New substantial shareholder in Vastalux Energy

KUALA LUMPUR (Jan 3): VASTALUX ENERGY BHD [], which managed to avert the delisting of its securities, has seen the emergence of a substantial shareholder, Tengku Uzir Tengku Ubaidillah.

Tengku Uzir, who is a director of Gas Altimate Services Sdn Bhd, acquired the 16.25 million shares or a 7.89% stake from the open market on Dec 28.

His entry could be part of the corporate exercise to rescue Vasatlux, whose shares has been suspended from trading since Dec 29.

The company is in the midst of drawing up a regularisation plan.

Vastalux, which faced suspension and delisting on Jan 3, 2012, had managed to submit its appeal to Bursa Malaysia Securities on Dec 23 last year.

As it had submitted the appeal within the timeframe, the regulator had deferred the decision to remove the company’s securities pending its Appeal Committee’s decision.



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Century Logistics expects repairs to Thai centre ready by 1Q

KUALA LUMPUR (Jan 3): CENTURY LOGISTICS HOLDINGS BHD [] expects the complete repairs to its distribution centre in Rojana Industrial Park, Ayutthaya, Thailand to be ready by the first quarter of 2012.

It said on Tuesday the flood waters surrounding the distribution centre receded on Nov 28.

“Based on the preliminary assessment conducted by the loss adjustors of the insurers, there was clear indication that the 2.5 metres of floods since Oct 7, 2011 had caused some rust, corrosion and general contamination to the distribution centre,” it said.

Century Logistics added the removal of non structural debris and decontamination started on Dec 7. It added the final cleaning for the three-storey office complex and perimeter open space was underway and was expected to be completed in one week.



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Sime Darby expands into China’s vehicle market

KUALA LUMPUR (Jan 3): SIME DARBY BHD [] is expanding into China’s vehicle market with the setting up of Chongqing Bow Chuang Motor Sales & Services Co., Ltd (CQBC).

The conglomerate said on Tuesday it received the business licence approval on Dec 30.

CQBC's registered capital would be 35 million renminbi (RM17.57 million) and held by Sime Darby’s unit B.M.W. Concessionaires (H.K.) Ltd.

It added CQBC would be involved in the display of vehicles, provision of technical consultancy and marketing consultancy services for motor vehicles, sales of parts of vehicles and motorcycles.



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Maybank given until June to sell down stake in BII

KUALA LUMPUR (Jan 3): MALAYAN BANKING BHD [] has been given a further extension until June 1, 2012 to sell down its stake in PT Bank Internasional Indonesia Tbk (BII).

Maybank said on Tuesday it had received a letter, dated Dec 27, from Indonesia’s Badan Pengawas Pasar Modal dan Lembaga Keuangan (Bapepam) where the latter had given it more time to undertake the corporate exercise.

The corporate exercise is to fulfill the mandatory sell-down requirement for BII, after several extensions.

Maybank owns 97.5% of BII which it had acquired in 2008 amid much criticism that it had paid too much for the Indonesian bank.



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Esthetics rights issue undersubscribed by 28%

KUALA LUMPUR (Jan 3): ESTHETICS INTERNATIONAL GROUP [] Bhd’s rights issue of 52.80 million new shares and 52.80 million free detachable warrants were undersubscribed by 28%.

The rights issue was on the basis of two rights shares and two warrants for every five shares held as at Dec 6, 2011 at an issue price of 50 sen per share.

Esthetics said at the close of acceptance and payment of the rights issue at 5pm on Dec 28, the total valid acceptances and total valid excess applications for the rights issue were 38.016 million rights shares, which was a subscription rate of 72%. Hence, 14.78 million rights shares of 28% were undersubscribed.

“In view that the rights shares with warrants have not been fully subscribed for, the board has resolved to allot the rights shares with warrants to all applicants who have applied for the excess rights shares with warrants.

“The undersubscribed rights shares with warrants will be subscribed by Esthetics’ major shareholders namely, Providence Capital Sdn Bhd and Gambir Capital Sdn Bhd pursuant to their undertakings as stated in the abridged prospectus dated Dec 6, 2011,” it said.



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Market Commentary

The FBM KLCI index lost 17.19 points or 1.12% on Tuesday. The Finance Index fell 1.76% to 13461.23 points, the Properties Index up 0.55% to 1005.22 points and the Plantation Index rose 0.68% to 8218.44 points. The market traded within a range of 11.63 points between an intra-day high of 1523.71 and a low of 1512.08 during the session.

Actively traded stocks include HIBISCS-WA, MAS-CD, MAXBIZ, XDL, JCY-CD, HIBISCS, MAS-CC, SANICHI, MAS-CE and DBE. Trading volume increased to 1604.56 mil shares worth RM1406.53 mil as compared to Friday’s 1329.42 mil shares worth RM1527.91 mil.

Leading Movers were GENTING (+24 sen to RM11.24), TENAGA (+5 sen to RM5.95), KLK (+30 sen to RM23.00), YTLPOWR (+5 sen to RM1.83) and GENM (+4 sen to RM3.87). Lagging Movers were MAYBANK (-24 sen to RM8.34), CIMB (-20 sen to RM7.24), AXIATA (-14 sen to RM5.00), PBBANK (-22 sen to RM13.16) and TM (-16 sen to RM4.80). Market breadth was positive with 446 gainers as compared to 325 losers. -- JF Apex Securities Bhd



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KL shares close lower

Shares of the following companies had unusual moves in Malaysia trading. Stock symbols are in parentheses and prices are as of the close in Kuala Lumpur.

The FTSE Bursa Malaysia KLCI Index fell 1.1 per cent to 1,513.54. The decline is the most since Nov. 25, snapping a seven-day, 4.5 per cent rally.

Boustead Holdings Bhd, a plantation, property and heavy industries group, added 2.6 per cent to RM5.93, its highest close since July 13. Its unit MHS Aviation Bhd, which provides air transport services to the oil and gas industry, agreed to buy 16 aircraft for RM586.2 million from DRIR Management Sdn Bhd and DRIR Rotor Sdn Bhd, according to a stock-exchange filing.

Cypark Resources Bhd, an environmental and landscaping services provider, lost 1.4 per cent to RM1.43, the biggest slide since Dec. 16. Fourth-quarter net income fell 22 per cent from a year earlier to RM4.1 million, it said in a statement.

Malaysian Airline System Bhd, the national carrier, jumped 13 percent to RM1.47, its largest gain since October 2007. The airline hired Hugh Dunleavy of WestJet Airlines to head the carrier’s network, alliance, strategy and planning unit, and Shihaj Kutty to lead revenue management as part of a new management structure, it said in a statement.

Proton Holdings Bhd, the national carmaker, rose 1.7 per cent to RM4.90, its highest since Dec. 14, 2010. General Motors Co may buy as much as 50 per cent of Proton’s stake in an auto plant in Tanjung Malim for up to RM800 million, the Edge weekly newspaper reported, citing people it didn’t identify. Proton Managing Director Syed Zainal Abidin Syed Mohamed Tahir couldn’t immediately return calls seeking comment.

Proton was also upgraded to “trading buy” from “neutral” at CIMB Group Holdings Bhd, which raised its share- price estimate to RM5.45 from RM4.35. -- Bloomberg



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KLCI starts 2012 in negative territory as rally fizzles out

KUALA LUMPUR (Jan 3): The FBM KLCI fell into negative territory on the first trading day of 2012 as the rally fizzled out and profit taking activities chipped off its gains made during the final week of 2011.

The 30-stock index fell 1.12% or 17.19 points to 1,513.54, weighed by losses at banking and key blue chips.

The broader market sentiment however was mixed with gainers leading losers by 446 to 325, while 278 counters traded unchanged. Volume was 1.6 billion shares valued at RM1.41 billion.

Meanwhile, better-than-expected data from China's giant manufacturing sector boosted global stocks and the euro on Tuesday and pushed safe-haven bets like German bonds lower, according to Reuters.

Europe's debt crisis still clouds the outlook ahead of a daunting first quarter of borrowing which is expected to push the euro lower and undermine demand for the region's lower-rated sovereigns, it said.

Signs of improved growth in the United States may also cool any speculation about another round of money-printing by the Federal Reserve, improving the outlook for the dollar, it said.

At the regional markets, Hong Kong’s Hang Seng Index jumped 2.4% to 18,877.41, South Korea’s Kospi rose 2.69% to 1,875.41, Taiwan’s Taiex gained 1.46% to 7,053.38 and Singapore’s Straits Times Index added 1.59% to 2,688.36.

The China and Japan markets were closed today for holidays.

