Market Commentary

The FBM KLCI index lost 10.07 points or 0.68% on Thursday. The Finance Index fell 1.29% to 13062.16 points, the Properties Index dropped 0.76% to 950.49 points and the Plantation Index rose 0.59% to 7929.11 points. The market traded within a range of 7.82 points between an intra-day high of 1477.75 and a low of 1469.93 during the session.

Actively traded stocks include SAAG, VERSATL, SYCAL-WA, DVM, SYCAL, WIJAYA-WA, COMPUGT, PROTON-CG, DRBHCOM-CF and DRBHCOM-CG. Trading volume decreased to 1622.84 mil shares worth RM1175.63 mil as compared to Wednesday’s 2088.21 mil shares worth RM1770.42 mil.

Leading Movers were KLK (+84 sen to RM23.00), GENTING (+12 sen to RM10.88), TENAGA (+6 sen to RM5.52), PPB (+10 sen to RM16.50) and PETCHEM (+1 sen to RM6.09). Lagging Movers were AXIATA (-20 sen to RM4.89), CIMB (-21 sen to RM6.99), MAYBANK (-9 sen to RM8.21), GAM (-12 sen to RM3.28) and IOICORP (-5 sen to RM5.07). Market breadth was negative with 300 gainers as compared to 447 losers. -- JF Apex Securities Bhd



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KLCI closes lower, Asian markets slip in weak turnover

KUALA LUMPUR (Dec 8): The FBM KLCI closed lower on Thursday, while key Asian markets slipped in weak turnover ahead of the European leaders’ summit on Friday and release of economic data from China over the next two days.

The FBM KLCI fell 0.68% or 10.07 points to close at 1,472.92.

Losers beat gainers by 447 to 300, while 287 counters traded unchanged. Volume was 1.62 billion shares valued at RM1.18 billion.

At the regional markets, Hong Kong’s Hang Seng Index lost 0.69% to 19,107.81, Japan’s Nikkei 225 fell 0.66% to 8,664.58, Taiwan’s Taiex was down 0.71% to 6,982.90, South Korea’s Kospi lost 0.37% to 1,912.39, the Shanghai Composite Index shed 0.12% to 2,329.82 and Singapore’s Straits Times Index down 1.95% to 2,728.31.

The top loser on Bursa Malaysia was BAT that fell 60 sen to RM47.40; F&N lost 30 sen to RM17.80, JT International down 27 sen to RM6.53, Allianz 22 sen to RM4.66, Riverview, CIMB and RHB Capital down 21 sen each to RM2.91, RM6.99 and RM6.92 respectively, while Hong Leong Bank, IJM Corp and Axiata lost 20 sen each to RM10.54, RM5.50 and RM4.89 respectively.

SAAG was the most actively traded counter with 71.7 million shares done. The stock was unchanged at 6.5 sen.

Other actives included Versatil, DVM, Sycal, Compugates while Proton and DRB-Hicom warrants were also actively traded.

Gainers included KLK, Nestle, Batu Kawan, Sarawak Oil Palm, BLD PLANTATION []s, Boxpak, BHIC, Lafarge Malayan Cement, Genting and Nilai.



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Astral buys 227ha for RM1.77m

KUALA LUMPUR: Astral Asia Bhd is buying a 226.7ha site in Kuantan for RM1.77 million to expand its adjacent Kuantan Hi-Tec Park project.

In a filing with Bursa Malaysia yesterday, Astral Asia said its 65% owned subsidiary Syarikat Ladang KLPP Sdn Bhd (SLKLPP) had entered into a sales and purchase agreement with Lembaga Kemajuan Perusahaan Pertanian Negeri Pahang (LKPP).

It is a related-party transaction as LKPP is a major shareholder of Astral Asia with a 26.91% stake.

Astral Asia said the land is adjacent to the proposed Kuantan Hi-Tech Park development, and would increase its total landsize to 984.6ha from 758ha.

“The additional 560 acres (226.7ha) designated area shall be earmarked for the development of heavy industries component in the overall industrial park of Kuantan Hi-Tech Park,” it said.

Astral Asia said the total development costs and the expected profits are yet to be derived as the detailed development plan is pending finalisation.

On Feb 9, SLKLPP had entered into a joint-venture agreement with Tasja Development Sdn Bhd to develop the Kuantan Hi-Tech Park over 15 years.

The 226.7ha site is currently being used for oil palm cultivation.

Astral Asia gained one sen to close at RM1.29 yesterday with 47,000 shares done.


This article appeared in The Edge Financial Daily, December 8, 2011.



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Pavilion REIT to expand domestically

KUALA LUMPUR: Malaysia’s largest retail real estate investment trust Pavilion REIT is looking to expand by acquiring assets in Penang, Johor and the Klang Valley, according to news reports.

“We will evaluate any financially-viable investment opportunity that comes around,” said Philip Ho, CEO of Pavilion REIT’s manager Pavilion REIT Management Sdn Bhd, after the REIT’s listing on Bursa Malaysia yesterday.

With regard to the REIT’s expansion plan, Ho said the company’s trustees had signed three rights of first refusal (ROFR) for the acquisition of Fahrenheit 88 mall, the extension of Pavilion Kuala Lumpur mall and also another mall in USJ, Subang Jaya.

The management will also evaluate opportunities to acquire assets overseas when presented, but currently the focus is on local expansion, said Ho.

The Pavilion mall in Jalan Bukit Bintang in downtown Kuala Lumpur provides 96.4% of the REIT’s overall revenue.

The REIT opened yesterday at RM1.03, a 13 sen premium to its institutional offer price of 90 sen, with 15.7 million units traded at the market’s opening
bell.

Pavilion REIT executive director Datin Cindy Lim hitting the gong to mark the REIT's debut. From left are executive directors Datuk Maznah Abdul Jalil, Datuk Lee Tuck Fook, Syed Mohd Fareed Shaikh Alhadshi, Ooi Ah Heong, Datuk Roger Tan, Datuk Mokhzani Abdul Wahab and Ho.

The stock ended the day as the most highly traded with 197.3 million units transacted, closing 12 sen higher at RM1.02 after hovering between the low of 98 sen and the high of RM1.04 yesterday.

Based on an estimated gross dividend payout of 5.7 sen next year, the REIT was traded at a yield of 5.6%.


This article appeared in The Edge Financial Daily, December 8, 2011.



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Toyoink gets nod for R&D on US$2.5b Viet power plant

PETALING JAYA: Ink manufacturer Toyoink Group Bhd has been given the green light by the Vietnamese government to conduct research and development (R&D) on a proposed US$2.5 billion (RM7.8 billion) thermal power plant project in the country.

Named the Song Hau 2 thermo power plant, it is slated to have a capacity of 2x1000 MW and will be located at the Song Hau power centre in Hau Giang province.

Toyoink added that the Vietnamese Ministry of Trade and Industry and the province’s People’s Committee will provide guidance to set up the investment project, to implement steps and to organise assessment and submission for approval as required by law.

The group said it will negotiate on power purchase agreements (PPA) and implementation pacts with the authorities, and is looking for partners to incorporate a joint-venture company in Vietnam.

Industry observers have been pessimistic on Toyoink undertaking the massive project, largely due to the company’s weak balance sheet and its lack of expertise in the power generation business.

“Although it is understood that Toyoink will not be venturing into the (power generation) business alone, given the scale of the project, there has to be more information made available and many issues to be clarified. It will be interesting to see how funding is secured,” said an industry observer.

As at Sept 30, the group was in a net debt position of RM10 million. During the period, it had RM106.78 million in current assets, with RM104 million of the amount tied up in inventories and trade receivables.

Its cash and bank balances stood at RM1.78 million, which were low as the group had RM41.3 million in short-term borrowings and amounts owed to directors and trade payables. For 2Q ended Sept 30, Toyoink raked in RM435,000 in net profits compared with RM1.4 million in the corresponding quarter last year.

Trading in Toyoink’s securities was suspended yesterday, pending the announcement. Trading will resume today.

The share price has increased by 36.23% this month, ending Tuesday at RM1.88, gaining 50 sen from its close of RM1.38 on Nov 30.


This article appeared in The Edge Financial Daily, December 8, 2011.




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Sanichi secures coal supply deal

PETALING JAYA: ACE Market-listed Sanichi Technology Bhd has secured a coal supply commitment and collaboration agreement from Kalimantan-based CV Permata Al Zahra for the supply of three million tonnes of coal per annum for a two-year term from Tuesday.

Permata is involved in coal mining and the supply of coal products. Sanichi has committed to undertaking business development activities to market and distribute coal supplied by Permata.

On a separate announcement, Sanichi said it had agreed with FIRC Trade (M) Sdn Bhd to enter into a collaboration framework agreement for the purpose of forming an alliance to venture into the business of minerals mining and supply.

FIRC is principally involved in mining, trading and supply of iron ore and coal from mines in Malaysia and Indonesia.

