Friday 27 January 2012

Samling launches privatisation of Samling Global, Glenealy, Lingui

KUALA LUMPUR (Jan 27): Samling Strategic Corporation Sdn Bhd (SCC), plans to take its Hong Kong-listed Samling Global Ltd and also Glenealy PLANTATION []s (Malaya) Bhd and Lingui Developments Bhd private.

The companies said on Friday that SCC offered RM7.50 a share for the plantation-based Glenealy shares, which is a premium of 95 sen or 14.5% above the pre-suspension price of RM6.55.

SCC also offered RM1.63 for the timber-based Lingui shares, which was 27 sen or 19.8% above the pre-suspension price of RM1.36.

However, it said the offer prices were indicative only, non-binding and might be subject to variation.

Glenealy is an associate company of Lingui due to Lingui’s 38.33% stake in Glenealy. Lingui is a subsidiary of Samling Global -- an integrated forest resource and wood products company -- as the latter holds 67.23% in Lingui.

SCC owns a direct 15.36% stake in Glenealy comprising of 17.52 million shares and an indirect stake of 38.33% or 43.72 million shares, according to the company’s annual report as at Sept 9, 2011. Lingui owns a direct 1.91% or 2.18 million shares and indirectly holds 36.42% or 41.54 million shares.

As for Lingui, SSC indirectly owns 67.23% or 443.47 million shares, according to the annual report as at Sept 9, 2011. Samling Malaysia Inc owns a direct 59.69% stake in Lingui or 393.72 million shares.

“If proposed and implemented, the SGL privatisation will be conditional upon, amongst other things, the approval of the independent shareholders of SGL to the launch of both the Lingui privatisation and the Glenealy privatisation (but not the completion thereof).

“Further, if proposed and implemented, the Lingui privatisation and the Glenealy privatisation will be conditional upon the completion of the SGL privatisation,” according to the companies.

If a formal offer in respect of the proposal is put forward, SSC indicated it expects to propose an offer price of RM1.63 per share for the Lingui privatisation and RM7.50 per share for the Glenealy privatisation.



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Trinity Corp proposes more collateral as RM84.65m Sukuk matures

KUALA LUMPUR (Jan 27): Trinity Corporation Bhd has proposed additional collateral from the sale proceeds of shophouses totalling RM40 million as the balance of the Sukuk Al-Ijarah of RM84.65 million has reached maturity on Friday.

The company, formerly TALAM CORPORATION BHD [], said the Sukuk holders had not declared an event of default on its unit Ample Zone Bhd, which issued the debt notes.

“They (Sukuk holders) have not convened a Sukuk holders’ extraordinary general meeting to deliberate Ample Zone’s proposal for a three-year extension of time to Jan 27, 2015,” it said.

Trinity Corp said the proposal to the Sukuk holders included additional collateral in terms of assignment of sales proceeds of 40 shop-offices at Saujana Putra totaling RM40 million arising from a proposed joint venture.

It added this was in addition to the existing securities in the form of the balance of three commercial buildings -- Midpoint shopping complex, Menara Maxisegar commercial building, Pandan Kapital shopping complex.



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Kimlun proposes private placement to raise RM27.94m

KUALA LUMPUR (Jan 27): Kimlun Corporation Bhd has proposed to raise RM27.94 million from the private placement of new shares.

It said on Friday the private placement would entail the issuance of up to 22.90 million new shares, or up to 10% of the issued and paid-up share capital of RM114.50 million, comprising of 229 million shares.

“Assuming the placement shares are issued at an indicative issue price of RM1.22 per placement share based on a discount of approximately 10% to the WAMP up to Jan 26, 2012 of RM1.36, the proposed private placement is expected to raise gross proceeds of up to approximately RM27.94 million,” it said.

Kimlun said the shares would be placed to third party investor or investors to be identified at a later stage.

Of the RM27.94 million, it said that the bulk of it or RM13 million would be used for development and incidental expenditure of Kimlun Group’s existing land bank. Another RM9.64 million would be used for working capital and RM2.80 million to purchase a parcel of industrial land.



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Hubline fixes placement shares at 20c each, premium of 150%

KUALA LUMPUR (Jan 27): HUBLINE BHD [] has fixed the issue price for the private placement of 15 million shares together with 22.50 million additional warrants at 20 sen per placement share.

It said on Friday the issue price was a premium of 150% to the five-days volume weighted average market price of Hubline shares up to and including Jan 26 of 8.0 sen per share. It closed at 8.5 sen on Friday.



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Kimlun plans pre-cast concrete products factory in Seremban

KUALA LUMPUR (Jan 27): Kimlun Corporation Bhd, which is actively bidding for CONSTRUCTION [] jobs in the Klang Valley, plans to set up a factory in Seremban to manufacture pre-cast concrete products to support its demand for the products to be used in the projects.

Kimlun said on Friday its unit SPC Industries Sdn Bhd had entered into a conditional sale and purchase agreement with CIMB Bank Bhd to acquire a piece of leasehold land in Mukim Rantau, Seremban for RM15.50 million cash.

Kimlun said the land was near established industrial developments, such as Sungai Gadut Industrial Park, Taman Tuanku Jaafar Industrial Park and Senawang Industrial Estate and about 7km from the Senawang Toll Plaza of North-South Expressway.

It added a factory would be built on the site for the fabrication of pre-cast concrete products to cater for the anticipated demand for the products in the Klang Valley.

SPCI’s core business is manufacturing and supply of concrete products. The purchase consideration was based on the price tendered by SPCI which took part in a bidding exercise to purchase the land from the vendor.

“The group has been bidding and will continue to actively bid for construction projects as well as orders for pre-cast concrete products arising from projects including those to be awarded under the Greater Kuala Lumpur/Klang Valley National Key Economic Area of the Economic Transformation Programme (which includes the proposed mass rapid transit system for Greater KL/KV),” it said.

Kimlun said the new factory would begin with the production of IBS components such as floor slab, column and beam.

It added the group would include more pre-cast products, particularly those manufactured by its existing plant in Ulu Choh, Johor such as tunnel lining segment in the product range of the new factory when sales opportunities arise.

Kimlun said the purchase consideration would be via proceeds from the proposed private placement, its own funds and bank borrowings.



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Maxbiz expects 5% to 15% profit margin from fibre network connection project

KUALA LUMPUR (Jan 27): MAXBIZ CORPORATION BHD [] expects profit margin of between 5% and 15% from the fibre network connection (FTTx) project, estimated to cost RM5,100 for each connection to a house and office.

The company, queried by Bursa Malaysia Securities Bhd several times over its announcement of a letter of intent (LOI) for the project totaling RM510 million from Fibre-N Sdn Bhd (FNSB), had on Friday provided the possible profit margins.

“The LOI that was received by Maxbiz states 100,000 FTTx homes and office connections and the price per connection is RM5,100 hence the amount of RM510 million is derived, the contract value would be determined when the LOI becomes a letter of award (LOA),” it said.

FTTx is a broadband network architecture using optical fibre to replace all or part of the usual metal local loop used for the last mile telecommunications.

On Jan 9, Maxbiz said FNSB had a contract for 100,000 FTTx connections and the LOI was for Maxbiz to be one of companies developing the fibre network connection project.

Maxbiz had then stated it received a LOI and it would be working towards converting it to a LOA.

In the latest announcement, Maxbiz said it would be informed of the actual number of connections upon confirmation by FNSB after the submissions expected in February 2012.

“Based on quotations from similar projects, and the price of RM5,100 a profit margin 5% to 15% is acheivable, 5% being the lowest and the 15% being the best case scenario.

“The profit margin is dependent on the logistics, if the buildings assigned are in close proximity to each other, the profit margin would be better because of the time and labour factor,” it said.

Maxbiz said that as at any start of a project, the cost of equipment or rental would lower the profits but with the continuation of the project, the margin was expected to increase due to re-utilisation of the sub-contractors and materials.

“Maxbiz expects to complete the study and submission to FNSB by the end of February 2012. The company is already engaged in discussions with FNSB on the project and is on-going,” it said.



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AM Best affirms Malaysian Reinsurance’s financial strength rating of A-

KUALA LUMPUR (Jan 27): A.M. Best Co. affirmed the financial strength rating of A- (excellent) and issuer credit rating of “a-” of MNRB HOLDINGS BHD []’s unit Malaysian Reinsurance Bhd (Malaysian Re). The outlook for both ratings is stable.