Banking stocks were among the major losers, with Maybank falling 24 sen to RM8.34, Public Bank down 22 sen to RM13.16, CIMB 20 sen to RM7.24, RHB Capital 17 sen to RM7.31, AMMB 15 sen to RM5.80 and Hong Leong Bank 14 sen to RM10.76.

Other losers included BAT that fell 48 sen to RM49.44, Petronas Dagangan 36 sen to RM17.44, Petronas Gas 30 sen to RM14.90, Nestle 20 sen to RM56, while JT International and PPB fell 18 sen each to RM7.21 and RM16.98.

Gainers included KLK that added 30 sen to RM23, Y&G 25 sen to RM1, Genting 24 sen to RM11.24, Hibiscus 22.5 sen to RM1.17, Glenealy, Toyo Ink, IGB and SOP up 20 sen each to RM6.22, RM1.80, RM2.66 and RM5.79, while KPower added 19.5 sen to 47 sen.

Meanwhile, the actives included Hibiscus, Maxbiz, XDL, JCY, Sanichi and DBE Gurney.



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Maxis continues to invest prudently in 2012

TEFD: What is the outlook for the telecom industry for 2012?
Sandip: Overall growth in 2011 had been steady for the telecommunications industry at about 4% in the first three quarters of last year. Though we are seeing a maturing voice business, the telecommunications industry is moving fast into its next phase, largely driven by demand for broadband services.

As we move into 2012, we believe the overall demand from the consumer segment would remain relatively stable as the industry has continued to reinvent itself beyond voice business and is a surrogate enabler for other businesses and services. At the macro level, the Economic Transformation Programme, designed to spur growth across many industries by harnessing telecom infrastructure effectively, certainly augurs well for the telecommunications industry as a whole.

Having said that, the consumption for telecom services which is sensitive to the health of the economy could potentially face challenges in 2012, particularly with the smaller businesses and those at the bottom of the pyramid.

We expect to continue to invest prudently in networks to keep delivering the quality of services that customers expect from
our brand.

Will spending in the telecom industry increase next year?
As networks approach low-yielding rural geographies, we foresee operators becoming partial to sharing more infrastructure. This will help conserve excessive capital deployment while rationalising industry spends. Network sharing will also provide the insurance for marginal future revenues until such time as new businesses mature. On our part, we will continue to strengthen and modernise our networks while looking to build on the extensive passive infrastructure sharing we are already undertaking.

We expect to continue to invest prudently in networks to keep delivering the quality of services that customers expect from our brand. In October last year we took a major step in offering our 3G HSPA+ network to U Mobile, the first of its kind in Malaysia.

Besides monetising our network and bringing forward our return on capital expenditures, it also ushers in a new era of cooperation with competition by which we conserve capital resources which in turn helps us not duplicate infrastructure expenditure at the national level. These savings can be deployed for further enhancing customer service.

Can you comment on data explosion in the coming years? Can the network handle the surge in data traffic?
Yes, explosive growth in data traffic on a telecommunications network is not unique to Malaysia; it is a common experience in most major networks globally driven by adoption of devices and applications (such as smartphones and streaming services) that place significant demands on the network.

At Maxis, we do take into account in our planning process the behavioural change in our customer base by increasing capacity and adopting new technologies where and when needed. It is a moving target but we are up to it. Malaysia is a high Internet usage country.

It is particularly satisfying for us that our investment in high speed networks, considered the best in the country, supported by our strong range of content offerings, are enriching our customers’ lives. They are also underlying our thrust on data revenues which are beginning to compensate for voice sluggishness.



This article appeared in The Edge Financial Daily, January 3, 2012.




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Latex glove makers to bounce back

KUALA LUMPUR: Malaysia’s largest latex glove makers, many of them world leaders, had a tough 2011 on many fronts, as most experienced lower on-year profits and margins. However, analysts say their fortunes are improving going into 2012 as the emerging threat of bird flu in China and Hong Kong may attract investor interest to these counters.

Last Saturday’s death of a man in China from bird flu or influenza H5N1 — the reported human case in the country in 18 months — has put health authorities in the region on alert although the virus does not spread from person to person. In December, Hong Kong raised the city’s bird flu alert level to “serious” and culled thousands of chickens after three birds tested positive for the H5N1 virus strain.

Back in 2009, the H1N1 pandemic led to surge in demand for gloves which led to overstocking by healthcare providers and major distributors, subsequently contributing to a challenging operating environment for glove makers in 2011.

According to TA Research, a 1% drop in latex prices could lead to a 4% to 5% increase in net profit for Supermax and Top Glove.

While it is unclear how serious a threat H5N1 is at this juncture, other factors are looking up for latex glove makers.

For one, the US dollar — the currency glove-makers are paid in — have appreciated versus the ringgit from their lows of around the 2.90-levels in 2011 to about 3.18 now. TA Securities, for instance, calculated that a 1% appreciation in the greenback could work out to some 2% to 3% higher earnings for Top Glove Corp Bhd and Supermax Group Bhd.

Hon Seow Mee, an analyst with HwangDBS Vickers Research, who earlier in predicting the rout for glove makers in 2011, sees the stronger greenback boosting revenues. “Our sensitivity analysis shows that every 1% increase in US dollar versus the ringgit could lift earnings by around 5%,” Hon wrote in a note dated Dec 20.

Nonetheless, given the volatility in currency trends, she pointed out that glove makers are likely to hedge US dollar exposure, something that could result in wide fluctuations in translation gains or losses.

Whatever the case, the lower cost of latex is definitely a plus point for glove makers like Top Glove and Supermax which sell more gloves made of natural rubber than synthetic (nitrile) rubber, analysts said. Latex — which suddenly spiked from an average of RM3.30 per kg end-2009 to never-before-seen levels of RM10.60 per kg in February 2011 — accounts for 60% to 70% of production cost.

Prices had since declined by 37% to average around RM6.70 per kg in December 2011. The expected slower demand from Chinese automakers in 2012 means latex prices may continue to ease or stabilise at current levels, analysts said.

“China’s auto market has slowed down and tyres use up 70% of global natural rubber. A lower demand from the tyre industry will lead to excess capacity in the industry,” Jason Yap, an OSK Research analyst who tracks the rubber glove sector, told The Edge Financial Daily recently.

He expects latex prices to be less volatile in 2012. “As the European market is still uncertain, there will be less speculative elements on the commodity side,” Yap said, forecasting prices to stay around RM6 to RM7 per kg this year and over the longer term.

One factor to watch is how latex prices perform ahead of the low production “wintering” season between February and April, analysts said.

According to TA Research, a 1% drop in latex prices could lead to a 4% to 5% increase in net profit for Supermax and Top Glove. To be sure, actual numbers may differ given the impact of other factors like demand as well as product mix.

Nitrile currently accounts for 33% and 17% of Supermax and Top Glove’s production mix respectively, according to a recent report by TA Securities. New glove production lines are able to switch between producing nitrile and latex gloves, officials at both companies have said.

Conversely, synthetic rubber gloves make up 80% of production of Hartalega Holdings Bhd, the world’s largest nitrile glove maker, which did much better than its peers in 2011. While the price of nitrile, a byproduct of crude oil, too has declined from its peak in mid-2011, the decline is smaller than that of latex, analysts said. Crude oil is still near US$100 (RM317) levels.

Latex prices, on the other hand, may slide further than the price of hard rubber, which is supported by the Thai-government. Thailand’s floor price of US$3 per kg for hard rubber implies a floor price of roughly RM5.70 for latex, which is 40% water, OSK’s Yap estimated.

He also sees latex glove players benefiting from the production of thinner gloves, which cost less to produce and had gained acceptance as customers searched for cheaper alternatives when latex prices spiked in 2011.

Given these factors, analysts think latex glove players have a greater chance of better growth in 2012 versus nitrile glove-makers. TA Securities, for instance, recently wrote that “2012 could see a glut of nitrile gloves” given that manufacturers here and in China had ramped up production when demand was strong.

While a rise in nitrile prices is less of a worry, there is concern over potential competition from rivals in China, something that would put pressure on pricing and margins. According to Yap, the Chinese government is also offering rebates to its nation’s glove-makers, which allows them to undercut competitors.

Even so, analysts do not see the current leading nitrile glove player, Hartalega, faring badly in 2012.

“I don’t believe Hartalega will be significantly affected. Competition will be there but because of its high technology, it actually produces gloves targeting the high-end market, which I think Chinese [competitors] may take some time to penetrate,” said Yap.

Hartalega has 11 “buys”, one “hold” and zero “sell”, according to Bloomberg. With an RM8.44 price target, CIMB Research is the most bullish, while RHB Research is the least with a RM6.06 valuation. Hartalega closed at RM5.84 on Dec 30.

