Syed Mokhtar selling Bank Muamalat?

KUALA LUMPUR (Jan 17): Business tycoon Tan Sri Syed Mokhtar AlBukhary has to fork out over RM3 billion for the entire purchase of PROTON HOLDINGS BHD [], the national car maker.

Industry players are speculating on his moves to obtain the funds to finance the purchase.

Yesterday, Syed Mokhtar's DRB-Hicom bought 42.7 per cent stake in Proton from Khazanah Nasional Bhd via a conditional sale at RM5.50 or RM1.29 billion cash.

Once the deal is completed, expected in two months, DRB-Hicom is obliged to undertake a general offer for the remaining Proton shares at the same price.

It will have to come up with another RM1.73 billion for the remaining 52.28 per cent comprising 314.48 million shares which are not owned by Khazanah.

With such huge amount of cash needed for Proton's purchase, industry observers are saying the tycoon may be looking at a few alternatives, which could include borrowings from foreign banks.

Another alternative is to dispose his assets. Could he be looking at disposing Bank Muamalat?

With the third round of liberalisation expected in the banking industry soon, analysts said smaller banks would be merged to create large and strong banks.

Hence, it makes sense to dispose Bank Muamalat if the bank is not a large entity sooner or later, smaller banks would have to be sold anyway.

DRB-Hicom is the holding company of Bank Muamalat Bhd, controlling a 70 per cent stake, while state asset manager, Khazanah Nasional Bhd, owns the remaining 30 per cent.

Bank Muamalat started operations on Oct 1, 1999, with combined assets and liabilities brought over from the Islamic banking windows of the then Bank Bumiputra Malaysia Bhd, Bank of Commerce (M) Bhd and BBMB Kewangan.

Last year, Bank Muamalat submitted a letter of expression of interest to BIMB HOLDINGS BHD [] (BIMB) to explore a potential merger with Bank Islam Malaysia Bhd but was rejected by the board of the latter. - Bernama



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DRB-Hicom buys 39.9m Proton shares from open market

KUALA LUMPUR (Jan 17): Just a day after DRB-HICOM BHD [] emerged as the successful bidder for Khazanah Nasional Bhd’s 42.7% stake in PROTON HOLDINGS BHD [], it was actively buying up the Proton shares from the open market.

DRB-Hicom said on Tuesday that it had bought 39.927 million Proton shares or a 7.27% stake via open market at prices ranging from RM5.40 to RM5.47 per share.

“Assuming that the proposed acquisition is successfully completed, DRB-Hicom will hold, in aggregate, more than 50% of the voting shares of Proton. As such, the Proposed MGO will not be conditional upon acceptances,” it said.

On Monday, Khazanah announced that it had agreed to dispose of its Proton stake, comprising of 234.73 million shares, to DRB-Hicom for a total consideration of RM1.291 billion or RM5.50 per share.

Proton share price rose 23 sen to RM5.14 and there were 57.45 million shares done.



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Starhill 2Q net profit surges to RM51.62 million

KUALA LUMPUR (Jan 17): Starhill Real Estate Investment Trust (Starhill REIT) net profit for the second quarter ended Dec 31, 2011 surged to RM51.62 million from RM13.53 million, due mainly to higher revenue and gain on disposal.

Revenue for the quarter increased to RM 16.69 million from RM6.69 million in 2010. Earnings per unit was 3.90 sen compared to 1.15 sen a year earlier.

It declared an income distribution of 4.01sen per unit (of which 0.92 sen is taxable and 3.09 sen is non-taxable in the hands of unitholders) in respect of the six months ended Dec 31, 2011.

For the six months ended Dec 31, Starhill REIT’s net profit jumped to RM67.05 million from RM28.96 million in 2010, while revenue rose to RM24.68 million from RM14.94 million.

Reviewing its performance, Starhill REIT said the increase in revenue and profit during the quarter was due to recognition of lease rental income from the lease of the hospitality related PROPERTIES []; a gain on disposal of convertible preferred units (CPUs) as a result of the transfer of 155.56 million CPUs; and unrealised foreign exchange gain.

On its prospects, Starhill REIT said it was optimistic of achieving a satisfactory performance for the financial year ending June 30, 2012.



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AmBank, ANZ ink pact to boost regional banking biz

KUALA LUMPUR (Jan 17): AMMB HOLDINGS BHD [] and Australia and New Zealand Banking Group Ltd (ANZ) have sealed a business principles agreement to leverage on their banking businesses across 27 countries.

In a joint statement issued on Tuesday, AmBank group and ANZ would access each other’s available resources to collaborate in areas of businesses which include Islamic banking, transaction banking and wealth management.

“The banks will also work together on capital markets, project finance and international trade transactions,” they said.

Group managing director, AmBank Group Cheah Tek Kuang described the agreement as a big step ahead in AmBank Group’s collaboration with ANZ “as we continue to leverage the synergies of a regional distribution platform and respective areas of expertise”.

ANZ CEO South & Southeast Asia Mark Robinson said the collaboration would see AmBank group complementing ANZ’s offerings across its network.



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Prestariang lands two-year government contract worth RM14m

KUALA LUMPUR (Jan 17): Prestariang Bhd has landed a two-year contract worth RM14 million from the Ministry of Information Communications and Culture for its 1Citizen Program, its second such contract.

The company, which is an ICT service and education training provider, said on Tuesday rthat its unit Prestariang Systems Sdn Bhd (PSSB) had been awarded the contract.

It said PSSB expects to roll out the 1CITIZEN program from 1 January 2012 to 31 December 2013.

It said the program was targeted at the community-at-large and would cater for 40,000 participants to be educated and trained for digital literacy and Internet etiquette.

Prestariang chief executive officer Dr Abu Hasan Ismail in a statement Jan 17 said the company was confident that the contract would contribute significantly to its revenue growth for 2012 as well as its order book for the next two years.

PSSB had in August 2011 received a contract of RM28 million from Ministry of Higher Education (MoHE) for its 1CITIZEN program to be implemented for 80,000 students in 20 public institutions of higher learning including universities, polytechnics and community colleges in Malaysia, as well as selected private institutions of higher learning.

Dr Abu said the IC CITIZEN program was the first of the company’s many more home-grown certifications to come.

“It has been well received since its introduction in November 2010.

“More importantly, it is also starting to gain momentum in international markets through our global partners such as Certiport, US and Knowledge Point, UAE,” he said.

IC CITIZEN program is the first of its kind certification on internet etiquette developed and owned by Prestariang Group.

Launched in 2010, IC CITIZEN is globally marketed in partnership with US-based Certiport to a network of 10,000 centres in 152 countries.

Dr Abu said Prestariang’s focus in developing its own Intellectual Property (IP) training and certification programs, such as IC CITIZEN had continued to generate new income stream.

“Moving forward, the company expects to see greater growth and revenue contributions to be spurred by other home-grown certification programs such as Vocational English, Islamic Finance and Green IT scheduled for launch within this year.

“Prestariang’s business model in synergizing both ICT training and certification with software license distribution and management will continue to provide advantage to the group,” he said.



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Bina Puri inks RM864m Pakistan highway concession

KUALA LUMPUR (Jan 17): BINA PURI HOLDINGS BHD []’s Pakistan subsidiary has inked a concession agreement with the National Highway Authority of that country to build a 136km-long motorway under a build-transfer-operate concept for a contract value of RM864 million .

It said on Tuesday that its subsidiary, Bina Puri Pakistan (Private) Ltd had signed the 28-year concession agreement for the conversion of the existing four-lane Karachi-Hyderabad superhighway into a six-lane motorway.

Bina Puri said the CONSTRUCTION [] cost amounted to RM644 million and that the construction, upgrading and rehabilitation of the motorway is to be completed over 30 months, adding that it expected the groundbreaking to be sometime in March 2012.

“The M-9 highway is the gateway to Pakistan as Karachi is the only port city in the country.

“We are working with our financiers towards achieving the financial close, which is six months from the signing of the concession agreement,” it said.

Bina Puri said its current unbuilt book order stood at RM2.31 billion as at to date.

The company said the contract was not expected to contribute positively to its earnings for the financial year ending Dec 31, 2012.



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Petronas awards 2 deepwater exploration blocks off Sabah

KUALA LUMPUR (Jan 17): Petroliam Nasional Bhd has awarded two deepwater exploration blocks offshore Sabah under separate production sharing contracts (PSC).

Petronas said the PSC for deepwater Block R was awarded to the JX Nippon Oil & Gas Exploration (Deepwater Sabah) Ltd (operator; 37.5%), INPEX Offshore South West Sabah Ltd (37.5%) and Petronas Carigali Sdn Bhd (25%).

For deepwater Block S, the PSC was awarded to INPEX Offshore North West Sabah Ltd (operator; 75%) and Petronas Carigali (25%).

“The minimum financial commitment for deepwater Blocks R and S are US$123 million and US$72 million respectively,” it said.

