Al Femah seeks RM13.1m claim from Faber, Propel

KUALA LUMPUR (Dec 13): Al Femah Contracting and Transporting Establishment is seeking RM13.10 million in claims from FABER GROUP BHD []’s subsidiary and Projek Penyelenggaraan Lebuhraya Bhd (Propel).

Faber said on Tuesday its subsidiary Faber Limited Liability Company (Faber LLC) had received a summons and statement of claim from Al Femah.

Al Femah had sought the Court of First Instance, in Abu Dhabi Emirates to order FLLC and Propel to pay the amount. The first hearing of the summons and statement of claim will be held on Dec 29.

Al Femah is a Propel’s sub-contractor for the maintenance of facilities and projects at Madinat Zayed, Zone-1, which was awarded by the Department of Municipal Affairs, Western Region Municipality, Emirate of Abu Dhabi.

Propel in turn is a sub-contractor of Faber LLC for the project.

“Propel has confirmed with Faber Group the balance outstanding is RM5.74 million. Propel received a further claim of RM7.30 million which Propel is currently disputing,” it said.



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Ramunia posts lower pre-tax profit

Oil and gas company Ramunia Holdings Bhd has reported a significantly lower profit before tax of RM4.714 million for the year ended Oct 31, 2011 from RM64.359 million in the previous corresponding period. Revenue for the period decreased to RM18.955 million from RM34.865 million previously, it said in its filing to Bursa.

For the quarter ended Oct 31, 2011, profit reduced to RM112,000 from RM30.365 million previously. Revenue for the current quarter, however, increased to RM15.674 million from RM992,000.

Ramunia said the income in the preceding year included a onetime write-back item. -- Bernama



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Scomi Engr inks venture pact in Brazil

Scomi Engineering Bhd, a subsidiary of Scomi Group Bhd, has signed a non-binding memorandum of understanding with Montagens e Projetos Especiais SA (MPE) and Brasell Gestão Empresarial, LTDA, to set up a joint-venture company in Brazil.

Scomi Engineering said proposed activities to be undertaken by the joint-venture company include monorail manufacturing and participating in other rail-related projects such as systems supply and installation and other types of rolling stock supply and assembly such as Metro and light rail vehicles.

"Through this partnership with MPE, Scomi will be in a stronger position to capitalise on rail projects, driven by investments to expand and improve urban transport systems in preparation for the FIFA World Cup and the Olympic Games," Scomi Brazil Country president Hilmy Zaini Zainal said in a statement.

With the burgeoning rail market in Brazil, the government is expected to float at least another 20 tenders in the next 24 months for urban transport projects, of which 35 per cent is projected to be monorail systems. Currently, Scomi is involved in two monorail projects in Brazil, with a combined value of RM5.36 billion. -- Bernama



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Goldis posts higher Q3 pre-tax profit

Goldis Bhd posted a significantly higher pre-tax profit of RM237.64 million in the third quarter ended October 31, 2011, compared to RM6.50 million recorded in the same period last year.

In a filing to Bursa Malaysia today, the company attributed the profit to gains from the disposal of a subsidiary amounting to RM221.2 million during the quarter.

There was also higher contribution from the property and investment segment, it said. Goldis' revenue increased to RM75.82 million against the RM50.64 million previously.

"Increase in revenue was due to higher contribution from the property, ICT, paper and hotel segment," it added. -- Bernama



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Dr M: Buyer of Khazanah's Proton stake may have to inject RM2b

KUALA LUMPUR (Dec 13): PROTON HOLDINGS BHD []'s adviser, Tun Dr Mahathir Mohamad said the buyer of Khazanah Nasional Bhd's 42.7% stake in the national car maker might have to inject maybe another RM2 billion more.

He said on Tuesday, it was his hope to see the company with the biggest amount of money to buy the stake which Khazanah had planned to sell.

"At the moment, Proton cannot make progress, introduce new vehicles and all that, because of shortage of funds," he said at a press conference after officiating the launch of Sahara Run Gold Dinar here on Tuesday.

Dr Mahathir said that Khazanah should make a decision because the shares belonged to the company.

"I heard it (Khazanah) wants to sell but has not made an announcement. It can be good, depends on who is taking over and how much they are paying," he added.

Dr Mahathir's worry is that if the price of the shares are too high, turning around the company may become difficult.

"Like everything else, if the capital cost is very high, it's very difficult to make a profit," he said.

Dr Mahathir said his concern was for Proton to be well managed and be a successful company, adding that he will not "make any money from that."

He also said that the buyer of the stake will have to make a general offer (GO) if it buys more than 30% equity interest.

"I understand that Khazanah has 42% to sell, so whether DRB-Hicom or whoever, the buyer has to make a GO for the rest of the shares," he said.

Asked his opinion on a GO for Proton, he said that he was "not okay with it", adding that it was not because the buyer would be taking Proton away but because the cost will be very high and that would make turning it around very difficult.

"The buyer will have to inject more money into Proton, maybe another RM2 billion more," he explained.

Therefore, the company that buys the stake must be financially strong and know how to manage or it may result in the company losing and that will hurt Proton.

"I don't want Proton to be hurt, I don't care if others are hurt, but not Proton," he added. - Bernama




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DRB-Hicom mulls turning Pulau Rebak into luxury holiday paradise

KUALA LUMPUR (Dec 13): DRB-HICOM BHD [], via its unit, Rebak Island Marina Bhd, intends to launch a world-class luxury holiday concept property development project on Pulau Rebak in Langkawi for domestic and foreign markets.

DRB-Hicom said on Tuesday Pulau Rebak's strategic location and the government's plan to upgrade the holiday haven on par with the world's top holiday islands would serve as a catalyst to the company's aspirations.

Group managing director Datuk Seri Mohd Khamil Jamil said the launch of the Langkawi Tourism Blueprint by Prime Minister Datuk Seri Najib Tun Razak recently, entailing an estimated RM5 billion investment over the next five years was a welcome initiative.

"I'm confident with the five-year comprehensive plan, coupled with the cooperation and participation of all parties, the government's estimate to double tourism revenue to RM3.8 billion via the arrival of three million tourists to Langkawi by 2015 will be realised," he said in a statement.

Mohd Khamil said DRB-Hicom, through its property, asset and CONSTRUCTION [] wing, has identified one of the strategies for Pulau Rebak -- developing "boutique" luxury holiday residences which would be sold to specific buyers from within and outside the country.

He said the absence of a contemporary ultra luxury world-class concept property development on a holiday island in Malaysia has provided an opportunity to DRB-Hicom to explore the potential.

"In fact, the DRB-Hicom Group has been discussing the Pulau Rebak Development Plan since 2009 and the feedback received from international development consultants, residential property owners and world-class holiday companies is very encouraging.

"This is a good sign as Langkawi truly has its unique attraction and distinct natural scenic landscape which have not been brought to the fore at international stage.

"The time has come for Malaysia to have luxury holiday residences which can woo the rich and the famous from throughout the world to pick Pulau Rebak as their choice holiday destination," he added. - Bernama



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Ramunia 4Q net profit RM112,000, absence of writeback

KUALA LUMPUR (Dec 13): RAMUNIA HOLDINGS BHD [] posted net profit of RM112,000 in the fourth quarter ended Oct 31, 2011 compared with RM30.36 million when there was a one-time writeback from a previously concluded scheme of arrangement.

It said on Tuesday that its revenue was RM15.67 million compared with only RM992,000 a year ago. Its earnings per share were 0.02 sen compared with 4.91 sen.

For the financial year ended Oct 31, 2011, its net profit plunged to RM4.66 million from RM65.78 million in the previous financial year. Its revenue fell 45.6% to RM18.95 million from RM34.86 million.



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Goldis 3Q net profit surges to RM237.4m on gain on disposal

KUALA LUMPUR (Dec 13): GOLDIS BHD [] net profit for the third quarter ended Oct 31, 2011 surged to RM237.4 million from RM11 million a year earlier, due mainly to the gain on disposal of a subsidiary amounting to RM221.2 million.

It said on Tuesday that revenue for the quarter rose 49.7% to RM75.82 million from RM50.64 million in 2010.

Earnings per share for the quarter under review jumped to 38.91 sen from 1.80 sen, while net assets per share was RM2.32.

The company declared a gross second interim dividend of half a sen and 9.50 sen single tier per ordinary share, to be paid Jan 18, 2012.

For the nine months ended Oct 31, Goldis posted net profit RM267.45 million compared to RM25.46 million in 2010, while revenue for the quarter increased to RM203.04 million from RM133.59 million.

Reviewing its performance, Goldis said the increase in revenue for the period was due to higher contribution from its property, ICT, paper and hotel segment.

