Wednesday, 15 February 2012

Prestariang posts 4Q net profit of RM10.55m, boost from ICT

KUALA LUMPUR (Feb 15): Prestariang Bhd posted net profit of RM10.55 million in the fourth quarter ended Dec 31, 2011, underpinned by strong demand for its information communications TECHNOLOGY [] (ICT) training.

It said on Wednesday that its revenue was RM32.63 million. Its earnings per share were 4.80 sen. It proposed a final single-tier dividend of 4.0 sen per share.

For the financial year ended Dec 31, 2011, it reported net profit of RM33.61 million on the back of RM111.75 million in revenue.

“The results more than doubled Prestariang’s FY2010 performance of RM15.11 million in profit after tax and RM58.52 million in revenue,” it said.

Prestariang CEO Dr Abu Hasan Ismail, CEO of Prestariang said the company’s record performance in 2011 was mainly contributed by the strong demand in ICT training, certification and management of software licences.

“Riding from the rising requirements for ICT training and certifications, we have grown at a compounded annual growth rate of 22.60% since 2006,” he said.

Abu Hassan said Prestariang would roll its own intellectual property (IP) certifications including Green IT and vocational English which would be implemented by second half of this year.

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Ex-Kian Joo MD, 13 others seek review of Federal Court ruling

KUALA LUMPUR (Feb 15): The former managing director of KIAN JOO CAN FACTORY BHD [] (KJCF) and 13 others have filed an application seeking the review of the Federal Court ruling that gave the nod for CAN-ONE BHD [] to buy the 32.9 pct stake of KJCF.

Can-One said on Wednesday it was informed by its solicitors that Datuk See Teow Chuan and the 13 other applicants had applied for the Federal Court order dated Jan 5, 2010 be reviewed and set aside.

It said its solicitors had on Monday received two notices of motion and the affidavits in support from Messrs V K Lingam & Co, who is acting on behalf of See and the applicants.

The application was for the appeals to be re-heard by the Federal Court consisting of judges of the Federal Court other than those who heard and decided upon the appeals on Jan 5.

To recap, Can-One Bhd said on Jan 5 it had won the legal tussle to acquire the 146.13 million KJCF shares held by Kian Joo Holdings Sdn Bhd after a Federal Court ruled in its favour.

Can-One had then said the apex court had allowed its appeal to proceed with the completion of the acquisition of the 32.9% stake for RM241.11 million.

However, in the latest development, See and the 13 other applicants had sought to restrain Ooi Woon Chee and Ng Kim Tuck from distributing the RM241.11 million from the sale of the 146.13 million KJCF shares to Can-One International Sdn Bhd.

They also applied for Can-One International be restrained from selling and/or disposing of the whole or any part of the 146.13 KJCF shares purchased from Kian Joo Holdings Sdn Bhd pending the hearing and final disposal of the application.

Can-One said it would be opposing the applications and it was in the process of taking legal advice.

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GD Express 2Q net profit up 30% to RM2.11m

KUALA LUMPUR (Feb 15): GD EXPRESS CARRIER BHD [] net profit for the second quarter ended Dec 31, 2011 rose 30% to RM2.11 million from RM1.62 million a year earlier, due mainly to growth in customer base and increase in business from existing customers.

It said on Wednesday that revenue for the quarter rose 28% to RM29.87 million from RM23.33 million in 2010.

Earnings per share increased to 0.82 sen from 0.63 sen a year earlier, while net assets per share was 20 sen.

For the six months ended Dec 31, GD Express registered a 29% increase in net profit to RM3.68 million from RM2.86 million in 2010 on the back of a 25.73% rise in revenue to RM56.15 million from RM44.66 million.

Reviewing its performance, GD Express said the completion of its transshipment hub upgrading at the end of the preceding quarter was timely to support the increased business volume as the handling capacity was increased almost three fold.

The high capacity helped to overcome bottleneck in the operational process and thereby leading to improvement in service quality, it said.

The company said the improvement in its results was also due to higher business volume, in line with the seasonal factor in which the quarter was experiencing the year-end effect, which usually saw higher movement of goods and services, as well as better cost control.

On its outlook, GD Express said it expects the domestic economy to remain healthy, with the implementation of various government initiatives.

“However, the Malaysia economy and the express carrier industry may face serious slow-down if the world economy situation deteriorate further.

“The group will continue to focus on its core business in improving service quality and gain greater trust from the customers,” it said.

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AirAsia planning low cost airline for Gulf region

DOHA (Feb 15): AIRASIA BHD [] is in talks to establish a low cost carrier serving the Gulf region, a market that is largely dominated by full service carriers, said its group CEO Tan Sri Tony Fernandes.

He said AirAsia could potentially tap the pilgrimage (umrah) and tourism markets within the Gulf Cooperation Council (GCC) countries.

"For the low cost carrier model in the Gulf, we really are creating new markets much like what Air Asia has done in Malaysia," Fernandes said after launching Tune Middle East in the Qatari capital here on Wednesday.

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Amway 4Q net profit rises 36% to RM24.93m

KUALA LUMPUR (Feb 15): Amway (Malaysia) Holdings Bhd net profit for the fourth quarter ended Dec 31, 2011 rose 36.1% to RM24.93 million from RM18.31 million a year earlier, due mainly to improved gross margin arising from the lower cost of products and lower operating expense.

Revenue for the quarter dipped marginally to RM182.37 million from RM184.10 million in 2010. Earnings per share rose to 15.15 sen from 11.14 sen in 2010, while net assets per share was RM1.17.

Amway declared a fourth interim single tier dividend of nine sen net per share for the financial year ended Dec 31, 2011, to be paid on March 30, 2012.

The company also announced that it was adopting a dividend payout ratio of no less than 80% of the company’s current year net earnings from the financial year 2012.

For the financial year ended Dec 31, Amway’s net profit was up 14.9% to RM89.99 million from RM78.32 million in 2010, while revenue rose to RM735.81 million from RM719.41 million.

Reviewing its performance, Amway said on Wednesday that its sales revenue recorded an increase of 2.3% for the year ended Dec 31, 2011due to aggressive sales and marketing programs to stimulate demand in support of Amway distributors’ retailing and sponsoring activities.

On its outlook, Amway said it expects to achieve single digit growth in sales revenue for the financial year in 2012 due to the continuous uncertainty in global economic outlook.

It said that the outlook was realistic based on current market conditions and currently available information.

“The target will be reviewed periodically by the board of directors and any subsequent changes will be conveyed to the market in accordance with Bursa Malaysia Securities Berhad Main Market Listing Requirements.

“The above is internal management target and is not an estimate, forecast or projection. In addition, this internal target has not been reviewed by our external auditors,” it said.

On its dividend policy, Amway said it would maintain the payout ratio of 80% subject to, amongst others, cash and distributable reserves available for the dividend payout.

“The board will reassess this dividend policy on an ongoing basis to ensure efficient distribution of dividends to shareholders and to ensure that the company’s dividend payment will continue to reflect the group’s underlying financial performance.

“Shareholders should note that this dividend policy describes the company’s present intention and shall not constitute legally binding obligations with respect to the company’s dividends which may be subject to modifications at the board’s discretion,” it said.

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Market Commentary

The FBM KLCI index lost 4.75 points or 0.30% on Wednesday. The Finance Index fell 0.34% to 13854.79 points, the Properties Index up 0.29% to 1054.21 points and the Plantation Index down 0.21% to 8863.22 points. The market traded within a range of 8.11 points between an intra-day high of 1566.66 and a low of 1558.55 during the session.

Actively traded stocks include NICORP, TMS, DATAPRP, COMPUGT, TIGER, PERISAI, EMICO, HIBISCS-WA, SAAG and KHSB. Trading volume decreased to 2309.57 mil shares worth RM2145.93 mil as compared to Tuesday’s 2546.67 mil shares worth RM2258.05 mil.

Leading Movers were DIGI (+6 sen to RM4.16), BAT (+70 sen to RM52.48), MAYBANK (+1 sen to RM8.53), TM (+2 sen to RM4.83) and RHBCAP (+9 sen to RM7.37). Lagging Movers were IOICORP (-6 sen to RM5.43), PETDAG (-56 sen to RM18.22), SIME (-3 sen to RM9.61) and PETCHEM (-4 sen to RM6.94). Market breadth was positive with 433 gainers as compared to 385 losers. -- JF Apex Securities Bhd

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RHBCap stake up for sale again?

KUALA LUMPUR: Abu Dhabi’s state investment arm Aabar Investments is said to be finding a buyer for its 25% equity stake in RHB Capital Bhd (RHBCap) that it bought in June last year.

Citing sources familiar with the matter, Reuters reported yesterday that Aabar Investments is engaged in talks with Japan’s Sumitomo Mitsui Banking Corp (SMBC) to dispose of the shareholding in RHBCap.

To recap, Aabar Investments acquired the 25% stake from its sister company Abu Dhabi Commercial Bank (ADCB) for about RM5.9 billion, or RM10.80 per share.

