DRB-Hicom’s balance sheet unstressed

DRB-Hicom Bhd (Dec 8, RM2.18)
Maintain market perform at RM2.10 with fair value of RM1.90: Persistent market talk suggests that DRB-Hicom is looking at re-acquiring a stake in Proton Holdings Bhd. Its balance sheet is relatively unstressed with a net gearing of just 0.14 times or net debt of RM722 million as at end-September 2011. Assuming a prudential net gearing cap of 0.5 times implies an ability to fund an acquisition of up to RM1.8 billion. For the record, DRB-Hicom’s management has repeatedly denied having any interest in Proton.

Proton could be attractive to DRB-Hicom for its spare assembly capacity, especially as the latter cements its relationship with Volkswagen. However, DRB-Hicom’s management confirms there remains ample spare capacity at its Pekan plant, currently operating at 40% capacity. It can expand to accommodate higher assembly volumes should Volkswagen decide to expand its completely-knocked-down (CKD) assembly plans in Malaysia.

DRB-Hicom on its own can only bring new contract assembly business to Proton. For DRB-Hicom to bring value to Proton, a potential tie-up needs to involve a global original equipment manufacturer (OEM) — Volkswagen is the most likely candidate — that can offer access to technologies, new platforms, engines and transmissions. Hence, for a deal to succeed, a plan that may need to involve equity participation needs to be formulated that incentivises the global OEM to make available the said technologies.

Should DRB-Hicom acquire a controlling stake in Proton, political considerations will need to be carefully managed. This includes managing expectations and securing the buy-in from the authorities that have a vested interest in the longer term prospects for Proton.

We reiterate our “market perform” call on DRB-Hicom and sum-of-parts-derived fair value of RM1.90 (unchanged) that applies a 40% holding company discount. Improved financial transparency and increased investor understanding of the group’s businesses would reduce our applied discount over time. Macroeconomic uncertainties could cap share price performance in the near term. — RHB Research, Dec 8


This article appeared in The Edge Financial Daily, December 9, 2011.



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BToto a good blend of yield and growth

Berjaya Sports Toto Bhd (Dec 8, RM4.14)
Maintain buy at RM4.15 with revised target price of RM4.95: Taking a cue from the relatively flat 1QFY12 dividend payout (net dividend per share was flat year-on-year at 8 sen), we trim the FY12/FY13 dividend payout ratio from a more aggressive 90% to 80% of annual earnings (similar to FY11 payout). This results in a 4% to 7% cut in FY12/FY13’s net dividend per share (DPS).

Despite the DPS cut, we continue to like BToto for its highly cash generative and asset light business model.

We project a robust CY12 free cash flow yield of 8% underpinned by minimal FY12 to FY14 capital expenditure requirements, atypical of the highly regulated numbers forecast operations (NFO) industry.

Against this backdrop, we opine BToto will remain a high-yield defensive hideout from the external economic uncertainties. The stock, in our view, offers investors above market net yields of 6%.

We maintain our “buy” call with a lowered discount dividend model-based target price of RM4.95 (discount rate 8%, growth rate 3%) in tandem with the lowered DPS.

Our recent discussions with the company suggest that BToto may see only a moderate single digit top line growth in FY12 as there is always the risk that the launch of BToto 4D Jackpot may cannibalise its 4D ticket sales. If we strip out BToto’s 4D Jackpot and Lotto revenue from 1QFY12’s top line, we estimate that 4D ticket sales fell 4.4% quarter-on-quarter (q-o-q).

We believe this is due to a seasonally strong 4QFY11 (coinciding with Chinese New Year) and partly cannibalisation of the 4D Jackpot. At this juncture, we maintain our conservative 4.5% year-on-year (y-o-y) top line growth for FY12 to FY14 with upside towards FY13/FY14 as its 4D Jackpot gains further traction with punters.

Results for 2QFY12, to be released next Monday, may continue to see top line growth despite the cannibalisation as the total 4D Jackpot and Lotto sales surged 47.4% q-o-q. Drivers are: (i) full three months’ contribution from 4D Jackpot (launched in June 2011); and (ii) a run-up in the Supreme 6/58 prize monies.

We also do not expect any swings in prize payouts in 2Q. We project FY12 net earnings of RM405.3 million (+16.4% y-o-y), driven by: (i) full-year impact of lower prize monies (to counter higher betting duties); and (ii) a modest 4.5% y-o-y revenue growth. — Affin IB Research, Dec 8


This article appeared in The Edge Financial Daily, December 9, 2011.



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Up to RM1m in furniture vouchers for St Mary Residences buyers

KUALA LUMPUR: The developer of St Mary Residences in Kuala Lumpur is collaborating with XTRA, a premium branded furniture importer and retailer, to offer furniture vouchers to new purchasers of units in the serviced apartment project.

