Stocks to Watch LPI, Hong Leong, Guan Chong, Silk

KUALA LUMPUR (April 9): Malaysian shares could see further correction on Tuesday against a backdrop of less-optimistic global economic data. Crucial highlights include the still-weak job market in the US, besides China's inflation growth of 3.6% in March.

China's latest inflation numbers, which came in higher than street estimates, have prompted the anticipation that policymakers will delay monetary loosening to spur the world's second largest economy.

Analysts said Malaysia's FBM KLCI may see sideway consolidation with downward bias, due to global economic concerns.

"Domestically, any correction in the benchmark index is expected to be shallow, with domestic factors holding up the market until the dissolution of the parliament paves way for the next general election," TA Securities Holdings Bhd wrote in a note.

On Monday, the FBM KLCI fell 7.59 points to close at 1,591.28, while US equity futures declined on global economic growth concerns. The S&P 500 futures fell some 1% while the Dow Jones Industrial Average futures was down 0.9%, an indication that US stock markets could decline when markets open.

Stocks to watch on Tuesday include LPI CAPITAL BHD [], HONG LEONG BANK BHD [], GUAN CHONG BHD [], HUA YANG BHD [], Silk Holdings Bhd.

LPI's net profit fell 19% in the first quarter ended March 31, 2012 from a year earlier, as the general insurer's contractual liabilities, lower investment income, and higher operating expenses offset a higher revenue. In a statement to the exchange on Monday, LPI said its net profit during the quarter came to RM31.48 million against RM38.63 million previously. Revenue rose 15% to RM246.06 million from RM213.33 million .

The Securities Commission has approved Hong Leong's plan to issue up to US$1.5 billion (RM4.61 billion) worth of bonds to finance its working capital needs.

Cocoa processor Guan Chong plans to undertake a secondary listing on the Singapore bourse. The firm also plans to reward shareholders with a bonus issue of new shares.

TA Securities has upgraded Hua Yang, a property developer, to a "buy" from "hold" with a target price of RM1.68.

PETROFAC (M) Ltd has extended its anchor handling tug supply vessel contract with Silk in a deal worth RM10.77 million. The company said the contract extension was expected to contribute positively to its earnings for the financial years ending July 31, 2012 and 2013.



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SILK unit gets contract extension worth RM10.77m

KUALA LUMPUR (APRIL 9): SILK Holdings Bhd’s unit has secured a contract extension worth RM10.77 million from Petrofac Malaysia Ltd.

The company said on Monday that its unit Jasa Merin (Malaysia) Sdn Bhd had accepted the award from Petrofac for the contract extension of Jasa Merin’s anchor handling tug supply vessel JM Intan to Petrofac.

SILK said the contract which commenced on July 23, 2009, had a primary period of two years with the extension options of 1+1+1 year, is to be extended for the second extension commencing July 23, 2012 until 22 July 2013.

The company said the contract extension was expected to contribute positively to its earnings for the financial years ending 31 July 2012 and 2013.



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CIMB Research has technical sell on Silk Holdings at 45 sen

KUALA LUMPUR (March 14): CIMB Equities Research has a technical sell on Silk Holdings at 45 sen at which it is trading at a price-to-book value of 1.4 times.

The research house said on Wednesday the black marubozu pattern formed on Monday was confirmed by yesterday’s slip. It appears that the candles are likely to derail towards 42 sen, 39 sen and 36.5 sen soon.

“If the medium term uptrend channel is breached, we expect the bears to take lead. Indicators also look exhausted at the moment. MACD histogram bars are losing pace while RSI has hooked downward,” it said.

CIMB Research said any rebound is an opportunity to unload. It added that it would only review its call if the candles swing past the 50.5 sen level.



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KL shares close marginally higher

Shares of the following companies had unusual moves in Malaysia trading. Stock symbols are in parentheses and prices are as of the close in Kuala Lumpur. The FTSE Bursa Malaysia KLCI Index rose 0.27 point, or less than 0.1 per cent, to 1,559.04.

DRB-Hicom Bhd, an automotive, construction and property group, dropped 2 per cent to RM2.52, its lowest close since Jan. 26. Third-quarter net income slipped 28 per cent from a year earlier to RM79.6 million, the company said in a stock-exchange filing.

