KLCI dips to below 1,580-level, blue chips drag

KUALA LUMPUR (April 25): The FBM KLCI closed below the 1,580-point level on Wednesday, reversing its gains earlier in the morning session, weighed by losses including Genting, Tenaga, CIMB, KLK and Petronas Dagangan.

The index fell 2.93 points to 1,579.35.

Market breadth was weak with 405 losers, 315 gainers and 346 counters trading unchanged. Volume was 1.47 billion shares valued at RM1.53 billion.

Meanwhile, global shares rose on Wednesday ahead of the U.S. Federal Reserve's policy meeting, due mainly to signs of good demand for euro zone sovereign debt before a German bond sale, and some strong corporate earnings, according to Reuters.

Markets could take their cues from several planned public speeches by European Central Bank officials, which will be scrutinised for any signs it would consider more liquidity operations if the euro zone's problems worsened, it said.

At the regional markets, Japan’s Nikkei 225 rose 0.98% to 9,561.01, Taiwan’s Taiex added 0.86% to 7,563.18, and the Shanghai Composite Index gained 0.75% to 2,406.81 and Singapore’s Straits Times Index added 0.20% to 2,980.19.

Meanwhile, Hong Kong’s Hang Seng Index lost 0.15 % to 20,646.29 and South Korea’s Kospi shed 0.07% to 1,961.98.

Among the decliners on Bursa Malaysia, BAT fell 28 sen to RM55.12, KLK and TH PLANTATION []s lost 16 sen each to RM23.82 and RM2.65, CSL down 15 sen to RM1.48, UMS 14 sen to RM1.66, Yeo Hiap Seng 13 sen to RM2.88, Toyo Ink, Tanjung Offshore and MMC Corp down 12 sen each to RM1.36, 78 sen and RM2.62 respectively, while Quality Concrete lost 11 sen to RM1.24.

Utopia was the most actively traded counter with 186.1 million shares done. The stock added one sen to 9.5 sen.

Other actives included Ariantec, Ramunia, CSL, Metronic, Astral Supreme, HWGB and JCY.

Meanwhile, the gainers included Panasonic, UMWE, The Store, NSOP, SPB, Batu Kawan, Cepco, TDM and Scientex.



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KLCI edges down 0.1% at mid-day break

KUALA LUMPUR (April 25): The FBM KLCI edged down 0.1% at the mid-break on Wednesday in choppy trade, weighed by losses at key blue chips including Genting, Tenaga and Petronas-linked counters.

The benchmark index was down 0.81 of a point to 1,581.47 at the mid-day break.

Gainers trailed losers by 271 to 302, while 318 counters trade unchanged. Volume was 777.12 million shares valued at RM621.37 million.

The ringgit weakened 0.04% to 3.0638 versus the greenback, crude palm oil futures fell RM3 per tonne to RM3,460, crude oil gained 21 cents per barrel to US$103.76 and gold added 10 cents an ounce to US$1,642.38.

Meanwhile, Asian shares rose on Wednesday, buoyed by firm U.S. corporate earnings, signs of an improving U.S. housing market, and healthy demand for euro zone sovereign debt, while investor focus shifted to the Federal Reserve's policy meeting.

Markets will be looking for the Fed's economic assessment and clues to future monetary policy, including the probability of a third round of quantitative easing, when it ends its two-day meeting later on Wednesday.

At the regional markets, Japan’s Nikkei 225 gained 0.98% to 9,560.47, Hong Kong’s Hang Seng Index edged up 0.08% to 20,693.10, the Shanghai Composite Index rose 0.33% to 2,396.68, Taiwan’s Taiex gained 0.83% to 7,561.07, South Korea’s Kospi was up 0.23% to 1,967.99 and Singapore’s Straits Times Index was up 0.09% to 2,976.93.

Maybank Investment Bank Bhd head of retail research and chief chartist Lee Cheng Hooi in a note to clients on Wedneday said the FBM KLCI declined 1.52 points to close at 1,582.28 on Tuesday.

