Associated Intl Cement acquires 42.5% of Lafarge MCement under internal revamp

KUALA LUMPUR (Jan 26): Associated International Cement Ltd (AIC) acquired a 42.56% stake of LAFARGE MALAYAN CEMENT BHD [] (Lafarge MCement) on Thursday from Lafarge Cement UK Ltd.

A statement from Lafarge MCement on Thursday said AIC acquired the stake, comprising of 361.624 million shares, under an internal restructuring exercise via a direct business transaction on Bursa Malaysia.

Stock market data showed the 361.624 million shares were transacted at RM6.885 each.



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KEuro subsidiary gets govt nod for RM7.07b highway, 60-yr concession

KUALA LUMPUR (Jan 26): KUMPULAN EUROPLUS BHD []’s subsidiary West Coast Expressway Sdn Bhd (WCE) has received the government’s approval to build the 316-km west coast project costing RM7.07 billion.

It said on Thursday the 316-km Banting to Taiping expressway would be on a build-operate-transfer (BOT) with a concession period of 60 years, which could be the longest period for such a concession.

“The land acquisition cost of up to RM980 million for the project will be borne by the government of Malaysia,” it said in a statement to Bursa Malaysia.

KEuro said WCE, a 64.2% subsidiary, had received an approval letter dated Jan 26 from the Public Private Partnership Unit of the Prime Minister’s Department to build the West Coast Expressway.

“To enhance the viability of the project, a government support loan of RM2.24 billion, commencing from year 2013 at an interest rate of 4% per annum, and an interest subsidy, of up to 3% from commercial loans for a period of 22 years, will be granted to WCE,” it said.

KEuro said toll revenue in excess of an agreed traffic volume would be shared on the basis of 70:30 between the government of Malaysia and WCE till full settlement of the government support loan and subsequently 30:70 after the loan is settled.

It also said the CONSTRUCTION [] works of the project would be implemented by WCE through open tender.



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Flash: MRT Corp awards RM1.738 bn jobs to IJM, AZRB

KUALA LUMPUR (Jan 26): MRT Corporation has awarded two significant CONSTRUCTION [] packages worth RM1.738 billion for the Sungai Buloh-Kajang My Rapid Transit (MRT) line to IJM Construction Sdn Bhd and Ahmad Zaki Sdn Bhd.

In a statement, it said IJM Construction will be appointed the main contractor for Package V5 which will cover the construction and completion of the Viaduct Guideway and other associated works from Maluri Portal to Plaza Phoenix Station worth RM974 million.

Ahmad Zaki will be appointed the main contractor for Package V6 which covers the construction and completion of the Viaduct Guideway and other associated works from Plaza Phoenix to Bandar Tun Hussein Onn Station with a contract value of RM764 million, it said.

Both awards are subject to the successful tenderers accepting the Letter of Award to be issued by MRT Corp in due course.

"After stringent and comprehensive evaluation by the One Stop Procurement Committee (OSPC) chaired by the Prime Minister, Datuk Seri Najib Tun Razak, MRT Corp is pleased to announce this award to IJM Construction and Ahmad Zaki. Both companies are helmed by an experienced management team and have a solid track record of delivering projects on time and within costs," said the chief executive officer of MRT Corp, Datuk Azhar Abdul Hamid.

"We are confident that with these significant contract awards, the MRT project implementation will gain momentum and continue to provide positive benefits to the economy," he said.

He said MRT Corp will ramp up its efforts to publically announce the tender and award schedule for the various work packages and encourage all qualified contractors to participate.

"It is our intention that all works packages be subject to competitive bidding. All bidders will have equal opportunity in the tender process and the winning bids will be strictly based on merit," he added. - Bernama



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Market Commentary

The FBM KLCI index gained 4.10 points or 0.27% on Thursday. The Finance Index increased 0.54% to 13496.61 points, the Properties Index up 0.40% to 1025.65 points and the Plantation Index rose 0.67% to 8727.21 points. The market traded within a range of 4.00 points between an intra-day high of 1523.86 and a low of 1519.86 during the session.

Actively traded stocks include DBE, KARYON-WA, HIBISCS-WA, JCY-CD, DRBHCOM-CI, DBE-WA, JOTECH, WIJAYA-WA, JCY and DRBHCOM-CF. Trading volume increased to 1957.46 mil shares worth RM1692.47 mil as compared to Wednesday’s 1343.61 mil shares worth RM1542.22 mil.

Leading Movers were PBBANK (+8 sen to RM13.40), GENTING (+10 sen to RM11.00), HLBANK (+30 sen to RM11.60), PETCHEM (+7 sen to RM6.67) and TENAGA (+4 sen to RM6.14). Lagging Movers were CIMB (-3 sen to RM6.96), YTL (-1 sen to RM1.51), SIME (-1 sen to RM9.08), YTLPOWR (-1 sen to RM1.84) and ARMADA (-3 sen to RM4.02). Market breadth was positive with 524 gainers as compared to 233 losers. -- JF Apex Securities Bhd



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Alam Maritim lands US$37m job from Samsung Engineering

KUALA LUMPUR (Jan 26): ALAM MARITIM RESOURCES BHD [] has landed a US$37 million (RM115 million) transportation, installation and pre-commissioning contract from Samsung Engineering (Malaysia) Sdn Bhd (SEMSB).

The company said on Thursday that its unit Alam Maritim (M) Sdn Bhd had received the contract fom SEMSB for the transportation, installation and pre-commissioning of two pipelines, two single point moorings and two PLEM’s (pipeline end manifold) in connection with Sabah Oil & Gas Terminal Project.

It said the engineering work was expected to start iimmediately and the anticipated delivery date was by the third quarter of the financial year ending Dec 31, 2012.

It said the contract was not renewable.

Alam Maritim said the contract was expected to positively contribute to its earnings for the financial year ending Dec 31, 2012.



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Banks, blue chips lift KLCI firmly higher

KUALA LUMPUR (Jan 26): The FBM KLCI closed firmly higher on Thursday as banking and blue chip counters rallied, while investors also nibbled on lower liner stocks.

The 30-stock index closed 4.10 points higher at 1,523.86.

At the regional markets, Hong Kong’s Hang Seng Index jumped 1.63% to 20,439.14, South Korea’s Kospi edged up 0.25% to 1,957.18 and Singapore’s Straits Times Index edged up 0.10% to 2,894.43, while Japan’s Nikkei 225 fell 0.39% to 8,849.47.

Financial markets in mainland China and Taiwan are shut for the Lunar New Year holiday this week and will resume trading on Monday.

Meanwhile, European shares rose on Thursday, halting two-days of losses, after the U.S. Federal Reserve said interest rates would remain low for a considerably longer period than expected and it was ready to offer additional stimulus to boost economic growth, according to Reuters.

On Bursa Malaysia, Genting PLANTATION []s added 37 sen to RM9.65, Tahps 32 sen to RM4.50, TDM and AutoV 21 sen each to RM4.42 and RM1.86, Batu Kawan, DRB-Hicom and AIC 20 sen each to RM19, RM2.50 and RM1.49, while Boxpak added 19 sen to RM2.36.

Among banking stocks, HLFG added 36 sen to RM12.26, Hong Leong Bank up 30 sen to RM11.60, Public Bank eight sen to RM13.40, AMMB three sen to RM5.82 and Maybank two sen to RM8.22.

DBE Gurney was the most actively traded counter with 130.3 million shares done. The stock added 1.5 sen to 14 sen.

Other actives included Karyon, Hibiscus, JCY, DRB-Hicom and Jotech.

Among the decliners, Dutch Lady fell 20 sen to RM25.58, Malayan Flour Mills 16 sen to RM3.87, Encorp and Nestle 10 sen each to 58 sen and RM56, APM Automotive and Can-One down eight sen each to RM4.60 and RM2.09, Top Glove seven sen to RM5.06, while Inno, Sungei Bagan and KLCCP lost six sen each to RM1.44, RM2.90 and RM3.30 respectively.



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Oldtown building a new FMCG facility

Oldtown Bhd (Jan 25, RM1.33)

Maintain buy at RM1.28 with fair value of RM1.55: Oldtown reported last week that its wholly-owned subsidiary, White Café Sdn Bhd, has awarded the tender for the main construction of its new factory in Tasek Industrial Estate, Perak, to Sg Besi Construction Sdn Bhd for a total contract consideration of RM36.7 million.

