Monday, 30 January 2012

Goh Tian Chuan gets nod to merge Jotech, AIC and AutoV

KUALA LUMPUR (Jan 30): Datuk Goh Tian Chuan’s special purpose vehicle Temasek Formation Bhd (TFB) has received the Securities Commission’s approval to merge JOTECH HOLDINGS BHD [], and AIC CORPORATION BHD [] and AutoV Corporation Bhd.

The proposed merger of the three companies for a total consideration of about RM696 million would be satisfied via the issuance of new Temasek Formation shares.

Goh, who is the group executive chairman of Jotech and AIC, described the SC approval as “an important milestone for the three PLCs and will leverage the groups plans to achieve greater heights”.

When completed, the merger would create a larger group in terms of market capitalisation, streamline the multi-tiered shareholding structure and unlock potential intrinsic values.

“The full value of the business potential of Jotech, AIC and AutoV is expected to be accurately reflected at TFB level,” he said.

The merger offers comprise an offer of 18 sen for each Jotech share, RM1.80 for each AIC share and RM2.38 for each AutoV share, representing a premium of 20% over the respective five-day volume weighted average market prices (VWAMP) of Jotech, AIC and AutoV shares up to and including July 26, 2011 of 15 sen, RM1.50 and RM1.98 respectively.

The offers of 9.0 sen for each Jotech warrant and RM1 for each AIC warrant was a premium of 17% over the respective five-day VWAMP of Jotech and AIC warrants up to July 26, 2011 of 7.7 sen and 85.2 sen respectively.

The proposed swap ratios are three new TFB shares for every two existing Jotech shares; 15 new TFB shares for every one existing AIC share and 119 new TFB shares for every six AutoV shares.

As for the warrants holders, the proposed swap ratios would be three new TFB shares for every four existing Jotech warrants and 25 new TFB shares for every three existing AIC warrants.

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MAHB plans share placement to raise RM598.4m

KUALA LUMPUR: Malaysia Airports Holdings Bhd (MAHB) plans to raise RM598.40 million from a proposed share placement exercise to finance the new low cost carrier terminal at Kuala Lumpur International Airport (klia2).

MAHB said on Monday it planned to issue 110 million new shares, which was up to 10% of its issued and paid-up share capital to investors to be identified via a book building exercise.

“Based on a 5% discount to the five-day volume weighted average market price (VWAMP) of MAHB shares up to and including Jan 27, of RM5.7298, the indicative issue price for the placement shares would be RM5.44,” it said.

MAHB said assuming that the issue price was fixed at RM5.44 per placement share and MAHB issued 110 million new shares, “the company is expected to raise gross proceeds of approximately RM598.40 million”.

Of the proceeds, MAHB said RM590 million would be used to part finance the additional capex for klia2 while the remaining RM8.40 million would be used to defray expenses relating to the proposed private placement.

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Axiata gets another 2 yrs to secure outdoor structures approval

KUALA LUMPUR (Jan 30): Axiata Group Bhd has received another two-year extension from the Securities Commission (SC) to get the local authorities’ approval for its outdoor structures.

It said on Monday the SC had given it until Jan 29, 2014 to get the approvals for the outdoor structures, which were part of the conditions for its listing on Bursa Malaysia.

To recap, on Feb 22, 2010, the SC had given Axiata two years up to Jan 29, 2012 for it to get the necessary approvals for the remaining 111 structures.

As at Dec 19, 2011, Axiata said 22 outdoor structures were pending approval from local authorities.

“Applications for 27 outdoor structures have been declined, and the Celcom Group is in the midst of appealing to the relevant local authorities with respect to such applications,” it said.

As part of the extension, Axiata said it had to make quarterly announcements on the status of application on the outdoor structures to Bursa Securities until the approvals were obtained.

Axiata also had to update the SC on the status of the application on the outdoor structures every six months until such approvals were obtained.

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UZMA names new chief operating officer

KUALA LUMPUIR (Jan 30): UZMA BHD [] has appointed Khong Kheng Ting as its new chief operating officer (COO) with effect from Feb 1, 2012.

In a statement Monday, UZMA said the appointment was in line with the group's business growth strategy in line with Petronas' major investment plans for the Oil & Gas industry as announced recently.

The company said Khong is a petroleum engineering graduate from University TECHNOLOGY [] Malaysia and a MBA from University of Strathclyde, United Kingdom, with 23 years experience in the upstream oil and gas services industry.

It said Khong was formerly a vice president of Roxar/Emerson Asia Pacific.

“Prior to this, he held various senior sales and operations management positions globally in Schlumberger, Halliburton and Baker Hughes, the top three global oil field services provider.

“Khong currently serves as Director of the Society of Petroleum Engineer (SPE) - Kuala Lumpur Chapter,” it said.

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D’nonce Technology posts 1Q net loss of RM6.11m due to Thai floods

KUALA LUMPUR (Jan 30): D’nonce TECHNOLOGY [] Bhd posted net loss of RM6.11 million in the first quarter ended Nov 30, 2011 compared with a net profit of RM498,000 a year ago due to the impact of the severe flooding in Thailand last year.

It said on Monday its factories in Bangkok were inundated by the flood waters which damaged its property, plant and equipment and inventories in early October 2011.

“The group has written off the assets which were damaged by the flood in this current quarter. Our insurance claim has yet to be finalized by the insurance company. As to date, our factories in Bangkok have yet to commence operations,” it said.

Its revenue rose 6.2% to RM40.78 million compared with RM38.36 million. Loss per share was 13.55 sen compared with earnings per share of 1.10 sen.

Notes to its accounts showed that operating expenses had increased to RM48.54 million from RM37.21 million. At the operations level, it reported losses of RM7.49 million compared with profit of RM1.35 million.

Its accumulated losses as at Nov 30, 2011 was RM19.25 million compared with RM13.14 million as at Aug 31, 2011.

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Malaysian Pacific Industries posts net loss RM16.21m in 2Q

KUALA LUMPUR (Jan 30): MALAYSIAN PACIFIC INDUSTRIES [] Bhd posted net loss RM16.21 million in the second quarter ended Dec 31, 2011 compared to net profit RM25.29 million a year earlier, due mainly to weaker demand and lower revenue.

The company said on Monday that its revenue for the quarter fell 24.04% to RM279.23 million from RM367.59 million in 2010.

Loss per share was 8.37 sen compared to earnings per share of 13.05 sen, while net assets per share was RM3.77.

For the nine months ended Dec 31, MPI posted net loss RM25.84 million compared to net profit RM51.13 million, on the back of a 19.4% drop in revenue to RM594.84 million from RM738.05 million.

Reviewing its performance, MPI said while the weak semiconductor market was affecting all its segments, many of the manufacturing hubs in Asia were shutting down towards the end of December to adjust for the lower demand.

“This, coupled with the general inventory correction in the industry, has further impacted the supply chain and revenue of the sub-contracting business during the quarter under review,” it said.

“The board anticipates that business prospects will remain challenging across all segments for the financial year ending June 30, 2012 given the uncertain macro-economic outlook,” it said.

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TI-Malaysia: Explain awarding of RM7.07 bn West Coast Expressway project

KUALA LUMPUR (Jan 30): Transparency International Malaysia (TI-M) has expressed concern over the apparent lack of transparency and proper procedure in the awarding of the RM7.07 billion West Coast Expressway concession project.

Its president, Datuk Paul Low said this mega project would involve massive public financing of a soft loan of RM2.24 billion and payment of RM980 million for land acquisition, and an unprecedented 60-year toll concession.

“TI-M views with concern the apparent lack of transparency and proper procedure in the award. Given the public funding and long concession period, there could have been proper governance and transparency in the award through an open, transparent and competitive procurement process and public disclosure of the terms and conditions of the contract,” he said in a statement.

To recap, on Jan 26, KUMPULAN EUROPLUS BHD [] announced to Bursa Malaysia that its 64.2% owned 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.

KEuro also said the land acquisition cost of up to RM980 million for the project would be borne by the government.

The company had also saud a government support loan of RM2.24 billion, starting from 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, would be granted to WCE,” it said.

KEuro had then 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.

However, on Monday, Low pointed out that such a mega project and also its impact on the public was an ideal candidate for implementing the Integrity Pact (IP), a tool for curbing corruption risks in public contracting projects.

“The government has recognised the potential benefits of IPs by a Treasury circular dated Dec 16, 2010 outlining guidelines for implementing IPs in government procurement.

“Further, MRT Corp., the GLC tasked with implementing the MRT project, has agreed to incorporate the IP in its procurement exercises,” he said.

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Perstima 3Q net profit falls 42.9% to RM7.99m on lower sales

KUALA LUMPUR (Jan 30): Perusahaan Sadur Timah Malaysia (Perstima) Bhd net profit for the third quarter ended Dec 31, 2011 fell 42.95% to RM7.99 million from RM14.01 million a year earlier, due mainly to lower sales volume coupled with lower profit margin.

The company said on Monday that its revenue for the quarter slipped 9.4% to RM204.26 million from RM225.47 million in 2010.

