Dialog rights shares fixed at RM1.20, warrants exercise price RM2.40

KUALA LUMPUR (Dec 15): DIALOG GROUP BHD [], which is undertaking a cash call to raise funds for more investments in the upstream oil and gas opportunities, has fixed the rights shares at RM1.20 each and the exercise price of the warrants at RM2.40 each.

Dialog’s cash call involved a renounceable rights issue of up to 398.73 million new shares of 10 sen each together with up to 100.36 million free detachable warrants. This would be on the basis of two rights shares with one warrant for every 10 shares held as at Jan 9, 2012.

“Based on the issue price of RM1.20 per rights share, Dialog is able to further strengthen its financial position, with its shareholders’ funds increasing to more than RM1.0 billion from RM583.1 million,” it said.

Dialog said the proceeds from the rights issue with warrants would enable it to boost its investments in the upstream oil and gas opportunities, including the development and production of petroleum under risk service contracts with Petroliam Nasional Berhad as well as the development of Pengerang independent deepwater tank terminals.

The issue price would be a discount of about 46% to the theoretical ex-rights price of RM2.23 per share, based on the five-day volume-weighted average market price up to Dec 14 of RM2.43.

“The discount of approximately 46% to the theoretical ex-rights price also enables the board to meet its objective of fixing the issue price at a discount of at least 30% to the prevailing theoretical ex-rights price as well as to reward Dialog’s shareholders for their continuous support for the company,” it said.

As for the warrants, it said the exercise price was 8% above the theoretical ex-rights price of RM2.23 per share, based on the five-day volume-weighted average market price up to Dec 14 of RM2.43.

Dialog had on Thursday also executed an underwriting agreement with AmInvestment Bank Bhd and CIMB Investment Bank Bhd whereby they would underwrite up to 170.59 million rights shares to be issued pursuant to the rights issue with warrants, being the difference between the minimum subscription level and 109.40 million rights shares undertaken by certain shareholders and executive directors.



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Sanichi gets LOI for 1.8m tonnes of steam coal

KUALA LUMPUR (Dec 15): SANICHI TECHNOLOGY BHD [] has received a letter of intent from China’s Guangxi Huayin to purchase 150,000 tonnes of steam coal per month, totaling 1.80 million tonnes for a one-year period.

Sanichi said Guangxi Huayin is one of the largest and most advanced aluminium producers in China. Guangxi Investment Group Co. Ltd hold a 34% stake, Minmetals Aluminium Company Ltd (33%) and Aluminium Corporation of China (33%).

“The LOI enable Sanichi to commence negotiations with its supplier(s) to obtain firm commitments to match the buyer’s specifications and requirements,” it said.

It said the earnings would from the trading margin between Sanichi’s selling price to the buyer and the company’s buying price from its supplier(s).

“The company expects to obtain shareholders approval by first quarter of 2012 and therefore, it is anticipated that the commencement of supply of steam coal to the buyer will be no later than end of quarter two of 2012,” it said.

Sanichi said based on the estimated net profit margin of the coal trading business to be 1%-2% and the volume of the LOI order, it expected a positive impact on its earnings per share and net assets per share for the financial year ending June 30, 2012.

The estimated profit sharing arrangement between Sanichi and FIRC Trade Sdn Bhd was 30% for Sanichi and 70% for FIRC.



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UMW: No submission to buy Khazanah’s 42.7% Proton stake

KUALA LUMPUR (Dec 15): UMW HOLDINGS BHD [] has confirmed that it had not submitted any bid to Khazanah Nasional Bhd to acquire its 42.7% stake in PROTON HOLDINGS BHD [].

“UMW also confirms that it is not in any form of discussion with any parties in this regard,” it said.

It said in a statement to BURSA MALAYSIA BHD [] that it had no knowledge of a news report on Thursday about it making a presentation to Khazanah about the Proton stake.

The news report stated that UMW, which is majority-controlled by the government’s Permodalan Nasional Bhd and the Employees Provident Fund, was also the single largest shareholder of Perusahaan Otomobil Kedua Sdn Bhd, the manufacturer of Malaysia’s second national car.

Market speculation has picked up pace that Khazanah was keen to sell its stake and among the names were DRB-Hicom Holdings Bhd.

Earlier, Hwang DBS Vickers Research said Khazanah’s sale looked increasingly more likely, in its view.

HDBSVR said assuming Khazanah sold its 42.7% stake and not a partial interest, there might be a general offer on the cards unless exemption was given.

“We think DRB-Hicom has the financial strength as well as track record in the automotive industry to take up the exercise if a GO happens,” said the research house.



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UMW associate WSP gets takeover offer at 60c per share

KUALA LUMPUR (Dec 15): UMW HOLDINGS BHD []’s associate WSP Holdings Ltd has received a takeover offer from HDS Investments LLC for 60 US cents per American Depositary share in cash.

UMW said on Thursday that WSP, a 22.3% associate which manufactures seamless pipes for oil and gas exploration, had set up a special committee of independent directors to consider strategic alternatives which would enhance shareholder value.

The China-based WSP, had in the letter to the US Securities and Exchange Commission, said HDS has had preliminary and informal talks with Expert Master Holdings and some significant shareholders of the company.

Expert Master Holdings is wholly owned by Longhua Piao, the company’s chairman and chief executive officer. He is the major shareholder of WSO with 50.9% of the paid-up.

HDS could be funding the takeover through its own capital, according to WSP’s letter to the US Securities and Exchange Commission.

WSP is a leading manufacturer of oil country tubular goods (OCTG) in China. Its products consist of seamless casing, tubing and drill pipes which are used for oil and natural gas exploration, drilling and extraction, and other pipes and connectors.



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StanChart sole arranger, manager for Guinness Anchor RM500m debt notes

KUALA LUMPUR (Dec 15): Standard Chartered Bank Malaysia Bhd today has been appointed as the sole arranger and manager for GUINNESS ANCHOR BHD []’s (GAB) proposed debt notes of up to RM500 million.

The bank said on Thursday the commercial papers (CP) and medium term notes (MTN) programme of up to RM500 million would have a tenor of up to seven years from the date of first issue.

GAB proposed the CP and MTN programme in a move to better plan their business strategy and optimise their capital structure.

“With a tenor of seven years from the date of first issue, GAB has proposed an initial issue of CPs and MTNs to the value of RM150 million to RM400 million. The additional capital from this will be used for general corporate purposes to deepen GAB’s investments in Malaysia,” it said.

GAB would use the additional capital for general corporate purposes to strengthen GAB’s investments in Malaysia. GAB intends to employ a more optimal capital structure.

“As such, proceeds from the CPs and MTNs will be used to enhance its information TECHNOLOGY [] infrastructure and brewery equipment, purchase new equipment, as well as to serve its rising working capital needs,” it said.



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Production at Thai plants to normalise by 3Q next year, says Eng Teknologi

KUALA LUMPUR (Dec 15): ENG TEKNOLOGI HOLDINGS BHD [] said the production level at its two subsidiaries affected by the floods in Ayuththayya, Thailand would only return to normal by the third quarter of 2012 as the output was meant for major customers that had also been affected by the floods.

It said on Thursday that flood waters had receded at the manufacturing facilities of both Engtek (Thailand) Co., Ltd. (ETCL) and Altum Precision Co., Ltd. (APT).

The company said that decontamination and cleaning work were currently underway at the facilities and was expected to be completed by next week, adding that restoration work would commence after that.

It said insurance loss adjustors had conducted a preliminary assessment of the damage caused by the floods, and that initial assessment indicated that the machinery damage was widespread due to rust, corrosion and contamination after being submerged in flood waters above two metres since October 2011.

“Meanwhile management is currently working on the detailed documentation for the insurance claims which is expected to be finalised and submitted to the insurers by the end of December 2011.

“Thereafter further assessment will be made by the insurers while operations gradually resume,” it said.

Eng Teknologi said the insurance claims process was expected to be completed within three to six months.

“Whilst production capacity of ETCL and APT may be fully restored by the second quarter of 2012, production level at both ETCL and APT are only expected to return to normal by the third quarter of 2012 as the output is meant for major customers which have also been affected by the floods.

“The floods have caused a substantial disruption to the supply chain of key hard disk drive components and the whole hard disk drive industry in Thailand,” it said.

The company said the supply chain situation would only be normalised in the next three to six months.



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Market Commentary

The FBM KLCI index gained 0.99 points or 0.07% on Thursday. The Finance Index increased 0.14% to 13078.38 points, the Properties Index up 0.71% to 957.45 points and the Plantation Index rose 0.11% to 7906.09 points. The market traded within a range of 15.98 points between an intra-day high of 1464.52 and a low of 1448.54 during the session.

