Khazanah books ‘modest’ divestment gain from sale of Proton stake

KUALA LUMPUR (Jan 18): Khazanah Nasional Bhd managing director Tan Sri Azman Mokhtar maintains that the sovereign wealth fund will book a "modest" divestment gain from selling its strategic stake in PROTON HOLDINGS BHD [] to DRB-HICOM BHD [].

Speaking to reporters during Khazanah's annual review on Wednesday, Azman dismissed reports that Khazanah's entry cost into Proton in 2002 was RM8 a share, saying that its average investment cost was lower.

Azman however declined to disclose Khazanah's investment cost in Proton or the expected divestment gain from the transaction, only saying that the RM5.50 per share price tag was slightly higher than Khazanah's holding cost for the 42.72% block.

On Monday, Khazanah announced it was selling the Proton stake for RM5.50 per share or a total cash consideration of RM1.29 billion.

To recap, news that Khazanah Nasional's stake in Proton was up for sale had pushed up Proton's share price since mid-November, from RM2.70 on Nov 14, 2011 to a high of RM5.46 on Jan 12.

Although the RM5.50 a piece offer price from DRB-Hicom was a 39.24% premium over the national carmaker's five-year average price of RM3.95, there was criticism that Khazanah could have negotiated for a better price.

Additionally, Khazanah was selling its equity interest in Proton at a 43.9% discount to Proton's net asset value of RM9.81 per share.



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Pantech 3Q earnings up nearly 70% to RM10.34m, plans capacity expansion

KUALA LUMPUR (Jan 18): Steel pipes and fittings manufacturer PANTECH GROUP HOLDINGS BHD [] posted net profit of RM10.34 million in the third quarter ended Nov 30, 2011, an increase of 69.5% from RM6.09 million a year ago while it planned to expand its capacity.

It said on Wednesday its revenue increased 49.3% to RM112.65 million from RM75.43 million. Earnings per share were 2.29 sen compared with 1.36 sen. It declared a special interim single tier dividend of 1.2 sen per 20 sen share.

Pantech said its third quarter financial performance was also better than the second quarter where the revenue was RM100.58 million and net profit RM7.23 million due mainly to better products mix.

For the nine-month period, its earnings were flat at RM23.83 million compared with the RM23.88 million a year ago due to continued losses incurred by the new manufacturing plant.

However, its revenue increased by 17.4% to RM308.58 million from RM262.87 million due to improved sales from both manufacturing and trading division.

On the outlook, Pantech said the group would continue to focus and expand on its existing revenue generating businesses and seek opportunities to grow its businesses, both locally and overseas.

This would see it expanding its capacity as the major pipes, fittings and flow controls solutions provider to the oil and gas industries and related upstream and down-stream industries.

“The group is of the view that the long term outlook of the oil and gas industries continues to be positive with the expected multi billions oil and gas investment under Economic Transformation Programme (ETP) announced by the government,” it said.



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Hua Yang 3Q earnings up 90% to RM14.57m, unbilled sales at RM505m

KUALA LUMPUR (Jan 18): HUA YANG BHD []’s earnings jumped 90% to RM14.57 million in the third quarter ended Dec 31, 2011 from RM7.68 million a year ago underpinned by better sales of its homes. It also recorded unbilled sales of RM505 million.

It said on Wednesday its revenue rose 70.8% to RM84.25 million from RM49.30 million while earnings per share were 10.12 sen versus 5.33 sen.

Chief financial officer, May Chan said total sales achieved for the third quarter was RM175 million, an increase of 141% from a year ago.

For the nine-month period, the property company chalked up strong growth in earnings and revenue.

Its earnings rose 136% to RM39.94 million from RM16.90 million in the previous corresponding period while its revenue increased 81.8% to RM222.13 million from RM122.15 million.

Chan said the strong financial performance was due to better sales achieved for phases under development and steady recognition of CONSTRUCTION [] progress. There was a strong demand for its projects nationwide, she added.

“Our homes in the Klang Valley, Ipoh and Johor have received positive response from the mass, middle-income segment consisting of first-time homebuyers and up-graders. The My First Home Scheme (MFHS) has also contributed to sales, particularly for our projects outside of the Klang Valley,” she said.

Cumulative sales for the period stood at RM451 million, surpassed the sales of RM310 million in FY ended March 31, 2011.

“With unbilled sales for the financial quarter standing at approximately RM505 million, we are confident of improved earnings visibility for the group going forward. We will continue to strive for a stronger finish in our next financial quarter,” said Chan.



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HELP International investing RM20m for international school

KUALA LUMPUR (Jan 18): HELP INTERNATIONAL CORPORATION [] Bhd is expanding its education business to set up a private primary and secondary international school.

It said on Wednesday it is investing RM20 million to set up the school on a seven acre site in Subang with the capacity to cater for more than 3,000 students.

The first phase will open in September 2012 with an initial intake of 500 to 600 students.

To recap, HELP said it had on Jan 16 received the Education Ministry’s approval to set a private international school within the vicinity of HELP University’s flagship green TECHNOLOGY [] campus in Subang 2.

HELP executive director Adam Chan said: “We aim to make this a model school and will look at other opportunities to expand within Malaysia and overseas.”



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Country View back in the black for FY11

KUALA LUMPUR (Jan 18): COUNTRY VIEW BHD [] swung into the black for the financial year ended Nov 30, 2011, posting net profit of RM7.43 million compared with net loss of RM8.19 million in FY10, boosted by higher sales from its residential PROPERTIES [] and shop-offices.

It said on Wednesday revenue surged 314% to RM96.29 million from RM23.26 million. At the profit before tax level, it was RM11.50 million compared loss before tax of RM8.5 million.

“The significant increase in the revenue and profit before tax was derived from the percentage of completion recognised and the increase in sales for the residential properties and triple storey shop-offices in Taman Nusa Sentral as well as the bungalow units, Residence at The Peak,” it said.

In the fourth quarter ended Nov 30, 2011, it posted net profit of RM4.72 million compared with net loss of RM1.72 million a year ago.

Revenue jumped 721% to RM41.40 million from RM5.04 million a year ago while earnings per share were 4.72 sen compared with loss per share of 1.72 sen.

Country View said the profit before tax of RM6.3 million in the fourth quarter as compared to the profit before tax of RM3.0 million in the third quarter was derived from the percentage of completion recognised and the increase in sales for the residential properties and triple storey shop-offices as well as the bungalow units.



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Market Commentary

The FBM KLCI index lost 1.98 points or 0.13% on Wednesday. The Finance Index fell 0.01% to 13432.71 points, the Properties Index dropped 0.06% to 1006.1 points and the Plantation Index rose 0.40% to 8486.03 points. The market traded within a range of 5.85 points between an intra-day high of 1519.23 and a low of 1513.38 during the session.

Actively traded stocks include DBE, DBE-WA, BIMB-CB, BIMB-CC, COMPUGT, MBSB-CA, WIJAYA-WA, TM, XDL and AXIATA. Trading volume increased to 1490.47 mil shares worth RM1599.87 mil as compared to Tuesday’s 1444.00 mil shares worth RM1787.92 mil.

Leading Movers were PETCHEM (+13 sen to RM6.64), PBBANK (+6 sen to RM13.24), YTL (+3 sen to RM1.50), DIGI (+2 sen to RM3.87) and IOICORP (+2 sen to RM5.35). Lagging Movers were TENAGA (-13 sen to RM6.10), AXIATA (-6 sen to RM4.87), CIMB (-5 sen to RM7.11), AMMB (-6 sen to RM5.78) and TM (-5 sen to RM4.75). Market breadth was positive with 368 gainers as compared to 364 losers. -- JF Apex Securities Bhd



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DRB-Hicom to steer Proton via foreign tie-ups, branding

SHAH ALAM (Jan 18): DRB-HICOM BHD [] will steer PROTON HOLDINGS BHD [] into the future by looking into foreign collaborations and branding, Managing Director Datuk Seri Mohd Khamil Jamil said on Wednesday.

"Branding is important to go global and there will be alliances, collaborations or joint-ventures between foreign partners to assist and give us a platform to move into the global market.

"My agenda is just not Proton but also the national automobile industry and we must brand Proton as a good car manufacturer besides being a national car," he said in a media briefing.

He said DRB-Hicom was in exploratory talks with its foreign partners over a possible collaboration involving Proton.

He said DRB-Hicom was looking forward to meet with Proton's management to discuss growth plans including the vendor supply chain, reviving the brand name and increasing exports.

Any possible tie-ups must be a win-win collaboration, he said adding that DRB-Hicom intended to move forward as a car producer and car manufacturer.

"I'm open. It could be General Motors, Volkswagen or Honda that are willing to work and give benefit to Proton and the industry," he said.

On changes in Proton's management, Khamil said that he prefered it to be a blend of old and new.