Under this agreement, both Sanichi and FIRC shall carry out marketing, development, project bidding and project management, together with cost and profit sharing.

The agreement underlines that FIRC will provide technical expertise and dedicated engineering support to Sanichi to cater to customers’ needs and requirements. On the other hand, Sanichi will handle marketing and business development.

The contracts could kick in by early January next year and are slated for a minimum period of five years.



According to Sanichi, the pipeline of opportunities available to the alliance is significant. However, it said that it was not in the position to make a clear assessment of the potential impact on Sanichi’s earnings per share, net assets per share and gearing for the financial year ending June 30, 2012, given the early stage of the pipeline.

Sanichi’s share price has been actively traded in recent months since the entry of Datuk Md Wira Dani Abdul Daim, son of former finance minister Tun Daim Zainuddin, as a new substantial shareholder with a 6.01% stake on Aug 3 this year.

Since then, the stock has been traded heavily; it started ascending on Nov 4, with 88.5 million shares traded in the open market, pushing the stock price up by 70% to 8.5 sen.

A month later on Dec 5, Sanichi was again heavily traded with 119.5 million shares changing hands in a single trading day, which sent its share price to end at 20 sen, an increase of 73% over the previous week’s closing.

On the same day, Bursa Malaysia issued an unusual market activity query to Sanichi, to which the company replied that it was not aware of any developments relating to its subsidiaries.

The stock again saw heavy trading yesterday with 77.7 million changing hands in the open market, sending its price to a year-to-date high of 20.5 sen, an increase of 3.5 sen or 20.6% over Tuesday’s closing price of 17 sen. The stock was suspended by Bursa Malaysia with effect from 3.25 pm yesterday, and trading is to resume today.


This article appeared in The Edge Financial Daily, December 8, 2011.




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MHB’s longer term prospects better

Malaysia Marine and Heavy Engineering Holdings Bhd (Dec 7, RM5.61)
Downgrade to hold with lowered target price of RM5.70 from RM8: The delay in the rollout of projects, a likely setback at Sime Darby Bhd’s yard, grey visibility at Turkmenistan and higher tax rates are the four key reasons that compel us to cut 2011 to 2013 earnings forecasts by 9% to 29%.

The slower execution will constrain available yard space and could see MHB missing out on some projects in 2012. Against this backdrop, we cut our target price (TP) to RM5.70 (20 times 2013 price-earnings ratio [PER] or -29%). We also downgrade our call on the stock due to fair valuations at this juncture although we remain positive over its longer-term prospects.

We gather that the Gumusut-Kakap floating production system (FPS) project could be delayed by a year and is only expected to be rolled out in 2H13. Revenue recognition is set to slow in 2012 with the outstanding RM464 million works for this project expected to be booked in over an extended period into 2013.

Works recognition has already slowed — MHB recognised RM54 million revenue from this project in 2QFY12E against RM191 million and RM199 million per quarter over the previous six months.


Sime Darby’s yard is unlikely to contribute to MHB until 2014. While the proposed acquisition is still on target to be completed by 1Q12, we think MHB will not “inherit” any of the projects in hand at Sime’s Pasir Gudang yard (Kebabangan, Oil and Natural Gas Corp Ltd). MHB is likely to sub-let the yard space to Sime instead until the existing projects are completed by 2013, earning low rentals in return (from 2Q12 to end-2013).

Hence, Sime’s yard will only contribute positively to MHB’s earnings from 2014 and not 2013, as we had initially expected. Sime’s 47ha yard will add 31% to MHB’s existing yard capacity of 150ha.

We now expect negligible contribution from the Sime Darby yard in 2012/13 against earlier projected RM30 million to RM150 million in net profit contribution per year. In addition, we now project zero associate profit contribution in 2012/13 at its Turkmenistan venture (previously RM29 million per year) on a more challenging order book replenishment outlook. Our new forecasts also assume a higher tax rate for the group on unabsorbed allowances on lower yard utilisation. — Maybank IB Research, Dec 7


This article appeared in The Edge Financial Daily, December 8, 2011.



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Johan suffers RM13m net loss in 3Q

KUALA LUMPUR: Johan Holdings Bhd posted a net loss of RM13.86 million for its third quarter ended Sept 30, 2011 (3QFY11) in contrast to a net profit of RM1.81 million a year earlier.

The bleeding was due mainly to losses incurred in its tile manufacturing, hospitality and card services businesses.

The group’s revenue rose 9.1% to RM81.74 million from RM74.37 million a year earlier. It posted basic loss per share of 2.22 sen versus basic earnings per share of 0.29 sen a year earlier.

In its notes to Bursa Malaysia, Johan said its tiles manufacturing business incurred losses due to low selling prices, as a result of keen competition. “Furthermore, the shortage of skilled labour contributed to high production cost,” it added.

The group’s hospitality and card services businesses also incurred losses due to higher payroll, marketing costs, administrative expenses and finance costs.

For the nine-month period, Johan posted a net loss of RM27.48 million compared to a net profit of RM18.64 million a year earlier. Its revenue grew marginally to RM227.3 million from RM217.1 million for the corresponding period a year ago.

Johan gained one sen to close at 25 sen yesterday with 150,000 shares changing hands.


This article appeared in The Edge Financial Daily, December 8, 2011.



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GDEX still eyeing regional plans

KUALA LUMPUR: Although GD Express Carrier Bhd’s (GDEX) earlier plans to expand to Laos did not materialise, the express delivery and logistics services provider is still eyeing regional expansion as competition heats up in the domestic courier segment.

GDEX CEO and executive director Leong Chee Tong said yesterday the group had been looking for opportunities in Southeast Asia, with Indonesia being a potential destination in the near term.

The ACE Market-listed company is in preliminary discussions with potential local partners in Indonesia and other neighbouring countries, Leong told The Edge Financial Daily after the GDEX AGM yesterday.

Leong said GDEX would likely team up with local partners in countries in Southeast Asia as direct entry appeared a less probable model.

“The form of collaboration would depend on the situation and conditions in the respective countries,” Leong said.

GDEX first revealed its regional aspirations in early 2009 when it entered into a memorandum of understanding with Laos’ national postal operator Entreprise Des Postes Lao.

Entreprise Des Postes Lao and GDEX had concluded feasibility studies and worked on proposals for a prospective strategic partnership but the initial talks did not bear fruit.

Leong: There are big opportunities in the Iskandar Malaysia region.

“For the past few years, we have been working hard on Laos but we did face some hindrance there. Maybe the timing was not right. There are some changes in the country,” Leong said.

Nevertheless, GDEX is still awaiting opportunities for its Laotian plans in the future, he said.

When asked, Leong said GDEX could also team up with its substantial shareholder, Singapore Post Ltd (SingPost), for the group’s regional expansion plans.

“I won’t rule out going regional with SingPost. But I think we will first look at what we can do together in Malaysia.

“Singapore is a saturated market, SingPost doesn’t need us there. It is more for expanding here or in the region,” Leong said.

SingPost emerged as a strategic investor of GDEX on March 15 after it increased its stake in GDEX to 27.08% from the initial 4.98%.

According to the website, GDEX operates a network of 96 stations which comprise 53 branches, two affiliate stations and 41 agents throughout East and West Malaysia.

It is currently assuming the role of SingPost’s local partner, delivering the Singapore postal operator’s express shipments to Malaysia.

But there are plans to deepen the working relationship into other areas of cooperation.

Leong pointed out that there are gaps in the services sector which GDEX could fill, such as in warehousing and logistics management.

Anticipating growing demand for integrated logistics services, GDEX last year boosted its warehousing facilities and developed its freight handling resources to complement its core business of express delivery service. The group has leased a 59,886-sq ft warehouse and invested in upgrading its infrastructure and handling capacities.

In GDEX’s 2010 annual report, the group noted that although these investments would initially affect the group’s bottom line, it is essential to propel GDEX to become a total logistics solution provider.

Leong is upbeat that GDEX and SingPost can leverage on the warm diplomatic ties and flourishing trade between Singapore and Malaysia.

He noted that some Singapore-based businesses had already moved their operations headquarters and production base to Malaysia.

“There are big opportunities in the Iskandar Malaysia region in Johor. It is good that we talk now (to SingPost). When the time is ripe, we are ready,” Leong added.


This article appeared in The Edge Financial Daily, December 8, 2011.




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APM’s dividend potential to support share price

APM Automotive Holdings (Dec 7, RM4.38)
Maintain market perform with lower fair value of RM4.30 from RM4.50: APM will likely face a challenging year in 2012 with pressure on both cost and pricing. While steel and resin prices are manageable, the recent strength of the yen and US dollar will pressure margins.

APM faces renewed pressure on pricing from original equipment manufacturer (OEM) customers continually looking to cost down. From a volume perspective, we are expecting total industry volume (TIV) in 2012 to stay relatively flat. Proton and Perodua will continue to dominate the local market contributing about 60% of APM’s revenue.