On its prospects, the company said its performance for the financial year ending Jan 31, 2012 would be satisfactory.



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Vendor rejects S P Setia’s bid for more time over RM330m land purchase

KUALA LUMPUR (Dec 13): S P Setia Bhd’s request for more time to fulfill the conditions in its purchase of 1,010.5 acres of land in Ulu Langat, Selangor for RM330.13 million was rejected by the vendor Ban Guan Hin Realty Sdn Bhd.

S P Setia said on Tuesday Ban Guan Hin Realty did not agree to an extension of the period to fulfill the conditions, including securing the Estate Land Board’s approval for the sale and transfer of the land to the purchaser.

“The purchaser is currently seeking legal advice on its position under the sale and purchase agreement and will seek the appropriate relief from the court, if necessary,” it said.




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PLB Engr disposes of land for RM22m

PLB Engineering Bhd's wholly-owned sub-subsidiary, Pelangi Sehati Development Sdn Bhd, has disposed of a vacant freehold in Seberang Perai Selatan to Chin Hin Land Sdn Bhd for RM22.183 million.

In a filing to Bursa Malaysia today, PLB said the disposal was in line with the group's strategy of preserving capital value and strengthening the balance sheet via realising assets which can then be developed in other projects and investments.

"The disposal is expected to result a one-off gain (net of tax) of RM5 million (estimated) to the group after deducting the development cost incurred and other sundry expenses fees," PLB said.

Proceeds from the disposal would be utilised for working capital and/or repayment of bank borrowings, the company said.

As at Aug 31, the total bank borrowings of the PLB amounted to approximately RM56.98 million. -- Bernama



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PLB Engineering to gain RM5m from disposal of land

KUALA LUMPUR (Dec 13): PLB ENGINEERING BHD [] expects a one-off net gain of RM5 million from the disposal of a piece of freehold land in Seberang Perai for RM22.18 million.

The company said on Tuesday that its wholly owned sub-subsidiary Pelangi Sehati Development Sdn Bhd had entered into an agreement with Chin Hin Land Sdn Bhd to dispose the land.

PLB Engineering said its cost of investment in the land was RM6.34 million and that the land was acquired in July 2005, adding that the net book value of the land is RM10.24 million as per Pelangi’s audited financial statements as at Aug 31, 2011.

The company said the entire proceeds from the disposal (net of estimated expenses) would utilised to pare down its borrowings.

The company said that as at Aug 31, 2011, its total bank borrowings amounted to approximately RM56.98 million.

“Assuming the entire proceeds from the disposal were utilised to pare down borrowings, the annual savings in interest is expected to be approximately RM1.6 million based on an average interest rate of approximately 8% per annum.

“The proceeds from the disposal are expected to be fully utilised in 2012,” it said.

PLB Engineering said the disposal was in line with its strategy of preserving capital value and strengthening the balance sheet via realising assets which can then be deployed in other projects and investments to maximise the returns and/or for repayment of borrowings.




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Mah Sing disputes with JV partners over Jln Tun Razak project

KUALA LUMPUR (Dec 13): MAH SING GROUP BHD [] has disputed with the joint venture partners for the proposed development of a piece of prime land along Jalan Tun Razak here and is maintaining that the agreement is valid.

Mah Sing said on Tuesday the two parties -- Asie Sdn Bhd and Usaha Nusantara Sdn Bhd -- had claimed the joint venture agreement (JVA) for the development of the 4.08 acres site had lapsed “and is of no effect from Dec 2, 2011” as the conditions were not met.

“Mah Sing however, takes a different position and maintains that the JVA has not lapsed,” it said, referring to its Dec 6 announcement that it waived the conditions in the Aug 2 announcement.

“Mah Sing’s solicitors have today issued a letter to Asie’s and Usaha Nusantara’s solicitors inter alia maintaining this position,” it said.

It added that its solicitors also returned the RM6.44 million deposit, with interest earned, to Asie and Usaha Nusantara, as it was unable to accept the refund of the deposit.



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Market Commentary

The FBM KLCI index lost 1.71 points or 0.12% on Tuesday. The Finance Index increased 0.00% to 13007.61 points, the Properties Index dropped 0.56% to 952.15 points and the Plantation Index rose 0.73% to 7985.38 points. The market traded within a range of 10.21 points between an intra-day high of 1467.52 and a low of 1457.31 during the session.

Actively traded stocks include SANICHI, AFFIN-CE, MAS-CC, PROTON-CG, UTOPIA, MBSB-CA, BIMB-CB, PROTON-CH, PROTON-CI and BIMB-CC. Trading volume increased to 1829.66 mil shares worth RM1385.36 mil as compared to Monday’s 1595.73 mil shares worth RM1129.18 mil.

Leading Movers were KLK (+70 sen to RM23.10), BAT (+150 sen to RM48.70), AXIATA (+3 sen to RM4.85), MAYBANK (+3 sen to RM8.19) and PETGAS (+18 sen to RM14.18). Lagging Movers were CIMB (-11 sen to RM6.84), GENTING (-18 sen to RM10.64), MISC (-12 sen to RM5.48), PPB (-24 sen to RM16.36) and TENAGA (-3 sen to RM5.47). Market breadth was negative with 344 gainers as compared to 386 losers. -- JF Apex Securities Bhd






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Syed Mokhtar's DRB best fit for Proton: Dr M

Syed Mokhtar Al-Bukhary, Malaysia’s second-youngest billionaire, received former Prime Minister Mahathir Mohamad’s endorsement to acquire a controlling stake in automaker Proton Holdings Bhd.

DRB-Hicom Bhd, Syed Mokhtar’s auto assembler, is the best candidate to buy the government’s 43 per cent stake in Proton, Mahathir, now an adviser at the carmaker he founded in 1983, said in a joint interview yesterday in Putrajaya, outside Kuala Lumpur.

Officials at DRB and Khazanah Nasional Bhd, the government investment arm holding the Proton shares, weren’t immediately available to comment.

The support of the man who was Malaysia’s prime minister for two decades indicates DRB’s purchase of the stake -- valued at RM993 million (US$314 million) at current prices -- is imminent because of the former premier’s lingering influence, according to James Ratnam, an analyst at TA Securities Holdings Bhd.

Proton would add the owner of the Lotus sports car brand to Syed Mokhtar’s business empire, which includes ports, airports and power plants.

“Mahathir’s view and approval would be sought by Khazanah if it wants to sell Proton,” said Ratnam, an analyst in Kuala Lumpur. “He is the adviser and founder of Proton, the company is still very close to his heart even as he has retired.”

Proton advanced 1 per cent to close at RM4.27 in Kuala Lumpur today, extending its lead as the best performer on the FTSE Bursa Malaysia 100 Index in the past month to 58 per cent. DRB-Hicom was unchanged at RM2.12.

General Offer

Should DRB seek to buy a 43 per cent stake, it would be obliged to make a general offer for Proton’s remaining shares under Malaysian acquisition rules.

Syed Mokhtar, 60, is the Southeast Asian nation’s second- youngest billionaire after Berjaya Corp Chairman Vincent Tan, according to Forbes magazine’s latest rankings.

His ties to Mahathir, who describes the Malaysian tycoon as a friend, stretch back more than a decade. About a year before Mahathir stepped down in 2003 as prime minister, he awarded a US$3.8 billion rail project -- then the nation’s biggest infrastructure undertaking -- to contractors including Syed Mokhtar’s MMC Corp.

DRB would be able to consolidate and expand its share of Malaysia automotive market with a Proton acquisition, TA Securities’ Ratnam said. DRB manufactures, distributes and assembles a range of vehicles from motorcycles to garbage trucks for brands including Suzuki, Mercedes-Benz and Yamaha. It has eight assembly plants of which four are for cars, including one in Malaysia’s southern Malacca state where Hondas are made.

Volkswagen Partnership

Selangor-based DRB began manufacturing its first Volkswagen AG Passat vehicles several weeks ago after signing a partnership agreement with the German carmaker last year.

Proton, whose vehicles are driven by taxi drivers across Malaysia, are among the cheapest cars sold in the country. The company, which had two annual net losses over the past five years, is poised to see its profit fall 51 per cent in the year ending March, according to the average of 13 analyst estimates compiled by Bloomberg.

Proton has been looking for a strategic partner to compete with global automakers such as Toyota Motor Corp. Partnership talks to form a partnership with Volkswagen, Europe’s largest carmaker, ended last year.

While Khazanah approached local companies Naza Group and Sime Darby Bhd. about buying the Proton stake, Syed Mokhtar’s DRB may be the best fit, said Mahathir.

