Tuesday 20 December 2011

Vastalux to be suspended on Dec 29, delisted Jan 3

KUALA LUMPUR: VASTALUX ENERGY BHD [], listed in September 2008, will see its shares suspended from trading on Dec 29 and delisted on Jan 3 after Bursa Malaysia Securities rejected its application for more time to submit its regularisation plan.

A Bursa Securities circular said on Tuesday the company had failed to submit its regularisation plan to the Securities Commission or Bursa Securities for approval within the timeframe under Bursa Securities Main Market Listing Requirements.

It said the suspension and delisting would take effect “unless an appeal is submitted to Bursa Securities on or before Dec 28”, it said.

Bursa Securities said any appeal submitted after the appeal timeframe would not be considered. However, if the company submitted an appeal to Bursa Securities within the appeal timeframe, the removal of the securities on Jan 3 would be deferred pending the decision on the appeal.

Vastalux, which is involved in the oil and gas (O&G) sector, closed 0.5 sen higher at 8.5 sen with 6.23 million shares done on Tuesday.

The group fell into the Practice Note 17 (PN17) category in November 2010 and it had until November this year to submit a regularisation plan.

To recap, Vastalux chairman Rosthman Ibrahim told The Edge Financial Daily on July 1 this year the company had until Nov 25 to put up a regularisation plan.

The regularisation proposal would have to come in with the proposal for a white knight, Rosthman said.

He had then said the group was approached by several interested parties including property and O&G players.

Rosthman said the new investor would have to inject acceptable assets and business into the group, as currently the group is merely a shell company.

Its unit Vastalux Sdn Bhd (VSB), which held its core business of O&G service provider, had been under liquidation since Dec 16 last year.

Vastalux then de-consolidated VSB from its accounts. Prior to the liquidation, VSB had proposed a debt restructuring scheme to its creditors, which among others included a proposal for creditors to take up to a 50% “hair cut” on the amount owed to them.

However, the proposal was rejected by the creditors, which included Alam Maritim (M) Sdn Bhd, the largest creditor with RM146.8 million owed by VSB out of total debts of RM174.4 million.

Alam Maritim is a unit of ALAM MARITIM RESOURCES BHD []. Alam Maritim is classified as unsecured scheme creditors, class 2, under the proposed debt restructuring scheme.



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Aeon Credit 3Q net profit up 57.4% to RM25.25m

KUALA LUMPUR (Dec 20): Aeon Credit Services (M) Bhd net profit for the third quarter ended Nov 20, 2011 rose 57.4% to RM25.25 million from RM16.04 million a year earlier, due mainly to growth in revenue.

The company said on Tuesday that its revenue for the quarter was up 31.7% to RM89.81 million from RM68.18 million.

Earnings per share for the quarter was 21.05 sen compared to 13.37 sen in 2010, while net assets per share was RM2.53.

For the nine months ended Nov 20, Aeon Credit’s net profit increased to RM67.89 million from RM44.03 million in 2010, while revenue jumped to RM249.99 million from RM195.88 million.

Reviewing its performance, Aeon Credit said the increase in revenue was due mainly to growth in business and receivabled based on increased financing transaction volume as a result of marketing and promotion activities during the festive periods.

On its current year prospects, Aeon Credit said the Malaysian economy registered a higher growth of 5.8% in the third quarter of 2011 due to stronger domestic demand.

“The company anticipates to be able to sustain its performance for the remainder of the current financial year based on this trend,” it said.



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Ingress 3Q earnings jump 222% to RM6.74m from RM2m yr ago

KUALA LUMPUR (Dec 20) INGRESS CORPORATION BHD []’s earnings surged 222% to RM6.73 million in the third quarter ended Oct 31, 2011 from RM2.09 million a year ago, underpinned by its automotive component manufacturing and dealership businesses.

It said on Tuesday, revenue declined 18.6% to RM159.67 million from RM196.11 million while earnings per share were 8.77 sen compared with 2.72 sen. Pretax profit was 67.2% higher at RM10.20 million compared with RM6.10 million a year ago.

Ingress said the automotive division, which included the automotive component manufacturing division and premium automotive dealership, recorded revenue of RM151.50 million and profit before tax of RM11.70 million compared with revenue of RM170.70 million and profit before tax of RM6.30 million a year ago.

For the current quarter, the pre-tax profit was higher at RM10.2 million when compared with the second quarter’s RM5.4 million mainly due to the recovery from the impact of the March 2011 earthquake and tsunami in Japan especially to the Thailand's automotive industry.

For the nine-month period, its earnings increased by 15.9% to RM17.42 million from RM15.03 million in the previous corresponding period but revenue declined 10.3% to RM512.81 million from RM572.09 million.



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PLUS SPV redeems remaining RM1.8b sukuk

KUALA LUMPUR (Dec 20): PLUS SPV Bhd (PLUS SPV) has fully redeemed the RM1.8 billion outstanding amount under its sukuk issue of up to RM4.0 billion in nominal value under the Islamic principle of Musharakah (2008/2026).

RAM Rating Services Bhd said on Tuesday it had received confirmation from the facility agent about the redemption of the sukuk by PLUS SPV. The Sukuk had consequently been cancelled.

Following the redemption, RAM Ratings had withdrawn the AA1/stable rating and it did not had any more rating obligation on the Sukuk.

PLUS SPV is an independent special-purpose company through which PLUS EXPRESSWAYS BHD [] issued the sukuk to meet its funding requirements.

PLUS Expressways operates tolled roads, both in Malaysia and abroad. Under the Musharakah structure, the Sukuk holders’ recourse to PLUS Expressways is recognised via a purchase undertaking deed.



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Berjaya Land sells 2.66m BToto shares at RM4.22 each

KUALA LUMPUR (Dec 20): BERJAYA LAND BHD [] disposed of 2.66 million shares of BERJAYA SPORTS TOTO BHD [] (BToto) in the open market on Dec 16 and 19.

BLand said in a statement to Bursa Malaysia on Tuesday the shares were disposed for RM11.22 million or at an average selling price of RM4.22 per share. The shares represented 0.20% of BToto’s issued and paid-up capital of 1.351 billion shares.

“The disposals were at prevailing market prices of BToto Shares at the time of the disposals. The disposed shares which were purchased since 1992, have a total carrying value of about RM12.74 million in the books of BLand group. The net proceeds from the disposals will be utilised as working capital and repayment of bank borrowings of the BLand Group,” it said.

Following the recent disposals, BLand and its unlisted subsidiaries now hold 560.158 million BToto shares representing 41.99% stake.

BERJAYA CORPORATION BHD [] and its unlisted subsidiaries also hold 142.79 million BToto shares or 10.70% stake.

With the disposals, the entire BCorp Group (including BLand group) own 702.948 million BToto shares or 52.69%.

BToto is a subsidiary of B-Land, which in turn is a listed subsidiary of BCorp. BCorp is the ultimate holding company of BToto.



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NCB gets concession extensions for Northport, SouthPoint

KUALA LUMPUR (Dec 20): NCB HOLDINGS BHD [] has been given concession extensions for the privatised Northport and SouthPoint services which were due to expire in 2013.

It said on Tuesday that the government via a letter dated Dec 16 had agreed in principle to extend the concession period for the license and lease of Northport services for a period of 30 years for Northport and 21 years for SouthPoint respectively.

It said the approval was subject to further negotiation and subsequent agreement on the terms and conditions of the concession with the Public Private Partnership Unit at the Prime Minister’s Department.



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Genetec secures RM13.1m new orders from hard disk drive sector

KUALA LUMPUR (Dec 20): Machine design specialist, Genetec TECHNOLOGY [] Bhd has secured RM13.1 million in orders from the hard-disk drive sector, increasing the total order to about RM20.7 million.

Genetec’s executive chairman Ron Ortscheid said on Tuesday this was significant as the new orders are “indicative of the recovery in the HDD sector following the Thailand flood a few months ago”.

He hoped the ACE-listed company would be able to secure more new orders to cater to the recovering demand.

The RM13.10 million in orders from the HDD sector was out of the RM16.50 million new orders clinched, said Ortscheid.

He expected the new orders to contribute positively to Genetec’s financial year ending March 31, 2012.



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UMW subsidiary gets RM94.74m job from Carigali Iraq

KUALA LUMPUR (Dec 20): UMW HOLDINGS BHD []’s 60% owned subsidiary Synergistic Generation Sdn Bhd (SGSB) has secured a contract worth RM94.74 million (US$29.7 million) from Petronas Carigali Iraq Holding BV (PCIHBV) to supply material and install the Garraf Power Plant phase 1 for the Garraf field located onshore Iraq.

UMW said on Tuesday that PCIHBV was engaged in the development of the Garraf Contract Area, Iraq under a development and production service contract between South Oil Company, Petronas Carigali Sdn Bhd, Japan Petroleum Exploration Co Ltd (JAPEX) and North Oil Company.

