Stocks to watch: Tebrau Teguh, MIG, Southern Steel, IJM, AZRB

KUALA LUMPUR (Feb 1): TEBRAU TEGUH BHD [] will be the stock to watch when the Malaysia market resumes trading after a one-day break for the Federal Territory holidays on Wednesday.

Other stocks which could also see trading interest are MELEWAR INDUSTRIAL GROUP BHD [] (MIG), SOUTHERN STEEL BHD [], IJM CORPORATION BHD [] and AHMAD ZAKI RESOURCES BHD [] (AZRB) following the latest corporate developments.

In a surprising turn of events, Tebrau Teguh is being taken over by Iskandar Waterfront Holdings Sdn Bhd (IWH), which is offering 76 sen per share – or just one sen above the pre-suspension price of 75 sen. Its net asset per share was 75 sen as at Sept 30, 2011 while it had RM44.52 million in cash and bank balances.

IWH is buying a 33.15% stake in Tebrau Teguh Bhd, comprising of 22 million shares, from Kumpulan Prasarana Rakyat Johor Sdn Bhd (KPRJ). The proposed acquisition would trigger a mandatory take-over offer by IWH for the remaining shares.

While the one sen premium is insignificant, the upside for the low-key Tebrau Teguh is that it has been appointed to develop 413 acres of land in Pengerang, Kota Tinggi, Johor.

The Johor government has appointed Tebrau Teguh to develop the site for a comprehensive mixed development project. The land, belonging to the state government, is within the Johor oil & gas Industry hub.

Meanwhile, MIG has proposed a corporate exercise involving a share capital reduction and a renounceable rights issue of up to 150.348 million new shares.

The rights issue, at an indicative price of 40 sen per rights share, the rights share would enable it to raise between RM21.97 million and RM60.14 million.

Southern Steel Bhd swung into the red with losses of RM5.52 million in the second quarter ended Dec 31, 2011 due to lower margins and foreign exchange translation losses. Its revenue and loss before tax were RM928.84 million and RM6.40 million respectively as compared with the preceding quarter’s revenue and profit before taxation of RM734.0 million and RM17.3 million.

IJM and AZRB, whose shares had rallied after the announcement by Mass Rapid Transit Corporation Sdn Bhd for the Sungai Buloh-Kajang phase, confirmed on Tuesday they had officially received the letters of acceptance.

IJM’s phase is for package V5 of the Mass Rapid Transit costing RM974.78 million while AZRB’s contract includes the completion of viaduct guideway and other works from Plaza Phoenix to Bandar Tun Hussein Onn station valued at RM764.91 million.



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Melewar Industrial Group proposes share capital reduction, rights issue

KUALA LUMPUR (Jan 31): MELEWAR INDUSTRIAL GROUP BHD [] (MIG) has proposed a corporate exercise involving a share capital reduction and a renounceable rights issue of up to 150.348 million new shares.

MIG said on Tuesday the rights issue, at an indicative price of 40 sen per rights share, the rights share would enable it to raise between RM21.97 million and RM60.14 million.

As for the share capital reduction, this would involve cancelling 75 sen of the par value of every existing RM1 share. The share capital reduction would not result in any adjustment to the share price and existing number of shares issued in the company.

MIG explained that its shares had been trading on Bursa Securities below its existing par value of RM1 per share since April 15, 2011. The last traded price on Jan 27 was 53 sen, which was a discount of 47.0% to the par value of RM1 per share.

“The current market price of MIG's shares is, therefore, not conducive for MIG to embark on any fund raising exercise and/ or corporate exercise involving new issuance of shares,” it said.

MIG added the proposed share capital reduction would enable it to undertake the rights issue at an indicative price of 40 sen each.

It said the renounceable rights issue of 150.348 million new shares would be on the basis of two rights shares for every three existing shares held.

As at Jan 27, 2012, MIG’s paid-up was RM226.75 million, comprising 226.755 million shares of RM1 each including 1.23 million treasury shares.

The board has resolved to cancel all the existing 1.23 million treasury shares prior to the implementation of the proposals, which would reduce the paid-up by 1.23 million.

As for the share capital reduction, MIG said that 75 sen of the par value of every share of RM1 each would be cancelled.

Upon completion of the proposed treasury shares cancellation, the proposed share capital reduction will reduce the paid-up to RM56.38 million, comprising of 225.522 million MIG shares.

“The proposed share capital reduction will give rise to a credit of RM169.14 million which will be transferred to a non-distributable capital reserve account of MIG,” it said.