"There maybe changes and may not be," he said.

DRB-Hicom has a partnership with Volkswagen and assembles and distributes vehicles for Volkswagen, Daimler AG's Mercedes-Benz, Honda, Isuzu and Suzuki.



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Blue chips close slightly lower, Tenaga, MMHE weigh

KUALA LUMPUR (Jan 18): Blue chips closed slightly lower on Wednesday, weighed down by declines in heavyweights Tenaga and MMHE but the broader market was mixed, with strong trading interest in small caps and penny stocks.

At 5pm, the FBM KLCI was down 1.98 points to 1,517.38. Turnover was 1.49 billion shares valued at RM1.60 billion. There were 368 gainers, 364 losers and 359 stocks unchanged.

Among key regional markets, Japan’s Nikkei 225 rose 0.99% to 8,550.58, Hong Kong’s Hang Seng Index added 0.30% at 19,686.92 but South Korea’s Kospi shed 0.02% to 1,892.39 and Singapore’s Straits Times Index fell 0.79% to 2,793.53.

European markets were in the red as investors were worried about Greek bond talks and government debt sales, a day after economic data had raised hopes the global economy wouldn't slowdown as much as feared.

Reuters reported international creditors are set to meet the Greek government to resume the talks that broke down last week over the interest rate Greece will offer on new bonds and a plan to enforce investor losses. A deal with the private sector is vital to cash-strapped Athens if it is to avoid going bankrupt when 14.5 billion euros ($18.5 billion) of bond redemptions fall due in late March.

At Bursa Malaysia, the KLCI was trading between 1,513 and 1,519 and managed to close off its intra-day low of 1,513.

A fund manager said the markets had priced in the eurozone crisis and he expected to see more upside for the markets, albeit intermittent swings in trading conditions depending on the newsflow.

At Bursa Malaysia, he said there was some profit taking ahead of the Chinese New Year next week, especially on stocks which had run-up recently. He expected the market to hold steady at the current levels.

Among the heavyweights, Tenaga fell 13 sen to RM6.10 after reporting net losses in the first quarter ended Nov 30, 2011. MMHE shed 12 sen to RM5.32 on concerns about the uncertainties about its projects and delays.

Petronas Dagangan and Petronas Gas fell 10 sen each to RM17.40 and RM15.28.

EUPE was the top loser, down 14.5 sen to 48.5 sen, Ibraco 14 sen lower at RM1.30 and Ireka 12.5 sen to 66.5 sen in thin trade.

Poultry stock DBE was the most active with 138.96 million shares done, adding two sen to 11 sen while its warrants rose 1.5 sen to 6.5 sen.

BIMB, seen as the only Syriah-compliant banking stock, jumped 22 sen to RM2.24 in heavy trade with 10.21 million units done. BIMB-CB added 1.5 sen to 9.0 sen and BIMB-CC six sen to 17.5 sen. The two warrants accounted for 100 million units transacted.



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TNB expects gas woes to end in September

KUALA LUMPUR: Tenaga Nasional Bhd (TNB) expects its gas shortage woes to end in September, once Petroliam Nasional Bhd’s (Petronas) liquefied natural gas (LNG) regasification terminal in Malacca starts operations.

Datuk Seri Che Khalib Mohamad Noh, TNB president and CEO, said the national electricity provider is still in the early stages of negotiations with oil majors on importing gas at international market prices. He said TNB could not firm up negotiations as the government had yet to finalise the guidelines, rules and policy for gas importation.

“Once we have all the rules cleared, we can firm up with all the parties,” he told a media briefing yesterday.

He added that a task force, which consists of TNB, Petronas and the government, is looking at addressing the gas supply shortage first due to its importance.

“Once the LNG terminal is ready, we can resolve the gas supply shortage issue. The financial part [the pricing of the gas from the new plant] can be resolved between us and the government,” he said. When asked if the import of gas at market prices would affect electricity tariffs, Che Khalib said the task force will look into it.

“The government knows what is best for the country,” he said. Petronas currently supplies around 1,100 million standard cu ft per day (mmscfd) of gas to TNB, which is 8.8% short of its 1,250 mmscfd requirements.

TNB has posted losses for five consecutive quarters as it has to source alternative fuels such as oil and distillates to generate electricity.

Che Khalib said TNB is expected to return to the black for 2QFY12 ending Feb 29 after receiving RM2 billion in payments from Petronas and the government as part of a fuel cost-sharing mechanism.

“We received the first payment of RM1 billion from Petronas on Dec 30. We expect the remaining payment in February,” he said.

Last December, TNB announced that the company would equally share with Petronas and the government the differential cost of RM3.07 billion it had incurred due to a gas shortage from Jan 1, 2010 until Oct 31, 2011. This will allow the utility company to recoup some RM2 billion in costs.

However, the profit may only last for one quarter as rising fuel costs coupled with unchanged electricity tariffs will continue to erode TNB’s earnings.

For 1QFY12 ended Nov 30, it posted a net loss of RM224.7 million compared with a net profit of RM716.5 million a year earlier, due to higher operating expenses from using oil and distillate to generate electricity.

TNB said its oil consumption had increased by 26 times to 271,949 tonnes from 10,554 tonnes a year earlier, while the total amount incurred rose to RM593.3 million from RM16.4 million. It also noted that distillate consumption had increased by 28 times to 168.9 million litres from six million litres a year earlier. The cost for distillate consumption rose to RM413.8 million from RM17.6 million.

TNB’s revenue rose 12.4% to RM8.69 billion from RM7.73 billion a year earlier, while unit electricity demand grew 3.9%.

On a quarterly basis, TNB’s net loss narrowed by 50.5% from RM453.9 million three months earlier. This was attributed to lower operating costs due to reduced usage of distillate and lower costs of repair and maintenance.

TNB fell 5.78% from a six-month high of RM6.59 on July 20, 2011 to close at RM6.23 yesterday.


This article appeared in The Edge Financial Daily, January 18, 2012.



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IOI Corp secures tender for Singapore land

KUALA LUMPUR: IOI Corp Bhd said yesterday it had won a tender for a parcel of land in Jalan Lempeng, Singapore, for S$408 million (RM995 million).

The Housing and Development Board of Singapore (HDB) on Monday accepted the bid from Multi Wealth (Singapore) Pte Ltd, in which IOI Corp holds a 99.8%-owned subsidiary, to build condominiums on the parcel of land.

The land is located in Jalan Lempeng, Off Clementi Avenue 6, adjacent to several private condominiums such as Park West, Regent Park and Faber Hill. This places it within walking distance of the Clementi Mass Rapid Transit station and the Clementi bus interchange.

The 99-year leasehold parcel of land measures about 24,417 sq m (2.4ha) with a permissible gross floor area of 68,369.3 sq m (736,000 sq ft), which translates into a plot ratio of 2.8.

“The gross development value and gross development costs of the proposed development have yet to be determined as the project development plans are still at a preliminary stage,” said IOI Corp.

The deal has been met with scepticism by analysts who expect foreign demand for Singapore properties to weaken after it introduced an additional 10% stamp duty amounting to 10% of the property value in December 2011.

Adding to the scepticism is the delay in IOI Corp’s earlier project, South Beach, in which it holds a 49.9% stake. The project hit a snag after the onset of the global financial crisis in 2008. Until now, there has been little progress on the project.

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

IOI’s share price slid one sen to RM5.33 yesterday with 6.8 million shares changing hands.


This article appeared in The Edge Financial Daily, January 18, 2012.



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Star moves into mobile Internet

KUALA LUMPUR: Star Publications (M) Bhd is venturing into the provision of free wireless broadband service in Sweden together with ACE Market-listed MNC Wireless Bhd.

It is learnt that Star holds a 15% equity stake in IntJoors Sverige AB (Joors), which will launch the world’s first free high speed mobile Internet service in Sweden.

In a statement yesterday, MNC Wireless said it has, via its associate company Joors, initiated the launch of “Joors”, said to be the world’s first free broadband service.

“The shareholders of Joors make up some of the best minds in telecommunications, advertising and media in the Nordic and Asian regions,” it said, adding that Joor’s investors include Star.

According to the statement, the enabling technology and technical platforms for the Internet service was designed and developed by MNC Wireless, while the mobile broadband network is provided by TeliaSonera Mobile Networks AB, the largest telco in Sweden, on a wholesale basis.

MNC Wireless said users of the Internet service will need to pay a one-time start-up fee for registration and will be provided with free Internet access “for normal usage, for every 30 days at a speed up to 10 Mbps.” Users requiring more data capacity will have the option to purchase extra data at competitive prices.

The business model of Joors mobile broadband will be supported by advertising revenue.

This is the main reason Star is venturing into the project, says a source, who added that the move is to diversify the company’s earnings portfolio.

