Monday 13 February 2012

Market Commentary

The FBM KLCI index gained 1.16 points or 0.07% on Monday. The Finance Index fell 0.23% to 13827.57 points, the Properties Index dropped 0.64% to 1057.23 points and the Plantation Index rose 0.53% to 8925.24 points. The market traded within a range of 4.83 points between an intra-day high of 1562.89 and a low of 1558.06 during the session.

Actively traded stocks include COMPUGT, NICORP, TIME, EXTOL, TMS, IRIS, TEBRAU, DBE, MBSB-CA and HUBLINE. Trading volume decreased to 2661.46 mil shares worth RM2119.19 mil as compared to Friday’s 3354.88 mil shares worth RM2811.66 mil.

Leading Movers were GENTING (+20 sen to RM10.50), TENAGA (+8 sen to RM6.19), KLK (+50 sen to RM25.98), YTL (+4 sen to RM1.52) and BAT (+120 sen to RM51.50). Lagging Movers were CIMB (-5 sen to RM7.16), SIME (-6 sen to RM9.61), PBBANK (-6 sen to RM13.94), DIGI (-3 sen to RM4.10) and PETCHEM (-4 sen to RM6.95). Market breadth was negative with 364 gainers as compared to 517 losers. -- JF Apex Securities Bhd



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KLCI up on late buying of Genting, Tenaga

KUALA LUMPUR (Feb 13): Blue chips closed higher in late trade on Monday, nudged up by gains in GENTING BHD [], Tenaga and PLANTATION [] stocks, in line with the firmer regional markets and European bourses after Greece voted in favour of the austerity bill.

The KLCI was in the red most of the day and managed to rebound towards the last half-hour of trade. It closed 1.16 points or 0.07% higher at 1,562.82. Turnover was 2.66 billion shares valued at RM2.12 billion. There were 364 gainers, 517 losers and 321 stocks unchanged.

Greece approved the deeply unpopular austerity bill to help secure a second bailout, even as riots in central Athens and violence across the country raised doubts about implementation of the approved spending cuts, Reuters reported.

Asian markets posted modest gains on the news, extending their bright start to the year. However, turnover declined from last week, suggesting that some players were cautious about chasing the rally further.

Japan’s Nikkei 225 rose 0.58% to 8,999.18, Hong Kong’s Hang Seng Index added 0.5% to 20,887.40, Taiwan’s Taiex 0.64% to 7,912.91, South Korea’s Kospi 0.6% to 2,005.74 and Singapore’s Straits Times Index 0.54% to 2,975.98. Shanghai’s Composite Index was flat at 2,351.85.

US light crude oil rose US$1.18 to US$99.85. The ringgit strengthened 0.0069 to 3.0248 against the US dollar.

At Bursa Malaysia, with Monday being the T+3 settlement day after the huge volume on Wednesday, saw some mild selling pressure in lower liners and penny stocks. The broader market weakened somewhat with profit taking picking up pace.

Genting Bhd rose 20 sen to RM10.50 and Tenaga eight sen to RM6.19, adding 2.77 points to the KLCI. BAT was the top gainer, up RM1.20 to RM51.50.

Plantations were given a boost with third-month delivery up RM38 to RM3,168 per tonne. United Plantations added 50 sen to RM22.50, KLK 50 sen also to RM25.98 and BLD Plantations 41 sen to RM10.08.

Compugates was the most active with 272.28 million shares done, up one sen to 13 sen. Talk of a corporate exercise saw Time adding 5.5 sen to 40.5 sen. Hopes of higher offer price saw Tebrau Teguh adding 2.5 sen to 91.5 sen.

Naim Indah Corp fell 11 sen to 56 sen with 196.26 million units done. The share price had surged from 9.0 sen on Feb 2 on expectations of a corporate exercise. It resumed trading on Monday after announcing last Friday it proposed to acquire 60% in Sagajuta (Sabah) Sdn Bhd for an indicative price of RM240 million from Generasi Cipta Sdn Bhd.

Petronas Dagangan fell 18 sen to RM18.78, GBH 17 sen to RM1.09 and Ekovest 16 sen to RM2.77. DRB-Hicom eased 11 sen to RM2.87.



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Can China shoe stocks remain at bargains

KUALA LUMPUR: After being battered down from their IPO prices, all the five China-based shoe companies on Bursa Malaysia are trading at large discounts to their book values and at low price-earnings ratio (PER) of around two times. Coupled with impressive double-digit growth and attractive dividend yields, how much longer can they remain at bargain levels?

Most investors are no doubt sceptical about China stocks listed on overseas exchanges, given the numerous accounting issues these companies have faced in the US and Singapore over the last few years.

However, analysts also noted that none of these issues has surfaced in Malaysia yet, and the Chinese companies listed here have consistently delivered strong earnings despite their lacklustre stock price performances.

Xingquan International Sports Holdings Ltd, the first Chinese company listed in Malaysia for close to three years now, has yet to disappoint investors in terms of earnings. Apart from Xingquan, four other shoe companies listed here are Multi Sports Holdings Ltd, XiDeLang Holdings Ltd (XDL), K-Star Sports Ltd, and Maxwell International Holdings Bhd.

According to calculations by The Edge Financial Daily, from 2006 to 2010, the five shoe companies chalked up a compound annual growth rate (CAGR) of at least 30% for both revenue and net profit.

The five China-based shoe stocks are sitting on large cash reserves and most have paid high-yielding dividends.

Their PERs are about two times — well below the market’s broader average of 15 to 16 times.

The recent listing of two China-based apparel stocks in Hong Kong could also provide a re-rating catalyst for the Malaysian — listed shoe makers. China Outfitters Holdings Ltd and Active Group Holdings Ltd were listed at PERs of six to seven times, three times more than their Malaysia-listed peers.

With such low valuations, the possibility of potential privatisations and corporate exercises cannot be ruled out, according to analysts. This almost happened in the case of XDL.

XDL’s share price saw some excitement recently when the company’s major shareholder revealed that he held informal discussions with Navis Capital Partners to sell a stake to the latter.

According to reports, XDL’s founder and managing director Ding Peng Peng was “frustrated with the stock’s lacklustre share price”.

However, the talks with Navis apparently did not pan out. Investors have started to take notice of XDL’s low valuations, and the stock has risen about 25% since the beginning of the year. It has proposed a bonus issue, private placement and warrants.

Edmund Tham, head of research with Mercury Securities, said the perception of China-based stocks in Malaysia will gradually improve over the years.

“It might take a couple of months or even years for investors to change their perception of China companies listed in Malaysia. Over time, with more roadshows and briefings, people will start to see that they are good companies, provided they continue to generate sufficient operating cash flows and profits,” said Tham.

According to Tham, a good business model and an attractive dividend policy will cause investors to take note.

He added that the public should not be doubtful about these companies as some of them have first- and second-tier global auditors such as BDO Binder and Grant Thornton.

Tham covers Xingquan, Xidelang, Multi Sports and Sozo Global Ltd (a China-based foodstuff manufacturer listed on Bursa).

Except for K-Star, all the companies are covered by a research house as a result of their participation in Bursa Malaysia’s CMDF-Bursa Research Scheme, which aims to enhance research coverage and interest in stocks, particularly smaller capitalised ones.

On July 10, 2009, Xingquan became the first China-based shoe company to be listed on Bursa. The last was Maxwell which was listed on Jan 6 last year.

Multi Sports made its debut on Aug 19, 2009, followed by XDL on Nov 11, and K-Star on June 4, 2010.

The Edge Financial Daily takes a look at the five shoe companies and their underlying fundamentals that appear to be attractively undervalued.

As at last Friday, the stock which had fallen the most from its IPO price was K-Star (-60.9%), followed by Multi Sports (-52.9%), Xingquan (-44.4%), XDL (-36.2%), and Maxwell (-23.1%).

These counters are trading at a PER of 1.8 to 2.4 times, according to Bloomberg data. They are also trading below their book values at discounts between 41% and 67% and all are in net cash positions from RM90 million to RM193 million.

Tham likes Xingquan as it registers the strongest earnings of more than RM100 million and has a strong leadership position in the outdoor casual wear market. Another analyst likes Maxwell as the stock is trading below its cash value per share.

“The share price is something beyond our control. We will continue to manage the company well, deliver good results and hopefully the share price will take care of itself,” Xingquan CEO Wu Qingquan told The Edge Financial Daily recently.

He believes the company can maintain double digit growth in its FY12 ending June.

Xingquan
Xingquan is principally engaged in the manufacturing and sale of shoes and soles, as well as the sale of apparel and accessories.

In 2004, it started its own brand manufacturing business for footwear under Addnice and in 2005 expanded into the sports apparel and accessories market.

