Wednesday, 21 March 2012

BToto 3Q net profit dips 1.8% to RM112.74m, 9-month RM310m

KUALA LUMPUR (March 21): BERJAYA SPORTS TOTO BHD [] posted net profit of RM112.74 million in the third quarter ended Jan 31, 2012, a slight decline of 1.8% from the RM114.87 million a year ago.

It said on Wednesday its revenue rose 15.5% to RM983.46 million from RM851.16 million. Earnings per share were 8.44 sen compared with 8.59 sen. It declared a third interim single tier exempt dividend of 6.0 sen per share which will go ex on April 9.

“The higher percentage increase in revenue was mainly attributed to the higher revenue reported by Sports Toto Malaysia Sdn Bhd. Berjaya Philippines Inc. group reported lower revenue and pre-tax profit for the current quarter under review mainly attributed to higher revenue achieved in the previous year corresponding quarter as a result of the high Jackpot prize then,” it said.

It added that Sports Toto recorded an increase in revenue and pre-tax profit of 17.5% and 13.7% respectively compared to a year ago mainly due to the traditionally high sales during the Chinese Lunar New Year festive season in the current quarter coupled with higher number of draws in the current quarter under review.

For the nine-month period ended Jan 31, 2012, its earnings rose 27.3% to RM310.52 million from RM243.91 million in the previous corresponding period. Revenue rose at a slower pace of 6.3% to RM2.691 billion from RM2.532 billion.

BToto said the group’s improved performance was primarily attributed to the improved results of Sports Toto which recorded an increase in revenue of 6.5%.

Sports Toto recorded an increase in pre-tax profit of 25.4% mainly due to lower prize payout in the current period under review.

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BNM Annual Report 2011: Expanding e-payment adoption

KUALA LUMPUR (March 21): The central bank plans to expand the adoption of electronic payments (e-payments) in the country as an alternative to conventional methods to promote transaction efficiency.

In its 2011 Financial Stability and Payment Systems report, Bank Negara Malaysia (BNM) said it needed the commitment from all stakeholders to realise the goal.

“The bank’s efforts in driving improvements in the efficiency of e-payment services coupled with support from the public and private sectors and improvements in the enabling environment, notably the advances in telecommunication services, have contributed to increasing the use of e-payments in Malaysia

“Among the immediate priorities are to promote greater interoperability through enhancements to the payment infrastructure, and to implement appropriate pricing reforms to strengthen incentives for the migration to more cost-effective payment modes,” BNM said.

According to the central bank, the average number of e-payment transactions per capita grew 14% to 50 in 2011 from 44 in 2010. The increase was mainly due to the higher usage of electronic money (e-money) and Internet banking.

The number of e-money transactions grew 15.4% to 806.8 million transactions worth RM3.8 billion in 2011 compared with 699.3 million transactions valued at RM2.7 billion in 2010, according to BNM.

As e-money transactions were mainly concentrated within the transportation industry, the growth was mainly helped by higher traffic volume along tolled highways and the usage of cashless ticketing machines on public buses , it said.

BNM said the wider adoption of e-money was also seen in the mass transit and rail segments where usage rose almost three-fold to 61.2 million transactions in 2011. For parking, it said more than 12.1 million payments were made using e-money, a growth of 45.8% from 2010.

The adoption of Internet banking had also risen. The central bank said in line with the increase in the household broadband penetration rate from 15.5% in 2007 to 62.3% in 2011, the number of active subscribers of Internet banking has more than doubled over the past five years.

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BNM Annual Report 2011: Malaysian household debt growth slows in 2011

KUALA LUMPUR (March 21) : Malaysian household debt growth slowed to 12.5% in 2011 versus 13.7% a year earlier following more stringent measures by the central bank to curb speculation in the real estate market.

Bank Negara Malaysia (BNM) said the measures implemented since 2010, had shown results as the number of borrowers with more than two outstanding housing loans moderated and registered a significantly lower growth of 2.9% in 2011versus 14.9% in 2010.

In its 2011 Financial Stability and Payment Systems report on Wednesday, it said: “The credit exposures to the household sector continue to be manageable with some emerging signs of moderation in household borrowing, particularly in the second half of 2011.

“The financial position and debt-servicing capacity of households remain sound at the aggregate level, supported by higher income and favourable employment conditions,” BNM said.

According to BNM, the latest household debt numbers as a proportion of the country’s gross domestic product translates into a ratio 76.6% compared to 75.8 % in 2011.

Loans for the purchase of residential PROPERTIES [] accounted for the single largest chunk of 45% of household house debt in 2011, it said.

BNM said while home loan growth slowed to 12.7% in 2011 from 12.8% in the preceding year, house prices had continued to rise at an annual average of 5.9%, on a quarterly basis, in the last three years. This compares with the average of 3.9% for the period of 2001 till the third quarter of 2011.

It said bulk of the loans dished out for the purchase of residential units was for those priced over RM250,000 each.

On the whole, BNM said household balance sheets generally exhibited strong financial buffers against adverse changes in asset values, interest rates and income levels. However, the central bank cautioned that borrowers with a monthly income of RM3,000 and below and living in urban centres were more vulnerable to “potential income shocks”.

This is because this segment of borrowers had substantial debt obligations with limited buffers to counter any loss of income, or price increases.

“Given the high dependence on income to sustain consumption, lower-income households, in general, are more susceptible to income shocks and to some extent, price shocks.

“Outstanding borrowings of individuals in this income group accounted for about 23% of banks’ exposures to households or 12.7% of banking system loans, with the majority of borrowers’ loan facilities concentrated in vehicle and personal financing,” BNM said.

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MHC Plantations proposes 2-for-5 bonus issue, warrants

KUALA LUMPUR (March 21): MHC PLANTATION []S BHD [] has proposed a bonus issue of 56.15 million new shares on the basis of two bonus shares for every five existing shares held.

It said on Wednesday, the corporate exercise would also include a bonus issue of 56.15 million warrants on the basis of two free warrants for every five existing shares held.

MHC said based on the paid-up share capital of MHC as at March 19 of RM140.38 million comprising 140.38 million MHC shares, a total of 56.15 million bonus shares may be issued.

