Gamuda proposes 25-yr RM800m Islamic debt notes, rated AA3 by RAM Ratings

KUALA LUMPUR (Dec 19): GAMUDA BHD [] has proposed a 25-year RM800 million Islamic medium-term notes programme (MTN) and seven-year RM100 million Islamic commercial papers (ICP) programme.

RAM Rating Services Bhd said on Monday it had reaffirmed the respective AA3 and P1 ratings of Gamuda MTN programme and ICP programme.

It also reaffirmed the existing RM800 million Islamic MTN programme (2008/2028) and RM100 million CP programme (2008/2015).

“Both long-term ratings have a stable outlook. Each of the combined facilities will be capped at RM800 million at all times,” said the rating agency.

RAM Ratings said Gamuda and its subsidiaries’ core activities were civil engineering and CONSTRUCTION [], property development, tolling operations, and the operation and maintenance of water-treatment plants.

“Gamuda’s solid reputation and track record of project-execution capability will continue to make it a strong contender for complex large-scale projects, both domestically and internationally,” said RAM Ratings’ head of real estate and construction ratings Shahina Azura Halip

“We believe the gradual decline in its order book following the substantial completion of its overseas projects will be turned around by the upcoming jobs under the Economic Transformation Programme, the Tenth Malaysia Plan and Budget 2012. The Group also derives some earnings diversity from its property developments and concession assets,” said Shahina.

Gamuda’s outstanding construction order book of around RM2.59 billion and RM1.01 billion of unbilled property sales (as at end-July 2011) should assure revenue stability through the next 2 years.

Gamuda’s ratings are moderated by the significant concentration and execution risks related to the Group’s projects. Presently, the electrified double-track railway project constitutes 85% of its order book. This heavy reliance on just a couple of projects (i.e. the electrified double-track railway project and the potential Klang Valley MY Rapid Transit tunnelling project) is exacerbated by execution and integration risks arising from the complexity of the work involved.

Gamuda’s significantly lower leverage (its debt load is about 30% lighter than previously projected for fiscal 2011) is a result of the slower-than-expected regulatory approvals for its Vietnamese projects.

Going forward, RAM Ratings anticipated a more gradual and conservative gearing up of the group’s balance sheet as it moderates its property launches in Vietnam amidst the sluggish property market there.

“The group’s debt burden is expected to peak at around RM2.56 billion in FY July 2013, with a net gearing ratio of 0.41 times. Over the next 2 years, its operating profit before depreciation, interest and tax debt cover and funds from operations debt cover will range around 0.20–0.25 times and 0.13–0.18 times, respectively,” it said.



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IGB to buy remaining 50% stake in Great Union Properties for RM277.5m

KUALA LUMPUR (Dec 19): IGB CORPORATION BHD [] has made a RM277.50 million offer to acquire the remaining 50% stake in Great Union PROPERTIES [] Sdn Bhd (GUP), which owns the Renaissance Kuala Lumpur Hotel, from Stapleton Developments Ltd and Chong Kim Weng.

IGB, which currently owns 50% of GUP, would pay RM101.348 million and also settle the shareholder’s advance of RM176.15 million in GUP, for cash consideration of RM277.50 million.

Based on GUP’s audited financial statements for the financial year ended (FYE) Dec 31, 2010, GUP recorded earnings before interest, depreciation and tax (EBITDA) of RM24.0 million while its net assets was RM116.6 million.

IGB said SDL was a subsidiary of New World Development Company Ltd, which was listed on the Hong Kong Stock Exchange. Chong is a senior partner of Jeyaratnam & Chong, a legal firm in Malaysia where IGB Group procures legal advisory services from time to time.

“The total consideration is based on 8.5 times the hotel’s 2010 EBITDA which is equivalent to valuation of the hotel at RM710 million net of bank borrowings and shareholders loan. The total consideration will be satisfied wholly in cash from internally generated funds,” it said.

IGB had invested RM226.0 million in GUP, comprising of subscription of 50 million RM1 shares between 1988 and 1992 and 100 million preference shares of 10 sen each (between 1993 and 1996) and shareholder’s advance of RM76.0 million.

“The total cost of investment in GUP post-proposed acquisition will be RM503.0 million,” it said. IGB said upon completion of the proposed acquisition, GUP would be a unit of IGB.

“As the controlling shareholder of GUP, IGB will have full management control and hence will be able to execute its business plans and strategies more effectively,” it said.



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Kurnia Asia proposes to sell Kurnia Insurans to AmG Insurance

KUALA LUMPUR (Dec 19): KURNIA ASIA BHD [] plans to sell its insurance unit, Kurnia Insurans (Malaysia) Bhd to AmG Insurance Bhd.

It said on Monday it had submitted an application to Bank Negara Malaysia (BNM) for the Minister of Finance’s approval under the Insurance Act 1996.

Kurnia Asia said the approval was to review the proposal to sign an agreement with AmG Insurance -- the insurance division of the AmBank group -- to dispose of the stake.



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Favelle Favco units get jobs worth RM72.3m

KUALA LUMPUR (Dec 19): FAVELLE FAVCO BHD []’s units have secured five separate purchase orders worth a combined RM72.3 million to supply four offshore cranes and one tower crane.

The company said on Monday that Favelle Favco Cranes (M) Sdn Bhd had received four contracts to supply offshore cranes each to SMOE Pte Ltd, Technics Offshore Engineering Pte Ltd, China Communications Import & Export Corporation and China Merchant Heavy Industry (Shenzhen) Co. Ltd respectively.

It said the cranes the first three parties would be delivered by end 2012, while the fourth would be supplied between end 2012 and early 2013.

Meanwhile, Kroll Cranes A/S had received a contract to supply a tower crane to GRPM, to be delivered by mid 2012.

Favelle Favco said the contracts were expected to contribute positively to its earnings for the financial year ending Dec 31, 2011 and beyond.



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Market Commentary

The FBM KLCI index gained 11.56 points or 0.79% on Monday. The Finance Index increased 0.16% to 13179 points, the Properties Index up 0.01% to 961.26 points and the Plantation Index rose 0.30% to 7888.07 points. The market traded within a range of 14.51 points between an intra-day high of 1477.78 and a low of 1463.27 during the session.

Actively traded stocks include UTOPIA, JCY-CD, WIJAYA-WA, ASUPREM, UTOPIA-WA, JCY, VERSATL, SANICHI, FLONIC and DATAPRP. Trading volume decreased to 1601.87 mil shares worth RM1033.26 mil as compared to Friday’s 1790.67 mil shares worth RM1331.30 mil.

Leading Movers were AXIATA (+14 sen to RM5.00), DIGI (+8 sen to RM3.70), GENTING (+16 sen to RM10.54), YTL (+8 sen to RM1.54) and CIMB (+5 sen to RM7.05). Lagging Movers were GENM (-3 sen to RM3.80), AIRASIA (-2 sen to RM3.72), MMHE (-8 sen to RM5.44), RHBCAP (-7 sen to RM6.80) and UMW (-3 sen to RM6.47). Market breadth was negative with 315 gainers as compared to 445 losers. -- JF Apex Securities Bhd



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YTL Corp extends share exchange offer to YTL Cement shareholders

KUALA LUMPUR (Dec 19): YTL CORPORATION BHD [] has extended a voluntary share exchange offer to the holders of YTL CEMENT BHD [] shares and its loan stocks to maximise the value of their investments.

It said on Monday the offer was RM4.50 for each YTL Cement share, or 3.17 shares of 10 sen each in YTL Corp for every one ordinary share of 50 sen each held in YTL Cement.

For the irredeemable convertible unsecured loan stocks (ICULS) holders, the offer was RM2.21 for every RM1 in ICULS held, or 1.56 YTL Corp shares for each ICULS.

YTL group managing director Tan Sri Francis Yeoh Sock Ping described the transaction as a “homecoming opportunity” for YTL Cement shareholders as they could better maximise the value of their investments by exchanging their shares into the diversified business of YTL Corp.

Yeoh said the bulk of YTL Corp’s earnings was underpinned by its regulated water and utilities concessions, as well as its cement, CONSTRUCTION [], property and hospitality businesses.

“YTL Corp, as a major shareholder of YTL Cement, recognises that the liquidity of YTL Cement’s shares has continued to remain at relatively low levels, which presents a challenge to YTL Cement’s shareholders looking to adjust their investment strategies or portfolios,” he said.

He added the exchange plan would also enable YTL Corp’s shareholders to increase the stake in a highly efficient and profitable business and consolidate a greater proportion of its earnings and performance for the benefit of the wider group.



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Mitrajaya gets RM21.89m biotech cluster job in Terengganu

KUALA LUMPUR (Dec 19): MITRAJAYA HOLDINGS BHD [] has secured a RM21.89 million project in the herbal and bioTECHNOLOGY [] products clusters in Pasir Raja, Terengganu.

It said on Monday that its unit Pembinaan Mitrajaya Sdn Bhd was awarded the project by the East Coast Economic Region Development Council (ECERDC) to build the farm establishment, buildings and infrastructure works at the clusters.

