MBSB 4Q earnings soar to RM83.8m on Islamic banking, lower tax

KUALA LUMPUR (Feb 2): MALAYSIA BUILDING SOCIETY BHD [] (MBSB) posted a stellar set of earnings in the fourth quarter ended Dec 31, 2011, with net profit up 554% to RM83.82 million from RM12.81 million a year ago.

Its earnings were boosted mainly by higher net income from Islamic banking operations via the expansion of personal financing and also lower taxation. Net income from Islamic banking operations was RM113.17 million compared with RM52.92 million a year ago.

However, MBSB accorded higher allowance for impairment losses on loans, advances and financing at RM46.82 million compared with RM8.64 million a year ago.

Profit before taxation and zakat was RM101.19 million compared with RM72.43 million. Its taxation was RM17.37 million compared with RM59.62 million a year ago.

Revenue rose 66.1% to RM347.14 million from RM208.91 million while earnings per share were 8.35 sen compared with 1.83 sen. The board recommended a final dividend of 7% less income tax (5.25 sen net per ordinary share) for FY ended Dec 31, 2011.

For FY ended Dec 31, 2011, its earnings jumped 122.8% to RM325.43 million from RM146.02 million in FY10. Its revenue rose 64.8% to RM1.269 billion from RM769.94 million.

At the pre-tax level, MBSB made a record pre-tax profit of RM428.3 million, up 107% from RM207.4 million a year ago. This contributed to improved basic net earnings per share of 32.43 sen and return on equity of 43%.

MBSB chief executive officer Datuk Ahmad Zaini Othman said: “Our group’s improved performance for the 12 months of 2011 is the result of the company’s persistent efforts to grow its retail business in the face of stiff market competition.”

He said continuous operational improvements as targeted under the transformation program, “Taking MBSB to the Next Level”, also contributed to the exceptional results.

“While the asset growth is largely driven by Personal Financing-i, our strategy to diversify asset portfolio beginning early last year has also shown remarkable progress,” he said.

As at Dec 31, 2011, net loan, advances and financing stood at RM15.2 billion, an increase of 42% as compared to RM10.7 billion as at Dec 31, 2010 which exceeded the banking industry’s average growth rate of 13.6%.



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Hibiscus clarifies posted 2Q net loss of RM1.27m instead of net profit

KUALA LUMPUR (Feb 2): Two months after it announced that it posted net profit of RM1.27 million for the quarter ended Sept 30, 2011, Hibiscus Petroleum Bhd clarified on Thursday it had instead posted losses.

In its amended financial statements, it said the net losses were due to the higher expenditure. It also said it posted net losses of RM13,000 in the quarter ended Sept 30, 2010 instead of a net profit of RM13,000.

For 2Q ended Sept 30, 2011, it said the group earned interest income of about RM2.3 million from its fixed deposits placements. The total expenditure incurred was RM3.4 million, resulting in net loss before taxation of RM1.2 million.

Out of the total expenditure incurred, RM1.30 million comprised of initial public offer and proposed qualifying acquisition costs, which were regarded as non-recurring costs.



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Knusford associate apptd master developer for Johor Baru central district

KUALA LUMPUR (Feb 2): KNUSFORD BHD []’s associate has secured two contracts from the Johor state economic planning unit to undertake the transformation plan for the state capital.

Knusford said on Thursday its 40% associate CBD Development Sdn Bhd had received a letter regarding the transformation of Johor Bahru central district and the relocation of the city hawkers to a new building.

CBC Development would be appointed master developer for the transformation project, which would also hinge on a detailed proposal and business model.

The relocation of the hawkers would be part of the proposed transformation plan for Johor Bahru City.

“The board expects CBD Development to contribute positively to the growth of the group in later years,” it said.



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Maxbiz has until Feb 13 to submit appeal or face suspension

KUALA LUMPUR (Feb 2): Trading of MAXBIZ CORPORATION BHD []’s securities faces the threat of suspension from Feb 14 unless it can submit an appeal before Feb 13.

A Bursa Malaysia Securities circular said on Thursday that Maxbiz failed to submit its regularisation plan to the Securities Commission or Bursa Securities Bhd for approval within the timeframe stipulated.

Maxbiz, could still however, submit an appeal to Bursa Securities on or before Feb 13.

Any appeal submitted after the appeal timeframe would not be considered by Bursa Securities.

“In the event the company submits an appeal to Bursa Securities within the appeal timeframe, the removal of the securities of the company from the Official List of Bursa Securities on Feb 16, shall be deferred pending the decision on the company’s appeal,” it said.

Bursa Securities said upon the de-listing, the company would continue to exist but as an unlisted entity.

“The company is still able to continue its operations and business and proceed with its corporate restructuring and its shareholders can still be rewarded by the company’s performance. However, the shareholders will be holding shares which are no longer quoted and traded on Bursa Securities,” it said.



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Firm start for February, volume surges to 2.6 bn units

KUALA LUMPUR (Feb 2): Stocks on Bursa Malaysia closed on a firm note on Thursday, with the FBM KLCI advancing nearly 16 points, supported by gains in bigger capitalised stocks including Maybank, Public Bank, conglomerate Sime Darby and DiGi.

Trading volume was high with nearly 2.6 billion units transacted in a market which also saw active trade in smaller capitalised stocks. The broader market was firmer, with advancing counters beating decliners more than two to one.

At 5pm, the 30-stock KLCI was up 15.8 points to 1,537.09 and year-to-date, it is up 3.37%. Turnover was 2.58 billion shares valued at RM2.86 billion. There were 643 gainers, 286 losers and 298 counters unchanged.

Among the key regional markets, Hong Kong’s Hang Seng Index closed up 2% at 20,739.45. The China Enterprises Index of top mainland listings in Hong Kong ended up 2.93% at 11,583.47. The Shanghai Composite Index finished up 1.96% at 2,312.56.

Japan’s Nikkei 225 rose 0.76% to 8,876.82 while Taiwan’s Taiex added 1.37% to 7,652.46 but Singapore’s Straits Times Index reversed into the red in late trade, down 0.06% to 2,903.04.

Meanwhile, European shares hit a six-week high on Thursday adding to solid gains after global manufacturing data eased fears about the growth outlook, but with Greek debt talks unresolved, gains were limited.

OSK Research said it indeed the KLCI performs well over the next 15 days in line with a global rally, it would be forced to rethink our bearish view for 1H12.

“Instead, we may upgrade our call on the market to a NEUTRAL from the current Sell, and may well promote more cyclical sectors such as Oil & Gas and CONSTRUCTION [].

“While the market may subsequently turn south after a 1Q rally, still the flush of liquidity in the system may keep it resilient for most of the year. For now, we remain Defensive with Consumer stocks and other defensive mid-cap plays likely to outperform still in the short term,” it said.

Among the index-linked stocks, DiGi rose 14 sen to RM4.10, adding 2.58 points to the KLCI. Maybank added 14 sen to RM8.34, Public Bank 20 sen to RM13.74, pushing the index up by 2.48 points and 2.23 points. Sime Darby’s 14 sen gain to RM9.28 added nearly two points.

Hartalega was the top gainer, adding 41 sen to RM7.63, deemed a favourite among glove maker while among PLANTATION []s, United Plantations added 36 sen to RM20.70, SOP 29 sen to RM6.44 and PPB 26 sen to RM17.22.

Among oil and gas players, SapuraCrest jumped 32 sen to RM5.18 and Kencana 17 sen to RM3.29 ahead of the completion of their merger.

Among the decliners were Glenealy, down 15 sen to RM7.22 with 12,100 shares but the RM7.50 takeover price by Samling provided the support for the plantation stock which had run up earlier this week.

RHB Cap fell 14 sen to RM6.98, TDM 11 sen to RM4.57 and KLK 10 sen to RM25.60.



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Tajudin Ramli’s case to proceed

KUALA LUMPUR: The High Court has disallowed an application by Tan Sri Tajudin Ramli, the former major shareholder of Malaysian Airline System Bhd (MAS), to adjourn all cases involving him and various parties to facilitate an “out of court” settlement.

The High Court’s decision to go ahead with the civil proceedings involving Tajudin has been described by some in the legal fraternity as another move that demonstrates the independence of the judiciary. It paves the way for the hearing of one of Malaysia’s most awaited civil suits that has dragged on since 2006.

More importantly, the High Court’s decision to proceed, to some extent, lifts the cloud of uncertainty on the possibility that the civil suits between Tajudin and various parties — some 52 cases at least in the Court of Appeal and High Court — will be settled “out of court” as advocated by the government and ministry of finance in a letter issued last August.

In disallowing Tajudin’s application, the special officer to Judge Datuk Zaharah Ibrahim stated that case management for all suits in the High Court involving the once high-flying corporate figure fixed for March 8, 2012, would go ahead as scheduled.

Tajudin, via legal firm Lim Kian Leong & Co, had also applied to the Court of Appeal to adjourn “all relevant cases” to enable settlement of the cases to be finalised out of court.

