Monday, 9 January 2012

KHSB confirms privatisation option by KPS

KUALA LUMPUR (Jan 9): KUMPULAN HARTANAH SELANGOR BHD [] (KHSB) has confirmed The Edge report that its major shareholder KUMPULAN PERANGSANG SELANGOR [] Bhd (KPS) has been given the mandate to enhance or revive its investments.

KHSB said in a reply to Bursa Malaysia Securities on Monday that KPS was mandated by the board to explore and evaluate the available options, which might include a reorganisation and restructuring of its investments and mergers, acquisitions or divestments of its non-performing investments.

“As part of the available options to enhance or revive its investments, KPS has also been mandated to study the feasibility of taking KHSB private.

“However, to-date, consultants have not been appointed to conduct the feasibility study,” it said.



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Xidelang confirms major shareholder HongPeng not selling stake

KUALA LUMPUR (Jan 9): Xidelang Holdings Ltd said its major shareholder HongPeng International Holdings Ltd does not have any plans to sell its stake.

In confirming The Edge report, Xidelang said it had made due and diligent enquiry with HongPeng which replied while it had been receiving enquiries from external parties including private equity firms, “but HongPeng has no intention of selling its stake at this juncture”.

Xidelang also said the discussions between Navis Capital and HongPeng held during October and November last year were solely exploratory in nature and there was no offer being made or a price range indicated by Navis Capital.

“These exploratory discussions were discontinued in late November 2011,” it said.



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RAM Ratings reaffirms Hubline’s ratings, maintains negative outlook

KUALA LUMPUR (Jan 9): RAM Ratings has reaffirmed the respective long- and short-term ratings of A2 and P1 for HUBLINE BHD []’s (Hubline) RM150 million Murabahah Commercial Papers/Medium-Term Notes Programme (2005/2012).

Concurrently, the A2 rating of Hubline’s RM70 million Bai’ Bithaman Ajil Islamic Bonds (2005/2012) has also been reaffirmed.

Meanwhile, the rating agency said on Monday that the negative outlook on the long-term ratings has been maintained.

Hubline is involved in the provision of container and dry-bulk shipping services as well as vessel chartering.

RAM Ratings said Hubline’s ratings remain supported by the Group’s extensive network of 70 agents across 18 countries and niche routes that give it a competitive edge over its peers.

It said the group plies certain niche routes which are less competitive and where freight rates are more attractive, adding that due to its fleet of smaller vessels, it was able to call at smaller ports that cannot accommodate the large vessels of the main line operators.

Being involved in both the container and dry-bulk shipping segments, Hubline is able to enjoy some degree of diversification, it said.

However, the ratings are moderated by Hubline’s vulnerability to the cyclical nature of the shipping industry.

“Hubline has no control over movements in freight rates, which can be very volatile. On top of this, the shipping industry is also facing overcapacity amid the slowdown in global trade; this is anticipated to worsen with the imminent availability of more new vessels.

“Meanwhile, Hubline is also exposed to volatile bunker costs as well as hefty expenses from the maintenance and purchase of vessel equipment to support its operations,” it said.

RAM Ratings said that in the financial year ended Sept 30, 2011, profit from Hubline’s dry-bulk shipping business improved year-on-year (y-o-y) following some recovery in freight rates and cargo volumes from new contracts.

It said although the rates for container shipping declined y-o-y in FY Sep 2011, the group benefited from lower bunker costs (arising from the stronger ringgit against the US dollar) as well as lower operating expenses from its active planning of trade routes.

As such, Hubline’s operating profit before depreciation, interest and tax jumped 69.4% y-o-y to RM85.08 million in FY Sep 2011 (FY Sep 2010: RM50.21 million), it said.

At the same time, the group’s funds from operations (FFO) debt cover advanced from 0.14 to 0.16 times y-o-y, it said.

That said, its cashflow-protection metrics remained weaker than its pre-crisis level of above 0.2 times, it said.

RAM Ratings’ Head of Consumer and Industrial Ratings Kevin Lim said despite the better showing, RAM Ratings maintained the negative rating outlook, premised on Hubline’s patchy recovery in FY Sep 2011 and concerns over the sustainability of its improved operating performance.

Going forward, the operating environment for Hubline’s container and dry-bulk shipping is expected to remain tough amid the influx of new capacity and mounting anxiety over the Euro zone’s crises, which may pose downside risks to global trade, said Lim.

“We also expect the Group to remain challenged by weak freight rates for both its shipping segments.

“Taking this into consideration, Hubline’s FFO debt cover is envisaged to remain lethargic at around 0.14 times through the next 2 years,” he said.

Lim said Hubline’s ratings could be downgraded if its business fundamentals weaken and its financial metrics deteriorate amid a notable decline in freight rates and/or cargo volumes.

On the other hand, the negative outlook may be revised to stable if the group is able to demonstrate sustainable improvement in its financial performance, he said.



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DRB-Hicom confirms bid for Khazanah’s 42.7% stake in Proton

KUALA LUMPUR (Jan 9): DRB-HICOM BHD [] has confirmed it has submitted a bid to acquire Khazanah Nasional Bhd’s 42.7% stake in PROTON HOLDINGS BHD [].

“As at to date, the proposal is pending decision by Khazanah,” it said in a statement to Bursa Malaysia following a telephone query from the exchange.

DRB-Hicom said it had always viewed Proton as an important automotive industry player.

“DRB-Hicom was on the look-out for when opportunity will arise to explore any viable proposal(s) which will benefit and add value to the group’s business and expansion plans,” it said.

OSK Research said it was maintaining its trading buy for Proton at an unchanged fair value of RM5.87, premised on a 10% premium to its adjusted NTA per share of RM5.34, which includes a revaluation surplus of RM147.6 million on the group's land bank and after stripping off all intangibles and inventories, as well as the estimated equity value of loss-making Lotus.

“The stock’s 1HFY12 NTA is RM7.62,” it said in a research note on Monday.

OSK Research said the attempts from Proton chairman Datuk Nadzmi Mohd Salleh and other joint bidders do not represent enough value to ensure Proton’s turnaround.

“We still reiterate that DRB-Hicom is currently Proton’s best suitor given its tie-up with Volkswagen, which intends to set up a large ASEAN production hub in Malaysia. This is followed by Naza, which plans to localise production of the Chevrolet marquee by making use of Proton’s Tanjung Malim plant,” it said.

OSK Research said funding would not be an issue for DRB-Hicom as the group’s net gearing ex-bank related assets and liabilities stand at only 17%, as indicated by its last quarterly results.

“This can be easily stretched to 50%-70% to acquire Proton and possibly even higher, given Proton’s onerous capex needs and its planned R&D activities and expansion,” it said.

The research house said interestingly DRB-Hicom recently announced that it is raising RM500 million from the Sukuk market for working capital purposes, as well as other potential acquisitions and expansion.

DRB-Hicom has an option to maximise this sukuk issue to the tune of RM1.8 billion.



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LPI Capital kicks off 4Q reporting season with RM39m net profit

KUALA LUMPUR (Jan 9): LPI CAPITAL BHD [] was the first company to report its financial results for the October-December 2011 quarter, registering a 6.5% increase in net profit to RM39.33 million from RM36.94 million a year ago, boosted by the general insurance business.

The insurance company said on Monday revenue rose 25.5% to RM239.32 million from RM190.63 million largely contributed by the general insurance segment which marked a commendable growth of 26.2% over the corresponding quarter.

“The increase was mainly contributed by higher gross earned premium for the quarter which registered an increase of RM47.4 million (25.8%) over the corresponding quarter,” it said.

LPI said earnings per share were 17.85 sen compared with 16.77 sen. It announced a second interim single tier dividend of 50 sen per share versus 45 sen a year ago.

For the financial year ended Dec 31, 2011, its earnings rose 12% to RM154.49 million compared with RM137.91 million in FY10. Its profit before tax of RM200.10 million showed an increase of RM18.80 million (10.4%) compared to last year.

“The increase in profit before tax was contributed by the general insurance segment, which recorded a profit before tax of RM174.8 million, up by RM26.3 million from last year.

“Investment holding segment recorded a lower profit before tax of RM25.3 million compared to RM32.9 million last year mainly due to lower dividend income,” it said.

Its revenue rose at a stronger pace of 20% to RM902.73 million from RM751.72 million mainly contributed by the general insurance segment which recorded a growth of 22.3%.



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Market Commentary

The FBM KLCI index gained 7.60 points or 0.50% on Monday. The Finance Index increased 0.42% to 13443.7 points, the Properties Index up 1.03% to 1002.21 points and the Plantation Index rose 0.39% to 8469.86 points. The market traded within a range of 8.38 points between an intra-day high of 1521.73 and a low of 1513.35 during the session.

Actively traded stocks include KHSB, SANICHI, NEXTNAT, PROTON-CG, PROTON-CH, TAKASO, WIJAYA-WA, XDL, JCY and JCY-CD. Trading volume increased to 1642.72 mil shares worth RM1706.14 mil as compared to Friday’s 1466.83 mil shares worth RM1388.62 mil.

