Thursday 22 December 2011

HELP 4Q net profit falls 44.6% to RM3.59m

KUALA LUMPUR (Dec 22): HELP INTERNATIONAL CORPORATION [] Bhd net profit for the fourth quarter ended Oct 31, 2011 fell 44.6% to RM3.59 million from RM6.47 million a year earlier, due to new student recruitment affected by delays in obtaining licences and approvals for operations.

Revenue for the quarter rose to RM28.44 million from RM27.33 million in 2010.

Earnings per share for the quarter fell to 2.50 sen from 4.60 sen in 2010, while net assets per share was 88 sen.

HELP proposed a final gross dividend of two sen per share of 50 sen each, amounting to RM2.13 million for the financial year ending Oct 31, 2011.

For the financial year ended Oct 31, HELP’s net profit fell 31.6% to RM13.06 million from RM19.1 million in 2010, on the back of increased revenue of RM108.06 million from RM105.2 million a year earlier.



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MRCB gets RM13.93m job to upgrade Sabah EPF building

KUALA LUMPUR (Dec 22): MALAYSIAN RESOURCES CORPORATION BHD unit MRCB Engineering Sdn Bhd has been awarded a RM13.93 million contract to upgrade the Sabah Employees Provident Fund (EPF) building.

MRCB said on Thursday that the project involved renovating and upgrading the EPF Building in Kota Kinabalu, Sabah of approximately 400,000 square feet.

MRCB said the project would be financed via internally generated funds and/or borrowings, and completed within 18 months from Jan 16, 2012.



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Market Commentary

The FBM KLCI index gained 6.48 points or 0.44% on Thursday. The Finance Index increased 0.77% to 13369.96 points, the Properties Index up 0.88% to 982.1 points and the Plantation Index rose 0.19% to 7923.25 points. The market traded within a range of 8.78 points between an intra-day high of 1491.67 and a low of 1482.89 during the session.

Actively traded stocks include TMCLIFE-WA, SANICHI, HIBISCS-WA, PROTON-CG, PROTON-CH, UTOPIA, FLONIC, UEMLAND, ENVAIR and IRCB. Trading volume decreased to 1204.40 mil shares worth RM1016.97 mil as compared to Wednesday’s 1654.60 mil shares worth RM1320.54 mil.

Leading Movers were MAYBANK (+8 sen to RM8.45), GENTING (+14 sen to RM10.76), TENAGA (+7 sen to RM5.79), CIMB (+5 sen to RM7.00) and HLBANK (+32 sen to RM10.86). Lagging Movers were YTL (-3 sen to RM1.51), YTLPOWR (-2 sen to RM1.80), IOICORP (-1 sen to RM5.14), UMW (-5 sen to RM6.45) and PETCHEM (-1 sen to RM6.19). Market breadth was negative with 290 gainers as compared to 455 losers. -- JF Apex Securities Bhd



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Muhibbah’s Australian JV gets RM1.05b job in Queensland

KUALA LUMPUR (Dec 22): Muhibbah Engineering Bhd and its Australian joint venture partner Monadelphous Group Limited have landed a RM1.05 billion (AUD330 million) job to build an approach jetty and ship berth in Queensland.

Muhibbah said on Thursday that Monadelphous Muhibbah Marine JV (MMM) had secured the contract to build the jetty and ship berth associated with the Wiggins Island Coal Export Terminal Pty Ltd’s (WICET) Project at Gladstone in Queensland.

MMM is a 50:50 joint venture between Muhibbah CONSTRUCTION [] Pty Ltd, a wholly owned subsidiary of Muhibbah in Australia and Monadelphous Engineering Pty Ltd, a wholly owned subsidiary of Monadelphous Group Ltd.

Muhibbah said the contract included the construction of offshore plant and infrastructure including a 1.8km approach jetty and transfer tower platform, wharf, wharf conveyor including the drive and take up tower, berthing and mooring dolphins, ship access platforms, jetty conveyor (including the section onshore) and transfer tower.

It said the work, which is part of stage one of the project, was scheduled to commence immediately and be completed by the first quarter of the 2014 calendar year.

Muhibbah said the contract was expected to contribute positively to its earnings for the current and future financial year.

Monadelphous Group Limited (Monadelphous) is an Australian firm listed on the Australian Securities Exchange, an engineering group providing construction, maintenance and industrial services to the resources, energy and infrastructure industry sectors.



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KLCI edges up to close higher, but broader market stays weak

KUALA LUMPUR (Dec 22): The FBM KLCI inched up to close higher on Thursday and bucked the trend among regional markets that appeared to be weighed by eurozone debt crisis jitters.

Meanwhile, European stocks rose in early trade on Thursday, reversing all of the previous session's losses, but nagging worries over the euro zone debt crisis after the European Central Bank's 3-year tender were seen capping the rebound ahead of the holiday break, according to Reuters.

The FBM KLCI rose 6.48 points to close at 1,491.46, lifted by gains at select blue chips.

But the broader market remained weak with losers beating gainers by 455 to 290, while 287 counters traded unchanged. Volume was 1.2 billion shares valued at RM1.02 billion.

At the regional markets, Japan’s Nikkei 225 fell 0.77% to 8,395.16, the Shanghai Composite Index lost 0.22% to 2,186.30, Hong Kong’s Hang Seng Index was down 0.21% 18,378.23, South Korea’s Kospi fell 0.05% to 1,847.49, Taiwan’s Taiex was flat at 6,966.35 and Singapore’s Straits Times Index shed 0.32% to 2,664.80.

On Bursa Malaysia, Nestle was the top gainer and added 42 sen to RM56.60; Hong Leong Bank rose 32 sen to RM10.86, United PLANTATION []s 30 sen to RM18.60, PPB 24 sen to RM17.10, Supermax 20 sen to RM3.68, Top Glove 19 sen to RM4.65, Shell 15 sen to RM9.30, Genting 14 sen to RM10.76 and Hartalega 13 sen to RM5.68.

Jaya Tiasa was the top loser and fell 18 sen to RM6.81; Widetech lost 14 sen to 52 sen, Petrol One 13 sen to 84 sen, Dutch Lady and KAF down 12 sen each to RM23.30 and RM1.60, while Sungei Bagan lost nine sen to RM2.78.

The actives included TMC Life, Sanichi, Hibiscus, Utopia, Flonic, UEM Land, Envair and IRCB.



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Slowdown in adex here to stay

Media Sector
Maintain underweight: November 2011 total gross advertising expenditure (adex) was up only 2% year-on-year (y-o-y) but TV adex contracted 6% y-o-y, the second consecutive month of contraction. December 2011 total gross adex may not be as strong as that of past Decembers as we understand that Europe-based companies are cutting their advertising and promotion (A&P) budgets. Maintain “underweight” on the media sector.

Newspaper adex, especially for the Malay and Chinese newspapers, grew 9% y-o-y while TV adex contracted 6% y-o-y, the second consecutive month of contraction. Radio adex’s inconsistent performance continued as it contracted 3% y-o-y, the third time this year.

November 2011 total gross adex was again little changed from the seasonally slower months of March 2011 and April 2011. Although newspaper adex eased only 1% month-on-month (m-o-m), historically November newspaper adex is usually seasonally higher m-o-m.

Ad spend by telcos plummeted by a whopping two thirds! November 2011 total gross adex growth of 2% y-o-y largely came from ad spend by government institutions which surged 40% y-o-y. That said, it was offset by a sharp contraction in ad spend by mobile service providers (telcos) which plummeted by a whopping 67% y-o-y.

Historically, December is the best month as advertisers exhaust their A&P budgets. We understand that the hitherto weak adex growth was aggravated by Europe-based companies cutting their A&P budgets. Therefore, this month’s total gross adex may not be as strong as that shown in December in previous years.


11M11 total gross adex grew 9% y-o-y, a tad above our +6.8% forecast for 2011; our forecast for 2012 is +7%. That said, we may cut our earnings estimates for Media Prima Bhd again as 11M11 TV adex grew by 5% y-o-y or below our 2011 TV adex growth assumption for Media Prima of 6.8% y-o-y.

We reiterate our view that total gross adex growth y-o-y going forward will be mid single digits in percentage terms at best. Media Prima and Media Chinese International Ltd remain as “sell” while Star Publications (M) Bhd remains a “hold” for its stable dividend yields of more than 5%. At current valuations, risk rewards ratios do not favour investors given the poor adex sentiment. — Maybank IB Research, Dec 21


This article appeared in The Edge Financial Daily, December 22, 2011.