Petronas said Blocks R and S, with an area of 672 sq km and 574 sq km respectively, are in water depths ranging from 100 metres to 1,600 metres.

These exploration blocks are near key discoveries such as the Kikeh, Kebabangan, and Gumusut-Kakap fields, to name a few.

It said the partners for Block R had to drill three wildcat wells and acquire 700 sq km of new 3D seismic data, while for the Block S the PSC partners will drill two wildcat wells and acquire 600 sq km of new 3D seismic data.



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Market Commentary

The FBM KLCI index gained 10.30 points or 0.68% on Tuesday. The Finance Index increased 0.46% to 13433.94 points, the Properties Index up 0.65% to 1006.72 points and the Plantation Index rose 0.27% to 8451.82 points. The market traded within a range of 10.66 points between an intra-day high of 1520.27 and a low of 1509.61 during the session.

Actively traded stocks include PROTON, MAYBULK-CC, COMPUGT, E&O-CB, PROTON-CH, WIJAYA-WA, E&O-CA, REDTONE, CIMB and DRBHCOM-CF. Trading volume increased to 1444.00 mil shares worth RM1787.92 mil as compared to Monday’s 1435.82 mil shares worth RM1363.76 mil.

Leading Movers were GENTING (+44 sen to RM11.00), MAYBANK (+10 sen to RM8.29), TENAGA (+11 sen to RM6.23), PETCHEM (+8 sen to RM6.51) and AMMB (+8 sen to RM5.84). Lagging Movers were CIMB (-3 sen to RM7.16), MMCCORP (-5 sen to RM2.68), DIGI (-1 sen to RM3.85), IOICORP (-1 sen to RM5.33) and YTL (-1 sen to RM1.47). Market breadth was positive with 433 gainers as compared to 330 losers. -- JF Apex Securities Bhd



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Tenaga expects to be in the black in 2Q end Feb 2012

KUALA LUMPUR (Jan 17): TENAGA NASIONAL BHD [] expects to return to black in the second quarter ending Feb 2012, boosted by the RM2 billion received from Petroliam Nasional Bhd and the government under the fuel cost-sharing mechanism.

Its president and CEO Datuk Seri Che Khalib Mohamad Noh said on Tuesday the first RM1 billion was received on Dec 30 while the second RM1 billion is expected to be received next month.

On the gas shortage, Che Khalib said a task force comprising of TNB, Petronas and the government was set up to find ways to resolve this issue.

He said TNB would source the gas at competitive market prices from the various gas suppliers once the LNG regas terminal is ready by Sept 2012.

On its impact on tariff and TNB's costs, Che Khalib said the company was working with the government to address this issue.

"We need to resolve the gas supply shortage first," he said.



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Tenaga 1Q net loss RM224.7m vs net profit RM716.5m yr ago

KUALA LUMPUR (Jan 17): TENAGA NASIONAL BHD [] posted a net loss of RM224.70 million in the first quarter ended Nov 30, 2011 compared to net profit RM716.50 million a year earlier.

It said on Tuesday the losses were due mainly to 29.5% increase in operating expenses due to continued use of oil and distillate as alternative fuel to generate electricity.

“Oil consumption had increased by 26 times to 271,949 tonnes from 10,554 tonnes a year earlier. The total amount incurred for oil rose to RM593.3 million from RM16.4 million.

“Distillate consumption also increased by 28 times to 168.9 million litres from 6.0 million litres a year earlier. Cost for distillate consumption rose to RM413.8 million from RM17.6 million,” it said.

The quarter saw 3.9% growth in electricity demand in Peninsular Malaysia. Revenue for the quarter rose 12.4% to RM8.69 billion from RM7.73 billion a year ago.

Loss per share was 4.12 sen compared to earnings per share of 13.16 sen a year earlier.



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China data lifts Asian markets, KLCI stages firm rebound

KUALA LUMPUR (Jan 17): The FBM KLCI staged a firm rebound on Tuesday as Asian markets mostly rose after data suggested the world's second-largest economy grew faster than expected in the last quarter of 2011 with a year-on-year growth of 8.9%.

The FBM KLCI rose 10.30 points to close at 1,519.36, lifted by select blue chips.

Gainers led losers by 433 to 330, while 305 counters traded unchanged. Volume was 1.44 billion shares valued at RM1.79 billion.

At the regional markets, the Shanghai Composite Index jumped 4.18% to 2,298.38, Hong Kong’s Hang Seng Index rose 3.24% to 19,627.75, South Korea’s Kospi was up 1.8% to 1,892.74, Taiwan’s Taiex added 1.65% to 7,221.08, Japan’s Nikkei 225 gained 1.05% to 8,466.40 and Singapore’s Straits Times Index gained 2.2% to 2,815.85.

On Bursa Malaysia, BAT was the top gainer and added 50 sen to RM49.80; Genting rose 44 sen to RM11, Dutch Lady 40 sen to RM25.90, Petronas Dagangan 28 sen to RM17.50, KLK 26 sen to RM24.64, Ibraco 21 sen to RM1.44, Ireka 18 sen to 79 sen and Genting PLANTATION []s 16 sen to RM9.10.

Proton was the most actively traded counter after Khazanah Nasional Bhd finally put an end to months of speculation and announced it was divesting its 42.72% Proton stake to DRB-HICOM BHD [] for RM5.50 per share or RM1.291 billion cash.

Upon completion of the sale and purchase agreement, DRB-Hicom will be obliged to undertake a mandatory general offer on the remaining Proton shares.

Proton rose 23 sen to RM5.41 with 57.5 million shares done. Meanwhile, DRB-Hicom fell seven sen to RM2.10.

Other actives included Maybulk, Compugates, E&O, RedTone, CIMB and DRB-Hicom.

Losers included Tradewinds, GUH, Fiamma, PacificMas seven sen to RM3.48, while Kawan Food and Lysaght lost six sen each to 87 sen and RM1.64.



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DRB-Hicom buys Proton at RM5.50

KUALA LUMPUR: Khazanah Nasional Bhd is divesting its 42.72% stake in Proton Holdings Bhd to DRB-Hicom Bhd via a conditional sale at RM5.50 per share or RM1.29 billion cash.

Once the deal is completed, DRB-Hicom will be obliged to undertake a mandatory general offer (MGO) for the remaining Proton shares at the same price. This will result in the diversified company having to fork out an additional RM1.73 billion for the remaining 57.28% or 314.48 million shares not under Khazanah’s control.

Thus, the price tag for the takeover of Proton could be just over RM3 billion.

This is the second asset that DRB-Hicom is taking over from Khazanah in under a year after the former won the bid for a 32.2% controlling stake in Pos Malaysia Bhd last April.

The conditional sale which was announced yesterday afternoon confirmed a report by The Edge Financial Daily, citing industry sources, which said DRB-Hicom was understood to have secured Khazanah’s 42.72% stake in Proton, with only a few minor issues left to seal the deal.

Khazanah managing director Tan Sri Azman Mokhtar said it is another milestone in the sovereign wealth fund’s strategic divestment programme as it represents the largest in size to date.

“The divestment is a further example of public-private partnerships, whereby strategic divestments are made with the aim of putting government-linked companies (GLC) on a stronger and more competitive footing, and at the same time enhancing private sector participation and building the entrepreneurial capacity of Malaysian businesses in key economic sectors,” he said.

The Proton stake is the second asset that DRB-Hicom is taking over from Khazanah in under a year after the former won a controlling stake in Pos Malaysia last April.

How minority shareholders react remains to be seen, with the offer price more than double 2011’s lowest level of RM2.57.

The national carmaker’s shares had been trading at a five-year average of RM3.95 before the stock price began to climb from RM2.70 on Nov 14 to as high as RM5.46 last Thursday.

While minority shareholders may be happy to cash out at a gain of about 93% since November, Khazanah will be selling its assets at almost half Proton’s book value of RM9.81 net assets per share.

Khazanah will also incur a “real” loss on the disposal after having acquired its stake in Proton for roughly RM8 per share. As Malaysia’s sovereign fund, the loss is indirectly borne by the general public. At face value, the disposal translates into a loss of about half a billion ringgit.

However, Khazanah’s holding cost is understood to be in the RM5.50 band after taking into consideration Proton’s dividend payments over the years.

Nevertheless, the general consensus is that Khazanah could have wrangled for a better price.

“Khazanah could have extracted a better price from DRB-Hicom. If DRB-Hicom did not have enough money to conduct a GO at a higher price, the diversified company could always have settled for a 30% stake which would still grant it control of Proton,” said an observer.

He added that Khazanah should not be in a weak negotiating position as there were other contenders, and the sovereign wealth fund had previously indicated that it was in no hurry to dispose of the stake.

A local analyst pointed out that the deal is definitely good for DRB-Hicom. “As DRB can flip some of the assets to Volkswagen, it can also flip Lotus which has a very strong brand recognition,” he said.