“As we approach the handover next year we have been receiving numerous enquiries from existing and potential purchasers on possible furnishing solutions. As a response to this demand, we have tied up with a reputable supplier to provide attractive furniture packages to our St Mary buyers,” said Eastern & Oriental Bhd (E&O) deputy managing director Eric Chan Kok Leong. The development is a joint venture between E&O and the Lion Group.

The offer is for the 15% remaining units available for sale, most of which are bumiputera quota units.

The promotion began Nov 15 and ends Dec 31. To be eligible for the vouchers worth between RM70,000 and RM1 million, potential buyers must be registered with XTRA on its promotional website prior to their purchase.

All transactions must be made via Mergexcel Property Development Bhd, a joint-venture company between the Lion Group and E&O that is undertaking the St Mary Residences project.

The serviced apartment project comprises 457 units priced from RM1.5 million to RM11.08 million with sizes from 1,131 to 6,759 sq ft. Buyers have a choice of six designs from Studio Suites, City Suites, Metro Suites and Rooftop Penthouses.

With a gross development value (GDV) of RM780m, St Mary Residences is about 70% complete.

With a gross development value (GDV) of RM780 million, St Mary Residences is about 70% complete, putting it on track for completion in mid-2012. Developed on the former site of St Mary’s School in Kuala Lumpur’s Golden Triangle, St Mary Residences comprises three towers, one of which is slated to be a luxury service residence run by a renowned hotel manager.

E&O has a total of 1,905.5 acres (771ha) of landbank in Peninsular Malaysia with an estimated potential GDV of RM20 billlion — 330.5 acres in Kuala Lumpur, 1,365 acres in Penang and 210 acres in Iskandar Malaysia, Johor.

Looking ahead, Chan said E&O has several projects set to launch in the next 12 to 18 months. The Andaman Series condominiums in Seri Tanjung Pinang, Penang, will be open for sale in 1Q12. In the south, the group is looking to introduce a wellness township in Iskandar Malaysia in 4Q12. The mixed development will comprise terraced and semi-detached houses, bungalows, serviced apartments and condominiums, wellness centres and retail and commercial properties.

The developer’s upcoming projects in Kuala Lumpur City Centre in Jalan Yap Kwan Seng and in Kemensah Heights are in various stages of planning.


This article appeared on the Property page, The Edge Financial Daily, December 2, 2011.



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Celcom eyes over RM2b revenue for Q4

KUALA LUMPUR:Celcom Axiata Bhd is confident of achieving over RM2 billion in revenue for its fourth quarter this year, said its chief executive officer, Datuk Seri Shazalli Ramly.

He said the target was achievable considering that the company recorded strong growth in the third quarter this year.

Celcom today announced strong third-quarter results, recording 22 consecutive quarters of positive revenue growth.

Revenue rose by four per cent to over RM1.8 billion.

Its profit after tax and minority interest rose by 29.1 per cent to RM531 million.

Shazalli said the growth in revenue was mainly attributed to its voice resuscitation campaigns and non-voice services, backed by smart product offerings.

"Voice revenue showed a marked increase of 3.5 per cent quarter-on-quarter despite trends towards increased data-centric communication," he said.

He said this at the media briefing on its third-quarter results here today.

Shazalli said Celcom's mobile broadband subscriber base continued to increase, surpassing the 900,000-mark with 15 per cent more users from a year ago, reaffirming the company's position as the leading mobile broadband provider in the country.

He said the company has allocated RM900 million for capital expenditure for next year, focusing mainly on deployment of network enhancement and information technology capability geared towards a changing environment.

"Next year, we also want to increase our content business mainly for ageing population and see huge demand particularly in download activities, while re-looking at our business strategy for non-voice business to stay robust in the market," he said.

In an effort to accelerate network modernisation, Shazalli said, Celcom, like other sector players, was well-prepared to upgrade its network service from third-generation (3G) to 4G.

He said the company was still waiting for approval from Malaysian Communications and Multimedia Commission.

On its mobile virtual network operator business, Shazalli said, the company was eyeing on providing the non-voice services as well. - BERNAMA



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KL shares lower at midafternoon

KUALA LUMPUR - Share prices on Bursa Malaysia continued its downtrend at midafternoon today on selling pressure.

At 3.20pm, the FBM KLCI dropped 15.05 points to 1,457.87.

Dealers said disagreements between European leaders continued to dent hopes for an aggressive plan to ease the region's debt crisis, mirrored the downtrend in the global market.

The Finance Index lost 123.83 points to 12,938.33, Industrial Index declined 25.62 points to 2,645.75 and the Plantation Index fell 85.38 points to 7,843.73.