The application to the Court of Appeal was made on Jan 27 while the application to the High Court was made on Jan 30. The High Court came back with an answer the following day.

Based on the High Court’s decision to disallow an adjournment, lawyers are awaiting in anticipation that the Court of Appeal will also proceed with the case between Tajudin and Pengurusan Danaharta Bhd (Danaharta) that has been scheduled for hearing from Feb 13 to 15. There are several other cases tied to this suit at the Court of Appeal.

The case before the Court of Appeal follows a decision in the High Court on Dec 7, 2009 whereby the judge ordered Tajudin to pay Danaharta a sum of RM589.14 million with interest at 2% per annum above the base lending rate of Malayan Banking Bhd, back-dating it to Jan 1, 2006.

Tajudin filed an appeal with the Court of Appeal on Jan 4, 2010. After case management in October, it was fixed for hearing before Tan Sri Md Raus Sharif from Feb 13 to 15.

In the application to the Court of Appeal, Tajudin stated that he has been requested by Danaharta, which is the main plaintiff in the civil suits against him to seek for an adjournment of “all relevant” cases to enable settlement of the cases to be finalised “out of court”.

It further stated that the reason Danaharta requested Tajudin to apply for “all relevant cases” be adjourned, was that the co-ordination of the many cases had yet to be finalised.

“As requested by Danaharta, we therefore respectfully seek Yang Amat Arif’s indulgence to adjourn all relevant cases involving Tan Sri Tajudin Ramli, including the appeals which have been fixed from Feb 13 and all High Court matters so that the settlement process can be finalised.

“We are instructed that Danaharta will instruct its own lawyers to confirm the request for adjournment shortly, but due to the urgency has requested our client to make this request to Yang Amat Arif immediately,” the application stated.

The managing director of Prokhas Sdn Bhd, Fazlur Rahman Ebrahim, could not be contacted for comments. Prokhas, which is owned by the finance ministry, has taken over the residual assets of Danaharta and its role in the legal suits.

Tommy Thomas, the lawyer for Danaharta, declined to comment when contacted.

Among those who have filed suit against Tajudin are Danaharta, Telekom Malaysia, Celcom (M) Bhd, CIMB, Naluri Corp Bhd, Atlan Holdings Bhd and MAS.

Tajudin, one of the coterie of bumiputera businessman close to former finance minister Tun Daim Zainuddin, was formerly the largest shareholder in MAS and controlled Celcom via Naluri Bhd. He took up a RM1.79 billion loan in 1994 to purchase a 32% stake in MAS from the government.

Like most others, he was hit by the 1997/1998 Asian financial crisis. In 2001, he sold MAS back to the government at RM8 per share, a decision that did not go down well with the public.

Former prime minister Tun Dr Mahathir Mohamad was the premier then, and Daim was recalled to public service due to the financial crisis.

Tajudin defaulted on the loans taken to purchase MAS and Danaharta filed a suit against him in 2006, seeking RM589.14 million with interest. He filed a counter suit claiming RM13.46 billion from some 22 parties and individuals.

It was not only the massive sum of RM13.46 billion that caught the public’s eye. What was more interesting was that in his extensive affidavit supporting his counter-claim, Tajudin revealed a lot of the inner-workings behind the purchase of MAS and contended that he was instructed by Dr Mahathir and Daim to take over the national carrier.

He also claimed that there was an over-riding agreement protecting him from liabilities. Dr Mahathir has denied giving such instructions.

The case against Tajudin took a twist in August 2011 when the litigants in the various suits, including MAS, were told that the government and the ministry of finance had agreed that all suits against Tajudin be withdrawn for it to be settled out of court.

The litigants, in a letter signed by Minister in the Prime Minister’s Department Datuk Seri Mohamed Nazri Abdul Aziz, were told to hand over their cases to a legal firm, Hasfarizam Wan & Aisha Mubarak, a firm that acts for Umno.

Nazri had claimed then that the move to settle out of court would save the government billions. But it is believed that this is something that not all the litigants are in concurrence.



This article appeared in The Edge Financial Daily, February 2, 2012.



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DRB-Proton integration may widen opportunities for vendors

KUALA LUMPUR: AutoV Corp Bhd, a components manufacturer for the auto industry, believes the impending takeover of Proton Holdings Bhd by DRB-Hicom Bhd will open up new business opportunities for Proton’s present vendors.

AutoV manufactures components and parts that primarily cater for Proton, which accounts for around 70% of its revenue. The rest of the company’s revenue comes from supplying parts to Perodua, Honda, Toyota and other carmakers.

“We feel that the takeover will offer more business potential for us. Having said that, it would depend on the direction that DRB-Hicom takes on Proton,” AutoV chairman and CEO Bernard Kong told The Edge Financial Daily.

Kong reckoned that a possible drawback from the takeover may be the overlap of vendors supplying to Proton.

“DRB-Hicom has its own vendors, which may be capable of producing components that AutoV or any other vendors currently supply to Proton,” he said.

“But we believe we can work with DRB-Hicom (as a partner), instead of a competitor. If we can’t be a tier-one supplier, which supplies directly to the manufacturer, we can be a tier-two supplier and serve those in tier-one. We can complement and support each other,” said Kong.

He said this may be true in the case of Proreka (M) Sdn Bhd, a manufacturer of plastic parts acquired by AutoV last June for RM27.88 million. Proreka is currently a tier-one vendor and manufacturer of OEM (original equipment manufacturer) and ODM (original design manufacturer) automotive parts and components.

In an interview last August, Kong said the addition of Proreka may elevate AutoV’s role in supplying to Proton.

“Proton would prefer itself to be supported by bigger vendors that can cater for its large demand. We believe that with the acquisition of Proreka, we can achieve the necessary requirements needed to be bigger and better,” he said.

AutoV had stated that the acquisition of Proreka was “in line with its strategic plan to grow the group into a bigger and integrated producer of automotive parts with a more diversified range of products and clientele”.

Besides Proreka, AutoV last year also acquired JP Metal Sdn Bhd, a manufacturing and fabrication unit, from JoTech Holdings Bhd for RM7 million.

Though revenue in its most recent quarter improved, AutoV’s results for the nine months ended Aug 31, 2011 showed a year-on-year decline.

“Group revenue decreased by RM3 million or 3.7% to RM77.2 million from RM80.2 million in the preceding corresponding period. This was mainly due to the reduced production of certain car models during the period of declining sales,” AutoV said in a statement to Bursa Malaysia.

AutoV announced on Monday that Temasek Formation Bhd had received approval from the Securities Commission (SC) for the merger of AutoV, JoTech and AIC Corp Bhd.

The merged entity will be listed under Temasek Formation.

“Prior to the merger, AutoV has always been restricted by its small size. We had problems in the past with acquiring a certain company due to our smaller presence. With the merger, we plan to continue with our current strategy of acquiring companies that prove to be beneficial to us,” Kong told The Edge Financial Daily in an earlier interview.

“Upon the successful completion of the proposed merger, it will create a larger group in terms of market capitalisation. It will also streamline the multi-tiered shareholding structure and unlock potential intrinsic values of the target companies,” said Temasek Formation owner Datuk Goh Tian Chuan.


This article appeared in The Edge Financial Daily, February 2, 2012.


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Guan Chong sees strong revenue in 2012

KUALA LUMPUR: Guan Chong Bhd, one of the top cocoa processors in the world, may see a 30% to 50% increase in revenue for FY12 ending Dec 31, say fund managers with guidance from the management. Its second production line at Batam, Indonesia commences operations in March or April this year.

The second line at Batam will increase Guan Chong’s annual cocoa grinding capacity, in Malaysia and Indonesia combined, by over 40% to 200,000 tonnes.

For FY11, the consensus is for Guan Chong’s revenue to come in at around RM1.3 billion, compared with RM1.17 billion in FY10. A 30% to 50% increase in FY12 will lead to revenue of RM1.69 billion to RM1.95 billion.

“Margin per tonne may be lower [in FY12] but overall group performance will be sustained [due to higher revenue],” its managing director and CEO Brandon Tay Hoe Lian told The Edge Financial Daily in a recent phone interview.

For the nine months to Sept 30, 2011, Guan Chong posted a net profit of RM90.47 million on a revenue of RM990.36 million, an increase of 58.4%, and 18.4% from a net profit of RM57.11 million and revenue of RM836.30 million in the same nine-month period in 2010. For the full FY10, net profit was RM101.15 million on the back of RM1.16 billion in revenue.

Guan Chong is principally involved in manufacturing cocoa-derived food ingredients — cocoa butter, cocoa powder, cocoa cake, and cocoa liquor (cocoa mass). These products are mainly used to produce chocolates, dairy products, bakery products, instant drinks, confectionery and chocolate drinks.

In a statement to Bursa Malaysia recently, Guan Chong said its second production line at Batam is expected to start commercial production in March or April this year. The line will increase Guan Chong’s total annual cocoa grinding capacity to 200,000 tonnes from 140,000 tonnes currently.