Earnings per share fell to 8.05 sen from 14.11 sen, while net assets per share was RM3.17.

For the nine months ended Dec 31, Perstima’s net profit fell 48.6% to RM30.55 million from RM59.42 million in 2010, while revenue was 3.51% lower at RM621.77 million from RM644.43 million.

Reviewing its performance, Perstima said its lower profit margin was due to the increase of production cost which was higher than the increase in selling price in order to remain competitive against importation in the market.

On its outlook, Perstima said it expects its operating environment to remain challenging and competitive due to lower tinplate price from China and Korea as well as the expected economic downturn in the global market.

“These factors will affect the growth and profitability of the group for the next three months,” it said.

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CEPCO 1Q net profit falls 57.3% to RM2.46m

KUALA LUMPUR (Jan 30); CONCRETE ENGINEERING PRODUCTS [] Bhd (CEPCO) net profit for the first quarter ended Nov 30, 2011 fell 57.3% to RM2.46 million from RM5.75 million a year earlier, due mainly to lower levels of deliveries due to customer’s current site requirements.

Revenue for the quarter jumped 80.5% to RM37.13 million from RM20.57 million in 2011. Earnings per share was 5.48 sen compared to 12.85 sen, while net assets per share was RM1.99.

Reviewing its performance, CEPCO said on Monday that revenue for the quarter rose due to improved sales volume is due to improved market demand.

On its outlook, CEPCO said the current year prospects were backed against its current order book and potential orders from new projects in Malaysia and regionally.

“The effects of major raw material prices would also have a direct effect on the prospects of the group as selling prices are based on current prices of raw materials.

“The group’s major raw materials include cement, steel bars, sand and aggregates,” it said.

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Market Commentary

The FBM KLCI index lost 7.35 points or 0.48% on Monday. The Finance Index increased 0.03% to 13425.09 points, the Properties Index up 0.45% to 1030.1 points and the Plantation Index down 0.26% to 8727.99 points. The market traded within a range of 11.88 points between an intra-day high of 1523.91 and a low of 1512.03 during the session.

Actively traded stocks include DBE, DRBHCOM-CG, TMS-WA, DRBHCOM-CI, DRBHCOM-CF, COMPUGT, POS-CB, DRBHCOM-HA, REDTONE and UTOPIA. Trading volume increased to 2307.55 mil shares worth RM1841.46 mil as compared to Friday’s 2278.30 mil shares worth RM1849.17 mil.

Leading Movers were PBBANK (+8 sen to RM13.52), CIMB (+4 sen to RM6.89), AMMB (+4 sen to RM5.81), SIME (+2 sen to RM9.09) and MMCCORP (+3 sen to RM2.75). Lagging Movers were GENTING (-26 sen to RM10.90), TENAGA (-13 sen to RM5.97), IOICORP (-7 sen to RM5.40), MAXIS (-14 sen to RM5.56) and HLBANK (-20 sen to RM11.50). Market breadth was positive with 460 gainers as compared to 387 losers. -- JF Apex Securities Bhd

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S P Setia’s proposed Semenyih land purchase for RM381m now unconditional

KUALA LUMPUR (Jan 30): S P Setia Bhd’s proposed acquisition of 673.27 acres of land in Semenyih, Ulu Langat, Selangor has been rendered unconditional.

S P Setia said on Monday the latest development involved its unit, Setia Ecoholl Sdn Bhd’s proposed acquisition of the land for RM381.259 million from Spektrum Megah (H) Sdn Bhd.

The land would be used for a mixed housing development project.

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KLCI falls below 1,515 level as Asian markets dip ahead of EU talks

KUALA LUMPUR (Jan 30): Losses at blue chip stocks at Bursa Malaysia dragged the FBM KLCI below the 1,515-point level on Monday as key regional markets fell ahead of more crisis talks among European Union leaders.

The FBM KLCI fell 7.33 points to close at 1,513.55, weighed by losses including at Genting, Hong Leong Bank and HLFG.

Gainers led losers by 460 to 387, while 310 counters traded unchanged. Volume was 2.31 billion shares valued at RM1.84 billion.

At the regional markets, Hong Kong’s Hang Seng Index fell 1.66% to 20,160.41, the Shanghai Composite Index lost 1.47% to 2,285.04, South Korea’s Kospi was down 1.24% to 1,940.55, Japan’s Nikkei fell 0.54% to 8,793.05 and Singapore’s Straits Times Index shed 0.96% to 2,888.96, while Taiwan’s Taiex rose 2.4% to 7,407.41.

The lack of concrete progress in Greek debt talks, which officials have said are on the verge of a deal, kept markets on edge and for the single currency there was an element of profit-taking after its strongest week in more than three months, said Reuters.

The Greek deal is needed before agreement can be reached on a second bailout package which Greece needs to meet a 14.5 billion euro repayment on its debt due in mid-March. Otherwise Athens faces a messy default that could reverberate through European and world markets, it said.

On Bursa Malaysia, BAT fell 58 sen to RM49.38, Maybulk lost 35 sen to RM2.30, Genting down 26 sen to RM10.90, Hong Leong Bank, PPB, HLFG and Nestle fell 20 sen each to RM11.50, RM16.90, RM11.70 and RM55.80 respectively, KLK 18 sen to RM25.72, while Lysaght and Parkson lost 15 sen each to RM1.75 and RM5.57.

DBE Gurney was the most actively traded counter with 155.5 million shares done. The stock fell half a sen to 13 sen.

Other actives included DRB-Hicom, TMS, Pos Malaysua and Compugates.

Among the gainers, Glenealy added 58 sen to RM7.13, Hartalega 29 sen to RM7.19, Batu Kawan and Mentiga 24 sen each to RM19.24 and 90 sen, TDM 21 sen to RM4.57, Puncak Niaga 18 sen to RM1.48 while Tradewinds PLANTATION []s and Malayan Flour Mills added 17 sen each to RM4.85 and RM4.14.

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Schools project worth RM350m?

Sistem Pengurusan Sekolah (SPS), or school management system project, which The Media Shoppe Bhd and Theta Edge Bhd are jointly proposing to the government, is estimated to be worth around RM350 million, according to a source familiar with the matter.

Theta Edge said in its reply to Bursa Malaysia’s query last Thursday that the estimated value of the project, profit margin and revenue and profit sharing ratio between the two parties are still being discussed. Similarly, The Media Shoppe told the stock exchange that the project value and profit sharing arrangement with Theta Edge have yet to be determined.

Theta Edge did indicate that if its wholly-owned subsidiary Konsortium Jaya Sdn Bhd (KJSB) is awarded the project, it would have a material impact on the group’s earnings.

In its Jan 19 announcement to Bursa Malaysia, Media Shoppe said its wholly-owned subsidiary TMS Software Sdn Bhd had entered into a teaming agreement with KJSB to submit their proposal for the SPS project to the government.

KJSB, which provides sales and maintenance of computers and telecommunications equipment, peripherals and related services, is the main contractor in this project. If it is awarded the project, it will appoint TMS as subcontractor for the implementation stage.

“The project proposed to the Ministry of Education (MoE), which will take about three years to implement in 10,000 schools, is estimated to be worth RM350 million. The expected margin is quite high,” said the source.

If the project is secured, it could give the two companies’ earnings a major lift.

Theta Edge and The Media Shoppe have a combined market capitalisation of RM244.6 million and were loss-making in the first nine months of last year.

Theta Edge has a market capitalisation of RM65.42 million. Its revenue for FY10 ended Dec 31 was RM86.2 million and its net loss RM4.3 million. For the nine months to Sept 30, 2011, the company posted a net loss of RM10.51 million on revenue of RM42.44 million.

The Media Shoppe’s market capitalisation stood at RM179.2 million. Its revenue for FY10 ended Dec 31 was RM10.2 million and its net profit RM2.2 million. For the nine months to Sept 30, 2011 though, the company slipped into the red, with a net loss of RM3.7 million on revenue totalling RM2.63 million.

The RM350 million project is apparently a milestone for both companies but it should be noted that it is not yet in the bag. It is also unclear if the government will open up the SPS project for tender by other parties.

As such, investors betting on it becoming a reality for the two companies could be taking a risky bet, especially after the sizable gains last week.

“There is currently no call for tender and the expected date of submission of proposals to the government for the project is not fixed,” The Media Shoppe clarified to the stock exchange last Thursday. “We have successfully implemented the pilot project in 88 schools and have the technical knowledge, experience, software resources and necessary expertise for the same area.”

Theta Edge, a subsidiary of Tabung Haji group, told Bursa in its reply that KJSB had only started working with TMS on the preparation of the proposal. It added that the expected financing requirements and/or sources of funding for the project and sub-contract agreement had yet to be finalised.

It also pointed out that no deposit, performance bond or tender fee had been paid for the teaming agreement with TMS, and no date was set for the submission to the MoE.

“As far as Theta Edge is aware, there is no specific time frame for the MoE to revert on the outcome of the proposal,” said the company.