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AMMB in cautious mode

AMMB Holdings Bhd (Dec 21, RM5.90)
Maintain hold with target price RM5.80 from RM6.70: Competition for deposits remains intense, and we expect further pressure in funding costs.

AMMB’s portfolio re-balancing appears to be biased towards a rate hike — variable rate loans were 53% of total loans as at September compared with 47% a year ago. However, this strategy to better position itself for a rising interest rate environment could work against AMMB, as we expect Bank Negara to shift to an easing mode and cut overnight policy rate by 50 basis points to 2.5% (from 3%) by end of 1Q12 to pre-empt any slowdown in the economy.

Management relayed a cautious tone post 2Q12 results. We raised operating expenses as AMMB invests and improves its core banking platform and FY12-14F cost-to-income ratio assumptions were adjusted to 42%/42%/41% (from 40%/40%/39%), in line with management’s guidance.

We also raised provisions in FY12 in anticipation of a more proactive provisioning stance in 2HFY12. Other growth levers were unchanged — FY12F loan and deposit growth targets were maintained at 8%. AMMB’s non-interest income will remain susceptible to capital market flows as more than half (52%) stem from market-related activities.

We expect fund raising activities in the small-to mid-market segment (AMMB’s captive market) to remain weak in the near term, given the cautious market outlook.

Maintain “hold”, target price cut to RM5.80 based on the Gordon Growth Model, after earnings revisions and assuming 14.5% return on equity (from 15.5%), 6% growth and 11.5% cost of equity. Our RM5.80 implies 1.4 times CY12 book value, which is equivalent to +1 standard deviation from mean. — HwangDBS Vickers Research, Dec 21


This article appeared in The Edge Financial Daily, December 22, 2011.




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UMW clinches new Iraq power contract

UMW Holdings Bhd (Dec 21, RM6.50)
Maintain underperform with fair value of RM5.80: UMW’s 60%-owned subsidiary Synergistic Generation Sdn Bhd (SGSB) has entered into a contract with Petronas Carigali Iraq (PCI) for the procurement of materials and equipment and installation and commissioning of all equipment and facilities by SGSB for the setting up of the Garraf Power Plant Phase I for Garraf Field, Republic of Iraq, at a contract value of US$29.7 million (RM94.1 million).

PCI is engaged in the development of the Garraf Contract Area, Republic of Iraq, and the operator of the Garraf Field. The contract is for 55 months from Sept 8 with an option by PCI to extend for another 12 months.

UMW’s 22.3% associate WSP Holdings Ltd also recently announced that its board had formed a special committee after receiving a non-binding proposal letter from HDS Investments to acquire all the shares in WSP in a possible going-private transaction.

HDS has had preliminary and informal communications with Expert Master Holdings (EMH, wholly-owned by Piao Longhua, WSP’s chairman, CEO and majority shareholder with a 50.9% stake) and believes that EMH and certain other significant shareholders would be interested in pursuing a transaction where a HDS special purpose vehicle would acquire all the publicly held shares of WSP for US$0.60 cash and exchange shares in the HDS SPV for shares held by EMH and certain other significant shareholders.


WSP has been incurring losses after Chinese pipe manufacturers were hit by anti-dumping and countervailing duties by the US in 2010. WSP is expected to break even by 2Q12 and we are forecasting a small profit for 2012.

It is unclear if UMW will opt for the cash or share swap option although it will probably realise a loss on its investment in WSP if it accepts US$0.60 cash (we are unable to ascertain UMW’s carrying cost of WSP).

UMW could be better off holding on to WSP given the improved outlook helped by its new facilities in Houston (100,000 tonnes per annum) and Rayong, Thailand (200,000 tonnes per annum) that have just commenced trial production.

We are leaving our forecasts unchanged.

Risks: 1) Stronger economy boosting car sales, 2) Favourable forex trends and 3) Reduced competition.

No change to our “underperform” recommendation on valuation grounds. Our sum-of-parts derived fair value estimate is RM5.80. The recent strength of the US dollar remains a worry although a higher dividend payout could keep investor interest up. — RHB Research, Dec 21


This article appeared in The Edge Financial Daily, December 22, 2011.




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QSR, KFCH not seeking other bids

KUALA LUMPUR: The boards of QSR Brands Bhd and KFC Holdings (M) Bhd (KFCH), which have accepted the joint takeover offer by Johor Corp (JCorp) and CVC Capital Partners Asia III Ltd, are not seeking any alternative bids for the sale of their assets and liabilities.

The statements by both companies to not invite alternative bids will put to rest speculations on possible counter bids for the fast food chain assets.

The latest announcements also clear doubts that the joint offers to take control of the country’s largest fried chicken chain would be able to meet the tight deadline of just seven days after the offer was made.

In separate announcements to Bursa Malaysia yesterday, both QSR and KFCH said their independent directors had agreed to accept the takeover offer made by Massive Equity Sdn Bhd (MESB).

However, both companies noted that the takeover offers are subjected to “further negotiations and mutual agreement on terms and conditions to be incorporated into the definitive sale and purchase agreement”.

MESB is a special purpose vehicle created to undertake the take-over exercise to acquire all assets and liabilities in QSR and KFCH. The shareholders of MESB are Triple Platform Sdn Bhd, a wholly-owned subsidiary of JCorp, with a 51% stake and Melati Asia Holdings Ltd, a wholly-owned unit of CVC Capital Partners, with 49%.

Currently, JCorp owns a 57.05% stake in Kulim (M) Bhd, which in turn holds 58.68% of QSR. QSR is the major shareholder of KFCH with a 50.64% equity stake.

MESB is offering RM6.80 cash per share for QSR Brands, and RM3.79 for the company’s warrants. Meanwhile, the SPV offered to buy the assets in KFCH at RM4 per share and RM1 for all its outstanding warrants.

Upon completion of the takeover exercise, both QSR and KFCH will become empty shell companies, and the two companies intend to return the bulk of the sale proceeds to shareholders through capital repayment exercises.

“The board intends to return the cash to all the shareholders and warrant holders of KFCH via a capital repayment exercise,” said KFCH.

However, some quarters said it remained to be seen how much of the cash proceeds would be returned to shareholders.

Both companies have appointed OSK Investment Bank Bhd as the main adviser for the proposed disposal and proposed capital repayment.

They have also appointed Affin Investment Bank Bhd as the independent adviser to advise the non-interested directors and non-interested shareholders and warrant holders of QSR and KFCH on the fairness and reasonableness of the proposals.

Both QSR and KFCH’s share price jumped after the announcements on the joint takeover. QSR closed at RM6.40, while KFCH finished at RM3.74 yesterday.


This article appeared in The Edge Financial Daily, December 22, 2011.




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DRB-Hicom swaps land status in RM76m deal

KUALA LUMPUR: DRB-Hicom Bhd announced yesterday it had entered into an agreement to swap the Malay Reserve (MR) status of a plot of land in Langkawi with the non-MR status of a piece of land in Kedah for RM76 million.

DRB-Hicom’s wholly owned subsidiary Rebak Island Marina Bhd (RIMB) entered into the land status-swap (LSS) agreement with Northern Gateway Free Zone Sdn Bhd (NGFZ).

This could be the first time listed companies have swapped the status between two pieces of land and the only approval required is the nod from the state authority. The swap may set a precedent for LSS deals to take place in the future.

In its announcement to Bursa Malaysia yesterday, DRB-Hicom said RIMB’s plot which has been proposed for the LSS is located on Pulau Rebak Besar in Mukim Kedawang, Langkawi and spans 333 acres.

DRB-Hicom hopes to swap the 333 acres of its Pulau Rebak Besar land’s MR status with the non-MR status of NGFZ’s 350-acre piece of agricultural land located in Bandar Kota Perdana in Mukim Sungai Laka, Kubang Pasu, Kedah.

One of the conditions imposed by the Kedah government is that the land in the state to receive MR status must be held by a Malay individual or a company which is deemed as “Malay’.

“The swapping of the land status is an allowed exercise to convert the status of MR land to non-MR land subject to the relevant conditions imposed by the Kedah government. MR land in Langkawi can only be converted into non-MR status by swapping with land located in Kubang Pasu, Kuala Muda and/or Kulim,” DRB-Hicom noted.

The consideration of RM76 million to be paid to NGFZ works out to RM5.23 psf to convert the MR land to non-MR land.

