KLCI falls as eurozone woes grip global markets

KUALA LUMPUR (May 9): The FBM KLCI fell on Wednesday as concerns over the economic and political direction of several eurozone countries kept regional and global investors on tenterhooks.

The FBM KLCI lost 5.70 points to close at 1,584.90, weighed down by losses at blue chips.

Losers outpaced gainers by 450 to 273, while 313 counters traded unchanged. Volume was 1.28 billion shares valued at RM1.42 billion.

Asian bourses were mired in the red as Greece struggled to form a government two days after an election, heightening the risk that a hard-won bailout deal could be scrapped, according to Reuters.

Meanwhile, European shares edged lower on Wednesday as a technical rebound from four-month lows was offset by falls among Spanish banks, which were dragged by fears they would be forced to raise money to cover their property assets, said Reuters.

Technical momentum was supportive after key indexes in the US and Europe closed above support levels on Tuesday, sending a bullish short-term signal despite still-depressed market sentiment as a political impasse in Greece threatened to deepen the eurozone crisis, it said.

At the regional markets, the Shanghai Composite Index lost 1.65% to 2,408.59, Japan's Nikkei 225 lost 1.49% to 9,045.06, Taiwan’s Taiex fell 0.93% to 7,475.71, South Korea’s Kospi lost 0.85% to 1,950.29, Hong Kong’s Hang Seng Index shed 0.75% to 20,330.64 and Singapore’s Straits Times Index fell 1.06% to 2,900.91.

On Bursa Malaysia, BAT fell 64 sen to RM55.04, Petronas Dagangan and HLFG lost 24 sen each to RM19.70 and RM11.94, MISC 13 sen to RM4.46, PPB, MMHE and Aeon 12 sen each to RM16.60, RM4.88 and RM9.75 respectively, MSM 11 sen to RM5.20, IJM Corp 10 sen to RM5.44 and BLD PLANTATION []s fell nine sen to RM8.81.

Naim Indah Corp was the most actively traded counter with 80.2 million shares done. The stock was unchanged at 49 sen.

Other actives included Ingenuity Solutions, Metronic, Permaju, Harvest Court, Focus, Ariantec, Astral Supreme and CBSA.

Gainers included Tahps, GCE, GAB, Panasonic, Nadayu, YHS, KGB, Ajinomoto, Tasek and Sunway.



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KLCI remains in the red at mid-day as Asian markets slide

KUALA LUMPUR (May 9): The FBM KLCI remained in the red at the mid-day break on Wednesday in line with the slump at key regional markets, following the overnight fall at Wall Street.

At 12.30pm, the FBM KLCI was down 3.04 points to 1,587.56, weighed by select blue chips.

Losers beat gainers by 386 to 207, while 286 counters traded unchanged. Volume was 692.41 million shares valued at RM558.87 million.

The ringgit weakened by 0.34% to 3.0675 versus the greenback, crude palm oil futures fell RM6 per tonne to RM3,334, crude oil fell 35 cents per barrel to US$96.66 while gold lost US$14 an ounce to US$1,591.48.

Shares, gold and oil fell and the euro remained pressured on Wednesday as Greece struggled to form a government two days after an election, heightening the risk that a hard-won bailout deal could be scrapped, according to Reuters.

Radical leftist Alexis Tsipras meets the leaders of Greece's mainstream parties on Wednesday to try to form a coalition government, an effort seen as doomed after he demanded that pledges made in exchange for an European Union/International Monetary Fund rescue package be torn up, it said.

Officials estimate Greece could run out of money as soon as next month if it does not stick to the aid package terms, which kept the country solvent and in the single currency bloc, said Reuters.

At the regional markets, Japan’s Nikkei 225 lost 1.62% to 9,032.78, Hong Kong’s Hang Seng Index fell 0.94% to 20,292.00, the Shanghai Composite Index fell 1.33% to 2,416.28, Taiwan’s Taiex shed 0.86% to 7,480.85, South Korea’s Kospi fell 1.10% to 1,945.31 and Singapore’s Straits Times Index shd 0.65% to 2,912.84.