Guan Chong’s first production line at Batam has an annual production capacity of 60,000 tonnes, while its plant in Pasir Gudang, Johor, has a capacity of 80,000 tonnes.

Tay expects the additional capacity in Batam to be absorbed by orders from new multinational corporations and existing customers, which include global chocolate manufacturers like MARS, Hershey’s and South Korea’s Lotte Confectionery.

Tay said the recent rebound of cocoa prices will not significantly affect Guan Chong’s margins as most price changes are passed on to its customers.

Cocoa prices surged in recent weeks due to concerns that the nationwide strike in Nigeria (the world’s fourth largest producer) would disrupt supplies, Bloom-berg reported.

For instance, cocoa futures for March delivery were up by as much as 15.9% from US$2,028 (RM6,165.12) per tonne on Jan 9 to US$2,350 per tonne on Jan 12. However, prices are still low compared with a peak of US$3,593 per tonne in March 2011.

“We sell forward as far as a year [into next year] and stock up more than two months of our needs of raw materials,” Tay said.

He added that higher cocoa future prices had actually encouraged more cocoa bean production in countries such as Indonesia, where Guan Chong’s Batam plant sources its cocoa from. And as the company sources cocoa internally in Indonesia it avoids paying taxes, giving it a better cost advantage. This is the main reason Guan Chong is expanding its capacity in Indonesia, the third largest cocoa producer in the world.

On the industry outlook, Tay said demand for cocoa products will remain relatively steady or slightly better than 2011.

Guan Chong’s short-term plan is to ensure that its enlarged operation (with the second production line at Batam) runs smoothly, he said.

“We have been increasing our capacity from 80,000 tonnes in 2010 to 200,000 tonnes in 2012 in just a three-year time frame. We need to digest the increased capacity and fine-tune our overall performance to the top,” he said.

On its long-term plans, Tay said: “We will continue to seek opportunities to expand Guan Chong’s downstream business and synergy to invest in related industries.”

Guan Chong, with total issued shares of 319.74 million, had a market capitalisation of RM745 million at its close of RM2.33 on Tuesday. It had a book value of 78.4 sen as at end-September 2011.

Its share price has gained around 6% over the past 52 weeks and has traded between a 52-week high of RM3.10 and a low of RM1.69.

Since its listing in 2005 until 2010, Guan Chong has chalked up compound annual growth rates of about 30% for revenue and 43% for net profit.

In FY10, Guan Chong paid total dividends of 10.625 sen per share representing a payout ratio of 27.5% of its profit for the year. For FY11, it has declared dividends amounting to 9.25 sen per share to date, pending the release of its 4QFY11 results. In 2010, Guan Chong set a dividend policy of 25% which will take effect from FY11.

According to Bloomberg data, Guan Chong is trading at a forward price-earnings ratio of 6.3 times, a wide valuation compared with its Singapore-listed peer Petra Foods Ltd, with a forward PER of about 15 times.


This article appeared in The Edge Financial Daily, February 2, 2012.



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DRB-Hicom auto chief denies speculation

KUALA LUMPUR: Datuk Nik Hamdan Nik Hassan, the group automotive director at DRB-Hicom Bhd, has denied speculation that he has resigned from his current position in the conglomerate as well as market rumours that he will assume the post of chairman of Proton Holdings Bhd.

Nik Hamdan was quoted by news reports as saying he is instead working with key officials of DRB-Hicom to facilitate the takeover of Proton by the conglomerate.

Speculation of his resignation follows the sale of Khazanah Nasional Bhd’s 42.7% stake in Proton to DRB-Hicom, which is controlled by tycoon Tan Sri Syed Mokhtar Al-Bukhary.

Khazanah’s equity interest in Proton will be divested to DRB-Hicom for RM5.50 a share for a total sum RM1.29 billion. DRB-Hicom will be required to do a mandatory general offer for the remaining Proton shares it does not own upon completion of the share sale.

Nik Hamdan is the brother-in-law of Proton CEO Datuk Seri Syed Zainal Abidin Syed Mohamad Tahir.

Industry observers told The Edge Financial Daily that should Nik Hamdan relinquish his position in DRB-Hicom, it would deprive the conglomerate of a capable hands-on automotive expert.

Nik Hamdan has over 25 years of automotive experience, with stints in the former Hicom Bhd, Proton as well as Honda Malaysia.

DRB-Hicom is a major automotive assembler and distributor. Its prowess in automotive assembly is by virtue of its integrated complex in Pekan, Pahang.

According to the DRB-Hicom’s website, the assembly plant’s portfolio includes brands like Mercedes-Benz, Suzuki and Isuzu.


This article appeared in The Edge Financial Daily, February 2, 2012.




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YTL Cement minorities stuck between a rock and a hard place

KUALA LUMPUR: It would appear that YTL Cement Bhd’s minority shareholders are stuck between a rock and a hard place when it comes to accepting YTL Corp Bhd’s offer to take the former private.

Last December, the conglomerate made a conditional share exchange offer to buy the remaining shares and outstanding irredeemable convertible unsecured loan stocks (ICULS) in YTL Cement that it does not own at RM4.50 and RM2.21 respectively.

The share exchange would be settled with the issuance of YTL Corp shares of 10 sen each at RM1.42 per share. This translates into an exchange ratio of 3.17 YTL Corp shares for every YTL Cement share, and 1.56 YTL Corp shares for every YTL Cement ICULS.

The offer, which will be closed on Feb 10, 2012, raised eyebrows as YTL Corp received a waiver from Bursa Malaysia to hold an extraordinary general meeting (EGM) to obtain YTL Corp shareholders’ approval for the share swap.

YTL Corp based this waiver on the grounds that it has obtained authorisation from its shareholders at its annual general meeting (AGM) last November to issue up to 10% of its current issued shares without the need for shareholders’ approval. YTL Cement was also not required to hold an EGM.

As such, the deal would go through without an EGM at YTL Corp and YTL Cement.

HwangDBS Investment head of equities Gan Eng Peng said YTL Corp had provided a poor share swap for the minority shareholders of YTL Cement, adding that the minorities could not object to the offer as no EGM would be held, and the offer does not include a premium.

“Furthermore, YTL Corp’s high effective shareholding means it is very easy to delist YTL Cement, forcing the minorities to accept the poor deal,” Gan told The Edge Financial Daily.

YTL Corp already owned 47.4% of YTL Cement on Jan 9, 2012, the posting date of the offer document . As at Jan 20, it received acceptances for an additional 9.62% stake in YTL Cement which nudged up its interests to 57.02%, hence making the offer unconditional. Feb 10 will be the first closing date for the offer.

Gan said the share swap is essentially a case of Hobson’s Choice for YTL Cement’s minorities who have little to benefit from the share swap, whether they accept or reject the offer.

Gan noted that if the minorities accept the offer, they would be trading for less attractive YTL Corp shares which are more expensive and provide less dividend payout.

For FY11 ended June 30, YTL Corp and YTL Cement declared two sen and 13 sen in dividends to their shareholders respectively. The dividends represent a yield of 1.4% for YTL Corp shares at RM1.42 each, and 2.9% yield for YTL Cement shares based on the offer price of RM4.50 each.

Gan also noted that the minorities would be switching their investment to a conglomerate, which is less favourable than a pure-play stock.

The latest statements ended Sept 30, 2011 showed that YTL Cement was in a net cash position, while YTL Corp had RM28.34 billion in borrowings and RM12.97 billion in cash.

As at Sept 30, 2011, YTL Corp’s and YTL Cement’s net assets per share were RM1.20 and RM4.76 respectively,

For FY11, YTL Corp posted a net profit of RM1.03 billion or 11.53 sen per share (basic) and 11.44 sen (fully diluted).

YTL Cement, meanwhile, recorded RM337 million in net profit, with earnings per share of 71.53 sen (basic) and 48.44 sen (fully diluted).

At the offer price of RM4.50, YTL Cement is being valued at 0.95 times book, while the shares it will receive in YTL Corp are priced at 1.18 times book.

On a price-earnings ratio (PER) basis, YTL Cement is priced at a historical PER of 6.3 times, while the YTL Corp shares are issued at a PER of 12.3 times — almost twice that of YTL Cement shares.

On a fully diluted basis though, the PER valuation gap narrows, with YTL Cement valued at 9.3 times and YTL Corp at 12.4 times.

If the minorities were to refuse the offer, Gan said they would end up with YTL Cement shares that are less liquid as other parties would have accepted the share swap.

Note that YTL Corp already owned a 57.02% stake as at Jan 20.

In its announcement to Bursa Malaysia, YTL Corp said it does not intend to maintain the listing of YTL Cement if it does not meet the public shareholding spread of 25%.

YTL Corp and parties acting in concert (PAC) currently have a 96% stake in the ICULS. If the ICULS are fully converted, YTL Corp and PAC would own 67% of YTL Cement’s enlarged share capital.

“It would be easy for YTL Corp to increase its shareholding from 67% to 75% and force a delisting. In an EGM called for delisting, all shareholders, including PAC, can vote and there should be an exit offer of the same nature”, said Gan.