Kossan, on the other hand, has 11 “buys” and five “holds” with target prices ranging between Nomura Research’s RM2.51 and OSK’s RM5. It closed at RM3.25 on Dec 30, up 2.85% for the year.

Is consensus behind the curve on Top Glove, or have prices run ahead of fundamentals?
While Top Glove has only five analysts calling it a “buy” versus seven “hold” and 10 “sells”, its stock price had continued to appreciate to reach RM5 on Dec 30. That’s ahead of 13 of the 17 price targets available on Bloomberg.

For Supermax, OSK is the most bullish of six analysts with a “buy”, valuing it at RM5.50. Kenanga Research has the lowest price target of RM2.94, with a “hold” recommendation.



This article appeared in The Edge Financial Daily, January 3, 2012.



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Market may see profit-taking activities

KUALA LUMPUR: The local bourse may see some investors taking profit after the recent rally over the past straight seven days, which pushed the FBM KLCI to close the year on a positive note last Friday.

Window-dressing activities saw the KLCI surging more than 45 points to end 2011 at 1,530.7 and recording a year-to-date gain of 0.78%, outperforming the key regional markets which posted double-digit losses.

Total market capitalisation increased by RM11.38 billion over the same period to RM1.28 trillion on Dec 30.

Stocks which could see trading interest this week are those whose dividends will go ex and companies with fresh corporate news and thematic plays.

Among the stocks whose dividends will go ex today are Imaspro Corp Bhd’s first and final single-tier dividend of 3.5 sen and Chin Teck Plantations Bhd’s interim dividend of 16 sen.

Konsortium Logistik Bhd’s first interim (tax exempt) dividend of eight sen and special dividend of 37.7 sen will also go ex today.

RHB Research Institute has Multi-Purpose Holdings Bhd (MPHB) as its top pick for the numbers forecast operator (NFO) sub-sector. Its fair value is RM3.10 per share while price-to-earnings is only 12.3 times for 2012.

“We believe one of the main rerating catalysts for the stock would be the disposal of more of its non-core assets, which will put MPHB on a more even footing with Berjaya Sports Toto,” it said.

Other stocks in focus are MNRB Holdings Bhd, Malaysian Airline System Bhd (MAS), Cypark Resources Bhd, SMR Technologies Bhd, VS Industry Bhd, Silver Bird Group Bhd and JAKS Resources Bhd.

Malaysian Rating Corp Bhd (MARC) lowered its rating on MNRB’s RM200 million Islamic medium term notes to A+ IS from AA- IS after the reinsurer suffered two consecutive years of losses and thin cash flow coverage measures.

Last Friday, MAS unveiled its new management structure which included several new business units, the entry of two senior aviation experts and the departure of several top officials.

The focus will be on the long-haul business, with its group CEO Ahmad Jauhari Yahya taking on the role as CEO of long-haul. His deputy, Mohammed Rashdan Mohd Yusof, who is CEO of short-haul, will head the short-haul, group finance, aircraft finance and management, and in the interim helm commercial operations.

Cypark’s earnings fell 21.5% to RM4.11 million in the fourth quarter ended Oct 31 from RM5.24 million a year ago due to lower profit margins than the previous quarter.

SMR’s unit SMR HR Group Sdn Bhd has secured a RM14 million contract from the Human Resources Ministry to implement a trainining programme.

VS Industry’s earnings fell 10.9% to RM11.59 million in the first quarter ended Oct 31 from RM13.01 million a year ago due to stiffer competition and losses from its China associate.

Silver Bird called off its proposed placement exercise and a subscription commitment of up to RM100 million with GEM Global Yield Fund. It had to abort the proposals as Bursa Malaysia Securities Bhd rejected its application for a waiver from complying with all the requirements to undertake back-to-back placements.

JAKS posted net losses of RM25.13 million in the fourth quarter ended Oct 31 from a net profit of RM1.19 million a year ago due to goodwill impairment adjustment of RM25.9 million.

For the financial year ended Oct 31, it posted net losses of RM22.89 million compared to a net profit of RM2.28 million in the previous financial year.



This article appeared in The Edge Financial Daily, January 3, 2012.




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Domestic consumption may soften yet

KUALA LUMPUR: In the wake of slowing global growth in 2012, domestic consumption is expected to prop up the local economy but it will not be entirely off the hook as economists still see some softening for the sector.

Weaker exports in the face of headwinds in developed economies are factors behind economists’ expectation of slower GDP growth for Malaysia in 2012.

CIMB’s chief economist Lee Heng Guie, in a report on the outlook for 2012, expects the country’s GDP growth to slow to 3.8% from the estimated 5% in 2011. He cited continuing weak global growth, pressured by volatile financial markets and Europe’s sovereign debt worries, a downturn in Malaysia’s export cycle, and an expected slowing of consumption and investments due to worries over economic conditions.

“With the export engine throwing a spanner in the works, the pressure is on domestic demand to keep the economy going, underpinned by both private spending and public investment.

“The key drivers of consumer spending are stable income and favourable employment prospects. But concerns over weaker growth prospects and volatile stock markets will bite into discretionary spending. Also, global uncertainties will throw a damper over investment activity,” he said in his report.

DBS Group Research in its 1Q 2012 outlook report said although the domestic economy is not expected to drop sharply, some moderation is expected.

The report pointed out that the labour market is showing signs of softening where unemployment rate has inched up a bit while job vacancies has fallen. It noted that the slowing growth has affected employment prospects.

“While we do not expect a severe dislocation in the labour market, it is reasonable to assume that companies and consumers alike may turn more cautious in the coming quarters until the growth outlook brightens again, most likely in 2H12,” said the report. It added that external uncertainties had taken a toll on investor confidence.

“Although investment grew by 6.1% in 3Q11, it was largely driven by public infrastructure investment,” it added.

DBS has forecast GDP growth to slow to 4.5% this year compared with an expected 5% in 2011.

RHB Research in a report on Dec 13 also said domestic demand, after picking up in 2011, will likely ease in 2012 on the back of softer growth in consumer spending and a slowdown in investment activities.

“Nevertheless, consumer spending will be supported by high savings, rising consumerism and favourable labour market conditions. Investments, on the other hand, will be underpinned by the progress in the implementation of the Economic Transformation Programme,” it added.

RHB Research expects economic growth to slow to 3.6% this year.

CIMB’s Lee also believes that unfavourable external environment and some easing in inflationary pressures will give Bank Negara Malaysia (BNM) the leeway to loosen monetary policy if domestic growth comes under threat.

“We think that a rate cut in 1Q12 is a possibility and maintain our end-2012 overnight policy rate (OPR) estimate of 2.5% to 2.75% (3% at end-2011),” he added.

DBS concurred with the view, saying it expects BNM to cut rates as early as end of the first quarter, by 25 basis points (bps) to 2.5%, to pre-empt downside risks to growth. Meanwhile, RHB Research said the central bank may ease monetary policy, cutting the OPR by 25 to 50 bps in the first half, if global economic conditions worsen.



This article appeared in The Edge Financial Daily, January 3, 2012.



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KFCH — potential counter offer by MCCM

KFC Holdings (M) Bhd (Dec 30, RM3.84)
Maintain trading buy at RM3.77 with fair value of RM4: The Malay Chamber of Commerce Malaysia (MCCM) said last Thursday that it would make a counter offer for Kulim’s 54% stake in QSR Brands Bhd to ensure the profitable fast food business remains in the hands of bumiputra. It plans to offer to buy QSR shares at RM6.90 per share which is 10 sen higher than Massive Equity Sdn Bhd’s (MESB) offer of RM6.80 per share.

We understand that the chamber would seek funding from various bumiputra-linked funds such as Lembaga Tabung Haji, Felda Holdings Bhd, Amanah Saham Mara, and Permodalan Nasional Bhd. Note that the chamber has yet to officially approach these organisations and would do it sooner or later. In addition, we expect MCCM to approach the various funds which are shareholders of QSR. Unlike KFCH, which has a substantial minority shareholder i.e. Tabung Haji at 22%, QSR’s shareholding structure is very fragmented, with EPF owning about 5% of the company and a myriad of other funds each holding 1%-2%.

MCCM’s offer of RM6.90/share would not have any impact on KFCH shares as it is purchasing QSR’s shares from Kulim. Recall that MESB’s offer is to purchase the assets and liabilities of both KFCH and QSR at RM4/share and RM6.80/share respectively. After the disposal to MESB, both KFCH and QSR would be shell companies with cash, which would be distributed to the respective shareholders.

On the flipside, MCCM’s offer for QSR shares which are owned by Kulim would result in a change of major shareholder. We believe MCCM could do a general offer for the remainder of QSR shares that it does not own, post-acquisition, although we believe this is unlikely as MCCM stated in the media that its planned offer would only cost them RM1 billion, which is the value of Kulim’s 54% stake in QSR at RM6.90/share.
No change to our forecasts.