The SPS is a system that manages day-to-day school operations such as student registration, subjects, extra curricular activities, examinations and staff. It also acts as a communication channel for teachers, students, parents and the MoE, according to the source.

Theta Edge outlined the roles of KJSB, which include hosting, creating and submitting the proposal and subsequent correspondence with the MoE. It will also consult with TMS on the preparation, creation, submission of the proposal and communication with the MoE.

To this end, TMS will also prepare and submit to KJSB part of the proposal with regard to its services that include its roles, responsibility and fees.

The Media Shoppe’s share price tripled in the past week alone after news of the project broke.

After Bursa issued an unusual activity query on Jan 19, the company announced the tie-up with Theta Edge on the same day, and requested a suspension of the shares on Jan 20 which closed at 34 sen.

The counter resumed trading last Friday to close at 37.5 sen, up 3.5 sen but off an intra-day high of 45 sen. Before last week’s rally, its shares were trading below 10 sen.

Theta Edge’s shares also rallied, but by a smaller margin. The stock shed 2.5 sen to 61 sen last Friday, and rose 30% from 47 sen before the market closed for the lunar new year holidays.

However, with no certainty if the proposal will be accepted by the government, and with no fixed timeline, an analyst advocates caution at this juncture.

As a yardstick, net assets per share of The Media Shoppe and Theta Edge stood at six sen and 82 sen respectively as at Sept 30, 2011.

This article appeared in The Edge Financial Daily, January 30, 2012.

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KLCI may break through 1,530 level

KUALA LUMPUR: Stocks on Bursa Malaysia are likely to trend higher this week and for the FBM KLCI, a break above the 1,530 resistance level could see it charging towards 1,560.

Affin Investment Bank’s head of retail research Dr Nazri Khan said the upside would be renewed belief among investors that the US Federal Reserve was ready to support financial assets.

“We view the dovish statement from the US central bank, (which said interest rates would remain exceptionally low until at least late 2014) is a positive surprise for investors and hence open out a possibility of huge asset purchases to boost the global economy (with some economists already anticipating another round of QE3 during the next March-April meetings),” he said.

As for stocks on Bursa Malaysia, he believed investors would maintain their strong risk appetite, with commodities and emerging market currencies seeing strong demand.

His views were also supported by EPFR Global which provides fund flows and asset allocation data to financial institutions around the world.

EPFR said flows into EPFR global-tracked Emerging Markets Equity Funds hit a 42-week high during the week ended Jan 25, with retail investors committing the most money in over a year. Investors recovered their appetite for Asia’s story and factored in the monetary easing they now expect from the European Central Bank and the US Federal Reserve.

“Flows into Asia ex-Japan Equity Funds climbed to a 30-week high, year-to-date inflows for the diversified Global Emerging Markets (GEM) Equity Funds moved close to the US$6 billion (RM18.2 billion) mark and Latin America Equity Funds had their best week since the fourth quarter of 2010,” it said in a statement.

Glenealy Plantations (M) Bhd and Lingui Development Bhd could see some trading interest after its major shareholder Samling Strategic Corp Sdn Bhd (SCC) announced plans to take them private.

SCC offered RM7.50 a share for the plantation-based Glenealy shares, which was a premium of 95 sen or 14.5% above the pre-suspension price of RM6.55. It also offered RM1.63 per share for the timber-based Lingui shares, which was 27 sen or 19.8% above the pre-suspension price of RM1.36.

Golden Frontier Bhd’s main shareholder Frontier Equity Sdn Bhd, which owns 41.26%, has served a notice of conditional takeover offer on the company, offering RM1.50 a share for the remaining stake it does not own.

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.

Malaysian Rating Corp Bhd (MARC) downgraded the rating of Olympia Industries Bhd’s outstanding RM49.73 million nominal value redeemable unsecured loan stocks (RULS) loan stocks to B+ from BB-.

However, MARC concurrently revised the rating outlook of these RULS to stable from negative on expectations that Olympia will manage timely the disposal of assets to meet its future debt obligations.

The Edge weekly reported that steel players were not benefiting from the recent Thai floods.

It said the optimism proved unfounded as demand failed to materialise due to excess capacity and delays in implementation of big projects.

Malayan Bulk Carriers Bhd was queried by Bursa Malaysia Securities Bhd over the rise in share price and high trading volume, which closed up 21 sen to RM2.65.

However, the company said it was not aware of any reasons or any corporate exercise that might have contributed to the unusual market activity.

Maybulk CEO Kuok Khoon Kuan disposed of 830,000 shares on Jan 26 and 27, reducing his direct stake to 0.13% or 1.268 million shares.

Luxembourg-registered Genesis Smaller Companies Sicav disposed of 4.6 million shares in Air Asia Bhd on Jan 26, reducing its stake to 146.029 million shares or 5.26%.

This article appeared in The Edge Financial Daily, January 30, 2012.

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Media Shoppe’s directors sell into rally

KUALA LUMPUR: Several directors in The Media Shoppe Bhd have pared their stakes in the company, riding on a strong rally spurred by news of its plans to bid for a school management project.

Incidentally, the timing of this announcement on Jan 19 coincided with the listing of its 312.63 million new shares and 234.47 million warrants arising from the rights issue.

The rally in The Media Shoppe share price enabled its shareholders to rake in quick profits when they received new shares from the rights issue.

In fact, several of the ACE Market-listed company’s shareholders and directors have since sold some of their newly issued free warrants — with handsome gains.

According to filings with Bursa Malaysia, two directors — CEO Christopher Chan Hooi Guan and Chan Chooi Teng — have sold a total of 48.7 million warrants, or 20% of the total warrants issued under the rights issue.

The warrants were issued free to shareholders who subscribed for the rights shares, but were worth 10.5 sen each by the end of last Friday.

The fundraising exercise proposed last October comprised a 2-for-1 rights issue priced at 10 sen per share, together with free warrants on the basis of three warrants for every four rights shares subscribed.

Chan and his spouse own 44 million shares and 33 million warrants with Master Knowledge Sdn Bhd.

On Jan 19, The Media Shoppe told Bursa Malaysia that its subsidiary TMS Software Sdn Bhd and Theta Edge Bhd’s subsidiary Konsortium Jaya Sdn Bhd entered into a teaming agreement on Jan 18 to work together for the submission of a proposal to the Education Ministry in relation to the Perluasan Sistem Pengurusan Sekolah (SPS) or school management project (see related story).

However, it should be noted that the parties are only planning to submit their proposal for the project. There is no deadline, time line or indicative chances of its success.

Still, that piece of news sent The Media Shoppe shares tripling in the past week, and shareholders who participated in the rights exercise appeared to have gained more than that.

The stock was trading at below 10 sen the previous week, and surged to 37.5 sen last Friday. The newly issued warrants closed at 10.5 sen.

According to calculations by The Edge Financial Daily, a shareholder with 4,000 shares bought at 10 sen each for RM400 would have been entitled to subscribe for 8,000 rights shares at 10 sen each (or RM800). He would have also received 6,000 free warrants.

After the rights issue, he will end up with 12,000 shares and 6,000 warrants, at a total cost of RM1,200.

Based on last Friday’s closing prices, these securities would be worth RM5,130, comprising RM4,500 for the shares and RM630 for the warrants.

This suggests a four-fold increase in the value of a shareholder’s investment in the company.

In other words, if one had invested RM100,000 in The Media Shoppe’s shares and taken up the rights issue, that investment would be worth RM427,500 last Friday.

That fact does not appear to have gone unnoticed among some of the company’s directors.

CEO Chan’s shareholding changed on Jan 19, after he acquired 44 million shares and 33 million warrants via the rights issue.

Chan and his spouse Li Chi Yeng collectively own the shares with Master Knowledge Sdn Bhd in which they have interest.

Chan was subsequently reported on Jan 20 and 27 to have disposed of 12.78 million warrants and 7.72 million warrants respectively, paring down his stake to 5.33%.

Chooi Teng, meanwhile, acquired 37.6 million shares and 28.2 million free warrants via the rights issue. She disposed of a total of 25.95 million warrants on Jan 19 and 20, and another 2.25 million warrants on Jan 27.

This article appeared in The Edge Financial Daily, January 30, 2012.

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IJM to get earnings boost from WCE, MRT

KUALA LUMPUR: The two major construction projects that were recently awarded to IJM Corp Bhd will bode well for the company and provide it with earnings visibility for the next two to three years, say analysts.

Last Thursday, IJM received the green light to proceed with the West Coast Expressway (WCE), a project that has been delayed for more than 10 years.

Kumpulan Europlus Bhd, a 25% associate of IJM, announced that its 64.2% subsidiary, West Coast Expressway Sdn Bhd, had received an approval letter from the government for the expressway project, which has an estimated project cost of RM7.07 billion.

The concession is on a build-operate-transfer (BOT) basis and for a period of 60 years – the longest concession the government has ever given out. The expressway from Banting in Selangor to Taiping in Perak will cover a distance of 316km, of which 224km will be tolled while 92km will be toll-free.