The total land area of Pulau Rebak Besar is 391.73 acres of which 44.57 acres have already been developed and another 114.84 acres is a forest park. RIMB holds a 379.78 acre plot of 60-year leasehold land which will expire on May 8, 2054 and currently has a MR status. The undeveloped portion of RIMB’s land is approximately 225.07 acres.

DRB-Hicom said the settlement amount of RM76 million had taken into consideration the incremental market value of Rebak Land by RM85.3 million arising from the redesignation of the Rebak Land as a non-MR land as well as the prospects of the high-end niche development by Rebak. The size of land to be swapped is based on the swapping ratio of 1 MR: 1.05 non-MR.

“Messrs Hakimi & Associates, the independent valuer has estimated that the market value of the redesignated Rebak Land will increase by RM85.3 million ie from RM47.8 million to RM133.1 million based on the valuation report dated Dec 8,” it said.

DRB-Hicom plans to develop villas and waterfront bungalow lots, commercial retail outlets and other required amenities on the undeveloped portion of Rebak Land.

“To attract the high net worth individuals to invest in the said developments, the MR status of Rebak Land needs to be converted into non-MR.”

The conversion of the land status via the proposed land status swap will facilitate DRB-Hicom’s/Rebak’s plan to develop high-end “boutique” mixed developments targeted mainly to attract the high net worth individuals, both foreigners and Malaysians, the company noted.

The proposed LSS deal is expected to be completed by 2Q12.


This article appeared in The Edge Financial Daily, December 22, 2011.



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MNCs to pay bumper dividends?

KUALA LUMPUR: With Guinness Anchor Bhd (GAB) recently declaring a bumper dividend following its proposed debt issuance, could other multinational corporations (MNCs) listed on Bursa Malaysia follow suit? If they do, how much dividends could they potentially pay out?

Most large MNCs listed on Bursa Malaysia currently have minimal or no gearing. Coupled with a strong and stable free cash flow, they could potentially raise debt and declare a special dividend in the near future, according to industry observers.

“With interest rates at historically low levels, it would be advantageous for MNCs to raise long-term debt in order to lower their cost of capital,” said an analyst.

“Such a move creates a double benefit for the MNC. First, it improves the cash flow of the parent company overseas and reduces country risks as the investment here is reduced. Second, a higher dividend yield will boost the stock price, and thereby increase the value of the parent’s stake in the listed entity — even as more cash is withdrawn from the company”, he explained.

He said it is not uncommon for large and matured companies to gear up and pay more dividends.

“In general, provided that their gearing is low, it optimises the use of their balance sheets and debt-to-equity levels to maintain dividend yields.”

He said yield plays such as British American Tobacco (M) Bhd (BAT) had been issuing bonds from as far back as 10 years ago for this purpose.

Among the banks, he also noted Public Bank Bhd decided on a more optimum capital structure many years back and decided to return surplus capital to shareholders. This made the stock both a growth and yield play.

To recap, GAB on Dec 12 announced a special interim dividend of 60 sen per share, which exceeded its total dividend of 54 sen in FY11 (ended June).

The special dividend, amounting to RM181.26 million, came after its Nov 25 proposal to raise debt by implementing a commercial papers (CP) and medium-term notes (MTN) programme of up to RM500 million. The CP and MTN programme will have a tenor of seven years from the date of its first issue.



As at end-September, GAB was in a net cash position of RM164 million with no borrowings. Assuming that it issues RM500 million of debt, it will have a gross and net gearing of 0.87 and 0.59 times respectively.

Like Guinness, many MNCs, such as JT International Bhd, Dutch Lady Milk Industries Bhd, Ajinomoto (M) Bhd and Panasonic Manufacturing (M) Bhd (Panamy), were in a net cash position with no debt, as of end-September.

BAT, as a result of its RM650 million MTNs, had a relatively high gross and net gearing of 1.53 and 0.78 times respectively, while Carlsberg Brewery (M) Bhd and DiGi.Com Bhd had a gross gearing of 0.16 and 0.56 times respectively.

Incidentally, these are three of the better performing all-weather stocks on Bursa Malaysia, particularly DiGi.Com, as investors look for string management and yields in a volatile market environment.

The Edge Financial Daily takes a hypothetical look at some of the MNCs trading on Bursa Malaysia and the potential bumper dividends they could pay out if they decide to gear up, assuming a 35% net gearing ratio.

As of Sept 30, Carlsberg Malaysia had cash reserves of RM82.72 million and short-term loans of RM94.21 million, translating into a net debt position of RM11.49 million.

It had a gross and net gearing of 0.16 and 0.02 times respectively, based on its shareholders’ funds of RM603.33 million as of end-September.

Assuming that it raises debt equivalent to 35% of its shareholders’ funds, it could potentially borrow up to RM211.17 million.

Given its existing marginal net debt position, it could pay out as much as RM199.68 million, or 65 sen per share.

This amount is equivalent to 7.7% of its share price, representing some 3.4 times its annual dividends.

For FY10, Carlsberg paid net dividends of 19 sen (a 99.2% payout ratio), representing a net yield of 2.3% based on its closing price of RM8.40 yesterday.

JTI had cash reserves of RM189.94 million with no borrowings, as at end-September.

With shareholders’ funds of RM436.45 million, the company could borrow up to RM152.76 million to target a 35% gearing ratio.

Combining its net cash as of end-September with the debt proceeds, it could potentially pay up to RM342.70 million over the next few years.

On a per share basis, this comes to RM1.31 per share, representing 19% of its closing price of RM6.88 yesterday as well as 5.8 times its dividends last year.

For FY10, JTI paid net dividends amounting to 22.5 sen per share, translating into a dividend yield of 3.3% based on its closing price yesterday.

With a net earnings per share (EPS) of 51.2 sen in 2010, its payout ratio was 44%.

Panamy’s cash pile stood at RM446.55 million with no borrowings as at end-September.

Raising gearing to 35% of its shareholders’ funds of RM627.28 million could provide it with RM219.55 million in debt proceeds.

On this assumption, Panamy will be able to pay up to RM666.09 million in dividends or RM10.96 per share, representing a hefty 54.7% of its closing price of RM20.02 yesterday.

This is also equivalent to about ten times last year’s dividends.

For FY11, Panamay paid net dividends of RM66.06 million or RM1.09 per share, equivalent to 80% of its net profit in that year. Its net yield was 5.4% based on its last traded price.

Ajinomoto had cash and bank balances of RM66.75 million with zero borrowings as at end-September.

With shareholders’ funds of RM233.61 million, implementing a gross gearing of 35% would suggest the company could take on RM81.76 million in debt.

This would allow it to pay dividends of up to RM148.51 million or RM2.44 per share, equivalent to a sizable 61.5% of its closing price of RM3.97 yesterday.

Put it in another way, these potential bumper dividends could be as much as 14 times its annual historical payout.

For FY11 ended March, it paid net dividends of 17.25 sen per share or RM 10.45 million, amounting to 40.5% of its net profit. This translated into a net yield 4.35% based its last traded price.

As of end-September, Dutch Lady had a cash pile of RM145.77 million and no debt. Its shareholders’ funds stood at RM254.78 million.

Assuming that it employs a 35% gross gearing, it will raise RM89.17 million in debt and will be able to pay out cash of up to RM234.95 million or RM3.67 per share.

That would represent 15.7% of the current share price and five times last year’s dividend payout.

For FY10, Dutch Lady paid net dividends amounting to 72.5 sen or RM46.4 million, amounting to about 73% of its net profit.

With a closing price of RM23.42 yesterday, its FY10 net dividends represented a yield of 3.1%.

DiGi is one of the MNCs seen raising debt to increase its dividends. That strategy has paid off well, with a spectacular share price performance and a stock valued for its dividend yield and innovative management.

It had a cash pile of RM987.15 million and total borrowings of RM726.68 million as of end-September. Its net cash stood at RM260.47 million, while its gross gearing was 0.56 times based on its shareholders’ funds of RM1.305 billion.

If DiGi issues 35% of its shareholders’ funds as debt, it can potentially raise debt of RM456.71 million. Its total borrowings (including those at end-September) will increase to RM1.184 billion, increasing its end-September gross gearing to 0.91 from 0.56 times.

But with the debt proceeds and its end-September net cash, DiGi could potentially pay out cash of up to RM717.17 million, or 9 sen per share.

That is equivalent to 2.4% of the share price of RM3.68, after undergoing a 1-into-10 share split.

