Friday, 3 February 2012

Naim Indah: Major shareholder in talks to sell its 22.8% stake

KUALA LUMPUR NAIM INDAH CORPORATION BHD []’s major shareholder, Crest Energy Sdn Bhd is said to be in discussions with various parties to dispose of the shares.

Naim Indah said that no details of the proposed disposal, including the price, had been finalised.

“Further details of the proposed disposal will be announced in due course. Please note that at this moment, there is no certainty of the proposed disposal will be successful,” it said.

Naim Indah was responding to a query from Bursa Malaysia Securities over the sharp rise in price and high volume of the shares recently.

According to the company’s annual report, Crest Energy owns the 22.8% stake which comprises of 160.06 million shares.

However, Naim Indah did not state the name of the shareholder in its reply to the query.

The share price closed nine sen higher at 18 sen with 260.53 million shares done.

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Encorp unit Encorp Systembilt proposes up to RM1.57 bn debt notes

KUALA LUMPUR (Feb 3): ENCORP BHD []’s unit Encorp Systembilt Sdn Bhd has proposed to issue up to RM1.575 billion (2012/2028) in Islamic debt notes, bulk of which would be used to refinance the outstanding amount on its debt notes.

RAM Rating Services Bhd said on Friday it had assigned preliminary AA2 rating to Encorp Systembilt’s proposed Sukuk Murabahah of up to RM1.575 billion. The long-term rating carries a stable outlook.

To recap, Encorp Systembilt is the concessionaire for the building of 10,000 units of teachers’ quarters throughout Malaysia, based on the “build, transfer and finance” concept.

It issued Al-Bai’ Bithaman Ajil notes issuance facility (ABBA notes), raising proceeds of about RM1 billion to fund the CONSTRUCTION [].

All 10,000 units were eventually completed and handed over to the government in early 2004, under the privatisation agreement. In return, the government would make monthly concession payments to Encorp Systembilt, with effect from the month following the issuance of the certificate of practical completion for each cluster of units, until the expiry of the 30-year concession in February 2028.

“Proceeds from the proposed Sukuk Murabahah will be used to refinance the outstanding amount on Encorp Systembilt’s existing ABBA Notes (up to RM1.5 billion), to fund the trustees’ reimbursement account and the balance shall be utilised for the company’s general corporate purposes,” it said.

RAM Ratings said the rating of the proposed Sukuk Murabahah reflected the stream of highly predictable and contractually-backed concession payments from a strong counterparty, that is the government through the Ministry of Education.

The rating agency noted the government demonstrated a track record of regular payments to the company since November 2006, with monthly instalments received within one to two months from the invoice dates.

“Backed by this stream of monthly payments, we expect Encorp Systembilt to register a stressed minimum finance service cover ratio (FSCR) of 1.20 times. In addition, the company does not face any performance or operating risks as its obligations under the privatisation agreement have already been fulfilled and it is not required to operate the quarters,” it said.

RAM Ratings pointed out Encorp Systembilt’s debt-servicing ability was also safeguarded by the transaction’s tight structure and covenants, which minimise cashflow leakage.

These include limits on the company’s activities and the incurrence of additional debt. The company is also not permitted to declare or pay any dividends during the tenure of the proposed Sukuk Murabahah, except for a one-time inter-company loan and/or dividend payment to its holding company and/or ultimate holding company from the proceeds of the proposed Sukuk Murabahah.

The Escrow Account – one of the designated accounts to be opened by Encorp Systembilt – will capture, amongst others, the monthly concession payments from the Government; this account will be operated solely by the security trustee and pledged to Sukuk holders as security.

“However, Encorp Systembilt’s debt-servicing ability is vulnerable to any material delay in disbursement of concession payments as it relies solely on the monthly instalments to service its proposed Sukuk Murabahah. As such, the possibility of future delays cannot be entirely discounted,” said RAM Ratings.

The last tranche of the proposed Sukuk Murabahah is expected to mature after the end of the concession period.

RAM Ratings said assuming that the proposed Sukuk Murabahah is issued on April 1, 2012, the last tranche of the proposed Sukuk Murabahah is expected to mature on April 1, 2028, that is after the concession expires on Feb 9, 2028.

It noted that the repayment of the proposed Sukuk Murabahah was, however, well supported by the accumulated funds in the escrow Account.

“Under our stressed scenario, the Company’s cash reserves after the redemption of the proposed Sukuk Murabahah are estimated to come up to RM24.84 million (as at April 2028),” it said.

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F&N 1Q earnings fall on absence of Coca-Cola contribution, higher material costs

KUALA LUMPUR (Feb 3): Fraser and Neave Holdings Bhd reported a 61% decline in its earnings to RM41.74 million in the first quarter ended Dec 31, 2011 from RM107.08 million a year ago, partly due to the absence of contribution from the Coca-Cola business.

It said on Friday, the earnings were also impacted by the different timing in the accounting of operating losses in Thailand due to the sever floods last year and recovery under its business interruption insurance policy.

F&N said other factors were higher raw material costs particularly skimmed milk powder and sugar and lower sales in Dairies Malaysia.

It cautioned that higher raw material costs and the Euro zone financial crisis would impact its profitability.

F&N explained any slowdown in demand would lead to more intense competition in the market place, adding these external forces and volatile raw material input costs were expected to continue to exert pressure on operating margin.

“The group’s sustained effort and investment to strengthen distribution, brand equity, broaden product range and improve operating efficiency will alleviate the negative impact of these external forces,” it said.

F&N said its revenue fell 27.7% to RM743.29 million from RM1.028 billion a year ago. Its earnings per share were 11.60 sen compared with 30 sen.

“Group profit before tax for the quarter of RM54 million was 19% lower than the preceding quarter, mainly due to loss of Coca-Cola contribution and operating losses arising from Thailand flood but off set by the excess on insurance claim,” it said.

On the impact from the absence of Coca-Cola business, it said several actions taken by the soft drinks unit to date had lifted its revenue by 9% during the quarter (on a comparable basis, by excluding last year’s Coca-Cola revenue). F&N said such activities would continue and be intensified in the coming quarters.

As for Dairies Malaysia, the second quarter ending March 31, 2012 would see the major shift of equipment and production to its new manufacturing plant in Pulau Indah, Selangor. This shift would impact operating efficiencies while operating costs would rise.

“Upon commencement of commercial production around March 2012, the Group will be able to recognise the deferred tax asset amounting to approximately RM76 million in relation to the halal hub tax incentive granted in respect of the project in year 2009,” it said.

F&N said Dairies Thailand was scheduled to recommence production in stages starting from March. Hence, it said sales volume would continue to remain low for 2Q.

It added the Thai unit’s financial performance during the interruption period would hinge on the actual amount of the compensation approved by the insurer for insurance claims related to the floods.

It added that after it had divested 50% of its interest in the development land in PJ Section 13, the group would realise 50% of the capital gain of RM55 million in 2Q.

“While the operating results of the group will be much lower than that of last year due to the absence of Coca-Cola business and the challenges face by Dairies business in Malaysia and Thailand, the overall results of the group will be bolstered by the non-operating items of deferred tax income and crystallisation of capital gain during the year,” it said.

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The Media Shoppe inks collaboration agreement with Hopetech

The Media Shoppe inks collaboration agreement with Hopetech

KUALA LUMPUR (Feb 3): THE MEDIA SHOPPE BHD [] has inked a collaboration agreement with Hopetech Sdn Bhd under which Hopetech would be granted access to several projects.

TMS said on Friday that under the agreement, the projects could be undertaken by Hopetech by itself or with the assistance of TMS, in the areas of technical and funding support.

The company said Hopetech would be the main identifier of projects which require TMS’ input and participation.

The parties would then mutually decide on the best possible way to tap into each others’ intellectual property in order to carry out the execution of the project in the most efficient and optimum manner, it said.

TMS chief executive Christopher Chan said that under the agreement, both TMS and Hopetech had the option of a joint venture structure where they may enter into negotiations for the setting-up of a joint venture company should both companies agree to proceed with the project.

The agreement would be valid for a duration of 12 months unless terminated earlier, he said in a statement Friday.

Chan said Hopetech wou;d be responsible for identifying and pursuing projects including governmental projects whether local or overseas.

Hopetech will also be responsible for the preparation of any submission and pitching to the awarding party and to identify any funding requirements pursuant to the said projects, he said.

Chan said that TMS, on its part, would assist Hopetech in the latter’s pitching and submission and undertake relevant portions of the projects including assisting to raise or procure funding (whether through itself or through a third party) to carry out the said projects.