Media analysts said such a business model could be likened to the free newspaper model, in which the publishers do not make a profit from selling newspapers, but from advertisements.

When the number of subscribers to the free broadband service rises, it could be a tool to attract advertisers.

Since the change of guards in Star last year, the publication group seems to have adopted a more aggressive approach to diversify its media business.

Datuk Vincent Lee, who took over as executive deputy chairman last March, is also the largest shareholder of MNC Wireless with a 39.5% stake. Star made four acquisitions last year, which is rather aggressive considering the publishing group’s conservative approach of hoarding cash in the past.

Last month, it bought a 83.61% stake in publisher Red Tomato Media Sdn Bhd, which publishes a free Chinese weekly tabloid in the Klang Valley and Penang, for RM1.49 million. In the middle of last year, it acquired 51% of LI TV Holdings Ltd, which operates the Life Inspired lifestyle television channel, for RM35 million, and a 4.99% stake in Catcha Media Bhd, a magazine publisher and online media firm, for RM4.97 million.

The group also took up an 80% stake in radio station operator Capital FM Sdn Bhd for RM15 million.

Despite its diversification efforts, the company’s English daily, The Star, is still the bread winner.

For 9MFY11 ended Sept 30, print and new media accounted for 80% or RM611 million of Star’s revenue, followed by events and exhibitions 15%, while radio barely hit 5%.

Star has a cash pile of RM550 million compared to its borrowings of RM308.8 million.

The company’s net cash position would enable it to continue on its acquisition trail, although analysts noted that few of the acquisitions have so far given a major boost to Star’s earnings.


This article appeared in The Edge Financial Daily, January 18, 2012.



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TM in talks with 20 developers for HSBB deal

KUALA LUMPUR: Telekom Malaysia Bhd (TM) is in negotiations with 20 property developers to deliver its high-speed broadband (HSBB) infrastructure services to new property projects, riding on the slew of real estate projects in the pipeline.

TM small-medium-enterprises (SME) executive vice-president Azizi A Hadi yesterday said TM was focusing on urban centres such as the Klang Valley, Penang and Johor to grow the take-up of its HSBB offerings for residential, commercial and office buildings.

Last year, TM signed 11 agreements with property developers nationwide for the provision of HSBB services in new projects, Azizi said.

“We are talking to developers nationwide but almost 70% of the projects are in the Klang Valley and Kuala Lumpur area.

“We would also like to work with other developers to bring our Unifi HSBB services to other parts of the country,” Azizi said after signing an agreement with privately-owned property developer BHL Group of Companies.

Under the deal, TM will provide its HSBB network infrastructure and services to BHL’s three real estate projects in the Klang Valley — USJ One Park residential project in Subang Jaya, KL Palace Court condominium in Kuchai Lama and an upcoming serviced apartment project in Cheras.

The projects, which have a combined gross development value of RM680 million, are expected to be completed in 2014.

Lim (left) briefing Telekom Malaysia Bhd government sector executive vice-president Datuk Kairul Annuar Zamzam, TM MSC state general manager R Manivannan and Azizi.

BHL executive chairman Datuk Lim Boo Kian said BHL was currently in negotiations to acquire land in Kota Damansara and Puchong for future mixed development projects.

Azizi said TM’s SME division was also working to bring its Unifi service to selected industrial areas to cater for demand from SME.

TM is aiming to grow its HSBB coverage areas to 95 locations serving 1.3 million premises across the country, from the existing 78 spots and 1.19 million premises currently covered, Azizi said.

“The take-up of our Unifi service is about 30% of our infrastructure capacity, exceeding our expectations,” he added.

In 3QFY11 ended Sept 30, TM’s revenue grew 5.79% y-o-y to RM2.32 billion from RM2.19 billion a year ago aided by higher revenue from its Internet, multimedia, data and non-telecommunications services.

However, the results were mitigated by the impact of the lower revenue from its voice and other telecommunications-related services.

Net profit fell 31% to RM302.2 million from RM438.5 million a year ago due to unrealised foreign exchange losses on its borrowings.

For the nine-month period, TM’s net profit slid 26.44% to RM592.7 million from RM805.8 million on a 3.6% revenue growth to RM6.7 billion from RM6.47 billion a year ago.

TM is expected to release its 4QFY11 results in the coming weeks.

According to OSK Research, TM expects to end its FY11 with full-year revenue of RM9.1 billion and Ebitda of RM3 billion, slightly ahead of its key performance indicator target of a 2.5% revenue growth and margin of 33%.

In a note dated Jan 10, OSK Research said it expected TM’s capital expenditure (capex) to level off, given that the group’s spending on HSBB has peaked with about 200,000 premises left to be connected under Phase 1 of the private-public partnership agreement with the government.

“TM will extend its HSBB footprint to new areas based on demand and return on investment,” said the research house.

TM’s overall capex for FY12 could be lower than the RM2.7 billion guided for FY11 as TM is seeing procurement savings and benefiting from better network design architecture, OSK Research said.

OSK Research added that TM has spent about RM4 billion to lay over 580,000km of fibre core access nationwide via 77 exchanges since the rollout of HSBB network in 2008.


This article appeared in The Edge Financial Daily, January 18, 2012.



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MAA: Auto sales to rise 2.5% to 615,000 units in 2012

KUALA LUMPUR: The Malaysian Automotive Association (MAA) estimates that auto sales will increase 2.5% to 615,000 vehicles this year from 599,877 units last year, underpinned by resilient consumer demand, accommodating borrowing costs and new model launches.

“[The estimate] is also based on the economy expanding at a moderate rate of 4.8% this year,” the association’s president Datuk Aishah Ahmand told a news conference yesterday.

She added that robust intra-regional trade in Asia could mitigate the effects of the current global economic uncertainties, mainly caused by the financial troubles in the eurozone.

Total industry volume (TIV) last year declined 0.9% to 599,877 units from 605,156 a year before, after vehicle production was disrupted by Japan’s tsunami in March and the devastating floods in Thailand in the last quarter of last year, Aishah said.

“As a result of the two natural disasters, sales of new motor vehicles were much lower during the second and fourth quarters of 2011 compared with the corresponding periods in 2010,” she said.

Nonetheless, Aishah said the impact of the two major natural disasters on the automotive supply chain was offset by Malaysia’s fairly strong GDP growth of 5% for 2011.

Commenting on DRB-Hicom Bhd’s takeover of national carmaker Proton Holdings Bhd, she said it is the right move and it is hoped that DRB can improve Proton’s image and technology in the future.

DRB-Hicom has an agreement with Volkswagen AG, which includes contract assembly at its plant in Pekan, Pahang, and the sale of Volkswagen marques as well.

The local conglomerate announced on Monday that it is buying the 42.72% stake in Proton held by sovereign wealth fund Khazanah Nasional Bhd for RM5.50 per share or RM1.29 billion cash.

Proton had a 26.4% market share of car sales in 2011, second only to second national automaker Perusahaan Otomobil Kedua Sdn Bhd (Perodua).

Toyota Motor Corp ranked third in terms of sales with 14.5% market share, while Honda Motor Corp came in fourth with 5.4%, followed by Nissan Motor Co ( 5.4%). Both Nissan and Honda saw their production disrupted by last year’s flooding in Thailand.


This article appeared in The Edge Financial Daily, January 18, 2012.



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MBSB to grow east Malaysian contribution to 30%

KUALA LUMPUR: Malaysia Building Society Bhd (MBSB) aims to increase revenue contribution from east Malaysia to 30% this year from more than 20% in 2011, said CEO Datuk Ahmad Zaini Othman.

“Presently, the east Malaysian side contributes more than 20% and we are aiming to push it (up by) another 10% to 15% this year,” he said at the signing ceremony between MBSB and Labuan Shipyard Engineering Sdn Bhd (LSE) for a project financing facility of RM51 million. The group began establishing its offices and branches in Sabah two years ago and currently has a total of 14 branches there.

The signing with LSE for a financing facility of RM51 million marks the group’s foray into contract financing for the oil and gas sector and is part of the company’s mission to diversify its loan portfolio.

It will set up a dedicated project monitoring department in Kota Kinabalu, Sabah this year.

For the nine months ended Sept 30, the group generated RM327.1 million in profit on the back of R1billion in revenue.

Ahmad Zaini is bullish on the group’s prospects for the year and plans to grow its loans book between 20% and 25% in 2012 with personal loan financing, mortgages and its new venture into hire-purchase financing, to be launched next month.

“We will take it slow and easy and do a bit more on high-end vehicles,” he elaborated on his strategy on MBSB’s hire-purchase facility.

He noted that the group would be able to achieve single-digit non-performing loan (NPL) ratio, adding that it has progressively pared down its NPL ratio from about 25% in 2009 to 11% currently.