It said in a statement on Friday the ratings reflected Malaysian Re’s adequate capitalisation, improving trend in underwriting performance and consistent positive investment income attributed to a prudent approach.

“The ratings also acknowledge Malaysian Re’s leading market position in Malaysia, its key country of exposure,” said A.M. Best, which is the world's oldest and most authoritative insurance rating and information source.

It said Malaysian Re’s risk-based capitalidation had slightly strengthened for fiscal year (FY) 2010 ended March 31, 2011, due to more favourable overall income stemming from an improvement of both the underwriting and investment performance, and greater retention of earnings.

“A.M. Best expects Malaysian Re’s capital position will be maintained at a similar level in the near future due to the composition of the company’s underwriting portfolio, investment strategy and quarterly monitoring of the local risk-based capitalisation,” it said.

It pointed out that due to its national reinsurer background, almost three quarters of Malaysian Re’s business was derived from the Malaysian market.

“The company’s underwriting margin had been in an increasing trend over the past three years, primarily reflecting the better quality of its Malaysian portfolio, while the loss ratios of its overseas portfolio had remained volatile.

“A.M. Best anticipates that losses arising from the Thai flooding will have minimal impact on the company’s underwriting performance and on its risk-based capitalidation for FY 2011 due to management’s focus on the bottom line and strengthening the capital base,” it said.

However, A.M. Best said that partially offsetting rating factors are the keen competition in overseas markets, potential discontinuation of the voluntary cession and the impact in the long run on the company’s profitability.

It said that due to the market competition in Asia Pacific, more capital is required to support Malaysian Re’s growth and expansion to overseas markets.

In addition, if the actual premium growth is higher than projected, the stability of the ratings could be jeopardised if the company's current level of risk-adjusted capitalisation cannot be maintained.



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Golden Frontier main shareholder launches takeover at RM1.50 a share

KUALA LUMPUR (Jan 27): GOLDEN FRONTIER BHD []’s main shareholder Frontier Equity Sdn Bhd, which owns 41.26% , has served a notice of conditional take-over offer on the company, offering RM1.50 a share for the remaining stake it does not own.

Golden Frontier said on Friday that parties acting in concert in the takeover are TH Khor Holdings Sdn Bhd, which is the holding company of Frontier Equity.

Also involved in the takeover is Golden Frontier executive chairman and group managing director Datuk Khor Ten Haw and eight others who own a combined 0.89% or 467,162 shares. Khor is also a director of Frontier Equity.

The RM1.50 offer price is a premium of 21.95% or 27 sen over the five-day volume weighted average price (VWAP) of the shares up to Jan 20. The offer price is 27.12% or 32 sen over the one-month VWAP of RM1.18. The pre-suspension price was RM1.21.

Golden Frontier said the takeover offer by Frontier Equity would remain open until 5pm for at least 21 days after the posting date.

The offeror also did not intend to maintain the listing status in the event the 90% acceptance condition was achieved.



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Market Commentary

The FBM KLCI index lost 2.96 points or 0.19% on Friday. The Finance Index fell 0.56% to 13420.77 points, the Properties Index dropped 0.01% to 1025.51 points and the Plantation Index rose 0.27% to 8750.52 points. The market traded within a range of 4.68 points between an intra-day high of 1523.87 and a low of 1519.19 during the session.

Actively traded stocks include TMS-WA, COMPUGT, DRBHCOM-CI, DRBHCOM-CF, KARYON-WA, DBE, MAYBULK-CB, DRBHCOM-CG, HUBLINE and TMS. Trading volume increased to 2278.30 mil shares worth RM1849.17 mil as compared to Thursday’s 1957.46 mil shares worth RM1692.47 mil.

Leading Movers were GENTING (+16 sen to RM11.16), IOICORP (+3 sen to RM5.47), PBBANK (+4 sen to RM13.44), HLBANK (+10 sen to RM11.70) and PETDAG (+14 sen to RM17.70). Lagging Movers were CIMB (-11 sen to RM6.85), AXIATA (-4 sen to RM4.77), MAYBANK (-3 sen to RM8.19), TENAGA (-4 sen to RM6.10) and HLFG (-36 sen to RM11.90). Market breadth was positive with 459 gainers as compared to 370 losers. -- JF Apex Securities Bhd



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Eng Kah enters joint venture agreement with Cosway China

KUALA LUMPUR (Jan 27): ENG KAH CORPORATION BHD [] has entered into an agreement with Cosway (China) Co. Limited to establish a joint venture company in China to manufacture cosmetics, toiletries and household products.

The company said on Friday that Cosway China had acquired the entire interest and control of Guangzhou Cosway Cosmetic Manufacture Co. Ltd which would be the joint venture company (JVC) to manufacture cosmetics, toiletries and household products.

Eng Kah said it would acquire a 30% stake in the JVC and provide the manufacturing experience, expertise, TECHNOLOGY [] and production management and know-how to the JVC in order for the JVC to commence its manufacturing activities to support the business of Cosway China.

The company said the joint venture was in line with its plans to expand and develop its manufacturing business overseas, including in China.

Eng Kah said it would finance the equity participation via internally generated funds, and that there were no liabilities to be assumed by it arising from the proposed joint venture business.

“The proposed joint venture business is expected to contribute positively to the future earnings of the company,” it said.



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KLCI dips on mild profit taking, lags regional markets

KUALA LUMPUR (Jan 27): The FBM KLCI fell on Friday, and lagged key regional markets as mild profit taking chipped off some of the previous day’s gains.

The FBM KLCI closed 2.96 points lower at 1,520.90, weighed by losses at select blue chips.

Gainers led losers by 459 to 370, while 292 counters traded unchanged. Volume was 2.28 billion shares valued at RM1.85 billion.

At the regional markets, Hong Kong’s Hang Seng Index rose 0.31% to 20,501.67, South Korea’s Kospi gained 0.39% to 1,964.83 and Singapore’s Straits Times Index rose 0.75% to 2,916.26, while Japan’s Nikkei 225 fell 0.09% to 8,841.22.

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

Meanwhile, European shares retreated from a six-month high on Friday, in a mild technical pullback after the previous session's strong rally and with Greek debt talks still firmly in focus, although equities still remain on course for their sixth week of gains, according to Reuters.

On Bursa Malaysia, HLFG lost 36 sen to RM11.90, Genting PLANTATION []s down 15 sen to RM9.50, Warisan, MPI and CIMB fell 11 sen each to RM2.55, RM3.58 and RM6.86 respectively, while Sunchirin, NCB, Metrod and Yinson lost 10 sen each to RM1.65, RM3.90, RM1.95 and RM1.98 respectively.

Among the gainers, Bintulu Port added 32 sen to RM7, Boxpak up 28 sen to RM2.64, IJM Corp 25 sen to RM5.70, Lysaght 23 sen to RM1.90, Eng Kah 22 sen to RM3.50, Hartalega, DRB-Hicom and Maybulk gained 21 sen each to RM6.90, RM2.71 and RM2.65, while Southern Acids added 19 sen to RM2.40.

The actives included TMS, Compugates, DRB-Hicom, Karyon, DBE Gurney and Maybulk.



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LPI Capital sees premium growth and improved claims ratio

LPI Capital Bhd (Jan 26, RM13.38)

Upgrade to market perform at RM13.40 with fair value of RM13.60: For FY12, LPI’s management expects gross premiums to grow by 15% to 16%, in line with our assumptions
and below the circa 20% achieved in FY11. In FY11, LPI’s “miscellaneous” classes grew strongly due to the newly introduced mandatory foreign worker insurance, although we
understand this has tapered off in FY12.

Management expects strong growth arising from its construction-related business, such as workers compensation and so on, due to the rollout of more Economic Transformation
Programme projects. LPI also expects strong growth in its marine, aviation and transit (MAT) segment, which it expects will make a larger contribution to LPI’s overall gross premiums portfolio in FY12 of about 5% to 6% (from about 4% currently).

We understand management expects a lower claims ratio for FY12, positively impacted by the increase in its MAT portfolio coupled with economies of scale as it continues to grow its gross premiums.

MAT businesses are generally profitable, although management noted that it is a class of business that LPI has to be careful of writing given the lumpy claims associated with the business. LPI expects its claims ratio for FY12 to be within the range of 46% to 47%, an improvement of two to three percentage points over FY11’s 48.9%.



