Stocks to watch: IPPs, Mah Sing, Genting, UEM Land

KUALA LUMPUR (Feb 29): With the current corporate results drawing to an end on Wednesday, investors’ focus would be on the companies with the stronger set of financial results and their prospects for the year ahead as the external and domestic economies slow down.

The important decision would be to pick companies which would be able to ride through slower growth, especially PLANTATION []s and banks with overseas operations.

Among the stocks to watch on Wednesday after independent power producers (IPPs), MAH SING GROUP BHD [], GENTING BHD [] and UEM Land Bhd.

The Energy Commission has invited the first generation of independent power producers to submit their plans to extend the power purchase agreements (PPAs).

These IPPs, whose PPAs were scheduled to end in three to four years, were invited to extend the agreements on condition they would reduce the capacity payments.

Mah Sing Group Bhd posted net profit of RM41.03 million in the fourth quarter ended Dec 31, 2011, up 30.8% from RM31.35 million a year ago, boosted by the property segment.

Its revenue increased by 41% to RM422.12 million from RM299.28 million. Earnings per share were 4.93 sen compared with 3.77 sen. It announced dividend of 11 sen a share.

For FY11, its earnings rose 42.7% to RM168.55 million from RM118.07 million in FY10.

Genting Bhd reported net profit of RM772.91 million in the fourth quarter ended Dec 31, 2011, up 66% from RM465.43 million a year ago.

Its revenue increased by 23.9% to RM5.06 billion from RM4.08 billion. Its earnings per share were 20.94 sen compared with 12.57 sen while it proposed a dividend of 4.5 sen a share.

Group profit before tax was RM1.802 billion, compared with RM1.182 billion a year ago as it included a reversal of RM308.6 million in respect of previously recognised impairment loss relating to the UK casino licenses and a net fair value gain of RM64.4 million on derivative financial instruments.

UEM LAND HOLDINGS BHD [] posted a 3.84% increase in earnings to RM140.56 million for the fourth quarter ended Dec 31, 2011, from RM135.36 million, due to improved performance from the group's various development activities.

It said the board was confident of the group’s prospects in the coming financial year as the on-going projects had unbilled sales of RM1.85 billion as at Dec 31, 2011.

Shareholders of TSM GLOBAL BHD [], who own 28.07% of the paid-up share shares, have offered to acquire all the business, including assets and liabilities, for RM159.24 million or RM1.25 per share.

Property developer, Dijaya Corp Bhd's earnings rose 12.8% to RM39.02 million for the fourth quarter ended Dec 31, 2011, from RM34.59 million a year ago, due to better sales performance and recognition of progress billings from its project launches in 2011.

Revenue was up 53.2% to RM156.19 million from RM101.91 million. Earnings per share were 8.53 sen compared to 7.60 sen a year ago.

KFC Holdings Bhd (KFCH) saw its fourth quarter earnings decline 21.9% to RM38 million from RM48.67 million a year ago.

It said KFC India and KFCH International College continued to incur high initial start-up costs in the current quarter during the gestation period.

QSR BRANDS BHD [] reported net profit of RM38.69 million in the fourth quarter ended Dec 31, 2011, up 9.7% from the RM35.25 million a year ago due to better profits from Pizza Hut Malaysia.

Cafe chain operator Oldtown Bhd recorded RM11.66 million in profits for the fourth quarter ended Dec 31, 2011 as it benefited from an increase in exports of its beverage products and higher selling prices.

Steel contractor Eversendai Corporation Bhd recorded profits of RM36.42 million for the fourth quarter ended Dec 31, 2011, due to higher revenue from current on-going projects. Its revenue was RM313.29 million while earnings per share were 5.41 sen.

For the financial year ended Dec 31, 2011, revenue was RM1.03 billion, while profits were RM119.45 million.

Benalec Holdings Bhd, posted a 52.51% increase in earnings to RM28.84 million for the second quarter ended Dec 31, 2011, from RM18.91 million due to net gain on sale of land in the current quarter.

Its revenue was 40.54% lower to RM26.89 million from RM45.22 million mainly due to certain projects located in Melaka had already reached the completion stage.

RHB CAPITAL BHD [] posted an 8.09% fall in profits to RM348.39 million for the fourth quarter ended Dec 31, 2011, from RM380.15 million due to increased competition among banks.



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Benalec 2Q earnings up 52% to RM28.8m, boost from land sale

KUALA LUMPUR (Feb 28): Benalec Holdings Bhd, posted a 52.51% increase in earnings to RM28.84 million for the second quarter ended Dec 31, 2011, from RM18.91 million due to net gain on sale of land in the current quarter.

It said on Tuesday, revenue was 40.54% lower to RM26.89 million from RM45.22 million mainly due to certain projects located in Melaka had already reached the completion stage. Earnings per share were 3.90 sen compared to 3.00 a year ago.

For the first six months ended Dec 31, 2011, revenue was up 4.15% to RM101.47 million from RM97.43 million. Net profits were also up 18.2% to RM57.77 million from RM48.87 million.

"The increase in the revenue was mainly due to the increased activities in reclamation works being undertaken in Melaka and Port Klang," it said, adding the small increase in profit was due to the sale of land valued at RM15.5 million.

However, higher operating expenses, increased finance costs and a lower contribution from its marine CONSTRUCTION [] arm mitigated the gains.



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InsiderAsia’s model portfolio - 468

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

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

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

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

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

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



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

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

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

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

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

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

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

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

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

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

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

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

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


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


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



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BIMB Securities cautiously optimistic in 2012

What does 2012 hold for equity markets? After a volatile 2011 that saw financial markets tumble and investor sentiment rattled by the debt crisis in the US and eurozone, geopolitical upheavals and natural disasters, how will the local stock market fare in the New Year? BIMB Securities head of research Kenny Yee shares insights with The Edge Financial Daily’s Surin Murugiah.

What is your outlook for the Malaysian stock market and economy for 2012?
We are cautiously optimistic for 2012. Though the Asian region remains solid, like others our concerns stem on the progress in the eurozone and how it is going to pan out following numerous fund injections into the region.

What is your target for the FBM KLCI for 2012?
We have 1,600 as our preliminary target for 2012 at par to our market’s average PE of around 15.5 times.

Yee believes a full-blown crisis can be averted with regards to the euro-debt crisis.

How do you think the euro debt crisis will play out, and what impact will it have on Malaysia?
Judging from the more proactive approach by the policymakers, we believe a full-blown crisis can be averted. Nonetheless, our concerns stem from the intensity of the crisis and the aftermath on the global financial entities. With regards to the impact on Malaysia, though our economy is more domestically driven, nonetheless we are not insulated on the export front.