“Its resistance areas of 1,582 and 1,609 will cap market gains, whilst the weaker support areas are located at 1,562 and 1,579.

“Despite the US markets’ better tone last night, we may be in for another day of heavy selling here,” he said.

On Bursa Malaysia, Petronas Dagangan was the top loser and fell 20 sen to RM19.08, Tradewinds PLANTATION []s fell 15 sen to RM5.51, UMS 13 sen to RM1.67, Yeoh Hiap Seng 12 sen to RM2.89, Aeon Credit 11 sen to RM9.87, MMC Corp 10 sen to RM2.64, TH Plantations nine sen to RM2.72, Tanjung Offshore 8.5 sen to 81.5 sen and Rapid fell eight sen to RM2.49.

Meanwhile, Genting and Tenaga fell four sen each to RM10.52 and RM6.49, KLK eight sen to RM23.90 and Petronas Gas fell six sen to RM16.88.

Utopia was the most actively traded counter with 108.85 million shares done. The stock added one sen to 9.5 sen.

Other actives included Ariantec, Ramunia, CSL, Metronic, JCY, Karambunai and Astral Supreme.

Gainers included Panasonic, UMW, TDM, KPJ shares and warrants, Pintaras, Ekovest, MPI and Carlsberg.



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Tanjung Offshore up 4% on marine unit disposal

KUALA LUMPUR (April 24) : TANJUNG OFFSHORE BHD [] shares gained as much as 4.3% following updates that the firm plans to sell its marine oil and gas support services unit to a major shareholder.

The stock rose four sen to 97 sen before settling lower at RM92.5 sen at lunch break with some three million shares done.

Tanjung Offshore said it plans to sell its entire stake in wholly-owned Tanjung Kapal Services Sdn Bhd to local private equity firm Ekuinas for RM220 million. Ekuinas owns 24% ofTanjung Offshore.

The exercise will also see Tanjung Kapal settling some RM44 million worth of advances from Tanjung Offshore, according to the seller. Tanjung Offshore had cash of RM21.85 million as at December 31, 2011 versus debt obligations of RM348.55 million, translating into a net debt of RM326.7 million, its balance sheet shows.



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Tanjung Offshore suffers net loss of RM55.4m

Integrated oil and gas services provider, Tanjung Offshore Berhad (TOB), suffered a net loss of RM55.395 million for the financial year ended Dec 31, 2011 (FY2011) compared with a net profit of RM6.813 million a year ago.Revenue for the year declined to RM459.045 million from RM541.807 million.

The losses are due to the cessation of group's subsidiary in the United Kingdom, Citech Energy Recovery Systems UK Ltd (Citech), which resulted in expenses amounting to and#163;6 million or about RM30 million, the company said in a statement today.

The losses were also due to impairment of receivables and high operating expenses at the engineering equipment division at Tanjung Offshore Services Sdn Bhd, Tanjung CSI Sdn Bhd and Tanjung PetroConsult Services Sdn Bhd, it added. -- Bernama



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Tanjung Offshore up on takeover talk

Tanjung Offshore Bhd, an oil and gas services provider, jumped 6.6 percent to 96.5 sen in Kuala Lumpur at 9.45am, on course for its highest close since Aug. 8.

The company may be a takeover target, the Edge newspaper reported, citing people it didn’t identify.

Managing Director Omar Khalid couldn’t be immediately reached for comment when phoned at his office today. -- Bloomberg



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HDBSVR: Buying interest in Malaysian stocks to resume

KUALA LUMPUR (Feb 20): HwangDBS Vickers Research (HDBSVR) said buying interest in Malaysian stocks could resume on Monday due to better external sentiment.

“If so, then the benchmark FBM KLCI may pull away from its immediate support level of 1,555 ahead,” it said on Monday.