Due to better growth opportunities, Xingquan left the sportswear market and ventured into outdoor casual wear with the launch of its Gertop brand in 2010. Its shoes, apparel and accessories are sold under the Gertop brand in the outdoor casual wear segment at more than 2,300 outlets via 31 distributors in 26 provinces in China.

Compared with the IPO price of RM1.71 in July 2009, Xingquan tumbled 44.4% to close at 95 sen last Friday. The closing price represented a 43.8% discount to its end-September 2011 book value of RM1.69.

At end-September 2011, it had cash reserves of 399.77 million yuan (RM192.05 million) against borrowings of 38 million yuan, which translated into net cash of 56.3 sen per share. From 2006 to 2011, Xingquan chalked up a CAGR of about 39% for both revenue and net profit.

For FY11, it posted a 16% rise in net profit to 252.29 million yuan from 217.27 million yuan a year ago, while its revenue increased by 22% to 1.5 billion yuan from 1.23 billion yuan previously. Shoes accounted for 49% of revenue, followed by apparel and accessories (33%), and soles (19%).

For 1QFY12 ended Sept 30, the apparel and accessories segment contributed 39% to revenue, compared with shoes (37%) and soles (24%). Due to higher contributions from its apparel and accessories segment in recent quarters, Xingquan expects the apparel division to be its main revenue driver.

For 1QFY12, Xingquan posted a 25.4% increase in net profit to 70.21 million yuan from 56.01 million yuan a year ago, in addition to a 26.8% jump in revenue to 426.30 million yuan from 336.09 million yuan previously.

Xinquan’s outlets in China grew to 2,382 in FY11 from 409 in FY06. The company said it will add 200 sales outlets in FY12. It will also expand its production capacity for soles to around 30 million pairs in FY12 from 24 million currently. Its current production capacity for shoes is about six million pairs.

For FY10 ended June 30, Xingquan paid net dividends of five sen per share.

To ensure sufficient funds for the planned expansion and working capital requirements, no dividends were declared by Xingquan in FY11.



Maxwell
Maxwell is an original equipment manufacturer (OEM) and original design manufacturer (ODM) in the sports shoe market. As an ODM the company is able to manufacture as well as design and develop shoes for its customers.

Its primary products are court sports shoes (soccer, tennis, skateboarding, basketball, badminton and baseball), which contributed to 88.4% of revenue in 2010. Its end-customers include international brand names such as Yonex, Diadora, Kappa, Brooks and FILA.

Since the debut at the IPO price of 54 sen in January 2011, Maxwell’s stock has tumbled by 23.1% to close at 41.5 sen last Friday. The closing price represented a 13.5% discount to its end-September 2011 cash per share of 48 sen and a 43.2% discount to its book value of 73 sen.

Maxwell paid its maiden dividend of 3.35 sen net per share in September last year, which represented a net yield of 8.1% based on last Friday’s close. Maxwell has set a dividend policy of 20%.

As at Sept 30, 2011, it was in a net cash position of RM193.12 million with zero borrowing. From 2006 to 2010, revenue and net profit grew at a CAGR of 46% and 53% respectively.

For FY10 ended December, it posted a net profit of RM65.14 million on RM335.92 million in revenue. About 96% of the revenue came from China. Customers are mainly trading houses and brand distributors based in China. These customers in turn export Maxwell’s shoes to Europe, South and North America, Asia and Africa.

For 3QFY11 ended September, Maxwell announced a 13.8% year-on-year (y-o-y) rise in net profit to RM22.59 million from RM19.85 million a year ago. Due to better sales, revenue also increased by 18.4% to RM114.7 million from RM96.88 million previously.

For the nine months to Sept 30, net profit remained flat at RM49.6 million against RM49.8 million in the previous corresponding period, while revenue grew by 10.8% to RM272 million from RM245.3 million previously.

Maxwell plans to increase its production capacity to 16 million pairs of shoes by adding four production lines to its current four. In 2010, it produced 11.27 million pairs of shoes, of which 47% was outsourced.

It is close to sealing a deal with a leading international sports shoe brand, the company added.



Multi Sports
Multi Sports stands out from the rest as its main business is to design, develop and manufacture shoe soles only.

It is a one-stop shoe sole specialist for China’s sports footwear industry. It is vertically integrated and is able to process raw materials into its needed shoe components. The company has produced over 300 designs suitable for a wide range of sports shoes.

Since listing on Aug 19, 2009, the shoe sole maker has dropped 52.9% from its IPO price of 85 sen to last Friday’s close of 40 sen. It is trading 41.2% below its end-September 2011 book value of 68 sen.

At end-September 2011, it had cash reserves of 365.3 million yuan versus borrowings of 27.5 million yuan, which translated into net cash per share of 31.2 sen.

In FY10, Multi Sports paid a net dividend of 2.5 sen per share, giving a yield of 6.3%, based on its closing price last Friday. From 2006 to 2010, it chalked up a CAGR of about 30% for both net profit and revenue.

For FY10 ended December, net profit increased to 139.14 million yuan from 113.94 million yuan for FY09, while revenue increased to 613.46 million yuan from 474.19 million yuan previously.

Multi Sports’ revenue comes from four types of soles it produces namely thermoplastic rubber (TPR), rubber, ethylene vinyl acetate (EVA) Model 1 (MD1), and EVA Model 2 (MD2). EVA soles are known to have better elasticity, softness and flexibility.

In FY10, its MD2 accounted for 56.3% of revenue, while MD1 contributed 31.2%, TPR (8.8%), and rubber (3.6%).

For 3QFY11 ended September, it posted a net profit of 49.7 million yuan on revenue of 239.60 million yuan, up from a net profit of 35.78 million yuan on revenue of 152.72 million yuan previously.

The company attributed the higher revenue to increased MD2 sales, but said profit margins had dropped due to higher labour and raw material costs, and depreciation expenses.

In its 2010 annual report, Multi Sports said annual production capacity is expected to increase to 84.4 million pairs in FY11 from about 35.6 million in FY10, with its new production centre in Jinjiang City.

On Dec 30, 2011, Multi Sports issued 67.5 million new shares or 15% of its existing issued and paid-up capital to sponsor a depository receipt programme in Taiwan, which entailed the issuance of Taiwan Depository Receipts. The issuance was expected to raise NT$236 million (RM24 million) for capacity expansion and working capital.



K-Star
K-Star is principally engaged in the design, manufacture and distribution of sports footwear under its own proprietary brands, Dixing and K-Star. The company generates over 700 designs annually.

Its product range covers athletic shoes for running, tennis, basketball and mountain climbing as well as leisure. K-Star is also an OEM and ODM for international sports brands including Umbro, Diadora, Kappa and China’s footwear brand, Double Star.

Its proprietary products are distributed across 18 provinces and three municipalities in China at over 870 retail locations. They are exported to Russia and other markets such as Ukraine, Belarus, the Czech Republic, Poland, Finland, Romania and Hungary. In 2010, K-Star expanded into sports fashion apparel and accessories.

Listed on June 4, 2010, K-Star closed at 28 sen last Friday, falling 60.9% from its IPO price of 71.7 sen (IPO price adjusted for a one-to-three share split on Nov 1, 2010)

It is trading at a 67.1% discount to its end-September 2011 book value of 177.97 yuan and close to its net cash per share of 25 sen. As at end-September 2011, it had cash reserves of 154.81 million yuan versus current borrowings of 17.68 million yuan, which translated into a net cash position of 137.13 million yuan.

In FY10, it paid a net dividend of 1.6 sen per share, representing a yield of 5.7%. From FY06 to FY10, the company’s CAGR for net profit and revenue was 47.8% and 43.8% respectively. For FY10, it posted a net profit of 88.25 million yuan on revenue of 670.87 million yuan.

For 3QFY11 ended September, it posted a net profit of 11.14 million yuan on revenue of 169.60 million yuan, down from a net profit of 31.16 million yuan on revenue of 191.48 million yuan previously. K-Star said the decline was mainly due to higher raw material and labour costs.

Its sports footwear segment contributed to about 95% of revenue, while its sports apparel and accessories accounted for the remaining 5%.

As part of its expansion plan, K-Star announced in October that it was buying a piece of state-owned leasehold land of 675 sq m in Jinjiang City in Fujian Province for 27 million yuan in cash.

As at end-2010, it had four production lines at three factories in Jinjiang City. Its estimated annual production capacity was 3.97 million pairs and output utilisation rate was 93.7% in 2010.



XiDeLang
XDL is predominantly involved in the design, manufacturing and marketing of its own Xidelang brand of sports shoes, as well as designing and marketing of sports apparel, accessories and equipment in China.

It churns out around 2,000 sports shoe designs yearly, of which 500 are commercialised. Its direct customers are intermediaries such as third-party distributors and retailers.

XDL’s products are retailed across 25 provinces and municipalities in China through a network of more than 2,500 retail locations, of which about 1,300 are concept stores.