Actively traded stocks include JCY-CD, MBSB-CA, JCY, KULIM-CB, SANICHI, KFC-CB, FLONIC, AFFIN-CE, PROTON-CH and BIMB-CB. Trading volume increased to 1564.71 mil shares worth RM1251.16 mil as compared to Wednesday’s 1494.84 mil shares worth RM1084.68 mil.

Leading Movers were CIMB (+7 sen to RM6.92), UMW (+34 sen to RM6.84), IOICORP (+6 sen to RM5.15), AXIATA (+3 sen to RM4.90) and MAXIS (+4 sen to RM5.49). Lagging Movers were KLK (-48 sen to RM22.12), DIGI (-4 sen to RM3.62), GENTING (-8 sen to RM10.34), MISC (-8 sen to RM5.39) and GAM (-6 sen to RM3.03). Market breadth was negative with 346 gainers as compared to 380 losers. -- JF Apex Securities Bhd



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KL shares remain bearish

Share prices on Bursa Malaysia remained lower at midafternoon today as the bearish sentiment continued due to deepening concern over the European debt crisis, dealers said.

At 3.15pm, the FBM KLCI stood at 1,457.23, down 0.4 per cent or 5.89 points.

Dealers said the local bourse performance was also in line with regional markets as investors' dumped riskier assets and bought the safe-haven dollar.

The Finance Index fell 29.43 points to 13,030.24, the Plantation Index shed 6.84 points to 7,890.36 and the Industrial Index fell 15.37 points to 2,631.44.

The FBM Emas Index lost 29.021 points to 9,996.93, the FBM Mid 70 Index added 20.79 points to 11,017.1 and the FBM ACE Index declined 39.43 points to 4,112.43.

Losers led gainers by 412 to 225 while 285 counters traded unchanged. Turnover stood at 880.84 million shares worth RM635.32 million.

For the active stocks, MBSB-CA gained 3.0 sen to 17.5 sen while KFC-CB added 12 sen to 18.5 and Kulim-CB increased 11.5 sen to 19.5 sen. Among heavyweights, Maybank lost 1.0 sen to RM8.24, Sime Darby was flat at RM8.94 and CIMB rose 2.0 sen to RM6.87.
-- Bernama



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Coastal Contracts orderbook hits RM690m with new RM233m deals

KUALA LUMPUR (Dec 15): COASTAL CONTRACTS BHD []’s year-to-date order wins rose to RM690 million after the company secured new contracts worth RM233 million.

It said on Thursday that its units had secured contracts for the sale of three offshore support vessels, two landing crafts and two barges for a total of RM233 million.

“With this latest batch of contracts, the value of Coastal Group’s secured vessel sales orders currently stood at about RM610 million, with deliveries through 2012,” it said.

Coastal Contracts said the contracts were expected to contribute positively to its earnings for the financial year ending Dec 31, 2012.



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MAS offers 30pc discount for Europe travel

Malaysia Airlines (MAS) is offering a 30 per cent discount for Malaysians to travel to five European destinations from the Kuala Lumpur International Airport (KLIA).

The discount is for travel to London, Amsterdam, Frankfurt, Paris and Istanbul.

In a statement today, the national airline said all that customers need to do is, plan and travel together in groups of three, six or nine.

"They must be from at least three different Malaysian ethnic or cultural backgrounds to enjoy a fantastic European holiday in 1Malaysia style," it added.

MAS is offering the discount on business and economy class fares for the promotion covering travel from Jan 1-March 31, 2012.

Each 1Malaysia group must travel on the same class and flights throughout the journey using the special offer which is available from now until Dec 26, 2011.

MAS currently operates twice daily flights to London with daily flights to Amsterdam and Paris, five-weekly services to Frankfurt and thrice weekly to Istanbul. -- Bernama



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KLCI edges up but Asian markets mired in red

KUALA LUMPUR (Dec 15): The FBM KLCI bucked the trend and edged up to close marginally higher on Thursday, but key regional markets mostly extended their losses amid fears that Europe's debt crisis continues to worsen.

But European markets opened slightly higher and bounced off a two-week closing low, lifted by some mild bargain hunting.

The FBM KLCI rose 0.99 point to close at 1,464.11.

Gainers trailed losers by 346 to 380, while 314 counters traded unchanged. Volume was 1.56 billion shares valued at RM1.25 billion.

At the regional markets, the Shanghai Composite Index lost 2.14% to 2,180.90, Taiwan’s Taiex fell 2.28% to 6,764.59, South Korea’s Kospi was down 2.08% to 1,819.11, Hong Kong’s Hang Seng Index lost 1.78% to 18,026.84, Japan’s Nikkei 225 fell 8,377.37 and Singapore’s Straits Times Index shed 1.39% to 2,635.25.

On Bursa Malaysia, QSR and KFCH were in focus on Johor Corporation’s plans to privatise the two companies. QSR rose 44 sen to RM6.44 while KFCH was up 39 sen to RM3.80.

Other gainers included Proton that rose 38 sen to RM4.55, UMW 34 sen to RM6.84, KrisAssets and GAB 32 sen each to RM5.62 and RM13.50, Kulim 28 sen to RM3.97, Jaya Tiasa 18 sen to RM6.91 and APM Automotive 17 sen to RM4.39.

Among the decliners, Dutch Lady lost RM1.30 to RM24.58, KLK 48 sen to RM22.12, Nestle 46 sen to RM56.02, Aeon 25 sen to RM7.15, Batu Kawan 20 sen to RM17.26, Bintulu Port 17 sen to RM6.70, MPI 16 sen to RM2.70, Hong Leong Industries 15 sen to RM3.95 while Hartalega was down 14 sen to RM5.61.

Meanwhile, the actives included JCY, Sanichi, QSR, KFC, Flonic and Proton.



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Construction sector taking the high ground

Construction

Maintain overweight: Results letdowns by certain contractors during the 3Q11 reporting period should not raise red flags as better quarters are in the offing. More importantly, the outlook for project awards starting 1H12 is good, driven by the rollout of large scale jobs.

We expect a continued improvement in construction margins, underpinned by progress billings and new contracts. Project flows are likely to pick up in 1H12 and trigger a re-rating of the sector. Maintain “overweight”. IJM Corp Bhd and WCT Bhd remain our top picks.

For 3Q11, five contractors, or 71% of the contractors we cover, delivered while two fell short. They turned in construction pretax margins of 3% to 22% in 3Q11, with exception of Malaysian Resources Corp Bhd which reported operating losses due to the timing of progress billings and profit recognition. Other contractors’ margins held steady, with upside coming from new jobs secured in the past three to six months.

The highest margin consistently came from Mudajaya Group Bhd though its results were below expectations. The lowest were IJM Corp and Sunway Bhd at 3%. IJM’s margins were dragged down by its Indian projects but should slowly recover to 6% to 8% due to new jobs. Gamuda Bhd’s margins stood at 7% mainly due to the double tracking project.

WCT’s margins were underpinned by its Middle East projects.

We expect project flows to be more active in 1H12 compared with 2H11 as most tenders will be due for award over the next few months. Year-to-date total major project awards amount to RM8 billion.

We note a shift towards projects of above RM500 million in value, a trend that is set to gain momentum as larger projects make tracks. This should be positive for the entire sector.

The value of projects to be awarded in 2012 should be at least double the value in 2011 as infrastructure works for the MRT SBK line alone will be worth about RM18 billion.

Other large-scale projects to be awarded in 2012 are the RM6 billion West Coast Expressway (WCE), about RM1 billion extension of the New Pantai Expressway (NPE) and the RM7 billion railway double tracking project from Gemas to Johor Baru.

There is likely to be excitement in 1H12 in the form of the pending awards for the MRT SBK line. Of the 28 contractors in the running for the elevated, stations and depot works, 14 are listed companies. — CIMB IB Research, Dec 14




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Seasonally weaker production for plantations

Plantation

Maintain neutral: Lower crude palm oil (CPO) production in November was matched by lower exports resulting in the Malaysian Palm Oil Board’s monthly stock closing marginally lower as at end-November 2011 but still above the two million level, at 2.06 million tonnes.

We expect December stock level to stay above the two million mark again, which is ample, and could pressure near-term CPO price. Maintain “neutral” on the sector. Kuala Lumpur Kepong Bhd and Genting Plantations Bhd are our top “sells” for their relatively higher valuations.

Malaysia’s November CPO production was down 14.8% month-on-month (m-o-m) to 1.63 million tonnes (+11.5% year-on-year [y-o-y]) but was largely within expectations as oil palm trees enter into seasonally weaker production months.

The weaker production was matched by a 9.9% fall in exports to 1.66 million tonnes (+10.2% y-o-y). Compounded with higher imports and lower domestic consumptions, November month-end closing stock was marginally lower m-o-m (-1.5%) at 2.06 million. Except for the US and Pakistan, major markets like the EU, China and India recorded lower m-o-m demand.