Mitrajaya said the contract was for a duration of 80 weeks and expected to be completed by July 2013.

It said the contract was expected to improve its future earnings.



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Setia Sky Residences final tower launch in 1Q12

KUALA LUMPUR: S P Setia Bhd is targeting 1Q12 for the launch of the fourth and final tower of its Setia Sky Residences project in downtown Kuala Lumpur.

The first phase is in an advanced stage of development and will be completed in the second half of 2012. The first phase comprises Alia Tower and Boheme Tower.

Alia is sold out and there are limited units left in Boheme Tower. The third tower, Celeste, is currently selling the remaining units, which are of larger sizes.

The project, S P Setia’s first luxury high-rise development in Kuala Lumpur, is located on a 2.4ha site at the intersection of Jalan Tun Razak and Jalan Raja Muda Abdul Aziz, and offers unobstructed views of the Kuala Lumpur City Centre (KLCC) twin towers and city skyline.

The group is now embarking on its largest development in the city to date, the RM6 billion KL Eco City project in Abdullah Hukum, near Midvalley City.

Setia Sky Residences have seen only minimal impact from the new housing loan guidelines announced by Bank Negara Malaysia (BNM).

A model of Setia Sky Residences, comprising four towers (top). The show unit for the last tower, Divina, features a cosy ambience for the living and dining areas (bottom)

“We were only affected to a certain extent, but there are still people who can buy the units,” said Norhayati Subali, the group’s divisional general manager, who is in charge of the Sky Residences project.

The BNM guidelines call for housing loans to be assessed on the applicant’s net income rather than the gross income.

“There are some people who feel like this is the right time to buy,” Norhayati told The Edge Financial Daily at the show house last week.

Within Setia Sky Residences, Norhayati said her company noticed the larger units were taking longer than others to sell, and the S P Setia team is taking this into consideration in fine tuning the plans of the last tower, Divina. This tower will be launched in the first quarter of 2012.

“We knew the demand for Kuala Lumpur properties was for smaller units,” said Norhayati. “Not shoebox units, but sizeable units catered for an urban living lifestyle.”

This would be better suited for the majority of the Sky Residence unit purchasers, who are younger professionals, according to Norhayati. She said many of these young professionals work in the Kuala Lumpur city centre, and find that most other properties in that area cost a great deal more than the Sky Residences.

Older, loyal customers of the S P Setia brand have also purchased units for their children who work in Kuala Lumpur. Norhayati said the group’s track record and brand name are among the reasons the Sky Residences units attracted many repeat customers.

“They follow us because we have a commitment to maintain the facilities we provide,” she said.

The Sky Residences feature some out of the ordinary facilities, including a cigar room, a wine cellar, outdoor event area and private lift lobbies.

Norhayati says sales have only seen a minimal impact from the new housing loan guidelines announced by Bank Negara Malaysia.

So far, Norhayati has only been able to convey the facilities at Sky Residences through display models, but this will change come 2012, when the both Alia and Boheme towers will be completed in the second half of next year.

“People haven’t seen the actual blocks yet, so when Phase 1 is complete, they will be able to feel the real experience that has been promised to them,” said Norhayati.

Asked if she is worried about the uncertainties in the market hurting the sales of Sky Residences, Norhayati said, “People have many choices in the market, but S P Setia has the brand name and a track record. We have the competitive edge, so even if the market shrinks there will be those who will want to buy.”

S P Setia holds the distinction of being the only property developer to be ranked No 1 six times in The Edge Top Property Developers Awards since its inception in 2003.


This article appeared in The Edge Financial Daily, December 19, 2011.



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InsiderAsia’s Model Portfolio - 460

Sentiment for global equities remained ambivalent last week. Investors continue to trade cautiously on the back of persistent uncertainties over the eurozone sovereign debt crisis. But confidence was bolstered somewhat by stronger than expected US economic data.

Even as we approach the end of the year, the market outlook going into 2012 remains clouded. Trading activities may also start to wind down towards the year-end. Thinner trading volume could exacerbate price movements. As such, we expect investors to stay on the defensive pending greater clarity and unlikely to take up any major fresh positions in the coming days.

A big part of the uncertain outlook has to do with the eurozone debt crisis. In the past few weeks, confidence in the market has been shored up by stronger than expected US economic data. Following the mid-year slowdown, the world’s largest economy appeared to have regained some positive momentum.

For instance, the last labour market report painted a better than expected picture with some 120,000 new jobs created in November while the figures for September and October also saw upward revisions. The unemployment rate fell to 8.6%, the lowest level since the onset of the global financial crisis. Last week, claims for unemployment benefits fell to a 3½-year low. Manufacturing activities are gaining some traction while retails sales for the holiday season are looking fairly upbeat.

European growth will slow in 2012, possible even dipping into recession. Aside from the ongoing financial turmoil and credit crunch, broadening of austerity measures will damp economic growth. The big question is whether the US economy can continue to strengthen if the crisis in Europe takes a turn for the worse.

Talks of a breakup of the eurozone are now cropping up more regularly in mainstream discussions. This could be the worst-case scenario and it may result in chaos in the financial world.


The most recent summit among European leaders, again, failed to present the world with any comprehensive solution. Most of the countries have agreed to a new fiscal compact, designed to address flaws for the single currency’s current framework. But details are still lacking. German Chancellor Merkel has cautioned that there will be no quick fix for the crisis, which will take years to mend. In the meantime, Italy remains very much in the eye of the storm.

Asian stock markets did finish the week on a broadly positive footing last Friday, recouping some lost ground from the preceding few days. However, relevant bellwether indices for key markets still ended the week in the red.

On the local bourse, the benchmark FBM KLCI bucked the region’s downtrend. The benchmark index ended six points higher, at 1,466.2, for the week. However, much of the gains come from select index-heavyweights that were relatively thinly traded. Performance for the broader market was decidedly more ambivalent.

Trading volume fell back slightly with less than 1.66 billion shares traded daily, on average, compared with the daily average of almost 1.92 billion shares traded in the previous week. Trading interest remains focused on lower liner stocks.

Portfolio review
Stocks in our model portfolio underperformed the benchmark index last week. Total market value for our basket of 18 stocks was up by 0.03% to RM390,420, compared with the KLCI’s 0.42% gain.

Ten stocks in our portfolio closed with gains while five ended lower and three others traded unchanged. Bumi Armada (+3.8%), CIMB (+1.6%) and MyEG Services (+2.2%) were some of the notable gainers last week. At the other end, Benalec (-3%), DiGi (-1.9%) and BSDREIT (-1.3%) were among the big losers for the week.

Including our cash holdings, for which no interest income is imputed, our total portfolio value was up by a lesser 0.02% to RM666,085. Our total profits are very substantial at RM506,085, of which RM400,948 has already been realised from previous shares sales.

Last week’s gains lifted our model portfolio’s cumulative returns since inception to 316.3% on our initial capital of just RM160,000. We continue to outperform the KLCI, which was up by about 126.7% over the same period, by some distance.

Our cash holdings remain substantial at RM275,665, accounting for 41% of our total portfolio value. The relatively high percentage is, primarily, for prudence’s sake. We remain very cautious given the uncertain outlook. We kept our portfolio unchanged.

Note that this will be our last Portfolio review for this year. InsiderAsia wishes readers Merry Christmas and Happy New Year.


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


This article appeared in The Edge Financial Daily, December 19, 2011.



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Pavilion REIT a new benchmark

KUALA LUMPUR: In a clear sign of rapidly rising property values and rentals for Klang Valley malls, the listing of Pavilion REIT earlier this month has set a new valuation benchmark in the industry. The value of its Pavilion KL Mall exceeds by a wide margin those of other malls injected into real estate investment trusts (REIT), and yet offers decent yields.

Based on the REIT’s purchase consideration of RM3.19 billion and net lettable area of 1.335 million sq ft, Pavilion KL is valued at RM2,390 per sq ft (psf) — the highest for a mall injected into a REIT, according to a study by The Edge Financial Daily. The mall’s appraised value is even higher at RM3.415 billion or RM2,558 psf.

This is over four times that of Subang Parade — the first mall to be listed in a REIT — which was injected into Hektar REIT at a mere RM589 psf when it was listed four years ago. Subang Parade, which had 475,022 sq ft of net lettable area, was injected into the REIT at RM280 million, slightly below its then appraised value of RM290 million.

The valuation for Pavilion KL is 85% higher than Sunway Pyramid’s RM1,365 psf, despite the latter being situated in a premium location, with high rental rates and good patronage. Sunway Pyramid forms part of Sunway Real Estate Investment Trust (SunREIT), which was listed in July 2010.

However, neighbouring retail locations within the city centre stand as a more suitable comparison for Pavilion KL. A more immediate peer would be Suria KLCC, which is in the stable of KLCC Property Holdings Bhd (KLCCP), one of a few companies to routinely revalue its properties every year, resulting in more up-to-date valuations.