Risks. 1) Bird/swine flu escalation; 2) Escalation of corn and soyabean prices, which would eat into margins; and 3) Deteriorating consumer spending power, resulting in lower same-store sales (SSS) growth.

We believe the MCCM’s offer is not likely to go through as both KFCH and QSR boards had already stated that they will not consider any other offers.
Furthermore, MCCM’s offer to purchase the stake in QSR would require the approval of Kulim’s shareholders, of which JCorp is the majority. We reiterate our “trading buy” call on the stock with an unchanged fair value of RM4/share, which represents MESB’s offer for the assets and liabilities of KFCH. — RHB Research, Dec 30



This article appeared in The Edge Financial Daily, January 3, 2012.



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UMW sees cloudy outlook at least in 1HFY12

UMW Holdings Bhd (Dec 30, RM7.00)
Maintain add at RM6.85 with target price of RM7.25: UMW’s share price throughout 2011 has stayed relatively flat given a lack of rerating catalysts.

Commanding 44% of Malaysia’s automotive market (combined market share of 38%-owned Perodua and 51%-owned Toyota), the stock was dragged down by the negative sentiments clouding the Malaysian automotive sector given: (1) tight auto part supply caused by the March 2011 Japan earthquake; and (2) recent flooding in Thailand. The oil and gas division also continued to be a drag on 9MFY11’s earnings.

We estimate that 41%-owned subsidiary UMW-Toyota accounts for more than 75% of the group’s bottom line and hence a shortfall in sales volume will have an adverse impact on earnings forecast. For the Malaysian automotive sector, we may see a deterioration in 2012 sales volume and earnings given: (1) economic uncertainties in Europe and America; and (2) higher raw material costs (essentially from coil steel, aluminium, lead, copper, etc). With that in mind, we recently cut our FY12-13 EPS forecasts for UMW by 10%-16% in our recent 2012 Strategy Report after changes to the following assumptions:-

(1) FY12-13 Toyota sales cut by 5% to 93K and 98K respectively;
(2) FY12-13 Perodua sales cut by 3% to 192,000 and 199,000 respectively; and
(3) automotive Ebit margins cut by 1.5ppt to reflect higher raw material costs.

We now project relatively subdued three-year earnings compound annual growth rate (CAGR) of 4% over FY11-13. Also, earnings contribution from the group’s three rig assets (all chartered out) should be more pronounced in FY12.

In tandem with the earnings downgrade, our sum-of-parts-based fair value was lowered from RM7.90 to RM7.25. At our fair value, the implied valuation of 11.8 times CY12 EPS is at parity to the stock’s average five-year PER. While earnings forecasts were cut, we left our dividend forecasts unchanged.

We opine our assumed dividend payout ratios of 65% for FY12 and 61% for FY13 are reasonable, predicated on dividend payouts of between 61% and 66% over FY09-10. At current share price, investors can look forward to an attractive net dividend yield of 5.8% for 2012.

Maintain ADD. We expect emerging re-rating catalysts only towards 2HFY12 driven by: (1) the launch of Toyota Avanza replacement in 1QFY12; (2) the rollout of CKD Toyota Camry with a potential 40% local content by end-2QFY12; and (3) the potential listing of UMW Oil & Gas as its investments gain better earnings traction with the maturity of its assets. The group is continuously looking to streamline its investments while recognising that certain investments in which they do not have good management control should be divested at a suitable time and price (potential divestment of WSP Group). — Affin IB Research, Dec 30



This article appeared in The Edge Financial Daily, January 3, 2012.



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REDtone Mobile gets new shareholders

REDtone International Bhd (REDtone) unit, REDtone Technology Sdn Bhd, has sold 65 per cent of its equity in REDtone Mobile Sdn Bhd (REDtone Mobile) to Teh Beng Hock and Tee Yew Yaw.

REDtone said the move to bring in new shareholders for REDtone Mobile, which offers Mobile Virtual Network Operator (MVNO) services, was part of its business rationalisation strategy as the group wanted to focus in businesses it was strong in.

Teh and Tee are shareholders of Elepoint Sdn Bhd, the largest Celcom re-seller for the corporate segment in Malaysia.

Chief executive officer Lau Bik Soon said new shareholders for REDtone Mobile were necessary to sharpen the company's focus and competitive advantage to make its MVNO services more appealing.

"Teh and Tee have more than 15 years experience and a deep understanding of the mobile business in the country. Together with REDtone's expertise in the small-and medium-sized enterprise segment, we believe it is a strong partnership
that will be able to take the company to a new growth level.

"The new REDtone Mobile will be more vibrant with better distribution channels to extend the reach of its services, and with more appealing offerings," he said, adding that REDtone expects to be profitable, moving forward.

He also said a new management would take over REDtone Mobile with immediate effect.

"A new and highly-experienced CEO will also come on board to run the company. We will now be able to better focus on growing our data and broadband business. We expect it to be the major contributor to the group's profit and revenue in financial year 2012," he said in a statement.

As an MVNO, REDtone Mobile rides on Celcom's digital network to offer mobile services to its customers who are primarily from the SME segment.

Besides divesting its stake in the mobile business, REDtone has put in place numerous other initiatives to strengthen its performance and turn the group around into a profitable entity.

These include further growing its profitable data and broadband business, working with other telecommunication service providers on joint projects that can leverage on its strength as a WiFi network builder and commercialising its proprietary technologies.

Meanwhile, in China, where its Shanghai operations were doing well, REDtone is considering expanding its customer loyalty pre-paid card business, he added. -- BERNAMA



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Tricubes bags RM6m PDRM job

Tricubes Bhd's 70 per cent-owned subsidiary TricubesNCR JV Sdn Bhd has accepted a letter of award from the Home Affairs Ministry to maintain the police force's Hardware and Software and Server Enhanced Mobile Management System (EMMS).

The award is valued at RM6 million, Tricubes said in a filing to Bursa Malaysia here today. The contract also includes maintaining the force's Mobile Card Acceptance Device (MCAD), both for a period of two years from Jan 1, 2012 to Dec 31, 2013.

The company said the award will contribute positively to the earnings and nets assets per share of the group from the financial year ending March 31, 2012 and is not expected to have any material effect on the gearing of the company. -- Bernama



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KLCI extends losses, Maybank leads losers among banks

KUALA LUMPUR (Jan 3): Banks were the major losers on Tuesday as profit taking almost erased the gains from last Friday’s window-dressing activities by local funds. However, the overall market sentiment was mixed.

At 3.25pm, the FBM KLCI was down 16.05 points to 1,514.68. Turnover was 1.10 billion shares valued at RM884.54 million. There were 361 gainers, 340 losers and 284 stocks unchanged.

Maybank fell the most among banking stocks, down 24 sen to RM8.34 with 3.15 million shares done, Public Bank gave up 22 sen to RM13.16 and CIMB 21 sen to RM7.23 while RHB Cap shed 19 sen to RM7.29.

OSK Equities Research said for December, as expected, the market rallied with a particularly strong run at the last minute to bring it within 3.0 points of its 1,533 2011 year-end target

“As we have said in our 2012 market outlook strategy piece, above 1,500, we will call a SELL and so we call a SELL now on the market. Our 2012 KLCI fair value of 1,466 remains intact (mid-year target),” it said.



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Nilai Resources gets RM27m price reduction from major shareholder

KUALA LUMPUR (Jan 3): Nilai Resources Group Bhd’s subsidiary has received a RM27.36 million discount on the purchase price of LK Prisma Sdn Bhd by Lapangan Kota Sdn Bhd.

Nilai Resources said on Tuesday its subsidiary BBN Development Sdn Bhd had on Dec 31, 2011 received a revised letter of offer from Lapangan Kota to sell the company for RM91.08 million.

The previous price tag of RM118.41 million was announced on Nov 16.

Lapangan Kota is majority owned and controlled by Nilai Resources shareholder Datuk Dr Gan Kong.

Lapangan Kota owns 418.20 acres of land, which is part of the Seremban Utara township development. The land was approved for either residential, commercial, institution or industry use.



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KFC stake buy: Chamber ready to outbid CVC

The Malay Chamber of Commerce Malaysia said it is prepared to outbid CVC Capital Partners Ltd in offering to buy Lembaga Tabung Haji’s 23 per cent stake in fast-food operator KFC Holdings (Malaysia) Bhd.

The chamber has already said it wants to buy a controlling stake in the KFC franchise’s parent QSR Brands Bhd, rivaling an earlier US$1.6 billion buyout bid for the company and its KFC unit by CVC and Johor Corp. It will write to Tabung Haji today offering two options: either be a partner in bidding for QSR, or sell the KFC stake to the business association at RM4.10 a share, Chamber President Syed Ali Alattas said.