In addition, a minimum 90% acceptance level of the outstanding shares would result in a mandatory acquisition by YTL Corp of YTL Cement shares, including those that belong to the dissenting shareholders.

As such, Gan noted that the outcome is not favourable for YTL Cement’s minority shareholders, whether they accept the offer or not.

Compared with the recent privatisation offers for Proton Holdings Bhd and QSR Brands Bhd which offered a premium to the minorities, it appears that YTL Cement is left with no clear winning choice.

While the share swap is an easy deal for YTL Corp to privatise its subsidiary at a low price, observers are concerned that it would become a precedent for similar deals in the future.


This article appeared in The Edge Financial Daily, February 2, 2012.




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Article put me in negative light, says ex-Pos Malaysia chairman

KUALA LUMPUR: Former Pos Malaysia non-executive chairman Tan Sri Adam Kadir told the High Court on Tuesday in a defamation suit that he believes certain words used in an article had cast a negative light on him.

In the suit against The Edge Communications Sdn Bhd, Adam alleged that in an article in The Edge Financial Daily on June 18, 2008 entitled “Adam resigns ahead of Pos Malaysia AGM”, the sentence “It is believed that the disagreement between the two parties ranged from the disposal of land to the awarding of contracts” was published in bad faith.

The Edge Communications publishes The Edge Financial Daily as well as business weekly The Edge Malaysia.

The story was published a day before the said AGM.

However, he admitted during cross-examination by The Edge Communications’ counsel Raja Eileen Soraya Raja Aman that a letter he sent to The Edge after the publication of the June 18, 2008 article did not state that the said article had contained “falsehoods”.

He also agreed with Raja Eileen that the said article did not directly state that he had misused his position as chairman by getting involved in activities which resulted in losses to Pos Malaysia.

Asked why he took about two years to take action against The Edge in re-examination by his counsel Mohamed Hanipa Maidin, Adam replied: “I waited for two years because I know I have three to four years to take action.”

In his suit filed on July 15 last year, Adam named Ho Kay Tat, former editor in chief of The Edge and The Edge Financial Daily, and The Edge Communications Sdn Bhd as defendants.

According to his statement of claim, Adam said Ho had allowed The Edge Communications to publish a defamatory statement of him together with his photograph on the front page of The Edge Financial Daily on June 18, 2008.

In the statement of defence filed on Aug 15 last year, Ho and The Edge Communications claimed qualified privilege and fair comment on a matter of public interest.

Ho who is now the group managing director/CEO of Star Publications (M) Bhd testified that the article was published as a matter of public interest because Pos Malaysia is a company listed on Bursa Malaysia and its major shareholder Khazanah Nasional Bhd is the investment holding arm of the government.

“Any issues or disputes involving any one of these two companies would be a matter of public interest,” said Ho.

Khazanah was then the biggest shareholder of Pos Malaysia. In November 2010, Adam had also filed a suit against Khazanah’s managing director Tan Sri Azman Mokhtar over his dismissal from the chairman’s post. The suit has since been dismissed.

At Tuesday’s hearing, Ho also told the court that there was no record of a complaint from Adam and that he only knew that the former Pos Malaysia chairman was aggrieved over the content of the said article when he received a letter of demand dated Oct 20, 2010.

“I was surprised when I first saw the plaintiff’s letter of demand as it was only sent almost two years after the article was published,” he said.

Ho also said that Adam had been a columnist for The Edge Malaysia and his last column had been published on June 16, 2008.

In cross examination by Adam’s counsel Mohamed Hanipa Maidin, Ho disagreed that by including the words “disposal of land to the awarding of contracts”, the readers would think that Adam was involved in it.

The hearing before Justice Datuk John Louis O’Hara continues today.


This article appeared in The Edge Financial Daily, February 2, 2012.


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AirAsia 4Q11 traffic numbers in line

AirAsia Bhd (Jan 31, RM3.55)
Maintain buy at RM3.56 with a revised fair value of RM4.40 (from RM5): We maintain our “buy” call on AirAsia, but with a lower fair value of RM4.40 per share (RM5 previously) following an earnings cut. Our sum-of-parts derived valuation continues to peg AirAsia at 12 times FY12F earnings.

The budget airline announced sterling 4QFY11 operating statistics on Jan 30. The group reported a 9% year-on-year growth in 4QFY11 passenger traffic. For the full year, passenger traffic grew by 12% (FY10: +20%). The numbers were in line with our expectations; though the load factor of 80% surprised on the upside given lower than expected capacity growth of 7%.

Traffic numbers aside, however, we are concerned about AirAsia’s ability to achieve our forecast yield of 16 sen per revenue passenger kilometres for FY11F. We believe surcharges are unlikely to go away considering stubbornly high fuel prices, but slowing underlying demand could translate into more aggressive strategies on underlying pricing.

We have conservatively trimmed our forecasts by 15% to 20% over FY11 to FY13F ahead of its results announcement next month on: (i) lower yield assumptions (from 16 sen to 15.4 sen in FY11F); (ii) higher jet fuel price assumptions (from US$120 (RM364.80) to US$126 per barrel); and (iii) lower available seat kilometres (ASK).

Nonetheless, any yield weakness should be cushioned by the elimination of irrational competition with the withdrawal of Firefly’s jet operations in December 2011. Additionally, AirAsia’s Asean-centric network and potential downtrading by passengers from full-service carriers (FSC) suggest that AirAsia passenger trends will not be as badly affected as its FSC peers as a result of the economic slowdown in Europe. During the 2009 economic slowdown, AirAsia managed to grow passenger traffic by up to 20%.

More importantly, our “buy” recommendation is also premised on the value unlocking from the listing of Thai AirAsia and Indonesia AirAsia (both currently 49%-owned, but which for our calculations we assume will be diluted to 45% post listing). The current market price of RM3.59 per share only captures 25% of the value of AirAsia’s holdings in these associates. One of the hurdles for the listing in 4QFY11 was the poor market valuations then — which have since improved quite significantly, suggesting greater certainty in the listing now.

Key 2012 valuation/earnings catalysts include: (i) listing of associates; (ii) recognition of associate earnings; (iii) commencement of AirAsia Japan; (iv) yield upside from AirAsia’s monopoly in Malaysia’s budget airline space. — AmResearch, Jan 31


This article appeared in The Edge Financial Daily, February 2, 2012.




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Credit crunch and weakening ringgit negative for automobile sector

Automotive sector
Maintain negative: December’s total industry volume (TIV) dropped by 12.9% year-on-year (y-o-y) and 2% month-on-month (m-o-m) to 47,708 units. The lower sales in December were attributed to the floods in Thailand and seasonal factors. The Malaysian Automotive Association (MAA) guided that January 2012 vehicle sales should improve slightly given ongoing promotional campaigns and the rush to deliver new vehicles ahead of the Chinese New Year holidays.

In 2011, Perodua continued to maintain the top spot with a market share of 30% against Proton’s 26.4%. In the non-national vehicle segment, Toyota remained resilient with a 14.8% market share. However, the back-to-back disasters narrowed the market share gap between Honda and Nissan. The top three Japanese marques ended FY11 with only 25.6% market share of TIV down from 28.3% in FY10.

We anticipate vehicle sales to benefit from a pent-up demand after last year’s two major disasters. However, there are several potential dampeners for the auto industry: (i) The uncertain global economic outlook could dent consumer confidence and they would turn cautious on spending on big-ticket items such as cars.

(ii) A more stringent auto financing loan approval process and credit control. Bank Negara Malaysia imposed a new ruling on credit standards late last year. Banks are now required to assess loan applications based on the net income instead of the gross income of the borrower. About 70% of hire purchase loan applications have been rejected since the new ruling came into place. This would likely affect consumers within the low to middle income bracket, while mid-range Japanese and South Korean makes could be the hardest hit. Second-hand vehicle prices are expected to fall as the car sellers will offer discounts given the stricter credit financing conditions.



(iii) The weakening of the ringgit against the yen and US dollar could add cost pressure in terms of rising raw material prices and potentially higher completely-knocked down (CKD) costs. Among local stocks, the biggest exposure to the greenback over the yen is Tan Chong Motor Holdings Bhd with as much as 70% of its imports in US dollars. UMW Toyota Motor Sdn Bhd’s imports are mostly priced in dollars and its 38% associate Perusahaan Otomobil Kedua Sdn Bhd (Perodua) imports in yen. MBM Resources Bhd has no direct exposure to yen except via its 20% associate Perodua. Proton Holdings Bhd has about 7% exposure to the greenback via imported CKD content in its Inspira model.

We continue to maintain our 2012 TIV forecast of 611,140 units, lower than MAA’s 615,000 as we expect more severe repercussions for TIV from tighter credit conditions.