MIG added the proposed rights issue would be implemented after the completion of the proposed share capital reduction.



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MIG to build steel plant in Kazakhstan

KUALA LUMPUR: Melewar Industrial Group Bhd (MIG) yesterday signed a memorandum of understanding (MoU) with Kazmy Steel Company of Kazakhstan in which MIG is to be the turnkey design-and-build contractor for a mycrosmelt steel plant in Almaty.

Undertaking the job in Kazakhstan will be MIG’s 70% unit Melewar Integrated Engineering Sdn Bhd (MIE), which will act as the project manager to provide the necessary expertise, experience and resources to design and build the plant.

The proposed investment in the plant is estimated at RM178 million via a joint venture by MIE and Kazmy. Of the RM178 million, 30% will come directly from shareholders and 70% via bank borrowings from Kazakh financial institutions.

“Kazakhstan is big as it is the ninth largest country in the world. It is a major producer of steel especially in the northern region near Astana,” MIG chairman Tunku Ya’acob Tunku Abdullah said.

Almaty is the largest city in Kazakhstan, located almost 2,000km south of Astana, the capital of the former Soviet republic, where the country’s steel production facility is located.

The plant is likely to have an annual capacity of 100,000 tonnes per annum and provides cheaper long products, including integrated re-bars, said Tunku Ya’acob.

While the cost of transporting steel through Astana to Almaty is high, MIG’s mycrosteel technology has helped to maintain the costs.

Construction work on the plant is slated to start in the second quarter of 2012, with the targeted completion date in 2013.

For 1Q ended Sept 30, 2011, MIG incurred a net loss of RM15.65 million on RM218.46 million revenue. For the corresponding period a year ago, the company suffered a net loss of RM7.46 million from RM157.93 million in sales.

Tunku Ya’acob added that the group intends to exit the power generation business in Thailand by selling its plant there to concentrate on the steel production business.

MIG’s power generation arm contributed RM75.82 million in revenue for the quarter and it accounted for RM13.32 million of MIG’s RM16.48 million loss before tax.

MIG ended trading yesterday at 49.5 sen, slipping half a sen.


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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Melewar signs MoU with KAZMY Steel to build Kazakh steel plant

KUALA LUMPUR (Dec 8): MELEWAR INDUSTRIAL GROUP BHD [] subsidiary Melewar Integrated Engineering Sdn Bhd (MIE) has signed a memorandum of understanding (MoU) with KAZMY Steel Company (KAZMY) to appoint MIE as the turnkey design and built contractor for the MycroSmelt plant in Almaty, Kazakhstan.

KAZMY is the special purpose vehicle designated to launch the project in Kazakhstan, to fulfill the high demand for top quality building materials in the republic, using MycroSmelt TECHNOLOGY [].

The planned investment is estimated to cost RM178 million, and will be represented by an equal 50% participation by both MIE and KAZMY, in which 30% will be made directly by shareholders of the joint venture and 70% will be in the form of bank lending from Kazakh financial institutions.

Under the MoU signed on Thursday, MIE would be the lead technical development engineer and the project manager.

It will provide the necessary expertise, experience and resources to design and build the MycroSmelt plant.

The CONSTRUCTION [] is planned to start in second quarter of 2012, with its target completion date in 2013.

The projected annual capacity of the MycroSmelt plant is expected to be approximately 110,000 tonnes per year.

Melewar executive chairman Tunku Datuk Ya'acob Tunku Tan Sri Abdullah said the MycroSmelt technology provided tremendous cost savings in the production of integrated re-bar and other long product, as it uses high efficient induction furnaces.

"With energy efficiency of a large-scaled facility, the MycroSmelt Steel facility can be located close to urban areas and companies can enjoy savings from not having to transport scrap iron over long distances, and transporting the finished steel products back again.

"MycroSmelt technology enables to smelt and process scrap iron in small quantities, with comparable unit operating cost and capital expenditure of large scale facilities," he said.

The MoU between MIE and KAZMY was signed by Tunku Ya'acob and Temujin Nukenov, the managing director of the Kazakhstan-Malaysia Chamber of Commerce and Industry (KMCCI) representing KAZMY.



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Stocks to watch: Decisive debt resolution crucial

KUALA LUMPUR: The performance of markets, including Bursa Malaysia, in the week ahead will hinge on a decisive debt resolution by European officials.

Markets are hoping that the European Council meeting will deliver a comprehensive programme of measures to address the European financial crisis.

Affin Investment Bank head of retail research Dr Nazri Khan expects the FBM KLCI to trend moderately higher this week, but the strength would be determined by the measures to resolve the European debt crisis.