Incidentally, DiGi already appears to have a plan to reward its shareholders with more dividends.

In early September, the company announced that its wholly-owned subsidiary, DiGi Telecommunications Sdn Bhd (DiGiTel) was proposing to undertake a capital management initiative whereby DiGiTel would undertake a capital distribution of approximately RM509 million to DiGi.Com.

The proposed capital distribution entailed the issuance of redeemable preference shares from DiGiTel to DiGi.Com which upon redemption would result in a cash payment of approximately RM509 million to DiGi.Com.

DiGi.Com said it intended to distribute the excess proceeds from the capital distribution to all its shareholders by the first half of FY12.


This article appeared in The Edge Financial Daily, December 22, 2011.




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Ho Hup share price plunges

PETALING JAYA: The share price of Ho Hup Construction Co Bhd tanked yesterday after the Court of Appeal has reversed the High Court’s judgment on declaring the joint development agreement (JDA) on a parcel of land near Bukit Jalil as void.

The property stock plunged 11% or eight sen to 61 sen. The counter rebounded from the low of 44 sen in March to the peak of 83.5 sen in August when Ho Hup won a courtroom battle with Malton Bhd for the ownership of its 60-acre plot of land in Bukit Jalil.

Howevever, in an announcement to Bursa Malaysia, Ho Hup said the Court of Appeal held that the JDA, Power of Attorney, and Undertaking and Endorsement (all dated March 16, 2010) did not amount to a “disposal” under Section 132C of the Act.

This implies that the JDA that Bukit Jalil Development Sdn Bhd (BJD) had entered with Pioneer Haven Sdn Bhd on the land in Bukit Jalil is still effective.

Pioneer Haven is a wholly-owned unit of Kumpulan Gapadu Sdn Bhd, which in turn is a subsidiary of Malton.

With the latest court ruling, this could mean that Ho Hup would not be able to reap the top value from the development of the tract, which is the key asset to regularise the company’s financial position.

The freehold land is perceived to be the last trump card that Ho Hup has to help it to get out of the PN17 status.

The freehold land in Bukit Jalil is perceived as the last trump card that Ho Hup has to help it get out of PN17 status.

Under the terms, Pioneer Haven would be solely responsible for the financing of the development. BJD would not have to fork out any money, and it would be entitled to at least RM265 million or 17% share of the project’s gross development value (GDV).

However, the JDA does not stipulate the time frame of the payment of BJD’s entitlement.

Ho Hup said in the announcement that it would file an appeal to the Federal Court.

When contacted by The Edge Financial Daily, executive director Derek Wong declined to comment on the ruling, but said Ho Hup is preparing its next course of action to bring the matter to the Federal Court.

He did not want to reveal the company’s next move and said Ho Hup might call for a press conference at a later date.

The latest ruling by the Court of Appeal seems to indicate that the legal battle faced by Ho Hup is far from over.

While the shareholder tussle appears to have ended after Datuk Vincent Lye’s investment vehicle Extreme System Sdn Bhd exited the company by selling its 20.59% equity stake to Formis Resources Bhd in July.

Things improved further at Ho Hup as it managed to get a RM75 million financing facility from Insas Bhd.

Insas’ unit Insas Credit & Leasing Sdn Bhd extended a RM75 million financing facility to Ho Hup’s subsidiary which would help ease the property developer’s financial stress.

In fact, Ho Hup paid off its outstanding loan with CIMB Bank Bhd amounting to RM72.6 million.

Also, Insas, which is controlled by Datuk Thong Kok Khee, has emerged as a substantial shareholder of IT-based firm Formis, which recently acquired a 20.59% equity stake in Ho Hup.

The critical part of the restructuring plan is the emergence of a new shareholder, Raymond Tan, a familiar name in the property development industry.

Tan is perceived to be the white knight, who will be injecting two property companies into Ho Hup in return for a 29.44% equity stake, being the single largest shareholder.

But the latest court judgement raises the question if Tan is still keen on Ho Hup if the company has to jointly develop the land with Malton, which will play a dominant role in the development.


This article appeared in The Edge Financial Daily, December 22, 2011.




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Hong Leong Bank in for the long haul

Hong Leong Bank Bhd (Dec 21, RM 10.54)
Maintain buy with fair value of RM12.33 from RM12.15: The group is well positioned post merger to capitalise on growth opportunities but we believe that the market may not have fully appreciated the revenue synergies that the larger organisational platform can potentially attain.

Maintain “buy” with a higher fair value of RM12.23, or 1.95 times FY12 price to book value (P/BV), based on the Gordon Growth model. This valuation is supported by 14.8% return on equity (ROE), 9.2% cost of capital (COE) and 4% long-term growth rate.

The key catalysts are: (i) a bigger-than-expected upside in revenue and operational synergy, (ii) more resilient-than-expected asset quality and (iii) stronger-than-expected growth from 20% associate Bank of Chengdu in China. The stock’s 1.6 times (P/BV) is compelling against ROE of 14% to 15%.

Management is now guiding for FY12 loan growth to come in at the lower end of its earlier 10% to 15% loan growth targets as macroeconomic uncertainties persist. The group’s recent 1Q12 quarter-on-quarter (q-o-q) loan growth grew by a relatively subdued 1.3%, or an annualised rate of just 5.2% partially weighed down by lumpy loan repayments.

As such, its earlier 10% to 15% loan growth guidance does look optimistic. We have correspondingly lowered our FY12 and FY13 loan growth targets from 13.6% and 14.1% to 9.7% and 13.1% respectively.


Current loan growth trajectory is largely driven by secured mortgage and non-residential properties but HLB intends to enhance its community SME business banking portfolio.

This is because its much larger branch network now allows the realignment of some of its branches to expand its reach to this market segment more aggressively which is also positive for longer-term lending yields.

EON Capital’s loan portfolio has been holding up stronger than expected with the merged entity’s absolute impaired loans declining 5% q-o-q in the recent quarter.

In fact, the actual additional impairment on EON Capital’s loans book as a consequence of harmonising with HLB’s more stringent impaired loan criteria only led to a RM30.9 million increase in impaired loans for EON Capital, which is small in relation to the RM673 million excess loan loss cover the group is currently sitting on.

We have consequently lowered our credit cost assumption for the group in FY12 and FY13 from 51 basis points (bps) and 42bps to 41bps and 35bps respectively. — OSK Research, Dec 21


This article appeared in The Edge Financial Daily, December 22, 2011.




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Garuda to contribute to Perisai 2012 turnover

Perisai Petroleum Teknologi Bhd, which provides offshore vessel charter services, expects the acquisition of Garuda Energy (L) Inc will start to contribute to its bottomline in the next financial year 2012.

Its managing director, Zainol Izzet Ishak, said the acquisition comes with an annual net profit guarantee of US$16.67 million for the first two years.

"Over the duration of the fixed two years of the deployment, the Mobile Offshore Production Unit (MOPU) is expected to contribute about US$50 million to Perisai's turnover," he told reporters after the company's extraordinary general meeting today.

In addition, there is an option for two further extensions of one year each, he said.

Garuda Energy is the owner of the MOPU which is contracted to work off the coast of Terengganu.

Zainol said it was a good acquisition for the company as it brought assets that already have steady revenue streams as well enhance the earnings per share of the Perisai group.

He said the acquisition of several companies this year has also come with several assets that promised a sustainable income for the group in the next one to three years.

"The acquisition exercise of Garuda Energy is expected to be completed by year-end," Zainol said.

On the outlook of the industry next year, he said, the company was optimistic on future growth especially with the Economic Transformation Programme projects expected to come onstream next year including investment in the marginal field and new oil finds. -- Bernama



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OSK Research upgrades Technology sector to Neutral

KUALA LUMPUR (Dec 22): OSK Investment Research has upgraded the TECHNOLOGY [] sector to Neutral and said that better HDD pricing could help mitigate losses from the Thailand flood.

It said that against the backdrop of the massive works in progress to restore operations following Thailand’s crippling floods, the worst could well be over.

The research said it had become less bearish on the hard-hit HDD components sector given the ongoing accelerated restoration as well as potential price hike over the immediate term, which could mitigate the earnings pressure from forgone capacity in the short term.

"Hence, we are upgrading our call on the sector to Neutral as the downside risks subside and the supply chain moves towards full restoration, possibly by 3QCY12," it said on Dec 22.

