Wednesday, 11 January 2012

Tan Chong Motors: No bid for Proton stake

KUALA LUMPUR (Jan 11): TAN CHONG MOTOR HOLDINGS BHD [] says it does not plan to acquire a stake in PROTON HOLDINGS BHD [].

In a statement to Bursa Malaysia on Wednesday, it said that it “has neither received any formal invitation nor has any plan to bid for the stake in the national carmaker, Proton”.

It was responding to a query from Bursa Malaysia Securities over a news report that it was drawaing up a proposal to bid for Proton.

Proton has been in the news that several suitors are keen on Khazanah Nasional’s 42.7% stake in the national car maker.

Earlier on Wednesday, UMW HOLDINGS BHD [] group chairman Tan Sri Asmat Kamaludin said UMW had no plans to acquire Khazanah’s stake in Proton.

He said UMW wanted to focus on its current commitments, including its partnership with Toyota and Perodua.

However, DRB-HICOM BHD [] had on Monday confirmed it has submitted a bid to acquire Khazanah’s stake and it was awaiting a decision by Khazanah.

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



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Takaso Resources to ink deal on timber concession on Thursday

KUALA LUMPUR (Jan 11): TAKASO RESOURCES BHD [], whose shares have been actively traded recently over a proposed timber concession, is set to seal an agreement with Kayumas PLANTATION [] Ltd on Thursday.

The agreement will enable Takaso to diversify and tap into Kayumas’ resources, including its concession and a timber licence. Kayumas also has the logging rights for 40,000 ha of timber in Papua New Guinea.

Takaso rose 0.5 sen to close at 25 sen on Wednesday. It was the most active with 83.56 million shares done.

On Tuesday, Takaso said it would need to carry out its own due diligence to verify information furnished by Kayumas so far including its concession and timber licence and rights to log 40,000 ha of timber in PNG.



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Market Commentary

The FBM KLCI index gained 0.30 points or 0.02% on Wednesday. The Finance Index fell 0.11% to 13437.02 points, the Properties Index up 0.42% to 1004.79 points and the Plantation Index rose 0.35% to 8537.97 points. The market traded within a range of 5.14 points between an intra-day high of 1523.94 and a low of 1518.80 during the session.

Actively traded stocks include TAKASO, MUDAJYA-CG, HUBLINE, MAS-CD, MAS-CE, HIBISCS, MAS-CC, HIBISCS-WA, IRIS and XDL. Trading volume increased to 1910.79 mil shares worth RM1941.53 mil as compared to Tuesday’s 1858.39 mil shares worth RM1872.05 mil.

Leading Movers were IOICORP (+10 sen to RM5.49), TENAGA (+9 sen to RM6.16), PETCHEM (+10 sen to RM6.46), SIME (+7 sen to RM9.15) and GENM (+2 sen to RM3.90). Lagging Movers were AXIATA (-7 sen to RM4.92), GENTING (-14 sen to RM10.76), TM (-8 sen to RM4.83), AMMB (-8 sen to RM5.74) and MAYBANK (-2 sen to RM8.22). Market breadth was positive with 437 gainers as compared to 384 losers. -- JF Apex Securities Bhd



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KLCI closes higher for third day running, gains capped

KUALA LUMPUR (Jan 10): The FBM KLCI closed marginally higher for the third day running on Wednesday, but gains remained capped in line with the mixed sentiment at regional markets.

The FBM KLCI edged up 0.30 of a point to close at 1,522.29.

Gainers beat losers by 437 to 384, while 301 counters traded unchanged. Volume was 1.91 billion shares valued at RM1.94 billion.

Meanwhile, Europe's persistent debt crisis kept the single currency and global stocks under pressure on Wednesday, threatening to overshadow a slight improvement in the economic outlook that has driven a solid rally in world equity markets, according to Reuters.

European shares hit a one-week closing high on Tuesday, and U.S. stocks reached a five-month peak, after an upbeat forecast by aluminum company Alcoa about the demand outlook for the metal and amid rising hopes of a policy easing in China.

At the regional markets, Hong Kong’s Hang Seng Index rose 0.78% to 19,151.94, Japan’s Nikkei 225 added 0.30% to 8,447.88, Taiwan’s Taiex up 0.13% to 7,188.21 and Singapore’s Straits Times Index rose 1% to 2,747.13.

Meanwhile, the Shanghai Composite Index fell 0.42% to 2,276.05 and South Korea’s Kospi lost 0.41% to 1,845.55.

On Bursa Malaysia, glove makers were in focus on expectations that earnings going forward would see improvement given the outlook for favourable natural rubber prices.

Supermax jumped 39 sen to RM4.32, Kossan 27 sen to RM3.57, Hartalega up 22 sen to RM6.22, Top Glove 19 sen to RM5.25, Adventa 11 sen to RM1.73, Latexx 10 sen to RM2.01 and Rubberex added 3.5 sen to 73 sen.

Other gainers included Malayan Flour Mills that added 22 sen to RM7.40, Dutch Lady 20 sen to RM26.20, Hai-O 19 sen to RM2.16 and Mudajaya 17 sen to RM2.49.

Decliners included PPB and Hibiscus that fell 16 sen each to RM17.04 and RM1.02, Genting and KLK down 14 sen each to RM10.76 and RM24.70, Super Enterprise, OFI and Can-One 13 sen each to 82 sen, RM1.52 and RM1.65, while Sui Wah fell 11 sen to RM1.46.

Takaso was the most actively traded counter with 83.6 million shares done. The stock added half a sen to 25 sen.

Other actives included Mudajaya, Hubline, Hibiscus, Iris Corp and XDL.



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QL Resources expanding operations in Indonesia

KUALA LUMPUR: QL Resources Bhd plans to spend US$3 million (RM9.45 million) this year to double the production capacity of its fish plant operations in Surabaya, Indonesia, while also targeting to multiply egg production in Indonesia and Vietnam by the first quarter of 2013.

The group commenced its fishery operations in Indonesia in August 2011. The plant currently processes 5,000 tonnes of surimi (fish paste) and fishmeal per year respectively.

“We will be adding two lines to the plant, each with a capacity of 5,000 tonnes for the processing of surimi and fishmeal,” Freddie Yap, group accountant and investor relations, told an investor education forum organised by Bursa Malaysia and Affin Investment Bank over the weekend.

QL Resources is currently the biggest producer of surimi, surimi-based products and fishmeal manufacturer in Malaysia with a 50% market share in the surimi segment, and 30% each in the surimi-based products and fishmeal.

The group is also a leading producer of eggs with a 12% share in the local market and has oil palm plantations in Sabah and Tarakan, Indonesia. According to Yap, QL Resources hopes to grow briskly in the next five years, riding on the aggressive expansion plans for its poultry farms in Indonesia, Vietnam as well as its oil palm plantation in Tarakan, East Kalimantan.

Its 17ha egg farm in Indonesia currently has a production capacity of 110,000 eggs per day, but the group plans to increase capacity to one million eggs per day by March 2013. Its 20ha farm in Vietnam is currently producing 80,000 eggs per day. The group is targeting production to reach 500,000 eggs per day by March 2013.

QL Resources’ venture into the plantations sector started four years ago and now it has some 20,000ha of oil palm plantations under development in Indonesia, 1,200ha of mature oil palm plantations in Sabah and two crude palm oil mills with a 600,000-tonne capacity in Tawau, Sabah.

At present, Yap explained, the trees are still very young and so the yield is still low, at around 2.56 tonnes per ha for the first quarter of this year. He expects the yields to improve strongly starting 2013 with projections of 7.37 tonnes in 2013, 11.15 tonnes in 2014 and 13.08 tonnes in 2015.

Both the egg farms and oil palm plantations in Indonesia will provide positive contributions to the group starting 2013, Yap added.


This article appeared in The Edge Financial Daily, January 11, 2012.



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UEM Land eyes RM3b in sales for 2012

KUALA LUMPUR: UEM Land Holdings Bhd is targeting RM3 billion in property sales this year, riding on new launches with a gross development value (GDV) of RM5.5 billion.

