Bullish tone for REDtone

Puchong: REDtone International Bhd, a telecommunications service provider, believes the worst is over and it might return to the black in the current financial year, boosted by revenue from its broadband business.

"This is definitely a turnaround year for REDtone. Barring unforeseen circumstances, we are likely to break even or be profitable this financial year (ending May 31 2012). As you know, we suffered a net loss of about RM11 million last year, so if we break even, it would mean an improvement of RM11 million ... that's a huge improvement," said its managing director Datuk Wei Chuan Beng in a Business Times exclusive.

The company suffered a net loss of RM11.7 million for the fiscal year ended May 31 2011 against a net loss of RM5.4 million a year ago.

REDtone has been posting net losses since its 2008 financial year and the market will be keenly watching its first-quarter results, due to be announced sometime this month, for an indication that the company has indeed made a turn for the better.

Wei said the wider net loss previously was partly due to the roll-out of its wireless broadband network in East Malaysia, impairment of past investments in China and provision of doubtful debts, among others.

"Our core businesses are showing positive signs. Voice business has been profitable for many years.

"Our data business is also profitable now, our WiMAX broadband business in East Malaysia is very close to breaking even, and that's a very good progress."

He said its broadband business was in an investment mode over the past few years, especially in East Malaysia.

REDtone has now stabilised and Wei believes it is at a tipping point where the business can be profitable.

REDtone now offers broadband services to close to 10,000 residential customers and 1,000 companies.

Wei said that broadband will be a major growth driver for the firm.

"Currently, the business contributes about 20 per cent to its overall revenue. Moving forward, especially when the LTE spectrum is awarded, we are looking at revenue contribution of more than 50 per cent in three to five years."

REDtone is also banking on its new board of directors to push it to the next level.

In July, it announced the appointments of Datuk Wira Syed Ali Syed Abbas Al Habshee as its deputy chairman and Datuk Ismail Osman as its senior executive director.

"With the new board (members), I believe REDtone now has all the ingredients needed - the people, the technology, and the experience - to take itself to the next level and become one of the big boys in the telecommunications industry," said Ismail.

Asian shares lower, euro capped ahead of Europe summit

TOKYO: Asian stocks fell on Thursday, as growing investor caution about taking risks ahead of a key European leaders' summit at the weekend weighed on riskier assets across the board and supported safe-haven government bonds.

The euro struggled to make much headway, having pared gains on Thursday on fresh reports suggesting Europe remains a long way from resolving its debt woes. The single currency was up 0.1 percent against the dollar at $1.3770.

Plans to tackle the euro zone debt crisis have stalled, with Paris and Berlin at odds over how to increase the firepower of the region's bailout fund, French President Nicolas Sarkozy said on Wednesday, heightening concerns about how much progress could be made at a summit of European leaders on Sunday.

Investors are looking for more details from the meeting of plans to contain the euro zone sovereign debt crisis, particularly beefing up the rescue fund, a vehicle to guarantee national governments' sovereign debt issuance, although many believe a rapid solution is unlikely.

The meeting is also expected to agree on a plan to recapitalise European banks, but a report in the Financial Times said on Thursday that the plan to strengthen Europe's banking system is set to fall short of market expectations.

MSCI's broadest index of Asia Pacific shares outside Japan fell 0.6 percent, with the materials sector leading the decline, falling 1.5 percent.

Australian shares fell 1.2 percent on Thursday as miners sank after copper and gold prices fell, while Japan's Nikkei stock average opened down 0.4 percent.

The MSCI world stocks index was down 0.3 percent at 297.88, while U.S. stocks ended lower on Wednesday as sentiment was also undermined by the Federal Reserve's Beige Book report, which suggested the outlook for the U.S. economy grew dimmer in September.

Oil edged up in early Asia on Thursday, after falling the day before on concerns about growth. Brent crude futures were up 0.4 percent to $108.88 a barrel, while U.S. crude futures edged 0.2 percent higher at $86.30 a barrel.

In Asian credit markets, spreads on the iTraxx Asia ex-Japan investment grade index , a gauge for whether investor risk appetite is returning, widened a tad by 1 basis point.

U.S. Treasury prices rose modestly on Wednesday, with benchmark 10-year Treasury notes trading up 4/32 in price to yield 2.16 percent, down from 2.18 percent late Tuesday.

Gold fell for a third consecutive session on Wednesday, moving once again in tandem with riskier assets, as jittery investors sold on a lack of progress over euro zone debt talks and an uncertain U.S. economic outlook. Spot gold was steady at $1,641.49 an ounce. – Reuters

CIMB Research has technical buy on Muhibbah

KUALA LUMPUR: CIMB Equities Research has a technical buy on Muhibbah Engineering at RM1.21 at which it is trading at a FY12 price-to-earnings of 6.1 times and price-to-book value of 1.0 times.