Ahmad Zaini said MBSB will carry out at least one asset-based securitisation programme of RM4 billion to RM5 billion this year, depending on the growth of its assets and market conditions.

In 2011, MBSB carried out a securitisation programme of RM1.5 billion with Cagamas, the national mortgage corporation.

Asked on rumour of a possible merger or acquisition, Ahmad Zaini said presently there were no plans on the table yet and it was up to the shareholders to decide should a situation arise. To him, the topic of merger and acquisition has always been a topic discussed by the board but it has always been a case of suitable pricing.

“As far as MBSB is concerned, it is making good profits and good returns for the shareholders.

“I think the shareholders would have to weigh between what they are already earning and what they could earn from such an exercise.” he added.


This article appeared in The Edge Financial Daily, January 18, 2012.



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DRB-Hicom snaps up Proton shares

KUALA LUMPUR: DRB-Hicom Bhd snapped up 39.93 million shares in automaker Proton Holdings Bhd or almost 70% of all the automaker’s shares that were traded yesterday, ahead of its acquisition of Khazanah Nasional Bhd’s 42.72% block in the company.

The shares amounted to a 7.27% stake in Proton and were acquired between RM5.40 and RM5.47 per share, setting DRB-Hicom back by about RM218 million.

Proton was the most active counter on the local bourse yesterday, with 57.45 million shares changing hands.

DRB-Hicom’s open market purchases came right after the opening bell, when Proton’s shares resumed trading. Trading in the stock was suspended on Monday pending DRB-Hicom’s announcement of its planned acquisition. DRB announced its intent to acquire the 42.72% stake in Proton at RM5.50 per share or for RM1.29 billion.

The sale will trigger a mandatory general offer (MGO) from DRB-Hicom for all the outstanding Proton shares not under its control. Discounting the 7.27% stake it acquired yesterday, the MGO may cost DRB-Hicom up to RM2.8 billion.

Following the announcement of the takeover, the national carmaker surged 4.44% yesterday to RM5.41 from RM5.18 last Friday.

It is not clear if DRB-Hicom’s plan is to delist the automaker.

In the first scenario where DRB-Hicom acquired more than 75% of the issued Proton shares, which is above the minimum shareholding spread, this will leave minority shareholders in a bind.

On the other hand, DRB-Hicom may not delist Proton, as it still needs access to the capital markets.

Even if DRB-Hicom acquires more than 75% of the issued shares, it can still apply to maintain the listing status of the company by undertaking corporate exercises like private placements to maintain the public shareholding of more than 25%.

However, HwangDBS Vickers Research noted that Proton’s near-term prospects will be unfavourable.

“The synergies with DRB-Hicom will only be realised years down the road and Proton’s share price could fall below the GO price,” said HwangDBS.

An analyst noted that Proton’s share price is only sustained at the current level because of the MGO and once that is completed, the price will likely fall again.

Investors may be compelled to hold on to Proton shares for exposure to the earnings upside as DRB-Hicom attempts to turn the ailing automaker around. In that situation, they should still cash out at RM5.50 and buy back at a lower price.

Petroliam National Bhd (Petronas) and the Employees Provident Fund (EPF) are the two largest shareholders of Proton after Khazanah with 7.8% and 7.5% respectively.

If Petronas and the EPF do not subscribe to the MGO, this would shave off approximately RM460 million from DRB-Hicom’s acquisition costs.

However, the EPF has been paring down its stake from September last year when it owned some 59.2 million shares or 10.78% equity interest in the company.

Former premier Tun Dr Mahathir Mohamad is adviser to both Petronas and Proton.

DRB-Hicom’s acquisition comes with conditions, with no retrenchments for a one-year time frame and a two-year moratorium on sale of Proton shares.

According to a CIMB report, DRB-Hicom will need to secure Khazanah’s approval to sell any of the 42.72% stake or profits from any sale above RM5.50 will also go to Khazanah, thus preventing DRB-Hicom from flipping shares for an extraordinary gain.

However, CIMB noted that DRB-Hicom is likely to relist some of the stake after two years to service the debt for the acquisition.

DRB-Hicom slipped seven sen yesterday to RM2.10, with 12.81 million shares changing hands.


This article appeared in The Edge Financial Daily, January 18, 2012.



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Bina Puri bags RM864m Pakistan highway contract

KUALA LUMPUR: Bina Puri Holdings Bhd has secured its much-awaited Pakistan highway concession contract.

The project, worth 24.93 billion rupees (RM864 million), is for the construction of the Karachi-Hyderabad Motorway (M-9) in Pakistan, after which it will hold the concession for 28 years.

In a statement yesterday, Bina Puri said its wholly-owned subsidiary, Bina Puri Pakistan (Pvt) Ltd signed a concession agreement with the National Highway Authority (NHA) of Pakistan on Monday for the construction of the 136km motorway. The conversion of the existing four-lane Karachi-Hyderabad superhighway into a six-lane motorway (M-9) will be on a build-operate-transfer (BOT) basis.

“This is also another achievement for Bina Puri to participate in its second BOT expressway project after the first one in Malaysia — the KL-Kuala Selangor Expressway Bhd (Latar Expressway),” Bina Puri group managing director Tan Sri Tee Hock Seng said in the statement.

“For the Karachi-Hyderabad Superhighway, we are working with our financiers towards achieving the financial close, which is six months from the signing of the concession agreement today,” he said.

The project involves upgrading the existing four-lane Karachi-Hyderabad superhighway into a six-lane motorway with the construction cost of 18.26 billion rupees with a construction period of over 30 months. The concession period will be for 28 years.

Bina Puri said it has a current unbuilt book order of RM2.31 billion.

Tee (second from left) presenting a memento to NHA chairman Syed Muhammad Ali Gardezi after the concession agreement signing on Jan 16. Also present were (from left) Bina Puri executive director Matthew Tee and Pakistan Federal Minister for Communications Dr Arbab Alamgir Khan.

In Pakistan, Bina Puri has participated in construction for the Defence Housing Authority (DHA) in Lahore last year with a contract value of RM185 million.

In 2010, it completed the construction of the Nippon Paint factory at Lahore for a contract sum of RM16.5 million.

In an earlier interview, Bina Puri executive director Matthew Tee told The Edge Financial Daily that the project will likely yield an internal rate of return of at least 20%. While that is high by Malaysian standards, he said it was also due to the high cost of broowing in Pakistan, with interest rates hovering between 14% and 15% per year.


This article appeared in The Edge Financial Daily, January 18, 2012.



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Axis REIT aims to grow assets to RM2b by 2013

KUALA LUMPUR: Axis Real Estate Investment Trust (Axis REIT) aims to grow its asset portfolio by 56% to the RM2 billion mark by next year from the current size of RM1.28 billion.

In the nearer term, the REIT targets to achieve up to RM1.6 billion in assets by the end of this year, beginning with the addition of two warehouses in Penang with a combined value of RM110.5 million this month.

Axis REIT is eyeing RM545.3 million worth of acquisitions in the near to medium term, CEO Stewart Labrooy said during the announcement of the company’s 4QFY11 unaudited financial results yesterday.

It had about RM411.7 million or about a third of its present total assets value when listed six years ago.

The company borrows to fund its new acquisitions and it carries out routine placements to keep the gearing level below 35%. Last month, it issued 75.2 million units of RM2.45 each to raise RM184.2 million to bring down its gearing ratio to 24% from 38.2%, a historical high.

Its fifth and next placement will take place sometime this year, and will potentially involve 90 million new units or 20% of the existing approved fund size of 453.8 million units to raise up to RM240 million.

The company’s net profit for its FY11 ended Dec 31 dipped 20.2% to RM81.05 million from RM101.35 million a year ago.

Labrooy said this was due to a revaluation surplus recorded in 2010, amounting to RM45.6 million or nearly 45% of net profit that year.

Its realised income after taxation, excluding the surplus, grew 23.3% to RM64.8 million from RM52.6 million the previous year. Revenue rose nearly 28% to RM114.73 million from RM89.9 million before.

Rental income rose by more than a third due to the contribution from two new properties, higher occupancy rates with an average of 97.2% and positive rental negotiations. The company disposed of one property last year, resulting in a realised gain of RM784,813 which was distributed to unit holders as part of its second interim dividend for 2011.

It will pay out 17.2 sen in distribution per unit (DPU) for 2011, following a final income distribution of 1.4 sen per unit end-February.

Shares in Axis REIT closed unchanged at RM2.70, an all-time high for the stock.


This article appeared in The Edge Financial Daily, January 18, 2012.