Construction is expected to be completed by 3Q12 and will be financed by a combination of the utilisation of initial public offering proceeds, bank borrowings and internally generated funds as stated in the group’s IPO prospectus.

Management confirmed the total construction cost for the new fast-moving consumer goods (FMCG) facility is in line with our projection of RM52 million, but this may swell to as high as RM62 million if construction costs escalate. The RM36.7 million announced is for Phase 1, which comprises:

(i) a 2½-storey factory building;
(ii) a 1-storey warehouse;
(iii) 2-storey canteen and training centre;
(iv) 3-storey administration building; and
(v) two guardhouses. Once Phase 1 is completed, Phases 2 and 3 will involve installation of machinery and other equipment, which will cost the group RM15.3 million.

The capital expenditure was expected and has been factored into our earnings forecast. We forecast depreciation expenses of RM14.9 million for FY11 and RM20.2 million for FY12, as we expect higher capital expenditure for the construction of this facility and the opening of new fully-owned outlets.

We believe that the group’s 4QFY11 earnings may well exceed our conservative estimates, justifying our positive view on the stock. We maintain our “buy” recommendation on Oldtown and value the stock at RM1.55, based on 13 times FY12 earnings per share. — OSK Research, Jan 20



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A new chapter for Jetson

Kumpulan Jetson Bhd (Jan 25, RM1.23)

Not rated at RM1.24 with target price of RM1.71: It was once a hopeful thought that Kumpulan Jetson would be linked to Naza group to undertake the multi-billion Matrade Centre development for the International Trade and Industry Ministry.

Its share price soared to a high of RM2.99 in November 2009 when a formal shareholders’ agreement was inked between Jetson and Naza to formalise the relationship in the joint venture company, TTDI Jetson, and to carry out the development of Matrade Centre as well as the exchange land at Jalan Duta.

However, this euphoria was short-lived with a termination of JV agreement in September 2010, leading to a sharp drop in share price to a low of 87 sen in late 2010.

The repercussions of the termination of the JV agreement were felt in both the top and bottom lines. Year-to-date 9MFY11 earnings slipped into losses underpinned by 65.8% contraction in construction revenue.

According to management, the lacklustre performance was largely due to a lack of new construction job wins in 2009/10. The group did not actively bid for external jobs as it had planned and allocated substantial resources to the development of the Matrade Centre.

Moreover, the adoption of a new accounting standard, IC12, on the treatment of amortisation of concession assets, has resulted in a surge in amortisation cost of its concession asset.

If we exclude the IC12 impact, the 9MFY11 earnings would have otherwise shown a profit of RM1.9 million. Nonetheless, Jetson is expected to bounce back with its management team pulling up its socks and ardently exploring new opportunities. The results can be seen in new projects secured in 2011, which would add to the bottom line over the immediate term.

In addition, the impact of IC12 will be muted in FY12 earnings. All in, the group is expected to close this difficult chapter in Jetson’s history in FY11 and move on to a new chapter of life with increasing contribution from all divisions.

Earnings for FY12 are expected to stage a strong rebound if all projects and plans kick start this year. Based on our conservative assumptions (base-case), we expect earnings to increase to RM13.1 million in FY12 and RM15.1 million in FY13 from an estimated net loss of RM4.8 million in FY11.

In our best-case scenario, our FY12/FY13 earnings projections could grow to as high as RM21.4 million to RM21.7 million if the group were to secure additional new contracts and lock in higher sales of property in FY12/FY13. However, if the group fails to secure any new orders and the take-up rates on its Penang and China projects are low, FY12/FY13’s earnings recovery would be mild (worst-case scenario).

In terms of balance sheet quality, the group’s net gearing stood at 0.4 times as at September 2011. We believe much of the borrowings are draw-down for financing the concession assets, thus we see minimal liquidity risks.

However, for the group to take on new projects or landbanking, new funding in the form of borrowing or equity would have to come to support this. Having said that, we understand that the group is actively scouting for land in Penang and the Klang Valley for future development.

For valuation purposes, we draw a direct comparison with TRC Synergy under our coverage. Based on our base-case projections, Jetson is currently trading at a discount to TRC.

Although Jetson’s earnings and balance sheet quality are inferior to TRC’s, we consider the discount of up to six times TRC’s current trading price-earnings ratio (PER) as excessive. We value Jetson at RM1.71 per share with a potential upside of 38% after pegging a PER of eight times CY12 earnings.

In the valuation, we believe a turnaround in FY12 earnings is in the making and the disappointment over the Matrade deal is now behind us. Not rated. — TA Securities Research, Jan 20



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DiGi.Com sees strong recovery in margins

DiGi.Com Bhd (Jan 25, RM3.95)

Maintain add at RM3.99 with revised target price of RM4.15: DiGi ended the year with 8.3 million (+13.4% year-on-year [y-o-y]) prepaid and 1.6 million (+11.7% y-o-y) postpaid subscribers, or total net adds of 1.16 million for FY11. Although blended average revenue per user (ARPU) was relatively lower at RM50 (-3.8% y-o-y — postpaid ARPU was up 1.2% y-o-y), DiGi’s FY11 top line grew 10.3% y-o-y to RM5.9 billion.

However, DiGi booked in accelerated depreciation charges of RM430 million resulting in a spike in depreciation charges to RM1.2 billion (+51% y-o-y) leading to a slightly weaker FY11 core net profit growth of 7.4% y-o-y to RM1.2 billion. Notwithstanding, FY11 results were 9% and 8% above our and street forecasts due to a lower than expected tax charge arising from a tax incentive. This will be recovered over a period of five years from FY09 to FY13. Dividend per share (DPS) for 4QFY11 amounted to 6.5 sen, totalling 17.5 sen for FY11 (ahead of our 16.3 sen forecast).

Sequentially, 4QFY11 net profit rose 34.8% to RM394.2 million largely due to a positive tax charge as a result of the tax incentive. At the pre-tax level, earnings were lower by 2.3% quarter-on-quarter (q-o-q) to RM389.3 million, largely due to higher depreciation charges (accelerated depreciation charges of RM150 million).

Ebitda margins showed healthy improvement, rising to 47.1% in 4Q from 46.6% in 3QFY11. This was driven by continued strong revenue growth due to improved coverage coupled with cost reductions. Revenue improvement was also largely underpinned by service revenue (+1.9% q-o-q). DiGi added 264,000 prepaid customers and 39,000 postpaid subs). Handset sales for 4QFY11 were lower by 2.5% q-o-q to RM78 million as customers held back for the iPhone 4S.

Management is guiding for mid to high single digit revenue growth for FY12, and expects growth to be ahead of industry (about 5%). The strong Ebitda margins in 4QFY11 are expected to improve further in FY12 or to sustain at least. Capex for FY12 is expected to be in the region of RM700 million to RM750 million, above FY11’s RM604 million.

We have raised our FY12/FY13 earnings per share forecast by 7% to 8% to account for management’s more upbeat Ebitda margin guidance, stronger sub growth and a lower effective tax rate. Our discounted cash flow-derived target price is raised to RM4.15. — Affin IB Research, Jan 20



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Carlsberg ends 2011 on a good note, outlook clearer for 2012

Carlsberg Brewery Malaysia Bhd (Jan 25, RM8.68)

Maintain market perform at RM8.64 with revised fair value of RM8.70 (from RM8.05): Carlsberg will be releasing its 4QFY11 results on Feb 28. We understand from management that 4Q earnings should be fairly strong, underpinned by the earlier timing of Chinese New Year.

Typically, 4Q revenues are the weakest, given that sales volumes normally drop after the trade loading activities by wholesalers and other distributors in anticipation of a potential excise duty-driven price hike in October or 3Q. Overall, we expect total industry volume (TIV) growth to be within the 4% to 6% range for FY12, in line with our forecast.


Given that capital expenditure plans for FY12 are relatively small, comprising largely replacement capex of about RM30 million, we believe management could potentially surprise the market by paying out 90% to 100% of its FY11 earnings.

Our view is further supported by Carlsberg’s fairly clean balance sheet position as at 9MFY11, with net gearing of only 0.01 times and reserves of RM450 million or RM1.46 per share. Note that Carlsberg does not have any long-term debt and the gearing is comprised purely of its short-term revolving credit for working capital purposes.