Shares in XDL have been actively traded since the start of the year following speculation that a major shareholder plans to sell its entire 54.5% stake in XDL to Navis Capital Partners. However, XDL said in a Bursa announcement last month that it had not made any concrete plans or proposal on the matter.

Since Dec 30, 2011, XDL has risen about 25% to close at 37 sen last Friday. Despite the recent surge, XDL is still trading at undemanding valuations. Based on Friday’s close, the share price was at a 49.3% discount to its book value of 73 sen (as at Sept 30, 2011)

As at end-September last year, it had cash reserves of RM136.53 million and current borrowings of RM47.17 million, which translated into net cash of RM89.36 million or 20.3 sen per share.

In FY10, it paid net dividends of 2.5 sen per share, representing a yield of about 6.8% based on Friday’s closing price. From 2006 to 2010, the CAGR for revenue and net profit was 48.5% and 60% respectively. For FY10, it posted a net profit of RM68.19 million on revenue of RM77.91 million, all of which was derived from China.

XDL’s shoe segment contributed 53% of revenue, while the remaining 47% came from its apparel, accessories and equipment.

For its 3QFY11 ended September, its net profit increased to RM23.98 million from RM21.92 million a year ago, while revenue was RM132.94 million compared with RM125.25 million previously.

XDL said an increase in brand awareness and demand led to the improved performance.

On Jan 18, XDL proposed a private placement, bonus issue and rights issue of warrants to raise up to RM29.7 million for expanding production capacity at its new design and production centre.

The construction of the first stage of the centre is expected to be completed by the first half of 2012.




This article appeared in The Edge Financial Daily, February 13, 2012.



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Re-rating of China-based stocks?

KUALA LUMPUR: The recent listing of two Chinese companies in Hong Kong could trigger a re-rating of China-based stocks listed in Malaysia. It may even change investor perception on these stocks here.

Listed in the fourth quarter of 2011, China Outfitters Holdings Ltd (COH) and Active Group Holdings Ltd (AGH), are trading at higher valuations than China-based stocks listed on Bursa Malaysia. They are trading at a price-to-earnings ratio (PER) of about three times more than their Malaysian-listed peers that have hit rock-bottom PER of around two times, according to CIMB Research in a report last week.

CIMB said the recent listing of the two small-and mid-cap stocks in Hong Kong could help towards an upward re-rating of Malaysia-listed Xingquan International Sports Holdings Ltd.

COH and AGH provide a good comparison to Xingquan as they are all in the same business category — the production and sale of casual wear products in China.

Xingquan sells apparel and shoes, while COH sells men’s casual wear and AGH men’s casual footwear.

Even though Xingquan is in a similar business, it is trading at a huge discount compared with them.

Xingquan’s CY12 PER is around two times, while COH and AGH have PER of six and seven times respectively. Ex-cash, Xingquan’s PER stands at 0.8 times compared with five times for COH and 5.8 times for AGH, CIMB said.

On a price to book value (P/BV) basis, Xingquan is also at a huge discount to the two firms with a P/BV of 0.5 times against COH’s 2.1 times and AGH’s 1.5 times.

According to CIMB, among the three, Xingquan has the highest net cash per market capitalisation ratio at 0.7 times, which means that 70% of the share price is supported by its net cash.

If valuations of Xingquan and other China shoe companies listed on Bursa do not narrow, CIMB said it may be only a matter of time before they are taken private and listed on other markets.

The local research house said with the Hong Kong listing of small- and mid-cap retail stocks such as COH and AGH, Xingquan should be more than qualified to list there in the near future, where it should fetch a much higher valuation.


This article appeared in The Edge Financial Daily, February 13, 2012.



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Should PNB be made to divest assets to a few?

Since Permodalan Nasional Bhd (PNB) has been successful in asset management and has over the years delivered handsome returns to its account holders that are majority bumiputera investors, it raises a question now why it should be made to divest five of its non-core holdings to just a few bumiputera companies.

Prime Minister Datuk Seri Najib Razak announced last Thursday that Khazanah Nasional Bhd and PNB would each divest five of their non-core holdings/companies to bumiputera companies through open tender. According to Najib, the 10 companies have been identified.

“In the case of Khazanah, the intention could be to allow qualified bumiputera entrepreneurs to help grow some of the companies, especially if they are non-core ones. But questions arise why PNB should be made to divest its holdings when it has brought good returns to its investees who are majority bumiputera. Its annual dividends have been higher than other local funds and the companies it invests in are professionally managed,” said an industry observer.

He added that PNB has a stated bumiputera agenda since its inception. Hence, he said it would make more sense to keep those so-called non-core holdings within PNB to benefit the wider bumiputera community, rather than divesting them to a few bumiputera companies. He maintained that ideally, any such decision on asset disposal should be driven by market forces.

“With PNB, the fruit of the assets are enjoyed by a larger bumiputera community which are millions of account holders. But now the government wants them to off-load some of their non-core holdings to just a few bumiputera companies. This doesn’t really increase the overall levels of bumiputera ownership, but transfers ownership from a lot to a few,” said the observer.

“PNB has been a very astute investor and has done well in raising returns for its stakeholders,” he said.

He hoped that PNB would be able to get the best price for its five non-core companies, and that the fund ensures potential buyers have synergies with those companies.

PNB is an entity under the government’s New Economic Policy (NEP) which was conceived after the 1969 race riots to promote national unity through equal wealth distribution.

Incorporated in 1978, PNB’s aims are to promote bumiputera share ownership in the corporate sector, and to develop opportunities for suitable bumiputera professionals to participate in the creation and management of wealth.

PNB set up its wholly-owned subsidiary Amanah Saham Nasional Bhd (ASNB) in 1979, which operates as a vehicle to accumulate funds through its first unit trust fund Amanah Saham Nasional (ASN), launched in 1981.

It now has 10 unit trust funds with 79 billion units in circulation and nine million bumiputera and non-bumiputera account holders.

It is worth noting that PNB is sitting on assets of over RM120 billion (based on 2010 numbers). On average, its investments have yielded at least 8.5% in terms of annual returns to unitholders for the past five years.

In comparison, the Employees Provident Fund (EPF) provided returns to unitholders of less than 6%, Lembaga Tabung Haji 4.5% to 7% and Lembaga Angkatan Tentera (LTAT) between 15% and 16% over the same period.

In December last year, ASNB announced an income distribution of 7.65 sen per unit and a bonus of 1.15 sen per unit for Skim Amanah Saham Bumiputera (ASB) for FY11 ended Dec 31.

The income distribution is 0.15 sen higher than the 7.5 sen a unit paid out in 2010. The income distribution involved a total payout of RM7.04 billion, an increase of 21% over the RM5.82 billion paid out in 2010. The bonus involved a total payout of RM628.29 million.

Up until Dec 15, 2011, ASB recorded a gross income of RM7.19 billion. Dividend income from investee companies contributed RM4.09 billion or 56.9% of the gross income. Profit from the sale of shares made up RM2.25 billion or 31.3% with the rest derived from investments in short-term instruments and others.

Among the bigger companies PNB has invested in are Sime Darby Bhd in which it owns a 48.14% stake valued at around RM28 billion.

One of the smaller companies where PNB has a large stake is Bonia Corp Bhd. The fund holds a 32.99% stake in the leather goods company.

PNB’s largest and highest dividend-yielding investment is Malayan Banking Bhd. The fund, via ASB and PNB directly, owns about 51.4% of the country’s biggest bank.

It also owns 46.42% in UMW Holdings Bhd, which in turn controls Perusahaan Otomobil Kedua Sdn Bhd (Perodua).

PNB also invests in little known companies such as Formosa Prosonic Industries Bhd, which makes high quality speakers. It has a 22.4% stake in Formosa.

Other companies in PNB’s portfolio include Mesiniaga Bhd, Malaysian Building Society Bhd, Eng Teknologi Holdings Bhd and property developer S P Setia Bhd, for which it recently launched a revised takeover offer with the latter’s president and chief executive Tan Sri Liew Kee Sin.

PNB also has about 170 directors on the boards of 138 companies in which it has significant investments.


This article appeared in The Edge Financial Daily, February 13, 2012.



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Investors warm up to Tebrau Teguh

KUALA LUMPUR: Tebrau Teguh Bhd could be seeing better times as the stock saw increases in both its price and trading volume last Friday, surging far ahead of its takeover offer price of 76 sen to hit a six-month high.

The stock price closed at 89 sen last Friday with a whopping 151 million shares traded. The closing price was 8.5 sen higher, or a 10.56% increase from its previous day’s close at 80.5 sen. The stock saw a 1,516% increase in volume traded.

A proposed general offer was announced on Jan 31, and Tebrau’s share price has been on the rise since it resumed trading on Feb 2, staying between 80 sen and 81.5 sen for the four days before Friday’s leap.