APM’s strategy to boost revenue and margins involves efforts to supply complete component modules as opposed to individual components.

With effective automotive duties currently hinging on the level of localisation achieved, we see increasing efforts by domestic assemblers to raise local content levels that will benefit APM.

The recently announced joint venture agreements (JVA) with the International Automotive Components Group (IAC) expand APM’s regional footprint and improve its ability to win new business from European manufacturers who are becoming increasingly important players in the domestic market.


APM will also continue to leverage on its relationship with sister company Tan Chong Motor Holdings Bhd. We also expect APM to benefit from Tan Chong’s contract assembly deals on behalf of Warisan TC (Beiqi Foton vehicles) and HK-listed TCIL (Subaru vehicles).

There are also opportunities from Japanese OEMs looking to lower supply chain risks by spreading their assembly and production facilities following the natural disasters experienced in Japan and Thailand this year.

Investor interest in APM could be sustained by the possibility of a higher dividend payout considering its consolidated net cash position of RM361.6 million as at end-September that could fund a dividend of up to RM1.85 per share.

Our 2011 forecasts are broadly unchanged. However, we lower our 2012/13 estimates by 11.3% and 11.7% after dialling back our revenue growth and margin assumptions. Risks include lower car sales and unfavourable foreign exchange trends.

We make no change to our “market perform” recommendation. However, we lower our fair value estimate to RM4.30 (from RM4.50) derived from applying a seven times (from 6.5 times) target price earnings ratio (PER) to 2012 earnings (unchanged).

The target PER is a 10% discount to the five-year average PER of 7.8 times that fairly reflects prospects for the year ahead. APM’s share price should also be supported by an expected gross yield of 5% based on conservative gross dividends per share estimates of 22 sen and 24 sen for 2011 and 2012 respectively. — RHB Research, Dec 7


This article appeared in The Edge Financial Daily, December 8, 2011.



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Wah Seong riding on Petronas capex

Wah Seong Corp (Dec 7, RM1.98)
Maintain buy with revised target price RM2.50 from RM3.10: Wah Seong is likely to be busy with Malaysian contracts next year, underpinned by Petroliam Nasional Bhd’s (Petronas) record high RM300 billion five-year capital expenditure. We understand Wah Seong has been receiving inquiries for pipe-coating jobs in Malaysia, indicating potentially robust replenishment for the company.

It is likely to be a direct beneficiary of Petronas’ plan to replace ageing facilities as 60% of the national oil company’s major producing oil fields in Malaysia average 26 years old.

Wah Seong is now primed to strengthen its pipe-coating market share in Malaysia, especially with the RM15 billion North Malay basin project (construction of a 200km of pipeline to transfer gas from nine fields to Kerteh, Terengganu) to be rolled out in the near term, given Petronas’ ambitious timeline of first production by 2013.

Bredero Shaw, a subsidiary of Canada-listed ShawCor Ltd, announced end-November that it had received a letter of intent from Mitsui and Co for pipeline coating jobs (US$400 million or RM1.3 billion) for the Ichthys LNG project, subject to a final investment decision by the project anchors, Japan’s Inpex and France’s Total.

This comes after Wah Seong had lost the Wheastone LNG project (US$170 million) on Oct 11 to Bredero Shaw. We are disappointed with this news, but Wah Seong could still benefit from the duopoly market in Malaysia given that Bredero Shaw’s plant in Kuantan, Pahang, is likely to be fully utilised next year for both Australian projects.

We cut FY12 profit by 10% and FY13F by 4%, including adjusting for the lost bids. Our target price is also reduced to RM2.50, pegged to 15 times revised FY12 earnings per share, in line with its six-year mean multiple. We continue to like Wah Seong for its track record and niche expertise in pipe-coating. — Hwang DBS Vickers, Dec 7


This article appeared in The Edge Financial Daily, December 8, 2011.



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KrisAssets surges on speculation of REIT

KUALA LUMPUR: Mall operator KrisAssets Holdings Bhd continues to surge on investor interest. The counter was among the top gainers yesterday, adding 30 sen to close at RM5.38 with 325,300 shares done.

The stock has gained 25% since Nov 17. The rise is significant as the stock was trading in the range of RM4 to RM4.40 in the past six months.

KrisAssets has been rising on speculation that it may form a real estate investment trust (REIT).

The company completed the purchase of The Gardens shopping mall in July from parent IGB Corp Bhd, which expanded its portfolio that previously comprised only Mid Valley Megamall.

Analysts expect the successful listing of Pavilion REIT, which owns the Pavilion Kuala Lumpur mall in Bukit Bintang, to elicit a similar move from KrisAssets.

Pavilion debuted on Bursa Malaysia yesterday and closed at a 13.3% premium at RM1.02, giving it a FY12 dividend yield of about 5.6%.

Analysts said a REIT structure would unlock value for KrisAssets’ shareholders, as the property trust would be exempt from corporate tax if it distributes at least 90% of its total annual income. In addition, unit holders also enjoy a lower 10% withholding tax on distribution.

The company posted RM152.24 million in pre-tax profit (excluding fair value gain on investment property of RM80 million) for the nine months ended Sept 30, 2011. Annualised, FY11 pre-tax profit or distributable profit could be RM203 million.

Assuming 90% of the profit is distributed, gross dividend per share could be 41.5 sen a share. Applying a yield of 6% for an IPO, similar to Pavilion REIT’s valuation, KrisAssets’ shares could be worth about RM6.91, compared with yesterday’s closing price of RM5.38.

“KrisAssets shares have not been traded to their full potential because asset expansion was slow and dividends were modest. So it was valued neither as a growth stock nor a dividend yield stock. But if it becomes a REIT, it has to distribute much higher dividends, at 90% of distributable profits, and then investors would value it based on the yield,” said a market observer.

In a previous interview with The Edge weekly, KrisAssets managing director Robert Tan had said the company was considering forming a REIT to reap the tax benefits accorded to such property trust. He said the intention was there and it was just a question of timing.


This article appeared in The Edge Financial Daily, December 8, 2011.



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A strange letter involving Envair

On Tuesday, The Edge Financial Daily received an email from a person claiming to represent Carpet Raya Sdn Bhd director Deepak Jaikishan.

The email came with an attached document purported to be a statement by Deepak, but it did not have any letterhead, nor was it physically signed.

In the letter, a person claiming to be Deepak said he had a long-term view of his investment in ACE Market-listed Envair Holdings Bhd and that he is looking at increasing his stake to over 10% in the next few weeks.

To recap, Deepak emerged as a substantial shareholder in loss-making Envair on Dec 2 with a 5.06% stake. On the same day, former Envair director Datuk Teh Chee Teong had disposed of 15.8 million shares in off-market transactions. The value of Teh’s stake was not disclosed.

Given the uncertainty surrounding the document, The Edge Financial Daily decided not to run the story for a few reasons.

First, the attached document was a plain Word document with no formal letterhead and it did not have any physical signature. It also did not have any address nor official contact to verify its authenticity.

Second, the sender of the email gave only her first name and a handphone number. There was no surname of this person, no designation, no company address or details, except for a cheerful “Greetings from Tek Holdings” as a start to the message. It did not indicate what link Tek Holdings has with Deepak or the sender’s position in the company.

After all, the Envair shares were acquired by Deepak in his personal capacity, according to filings with Bursa Malaysia.

A search on the Internet showed little on Tek Holdings, which does not have a website.

To find that link, one has to do a search with the Companies Commission of Malaysia. Our search showed that Deepak is a major shareholder of Tek Holdings, together with his brothers, Dhanesh and Rajesh.

Tek Holdings was registered in February 2009, but there were no financial details available. The veracity of the letter could not be ascertained as there was no Tek Holdings letterhead.

Third, the email’s contents are interesting, containing potential market-moving statements.

The statement claimed that Deepak is looking to increase his Envair stake to over 10% in the coming weeks and that he intends to be part of the group’s management.

“We have by announcing our stake in Envair, decided to be part of this new business and over the next few months combine our strength to build the business further. We hope to be able to increase our stake in Envair over the weeks ahead to above 10% as we aim to be part of this thriving company’s executive board and management,” said the letter.

The letter also claimed that Deepak would not sell down his stake in the future but he will increase it steadily in the coming days.

Retail investors have been burnt as the market has recently seen numerous quick entry-and-exit strategies by substantial shareholders in companies such as Harvest Court Industries Bhd and Sanichi Technology Bhd. Share prices of these companies rose dramatically, fuelled mostly by speculation, only to fall back again.

Is the letter intended to quell investor fears of another quick enter-and-exit strategy? Or is it to whet investor appetite?

If one reads into the statement, it would suggest that the stock could rise in the coming days or weeks if there is a big buy order for another 5% block.