HDBSVR said although Wall Street saw mixed closings last Friday – ending between -0.3% and +0.4% – the futures markets were up on Monday morning. The DJIA March futures contract was trading at a 56-point premium to the spot rate at 8.15am Malaysian time, lifted by hopes that Greece is on track to receiving international financial aid.

In terms of share price actions, oil & gas counters may be in the limelight, including:

(a) Tanjung Offshore, which could be a merger & acquisition target according to a business weekly report;

(b) SapuraCrest Petroleum, after entering into a joint venture in relation to the building, CONSTRUCTION [] and operation of three pipe-laying support vessels pursuant to a previously secured contract to charter and operate the three vessels at a contract value of US$1.4 billion; and

(c) MMC Corporation, following its announcement that the listing of its subsidiary Gas Malaysia would be delayed from 1Q12 to 2Q12.



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Excitement abounds, stay in oil and gas

Oil and gas sector
Maintain overweight: Petroliam Nasional Bhd’s (Petronas) domestic activities are picking up, from first production systems to rejuvenation jobs. Platforms, chemicals and floating solutions are the essentials for development. Jobs will likely be spread out favouring a large group of local service providers such as Bumi Armada Bhd, M3Nergy Bhd, MISC Bhd, Ramunia Holdings Bhd, Tanjung Offshore Bhd and Deleum Bhd. We remain “overweight” on the sector.

Our recent fact-finding “coffee talk” round with oil and gas service providers revealed that a series of field developments will be rolled out this year. We have identified five projects revolving around the rejuvenation/enhanced oil recovery (EOR), early production system (EPS) and marginal to shallow water field projects. They are: (i) Petronas Carigali’s Angsi (EOR project off Peninsular Malaysia); (ii) Shell’s St Joseph (EOR project offshore Sabah); (iii) Carigali’s Tanjung Baram EPS; (iv) Hess’ Belud (Sabah’s shallow water field project); and (v) Hess’ Kamelia field.

This is a fast-track project. Petronas has set a target to hit first oil production by June 2013. It requires a vessel-based sea-water reverse osmosis (SWRO) plant (chemical floating production, storage and offloading [FPSO]) with the capacity to desalinate 150,000bpd of seawater to increase oil recovery rates up to 20%. US-based Water Standard won the oilfield desalination project and will likely partner an FPSO operator for this job. Conversion is expected to take 16 months to complete.



This project is similar to the Angsi field but on a smaller scale (30,000bpd desalination injection capability), and will use chemical alkaline surfactant polymer (ASP). Shell recently issued an invitation-to-bid (ITB) for the engineering, procurement, construction and commissioning (EPCC) job. Unlike the Angsi field, the main asset (vessel) will be owned by Shell. The winner of the EPCC job will jointly undertake the front-end engineering design (FEED) studies, choose and convert the tanker and earn project management fees, similar to Bumi Armada’s Sepat project.

Hess’ Belud field plan, meanwhile, calls for an FPSO and wellhead platform for the oil and gas complex on Block SB302 with first oil or gas production by 2014. The Kamelia project too requires an FPSO. Separately, the Tanjung Baram EPS project, awarded to a foreign party, is running into complications and will likely miss the first oil production target (1,000 to 3,000bpd) set for July 2012. A re-tender could occur should the issue remain unresolved.

We think Bumi Armada is the likeliest partner for Water Standard for the Angsi project. This would involve a chemical FPSO. For St Joseph, we gather that five bidders were invited (M3Nergy, Bumi Armada, Deleum, BW Offshore Sdn Bhd and Tanjung). Bids will close in February with an announcement in three months. Elsewhere, our ground checks suggest that M3Nergy’s odds of securing an FPSO contract are high; we think it could be for the Belud project. Also, market talk suggests that the MISC-Ramunia partnership is a frontrunner for an FPSO for the Kamelia field. — Maybank IB Research, Jan 27


This article appeared in The Edge Financial Daily, January 30, 2012.