We reiterate our “negative” recommendation for the automotive sector. Under our coverage, we have only a “buy” on MBM Resources (target price: RM3.60 — under review) backed by its current low valuation among its peers. We maintain “neutral” on Tan Chong (TP: RM4.50), UMW (TP: RM6.90) and Proton (TP: RM5.50). — MIDF Research, Jan 31


This article appeared in The Edge Financial Daily, February 2, 2012.



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Another bad quarter for Malaysian Pacific Industries

Malaysian Pacific Industries Bhd (Jan 31, RM3.48)
Maintain sell at RM3.68 with a fair value of RM2: MPI reported sequentially weaker results as 2QFY12 revenue fell to RM279.2 million (-11.5% quarter-on-quarter [q-o-q], -24% year-on-year [y-o-y]) on anaemic demand from upstream players amid an industry-wide general inventory correction as the semiconductor industry suffered a disruption in its supply chain. During the quarter, fixed costs remained high owing to underutilisation of assets, which led to negative operating margins, which narrowed by 280 basis points (bps) q-o-q (-1,270 bps y-o-y) to -5.8% and in turn dragging down group bottom line to a loss of RM16.2 million.

Customers’ guidance for the upcoming quarter, being a seasonally weaker period, is: (i) Skyworks expects revenue to contract by 9% q-o-q to US$360 million (RM1.09 billion) as handset manufacturing tapers off after the holiday season; (ii) Maxim anticipates revenue to weaken to US$555 million to US$585 million, implying a 1% to 6% q-o-q decrease, due to softer demand from the end markets, especially PC notebooks and optical equipment used in communications infrastructure; and (iii) Linear Technology believes that it is at an inflection point and estimates revenue to go up by 4% to 8% q-o-q.

Last week, the International Monetary Fund (IMF) cut its global growth forecast by 0.7% and 0.6% for FY12 (4% to 3.3%) and FY13 (4.5% to 3.9%) on fears the European debt crisis may cause ripple effects globally. We think there might be a prolonged slowdown in the sector as consumers may be more cautious on spending. According to SEMI, the global industry association serving the manufacturing supply chains for the microelectronic, display and photovoltaic industries, the industry is still plagued by an oversupply of semiconductor equipment, with the book-to-bill ratio for worldwide semiconductor manufacturing equipment at 0.88 for the month of December. In addition, the Semiconductor Industry Association said November quarterly worldwide semiconductor sales contracted by 2.4% q-o-q and 3.1% y-o-y.



The worst is not over for the local semiconductor industry or MPI as the current run-up in its share price is unjustifiable. For now, we are maintaining our financial forecasts while reiterating our “sell” call with our fair value unchanged at RM20, based on 0.6 times FY12 price-to-net tangible assets. — OSK Research, Jan 31


This article appeared in The Edge Financial Daily, February 2, 2012.



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Shift in tax-free quotas for crude palm oil?

Plantations sector
Maintain underweight: Malaysia has denied reports that it has delayed issuing quotas for tax-free crude palm oil (CPO) because it is drafting a policy to counter competition from Indonesia. This will provide short-term relief to the market.

However, we believe the government is still exploring options to help local downstream players. This may be negative for the earnings of pure upstream producers. In view of this risk and the rich valuations of Malaysian planters relative to regional peers, we maintain our “underweight” call.

According to Reuters sources, Malaysia has delayed issuing quotas for tax-free export of CPO in 2012 as it is drafting a policy to counter competition from Indonesia, which slashed export taxes for refined oil.

An official involved in the licensing process said the government is formulating a framework that would be acceptable to all stakeholders in the Malaysian palm oil industry. However, Tan Sri Bernard Dompok, Minister for Plantation Industries and Commodities, has denied this news, attributing the delay to the festive holidays.

The denial of a policy shift in tax-free quotas for CPO is neutral for the sector. But we understand from the market that the government has been exploring options to protect the downstream industry from rising competition. One of the options being explored is a reduction of Malaysia’s CPO export tax to parity with Indonesia’s and scrapping or reducing the CPO tax-free quota system.

This would be negative for the upstream palm oil players and palm oil producers who currently enjoy tax-free CPO quotas. It would be positive for the local refiners as it would allow them to compete on a level playing field with Indonesian players.

A shift in policy to help the downstream players in Malaysia may be negative for the upstream players unless the government forks out tax rebates. We maintain our “underweight” call on Malaysian planters in view of their pricey valuations and potential earnings risks. — CIMB Research, Jan 31


This article appeared in The Edge Financial Daily, February 2, 2012.



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Southern steel declines on Q2 loss

Southern Steel Bhd. (SSB MK) slid 4.9 per cent to 1.95 ringgit, bound for its steepest decline since Sept. 27. The steel producer posted a second-quarter net loss of 5.53 million ringgit, it said in a filing to the exchange. It didn’t provide year-earlier figures because of a change in its financial calendar. -- Bloomberg



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Malaysian AE climbs on higher Q2 income

Malaysian AE Models Holdings Bhd. (MAE MK), a provider of industrial automation and sensor equipment, climbed 4.6 percent to 57 sen, set for its highest close since Aug. 3. Its second- quarter net income jumped 70 percent from a year earlier to 3.34 million ringgit, the company said in a statement. -- Bloomberg



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Greenyield up 12pc, moving to main board

Greenyield Bhd. (GREE MK), a manufacturer of agricultural products, advanced 12 percent to 24 sen, headed for its highest close since Sept. 26. The company will transfer its listing to the Main Board on Feb. 8, according to an exchange filing. -- Bloomberg



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Berjaya Land falls on prop sale news

Berjaya Land Bhd. (BL MK), a property developer, fell 1.6 percent to 92.5 sen. The company denied in a stock-exchange filing a Business Times report that it’s planning to sell overseas hotel properties. Separately, the company said in a statement that it has sold 8.25 million shares in Berjaya Sports Toto Bhd. (BST MK) for 35.2 million ringgit. -- Bloomberg



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KL shares remain bullish at mid-afternoon

Share prices on Bursa Malaysia remained in positive territory at mid-afternoon today on continued buying momentum following the firmer overnight Wall Street, dealers said.

They said the investors were also more confident towards the progress of the eurozone debt crisis.

As at 3.01pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) was 9.09 points higher at 1,530.38.

The Finance Index gained 38.22 points to 13,480.89, the Plantation Index surged 23.30 points to 8,752.72 and the Industrial Index perked 31.40 points to 2,838.22.

The FBM Emas Index jumped 79.46 points to 10,666.66, the FBM Mid 70 Index soared 151.11 points to 12,310.99 and the FBM ACE Index earned 3.31 points to 4,499.90.

Gainers beat losers 540 to 291 with 326 counters unchanged, 315 untraded and 15 suspended. Turnover stood at 1.69 billion shares worth RM1.61 billion.

Of the actives, Tebrau Teguh advanced eight sen to 83 sen, Petronas Chemicals-CH added 3.5 sen to 60 sen, while D.B.E. Gurney Resources eased half-a-sen to 12 sen.

Among heavyweights, Maybank gained four sen to RM8.24, Sime Darby added 12 sen to RM9.26 and Petronas Chemicals Group rose eight sen to RM6.75. -- BERNAMA



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Ahmad Zaki, IJM jump on MRT job

Ahmad Zaki Resources Bhd. (AZR MK) jumped 4 percent to 91.5 sen, on course for its highest close since April 18. IJM Corp. (IJM MK) advanced 3.5 percent to 5.94 ringgit. The two companies received contracts from Mass Rapid Transit Corp. to build parts of a mass-rail network, according to stock- exchange filings. IJM’s contract is valued at 974.8 million ringgit ($323 million) and Ahmad Zaki’s at 764.9 million ringgit, the companies said. -- Bloomberg



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S P Setia takes legal action over RM330m land deal dispute

KUALA LUMPUR (Feb 2): S P Setia Bhd has taken legal action over a RM330.13 million land deal to stop the vendor, Ban Guan Hin Realty Sdn Bhd from disposing of a piece of land in Ulu Langat, Selangor to other parties.

S P Setia said on Thursday, its unit Bukit Indah (Selangor) Sdn Bhd had filed and served a writ of summons and statement of claim against Ban Guan Hin Realty on Jan 31 over the land, measuring 1,010.5 acres.

The legal action was for, among other remedies, specific performance of the sales and purchase agreement.

“Bukit Indah has also filed an application for interlocutory injunction to, inter-alia, restrain Ban Guan Hin Realty from disposing, transferring, selling, letting, charging or howsoever dealing with and/or encumbering the said Land until the disposal of the action or until further order is made by the court,” it said.

To recap, on Aug 12, 2011, Bukit Indah entered into an SPA with Ban Guan Hin Realty for the proposed purchase of the land.

S P Setia had then said it intended to develop a mixed residential township development project on the site with an estimated gross development value of RM3.5 billion.

It had also said then the proposed acquisition offered S P Setia a good opportunity to tap into strong demand for attractively priced homes by first time owners and other home buyers in the Semenyih-Kajang corridor.

However, on Dec 13, S P Setia announced the vendor had not agreed to an extension of the period for the fulfillment of the conditions precedent which included the requirement for the approval of the Estate Land Board to be obtained for the sale and transfer of the said Land to the purchaser.