DRB-Hicom has an agreement with Volkswagen AG, which includes the contract assembly and sales of certain marques at DRB’s plant in Pekan, Pahang.

The analyst also questioned why Khazanah did not restructure Proton to place the national carmaker on a stronger footing. “Khazanah could have created a much better value from its assets if it had sold Lotus and done the deal with Volkswagen instead of introducing a middle man.”

Talks between Volkswagen and Proton fell through on a few occasions previously due to the inability to come to an agreement. Industry sources revealed that Volkswagen could have used some of Proton’s unutilised production space in its Tanjung Malim plant to manufacture its vehicles.

The Tanjung Malim plant has a production capacity of 150,000 units per annum which can be expanded to 250,000, but for FY11 ended March 31, the plant only produced about 57,700 units.

Observers noted that Proton should consolidate its production by moving its Shah Alam operations to the under-utilised Tanjung Malim plant which boasts more high-tech and automated facilities.

It would not be unreasonable to assume that DRB-Hicom may do just that.

Besides the savings in costs from operating a single plant in a single location and maximising the use of Proton’s production facilities, the move would also free up prime land that the Shah Alam plant is currently sitting on.

The Shah Alam land and buildings are valued at RM165 million but this is probably worth many times as they were last re-valued almost 30 years ago in 1983 and is sitting in a prime location.

Property players said Proton’s Shah Alam land could have a gross development value in excess of RM1 billion.

Elsewhere, Proton has three other pieces of land in the Petaling district worth a total of RM114.2 million, including buildings which were last re-valued about 20 years ago.

Likewise, Proton Cars (UK) Ltd has land and a building worth RM6.37 million in Bristol, England, which was last re-valued in 1994 and subsidiary Lotus Cars Ltd’s production facilities in Norfolk, England, are valued at RM56.68 million as of 1968.

“I think that Khazanah has always wanted to sell its stake in Proton. Proton and MAS make up for 2% to 3% of Khazanah’s holdings, but account for 30% of its problems. Of course, Khazanah’s hands have always been tied. The government has a social agenda when it comes to their (Proton and MAS) ownership and management,” noted an analyst.

DRB-Hicom’s funding for the RM1.291 billion acquisition will likely be sourced from several major investment banks. Among them will probably be Malayan Banking Bhd which will handle the merchant banking requirements for DRB-Hicom.

Trading in Proton’s shares was suspended yesterday pending the announcement. The stock traded and closed at RM5.18 last Friday.


This article appeared in The Edge Financial Daily, January 17, 2012.



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All bids for Proton should be revealed

So Khazanah Nasional Bhd is finally selling its 42.7% equity interest in automaker Proton Holdings Bhd — at RM5.50 per share or almost RM1.3 billion. This time around minority shareholders get to partake in the offer and sell their shares as well at RM5.50, as the transaction will trigger a mandatory general offer (MGO).

The fact of an MGO was explicitly stated in Khazanah’s statement about the transaction. The disposal by Khazanah should be lauded, as after all, the strategic investment arm of the government has experienced much heartache dealing with a company it doesn’t have proper control of, which makes up for a small percentage of its portfolio but a big proportion of its problems.

However, there are some issues that need explaining.

For starters, Khazanah should disclose if there were other bids and what the parties were prepared to offer. Were there any worthy offers that were higher than RM5.50 per share? And if there were, why were they turned down?

Such disclosure would be most welcome as there are some who feel that DRB-Hicom Bhd got Proton cheap as the latter’s net assets per share as at end-September last year stood at RM9.81.

Some clarity on this aspect of the deal would put things in better perspective and quash market speculation that there were higher offers for Proton.

Apart from DRB-Hicom, among those interested in Proton were its chairman Datuk Seri Mohd Nadzmi Mohd Salleh and the Naza group. Did any of these parties put in a proposal with a firm financial package? If so, what was the price offered and the reasons for rejection?

While the deal is subject to DRB-Hicom forking out the cash for the corporate exercise, without some clarity if RM5.50 was the best price on the table, the question will always remain if Khazanah, as the custodian of the Proton shares, got the best out of its investment in Proton.

There is also a need for DRB-Hicom to make some clear statements for the sake of the minorities.

For instance, DRB-Hicom says, “There are no liabilities, including contingent liabilities and guarantees, to be assumed by DRB-Hicom pursuant to the proposals. The existing liabilities of Proton will be settled by Proton in its ordinary course of business.

“There are no additional financial commitments by DRB-Hicom in putting the assets/businesses of Proton group onstream as Proton group already has ongoing businesses,” DRB-Hicom said in its announcement to Bursa Malaysia.

Does this mean Khazanah is exiting at RM5.50 and the minorities had better follow suit and exit as well, as DRB-Hicom is not going to fork out funds to improve things at Proton?

Also, by not assuming any contingent liabilities, would this affect the guarantees given by Proton for Lotus International’s turnaround programme? Lotus last year embarked on a £480 million (RM2.31 billion) 10-year turnaround plan and the loan is backed by Proton.

If DRB-Hicom is not prepared to fork out more money to be pumped into Proton, why is it the chosen one to take over the national car manufacturer. After all, Proton’s adviser Tun Dr Mahathir Mohamad had said that one of the reasons why Khazanah was selling was because it was not prepared to pump any more money into the national carmaker.

If DRB-Hicom is not going to incur any additional financial commitment on Proton, there should be some clarity on how exactly it is going to make a difference in the national car manufacturer.

Then there is also the issue of DRB-Hicom, which is controlled by Tan Sri Syed Mokhtar AlBukhary, again coming up tops as Khazanah embarked on an asset disposal. Last year DRB-Hicom bagged a 32% stake in Pos Malaysia Bhd after a competitive and lengthy process. It edged out the Scomi group.

Now, it has landed Proton.

Already Syed Mokhtar has extensive interests in a sprawling empire consisting of ports, power, plantations, hotels, engineering, construction, airports and even rice distribution.

We have in the past experienced and seen what happens when so much privatised national assets are placed in the hands of a single group controlled by an individual.

The question is how come there are no other groups or individuals joining the fray? Can anybody please explain?


This article appeared in The Edge Financial Daily, January 17, 2012.



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Analysts: Timing not good for IOI’s land buy in Singapore

KUALA LUMPUR: IOI Corp Bhd is said to have won the bidding for a prime piece of land in Singapore that is earmarked for a RM1.7 billion to RM1.9 billion development. But analysts opine the timing of the venture may not be quite right.

It is learnt that IOI put in a bid for the tract at Jalan Lempeng, not far from the Clementi MRT station.

Maybank Investment Bank said in a note yesterday IOI subsidiary MultiWealth (S) Pte Ltd has emerged as the highest bidder for S$408 million (RM995 million) or S$554 per sq ft per plot ratio (ppr), citing Singapore’s Housing and Development Board (HDB) as its source.

Analysts are cautious on IOI ’s venture into the Singapore property market, which is expected to soften after the government decided to make foreign buyers pay more in taxes.

“To go in at a time when the foreign buyer market is collapsing due to the introduction of the additional stamp duty is not good [timing],” said an analyst.

Analysts are concerned that IOI has bitten more than it can chew with the latest venture, especially since there is little development at its South Beach project after five years.

South Beach is a planned commercial and residential complex located on Beach Road in downtown Singapore. City Developments Ltd and IOI holding 50.1% and 49.9% respectively in the venture.

Analysts expect foreign demand for Singapore properties to weaken, after it introduced an additional stamp duty amounting to 10% of the property value in December 2011.

Singapore permanent residents will be subject to additional stamp duty of 3% for second and subsequent properties while citizens buying their third and subsequent homes will also have to pay an extra 3% on the property’s value.

Analysts expect property prices there to drop by 30% to 40% with the new ruling.

Market observers question whether the price of land negotiated by IOI is reflective of the latest market conditions, after factoring in the imposition of the 10% stamp duty.

Apart from IOI, other Malaysian property players that have expanded to Singapore include S P Setia Bhd, Selangor Dredging Bhd, YTL Land and Development Bhd, and Khazanah Nasional Bhd.

According to official data, foreign buyers accounted for 19% of all private residential property purchases in the second half of 2011, almost triple the 7% of the first half of 2009.

Maybank IB is neutral as it is cautious on the outlook for residential property in Singapore in the near term. Pending an announcement by IOI, it retained the hold call on the group.

The house noted that IOI’s S$408 million bid for this 99-year leasehold land is 13% higher than that of the second highest bidder, UOL Group Ltd.

Maybank IB said the 2.4ha plot is earmarked for a 685-unit condominium development, translating into an average 1,074 sq ft of built-up area for each unit.

It said, based on an average selling price (ASP) of S$1,000 to S$1,100 per sq ft, each unit will be priced between S$1.07 million and S$1.18 million. This translates into a combined estimated gross development value of S$736 million to S$809 million.