In FY11, LPI paid out a total of 75 sen per share in dividends, which implies a net payout of 107%. Historically, LPI’s net dividend payout has ranged between 74% and 85%.

Dividends are largely dependent on LPI’s internal capital adequacy ratio (ICAR), which is set by Bank Negara Malaysia. We understand BNM has no issues with LPI’s ICAR, and as such, we believe there is a high likelihood of 100% dividend payout for FY12 onwards.

Risks to our view include:
(i) a change in government policy that may result in lower car prices;
(ii) jump in claims ratio;
(iii) its combined ratio may exceed 100%; and
(iv) intense competition from insurance sector liberalisation.

Our FY12 to FY14 earnings forecasts were increased by 0.5% to 2.4% after reducing our claims ratio for FY12 to FY14 and imputing the losses from the Malaysia Motor Insurance Pool.

LPI’s consistent dividend payouts and attractive yields of 5.7% to 7% per year are supported by its stable cash flow outlook and current net cash position. We believe this will support the share price at current levels, implying a FY12 price-earnings ratio of around 16 times and fair value of RM13.60, based on our upgraded earnings estimates.

We note that a dividend payout of 100%, higher than our 90% payout assumption, would result in further upside to the share price. As such, we expect continued interest in
LPI’s stock, although given its tight trading liquidity, we believe LPI is more suited to investors with long-term investment horizons. We therefore upgrade our call on the stock to “market perform” (from “underperform”). — RHB Research, Jan 26



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Uncertainty in sector

Steel sector
Maintain neutral: The latest numbers from the World Steel Association confirmed our worries about the global steel industry. Global steel production was 1.53 billion tonnes in 2011, up by only 6.8% compared with 15% year-on-year in 2010. Although steel production in China rose by 4.6% in December to 52.2 million tonnes, it was still 13% lower than the peak in May 2011 of 60.2 million tonnes.

The world’s steel utilisation rate also trended lower at 73.4% in November 2011, the lowest since April 2011. We believe the unresolved European debt crisis coupled with a slower property market in China are among the factors that led to the weakening global steel demand. As these risks are likely to persist in the foreseeable future, we expect the weakening demand trend to continue for the rest of the year.

Local growth in steel demand continues to be driven by ongoing construction projects.

We estimate about RM63 billion in total project value under the Economic Transformation Programme (ETP) and 10th Malaysia Plan will be awarded in 2H12. This should boost demand for steel products this year.

The RM4 billion River of Life project in Kuala Lumpur should boost demand for
steel products this year.


Among the projects are the Klang Valley MRT Sungai Buloh-Kajang Line (RM20 billion), Gemas- Johor Baru double tracking railway (RM8 billion), Menara Warisan (RM5 billion), River of Life (RM4 billion), KL International Financial District (RM26 billion).

China is the biggest consumer of iron ore, coal and copper. The country is also the biggest steel producer, accounting for 45% of world steel production. According to our economist, China is still addressing inflation by tightening lending and curbing investment to prevent overheating and inflation.

More importantly, China’s government continues to curb the residential real estate market, thus bringing down its home prices. As a result of the tightening policy in the property market, China’s steel millers have faced overcapacity, which dragged down steel prices.

We believe there is a possibility that China’s oversupply situation may lead to cheap imports in Malaysia. With steel demand in China staying sluggish, we would not be surprised if there are elements of “dumping” in China’s export strategy moving forward.

The presence of cheap imports will adversely impact local steel players’ earnings.

The prices of upstream/upper-midstream steel products (billets, steel bar, and wire rod) are still depressed. Billet and steel bar prices are now trading at 7.4% and 8% below their one-year historical average prices. In addition, prices of scrap metal, the raw material for steelmaking, have rebounded after the huge decline since September 2011. This means that the margins of billet and steel bar producers are likely to narrow, potentially causing steel producers to report a net loss in the upcoming quarterly results.

Prospects are better for steel millers using iron ore as their feedstock, compared with those using scrap metal. Indeed, the spread between long steel product (billet) prices and iron ore has widened to US$499 (RM1,517) per tonne from US$475 two months ago.



Currently, most Malaysian steel millers are using scrap metal as their feedstock for steelmaking, except for Ann Joo Resources Bhd.

In October 2011, the group pre-commenced its mini integrated blast furnace. With the blast furnace in place, Ann Joo can flexibly switch between scrap metal or iron ore (according to market conditions) for its steel manufacturing. We have a “neutral” call on Ann Joo with a target price of RM1.78.

So far, the share prices of steel counters under our coverage — Lion Industries Corp Bhd, Kinsteel Bhd and Ann Joo have outperformed the KLCI. This was due to the short rally prior to Chinese New Year. Although we are positive on local steel, we do not expect the prices of steel stocks to recover significantly for the rest of this year as industry fundamentals are still weak. Steel product prices have yet to recover while raw material prices are trending higher.

We reiterate our “neutral” call on both Kinsteel (target price: RM0.51) and Ann Joo (TP: RM1.78) and “sell” call with an unchanged TP of RM1.14 on Lion Industries. — MIDF Research



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Media: Meek end to 2011

Media sector
Maintain underweight: Total gross advertising expenditure in December 2011 was up only 1% year-on-year (y-o-y), while TV adex contracted 2% y-o-y, the third consecutive month of contraction. With consumer sentiment at a two-year low, total gross adex growth in 2012 will likely be off to a slow start. Maintain “underweight” on the media sector.

Although newspaper adex still grew 6% y-o-y, this was the weakest growth since February 2011. By language, we understand that newspaper adex growth was driven by the Malay and Chinese newspapers, while adex of English newspapers was flattish if not lower y-o-y.

Gross adex growth for 2011 of 8% was within expectations and a tad higher than our forecast of 7%. By segment, however, TV adex growth of 4% was below our expectation of 7% while newspaper adex growth of 12% was above our 5% expectation. The eurozone debt crisis drove European multinationals to migrate more of their ad spend from TV to cheaper mediums such as newspapers in 2H11.

Media Chinese International Ltd, which owns Sin Chew Daily, remains a 'hold'.


There is a high correlation between consumer sentiment and total y-o-y adex growth. The Malaysian Institute of Economic Research (Mier) Consumer Sentiment Index hit a two-year low of 106.3 in 4Q11 on job security and inflation concerns. With consumers expected to reduce spending going forward, adex growth will be negatively affected.

We maintain our 2012 total gross adex growth forecast of 7% based on two times real GDP growth.

We understand that spot newsprint prices eased from US$700 (RM2,128) per tonne in 3Q11 to US$680 in 4Q11 due to the slowing Chinese economy negatively impacting old newspaper prices, the raw material for newsprint production. That said, it remains to be seen if the slowing Chinese economy will negatively impact the Malaysian economy and hence, adex growth, even further.

As 2011 TV adex growth of 4% was below expectation of 7%, we may have to review our Media Prima Bhd estimates. We reiterate our view that total y-o-y gross adex growth
going forward will be in mid-single digits at best until mid-2012 at the earliest.

Media Prima and Media Chinese International Ltd remain “sells”, while Star Publications (M) Bhd remains a “hold” for its stable dividend yields of more than 5%. — Maybank IB Research, Jan 26



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Promising prospects for Wah Seong

Wah Seong Corp Bhd (Jan 26, RM2.10)

Maintain buy at RM2.10 with target price of RM2.50: Wah Seong’s two pipe coating plants in Louisiana, the US, that cost US$20 million (RM60.8 million) will be ready by 2H12, and it has been pre-qualified for projects in the Gulf of Mexico. These plants will be operated by a joint venture with Insituform Technologies, a subsidiary of US-listed Aegion.

The JV will springboard Wah Seong’s entry into this region by leveraging on its partner’s infrastructure. Brazil could be another massive market for Wah Seong to venture into after it is established in the region.

Despite losing two large contracts to Bredero Shaw in October and November 2011, Australia still offers huge potential for Wah Seong because of the large number of liquified natural gas (LNG) projects there. It is bidding for contracts at Julimar and Ichthys (deepwater portion) that could be worth US$150 million in total.

The Browse LNG project is also in the pipeline after some delays as development cost continues to climb. Wah Seong will be a prime beneficiary of the duopoly pipe coating market for the next two years as Bredero Shaw will have its hands full.

There are about 800km of pipelines that are over 30 years old that need to be replaced soon. And Wah Seong stands to gain pipe coating market share in Malaysia with the 2013 deadline for first production for the RM15 billion North Malay basin project.

