Thursday 9 February 2012

Berjaya Land records RM8.05m loss from sale of BToto shares

KUALA LUMPUR (Feb 9): BERJAYA LAND BHD [] (B-Land) recorded a net loss of about RM8.05 million at group level after it disposed of 18.301 million BERJAYA SPORTS TOTO BHD [] shares for RM79.61 million.

B-Land said the shares were disposed of on Thursday at an average selling price of RM4.35 and the shares represented about 1.37% of BToto.

“The disposed shares which were purchased since 1992, have a total carrying value of about RM87.66 million in the books of B-Land group. The net proceeds from the disposals will be utilised as working capital and repayment of bank borrowings of the B-Land group,” it said.

B-Land said after the disposals of the 18.301 million shares, the company and its unlisted subsidiaries owned 533.607 million BToto shares or 40.00%.

BERJAYA CORPORATION BHD [] and its unlisted subsidiaries also hold 132.439 million BToto shares representing 9.93%.

“With the disposals, the entire BCorp Group (including the B-Land group) has a total of 666.046 million shares representing approximately 49.93% equity interest in BToto. BToto is deemed a subsidiary of B-Land, which in turn is a listed subsidiary of BCorp. BCorp remains the ultimate holding company of BToto,” it said.



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Puncak Niaga queried

Bursa Malaysia Securities Bhd has issued an unusual market activity query to Puncak Niaga Holdings Bhd due to the sharp rise in its price and high volume.

In a statement today, Bursa Malaysia advised investors to take note of the company's reply to the query which would be posted on Bursa Malaysia's website under 'Company Announcement', when making their investment decision.

At the close today, Puncak Niaga rose 44 sen, or 30.35 per cent, to RM1.89, with 30.93 million shares traded. -- Bernama



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Sunway REIT declares RM53.6m distribution income

Sunway Real Estate Investment Trust (Sunway REIT) has announced a distribution income of RM53.6 million in the second quarter 2012 for the financial year ending June 2012.

In a statement today, the manager of Sunway REIT, Sunway REIT Management Sdn Bhd said the result represented an increase of 14.1 per cent compared to the corresponding quarter of the preceding year.

"This also translates into a record high in quarterly distribution per unit (DPU) of 1.99 sen. On a year-on-year basis, the DPU rose 13.7 per cent in the second quarter 2012 from the 1.75 sen declared for the period October-December
2010," it added.

Sunway REIT Management said the high quarterly DPU of 1.99 sen to their unit holders was on the back of a strong performance from the initial portfolio and positive contribution from Sunway Putra Place.

"We endeavour to continue to enhance unit holders’ value by striving to achieve sustainability in income and growth.

"Sunway REIT’s unit price has appreciated by 12.6 per cent year-to-date second quarter 2012, bringing a total return of 18.5 per cent for the six months period from July 2011," it added. -- Bernama



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Koh Lek awarded SIGGAS RM2.75m job

Southern Industrial Gas Sdn Bhd (SIGGAS), a wholly-owned subsidiary of Sig Gases Bhd, has awarded a RM2.75 million construction tender to Koh Lek Construction and Renovation Sdn Bhd.

SIGGAS in a filing to Bursa Malaysia today said the contract is for the execution and completion of a semi-open factory and single factory office block in Kuantan, Pahang.

The SIGGAS board of directors is of the opinion that the contract is in the best interest of the company. -- Bernama



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KLCI stages late rally, banks advance on steadier economic outlook

KUALA LUMPUR: Blue chips on Bursa Malaysia staged a late push on Thursday, pushing the FBM KLCI closer its all-time high of 1,597 in mid-July 2011 as banks advanced on steadier outlook for the economy following the release of fresh economic data.

The KLCI closed up 12.14 points or 0.78% to 1,565.32 while volume was still strong at 3.31 billion shares valued at RM2.98 billion. Gainers led losers 446 to 456 with 309 counters unchanged.

December’s industrial production index expanded 3.0% on-year underpinned by the stronger manufacturing sector and electricity output, which was higher than expectations.

Meanwhile, Credit Suisse's Emerging Markets Economic Research expected Malaysia's real GDP growth to continue outperforming other small open economies in the region.

"Malaysia’s real GDP growth has outperformed industrial production growth since the global financial crisis, as the services sector has been the main contributor to real GDP growth during this period. Our real GDP growth forecasts for 2011 and 2012 remain unchanged at 5% and 4.8%, respectively, above the consensus forecast of 3.8% for 2012,” it said.

The growth would be underpinned by the strong domestic demand, high palm and crude oil prices, and the fiscal boost from the government, said the research house.

Despite starting the trading day on a weak note, the KLCI outperformed other regional bourses beating Shanghai's Composite Index closed up 0.09% to 2,349.59, South Korea's Kospi Index rose 0.54% to 2,014.62 and Taiwan's Taeix Index increased 0.52% to 7,910.78. Japan's Nikkei fell 0.15% to 9,002.24 and Singapore's Straits Index was down 0.16% to 2,977.31.

At Bursa Malaysia, among the lower liners and penny stocks which were the top performers were Selangor-linked stocks which were also involved in the water industry.

Dominating the top gainers’ list were KUMPULAN PERANGSANG SELANGOR [] and KUMPULAN HARTANAH SELANGOR BHD [] both up 27 sen to RM1.39 and 78 sen respectively. PUNCAK NIAGA HOLDINGS BHD [] was also up 44 sen to RM1.89, prompting an unusual market activity query by Bursa Malaysia. Water pipe manufacturer JAKS Resources climbed 14 sen to 72 sen.

Other index-linked stocks which closed higher include KLK up 56 sen to RM25.50, Carlsberg 29 sen to RM9.60, British American Tobacco 26 sen to RM50.26 and RHB Cap 20 sen to RM7.20.

Axiata gained 19 sen to RM4.97, pushing the index up 3.80 points, IOI Corp pushed the index up 1.97 points. Among the banks, RHB Cap added 20 sen to RM7.20, AMMB 14 sen to RM6.10, CIMB nine sen to RM7.20 and Maybank six sen to RM8.47.

Among actively traded stocks, Naim Indah rose 18 sen to close at 67 sen as a Bursa Malaysia Securities caution to investors saw it closing off the day’s best of 75 sen.

The worst performer was FarEast down 30 sen to RM7.00 followed by Maybulk 18 sen to RM2.01, Nestle 16 sen to RM55.52 and Aeon 15 sen to RM7.85.



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Khazanah, PNB told to dispose non-core assets

The Bumiputera Agenda Action Council meeting has decided to ask Khazanah and Permodalan Nasional Bhd (PNB) to dispose of non-core assets to Bumiputera firms through an open tender process.

So far, five companies from Khazanah and five from PNB had been identified for this purpose, said Prime Minister Datuk Seri Najib Tun Razak who chaired the meeting today. -- Bernama



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OSK reaffirms bullish view on AirAsia Japan

OSK Research Sdn Bhd has reaffirmed its bullish view that AirAsia Japan will be profitable from the first year of operation from the high-yield market.

In a research note today, OSK said Japan's low-cost passenger segment was under-served, with its penetration rate at only 9.1 per cent.

"AirAsia Japan's planned destinations are among the top four domestic destinations in Japan, while on the international side, Seoul is in the top spot with Busan (also in South Korea) ranked somewhere between 10 and 15," it said.

OSK said AirAsia would be competing head-on (in terms of routes operating from Narita airport) with Jetstar Japan, which was expected to commence operation a month earlier.

It said Jetstar's presence would certainly add heat to the competition but the fact that penetration of low-cost travel in Japan was relatively low compared to other regions meant that the market was big enough for all.

AirAsia Japan last week received the air operator certificate (AOC) to start operations by Aug 1, 2012 from Narita airport to Sapporo, Fukuoka and Okinawa and to Seoul and Busan in October.

Meanwhile, OSK said it was optimistically cautious on AirAsia Inc, AirAsia's Philippines associate.

It said the Philippines, an attractive market for low-cost carriers given the archipelagic nature of its geography, was conducive for air travel.

OSK said coupled with the high number of Filipinos working abroad as a boost to international travel, the Philippines offered significant growth potential given the propensity for air travel on the back of rising per capita income.

AirAsia Inc has received its AOC from the Civil Aviation Authority of the Philippines.

It is expected to commence flights as early as March or April 2012 to Singapore, Hong Kong and Macau.

OSK has maintained earnings and 'buy' call on AirAsia with the fair value unchanged at RM4.57. -- BERNAMA



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MRCB a 'buy', say research houses

MIDF Research has maintained a "buy" recommendation on Malaysian Resources Corp Bhd (MRCB) with an unchanged target price of RM2.41, as it may benefit from the slew of expected contract awards this year.