Assuming a net payout of 90% to 95%, based on our earnings forecast, this would translate to a 4QFY11 dividend of 45 to 48 sen per share.

In our 2012 strategy report, we highlighted that one of our main concerns regarding the earnings of food and beverage consumer stocks are the potentially higher raw material prices which could erode margins. We highlighted that Carlsberg, with wheat being its key raw material, could face eroding margins due to the volatility of raw material prices.

However, based on our recent discussion with management, we understand that almost all of Carlsberg’s raw material requirements for FY12 were locked in by end-FY11, albeit at a higher prices year-on-year of 9% to 10%. We view this positively as this would mean margins would be relatively stable throughout FY12.

Regarding Carlsberg’s move to brew Asahi beer locally, management confirmed our view that it wouldn’t have an immediate significant impact in the premium beer market and Carlsberg’s earnings in the next one to two years. We are not imputing any incremental contribution from Asahi as yet, as it is still uncertain how big of an impact it will have.

We make no change to our earnings forecasts. The risks include:

(i) a sharp drop in TIV;
(ii) continued decline in Carlsberg’s market share; and
(iii) an excise duty hike in the next budget.

Our discounted cash flow-derived fair value is increased to RM8.70 (from RM8.05) based on a new weighted average cost of capital of 9.4% (from 9% previously) after we updated our beta assumptions.

We also reduced Carlsberg’s long-term annual capex assumptions to RM30 million per year from RM50 million to RM60 million previously, in line with management’s guidance of its replacement capex for FY12. We maintain our “market perform” call on the stock. A near-term re-rating catalyst would be a potential bumper dividend for shareholders for FY11, as highlighted above. — RHB Research, Jan 20



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Public Bank to kick off the reporting season

Public Bank Bhd (Jan 25, RM13.32)

Maintain buy at RM13.30 with revised target price of RM14.60 (from RM13.50): Factoring in a 3% increase to our book value per share for FRS139 adoption and a higher target price-to-book value of 2.8 times (2.7 times previously) on updating our historical parameters, we are raising our target on Public Bank to RM14.60 from RM13.50 previously. We maintain our “buy” call for exposure to Public Bank’s impeccable fundamentals while a net yield of 4% provides support to the share price.

Public Bank can still expand its loan base by 15% per year while maintaining a dividend payout ratio of 50%.

Public Bank is expected to adopt FRS139 in full from 1QFY12 onwards, which entails a potential writeback in excess collective allowance. Assuming a historical probability of default/loss given default experience of 1% as opposed to the present 1.5% transitional provision requirement, we estimate a RM724 million writeback, which we have credited to a regulatory reserve. This effectively enhances the group’s book value by about 3%.

Public Bank will kick off the reporting season for banks with the release of its 4QFY11 results by month-end. Our full-year net profit estimate stands at RM3.37 billion, just slightly behind (1.8%) consensus’ RM3.43 billion.

This implies a 4QFY11 net profit of RM761 million, down 10% year-on-year and 15% quarter-on-quarter, premised largely on net interest margin (NIM) compression and lower q-o-q non-interest income. Admittedly, the bank has thus far succeeded in surprising on the upside despite repeatedly cautioning a 10 to

15-basis point compression in NIM in 2011. We would not be too surprised if management pulls it off again, which could result in earnings surprising on the upside.

Key assumptions include: (i) a moderation in domestic loan growth to 11.1% from 14% in 2011; (ii) NIM compression (albeit a modest six basis points).

The minimum common equity ratio of 7% buys Public Bank about two to three years before it needs to consider any fundraising exercise. Growth is not expected to be impeded, for at this minimum level, the bank can still expand its loan base by 15% per year while maintaining a dividend payout ratio of 50%. — Maybank IB Research, Jan 25



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Way of the dragon

In the Q&A below, HwangDBS Vickers Research explains the significance and expectations of the Year of the Dragon, which will reign from Jan 23, 2012 through Feb 9, 2013.

Q: Can you briefly explain the Chinese animal signs and basics of Chinese geomancy?
A: According to the Chinese almanac, the lunar calendar runs on a 60-year cycle, rotating among 12 animal signs of the zodiac and five elements that represent the basic components of everything in the universe — fire, earth, metal, water and wood, in this order — with their inter-relationships governed by the cycle of birth and destruction. This year, we are marking the Year of the Water Dragon, which takes over from the Metal Rabbit.

How do you know about celestial predictions when you are supposed to be a financial analyst? Who are your sources?
We do not pretend to know everything, certainly not the art of fortune telling. We trawl through cyberspace and borrow the crystal balls of experts who use a combination of astrology, horoscope and metaphysics principles. Based on consensus opinion, we then link their interpretations to our stock market knowledge, with a dose of logic of course.

Are the astrologers’ forecasts reliable?
Call them what you want — geomancers, soothsayers, astrologers, fortune tellers, feng shui practitioners — these self-styled masters earn a living by making predictions. Just like us, who advise clients by recommending what stocks to buy or sell (and hope we will be rewarded with commissions in return). Since forecasting is more art than science, based on different methods and subjective interpretations, there is no guarantee of accuracy. So, please do not hold us liable for their forward-looking opinions.



But were the predictions accurate last year?
To be honest, it was mixed. We wrote that the stock market rally would extend into 2011, but our local bourse could not sustain its momentum despite registering new highs. Yet, the advice to be more vigilant in the later stages due to possible cooling effects arising from the water element with the arrival of the Year of the Dragon seemed to offer a sense of truth.

In hindsight, investors who emulated the traits of the Rabbit would have benefited. Calls to use the long bunny ears to filter out market noises, avoid overconfidence, and show resilience, were timely. A word of caution — past track record is not a guarantee or reflection of future performance.

Why should we then read this report?
This report is for fun, if you will. The content is merely for amusement to take your mind off the shaky global economic outlook. It is not meant to be a substitute for our fundamental approach. So, be open-minded and stay positive. You can choose to believe or ignore these general forecasts, which are made without considering specific elements. Whatever the omens, remember, you are the master of your own destiny. So, let’s use our common sense to seek the truth.

Which elements will dominate in the Year of the Dragon?
We will see water sitting on top of earth. This represents a destructive cycle as earth is the destroyer of water according to the cycle of birth and destruction. Due to this conflicting relationship, there could be upheavals arising from a sense of imbalance. The combination of the water and earth elements may also result in murky waters, which could obscure the outlook. In addition, the Dragon is the only animal in the Chinese zodiac that is mythical, which implies events may unfold in an illusory manner. Yet, the later part of the year promises stability and recovery.

Will the world end on Dec 21?
As an investor, you should worry more about whether you will make money this year. Contrary to popular belief, the Mayan doomsday prophecy did not predict that the world would end on Dec 21, 2012. It merely said the date marks the end of a great cycle and the beginning of another in their calendar. It is also a leap year, which signifies that we will be able to jump over obstacles ahead. And just to be clear, we plan to be around this time next year to write on the Year of the Snake.

What happened in previous Dragon years?
An analysis of historical stock market performance was inconclusive. In Malaysia, the benchmark KLCI saw an obvious downtrend in 2000, but chalked up gains in 1988. If we go back to the last Year of the Water Dragon in 1952, the DJIA on Wall Street pulled back first (-7%) before rebounding subsequently to close the year up a minute 4%.

When will the bulls return? What does the Year of the Dragon hold for our stock market?
We wish we knew the exact timing. According to the soothsayers, the bulls may not make their presence felt this lunar year. This is because of the missing fire element, which represents the driving force behind the stock market. You may argue that the mythical creature could breathe out fire, but let’s not forget the dominance of the water element in the Year of the Dragon that can calm its fire. Also, because the spirit of the Dragon tends to make everything seem larger than life, the financial markets could see more volatility this year.

To prosper, be adaptable like the Dragon, which can live in water, on land and in the air. Being imaginative and self-driven are essential investment traits, too, as the divine beast is always able to see and chart new paths.


Which sectors will see good fortune?
Industries associated with the wood and earth elements. This is because according to the cycle of birth and destruction, wood conquers earth while earth conquers water (and earth and water are the two dominant elements in the Year of the Dragon). They include consumer products, food and beverage and media (wood element), and property, construction, petroleum related and mining (earth element). Meanwhile, industries that fall under the fire element (airlines, for example) and water element (shipping) are expected to face turbulent times.