Leading Movers were CIMB (+11 sen to RM7.29), TENAGA (+13 sen to RM6.09), PETGAS (+30 sen to RM15.10), MAXIS (+9 sen to RM5.62) and AXIATA (+3 sen to RM4.98). Lagging Movers were GENTING (-10 sen to RM11.14), KLK (-6 sen to RM24.58), RHBCAP (-4 sen to RM7.30) and HLFG (-2 sen to RM11.70). Market breadth was positive with 491 gainers as compared to 264 losers. -- JF Apex Securities Bhd



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AmBank, UK’s Friends Life Group in takaful JV

KUALA LUMPUR (Jan 9): AmBank Group and Friends Life Group of UK have teamed up to set up AmFamily Takaful Bhd (AmTakaful) to tap into the family takaful business where the market penetration is very low.

The companies said that AmTakaful, the 12th licensed takaful operator in Malaysia, would carry on the family takaful business with effect from Monday following the soft launch ceremony.

“By combining the expertise of its shareholders (namely AmBank Group and Friends Life Group), as well as Shariah principles and values, AmTakaful will be introducing a wide range of family takaful solutions to meet the evolving lifestyle needs of all Malaysians,” they said in the statement.

The chairman of AmBank Group and AmTakaful, Tan Sri Azman Hashim pointed out there was a huge business opportunity as market penetration rate for family takaful business in Malaysia was relatively low and remains largely untapped.

“AmTakaful’s range of family takaful products will appeal to all Malaysians in line with Bank Negara Malaysia’s efforts in actively promoting Islamic finance as an additional avenue for Malaysian consumers in meeting their financial services needs” he said.

The managing director of Friends Life’s international businesses John Van Der Wielen said: “This development marks the beginning of an exciting period of additional growth for both AmBank Group and Friends Life Group.”

The company will be led by Wan Zamri Wan Zain as chief executive officer, who has over two decades of experience in the field of banking, investment, insurance and takaful.



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KLCI closes higher but gains could be short-lived

KUALA LUMPUR (Jan 9): The FBM KLCI closed higher Monday as some regional markets reversed earlier losses lifted by short-covering after mainland markets were boosted by better-than-expected economic data and comments from Chinese Premier Wen Jiabao.

Meanwhile, European shares turned negative in choppy trading on Monday, with heavyweight GlaxoSmithKline leading the healthcare sector lower after the release of a mixed batch of clinical trials results on a key new lung drug, according to Reuters.

The FBM KLCI rose 7.60 points to 1,521.73, lifted by gains at select blue chips.

Gainers beat losers by 491 to 264, while 301 counters traded unchanged. Volume was 1.64 billion shares valued at RM1.71 billion.

Wen said Beijing would improve market regulation and protect investor rights after a financial work conference over the weekend, according to Reuters

He said China must "strengthen and improve its financial supervision and effectively prevent systematic financial risks", calling on Saturday for a reduction of risks from local government debt, it said.

At the regional markets, the Shanghai Composite Index jumped 2.89% to 2,225.89 and Hong Kong’s Hang Seng Index rose 1.47% to 18,865.72, while South Korea’s Kospi shed 0.90% to 1,826.49, Taiwan’s Taiex edged down 0.39% to 7,093.04 and Singapore’s Straits Times Index slipped 0.90% to 2,691.28.

Japan stock markets are closed for a national holiday.

On Bursa Malaysia, BAT added RM1.08 to RM49.84, Dutch Lady 80 sen to RM26, Harvest Court and Genting PLANTATION []s 33 sen each to RM1.41 and RM8.90, Petronas Gas 30 sen to RM15.10, Batu Kawan 28 sen to RM18.76, Proton 26 sen to RM5.25, F&N 24 sen to RM18.74 and Can-One 23 sen to RM1.82.

KHSB was the most actively traded counter with 106.98 million shares done. The stock rose 13.5 sen to 50 sen.

Other actives included Sanichi, Nextnation, Proton, Takaso, Wijaya, XDL and JCY.

The decliners included Nestle, Lafarge Malayan Cement, BHIC, Southern Acids, JCY, Boxpak, Nadayu, Ta Ann and Genting.



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REIT gaining traction

Property sector
Maintain overweight: We believe M-REIT will continue to garner interest due to the uncertain investing climate where most investors will opt for defensive plays. We remain positive on the sector for its solid fundamentals and defensive yields averaging 6.8% (net). We see a further re-rating on M-REIT with the potential REIT-ing of Mid Valley Megamall and The Gardens Mall, making the sector more appealing to international investors. Axis REIT is our top pick for the sector.

M-REIT have outperformed S-REIT, particularly with the listing of Pavilion REIT on Dec 8, 2011, which has narrowed M-REIT-S-REIT yield gap to +29 basis points (bps) in mid-December (from 119bps in mid-October). The potential REIT-ing of KrisAssets’ (not rated) RM2.8 billion Mid Valley Megamall and The Gardens Mall would further develop the breadth and depth of M-REIT, we believe. It was reported that KrisAssets’ major shareholder, IGB Corp Bhd (not rated; 76% stake) is hiring investment bankers to look into structuring a REIT which they hope to launch by 1H12.

Most M-REIT have gearing below 0.4 times (well below the Securities Commission’s 0.5 times cap). Post-private placements, Axis REIT and CMMT’s gearing would be around 0.24-0.3 times. M-REIT also have low refinancing risks over the next one year due to active capital management (preference for long-term over short-term debt) after the 2008 global financial crisis. Strong balance sheets provide room for expansion without equity fundraising.




Quill Capita Trust has the highest percentage of leases up for renewal (38% of net lettable area or NLA) in 2012, followed by 32% for CMMT. While the office market continues to be threatened by excessive supply, Quill has thus far managed to retain its tenants with a 2% to 3% annual rate hike due to its active management and good relations with the existing tenants. As for CMMT, the bulk of the 32% relates to occupancy at The Mines. We understand that CMMT has received positive indications on renewals thus far.

M-REIT trade at an average 6.8% 2012 net yield, which is attractive compared with the 3.7% yield on 10-year MGS. At our DCF-based target prices, M-REIT under our coverage would trade at implied yields of 6.3% to 7.8% (gross). We retain all stock calls except for CMMT (downgrade to “hold” from “buy”) whose share price has run ahead due to the spillover effects post listing of large-cap Pavilion REIT. — Maybank IB Research, Jan 6


This article appeared in The Edge Financial Daily, January 9, 2012.



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2012 CEO Outlook series: Carlsberg banks on premium beers

Soren Ravn, managing director of Carlsberg Brewery Malaysia Bhd, shares his views and outlook on the year ahead with The Edge Financial Daily in this interview.

TEFD: What are your expectations for 2012, for your company and your industry?
Ravn: Industry-wise, we are expecting the overall growth to be relatively flat at low single-digit growth. Nevertheless, the premium segment will continue to be the key growth driver as consumers become more sophisticated and are increasingly trading up for more premium selections and this segment will definitely be a key focus for us as a company in 2012.

We are aiming for favourable results in 2012 due to better product and channel mix. At the same time, efficiency improvements will remain one of the top priorities to optimise our cost structure and asset base in the midst of a weakening global environment — which is likely to insert pressure on cost of goods sold.

What impact, if any, do you expect from the euro crisis?
The European Union (EU) is Malaysia’s fourth largest export market after China, Singapore and Japan, accounting for 10.4% of total exports in the first eight months of 2011. The contribution of Europe-bound exports to overall export growth in 2011 was negligible and, in the event of a recession, the EU (situation) could very well turn into a drag.

With demand from the United States and EU accounting for nearly 20% of total exports and 16.4% of GDP, Malaysia looks relatively more exposed to weaker growth due to these two economies.

In addition, a recession in Europe may impact the Malaysian economy via slower inflows of foreign direct investments (FDI). In the first half of 2011, FDI from European countries totalled RM11.4 billion, marking Europe as the second largest foreign direct investor in Malaysia, and contributing around 22.8% of overall FDI.

Will Bank Negara Malaysia’s (BNM) recent tightening of consumer borrowing have an impact?
The need to cushion consumers from higher debt-servicing burdens is indeed a strongest argument for BNM to tighten consumer borrowing and maintain overnight policy rate at 3%. Private consumption growth may soften especially due to a reduction in credit card purchases.

We are of the opinion that these steps are necessary to ensure that the consumer credit situation does not get out of hand. Unbridled consumer credit was one of the contributing factors that impacted developed economies and the intention to rein this in is welcomed.

What are the company’s plans and focus for 2012?
We will continue to drive profitable growth with focus on our flagship brand — Carlsberg Green Label (CGL) as well as our extensive portfolio of other brands. It is important for us to provide our range of customers with a suite of brands that caters to their varying tastes and economic conditions.