Interestingly, Envair’s shares did not behave that way yesterday. After opening 0.5 sen higher at 31 sen, the stock closed two sen lower at 28.5 sen with 4.29 million shares done.

Incidentally, another national daily decided to publish the contents of the letter yesterday, with a front page story in its business section.

The Edge Financial Daily receives dozens of press releases daily, from public-listed companies themselves or their public relations firms. This is certainly one of the strangest statements we have received.

This article appeared in The Edge Financial Daily, December 8, 2011.



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Back to black in 2013 for MAS?

PETALING JAYA: Malaysian Airline System Bhd (MAS) aims to fly back into the black by 2013 through an aggressive capacity cutting exercise. It could be the largest in the airline’s history.

Group CEO Ahmad Jauhari Yahya said MAS has taken a leaf out of the book of airlines like Japan Airlines and Garuda, which suggests that aggressive network cuts work in turning around a bleeding airline.

MAS will remain in the red this year after posting a RM1.25 billion loss for the first nine months.

Jauhari said to stop MAS — which has RM1 billion of cash in the kitty to last it a year — from further bleeding, it will reduce 12% of its capacity and cut unprofitable routes over the next year.

The move will save some RM300 million, which accounts for over 20% of the RM1.18 billion to RM1.51 billion in cost savings and additional income MAS aims to achieve under the turnaround plan it unveiled yesterday.

Jauhari said, given the necessity to shrink to grow, the airline has no choice but to consider right-sizing the organisation.

“A leaner and meaner organisation will quickly become agile, competitive and a winning entity,” he told the briefing, which was also his first encounter with the media as the head of the airline.

Jauhari (left) and Rashdan during the media briefing yesterday.

Jauhari said while the aim is to narrow losses to a “base case” RM165 million net loss next year, its stretched target would be a net profit of RM238 million.

All these targets, including a net profit of RM900 million by 2016, are based on a jet fuel assumption of US$130 (RM406.90), he added.

Besides the financial targets, the new MAS chief emphasised that it is a matter of survival that the airline transforms itself into a high-performance organisation.

He called for a boost in productivity, performance-based remuneration and a customer-oriented culture from MAS staff.

Jauhari said while he plans to shrink the organisation, the extent of any right-sizing exercise would depend on the execution of its recovery plan and “game changers” that play an integral role in the national airline’s business turnaround plan.

“We are flying only 88 aircraft as we are returning 36 to the lessor, and we take delivery of 23 aircraft next year. Based on the fleet reduction, we will see a reduction in networks and obviously we will have to right-size our organisation,” he said.

He said while cutting jobs is a “last resort”, a few game changers and recovery plans have already been identified.

He said the game changers include the launching of the new regional premium airline by the middle of next year, which will serve mainly Asian routes.

“There is a market for [premium airlines] in this region. It will remain, in fact, it will grow,” he said.

Analysts, however, are negative on this move.

“MAS is bleeding, we really question why [it should] take the risk, starting an airline from scratch when you have a well-known brand at your disposal,” said an analyst.

Be that as it may, analysts view MAS’ aggressive capacity cutting positively as it signals a different “management and fundamental” approach to running the airline.

Going back to the business turnaround strategy, Jauhari said his team will explore more alliances, enhance collaboration with AirAsia Bhd and spin off its ancillary businesses, which include its maintenance, repair and overhaul (MRO) unit.

Jauhari said MAS is also open to a strategic partner to take up a stake in its MRO business, apart from the transfer of skills and technology, but he ruled out listing the entity.

Deputy group CEO Mohammed Rashdan Yusof said that under its recovery plans, MAS expects to save RM220 million to RM302 million by cutting loss-making routes, which include South Africa, Dubai and a few European destinations. An additional RM255 million to RM337 million will come from spinning off ancillary businesses.

He said with the deployment of new and more efficient 737-800 aircraft, MAS could save some RM300 million from lower fuel bills, and generate RM394 million to RM477 million from optimising yields.

There is also an annual savings of RM100 million from the joint procurement and consolidation of key activities with AirAsia Bhd.

This is the result of the comprehensive collaboration framework (CCF) agreement entered into with the budget carrier earlier in August, which was facilitated by the share swap between shareholders of MAS and AirAsia.

Jauhari said MAS is also in exploratory talks with Australia’s Qantas and other airlines on partnerships, but did not elaborate.

MAS already has code sharing arrangements with a few major airlines, and will be a full member of the One World Alliance in September next year.

Rashdan, meanwhile, said MAS is not concerned with its cash position of just RM1 billion for a whole year.

“We have our funding mix plan [for aircraft purchase] ascertained,” he said.

He added that the airline could raise some RM5 billion worth of funds from banks, credit agencies, and leasing arrangements of its new aircraft. He said another RM1 billion will come from the return of pre-delivery deposits from the aircraft manufacturer.

He ruled out any equity fundraising. “Khazanah has indicated that they’ve already done so in 2010. We cannot do a capital call very soon but we can tell financiers that we have strong shareholders.”

On operating expenditure, Rashdan said the plan is to cut some 12% in absolute cost from the estimate of RM13.76 billion this year to RM12.88 billion next year. He said MAS also targets to increase its revenue per available seat kilometre (ASK) by about 20% to 22.3 sen from an estimated 18.7 sen this year, and decrease its cost per ASK by 27% from 22.4 sen to 22.3 sen.


This article appeared in The Edge Financial Daily, December 8, 2011.



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Rubber gloves: Sequential earnings growth gaining momentum

Rubber gloves
Maintain overweight: Average latex price in 3QCY11 fell by 10.3% quarter-on-quarter (q-o-q), while the US dollar exchange rate remained relatively steady (+0.3% q-o-q). Top Glove Corp Bhd, Supermax Corp Bhd and Kossan Rubber Indistries Bhd were the main beneficiaries of the latex price decline.

Aggregate core net profit for 3QCY11 for the three companies rose by 10.2% q-o-q, bolstered mainly by core net profit growth of 12.9% q-o-q for Kossan and 16% q-o-q for Supermax. Net profit growth for Top Glove was weaker at 1.9% q-o-q. This did mark Top Glove’s third consecutive quarter of sequential growth.

More importantly, 3QCY11 saw a significant improvement in operating margins as the 10.2% q-o-q bottom line growth was only partially derived from the 4.1% q-o-q increase in revenue. Supermax’s 3QCY11 earnings before interest and tax (Ebit) margin expanded by three percentage points (ppt) (2QCY11: 8%, 3QCY11: 11%), Kossan added 1.5ppt (2QCY11: 10.3%, 3QCY11: 11.8%), and Top Glove’s 3QCY11 Ebit margin held steady at 6.4%.

There were two key reasons for the stronger margins: (i) lower latex costs, and; (ii) increased demand and production of higher margin nitrile gloves. Although nitrile latex prices have increased by more than 50% year-to-date (YTD), margins for synthetic gloves are still higher than natural rubber (NR) gloves (15% to 20% against 10% to 15% for NR gloves). Thus, the higher production of nitrile gloves aids in supporting overall margins.

Hartalega Sdn Bhd’s 2QFY12 Ebit margin slipped to 29.9% from 32.4% in 1QFY12, attributed to: (i) higher nitrile latex costs, and; (ii) increased pricing pressure, which limits Hartalega’s ability to fully pass on the incremental increase in raw material costs. That said, demand for gloves sold was steady (+1.1% q-o-q), leading to a 4.6% q-o-q increase in revenue. 2QFY12 core net profit of RM54.8 million was well within our expectations.

We maintain our “overweight” stance on the rubber gloves sector. Our view is premised on: (i) low demand risk. Although preference for type of gloves may change, overall global demand growth for medical gloves remains strong; (ii) an inherently defensive sector in a risk-averse environment. Given low demand risk, the rubber glove sector makes an attractive choice for investors during periods of weak global sentiment and economic uncertainty; (iii) improved earnings visibility. With 4QCY11 average latex price hovering at RM7.47 per kg currently (representing a q-o-q decline of 14%), we expect sequential earnings growth and margin improvement to continue; and (iv) attractive valuations.

Excluding Top Glove (which historically trades at a premium), glove manufacturers are still trading at single digit CY12 price earnings ratios, despite the recent run-up in share prices. With stronger sequential earnings growth and improved investor sentiment on the sector, we believe glove stocks could trade at up to +1 standard deviation above historical means.

We maintain our “buy” recommendations for Kossan (target price: RM4.04), Supermax (TP: RM4.36) and Hartalega (TP: RM7.33). Top Glove remains a “neutral”, with a TP of RM4.82. Top picks are Kossan and Supermax for better earnings visibility and attractive valuations. — Affin Research, Dec 7


This article appeared in The Edge Financial Daily, December 8, 2011.



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Benelec, Rotary Engr inks deepsea storage pact

Benalec Holdings Bhd and Singapore-listed company Rotary Engineering Ltd today jointly announced the signing of a Memorandum of Understanding (MoU) to develop an independent deepwater storage terminal for oil products in Tanjung Piai.