“Under the agreement, each company will be allowed to cross invest in the other company.

“Both TMS and Hopetech believe that they can mutually benefit from entering into a Collaboration Agreement to work together,” he said.

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AirAsia Japan ready for takeoff with air operators certificate

KUALA LUMPUR (Feb 3): AIRASIA BHD []’s joint venture with All Nippon Airways Co., Ltd has obtained an air operators certificate (AOC) from the Japanese Civil Aviation Bureau.

“The AOC shall enable AirAsia Japan to operate aircraft in its fleet for commercial flights to international and domestic destinations,” AirAsia said on Friday.

On July 21, 2011, both airlines had announced a JV entity to set up a low-cost airline in Japan, AirAsia Japan Co., Ltd.

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S&P assigns A- to Maybank’s proposed issue of notes under US$2b programme

KUALA LUMPUR (Feb 3): Standard & Poor's Ratings Services assigned its 'A-' long-term foreign currency issue rating to the proposed issue of senior unsecured notes by MALAYAN BANKING BHD []. (A-/Stable/A-2).

“The proposed issue will be a drawdown under the bank's US$2 billion multi-currency medium-term note program (unrated). The rating on the notes is subject to our review of the final issuance documentation,” it said.

The ratings agency said the fixed-rate notes would constitute direct, unconditional, unsubordinated, and unsecured obligations of Maybank.

The notes would rank pari passu with all other unsecured and unsubordinated obligations of the bank.

“We expect Maybank to use the proceeds from the proposed issue for working capital, general banking, and other corporate purposes,” it said.

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Hibiscus explains typographical error in financial results

KUALA LUMPUR (Feb 3): Hibiscus Petroleum Bhd said it had issued an amended announcement about its Sept 30, 2011 financial results on Thursday to clarify a typographical error in the summary page of the results released on Nov 29, 2011.

"We wish to emphasise that the full unaudited interim financial report for the six months ended Sept 30, 2011, which was an integral part of the results and was attached to the same announcement of Nov 29, 2011, reflected the true and fair loss position of the group," it said in a follow-up statement on Friday.

Hibiscus Petroleum also clarified that the group did not incur additional expenditure which resulted in losses for Sept 30, 2011 that was not reported until Feb 2, 2012.

"The loss position of the group was in fact reported in the full unaudited interim financial report announced to Bursa Malaysia Securities Bhd on Nov 29,
2011," it said on Friday.

It had stated in the Nov 29 announcement it posted net profit of RM1.27 million for the quarter ended Sept 30, 2011. However, it clarified on Thursday it had instead posted losses.

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Sunway REIT accepts facility of up to US$100m to refinance borrowings

KUALA LUMPUR (Feb 3): Sunway Real Estate Investment Trust’s (Sunway REIT) trustee, OSK Trustees Bhd has accepted a three-year Commodity Murabahah Financing-i-2 Facility of up to US$100 million from HSBC Amanah Malaysia Bhd and a cross currency swap facility from HSBC Bank Malaysia Bhd.

The REIT’s manager, Sunway REIT Management Sdn Bhd in a filing Friday said OSK Trustees had entered into the cross currency swap to fully hedge the foreign exchange and interest rate exposures of the facility.

It said the purpose of the facility, which bore a lower interest rate, was to partially refinance some of the current borrowings of SunReit.

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Market Commentary

The FBM KLCI index gained 1.68 points or 0.11% on Friday. The Finance Index increased 0.30% to 13587.31 points, the Properties Index up 0.12% to 1045.22 points and the Plantation Index down 0.34% to 8737.92 points. The market traded within a range of 15.28 points between an intra-day high of 1541.31 and a low of 1526.03 during the session.

Actively traded stocks include NICORP, SAAG, DBE, TMS-WA, KBUNAI, COMPUGT, PCHEM-CF, JCY-CD, DRBHCOM-CF and ASIAPAC. Trading volume increased to 2844.82 mil shares worth RM2315.26 mil as compared to Thursday’s 2580.75 mil shares worth RM2867.63 mil.

Leading Movers were SIME (+18 sen to RM9.46), CIMB (+7 sen to RM7.00), PETGAS (+32 sen to RM16.20), PETCHEM (+6 sen to RM6.79) and AXIATA (+2 sen to RM4.75). Lagging Movers were GENTING (-16 sen to RM11.00), KLK (-70 sen to RM24.90), GENM (-9 sen to RM4.01), AIRASIA (-7 sen to RM3.63) and MMCCORP (-8 sen to RM2.86). Market breadth was positive with 461 gainers as compared to 399 losers. -- JF Apex Securities Bhd

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KLCI reverses earlier losses, closes slightly firmer

KUALA LUMPUR (Feb 3): The FBM KLCI recovered lost ground in the afternoon session on Friday and closed higher as gainers overtook losers, buying into blue chips including Petronas Gas and Sime Darby.

The 30-stock index added 1.68 points to close at 1,538.77.

Gainers led losers by 461 to 399, while 352 counters traded unchanged. Volume was 2.84 billion shares valued at RM2.32 billion.

Asian stocks were mixed, but gains were capped ahead of the economic and employment data scheduled for release later on Friday.

At the regional markets, the Shanghai Composite Index rose 0.77% to 2,330.40, Taiwan’s Taiex added 0.29% to 7,674.99, Hong Kong’s Hang Seng Index edged up 0.08% to 20,l756.98 and Singapore’s Straits Times Index gained 0.58% to 2,917.95.

Meanwhile, Japan’s Nikkei 225 fell 0.61% to 8,831.93 and South Korea’s Kospi lost 0.60% to 1,972.34.

European shares fell slightly on Friday, from six-month closing highs, as investors awaited U.S. jobs data for indications of the strength of the recovery in the world's biggest economy, according to Reuters.

On Bursa Malaysia, United PLANTATION []s jumped RM1.10 to RM21.80, Petronas Gas gained 32 sen to RM16.20, Tradewinds 29 sen to RM10.22, BLD Plantations and GAB 24 sen each to RM8.84 and RM12.64, Delloyd, Gamuda and Sime Darby gained 18 sen each to RM3.68, RM3.90 and RM9.46 respectively, while TDM added 15 sen to RM4.72.

Naim Indah Corp was the most actively traded counter with 260.5 million shares done. The stock rose nine sen to 18 sen.

Other actives included SAAG, DBE Gurney, Karambunai, Compugates, Petronas Chemicals, JCY and DRB-Hicom.

Decliners included KLK, Dutch Lady, F&N, Southern Acids, DKSH, SapuraCrest, Genting, Malayan Flour Mills and Genting Plantations.

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Maxbiz to submit application against Bursa’s proposed delisting plan

KUALA LUMPUR (Feb 3): MAXBIZ CORPORATION BHD [], which faces suspension on Feb 14 and de-listing on Feb 16, says it will file an appeal to Bursa Malaysia Securities.

“The board intends to submit an application to Bursa Securities to appeal against Bursa Securities’ decision to remove the securities of the company from the Official List of Bursa Securities,” it said in a statement on Friday.

On Feb 2, Bursa Securities informed that Maxbiz had failed to submit a regularisation plan to the Securities Commission or Bursa Securities for approval within 12 months from the company’s first announcement under the Main Market Listing Requirements of Bursa Securities, which was on or before Jan 17.

Maxbiz's application for an extension of time to submit the regularisation plan was rejected.

Bursa Securities then cautioned the company that trading in its securities would be suspended from Feb 14 and de-listed on Feb 16 “unless an appeal is submitted to Bursa Securities on or before Feb 13”.

The regulator had also stated that any appeal submitted after the appeal timeframe would not be considered by Bursa Securities. However, if the company submitted an appeal to Bursa Securities within the appeal timeframe, the removal of the securities of the company on Feb 16 would be deferred pending the decision on the company’s appeal.

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Oriental buys Kingsley Hotel

KUALA LUMPUR: Oriental Holdings Bhd has acquired the Kingsley Hotel in central London for a cash consideration of £42.71 million (RM203.9 million) yesterday.

This marks one of the biggest acquisitions by the RM3.3 billion market cap company in recent years and comes at a strategic time with the upcoming Olympic Games in London.

In an announcement to Bursa Malaysia yesterday, Oriental said its wholly-owned subsidiary Kah Motor Company Sdn Bhd had entered into a sale and purchase agreement with Curzon Hotel Properties (GP) Ltd, The Curzon Hotel Properties Ltd Partnership and Curzon Hotels (Operator) Ltd for the acquisition of “the Kingsley hotel, its business, the lease and the assets in London”.