The research house said the construction sector has regained its momentum since early this year, supported by positive news flow and job awards to contractors.

"We expect MRCB's construction division to recover this year," it said in a research note today, adding, the company had a healthy outstanding order book of RM2.5 billion.

MRCB's external revenue from the construction division was lower by 10.2 per cent year-on-year for financial year 2011, as the company was focused largely on in-house construction works.

MIDF Research said MRCB might top up its construction order book by RM1.5 billion in the current financial year.

It is also expecting MRCB's construction margin to recover this year given lower building material prices, particularly steel bars, which is relatively cheaper as compared to last year.

Steel bars are now trading at RM2,150-RM2,300 per metric tonne, which is five-six per cent lower than the average price in 2011.

Meanwhile, OSK Research has recommended a "buy" on MRCB at an unchanged fair value of RM2.50, as construction of the light rail transit (LRT) extension is expected to fully start this year.

"We expect the construction division to post a better performance as it was awarded a major contract for the LRT extension," it said.

At 12pm, MRCB's shares declined four sen to RM2.20. -- Bernama



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Bursa Q4 income rises to RM31m

Bursa Malaysia Bhd, the country’s stock exchange operator, said fourth-quarter net income rose to RM31.3 million from RM29.8 million a year earlier, according to a company statement in Kuala Lumpur today.

According to Chief Executive Officer Tajuddin Atan, Bursa is open to strategic alliances. He declined to give more details.

He also said that Bursa has targeted average trading value of at least RM1.6 billion this year for the nation’s stock market.

Last year’s target was the same and average trading value reached RM1.8 billion, he told reporters in Kuala Lumpur today. -- Bloomberg



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Bursa Securities queries Puncak Niaga over unusual market activity

KUALA LUMPUR (Feb 9): Bursa Malaysia Securities Bhd has queried PUNCAK NIAGA HOLDINGS BHD [] following the sharp rise in price and high volume in its shares on Thursday.

The regulator had requested the company to provide it with an announcement for public release after enquiring with the directors and major shareholders to seek the cause of the unusual market activity.

Puncak’s share price rallied 44 sen to RM1.89 with 30.93 million shares transacted.



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Market Commentary

The FBM KLCI index gained 12.14 points or 0.78% on Thursday. The Finance Index increased 0.75% to 13822.38 points, the Properties Index up 0.56% to 1057.41 points and the Plantation Index rose 1.45% to 8925.13 points. The market traded within a range of 14.13 points between an intra-day high of 1565.32 and a low of 1551.19 during the session.

Actively traded stocks include NICORP, COMPUGT, TMS, KHSB, DBE, MTRONIC, SAAG, GPRO, KARYON-WA and JAKS. Trading volume decreased to 3314.40 mil shares worth RM2974.84 mil as compared to Wednesday’s 4388.09 mil shares worth RM3295.58 mil.

Leading Movers were AXIATA (+19 sen to RM4.97), IOICORP (+13 sen to RM5.60), CIMB (+9 sen to RM7.20), MAYBANK (+6 sen to RM8.47) and AMMB (+14 sen to RM6.10). Lagging Movers were TENAGA (-8 sen to RM6.30), GENTING (-4 sen to RM10.46), UMW (-2 sen to RM6.85), HLBANK (-2 sen to RM11.58) and HLFG (-2 sen to RM11.74). Market breadth was negative with 447 gainers as compared to 456 losers. -- JF Apex Securities Bhd



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Ex-CEO of Petra Energy resigns as director ahead of EGM

KUALA LUMPUR (Feb 9): The former chief executive officer (CEO) of PETRA ENERGY BHD [] Kamarul Baharin Albakri resigned as a director of the company on Wednesday, Feb 8 ahead of the EGM on Thursday to seek his removal.

The integrated brownfield oil and gas service provider said the ordinary resolution was therefore not considered at the EGM.

To recap, on Jan 10, Petra Energy announced that it would hold an EGM following a requisition by a shareholder, Shorefield Resources Sdn Bhd to remove Kamarul with immediate effect.

He was the former CEO and his services were terminated on Dec 20. Despite his removal then, he still remained a director of the company.



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MRCB 4Q profit falls to RM26m

KUALA LUMPUR: Malaysian Resources Corp Bhd’s (MRCB) net profit for 4QFY11 ended Dec 31 fell to RM26.12 million, or 1.88 sen a share, from RM41.5 million in the same period last year.

Revenue, however, rose to RM470.39 million from RM433.19 million previously, MRCB said in a filing with Bursa Malaysia yesterday. For the full year of 2011, net profit gained 15.2% to RM77.46 million while revenue increased 13.6% to RM1.21 billion.

MRCB said the better performance in FY11 was due to higher contribution from the group’s ongoing property development projects at Kuala Lumpur Sentral, which it has offset against lower revenue from the infrastructure and environmental segment due to completion of existing environmental projects.


This article appeared in The Edge Financial Daily, February 9, 2012.



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Harvest Court’s Chan emerges in Naim Indah

KUALA LUMPUR: Naim Indah Corp Bhd, which saw its share price surge by 172.2% to close at 49 sen yesterday, announced six new shareholders including Datuk Raymond Chan Boon Siew.

Prior to the announcement, Naim Indah hit limit-up, surging 30 sen to 48 sen yesterday morning and was the second most active stock on Bursa with 267.37 million shares changing hands. This represented 37.9% of its 702.03 million total issued shares.

Naim Indah announced that Crest Energy Sdn Bhd, its major shareholder, had disposed its whole 22.8% stake to six individuals yesterday.

Among the six individuals, Chan, a major shareholder and exective director of Harvest Court Industries Bhd, will hold the largest stake of 12.11% or 85 million shares. Chan is also the managing director of Sagajuta (Sabah) Sdn Bhd, a property developer.

The other individuals emerging in Naim Indah are Ng Kian Huat with a 3.99% stake, followed by Woo Sew Kew (2.56%), Leow Sien Kuan (2.28%), Krishna Bhatt @ Achong (0.98%) and Chong Kok Loong (0.88%).

Chan came into the limelight after he bought into Harvest Court in the last quarter of 2011.

He subsequently awarded more than a billion ringgit worth of construction contracts to Harvest Court, which saw its share price climbed from 12 sen to as high as RM2 last year, an increase of more than 16-fold.

Chan was reported as saying that he was injecting assets into Harvest Court to help turn around the loss-making company.

Speculation is that Chan could possibly do the same for Naim Indah, which has been loss-making since 2008.

“He could possibly inject assets of his Sagajuta group into Naim Indah, such as the 1Borneo Hypermall in Kota Kinabalu, Sabah which is worth more than RM400 million together with several other projects,” said a market observer.

Naim Indah’s core activities are in property investment, property development and round logs timber extraction.

For its 3QFY11 ended Sept 2011, it posted a net loss of RM2.21 million against revenue of RM12.96 million.

For the nine months to Sept 30, 2011, Naim Indah posted a net loss of RM1.83 million on revenue of RM20.03 million. During the period, its property development segment accounted for 51.6% of revenue, followed by timber extraction (34.2%), and property management (14.2%).

For FY10 ended Dec 31, the company posted a net loss of RM18.36 million on revenue of RM12.52 million.

As of Sept 30, 2011, Naim Indah had cash reserves of RM512,000 against borrowings of RM18.91 million. Its net asset per share stood at 11 sen as at Sept 30, 2011.


This article appeared in The Edge Financial Daily, February 9, 2012.

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TMS gets KTMB ticketing job

KUALA LUMPUR: The Media Shoppe Bhd (TMS) has been appointed a subcontractor for the automatic fare collection system (AFC) for KTM Bhd’s (KTMB) commuter stations.

In a filing with Bursa Malaysia yesterday, TMS said it had received a letter of award dated Feb 8, 2012 from Hopetech Sdn Bhd appointing it as subcontractor to work on the RM85.88 million project which involves designing, manufacturing, supplying, installing and commissioning of the AFC system.

Hopetech was given a letter of award by the Transport Ministry on Dec 21 appointing it a contractor for the RM85.88 million contract.

“According to Hopetech, the letter of award from the MoT is still valid and the project has commenced in January 2011, and is expected to complete in April 2012,” said TMS in a statement.

TMS closed at 24 sen yesterday, with 41.6 million shares traded. At 24 sen, it is still 155% higher than the stock’s 52-week average price of 9.4 sen.


This article appeared in The Edge Financial Daily, February 9, 2012.