CEO Datuk Wan Abdullah Wan Ibrahim said the group will be launching properties in Nusajaya (Johor), Mont’Kiara, the Kuala Lumpur central business district, and Bangi and Kajang (Selangor). The properties include mixed developments of residential, commercial and office spaces.

Wan Abdullah said the UEM Land group fulfilled its target of RM2.2 billion in sales last year and is confident of achieving RM3 billion in sales in 2012.

“We expect a dramatic increase in the take-up rate this year,” he said, adding that his optimism is based on the strong uptake and sales achieved in the past two years.

Wan Abdullah was speaking to reporters after a signing ceremony between UEM Land and Medini Security Services Sdn Bhd yesterday.

The signing of the joint venture agreement yesterday was for Medini Security Services, a wholly-owned subsidiary of Iskandar Investment Bhd, and UEM Land to form a full-fledged security service company to provide enhanced security for Nusajaya, one of the five nodes of Iskandar Malaysia.

Services will be carried out in two phases. Phase 1 includes the guarding of premises, monitoring and response, event and critical infrastructure protection. Phase two will comprise all aspects of Phase 1 plus individual security escort teams, training, consultancy and corporate security.

Iskandar Investment Bhd CEO Datuk Syed Mohamed Syed Ibrahim (left) exchange documents with Wan Abdullah after the signing of the joint venture agreement yesterday.


The security service company will spend about RM8 million in its first year, with RM4 million for vehicles and communication equipment.

The sum will increase annually as the company increases the amount of CCTV cameras on the Nusajaya Loop later on.

Although the joint venture company will not be a profit centre, it will earn revenue from the provision of security services to any project in the Nusajaya area, said Wan Abdullah.

He said 20 auxiliary police officers have been deployed to Nusajaya with a further 160 to be deployed by 2015.

“This initiative is part of the Nusajaya Security Blueprint we had developed and practised throughout the zone. While relying on technology to provide a single and uniformed security platform, we believe that omnipresence is also key in providing residents with a more secure environment and in gaining the confidence of investors and ultimately, peace of mind for Nusajaya stakeholders,” he said.

Asked about the progress of UEM Land’s bid for the 7.6ha in Bangsar at the intersection of Jalan Bangsar and Jalan Maarof, Wan Abdullah said the group has been shortlisted and invited to present its case again to the panel. When it is fully developed, the parcel of land will have an estimated GDV of RM5 billion.

The land used to house Unilever (M) Holdings Sdn Bhd’s plant and was owned by Perbadanan Aset Keretapi. Its new owner, Pelaburan Hartanah Bhd, a government entity set up to promote bumiputera ownership of prime real estate, opened the tender for the development of the land last year and will announce its decision in the first half of 2012.

Other bidders include Mah Sing Group Bhd and Land & General Bhd.


This article appeared in The Edge Financial Daily, January 11, 2012.



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December CPO output falls 8.16%

KUALA LUMPUR: Malaysia crude palm oil (CPO) production fell 8.16% month-on-month in December as rainy weather disrupted fresh fruit bunch (FFB) production.

Data from the Malaysian Palm Oil Board (MPOB) released yesterday showed CPO output of 1.49 million tonnes in December compared with 1.62 million tones in November last year.

An analyst with HwangDBS Vickers Research said CPO production for January should continue to be lower due to weather conditions.

“A lot of activity has been disrupted by the rain. Although we did not see heavy flooding in Malaysia, the rainfall was still pretty heavy. That’s why CPO prices have found relatively strong support,” said the analyst.

However, the plantation analyst expects CPO prices should start to ease towards the second half of the year premised on the expected rising supply in Malaysia.

“Overall, the impact of the eurozone crisis on CPO demand and prices remains to be seen but we don’t expect a sharp fall in CPO prices,” said the analyst.

Yesterday’s MPOB data also showed that CPO inventory fell 13.36% to 1.06 million tonnes in December from a stock of 1.22 million tones in November. Palm oil exports contracted 4.49% to 1.58 million tones in December from 1.66 million tonnes a month earlier.

In a note on Jan 6, Maybank IB Research said it foresees CPO average selling price weakening 20% in 2012 to RM2,600 per tonne, pegging it to the recent historical five-year average.

“Another global recession may see CPO price re-testing RM2,000 per tonne,” the research house said.

Maybank IB Research noted that during the global financial crisis in 2008, CPO prices fell 67% within eight months from a high of RM4,203 per tonne to a low of RM1,404 per tonne.

Malaysian palm oil futures for February 2012 delivery rose by a modest RM8 to RM3,228 a tonne yesterday, extending a four-day uptrend over last week.


This article appeared in The Edge Financial Daily, January 11, 2012.



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Delloyd Ventures expands bus chassis business

KUALA LUMPUR: Diversified Delloyd Ventures Bhd plans to expand its commercial bus and chassis manufacturing business in Malaysia, following its success in Indonesia.

Group managing director Datuk Seri Tee Boon Kee told The Edge Financial Daily that the group had already made a prototype of the chassis of the compressed natural gas (CNG) buses it is now manufacturing in Indonesia to be submitted to the local authorities.

The prototype buses will then be subject to test runs and authority approvals, he said.

“We wanted to complete the prototype and submit it last year but we were occupied with a delivery,” he added.

Other than Malaysia and Indonesia, Delloyd Ventures has automotive parts and component manufacturing operations in Thailand.

The group ventured into the commercial vehicle manufacturing industry in 2008 through the acquisition of a 51% stake in PT Asian Auto International (PTAAI), Indonesia.

PTAAI is involved in the manufacturing and assembly of the Komodo brand of buses and articulated CNG buses for TransJakarta, the bus rapid transit system in Jakarta.

At present, the group only manufactures the chassis while PTAAI builds the body of the bus. The group last year secured a contract for 23 buses for a sum of RM32 million.

Apart from manufacturing automotive components the group also distributes Proton, Suzuki, Hyundai and Brilliance Auto’s Jinbei vans.

Although the auto parts division incurred losses, higher sales of Proton Saga and Persona units contained the losses to below RM1 million in FY09, and the division is now in the black with a profit of RM600,000 for FY11.

Tee said the group plans to spend about RM10 million on new moulds and machinery for its original equipment manufacturing business this year, adding that there is unlikely to be any major capital expenditure. The company has also diversified into plantations as a new engine of growth.

In 2006, the group acquired a 60% stake in PT Rebinmas Jaya, which owns three oil palm plantations in Pulau Belitung, Indonesia. The total planted area is 14,422ha as at September 2011, of which 6,945ha are matured trees.

It also has a 1,449ha plantation in Sungai Rambai, Selangor, with a mature acreage of 1,210ha or 83% as at September 2011.

Delloyd Ventures plans to double its revenue from the plantation segment in three years on higher fresh fruit bunch yield from its Indonesian estates.
“We are taking time to acquire new landbank as prices are still very high,” Tee said.

For the Malaysian plantation operations, the group wants to replant an average of 100ha annually over the next seven years and to complete the replanting of trees which are over 25 years of age by 2021.


This article appeared in The Edge Financial Daily, January 11, 2012.



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Amway expected to maintain dividends

InsiderAsia has highlighted several defensive investment ideas over the past few weeks. In view of the prevailing global uncertainties, we believe that many investors will remain cautious pending greater clarity. As such, today we take a look at another cash-rich company offering attractive yields.

Amway (M) Holdings Bhd’s shares fared quite well last year, gaining almost 20% (including dividends) against the FBM KLCI’s 0.8% advance. Persistent uncertainties for the broader market may continue to provide support to its share price. Having said that, expectations for more challenging operating conditions in 2012 may limit gains. Still, investors can count on the stock to continue giving higher than market average dividend yields.

Sitting on surplus cash
Amway has net cash totalling some RM185.1 million as at end-September 2011. This will be pared to an estimated RM140 million or so by end-2011, after taking into account the payment of a third interim and special dividends totalling 39 sen per share in December 2011.

We expect the company to declare a final dividend of nine sen per share next month, which would bring total dividends for last year to 66 sen per share, the same as 2010. The total dividend distribution would be equivalent to about 128% of our estimated net profit for 2011.