According to its annual report, Suria KLCC mall has an appraised value of RM3.47 billion and a net lettable area of about one million sq ft. That implies a valuation of RM3,470 psf, a 36% premium to Pavilion KL.

However, it should be noted that KLCCP’s share price of RM2.96 last Friday was well below its book value of RM5.68. This means the market is valuing its properties at only 0.52 times, resulting in a implicit value of RM1,804 psf for Suria KLCC, well below Pavilion KL’s.

By comparison, Pavilion REIT was trading at RM1.05 last Friday, some 12% above its book value of 94 sen upon listing on Dec 6, 2011.

The value of Pavilion KL is also higher than Sungei Wang Plaza’s RM1,607 psf and The Mines Shopping Centre’s RM737 psf. Both Sungei Wang and Mines Shopping Centre are owned by CapitaMalls Malaysia Trust (CMMT), which was listed in the middle of last year.

The value of these retail properties remains high despite the perceived oversupply of shopping centres in the Klang Valley, which CB Richard Ellis Research (CBRE) said accounts for 41.7% of the country’s shopping centre space. Together with Johor and Penang, these areas possess 67.4% of Malaysia’s shopping centres.

According to the Valuation and Property Services Department (JPPH), Kuala Lumpur shopping centres had an occupancy rate of 83.7% and Selangor 86.8% in 2010, both above the estimated national average of 77.5%.

“For prime centres within the Klang Valley, CBRE data shows that the occupancy in Kuala Lumpur is 92.9% while Selangor is 95.4%, leading to an overall prime occupancy rate in the Klang Valley of 94.7%,” said CBRE in a recent report.

For the current year, JPPH estimates 18.1 million sq ft in net lettable retail space is under construction, resulting in a 15.9% increase in retail stock by the year 2013, assuming a three-year construction period, said CBRE.

“With the growing number of malls in the Klang Valley, not all perform favourably and only a select few do well,” said a market observer.

CBRE said the total retail supply in the Klang Valley grew 4.4% to 42.3 million sq ft last year, and another four million sq ft is expected this year, with the bulk to be located in secondary locations such as newly completed townships.

Pavilion REIT’s two properties — Pavilion KL and Pavilion Tower, a 20-floor office building adjoined to the former — are both strategically located at the heart of Jalan Bukit Bintang. The company also holds the rights of first refusal (ROFR) to several properties including a six-storey retail mall to be developed in USJ, Subang Jaya.

“In terms of location, we are looking to further increase our presence in the prime Bukit Bintang area through our current assets as well as two of the ROFRs granted, for Farenheit88 and the proposed extension of Pavilion KL. However, there are limited retail assets in this specific area and it is also our plan to evaluate retail assets in the Klang Valley and other key localities within Malaysia,” CEO Philip Ho told The Edge Financial Daily. Ho noted that the company’s low loan-to-value (LTV) ratio of 20%, well below the 50% cap, provides the financial flexibility to resort to additional debt in order to fund future acquisitions.

Affin Investment Bank noted in an earlier report that a gearing ratio of 30% to 35% would allow the company to raise between RM360 million and RM540 million in debt.

“Going forward though, subject to such acquisition opportunities, we can definitely consider a higher LTV ratio, which is in line with industry norms,” said Ho.

Market observers note that any potential acquisition is unlikely to take place within the immediate term, hence efforts to raise funds via debt or placements for this purpose will only take place from 2014 onwards.

In the meantime, the company will rely on Pavilion KL which forms nearly 96% of its total asset value.

“Pavilion KL is relatively new and having only commenced operations in 2007, we believe there is significant room for improvement on rental yields, net lettable area and other asset enhancement initiatives. The company will be able to provide investors with growth opportunities from its existing portfolio as well through the potential acquisition of additional retail properties,” said Ho.


This article appeared in The Edge Financial Daily, December 19, 2011.




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UEM Land added to FBM KLCI today

PETALING JAYA: The inclusion of UEM Land Holdings Bhd in the 30-stock benchmark index FTSE Bursa Malaysia KLCI (FBM KLCI) from today could provide a catalyst for the stock. It will be the only pure property developer listed among the index’s constituents, analysts said.

However, analysts also caution that a negative outlook of the region’s property market could dampen its share price movement, noting that several countries, especially Singapore and to some extent Malaysia, have started to tighten the liquidity tap.

Maybank Kim Eng said in a research note last Friday that UEM Land’s high-end projects such as the Aurora Tower located in the KLCC area could face stiff competition with other projects like the KL International Financial District (KLIFD), the Pudu jail redevelopment project called Bukit Bintang City Centre and the planned 100-storey Warisan Merdeka.

Loong Kok Wen from RHB Research Institute told The Edge Financial Daily that over the short term, there will be news flow regarding the development of Iskandar Malaysia, of which UEM Land is the major beneficiary.

She said it is highly likely that in the first quarter of next year, both the governments of Malaysia and Singapore will meet to discuss the potential extension of Singapore’s Mass Rapid Transit system into Johor Baru.

However, she noted that the development project owned by M+S Pte Ltd, the joint venture company owned by Khazanah Nasional Bhd and Temasek Holdings Ltd in Marina South and Ophir-Rochor, of which UEM Land is the project manager, may not happen in the shortest time because of the expected dampened demand for high-end properties in Singapore.

Nevertheless, an official with UEM Land commented that the potential earnings contribution from the project to the group is minimal, and it is actually the group’s first step into exploring other potential development projects in the island republic.

Market observers say UEM Land’s vast landbank in Iskandar Malaysia could benefit from Singapore’s property restrictions, as it may attract foreign buyers who are now shunning real estate in the republic.

On Dec 7, the Singapore government imposed a 10% stamp duty on foreigners buying residential property on the island. The move was aimed at curbing foreign buying of properties and improve housing affordability for the local population.

Maybank Kim Eng said the group will likely win more government land deals, such as the Rubber Research Institute of Malaysia (RRIM) land in Sungai Buloh, the former Pudu jail development project in Jalan Hang Tuah, as well as the former Unilever factory land in Bangsar.

“We understand that UEM Land has been shortlisted for the 7.7ha land owned by Pelaburan Hartanah Bumiputera Bhd. Located at the intersection of Jalan Bangsar and Jalan Maarof, the land will be developed into a mixed development project with an estimated gross development value of RM4 billion to RM5 billion.

“There is a high chance of clinching the land bid, we think, given Sunrise’s strong branding and proven track record in high-rise integrated developments in the Klang Valley. Sunrise’s newer office/retail/SoHo projects like Summer Suites and Arcoris@ Mont’Kiara (office portion) have received good response with 85% to 100% take-up,” the report added.

UEM Land’s share price added two sen to close at RM2.26 last Friday.


This article appeared in The Edge Financial Daily, December 19, 2011.




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A Chinese buyer for Lotus?

KUALA LUMPUR: Market talk is rife that a corporate exercise could be brewing to hive off Proton Holdings Bhd’s Group Lotus plc.

“There are interested suitors for Lotus and one of them is a party from China,” said a source.

In October, Proton managing director Datuk Syed Zainal Abidin Syed Mohamed Tahir dismissed speculation that the company was selling its stake to Genii Capital, which owns the Renault Formula One (F1) team that has Lotus as its title sponsor for the event.

“There are no plans or discussions about Proton selling a stake in Lotus, this is just speculation,” said Syed Zainal two months ago in October.

Lotus CEO Dany Bahar said then that the company’s involvement with the Renault F1 team was “the start of a close relationship” though Gerard Lopez, head of Genii Capital, did not rule out further involvement with Lotus.

“I think they have a good shareholder with Proton. For sure, that is something also that we will be looking at, but its not anything urgent,” he said in an interview with a local media outlet.

Nevertheless, it seems rumours that Proton could see the sale of Lotus continue to swirl around the national carmaker.

Industry observers believe that the severance of Lotus from Proton is expected to provide a cleaner slate for a new entrant to implement improvements.

This is amidst market chatter of Khazanah Nasional Bhd seeking interested buyers for its 42.7% stake in the national automaker.

“Proton is continuing with major losses from Lotus, its cash
resources and bottom line financials are dwindling as a result. The disposal of Lotus would provide a much needed reboot,” said a market observer.

Expenses incurred on Lotus have weighed heavily on Proton’s earnings. Proton is in the second year of its five-year turnaround plan for Lotus, which has been estimated to cost £480 million (RM2.4 billion).

Despite continuing losses from Lotus, Proton has been adamant over its vision and has constantly reaffirmed that it will achieve break-even for Lotus by 2014.

Most recently, net profit for Proton’s second quarter ended Sept 30 fell 76% to RM15.6 million from RM65.9 million a year ago, while its half-year earnings dropped 86.6% to RM20.1 million from RM150 million.

The lower profit was largely attributed to higher expenses incurred by Lotus, in line with Proton’s efforts to achieve Lotus’ long-term business transformation plans.

