Benalec is making things happen

Benalec Holdings Bhd
(Dec 9, RM1.34)

Maintain buy with fair value RM2.85: Maintain “buy” on Benalec with an unchanged sum-of-parts-based fair value of RM2.85 per share. Benalec has signed an MoU with Rotary Engineering Ltd to co-develop an integrated petroleum storage facility for storing, blending and distributing crude oil and its derivatives on 101ha of reclaimed land at Tanjung Piai, southwest Johor.

With an initial capacity of one million cu m, the storage facility is scalable up to three million cu m and comes with jetties capable of handling very large crude carriers (VLCC).
Both parties will jointly construct and develop the first independent deepwater storage terminal for oil products at Tanjung Piai. Benalec will undertake the land reclamation, with Rotary handling the design, construction and maintenance of the terminal.

Singapore-based Rotary is the region’s largest engineering procurement, construction and maintenance (EPCM) provider for the oil and gas (O&G)/petrochemical industry in the region, having built almost half of the independent storage tanks in Jurong.

We are increasingly upbeat with Benalec’s astute landbanking moves, and the speed at which they are being executed. The Rotary deal comes just under one month after the group had secured development rights in principle to 2,123ha of prime seafront land in south Johor.his trailblazer deal validates our earlier conviction of Tanjung Piai’s strategic

positioning in complementing the vibrant Jurong petrochemical hub with its excellent location within the busy Straits of Malacca and close proximity to Singapore.

Most importantly, Benalec is in a sweet spot to monetise the deep development potential of its Tanjung Piai landbank with the solid backing of Rotary. The JV will be at the forefront to exclusively promote Tanjung Piai as an O&G/petrochemicals hub within Asia, notably in Malaysia and Singapore.

Benalec is set to gain from multiple new earnings streams via marine-related works and associated recurring income from the ownership of this proposed oil terminal.
By extension, this implies more upside to our fair value, whereby we have only assumed land sales of about 121ha each for FY13F/FY14F.

We continue to highlight Benalec as a cheaper but early stage play on the repositioning of south Johor as a rising O&G hub (fully diluted FY12F to FY14F price earnings ratio (PER) five to 10 times against earnings per share compound annual growth rate of 27%). The crystallisation of more landbanking deals in Tanjung Piai following this maiden oil terminal project would help prod a further PER re-rating, we believe. — AmResearch, Dec 9



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DRB-Hicom building up its defences

DRB-Hicom
(Dec 9, RM2.12)

Maintain outperform with target price RM3.95: DRB-Hicom has partnered with Saab AB to bid for the Ministry of Defence’s airborne early warning system.

This is a positive move in the development of its defence business which is one of the many catalysts behind our high conviction call.

The announcement is unlikely to affect DRB-Hicom’s share price which is still driven by speculation of a potential merger with Proton. With or without Proton, we maintain our
“outperform” call. We make no change to our target price which is based on 10% discount to revalued net asset value (RNAV).

At the Langkawi International Martime and Aerospace Exhibition (LIMA 2011), DRB-Hicom announced it is partnering Saab to bid for the airborne early warning and control (AEWC)
system for the Royal Malaysian Airforce. The AEWC system will enhance the government’s monitoring of its territorial and international domains.

DRB-Hicom is broadening its defence portfolio to aerospace. Since 1996, it has supplied and maintained land vehicles for the Malaysian army. The AEWC deal, if successful, will allow it to cross as a defence contractor for the air force and the navy. It is a positive step in its plans to become a local defence champion.

The announcement is not material at this stage as DRB-Hicom is essentially forming a strategic collaboration with Saab and needs to formulate the working requirements of the
AEWC system with the Ministry of Defence before it can come up with any figures for the contract bid.

However, four units of a similar system were purchased by the Singapore defence forces in 2007 for US$375 million (RM1.18 billion) each.

DRB-Hicom remains a high conviction play. This latest announcement is unlikely to be the reason behind the recent share price activity. The press continues to speculate on the
possibility of the company tying up with Volkswagen to acquire Proton Holdings Bhd.