Maybank said the land is well located as it is some 500m away from Clementi MRT Station and Clementi Bus Interchange.

It added that another key attraction is its proximity to Nan Hua Primary School and Clementi Town Primary and Secondary School, which will make project appealing to young families.

The research house said, based on a construction cost of about S$350 per sq ft added to its land cost of S$554 per sq ft, it estimates IOI’s breakeven cost to be at about S$900 per sq ft ppr.

Based on the latest ASPs in the surrounding area of S$1,000 to S$1,100 per sq ft, IOI should enjoy pre-tax margins of 10% to 18%, translating into S$61 million to S$123 million in net profit.

Maybank IB said the project has a marginal uplift to IOI’s net profit base of circa RM2 billion per year if recognised progressively over a three- to four-year period.

For FY11 ended June 30, IOI posted a net profit of RM2.22 billion versus RM2.03 billion.


This article appeared in The Edge Financial Daily, January 17, 2012.



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Kulim rejects MCCM’s offer for QSR

KUALA LUMPUR: Kulim (M) Bhd has rejected the unsolicited offer from the Malay Chamber of Commerce Malaysia (MCCM) to buy its 58.68% stake in QSR Brands Bhd at RM6.90 a share.

Kulim announced yesterday that its board of directors had deliberated on MCCM’s offer, which would have required the approval of Kulim’s shareholders.

“Kulim took note of the stand by its holding corporation, Johor Corp (JCorp), that it would not support any proposal to dispose of the QSR shares,” read the announcement.

To recap, MCCM had offered to buy Kulim’s 58.68% stake in QSR at RM6.90 a share, rivalling an earlier RM6.80 offer by Massive Equity Sdn Bhd, a joint-venture vehicle between Kulim’s ultimate parent JCorp and private equity firm CVC Capital Partners.

Massive Equity had made a conditional offer to acquire the entire business and undertakings including all assets and liabilities of QSR and KFC Holdings (M) Bhd (KFCH) on Dec 14, which works out to RM5.3 billion excluding warrants.

MCCM’s offer was only for Kulim’s stake in QSR, although such an acquisition would have eventually triggered a general offer (GO) for QSR and KFCH.

KFCH operates more than 620 KFC outlets in Malaysia, Singapore, Brunei, Cambodia and India.

Massive Equity offered RM4 per KFCH share and RM1 per warrant. Both QSR and KFCH accepted the buyout offer made by JCorp and CVC seven days after the offer was made and stressed that their boards were not seeking alternative bids.

MCCM’s bid saw a muted response from investors even though it had offered 10 sen more per share.

“This is part of the overall JCorp’s rationalisation programme for its various divisions to focus on their core businesses. For example, via this restructuring, Kulim would exit the food retail business and focus on plantations,” said Datuk Abdul Ghani Othman, Johor Menteri Besar and chairman of JCorp, explaining the rationale behind the acquisition in a question and answer session with Bernama.

QSR was thinly traded and closed unchanged at RM6.51 yesterday. Likewise, KFCH closed unchanged at RM3.82 with 234,000 shares traded. Kulim lost two sen to RM4.39 from RM4.41 on the back of 868,600 shares done.


This article appeared in The Edge Financial Daily, January 17, 2012.



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Second liner call warrants in focus

KUALA LUMPUR: Structured warrants issued over the shares of situational stocks and second liners have come into active investors’ play despite the bearish sentiment persisting over equity markets in recent months.

According to data compiled by Bursa Malaysia, the top three most active warrants in December were those issued by Wijaya Baru Global Bhd (Wijaya-WA), Proton Holdings Bhd (Proton-CG) and JCY International Bhd (JCY-CD),

Notably, warrants issued over the stocks of FBM KLCI’s component stocks did not make it to the list of the top 20 most active warrants in December 2011.

All three of the most active warrants last month had their respective catalysts to support an uptrend in the stock prices of their mother shares and investor interest in the warrants.

Take for example, Wijaya-WA which emerged as the most active warrant in December with a volume of 895.13 million units done.

Wijaya Baru in October last year announced its foray into Indonesia’s logging sector after acquiring two companies for US$80 million (RM252 million).

The group’s new business venture came more than a year after its last timber licence expired.

Wijaya-WA yesterday closed down one sen to 34.5 sen with 9.26 million units traded while its mother share gained 1.5 sen to 81 sen with 3.34 million shares done.

Similarly, Proton’s shares and related warrants also received a boost from late November last year amid speculation that Khazanah Nasional Bhd would sell its 42.7% stake in the national carmaker.

Khazanah yesterday announced that it would sell its strategic stake in Proton to DRB-Hicom Bhd for RM1.291 billion cash or RM5.50 per share.

Proton-CG was the second most active warrant in December with 822.57 million units traded.

The national carmaker’s shares and related securities were suspended from trading yesterday pending the announcement on Khazanah’s stake divestment.

Listed yesterday, the warrants of Hiap Tek Venture Bhd (Hiaptek-WA) emerged as the top gainer on the local bourse after they gained 26.5 sen to 27 sen.

Hiaptek-WA was offered to investors as part of Hiap Tek’s renounceable rights issue on the basis of one rights share for every Hiap Tek share held and one warrant for every four rights shares subscribed to.

In a recent interview, OSK Investment Bank Bhd head of derivatives and structured products Foo Keah Keat said issuing structured warrants over “second-liner” stocks has become an alternative to issuing such products based on blue-chip stocks.

According to Foo, the requirements imposed on issuing structured warrants often made it challenging to issue and sell structured warrants based on blue-chip stocks.

“The challenge is that we can only issue warrants based on blue-chip stocks because of the RM1 billion market capitalisation requirement, these stocks are said to be more liquid and are supposedly more safe.

“But unfortunately most of the blue-chip stocks are dominated by government-liked institutional funds and the liquidity isn’t there,” Foo told The Edge Financial Daily.

One of the key guidelines for the issuance of structured warrants is that the underlying corporation of exchange-traded fund (ETF) must have an average daily market capitalisation of at least RM1 billion in the past three months ending on the last market day of the calendar month immediately preceding the issue date.

Additionally, the issuer of structured warrants must ensure that the underlying corporation is in compliance with the stock exchange’s public shareholding spread requirement.

Foo said that although Malaysian investors are familiar with call warrants, there is still little demand for put warrants and warrants issued over foreign stocks.

Structured warrants based on US and Hong Kong stocks could offer better directional play for investors given that these major markets tend to have greater depth, liquidity and volatility.

“Somehow, investors here are not warming up to foreign warrants. Our last issue was (call warrants over) Citigroup shares and there wasn’t much interest. But we still do want to issue foreign warrants from time to time,” he said.


This article appeared in The Edge Financial Daily, January 17, 2012.



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Bina Puri eyes 20% IRR from Pakistan highway concession

PETALING JAYA: Bina Puri Holdings Bhd is expecting a minimum internal rate of return (IRR) of 20% for the 28-year concession of Motorway-9 (M-9) in Pakistan, according to its executive director Matthew Tee.

Although this rate is considered high by Malaysian standards, Tee said the cost of borrowing in Pakistan is also quite high, with interest rates hovering between 14% and 15% per annum.

To recap, Bina Puri announced it had received a letter of intent dated Nov 11 from the National Highway Authority (NHA) in Islamabad, Pakistan for the conversion of the existing four-lane Karachi-Hyderabad super highway into a six-lane motorway, M-9, on a build, operate and transfer basis.

The M-9 links Hyderabad with Karachi, Pakistan’s largest city and seaport.

“We are currently negotiating the financial and legal aspects of the concession agreement with them. We will make further announcement on the progress of the concession,” the company told the stock exchange.

The project involves the upgrading of the M-9 from the current four lanes to six lanes, with the costing worked out to around 18.2 billion Pakistani rupees or around RM631 million, according to Tee.

Apart from the construction job, Bina Puri is slated to get a 28-year concession for the collection of tolls at the highway, which will increase its recurring income stream.

Tee is clearly excited about the prospects of the Pakistan highway concession.

Tee says the key to venturing abroad is to ensure that the clients or paymasters have the means to pay for the services rendered.

“If you look at our financial results, almost 100% of our revenue comes from the construction business, and income from construction business is cyclical.

“Now with the concession agreement, we plan to diversify our income stream to a more stable source. The highway (M-9) is the most lucrative highway in the whole of Pakistan, with around 23,000 vehicles using the highway every day,” he said.

As at end-November last year, the company’s order book amounted to RM2.7 billion.

“We will be focusing on this project in Pakistan for the time being, as it is already quite a substantial project. The political environment in the country also requires us to be cautious in selecting which projects we should take up,” said Tee.

As far as the funding is concerned, Tee said the group is still working things out with its financial advisors. He also does not rule out Bina Puri taping the capital markets if the need arises.