Strategically located at the south-western tip of Johor, Tanjung Piai offers easy access to international shipping routes in the Straits of Malacca and Singapore's Jurong Island, an international petroleum, petrochemicals and terminal hub.

Benalec managing director Vincent Leaw said: "We are delighted to have Rotary Engineering on board with us in our maiden foray into the high-growth oil and gas and petrochemicals industry.

"Tanjung Piai is very well positioned to complement the region's growth in the oil and gas industry, and to tap into the growing demand for the storage and distribution of petroleum and petrochemical products in Asia," he said when commenting on the MoU.

Meanwhile, Rotary Engineering chairman and managing director Roger Chia Kim Piow said: "We are excited to provide more value added services to our clients through this strategic partnership with Benalec."

He said with Tanjung Piai’s close proximity to Jurong Island, "we see much synergy between Singapore and Johor in further developing this area into an even larger international petroleum hub."

With an initial capacity of 1 million cubic metres (cbm), with subsequent phases to increase capacity to 3 million cbm on the total reclaimed land area of 101.25ha, the proposed terminal will be a petroleum storage facility for storing, blending and distributing crude oil and its derivatives.

The integrated storage facility will be completed with deepwater jetty facilities capable of handling very large crude carriers (VLCCs).

The two companies will jointly embark on a technical feasibility study, after which they will form a joint venture company by taking equity ownership and developing the first 1 million cbm oil storage terminal as well as other terminal projects.

In addition, the joint venture company will exclusively undertake the promotion of Tanjung Piai as an oil and petrochemicals terminal hub. -- Bernama



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'Construction industry to be active over the next 5 months'

Gamuda Group Managing Director Datuk Lin Yun Ling said today the Malaysian construction industry is expected to be active over the next five months.

He told reporters after the group's annual general meeting here today that the next five months would also be the procurement phase for the Mass Rapid Transit (MRT) project.

"I think more than 50 packages of works, big and small, for underground, elevated and civil works, stations, park and ride facilities as well as systems packages will have tenders called.

"In fact, some of the tender packages, have already been called with the valuation having been done," he said.

Lin said the construction industry next year would be quite active and provide a multiplier effect across the whole economy, that should help Malaysia counter the effects of an economic slowdown in Europe and in the United States.

He also said that Gamuda through its joint-venture company for the MRT project, MMC-Gamuda JV, had yet to submit the tender for the project which would close towards the end of January next year.

On prospects for the property sector in the country, he said the supply of commercial properties was quite plentiful and as a player, the group noticed that in the last three years, demand had been very strong.

On the issue of a housing "bubble", Lin said a good indicator as to whether this was the case at present, is to use the ratio of house prices to income as a rule of thumb.

"Currently, the ratio is between six to seven and if it hits 10, you have to worry," he added.

On Gamuda's overseas ventures, Lin said the group had allocated more than US$1 million to study the business potential in Myanmar which was slowly opening up to more democratic rule.

"We are studying the infrastructure needs in Myanmar and assessing the supply chain there. This is so that, when the situation permits, we will be ready," he added.

Meanwhile, for the financial year ended July 31, 2011, the group recorded a revenue of RM2.67 billion from RM2.46 billion previously, while pre-tax profit surged to RM544.5 million from RM412.3 million. -- Bernama



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Benalec signs MoU to jointly develop deepwater storage terminal in Johor

KUALA LUMPUR (Dec 8); Benalec Holdings Bhd has entered into a MoU with Singapore-based Rotary Engineering Ltd to jointly develop an independent deepwater storage terminal for oil products in Tanjung Piai, Johor.

The company said on Thursday that the MoU would enable it to become a strategic business partner with Rotary in the equity ownership and development of the terminal in Tanjung Piai.

Benalec said the proposed terminal would have an initial storage capacity of 1 million cubic metres (cbm), with subsequent phases to increase capacity to 3 million cbm on the total reclaimed land area of 250 acres.

The company said the project would be undertaken on a piece of 3,485 acres of land situated at the coast of Tanjung Piai.

The terminal will be a tank facility for storing, blending and distributing crude oil and petroleum products with deepwater port facilities capable of handling very large crude carriers, it said.

Rotary is an oil and gas infrastructure services company offering fully integrated engineering design, procurement, CONSTRUCTION [] and maintenance (EPCM) services to the oil and gas, petroleum, petrochemical and pharmaceutical industries.

Benalec said the total investment outlay, and its breakdown, of the proposed terminal are yet to be determined, pending the results of the technical feasibility of the development to be conducted.

“Hence, the sources of funding of the proposed terminal and the eventual issued and paid-up share capital (including the equity participation by Benalec via its subsidiary and Rotary) of the joint venture company are yet to be determined,” it said.

Benalec said it would utilise both internally generated funds and borrowings to finance its investment in the joint venture company, when formed.

“Benalec’s equity ownership and development in the independent deepwater storage terminal will result in an increase in its sources of sustainable and recurring income in the future,” it said.



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Melewar signs MoU with KAZMY Steel to build Kazakh steel plant

KUALA LUMPUR (Dec 8): MELEWAR INDUSTRIAL GROUP BHD [] subsidiary Melewar Integrated Engineering Sdn Bhd (MIE) has signed a memorandum of understanding (MoU) with KAZMY Steel Company (KAZMY) to appoint MIE as the turnkey design and built contractor for the MycroSmelt plant in Almaty, Kazakhstan.

KAZMY is the special purpose vehicle designated to launch the project in Kazakhstan, to fulfill the high demand for top quality building materials in the republic, using MycroSmelt TECHNOLOGY [].

The planned investment is estimated to cost RM178 million, and will be represented by an equal 50% participation by both MIE and KAZMY, in which 30% will be made directly by shareholders of the joint venture and 70% will be in the form of bank lending from Kazakh financial institutions.

Under the MoU signed on Thursday, MIE would be the lead technical development engineer and the project manager.

It will provide the necessary expertise, experience and resources to design and build the MycroSmelt plant.

The CONSTRUCTION [] is planned to start in second quarter of 2012, with its target completion date in 2013.

The projected annual capacity of the MycroSmelt plant is expected to be approximately 110,000 tonnes per year.

Melewar executive chairman Tunku Datuk Ya'acob Tunku Tan Sri Abdullah said the MycroSmelt technology provided tremendous cost savings in the production of integrated re-bar and other long product, as it uses high efficient induction furnaces.

"With energy efficiency of a large-scaled facility, the MycroSmelt Steel facility can be located close to urban areas and companies can enjoy savings from not having to transport scrap iron over long distances, and transporting the finished steel products back again.

"MycroSmelt technology enables to smelt and process scrap iron in small quantities, with comparable unit operating cost and capital expenditure of large scale facilities," he said.

The MoU between MIE and KAZMY was signed by Tunku Ya'acob and Temujin Nukenov, the managing director of the Kazakhstan-Malaysia Chamber of Commerce and Industry (KMCCI) representing KAZMY.



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KL shares in red at mid-afternoon

Shares prices on Bursa Malaysia were further adrift at mid-afternoon today as market players remained cautious ahead of key events in Europe, dealers said.

As at 3.08pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) fell 12.33 points to 1,470.66.

The Finance Index plunged 165.82 points to 13,233.15, Plantation Index shed 57.09 points to 7,825.73 and the Industrial Index declined 11.57 points to 2,668.85.

The FBM Emas Index lost 70.75 points to 10,144.87, FBM 70 Index fell 34.68 points to 10,997.61 and the FBM ACE Index declined 55.41 points to 4,205.83.

Decliners led advancers by 423 to 218 while 265 counters were unchanged and total volume stood at 1.098 billion shares worth RM652.921 million.

The most active, SAAG Consolidated added half-a-sen to seven sen, Sycal Ven-WA perked three sen to 12.5 sen and DVM Technology inched up half-a-sen to 9.5 sen.

As for the heavyweights, Maybank slipped 10 sen to RM8.20, Sime Darby lost one sen to RM8.93, CIMB dropped 20 sen to RM7 while Petronas Chemicals was flat at RM6.08. -- Bernama



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Bumi Armada gets RM341m loan from 7 banks

Bumi Armada Bhd, a Malaysian oilfield-services provider, signed an agreement for US$341.1 million of financing with seven banks today.

They were led by Sumitomo Mitsui Banking Corp, CIMB Bank Bhd, ING Bank N.V, Maybank Investment Bank Bhd, OCBC Bank (Malaysia) Bhd, RHB Investment Bank Bhd and the Bank of Tokyo-Mitsubishi UFJ Ltd, the company said in a statement in Kuala Lumpur today. -- Bloomberg



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SP Setia Q4 profit soars to RM82.5m

SP Setia Bhd said fourth-quarter profit rose to RM82.5 million from RM75.2 million a year earlier. Sales rose to RM633.4 million from RM558 million in the quarter ended Oct 31.