Dutch Lady Milk Industries Bhd, a dairy-products maker, jumped 6.6 per cent to RM27.50, a record close. The company declared a dividend of 50 sen per share and a special dividend of 80 sen after fourth-quarter profit more than doubled to RM28.4 million from RM10.8 million a year earlier, according to an exchange filing.

KLCC Property Holdings Bhd, the owner of Kuala Lumpur’s Petronas Twin Towers, gained 3.7 per cent to RM3.40, its highest close since July 22. Its third-quarter profit jumped to RM518.7 million from RM67.8 million a year earlier, the company said in a statement.

Latexx Partners Bhd, a rubber-glove maker, slid 7.7 per cent to RM1.55, its largest loss since July 25. Its fourth-quarter profit slumped to RM926,000 from RM5.6 million a year earlier, according to an exchange filing.

Oriental Holdings Bhd, a vehicle assembler, advanced 2.8 per cent to RM6.24, its highest close since Feb. 23. The company may be bought out by its single-largest shareholder, the Star newspaper reported, citing a person it didn’t name. Robert Wong and Lim Su Tong, managing directors at Oriental, weren’t immediately available for comments when contacted at their office.

Silk Holdings Bhd gained 2.5 per cent to 40.5 sen, its highest close since Feb. 22. PLUS Expressways Bhd is interested in buying the highway toll concessions of Silk and Lingkaran Trans Kota Holdings Bhd, the Edge newspaper reported, citing people it didn’t name. Lingkaran added 0.8 per cent to RM4.03, its highest close since Dec. 6, 2007.

Silk Executive Chairman Mohammed Azlan Hashim didn’t immediately reply to an e-mail by Bloomberg News seeking comments. Lingkaran Executive Director Yusoff Daud wasn’t in the office when phoned. -- Bloomberg



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Kajang-Silk Highway breaches 50-million vehicle mark

KUALA LUMPUR: SILK Holdings Bhd, which operates the Kajang-Silk Highway via its unit Sistem Lingkaran Lebuhraya Kajang Sdn Bhd, hit a major milestone after the highway breached the 50-million vehicle mark for the first time yesterday.

In a statement yesterday, SILK executive chairman Datuk Mohd Azlan Hashim said it was a significant achievement for the highway that has served the greater Kajang area by acting as a linkage to the existing networks, including Plus, Besraya and Grand Saga since 2004.

More recently it added Lebuhraya Kajang Seremban (Lekas) and South Klang Valley Expressway (SKVE) to its list of connectivity.

Azlan said the highway had seen its average daily traffic volume increase from just over 47,000 vehicles per day when it started operations in 2004 to almost 150,000 vehicles per day today.

The highway had seen double-digit growth in annual traffic volume in recent years, he said, adding that it recorded a total traffic volume of 38.8 million vehicles in 2009 and 45.4 million vehicles in 2010.

Azlan said the highway had also been recognised by road users, adding that a triennial independent survey of users released by Lembaga Lebuhraya Malaysia (LLM) in 2010 ranked the highway in the top half out of 24 tolled highways.

He said among comparable peers, the highway was deemed the most improved since the last survey, and that it was ranked in the top two by road users in terms of image and toll plaza management.

Azlan said the survey ranking was testament to the effort and commitment of the group’s highway’s operations personnel.

“While increasing traffic volume provides an indication on the highway’s increasing significance to the greater Kajang area, recognition from road users on usability and service level means just as much.

“In fact, it has become a motivation for all of the group’s highway operations personnel to continually give the best service possible,” he said.


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



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Kajang-SILK Highway breaches 50-million vehicle mark for the first time

KUALA LUMPUR (Dec 20): SILK Holdings Bhd, which operates the Kajang-Silk Highway via its unit Sistem Lingkaran Lebuhraya Kajang Sdn Bhd, hit a major milestone after the highway breached the 50 million vehicles mark for the first time on Tuesday.

In a statement Dec 20, SILK executive chairman Datuk Mohd Azlan Hashim said it was a significant achievement for the highway that has served the greater Kajang area by acting as a linkage to the existing highway networks, including PLUS, BESRAYA and Grand Saga since 2004.

More recently it added Lebuhraya Kajang Seremban (LEKAS) and South Klang Valley Expressway (SKVE) to its list of connectivity.

Mohd Azlan said the highway had seen its average daily traffic volume increase from just over 47,000 vehicles per day when it first started operations in 2004 to almost 150,000 vehicles per day today.

He said the highway had seen double-digit growth in annual traffic volumes in recent years, adding that it recorded a total traffic volume of 38.8 million vehicles in 2009 and 45.4 million vehicles in 2010.