“DRB seems well-run,” Mahathir said. “It is already producing cars for Suzuki, Mercedes and Volkswagen. They have the capacity to turn around Proton and won’t undermine its vendors.” -- Bloomberg



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AMMB, Friends invest in takaful venture

AMMB Holdings Bhd and Friends Provident Group Plc will invest RM100 million in their Islamic insurance joint venture, according to statement from Resolution Ltd, Friends Provident’s parent.

AMMB will hold 70 per cent of the Islamic insurance, or takaful, venture, it said. -- Bloomberg



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KLCI closes lower but narrows losses

KUALA LUMPUR (Dec 13): The FBM KLCI narrowed its losses on Tuesday, but investor sentiment across the region remained jittery as the Eurozone debt crisis and fear of credit downgrades in that region kept investors on the sidelines.

The FBM KLCI close 1.71 points lower at 1,465.39. The index had earlier fallen to its intra-morning low of 1,457.31.

Losers edged gainers by 386 to 344, while 315 counters traded unchanged. Volume was 1.83 billion shares valued at RM1.39 billion.

Meanwhile, European shares rose on Tuesday as investors bought up beaten-down stocks following sharp falls on Monday after a plan outlined at last week's EU summit for stricter budget rules failed to ease worries about the region's debt crisis, according to Reuters.

Gains, however, are likely to be short-lived on concern about credit downgrades after Moody's Investors Service said its ratings for all EU member states would be reviewed in the first quarter of 2012 as well as eight Spanish banks, it said.

Also, market activity is likely to be subdued ahead of the release of US retail sales for November due out later and the outcome of the Federal Reserve's FOMC meeting, though no change in U.S. interest rates is expected, it said.

At the regional markets, the Shanghai Composite Index fell 1.87% to 2,248.59, South Korea’s Kospi lost 1.88% to 1,864.06, Japan’s Nikkei was down 1.17% to 3,292.79, Taiwan’s Taiex lost 0.76% to 6,896.31, Hong Kong’s Hang Seng Index fell 0.69% to 18,447.17 and Singapore’s Straits Times Index.

On Bursa Malaysia, JobStreet was the top loser and fell 28 sen to RM2.50; PPB lost 24 sen to RM16.36, NSOP down 20 sen to RM5.36, Genting 19 sen to RM10.64, Guan Chong 15 sen to RM2.15, DKSH 14 sen to RM1.59, Sungei Bagan and Genting PLANTATION []s 13 sen each to RM2.82 and RM8.15, while MISC was down 12 sen to RM5.48.

Sanichi was the most actively traded counter with 170.3 million shares done. The stock added 5.5 sen to 23 sen.

Other actives included Utopia, Proton, warrants of MAS, BIMB, MBSB and Affin respectively.

Among the gainers, BAT added RM1.50 to RM48.70, GAB and KLK up 70 sen each to RM12.98 and RM23.10, Dutch Lady 42 sen to RM26.40, HLFG 38 sen to RM11.70, Carlsberg 31 sen to RM8.46, Orient 29 sen to RM5.30, JT International 24 sen to RM6.92, F&N 22 sen to RM18.22 and Petronas Dagangan 20 sen to RM17.38.



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Petronas confirms fire at Kerteh refinery

Petroliam Nasional Bhd, Malaysia’s state oil and gas company, confirmed a fire broke out yesterday at the crude distillation unit of its refinery in Kerteh, Terengganu state.

Four contract workers were injured and the fire was extinguished within 15 minutes, Petroliam Nasional, or Petronas, said in an e-mailed statement today. While investigations are still underway, there is no visible damage to equipment and surrounding structure, it said. -- Bloomberg



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BToto up dividend payment, 2Q net profit rise 62%

KUALA LUMPUR: Berjaya Sports Toto Bhd (BToto), which saw its second quarter net profit jump by 62%, has also bumped up its dividend payment.

The number forecast operator yesterday declared a dividend per share of eight sen for 2QFY12 ended Oct 31. BToto has so far declared dividends of 16 sen per share for FY12 ending April 30, which is more than its earnings per share (EPS) of 14.79 sen.

“This will bring the total dividend distribution for the financial period ended Oct 31, 2011 to about RM213.7 million, representing about 108.1% of the attributable profit of the group for this financial period,” BToto said in its financial results announcement.

BToto’s net profit went up to RM105.67 million or 7.9 sen from RM65.08 million or 4.87 sen last year due to better luck factor despite fewer draws during the quarter. The company had a high prize payout in the previous corresponding period.

EPS stood at 14.79 sen, while net assets per share was 38 sen. The stock shed one sen to close at RM4.11 yesterday.



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Celcom inks agreement with Australian partner on digital TV

KUALA LUMPUR: Celcom Axiata Bhd has signed a teaming agreement with Broadcast Australia, its technical partner in the bid to build infrastructure for the country’s digital terrestrial television broadcasting (DTTB) network.

“Broadcast Australia has the technical know-how for the delivery of terrestrial digital TV, and will be backed by Celcom’s largest network and engineering presence across Malaysia,” said Celcom CEO Datuk Seri Shazalli Ramly at the signing ceremony yesterday.

The DTTB network is prepped for free-to-air broadcasters who have yet to make the switch from analogue to digital, which is expected to take place by 2015.

The move to digital is believed to be a welcome cost savings for broadcasters, as it runs on fewer spectrums and consumes less power relative to the analogue system.

Shazalli said Celcom had received a letter of intent (LoI) from the Malaysian Communications and Multimedia Commission (MCMC) last week and it is in the process of submitting its business plan for the project.

The company aims to provide infrastructure for the DTTB project and rent it out to TV broadcasters for recurring income.

MCMC had earlier specified that to qualify for the job, applicants have to have experienced technical partners.

Maxis Bhd has teamed up with Astro, which has launched digital transmission for its paid television service.

KUB Malaysia Bhd is with Germany’s Media Broadcast Systems, while YTL Communications partners with US company Sezmi.

Celcom Axiata Bhd chief of strategy and business transformation Farid Yunus (left) shaking hands with Broadcast Australia director of strategy and corporate development Brett Savill at the signing ceremony on digital television infrastructure, withnessed by Deputy Minister of Information, Communication and Culture Datuk Joseph Salang (second from right) and Shazalli.

Celcom estimates the cost of building infrastructure for the DTTB network would be RM500 million over a period of three to five years, adding that the share of investment and stakeholding by Celcom and Broadcast Australia has yet to be determined.

“This collaboration lowers the risk for such a crucial and large national project, with both partners having a proven track record and easy access to the required funding,” Shazalli said. However, he noted that that Celcom is open to the participation of more than one other party who may also provide a portion of the required funding.

The company said last week that it would spend RM1 billion next year for its 3G infrastructure, the amount invested in the current year.

The move is part of Celcom’s plan to diversify from its voice business, which currently contributes about 70% of total revenue.

Contribution from its data and business solutions is expected to grow to 50% by 2015 from the current 30%.

“Celcom has been seeking to diversify its business and this partnership is the first step towards achieving that objective. We have been discussing the need to pursue (opportunities) beyond voice, but still within the context of our core business,” said Shazalli.

The company said it posted a record profit and revenue for its 3Q ended Sept 30.

Profit after tax and minority interests increased 10% to RM531 million from RM509 last year, while revenue rose 6% to RM1.83 billion from RM1.77 billion.



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UMLand builds on education in Iskandar

KUALA LUMPUR: United Malayan Land (UM Land) continues to create more value for its large landbank in Iskandar Malaysia, Johor.

After last month’s purchase of a large tract of land at a low price, UM Land is embarking on a joint venture with Singapore-based Raffles Campus Pte Ltd to build an international school in its Seri Alam township.

As part of the agreement, UM Land will sell 8ha of land to Raffles Campus (Seri Alam) Sdn Bhd (RCSA) — the joint venture company which is 51% owned by UM Land and 49% by Raffles.

The land is being sold for RM10.83 million, or around RM12.61 psf.

Interestingly, while market observers note that the sale price appears relatively low as it is for a joint venture project, UM Land still stands to make a large profit from it. According to the company’s announcement, as at Dec 31, 2010, the net book value of the land was just RM2.4 million, or RM2.80 psf which means the sale price is 4.5 times higher.

This underscores the undervaluation of its large landbank and its stock is trading at half its understated book value. UM Land shares gained seven sen to close at RM1.49 yesterday, half of its book value of RM3 as at Sept 30, 2011.

The land sale follows an earlier announcement to Bursa Malaysia in April on the proposed tie-up to establish the international school. The school will be named Excelsior International School and is expected to be completed in 2013.