As a result of the re-launch of Carlsberg brand and its bold new look and tagline — “That Calls for A Carlsberg” in 2011, we received exceptionally positive feedback and acceptance by our market segment. Carlsberg Green Label strengthened its position as the most preferred brand among all drinkers in Malaysia (one out of every two drinkers voted Carlsberg as their preferred brand based on the study by independent international research agency Millward Brown).

We expect 2012 to be another exciting year for our Carlsberg Green Label particularly due to the fact that Carlsberg is the official beer of Euro 2012.

We also see growing consumption from the younger segment, below the 30-year-old bracket, hence we will be increasing our efforts to engage with this market segment.

Our joint venture with subsidiary Luen Heng F&B Sdn Bhd in end-2007 (which helped us establish our presence in the premium segment with imported beer brands such as Hoegaarden, Erdinger and Stella Artois) has also played an important part in building our brand portfolio. Additionally, Kronenbourg 1664 & Blanc have reinforced our brand presence in this market segment which contributed to our growth in 2011.

We are excited about the Asahi Breweries Ltd deal to locally manufacture, sell and distribute Asahi Super Dry (the No 1 Japanese beer brand around the world). This marked another important milestone in Carlsberg Malaysia’s journey to becoming the nation’s most vibrant beer portfolio company.

Driving operating efficiencies will continue to be a priority as we look toward 2012. We have maintained our standards and freshness while ensuring efficiencies improve. Toward this end, we introduced and rolled out a new generation distributor model in 2011 where we aim to transform our traditional wholesalers to become trusted and strategic partners of Carlsberg Malaysia. This initiative will help us optimise our efficiencies in route-to-market while at the same time improve our customer service throughout the nation.

On our human capital front, we have increased employee engagements while streamlining our talent management and development programmes. These initiatives will be a key agenda next year as we look forward to drive growth and build a sustainable future.

One of our flagship corporate social responsibility projects themed Top 10 Charity Campaign celebrated its 25th anniversary in 2011. We have over the years accumulated a total school-building fund of RM370 million to date. Combining the contribution by all our education programmes, we have also raised more than RM400 million for the development of vernacular education in Malaysia. We have pledged to continue our support and contribution toward the development of education for both the Chinese and Indian communities.

What is your personal wish list for 2012?
Obviously, we would like Malaysian consumers to continue to enjoy their favourite beer without having to be taxed further. We are appreciative of the government’s efforts in not increasing duties under Budget 2012 as this will only have a negative impact on tourism and be an unnecessary burden to Malaysian consumers.

We also look forward to seeing the Malaysian economy continue to improve and this should be the case with all the transformational efforts being undertaken. Of course, implementation will be crucial toward this end.


This article appeared in The Edge Financial Daily, January 9, 2012.



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Genting Malaysia making its presence felt

Genting Malaysia Bhd
(Jan 6, RM3.88)
Maintain hold at RM3.89 with target price of RM4.10: GenM has signed a non-binding letter of intent (LoI) with New York State Urban Development Corp to develop an integrated mixed-use complex next to Resorts World New York (RWNY). The US$4 billion (RM12.6 billion) integrated resort (IR) will include a 3.8 million sq ft convention centre, 3,000 hotel rooms and casino expansion. It might see a binding MoU before the Nov 30 deadline as both the New York governor and mayor support the project, which will create jobs and bring in tax revenues and tourist dollars (largest MICE space in the US). This might improve its chances of securing approvals for table games at RWNY, although it would be a complicated process to amend the state constitution (currently, only Native American-owned casinos are allowed).

RWNY is expected to contribute 16% of GenM’s 2012F earnings. It is fully operational with 5,000 video lottery terminals (VLT) and 205 electronic gaming tables. Net win for the past two months had touched US$78 million, with average daily win/VLT at US$261 (based on 5,000 VLTs versus US$618 for 2,486 VLTs during the opening week). We assumed US$300 daily win/VLT in our forecasts, but that should rise with more promotional activities and an extensive bus programme. The covered walkway link to an adjacent train stop (to be completed by 2Q12) should improve accessibility further. RWNY can leverage on its strategic location i.e. 10 minutes from JFK Airport (huge transit passenger traffic) and 15 minutes from Flushing’s Chinatown (about 30 minutes from Manhattan’s Chinatown).

Stretching balance sheet and cash flow. If both the RWNY extension and RW Miami pan out, GenM’s capex could reach US$7.8 billion over the next five years or so. Assuming 70:30 debt-equity, 2013F net gearing could spike up to 86% (may be lower depending on timing of debt drawdowns), but GenM should be able to secure funding given its US$410 million net cash, healthy US$500 million per annum operating cash flow, and solid execution track record. Given limited details, it is premature to assess the earnings impact although Genting group typically targets a minimum of 15% IRR. — HwangDBS Vickers Research, Jan 6


This article appeared in The Edge Financial Daily, January 9, 2012.



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SapCrest expanding IPF business

SapuraCrest Petroleum Bhd
(Jan 6, RM4.58)
Maintain neutral at RM4.53 with a revised target price of RM4.60 (from RM3.90): SapCrest’s wholly-owned subsidiary TL Offshore S/B (TLO) has finalised, executed and formalised two separate contracts with Cosco (Nantong) Shipyard Co Ltd for the construction of two units of pipelay cum heavylift offshore construction vessels at a combined contract value of US$227 million (RM715 million). One of the vessels is scheduled to be delivered in 4QCY13 and the other vessel in 1QCY14.

To recap, TLO issued two separate letters of award for the abovementioned contract to Cosco on Sept 22 last year. The first vessel (hull number N449) and the second (with hull number N448) are set to cost US$117 million and US$110 million respectively. Both vessels are to be constructed, completed and delivered at the Cosco’s shipyard in China. The acquisition will be funded by internally generated fund and bank borrowings.

Currently, SapCrest jointly owns three heavylift cum pipelay vessels with its international partners (Subsea 7, Larsen & Toubro and Quippo) and two lay barges through Clough (the acquisition was completed recently on Dec 22, 2011). Besides the US$1.4 billion contract from Brazil’s state-controlled oil giant, PetrĂ³leo Brasileiro SA (Petrobras), TLO will also construct, charter and operate three pipe-laying support vessels (PLSV). Including the two new vessels to be built by Cosco, SapCrest will own 10 pipelay/lift vessels fleet by FY15, which is the largest in Malaysia. SapCrest’s market share in the domestic installation of pipelines and facilities (IPF) segment is more than 70% and 100% respectively for the shallow water and deepwater. Note that Global Industries, McDermott, Hyundai, Nippon Steel, Saipem and Swiber are its competitors locally.




Maintain “neutral”. We are raising our target price for SapCrest to RM4.60 (from RM3.90) which is at par with the offer price for its merger deal. Our target price implied 21 times PER12, which is about +1 standard deviation above its historical average since 2007. The proposed merger with Kencana Petroleum Bhd and the listing of Integral Key (SPV to facilitate the merger) is expected to be completed by 1QCY12. — MIDF Research, Jan 6


This article appeared in The Edge Financial Daily, January 9, 2012.



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All eyes on Harvest Court today

KUALA LUMPUR: Investors will closely watch the share price performance of Harvest Court Industries Bhd today after Bursa Malaysia lifted its nearly two-month old designation status last Friday.

In mid-November, Bursa Malaysia declared Harvest Court’s shares and warrants as “designated securities” after the share price skyrocketed as much as 20 times in a matter of weeks.

Since then, the stock price has halved from a peak of RM2.14 to RM1.08 last Friday, although it is still well above the below-10-sen- level the stock traded at prior to its run-up. Trading volume also dwindled to just 202,200 shares last Friday, compared with a peak of 9.5 million shares in early November.

Clearly, the restrictions had worked and taken away some froth, although the stock exchange also warned that it would continue to monitor the trading in the stock.

“In the discharge of its frontline regulatory role, the stock exchange will continue to monitor the trading activities of Harvest and Harvest-WA, and where trading concerns are noted, the exchange may take appropriate regulatory actions”, Bursa Malaysia said in a statement last Friday.

How the stock reacts today remains to be seen. However, one thing is almost certain — Harvest Court will likely not be the last stock to be designated as the market is prone to speculative trading.

It is often said that a little speculation is sometimes good for the market, especially during times when the market is listless, sentiment is poor or where there are few fresh leads. However, there is a clear line drawn between speculation and stock manipulation, and the authorities are seen as doing the right thing in clamping down hard on the latter.

Still, one should note that the designation of a stock is purely a reflection of the company’s share price rather than its actual operating business, although valuations may have disconnected.

Since the entry of new shareholders, Harvest Court for instance, has clinched several contracts for projects related to its new directors.

While its financial performance will likely improve with the new contracts, at what level the stock should trade is a subjective matter.

The company’s net assets per share stood at a low of 17.5 sen as at Sept 30, 2011.

Indeed, history has proven that designated stocks do not necessarily mean a death sentence for the companies involved.

A slew of stocks were given the dreaded designation status in the early 1990s — the height of the bull run.

One of them, Union Paper Holdings Bhd, became the subject of national and even criminal interest. Many of these companies were either taken private or were loss-making and eventually changed hands, including Union Paper.