The London property in question comprises a freehold land with the six-storey Kingsley Hotel on it with a total built-up of about 71,000 sq ft. The Kingsley Hotel commands a four-star rating and has 129 en suite bedrooms, a brasserie restaurant, bar and lounge together with seven meeting rooms.

The hotel is strategically located in central London’s midtown district, near Covent Garden and New Oxford Street and is in close proximity to two underground stations — Holborn (Piccadilly Central Line) and Tottenham Court Road (Central Line).

The Kingsley Hotel in central London is strategically located and is close to two underground stations.

Oriental said the funding for the £42.71 million acquisition will be internally generated by Kah Motor and the deal is expected to be completed by the end of the first quarter.

Oriental added that no valuation had been carried out on the property and therefore the new book value of the property cannot be disclosed as it is not known. Nonetheless, it said based on the property’s earnings before interest, tax, depreciation and amortisation in 2011, the purchase price translates into a yield of 5%. Oriental will not assume liabilities from the acquisition.

The acquisition will cater for the expansion of the group’s hospitality division, said Oriental, which nevertheless noted that the slowing global economy including that of Europe and the UK could be a material risk to the acquisition.

Oriental’s largest shareholder is Boon Siew Sdn Bhd, with a 43% stake in the company, which has interests in plantations, automotive sector, property development and others. Oriental and Boon Siew were founded by the late Tan Sri Loh Boon Siew.

Oriental closed unchanged yesterday at RM5.28, with 150,700 shares traded. The stock has risen sharply by 22.8% from a low of RM4.30 in November due to renewed investor interest in its growing plantation operation in Indonesia.

This article appeared in The Edge Financial Daily, February 3, 2012.

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MBSB net profit jumps 123% to RM325m

KUALA LUMPUR: Malaysia Building Society Bhd (MBSB) saw its bottom line soaring 122.87% to RM325.4 million last year compared with RM146 million a year earlier. The improved performance was on the back of higher income from its Islamic banking operation via the expansion of personal financing.

Its revenue also increased by 63.6% to RM1.26 billion from RM769.9 million in 2010 while its basic earnings per share rose to 32.43 sen from 20.85 sen.

MBSB also recommended a final dividend of 7% less 25% income tax (5.25 sen net per ordinary share) for FY11 ended Dec 31. This will bring total dividends to 12% for FY11 in view of the 5% interim dividend paid during the year.

“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.

“Continuous operational improvements as targeted under the transformation programme, Taking MBSB to the Next Level, have also contributed to the exceptional results,” said MBSB’s CEO Datuk Ahmad Zaini Othman.

He added that while the Personal Financing-I (PF-i) scheme has largely driven its asset growth, the group’s strategy to diversify its asset portfolio since the beginning of last year had also shown remarkable progress.

Meanwhile, MBSB’s 4QFY11 also saw net profit rising to RM83.8 million from RM12.8 million in the previous corresponding quarter, a 554.7% jump.

Its revenue for the quarter also improved to RM347.1 million from RM208.9 million previously, a 66.1% rise.

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

It said civil servants remain supportive of MBSB’s PF-i mainly due to its high affordability and the offer of several financing packages to suit their different needs.

The company also noted an improvement in its total net non-performing loans ratio to 8.8% for FY11 from 15.7% in FY10.

“This is principally due to the restructuring of major corporate legacy accounts achieved in the same year and an expansion of financing and loan bases,” it said.

This article appeared in The Edge Financial Daily, February 3, 2012.

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Tebrau rises, seen as exciting Johor proxy

KUALA LUMPUR: Tebrau Teguh Bhd’s shares jumped 7 sen or 9.3% to close at 82 sen when trading on the stock resumed yesterday following the announcement of a proposed general offer exercise.

This places the stock 7.9% ahead of the takeover offer price of 76 sen, which analysts say is unlikely to spark a high take-up rate.

Tebrau was the latest in a flurry of privatisation and takeover exercises over the past two weeks, which included Proton Holdings Bhd, Glenealy Plantations Bhd and Lingui Developments Bhd.

Tebrau’s privatisation exercise, however, does not offer a significant premium for minority shareholders. The offer price is just one sen above the pre-suspension price of 75 sen, and the current price is much higher.

And while Proton’s share price doubled in the weeks leading up to the exercise, Tebrau’s shares have traded within a tight range of between 67 sen and 77.5 sen over the last three months.

It is also almost squarely at Tebrau’s net assets per share of 75 sen as at Sept 30, 2011, which analysts say is undervalued, given its large landbank in Iskandar Malaysia, the country’s latest property hotspot.

Although the exercise could see a poor take-up rate as a result of these factors, market observers also concur that Tebrau could be headed for better times as investors start taking notice of its large landbank and the possibility of further corporate developments with the entry of tycoon Datuk Lim Kang Hoo of Ekovest Bhd.

Tebrau is being taken over by Iskandar Waterfront Holdings Sdn Bhd (IWH), which is buying a 33.15% stake in the company from Kumpulan Prasarana Rakyat Johor Sdn Bhd (KPRJ) for RM168.7 million.

KPRJ, the Johor state investment arm, will remain a major shareholder of Tebrau as IWH is owned by KPRJ and Credence Resources Sdn Bhd, a company controlled by Lim.

With the collaboration between Lim and the state investment entity, analysts think Tebrau could potentially be a stock to watch for exposure to Johor.
An inkling of that came at the same time the takeover offer was announced.

Tebrau announced that it had been appointed by the Johor government to develop 413 acres in Pengerang to complement an oil and gas hub there.

Analysts also note that Tebrau’s book value of 75 sen per share looks understated, given that the bulk of its land was last revalued nine years ago.

The jewel in the company is its landbank in Iskandar, which according to its 2010 annual report, measures about 413.534ha (1,022 acres) and has a book value of RM591.93 million, based on 2003 prices.

This values the land at RM579,278 per acre, or RM13.30 per sq ft, a price which market observers note may be on the low side, given that land values there have appreciated substantially over the past nine years.

An analyst said assuming the price has risen 50% to RM20 psf, Tebrau could be sitting on potential revaluation gains of RM296 million.

Based on Tebrau’s issued base of 669.73 million shares, those potential revaluation gains could be worth 44 sen on top of the company’s current book value of 75 sen per share, he estimated.

Lim’s entry into Tebrau also raises speculation that some of his privately owned assets, such as Danga Bay Sdn Bhd (DBSB), may be injected into the company later.

DBSB owns Danga Bay, and is one of the largest owners and developers of sea-fronting projects in Johor.

This article appeared in The Edge Financial Daily, February 3, 2012.

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MKH soars to 15-year high after selling non-halal unit

KUALA LUMPUR: Shares in MKH Bhd climbed to their highest in 15 years in active trading as the company attracts fresh interests from institutional investors after having sold its non-halal livestock farming business last month.

Formerly known as Metro Kajang Holdings Bhd, MKH closed three sen higher at RM1.89 yesterday, giving it a market capitalisation of RM500.1 million, the highest since October 1997.

The counter has gained about 16.7% since it announced on Dec 29, 2011 the sale of its pig farm and pork retailing business to Thailand’s agricultural giant Charoen Pokphand Foods Pcl for RM64 million. The sale was completed on Jan 16.

MKH’s non-halal livestock farming business comprised Makin Jernih Sdn Bhd (MJSB) and its subsidiaries — Chau Yang Farming Sdn Bhd, Tip Top Meat Sdn Bhd and AA Meat Shop Sdn Bhd.

Fund managers said MKH’s disposal of its non-halal livestock farming business was beginning to attract institutional investors that seek syariah-compliant stocks as well as government-linked funds such as Employees Provident Fund, Lembaga Tabung Haji and Permodalan Nasional Bhd (PNB).

“MKH can be exciting. It still has close to 242.8ha of landbank in Kajang/Semenyih that are carried at less than RM10 per square foot, and have mostly converted for development purposes. Its 16,000ha plantation operations in Indonesia also look promising,” said a fund manager.

The Edge weekly reported last month that MKH’s main rationale for exiting its non-halal business, which it ventured into in 2006, was to focus on its core business in property development and oil palm plantation in Indonesia, which is set to become a major earnings contributor to the group in the next five years.

MKH had also said it hoped to get on the radar of analysts and the syariah or government-linked funds after the disposal.

For FY11 ended Sept 30, 2011, MKH posted a net profit of RM38.36 million on the back of RM342.35 million in revenue.

While the group’s total net borrowings of RM315 million as at Sept 30 translated into a net gearing of 42.9% against shareholders’ funds of RM734.21 million, the ratio is set to reduce with the RM64 million proceeds from the disposal. MKH’s net assets per share was at RM2.77.