On Bursa Malaysia, BAT fell 48 sen to RM55.20, F&N down 16 sen to RM18.88, Petronas Dagangan 14 sen to RM19.80, Sarawak PLANTATION []s and MSM lost 11 sen each to RM2.92 and RM5.20, Sarawak Oil Palms and Iretex down 10 sen each to RM6.56 and RM1.20, while BLD Plantations and IJM Corp fell nine sen each to RM8.81 and RM5.45.

Harvest Court was the most actively traded counter with 48.1 million shares done. The stock fell half a sen to 70.5 sen.

Other actives included Permaju, Metronic, Ingenuity Solutions, Naim Indah Corp, Ariantec, Focus, CBSA and Perisai.

Gainers in the morning session on Wednesday included GAB, KGB, Cybertowers, MTD ACPI, Rubberex, United Plantations, Sunway, Ajinomoto, Mercury and Kawan Food.



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KLCI stays in the black at mid- day break

KUALA LUMPUR (May 8): The FBM KLCI reversed its earlier losses and stayed in positive territory at the mid-day break on Tuesday, in line with most key regional markets that shrugged off jitters from a day earlier following election results in Greece and France.

The FBM KLCI added 2.75 points to 1,587.62 at the mid-day break, lifted by gains at select blue chips.

Gainers outpaced losers by 302 to 272, while 332 counters traded unchanged. Volume was 620.94 million shares valued at RM467.71 million.

The ringgit strengthened 0.01% to 3,0543 versus the US dollar; crude palm oil futures rose RM28 per tonne to RM3,374, crude oil shed two cents per barrel to US$97.92 and gold fell US$1.63 an ounce to US$1,636.93.

Shares recovered on Tuesday from the previous day's plunge, as sentiment improved on hopes Spain would use public funds to bolster its struggling banks, although persistent wariness over Greece weighed on the euro, according to Reuters.

MSCI's broadest index of Asia-Pacific shares outside Japan inched up 0.1 percent, having slid more than 2 percent the day before for its worst daily fall in about five months and hitting its lowest in about three months, it said.

At the regional markets, Japans’ Nikkei 225 gained 0.68% to 9,180.87, South Korea’s Kospi added 0.50% to 1,966.13, Singapore’s Straits Times Index was up 0.42% to 2,937.16 and Taiwabn’s Taiex edged up 0.13% to 7,548.19.

Meanwhile, the Shanghai Composite Index lost 0.65% to 2,435.90 and Hong Kong’s Hang Seng Index shed 0.05% to 20,525.90.

On Bursa Malaysia, BAT was the top gainer and rose 70 sen to RM55.86, Kulim 24 sen to RM4.48, Tasek 20 sen to RM9.23, Ekovest 17 sen to RM2.65, MSM 16 sen to RM5.34, Atlan 13 sen to RM4.39, Tong Herr and Permaju 11 sen each to RM2.51 and 84 sen, whiel Nakamichi and Multico added 10 sen each to 76 sen and RM1.25.

Menawile, Genting rose eight sen to RM10.64, Genting PLANTATION []s six sen to RM9.50 and Petronas Chemicals up three sen to RM6.58.

TMS was the most actively traded counter with 41.34 million shares done. The stock added half a sen to 9.5 sen.

Other actives included Sanbumi, Ariantec, JCY, Permaju, Naim Indah Corp and Metronic.

Decliners in the morning session included Jaya Tiasa, Toyo Ink, Lafarge Malayan Cement, PPB, JCY, Sarawak Oil Palms, IJM Land, MMHE, Texchem and OIB.



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Stocks to Watch F&N, Bumi Armada Bhd, PerMaju Industries Bhd and MSM Holdings Bhd

KUALA LUMPUR (May 7): The FBM KLCI may extend its losses on Tuesday, in line with the tepid investor sentiment at most global markets, after most Asian and European equities were mired in the red following several electoral results in the troubled eurozone area.

Greek and French election results rattled investors on Monday by undermining confidence in the region's plans to cut spending and tackle its debt crisis, sending the euro to a three-month low, according to Reuters.