The company reported a good set of results for 3QFY11. Turnover was up 10.5% year-on-year (y-o-y) to RM211.5 million, bolstered by more aggressive sales and marketing programmes. Net profit grew an outsized 19.8% y-o-y to RM25.8 million. On top of higher sales, margins were lifted by a stronger ringgit during the quarter. Earnings for the first nine months of the year totalled RM65.1 million, up 8.5% from the previous corresponding period.



We do, however, expect earnings to pare back in the last quarter compared with 3QFY11. This is due in part to the recent strengthening of the greenback. For the full-year, we estimate net profit totalling roughly RM84.5 million, up 7.9% from RM78.3 million in 2010. We are also cautious on the earnings outlook for this year.

Possible pressure on margins
While consumer spending has stayed fairly robust through the global financial crisis and subsequent recovery, there are still many uncertainties that could dampen future consumption.

On a positive note, we expect Amway’s sales to stay relatively resilient taking into account its distributor base of 221,000 people and wide product range. Its current range of consumer goods includes personal care, nutrition and wellness, skin care, home tech and home care products, totalling over 250 items.

There are plans to launch several new products this year. The company is also expected to roll out incentive programmes and product promotions through the year to drive demand.

As at end-2011, the company has 16 Amway shops that are aimed at boosting its physical presence in key locations. The higher visibility will act as a platform to attract more people to join its ranks. Additionally, they provide greater convenience and easier access for existing distributors.

To support longer-term growth, Amway is targeting younger distributor recruits (age 35 and below) as well as enhancing its presence in the still comparatively untapped Malay market to widen its addressable customer base.

On balance, we expect the company will continue to register low single-digit sales growth this year. A weaker ringgit against the US dollar, however, will hurt margins as the bulk of Amway’s products are imported. It is also likely that prices for products sourced from its US-based parent company will be slightly higher after the annual review. In view of the prevailing uncertainties, Amway has no plans at present to raise selling prices to consumers.

Net yield estimated at 7%
We forecast net profit will decline by about 6% to RM79.4 million on the back of narrower margins despite expectations for better sales. This is assuming the ringgit-US dollar exchange rate remains around current levels. Nevertheless, we do believe that the company will maintain its dividends in 2012 based on its surplus cash position.

With cash, and zero borrowing, on its balance sheet and no major capital expansion plans for the foreseeable future, Amway would be inclined to distribute surplus cash back to shareholders.

Following the completion of the new RM100 million Amway headquarters in Petaling Jaya, with the bulk of capital expenditure (capex) in 2008/09, capex is expected to be minimal in the next few years. Plans to convert all nine existing regional distribution centres into Amway shops are estimated to cost less than RM5 million or so in total over 2012 to 2014.

With surplus cash and minimal capex, Amway is well able to maintain its current level of dividend payout. Assuming dividends remain at 66 sen per share, shareholders will earn an attractive net yield of 7% at the prevailing price of RM9.48.

Looking slightly further ahead, we forecast earnings will improve in 2013, on the back of continued top line growth and assumption of a selling price hike, after holding prices in 2011/12. Net profit is estimated to rise to RM85.2 million. Based on our earnings forecast, the stock appears fairly valued at a forward price-earnings ratio of 19.6 times, which will drop to about 18.3 times in 2013.


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


This article appeared in The Edge Financial Daily, January 11, 2012.




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Lafarge Malayan Cement a defensive growth play

Lafarge Malayan Cement Bhd (Jan 10, RM6.75)
Maintain add at RM6.90 with target price of RM7.10: For the 9MFY11, domestic demand for cement registered a commendable growth of 10% to 12%. Extrapolated, this surpassed our 2011 full-year demand growth expectation of 5% to 7%. Typically, demand in 4QFY11 is seasonally stronger as stockists stock up ahead of the Chinese New Year. This is supported by healthy construction activities, as we expect the construction sector to post 7% growth in 4QFY11. Assuming a 10% volume growth in 2011, domestic demand could potentially reach 15 million tonnes, surpassing the peak historical level of 14.5 million in 2008. Entering into 2012, we expect a stronger pace of construction growth of 7% from an estimated 5% in 2011 as ongoing projects like the Second Penang Bridge, KLIA 2 and the LRT extension pick up momentum. Despite the anticipated slew of infrastructure projects in the pipeline, we believe there will be sufficient capacity to accommodate the demand growth as we gather that industry utilisation is only at around 70%. As for Lafarge, the proportion of sales between local consumption and exports remains relatively unchanged at 70:30. This suggests that it could easily switch its sales mix if there is a spike in local demand.

Despite the strong volume growth, we gather the domestic effective selling price remains under pressure, as manufacturers continue to offer high rebates in efforts to garner a bigger share of the pie. We gather that the amount of rebates currently being handed out range between RM40 to RM60 per tonne from just RM30 per tonne six months ago. Although the rising amount of rebates is a concern to the industry, as it may be an impetus to a price war, we believe the likelihood of a drastic price war among manufacturers is slim. We expect domestic demand to sustain at the current level, if not stronger, on the back of the slew of construction projects under the Economic Transformation Programme (ETP), while little new production capacity is seen in the near term. After the last hike in gross selling price in May 2011, we do not expect any further hikes as production costs have plateaued over the past nine months. We believe the quantum of rebates is not likely to increase further but will remain at the current level, if it does not not narrow, as demand is anticipated to remain buoyant. Therefore, we make no change to our RM297 per tonne average selling price (ASP) assumption for FY12.

Energy constitutes about 30% of production cost for cement manufacturers. As such, high coal prices will remain a challenge for Lafarge. The cost of coal remains high at around US$120 per tonne. Despite the high cost, Lafarge has consistently managed to maintain its earnings before interest, tax, depreciation and amortisation (Ebitda) margin at above 20% through various initiatives, including improving plant efficiency. We have imputed US$105 (RM330.75) per tonne coal price assumption for FY12.

We make no changes to our earnings forecast. Based on our simulation, every RM5 increase in net selling price will result in an 8% increase in earnings and vice versa. With no huge capital expenditure in the pipeline, we believe Lafarge is on track to maintain its 80% to 90% dividend payout, which at the current price level offers a decent 5.5% yield.

Fundamentally sound, Lafarge is a good proxy to the construction and ETP theme given that it is domestic-driven and less exposed to the external environment. Against this background, we maintain our “add” recommendation on Lafarge and target price of RM7.10, which is based on an unchanged target price-earnings ratio of 14.5 times FY12 earnings per share. The stock is also supported by a generous dividend yield. Risks to our recommendation include: (i) delay in implementation; (ii) higher rebates which will result in lower ASP; and (iii) resurgence of the coal price. — Affin IB Research, Jan 10


This article appeared in The Edge Financial Daily, January 11, 2012.




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Zhulian a yield seekers’ haven

Zhulian Corp Bhd (Jan 10, RM1.84)
Maintain buy at RM1.77 with target price of RM2.30: Strong free cash flow of seven sen to 14 sen per share for FY11 to FY13F is supported by 11.3% earnings compound annual growth rate and low maintenance capital expenditure (less than RM10 million per year), while its RM135 million cash pile (29 sen per share as at Aug 31, 2011) will continue to support a 60% dividend payout. This translates into 13.9 sen dividend per share (DPS) or 8.1% net yield, one of the highest in our universe.

Zhulian’s 4QFY11 (results out mid-January) should register RM25.3 million net profit (+20% quarter-on-quarter [q-o-q]) and RM95.3 million revenue (+3%). These will be driven by: (i) year-end rush to achieve 2011 sales targets in order to qualify for Zhulian’s Diamond International Forum 2011 in Dubai; and (ii) the US dollar appreciating 4% q-o-q against the ringgit in September to November 2011, which should result in 4% to 5% net positive impact on earnings. The Thailand floods had minimal impact on its regional office and warehouse in Nontaburi, and it has met its internal sales target.