Although the construction of WCE will be implemented through open tender, OSK Research, in a Jan 27 note, said it sees IJM as a front runner to bag at least half of the RM6 billion construction works available, given its close rapport with Kumpulan Europlus.

MIDF Research shared the same view and said IJM will have a higher chance to undertake the full WCE project or part of it. Apart from IJM’s association with Kumpulan Europlus, MIDF said IJM’s strong track record of undertaking expressway construction in the country as well as abroad will also increase its chances.

Last Thursday, IJM was also reported to have been awarded a RM974 million construction package from Mass Rapid Transit Corp Sdn Bhd (MRT Corp).

IJM’s wholly-owned subsidiary, IJM Construction Sdn Bhd, was appointed the main contractor for Package V5 of the Klang Valley MRT Sungai Buloh — Kajang Line (KVMRT) project.

Under Package V5, IJM will undertake the construction and completion of Viaduct Guideway and other associated works from Maluri Portal to Plaza Phoenix Station.

Affin Investment Bank, in a report last Friday, said it expects Package V5 to boost IJM’s net profit in FY13 and FY14 by 3.8%, assuming a pre-tax profit margin of 10% and a construction period of three years.

MIDF Research said, assuming the MRT project is for three years with a 6% to 7% net profit margin, IJM is set to recognise RM20 million to RM23 million in additional annual net profit. MIDF said this could increase IJM’s earnings per share by another 1.4 sen to 1.7 sen.

On IJM’s order book, Affin Investment believes that it could increase to RM6 billion, while MIDF said it could rise to RM10 billion.

MIDF said excluding the WCE project, IJM’s outstanding order book stands at RM4.7 billion with the MRT job.

MIDF said the MRT project alone already covers up to 65% of IJM’s RM1.5 billion assumed order book replenishment rate in FY12 (ending March).

OSK Research, meanwhile, has tweaked its FY13 order book replenishment assumption for IJM from RM2 billion to RM4 billion.

For FY11, IJM posted a net profit of RM321.3 million on revenue of RM3.721 billion.

MIDF Research is forecasting net profit of RM442.4 million and revenue of RM4.435 billion for IJM in FY12.

For FY13, it has forecast net profit of RM585.73 million and RM5.557 billion in revenue.

Last Friday, IJM rose 25 sen to RM5.70. Its shares have traded between a high of RM6.71 and low of RM3.90 over the past 52 weeks.

Affin Investment Bank maintains a “buy” call on the stock and has increased its target price to RM7.06 from RM5.73 previously, while ECM Libra Investment Bank reiterated its “buy” recommendation with an unchanged target price of RM7.02.

MIDF Research upgraded its recommendation from “neutral” to “buy” with a target price of RM6.24 from RM5.45 previously.

This article appeared in The Edge Financial Daily, January 30, 2012.

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Higher dividends for Kian Joo shareholders?

KUALA LUMPUR: Kian Joo Can Factory Bhd (KJCF), which has paid out half its earnings in dividends, could be even more generous considering its new controlling shareholder Can-One Bhd needs cash to pare down its high borrowings.

Can-One has raised borrowings to finance the acquisition of a 32.9% equity stake in KJCF costing RM241 million in cash.

The loan, which finances the share purchase, will effectively double Can-One’s existing borrowings to RM467 million, and raise net gearing to about 2.2 times, according to estimates by The Edge Financial Daily.

As at Sept 30, 2011, before the KJCF acquisition, Can-One had RM226.04 million in borrowings and RM11.84 million cash. With a shareholders’ equity of RM205.44 million, it then had a net gearing of 1.04 times.

“We believe Can-One would need additional cash inflow to pay off the loan interest. At this juncture, we reckon that Can-One will probably opt to receive dividends from KJCF to pay off its borrowings plus interest.

“As such, there is a possibility that with Can-One controlling KJCF now, the company may see a higher dividend payout in the future, benefiting minority shareholders of KJCF as well,” said Kenanga Research.

Kenanga estimates Can-One to incur interest expense of an additional RM28 million per annum on the borrowings to finance the acquisition of the KJCF stake.

The research house reckons that Can-One could increase KJCF’s payout ratio from the current 50% to 80%, which translates into 20.3 sen dividend per share (DPS) based on net profit forecast of RM112.8 million or 25.3 sen per share for FY11 ended Dec 31.

KJCF recorded a net profit of RM89.75 million or 20.21 sen per share for the nine months ended Sept 30.

With 146.1 million shares in KJCF, Can-One would receive about RM30 million in extra cash.

For FY10, KJCF declared a 55% dividend payout, amounting to 13.75 sen per share. KJCF posted a net profit of RM101.97 million or 22.96 sen per share for FY10.

Kenanga forecasts KJCF’s net profit to grow to RM132 million or 29.8 sen per share for FY12. Meanwhile, TA Research expects a net profit of RM143 million or 32.2 sen per share for FY12.

Assuming a payout ratio of 80%, KJCF could probably declare DPS of 23.8 sen to 25.7 sen. This will make KJCF an attractive dividend stock with a 10% yield based on its share price which closed at RM2.20 last Friday.

To recap, Can-One won the bid for a controlling 32.9% stake in its largest competitor KJCF in February 2009 at RM1.65 per share. But the See family, who founded KJCF, waged a legal battle to reject the share disposal.

After three years of courtroom tussles, the Federal Court ruled in favour of Can-One’s bid to purchase the stake on Jan 5.

The acquisition is considered a good bargain for Can-One as the price it paid was at more than 20% discount over the market value, and nearly 25% over its net asset per share of RM2.02.

With the large block of shares crossed via off-market last week, Can-One is now the single largest shareholder of KJCF. Can-One is expected to seek board representation at KJCF.

More generous dividend payments would probably be good news for other shareholders as well. Other substantial shareholders of KJCF are Kumpulan Wang Persaraan with 8.96%, and the Employees Provident Fund 7.94%.

Kian Joo Holdings Sdn Bhd, the investment vehicle of the See family, is left with 1.74%. The See brothers collectively own a 6.6% stake.

Apart from the steady cash flow generated from its can manufacturing business, KJCF has the option to divest its shareholding in Box-Pak (M) Bhd, a corrugate carton box manufacturer.

“If KJCF disposes of its 54.8% stake in Box-Pak at the previously rumoured price of RM3.20, Can-One could be getting about RM34.6 million as capital repayment at the level,” added Kenanga.

However, an analyst noted that at Kenanga’s rumoured price, Box-Pak would look very pricey, at 1.82 times book and a price-to-earnings ratio of 13.9 times, based on annualised earnings per share of 23 sen for FY11 ended Dec 31.

Box-Pak’s shares surged 28 sen or 11.9% to RM2.64 on a heavy volume of 1.91 million shares last Friday.

The stock is trading near its 12-month high, whose share price doubled over the past two months.

The possible dividends would come in handy for Can-One to at least cover its interest expenses.

However, Kenanga conceded that the move to raise dividends would only lift Can-One’s debt burden temporarily, and it is still uncertain how Can-One plans to pay off its huge borrowings in the long run.

This article appeared in The Edge Financial Daily, January 30, 2012.

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Hartalega rises to record high on lower nitrile prices

KUALA LUMPUR: The tug of war between nitrile and latex glove makers has now tilted in favour of the former, following Thailand’s intervention moves to raise rubber prices early last week.

The intervention by Thailand, the world’s largest rubber producer, has arrested the decline in the rubber price and lifted it from recent lows.

On the other hand, nitrile prices have headed south despite high crude oil prices as the performance of the two has started to diverge.

Hartalega Holdings Bhd is the biggest beneficiary of this latest development. Its share price rose to a record high of RM6.90 last Friday as investors expect the glove maker to benefit from lower nitrile prices.

According to CIMB Research, the cash cost for producing nitrile gloves is 20% lower than rubber gloves, as natural rubber prices have risen 17% since Thailand approved measures to boost the price on Jan 24.

As such, the research house anticipates demand to shift from natural rubber to nitrile gloves.

“The widening cost difference between nitrile and natural rubber is positive for Hartalega as its superior affordability will underpin demand for nitrile gloves. This will enable Hartalega to grab market share from natural rubber glovemakers as reduced healthcare budgets in Europe encourage hospitals to search for cheaper alternatives,” CIMB Research said in a note last Friday.

Compared with its peers that manufacture more natural rubber gloves, Hartalega produces 80% of nitrile gloves in its product mix.

The research house said nitrile prices have fallen 35% since last August to stabilise between US$1,500 (RM4,560) and US$1,600 per tonne currently.

“More significantly, nitrile prices have begun to diverge with Brent crude, as the latter has fallen by 15% to US$110 per barrel since mid-2011. We believe that the divergence is the result of the tug of war between weakening oil demand growth (lower prices) and supply risks due to geopolitical uncertainty (higher prices),” said CIMB Research.

In the past, analysts noted there was a strong correlation between nitrile and Brent crude oil price movements.

At the same time, natural rubber prices fell from a record high of RM10.60 per kg last February to around RM6 per kg earlier this month. Since Thailand gave the green light to increase its locally grown natural rubber price to 120 baht (RM11.75) per kg, natural rubber price has increased to RM7.43 per kg.