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IOI Corp spreading its roots in Singapore

IOI Corp Bhd (Jan 17, RM5.33)
Maintain underperform at RM5.34 with target price of RM4.60: IOI Corp’s wholly-owned subsidiary Multi Wealth (S) Pte Ltd has won the bid for a site in Jalan Lempeng, near Clementi town centre in Singapore. It put in the highest bid of S$408 million (RM995 million) or S$554.35 per sq ft (psf) for the 99-year leasehold site. It has a maximum gross floor area of 68,369.28 sq m (736,000 sq ft) based on a gross plot ratio of 2.8. It can yield an estimated 685 dwelling units. The land tender attracted eight bids. IOI’s bid was 13% above the second highest bid and 22% above the third highest. The tender was launched on Nov 29 and closed on Jan 12 this year.

While the project could add 3% to 5% to FY13/FY14 ending June earnings, this is offset by our negative view on the Singapore property market. We maintain our “underperform” call (target basis of 14 times CY13 price-earnings ratio [PER]) in view of its rich valuations and earnings risk from downstream and property activities.

The win is a slight surprise to us as we did not expect the group to venture into another Singapore property project so soon after its recent purchase of the South Beach project. The Clementi condo is strategically located and should attract pent-up demand from residents in the area. We estimate the breakeven price to be S$950 to S$1,000 psf and selling price to be in the range of S$1,100 to S$1,150 psf. But we are cautious on the Singapore property market given the recent hike in stamp duties. We expect prices to correct 15% to 10% in 2012. The acquisition will raise the group’s net gearing ratio from 20% to 27% and increase property earnings from around 25% of group earnings currently.

We maintain our “underperform” call and recommend Sime Darby Bhd for exposure to Malaysian planters. We are neutral on this news as the potential earnings upside from the project is offset by IOI Corp’s rising exposure to the more competitive Singapore property market, which may dilute its profit margins and PER over time. — CIMB Research, Jan 17


This article appeared in The Edge Financial Daily, January 18, 2012.



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Domestic spending lifts retailer earnings

Despite prevailing external uncertainties, there appears a consensus among market observers that domestic consumption will remain comparatively resilient. This expectation is predicated on several factors, including the country’s relatively low unemployment rate. A higher degree of job security means that consumers would be more inclined to spend.

The new remuneration scheme for the country’s 1.4 million civil servants, effective January this year, will raise salaries by between 7% and 13%. The pay rise should also indirectly raise income levels for those working in the private sector. In addition, the government is handing out cash to students and low-income households. Coupled with expectations that inflation has peaked, rising disposable incomes are expected to be supportive of consumer spending going forward.

The Retail Group Malaysia recently forecast sales growth of 6% this year, just slightly lower than that estimated for 2011. Indeed, retailers in the country have been chalking up robust sales in the last two quarters.

Strong y-o-y growth in 3Q11 for Padini and Bonia
Padini reported 30% year-on-year (y-o-y) sales growth in 3Q11 to RM178.1 million while net profit was up 47% y-o-y to RM26.9 million. The company attributed the strong growth to higher spending during the Mega Sale period as well as the Hari Raya Aidilfitri celebrations.

Top line sales were also boosted by Padini’s move to focus on its Brands Outlet, a value-for-money concept store targeted at the mid- to lower-income households. The store carries the company’s lower end in-house brands as well as a wide range of consignment brands. The comparatively affordable pricing generates greater volume sales. Even though product margins are thinner, the higher sales volume, simpler store design and larger space translate into economies of scale and overall cost savings.




Clearly, the strategy is working. Padini opened three new Brands Outlets in its last financial year ended June 2011, bringing the total to 13 — even as it streamlined its network of standalone stores from 50 to 45.

Overall gross floor area expanded by some 7.6% while total sales grew at a slightly faster pace of 9.6% in the last financial year. Looking ahead, the company is planning more Brands Outlets as well as the larger concept stores.

Similarly, Bonia reported strong sales growth of 49% y-o-y to RM152.2 million in 3Q11, the first quarter of the company’s financial year ending June 2012. To be sure, the numbers are not directly comparable as sales in 1QFY12 were boosted by contributions from subsidiary, Jeco Group, which was acquired in late December 2010. Still, stripping this out, the company’s sales are estimated to have expanded in the low double digits. Net profit doubled to RM20 million from the previous corresponding quarter.

While Padini has remained focused on its homegrown brand names and branching out into the lower income market segment, Bonia is adopting a different growth strategy. The company’s acquisition of Jeco means that it now complements its own brand names with international labels such as Renoma, Pierre Cardin, Bruno Magli and Braun Buffel.

Most recently, Bonia announced the acquisition of a 49% stake in Braun GmbH and Braun KG, the Germany-based owner of the Braun Buffel brand name, for some RM13 million. The purchase will allow the company to expand its geographical rights to market leather products and accessories under the brand name.

Upcoming 4Q11 results expected to be positive
Sales in 4Q11 are expected to remain robust, with the traditionally strong year-end spending bolstered by an early Chinese New Year. Thus, we would expect the upcoming 2QFY12 earnings results for Padini and Bonia to be positive.

One of the biggest risk factors for retailers is if the domestic economy turns out to be weaker than expected and consumers pull back on their spending. This could happen if the crisis in the eurozone takes a turn for the worst, buffeting financial markets and straining the fragile recovery in the US.

Slower volume sales translate into higher stock obsolescence and narrower margins given that the retail industry has a relatively high fixed cost structure.

Offering larger discounts to drive top line sales would on the other hand dampen profitability.

On balance though, we believe the global economy is in fairly good shape at the moment, albeit expected to grow at a slower pace.

Both stocks trading at modest valuations
Coming off an expected strong 1HFY12, sales and earnings in the second half of the financial year for both Padini and Bonia are likely to be slower in the absence of major festive celebrations. Nonetheless, sales and earnings for FY12 should still register positive growth from the previous year. Both stocks are currently trading at fairly decent, single-digit forward price-earnings ratios.

Based on our earnings forecast, the companies are expected to maintain their dividends at least. Padini paid net dividends totalling four sen per share while Bonia’s gross dividends totalled five sen per share in FY11. The former is sitting on net cash totalling some RM89.6 million. Bonia had net cash of RM12.4 million as at end-September 2011, before taking into account the latest acquisition of the stake in Braun Buffel.


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 18, 2012.



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Bumi Armada wins Latin America contract

Bumi Armada Bhd (Jan 17, RM4.15)
Maintain buy at RM4.11 with target price of RM4.48: We are delighted with this development as it again serves as a testament to Bumi Armada’s competitive strength in bidding for international jobs and has proved its investment in high capability offshore support vessels (OSV) was the right one. With the ramp-up of the pre-salt oilfield developments by Petrobras, we could see Bumi Armada diversify its earnings base into Brazil where demand across the oil and gas (O&G) products spectrum is getting stronger.

We believe Bumi Armada is one of the definite candidates to benefit the most from the domestic O&G capital expenditure upcycle and expect the company to secure more contracts in FY12 to replenish its current order book of about RM10 billion.

We have identified the company as the next candidate for a Petroliam Nasional Bhd risk sharing contract (RSC) play with four or five RSCs expected to be dished out in 2012. While the company is bidding for four floating production, storage and offloading (FPSO) contracts, our earnings estimates incorporate an additional two FPSO contract wins in FY12.


To recap, at the end of last year, the company announced the acquisition of an oil tanker, Rainbow River, which based on its technical specifications could well be the sixth FPSO conversion candidate for Bumi Armada.

We maintain our earnings estimates and “buy” call on Bumi Armada with target price of RM4.48 based on 23 times trading multiples on FY12 earnings per share of 19.5 sen. With the moratorium restriction on cornerstone investors which collectively hold about 10% of Bumi Armada expiring on Jan 21, we expect potential profit-taking on the counter which could offer an opportunistic entry point for investors. — BIMB Securities Research, Jan 17


This article appeared in The Edge Financial Daily, January 18, 2012.



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Public Bank: Pressure on capital and dividends easing

Public Bank Bhd (Jan 17, RM13.18)
Upgrade to buy at RM13.14 with a revised fair value of RM15.40 (from RM13.40): We are upgrading our rating on Public Bank Bhd (PBB) to “buy” from “hold”, with a higher fair value of RM15.40 per share (RM13.40 previously). This is based on an upgraded return on equity of 24% (21.8% previously) for FY12F, leading to a fair price-to-book value (P/BV) of 3.5 times (3.2 times previously).

The newly released guidelines on implementation of Basel III are likely to have a positive impact on PBB in terms of less pressure on capital on two fronts. First, the implementation of a counter-cyclical buffer will now likely take place in 2015. Previously, counter-cyclical buffers were widely expected to be set at 1% to 1.5%, with a timeline for implementation by end-2012. However, under the new guidelines, local regulators are expected to issue concept papers outlining the rules and mechanisms to implement the new capital buffers by 2014.