It added that 56.15 million free warrants would be issued pursuant to the proposed bonus issue of warrants.

The indicative exercise price of the warrants was assumed at RM1.33 per warrant, a premium of 19.8% to the theoretical ex-bonus price of RM1.11 per MHC share up to an including March 19 of RM1.55 per share.

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BNM Annual Report 2011: External risks to dictate domestic financial landscape

KUALA LUMPUR (March 21): External risks emanating from the European sovereign debt crisis and the US fiscal position, are deemed crucial threats to Malaysia’s financial stability in 2012, according to Bank Negara Malaysia (BNM).

In its Financial Stability and Payment Systems Report issued on Wednesday, BNM said uncertainties from both regions will continue to weigh on global market sentiment and economic growth.

“This in turn will continue to adversely affect the balance sheets and funding of global banks, hampering efforts to strengthen the financial systems in the advanced economies.

“Risks to domestic financial stability in 2012 are expected to continue to be mainly externally driven,” BNM said.

According to the central bank, these external uncertainties can lead to higher levels of domestic market volatility and continued challenges in foreign currency funding.

Moreover, weakness in advanced economies, which are also major importers of goods from emerging markets, could dent Malaysia’s export performance and the profitability of Malaysian companies, BNM said,.

Weaker corporate earnings in local firms may, in turn, lead to higher credit risks for domestic banks should borrowers fail to fulfill their debt obligations, according to BNM.

The central bank is however optimistic that the country’s financial sector is well positioned to mitigate the impact from such situation. The optimism is based on the anticipation that credit risk for Malaysian lenders will be manageable this year against a stable employment and income outlook within a sustained domestic demand backdrop, according to BNM.

The central bank said it will improve its ability to identify “second-order contagion risks that can affect the financial sector” and ensure domestic lenders exercise prudence in disbursing loans to consumers.

“Aside from maintaining a heightened vigilance over banks’ exposures to households, the bank will also increase its scrutiny on the quality of banks’ business credit exposures and financing to the commercial property sector,” BNM said.

Household debt is a crucial concern. The regulator said it plans to strengthen its emphasis on ensuring that household debt is at reasonable levels via the proper assessment of potential borrowers’ ability to take on new loans.

“The bank will continue to actively monitor the financial position of households, coordinating closely with other relevant authorities in implementing appropriate measures to ensure that the resilience of the household sector is preserved.

“While the foundations for financial stability is well entrenched, Malaysia will strive to improve further in safeguarding financial stability in a highly dynamic domestic and external environment,” BNM said.

On a global scale, the regulator said it hopes to strengthen its links with other central banks to jointly undertake proactive measures to counter risks in the broader financial backdrop.

Another crucial highlight is BNM’s aim to further strengthen financial market infrastructures especially payment and settlement systems to support rising volume of cross-border and multi-currency transactions.

The regulator also hopes to collaborate with other authorities to improve access to, and the transparency of, information on over-the-counter derivatives exposures.

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Bumi Armada gets RM115m Petrobras contract to supply vessel

KUALA LUMPUR (March 21): Bumi Armada Bhd has secured a four-year charter and operations contract from Brazilian oil and gas major, PetrĂ³leo Brasileiro S.A. (Petrobras) valued at RM115 million.

It said on Wednesday that under the contract, its platform supply vessel (PSV) Armada Tuah 301 would support Petrobras’ cargo transportation between platforms and the transfer of personnel in the Brazilian continental shelf.

With a deadweight of 3,000 tonnes, the 75-metre long AT301 is Bumi Armada’s first PSV, complementing its fleet of over 40 OSVs.

“The four-year contract comes with an extension of a further four years, and the total award is estimated to be valued at approximately RM115 million. The contract is expected to be effective by the second quarter of 2012,” it said.

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BNM Annual Report 2011: Foreign Investments in manufacturing sector to moderate

KUALA LUMPUR (March 21): Foreign investments in the manufacturing sector may moderate as foreign firms are expected to turn more cautious following the heightened uncertainty in the global economy, Bank Negara Malaysia (BNM) said.

However, the central bank said this could be offset by foreign direct investments (FDIs) in new growth areas including renewable energy, and advanced electrical and electronic (E&E) products, the oil and gas sectors and in the services sector.

In its annual report released on Wednesday, it said foreign direct investment (FDI) inflows, which began to soften in the second half of 2011, were expected to moderate further in 2012.

BNM said the decline in the FDIs were due to weak external demand and greater uncertainty in the global economic environment.

While there has been higher levels of foreign manufacturing projects approved by the Malaysian Investment Development Authority (MIDA) in 2010 and 2011 (RM29.1 billion and RM34.1 billion respectively), the central bank said investments in the manufacturing sector might moderate as foreign firms were expected to turn more cautious following the heightened uncertainty in the global economy.

It noted that FDI into new growth areas such as renewable energy, and advanced E&E products such as light-emitting diodes and test equipment was expected to continue given the growing global interest in green TECHNOLOGY [].

Foreign investments in the O&G sector were projected to remain firm, supported by increased government incentives to the sector.

The liberalisation of several services sub-sectors under the Economic Transformation Programme would also contribute to further inflows of FDI into the services sector.

The trend in direct investment abroad (DIA) by Malaysian companies is likely to mirror that of the FDI, although by a lesser degree.

BNM said this was mainly due to the diversified profile of overseas investment in terms of economic activity as well as the investment destination.

DIA was expected to be channeled mainly into the services and O&G sectors, with a continued focus on high-growth markets in the region.

The central bank said despite the highly challenging global economic conditions, Malaysian companies are anticipated to continue venturing abroad to seek access to new and larger markets.

“Over the medium term, this regional and global expansion will contribute in creating more competitive and globalised Malaysian companies,” it said.

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BNM Annual Report 2011: Fiscal deficit to narrow to 4.7% in 2012

KUALA LUMPUR (March 21): Bank Negara Malaysia (BNM) expects the fiscal deficit to narrow further from 5.0% of gross domestic product (GDP) in 2011 to 4.7% of GDP in 2012, underlining the government’s commitment to fiscal consolidation.

It said on Wednesday the government faces the challenging task of balancing between fiscal consolidation and to support initiatives to transform the country into a high-income economy.