With Tebrau’s current share price at 89 sen, the general offer exercise at 76 sen each is not expected to attract any acceptance, said market observers.

The Edge Financial Daily reported on Feb 3 that even though the exercise could see a poor take-up rate as a result of this, there are two factors which could attract the attention of investors.

The first would be the possibility of further corporate developments with the entry of Ekovest Bhd’s Datuk Lim Kang Hoo into the Tebrau picture, while the second would be the group’s rich landbank.

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

The jewel in the company’s crown is its landbank in Iskandar Malaysia, Johor, which according to its 2010 annual report, measures about 413.53ha and has a book value of RM591.93 million, based on 2003 prices.

This values the land at 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, citing that there could still be potential upside in the stock.


This article appeared in The Edge Financial Daily, February 13, 2012.



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InsiderAsia’s model portfolio - 468

Asian stocks traded broadly higher last week, buoyed by the sustained rally in US markets. US stocks continued with their steady climb since the start of the new year, gaining slowly but surely. The Dow Jones Industrial Average closed at its highest level since mid-2008 last Thursday (at the end of the Asian trading week) and is now just about 10% off its all-time high.

So far this year, global equities have certainly performed far better than most had initially expected. Investors started off with great caution and higher than average holdings in cash. But it appears they are slowly being lured back into the fray.

Thus far, improvement to the underlying US economy has been the strongest confidence booster. Even though growth is still tepid by most measures, there is growing evidence that the economy is gaining traction over the past few months.

One of the key drivers was the slow but steady strengthening in the job market. The US economy added 243,000 jobs in January, the most since mid-2010, while unemployment dipped to a three-year low of 8.3%. Improved employment prospects are expected to underpin consumer spending, the primary growth driver for the world’s largest economy.

Equally important, US corporate earnings are still growing, which in turn are driving stock prices higher while keeping valuations modest. Company balance sheets are strong, many are flush with cash, and operations lean following rounds of cost saving exercises implemented since the recession.

The improving outlook for the US has so far outweighed lingering concerns in Europe. Indeed, it appears that some investors may have been persuaded that even the worst-case scenario of a Greece exit from the eurozone will not be as disastrous as initially feared, and that measures such as the fiscal compact, establishment of the permanent rescue fund ahead of schedule and unlimited, long-term European Central Bank refinancing operations for banks may have built a sufficient firewall around the crisis.



In short, even though it may still be too early to say that market turbulence is a thing of the past, investor confidence has undoubtedly gained ground over the last few weeks. A steadier global market will be positive for the local bourse, and in particular, higher risks but more attractively valued medium and smaller capitalised stocks.

Interest in lower liner stocks too has been quite robust of late. Trading volume on the local bourse surged to a record 4.39 billion shares last Wednesday, with the bulk of the activities focused on penny stocks.

Among the most actively traded was Naim Indah Corp Bhd. In view of the sharp rise in price and volume for the stock, Bursa Malaysia issued a cautionary note to investors last Thursday. Following this, the company requested a one-day suspension in trading pending a material announcement.

The benchmark index added almost 23 points to finish at 1,561.7 last Friday. Market sentiment appears likely to stay firm in the near term. While smaller cap stocks are attracting renewed interest, gains for big cap blue chips may lag on the back of relatively rich valuations. Indeed, unless earnings results for 4QFY11, to be released over the next two weeks, register significant surprises on the upside, the FBM KLCI may continue to lag the regional turnaround.

Portfolio review
Note that this review is for a four-week period from Jan 16.

Stocks in our model portfolio outperformed the benchmark index over the past month. Total market value for our basket of 20 stocks was up by 3.84% to RM439,850, compared with the KLCI’s 2.53% gain.

Fourteen stocks in our portfolio closed higher while five ended in the red and one traded unchanged. Some of our notable gainers include Pantech Group Holdings Bhd (17.3%), Al-Hadharah Boustead REIT (BSDREIT) (9.9%), MyEG Services Bhd (6.3%) and DiGi.Com Bhd (5.9%). At the other end, Al-Aqar Healthcare REIT (-2.5%), Bumi Armada Bhd (-1.7%) and Bonia Corp Bhd (-4.8%) were among the bigger losers for the period under review.

Pantech shares did well after the company reported stronger earnings in its latest 3QFY12 ending February results. We expect earnings will continue to improve, underpinned by higher spending in the oil and gas sector. Pantech’s valuations remain attractive relative to both the industry and broader market.

Prices for BSDREIT also surged. We attribute this to the sharp rise in the real estate investment trust’s net assets following a revaluation of its properties. Net assets per unit rose to RM1.81 as at end-2011, up from RM1.43 at end-September.

Including our cash holdings, for which no interest income is imputed, our total portfolio value was up by a lower 2.38% to RM698,535. Our total profit is very substantial at RM538,535, of which RM400,948 has already been realised from previous shares sales.

Last week’s gain lifted our model portfolio’s cumulative returns since inception to 336.6% on our initial capital of just RM160,000. We continue to outperform the KLCI, which was up by about 141.4% over the same period, by some distance.

We acquired an additional 5,000 shares in Benalec Sdn Bhd, 10,000 shares in United Malayan Land Bhd (UM Land) and 3,000 shares in Alliance Financial Group Bhd (AFG) for a combined RM34,140. UM Land shares are currently trading at just about 0.5 times net assets of RM3 per share and could be up for a re-rating while AFG is trading at a reasonable price-to-net assets ratio, of 1.7 times, relative to the banking sector.

Our cash holdings were pared to RM224,545, following the acquisitions but continue to account for 32% of our total portfolio value. The relatively high percentage is, primarily, for prudence’s sake.


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 13, 2012.




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All signs point to healthy numbers for KPJ

KPJ Healthcare Bhd (Feb 10, RM5.01)
Maintain buy with higher fair value of RM5.84 from RM5.21: On Feb 28, KPJ is due to release its FY11 results, which we expect to come in within our and consensus estimates.

With Integrated Healthcare Holdings’ (IHH) upcoming listing possibly sparking an upward sector rerating, we hold firm to our view that KPJ is an excellent long-term investment for portfolio balancing with immense growth potential in a defensive sector.

We expect KPJ to sustain strong top line growth of about 13% to 15% year-on-year (y-o-y). However, due to slower yield growth at new hospitals such as Tawakkal Specialist, Penang Specialist and Bumi Serpong Damai (BSD) in Jakarta, group profit before tax (PBT) growth may come in at a more moderate 8% to 10% y-o-y.

That said, following an increase in capacity, yields started to improve at Penang Specialist while Tawakkal Specialist has started to show moderate yield improvement. As BSD is still in its gestation phase, it is expected to remain in the red but should perform over time as it develops a stronger patient base.

Bandar Baru Klang Specialist Hospital, on which construction was completed late last year, is expected to start operating in March, pending further regulatory approvals.

Four of KPJ’s new hospitals are under construction while work on another three is expected to start this year. Other than greenfield projects, KPJ is still on the lookout for potential acquisitions locally and abroad as part of its expansion strategy.

Its goal of reaching RM2 billion revenue for 2012 is highly achievable in view of the increase in patient capacity and higher facility utilisation.

We gather that its earlier acquisition of 51% equity interest in Jeta Gardens, which operates a nursing home in Queensland, Australia, was completed in late 2011 and has turned in a marginal net profit.

We maintain our forecast but are incorporating an enlarged share base of 594.3 million against 566.3 million previously as some of KPJ’s warrants have been exercised.

This accordingly dilutes our FY11 and FY12 earnings per share (EPS) by 4.9%. In line with the upward regional sector price-earnings ratio rerating, we are raising our price-earnings ratio on KPJ from 19.6 times to 23.1 times on FY12 EPS, based on a market cap weighted average regional sector PER. We maintain our “buy” recommendation on KPJ, but at a higher fair value of RM5.84, up from RM5.21 previously. — OSK Research, Feb 10


This article appeared in The Edge Financial Daily, February 13, 2012.




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Good re-rating prospects for HSL

Hock Seng Lee Bhd (Feb 10, RM1.70)
Maintain buy with revised fair value of RM2.44 from RM2.30: We have tweaked downwards our earnings forecast for FY11F by 4%, but upped FY12F and FY13F earnings by 1% to 5% after raising our order book assumption to RM600 million (against RM570 million previously) each per year.

Our upward revisions are prompted by recent news flow that has strengthened our belief in the multi-year re-rating prospects for local construction players in Sarawak.

We believe there will be a flurry of job announcements in the weeks and months ahead relating to the Sarawak Corridor of Renewable Energy (Score) and in particular, the fast developing Samalaju Industrial Park.

According to recent reports, Sarawak Hidro Sdn Bhd is ramping up the 2,400MW Bakun hydroelectricity dam.