The years 2010 and 2011 were seen as years of M&A (merger and acquisition) activities, and the government’s economic transformation programme. What do you see as the domestic theme for 2012?
We believe the M&As as initiated by the GLICs (government-linked investment companies) to continue as part of the process to rationalise the shareholdings in GLCs (government-linked companies) and would have positive implications on the stock market.

As for the themes for 2012, our focus remains on the construction and oil and gas sectors. The plantation sector could offer an interesting proposition as well.

If the general elections are held in 2012, as widely expected, how do you expect the market to react, pre and post elections?
We have done some analysis on the past five GEs and there are no correlation between the general election on the stock market.

What sectors do you like for 2012?
Consumer, construction, oil & gas and possibly plantation.

What are your top stock picks and why?
Construction: Benalec Holdings Bhd (Rather insulated from external vagaries, most projects are domestic centric and strong order book.)
Oil & gas: Uzma Bhd (An up- and-coming oil & gas player. With expertise in the upstream segment).
Dialog Group Bhd (Strong orderbook backed by higher recurring income.)
Plantation: TH Plantations Bhd (improving prospects from recent land acquisitions)

Your wish list for the year?
Eurozone soft landing and flow of foreign funds back to Asia.



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InsiderAsia’s Model Portfolio - 460

Sentiment for global equities remained ambivalent last week. Investors continue to trade cautiously on the back of persistent uncertainties over the eurozone sovereign debt crisis. But confidence was bolstered somewhat by stronger than expected US economic data.

Even as we approach the end of the year, the market outlook going into 2012 remains clouded. Trading activities may also start to wind down towards the year-end. Thinner trading volume could exacerbate price movements. As such, we expect investors to stay on the defensive pending greater clarity and unlikely to take up any major fresh positions in the coming days.

A big part of the uncertain outlook has to do with the eurozone debt crisis. In the past few weeks, confidence in the market has been shored up by stronger than expected US economic data. Following the mid-year slowdown, the world’s largest economy appeared to have regained some positive momentum.

For instance, the last labour market report painted a better than expected picture with some 120,000 new jobs created in November while the figures for September and October also saw upward revisions. The unemployment rate fell to 8.6%, the lowest level since the onset of the global financial crisis. Last week, claims for unemployment benefits fell to a 3½-year low. Manufacturing activities are gaining some traction while retails sales for the holiday season are looking fairly upbeat.

European growth will slow in 2012, possible even dipping into recession. Aside from the ongoing financial turmoil and credit crunch, broadening of austerity measures will damp economic growth. The big question is whether the US economy can continue to strengthen if the crisis in Europe takes a turn for the worse.

Talks of a breakup of the eurozone are now cropping up more regularly in mainstream discussions. This could be the worst-case scenario and it may result in chaos in the financial world.


The most recent summit among European leaders, again, failed to present the world with any comprehensive solution. Most of the countries have agreed to a new fiscal compact, designed to address flaws for the single currency’s current framework. But details are still lacking. German Chancellor Merkel has cautioned that there will be no quick fix for the crisis, which will take years to mend. In the meantime, Italy remains very much in the eye of the storm.

Asian stock markets did finish the week on a broadly positive footing last Friday, recouping some lost ground from the preceding few days. However, relevant bellwether indices for key markets still ended the week in the red.

On the local bourse, the benchmark FBM KLCI bucked the region’s downtrend. The benchmark index ended six points higher, at 1,466.2, for the week. However, much of the gains come from select index-heavyweights that were relatively thinly traded. Performance for the broader market was decidedly more ambivalent.

Trading volume fell back slightly with less than 1.66 billion shares traded daily, on average, compared with the daily average of almost 1.92 billion shares traded in the previous week. Trading interest remains focused on lower liner stocks.

Portfolio review
Stocks in our model portfolio underperformed the benchmark index last week. Total market value for our basket of 18 stocks was up by 0.03% to RM390,420, compared with the KLCI’s 0.42% gain.

Ten stocks in our portfolio closed with gains while five ended lower and three others traded unchanged. Bumi Armada (+3.8%), CIMB (+1.6%) and MyEG Services (+2.2%) were some of the notable gainers last week. At the other end, Benalec (-3%), DiGi (-1.9%) and BSDREIT (-1.3%) were among the big losers for the week.

Including our cash holdings, for which no interest income is imputed, our total portfolio value was up by a lesser 0.02% to RM666,085. Our total profits are very substantial at RM506,085, of which RM400,948 has already been realised from previous shares sales.

Last week’s gains lifted our model portfolio’s cumulative returns since inception to 316.3% on our initial capital of just RM160,000. We continue to outperform the KLCI, which was up by about 126.7% over the same period, by some distance.

Our cash holdings remain substantial at RM275,665, accounting for 41% of our total portfolio value. The relatively high percentage is, primarily, for prudence’s sake. We remain very cautious given the uncertain outlook. We kept our portfolio unchanged.

Note that this will be our last Portfolio review for this year. InsiderAsia wishes readers Merry Christmas and Happy New Year.


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, December 19, 2011.



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Benalec is making things happen

Benalec Holdings Bhd
(Dec 9, RM1.34)

Maintain buy with fair value RM2.85: Maintain “buy” on Benalec with an unchanged sum-of-parts-based fair value of RM2.85 per share. Benalec has signed an MoU with Rotary Engineering Ltd to co-develop an integrated petroleum storage facility for storing, blending and distributing crude oil and its derivatives on 101ha of reclaimed land at Tanjung Piai, southwest Johor.

With an initial capacity of one million cu m, the storage facility is scalable up to three million cu m and comes with jetties capable of handling very large crude carriers (VLCC).
Both parties will jointly construct and develop the first independent deepwater storage terminal for oil products at Tanjung Piai. Benalec will undertake the land reclamation, with Rotary handling the design, construction and maintenance of the terminal.

Singapore-based Rotary is the region’s largest engineering procurement, construction and maintenance (EPCM) provider for the oil and gas (O&G)/petrochemical industry in the region, having built almost half of the independent storage tanks in Jurong.

We are increasingly upbeat with Benalec’s astute landbanking moves, and the speed at which they are being executed. The Rotary deal comes just under one month after the group had secured development rights in principle to 2,123ha of prime seafront land in south Johor.his trailblazer deal validates our earlier conviction of Tanjung Piai’s strategic

positioning in complementing the vibrant Jurong petrochemical hub with its excellent location within the busy Straits of Malacca and close proximity to Singapore.