PCIHBV is the operator of the Garraf Field, which is located in the province of Dhi Qar, about 250km southeast of Baghdad, it said.

UMW said the contract was for a period of 55 months, effective Sept 8, 2011, with an option by PCIHBV to extend the contract for another 12 months.

It said the contract was expected to contribute to its earnings for the financial year ending Dec 31, 2012.



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Market Commentary

The FBM KLCI index lost 12.61 points or 0.85% on Tuesday. The Finance Index fell 0.75% to 13080.61 points, the Properties Index up 0.68% to 967.77 points and the Plantation Index down 0.49% to 7849.12 points. The market traded within a range of 12.10 points between an intra-day high of 1476.41 and a low of 1464.31 during the session.

Actively traded stocks include UTOPIA, ASUPREM, JCY-CD, MAXBIZ, ASUPREM-WA, JCY, SANICHI, RA, GAMUDA-CS and FOCUS. Trading volume increased to 1642.89 mil shares worth RM1243.57 mil as compared to Monday’s 1601.87 mil shares worth RM1033.26 mil.

Leading Movers were TENAGA (+5 sen to RM5.50), YTLPOWR (+4 sen to RM1.80), MAYBANK (+2 sen to RM8.24), UEMLAND (+3 sen to RM2.28) and RHBCAP (+2 sen to RM6.82). Lagging Movers were CIMB (-15 sen to RM6.90), DIGI (-9 sen to RM3.61), GENTING (-18 sen to RM10.36), PETCHEM (-15 sen to RM6.05) and PPB (-50 sen to RM16.70). Market breadth was negative with 328 gainers as compared to 429 losers. -- JF Apex Securities Bhd



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Banks, blue chips drag KLCI lower as sentiment remains shaky

KUALA LUMPUR (Dec 20): The FBM KLCI fell on Tuesday, weighed by losses at banks and select blue chip counters as external uncertainties and some mild profit taking took a toll on the index.

At the close, the 30-stock index closed 12.61 points lower at 1,465.17.

Losers led gainers by 429 to 328, while 299 counters traded unchanged. Volume was 1.64 billion shares valued at RM1.24 billion.

Investor sentiment waned at regional markets and European stocks came under pressure on Tuesday after a euro zone plan to boost crisis funds parked with the IMF failed to reach a hoped-for target, though looming ECB funding for the region's banks lifted sentiment in some bond markets, according to Reuters.

At the regional markets, South Korea’s Kospi rose 0.91% to 1,793.06, Japan’s Nikkei added 0.49% to 8,336.48, Taiwan’s Taiex gained 0.44% to 6,662.64 and Hong Kong’s Hang Seng Index edged up 0.06% to 18,080.20.

Meanwhile, the Shanghai Composite Index shed 0.10% to 2,215.93 and Singapore’s Straits Times Index was down 0.14% to 2,614.45.

Earlier, Standard & Poor’s Rating Services in a report entitled "A Slowdown In Europe And China, And Sluggish Exports Moderate Asia-Pacific Credit Outlook In 2012" released on Tuesday said mounting challenges across the globe could severely test the resilience of sovereigns in Asia-Pacific.

“The uncertainty over sovereign debt and banking sector stability in the eurozone is by far the biggest of these challenges," it said.

However, it added that most banking systems in the region have strong retail deposit bases, which provide a buffer against volatility in wholesale funding markets."

At Bursa Malaysia, BAT was the top loser and fell RM1.40 to RM48; PPB lost 50 sen to RM16.70, Petronas Dagangan down 30 sen to RM17, Tradewinds PLANTATION []s 24 sen to RM4.31, Perak Corp 23 sen to RM1.11, Genting 18 sen to RM10.36 and MAHB 16 sen to RM5.46.

Among banks, HLFG lost 28 sen to RM11.42, CIMB 15 sen to RM6.90, AMMB 12 sen to RM5.70, Affin five sen to RM2.86 while Public Bank and Hong Leong Bank fell two sen each to RM13 and RM10.54.

Utopia was the most actively traded counter with 114.9 million shares done. The stock fell one sen to 9.5 sen.

Other actives included Astral Supreme, Maxbiz, JCY, Sanichi and Focus.

Meanwhile, the gainers included Aeon Credit, Jaya Tiasa, Panasonic, KAF, NSOP, Kawan Food and Dutch Lady.



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Analysts are concerned about Gamuda’s depleting order book

KUALA LUMPUR: Gamuda Bhd is facing the problem of depleting order book as its existing construction projects are reaching the tail-end and on expectations of possible hiccups on the execution of the mass rapid transit (MRT) project.

Analysts are concerned that the depleting construction order book would translate into weaker future earnings.

According to OSK Research, while Gamuda’s FY12 ending July 31 earnings are anticipated to grow 22.6%, this will eventually diminish to a growth of 6.5% for FY13 as its existing construction order book “would have dried up by then” and that the MRT tunnelling works would only be at the infancy stage.

However, Jeremy Goh, an analyst at OSK, foresees that by FY14, the company’s earnings growth momentum will pick up again at 15.6% in anticipation of registered income from the MRT job. For a start, the government has solicited bids for the Sungai Buloh-Kajang MRT line. The tunnelling work for the Sungai Buloh-Kajang MRT line is worth some RM7 billion.

For now, Gamuda has some RM2 billion worth of outstanding building jobs, of which a large chunk comes from the Ipoh-Padang Besar double-tracking project which is already 71%-completed.

Its other projects include the New Doha International Airport in Qatar and Yen So Sewage Treatment Plant in Vietnam, which are 98% and 95% completed respectively.

Nonetheless, the silver lining at this juncture, analysts said, is that MMC-Gamuda Joint Venture Sdn Bhd, in which Gamuda holds a 50% stake, stands a relatively good chance of securing the tunnelling works for the Klang Valley MRT project.

“The MRT project is on track to be awarded by 1H12 and we continue to view the company (Gamuda) as the frontrunner for the tunnelling works,” OSK’s Goh wrote in a note yesterday.

Gamuda’s net profit rose 49% to RM132.32 million in the first quarter ended Oct 31 from RM88.53 million a year earlier as operating and finance costs declined, while top line improved. Revenue for the quarter came in 1% higher at RM641.99 million from RM634.2 million.

As at Oct 31, Gamuda had cash of RM1.39 billion against debt obligations of RM2 billion, translating into a net debt of RM612.52 million, according to its latest balance sheet. Net assets per share stood at RM1.85. Gamuda shares rose 12 sen to RM3.12 yesterday.

Group managing director Datuk Lin Yun Ling could not be reached for comment at the time of writing.

According to the Greater KL Public Transport Master Plan draft, the remaining two MRT lines comprise he 41km Circle line and the 36km North-South line.
These lines are scheduled for operation from mid-2013.

“Should the JV win the Sungai Buloh-Kajang MRT line, we believe this will enhance its chances for the remaining two lines as it would have already purchased the required equipment (tunnel boring machines). This would enable the JV to price its bids lower than its competitors since it already owns the necessary equipment,” said Goh, who recommends a “buy” for Gamuda shares with a fair value of RM3.94.

However, analysts also foresee that it will not be a walk in the park when the MRT projects take off.

In a note yesterday, RHB Research Institute Sdn Bhd said even if work on the MRT projects start as scheduled, “the initial progress is likely to be painfully slow due to bureaucratic hurdles”. Hence, the earnings impact from the MRT projects may take up to two years to be made, according to RHB.

The MMC-Gamuda consortium was the only Malaysian entity shortlisted for the RM7 billion MRT tunnelling project. Its global rivals include South Korea’s SK Holdings, and China’s Sinohydro Group Ltd, apart from two other bidders — one each from China and Japan. It was reported last October that these companies had three months to submit their tenders for the project.

By virtue of MMC-Gamuda being the project delivery partner of the MRT project, the consortium is deemed to have an edge over its competitors. This is because MMC-Gamuda is given the right to match the lowest rival offer for the tunnelling job under the Swiss challenge system.


This article appeared in The Edge Financial Daily, December 20, 2011.



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IGB to buy up Great Union Properties for RM277.5m

KUALA LUMPUR: IGB Corp Bhd has made a RM277.5 million cash 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 (SDL) and Chong Kim Weng.

IGB, which currently owns 50% of GUP, will pay RM101.348 million and settle the shareholder’s advance of RM176.15 million in GUP.

Based on GUP’s audited financial statements for the financial year ended Dec 31, 2010 (FY10), GUP recorded earnings before interest, depreciation and tax (Ebitda) of RM24 million while its net assets were RM116.6 million.

IGB said SDL is a subsidiary of New World Development Co Ltd, which is listed on the Hong Kong Stock Exchange. Chong is a senior partner of Jeyaratnam & Chong, a legal firm in Malaysia from which 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 million in GUP, comprising 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 million.