The company has just concluded the third and final tranche of its private placement exercise, which saw 11.23 million shares placed out at RM1 each, a premium to the last traded price of 93.5 sen.

If all goes well, the Pakistan highway could be Bina Puri’s second highway concession and its first outside Malaysia.

Bina Puri has a 50% stake in KL-Kuala Selangor Expressway Bhd, which operates the KL-Kuala Selangor Expressway (Latar) that connects Rawang with Kuala Selangor through Assam Jawa.

In recent years, some Malaysian companies have been venturing overseas to look for greater opportunities.

This was particularly the case for local construction companies as jobs in Malaysia were getting scarce.

However, much to the disappointment of shareholders, some of these overseas ventures have not been generating good returns, with many companies operating in the Middle East posting losses.

However, Tee said the key to venturing abroad is to ensure that the clients or paymasters have the means to pay for the services rendered.

In Bina Puri’s case, he said the group only deals with governments or government-linked companies (GLCs), as these entities are unlikely to have payment issues.

“All this while, the Pakistani authorities have been honouring their commitment to us, so we are quite confident and comfortable working with them,” he said.

Indeed, Pakistan is not an unfamiliar terrain for Bina Puri.

In September last year, the company completed the construction of 174 villas called Phase 6, Defence Raya Golf Resort, Defence Housing Authority, in Lahore, the country’s second largest city. The contract was valued at RM194 million. In 2010, it completed construction works for the Nippon Paint Factory at Lillani Kasor, Lahore, for a contract sum of RM340 million.

Bina Puri has also completed three major highways in India, including the Vijayawada-Eluru Expressway and Tada-Nellore Expressway in Andhra Pradesh and Chittorgarh-Mangalwar Highway in Rajasthan.

It also has a power generating business in Indonesia to further diversify its income base, with five power plants with capacity to generate 2MW per plant.

“We are also exploring the opportunity to generate hydroelectricity in Indonesia. There’s a lot of potential in the power generating business there as only 50% of the country is connected to the power grid,” Tee said.

For its nine months ended September 2011, Bina Puri posted a lower net profit of RM7.57 million or 6.95 sen per share compared with RM8.13 million or 7.76 sen per share in the previous corresponding period. However, revenue was higher at RM888.3 million compared with RM860.9 million before.

Bina Puri closed down 1.5 sen to 92 sen yesterday.


This article appeared in The Edge Financial Daily, January 17, 2012.



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Axis REIT posts lower net income for 4Q

KUALA LUMPUR: Axis Real Estate Investment Trust Bhd (Axis REIT) posted a 21.9% decline in net profit for 4QFY11 ended Dec 31 to RM31.98 million from RM40.94 million a year ago.

Revenue for the quarter rose 12.1% to RM29.81 million from RM26.59 million a year ago, while basic earnings per share fell to 8.2 sen from 10.89 sen previously.

In a filing with Bursa Malaysia yesterday, Axis REIT said its total expenditure for 4QFY11 was RM13 million, of which RM4.6 million was attributable to property expenses and RM8.41 million to non-property expenses, while its realised income before taxation and available for distribution for 4QFY11 amounted to RM16.8 million.

For FY11, its net profit was down 20.03% to RM81.05 million from RM101.35 million in 2010, while its revenue rose 27.7% to RM114.73 million from RM89.85 million.

Axis REIT said total expenditure for FY11 was RM49.9 million of which RM17.36 million was attributable to property expenses and RM32.54 million to non-property expenses, while its realised income before taxation and available for distribution amounted to RM64.83 million.
Most of the RM13.21m for the enhancement of its properties were spent on the refurbishment of Menara Axis and Crystal Plaza.

To date, Axis REIT said it has paid a total income distribution of RM59.39 million to unitholders and has set aside RM6.35 million for income distribution as the final distribution, which translates to 1.4 sen per unit to be paid on Feb 29.

It added that RM13.21 million was incurred for the enhancement of its properties during 2011, with most of the expenses being spent for the refurbishment of Menara Axis and Crystal Plaza.


This article appeared in The Edge Financial Daily, January 17, 2012.



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TMC Life Science continue losing streak

KUALA LUMPUR: Despite the entry of Singapore billionaire investor Peter Lim Eng Hock in 2010, TMC Life Sciences Bhd has continued to bleed losses.

For the second quarter ended Nov 30, TMC Life posted net losses of RM3.04 million on the back of RM14.46 million in revenue. For the six-month period, TMC Life suffered RM5.37 million in net losses on a revenue of RM27.68 million. According to its Bursa Malaysia filings, TMC Life attributed the losses to depreciation, finance cost and expenses incurred for its rights issue exercise.

Despite the losses, TMC Life said it is cautiously optimistic for its prospects for FY12 ending May 31.

“The main hospital continues to attract more patients and specialist doctors and is conducting more activities to promote the hospital’s advanced facilities and services,” it said. TMC Life added that it is expecting to receive more patients with the signing of several memoranda of understanding with various organisations and other marketing activities to promote medical tourism.

TMC Life said there are no comparative figures for the quarter under review due to changes in the financial year end from Dec 31 to May 31. TMC Life has been posting losses since the quarter ended March 31, 2009.

The company also announced the appointment of Dr Wong Chiang Yin as group CEO in addition to his role as executive director. Wong replaces Lim Poon Thoo who resigned as CEO to take up engagements in other organisations.

Last December, TMC Life issued 200.59 million new rights shares together with 401.17 million new detachable warrants on the basis of one rights share with two free warrants for every three existing TMC Life shares held.

TMC Life fell 30.8% from a high of 45.5 sen in the last three months to close at 31.5 sen yesterday.


This article appeared in The Edge Financial Daily, January 17, 2012.



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Hovid’s PN17 status lifted

KUALA LUMPUR: Pharmaceutical products manufacturer Hovid Bhd’s Practice Note 17 (PN17) status will be lifted effective today.

The company’s share price gained 10% or 2.5 sen to 27.5 sen yesterday, the highest since October 2009, with 17.94 million shares done.

The counter has climbed steadily from a low of 18.7 sen in October last year.

In a filing with the stock exchange, Hovid said it received a letter yesterday from Bursa Malaysia informing the company that it no longer triggered any of the PN17 criteria.

According to the filing, Bursa had taken into consideration the profitability and growth of Hovid’s pharmaceutical segment for the past seven financial years up to June 30, 2011, as well as the latest quarter ended Sept 30, 2011. It had also taken note of Hovid’s distribution of a portion of its shareholdings in Carotech Bhd via a dividend-in-specie on Dec 23, 2011.

“Bursa Securities has decided to grant Hovid a waiver from complying with paragraph 8.04(3) of the Main Market Listing Requirements, which requires a PN17 company to submit a regularisation plan to the relevant authority to regularise its condition,” it said.

For 1QFY12 ended Sept 30, Hovid posted a net profit of RM504,000 compared with a net loss of RM5.4 million previously, while revenue came in lower at RM37 million from RM42.4 million in the previous corresponding period.

Hovid incurred a net loss of RM5.6 million in FY11 ended June 30, compared with RM53.9 million the year before.


This article appeared in The Edge Financial Daily, January 17, 2012.



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TNB likely to continue in the red

Tenaga Nasional Bhd (Jan 16, RM6.12)
Maintain buy with unchanged target price RM6.70: Tenaga Nasional Bhd (TNB) is due to release its 1QFY12 results on Jan 17. We estimate 1QFY12 will see a further net loss of RM300 million to RM380 million, much lower than 4QFY11’s RM453.9 million net loss.

The estimated net loss is due to the continued high fuel cost, coupled with foreign exchange losses (estimated at RM395 million, up by 276.2% year-on-year [y-o-y] and 18% quarter-on-quarter [q-o-q]) given the strengthening of the yen and US dollar against the ringgit.

The unavailability of adequate gas supplies has led TNB to continue burning more costly alternative fuel (oil and distillate) apart from coal.

The recent one-off advance payment worth RM1 billion from the government should help alleviate pressure on TNB’s fuel expenses.

We gather the national utility is still getting slightly less than 1,000 million metric standard cubic feet per day (mmscfd) gas supply in 1QFY12 (below the required gas supply level of 1,250mmscfd).

However, we have anticipated this shortfall as we only expect gas supply level of 1,050 mmscfd for 1H12.

The remaining RM1.1 billion, which TNB expects to receive in FY12, is still being verified by Petroliam Nasional Bhd. Recall that in December 2011, the government approved a fuel cost sharing mechanism to address the current increased cost borne by TNB due to the gas supply shortage.

The fuel cost sharing mechanism will see the government, TNB and Petronas equally share the RM3.1 billion additional costs incurred from the purchase of alternative fuel from January 2010 until October 2011. TNB is entitled to RM2.1 billion compensation in total but we make no changes yet to our FY12F/FY13F earnings forecast.