The research house upgraded Eng Teknologi and Notion Vtec from Sell to Neutral, and upped its recommendation on JCY International to Trading Buy from Sell.



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Envair Holdings active, down in afternoon session

KUALA LUMPUR (Dec 22): ENVAIR HOLDING BHD [] shares were actively traded and fell on Thursday after Carpet Raya Sdn Bhd director Deepak Jaikishan ceased to be a substantial shareholder in the loss-making company.

At 2.50pm, Envair fell four sen to 28 sen with 13.96 million shares done.

A filing with Bursa Malaysia on Dec 21 showed that Deepak had disposed six million Envair shares in the open market on Dec 14.

Deepak had emerged as a substantial shareholder in Envair after he acquired a 5.06% equity interest or six million shares in Envair in a direct deal on Dec 2.



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Malaysia property mart seen slowing down

The Malaysian property market is likely to see a gradual slowdown next year, taking into consideration the uncertainty in the global economic situation.

President of Fiabci Malaysia, Yeow Thit Sang, said the high-end residential units were already seeing a slowdown both in pricing and the take-up rate.

"There are less expatriates from multinational companies (MNCs) coming here and rentals with a yield of between six and eight per cent are no longer achievable.

"Investors in these units will have to wait longer to realise their investment. The slowdown in global economy is definitely affecting the high-end property market," he said in an interview recently.

He also saw a fallout for office space next year, saying the category was already overbuilt and the overhang felt in the market with rental falling and a slow take-up rate.

However, there is a huge demand for low-medium and medium-cost residential units below RM300,000 with most developers building high-end units to cash in on the good time.

"The government's effort in building such units in joint venture with developers will help the low-income earners to own affordable homes.

"Building such units will not be fast enough to relieve the pent up demand over the last five years," he added.

Meanwhile, Zerin Properties' chief executive officer, Previndran Singhe, said the slowdown in the property market would only last in the first quarter next year and the industry will be stable afterwards.

"Prices will remain stable, with asking prices, not values, becoming more reasonable as owners check their values to real pricing.

"At present, sentiment is down due to the eurozone financial crisis and the US double dip fears, which has been faring for a long time, but I think we are more Asia focused," he said.

If and when China goes on reverse gear, then there would have to be concerns in the market, otherwise, barring external shocks, the industry should have a stable year next year, he said.

Contrary to common belief and expectations, the property market has registered 214,764 transactions worth RM64.75 billion within the first half of 2011.

Against the first half of 2010, the volume and value of transactions recorded double-digit growth of 18.1 per cent and 29.7 per cent respectively. -- Bernama



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Hai-O gains 1.7pc on Q2 profit rise

Hai-O Enterprise Bhd gained 1.7 per cent to RM1.83, set for its highest close since Dec 2. The seller of traditional health-care products reported a 28 per cent increase in second-quarter profit to RM7.9 million (US$2.5 million), according to an exchange filing. -- Bloomberg



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KL shares slightly higher at midday

Share prices on Bursa Malaysia ended the morning session marginally firmer, but in quiet trading, despite regional markets winding down ahead of the festive holidays.

Dealers said the benchmark FBM KLCI could swing between its immediate support and resistance levels of between 1,475 and 1,500 pending the emergence of fresh market leads. At 12.30pm, the FBM KLCI ended at 1,485.92, up 0.94 of a point.

The Finance Index rose 17.29 points to 13,284.93, the Plantation Index increased 12.560 points to 7,920.02 and the Industrial Index perked 0.2 point of a point to 2,663.02. The FBM Emas Index added 7.940 points to 10,178.4, FBM Mid 70 Index gained 26.521 points to 11,190.99 but the FBM ACE Index declined 38.74 points to 4,027.65.

Losers led gainers 380 to 212 while 274 counters were unchanged. Turnover stood at 629.408 million shares worth RM397.789 million.

Of the active counters, TMC Life Sciences Bhd-Warr added 11.5 sen to 12 sen while Hibiscus Petroleum Warr 11/14 and Sanichi Tech both gave up 1.5 sen each to 50.5 sen and 14 sen, respectively.

In heavyweights, Maybank rose one sen to RM8.38, Sime Darby was unchanged at RM9.00 and CIMB firmed four sen to RM6.99. -- Bernama



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LTAT may dilute stake in Boustead

Lembaga Tabung Angkatan Tentera, a Malaysian armed forces fund, may dilute its stake in Boustead Holdings Bhd to about 50 percent in the name of good corporate governance, Group Managing Director Lodin Wok Kamaruddin told reporters in Kuala Lumpur today.

The fund, also known as LTAT, currently holds 61.2 percent of the plantations, engineering and financial services group, according to data compiled by Bloomberg. -- Bloomberg



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Boustead keen to buy Exxon assets

Boustead Holdings Bhd, a Malaysian plantations, engineering and financial services group, is still interested in buying Exxon Mobil Corp’s oil and gas assets in the Southeast Asian nation if San Miguel Corp’s planned acquisition falls through, group managing director Lodin Wok Kamaruddin said.

Exxon agreed in August to sell its entire 65 per cent stake in Esso Malaysia Bhd and some other assets in the country to the Philippine beer-maker for US$610 million. While this won Malaysian government approval last month, the transaction has yet to be concluded.

“We first had a discussion with Esso in August last year,” Lodin told reporters in Kuala Lumpur today. “If there is a review with whomever they have made an agreement with, we are open and prepared to talk to anyone.”

San Miguel agreed to acquire Exxon’s entire 65 per cent stake in Kuala Lumpur-listed Esso Malaysia for about US$206 million, or RM3.50 per share, giving it control over a chain of gasoline stations and one refinery with a capacity of 88,000 barrels a day. The Philippines’ largest food and drinks company also agreed to purchase all of unlisted ExxonMobil Malaysia Sdn and Exxon Mobil Borneo Sdn for a combined US$403 million.

The takeovers would provide the Manila-based company with downstream interests including seven fuel distribution terminals and a network of 560 service stations.

This would be San Miguel’s first overseas expansion in the oil and gas sector. It already owns Petron Corp, the largest of the Philippines’ two oil refiners. Boustead has no significant track record in the industry outside of heavy engineering.

San Miguel President Ramon Ang wasn’t immediately available for comment when text-messaged in Manila today.

Separately, Lembaga Tabung Angkatan Tentera, a Malaysian armed forces fund, may dilute its stake in Boustead to about 50 per cent in the name of good corporate governance, Lodin said. The fund currently holds 61.2 per cent, according to data compiled by Bloomberg. -- Bloomberg



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KLCI edges up marginally at mid-day, but sentiment remains jittery

KUALA LUMPUR (Dec 22): The FBM KLCI edged up marginally at the mid-day break on Thursday, while key regional markets slipped as lingering concerns over the eurozone debt crisis kept investor sentiment jittery.

Asian shares and the euro eased on Thursday as doubts remained over how much of the funds banks raised from an inaugural long-term European Central Bank tender will actually flow into struggling euro zone economies and help restore confidence, according to Reuters.

The FBM KLCI edged up 0.79 point to 1,485.77 at the mid-day break, lifted by select blue chips.

Gainers trailed losers by 212 to 380, while 274 counters traded unchanged. Volume was 629.41 million shares valued at RM397.79 million.

The ringgit weakened 0.53% to 3.1778; crude palm oil futures for the third month delivery rose RM13 per tonne to RM3,085; crude oil added 18 cents per barrel to US$98.85 while gold fell US$4.78 an ounce to US$1,610.45.

At the regional markets, Japan’s Nikkei 225 fell 0.58% to 8,411.33, Hong Kong’s Hang Seng Index lost 0.53% to 18,318.39, the Shanghai Composite Index was down 0.44% to 2,181.52, Singapore’s Straits Times Index lost 0.39% to 2,662.79, South Korea’s Kospi fell 0.23% to 1,844.20 and Taiwan’s Taeix shed 0.07% to 6,961.34.

On Bursa Malaysia, Boustead added 14 sen to RM5.80, Nestle and Top Glove added 12 sen each to RM56.30 and RM4.58, Supermax gained 11 sen to RM3.59, while PPB, Hartalega and Petronas Dagangan gained 10 sen each to RM16.96, RM5.65 and RM17.06 respectively.

Among banking stocks, Hong Leong Bank gained six sen to RM10.60, CIMB four sen to RM6.99 and Maybank one sen to RM8.38.

