequent years if operations remain static,” the Sime Darby spokesperson said.

Loh said that through education and adequate disclosures in the financial statements, stakeholders would be able to benefit from IAS 41.

“In a world where people are informed, the information will unlock a lot of value. In the cost method, values are generally lower. There’s talk about plantation companies being undervalued so showing fair value, especially in this market when values are high, may unlock some of these values. So, it’s not all bad for the plantation companies. Shareholders may benefit from it,” he added.


This article appeared in The Edge Financial Daily, December 5, 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.

InsiderAsia’s model portfolio - 458

Global stocks rallied last week on a wave of optimism, driven primarily by the coordinated action taken by major central banks to tackle the emerging credit crunch and better-than-expected economic data from the US.

It remains to be seen, however, if the uptrend will last. By the end of the week, investors were pulling back a little pending November’s employment data from the US Labour Department, which was released after the close of Asian market trading hours.

The mid-week move by the US Federal Reserve, together with the central banks of Japan, England, Switzerland, Canada and the European Central Bank (ECB), to lower the interest cost on emergency US dollar loans tempered fears of a wider fallout from the emerging credit crunch, especially among European banks. With the sovereign debt crisis continuing to drag on, traditional sources of US dollar funding are beginning to dry up as investors shifted to safer assets.

The provision of liquidity, however, is not a solution to the crisis, which has, until today, remained elusive. European leaders remain at odds on the next step forward. Of late, Germany and France have been pushing for deeper fiscal integration among members of the single currency, including central oversight of national budgets, tougher enforcement and harsh automatic sanctions if rules are breached.

Obtaining approval for such a move from all member countries is unlikely to be an easy task. If successful though, the ECB has hinted that it could expand its bond-buying role, which is increasingly being advocated as the solution to bring stability back to the markets. So far, its limited buying programme has not stopped yields for troubled countries such as Italy and Spain from rising to record levels. Rising investor nervousness was evident when even a German bond auction received tepid response.


Until a comprehensive solution is found, financial markets will continue to be driven by headline news out of Europe.

Positively, the US economy appears to have picked up some momentum after a disappointing 1H11. 3Q11 GDP growth was stronger at 2%, compared with 0.4% and 1.3% in 1Q11 and 2Q11 respectively. Retail sales got off to a robust start for the year-end holiday shopping season while the job market is also showing some signs of improvement. Even the moribund housing market is showing signs of bottoming out, though there are still downside risks to prices as a result of foreclosures. With Europe expected to go into mild recession next year, growth in the US will be vital to keep the global economy afloat.

Underpinning global economic concerns, China lowered the reserve requirement for banks last week, for the first time since the financial crisis. Prior to this, the country has been raising both the reserve requirement and interest rate to tamp rising inflation. The most recent November manufacturing data showed activities contracting in the world’s second-largest economy.

Portfolio review
Note that this review is for a two-week period. Stocks in our model portfolio outperformed the benchmark index over the past two-week period. Total market value for our basket of 17 stocks was up by 2.79% to RM388,085, compared with the FBM KLCI’s 2.38% gain.

Ten stocks in our portfolio closed with gains while six ended lower and one other traded unchanged. Some of the notable gainers include DiGi (+6.7%), Masteel (+6.6%), MyEG Services (+6.4%), CIMB (+4.8%) and Maybank (+4.7%). At the other end, Pantech (-2.1%) and Al-Aqar KPJ REIT (-3.4%) were among the notable losers.

We added dividends from Pantech (one sen per share) and Maybank (32 sen per share) to our cash holdings. Also, note that DiGi has completed its one-to-10 share split exercise. As such, we now own 20,000 shares in the mobile operator. Our average cost is effectively zero after adjusting for previous dividend payments.

Including our cash holdings, for which no interest income is imputed, our total portfolio value was up by a lesser 1.6% to RM670,338. Last week’s gains boosted our model portfolio’s cumulative returns since inception to 319% on our initial capital of just RM160,000. We continue to outperform the FBM KLCI, which was up by about 130.2% over the same period, by some distance.

Our cash holdings remain substantial, accounting for 42% of our total portfolio value. The relatively high percentage is primarily for prudence’s sake. Despite the recent rebound, we remain cautious on the market outlook.

Our total profits are very substantial at RM510,338, of which RM399,793 has already been realised from previous shares’ sales.