“If they have to sell, we will buy,” Syed Ali said in a telephone interview from Johor today. “We would like them to join us. Hopefully, they won’t sell.”

The chamber says it has more than 1 million members, representing the Southeast Asian nation’s “Bumiputeras” or “sons of the soil”, who comprise ethnic Malays and indigenous people. The association wants to prevent control of these companies leaving the community by asking Tabung Haji and similar funds to be its partners.

At stake is control over QSR’s almost 900 fast-food outlets in Southeast Asia and India for brands including KFC and Pizza Hut, according to their websites.

London-based CVC last month teamed up with Johor Corp, an arm of Malaysia’s Johor state government, to bid for all the assets and liabilities of both QSR and KFC Malaysia. That would cost them more than RM5.24 billion (US$1.6 billion) excluding warrants, according to Bloomberg News calculations.

The Malay business chamber is seeking a cheaper option. Instead of buyouts, it’s seeking control by acquiring strategic stakes.

Syed Ali last week said the association will offer Kulim (Malaysia) Bhd. RM6.90 per share for its 54 per cent stake in QSR, topping CVC and Johor’s RM6.80 general offer.

It’s similarly prepared to pay Tabung Haji 10 sen per share more than CVC and Johor for the Muslim pilgrims fund’s 23 per cent stake in KFC Malaysia. That would give the chamber control of about three quarters of KFC’s shares should both deals go through, given that QSR holds a 51 per cent stake, according to data compiled by Bloomberg.

The chamber is writing to Bumiputera funds including Federal Land Development Authority and Amanah Saham Mara Bhd to also back its QSR bid, Syed Ali said.

Kuala Lumpur-based QSR operates about 260 Pizza Hut restaurants in Malaysia and Singapore, while KFC Malaysia operates more than 620 fried-chicken outlets in Malaysia, Singapore, Brunei, Cambodia and India, according to their respective websites.

They’re both franchise holders, while Yum! Brands Inc, based in Louisville, Kentucky, owns the KFC and Pizza Hut brands.

“We want to use QSR and KFC in the development of entrepreneurs,” Syed Ali said. “We can add another 1,000 outlets, double the number of franchises. We would distribute 70 per cent of these to Bumiputeras.” -- Bloomberg



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Air Asia X offers low fare deals

AirAsia X, low-fare affiliate of AirAsia, is offering low-fare deals to destinations in Australia, Europe, South Korea and Japan from Kuala Lumpur.

In a statement today, AirAsia said its 'Blast Off 2012' promotion offered low-fare deals from Jan 3-15 for the immediate travel from Jan 9-Mar 31 and would be available exclusively online at www.airasia.com.

"The all-in fare to Japan starts from as low as RM406 to Osaka and RM556 to Tokyo from Kuala Lumpur, while a trip to Australia is from RM496 to Perth, RM616 to Gold Coast and RM646 to Melbourne.

"Other international destinations offered are from RM436 to Seoul, RM716 to Paris and RM836 to Gatwick," it said.

AirAsia X chief executive officer, Azran Osman-Rani, said with the pent-up demand for the selected destinations during the year-end sale last year, the company has decided to offer this special treat to its guests.

"The guests may also grab the 'fly-thru deals' from Australia to Japan and Europe and vice versa or hop on to Kuala Lumpur and connect to South-East Asia and beyond," he said. -- BERNAMA



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Tricubes’s 70% subsidiary gets RM6m police contract

KUALA LUMPUR (Jan 3): TRICUBES BHD []’s subsidiary has secured a RM6 million contract from the Home Ministry to provide the maintenance services for two mobile management systems used by the police.

It said on Tuesday its 70% owned TricubesNCR JV Sdn Bhd had accepted the letter of award for the maintenance of the hardware and software and server enhanced mobile management system and mobile card acceptance device.

“The award is valued at RM6 million for a period of two years commencing from Jan 1, 2012 to Dec 31, 2013,” it said.

The group incurred loss from operation of RM719,290 and the company incurred a net loss of RM3.13 million respectively for financial year ended March 31, 2011. As of that date, the group’s accumulated losses amounted to RM17.24 million.



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Maxbiz gets letter of intent for FTTX infrastructure works worth RM510m

KUALA LUMPUR (Jan 3): MAXBIZ CORPORATION BHD [] has received a letter of intent (LOI) in respect of a fibre-to-the-home and fibre-to-the-office (FTTX) contract worth RM510 million.

The company said on Tuesday that it had received the LOI from Fiber-N Sdn Bhd on Dec 30, 2011 for the infrastructure works for 100,000 FTTX connections on high rise residential and office buildings in Klang Valley, Penang and Johor Bahru.

Meanwhile, the company also said its unit Dutamas SME had received a letter of award for infrastructure works for a project in Ipoh worth RM4.94 million from Harta Mesra Development Sdn Bhd.

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



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MAS jumps 9.2pc on new management

Malaysian Airline System Bhd, the national carrier, jumped 9.2 per cent to RM1.42, on course for its largest gain since Feb. 23, 2010.

The airline hired Hugh Dunleavy of WestJet Airlines to head network, alliance, strategy and planning unit, and Shihaj Kutty to lead revenue management as part of a new management structure, it said in a statement. -- Bloomberg



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LBS Bina eyes RM1b sales in 2 years

Property developer, LBS Bina Group Bhd, aims to achieve sales of RM1 billion in two years in view of the strong demand despite cautious market sentiment, says managing director Datuk Lim Hock San.

He said the company aimed to achieve RM800 million in sales this year backed by 16 new launches and 21 ongoing projects and RM950 million in 2013.

"Currently, we have some 920-hectare land bank with an estimated gross development value (GDV) of RM9.1 billion to keep us busy for the next few years," he told reporters after the company's annual general meeting in Kuala Lumpur today.

Lim said the company would launch 16 projects, comprising 2,426 units with a GDV of RM1.5 billion, together with some 21 ongoing projects with a value of RM665 million.

"These include projects in D'Island Residence, Bandar Saujana Putra, Taman Golden Hills in Cameron Highlands and Bandar Putera Indah in Batu Pahat, Johor," he said. -- BERNAMA



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Stake buy report buoys Proton

Proton Holdings Bhd, the national carmaker, rose 2.5 per cent to RM4.94, set for its highest close since Sept 30, 2010.

General Motors Co may buy as much as 50 per cent of Proton’s stake in an auto plant in Tanjung Malim for up to RM800 million, the Edge weekly newspaper reported, citing people it didn’t identify.

Proton Managing Director Syed Zainal Abidin Syed Mohamed Tahir couldn’t immediately return calls seeking comment. Proton was also upgraded to “trading buy” from “neutral” at CIMB Group Holdings Bhd, which raised its share-price estimate to RM5.45 from RM4.35.



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Maxbiz gets 2 contracts worth RM515m

Maxbiz Corporation Bhd's wholly-owned subsidiary, Dutamas SME Sdn Bhd, has secured a RM4.935 million contract, from Harta Mesra Development Sdn Bhd, to undertake phase 1A of infrastructure works for a proposed development in Klebang, Perak.

The company also received a letter of intent from Fibre-N Sdn Bhd, in respect of a RM510 million contract for the Fibre-to-the-Home and Fibre-to-the-Office (FTTX) Infrastructure Works, for 100,000 FTTX connections on high-rise residential and office buildings in Klang Valley, Penang and Johor Baru. -- Bernama



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Boustead gains after purchasing aircrafts

Boustead Holdings Bhd, a plantation, property and heavy industries group, added 1.2 per cent to RM5.85, bound for its highest close since Aug. 4.

Its unit MHS Aviation Bhd., which provides air transport services to the oil and gas industry, agreed to buy 16 aircraft for RM586.2 million from DRIR Management Sdn and DRIR Rotor Sdn, according to a stock-exchange filing. -- Bloomberg



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Tabung Haji asked to join bid for QSR

The Malay Chamber of Commerce Malaysia (MCCM) is asking Lembaga Tabung Haji and other so-called “Bumiputera” funds to be its partners in bidding for a controlling stake in fast-food restaurants operator QSR Brands Bhd, chamber President Syed Ali Alattas said in a telephone interview today.

The chamber is also offering to buy Tambung Haji’s 23 per cent stake in QSR subsidiary KFC Holdings Malaysia Bhd at RM4.10 per share if it doesn’t want to be one of its partners, Syed Ali said. This is 10 sen per share more than CVC Capital Partners Ltd and Johor Corp offered in a proposed buyout on Dec. 14. -- Bloomberg



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Media Chinese Intl director sells 400,000 shares

KUALA LUMPUR (Jan 3): MEDIA CHINESE INTERNATIONAL LT []d director Tiong Kiew Chiong disposed of 400,000 shares in the open market on Dec 30.