We expect FY12F net profit to grow 15% year-on-year (y-o-y) to RM106.6 million on the back of RM410.5 million revenue (+12% y-o-y), despite global economic concerns. Zhulian’s earnings were resilient during the 2008/09 crisis — FY08 net profit grew 27% y-o-y and FY09 grew 10%. In FY12F, Thailand will be the biggest contributor at 52% of group revenue, followed by Malaysia at 44%. We expect 22% earnings before interest and tax (Ebit) margin (against FY11F’s 21.6%) backed by stable raw material prices and US dollar/ringgit rate. Maintain “buy” and RM2.30 target price based on 6% yield in FY12F, in line with its historical average. — HwangDBS Vickers Research, Jan 10


This article appeared in The Edge Financial Daily, January 11, 2012.



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Media past its prime time for now

Media
Maintain underweight: We expect advertising expenditure (adex) growth to slow significantly due to weak consumer sentiment and slower economic growth. Coupled with still high newsprint prices, we expect three-year forward media sector earnings compound annual growth rate of only 2%. As current risk reward ratios are unfavourable, we continue to rate Media Prima Bhd and Media Chinese International Ltd (MCIL) as “sell” but Star Publications (M) Bhd a “hold” for its attractive net 5.8% dividend yield.

We expect media sector earnings to grow by just 3% in 2012. Over the next three years, we expect media sector earnings compound annual growth rate of only 2%. Although we still expect adex revenue of media companies to continue to expand, we do not expect it to outpace cost inflation, especially higher newsprint cost.

We note: (i) shortened forward ad booking visibility from two to three months pre-Hari Raya Aidilfitri to one to two months currently due to lack of adex friendly events and weak consumer sentiment; and (ii) the eurozone debt crisis has prompted European multinationals to cut their advertising and promotional (A&P) budgets.

We expect total gross adex growth year-on-year to be mid single digit in percentage terms at best, insufficient to outpace cost inflation. To reinforce our view, each adex bull cycle in the past lasted five to 11 quarters before contracting or stalling. This adex bull cycle has already lasted for 11 quarters.

Our forecast is based on two times real GDP growth of 3.5% and will be the weakest for a “peak” year (Olympics, Euro Cup football and general election) in a decade. This weakness is due to the slowest real GDP growth for a peak year and European MNCs cutting their A&P budgets. There is also added downside risk from slower-than -expected economic growth.

Spot newsprint prices have remained elevated at US$700 (RM2,205) per tonne to US$750 per tonne. The financial troubles of the two largest newsprint manufacturers in the world, Abitbi Bowater and Norske Skog, have kept global newsprint supply tight. Media companies cannot look to cheaper newsprint prices for relief.

This is because we expect media sector earnings growth to slow markedly with added downside risk. Media Prima is a “sell” for its vulnerability to deceleration in adex growth. MCIL is a “sell” for its vulnerability to increases in newsprint prices. Star is a “hold” for its attractive net dividend yield of 5.8% for 2012. — Maybank IB Research, Jan 10


This article appeared in The Edge Financial Daily, January 11, 2012.




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KL shares mixed at mid-afternoon

Share prices on Bursa Malaysia continued their mixed trend during mid-afternoon trading today, with interest seen mostly on lower-liners and penny stocks, dealers said.

They said the underlying sentiment remained optimistic due to external factors such as signs of a strengthening U.S. economy and China's steady perfomance.

At 3.10pm, the FBM KLCI eased 1.55 points to 1,520.44 after opening 0.04 of a point higher at 1,522.03.

The Plantation Index lost 0.07 of a point to 8,507.91 but the Industrial Index gained 10.510 points to 2,791.39.

The Finance Index shed 24.210 points to 13,427.

The FBM 70 Index firmed 70.230 points to 11,752.33, the FBM ACE Index perked 44.9 points to 4,285.29 and the FBM Emas Index rose 5.229 points to 10,485.38.

Turnover stood at 1.318 billion shares worth RM1.136 billion.

Gainers led losers by 374 to 359 while 313 counters were unchanged, 439 untraded and 19 others suspended.

Of the active stocks, Takaso Resources rose 1.0 sen to 25.5 sen, Mudajaya-CG gained 2.5 sen to 6.5 sen and Hubline Bhd earned one sen to nine sen.

Among heavyweights, Maybank lost four sen to RM8.20, Sime Darby gained one sen to RM9.18 while CIMB was flat at RM7.29. - Bernama



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Supermax to meet FY2012 profit target: Thai

KUALA LUMPUR:Rubber gloves manufacturer Supermax Corporation Bhd expects to meet its after-tax profit forecast of RM100 million to RM110 million for the company’s financial year ended Dec 31 2011, says executive chairman Datuk Seri Stanley Thai.

Thai estimates revenue of about RM1 billion for the company’s financial year 2011.

He said the company would announce the performance for its financial year 2011 in the middle of February.

According to Thai, Supermax’s performance for its financial year 2011 was affected among others by the firm price of natural rubber and the economic uncertainty.

Supermax posted an after-tax profit of RM158.9 million on revenue of RM977.28 million for its financial year 2010.

Moving forward, he foresees a remarkable performance for the company's financial year 2012 due to the lower price of natural rubber.

Thai estimates an increase of between 20 and 30 per cent in the group's sales for the current financial year.

“Financial year 2012 will be the best year for Supermax. The financial performance will be similar to that of 2010. Our financial year 2012 will record the highest absolute value in the history of the rubber gloves industry,” he said at a press conference after the company’s extraordinary general meeting (EGM) here today.

Thai said natural rubber gloves contributed 63 per cent and 60 per cent to the group’s profit for its financial years 2010 and 2011, respectively.

“For 2012, the contribution of natural rubber gloves to the group’s profit would be higher. Demand for natural rubber gloves is increasing,” he said.

He said apart from the lower natural rubber price, other factors contributing to the expected better earnings would be sales growth and contribution from the company's distribution activities.

Supermax had incorporated a subsidiary in the United Kingdom, which will take care of the markets in England, Scotland and Ireland, he said.

He also said the company’s subsidiary in Germany had recorded high growth in business activities especially in the hospital market in the country.

Thai said Supermax currently produced 17.5 billion pieces of gloves and the number would increase gradually to 22 billion pieces by 2013 with the completion of its two new plants in Meru, Selangor and the replacement of all its production lines.

“There will be a gradual increase of 20 per cent a year in production capacity,” he added.

At the extraordinary general meeting today, shareholders of Supermax approved its proposed bonus issue of 340,077,440 new ordinary shares of RM0.50 each in the company to be credited as fully paid-up on the basis of one bonus share for every one existing Supermax share.

The shareholders also approved the proposed purchase by Supermax of up to 10 per cent of its issued and paid-up share capital. - Bernama



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Glove makes among top gainers, Supermax leads

KUALA LUMPUR (Jan 11): Glove manufacturers were in focus on Wednesday, emerging as the top gainers as optimism returned following expectations of weaker latex prices and a more stable foreign exchange.

At 3.24pm, Supermax was up 38 sen to RM4.31 with 8.13 million shares done, Top Glove added 22 sen to RM5.28, Hartalega 20 sen to RM6.20 and Kossan 19 sen to RM3.49.

Top Glove-CI jumped 15.5 sen to 30.5 sen while Supermax-CE added four sen to 7.5 sen with 22.32 million units done.

Sentiment perked up following positive comments from Supermax executive chairman Datuk Seri Stanley Thai.

He expected the company to record between RM100 million and RM110 million in profit after tax for the financial year ended Dec 31, 2011.

For the nine-months ended Sept 30, FY11, Supermax reported RM77.86 million earnings on the turnover of RM750.70 million.

As for 2012, Thai was upbeat about a better year as natural rubber price was expected to fall to between RM5.50 and RM6 per kg in 1QCY2012 while foreign exchange was expected to be stable.

Meanwhile, CIMB Equities is maintaining its Sell rating on Top Glove Corp Bhd and target price of RM3.61, which is still based on a forward price-to-earnings of 13.05 times.

“Consensus numbers are still too high and valuations expensive. Hartalega is a better proxy for the glove sector,” it said on Wednesday.

CIMB Research said Top Glove’s 1Q12 briefing revealed that demand has not picked up despite a 40% slump in rubber latex price from last April’s peak.