We kept our portfolio unchanged.


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


This article appeared in The Edge Financial Daily, December 5, 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.

Affin preserving asset quality amid tougher conditions

Affin Holdings Bhd (Dec 2, RM2.99)
Maintain underperform at RM2.94 with fair value of RM2.05: Management guided for loan growth of 13% to 14% this year (2010: 17.1% year-on-year), slightly below the earlier guided 13% to 15% but in line with annualised loan growth of 12.9% for 9MFY11. For 2012, the focus is on preserving asset quality and capital, in light of the challenging macro environment ahead. As such, Affin does not plan to grow its loan book aggressively, and instead guided for loan growth to slow down further to 9% to 10%. We assume 2011 and 2012 loan growth of 11% and 9% respectively, which we leave unchanged for now.

For 3QFY11, net interest margin (NIM) fell 10 basis points (bps) quarter-on-quarter (q-o-q), which Affin said was due to competition on both lending and, especially, deposit gathering. Management thinks 3Q NIM could have bottomed out and hopes to sustain current levels, citing measures such as controlled loan growth and pricing strategies. However, while Affin’s balance sheet appears liquid (loan deposit ratio [LDR] of 75.3%), there may not be much room here to help NIMs as the liquidity resides at the Islamic bank (LDR of 55% to 60%) while the commercial bank’s LDR is at a higher 80% to 85%. We have assumed NIM contraction of 17bps in 2011 and another 3bps decline in 2012.

For 3QFY11 net profit was boosted by recoveries of RM123 million, which in turn was helped by recoveries from some large corporate accounts. Thanks to the rise in collateral values, some of the collateral was more than sufficient to cover the outstanding principal. Nevertheless, management does not expect such recoveries to be sustainable ahead. Thus, the emphasis on preserving asset quality so as to keep credit cost low.


Affin’s interim gross dividend per share (DPS) of 12 sen (ex date is Dec 6) beat our initial 10 sen expectation. Management hinted at the possibility of a final dividend. Assuming a net payout ratio of 40% (close to the larger banks and our 38% assumption for AFG), we estimate a potential final gross DPS of 5.5 sen or full-year net yield of 4.4%.

We make no change to our earnings forecasts and maintain our fair value of RM2.05 (based on the average values derived from target CY12 price-earnings ratio of 6.5 times and target CY12 price-to-book value of 0.5 times) and “underperform” call. We remain concerned about the group’s ability to grow income, given slowing loan growth and NIM pressures. Already, 3QFY11 operating income fell 5% q-o-q. With recoveries unlikely to be sustained, this will put upward pressure on credit cost, further adversely affecting earnings growth ahead, in our view. — RHB Research, Dec 2


This article appeared in The Edge Financial Daily, December 5, 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.

Hua Yang to offer more affordable houses

Hua Yang Bhd's biggest lakeside township development in Perak, Bandar Universiti Seri Iskandar, will be offering more affordable houses by building 137 units of the Tropika and Casa Series, which are essentially double-storey terrace houses.

"There will also be the Seri Idaman and Seri Andaman series, priced from RM130,000 with each unit spanning 74.4 sq m.

"Overall, a total of 909 units will be built," said chief executive officer Ho Wen Yan in a statement today.

The company will also launch 123 units of retail shops with a pedestrian mall concept adjacent to the Tesco Superstore in 2012, and will build more commercial shop lots priced from RM450,000.

Spanning over 335.2 ha, the township, the group's biggest township project by area, will contribute about 30 per cent of the entire group's earnings next year and will allow Hua Yang to develop the total area in parcels over the next eight years.

The company today received the arrival of a Tesco Superstore, which is set to boost sales and mark the arrival of other retail vendors.

Strategically located at OneBU@Seri Iskandar, the township's lifestyle and business hub, Tesco's main footage will attract families and individuals to visit the township for groceries, fresh foods and household needs, Ho said.

He said Tesco will cater to the rapidly growing population, which now stands at 10,000. "We have seen brisk sales with our latest phases of the Selinsing and Lily series fully sold out," he said.

Two hundred units of the Bandar Universiti Business Centre (BUBC) series of commercial shop lots have been snapped up by operators leveraging on the growing student population.

The company said to date, it had achieved a good sales take-up rate of 85 per cent. -- 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.

