HDBSVR sees KLCI finding more strength to move higher

KUALA LUMPUR (Dec 6): Hwang DBS Vickers Research said the benchmark FBM KLCI may find more strength to move upward on Tuesday, trading within a wider band than Monday.

It said that on the chart, its immediate resistance level stands at 1,500 currently.

Giving the regional bourses as well as Malaysian bourse a boost is the positive closing on the Wall Street last night.

Key equity indices ended the day between 0.7% and 1.1% lifted by optimism that Europe will resolve its debt crisis.

HDBSVR said it expects to see continued interest in the trading of Proton Holdings and DRB-Hicom shares.

News reports said three parties -- Tan Sri Syed Mokhtar AlBukhary’s DRB-HICOM BHD [], several key shareholders linked to the Naza Group and Proton chairman Datuk Mohd Nadzmi Mohd Salleh, have submitted a bid to Khazanah Nasional Bhd on Monday to seek control of Proton. The bids were in the range of RM6.00-RM7.00/share.

Another stock name that could be of interest is Hiap Teck Venture as its 55%-owned Eastern Steel Sdn Bhd has been granted a licence by the Terengganu government to mine iron ore on a 243ha site near Bukit Besi.



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ECM Libra Research maintains Trading Buy call on SapuraCrest

KUALA LUMPUR (Dec 6): ECM Libra Investment Research has maintained its Trading Buy recommendation on SapuraCrest at RM4.22 and said the company’s 9MFY12 earnings of RM233.7 million beat the research house’s and consensus estimates by making up to 80% of both full year estimates.

In a note Tuesday, ECM Libra said the drivers for SapuraCrest were (1) the group’s ongoing merger exercise and (2) significant geographic expansion into Brazil and also Australia (through the purchase of Clough’s marine assets).

“SapuraCrest is becoming a global pipelaying and installation player by 2015 with a fleet of 7 pipe lay barges (currently 4 including Clough’s assets).

“Maintain target price of RM4.60, pegging to the offer price for SapuraCrest in the merger exercise with Kencana,” it said.



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CIMB Research maintains Neutral on banks, Maybank top pick

KUALA LUMPUR (Dec 6): CIMB Equities Research said Malaysian banks’ 14.8% net profit growth in 3Q11 is no cause for elation as it was slightly below expectations.

It said on Tuesday the growth came primarily from unsustainably strong growth of investment income and write-backs.

“Topline growth is weak, going by the 2.4% rise in net interest income. Banks’ earnings misses for two straight quarters do not point to a promising outlook,” it said.

CIMB Research said though net interest margins is expected to stabilise, there is earnings risk from weaker loan growth and investment banking income.



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AirAsia denies being behind delay of KLIA2

KUALA LUMPUR: In a battle that looks set to worsen, AirAsia Bhd has come out with its own set of bewildering revelations on the construction of KLIA2, the country's new low-cost carrier terminal.

The budget airline has refuted claims by Malaysia Airports Holdings Bhd (MAHB) that it had asked for a fully automated baggage handling system (BHS) and a 4km runway.

It also denied that it had been part of a decision by MAHB to increase the terminal capacity of KLIA2 to 45 million passengers per annum (ppa).

On Saturday, MAHB published on its website a list of requirements purpotedly made by airlines that were incorporated into the construction of KLIA2.

In the posting, MAHB said an airline, believed to be AirAsia, requested for the BHS, a 45 million passengers per annum capacity terminal and a 4km runway.

The BHS has been cited as one of the main reasons for the delay in the completion of KLIA2.

Referring to a letter dated August 9, 2011 written by MAHB managing director Tan Sri Bashir Ahmad, AirAsia said MAHB had confirmed that KLIA2 would be sufficient for 30 million ppa.

"This figure has never been officially changed by AirAsia or MAHB since August 9, 2011," the statement said.

It also went on to say that a joint committee comprising AirAsia and MAHB officials to agree on the construction of the new terminal and the charges, fees and concession mix was never formed.

"MAHB has not been consistent in producing mutually agreed plan and cost of construction," AirAsia said.

The statement also claimed that the 4km runway had been allocated for in the original design of the LCCT and had not been specifically requested for by AirAsia.