This article appeared in The Edge Financial Daily, February 3, 2012.

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AirAsia to receive 275 Airbus aircraft over 14 years

SEPANG: AirAsia Bhd will take delivery of 275 Airbus A320 aircraft over the next 14 years as part of its fleet expansion, says CEO Tan Sri Tony Fernandes.

He said 200 aircraft will be the A320neo model while the A320 will account for the remaining 75 aircraft. They will complement AirAsia’s existing fleet of 100 aircraft, which together are worth US$25 billion (RM75.5 billion).

“The 200 A320neo have a market price of up to US$18 billion while the 75 A320 will have a market price of US$7 billion,” Fernandes told reporters after taking delivery of AirAsia’s 100th Airbus A320 aircraft at the Low-Cost Carrier Terminal yesterday.

The latest delivery will make the budget carrier the largest Airbus A320 aircraft operator in Southeast Asia.

AirAsia has 58 Airbus A320 based in Malaysia, 22 in Thailand, 18 in Indonesia and two in the Philippines.

Fernandes said with the increase in the number of aircraft, AirAsia and AirAsia X will increase their flight frequencies to key destinations and introduce new routes.

“We will fly to Lombok, Indonesia, and focus on adding new routes in China.We have so far identified three destinations, Xiamen and two other routes.

Fernandes: It is also my aspiration to fly AirAsia to Sao Paolo, Brazil.

“It is also my aspiration to fly AirAsia to Sao Paulo, Brazil. I have received numerous requests to fly there from Brazilians but I guess we will have to wait as it will take some time [to materialise].

“AirAsia X will have to wait for the right time and for the right type of aircraft. That’s the main reason why we have suspended our routes to London and Paris,” he said.

On passenger traffic, Fernandes said he is cautiously optimistic of AirAsia moving forward, hoping the budget airline will continue to register growth in numbers in tandem with many other budget airline operators worldwide.

“It’s very difficult to say. First quarter has been always a slow quarter for us. But I am positive,” he said.

In 2011, 29.86 million passengers travelled by AirAsia, up from 25.68 million passengers recorded by the airline in 2010.

Capacity jumped 13.5% to 37.51 million and load factor increased by 2% to 80%.

The AirAsia chief said the recent lawsuit against AirAsia X in Australia will not affect the sales performance of the low-cost carrier.

Fernandes 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 and AirAsia X routes. It’s a small issue. The AirAsia X management has corrected it,” he said.

He said AirAsia X CEO Azran Osman-Rani is already eyeing the possibility of AirAsia going to Adelaide.

Fernandes said, meanwhile, the comprehensive collaboration framework between Malaysian Airline System Bhd (MAS), AirAsia and AirAsia X agreed last year will 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.

This article appeared in The Edge Financial Daily, February 3, 2012.

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Zelan to have 51% stake in CIQ complex

KUALA LUMPUR: Zelan Bhd will have a 51% interest in the proposed development of the Integrated Immigration, Custom, Quarantine and Security Complex at Bukit Kayu Hitam, Kedah.

In its filing with Bursa Malaysia yesterday, Zelan said its wholly- owned unit Zelan Construction Sdn Bhd (ZCSB) will have 51% participating interest while Kiara Teratai Sdn Bhd will have 49%, subject to the terms and conditions of the joint venture agreement to be entered into by the two parties contingent upon the award of the project by Northern Gateway Infrastructure Sdn Bhd.

Zelan however, did not disclose the development value of the complex. The company is involved in engineering and construction and property development.

This article appeared in The Edge Financial Daily, February 3, 2012.

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S P Setia files suit on land matters

KUALA LUMPUR: S P Setia Bhd is the latest among listed property developers to file a suit over land acquisition matters.

In a filing with Bursa Malaysia yesterday, the company said it had filed and served a writ of summons and statement of claim against Ban Guan Hin Realty on Jan 31 for remedies, including specific performance of the sale and purchase agreement (SPA) over 1,015 acres (406ha) in Ulu Langat, Selangor. S P Setia was to purchase the land from Ban Guan Hin for RM330.13 million.

The property developer filed the suit via its wholly-owned subsidiary Bukit Indah (Selangor) Sdn Bhd.

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

S P Setia’s suit came not long after Mah Sing Group Bhd commenced a suit in December 2011 against Asie Sdn Bhd and Usaha Nusantara Sdn Bhd to restrain them from making deals pertaining to a 4.08-acre leasehold parcel along Jalan Tun Razak, Kuala Lumpur. Mah Sing was to acquire the parcel from Asie.

The prolonged legal tussle between Ho Hup Construction Co Bhd and Malton Bhd over the joint development of 60 acres in Bukit Jalil is still ongoing.

This article appeared in The Edge Financial Daily, February 3, 2012.

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Knusford gets 2 Johor projects

KUALA LUMPUR: Knusford Bhd’s 40%-associate company CBD Development Sdn Bhd has received a letter of intent from Unit Perancang Ekonomi Negeri Johor for two projects.

Knusford, in its filing with Bursa Malaysia, said CBD has been appointed turnkey contractor for The Wave project (for the relocation of city hawkers) subject to a detailed proposal that includes a business model for consideration.

CBD has also been appointed master developer for the transformation of Johor Baru central district where it also has to submit a detailed proposal and business model.

This article appeared in The Edge Financial Daily, February 3, 2012.

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Non-bank institutions gaining upper hand

KUALA LUMPUR: With Bank Negara Malaysia (BNM) reining in household debt and tightening credit to consumers, non-banking financial institutions are gaining the upper hand by boosting lending and gaining market share from traditional banks.

In view of household debt touching 76% of the country’s GDP, BNM has been tightening credit to consumers by targeting credit cards, housing loans as well as car loans.

This has resulted in overall loan growth for the banking industry decelerating to 9% in the first nine months of last year from 10.1% in the previous corresponding period.

Taking up the slack and benefiting from tighter credit at banks are the non-banking financial institutions, where consumer lending remains robust.

Non-financial institutions such as Malaysian Building Society Bhd (MBSB) and AEON Credit Service (M) Bhd do not fall under the purview of BNM’s Banking and Financial Institutions Act or Bafia.

As these institutions are not governed by BNM’s stricter credit guidelines, analysts said they are likely to continue chalking up higher than the banking average loan growth. However, they are also concerned if a rapid rise in loan growth in a slowing economy leads to asset quality issues over the longer term.

Among the non-bank financial institutions, MBSB has been leading the pack — not only in terms of size and growth, but also in transforming itself from a loss-making building society into a major consumer financier.

Last night, MBSB announced that net profit for its full year ended Dec 31, 2011 rose 122% to RM325.43 million from RM146.03 million the year before on significant growth in its loans base.

Net loan, advances and financing stood 42% higher at RM15.2 billion as at Dec 31 compared with RM10.7 billion at end-2010, while deposits grew 29% to RM13.5 billion from RM10.5 billion.

An analysis of its loan segmentation revealed that gross loans for personal financing grew 118% to RM8.72 billion from RM3.99 billion in the nine-month period.

Personal financing accounted for 49% of MBSB’s gross loans of RM17.8 billion, before an allocation of RM2.62 billion in allowance for impairment.

MBSB’s loan book is about two thirds the size of Alliance Banking Group Bhd, the country’s smallest banking group.

However, MBSB’s ratio of non-performing loans (NPL) stood at a relatively high level of 9%, compared with the banking industry’s average of 1.8% in December 2011.

Still, it is a substantial decline from the NPL ratio of 23.2% that the company recorded in 2008. It has also been trending down from 16% at end-2010 and 11% in Sept 2011.

Between end-2010 and end-2011, gross NPLs declined from RM4.91 billion to RM3.14 billion, while net NPLs (after provisions) fell from RM1.68 billion to RM1.29 billion.

“Loan restructuring and the execution of settlement agreements of several major accounts have brought down the NPL over the years,” MBSB head of corporate planning and communications Azlina Rashad recently told The Edge Financial Daily.

The company, which provides personal financing to government servants, will rely more heavily on its other segments for future earnings.

“The key asset driver for the past three years has been our personal financing product, which makes up about 40% of the company’s total loan assets. However, in the next three years we hope to achieve a more balanced portfolio where our personal financing, home mortgage and corporate loans each contribute a third,” said Azlina.

MBSB has also identified bridging financing of government contracts as a major new growth area.

AEON Credit, which has a loan portfolio merely a 10th of MBSB’s, also recorded a strong growth in recent years.

Its short-term loan financing portfolio increased by 26.3% in a span of nine months from RM701.13 million on Feb 20, 2011 to RM885 million on Nov 20.