“The total cost of investment in GUP post-proposed acquisition will be RM503 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.


This article appeared in The Edge Financial Daily, December 20, 2011.


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Kurnia Asia applies to sell insurance unit to AmG

KUALA LUMPUR: Kurnia Asia Bhd (KAB) yesterday announced that it had submitted an application to Bank Negara Malaysia (BNM) for the approval of Minister of Finance to enter an agreement to possibly dispose of its wholly-owned subsidiary, Kurnia Insurans (M) Bhd (KIMB), to AmG Insurance Bhd.

AmG is the general insurance arm of AmAssurance Bhd and is 49%-owned by Insurance Australia Group (IAG), the largest general insurer in Australia and New Zealand.

On July 21, KAB announced that BNM had no objection for it to commence preliminary negotiations with relevant parties which had expressed interest to acquire a stake in KIMB.

The latest news of the proposed sale of KIMB comes a year after AmG Insurance discontinued acquisition discussions for MAA Insurance’s general insurance business.

In a local news report last week, it was speculated that KAB would most likely sell KIMB at around 2.5 to three times the book value of the company. The report said based on KIMB’s book value of RM720 million as of March 31, the deal would be around RM1.8 billion to RM2.2 billion.

There has been a string of M&As involving local insurers since 2009. In April 2009, BNM had liberalised the insurance sector and announced that to further strengthen the resilience and competitiveness of the insurance and takaful industry, insurance companies and takaful operators are given greater flexibility to tie up with foreign partners.

Accordingly, the foreign equity participation in insurance companies and takaful operators will be increased to a limit of up to 70%. Interestingly, it added that a higher foreign equity limit beyond 70% for insurance companies would be considered on a case-by-case basis for players which can facilitate consolidation and rationalisation of the insurance industry.

It was also noted that existing foreign insurers which participate in the process will be accorded flexibility in meeting the divestment requirement.

Last year, Jerneh Insurance Bhd was sold to US insurer ACE Ltd at 2.24 times book value, making it the highest general insurer deal after the financial crisis hit in 2008.

Berjaya Corp Bhd’s disposal of a 40% stake in Berjaya Sompo Insurance Bhd to its Japanese stakeholder this year had set a new benchmark pricing for general insurers at 3.3 times book value.

PacificMas Bhd also sold its insurance business in March to a foreign insurer, Fairfax, at 1.57 times book value. MAA Holdings Bhd announced in June a proposed disposal of its insurance business to Zurich Insurance Co Ltd at 1.35 times.

For its 3QFY12 ended Sept 30, KAB posted a net profit of RM7.27 million on revenue of RM295.06 million. This was an improvement against a net loss of RM3.75 million in the corresponding quarter last year. KAB attributed the improvement in earnings to stronger underwriting performance.


This article appeared in The Edge Financial Daily, December 20, 2011.

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YTL Cement to be taken private

KUALA LUMPUR: YTL Corp Bhd is making a voluntary share swap offer for YTL Cement Bhd at an offer price of RM4.50 per share.

The Edge had reported on Oct 17 that a corporate exercise was brewing in the YTL Group.

Under the proposed scheme, YTL Cement’s minority shareholders will be getting 3.17 YTL Corp shares for every existing YTL Cement share held.

Based on YTL Corp’s closing price of RM1.54 yesterday, the takeover offer values the group’s cement unit at RM4.88 per share, which is only a 6.12% premium over the market value.

Also, YTL Corp is offering RM2.21 for every RM1 in irredeemable convertible unsecured loan stocks (Iculs) of YTL Cement. This translates into 1.56 YTL Corp shares for each RM1 Iculs.

As at Dec 16, YTL Corp and its investment vehicle YTL Industries Bhd collectively hold 47.8% in YTL Cement.

According to some analysts, the minorities of YTL Cement seem to be getting the raw end of the deal, considering the cement manufacturer’s cash-rich balance sheet and its steady earnings growth over the past few years. But as the acquirer, YTL Corp is seen to be getting a good deal since YTL Cement is priced at a lower valuation.

“I do not think the offer is very compelling. If the consideration had been on a cash basis, it would have been much better. Furthermore, YTL Corp is virtually offering no premium,” noted an analyst from a local investment bank.

Based on YTL Cement and YTL Corp’s three-month volume weighted average moving price (VWAMP) of RM4.44 and RM1.43 respectively, the offer would have given almost no premium at 2.03%.

“You would expect a premium of at least 10%,” said the analyst who pointed out that the offer did not reflect a control premium.

A control premium is the amount an investor will pay to acquire control of a company. It is usually higher than the current market value of the company.

YTL Cement is also trading at relatively low valuations at 9.7 times price-earnings ratio (PER) and below book value at 0.97 times price-to-book (P/B) compared with its historical 10-year average PER and P/B of 10.67 times and 1.31 times respectively. The cement maker posted a net profit of RM75.8 million for its 1QFY12 ended Sept 30.

In comparison, Lafarge Malayan Cement Bhd, which made a net profit of RM71.3 million for the same period, is trading at 19.5 times PER and 1.79 times P/B.

YTL Cement’s low valuations can be attributed to the poor liquidity of the stock with the top 30 shareholders owning 86.5% of the company as at Sept 30. Some 52.8% of the company’s shares are already held by parties acting in concert.

In a statement, YTL group managing director Tan Sri Francis Yeoh said: “This transaction represents a homecoming opportunity for the shareholders of YTL Cement as it provides them with the opportunity to better maximise the value of their investments by exchanging their shares into the diversified business of YTL Corp.”

However, an analyst pointed out that, “YTL Cement’s shareholders could easily invest directly into YTL Power [Bhd], instead of having YTL Corp shares, if they had the cash and gain the exposure directly.”

YTL Power is the largest income contributor of YTL Corp, accounting for 81% of the latter’s earnings for FY11 ended June 30.

YTL Power shares are trading at 9.8 times PER and 1.43 times P/B.

In comparison, YTL Corp’s PER is much higher at 13.4 times with a P/B of 1.29 times, which makes YTL Power a much cheaper buy.

“Furthermore, investors who had gone into YTL Cement to get exposure to the construction boom will lose that direct exposure,” added the analyst.

In practice, holding companies often trade at a discount to their earnings-contributing companies because investors prefer direct exposure to their subsidiaries.

It is worth noting that YTL Cement has RM1.374 billion in cash with some RM866.2 million bank borrowings as at Sept 30.

The exercise will allow YTL Corp to gain access to YTL Cement’s net cash of RM508 million.

The extra cash in YTL Corp’s war chest will be good for the group which could take advantage of the suppressed asset valuations amidst current economic uncertainties.

Furthermore, an analyst noted that YTL Cement has not been very generous with dividend payment despite its ballooning cash pile.

According to Bloomberg, YTL Cement’s 12-month dividend yield is 2.86%, versus Lafarge’s 6.52%.

The outlook for the building materials sector is positive. Hence, it does make sense for YTL Corp to privatise YTL Cement as its shares are seen as undervalued.


This article appeared in The Edge Financial Daily, December 20, 2011.



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The River of Life beautification work for Ekovest-MRCB

KUALA LUMPUR: The project delivery partner (PDP) of the River of Life project, Ekovest-MRCB JV Sdn Bhd, will earn more than just the RM22 million fee in the coming three years, said Ekovest Bhd managing director Lim Keng Cheng.

Lim pointed out that the joint venture firm, will get better benefits as the PDP of the project than being a sub-contractor bidding for the work packages of the River of Life project. Ekovest has a 60% stake in the Ekovest-MRCB.

Speaking after the company’s AGM, Lim told the media that Ekovest-MRCB might participate in the beautification of a 10.7km portion of the Klang river, but will not take part in the river cleaning works. He said according to the agreement between Ekovest-MRCB and the federal government, the PDP is not allowed to tender for the land along the 10.7km portion of the river.

Furthermore, the joint venture firm is not permitted to bid for the river cleaning works for the 110 km of the Klang river that runs through the capital.

However, according to Lim, the agreement is silent on the beautification works of the project.

“As the PDP, our role is to coordinate the 43 government agencies to make sure the project be delivered on time, and we also have some monetary incentives, where we should look into enhancing the value of the land, the various engineering on the cleaning of the river, and ensure the KPI (key performance indicator) is met on the beautification of the river,” said Lim, who is the nephew of Datuk Lim Kang Hoo.

Lim (left) and executive director Cho Joy Leong at the press conference yesterday.

Kang Hoo is the major shareholder of Ekovest, holding a 24.61% equity stake.

In an earlier announcement to Bursa Malaysia, Ekovest said being the PDP, Ekovest-MRCB would earn a maximum fee of RM22 million, which is equivalent to 1% of the total projected works to be delivered over the three-year period.