“In the medium-term, the government will remain committed to fiscal consolidation. A successful implementation of the ETP (Economic Transformation Programme) and all other reform initiatives are expected to ensure sustainable growth which will enhance tax revenues, thus contributing to the efforts to strengthen the fiscal position of the government,” it said.

BNM said revenue collection was expected to improve to RM186.9 billion due to better tax administration and higher compliance in tax submission and collection.

Total expenditure, BNM added, would continue to support of growth with an allocation of RM181.6 billion for operating expenditure and RM49.2 billion for development expenditure.

Development expenditure would be channeled for projects and programmes under the second rolling plan (RP2) of the 10th Malaysia Plan (10MP) including transformation initiatives under the National Key Result Areas (NKRAs), National Key Economic Areas (NKEAs) and Strategic Reform Initiatives (SRIs)

“The government will continue to finance the fiscal deficit from domestic sources, mainly through the issuances of Malaysian Government Securities (MGS) and Government Investment Issues (GII), given the high domestic savings and the ample liquidity in the financial system,” it said.

As for the monetary policy in 2012, BNM said the Malaysian economy entered 2012 with increasing downside risks to growth amid softening inflationary pressures domestically.

BNM said the monetary policy would continue to operate in a complex global environment characterised by slower growth, rising uncertainties and increased volatility in the financial and commodities markets amid high liquidity in the international monetary system.

“Monetary policy in 2012 will focus on ensuring the sustainability of economic growth in an environment of price stability. Emphasis will also be placed on ensuring monetary policy remains appropriate to avoid the build-up of financial imbalances,” it said.

BNM said despite the highly challenging external environment, the fundamentals supporting the economy remain intact.

It said the Malaysian economy was expected to remain resilient and to grow within the range of 4 - 5% in 2012.

“Domestic demand will continue to be the anchor for growth. Private sector economic activity will be sustained, underpinned by stable employment conditions and a favourable outlook for the domestic- oriented sectors.

“This will be further reinforced by public sector spending and investment via the ETP and policy initiatives announced during the 2012 Budget such as the one-off financial assistance to low and middle income groups, upgrading of schools, hospitals and basic rural infrastructure and the CONSTRUCTION [] of public housing,” it said.

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BNM Annual Report 2011: Economy to expand 4% to 5% in 2012

KUALA LUMPUR (March 21): The economy is expected to grow at between 4% and 5% in 2012, with domestic demand continuing to underpin growth, according to the Bank Negara Malaysia annual report 2011.

The slower growth would be amid more challenging external environment and the central bank expects growth in both private consumption and investment to soften in 2012, according to the report which was released on Wednesday.

“The GDP growth projection of between 4% and 5% in 2012 is premised upon the expectation of a moderation in global growth and the timely and full implementation of measures announced in the 2012 Budget,” it said.

BNM’s GDP projection was lower than the government’s earlier projection of between 5% and 6% for 2012 announced in the 2012 Budget.

Several risks confronting the economy were deterioration in the eurozone sovereign debt crisis and much slower growth in Malaysia’s major trading partners.

However, should growth in the advanced economies turn out to be stronger than expected, there was some upside potential to domestic growth in 2012.

The central bank said the authorities had sufficient policy flexibilities and tools to support the domestic economy and manage the international challenges, should conditions warrant it.

BNM added some measures announced in the 2012 Budget were expected to provide support to private consumption. These include the one-off financial assistance to low- and middle-income groups and the higher increment of public sector wages.

It expected private investment to be supported by continued investment by domestic-oriented industries and the ongoing implementation of projects under the Economic Transformation Programme (ETP).

It said the public sector would remain supportive of growth in 2012, with higher capital expenditure by both the Federal Government and the non-financial public enterprises (NFPEs).

The implementation of the Special Stimulus Package through Private Financing Initiative announced in the 2012 Budget would provide further impetus to real activity during the year.

Domestic demand

On the demand side, BNM said domestic demand would continue to be the main driver of growth in 2012, with the rate of expansion remaining resilient at 6.6% (2011: 8.2%).

It said the weaker global growth outlook was likely to affect income and capital expenditure in the external-related sectors of the economy, thus constraining the overall momentum in private consumption and investment.

However, the public sector was expected to remain supportive of growth, driven by higher capital expenditure by both the Federal Government and the NFPEs.

Private sector expenditure was expected to grow at a slower pace of 8.2% (2011: 6.6%)

Private consumption was expected to remain strong in 2012 at 6.2% , though slightly lower that 2011’s 6.9%.due to a slight moderation of consumer expenditure. BNM said this was mainly attributed to moderating income in the private sector.

Private investment was expected to expand at a more moderate pace of 8.3% (2011: 14.4%).

“Continued investment by domestic-oriented industries is expected to mitigate the anticipated moderation in investment by export-oriented industries. The ongoing implementation of projects under the ETP will also augment private investment activity,” it added.

BNM said public consumption was expected to record only 0.2% (2011: 16.8%) mainly due to of a significant moderation in the expenditure on supplies and services as the government was expected to continue with its consolidation efforts.

However, public investment was expected to pick up strongly at 16.2% after contracting 2.4% in 2011 due to slower implementation of new 10MP projects then.

“Growth will be supported by higher Federal Government development expenditure and NFPEs’ investments in the mining and transportation sectors,” it said.

Supply side

On the supply side, BNM expected most sectors to continue to expand in 2012 but slower growth in global demand might adversely affect export-oriented industries in the manufacturing sector as well as trade-related industries in the services sector.

As for domestic oriented industries, the central bank expected this sector to remain firm, underpinned by resilient domestic demand conditions.

BNM expected the CONSTRUCTION [] sector to grow at 6.6% (2011: 3.5%), supported by the implementation of major infrastructure projects and the Special Stimulus Package.

The mining sector was expected to record positive growth of 0.6% from a contraction of 5.7% in 2011.

However, the agriculture sector was likely to record 3.8% growth (2011: 5.6%) mostly due to lower growth of both palm oil and natural rubber following the strong performance in 2011.

The manufacturing sector was expected to slow down to 3.9% (2011: 4.5%) due to the anticipated slower activity in the export-oriented industries.