The price valued the block of shares at 2.25 times price-to-book based on RHBCap’s net assets per share of RM4.79 as of March 2011.

However, RHBCap’s share price has declined since then. The banking stock tumbled to a low of RM6.53 in last October from the peak of RM9.98 in last June after both CIMB Group Holdings Bhd and Malayan Banking Bhd terminated merger talks with the group separately.

Based on yesterday’s closing price of RM7.28, Aabar Investments’ stake is worth about RM4.01 billion, nearly 33% below its investment cost of RM5.9 billion.

In terms of valuation, yesterday’s closing price valued RHBCap at 1.43 times book value and a price-earnings ratio (PER) of 10.29 times, against the group’s net assets per share of RM5.09 as of September 2011.

“It is the second cheapest bank in terms of PER and price-to-book valuation, which we believe is unreasonable given that the bank has consistently churned out mid-teen ROE (return on equity),” explained Cheah King Yoong, an analyst with Alliance Research.

Talk that SMBC, which has been issued a commercial banking licence by Bank Negara, is interested to take up an equity stake in RHBCap is not totally new in the industry.

Back in 2007, there was already market talk that the Japanese financial group was eyeing RHBCap to expand its local presence.

“It doesn’t make sense (for Aabar Investments) to sell now as the market price is substantially lower than the price it paid a year ago,” said an analyst.

At face value, Aabar Investments’ loss will be roughly a third of its RM5.9 billion investment, or about RM2 billion based on the three-month volume weighted average price of RM7.16.

In fact, the loss incurred could be even bigger, after taking into account financing costs as Aabar Investments is believed to have taken a loan to finance the share purchase, said analysts.

However, the government of Abu Dhabi, which is the ultimate owner of both Aabar Investments and ADCB, may be willing to hive off the stake held by Aabar Investments at a price below RM10.80 per share.

The share purchase was indeed a left hand to right hand transaction.

Many have viewed Aabar Investments’ share purchase — undertaken when both Maybank and CIMB were keen to merge with RHBCap — as setting a benchmark price-tag for the eventual sale to Maybank or CIMB. However the sale did not take place.

From the Abu Dhabi government’s perspective, the investment costs of RHBCap would just be the price of RM7.20 that ADCB paid in 2008.

Furthermore, the Abu Dhabi government owns a 95.23% equity stake in Aabar Investments, compared with its 64.8% shareholding in ADCB.

Hence, it would be easier for the government to push through the share sale. There are less minorities in Aabar compared with ADCB to account to.

While Aabar Investments may be willing to settle for a price lower than RM10.80, it should be noted that RHBCap’s current share price is near its cost of RM7.20.

In terms of timing, some quarters may wonder why SMBC would want to buy a stake in RHBCap now when the latter is still ironing out the terms for its merger with OSK Holdings Bhd’s investment banking division.

New shares might be issued for the merger exercise that could dilute Aabar Investments’ 25% stake. It is already known that the merger could be a share swap deal, although the pricing and terms are still being discussed.

“A buyer would have to have in-depth knowledge of the RHB-OSK merger to take up the 25% stake, otherwise there is too much uncertainty,” noted one analyst.

Prospective suitors for the 25% stake will be drawn to RHBCap’s relatively cheap valuations and strategic positioning in Malaysia.

However, they will also have to be cautious of the uncertainty following the RHB-OSK merger which could see shareholding dilution.

“OSK Holdings’ team, under Ong Leong Huat, is widely tipped to run RHBCap’s merged investment banking business. However, RHBCap’s existing management, under Kellee Kam, has already been running the group well and rejuvenating it over the last few years ... so where does that leave SMBC? Will it be just a passive shareholder?,” an analyst posed the question.

Still, Alliance’s Cheah sees RHBCap as an attractive merger and acquisition play, more so since he thinks the top three banks, Maybank, CIMB and Public Bank, are unlikely to be up for sale.

“Besides the potential synergistic benefits that could arise from this upcoming merger deal between RHBCap and OSK Holdings, the merger exercise will leapfrog its scale and increase its appeal to potential suitor significantly,” said Cheah.

Cheah highlighted that following the merger, RHB-OSK will be the largest securities firm in Malaysia and the fourth largest bank.

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LCI snaps two-day winning streak as select blue chips weigh

KUALA LUMPUR (Feb 15): The FBM KLCI snapped its two-day winning streak and closed lower on Wednesday, lagging its regional peers, weighed by losses at select blue chips.

The FBM KLCI fell 4.75 points to 1,561.30.

Gainers led losers by 433 to 385, while 346 counters traded unchanged. Volume was 2.31 billion shares valued at RM2.15 billion.

Meanwhile, regional markets rose on Wednesday as investors hoped Greece would deliver on a commitment to enact harsh reforms, while comments from China's central bank governor saying Beijing would continue to invest in euro zone government debt aided sentiment, according to Reuters.

Asian shares, including Shanghai, Hong Kong and Japan, also broke through key technical resistances, after Zhou Xiaochuan said Beijing remains confident in the euro and in the ability of euro zone members to solve their debt problems, it said.

The Shanghai Composite Index gained 0.94% to 2,366.70, Hong Kong’s Hang Seng Index added 2.14% to 21,365.23, Japan’s Nikkei 225 rose 2.30% to 9,260.34, Taiwan’s Taiex was up 1.54% to 8,005.24, South Korea’s Kospi added 1.13% to 2,025.32 while Singapore’s Straits Times Index added 0.81% to 3,011.68.

On Bursa Malaysia, Petronas Dagangan was the top loser and fell 56 sen to RM18.22; Hartalega lost 34 sen to RM7.92, Aeon 15 sen to RM7.70, Kossan and Carlsberg down 11 sen each to RM3.44 and RM9.45, Petronas Gas 10 sen to RM16.64, while Nestle, IGB, Hong Leong Bank and KLK fell eight sen each to RM55.40, RM2.67, RM11.62 and RM25.38 respectively.

Naim Indah Corp was the most actively traded counter with 268.3 million shares done. The stock rose four sen to 52 sen.

Other actives included TMS, Dataprep, Compugates, Tiger Synergy, Perisai, Emico, SAAG and KHSB.

Among the gainers, BAT added 70 sen to RM52.48, Amtek 27 sen to 50 sen, Kim Hin, SPB and Lafarge Malayan Cement up 16 sen each to RM1.44, RM3.74 and RM7.08 respectively, TSM 15 sen to RM1.47, while SapuraCrest added 12 sen to RM5.05.

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Interest may return to HDD component makers

KUALA LUMPUR: Investing interest may return to smaller hard disk drive (HDD) component makers after recent earnings results from JCY International Bhd, as well as Western Digital Corp and Seagate Technology in the US topped analysts’ expectations, implying a more positive outlook on the sector.

Ironically, the devastating floods in Thailand which disrupted the global supply chain of HDDs have created an opportunity for the industry. From excess inventory and falling prices amid keen competition from existing players and the threat of solid state drives (SSD), the HDD industry is now witnessing supply shortages and higher prices. Companies like Dufu Technology Corp Bhd, Eng Teknologi Holdings Bhd (EngTek) and Notion VTec Bhd, which supply smaller HDD components that benefited less after the Thai floods, may see investor interest return as the outlook on the sector improves. However, analysts also note that they are unlikely to see a large increase in profit on a scale similar to JCY.

JCY reported a 20-fold increase in net profit to RM162.45 million for 1QFY12 ended Dec 31, from RM7.5 million a year earlier. Revenue also grew 27% to RM559.04 million from RM438.9 million. Its share price has risen 18% year-to-date (YTD).

Apart from the Thai floods which inundated the factories of other competitors, JCY finance director James Wong cited internal measures to increase output and reduce costs as a contributor to its performance.

“If the floods did not happen, I think we could have recorded 50% of our net profit for the quarter due to our internal efficient cost measures,” Wong told The Edge Financial Daily.

Industry observers attributed JCY’s commendable performance to its ability to capitalise on the supply chain disruption which saw demand for two of the larger HDD component parts — base plates and actuators — spike as their manufacturers in Thailand were flooded.

JCY, which supplies to Seagate and Western Digital, was able to secure contracts for these larger components at relatively high prices.

Be that as it may, positive earnings announcements at the end of last month by Seagate and Western Digital, which reported “substantial progress” in the recovery from the flooding, suggest the outlook for the industry is improving.

Seagate’s share price has risen 62% and Western Digital’s 26% YTD. Unlike Western Digital, Seagate was not directly affected by the floods and saw its profit surge as HDD prices increased. Seagate managed to quadruple its net profit to US$563 million (RM1.7 billion) for the quarter ended Dec 30, 2011 on the back of increased revenue of US$3.2 billion. Although hit by the floods, Western Digital’s earnings fell but were still better than expected.

In a statement on Jan 23, Western Digital president and CEO John Coyne said supply remained significantly constrained, adding that this will persist throughout 2012 with improvement during the year.