Besides making a profit, UM Land will also be able to increase the value of the Bandar Seri Alam land as it adds another educational institution to its list of six.

The “City of Knowledge”, which Bandar Seri Alam has been called, has four universities (Masterskill University College of Health Sciences, Universiti Kuala Lumpur, Universiti Teknologi Mara, HELP University College), two colleges (Mara Junior Science College and Malaysia Art School) and Raffles International School.
Furthermore, there are schools including a Japanese school, Nam Heng Primary School and 16 primary, secondary and religious schools.

The positioning of Seri Alam as a major education hub will significantly increase its appeal, said an analyst, given the various competing developments in Iskandar Malaysia. It will also benefit UM Land’s recently acquired land near Seri Alam at a low price.

On Nov 22, 2011, the company proposed to acquire 135ha of land in the vicinity at a low price of just over RM4 psf through the acquisition of Tentu Teguh Sdn Bhd.
The acquisition will increase UM Land’s landbank in Iskandar Malaysia to almost 810ha, making it one of the largest landowners there, apart from UEM Land Holdings Bhd, which has over 3,600ha.

UM Land, with its large landbank in Iskandar Malaysia, Bangi, Selangor and the KLCC area, has a relatively small market capitalisation of RM450.03 million, while UEM Land’s land bank is five times larger but its market capitalisation of RM9.68 billion is 21 times higher, the analyst noted.

UM Land’s other main township in Iskandar Malaysia is Taman Seri Austin, while its Bangi project, Bandar Seri Putra, also draws more interest as developers like S P Setia Bhd are moving to more outlying areas like Semenyih and Beranang.

Besides attracting Singaporeans, the Iskandar Malaysia region could also be an attractive investment alternative for foreigners discouraged by the recent measures by the Singapore government to cool the property market. Last week, the Singapore government announced a measure which requires foreigners to pay an additional stamp duty of 10% of the property value.

UM Land’s major shareholders include CapitaLand Ltd and Tradewinds Corp Bhd.



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GAB declares bumper dividend

KUALA LUMPUR: Christmas comes early for Guinness Anchor Bhd (GAB) shareholders. The brewery yesterday announced a special single-tier dividend of 60 sen per share. The latest dividend payment has exceeded GAB’s full dividends of 54 sen in FY11 ended June 30 and 45 sen in FY10.

Expectation is growing that there could be more dividend payouts for GAB shareholders in the pipeline as the brewery is believed to be making efforts to improve its capital structure, which will allow it to reward shareholders with higher dividends.

GAB’s share price rocketed to a record high of RM12.28 yesterday, up 28 sen or 2.3%, with 111,500 shares traded. It was among the top gainers on Bursa Malaysia yesterday. The stock has gained 21% year-to-date.

GAB announced last month it proposed a plan to issue debt notes of up to RM500 million. The proposed debt paper programme was assigned a rating of AAA by RAM Rating Services Bhd.

GAB said the proposed debt paper programme would provide it with an alternative source of financing and enable it to effectively plan and manage its funding costs and requirements.

It added that the proceeds of the proposed CP/MTN programme will be utilised for general corporate purposes including repayment of bank borrowings, if any.

It is worth noting that GAB is in a net cash position of RM163.98 million as at end-September with no borrowings.

According to OSK Research, GAB’s dividend payout ratio has averaged 88.4% in the last five years. “With a more optimal capital structure, it can definitely accommodate a higher payout ratio. In fact, we do not discount the possibility of a special dividend,” it commented.

Another analyst points out that more companies are looking at more efficient capital, such as Public Bank Bhd and DiGi.Com Bhd, and that resulted in increased dividends and higher stock prices as companies became more attractive dividend yield stocks.


The current low interest rate environment has made it conducive for companies with healthy and steady cash flow to raise debt to improve capital structure.

“A balance sheet with a too large cash pile may be viewed as a ‘lazy balance sheet’, which some consider not optimum. Hence, it does make commercial sense to gear up to a healthy level since the operation is generating healthy cash flow to service the loans,” said the analyst.

“Being in the relatively defensive brewery sector, we argue that GAB’s capital structure pre-debt issuance is not optimal.”

With no debt in its current capital structure, OSK Research said GAB’s weighted average cost of capital (WACC) and cost of equity stands at 7.1%, based on a risk free rate of 4.1%, market risk premium of 5%, and beta of 0.6 times. Given the AAA rating, OSK Research feels GAB’s cost of debt should be around 4.5%.

Based on GAB’s 1QFY12 (ended Sept 30) shareholders’ fund of RM571.8 million, the RM500 million in new debt would translate to gross and net debt to equity ratios of 0.87 times and 0.59 times, respectively.

Post debt issuance, GAB’s WACC will be lower at 5.4% (assuming an effective tax rate of 25%), stated the analyst’s report.

On the reasons for issuing the debt, OSK Research said that GAB’s management guided that the issue will mainly be used for capital expenditure and working capital requirements. GAB has clarified that the issue proceeds will not be used for acquisition purposes.

The OSK report said GAB intends to allocate RM80 million to RM100 million for FY12 (ending June) which includes a new packaging line (RM40 million) and an upgrade of its SAP system (RM30 million).

In FY11, the brewery posted a net profit of RM181.38 million on revenue of RM1.48 billion.



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Maybank’s Fortune8 targets RM300m investments

KUALA LUMPUR: Malayan Banking Bhd’s (Maybank) closed-end fund Fortune8, targets RM300 million in sales when it closes on Dec 31.

It said yesterday that the Fortune8 is a single premium and capital guaranteed investment-linked insurance plan. It is a closed-end three-year, six-month investment-link plan.

The fund provides a guaranteed investment return and capital protection on the investment with additional potential upside return from the performance of commodity prices.

Lim says Fortune8 is
in line with Maybank's
strategy to extend its
asset management
business, not only in
Malaysia but regionally.

Lim Hong Tat, Maybank deputy president and head of community financial services, said Fortune8 provides potential upside return apart from guaranteeing 100% of the capital on maturity and paying a 5% guaranteed cash payout at the end of the 18th policy month.

“Customers can start investing with a minimum investment of RM15,000 and additional investments in multiples of RM1,000,” he said.

“The fund provides exposure to commodities as a hedge against the global inflationary environment, including items such as food, transport and many more. Commodities are able to protect investors from the short-term effects of inflation while providing capital appreciation,” he said.

Fortune8 investors can choose to invest in commodities like energy, precious metals, industrial metals, agriculture and livestock.

Lim said Fortune8 is in line with Maybank Group’s strategy to extend its asset management business, not only in Malaysia but regionally.

“Given the growing demand from customers for a diversified range of investment products, especially from those with a low risk profile, we believe that Fortune8 will provide them the confidence to invest even in volatile market conditions,” Lim said.




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Gamuda’s 1QFY12 results to trail consensus

Gamuda Bhd
(Dec 12, RM3.13)

Downgrade to market perform with fair value RM3.02 from RM3.41: We expect Gamuda 1QFY12 results to meet our expectations but miss the market consensus.

At RM100 to RM105 million, 1QFY12 core net profit will have declined by 17% to 21% against RM126.2 million recorded in 4QFY11 ended July largely due to:
(i) the high base in 4QFY11 due to the writeback of overprovisioning of scheduled highway maintenance expenses in India;
(ii) continued easing in property profits; and
(iii) slightly reduced construction margins.

Nonetheless, on a year-on-year (y-o-y) basis, 1QFY12 net profit will still have grown by 13% to 19%, underpinned largely by firmer construction margins on the back of the more stable input costs, as well as stronger property profits.

We maintain our forecasts. Risks to our view inlcude:
(i) the delay or cancellation of the Klang Valley MRT project;
(ii) Gamuda getting a smaller role in the MRT project; and
(iii) rising input costs.

CAPTION

We have turned less enthusiastic on construction stocks as we believe their share price performance is likely to be muted over the next three to six months as it has become increasingly clear that:

(i) it is easier said than done when it comes to the actual rollout of new large-scale projects;
(ii) realistically, earnings impact from the Klang Valley MRT may be quarters, or even a year or two away, given the inevitable bureaucratic hurdles; and
(iii) there is a lack of credible new large-scale projects in the pipeline.

Indicative fair value for Gamuda is reduced by 11% to RM3.02 from RM3.41 based on sum-of-parts, valuing its construction business at 12 times one-year forward earnings (from 14 times previously), in line with the downgrade in our one-year forward target price earnings ratio for the construction sector to eight to 12 times (from 10 to 14 times previously). — RHB Research, Dec 12




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Billion Ringgit Club: Hock Seng Lee Bhd

Hock Seng Lee Bhd (HSL) is a Sarawak-based marine engineering, civil engineering and construction company.