The services sector was also expected to growth at a slower pace of 5.1% (2011: 6.8%), supported by consumer-related sub-sectors, which was likely to cushion the effects of slower trade-related activity during the year.

Headline inflation was expected to moderate in 2012, averaging between 2.5% and 3.0% due to a moderation in global commodity prices and the weaker global growth outlook.

On the external front, the current account surplus was projected to remain large at RM109.5 billion or 12.2% of gross national income (GNI).

BNM said gross exports were expected to grow at a slower pace in 2012.

Labour market conditions

On the labour market conditions, it expected the unemployment rate to increase to 3.2% of the labour force in 2012 (2011: 3.1%).

“Income growth in 2012 will be affected by the cautious economic outlook, which affects firms’ decisions on salary increments and bonus payments,” it said.

BNM said job creation was projected to be concentrated in the domestic-oriented sectors, particularly in the services and construction sectors, as domestic demand was expected to remain firm.

However, employment in the export-oriented sectors might be affected by the weakening external demand, it said.

The central bank said financial stability was expected to remain intact, underpinned by well-capitalised financial institutions which would continue to provide support for financial intermediation in the economy.

“Given the comfortable level of reserves and relatively low external debt, Malaysia is well positioned to manage volatile capital flows under the current environment of continued volatility in the international financial markets,” it said.

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Bursa Securities dismisses appeal by Maxbiz, to be delisted on Monday

KUALA LUMPUR (March 21): Bursa Malaysia Securities Bhd has dismissed the appeal of MAXBIZ CORPORATION BHD [] and will delist the securities on Monday, March 26.

The stock exchange said on Wednesday that it considered all the facts and matters and decided to dismiss Maxbiz’s appeal.

“Accordingly, the securities of Maxbiz will be removed from the Official List of Bursa Securities on Monday, March 26, 2012,” it said.

Bursa Securities said the securities of Maxbiz currently deposited with Bursa Malaysia Depository Sdn Bhd, may remain deposited with Bursa Depository notwithstanding the de-listing of the securities from the Official List of Bursa Securities.

“It is not mandatory for the securities of a company which has been de-listed to be withdrawn from Bursa Depository,” it said.

It also said shareholders who intend to hold their securities in the form of physical certificates can withdraw these securities from their Central Depository System (CDS) accounts with Bursa Depository, at any time after the securities of the company is de-listed.

Bursa Securities said upon the de-listing of Maxbiz, it wouldl continue to exist but as an unlisted entity.

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

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RAM Ratings assigns P1(s) rating to Sunway REIT’s proposed RM1.6 bn debt notes

KUALA LUMPUR (March 21): RAM Rating Services Bhd has assigned a preliminary short-term enhanced rating of P1(s) to SunREIT Capital Bhd’s proposed up to RM1.6 billion debt notes.

The ratings agency said the debt notes to be issued by SunREIT (formerly known as Noble Pioneer Sdn Bhd) were nominal value commercial papers (CP) programme.

“The suffix “s” denotes the rating enhancement accredited after due consideration on the collateral for the proposed CP programme,” it said.

Below is the text of the statement issued by RAM Ratings

SunREIT is a special-purpose vehicle set up by Sunway Real Estate Investment Trust (Sunway REIT) as a funding conduit - to undertake a fund-raising exercise on a secured basis.

As such, the stand-alone rating of the proposed CP programme reflects the credit profile of Sunway REIT.

The rating enhancement for the proposed CP Programme is premised on RAM Ratings’ methodology on well-secured debts.

The enhanced P1(s) rating does not solely reflect Sunway REIT’s default probability on its financial obligations, but also considers the strong likelihood of recovery of its principal through the crystallisation of the proposed CP Programme’s securities within a reasonable period after default.

Excluding its Penang PROPERTIES [], Sunway REIT’s remaining portfolio (“the Security Portfolio”) valued at RM4.1 billion has been pledged as security for the proposed CP Programme.

Based on this latest valuation, the CP holders will have asset-to-debt cover of 2.55 times.

However, this ratio could decline to approximately 2.22 times as this transaction permits additional security sharing on a pari passu basis.

We also take into consideration the full underwriting commitment for the proposed CP Programme, which moderates the rollover risk of the CPs.

The amount underwritten by PUBLIC BANK BHD [] must always be equal to the applicable limit of the CP Programme, as long as the minimum rating is P3(s).

Public Bank, however, reserves the right to sell down all or part of its commitment. In such instances, the new underwriter will honour the same terms and conditions of Public Bank’s underwriting commitment.

Listed on the Main Market of Bursa Malaysia, Sunway REIT is currently the largest Malaysian real-estate investment trust in terms of assets (RM4.4 billion as of end-June 2011).

Its credit profile is supported by the above-average quality of its portfolio. Besides the newly acquired Sunway Putra Place, the portfolio also contains seasoned investment properties with above-average profiles and strong operating track records.

Led by its crown jewel, Sunway Pyramid, 74% of the portfolio’s value centres on Bandar Sunway.

“These assets have established a symbiotic relationship by leveraging on each other’s strengths to draw crowds from the major surrounding catchment areas,” observes Shahina Azura Halip, RAM Ratings’ Head of Real Estate & CONSTRUCTION [] Ratings.

Sunway REIT also derives diversification through its various industry exposures, i.e. retail (66% of its portfolio value), hospitality (24%) and office buildings (10%).

Its tenant mix is also well spread out across many industries, thus minimising its dependence on any particular one. The top 5 tenants account for only about 16% of the REIT’s revenue.

Sunway REIT also has a close relationship with its active Sponsor, Sunway Berhad – an established developer, owner and manager of investment properties in the office, retail, hospitality, leisure, education and healthcare segments.

Offsetting the strengths above is the REIT’s substantial dependence on the performance of Sunway Pyramid (which accounted for 53% of its net property income in 1H FYE June 2012).

In addition, Sunway REIT’s aggressive expansion plans to double its asset base in the next 5-7 years, from RM3.7 billion at its initial public offering to RM7 billion, will add pressure to its balance sheet.

Gearing ratio and leverage ratio (debt–to–asset) will be about 0.72 times and 0.42 times respectively.