A letter written by AirAsia's Strategy, Airports and Planning regional head, Ashok Kumar, on July 6, 2010 to MAHB is cited to back the claim.

The low-cost carrier also had in its letter to MAHB in 2009 warned of the unsuitability of the site for KLIA2 and that costs would go up to between RM3.7 billion and RM3.9 billion.

AirAsia cited four elements - work to prepare the KLIA2 site, construction cost of the LCCT, a proposed sky bridge and MAHB's baggage system (not a fully automated one) - as contributors to higher costs.



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Three-way bid for Proton stake

It is believed that the bidders are Tan Sri Syed Mokhtar AlBukhary’s DRB-HICOM, several key shareholders
linked to the Naza Group and Proton chairman Datuk Mohd Nadzmi Mohd Salleh.

As many as three parties have submitted a bid to Khazanah Nasional Bhd yesterday to seek control of national carmaker Proton Holdings Bhd, people involved in the bidding process said.

“The bids were in the range of between RM6 and RM7 a share,” said a party directly involved in the bidding process.

It is believed that the bidders are Tan Sri Syed Mokhtar AlBukhary’s DRB-HICOM Bhd, several key shareholders linked to the Naza Group and Proton chairman Datuk Mohd Nadzmi Mohd Salleh.

Khazanah has a 43 per cent stake in Proton, and any bidder seeking to buy the government investment arm’s block will trigger a general offer.

“Those are the nitty gritty details, which are still being worked at ... but whoever is buying Proton is getting the company on the cheap,” said the source.

As at end-March 2011, Proton’s book value per share stood at RM9.84.

The carmaker posted a revenue of RM8.96 billion and a net profit of RM155.61 million in its B3last financial year ended March 31 2011.

Business Times understands that a clearer picture on the takeover will likely emerge later this week.

Proton, which owns sports car maker Lotus Group International Ltd, has been on the lookout for a strategic partner to help compete with bigger global automakers such as Toyota Motor Corp, Volkswagen AG and Honda Motor Co.

Proton’s rival DRB-HICOM already has a collaboration agreement with Volkswagen to locally assemble VW cars in Pekan, Pahang.

The VW cars assembled there are likely to be priced close to the top range Proton models, which currently sell at above the RM100,000 mark.

This could put pressure on the national carmaker’s production capacity at its Tanjung Malim plant, which has an installed capacity of 150,000 units a year.

Meanwhile, Proton shares were heavily traded yesterday and were second top gainer, up 89 sen to RM4.50.

Interest in the shares was sparked by reports of a possible sale of Khazanah Nasional’s block in Proton and also because two research firms, namely OSK Holdings Bhd and RHB Capital Bhd, had upgraded the stock to a “buy” with a RM5-a-share fair value.





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Hiap Teck in RM1.8b steel mill joint venture

Hiap Teck says future prospects are good due to strong steel demand in Malaysia as well as Indonesia, Thailand and as far as China, Japan, Korea, Europe and the United States.

HIAP Teck Venture Bhd expects its new RM1.8 billion steel mill in Terengganu to account for 50 per cent of its bottom line starting from 2014 on robust exports in Malaysia and Asean countries.

Hiap Teck executive deputy chairman Datuk David Law Tian Seng said future prospects are good due to strong steel demand locally as well as Indonesia, Thailand and as far as China, Japan, Korea, Europe and the United States.

The demand for steel in Asean alone is around four million tonnes a year.

Hiap Teck executive director Low Choong Sing said the integrated steel mill will start producing 700,000 tonnes a year by June 2012 (stage one), before being ramped up to 1.5 million tonnes (stage two) after one year.

About 60 per cent of the output will be for Malaysia, while the remaining 40 per cent for the Asean market.

"The mill will first run on one furnace and if demand is good, we may put in a second furnace under phase two.

"This can contribute to our bottomline as high as 70 per cent beyond 2015," Low told reporters here yesterday.

Hiap Teck has forged an alliance with China Shougang Group, and this was marked by a groundbreaking ceremony witnessed by Terengganu Menteri Besar Datuk Seri Ahmad Said yesterday.

Hiap Teck and Shougang formed a joint venture company called Eastern Steel Sdn Bhd, of which Hiap Teck owns 55 per cent, China Shougang 40 per cent and Chinaco Investment Pte Ltd owns the remaining five per cent.