Sarawak Energy Bhd (SEB) is looking at spending over RM6 billion to develop an over-RM3 billion coal-fired power station in Balingian, Mukah, and a 500kV transmission network linking Bintulu to Kuching this year.



SEB has recently formalised a second power purchase agreement (PPA) with OM Materials Sdn Bhd for a 20-year supply of 500MW to power the latter’s US$500 million (RM1.5 billion) manganese and ferrosilicon alloy smelting plant in Samalaju.

This followed an earlier pact between SEB and Asia Minerals Ltd (AML) for the supply of 270MW of power, also for 20 years, to a similar project estimated at RM790 million.

HSL will be a direct beneficiary of the massive and rapid developments within Score, given its expertise in infrastructure and construction; and specifically in land reclamation, considering Sarawak’s large areas of swamps and marshland.

HSL currently has RM1.6 billion worth of projects in hand, of which RM1 billion is outstanding. We understand that HSL is actively bidding for energy-related projects as well.

Other potential projects include: (i) the remaining packages of the Kuching central sewerage system worth a total of about RM1.7 billion; (ii) additional flood mitigation packages worth about RM250 million in Sibu; (iii) the development of a port and additional water treatment plants at Samalaju; and (iv) various road and rural water supply jobs.

Valuations are attractive, with forward price earnings of six to eight times FY11F to FY13F. Accumulate ahead of the company securing more lucrative jobs within Score. — AmResearch, Feb 10


This article appeared in The Edge Financial Daily, February 13, 2012.




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Puncak Niaga’s sharp rise elicits UMA query

Puncak Niaga Holdings Bhd (Feb 10, RM1.66)
Maintain neutral with fair value RM1.82: Bursa Malaysia has issued an unusual market activity (UMA) query to Puncak Niaga Holdings due to the recent sharp rise in its share price and high trading volume.

After consulting its board of directors, the management said it is not aware of any corporate development relating to the group’s business, rumour or report concerning the business or affairs of the group or any other explanation that could account for the unusual market activity.

We are pleased with the upward re-rating of Puncak’s share price to near our theoretical fair value, as we had earlier recommended a tactical “trading buy” on the counter when its share price dropped near its historical lows after the group emerged as an integrated water player.

However, we are surprised with the sudden surge in the company’s share price, together with high transacted volume that we suspect may emanate from pure market speculation.

We did get wind of market rumours that the company may be taken private. The offeror was not identified.

However, we see a low possibility of this happening, especially at this juncture. Puncak has received a few offers to take over its water assets at various amounts but these came short of the board’s expectations, especially considering the amount offered would be able to avert a possible default or cross-default on bonds issued by the concessionaire.

As the asset purchase could be a politically sensitive issue, especially with a general election just around the corner, we do not expect this deadlock to be resolved in the medium term.

The deadlocked restructuring of water assets obviously presents a major roadblock to any buyer in taking a substantial stake in the company in view of the huge investment risk. Apart from that, we also think a privatised entity may lose significant bargaining power during the asset purchase negotiation process.

Although we applaud the management’s efforts to diversify into other related businesses to obtain new income streams, such plans still do not justify the recent run-up in its share price.

Puncak is still bidding for various water projects, having recently secured a contract worth RM667.32 million from the Rural and Regional Development Ministry via a 40:60 joint venture with Quality Concrete Holdings Bhd.

Based on its 40% stake in the project, plus gross margin in the mid-teens, we see small earnings contribution arising from this project. As for its recent foray into the oil and gas sector, we expect Puncak to go through a steep learning curve, being the new kid on the block despite the fact that it has already secured some RM400 million in contract value for 2012. — OSK Research, Feb 10


This article appeared in The Edge Financial Daily, February 13, 2012.




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EDL losses to weigh down MRCB’s FY12 performance

Malaysian Resources Corp Bhd (Feb 10, RM2.17)
Downgrade to market perform with revised fair value of RM2.11 from RM2.40: MRCB guided for RM30 million to RM40 million start-up losses in FY12 ending December from the newly completed 100%-owned Eastern Dispersal Link (EDL) in Johor. The losses will come predominantly from an expected two-month gap between the opening of the toll road to the public in March this year and the commencement of tolling in May.

MRCB projects a base-case average daily traffic volume of about 75,000 to 80,000 cars and expects the toll road to turn profitable in FY13.

MRCB guided for very thin margins from the RM1.4 billion LRT line extension project it secured in August 2011. Out of the total RM1.4 billion, only about RM450 million worth of main works is earmarked to be carried out directly by MRCB (that fetches 3% to 4% margins).

The remaining jobs, comprising predominantly stations, depots and anciliary works worth about RM950 million in total, will be awarded separately by Prasarana Negara Bhd to other contractors. MRCB will only earn a 1% management fee.

MRCB was less “chatty” about the redevelopment project on the 1,085ha Rubber Research Institute (RRI) land in Sungai Buloh. The management just described it as “still work in progress”.



FY12 to FY14 net profit forecasts are cut by 14% to 44% largely to reflect RM30 million to RM40 million start-up losses in FY12 from the EDL, as well as lower blended construction earnings before interest and tax (Ebit) margins in FY12 to FY14.

Risks include: (i) new construction contracts secured in FY12 to FY14 coming in below our target of RM1.5 billion per year; (ii) rising input costs; and (iii) EDL tolling commencing later than May this year.

We have turned less enthusiastic on construction stocks as we believe their share price performance is likely to be muted over the next six to 12 months as the market begins to price in a higher risk premium for construction stocks ahead of the general election that must be held by March 2013.

Indicative fair value for MRCB is cut by 12% from RM2.40 to RM2.11 based on sum-of-parts. Valuations are no longer as compelling. We therefore downgrade our call on MRCB from “trading buy” to “market perform”. — RHB Research Institute, Feb 10


This article appeared in The Edge Financial Daily, February 13, 2012.




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Sustainable momentum is key for Bursa Malaysia

Bursa Malaysia Bhd (Feb 10, RM7.60)
Revise target price to RM6 from RM5.20: Net profit for 4QFY11 of RM31 million took FY11 earnings to RM146 million, within our and consensus expectations.

Net profit grew 29% year-on-year (y-o-y) led by higher revenues from securities (15%), derivatives (36%) and “stable revenue” (9%). Average daily turnover volume and value rose to 1.3 billion (35%) and RM1.7 billion (23%), but velocity was flat at 33%.

Average daily contracts for derivatives grew 39% on stronger foreign and domestic participation. Stable revenue was lifted by higher listing fees (larger listing market cap and structured warrants) although the number of initial public offerings was similar (28 against 29 in FY10).

Operating expenses rose 9%, but excluding Globex fees, expenses only rose 4%. Bursa declared a final 13 sen dividend per share in 4QFY11, taking FY11 DPS to 26 sen, equivalent to 95% payout (we assumed 90%).

The stronger than expected trading momentum in January and February this year (up to Feb 8, average daily turnover volume and value reached highs of 1.9 billion and RM1.8 billion) prompted us to tweak our FY12/FY13F average daily turnover volume and value assumptions to 1.1 billion to 1.2 billion (from one billion to 1.1billion) and RM1.5 billion to RM1.6 billion (from RM1.3 billion to RM1.5 billion), respectively.



Consequently, we raise our FY12/FY13F earnings per share by 8%. However, the sustainability of trading momentum remains the key.

Our RM6 target price is based on the dividend discount model and assumes 92% dividend payout (from 90% previously), 7% long-term growth (from 6% previously) and 11% cost of equity. Our target price implies 22 times FY12 earnings per share. — HwangDBS Vickers Research, Feb 10


This article appeared in The Edge Financial Daily, February 13, 2012.




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Petronas makes 2 gas discoveries offshore Sarawak

KUALA LUMPUR (Feb 13): Petroliam Nasional Bhd had discovered two gas fields offshore Sarawak with a total gas-in-place of 3.45 trillion standard cubic feet.

The national oil corporation said on Monday the two discoveries were in the Kasawari and NC8SW fields in Block SK316.

Petronas said the Kasawari-1 well was drilled in November 2011 and found gas in the carbonate reservoirs. The well, drilled to a total depth of 3,196 metres, penetrated about 1,000 metres of gas column -- the longest drilled section of gas column in Malaysia.

“Preliminary assessments carried out in early February 2012 indicate that gas-in-place for the Kasawari field is over five trillion standard cubic feet (TSCF) with estimated recoverable hydrocarbon resource of just over three TSCF, making it one of the largest non-associated gas fields in Malaysia. The well-test conducted produced 29 million standard cubic feet per day (mmscfd) of gas,” it said.

Petronas said the NC8SW-1 well was 17km south of Kasawari and was drilled in September 2011 to a total depth of 3,853 metres and found gas in a 440-metre column in similar carbonate reservoirs.

“The recoverable resource for the NC8SW field is estimated at more than 450 billion standard cubic feet of gas,” it said.