Mohd Azlan said that in addition to increasing traffic volume, the highway had also been recognised by road users, adding that a triennial independent survey of road users released by Lembaga Lebuhraya Malaysia (LLM) in 2010 ranked the highway in the top half out of 24 tolled highways.

He said among comparable peers, the highway was deemed the most improved since the last survey, and that it was ranked in the top two by road users in terms of image and toll-plaza management.

Mohd Azlan said the survey ranking was testament to the effort and commitment of the group’s highway’s operations personnel.

“Whilst increasing traffic volume provides an indication on the highway’s increasing significance to the greater Kajang area, recognition from road users on usability and service level means just as much.

“In fact, it has become a motivation for all of the Group’s highway operations personnel to continually give the best service possible,” he said.



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SILK 1Q net loss widens to RM2.19m despite higher revenue

KUALA LUMPUR (Dec 16): SILK Holdings Bhd net loss for the first quarter ended Oct 31, 2011 widened to RM2.19 million from a net loss of RM1.15 million, despite a 11.1% increase in revenue year-on-year to RM64.65 million from RM58.17 million.

The company said on Friday that loss per share for the quarter was 0.57 sen compared to loss per share of 0.30 sen, while net assets per share was 47.61 sen.

SILK chairman Datuk Mohd Azlan Hashim said the loss for the quarter was within expectation given the significantly higher depreciation and amortisation charges and finance costs incurred in line with the fleet expansion at its oil & gas (O&G) support services division.

“That said, the board is encouraged by the improvements in revenue and earnings before interest, tax, depreciation and amortisation (EBITDA) and expect that these will eventually provide a positive boost to the bottom-line,” he said.

Commenting on the company’s divisions, Mohd Azlan efforts by the management of its highway infrastructure division had enabled it to continue to record operational improvements.

“Given the relatively stable cost base of the division, the improved revenue emanating from the operational improvements has allowed for the after-tax loss for the quarter to be reduced considerably” he said.

On its O&G support services, Mohd Azlan said the division’s increase in depreciation and finance costs were unavoidable given its fleet renewal program and fairly conservative accounting policies in respect to the depreciation of its vessels and dry-docking costs.

“That said, the costs remain manageable and within expectation,” he said.

“All in all, the board is pleased with the overall top-line performance of the group.

“However, it takes cognisance of the increase in depreciation and finance costs and will monitor these closely going forward,” he said.



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Can KLCI break through 1,500 points?

KUALA LUMPUR: Can the October rally extend into November, after chalking up gains of 8.35% over the month and breaking through the psychologically important 1,500? Or is the rally losing steam?

Based on Bursa Malaysia stock market data, the FBM KLCI is up 114.3 points from Oct 3’s 1,367.52 to end 1,481.82 last Friday. For past week, the KLCI was up 30.9 points or 2.19%.

The October performance was the strongest since the selldown in late June, as investors picked up equities after European officials hammered out the €1 trillion (RM4.33 trillion) rescue package to mend Europe’s debt woes, especially Greece.

On Wall Street, stocks closed out a fourth week of gains in quiet fashion last Friday, edging higher as the market took a breather after rallying 3% on Europe’s deal to stem its debt crisis.

The Dow Jones industrial average gained 22.56 points, or 0.18%, to 12,231.11. The Standard & Poor’s 500 Index added 0.49 of a point, or 0.04%, to 1,285.08. The Nasdaq Composite Index shed 1.48 points, or 0.05%, to 2,737.15.

OSK Research director of research Chris Eng said it is possible although the rally does look as though it is running out of steam.

He said for the KLCI, the rally thus far has been quite steep although slightly lagging the global average.

On the outlook for Greece, he said Greece could avoid default in the short term.

“However, Europe is still faced with the problem of cutting deficits from almost everyone except Germany. The risk of a mild recession is still there,” he said.

As for investors, he remained “neutral” on the market and said investors should buy below 1,300 and sell above 1,533. Eng’s advice is for investors to remain defensive.
Affin Investment Bank head of retail research Dr Nazri Khan believes the KLCI is likely to trend higher this week on stronger global risk appetite following twin Europe-US catalysts last week.

He said the positive factors were the long awaited plan to resolve the European debt crisis and the stronger than expected US third quarter economic growth (registering the fastest quarterly GDP in a year).