Most importantly, Benalec is in a sweet spot to monetise the deep development potential of its Tanjung Piai landbank with the solid backing of Rotary. The JV will be at the forefront to exclusively promote Tanjung Piai as an O&G/petrochemicals hub within Asia, notably in Malaysia and Singapore.

Benalec is set to gain from multiple new earnings streams via marine-related works and associated recurring income from the ownership of this proposed oil terminal.
By extension, this implies more upside to our fair value, whereby we have only assumed land sales of about 121ha each for FY13F/FY14F.

We continue to highlight Benalec as a cheaper but early stage play on the repositioning of south Johor as a rising O&G hub (fully diluted FY12F to FY14F price earnings ratio (PER) five to 10 times against earnings per share compound annual growth rate of 27%). The crystallisation of more landbanking deals in Tanjung Piai following this maiden oil terminal project would help prod a further PER re-rating, we believe. — AmResearch, Dec 9



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Benalec, S’pore firm to develop oil terminal

KUALA LUMPUR: Benalec Holdings Bhd has found a Singapore buyer for a plot of reclaimable land forming part of its ambitious reclamation project in southern Johor. The 100ha plot will be turned into an oil storage terminal in which Benalec will also own a small stake, partnering with foreign oil and gas firms.

Benalec, a marine construction specialist, yesterday announced that it has entered into a memorandum of understanding (MoU) with Rotary Engineering Ltd to collaborate in developing an independent oil storage terminal spanning 100ha in Tanjung Piai, located on the southwestern tip of Johor.

The land is part of Benalec’s entitlement to reclaim some 1,400ha in Tanjung Piai and 712ha in Pengerang. The Johor government has given “approvals in principle” to two units of Benalec for the reclamation projects.

Singapore-listed Rotary is a provider of engineering, procurement, construction (EPC) services specialising in the oil and gas industry. Rotary’s MoU with Benalec has lent more credence to the latter’s reclamation project in Johor, which surprised many in the industry.

“Benalec with its marine construction expertise will reclaim the land while Rotary will build the oil storage tanks,” said a source.

He explained that once the oil storage terminal is developed, a joint venture will be formed between Rotary, another oil and gas firm and Benalec to own and operate the terminal.

“Benalec will make profit from selling the reclaimed land to the JV, it will also take up a small stake in the JV which will provide it with recurring income,” he added.

Benalec stated that the terminal will be a tank facility for storing, blending and distributing crude oil and petroleum products with deepwater port facilities capable of handling very large crude carriers.

The terminal will have an initial storage capacity of one million cu m with subsequent phases to increase capacity to three million cu m, it said.

It is worth noting that the terminal, when it is developed, will be similar to Dialog Group Bhd’s facility in Pengerang, at the southeastern tip of Johor. So this could mark the start of a rivalry between the two companies, said an observer.

Dialog has begun the first phase of its 202ha independent deepwater terminal project in Pengerang. It has completed 5% of the first phase, which is scheduled for completion in early 2014.

Dialog’s terminal involves tankage facilities for handling, storing, blending and distribution of crude oil and petroleum products, together with marine facilities capable of handling large crude carriers with a water depth of up to 26m.


This article appeared in The Edge Financial Daily, December 9, 2011.



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Stocks to watch: S P Setia, Kencana, Boustead, Benalec

KUALA LUMPUR (Dec 9): The FBM KLCI could trade in a tight range on Friday, as the focus turns on the economic data from China over the next two days as well as the crucial summit of European policymakers.

Global markets, however, could edge upwards as the European Central Bank cut interest rates by a quarter of a point on Thursday to counter the twin threats of recession and deflation in the euro zone.

The ECB is also expected to unveil fresh measures to help banks hurt by the bloc's debt crisis, according to Reuters.

At Bursa Malaysia, the market could be given a boost from the slew of fresh corporate announcements.

Among the stocks are S P Setia Bhd, KENCANA PETROLEUM BHD [], BOUSTEAD HOLDINGS BHD [], Benalec Holdings, Bumi Armada Bhd and MELEWAR INDUSTRIAL GROUP BHD [].

S P Setia Bhd set a set a new full-year sales record in FY 2011 of RM3.29 billion, or a 42% increase from the previous record of RM2.31 billion set in FY 2010. The company has also set a target to achieve total new sales of RM4 billion in FY 2012.

For the financial year ended Oct 31, S P Setia’s net profit rose 30.2% to RM327.97 million from RM251.81 million, on the back of an increase in revenue to RM2.23 billion from RM1.75 billion in 2010.

However, the offer price cap set by Permodalan Nasional Bhd (PNB) in its takeover bid could restrain any upside. PNB offered RM3.90 per share and 91 sen per warrant.

Kencana’s unit, Kencana HL Sdn Bhd, secured a RM1 billion contract from Bechtel International Inc to fabricate and assemble a liquefied natural gas (LNG) processing plant in Australia.

The contract includes fabrication to loading of process equipment modules for Wheatstone Project LNG plant at Ashburton North, Western Australia.

Boustead subsidiary, Boustead Naval Shipyard Sdn Bhd secured a RM62 million job from the government to supply spare parts, maintenance, integrated logistic support and training for the 17th patrol vessel squadron of the Malaysian navy.

Benalec inked a MoU with Singapore-based Rotary Engineering Ltd to jointly develop an independent deepwater storage terminal for oil products in Tanjung Piai, Johor. The MoU would enable it to become a strategic business partner with Rotary in the equity ownership and development of the terminal in Tanjung Piai.

Bumi Armada's subsidiary Armada TGT Ltd has inked a US$341.1 million (RM 1.08 billion) loan with seven financial institutions to fund the conversion and installation of the FPSO Armada TGT 1 to be used in the Te Giac Tran Field, offshore Vietnam.

Its chief financial officer Shaharul Rezza Hassan said the facility was for seven years and represented about 80% of its capex value.

Meanwhile, Melewar’s unit Melewar Integrated Engineering Sdn Bhd (MIE) has inked an MoU with KAZMY Steel Company wherein MIE would be the contractor to design and build the MycroSmelt plant in Almaty, Kazakhstan.



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Benelec, Rotary Engr inks deepsea storage pact

Benalec Holdings Bhd and Singapore-listed company Rotary Engineering Ltd today jointly announced the signing of a Memorandum of Understanding (MoU) to develop an independent deepwater storage terminal for oil products in Tanjung Piai.

Strategically located at the south-western tip of Johor, Tanjung Piai offers easy access to international shipping routes in the Straits of Malacca and Singapore's Jurong Island, an international petroleum, petrochemicals and terminal hub.