Long-term financing receivables (for loans extended beyond a year), meanwhile, rose 26.8% from RM407.38 million to RM516.39 million in the same period.

Unlike MBSB, AEON Credit’s NPL ratio increased in the past few years due to high growth in its personal financing and credit card businesses.

The company’s NPL ratio has fluctuated between 1.63% and 1.94%, which is still low even by banking standard norms. For the nine months to Nov 20, 2011, it rose to 1.93% from 1.83% the previous year, according to a report by OSK Research.

That, however, has not affected AEON Credit’s profitability as the company posted a 54.3% jump in net profit to RM67.89 million for the nine months compared with RM42.97 million previously.

“Our total consumer financing portfolio of about RM1.4 billion represents a small share of the consumer credit in Malaysia, so our smaller asset base has contributed to the higher growth rate (of our portfolio),” said a representative of the company.

The company caters to an “under-served” consumer segment while a majority of its banking peers serve middle to higher income brackets.

An analyst with Hwang DBS Vickers said AEON Credit’s high growth will taper off in the medium term, as the optimistic outlook for the country’s economy begins to moderate.

“I think the growth in personal financing has a direct correlation with the underlying economic outlook, which is buoyant as a rate of 4% to 5% is expected for Malaysia’s GDP. However, I don’t think this kind of growth is sustainable, it would moderate after hitting the top,” said the analyst.

This article appeared in The Edge Financial Daily, February 3, 2012.

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Strong momentum in banking

Banking sector
Maintain overweight: Growth momentum in loan applications and loan approvals moderated in December 2011, declining by 2.1% and 3.4% on a month-on-month (m-o-m) basis to RM63.4 billion (November 2011: RM64.8 billion), RM34.7 billion (November: RM35.9 billion), respectively. We believe the m-o-m moderation in loan applications and loan approvals to be reasonable in view of the shorter working period due to the year-end holidays and festive seasons. On the other hand, loan disbursements surged by 18% m-o-m to RM83.7 billion (November: RM71 billion), indicating continued vibrant lending activities. Supported by strong loan disbursement, outstanding loans for 2011 grew by 13.6% year-on-year (y-o-y) (November: 13%).

Property loans remain the key growth driver, accounting for 41.8% of the year-to-date (YTD) credit expansion, followed by working capital loans (22%). Property loans, the major loan growth driver last year, peaked in 2011, and we expect the increased business loans stemming from the rollout of Entry Point Projects (EPP) under the government’s Economic Transformation Programme (ETP) and the recovery in hire purchase loans to pick up the slack caused by the anticipated moderation in property loans.

Both loan-deposit ratio (LDR) and financial-deposit ratio reduced marginally at 80.9% (November: 81.7%) and 86.7% in December (November: 87.7%).

Deposits rose by 3.1% m-o-m (November: 1.7%). Full-year deposit growth rate improved to 14%, compared with an annualised YTD growth rate of 11.5% in November.

The average base lending rate of the commercial banks remained flattish m-o-m at 6.54%. The average lending rate (ALR) three-month fixed deposit (FD) spread moderated marginally to 2.06% (November: 2.07%). The stagnant ALR three-month FD spread, which serves as a proxy for the sector net interest margin (NIM), has reaffirmed our expectation that NIMs have hit bottom last year and should stabilise or even improve in 2012.

Despite the persistent global uncertainties in the second half of 2011, asset quality for the banks in December improved marginally m-o-m with impaired loan ratio for December lowered at 1.8% (1.9%) and loan loss coverage increased to 99.6% (November: 96.3%). The banking system remained well-capitalised, with the risk-weighted capital ratio and core capital ratio at 14.9% and 12.9% respectively. This implies the domestic banking system is resilient to withstand unanticipated shocks to the financial system, if any. The latest banking statistics have reaffirmed our conviction that the underlying fundamentals of the domestic banking sector remain solid. — Alliance Research, Feb 2

This article appeared in The Edge Financial Daily, February 3, 2012.

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PetGas expanding gas infrastructure

Petronas Gas Bhd (Feb 2, RM15.88)
Maintain buy at RM15.68 with revised fair value of RM17.62 (from RM15.30): We maintain our “buy” recommendation on Petronas Gas (PetGas) with a higher sum-of-parts- (SOP) based fair value of RM17.62 against RM15.30 previously. This implies an FY12F price-earnings ratio (PER) of 22 times.

Our higher SOP largely stems from a one percentage point increase in our terminal growth rate to 5% for the group’s core gas processing and transport cash flows and 40% increase in the discounted cash flow of the Lekas regassification terminal (RGT) in Malacca.

We have also raised FY12F to FY14F net profit by 2% to 4% by incorporating the contributions of the group’s RM1.2 billion investment in the Lekas RGT.

While details are still sketchy after our recent company visit, the group’s parent Petroliam Nasional Bhd is evaluating the viability of additional regassification projects in Pengerang, Johor; Lumut, Perak; and Lahad Datu, Sabah, after the completion of the Lekas terminal by August this year.

The RM60 billion Refinery and Petrochemicals Integrated Development (Rapid) programme, encompassing power generation capacity of 1,200MW and other manufacturing processes in Pengerang is likely to involve an RGT project much larger than the over RM2 billion Malacca terminal.

The group is also interested in additional power generation projects after the 60%-owned 300MW Kimanis power plant in Sabah is completed by end-2013. As a benchmark, a 1,000MW combined-cycle gas-fired power plant will cost around RM3 billion to RM3.5 billion. Recall that Petronas is currently one of the 47 prospective bidders for 4,500MW of new power plants in Peninsular Malaysia.

While it is still premature to provide any estimates in earnings contribution to the group for any future RGT or power projects at this juncture, we estimate that every additional RM1 billion in investment could raise PetGas’ SOP by 16 sen, assuming a project internal rate of return of 9%, equity discount rate of 10% and debt-to-equity ratio of 80:20.

We remain positive on PetGas due to: (i) the global shift from nuclear to natural gas for power generation; (ii) the government’s strategy to gradually remove natural gas subsidies by 2015, which will lead to a more viable pricing mechanism for electricity generation; (iii) multiple domestic regassification projects; and (iv) expanding power generation ventures.

The stock is currently trading at an attractive CY12F PER of 20 times, below its 2009 peak of 22 times. We expect further news flow on LNG projects to further catalyse the stock’s re-rating process. — AmResearch, Feb 2

This article appeared in The Edge Financial Daily, February 3, 2012.

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Oldtown plans for double digit growth

Oldtown Bhd’s shares have had their ups and downs since the company made its debut on Bursa Malaysia’s Main Market in July last year. Through much of the second half of last year, the stock was buffeted by rising volatility in global financial markets that saw a broad-based selloff in risky assets. The stock fell to as low as 88 sen in October — from the initial public offering price of RM1.25 — but has since rebounded to RM1.26.

We suspect the stock will fare better this year. Given the prevailing cautious market sentiment, Oldtown’s comparatively resilient business, modest valuations and yield expectations would appeal to the more risk-averse investor.

Comparatively defensive business operations
Oldtown is an established, and one of the most widely known, homegrown consumer brand names in the country. While the company traces its roots back to 1999, when its founders successfully formulated and commercialised their own blend of 3-in-1 instant white coffee mix, it is, perhaps, the downstream diversification into the café chain business that has raised the Oldtown profile over the last few years.

From the first café in Ipoh back in 2005, the business has grown rapidly, and today counts as one of the largest café chain operators in the country — with 183 outlets nationwide as at end-2011. The company also has 13 cafés — including fully-owned, partially-owned, franchised and licensed outlets — in Singapore, Indonesia and China.

Although the quality of food is average, the café draws customers with a reasonably priced menu of popular local offerings such as kaya and butter toast, soft boiled eggs, nasi lemak, curry mee and Ipoh chicken hor fun.

The beverage manufacturing business has been growing at a double-digit pace as well. Oldtown has gradually expanded both its product range and target markets over the years.

In addition to coffee mixes, including variations of white coffee, which remains its primary income generator, the company also sells instant milk tea and three types of roast coffee powder as well as canned ready-to-drink white coffee. The roasted coffee powder products are marketed under the “Nan Yang” brand name.

These products are sold through key distributors appointed in both the local and overseas markets and are available in hypermarkets, convenience stores, petrol kiosks and other food services outlets.

Roughly 44% of beverage manufacturing sales were derived from export markets in 2010. Hong Kong is the company’s largest overseas market, where it is now one of the best-selling instant coffee brand names, second only to Nescafe. Other export markets include Singapore, Taiwan, Thailand, Indonesia, the Philippines, Australia, Canada and the US.