However, VW has come out to say that it has no plans to expand its Malaysian operations beyond its partnership with DRB-Hicom. With or without Proton, the current deal with VW is a large enough catalyst for DRB-Hicom’s auto business. VW-related earnings are expected to contribute 13% of FY14 net profit. — CIMB IB, Dec 9



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Faber in RM30m lawsuit

Faber
(Dec 9, RM1.48)

Maintain market perform with fair value RM1.53: Faber announced yesterday that it had received a statement of claim from Baynona Group. Its UAE subsidiary, Faber LLC, and Project Penyelenggaraan Lebuhraya Berhad (Propel) are defendants in a net claim of about RM29.8 million.

The claims made by Baynona Group are in relation to completed contract works in the UAE first awarded to Faber LLC by the Department of Municipal Affairs, Western Region Municipality. Upon being awarded the contract, Faber LLC contracted out works to Propel which in turn, subcontracted out works to Baynona Group.

As for Faber, we understand that there is no direct award of subcontracting works (for the improvement, development, upgrade and maintenance of infrastructure facilities at Madinat Zayed) to Baynona Group.

Propel informed Faber that the outstanding amount owed to Baynona Group is significantly lower at about RM3.2 million.



The lawsuit against Faber is currently at a preliminary stage as Baynona Group is seeking the Abu Dhabi Court’s approval for the appointment of a committee of experts to examine the documents and project work in relation to the amount claimed. Therefore, Baynona Group has yet to make any specific claim against Faber. Faber is unable to assess the financial impact, if any, arising from the statement of claim.

Risks to our view include:
(i) Failure to secure an extension to the concession agreement with the government; and
(ii) Delays in property launches and approvals, which could affect revenue from the property segment.

We make no changes to our forecasts pending the outcome of the court decision. Our sum-of-parts fair value estimate of RM1.53 remains as we await further announcements on the lawsuit. We reiterate our “market perform” call on the stock. — RHB Research, Dec 9





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FBM KLCI continues uptrend at mid-afternoon

Share prices on Bursa Malaysia continued the positive momentum at midafternoon today with continued gains seen in selected bluechips, dealers said.

At 2.58 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) was up 10 points to 1,470.13, after opening 3.6 points higher at 1,463.73.

A dealer said the uptrend on the local bourse was in line with key regional markets, following last Friday's firmer close on Wall Street as well as positive sentiment from the European region.

Risk appetite also improved on fresh optimism that the eurozone debt crisis could be contained after the pact reached by the European countries for deeper economic integration and a proposal to increase the rescue fund's size.

The Finance Index rose 111.21 points to 13,052.10 and the Plantation Index jumped 60.74 points to 7,921.43 while the Industrial Index added 8.32 points to 2,658.28. The FTSE Bursa Malaysia Emas Index increased 67.26 points to 10,066.81, the Ace Index gained 6.65 points to 4,181.10 and the Mid 70 Index went up 72.50 points to 10,988.21.

Gainers led losers 352 to 274 while 304 counters were unchanged with 547 untraded and 18 others suspended. Trading volume stood at 1.02 billion shares valued at RM586.2 million.

For the actives, 1 Utopia Bhd-WA was unchanged at 5.0 sen, 1 Utopia Bhd rose 0.5 sen to 12 sen, Proton Holding - CG went up 6.0 sen to 37 sen and Sanichi decreased 2.5 sen to 18 sen.

Among heavyweights, Maybank added 3.0 sen to RM8.18, CIMB rose 10 sen to RM6.99, Sime Darby climbed 2.0 sen to RM8.92, Petronas Chemicals increased 8.0 sen to RM6.08 and Tenaga Nasional Bhd gained 2.0 sen to RM5.55. -- Bernama



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Sersol unaware of unusual market activity

KUALA LUMPUR (Dec 12): SERSOL TECHNOLOGIES BHD []’s shares were suspended from trading since 3.56pm on Monday after the company announced it was unaware of the reasons for the unusual market activity.

Trading will resume at 9am on Tuesday, according to a Bursa Malaysia Securities circular.

The company was earlier queried by Bursa Securities over the sharp rise in price and high volume in the shares recently.

Sersol, in its reply to the regulator, said the directors and major shareholders were not aware of any factors which might have contributed to the unusual market activity.