EngTek, Notion VTec and Dufu will announce earnings results in the next few weeks. Notion will announce its results on Feb 20, while EngTek traditionally releases its results in the third week of February and Dufu the fourth. YTD, Notion’s shares are up 15%, while Dufu has risen 4.5% and Engtek 8.2%.

In an announcement to Bursa Malaysia last Friday, Notion VTec updated its progress on the cleaning up of its Ayutthaya, Thailand, plant and indicated confidence in its prospects for the year.

“The Group’s business outlook has turned for the better with a strong recovery in January 2012 sales to much higher than pre-flood levels. The trend is expected to be upwards for the remainder of the financial year ending Sept 30 and beyond, as the HDD segment is expected to be in short supply until mid-2013 due to a backlog of orders,” it said.

“The average selling price of HDD is expected to remain above pre-flood levels for multi-quarters ahead,” Notion said.

“With the entrance of three new major Japanese customers in the HDD segment and the ramp-up in HDD component sales, we expect FY2012’s revenue to grow in strong double digits over FY11. The sustainability of this new business is expected to be good as the customers’ commitment is assumed to be long term,” it added.

The group expects camera orders to remain robust from this month as the camera segment is expected to be en route to full pre-flood operations by March, while its auto and industrial segment remains stable.

This article appeared in The Edge Financial Daily, February 15, 2012.

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China-based shoe stocks continue to rally

KUALA LUMPUR: China-based shoe stocks on Bursa Malaysia continued their uptrend for the second day yesterday as investor sentiment improved towards the sector.

The rally follows a comprehensive three-page report by The Edge Financial Daily on Monday, highlighting the attractive valuations of all five China-based shoe companies listed here.

The Edge Financial Daily had highlighted that all five counters were trading at large discounts to book value and at price-to-earnings ratios (PERs) of around two times, based on last Friday’s closing prices. They were all in a net cash position and their earnings have grown impressively from 2006 to 2010.

Another potential re-rating catalyst, the report argued, was the recent listing of two Chinese companies in Hong Kong — China Outfitters Holdings Ltd (COH) and Active Group Holdings Ltd (AGH).

Listed in the fourth quarter of 2011, the two Hong Kong-listed stocks are trading at a PER of about three times more than their Malaysian-listed peers, which were trading at a PER of just over two times, according to Bloomberg data.

Over the last two days, all five China-based shoe stocks have chalked up total gains ranging from 3.8% to 12.5%.

K-Star Sports Ltd was the top performer, with a two-day total gain of 12.5%, followed by Maxwell International Holdings Bhd with 9.6%, XiDeLang Holdings Ltd (XDL) with 5.4%, Xingquan International Sports Holdings Ltd with 5.3% and Multisports Holdings Ltd with 3.8%.

On Monday, K-Star climbed 5.4% or 1.5 sen to close at 29.5 sen on a volume of 3.6 million shares. The stock gained another two sen or 6.8% to close at 31.5 sen with volume surging to 17.94 million shares.

The company’s book value stood at 85 sen as at Sept 30, 2011.

Maxwell gained the most on Monday, up 9.6% or four sen to close at 45.5 sen with 1.43 million shares changing hands. The stock ended unchanged yesterday with 954,100 shares traded.

Maxwell is still trading below its end-September 2011 net cash per share and book value of 48 sen and 73 sen respectively.

XDL saw its trading volume surge yesterday to 16.4 million shares from 6.18 million shares on Monday. After gaining 4% or 1.5 sen to 38.5 sen on Monday, it added another 0.5 sen or 1.3% to close at 39 sen yesterday. Its book value was 73 sen as at end-September 2011.

Xingquan, the first China-based company listed here, also enjoyed a two-day rally.

The stock closed 1.6% or 1.5 sen higher at 96.5 sen on Monday, and added another 3.5 sen or 3.6% to close at RM1 yesterday.

Trading volume increased from 902,500 shares on Monday to 1.6 million shares yesterday. Its book value was RM1.69 as at end-Sept ember last year.

Multisports Holdings Ltd had climbed 1.3% or 0.5 sen to close at 40.5 sen on a volume of 656,000 on Monday.

Yesterday, the stock added another one sen or 2.5% to close at 41.5 sen, with volume increasing to five million shares.

Multisports’ book value stood at 85 sen at end-September 2011.

This article appeared in The Edge Financial Daily, February 15, 2012.

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AMMB’s 3Q results within expectations

PETALING JAYA: AMMB Holdings Bhd (AMMB) posted a net profit of RM357.18 million for 3QFY12 ended Dec 31, 2011, up 9.8% over the previous corresponding quarter. The group’s revenue was higher at RM1.96 billion during the quarter, compared with RM1.82 billion previously.

This is the group’s 19th consecutive quarter of profit growth. However, analysts who track the banking group said the latest quarterly earnings numbers are pretty much in line with market consensus.

“There is no surprise to the market,” said Alliance Research analyst Cheah King Yoong, adding that AMMB’s results continued to be supported by strong growth in non-interest income, stabilised net interest margin (NIM) and improving loan quality that resulted in lower loan loss charged.

For the nine-month period ended Dec 31, AMMB recorded an increase of 13.8% on net profit to RM1.17 billion above the same period last year.

AMMB said the double-digit growth of the group’s 9MFY12 earnings was driven by growth across most divisions, with the retail banking division leading the contributions.

The division recorded RM433.6 million in profit after tax (PAT), an increase of 3.6% from the same period last year, driven by lower impairments of non-performing loans.

Cheah Tek Kuang: We will continue with our disciplined execution of strategic priorities.

Most other divisions also recorded double-digit growth rates in net profit. The markets division’s — which involves Treasury business and trading of bonds — net profit jumped by 51.3% year-on-year (y-o-y) to RM235.1 million, while the corporate and institutional banking division recorded 35.5% growth in net profit to RM186.7 million.

Net profit for business banking increased by 17.8% to RM158.9 million, with higher income growth of 20.5% from diversified growth in asset base and strong fee income, according to the group’s statement. The investment banking division recorded a net profit of RM116.2 million, an increase of 29% over the year.

The general insurance division recorded RM64 million in PAT, a 38.7% increase over the year, driven by better underwriting profits and lower claims, the group stated. General insurance fund assets increased by 10.2% while the claim ratio continues to improve, it said.

However, PAT for the life insurance division dropped by 18.2% y-o-y to RM42.2 million, pending stabilisation of business model refinements focusing on bancassurance business growth initiatives, better performing agencies and infrastructure improvements, the group said.

“Net interest margin improved quarter on quarter while the non-retail segment drove loans growth. We continue to strategically grow our Casa (current account savings account), alongside diversifying our overall funding profile which includes stable funds such as senior notes, medium-term notes and sukuk funding programmes,” said Cheah Tek Kuang, group managing director of AMMB in the statement.

According to Keith Wee of OSK Investment Research, although the group’s annualised loan growth at 5.6% y-o-y is slightly below the research firm’s target of 8% growth y-o-y, AMMB’s focus is on profitability rather than volume growth.

This strategy has paid off, reflected by improvement in the quarterly NIM to 2.85% in 3QFY12 compared with 2.71% in 2QFY12, he added.

For FY12, the group will remain cautious in the short term. “We will continue with our disciplined execution of strategic priorities but remain cautious of short-term downside risks,” said AMMB’s Cheah.

AMMB’s share price traded one sen higher to RM6.12 yesterday with just over three million shares traded. Year-to-date, the stock has increased by 5.5% from RM5.80 on Jan 3. For the 52-week period since Feb 14, 2011, it has dropped by 2.4% from RM6.27.

This article appeared in The Edge Financial Daily, February 15, 2012.

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Dialog’s 2Q earnings up 15%

PETALING JAYA: Dialog Group Bhd’s net profit rose 15.2% to RM41.5 million for 2QFY12 ended Dec 31, on a 34% increase in revenue of RM358.6 million during the quarter.

The higher earnings were mainly due to the consolidation of the revenue of the newly acquired fabrication and multi-disciplined engineering company, New Zealand-based Fitzroy Engineering Group Ltd. For 6MFY12 ended Dec 31, 2011, revenue from its operation in Australia and New Zealand was RM142.2 million, or 20% of the group’s total revenue during the period.

“Contribution from Malaysia and Asia operations such as Brunei, Thailand, Oman and China, also increased significantly, mainly due to higher revenue of specialist products and services. The Singapore operation, however, registered lower revenue mainly due to fewer jobs undertaken by its engineering and construction and plant maintenance [divisions],” the group said in the announcement.

For 6MFY12, revenue from its Malaysian operation stood at RM316.9 million with an operating profit of RM90.2 million, while revenue from Singapore stood at RM57.2 million and an operating profit of RM11.3 million. Operating profit from Australia and New Zealand was at RM5.5 million, on the back of RM142.2 million of revenue, while profit from other parts of Asia was RM2.4 million against RM193.7 million in revenue.

On current year prospects, Dialog said the development of the oil and gas (O&G) industry under the Economic Transformation Programme (ETP) will generate tremendous opportunities for the local O&G players. It said that being an integrated technical service provider for the oil, gas and petrochemical industry, the group is poised to benefit from the opportunities.