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Asian markets stay edgy on renewed eurozone debt woes

KUALA LUMPUR (Dec 29): External woes, in particular the renewed concerns over the eurozone debt crisis, weighed heavily on global equity markets as nervous investors took profit on the penultimate trading day of 2011.

The FBM KLCI fell 5.18 points to 1,498.93 at 10.01am, dragged by losses at key blue chips.

Losers edged gainers by 165 to 158, while 207 counters traded unchanged. Volume was 277.08 million shares valued at RM131.89 million.

At the regional markets, Japan’s Nikkei 225 fell 0.91% to 8,346.68, Hong Kong’s Hang Seng Index lost 1.04% to 18,326.90, the Shanghai Composite Index was down 0.13% to 2,167.22, Taiwan’s Taiex fell 0.45% to 7,024.71, South Korea’s Kospi lost 0.72% to 1,812.05 and the Singapore Straits Times Index shed 0.27% to 2,659.02.

BIMB Securities Research in a note Dec 29 said investors may yet end 2011 on a jittery note with Eurozone’s problems still very much the starring role, adding that all eyes would be on Italy’s bond auction tomorrow to gauge the sentiments on the financially strapped country though sale of shorter term notes had been rather successful.

As a result, performances of major European bourses sank yesterday, it said.

Over on Wall Street, the situation was not much different with the Dow Jones Industrial Average declining by almost 140 points to 12,151 amid a low trading volume coupled with some realignment of portfolios, it said.

It was also a mixed day for Asian markets from the weak opening over in Europe, it said.

BIMB Research said that domestically, the FBM KLCI remained resilient posting a 3 point gain and stayed above the 1,500 level.

“We would expect the 1,500 to be under pressure today following the weak overseas markets.

“Meanwhile, we noticed that news-flow within the oil & gas sector has been quite apparent over the past weeks and could be a precursor for more to come,” it said.

On Bursa Malaysia, Nestle and KLK fell 20 sen each to RM56.50 and RM22.38, Southern Acids 15 sen to RM2.15, UMW 13 sen to RM6.82, IOI Corp seven sen to RM5.22, Public Bank, Dutch Lady, Genting and AMMB fell six sen each to RM13.06, RM23.16, RM10.90 and RM5.92, whiel Tanjung Offshore shed 4.5 sen to 74 sen.

Utopia was the most actively traded counter with 28 million shares done. The stock was unchanged at 7.5 sen.

Other actives included Sanichi, KNM, JCY, TMS, Flonic and Sumatec.

Gainers included Atis, Boxpak, Integra, DKSH, EKIB, Faber, Maybulk and Perak Corp.



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Maybank IB downgrades Tanjung Offshore to Sell, cuts TP to 70 sen

KUALA LUMPUR (Dec 21): Maybank Investment Bank Bhd Research has downgraded TANJUNG OFFSHORE BHD [] to Sell from Buy previously and cut its target price to 70 sen (from 98 sen) ahead of the company’s 4Q results.

The research house said Tanjung’s 4Q results would be hit by a confluence of issues at its engineering equipment division.

“For this, we forecast TOFF to end 2011 with a higher net loss of RM14 million, making consensus and our initial estimates untenable.

“The stock is unlikely to re-rate until the company shows tangible signs of managing costs effectively,” it said in a note Wednesday.



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Tanjung Offshore rises on maintenance job

Tanjung Offshore Bhd rose to a two- week high in Kuala Lumpur trading after winning a RM43 million maintenance contract from Petronas Carigali Sdn.

The stock gained 1.2 percent to 85.5 sen at 9:08 a.m. local time, set for its highest close since Nov. 15. -- Bloomberg



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Tanjung gains on Petronas Carigali job

KUALA LUMPUR (Dec 1): TANJUNG OFFSHORE BHD [] shares advanced on Thursday after its subsidiary Tanjung Maintenance Services Sdn Bhd secured a RM43 million contract from Petronas Carigali Sdn Bhd.

At 9.32am, Tanjung was up 1.5 sen to 86 sen woth 25,000 shares done.