As it stands, Sunway REIT is substantially reliant on floating-rate debts, with about 55% of the REIT’s debts comprising variable-rate borrowings as at February 2012. Apart from that, Sunway REIT is exposed to the vagaries of the retail, hospitality and office sectors.

We highlight that the proposed CP Programme allows other new financiers to share the Security Portfolio on a pari passu or subordinated basis.

While the legal facets of the structure will be addressed via the terms of the transaction documents, particularly the Security Agency and Sharing Agreement that details the security rankings and rights of all the lenders over the same security, the smooth execution of the agreement under a distressed scenario has yet to be proven.

Nonetheless, the REIT’s 2 unencumbered investment properties (valued at RM306 million as of June 2011) provide another fund-raising avenue.

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RAM Ratings: KLK’s ratings unaffected by disposal of Crabtree & Evelyn

KUALA LUMPUR (March 21): RAM Rating Services said KUALA LUMPUR KEPONG BHD []’s (KLK) proposed disposal of its entire global Crabtree & Evelyn (C&E) business will not have any impact on the group debt notes’ ratings

The ratings agency has an AA1/P1 rating of the group’s RM500 million Sukuk Ijarah commercial paper/medium-term notes programme (CP/MTN) (2007/2012) and RM300 million Sukuk Ijarah CP/MTN programme (2011/2016); both long-term ratings have a stable outlook.

RAM Ratings’ Head of Real Estate and CONSTRUCTION [] Ratings said the proposed disposal was positive as the retail arm’s performance was highly seasonal and had been weighed down by the sluggish economies of Europe and the US.

“The disposal will enable KLK to focus on its core PLANTATION []s and oleochemicals operations,” she said.

KLK recently announced that it had entered into an unconditional share sale and purchase agreement with Khuan Choo International Limited, a Hong Kong-based investment-holding company, to dispose of the non-core C&E business, as part of the Group’s continuous efforts to streamline its operations.

RAM Ratings said the global financial crisis had dealt the retail arm a significant blow, with the division suffering a hefty RM77.5 million operating loss in FY September 2009 amid weak consumer sentiment in the US and Europe.

Nonetheless, the division turned around in fiscal 2010 after the closure of non-performing stores and a leaner cost structure following the completion of its restructuring plan - under Chapter 11 of the United States Bankruptcy Code – in late January 2010.

RAM Ratings noted that the bottom-line contributions from this division have been minimal in the last 2 years, at less than 3% of the group’s operating profit before interest and tax. The division posted a RM22.8 million operating profit in fiscal 2011.

The ratings agency noted that KLK had already received 10% (or RM31.7 million) of the purchase price, adding to its already-considerable RM2.04 billion cash hoard as at end-December 2011. The group was in a net-cash position as at the same date.

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MARC downgrades KNM, KNM Capital long-term ratings

KUALA LUMPUR (March 21): Malaysian Rating Corporation Bhd (MARC) has downgraded the long-term ratings of KNM GROUP BHD [] and KNM Capital Sdn Bhd to A+ID from AA-ID, and revised the outlook of the ratings to developing from stable.

It said on Wednesday that it had concurrently affirmed the short-term ratings at MARC-1ID for the following rated programmes/issuers:

1) RM300.0 million Murabahah Underwritten Notes Issuance Facility (MUNIF)/Islamic Medium Term Notes (IMTN) Programme of KNM Capital Sdn Bhd (KNM Capital); and

2) RM400.0 million Islamic Commercial Paper (ICP) Programme/RM1.1 billion Islamic Medium Term Notes (IMTN) Programme of KNM Group Berhad (KNM).

The rating action affected RM190.0 million of outstanding notes issued by only KNM Capital as there had not been any issuance by KNM.

“The downgrade of the long-term rating reflects KNM’s weak results in recent periods and continued challenging market conditions for the process equipment market,” it said in a statement.

Below is the text of the statement

MARC said the developing outlook that it had attached to the ratings recognises the potential for KNM to stabilise and restore its financial position through rationalisation of its capacity and product portfolio as well as the possibility of negative rating action if the gains from rationalisation are insufficient to stabilise and improve KNM’s credit metrics.

The affirmation of the short-term ratings is based on its satisfactory liquidity position vis-a-vis ongoing short-term debt obligations.

KNM’s weak results in recent periods reflect increased competition in the lower-to-middle range process equipment segment and reduced demand for process equipment due to economic cyclical factors.

In the high-end process equipment segment, KNM also saw modest increase in new contracts secured due to a general slowdown in capital expenditure by oil and gas majors.

Delays in financial close for energy renewal projects which KNM had earlier depended upon to turn around its declining profitability significantly impacted its 2011 results and financial profile.

From a geographical viewpoint, the group is exposed to potential macro-economic difficulties in Europe, given the rather high revenue contribution from its European business. The group’s European operations generated 68% of revenue for financial year ended December 31, 2011 (FY2011).

The company has alluded to an expected rebound in 2012, which is expected to be driven by the rationalisation of its plant capacity and product portfolio. In response to the challenges posed by increased competitive intensity in the lower-to-middle range product segment, KNM intends to focus on the high-end segment and diversify into new end markets. On a related note, MARC observes that wholly-owned process equipment manufacturer BORSIG GmbH has defended its niche position well and has significant recurring maintenance and spare parts business.

MARC believes that the group’s strategic focus on high-end offerings and cost efficiencies should benefit its consolidated gross margins.

At the same time, the agency is mindful of the incremental risks posed by KNM’s decision to market its services as an engineering, procurement, CONSTRUCTION [] and commissioning (EPCC) contractor and facility operator for renewable energy projects notwithstanding the potential benefits to be gained in terms of margin enhancement and recurring income generation.

Apart from the group’s lack of sufficient track record as an EPCC contractor, the execution and sovereign risks exposure inherent in such projects could weigh on its consolidated business risk profile.

Based on unaudited results, the group posted a pre-tax loss of RM147.5 million (FY2010: pre-tax profit of RM46.5 million) on revenues of RM1,982.3 million.

The full-year loss was mainly attributable to provisions for foreseeable losses and credit impairment which collectively totalled RM140.0 million for the quarter ended Sept 30, 2011 (3QFY2011). MARC’s rating concern is the continuing trend of declining margins compared to the strong historical double-digit margins experienced prior to FY2009.