The research house added this was due to overcapacity and cautious business sentiment in the EU and US. Also, hospitals and governments are better prepped for ‘flu outbreaks.



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Manila's San Miguel to sell 60% of bank unit to CIMB

KUALA LUMPUR (Jan 11): Philippine conglomerate San Miguel Corp is finalising a deal to sell 60 percent of its banking arm, Bank of Commerce, to the CIMB Group, Malaysia's second-largest bank, a source involved in the share sale said on Wednesday.

A share-transfer agreement was now being reviewed by the groups involved, the source, who was not authorised to speak to the media about the matter and thus did not want to be identified, told Reuters.

Officials from San Miguel, Bank of Commerce and CIMB were not immediately available for comment.

CIMB had said in October it was in early talks to acquire a stake in Bank of Commerce from San Miguel group.

Bank of Commerce, with total assets of $2 billion, has capital stock of 16.96 billion pesos ($385.5 million) as of June 2011, latest bank filings with the central bank show.

Based on this data, a sale of a 60 percent stake in the bank could be worth $231.3 million.

The bank had total stockholders' equity of 14.57 billion pesos and 122 branches nationwide as of June.

Citing an unidentified source, the Business Times of Malaysia reported on Wednesday that CIMB Group was likely to sign the deal to buy into the medium-sized Philippine bank by the end of January.

"It's going for a 60 percent stake," the newspaper quoted the source as saying, adding that valuations were still being worked out.

CIMB's planned move is part of a strategy by Malaysian lenders to broaden their regional reach as the domestic market matures. In recent years, CIMB has already expanded its footprint in Southeast Asia, with buys in Singapore and Indonesia.

San Miguel shares were up 2 percent in a strong overall Philippine stock market on Wednesday. CIMB shares were flat in a slightly weak Kuala Lumpur stock market. ($1 = 44.0050 Philippine pesos) - Reuters



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Supermax set up Supermax Healthcare in UK

Supermax Corp Bhd announced today it has incorporated a wholly-owned subsidiary in the United Kingdom, Supermax Healthcare Ltd, with registered offices in Britain and Wales.

It said Supermax Healthcare's core business are marketing, importing and distributing latex gloves. Its board of directors comprise Supermax executive chairman Datuk Seri Thai Kim Sim and executive director Datin Seri Tan Bee Geok.

Incorporation of the new subsidiary would not have material effect on Supermax Group’s earnings and net assets for the financial year ended Dec 31, 2011. -- Bernama



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UMW says no plans to buy Khazanah’s 42.7% Proton stake

KUALA LUMPUR (Jan 11): UMW HOLDINGS BHD [] has no plans to acquire Khazanah Nasional's 42.7% stake in PROTON HOLDINGS BHD [] and prefers to focus on its current commitments.

UMW group chairman Tan Sri Asmat Kamaludin said on Wednesday UMW's focus was on its partnership with Toyota and Perodua.

"I think we've already cleared that UMW is not making any bids. We at UMW are committed to our partner Toyota in enhancing its business here in Malaysia and making Perodua self-reliant pre- and post-NAP (National Automotive Policy).

"We've never made any bids. The reports say that shareholders of UMW have made the bid. I don't know about that. May be you have to ask them," he told reporters after the media launch of new Toyota Avanza here.

Asmat said as far as UMW was concerned, the Proton issue had not been discussed at board level.

"And as far as I know we have no plans to make a bid. We have not even considered it," he said. - Bernama



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RHBCap seeks nod for OSK Invt buy

RHB Capital Bhd, Malaysia’s sixth-biggest banking group, said it asked the central bank for approval of its proposed purchase of OSK Holdings Bhd’s investment bank.

“An application to Bank Negara Malaysia has been made today for the proposed merger,” RHB and OSK said in separate filings to the stock exchange, without giving details. The lender may pay as much as RM1.9 billion (US$604 million) in shares for OSK Investment Bank Bhd, three people with knowledge of the matter said on Dec. 29.

Buying OSK Investment would allow RHB to overtake CIMB Investment Bank Bhd. as the biggest stockbroker in Malaysia, based on data from the country’s stock exchange. Malaysian banks and brokerages have been merging amid increased competition from foreign lenders such as Bank of China Ltd and Sumitomo Mitsui Banking Corp.

Hong Leong Bank Bhd acquired EON Capital Bhd for US$1.7 billion in May. K&N Kenanga Holdings Bhd, a brokerage part-owned by Deutsche Bank AG, is in talks to buy the investment banking and broking operations of local rival ECM Libra Financial Group Bhd, two people with knowledge of the matter said on Dec. 1.

Both RHB and OSK shares were unchanged at the 12:30 p.m. break in Kuala Lumpur. OSK held at RM1.80 while RHB was at RM7.27. -- Bloomberg



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UMW expects to sell 93,000 cars in 2012

UMW Toyota Motor Sdn Bhd, the exclusive distributor of Toyota and Lexus cars in Malaysia, expects to sell some 93,000 cars this year.

UMW Toyota Motor president Ismet Suki said in 2011, the company recorded sales of 89,000 units, which he added was above the company's initial expectation.

"This year will be an exciting year, we will be having maybe four new car models and will also be launching some enhanced and improved cars of the existing models.

"Next month, we will be launching the Prius C, a smaller hybrid version of the Prius model," he said after the launch of the new Toyota Avanza by UMW Toyota Motor chairman Tan Sri Asmat Kamaludin.

Ismet said the first generation of Toyota Avanza was launched in October 2004 and to-date the company has recorded sales of over 140,000 units of the model.

"We expect that the demand for the Avanza will be strong, and target to sell some 8,500 to 9,000 units this year, accounting for around 9.5 per cent of our total sales in 2012.

"We started taking bookings in early December and until Jan 10, we have collected more than 710 orders," he said.

The new Toyota Avanza comes in four new enhanced models showcasing an advanced and dynamic design, with on-the-road prices of RM64,590 to RM79,590. -- Bernama



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UMW: No plans to acquire stake in Proton

UMW has no plans to acquire Khazanah Nasional's 42.7 per cent stake in national automaker Proton, saying "it has a lot in its hands already".

Group Chairman Tan Sri Asmat Kamaludin said UMW's focus was on its present commitments, mainly the partnership with Toyota and Perodua.

"I think we've already cleared that UMW is not making any bids. We at UMW are committed to our partner Toyota in enhancing its business here in Malaysia and making Perodua self-reliant pre- and post-NAP (National Automotive Policy).

"We've never made any bids. The reports say that shareholders of UMW have made the bid. I don't know about that. May be you have to ask them," he told reporters after the media launch of new Toyota Avanza here today.

Asmat said as far as UMW was concerned, the Proton issue had not been discussed at board level.

"And as far as I know we have no plans to make a bid. We have not even considered it," he said.

UMW, he said, had plans to ensure Perodua survive post the implementation of the new NAP where the government had indicated that it would liberalise the automotive sector by 2016.

"We have a plan to develop Perodua and make it self-reliant before that," he said. UMW is the largest shareholder of Perodua with a 38 per cent stake.

On the proposed strategic collaboration between Proton and Perodua, Asmat said they were looking at the areas of collaboration.

"But there is no talk about exchange of equity or ownership," he added. -- Bernama



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FBM KLCI slips below 1,520-level at mid-day break

KUALA LUMPUR (Jan 11): The FBM KLCI extended its losses at the mid-day break on Wednesday and fell below the 1,520-point level, weighed by select blue chips.

The FBM KLCI was down 2.20 points to 1,519.79 at the mid-day break.

Gainers edged losers by 344 to 327, while 303 counters traded unchanged. Volume was 1.11 billion shares valued at RM903.12 million.

The ringgit weakened 0.05% to 3.1348 versus the US dollar; crude palm oil futures for the third month delivery fell RM13 per tonne to RM3,196, crude oil shed 45 cents per barrel to US$101.79 while gold added US$4.58 an ounce to US$1,636.93.

At the regional markets, Japan’s Nikkei 225 rose 0.17% to 8,436.41, Hong Hong’s Hang Seng Index up 0.09% to 19,020.85, Taiwan’s Taiex added 0.39% to 7,206.95 and Singapore’s Straits Times Index gained 0.32% to 2,728.66.