BAT was the top loser this morning and fell 28 sen to RM47.68; Petrol One down 13 sen to 84 sen, KAF 10 sen to RM1.62, Sungei Bagan seven sen to RM2.80, Mahajaya down 6.5 sen to 61 sen, while Utusan, Uzma, Batu Kawan, Quality Concrete and Kluang lost six sen each to 72 sen, RM1.56, RM17, RM1.24 and RM2.60 respectively.

Meanwhile, the actively traded stocks included TMC Life, Hibiscus, Sanichi, Flonic, IRCB, Envair and Rimbunan Sawit.



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Perisai Petroleum: Contribution from MOPU to be realised starting FY12

KUALA LUMPUR (Dec 22): PERISAI PETROLEUM TEKNOLOGI BHD (Perisai) expects contribution from its mobile offshore production unit (MOPU), which it acquired through Garuda Energy (L) Ltd to be realised by FY12.

The company’s managing director Zainol Izzet Ishak said on Thursday that the acquisition would be finalised by the end of this year and will start contributing to the group's bottom line from the first day of its operation as the group's asset.

"In the circular to shareholders we stated that there is a profit after tax guarantee of approximately US$16.67 million, so we expect to see the full impact from this acquisition by FY2012," Zainol said after its extraordinary general meeting (EGM) today.

Perisai bought the asset via the acquisition of Garuda Energy at USD70 million of which US$50 million is payable by cash while the remaining US$20 million would be satisfied by the issuance of 97 million shares of Perisai at a valuation of 65 sen each.

The MOPU os currently contracted by Garuda to work off the coast of Terengganu. The contracted work is for a fixed duration of two years at a charter rate of US$70,800 per day.

Over the duration of the fixed two years of the deployment, the MOPU is expected to contribute approximately USD50 million to Perisai's turnover.

In addition, the group stated that there is an option to extend the deployment of the MOPU for two further extensions of one year each.



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Sentoria gets SC nod for listing

Sentoria Group Bhd has received the approval from Securities Commission Malaysia (SC) for its listing on the Main Market of Bursa Malaysia Securities Bhd.

In a statement today, Sentoria said it expected the listing in the first quarter of 2012.

Sentoria, established since 1998, has built its expertise in the leisure and hospitality as well as the property development sectors, it said.

"The company has also carved a niche in developing affordable housing primarily in Kuantan, Pahang, with a proven track record of delivering properties ahead of time and adding development value to acquired land," it said.

Its head public and investor relations, Nasiruddin Nasrun, said the company has a unique business model through its synergistic business segments, in which it has a rising star in the leisure and hospitality sector, underlined by the cash cow business of property development.

"The listing milestone is a culmination of the group's past 10 years of enterprise building, and delivering properties and hospitality services that enrich the lives of our end-customers," he said. -- Bernama



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KL shares firmer at mid-morning

Share prices on Bursa Malaysia were firmer at mid-morning today, dealers said. They said the Asian equities would probably consolidate their gains chalked up yesterday.

Dealers said the benchmark FBM KLCI could swing between its immediate support and resistance levels of 1,475 and 1,500 respectively, pending the emergence of fresh market leads.

At 11.15am, the FBM KLCI inched up 0.06 point to 1,485.04.

The Finance Index rose 6.740 points to 13,274.38 and the Plantation Index increased 6.680 points to 7,919.56.

The Industrial Index, however, shed 0.72 point to 2,662.1. The FBM Emas Index was up 0.65 point to 10,171.11 and FBM Mid 70 Index added 15.59 points to 11,180.06. The FBM ACE Index, however, declined 33.33 points to 4,033.06.

Losers led gainers by 329 to 176 while 269 counters were unchanged. Turnover stood at 477.675 million shares worth RM248.815 million.

Of the active counters, TMC Life Sciences Bhd-Warr added 11 sen to 11.5 sen, Hibiscus Petroleum Warr 11/14 inched up two sen to 50 sen and Sanichi Tech shed 1.5 sen to 14 sen.

In heavyweights, Maybank rose one sen to RM8.38, Sime Darby was unchanged at RM9.00 and CIMB firmed five sen to RM7.00. -- Bernama



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RAM Ratings reaffirms Road Builder’s A1/P1 ratings

KUALA LUMPUR (Dec 22): RAM Ratings has reaffirmed the A1/P1 ratings of Road Builder (M) Sdn Bhd’s RM400 million Commercial Papers/Medium-Term Notes Programme (2006/2013) (CP/MTN) with a stable outlook.

RBM is principally engaged in CONSTRUCTION [] and is wholly owned by IJM CORPORATION BHD [].

In a statement Thursday, RAM Ratings said the ratings of RBM’s CP/MTN reflected the high likelihood of support from its parent, IJM, given the close connection between the 2 entities.

It said the Company was expected to be able to count on ready support (business and financial) from IJM, if needed.

“The group’s strong credit profile is underscored by its diversified earnings base as well as its established position in the construction and property sectors, in addition to its healthy financial profile,’ it said.

The rating agency said that on a stand-alone basis, RBM had established a sound track record in the local construction industry via its involvement in various civil-engineering and building projects, including tolled roads, dams, water-treatment plants, airports and PROPERTIES [].

It said that at present, the company’s healthy RM600 million order book was underpinned by the ongoing apportionment of construction projects from IJM, given that the former’s operations and human resources had been fully integrated with the IJM Group’s construction division since 2007.

RAM Ratings said as at end-March 2011, RBM’s gearing level and funds from operations debt coverage ratio stood at a comfortable 0.42 times and 0.24 times, respectively.

The Company has sufficient liquidity to cover its short-term debt obligations, it said.

Its cash balances of RM115.60 million as at end-September 2011 amply cover the last principal repayment of RM40 million on its CP/MTN in March 2012, it said.

On the other hand, RBM is exposed to the cyclical and competitive construction industry, similar to all construction companies, it said.

“Nonetheless, we maintain a positive outlook on the construction sector, underscored by the implementation of projects under Budget 2012, the 10th Malaysia Plan and the Economic Transformation Programme.

“This, in addition to IJM’s strong branding and track record, augurs well for the Group (and, in turn, RBM) in terms of order-book replenishment. We note that the Group has submitted bids for myriad contracts and had pre-qualified for various large-scale projects,” it said.



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Fajarbaru edges up on getting RM61.99m sewage treatment plant job

KUALA LUMPUR (Dec 22): Fajarbaru Builder Group Bhd shares edged up on Thursday after it secured a RM61.99 million contract to build a sewage treatment plant on Klang, Selangor.

At 11am, Fajarbaru gained half a sen to 92.5 sen with 30,000 shares traded.

It said on Wednesday that its wholly-owned unit Fajarbaru Builder Sdn Bhd had received a letter of acceptance dated Dec 20, 2011 from the Ministry of Energy, Green TECHNOLOGY [] and Water for Package of the sewage treatment plant.

Fajarbaru said the CONSTRUCTION [] period was 30 months commencing from the date of possession on Jan 11, 2012.

RHB Research Institute Sdn Bhd maintained its Market Perform call on Fajarbaru with a fair value of 91 sen.

The research house said this was the second key contract Fajarbaru had secured in FY06/12, boosting its year-to-date new contracts secured to RM228 million and outstanding construction orderbook by 11% from RM580 million to RM642 million.

“Assuming an EBIT margin of 8-10%, the contract will fetch RM5 million- RM6.2 million EBIT over the construction period of 30 months commencing Jan 2012.

“Forecasts are maintained as we have assumed Fajarbaru to secure RM250 million worth of new jobs in FY06/12,” it said.



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KL shares open softer in cautious trade

Share prices on Bursa Malaysia opened softer this morning in cautious trading, dealers said. The FBM KLCI opened 0.38 points lower at 1,484.6 and trended lower to 1,484.05 at 9.50am.

However, the Finance Index rose 0.27 points to 13,267.37, Plantation Index increased 14.69 points to 7,922 and the Industrial Index gained 1.2 points to 2,664.02. The FBM Emas Index declined 4.55 points to 10,165.91, FBM Mid 70 Index added 9.601 points to 11,174.07 and the FBM ACE Index shed 29.84 points to 4,036.55.

Losers led gainers 234 to 151 while 206 counters were unchanged. Turnover amounted to 288.949 million shares worth RM123.920 million.