However, some have flourished into stronger entities, notably Iris Corp Bhd — the last designated stock before Harvest Court — which is scaling new heights financially.

The Edge Financial Daily takes a trip down memory lane to look at some companies which made history by being designated — and where they are now.

Union Paper Holdings Bhd
One of the biggest scandals that rocked the credibility of the then Kuala Lumpur Stock Exchange in the early 1990s involved Union Paper Holdings Bhd (UPHB), a joss paper, toilet paper and wrapping paper processing company.

Its share price skyrocketed 1,229% in a span of three months, from a low of RM1.73 to RM23, before crashing to RM4.72 following its designation by the local bourse.

The meteoric rise in its share price during the height of the bull run in 1993 was partly attributed to a rumour that KUB Malaysia Bhd was poised to make a reverse takeover.

The rumour never materialised. The company had a paid-up capital of only RM17.37 million and former deputy prime minister, the late Tun Ghafar Baba, was its chairman.

It became a topic of national interest not only for punters but also the man on the street who lost a lot of money from investing in the stock.

“It is easy to understand why people were scared. This was the time when someone with a yen to invest and with balls of steel could become a millionaire overnight. This was a time when investment strategies were non-existent and investment decisions were made because ‘someone’s mother, brother, uncle’ had a hot tip. People borrowed heavily to invest, often from people who no one in their right mind would ever want to owe money. And they took all that money and sank it into UPHB,” wrote Teoh Siang Swee in an essay competition organised by the Securities Industry Development Corporation.

During the investigations, short- selling in the stock came to light.

Tan Sri Ibrahim Mohamed, then CEO of Uniphoenix Corp Bhd and Damansara Realty Bhd, was fined RM500,000 after pleading guilty to short-selling 825,000 UPHB shares.

After the debacle died down, the company’s finances suffered and posted losses from 1994 to 1998, before it was acquired by the Tung Hup Group in 1999 via a reverse takeover.

But the stock did attempt one more last hurrah.

It saw another sharp rally in late 1996 and early 1997 that drove the stock price to a high of RM17.80 in February, before tumbling all the way down to RM1 by the end of the year as the Asian financial crisis occurred.

Under the reverse takeover, UPHB was renamed TH Group Bhd. Its paper business was sold for a nominal RM1 and assets worth RM333.64 million were injected into the group via an issue of new shares.

TH Group’s new core businesses were in timber extraction, plantations and construction, and they fared relatively well financially for the next few years.

Subsequently, TH Group diversified its operations to include an information technology venture capital arm. The company was also active in its contracting and civil engineering divisions, garnering contracts locally and from Indonesia.

Nevertheless, it fell into the red in 2007 and 2008.

In September 2008, TH Group’s major shareholders proposed to privatise the company via a selective capital reduction and repayment of 75 sen.

The company was delisted in 2009 after the exercise was completed — 10 years after the reverse takeover and 16 years after the stock’s designation.

A final chapter closed in July last year when NTPM Holdings Bhd, which manufactures tissue and toilet paper, entered into agreements with Union Paper Industries Sdn Bhd, the core subsidiary of the formerly listed UPHB, to buy its land and machinery for RM20 million.

Ho Wah Genting Bhd
In the middle of 2001, Ho Wah Genting Bhd’s (HWGB) securities became the target of punters, driving the stock price up 284.2% from a low of 57 sen to a high of RM2.19 within six months.

The speculation was much more feverish for its warrants, whose price exceeded even that of the underlying shares by several folds.

HWGB warrants skyrocketed from RM1.30 in late July to RM12.60 by mid-August, earning the ire of regulators which designated the stock and warrants then.

After the stock’s designation status was lifted at the end of January 2002, it drifted down to around the RM1 level, and fell below 50 sen by mid-2004, where it has largely stayed since.

HWGB manufactures and trades in wires and cables, moulded power supply cord sets and cable assemblies for electrical and electronic devices and equipment. It is also involved in mining dolomite and manufacturing magnesium ingots. The US market contributes to the bulk of its revenue, subjecting it to volatile commodity prices and the uncertain economic recovery in the US.

Shortly after its designation, HWGB tried its luck in the gaming industry and opened a casino in Poipet, Cambodia. However, the casino ceased operations in 2006 following several years of losses.

Recently, the company had been gambling on mining and natural resources to spur its earnings, which have been relatively unexciting in the past decade.

Its subsidiary HWG Tin Mining Sdn Bhd has been awarded a 10-year tin mining lease until 2020 on a 202.4ha site in Pengkalan Hulu, Grik, Perak.

“From mid-February until now, we’ve extracted around 30 tonnes of tin ore”, managing director William Teo said in July last year. He is targeting to produce 1,800 tonnes a year in 2012.

Teo expects HWGB’s tin mining business to be a major earnings driver as the operations move into commercial production by mid-2012.

“Back in January 2008, tin was trading at US$16,500 (RM51,975) per tonne and as at June 2011, it climbed to US$25,500 per tonne. The buoyant pricing was mainly due to global demand outpacing supply. The weakening US dollar had also contributed to the price hike,” he said.

Teo had then expected tin prices to reach between US$25,000 and US$30,000 per tonne due to limited supply and rising demand from the electrical and electronics sector.

Unfortunately, tin prices have since fallen to around US$20,000 per tonne.

Malaysia Smelting Corp Bhd CEO Mohammad Ajib Anuar was recently quoted in media reports as saying that 20% of the world’s tin producers would go out of business at the current price level, adding that their production costs were around US$20,000 to US$25,000 per tonne.

HWGB also owns a 26% stake in Hong Kong-listed magnesium producer CVM Ltd, which has dolomite reserves of some 20 million tonnes in Perak.

In the 10 years after the designation, HWGB has gone through various ups and downs, finding new businesses to spur growth. It now bets on mining for its future, although that is subject to volatility in metal prices.

Financially, HWGB appears to be turning around the corner. For the year ended Dec 31, 2010, the company recorded an all-time high revenue of RM240.53 million from RM144.04 million the previous year, with a net profit of RM9.85 million versus a net loss of RM23.81 million.

Investors will be monitoring if the recovery continues and the tin venture pans out.

Iris Corp Bhd
Prior to Harvest Court, Bursa Malaysia had not designated a company for five years, since Iris Corp Bhd in 2006.

Iris, a security systems company, saw its share price soar from around 14 sen to just under RM1.40 in the course of five months before it was designated in May 2006 to curb excessive speculation.

Following the designation, the stock fell back to around 70 sen, but attempted to reach a similar high in July 2006 before tumbling to the 20 to 30 sen level by year-end. Since then, Iris has been a penny stock, languishing mostly below 20 sen in the past few years. It last traded at 16 sen.

Ironically, while the stock price is languishing, Iris appears to be faring quite well operationally.

The company specialises in digital identity, business, food security and environmental solutions. Iris pioneered the world’s first electronic passport and national multi-application identity card with the introduction of the Malaysian Electronic Passport and the MyKad, whose technologies were introduced across Asia, the Middle East and Africa.

In the months leading up to the designation, filings with Bursa Malaysia indicated that the group was awarded various contracts from the governments of Bahrain, Thailand, India, Nigeria and Somalia for the implementation of its digital identity solutions and securing local contracts with clients such as MyRapid KL.

It also signed agreements with IBM and Hewlett-Packard. This probably drove the masses to punt on the stock. These efforts appeared to have borne fruit, as Iris had banked on electronic passports as the springboard for its growth.

For the financial year ended Dec 31, 2010, Iris’ revenue increased 10.4% to a record high of RM366.1 million, with 66% and 35% from domestic and foreign contracts respectively.

The company attributed the growth to sustained demand for digital identity solutions and its success in making inroads into financial institutions.

Net profit for the year surged 79.9% to a record RM28 million, or two sen per share, due to higher contributions from domestic and overseas ePassport projects and cost reduction measures. This placed the stock’s trailing price-to-earnings ratio at 8.3 times. The company’s digital identity solutions division is the main driver of growth, accounting for 82% of revenue in 2010.

Major existing projects are the Malaysia ePassport, Malaysia MyKad, Nigeria ePassport and the Bangladesh MRP Passport. Other contracts include the Thai inlay project, Senegal ePassport, Cambodia ePassport, Italy inlay project, Egypt CSO job, Maldives ePassport and the Canadian driving licence project.

According to the 2010 annual report, the group continued to expand its global presence via the signing of a US$149.9 million contract with the Ministry of Home Affairs of Tanzania for the implementation of the national identity card system.

To add strength to its already impressive portfolio, the group received three industry awards in 2010. These were the MSC Malaysia Research and Development Grant Scheme Top Performer award, the Ernst & Young Entrepreneur of the Year award and the Ministry of International Trade and Industry Excellence award for export excellence.

For a company shunned by investors due to the stigma of its 2006 designation, Iris appears to have come a long way.