Second, we understand that local regulators have extended the consultative process to determine possible additional capital requirements under Pillar 2 of Basel II. Recall that in July 2011, PBB first hinted that the central bank may look at raising the capital requirements under Pillar 2 of Basel II (whereby individual banks are assessed based on their own risk profiles), which may involve a higher capital of between 1% and 2%.

This means any possible rights issue by PBB will take place from 2015, rather than from end-2012. This removes the immediate short-term concerns over a possible capital raising exercise. We believe PBB may be allowed to move towards full adoption of FRS139 accounting standards. At the moment, all local banks have adopted the transitional provisions of FRS139 since 2010 with a view towards full FRS139 adoption by 2012. The only exceptions are CIMB Bank and Malayan Banking Bhd, which had crossed over to full FRS139 basis immediately in 2010.

A full adoption of FRS139 will allow PBB to lower its collective assessment (widely perceived to be similar to general provision under the old GP3), from 1.5% to 0.7%. This could lead to a writeback into shareholders’ funds of RM1.1 billion, leading to a possible boost to book value by 31 sen per share or 7%, core equity ratio by 0.3%, and possibly reducing the size of potential rights issue in 2015. P/BV would be reduced from three times to 2.8 times — the trough valuation level of 2008. — AmResearch, Jan 17


This article appeared in The Edge Financial Daily, January 18, 2012.



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AmInvestment Bank eyes RM30b for FY2012

AmInvestment Bank Group hopes to close its financial year ending March 31, 2012 with RM30 billion in total assets under management, both for AmMutual and AmIslamic funds.

"As of Dec 31 last year, assets under management totalled RM27 billion," Funds Management Division chief executive officer Datin Maznah Mahbob said.

The three-year close-ended bond fund offers a regular income for investors looking for income stability in a volatile investment market climate, she told reporters after launching AmConstant Flexi, the 13th fund under the AmConstant series.

Maznah said AmConstant Flexi has the same features with AmConstant funds, but the flexibility of AmConstant Flexi allows early repayment of partial capital to investors before the maturity date.

"Investors may receive the bond's proceeds, which include the principal amount and realised gains at any time when a bond in the fund's holdings has achieved 15 per cent cumulative returns before its maturity, subject to the investment manager's discretion," she said.

Maznah said the fund would invest a minimum of 95 per cent of its net asset value in a domestic and/or foreign bond sector, with a strategy to buy bond funds that generally have a shorter or similar maturity tenure to the fund's maturity.

"For the purpose of maximising returns, the fund manager will not actively adopt a trading strategy unless there are changes in interest rates that will result in bond price changes," she said, adding that they are looking at Australia and Indonesia bond markets to invest.

For every bond fund launched, they aimed for at least five to six per cent returns per annum, she said.

AmConstant Flexi has an approved fund size of 100 million units offered at RM1 a unit, with a 45-year offer period, beginning Monday until Feb 29.

Its initial and additional investments are RM5,000. The fund is distributed and made available at all AmBank, Alliance Bank, CIMB Bank, OCBC Bank and UOB Bank branches. -- Bernama



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Brahim's Hldgs offered 60pc stake in Admuda

Brahim's Holdings Bhd (BHB) says it has received an invitation to take up to 60 per cent equity interest in Admuda Sdn Bhd for a consideration of up to RM20 million. It is to be satisfied via a combination of cash and issuance of BHB's shares, the company said in a filing to Bursa Malaysia today.

Admuda holds a licence from the International Trade and Industry Ministry to operate as a licensed manufacturer of refined sugar and molasses in East Malaysia.

The BHB board has agreed to accept the investment invitation subject to further agreement of terms, saying it is in line with the company's strategic plan to venture into upstream production in food businesses and its related supply chain. -- Bernama



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DRB-Hicom denies speculations

DRB-Hicom Bhd Managing Director Datuk Seri Mohd Khamil Jamil today denied talk that the company is selling assets, borrowing from foreign banks and using billionaire Tan Sri Syed Mokhtar al-Bukhary's influence to finance Proton Holdings Bhd's share purchase. "I don't have to sell any asset to purchase Khazanah Nasional's properties.

"I will not sell (Bank Muamalat) a strategic business entity of DRB-Hicom that generates growth. Industry observers speculated that Syed Mokhtar may sell Bank Muamalat to raise funds to finance the purchase which may include foreign bank borrowings.

"Tan Sri Syed Mokhtar is a shareholder and we have to be fair to him. We report to the board and not to him. He didn't influence the deal," he told reporters at a press conference here today.

DRB-HICOM on Monday paid RM1.29 billion, cash, to acquire Khazanah Nasional's 42.74 per cent stake in Proton Holdings.

The acquisition of 39.927 million shares in Proton, represented 7.27 per cent of the national automaker's issued and paid-up share capital.

He said 85 per cent of the acquisition was financed by borrowings from Malayan Banking Bhd while the remainder was financed via internally generated funds.

"DRB-HICOM's gearing ratio is healthy. So, the need for foreign bank borrowings to finance the purchase does not arise at all," he explained.

Meanwhile, Khamil said the company had no plans to sell a stake in Proton to another party but instead had plans to privatise the national car maker. -- Bernama



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KL shares continue downtrend

Shares on Bursa Malaysia continued their downtrend at midafternoon today as investors reduced their positions ahead of the extended weekend, dealers said.

At 3pm, the FBM KLCI declined 3.62 points or 0.24 per cent to 1,515.74, led by losses in selected heavyweights and financial stocks on lingering concern over the euro zone debt crisis. It had opened 2.27 points lower at 1,517.09. Losses were limited amid investors' interest on smaller cap stocks.

On the broader market, sentiment remained bearish with losers leading gainers 358 to 305 while 303 counters unchanged. Volume totalled 880.63 million shares worth RM749.48 million.

The Finance Index slipped 32.26 points to 13,401.68, the Industrial Index declined 4.65 points to 2,775.36 while the Plantation Index advanced 33.11 points to 8,484.93.

The FBM Emas slid 16.45 points to 10,465.41 while the FBM Mid 70 added 22.95 points to 11,794.04 and the FBM ACE increased 10.68 points to 4,286.33.

Among active stocks, DBE Gurney rose one sen to 10 sen, DBE Gurney-Warrants up 1.5 sen to 6.5 sen while Compugates was unchanged at 7.5 sen. For the heavyweights, Maybank fell eight sen to RM8.21, CIMB lost six sen to RM7.10 while Sime Darby was flat at RM9.10.

Bursa Malaysia will be closed on Monday and Tuesday for the Chinese New Year celebrations. -- Bernama



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MMHE slips on concerns about projects uncertainties, delays

KUALA LUMPUR (Jan 18): Shares of Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE) fell on Wednesday as concerns about the uncertainties about its projects and delays.

At 3.36pm, it was was down 13 sen to RM5.31 with 1.44 million shares done.

The FBM KLCI fell 2.8 points to 1,516.56. Turnover was 1.05 billion shares valued at RM950.38 million. There were 312 gainers, 380 losers and 315 stocks unchanged.

CIMB Equities Research had recently began coverage of MMHE and had a target price of RM4.82.

It said for MMHE, which was Malaysia’s largest oil & gas fabricator and yard owner, being in the Petronas stable, was no guarantee of Petronas contracts.

“Project uncertainties, delays and intensifying competition cloud the company’s earnings visibility. The stock is the most expensive in our oil and gas portfolio despite a three-year 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 P/E, a 40% premium over our target market P/E,” it said.



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Tenaga extends losses in afternoon

KUALA LUMPUR (Jan 18): TENAGA NASIONAL BHD []’s (TNB) share price extended its losses in the afternoon session on Wednesday after reporting net losses in the first quarter ended Nov 30, 2011.

At 2.59pm, it was down 13 sen to RM6.10 with 3.07 million shares done.

The FBM KLCI fell 3.82 points to 1,515.54. Turnover was 877.08 million shares valued at RM746.48 million. Losers led gainers 357 to 306 while 302 stocks were unchanged.

On Tuesday, TNB reported net loss of RM224.70 million for the first quarter ended Nov 30, 2011 compared to net profit RM716.50 million a year earlier.

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

RHB Research Institute said excluding forex losses of RM420 million, TNB’s 1QFY12 results were above its expectations with core net profit of RM196 million (down 76.1% on-year) as it had expected TNB to incur losses in 1HFY12 before the gas supply normalises in 2HFY12.

“ FY12 core earnings forecast raised by 22% after imputing an additional 50 mmscfd of gas to be received by TNB beginning Mar. Fair value revised to RM6.50 (from RM6.15) based on unchanged target CY12 PER of 15x. Maintain Market Perform,” it said.



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Brahim’s to subscribe for 60% stake in sugar manufacturer for RM20m

KUALA LUMPUR (Jan 18): Brahim’s Holdings Bhd will subscribe for a 60% stake in in Admuda Sdn Bhd via cash and shares which would see it venturing into the manufacturing of sugar.