“Going forward next week [this week], we expect investors to price in stronger US/European economy as well as the reduced banking crisis risk in both continents, pushing the KLCI to a possible 1,524 level (KLCI’s high made in 2008 before the subprime crisis),” he added.

Nazri said given the KLCI has gained 13% from its October low and MSCI Asia Pacific index has gained 8.1%, there were highly probable signs that intermediate bottom has been in place and the traditional year-end rally has started, which is likely to last till before Chinese New Year 2012.

He cited positive local corporate earnings (for example Public Bank Bhd, Malaysia Airports Holdings Bhd (MAHB), Supermax Bhd) and good average daily volume above one billion shares.

Nazri said there was across-the-board sectoral strength in the trading service, plantation and finance indices and weekly gains in economically-sensitive oil and palm oil to sustain the KLCI rebound in the near term.

“As for strategy next week [this week], we are recommending our investors to gradually accumulate blue-chip leaders especially those in the fast growth service sector (such as Genting Bhd, Media Prima Bhd, MAHB and AirAsia Bhd).

Among the stocks to watch today are Tenaga Nasional Bhd, Envair Holdings Bhd, SILK Holdings Bhd and Malayan Flour Mills Bhd (MFM).

TNB announced a 4Q net loss of RM453.9 million, the second consecutive quarter of losses, and expected the current financial year to be very challenging.

Though investors anticipated TNB would report losses, their concerns were whether it could work out the gas supply issue and a definite compensation from Petroliam Nasional Bhd (Petronas).

However, the lack of assurance from Petronas could weigh on the share price, especially after TNB president and CEO Datuk Seri Che Khalib Mohamad Noh said last Friday no decision had been reached as yet.

Envair has received a letter of intent from Zai Corporate Finance Ltd, an investment banking firm based in London, to subscribe for up to 30% of its new ordinary shares of 10 sen each at the market issue price.

SILK chairman Datuk Mohd Azlan Hashim has said he is confident the company would be able to return to profitability in a couple of years as traffic volume picks up for its tolled highway operations and an improvement in the marine support services.

Malayan Flour Mills could be getting ready for the next stage of growth, having announced a series of corporate exercises in May and signing an agreement in October that would see it step into the Indonesian market, according to The Edge weekly.


This article appeared in The Edge Financial Daily, October 31, 2011.

Bursa likely to extend gains

TA Securities expects the positive sentiment globally will further help property and construction stocks to slightly recover after their recent losses.

STOCKS on Bursa Malaysia are likely to extend its gains this week, underpinned by the recent strong performance on Wall Street and news of an European plan to address Greece's debt issues.

The news are expected to bring cheer to the local market and help boost investors' appetite.

Investors will price in the stronger US and European economies as well as the reduced banking crisis risk in both continents in their investment strategy.

Wall Street held its gains from Thursday's big rally and ended with the fifth straight week of advances last week. As for Europe, it has expanded a bailout facility and recapitalise the region's biggest banks in efforts to rescue Greece.

At home, the uptrend news on the global front is expected to help push the benchmark FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) to a possible 1,524 level, the highest level recorded in 2008 before the subprime crisis.

The FBM KLCI was up 114.3 points from 1,367.52 on October 3 to end 1,481.82 last Friday. For last week, the main index was up 30.9 points, or 2.19 per cent.

Bursa Malaysia was closed on Wednesday for the Deepavali holiday.

TA Securities senior technical analyst Stephen Soo said the key index is expected to strengthen, boosted by rising appetite in riskier assets. "We foresee the positive sentiment globally will further help property and construction stocks to slightly recover after their recent losses," he added.

Despite the positive views, OSK director and research head Chris Eng warned that the market is still in defensive position and investors will remain cautious amid the uncertain global economic outlook.

"There is a possibility the market will dip if the index reaches the 1,500 level, due to selling pressure," he added.

Week-on-week, the FBM KLCI advanced 42.99 points to 1,481.82 against the previous Friday's closing of 1,438.83. Total volume declined 6.03 billion shares worth RM7.10 billion from 7.40 billion shares worth RM6.58 billion before.

Main Market turnover fell 4.67 billion units worth RM6.94 billion from 5.49 billion units worth RM6.362 billion previously.

Among stocks in focus this week are Tenaga Nasional after it announced a fourth-quarter net loss of RM453.90 million, the second consecutive quarter of losses, last Friday. Others include Tasek Corp Bhd, Cycle & Carriage Bhd and SILK Holdings Bhd.

