Stocks to watch: Kimlun, PFCE, SIG Gases, Gamuda

KUALA LUMPUR (March 13) : The Malaysian stock market which saw a downward correction on Monday, is likely to find support on Tuesday from a still-liquid market amid positive domestic news flow ahead of the country’s impending general election .

Analysts said the existing uptrend in the FBM KLCI was still intact as the domestic backdrop is still flush with liquidity and foreign funds are still pouring into the local market.

“The FBM KLCI still has more legs” TA Securities Holdings Bhd head of research Kaladher Govindan wrote in a note on Monday.

On Monday, news of China’s economic slowdown dragged Asian stock markets lower. These include updates that the world’s second largest economy’s exports growth coming in at 18.4% in February, way below street estimates of a 31.1% expansion, according to Bloomberg.

A slowdown in China does not bode well for Asian exporting countries where stock indices had reacted negatively to the updates.

Japan’s Nikkei 225 which fell 0.4% to 9,889.86 and Taiwan’s Taiex which was down 1.1% to 7927.55 and Singapore’s Straits Times Index retreated 0.03% to 2962.18. The FBM KLCI of 30 blue chip stocks fell 0.9% or 14.25 points to close at 1,564.75.

Stocks to watch on Tuesday include Kimlun Corp Bhd, PFCE Bhd, SIG Gases Bhd, GAMUDA BHD [], MALAYSIAN AIRLINE SYSTEM BHD [] (MAS) and AIRASIA BHD [].

Kimlun Corporation Bhd has secured two contracts worth RM151.61 million for housing projects in Johor Bahru.

It had accepted a RM114.70 million contract from S P Setia Bhd’s unit Bukit Indah (Johor) Sdn Bhd for the CONSTRUCTION [] of service apartments and ancillary buildings.

It also secured a RM36.90 million contract from Keck Seng (Malaysia) Bhd to build 244 houses in Johor Bahru, Johor. The estimated date of completion is September 2013.

Ceramic products maker PFCE is acquiring the entire equity interest in its single largest shareholder PFC Engineering Sdn Bhd for RM300 million under an all share deal which will transform the acquirer into an oil and gas support services provider. PFC Engineering owns 40% of PFCE.

Shares of PFCE last closed at 70 sen on Friday, prior to the suspension of the stock’s trading on Monday. PCFE will resume trading on Tuesday.

SIG Gases Bhd is teaming up with a unit of Iwatani Corporation, Japan to set up a joint venture company to set up facilities in Samalaju Industrial Park, Bintulu, Sarawak.

The JV would pave the way for SIG Gases and Iwatani to be strategic business partners to set up the facilities in Samalaju to produce and supply of liquid products and compressed gases to customers in Sarawak.

RHB Research Institute Sdn Bhd had reduced its fair value for Gamuda shares by 2.8% from RM3.89 to RM3.78. The downward revision factors in potential earnings from the Klang Valley Mass Rapid Transit project into the research firm’s valuation for Gamuda’s construction business, RHB said. Gamuda shares, however, rose three sen to RM3.70.

The Edge weekly, quoting sources, reported that the share swap between the major shareholders of MAS and AirAsia could be unraveled following resistance from the Malaysian Airline System Employees’ Union. MAS shares declined two sen to RM1.36 on Monday while AirAsia fell four sen to RM3.59.



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Abdul Talib Mohamed, son in reverse takeover of PFCE

KUALA LUMPUR (March 12): The group executive chairman of PFC Engineering Sdn Bhd Datuk Abu Talib Mohamed and his son, Muammar Gadaffi are undertaking a reverse takeover of the loss-making PFCE Bhd, which is currently involved in the ceramics business.

PFCE said on Monday the corporate exercise would see Abu Talib and his son, who own 100% stake in PFC Engineering injecting the company into PFCE. Currently, they also own a combined 40% stake in PFCE or 35.16 million shares.

Under the corporate exercise, they will transfer their stake in PFC Engineering to a new company, DAT Sdn Bhd.

In conjunction with the proposed transfer, PFC Engineering will distribute its investment in PFCE -- comprising 35.16 million PFCE shares via dividend-in-specie to DAT for RM15.8 million. PFC Engineering will declare up to RM24 million cash dividend to DAT.

DAT, the ultimate shareholders and parties acting in concert with them proposed to seek an exemption to extend a mandatory general offer for all the remaining PFCE Shares not already held by them.

The exercise would then see PFCE acquiring the entire interest in PFC Engineering from DAT for RM300 million which would be satisfied by the issuance of 500 million new PFCE shares at 60 sen per share.

DAT would also place out up 90 million PFCE shares and proposed restricted offer for sale of up to 52.838 million PFCE shares at an issue/offer price to be determined later.

PFCE said the rationale for the corporate exercise was that the PFCE group was currently involved in the ceramic business, which had been losing money for the past seven financial years ended Dec 31, 2011.

“The proposed acquisition will allow PFCE to diversify its business into the oil and gas industry which would provide another source of revenue and income to PFCE and reduce its sole dependency on the existing core business of trading and manufacturing of pottery, porcelain and ceramic ware products.

“The expansion of PFCE’s business into the oil and gas industry is part of PFCE’s long term strategy of diversifying into other industries with strong growth prospects instead of depending solely on its existing core business,” it said.

As for the PFC Engineering group of companies, they had completed over RM1.2 billion worth of projects over the past three (3) years and was expected to enhance the earnings of PFCE subsequent to the completion of the proposed acquisition.

The acquisition of PFC Engineering is expected to reverse the loss after tax after minority interest of PFCE of RM1.3 million for FYE Dec 31, 2011 to a healthy profit after tax and minority interests of RM29.1 million upon completion of the proposed acquisition, premised on a full year of PFC Engineering’s earnings for FYE 2011, based on PFC Engineering’s unaudited consolidated financial results.



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