Wah Seong is looking for potential mergers and acquisitions to boost the contribution for its non-oil and gas division, which we believe is part of the IPO for its demerger exercise to unlock value for the company. — HwangDBS Vickers Research, Jan 26





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2012 CEO Outlook series: Petronas Dagangan to boost presence beyond M’sia

Petronas Dagangan Bhd (PDB) CEO and managing director Amir Hamzah Azizan shares his views and outlook on the year ahead with The Edge Financial Daily in this final article of the 2012 CEO Outlook series.

TEFD: What are your expectations for 2012, for Petronas Dagangan and the industry?
Amir: We expect 2012 to be challenging but the initiatives put in place over the years will enable us to ride through the rough patches arising from the slowdown in the global economy and fluctuations in international oil prices.

PDB is confident that it will be able to reinforce the company’s market leadership through our aggressive marketing initiatives, research and development, and global strategic partnerships focusing particularly on aggressive growth in the retail sector.

We will further improve our margins through ongoing stringent cost optimisation and operational efficiency initiatives across the organisation.

This year, we will explore growth beyond Malaysia, starting with regional opportunities that will complement our commercial goals.

What are your company’s plans and focus for 2012?
We will continue to build our market leadership by giving our customers better value for money in the form of enhanced quality and services. At the same time, we will continue to invest in growing our four core businesses namely retail, commercial, liquefied petroleum gas (LPG) and lubricants. Building on our existing sound fundamentals, these ongoing efforts on the domestic front will certainly solidify our leadership position in Malaysia.

The retail business will continue to see growth through the expansion of our network of retail stations, which we hope to surpass 1,000 this year, putting us ahead of the competition.

Amir: We are ready to pursue opportunities that clearly complement our exisiting business plans and operating values.


I have reiterated that besides a wide network to reach out to our customers all over the country, PDB is also tuned into providing a wide range of complementary services at our stations, to suit the different needs of our customers and ensure that they can always associate a Petronas retail station with convenience.

Our LPG or cooking gas cylinder business currently enjoys market leadership status, and we are working hard on service enhancement that stands out as the best in class to complement this position. Our challenge is to find the simple, yet significant service areas which will make all the difference to our customers, and I am looking forward to launch one such service come mid-2012.

For lubricants, we will continue to grow sales through our strong partnerships with industry players and our wide distribution network. More importantly, however, is to relay to our customers the range and quality of our line of lubricant products developed by industry experts and have been proven to be the preferred brand in the motor industry as well as by industrial users.

The commercial business in PDB is a significant contributor to our sales volume and revenue. This year will prove to be challenging due to the global economic uncertainties that may affect domestic market demand. Our commercial team will continue to focus on going the extra mile to meet customer needs, and to secure products through our established supply and distribution network, ensuring consistent and reliable services to existing and new customers, particularly in the aviation sector.

We will explore opportunities to grow our presence outside Malaysia, particularly within the Southeast Asian region, as part of our strategy to reinforce Petronas’ position as the Brand of 1st Choice, and we are ready to pursue opportunities that clearly complement our existing business plans and operating values.

What impact, if any, do you expect from the euro crisis?
The euro crisis will have an adverse impact as the continent would be dragged into recession, causing lower purchasing power among consumers. This could translate into a knock-on impact on Malaysia — whichever way it swings — is still speculative.

As far as we are concerned, PDB will continue to aggressively grow its business in the Malaysian market and explore avenues for regional expansion.

We will leverage on pursuing growth within a fairly insulated environment and build up the company’s resilience to weather future challenges.

What is your personal wish list for 2012?
This year is the 30th anniversary of PDB, and I am looking forward to PDB punching through new milestones to gain market leadership, particularly for our retail and lubricants businesses.

As a company, PDB has proven to be exceptionally resilient, growing from a fledgling unit competing with the big boys to become the formidable company it is today. Much is due to the dedicated workforce and the host of visionary leaders who have helmed the company over the years. I wish to see this legacy continued as we cross the threshold to turn 30.

This would be a good year to take PDB overseas, and if the right opportunity arises, I hope to see it through to mark the coming of age of the company.



This is the final article of the 2012 CEO Outlook series, which started on Dec 19, 2011. The Edge Financial Daily interviewed Geoffrey Briscoe of BMW Malaysia, Tan Sri Teh Hong Piow of Public Bank Bhd, Jeffrey Chew of OCBC Bank (M) Bhd, Osman Morad of Standard Chartered Bank Malaysia Bhd, Yvonne Chia of Hong Leong Bank Bhd, Tan Sri Lee Oi Hian of Kuala Lumpur-Kepong Bhd, among many others. If you’ve missed them, please read our back issues on iPad for free.



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Lafarge shares change hands in internal restructuring

KUALA LUMPUR: Lafarge Malayan Cement Bhd saw 42.5% of its shares cross traded in an off-market deal as part of its internal restructuring.

Stock market data showed that 361.62 million shares were transacted at RM6.885 each at midday yesterday. A check with the company’s annual report indicated that its single largest shareholder Lafarge Cement UK plc owns that entire block of shares.

According to a source familiar with the company, the shares were moved to Associated International Cement Ltd (AIC), which is 100%-owned by Lafarge SA in France.

“It is an internal restructuring. It is to streamline the investments held by the UK companies. There is no point in having two companies holding the shares,” said the source.

According to Lafarge’s annual report, AIC holds 8.4% or 71.72 million shares. With the transfer, AIC will now hold about 50.9% stake, making it the single largest shareholder replacing Lafarge Cement UK.

Lafarge recently saw some changes in its boardroom where it appointed Bradley Peter Mulroney CEO and president, replacing Bi Yong So Chungunco, who had resigned.

According to an announcement to Bursa Malaysia on Jan 20, the company also appointed chief financial officer Chen Theng Aik to the position of executive director.

Lafarge shed one sen in thin trading to close at RM6.84 yesterday.



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WCT confident of Vietnam ventures

KUALA LUMPUR: Despite the lingering economic uncertainty in Vietnam, construction firm WCT Bhd is confident of the long-term prospects of its property venture in the third most populated Southeast Asian nation.

The company sees Vietnam as part of its long-term growth plan and will continue to seek business opportunities in that country, said its CEO of China and Vietnam operations Datuk Teo Tong Kooi.

“We are fully aware of the challenges ... at the moment but we are in Vietnam for the long term as proven by our presence in the Middle East since 2002,” he told The Edge Financial Daily.

“Although we have been informed that the high borrowing costs and inflation rates [in Vietnam] have more or less stabilised over the past few months, we are still taking a very cautious approach to our investments in Vietnam,” Teo said.

WCT, via its wholly owned subsidiary WCT (S) Pte Ltd, was awarded an investment certificate (IC) by the Vietnamese government on Dec 24 last year to undertake a residential and commercial mixed development on a 4.7ha tract in Binh Hung Commune, Ho Chi Minh City.

Teo: We are still taking a very caution approach to our investments in Vietnam.


According to the announcement to Bursa Malaysia, it will be a 70:30 joint venture (JV) project between WCT and the Vietnamese government’s Southern Land Corp. The project has a plot ratio of six and is earmarked for commercial shoplots and condominium units complete with a garden and full-fledged facilities.

“The estimated gross development value (GDV) is RM700 million,” Teo said. “We have started land clearing and land filling. Due to the current economic outlook and rather weak property sentiment in Vietnam, the JV partners have agreed to defer the official launch to a later date to be decided.”

This marks WCT’s second property venture in Vietnam. The company, via a 67:33 JV called BSC-WCT Co Ltd with another local partner Minh Thien Construction and Trading Co Ltd, in 2008 obtained the IC to undertake a commercial and retail development named Platinum Plaza. However, the RM1 billion project has yet to contribute to WCT’s revenue.

“We do not expect any financial contribution from this project for this financial year [ending Dec 31, 2012],” Teo said.

“We can only officially launch the Platinum Plaza project once the local authorities have resolved the land settlement and terms which our JV partner has proposed to amend, which are still pending approval. Hence, there will be further delay in the official launch of this project,” he said.

Teo said there is no urgency to expedite the projects until WCT sees further improvement in the local economy. “The demographics of Vietnam will eventually create an appealing business environment,” he said.

While WCT fell short of meeting its RM2 billion construction job wins target last year with just RM187 million jobs secured, its property division has been doing relatively well despite the current global economic uncertainty.