Inch Kenneth Kajang Rubber plc, Kluang Rubber Co (M) Bhd, Mentakab Rubber Co (Malaya) Bhd and Sungei Bagan Rubber Co (M) Bhd
While some companies have changed hands, restructured or improved post-designation, there are some which continue operating just as they were.

In mid-2005, a handful of old and very thinly capitalised plantation companies were designated as their share prices shot up in response to large bonus issues. They are Inch Kenneth, Kluang Rubber and Sungei Bagan Rubber. The last two are related companies.

Another small company, Mentakab Rubber was designated in 2004 when an 18-for-1 bonus issue was proposed.

The large bonus issues were in response to new minimum capital regulations for listed companies set by the regulators, namely RM60 million for then Main Board companies and RM40 million for Second Board.

Inch Kenneth, for instance, went through a 50-for-1 bonus issue, and its stock price jumped 89% in three days.

“The rationale for this bonus issue was to meet the minimum issued and paid-up share capital of at least RM60 million as required by the Securities Commission and to reward the existing shareholders of the group for their continued support,” it said in the group’s 2005 annual report.

“The bonus issue was effected by capitalising on the company’s revaluation reserve account and retained profits,” it continued.

After the issuance, the company’s operations continued as before the designation. Inch Kenneth owns several plantations in Kajang and Bangi, which are prime for property development, and late last year sold a 448.6-acre (179.4ha) plot to UEM Land Holdings Bhd for RM259.9 million or RM13.30 psf.

The same was seen with Kluang Rubber when it issued a 29-to-1 bonus issue in 2005, the same year Inch Kenneth was designated.

“The Bursa Malaysia Securities Bhd Listing Requirements for Main Board public-listed companies (plc) require a minimum paid-up capital of RM60 million. The company has yet to comply with this requirement and is currently looking at various options,” it said in its 2004 annual report.

As of the financial year ended 2004, Kluang Rubber only had a paid-up capital of RM2 million, less than 1% of the required RM60 million.

After increasing its capital base, the company has remained a low-profile small plantation company with 1,600 acres of land in Kluang and annual revenue of RM7 to RM8 million a year.

Similarly, Sungei Bagan is also collecting earnings from its 2,744-acre plantations in Kelantan, with little impetus or growth or corporate developments. Its revenue for the year ended June 2011 stood at just RM13.5 million.

It was a different story for Mentakab Rubber which is a very small and odd subsidiary of government-controlled giant Golden Hope Plantations Bhd.

Mentakab was eventually privatised with Golden Hope and several other companies under the Synergy Drive merger exercise in November 2007 to create what is now the enlarged Sime Darby Bhd.


This article appeared in The Edge Financial Daily, January 9, 2012.


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HDD counters up on JCY’s profit guidance

KUALA LUMPUR: Spurred by JCY International Bhd’s profit guidance announcement last Thursday, other hard disk drive (HDD) players also saw rising investor interest in their companies, sending share prices higher.

Dufu Technology Corp Bhd, Eng Teknologi Holdings Bhd (EngTek) and Notion VTEC Bhd all saw their share prices end last week on a higher note; in particular, Dufu and EngTek with substantial volumes of shares changing hands.

To recap, JCY guided that its net profit for first quarter ended Dec 31, was expected to see a year-on-year leap of around 1,900%. This was the result of a handful of factors including the strengthening US dollar, better cost management and product mix.

However, the main driver for the improved results was the floods in Thailand last November. While a number of HDD component manufacturers were hit, JCY’s facility was spared.

As a result, there was also a surge in renewed interest in other HDD manufacturers as the industry works to normalise its production output in the wake of the floods.

“The positive sentiment from JCY’s profit guidance has spilled over to the other players. Now with average selling prices higher, it could mean a bump in earnings for other players if they managed to capitalise on the fact,” said an industry observer.

Last Friday, Dufu closed 1.5 sen higher at 36.5 sen with some 2.98 million shares done.

It was a similar story for EngTek, which had traded at around RM1.55 for most of December. EngTek’s share price ended 15 sen higher last Friday at RM1.69, with some 2.85 million shares traded.

However, Notion VTec did not manage to gain as much interest as the other companies although its share price did close higher at RM1.82 last Friday with around 131,500 shares traded. At the beginning of Dec 2011, its share price traded around the RM1.55 mark.

This could have been due to the fact that Notion VTec mostly deals in the manufacturing of camera parts compared to the rest that manufacture parts for other electronic gadgets.

However, the question now is how long the rally in JCY’s share price is expected to continue. In addition, while JCY came out of the affair unscathed, it is uncertain whether Dufu and EngTek would share the same fortunes.

The floods in Thailand had disrupted the HDD supply chain badly, with many analysts opining that the situation would only be resolved in another six months. It resulted in many of the big players writing off not only their inventories but also machines.

In a recent interview, JCY’s non-independent executive director James Wong said that the company expected to see the average selling prices to remain at the current levels for sometime as the supply chain rights itself. In fact, JCY announced that it would be spending around RM300 million over the next 24 months to upgrade its factory and increase production.

However, the real impact on earnings will only be seen in the coming months as the companies announce their results for the last quarter of 2011.


This article appeared in The Edge Financial Daily, January 9, 2012.




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UBS says Malaysia looks pricey but sees FBM KLCI at 1,700

KUALA LUMPUR: Having outperformed most of its regional peers last year, the FBM KLCI is looking unattractive to foreign investors searching for good bargains, said UBS Securities Malaysia Sdn Bhd.

“It has increasingly become more difficult (for foreigners to buy into this market) valuation range right now, trading at a 40% premium to the [Asia ex-Japan] region,” said Chris Oh, UBS’ head of Malaysia research at a media roundtable on the “Malaysia Outlook 2012” here last Friday.

UBS currently has an “underweight” call on Malaysia as well as other Asean countries, given that these markets have been relatively defensive in 2011 and their valuations are no longer attractive. The Malaysian market was the third best-performing Asian market in 2011.

The local market is trading at premium price-earnings (PE) multiples largely due to the perception that Malaysia is a relatively stable market relative to other markets, Oh explained. This stability is due to the dominance of domestic institutional funds like the Employees Provident Fund (EPF) as well as the low foreign ownership levels.

Data from Bursa Malaysia indicated that foreign ownership in Malaysia stood at 22.2% as of September 2011, compared to 27% before the financial crisis of 2008.

In all the past corrections, Malaysia had been able to outperform the MSCI Asia Pacific ex-Japan index every time markets fell, he added.

As such, foreign money may still find its way into the local market, in spite of the multiples already looking rich, should global markets remain volatile and investors become increasingly nervous about developments in Europe and the US, he said. However, more of that money will flow out to markets trading at more attractive earnings multiples should prospects of a recovery become more imminent.

For now, UBS has a year-end target of 1,700 points for the KLCI, on the assumption that risk aversion normalises. The target is based on a forward PE multiple of 14 times, assuming earnings will grow 9% in 2012 and 13% in 2013.

“Malaysia is bracing for a slower external growth environment, but we believe earnings will hold up due to a resilient domestic sector and an on-going economic reform, as a result of the political transformation under Prime Minister Datuk Seri Najib Razak’s leadership,” Oh wrote in a recent note.

The brokerage expects Malaysia’s economy to expand by 3% in 2012 before rebounding to 5.5% in 2013. That’s below its forecast of a 5.9% GDP growth for Asia ex-Japan in 2012 and 6.7% in 2013. Expecting the eurozone to dip into recession, UBS sees global GDP growth for 2012 at only 2.7%, down 50 basis points from 2011, before rebounding to 3.4% in 2013.

Oh’s forecast for the KLCI will fall to 1,300 points should the eurozone crisis be worse than expected, or what he calls a “black-sky scenario”. That’s based on a 12.6 times forward PE and the Malaysian economy contracting 3.3% in 2012.

UBS foresees investors buying higher beta or cyclical names as they position their portfolios for a relief rally when the European situation or market sentiment improves. Investors are also expected to adopt a defensive strategy by going into companies with high earnings visibility, strong cash-flow generation and reasonable dividend yields.

In his presentation last Friday, Oh highlighted five themes for the year and they included the possibility of a pre-election rally, more policy reforms should Najib remain in power, improving Malaysia and Singapore relations as well as a focus on the plantation and the oil and gas sectors.

Pointing out that there was “no clear trend” on a pre-election rally taking place in the past six general elections, UBS reckons the possibility of a pre-election rally taking place here is low due to prevailing weak investor sentiment.

That said, Oh observed that retail investors’ interest in companies with perceived links to the ruling coalition and the current leadership has historically been strong during a pre-election rally. “These companies include SapuraCrest Petroleum Bhd, MMC Corp Bhd, DRB-Hicom Bhd, Malaysian Resources Corp Bhd (MRCB), Johan Holdings Bhd and George Kent (M) Bhd,” Oh wrote in a note dated Dec 1, 2011.