Where should investors put their money? And why?
In defensive stocks, of course. For prudence’s sake, that’s why. If the worst is yet to come, then it only makes sense to adopt a capital preservation investment strategy. To seek shelter in Malaysia, consider the following eight names. They are either in auspicious sectors or offer attractive dividend returns: Berjaya Sports Toto Bhd (“buy”, target price: RM4.70), Parkson Holdings Bhd (“buy”, TP: RM6.55), KLCC Property Holdings Bhd (“buy” TP: RM3.70), Axis REIT (“buy”, TP: RM2.75), Gamuda Bhd (“buy”, TP: RM4.80), Petronas Gas Bhd (“buy”, TP: RM16.90), Bumi Armada Bhd (“buy” TP” RM5) and Malayan Banking Bhd (“buy” TP: RM10.60).



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2012 CEO Outlook series: TM maintains lead in broadband

TEFD: What are your expectations for 2012, for your company and your industry?

Bazlan: We foresee the outlook for 2012 is positive. Growth is seen for the domestic telecoms industry and is reflected in the expanding market size.

The telecoms market size is forecast to grow to RM30 billion from RM27.4 billion in 2010, while the information and communications technology (ICT) market is expected to grow to RM31.4 billion from RM25.1 billion in 2010. The broadband market, meanwhile, is forecast to grow to RM6.23 billion.

For TM, 2011 was a phenomenal year in terms of broadband growth, as we saw our total broadband customers reaching 1.9 million. This was on the better-than-expected take-up of our triple-play service, UniFi, which now stands at over 227,000.

TM sees UniFi as not only a broadband access service, but also as an enabler for enriched and enhanced online experience for our customers. We’re positioning our HyppTV offering as the gateway for this, giving customers an integrated digital-lifestyle experience.

The true age of convergence is here. Customers now expect to access their content and info from any device at anytime, everywhere and TM aims to be the key enabler to delivering this. More applications and solutions can ride on better broadband services (higher bandwidth) enriching customers’ digital lifestyles.

Superior high speed broadband (HSBB) connectivity will spur small and medium enterprises to offer services to their end users as well as subscribe to our managed services, like cloud. We see content as another area for growth in 2012. We foresee that the content service delivery platform (CSDP — My1Content) will spur local content and application hub growth among producers, increase content-related transactions and raise demand for bandwidth among consumers.

The competitive landscape continues to evolve with the entrance of new players into the market and we expect a continual healthy competition from fellow broadband providers, from mobile to WiMAX.

A lot of operators are moving towards the service-oriented business model. We can see this trend as more operators are venturing into new areas such as cloud computing, content delivery and IPTV. The market acceptance of the managed and outsourcing business model for IT and business processes is also slowly improving. We anticipate an increasing take-up for managed and outsourcing business model in Malaysia, as more enterprises realise their value.

Cloud computing is another area expected to perform well in 2012. TM became the first Malaysian telco to offer comprehensive three-layer cloud services and a technology neutral cloud infrastructure. Further to that, through wholly-owned subsidiary VADS Bhd, TM has entered into a collaboration with Mimos to develop an orchestration platform for VADS cloud computing services.
Overall, we operate in a highly competitive market, where voice revenues are maturing rapidly, Internet competition is fierce and a preference to mobile services, besides the fact that globally the overall economic environment remains uncertain. Competition among the telcos is most intensive in the race to win and retain customers.

What are the main challenges for the company?
Competition is our main challenge as more mobile and wireless providers introduce their products and services into the market.
The broadband marketplace for 2011 was highly competitive, with some of our rivals cutting prices to gain market share. However, as seen in more mature markets, we believe that fixed and wireless broadband services are actually complementary as the needs and requirements of customers are varied.

Fixed-line services provide consumers with pipes to utilise heavy content and applications, while wireless service providers give consumers the flexibility to utilise broadband on the go. In fact, by increasing the rate of broadband penetration in the country, all providers stand to gain bigger shares from the larger pie. Hence, there is a place for fixed and mobile broadband in every customer’s needs.

However, the wireless players are not without their own set of challenges, such as limited capacity due to the tremendous growth in data and Internet traffic. TM has the opportunity to help them manage that traffic on our networks.

We will see a new age of collaboration among industry players in many areas of infrastructure and services, facilitated by the regulatory environment and for the ultimate benefit of Malaysian consumers. Though we compete at the retail end, we also have been the enabler for some of them through our wholesale arm by providing backhaul and access services.

Right now, the industry is at the inflection point of moving from legacy digital to an Internet protocol- (IP) based network. With IP-based network, it is expected to completely reshape the present structure of communications systems and access to the Internet. TM itself recently migrated its core network to the latest IP network infrastructure.

Within this dynamic landscape, we have to embrace this development and ask our commercial teams to constantly improve their go-to-market model, and be faster and better at piloting and testing new offerings. Moving forward, what is important for us is to step up our efforts and continue to challenge ourselves to be more innovative and creative in providing services that cater to our customers’ lifestyles.

Bazlan: Apart from infrastructure sharing, we think it is time that we in Malaysia consider content sharing.

What are the company’s plans and focus for 2012?
Our focus for 2012 will still be on broadband, coupled with efforts to enhance our customer experience.

We remain steadfast in maintaining our position as Malaysia’s broadband champion anchoring on Streamyx and UniFi as our key broadband products, delivering an enhanced and integrated digital lifestyle to all Malaysians where everyone can leverage on the platform to connect, communicate and collaborate effectively; while focusing on a transformation journey to be a new generation telco and an information exchange.

We will continue to leverage on our infrastructure, collective expertise and reach to improve the company’s footing in ICT and business process outsourcing services for the business/enterprise segment via our ICT arm, VADS. The next step is to stack up the current services with innovative applications to provide an ever enriching customer experience with TM, be it with the consumer products and services or with the business/enterprise offering.

TM is also positioning itself to be the regional IP hub of choice by leveraging on its extensive global network infrastructure and assets to meet the increasingly sophisticated demand of global carriers and enterprise customers. TM recently entered into a collaboration to set up a distributed global server network to place content closer to web users.

We will also continue to focus on the entire customer experience and will pursue our quality improvement programmes in our effort to deliver an enhanced customer experience.

In 2010, we spent 5.1% or RM451 million of our revenue to that end in line with our key performance indicator guidance. Over and above just spending alone, we will continue to improve our end-to-end processes, right from the sales to delivery to installation and service provisioning under our programme ACE — Achieving Customer Experience. We will also continue to address the “pain points” in our delivery as part of our overall service improvement initiatives.

What is your wish list for 2012?
Moving into 2012, we hope to maintain our leadership position as Malaysia’s broadband champion with the continuing success of our UniFi and Streamyx as well as HSBB project. We also hope to lay a strong foundation to achieve the company’s transformation towards becoming an information exchange.

As the country’s leading telecommunications company, we also have a national wish list. Apart from infrastructure sharing, we think that it is time that we in Malaysia consider content sharing.

We believe that as per what is being practised in the infrastructure network, all licensed broadcasters should be given fair access to content — local or international content channels.

One may argue that in the US, there are hundreds of cable channels with different content offerings but they are addressing over 300 million people.

The market in Malaysia is limited and the user demographics and behaviour are rather uniform. If the government could do something about liberating content exclusivity, TM will be able to satisfy the needs of Malaysian viewers alongside other service providers in the same space.



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Bumi Armada dips after moratorium ends

KUALA LUMPUR: Bumi Armada closed 1.94% or eight sen lower to RM4.05 yesterday on a volume of 3.98 million shares after a moratorium on its cornerstone investors was lifted last Saturday.

Analysts said the decline was due to profit taking following the expiration of a six-month moratorium which had restricted cornerstone investors from selling the stock.

For its IPO, Bumi Armada managed to lock in cornerstone investors, who paid the listing price but received a predetermined amount of shares and were subject to a six-month lock-up period. According to analysts, cornerstone investors held around 10% stake in Bumi Armada.

The cornerstone investors are state-controlled unit trust outfit Permodalan Nasional Bhd and insurance outfits Great Eastern Life Assurance (M) Bhd and Prudential Assurance (M) Bhd.

Bumi Armada made its debut on July 21 last year and its shares are now trading at a 33.7% premium to the IPO price of RM3.03. After closing at RM4.14 on debut, the stock gradually fell to the RM3.20 level in September last year and has since been on an upward trend.