At 1.37 local times the stock was at RM3.85, down 0.01 sen. -- Bloomberg



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Flash: Bumi Armada subsidiary inks RM1.08b financial facility

KUALA LUMPUR (Dec 8): Bumi Armada Bhd's subsidiary Armada TGT Ltd has inked a US$341.1 million (RM 1.08 billion) facility agreement with seven financial institutions to finance the costs related to the conversion and installation of the FPSO Armada TGT 1 for deployment in the Te Giac Tran Field, offshore Vietnam.

Its chief financial officer Shaharul Rezza Hassan said on Thursday that the facility was for seven years and represented about 80% of its capex value.

Sumitomo Mitsui Banking Corp is the coordinating bank, mandated lead arranger, facility agent, security agent, and account bank with the following banks as mandated lead arrangers, CIMB Bank Bhd, ING Bank N.V., Maybank Investment Bank Bhd, OCBC Bank (M) Bhd, RHB Investment Bank Bhd and The Bank of Tokyo-Mitsubishi UFJ Ltd.

Bumi Armada's FPSO Armada TGT 1 was completed on schedule and it achieved first oil on Aug 22, 2011, with final acceptance received on Nov 30.



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S P Setia hits new full-year sales record of RM3.29b, targets RM4b in FY2012

KUALA LUMPUR (Dec 8): S P Setia Bhd has set a set a new full-year sales record in FY 2011 of RM3.29 billion, or a 42% increase from the previous record of RM2.31 billion set in FY 2010.

The company has also set a target to achieve total new sales of RM4 billion in FY 2012.

Announcing its financial results on Thursday, S P Setia said its net profit for the fourth quarter ended Oct 31, 2011 rose 9.74% to RM82.47 million from RM75.15 million a year earlier, due mainly to the flow through effect of overall increases in selling prices achieved for new launches since FY 2010 and the general stabilisation in prices of CONSTRUCTION [] materials experienced during the financial year.

It said on Thursday that revenue for the quarter increased 13.5% to RM633.36 million from RM557.99 million in 2010.

Earnings per share was 4.61 sen compared to 4.93 sen a year earlier, while net assets per share was RM1.88.

S P Setia proposed a final gross dividend of nine sen per share in respect of the financial year ended Oct 31.

For the financial year ended Oct 31, S P Setia’s net profit rose 30.24% to RM327.97 million from RM251.81 million, on the back of an increase in revenue to RM2.23 billion from RM1.75 billion in 2010.

Reviewing its performance, S P Setia said its profit and revenue were principally derived from its property development activities carried out in the Klang Valley, Johor Bahru and Penang.

Ongoing projects which contributed to the group’s profit and revenue include Setia Alam and Setia Eco-Park at Shah Alam, Setia Walk at Pusat Bandar Puchong, Setia Sky Residences at Jalan Tun Razak, Bukit Indah, Setia Indah, Setia Tropika and Setia Eco Gardens in Johor Bahru and Setia Pearl Island and Setia Vista in Penang, it said.

Apart from property development, the group’s construction and wood-based manufacturing activities also contributed to the earnings achieved, it said.

S P Setia said its sales of RM3.29 billion in FY11 was the fourth consecutive year of increase in its new sales record and the second consecutive year that its total sales had exceeded the RM2 billion mark.

The company said it was confident that it had the capability and capacity to grow the value of its new sales even further despite the anticipated head-winds stemming from the slowdown in the global economy.

“Fundamental determinants of property demand, such as demographics, favourable interest rates, job stability, and a structural decline in housing starts, remain supportive and positive. “Recent pro-active policies from the central bank and government that seek to further encourage prudence in bank lending should not adversely impact genuine home-owner demand particularly for quality PROPERTIES [],” it said.

S P Setia said its existing projects in the Klang Valley, Johor Bahru and Penang would continue to underpin its sales performance in FY 2012.

It said its recently launched KL EcoCity, a new integrated green commercial and mixed residential development, was expected to contribute strongly to the group’s sales.

Other recent launches like Fulton Lane and EcoXuan, its maiden project in Melbourne and second project in Vietnam respectively, are expected to help augment sales in FY 2012 which will also benefit from planned new project launches like Setia Eco Cascadia, S P Setia’s first upgraders’ project in Johor, and Aeropod, the Group’s maiden project in Sabah, it said.

S P Setia said that coupled with its healthy cash flow and strong financial position, the company hopes to be able to capture increased market share in FY 2012.

“The group also intends to seize opportunities which may arise during uncertain times to acquire more choice assets on favourable terms to further strengthen the group’s growth prospects in line with its long-term expansion plans.

“Barring unforeseen external shocks, the board is optimistic that the group’s strong performance will continue in FY 2012,’ it said.



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KLCI stays in the red at mid-day as investors remain jittery

KUALA LUMPUR (Dec 8): The FBM KLCI stayed in negative territory at the mid-day break on Thursday, in line with most key regional markets as investors stayed undecided ahead of the European crunch summit over the weekend.

Asian shares fell on Thursday as doubts set in about whether European leaders can agree on a plan to tackle the euro zone's two-year-old debt crisis at a high-stakes summit on Friday, according to Reuters.

The FBM KLCI fell 10.28 points to 1,472.71 at the mid-day break.

Losers led gainers by 216 to 364, while 275 counters traded unchanged. Volume was 895.84 million shares valued at RM498.92 million.

The ringgit weakened 0.19% to 3.1316 versus the US dollar; crude palm oil futures for the third month delivery slipped RM3 per tonne to RM3,112, crude oil gained 13 cents per barrel to US$100.62 while gold shed US$3.57 an ounce to US$1,738.23.

At the regional markets, Japan’s Nikkei 225 was down 0.52% to 8,676.76, Hong Kong’s Hang Seng Index lost 0.67% to 19,111.64, Taiwan’s Taiex fell 1.17% to 6,950.81, Singapore’s Straits Times Index lost 1.59% to 2,738.25 and South Korea’s Kospi shed 0.28% to 1,914.00.

Meanwhile, the Shanghai Composite Index gained 0.42% to 2,342.42.

Among the losers on Bursa Malaysia, BAT fell 34 sen to RM47.66, JT International down 25 sen to RM6.55, KLK 22 sen to RM21.94, Hong Leong Bank and IJM Corp 20 sen each to RM10.54 and RM5.50, Axiata 17 sen to RM4.92, Uzma and CIMB 15 sen each to RM1.60 and RM7.05, while Allianz and KrisAssets lost 13 sen each to RM4.75 and RM5.25.

SAAG was the most actively traded counter with 64.4 million shares done. The stock was up half a sen to 7 sen.

Other actives included DVM, Sycal, iDimension, Timecom, Time and MUI Industries.

Among the gainers this morning were Nestle, BHIC, Boxpak, BLD PLANTATION []s, HLFG, Cycle & Carriage Bintang, Milux, Ajinomoto, PPB and Hwatai.



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KL shares still in the red at midday

Share prices on Bursa Malaysia continued to lose grounds at midday today as the market remained under pressure on external developments.

At 12.30pm, the FBM KLCI was down 10.10 points at 1,472.89, after opening 5.24 points lower at 1,477.75.

Dealers said investors were cautious ahead of a European Union summit this week. Economic data from Japan and Australia that indicated the global economy is slowing also weighed on the local equity market.

The Finance Index dipped 125.78 points to 13,107.37, the Industrial Index slipped 7.39 points to 2,673.03 and the Plantation Index dropped 49.88 points to 7,832.94. The FBM Emas Index lost 59.25 points to 10,085.62, the FBM 70 Index declined 35.03 points to 10,997.26 and the FBM Ace Index was down by 46.98 points to 4,214.26.

Decliners led advancers by 364 to 216 while 275 counters were unchanged, 631 untraded and 25 others suspended. Trading was moderate with a total volume of 895.838 million shares worth RM498.921 million.

Among active stocks, SAAG Consolidated earned 0.5 sen to 7.0 sen, Sycal Ven-WA added 3.5 sen to 13 sen and DVM Technology inched up 1.0 sen to 10 sen.

Sanichi Technology was suspended pending a reply to queries and further clarification on the details of the two announcements made by the company yesterday. British American Tobacco lost 34 sen to RM47.66, JT International eased 25 sen to RM6.55, while Kuala Lumpur Kepong erased 22 sen to RM21.94

Of the heavyweights, Maybank dropped 9.0 sen to RM8.21, Sime darby was flat at RM8.94, CIMB fell 15 sen to RM7.05 while Petronas Chemicals edged up 1.0 sen to RM6.09. -- Bernama



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Asian markets fall on doubts over European leaders’ summit outcome

KUALA LUMPUR (Dec 8): The FBM KLCI slipped on Thursday in line with the weaker overnight close at European bourses as well as Wall Street, following growing concerns over the eurozone debt crisis and doubts over whether a European policymakers’ summit this week would solve the financial woes there.