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CIMB and RBS talks very preliminary

KUALA LUMPUR: Talks between CIMB Group Holdings Bhd and Royal Bank of Scotland (RBS) for the latter’s Asian equities are at a very preliminary stage with no commitment yet, according to an analyst familiar with the matter.

CIMB declined to comment on the talks with RBS.

The Financial Times reported yesterday that CIMB and China International Capital Corp are the two remaining bidders in the running to buy RBS’ Asian equities, mergers and acquisitions, and research businesses.

According to the newspaper, the units which are part of the UK bank’s investment banking division, are expected to command up to US$50 million (RM150 million).

“In our meeting with them earlier, CIMB’s management team said they are not going through any acquisition. They provided guidance that they are only doing due diligence on the Philippine bank,” said the analyst.

He also said the group as an investment bank is open to any opportunity and is constantly looking at many deals.

“But there is no commitment or desperation to buy. CIMB is very selective and not desperate. Any acquisition must add value. This RBS case is at a preliminary stage that the management is not giving any guidance on it,” said the analyst, adding that according to RBS, it would retain its banking operations.

The analyst is sceptical if RBS is a right fit for CIMB as it (CIMB) is focusing on Asean right now while RBS has an Asian reach, which may be contradictory to CIMB’s goal at the moment.

“However, the acquisition of RBS will leapfrog CIMB’s presence in the region but I don’t know if it has the appetite to go for the whole of Asia,” he said, adding that right pricing would be crucial in any acquisition.

Last month it was reported that CIMB was in talks with brewer San Miguel Corp for a stake in the Philippines’ Bank of Commerce.

CIMB group chief executive Datuk Seri Nazir Razak said last month that the parties are still in negotiations and he hoped the discussions will conclude by the first quarter this year.

Nazir also said the bank would apply for a licence in Laos and if the deal in the Philippines goes through, CIMB will have a presence in the whole of Asean.


This article appeared in The Edge Financial Daily, February 9, 2012.




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JCY expects growth to continue

KUALA LUMPUR: JCY International Bhd is expected to continue its growth into 2QFY12 ending March 31, continuing its good numbers for 1QFY12.

“We are on target and are able to achieve as good as what we are achieving right now [for 1QFY12 ended Dec 31],” James Wong, the group’s finance director, told a media briefing yesterday. The group announced its 1QFY12 results yesterday.

The hard disk drive (HDD) component manufacturer posted a net profit of RM162.45 million for 1QFY12, a 2,063% year-on-year (y-o-y) increase from its net profit of RM7.51 million in the previous corresponding period.

Wong said its performance was 50% attributable to the advantages it gained over its competitors due to the floods in Thailand in October last year. His group also made some internal changes to increase output and to reduce costs.

JCY was one of the few HDD component producers able to continue to supply its main vendor, Seagate Techonology plc, as its Thai operations were not affected by the flooding.

There was a shortage in HDD component products and drives as many producers had to shut down their Thai operations. This disrupted the HDD supply chain which increased the average selling prices, contributing to JCY’s increase in profit.

Addressing the issue of sustainability, Wong said: “The full recovery in terms of the supply will not be (seen) until 2013.”

“The first thing to do is to capture global market share,” he said, adding that JCY is at an advantage as its competitors could face hurdles in re-establishing their HDD operations, and it is not easy for newcomers to enter the HDD industry.

“The demand is there, the question is how can you provide (supply),” Wong said.

As part of its initiative to increase its market share, the group announced in early January that it would spend RM300 million over the next 24 months to expand its facilities in Malaysia, Thailand and China.

“Some 80% of the expenditure is on machinery and the other 20% is on infrastructure,” said Wong. The group is purchasing new machinery which will help increase output of HDD components.

JCY is opening a plant in Guangzhou, China in June in addition to its other China plant in Suzhou. Wong said his group is expecting the Guangzhou plant to have a high efficiency partly due to its strategic location close to a port.

The group’s net profit is a complete turnaround from its previous financial standing a year ago. JCY previously posted losses for 3QFY11 due to a combination of lower selling prices, smaller sales volume and a weaker US dollar.

The group’s stock has been on an uptrend since the Thai floods in October, closing at a 52-week high on Feb 3 at RM1.42. It closed yesterday one sen lower at RM1.41 with 39.72 million shares changing hands.


This article appeared in The Edge Financial Daily, February 9, 2012.




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MMC-Gamuda JV firms up details with MRT Co

KUALA LUMPUR: The joint venture between MMC Corp Bhd and Gamuda Bhd (MMC-Gamuda JV) has firmed up the details with MRT Co on the scope of work and fees for its role as the project delivery partner (PDP) for the multi-billion ringgit Klang Valley mass rapid transit project.

According to sources, the PDP will get fees of 6% of the total project cost excluding the tunnelling portion and 5% reimbursement for costs incurred so far in getting all approvals, preparing technical designs and specifications and Environmental Impact Analysis (EIA) approvals for the Sungai Buloh-Kajang MRT (SBK MRT) line.

The PDP is projected to earn about RM480 million, assuming the project cost is RM8 billion (excluding land cost and without the tunnelling portion which is estimated at roughly RM7 billion) over the duration of the project that is expected to be completed in mid-2017. Any cost savings from the project will go back to the government.

It must be noted that the MMC-Gamuda JV is also eyeing the tunnelling job for the SBK MRT line.

“If the MMC-Gamuda JV does not get the tunnelling portion, then its PDP fee will also include the tunnelling cost. However, if the JV is made the tunnelling contractor, then they don’t get fees on that portion,” explained the source.

The scope of work will involve the PDP acting like a turnkey contractor as it is responsible for the engineering designs and technical specifications that meet the requirements of the government.

“It also has to deliver the SBK MRT line within cost and on time. The PDP must also ensure performance of all other contractors in terms of quality, safety and timeliness. The government is protected from all disputes and claims,” said the source.

He explained the PDP has to date obtained Railway Scheme approval that includes network planning studies and land use planning, undertaken traffic forecasts for the government, cost benefit analysis and EIA approval.

“There are more than 30 consultants involved so the PDP would have to interface and coordinate with them all. At the same time, the PDP must bear all risks with regard to matters such as variation orders, delays and claims,” the source said.

The source also told The Edge Financial Daily that 90 construction packages have been planned to ensure wider participation.

“However, the final say is with the government. The PDP will have to ensure successful delivery of the project based on government’s award decisions. There has to be extensive interfacing between the PDP and the contractors who are involved in the 90 packages to ensure quality and on time delivery,” he said.

The source said the PDP is in for more interfacing and coordinating as the system works will be broken up into 11 packages.

“This is the first time it is sliced and diced into 11 packages, again to allow wider participation. The PDP will have to coordinate and manage any disputes,” said the source.

The SBK MRT project is expected to last seven years (18 months have passed) with completion in July 2017. The PDP is also expected to employ some 456 staff during this time.

The SBT MRT project was launched on July 8 last year by Prime Minister Datuk Seri Najib Razak but has since faced issues such as land acquisition in Jalan Bukit Bintang and Jalan Sultan in the city centre and the total cost of the entire project.

The SBK MRT line runs from Sungai Buloh to Kajang cutting through the Kuala Lumpur city centre covering 51km and 31 stations.


This article appeared in The Edge Financial Daily, February 9, 2012.



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AirAsia X eyes IPO in 2H

KUALA LUMPUR: AirAsia X Sdn Bhd is planning to go public as early as the second half of the year, despite axing four of its more popular routes.

CEO Azran Osman-Rani said the listing of the long-haul low-cost carrier is subject to the listing of AirAsia’s foreign associates — Thailand AirAsia and Indonesia AirAsia.

“As you know, the Thailand and Indonesian IPOs will take off first. Only then AirAsia X. So I would like to think that AirAsia X’s listing can happen in the second half,” he told The Edge Financial Daily in a recent interview.

The intention to list AirAsia X is not new. The carrier first unveiled plans to list its shares to raise funds for expansion more than two years ago.

It was reported in the past that the exercise, which was put on hold due to unfavourable market conditions, would raise as much as RM1 billion for the long-haul budget airline.

But with recent developments signalling decelerating growth at the airline, there are questions about its plans for an IPO.

AirAsia X recently postponed plans for a US$200 million (RM600 million) Islamic bond issue planned for March by at least 12 months. The proceeds from the sukuk issuance were originally for the purchase of two planes flying the London and Paris routes -- from which AirAsia X withdrew earlier this year. The airline has also axed the Kuala Lumpur to Mumbai and New Delhi routes.

“We are not cancelling the sukuk issue. We are putting it on hold since we are not getting any delivery of planes this year, but only in 2013,” said Azran.