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Petronas Gas surge after fair value raised

Petronas Gas Bhd surged to a record in Kuala Lumpur trading after the stock’s so-called fair value was raised at AMMB Holdings Bhd to reflect rising demand for natural gas and the prospects of more gas plants in Malaysia.

Shares of the gas distributing arm of state oil company Petroliam Nasional Bhd, or Petronas, jumped as much as 12 per cent to RM17.50, the highest intraday price on record. They traded at RM16.06 at the 12:30 p.m. local time break. Petronas Gas is the third-best performer on the benchmark FTSE Bursa Malaysia KLCI Index today.

Petronas, which is building a $20 billion refining complex bordering Singapore, said in June it will construct a liquefied natural gas import and re-gasification terminal there. The oil and gas hub is aimed at complementing Malaysia’s 10-year $444 billion program to build roads, railways and power plants.

“We remain positive on Petronas Gas due to the global shift from nuclear to natural gas for power generation,” Alex Goh, an analyst at AMMB, wrote in a report today. The company will gain from the “multiple domestic re-gasification projects and expanding power generation ventures,” he said. Goh raised his fair value for the stock to 17.62 ringgit from 15.30 ringgit and kept his “buy” rating.

Petronas and Tenaga Nasional Bhd., Malaysia’s biggest power producer, are investing in a 300-megawatt gas plant and LNG terminal in eastern Sabah state, the Star newspaper reported today, citing Tenaga Chief Executive Office Che Khalib Mohd Noh. He couldn’t be immediately available for comment when phoned at his office today, as he was out for a meeting.

Petronas Gas processes natural gas from offshore fields before being piped and delivered to power, industrial and commercial users. The company reported net income of 350.2 million ringgit ($116 million) for the second quarter ended Sept. 30. Revenue was 927.3 million ringgit. It gave no year-ago comparison after changing the company’s fiscal year-end. -- Bloomberg



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Cypark gets nod for landfill job

Cypark Resources Bhd has received an approval-in-principle letter from the government for the proposed development of a new sanitary landfill in Negeri Sembilan.

In a statement today, the company said the approval allows Cypark to implement the project through build, operate and transfer (BOT) method subject to the terms and conditions to be agreed, via a public private partnership.

It would enable Cypark to proceed with negotiations to finalise and formalise the terms and conditions of the concession agreement, targeted to be completed within the next six months, it said.

The environmental technology and engineering specialist had earlier submitted the BOT proposal to the government for a concession period of 25 years.

The project, which will treat and dispose municipal solid waste (MSW) received from many parts of Negeri Sembilan, is expected to commence this year and completed in a few phases over a period of two years.

The estimated flow of MSW into the project is above 1,000 tonnes per day.

Cypark's Executive Chairman, Tan Sri Razali Ismail said the project would contribute significantly to the revenue and earnings of his company.

The earnings would come from the tipping fees paid by the government for every tonne of MSW received and the sale of renewable energy to Tenaga Nasional Bhd with favourable rates as currently provided by the Sustainable Energy Development Authority (SEDA) through the Feed-in-Tariff (FiT).

"We expect to see even brighter prospects for Cypark," he said, adding that, this will be in addition to the recurring future earnings to be generated by its other renewable energy projects, such as the Pajam 8 MW solar farm.

Pajam 8 would start selling green energy to Tenaga Nasional for 21 years from March 2012, Razali said. -- BERNAMA



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AirAsia chief: Suit won't affect sales

The recent lawsuit against AirAsia X in Australia will not affect the sales performance of the the low-cost carrier in the country, says AirAsia Group chief executive officer, Tan Sri Tony Fernandes.

He said the lawsuit was a minor technical problem and would not result in any changes in the long-haul budget airline's frequencies to Australia.

AirAsia X currently flies to Gold Coast, Melbourne, Perth and Sydney.

Earlier last month, a consumer watchdog in Australia sued the budget carrier for allegedly failing to disclose the full price of fares for flights from Australia.

The Australian Competition and Consumer Commission (ACCC) took legal action against the airline the same day its executives were launching the fares for the Sydney-Kuala Lumpur route with one-way fare from as low as A$99 (RM319).

"The issue concerns only four routes from hundreds of AirAsia's and AirAsia X's routes. Thus, it's a small issue.

"The AirAsia X management has corrected it," he told reporters after welcoming the arrival of AirAsia's 100th Airbus A320 at the Low-Cost Carrier Terminal here today.

He said Azran (AirAsia X chief executive officer) has already eyed possibilities for AirAsia going to Adelaide.

Meanwhile, Fernandes said, the Comprehensive Collaboration Framework between Malaysian Airline System Bhd (MAS), AirAsia and AirAsia X last year would produce significant results in the next six months.

"The share-swap deal, which included a collaboration agreement to explore opportunities on a broad range of areas between the entities, is special to AirAsia group.

"In the next six months, things will change significantly.

"MAS and AirAsia will jointly make Malaysia a powerhouse in the Asian aviation industry," he said. -- BERNAMA



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Fernandes: Lawsuit won't affect AirAsia sales

SEPANG (Feb 2): The recent lawsuit against AirAsia X in Australia will not affect the sales performance of the the low-cost carrier in the country, says AirAsia Group chief executive officer, Tan Sri Tony Fernandes.

He said the lawsuit was a minor technical problem and would not result in any changes in the long-haul budget airline's frequencies to Australia.

AirAsia X currently flies to Gold Coast, Melbourne, Perth and Sydney.

Earlier last month, a consumer watchdog in Australia sued the budget carrier for allegedly failing to disclose the full price of fares for flights from Australia.

The Australian Competition and Consumer Commission (ACCC) took legal action against the airline the same day its executives were launching the fares for the Sydney-Kuala Lumpur route with one-way fare from as low as A$99 (RM319). - Bernama



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MIDF 'neutral' on banking sector

KUALA LUMPUR: MIDF Research is neutral on the banking sector as it expects net profits this year to be moderated by slower economic growth.

In a note today, MIDF said loan growth for this year was expected to be dampened and would grow at a slower rate of nine per cent.

It said exports and industrial production were expected to be affected by external environment.

"Eventhough the private sector is expected to cushion the impact from debt crisis and weaknesses of the advanced economies, overall, the growth of the domestic economy would still be impacted," it said.

MIDF said it expected the household sector loan growth to be trending lower for this year due to the new guidelines introduced by Bank Negara Malaysia on responsible financing to the retail sector.

"Judging from the key indicators, loan applications and approval slowed down in December 2011 which suggest a likelihood of a slower loan growth momentum moving into this year," it said.

It maintained its 'buy' calls on RHB Bank with a target price of RM9.20 and Alliance Financial Group Bhd at RM4.10.

Meanwhile, HwangDBS Vickers Research expected the banking sector's growth to be led by both retail and business loans.

In a note today, HwangDBS said last year's loan growth hit 13.6 per cent as per its forecast, boosted by 1.5 per cent growth in December 2011.

"Overall, loans growth grew by 12 per cent, while business loans grew by 15 per cent," it said.

HwangDBS has recommended a 'buy' call on Maybank with a target price of RM10.60 for its resilient transactional banking income and dividend yields.

It also picked Hong Leong Bank for the potential synergies as a newly-merged entity. -- BERNAMA



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Cypark gets approval-in-principle to build new landfill in N. Sembilan

KUALA LUMPUR (Feb 2): CypARK RESOURCES BHD [] has received an approval-in-principle from the government to develop a new sanitary landfill in Negeri Sembilan by way of a public private partnership.

The company said on Thursday that approval for the landfill at Ladang Tanah Merah allowed it to implement the project via a build, operate and transfer (BOT) method subject to the terms and conditions to be agreed.

Cypark had earlier submitted the BOT proposal to the Government for a concession period of 25 years.

The company said the approval would enable it to proceed with negotiations to finalise and formalise the terms and conditions of the concession agreement, targeted to be completed within the next six months.

In a statement Thursday, Cypark executive chairman and founder Tan Sri Razali Ismail said that upon completion, the project would contribute significantly to the revenue and earnings of the company.

He said the earnings would be contributed from tipping fees paid by the government for every tonne of municipal solid waste (MSW) received and the sale of renewable energy to TENAGA NASIONAL BHD [] with favourable rates as currently provided by the Sustainable Energy Development Authority through the Feed-in-Tariff.

With the stable and recurring income flow expected to come from the new sanitary landfill BOT concession and many renewable energy projects which are currently being implemented, Cypark’s future will be resilient to the local and global market fluctuation, he said.

“With the company’s future earnings being contributed significantly by long-term concessionaire type of income, we expect to see even brighter prospects for Cypark.

“This is in addition to the recurring future earnings to be generated by our other renewable energy projects, such as the Pajam 8 MW solar farm which will start selling green energy to TNB for 21 years from March 2012,” Razali said.