“We notice that the global equities are moving beyond the stalled European debt talks and have shown a slight risk-on attitude late last week,” he said.

Nazri expects comments from France and Germany on the debt crisis resolution via leveraging bailout funds and recapitalising troubled banks to relieve investors.

“While there are scant specifics on the solution, we expect the details to be released in the EU summit to produce more equity strength. We therefore believe the reaction to the eurozone contagion threat may have been slightly exaggerated and that diminished risk concerns could be a positive factor this week,” he said.

As for Malaysia, he said the easing inflationary pressures and the signing of a five-year agreement on Malaysia-China joint development programme to be broadly supportive for local stocks.

“Further, we anticipate the strong floods in Thailand to divert some foreign investment to selective local sectors especially tourism, healthcare and automotive sectors. Finally, we expect the early corporate results to kickstart a mild year-end rally,” he added.

However, Nazri said he expects more volatile trading and he is still cautious on a longer term prospects as the underlying economic fundamentals for the US and Europe remain unchanged.

Over the last two weeks, local funds had been providing the direction for the market but he was concerned global economic conditions could enter into a double dip. Instead, he urged investors to wait to pick fundamentally strong, well-managed companies with strong defensive qualities at lower prices.

Among the stocks to watch are Tenaga Nasional Bhd (TNB), Maxis Bhd, Tanjung Offshore Bhd, Daibochi Plastic and Packaging Industry Bhd and SILK Holdings Bhd.

TNB will announce its financial results for the fourth quarter (4Q) ended Aug 31 but analysts expect it to record another quarter of losses as the shortage of gas supply from Petroliam Nasional Bhd (Petronas) forced it to burn the more expensive oil and distillate.

RHB Research Institute has maintained its “underperform” call on the power company with an unchanged indicative fair value of RM4.74 based on unchanged target CY12 price-to-earnings ratio of 12 times.

“Due to ongoing gas shortage from maintenance at Petronas’ liquefied natural gas plants and delays for the Bekok C bypass, TNB will likely record a loss in 4Q, possibly close to that seen in 3Q (net loss RM460 million),” it said.

TNB has proposed to issue RM5 billion in Islamic debt notes to finance the development of the 1,010MW coal-fired power plant in Manjung, Perak. The tenure is 28 years.

Meanwhile, Maxis expects significant gains from the provision of its 3G radio access network to U Mobile Sdn Bhd under the country’s first landmark network sharing and alliance agreement for an initial period of 10 years.

The arrangement also includes long-term evolution sharing, depending on the availability of the spectrum and technology.

Tanjung was awarded a RM27 million contract by Petronas Carigali Sdn Bhd to provide three offshore support vessels for up to two primary years. Tanjung said its unit Offshore Services Sdn Bhd was awarded the contract on Oct 20.

Daibochi’s net profit fell 5.8% to RM4.54 million in 3Q ended Sept 30 from RM4.82 million a year ago mainly due to a lower contribution from the property segment.

Its revenue declined 5.2% to RM67.66 million from RM71.42 million mainly due to lower sales in the packaging segment. Earnings per share was lower at 6.04 sen compared with 6.4 sen. It declared an interim dividend of three sen per share.

SILK’s unit Jasa Merin (M) Sdn Bhd was awarded a contract extension worth RM23.5 million by Petronas Carigali Sdn Bhd to provide an anchor handling tug supply vessel.

Melewar Industrial Group Bhd has proposed a two-call rights issue of up to 151.17 million rights shares to raise RM27.46 million.

It said the rights issue would be at an indicative issue price of RM1 per rights share on the basis of two rights shares for every three existing shares held on an entitlement date to be determined later.


This article appeared in The Edge Financial Daily, October 24, 2011.

Stocks to watch: Tenaga, Maxis, Tanjung, Daibochi

KUALA LUMPUR: Investors will sitting on their hands over the weekend as they focus on the summit of European leaders to resolve Europe’s debt crisis. A decisive framework to reach basic agreements over the weekend would bolster investor confidence.

On Wall Street, the S&P 500 posted its third straight week of gains on Friday Oct 21, lifted by optimism before this weekend's summit and strong earnings from blue-chip stocks.

The Dow Jones industrial average was up 267.01 points, or 2.31%, at 11,808.79. The Standard & Poor's 500 Index was up 22.86 points, or 1.88%, at 1,238.25. The Nasdaq Composite Index was up 38.84 points, or 1.49%, at 2,637.46.