DiGi: Take the money and run

DiGi.Com Bhd (Dec 2, RM3.73)
Downgrade to hold at RM3.60 with target price of RM3.46: We are downgrading our call on DiGi.Com Bhd to a “hold” following a very successful “buy” call in October. Since then, the stock has surged by some 16% and outperformed the KLCI by 15%. Given a lack of further catalysts other than the stock split that occurred post-upgrade, and the fact that recent results by all the telcos suggest the Malaysia telco market is in the grind phase as it combats declining voice revenue and slowing data growth, we would prefer to take the money first. Switch to Telekom Malaysia Bhd. Our earned value-based target price of RM3.46 is maintained.

Interest in the stock has been stoked by the group’s capital management plans, while fundamentally the group has continued to display strong defensive qualities. Its 10-for-one share split that took effect on Nov 24, has also attracted much retail interest with the share price reduction from a heady RM30 plus to a more retail palatable RM3 plus. DiGi’s foreign shareholding has moved up since the beginning of the year (11.9% as at end-October against 9% as at end-January).

At the current level, DiGi has the honour of heading up the rich territory in our basket of telcos under coverage. At the current share price, it is trading at 24 times FY12 earnings. Admittedly, earnings are skewed by its policy of accelerating the depreciation of its old 2G network as it swaps out to a new network capable of HSPA+ and LTE. But even if we add back an estimated RM500 million to RM550 million to FY12 earnings, its price-earnings ratio will still be around 20 times.


Following the last round of capital distribution (6.5 sen per share raised from subsidiary Digitel’s share premium account to the listco), there is the possibility of another 8.9 sen per share (RM692 million) in its own share premium account that could be distributed. However, DiGi will need to go through a legal process to get this transferred to distributable reserves before it can pay it out. Management has remained tight-lipped on what it intends to do and when. We fear it may not be so soon after the last round. — Maybank IB Research, Dec 2


This article appeared in The Edge Financial Daily, December 5, 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.

Petronas Gas: And Lumut makes four?

Petronas Gas Bhd (Dec 2, RM14)
Maintain buy at RM13.32 with fair value of RM15.52: During the press conference on Petronas Gas Bhd’s (PetGas) 2Q results, its president Datuk Shamsul Azhar Abbas announced that the company plans to build two more liquefied natural gas (LNG) terminals in Pengerang and Lahad Datu and is considering a fourth in Lumut. The Pengerang and Lahad Datu terminals are expected to be completed by 2015. There will also be a floating LNG plant in Kanawit, Sarawak, by 2015 and possibly a second floating LNG plant in Sabah by 2016.

While we have often talked about the Pengerang and Sabah LNG terminals, this is the first time we have heard of the Lumut terminal. Given the presence of numerous gas fired power plants (Malakoff’s Segari Energy Ventures and GB3) and the existence of deep draft ports in the area, it would certainly be no surprise if a fourth LNG terminal emerges in Lumut.

While Shamsul had previously said that Pengerang should have a LNG terminal, which we understand will have a rated capacity of 3.8 million tones, similar to Malacca, it was Sabah state officials who talked about having a LNG terminal in Sabah. Now Petronas has officially said that a LNG terminal will be built in Lahad Datu to cater for the new Sabah east coast gas plant and possibly new industries in that area. We understand that this terminal will have a rated capacity of one million tonnes per year but this could go up pending an assessment of demand before construction begins. As for the Sabah and Sarawak floating LNG terminals, we are aware that these have been on the drawing board since 2007 but we believe MISC will want to be the operator of these terminals.

As we mentioned in our previous reports, we believe PetGas, as the operator of the upcoming first LNG terminal in Malacca, will also get to be the owner-operator of the LNG terminals in Pengerang, Lahad Datu and Lumut as well. We had already bumped up our terminal growth rate for PetGas to 3.5% and raised our fair value (FV) to RM15.52 (See our Nov 25 report) to account for potential earnings from Pengerang and Lahad Datu. We will await further details before raising our fair value further. As of now, no contract has been signed by PetGas confirming that the group will indeed own and operate the other LNG import terminals in Malaysia.

PetGas remains our top utility buy and one of our top 10 “buys” for the market overall. The group’s existing business is defensive in nature while the upcoming LNG terminals will enhance its appeal as well as safe growth angle given that the gas shortage in Peninsular Malaysia may become more acute in the coming years. — OSK Research, Dec 2


This article appeared in The Edge Financial Daily, December 5, 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.