A filing to Bursa Malaysia on Tuesday showed he disposed of the shares, representing 0.03%, for RM1.19 a share.

After the disposal of the stake, Tiong’s stake was reduced to 3.607 million shares.



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Mild profit taking keeps KLCI in the red at mid-day

KUALA LUMPUR (Jan 3): The FBM KLCI remained in negative territory at the mid-day break on Tuesday, as mild profit taking and losses at banking stocks weighed on the index.

The FBM KLCI fell 12.88 points to 1,517.85 at the mid-day break, bucking the trend at key regional markets.

Gainers led losers by 330 to 293, while 276 counters traded unchanged. Volume was 818.82 million shares valued at RM584.83 million.

The ringgit strengthened 0.61% to 3.1498 versus the US dollar; crude palm oil futures for the third month delivery rose RM50 per tonne to RM3,220, crude oil gained US$1.44 per barrel to US$100.27 while gold jumped US$14.68 an ounce to US$1,580.95.

At the regional markets, Hong Kong’s Hang Seng Index jumped 2.05% to 18,812.69, South Korea’s Kospi was up 2.43% to 1,870.70, Taiwan’s Taiex added 1.68% to 7,068.94 and Singapore’s Straits Times Index rose 1.25% to 2,679.49.

The China and Japan markets are closed today for holidays.

On Bursa Malaysia, BAT was the top loser this morning and fell 50 sen to RM49.42; Petronas Dagangan fell 30 sen to RM17.50, Petronas Gas down 20 sen to RM15, Tahps 18 sen to RM4.10, PPB 16 sen to RM17 and JT International down 15 sen to RM7.24.

Among the banks, Public Bank fell 22 sen to RM13.16, CIMB and Maybank down 20 sen each to RM7.24 and RM8.38, RHB Capital lost 14 sen to RM7.34, AMMB 11 sen to RM5.84, Hong Leong Bank fell four sen to RM10.86 and Affin was down three sen to RM3.05.

PLANTATION [] stocks advanced after RHB Research maintained its Outperform call on the sector and said CPO prices could rise above expectations.

“Recently, several developments have led us to believe that the risk of CPO prices rising above market expectations is increasing, particularly in 1H2012, including: 1) The weather is now officially in La Niña territory; 2) Impact of La Niña on soybean supply is a high risk factor; 3) Any crop losses would have knock-on effects on CPO demand and prices; 4) Rising crude oil price and its close correlation with CPO prices; and 5) Continued narrowing of the price discount between CPO and other competing vegetable oils,” it said in a note Jan 3.

Among plantation counters, KLK rose 20 sen to RM22.90, United Plantations and Kulim 18 sen each to RM19.18 and RM4.40, Tradewinds Plantations 16 sen to RM4.50 and Batu Kawan eight sen to RM17.54.

Other gainers included IGB that rose 22 sen to RM2.68, Genting 20 sen to RM11.20, Aeon, LPI Capital and BHIC 16 sen each to RM7.40, RM13.68 and RM3.59, while Supermax was up 14 sen to RM3.97.

The actives included Hibiscus, JCY, MAS warrants, XDL, IRCB, Time and Proton.



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Finance counters drag FBM KLCI further

Aggressive profit-taking in finance counters continued to drag the FTSE Bursa Malaysia KLCI (FBM KLCI) lower mid-day, ignoring the bullish sentiment in regional markets, dealers said.

At 12.30pm, the key index finished the morning session 12.88 points lower at 1,517.85.

Affin Investment Bank Head of Retail Research Dr Nazri Khan said the market was cautious, despite the positive sentiment regionally, as it reacted to the stronger-than-expected manufacturing data from China.

"The CI raced up to end the final trading week of last year at 1,530.73 but retreated on mixed trading mid-day. This is a normal reaction after a rally to go into a profit-taking mode," he told Bernama today.

He said the local market would most likely improve by Friday.

Public Bank, Hong Leong Bank, Maybank, CIMB and RHB Capital were the major losers today.

The Finance Index erased 216.24 points to 13,486.51, the Plantation Index gained 33.18 points to 8,195.88 and the Industrial Index fell 9.06 points to 2,733.99. The FBM Emas Index lost 51.851 points to 10,437.22, the FBM 70 Index rose 79.93 points to 11,576.68 and the FBM ACE Index inched up 4.16 points to 4,072.74.

Gainers led losers 330 to 293, 276 counters were unchanged and 577 counters were untraded.Turnover stood at 818.813 lots worth RM584.827 million.

For actives, Hibiscus Petroleum-WA gained five sen to 58 sen, JCY International-CD added eight sen to 54 sen, MAS-CD perked 3.5 sen to 9.5 sen and Kulim-CB advanced 3.5 sen to 18.5 sen.

Among heavyweights, Maybank and CIMB lost 20 sen each to RM8.38 and RM7.24, respectively, Sime Darby erased two sen to RM9.18 while Petronas Chemicals was flat at RM6.20. -- BERNAMA



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Hong Leong keeps 'hold' call on Telekom

Hong Leong Investment Bank (HLIB) is maintaining a "hold" call on Telekom Malaysia Bhd (TM), with an unchanged target price of RM4.54 per share, given the recent price rally.

"The stock is likely to continue attracting investors due to its defensive nature amid strong swings in global equity markets," said HLIB in a research note today.

The research firm said the nation's largest integrated solutions provider has budgeted between RM2.7 billion and RM3 billion in capital expenditure (CAPEX) for this year as it continued to roll out high speed broadband (HSBB) access to more areas.

TM would expand its Internet access beyond homes and offices via wireless fidelity (WiFi) hotspots, HLIB said, adding that TM was also planning to widen its WiFi reach for nomadic users.

"This came as a shock to us as we expected CAPEX to be decreasing gradually as HSBB's implementation is towards completion.

"We opine that the best approach for TM will be to capture nomadic users by partnering a mobile telecommunication company, it said adding that TM should leverage on its existing collaboration with Celcom Axiata Bhd," it said. -- BERNAMA



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Flash: LBS Bina targets RM1 bln annual property sales target

KUALA LUMPUR (Jan 3): LBS BINA GROUP BHD [] is targeting RM1 billion annual property sales target in the near term as the company focuses on the various segments of the residential market apart from commercial and industrial PROPERTIES [].

Managing director Datuk Lim Hock San said on Tuesday that LBS was expected to achieve property sales of RM800 million and RM950 million in the financial years ending Dec 2012 and 2013 respectively.

"As such, we are confident" Lim told reporters after the EGM.

He also indicated that LBS might venture into Sabah and Sarawak, but this would hinge on the feasibility of the property development projects.

Lim said the firm had been approached to undertake projects in Sabah. He declined to elaborate.



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Banks, blue chips weigh KLCI down at mid-morning

KUALA LUMPUR (Jan 3): The FBM KLCI bucked the regional trend and retreated on the first trading day of 2012, and slipped 8.62 points to 1,522.11 at mid-morning, weighed by banking and select blue chip stocks.

Gainers led losers by 223 to 160, while 212 counters traded unchanged. Volume was 325.47 million shares valued at RM182.34 million.

At the regional markets, Hong Kong’s Hang Seng Index jumped 1.7% to 18,747.83, South Korea’s Kospi rose 1.97% to 1,862.38, Taiwan’s Taiex added 1.4% to 7,049.28 while Singapore’s Straits Times Index gained 0.62% to 2,662.78.

The China and Japan markets are closed today for holidays.

OSK Research director Chris Eng in his January outlook report said the research house’s expectation of a December rally proved correct as the FBM KLCI raced up in the final trading week of 2011 to end at 1530.73 points, less than 3 points shy of its 2011 year-end target.

“We stand by our earlier strategy that investors should “Remain Defensive, Sell” when KLCI breaks above 1,500 pts, and Buy as the index approaches 1,300 points”.

“As such, we have a Sell call on the market for January,” he said.

Eng said the KLCI was overpriced and lacking fundamentals to sustain at this level.

“With 3 of our 5 Top Dec buys having outperformed the KLCI, we are switching to the more unconventional small cap buys for January given our broader market Sell call.

Among the decliners at mid-morning, Public Bank fell 22 sen to RM13.16, CIMB 17 sen to RM7.27, while Maybank and RHB Capital lost 13 sen each to RM8.45 and RM7.35.

Other losers included Nestle that fell 20 sen to RM56, BAT 16 sen to RM49.76, KrisAssets 15 sen to RM6.10, Batu Kawan 14 sen to RM17.32, while Ewein and Lafarge Malayan Cement fell 10 sen each to 80 sen and RM6.90.