It said the NC8SW-1 well also discovered potential oil play which required further assessment to determine its commercial viability.



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KL shares lower at midafternoon

Share prices on Bursa Malaysia were easier at midafternoon today as losses in finance-related stocks weighed on the market amid tepid investors' sentiment over the Greek bailout measure development, dealers said,

At 3.15pm, the benchmark FBM KLCI dropped 2.67 points to 1,558.99.

The Finance Index fell 36.63 points to 13,822.78, the Plantation Index added 3.18 points to 8,891.67 and the Industrial Index advanced 3.77 points to 2,905.05.

The FBM Emas Index shed 19.939 points to 10,863.82, the FBM Mid 70 Index declined 47.271 points to 12,444.56 and the FBM ACE Index increased 11.52 points to 4,757.11.

Losers outnumbered gainers 468 to 351 while 317 counters were unchanged and 344 others untraded. A total of 1.924 billion shares worth RM1.236 billion were traded.

Among active stocks, British American Tobacco added RM1.48 to RM51.78, BLD Plantation earned 31 sen to RM9.98, Metal Reclamation went up 30 sen to RM1.20 and Genting perked 22 sen to RM10.52.

As for the heavyweights, Maybank edged down four sen to RM8.48, Sime Darby, Petronas Chemicals and CIMB each eased five sen to RM9.62, RM6.94 and RM7.16, respectively. -- Bernama



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RAM Ratings maintains A3 rating of Royal Selangor’s RM30m bonds

KUALA LUMPUR (Feb 13): RAM Rating Services Bhd reaffirmed the A3 rating of Royal Selangor International Sdn Bhd’s RM30 million redeemable unsecured bonds (2001/2014).

RAM said on Monday the rating was supported by Royal Selangor’s well-established brand, manageable balance sheet and moderate cashflow-protection measures.

“The ratings are, however, moderated by its susceptibility to cyclical economic change amidst a competitive and fragmented industry, its longer operating cash cycle days, continued losses in Selberan Jewellery Sdn Bhd and its exposure to volatile tin prices,” it said.

However, it maintained the negative outlook on the group’s long-term rating on fresh concerns over the softer economic conditions and the resultant impact on consumer and corporate spending on discretionary pewter giftware.

Royal Selangor and its subsidiaries manufacture and market pewter, as well as marketing of jewellery products.

RAM Ratings said Royal Selangor’s overall operating performance improved in FYE 30 June 2011 (FY June 2011).

The group’s revenue grew 7.24% on the back of half-year contributions from its new Straits Quay tourist centre and its new flagship store at Pavilion which opened in the second half of the fiscal year as well as increased sales of higher-value items.

Group profit margins also improved, aided by effective tin hedging policy and above-mentioned increased sales of higher-priced products.

“Despite the better operating performance, funds from operation debt cover (FFODC) slipped to 0.14 times (end-FY June 2010: 0.22 times) as more debt were assumed during the year amid its store expansion and corresponding increase in working capital needs,” it said.

RAM Ratings said the higher debt levels lifted Royal Selangor’s gearing ratio to 0.73 times as at FY June 2011 (end-FY June 2010: 0.66 times) but is still within its expectations.

“Looking ahead, Royal Selangor’s gearing ratio is envisaged to stay manageable at below 0.8 times in the next two fiscal years, as its capital expenditure plans are estimated to be less hefty than those incurred in FY June 2011.

“Full-year contribution from the group’s new outlets opened in 2H FY June 2011 as well as full-year effect of selling price increase implemented in April 2011 are expected to keep its FFODC at around 0.15 times in the near term.

“That said, the group’s FFODC may dip below 0.15 times should Royal Selangor’s product demand be affected by the weaker economic environment,” said RAM Ratings’ head of consumer and industrial ratings Kevin Lim.

However, the impact of higher tin price contracted on margins and the lengthening of operating cash cycle on higher working capital needs may also pose downside risk to Royal Selangor’s performance.

The rating may revert to stable if the group is able to demonstrate resiliency amidst the challenging economic conditions as well as preserve its balance sheet strength and cashflow-protection measures.

Conversely, the rating could be downgraded if Royal Selangor's business and financial profiles deteriorate.



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Felda Global IPO on May 10

Malaysian plantation firm Felda Global Venture Holdings Bhd will launch its initial public offering on Malaysia’s stock exchange on May 10, state news agency Bernama cited a senior government official as saying today.

A deputy minister in the prime minister’s department, Ahmad Maslan, was reported by Bernama as specifying the date for the IPO, which is expected to be the largest stock debut this year in Malaysia.

A source with direct knowledge of the deal told Reuters the IPO would raise as much as US$2 billion and would take place in early May.

Felda Global, the business arm of the nation’s federal land authority (FELDA), is an agri-business company focused on palm oil, rubber and sugar cane processing and cultivation.

The proposed IPO has courted some political controversy because the land authority is also responsible for the welfare of FELDA settlers, ethnic Malays who receive aid in the form of land from the government. -- Reuters



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AirAsia X Australia probe: Inexperience found

Two AirAsia X crews who flew dangerously low into Australia’s Gold Coast were “probably not adequately equipped” to make the descent, Australian air safety investigators have found.

Australia’s Transport Safety Bureau (ATSB) said the flights from Kuala Lumpur on May 4 and May 29 2010 descended into the northeastern Australian airport below “minimum safe altitude”. “As a result, the aircraft descended to an altitude where there was no longer separation assurance from terrain and aircraft operating outside controlled airspace,” the ATSB said in a report.

The ATSB found that the incidents were “indicators of a minor safety issue regarding the operator’s training of its flight crews”. “The aircraft operator’s flight crews were probably not adequately equipped to manage the vertical profile of non-precision approaches in other than autopilot managed mode,” it said.

Both approaches were in cloudy, overcast conditions and involved the Airbus A330 being put into “selected” mode, where the autopilot operated on target values entered by the crew.

Simulator training at AirAsia X, the long-haul offshoot of Asia’s biggest budget carrier, was largely based on descents into Kuala Lumpur which were “relatively simple” and none reflected the approach to the Gold Coast.

“It is likely that crews were not regularly exposed to intermediate vertical profile restrictions during the conduct of non-precision instrument approaches,” the ATSB said in its report published late Friday.

Since the incidents the ATSB said AirAsia X had developed specific Gold Coast descent training and all crew had been required to complete it before flying the route.

Tiger Airways Australia, an offshoot of Singapore’s Tiger, was grounded for six weeks last year after two similar incidents over Melbourne, and the ATSB is investigating a third serious occurrence involving Thai Airways last July.

Malaysia-based AirAsia X boosted flights into Australia last month by adding Sydney onto its routes. It is also facing a lawsuit from Australia’s consumer regulator for failing to disclose some fares in full on its website. -- AFP



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Littledale appointed AirAsia CFO

KUALA LUMPUR (Feb 13): AIRASIA BHD [] has appointed its group financial controller Andrew Littledale as its chief financial officer with effect from Tuesday, Feb 14.

The low-cost carrier said on Monday that prior to joining AirAsia in March 2010 as group financial controller, he was the chief financial officer at AirAsia X since its inception in July 2007.

Littledale’s previous appointments include group reporting manager at Cookson plc, group management accountant at FKI plc and group financial accountant at Blue Circle Industries plc all based in London.



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Hock Seng Lee gets RM82m road project in Sarawak

KUALA LUMPUR (Feb 13): HOCK SENG LEE BHD [] has secured a RM82.22 million contract to build a road from Balingian to Jalan Persekutan, Sibu/Bintulu, Sarawak.

The company said on Monday it had signed a subcontract agreement with PN CONSTRUCTION [] Sdn Bhd for the project which includes earthworks, drainage and culverts, road and bridges.

The project is scheduled to be completed in the first quarter of 2014.

“The contract is expected to contribute positively to the earnings and net assets of Hock Seng Lee group for the financial years ending 2012 to 2014,” it said.



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Hock Seng Lee wins RM82m road contract

Hock Seng Lee Bhd (HSL) signed a RM82.223 million sub-contract agreement with PN Construction Sdn Bhd today for the construction of a road in Sarawak.

In filing to Bursa Malaysia, HSL said the scope of works for the project from Balingian to Jalan Persekutan, Sibu/Bintulu, includes earthworks, drainage and culverts, road and bridges.

HSL said the project is due to be completed in the first quarter of 2014.

The contract is expected to contribute positively to the earnings and net assets of the Group for the financial years ending 2012-2014, it added. -- BERNAMA



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AirAsia gets new group chief financial officer

AirAsia Bhd today announced the appointment of Andrew Littledale as the budget carrier's new group chief financial officer.

The appointment takes effect tomorrow.

Littledale will assume leadership responsibilities across the group’s accounting and financial functions.