The integrated steel mill will be based in the Kemaman Heavy Industrial Park, a project by the East Coast Economic Region (ECER).

The plant will cover 485ha site and employ 1,000 workers.

This is China Shougang's first investment in a steel mill outside China and the biggest Chinese foreign direct investment in Malaysia to date.

China Shougang is a leading steel producer in China with overseas investments in Hong Kong, Peru, South East Asia, Europe, Africa, North America and South America.

It is ranked at 325 in 2011 Global Fortune 500 with annual revenue of US$34.6 billion (RM108.4 billion) and produces 32 million tonnes of crude steel annually.

China Shougang chairman Zhu Jimin said it chose Malaysia due to its political and economic stability and its position as the third largest economy in South-East Asia.

It chose Hiap Teck as its partner because of the latter's listing status and good financial and track record in the steel industry.

The project has secured funding by HSBC Bank, Bank of China and the International Commerce Bank of China.

Established in 1987, Hiap Teck owns six factories and warehouses that sit on over 26.3 hectares.

It manufactures and distributes steel pipes, hollow sections, scaffolding equipment, accessories and other steel products.

With the new mill. Hiap Teck will be the country's largest steel pipes manufacturer and the country's top three producers of steel products.



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MAHB extends olive branch

KUALA LUMPUR: Malaysia Airports Holdings Bhd has come out to offer the proverbial olive branch to AirAsia Bhd.

In a four-paragraph statement on its website, the airport operator suggested that a proper working forum would be the best and most objective way to address outstanding issues with each other.

MAHB said while it had always been its view that proper consultation was the way to deal with issues raised by its partners, from time to time, it was duty bound to make clarifications so that the public received accurate information and a balanced perspective.

"MAHB believes that any disagreements in public are neither good for the image nor in the best interest of the country," it said.

The airport operator ended its statement stating that it had played its role to support the development of air travel in Malaysia and would continue to do so in the future.



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Stocks to watch Proton, TRC Synergy, SapuraCrest, Hiap Teck

KUALA LUMPUR (Dec 6): The FBM KLCI could trend higher on Tuesday in line with European markets that opened higher on Monday on optimism that European leaders would find a solution to the eurozone debt crisis at a summit a later this week.

The positive mood in Europe looks set to add to the glow from last week's U.S. jobs data with stock index futures pointing to a higher open for equities on Wall Street, according to Reuters.

Market sentiment was given an early boost on Monday after Italy unveiled a 30-billion-euro package of austerity steps, and the Irish government too said it would do the something similar in a new budget to be announced later in the day, it said.

On Bursa Malaysia, stocks that could be in focus include PROTON HOLDINGS BHD [], TRC SYNERGY BHD [], SAPURACREST PETROLEUM BHD [] and HIAP TECK VENTURE BHD [].

Proton shares, which were actively traded on Monday, could continue to attract investor attention after The Edge weekly reported over the weekend that state investment arm Khazanah Nasional Bhd was likely to ask for proposals from interested parties for its stake in the carmaker.

Citing industry sources, The Edge said Khazanah had made overtures and put out feelers to the market, seeking proposals from existing car players on a business plan with regard to Proton.

Khazanah is the largest shareholder with a 42.74% stake in Proton. Proton surged 89 sen on Monday to RM4.50 with 20.1 million shares traded.

Meanwhile, TRC Synergy secured a contract worth RM38.1 million from Putrajaya Holdings Sdn Bhd to build 86 two-storey terrace houses and 14 two storey semi-detached houses in Precint 14, Putrajaya.

SapuraCrest Petroleum Bhd's net profit for the third quarter ended Oct 31, 2010 rose 51.6% to RM83.13 million, due mainly to higher contribution from marine services division.

For the nine months ended Oct 31, SapuraCrest’s net profit jumped to RM233.71 million from RM158.77 million in 2010, on the back of revenue RM1.99 billion.

Meanwhile, Hiap Teck Venture's 55% owned Eastern Steel Sdn Bhd had been granted a mining licence by Trengganu state government to mine iron ore on the area of 600 acres near Bukit Besi.

The mining concession would allow Eastern Steel to mine the area, which has estimate reserve of 40 to 50 million ton of iron ore, until the end of its mining life.



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