Allianz led the gainers and was up 60 sen to RM5.35; United PLANTATION []s gained 20 sen to RM19.20, Aeon 16 sen to RM7.40, Hibiscus 12.5 sen to RM1.07, Proton 12 sen to RM4.94, Supermax and Tradewinds Plantations 11 sen each to RM3.94 and RM4.45, while MAHB, Malayan Flour Mills and KLK added 10 sen each to RM5.90, RM7.30 and RM22.80 respectively.

The actives included Hibiscus, JCY, IRCB, Proton, Sanichi and TMS.



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OSK Research advises investors to remain defensive, sell above 1,500

KUALA LUMPUR (Jan 3): OSK Research said its expectation of a December rally proved correct as the FBM KLCI raced up in the final trading week of 2011 to end at 1530.73, less than 3.0 points shy of its 2011 year-end target.

“We stand by our earlier strategy that investors should ‘Remain Defensive, Sell when KLCI breaks above 1500, and Buy as the index approaches 1300’, it said.

OSK Research said it has a Sell call on the market for January. It viewed the KLCI as overpriced and lacking fundamentals to sustain at this level.

“With three of our five Top December buys having outperformed the KLCI, we are switching to the more unconventional small cap buys for January given our broader market Sell call,” it said.



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JAKS Resources declines 1.8%

JAKS Resources Bhd, a pipe maker, fell 1.8 per cent to 55.5 sen, on course for its lowest close since Oct 12.

The company had a fourth-quarter net loss of RM25.1 million, compared with a profit of RM1.2 million a year earlier, it said in a stock exchange filing. -- Bloomberg



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FBM KLCI opens 8 points lower

At 9.30 a.m. today, there were 168 gainers, 121 losers and 174 counters traded unchanged on the Bursa Malaysia.

The FBM-KLCI was at 1,522.73 down 8.00 points, the FBMACE was at 4,065.95 down 2.63 points, and the FBMEmas was at 10,447.20 down 41.91 points.

Turnover was at 207.872 million shares valued at RM100.757 million. -- BERNAMA



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Proton continues to remain in limelight

KUALA LUMPUR (Jan 3): PROTON HOLDINGS BHD [] continued to remain in the limelight and on investors’ radar into the new year, following a report by the Edge weekly that General Motors (GM) is eyeing a stake in the national carmaker’s Tanjung Malim plant.

At 9.30am, Proton added six sen to RM4.88 with 732,600 shares traded.

The Edge weekly in its latest edition reported that Proton’s top management was said to be in talks with the Detroit-based GM to sell up to a 50% stake in its Tanjung Malim plant.

Citing sources, the Edge said that GM could buy a 40% to 50% stake in the plant for between RM700 million to RM800 million.

For more, read the latest edition of the Edge weekly.



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RHB Research maintains underperform on VS Industry

KUALA LUMPUR (Jan 3): RHB Research Institute is maintaining its Underweight on VS Industry and its fair value estimate of RM1.40 a share based on 6.0 times CY12 remains unchanged.

It said on Tuesday the 1QFY07/12 core net profit of RM9.6 million was within expectations. The 1Q revenue increased by 7.5% on-quarter on orders from new volume sales for Itron and Epson.

However, the first quarter earnings before interest and taxation (EBIT), more than doubled on-quarter as EBIT margin expanded by 2.8 percentage points from operating leverage effects on higher utilisation rates.

“Coupled with lower share of associate losses, core net profit grew 29.1% on-quarter. Separately, VSI declared an interim single-tier DPS of 5.0 sen,” it said.

RHB Research said it believes the near-term outlook remains challenging stemming from weaker consumer spending amidst the macroeconomic headwinds.

“However, we believe the new contribution of Keurig (coffee brewers) should partly mitigate weaker sales from existing customers (i.e. NextWindow and Dyson). Furthermore, in the longer term, we believe VSI could benefit from rising demand for outsourcing manufacturing capabilities,” it said.



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RHB Research maintains overweight on plantations sector

KUALA LUMPUR (Jan 3): RHB Research Institute is maintaining its Overweight on the PLANTATION []s sector, with five Outperform calls and three Market Perform calls.

It said on Tuesday that it has Outperform calls on Genting Plantations, Sime Darby, TH Plantations, First Resources and CBIP while the three Market Perform calls are IOI Corp, KLK and IJM Plantations.

“Our top picks remain upstream players like Genting Plantations and TH Plantations, as we believe the risks faced by the more integrated players are rising, due to the new disadvantageous Indonesian export tax structure,” it said.

RHB Research said recently, several developments have led it to believe that the risk of CPO prices rising above market expectations is increasing, particularly in 1H2012.

It said the weather is now officially in La Niña territory; 2) Impact of La Niña on soybean supply is a high risk factor; 3) Any crop losses would have knock-on effects on CPO demand and prices; 4) Rising crude oil price and its close correlation with CPO prices; and 5) Continued narrowing of the price discount between CPO and other competing vegetable oils.

“We maintain our CPO price assumptions of RM3,100 a tonne for CY12 and RM2,900/t for CY13. For CY11, our price projection remains unchanged at RM3,100 even though YTD average price is RM3,274. We are not revising our forecasts for 2011 to be conservative, as we believe most plantation companies would not necessarily be able to achieve prices so close to the spot price,” it said.



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Adventa dives on RM8.5m net loss

Adventa Bhd, a Malaysian rubber-glove maker, fell the most in three weeks in Kuala Lumpur trading after posting fourth-quarter net loss of RM8.5 million compared with a profit of RM11.2 million a year earlier.

The stock lost 1.9 per cent to RM1.56 at 9:08 a.m. local time, set for the steepest drop since Dec. 13. -- Bloomberg



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KLCI opens lower on first trading day of 2012

KUALA LUMPUR (Jan 3): The FBM KLCI opened lower on the first trading day of 2012, weighed down by banks and blue chips stocks.

The FBM KLCI fell 11.19 points to 1,519.54 at 9.10am.

Gainers led losers by 114 to 80, while 141 counters traded unchanged. Volume was 80.09 million shares valued at RM35.31 million.

Among the early decliners were Nestle, BAT, CIMB, Batu Kawan, Maybank, RHB Capital, F&N, IOI Corp, Axiata and Tenaga.

Maybank Investment Bank Bhd maintained its 2012 year-end KLCI target of 1,500 points based on one standard deviation below mean on expectation of turbulence still at the external markets impacting sentiment and global growth.

“At the domestic front, the country could return to the polls earlier with the 13th General Elections which may, in turn, lend to cautiousness.

“Our 7.7% KLCI earnings growth forecast for 2012 is unchanged premised on our 3.5-4% domestic GDP growth forecast,” it said in a note Jan 3.



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Cypark Resources drops to 2-week low

Cypark Resources Bhd, a Malaysian environmental and landscaping-services provider, fell the most in two weeks in Kuala Lumpur trading after reporting a 22 per cent drop in fourth-quarter profit.

The stock dropped 1.4 per cent to RM1.43 at 9:05 a.m. local time, set for its biggest decline since Dec. 16. -- Bloomberg



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HDBSVR expects KLCI to stage pullback after late surge on Friday

KUALA LUMPUR (Jan 3): Hwang DBS Vickers Research expects the key FBM KLCI to gap down when trading kicks off on Tuesday morning.

It said the benchmark index could pull back towards the immediate resistance-turned-support level of 1,515 on the chart. This follows its spurt in the last 15-20 minutes of trading on the last trading day of 2011, presumably attributable to window-dressing activities.

In addition, the few stock exchanges that were opened for trading yesterday saw mixed closings, with Taiwan (-1.7%) and Indonesia (-0.3%) on the losing side while the Philippines (+0.6%) and India (+0.4%) chalked up marginal gains.

Locally, stocks that may be in the limelight today include: (a) Proton, in response to a business weekly report saying that the national automaker is in talks to sell up to 50% of its stake in its Tanjung Malim plant to General Motors for between RM700 million to RM800 million; and (b) glove manufacturers like Top Glove, Kossan Rubber and Hartalega, as demand for gloves may rise following the latest bird flu scare in China and Hong Kong.



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Octagon rises after recording better earnings

Octagon Consolidated Bhd, a Malaysian manufacturer of paints and chemicals, rose in Kuala Lumpur trading after reporting a narrower fourth-quarter loss of RM4.6 million.

The stock gained 3.5 per cent to 15 sen at 9:02 a.m. local time, set for its highest close since Dec. 29. -- Bloomberg



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CIMB Research has technical buy on Rimbunan Sawit at 92.5 sen

KUALA LUMPUR (Jan 3): CIMB Equities Research has a technical buy on Rimbunan Sawit at 92.5 sen at which it is trading at a price-to-book value of 0.8 times.