Of active counters, TMC Life Sciences Bhd-Warr added 11 sen to 11.5 sen, Sanichi Tech shed one sen to 14.5 and Integrated Rubber Corp increased one sen to 17 sen. In heavyweights, Maybank rose one sen to RM8.38, Sime Darby eased one sen to RM8.99 and CIMB added three sen to RM6.98. -- Bernama



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KLCI slips at mid-morning as excitement at Asian markets fizzles out

KUALA LUMPUR (Dec 22): The FBM KLCI slipped at mid-morning on Thursday in line with the key regional markets and the lackluster close at Wall Street as the initial excitement over the inaugural long-term European Central Bank tender fizzled out, and concerns over the eurozone debt crisis re-surfaced.

At 10am, the FBM KLCI shed 0.26 point to 1.484.72.

Losers edged gainers by 248 to 153, while 204 counters traded unchanged. Volume was 298.13 million shares valued at RM128.88 million.

Asian shares and the euro eased on Thursday as doubts remained over how much of the funds banks raised from an inaugural long-term European Central Bank tender will actually flow into struggling euro zone economies and help restore confidence, according to Reuters.

At the regional markets, Japan’s Nikkei 225 was down 0.50% to 8,417.78, Hong Kong’s Hang Seng Index shed 0.30% to 18,360.63, the Shanghai Composite Index fell 0.60% to 2,177.90, Taiwan’s Taiex was down 0.11% to 6,958.53, South Korea’s Kospi was shed 0.16% to 1,845.46 and Singapore’s Straits Times Index fell 0.13% to 2,669.97.

Maybank Investment Bank Bhd head of retail research and chief chartist Lee Cheng Hooi in a note to clients on Thursday said the FBM KLCI’s resistance areas of 1,487 and 1,510 could cap market gains, whilst the obvious support areas may be located at 1,466 and 1,484.

“Due to the US markets’ mixed tone last night, we may have a quiet and benign day today,” he said.

On Bursa Malaysia, Jaya Tiasa fell nine sen to RM6.90, Uzma lost seven sen to RM1.55, Mahajaya down 6.5 sen to 61 sen, Batu Kawan and Public Bank fell six sen each to RM17 and RM13.14. while YHS, RHB Capital and MISC fell five sen each to RM1.69, RM6.96 and RM5.50 respectively.

Among the gainers, KLK added 20 sen to RM22.20, F&N and Malayan Flour Mills 18 sen each to RM18.08 and RM7.48, Top Glove 14 sen to RM4.60, while PPB, Nestle and Supermax added 12 sen each to RM16.98, RM56.30 and RM3.60.

The actives included Sanichi, IRCB, TMS, Rimbunan Sawit, Envair and Utopia.



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Higher palm oil prices buoy plantation stocks

Kretam Holdings Bhd advanced 4.2 per cent to RM2.50, set for its highest close since Dec 3, 1998. Rimbunan Sawit Bhd rose 2.3 per cent to 89 sen, and Sarawak Oil Palms Bhd climbed 1.5 per cent to RM5.48.

Palm oil futures gained 1.7 per cent to RM3,072 (US$970) a metric tonne in Malaysia yesterday, the steepest increase since Dec 5, on concern vegetable oil supplies will drop as production in Malaysia slows and dry weather threatens soyabean crops in Brazil and Argentina. -- Bloomberg



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KFC climbs after accepting buyout offer

KFC Holdings (Malaysia) Bhd climbed 1.3 per cent to RM3.79, set for its highest close since Dec 15. The fast-food restaurant operator’s independent directors backed a buyout offer from CVC Capital Partners Ltd and Johor Corp, according to an exchange filing.

KFC’s fair value was raised to RM4 ringgit from RM3.97 at OSK Holdings Bhd, its brokerage said in a report. -- Bloomberg



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Sentoria Group gets SC nod to list on Main Market

KUALA LUMPUR (Dec 22): Sentoria Group Bhd, the developer and operator of the Bukit Gambang Resort City (BGRC) in Kuantan, Pahang, has received the approval from the Securities Commission to list on the Main Market of Bursa Malaysia Securities Bhd.

In a statement Thursday, Sentoria said it was aiming to be listed in the first quarter of 2012.

Its head of public and investor relations Nasiruddin Nasrun said the company had a unique business model through its synergistic business segments.

“The listing milestone is a culmination of the group’s past 10 years of enterprise building, and delivering PROPERTIES [] and hospitality services that enrich the lives of our end-customers.

“We believe that our upcoming listing exercise would not only raise our profile nationwide, but also raise the funds necessary to bring the group to the next lap of growth,” said Nasiruddin.

Sentoria was established in 1998 and has built its expertise in the leisure and hospitality as well as the property development sectors.

BGRC is o0ne of the largest integrated resort cities in Malaysia with 547-acre land area and features multiple attractions including the Bukit Gambang Water Park and Active Academy, as well as MICE[1] facilities and 998-room accommodation for families and corporate groups.

Sentoria also develops affordable housing primarily in Kuantan. Among its completed projects are Bay Resort and Desa Hijauan within BGRC, and Taman Indera Sempurna 1 and 2.



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Malaysia, Emirates plan sukuk to fund aircraft:

Malaysian Airline System Bhd. and AirAsia X Sdn. are joining Emirates in planning sales of Islamic bonds as banks curb lending on Europe’s debt crisis.

Malaysian Air, voted Asia’s leading air carrier by World Travel Awards this year, may sell sukuk to partly fund an order for 12 billion ringgit ($3.8 billion) of aircraft due to be delivered by the end of 2014, Chief Executive Officer Ahmad Jauhari Yayha told reporters in Kuala Lumpur on Dec. 7. AirAsia X, the region’s first long-haul budget service, may issue Shariah-compliant debt to expand its fleet, CEO Azran Osman Rani said in an interview in the capital on Dec. 13.

The airlines are turning to Islamic markets on prospects European lenders will reduce credit next year due to the region’s financial crisis, according to Standard & Poor’s. Syndicated loans in Europe, the Middle East and Africa fell 31 percent to $184.4 billion this quarter from the previous three months, while global sales of sukuk rose 38 percent to $7.2 billion, according to data compiled by Bloomberg.

“Banks in Europe are less willing to provide financing for large asset purchases because of the region’s debt crisis and the need to preserve capital,” Hang Tuah Amin Tajudin, vice president of Kuala Lumpur-based OCBC Al-Amin Bank Bhd., the Islamic unit of Singapore’s Oversea-Chinese Banking Corp., said in a Dec. 19 interview. “Sukuk is a good option as there’s still pent-up demand.”

‘Diversification’ Source

Average yields on sukuk have dropped eight basis points, or 0.08 percentage point, to 4.09 percent since reaching a seven- month high of 4.17 percent on Dec. 9, according to the HSBC/NASDAQ Dubai US Dollar Sukuk Index. Yields fell 65 basis points this year, following a 252 basis-point decline in 2010.

Yields on emerging-market bonds fell five basis points this month to 6.06 percent and are down seven basis points since the end of last year, according to JPMorgan Chase & Co.’s EMBI Global Sovereign Index.

“Sukuk may not necessarily be priced lower than conventional bonds but they offer the airlines a source of diversification,” Michael Oh-Lau, head of debt markets at Kuala Lumpur-based Maybank Investment Bank Bhd., said by e-mail on Dec. 12. “The sukuk market opens doors to a wider group of investors.”

Islamic bonds are “naturally suited” to airlines given their structure and because aircraft can be used as the underlying asset to back the debt, said Badlisyah Abdul Ghani, chief executive officer of Kuala Lumpur-based CIMB Islamic Bank Bhd., a unit of CIMB Group Holdings Bhd.

Ijara Option

Sukuk can be based on a sale and lease agreement such as Ijara, where the asset is rented out and final ownership is optional. Islamic bonds can also use Murabaha, a three-party transaction where a bank buys a product on behalf of the customer and sells it back at a mark up. There is also Istisna, a contract to make an item at an agreed price with the potential buyer making periodic payments.

“More airlines can be expected to look at the Islamic market for financing,” Badlisyah said in a Dec. 12 interview. “Ijara is a perfect Islamic structure for airlines.”

Selling Shariah-compliant notes is an option for Emirates, the biggest international carrier, Chairman Sheikh Ahmed bin Saeed al Maktoum said at the Dubai Airshow on Nov. 15. Gary Chapman, president for group services, didn’t answer calls to his mobile phone this week seeking comment.

The company, based in the United Arab Emirates, sold $550 million of floating rate dollar-denominated Islamic bonds in June 2005, the world’s first sale of sukuk by an airline. The price of the notes was 98.36 on Dec. 20, compared with 94.12 at the end of last year, according to data compiled by Bloomberg.