Its origins date back to the mid-1960s when the three eldest brothers of the Yii family established what was principally a sand dredging and landfill operation. The group has been listed on Bursa Malaysia since 1996.

HSL is today one of Sarawak’s larger players, with a focus on dredging, land reclamation and earthworks, road and bridge construction, flood mitigation and specialised tunnelling. The group also has a property arm.

HSL undertakes sewerage works and infrastructure and building works for ports, airports, industrial parks, townships, educational institutions and housing. Its current ongoing projects include the Kuching City Centralised Waste Water Management project (Package 1), various road works in Kuching, Sri Aman, Sarikei, Mukah, Samarahan and Tanjung Manis; building works in Samarahan, flood mitigation works in Sibu as well as land reclamation jobs. In Oct 2011, it secured a RM90.3 million rural water treatment plant project in Samalaju.

Datuk Paul Yu Chee Hoe, HSL’s managing director shares with The Edge Financial Daily his strategies and dreams for the company.

TEFD: What are the company’s strengths and advantages?
Yu: HSL has a niche market position in marine engineering, particularly mass land reclamation which is an essential precursor to most construction works in the low-lying swampy terrain of Sarawak’s long coastline. Reclamation, earthworks, piping, roads, bridges and the many other forms of construction requiring geo-technical or water-related engineering expertise are strongly in demand in Sarawak and yet local skills in these fields are rare.

For this reason, and in view of our technical expertise and track record, we foresee our growth story to be an ongoing one. HSL has delivered consistently strong financial results with impressive earnings growth in each of the last 10 years; superior pre-tax profit margins averaging 20% over the last five years and has a healthy balance sheet with zero gearing and net cash position of some RM130 million.

We have a strong track record of project delivery over the last thirty years. Our order book is sizable at RM1.7 billion, with RM1.1 billion outstanding. As a major player in Sarawak, we expect HSL to be a beneficiary of accelerated infrastructure development in the state, through programmes such as the 10th Malaysia Plan and the Sarawak Corridor of Renewable Energy (Score). We are well placed to ride the potential infrastructure spending boom with a large portfolio of marine and land-based heavy equipment including dredgers, barges, cranes and tunnel boring machines.

The company has also been well recognised for creating shareholder value, with awards from The Edge and KPMG, among others. (Editor’s note: In November 2011, HSL received the Forbes Award as one of the top 200 best performing small-medium companies in the Asia-Pacific region).

What have been the major achievements of the company in the past four years?
HSL’s total order book has doubled over the past three years and is currently approaching a record RM2 billion. This is a reflection of the dramatic pace of infrastructure progress in its home state of Sarawak under the 10th Malaysia Plan as well as the advent of Score.

HSL has also continued to build on its expertise in marine engineering by undertaking increasingly sophisticated engineering projects, notably its move into high-tech tunnel boring for the implementation of central sewerage systems.

We had a record year in 2010 for revenue and pre-tax profit, both of which chalked up a 30% growth over the previous year. In 2010, we achieved record revenue of RM488.3 million and pre-tax profit of RM98.4 million with profit after tax of RM73.4 million. We posted earnings per share of 13.4 sen, achieved return on equity of 23%, declared total cash dividends of 10% and undertook a share distribution exercise on the basis of one share for every 50 shares held.

Construction is one of HSL's business operations.

From 2006 to 2010, HSL’s revenue has grown 83% from RM260.6 million to RM488.3 million while pre-tax profit has doubled from RM48.2 million to RM98.4 million. Our net assets have grown by nearly 80% from RM193.2 million to RM345 million.

What are the major challenges your company faced over the years and how did you overcome them? Is there anything else you would have done differently?
We have managed our challenges well through an experienced and stable management. A few years back the major challenge was the dramatic fluctuation in material prices especially for fuel, cement and steel. However, we effectively mitigated the impact to our group with efficient project execution experience, hedging and building in cost variation clauses to our contracts.

How is the company positioning itself within the industry?
HSL enjoys a niche market position in Sarawak due to its unique skill set in marine engineering, its experienced technical and managerial personnel and its comprehensive range of advanced dredging, marine, heavy-lift, tunnel boring and other specialised machinery. We have the capacity and capability to expand nationally and regionally, but presently are very well occupied due to the amount of work in our home state of Sarawak. Our strategy will be to continue to pursue projects such as centralised sewerage, reclamation, flood mitigation and infrastructure works.

Yu says reclamation is an industry for the future as desirable land becomes scarce and populations increase.

What are your strategies to grow market share and your plans for the future?
We will continue to look for opportunities which draw on our core skills in marine and civil engineering and to advance our technological capabilities. Reclamation is an industry for the future as desirable coastal land becomes scarce and populations increase. This can be seen in Singapore, Japan and Hong Kong where land continues to be reclaimed from the sea. We believe we will retain our strong competitive advantage through our local knowledge, machinery portfolio, experienced people and niche in marine engineering. HSL has identified three main thrusts in the fast-paced development of Sarawak and these will impact positively on the group’s prospects.

The first is the emphasis on rural development, in particular bringing basic amenities such as water, power and roads to the more remote areas of the state.
The second is the actual on-the-ground implementation of Score projects by foreign investors, which are mostly high-energy consuming metal producers.

The third is the upgrading of public infrastructure to cope with the issues of rapid urbanisation. The latter gives rise to the need for flood mitigation, centralised sewerage treatment and flyovers — all projects which HSL are exposed to and continues to pursue more of. Indeed HSL has procured contracts during the year that have been generated by these three main thrusts and this trend looks set to continue.

What is your dream for your company? How would you like to see it in 10 years’ time?
In 10 years, we hope HSL would be a leading marine and infrastructure company that will continue to help create modern sustainable urban environments through projects such as roads, bridges, sewerage systems, flood mitigation and new townships. There are still many opportunities for development in Sarawak which has a land area 117 times the size of Singapore.

We will also continue to grow our property development division with innovative products for modern lifestyles. It currently contributes less than 10% to the group’s bottom line, but we expect this to grow to over 20% in the medium term.



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Top Glove re-examining fundamentals

Top Glove Corp Bhd
(Dec 12, RM4.43)

Maintain sell with target price RM3.40: Net profit for 1QFY12 is likely to undershoot market expectations but is in line with ours. We think the recent share price strength (+8% in two months) is sentiment driven on positive leading indicators (falling latex cost, stronger US dollar).

However, we caution that overcapacity in the latex powdered segment (53% of product mix) will limit earnings recovery and there is now downside risk to the street’s earnings estimates. Our RM3.40 discounted cash-flow-derived (DCF) target price (TP) implies 12 times CY13 price-earnings ratio (PER).

The results are due for release on Friday. We expect Top Glove to post net profit of around RM30 million (+15% quarter-on-quarter [q-o-q], -17% year-on-year [y-o-y]). Stronger sequential earnings are likely to be driven by margin recovery of +1.5-percentage points (ppt) q-o-q to earnings before interest, tax, depreciation and amortisation (Ebitda) margin of 11% (-1ppt y-o-y) on lower latex cost (-13% q-o-q) and stronger greenback (+5% q-o-q).

Sales volume remained uninspiring with a minimal pick-up of 2% to 3% q-o-q despite new capacity and much lower latex cost, which implies severe overcapacity in the latex powdered segment (70% plant utilisation against 100% for latex powder free (PF) and nitrile).

The margin premium for nitrile gloves (against latex) has narrowed to 4ppt (from 5ppt to 10ppt in FY11). This is a result of improved margin for latex gloves (on lower latex cost) while nitrile’s margin has came off due to new competition.

We believe the margin superiority of nitrile gloves will stay as:
(i) further downside to latex cost is limited given the intervention of the tripartite rubber producing countries (accounting for 70% of world supply); and
(ii) no significant overcapacity in the nitrile segment given that plants are running at full capacity and new nitrile lines are cautiously delayed.

We maintain our 20% to 22% earnings per share (EPS) growth forecasts for FY12/FY13, underpinned largely by improved margins in the latex segment. The stock currently trades at 16 times CY13 PER, above its mean of 13 times and a premium to the sector average of only eight times. Maintain “sell”. — Maybank IB Research, Dec 12


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O&G: Crude OSV letdown sours 3Q performance

Oil and gas — equipment and specialist valve services

Maintain overweight on sector: The oil and gas (O&G) sector experienced its first earnings setback for the year as Alam Maritim Resources Bhd and Perdana Petroleum Bhd missed expectations. However, the remaining companies in our portfolio are set to post record profit in CY11 to CY13. We are pumped about Petroliam Nasional Bhd’s (Petronas) RM300 billion capital expenditure and downstream push.