In addition, it noted that the PDP will also enjoy “monetary incentives” with respect to the river rehabilitation and beautification works.

However, Lim declined to reveal the details of the “monetary incentives”. He only disclosed that as part of the special monetary incentives, the PDP would earn a sum by helping the government to look for buyers for the land along the riverbank.

Also, he said Ekovest-MRCB would be rewarded if the joint venture firm managed to look for bidders who could do the river beautification and rehabilitation works at the lowest costs, even at costs below the allocated budget.

For 1QFY12 ended Sept 30, Ekovest recorded a net profit of RM6.5 million compared with RM1 million in the previous corresponding period. Revenue rose to RM31.9 million from RM21.3 million previously.

For FY11 ended June 30, Ekovest posted a net profit of RM24.6 million compared with RM10.1 million the year before. However, revenue was sharply lower at RM128.2 million versus RM217.7 million for FY10.

Ekovest attributed the higher earnings to the recognition of RM20.97 million after incorporating the effects of adopting FRS 139 compared to the preceding year.

However, excluding earnings recognition under FRS 139, the company’s earnings were lower compared with the preceding year as a result of a drop in revenue.

Ekovest’s order book stands at RM230 million currently and this can keep the company busy for up to two years, while its tender book stands at around RM3 billion. Ekovest plans to develop its 11.5 acres of land in Cheras into a mixed development worth RM1.5 billion, to be located near an MRT station.

In addition, Ekovest also has 20 acres of land each in Setapak and Iskandar Malaysia.


This article appeared in The Edge Financial Daily, December 20, 2011.




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2012 CEO Outlook Series - Public Bank’s focus on organic growth

TEFD: What are your expectations for 2012, for your bank and the industry?
Teh: The Malaysian banking system is relatively insulated from the adverse impact from the weakened external environment and is expected to remain stable in 2012, underpinned by strong capitalisation, healthy liquidity position and relatively strong asset quality.

Growth in the Malaysian banking sector will be largely driven by domestic economic activities in the coming year. Loan growth should remain moderate, supported by consumer loans and accelerated implementation of the projects under the 10th Malaysia Plan and the Economic Transformation Programme. Low financing cost is expected to continue to support lending activities. Competition will continue to be intense with pressure on interest margin. Furthermore, with the implementation of the Second Financial Sector Masterplan, the Malaysian banking sector is expected to see greater dynamism and innovation.

The Public Bank group will remain entrenched in our organic growth strategy and further grow our core businesses in the consumer and small and medium enterprise [SME] lending, core customer deposits and fee-based revenue. We will continue to capitalise on our strong PB brand, extensive retail franchise, excellent customer service, and leverage on our leading market position in the residential properties financing, vehicle financing, SME financing and unit trust business to sustain our growth momentum for 2012.

While the challenging external environment could present downside risk to Malaysia’s growth prospects, we will continue to remain steadfast and prudent in our business policies and practices and manage our business efficiently in order to achieve our 2012 key business targets and the expectations of our stakeholders.

What impact, if any, do you expect from the euro crisis?

Teh: Public Bank will remain entrenched in our organic growth strategy and grow our core businesses in consumer and SME lending, core customer deposits and fee-based revenue.


The risk to global economic growth has increased following the intensification of the euro debt crisis. The weaker external environment could affect the overall growth prospects of the Malaysian economy. However, resilient domestic demand is projected to continue to support economic growth. The Malaysian banking sector, in which the Public Bank group largely operates is expected to experience moderate growth. Furthermore, the group’s banking business model, which is based on prudent banking practices, will continue to deliver long-term sustainable growth to the group and its shareholders. The group will continue to enhance its risk management framework and practices, in line with the increased complexity and globalised nature of the banking and financing businesses today.


Will Bank Negara Malaysia’s recent tightening of consumer borrowing have an impact?
The recent issuance of Guidelines on Responsible Finance is aimed at fostering a healthy and sustainable credit market. The guidelines are a pre-emptive measure to ensure stability of the financial system. It is not expected to curtail lending activities, but will increase the level of prudent banking practices by banking institutions. Furthermore, some requirements in the guidelines are not entirely new as some of the banks are already practising them.

What are your group’s plans and focus for the coming year?
The Public Bank group will remain focused on its organic growth strategies to continue to grow its retail loans, core customer deposits and fee-based businesses. In particular, the group’s lending business will continue to be supported by growth in home mortgages, hire purchase financing for passenger vehicles and retail commercial loans to SME. To further enhance its profitability, the group will continue to intensify efforts to grow fee- and transaction-based revenue by promoting sales of unit trust funds, bancassurance and wealth management products.

The group will also continue to expand its Islamic banking business by focusing on Islamic consumer financing and retail commercial financing to SME. For its funding base, the group will continue to promote core customer deposits to ensure that it continues to maintain a healthy and liquid balance sheet. Also, the group remains committed to expanding its overseas operations, particularly its Hong Kong and Cambodian operations.

To sustain its strong market position, the group will further leverage its wide distribution network, strong sales and marketing force and efficient multiple delivery channels. The group will also continue to enhance its customer relationship management to further enhance customer experience.

In addition to providing competitive, innovative and differentiated products and services, efforts to further strengthen the group’s superior service delivery standards, such as excellent customer service and fast loan processing turnaround time, will continue to be intensified. Also, the Public Bank group will remain focused on maintaining its risk management practices to ensure that it continues to maintain the best asset quality and remain vigilant due to the economic uncertainties.


This article appeared in The Edge Financial Daily, December 20, 2011.



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PNB still awaiting SC nod for management deal with S P Setia

KUALA LUMPUR: Permodalan Nasional Bhd (PNB), the country’s largest state asset manager, is still waiting for the Securities Commission’s (SC) approval of its proposed management agreement, which will be part of PNB’s takeover of S P Setia Bhd.

The proposed management agreement is between PNB, S P Setia Bhd and its chief executive and president Tan Sri Liew Kee Sin, who holds a 10.86% stake.

“We have submitted it to the SC, we are now waiting for the SC’s approval,” PNB president and CEO Tan Sri Hamad Kama Piah Che Othman told reporters after he announced the income distribution for Skim Amanah Saham Bumiputera (ASB).

To recap, in September PNB launched a takeover bid on S P Setia after the asset manager’s equity interest reached 33.16% or 590.5 million shares.

PNB offered RM3.90 a share, which was 40 sen or 11.4% higher than S P Setia’s last traded price of RM3.50 at the time. PNB also offered to buy the remaining warrants at 91 sen a warrant, nearly double the market price before the offer.

When asked whether PNB is keen on buying into Proton Holdings Bhd, Hamad Kama Piah said, “UMW [Holdings Bhd] is a PNB company, they are involved in Toyota [distribution, marketing and assembly],” he said.

UMW Holdings is the largest shareholder of Perusahaan Otomobil Kedua Sdn Bhd (Perodua) with 38% equity interest.

UMW has denied the rumour it is keen to submit a bid to take over Khazanah Nasional Bhd’s 42.7% stake in Proton.

PNB is currently the largest shareholder in UMW with a 46.6% shareholding.

PNB’s wholly-owned subsidiary Amanah Saham Nasional Bhd (ASNB) announced an income distribution of 7.65 sen per unit and a bonus of 1.15 sen per unit for ASB for FY11 ended Dec 31, 2011.

The income distribution is 0.15 sen higher than the 7.5 sen a unit dividend paid out last year. The income distribution portion will involve a total payout of RM7.04 billion, an increase of 21% over the RM5.82 billion paid out last year. The bonus portion involves a total payout of RM628.29 million.

“The performance of ASB this year is satisfactory even though the stock market was greatly influenced by the uncertainties in the eurozone and faltering US economy, especially during the last quarter of this year,” PNB chairman Tun Ahmad Sarji Abdul Hamid said.

Ahmad Sarji said ASB recorded a gross income of RM7.19 billion up to Dec 15, 2011.

Dividend income from investee companies contributed RM4.09 billion or 56.9% of the gross income. Profit from the sale of shares made up RM2.25 billion or 31.3% with the rest derived from investments in short-term instruments and other investments.

On the Warisan Merdeka project, Hamad Kama Piah said PNB had submitted the design order to the city council and will make an announcement soon when approval is obtained.

Warisan Merdeka is a 100-storey tower, touted to be the country’s tallest, initiated by PNB last year. It is estimated to cost between RM2.5 billion to RM3 billion and will have gross floor space of three million sq ft and 2.2 million sq ft of net lettable area, according to a recent news report.

PNB has set up the wholly-owned unit PNB Merdeka Ventures Sdn Bhd to undertake the project. Tengku Abdul Aziz Tengku Mahmud, from Guthrie Property Development Holding Bhd and Sime Darby Property Bhd, heads the company. He came on board early this year.


This article appeared in The Edge Financial Daily, December 20, 2011.