The café chain business accounted for roughly 61% of Oldtown’s total sales in the first nine months of 2011 with the balance coming from the beverage manufacturing operations. Oldtown intends to grow both businesses in tandem.

Expanding café chain locally and overseas
The café chain business is very scalable as testified by its track record — having grown from 75 to 196 outlets over the past four years. That is an average of 30 new outlets per year. If all goes to plan, Oldtown intends to keep up this pace of growth, with new outlets locally and overseas.

For the domestic market, the company plans to open 20 to 30 new outlets annually, half of which will be under its franchise scheme. It is also planning to test out the kiosk concept, which will focus on beverages with a limited food menu. The first kiosk is slated for opening sometime in 3Q12.

The primary concern for the company’s rapid expansion plan is competition, which is intense and growing, among Oriental-style cafes such as PappaRich, Western-style cafes like Secret Recipe, fast-food chains McDonald’s and KFC as well as a whole host of other restaurants and food stalls.

Oldtown has managed to hold its own, with its specially formulated blend of white coffee and tea beverages and a reasonably priced menu. Having said that, it will likely be increasingly difficult to maintain the degree of service and food quality over an expanding chain, which could hurt business if not well executed.

Positively, Oldtown is upbeat that it will acquire halal certification for all 183 cafés in the country before the end of this year. (The food processing centres and beverage manufacturing are already certified.) This will significantly expand its target market, which at the moment is predominantly Chinese.

The move to focus on franchising will also lower the company’s risk and capital expenditure while maintaining growth momentum. This is true for the domestic as well as overseas expansions.

In Indonesia, there are plans to open 75 outlets over the next 10 years, by a company in which Oldtown has a minority stake. For its China expansion, Oldtown signed up a master franchisee for the Guangzhou and Macau provinces last year. The plan is to open up to 175 outlets over a 10-year period. In addition, the company also expects to add two or three new cafés in Singapore annually.

Oldtown has invested in a new food processing centre, which is expected to be operational very soon, to support the China venture.

New capacity to boost manufacturing sales in 2013
The beverage manufacturing business grew at an annual compound rate of nearly 42% between 2007 and 2010. Plans to broaden its export market are expected to sustain strong double digit growth for the foreseeable future.

Building on its good track record in Hong Kong, Oldtown is now targeting the mainland Chinese market as one of its new export markets. Its other new markets are South Korea and Vietnam.

Currently, the manufacturing facility for coffee and milk tea mixes is running at roughly 82% utilisation. The plant is forecast to hit maximum capacity this year. As such, Oldtown is building a new factory in Ipoh and will relocate its existing manufacturing activities there, slated by end-2012. The new facility will double its capacity by 2013, and eventually rise by up to five times to cater for demand growth for the next few years.

Steady earnings growth, modest valuations with fairly decent yields
We estimate the company’s underlying net profit at RM35 million this year, up some 10% from 2010, excluding net one-off gains of about RM3.4 million.

Net profit is forecast to grow by 14% to RM39.9 million in 2012 and and 17% to RM46.7 million in 2013. That implies the stock is trading at fairly modest 10.4 to 8.9 times our estimated earnings for the two years — compared with the average price-earnings ratio for the broader market and our projected growth rate for the company.

Oldtown has a minimum 50% net profit payout dividend policy. Based on our forecast, dividends would total some 5.3 sen per share for 2011, of which 2.5 sen had already been paid. Thus, a final dividend of about 2.8 sen per share is expected.

Dividends will rise to an estimated six sen per share this year, based on our earnings forecast. That will translate to a pretty decent net yield of 4.8% at the prevailing share price of RM1.26.

Including cash from the IPO, Oldtown had net cash totalling RM66.2 million as at end-September 2011. The strong balance sheet is well able to support its dividend policy as well as future expansion plans.

Note: This report is brought to you by Asia Analytica Sdn Bhd, a licensed investment adviser. Please exercise your own judgment or seek professional advice for your specific investment needs. We are not responsible for your investment decisions. Our shareholders, directors and employees may have positions in any of the stocks mentioned.

This article appeared in The Edge Financial Daily, February 3, 2012.

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MPI still waiting for the tide to turn

Malaysian Pacific Industries Bhd (Feb 2, RM3.42)
Maintain underperform at RM3.48 with revised target price of RM2.79 (from RM2.55): We cut our FY12 ending June earnings forecast to reflect the lacklustre demand for 2012. We tweak our target price for housekeeping purposes while still applying a 60% discount to its five-year historical adjusted average price-to-book value (P/BV). We reiterate our “underperform” call given the downside risks.

Peter Yates, group managing director, hosted MPI’s 2QFY12 briefing on Tuesday. Key takeaways were: (i) the PC/laptop segment will continue to be a problem this quarter; (ii) the smartphone/tablet segment will drive growth; (iii) over 80% of production has now been converted to the high density line; (iv) Suzhou Phase 2 is now completed and has landed a new tenant; (v) MPI has secured a new smartphone customer, and (vi) cost-cutting measures helped to contain 2QFY12 losses.

There were no surprises during the briefing. Visibility is low as customers are holding back. Utilisation rates remain below 70% for the second straight quarter and we suspect will continue to do so in 3QFY12. Despite the inventory cutback and market talk of a bottoming of inventory days, inventory days in 4QFY11 are expected to remain elevated at 79.3, albeit down slightly from 81 currently. 3QFY12 revenue is expected to remain flat assuming the macroeconomic situation does not deteriorate and the company continues to manage costs. While 4QFY12 prospects look brighter, we remain cautious as stockpiles are still higher than 2008 levels and customers continue to guide for a moderate decline over the next two quarters.

MPI’s recent share price resurgence seems premature and downside risk outweighs the upside. Investors should avoid MPI and the general semiconductor industry until orders start to pick up and the macroeconomic environment improves. Switch to JCY International Bhd to take advantage of the hard disk drive recovery from the recent shortage caused by the Thai floods. — CIMB Research, Feb 2

This article appeared in The Edge Financial Daily, February 3, 2012.

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Sime Darby Property accepts two awards for outstanding achievement

KUALA LUMPUR: Sime Darby Bhd’s property arm Sime Darby Property Bhd had a good start to 2012 when it received two awards for outstanding achievement in the property development sector in Malaysia and Southeast Asia.

The company received the Top 10 Developers Award at the BCI Asia Awards 2012 as well as the Prime Minister’s Hibiscus Award 2012 for Notable Achievement in the Environmental Excellence Category.

The BCI Asia Awards recognises the achievements of regional property developers that have made the greatest impact on the built environment in Southeast Asia. This is the second consecutive year that Sime Darby Property has been recognised.

The Hibiscus Award assesses an organisation’s overall commitment to reducing the environmental impact of its own operations and activities. The developer won the award for its Bukit Jelutong township in Shah Alam.

The self-contained Bukit Jelutong township is a low density development covering 2,200 acres (890ha) of prime freehold land. It went through a two-stage assessment process which included a site visit and detailed submissions of 14 areas covering an extensive range of environmental issues. It bagged the award for its excellent performance in several key areas including commitment and involvement of top management, assessment and management of environmental issues, provision of environment-related training and commitment to environmental social responsibility activities.

Bukit Jelutong township is a low density development covering 2,200 acres (890ha) of prime freehold land.

Sime Darby Property Managing Director Datuk Abdul Wahab Maskan said in a statement that it was gratifying to be one of the top 10 developers in Asia and to be acknowledged for its sustainable efforts in Malaysia.

“We will continue to work even harder to be the preferred developer in the region. They certainly validate Sime Darby Property’s commitment in creating developments that minimise the impact on the environment and is a testament to our commitment to developing sustainable communities in Malaysia and around the region.”

Sime Darby is currently the largest property developer in Malaysia with a landbank of 32,000 acres and has built 10 townships with 80,000 families and over 400,000 residents to date.

This article appeared on the Property page, The Edge Financial Daily, February 3, 2012.

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JCY continues upward trend ahead of 1Q earnings next week

KUALA LUMPUR (Feb 3): Shares of hard-disk drive (HDD) maker JCY International Bhd extended their gains on Friday ahead of the release of the earnings for the first quarter ended Dec 31, 2011.

JCY added seven sen to RM1.40 while JCY-CD rose seven sen also to 69.5 sen in very active trade.

The FBM KLCI was in positive territory, up2.18 points to 1,539.27. Turnover was 1.88 billion shares valued at RM1.43 billion. There were 377 gainers, 444 losers and 323 stocks unchanged.