The FBM Emas Index plunged 97.97 points to 9,984.54, FBM 70 Index dwindled 96.32 points to 10,895.3 and the FBM Ace decreased 51.9 points to 4,180.53.

Losers outnumbered gainers 512 to 146, while 252 counters traded unchanged.

A total of 908.303 million shares worth RM641.191 million changed hands.

Among active counters, Compugates dropped half a sen to 6.5 sen, SYF Res-WA added seven sen to RM57.5 sen and Versatile erased two sen to 42 sen.

Of the heavyweights, Maybank slipped six sen to RM8.15, Sime Darby shed four sen to RM8.90, CIMB erased nine sen to RM6.91 and Petronas Chemicals lost nine sen to RM6. Bernama



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Toyo Ink shares fall on concerns of longer ROI from Vietnam IPP

KUALA LUMPUR (Dec 9): Shares of TOYO INK GROUP BHD [] fell on Friday on concerns that its recent rally was overdone as its returns on investment in Vietnam’s US$2.5 billion (RM7.8 billion) power plant would be longer.

At 3.37pm, it was down 12 sen to RM1.65. There were 41,000 shares done at prices ranging from RM1.59 to RM1.71.

The FBM KLCI fell 15.17 points to 1,457.75. Turnover was 952 million shares valued at RM690.61 million. There were 155 gainers, 520 losers and 255 stocks unchanged.

The Egde FinancialDaily reported on Friday Toyo’s share price has benefited from the letter of approval it received from the Vietnamese government for the power plant, but realising the earnings may be a long way off.

It has taken over three years of hard work to obtain the letter, but Steven KC Song, managing director of Toyo, said on Thursday that the plant will take three to four years to build and estimated that it would only begin operating in 2017 or 2018.

It should be at least six to seven years before the US$2.5 billion project even begins turning in cash, yet Toyo’s share price surged as high as RM1.88 on Tuesday, with a 50 sen or 36.23% gain for the month.

Song had also said Toyo has yet to secure funding as it has not yet nominated a merchant bank to provide financial advice.



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Sime to boost oil & fat biz in South Africa

JOHANNESBURG: Sime Darby Group plans to further expand its oil and fats business in South Africa with the setting up of a packaging facility and another refinery in the future.

Its South Africa unit, Sime Darby Hudson & Knight (Pty) Ltd, was expected to set up the packaging facility, a company official said.

The official said this at a briefing for Minister of Plantation Industries and Commodities, Tan Sri Bernard Dompok, and his delegation during a visit to the refinery in Boksburg yesterday.

The official said the expansion, which started with the packaging facility, was in the final preparation stage as the group found new marketing opportunities for its products in neighbouring territories and countries.

"The new refinery will come in later when demand has increased
sufficiently," he said.

The Sime Darby Hudson & Knight refinery has a capacity for 160,000 tonnes with about 80 per cent utilisation.

About half of the refinery output is for Unilever.

Sime Darby group is a major investor in the oil and fats business in Africa.

Apart from the refinery, it also currently developing plantation in Liberia. - BERNAMA



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KL shares slump in broad sell-off

KUALA LUMPUR: Share prices on Bursa Malaysia slumped in broad-based sell-off at the end of the morning session today, dealers said.

They said the market barometer fell to below the 1,460-point level on downbeat outlook for the eurozone.

The FTSE Bursa Malaysia KLCI (FBM KLCI) slipped 14.33 points to close at 1,458.59, after opening 8.22 points lower at 1,464.7.

Dealers said the local equity market and Asian stocks were hit on fears that the crucial European Union summit would fail to deliver actions to ease the two-year old debt crisis.

"The global market sentiment dampened as hopes fizzled further on the summit following European Central Bank ruling out more bond buy, which overshadowed China's November inflation data that eased more than expected," a dealer said.

The Finance Index plummeted 129.57 points to 12,932.59, Industrial Index edged down 27.21 points to 2,644.16 and the Plantation Index dropped 90.10 points to 7,839.01.

The FBM Emas Index lost 93.819 point to 9,988.69, FBM Ace Index fell 47.29 points to 4,185.14 and the FBM 70 Index dwindled 98.69 points to 10,892.93.

Decliners led advancers 471 to 136 while 237 counters were unchanged, 634 untraded and 19 others suspended.

Total volume stood at 727.432 million shares worth RM485.120 million.

Among active stocks, Compugates was flat at seven sen, SYF Res-WA added six sen to 56.5 sen and Versatile eased 1.5 sen to 42.5 sen.

Of the heavyweights, Maybank slipped seven sen to RM8.14, Sime Darby edged down four sen to RM8.90, CIMB fell six sen to RM6.93 and Petronas Chemicals lost nine sen to RM6. - BERNAMA



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