Analysts reported that the expiration of the moratorium would be a good opportunity for investors to buy into the company.

Research houses HwangDBS Vickers Research and BIMB Securities Research are expecting Bumi Armada to secure a risk service contract (RSC) for Petroliam Nasional Bhd’s (Petronas) marginal oil fields this year, given its track record and synergistic oil and gas services.

According to Bloomberg, there are seven “buy” calls for Bumi Armada ranging from CLSA’s RM4 target price to AmResearch’s RM5.05.

There are four “hold” from RM3.55 to RM4, and two “sell” recommendations with valuations of RM3.16 and RM3.45.

On Jan 16, Bumi Armada announced that its subsidiary, Bumi Armada Navigation Sdn Bhd, was awarded a four-year charter and operations contract (with an extension of a further four years) worth RM155 million from Petrleo Brasileiro SA, a Brazilian oil and gas company, for its anchor handling towing support vessel Armada Tuah 102.



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Greenyield finds its pot of gold

KAJANG: Greenyield Bhd has created its own pot of gold at the end of the rainbow. The ACE Market-listed company manufactures unique plant pots made from a secret formulation and production process. Its artstone pots are not as heavy as the traditional ceramic pots, nor are they as vulnerable as the plastic ones.

The pots are lighter, more durable and possess a unique homogeneous travertine appearance.

“A woman can now go to the supermarket and purchase one of our very big pots and carry it home all by herself. Those who live in an apartment can carry the pots up to their floor by themselves without having to pay extra for delivery,” Greenyield group managing director Don Tham Foo Keong told The Edge Financial Daily.

But making artstone plant pots is not Greenyield’s main business. The company primarily develops, manufactures and markets agricultural systems, products and services based on agro-technology.

Its systems include gaseous stimulation systems, liquid stimulation systems, agricultural chemicals such as GreenPlus and rubber tapping utensils.

Nevertheless, the artstone plant pot making business, under its non-plantation arm, is gaining prominence in Greenyield which was founded in 1937 and listed in 2007. Tham expects revenue contribution from the non-plantation segment to overtake its core business in the future.


“We expect [the non-plantation business] to overtake our plantation-related products and services earnings in 2013 or 2014. But it might not happen if the plantation business grows more than we expected though,” he said.

Tham said Greenyield is also putting put more effort into sustaining turnover for its core business in view of the current challenging global economic environment.

As Greenyield’s plantation division is mainly focused on the rubber sector, Tham said the business could be affected if rubber prices remain stagnant this year.

“We expect rubber prices to remain quite stagnant this year but we believe the price could possibly go up at year-end on the back of increasing demand. But again, demand is very sensitive to the economic situation in Europe and the US, despite China being the No 1 user of rubber in the world.

“Rubber goods produced in China are meant for the US and Europe. If their economies are down, exports of rubber products will go down, too. Apart from that, rubber prices are very sensitive to the prices of crude oil,” he said.

The price of rubber slumped some 29% last year, but has rallied strongly since the new year.

Rubber futures for June delivery traded in Tokyo closed at a three-month high of ¥320.7 (RM12.63) per kg yesterday, with traders turning bullish due to Thailand’s recent price stabilisation measures.

Tham expects revenue contribution from the non-plantation segment to overtake its core business in the future.

Besides the outlook on the rubber sector, Tham said Greenyield’s earnings are highly exposed to foreign exchange fluctuations due to its large global presence.

“We engage in effective hedging against the greenback and euro, but still, there is only so much we can do. We can’t do it all,” he said.

Since its debut on the then Mesdaq market over four years ago, the company has been consistently profitable, with annual net profit ranging between RM4 million and RM7.4 million. For FY11 ended July 31, it posted a net profit of RM7.38 million, or 4.4 sen per share, on RM48.24 million in revenue.

The company saw its non-plantation business revenue grow 129% to RM36.21 million in FY11 compared with RM15.8 million a year earlier.

This comprised RM12.96 million in external sales, some 6% higher than the year before, and RM23.25 million in inter-segment revenue, a 6½-fold jump from RM3.59 million in FY10.

Its plantation division saw revenue from external customers increase 34.3% to RM35.28 million in FY11 from RM26.27 million a year before.

Greenyield derives more than 75% of its total revenue from the export markets. The company’s artstone plant pots are mainly exported to the US, Australia and Europe.

“The market [for artstone plant pots] is so small in Malaysia. Our buying power is not there and not many people have the money to spend on these things.

A big artstone plant pot is sold at some RM1,000 [a piece] by retailers here. But they are selling like mad in the US and Europe despite the financial troubles there,” said Tham.

Greenyield does not plan to patent its secret formula and production process for artstone material, he said.

“We talked to our patent lawyers and suddenly they started asking too much on both the process and ingredients. We are not going to apply [for patents], just like Coca-Cola, they don’t have a patent either,” Tham said.

The company’s net profit for 1QFY12 ended Oct 31 jumped significantly to RM2.19 million from RM786,000 a year earlier, due mainly to strong demand for plantation-related products and services from the overseas markets. Its revenue for the quarter rose to RM13.58 million from RM8.02 million a year ago, while earnings per share expanded to RM1.32 from 48 sen previously.

Greenyield is relatively cash rich. As at Oct 31, 2011, the company had RM16.2 million net cash, equivalent to 10 sen per share and comprises one-third of its shareholders’ funds of RM48.68 million.

“We will continue to invest despite the current challenging economic situation. We believe the best opportunities come when the economic environment is bad. On the whole, we are now trying to concentrate on expanding our plantations and plant pot businesses,” Tham said.

Greenyield’s share price closed at 21 sen yesterday, below its net assets per share of 29.2 sen as at Oct 31, 2011. At that price, the company has a market capitalisation of RM35 million.



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Learning from the GO of S P Setia

When Permodalan Nasional Bhd (PNB) launched its general offer (GO) for S P Setia Bhd, many analysts indicated that they would not hesitate to downgrade the property stock should its president and CEO Tan Sri Liew Kee Sin exit by selling his stake.

Liew, who is perceived as the mastermind of the property group, owns a 10.85% stake, or 200.49 million shares, in S P Setia.

Based on PNB’s initial offer price of RM3.90 per share, Liew would have instantly pocketed RM782 million if he had accepted the GO.

However, Liew did not take up the GO.

To the relief of S P Setia’s minority shareholders and employees, he instead formed a partnership with PNB to make a revised joint offer for S P Setia and has assured them that it will be business as usual.

Shortly before the Lunar New Year break, S P Setia announced that PNB and Liew made a joint revised offer at RM3.95 per share and 96 sen per warrant, which are higher than PNB’s initial offer of RM3.90 per share and 91 sen per warrant.

Liew and PNB have also entered into a management agreement, under which Liew will remain as S P Setia’s group president and CEO for three years. Liew is also granted the exclusive authority to oversee and manage the operations of the group within the ordinary course of the business.

“Based on the terms of the management agreement, PNB shall, for so long as it remains a substantial shareholder of the company, take all steps as shall lie within its power to ensure that Liew will independently manage the group,” S P Setia said in its statement when announcing the joint offer on Jan 20.

The partnership was formed about four months after PNB launched the GO in September to gain control of S P Setia.
Looking at the chronology of events, one may wonder what was PNB’s rationale in making the surprise GO, which some earlier saw as a rather hostile move.

What did PNB want to achieve with the takeover offer?

Could it be to gain not only equity, but also management control of S P Setia, which is widely regarded as the best-run property firm in the country?

But being an asset management firm, should PNB’s mandate be to own, rather than run, a property company, although it also has successful companies under its belt?

Furthermore, PNB’s GO to raise its stake in S P Setia came at a time when the government plans to wind down its equity interest in government-linked companies (GLCs).

The move, which was part of a Strategic Reform Initiative, is to define the government’s role in business so that there would be greater liquidity in the capital market and more opportunities for private investments.

“PNB had bought into S P Setia without thinking through whether it has the capabilities to run the company without Liew.

“The deal that PNB and S P Setia hammered out goes to show that PNB did not have an alternative plan, or its plan was not good enough if Liew and his team walked out,” said an industry observer.

The joint offer comes with an agreement that Liew would not accept the revised offer, but he is granted the option to sell his stake in tranches to PNB progressively at RM3.95 per share in the next three years should he wish to do so.