Proton said the higher expenses incurred for Lotus were partially offset by an increase in the carmaker’s domestic sales volume, which was 2% higher year-on-year 1HFY12.

As at Sept 30, Proton had RM1.31 billion in cash, bank balances and deposits alongside RM959.1 million in total borrowings.

In 1QFY12 ended June 30, Lotus registered a net loss of £14 million driven by high operating costs.

It is interesting to note that Proton opened its first Lotus showroom in China recently.

“We need to seize the opportunity now. Before this, Lotus relied on Europe, the US and Japan for sales but China is now the biggest market for cars globally.

The Chinese appetite for luxury brands is very strong and they are willing to spend to be different,” said Syed Zainal in October.

In 1996, Proton paid £38 million for a 63.75% stake in Lotus Group International Ltd, which owns 100% of Group Lotus plc.

Market talk of Proton selling Lotus first surfaced in 2000.

At the end of December 2007, there were reports that a Malaysian automaker had approached Proton on the sale of the Lotus brand.

Later in 2009, there was talk that Proton was on the lookout for new investors for Lotus. It was said to be seeking a “new long-term equity partner” for Lotus, with an information memorandum drawn up and furnished to potential local and international bidders who were keen to participate.

Following that piece of news, Syed Zainal said in July 2009: “We have no plans to sell Lotus at all. There might be interest somewhere out there but as of now, that is not a possibility. We want to exploit Lotus even more, we want to strengthen Lotus from what it is today and look at what we can do”.

If Proton divests its interest in Lotus, it will be the second major divestment following its sale of a 57.7% stake in MV Augusta for one euro (RM4.14) in 2006.


This article appeared in The Edge Financial Daily, December 19, 2011.

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UEM Land bagging government land?

UEM Land Holdings Bhd (Dec 16, RM2.26)
Maintain hold at RM2.24 with target price of RM2.02: Rising news flow on government land development awards may lift UEML’s near-term share price as it is viewed as one of the front runners. While UEML may benefit from these land wins, some of its existing projects especially in Mont’Kiara, are facing competition from the rising RM15 billion KL Metropolis project.

We maintain our earnings forecasts and RM2.02 target price (40% discount to RM3.37 realisbale net asset value). UEML will be the first property group to be included in FBM KLCI 30 (from today).

We understand that UEML has been shortlisted for the 7.7ha RNAV-accretive Unilever land. The results should be announced by end-2011/early-2012. Given Sunrise Bhd’s strong branding and track record in integrated high-rise developments being embedded in the enlarged UEML group post merger, we believe UEML stands a strong chance to clinch the land bid. We estimate a five to seven sen enhancement to our RNAV, if it materialises.

UEML remains confident on the Pudu Jail redevelopment and 1,214ha Rubber Research Institute Malaysia (RRIM) land development in Sungai Buloh, Selangor. We expect the awards to be announced by mid-2012. The securing of these developments (especially RRIM land) would provide a strong impetus to UEML’s medium-term earnings and valuation.


We are more upbeat on the Unilever land given: (i) shorter time to complete and lower upfront infrastructure costs compared with the RRIM greenfield land; (ii) lower take-up risks compared with the Pudu Jail redevelopment project which will face stiff competition from surrounding offices/hotels/malls and future government developments like KL International Financial District; and (iii) potential investment by Pelaburan Hartanah Bumiputera Bhd in the Unilever development itself, thereby reducing take-up risks.

We expect increasingly tougher competition in the property market especially the office segment due to massive government land developments. These projects could flush the market with ample supply of varieties, raise take-up/occupancy risks and limit pricing power. We are cautious on UEML’s Aurora Tower and Mont’Kiara projects and see pricing as the key success determinant. — Maybank IB Research, Dec 16


This article appeared in The Edge Financial Daily, December 19, 2011.



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Stocks to watch: Caution ahead due to eurozone worries

KUALA LUMPUR: Investors are expected to continue to be cautious in the week ahead as mounting worries about the eurozone crisis weigh on sentiment, while volume will be lower ahead of the Christmas holidays.

Institutional dealers said most of the recent blue chip buying was by local funds as foreign funds wound down their operations ahead of the Christmas and year-end holidays.

“We expect the market to be range bound in the week ahead with dwindling volume for blue chips while trading activity will focus on penny stocks and those with fresh news,” said the head of institutional dealing at a bank-backed brokerage.

The latest negative developments from the eurozone will continue to impact sentiment as rating agencies warn that no quick solution is at hand.

Fitch told eurozone countries it believes a comprehensive solution to their debt crisis is beyond reach, putting six eurozone economies, including Italy, on watch for potential downgrades in the near future.

It reaffirmed France’s top-notch AAA rating but said the outlook is now negative, meaning it could be downgraded within two years.

Moody’s Investors Service cut Belgium’s credit rating by two notches, saying the eurozone debt crisis raises funding risks for countries with high public debt burdens, and said a further downgrade is possible within two years.

Standard & Poor’s had already warned 15 of the currency bloc’s 17 members they are close to a downgrade.

CIMB Equities Research, in its market strategy, said investors need to tread carefully in 2012, which could be a very tough and volatile year for the stock market.

“Besides having to contend with a slowing economy, investors will very likely have to brace for the impact of the 13th general election, amid a multitude of risks.

“We downgrade Malaysia from “overweight” to “neutral” and reduce our end-2012 KLCI target from 1,570 to 1,520 points due to earnings cuts in the November results season. Our target basis remains 12.6 times price-earnings ratio, a 10% discount to the three-year moving average PER,” said the research house.

However, RHB Research was more upbeat, arguing that while global economic uncertainties would likely persist through 2012, there are a number of catalysts for the market.

The research house said it is more positive on commodity prices and the impact on the plantation and oil and gas (O&G) sectors.

“Major initial public offerings [IPOs] in 2012, particularly in the plantation, O&G and healthcare sectors, will continue to draw investor interest, but we also anticipate the possible re-listing of Malakoff [Corp Bhd], Tanjong [plc] and Astro [All Asia Networks plc] later,” it said.

Stocks to watch in the week ahead include Gamuda Bhd, Boustead Holdings Bhd, GD Express Carrier Bhd (GDex), TDM Bhd and Top Glove Corp Bhd.

Gamuda is upbeat about the outlook for the remaining financial year after its earnings climbed 49.5% to RM132.32 million in 1QFY12 ended Oct 31, 2011, from RM88.53 million a year ago due to higher contributions from all divisions.

Gamuda expects a stronger performance this year supported by its ongoing construction projects, continued strong property sales and steady earnings from the water and expressway divisions.

Boustead subsidiary Boustead Naval Shipyard Sdn Bhd has received the letter of award from the Ministry of Defence to supply six patrol vessels with a contract ceiling of RM9 billion.

The Edge weekly reported in its latest issue that GDex is bolstering its position to fight competition. It said the local express delivery provider is drawing up strategic plans on multiple fronts to deal with the increasing competition and gloomy economic outlook for 2012.

The Edge also reported that the rehabilitation of estates is paying off for TDM. It has been an exceptional year for the plantation company as its net profit for the first nine months of FY11 already exceeds that of any full year in the past.

Top Glove’s earnings fell 12.81% to RM31.43 million in the 1QFY12 ended Nov 30, 2011, from RM6.05 million a year ago, impacted by higher raw material prices and oversupply in the industry. However, the world’s largest glovemaker performed better compared with the preceding quarter in terms of revenue and earnings.

Commenting on the results, CIMB Equities Research said Top Glove’s 20.5% quarter-on-quarter rise in net profit, though strong, was expected.

“It came primarily from cost deflation as demand remains weak and industry overcapacity is still an issue. At 23.2% of our forecast and 20.2% of consensus, 1Q results were broadly in line as we expect stronger quarters ahead. We maintain our ‘underperform’ rating and target price, still based on 13.05 times PER,” it said.


This article appeared in The Edge Financial Daily, December 19, 2011.

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KLCI bucks the trend as Asian markets dip on N.Korean leader’s demise

KUALA LUMPUR (Dec 19): The FBM KLCI bucked the trend among regional markets and clawed back to close higher on Monday, after the death of North Korean leader Kim Jong-il and a warning from Fitch about possible credit downgrades kept investors on edge.

The FBM KLCI closed 11.56 points higher at 1,477.78, lifted by gains including at blue chips including Genting and Axiata.

Gainers trailed losers by 315 to 445, while 283 counters traded unchanged. Volume was 1.6 billion shares valued at RM1.03 billion.

Key regional markets pared down their losses, after having fallen sharply earlier in the day on news that North Korean leader Kim Jong-il had died.

Japan’s Nikkei 225 closed 1.26% lower at 8,296.12, Hong Kong’s Hang Seng Index fell 1.18% to 18,070.21, the Shanghai Composite Index was down 0.31% to 2,217.95, South Korea’s Kospi fell 3.43% to 1,776.93, Taiwan’s Taiex lost 2.24% to 6,633.33 and Singapore’s Straits Times Index shed 1.55% to 2,618.09.