European shares also initially traded lower, with Greek stocks down 6.4 percent, but reaction was muted with the UK market closed for a holiday. Wall Street stocks were expected to reflect the weaker tone when they were being trading, it said.

Among the stocks that could be in focus on Bursa Malaysia on Tuesday are Fraser & Neave Holdings Bhd (F&N), Bumi Armada Bhd, PERMAJU INDUSTRIES BHD [] and MSM Holdings Bhd.

F&N declared an interim single tier dividend of 20 sen per share for the financial year ending Sept 30, 2012 amounting to RM73 million to be paid on Aug 1. Its net profit fell 18.93% to RM107.01 million in its second quarter ended Mar 31,2012 from RM131.99 million a year earlier as a result of the cessation of its Coca-Cola business and flood disruptions in Thailand.

Bumi Armada Bhd’s unit has secured a five-year contract worth US$65 million (RM198.9 million) to provide an accommodation workboat. The company said on Monday that its subsidiary, Bumi Armada Navigation Sdn Bhd ("BAN") had been awarded the contract by Tecnologías Relacionadas con Energía y Servicios Especializados, SA de CV (TRESE). "The Vessel will be providing accommodation and offshore support services in the Mexican territorial waters."

Meanwhile, Bursa Malaysia Securities Bhd issued an unusual market activity (UMA) query to Permaju Industries Bhd over the sharp rise in the price and high volume in the company’s shares recently.

MSM Malaysia Holdings Bhd profits rose 7.05% in its first quarter ended Mar 31, 2012 to RM66.39 million from RM62.02 million a year ago, due to higher sales volume and average selling prices. It said on Monday that its revenue for the quarter increased 5.68% to RM531.76 million from RM503.17 million a year earlier.



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MSM 1Q net profit up 7.05% to RM66.39m

KUALA LUMPUR (May 7): MSM Malaysia Holdings Bhd profits rose 7.05% in its first quarter ended Mar 31, 2012 to RM66.39 million from RM62.02 million a year ago, due to higher sales volume and average selling prices.

It said on Monday that its revenue for the quarter increased 5.68% to RM531.76 million from RM503.17 million a year earlier.

"The profit before tax for current quarter ended Mar 31 is 2% lower in other words RM88.0 million as compared to RM90.0 million for the same quarter last year due to lower gross profit margin recorded during the quarter as a result of higher cost of sales caused mainly by increase in raw sugar price," it added.

Earnings per share were 9.44 sen compared to 10.76 sen a year earlier.



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CIMB Research maintains Neutral on MSM, TP RM4.65

KUALA LUMPUR (Feb 21): CIMB Equities Research said MSM Malaysia Holdings’ record performance in FY11 may not be sustainable as future profit margins could be crimped by higher raw material costs.

It said on Tuesday that it was offset by the group’s strong cash flows and dividend yield prospects.

“FY11 net profit was in line at 101% of our forecast and 102% of consensus. The one sour note was the surprising absence of a final dividend.

“We fine-tune FY12-13 earnings for lower raw sugar costs, leading to a slightly higher target price (still based on 12.6 times P/E),” it said.

CIMB Research said it was maintaining Neutral rating in view of its 5% net dividend yield. Its target price for MSM was RM4.65.



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MSM Malaysia pre-tax profit for FY11 at RM359.3m

KUALA LUMPUR (Feb 20): MSM Malaysia Holdings Bhd, the sugar refining unit of Felda Global Ventures Holdings Sdn Bhd, posted a higher pre-tax profit of RM359.373 million for its financial year ending Dec 31, 2011 from RM305.732 million recorded in the previous year.

Revenue for the 12-month period jumped to RM2.299 billion from RM2.168 billion previously.

For the fourth quarter ended Dec 31, 2011, MSM Malaysia registered a pre-tax profit of RM108.648 million, down from RM110.956 million in the corresponding quarter of the previous year.

Revenue for the three months, however, rose to RM609.538 million from RM542.506 million previously.

In a filing to Bursa Malaysia on Monday, the company said the increase in revenue in the fourth quarter was mainly due to increased sales volume for export and higher average price.