Independent cargo surveyors Societe Generale de Surveillance (SGS) and Intertek (ITS) forecast a 4.6% and 5.1% drop in export estimates for Nov 1 to 10, to 436,633 tonnes and 443,699 tonnes. If this sales trend persists throughout December, we expect the high inventory of CPO of above two million tonnes to be sustained, pressuring the price.

Furthermore, CPO price discount to soyoil is now US$30 (RM95.70) per tonne below its five-year historical mean of US$161.

The latest update from the Meteorological Department suggests that the current La Nina is likely to be weak to moderate. Malaysia’s weather is generally looking like the usual monsoon season.

Slightly wet weather is expected over northern Peninsular Malaysia and parts of Sabah in December and January. Elsewhere is looking normal. And Indonesia, the world’s biggest producer, is expected to receive normal rainfall in the near term.

We maintain our average CPO price forecast for 2012 at RM2,600 per tonne (year-to-date 2011: RM3,284 per tonne) as we have imputed an external economic slowdown that would hurt global demand. We advocate “buy” on under-appreciated mid-caps, TSH Resources Bhd and Sarawak Oil Palms Bhd, for their long-term value and growth propositions. — Maybank IB Research, Dec 14




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Earnings lift for AEON Credit Service

AEON Credit Service (M) Bhd
(Dec 14, RM 6.23)

Maintain buy with revised target price of RM7 from RM5.70: Our net profit forecasts have been raised after factoring in lower operating expenses (mainly from provision of doubtful debts), which more than offset the smaller increase in revenue contributions from the personal financing segment (on lower blended finance charges) and credit card business (due to lower outstanding credit balance).

We are keeping our FY12F to FY14F loan financing assumptions at RM1.5 billion (+27.8% year-on-year [y-o-y]), RM1.7 billion (+12.4% y-o-y) and RM2 billion (+16.4% y-o-y) as demand for microfinancing products is expected to remain steady despite the uncertain economic outlook.

During the 2008/09 global financial crisis, the group posted loan growth of 8.4% (and non performing loans of 1.8%) in FY10 ended February.

Results for 3QFY12, to be released this Tuesday, should come in stronger vis-à-vis 3QFY11 net profit of RM16 million and 2QFY12’s RM23.5 million. The most recent quarter could have benefited from spillover festive spending for Hari Raya Aidilfitri (which fell at end-August).

Our revised net profit projections imply annual growth rates of 40.5% (to RM89 million) in FY12 and 22% (to RM108.6 million) in FY13.

This is based on a higher CY12 target price earnings ratio of eight times (seven times previously) after considering the expanding size of ACSM (from RM300 million to RM751 million in market cap as net profit posted a five-year compound annual growth rate of 35.2%) since its listing in 2007.

Our new target price offers a potential upside of 17%, including FY13F net dividend yield of 5%. Maintain “buy”. — Hwang DBS Vickers Research, Dec 14




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MISC putting the worst behind it

MISC Bhd
(Dec 14, RM5.47)

Maintain buy with fair value RM7.23: MISC could put the worst behind when it completes its exit from the container business by June 2012. While the group’s loss-making petroleum tanker and chemical shipping segments are still a drag on earnings amid a tanker oversupply, their losses next year may somewhat be cushioned by robust earnings from other divisions, notably LNG and offshore.

MISC’s exit from the container liner segment will boost next year’s profit and help contain its losses before tax to US$64.2 million (RM204.8 million) on revenue of US$135.5 million as the group makes a clean break from this segment by end-June 2012. This will be sharply lower than the estimated loss before tax of US$191.6 million this year (excluding provisions).

MISC plans to sell all 16 container vessels and other container-related assets in the next six months, which may fetch a total of US$340 million if successful.

At worst, the value of its container vessels may drop by 13% to 25% year-on-year (y-o-y) due to the glut. If these are auctioned, the proceeds could go as low as US$250 million.

If completely sold off, the amounts will be written back from the US$400 million provided this year for MISC’s departure from the container liner business.

As tanker rates are expected to continue to be depressed, we are forecasting for MISC to remain mired in losses throughout FY12 to the tune of an estimated loss before tax of

US$190 million compared with the projected US$154 million for 9MFY11.

Annualising this estimate to strip off the nine-month effect will give rise to a 13% drop as we see rates start to tick up in 2H12 as the global economy starts to pick up.

Come 2013, MISC’s profit from the petroleum tanker segment should hover at US$25 million. We still think the glut in tanker supply will persist into 2013, although by then rates are bound to be better relative to currently as the imbalance between supply and demand eases.

Earnings from chemical tankers will break even next year as demand outstrips supply.

MISC is trading at an eight-year low, with a forward price-to-book value (P/BV) lower than -2 standard deviations, which we think is the bottom of the stock’s trading range as its book value next year will not get any lower. Its stable LNG and offshore segment as well as growing contribution from its tank terminal JVs and anticipated strong order book from Malaysia Marine and Heavy Engineering Bhd at over RM3 billion are expected to collectively generate a profit before tax of US$718.9 million.

This will help contain the US$274 million loss from the container and petroleum side next year. We reaffirm our contrarian “buy” call on MISC with our fair value of RM7.23 unchanged, premised on 1.5 times FY12 book value per share. — OSK Research, Dec 14




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Former KBB directors fined RM150,000

KUALA LUMPUR: Bursa Malaysia Securities Bhd has publicly reprimanded three KBB Resources Bhd’s former executive directors for failing to make an immediate, clear and accurate announcement on the payment defaults of various credit facilities.

The three were KBB’s former group managing director Datuk Ang Cho Teing, and former executive directors Datin Tai Chok Ping and Ang Chor Teng.

They were each fined RM50,000.

“Bursa Securities views the contraventions seriously and reminds KBB and its board of directors of their duty to uphold appropriate standards of responsibility and accountability to shareholders and the investing public,” said the regulator.

Bursa Securities said there were defaults in payment when certain credit facilities amounting to RM4.89 million had expired on July 9, 2010.

This triggered an immediate announcement under paragraph 2.1 (d) of PN1 as the amount represented 5.4% of KBB’s net assets as at Dec 31, 2009, it said.
The defaults were announced on July 26, 2010.

Bursa Securities said the company had breached paragraphs 9.03(1) and 9.04(I) of the Main Market Listing Requirements read together with paragraphs 2.1(d) and/or (e) of

Practice Note 1 for failing to make an immediate announcement on the defaults in payments of various credit facilities.

In addition, KBB’s announcement on July 26, 2010 breached paragraph 9.16(1)(a) as the announced date of the defaults (July 21, 2010) was not factual and was inaccurate in view of KBB’s confirmation to Bursa Securities that the credit facilities had expired as early as June 29, it said.

“The materiality of the breach where the requirement for listed issuers to make an immediate announcement of material default in payment of credit facilities was fundamental to enable investors to make informed investment decisions concerning the listed issuer’s financial condition,” said the regulator.


This article appeared in The Edge Financial Daily, December 15, 2011.



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SapuraCrest-Kencana plans RM1.4b capex for 2 years

KUALA LUMPUR: The merged entity between SapuraCrest Petroleum Bhd and Kencana Petroleum Bhd will allocate RM1.4 billion as capital expenditure over the next two years.

Speaking at a media briefing after the SapuraCrest EGM yesterday, group president and CEO Datuk Seri Shahril Shamsuddin said the capex would be used for expansion into Australia, Brazil and the Middle East.

He said the merged entity to be named Sapura Kencana Bhd will have an order book of about RM13 billion upon the merger. SapuraCrest’s order book is currently around RM4 billion to RM5 billion, he said.

At the EGM, Shahril said 99.5% of SapuraCrest’s shareholders are in favour of the proposed merger with Kencana.

Shareholders also approved SapuraCrest’s proposed acquisition of Australia-based Clough Ltd’s marine construction and offshore engineering operations in Australia, the UK and US for RM409 million in cash. Shahril said Clough will start contributing to SapuraCrest immediately as it has contracts in hand of over RM1 billion.

Clough’s acquisition has now given SapuraCrest the capabilities to lay flexible pipelines and umbilicals for deepwater projects, said Shahril.

Post merger, Shahril said the immediate task is to integrate the workforce between the two companies. This will be the focus for the first three to five months, he said, adding that SapuraCrest and Kencana plan to increase their skilled workforce by 15% to 20%.

At the same time, both companies will also streamline their operations upon the merger. “We will start by putting the businesses that overlap into single business units. We will then make sure they run efficiently,” said Shahril.

Shahril: We are able to go to the oil companies and offer them a one-stop shop.

He said the merger will allow SapuraCrest to become a fully integrated oil and gas services company, with an expanded suite of services that include engineering, procurement, construction, installation and commissioning (EPCIC) capabilities.