“After many months’ work, I am happy that we have managed to come up with what I believe is a win-win solution for everyone, especially our customers, employees and all shareholders of S P Setia.

“More importantly, the joint offer will provide a fresh launching pad for S P Setia to continue pursuing its quest to create even greater value for all stakeholders,” said Liew.

He added that he is appreciative of PNB’s put option offer as it would enable him to focus on doing his best to grow the underlying value of the company for the mutual benefit of all shareholders.

It would be interesting to see if what Liew would do in three years. Would he exercise the put option, which could rake in close to RM800 million?

That said, both PNB and S P Setia deserve a pat on the shoulder for hammering out a win-win formula that benefits all parties.

With the benefit of hindsight, perhaps PNB could have strategised its move differently.

The takeover exercise also teaches us a lesson: besides its prime landbank, leadership, human capital and expertise are very much the key assets of a property company.



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Kian Joo stake sale completed

KUALA LUMPUR: Can-One Bhd finally got hold of 32.9% equity interest, or 146.1 million shares, in Kian Joo Can Factory Bhd (KJCF) from the See family via an off-market trade yesterday.

The news should lay to rest any remaining uncertainty over Can-One’s acquisition of the stake in KJCF at RM1.65 per share, which is at a 25.6% discount to yesterday’s closing price of RM2.22.

In fact, Can-One’s share price climbed further yesterday, setting a record high of RM2.17. Some 6.9 million shares changed hands on the open market.

It has been two weeks since the Federal Court ruled in favour of Can-One’s takeover of the See family’s 32.9% stake in KJCF.

The delay to the block of shares changing hands had raised uncertainty about whether Can-One was facing hurdles on the share purchase after a three-year tussle in the courtroom.

To recap, Can-One won the bid for its largest competitor, KJCF, three years ago at RM1.65 per share but the See family waged a legal battle to reject the share disposal.

Today, KJCF has net assets per share of RM1.96 and it is valued at 1.13 times book value based on yesterday’s closing of RM2.22.

As such, Can-One is buying KJCF at a discount of 0.84 times book value. Can-One only has to pay RM241 million for the KJCF block that is worth RM324.3 million based on yesterday’s closing price. This gives Can-One a paper gain of about RM83.3 million.

KJCF has a string of real estate assets in Malaysia and Vietnam with a total net book value of RM340.98 million, according to the company’s latest annual report.

With KJCF shares in hand, Can-One will no longer have to contemplate the See family’s potential “poison pill” of a rights issue.

The rights issue was announced in February 2011 and would have diluted the block of shares substantially if the See family decides not to subscribe to the cash call before selling to Can-One.


An analyst noted that Can-One’s acquisition will translate into better margins. Combined, both players will be able to command better prices as well as leverage their combined size for better prices from suppliers.

Analysts also said Can-One is getting a bargain as KJCF has a stable earnings track record, having expanded its production capacity in Malaysia and Vietnam. It also has improved future earnings prospects as it ventures into Indonesia.

As things stand, KJCF looks poised for a record year of profits.

TA Research forecasts KJCF’s FY11 net profit to rise to RM116.8 million, up 14.5% from RM101.98 million for FY10. Net profit for FY12 is expected to be RM143 million.

In line with that expectation, Kenanga Research forecasts KJCF’s net profit for FY11 to grow 10.6% year-on-year to RM112.8 million and hit RM132 million for FY12. Kenanga maintained its target price of RM2.38 with a “market perform” call on the counter.

Funding to acquire KJCF would not have been difficult to secure, as Can-One has bought an income-generating asset at a discount.

On the other hand, Can-One’s relatively weak cash position of RM11.85 million compared with its debt obligation of RM226.04 million may be a problem moving forward. Concern has been raised that the high gearing might prove challenging, particularly if Can-One should require additional funding at a later date.






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AirAsia’s airfare issue with Australia consumer watchdog resolved

KUALA LUMPUR (Jan 26): AIRASIA BHD []’s airfare issue with the Australian regulators over its online airfare information has been resolved, wire reports said.

The reports, quoting AirAsia, stated on Thursday the problem could have been due to an IT issue in September 2011 and it had taken corrective action to resolve the complaints.

AirAsia had stated that as soon as it became aware of the matter based on the Australian Competition and Consumer Commission’s (ACCC) complaint, it had taken corrective action and was focused on ensuring its customers had all relevant information on our fares.

The low-cost carrier had also said it had resolved the issue on its website.

The ACCC claimed some fares sold on AirAsia's website do not display prices inclusive of all taxes, duties, fees and other charges.



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Superlon’s 2m shares crossed 53c each, 29% above Wednesday’s closing price

KUALA LUMPUR (Jan 26): Superlon Bhd saw two million shares crossed in an off-market deal at 53 sen each on Thursday.

Stock market data showed the shares transacted at 53 sen, were 12 sen or 29.2% above Wednesday’s closing price of 41 sen.

At 3.01pm, Superlon was down three sen to 38 sen. There were 3,000 shares transacted.

The company, through its subsidiary, Superlon Worldwide Sdn Bhd, designs, manufactures, and tests NBR thermal insulation materials primarily for the heating, ventilation, air-conditioning, and refrigeration (HVAC&R) industry worldwide.



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Lafarge MCement sees 42.5% stake crossed off-market at RM6.88 each

KUALA LUMPUR (Jan 26): LAFARGE MALAYAN CEMENT BHD [] saw a 42.5% crossed in an off-market deal at midday on Thursday.

Stock market data showed the 361.62 million shares were transacted at RM6.885 each.

According to the company’s annual report, the block of shares is owned by the single largest shareholder, Lafarge Cement UK PLC.

The company’s paid-up is 849.69 million shares.

The share price closed three sen lower at RM6.82 at midday.



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Supermax shares dip on ex-date for 1-for-1 bonus issue

KUALA LUMPUR (Jan 26): SUPERMAX CORPORATION BHD []’s share price dipped in relatively thin trade at midday on Thursday as its one-for-one bonus issue went ex on Thursday.

At 12.30pm, it was down four sen to RM2.15. There were 1.13 million shares done at prices ranging from RM2.15 to RM2.25.

The bonus issue involved 340.07 million new shares of 50 sen each to be credited as fully paid-up on the basis of one bonus share for every one existing share held at 5pm on Jan 30.

Earlier Thursday, CIMB Research said it had a technical sell on Supermax at RM2.195 at which it was trading at a FY13 price-to-earnings of 19.1 times and price-to-book value of 2.0 times.

The research house said the rebound from its September 2011 low appeared to have exhausted. It pointed out that last Friday’s sharp pullback violated its short term uptrend channel and this could be seen as a prelude to more downside ahead, it added.

“If we are right, the candles are likely to fall towards RM2.00 and RM1.90 in the near term,” it said.

CIMB Research said sell into strength looks like a good option here, especially near the RM2.30-RM2.40 resistances. Only a sharp rise above RM2.50 would prompt it to review its call on Supermax.



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Nazir Razak appointed president commissioner of CIMB Niaga

KUALA LUMPUR (Jan 26): The group chief executive / managing director of CIMB Group Datuk Seri Nazir Razak has been appointed president commissioner of CIMB Niaga at the EGM in Jakarta on Thursday.

CIMB Group said in a statement that Nazir replaces Datuk Mohd Shukri Hussin who stepped down following his retirement from CIMB Group end-2011 .

Glenn Muhammad Surya Yusuf was appointed vice president commissioner of Bank Niaga. Glenn replaces Roy Edu Tirtadji who remains an independent commissioner.

The appointments are effective upon the approval of Bank Indonesia (BI).

CIMB Group said Nazir’s appointment to the chairmanship of the board of commissioners at CIMB Niaga was consistent with CIMB Niaga’s growing importance to CIMB Group.

For the nine-month period in 2011, CIMB Niaga accounted for approximately 30% of CIMB Group’s profit before tax (PBT).

Nazir, 45, graduated from the University of Bristol with a BSc (Hons) and obtained an MPhil from the University of Cambridge.

He joined CIMB’s corporate advisory department in 1989 and was appointed chief executive on June 1, 1999. He spearheaded the group’s transformation from a Malaysian investment bank to a regional universal bank via the acquisitions of G.K. Goh Securities and Bumiputra-Commerce Bank in 2005, Southern Bank in 2006, and Bank Lippo and BankThai in 2008.