He said the project would involve firstly the development of a sanitary landfill and the required infrastructure, material recovery facilities, and subsequently the development of renewable energy plants for green energy generation from waste biomass and methane gas.

Razali said the project, which was expected to commence this year and to be completed in a few phases over the period of two years, will treat and dispose municipal solid waste (“MSW”) received from many parts of Negeri Sembilan.

The estimated flow of MSW into the project is above 1,000 tonne per day, he said.



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KLCI stays in the black at mid-day, lifted by select blue chips

KUALA LUMPUR (Feb 2): The FBM KLCI remained in positive territory at the mid-day break on Thursday, tracking the gains at key regional markets, but struggled to climb above the 1,530-level.

At 12.30pm, the index added 7.94 points to 1,529.23, lifted by gains at select blue chips.

Gainers led losers by 504 to 272, while 338 counters traded unchanged. Volume was 1.46 billion shares valued at RM1.31 billion.

The ringgit strengthened 0.81% to 3.0208 versus the US dollar; crude palm oil futures for third month delivery fell RM10 per tonne to RM3,065, crude oil slipped eight sen to US$97.53 while gold rose US$4.35 an ounce to US$1,747.75.

At the regional markets, Japan’s Nikkei 225 rose 0.91% to 8,889.85, Hong Kong’s Hang Seng Index added 1.46% to 20,629.60, the Shanghai Composite Index up 0.31% to 2,275.04, Taiwan’s Taiex gained 0.75% to 7,605.84, South Korea’s Kospi rose 1.29% to 1,984.55 while Singapore’s Straits Times Index was up 0.48% to 2,918.82.

On Bursa Malaysia, Hartalega was the top gainer this morning and was up 42 sen to RM7.64; BAT added 40 sen to RM49.80, Petronas Gas 38 sen to RM16.06, KAF, Malayan Flour Mills, IJM Corp and Petronas Dagangan added 20 sen each to RM1.95, RM4.53, RM5.94 and RM18.20 respectively, United PLANTATION []s 18 sen to RM20.52 while SOP added 15 sen to RM6.30.

Tebrau Teguh was the most actively traded counter after a takeover offer made by Iskandar Waterfront Holdings Sdn Bhd (IWH), which is offering 76 sen per share – or just one sen above Tebrau’s pre-suspension price of 75 sen.

The stock rose 8.5 sen to 83.5 sen with 52.6 million shares done.

Other actives included DBE Gurney, Petronas Chemicals, Coastal Contracts, DRB-Hicom, Karyon, UEM Land and Benalec.

Decliners included Glenealy, RHB Capital, Southern Steel, Mintye, Dutch Lady, KLK, TDM, Tenaga, Melewar and SHL.



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HwangDBS keeps 'buy' call on Guan Chong

HwangDBS Vickers Research has maintained a "buy" call on Guan Chong Bhd shares with a lower target price of RM2.80.

In a research note today, HwangDBS said Guan Chong was expected to meet its full-year financial year 2011 net profit estimate of RM118.8 million but lack order visibilty post-financial year 2011.

HwangDBS said beyond the near-germ global uncertainties, the group was poised to be among the top five largest cocoa processors in the world.

"The group normally signs forward contracts with buyers to sell cocoa butter and cocoa powder or cake products to secure sales upfront," it said.

It said Guan Chong was also a net beneficiary of a stronger US dollar as nearly all receivables (exports accounted for over 95 per cent of sales) and payables were dominated in US dollar.

"This also provides a natural edge for the group's borrowings (RM384 million at end-September 2011), which are mostly denominated in US dollar and primarily used to purchase cocoa beans," it said.

HwangDBS said the stock, after plunging from a high of RM2.52 in November 2011 to a low of RM1.99 in December 2011, has recovered to RM2.33 currently.

It said the progressive disposal of 10.3 million Guan Chong shares and the cessation of Lembaga Tabung Angkatan Tentera as a substantial shareholder at end-December 2011 may lift near-term overhang on the stock. -- Bernama



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Glenealy top loser, upside seen from RM7.50 offer price

KUALA LUMPUR (Feb 2): Glenealy PLANTATION []s (Malaya) Bhd was the top loser in thin trade on Thursday as investors were quick to take profit following the run-up in the share price following proposed takeover of the plantations company.

At 11.29am, Glenealy was down 27 sen to RM7.10. There were 7,000 shares done at prices ranging from RM7.10 to RM7.30.

On Jan 27, Samling Strategic Corporation Sdn Bhd (SCC) announced plans to take its Hong Kong-listed Samling Global Ltd and also Glenealy and Lingui Developments Bhd private.

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.



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KL shares higher at mid-morning

KUALA LUMPUR: Shares on Bursa Malaysia were higher at mid-morning today boosted by positive sentiment on regional markets, dealers said.

At 10.53am, the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) was up 6.44 points to 1,527.73.

Market breadth was positive with 458 gainers and 222 losers with turnover amounting to one billion shares worth RM835.07 million.

A dealer said the market was positive following better-than-expected jobs and manufacturing data out of the US.

Bursa Malaysia's Finance Index rose 33.35 points to 13,476.02, Plantation Index increased 15.54 points to 8,744.96 and the Industrial Index was 35.36 points higher at 2,842.18.

The FTSE Bursa Malaysia Emas Index gained 61.40 points to 10,648.60 and Malaysia Mid-70 Index jumped 130.30 points to 12,290.185.

The FTSE Bursa Malaysia Ace Index, however, eased 3.59 points to 4,493.

Among active counters, Tebrau Teguh added eight sen to 78 sen, while D.B.E Gurney Resources and Coastal-CA slipped one sen each to 12.5 sen and 11 sen, respectively.

Of the heavyweights, Maybank earned two sen to RM8.22, Sime Darby perked 10 sen to RM9.24 and Petronas Chemicals added five sen to RM6.72. -- BERNAMA



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KLCI edges up at mid-morning, but struggles to sustain early gains

KUALA LUMPUR (Feb 2): The FBM KLCI rose at mid-morning on Thursday, in line with the gains at the key regional markets, but found it hard to sustains its gains.

At 10am, the FBM KLCI was up 7.87 points to 1,529.16, lifted by gains at select blue chips. The index had initially breached the 1,540-level in very early trade.

Gainers led losers by 388 to 188, while 287 counters traded unchanged. Volume was 628.94 million shares valued at RM519.44 million.

At the regional markets, Hong Kong’s Hang Seng Index rose 1.2% to 29,577.00, Japan’s Nikkei 225 added 0.84% to 8,883.94, the Shanghai Composite Index edged up 0.19% to 2,272.28, Taiwan’s Taiex rose 1.15% to 7,635.93, South Korea’s Kospi added 1.42% to 1,987.04 and Singapore’s Straits Times Index was up 0.44% to 2,917.59.

OSK Research director Chris Eng Poh Yoon in his February market outlook on Thursday said the research house’s January Sell call on the FBM KLCI was correct as the market dipped slightly, underperforming almost all major markets in the world.

He said its “Alternative” Top Buys also did well in January with four out of its five Top Buys outperforming the FBM KLCI, namely Supermax, JCY, Old Town and Sarawak Oil Palm

Still, markets performed better than expected and the global rally seems sustained by a flush of liquidity from the Long Term Refinancing Operation (LTRO), he said.

“As such, we are keeping a close eye on the market for the 1st half of Feb. If indeed markets continue to do well, we may be forced to abandon our Bearish stance and upgrade the KLCI to a Neutral with a preliminary year-end target of around 1,600 points.

“To note our 1,466 points current Fair Value will remain intact but it’s a Fair Value not a year-end target,” he said.

Eng said an upgrade would likely see the research house more aggressively promoting the CONSTRUCTION [] and O&G sectors, adding that for now, Consumer stocks are the flavor of the month.

“Top Buys are KPJ, MBSB, QL and Media Chinese as well as Padini which should attract interest as a cheap and good consumer stock,” he said.

On Bursa Malaysia, Petronas Gas added 52 sen to RM16.20, BAT 48 sen to RM49.88, Hartalega 47 sen to RM7.69, Ekovest 21 sen to RM2.96, Kretam and Petronas Dagangan 20 sen each to RM2.55 and RM18.30, Malayan Flour Mills 17 sen to RM4.50, United PLANTATION []s 16 sen to RM20.50, IJM Corp 14 sen to RM5.88 and Lafarge Malayan Cement up 12 sen to RM6.80.

Tebrau Teguh was the most actively traded counter after a takeover offer made by Iskandar Waterfront Holdings Sdn Bhd (IWH), which is offering 76 sen per share – or just one sen above Tebrau’s pre-suspension price of 75 sen.

The stock rose eight sen to 83 sen with 40.7 million shares done.

Other actives included Coastal Contracts, DRB-Hicom, DBE Gurney, UEM Land, Petronas Chemicals, Mudajaya and Jotech.

Decliners included Tahps, Dutch Lady, Melewar, Southern Steel, MPI, Ajinomoto, Glenealy and BHIC.