“We are able to go to the oil companies and offer them a one-stop shop,” he said, adding that there are only three to five companies globally that are able to do this.

With a combined balance sheet, he said SapuraCrest and Kencana will be able to take on larger projects. “It is very difficult for a company with a RM100 million paid-up [capital] to bid for a RM10 billion job,” he said.

The combined balance sheet of both companies will have a gearing of 1.1 times and RM1.3 billion cash. The merger was announced in July.

Under a cash and share swap deal, Integral Key Bhd (IKB), a special purpose vehicle, will acquire all assets and liabilities of SapuraCrest for a total consideration of RM5.87 billion, equivalent to RM4.60 per share. The total consideration is to be distributed to shareholders by the first quarter of 2012 when the merger is expected to be completed with the listing of IKB.

As for Kencana, IKB was offering RM5.98 billion or RM3 per share. Kencana will hold its EGM today for the approval of the merger.

SapuraCrest closed nine sen higher to RM4.41 yesterday with 4,324,700 shares transacted.


This article appeared in The Edge Financial Daily, December 15, 2011.



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ECM Libra’s 3Q earnings drop 75% on higher expenses

KUALA LUMPUR: ECM Libra Financial Group Bhd’s net profit for 3QFY11 ended Oct 31 fell 75.7% to RM1.71 million from RM7.06 million a year earlier. This is mainly due to higher operating expenses, share of loss of an associated company, impairment allowance for bad and doubtful debts as well as losses on loans and advances.

Revenue rose marginally to RM45.65 million during the quarter from RM43.29 million a year ago, while earnings per share dropped to 0.21 sen from 0.87 previously. No dividend was declared during the quarter.

For 3Q, ECM Libra reported an impairment allowance for bad and doubtful debts of RM400,000 and a share of loss of an associated company of RM900,000.

“The group’s fundamentals and financial position remain strong and are expected to show satisfactory performance in the current financial year,” it said in an announcement to Bursa Malaysia yesterday.

For the nine months ended Oct 31, ECM Libra saw its net profit rise 58% to RM30.66 million from RM19.37 million a year earlier on a 24% increase in revenue to RM138.11 million from RM111.15 million. Earnings per share increased to 3.74 sen from 2.39 sen previously.

The counter closed unchanged at 80 sen yesterday with a total of one million shares changing hands, which gave it a market capitalisation of some RM664.7 million. The closing price is a 33.9% discount to its net assets per share of RM1.21 as at Oct 31.

The recent quarterly results are in stark contrast to ECM Libra’s stellar second quarter results in which it saw its net profit jump 189.12% to RM14.62 million from RM5.06 million a year earlier. This was driven partly by net brokerage income of RM10.5 million, fee income of RM5.7 million, net gain from trading and investment securities of RM8.4 million, net interest income of RM8.4 million as well as a writeback of impairment allowance of RM5 million from a legacy pre-merger account.

The Edge Financial Daily reported on Dec 1 that ECM Libra’s investment banking unit is believed to be an acquisition target of K&N Kenanga Holdings Bhd. It is learnt that the proposed acquisition that is currently being explored is a cash deal. Speculation that both parties were exploring M&A had been in the market as early as the first half of the year.

In April, The Edge weekly, quoting sources, reported that both parties were exploring a merger.


This article appeared in The Edge Financial Daily, December 15, 2011.



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Goldis disposes of Macro Kiosk for RM15m

KUALA LUMPUR: Goldis Bhd announced yesterday it has accepted an offer from Trigoh Sdn Bhd to dispose of its 70% stake in Macro Kiosk Bhd (MKB) for RM15 million cash.

The proposed disposal will be a management buyout (MBO) by Goh Chee Ken, Goh Chee Heng and Goh Chee Seng who are the chief executive officer, chief operating officer and head of corporate affairs of MKB respectively.

MKB’s principal activity is as a mobile communications technology provider.

The three Gohs will conduct the MBO through Trigoh of which they are also directors and shareholders.

The offer price is about five times MKB’s net cash flow which stood at RM5.04 million for the financial year ended Jan 31, 2011.

The 70% stake in MKB was originally acquired for RM105,000 on Feb 1, 2002.
Goldis reported that the expected gain on disposal of MKB will be about RM9.5 million.

Goldis reported that the total proceeds of the disposal will be “utilised for capital expenditure/future investments.

This includes investing in the equities of private companies operating in various sectors.

Goldis had reported a strong third quarter ended Oct 31 net profit of RM237.41 million of which RM221.23 million could be attributable to the disposal of Goldis’ subsidiary, HEOPharmaHoldings Sdn Bhd, on Aug 1.

On the news of a 9.625 sen dividend and strong quarterly earnings announced on Tuesday, Goldis’ share price closed 5% higher yesterday at RM1.88 up from RM1.79.




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Trading interest in Takaso surges

KUALA LUMPUR: Interest in hardly traded Takaso Resources Bhd spiked yesterday with 100 million shares changing hands, making it the most active stock by volume and the sixth highest by value.

The loss-making company’s share price rose 5.1% to 20.5 sen. Some 99.5 million of its 135.22 million issued shares were traded yesterday, or a 129% float of roughly 77 million shares.

When queried, Takaso chief financial officer Su Seong Yeen told The Edge Financial Daily: “We are unaware of any reason for the market activity.

All related parties, substantial shareholders and company directors have been contacted but there are no transactions or corporate exercises that the company is aware of other than the corporate exercise which the company has announced.”

The surge in volume traded is all the more curious when considering that the manufacturer of condoms and baby products has been on a five-year loss-making streak. “The market for our products has been highly competitive,” said Su.

“In a bid to turn the company around, the management of Takaso is planning to invest in new businesses,” said Su, who declined to disclose them. To fund its plans, the company had raised RM32 million through a rights issue of 94.034 million new shares and 56.42 million warrants in September.

Two weeks ago, Takaso announced that it had fully acquired Benchmark Vista Sdn Bhd, a cathode ray tube recycler, for RM2 million via the purchase of one million shares in Benchmark.

Takaso also acquired two dormant companies as part of its restructuring process. It had subscribed for S$100,000 (RM244,215) worth of shares in its unit Takaso Industries Pte Ltd (TIPL) on Nov 23. It also bought Secret Universal Sdn Bhd, which was renamed Takaso International Sdn Bhd, for RM2 on Nov 3.

According to its most recent annual report, Takaso’s net loss widened to RM2.16 million for FY11 ended July 31 from RM1.28 million the previous year. Revenue shrank by 11% from RM19 million for FY10 to RM16.8 million.

“The losses in 2011 were exacerbated to the political crisis in the Middle East as well as the eurozone crisis which are two of our major export markets,” said Su. “To reduce our
exposure to the Middle East and Europe, Takaso is targeting new markets like Thailand.”

To offset the growing losses, Takaso had reduced the value of its shares from RM1 to 25 sen on July 22.

The group signed a memorandum of understanding (MoU) with Yakin Hakikat (Thailand) Ltd on Aug 10 under which Yakin will be the sole distributor of Takaso’s condoms and related products in Thailand.

The MoU also grants Takaso the option of acquiring a 39% stake in Yakin, which is the maximum allowed for foreign companies.

Penny stocks continued to garner investor interest yesterday with the top 10 active counters having values of less than RM1. The top four were Takaso, Sanichi Technology Bhd, Envair Holdings Bhd and Asia Media Group Bhd.

Asia Media rose 18.18% to 32.5 sen, Eduspec Holdings Bhd was up 17.39% to 12.5 sen and BCT Technology Bhd ended 16.67% higher to 3.5 sen.




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Kencana 1QFY11 profit up 31%

KUALA LUMPUR: Kencana Petroleum Bhd saw net profit for its 1QFY11 ended Oct 31 increase 31% from the preceding quarter to RM83.54 million from RM63.72 million due to the addition of a new subsidiary.

The company said its higher earnings were due to the full-quarter contribution from Allied Marine and Equipment Sdn Bhd (AME), which it acquired in July through a share swap arrangement.

Kencana also recorded strong improvement in its contracts on a bigger order book and the better management of the relevant costs.

Year-on-year, its net profit grew nearly 60% from RM52.36 million in the previous corresponding quarter. Meanwhile, revenue rose 69% to RM569.9 million from RM336.9 million a year ago.

AME was acquired for RM400 million in a share swap. It provides offshore diving and underwater-related services for the inspection, repair and maintenance of structures, pipelines and risers for the construction of underwater facilities for the oil and gas industry.

Kencana said in an earlier announcement that the acquisition of AME would enable it to earn recurring revenues and potential cost synergies.

AME has undertaken projects in Malaysia, Indonesia, Vietnam, China and India.

The acquisition came with a guarantee that AME’s audited consolidated profit after tax for each of the years ending Sept 30, 2011 and 2012 reach a minimum of RM40 million.