The Shanghai Composite Index fell 0.42% to 2,276.15 and South Korea’s Kospi lost 0.19% to 1,849.64.

Among the decliners on Bursa Malaysia, Super Enterprise fell 19 sen to 76 sen, PPB down 12 sen to RM17.08, GAB lost 10 sen to RM12.32, United Malacca, Telekom, Tradewinds and Harvest Court down nine sen each to RM6.70, RM4.82, RM9.58 and RM1.51 respectively, while KLK and Carlsberg lost eight sen each to RM24.76 and RM8.73.

Meanwhile, glove makers were in focus as investors viewed the softening natural rubber prices as positive for the companies.

Furthermore, Supermax Corp Bhd executive chairman Datuk Seri Stanley Thai said the company was expecting to achieve net profit between RM100 million to RM110 million and sales of RM1 billion for FY2011 ended Dec 31.

He said natural rubber price expected to fall to between RM5.50 to RM6 in 1QCY2012 and expected a better FY2012 due to softening natural rubber price and stable forex.

Among glove makers, Supermax rose 37 sen to RM4.30, Kossan 19 sen to RM3.49, Top Glove 17 sen to RM5.23, Hartalega 15 sen to RM6.15, Adventa 13 sen to RM1.72 and Latexx 11 sen to RM2.02.

Takaso was the most actively traded counter with 62.5 million shares done. The stock added 1.5 sen to 26 sen.

Other actives included Mudajaya, Hubline, Supermax and Maybulk.



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Flash: OSK, RHB submit applications to BNM for possible merger

KUALA LUMPUR (Jan 11): OSK HOLDINGS BHD [] and RHB CAPITAL BHD [] have submitted their applications for the possible merger of the businesses between OSK investment banking group and RHB banking group.

They said in separate statements to Bursa Malaysia on Wednesday that they had submitted their applications to Bank Negara Malaysia (BNM) for the approval of the central bank and the Minister of Finance for the proposed merger.



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UMW Toyota unveils second generation Avanza

KUALA LUMPUR: UMW Toyota Motor Sdn Bhd unveiled the second generation Toyota Avanza seven seater MPV on Wednesday and expects to sell 8,800 units in 2012.

The new Avanza comes in four variations with the 1.3 litre manual transmission model priced at RM64,590 on-the-road and the 1.5 litre sporty version at RM79,590 (OTR)

UMW Toyota deputy chaiman Takashi Hibi said: "Back in 2005, the Avanza commanded 60% of the market share of affordable MPV's and sold about 30,000 units a year. Since then however, taxes have risen sharply and there are more competitors in the market."

Since it was first launched in 2005, UMW has sold over 140,000 Avanzas in Malaysia and was the best-selling non-national car from 2005 to 2007.



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KL shares mixed at mid-day

Share prices on Bursa Malaysia ended the morning session on a mixed note today with interests seen mostly on lower-liners and penny stocks, dealers said.

At 12.30pm, the FBM KLCI declined 2.03 points to 1,518.96 after opening 0.04 point higher at 1,522.03.

The Plantation Index lost 3.150 points to 8,504.83. The Industrial Index gained 6.640 points to 2,787.52.

The Finance Index shed 17.161 points to 13,434.14.

The FBM 70 Index firmed 52.721 points to 11,734.82, FBM Ace perked 43.360 points to 4,283.75 and the FBM Emas Index rose 0.29 point to 10,480.44.

Turnover stood at 1.11 billion shares worth RM903.12 million. Gainers led losers by 344 to 328 while 302 counters were unchanged, 511 untraded and 19 others suspended.

Of the active stocks, Takaso Resources rose 1.5 sen to 26 sen, Mudajaya-CG gained 2.5 sen to 6.5 sen and Hubline Bhd earned one sen to nine sen.

Among heavyweights, Maybank lost one sen to RM8.23, Sime Darby gained four sen to RM9.12 while CIMB flat at RM7.29. -- Bernama



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Supermax expects up to RM110m in net profit for FY 2011

KUALA LUMPUR (Jan 11): Supermax Corp Bhd expects to record between RM100 million and RM110 million in profit after tax for the financial year ended Dec 31, 2011.

Its executive chairman Datuk Seri Stanley Thai said on Wednesday he also expected RM1 billion in sales in FY11.

For the nine-months ended Sept 30, FY11, Supermax reported RM77.86 million earnings on the turnover of RM750.70 million.

As for 2012, he was upbeat about a better year as natural rubber price was expected to fall to between RM5.50 and RM6 per kg in 1QCY2012 while foreign exchange was expected to be stable.



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Maybank IB Research remains Overweight on construction

KUALA LUMPUR (Jan 11): Maybank Investment Bank Bhd Research has maintained its Overweight rating on the CONSTRUCTION [] sector and said that after an extremely dry year in terms of major work awards, 2012 has to be the year, with the Greater KL mass rapid transit (MRT) to dominate news flow.

Government land development roll-outs will also be positive for the construction sector, it said in a note Wednesday.

“We remain Overweight on the sector with our core pick being Gamuda.

“We think that the jobs will flow again in Sarawak to support the state’s industrialisation plan. Hock Seng Lee is our pick,” it said.

Maybank Research said Gamuda stays its top pick, adding that it was confident of sizeable job wins to boost Gamuda’s RM2 billion outstanding order book.

“The MRT tunnel win plus the Gemas-JB double-track rail project could raise its job size by RM4 billion each, we estimate. The stock is now trading at 13% below our RNAV-based target price,” it said.

The research house said HSL was our pick for an upturn in construction activities in Sarawak to bring large-scale energy intensive industries into the state.

“We also like Eversendai, an integrated structural steel turnkey contractor with a list of globally acclaimed landmark projects on record. Valuations are attractive at single digit forward PERs,” it said.



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KL shares easier at mid-morning trade

Share prices on Bursa Malaysia were traded easier at the mid-morning session Wednesday, with mixed market sentiments, dealers said.

At 11.15am, the FTSE Bursa Malaysia KLCI (FBM KLCI) was 2.920 points lower at 1,519.07.

The Finance Index shed 10.25 points to 13,441.05, Plantation Index fell 7.641 point to 8,500.34 but the Industrial Index gained 4.73 points to 2,785.61.

The FBM Emas Index lost 5.86 points to 10,474.29 but FBM 70 Index surged 38.631 points to 11.720.73 and the FBM Ace perked 36.57 points to 4,276.96.

Gainers led losers by 309 to 257 while 293 counters were unchanged, 626 untraded and 19 suspended. Turnover stood at 815.008 million shares worth RM607.283 million.

Volume leaders, Mudajaya-CG gained 3.0 sen to 7.0 sen, Takaso Resources added two sen to 26.5 sen and Hubline Bhd earned one sen to nine sen.

Among heavyweights, Maybank lost one sen to RM8.23, Sime Darby gained five sen to RM9.13 while CIMB was down one sen to RM7.28. -- Bernama



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Tenaga advances, AmResearch maintains buy, FV RM6.57

KUALA LUMPUR (Jan 11): Shares of TENAGA NASIONAL BHD [] rose to a high of RM6.19 on Wednesday as analysts expected lower losses in the first quarter of its financial year.

At 11.30am, it was up six sen to RM6.13. There were 4.02 million shares done at prices ranging from RM6.12 to RM6.19.

AmResearch maintained its Buy on the power giant, with an unchanged discounted cashflow-derived fair value of RM6.57 a share, which implied a CY12F PE of 12 times and a price-to-book value of 1.2 times.

“We maintain FY12F-FY14F earnings which incorporate the one-off RM2 billion fuel relief provided for the natural gas shortage and assumption of normalised fuel costs,” it said.

AmResearch said it expected further losses in the 1QFY12 results, which will be announced on Jan 17, 2012, due to high oil and distillate costs arising from the persistent natural gas shortage.

“But 1QFY12 loss would likely be lower than the RM454 million incurred in 4QFY11 given lower alternative fuel costs amid slightly improved natural gas supply during the flat on-quarter seasonal electricity consumption,” it said.