Electricity demand grew by 7.2% y-o-y in the first two months of 1QFY12. The strong growth was attributed to the low base effect and Hari Raya Aidilfitri season. The major source of the strong demand is the commercial sector which made up 34.7% of TNB’s unit electricity sales in the first two months of 1QFY12.

However, TNB guided that it expects the electricity demand for 1QFY12 to register at least 4% growth.

Note that coal prices have been easing to below US$100 (RM315) per tonne, against our FY12F assumption of US$110 per tonne, against a backdrop of post-mild winter season and China’s lower purchasing activities.

Should the current downward trend in coal prices persist, TNB will enjoy substantial savings. Every US$10 per tonne change in average coal price translates to about a RM500 million change in TNB’s fuel costs.

We are leaving our earnings forecast unchanged pending the release of the 1QFY12 results. Our target price remains unchanged at RM6.70 based on discounted cash flow using a weighted average cost of capital of 8.8%. We reiterate our “buy” recommendation although the expected total return now is at 10.3% (which is below than our 15% “buy” definition).

We believe much of the negative news has been priced in and investors are looking forward to a better 2H12 given better gas supplies as the Malacca regasification plant is to take off in July 2012. Another key re-rating catalyst is the potential upward tariff review as per the fuel cost pass-through (FCPT) mechanism amid incorporation of coal prices in the FCPT review. — MIDF Research, Jan 16


This article appeared in The Edge Financial Daily, January 17, 2012.



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MMHE not a yardstick for expansion in O&G sector

Malaysia Marine and Heavy Engineering Holdings Bhd (Jan 16, RM5.46)
Maintain underperform with target price RM4.82: Being in the Petroliam Nasional Bhd stable is no guarantee of Petronas contracts for MMHE, the country’s largest oil and gas (O&G) fabricator and yard owner. Project uncertainties, delays and intensifying competition cloud the company’s earnings visibility.

The stock is the most expensive in our O&G portfolio despite a three-year earnings per share compound annual growth rate (EPS CAGR) of -11.5%, a stark contrast to the sector average of 20.3%.

We begin coverage with an “underperform” call, valuing it at 17.6 times CY13 price-earnings ratio, a 40% premium over our target market PER.

MMHE’s order book is filling up more slowly than expected, indicating that it is not necessarily the fabricator of choice for Petronas, its production sharing contractors and even its parent MISC Bhd.

In an increasingly competitive operating environment, contract awards ultimately boil down to pricing, even for Petronas contracts. MMHE’s order book shrank from RM5.95 billion on June 10 to RM3.7 billion currently.

Two widely anticipated major contracts, Turkmenistan’s Block 1 Phase 2 project and Shell’s Malikai project, may not be awarded so soon and may not go to MMHE.


For Shell’s Malikai project, it does not help that MMHE is behind schedule in completing its Gumusut-Kakap floating production system.

Furthermore, we think that it is only a matter of time before the merged entity of Kencana Petroleum Bhd and SapuraCrest Petroleum Bhd matches MMHE’s fabrication capacity, especially given the delay in the acquisition of Sime Darby Bhd’s yard.

The expected fall in MMHE’s earnings bucks the broader sector’s uptrend. We think investors will prefer companies with more solid and long-term order books (Bumi Armada Bhd, Dialog Group Bhd, Kencana and SapCrest) and hold back from buying MMHE until there is a substantial improvement in its earnings prospects.

Bumi Armada, Dialog and Kencana boast 27% to 33% three-year EPS CAGR. — CIMB IB Research, Jan 16


This article appeared in The Edge Financial Daily, January 17, 2012.



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Iskandar Malaysia starting to bear fruit

Iskandar Malaysia
During our recent visit to Iskandar Malaysia, we were pleasantly surprised by the strong 65% bookings for UEM Land Holdings Bhd’s Imperia@Puteri Harbour condos launched in November 2011 at a record RM725 per sq ft (comparable with suburban condominiums in Kuala Lumpur).

Impiana@East Ledang condos also saw brisk sales with two blocks almost fully sold within six months at RM480 psf (against RM300 psf for the adjacent Ujana apartments launched in 2009). Southern Industrial and Logistics Clusters (SiLC) industrial land values continued to appreciate with the latest transactions hitting RM35 psf against 2010’s RM25 psf.

For S P Setia Bhd, Johor remains a core market (29% of sales) with sales surging 57% in FY11.

Since its launch in December 2011, the Johor Premium Outlets (JPO) has been seeing strong crowds, especially during weekends (locals and Singaporeans). About 90% of Phase 1’s 70 stores are operational (Coach, Ferragamo, Burberry, Levis, Guess) while the rest are being fitted out (Polo Ralph Lauren, Tommy Hilfiger, Brooks Brothers).

Discounts range from 30% to 60% (a tad better than Singapore sales). Accessibility to JPO is good (10 minutes from Senai Airport via a dedicated interchange) with clear signs.

However, the food court is small and car park pay machines are limited. JPO’s size pales in comparison with similar outlets in the US, Japan and Hong Kong, but Phase 2 could see another 60 outlets (130 in total).

Future development may also include a 2,000-room hotel and water theme park. Genting Plantations Bhd will be the largest beneficiary given its 2,226ha in Kulai — every RM5 psf increase (from RM10 psf assumed) would raise its sum-of-parts value by 10%.

Iskandar is set to reach its tipping point in 2012/13 following the completion of key catalyst developments and infrastructure improvements.

The recent Malaysia-Singapore leaders’ retreat saw continued improvement in bilateral ties (including plans to build an underground link for a rapid transit system by 2018).

The entry of more developers (Temasek Holdings, Sunway and China’s Zhuoda Group in Medini, Bandar Raya Developments Bhd in Nusajaya, Dijaya Corp Bhd in Danga Bay) should help expedite Iskandar’s overall development progress.

We believe Singapore’s stubbornly high property prices and latest stamp duty hike could lead to spillover demand for Iskandar properties. — HwangDBS Vickers Research, Jan 16


This article appeared in The Edge Financial Daily, January 17, 2012.



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Dialog continues growth story into 2012

Dialog Group Bhd (Jan 16, RM2.36)
Maintain buy with lowered target price (excluding rights) RM3.05 from RM3.35: We have raised FY12 to FY14F earnings estimates by 8% to 20% on higher engineering, procurement, construction and commissioning (EPCC) revenue (+RM400 million to RM900 million per year). Our three-year net profit compound annual growth rate (CAGR) of 21% now reflects Dialog’s 20% to 30% growth guidance.

Our sum-of-parts-based target price has however been lowered to RM3.05 (from RM3.35) after adjusting for the two-for-10 rights issue (excluding warrants).

Despite trading at 25 times 2013 earnings (which incorporated just partial earnings potential), we continue to rate Dialog a “buy” on expectations of continuous major project wins in 2012.

Management has expressed participation interest in Petroliam Nasional Bhd’s upcoming marginal field risk sharing contract (RSC) and enhanced oil recovery (EOR) projects. It is targeting two or three new jobs, provided returns are palatable.

Proceeds raised from the recent two-for-10 rights issue (RM472 million cash) will be adequate to support this growth (one RSC project would cost about US$1 billion [RM3.15 billion]).

Marginal contributions are expected from Balai RSC at the pre-development stage. Dialog will likely earn nominal fabrication, base oil supply transport and installation (T&I) and hook-up and commissioning (HUC) income during this stage (FY12 to FY14F; assuming these are contracted to Dialog). Two or three wellhead platforms are required for this field, to be built by its fabrication unit, Fitzroy Engineering.

The joint venture (32% Dialog), which handles the Balai field, will not recognise any profit until it hits first oil or gas production.

The first phase of the Pengerang centralised tankage facilities (CTF) project (initial storage capacity of 1.3 million cu m) is scheduled to commence operations by 2014.

While the initial blueprint indicates a five million cu m capacity by 2020, Dialog has stated that it could double the storage capacity to 10 million cu m should the need arise.

Our back-of-the-envelope calculation suggests that an extra five million cu m would earn Dialog about RM245 million in net profit per year, or 1.6 times FY11 earnings (based on its effective 46% stake).

Overall, we like Dialog’s business model, respectable earnings growth, focused management and healthy balance sheet. Dialog offers attractive earnings visibility and defensive qualities, with steady, progressive dividends. — Maybank IB Research, Jan 16


This article appeared in The Edge Financial Daily, January 17, 2012.



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Chor: Local property mkt to see slight impact from eurozone downturn

KUALA LUMPUR (Jan 17): Housing and Local Government Minister Datuk Seri Chor Chee Heung is confident that the local property development will continue to thrive despite the economic slowdown that has currently impacted European countries.

He said the crisis would have a slight impact only on PROPERTIES [] that exceed RM1 million.

He said the property development in the country was mainly driven by local buyers and hoped that developers would build more affordable houses for Malaysians in conjunction with the government's 1 Malaysia policy.