It is expected to release its earnings next week. In early January, it stated the group was likely to record a surge in earnings for the quarter ended Dec 31, 2011.

JCY had also said that based on current available information, the group was likely to record an increase in net profit for the financial quarter ended Dec 31, 2011 “of approximately 1,900%” compared with a year ago where net profit was RM7.5million.

For the quarter ended Dec 31, 2011, it expected net profit to be an increase of 460% compared with the quarter ended Sept 30, 2011’s net profit of RM26.4million.

JCY cited the surge in earnings to an increase in average selling prices caused by component shortages arising from the October 2011 floods in Thailand; effective product mix; appreciating US dollar against the ringgit and continuous efficient cost management.

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Sime Darby advances, JP Morgan keeps OW, TP RM10.40

KUALA LUMPUR (Feb 3): SIME DARBY BHD []’s share price extended its gains in the afternoon session on Friday, buoyed by a positive outlook from JP Morgan Research Asia Pacific Equity Research.

At 2.38pm, it was up 27 sen to RM9.55 with 6.51 million shares done.

The FBM KLCI rose 1.53 points to 1,538.62. Turnover was 1.39 billion shares valued at RM1.09 billion. There were 302 gainers, 456 losers and 339 stocks unchanged.

The research house said its sum-of-the-parts (SoTP) based target price of RM10.40, assuming the 2012 crude palm oil forecast of RM2,850 per tonne.

“On the upside, we reiterate that a sustained global recovery could lift 2012E CPO prices to R$3,200 a tonne and our SoTP to RM11.60,” it said.

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KL Bourse issues market query to Naim Indah

KUALA LUMPUR: Naim Indah Corporation Bhd has attracted Bursa Malaysia's attention following a sharp increase in its share price and high trading volume.

In a statement today, the local bourse operator said it has issued an unusual market activity (UMA) query to the company.

Naim Indah's share rose 27.778 per cent or 2.5 sen to 11.5 sen at the end of the morning session today compared to yesterday's close of nine sen.

Trading also saw 92.077 million shares changing hands. -- BERNAMA

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Bursa Securities queries Naim Indah over unusual market activity

KUALA LUMPUR (Feb 3): NAIM INDAH CORPORATION BHD [], who shares rose in very active trade in the morning session on Friday, came under the scrutiny of Bursa Malaysia Securities Bhd.

Bursa Securities issued an unusual market activity query to Naim Indah due to the due to the sharp increase in price and high volume in the shares recently.

At midday, the share price was up 2.5 sen to 11.5 sen with 92 million shares done.

The FBM KLCI shed 0.24 of a point to 1,536.85. Turnover was 1.32 billion shares valued at RM1.032 billion. There were 298 gainers, 449 losers and 445 counters unchanged.

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Wah Seong ventures into Congo oil palm industry in US$25m deal

KUALA LUMPUR (Feb 3): WAH SEONG CORPORATION BHD [] is venturing into Congo’s PLANTATION []s sector, with the possibility of planting oil palm trees there after its proposed acquisition of a 51% stake in Atama Resources Incorporated for US$25 million.

Wah Seong said its unit WS Agrco Industries Pte Ltd had signed the agreement to acquire the stake in Atama Resources, which had a 30-year concession from the Republic of Congo to cultivate crops including oil palm on 470,000 ha of federal land.

Wah Seong would acquire the Atama Resources stake from Silvermark Resources Inc and Giant Dragon Group Bhd Ltd.

It said the planning and feasibility studies for the project had been carried out and 180,000hs had been identified as highly suitable for oil palm cultivation.

“Based on this acerage, it is envisaged the complete development will take over 15 years in 10 phases, with planting to commence towards the second quarter of 2012,” it said, adding the finale land area could exceed 180,000 ha.

Wah Seong said the acquisition of the stake was in line with the group’s expansion plan into the oil palm plantations, which would be a source of sustainable and recurring income for the group.

“It is also an upstream integration for WSC, because through its subsidies, it has already been in the business of supplying specialised equipment like boilers, steam turbine and oil room centrifuges to palm oil operators both locally and overseas, including Africa,” it said.

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Perwaja Steel RM400m notes downgraded

KUALA LUMPUR: Malaysian Rating Corp Bhd (MARC) has downgraded Perwaja Steel Sdn Bhd's RM400 million Murabahah Medium-Term Notes(MMTNs) programme from AID to A-ID with a negative outlook.

The rating action, which affected RM160 million of outstanding MMTNs under the programme, was premised on the prolonged decline in the steel maker's operating performance," said the rating agency in a statement today.

It said Perwaja's strategic initiative to integrate backwards into iron ore processing would likely contribute to better longer-term performance.

However, MARC believed the uncertain industry conditions and ongoing pressure on Perwaja's profitability would make it difficult for the steel maker to improve its credit measures to a level commensurate with its previously assigned rating within the next 12 to 24 months.

"Hence, this view is reflected in our negative outlook on the company," it added. -- BERNAMA

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Tricubes: No progress in regularisation scheme

KUALA LUMPUR (Feb 3): TRICUBES BHD [], which was in the news in 2011 when it posted higher accumulated losses than earlier announced, said on Friday there was no progress in the scheme to regularise its condition.

“Tricubes wishes to announce that there is no development since that announcement (on Jan 3, 2012),” it said in its monthly report on the status of its plan to comply with the obligation to regularise its condition under Guidance Note 3 of the Bursa Malaysia Securities Bhd market listing rules.

At 12.30pm, its share price was up 0.5 sen to 17 sen.

In late December last year, Tricubes revealed its accumulated losses for the financial year ended March 31, 2011 was RM17.24 million and not RM7.3 million as stated in its 2011 Annual report.

Tricubes had said there were typo errors on the accumulated losses as stated in pages 49, 61 and 98 of the 2011 Annual Report.

The announcement by Tricubes followed an audit of its 2011 annual report which was submitted to Bursa on Sept 7.

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KLCI pares down losses at mid-day, broader market stays weak

KUALA LUMPUR (Feb 3): The FBM KLCI pared down some its losses at the mid-day break on Friday, in line with the limited losses at key regional markets.

The FBM KLCI was down 0.24 of a point to 1,536.85 at the mid-day break.

The broader market was weaker with losers leading gainers by 449 to 298, while 335 counters traded unchanged. Volume was 1.32 billion shares valued at RM1.03 billion.

The ringgit weakened 0.13% to 3.0224 versus the US dollar; crude palm oil futures for the third month delivery was flat at RM3,050 per tonne, crude oil added 14 cents a barrel to US$96.50 while gold fell US$3.20 an ounce to US$1,756.27.

Hong Kong and China shares were weaker at midday in thin Friday trade, but losses on the benchmark indexes were limited by chart support levels with investors cautious ahead of fresh U.S. employment data later in the day, according to Reuters.

At the regional markets, Japan’s Nikkei 225 was down 0.14% to 8,864.48, Hong Kong’s Hang Seng Index shed 0.10% to 20,719.20, the Shanghai Composite Index was down 0.07% to 2,310.87, South Korea’s Kospi fell 0.87% to 1,966.95, while Singapore’s Straits Times Index rose 0.80% to 2,924.35 and Taiwan’s Taiex added 0.16% to 7,664.83.

On Bursa Malaysia, KLK fell 56 sen to RM25.04, Dutch Lady was down 36 sen to RM25.24, DKSH 20 sen to RM1.91, SapuraCrest and Genting shed 18 sen each to RM5 and RM10.98, F&N 16 sen to RM17.66, PPB 12 sen to RM17.08, Kamdar 10.5 sen to 37.5 sen, Toyo Ink nine sen to RM1.60 an d APM eight sen to RM4.50.

Gainers this morning included United PLANTATION []s, Tradewinds, MalPac, GAB, TDM, Sime Darby, BLD Plantations, Delloyd, BAT and Petronas Gas, while the actives included Nicorp, Mah Sing, JCY, DBE Gurney, Compugates, DRB-Hicom and Maxbiz.

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KL shares mixed to lower at midday

KUALA LUMPUR: Share prices on Bursa Malaysia ended midday mixed to lower on continued selling pressure but selective buying trimmed losses, dealers said.

At 12.30pm, the benchmark FTSE Bursa Malaysia KLCI stood at 1,536.85, down 0.24 of a point, after hovering between 1,526.03 and 1,537.59 throughout the morning session.

One dealer said sentiment was also in tandem with weaker regional markets due to the unresolved European debt crisis and uncertain US economic outlook.

"Investors need to see whether the US employment data, due out this evening, remains positive, before they place their money on risk assets," he said.