It said on Tuesday the share price of the PLANTATION [] company broke out of its consolidation triangle pattern on Friday.

“We think the stock is ripe for a stronger rebound. If we are right, there is a good chance that prices may charge towards 95.5 sen over the next few days. The following resistance levels are RM1.00 and RM1.04,” it said.

CIMB Research said the technical landscape remains conducive. MACD signal line is poised for a positive crossover while RSI has begun to hook upward. The 30-day SMA (now at RM0.88) could also offer some support to prices.

“Aggressive traders may start to nibble now. However, always place a stop at between 90.5 sen to 87 sen. A break below 83 sen would indicate that the uptrend from its April 2011 low is likely over,” it said.



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MIDF Research remains Neutral on banking sector

KUALA LUMPUR (Jan 3): MIDF Research remains Neutral on the banking sector as it expects net profit of banks next year to be moderated by slower economic growth.

The research house said on Tuesday that although the Nov 2011 statistics showed an increase in growth rate of loan applications, the stronger growth rate was attributed to the effect of a lower base of loan applications in Nov 2010 which was lower by 6.7% compared to Oct 2010.

MIDF Research said it expects banks to be prudent and conservative in terms of capital management in light of the Basel III requirements especially for requirement for potential capital buffer even though as of now, all banks appeared to be comfortable in meeting the higher capital ratio requirements of Basel III.

“Our BUY calls on RHB CAP (TP: RM9.20) and AFG (TP: RM4.10) remained unchanged as of now. We have adjusted our TP for AFG to RM4.10 from RM3.84 previously based on 1.6x PBVR on FY13 BVPS.

“We are still NEUTRAL on AMBANK (TP: RM6.03), HONG LEONG BANK (TP: RM10.50), CIMB (TP: RM7.50), MAYBANK (TP: RM8.80) and PUBLIC BANK (TP: RM13.00),” it said.



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Cypark sees bright prospects

KUALA LUMPUR: Cypark Resources Bhd is positive that the company will have a bright prospects this year with several contracts already in the bag.

Its founder and chairman Tan Sri Razali Ismail said the market growth for solid waste management services is strong, driven by the implementation of Solid Waste Management Act last September.

"With the increasing waste output of Malaysia's population, the group expects to benefit from government projects earmarked under the 10th Malaysia Plan.

"Additionally, with various attractive initiatives offered by the government under the National Renewable Energy Act and with the implementation of the Sustainable Energy Development Authority, Cypark is in a strong position to seize the opportunities in renewable energy sector," he said in a statement.

Cypark is an environmental technology and engineering specialist, focusing on areas of integrated renewable energy, waste management, and environmental remediation.

The company has developed expertise and technical know-how to generate renewable energy whereby waste biomass, landfill gas and solar PV from the remediated sites and brown fields are harnessed to produce green energy at integrated renewable energy parks.

The company obtained a Letter of Acceptance dated December 23 from the Housing and Local Government Ministry for the proposed upgrading of the landfill site at Kok Foh, Jempol, Negeri Sembilan, worth RM14.7 million.

Razali said the company had posted better results in its unaudited financial report for the fourth quarter and for the current full-year ended October 31.

Cypark registered higher net profit of RM22 million despite a slowdown in the world economy compared with RM20.3 million net profit achieved last year.

For the fourth quarter under review, Cypark recorded a 15 per cent revenue growth to RM42.4 million.

The company's net profit for the fourth quarter stood at RM4.1 million compared to RM5.2 million achieved in the same period last year.

"The profit generated for this year has been very encouraging. This is a strong sign that our business continues to remain sustainable even in the current weak global economy," Razali said.



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OSK: TRC Synergy to sizzle this year

KUALA LUMPUR: TRC Synergy Bhd is expected to sizzle this year with the progress on the RM950 million project of Kelana LRT extension regaining momentum, an investment bank said.

OSK Investment Bank said TRC is a strong contender for the Sungai Buloh-Kajang (SBK) line of the MRT (mass rapid transit) project, given its track record in the Kelana LRT extension.

OSK pointed that TRC was the only contractor that was prequalified for all packages of the RM12 billion SBK line for the KL MRT's open and Bumiputera portions.


"Having purchased all the necessary machinery for the Kelana extension job, we believe it is strong contender for the SBK line's elevated works, especially the Bumiputera portion," it said.

TRC had mobilised the required machinery for the job and will accelerate works to make up for lost time, it added.

The first two packages (V5 and V6), which the company is eyeing, should be awarded in early part of this year.

In its research report to investors, the investment bank said, currently, TRC managed to add RM485 million worth of new projects to replenish its order book.

"This is pretty much in line with our full-year target of RM500 million," OSK said, noting that one notable award was the Brunei Airport upgrade, worth RM318 million, which is expected to drive TRC's financial year 2012 and 2013 earnings.

OSK believes that TRC's earnings are at an inflection point and projects a three-year compounded annual growth rate (CAGR) of 37 per cent.

"We feel that TRC offers an attractive exposure to the KL MRT play," said the firm, which has tagged a "buy" on TRC.



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Stocks to watch: MAS, Boustead, Cypark, SMR, VS Industry

KUALA LUMPUR (Jan 1): The local stock market could see some profit taking in the first week of the trading year day after the recent run-up and last-minute window dressing activities. The rally was underpinned by local funds and pushed the FBM KLCI into positive territory for 2011.

The 30-stock index rallied more than 45 points over a seven-day trading period to end 2011 at 1,530.7. Total market capitalisation increased by RM11.38 billion over the same period to end the trading year at RM1,284.55 billion.

Among the stocks which could see trading interest following corporate developments include MALAYSIAN AIRLINE SYSTEM BHD [] (MAS), Boustead Holding Bhd, environmental TECHNOLOGY [] and engineering specialist CYPARK RESOURCES BHD [], SMR TECHNOLOGIES BHD [], VS Industry Bhd and SILVER BIRD GROUP BHD [].

Last Friday, MAS unveiled its new management structure which included several new business units, the entry of two senior aviation experts and the departure of several top officials.

Focus would be on MAS' long-haul business, with its group chief executive officer Ahmad Jauhari Yahya taking on the role as CEO of long-haul. His deputy, Mohammed Rashdan, who is CEO of short-haul, would head the short-haul, group finance, aircraft finance & management, and in the interim helm commercial.

BOUSTEAD HOLDINGS BHD []’s 51% owned MHS Aviation Bhd is acquiring 16 aircraft for RM586.20 million from DRIR Equities Sdn Bhd. DRIR owns the other 49% of MHS.

Cypark’s earnings fell 21.5% to RM4.11 million in the fourth quarter ended Oct 31, 2011 from RM5.24 million a year ago due to lower profit margins than the previous quarter. Gross profit margin was 25%, a decline from the 36% a year ago when it benefited from design income fee and good material rate negotiated in the quarter.

SMR’s unit SMR HR Group Sdn Bhd has secured a RM14 million contract from the Human Resources Ministry. The one-year contract is to implement a trainining programme known as Accelerated Skills Enhancement Training Programme (ASET).

VS Industry Bhd’s earnings fell 10.9% to RM11.59 million in the firstquarter ended Oct 31, 2011 from RM13.01 million a year ago due to stiffer competition and losses from its China associate. Its revenue increased 14.1% to RM282.43 million from RM247.39 million while earnings per share were 6.39 sen compared with 7.27 sen.

Silver Bird called off its proposed placement exercise and a subscription commitment of up to RM100 million with GEM Global Yield Fund. It had to abort the proposals as Bursa Malaysia Securities Bhd rejected its waiver from complying with all the requirements to undertake back-to-back placements.

Malaysian Rating Corp Bhd (MARC) lowered its rating on MNRB Holdings Bhd’s (MNRB) RM200 million Islamic medium term notes (IMTNs) to A+IS from AA-IS after the reinsurer suffered two consecutive years of losses and thin cash flow coverage measures.

The ratings agency said while the outlook for the debt notes was stable, the downgrading reflected weakened holding company level financial metrics after losses for FY ended March 31, 2010 (FY2010) and FY2011.

JAKS Resources Bhd posted net losses of RM25.13 million in the fourth quarter ended Oct 31, 2011 from a net profit of RM1.19 million a year ago due to goodwill impairment adjustment of RM25.90 million.

Its revenue rose 9% to RM93.24 million from RM85.74 million mainly due to higher revenue recognition of works done for projects in the CONSTRUCTION [] division. Loss per share was 5.73 sen compared with earnings per share of 0.27 sen.

For the financial year ended Oct 31, 2011, it swung into net losses of RM22.89 million compared net profit of RM2.28 million in the previous financial year.



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