The airline needed to withdraw from the four routes because they were unprofitable. The airline was “bleeding millions a month” on the London route, he said, which is dominated by full-service carriers, especially those from the Middle East.

“It is difficult to compete with full-service carriers that offer better service at a price just marginally above ours. Emirates also recently added A380 services on this route,” he said.

The Delhi route has been unprofitable for more than one year following the visa revocation of Indian workers. He said there was also a 700% increase in airport taxes at Delhi.

On the Mumbai route, Azran said the plane was redeployed to serve Haneda, Tokyo.

He said despite the axing of the four routes, the airline -- which has nine aircraft and flies to 15 different countries -- still has a good IPO story to tell investors.

“Our China and other routes are profitable. And now we have Sydney. We still have a good IPO story,” he said.

However, one potential caveat for AirAsia X’s IPO plan is its losses for FY11 ended Dec 31.

“I can’t share with you the figures as they are being finalised,” said Azran, who attributed the losses to the now axed London, Paris, Mumbai and Delhi routes.

It is not known what kind of valuation AirAsia X can demand for its IPO, but if the listing of Singapore’s Tiger Airways is taken as a benchmark, the former can fetch a price multiple in the low teens, analysts said.

After all, the Singapore Airlines low-cost unit was still making losses when it went public last year.

AirAsia X has been in the limelight recently for all the wrong reasons, which include the recent lawsuit filed by an Australian consumer watchdog against the airline.

The watchdog claimed some fares sold on the airline’s website did not display prices inclusive of all taxes, duties, fees and other charges.

However, in its latest statement AirAsia said it has taken “corrective action” to resolve the issue, which the airline attributed to an “IT glitch”.

Azran said the lawsuit has not impacted its ticket sales for its recently introduced Sydney route.

It is worth noting that although AirAsia X has been fighting for the coveted route for the past three years, it was only awarded the rights recently.

This came a few months after Malaysian Airline System Bhd (MAS), AirAsia Bhd and Air Asia X signed a comprehensive collaborative framework agreement (CCF).

MAS, on the other hand, has also withdrawn from unprofitable routes, which include Dubai and Johannesburg.

Given the chronology of events, both AirAsia (including its unit AirAsia X) and MAS were put under public scrutiny for the deliberate “give and take” of the routes they fly, which can be viewed as anti-competitive behaviour.

Azran said AirAsia X has its ground covered if it were to be taken to task for anti-competitive behaviour as it has valid reasons behind the rationalisation of its routes.

“We considered axing these routes way before the CCF with MAS last August,” he said.

As for AirAsia X managing to secure the Sydney route, Azran said, “The launching of Scoot was one of the major reasons why AirAsia X could secure the route this time around.”

Late last year, Singapore’s new long-haul no-frills carrier Scoot, which is said to be a major rival to AirAsia X and even Australia’s Qantas, chose Sydney as its first city to fly into in mid-2011.

Under the CCF, Khazanah Nasional Bhd was also given the option to take up to 10% in AirAsia X.

“Khazanah has bigger issues to iron out with regards to the CCF before they embark on this decision [to exercise the option in AirAsia X],” responded Azran when asked about developments on the matter.


This article appeared in The Edge Financial Daily, February 9, 2012.



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AirAsia X eyes IPO in 2H

KUALA LUMPUR: AirAsia X Sdn Bhd is planning to go public as early as the second half of the year, despite axing four of its more popular routes.

CEO Azran Osman-Rani said the listing of the long-haul low-cost carrier is subject to the listing of AirAsia’s foreign associates — Thailand AirAsia and Indonesia AirAsia.

“As you know, the Thailand and Indonesian IPOs will take off first. Only then AirAsia X. So I would like to think that AirAsia X’s listing can happen in the second half,” he told The Edge Financial Daily in a recent interview.

The intention to list AirAsia X is not new. The carrier first unveiled plans to list its shares to raise funds for expansion more than two years ago.

It was reported in the past that the exercise, which was put on hold due to unfavourable market conditions, would raise as much as RM1 billion for the long-haul budget airline.

But with recent developments signalling decelerating growth at the airline, there are questions about its plans for an IPO.

AirAsia X recently postponed plans for a US$200 million (RM600 million) Islamic bond issue planned for March by at least 12 months. The proceeds from the sukuk issuance were originally for the purchase of two planes flying the London and Paris routes -- from which AirAsia X withdrew earlier this year. The airline has also axed the Kuala Lumpur to Mumbai and New Delhi routes.

“We are not cancelling the sukuk issue. We are putting it on hold since we are not getting any delivery of planes this year, but only in 2013,” said Azran.

Azran says the recent lawsuit by an Australian consumer watchdog has not impacted ticket sales for the Sydney route.


The airline needed to withdraw from the four routes because they were unprofitable. The airline was “bleeding millions a month” on the London route, he said, which is dominated by full-service carriers, especially those from the Middle East.

“It is difficult to compete with full-service carriers that offer better service at a price just marginally above ours. Emirates also recently added A380 services on this route,” he said.

The Delhi route has been unprofitable for more than one year following the visa revocation of Indian workers. He said there was also a 700% increase in airport taxes at Delhi.

On the Mumbai route, Azran said the plane was redeployed to serve Haneda, Tokyo.

He said despite the axing of the four routes, the airline -- which has nine aircraft and flies to 15 different countries -- still has a good IPO story to tell investors.

“Our China and other routes are profitable. And now we have Sydney. We still have a good IPO story,” he said.

However, one potential caveat for AirAsia X’s IPO plan is its losses for FY11 ended Dec 31.

“I can’t share with you the figures as they are being finalised,” said Azran, who attributed the losses to the now axed London, Paris, Mumbai and Delhi routes.

It is not known what kind of valuation AirAsia X can demand for its IPO, but if the listing of Singapore’s Tiger Airways is taken as a benchmark, the former can fetch a price multiple in the low teens, analysts said.

After all, the Singapore Airlines low-cost unit was still making losses when it went public last year.

AirAsia X has been in the limelight recently for all the wrong reasons, which include the recent lawsuit filed by an Australian consumer watchdog against the airline.

The watchdog claimed some fares sold on the airline’s website did not display prices inclusive of all taxes, duties, fees and other charges.

However, in its latest statement AirAsia said it has taken “corrective action” to resolve the issue, which the airline attributed to an “IT glitch”.

Azran said the lawsuit has not impacted its ticket sales for its recently introduced Sydney route.

It is worth noting that although AirAsia X has been fighting for the coveted route for the past three years, it was only awarded the rights recently.

This came a few months after Malaysian Airline System Bhd (MAS), AirAsia Bhd and Air Asia X signed a comprehensive collaborative framework agreement (CCF).

MAS, on the other hand, has also withdrawn from unprofitable routes, which include Dubai and Johannesburg.

Given the chronology of events, both AirAsia (including its unit AirAsia X) and MAS were put under public scrutiny for the deliberate “give and take” of the routes they fly, which can be viewed as anti-competitive behaviour.

Azran said AirAsia X has its ground covered if it were to be taken to task for anti-competitive behaviour as it has valid reasons behind the rationalisation of its routes.

“We considered axing these routes way before the CCF with MAS last August,” he said.

As for AirAsia X managing to secure the Sydney route, Azran said, “The launching of Scoot was one of the major reasons why AirAsia X could secure the route this time around.”

Late last year, Singapore’s new long-haul no-frills carrier Scoot, which is said to be a major rival to AirAsia X and even Australia’s Qantas, chose Sydney as its first city to fly into in mid-2011.

Under the CCF, Khazanah Nasional Bhd was also given the option to take up to 10% in AirAsia X.

“Khazanah has bigger issues to iron out with regards to the CCF before they embark on this decision [to exercise the option in AirAsia X],” responded Azran when asked about developments on the matter.


This article appeared in The Edge Financial Daily, February 9, 2012.



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MMC-Gamuda JV firms up details with MRT Co

KUALA LUMPUR: The joint venture between MMC Corp Bhd and Gamuda Bhd (MMC-Gamuda JV) has firmed up the details with MRT Co on the scope of work and fees for its role as the project delivery partner (PDP) for the multi-billion ringgit Klang Valley mass rapid transit project.

According to sources, the PDP will get fees of 6% of the total project cost excluding the tunnelling portion and 5% reimbursement for costs incurred so far in getting all approvals, preparing technical designs and specifications and Environmental Impact Analysis (EIA) approvals for the Sungai Buloh-Kajang MRT (SBK MRT) line.