This is in contrary to earlier views by Top Glove Corp Bhd, Supermax Corp Bhd and estimates by other analysts, who were bearish on rubber prices before the Thai government’s intervention.

Earlier this year, Top Glove and Supermax forecast that natural rubber prices would fall to between RM5.50 and RM6 per kg in the first quarter of 2012.

Analysts also held similar views then as natural rubber prices were expected to fall due to the rubber glut and weakening demand.

Supermax then expected the lower natural rubber price and stronger US dollar to boost its sales by 20% for FY12 ending Dec 31, while Top Glove was looking to increase profits by 30%.

This optimism boosted the share prices of both counters earlier this year.

Supermax and Top Glove rose 30.3% and 26.2% in the last three months to their respective year highs of RM2.32 and RM5.25, but have since pared some of their gains to close at RM2.15 and RM5.05 respectively last Friday.

AmResearch upgraded the sector outlook to “overweight” and upgraded Top Glove and Kossan Rubber Industries Bhd to “buy” with fair values of RM6.15 and RM4.31 respectively.

However, it remains to be seen if these stocks would be re-rated soon as the price control measure by the Thai government has pushed up natural rubber prices.

CIMB Research has an “underperform” on Top Glove with a fair value of RM3.61 and advised investors to accumulate Hartalega shares instead. It has an “outperform” call on Hartalega with a target price of RM8.44.

“While Hartalega’s liquidity is still low compared with Top Glove, it is up 35% since our conference in January. Its major shareholder has indicated a willingness to further improve liquidity via a bonus issue and/or a measured selldown of its majority stake,” CIMB said.

According to Bloomberg data, Hartalega has 11 “buy” and one “hold” calls with a consensus fair value of RM6.98. Supermax has six “buy”, five “neutral” and two “sell” calls with a consensus fair value of RM2.00.

Top Glove has only one “buy”, three “neutral” and four “sell” calls with a consensus fair value of RM3.58, while Kossan has 13 “buy” and four “neutral” recommendations with a consensus fair value of RM3.58.

Hartalega gained RM1.36 or 24.5% in the past three months to close at RM6.90 last Friday. Kossan rose 29.4% in the same period to a high of RM3.65 on Jan 13, before paring down to RM3.47.

This article appeared in The Edge Financial Daily, January 30, 2012.

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Posh put option wildcard for Maybulk

KUALA LUMPUR: Malaysian Bulk Carriers Bhd’s (Maybulk) share price has been bucking the trend when most of its peers are heading south against the backdrop of softening charter rates.

But Maybulk’s share price movement does not mirror its financials entirely. In fact, Maybulk shares the same fate as its peers that face falling charter rates as the industry suffers from the oversupply of vessels, weaker US currency and slower Chinese demand.

For 9MFY11 ended Sept 30, the company posted a RM74.92 million net profit, down 56% from RM170.67 million a year ago. Revenue fell 38% to RM198.95 million from RM319.53 million. The company is estimated to post a net profit of RM114.3 million for FY11 ended Dec 31, which is 52% lower than RM238.4 million for FY10 and down 53% from RM243.8 million for FY09.

Despite weaker financials and the Baltic Dry Index plunging to a record low, Maybulk shares are on the uptrend. While there is speculation of a privatisation, it is unclear what really fuelled the rally in Maybulk shares.

The strong rebound in Maybulk’s share price has also drawn attention to the bulk carrier’s US$221 million (RM671.8 million) investment in PACC Offshore Services Holdings Group (Posh) made at end-2008.

It now has a 21.23% stake in the Singapore-based company that offers offshore marine support services. There is a put option tied to this investment that can be exercised if Posh is not listed by end-2013.

In the event Maybulk exercises its put option at a 25% premium or RM8.12 apiece, this could help enhance the company’s real net asset value (RNAV) of RM2.27.

The RNAV is based on CIMB Research’s estimate of Maybulk’s fleet valued at RM798.7 million, net cash of some RM286.2 million, other net assets of RM1.14 billion and charter earnings of about RM39.9 million.

Unlike Maybulk’s core business that is dependent on dry bulk cargos, Posh is involved in providing services to the oil and gas industry, which is experiencing increased activities thanks to the crude oil price boom.

CIMB noted that Posh’s earnings have been falling in recent quarters. Earnings fell to a mere RM300,000 in the second quarter ended June 30, lower than the previous quarter at RM1.8 million. This was much below the RM16 million quarterly average back in 2009, added CIMB.

In the past, Maybulk’s management said it was confident that prospects in the oil and gas industry would improve and might decide to keep its stake in Posh.

That said, the investment in Posh could be a wildcard for Maybulk against the backdrop of the harsh operating environment in the dry bulk business.

If Posh undertakes a listing exercise or the exercise of the put option, Maybulk will stand to gain eventually.

This article appeared in The Edge Financial Daily, January 30, 2012.

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Watch out for NIM and credit cost at MBSB

Malaysia Building Society Bhd (Jan 27, RM2.18)
Maintain market perform at RM2.24 with fair value of RM1.85: MBSB is expected to release its 4QFY11 results in early February. Our full-year pre-tax profit estimate stands at RM422 million, slightly ahead of the pre-tax profit of at least RM400 million that MBSB CEO reportedly said was achievable.

However, relative to MBSB’s 3QFY11 results, our 2011 forecast may appear on the conservative side as it implies that 4Q net profit would contract about 20% quarter-on-quarter (+480% year-on-year [y-o-y]) mainly due to net interest margin (NIM) compression and higher loan impairment charges.

We have assumed full-year gross loan growth of 30% y-o-y, in line with the nine-month annualised figure. While any surprises here (positive or otherwise) are unlikely to impact overall net profit too significantly, two areas that may are NIM and loan impairment allowances. Our full-year NIM assumption of 3.9% is lower than MBSB’s nine-month NIM of 4% as we factor in the repricing of fixed deposits and dilution in asset yields.

NIM may surprise on the upside if the growth in higher yielding personal financing stays robust and/or growth in the other segments of the loan portfolio is slower (against personal financing). As for loan impairment allowance, we have assumed this will continue to rise on the back of the strong loan growth and to beef up coverage levels (2011F: 83% against 2010: 77.2%).

We expect a final gross dividend per share (DPS) of 5.5 sen (4QFY10: nine sen), which would bring the full-year gross DPS to 10.5 sen (FY10: nine sen). This would translate to a net payout ratio of about 30%, in line with the dividend payout guidance of at least 30%.

Looking ahead to 2012, our pre-tax profit projection of RM499 million (+18% y-o-y) is in line with the targeted RM500 million mark mentioned by the CEO. This is underpinned by loan growth assumption of 17.5% and lower credit cost of 138 basis points (2011F: 162 bps), partly offset by NIM contraction of seven bps and higher cost-income ratio of 22% (2011F: 18%).

MBSB intends to diversify its loan book mix to roughly equal contribution from personal financing, mortgages and corporates, but this will also dilute NIMs. However, if the growth in personal financing continues to outpace the other segments, NIMs may turn out to be stronger than expected leading to positive earnings surprises.

The risks include: (i) adverse regulatory changes; (ii) slower than expected loan growth; (iii) weaker than expected NIMs; (iv) deterioration in asset quality; and (v) high loan-deposit ratio.

We maintain our fair value of RM1.85 (target price-earnings ratio of eight times ascribed to MBSB’s fully-diluted 2012 earnings per share) and “market perform” call. — RHB Research, Jan 27

This article appeared in The Edge Financial Daily, January 30, 2012.

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Samsung contract in the bag for Alam Maritim

Alam Maritim Resources Bhd (Jan 30, 78 sen)
Maintain neutral at 75.5 sen with fair value of 85 sen: Last week, Alam Maritim Resources announced that its 100%-owned subsidiary Alam Maritim (M) Sdn Bhd was recently awarded a contract by Samsung Engineering (M) Sdn Bhd for the transport, installation and pre-commissioning of two pipelines, two single-point moorings and two pipeline end manifolds in connection with the Sabah Oil and Gas Terminal project (SOGT). The one-off, not renewable contract is valued at US$37 million (RM113 million). The engineering works are expected to commence immediately with completion by 3QFY12.

We have confidence in Alam securing jobs involving pipelay vessels since they are specialised vessels and there is minimal competition in the market, especially for those tailor-made to cater for Asia.

Although it has taken a long time for Alam to secure a sizable contract, we see this as earlier efforts finally bearing fruit. To recap, Alam’s management has shown good foresight in targeting jobs expected to arise from the SOGT project since October 2010, especially when it decided to sign a memorandum of understanding with Yayasan Sabah Shipping Sdn Bhd to increase its success rate in securing these jobs. This project not only contributes positively to its revenue and net profit, but also gives it valuable experience needed to improve its success rate for bidding on similar projects in the future, given its current minimal track record in utilising pipelay vessels. Also, after going up the learning curve, it would have more opportunities to bid for bigger and more complicated jobs, which could yield even better margins.