Partially offsetting the pressure on the group’s financial profile is the increase in cash flow from operations (CFO) to RM165.6 million (FY2010: RM53.7 million), presumably due to working capital reductions. Consequently, CFO interest cover increased to 3.3 times (FY2010: 1.1 times) while free cash flow reverted to a positive RM90.6 million (FY2010: -RM2.1 million). The group’s liquidity position is strong, backed by cash and bank balances of RM416.4 million (FY2010: RM296.2 million) vis-a-vis the forthcoming notes redemption of RM90.0 million in 2012.

Downward rating pressure would be exerted on the ratings following slower-than-anticipated progress in the group’s financial turnaround and/or a weakening in its business risk profile.

While MARC believes that KNM has the potential to restore its financial health to previous levels in the medium term, the meaningful challenges that management will face in achieving this are also acknowledged.

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KLCI edges higher, lifted by bank stocks

KUALA LUMPUR (March 22): The FBM KLCI closed marginally higher on Wednesday, lifted by gains at select blue chips including Maybank, Public Bank, KLK, and BAT while trading volume surged to nearly 3.6 billion shares.

The 30-stock index rose 4.91 points to close at 1,582.53. Gainers beat losers by 384 to 339, while 270 counters traded unchanged. Volume was 3.59 billion shares valued RM1.79 billion following heavy transactions in penny stocks.

However, Asian shares eased on March, as concerns about China's slowing economy dampened the optimism generated by a brightening outlook for the U.S. economy that has been pushing equity markets higher since late last year, according to Reuters.

But financial spreadbetters predicted major European markets, it said.

At the regional markets, Japan’s Nikkei 225 fell 0.55% to 10.086.49, Hong Kong’s Hang Seng Index shed 0.15% to 20,856.63, South Korea’s Kospi lost 0.73% to 2,027.23, while the Shanghai Composite Index gained 0.06% to 2,378.20 and Taiwan’s Taiex rose 0.12% to 7,981.94.

Meanwhile, European stock index futures signalled gains on Wednesday, with stocks set to bounce back from the previous session's pull-back as investors bet U.S. housing data will give further evidence of economic recovery, eclipsing recent worries over Chinese growth, it said.

Among the gainers on Bursa Malaysia, BAT added 78 sen to RM53.20, PPB up 22 sen to RM16.78, Lafarge Malayan Cement, Sarawak Oil Palms and JTI up 17 sen each to RM7.25, RM6.70 and RM6.86 respectively.

Far East and Cepco added 15 sen each to RM7.40 and RM1.80, Metronic 14.5 sen to 25.5 sen, Tasco 12 sen to RM2.14 while Public Bank and KLK up two sen each to RM13.64 and RM23.43, while Maybank added one sento RM8.74.

Metronic was the most actively traded counter with 845.6 million shares done.

Other actives included Ariantec, Ingenuity Solutions, Focus, Tiger Synergy, Hubline, Asia-Bio, and Naim Indah Corp.

Decliners included Hartalega, Aeon Credit, Litrak, GAB, Gamuda, Kluang, United Malacca, SPMC, Allianz and MSM.

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Lysaght gets subcontracts worth RM22.75m from YTL unit

KUALA LUMPUR (March 21): Lysaght Galvanized Steel Bhd’s wholly owned unit has been awarded four subcontracts by Syarikat Pembenaan Yeoh Tiong Lay Sdn Bhd to supply and install antenna poles.

It said on Wednesday that a subcontract agreement would be entered between Lysaght Marketing Sdn Bhd and Syarikat Pembenaan Yeoh Tiong Lay Sdn Bhd at a later date.

Lysaght said the estimated date of completion was within 177 days to 206 days from the date of commencement.

It said the Subcontracts were expected to contribute positively to the earnings and net assets of LGS group for the financial year ending 2012.

It said the subcontracts would be financed by internally generated funds.

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FBM KLCI cuts losses, in positive territory at lunch break

KUALA LUMPUR (March 21) : The FBM KLCI cut losses to leap back into positive territory towards lunch break as most Asian stock markets encountered a sell down on China economic growth concerns.

Regional sentiment was hit by updates on costlier retail energy in China and the anticipation of weaker demand in the world’s second largest economy for raw materials such as iron ore, the primary feedstock for steel manufacturing.

In Malaysia, the 30-stock FBM KLCI rose 0.68 point to 1,578.3 at 12.30pm with 1.83 billion shares worth some RM682 million traded. Across the exchange, there were 238 gainers versus 349 decliners while 330 stocks were unchanged.

The index had fallen as much as 0.3%or 4.45 points to an intraday low of 1,573.17 earlier.

Top gainer and most active stock METRONIC GLOBAL BHD [] added 18 sen to 29 sen followed by Genting PLANTATION []s Bhd which was up 11 sen to RM9.46.

Metronic said on Monday it was informed by its managing director Dr Ng Tek Che that he was approached by parties who are keen to acquire his 5.23% stake in the firm.

Decliners include ALLIANZ MALAYSIA BHD [] which lost 17 sen to RM4.70 while PPB GROUP BHD [] was down 16 sen to RM16.40.

Most Asian stockmarkets fell at midday. Japan’s Nikkei 225 declined 0.48% to 10,093.1 points, Australia’s S&P/ASX 200 was down 0.37% to 4,259, while Hong Kong’s Hang Seng lost 0.47% to 20,789.8

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MBSB signs financing agreement with NCT United

KUALA LUMPUR (March 21) : MALAYSIA BUILDING SOCIETY BHD [] (MBSB) has signed an agreement for term and bridging financing facilities of up to RM215 million with NCT United Development Sdn Bhd to revive the largest abandoned housing project in the country.

The abandoned housing project Taman Kenanga, is situated in Bandar Baru Salak Tinggi in Sepang, Selangor. The project which was initiated in 1998, was halted in 1999, and was classified as an abandoned project by the Ministry of Housing and Local Government in 2002.

Speaking during the signing ceremony on Wednesday, MBSB president and chief executive Datuk Ahmad Zaini Othman said the effort to find a permanent solution to resuscitate the project is part of MBSB's new recovery strategies .