Tanjung said on Nov 30 that the contract was to provide maintenance services for mechanical rotating equipment at all offshore platforms operated by Petronas Carigali in the Sarawak operations region.



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Stocks to watch: Maxis, Axiata, E&O, Tanjung, PJI

KUALA LUMPUR (Dec 1): After the flurry of corporate results for the quarter ended Sept 30, 2011, stocks which could see trading interest on Thursday include Maxis Bhd, Axiata Group Bhd and Eastern & Oriental Bhd (E&O).

Other companies which could also come under focus following fresh contracts are PJI HOLDINGS BHD [], TANJUNG OFFSHORE BHD [] and MALAYSIAN RESOURCES CORPORATION BHD (MRCB).

Maxis’ earnings fell 10.6% to RM537 million in the third quarter ended Sept 30 from RM610 million a year ago on higher administrative expenses and network operation costs. Revenue was 1.3% higher at RM2.244 billion from RM2.216 billion a year ago, while earnings per share were 7.2 sen compared with 8.0 sen. It declared a third interim single-tier tax exempt dividend of 8.0 sen per share.

Meanwhile, Axiata’s earnings fell 7.7% to RM589.62 million in the third quarter ended Sept 30, 2011 from RM639.12 million a year ago on foreign exchange translation losses and higher costs. Net foreign exchange losses surged to RM43.91 million compared with gains on financing activities of RM71.96 million a year ago.

E&O saw its earnings surge 172% to RM13.83 million from RM5.08 million a year ago. Its revenue increased by 25.5% to RM82.60 million from RM65.81 million while earnings per share were 1.27 sen compared with 0.48 sen.

Tanjung Offshore’s subsidiary, Tanjung Maintenance Services Sdn Bhd has secured a RM43 million contract from Petronas Carigali Sdn Bhd. The contract was to provide maintenance services for mechanical rotating equipment at all offshore platforms operated by Petronas Carigali in the Sarawak operations region .

PJI Holdings Bhd’s unit has secured two contracts worth RM59.64 million at the KLIA2 involving the low voltage system for several locations at the KLIA2.

Its unit P.J. Indah Sdn Bhd had accepted the letter of award from BINA PURI HOLDINGS BHD [] to formalise the sub-contract valued at RM25.16 million.

P.J. Indah had also accepted a RM34.64 million contract from UEM CONSTRUCTION [] Sdn Bhd for the design, supply and maintenance of the low voltage system, uninterruptible power supply and lightning protection system at KLIA2.

MRCB has secured a RM40.3 million contract to carry out coastal protection works at the Sungai Perai river mouth. MRCB said it had received the letter of award from the Department of Irrigation and Drainage for the third phase of the project.

FABER GROUP BHD [] posted net losses of RM26.87 million in the third quarter ended Sept 30, 2011 compared with net profit of RM29.01 million a year ago. The losses were mainly due to the recognition of costs amounting to RM44.5 million for works completed for the projects in the United Arab Emirates (UAE) where the corresponding revenue was not recognised as it could not be measured reliably.

KUB MALAYSIA BHD [] posted net loss of RM12.86 million in the third quarter ended Sept 30, a vast contrast from the net profit of RM2.49 million a year ago. KUB had undertaken impairment assessments on its assets of underperforming subsidiaries and decided to provide impairment losses of RM14.70 million.



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Tanjung Offshore secures RM43m contract from Petronas Carigali

KUALA LUMPUR (Nov 30): TANJUNG OFFSHORE BHD []’s subsidiary, Tanjung Maintenance Services Sdn Bhd has secured a RM43 million contract from Petronas Carigali Sdn Bhd.

It said on Wednesday the contract was to provide maintenance services for mechanical rotating equipment at all offshore platforms operated by Petronas Carigali in the Sarawak operations region .

“The said maintenance contract is for a tenure of five years with an option to extend for another one year. The primary contract is effective from Jan 1, 2012 to Jan 4, 2017,” it said.