Axiata’s growing pains

Axiata Group Bhd (Dec 2, RM4.90)
Maintain hold at RM4.83 with revised target price of RM4.80 (from RM5.10): Celcom Axiata Bhd’s migration to an intelligent network (IN) platform from its 15-year-old legacy infrastructure caused new prepaid packages and bundles to be deferred from 3Q11 to 4Q11. As such, we expect minimal declines in voice and SMS revenues this quarter, supported by the sale of these packages as well as continued efforts to resuscitate voice revenues. To date eight million new subscribers have been migrated to the new IN. Celcom also attributed slower wireless broadband growth to the substitution effect as dongle users increasingly go for medium screen tablets and smartphones. But overall, data is still growing at a double digit pace.

Management guided for capital expenditure to range between RM4.1 billion and RM4.4 billion in FY11, driven by XL Axiata Tbk’s accelerated deployment of network coverage infrastructure. XL will take up RM2.3 billion, and Celcom RM950 million. The remaining RM850 million will be split between Dialog, Robi, Hello and others. We understand this trend may extend to 2012, when XL completes its network expansion. Capital management plans are under review, but management is currently sticking to its 30% dividend payout policy.


We trimmed FY11 to FY13F earnings by 3% to 4% after imputing larger depreciation charge for Axiata’s network modernisation and USP and raised capex assumptions to guided numbers. Coupled with rolling over our target valuation base to FY12F, we derived a sum-of-parts fair value of RM4.80. — HwangDBS Vickers Research, Dec 2


This article appeared in The Edge Financial Daily, December 5, 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.

RM2b fuel relief boost for TNB

Tenaga Nasional Bhd (Dec 2, RM5.64)
Maintain buy at RM5.68 with revised fair value of RM6.57 (from RM6.40): We reiterate our “buy” call on Tenaga Nasional Bhd (TNB), with a higher discounted cash flow-derived fair value of RM6.57 against RM6.40 previously due to the higher-than-expected fuel sharing relief from the government and Petroliam Nasional Bhd (Petronas).

We maintain our core FY12F earnings of RM2,886 million, but have incorporated an additional RM1 billion in exceptional fuel cost relief from the government and Petronas. The additional FY12F earnings translate into a 17 sen per share increase in TNB’s discounted cash flow to RM6.57 per share.

Recall that our earlier FY12F net profit of RM3,983 million had already assumed a writeback of 50% of the additional fuel cost of RM2.1 billion suffered by TNB in FY11. Our new FY12F net profit of RM4,933 million assumes a writeback of RM2 billion fuel relief.

Our FY12F/FY13F assume normalisation of fuel costs, hence are 8% to 38% above street estimates. We believe these are more reflective of TNB’s earnings as any additional fuel costs next year will likewise be shared with the relevant parties.

TNB has received a letter from the government that provides a fuel cost sharing mechanism to address the current increased cost borne by the group due to the gas shortage. TNB will be liaising soon with the relevant parties to implement this mechanism.


As mentioned in our past reports, TNB is bearing higher operational costs due to running its gas-based power plants on expensive alternate fuels and power imports from Singapore and Thailand.

The letter provides that TNB, Petronas and the government will equally share the differential cost of RM3.1 billion incurred by TNB due to the usage of alternative fuels from Jan 1, 2010 until Oct 31, 2011. Assuming TNB bears only a third of the differential cost, this translates into a one-off RM2 billion relief to the group.

While management does not expect Petronas to fully alleviate the natural gas shortage next year, we expect the supply to be 10% above the 950 mmscfd registered in 2HFY11. Notwithstanding the ongoing gas shortage, the Economic Planning Unit had earlier given assurance that TNB will secure 1,250mmscfd in 2008 to 2011 and 1,350mmscfd next year onward. Hence, we expect Petronas, which will now share a third of the additional fuel cost, to speedily resolve its upstream problems.

The stock currently trades at a price-to-book value of one times, at the lower range of one to 2.6 times over the past five years. Earnings-wise, TNB offers an attractive CY12F price-earnings ratio of eight times compared with the stock’s three-year average band of 11 to 16 times. — AmResearch, Dec 2


This article appeared in The Edge Financial Daily, December 5, 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.