Benalec managing director Vincent Leaw said: "We are delighted to have Rotary Engineering on board with us in our maiden foray into the high-growth oil and gas and petrochemicals industry.

"Tanjung Piai is very well positioned to complement the region's growth in the oil and gas industry, and to tap into the growing demand for the storage and distribution of petroleum and petrochemical products in Asia," he said when commenting on the MoU.

Meanwhile, Rotary Engineering chairman and managing director Roger Chia Kim Piow said: "We are excited to provide more value added services to our clients through this strategic partnership with Benalec."

He said with Tanjung Piai’s close proximity to Jurong Island, "we see much synergy between Singapore and Johor in further developing this area into an even larger international petroleum hub."

With an initial capacity of 1 million cubic metres (cbm), with subsequent phases to increase capacity to 3 million cbm on the total reclaimed land area of 101.25ha, the proposed terminal will be a petroleum storage facility for storing, blending and distributing crude oil and its derivatives.

The integrated storage facility will be completed with deepwater jetty facilities capable of handling very large crude carriers (VLCCs).

The two companies will jointly embark on a technical feasibility study, after which they will form a joint venture company by taking equity ownership and developing the first 1 million cbm oil storage terminal as well as other terminal projects.

In addition, the joint venture company will exclusively undertake the promotion of Tanjung Piai as an oil and petrochemicals terminal hub. -- Bernama



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Benalec signs MoU to jointly develop deepwater storage terminal in Johor

KUALA LUMPUR (Dec 8); Benalec Holdings Bhd has entered into a MoU with Singapore-based Rotary Engineering Ltd to jointly develop an independent deepwater storage terminal for oil products in Tanjung Piai, Johor.

The company said on Thursday that the MoU would enable it to become a strategic business partner with Rotary in the equity ownership and development of the terminal in Tanjung Piai.

Benalec said the proposed terminal would have an initial storage capacity of 1 million cubic metres (cbm), with subsequent phases to increase capacity to 3 million cbm on the total reclaimed land area of 250 acres.

The company said the project would be undertaken on a piece of 3,485 acres of land situated at the coast of Tanjung Piai.

The terminal will be a tank facility for storing, blending and distributing crude oil and petroleum products with deepwater port facilities capable of handling very large crude carriers, it said.

Rotary is an oil and gas infrastructure services company offering fully integrated engineering design, procurement, CONSTRUCTION [] and maintenance (EPCM) services to the oil and gas, petroleum, petrochemical and pharmaceutical industries.

Benalec said the total investment outlay, and its breakdown, of the proposed terminal are yet to be determined, pending the results of the technical feasibility of the development to be conducted.

“Hence, the sources of funding of the proposed terminal and the eventual issued and paid-up share capital (including the equity participation by Benalec via its subsidiary and Rotary) of the joint venture company are yet to be determined,” it said.

Benalec said it would utilise both internally generated funds and borrowings to finance its investment in the joint venture company, when formed.

“Benalec’s equity ownership and development in the independent deepwater storage terminal will result in an increase in its sources of sustainable and recurring income in the future,” it said.



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Benalec calls south Johor home

Benalec Holdings Bhd (Dec 1, RM1.36)
Mantain buy at RM1.35 with fair value of RM2.85: Maintain “buy” on Benalec Holdings with an unchanged sum-of-parts-derived fair value of RM2.85. Reuters recently reported that at least three loaded oil storage supertankers have been allowed to remain anchored in southern Malaysian waters.

This came three months after the government ordered the eviction of seven converted very large crude carriers (VLCCs) off Pasir Gudang in August. These vessels held a combined capacity of 1.9 million tonnes of crude/fuel oil.

Two vessels have since secured licences to stay in the area — the One Emerald leased by Mercuria and Nasa Unity (jointly utilised by Thailand’s PTT and Azerbaijan’s Socar). A third vessel, the Front Queen, chartered by Arcadia was also issued a similar permit although it was not one of the original seven VLCCs asked to leave the area.

Three of the original seven VLCCs have since moved to a new home. The Brilliant Jewel (housing Vitol’s fuel oil) has moved to the Port of Tanjung Pelepas.

The other two, Mayfair and Titan Venus, chartered by ConocoPhillips and Trafigura respectively, have moved to Linggi on the southwest coast of Peninsular Malaysia near Port Dickson.


This latest news strengthens our view of the immense development potential of Benalec’s Johor landbank as a future oil hub for landed storage, specifically for its Tanjung Piai landbank (3,485 acres). While the three VLCCs mentioned earlier have been granted an extended stay in Johor, they will eventually have to find a new permanent base, we believe.

Most of the VLCCs squatting near Johor are incumbents within the overcrowded Jurong petrochemical hub. To be sure, we gather that ConocoPhillips may not be ending its Mayfair lease soon.

The quit notice issued by the Malaysian government is to improve access along the shallow waterways of south Johor, possibly to accommodate Petroliam Nasional Bhd’s RM60 billion refinery and petrochemicals integrated development project.

New IMO requirements that require the gradual phasing out of single-hull vessels may somewhat curb demand for floating storage. The location of these fuel-carrying vessels is also farther away from the main bunker markets.

Singapore traders looking for more alternative storage space may still favour Johor over Indonesia’s Karimun island as reports indicate that cargo owners would have to pay 30% to 35% more for operational logistics. — AmResearch, Dec 1


This article appeared in The Edge Financial Daily, December 2, 2011.



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Benalec 1Q net profit marginally lower

KUALA LUMPUR: Marine construction firm Benalec Holdings Bhd’s net profit for 1QFY12 ended Sept 30 fell 3.44% to RM28.92 million from RM29.95 million a year ago.

In a filing with Bursa Malaysia yesterday, it said pre-tax profit decreased 9.51% to RM35.04 million from RM38.72 million.

This was on the back of 42.85% revenue growth to RM74.58 million from RM52.2 million.

Earnings per share was four sen while net assets per share was 52 sen as at Sept 30.

Quarter-on-quarter (q-o-q), Benalec’s net profit grew 26.8% to RM28.92 million from RM22.81 million.

In the notes to its financial results, Benalec attributed the improved q-o-q results to the recognition of higher profit from its marine construction division’s ongoing works and its vessel chartering division.

Pre-tax profit grew 13.6% to RM35.04 million from RM30.84 million, while revenue rose 13.07% to RM74.58 million from RM65.96 million a quarter earlier.

Benalec said its prospects for growth are bright due to the future projects that could come onstream including those in Penang, Malacca, Iskandar Malaysia, Port Klang and the Sarawak Corridor of Renewable Energy.