“The ongoing expansion of tank terminals in Tanjung Langsat and the development of an independent deepwater terminal in Pengerang will not only bring in short- to medium-term contribution from engineering and construction in Malaysia, but also long-term recurring income when the tank facilities are operational.

“In addition, the group is investing in upstream oil and gas opportunities, including the development and production of petroleum under the small field risk service contract (SFRSC). The group continues to grow its technical services, such as its specialist products and services, engineering, procurement, commissioning and construction and plant maintenance services,” it said.

Dialog’s share price traded one sen lower yesterday at RM2.44, with only 5.9 million shares traded. Year-to-date, the stock has risen by 1.73% from RM2.39 on Jan 3, 2012, while it has risen by 27.28% in the 52 weeks from RM1.91 on Feb 14, 2011. The stock declined to RM1.74 in September last year and has since climbed nearly 40%.

This article appeared in The Edge Financial Daily, February 15, 2012.

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Hap Seng group post strong full-year profit

KUALA LUMPUR: Hap Seng Consolidated Bhd posted a marginal year-on-year (y-o-y) increase in profit in its 4QFY11 results, while its listed plantation arm, Hap Seng Plantations Holdings Bhd saw a slight decrease, according to announcements made to Bursa Malaysia yesterday. Both companies chalked up strong double-digit growth in profit for FY11 ended Dec 31, sending their share prices to 52-week highs.

Hap Seng Consolidated posted a 20.6% y-o-y increase in its FY11 net profit, rising to RM493.13 million from RM409.05 million, with earnings per share of 18.85 sen. Hap Seng Plantations’ net profit grew 49.6%, from RM169.11 million to RM252.97 million, or 31.62 sen per share.

For 4QFY11, Hap Seng Consolidated posted a net profit of RM136.5 million, 4.28% y-o-y higher than its 4QFY10 net profit of RM130.89 million. On a quarter-on-quarter basis, net profit improved 49.75% from RM91.15 million in 3QFY11.

The diversified company’s 4Q revenue increased 20.2% to RM974.64 million from RM810.89 million. It attributed the higher revenue to growth in all divisions except for property, which posted a 10% y-o-y decline in revenue due to lower project sales due to the timing of completion of its existing projects in Sabah and Sarawak.

“Group operating profit for the current quarter at RM191.3 million was 4% higher y-o-y, with improved contributions from the property, credit financing and automotive divisions,” it said.

The group’s listed plantation arm, Hap Seng Plantations, posted net profit of RM53.07 million for the latest quarter, a 2.9% y-o-y decline from RM54.64 million last year, which it attributed to higher production costs. Its revenue increased marginally by 2.3% y-o-y to RM161.02 million from RM157.43 million.

Despite recording higher crude palm oil sales of 46,238 tonnes and higher CPO selling prices of RM2,977 per tonne compared with last year’s RM2,843 per tonne, the gains were affected by lower palm kernel sales. Both companies announced second interim dividends, 10 sen for Hap Seng Plantations and 4.7 sen for Hap Seng Consolidated.

Hap Seng Consolidated and Hap Seng Plantations each closed one sen higher at RM3.05 and RM1.68, respectively. Their trading volume stood at 985,400 shares and 1.5 million shares.

This article appeared in The Edge Financial Daily, February 15, 2012.

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Xingquan to maintain double-digit growth

KUALA LUMPUR: China-based shoe manufacturer Xingquan International Sports Holdings Ltd’s CEO Wu Qingquan believes the company can maintain its double-digit growth for FY12 ending June 30.

From 2006 to 2011 the company had chalked up a compound annual growth rate of around 39% for both revenue and net profit.

Xingquan, through its wholly-owned subsidiaries in China, is principally engaged in the manufacturing of shoe soles and shoes, and the sale of shoe soles, shoes, apparel and accessories.

An own brand manufacturer (OBM), its shoes, apparel and accessories are sold under its own brand Gertop in the outdoor casual wear segment in over 2,300 outlets via 31 distributors in 26 provinces in China.

Subsequent to Xingquan’s listing on Bursa Malaysia on July 10, 2009, four more China-based shoe companies were also listed, with the latest being Maxwell International Holdings Bhd on Jan 6 , 2011.

Despite its sound fundamentals, Xingquan — like the other China-based shoe companies listed on Bursa Malaysia — has seen steep declines in its share price due to the negative perception of Chinese companies listed on overseas exchanges.

Wu posing with some of the shoes produced by Xingquan.

However, as a result of the double-digit growth and undemanding fundamentals shown by Xinquan and the other China-based shoe companies listed on Bursa, hopefully, investors will have a change of heart, Wu told The Edge Financial Daily.

“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,” Wu told pressmen after the company’s recent AGM.

It appears investors are starting to take a second look at the sector.

Xingquan rose 3.5 sen to RM1 yesterday, and with Monday’s 1.5 sen rise, its share price has risen 5.3% in the last two days.

On Monday The Edge Financial Daily highlighted in a report the attractive valuations of the five China-based shoe companies.

At the closing price of RM1 yesterday, Xingquan is trading at a 40.8% discount to its end-September book value of RM1.69 and 15.3% below its net cash per share of RM1.18.

Its stock has been battered down by 41.5% from its IPO price of RM1.71.

Wu said Xingquan should be able to main its double-digit growth for FY12 as it has received a 10.7% increase in orders, amounting to 670 million yuan (RM329.64 million), from its 2012 spring/summer sales fair.

Xingquan finished its first quarter of FY12 (ended Sept 30) well, posting a 25.4% increase in net profit to 70.21 million yuan from 56.01 million yuan a year ago, on a 26.8% increase in revenue to 426.3 million yuan from 336.09 million yuan previously.

For FY11, it posted a 16% increase in net profit to 252.29 million yuan from 217.27 million yuan for FY10, while its revenue increased by 22% to 1.497 billion yuan from 1.23 billion yuan previously.

Xingquan’s point of sales (POS) or sales outlets for its Gertop products has increased to 2,382 in FY11 from 409 in FY06.

Wu said the immediate target is to add 200 sales outlets across the 26 provinces in China in FY12.

He said Xingquan does not actually own the outlets, but helps establish them by providing subsidies.

Xingquan will spend about 25 million yuan in subsidies for the 200 new sales outlets, he said.

Wu said Xingquan outsources the manufacturing of its outdoor apparel products. At the moment, Xingquan does not have plans to start its own manufacturing of outdoor apparel products, he said.

For shoe soles, Xingquan has a production capacity of 24 million pairs per annum which will be expanded to around 30 million pairs in FY12, according to Wu.

For shoes, Xingquan’s current production capacity is around six million pairs, he said.

Moving forward, Wu expects its apparel division to be the main driver of revenue.

“People would rather spend more on apparel than on shoes,” he said.

In recent years, Xingquan made a switch in products from outdoor sportswear to outdoor casual wear.

When Xingquan was in the outdoor sportswear market, it was not among the top 10 most popular brands in China, Wu said. But now the Gertop brand (launched in 2010) is among the top three most popular outdoor casual wear brands in China.

Its competitors include Camel, Jeep and Timberland, he said.

“We have first mover advantage in the outdoor casual wear segment,” said Wu, adding that there are not many players in the market.

According to Wu, the outdoor casual wear market is a young industry and has better growth in average selling price (ASP) compared to the outdoor sportswear market.

Xingquan’s ASP for apparel (per piece) has increased 35.4% to 90.3 yuan in FY11 from 66.7 yuan in FY10. Wu said the increase in ASP mainly came from branding initiatives.

Xingquan said the outdoor casual wear market is estimated to be worth at least 27 billion yuan in 2010 based on research by Converging Knowledge Pte Ltd which said this market is expected to grow at an annual growth rate of 30% for 2011 and 2012, and subsequently slow down to 20% in 2013. Based on this growth projection, the market may reach 55 billion yuan by 2013.

Wu said by CY2012, its apparel segment will most likely contribute more revenue than its shoe segment.

In FY11, shoes accounted for most of Xingquan’s revenue (49%), followed by the apparel and accessories segment (33%) and soles (19%). However, for 1QFY12, its apparel and accessories segment contributed 39% to revenue compared to shoes (37%) and soles (24%).

Xingquan did not declare any dividend payment in FY11. For FY12, Wu said dividends will depend on the cashflow position of the company.

This article appeared in The Edge Financial Daily, February 15, 2012.

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Is it worth taking a bet on Maxwell?

Shares in Maxwell International Holdings (43 sen) have not fared well in the year since listing on the Main Market. The stock hit a high of 56 sen in the week of its debut in early January 2011, but has since then seen waning investor interest. The stock fell to as low as 30 sen in July. Despite clawing back some lost ground in recent months, Maxwell shares remain well below the initial public offering price of 54 sen.

We believe the poor sentiment has less to do with Maxwell’s underlying fundamentals than it does with the negative perception surrounding all China-based companies listed on Bursa Malaysia. Even though most of have not disappointed earnings-wise, investors are leery of their reported numbers.