"The decline in profit was due to due to lower fair value gain recorded during the quarter. Notwithstanding the volatility of commodity prices, the group is expected to be able to sustain its satisfactory performance," it said.



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It is not just the yield appeal

Consumer sector
Maintain neutral: Amid expectations of slower domestic consumption into 2012, we are overall “neutral” on the consumer space. Positively, this sector comprises resilient companies with strong balance sheets and strong cash flows.


Dividend yields are decent and average 4% across the sector for 2012, while capital management remains an ongoing theme. It is for these very reasons, however, that consumer stocks had significantly outperformed the FBM KLCI in 2011, and current valuations are fair, with the sector trading at a 2012 PER of 15.8 times.

Within the consumer sector, there are pockets of interest, retail being one of them.

While 2012 is likely to be a challenging year, our two stocks in this segment, Padini Holdings Bhd and Aeon Co (M) Bhd are likely to outperform their peers, in our view, due to strong management, their responsiveness to customer needs and strong balance sheets.

Padini’s move into Brands Outlets provides it with a whole new clientele base while Aeon’s property management division provides it with stable recurring earnings.

We have a “buy” on QL Resources Bhd for its strong earnings growth ahead, emanating primarily from its Indonesian operations. We are nevertheless “neutral” on MSM Malaysia Holdings Bhd and Beras Nasional Bhd due to price control issues that cloud their near-term outlook.

Tobacco and brewery stocks had significantly outperformed the FBM KLCI in 2011.

Tobacco and brewery stocks had significantly outperformed the KLCI in 2011. Capital management is likely to be an ongoing theme that will sustain interest in all four stocks but valuations are fair in our view. The tobacco stocks trade at a 2012 PER of 15.8 times while the brewers trade at 17.5 times. With the recent run-up, we downgrade Carlsberg Brewery (M) Bhd and Guinness Anchor Bhd to “hold” from “buy”.

We have two great companies in this category — Nestle (M) Bhd and Fraser & Neave Holdings Bhd (F&N). Trading at average 2012 PER of 23.1 times with average net yield of just 3.3%, we see little reason to own Nestle at this stage while F&N’s near-term outlook is clouded by potentially stiffer competition from Coca-Cola and Permanis Sdn Bhd. — Maybank IB Research, Jan 5



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'Govt selloffs in GLCs to be on high gear'

The government divestments in the government-linked companies (GLCs) are expected to be on high gear this year with three of them expected to go for listing and some up for grabs via outright sales.

Felda Global Ventures Holdings Sdn Bhd and Parkway Pantai are among the names that are going to rock Bursa Malaysia this year, aside from the sale of stake in national carmaker Proton Holdings Bhd by Khazanah Nasional Bhd, the government investment arm.

Looking at these developments, one may say the divestments are probably good and crucial as the country prepares for another possible phase of economic turbulence in the form of external global economic environment, likely to happen in the first half of this year.

Affin Investment Bank Bhd's Retail Research Head Dr Nazri Khan said with the GLC Transformation Programme entering its eighth year, the divestments so far have borne fruits and created a new source of revenue for the government.

Nazri said with the goods and services tax still pending implementation, the divestments have somewhat provided "handsome temporary source of revenue" especially with the government likely to face fiscal constraints on the back of global economic uncertainties.

"The divestments can also create trading liquidity. A one per cent reduction in the stake of the government can create RM8 billion liquidity.

"(And) of course, it can also help raise the attractiveness in Bursa Malaysia as an emerging exchange by creating all these liquidities," he told Bernama in an interview.

Apart from that, the divestments will also help reduce the burden of tax payers as well as allow the government to separate its role as regulator and being involved in business, he said.

Since the programme started in 2004, the GLCs have performed very well with the market capitalisation doubling from RM150 billion to RM300 billion while a few achieved about 80 per cent of the Key Performance Indicators.

Nazri said the previous initial public offerings (IPOs) of GLCs, like Petronas Chemicals Group Bhd and MSM Malaysia Holdings Bhd, have benefited the government.

"The previous IPOs have been successful, (so) moving forward, there's no reason why the government should not be making money from them," he said.