Ahmad Zaini said the significance of the signing ceremony marks MBSB's determination to address and resolve its corporate legacy accounts. He said through programs underlined by the new management's strategy, MBSB's net non performing loans have been reduced to 8.5% in 2011 from 18.7% in 2009.

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Iris rises on buying stake in Neuralogy

Iris Corp, a technology-consulting company, rose 5.7 per cent to 18.5 sen in Kuala Lumpur trading at 9.37am, bound for its steepest gain since March 8.

The company agreed to buy a 20 per cent stake in Neuralogy Sdn Bhd, a researcher and developer of telecommunications products, for RM500,000, it said in a statement. -- Bloomberg

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Key West gains, unaware of reverse takeover

Key West Global Telecommunications Bhd added 2.2 per cent to 23.5 sen in Kuala Lumpur trading at 9.37am, headed for its highest close since Jan. 8, 2010.

The telecommunications products and services provider has no knowledge of any reverse takeover plan by Indonesian tycoon Yanki Regan, it said in an exchange filing in response to a Business Times report. -- Bloomberg

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Focus Dynamic slides, no asset injection

Focus Dynamics Technologies Bhd, an electric-products maker, slid 9.3 per cent to 19.5 sen in Kuala Lumpur trading at 9.37am, poised for its biggest loss since Nov. 15.

The company hasn’t received any proposal from Raymond Chan to inject oil and gas assets into Focus, it said in a statement in response to a Nanyang Siang Pau report. -- Bloomberg

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FBM KLCI falls in morning trade on China growth concerns

KUALA LUMPUR (March 21) : Malaysians stocks fell on Wednesday morning in tandem with Asian markets due to China’s economic growth concerns. These include costlier retail energy prices in China and an anticipated weaker demand in the world’s second largest economy for raw materials such as iron ore, the primary feed stock for steel manufacturing.

Analysts said the Malaysian equities barometer FBM KLCI is expected to consolidate in the near term and the spotlight will now be directed at companies with smaller market capitalisation.

“Stocks should extend consolidation in the near-term, with trading activity focused on ACE market, small-caps and penny stocks while blue chips maintain their range-bound trading pattern,” TA Securities Holdings Bhd wrote in a note on Wednesday.

In Malaysia, the 30-stock FBM KLCI fell 1.6 points to 1,576.02 at 9.26am with some 273 million shares worth RM81million traded. There were 109 gainers versus 148 decliners while 178 stocks were unchanged.

Top gainers across Bursa Malaysia include Petrol One Resources Bhd which added 20 sen to RM1.08 while Malaysia Airports Holdings Bhd was up eight sen to RM5.68.

Decliners include HONG LEONG FINANCIAL GROUP BHD [] which fell 12 sen to RM11.88 while Genting PLANTATION []s Bhd was down 11 sen to RM9.24.

Most active was INGENUITY SOLUTIONS BHD [] which added three sen to 14 sen with some 58 million shares done.

Asian stock benchmarks declined. Japan’s Nikkei 225 fell 0.21% to 10,120.57 points, Australia’s S&P/ASX 200 was down 0.32% to 4,261.4, while South Korea’s Kospi lost 0.42% to 2,033.5.

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RHB Research maintains KLK fair value at RM25.80

KUALA LUMPUR (March 21): RHB Research Institute is maintaining its sum-of-parts based fair value of RM25.80 for Kuala Lumpur Kepong and its market perform call.

KLK is expanding its oil palm PLANTATION [] area in Indonesia with the acquisition of PT. Global Primatama Mandiri (PT GM) which has the rights for 7,400 ha of land in Kalimantan for plantations. The acquisition price for the 90% stake in PT GM is RM3.60 million.

PT GPM holds a certificate of licensed location for 7,400 ha of land in Kecamatan Kelay, Kabupaten Berau, east Kalimantan which it intends to develop into oil palm plantations in due course.

RHB Research said assuming 70% of the land is plantable, the effective acquisition price of RM3.6 million values the land at around RM772 a hectare (US$257 per ha), relatively inexpensive for greenfield land in Kalimantan. Previous land transactions there have been at US$300 to US$700 per ha.

“We are positive on this acquisition as it would enlarge KLK’s landbank by 3% to bring total landbank to almost 262,000ha,” it said.

RHB Research said there was no change to its forecasts as this land would take a few years to contribute to KLK’s bottomline.

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CIMB Research has technical buy on Supermax at RM1.90

KUALA LUMPUR (March 21): CIMB Equities Research has a technical buy on Supermax Corporation at RM1.90 which it is trading at a FY13 price-to-earnings of 7.6 times and price-to-book of 1.7 times

It said on Wednesday the recent correction dragged Supermax to the 38.2% Fibonacci Retracement levels. This would likely be its first line of defence. If prices can hold on above its previous swing low of RM1.87, there is a good chance that a stronger rebound would kick in.

“Technical indicators are showing sign of improvement. MACD signal line has flattened out, suggesting that selling pressure has tapered off. RSI too has bounced off its lows,” it said.

CIMB Research said aggressive traders may take some position here while others should only join the bandwagon after prices swing past the short term resistance trend line at RM2.00. A break below RM1.87 would negate this bullish tone.

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CIMB Research has technical buy on Opensys at 14.5 sen

KUALA LUMPUR (March 21): CIMB Equities Research has a technical buy on OPENSYS (M) BHD [] at 14.5 sen which it is trading at a price-to-book of 0.8 times.

It said on Wednesday the correction in February was sharp. Prices plunged from a high of 22 sen to reach a low of 12 sen before the bulls started to make a comeback. Currently, the stock is lingering a tad below its moving averages.

“If the candles can close above the 30-day and 50-day SMAs over the next few days, we believe momentum would pick up strongly. This should further lift prices towards 16 sen and 18.5 sen,” it said.

CIMB Research said its strategy was to buy on breakout. Hence, traders should only take position when prices close above 15 sen.

“Be quick to cut loss if the 14 sen level is breached as next support is at 12 sen,” it said.

According to CIMB Research, Opensys designs and develops touch ESM (efficient service machine), develops and licenses proprietary enterprise software products for customers in the financial services industry under its eSys suite of solutions, and provides IT services with its own software products.