The sector remains an “overweight”. Also intact are all our stock recommendations, earnings forecasts and target prices. Our top picks are Petronas Dagangan Bhd (PetDag) for the big caps and Perisai Petrolem Teknologi for the small caps.

Petronas targets to invest RM300 billion over the next five years.

The sector remains an “overweight”. Also intact are all our stock recommendations, earnings forecasts and target prices. Our top picks are Petronas Dagangan Bhd (PetDag) for the big caps and Perisai Petrolem Teknologi for the small caps.

The O&G sector had a strong first half with two quarters of disappointment-free performance since 4Q08 when we started our quarterly results review. However, it hit a bump in 3Q.

Of all the nine companies under our O&G coverage, seven or 78% met our expectations. Offshore support vessel (OSV) providers Alam and Perdana undershot expectations, providing the first letdown for the sector this year.
We expect all-time high net profit in CY11 to CY13 for Bumi Armada Bhd, Dialog Group Bhd, Perisai, PetDag and Wah Seong Engineering Sdn Bhd, a leading fabricator and a top driller.

This collective record performance supports our three-year earnings per share compound annual growth rate of 25% for our O&G portfolio in Malaysia, superior to Thailand’s 16.1% and Singapore’s 0.7%.

Petronas aims to invest RM300 billion over the next five years. It is undertaking major downstream initiatives, which include the US$20 billion (RM63 billion) refinery and petrochemical integrated development (Rapid) project in Johor and the expansion of PetDag’s retail and lubricant businesses. — CIMB Research, Dec 12



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DRB-Hicom likely to win Proton

KUALA LUMPUR: DRB-Hicom Bhd probably stands a better chance than others to take over the driving seat of Proton Holdings Bhd if the diversified conglomerate is keen on the loss-making national carmaker.

If DRB-Hicom wins the bid, it would be second asset that the group acquires from Khazanah Nasional this year, after the acquisition of a 32.2% stake in Pos Malaysia Bhd. Khazanah has a 42.7% stake in Proton.

Former Prime Minister Tun Dr Mahathir Mohamad, the adviser to Proton, told Bernama and Bloomberg in a joint interview yesterday that DRB-Hicom “is likely to win the bid for Khazanah’s equity interest in Proton”.

According to Mahathir, Khazanah has approached several buyers for its stake in Proton, including the Naza Group of companies, Sime Darby Bhd and several other local companies. He said Sime Darby rejected the offer while Naza Group appeared to be interested as it had submitted a proposal.

“The buyer must have the capacity to finance the turnaround of Proton’s finances,” said Mahathir, who added that he is not backing any company and the final decision is in Khazanah’s hands.

Mahathir (right) and Tan Sri Syed Mokhtar Al Bukhary in a file photo of signing ceremony GIIG and Chalco on Feb 9, 2010. Mahathir, and adviser to Proton, told Bernama and Bloomberg in a joint interview yesterday that DRB-Hicom, controlled by the latter, 'is likely to win the bid for Khazanah's equity interest in Proton'.

It is understood that Khazanah is looking for a buyer who has the technology and expertise to improve Proton’s product quality for future survival. “DRB-Hicom is quite well-run.

They produce cars for Suzuki, Mercedes and Volkswagen. This company belongs to the Al-Bukhary Group, which has a lot of other businesses, including port operations. They seem to be able to do business,” the former prime minister was quoted as saying in the interview in Putrajaya yesterday.

Proton shares rose as much as 31 sen to RM4.30 before closing at RM4.23 for a 6% gain, giving the company a market capitalisation of RM2.32 billion.

However, the stock, which saw some 17 million shares traded, has declined 6% so far this year, underperforming the FBM KLCI’s 3% loss.

DRB-Hicom rose 3.3% or seven sen to RM2.19 during the day before it closed unchanged at RM2.12 yesterday. The stock which saw some 5.3 million shares traded, has gained 9% this year.

Khazanah Nasional Bhd had not responded to email enquiries by The Edge Financial Daily at press time, while Proton and DRB-Hicom officials declined to comment when contacted by telephone.

DRB-Hicom has previously denied knowledge of a bid for Proton and of plans to sell a stake in Proton to Volkswagen.

The likelihood of Khazanah selling its stake in Proton and DRB-Hicom’s interest in the carmaker was first highlighted by The Edge weekly just over a week ago.

It is learnt that DRB-Hicom might be paying around RM1.38 billion or RM5.90 per share for the 42.7% stake held by Khazanah in the national carmaker. At RM5.90, the offer price is about a 39% premium to yesterday’s closing price of RM4.23.

Mahathir, who had been instrumental in the development and progress of Proton since its first car was rolled out in 1985, said DRB-Hicom was deemed a preferred candidate due to its strong financial and management capabilities.

Over the weekend, Mahathir was quoted as saying in Langkawi that Khazanah is selling its equity interest in the national car company because it is not putting more money in Proton, which requires financial resources for research and development to spur its new product development.

The former prime minister also expressed concern over whether DRB-Hicom has the money to finance the acquisition as the purchaser would be paying a premium for the Proton shares. DRB-Hicom’s largest shareholder is Etika Strategi Sdn Bhd, which in turn is the private vehicle of tycoon Tan Sri Syed Mokhtar Al-Bukhary.



Proton’s existing management is also said to have expressed interest in a management buyout. The proposal is spearheaded by chairman Datuk Seri Mohd Nadzmi Mohd Salleh and CEO Datuk Seri Syed Zainal Abidin Syed Mohamad Tahir.

Proton’s earnings have not fared well due to falling sales and higher operating expenses. Net profit in the first half ended Sept 30, 2011 fell 87% to RM20.11 million from RM150.6 million a year earlier, while revenue declined 0.7% to RM4.5 billion from RM4.53 billion, despite the rollout of several new models.

As at Sept 30, Proton had cash of RM1.31 billion against debts of RM960 million, translating into net cash of RM350 million for the company. Its net assets per share stood at RM9.81.

Assuming DRB-Hicom acquires the entire 42.7% stake in Proton, the buyer would need to do a mandatory general offer to minority shareholders for the remaining stake in the national carmaker.

In a note yesterday, TA Securities Holdings Bhd analyst Tan Kam Meng said while the rumoured price is RM6 to RM7 a share for Proton, a huge premium to the current market price, the acquisition price range is still below Khazanah’s cost of investment of over RM8 a share in Proton.

“The key risk is whether DRB-Hicom’s minority shareholders would approve a deal. Shareholders would naturally question whether it is worth it to acquire Proton at a huge premium given the fact that the national carmaker is losing market share and will require substantial funding to keep it competitive,” said Tan who has a fair value of RM5.91 for Proton shares with a “buy” call.

The analyst said DRB-Hicom has the means to raise the funds needed for the acquisition as the group’s gearing level is low. As at Sept 30, 2011, the firm’s total borrowings and net gearing stood at RM2.1 billion and 0.14 times respectively, according to Tan.

Assuming the acquisition is entirely done via a share swap, Tan said it would lead to a significant dilution of up to 94% to DRB-Hicom’s current shareholders. “Hence, we think any deal would likely comprise a combination of DRB-Hicom shares and cash,” he said.

The conglomerate had cash and cash equivalents of RM1.83 billion, excluding banking assets, as at Sept 30, according to its latest reported balance sheet.

Affin Investment Bank analyst Chong Lee Len said DRB-Hicom’s move to acquire Proton would instantly increase the acquirer’s installed automotive plant capacity.

However, Chong noted that DRB-Hicom can easily expand its capacity on its own without having to buy Proton.

“Thus, we see less synergy from the potential acquisition of DRB-Hicom vis-à-vis the potential entry of a foreign automaker.

“Fundamentally, we continue to see a competitive domestic landscape and stagnant market share for Proton. The export market is also expected to remain a stumbling block as a depressed Europe and flattish US market will force global auto players to focus very much on Asia, the growth driver,” Chong wrote in a note yesterday.

According to the analyst, funding will remain a “stumbling block” for DRB-Hicom as it would need an estimated RM2.6 billion to purchase the entire stake in Proton, assuming the buyer pays RM4.79 per Proton share, or a 20% premium to the stock’s closing price of RM3.99 last Friday.



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S P Setia: Takeover offer an acceptable one

S P Setia
(Dec 12, RM3.86)

Maintain accept with target price RM3.90 from RM3.20: Net profit for 12MFY11 of RM 318.3 million was within expectations due to property development activities carried out in Klang Valley, Johor Baru and Penang. Property sales momentum remained intact as S P Setia reported 12-month sales of RM3.2 billion. Management is confident of achieving its RM4 billion sales target on the back of more launches in FY12, including Setia Eco Cascadia in Johor and Aeropod in Sabah.