This negative perception can be attributed to news reports of financial irregularities and corporate governance issues in Chinese companies listed overseas, including those in neighbouring Singapore and most recently in the US.

It may not be quite fair to tar all the Bursa-listed Chinese companies with the same brush. Indeed, accounting irregularities and corporate governance issues are not exclusive to any particular class of companies. There have been ample such cases involving local companies, including more than a few investor darlings of yesteryear.

Re-rating from prevailing low valuations?
Maxwell shares are currently trading at an estimated forward price-earnings ratio (PER) of just about 4.3 times. Its share price is also well below the company’s net assets per share of 73 sen as at end-September 2011. This is including net cash of RM193.1 million, equivalent to 48 sen per share.

In addition, Maxwell intends to pay some 20% of its annual net profit as dividends. Based on our forecast, dividends are estimated to total roughly 3.5 sen per share for 2011, up from 3.35 sen per share in 2010. That would give shareholders a higher than market average net yield of 8.1% at the prevailing share price.

Such valuations would appear to provide a compelling case for further gains. The company’s executive chairman and major shareholder Li Kwai Chun has raised her stake to about 57.7%, up from 54.6% during the IPO.

Still, it remains to be seen if valuations and/or a longer track record will change investors’ perception and bring about an upward re-rating for the stock. Only time will tell.

Proven underlying business model
Operations-wise, Maxwell’s business model as OEM (original equipment manufacturer) and ODM (original design manufacturer) for primarily court sports shoes has been quite successful. The company’s net profit grew at a compound annual rate of nearly 53% from 2007 to 2010.

In recent years, major brand owners have shifted their focus to research and development as well as sales, marketing and distribution while outsourcing the manufacturing activities to third parties. This trend is likely to continue. As an ODM, Maxwell is able to provide greater value-added services to customers.

Currently, about half of its manufactured products are based on in-house designs.

The majority of Maxwell’s customers are trading houses and brand distributors, who in turn service a wide range of international brand names including Yonex, Diadora, Kappa, Hush Puppies, Brooks, FILA and most recently Li Ning.

Although Maxwell manufactures on a short-term contract basis, most of its customers are in fact repeat customers. The bulk of the company’s end products are ultimately exported to the rest of the world, where demand is expected to keep growing.

Case in point, few consumers own just one pair of shoes, which are considered now less a necessity and more an accessory and fashion statement. Consumers are, however, fickle. And fast-changing consumer preference is among the biggest threats for any brand name.

But as an OEM, Maxwell is buffered against such risks. It also does not have to spend on building and marketing its own brand name. Maxwell earns a manufacturing margin by pricing its products on a cost plus basis.

All in all, this business model has enabled the company to maintain pretty good margins and returns on assets over the years.

We estimate net profit at roughly RM69.3 million for 2011, including RM2.5 million in one-off listing expenses, up some 6% year-on-year. Earnings are forecast to expand further to RM81.5 million in the current year. Net margin is estimated at roughly 18% to 19% while the average return on assets for the two years is estimated at about 26.3%.

Putting cash to better use
Maxwell is sitting on net cash totalling some RM193.1 million, almost all of which is earning marginal interest income from bank deposits. The company expects to distribute about 20% of its annual net earnings as dividends — estimated to total some RM30 million for 2011/12. It intends to reinvest the bulk of the remaining cash.

The company is planning to double its production capacity, from the current eight million shoe pairs per year as well as to expand its in-house design division. At the moment, the company outsources about half of its orders to smaller contract manufacturers.

Outsourcing gives it greater flexibility to cope with surges in orders while limiting the downside risks, in terms of fixed overheads and salaries, on unexpected demand drops. Margins for both in-house production and outsource are about the same.

Elsewhere, Maxwell is in negotiations to acquire a sportswear apparel company based in Hong Kong. The acquisition will change the company’s scope of operations, expanding its product range to include its own apparel brand name and diversifying into the downstream retail business. This would also change the overall risks for the company.

On the other hand, contributions from the acquisition will provide an immediate boost to its earnings, compared with prevailing low interest income, and raise the company’s overall return on assets. Based on its existing operations, the stock is trading at just about 4.3 times our forecast earnings for 2012.

Successful completion of the proposed acquisition would drive valuations even lower, although this would likely entail higher earnings risks.

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 15, 2012.

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Funding scenarios for West Coast Expressway

IJM Corp Bhd (Feb 14, RM5.95)
Maintain buy with unchanged sum-of-parts-derived fair value of RM7.23 per share: In this report, we examine three possible funding scenarios for the West Coast Expressway (WCE).

A key focus of the WCE is on its funding requirements after IJM’s 23%-owned associate Kumpulan Europlus (KEuro) received approval-in-principle to privatise the highway via the latter’s 64%-owned unit West Coast Expressway Sdn Bhd just last month.

Assuming a debt/equity ratio of 70:30, we estimate that the equity portion for the WCE may reach RM2 billion.

Its equity needs may appear huge compared to KEuro’s market capitalisation of only about RM669 million.

Furthermore, KEuro remains relatively highly leveraged with a net gearing ratio of around 1.1 times as at Oct 31 last year compared with 3.4 times a year ago.

By extension, this has given rise to market postulation of the potential involvement of other parties to help bridge the funding gap of WCE, including IJM.

Three possible financing scenarios are: (i) IJM increases its current stake of 23% in KEuro; (ii) IJM owns a direct stake in the highway itself; and (iii) the entry of select cornerstone investors in the project, including government-related entities.

In our view, scenario one is unlikely to materialise as such a move would likely trigger a general offer on KEuro and may undermine IJM’s balance sheet if the former’s debts are subsequently consolidated at IJM group level.

We believe option two and/or three could emerge as realistic choices. Under the first, IJM would help lend credence to the WCE and further solidify its bid for up to RM7 billion worth of associated construction works without the need to consolidate KEuro into its books.

The presence of strategic government-backed investors under scenario three would help plug the funding gap, possibly through the balance 36% share of WCE Sdn Bhd, where the identity of the stakeholder remains unknown at this juncture.

We expect the formalisation of a concession agreement for the WCE in a matter of weeks to boost IJM’s rising order book prospects, where the highway could present over RM4 billion of job opportunities to underpin the group’s RM8 billion to RM9 billion new contract target in 2012.

We also like IJM for its diversified earnings base. IJM Plantations (28% of FY12F group earnings) is on track to double its Indonesian plantation landbank to 40,000ha in three years. — AmResearch, Feb 14

This article appeared in The Edge Financial Daily, February 15, 2012.

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Another record year in the making for MCIL

Media Chinese International Ltd (Feb 14, RM1.19)
Maintain buy with fair value RM1.47: According to AC Nielsen’s latest published figures, newspaper advertising expenditure (adex) registered a commendable year-on-year (y-o-y) growth of 12.1% in 2011.

Other than Malay dailies which continued to make adex market share gains (33.4% y-o-y), Chinese dailies too chalked up a commendable y-o-y growth of 6.8%.

For 9MFY12, MCIL’s share of adex improved y-o-y by 8.8%, driven by its flagship Sin Chew Jit Poh publication where adex share went up by 7.14% y-o-y for 3QFY12 alone. On the other hand, management guided that its Hong Kong operation is likely to see improvements by leveraging on higher ad-dollars from the property segment.

As such, we believe the group is likely to record its best quarter ever in 3QFY12. Net profit is expected to come in at RM60 million, which represents a y-o-y growth of 10%.

Stepping into 4QFY12, we foresee that the group will continue to report healthy growth, on the back of aggressive advertising and promotion activities among hypermarkets and fast-moving consumer good companies during the Chinese New Year period in January 2012.

We expect the positive trend to persist going into FY13 as it pursues continuous efforts to better manage overhead and operating expenses.

In addition, newsprint prices, which are currently hovering at US$650 (RM1,982.50) to US$660 per tonne, are likely to remain stable. Upcoming major events, such as the impending general election, the 2012 Olympics and Euro 2012 football tournament will provide a potential boost.

We also see strength in its creatively bundled offerings, where MCIL organises crowd-pulling events for customers that advertise in its publications to increase the brand visibility of their products.

We feel positive that its 9MFY12 results will be at least in line with our forecasts in light of its resilient adex share in Malaysia and improvements in its Hong Kong operations, which made up 15% of the group’s earnings before interest and tax (Ebit).

We also believe the group will continue to reward its shareholders given its mounting cash pile, which stood at RM390.7 million as at September 2011.

Thus, we continue to impute a payout ratio of 60% for FY12, which translates into an appealing yield of 5.5%. Hence we maintain our “buy” call at an unchanged fair value of RM1.47, based on 13 times CY12 price-earnings ratio. We make no changes to our forecasts at this juncture, though an upside bias could likely be confirmed by its upcoming 3QFY12 results. — OSK Research, Feb 14

This article appeared in The Edge Financial Daily, February 15, 2012.