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Sunway-Khazanah JV acquires land in Medini Iskandar for RM745m

KUALA LUMPUR: 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 yesterday, the company said the two parcels of land adjacent to each other totalled 691 acres (276.4ha), 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 RM32 billion. As a result, Sunway will become one of the largest land holders in Iskandar Malaysia.

“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 RM13 billion,” it said.

Meanwhile, in an email reply to The Edge Financial Daily, Sunway said the parcels of land were controlled and owned by Iskandar Investment Bhd (IIB), which had chosen not to sell the land but grant leases to developers so that they can develop and sell the land to end-buyers.

Sunway said it intended to extend the lease for another 30 years from IIB for which a consideration of 10% of the purchase price would need to be paid to IIB.

The company also announced yesterday 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 two parcels of 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.

Sunway founder and chairman Tan Sri Dr Jeffrey Cheah said the acquisition was in line with its strategy to continue extending its expertise in building and managing integrated cities, as exemplified by its integrated developments in Bandar Sunway, Sunway City Ipoh, Sunway Velocity, and Sunway Damansara.

“We want to replicate this expertise in Johor and develop an iconic development which will capture the local, regional and international market segments as we have done with our integrated developments.”

“Together with Khazanah, we are confident that we will be able to successfully establish a strong foothold in the state in the near future,” he said.

Cheah said the project was expected to contribute positively to Sunway’s future earnings and cash flow by 2013.

Khazanah managing director Tan Sri Azman Mokhtar said Sunway’s participation in Iskandar Malaysia further demonstrated strong local investor confidence in the region’s continuing progress.

“Sunway has a proven track record as a successful master developer in Malaysia and this joint-venture is an indication of Khazanah’s deepening collaborative partnerships with the private sector.

“We are confident this joint-venture will further boost Medini Iskandar’s progress as a catalyst development for Iskandar Malaysia,” he said.


This article appeared in The Edge Financial Daily, December 20, 2011.



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Dawn of a golden era for BHIC

Boustead Heavy Industries Corp Bhd (Dec 19, RM3.16)
Maintain buy at RM3.15 with target price of RM4: BHIC announced last Friday that its 21%-owned associate, Boustead Naval Shipyard (BN Shipyard), has received a letter of award from the Ministry of Defence to design, construct and deliver six units of second generation patrol vessels littoral combat ships (frigate class) with a ceiling price of RM9 billion. The delivery of the first vessel is estimated in 2017 with the other vessels to be delivered every six months thereafter. Each vessel weighs 2,400 tonnes and can transport one EC275 helicopter made by Eurocopter, a subsidiary of EADS.

We had expected the contract to come by end-2011. The major surprise was the higher than expected contract value of RM9 billion as opposed to our initial forecast of RM7 billion. We believe the earnings impact on BHIC will not be confined to its associate company level given its leading role in weaponry, combat systems, vessel design, naval electronics and so on, which could be undertaken on a sub-contract basis from BN Shipyard. With the massive contract, it has expunged concerns over BHIC earnings visibility.

We maintain our earnings forecast and target price for now pending details on the contract’s implementation schedule and higher than expected ceiling. BHIC is a clear bargain, trading at only 9.5 times FY12 earnings per share despite its enviable monopolistic position in naval vessel construction and maintenance for the Royal Malaysian Navy. We expect BHIC to be re-rated following this news, which has been long overdue. — HwangDBS Vickers Research, Dec 19


This article appeared in The Edge Financial Daily, December 20, 2011.




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Will 2012 match 2011 for breweries?

Brewery sector
Maintain overweight: Breweries staged a strong performance in 2011, both in terms of earnings as well as share prices. Aggregate year-to-date 2011 net profit for Carlsberg Brewery Malaysia Bhd and Guinness Anchor Bhd (GAB) grew by 17.3% year-on-year (y-o-y), driven by higher malt liquor market (MLM) sales and stronger margins from productivity and efficiency improvements.

GAB’s share price has appreciated by 38% and Carlsberg’s by 47% year-to-date 2011 and outperformed the FBM KLCI by 43% and 52%. Valuation multiples have re-rated from 13 to 14 times to 16 to 20 times. What is more impressive is that this is the third year of strong share price performance — since January 2009, share prices of brewery stocks have soared by 178% to 211% and outperformed the KLCI by 64% to 86%.

Positive sentiment from GAB’s announcements on its commercial paper/medium term notes (CP/MTN) programme and special dividend per share (DPS) was most likely the cause of the recent sharp share price appreciation for both stocks (15% since early December 2011). While we expect some profit-taking as the year wraps up, we believe fundamentals remain sound to support further re-rating in 2012. Our view is underpinned by:

(i) Effective cost management and earnings delivery. Carlsberg and GAB hedge up to 80% of their raw material requirements in advance. Brewers benefited from lower input costs in 2011 as raw materials were locked in at 2010 prices. The impact of higher raw material prices (prices of malt barley grew by 32% y-o-y in 2011) will be felt in 2012. Brewers will be able to manage the higher costs via gradual and moderate price increases.

We expect MLM sales to be supported by higher on-trade revenue (pubs, coffeeshops and so on) during UEFA Euro 2012 taking place from June 8 to July 1, 2012.


(ii) Strong track record in dividend payout with high possibility of special dividends. Carlsberg paid out a special DPS of 43 sen in 4QFY10 to reward shareholders after the faster than expected integration of Carlsberg Singapore. Aside from the 60 sen special DPS, GAB’s CP/MTN programme also implies further capital management initiatives ahead. In a normal year, Carlsberg pays out 60% to 70% of its earnings while GAB has a higher dividend payout policy of 85% to 90%, or annual dividend yields of 3% to 5%.

(iii) A favourable domestic market for 2012. The fact that the government has not raised excise taxes for six years indicates that the authorities are cognisant of the fact that Malaysia has one of the highest beer taxes in the world. Steady share price improvements over the past three years illustrate increasingly positive sentiment on the domestic malt liquor market, a trend that we believe will likely continue. Although there have been rumours of an excise tax increase after the next general election, we believe the focus will largely be on the tobacco sector.

(iv) The upcoming festive season. Typically, share prices of brewery stocks have fared well in the first and fourth quarters of the year, supported by the Christmas season and Chinese New Year. We expect profit taking to occur around mid-1H12 (traditionally the post-festive season), but believe that in the long term, share prices will continue their upward trend.

(v) A safe haven in a volatile environment. Our house view is that 1H12 will be a relatively volatile time for the market, given the fragile credit markets in Europe, growth cycle and potential 13th general election. Investors seek safe haven in defensive yield stocks during periods of risk aversion — here, the appeal lies in the brewery sector’s resilient earnings growth and high payout ratio.

Maintain “overweight” on the brewery sector. We trim our FY12 to FY14 net profit forecasts for Carlsberg and GAB slightly by 1% to 3%, after some housekeeping and factoring in gradually increasing finance costs for GAB from the CP/MTN programme.

We also switch our valuation methodology from discount dividend model to a 10-year discounted cash flow to better reflect growth in both earnings as well as dividends. Based on terminal growth rates of 3%, our target price for Carlsberg is raised to RM10.90 (weighted average cost of capital: 9%, beta: 0.9 times, previous target price: RM9.10) while GAB’s target price is raised to RM16 (WACC: 7%, beta: 0.7 times, previous TP: RM11.92). We maintain “buy” for Carlsberg and we raise our recommendation for GAB to a “buy” (from “add”). — Affin IB Research, Dec 19


This article appeared in The Edge Financial Daily, December 20, 2011.




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Top Glove improves q-o-q

Top Glove Corp Bhd (Dec 19, RM4.48)
Maintain buy at RM4.44 and target price of RM5.26: Year-on-year earnings were 12.8% lower. Earnings before interest and tax (Ebit) margin was also lower from 8.4% to 6.8%. The lower earnings were not a surprise because the latex price averaged RM8.34 per kg compared with RM7.19 per kg in the same period the previous year.

With the slightly lower latex prices in the current quarter, quarter-on-quarter (q-o-q) Ebit has shown improvement of 45% over the previous quarter. Ebit margin has also improved to 6.8% from 4.8%.

The latex price peaked in early 2011 at RM10.90 per kg. It has since moved south and stabilised in the range of RM6.60 to RM6.80 per kg.

Despite the 1QFY12 figures coming in lower than our forecast, we are maintaining our FY12 earnings estimates at RM159.5 million as we expect earnings to improve in the next quarter given the lower latex price. Our FY13 earnings estimate is also unchanged at RM169.7 million. The company’s financial position has improved with net cash per share of 34 sen compared with the previous quarter’s 24 sen.