The PDP is projected to earn about RM480 million, assuming the project cost is RM8 billion (excluding land cost and without the tunnelling portion which is estimated at roughly RM7 billion) over the duration of the project that is expected to be completed in mid-2017. Any cost savings from the project will go back to the government.

It must be noted that the MMC-Gamuda JV is also eyeing the tunnelling job for the SBK MRT line.

“If the MMC-Gamuda JV does not get the tunnelling portion, then its PDP fee will also include the tunnelling cost. However, if the JV is made the tunnelling contractor, then they don’t get fees on that portion,” explained the source.

The scope of work will involve the PDP acting like a turnkey contractor as it is responsible for the engineering designs and technical specifications that meet the requirements of the government.

“It also has to deliver the SBK MRT line within cost and on time. The PDP must also ensure performance of all other contractors in terms of quality, safety and timeliness. The government is protected from all disputes and claims,” said the source.

He explained the PDP has to date obtained Railway Scheme approval that includes network planning studies and land use planning, undertaken traffic forecasts for the government, cost benefit analysis and EIA approval.

“There are more than 30 consultants involved so the PDP would have to interface and coordinate with them all. At the same time, the PDP must bear all risks with regard to matters such as variation orders, delays and claims,” the source said.

The source also told The Edge Financial Daily that 90 construction packages have been planned to ensure wider participation.

“However, the final say is with the government. The PDP will have to ensure successful delivery of the project based on government’s award decisions. There has to be extensive interfacing between the PDP and the contractors who are involved in the 90 packages to ensure quality and on time delivery,” he said.

The source said the PDP is in for more interfacing and coordinating as the system works will be broken up into 11 packages.

“This is the first time it is sliced and diced into 11 packages, again to allow wider participation. The PDP will have to coordinate and manage any disputes,” said the source.

The SBK MRT project is expected to last seven years (18 months have passed) with completion in July 2017. The PDP is also expected to employ some 456 staff during this time.

The SBT MRT project was launched on July 8 last year by Prime Minister Datuk Seri Najib Razak but has since faced issues such as land acquisition in Jalan Bukit Bintang and Jalan Sultan in the city centre and the total cost of the entire project.

The SBK MRT line runs from Sungai Buloh to Kajang cutting through the Kuala Lumpur city centre covering 51km and 31 stations.


This article appeared in The Edge Financial Daily, February 9, 2012.



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JCY expects growth to continue

KUALA LUMPUR: JCY International Bhd is expected to continue its growth into 2QFY12 ending March 31, continuing its good numbers for 1QFY12.

“We are on target and are able to achieve as good as what we are achieving right now [for 1QFY12 ended Dec 31],” James Wong, the group’s finance director, told a media briefing yesterday. The group announced its 1QFY12 results yesterday.

The hard disk drive (HDD) component manufacturer posted a net profit of RM162.45 million for 1QFY12, a 2,063% year-on-year (y-o-y) increase from its net profit of RM7.51 million in the previous corresponding period.

Wong said its performance was 50% attributable to the advantages it gained over its competitors due to the floods in Thailand in October last year. His group also made some internal changes to increase output and to reduce costs.

JCY was one of the few HDD component producers able to continue to supply its main vendor, Seagate Techonology plc, as its Thai operations were not affected by the flooding.

There was a shortage in HDD component products and drives as many producers had to shut down their Thai operations. This disrupted the HDD supply chain which increased the average selling prices, contributing to JCY’s increase in profit.

Wong says the HDD supply chain will not see full recovery till 2013.


Addressing the issue of sustainability, Wong said: “The full recovery in terms of the supply will not be (seen) until 2013.”

“The first thing to do is to capture global market share,” he said, adding that JCY is at an advantage as its competitors could face hurdles in re-establishing their HDD operations, and it is not easy for newcomers to enter the HDD industry.

“The demand is there, the question is how can you provide (supply),” Wong said.

As part of its initiative to increase its market share, the group announced in early January that it would spend RM300 million over the next 24 months to expand its facilities in Malaysia, Thailand and China.

“Some 80% of the expenditure is on machinery and the other 20% is on infrastructure,” said Wong. The group is purchasing new machinery which will help increase output of HDD components.

JCY is opening a plant in Guangzhou, China in June in addition to its other China plant in Suzhou. Wong said his group is expecting the Guangzhou plant to have a high efficiency partly due to its strategic location close to a port.

The group’s net profit is a complete turnaround from its previous financial standing a year ago. JCY previously posted losses for 3QFY11 due to a combination of lower selling prices, smaller sales volume and a weaker US dollar.

The group’s stock has been on an uptrend since the Thai floods in October, closing at a 52-week high on Feb 3 at RM1.42. It closed yesterday one sen lower at RM1.41 with 39.72 million shares changing hands.


This article appeared in The Edge Financial Daily, February 9, 2012.



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CIMB and RBS talks very preliminary

KUALA LUMPUR: Talks between CIMB Group Holdings Bhd and Royal Bank of Scotland (RBS) for the latter’s Asian equities are at a very preliminary stage with no commitment yet, according to an analyst familiar with the matter.

CIMB declined to comment on the talks with RBS.

The Financial Times reported yesterday that CIMB and China International Capital Corp are the two remaining bidders in the running to buy RBS’ Asian equities, mergers and acquisitions, and research businesses.

According to the newspaper, the units which are part of the UK bank’s investment banking division, are expected to command up to US$50 million (RM150 million).

“In our meeting with them earlier, CIMB’s management team said they are not going through any acquisition. They provided guidance that they are only doing due diligence on the Philippine bank,” said the analyst.

He also said the group as an investment bank is open to any opportunity and is constantly looking at many deals.

“But there is no commitment or desperation to buy. CIMB is very selective and not desperate. Any acquisition must add value. This RBS case is at a preliminary stage that the management is not giving any guidance on it,” said the analyst, adding that according to RBS, it would retain its banking operations.

The analyst is sceptical if RBS is a right fit for CIMB as it (CIMB) is focusing on Asean right now while RBS has an Asian reach, which may be contradictory to CIMB’s goal at the moment.

“However, the acquisition of RBS will leapfrog CIMB’s presence in the region but I don’t know if it has the appetite to go for the whole of Asia,” he said, adding that right pricing would be crucial in any acquisition.

Last month it was reported that CIMB was in talks with brewer San Miguel Corp for a stake in the Philippines’ Bank of Commerce.

CIMB group chief executive Datuk Seri Nazir Razak said last month that the parties are still in negotiations and he hoped the discussions will conclude by the first quarter this year.

Nazir also said the bank would apply for a licence in Laos and if the deal in the Philippines goes through, CIMB will have a presence in the whole of Asean.


This article appeared in The Edge Financial Daily, February 9, 2012.



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TMS gets KTMB ticketing job

KUALA LUMPUR: The Media Shoppe Bhd (TMS) has been appointed a subcontractor for the automatic fare collection system (AFC) for KTM Bhd’s (KTMB) commuter stations.

In a filing with Bursa Malaysia yesterday, TMS said it had received a letter of award dated Feb 8, 2012 from Hopetech Sdn Bhd appointing it as subcontractor to work on the RM85.88 million project which involves designing, manufacturing, supplying, installing and commissioning of the AFC system.

Hopetech was given a letter of award by the Transport Ministry on Dec 21 appointing it a contractor for the RM85.88 million contract.

“According to Hopetech, the letter of award from the MoT is still valid and the project has commenced in January 2011, and is expected to complete in April 2012,” said TMS in a statement.

TMS closed at 24 sen yesterday, with 41.6 million shares traded. At 24 sen, it is still 155% higher than the stock’s 52-week average price of 9.4 sen.


This article appeared in The Edge Financial Daily, February 9, 2012.



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Harvest Court’s Chan emerges in Naim Indah

KUALA LUMPUR: Naim Indah Corp Bhd, which saw its share price surge by 172.2% to close at 49 sen yesterday, announced six new shareholders including Datuk Raymond Chan Boon Siew.

Prior to the announcement, Naim Indah hit limit-up, surging 30 sen to 48 sen yesterday morning and was the second most active stock on Bursa with 267.37 million shares changing hands. This represented 37.9% of its 702.03 million total issued shares.

Naim Indah announced that Crest Energy Sdn Bhd, its major shareholder, had disposed its whole 22.8% stake to six individuals yesterday.

Among the six individuals, Chan, a major shareholder and exective director of Harvest Court Industries Bhd, will hold the largest stake of 12.11% or 85 million shares. Chan is also the managing director of Sagajuta (Sabah) Sdn Bhd, a property developer.

The other individuals emerging in Naim Indah are Ng Kian Huat with a 3.99% stake, followed by Woo Sew Kew (2.56%), Leow Sien Kuan (2.28%), Krishna Bhatt @ Achong (0.98%) and Chong Kok Loong (0.88%).