For 2012, UBS top stock picks include Berjaya Sports Toto Bhd, Genting Bhd, Hong Leong Bank Bhd, IJM Corp Bhd and Public Bank Bhd. UBS also likes Axiata Group Bhd and Kuala Lumpur Kepong Bhd, which it has a ‘neutral’ recommendation currently.

These companies are on its preferred list because they are well-managed, with strong fundamentals, earnings growth momentum, clear and strategic direction and provide attractive dividend yields, UBS added.


This article appeared in The Edge Financial Daily, January 9, 2012.



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FBM KLCI up 3.94 points

At 4.00 p.m. today, there were 422 gainers, 298 losers and 289 counters traded unchanged on the Bursa Malaysia.

The FBM-KLCI was at 1,518.07 up 3.94 points, the FBMACE was at 4,167.95 up 38.03 points, and the FBMEmas was at 10,448.26 up 31.45 points.

Turnover was at 1.309 billion shares valued at RM1.203 billion. -- BERNAMA



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Inari: Amertron buy to boost revenue

Inari Bhd is optimistic the proposed 100 per cent equity acquisition of Amertron Inc (Global) Limited will boost its revenue by three fold.

Inari, an electronics manufacturing services (EMS) provider, and Amertron Global, a Cayman Islands-incorporated company, inked a memorandum of understanding today to start negotiations for the acquisition, expected to be completed in the second half of this year.

Inari managing director Dr Tan Seng Chuan said the company expects to achieve a revenue of US$60 million for the financial year ending June 30, 2012 (excluding the proposed acquisition).

"On a combined basis, upon completion in eight to 10 months, we will have a revenue of US$180 million.

"It will take us a while to work out the handover following Amertron's large network, thus Inari foresees 20 months down the road to benefit from this synergy," he told reporters after the signing ceremony here today.

He said the sales and purchase value would be based on the audited net tangible asset value of Amertron Global, indicatively at US$320 million as at June 30, 2011.

Amertron has three EMS plants, two operating in the Philippines and one in China, with about 3,700 employees worldwide.

He said with Amertron Global on board, Inari would be a step closer to becoming a multinational EMS player.

The acquisition would enable Inari to move into new markets, broaden customer base, expertise and manufacturing capacity as well as increase its current staff strength four-fold, he said.

"This move to strengthen our position will give us access to Amertron's global customer base in Asia, the US and Europe.

"Today's signing ceremony marks the company's second strategic move after the first merger and acquisition exercise, the 51 per cent investment in Ceedtec Sdn Bhd," Tan added.

In its goal to be a leading global EMS industry player, Inari embarked to be listed on the ACE Market of Bursa Malaysia in July 2011.

Inari provides end-to-end, vertically-integrated semiconductor packaging services for radio frequency chips in the wireless and mobile technology markets, while Amertron Global, also an EMS provider, focuses on the manufacture of mainly optoelectronic modules.

Going forward, he said compared to the global EMS industry worth US$150 billion, the expected US$180 million still places Inari as a relatively small player.

For the next lap of growth, Inari will be looking at opportunities to grow as soon as possible given the competitive global landscape, he added. -- BERNAMA



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Proton share price extends gains on more suitors

KUALA LUMPUR: Shares of PROTON HOLDINGS BHD [] rallied on Monday as newsflow about more suitors for Khazanah Nasional Bhd’s 42.7% stake in the national car maker whetted the appetite of investors.

At 3.33pm, Proton share price was up 29 sen to RM5.28 with 6.77 million shares done. The call warrants Proton-CG added eight sen to 56 sen and Proton-CH also eight sen to 51 sen.

The FBM KLCI rose 3.14 points to 1,517.27. Turnover was 1.18 billion shares valued at RM1.04 billion. The broader market showed an improvement, with 419 gainers, 279 losers and 281 stocks unchanged.

OSK Research said it was maintaining its trading buy for Proton at an unchanged fair value of RM5.87, premised on a 10% premium to its adjusted NTA per share of RM5.34, which includes a revaluation surplus of RM147.6 million on the group's land bank and after stripping off all intangibles and inventories, as well as the estimated equity value of loss-making Lotus.

“The stock’s 1HFY12 NTA is RM7.62,” it said in a research note.

OSK Research said the attempts from Proton chairman Datuk Nadzmi Mohd Salleh and other joint bidders do not represent enough value to ensure Proton’s turnaround.

“We still reiterate that DRB-Hicom is currently Proton’s best suitor given its tie-up with Volkswagen, which intends to set up a large ASEAN production hub in Malaysia. This is followed by Naza, which plans to localise production of the Chevrolet marquee by making use of Proton’s Tanjung Malim plant,” it said.

OSK Research said funding would not be an issue for DRB-Hicom as the group’s net gearing ex-bank related assets and liabilities stand at only 17%, as indicated by its last quarterly results.

“This can be easily stretched to 50%-70% to acquire Proton and possibly even higher, given Proton’s onerous capex needs and its planned R&D activities and expansion,” it said.

The research house said interestingly DRB-Hicom recently announced that it is raising RM500m from the sukuk market for working capital purposes, as well as other potential acquisitions and expansion. It has an option to maximize this sukuk issue to the tune of RM1.8 billion.



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Power sale to Singapore unlikely, says OSK

OSK Research said it is unlikely that any party would be selling power to Singapore until gas and electricity subsidies are completely removed.

The research house said Petronas has baulked at having to carry on with gas subsidies while TNB has clamoured for more gas.

It said there has been speculation that the electricity sale might involve laying a new submarine cable from Sarawak's dams to Singapore given the excess electricity.

"However, this too would take some time given the construction lead time required," it said in a note today.

"As such, unless Malaysians suddenly feel very generous and wish to sell subsidised electricity to Singapore, we believe that it is unlikely that the sale of electricity to the republic would materialise anytime soon," it said.

OSK Research has maintained its 'neutral' call on the utility sector with 'top buy' being Petronas Gas at RM15.95 while remaining neutral on Tenaga Nasional at RM6.36.

The research house, however, maintained its trading 'buy' call at RM3.65 on MMC Corp, mainly on the potential listing of its subsidiaries as well as merger and accquisition news.

During the Malaysia-Singapore Leaders' Retreat last week, Singapore Prime Minister Lee Hsien Loong said the city-state was keen to buy electricity from Malaysia if the terms are right.

Lee said Singapore was in the process of working out a framework to manage the import of electricity and Malaysian companies were welcome to bid to supply electricity.

Prime Minister Datuk Seri Najib Tun Razak said that the sale of electricity would be a private sector initiative. -- BERNAMA



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Run-up in JCY stalls despite recent positive profit outlook

KUALA LUMPUR (Jan 9): The run-up in hard disk drive manufacturer JCY International Bhd’s shares and call warrants seemed to have stalled after the recent positive profit forecast announced by the company.

Investors who bought the shares ahead and after the Jan 4 announcement seemed to have been locking in their profits.

At 2.52pm, JCY was down eight sen to RM1.14 with 16.68 million shares done while the warrants fell seven sen to 57 with 15.43 million units transacted.

The FBM KLCI was up 2.64 points to 1,516.77. Turnover was 948.16 million shares done valued at RM787.04 million. There were 389 gainers, 247 losers and 292 stocks unchanged.

JCY had stated that the group is likely to record a surge in earnings for the quarter ended Dec 31, 2011.

In said based on current available information, the group was likely to record an increase in net profit for the financial quarter ended Dec 31, 2011 “of approximately 1,900%” compared with a year ago where net profit was RM7.5million.

According to a CIMB Equities Research report, the favourable impact of a higher average selling price, better product mix and stronger US dollar prompted us to revise our above-industry forecasts again for FY12-14.

“This raises our target price to RM1.54, still based on 6x CY13 price-to-earnings. Maintain Trading Buy,” it had then said on Jan 5.



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Inari climbs after saying may buy Amertron

Inari Bhd, a Malaysian semiconductor-packaging services company, rose to the highest level in two months in Kuala Lumpur trading after it proposed buying Amertron Inc (Global), an electronics-manufacturing services provider.

The stock gained 5.3 per cent to 39.5 sen at 2:40 p.m. local time, set for its highest close since Nov 9. Inari aims to complete due diligence within 60 days, its statement said. -- Bloomberg



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Astral rises on RM12.5m order

Astral Supreme Bhd, a maker of electronic toys and games, climbed 4.6 per cent to 23 sen. The company won a RM12.5 million (US$4 million) order from Sphairon Technologies GmbH, Astral said in a statement.-- Bloomberg



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Petra Energy drops 7.4%

Petra Energy Bhd, an oil and gas services provider, slid 7.4 per cent to RM1, bound for its lowest close since Oct 12. The company received a notice from shareholders to vote on the proposed removal of its chief executive officer Kamarul Baharin Albakri, it said in a statement. -- Bloomberg



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Genting dips on lower profit forecast

Genting Bhd, a casino, plantation and property group, dropped 1.1 per cent to RM11.12, bound for its steepest decline since Dec. 20. Its Genting Singapore Plc (GENS SP) unit was downgraded to “neutral” from “buy” at UBS AG, which said profit growth may remain “subdued” in 2012. -- Bloomberg



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MAS advances on increased flights

Malaysian Airline System Bhd, the national carrier, gained 3.3 per cent to RM1.57, set for its highest close since Aug 23. The airline will increase flights to destinations including Beijing, Los Angeles, and the Philippines, it said in a statement. -- Bloomberg



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DRB-Hicom may be Proton's best suitor: OSK

DRB-Hicom Bhd may just be the best bidder for Khazanah's 42.7 per cent stake in Proton Holdings, said OSK Research.