On Bursa Malaysia, PPB was the top gainer and rose 44 sen to RM17.20; Nestle added 36 sen to RM56.36, BAT 30 sen to RM49.40, Perak Corporation 19 sen to RM1.34, HLFG and Genting 16 sen each to RM11.70 and RM10.54, Amway 15 sen to RM9.20 while Tasek and Axiata added 14 sen each to RM8 and RM5.

Among the decliners, Dutch Lady fell RM1.14 to RM23.30, United PLANTATION []s down 28 sen to RM18.22, Jaya Tiasa 27 sen to RM6.79, F&N and GAB 26 sen each to RM18.10 and RM13.14, Harvest Court, Carlsberg and Rapid lost 19 sen each to RM1.09, RM8.47 and RM1.82 respectively, while JobStreet fell 17 sen to RM2.33.

Utopia was the most actively trade counter with 125.9 million shares done. The stock added half a sen to 10.5 sen.

Other actives included JCY, Astral Supreme, Versatile, Sanichi, Flonic and Dataprep.



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Dialog fuelling its ETP projects with a rights issue

Dialog Group Bhd (Dec 16, RM2.54)
Maintain outperform at RM2.44 with target price of RM3.64: Though the cash call and full warrant exercise could dilute our earnings per share (EPS) forecasts by up to 18% to 21% and knock 13% off our target price, it would not change our “outperform” call. We continue to value the stock at its sum-of-parts value.

Dialog has fixed the issue price for its one-for-five rights issue at RM1.20. The rights issue comes with free warrants on the basis of one-for-10 rights shares. The exercise price of the warrants has been set at RM2.40.

We were not surprised by the development as Dialog had announced the rights issue proposal on Aug 18 following the award of the Balai marginal field project on Aug 16. As at end-September this year, Dialog had RM92 million (4.6 sen per share) net cash. The cash call is expected to raise up to RM957 million (RM478 million from rights issue + RM478 million from full exercise of warrants). The proceeds will be used to fund the Balai project and the Pengerang tank terminal, which come under the Economic Transformation Programme (ETP).


We advise shareholders to subscribe to the rights given the steeply discounted rights price of RM1.20. The issue price represents a 46% discount to the theoretical ex-rights price of RM2.23, based on the five-day average of RM2.43. This fundraising exercise could enlarge Dialog’s share base by up to 30% from two billion (as at circular date of Oct 28) to 2.6 billion. We expect to reduce our FY12 ending June to FY14 EPS forecasts by 13% to 16% following the expected completion of the rights issue in February 2012. The warrants will expire in five years. Imputing RM957 million proceeds and a fully enlarged share base of 2.6 billion, we arrive at a fully diluted target price of RM3.18 compared with RM3.64 currently. — CIMB Research, Dec 16


This article appeared in The Edge Financial Daily, December 19, 2011.

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Coastal: More wind in its sails

Coastal Contracts Bhd (Dec 16, RM1.92)

Maintain buy at RM1.79 with target price of RM3.25: Coastal scored RM233 million worth of vessel construction contracts — two offshore support vessels (OSV) for longtime client Tidewater Group, one OSV and two landing craft to customers from Nigeria and Malaysia (both new), and two barges from an Indonesian return customer. This brings its outstanding order book to RM610 million as at last Friday, with year-to-date order wins at RM690 million.

Though these contracts were certainly a welcome surprise to end the current year, earnings impact will only be felt in 2012, as Coastal has a policy of recognising revenue upon vessel delivery. Thus we absorb the above contracts into our FY12 order book assumption of RM710 million wins (33%). We retain our cautiously optimistic outlook for FY12 as margins shrink from continued excess OSV supply (especially in the less than 8,000 BHP range) while oil and gas activity could slow due to possible liquidity issues in Europe and the cascading effect on global markets.


We maintain our “buy” call on Coastal with RM3.25 target price, pegged to eight times FY12 earnings per share (EPS) of 40.5 sen. We like Coastal for its cheap valuations (4.4 times FY12F EPS against 12 times peer average and trading at slightly above -1 standard deviation of 3.2 times), consistency in delivering stellar results (43% compound annual growth rate for FY07 to FY10A earnings), net cash position with solid operating cash flows (RM196.7 million cash pile) and cost efficient business structure (circa 30% net margin). The stock price should be supported by persistently high oil prices (US$94per barrel as at last Thursday). — HwangDBS Vickers Research, Dec 16


This article appeared in The Edge Financial Daily, December 19, 2011.



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HELP expecting a better quarter

HELP International Corp Bhd (Dec 16, RM1.71)

Maintain market perform at RM1.71 with a fair value of RM1.80: HELP is due to release 4QFY11 ended October results on Thursday. We are expecting 4Q11 net profit of RM2 million, a sequential improvement given: (i) historical trends (HELP’s 4Q results tend to be stronger than 3Q); and (ii) 3Q11 earnings were affected by low student numbers and a material one-off relocation cost from Klang to Fraser Business Park (FBP), resulting in net profit declining to only RM245,000 for the period (2Q11:RM6.5 million, 3Q10:RM3.2 million). Earnings before interest, tax, depreciation and amortisation (Ebitda) margin for 4Q11 is likely to improve to around 20% to 25%, after declining to a dismal 4.6% in 3Q11. Full-year dividend is anticipated to be minimal, as HELP is conserving its cash for the construction of its Subang 2 campus.

Although HELP’s revenue has grown marginally year-on-year, this increase has been offset by the higher operating expenses incurred during the year, hence HELP’s FY11 net earnings will likely be lower than FY10 net earnings of RM19.1 million. However, we believe that net earnings will improve in FY12 as HELP will no longer be incurring exceptional costs in relation to the FBP branch.

The key earnings driver for HELP in FY12 will be the contribution from its FBP facility. The full contribution from the branch will be seen in FY12, after the setbacks experienced in FY11. The management is guiding for up to 1,000 new students for the facility in FY12, an almost 10% increase on HELP’s current total student numbers. We expect earnings to pick up from 2QFY12 onwards, as HELP’s major intakes will be from January to March 2012.


The risks include: (i) further regulatory changes; (ii) lower than expected student numbers; and (iii) decline in the demand for private higher education.

We are maintaining our earnings forecasts pending the release of the 4QFY11 results.

We maintain our “market perform” call on HELP (after upgrading the stock from “underperform” on Dec 1), with an unchanged fair value of RM1.80. We value HELP at 12 times FY12 earnings, after imputing a two times discount to the market’s estimated price-earnings ratio of 14 times due to the stock’s thin trading volume (12-month average traded volume of 26,000, against SEG International Bhd’s 958,000 and Masterskill Education Group Bhd’s 2.4 million). — RHB Research, Dec 16


This article appeared in The Edge Financial Daily, December 19, 2011.



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Sunway-Khazanah JV acquires lease in Medini Iskandar for RM745.3m

KUALA LUMPUR (Dec 19): Sunway Bhd has acquired the leases of two parcels of land for RM745.3 million with a gross development value (GDV) of RM12 billion in Medini Iskandar via a joint venture (JV) with Khazanah Nasional Bhd.

In a statement on Monday, the company said that the two parcels of land adjacent to each other totaled 691 acres, adding that the leases acquired were for a period of 99 years.

Sunway said the newly acquired land known as Zone F Medini would boost its landbank by 30% from the previous 2,145 acres, while the proposed development will increase the company’s current GDV to RM 32 billion.

“With the acquisition, Sunway will have 755 acres of development land in Johor, in addition to the existing land at Bukit Lenang, with estimated total GDV of RM 13 billion,” it said.

The company also announced its JV with Dayang Bunting Ventures Sdn Bhd, a wholly-owned subsidiary of Khazanah to form Semerah Cahaya Sdn Bhd which would principally be involved in conceptualising, managing, implementing and developing the said land.

Sunway currently holds 38% in the JV but will increase its holdings to 60% within 54 months from the date of the lease purchase agreement, it said.



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MIDF upgrades Gamuda to 'buy'

MIDF Research has upgraded its call from 'neutral' to 'buy' on Gamuda Bhd, citing the latter's earnings growth potential.

It has also set a new target price of RM3.62 against RM3.20 previously.

In a research note today, MIDF said Gamuda's net profit of RM132.3 million in the first quarter of financial year 2012 was above its expectation.

"We are raising our net profit forecast for 2012 and 2013 financial years by 15 per cent and 14 per cent respectively, as the first quarter (2012) results were above our expectation," it said.

Although Gamuda's revenue for the quarter declined by 21 per cent quarter-on-quarter, its pre-tax profit jumped by 52 per cent year-on-year and 11 per cent from the preceding quarter to RM167.2 million with strong contribution from the construction and property divisions, said MIDF.

MIDF also believed that sales recognition from the Double Tracking Project (Ipoh-Padang Besar) and domestic property sales would likely drive Gamuda's earnings in the upcoming quarters. --Bernama



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MIDF raises Top Glove earnings forecast

MIDF Research has revised upwards Top Glove Corp Bhd's earnings forecast for financial year 2012 by 9.8 per cent to RM159.6 million from RM145.3 million.