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Kencana Petroleum going the extra mile

Kencana Petroleum Bhd (Feb 14, RM3.16)
Maintain buy with revised target price of RM3.66 from RM3.65: Kencana remains our top conviction “buy” in the oil and gas sector for 2012.

On a stand-alone basis, Kencana is a stock with strong earnings visibility and offers the best exposure to Petroliam Nasional Bhd’s domestic capital expenditure programme in fabrication, drilling and marginal field/enhanced oil recovery (EOR) projects.

We believe Sapura Crest-Kencana Petroleum (Newco) is highly likely to be featured in the KLCI FBM 30 come the next revision in June 2012, a positive in our view, in drawing higher interest and ratings.

Our marginally revised target price of RM3.66 offers a 15% upside from current levels.

We believe Kencana could be a major winner of the Petronas jobs, ahead of its domestic peer Malaysia Marine and Heavy Engineering Holdings Bhd (“hold”, target price [TP]: RM5.70), for it has the advantage of having ample yard space to take up more jobs. It is in the enviable position of being able to clinch most of Petronas Carigali Bhd, Hess, Nippon Oil and Murphy’s platform projects. We estimate total domestic orders to be worth up to RM5 billion this year.

We project Kencana will secure RM2 billion in job wins (+100% year-on-year) in 2012.

Construction of two new tender-assisted rigs — estimated total cost of US$400 million (RM1.2 billion) — is underway, with delivery targeted in 4Q13 and 1Q14.

This is in anticipation of strong domestic drilling requirements in 2013/14. With a pick-up in the marginal fields/EOR programme, demand for floating solutions (mobile offshore production unit) is equally strong.

Kencana could capitalise on this, as it has secured two old jack-ups for conversion. The likelihood of securing contracts is high.

We have raised FY14 forecast by 8%, taking into account the partial contribution of the KM-2 rig. Stronger growth is visible from FY15 onwards, as Kencana will fully recognise contributions from two new rigs (KM-2, KM-3) and potentially two Mopus as well.

Meanwhile, the plan to list Newco is on track to meet the April deadline. Kencana shareholders will get 1.26 Newco shares plus 48.6 sen in cash for every share held. Based on our TP of RM2.52 for Newco (20 times 2013 earnings per share), we derive a TP of RM3.66 for Kencana. — Maybank IB Research, Feb 14

This article appeared in The Edge Financial Daily, February 15, 2012.

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Sarawak gas finds to spur new investments

Oil and gas sector
Maintain overweight: Petroliam Nasional Bhd (Petronas) has made two new big gas discoveries offshore Sarawak with estimated recoverable reserves of almost four trillion standard cubic feet (TSCF), an estimated 4% of Malaysia’s current natural gas reserves of 14.8 billion barrels of oil equivalent. The gas finds were at the Kasawari and NC8SW fields in Block SK316 off Sarawak, through exploration wells Kasawari-1 and NC8SW-1. These are the latest wells drilled in Block SK316 which are part of Petronas’ strategy to intensify domestic exploration and prolong its reserves.

The Kasawari-1 well was drilled last November and gas was found in the carbonate reservoirs. The well, drilled to a depth of 3,196m, penetrated about 1,000m of gas column — the longest drilled section of gas column in the country. The well test produced 29 million standard cu ft per day of gas. Preliminary assessments conducted early this month indicate that the gas-in-place for the Kasawari field is over five TSCF, with an estimated recoverable hydrocarbon resource of just over three TSCF — which is one of the largest non-associated gas fields in Malaysia. The NC8SW-1 well, located about 17km south of Kasawari, was drilled last September to a total depth of 3,853m. Gas was found in a 440m column in similar carbonate reservoirs, which are estimated to have recoverable reserves of over 450 billion standard cu ft. Petronas said the NC8SW-1 well discovered potential oil play which requires further evaluation to determine its commercial viability.

While these new gas finds would need another three to five years of analysis and interpretation of seismic data before progressing to the initial development phase, they continue to fuel excitement for oil and gas investments in Sarawak, a major gas producer and exporter with the country’s only liquefied natural gas plant in Bintulu.

Over the next 12 months, we expect Shell’s massive enhanced oil recovery projects in the Baram Delta off Sarawak to gain prominence. These projects involve the Bokor, Bakau, Baram, Baronia, Betty, Fairley Baram, Siwa, Tukau and West Lutong oilfields.

But over the next six months, we expect fresh news from Petronas’ RM15 billion fast-tracked programme to develop gas reserves from a cluster of fields in the North Malay basin, off Peninsular Malaysia. This project is expected to commence production towards the end of 2013. Initial beneficiaries of the North Malay basin development will be fabricators such as Malaysian Marine and Heavy Engineering Holdings Bhd (MMHE), Kencana Petroleum Bhd, SapuraCrest Petroliam Bhd and Dialog Group Bhd. UMW’s oil and gas division, which provides oil country tubular goods and pipelines and rig services, and Wah Seong Corp Bhd for gas compression modules and pipe-coating services, could likewise benefit.

We remain excited about the sector given Petronas’ massive capital expenditure programme of RM300 billion over the next five years involving enhanced oil recovery, marginal fields and cluster/deepwater developments towards maintaining its oil and gas production. We remain “overweight” on the sector and retain our “buy” calls on MMHE, Bumi Armada Bhd, Dialog, SapuraCrest, Kencana Petroleum and Petronas Gas Bhd. — AmResearch, Feb 14

This article appeared in The Edge Financial Daily, February 15, 2012.

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Bursa Securities queries The Media Shoppe over unusual mkt activity

KUALA LUMPUR (Feb 15): Bursa Malaysia Securities has queried THE MEDIA SHOPPE BHD [] over the unusual market activity in its shares.

At 4.49pm, TMS was up 0.5 sen to 13.5 sen with 142 million shares done

Bursa Securities said the query was over the sharp fall in price and high volume of the company’s shares recently.

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Tan Chong opens UD Trucks 3S in Ipoh

Tan Chong Industrial Equipment Sdn Bhd (TCIE), the sole distributor of UD Trucks in the country, has opened its first corporate identity UD Trucks 3S (sales, service and spare parts) centre in Malaysia, in Klebang here.

The RM8 million centre will serve the transportation needs of TCIE's customers in Perak and the Northern region. TCIE executive director Tan Keng Meng said the 3S centre would give the company a competitive edge in the Northern region, adding it expects to enjoy double-digit growth in sales of UD Trucks this year.

"The establishment of the new 3S centre further reaffirms the company's commitment and promise to their existing and potential customers to continously improve on their offering of quality products and services," he said in his speech at the opening of the centre today.

The centre was officially opened by Volvo Malaysia Sdn Bhd managing director Mansoor Ahmed. Tan said the centre would cater to TCIE's future business growth and expansion, and incorporate 16 service bays catering to about 26 Light and Heavy vehicles.

He said the company had also invested about RM1.2 million in new
state-of-the-art workshop equipment and tooling to ensure speedy quality servicing of vehicles for existing and potential customers.

The new facility offers extended hours and 24-hour breakdown support services. Moving forward, Tan said TCIE is exploring to expand the UD Trucks 3S centre network to Butterworth, Melaka and possibly in the East Coast in efforts to uplift the level of its services.

On the performance of trucking and bus industry in Malaysia, Tan said it sustained a marginal growth rate of almost three per cent last year with registered vehicle sales of 12,374 units compared to 12,018 units in 2010.

He said industry growth in the Northern region (covering Perlis, Penang, Kedah and Perak) remained constant, accounting for about 13.5 per cent of overall share market nationwide, with registered sales of 1,716 vehicles last year.

TCIE posted positive growth of 17 per cent for overall sales of its UD Trucks light commercial vehicles, heavy commercial vehicles and buses last year. -- Bernama

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KL shares lower at mid-afternoon

Finance and plantation-related counters contributed to the soft performance on Bursa Malaysia today with the FTSE Bursa Malaysia KLCI (FBM KLCI) easing 5.67 points to 1,560.38 as at 3.05pm, dealers said.

Hong Leong bank, Kuala Lumpur Kepong, IGB Corporation, United Plantations, IOI Corporation, Sime Darby and CIMB were among the stocks in losses.

Dealers said market players were cautious ahead of the release of the domestic economic growth data later today, contributing to the bearish performance against an improved market sentiment in the region.

Nevertheless, the market sentiment was more optimistic following a pledge from China to help resolve Europe's debt crisis. The Finance Index lost 51.66 points to 13,851.04, the Industrial Index declined 5.33 points to 2,906.77 and the Plantation Index decreased 20.31 points to 8,861.24.

The FBM Emas eased 30.29 points to 10,852.34, the FBM 70 Index dropped 5.21 points to 12,368.06 and the FBM Ace Index was 16.7 points lower at 4,687.3. Losers led gainers 395 to 329 while 353 counters were unchanged. Total volume was 1.392 billion shares worth RM1.099 billion.