Last week, Kencana announced it had won a RM1 billion contract from Bechtel International Inc to fabricate and assemble a liquefied natural gas processing facility in Australia.

The company received a buyout offer from Integral Key Bhd for RM5.87 billion or RM4.60 per share, as part of a plan to merge Kencana with SapuraCrest Petroleum Bhd.

Both shares of Kencana and SapuraCrest reached a near four-month high yesterday. Kencana gained four sen to end at RM2.79 while SapuraCrest closed nine sen higher at RM4.41.


This article appeared in The Edge Financial Daily, December 15, 2011.



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Baneng to be delisted tomorrow

KUALA LUMPUR: Garment manufacturer Baneng Holdings Bhd will be delisted from Bursa Malaysia tomorrow after its lenders decided to discontinue with the proposed debt restructuring the company had embarked on since April 2009.

“The board of directors of Baneng regret to inform that the company, together with the corporate debt restructuring committee (CDRC) and all lenders, have failed to reach an agreement to the proposed debt restructuring scheme, which has been formulated before it was admitted as an affected listed issuer under the PN 17 of the Main Market listing requirements of Bursa Securities on Nov 30, 2010,” it said in an announcement to Bursa Malaysia yesterday.

Baneng said the CDRC convened a meeting with the company and all lenders on Monday to deliberate on the final revised schemes proposed by Baneng.

After the meeting, the CDRC on the same day informed Baneng that the lenders had decided to discontinue with the proposed debt restructuring that it had embarked on with the lenders on April 2009, according to Baneng.

Baneng’s securities were suspended yesterday following its failure to submit a regularisation plan to the Securities Commission or Bursa Malaysia for approval within 12 months from its first announcement on its restructuring scheme on Nov 29, 2010.

Apart from that, Baneng’s application for an extension of time to submit the regularisation plan was rejected, as communicated by Bursa Malaysia to the company on Dec 6, according to its previous announcement to the local stock exchange. It is worth noting that Baneng would continue to exist but as an unlisted company.

“The company is still able to continue its operations and business and proceed with its corporate restructuring and its shareholders can still be rewarded by its performance.

However, the shareholders will be holding shares which are no longer quoted and traded on Bursa Malaysia,” said Baneng.

Baneng manufactures and sells fabrics, garments, apparels and textiles in Malaysia and Brunei. The company saw its net loss narrowed to RM8.98 million for the nine-month period ended Sept 30, 2011 from RM27.99 million the same period a year ago mainly on its cost cutting and consolidation measurements.

Nonetheless, revenue slipped 10% to RM81.43 million during the three quarters ended Sept 30 from RM90.42 million a year ago mainly due to the weak consumer market in the US and its direction to limit operating exposures amid the completion of its proposed debt restructuring scheme.

Loss per share was 14.97 sen versus 48.12 sen previously. The counter closed at 1.5 sen on Tuesday, a day before its suspension.


This article appeared in The Edge Financial Daily, December 15, 2011.



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UDA to review MoF plan to split former Pudu Jail land

KUALA LUMPUR: UDA Holdings Bhd will review the Ministry of Finance’s (MoF) plan to divide the former Pudu jail site into three plots, a move to maximise the value of the 8.1ha site.

UDA chairman Datuk Nur Jazlan Mohamed said in a statement yesterday that a study was underway to look into the proposed development of the site which is better known as Bukit Bintang City Centre (BBCC).

A special panel headed by an UDA board member would undertake the proposed development plan and present it to the finance ministry for consideration.
Nur Jazlan said the planning of the development of the land had to be made carefully because the survival of UDA and almost 1,400 of its employees hinged upon its successful implementation.

“For UDA, this development marks the continuation of the company’s survival for the future, and the board of directors have agreed that any form of development needs to prioritise UDA’s interest first,” he said. Previous reports said the finance ministry ordered UDA to divide the former Pudu jail land into three plots with two to be given to local bumiputera companies and the remainder to a non-bumi entity.

The directive was issued after the finance ministry did not consider UDA’s proposal to appoint a China government-linked company — Everbright International Construction Engineering Corp, which involves a foreign direct investment value of almost RM4 billion — as its joint venture partner for the Pudu jail land.

The former Pudu jail site is to be divided into three plots.

This article appeared in The Edge Financial Daily, December 15, 2011.



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Kurnia still in talks on possible disposal of KIMB

KUALA LUMPUR: Kurnia Asia Bhd has clarified a newspaper report that it is still in talks to dispose of its wholly-owned subsidiary Kurnia Insurans (M) Bhd (KIMB).

“The company is still in negotiations for the possible disposal and hence is unable to comment on the price, the name of the relevant parties or the likelihood of the possible disposal,” it said in a filing with Bursa Malaysia yesterday.

It was reported yesterday that the insurer would likely announce its decision to sell an equity stake in KIMB to Insurance Australia Group (IAG) this week at a price estimated to be 2.5 times to three times of KIMB’s book value.

“We believe one of the key issues regarding the disposal is the stake that is to be sold.

Given that IAG is a foreign company, Kurnia might only be able to dispose of up to 70% of KIMB due to Bank Negara Malaysia’s foreign ownership rules. We value 100% of KIMB at RM1.4 billion to RM1.5 billion,” RHB Research said in a note yesterday.

Kurnia closed 2.5 sen or 4.81% higher at 54.5 sen yesterday with a total of 23.1 million shares changing hands.

Following a report in The Edge, Kurnia had in July announced that it received expressions of interest from certain parties to explore the possibility of acquiring an interest in KIMB.


This article appeared in The Edge Financial Daily, December 15, 2011.



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MAS begins route rationalisation

KUALA LUMPUR: Malaysian Airline System Bhd (MAS) will begin its route rationalisation exercise by discontinuing eight loss-making routes beginning January.

Group CEO Ahmad Jauhari Yahya said the withdrawal was based on an independent internal profitability and yield analysis.

“This accounts for almost 12% of our passenger capacity and we estimate that the ongoing route rationalisation will improve loads, increase yields and have a profit impact of RM220 million to RM302 million for 2012,” Jauhari said in a statement yesterday.

These routes include Kuala Lumpur-Surabaya, Kuala Lumpur-Dubai, Kuala Lumpur-Johannesburg and Kuala-Lumpur Rome.

The rationalisation was outlined in MAS’ business plan last week, where it said 40% of its 100 routes were loss-making and that its unit cost position was 10% to 15% above corresponding revenues.

Concurrently, it will increase frequencies of flights to key regional cities to benefit from the strong growth expected in regional demand.
“Malaysia Airlines will focus on the core Asean region, South Asia, Greater China and North Asia where the demand outlook is strong, fuelled by a burgeoning middle class and increased global and intra-regional trade,” it said.

Additionally, MAS seeks to identify strategic partnerships for code sharing and joint ventures to leverage on strategic routes.

MAS intends to minimise the losses expected for FY11 ending Dec 31 and FY12. The national carrier’s net loss for 9MFY11 ended Sept 30 amounted to RM1.2 billion.

The strategy to withdraw from loss-making routes is part of MAS’ aim to become a “smaller yet profitable network”. MAS said the rationalisation exercise would have a minimal impact of its cargo operations, as it will continue to maintain its key cargo destinations in the UK, Europe, the Orient, Australia, the Middle East, South Africa and the US.

The move was also in line with MAS’ focus on shifting to the ‘hub-and-spoke’ approach, with the KL International Airport as a centre to its global network.

“The route rationalisation is expected to have minimal impact on Malaysia’s position as a top tourist destination in Asia as we will work aggressively with our code-share partners.

“Through our existing arrangements with them, we will continue to promote connectivity between Malaysia and key international destinations as well as contribute towards efforts to increase tourist arrivals to Malaysia,” said Jauhari, adding MAS hoped to return to these markets after it had stabilised its business.


This article appeared in The Edge Financial Daily, December 15, 2011.



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Sime Darby buys Bucyrus business from Caterpillar for US$360m

PETALING JAYA: Sime Darby Bhd has bought part of Bucyrus distribution business from Caterpillar for US$360 million (RM1.1 billion).

In a statement, Sime Darby said the acquisition would help to strengthen the group’s industrial division in the mining industry by offering a wider range of mining equipment and services to its customers.

“It will also allow Sime Darby’s industrial division to leverage its position in Australasia’s rapidly growing mining industry, especially in Queensland, Northern Territory of Australia and Papua New Guinea,” the statement added.

According to the announcement to Bursa Malaysia yesterday, the acquisition was done through Sime Darby’s wholly-owned units, Hastings Deering (Australia) Ltd, Societe Caledonienne Des Tracteurs SAS and Hastings Deering (PNG) Ltd.

The assets acquired comprise owned and leased properties, plant and equipment, inventories, maintenance contracts, order book and employees.