"For developers undertaking affordable housing of between RM400,000 and RM600,000, there will be no shortage of takers," he told reporters after launching the "Malaysia Top Property Developers 2011/2012" coffee table book.

The 250-page coffee table book is available at MPH bookstores and some will be on sale in overseas markets.

The book focuses on the 36 top developers in Malaysia, among others, IJM LAND BERHAD [], Berjaya Land Berhad and Mah Sing Group Berhad.

Chor said his ministry would revive about 35 more abandoned housing projects throughout the country after having successfully done so with 35 others last year.

Meanwhile, the Chief Executive Officer of Malaysia Property Incorporated, Kumar Tharmalingam said Malaysia's property market, was different from that of Singapore.

"(In Malaysia) 98 per cent of the properties are sold to Malaysians and only two per cent to foreigners. This is in contrast with the Singapore property market that is targeting 30 per cent of sales to foreigners," he added.

He said Malaysian builders had very deep pockets and were able to manage the economic slowdown in sales by holding back launches while having had also paid for the land.

He predicted that this year the country would see less luxury projects launched, with the exception of established markets such as Iskandar Malaysia in Johor, the Klang Valley, Kota Kinabalu (Sabah) and Batu Ferringhi (Penang).

These he added, are foreign market oriented. - Bernama



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Haisan submits proposed revamp to MITI

KUALA LUMPUR (Jan 17): HAISAN RESOURCES BHD [] has submitted the proposed regularisation plan to the Ministry of International Trade and Industry for approval.

Its merchant bank, Public Investment Bank Bhd, said on Tuesday the plan was submitted on Monday.

On Jan 9, Haisan had submitted the proposed regularisation plan to Bank Negara Malaysia for approval i involving the issuance of warrants to all non-resident shareholders and also the issuance of ICULS and warrants to the unsecured lenders under the proposed debt restructuring.



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Labuan Shipyard eyes jobs worth RM150m

Labuan Shipyard and Engineering Sdn Bhd aims to secure at least two major projects from Petroliam Nasional Bhd (Petronas) and Shell worth RM150 million this year.

Its chief executive officer Azman Nasir said the company, which is bidding for RM800 million worth of fabrication and shipbuilding projects locally, has been shortlisted for four projects that it bid for last year.

The projects -- Shell's F14, D12 and Laila and Petronas' Bulan B -- are all located in East Malaysia. He was speaking to reporters after a signing ceremony between Labuan Shipyard and Malaysia Building Society Bhd (MBSB) for loan facilities here today.

The company also aims to secure the contract for the Tanjung Kapal Services (M) Sdn Bhd second diesel electric propulsion platform supply vessel (PSV).



"We are proceeding well with our first vessel and it is scheduled to be completed in June 2013, but we are targeting to complete it three months earlier, which shows to our client that we are very serious with our business," he said.

Azman added Labuan Shipyard is also targeting at least three major refit and repair vessel projects from the government, each costing more than RM50 million.

Azman said the company is also eyeing projects valued at more than RM100 million in Permas, Endau and Belut fields from Murphy Oil Corp and Hess Aremada next month.

He said as at Dec 31, 2011, the company's book order stood at RM170 million comprising major shipbuilding and minor fabrication projects in the oil and gas sector.

"Hence, we are confident this year we will achieve revenue of about RM300 million, compared to the estimated revenue of RM100 million in 2011, backed by these projects," Azman said.

Meanwhile, MBSB chief executive officer Datuk Ahmad Zaini Othman said the deal between Labuan Shipyard is for the Murabahah Tawarruq financing facility of up to RM41 million and Kafalah bank guarantee of up to RM10 million.

"This is for the purpose of the engineering, construction, testing and delivery of the 77m Dynamic Positioning 2 diesel electric PSV," he said.

He added the company believes that such financial assistance would greatly benefit its corporate customers by easing their cash flow, allowing them to focus on business at hand while the bank attends to their capital needs. -- Bernama



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KL shares higher at mid-afternoon

Shares on Bursa Malaysia were traded higher at mid-afternoon session Tuesday, tracking positive regional sentiments, dealers said.

At 3pm, the underlying FTSE Bursa Malaysia KLCI gained 3.60 points or 0.24 per cent to 1,512.66, after opening 0.55 point higher at 1,509.61.

A dealer said further gains were capped by losses on plantation counters on concerns over the euro zone debt crisis, higher-than-expected edible oil supplies and weak exports.

Furthermore, there are no positive news to spark fresh buying interest, the dealer said, adding that trading is likely to remain light ahead of the Chinese New Year holidays.

On the broader market, sentiments were bearish, with losers leading gainers 329 to 307 while 324 counters were unchanged. Turnover totalled 869.14 million shares worth RM949.81 million.

Proton was the actively-traded counter after Khazanah announced yesterday it was divesting its 42.7 per cent Proton stake to DRB-Hicom for RM5.50 per share or RM1.29 billion cash. Proton jumped 25 sen or 4.83 per cent to RM5.43.

Maybulk-Call Warrant gained six sen to 32 sen, E&O-Call Warrant rose three sen to 11.5 sen, while Compugates lost half a sen to 7.5 sen.

Among heavyweights, Maybank slid one sen to RM8.18, CIMB slipped three sen to RM7.16, while Sime Darby added one sen to RM9.09.

Bursa Malaysia's Finance Index rose 5.60 points to 13,378.32, the Industrial Index added 1.61 points to 2,776.79, while the Plantation Index slipped 4.81 points to 8,423.96.

The FTSE Bursa Malaysia Emas Index added 24.91 points to 10,439.22, the FTSE Bursa Malaysia Mid 70 Index jumped 31.78 points to 11,743.31 and the FTSE Bursa Malaysia Ace Index was 4.47 points higher at 4,269.96. -- Bernama



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DRB-Hicom says has workable biz model for Proton

KUALA LUMPUR (Jan 17) Upon acquiring Khazanah Nasional Bhd's 42.7% equity in PROTON HOLDINGS BHD [], DRB-Hicom has set its eyes on realising a workable business model for the national car maker, with special emphasises on electric and hybrid car manufacture.

In a statement, DRB-Hicom group managing director Datuk Seri Haji Mohd Khamil Jamil said product renewal and enhancement would be a major agenda lined up by the company for Proton.

"As the automotive TECHNOLOGY [] evolves, green technology has gained momentum as well as the approval of many environmental conscious consumers. As such, hybrid and electric vehicles would be one of the main focus.

"Proton will continue to strive to cater to its consumers' needs, taste, lifestyle requirement in line with global automotive market trends," he added.

Mohd Khamil said besides DRB-Hicom and Proton working hand-in-hand to promote performance and diversify product offerings, it would be crucial for the national auto maker to broaden its talent capabilities and simultaneously raise the quality of its workforce.

"This is where the presence of the International College of Automotive (ICAM), established by DRB-Hicom, can provide one of the best synergies and perhaps the golden key to the company's core competence to unlock the future for Proton.

ICAM, being the only local centre of education that offered automotive courses, also prides itself with a unique holistic teaching approach enlisting teaching personnel who are also industry professionals.

Mohd Khamil said as the government continued its effort to enlarge the nation's automotive industry, the National Automotive Policy should also be able to reach out and encourage global players to intensify their presence and investments in Malaysia.

"DRB-Hicom will maintain its intention and interest to safeguard the national car company while at the same time encourage, facilitate, grow and enhance Malaysia's national automotive industry, hence making Malaysia a preferred automotive hub capable of rivalling its neighbours," he said. - Bernama



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DRB-Hicom has workable model for Proton

Upon acquiring Khazanah Nasional Bhd's 42.7 per cent equity in Proton Holdings Bhd, DRB-Hicom has set its eyes on realising a workable business model for the national car maker, with special emphasises on electric and hybrid car manufacture.

In a statement, DRB-Hicom group managing director Datuk Seri Haji Mohd Khamil Jamil said product renewal and enhancement would be a major agenda lined up by the company for Proton.

"As the automotive technology evolves, green technology has gained momentum as well as the approval of many environmental conscious consumers. As such, hybrid and electric vehicles would be one of the main focus.

"Proton will continue to strive to cater to its consumers' needs, taste, lifestyle requirement in line with global automotive market trends," he added.

Mohd Khamil said besides DRB-Hicom and Proton working hand-in-hand to promote performance and diversify product offerings, it would be crucial for the national auto maker to broaden its talent capabilities and simultaneously raise the quality of its workforce.

"This is where the presence of the International College of Automotive (ICAM), established by DRB-Hicom, can provide one of the best synergies and perhaps the golden key to the company's core competence to unlock the future for Proton.

ICAM, being the only local centre of education that offered automotive courses, also prides itself with a unique holistic teaching approach enlisting teaching personnel who are also industry professionals.