Stocks to watch: Tenaga, Envair, SILK, MFM

KUALA LUMPUR: TENAGA NASIONAL BHD [] could be in focus on Monday, Oct 31 after it announced fourth quarter net loss of RM453.90 million, the second consecutive quarter of losses, last Friday, and expected the current financial year to be very challenging.

At the operating level, the power company reported operating losses of RM248.80 million due to higher fuel costs of coal and utilisation of oil and distillates after the gas curtailment by Petroliam Nasional Bhd.

Though investors anticipated Tenaga to reported losses, their concerns were whether it could work out the gas supply issue and a definite compensation from Petronas.

However, the lack of assurance from Petronas could weigh on the share price, especially after Tenaga president and chief executive officer Datuk Seri Che Khalib Mohamad Noh said on Friday no decision had been reached as yet.

OSK Research said barring a write-back of compensation from Petronas due to its failure to supply sufficient gas to Tenaga, the power company should still post losses over the next two quarters.

“A continued gas shortage coupled with outages in coal plants during 4QFY11 should have necessitated Tenaga to continue to generate substantial power from expensive oil and distillates. In addition, the weakening ringgit would give rise to translation losses,” it said.

OSK Research cautioned that Tenaga might be hopeful for compensation from Petronas amounting to 33% to 67% of its additional fuel bill.

“Investors may also hold out hopes of Tenaga securing a fuel cost pass through after the anticipated General Elections, which may be held soon. In any case, we still believe it would be risky to invest in Tenaga beyond current levels given such speculation,” it added.

However, the broader market could extend their gains, underpinned by the recent strong performance on Wall Street where stocks closed out a fourth week of gains in quiet fashion on Friday, edging higher as the market took a breather after rallying 3% on Europe's deal to stem its debt crisis.

Reuters reported though investors still have questions about implementing the deal, they appeared satisfied by Europe's progress as stocks ended their longest weekly winning streak of the year.

The Dow Jones industrial average gained 22.56 points, or 0.18%, to 12,231.11. The Standard & Poor's 500 Index added 0.49 point, or 0.04%, to 1,285.08. The Nasdaq Composite Index shed 1.48 points, or 0.05 percent, to 2,737.15.

As for the FBM KLCI, it is up 114.3 points from Oct 3’s 1,367.52 to end 1,481.82 last Friday. For last week, the KLCI was up 30.9 pts or 2.19%.

Affin Investment Bank head of retail research Dr Nazri Khan believes the KLCI is likely to trend higher next week on stronger global risk appetite following twin Europe-US catalysts last week.

The factors were the long awaited plan to resolve the European debt crisis and the stronger than expected US 3rd quarter economic growth (registering the fastest quarterly GDP in a year).

“Going forward next week, we expect investors to price in stronger US/European economy as well as the reduced banking crisis risk in both continents, pushing KLCI to a possible 1,524 level (which is the KLCI high made in 2008 before the subprime crisis),” said Nazri.

Other stocks to watch are Envair Holdings Bhd, SILK Holdings Bhd and MALAYAN FLOUR MILLS BHD [] (MFM). Also in focus could be TASEK CORPORATION BHD [] and Cycle & Carriage Bhd.

Envair has received a letter of intent from Zai Corporate Finance Ltd (ZAICF), an investment banking firm based in London, to subscribe for up to 30% of its new ordinary shares of 10 sen each at the market issue price.

The ACE Market listed company said the board would deliberate on this matter and announce its decision on the private placement.

SILK chairman Datuk Mohd Azlan Hashim has said he was confident the company would be able to return to profitability in a couple of years as traffic volume picks up for its tolled highway operations and an improvement in the marine support services.

"We expect with the continued increase in traffic flow in that area, these losses will eventually be wiped out and there will be a turnaround in profitability," he said.

Malayan Flour Mills could be getting ready for the next stage of growth, having announced a series of corporate exercises in May and signing an agreement in October that would see it step into the Indonesian market, according to The Edge weekly.

Tasek's earnings fell 32.9% to RM22.10 million in the third quarter ended Sept 30, 2011 (3QFY11) from RM32.90 million a year ago, due to lower sales. Its revenue fell 7.5% to RM132.99 million from RM143.78 million. Earnings per share were 17.82 sen compared with 20.63 sen.