According to a research report from Maybank Investment Bank, WCT’s property development sales for the nine-month period ended Sept 30, 2011 (9MFY11) was RM398 million, which was just RM2 million away from its RM400 million internal target for 2011.



The strong demand came from both its property projects in Klang, Selangor, and Sabah. The company recently launched the RM700 million 1-Medini residential project in Iskandar Malaysia, Johor, and is slated to open the Paradigm shopping mall this year.

Analysts are still upbeat on WCT despite a lack of new large-scale projects in the pipeline. According to Bloomberg data, 15 out of the 20 analysts who cover the company had a “buy” recommendation.

The consensus target price on the stock is RM2.91, according to Bloomberg data. This is 26.5% or 61 sen higher than last Friday’s closing price of RM2.30, which gave the company a market capitalisation of some RM1.9 billion.

According to Maybank IB Research, WCT is currently tendering for some RM4 billion jobs, of which about 75% is for infrastructure projects in Oman and the balance is domestic jobs. The company currently has an order book with a value of near RM3 billion, which would keep the company busy until 2013, it added.

For 9MFY11, WCT posted a 15.3% increase in net profit to RM114.5 million from RM99.3 million the same period a year earlier, mainly due to higher contribution from its civil engineering and construction division.

Revenue dropped 17% to RM1.05 billion in 9MFY11 from RM1.27 billion a year ago. Earnings per share rose to 14.29 sen from 12.61 sen previously.

The property development and property investment and management divisions made up some 40.6% or RM79.7 million of its total operating profit of RM196.2 million (excluding elimination of intra-group profit) in 9MFY11, up from a contribution of 37.5% the same period a year ago. The balance was contributed by its civil engineering and construction businesses.



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West Coast Expressway gets record 60-year concession

KUALA LUMPUR: The longest concession agreement ever, 60 years, has been granted for the West Coast Expressway (WCE), in which the government will have a share of the toll revenue.

In an announcement to Bursa Malaysia, Kumpulan Europlus Bhd said WCE Sdn Bhd, in which it holds 64.2% equity interest, has obtained approval from the Public Private Unit of the Prime Minister’s Department for the proposed privatisation and construction of the long overdue expressway from Taiping, Perak, to Banting in Selangor.

The concession period of 60 years is the longest ever the government has given out, but the latter will have a share of the toll revenue should the traffic volume exceed forecast.

The concession agreement between WCE and the Ministry of Works, on behalf of the government, has yet to be signed. It is awaiting clearance from the Attorney General’s Chambers.

This is seen as a groundbreaking highway concession as in the past the toll revenues are enjoyed by the concessionaire.

According to the announcement, toll revenue in excess of a yet-to-be agreed upon traffic volume will be shared on the basis of 70:30 between the government and WCE Sdn Bhd. Upon the full settlement of a RM2.24 billion government support loan (GSL), the toll revenue will be split 30:70 in favour of WCE.

The project has been delayed for over 10 years due mainly to financing problems. Europlus, controlled by Tan Sri Chan Ah Chye, has difficulty getting funding for the project since the onset of the 1997/98 Asian financial crisis.

Tan Sri Chan Ah Chye mooted the West Coast Expressway more than 10 years ago, but the Asian financial crisis of the late 1990s made finding financing problematical. Now, with a government support loan and a record-breaking 60-year concession, his dream is set to become a reality.


To increase the viability of the project, the government will provide the GSL, which will commence in 2013 at an interest rate of 4% per year and an interest subsidy of up to 3% from commercial loans for a period of 22 years.

The concession stretches 316km, of which 224km will be tolled while 92km will be toll free.

Overall, the cost of the project is estimated at RM7.07 billion, of which the land acquisition cost of RM980 million will be borne by the government. Construction of the project will be implemented by WCE via open tender.

The highway was mooted 15 years ago by Chan, who established Konsortium LPB Sdn Bhd (KLPB), the promoter of the project.

Chan holds 27.58% equity interest in Europlus while construction giant IJM Corp Bhd owns a 22.72% stake. IJM also holds a controlling stake in KLPB.

After years of feasibility studies, the project finally started moving in May 2007, when KLPB entered into a concession agreement for the construction of the WCE, which will connect the North-South Expressway at Taiping in the north, to Banting in the south, leading to the Kuala Lumpur International Airport (KLIA).

Prior to the announcement of the WCE approval, Europlus’ share price rose 5.6% to a nine-month high of RM1.31 yesterday from RM1.24 on Wednesday with 1.4 million shares changing hands. With net assets per share of 19.68 sen, Europlus is trading at 6.66 times book value.

For the nine months ended Oct 31, 2011, Europlus reported a net profit of RM5 million on RM14.8 million in revenue, compared with a net loss of RM24.1 million from RM20.5 million in sales for the corresponding period a year ago.



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Tighter financing spreads to auto sector

KUALA LUMPUR: Car buyers may soon find it more difficult to secure loans as banks move to clamp down on auto financing.

While requirements are still being finalised, luxury car buyers may be required to take out as much as 50% up front payment. Buyers may be limited to a maximum of two car loans in their names at any one time.

It is learnt that the private sector and financial institutions are spearheading the move.

Malaysian Automotive Association (MAA) president Datuk Aishah Ahmad told The Edge Financial Daily that she knows the banks are in discussion to tighten lending but is unaware of any details.

“I cannot comment on something when I do not have the details, but this will be bad for the industry if the banks tighten too much,” she said.

“If you want to check the credit of borrowers, that is fine. However, strong measures will affect sales of cars. This will in turn reduce the money for the government as this sector contributes a lot of tax,” Aishah said yesterday.

A source said the banks are still considering several proposals to control lending to the automotive sector. One of the proposals is a 50% up front payment for the purchase of exotic makes, such as two-door sports cars and brands like Bentley, Ferrari and Maserati.

“The banks will stop lending to people who want to take third car loans in their names as it is found that borrowers with more than two car loans pose the highest risk of non-performing loans. Buyers taking first car loans will still be able to secure 90% financing but for a second loan a down payment of 30% to 35% is required, depending on the credit worthiness of the borrower,” added the source.

Another proposal is standardising lending rates against specific models, said the source.

At the outset, these measures are likely to impact auto sales adversely.

“Of course, the move will not be good for the automotive sector. However, banks spend a lot of time chasing car payments and a lot of money is used for the recovery of vehicles. You have to tow the car, store the car and furthermore, it is a depreciating asset. And that is if you can find the car.

“Unlike a house, which the bank knows its location, it is hard to keep track of a car. Sometimes the car just disappears or it takes a long time to track it down. The banks will have to bear the cost of transporting the vehicle back.

“In some cases, it will take about 15 good car loans to recover the costs and losses incurred by a single bad loan. If the banks can improve the quality of the loans, this will bolster their profits,” the source said.

Many in the auto industry are fearful that the situation may spiral out of control, worrying about dwindling sales volume.

Federation of Motor and Credit Companies Association of Malaysia president Datuk Tony Khor was wary when contacted by The Edge Financial Daily.

While declining to comment extensively on the matter, Khor said: “When loans are difficult to secure, the prices of second-hand cars will start to fall. Sales of new cars will also be weaker and sellers will offer discounts which will further depress the value of second-hand cars.

“There are people who want to swap their cars for cheaper models when their incomes are affected. Since they can no longer trade in their cars for cheaper makes to clear the loans, they will default.”

While Khor denied having any knowledge of the talks among the bankers, he noted that the automotive sector was badly hit by the credit restrictions recently implemented by the government. Banks were told to look at net income instead of gross income for loans. These restrictions came into force late last year.

“About 70% of car loan applications have been rejected since the new ruling came into place. This makes it very difficult to sell cars and many dealers have voiced their unhappiness,” said Khor, who said second-hand car prices have started to drop.

Khor noted that low-income and middle-income buyers are the most severely affected while mid-range Japanese and Korean makes are the hardest hit.

“Increasing the down payment for luxury cars should not have too much impact as buyers of these vehicles have the means to pay,” he added.

“Chinese New Year sales have been bad. We hope for something to be done, there has to be a balance,” Khor said.

According to sources, the rationale for raising the required down payment for high-end cars is to prevent abuse.