It said on Thursday, Oct 20 Muhibbah Engineering broke out of its medium term downtrend channel recently. The rebound also lifted prices above its 30-day and 50-day SMAs.

“Looking at the chart, we think there is still room to the upside. Prices are likely to charge towards RM1.28 and RM1.36 in the near term. If these levels are taken out, the 200-day SMA (at RM1.45) will be the next target,” it said.

CIMB Research said the MACD signal line has returned to the black while RSI is also above the 50pts mark. The positive technical reading reflects its stance on the stock.

“Traders with higher risk appetite may start to nibble now. However, always put a stop at below RM1.11, just in case,” it said.

CIMB Research has technical buy on Latexx

KUALA LUMPUR: CIMB Equities Research has a technical buy on Latexx Partners at RM1.49 at which it is trading at a FY12 price-to-earnings of 4.8 times and price-to-book value of 1.2 times.

It said on Thursday, Oct 20 the recent rebound lifted Latexx above its 30-day SMA. Since then, prices have been consolidating in a bullish flag pattern.

“We are of the opinion that this upswing can be extended. If we are right, prices should take out the 50-day SMA soon, before charging towards RM1.56 and RM1.68 next,” it said.

CIMB Research said the MACD signal line has turned flattish, reflecting its earlier consolidation mode. Meanwhile, RSI is above the 50pts mark.

“Risk takers may consider taking some position now ahead of the breakout run. Be quick to cut loss if the RM1.42 level is violated,” it said.

MIDF Research maintains Neutral on Bursa Malaysia

KUALA LUMPUR: MIDF Research has maintained its Neutral rating and target price of RM5.90 on BURSA MALAYSIA BHD [] and said it expects the percentage of derivatives trading revenue to total operating revenue to trend higher to 13.9% in FY11 and 15.3% in FY12 (FY10: 11.4%).

However, the equity market is expected to be volatile due to external events before gaining momentum in 2HCY12, it said in a note Oct 20.

The research house said the rise in derivatives trading revenue would not be sufficient to offset a lower revenue from the equity market in FY12 as the latter will still account for significant percentage of Bursa’s total operating revenue.

MIDF Research said it had already rolled over its valuation period to FY12.

“With no changes to our forecast, we maintain our TP at RM5.90 based on FY12 EPS of 24.5 sen pegged to a PER of 24.0x (1 standard deviation below historical 5 years average mean) or PBVR of 3.6x.

“We retain our view that the stock is still pricey by regional peers standard, hence our Neutral rating,” it said.

US stocks sink on Fed's report

NEW YORK: US stocks fell sharply Wednesday after the Federal Reserve's "Beige Book" portrayed a still-weak economy in September, as big losses from tech stars Apple and Amazon pulled the Nasdaq down more than 2.0 per cent.

Reports of ongoing discord over the coming comprehensive rescue plan for the eurozone also helped push shares lower, analysts said.

The Dow Jones Industrial Average lost 72.43 points (0.63 per cent) to close at 11,504.62.

The broader S&P 500 shed 15.50 points (1.26 per cent) to 1,209.88, while the tech-heavy Nasdaq Composite sank 53.39 points (2.01 per cent) to end at 2,604.04.

The Nasdaq was down from the beginning of the session, but the other indices mostly stayed positive until the last two hours.

"Momentum from the prior session's broad-based bounce was lost this morning as reports regarding plans to boost bailout funds in the EFSF (European Financial Stability Facility) were contradicted," said Briefing.com.

"Headlines indicative of conflicting goings on at meetings between eurozone officials played a part in an afternoon sell-off that left stocks to end the session at lows."

Also souring sentiment was the Beige Book September report, which compiles assessments of the economy from the central bank's 12 regions.

While there was still growth in all the areas, "many districts described the pace of growth as 'modest' or 'slight,'" the report said.

The report said business contacts "generally noted weaker or less certain outlooks for business conditions."

The Nasdaq was dragged down by Apple, which fell 5.6 per cent after its quarterly report fell below expectations, and Amazon, which lost 5.1 per cent.

Abbott Laboratories shares rose 1.5 per cent after the company said it would split into two companies, one for its pharmaceutical research and branded drugs, and another for the rest of its medical products, drugs, and infant formula.

Takaful to pay RM9.36mil dividend

KUALA LUMPUR: Syarikat Takaful Malaysia Bhd announced its declaration of interim dividend of 7% which will result in a payout amounting to RM9.36mil for its financial year ending Dec 31, 2011.