MIDF Research said the adjustments were basically to reflect lower assumption on average latex price, higher utilisation rate and stronger greenback against the ringgit.

"Despite softening in latex price and strengthening of dollar, we believe that demand for gloves plays a major role in sustaining good performance for the glove players including Top Glove," it said today.

Meanwhile, HwangDBS Vickers Research expects Top Glove to record better earnings in the second quarter onwards after the company posted a within-expectation performance in the first quarter of RM31.4 million, accounting for 21.6 per cent and 20.2 per cent of the research house and consensus full year estimates respectively.

"Key to our forecast is higher cost savings passed to ustomers," it said.

Therefore, HwangDBS Vickers maintains a "hold" call on Top Glove with a target price of RM4.05 while MIDF Research maintained its "sell" recommendation on a higher target price of RM3.61 from RM3.29. -- Bernama



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KL shares lower at midafternoon

KUALA LUMPUR -- Share prices on Bursa Malaysia were mixed at midafternoon today, tracking mild gains in selected bluechips, dealers said.

At 3pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) rose 1.94 points or 0.132 per cent to 1,468.16.

The Finance Index fell 25.33 points to 13,133.26 but the Plantation Index rose 14.09 points to 7,878.20 and the Industrial Index rose 2.03 points to 2,651.55.

The FBM Emas Index increased 9.14 points to 10,063.63, the FBM Mid 70 Index added 0.2 of a point to 11,060.78 and the FBM ACE Index declined 49.17 points to 4,084.08.

Losers led gainers by 430 to 208, while 272 counters were unchanged.

Turnover stood at 1.012 billion shares worth RM554.36 million.

Among actives, 1 Utopia rose 1.5 sen to 11.5 sen, Wijaya-Wa fell 3.5 sen to 41 sen and Astral Supreme gained one sen to 22 sen.

Among heavyweights, Maybank and CIMB declined one sen each to RM8.20 and RM6.99 respectively while Sime Darby rose one sen to 8.97. -- Bernama



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YTL Ind offers to buy YTL Cement

YTL Industries Bhd, a wholly-owned subsidiary of YTL Corp Bhd, has made a conditional share exchange offer to acquire the entire equity interest and all outstanding irredeemable convertible unsecured loan stocks in YTL Cement Bhd.

The offer would be through the issuance of ordinary shares of 10 sen each in YTL Corp at an issue price of RM1.42 each.

In a filing to Bursa Malaysia today, YTL Corp said the relatively low trading activity on YTL Cement shares did not present shareholders with the necessary platform to maximise the value of their investments in YTL Cement via a continued listing on Bursa Securities.

The proposed offer is a viable way to provide YTL Cement shareholders more liquidity for their investment in YTL Cement shares by exchanging for YTL Corp shares.

The YTL Corp stock was suspended today with its price at RM1.45.--Bernama



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KLKepong expands Crabtree biz into China

Kuala Lumpur Kepong Bhd (KLK) is expanding its Crabtree & Evelyn business into China via wholly-owned subsidiary Crabtree & Evelyn (Hong Kong) Ltd.

In a filing to Bursa Malaysia today, KLK said Crabtree & Evelyn (Hong Kong) has incorporated a new wholly-owned subsidiary namely, Crabtree & Evelyn (Shanghai) Ltd in China.

Crabtree & Evelyn (Shanghai) with a registered capital of one million renminbi will undertake the sale of Crabtree & Evelyn products in China. -- Bernama



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PNB chief says still awaiting SC nod for S P Setia takeover

KUALA LUMPUR (Dec 19): Permodalan Nasional Bhd is still waiting for the Securities Commission’s approval in its takeover of property developer S P Setia Bhd.

PNB's chief executive officer Tan Sri Hamad Kama Piah Che Othman said: “We have submitted it to the SC, we are now waiting for the SC’s approval.”

He was speaking to reporters after announcing the income distribution for its unit Skim Amanah Saham Nasional Bhd for 2011.

To recap, PNB had on Sept 28 served a takeover notice on S P Setia after its shareholding reached 33.16% or 590.502 million shares.

PNB offered RM3.90 per share, which based on the last traded price of RM3.50, was a 40 sen premium. PNB also offered to acquire the remaining warrants at 91 sen per warrant. This was 45 sen or 97.8% above the last closing price of 46 sen before the offer was made.

S P Setia subsequently rejected the offer, stating it fundamentally undervalued the company and it then decided to seek a competing offer from other interested parties to make an offer to purchase the company's shares. However, it did not receive any competing offers for the stake in the company.

On a separate matter, when asked whether PNB had any interest in joining the race to take over PROTON HOLDINGS BHD, he did not comment but said PNB had a stake in UMW HOLDINGS BHD.



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KL shares lower in cautious trade

Share prices on Bursa Malaysia turned lower at midday today in cautious trade.

The FBM KLCI fell 0.68 of a point to 1,465.54. Dealers said the local bourse moved in line with weaker sentiment in key regional markets.

Meanwhile, key equity indices on the Wall Street ended mixed last Friday as Fitch Ratings lowered France's credit outlook.

"Trading volume to taper off ahead of Christmas and going into the new year in anticipation of investors taking a break," said OSK Research in a research note.

The Finance Index fell 31.399 points to 13,127.19 and the Plantation Index rose 1.69 points to 7,865.8 and the Industrial Index rose 1.19 points to 2,650.71. The FBM Emas Index declined 4.26 points to 10,050.23, the FBM Mid 70 Index added 3.81 points to 11,064.39 and the FBM ACE Index fell 29.74 points to 4,103.51.

Losers led gainers by 403 to 201 with 249 counters traded unchanged. Turnover stood at 886.79 million shares worth RM458.08 million.

Dutch Lady lost 78 sen or 3.2 per cent to RM23.66 on profit taking. For the actives, Utopia rose 1.5 sen to 11.5 sen, Wijaya-Wa fell 3.5 sen to 41 sen and Astral Supreme gained 1.5 sen to 22.5 sen.

Among heavyweights, Maybank declined one sen to RM8.20, Sime Darby was flat at 8.96 and CIMB was down one sen at RM6.99. -- Bernama



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Atis group MD gets SC’s exemption from mandatory takeover of Nadayu

KUALA LUMPUR (Dec 19): ATIS CORPORATION BHD [] group managing director Chen Khai Voon and parties acting in concert in the takeover of Nadayu PROPERTIES Bhd, will not have to make a mandatory takeover offer.

Atis said on Monday that Chen and the parties were given the exemption by the Securities Commission in a letter dated Dec 16 from the mandatory takeover offer of Nadayu (formerly MUTIARA GOODYEAR DEVELOPMENT BHD).

They had earlier submitted an application to the SC to seek for an exemption under paragraph 21.1, Practice Note 9 of the Malaysian Code on Take-Overs and Mergers 2010.



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KLK expanding Crabtree & Evelyn biz into China

KUALA LUMPUR (Dec 19): KUALA LUMPUR KEPONG BHD [] has set its sights on expanding its Crabtree & Evelyn business, which focused on body and home products, into China.

The company said on Monday its unit Crabtree & Evelyn (Hong Kong) Ltd had incorporated a new wholly-owned subsidiary, Crabtree & Evelyn (Shanghai) Ltd in China.

"Crabtree & Evelyn (Shanghai) Ltd with a registered capital of 1.0 million renminbi will undertake the sale of Crabtree & Evelyn products in China," said KLK.



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N. Korean leader’s death rattles Asian mkts, but KLCI only slightly affected

KUALA LUMPUR (Dec 19): The death of North Korea’s leader Kim Jong-il that was announced by the reclusive republic’s state television on Monday rattled already jittery Asian markets worried over the eurozone debt crisis.

Seoul shares extended their fall to nearly 5% on Monday after North Korea's state television reported that North Korean leader Kim Jong-il had died on Saturday, according to Reuters.

Trading on Bursa Malaysia was also choppy with the FBM KLCI struggling to stay in positive territory. At the mid-day break, the FBM KLCI was down 0.93 point to 1,465.39. Market breadth was negative with 403 losers and 201 gainers, while 249 counters traded unchanged. Volume was 886.79 million shares valued at RM458.08 million.

The ringgit weakened 0.05% to 3.1793; crude palm oil futures for the third month delivery rose RM6 per tonne to RM2,990, crude oil shed 63 cents per barrel to US$92.90 and gold lost US$10.25 an ounce to US$1,588.70.

At the regional markets, South Korea’s Kospi fell 3.54% to 1,774.81, the Shanghai Composite Index lost 2.57% to 2,167.68, Hong Kong’s Hang Seng Index down 2.47% to 17,833.42, Taiwan’s Taiex lost 2.03% to 6,647.26, Singapore’s Straits Times Index fell 1.65% to 2,615.26 and Japan’s Nikkei 225 shed 1.12% to 8,307.81.