Benalec made the news when it secured the rights to reclaim two tracts of seafront land on the coasts of Tanjung Piai (3,485 acres) and Pengerang (1,760 acres) in Johor, measuring a total of 5,245 acres.

The land reclamation is for the proposed development of a petroleum and petrochemical hub and maritime industrial park.

In an earlier announcement, Benalec said it expects the Johor projects to contribute positively to its earnings and net assets from FY13.

Benalec expects the project to provide it a sustainable order book for the next 10 to 15 years.

Apart from domestic work, the company said it is also eyeing future projects in the Asia-Pacific region estimated at over RM170 billion.

Benalec shares yesterday gained two sen to RM1.36 with 3.52 million shares traded.


This article appeared in The Edge Financial Daily, November 30, 2011.



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Stocks to watch: JCY, RHB Cap, HL Bank, KPJ

KUALA LUMPUR (Nov 30): Stocks which could see trading interest on Wednesday include JCY International Bhd which finally turned around after a very difficult year where it was beset by weak hard-disk drive prices while technological changes saw companies pushing ahead with solid state drives.

Other stocks in focus are RHB CAPITAL BHD [], HONG LEONG BANK BHD [], KPJ HEALTHCARE BHD [], PROTON HOLDINGS BHD [] and Benalec Resources Bhd.

JCY posted net profit of RM26.44 million in the fourth quarter ended Sept 30, 2011, boosted by higher shipments and a favourable US dollar exchange. The fourth quarter financial performance was a turnaround from the net loss of RM25.18 million a year ago.

It also improved on-quarter but f0or the 12-month period, its earnings plunged 92% to RM14.55 million from RM173.76 million in the previous financial year. Its revenue fell 17.8% to RM1.671 billion from RM2.033 billion.

RHB Capital earnings rose 7.1% in the third quarter to RM376.73 million from RM351.35 million a year ago on lower allowance for impairment on loans, financing and other losses which was reduced to RM29.64 million from RM174.25 million a year ago.

Its earnings were also boosted by income from Islamic banking business at RM120.43 million compared with RM84.24 million a year ago.

Hong Leong Bank’s earnings rose 58.3% to RM407.11 million in the first quarter ended Sept 30, 2011 from RM257.20 million a year ago following the consolidation of the enlarged group after the acquisition of EON CAPITAL BHD []. Its revenue increased by 69.8% to RM916.73 million from RM539.78 million.

KPJ Healthcare Bhd recorded a 14% increase in its earnings to RM34.49 million from RM30.23 million a year ago. Its profit before taxation for the current quarter has increased by 11.1% to RM47.9 million from RM43.1 million a year ago. It declared an interim dividend of 2.5 sen per 50 sen share.

For the nine-month period, KPJ’s earnings rose 6.4% to RM92.16 million from RM86.64 million in the previous corresponding period.

Proton’s earnings fell 76.4% to RM15.55 million in the quarter ended Sept 30, 2011 from RM65.92 million a year ago due to higher expenses incurred by the Lotus Group International Ltd. Its revenue was a marginal 1% higher at RM2.263 billion from RM2.240 billion a year ago while earnings per share were 2.8 sen compared with 12 sen.

However, the national car maker said the group posted higher pre-tax profit of RM35 million compared to RM12 million in the first quarter.

Benalec’s first quarter earnings slipped 3.4% to RM28.93 million from RM29.96 million a year ago. Its revenue was however, 42.8% higher at RM74.58 million compared with RM52.21 million while EPS was 4.0 sen.

Benalec said when compared to the preceding quarter, its revenue rose 13.1% or RM8.6 million mainly due to increase in marine CONSTRUCTION [] income.

“Profit after tax of the group of RM28.9 million for the current quarter is higher compared to the preceding quarter of RM22.8 million, representing an increase of RM6.1 million or 26.8% mainly due to recognition higher profit from marine construction works in progress and vessel chartering division,” it said.



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Dialog: Benalec not a rival

KUALA LUMPUR: Integrated oil and gas service provider Dialog Group Bhd does not think it will be affected by Benalec Holdings Bhd’s land reclamation project in south Johor.

“I don’t think [Benalec is a competitor] because we are different. We are very focused on our [oil terminal] project [in Pengerang], we don’t know what they are doing,” said Dialog executive chairman Ngau Boon Keat after the AGM and EGM yesterday.

“We have our own clients and we have our own purpose. We have taken about three years to get where we are. I mean the world is so big, anybody can do what they want to do,” he said.

On Nov 10, Benalec announced that it had secured the rights to reclaim two large tracts of land in south Johor — Tanjung Piai (3,485 acres) and Pengerang (1,760 acres).

Ngau: The world is so big, anybody can do what they
want to do.

Benalec said the reclamation is to facilitate the development of the petroleum and petrochemical hubs and maritime industrial parks situated on the Pengerang and Tanjung Piai coasts.

However, Dialog has begun the first phase of its 500-acre independent deepwater terminal project in Pengerang. It has completed 5% of the first phase, which is scheduled for completion in early 2014, according to Ngau.

The terminal involves tankage facilities for handling, storing, blending and distribution of crude oil and petroleum products, together with marine facilities capable of handling large crude carriers with a water depth of up to 26m.

The terminal will be jointly developed by Dialog, Vopak Terminal Pengerang BV and the State Secretary of Johor Inc (SSJI). A joint venture company will be formed in which Dialog and Vopak will hold 90% equity interest with the rest held by SSJI.

Ngau said Dialog will mainly focus on the Pengerang project because of its size. He said the Pengerang Terminal is 10 times bigger than the Kertih Terminal — the first centralised tankage facility (CTF) project by Dialog — consisting of petrochemical tanks with storage capacity of 400,000 cubic metres.

The entire development of Pengerang Terminal will eventually support about five million cu m of storage capacity and will take about 10 years to fully develop.

On its ongoing expansion of tank terminals in Tanjung Langsat in Johor, Ngau said Dialog is promoting more investments in the project.

He said Dialog plans to start building Langsat Terminal Three after the completion of Langsat Terminal Two, which is expected to be concluded in December this year. Langsat Terminal One was completed in August.

Ngau said Dialog will continue to look for opportunities to complement its services, such as its purchase of a 51% stake in Anewa Engineering Pvt Ltd this year. Anewa is an outsourcing company which provides engineering design to customers, mainly multinational companies in India, the Middle East and Southeast Asia in the oil, gas and petrochemical industry.

On the weakening global economic environment, Ngau said Dialog will not be severely affected.