Among active stocks, Dialog Group-WA rose 30.5 sen to 34.5 sen, Sapuracrest Petroleum and TSM Global each added 16 sen to RM5.09 and RM1.48 respectively.

Of the heavyweights, Maybank was unchanged at RM8.52, Sime Darby fell two sen to RM9.62, Petronas Chemicals slipped four sen to RM6.94 and CIMB slid one sen to RM7.30. -- Bernama

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Petronas restarts Melaka refinery

Petroliam Nasional Bhd, Malaysia’s state-owned oil company, restarted its Melaka refinery after a two-day planned shutdown, a company official said. -- Bloomberg

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Maybank unch, Indonesia scraps shareholding cap

KUALA LUMPUR (Feb 15): Shares of MALAYAN BANKING BHD [] (Maybank) were unchanged in late afternoon trade on Wednesday despite news that the Indonesian regulator had decided against a shareholding cap for its banks.

At 3.05pm, it was unchanged at RM8.52.

CIMB Equities Research said the latest development was not a total surprise but it was good news for selected Malaysian banks.

“Maybank will not have to cut its stake in BII (Bank Internasional Indonesia) while RHB and Affin can proceed with their investments in Indonesian banks. Contributions from Indonesia for the banks we cover are still small at about 2% of earnings.

“While this news lifts the shareholding fears, we are still worried about the impact of an economic slowdown this year. We remain Neutral, with Maybank staying as our top pick,” it said.

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S&P: Asia-Pacific banks capable of withstanding euro debt crisis

KUALA LUMPUR (Feb 15): Most of the rated Asia-Pacific banks are capable of withstanding pressures from the euro debt crisis at their current rating levels based on the sound financial profiles, says Standard & Poor’s Ratings Services.

“However, in the case of a more pronounced global economic slowdown, there could be increasing pressure on the banking sectors of some Asia-Pacific countries,” it said in a report on Wednesday.

S&P said under its base-case scenario and based on the assumption the global economy will avoid a severe recession; the Economic and Monetary Union will grow at an anemic 0.4% in 2012 and enter a mild recession; the U.S. economy will escape a recession; and China will manage to secure a soft landing with about 7.7%-8.0% growth in 2012.

The ratings agency said if the eurozone’s debt woes lead to a more severe global financial, it could lower its assessments of the banks, including those for their risk positions and capital and earnings.

S&P credit analyst Naoko Nemoto pointed out that considering the export-oriented structure of the Asia-Pacific region, a more pronounced global economic slowdown could have a larger impact on the region’s overall economy and the credit profile of the Asia-Pacific banking industry.

“Under this scenario, which differs from our base-case scenario, we would consider negative rating actions on the banking sectors of relevant Asia-Pacific countries,” she said.

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MESB mulls buying 3 apparel brands

Engineering services provider, MESB Bhd, is looking at the acquisition of three potential apparel brands to strengthen its retail business division.

Executive director Yam Kin Lum said the company had set aside RM5 million from the disposal of its telecommunication engineering company, Dynamic Communication Link Sdn Bhd, to grow its retail business over the next two years.

"We hope complete at least the acquisition of one brand in the current financial year ending March 31," he told reporters after the company's extraordinary general meeting (EGM) here today.

He said the new acquisition is expected to contribute 15 per cent to the company's revenue in the next financial year.

At the EGM, a majority of shareholders approved the selling of Dynamic Communication Link to Touch Mindscape Sdn Bhd for RM15 million.

Yam said the disposal of Dynamic Communication Link was in line with the company's current objective of focusing on the retail business.

The retail business provided strong earnings for MESB's turnover in the last financial year, contributing 65 per cent of the company's RM70 million revenue, he added.

He also said the company is open to any business opportunities and has set aside RM5 million to venture into new engineering segments.

On the outlook for the retail sector, he said MESB is cautiously optimistic over it this year, due to an expected general election.

"The rise in civil servants wages does give some breather to the industry as it is expected to increase domestic consumption," Yam added. -- Bernama

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Mulpha Intl to realise RM57.3m one-off gain from sale of HK firm

KUALA LUMPUR (Feb 15): MULPHA INTERNATIONAL BHD [] expects to record a one-off gain of about RM57.35 million from the sale of its 75% stake in Hong Kong listed Manta Holdings Company Ltd for HK$285 million (RM111.15 million).

Mulpha said on Wednesday its unit Jumbo Hill Group Ltd had on Tuesday entered into a sale and purchase agreement with Eagle Legend International Holdings Ltd to dispose of the stake, comprising of 150 million shares, at HK$1.90 a share.

At HK$1.90 a share, this is a premium of 13.1% over the closing price of Manta on the last practicable date of HK$1.68 and it higher than the 52-week trading range of between HK$1.15 and HK$1.89.

Manta’s core activities are rental and trading of tower cranes, CONSTRUCTION [] equipment and provision of maintenance services for tower cranes in Hong Kong, Macau, Singapore and Vietnam.

Mulpha said its carrying value of the investment in Manta as at Dec 31, 2011 was about RM48.24 million.

“The proposed disposal is in line with Mulpha International group’s strategy to dispose of its non-core assets and focus on its core business in property development and investment and property related business.

“The proposed disposal enable Mulpha International to realise its investment in Manta at an attractive valuation, the proceeds of which may be redeployed to the repayment of bank borrowings and/or working capital requirements of the Mulpha International group,” it said.

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SapuraCrest-Kencana merger may list in Mar

The proposed listing of a combined SapuraCrest and Kencana Petroleum Bhd in Malaysia has been delayed to end-March or early April, a source told Reuters on Wednesday.

The planned merger of the Malaysian oil and gas services firms, the largest in the Malaysian oil and gas sector, was scheduled to list the combined entity by end-February, but has been delayed because the companies are awaiting court approval on certain aspects of the deal.

“We are still waiting for the high court to approve some outstanding processes for the merger to go ahead,” said the source, who could not be identified because he is not authorised to speak to the media. - Reuters

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KL shares lower at midday

Weighed down by losses in selected key heavyweights including Petronas Gas, Hong Leong Bank, Petronas Dagangan and British American Tobacco, the FTSE Bursa Malaysia KLCI (FBM KLCI) remained in the red at midday today, dealers said.

At 12.30pm, the benchmark index declined 6.59 points to 1,559.46, after opening 0.61 of a point better at 1,566.66.

Dealers said the subdued market sentiment over uncertainties in the eurozone, and the fourth quarter 2011 gross domestic product report to be released later today, continued to weigh in on trading.

Losers led gainers 374 to 303 on Bursa Malaysia while turnover amounted to 1.070 billion shares worth RM826.885 million.

The Finance Index declined 66.25 points to 13,836.45, the Industrial Index slipped 7.85 points to 2,904.25 and the Plantation Index dropped 28.2 points to 8,852.75.

The FBM Emas Index eased 35.18 points to 10,847.45, the FBM Ace Index slipped 18.84 points to 4,685.16 and the FBM Mid 70 Index inched down 3.570 to 12,369.69.

Volume leaders, Dialog Group-WA gained 30 sen to 34 sen, TSM Global added 14 sen to RM1.46 and Hap Seng Plantations rose 12 sen to RM3.17.

Among heavyweights, Maybank was unchanged at RM8.52, Sime Darby and CIMB each lost three sen to RM9.61 and RM7.28 respectively, while Petronas Chemicals slid two sen to RM6.96. -- Bernama

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Banks, plantations drag KLCI at mid-day break

KUALA LUMPUR (Feb 15): The FBM KLCI remained in negative territory at the mid-day break on Wednesday, lagging key regional markets, weighed by losses at index-linked banking and PLANTATION [] counters.

The index fell 6.59 points to 1,559.46 at 12.30pm. Volume was 1.07 billion shares valued at RM826.89 million.

The ringgit strengthened 0.29% to 3.0368 versus the US dollar; crude palm oil futures for the third month delivery fell RM8 per tonne to RM3,198, crude oil gained 76 cents per barrel to US$101.50 while gold gained US$4.77 an ounce to US$1,724.95.

At the regional markets, Japan's Nikkei share average rallied more than 2% and the broader Topix rose above the 800 mark for the first time in six months on Wednesday after the Bank of Japan stepped up its asset buying programme the previous day, according to Reuters.

The Nikkei 225 rose 2.5% to 9,277.97, Hong Kong’s Hang Seng Index added 1.97% to 21,330.60, the Shanghai Composite Index gained 0.86% to 2,364.92, Taiwan’s Taiex rose 1.18% to 7,976.83, South Korea’s Kospi was up 0.97% to 2,022.07 and Singapore’s Straits Times Index added 0.71% to 3,008.63.

On Bursa Malaysia, Hartalega fell 32 sen to RM7.94, BAT down 28 sen to RM51.59, Petronas Dagangan lost 18 sen to RM18.60, Petronas Gas 12 sen to RM16.62, Warisan 10 sen to RM2.60 and Carlsberg nine sen to RM9.47.

Among banking stocks, Hong Leong Bank fell 10 sen to RM11.60, CIMB down three sen to RM7.28, HLFG two sen to RM11.64 while AMMB and Affin shed one sen each to RM6.11 and RM3.14.