Currently, the government owns 40 per cent, on average, of the top 100 stocks in the FTSE Bursa Malaysia KLCI Index and out of that, Petroliam Nasional Bhd (Petronas) owns 13 per cent, the Employees Provident Fund (EPF) (12 per cent), Khazanah (nine per cent) and Permodalan Nasional Bhd (seven per cent).

"These are the four government-linked investment companies that will probably be in focus.

"Petronas may list one or two more units, Khazanah, one or two more companies," he said, adding that the EPF may reduce its stakes in some firms.

Touching on several "weaker" GLCs, he said, the government has created some kind of "clinic programme" in order to improve their performances.

"These include revamping the directorships, collaboration with competitors as well as boosting the marketing arms of these GLCs to show some improvement over the next few quarters," Nazri said.

Among the GLCs that are seen as relatively weaker include Malaysia Airlines, MISC Bhd, Proton and Tenaga Nasional Bhd, which are facing uncertainties such as rising costs of raw materials and price mechanism, he added.

Last July, Minister in the Prime Minister's Department, Datuk Seri Idris Jala, said a total of 33 GLCs had been identified as part of government efforts to realign its involvement in the GLCs under the Strategic Renewal Initiative.

Idris, who is also Chief Executive of the Performance Management and Delivery Unit (PEMANDU), said the government will speed up its reduction or the disposal of its equity in the 33 GLCs through three options -- the reduction of its equity, listing or direct sales of its equity to qualified bidders.

Out of the 33 GLCs, five are to see a reduction in the government share of their companies, another seven will be listed while 21 companies will be sold directly through the bidding process.

Nevertheless, whatever the global economic condition, which is expected to be gloomy, for Malaysian corporates the first half is expected to be exciting. -- Bernama



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KLCI pares down gains, struggles to stay above 1,490-level

KUALA LUMPUR (Dec 1): The FBM KLCI pared down its gains on Thursday and slipped to below the 1,490-point level, while regional markets chalked up strong gains as coordinated liquidity action by the major central banks boosted investor sentiment.

The US Federal Reserve, the European Central Bank and the central banks of Canada, Britain, Japan and Switzerland said on Wednesday they would lower the cost of existing dollar swap lines by 50 basis points from Dec 5, and arrange bilateral swaps to provide liquidity for other currencies, according to Reuters.

The FBM KLCI closed 13.16 points higher at 1,485.26. The index had earlier risen to its intra-day high of 1,502.53.

At the regional markets, Hong Kong’s Hang Seng Index surged 5.63% to 19,002.26, Taiwan’s Taiex rose 3.98% to 7,178.69, South Kospi gained 3.72% to 1,916.18, the Shanghai Composite Index added 2.29% to 2,386.86, and Japan’s Nikkei 225 was up 1.93% to 8,597.38 and Singapore’s Straits Times Index rose 2.2% to 2,761.88.

On Bursa Malaysia, BAT was the top gainer and rose RM1.60 to RM48.10; PPB added 52 sen to RM16.58, Cepco rose 40 sen to RM1.91, JobStreet 39 sen to RM2.80, Hong Leong Bank 32 sen to RM10.78, Nestle, Dutch Lady and KLK 30 sen each to RM5.20, RM24.40 and RM21.80 respectively, Shangri-La 28 sen to RM2.38 and Litrak 24 sen to RM3.65.

Genting was the top loser and fell 26 sen to RM10.70; Lafarge Malayan Cement lost 24 sen to RM6.70, MSM 19 sen to RM4.81, Axiata 17 sen to RM4.93, F&N 14 sen to RM18.02, IJM Corp, Tan Chong and MAHB fell 11 sen each to RM5.80, RM4.24 and RM6.08 respectively, while Southern Steel lost 10 sen to RM1.98.

The actively traded counters included Wijaya warrants, Compugates, Utopia, Extol, Karambunai, Hubline and GPRO.



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CIMB Research cuts MSM’s earnings, keeps Neutral call

KUALA LUMPUR (Nov 25): CIMB Equities Research said MSM Malaysia Holdings Bhd’s strong export sales could not fully cover the drop in sales volume for the more profitable domestic sugar business.