Our fair value for Alam remains unchanged at 85 sen based on the existing FY12 price-earnings ratio of 12 times. Relative to its other listed peers like Perdana Petroleum Bhd and Tanjung Offshore Bhd, we expect Alam to outperform in terms of new job order wins and quarterly earnings performance. Nevertheless, considering that Alam’s valuation is considered quite rich among its peers, we are keeping our “neutral” call for now. — OSK Research, Jan 27

This article appeared in The Edge Financial Daily, January 30, 2012.

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Tighter financing spreads to luxury cars

Automotive sector
Maintain underweight: The Edge Financial Daily reported last Friday that car buyers may soon find it more difficult to secure loans as banks move to clamp down on auto financing.

While the financing structure is fluid at this juncture and has yet to be finalised, it was reported that luxury car buyers (high-end models like two-door sports cars and brands like Bentley, Ferrari and Maserati) may be required to take out as much as 50% up front payment. Additionally, buyers may be limited to a maximum of two car loans in their names at any one time.

The banks are proposing to stop lending to people who want to take a third car loan. Buyers taking a first car loan will still be able to secure 90% financing, while for a second loan a down payment of 30% to 35% may be required. This move was reportedly spearheaded by the private sector and financial institutions.

If the above tightening of auto loan spread is limited to only high-end luxury models, we don’t expect a change in our projected 600,000 unit sales forecast for 2012 (flat year-on-year).

New Porsche cars sold in 2011 were 126 units (out of 600,000 vehicles sold in 2011). Note that reconditioned car sales are not captured in our sales forecast. However, if the tightening of auto loans is also spread to mass models, the impact is clearly negative on 2012 auto sales forecast. At this juncture, we maintain our projections until further clarity from financial institutions.

In the past one decade, auto sales have grown by 12% annually and this is largely due to: (i) positive economic growth; and (ii) high levels of affordability. Thus, if financial institutions change the tenure of car loans (Malaysia has one of the longest tenures, with options to take a car loan for up to nine years) or impose a higher down payment, the sector will be challenging in 2012.

We maintain our “underweight” call on the sector to reflect flattish sales growth prospects and concerns over margin compression over the next six to nine months (on the back of higher raw material cost and advertising and promotions given the onset of competition, especially in 2H12). The sector trades at 12.1 times CY12 earnings and 0.75 times price over earnings-to-growth ratio — fairly reflective of a mature ex-growth sector with low trading liquidity.

Top pick: MBM Resources Bhd (Buy, current target price [TP] RM3.65 — under review) for good representation in both the mass (Perodua) and high-end market (VW, Volvo, Mitsubishi) as well as good cost discipline.

We also believe MBM is a prime candidate to undertake a privatisation exercise given its attractive valuations (price-earnings ratio of 6.7 times, 0.8 times book value, net cash of RM132 million and return on equity of 11.2%). The completion of the Hirotako takeover will raise FY12 earnings per share by 10% and bump up our TP for MBM from RM3.65 to RM3.80. — Affin IB Research, Jan 27

This article appeared in The Edge Financial Daily, January 30, 2012.

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Excitement abounds, stay in oil and gas

Oil and gas sector
Maintain overweight: Petroliam Nasional Bhd’s (Petronas) domestic activities are picking up, from first production systems to rejuvenation jobs. Platforms, chemicals and floating solutions are the essentials for development. Jobs will likely be spread out favouring a large group of local service providers such as Bumi Armada Bhd, M3Nergy Bhd, MISC Bhd, Ramunia Holdings Bhd, Tanjung Offshore Bhd and Deleum Bhd. We remain “overweight” on the sector.

Our recent fact-finding “coffee talk” round with oil and gas service providers revealed that a series of field developments will be rolled out this year. We have identified five projects revolving around the rejuvenation/enhanced oil recovery (EOR), early production system (EPS) and marginal to shallow water field projects. They are: (i) Petronas Carigali’s Angsi (EOR project off Peninsular Malaysia); (ii) Shell’s St Joseph (EOR project offshore Sabah); (iii) Carigali’s Tanjung Baram EPS; (iv) Hess’ Belud (Sabah’s shallow water field project); and (v) Hess’ Kamelia field.

This is a fast-track project. Petronas has set a target to hit first oil production by June 2013. It requires a vessel-based sea-water reverse osmosis (SWRO) plant (chemical floating production, storage and offloading [FPSO]) with the capacity to desalinate 150,000bpd of seawater to increase oil recovery rates up to 20%. US-based Water Standard won the oilfield desalination project and will likely partner an FPSO operator for this job. Conversion is expected to take 16 months to complete.

This project is similar to the Angsi field but on a smaller scale (30,000bpd desalination injection capability), and will use chemical alkaline surfactant polymer (ASP). Shell recently issued an invitation-to-bid (ITB) for the engineering, procurement, construction and commissioning (EPCC) job. Unlike the Angsi field, the main asset (vessel) will be owned by Shell. The winner of the EPCC job will jointly undertake the front-end engineering design (FEED) studies, choose and convert the tanker and earn project management fees, similar to Bumi Armada’s Sepat project.

Hess’ Belud field plan, meanwhile, calls for an FPSO and wellhead platform for the oil and gas complex on Block SB302 with first oil or gas production by 2014. The Kamelia project too requires an FPSO. Separately, the Tanjung Baram EPS project, awarded to a foreign party, is running into complications and will likely miss the first oil production target (1,000 to 3,000bpd) set for July 2012. A re-tender could occur should the issue remain unresolved.

We think Bumi Armada is the likeliest partner for Water Standard for the Angsi project. This would involve a chemical FPSO. For St Joseph, we gather that five bidders were invited (M3Nergy, Bumi Armada, Deleum, BW Offshore Sdn Bhd and Tanjung). Bids will close in February with an announcement in three months. Elsewhere, our ground checks suggest that M3Nergy’s odds of securing an FPSO contract are high; we think it could be for the Belud project. Also, market talk suggests that the MISC-Ramunia partnership is a frontrunner for an FPSO for the Kamelia field. — Maybank IB Research, Jan 27

This article appeared in The Edge Financial Daily, January 30, 2012.

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KLCI slumps nearly 7pts, Genting, HL Bank down

KUALA LUMPUR (Jan 30): Blue chips fell in the afternoon trade on Monday, with Genting and Hong Leong Bank among the major losers despite the broader market displaying more resilience.

At 3.14pm, the KLCI was down 6.93 points to 1,513.97. Turnover was 1.66 billion shares valued at RM1.11 billion. Advancing counters beat decliners 462 to 340 while 292 stocks were unchanged.

European stock index futures pointed to a lower open on Monday as investors continued to book profits after a six-week rally, awaiting to see the details of Greece's debt swap deal and the outcome of yet another European summit, Reuters reported.

China shares fell 1.5% on Monday, with Chinese banks among the top drags after an expected cut in reserve requirement ratio by Beijing failed to materialise over the week-long Lunar New Year holiday.

The Shanghai Composite Index slipped to 2,285.04 points, dipping below the 2,300 level which it only broke on the Friday before the market closed for the new year break

At Bursa Malaysia, consumer stock BAT was down 62 sen to RM49.34 while Nestle lost 30 sen to RM55.70.

Genting lost 26 sen to RM10.90, HL Bank 20 sen to RM11.50 and PPB 30 sen to RM16.80.

Among PLANTATION []s, KLK lost 18 sen to RM25.72 but Batu Kawan added 22 sen to RM19.2, Tradewinds Plantations 21 sen to RM4.89 and Sarawak Plantations 17 sen to RM3.

Maybulk gave up part of the recent gains, falling 29 sen to RM2.36. The company said it was unaware of the surge in the share price and volume last week.

However, on the positive side, takeover targets, Glenealy jumped 57 sen to RM7.1`2 and Lingui 16 sen to RM1.52.

TDM rose to a historic high, up 22 sen to RM4.58, extending its gains from last week and spurred on by comments from Maybank IB Research that the company could be a strategic privatisation target for its relatively low valuation.

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Dayang Enterprise MD sells 2m shares

KUALA LUMPUR (Jan 30): DAYANG ENTERPRISE HOLDINGS BHD [] non-independent managing director Tengku Yusof Tengku Ahmad Shahruddin disposed of two million shares on Jan 27.

A filing with Bursa Malaysia showed that after the disposal of the 0.36% stake, his direct stake was reduced to 10.43% or 57.34 million shares.

The share price closed at RM1.90 on that day. Its 52-week high was RM3.04 and its 52-week low was RM1.41.

Dayang Enterprise provides maintenance services, fabrication operations, hook-up and commissioning and chartering of marine vessels.

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AirAsia X making arrangements for 30,000 cancelled online bookings

LONDON (Jan 30): AirAsia X is making arrangements for at least 30,000 cancelled online bookings following the low-cost carrier's withdrawal from London, Paris and India, its chairman, Tan Sri Rafidah Aziz, said.

Though the costs for this exercise have not been disclosed, Rafidah said the withdrawals have curtailed the dimensions of losses already felt by AirAsia X long-haul routes following escalating oil prices and government taxes.