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Proton’s shares rally on takeover talks again, DRB-Hicom up

KUALA LUMPUR (Dec 12): PROTON HOLDINGS BHD []’s shares and call warrants rallied on Monday as market talk that Khazanah Nasional would sell its stake to DRB-HICOM BHD [] went into overdrive.

At 3.28pm, Proton was up 31 sen to RM4.30 with 13.15 million shares done. Its call warrants Proton-CG added 7.5 sen to 38.5 sen and Proton-CI added 12 sen to 45 sen.

DRB-Hicom rose one sen to RM2.13. There were 3.59 million shares traded at prices ranging from RM2.13 to RM2.19.

The FBM KLCI was up 7.79 points to 1,467.92. Turnover was 1.15 billion shares valued at RM685.36 million. There were 342 gainers versus 311 losers while 304 stocks were unchanged.

Tun Dr Mahathir Mohamad, Proton’s adviser, said Khazanah was selling its stake to DRB-Hicom. He was quoted saying on Sunday that Khazanah was selling its stake because it was not pumping more money into Proton, which needed funds for research and development work on new products such as hybrid cars.

“I worry about the buyer (DRB-Hicom) having enough money to inject into Proton. The shares it will be buying are above market price, which will make profitability difficult,” Dr Mahathir said. “But I believe in DRB-HICOM's capabilities,” he said, adding that the status of Proton as a national car would remain after the sale

The Edge weekly reported that the Shanghai Automotive Industry Corp (SAIC) has expressed strong interest in owning a stake in Lotus, following its recent visit to the Lotus manufacturing plant in England.

OSK Research said given the encouraging market potential for Lotus in China and the dire need for funds by Proton in view of its burgeoning capex allocation; “we think the entry of SAIC in the form of equity injection would be meaningful”.

The research house said SAIC was both the JV partner of Volkswagen and GM, which we think would spur more interest from DRB being Proton's suitor.

“We maintain our Trading Buy with our fair value unchanged at RM5,” OSK Research said.



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Cakna to distribute Ayamas products

KFC Holdings (Malaysia) Bhd has agreed in principle to appoint Cakna Sdn Bhd as the distributor for Ayamas products in Terengganu, a state executive councillor said today.

Datuk Mohamed Awang Tera, state executive councillor for rural and entrepreneur development and cooperatives, said Cakna would distribute frozen products such as frozen chicken and frozen chilli sauce.

The products would be distributed to all T'Shoppe convenient stores nationwide from early next year, he told reporters after launching Universiti Malaysia Terengganu's YoungPreneurs' programme.

Mohamed said there are 30 T'Shoppe shops nationwide, 20 in Terengganu and the rest in Melaka, Selangor, Kedah and Perlis.
With Cakna taking charge of distribution via the strategic business partnership with KFC Holdings, Ayamas products would be readily available at convenient stores, he said.

"Currently, consumers are facing problems to get Ayamas products as they are available only in certain outlets such as supermarkets," he said.

Mohamed said 1Malaysia products would also be sold at T'Shoppe outlets from next year to make it easier for consumers to buy the products. -- Bernama



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Toyo Ink extends losses, more details of US$2.5b power plant needed

KUALA LUMPUR (Dec 12): Shares of TOYO INK GROUP BHD [] fell to RM1.60 on Monday, extending its losses from last Friday as investors turned cautious about the return on investment from the US$2.5b coal-fired thermo power plant power plant in Vietnam.

At 3.04pm, it was down seven sen to RM1.60, off the day’s high of RM1.80. There were 28,000 shares done.

However, the 30-stock FBM KLCI was up 10.69 points to 1,470.82. There were 1.05 billion shares done valued at RM601.71 million. There were 350 gainers, 288 losers and 298 stocks unchanged.

Last Friday, Toyo Ink said it planned to finance the US$2.5b coal-fired thermo power plant power plant in Vietnam from a corporate exercise and also through borrowings.

Since the project involved a massive capital outlay, the company said it would consider raising certain portion of the project capital via corporate exercise and then funding the balance through borrowings.

Toyo Ink said it would also seek equity partnerships to incorporate a joint venture company in Vietnam.



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