In its report issued on Friday, the research house said this resulted in weaker 3Q11 earnings. However, the eight sen dividend did not disappoint.

“The 9M11 net profit was below expectations as it was only 63% of our full-year forecast and 67% of consensus earnings.

“We cut our FY11-13 earnings and target price (based on 12.6x target market P/E) after we roll it over to end-12. Maintain NEUTRAL rating,” it said.

CIMB Research reduced the target price from RM5.82 to RM5.



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MSM Q3 pre-tax profit dwindles to RM63m

MSM Malaysia Holdings Bhd's pre-tax profit for the third quarter ended Sept 30, 2011 fell to RM62.79 million from RM107.96 million in the same quarter last year.

Revenue, however, rose to RM623.98 million from RM540.82 million in the same quarter last year. The group attributed the lower pre-tax profit to higher sales cost as reflected in the spiralling raw sugar price, it said.

The better revenue performance was mainly due to higher export volume and
increased average price, it said in a filing to Bursa Malaysia.

On prospects, the group is expected to sustain its satisfactory performance despite the volatility in commodity prices. -- Bernama



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Moment of truth for MSM

MSM Malaysia Holdings Bhd (Nov 14, RM4.85)
Maintain hold with target price of RM4.85: MSM is expected to release its 3QFY11 results in the fourth week of November.

3QFY11 is a seasonally strong quarter due to the Hari Raya Aidil Fitri season and school holidays. Furthermore, MSM will reap the benefit of stronger ringgit against the US dollar which will help to reduce its raw sugar input cost.

Maintain “hold”, with an unchanged target price of RM4.85 per share based on dividend discount model (DDM).

We expect sugar volumes to decline by 5% to 6% year-on-year (y-o-y) due to the cessation of local export businesses.

This is consistent with the management’s input in 2QFY11, average selling price (ASP) should be up by 4% y-o-y from the price increase implemented in early 2011.

Unit cost is expected to decline as MSM reaps the benefit of the stronger ringgit against the greenback making its raw sugar cheaper while maintaining a constant ASP.

This should support a strong 3QFY11 financial performance (2QFY11 net profit: RM88.7 million, 1HFY11: RM139.6 million).


MSM is expected to announce its maiden dividend in this quarter, and all investors are keen to find out the payout ratio.

We have used the minimum guaranteed payout ratio of 50% in our earnings forecasts, but we believe the company can comfortably afford 60% to 65% as it is highly cash generative with minimal capital expenditure requirements.

The current domestic raw sugar contract is due to expire at the end of the year and we eagerly await the management’s inputs regarding the upcoming contract.

MSM is certain to pay higher prices, as the current sugar prices are hovering around 25 US cents (78 sen) per lb versus the old contractual rate of US 17.5 cents per lb. The ability for MSM to raise its selling price is the issue as domestic sugar is a price controlled item.

We maintain our recommendation pending the resolution of the next long-term contract for raw sugar and news of the payout ratio.

As our valuation is DDM-based, any material increase of payout ratio from our assumed 50% will impact positively on our target price.

There is scope for the management to surprise on the upside and therefore we advocate a “hold” call for now. — Maybank IB Research, Nov 14


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



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Are weak IPOs worth another look?

KUALA LUMPUR: Many of this year’s initial public offering (IPO) stocks have been among Bursa Malaysia’s worst performers — but are they now worth another look?

Interest certainly appears to be returning to them, as investors are starting to take notice of stocks that have fallen under the radar and are offering good bargains.

In the past 1½ weeks, stocks such as UOA Development Bhd, MSM Malaysia Holdings Bhd and Petronas Chemicals Group Bhd have regularly dominated either the top actives or gainers lists, while others like Oldtown Bhd and Benalec Holdings Bhd have bounced well off their lows on high volume.

Many of the newly listed stocks slumped after their debuts. Fuelled by weak market sentiment, they have fallen more than the general market due to a high number of short-term investors, such as venture capitalists, high net worth placees and short-term institutional funds, exiting these stocks, said industry observers.