“Our business model does not depend on just building new plants or new investments. Our focus is on recurring income, such as from terminals, maintenance, and special product services — where oil prices do not matter,” he said.

He said recurring income accounts for about 80% of Dialog’s revenue.

Dialog recently posted a 34.5% increase in net profit for its 1QFY12 ended Sept 30. Net profit rose to RM44.54 million from RM33.09 million a year ago, while revenue increased 35% to RM355.2 million from RM263.08 million.

As at Sept 30, Dialog had cash reserves of RM215 million against RM123.4 million in short- and long-term borrowings, translating into a net cash position of RM91.6 million.

Dialog said the improved performance was due to higher contribution from its operations in Australia and New Zealand. The consolidation of Fitzroy Engineering Ltd, a fabrication and multi-discipline engineering company based in New Zealand, was also a major contributor to the increase, it said.

For FY11 ended June 30, Dialog posted a 28.7% increase in net profit to RM152.3 million from RM118.3 million, on a 6.1% increase in revenue to RM1.21 billion from RM1.14 billion a year ago.

Dialog closed one sen lower at RM2.40 yesterday.


This article appeared in The Edge Financial Daily, November 25, 2011.



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Market volatility to continue

KUALA LUMPUR: The markets are expected to be volatile in the week ahead, as the news flow from the eurozone continues to swing like a pendulum. On the minds of investors is whether the governments in Europe and the US can resolve the growing debt problems.

Investors are unsure whether the European Central Bank will find a way to act as a lender of last resort in the manner of the US Federal Reserve.

In Malaysia, while the economy grew at a faster pace of 5.8% year-on-year in 3Q from 4.3% in 2Q, there were concerns over the headwinds in 4Q12. RHB Research Institute said it tweaked its real GDP growth estimate for 2011 upwards to 5% from 4.5%.

“However, we are keeping our 2012 forecast unchanged and expect economic growth to weaken to 3.6%, given that the eurozone’s sovereign debt crisis is still lingering and the risk of it worsening remains high, and on the back of a slow US economic growth,” it said.

Affin Investment Bank’s head of retail research Dr Nazri Khan said 3Q GDP results showed the existing financial conditions in the country remain conducive for growth.

“Our view is that the government and Bank Negara Malaysia should continue with the current environment of low interest rates, ensure ample liquidity in the financial markets and easy credit accessibility, to bolster domestic demand,” he said.

Nazri said key support for future GDP growth would definitely be private investment.

“As the projects under the ETP [Economic Transformation Programme] kick off to higher gear, we expect stronger private investment and other side effects, such as bond and equity income growth, to bring more contribution to the economy,” he said.

As for equities, Nazri believes the FBM KLCI is now ripe for a pullback towards a lower range of 1,450 to the 1,430 support level.

“We believe the global equity market will be affected by the widening European debt crisis following disappointing French and Spanish bond auctions and downgrade warnings from ratings agency on the US’ large banks,” he said.

RHB Research, in its market strategy, said the volatile news flow would continue as long as there are no firm and detailed solutions, forestalling the equities market correction it had been anticipating.

“We continue to advise caution,” it said, pointing out that its top picks are companies with stable cash flow and those with above-market dividends.

Its stocks which offered more trading flavour and near-term trends were UEM Land Bhd, Top Glove Corp Bhd and WTK Holdings Bhd.

It said UEM Land is expected to benefit as oil and gas projects in Johor will continue to raise land values and provide catalysts for the share price.

It also favoured Top Glove as lower auto industry demand — due to Thailand’s severe floods — could impact the latex price in the near term.

“We see potential for the stock to move higher, although we recognise its premium valuations relative to its sector peers,” it said.

RHB Research added that WTK would benefit from a rise in timber prices in 2012 as Japan’s post-tsunami construction picks up. It explained that WTK is the purest timber play for Japan and the recent share price pullback saw it trading at relatively inexpensive valuations against the less liquid peers.

Other stocks to watch include IOI Corp Bhd, Masterskill Education Group Bhd, Affin Holdings Bhd and Benalec Holdings Bhd.

IOI’s net profit for 1QFY12 ended Sept 30, 2011, fell 48.2% to RM258.09 million from RM498.13 million a year ago, due mainly to unrealised translation loss on foreign currency denominated borrowings of RM271.7million. The loss was higher than analysts’ estimates.

Masterskill’s net profit for 3QFY11 ended Sept 30 fell 78.8% to RM5.55 million from RM26.18 million a year ago mainly due to lower student enrolment and higher overheads.

Affin reported an improvement in its earnings, which rose 17.5% to RM135.19 million in 3QFY11 ended Sept 30 from RM115.01 million a year ago, boosted by higher writebacks and higher Islamic banking income. It declared an interim dividend of 12 sen per share.

The Edge weekly reported that Benalec’s recent foray into land reclamation at the oil and gas hub in Johor has raised some eyebrows.

If all goes well, the project will boost the total outstanding gross development value of its projects from about RM1.5 billion to over RM15 billion.


This article appeared in The Edge Financial Daily, November 21, 2011.



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Stocks to watch: IOI Corp, MEGB, Affin, Benalec, Texchem

KUALA LUMPUR (Nov 19): Sentiment is expected to stay cautious in the week ahead as investors worry about whether the governments in Europe and the US could resolve the growing debt problems.

Reuters said a major question has been whether the European Central Bank will find a way to act as a lender of last resort in the manner of the U.S. Federal Reserve. Speculation has grown the ECB could lend money to the International Monetary Fund to bail out some euro zone members.

The Dow Jones industrial average gained 25.43 points, or 0.22%, to 11,796.16. The S&P 500 dipped 0.48 point, or 0.04%, to 1,215.65. The Nasdaq Composite lost 15.49 points, or 0.60%, to 2,572.50. However, for the week, the Dow fell 2.9%, the S&P dropped 3.8% and the Nasdaq lost 4%.

As for Malaysia, while third quarter GDP expanded at a stronger pace of 5.8% on-year from a revised 4.3% in the second quarter, there were gnawing concerns about the headwinds in the fourth quarter and 2012.

RHB Research Institute said it tweaked its real GDP growth estimate for 2011 upwards to 5% from 4.5%.

“However, we are keeping our 2012 forecast unchanged and expect the economic growth to weaken to 3.6%, given that Eurozone’s sovereign debt crisis is still lingering and risk of it worsening remains high, and on the back of a slow US economic growth,” it said.