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Hubline up in active trade, ratings outlook ignored

KUALA LUMPUR (Jan 11): Securities of HUBLINE BHD [] rose in active trade on Wednesday despite a recent report about a negative outlook on its long-term ratings.

At 11.11am, Hubline was up one sen to 9.0 sen with 34.24 million shares done while Hubline-WA added 0.5 sen to 4.5 sen with 19.89 million units transacted.

The FBM KLCI was down 1.94 points to 1,520.05. Turnover was 804.95 million shares valued at RM597.22 million. There were 311 gainers, 251 losers and 291 stocks unchanged.

On Monday, RAM Ratings reaffirmed Hubline’s respective long- and short-term ratings of A2 and P1 for its RM150 million Murabahah commercial papers and medium-term notes programme (2005/2012).

“Concurrently, the A2 rating of its RM70 million Bai’ Bithaman Ajil Islamic Bonds (2005/2012) has also been reaffirmed. Meanwhile, the negative outlook on the long-term ratings has been maintained," it said.

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



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AmBank issues 6 European-style warrants

AmBank (M) Bhd is issuing six new European style cash-settled structured warrants to meet investor demand for investment alternatives and trading opportunities.

In a statement today, AmBank said for its upcoming issuance, there will be six call warrants (CW) over the ordinary shares of UEM Land Bhd, Malaysian Resources Corporation Bhd (MRCB), Berjaya Sports Toto Bhd, IJM Corporation Bhd, Boustead Holdings Bhd and Malaysian Airline System Bhd (MAS).

"The structured warrants will have tenures of approximately seven months and will be listed on Jan 12 with issue size of up to 100 million each.

This offer is aimed at sophisticated traders who want to trade on the direction and volatility of the entities, AmBank said.

It added that the new CWs have gearings ranging between 4.33 and 7.27 and are targeted at investors who want leveraged exposure to the underlying counters. -- Bernama



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KLCI slips at mid-morning, Asian markets mixed

KUALA LUMPUR (Jan 11): The FBM KLCI slipped into negative territory at mid-morning on Wednesday while Asian markets remained mixed, with gains capped by lingering worries over the eurozone debt crisis.

The FBM KLCI shed 0.51 of a point to 1,521.48 at 10.01am.

Gainers edged losers by 258 to 169, while 264 counters traded unchanged. Volume was 502.95 million shares valued at RM292.22 million.

At the regional markets, Japan’s Nikkei 225 was up 0.21% to 8,440.12, Hong Kong’s Hang Seng Index added 0.23% to 19,048.00, Taiwan’s Taiex gained 0.33% to 7,202.25 and Singapore’s Straits Times Index edged up 0.05% to 2,721.31.

Meanwhile, South Korea’s Kospi fell 0.33% to 1,847.08 and the Shanghai Composite Index shed 0.08% to 2,283.99.

BIMB Securities Research in a note Jan 11 said investors were warming up to the developments in the Eurozone.

It said that positive comments from Fitch that it will not downgrade France this year despite placing the region on negative watch list last year had put a different perspective on Europe now.

Consequently, most major European bourses charted positive gains overnight.

The research house said better earnings indication from Alcoa coupled with any absence of negative news saw another positive day for the Dow Jones Industrial Average (+70 points) whilst the S&P 500 ended on a 12-month high.

“Regionally, equity markets snapped their dismal runs with most ended in positive territory following better indications from Europe.

“As for the FBMKLCI, it closed on a flat note at 1,521 just a tad below the next resistance of 1,525 of which may be tested today,” it said.

On Bursa Malaysia, Tong Herr fell 15 sen to RM1.93, PPB down 14 sen to RM17.06, Telekom nine sen to RM4.82, HELP, LPI Capital and BAT down six sen each to RM1.50, RM14.02 and RM49.84 respectively, while Can-One fell five sen to RM1.73.

Among the gainers at mid-morning, Dutch Lady rose 38 sen to RM26.38, Mudajaya 20 sen to RM2.52, Supermax 13 sen to RM4.06, UMW and Latexx 11 sen each to RM7 and RM2.02, Cepco and Hai-O nine sen each to RM1.69 and RM2.06, while Petronas Gas and Tenaga were up eight sen each to RM15.42 and RM6.15.

The actives included Mudajaya, Hubline, Takaso, PDZ, Benalec and JCY.



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Tenaga rises to 5-month high

Tenaga Nasional Bhd rose to a five-month high in Kuala Lumpur trading after AMMB Holdings Bhd said the Malaysian power utility may report a smaller loss in its fiscal first quarter compared with the fourth quarter.

The stock gained 1.3 per cent to RM6.15 at 9:33 a.m. local time, set for its highest close since Aug. 1. -- Bloomberg



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SapuraCrest up after JV company gets RM315m Vietnam offshore job

KUALA LUMPUR (Jan 11): SAPURACREST PETROLEUM BHD []’s shares rose on Wednesday after its joint venture has secured a subsea CONSTRUCTION [] project worth RM315 million (US$100 million) offshore Vietnam.

At 9.40am, SapuraCrest added two sen to RM4.58 with 10,800 shares done.

SapuraCrest on Tuesday said that SapuraAcergy Sdn Bhd, which is 50:50 owned by SapuraCrest and Subsea 7 S.A. was awarded the contract, adding that the offshore work was expected to be performed in mid 2012.

RHB Research in a note Jan 11 said it was positive on the contract as it was in-line with Sapuracrest’s goal of enhancing its international revenue contribution.

“We maintain our fair value of RM4.50/share and Outperform call on the stock.

We foresee the company being a large formidable entity post its merger with Kencana expected to be completed by Feb-12,” it said.



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QSR, Kulim and KFCH shares edge up on Malay Chamber’s higher offer price

KUALA LUMPUR (Jan 11): Shares of QSR BRANDS BHD [], KULIM (M) BHD [] and KFC HOLDINGS (M) BHD [] edged up on Wednesday following a slightly higher offer price made by Kumpulan Syarikat Pelaburan DPMM (DPMM) to acquire a strategic stake in the fast food operator (QSR).

At 9.20am, QSR was up 5 sen to RM6.50, Kulim gained two sen to RM4.34 and KFCH one sen to RM3.81.

Kumpulan Syarikat Pelaburan DPMM raised the offer for the 58.68% or 163.15 million QSR shares owned by Kulim by 10 sen to RM6.90, or some RM1.12 billion.

The offer made by DPMM is 10 sen above the offer made by Massive Equity Sdn Bhd (MESB) to acquire QSR’s business and undertakings, including substantially all the assets and liabilities of QSR for RM6.80 per share.



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Top Glove upgraded, stock advances

Top Glove Corp rose in Kuala Lumpur trading after the stock was upgraded to “market perform” from “underperform” at RHB Capital Bhd with a higher price estimate.

The stock added 1 percent to RM5.11 at 9:10 a.m. local time. -- Bloomberg



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Takaso gains on plan to buy timber firm

Takaso Resources Bhd, a Malaysian consumer-products company, rose to the highest level in more than four months in Kuala Lumpur trading after saying it plans to buy a timber company in Papua New Guinea.

The stock gained 8.2 per cent to 26.5 sen at 9:03 a.m. local time, set for its highest close since Sept. 5. -- Bloomberg



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Kulim rises on Malay chamber's offer

Kulim (Malaysia) Bhd rose the most in a week in Kuala Lumpur trading after the Malay Chamber of Commerce Malaysia offered to buy Kulim’s stake in QSR Brands Bhd at RM6.90 a share.

Kulim climbed 1.2 per cent to RM4.37 at 9:07 a.m. local time, set for its biggest gain since Jan. 4. QSR added 0.8 per cent to RM6.50.-- Bloomberg



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OSK Retail Research: Accumulate CIMB Group shares

KUALA LUMPUR (Jan 11): OSK Retail Research said while CIMB has been consolidating the sharp decline recorded on the week of Aug 22, 2011, there is a possibility that the stock might have already constructed a new floor at the RM6.56 level after testing this level two times in 4Q2011.

It said on Wednesday, a break above RM7.58 would confirm a “Double Bottom” bullish-reversal formation.