The company said in a statement yesterday that dividend payments would be made on Dec 2 to depositors who transfer shares into their securities account before 4pm on Nov 11. “The group recorded operating revenue of RM636.2mil comprising RM532.5mil in gross contribution and RM103.7mil in investment income during the financial period ended June 30, representing an increase of 8.3% over the same period last year of RM587.2mil,” said Takaful Malaysia group managing director Datuk Mohamed Hassan Kamil.

He said the group also attained a favourable profit before zakat and taxation of RM49.9mil, representing a growth of 134% over the same period last year of RM21.3mil.

On the six months financial result, Mohamed Hassan said the gross contribution was mainly attributable to its Family Takaful Group business, motor and fire class of business.

He added that the company’s new distribution channel, the Wakalah or retail agency model launched in March 2010, was the main contributor to its Family Takaful Group business.

Stocks to watch: Kencana, Bursa, Hua Yang, Hai-O, Bonia

KUALA LUMPUR: Trading on Bursa Malaysia on Thursday, Oct 20 could see some downside pressure after stocks on Wall Street fell overnight on worries that Europe remains far from a solution to its debt crisis.

The Dow Jones industrial average shed 75.49 points, or 0.65 percent, at 11,501.56. The Standard & Poor's 500 Index fell 15.63 points, or 1.28 percent, at 1,209.75. The Nasdaq Composite Index was down 54.41 points, or 2.05 percent, at 2,603.02.

On Wednesday, several Asian markets slipped into the red yesterday after Hong Kong's government said it expects economic growth in the territory to be affected by weaker exports, with gross domestic product anticipated to grow at lower end of its own forecast range.

On Bursa Malaysia, among the stocks that could be in focus are KENCANA PETROLEUM BHD [], JCY International Bhd, BURSA MALAYSIA BHD [], HUA YANG BHD [], HAI-O ENTERPRISE BHD [], BONIA CORPORATION BHD [] and AT SYSTEMATIZATION BHD [].

The Edge FinancialDaily reports Kencana is in talks to acquire more than 130 acres (52ha) of land adjacent to its fabrication yard in Lumut, Perak, sources said.

It also reported Malaysia’s country's largest listed hard disk drive component maker by market capitalisation, JCY International Bhd, chalked up impressive gains on Bursa Malaysia yesterday with its share price rising 12.5 sen or 27.5% to close at 58 sen.

Bursa Malaysia’s net profit for the third quarter ended Sept 30, 2011 rose 39.37% to RM38.61 million from RM27.71 million a year earlier, driven mainly by higher revenue, but it was cautious on the outlook on concerns of further downside risk.

Revenue for the quarter increased by 23.68% to RM107.31 million from RM86.76 million in 2010. Earnings per share were 7.30 sen compared to 5.20 sen in 2010, while net assets per share was RM1.56.

For the nine months ended Sept 30, Bursa’s net profit rose to RM114.82 million from RM83.26 million in 2010, on the back of a 25% increase in revenue to RM324.47 million from RM259.14 million a year earlier.

Hua Yang’s net profit for the second quarter ended Sept 30, 2011 surged to RM13.89 million from RM4.31 million a year earlier, due mainly to steady CONSTRUCTION [] progress and better sales.

Its revenue for the quarter more than doubled to RM76.13 million from RM35.63 million in 2010.

Reviewing its performance, Hua Yang said the sales achieved during the quarter under revised was 119% higher year-on-year with total unbilled sales of RM395.24 million, giving it improved earnings visibility in the remaining period of FY2012.

Meanwhile, Hai-O Enterprise is expecting to see higher profits for FY2012, on the back of improving sales for its consumable products, said its co-founder and group managing director Tan Kai Hee.

He said the multi-level marketing (MLM) group was now focusing on marketing its consumable products such as health supplements and herbs which had higher margins and ensure repeated sales for recurring income.

He said Hai-O’s profit for FY2011 ended April 30 had fallen 60% due to the implementation of the new Direct Sales Act by the government in April 2010.

Bonia is acquiring PROPERTIES [] in Cheras for RM44.29 million for its expansion plans and to reduce rental expense.

Its unit Luxury Parade Sdn Bhd had entered into 15 sale and purchase agreements with Platinum Starhill Sdn Bhd to acquire freehold units in two blocks in Cheras.

ACE Market-listed AT Systematization became the latest casualty of Thailand’s flood casualty, after its wholly-owned subsidiary, Automation TECHNOLOGY [] Systematization Industries Limited (ATSi) temporarily closed its operations there.

ATSi procures design and assembles automatic machines according to purchase orders.

AT Systematization said ATSi had shut down the manufacturing operations from Oct 13 due to the unexpected severe floods in Thailand.