Target price is unchanged at RM5.26 based on an average five-year price-earnings ratio band of 20 times over CY12 earnings per share of 26.3 sen. In our previous sector update dated Nov 15, we upgraded the rubber glove sector to “overweight” and Top Glove to “buy” following the sharp decrease in latex price. Maintain “buy”. — BIMB Research, Dec 19


This article appeared in The Edge Financial Daily, December 20, 2011.




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Gamuda’s 1QFY12: Strong but turning cautious

Gamuda Bhd (Dec 19, RM3.12)
Maintain sell at RM3 with target price of RM2.94: Gamuda’s 1QFY12 results came in above house but within market expectations with net profit of RM132.3 million, accounting for 31% of house and 28% of consensus full-year estimates.

Despite flat revenue growth year-on-year in 1QFY12, the key earnings driver that surprised us on the upside was the property development division, which delivered an exceptional pre-tax profit (PBT) increase of 127% for the quarter. This is primarily attributed to new local property sales from Bandar Botanic, Horizon Hills and Jade Hills. Currently, Gamuda has RM1.2 billion of unbilled sales which are expected to tide the group over the next two years and make up for a potential shortfall in securing new sales in Malaysia and Vietnam.

The take-up rate at Celadon City, Ho Chi Minh City, has improved to 40% (98 out of 250 apartment units) from 20% as at October 2011, when the first phase was launched. However, Gamuda City Hanoi saw a 100% take-up of 72 terrace and semi-D houses in Phase 1 soft-launched recently. We opine that the difference in the performance of the mixed commercial developments is because buyers prefer landed to strata properties to hedge against property market downturn risk.

Gamuda’s construction segment PBT margin has normalised to 11.2% this quarter from 5.5% in 1QFY11, mainly due to reversal of earlier provisions made for uncertain cost of building materials required for the Ipoh-Padang Besar electrified double-tracking project (EDTP), now that the group has stockpiled sufficient steel and cement supplies for the project, due to be completed in June 2014.

Despite a strong first quarter, we foresee a challenging year ahead for the group in FY12, particularly for the Vietnam property business as buyers turn more cautious amid possible further credit tightening and the deteriorating global economic outlook arising from the European sovereign debt crisis.

Gamuda-MMC remains the frontrunner for the circa RM8 billion Sungai Buloh-Kajang (SBK) MRT tunnelling job, given its 7.5% built-in price advantage under the Swiss Challenge. The tender will close end-January and the contract award result will be announced by April or May 2012. The JV is expected to sign the project delivery partner (PDP) agreement with the government and MRT Corp in four to eight weeks to firm up the PDP fees and pain/gain formula for the entire circa RM60 billion Klang Valley MRT (KVMRT) project. The SBK MRT underground works is estimated to take five years to finish, and based on our model, we opine that earnings from this will start gaining momentum only from FY14 onwards.

With focus predominantly on the KVMRT, we think the group is unlikely to seriously consider other construction projects, although the management indicated that it will bid for a JV/subcontractor role with a Chinese contractor in the circa RM8 billion Gemas-Johor Baru EDTP project, as well as the much-delayed Langat 2 water treatment plant project.

Maintain “sell” with target price at RM2.94 based on sum-of-parts valuation. — ECM Libra Research, Dec 19


This article appeared in The Edge Financial Daily, December 20, 2011.




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OCBC said to buy into KAF-Seagroatt

Oversea-Chinese Banking Corp, Southeast Asia’s second-largest lender by assets, plans to buy a stake in the brokerage business of Malaysia’s KAF-Seagroatt & Campbell Bhd, a person with knowledge of the matter said.

Singapore-based OCBC aims to acquire 49 percent of the equities brokerage unit at a price equivalent to 1.3 to 1.4 times book value, said the person, who declined to be identified as the information is private. OCBC expects to complete talks with KAF-Seagroatt, which have been going on for more than a year, early in 2012, the person said.

The offer would follow UOB Kay-Hian Holdings Ltd’s purchase last week of Malaysian broker Innosabah Securities Bhd from Kretam Holdings Berhad. UOB Kay-Hian, a unit of Singapore- based United Overseas Bank Ltd, paid RM56.7 million for Innosabah, according to a stock exchange announcement.

KAF-Seagroatt jumped 11 percent at 3:28 p.m. local time in Kuala Lumpur trading, giving the company a market value of RM176 million. The Edge Financial Daily earlier reported that a Singapore bank is interested in buying the company’s broking business, without naming the suitor.

OCBC had no comment on the planned acquisition. KAF-Seagroatt Chairman Ahmad Kadis couldn’t be reached for comment today at his office. -- Bloomberg



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KL shares lower at mid-afternoon

KUALA LUMPUR: Share prices on Bursa Malaysia were lower at midafternoon today, tracking losses in plantation and finance stocks, dealers said.

At 2.45pm, the FBM KLCI lost 8.25 points or 0.558 per cent to 1,469.53.

The Finance Index fell 50.43 points to 13,128.57, the Plantation Index dropped 32.85 points to 7,855.22 and the Industrial Index eased 16.53 to 2,648.81.

The FBM Emas Index decreased 38.90 points to 10,078.01 but the FBM Mid 70 Index added 11.0 points to 11,091.55 while the FBM ACE Index declined 25.30 points to 4,075.47.

Losers led gainers by 381 to 286 while 273 counters were unchanged.

Turnover stood at 957.56 million shares worth RM107.308 million.
Astral Supreme lost half a sen to 21.5 sen, Utopia was unchanged at 10.5 sen and JCY gained 5.5 sen to 93.5 sen.

Among heavyweights, Maybank added two sen to RM8.24, CIMB fell nine sen to RM6.96, Sime Darby shed two sen to RM8.99 and Axiata was down two sen at RM4.98. -- BERNAMA



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YTL Cement falls below YTL Corp offer price in privatisation move

KUALA LUMPUR (Dec 20): Shares of YTL CEMENT BHD [] fell on Tuesday to below the offer price of RM4.50 made by YTL CORPORATION BHD [] in its privatisation exercise while sentiment was also dented by the overall cautious market.

At 3.37pm, YTL Cement was down 14 sen to RM4.46 while YTL Corp lost 8.0 sen to RM1.46 at 3.37pm.

The FBM KLCI fell 12.27 points to 1,465.51. Turnover was 1.20 billion shares valued at RM818.41 million. Declining stocks led advancers 440 to 285 while 267 counters were unchanged.

On Monday, YTL Corp extended a voluntary share exchange offer to YTL Cement shareholders on the basis of 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.

RHB Research Institute said as at Nov 30, YTL Corp and its related parties owned a combined 52.8% in YTL Cement.

The research house said based on current stake held by YTLCorp and its related parties, the share exchange offer would likely go unconditional as the hurdle rate is just to achieve a more than 50% stake in YTL Cement.

“We believe some minority shareholders might take this opportunity to exit due to the low liquidity issues of YTL Cement shares. At the reference price of RM4.50, YTL Cement is valued at about 6.0 times EV/EBITDA on a fully-diluted basis, lower than Lafarge current valuation of about 8.5 times EV/EBITDA.

“We do note that minority shareholders will receive the more liquid YTL Corp shares, which then provides the more attractive exit route,” it said.

RHB Research said its indicative fair value remained at RM4.75 based on 10 times fully-diluted CY2012 EPS of 47.5sen, at 4.0 times multiple discount to its one-year forward target PER for the cement sub-sector to reflect YTL Cement’s relatively low share liquidity.

“Due to the recent run-up in share price and limited upside to our fair value, we hence downgrade our recommendation on YTL Cement to Market Perform. In the near term, we believe share price of YTL Cement is more likely to track YTL Corp’s share price due to this proposed share exchange offer. At current YTL Corp’s share price of RM1.54, YTL Cement is effectively valued at RM4.88 based on the terms of the proposed share exchange offer,” it said.



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'Sunway's Iskandar entry a positive move'

Sunway Bhd's entry into Iskandar Malaysia is a positive move given the cheap price of land acquisition, prime location and existing infrastructure in place.

HwangDBS Vickers Research, in a research note today, said the land acquisition of RM25 per square foot was cheap compared with recent land sale at RM38 per square foot.

It said with an implied pricing for residential portion at RM400 per square foot and commercial land 15 to 20 per cent higher, completion of other major projects there next year would enhance Sunway's pricing power.

"Other benefits include favourable tax incentives, no Bumiputera and low-cost housing content," it said.

Meanwhile, OSK Research said Sunway's entry into Iskandar Malaysia would enable the company to build its presence in the region and tap into the abundant growth opportunities offered by the property market there.

Both research houses maintained a "buy" call on Sunway with HwangDBS Vickers maintaining its target price at RM3.30 per share while OSK Research's fair value was unchanged at RM3.31 per share. -- Bernama



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Bursa queries Astral over price jump

Bursa Malaysia Securities Bhd has issued an unusual market activity query to Astral Supreme Bhd today due to the sharp increase in the price and high volume of the company’s shares recently.