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AirAsia Japan to start domestic flights Aug

AirAsia Japan Co, a low-cost airline venture of All Nippon Airways Co and AirAsia Bhd, will start flights from Tokyo’s Narita airport to Sapporo, Fukuoka and Okinawa in August and begin services to Seoul and Busan in October, Japan’s transport ministry said in a statement today. -- Bloomberg



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Tebrau Teguh active, up on takeover offer

KUALA LUMPUR (Feb 2): TEBRAU TEGUH BHD [] shares were actively traded on Thursday after the takeover offer made by Iskandar Waterfront Holdings Sdn Bhd (IWH), which is offering 76 sen per share – or just one sen above Tebrau’s pre-suspension price of 75 sen.

At 9.30am, Tebrau Teguh rose 7.5 sen to 82.5 sen with 22.65 million shares done.

IWH is buying a 33.15% stake in Tebrau Teguh Bhd, comprising of 22 million shares, from Kumpulan Prasarana Rakyat Johor Sdn Bhd (KPRJ). The proposed acquisition would trigger a mandatory take-over offer by IWH for the remaining shares.

While the one sen premium is insignificant, the upside for the low-key Tebrau Teguh is that it has been appointed to develop 413 acres of land in Pengerang, Kota Tinggi, Johor.

Its net asset per share was 75 sen as at Sept 30, 2011 while it had RM44.52 million in cash and bank balances.



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IJM Corp, AZRB extend gains on confirming MRT job

KUALA LUMPUR (Feb 2): IJM CORPORATION BHD [] and AHMAD ZAKI RESOURCES BHD [] shares extended their gains on Thursday after the two companies confirmed on Tuesday they had officially received the letters of acceptance Sungai Buloh-Kajang phase mass rapid transit project.

At 9.20am, IJM Corp rose 10 sen to RM5.84 with 512,500 shares done while AZRB added five sen to 93 sen with 967,600 shares traded.

IJM’s phase is for package V5 of the Mass Rapid Transit costing RM974.78 million while AZRB’s contract includes the completion of viaduct guideway and other works from Plaza Phoenix to Bandar Tun Hussein Onn station valued at RM764.91 million.



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Southern Steel dips in early trade on 2Q losses

KUALA LUMPUR (Feb 2): Shares of SOUTHERN STEEL BHD [] fell in early trade on Thursday after the company swung into the red with losses of RM5.52 million in the second quarter ended Dec 31, 2011 due to lower margins and foreign exchange translation losses.

At 9.15am, Southern Steel lost seven sen to RM1.98 with 11,000 shares traded.

Its revenue and loss before tax were RM928.84 million and RM6.40 million respectively as compared with the preceding quarter’s revenue and profit before taxation of RM734.0 million and RM17.3 million.



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OSK Research sees more upside for Genting Malaysia share price

KUALA LUMPUR (Feb 2): OSK Retail Research is still eyeing the RM4.26 and RM4.60 levels as the upside targets for Genting Malaysia.

In its previous analysis on Nov 8, 2011, it advised traders to accumulate Genting Malaysia’s shares during the consolidation phase in the RM2.96–RM3.93 range and wait for a possible re-test of the RM4.60 historic high in the future.

“After nearly two months, the RM3.93 level was finally violated with very strong volume on Tuesday.

“The stock is now expected to continue extending its upward move within the uptrend channel. We are still eyeing the RM4.26 and RM4.60 levels as the upside targets,” OSK Research said.



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KLCI starts February on firmer note, crosses 1,540-level

KUALA LUMPUR (Feb 2): The FBM KLCI started February on a firmer note and crossed the 1,540-level in early trade on Thursday, in line with gains at regional markets.

At 9.05am, the FBM KLCI jumped 19.23 points to 1,540.52, lifted by gains at blue chips.

Gainers beat losers by 281 to 39, while 146 counters traded unchanged. Volume was 127.31 million shares valued at RM79.69 million.

Among the early gainers were Petronas Gas, BAT, DiGi, MAHB, United PLANTATION []s, IJM Corp, KLK, Public Bank, Sime Darby and HLFG.

Meanwhile, Asian shares and the euro gained on Thursday as global manufacturing data soothed fears about global economies deteriorating on the back of the ongoing euro zone debt crisis, while falling European debt yields also improved sentiment, according to Reuters.



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RHB Research upgrades Hiap Teck Ventures to market perform, FV 64c

KUALA LUMPUR (Feb 2): RHB Research Institute has upgraded Hiap Teck Ventures to market perform.

It said on Thursday that it was rationalising its valuation method in order to better reflect the recent cash call and investment in the blast furnace project that is not likely to contribute to Hiap Teck’s earnings within the next one to two years.

“Indicative fair value is adjusted to 64 sen (from 70 sen) based on 0.5 times book value of RM1.28 (post-rights issue). Upgrade to Market Perform,” it said.

RHB Research said it believes Hiap Teck’s manufacturing division will continue to be weak due to lacklustre domestic demand in the absence of significant water-related projects. This is evidenced by its low capacity utilisation rate of 50%.

“Demand for steel slabs produced by Eastern Steel is not likely to be an issue as there is a ready buyer. We estimate that Phase 1 of the blast furnace project could contribute roughly RM35-46m to Hiap Teck’s FY07/14 net profit,” it said.

The research house said that captive raw material from securing iron ore mining concession will transform Hiap Teck into an integrated steel producer, although actual award of the mining concession could take some time.

“Our FY07/12-14 net profit forecasts are raised by 12%-28%, having reflected interest savings arising from the private placement and rights proceeds,” it said.



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CIMB Research has technical sell on SKP Resources at 42 sen

KUALA LUMPUR (Feb 2): CIMB Equities Research has a technical sell on SKP Resources at 42 sen at at which it is trading at a price-to-book value of 1.6 times.

It said on Thursday that the uptrend from its January's low may be coming to an end. The black candle formed on the previous trading day confirmed the reversal signal. If this is indeed the beginning of a downtrend, the candles must not rise above its recent high of 43.5 sen.

“Indicators are showing signs of exhaustion. MACD histogram bars are starting to lose strength while RSI has also hooked downward. These easing trends do not bode well for the stock.

“Unload on strength looks like a good option here, especially near the 43.5 sen high. The next downleg is going to drag prices towards 39 sen and 36.5 sen. Put a buy stop at 44 sen, just in case,” CIMB Research said.



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CIMB Research has technical sell on Versatile Creative at 53 sen

KUALA LUMPUR (Feb 2): CIMB Equities Research has a technical sell on Versatile Creative at 53 sen at which it is trading at a price-to-book value of 1.2 times.

It said on Thursday that Versatile Creative violated its wedge support few days ago and it believes this is a prelude to more downside ahead.

“If we are right, the candles should fall towards 50 sen and 46.5 sen soon. Selling pressure will intensify when the 30-day SMA is breached,” it said.

CIMB Research said the bearish divergence on the MACD indicator shows that buying momentum is losing steam. RSI has also fallen below the overbought territory.

“Traders should do well selling into strength as near term gains are likely capped at 54 sen to 55.5 sen. Put a buy stop at 58 sen, just in case,” it said.



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CIMB Research has technical sell on Bumi Armada at RM3.95

KUALA LUMPUR (Feb 2): CIMB Equities Research has a technical sell on Bumi Armada at RM3.95 at which it is trading at a FY13 price-to-earnings of 15.2 times and price-to-book value of 1.2 times.

It said on Thursday that Bumi Armada violated its medium term downtrend channel recently and selling pressure has been slowly creeping up.

“If the candles still could not climb back above its key moving averages at RM4.04-RM4.08, we expect prices to de-rate towards RM3.72 and RM3.59,” it said.

CIMB Research said the MACD signal line has slipped into the negative territory while RSI is below the 50pts mark. The weak technical reading suggests that the bears have the upper hand here.

“Any rebound towards RM4.04-RM4.08 is an opportunity to sell into strength. Only a rise above RM4.15 would prompt us to review our bearish stance,” it said.



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HDBSVR sees Malaysian market rebounding on Thursday

KUALA LUMPUR (Feb 2): Hwang DBS Vickers Research said most Asian indices registering positive gains on Wednesday, the FBM KLCI should be raring to go after a one-day break, with the immediate resistance of 1,530 within its sight.

It said on Thursday that major US stock indices rose between 0.7% and 0.9% overnight due to positive outlook from manufacturing data released in the US, UK, China and Germany.

“We believe investors would be keenly following news on Greece’s expected completion of a debt writedown with private investors and an accord on a US$171bn eurozone bailout by the end of this week,” it added.

As for stocks on Bursa Malaysia, HDBSVR said on counters that should attract interest include:

(a) Tebrau Teguh, which was appointed to develop 413 acres of land in Pengerang, Johor, despite an offer of only 76 sen for a 33% stake which would trigger a mandatory takeover offer;

(b) IJM and AZRB, after confirming that they had officially received the letters of acceptance from MRT Corp; and

(c) Southern Steel, after reporting a net loss of RM5 million in the Oct-Dec quarter, which was below consensus expectations.



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