Sime has an extensive presence in Queensland and Northern Territory of Australia in the mining equipment sector through its position as the largest distributor of Caterpillar’s mining trucks and tractors in Australia.


The industrial division is the second largest contributor to Sime Darby’s pre-tax earnings, generating RM1.06 billion or 18.8% of the conglomerate’s total pre-tax of RM5.44 billion for FY11 ended June. This is record earnings for the division.

For 1QFY12 ended Sept 30, the industrial division recorded a pre-tax profit of RM330 million, up 42% from RM232.3 million in the previous corresponding quarter. Revenue was at RM3.17 billion against RM2.37 billion a year ago.

Sime Darby attributed the strong earnings to the ongoing strong demand for heavy equipment in Australasia and Malaysia and the strong Australian dollar.

According to Ivy Ng, an analyst with CIMB Securities Sdn Bhd, the deal is a good one, and it will obviously improve Sime Darby’s growth prospects in the industrial sector.

The acquisition will complement Sime Darby’s existing product range in the heavy industrial equipment industry, and support its customers that are mainly mining companies down under.

“The potential earnings improvement from the acquisition will not be very significant. It will only enhance the group’s earnings by less than 1% ... at RM1.1 billion,” Ng told The Edge Financial Daily.

“The acquisition price is fair, but not cheap. However, it will be good for its long-term prospects,” she added.

Caterpillar said in a press release that the company intends to distribute Bucyrus’ mining products through Sime Darby’s other Caterpillar dealerships. Sime said the group’s industrial division will also start selling Bucyrus’ mining products in seven provinces in China through its dealerships operated by China Engineers Ltd.

In Malaysia, Caterpillar is represented by Sime Darby Industrial Sdn Bhd, while in Singapore, Maldives and Christmas Island, the heavy equipment maker is represented by Tractors Singapore Ltd.

Sime Darby may be allowed to distribute former Bucyrus’ products in other markets where it has Caterpillar dealerships such as China, Malaysia, Singapore and Christmas Island.

However, analysts are not excited on the potential earnings because besides China, the mining industries in the other countries are not as vast and developed as in Australia.

“There is not so much mining activity in Malaysia and Singapore, while Bucyrus’ products are used mainly in the mining industry.

“While they have a significant presence in China, it will take some time for the potential in China could be unearthed, as the mining industry there isn’t as developed as in Australia, which warrants expensive and high-technology equipment,” the analyst said.


This article appeared in The Edge Financial Daily, December 15, 2011.



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RHBCap, OSK to submit merger details to BNM

PETALING JAYA: The merger talks between RHB Capital Bhd (RHB- Cap) and the OSK group seem to be bearing fruit.

Both parties will soon submit to Bank Negara Malaysia (BNM) a detailed proposal on the merger between RHBCap and the investment banking unit of the OSK group, according to sources.

“The parties have been in negotiations and seem to have come to more definite terms on the proposed merger. They are nearing completion of discussions and aim to submit the details of the merger as early as this month,” said a source familiar with the matter.

“The due diligence undertaken by RHBCap for the proposed takeover of OSK Investment Bank is on track and the whole deal is targeted to be finalised by March of next year, if everything goes well,” noted another source.

It is understood that both parties are working on the management structure of the potential merged entity.

RHBCap is believed to be looking at bringing in an “outsider” who is not from either entity to lead the investment banking business of the merged entity.

“The RHB group has also been looking for someone to head its investment banking business after the former head Chay [Wai Leong] left earlier this year,” said a source, adding that the bank has a candidate in mind and may hire the person by the first quarter of next year.

There was earlier speculation that OSK’s founder and major shareholder Ong Leong Huat would lead the new merged investment bank. However, it is learnt that the seasoned investment banker will sit on the board rather than hold an executive position Ong will provide input and strategy on a macro level.

To recap, at end-September, RHBCap announced that it written to BNM for approval to commence negotiations with OSK Investment Bank on a possible merger of businesses.

The central bank gave its approval on Oct 13 and the parties have three months from then to negotiate.

The pricing of the deal is not known. Nonetheless, The Edge weekly reported on Oct 3 that RHBCap is likely to pay between 1.9 times and 2.2 times book value of OSK Investment Bank and it would likely involve a share swap.

While the investing public waits for further details of the proposed merger, the share prices of RHBCap and OSK Holdings have been on an uptrend recently.
RHBCap rose 1.2% yesterday to RM6.94 while OSK Holdings was up 2.31% at RM1.77.

Trading volume of RHBCap went up 76% to 2.3 million shares traded from Tuesday but it is still below the 52-week average daily volume of 2.9 million. OSK’s volume shot up 715% to 10.6 million shares traded from Tuesday, 278% higher than the 52-week average daily trading volume of 2.8 million shares.

The recent pick-up in RHBCap’s stock price reverses a downtrend since June after it hit a 14-year high of RM9.89. The banking counter reversed its upward trend after both Malayan Banking Bhd and CIMB Group Holdings Bhd dropped their plans to acquire RHBCap.

Banking analysts believe that the recent increase in the stock’s price could reflect investor anticipation of further information on the proposed merger as well as to factor in the price of the deal.

“There could be some adjustments in pricing so the deal will not be dilutive for the shareholders of both parties,” said a local banking analyst.


This article appeared in The Edge Financial Daily, December 15, 2011.



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Proton in talks with former distribution partner

KUALA LUMPUR: Proton Holdings Bhd is looking to rekindle its ties with international auto retailer and distributor Inchcape plc to leverage its global network.

“We are exploring opportunities with Inchcape to optimise our overseas distribution network, especially within Asean,” Datuk Syed Zainal Abidin Syed Mohamed Tahir, Proton managing director, told The Edge Financial Daily.

He said the deal with Inchcape involves Proton’s distribution network in Indonesia, which has proven to be a strong market for the national carmaker.

Sales of Proton vehicles in Indonesia rose 23.5% to 2,060 units in 2010 from the previous year, as it received a considerable boost from the Proton Exora. It is the 12th top brand there behind Chevrolet and Hyundai, according to Proton’s recent annual report. PT Proton Edar Indonesia currently manages the distribution of Proton vehicles there.

“If the deal with Inchcape proves to be good, we may elect them as the exclusive distributor for Indonesia,” said Syed Zainal Abidin.

Presently, Proton and Inchcape do not have any working arrangements. However, the two companies have a history.

Proton was first introduced to Australia in 1995 through Inchcape, before all dealers under the arrangement moved en bloc as Proton formed a wholly-owned subsidiary to manage its operations there.

Along with Proton, the company previously distributed other brands such as Ferrari and Audi in Australia but has since narrowed its focus there to Subaru, Volkswagen, Kia and Mitsubishi.

In the same year, Inchcape disposed of its 30% stake in Proton Cars (UK) Ltd to Proton, which then had full ownership of the unit. Proton had previously bought the 70% stake in Proton Cars (UK) Ltd from its founder and chairman David Brown.

The national carmaker currently exports to China, Thailand, Indonesia, Singapore, Australia, the UK and the Middle East.

According to its latest annual report, total shipments to overseas markets rose 12.3% year-on-year in 2010 mainly due to higher exports of completely-knocked-down (CKD) vehicles and cam profile switching (CPS) engines to China.

Its top five performing markets last year were Thailand, Australia, Indonesia, Egypt and Syria.

UK-based Inchcape has a strong presence in its home country, where it derives more than a third of its global sales from partnerships with BMW, Audi, Volkswagen, Lexus and Ford among others. The company distributes Toyota, Lexus, Hino and Suzuki vehicles in Singapore. In Brunei, it distributes Toyota and Lexus.

These two markets make up its South Asia portfolio, which made a profit of £36.1 million (RM178.2 million) in 2010, though this was a 35.4% drop from the previous year. It is also present in the Australasia region, the UK, Europe and North Asia.

“We anticipate the uneven global economic recovery will continue but with our strong portfolio of the world’s leading luxury and premium automotive brands, we are uniquely positioned worldwide to benefit from the exciting growth opportunities in the fast growing economies of Asia-Pacific and the emerging markets where the group delivers two-thirds of its trading profit,” Inchcape CEO Andre Lacroix said in an interim update recently.


This article appeared in The Edge Financial Daily, December 15, 2011.



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JCorp to privatise QSR and KFCH

KUALA LUMPUR: Johor Corp (JCorp) and private equity firm CVC Capital Partners Asia III Ltd have made a joint takeover offer for QSR Brands Bhd at RM6.80 per share and its subsidiary KFC Holdings (M) Bhd (KFCH) at RM4.

A special purpose vehicle called Massive Equity Sdn Bhd (MESB) will undertake the takeover to buy the assets and liabilities from the two subsidiaries of JCorp.

The assets and liabilities route will require the acquirers to secure the consent of at least 75% of the minority shareholders in order for the deals to materialise.