Chan came into the limelight after he bought into Harvest Court in the last quarter of 2011.

Chan is speculated to be injecting assets of his Sagajuta group into Naim Indah.


He subsequently awarded more than a billion ringgit worth of construction contracts to Harvest Court, which saw its share price climbed from 12 sen to as high as RM2 last year, an increase of more than 16-fold.

Chan was reported as saying that he was injecting assets into Harvest Court to help turn around the loss-making company.

Speculation is that Chan could possibly do the same for Naim Indah, which has been loss-making since 2008.

“He could possibly inject assets of his Sagajuta group into Naim Indah, such as the 1Borneo Hypermall in Kota Kinabalu, Sabah which is worth more than RM400 million together with several other projects,” said a market observer.

Naim Indah’s core activities are in property investment, property development and round logs timber extraction.

For its 3QFY11 ended Sept 2011, it posted a net loss of RM2.21 million against revenue of RM12.96 million.

For the nine months to Sept 30, 2011, Naim Indah posted a net loss of RM1.83 million on revenue of RM20.03 million. During the period, its property development segment accounted for 51.6% of revenue, followed by timber extraction (34.2%), and property management (14.2%).



For FY10 ended Dec 31, the company posted a net loss of RM18.36 million on revenue of RM12.52 million.

As of Sept 30, 2011, Naim Indah had cash reserves of RM512,000 against borrowings of RM18.91 million. Its net asset per share stood at 11 sen as at Sept 30, 2011.


This article appeared in The Edge Financial Daily, February 9, 2012.



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Brahim’s, Admuda buy Thai sugar

KUALA LUMPUR: Brahim’s Holdings Bhd and Admuda Sdn Bhd entered into a memorandum of understanding (MoU) with Thai Roung Ruang Sugar Group (TRR) yesterday for the supply of raw sugar and offtake of refined sugar.

In a filing with Bursa Malaysia yesterday, the company said the agreement would see TRR supplying 110,000 tonnes of raw sugar to Brahim’s/Admuda for 15 years and offering to buy 100,000 tonnes of refined sugar from the two parties for the same period.

It would be using the New York or London market price, or a price renegotiated every 12 months prior to the delivery, the company said.


This article appeared in The Edge Financial Daily, February 9, 2012.



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MRCB 4Q profit falls to RM26m

KUALA LUMPUR: Malaysian Resources Corp Bhd’s (MRCB) net profit for 4QFY11 ended Dec 31 fell to RM26.12 million, or 1.88 sen a share, from RM41.5 million in the same period last year.

Revenue, however, rose to RM470.39 million from RM433.19 million previously, MRCB said in a filing with Bursa Malaysia yesterday. For the full year of 2011, net profit gained 15.2% to RM77.46 million while revenue increased 13.6% to RM1.21 billion.

MRCB said the better performance in FY11 was due to higher contribution from the group’s ongoing property development projects at Kuala Lumpur Sentral, which it has offset against lower revenue from the infrastructure and environmental segment due to completion of existing environmental projects.


This article appeared in The Edge Financial Daily, February 9, 2012.



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Consolidation of coal miners won’t push up coal price

PETALING JAYA: The recent consolidation moves of several major coal mining companies, including the proposed merger of Glencore International plc and Xstrata plc, will not create an oligopoly in the global coal mining industry, said analysts.

This is because even though the merged entities, such as Glencore-Xstrata International and the revamped Bumi plc, will become some of the largest coal mining companies in the world, they do not hold majority share of the coal supply globally. There are many smaller, independent players in the industry, said an analyst with a bank-backed investment research.

“The coal price internationally depends much on the supply and demand of the commodity, and we don’t expect the consolidation to create an oligopoly in the industry as they (the merged entities) do not command the majority supply of coal.

“We expect coal price to stay stable this year at around US$110 (RM330) to US$115 per tonne, at least in the first half of 2012, as the economy of China and India is expected to slow down this year, compared to last year. This will in turn cool the demand for thermal coal,” the analyst told The Edge Financial Daily.

This is good news to Tenaga Nasional Bhd (TNB) as it has been paying US$110 per tonne to coal suppliers from Indonesia — its major source of thermal coal, according to a source close to the company. A stable price in that range for the next six to 12 months would be best for TNB’s cost management, according to an industry observer.

In the three months to Nov 30, TNB’s fuel costs consisted of RM1.83 billion in coal, RM1.41 billion in natural gas, RM593.3 million in crude oil and RM413.8 million in distillates.

The costs of crude oil and distillates, as a portion of TNB’s fuel costs, increased by over 100% during the period from a year ago, due to the shortage of gas supply as a result of the shutdown of Petronas’ re-gassification plant.

However, coal price could sway either way. While further development of shale gas in North America could provide alternative fuel to coal and depress its price, the prolonged floods in Queensland, Australia could reduce supply and shore up coal price, according to a market trader.

“The development of shale gas in North America has been tremendous. The US has started to export shale gas, as opposed to being a net importer previously. The increased supply of shale gas could depress the price of natural gas and coal, thus reducing the cost for TNB and other independent power producers (IPPs),” said the trader.

His view was, however, rebutted by an analyst with a local bank. According to this analyst, there are no linked gas pipes from North America to this part of the world. The development of shale gas is limited to North America and will not affect the price of natural gas in Asia.

“The price of natural gas internationally has started to decouple (from North America), as the price is arguably lower in North America because the region has ample supply of natural gas but somewhat low demand.

“However, in Asia, the price is high as the economy is growing fast and the shift from nuclear-powered plants to natural gas-powered ones in Japan will continue to support the price,” the analyst told The Edge Financial Daily.

In a research note published yesterday, HwangDBS Vickers Research said the bid for the second generation IPPs could create stronger competition among the existing ones such as YTL Power International Bhd, Malakoff Bhd, Sime Darby Bhd and Tanjong plc.The analyst said TNB will benefit the most from lower capacity payment pricing and larger supply.

“Existing players may have first mover advantage as their plants may allow them to offer lower average pricing for the new bids. They also have 15 to 20 years of technical expertise and strategic plant locations.

“Any existing IPP that wins a bid could see earnings potential which is not reflected in current valuations,” she added.

TNB closed 4 sen or 0.67% lower yesterday to RM5.95. Its share price has dropped by up to 16.5% since reaching its 52-week high of RM7.11 on May 31, 2011.

However, it has been on an increasing trend since reaching its lowest point in a year on Sept 26, 2011 at RM4.99.


This article appeared in The Edge Financial Daily, February 9, 2012.



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Genting M’sia falls on postponement of Florida bill

KUALA LUMPUR: Genting Malaysia Bhd’s stock fell close to 5% yesterday after news that the Florida legislature had postponed a vote on a bill to expand casino gambling in the state. However, analysts are still bullish on the company’s prospects.

Genting Malaysia fell 4.99% or 20 sen to RM3.81 on a volume of 24.04 million shares, while its parent, Genting Bhd, lost 4.55% or 50 sen to close at RM10.50 with 12.48 million shares traded yesterday.

The postponement of the vote by a Florida’s House of Representatives committee has stalled Genting Malaysia’s plan to build a US$3.8 billion (RM11.4 billion) 5,200-room casino resort overlooking Miami’s Biscayne Bay.

But RHB Research and CIMB Research are still maintaining their “outperform” recommendations on the stock, with target prices of RM4.20 and RM4.80 respectively.

Both RHB Research and CIMB Research said yesterday that the postponement of the vote does not mean that casino gaming in Florida is completely ruled out.

RHB Research added that there are still other avenues for the company to explore in order to get the project approved by lawmakers.

The local research house stated that it does not expect any financial impact from the postponement of the bill as Genting Malaysia’s management had told the research firm that the US$3.8 billion for the casino resort will not be spent unless the casino law is approved.

CIMB Investment, in a report yesterday, said that even if the bill does not go through, the buildings or landbank could still be used for non-gaming purposes since tourism is a huge business in Florida. If this were the case, the project’s development period should be considerably longer at around 10 to 15 years, it added.

Genting Malaysia has already bought nearly US$450 million worth of property for its project in Florida.

RHB Research said there is little chance that lawmakers will approve the sensitive bill this year, being an election year, while CIMB Research said it expects a retooled casino bill to make a comeback in the 2013 legislative sessions.

RHB Research said, according to state records, the Genting group contributed US$629,529 in the final seven months of 2011 to Florida lawmakers, parties and political committees, including US$385,000 to the state Republican Party, which controls the Legislature and the governor’s office.