CIMB said under Nazir’s stewardship, CIMB Group won many prestigious accolades. He was also the youngest recipient of FinanceAsia’s “Lifetime Achievement Award” in 2009, and was named the “Best Executive in Malaysia” by Asiamoney in 2009 and 2010 as well as “Best CEO (Malaysia)” by FinanceAsia in 2011.

Meanwhile, Glenn Muhammad Surya Yusuf has over 29 years of experience working in the business and finance sectors, with various positions which include director of Bank Niaga (1985-1994) and the first chairman of the Indonesian Bank Restructuring Agency (1998-2000).

He was also president director of PT Danareksa (Persero), a position he held between 1995 and 2001; and president director of PT Perusahaan Perkebunan London Sumatera Tbk from 2003 through 2007. He is currently a commissioner at PT Surya Citra Media Tbk (appointed in 2004), and also an independent non-executive director for CIMB Group Holdings Bhd (appointed in January 2010).



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KLCI edges past 1,520-level, Asian markets mixed

KUALA LUMPUR (Jan 26): The FBM KLCI edged above the 1,520 level at the mid-day break on Thursday, while regional markets were mixed with Japan’s Nikkei 225 slipping into the red.

The FBM KLCI rose 1.97 points to 1,521.73 at the mid-day break, lifted by select blue chips.

Gainers led losers by 376 to 237, while 307 counters traded unchanged. Volume was 1.09 billion shares valued at RM741.04 million.

The ringgit strengthened 1.28% to 3.3087 versus the US dollar; crude palm oil futures for the third month delivery fell RM35 per tonne to RM3,134, crude oil gained 55 cents per barrel to US$99.95 while gold added US$1.75 an ounce to US$1,712.32.

At the regional markets, Hong Kong’s Hang Seng Index was up 1.16% to 20,342.70 and South Korea’s Kospi gained 0.16% to 1,955.40, while Japan’s Nikkei 225 fell 0.32% to 8,855.39 and Singapore’s Straits Times Index lost 0.26% to 2,883.99.

The China and Taiwan stock markets are closed for the Chinese New Year holidays.

Maybank Investment Bank Bhd head of retail research and chief chartist Lee Cheng Hooi in a note to clients early Thursday had said that the FBM KLCI’s resistance areas of 1,519 and 1,531 may cap market gains, whilst obvious support areas may be located at 1,500 and 1,517.

“Despite the US markets’ positive tone last night, we could be in for yet another range bound trading day after the Chinese New Year holidays,” he said.

On Bursa Malaysia, United PLANTATION []s added 28 sen to RM20.50, MISC 23 sen to RM6.13, Nestle 20 sen to RM56.30, Hong Leong Bank, Boxpak and Batu Kawan 18 sen each to RM11.48, RM2.35 and RM18.98 respectively, TDM and Maybulk 16 sen each to RM4.37 and RM2.46, DRB-Hicom 14 sen to RM2.44 while Tradewinds gained 11 sen to RM9.95.

DBE Gurney was the most actively trade counter with 109 million shares done. The stock added 1.5 sen to 14 sen.

Other actives included Karyon, DRB-Hicom, JCY, Wijaya and Hibiscus.

Decliners included Triplc, APM Automotive, Dutch Lady, Fima Corp, Malayan Flour Mills, DKSH and Inno.



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TDM climbs to multi-year highs of RM4.36

KUALA LUMPUR (Jan 26): Shares of low-key TDM BHD [] rose to multi-year highs of RM4.36 on Thursday on investors’ positive outlook for its plan to invest RM300 million to expand its PLANTATION []s.

At 11.50am, it was up 15 sen to RM4.36, the highest in more than five years. There were 406,300 shares done.

The FBM KLCI was up 2.12 points to 1,521.88. Turnover was 932.83 million shares valued at RM614.05 million. There were 345 gainers, 227 losers and 306 stocks unchanged.

In early January, the company said it would invest RM300 million in 2012 to develop its plantations in Terengganu and Kalimantan.

The company which owned 32,000ha of oil palm land in Terengganu had recently acquired 40,000ha in Kalimantan.

Terengganu Incorporated Sdn. Bhd is the single largest shareholder in TDM with a 50.81% direct stake or 117.02 million shares.

TDM's net asset per share was RM3.50 as at Sept 30, 2011. Its earnings have also improved, surging to RM51.47 million in the third quarter ended Sept 30, 2011 from RM28.26 million a year ago.



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KLCI rises at mid-morning, lower liners in focus at Bursa

KUALA LUMPUR (Jan 26): Lower liners were in focus at Bursa Malaysia Securities Bhd at mid-morning on Thursday as the FBM KLCI edged up, lifted by select blue chips.

At 10am, the FBM KLCI added 0.92 of a point to 1,520.68.

Gainers led losers by 230 to 141, while 221 counters traded unchanged. Volume was 368.82 million shares valued at RM208.71 million.

At the regional markets, Hong Kong’s Hang Seng Index rose 1.02% to 20,314.70, South Korea’s Kospi gained 0.20% to 1,956.12, Singapore’s Straits Times Index edged up 0.20% to 2,897.28 and Japan’s Nikkei 225 shed 0.03% to 8,881.30.

The China and Taiwan stock markets are closed for the Chinese New Year holidays.

BIMB Securities Research in a note Thursday said the lack of new developments in Europe coupled with the highly anticipated low rate regime as pledged by the Feds, acted as catalysts for Wall Street pushing the Dow Jones Industrial Average up 81 points to close at a high of 12,757.

However, the same cannot be said for major European bourses as most ended up in the red as Greece remained locked in a negotiation stalemate on its debt restructuring, it said.

Meanwhile, performance from regional markets were rather mixed yesterday possibly from the holiday mood that most were still enjoying with Hong Kong and Taiwan remaining closed for Chinese New Year celebrations, it said.

The research house said that on the domestic front, the FBM KLCI saw some profit taking on blue chips as reflected by the 3 point decline to a tad below the 1,520 mark.

“Nonetheless, retailers came out in droves as trading on penny stocks came alive on the 1st trading day in the Year of the Dragon.

“We expect the benchmark index to move within a tight range of between the 1,515 and 1,525 levels and envisage focus to be on the lower liners again,” it said.

On Bursa Malaysia this morning, Boxpak added 18 sen to RM2.35. Theta 11.5 sen to 64.5 sen, YTL Cement, DRB-Hicom and WCT gained 11 sen each to RM4.47, RM2.41 and RM2.45, Carlsberg, Jaya Tiasa, Hartalega and Nestle added 10 sen each to RM8.78, RM7.13, RM6.70 and RM56.20 respectively, while GCE added nine sen to 75 sen.

DBE Gurney was the most actively traded counter with 27.5 million shares done. The stock added half a sen to 13 sen.

Other actives included Wijaya, DRB-Hicom, Unisem, Denko, KHSB, JCY and Iris Corp.

Decliners included Malayan Flour Mills, Hibiscus, DKSH, Can-One, Bursa Malaysia, Perduren, Chin Well, Kian Joo and MSM.



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Hibiscus dips after saying unaware for reasons of unusual market activity

KUALA LUMPUR (Jan 26): Hibiscus Petroleum Bhd was actively traded and was the top loser on early Thursday after the company said it was unaware of the reasons for the unusual market activity a day earlier.

At 9.40am, Hibiscus fell 11 sen to RM1.41 with 1.72 million shares traded.

Hibiscus had been queried by Bursa Malaysia Securities Bhd on Wednesday after its securities jumped in very active trade.



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Can-One, Kian Joo shares retreat in early trade

KUALA LUMPUR (Jan 26): Shares of CAN-ONE BHD [] and Kian Joo Can Factory fell on Thursday, a day after the former said it had completed the acquisition of the 32.9% stake in KJCF for RM241.11 million cash consideration.

At 9.40am, Can-One fell nine sen to RM2.08 with 1.61 million shares done, while KJCF lost four sen to RM2.18 with 84,000 shares traded.

Analysts are expecting Can-One to make a general offer after securing the 32.9% block of KJCF.



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CIMB Research has technical buy on Ramunia at 38.5 sen

KUALA LUMPUR (Jan 26): CIMB Research has technical buy on Ramunia Holdings at 38.5 sen at which it is trading at a price-to-book value of 1.5 times.