Prior to joining AirAsia as group financial controller, he was the chief financial officer of AirAsia X, AirAsia's long-haul carrier, since its inception in 2007.

Datuk Kamarudin Meranun, AirAsia's deputy group chief executive officer and president of Group Finance, Treasury, Corporate Finance and Legal, said Littledale has extensive experience in all aspects of finance, including strategies, financial planning, technical accounting and business operations.

"Littledale has shown he has the expertise, knowledge and enthusiasm to participate in AirAsia's growth and to manage the complex financial elements," he said in a statement.

Littledale holds a bachelor’s degree in Zoology from the University of London and a qualified accountant from the Chartered Institute of Management Accountants.

Littledale succeeds Rozman Omar who has left for Malaysia Airlines as the national carrier's new group chief financial officer. -- BERNAMA



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London Biscuits climbs, to go private

London Biscuits Bhd, a food and confectionery company, advanced 4.3 per cent to 85 sen, bound for the highest close since Dec 8.

The company wants to raise as much as RM29 million in a private placement, it said in a regulatory filing. The company will sell shares at RM1 ringgit, it said. -- Bloomberg



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KLCI dips, banks sees mild profit taking

KUALA LUMPUR (Feb 13): Blue chips were marginally lower at midday on Monday, with some mild profit taking seen on bank stocks and Sime Darby, while key regional markets notches small gains after the Greek government approved an austerity bill to secure a second bailout.

At 12.30pm, the FBM KLCI was down 1.79 points to 1,559.87. During the past two weeks, the KLCI had gained nearly 40 points from the 1,521 on Jan 31.

Turnover was 1.62 billion shares valued at RM952.19 million. Decliners led advancers 402 to 350 while 321 stocks were unchanged.

Japan’s Nikkei 225 rose 0.85% to 9,022.78, Hong Kong’s Hang Seng Index added 0.7% to 10,928.50, Shanghai’s Composite Index 0.14% to 2,355.19, Taiwan’s Taiex 0.43% to 7,896.11, South Korea’s Kospi 0.50% to 2,003.73 and Singapore’s Straits Times Index 0.31% to 2,969.1.

US light crude oil rose 93 cents to US$99.60 while Brent crude rose more than US$1 to US$118.35.

At Bursa Malaysia, among the index-linked stocks CIMB fell six sen to RM7.15, Maybank five sen to RM8.47, Public Bank four sen to RM13.96. Sime Darby lost three sen to RM9.64 and Air Asia three sen also to RM3.75.

Crude palm oil third-month futures rose RM28 to RM3,158. OSK Research said with inventory remaining above 2.0 million tonnes and CPO price being range bound, the rally has been driven by liquidity rather than fundamentals.

Far East was the top loser, down 24 sen to RM7.06, United PLANTATION []s 18 sen to RM21.82 and Chin Tek 10 sen to RM8.90.

Naim Indah Corp fell 7.5 sen to 59.5 sen with 125 million shares when it resumed trading after announcing a corporate exercise last Friday. The recent rally was seen as too steep, as the share price was chased up speculators.

Compugates was the most active with 211.66 million shares done, up 1.5 sen to 13.5 sen.

Tebrau Teguh added 5.5 sen to 94.5 sen as investors believed the company was more valuable than the 76 sen offer price made by Iskandar Waterfront Holdings Bhd (IWH).

BAT was the top gainer, adding 66 sen to RM50.96, Genting 20 sen to RM10.50 and MBSB 16 sen to RM2.39. IOI Corp added one sen to RM5.48 and MMHE two sen to RM5.60.



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'MMC-Gamuda likely to win tunnelling job'

MMC-Gamuda Joint Venture Sdn Bhd's (MMC-Gamuda JV) chances of clinching the tunnelling work for the Sungai Buloh-Kajang Line (SBK Line), worth RM8 billion, remains high, says OSK Research Sdn Bhd.

The research house said the tunnelling portion of the project was expected to be announced in April and MMC-Gamuda JV stood a good chance of clinching the project as the government preferred local contractors.

MMC-Gamuda's previous experience in the construction of the Stormwater Management and Road Tunnel and Koahsiung My Rapid Transit project in Taiwan was also expected to hold the joint venture company in good light with the government.

The entire SBK Line is targetted to be completed by July 31, 2017, it added.

Against this backdrop, OSK Research maintained a "buy" on MMC-Gamuda JV with a lower fair value of RM4.57, from RM4.46, previously. -- BERNAMA



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Time Engr surges on stake bid news

Time Engineering Bhd, a telecommunication services producer, surged 13 per cent to 39.5 sen, set for the highest close since June 30.

Khazanah Nasional Bhd, Malaysia’s state investment company, is evaluating three bids for its 45 per cent stake in Time, the Edge newspaper reported, citing an unidentified person.

UEM Group Bhd, an arm of Khazanah Nasional, declined to comment on the report, according to an e-mailed statement from UEM Group. -- Bloomberg



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DRB-Hicom extends losses from Friday

KUALA LUMPUR (Feb 13): Shares of DRB-HICOM BHD [] which had surged recently on its takeover of Khazanah Nasional Bhd’s 42.7% stake in PROTON HOLDINGS BHD [] seemed to have exhausted with investors taking profit.

At 10.48am, it was down 12 sen to RM2.86 with 10.30 million shares done.

The FBM KLCI inched up 0.04 of a point to 1,561.70. Turnover was 1.13 billion shares valued at RM579.85 million. There were 303 gainers, 309 losers and 306 stocks unchanged.

Last Friday, DRB-Hicom fell 16 sen to RM2.98.

News reports quoted DRB-HICOM group MD Datuk Seri Mohd Khamil Jamil as saying DRB-Hicom had not yet decided on the new management line-up to steer Proton.

Mohd Khamil was quoted saying he was surprised with all the names suggested through the media. "I do meet them (Proton officials) from time to time on business arrangements, but I have not made any decision on the new Proton line-up. I must first go through the merger and acquisition process.

"We will hold an EGM on the first or second week of March to finalise the deal,” he said.

There were news reports that Proton's former CEO Tengku Tan Sri Mahaleel Tengku Ariff was poised to make a comeback as the national carmaker's new chairman, replacing Datuk Seri Mohd Nadzmi Mohd Salleh. DRB-HICOM's group COO Datuk Lukman Ibrahim and Hicom Automotive Manufacturers CEO Abdul Rashid Musa were also names tipped to be potential candidates as Proton CEO.



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Notion VTEC gains, Thai plant to resume ops

Notion VTEC Bhd gained 2 per cent to RM2, poised for the highest close since Aug 4. The company said a factory in Thailand will resume operations before June. The revenue loss from Thai floods is “minimal”, it said in a regulatory filing. -- Bloomberg



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Nilai Resources jumps on Q4 income surge

Nilai Resources Group Bhd, a producer of fertilizer and chemical products, jumped 9.4 per cent to 1.40 baht, heading for the steepest advance since Sept. 29. Net income in the fourth quarter surged to RM20.8 million from RM1.6 million in the same period a year earlier. -- Bloomberg



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Malaysia Building rises on buyout report

Malaysia Building Society Bhd, a mortgage financing provider, climbed 4 per cent to RM2.32, on course for the highest close since August 1997.

The company’s biggest shareholder, Employees Provident Fund, is considering buying out Malaysia Building, the Star newspaper reported, citing people it didn’t identify.

Malaysia Building Chief Executive Officer Ahmad Zaini Othman couldn’t be reached for comment at his office. -- Bloomberg



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FBM KLCI opens in minus territory

Share prices on Bursa Malaysia opened mixed in early trading today, with the FTSE Bursa Malaysia KLCI (FBM KLCI) in the minus territory on selling pressure in plantation-related counters, dealers said.

The market's barometer was 0.71 of a point lower to 1,560.95 as at 9.30am after opening 1.31 points lower at 1,560.35.

HwangDBS Vickers Research said the benchmark FBM KLCI could consolidate today following a 40.8-point or 2.7 per cent increase over the last fortnight.

"Still our local bourse would likely show resilience as investors, who have missed out on the earlier market run-up may be waiting to buy on weakness," it said in a research note.

The research house said the bellwether may find immediate support at the 1,555 level.

The Finance Index eased 6.84 points to 13,852.57, Plantation Index fell 16.29 points to 8,861.99 and the Industrial Index inched down 4.13 points to 2,897.15. The FBM Emas Index lost 4.95 points to 10,878.81, FBM70 Index slipped 19.72 points to 12,472.11, but the FBM Ace Index gained 12.46 points to 4,758.05.

Advancers led decliners 211 to 179 while 243 counters were unchanged, 847 untraded and 14 suspended. Turnover stood at 529.528 million shares worth RM228.919 million.