Currently, JCorp owns a 57.05% stake in Kulim (M) Bhd, which in turn holds 58.68% of QSR.

QSR is the major shareholder of KFCH with a 50.64% stake.

Upon completion of the takeover exercise, both QSR and KFCH will become empty shell companies, and the bulk of the sale proceeds will be distributed back to shareholders in the form of capital repayment and special dividend.

The offer price of RM4 for KFC Holdings(M) Bhd values the fast food chain at
RM3.17 billion

JCorp holds 51% equity interest in MESB, while CVC Capital owns the remaining 49%.

MESB is also offering RM3.79 for each outstanding warrant in QSR and RM1 for every KFCH warrant.

“The acquisitions will allow JCorp to flatten its vertical corporate structure and reduce its multiple listings, resulting in better governance and greater operational efficiency which will drive both growth and long-term value.” said the Johor state-owned investment arm.

“This will in turn facilitate fund raising and leveraging on operating assets as part of JCorp’s overall rationalisation programme, which will also address the debt issue at JCorp,” it said.

At RM6.80 per QSR share, the company is valued at some RM2.06 billion. The offer price is an 80 sen or 13% premium over the last transacted price of RM6 prior to the announcement.

The offer price of RM4 a share for KFCH values the fast food chain at RM3.17 billion. The price is 59 sen or 17% higher than the counter’s last closing price of RM3.41 on Tuesday.

According to JCorp, the offer prices for QSR and KFCH are deemed attractive. This is because the acquirers are paying a premium of 18% and 20% to QSR and KFCH’s three-month weighted average share prices of RM5.68 and RM3.38 respectively.

The success of the takeover offers hinges on MESB signing definitive agreements with QSR and KFCH. Both offers will expire at 5pm on Dec 21. CIMB Investment Bank is advising MESB on the deals.

JCorp, in a statement yesterday, said its takeover offers for both companies indicated its confidence in the long-term value of the businesses.

QSR via KFCH owns and operates some 620 KFC restaurants in Malaysia, Singapore, Brunei, Cambodia and India, according to QSR’s website.

KFCH also manages some 29 RasaMas restaurants in Malaysia and Brunei besides 55 Kedai Ayamas in Malaysia.

In terms of financials, QSR’s net profit fell marginally to RM74.41 million for 9MFY11 ended Sept 30, from RM74.92 million a year earlier, despite revenue rising 10% to RM2.43 billion from RM2.2 billion.

KFCH’s net profit dipped 2% to RM106 million from RM108.17 million while revenue gained 10% to RM2.03 billion from RM1.84 billion.

As at Dec 31, 2010, JCorp’s debts came to RM3.35 billion, its latest annual report shows.

This compares with RM3.8 billion a year earlier.

JCorp has taken the initiative to repay and re-finance the debt obligations which mature in 2012. Under its Corporate Restructuring Master Plan, which was unveiled in 2002, the state investment arm had restructured its debt and raised funds from the divestment of non-strategic assets for loan repayment by July 31, 2012.

A JCorp official who requested anonymity told the briefing yesterday that MESB would fund the acquisitions via equity financing from its owners JCorp and CVC apart from resorting to bank loans to finance the acquisitions of QSR and KFCH.

CVC Capital is not new to the local corporate scene. The private equity firm had partnered Multi-Purpose Holdings Bhd to privatise Magnum Corp Bhd three years ago. It has also bought over Genting Bhd’s paper and packaging business for RM745 million.

In fact, this is the second attempt CVC made to take over the fast food chain, which is perceived to be a good cash generating asset.

To recap, in November last year, Tan Sri Halim Saad, the former executive chairman of Renong Bhd, and Datuk Che Mokhtar Che Ali via their private investment vehicle Idaman Saga Sdn Bhd offered to acquire the entire business and undertakings of QSR at RM5.60 a share.

The offer price was later revised upwards to RM6.70 after Idaman Saga said it planned to undertake the exercise in collaboration with KUB Malaysia Bhd and CVC.

QSR subsequently rejected the proposed takeover offer. QSR also declined offers from other private equity entities including Carlyle Group.


This article appeared in The Edge Financial Daily, December 15, 2011.



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Felda Global's listing likely in April 2012

The listing of Felda Global Ventures Holdings (FGVH) on the main market of Bursa Malaysia is expected to take place in April next year, says Felda Global group president, Datuk Sabri Ahmad.

He said FGVH had picked five investment banks, two local and three international, to manage the listing process.

"Felda has elected Maybank, CIMB, Morgan Stanley, JP Morgan and Deutsche Bank to undertake the listing process and secure the best value from the exercise," he added.

He was speaking at a media conference at the Felda Biotechnology Centre at Bandar Enstek, in Nilai, Negri Sembilan today.

Sabri said Koperasi Permodalan Felda (KPF), comprising Felda settlers, and which now has the biggest interest in Felda, will reap enormous benefits through the listing. He said to enable the settlers to own shares traded, FGVH will assist them, including providing the "pink form" for the purchase process.

"This listing will become a new income source for the settlers, as they will have a profit through dividend remuneration, apart from the yields from their plantations," he added.

Sabri also denied that the listing involved leasing the settlers land, explaining that it only concerned, what was owned by Felda.
For the record, Felda owns more than 360,000 hectares of land. The 112,635 settlers have more than half a million hectares.

Meanwhile, Felda Global today announced an important find in the oil palm industry's efforts towards overcoming Ganoderma or better known as Basal Stem Rot disease. Sabri said, Felda Global's Research and Development subsidiary, Felda Agricultural Services Sdn Bhd, had succeeded in creating the world's first marker to identify oil palm trees affected by the disease.

"The Ganoderma molecular marker system is an early attempt to prevent the start of infection. With the presence of this system, the grading programme for oil palm trees, can be more systematically implemented," he added.

The Ganoderma fungus can have a serious impact on the life of an oil palm along with its fresh fruit yield. -- Bernama



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JCY climbs as beneficiary of higher prices

KUALA LUMPUR (Dec 15): Shares of hard-disk drive manufacturer advanced in the afternoon session on Thursday as analysts were optimistic about its earnings outlook as its competitors faltered following the fallout from the severe floods in Thailand.

At 3.55pm, JCY was up 12.5 sen to 83.5 sen with 27.85 million shares done. Its call warrants, JCY-CD jumped 10 sen to 31 sen with 70.88 million units transacted.

The FBM KLCI fell 4.0 points to 1,459.12. Turnover was 1.13 billion shares valued at RM817.38 million. There were 258 gainers, 412 losers and 302 stocks unchanged.

“Buy JCY as we expect strong near-term earnings on higher average selling prices and allocations,” said CIMB Equities Research in its report on Wednesday.



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Kencana-SapuraCrest targets CAGR of 15% to 20% in revenue

KUALA LUMPUR: The final hurdle in the merger of KENCANA PETROLEUM BHD [] and SAPURACREST PETROLEUM BHD [] was crossed on Thursday after Kencana’s shareholders gave their approval at its EGM.

Kencana group chief executive officer Datuk Mokhzani Mahathir told reporters that the merged entity -- Sapura Kencana Bhd -- was looking at a compound annual growth rate of 15%to 20% for revenue.

The merger was expected to completed by end-February 2012 and it was on track to being listed in the first quarter of 2012 pending regulatory approvals.

He said the merged entity would have 9,000 people on its payroll globally across 20 countries ranging from Malaysia, Thailand, Brazil, the US and India to Australia.



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Vehicle ownership transfer via MyEG

Malaysia's e-government services provider MY E.G. Services MyEG) Bhd, will launch a new service next month to facilitate the online transfer of vehicle ownership via its website.

The service will be under the purview of the Road Transport Department (RTD). MyEG's executive chairman Datuk Dr Norraesah Mohamad said: "The new service empowers vehicle owners to be proactive in ensuring the full completion of the ownership transfer process, for a convenience fee of RM25."

The service consists of two phases, the "E-Tukar Hakmilik Sementara", where the ownership is transferred to used car dealers, and "E-Tukar Hakmilik Sukarela", to the eventual buyer.

"In the E-Tukar Hakmilik Sementara phase, all liabilities will fall on the dealers.

"The objective is to protect sellers and thereby absolve them from any matters pertaining to the car during the "transitional phase" before being sold to the next owner," she told a press conference after the company's Annual General Meeting in Kuala Lumpur today.

MyEG will also provide training for used car dealers and finance companies, as most car ownership transfers usually go through either one party, and the process will also be more efficient while lowering the cost.

Meanwhile, on revenue, Norraesah said that currently the highest contribution was from the RTD, at about 60 per cent. She also said MyEG would be embarking on a tax service project, whereby a RM40 million capital expenditure had been allocated to buy equipment to implement it, along with 100 new kiosks. -- Bernama



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Scientex eyes larger slice of global stretch film market

KUALA LUMPUR (Dec 15): Scientex Bhd, which invested RM16 million to expand its production capacity, has set its sights on expanding its share of the global stretch film market.