The renewed interest in IPOs was triggered on Oct 13, when UOA emerged from almost nowhere as one of the most actively traded stocks, closing 22 sen or 17.2% higher at RM1.50.

The stock again emerged as one of the most actively traded a week later last Thursday when it surged 19 sen or 12.58% to RM1.70.

Though ending last Friday lower at RM1.59, the stock has gained 37.1% since hitting a low of RM1.16 on Sept 27. Its net assets per share was RM1.35 as at June 30.

Even now, the stock is still 38.8% off its IPO price of RM2.60 when it was listed on June 8. During its lows, few had noticed that UOA had actually slumped more than 55.4%.

The Edge Financial Daily took a look at some of the best and worst performing IPOs this year, and which stocks may be of interest to investors.

As at last Friday, only eight out of 26 companies listed this year were winners.

The two biggest losers were MClean Technologies Bhd (-68.3%) and XOX Bhd (-69.4%), for fairly obvious reasons as their results have been less than impressive.

They were followed by UOA (-38.8%), Maxwell International Holdings Bhd (-34.3%), Oldtown (-12.8%), and Hibiscus Petroleum Bhd (-10%).

Listed on the ACE Market on May 10, MClean’s share price has dropped 68.3% to 16.5 sen from its listing price of 52 sen.


MClean, which provides precision cleaning services for hard disk drives, caused shock waves when it announced a net loss of RM190,000 just three weeks after its listing in May.

Another ACE Market-listed company, XOX tumbled 69.4% to close at 24.5 sen last Friday, compared with its offer price of 80 sen.

XOX also stunned when it reported a loss of RM1.66 million for 1QFY11 just a day before its debut. The loss sent its share price south by more than 35% on its debut. For its 2QFY11, XOX reported a net loss of RM2.92 million, due to higher selling and distribution expenses.

Value among major losers?
Not all of the IPOs that fared badly were due to their fundamentals, with UOA, Maxwell and Oldtown among those that could look attractive.

Affin Investment Bank has a “buy” call on UOA with a target price of RM2.07.

“We believe that value has emerged after UOA’s sharp share price correction,” it stated in an Oct 12 report.

UOA recently strengthened its landbank with the proposed acquisition of 9.8 acres of freehold land in Kepong for RM72.9 million or RM170 psf.

The report said it expects UOA’s other standalone residential projects such as Setapak Green and Sri Petaling and current unbilled sales of RM684 million to help sustain its medium-term earnings and dividend yield of over 5.5%.

China-based sports footwear designer and manufacturer Maxwell saw its share price close at 35.5 sen on Friday, down 34.3% from its IPO price of 54 sen in January.

While investors have been cautious of China-based companies in general, Maxwell appears to have a good earnings track record and high dividends to boot.
Between 2006 and 2010, Maxwell’s revenue and net profit saw a compound annual growth rate of 46% and 53% respectively.

For its first half this year, it had a cumulative revenue of RM157.34 million and net profit of RM26.99 million. With half-year earnings per share (EPS) of 6.75 sen, its annualised price-earnings ratio (PER) would be just 2.63 times.

Maxwell paid its maiden dividend of 3.35 sen net per share on Sept 28, representing a 9.4% net yield on its prevailing price.

Hibiscus, a special purpose acquisition company, was the first of its kind to be listed on Bursa Malaysia in July. It elicited some negative publicity then for its relatively high premium for what was essentially seen as a cash-rich shell company with management expertise.

From an IPO price of 75 sen though, Hibiscus’ share price has tumbled by 10% to 67.5 sen, above its cash per share of 58.6 sen. Hibiscus has three years from the time of listing to acquire a target company or asset, failing which it will be liquidated.

Meanwhile, despite the resilience of the food and beverage (F&B) sector, Oldtown saw its share price dip by 12.8% to RM1.09 from its IPO price of RM1.25.

Listed in July, the local coffee manufacturer and cafe operator is penetrating the China consumer market by opening its first two cafes in Guangzhou this month. Oldtown has set up a food processing centre in China and is targeting to open more outlets, especially in southern China, to achieve greater economies of scale. Although not rated, a report by OSK Research on Sept 20 valued Oldtown at 12.5 times FY11 EPS, which translates into a fair value of RM1.34.