As promised, the budget airline announced that all passengers, who hold bookings to the destinations, will be offered an alternative travel option at no additional cost to mitigate the inconvenience caused from the route withdrawals.

An e-mail stating available options will be sent to the affected passengers, including a full refund, a re-route to another AirAsia X destination (in Australia and North Asia) or move to an alternative carrier where available.

Rafidah also said any possibility for AirAsia X's return in the future has not been written off as the budget airline's strategy for Europe in the future remains open as she said nobody had expected for the frills-free airline to fly long-haul in the first place.

"Having said that, what happens in the distant time to come, we cannot tell, but what we can say is in the foreseeable future is as what it has been announced," she told a media conference after delivering a keynote address at the 2012 United Kingdom and Eire Council of Malaysian Students' Annual Summit at Marble Arch.

Despite the cancellations, the former international trade and industry minister said AirAsia still remained as the away jersey kit sponsor for the London football club, Queens Park Rangers, owned by the airline's founder Tan Sri Tony Fernandes.

The sponsorship deal is until the end of the 2012/2013 football season.

"When our sponsorship ends, the board will have to make a decision," the former International Trade and Industry Minister said.

Commenting on reports highlighting the disappointment of Malaysian students and frequent AirAsia travellers to Europe, Rafidah said what happened was unfortunate and what was done was in the business best interest.

"When a business strategy is not working, we've to resolve it, which we did with many early warnings," she added. - Bernama

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OSK Investment Bank chairman Choong retires

KUALA LUMPUR (Jan 30): Dr Choong Tuck Yew has retired as director and chairman of OSK Investment Bank Bhd (OSKIB), with effect from Jan 28.

OSK HOLDINGS BHD [] said on Monday that with the approval from Bank Negara Malaysia, the senior independent non-executive director, Foo San Kan has been re-designated as chairman of OSKIB with effect from Jan 29 for three years.

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SC: Sukuk dominates fund-raising activities in 2011

KUALA LUMPUR (Jan 30): Ringgit-denominated sukuk issuances dominated Malaysian fund-raising activities approved by the Securities Commission Malaysia (SC) in 2011, accounting for RM78.9 billion out of RM118.9 billion total funds approved through the capital market.

The SC said on Monday said that more than half of the amount to be raised from sukuk issuances was approved during the fourth quarter, through 15 Ringgit-denominated sukuk issues which are set to raise RM41.7 billion from the market.

The SC said in its Q4 2011 scorecard that fund-raising activities through issuances of corporate bonds and sukuk had increased significantly.

A total of 33 applications for corporate bonds and sukuk were approved during the quarter, an increase of 120% against the 15 applications approved in Q3.

These involved 28 Ringgit-denominated issues and eight foreign currency-denominated issues, it said.

The regulator said the approvals also included the world’s largest corporate sukuk programme of RM23.3 billion by Projek Lebuhraya Usahasama Berhad, adding that the issuance commenced under the programme in 2012.

The SC said corporate bonds and sukuk issues approved in Q4 are expected to raise a total of RM48.2 billion, which is three times more than the RM16.1 billion approved in Q3.

“In total, almost RM112.3 billion in Ringgit-denominated corporate bonds and sukuk was approved as of end 2011, which is almost double the RM63.6 billion approved in 2010,” it said.

The SC said it approved two applications for initial public offering (IPO) in Q4.

The two IPOs are expected to raise RM820.8 million from the capital market and to have a combined potential market capitalisation of RM3.2 billion, it said.

On collective investment schemes, the SC approved 33 applications to establish new funds in Q4, as compared to 20 in Q3.

Out of the total applications for new funds, 14 are for the establishment of new unit trust funds; 18 for wholesale funds and one for real estate investment trust (REIT), it said.

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Public Bank 4Q net profit up 3.6% to RM876.9m, FY11 net profit RM3.48b

KUALA LUMPUR (Jan 30): PUBLIC BANK BHD [] recorded net profit of RM876.98 million in the fourth quarter ended Dec 31, 2011, up 3.6% from a year ago due to higher net interest and net income from Islamic banking business. It declared a second interim single-tier dividend of 28 sen per share.

It said on Monday that its revenue rose 11.8% to RM3.32 billion from RM2.97 billion a year ago. Its earnings per share were 25.04 sen compared with 24.16 sen.

“For the 4Q ended Dec 31, 2011, the group registered a pre-tax profit of RM1.163 billion, an increase of RM33.0 million or 2.9% as compared to the previous corresponding quarter. The improved performance was mainly due to higher net interest and net income from Islamic banking business.

“This was partially offset by higher other operating expenses and higher loan impairment allowance on higher loan growth achieved. Earnings attributable to equity holders grew by 3.6% or RM30.8 million over the same period,” it said.

Public Bank’s net income rose 4.8% to RM1.882 billion from RM1.795 billion on-year. Its operating profit was RM1.320 billion compared with RM1.269 billion while its allowance for impairment on loans, advances and financing was higher at RM154.64 million compared with RM142.83 million.

There was a share of loss after tax of equity accounted from associated companies of RM3.21 million compared with profit of RM4.58 million.

For FY ended Dec 31, 2011, its earnings rose 14.3% to RM3.483 billion from RM3.048 billion in FY10. Its revenue was RM12.756 billion compared with RM11.035 billion.

Public Bank founder and chairman, Tan Sri Dr Teh Hong Piow said the Public Bank Group delivered yet another strong set of results in 2011 with record net profit of RM3.48 billion. Pre-tax profit increased by 12.8% to RM4.61 billion.

“With a clear lead of having the highest net return on equity of 26.8% amongst the Malaysian banking groups, the group continues to maintain its top ranking in asset quality and cost efficiency in the banking industry with notably lower gross impaired loan ratio of 0.9% and cost-to-income ratio of below 30%,” he said.

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KLCI stays above 1,520-level at mid-day, but caution reigns

KUALA LUMPUR (Jan 30): The FBM KLCI stayed about the 1,520 level at the mid-day break on Monday, but investor sentiment remained generally cautious in line with regional markets that inched down.

Markets are cautiously tuned in to a likely debt swap deal for Greece that is crucial to avoiding a messy default and eyed yet another European summit meeting, according to Reuters.

The FBM KLCI was up 0.25 of a point to 1,521.16 at the mid-day break.

Gainers led losers by 427 to 287, while 308 counters traded unchanged. Volume was 1.28 billion shares valued at RM769.76 million.

The ringgit weakened 0.02% to 3.0435 versus the US dollar; crude palm oil futures for the third month delivery fell RM17 per tonne to RM3,118, crude oil lost 44 cents per barrel to US$99.12, while gold fell US$6.52 an ounce to US$1,732.55.

At the regional markets, Japan’s Nikkei 225 was down 0.47% to 8,799.60, Hong Kong’s Hang Seng Index fell 0.49% to 20,401.30, the Shanghai Composite Index shed 0.32% to 2,311.70, South Korea’s Kospi fell 0.98% to 1,945.48, and Singapore’s Straits Times Index was down 0.57% to 2,899.68 while Taiwan’s Taiex jumped 2.35% to 7,403.47.

On Bursa Malaysia, Glenealy rose 58 sen to RM7.13, Hartalega up 30 sen to RM7.20, GFB 25 sen to RM1.46, Batu Kawan 22 sen to RM19.22, Tradewinds PLANTATION []s 20 sen to RM4.88, TDM, Sarawak Plantations and Puncak Niaga up 19 sen each to RM4.55, RM3.02 and RM1.49 respectively, Dutch Lady 18 sen to RM25.80 and Boustead 17 sen to RM3.59.

DBE Gurney was the most actively trade counter with 58.1 million shares traded. The stock rose half a sen to 14 sen.

Other actives included DRB-Hicom, TMS, Pos Malaysia warrants, Compugates, RedTone and Utopia.

Shipping-related counters were among the major losers this morning, with Maybulk down 31 sen to RM2.34, Bumi Armada down 12 sen to RM3.88 and MISC three sen to RM5.93.

Other decliners included Tasek, KLK, Amway, Parkson, Genting and Berjaya Sports Toto.

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Maybank concludes US$330.6m facility for Indonesia’s independent power producer

KUALA LUMPUR (Jan 30): MALAYAN BANKING BHD [] group has concluded the syndication of a US$330.6 million term facility for Indonesia’s independent power producer (IPP) PT Bajradaya Sentranusa (BDSN) as the group taps into cross-border financing opportunities, including Islamic banking.

Maybank said on Monday the entities - PT Bank Internasional Indonesia Tbk (BII), Maybank Investment Bank Bhd and PT Bank Maybank Syariah Indonesia (MSI) -- were the joint mandated lead arrangers and bookrunners.

BII, Maybank Islamic Bhd and MSI were the joint underwriters for this transaction. PT Bank Bukopin Tbk and Lembaga Pembiayaan Ekspor Indonesia (Indonesia Eximbank) were also lenders in this transaction.