Cycle & Carriage Bhd’s earnings for third quarter ended Sept 30, 2011 fell 38.37% to RM5.93 million from RM9.62 million a year ago, due to lower margins and reduced non-recurring income. Revenue rose 20.6% to RM188.21 million from RM156.03 million. EPS were 5.89 sen compared to 9.55 sen the previous year.

SILK Holdings to be profitable in ‘couple of years’

KUALA LUMPUR: SILK Holdings Bhd is confident the company will be able to return to profitability in a couple of years as traffic volume picks up for its tolled highway operations and an improvement in the marine support services.

Chairman Datuk Mohd Azlan Hashim said on Friday, Oct 28 that "we expect with the continued increase in traffic flow in that area, these losses will eventually be wiped out and there will be a turnaround in profitability".

The highway division’s loss of RM26 million for the financial year ended July 31, 2010 was reduced to RM19 million in FY11, he told reporters after the AGM.

He said the decline in losses, coupled with a continued increase in traffic flow in the Kajang area, SILK Holdings would be able to make a profit in the next couple of years.

"We've been experiencing traffic flow rates of 17% per annum for two years running now. There is tremendous growth potential and as development happens in that area, traffic is generated," he said. Currently, the area is low density, he added.

On their marine support services division, he said group was expanding its fleet and renewing with more modern vessels. Currently, they own 14 vessels and expect to acquire a few more vessels in the next few months.

Azlan said that the oil and gas sector in Malaysia is an exciting area to be in as it was one of the national key economic areas to be developed under the Economic Transformation Programme.

"We are positioning ourselves to serve that need. At the moment, a quarter of the group's revenues are contributed by the highway side and the remaining is by the marine support services arm," said Azlan.

"Having said that, the highway business takes time to build up as the concession is for 36 years and we are only in the early part now," he added.

"In the highway business, there is heavy capital outlay and a long gestation period," he said. "You have to be patient. The initial years will show losses but once you hit your critical mass in terms of traffic, then you will be out of the woods."

For the financial year ended July 31, 2011, SILK recorded net loss of RM11.24 million compared with net loss of RM10.03 million in FY10.

SILK sees double-digit highway traffic growth

SILK Holdings Bhd expects traffic flow on its Kajang SILK Highway to experience a double-digit growth in the next few years.

SILK Holdings chairman Datuk Mohd Azlan Hashim said: "For the time being, we are counting a loss in our highway infrastructure division, but we see it reducing organically as the traffic flow into the highway increases.

"This division experienced a loss reduction from RM26 million last year, to RM19 million this year," he told reporters after the company's annual general meeting today.

The concession operated by Sistem Lingkaran Lebuhraya Kajang Sdn Bhd recorded a total traffic volume of 45.4 million vehicles from January to December 2010, a 17 per cent increase over the total traffic volume of 38.8 million recorded the previous year.

"In the first nine months of this year, there has been a further marked increase in traffic performance with the average daily traffic volume in excess of 140,000 vehicles daily," Mohd Azlan said.

Meanwhile, the group's oil and gas support services division continues to be the biggest contributor to revenue.

Mohd Azlan said the division recorded an improved revenue of RM182.69 million for the year ended July 31, 2011 from the RM181.32 million recorded in the previous corresponding year.

"This represents a marginal improvement of 0.76 per cent over the previous recorded performance," he added.

He said during the financial year ended July 31, 2011 the division managed to secure six new long-term charters and had three existing ones renewed.

Mohd Azlan said the company currently owned 14 vessels and plans to purchase two more next year.

"The addition of the new vessels to the fleet and the company's established track record provides the division with the ability to remain competitive.

"The division is expected to continue to contribute positively to the group in the current financial year," he added. --Bernama

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.

Silk advances on winning contract extension

Silk Holdings, a Malaysian oil and gas services provider, rose to a seven-week high after it won a RM23.5 million contract extension for the supply of an anchor-handling tug to Petronas Carigali Sdn Bhd.

The stock gained 8 percent to 27 sen at 9:03 a.m. local time in Kuala Lumpur trading, set for its highest close since Sept. 2. -- Bloomberg

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.

SILK unit gets RM23.5m contract extension from Carigali

KUALA LUMPUR: SILK Holdings Bhd’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.

In a filing on Friday, Oct 21, SILK said the primary three-year contract had been extended for a further period of 12 months commencing 4 October 2011.

It said the contract extension was expected to contribute positively to its earnings for the financial year ending July 31, 2012.