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CIMB Research has technical sell on Petronas Chemicals at RM6.71

KUALA LUMPUR (March 21): CIMB Equities Research has a technical sell on Petronas Chemicals at RM6.71 at which it is trading at a FY13 price-to-earnings of 9.7 times and price-to-book of 2.7 times.

It said on Wednesday that Petronas Chemicals violated its uptrend channel few days ago.

“Currently, it is a tad below its 50-day SMA. If this candles fail to swing back above this key moving average soon, we expect next downleg to drag prices back towards RM6.38 and RM5.97. The 200-day SMA is also a magnet for prices,” it said.

CIMB Research said the technical landscape remains weak. MACD signal line is falling towards the negative territory while RSI has also hooked downward.

“As long as the candles stay below its 30-day SMA, we think the odds continue to favour the bears. Prices are likely capped at RM6.79-RM6.85 in the near term. Put a buy stop at RM7.00, just in case,” it said.

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CIMB Research ups Gamuda target price to RM4.50

KUALA LUMPUR (March 21): CIMB Equities Research said MRT Corp’s announcement of the award of MRT underground works to the Gamuda-MMC JV came earlier than expected and the RM8.2 billion project cost was higher than guided.

“This is good news for Gamuda and strengthens its position for MRT 2 & 3. We raise our EPS forecasts and target price from RM4.45 to RM4.50, pegged to an unchanged 10% discount to RNAV,” it said in a research report on Wednesday.

CIMB Research said it applied a higher CONSTRUCTION [] P/E of 13 times (12.6 times before), in line with its revised market P/E.

“Gamuda remains a Trading Buy and one of our top sector picks,” it said.

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HDBSVR: Malaysian equities may face pressure

KUALA LUMPUR: Hwang DBS Vickers Research said the profit-taking activities on Wall Street overnight may put the Malaysian bourse under pressures with the benchmark FBM KLCI likely to back off from its immediate resistance barrier of 1,580 ahead.

In its market outlook on Wednesday, HDBSVR said in terms of news flows, of probable interest is an insight into Bank Negara Malaysia’s projections on GDP growth rate and inflation, which will be revealed in the central bank’s 2011 annual report due for release this evening.

On the corporate front, there could be share price actions in the following counters: (a) KL Kepong, after disposing of its retailing business of personal care products for RM465 million; (b) Fajarbaru, which has received a letter of award for a CONSTRUCTION [] job worth RM73 million; and (c) TA Enterprise, as its latest financial results came in below par.

Berjaya Sports Toto is scheduled to announce its earnings report card later Wednesday.

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Stocks to watch: Fajarbaru, KLK, CBIP, Focus

KUALA LUMPUR (March 21): Malaysian equities could be subject to profit taking on Wednesday against a lack of domestic catalysts to drive the market.

Analysts said the strength of the FBM KLCI may be curbed as institutional and retail investors lock in their profits ahead of the country’s impending general election, possibly in May or June this year.

On the global backdrop, the spotlight will be on updates from US and China, sentiments from which are crucial drivers for Asian stock markets, they said.

There is a “lack of strong catalysts” to spur the FBM KLCI higher, Hong Leong Investment Bank Research had said in a market outlook.

The FBM KLCI rose 4.02 points or 0.26% to close at 1,577.62 on Tuesday.

Stocks to watch on Wednesday include Fajarbaru Builder Group Bhd, KUALA LUMPUR KEPONG BHD [] (KLK), CB INDUSTRIAL PRODUCT HOLDING [] Bhd (CBIP) and FOCUS DYNAMICS TECHNOLOGIES [] Bhd.

Other companies which would see trading interest are MALAYAN BANKING BHD [] (Maybank), MMC Corp Bhd, GAMUDA BHD [] and CypARK RESOURCES BHD [].

Fajarbaru secured a RM72.92 million contract from Messrs Shaw Plaza Sdn. Bhd to tear down and rebuild the Shaw Parade complex in Kuala Lumpur.

Kuala Lumpur Kepong Bhd (KLK) is exiting its personal care products under the brand name “Crabtree & Evelyn” with the proposed disposal of CE Holdings Ltd for US$155 million (RM465 million).

“The proposed disposal is expected to bring in a gain on disposal of approximately 11.5 sen per share for the financial year ending Sept 30, 2012,” it said.

In a separate statement, KLK said it was expanding its oil palm PLANTATION [] area in Indonesia with the acquisition of PT. Global Primatama Mandiri (PT GM), which has the rights for 7,400 ha of land in, Kalimantan for plantations.

KLK said on Tuesday its subsidiary KL-Kepong Plantation Holdings Sdn Bhd (KLKPH) had entered into two agreements to acquire 90% of PT GM for RM3.60 million.

HwangDBS Vickers Research Sdn Bhd has raised its target price for CBIP, a manufacturer of palm oil mills, by 23% from RM2.43 to RM3 while maintaining its Buy call for the stock.

This takes into account the stock’s attractive valuations at a forward price to earnings ratio of seven times, HDBSVR said. CBIP was up one sen to RM2.45.

Focus Dynamics, in its response to the query, said it is not aware of any factors contributing to the unusual trading patterns of its shares except for a news report speculating on Datuk Raymond Chan Boon Siew’s proposed acquisition of a 25% stake in the energy-efficient electrical control products manufacturer.

Focus Dynamics said its directors, after deliberating on the news report, have informed that Chan is not a placee in the firm’s private placement exercise.

“The board, however, is not in a position to comment on the report about his plans to acquire equity shares of Focus from the open market,” Focus Dynamics said, adding that the company has not received any proposal from Chan to inject oil and gas projects into the firm.

Maybank president and CEO Datuk Seri Abdul Wahid Omar said the financial services provider plans to set up its branch office in Myanmar as soon as foreign banks are given the approval to do so. Shares of Maybank added one sen to close at RM8.73 on Tuesday.

The MMC Corp Bhd-Gamuda Bhd joint venture has clinched the underground package for the Sungai Buloh-Kajang MRT line with an RM8.2 billion bid. MMC shares climbed 15 sen to RM2.95 while Gamuda added 12 sen to RM3.74.

Cypark Resources targeted to generate turnover of about RM45 million from 2013 when the 33 MW solar capacity from its solar plants are completed.

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