At 12.30pm, Astral's share price rose by half sen to 22.5 sen.

"Investors are advised to take note of the company’s reply to the query which would be posted on Bursa Malaysia’s website under company announcements," it said in a statement today. -- Bernama



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Astral Supreme pares gains after Bursa Securities query

KUALA LUMPUR (Dec 20): The securities of ASTRAL SUPREME BHD [] pared their gains in afternoon trade on Tuesday after Bursa Malaysia Securities queried the company over the unusual market activity.

At 3.15pm, the shares were unchanged at 22 sen with 88.88 million shares done after closing at 27 sen at midday.

The warrants were just 0.5 sen higher at 11.5 sen with 40.96 million units done. The warrants climbed to 13 sen at midday

The FBM KLCI fell 8.81 points to 1,468.97. Turnover was 1.06 billion units done valued at RM717.6 million. Losers beat gainers 408 to 286.

Bursa Securities queried Astral Supreme over the sharp increase in the price and high volume of the company’s securities recently.

The regulator had on Tuesday issued the unusual market activity query to Astral Supreme before the midday break.



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KL shares ended morning session lower

KUALA LUMPUR: Share prices on Bursa Malaysia ended the morning session lower as investors remained sidelined amidst wobbly global economic progress, dealers said.

At 12.30pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) was down 5.14 points at 1,472.64, after opening lower at 1,475.87.

Hong Leong Investment said given the persistent negative headlines from Europe and thin volume ahead of the year-end holidays, the local bourse remained volatile, albeit, with an upward bias due to window dressing activities.

The Finance Index erased 24.46 points to 13,154.54, the Plantation Index fell 27.24 points to 7,860.83 while the Industrial Index lost 17.40 points to 2,647.94.

The FTSE Bursa Malaysia Emas Index decreased 25.021 points to 10,091.89, the Ace Index declined 24.79 points to 4,075.98 but the Mid 70 Index rose 6.521 points to 11,087.07.

Losers led gainers 352 to 274 while 277 counters were unchanged.
Trading volume stood at 849.184 million shares valued at RM509.99 million.

For actives, Astral Supreme added half-a-sen to 22.5 sen, Utopia was unchanged at 10.5 sen and JCY gained four sen to 92 sen.

Among heavyweights, Maybank added two sen to RM8.24, CIMB fell one sen to RM7.04, Sime Darby shed two sen to RM8.99 and Axiata was flat at RM5.00. -- BERNAMA



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Kajang-SILK Highway breaches 50-million vehicle mark for the first time

KUALA LUMPUR (Dec 20): SILK Holdings Bhd, which operates the Kajang-Silk Highway via its unit Sistem Lingkaran Lebuhraya Kajang Sdn Bhd, hit a major milestone after the highway breached the 50 million vehicles mark for the first time on Tuesday.

In a statement Dec 20, SILK executive chairman Datuk Mohd Azlan Hashim said it was a significant achievement for the highway that has served the greater Kajang area by acting as a linkage to the existing highway networks, including PLUS, BESRAYA and Grand Saga since 2004.

More recently it added Lebuhraya Kajang Seremban (LEKAS) and South Klang Valley Expressway (SKVE) to its list of connectivity.

Mohd Azlan said the highway had seen its average daily traffic volume increase from just over 47,000 vehicles per day when it first started operations in 2004 to almost 150,000 vehicles per day today.

He said the highway had seen double-digit growth in annual traffic volumes in recent years, adding that it recorded a total traffic volume of 38.8 million vehicles in 2009 and 45.4 million vehicles in 2010.

Mohd Azlan said that in addition to increasing traffic volume, the highway had also been recognised by road users, adding that a triennial independent survey of road users released by Lembaga Lebuhraya Malaysia (LLM) in 2010 ranked the highway in the top half out of 24 tolled highways.

He said among comparable peers, the highway was deemed the most improved since the last survey, and that it was ranked in the top two by road users in terms of image and toll-plaza management.

Mohd Azlan said the survey ranking was testament to the effort and commitment of the group’s highway’s operations personnel.

“Whilst increasing traffic volume provides an indication on the highway’s increasing significance to the greater Kajang area, recognition from road users on usability and service level means just as much.

“In fact, it has become a motivation for all of the Group’s highway operations personnel to continually give the best service possible,” he said.



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KLCI drifts lower, sentiment cautious

KUALA LUMPUR (Dec 20): The FBM KLCI drifted lower on Tuesday on mild profit-taking, as Asian markets remained shaky despite edging upwards after the sharp selldown on Monday following the death of North Korean leader Kim Jong-il.

At the mid-day break, the FBM KLCI fell 5.14 points to 1,472.64. Losers led gainers by 352 to 274, while 277 counters traded unchanged. Volume was 849.18 million shares valued at RM509.99 million.

The ringgit weakened 0.25% to 3.1908 versus the US dollar; crude palm oil futures for the third month delivery fell RM14 per tonne to RM3,006, crude oil gained 42 cents per barrel to US$94.30 while gold rose US$2.80 an ounce to US$1,597.07.

At the regional markets, Japan’s Nikkei 225 edged up 0.54% to 8,341.20, Hong Kong’s Hang Seng Index rose 0.54% to 18,168.61, the Shanghai Composite Index was up 0.16% to 2,221.68, Taiwan’s Taiex added 0.43% to 6,661.99, South Korea’s Kospi rose 0.88% to 1,792.50 and Singapore’s Straits Times Index edged up 0.09% to 2,620.50.

On Bursa Malaysia, BAT was the top loser at mid-day and fell RM1.40 to RM48; PPB lost 40 sen to RM16.80, Tradewinds PLANTATION []s down 25 sen to RM4.30, Perak Corp 22 sen to RM1.12, HLFG and Petronas Gas down 18 sen each to RM11.52 and RM13.92, Inno 16 sen to RM1.34 and F&N fell 14 sen to RM17.96.

Gainers included Panasonic that rose 20 sen to RM20.02, Jaya Tiasa 11 sen to RM6.90, Dutch Lady, KAF, IGB and Tenaga up 10 sen each to RM23.40, RM1.43, RM2.43 and RM5.55 respectively, while Harvest Court was up nine sen to RM1.18.

Astral Supreme was the most actively traded counter with 66.2 million shares done. The stock edged up half a sen to 22.5 sen. Bursa Malaysia Securities Bhd later this morning had issued an unusual market activity query over the sharp increase in price and high volume of the company’s securities recently.

Other actives included Utopia, JCY, Gamuda and UEM Land warrants, and Wijaya warrants.



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Tomei Cons a 'buy', says OSK Retail

OSK Retail Research has made a "buy" call on Tomei Consolidated Bhd with a target price of 95 sen in view of the company's stable earnings growth over the years.

In a research note today, OSK said Tomei also has attractive projected financial year (FY) 2012 dividend yield of 7.1 per cent and undemanding valuation of less than three times FY2012 earnings forecast.

"The company has strong collaboration with Parkson in the local market and will be tapping Parkson's regional presence in Vietnam and China," it said.

To date, the gold and jewellery retailer has 17 retail kiosks in Vietnam and China, which were mainly located in Parkson shopping complexes, it said.

It said the group planned to open two outlets each in these countries.

"There are 11 new stores in Tomei's outlet pipeline for the local market, while it is expected to close down about three or four non-performing outlets," OSK said.

At mid-day today, the stock was flat at 77 sen. -- Bernama



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Bursa Securities queries Astral Supreme over unusual market activity

KUALA LUMPUR (Dec 20): Bursa Malaysia Securities has queried ASTRAL SUPREME BHD [] over the sharp increase in the price and high volume of the company’s securities recently.

The regulator had on Tuesday issued the unusual market activity query to Astral Supreme before the midday break.

As at 12,30pm, the share price was up five sen to 27 sen with 44.17 million shares done while the warrants added two sen to 13 sen with 26.58 million units transacted.



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Zelan active, up on getting LOI for MRR2

KUALA LUMPUR (Dec 20): ZELAN BHD [] shares were actively trade and rose on Tuesday after its 95% subsidiary Terminal Bersepadu Gombak Sdn. Bhd. (TBGSB) received a letter of intent (LOI) from the Ministry of Works to upgrade the MRR2 road and Taman Melati interchange.

At 11.35am, Zelan was up two sen to 38 sen with 9.05 million shares done.

The company said on Monday that the LOI would remain valid for 6 months subject to terms and conditions and the pricing of the proposed upgrading works, failing which the governmenthad the right to terminate the LOI without any further notice.



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KL shares open marginally lower

Share prices on Bursa Malaysia were marginally lower today reflecting the bearish sentiment in external markets, dealers said.

After 30 minutes of trading, the FBM KLCI fell 3.37 points to 1,474.41.