BDSN builds, owns and operates the Asahan 1 Hydroelectric Power Plant under a 30-year power purchase greement (PPA) with PT Perusahaan Listrik Negara (Persero).

Maybank said the 10-year facility is divided into dual-currency conventional tranches of US$187.5 million and 400 billion rupiah as well as US$100 million in an Islamic tranche.

Proceeds will be used to take over the entire existing project loans for the CONSTRUCTION [] of the 2x90 MW Asahan 1 hydroelectric power plant in North Sumatra.

BDSN president director Husni Sabar said: “We are pleased to have reached this milestone despite the general uncertainty in global financial markets. This transaction will mark a long and beneficial relationship between BSDN and the Maybank Group.”

Maybank deputy president and head, global wholesale banking Abdul Farid Alias: “This transaction marks a continuation of Maybank Group's support for its International Currency Business Unit (ICBU) platform, which is an initiative under the Malaysian International Islamic Financial Centre (MIFC) by the Malaysian Government.”

He said with Maybank group’s significant regional reach, “we are seeing greater opportunities in cross-border financing, including in Islamic banking”.

“In addition our strong capital base enables us to fund large infrastructure projects and we are seeing this as a new growth market for our global wholesale banking business,” he added.

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TDM at historic high, privatisation target?

KUALA LUMPUR (Jan 30): TDM BHD [] shares hit a fresh historic high of RM4.57 on Monday, extending its gains from last week and spurred on by comments from Maybank IB Research that the company could be a strategic privatisation target for its relatively low valuation.

At noon, TDM was up 21 sen to RM4.57 with 607,500 shares traded.

Maybank IB Research said TDM was under-appreciated, explaining that since the research house highlighted TDM as an undervalued stock in its 2012 outlook report of Jan 6, the share price had appreciated 15%.

“Still, it remains deep in value, trading at 8.7x 2013 PER with an EV/planted ha of just c.RM27,900 (sector average: RM72,000),” it said.

The research house said the market had also ignored TDM’s long-term growth catalysts, namely the potential doubling of planted area and tripling of hospital beds.

“TDM could be a strategic privatization target for its relatively low valuation. We attach a fair value of RM5.50 (based on 11x 2013 PER) to TDM.

“A further re-rating could come in in 2014 when it reaps the benefits of recently planted landbank and its extended hospital chain,” it said.

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KLCI stays cautious in line with the retreat at key regional markets

KUALA LUMPUR (Jan 30): Trading on the FBM KLCI remained cautious at mid-morning on Monday, in line with the subdued sentiment at key regional markets ahead of key economic data from the US as well as developments in Europe in relation to the Greece debt issues.

At mid-morning, the 30-stock index edged up 0.56 of a point to 1,521.46.

Gainers led losers by 279 to 199, while 263 counters traded unchanged. Volume was 582.43 million shares valued at RM239.19 million.

Asian shares inched lower and the euro eased from its highest in more than six weeks on Monday, as markets cautiously tuned in to a likely debt swap deal for Greece that is crucial to avoiding a messy default and eyed another European summit meeting, according to Reuters.

World stocks fell on Friday on a slower-than-expected annualised 2.8 percent growth in the U.S. economy in the last quarter of 2011, the fastest quarterly rate in 1-1/2 years, while U.S. stocks were also weighed down by disappointing corporate results, it said.

At the regional markets, Japan’s Nikkei 225 fell 0.64% to 8,784.31, Hong Kong’s Hang Seng Index was down 0.55% to 29,388.50, the Shanghai Composite Index lost 0.91% to 2,297.96, Taiwan’s Taiex rose 2.86% to 7,440.49, South Korea’s Kospi fell 0.68% to 1,951.45 while Singapore’s Straits Time Index lost 0.91% to 2,889.79.

BIMB Securities Research in a note Monday said that a slew of developments both in the US and Europe could chart the direction of global equity markets this week.

Impending economic data plus more corporate results from the US and the European Summit may well see investors stay sidelined, it said.

As such, there were some profits taking activities ahead of this week’s events with the Dow Jones Industrial Average losing 74 points last Friday, it said.

The research house said that as for Europe, most major indices ended up in the negative territory after an across the board technical rebound on Thursday.

Regionally, most major bourses continued with their uptrend buoyed possibly by prospects of more monetary easing within the region, it said.

Nonetheless, latest move by China to maintain its SRR would disappoint some market observers and trigger some profit taking today, it said.

“Domestically, the FBM KLCI maintained its range trading activities without any headway from the lack of fresh catalysts and may test the immediate support of 1,515 today.

“Nonetheless, the stronger ringgit at RM3.04 per US$1 may be a precursor of foreign funds trickling in,” it said.

On Bursa Malaysia, privatisation targets Glenealy and Lingui were among the top gainers. Glenealy jumped 65 sen to RM7.20 while Lingui added 17 sen to RM1.53.

Other gainers included GFB that added 26 sen to RM1.47, Hartalega up 25 sen to RM7.15, Malayan Flour Mills 16 sen to RM4.13, Tradewinds PLANTATION []s 14 sen to RM4.82, Pos Malaysia 13 sen to RM2.88, Sunchirin 12 sen to RM1.77 while MBM Resources and Boustead REIT added nine sen each to RM3.78 and RM1.80.

The actives included DBE Gurney, DRB-Hicom, Hubline, Privasia, Utopia while the decliners included Nestle, Maybulk, JobStreet, KLK< Boxpak, Chin Teck, Unisem and Genting.

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Glove makers rise in early trade

KUALA LUMPUR (Jan 30): Shares of glove manufacturers, led by Hartalega advanced in early trade on Monday on improving outlook for the sector.

At 9.30am, Hartalega rose 33 sen to RM7.23, Top Glove was up 13 sen to RM5.18, Supermax added 11 sen to RM2.26 while Kossan was up three sen to RM3.50.

CIMB Research in note Jan 27 had maintained its Outperform rating on Hartalega and said the affordability of nitrile gloves had improved, primarily due to a 35% drop in nitrile price, in contrast to a 17% rise in natural rubber price.

It said this was positive for Hartalega as it will underpin demand for nitrile gloves at a time when EU healthcare budgets are being cut.

“We retain our valuation basis of 11.75x forward P/E, 10% discount to our Top Glove target. Nitrile gloves are now 20% cheaper to produce versus NR, which will underpin demand.

“Hartalega is our top pick in the glove sector with leading returns and margins. Maintain Outperform,” it said.

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Glenealy, Lingui up on privatisation plan

KUALA LUMPUR (Jan 30): Shares of Glenealy PLANTATION []s (Malaya ) Bhd and Lingui Developments Bhd advanced on Monday after Samling Strategic Corporation Sdn Bhd (SSC) said it plans to pursue a proposed privatisation of Samling Global (SGL), and in turn, SGL will also propose to privatise Lingui and Glenealy.

At 9.20am, Glenealy jumped 45 sen to RM7 with 66,000 shares traded, while Lingui added 16 sen to RM1.52 with 676,500 shares done.

SSC has indicated that it expects to propose an offer price of RM1.63/Lingui share and RM7.50/Glenealy share.

RHB Research in a note Monday said that at RM1.63 per share, and assuming the offer price of RM7.50/share for Glenealy, this effectively valued Lingui’s timber business at a PER of 9-10x based on our CY12 EPS forecast.

It said the valuation seemed fair, as this was slightly higher than its current target PER of 8x for the timber sector and comparable to its closest and more liquid peer, WTK, which was trading at a CY12 PER of 9.5x.

“The offer price for Glenealy is also fairly valued at a PER of 12.8x consensus CY2012 EPS, similar to our target PER of 13x for mid-sized plantation company.

“We believe a formal offer will be put forward once SSC finalises its funding agreement. Hence, we revise our call (for Lingui) to Trading Buy (from Underperform) with a new fair value of RM1.63 per share (from RM1.33), which represents the indicative offer price proposed by SSC,” it said.

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Maybulk shares dip in early trade

KUALA LUMPUR (Jan 30); Malayan Bulk Carriers Bhd shares dipped in early trade on Monday after the company said last week it was unaware of any reasons or any corporate exercise that may have contributed to the unusual market activity involving its shares.

At 9.05am, Maybulk fell 16 sen to RM2.49 with 134,500 shares done.

The company was queried by Bursa Malaysia Securities Bhd last Friday over the increase in share price and high trading volume. Its share price closed up 21 sen to RM2.65.

Maybulk chief executive officer Kuok Khoon Kuan was seen disposing of 830,000 shares on Jan 26 and 27, reducing his direct stake to 0.13% or 1.268 million shares.

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Tebrau Teguh share trading halted for two days

KUALA LUMPUR (Jan 30): TEBRAU TEGUH BHD [] has requested for a two-day trading halted in its securities with effect from 9am, Monday Jan 30.

In a filing to Bursa Malaysia Securities Bhd, the company said it has requested for the trading suspension until 5pm on Tuesday, Jan 31 pending an announcement of a material corporate transaction to be made by the major shareholder, Kumpulan Prasarana Rakyat Johor (KPRJ).

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