On Bursa Malaysia, Dutch Lady fell 78 sen to RM23.66, F&N lost 36 sen to RM18, Carlsberg 27 sen to RM8.39, KrisAssets and Batu Kawan fell 26 sen to RM5.62 and RM17.10, LPI Capital and GAB fell 20 sen each to RM13.20 each respectively, while JT International and United PLANTATION []s lost 16 sen each to RM6.78 and RM18.34.

Utopia was the most actively traded counter with 69.97 million shares done. The stock rose 1.5 sen to 11.5 sen.

Other actives included Wijaya, JCY, Versatile, Flonic, Kurnia Asia and Boustead.

Gainers at mid-day included Nestle, Amway, Petronas Gas, Boustead, Far East, NSOP, Gamuda, Perstima, KLK and Suiwah.



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KL shares open marginally higher

Share prices on Bursa Malaysia opened slightly higher today.

At 9.15am, the FBM KLCI edged up 1.17 points to 1,467.39 after opening at 1,466.78.

Dealers said investors remained cautious due to mixed performance on Wall Street last Friday as Fitch Ratings lowered France’s credit outlook.

Fitch Ratings also put Spain, Italy, Belgium, Slovenia, Ireland and Cyprus on a “Rating Watch Negative” review, which is expected to be completed by end-January, dealers said.

HwangDBS Vickers Research said the Malaysian bourse might trade with a downward bias today towards its immediate support level of 1,445.

The Finance Index dropped 18.83 points to 13,139.76, the Plantation Index surged 1.32 points to 7,865.43 and the Industrial Index perked up 5.87 points to 2,655.39.

The FBM Emas Index was up 11.67 points to 10,066.16, the FBM Mid 70 Index jumped 31.39 points to 11,091.97 and the FBM ACE Index declined 0.06 of a point to 4,133.19.

Gainers led losers by 105 to 72 while 117 counters were unchanged.

Turnover stood at 112.34 million shares worth RM40.909 million.

Among the active counters, Wijaya Baru Global-Wa added half a sen to 45.5 sen, Astral Supreme rose 1.5 sen to 22.5 and Kurnia Asia was flat at 60.5 sen.

Among the heavyweights, Maybank fell one sen to RM8.20, CIMB was unchanged at RM7.00 but Sime Darby rose two sen to RM8.98. -- Bernama



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PLUS said to price bonds to yield 5pc

PLUS Bhd sold RM19.6 billion (US$6.2 billion) of Islamic bonds in Malaysia’s record corporate offering of the debt, pricing 19-year securities to yield 5 per cent, according to two people with knowledge of the deal.

The company issued RM11.3 billion of syariah-compliant notes with maturities ranging from five to 19 years, and has privately placed another RM8.3 billion due in 20 to 25 years, said the two persons who couldn’t be named because the information is confidential.

They said an additional RM11 billion of government-guaranteed debt will be sold later. State-controlled power producer Tenaga Nasional Bhd issued 20-year Islamic bonds in October at a yield of 4.9 per cent.

Sales of longer-dated debt may help set a benchmark for companies seeking funding for road and rail projects as part of the government’s US$444 billion development plan for the next decade. Companies in Malaysia have already issued RM44.6 billion of syariah-compliant debt this year, with almost 80 per cent due in less than 10 years, Bloomberg data show.

PLUS Bhd is taking over the local assets of Malaysia’s biggest toll-road operator PLUS Expressways Bhd in the first leveraged buyout using Islamic bonds, or sukuk. The company was set up by the Employees Provident Fund and state-owned UEM Group Bhd for the RM23 billion acquisition. Izzaddin Idris, chief executive officer of UEM, couldn’t be reached for comment when telephoned by Bloomberg today.

Orders for the RM11.3 billion portion totalled about RM50 billion, the two people said. PLUS sold the five-year Islamic bonds at 3.8 per cent and the 10 year at 4.3 per cent, they said.

The notes were provisionally rated AAA by Malaysian Rating Corp, the highest investment grade. CIMB Group Holdings Bhd, AMMB Holdings Bhd, Malayan Banking Bhd and RHB Capital Bhd were lead managers for the sale.

Average yields on global sukuk, which pay returns on assets to comply with Islam’s ban on interest, rose six basis points this month to 4.1 per cent on Dec 16, according to the HSBC/NASDAQ Dubai US Dollar Sukuk Index. The PLUS offering surpasses the previous Islamic bond record by a Malaysian company of RM12 billion by telecommunications company Binariang GSM Sdn in 2007. -- Bloomberg



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Asian markets fall on Eurozone fears, KLCI snaps winning streak

KUALA LUMPUR (Dec 19): The FBM KLCI snapped its positive run on Monday, in line with the fall at key regional markets, on worries that credit ratings downgrades of some European countries could hamper any progress towards resolving the region’s debt crisis.

At mid-morning, the FBM KLCI fell 0.60 point to 1,465.62.

Losers edged gainers by 194 to 170, while 196 counters traded unchanged. Volume was 402.72 million shares valued at RM185.43 million.

Asian stocks fell on Monday on fears possible credit ratings downgrades of several European countries could derail progress towards resolving the euro zone's debt crisis, while the euro steadied after its worst weekly performance in three months, according to Reuters.

At the regional markets, Japan’s Nikkei 225 fell 0.83% to 8,332.07, Hong Kong’s Hang Seng Index lost 1.63% to 17,986.54, the Shanghai Composite Index was down 1.53% to 2,190.89, Taiwan’s Taiex fell 1.74% to 6,667.36, Singapore’s Straits Times Index was down 1.54% 2,618.31 and South Korea’s Kospi lost 2.42% to 1,795.35.

Fitch Ratings had warned on Friday it may downgrade France and six other euro zone countries, saying a comprehensive solution to the region's debt crisis was "technically and politically beyond reach".

Fitch also revised the outlook on France's top-notch rating to negative, saying the downgrade was not imminent but could come in two years.

Maybank Investment Bank Bhd head of retail research and chief chartist Lee Cheng Hooi in a note to clients on Monday said the local market remained mildly positive despite the volatile global markets last week.

Some local institutional blue chip buying on Thursday and Friday led the index up in fairly lack lustre trading, he said.

The weaker support areas for the FBM KLCI are in the 1,424 to 1,460-zone. The next resistance levels of 1,466 and 1,511 will see heavy liquidation activities, he said.

Lee said the tone of the global indices was still unstable and that Eurozone worries on how to tame their debt crisis persisted, with Fitch stating that a comprehensive deal was “beyond reach”.

“There could still be inherent price volatility in the next week before the global markets wind-down for the Christmas and New Year holidays in late December,” he said.

Among the decliners at mid-morning, Carlsberg fell 20 sen to RM8.46, JT International lost 18 sen to RM6.76, JobStreet was down 15 sen to RM2.35, LPI Capital and F&N down 10 sen each to RM13.30 and RM18.26, Hartalega lost nine sen to RM5.52, while CCM, Keck Seng and Batu Kawan lost eight sen each to RM1.57, RM4 and RM17.28 respectively.

Meanwhile, gainers included BAT, Nestle, Amway, Bosutead, BHIC, Far East, SOP, Pintaras and Gamuda.

The actives included Wijaya, Boustead, Versatile, JCY and Utopia.



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Gamuda advances on upbeat outlook

KUALA LUMPUR (Dec 19): GAMUDA BHD [] shares advanced on Monday after the company said it was upbeat about the outlook for its prospects for the remaining financial year after its earnings climbed 49.5% to RM132.32 million in the first quarter ended Oct 31, 2011, from RM88.53 million a year ago due to higher contributions from all divisions.

At 9.30am, Gamuda rose six sen to RM3.06 with 479,200 shares done.

Gamuda expected a stronger performance this year supported by its ongoing CONSTRUCTION [] projects, continued strong property sales and steady earnings from the water and expressway divisions.

MIDF Research in a note Dec 19 said despite the potential erosion in Gamuda’s stock interest after its removal from FBM KLCI Index today, Gamuda’s fundamentals still remain intact.

The research house said should Gamuda-MMC secure the KVMRT tunnelling portion, its construction order book will reach up to RM RM6 billion-RM7 billion.

Also, the management mentioned that they are now eyeing several projects such as Selangor Langat 2 Water Treatment Plant and Gemas-Johor double tracking project (in participation with the existing contractor), it said.

“We upgrade our recommendation to BUY from Neutral previously with a new target price of RM3.62 (previously RM3.20).

“We derive our target price based on a PER of 14x (FY12 EPS of 22.7sen), which is 0.75 standard deviation below its 10-year average PER,” it said.



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OSK Research maintains Neutral on Top Glove, FV RM4.52

KUALA LUMPUR (Dec 19): OSK Research is maintaining its Neutral outlook on Top Glove Corp Bhd.

The research house said on Monday that despite a number of near-term setbacks, it had increased its Fair Value for Top Glove to RM4.52 (from RM4.00 previously), based on the existing price-to-earnings ratio of 17 times as it rolled forward to FY13 earnings.