Mohd Khamil said as the government continued its effort to enlarge the nation's automotive industry, the National Automotive Policy should also be able to reach out and encourage global players to intensify their presence and investments in Malaysia.

"DRB-Hicom will maintain its intention and interest to safeguard the national car company while at the same time encourage, facilitate, grow and enhance Malaysia's national automotive industry, hence making Malaysia a preferred automotive hub capable of rivalling its neighbours," he said. -- Bernama



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Nextnation: US$7m profit from IT infra project with Indonesia’s Inovisi

KUALA LUMPUR (Jan 17): NEXTNATION COMMUNICATION BHD [] expects cumulative profit of about US$7 million over the initial period of three years from its IT infrastructure project with Indonesia’s PT Inovisi Infracom, Tbk.

Nextnation said on Tuesday it would sell mobile platform infrastructure hosting and maintenance services to Indonesia’s PT Inovisi Infracom, Tbk.

Under the heads of agreement inked on Thursday, it would sell to Inovisi an IP interconnection platform to serve telecom operators offering IP services and an IP bandwidth optimiser, allowing data to be sent out via faster and more consistent IP networks.

“Inovisi will provide Nextnation a minimum revenue guarantee of not less than US$22.50 million over an initial period of three years, with an option to extend for another three years subject to overall performance. Nextnation's initial investment commitment for this Project is estimated at US$5 million.

“The funds will be used to purchase the necessary equipment and to set up the IT infrastructure to fulfil the project's requirements. From this project, Nextnation targets to achieve a cumulative profit contribution of about US$7 million over the initial period of three years,” it said.



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Sarawak Plantation in pact with Citra Widya

Sarawak Plantation Agriculture Development Sdn Bhd has signed a memorandum of understanding (MOU) with Citra Widya Education PT to collaborate on training of oil palm estate, mill and logistics operations and management staff.

Sarawak Plantation Agriculture is a wholly-owned unit of Sarawak Plantation Bhd.

In a filing to Bursa Malaysia today, Sarawak Plantation said MOU was valid for 12 months, starting from today, within which period a contract would be executed between the parties unless an extension of the MOU was mutually agreed to by the parties in writing.

Sarawak Plantation is one of the pioneer players in the oil palm industry in Sarawak, with a total land bank of 51,998 hectares of which 12,914ha are under the Native Customary Rights scheme. -- Bernama



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Labuan shipyard eyes Shell, Petronas jobs

Labuan Shipyard and Engineering Sdn Bhd aims to secure at least two major projects from Petroliam Nasional Bhd (Petronas) and Shell worth RM150 million this year.

Its chief executive officer, Azman Nasir said the company, which is currently biding for RM800 million worth of projects locally, has been shortlisted for four projects that it bid for last year.

The company also aims to secure the contract for the Tanjung Kapal second diesel electric propulsion platform supply vessel.

He was speaking to reporters after a signing ceremony between Labuan Shipyard and Malaysia Building Society Bhd for loan facilities in Kuala Lumpur today.



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Air Asia X launches KL-Sydney flight

Air Asia X, which launched its Kuala Lumpur-Sydney direct flight today, is already looking at Adelaide as the next city for its expansion in Australia.

Air Asia X chief executive officer, Azran Osman-Rani said talks on this are only at the preliminary stage and it will not happen this year but in 2013.

He was speaking to Malaysian journalists following the launch of the airline's Kuala Lumpur-Sydney route at the Museum of Contemporary Art Centre in Sydney.

The inaugural Kuala Lumpur-Sydney flight, which takes off on April 1, will be offered at a one-way fare of RM199. This is the lowest fare ever offered to this city by air from the Malaysian capital.

Fares for Australians flying into Kuala Lumpur will start from A$99.

Azran said the low-cost long-haul airline expects to see a revenue of RM16 million in its first year of operations into the Kuala Lumpur-Sydney route.

He also reiterated that while there was much speculation on the reasons for Air Asia X to recently suspend flights to four cities, namely Paris, London, New Delhi and Mumbai, it was purely a business decision.

Despite passenger traffic being high, the high fuel cost, introduction of a carbon tax in Europe (effective) and tax issues in India, were really the reasons for the pullout, he said.

Azran also said the withdrawal from the four cities had nothing to do with its collaboration with Malaysia Airlines (MAS).

The review of the sectors had started in 2010 and even before AirAsia's collaboration with MAS.

"This was really an Air Asia X decision. We decided that rather than go into many markets and stretch ourselves thin, we would focus on the core markets, where potential for growth was high.

"There are immense opportunities in the Asia Pacific. The strategy is for few countries, multiple cities and economies of scale. We are looking at Australia, Japan, China, Taiwan, and also Tehran," he said.

On whether Air Asia X would still be competing with MAS, Azran said that would be the case as with all the cities it was flying to.Air Asia X currently flies to the Gold Coast, Melbourne and Perth in Australia.

However, he said it is clear that the workable model for MAS, is in it being a premier airline offering premier products and services, and its real competitor would be other premier airlines.

Meanwhile, the Air Asia X Kuala Lumpur-Sydney flight has been lauded as a significant development for both the Australian and Malaysian tourism industries.

Sandra Chipchase, the chief executive officer of Destination NSW (New South Wales), said the new service would eventually generate around 55,000 more international visitors to the state annually.

She also said at the end of September last year, NSW welcomed 46,000 visitors from Malaysia.

"Visitor expenditure to NSW from Malaysia totalled A$142 million, an increase of over 75 per cent from the previously," she added.

Chipchase said the new AirAsia X service is expected to increase this income further.--BERNAMA



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IOI Corp wins Singapore land tender bid for S$408m

KUALA LUMPUR (Jan 17): IOI CORPORATION BHD []’s subsidiary Multi Wealth (Singapore) Pte Ltd has won the tender bid for a parcel of land in the island republic for S$408 million (RM995.50 million).

IOI Corp said on Tuesday Multi Wealth was notified by the Housing & Development Board of Singapore about the successful bid for the 24,417.60 sq metres (6.03 acres) parcel of land.

It said the site is at Jalan Lempeng, off Clementi Avenue 6 and is adjacent to private condominiums such as Park West and Regent Park, Faber Hill landed residences and schools. Across the road is the Clementi town centre.

“The subject land is a parcel of 99-year leasehold land measuring approximately 24,417.6 sq metres with a maximum permissible gross floor area of 68,369.3 sq. metres, which translates into a plot ratio of 2.8.

“The subject land is intended for residential development comprising of condominium units. The gross development value and gross development costs of the proposed development has yet to be determined as the project development plans are still at a preliminary stage,” said IOI Corp.



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IOI buys Singapore land for S$408m

IOI Corp, a Malaysian plantation and property group, said it won a site in Singapore by tender for S$408 million, according to a company statement in Kuala Lumpur today.

The parcel of land measuring 24,418 square metres and located at Jalan Lempeng in Singapore, is earmarked for a condominium development, IOI said. -- Bloomberg



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MBSB targets 30% revenue from East Malaysia this year

KUALA LUMPUR (Jan 17): Malaysian Building Society Bhd aims to increase revenue from its East Malaysian arm to 30% this year from more than 20% in 2011, said its CEO Datuk Ahmad Zaini Othman.

"Presently the East Malaysian side contributes about 20% to the group's revenue," he said at a signing ceremony between MBSB and Labuan Shipyard and Engineering Sdn Bhd on Tuesday.

The group began establishing its offices and branches there since two years ago and plans to open a further 14 branches this year.

Ahmad Zaini added that the group is expected to record a profit before tax of RM400 million for FY11.



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Axis REIT to increase total assets to RM2 bn by 2013

KUALA LUMPUR (Jan 17): AXIS Real Estate Investment Trust (Axis REIT) has targeted to increase its total assets portfolio from RM1.28 billion at end-2011 to RM2 billion by 2013.

It said on Tuesday that in the immediate term, the company, which focuses on commercial, office and industrial PROPERTIES [], expects its portfolio increase to about RM1.4 billion once it completes two property acquisitions at the end of this month.

Axis REIT has identified properties worth RM545.3 million for possible acquisitions and is conducting due diligence on a number of them.



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Labuan Shipyard plans to bid for RM800m in projects this year, says CEO

KUALA LUMPUR (Jan 17): Labuan Shipyard Engineering Sdn Bhd, a subsidiary of SapuraCrest Bhd, plans to bid for some RM800 million in fabrication and shipbuilding projects this year, said its chief executive officer Mohd Azman Nasir.

He said on Tuesday that the group was planning to bid for contracts in the Permas, Endau and Belut fields next month from Murphy Oil Co and Hess Aremada.

"We will only bid for contracts more than RM50 million," Azman said at a signing ceremony between MALAYSIA BUILDING SOCIETY BHD [] and Labuan Shipyard for RM51 million financial aid.

The group which recently turned profitable after a decade in the red said it was projecting a revenue of RM400 million this year from RM100 million the year before on the back of these projects.



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