It said on Thursday that Ramunia broke out of its consolidation triangle pattern recently.

“It appears that the stock is ripe for a stronger rebound. If the candles can continue to hold above its 50-day SMA, the next upswing is likely to push prices towards 42 sen and 45 sen,” it said.

CIMB Research said the 200-day SMA is also a magnet for prices. It added the technical landscape is improving. MACD signal line has returned to the black while RSI is also above the 50pts mark.

“Aggressive traders may start to nibble now before the next upleg kicks in. Always place a stop at below 36 sen to limit downside risk,” it said.



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CIMB Research has technical buy on WTK at RM1.44

KUALA LUMPUR (Jan 26): CIMB Research has technical buy on WTK Holdings at RM1.44 at which it is trading at a price-to-book value of 0.6 times.

It said on Thursday WTK Holdings broke out of its minor triangle pattern last week.

CIMB Research said looking at the chart, it seems that the bulls are trying to push prices back towards the RM1.53, 200-day SMA and possibly even RM1.62 levels.

“MACD signal line has staged a positive crossover while RSI is also rising. The positive technical readings reinforce our short term bullish stance with the only exception being its overbought RSI.

“Traders may start to accumulate on weakness. However, always put a stop at below RM1.37-RM1.34. A break below RM1.29 would cancel out this bullish run,” it said.



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CIMB Research has technical sell on Supermax at RM2.19

KUALA LUMPUR (Jan 26): CIMB Research has technical sell on Supermax Corp at RM2.195 at which it is trading at a FY13 price-to-earnings of 19.1 times and price-to-book value of 2.0 times.

It said on Thursday the rebound from its September 2011 low appears to have exhausted. Last Friday’s sharp pullback violated its short term uptrend channel and this could be seen as a prelude to more downside ahead, it added.

“If we are right, the candles are likely to fall towards RM2.00 and RM1.90 in the near term.

“Indicators are showing signs of exhaustion. MACD histogram bars are losing pace fast while RSI has also hooked downward. The overbought RSI which may have prompted the selloff is likely still intact,” it said.

CIMB Research said sell into strength looks like a good option here, especially near the RM2.30-RM2.40 resistances. Only a sharp rise above RM2.50 would prompt it to review its call on Supermax.



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KNM edges up in early trade on plans to buy UK firm

KUALA LUMPUR (Jan 26): KNM GROUP BHD [] shares rose on Thursday after it proposed to acquire a company owning 55 acres of land at Storey's Bar Road, Peterborough, England for 25 million pound sterling or RM120 million.

At 9.05am, KNM added 3.5 sen to RM1.03 with 892,200 shares traded.

It had signed an exclusivity agreement with Poplar Holdings Ltd for the grant of exclusivity to acquire the latter’s unit Poplar Investments Ltd which owns the 55 acres of vacant land.

KNM said the agreement was to secure exclusive rights to purchase the sale shares and indirectly own the land to build an 80 MW waste to energy plant.



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OSK Research maintains Buy on Axiata, FV RM5.60

KUALA LUMPUR (Jan 26): OSK Research said Axiata Group remains an inexpensive regional mobile exposure and is its top regional telecoms pick, trading at 13.5 times FY12 EPS.

It said on Thursday it is maintaining a Buy on Axiata with a fair value of RM5.60 while its last traded price was RM4.81.

OSK Research said Axiata’s 19.7%-owned India associate, Idea Cellular reported strong 9% on-quarter (up 27.2% on-year) growth in revenue (2QFY12: +2.2% on-quarter) for the December quarter (3QFY12) to INR50.3 billion.

The stronger earnings came on the back of seasonally higher MOUs (+7.3% on-quarter) and improved subscriber growth of 6.2% on-quarter (+30.1% on-year). The strong topline growth led to the 1.2 percentage points on-quarter expansion in group EBITDA margin to 26.7%.

“The strong results from Idea reaffirm our view on the improved revenue and earnings outlook for Idea in an environment of rising tariffs following the massive price war in 2009-2010.

“Axiata remains an inexpensive regional mobile exposure and is our top regional telecoms pick, trading at 13.5x FY12 EPS. Idea contributes less than 10% of Axiata’s net earnings and 5% of our SOP valuation on the stock. We have tagged a 20% discount to Idea’s valuation to account for regulatory risks in India,” said OSK Research.



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HDBSVR: Heavyweights to see fresh buying interest

KUALA LUMPUR (Jan 26): Hwang DBS Vickers Research expects the Malaysian market to get a slight lift on Thursday with index heavyweights such as Maybank, CIMB and Genting possibly attracting fresh buying interest.

It said KNM may be of interest too after entering into an exclusivity agreement to conclude the proposed acquisition of an UK-based company for about RM120 million (which will then pave the way for the development of an 80MWe waste-to-energy plant).

As for the US Federal Open Market Committee (FOMC) meeting held Wednesday night, the policymakers decided to keep the federal funds rate at low levels at least through late 2014 after trimming the official economic growth projections. In reaction, major U.S. equity indices jumped between 0.6% and 1.1% at the closing bell.

“The outcome of the FOMC meeting suggests that the US dollar – which has been weakening lately – would come under persisting pressures ahead. This may prompt a shift in fund flows to Asia, where economic growth prospects remain relatively stable,” HDBSVR said.



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RHB Research maintains Outperform on Sime Darby, FV RM10.40

KUALA LUMPUR (Jan 26): RHB Research Institute is maintaining its forecast for SIME DARBY BHD [] which said it was investing US$4.356 million (RM13.5 million) for a 95% stake in PT Indo Sukses Lestari Makmur (PTIS) in Indonesia.

PTIS develops industrial PLANTATION [] forest and rubber tapping. PTIS is in the process of obtaining the timber forest product exploitation business license from the Ministry of Forestry for about 10,000 ha of concession area.

The research house said on Thursday it was “slightly puzzled by this acquisition”, as the management had not really emphasised its intention to expand into the timber and rubber industries.

RHB Research also said there are no details on the concession and land use for it to assess the landbank pricing of US$435.60/ha (RM1,350/ha).

“No change to our forecasts as the investment amount is minimal, while development cost would be spread out over 15 years. Fair value remains at RM10.40. Maintain Outperform,” it said.



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Stocks to watch: Can-One, Kian Joo, Hibiscus, KNM

KUALA LUMPUR (Jan 26): Markets would be on the lookout for signals from the Federal Reserve about its monetary policy on Thursday morning while the eurozone is still mired in crisis.

Concern over how Greece's debt talks will develop trumped any appetite for riskier assets on Wednesday, despite good economic data from Germany and a widely held view that the Federal Reserve is set to signal an extended period of ultra-low rates.

Reuters reported Wednesday that the Fed looked set to keep monetary policy on hold, even as it releases forecasts expected to show interest rates will be near zero for at least two more years.

It said given recent improvement in the U.S. economy, the central bank will probably remain non-committal regarding the prospect for additional bond purchases, but will leave the door open to further action if Europe's banking problems spill over into the United States.

At Bursa Malaysia, the broader market closed higher in late trade, despite the decline in the FBM KLCI due to losses in banking stocks.

Stocks which could see trading interest following the latest corporate news are CAN-ONE BHD [], KIAN JOO CAN FACTORY BHD [] (KJCF), Hibiscus Petroleum Bhd and KNM GROUP BHD [].

Can-One said on Wednesday it had completed the acquisition of the 32.9% stake in KJCF for RM241.11 million cash consideration.

Analysts are expecting Can-One to make a general offer after securing the 32.9% block of KJCF.

Hibiscus Petroleum, which was queried by Bursa Malaysia Securities Bhd after its securities jumped in very active trade on Wednesday, replied it was unaware of the reasons for the unusual market activity.

The shares closed 32 sen higher at RM1.52 with 53.58 million shares done while the warrants climbed 14.5 sen to 85 sen with 176.11 million units done.

KNM has proposed to acquire a company owning 55 acres of land at Storey's Bar Road, Peterborough, England for 25 million pound sterling or RM120 million.

It had signed an exclusivity agreement with Poplar Holdings Ltd for the grant of exclusivity to acquire the latter’s unit Poplar Investments Ltd which owns the 55 acres of vacant land.

KNM said the agreement was to secure exclusive rights to purchase the sale shares and indirectly own the land to build an 80 MW waste to energy plant.



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