Top performers: Are they still worth buying?
Some of the IPO stocks which had the best returns as at last Friday are Boilermech Holdings Bhd (+93.9%), Berjaya Food Bhd (BFood) (+71.6%), MSM Malaysia Bhd (+42.9%), Bumi Armada Bhd (+20.8%), and Benalec Holdings Bhd (16%).

Listed on the ACE Market on May 5, Boilermech has been the best performing IPO this year gaining 93.9% to 64 sen from its listing price of 33 sen. Still, the stock has fallen 35.7% from an all-time high of 99.5 sen in May.

A biomass boiler manufacturer, Boilermech is a 35% associate company of food and agriculture group QL Resources Bhd. It is primarily engaged in the manufacture of boilers for the plantation, manufacturing and food industries.

Boilermech’s performance, market observers said, was attributed to its strong parent, QL Resources and its exposure to the renewable energy sector.

The second best performer was BFood, which is mainly involved in the operations of Kenny Rogers Roasters (KRR) restaurants in Malaysia. The stock has climbed 71.6% to 87.5 sen last Friday from its IPO price of 51 sen.

With 68 restaurants, BFood plans to open another 15 KRR restaurants in FY12. Via a joint venture, it will also expand its KRR operations in Indonesia where it targets to open 12 stores by end-June 2012.

For its FY11 ended April 30, its net profit was up by 17% to RM10.2 million from RM8.68 million in FY10. Revenue grew by 19% to RM71.9 million from RM60.42 in FY10.

BFood has a clean balance sheet with net cash of about RM31.29 million and no borrowings as at end-July. It paid its first interim dividend of three sen in FY11, amounting to RM4.26 million, which translates into a payout ratio of 41.8% and net yield of 3.4%. BFood’s earnings for FY13 onwards will get a boost from the ongoing acquisition of a 50% stake in Berjaya Starbucks Coffee Co Sdn Bhd, which will be concluded in 1Q12. It targets to open 12 to 15 Starbucks outlets every year.

Last Friday, the stock had a historical PER of 12.4 times and market capitalisation of RM124.24 million. As a comparison, KFC Holdings (M) Bhd has a historical PER of 17.2 times and market capitalisation of RM2.697 billion.

MSM, the largest sugar refiner in the country, was listed at end-June with an IPO price of RM3.50. Its share price had gained 42.9% to RM5 last Friday, partly due to its small free float.

MSM has adopted a dividend policy to pay out at least 50% of its annual net profit. Assuming this payout level, annual dividends are estimated to be 20 sen per share in 2011/12, which translates into a net yield of about 4% at its closing price on Friday.

As at end-June, MSM had net cash of RM141.7 million, which will support future capital expansion. About RM320 million of the RM425 million proceeds from the IPO have been allocated for capital expansion over the next two to three years.

A report by OSK Research on Sept 27 had a “buy” call on MSM with a fair value of RM5.24.

Benalec worth watching
Analysts say Benalec is a stock worth watching, as the company is well-liked for its niche in land reclamation jobs where margins are high and competitors are few. Its land reclamation projects also provide Benalec with ample and low-cost landbank for property development.

Listed on Jan 17, the stock closed at RM1.16 last Friday, 16% above its offer price of RM1, but well below its year high of RM1.61.

Benalec is bidding for land reclamation projects with a combined estimated contract value of RM8 billion and has a large unbilled order book of RM590 million.

AmResearch and Kenanga Research have “buy” recommendations with a price target of RM2.22 and RM1.93 respectively.

Bumi Armada, an oilfield services provider, rose 20.8% to RM3.66 last Friday, compared with its listing price of RM3.03 in July.

In late September, Bumi Armada announced its wholly-owned unit Armada Balnaves Pte Ltd had signed a floating, production, storage and offloading contract with Apache Energy Ltd, Australia. Valued at about RM1.46 billion, the contract is expected to contribute positively to Bumi Armada’s revenue and earnings for FY11 ending Dec 31.


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