This article appeared in The Edge Financial Daily, February 9, 2012.



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Perwaja calm on MARC downgrade

Perwaja Holdings Bhd (Feb 8, 78.5 sen)
Maintain buy with fair value RM1.65: The Edge weekly reported over the weekend that Malaysian Rating Corp Bhd (MARC) had lowered its rating on Perwaja Steel Sdn Bhd’s RM400 million Murabahah medium-term notes (MMTN) programme from AID to A-ID. The rating action affected RM160 million in outstanding 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 its operating performance. Given Perwaja’s reported losses for two consecutive years plus the poor 9MFY11 results thus far, the downgrade came as no surprise.

We highlighted in our recent updates that the basic fundamentals underlying steel mills in Malaysia remain weak, but various mega projects under the Economic Transformation Programme (ETP) may spur long steel demand despite execution risks.

While the industry’s poor outlook will persist, Perwaja is building an iron pelletising plant that is expected to boost the profitability of its direct reduction plant.

This would allow it to meet its own iron ore pellet needs, which are currently procured at a hefty premium to iron ore fines.

We see the new iron processing plant producing 400,000 tonnes of iron ore pellets in FY12 and achieving a total savings of US$50 (RM150) a tonne from the procurement of local iron ore, logistical benefits, in-house value-adding activities and utilisation of tax credits on accumulated losses.

Undeniably, iron ore mining in Malaysia is lucrative as the production cost is likely to be below US$50 a tonne compared with the international selling price of above US$140.

The news on the Terengganu government meeting Perwaja’s request to mine iron ore in Bukit Besi is not entirely unexpected as this was first announced by its mentri besar during Perwaja’s ground-breaking ceremony in July 2011, which kicked off the construction of its pelletisation and concentration plant.

Furthermore, the MB reiterated last December that the state government “has given an area at Bukit Besi”, which represented a firmer commitment on its part to allocate a portion of the mining area to Perwaja, as the MB had previously only indicated that the state government was “ready to consent” to the company’s request to mine iron ore in Bukit Besi. The tone of the MB’s remarks suggests that the “official” award is imminent and an agreement could be sealed anytime soon.

Aside from the ongoing transformation, Perwaja is in the process of completing its proposed redeemable convertible unsecured loan stocks (RCULS) with free detachable warrants, both on the basis of one-for-two.

Following some delay, the next key date is the ex-date for the entitlement, which may be fixed in the next few weeks, as the warrants are scheduled to start trading by the end of this month. We like the deal as the RCULS not taken up by minority shareholders will be subscribed by its main shareholder, Kinsteel Bhd. In addition, the detachable nature of the warrants will allow all minority shareholders to enjoy the free warrants.

We remain upbeat on Perwaja despite the rating downgrade by MARC. We believe equity investors should keep a close eye on the ongoing transformation efforts implemented by the management as: (i) the commissioning of the pelletisation and concentration plant in 2012 is likely to translate into significant cost saving of up to US$50 a tonne for its upstream material; and (ii) the award of the mining concession in Terengganu may also translate into a blue-sky discounted cash flow valuation of RM2.65 per share.

That aside, we also like the company’s impending corporate proposal to raise cash via the issuance of RCULS as they come with free detachable warrants on the basis of one-for-two, which is set to reward minority shareholders.

We maintain our “buy” recommendation on Perwaja and its fair value at RM1.65. — OSK Research, Feb 8


This article appeared in The Edge Financial Daily, February 9, 2012.




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S P Setia has a future to build

S P Setia Bhd (Feb 8, RM3.95)
Maintain trading buy with target price RM4.30: In The Edge weekly’s cover story interview, CEO Tan Sri Liew Kee Sin explained the rationale for his joint takeover of S P Setia with major shareholder Permodalan Nasional Bhd (PNB) and emphasised the need to move forward.

Key performance indicators for the next three years include 10% to 20% profit growth per year even in bad times.

We are encouraged by the target of earnings expansion even in bad times as this sector bellwether saw a drop in profit during the 2008/09 global financial crisis. We keep our target basis of parity with revalued net asset value (RNAV) and “trading buy” call.

The highlights of the extensive interview are: (i) it will be business as usual for the next three years; (ii) Liew will stay on beyond the three years as long as he enjoys his work and has freedom to manage the group; (iii) PNB could retain management if it achieves its sales targets and earnings growth of 10% to 20% per year and at least 10% in bad times; (iv) Liew is happy with the terms of the new conditional offer which he thinks is a very good deal; (v) PNB has been a passive shareholder for the past few years but if it could help S P Setia secure landbank, that would be “fantastic”.

The key surprise from the article was S P Setia targeting at least 10% profit growth even in difficult times. This could be a challenge as S P Setia, along with most developers, suffered a fall in revenue and profit during the global financial crisis due to weak sales, rising raw material costs and a squeeze in margins.



S P Setia sacrificed margins to push sales. But we think that its earnings should be more resilient this time around given its expanded landbank, more product offerings and geographical spread.

Investors should accumulate S P Setia’s shares as the outcome of the conditional takeover is close to our best-case scenario of management continuity and a cementing of ties with PNB.

This provides S P Setia with rock-solid backing and improves its chances of securing more privatised landbank. It should also facilitate the group’s global expansion. We believe that selling pressure after the conditional offer will be minimal, given that investors can sell on the open market now at close to the offer price. — CIMB IB Research, Feb 8


This article appeared in The Edge Financial Daily, February 9, 2012.




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CIMB will miss ROE target but NII better than expected

CIMB Group Holdings Bhd (Feb 8, RM7.11)
Maintain underperform with fair value RM6.20: Management said that the main focus is to find investors to complete the Asia Petroleum Hub project in Johor. Until then, CIMB will not put in more money into it.

The bulk of provisioning was made back in 2010 and no further provision is required at this juncture. Although the loan has not been fully provided for, management said the balance required is not much while the upside from recoveries could be quite decent.

Return on equity (ROE) for 2011 will end up at 16% to 17%, missing the 17% target. Loan growth in 2011 was decent while non-interest income (NII) was better than expected, especially considering that 2010 non-interest income was helped by lumpy items.

However, management also said that credit cost was higher in 4QFY11 as the group beefed up its limited liability company (LLC) (80% at end-3QFY11) by raising individual allowances, but full-year credit cost would still be below 40 basis points (9MFY11: 12 bps).

This helps lend support to our observation from the December 2011 banking statistics, where we noted that system individual allowances had risen 2.6% quarter-on-quarter while LLC rose 338 bps q-o-q. Full-year dividend payout will be within the 40% to 60% guided range.



More details on 2012 outlook were given during 4QFY11 results briefing but the broad outline includes: (i) loan growth should be decent.

There have been some pockets of activity in the Economic Transformation Programme, while the domestic small and medium enterprise space is an area CIMB is looking to get back into once economic conditions stabilise; (ii) net interest margin (NIM) for 2012 was largely stable at 4QFY11 level; (iii) the non-interest income pipeline appears decent with the debt capital market off to a good start (Plus bonds) and rates and foreign exchange are doing well; (iv) continued focus on cost control measures, especially removal of duplications. CIMB’s target is to reduce cost income ratio (CIR) to 50% by 2013 (9MFY11: 56.2%); and (v) no major asset quality issues for Malaysia and Indonesia but non-performing loans in Thailand could rise further once the moratorium for borrowers affected by the floods ends. This is unlikely to be too significant at the group level.

We make no change to our earnings forecasts for now. Our fair value of RM6.20 remains unchanged and is based on the average values of 10.5 times 2012 earnings per share and 1.7 times 2012 book value per share.

We remain cautious with respect to global economic conditions ahead and given that banks are viewed as proxies to the economy, we think the banks will not be spared from a slowdown.

We see higher earnings risk for CIMB which could stem from higher than expected loan impairment allowances and weaker than expected capital market activities. We therefore retained our “underperform” call on the stock. — RHB Research Institute, Feb 8


This article appeared in The Edge Financial Daily, February 9, 2012.




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Hitch in Miami gaming law approval for Genting Malaysia

Genting Malaysia Bhd (Feb 8, RM3.81)
Maintain outperform with fair value RM4.20: Genting Malaysia’s plans to build a US$3.8 billion (RM11.4 billion) 5,200-room resort overlooking Miami’s Biscayne Bay have stalled with the postponement of the vote on a bill to expand casino gambling by a Florida House of Representatives committee. What this means is that there is little chance that lawmakers will approve this sensitive bill this year, being an election year.

According to news reports, Jessica Hoppe, vice-president of Resorts World Miami, said the company had not decided on its next plan of action, which could include taking the issue directly to voters.