Among active counters, BLD Plantation jumped 23 sen to RM9.99, Genting Bhd rose 15 sen to RM10.46, Huat Lai Resources and QSR Brands each added 15 sen to RM2.50 and RM6.60, respectively. As for heavyweights, Maybank lost four sen to RM8.48, Sime darby earned one sen to RM9.68, Petronas Chemicals was unchanged at RM6.99 and CIMB eased two sen to RM7.19. -- BERNAMA



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CIMB Research keeps Sell on Malaysian Genomics Resource Centre

KUALA LUMPUR (Feb 13): CIMB Equities Research said Malaysian Genomics Resource Centre’s (MGRC) results significantly undershot its expectations with a 2Q net loss of RM1.42 million.

“We had earlier forecasted a net profit of RM2.62m for the full year and had been too optimistic in our projections. Higher operating costs were to blame for the poor 2Q, prompting us to cut our FY12-13 EPS by 58%-78%,” it said.

CIMB Research said in view of the volatile earnings, it changed its method of valuation from a price-to-earnings (P/E)basis to a price-to-book (P/B) basis.

“The stock remains firmly a SELL despite a slight nudge upwards in MGRC’s target price from 34 sen to 35 sen, as we now value the stock at 1.0 times P/B.

“Potential de-rating catalysts are 1) these set of poor 1H results, 2) continuing margin squeeze, and 3) a lack of new projects,” it said.



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RHB Research upgrades call on banks to Neutral from Underweight

KUALA LUMPUR (Feb 13): RHB Research Institute has turned more positive on the banks and consequently, upgraded its call to Neutral from Underweight.

“The key factors that underpin the change in our sector view are: 1) easing macro headwinds; and 2) the sector has underperformed the broader market and regional peers year-to-date,” it said on Monday.

RHB Research said while it thinks the Eurozone is unlikely to avoid a recession in 2012, “we think the worst has likely past”.

The research house said the recovery in the US economy appeared to be gaining momentum following a string of positive economic data in early-2012.

“These suggest that the risk of a double-dip global recession is receding and outlook is becoming less gloomy, in our view. This has improved the odds for an upgrade to our real GDP growth forecast of 3.6% for 2012,” it said.



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Tebrau Teguh inches up in early trade

KUALA LUMPUR (Feb 13): Shares of TEBRAU TEGUH BHD [] rose in early trade on Monday as investors believed the company was more valuable than the 76 sen offer price made by Iskandar Waterfront Holdings Bhd (IWH).

At 9.22am, it was up 1.5 sen to 90.5 sen with 6.64 million shares transacted.

The FBM KLCI shed 0.9 of a point to 1,560.76. Turnover was 404.66 million shares valued at RM172.92 million. There were 196 gainers, 156 losers and 223 stocks unchanged.

Last Friday, Tebrau Teguh rose 6.5 sen to 89 sen in very active trade.

IWH had offered 76 sen for the 33.15% stake in Tebrau Teguh when it acquired the block of shares from Johor government investment arm Kumpulan Prasarana Rakykat Johor.

Investors are hoping that IWH will raise the offer price for the remaining Tebrau Teguh stake. However, that remains to be seen.

Analysts said that there would unlikely be a higher price unless there was another competitor wanting to launch a takeover for Tebrau Teguh, especially now that it had been picked to develop the Johor Baru waterfront which faces Singapore.

However, analysts said Tebrau Teguh was valued more than RM1 based on its landbank which had not been revalued.



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Naim Indah slips on trading resumption on profit taking

KUALA LUMPUR (Feb 13): Shares of NAIM INDAH CORPORATION BHD [] slipped in early trade on Monday when it resumed trading after announcing its proposed acquisition of 60% in Sagajuta (Sabah) Sdn Bhd for an indicative price of RM240 million.

At 9.12am, it was down four sen to 63 sen with 48.73 million shares done as investors were taking profit after the price surge.

The FBM KLCI fell 1.64 points to 1,560.02. Turnover was 267.44 million shares valued at RM113.41 million. There were 161 gainers, 127 losers and 191 stocks unchanged.

Last Friday, Naim Indah proposed to acquire the Sagajuta stake from Generasi Cipta Sdn Bhd. It intends to acquire the remaining 40% equity interest in Sagajuta that is not owned by Generasi Cipta on similar terms as agreed between Nicorp and Generasi Cipta.

Naim Indah will undertake a proposed reduction in par value from 20 sen of each ordinary share to 10 each ordinary share in which the credit of RM70.2 million arising from the reduction of the par value shall be set-off against the unaudited accumulated losses of the vompany of RM64.6 million as at Sept 30, 2011.

It also proposed a renounceable rights issue on the basis of one right share of 10 sen per share on the basis of one rights share for every existing share with two free warrants after the proposed par value reduction.

Naim Indah proposed a private placement of 300 million new Naim Indah shares of 10 sen each to investors to be identified, with two free warrants for every placement share after the proposed par value reduction.



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Naim Indah falls, plans to buy Sagajuta

Naim Indah Corp (NIC MK), a developer, slid 9.7 per cent to 60.5 sen, set for the largest decrease since Nov. 21. Naim Indah said it plans to buy 60 per cent of Sagajuta (Sabah) Sdn from Generasi Cipta Sdn for RM240 million.

The company also proposed a reduction in the par value of its shares to offset accumulated losses, and will raise RM100 million from a rights offer and share placement, it said in a statement.

Naim is also in talks to buy the remaining 40 per cent stake not held by Generasi, according to a Kuala Lumpur stock exchange filing late yesterday. Sagajuta is a Malaysian property developer and investment company. -- Bloomberg



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CIMB Research has technical Buy on EA Holdings at 22.5 sen

KUALA LUMPUR (Feb 13): CIMB Equities Research has a technical buy on EA Holdings at 22.5 sen at which it is trading at a price-to-book value of 2.2 times.

The research house said on Monday EA Holdings broke out of its wedge pattern last week.

“We think it is poised for a stronger rebound. If we are right, the next upleg is going to push prices towards 24 sen and 26 sen,” it said.

CIMB Research said the MACD signal line has staged a positive crossover while its RSI has also hooked upward. The improving technical landscape bodes well for EA.

“Risk takers may start to nibble now while other should wait for a breakout above 23 sen (200-day SMA) before going long. Put a stop at below 21 sen,” it said.



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CIMB Research has technical sell on AFG at RM3.88

KUALA LUMPUR (Feb 13): CIMB Equities Research has a technical sell on Alliance Financial Group at RM3.88, at which it is trading at a FY13 price-to-earnings of 11.4 times and at a price-to-book value of 1.7 times.

The research house said on Monday the uptrend from its September 2011 low is probably over.

“Prices violated the 30-day SMA on Friday and we see this as a prelude to more downside ahead. If we are right, the candles should also fall below its 50-day SMA soon,” it said.

CIMB Research said the indicators are showing signs of exhaustion. The bearish divergence on its MACD shows that selling pressure is picking up. RSI has also hooked down.

“Any rebound towards RM3.91-RM3.96 is an opportunity to take profits. However, always put a buy stop at RM4.05, just in case. Support is at RM3.70 and RM3.57,” it said.



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CIMB Research has technical Buy on Hiap Teck at 69 sen

KUALA LUMPUR (Feb 13): CIMB Equities Research has a technical buy on Hiap Teck Venture at 69 sen at which it is trading at a price-to-book value of 0.4 times.

It said on Monday Hiap Teck Venture broke out of its bullish wedge pattern few days ago before prices started to build a base around its 50-day SMA.

Last Friday, the stock moved a tad closer towards its 200-day SMA.

“If prices can swing above the 70 sen level, we think that there is a good chance that the candle can edge towards 74 sen and 79 sen. Hence, aggressive traders might want to take some position here. However, always put a stop at below the 65 sen level,” it said.

CIMB Research said the technical landscape remains positive. MACD signal line is hovering in the positive territory while RSI is also above the 50-pts mark.



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HDBSVR: KLCI could consolidate after 40pt rally past 2 weeks

KUALA LUMPUR (Feb 13): HwangDBS Vickers Research said the benchmark FBM KLCI could consolidate on Monday following an increase of 40.8-point or 2.7% in the last fortnight.

“Still, our local bourse would likely show resilience as investors who have missed out on the earlier market run-up may be waiting to buy on weakness. On the chart, the bellwether may find immediate support at the 1,555 level,” it said.

Over on Wall Street, after the recent market rally, major U.S. equity indices dropped between 0.7% and 0.8% last Friday pending the emergence of fresh market developments.

At Bursa Malaysia, stocks that may be of added interest include: (a) Time Engineering, amid a weekly business report saying that three interested bidders are eyeing to acquire Khazanah Nasional’s 45% stake in the company; (b) BIMB, after a local media reported that its subsidiary Bank Islam is in talks to buy a stake in an Indonesian Islamic lender; and (c) IOI Corporation, following a news article stating that it is considering to re-list its property arm.



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