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HDBSVR sees KLCI falling below 1,475

KUALA LUMPUR (Nov 17): Hwang DBS Vickers Research (HDBSVR) said the benchmark FBM KLCI is expected to drop below its immediate support level of 1,475, possibly falling towards the next support line of 1,445 ahead.

It said on Thursday that sentiment would be impacted after the overnight fall on Wall Street. Major U.S. equity indices plunged between 1.6% and 1.7% at the closing bell partly on fears that American banks could be hit by the spreading eurozone sovereign debt crisis.

“Consequently, Asian equities will likely suffer from the spillover effects today,” it said.

HDBSVR said against the weak market backdrop, the share price and warrant price of Harvest Court should tumble further on Thursday after hitting limit down on Wednesday.

“And it remains to be seen whether the selling momentum will affect other penny stocks still sitting on huge gains such as DPS Resources, Federal Furniture and Tricubes.

“Meanwhile, Tanjung Offshore shares may come under pressures too following the release of a set of poor financial results last evening,” it said.



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Stocks to watch: Dialog, Malton, Tanjung Offshore, AMMB

KUALA LUMPUR (Nov 17): Stocks which could see trading interest on Thursday include DIALOG GROUP BHD [], MALTON BHD [], TANJUNG OFFSHORE BHD [], AMMB HOLDINGS BHD [], Amway (Malaysia) Holdings Bhd and ALLIANCE FINANCIAL GROUP BHD [] (AFG) following the release of their financial results for the quarter ended Sept 30.

Dialog posted net profit of RM44.54 million in the first quarter ended Sept 30, 2011, an increase of 34.6% from the RM33.09 million a year, underpinned by a strong increase in revenue, mainly from its New Zealand operations. Its revenue rose 35% to RM355.24 million from RM263.81 million while earnings per share were 2.26 sen compared with 1.69 sen.

Malton’s earnings jumped 118% to RM12.11 million in the first quarter ended Sept 30 from RM5.54 million a year ago, boosted by an improvement in the property development division from a year ago.

Revenue rose 44.3% to RM99.27 million from RM68.78 million while earnings per share were 2.90 sen versus 1.59 sen. Malton said pre-tax profit improved by 111.4% to RM16.7 million from RM7.9 million.

However, Malton's financial performance was slightly weaker compared with the immediate preceding quarter. Revenue declined from the preceding quarter’s RM167.9 million.

Tanjung Offshore Bhd swung into the red with net losses of RM429,000 in the third quarter ended Sept 30, 2011 compared with net profit of RM807,000 a year ago. Its revenue fell 14.3% to RM117.64 million from RM137.25 million a year ago. Loss per share was 0.15 sen compared with earnings per share of 0.29 sen.

For the nine months ended Sept 30, its net profit fell 51.9% to RM3.42 million from RM7.12 million a year ago while revenue was marginally lower at RM401.33 million compared with RM401.95 million. Tanjung Offshore had borrowings totaling RM560.53 million.

AMMB Holdings Bhd’s earnings rose 10.9% to RM369.47 million in the second quarter ended Sept 30,2011 from RM332.87 million a year ago, boosted by the group’s retail banking operations. Its revenue increased by 20.5% to RM2.138 billion from RM1.773 billion while earnings per share were 12.35 sen versus 11.08 sen. It declared a single tier dividend of 6.6% per share.

For the first half, its earnings increased by 15.6% to RM810.99 million while its revenue increased 17.6% to RM4.092 billion from RM3.477 billion.

Amway’s net profit rose 19.8% to RM25.77 million in the third quarter ended Sept 30, 2011 from RM21.51 million a year ago as it benefited from higher sales and improved gross margins due to the favourable foreign exchange impact. Its revenue rose at a slower pace of 5.4% to RM211.52 million from RM191.50 million while earnings per share were 15.68 sen compared with 13.08 sen.

Amway declared a third interim single tier dividend of 9.0 sen net per share and special interim single tier dividend of 30.0 sen net per share for the financial year ending Dec 31, 2011.