“Judging from the solid rebound that occurred on the last week of 2011 and yesterday’s stronger volume, CIMB may be able to carry on with its upward momentum hereafter.

“Traders could accumulate the shares ahead of a potential violation of the RM7.58 level. We are eyeing the RM9.00-RM9.17 area as the upside target. Our cut-loss level is pegged at below the RM6.56 level,” it said.



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RHB Research maintains overweight on plantations

KUALA LUMPUR (Jan 11): RHB Research Institute said Malaysia’s crude palm oil (CPO) production fell by 8.2% on-month in December, while exports fell by a slightly smaller 4.5% on-month.

It said on Wednesday that on a year-on-year basis, production rose by 21.3% on-year in December (+11.3% 2011), while exports rose by 23.1% on-year in December (+7.9% 2011).

RHB Research said as a result, closing CPO stock levels fell by 1.5% on-month to 2.04 million tonnes in December (from 2.07 million tonnes in November).

“We are now well and truly in the low season for CPO, although we suspect the slowdown in production was exacerbated by the wetter-than-usual weather patterns.

“As a result of the lower CPO stock levels, the stock/usage ratio in December fell to 10.36% (down from 10.5% in November and up from 8.7% in December 2010),” it said.

RHB Research said it had examined a lot of the supply risks in our previous reports, in particular from the onset of La NiƱa.

“We maintain our CPO price assumptions of RM3,100 a tonne for CY12 and RM2,900 a tonne for CY13.

“Due to the continued strength in liquidity in the market, we believe the PLANTATION [] sector will continue to benefit from these liquidity flows and are therefore upping our PER valuation targets by 1.0 times for all the stocks under our coverage.

“Our Overweight call on the sector is maintained, with five Outperforms (Genting Plant, Sime Darby, TH Plantations, First Resources and CBIP), two Market Performs (IOIC and IJMP) and one Underperform (KLK). Our top picks remain upstream players like Genting Plantations and TH Plantations, as we believe the risks faced by more integrated players are rising, due to the new disadvantageous Indonesian export tax structure,” it said.



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CIMB Research has technical buy on Mudajaya at RM2.32

KUALA LUMPUR (Jan 11): CIMB Equities Research has a technical buy on Mudajaya Group at RM2.32 at which it is trading at a FY13 price-to-earnings of 3.9 times and price-to-book value of 1.4 times.

It said on Wednesday that Mudajaya appears to have built a base near the RM2.13 level.

“As long as this level continues to hold steady, we think the risk reward ratio favours the bulls. Hence, we advocate traders to take some position here,” it said.

CIMB Research said the next upleg is likely to lift prices towards RM2.46 and RM2.66. Once these levels are taken out, the following resistance level is RM2.80.

“MACD signal line is rising while RSI has also hooked upward. Put a stop at below RM2.20, its 30-day SMA,” it said.



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CIMB Research has technical sell on Petra Energy at 94.5 sen

KUALA LUMPUR (Jan 11): CIMB Equities Research has a technical sell on Petra Energy at 94.5 sen at which it is trading at a price-to-book value of 0.6 times.

It said on Wednesday Petra Energy violated its triangle support on Monday.

“We see this as a prelude to more downside ahead. With the candles also falling below its key moving averages, we doubt any rebound would be sustainable,” it said.

CIMB Research said the technical indicators are also showing negative readings. MACD signal line has staged a dead cross while RSI is falling towards the oversold territory.

“As the trend favours the bears, traders should do well selling into strength. Near term gains are likely capped at 99.5 sen. Support is at 90 sen and 85 sen,” it said.



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CIMB Research has technical buy on Gamuda at RM3.53

KUALA LUMPUR (Jan 11) CIMB Equities Research has a technical buy on GAMUDA BHD [] at RM3.53 at which it is trading at a FY13 price-to-earnings of 11.8 times and price-to-book value of 1.9 times.

It said on Wednesday that Gamuda looks set to break out from its triangle resistance.

“Traders with higher risk appetite may take some position here as follow through momentum should pick up once the candles swing past the RM3.55 level,” it said.

CIMB Research said the MACD signal line is still trading in the positive territory, suggesting that the trend is still up. RSI too is above the 50pts mark.

“As long as prices stay above its 200-day SMA, there is still a good chance for the stock to charge towards RM3.70 and RM3.84. Put a stop at below RM3.36,” it said.



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CIMB Research maintains sell on Top Glove, TP RM3.61

KUALA LUMPUR (Jan 11): CIMB Equities is maintaining its Sell rating on Top Glove Corp Bhd and target price of RM3.61, which is still based on a forward price-to-earnings of 13.05 times.

“Consensus numbers are still too high and valuations expensive. Hartalega is a better proxy for the glove sector,” it said on Wednesday.

CIMB Research said Top Glove’s 1Q12 briefing revealed that demand has not picked up despite a 40% slump in rubber latex price from last April’s peak.

The research house added this was due to overcapacity and cautious business sentiment in the EU and US. Also, hospitals and governments are better prepped for ‘flu outbreaks.



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HDBSVR sees Wall St giving local market a boost

KUALA LUMPUR (Jan 11): Hwang DBS Vickers Research (HDBSVR) expects the positive overnight close on Wall Street to give the Malaysian stock market a boost.

It said on Wednesday the benchmark FBM KLCI – which has shown resilience lately – could climb towards the resistance line of 1,530 ahead.

On Wall Street, key U.S. equity indices were up between 0.6% and 1.0% at the closing bell, underpinned by hopes that China would take new measures to stimulate its economy following slower imports growth.

On the local front, trade data for November will be out on Wednesday. HDBSVR said one survey has projected an annual increase of 12.8% for exports and 8.9% for imports, translating to a monthly trade surplus of RM11.5 billion.

On the corporate front, investors may find interest in: (a) CIMB, after a local paper reported that it would likely sign a deal to acquire a bank in the Philippines by month-end; (b) DRB-Hicom, which was quoted by a media as saying that it expects associate company Pos Malaysia to post RM2 billion in sales by 2015; and (c) SapuraCrest Petroleum, which has been awarded a contract for a sub-sea CONSTRUCTION [] contract in Vietnam worth US$100 million.



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Stocks to watch: Kulim, QSR, SapuraCrest, Can-One

KUALA LUMPUR (Jan 11): The firmer overnight close on Wall Street could provide the much-needed boost for regional markets and Malaysia while fresh corporate developments could see trading interest in stocks like KULIM (M) BHD [] and QSR BRANDS BHD [].

Stocks which could see trading interest on Wednesday include Kulim (M) Bhd and QSR Brands Bhd following a slightly higher offer price made by Kumpulan Syarikat Pelaburan DPMM on behalf of the Malay Chamber of Commerce Malaysia (MCCM).

The MCCM raised the offer for the QSR shares owned by Kulim by 10 sen to RM6.90. However, could this lead to other offers in the pipeline?

At RM6.90, this was 10 sen above the offer made by Massive Equity Sdn Bhd (MESB) to acquire QSR’s business and undertakings, including substantially all the assets and liabilities of QSR for RM6.80 per share.

Meanwhile, SAPURACREST PETROLEUM BHD []’s joint venture has secured a subsea CONSTRUCTION [] project worth RM315 million (US$100 million) offshore Vietnam.

SapuraAcergy Sdn Bhd, which is 50:50 owned by SapuraCrest and Subsea 7 S.A. was awarded the contract, adding that the offshore work was expected to be performed in mid 2012.

CAN-ONE BHD [] stated it was unaware of any plan of its major shareholders to undertake a privatisation or merger with KIAN JOO CAN FACTORY BHD [].

PETRA ENERGY BHD []’s former chairman Tengku Datuk Ibrahim Petra Tengku Indra Petra is seeking RM891,000 as gratuity payment from the company and the transfer of a company car.

The Kuok Group continued to reduce its stake in HEXAGON HOLDINGS BHD []. It disposed of 7.69 million shares at an average price of 20 sen from Jan 4 to 9 and reduced its stake to 9.78% or 12.978 million shares.

Another stock which could see trading interest is Tan Chong Motor on speculation it might be keen in a stake in Proton.



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