Meanwhile, losers led gainers 449 to 298 while 335 counters were unchanged,390 untraded and 15 others remained suspended.

Turnover stood at 1.32 billion shares worth RM1.03 billion.

The Finance Index advanced 36.11 points to 13,582.42, the Industrial Index rose 16.43 points to 2,863.17 while the Plantation Index declined 40.03points to 8,727.28.

The FBM Emas Index eased 0.98 of a point to 10,713.03, FBM Ace Index lost18.68 points to 4,498.81 but the FBM Mid 70 index earned 3.62 points to12,368.32.

Among active stocks, Naim Indah Corp improved 2.5 sen to 11.5 sen, Petronas Chemicals-CF added two sen to 2.5 sen and Mahsing-CE rose 1.5 sen to 2.5 sen.

Heavyweights, Maybank eased one sen to RM8.33, Sime Darby gained 20 sen to RM9.48 and Petronas Chemicals added eight sen to RM6.81. -- BERNAMA

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OSK maintains 'buy' call on Axiata

KUALA LUMPUR: OSK Research Sdn Bhd today maintained its "buy" call on Axiata Group despite the revocation by India's Supreme Court of122 telecommunication licences held by eight operators, including Axiata's 19.7per cent-owned Idea Cellular and Spice Communication.

In a research note today, OSK said the fair value remained unchanged atRM5.60 per share but expected the news to contribute to further weakness in Axiata's share price.

As for Idea, the impact is expected to be minimal but the company is caught in a bind and is made to suffer due to the cancellation of licences despite being fully compliant at each stage of the licence allocation process.

Idea contributed less than 10 per cent of Axiata's net earnings.

"Excluding Idea's contribution, our sums-of-parts valuation on Axiata has dropped to RM5.30 (from RM5.60), which still represents a 12 per cent upside from current levels," added OSK Research. -- BERNAMA

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MARC lowers Perwaja Steel RM400m debt notes, outlook negative

KUALA LUMPUR (Feb 3): Malaysian Rating Corporation Bhd (MARC) lowered its rating on Perwaja Steel Sdn Bhd’s (Perwaja) RM400.0 million Murabahah medium term notes (MMTN) programme from AID to A-ID.

The rating agency said on Friday the rating action affected RM160 million of outstanding debt notes under the programme while the outlook on the rating was negative.

MARC said the rating action was due to the steelmaker’s prolonged decline in the operating performance.

The rating agency also expected a deterioration in Perwaja’s leverage and cash flow coverage credit metrics as a result of incremental debt to finance capital expenditure on an iron ore concentration and pelletising plant.

“While Perwaja’s strategic initiative to integrate backwards into iron ore processing would likely contribute to better longer-term performance, MARC believes that the uncertain industry conditions and ongoing pressure on Perwaja’s profitability will make it difficult for the steelmaker to improve its credit measures to a level commensurate with its previously assigned rating within the next 12 to 24 months,” it said.

Hence, MARC said this view was reflected in the negative outlook that it was maintaining on the rating.

The rating reflected Perwaja’s vulnerability to decreases in upstream steel consumption and lower steel prices, its domestic market revenue concentration and its sensitivity to raw material price fluctuations, as evidenced by its lacklustre sales and reported losses for two consecutive years and the nine month period ending September 2011 (9MFY2011).

MARC also acknowledges the financial support from Perwaja’s ultimate holding company KINSTEEL BHD [], which together with reduced working capital requirements at the steelmaker, have helped to limit the deterioration in Perwaja’s financial profile and allowed the company to exhibit improved cash flow coverage measures in a challenging operating environment.

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Stable outlook for IJM's RM1b notes

KUALA LUMPUR: Malaysian Rating Corp Bhd (MARC) has affirmed its MARC-1/AA- ratings on IJM Corp Bhd’s RM1.0 billion Commercial Paper/Medium Term Notes Programme with a stable outlook.

In a statement today, MARC said the ratings action incorporated the satisfactory operating performance of its plantation, property and infrastructure segments, as well as the holding company’s broadly adequate liquidity and favourable financial flexibility.

"The higher year-on-year pre-tax profits posted by the three segments in the financial year ended March 31, 2011 have helped to offset the losses of its construction segment and weaker performance at its industrial segment," it said.

MARC noted that there was an easing of the pressure on the holding company’s cash flow and liquidity in financial year 2011 on account of higher dividends received from subsidiaries, the repayment of advances by subsidiaries and lower investment outflows.

It added constraining the ratings was the cyclicality of its construction and property development businesses, the heavy capital spending required for its Indonesia-based oil palm plantation operations, and the drag on profitability exerted by IJM’s construction and toll road operations in India. - BERNAMA

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KL shares remain lower at mid-morning

KUALA LUMPUR: Share prices on Bursa Malaysia remained lower at mid-morning today, driven mostly by continued selling in plantation stocks, dealers said.

At 10.53am, the FBM KLCI eased 4.65 points to 1,532.44, after opening 0.5 of a point higher at 1,537.59.

Losers led gainers 379 to 245 while 310 counters were unchanged, 538untraded and 15 others suspended.

A total of 836.67 million shares worth RM579.93 million were traded. The Finance Index was up 6.33 points to 13,552.64, the Industrial Index earned 0.17 of a point to 2,846.91 while the Plantation Index dropped 34.82points to 8,732.49.

The FBM Emas Index decreased 21.23 points to 10,714.27, the FBM ACE Index shed 5.18 points to 4,512.31 but the FBM Mid 70 Index added 17.57 points to12,382.27.

Among active stocks, Naim Indah Corp advanced one sen to one sen and Mahsing-CE rose 1.5 sen to 2.5 sen. For heavyweights, Maybank lost four sen to RM8.30, while Sime Darby rose increased four sen to RM9.32 and Petronas Chemicals Group was up six sen to RM6.79. -- BERNAMA

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RAM Ratings reaffirms AmIslamic’s AA3/P1 ratings

KUALA LUMPUR (Feb 3): RAM Ratings has reaffirmed AmIslamic Bank Bhd’s (AmIslamic) long- and short-term financial institution ratings at AA3 and P1, respectively.

The rating agency said on Friday that concurrently, the issue ratings of the bank have also been reaffirmed.

All the long-term ratings have a stable outlook, it said.

RAM Ratings said AmIslamic’s financial institution ratings mirror the AA3/Stable/P1 ratings of AmBank (M) Bhd (AmBank), the core entity within the AMMB HOLDINGS BHD [] (AMMB) universal-banking group.

“As the Islamic banking arm of the group, the bank leverages on AmBank’s risk-management systems, back-room operations and common infrastructure, in addition to riding on its branch network and distribution channels.

“Funding and capitalisation are managed at group level and support is expected to be forthcoming from AmBank, should the need arise,” it said.

RAM Ratings said that together, AmIslamic and AmBank have a well-established franchise in vehicle financing as Malaysia’s third-largest automobile financier, adding that the bank’s strategies were closely aligned with those of AmBank.

In line with AmBank’s focus on portfolio diversification, AmIslamic has placed greater emphasis on the business and corporate segments, which are viewed to yield better returns given the greater cross-selling opportunities, it said.

The bank’s proportion of vehicle financing declined to 46.7% as at end-September 2011 (end-March 2010: 52.9%), albeit still its largest financing component, it said.

It said AmIslamic’s asset quality is still deemed sound despite having been affected by regulatory structural changes in the personal-financing space in 2010, adding that personal financing formed 14% of the bank’s gross financing as at end-September 2011.

“Although higher financing impairment charges arising from this portfolio had dragged down AmIslamic’s profit performance in FYE 31 March 2011 (FY Mar 2011), this moderated in 1H FY Mar 2012.

“Meanwhile, AmIslamic’s capitalisation is deemed sufficient, with respective tier-1 and overall risk-weighted capital-adequacy ratios of 8.2% and 14.3% as at end-September 2011,” it said.

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Extol MSC falls on share placement pricing

Extol MSC Bhd, a provider of anti-virus software, fell 2.9 percent to 17 sen in Kuala Lumpur trading at 9.42am, set for its biggest fall since Jan. 26.

The company priced its placement shares at 15 sen each, a 10 percent discount to its five-day volume-weighted average market price, according to a filing to the exchange. -- Bloomberg

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Hubline rises on share placement pricing

Hubline Bhd, a shipping group, rose 1.2 percent to 8.5 sen in Kuala Lumpur trading at 9.42am.

The company priced its placement shares at 20 sen each, a 122 percent premium to its five-day volume weighted average market price, it said in a statement. -- Bloomberg

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