The FBM KLCI fell 10.62 points to 1,472.37 at 10am, weighed by losses at blue chip stocks.

Losers led gainers by 232 to 164, while 195 counters traded unchanged. Volume was 465.58 million shares valued at RM206.77 million.

Asian shares drifted lower as a report that the G20 was preparing a $600 billion lending facility for the International Monetary Fund (IMF) to help Europe was denied by G20 and IMF officials, according to Reuters.

Meanwhile, Standard & Poor's warned on Wednesday that it could cut the credit ratings of the European Union and large euro-zone banks if a mass downgrade of euro-zone countries materializes.

S&P had said on Monday it may downgrade nearly all 17 euro-zone countries if EU leaders fail to agree on a solution for the region's debt crisis during Friday's summit.

At the regional markets, Hong Kong’s Hang Seng Index lost 1.03% to 19,041.67, Japan’s Nikkei 225 fell 0.97% to 8,637.95, Taiwan’s Taiex was down 1.36% to 6,937.42, South Korea’s Kospi lost 0.69% to 1,906.23, Singapore’s Straits Times Index fell 0.68% to 1,472.90 and the Shanghai Composite Index shed 0.62% to 2,318.21.

Maybank Investment Bank Bhd head of retail research and chief chartist Lee Cheng Hooi in a note to clients Thursday said the FBM KLCI’s resistance areas of 1,484 and 1,503 may cap market gains, whilst the obvious support areas may be located at 1,465 and 1,482.

“Due to the US markets’ mixed tone last night, we might a quiet and benign day for the local index today,” he said.

Among the losers on Bursa Malaysia at mid-morning were BAT that fell 40 sen to RM47.60, JT International down 29 sen to RM6.51, IJM Corp 25 sen to RM5.45, KLK 24 sen to RM21.92, PPB and Hong Leong Bank down 20 sen each to RM16.20 and RM10.54, Uzma 15 sen to RM1.60, Allianz and KrisAssets down 13 sen each to RM4.75 and RM5.25, while Axiata lost 12 sen to RM4.97.

SAAG was the most actively traded counter with 60.5 million shares done. The stock added one sen to 7.5 sen.

Other actives include DVM, Sycal, Timecom, Time, MUI Industries and YGL.

Meanwhile, gainers included Nestle, United PLANTATION []s, BHIC, Proton, Dutch Lady, Tradewinds Plantations, Petrol-One, Boxpak and Eng Kah.



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DRB-Hicom gains afer VW partnership news

DRB-Hicom Bhd, an automotive, construction and property group, gained in Kuala Lumpur trading after the Star newspaper reported that it may partner Volkswagen AG to buy a controlling stake in Proton Holdings Bhd.

The stock increased 2.9 per cent to RM2.16 at 10.09am local time. -- Bloomberg



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Proton jumps on GM tie-up talks news

Proton Holdings Bhd rose in Kuala Lumpur trading after Bloomberg News reported that General Motors Co had begun partnership talks with Malaysia’s national carmaker, citing two unidentified people familiar with the matter.

The stock rose 1.2 per cent to RM4.09 at 9.16am local time. Separately, the Star newspaper reported that Volkswagen AG may partner Malaysia’s DRB-Hicom Bhd. to buy a controlling stake in Proton, citing an unnamed person familiar with the matter. -- Bloomberg



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KL shares subdued in early trade

Share prices on Bursa Malaysia got off to a subdued start today as investors globally remained cautious ahead of a European Union summit this week.

Fifteen minutes after the opening, the FBM KLCI slipped 10.22 points to 1,472.77. It had opened 5.24 points lower at 1,477.75.

Dealers said investors' sentiment on lingering hopes that the euro zone would figure out a solution to its ongoing debt crisis continued to weigh on the local bourse. Investors were also cautious of the upcoming China inflation data later this week.

The Finance Index fell 74.721 points to 13,158.43, the Plantation Index eased 38.7 points to 7,844.12 and the Industrial Index slipped 21.76 points to 2,658.66. The FBM Emas Index dropped 54.811 points to 10,090.06, the FBM Mid 70 Index was 26.64 points lower at 11,005.65 and the FBM ACE Index decreased 10.47 points to 4,250.77.

Decliners led advancers 135 to 83 while 149 counters were unchanged, 1,119 untraded and 25 others suspended. Turnover stood at 158.071 million shares valued at RM52.450 million.

Sycal Ven-WA added 5.0 sen to 14.5 sen, SAAG Consolidated was flat at 6.5 sen, Sycal Ventures inched up 4.0 sen to 27.5 sen and Denko Industrial advanced 3.5 sen to 41.5 sen.

For heavyweights, Maybank shed 7.0 sen to RM8.23, Sime Darby dwindled 10 sen to RM8.84, CIMB eased 8.0 sen to RM7.12 while Petronas Chemicals was unchanged at RM6.08. -- Bernama



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BHIC advances in early trade

KUALA LUMPUR (Dec 8): Shares of BOUSTEAD HEAVY INDUSTRIES CORPORATION BHD (BHIC) rose in early trade on Thursday after announced that its subsidiary BHIC AeroServices (BHICAS) Sdn Bhd had been awarded the certification by Directorate General Technical Airworthiness of the Malaysian Armed Forces, which is the Malaysian technical airworthiness authority.

At 9.45am, BHIC gained 20 sen to RM3.06 with 409,000 shares traded.

The AMO certification is for the maintainance, repair & overhaul (MRO) of Eurocopter AS555SN Fennec helicopters, it said.

BHICAS is a joint venture between BHIC Defence Technologies Sdn Bhd, a wholly-owned subsidiary of Boustead Penang Shipyard Sdn Bhd, Prestige Pillar Sdn Bhd and Eurocopter Malaysia Sdn Bhd, a wholly-owned subsidiary of Eurocopter.



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GM said to revive talks with Proton

General Motors Co has begun talks with Proton Holdings Bhd, Malaysia’s biggest automaker, to form a manufacturing venture in the Southeast Asian country, according to two people familiar with the matter.

The discussions revive negotiations that were scrapped in 2007, said the people, who asked not to be identified because the talks are confidential. The talks are preliminary and may not lead to an agreement, they said.

For GM, an agreement would help the Detroit-based carmaker expand manufacturing of cars for Southeast Asia beyond Thailand, where the country is reeling from its worst floods in almost 70 years.

A deal may allow Proton, which has held unsuccessful alliance talks with Volkswagen AG and Peugeot SA, to gain access to GM technology that could help the Malaysian carmaker boost sales overseas.

Klaus-Peter Martin, a GM spokesman in Detroit, declined to comment. Izad Raya, head of group communications at Proton, which owns sports-car maker Lotus Group International Ltd, said the company doesn’t comment on speculation.

GM isn’t interested in buying the controlling 43 per cent stake in Proton held by Malaysian sovereign wealth fund Khazanah Nasional Bhd, the people said. Proton shares jumped 45 per cent over two days on Dec 5 after the Edge reported the state-owned asset manager was preparing to auction its holdings.

Auto and property group DRB-Hicom Bhd, Naza Group and Proton chairman Mohd Nadzmi Mohd Salleh submitted separate bids to Khazanah for Proton, Malaysia’s The New Straits Times newspaper reported this week, without saying where they obtained the information. -- Bloomberg



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Boustead rises to 3-month high

Boustead Heavy Industries Corp, a Malaysian shipbuilding and engineering group, rose to a three- month high in Kuala Lumpur trading after announcing plans to form a pilot training venture with Eurocopter Malaysia Sdn.

The stock rose 3.5 per cent to RM2.96 at 9.06 am local time, set for its highest close since Sept 5. -- Bloomberg



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Johan drops on RM14m Q3 loss

Johan Holdings Bhd, a ceramic-tile maker, dropped in Kuala Lumpur trading after reporting third- quarter net loss of RM13.9 million, compared with RM1.8 million profit a year earlier.

The stock lost 4 per cent to 24 sen at 9.05 am local time. -- Bloomberg



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KLCI falls on eurozone uncertainties

KUALA LUMPUR (Dec 8): The FBM KLCI opened lower on Thursday in line with most key regional markets, following the weaker overnight close at European bourses and wobbly Wall Street.

At 9.10am, the FBM KLCI fell 10.12 points to 1,472.87, weighed by losses at blue chip stocks.

Losers led gainers by 117 to 73, while 132 counters traded unchanged. Volume was 113.17 million shares valued at RM38.47 million.

Among the early decliners were PPB, IJM Corp, Uzma, Sime Darby, Axiata, IOI Corp, Top Glove, Gamuda and Petronas Dagangan.



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Automotive-based Sanichi plunges into energy sector

KUALA LUMPUR: Sanichi Technology Bhd, a mould maker for the automotive sector, has made its first venture into the energy sector by securing a two-year contract to supply three million tonnes of coal a year to China.