Stocks to watch on Monday include IOI CORPORATION BHD [], Masterskill Education Group Bhd (MEGB), AFFIN HOLDINGS BHD [], Benalec Holdings Bhd and TEXCHEM RESOURCES BHD [].

IOI’s net profit for the first quarter ended Sept 30, 2011 fell 48.2% to RM258.09 million from RM498.13 million a year ago, due mainly to unrealised translation loss on foreign currency denominated borrowings of RM271.7million. The loss was higher than analysts’ estimates. The PLANTATION [] company’s revenue for the quarter rose 17.9% to RM4.15 billion from RM3.52 billion a year ago.

Meanwhile, MEGB’s net profit for the third quarter ended Sept 30, 2011 fell 78.8% to RM5.55 million from RM26.18 million a year ago. It attributed the poorer financial performance mainly to lower student enrolment and higher overheads. MEGB’s revenue for the quarter fell to RM61.19 million from RM80.68 million in 2010.

For the nine months ended Sept 30, MEGB’s net profit fell 47.2% to RM39.72 million from RM75.29 million in 2010, while its revenue fell 14.5% to RM200.67 million from RM234.83 million.

However, Affin reported an improvement in its earnings, which rose 17.5% to RM135.19 million in the third quarter ended Sept 30, 2011 from RM115.01 million a year ago, boosted by higher write-backs and higher Islamic banking income.

Its revenue increased 13.7% to RM680.12 million from RM597.82 million a year ago while earnings per share were 9.05 sen compared with 7.70 sen. It declared an interim dividend of 12 sen a share.

The Edge weekly reported that Benalec’s recent foray into land reclamation works at the oil and gas hub in Johor has raised some eyebrows. But if all goes well, the project will boost the total outstanding gross development value of its projects from about RM1.5 billion to over RM15 billion, said the report.

Another company to watch is Texchem on expectations it may unlocking value of some of its assets.

RAM Rating Services Bhd said the corporate exercise by Texchem would generate significant net cash inflows that will help to considerably strengthen its balance sheet and liquidity position.

However, the ratings agency was also concerned about its financial health. It downgraded the long-term rating of Texchem’s RM100 million debt notes from A3 to BBB1 with a negative outlook on rising concerns about the company's weakening financial performance.

RAM Ratings said the downgrading of Texchem’s long-term rating was based on its weakened business and financial performance.



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Positive takeaways from Benalec’s investor briefing

Benalec Holdings Bhd (Nov 14, RM1.40)
Maintain buy with fair value of RM2.85: Maintain “buy” on Benalec Holdings with an unchanged sum-of-parts-derived fair value of RM2.85 per share. Benalec held an analysts’ briefing last Friday to highlight its success in securing the rights to reclaim and own two large tracts of land in South Johor — Tanjung Piai (3,485 acres) and Pengerang (1,760 acres).

We came away from the briefing feeling more encouraged about Benalec’s future prospects. The response to the briefing was overwhelming with over 50 analysts and fund managers attending. To be sure, Business Times reported that the Johor project may fetch a combined gross development value (GDV) of RM20 billion over the next 10 to 15 years.

The immediate focus, however, will be on harnessing the development potential of its Tanjung Piai landbank. Specifically, Benalec is working hard to monetise 2,000 acres under Phases 1 & 2. This piece of land has deep development appeal as a future oil hub because of its natural deepwater characteristics and strategic location adjacent to the vibrant petrochemical hub in Jurong.

The Johor project is scheduled to kick off by end-2Q12, implying that contributions will filter through from FY13F onwards. Having received approval in principle from the Johor government, Benalec is intensifying efforts to market the land, particularly to the oil and gas (O&G) and petrochemical incumbents in Jurong, Singapore.

The management expressed its confidence in the viability of its other landbank in Pengerang, although development will likely track the progress of Petroliam Nasional Bhd’s ambitious RM60 billion refinery and petrochemicals integrated development (Rapid) initiative. Financing risk for the project will be reduced by: (i) back-to-back execution of reclamation with off-takers; and (ii) potential structuring of upfront payments upon issuance land titles.

To be sure, net gearing is forecast to improve from 0.7 times in FY12F to 0.6 times and 0.3 times in FY13F and FY14F.

Our current forecast for Benalec is only anchored on the 2,000-acre Tanjung Piai Phases 1 & 2 with land sales of 300 acres each over the next two years. Yet, the earnings impact is already significant with FY13F net profit forecasts at RM169 million (+51%) and FY14F at RM216 million (+27%) on pre-tax margins of 28% to 30%.

Trading at fully diluted FY12F to FY14F price-earning ratios (PER) of only five and 10 times against robust earnings per share compound annual growth rate of 27%, Benalec is an attractive play on the repositioning of South Johor as an emerging O&G hub.

The stock is poised for a significant PER re-rating upon contract delivery, with a maiden off-taker possibly in the offing soon. — AmResearch, Nov 14


This article appeared in The Edge Financial Daily, November 15, 2011.



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Benalec landing down south with oil hub and marine park

Benalec Holdings Bhd (Nov 11, RM1.35)
Maintain buy with revised fair value RM2.85 from RM2.22: We maintain our “buy” call on Benalec Holdings Bhd and raise our fair value from RM2.22 per share to RM2.85 per share — based on our revised sum-of-parts value under our base case assumption for its new ventures in Johor.

Benalec has announced to Bursa Malaysia it has secured the rights to reclaim and own two large tracts of prime seafront land — at Tanjung Piai (3,485 acres or 1,410.3ha) and Pengerang (1,760 acres) on the southern tip of Johor.

The group is leveraging its core competencies in marine construction to create strategically located land with a water depth of more than 15m for the oil and gas and maritime industries.

These transformational deals — leveraging highly industrialised developments — will be very significant over the next 10 to 15 years.

In the immediate term, Benalec’s primary focus will be on the 2,000 acres under Phases 1 and 2 in Tanjung Piai. Its development potential as an oil and gas hub is high due to its strategic location within the busy Straits of Malacca and close proximity to Singapore.

Tanjung Piai is earmarked to complement the vibrant petrochemical hub on Jurong Island, which is already overcrowded. The key success factors are land arbitrage, deepwater depth (more than 20m deep), easy access for very large crude carriers (VLCC) and a large hinterland. In gauging the potential development value of Tanjung Piai, the latest land cost in Jurong Island is about S$116 (RM285) per sq ft.


But, the litmus test is in securing off-takers for the land. This will act as the primary catalyst for Benalec’s share price, we believe. Construction on Phase 1 is scheduled to commence by end-2Q12, as we expect the group to secure a major off-taker that would act as a trailblazer sometime soon.