Brahim’s, formerly known as TAMADAM BONDED WAREHOUSE BHD [], said on Wednesday Admuda holds a licence from the Ministry of International Trade and Industry for producing refined sugar and molasses in Sabah and Sarawak.

It said it had decided to take up the investment invitation from Admuda as it was in line with Brahim’s plan to venture into upstream production in food businesses and its related supply chain.

“The board has in the board meeting held today deliberated the Investment Invitation and mandated the management of the company to accept the said investment opportunity subject to further agreement of terms between the company and Admuda,” it said.



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C.I.mulls new investment opportunities

C.I. Holdings Bhd is still evaluating new investment opportunities after disposing of Permanis Sdn Bhd, says its managing director Datuk Johari Abdul Ghani.

"Since after the disposal deal, there is nothing concrete yet, but we are looking at all possible business ventures.

"We do not limit ourselves to any industry except for the property and Oil and Gas sectors because I do not have experience and expertise in these two sectors," he told reporters after the company's extraordinary general meeting (EGM) in Kuala Lumpur today.

He said he is looking into the possibility of turning around companies, even unprofitable ones, as long as he is confident that he can improve the business and create value to the shareholders.

"I am open to any industry, as long as the business can make good money and maximise shareholders' value and it is at the right price," he said.

On the EGM, the shareholders approved the proposed capital repayment of RM71 million to the shareholders of CIH on the basis of RM0.50 for every ordinary share of RM1 each held in the company. -- BERNAMA



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HeiTech padu gains on software deal

HeiTech Padu Bhd, a computer-services company, advanced 1.9 per cent to RM1.06 ringgit, bound for its steepest increase since Dec 20.

It signed a RM63.6 million contract to supply a banking software system to Bank Simpanan Nasional Bhd., HeiTech said in a statement. -- Bloomberg



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Starhill REIT up as income almost quadraples

Starhill Real Estate Investment Trust (STRH MK) climbed 3.9 per cent to 92.5 sen, on course for its highest close since Feb. 6, 2008. Second-quarter net income almost quadrupled to RM51.6 million from RM13.5 million a year earlier, according to a stock exchange filing. -- Bloomberg



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RedTone International 2Q net loss RM82,000 vs RM915,000 yr ago

KUALA LUMPUR (Jan 18): REDTONE INTERNATIONAL BHD [] posted lower net loss of RM82,000 in the second quarter ended Nov 30, 2011 compared with the RM915,000 a year ago.

It said on Wednesday that revenue rose 66.7% to RM35.96 million from RM21.56 million mainly due to revenue contribution from data business. Loss per share was 0.02 sen compared with 0.23 sen.

“Group profit before taxation for 2Q FYE 2012 was RM130,000 as compared to loss before taxation of RM480,000 for the corresponding quarter (2Q2 FY2011). The improvement in the profit before tax of approximately 127% is mainly due to higher revenue contributed by data projects of approximately RM6.20 million,” it said.

RedTone said for the first half ended Nov 30, 2011, its net loss was RM751,000 compared with losses of RM1.78 million a year ago. Its revenue rose 32.8% to RM60.66 million from RM45.47 million

“For the six months ended Nov 30, 2011, the group's data and broadband recorded revenue of RM17.4 million as compared to RM13.2 million for the 12 months ended May 31, 2011 (FYE 2011). By extrapolating our actual six months results, the increase in revenue from data is approximately 167% as compared to FYE 2011.” It said.

RedTone said the group would continue to build on its corporate and SME customer base in order to achieve a critical mass. In addition, the group will also continue to bid for broadband projects initiated by the government projects and special projects for the provisioning of Wifi hotspots solutions.



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KLCI pares down losses at mid-day

KUALA LUMPUR (Jan 18): The FBM KLCI pared down some of its losses at the mid-day break on Wednesday as key regional markets steadied on favourable economic data from China a day earlier.

However, cautioned reigned as focus returned to Europe with Portugal testing investor confidence in a debt sale and Greece resuming talks on its debt restructuring.

The FBM KLCI shed 0.14 of a point to 1,519.22 at the mid-day break on Wednesday. It had earlier fallen to its intra-morning low of 1,514.39.

Gainers trailed losers by 288 to 316, while 316 counters traded unchanged. Volume was 733.89 million shares valued at RM584.19 million.

The ringgit strengthened 0.25% to 3,1175 versus the US dollar; crude palm oil futures for the third month delivery fell RM8 per tonne to RM3,156, crude oil added 62 cents per barrel to US$101.33 while gold gained US$1.97 an ounce to US$1,654.02.

At the regional markets, Japan’s Nikkei 225 rose 1.42% to 8,586.73, Hong Kong’s Hang Seng Index gained 0.30% to 19,685.80, South Korea’s Kospi was up 0.29% to 1,898.18, Taiwan’s Taiex rose 0.20% to 7,235.27 and Singapore’s Straits Times Index gained 0.19% to 2,821.27.

Meanwhile, the Shanghai Composite Index fell 0.33% to 2,290.81.

On Bursa Malaysia, Eupe fell 14.5 sen to 48.5 sen, Ibraco and MMHE lost 14 sen each to RM1.30 and RM5.30, Ireka lost 13 sen to 66 sen, Petronas Gas 12 sen to RM15.26, Tenaga 11 sen to RM6.12, Metrod 10 sen to RM2, Perduren down 7.5 sen to 75 sen, while Fututec and Maybank fell seven sen each to 72 sen and RM8.22.

Among the gainers, GAB added 40 sen to RM12.20, KLK 24 sen to RM24.88, Far East 20 sen to RM7.20, MPHB 14 sen to RM2.86, Sungei Bagan and Petronas Chemicals up 12 sen each to RM2.94 and RM6.63, Degem 10.5 sen to RM1.05, while Batu Kawan and BAT added 10 sen each to RM18.66 and RM49.90.

DBE Gurney was the most actively traded counter with 70.3 million shares done. The stock gained one sen to 10 sen.

Other actives included Compugates, Wijaya, XDL, E&O, BIMB and MPHB.



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DRB-Hicom open to selling Lotus Group

KUALA LUMPUR (Jan 18): DRB-HICOM BHD [] is opened to options to sell PROTON HOLDINGS BHD []’s loss making unit Lotus Group International Ltd.

Wire reports quoted DRB-Hicom managing director Datuk Mohd Khamil Jamil as saying on Wednesday that DRB-Hicom was “open to options” but this would also hinge on a meeting with the Lotus management and its plans.

He was quoted saying that DRB-Hicom was unable to do a due diligence on Lotus earlier and “so (we) will need time to look into Lotus”.

As for Proton, there were no plans to re-list it for the time being once the buyout was completed.

To recap, in April 2011, Lotus Cars Ltd secured £270m million (RM1.33 billion) in loans from six financial institutions over a six-year period in a move to turnaround the loss-making England-based company.

Proton group managing director Datuk Seri Syed Zainal Abidin Syed Mohamed Tahir had on then said he expected Lotus to breakeven by 2014. He had also then said the loans would be consolidated into Proton’s books.

On Monday, Khazanah Nasional Bhd 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.

Then on Tuesday, DRB-Hicom announced 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.



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IOI advances, 'hold' rating stays

IOI Corporation Bhd rose one sen or 0.19 per cent to RM5.34 as at 11.20am today as market players are bullish on its property business.

IOI announced yesterday its 99.8 per cent-owned indirect subsidiary Multi Wealth (Singapore) Ltd has won a bid for a parcel of land in the island republic for S$408 million (RM995.5 million).

Measuring about 24,417.6 sq metres (2.4ha), the land, in Jalan Lempeng, Clementi Avenue 6, is intended for condominium development.

HwangDBS Vickers Research said it was neutral on the deal as the aggregate impact over five years would be less than 10 per cent of IOI's forecast pre-tax profits (approximately RM2.8 to RM3.4 billion per annum).

"We believe the estimated S$709 million (approximately RM1,730 million) total investment cost is better spent on its higher-margin plantation operations," it said in a research note today.

The research house maintains a "hold" rating on IOI. -- Bernama



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China Stationery to issue 90m new shares for Bursa listing

KUALA LUMPUR (Jan 18): Integrated plastic stationery company, China Stationery Ltd will be issuing 90 million new shares under its proposed listing on the Main Market of Bursa Malaysia Securities.

It said on Wednesday, that of the 90 million new shares, 60 million of the shares would be offered to the public and the remaining 30 million units to be placed out to selected investors.

As part of the listing exercise, China Stationery would also offer for sale of 133 million shares to selected investors via private placement.

It is scheduled to be listed by the first quarter of 2012.

The company recently signed its underwriting agreement with M&A Securities Sdn Bhd, which is its adviser, underwriter and placement agent.