According to state records, the Genting group contributed US$629,529 in the final seven months of 2011 to Florida lawmakers, parties and political committees, including US$385,000 to the state Republican Party, which controls the legislature and the governor’s office.

While this may be disappointing news, we believe the game is not over for Genting Malaysia’s Miami project, as it is just a postponement of the vote and not a vote against casino gaming completely.

In addition, there are still other avenues for the company to explore in order to get the project approved by lawmakers. As management has assured us that the US$3.8 billion will not be spent unless the casino law is approved, we do not expect there to be any financial impact from this delay.

Risks include: (i) a slower than expected global and regional economic recovery, which could affect domestic sentiment and visitor arrivals; (ii) lifting of domestic subsidies for food and transport costs, which would lower disposable income; and (iii) intensifying competition from regional players.

We make no change to our forecasts. Our sum-of-parts-based fair value remains at RM4.20 and we maintain our “outperform” recommendation on the stock. — RHB Research Institute, Feb 8


This article appeared in The Edge Financial Daily, February 9, 2012.




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Set up royal panel to probe Proton’s losses, says DAP

KUALA LUMPUR: A Royal Commission of Inquiry should be set up to investigate allegations by former prime minister Tun Dr Mahathir Mohamad that national car maker Proton Holdings Bhd had suffered RM3.4 billion in losses in its cash reserves due to bad management, the DAP said.

Commenting on a report in the New Straits Times on Tuesday quoting Mahathir that Proton’s cash reserves had fallen from a high of RM4 billion to RM600 million to help cut losses, DAP secretary-general and Bagan MP Lim Guan Eng said the inquiry must suggest the appropriate action to be taken against those responsible for the staggering losses incurred and recommend steps to prevent such future losses.

“The inquiry should determine whether the government should cut losses by cashing out immediately and winding up Proton, or risk losing more money as in the MV Augusta deal. This is an important decision that must be studied by the inquiry as the Malaysian public does not want Proton to end up as a sacred cash cow that continues to chew cash,” Lim said in a statement.

According to Mahathir, Proton had accumulated RM4 billion during Tengku Tan Sri Mahaleel Ariff’s tenure as CEO, but its cash reserves had dropped to a low RM600 million during his successor Datuk Mohammed Azlan Hashim’s stewardship, the statement said.

Mahathir added that the losses sustained are partly due to the sale of MV Augusta to a little-known company called Gevi SpA in 2006 for only €1 (RM4), even though Proton had paid more than RM300 million for a 57% stake.

Subsequently, after the sale of MV Augusta by Proton, BMW paid €93 million or RM446 million at the time for one third of MV Augusta. Following that, Harley Davidson bought the rest of MV Augusta for US$109 million or RM360 million at the time, Lim said.

The inquiry should also look into whether Khazanah Nasional, the Malaysian government’s investment arm, received a good price over the recent deal in which it divested its 42.7% stake in Proton to DRB-Hicom Bhd, said Lim. Khazanah sold their stake for RM1.3 billion or RM5.50 per share, which is half of Proton’s book value of RM9.81 per share and a write-down compared with the RM8 per share that they had originally paid.

One of the key persons involved in building up Proton’s cash position to RM4 billion is Tengku Mahaleel, Lim said.

“As such, we propose that Tengku Mahaleel’s should be a member of the inquiry panel as he will understand the issues best,” he said.


This article appeared in The Edge Financial Daily, February 9, 2012.



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KL shares close higher

Shares of the following companies had unusual moves in Malaysia trading. Stock symbols are in parentheses and prices are as of the close in Kuala Lumpur.

The FTSE Bursa Malaysia KLCI Index rose 0.8 per cent to 1,565.32, its fifth day of gains and the highest close since July 21.

Cahya Mata Sarawak Bhd climbed 3.2 per cent to RM2.28, its highest close since July 27. The construction company’s power-purchase talks with Sarawak Energy Bhd are ongoing and expected to be completed in coming months, Cahya Mata said in an exchange filing.

Compugates Holdings Bhd, a supplier of cellular phones, calculators and digital cameras, fell 4 per cent to 12 sen, the most since Jan. 30. The company isn’t aware of the reasons for the 39 per cent surge in its share price yesterday, it said in a response to a query by the stock exchange.

Malaysian Resources Corp, a property and construction group, dropped 2.2 per cent to RM2.19, its steepest decline since Jan. 12. Fourth-quarter net income slid 37 per cent from a year earlier to RM26.1 million, according to an exchange filing.

Naim Indah Corp, a property developer, surged 37 per cent to 67 sen, its highest close since October 2000. Its major shareholder Crest Energy Sdn Bhd sold a 22.8 per cent stake in the company to a group led by Raymond Chan, Naim Indah said in an exchange filing. The sharp rise in the price and volume prompted the stock exchange to advise investors today to “exercise caution” in trading the stock.

WCT Bhd, a construction group, jumped 7.8 per cent to RM2.78, its highest close since Aug. 17. The company won a RM300 million contract to build government buildings in Kuala Lumpur, WCT said in a statement. -- Bloomberg



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Flash: Bursa Securities cautions investors over Naim Indah shares

KUALA LUMPUR (Feb 9): Bursa Malaysia Securities Bhd has advised investors to be cautious following the recent sharp rise in the price and volume of Naim Indah Corporation shares.

In a statement issued on Thursday, the regulator said investors should exercise caution and make informed decisions in the trading of those shares.

“Notwithstanding the company's response to the Unusual Market Activity (UMA) query issued by Bursa Securities on Feb 3 and its announcements on the changes in shareholdings on Feb 8, Bursa Securities would like to advise investors to exercise caution and to make informed decisions in the trading of Naim Indah Corp shares,” it said.



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OSK: 'Buy' call on QL Resources stays

OSK Research has maintained a "buy" call for QL Resources Bhd with the fair value unchanged at RM3.62, backed by the company's solid earnings track record and an on-track expansion in Vietnam and Indonesia.

In a statement today, OSK Research said QL Resources is the biggest surimi producer in Malaysia with a 50 per cent market share.

It also said that the company plans to add another new production line for Surimi and fishmeal operations in Indonesia.

"Based on this plan, starting from financial year 2013, the company will boost its production capacity to 10,000 tonnes per annum from the present 5,0000.

"The company has also expanded its integrated livestock farming by venturing into Vietnam and Indonesia," the research firm added.

"As for its palm oil division, a new crude palm oil mill in Indonesia was completed early this year, with a palm pellet plant slated for completion by the second half 2012," the research firm said.

OSK Research said the company has planted 10,000 hectares of its oil palm estates in Indonesia and is expected to complete planting on 15,000 hectares by financial year 2014.-- BERNAMA



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Bursa Malaysia FY11 net profit RM146m, up 29% from 2010

KUALA LUMPUR: BURSA MALAYSIA BHD [] earnings rose 29% to RM146.16 million for FY ended Dec 31, 2011 from RM113.04 million in 2010 and expects market volatility is expected to persist in 2012 unless there is more clarity on how the global economy will pan out.

The stock exchange operator said on Thursday its revenue increased 16.3% to RM420.14 million from RM361.05 million.

It proposed a final dividend of 13 sen per share for the year under review, which was a distribution of 95% of its net profit.

For the fourth quarter, its earnings rose 5.2% to RM31.33 million from RM29.78 million. Revenue slipped 6.1% to RM95.67 million from RM101.91 million. Earnings per share were 5.90 sen compared with 5.60 sen.

Commenting on the FY2011 financial performance, its chief executive officer Datuk Tajuddin Atan said Bursa Malaysia delivered a good set of results despite the difficult conditions in 2011, which was a challenging year for markets around the globe.

“But we delivered a good set of results despite the difficult conditions and this demonstrates the tenacity and resilience of our market in times of uncertainty.

“Our securities and derivatives markets recorded improvements in trading volume as a result of increased participation by both foreign and local investors. This helped us achieve a 15% growth in operating revenue to RM381.3 million from RM331.3 million in 2010,” he said.

On the outlook, Tajuddin said for 2012 the Malaysian economy was expected to remain resilient due to its strong fundamentals, robust domestic demand as well as the government’s ongoing economic reform initiatives.

He added the divestment of assets by some government-linked companies would further contribute to the liquidity and vibrancy of the market.

He expected Bursa Malaysia’s derivatives business to benefit from increased risk management activities brought about by the global economic uncertainty.

“On our part, we aim to further liberalise access to the market, while launching new products to give investors greater options for trading. Overall, we expect our 2012 financial performance to at least mirror that of, if not better than, 2011,” Tajuddin said.



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