The industrial packaging manufacturer and property developer had recently commissioned its ninth production line at the Pulau Indah plant, which increased its production capacity by 20% to 120,000 tonnes per annum.

Managing director Lim Peng Jin said the AGM on Thursday the expansion of the production capacity was necessary, due to unabated demand for stretch film worldwide.



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FBM KLCI continues downtrend at midday

Share prices on Bursa Malaysia were lower at mid-day break today, as investors continued to sell ahead of the year-end holiday season, dealers said.

At 12.30pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) fell four points or 0.3 per cent to 1,459.12.

The Finance Index fell 23.83 points to 13,035.84, the Plantation Index shed 9.41 points to 7,887.79 and the Industrial Index fell 12.4 points to 2,634.41.

The FBM Emas Index lost 16.05 points to 10,009.9, the FBM Mid 70 Index added 32.08 points to 11,028.39 and the FBM ACE Index declined 27 points to 4,124.86.

Losers led gainers by 368 to 211 while 283 counters traded unchanged. Turnover stood at 733.86 million lots worth RM510.7 million.

For the active stocks, MBSB-CA gained 3.5 sen to 18 sen while KFC-CB and Kulim-CB gained 13 sen each to 21 sen and 19.5 sen respectively.

Among heavyweights, Maybank lost 2.0 sen to RM8.23, Sime Darby gained 1.0 sen to RM8.95 and CIMB rose 2.0 sen to RM6.87. -- Bernama



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TNB: Extra power capacity tender by end-Q1

Tenaga Nasional Bhd, Malaysia’s biggest power producer, may hold an open tender for additional electricity capacity by the end of the first quarter of 2012, Chief executive officer Che Khalib Mohamad Noh told reporters in Kuala Lumpur today. -- Bloomberg



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Tenaga in talks to buy gas: CEO

Tenaga Nasional Bhd, Malaysia’s biggest power producer, is in talks with Exxon Mobil Corp, Royal Dutch Shell Plc and others to buy gas, chief executive officer Che Khalib Mohamad Noh told reporters today in Kuala Lumpur.

Tenaga may report a fiscal first-quarter loss if it doesn’t receive compensation in time from the Malaysian government and its energy company Petroliam Nasional Bhd for disruptions in gas supply, the chief executive said.

The quarter may be “very challenging” unless this is resolved, Che Khalib added. -- Bloomberg



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Tenaga to rebalance fuel cost mix, focus more on coal, says Che Khalib

KUALA LUMPUR (Dec 15): TENAGA NASIONAL BHD [] is looking to rebalance its fuel cost mix of between coal and gas to 50:50 in 2016 from 40:60 now to reduce its dependency on gas, said its president and CEO Datuk Seri Che Khalib Mohamad Noh.

"The coal-fired plant in Tanjung Bin, Johor will be expanded to provide an additional 1,000 MW to meet the higher demand," he told reporters after the company's AGM here on Thursday.

Che Khalib said TNB hoped to receive payment of up to RM2 billion on the additional cost it incur for burning pricey oil and distillates from the government and Petroliam Nasional as soon as possible.

"We are working on it, and hopefully when we receive it, it will reverse our lost to profit, or else, we will be registering similar results we recorded for the past few quarters," he added.



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Scientex to invest RM50m in new plant

Scientex Bhd, an industrial packaging manufacturer and property developer, plans to invest between RM40 million and RM50 million to build a new manufacturing facility in Klang.

To be built opposite the existing plant, construction of the facility is expected to start by mid-2012.

"We are still in the planning stage. However, we plan to add another two productions line at the new plant," managing director Lim Peng Jin said after the company's annual general meeting today.

Scientex has at present, nine production lines at the Pulau Indah based facility with a production capacity of 120,000 metric tonnes annually.

"We expect our production capacity to increase by 30 per cent on top of the current 120,000 metric tonnes when the new plant starts operations, the latest by 2013," Lim said.

Scientex is one of the top five producers of stretch film globally. The company exports more than 78 per cent of its manufactured products to over 60 countries. -- Bernama



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Don't sell Proton stake to foreign firm: Dr M

Khazanah Nasional Bhd, a Malaysian government investment company, shouldn’t sell its controlling stake in carmaker Proton Holdings Bhd to a foreign company, former prime minister Tun Dr Mahathir Mohamad told reporters today in Selangor.

“I don’t think we should sell a stake to foreign companies,”said Dr Mahathir, who helped found Proton and remains an adviser. “They can participate in the company and contribute, but not by controlling” or buying shares. -- Bloomberg



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KLCI pares down loss at mid-day, but gloomy mood prevails

KUALA LUMPUR (Dec 15): The FBM KLCI pared down some of its losses at the mid-day break on Thursday, but the gloomy sentiment across the region remained on fears of a deepening eurozone debt crisis.

The FBM KLCI shed 4.15 points to 1,458.97 at 12.30pm, weighed by select blue chips. The index had earlier fallen to its intra-morning low of 1,448.54.

Losers led gainers by 368 to 211, while 283 counters traded unchanged. Volume was 733.86 million shares valued at RM510.67 million.

The ringgit weakened 0.39% to 3.1973 versus the US dollar; crude palm oil futures for the third month delivery fell RM50 per tonne to RM3,003, crude oil rose 76 cents per barrel to US$95.71 while gold added US$3 an ounce to US$1,577.05.

Asian shares fell into bear market territory for the year and commodities and the euro nursed stinging losses on Thursday, after fears that Europe's debt crisis is still worsening prompted investors to dump riskier assets and huddle in the safety of the dollar and Treasuries, according to Reuters.

The gloomy mood was not improved by a private sector survey indicating China's factory output shrinking again in December, adding to the headwinds facing a global economy struggling with sluggish US growth and the euro zone sliding back into recession, it said.

At the regional markets, Hong Kong’s Hang Seng Index lost 1.85% to 18,014.70, Japan’s Nikkei 225 fell 1.1% to 8,425.58, Taiwan’s Taiex Index was down 1.86% to 6,793.97, South Korea’s Kospi fell 1.99% to 1,820.74, South Korea’s Kospi lost 1.31% to 2,637.26 and the Shanghai Composite Index shed 1.11% to 2,203.84.

Among the losers this morning, Dutch Lady fell 98 sen to RM24.90, KLK was down 40 sen to RM22.20, HLFG and Nestle lost 28 sen each to RM11.38 and RM56.20, Hong Leong Bank 18 sen to RM10.50, Petronas Dagangan 16 sen to RM17.02, Orient 13 sen to RM5.11, BAT 12 sen to RM48.86 while Aeon and PPB fell 10 sen each to RM7.30 and RM16.30.

The gainers included QSR that added 43 sen to RM6.43, KFCH was up 41 sen to RM3.82, KrisAssets up 30 sen to RM5.60, Kulim 27 sen to RM3.96, Jaya Tiasa 25 sen to RM6.98, while Carlsberg and LPI Capital rose 14 sen each to RM8.97 and RM13.18.

The actives included Kulim and KFCH’s warrants, Flonic, Compugates, Boon Koon and Envair.



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Axiata subsidiary Dialog buying Sri Lanka Suntel for up to US$34.9m

KUALA LUMPUR (Dec 15): Axiata Group Bhd’s subsidiary Dialog Axiata PLC is buying Sri Lanka’s leading fixed telecommunications provider Suntel at an enterprise value of between US$33.9 million (RM107.84 million) and US$34.9 million cash pending a due diligence.

Axiata said on Thursday the acquisition of Suntel by Dialog’s fixed line subsidiary Dialog Broadband Networks (Private) Limited (DBN), provides the Dialog Axiata Group with a much enhanced leverage and footprint in the fixed telecommunications market space in Sri Lanka.

“The acquisition also provides an avenue for the Dialog Group to benefit from the integration with Suntel’s best in class fixed line operations framework,” it said in a statement to Bursa Malaysia.

Axiata said the acquisition of Suntel would be undertaken wholly in cash which will be funded through internally generated funds.

Under the deal, DBN wold acquire the Suntel shares from Overseas Telecom AB; Metrocorp (Pvt) Ltd.; Telecom Venture Group Ltd.; International Finance Corporation; National Development Bank PLC; C Tech Investments (Pvt) Ltd.; and Kelmarsh Investments Ltd.

Axiata said DBN was buying the shares “at an enterprise value in the range of US$33.9 million and US$34.9 million, corresponding to a valuation multiple of 3.0 times to 3.1 times of the EBITDA of Suntel for financial year ended Dec 31, 2010”.

It added the final pricing would be determined by the outcome of confirmatory business valuation and due diligence during the period leading up to the completion of the transaction.



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