Industry Outlook

Loans in Europe, the Middle East and Africa are poised for the worst quarter since the three months ended March 2010 and have climbed 8 percent in 2011 to $1 trillion from the year earlier period, data compiled by Bloomberg show. Global sales of Islamic bonds, which pay returns on assets to comply with Islam’s ban on interest, rose 68 percent to $26.4 billion, short of the 2007 record of $31 billion.

The deteriorating outlook for the airline industry and the clampdown on lending may encourage companies to turn to the Islamic bond market, Shukor Yusof, a Singapore-based aviation analyst at S&P, said in an interview on Dec. 20.

Profits may drop 57 percent this year and 49 percent in 2012 as Europe’s crisis hurts bookings, the International Air Transport Association said in a Dec. 7 statement. Companies may be unprofitable next year should the contagion “spiral out of control,” according to the Montreal-based agency that represents 240 airlines worldwide. Jet fuel prices have increased 14 percent this year to $119.40 per barrel.

‘Traditional Sources’

“Many airlines won’t be able to raise funds from their traditional sources,” said Shukor. “It’s natural for the Emirates and the Malaysian airlines to look at sukuk as they are from Muslim jurisdictions.”

Shariah-compliant bonds returned 6.7 percent this year, according to the HSBC/NASDAQ Dubai US Dollar Sukuk Index, while debt in developing markets rose 7.9 percent, JPMorgan Chase & Co.’s EMBI Global Composite Index shows.

The difference between average yields and the London interbank offered rate, or Libor, was little changed this month at 286 and narrowed four basis points in 2011, according to the HSBC/NASDAQ index.

The yield on Dubai’s 6.396 percent Islamic notes due in November 2014 fell two basis points to 5.89 percent yesterday and has decreased from the year’s high of 6.64 percent on Jan. 31, according to data compiled by Bloomberg. The difference in yields between Malaysia’s sukuk and the Dubai Department of Finance’s debt narrowed three basis points yesterday to 316, data compiled by Bloomberg show.

‘Variety of Funding’

The Bloomberg Malaysian Sukuk Ex-MYR Index of foreign- currency Islamic debt sold by companies in Malaysia climbed to 104.2280 on Dec. 20, the highest level since Nov. 17. The gauge has gained 5.8 percent this year.

AirAsia X, the long-haul affiliate of Asia’s biggest discount carrier AirAsia Bhd., is looking at Islamic bonds as it may add at least another 60 aircraft to an existing order of 30 Airbus SAS planes, CEO Azran said.

Emirates is building the world’s biggest fleet of wide-body jets and signed an order for $18 billion of planes on Nov. 13 with Boeing Co.

“In today’s environment, you need a variety of funding sources,” Azran said in telephone interview in Kuala Lumpur. “The situation in Europe plays a part.” -- Bloomberg



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Aeon’s land buy positive for organic growth, says Maybank IB Research

KUALA LUMPUR (Dec 22): Aeon Co (M) Bhd’s land acquisition in Kulai, Johor near the newly opened Johor Premium Outlet (JPO), is positive for its provides an organic growth to the group which already has a good reach in the Klang Valley, said Maybank IB Research.

“We maintain our forecasts and PER based RM7.90 target price (14x 2012) as earnings contribution will be beyond 2013.

“Aeon Co. is our top pick for consumer sector. Maintain Buy,” the research house said on Dec 22.

Aeon on Wednesday said it was acquiring two pieces of freehold land in Kulai for RM22.22 million as part of its strategy to expand its retail business.

The company entered into a sale and purchase agreement with Genting Property Sdn Bhd to acquire the freehold lands measuring a total 7.37ha for the purpose of operating a business of shopping centre with car parks and departmental stores cum supermarket.



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OSK Research maintains Neutral on Lion Industries, FV RM1.50

KUALA LUMPUR (Dec 22): OSK Investment Research has maintained its Neutral call on Lion Industries Corp Bhd with a fair value of RM1.50 and said it welcomed that the group was actively seeking mining assets, although the details were scarce.

The research house however added that the steel market was still fraught with challenges considering the slow execution of domestic projects and the impending consolidation of China’s steel industry, which may hurt global sentiment.

“Talks with potential investors on the sale of its steel units are still ongoing but we see an indefinite delay in the outcome.

“Thus, we keep our NEUTRAL call with a Fair Value of RM1.50 in the absence of immediate catalysts,” it said on Thursday.



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Boustead edges up in early trade after denying BHIC privatisation report

KUALA LUMPUR (Dec 22): BOUSTEAD HOLDINGS BHD [] shares advanced in early trade on Thursday after the conglomerate denied a news report that it was considering taking BOUSTEAD HEAVY INDUSTRIES CORPORATION BHD (BHIC) private.

At 9.25am, Boustead was up 15 sen to RM5.81, while BHIC was unchanged at RM3.39.

“We would like to clarify that Boustead is currently not considering any proposal to privatise Boustead Heavy Industries Corporation Bhd,” the conglomerate told Bursa Malaysia Securities Bhd in a one-paragraph statement on Wednesday.

Citing unnamed sources, it was reported by a local newspaper that Boustead was planning to take BHIC private “driven largely by the latter's seemingly cheap valuations especially in light of the recent RM9 billion vessel contract it has been awarded”.

BHIC's associate Boustead Naval Shipyard Sdn Bhd was last week awarded a contract with a ceiling of RM9 billion by the Defence Ministry to design, build and deliver six second-generation patrol vessels or Littoral combat ships.



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KLCI edges up in early trade, gains seen limited

KUALA LUMPUR (Dec 22): The FBM KLCI edged up marginally in early trade on Thursday, in line with the flat overnight close at Wall Street as global concerns over the impact of the eurozone debt crisis persists.

At 9.05am, the FBM KLCI was up 1.61 points to 1,486.59.

Gainers led losers by 90 to 62, while 100 counters traded unchanged. Volume was 61.92 million shares valued at RM20.88 million.

Among the early gainers were KLK, F&N, CBIP, BAT, PPB, Sarawak Oil Palm and Petronas Gas.



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Stocks to watch: Boustead, BHIC, DRB-Hicom, Jaya Tiasa, Fajarbaru, Aeon

KUALA LUMPUR (Dec 22): The FBM KLCI and regional markets are likely tread cautiously on Thursday, as the initial euphoria that followed the take-up of nearly 490 billion euros from the European Central Bank at its first-ever offer of three-year loans on Wednesday died out.

European shares reversed their gains and trended lower in early trade, as jitters over the actual extent of the eurozone debt crisis resurfaced.

Investor confidence at European markets appeared to fade as the heavy take-up of the ECB money highlighted the pressures upon European banks.

On Bursa Malaysia, among the stocks that could be in focus are BOUSTEAD HOLDINGS BHD [], BOUSTEAD HEAVY INDUSTRIES CORPORATION BHD (BHIC), DRB-HICOM BHD [], JAYA TIASA HOLDINGS BHD [], Fajarbaru Builder Group Bhd and Aeon Co (M) Bhd.

Boustead denied a news report that it was considering taking Boustead Heavy Industries Corporation Bhd private.

“We would like to clarify that Boustead is currently not considering any proposal to privatise Boustead Heavy Industries Corporation Bhd,” the conglomerate told Bursa Malaysia Securities Bhd in a one-paragraph statement on Wednesday.

DRB-Hicom’s unit has entered into a swap agreement to convert the status of its land in Langkawi from Malay reserve (MR) to non-Malay reserve with a view to undertake high-end boutique luxury mixed developments there.

Its unit Rebak Island Marina Bhd (Rebak) has entered into the agreement with Northern Gateway Free Zone Sdn Bhd (NGFZ) to change the designation of 333 acres of land owned by Rebak from MR to non-MR status of 350 acres freehold land in Bandar Kota Perdana, Kubang Pasu, Kedah for RM76 million cash.

Jaya Tiasa Holdings Bhd net profit for the second quarter ended Oct 31, 2011 rose 36.8% to RM41.16 million from RM30.07 million a year earlier, due mainly to increase in revenue.

Fajarbaru secured a RM61.99 million contract to build a sewage treatment plant on Klang, Selangor.

Aeon is acquiring two pieces of freehold land measuring 7.37ha in Kulai for RM22.22 million as part of its strategy to expand its retail business and operate shopping centre with car parks and departmental stores cum supermarket.



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