S P Setia posted positive earnings as 12MFY11 net profit of RM318.3 million achieved 95% of house and 108% of consensus full-year estimates.

The profit before tax (PBT) margin increased to 27% from 24% for the current FY. This is mainly due to the flow-through effect of overall increases in selling prices achieved for new launches since FY10 and the general stabilisation in prices of construction materials experienced during the FY. However, 4QFY11 PBT decreased by 20% year-on-year (y-o-y) and 30% quarter-on-quarter (q-o-q) despite improved margins from the preceding financial year.

A final net dividend of 6.75 sen was declared, which was lower than previous year’s seven sen.
Sales momentum remains firm as S P Setia achieved RM1.2 billion of new property sales in 4QFY11 which was 122% higher y-o-y and 56% q-o-q. The 12-month sales came up to RM3.2 billion.

The launch of KL EcoCity, S P Setia’s intergrated green commercial and mixed residential development, is expected to contribute strongly to the group’s sales. Its maiden project in Melbourne, Australia, and second project in Vietnam (EcoXuan), are expected to help augment sales in FY12, which will also benefit from planned project launches like Setia Eco Cascadia in Johor and Aeropod in Sabah.

The group faces a risk of a slowdown in property sales in FY12 should external uncertainties derail economic growth and dampen property buyer sentiment. Estimated current unbilled sales of RM2.8 billion (FY10: RM1.7 billion) should underpin near-term earnings viability. We have made no changes in earnings at this juncture. Although S P Setia has enjoyed brisk property sales recently, its valuation is still not compelling yet considering market risk aversion and a potential property sector downcycle.

In the absence of a competing offer, we advise investors to accept the takeover offer which we view as fair and attractive since it values S P Setia at upcycle valuations when current market conditions are on a downtrend. The offer is also attractive given current conditions in which equity market risk aversion is pervasive while the property sector may enter a cyclical downturn due to weakening economic outlook, deteriorating housing affordability and policy risks.

We raise our target price to match the takeover offer price of RM3.90 from RM3.20 previously (based on mid-cycle price earnings of 15 times). — ECM Libra, Dec 12


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Transformed GLCs see strong growth, mkt cap doubles

KUALA LUMPUR (Dec 13): Eighteen of the largest government linked companies (GLCs) under the GLC Transformation Programme have recorded significant progress and are on more stronger positions now than when the programme started in May 2004.

Deputy Finance Minister Datuk Donald Lim Seng Chai said on Tuesday these companies were not badly affected by the 2008/2009 global financial crisis and their key performances have since remained strong.

As of Nov 25, the market capitalisation of these 18 GLCs doubled to RM319 billion from the start of the programme in 2004, while their collective Total Shareholder Return (TSR) have grown by 13.6 per cent from May 14, 2004.

"The aggregate income of the 18 GLCs shot up 80 per cent to RM17.3 billion in the 2010 financial year compared with RM9.6 billion in the 2004 financial year.

"The GLCs achieved 72 per cent of the Key Performance Index targets in the 2010 financial year, an increase from the 64 per cent achievement in 2009," he said when answering a question from Senator Doris Brodie who wanted to know the current status of GLCs that have undergone the transformation programme.

Lim said intensive efforts meanwhile have been taken by GLCS that had recorded less satisfactory financial results to counter the issues they had been facing.

The initiatives include collaborating with competing companies in the private sector, while looking into new growth sectors and replanning their marketing segment, he said.

The problems faced by these GLCs originated from several structural and sectoral issues outside the control of these companies such as the rise in oil price, reduced supply of raw materials and the price mechanisms involving their products and services, he explained.

"Several GLCs had seen lower performances including MALAYSIAN AIRLINE SYSTEM BHD [] (MAS), TENAGA NASIONAL BHD [] (TNB) and PROTON HOLDINGS BHD [] (Proton).

"Considering that these companies are listed, their respective boards of directors are responsible for monitoring the performances of the management of the GLCs and taking the subsequent course of action when the KPI set by the board is not met with," he said. - Bernama


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BIMB call warrants see heavy trading interest, shares up

KUALA LUMPUR (Dec 19): The call warrants of BIMB HOLDINGS BHD [] saw heavy trading in the afternoon session on Tuesday, as traders focused on penny stocks with recent announcements.

At 3.35pm, BIMB was up 14 sen to RM1.84 with 9.03 million shares done. Its call warrants BIMB-CB added 4.5 sen to 10 sen with 29.84 million units transacted while BIMB-CC jumped 7.5 sen to 14 sen (29.50 million units).

The FBM KLCI fell 2.45 points to 1,464.65. Turnover was 1.30 billion shares valued at RM888.37 million. There were 286 gainers, 424 losers and 275 stocks unchanged.

Last Friday, BIMB announced it had targeted to achieve return on equity of 16% for the banking group under its headline key performance indicators for the financial year ending Dec 31, 2012. It also targeted return on assets of 1.5% for FY2012.

“These headline KPIs targets have been set and agreed by the board and management of BIMB group as part of a broader KPIs framework that the group has in place. The headline KPIs targets have been arrived at based on the targeted consolidated financial results of the group for FY2012,” it had said.



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Khazanah to disclose Proton stake sale

Proton Holdings Bhd said today Khazanah Nasional will make the necessary disclosure at the appropriate time pertaining
to the sale of its stake in Proton to DRB-Hicom Bhd.

In an announcement to Bursa Malaysia today, Proton said it was informed this by Khazanah after making due enquiry with its major shareholder following news reports that Khazanah was selling its 42.7 per cent stake in Proton to DRB-Hicom.

"Khazanah Nasional informed that in its normal course of business, it regularly receives proposals, enquiries and expressions of interest in relation to its various investments and companies where it has interest in, including Proton.

"We wish to reiterate that in the meantime, business is as usual at Proton," the national carmaker said. -- Bernama



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AirAsia chief: IPOs of Indonesian, Thai units on schedule

KUALA LUMPUR (Dec 13): AirAsia Group has reaffirmed that the proposed initial public offerings (IPO) of its Indonesian and Thai affiliates are on schedule.

"Both IPOs are on schedule with regards to due diligence process and the seeking of regulatory approvals," said its group chief executive officer, Tan
Sri Tony Fernandes, in a statement here on Tuesday.

Fernandes made the statement after AirAsia's public relation team was misquoted in a recent interview.

"We have always maintained the actual listing will be dependent on market conditions. In short, both Thailand and Indonesia continue to perform strongly heading into 2012," he said.

The Thai affiliate is submitting its listing application to the regulators in the early part of the first quarter of and Indonesia will follow suit shortly after.



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KL shares lower at mid-day

Share prices on Bursa Malaysia were lower at the end of the morning session today on concerns over the current eurozone crisis and the ability of the leadership there to solve the recurring problems, dealers said.

At 12.30pm, the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) declined 3.86 points or 0.26 per cent to 1,463.24.

The key index had opened 4.19 points lower at 1,462.91 compared with yesterday's close of 1,467.1.

The overall market breath was negative with losers outpacing gainers by 354 to 249 with 290 unchanged and 583 others untraded. Turnover stood at 952.5 million shares worth RM596.38 million.

Looking ahead, the benchmark index, is probably on its way towards the first support line of 1,445.

HwangDBS Vickers said Bursa Malaysia joined regional markets after Wall Street reversed direction overnight, with major US equity indices slipping between 1.3 per cent and 1.5 per cent.

Market players are concerned that international rating agencies could be looking to downgrade the sovereign credit ratings of some European countries despite the stopgap measures announced at a regional summit last weekend, it said.

The Finance Index rose 12.471 points to 21,511.3, the Plantation Index gained 23.51 points to 7,950.92 and the Industrial Index lost 2.15 points to 2,644.14.

The FBM Emas Index decreased 17.42 points to 10,029.71, the FBM Mid 70 Index rose 31.37 points to 11,012.28 and the FBM Ace Index declined 31.63 points to 4,119.84.

Among active stocks, Affin-CE rose 2.5 sen to five sen, MAS-CC added 1.5 sen to 2.5 sen and Proton-CG added seven sen to 45.5 sen.

For heavyweights, Maybank rose five sen to RM8.21, Sime Darby gained three sen to RM8.95 and CIMB fell 10 sen to RM6.85. -- Bernama



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Thai, Indon listings on schedule: AirAsia

AirAsia Group has reaffirmed that the proposed initial public offerings (IPO) of its Indonesian and Thailand affiliates are on schedule.