Johor-based Sanichi also formed a joint venture agreement with coal trader FiRC Trade (Malaysia) Sdn Bhd to sell steam coal in China.

Sanichi managing director Datuk Dr Jacky Pang said this venture will be the company's new business division and will bring it to a higher level in the future.

"Prospects are good because there is an overdemand situation for coal globally," he told reporters here at the company's KL office yesterday.

The steam coal will be supplied by Indonesia's coal miner CV Permata Al Zahra, which had signed an order supply commitment with Sanichi.

Sanichi has committed to undertake business development activities to market and distribute the coal supplied by Permata together with FiRC.

Sanichi and FiRC have agreed to a 50:50 profit-sharing ratio from the trading business.

"We will start supplying coal in January next year and it will impact positively to the company's future earnings and growth," said Pang.

However, he said the company is not in a position to make a clear assessment of the potential impact on Sanichi's earnings per share, net assets per share and gearing for the financial year ending June 30 2012.

Pang said China uses 2.5 billion tonnes of steam coal a year, of which 35 per cent Indonesia supplies followed by countries like South Africa, Australia and Mongolia.

Sanichi, which is listed on the ACE market, will fund the activities through internally-generated funds.

Pang said it will approach Tenaga Nasional to buy its coal and may also own mine in Indonesia.



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Pavilion REIT seeks expansion

PAVILION Real Estate Investment Trust (Pavilion REIT), the largest retail REIT in Malaysia, is eyeing more local assets to spur growth.


Pavilion REIT Management Sdn Bhd chief executive officer Philip Ho said the trust is seeking opportunities to expand its assets in Penang, Johor and the Klang Valley.

Ho said Pavillion REIT will evaluate any financially viable investment opportunity that comes around.

"As a retail real estate investment trust, our duty is to acquire malls and build up the portfolio," he told reporters after its listing ceremony here.

Ho said the company's trustees had signed three rights of first refusal (ROFR) to acquire Farenheit88, the Pavilion Mall's extension, and a mall in USJ Subang Jaya.

With an appraised value of RM3.54 billion, Pavilion REIT is currently made up of two assets - Pavilion Mall and Pavilion Tower.

The mall, which contributes 96.4 per cent to the appraised value, has 1.3 million sq ft of net lettable area.

It boasts of about 450 retail tenants, making it the largest premium retail fashion mall in Malaysia.

Pavilion REIT yesterday fetched a 13.3 per cent premium over its offer price on its debut on Bursa Malaysia.

It opened at RM1.03, 13 sen higher than its institutional price of 90 sen, with 15.7 million unit shares traded.

Ho said the listing provides the company with direct access to capital markets, thereby strengthening its financial capacity to seize new opportunities in the country.

"We are committed to enhance unitholders' return and value, both through the organic growth of our existing portfolio as well as visible growth via acquisitions," he added.



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MAS regional premium airline to start ops mid-2012

Malaysia Airlines (MAS) will start its yet-to-be-named regional premium airline by mid-2012, focusing on routes in Asean, South Asia and Greater China.

In the long term, it will fly to all of the domestic and regional routes serviced by MAS today.

The airline will be a single aircraft-type one, operating only the Boeing 737-800.

“We intend to create a separate management structure to focus on the unique customer needs of regional premium travellers.

“The new airline will set new standards for product and service quality, cost efficiency and operational excellence. It will set a template for the airline’s success,” Ahmad Jauhari said.

Meanwhile, Firefly is also expected to continue with its turboprop operations.



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MAS right sizing to fly back into the black

Malaysia Airlines expects another year of losses in 2012, before the “right sizing” of its network, staff and non-core businesses helps it get back into the black in 2013.


MAS group chief executive officer Ahmad Jauhari Yahya yesterday said the airline expects to start generating positive operating cash flow next year, but is still likely to post a net loss of RM165 million.

The airline reported a loss of RM1.2 billion for the first three quarters of 2011 and does not expect to make a profit for the full year.

“We firmly believe all is not lost,” Ahmad Jauhari said in his first meeting with the media since his appointment more than three months ago.

Also present was group deputy chief execuB4tive officer Mohammed Rashdan Yusof.

Ahmad Jauhari said the airline would explore all options in handling the issue of its 20,000 staff strength, adding that a separation scheme would be a last resort.

“First, we will have to spin off our businesses as separate entities, then we’ll see about relocating staff so that we operate at optimum level,” he said.

MAS also has an engineering division, a pilot training and safety academy, ground handling division and a cargo arm.

According to the recovery plan, MAS is looking to generate between RM1.2 billion and RM1.5 billion in cash through a combination of a smaller network, improved revenue management and sales and marketing efforts, re-negotiation of contracts and spinning off of its subsidiaries.

Ahmad Jauhari does not rule out the possibility of disposing of its other businesses such as cargo and engineering entirely if the price is right.

However, he maintained that the idea of bringing in strategic partners is to allow it to grow to its full potential and help reduce its own costs.

The national carrier plans to shrink its network by 12 per cent in 2012 by suspending routes to South Africa, Argentina and Dubai, among others.

According to MAS, 40 per cent of its long-haul routes are losing money.

MAS will operate only 88 aircraft in 2012, with plans to end operating leases for 36 aircraft.

Despite cuts, there are plans to increase frequencies to destinations such as Manila, Jakarta and Narita in Japan.

Ahmad Jauhari said MAS was in talks with not only Australian carrier Qantas Airways but also other carriers on potential partnerships.

He did not elaborate.

On the Comprehensive Collaboration Framework (CCF) with AirAsia and AirAsia X announced in August this year, he said MAS had begun discussions with them on joint procurement and consolidation of key activities that could bring a savings of RM100 million.

"I am not saying that it would have been impossible to have this collaboration with AirAsia and AirAsia X if we didn't have the CCF, but it certainly makes it easier," Ahmad Jauhari said.

He also said there were opportunities for further collaboration.



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Stocks to watch MAS, Toyo Ink, Sanichi, BHIC

KUALA LUMPUR (Dec 8): Gains at the FBM KLCI on Thursday could be capped by cautious sentiment ahead of a crucial European Union leaders’ summit later this week, as pressure mounts on policymakers there to thrash out a definitive plan to salvage the region from a deeper debt crisis.

European shares turned briefly negative on Wednesday after downbeat comments from a German politician about the chances for a comprehensive deal at a leaders' summit this week, aimed at resolving the region's debt crisis, according to Reuters.

Regional markets, including at Bursa Malaysia, had closed higher on Wednesday after the Financial Times reported that European leaders would discuss boosting the firepower of the euro zone bailout fund.

On Bursa Malaysia, among the stocks that could be in focus today are MALAYSIAN AIRLINE SYSTEM BHD [], TOYO INK GROUP BHD [], SANICHI TECHNOLOGY BHD [] and BOUSTEAD HEAVY INDUSTRIES CORPORATION BHD.

MAS aims to fly back into the black by 2013 on the back of an aggressive capacity cut, which is possibly the largest in the airline’s history.

The airline said it would reduce 12% of its capacity and cut unprofitable routes over the next one year, a move that it said would save it some RM300 million, which accounts for over 20% of the RM1.18 billion to RM1.51 billion in cost savings and additional income it aims to achieve under its turnaround plan unveiled yesterday.

MAS also confirmed the launch of a new regional premium airline, which will serve mainly Asian routes, by the middle of next year.

However, the airline will remain in the red this year after posting a RM1.25 billion loss for the first nine months.

Toyo Ink has been given the nod to commence research and development of the proposed US$2.5 billion Song Hau 2 Thermo Power Plant in Vietnam.

The company said on Wednesday that it had a letter from Vietnam's Ministry of Industry and Trade for it to start research and development of the plant with a capacity of 2 X 1000 MW at Song Hau Power Center, Hau Giang Province.

Sanichi, a precision-mould maker, is venturing into the minerals mining and supply business via a collaboration with FIRC Trade (Malaysia) Sdn Bhd. The latter is principally involved in the mining industry as contract owners and joint venture partners with several producing iron ore and coal mines in Malaysia and Indonesia.

Sanichi said under that the collaboration, FIRC would provide technical expertise and engineering support to Sanichi, while the group will co-brand with FIRC for the purposes of marketing and business development.

BHIC’s subsidiary BHIC AeroServices (BHICAS) Sdn Bhd was awarded the certification by Directorate General Technical Airworthiness of the Malaysian Armed Forces, which the Malaysian technical airworthiness authority.

The AMO certification is for the maintainance, repair & overhaul (MRO) of Eurocopter AS555SN Fennec helicopters, it said.

BHICAS is a joint venture between BHIC Defence Technologies Sdn Bhd, a wholly-owned subsidiary of Boustead Penang Shipyard Sdn Bhd, Prestige Pillar Sdn Bhd and Eurocopter Malaysia Sdn Bhd, a wholly-owned subsidiary of Eurocopter.



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