Among the plantation counters, BLD Plantations lost 22 sen to RM10.02, United Plantations and KLK down eight sen each to RM22.30 and RM25.38, IOI Corp seven sen to RM5.42, PPB four sen to RM17.66 while Sime Darby shed three sen to RM9.61.

Naim Indah Corp was the most actively traded counter with 126.1 million shares done. The stock rose 2.5 sen to 50.5 sen.

Other actives included TMS, Dataprep, Perisai, Hibiscus, SAAG, Compugates and DBE Gurney.

Meanwhile, gainers included TSM, Hap Seng Plantations, Asdion, Shell, KYM, Inno, Jaya Tiasa, Apollo and Maybulk.

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AMMB shares edge down at noon

KUALA LUMPUR (Feb 15): AMMB HOLDINGS BHD [] shares edged down at noon on Wednesday after CIMB Research said the banking group’s 9MFY3/12 results revealed a weak underlying trend for the lending business as year-on-year loan growth was only 6.2% in Dec 2011 and NIM shrank y-o-y.

At 11.57am, AMMB shed one sen to RM6.11 with 768,300 shares traded.

AMMB posted net profit of RM357.18m for the third quarter ended Dec 31, 2011, up 9.8% from the RM325.31 million a year ago underpinned by profit growth across most divisions.

Its revenue increased 7.2% to RM1.955 billion from RM1.824 billion. Earnings per share were 11.95 sen compared with 10.83 sen.

For the nine-months ended Dec 31, 2011, its earnings increased by 13.8% to RM1.168 billion from RM1.026 billion in the previous corresponding period. Its revenue registered a 14% increase to RM6.047 billion from RM5.302 billion.

CIMB Research in a note Feb 15 said it deemed the results slightly disappointing as 9M net profit was 72% of its full-year forecast and 77% of consensus.

The research house said its FY12 net profit and target price (10% discount to DDM value) are trimmed as it lowered loan growth by 1 percentage point and lending yield by 5 basis points.

“We retain our Neutral call as the challenging lending environment will dilute the impact of the revamp,” it said.

“Despite the benefits of its continuing revamp and strong treasury income growth, we do not advise investors to accumulate the stock for a host of reasons – below-industry loan growth, y-o-y drop in margin and increased competition for the investment banking business. We prefer Maybank,” it said.

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HwangDBS keeps 'buy' call on Maybank

HwangDBS Vickers has raised its dividend expectations on Malayan Banking Bhd (Maybank) to 70 per cent from 60 per cent as it expects the bank to utilise its existing S108 tax credits before it expires.

In a note here today, the research house said the RM1.95 billion tax credit which expires in 2013, implied that Maybank could pay a dividend of up to RM7.8 billion without incurring an additional tax.

It said, the bank's growth in Singapore and Indonesia remained strong, recording last year a year-on-year (y-o-y) loan growth of 44.6 per cent and 28.8 per cent respectively, which is seen to be stronger than Malaysia's 18.6 per cent.

In addition, HwangDBS noted that Singapore and Indonesia contributed 14 per cent and six per cent respectively to Maybank's pre-tax profit.

Maybank has an advantage of leveraging on deposits franchise for transactional banking, given its high current and savings account base, which has a share of 36 per cent of the total deposits, it said.

"It is less susceptible to capital market weakness as over 50 per cent of its non-interest income is recurring, mainly from transaction banking activities," added HwangDBS.
Maybank remains its top pick for defensive qualities and highest dividend yields in the sector.

Meanwhile, the research firm has maintained a "buy" call on the bank with a RM10.60 target price. -- Bernama

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RCE jumps on bonus, rights issue plan

RCE Capital Bhd, a consumer-credit provider, advanced 5.8 per cent to 54.5 sen, bound for its highest close since July 7.

The company proposed a one-for-two bonus issue and rights issue, it said in a statement. - Bloomberg

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Hap Seng climbs on Q4 profit boost

Hap Seng Consolidated Bhd, a plantation and property group, gained 3 per cent to RM1.73, on course for its highest close since May 11.

Its fourth-quarter net income grew 8.4 per cent from a year earlier to RM111.7 million, according to a stock exchange filing. - Bloomberg

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FBM KLCI falls below 1,560-level at mid-morning

KUALA LUMPUR (Feb 15): The FBM KLCI fell below the 1,560-level at mid-morning on Wednesday, weighed by select blue chips in cautious trade ahead of domestic economic growth data scheduled for release later in the day.

The FBM KLCI fell 7.06 points to 1,558.99 at 10am, weighed by select blue chips including BAT, PPB and Petronas Gas.

Gainers trailed losers by 162 to 300, while 271 counters traded unchanged. Volume was 419.75 million shares valued at RM223.51 million.

At the regional markets, Japan’s Nikkei 225 rose 1.02% to 9,144.15, Hong Kong’s Hang Seng Index added 0.43% to RM21,008.50, Taiwan’s Taiex was up 0.54% to 7,926.44, South Korea’s Kospi gained 0.55% to 2,013.69, Singapore’s Straits Times Index edged up 0.08% to 2,989.81 while the Shanghai Composite Index was flat at 2,344.86.

BIMB Securities Research in a note Wednesday said European shares closed lower yesterday after lower than expected US retail sales.

European officials jacked up the pressure on the Greek government to deliver budget cuts in exchange for a second bailout as they insisted that default is not an option, it said.

“Meanwhile in the US, stocks were near lows on earlier trading worries that euro zone finance ministers appeared unlikely to release the Greek bailout funds as hoped, however they retreated in the final half hour spurred by optimism that Greece will commit to budget cuts stopped short of erasing a huge decline in the S&P 500 while the DJI added 0.03%.

“Back home, the FBMKLCI remains positive, adding another 3.23 points to 1,566 and we expect it to test its immediate resistance of 1,570, followed by 1,580 today while support remains at 1,560,” it said.

On Bursa Malaysia, BAT fell 46 sen to RM51.32, United PLANTATION []s down 14 sen to RM22.24, GAB, PPB, Petronas Gas, Hartalega and F&N fell 10 sen each to RM12.50, RM17.60, RM16.64, RM8.16 and RM17.590 respectively, Carlsberg was down eight sen to RM9.48, Bursa seven sen to RM7.40 and Multico shed six sen to RM1.20.

Naim Indah Corp was the most actively traded counter with 49.14 million shares done. The stock fell 1.5 sen to 46.5 sen.

Other actives included TMS, MBF Holdings warrants, Scanwolf, RCE Capital, Envair, TMC Life and Green Packet.

The advancing stocks included Dialog, Petronas Dagangan, TMS, Jaya Tiasa, Boxpak, Apollo, Brahims, Kulim and Jetson.

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Dayang edges up on Talisman contract

KUALA LUMPUR (Feb 15): DAYANG ENTERPRISE HOLDINGS BHD [] shares rose on Wednesday after its wholly owned unit Dayang Enterprise Sdn Bhd received a contract worth RM125 million from Talisman Malaysia Ltd.

At 9.03am, Dayang rose one sen to RM1.96 with 49,700 shares done.

Dayang said on Tuesday that the contract was for the provision of topside general maintenance and that the duration of the contract was for a primary period of three years with the option of an extension for two years of one year each.

RHB Research in a note Wednesday said it was positive on Dayang’s new contract as it showed that the company continued to be one of the favourites for topside maintenance.

“We believe its tie-up with Perdana Petroleum raises Dayang’s competitive edge in winning contracts, as such we are increasing our FY12 target PER to 13x (from 12x).

“Maintain Outperform call with upgraded fair value of RM2.35/share (from RM2.07/share), based on 13x FY12 PER (from 12x previously),” it said.

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Dialog rises on higher 2Q earnings

KUALA LUMPUR (Feb 15): DIALOG GROUP BHD [] shares advanced on Wednesday after its earnings rose 15.1% to 41.45 million in the second quarter ended Dec 31, 2011 from RM35.99 million a year ago, boosted by higher revenue from the consolidation of its new businesses and operations.

At 9.05am, Dialog rose three sen to RM2.47 with 424,600 shares traded.

Its revenue increased at a stronger pace of 33.5% to RM358.62 million from RM268.53 million. Its earnings per share were 2.10 sen compared with 1.84 sen.

MIDF Research maintained its Buy rating on Dialog with an unchanged target price of RM2.80.

The research house said in a note Wednesday that it was adjusting its earnings estimate marginally by -3.4%, taking into account lower-than-expected revenue recognition but offset by higher-than-expected contribution from the associate & JCE (refer to the CTF business).

“Earnings outlook is still promising for Dialog with estimated 3-year (FY11-FY13) CAGR of +26%. Our number has yet to factor in any potential contribution from Balai Cluster Field development.

“Dialog is a proxy play to the government’s initiatives to turn Malaysia into an international oil trading hub. Incentive for petroleum trading is expected to accommodate Dialog’s future expansions,” it said.

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