“We are talking about cars from half a million to several million ringgit. Most of these cars are bought and sold on a willing buyer-willing seller basis. As such, the value of the car is often difficult to determine. Some buyers have been abusing the system by over-declaring the value of the cars and ending up with exorbitant loans that exceed the value of the vehicle. Again, the car is a depreciating asset. When the loan defaults, the banks lose a lot of money,” said an industry player.

Checks with dealers and industry observers show that the abuse has been a long-running problem which the banks have been looking to end. Borrowers are effectively taking 100% loans against a relatively high-risk asset, and it is not unheard of for some extra money to be pocketed.



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Fair value gains, rental income boost Al-Hadharah Boustead REIT 4Q earnings

KUALA LUMPUR (Jan 27): AL-HADHARAH BOUSTEAD REIT [] (Al-Hadharah REIT) net profit for the fourth quarter ended Dec 31, 2011 surged to RM239 million from RM32 million a year earlier, due mainly to fair value gains and an increase in rental income.

In a statement Friday, its chairman Tan Sri Lodin Wok Kamaruddin said that for the financial year ended Dec 31, Al-Hadharah REIT posted a 273% jump in net profit to RM306 million from RM82 million a year earlier.

This was achieved on the back of higher revenue of RM100 million compared with RM75 million in 2010 registering a 33% increase on a year-on-year basis, he said.

He said the realised operating profit for the year was RM93 million, a substantial jump of 37% from RM68 million last year, adding that the remaining profit was derived from fair value gains.

“Despite the uncertain global economic climate, by building on our established track record and exploring further opportunities in the market, we were able to continue to deliver greater value to our unitholders with improved earnings.

“In line with our accounting policy, we also undertook a revaluation of our assets, recording a fair value gain of RM213 million. This contributed to our total profit for the year and resulted in an increase in the closing net book value of our investment PROPERTIES [] to RM1.3 billion,” he said.

Al-Hadharah REIT declared a final dividend of 8 sen, bringing the total dividend for the year to 12 sen, representing a yield of 8% based on the closing unit price of RM1.54 for the year.

Lodin said that at the close of the financial year, the fund’s market capitalisation grew to RM965.4 million, a significant jump compared with RM802.1 million in the previous year.

“Moving forward, we look forward to further cultivating our portfolio of assets and enhancing our earnings potential.

"Given our unique position as Malaysia’s only PLANTATION []-based REIT coupled with the steady demand for commodities, we are confident that we are poised for greater growth in the year ahead,” he said.



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IJM awaiting MRT's letter of award

IJM Corporation Bhd is still awaiting the Letter of Award (LOA) from MRT Corp for the Package V5 Project of the MRT project.

In a filing to Bursa Malaysia, the company said it would make an announcement on the tender outcome upon receipt of the LOA from MRT Corp.

It also said that its wholly-owned subsidiary, IJM Construction Sdn Bhd, had submitted the tender for the Package V5 of the MRT project.

The filing was in reference to a news report yesterday quoting a statement by MRT Corp that IJM Construction would be appointed the main contractor for the Package V5.

The package covers the construction and completion of the Viaduct Gateway and other associated works from the Maluri Portal to the Plaza Phoenix Station and is worth RM974 million. -- Bernama



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KL shares mixed at mid-afternoon

KUALA LUMPUR: shares prices on Bursa Malaysia remained mixed at mid-afternoon today on continued profit taking activities ahead of the weekend, dealers said.

At 3.03pm, the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) eased 3.11 points to 1,520.75, pulled down by key bluechips, including CIMB, Maybank and Genting.

A dealer said with Wall Street looking to consolidate following the recent disappointing housing data in the United States, it caused investors to remain sidelined.

However, market remained active, with 1.485 billion shares worth RM1.11 billion, changing hands.

Gainers led losers 376 to 348 while 314 counters were unchanged.

The Finance Index lost 28.54 points to 13,468.07, while the Plantation Index advanced 8.46 points to 8,735.67 and the Industrial Index added 0.75 of a point to 2,793.45.

The FBM Emas earned 2.66 points to 10,577.27, the FBM Mid 70 surged 78.45 points to 12,140.47 and the FBM Ace rose 23.01 points to 4,473.41.

Among active stocks, Compugates Holdings advanced 0.5 sen to nine sen, DRB-Hicom increased eight sen to 14 sen while The Media Shoppe eased 0.5 sen to 11 sen.

Of the heavyweights, Maybank fell three sen to RM8.19, Sime Darby shed one sen to RM9.07, while Petronas Chemicals was flat at RM6.67. - Bernama



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IJM, AZRB awaiting formal letters of award from MRT Corp

KUALA LUMPUR (Jan 27): IJM CORPORATION BHD [] and AHMAD ZAKI RESOURCES BHD [] (AZRB) are awaiting the formal letters of award from Mass Rapid Transit Corporation Sdn Bh (MRT Corp) to undertake the million-ringgit phase of the MRT project.

The companies said in separate statements on Friday to BURSA MALAYSIA BHD [] that they would make a further announcement upon receipt and acceptance of the letters of awards.

To recap, on Thursday, MRT Corporation said it awarded two 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.

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.

AZRB 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.

In response on Friday, IJM noted the MRT Corp announcement that both awards were subject to the successful tenderers accepting the letter of award to be issued in due course.

“We wish to confirm that IJM Construction Sdn Bhd, a wholly-owned subsidiary of the company, had in December 2011 submitted the tender for the package V5 project and are still waiting for the outcome from MRT Corp.

“We will release the announcement upon receipt of the letter of award from MRT Corp,” it said.



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KL shares mixed at midday

Share prices on Bursa Malaysia ended the morning session mixed today as investors remained on the sidelines amid the cautious market sentiment, dealers said.

At lunch break, the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) eased 2.12 points to 1,521.74. It had opened 0.01 of a point higher at 1,523.87.

Another dealer said investors preferred to take a conservative approach amid continued talks between the Greek government and private-sector creditors over its debt crisis.

"Greece and its private-sector creditors agreed to meet again on Friday in a race to negotiate a 100 billion euro (US$131 billion) debt write-down for the country," he said.

A total of 1.21 billion shares worth RM893.67 million changed hands with gainers leading losers by 357 to 345.

The Finance Index slipped 29.87 points to 13,466.74, while the Plantation Index gained 16.44 points to 8,743.65 and the Industrial Index earned 2.99 points to 2,795.69.

The FBM Emas rose 5.88 points to 10,580.49, the FBM Mid 70 jumped 75.77 points to 12,137.79 and the FBM ACE increased 9.74 points to 4,460.14.

Among active stocks, The Media Shoppe stood unchanged at 11.5 sen, while Karyon Industries Warrants added two sen to six sen and DRB-Hicom advanced four sen to 10 sen.

Among heavyweights, Petronas Chemicals earned one sen to RM6.68, while Maybank and Sime Darby eased one sen each to RM8.21 and RM9.07, respectively. -- BERNAMA



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KLCI remains in the red at mid-day as Asian markets pause

KUALA LUMPUR (Jan 27): The FBM KLCI remained in the red at the mid-day break on Friday, as regional markets paused after the recent rally in line with the mixed overnight trade at the US markets.

The FBM KLCI fell 2.12 points to 1,521.74 at the mid-day break, weighed by select blue chips.

Gainers edged losers by 357 to 345, while 297 counters traded unchanged. Volume was 1.21 billion shares valued at RM893.67 million.

The ringgit weakened 0.01% to 3.0408 versus the US dollar; crude palm oil futures for the third month delivery rose RM2 per tonne to RM3,133, crude oil added 14 cents per barrel to US$99.84 while gold fell 33 cents an ounce to US$1,720.32.

At the regional markets, Japan’s Nikkei 225 fell 0.24% to 8,828.48, Hong Kong’s Hang Seng Index down 0.04% to 20,431.90 and South Korea’s Kospi shed 0.02% to 1,956.75, while Singapore’s Straits Times Index edged up 0.04% to 2,895.55.

On Bursa Malaysia, HLFG fell 26 sen to RM12, Tahps lost 25 sen to RM4.25, Genting PLANTATION []s down 20 sen to RM9.45, Hong Leong Industries down 18 sen to RM4.21, Triplc 15 sen to 39 sen, Fima Corp 12 sen to RM6.14, Warisan and MPI lost 11 sen each to RM2.55 and RM3.58, while Sunchirin lost 10 sen to RM1.65.

Gainers this morning included Bintulu Port, IJM Corp, Hartalega, Southern Acids, Puncak Niaga, Batu Kawan, Hong Leong Bank, Esso, AZRB and DRB-Hicom.