AFG reported a strong set of financial results for the second quarter ended Sept 30, 2011, with earnings up 18.2% to RM120.95 million from RM102.27 million a year ago. Revenue increased by 5.9% to RM314.60 million from RM296.98 million. Earnings per share were 7.9 sen compared with 6.7 sen.

For the first half, AFG's earnings rose 8.2% to RM250.51 million from RM213 million while its revenue increased 8.9% to RM624.37 million from RM573.20 million.



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Tanjung Offshore posts net loss RM429,000 in 3Q

KUALA LUMPUR (Nov 16): TANJUNG OFFSHORE BHD [] swung into the red with net losses of RM429,000 in the third quarter ended Sept 30, 2011 compared with net profit of RM807,000 a year ago.

It said on Wednesday that revenue fell 14.3% to RM117.64 million from RM137.25 million a year ago, Loss per share was 0.15 sen compared with earnings per share of 0.29 sen.

“The reduction in revenue is due to the slowdown in business activities for the engineering equipment division. The group registered a loss in the current quarter due to impairment of receivables and higher costs incurred in certain engineering equipment packages,” it said.

For the nine months ended Sept 30, its net profit fell 51.9% to RM3.42 million from RM7.12 million a year ago while revenue was marginally lower at RM401.33 million compared with RM401.95 million.

Tanjung Offshore had borrowings totaling RM560.53 million.

“The board of directors of Tanjung is cautiously optimistic of the prospects of oil and gas industry in Malaysia and the region as the market remains fragmented and competitive. Whilst we are experiencing a more robust demand for our offshore support vessels, we are undertaking a business rationalisation exercise for the non-marine division so as to reduce costs and seek strategic growth within our core business divisions,” it said.



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SapuraCrest secures US$1.4b Petrobras contract

KUALA LUMPUR: SapuraCrest Petroleum Bhd has secured a massive US$1.4 billion (RM4.35 billion) contract from Petróleo Brasileiro SA (Petrobras) for the charter and operations of three pipe-laying support vessels (PLSV), the single-largest contract by value that the group has won in recent years.

In an announcement to Bursa Malaysia yesterday, SapuraCrest said the contract is expected to generate revenue for the group by the fourth quarter of 2014.

It is also anticipated to “contribute positively” to the group’s earnings and net assets for the financial year ending Jan 31, 2015 and beyond, SapuraCrest said.

SapuraCrest said its wholly-owned subsidiary TL Offshore Sdn Bhd will construct two PLSVs outside Brazil and the other will be built in Brazil.

TL Offshore will be tasked with project management, procedures and operations of the PLSVs for Petrobras. The vessels will be deployed to perform oil and gas (O&G) marine construction projects in Brazilian waters.

SapuraCrest executive vice-chairman and president Datuk Seri Shahril Shamsuddin said in a statement the group’s entry into the Brazilian market is part of its long-term global expansion strategy.

“This contract is a significant milestone as it marks our entry into the vast, dynamic yet technologically challenging O&G market in Brazil. It is a definitive acknowledgement of SapuraCrest as a global player,” Shahril said.

Petrobras is a public-listed company in which the Brazilian government holds a majority stake.

The mega award comes in the midst of SapuraCrest’s merger with Kencana Petroleum Bhd via Integral Key Sdn Bhd, a special purpose vehicle established by Mayban Ventures Sdn Bhd.

Announced on July 11, the proposed merger values SapuraCrest at RM5.87 billion and Kencana at RM5.98 billion, with shareholders of the respective companies to get cash and Integral Key shares if they choose to accept the offer.

The merged entity will create the world’s fourth-largest integrated O&G services provider.

While the latest US$1.4 billion award provides a big boost to SapuraCrest’s future earnings, industry observers have raised questions if Mayban Ventures’ proposed merger of SapuraCrest and Kencana has undervalued SapuraCrest.