"Both IPOs are on schedule with regards to due diligence process and the
seeking of regulatory approvals," said its group chief executive officer, Tan
Sri Tony Fernandes, in a statement here.

Fernandes made the statement after AirAsia's public relation team was
misquoted in a recent interview.

"We have always maintained the actual listing will be dependent on market
conditions. "In short, both Thailand and Indonesia continue to perform strongly heading into 2012," he said.

Thailand is submitting its application to the regulators for early first
quarter 2012 market listing while Indonesia will follow suit shortly after. --
Bernama



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Supermax gets Bursa Securities’ nod to list 340m bonus issue

KUALA LUMPUR (Dec 13): SUPERMAX CORPORATION BHD [] has received Bursa Malaysia Securities’s approval for the listing of and quotation for 340.07 million shares under its bonus issue

The glove maker’s merchant bank, OSK Investment Bank Bhd said on Tuesday the approval for listing and quotation of the shares was received on Monday.

The proposed bonus issue of the 340.07 million new shares was on the basis of one bonus share for every one share held.



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'Tenaga ready to buy gas at market prices'

Tenaga Nasional Bhd (TNB) is ready to purchase gas for power generation at open market prices upon completion of the liquefied natural gas (LNG) regassification terminal in Melaka by 2012.

President/Chief Executive Officer Datuk Seri Che Khalib Mohamad Noh said the company had been talking to several gas suppliers including ExxonMobil and Royal Dutch Shell for a secured supply.

"We've appointed professional consultants to deal with the major suppliers as we are still new in the matter," he told reporters at Universiti Tenaga Nasional here today. The market price for gas presently hovers around RM30 to RM50 mmBTU.

The government, through Petroliam Nasional Bhd, spends around RM20 billion a year to provide subsidised gas to TNB at RM13.70 mmBTU.

Che Khalib said the open market price would not necessarily mean a hike in tariff rates for domestic and industrial consumers.

TNB would suggest several options to the government to either absorb the cost or pass it on to consumers, he said.

Natural gas accounts for 60 per cent of TNB's eletricity generation while coal and hydro contribute 35 per cent and five per cent respectively.

The company aims to have a balance between gas generated and coal generated power by 2015.

Meanwhile, Che Khalib said power demand was expected to increase three to four per cent next year. -- Bernama



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I-Berhad inks pact with Everbright Intl

I-Berhad today entered into a strategic alliance with China-based, Everbright International China, to co-develop 12.14 hectares (30 acres) of land in i-City via a joint venture.

Everbright will have a 70 per cent shareholding in the venture. I-Berhad, in a statement here today, said it would hold the balance 30 per cent stake.

Apart from financing the construction, Everbright will also lead a consortium of Chinese companies to set up operations in i-City, Shah Alam.

The development will be undertaken in two phases involving 5.66 hectares (14 acres) for the initial phase and the balance 6.47 hectares (16 acres) in the subsequent phase.

The first phase of the development is for a commercial hub with a gross development value of RM1.5 billion comprising a 92,903 sq m (one million sq ft) shopping mall and 185,206 sq m (two million sq ft) of mixed residential, MSC offices and educational institute. Work on the project is expected to begin by mid-2012. -- Bernama



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Proton: Khazanah regularly gets proposals, enquiries about its stakes

KUALA LUMPUR (Dec 13): PROTON HOLDINGS BHD []’s major shareholder Khazanah Nasional Bhd regularly receives proposals, enquires and expressions of interest about its various investments and companies.

In a statement issued to Bursa Malaysia on Tuesday, Proton said it had enquired with Khazanah, which owns a 42.7% stake, on news reports on Monday about DRB-HICOM BHD [] buying into Proton.

“The board of directors of Proton wishes to inform that after making due enquiry with the major shareholder, Khazanah has informed that, in its normal course of business, it regularly receives proposals, enquiries and expressions of interest in relation to its various investments and companies where it has interest in, including Proton. Khazanah will make necessary disclosure at the appropriate time,” it said.

Proton said in the meantime, business was as usual at Proton and the company would undertake to make all necessary disclosure to Bursa Malaysia in accordance with the provisions of the Main Market Listing Requirements.



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AirAsia denies delay in Indonesia listing

AirAsia Bhd group chief executive officer Tan Sri Tony Fernandes has denied that AirAsia Indonesia's initial public offering will be delayed.

"Indonesian communications staff misqouted. Indonesian IPO exactly on schedule," he tweeted earlier today without giving details.

Earlier this year, AirAsia Indonesia had targeted a fourth quarter listing, which ends in less than three weeks.

Fernandes went on to say that the affiliate to go for IPO first will be Thailand followed by Indonesia.

"Both companies doing extremely well," he said.



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KLCI pares down losses at mid-day

KUALA LUMPUR (Dec 13): The FBM KLCI pared down some of its losses at the mid-day break on Tuesday on some mild bargain hunting, in line with most of the key regional markets that also somewhat steadied.

At 12.30pm, the FBM KLCI was down 0.26% or 3.86 points to 1,463.24, weighed by losses at banks and select blue chips. The index had earlier fallen to its intra-morning low of 1,457.31. Losers led gainers by 354 to 249, while 290 counters traded unchanged. Volume was 952.5 million shares valued at RM596.38 million.

The ringgit weakened 0.66% to 3.1797 versus the US dollar; crude palm oil futures for the third month delivery rose RM19 per tonne to RM3,018, crude oil added 13 cents per barrel to US$97.60 while gold fell US$10.88 an ounce to US$1,655.70.

At the regional markets, Japan’s Nikkei fell 1.02% to 8,565,45, Hong Kong’s Hang Seng Index lost 0.87% to 18,413.52, the Shanghai Composite Index was down 1.33% to 2,261.15, South Korea’s Kospi lost 1.34% to 1,874.36, Taiwan’s Taiex fell 0.73% to 6,898.36 and Singapore’s Straits Times Index shed 0.49% to 2,688.60.

On Bursa Malaysia, Tahps was the top loser this morning and fell 38 sen to RM4.10; JobStreet lost 28 sen to RM2.50, PPB down 24 sen to RM16.36, Genting 20 sen to RM10.62, Apollo, Sungei Bagan and Genting PLANTATION []s fell 13 sen each to RM2.86, RM2.82 and RM8.15 respectively, while MISC and Aeon Credit fell 12 sen each to RM5.48 and RM6.26.

Among the banking stocks, CIMB lost 10 sen to RM6.85, Public Bank, RHB Capital and Hong Leong Bank fell two sen each to RM12.66, RM6.88 and RM10.54 respectively, while AMMB shed one sen to RM5.85.

GAB was the top gainer and added 70 sen to RM12.98; Dutch Lady was up 68 sen to RM26.66, Nestle and KLK up 38 sen each to RM52.28 and RM22.78, Carlsberg 34 sen to RM8.49, JT International 26 sen to RM6.94, Tradewinds 23 sen to RM10.16, HLFG 22 sen to RM11.54, Proton 21 sen to RM4.44 and F&N was up 18 sen to RM18.18.

Meanwhile, the actives included Proton and DRB-Hicom warrants, MAS warrants, Sanichi and BIMB warrants.



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Tenaga ready to buy gas from open market by 2012

BANGI, Selangor (Dec 13): TENAGA NASIONAL BHD [] (TNB) is ready to purchase gas from the open market by August 2012 once the regassification terminal in Malacca is completed.

TNB chief executive officer and president Datuk Seri Che Khalib Mohamad Noh said on Tuesday the power company had held talks with traders and suppliers including major multinationals such as ExxonMobil and Royal Dutch Shell to ensure a secured supply of gas.

However, he said the supply of gas from the open market, secured based on international market price, would not necessarily be translated into higher tariff rates for domestic and industrial consumers.

Che Khalib said TNB had put forward several options to the government.

On Dec 1, Petroliam Nasional Bhd (Petronas) said it would shoulder part of TNB’s higher operational costs caused by the shortage of gas.

The Edge FinancialDaily reported that TNB had received a letter from the government about a fuel cost sharing mechanism where Petronas, TNB and the government will equally share the RM3.07 billion the utility company incurred in cost overruns from Jan 1, 2010 to Oct 31, 2011.

The lifeline was thrown to TNB, which is swimming in a sea of red ink due to high costs, as it had to seek alternative fuel to make up for the shortage of subsidised gas supplied by Petronas to generate energy. TNB posted a net loss of RM453.9 million for 4QFY11 ended Aug 31.

Under the cost sharing mechanism, TNB will recoup RM2 billion, or 36.6 sen per share, of the cost overruns it incurred in the 22-month period.



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