The actives included TMS, Karyon, DRB-Hicom and Palette.



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'Neutral' call on IJM, Ahmad Zaki, stocks jump

IJM Corp Bhd and Ahmad Zaki Resources Bhd's shares rose after their units, IJM Construction Sdn Bhd and Ahmad Zaki Sdn Bhd, were awarded the viaduct construction contracts worth RM1.738 billion for the Sungai Buloh-Kajang Mass Rapid Transit line by MRT Corp.

At 10am, IJM Corp's shares were up 5.32 per cent or 29 sen to RM5.74, while Ahmad Zaki Resources shares surge 18.24 per cent or 13.5 sen to 87.5 sen.

IJM Construction has been appointed the main contractor for the RM974 million Package V5 which covers construction and completion of the viaduct guideway and other related works from Maluri Portal to Plaza Phoenix Station.

Ahmad Zaki has been appointed the main contractor for the RM764 million Package V6 which covers construction and completion of the viaduct guideway and other associated works from Plaza Phoenix to Bandar Tun Hussein Onn Station.

OSK Research Sdn Bhd said the announcement was within expectation as the research firm has highlighted that the V5 and V6 packages of the RM12 billion elevated portion of the Sungai Buloh-Kajang track were to be awarded in February or March.

"However, the quantum of the awards came in higher than our previous projections of between RM400 million and RM500 million each.

"Hence, we're taking this as a positive surprise and foresee near-term upside for both IJM Corp and Ahmad Zaki Resources," it said in a research note.

The research house maintains its "neutral" call on Ahmad Zaki Resources since the share price has increased by eight per cent yesterday to close at 74 sen, leaving less than 10 per cent upside to its revised target price.

It also maintained its "neutral" call on IJM Corp as its sum-of-parts valuation on the company was bumped up to RM5.80 from RM5.74, considering higher contribution from its construction division this year. -- Bernama



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XL Axiata 2011 revenue up 7pc

PT XL Axiata posted a 2011 net income of 2.8 trillion rupiah while revenue rose 7 percent from a year earlier to 18.9 trillion rupiah, the Indonesian mobile-phone company said in an e-mailed statement today.

The company had a net income of 2.89 trillion rupiah in 2010, according to data compiled by Bloomberg. -- Bloomberg



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KLCI up at mid-morning, but gains seen capped

KUALA LUMPUR (Jan 25): The FBM KLCI edged up gingerly at mid-morning on Wednesday, the first trading of the lunar year of the Dragon, in line with the muted gains at some of the key regional markets.

At mid-morning, the FBM KLCI gained 1.95 points to 1,524.61m lifted by gains at select blue chips.

Gainers led losers by 217 to 146, while 183 counters traded unchanged. Volume was 208.91 million shares valued at RM186.76 million.

Asian shares rose on Wednesday, underpinned by strong earnings from U.S. TECHNOLOGY [] giant Apple, stabilising European money markets and falling euro zone debt yields, with investors shifting their focus to the Federal Reserve from Europe, according to Reuters.

At the regional markets, Japan’s Nikkei 225 was up 0.81% to 8,856.06, South Korea’s Kospi gained 0.84% to 1,966.34, Australia’s S&P/ASX 200 Index rose 0.71% to 4,254.20 and Singapore’s Straits Times Index added 0.59% to 2,866.28.

The China, Hong Kong and Taiwan markets remained closed for the Chinese New Year holidays.

BIMB Securities Research in a note Wednesday said that despite concerns of Greece’s ongoing negotiations with the private sector over its debts may have hit a brick wall, we noticed that investors’ risk tolerance have had improved.

Given the same developments six months ago, equity indices would have spiralled downwards rather than the resilience shown over the past few days, it said.

Major European bourses closed marginally lower with the Dow Jones Industrial Average losing 33 points to remain above 12,600, it said.

Regionally, most major bourses were still closed for Chinese New Year celebrations and those that were opened, ended up in positive territory.

Though many are still on holiday mood, BIMB Securities Research said it expects trading to be mixed today regionally.

“Locally, the FBM KLCI edged up almost 6 points last Friday to stay above the 1,520 level.

“Though some profit taking is expected to emerge, we expect the benchmark to be well supported from selective buying on blue chips and could possibly move even higher with the 1,530 as the immediate,” it said.

Among the gainers on Bursa Malaysia at mid-morning, Dutch Lady added 52 sen to RM26.50, BAT 50 sen to RM50, KLK up 48 sen to RM25.96, Hong Leong Bank 30 sen to RM11.40, Batu Kawan 20 sen to RM18.90, Malaya Flour Mills, PPB and MPI rose 18 sen each to RM7.98, RM17.18 and RM3.46, NSOP 14 sen to RM5.84 while HLFG added 12 sen to RM11.88.

DBE Gurney was the most actively traded counter with 20.94 million shares done. The stock added half a sen to 13 sen.

Other actives included Compugates, JCY, Hibiscus, DRB-Hicom warrants, Maybulk and CIMB.

Decliners at mid-morning included F&N, CIMB, Genting, Genting PLANTATION []s, Supermax, Esso, Bumi Armada, MSM and Weida.



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KLCI slips at mid-morning as regional rally takes a breather

KUALA LUMPUR (Jan 27): The FBM KLCI slipped at mid-morning on Friday, in line with the weaker sentiment at key regional bourses as markets took a breather from the recent rally.

At the global markets, a broad asset rally inspired by the US Federal Reserve's pledge to keep rates low paused on Friday, as investors sought to gauge how sustainable the burst of optimism will be while waiting for the outcome of crucial Greek debt talks, according to Reuters.

The FBM KLCI fell 3.74 points to 1,520.12 at 10am, weighed by losses at select blue chips.

Gainers edged losers by 235 to 205, while 252 counters traded unchanged. Volume was 538.98 million shares valued at RM369/81 million.

At the regional markets, Japan’s Nikkei 225 edged down 0.02% to 8,847.62 and South Korea’s Kospi shed 0.14% to 1,954.48, while Hong Kong’s Hang Seng Index added 0.24% to 20,487.90 and Singapore’s Straits Times Index gained 0.25% to 2,901.54.

BIMB Securities Research in a note Jan 27 said it was a mixed trading day on Wall Street on Thursday from a mixed batch of earnings and economic data in the US.

Lower new home sales, higher durable goods orders and higher jobless claims had all placed investors on an indecisive mode, it said.

As a consequence, the Dow Jones Industrial Average erased early gains to end the session 22 points lower, it said.

The research house said whilst negotiations in Athens are still ongoing, most European indices reversed their losses from the past few sessions to chalk up impressive gains possibly on a technical rebound.

As for Asia, equity performances remain strong with almost all closed on a high, it said.

“Locally, the FBM KLCI gained 4 points to close above the 1,520 mark with interests again centred on the lower liners and we expect the same for today.

“It is interesting to note that the MYR is gaining momentum against the greenback hovering at RM3.04/US$1 indicating that funds may be flowing back into the country again.

“Recent calls to overweight the PLANTATION [] sector are bearing fruits and our top calls are Hap Seng Plantations and TH Plantations which are still low on valuations,” it said.

Among the decliners on Bursa Malaysia, Genting Plantations fell 25 sen to RM9.40, TDM 13 sen to RM4.29, Fima Corp 12 sen to RM6.14, Hong Leong Industries nine sen to RM4.30, Public Bank eight sen to RM13.32, Kossan seven sen to RM3.40, while Aeon, Delloyd and Can-One fell six sen each to RM7.40, RM3.44 and RM2.03.

Gainers included IJM Corp, Scicom, Nestle, Hartalega, DRB-Hicom, AZRB, Amway, Shell and MISC, while the actives included TMS, Karyon, DBE Gurney, Jotech, UEM Land and DRB-Hicom.



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KL stocks easier in early trade

Share prices on Bursa Malaysia were traded lower in the early session Friday on profit-taking in the plantation, palm oil and finance counters, dealers said.

After 10 minutes of trading, the underlying FBM KLCI lost 1.15 points to 1,522.71 after opening 0.01 of a point higher at 1,523.87.

The HwangDBS Vickers Research said the benchmark FBM KLCI would probably tread in a tight band with a marginal downward bias.

"The immediate support line for the bellwether currently stands at 1,515," it said in a research note today.