“Although the terms of the merger would more or less be fixed, it is debatable whether the deal gives enough weight to SapuraCrest’s tender book and future earnings potential,” said one industry observer.

Since the proposed merger was unveiled on July 11, SapuraCrest has secured several contracts with a combined value of RM5.16 billion.

To recap, SapuraCrest’s 50%-owned associate, Labuan Shipyard and Engineering Sdn Bhd, on Sept 30 was awarded a RM99.5 million shipbuilding contract from Tanjung Offshore Bhd.

On Sept 22, SapuraCrest’s unit TL Offshore was also awarded a US$227 million contract to construct two pipelay cum heavylift offshore construction vessels for Cosco Nantong Shipyard Co Ltd.

Kencana has yet to announce any new contract secured since July when the proposed merger with SapuraCrest was announced.

Earlier this year before the merger deal was struck, Kencana’s unit, Kencana HL Sdn Bhd, was given contracts worth over RM539 million.

These included a RM115 million contract from Petrofac E&C Sdn Bhd to construct a mobile offshore production unit and well head support structure for the Sepat early production system off the coast of Terengganu and a RM208 million job for the fabrication of a Kebabangan substructure for the Kebabangan northern hub development project off the coast of Sabah.

Kencana HL had in March also won a RM216 million contract from Petrofac Ltd for the engineering, procurement and construction of two well head platforms for the Cendor oil field off the coast of Terengganu.

Kencana’s wholly-owned subsidiary, Kencana Energy Sdn Bhd, had on Jan 31 entered into contracts to jointly develop and operate an oil and gas field from the Berantai field offshore Terengganu.

SapuraCrest yesterday shed six sen to close at RM4.00 with 543,000 shares traded. The stock surged 8.18% to RM4.10 on Oct 27 from RM3.79 on Oct 25, its steepest one-day gain in six months.


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

Tanjung Offshore wins Carigali contracts for 3 OSVs

Tanjung Offshore (Oct 24, 85 sen)
Maintain sell with revised fair value of 53 sen from 70 sen: Last Friday, Tanjung Offshore Bhd announced that its 100%-owned subsidiary, Tanjung Offshore Services Sdn Bhd, had been awarded a contract by Petronas Carigali Sdn Bhd for the provision of three offshore support vessels (OSVs) for a total charter contract of up to two primary years, valued at about RM27 million.

However, as we expect its vessel earnings to be affected by negative contributions from its other divisions, we are downgrading FY11/FY12 earnings by 24% to 52% and maintaining our “sell” call.

We see the continuing dishing out of contracts by Carigali as positive for the company as its contracts already make up about 38% of the company’s 16 contracts for its 16-vessel fleet. Hence, we believe this division will continue to lead Tanjong Offshore’s overall earnings. This is because we had assumed some order book replenishment for it vessels. Hence, we are keeping our vessel earnings contribution unchanged for now.

Although the vessel division is still the pillar of its business, its contribution is expected to be eroded by the company’s other divisions, especially its process equipment division, Citech, which was supposed to have broken even by now. But we gather that it is still in the red due to sluggish business activities amid the slowdown in the global economy, coupled with some potential provisions that need to be made to reflect the true value of the division.

Hence, we are downgrading our FY11/FY12 earnings by 24% to 52% to reflect the group’s potential loss in earnings.

Our fair value for the stock has also been downgraded to 53 sen (previously 70 sen), based on the existing price earnings ratio (PER) of 12 times FY12 earnings per share (EPS), following our FY12 earnings downgrade. — OSK Research, Oct 24


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

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.

Tanjung Offshore rises on Petronas unit job

Tanjung Offshore Bhd, a Malaysian oil and gas services provider, rose the most in two weeks in Kuala Lumpur trading after winning a RM27 million charter contract from Petronas Carigali Sdn Bhd.

The stock gained 4.2 percent to 87.5 sen at 9:00 a.m. local time, set for the largest gain since Oct. 11. -- Bloomberg