China Stationery Group, which is based in Putian, Fujian Province, is an integrated plastic stationery company with its own brands of plastic stationery products, proprietary products

Its manufacturing plant is in Putian where it manufactures polypropylene sheets, produces plastic filing and storage products. Its current production capacity of polypropylene sheets is about 27,600 tonnes per annum.



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HwangDBS keeps "buy" call on TNB

Tenaga Nasional Bhd (TNB) was among the top losers, losing 13 sen or 2.09 per cent to RM6.10 as at 10.30am today, as investors were concerned over the power utility giant's financial performance.

TNB reported yesterday RM224.7 million net loss for the first quarter ended November 2011 from RM716.5 million net profit in the same period in 2010 due to persistent higher use of oil and distillates.

However, the power company was confident to return to profitability in the second quarter ending February 2012 as it will receive RM2 billion in compensation from the government and Petronas.

HwangDBS Vickers Research said TNB could expect stronger earnings over the next few quarters with the recognition of gas compensation and gradual increase in gas supply to 1,150 million standard cubic feet per day (mmscfd).

The research house maintained "buy" call on TNB for strong earnings recovery.

"We expect TNB's earnings to recover strongly in the 2012 financial year following the RM2 billion gas compensation and increase in gas supply to 1,150 mmscfd," it said in a research note.

It said the gas shortage issue should be resolved following completion of Petronas Gas Bhd's new regas plant in July.

TNB received RM1 billion compensation from the government due to gas shortages and Petronas will pay the balance RM1 billion in the next few months.

Besides the RM2 billion claim, TNB will continue to ask for compensation as the current gas supply still falls below the agreed supply of 1,350 mmscfd.

HwangDBS Research said the gas compensation approval demonstrated TNB's ability to pass on costs increases through the "cost pass through" mechanism. -- BERNAMA



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KL shares remain bearish at mid-morning

Shares on Bursa Malaysia remained lower at mid-morning today amid lack of buying ahead of the Chinese New Year long weekend, dealers said.

At 10.45am, the underlying FBM KLCI declined 4.32 points or 0.28 per cent to 1,515.04 amid selling in selected heavyweights including Tenaga Nasional, Maybank and CIMB.

It had opened 2.27 points lower at 1,517.09.

TNB was among the top losers after reporting RM224.7 million net losses for the first quarter ended November 2011 against RM716.5 million net profit in the same quarter a year ago. It dropped 13 sen or 2.09 per cent to RM6.10 with 721,600 shares done.

Market breadth was moderate with losers outpacing gainers 242 to 238.

Volume amounted to 500.98 million valued at RM286.79 million.

The Plantation Index increased 19.52 points to 8,471.34 and the Industrial Index rose 0.76 point to 2,780.77. The Finance Index fell 46.79 points to 13,387.15. The FBM Emas also declined 19.22 points to 10,462.64. However, the FBM Mid 70 gained 13.94 points to 11,785.03 and the FBM Ace added 11.87 points to 4,287.52.

Among active counters, DBE Gurney rose one sen to 10 sen, DBE Gurney-Warrants added 1.5 sen to 6.5 sen and Compugates was half sen higher at eight sen.

For the heavyweights, Maybank slid nine sen to RM8.20, CIMB lost six sen to RM7.10 while Sime Darby was unchanged at RM9.10. -- BERNAMA



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Open to options on Lotus sale: DRB-Hicom

DRB-Hicom Bhd said it needs more time to decide whether to sell UK sportscar maker Lotus Group International Ltd after taking over its Malaysian parent Proton Holdings Bhd.

It’s “open to options,” DRB-Hicom Managing Director Mohd Khamil Jamil told reporters today in Selangor, outside of Kuala Lumpur. -- Bloomberg



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Axis REIT up on plans to increase assets portfolio

KUALA LUMPUR (Jan 18): AXIS Real Estate Investment Trust (Axis REIT) shares advanced on Wednesday after the company said it has targeted to increase its total assets portfolio from RM1.28 billion at end-2011 to RM2 billion by 2013.

At 10.55am, Axis REIT added three sen to RM2.73 with 5,000 units done.

Axis REIT said on Tuesday that in the immediate term, it 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.

RHB Research maintained its Market Perform rating on Axis REIT and raised its fair value for the stock to RM2.72 from RM2.70 previously.

“Our EPS forecasts have been revised slightly by 0.8-1.1% for FY12-14 after we factor in lower interest expenses,” the research house said on Wednesday.



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DRB-Hicom rises after lifting Proton stake

DRB-Hicom Bhd, a Malaysian auto assembler, rose the most in a week in Kuala Lumpur trading after saying it bought an additional 7.7 per cent stake in national carmaker Proton Holdings Bhd. in the open market.

The stock rose 2.4 per cent to RM2.15 at 9:05 a.m. local time, set for its biggest increase since Jan. 13.

DRB agreed this week to buy a controlling 42.7 per cent stake in Proton from the Malaysian government. -- Bloomberg



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C.I. Holdings exploring options to acquire businesses for expansion

KUALA LUMPUR (Jan 18): C.I Holdings Bhd is exploring the opportunities to acquire businesses that can potentially grow the company further in the future, said its managing director Datuk Johari Abdul Ghani.

Johari said the company was in talks with many people at the moment and would not rush and limit itself.

“But we are not looking at oil and gas and property as we don't have the expertise to deal with that businesses," he said after the company's EGM on Wednesday.

Johari added that C.I Holdings was also looking at any potential acquisition within the building material industry that can potential expand its existing tapware and sanitary business further.

“It can be a small company waiting for growth or big ones at the losing concerns.

“But we will only look at those opportunities where we can control the company (controlling stake) so we can grow it easier," he said.



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KLCI tapers down at mid-morning on mild profit taking

KUALA LUMPUR (Jan 18): The FBM KLCI slipped into negative territory at mid-morning on Wednesday on mild profit taking as investors began squaring off positions ahead of the extended weekend to celebrate the Chinese New Year next week.

At 10am, the FBM KLCI fell 2.19 points to 1,517.17, weighed by select blue chips.

Gainers edged losers by 209 to 185, while 229 counters traded unchanged. Volume was 361.96 million shares valued at RM185.82 million.

Asian shares and the euro steadied on Wednesday after sentiment improved on soothing economic data the day before, as focus returns to Europe with Portugal testing investor confidence in a debt sale and Greece resumes talks on its debt restructuring, according to Reuters.

European equities hit their highest in more than five months while gains in U.S. stocks were pared on Tuesday after Citigroup Inc reported an 11 percent drop in quarterly profit, as the European crisis battered capital markets and hurt the bank's trading revenue and fee-generating deals, it said.

At the regional markets, Japan’s Nikkei 225 rose 0.11% to 8,476.12, Hong Kong’s Hang Seng Index added 0.14% to 19,654.70, the Shanghai Composite Index was up 0.17% to 2,302.31 and Taiwan’s Taiex gained 0.24% to 7,238.25.

Meanwhile, South Korea’s Kospi fell 0.22% to 1,888.53 and Singapore’s Straits Times Index shed 0.19% to 2,810.36.

BIMB Securities Research in note Jan 18 said that investors’ risk appetite had expanded, adding that despite the looming Greece debt default and the recent downgrade of some European credit ratings, equity markets both in the US and Europe advanced buoyed by positive economic news.

Unlike previously, the positives now carry higher multiplier effects than the negatives, it said.

Reflecting the improved sentiments, yields of Italy, Germany and Spain had all declined, it said.

The research house said most European bourses closed higher overnight with the Dow Jones Industrial Average upped 60 points despite off its intra-day high.

Regional performances were also on a high with most ended the day on positive tone possibly from improved opening over in Europe, it said.

“Locally, the FBM KLCI rose 10 points yesterday to close above its immediate resistance of 1,515 at 1,519.36.

“We reckon there are funds out there snapping at equities on weakness and see the index to remain resilient. We may see the next immediate resistance of 1,525 level breached today,” it said.

On Bursa Malaysia, Petronas Dagangan was the top loser at mid-morning and fell 34 sen to RM17.16; Ireka and Eupe fell 13 sen each to 66 sen and 50 sen, Tenaga down 12 sen to RM6.11, Malayan Flour Mills and Maybank nine sen each to RM7.68 and RM8.20, United PLANTATION []s and PPB six sen each to RM20 and RM16.94, while Sapura Industrial and Delloyd fell five sen each to RM1.40 and RM3.38.

DBE Gurney was the most actively trade counter with 49.3 million shares done. The stock gained one sen to 10 sen.

Other actives included XDL, E&O, BIMB, Compugates, Mudajaya and Maybulk.

Gainers at mid-morning included BAT, Sungei Bagan, Batu Kawan, HLFG, Carlsberg, Parkson, Genting, CCM and Mudajaya.



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