The research house said while the broad market performance was expected to be sluggish, there could be excitement in individual stocks such as IJM Corp and Ahmad Zaki Resources Bhd amid media reports that they have been awarded construction packages worth RM1.7 billion for the Mass Rapid Transit project.

Kumpulan Europlus' shares are also expected to rise after securing government approval to undertake the RM7.1 billion West Coast Expressway project. The concession is for 60 years.

Market sentiments were broadly higher, with gainers outpacing losers 137 to 77, with 140 counters unchanged, 1,120 untraded and 26 suspended.

Turnover stood at 152.07 million shares worth RM80.17 million.
The Finance Index dwindled 10.74 points to 13,485.87, the Plantation Index lost 13.58 points to 8,713.63, and the Industrial Index fell 5.09 points to 2,787.61.

However, the FBM Emas gained 7.12 points to 10,581.73, the FBM Mid 70 surged 65.69 points to 12,127.71 and the FBM Ace rose 10.52 points to 4,460.92.

Among the volume leaders, The Media Shoppe earned half a sen to 12 sen, Karyon Industries added 1.5 sen to 5.5 sen, while Jotech Holdings eased half sen to 15 sen.

Among the heavyweights, Maybank gained four sen to RM8.26, Sime Darby stood unchanged at RM9.08, while Petronas Chemicals lost one sen to RM6.66. -- Bernama



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Alam Maritim rises on Samsung Engr deal

Alam Maritim Resources Bhd, an oil and gas services provider, rose 4.6 percent to 79 sen in Kuala Lumpur trading at 9.30am, set for its steepest gain since Oct. 13.

The company won a US$37 million contract from Samsung Engineering (Malaysia) Sdn Bhd to build pipelines for an oil and gas terminal in eastern Sabah state, according to a company statement. -- Bloomberg



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IJM, Ahmad Zaki jump on contract wins

IJM Corp jumped 6.1 percent to RM5.78 in Kuala Lumpur trading at 9.30am, headed for its biggest increase since Sept. 28.

Ahmad Zaki Resources Bhd rallied 24 percent to 92 sen, bound for its steepest gain since February 2000.

The companies won contracts valued at RM1.74 billion to build parts of a mass rail network, according to an e-mailed statement from MRT Corp., which awarded the deals. -- Bloomberg



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CIMB Research has technical buy on SYF Resources at 56 sen

KUALA LUMPUR (Jan 27): CIMB Equities Research has a technical buy on SYF RESOURCES BHD [] at 56 sen at which it is trading at a price-to-book value of 1.1 times.

It said on Friday the stock broke out of its consolidation triangle pattern yesterday on rising volume. This breakout could be the start of a new bullish run.

CIMB Research said the indicators are showing signs of improvement. Its MACD just confirmed its golden crossover while its RSI is starting to rise once more.

“The stock is a buy now with a stop placed below 50.5 sen. Prices could climb towards 62.5 sen in the near term. The next possible stopping point would be the 68 sen to 69 sen gap set in December last year if the 62.5 sen resistance can be taken out,” it said.



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CIMB Research has technical buy on KNM at RM1.10

KUALA LUMPUR (Jan 27): CIMB Equities Research has a technical buy on KNM GROUP BHD [] at RM1.10 at which it is trading at a price-to-book value of 0.6 times.

It said on Friday that KNM rallied strongly on Thursday on high volume after forming a base above its 30-day SMA for almost the whole of January.

“We believe that yesterday’s run is the beginning of a stronger rebound,” it said.

CIMB Research said that the MACD signal line has staged a positive crossover while RSI is also rising.

“The positive technical readings reinforce our short term bullish stance,” it said.

The research house said aggressive traders should buy now with a stop placed below 97.5 sen. This run has the potential to take prices up to RM1.35 and even RM1.50-RM1.55 as there is no strong resistance in sight.



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Alam Maritim advances on securing US$37m job from Samsung Engineering

KUALA LUMPUR (Jan 27): ALAM MARITIM RESOURCES BHD [] shares rose on Friday after it secured a US$37 million (RM115 million) transportation, installation and pre-commissioning contract from Samsung Engineering (Malaysia) Sdn Bhd (SEMSB).

At 9.20am, Alam Maritim added 3.5 sen to 79 sen with 1.47 million shares done.

The company said on Thursday that its wholly owned 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 commence immediately 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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CIMB Research has technical sell on Public Bank at RM13.40

KUALA LUMPUR (Jan 27): CIMB Equities Research has a technical sell on Public Bank at RM13.40 at which it is trading at a FY13 price-to-earnings of 10.3 times and price-to-book value of 3.4 times.

It said on Friday that Public Bank appears to be close to completing its 5-wave move from the September low.

CIMB Research said the stock should be ripe for a reversal soon as it is now testing the middle band resistance of its ST uptrend channel.

“The technical landscape is still positive but the MACD and RSI has a potential to sport a negative divergence. The overbought RSI is also a sign to be cautious,” it said.

CIMB Research said that buying at current levels is out of the question. It prefers to be sellers at higher levels, preferably near the RM13.50-RM13.70 levels.

“Anything above RM13.75 may force us to review our negative call. A break below RM13.12 would confirm that the trend has reversed,” it said.



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KLCI slips in early trade, blue chips weigh

KUALA LUMPUR (Jan 27): The FBM KLCI slipped into negative territory in early trade on Friday, weighed by losses at select blue chip counters, in line with the weaker overnight close at Wall Street.

At 9.10am, the FBM KLCI fell 1.15 points to 1,522.71.

Gainers led losers by 138 to 77, while 140 counters traded unchanged. Volume was 155.93 million shares valued at RM83.63 million.

Among the early decliners were Hong Leong Bank, Genting PLANTATION []s, KLK, MISC, IJM Plantations, YTL Cement, Kossan, Genting and CIMB.



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Infrastructure players advance on landing new jobs

KUALA LUMPUR (Jan 27): Shares of infrastructure players KUMPULAN EUROPLUS BHD [], IJM CORPORATION BHD [] and AHMAD ZAKI RESOURCES BHD [] advanced in early trade on Friday after each saw new developments, namely approval to build a highway and being awarded CONSTRUCTION [] packages.

At 9.05am, Kumpulan Europlus rose nine sen to RM1.40 after its 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.

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.

Meanwhile, IJM Corp added 31 sen to RM5.76 and AZRB rose 17 sen to 91 sen after MRT Corporation awarded two 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.

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.

AZRB 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.



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CIMB Research advises investors to accumulate IJM Corp

KUALA LUMPUR (Jan 27): CIMB Equities Research advises investors to accumulate IJM Corp shares as it expects the recent newsflow about the West Coast Expressway (WCE) project to spark a rerating of the infrastructure company.

It said on Friday that IJM Corp owns 22.5% of Kumpulan Euro and it is also vying for a share of the WCE CONSTRUCTION [] works.

To recap, on Thursday, Kumpulan Europlus said its subsidiary West Coast Expressway Sdn Bhd had received the government’s approval to build the 316-km west coast project costing RM7.07 billion.

The 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.

MRT Corporation awarded two significant construction packages worth RM1.738 billion for the Sungai Buloh-Kajang (SBK) My Rapid Transit (MRT) line to IJM Construction Sdn Bhd and Ahmad Zaki Sdn Bhd.

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.

CIMB Research said the award of two elevated packages for MRT SBK line and the approval letter for WCE indicate that progress on major projects is gathering pace, as expected. Newsflow on job awards is likely to be active in the medium term.

“These developments tie in with our expectation of strong project flows in 1H12. This news should spark a rerating of our top pick, IJM Corp, which will be a big winner of both projects. The sector remains a Trading Buy, with Gamuda being our other top pick,” it said.



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HDBSVR ups Boustead Holdings target price to RM6.60 ex-bonus

KUALA LUMPUR (Jan 27): Hwang DBS Vickers Research is maintaining its Buy call on BOUSTEAD HOLDINGS BHD [] and raised the target price to RM6.60 ex-bonus.

It said on Friday it continues to like Boustead as a government-linked conglomerate with strong growth prospects as the company has evolved into a more dynamic entity with lower execution risk.

"Our TP (ex-bonus) is raised to RM6.60 after including contribution from a new hotel, rolling over valuation base to FY12F and our new TP for Affin based on 1.1 times FY12F book value. This values Boustead at 12 times FY12F price-to-earnings and 2.0 times price-to-net tangible assets,” HDBSVR said.



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