In a research note today, OSK said DRB-Hicom may just be the best suitor out there despite bids by Proton chairman Datuk Nadzmi Mohd Salleh and Tan Sri Arumugam Apavoo Packiri and Gerald Lopez of Genii Capital, a private equity firm with a stake in the Lotus Renault GP Formula One Team.

"We opine that the attempts from Nadzmi and other joint bidders do not represent enough value to ensure Proton's turnaround.

"We still reiterate that DRB is currently Proton's best suitor given its tie-up with Volkswagen, which intends to set up a large Asean production hub in Malaysia," it added.

The research house said funding will not be an issues for DRB-Hicom as the group's net gearing ex-bank related assets and liabilities stand at only 17 per cent, as indicated by its last quarterly results.

"This can be easily stretched to 50-70 per cent to acquire Proton and possibly even higher, given Proton's onerous capital expenditure needs and its planned research and development activities and expansion," said OSK.

OSK said DRB-Hicom recently announced that it is raising RM500 million from the sukuk market for working capital and other potential acquisitions and expansion.

"It has an option to maximise this sukuk issue to the tune of RM1.8 billion," it added.

Meanwhile, it was reported in The Edge weekly that Arumugam and Lopez are mulling a joint bid for Khazanah's stake, reportedly for RM6 a share.

"We don't see any value proposition in turning around Proton on the table should these joint bidders acquire Proton, pointing out none of these two joint bidders have a stake or whatsoever relevant experience in the automotive sector," said OSK.

The research house maintains a "buy" call on Proton's shares at an unchanged fair value of RM5.87 premised on a 10 per cent premium to its adjusted Net Tangible Asset per share of RM5.34.

"This includes a revaluation surplus of RM147.6 million on the group's land bank and after stripping off all intangibles and inventories, as well as the estimated equity value of loss-making Lotus," it added. -- Bernama



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Property sector catalyst to push Malaysia into high-income nation, says Chor

PETALING JAYA (Jan 9): The local property sector can be the catalyst to propel Malaysia into a high-income nation by 2020, Housing and Local Government Minister Datuk Seri Chor Chee Heung said on Monday.

He said the Malaysian property segment and the Industry players despite experiencing major transformations in recent years due to the gloomy economic climate in the United States and Europe, did not lose its "charm" among regional property buyers.

"Initiatives like the Greater KL Plan will not only reposition our Kuala Lumpur capital city as a world-class city, but also bring significant spillover effects to the country's economy.

"At the same time, the housing and property segment, being one of the country's key economic contributors, should respond positively towards sustainability and environment-friendly," he said when presenting keys to owners of the Zest Point mixed residential housing scheme.

Chor said green TECHNOLOGY [] builders have a competitive advantage over traditional developers.

"I am confident this advantage will continue for a long time as the norm now is green technology like energy-efficient buildings and water conservation facilities.

"Developers already involved in the green building market are ahead of the masses," he added. - Bernama



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MNRB Hldgs names CEO

MNRB Holdings Bhd has appointed Mohd Din Merican president and chief executive officer (CEO).

In a statement to Bursa Malaysia, MNRB said prior to the appointment, Mohd Din was a former chief executive officer of Etiqa Insurance Bhd.

He has a Bachelor of Commerce (honours) from Carleton University, Ottawa, Canada, it said.

MNRB, formerly known as Malaysian National Reinsurance Bhd, is an investment holding company with units such as Malaysian Reinsurance Bhd, Takaful Ikhlas Sdn Bhd and MNRB Retakaful Bhd. -- Bernama



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MNRB appoints Etiqa Insurance CEO as president, CEO

KUALA LUMPUR (Jan 9): MNRB HOLDINGS BHD [] has appointed Etiqa Insurance Bhd chief executive officer Mohd Din Merican as president and CEO.

The reinsurer said on Monday his appointment takes effect on the same day.

Mohd Din, 50, was the CEO of Etiqa Insurance from Nov 1, 2008 to Dec 31, 2011.

Prior to that he was principal officer & general manager of Scor Switzerland Ltd from Sept 2000 to Oct 31, 2008.

He was deputy general manager - business development at Capital Insurance Bhd from July 1, 1995 to Aug 31, 2000.

Mohd Din was a manager at Inchcape Insurance Brokers (M) Sdn Bhd from May 1, 1994 to June 31, 1995.

From Aug 5, 1985 to April 30, 1994, he was a senior manager for underwriting at South East Asia Insurance Bhd.



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Market shrugs off Anwar verdict, more focused on external issues

KUALA LUMPUR (Jan 9): Investors at the local market appear to be more concerned with external issues affecting investments rather than local issues, as the FBM KLCI reacted in a muted manner to the verdict in the Datuk Seri Anwar Ibrahim’s sodomy trial on Monday.

The current Opposition leader and former deputy prime minister was acquitted after trial judge Datuk Mohamad Zabidin Mohd said the court could not with 100% certainty ascertain the integrity of the container (holding the DNA evidence) was not compromised.

The FBM KLCI rose 1.90 points to 1,516.03 at the mid-day break.

Gainers led losers by 373 to 233, while 286 counters traded unchanged. Volume was 856.14 million shares valued at RM699.96 million.

The ringgit weakened 0.30% to 3.1608 versus the US dollar; crude palm oil futures fell RM15 per tonne to RM3,189, crude oil was down 49 cents per barrel to US$101.07 while gold lost US$8.85 an ounce to US$1,609.10.

Regional markets were mixed ahead of a German and French leaders’ meeting on Monday to discuss ways to boost growth in euro zone states struggling to overcome the sovereign debt crisis and rising unemployment, and finalise a deal to increase fiscal coordination within the currency union, according to Reuters.

Chancellor Angela Merkel and President Nicolas Sarkozy, aiming to align the two powerhouse partners that have driven European integration, will also focus on how to boost employment in the current era of austerity, it said.

At the regional markets, the Shanghai Composite Index reversed earlier losses and jumped 1.44% to 2,194.57.

Meanwhile, Hong Kong’s Hang Seng Index pared down its losses and fell 0.92% to 18,422.23, Singapore’s Straits Times Index was down 0.84% to 2,692.82, Taiwan’s Taiex shed 0.66% to 7,073.34 while South Korea’s Kospi fell 1.31% to 1,818.99.

Japan stock markets are closed for a national holiday.

On Bursa Malaysia, Dutch Lady was the top gainer this morning and was up 80 sen to RM26; Harvest Court added 32 sen to RM1.40, Batu Kawan gained 28 sen to RM18.76, Sui Wah and Amway 19 sen each to RM1.65 and RM9.47, Petronas Gas and Proton rose 19 sen each to RM14.98 and RM5.17, F&N 16 sen to RM18.66 and Can-One 15 sen to RM1.74.

KHSB was the most actively traded counter with 70.6 million shares done. The stock added 10.5 sen to 47 sen.

Other actives included Nextnation, Proton, Takaso, DRB-Hicom, JCY and XDL.

Meanwhile, decliners included Nestle, Lafarge Malayan Cement, Allianz, Kian Joo, Genting, Tahps, Southern Acids, Boxpak and Ta Ann.



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Inari to buy 100% of Amertron Global

KUALA LUMPUR (Jan 9): ACE Market listed Inari Bhd plans to acquire a 100% stake in Amertron Inc (Global) Ltd.

Inari said on Monday it was signing an MoU with the existing shareholders of Amertron, represented by Richard Ta-Chung Wang to enter into negotiations for the proposed acquisition.

Trading in Inari was suspended from 11am to 12.30pm.



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KL shares firmer at mid-morning trade

Shares on Bursa Malaysia were traded firmer at mid-morning Monday, boosted by gains in selected heavyweights and supported by interesting local corporate developments, dealers said.

At 11.03am, the FTSE Bursa Malaysia KLCI (FBM KLCI) was 3.03 points higher at 1,517.16, pushed up by gains mostly seen in Petronas Gas, which contributed 1.16 points, to the increase in benchmark index. Earlier, the FBM KLCI opened 0.93 of a point to 1,515.06.

The Finance Index rose 25.8 points to 13,413.51, the Plantation Index added 8.29 points to 8,445.22, while the Industrial Index advanced 12.99 points to 2,769.84.

The FBM Emas Index gained 23.851 points to 10,440.66, the FBM 70 Index jumped 30.399 points to 11,613.43, the FBMT100 Index was 21.771 points higher at 10,246.61 and the FBM Ace perked 19.33 points to 4,149.25.