We are not unduly concerned about the funding for Phases 1 and 2 of Tanjung Piai (estimated at RM400 million through a mixture of new debt/equity) that will likely be partly used for the payment of land premiums. The reclamation would be executed in stages once Benalec has secured off-takers without stretching its cash flows.

We have raised FY13F/FY14F net profit forecasts by 21% to 23%, anchored on our base case assumptions of 2,000 acres in Tanjung Piai, pre-tax margins of 28% to 30% and a higher new order book target of RM0.9billion to RM1billion (+12% and +25%).

Benalec is a cheaper but early-stage play on the repositioning of south Johor as an emerging oil and gas hub. Valuations are compelling at FY12F/FY14F price-earnings ratio of only five times. — AmResearch, Nov 11


This article appeared in The Edge Financial Daily, November 14, 2011.



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KLCI succumbs to profit taking, extends losses

KUALA LUMPUR: The FBM KLCI reversed its earlier gains and slipped into negative territory on Friday, Nov 11 as some mild profit taking on select blue chips weighed on the index.

The FBM KLCI fell 3.90 points to 1,468.75, weighed by losses at select blue chips.

Gainers led losers by 425 to 310, while 282 counters traded unchanged. Volume was 2.07 billion shares valued at RM1.23 billion.

At the regional markets, Hong Kong’s Hang Seng Index closed 0.91% higher at 19,137.17, South Korea’s Kospi jumped 2.77% to 1,863.45, Taiwan’s Taiex up 0.80% to 7,367.29, Japan’s Nikkei gained 0.16% to 8,514.47 and the Shanghai Composite Index edged up 0.06% to 2,481.08, while the Singapore Straits Times Index added 0.14% to 2,790.94.

On Bursa Malaysia, DiGi and PPB fell 22 sen each to RM33.78 and RM16.62, Ya Horng down 18 sen to 42 sen, Sunchirin 14 sen to RM1.38, Uzma 13 sen to RM1.68, Petronas Dagangan 12 sen to RM16.10, Tasek and Genting 10 sen each to RM8 and RM10.58, while Benalec fell eight sen to RM1.35.

Compugates was the most actively traded counter with 79.8 million shares traded. The stock gained half a sen to 8.5 sen.

Other actives included JCY International, Takaso, iDimension, Tiger, Karambunai and Rimbunan Sawit.

Meanwhile, gainers included United PLANTATION []s, BLD Plantations, CI Holdings, Harvest Court, Manulife, Dutch Lady, BAT, TSH Resources and GAB.

UM Land grows Iskandar real estate cheaply

KUALA LUMPUR: United Malayan Land Bhd (UM Land) has proposed to acquire 332.68 acres (133ha) in Iskandar Malaysia, Johor, through the purchase of Tentu Teguh Sdn Bhd. This will expand its landbank there at the low price of just over RM4 per sq ft (psf).

The property development company announced to Bursa Malaysia yesterday that it had entered into a conditional share sale agreement to acquire Tentu Teguh for RM10.98 million cash. Upon completion, Tentu Teguh will become a wholly-owned subsidiary of UM Land.

If the proposal is approved, UM Land will subsequently receive 332.68 acres from Tentu Teguh’s February 2011 purchase from SAP Holdings Bhd.

The 332.68 acres comprise three parcels of freehold land in Felda Cahaya Baru in Johor Bahru. Tentu Teguh bought the land from SAP for RM45 million and has so far paid RM2.55 million.

UM Land will make the remaining payment of RM42.45 million for the land to SAP and Cahaya Baru Development Bhd and will absorb Tentu Teguh’s liabilities up to a maximum of RM9.3 million.

Based on the purchase price, the assumption of Tentu Teguh’s liabilities plus the remaining payments for the land, The Edge Financial Daily estimates the total effective cost to UM Land for the 332.68 acres will be RM62.73 million, or RM4.33 psf.

An analyst deems the price attractive given its strategic location within Iskandar Malaysia and its proximity to the major ports and petroleum hubs in the southern tip of the state.


“[The land] is within close proximity of UM Land’s flagship township Bandar Seri Alam and surrounding developments such as Taman Scientex, Bandar Bistari Perdana, Kota Masai and Lakehill Resort City,” said the company.

The company said fast expanding townships in the vicinity will provide a good base of potential buyers for its proposed developments on the land.

Pasir Gudang Port and the Tanjung Langsat industrial area are also close to the land. Tanjung Langsat is slated to be developed into a port for petrochemicals and non-edible chemicals and storage facilities. Ten multinationals have already committed to invest RM4 billion in the estate over the next few years.

Benalec Holdings Bhd announced yesterday that it had won approval from the Johor government to reclaim 1,760 acres on the coast of Pengerang and 3,485 acres on the Tanjung Piai coast in Johor, close to UM Land’s tract (please see separate story).

Benalec plans to develop the reclaimed land into a hub for petroleum and petrochemicals as well as maritime industrial parks.

Its ambitious plans, the large presence of oil and gas projects on the coast and the growing recognition of Iskandar Malaysia auger well for UM Land’s large landbank in the area.

A market observer notes that UM Land’s cost for the latest piece of land will likely be much lower than Benalec’s reclamation costs for the new project.

In a separate filing yesterday, UM Land announced that it had received approval of its earlier proposal to Bursa Malaysia in August to acquire a 8.89-acre parcel of land in Plentong, Johor, through its indirect wholly-owned subsidiary, PMS Services Sdn Bhd.

The purchase was made with a cash consideration of RM19.37 million, or RM50 psf, from TCB Realty Sdn Bhd.

UM Land said in its proposal filed with Bursa Malaysia in August that it “intends to build a commercial and retail complex to complement the existing amenities and facilities within the township”. The estimated gross development value of the project is RM90 million.

Despite a relatively small market capitalisation of RM426 million, UM Land has a large landbank of close to 2,000 acres located in Iskandar Malaysia and Selangor, as well as several niche projects in downtown Kuala Lumpur.

Its two main townships in Iskandar are Seri Alam and Taman Seri Austin, while its Bangi project is Bandar Seri Putra.

While UEM Land Holdings Bhd is synonymous with Iskandar Malaysia, UM Land is also one of the largest landowners there, with a landbank of around 1,790 acres following the latest purchase.

The company’s major shareholders include CapitaLand Ltd.

UM Land’s shares were untraded yesterday, and last closed at RM1.41. The stock is trading at less than half its net assets per share of RM2.95 as at June 30, after adjusting for a one-for-four bonus issue in August.


This article appeared in The Edge Financial Daily, November 11, 2011.