OSK Research said Top Glove’s 1QFY12 results met its expectations, but fell short of those of consensus.

“Its 1QFY12 net profit was higher q-o-q, owing to the time lag in passing that quarter’s lower latex costs to its customers. However, on a y-o-y comparison, its 1Q net profit was still lower in view of the weaker demand and hence, only about 70% of costs were being passed onto customers.

“Nevertheless, we believe the worst is over for Top Glove as it is expected to benefit from the decline in the price of natural rubber latex, which is used in about 80% of its product mix. Maintain NEUTRAL,” it said.



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Poh Kong rises on Q1 income surge

Poh Kong Holdings Bhd, a Malaysian jewelry maker, climbed the most in three months in Kuala Lumpur trading after first-quarter net income jumped 62 per cent to RM17.7 million.

The stock gained 4.8 per cent to 43.5 sen at 9:10 a.m. local time, set for the steepest increase since Sept 20. -- Bloomberg



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KLCI edges up in early trade, Boustead in focus

KUALA LUMPURT (Dec 19): The FBM KLCI edged up in early trade on Monday, bucking the trend at key regional markets that opened lower on fears possible credit ratings downgrades of several European countries.

At 9.15am, the FBM KLCI was up 2.32 points to 1,468.54.

Gainers led losers by 142 to 77, while 132 counters traded unchanged. Volume was 177.28 million shares valued at RM61.16 million.

Among the top gainers in early trade were Nestle, QSR, MISC, Gamuda and Tenaga.

Meanwhile, BHIC and Boustead advanced after Boustead’s subsidiary Boustead Naval Shipyard Sdn. Bhd received the letter of award from the Ministry of Defence to supply six patrol vessels with a contract ceiling of RM9 billion.



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Masterskill up 2.7pc on stake sale report

Masterskill Education Group Bhd, Malaysia’s largest operator of private nursing colleges, rose the most this month after the Star newspaper said its key shareholders may sell a stake to a strategic investor.

The stock gain 2.7 per cent to RM1.13 at 9:12 a.m. local time, set for its biggest increase since Nov 30. -- Bloomberg



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Gamuda hits 2-week high on Q1 results

Gamuda Bhd, a construction and property group, rose the most in almost two weeks in Kuala Lumpur trading after first-quarter net income grew 49 per cent to RM132.3 million.

The stock gained 2.3 per cent to RM3.07 ringgit at 9.03 a.m. local time, set for its steepest increase since Dec 7. -- Bloomberg



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HDBSVR has Buy on Boustead Holdings, TP RM6.80

KUALA LUMPUR (Dec 19): Hwang DBS Vickers Research has a Buy call on Boustead Holdings with a target price of RM6.80.

It said on Monday that BOUSTEAD HOLDINGS BHD []’s 69% owned Boustead Naval Shipyard Sdn. Bhd had secured a major win after securing a Ministry of Defence (Mindef) contract to supply six patrol vessels with a contract ceiling of RM9 billion.

Boustead Holdings Bhd said its subsidiary Boustead Naval Shipyard had received the letter on Friday to design, construct and deliver six second generation patrol vessels.

The contract carries a ceiling of RM9.0 billion, to be implemented over three Malaysia Plans, 10, 11 and 12. The delivery of the first of class ship is estimated in 2017 with follow-on ships every six months thereafter.

HDBSVR said this was a major win for Boustead as well as for its listed subsidiary BOUSTEAD HEAVY INDUSTRIES CORP [] HIC (BUY, TP RM4).

“We may look to raise our FY12-FY13F EPS pending clarification with management as we had only expected a contract sum of RM7 billion,” it said.



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Boustead Heavy gains on navy ship deal

Boustead Heavy Industries Bhd, a Malaysian shipbuilding and engineering company, rose to a four- month high in Kuala Lumpur trading after its associate won a contract to build navy ships that could be worth as much as RM9 billion.

The stock gain 4.8 percent to RM3.30 at 9:05 a.m. local time, set for its highest close since Aug. 17.

Boustead Naval Shipyard Sdn Bhd received a contract from the Malaysian government to deliver six combat ships, the group said in a statement. -- Bloomberg



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Boustead, BHIC top gainers in early trade

KUAL A LUMPUR (Dec 19): BOUSTEAD HOLDINGS BHD and BOUSTEAD HEAVY INDUSTRIES CORPORATION BHD shares rose in early trade after Boustead Naval Shipyard Sdn. Bhd received the letter of award from the Ministry of Defence to supply six patrol vessels with a contract ceiling of RM9 billion.

At 9.05am, Boustead was up 19 sen to RM5.55 while BHIC added 18 sen to RM3.33.

Hong Leong Investment Bank Bhd Research in a note Monday maintained its Buy call on Boustead with a target price of RM6.50 based on 10% holding company discount to estimated SOP of RM7.23.

The research house said the letter of award was a positive surprise versus its RM7 billion assumption, and kept its forecasts, pending further details from management.

“Our envisaged catalyst has materialized and vindicated our positive view on the stock. The contract would keep its heavy industry division busy over the next 9 years.

“It will also help BHIC to mitigate losses suffered from the vacuum in jobs and cost escalation,” it said.



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RHB Research sees UMW-Proton alliance as unlikely

KUALA LUMPUR (Dec 19): RHB Research Institute said on Monday that a UMW-Proton alliance is an unlikely scenario.

It said that UMW’s principal Toyota Motors, via its affiliate Daihatsu Motors, already had an interest in Perodua.

“We believe such a move is unlikely to have the backing of Toyota,” it said.

RHB Research was commenting on an announcement by UMW last Friday where it had, for the second time, denied any interest in Khazanah Nasional’s Proton stake after the first announcement on Thursday.

UMW had also announced to Bursa Malaysia that neither it nor its major shareholders had submitted any bids to Khazanah, nor have they won any bids to buy Khazanah's stake in Proton Holdings.

UMW also re-affirmed that it is not in any form of discussion with any parties in this regard.



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Bank Islam working towards third IPO, says MD

KUALA LUMPUR (Dec 18): Bank Islam Malaysia Bhd is working towards its third initial public offer (IPO) in sync with efforts to increase its non-fund based income.

Managing Director Datuk Seri Zukri Samat said the bank completed listing of two companies on Bursa Malaysia earlier this year and was working hard in getting more mandates to increase its non-fund based income.

"We have submitted the application for the third IPO candidate and are waiting for approvals," he said.

He said Bank Islam was the only commercial bank approved by the Securities Commission to act as principal adviser to undertake corporate finance work such as initial public offerings and advisory services for mergers and acquisitions.

"This is our niche and it gives us a competitive edge in an industry where competition is getting stiffer, with 17 domestic and foreign Islamic banks in the country," he told BERNAMA in an interview.

As at Dec 31, 2010, Bank Islam was ranked No. 3 in terms of asset, with 11.4 per cent market share, behind Maybank Islamic and CIMB Islamic.

In terms of deposits, the bank maintained its No. 2 position, with 12.3 per cent market share.

Zukri said Bank Islam was very much a retail bank as 74 per cent of the bank's assets were consumer-based.

"Our competitors are not only Islamic banks but also conventional banks," he said.

Apart from capitalising on the competitive advantage as the only Islamic bank on the SC's approved advisers' list, Bank Islam is also leveraging on its strong branding.

"The brand name of Bank Islam is very strong, especially in the east coast. It's an open secret that whenever we open a branch in the east coast, the breakeven period is shorter than usual", Zukri said.

He said innovation was another key factor that had helped Bank Islam stay ahead of the competitive curve and it had scored many firsts in terms of product innovations.

Its "Transact on Palm" mobile banking service, said to be Malaysia's first mobile banking service that does not require internet access, has recorded close to 160,000 subscribers since it was launched about a year ago.

The bank plans to roll out a few more products next year.

"According to a study undertaken by an independent party, a customer who has more than three products with a particular bank, would likely stay with the bank.

"We are working hard to cross-sell our products to our existing customers and ensure that they will have more than one Bank Islam's products," he said.

By end-December, Bank Islam will operate 122 branches, with the latest branch in Pasir Tumbuh, Kelantan, and Ara Damansara, Selangor.

"The bank will open 28 more branches over the next three years. By 2014, we target to have 150 branches. By then, we will be operating at our optimum size," he said.

The new branches will be located in fast-growing townships like Sungai Buloh, Puchong, Ipoh and some areas in Sabah and Sarawak and new townships.

Zukri also maintains his confidence in the bank's financial performance for the current year.

"This year, we expect to record a good performance. The numbers for the January-September period are already equivalent to the 12 months of last year." he said.

Zukri, however, cautioned that the bank's next financial year would be a challenging one due to the economic uncertainties in Europe and the United States.

"The government has projected five to six per cent growth, which is good compared with other countries, but we have to be mindful of what is happening in Europe, the US and around the world.

"Given the current scenario, if the world's economy is going to perform as what many believe, we reckon that next year is a challenging year, but InsyaAllah (God willing), we will be able to perform satisfactorily," he added. - Bernama



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