Gainers thumped losers by 302 to 191 while 268 counters were unchanged, 727 untraded and 24 suspended. Turnover stood at 617.079 million shares worth RM377.513 million.

Two counters -- Jaks Resources Bhd and Inari Bhd -- were suspended during trading this morning. Jaks Resources, suspended from 10.10am, is expected to announce a proposed joint venture for an independent power plant project in Vietnam, while Inari, halted from trading since 10.42am, will also be making an announcement.

Leading the actives' list is Kumpulan Hartanah Selangor, tipped to be taken private by its major shareholder, Kumpulan Perangsang Selangor, saw its shares surging 10.5 sen to 47 sen, followed by Nextnation Communication Bhd, which earned one sen to 12.5 sen.

Meanwhile, Proton-CG:CW was up 7.5 sen to 55.5 sen after news on DRB-Hicom and General Motors Corp are keen on the national automaker's stakes.

Heavyweights, Maybank added one sen to RM8.24, Sime Darby was unchanged at RM9.06, while CIMB Group rose five sen to RM7.23 and Petronas Gas gained 30 sen to RM15.10. -- Bernama



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KPS, KHSB up on possible privatisation deal

KUALA LUMPUR (Jan 9): Share of KUMPULAN PERANGSANG SELANGOR [] Bhd (KPS) and its subsidiary KUMPULAN HARTANAH SELANGOR BHD [] (KHSB) rose in active trade on expectations of a corporate exercise which could involve a privatisation.

At 11.37am, KPS was up 10 sen to RM1.15. There were 8.30 million shares done at prices ranging from RM1.06 to RM1.23.

KHSB added 10 sen also to 46.5 sen. There were 61.34 million shares transacted.

The FBM KLCI rose 2.51 points to 1,516.64. Turnover was 727.12 million shares done valued at RM521.91 million. There were 337 gainers, 210 losers and 281 stocks unchanged.

The Edge weekly reported KPS was looking to restructure the group with a possible eye on privatising KHSB. Both companies are Selangor government linked and the state is said to be looking to add value to the shareholders. KPS owns 56.57% in KHSB, whose core activity is property development and mining.



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JAKS Resources requests trading halt pending material announcement

KUALA LUMPUR (Jan 9): Trading in the securities of JAKS Resources Bhd has been halted with effect from 10.10am on Monday at the request of the company pending a material announcement.

“The request for suspension is made under subparagraph 3.1(b) of Practice Note 2 on the Main Market Listing Requirement in view that JAKS Resources intends to make a material announcement on the proposed joint venture for the independent power plant project in Vietnam,” the company said on Jan 9.



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KLCI stays lackluster at mid-morning as Asian markets fall

KUALA LUMPUR (Jan 9): Trading on the FBM KLCI remained lackluster at mid-morning on Monday as lack of fresh local leads as well as negative external sentiment kept investors on the sidelines.

Asian shares fell as renewed gloom about the fallout from the European sovereign debt crisis overshadowed signs of vigour in the US economy, according to Reuters.

Data on Friday showed that while US employment growth accelerated last month, euro zone retail sales fell and economic sentiment soured at the end of 2011, pointing to recession in the currency bloc, it said.

The FBM KLCI shed 0.03 point to 1,514.10 at 10.10am.

Gainers led losers by 249 to 160, while 236 counters traded unchanged. Volume was 395.02 million shares valued at RM213.43 million.

At the regional markets, Hong Kong’s Hang Seng Index lost 1.23% to 18,364.27, South Korea’s Kospi fell 1.31% to 1,818.92, Singapore’s Straits Times Index was down 1.03% to 2,687.49, Taiwan’s Taiex lost 0.77% to 7,065.53 and the Shanghai Composite Index shed 0.24% to 2,158.11.

Japan stock markets are closed for a national holiday.

BIMB Securities Research in a note Jan 9 said investors remained torn between US improving economic conditions and the “bubbling” undercurrent over in Europe.

As a result, Wall Street had a relatively mixed week before ending another 55 points lower amid a mixed performance from European bourses, it said.

The research house said that for this week, attention would be centred on corporate earnings for the 4Q11 in the US hence investors are expected to stay sidelined.

Taking lead from Europe’s weal opening, regional markets were rather mixed but the situation could be buoyed this week from signs that China has been easing its liquidity crunch with December’s loans growth higher than anticipated coupled with better M2 growth.

“In Malaysia, the FBM KLCI closed flat in tandem with regional performance.

“Unless there are fresh catalysts, we expect it to be another lacklustre performance. Immediate resistance is seen at 1,515 with 1,525 as the next level,” it said.

On Bursa Malaysia, Dutch Lady was the top gainer at mid-morning and was up 80 sen to RM26; Batu Kawan rose 42 sen to RM18.90, Harvest Court 32 sen to RM1.40, Can-One 19 sen to RM1.78, Hong Leong Bank 16 sen to RM10.92, Proton 15 sen to RM5.14, while Inno, Tradewinds PLANTATION []s and KPS added 12 sen each to RM1.48, RM4.45 and RM1.17 respectively.

Nextnation was the most actively traded counter with 27.4 million shares done. The stock added one sen to 12.5 en.

Other actives included KHSB, Takaso, DPS Gurney, DRB-Hicom, Proton and SYF Resources.

Meanwhile, decliners included Nestle, KLK, BLD Plantations, BAT, Parkson, Kian Jpp, Boxpak, Delloyd, Cepco and MMHE.



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Sodomy II Verdict: Anwar acquitted

KUALA LUMPUR: Opposition leader Datuk Seri Anwar Ibrahim was acquitted of sodomising his former aide Mohd Saiful Bukhari.

A jubilant Anwar said his immediate priority now is to focus on preparing his party and the Opposition to face the coming general elections.

In his immediate response after he was acquitted of sodomising his former aide Mohd Saiful Bukhari Azlan, Anwar said he was thankful that justice has been served.

“Thank God, I have been vindicated. My focus now will be at the coming elections,” he said.

Earlier, High Court Judge Justice Mohamad Zabidin Mohd Diah took three minutes to deliver his judgment.

He said there were no collaborating evidence to support Saiful’s testimony.
However, there is no written judgment.

Anwar immediately hugged his children who were crying over the verdict.

He also shook hands with the prosecution team.

Outside the courtroom, thousands of supporters cheered when they heard the news.



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Proton at 4-year high on DRB-Hicom bid

Proton Holdings Bhd rose to its highest level in more than four years in Kuala Lumpur trading after the Star newspaper reported that DRB-Hicom Bhd said it made a bid for the Malaysian carmaker.

The stock climbed 3.6 percent to RM5.17 at 9:03 a.m. local time, set for its highest close since Oct. 31, 2007. -- Bloomberg



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Can-One surges on court go-ahead

Can-One Bhd, a Malaysian maker of tin cans, jumped to a record in Kuala Lumpur trading after the Federal Court allowed it to proceed with the purchase of a 33 percent stake in rival Kian Joo Can Factory Bhd for RM241 million.

The stock surged 17 percent to RM1.86 at 9:03 a.m. local time. -- Bloomberg



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Xidelang slides on HongPeng report

Xidelang Holdings Ltd fell in Kuala Lumpur trading after the Edge weekly newspaper reported that the company’s biggest shareholder, HongPeng International, isn’t keen on selling its stake.

The stock slid 2.5 percent to 39 sen at 9:09 a.m. local time. -- Bloomberg



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Proton, DRB-Hicom up in active trade

KUALA LUMPUR (Jan 9): The securities of PROTON HOLDINGS BHD [] and DRB-HICOM BHD [] rose in active trade following fresh corporate news about the takeover of Kazanah Nasional’s 42.7% stake in the national car maker.

At 9.08am, Proton was up 16 sen to RM5.15 while its call warrants, Proton-CG added 3.5 sen to 51.5 sen and Proton-CH added 4.5 sen to 47.5 sen.

DRB-Hicom-CG rose two sen to 9.5 sen and DRB-Hicom-CI one sen to 3.5 sen and DRB-Hicom-CF 1.5 sen to 10 sen.

The FBM KLCI rose 1.4 points to 1,515.53. Turnover was 95.15 million shares valued at RM50.68 million. There were 124 gainers, 60 losers and 119 stocks unchanged.

The Edge weekly reported that local businessman Tan Sri AP Arumugam and Gerald Lopez of Genii Capital intends to put in a joint bid for the 42.7% stake in Proton that Khazanah is looking to divest.

The Edge also reported they are also looking to bring in a former CEO of Proton who ran the company between the mid-1990s to 2004. The plan involves Lopez taking over Group Lotus while Arumugam will control Proton

In another development, DRB-Hicom confirmed that it has submitted a proposal to acquire Khazanah’s 42.7% stake in Proton and is awaiting a decision from the government.

"The proposal was submitted to Proton for purchase of shares in the middle of last year," said DRB-Hicom group managing director Datuk Seri Mohd Khamil Jamil.

He was quoted saying added the bid was a standalone one and did not involve any strategic partner.



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