HwangDBS Vickers Research said US equity indices fell between 0.8 and 1.3 per cent at the closing bell, following news of North Korean ruler Kim Jong Il’s death and its effects on the future North Korean government and economic policies as his son, Kim Jong Un, begins his succession to power.

"Compounding this were lingering concerns over the Eurozone debt crisis," it added.

Back home, HwangDBS said local bourse would likely trend downwards to its immediate support level of 1,475 as the market continued to mull over North Korea's fate and progress on the International Monetary Fund Eurozone rescue scheme.

The Finance Index dropped 21.66 points to 13,157.34, the Plantation Index was up 2.09 points at 7,890.16 and the Industrial Index fell 6.12 points 2,659.22.

The FBM Emas Index was down 16.08 points to 10,100.83, the FBM Mid 70 Index added 6.16 points to 11,086.71 and the FBM ACE Index gained 5.38 points to 4,106.15.

Gainers led losers 134 to 135 while 167 counters were unchanged.
Turnover stood at 1.707 million lots worth RM64.146 million.

Among the active counters, Utopia earned one sen to RM11.5, Gamuda-CS rose three sen to nine sen and Astral Supreme added two sen to 24 sen.

Among the heavyweights, Maybank was unchanged at RM8.22, CIMB fell three sen to RM7.02 and Sime Darby erased two sen to RM8.99. -- BERNAMA



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KLCI stays in negative territory at mid-morning

KUALA LUMPUR (Dec 20): The FBM KLCI drifted lower at mid-morning on Tuesday, while key regional markets rebounded from their losses on Monday and edged up marginally higher.

At 10am, the FBM KLCI fell 3.25 points to 1,474.53.

Losers overtook gainers by 196 to 193, while 206 counters traded unchanged. Volume was 343.70 million shares valued at RM153.13 million.

Asian stocks and the euro steadied on Tuesday, but sentiment remained fragile on concerns that efforts to contain the euro zone debt crisis were faltering and tougher rules to strengthen banks' capital would further undermine their profits, according to Reuters.

Sentiment in Asia was already risk-averse, after the death of North Korea leader Kim Jong-il raised fears of regional instability and prompted investors to pull money out of riskier assets and into the safe-haven dollar on Monday, it said.

At the regional markets, Japan’s Nikkei 225 rose 0.61% to 8,346.49, Hong Kong’s Hang Seng Index added 0.83% to 18,219.62, Taiwan’s Taiex added 0.61% to 6,673.58, South Korea’s Kospi gained 0.98% to 1,794.28 and Singapore’s Straits Times Index edged up 0.21% to 2,623.67.

Maybank Investment Bank Bhd head of retail research Lee Cheng Hooi in a note to clients on Tuesday said the FBM KLCI’s resistance areas of 1,478 and 1,500 would cap market gains, whilst the weaker support areas maybe located at 1,460 and 1,476.

“Despite the US markets’ poorer tone last night, we may have a day of further windo- dressing on the local index today.

“Do liquidate on rallies (including the current window-dressing phase), as the holiday and year-end season approaches,” he said.

On Bursa Malaysia, PPB lost 32 sen to RM16.88, BAT and HLFG fell 20 sen each to RM49.20 and RM11.50, Top Glove and YTL Cement fell 11 sen each to RM4.37 and RM4.49, while Sarawak Oil Palms, Petronas Gas and KLK lost 10 sen each to RM5.40, RM14 and RM21.90 respectively.

Utopia was the most actively traded counter with 29.2 million shares done. The stock added half a sen to 11 sen.

Other actives included JCY, Zelan, Astral Supreme, and Gamuda and UEM Land warrants.

The gainers included Dutch Lady, Panasonic, KrisAssets, Petronas Dagangan, Toyo Ink, UEM Land, Faber and KAF.



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HDBSVR keeps Buy call on Sunway, TP of RM3.30

KUALA LUMPUR (Dec 20): Hwang DBS Vickers Research said Sunway Bhd’s valuations remain cheap at 8.0 times FY12F price-to-earnings and 1.0 times price-to-book value on the back of three-year EPS CAGR of 9%.

“We maintain our BUY rating and TP of RM3.30 based on a 10% discount to SOP valuation,” it said on Tuesday.

On Monday, Sunway announced a joint venture with Khazanah Nasional to acquire a 691-acre land lease in Zone F Medini Iskandar for RM745 million (or RM25 per sq ft).

“This appears cheap versus recent land deals of RM38-RM65 psf. It will initially own 38% in the JV, rising to 60% in 54 months via additional equity subscriptions,” it said.

HDBSVR said while there will be no immediate impact on Sunway’s balance sheet (net gearing of 0.5 times) and profit will be equity accounted (38%), impact will be more significant upon reaching 60% stake.

“We do not discount the possibility of a rights issue later given the magnitude of the deal. The total GDV for this 10-year project is RM12 billion with an implied pricing for the residential portion at RM400 psf and commercial at 15%-20% higher. We think this is conservative given its prime location at Medini Living, the southern most tip of Medini Node, existing infrastructure in place and just five minutes drive from the second link,” it said.



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KAF-Seagroatt up on Singapore bank interest

KAF-Seagroatt & Campbell Bhd, a Malaysian stock brokerage, rose to the highest level in more than a month in Kuala Lumpur trading after the Edge Financial Daily reported that a Singapore bank is keen on buying its stockbroking business.

The stock gained 3.8 percent to RM1.38 at 9:03 a.m. local time, set for its highest close since Nov. 9. -- Bloomberg



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Favelle advances on RM72m orders

Favelle Favco Bhd, a Malaysian crane maker, rose the most in almost a month in Kuala Lumpur trading after disclosing orders totaling RM72.3 million.

The stock gained 2.4 percent to RM1.26 at 9:13 a.m. local time, set for its biggest increase since Nov. 23. -- Bloomberg



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Mitrajaya rises on construction deal

Mitrajaya Holdings Bhd, a Malaysian builder, gained the most in two months in Kuala Lumpur trading after winning a construction contract worth RM21.9 million.

The stock added 6.4 percent to 50 sen at 9:18 a.m. local time, set for its steepest increase since Oct. 17. -- Bloomberg



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Zelan gains on securing road job

Zelan Bhd, a Malaysian builder, rose the most in two weeks in Kuala Lumpur trading after winning a road upgrading contract.

The stock gained 5.6 percent to 38 sen at 9:23 a.m. local time, set for its biggest increase since Dec. 5. -- Bloomberg



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Maybank IB Research maintains underweight on automotive sector

KUALA LUMPUR (Dec 20): Maybank IB Research is maintaining its underweight recommendation on the automotive sector.

“We retain our Hold calls on UMW and MBM while Tan Chong Motor remains a Sell,” it said on Tuesday.

Maybank Research said the sequentially weaker November's total industry volume of 48,702 units (down 9% on-month) was expected and the 11-month vehicles sales of 552,600 units (up 0.4% on-year; 92% of full-year estimates) was on track to meet its 2011 forecast.

“We expect a challenging 2012, on muted +1% to 2% on-year growth. 1Q12 sales will be weak, dampened by distribution issues post Thai flood aftermath. Margin pressure will be a likely drag to profits, on dearer component costs (stronger Yen and USD against RM) and higher A&P costs. In light of this, the sector remains an Underweight,” it said.



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Mitrajaya advances after landing biotech cluster job in Terengganu

KUALA LUMPUR (Dec 20): MITRAJAYA HOLDINGS BHD [] shares rose on Tuesday after it landed a RM21.89 million project in the herbal and bioTECHNOLOGY [] products clusters in Pasir Raja, Terengganu.

At 9.20am, Mitrajaya was up three sen to 50 sen with 2.9 million shares done.

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, and would improve its future earnings.



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Maybank IB Research: Liquidate on rallies ahead of year-end

KUALA LUMPUR (Dec 20): Maybank IB Research said while the FBM KLCI rose on late local bargain hunting and window-dressing activities on Monday, investors should liquidate on rallies.

The KLCI rose 11.56-points to close at 1,477.78, underpinned by Axiata, DiGi, Genting, YTL and CIMB.

The research house said in its technical view on Tuesday, the KLCI’s key swings were 936.63 (high) and 836.51 (low). A correction from the October 2008 low surged to the “Flat” Wave 5-move that stalled at the high of 1,597.08 in July 2011.

Maybank IB Research said however, a poor close in the last three months saw the KLCI plunge to the 1,310.53 low (on Sept 26). The current rebound phase may have stalled at 1,502.53 (on Dec 1), as the price bars fell recently into the gap-up move between Nov 30 and Dec 1.

“Despite the US markets’ poorer tone last night, we may have a day of further window dressing on the local index today.

“The market’s next swing high was located at 1,502.53 (1 Dec). As such, a softer phase has re-emerged. Do liquidate on rallies (including the current window-dressing phase), as the holiday and year end season approaches,” it said.



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