Reuters reported important differences still separate major players France and Germany in solving Europe's debt crisis, but with two summits scheduled for next week, investors took an optimistic view that a resolution will soon be reached. Buying was also motivated by fear of missing a sharp move if basic agreements are reached over the weekend.

At Bursa Malaysia, stocks to watch are TENAGA NASIONAL BHD [], Maxis Bhd, TANJUNG OFFSHORE BHD [], Daibochi Plastic and Packaging Industry Bhd and SILK Holdings Bhd.

Tenaga will announce its financial results for the fourth quarter ended Aug 31, 2011 but analysts expect it to record another quarter of losses due to the shortage of gas supply from Petroliam Nasional Bhd, forcing it to burn the more expensive oil and distillate.

RHB Research Institute had maintained its Underperform call on the power company with an unchanged indicative fair value of RM4.74 based on unchanged target CY12 price-to-earnings ratio of 12 times.

“Due to ongoing gas shortage from maintenance at Petronas’ liquefied natural gas plants and delays for the Bekok C bypass, Tenaga will likely record a loss in 4Q, possibly close to that seen in 3Q (net loss RM460 million),” it said.

Tenaga, meanwhile, has proposed to issue RM5 billion in Islamic debt notes to finance the development of the 1,010 MW coal fired power plant in Manjung, Perak. The tenure is 28 years.

Meanwhile, Maxis expects significant gains from the provision of its 3G radio access network to U Mobile Sdn Bhd under the country’s first landmark network sharing and alliance agreement for an initial period of 10 years.

This arrangement also included long-term evolution (LTE) sharing, depending on the availability of the spectrum and TECHNOLOGY []. The collaboration was a milestone in the local telecommunications industry in the sharing of active telco systems and operating frequency spectrum.

Tanjung Offshore Bhd was awarded a RM27 million contract by Petronas Carigali Sdn Bhd to provide three offshore support vessels (OSVs) for up to two primary years.

Tanjung said its unit Offshore Services Sdn Bhd had been awarded the contract on Oct 20.

Daibochi Plastic and Packaging Industry Bhd’s net profit fell 5.8% to RM4.54 million in the third quarter ended Sept 30, 2011 from RM4.82 million a year ago mainly due to a lower contribution from the property segment.

Its revenue declined 5.2% to RM67.66 million from RM71.42 million mainly due to the reduction in the sales in the packaging segment. Earnings per share were lower at 6.04 sen compared with 6.40 sen. It declared an interim dividend of 3.0 sen per share.

SILK’s unit Jasa Merin (Malaysia) Sdn Bhd has been awarded a contract extension worth RM23.5 million by Petronas Carigali Sdn Bhd to provide one anchor handling tug supply vessel.

SILK said the primary three-year contract had been extended for another 12 months, which started on Oct 4. It expected the extension to contribute positively to its earnings for the financial year ending July 31, 2012.

PROTON HOLDINGS BHD [] plans to collaborate with China’s Hawtai Motor Group to set up a joint venture (JV) company there as part of Proton’s strategy to make China as one of its major manufacturing hub, especially for left-hand-drive vehicles.

MELEWAR INDUSTRIAL GROUP BHD [] has proposed a two-call rights issue of up to 151.17 million rights shares to raise RM27.46 million. The rights issue would be at an indicative issue price of RM1 per rights share on the basis of two rights shares for every three existing shares held on an entitlement date to be determined later.

Melewar Industrial Group plans rights issue to raise RM27.4m

KUALA LUMPUR: MELEWAR INDUSTRIAL GROUP BHD [] has proposed a two-call rights issue of up to 151.17 million rights shares to raise RM27.46 million.

It said on Friday, Oct 21 the rights issue would be at an indicative issue price of RM1 per rights share on the basis of two rights shares for every three existing shares held on an entitlement date to be determined later.

However, its substantial shareholders Melewar Equities (BVI) and Melewar Khyra Sdn Bhd were seeking an exemption from undertaking a mandatory take-over offer due to the increase in their interests in the voting shares following the rights issue.

Melewar Industrial Group said the proposed rights issue was the most appropriate to raise funds while potentially enhancing the company's capital base.

It said the corporate exercise would recapitalise the shareholders’ equity base and enable the group to raise the necessary funds to meet its working capital requirements.

The company would also be able to raise funds without incurring interest expenses as compared to bank borrowings.

Based on the indicative issue price of RM1, the indicative first call of 50 sen per rights share, the theoretical ex-rights price of the shares was 52 sen, a discount of 3.85% to the five-day weighted average market price of the shares of 54 sen.