Sime to proceed with suits against ex-execs

KUALA LUMPUR: Sime Darby Bhd is set to proceed with its lawsuits against its former executives without the additional third party suits that were filed subsequently.

In a statement to Bursa Malaysia yesterday, Sime Darby said the Kuala Lumpur High Court on Tuesday struck out third party suits brought by former president and CEO Datuk Seri Ahmad Zubir Murshid.

To recap, Sime Darby and its units filed two civil suits against Ahmad Zubir and several other defendants last December in relation to the group’s Bakun Dam project and for its oil and gas (O&G) projects.

Sime Darby is seeking RM92.2 million from the defendants in the Bakun suit and another RM338 million from the defendants in the O&G suit.

In March, Ahmad Zubir filed third-party notices for both civil suits taken against him, seeking indemnity and contribution from Sime Darby directors should he be found liable.

The 17 Sime Darby directors named in the third party suits later asked the court to strike out the application, which the court did on Dec 13.

In the same statement, Sime also announced that the court had struck out the third party application filed earlier by former executive vice-president of Sime Darby’s energy and utilities (E&U) division Datuk Mohamad Shukri Baharom. Mohamad Shukri was named as a defendant in Sime Darby’s two legal claims alongside Ahmad Zubir.

“The High Court has allowed the applications by all 12 individuals in the O&G Suit and 11 individuals, Sime Engineering Sdn Bhd and Sime Darby Holdings Bhd in the Bakun suit and struck out Mohamad Shukri’s third party statement of claim, set aside the third party notices and dismissed the third party proceedings on the basis, among others, that the second defendant’s third party proceedings were frivolous and vexatious,” said the statement.

The High Court has scheduled Jan 19, 2012 for case management of the O&G suit and the Bakun suit.

It has been a year since Sime Darby filed suit against its executives after it revealed that three projects under its E&U division had suffered massive cost overruns.

The three projects are the Qatar Petroleum project, the Maersk Oil Qatar project and the project Marine, which relates to the construction of marine vessels.

After the massive cost overruns were revealed, Ahmad Zubir was asked to take a leave of absence ahead of the expiry of his contract on Nov 26.

Sime Darby appointed Zaid Ibrahim & Co to conduct a legal investigation into the losses suffered by the company in the projects under the E&U division.

The authorities, including the Malaysian Anti-Corruption Commission and the Securities Commission, also conducted investigations into possible breaches of law relating to the three projects.


This article appeared in The Edge Financial Daily, December 16, 2011.



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Full production for EngTek’s Thai units in 3Q12

KUALA LUMPUR: Full production level for the two subsidiaries of Eng Teknologi Holdings Bhd (EngTek) affected by the floods in Ayutthaya, Thailand will only return to normal in 3Q12.

Its manufacturing facilities — Thailand Engtek (Thailand) Co Ltd (ETCL) and Altum Precision Co Ltd (Altum) — are expected to restore its full production capacity by the second quarter (2Q) of 2012, noted the company’s statement to Bursa Malaysia yesterday.

It added that production levels are only expected to return to normal by 3Q as the output is meant for major customers, which have also been affected by the floods.

“The floods have caused a substantial disruption to the supply chain of key hard disk drive components and the whole hard disk drive industry in Thailand. It is estimated that the supply chain situation will only be normalised in the next three to six months,” said EngTek.

The company noted that the flood waters have receded at both the manufacturing facilities.

“Decontamination and cleaning work are currently underway at the facilities and is expected to be completed by next week. After which, restoration work will commence,” it said.

“The insurance loss adjustors have conducted a preliminary assessment of the damage caused by the floods. Initial assessment indicates that the machinery damage is widespread due to rust, corrosion and contamination after being submerged in flood waters above two metres since October 2011,” said the hard disc drive (HDD) manufacturer.

The company said that it is currently working on the detailed documentation for the insurance claims, which is expected to be finalised and submitted to insurers by end of

December. The insurance claims process is expected to be completed within three to six months.

EngTek’s Thai operations contribute 40% to the group’s revenue for FY10 ended Dec 31. The flooding has also delayed EngTek’s plan to privatise.

In a report in The Edge Financial Daily on Oct 14, the company said the floods would have a negative impact on its FY11 ending Dec 31.

EngTek announced in a note to Bursa on Oct 18 that its subsidiaries in China and the Philippines have also experienced disruptions to their production as a certain portion of their output was meant for their major customer in Thailand situated the flood affected areas.

Its counter closed unchanged at RM1.52 with stocks traded at a thin volume of 84,000 shares.


This article appeared in The Edge Financial Daily, December 16, 2011.



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TNB to rebalance fuel mix

KUALA LUMPUR: In order to reduce its dependency on gas, Tenaga Nasional Bhd (TNB) is looking to rebalance its fuel mix between coal and gas to 50:50 in 2016 from 40:60 currently.

“An additional 2,000MW using coal will be introduced into the system by 2016. One will come from Janamanjung and the other from Tanjung Bin,” TNB president and CEO Datuk Seri Che Khalib Mohamad Noh told reporters after the company AGM yesterday.

The utility group recently signed a power purchase agreement with Malakoff Bhd’s wholly-owned Tanjung Bin Energy Sdn Bhd to design, construct, own, operate and maintain an additional 1,000MW plant to add to the existing 2,100MW plant in Tanjung Bin, Johor.

This is in addition to 1,000MW block of its coal-fired Janamanjung plant in Lumut that TNB plans to expand.

TNB has been incurring extra cost to burn oil and distillate due to gas supply shortages from Petroliam Nasional Bhd (Petronas). The gas shortage has cost TNB an additional RM3.069 billion. The government and Petronas recently agreed that each of them will bear one third of the additional fuel cost incurred between Jan 1, 2010 and Oct 31, 2011.

“We have even asked them if they can release part of the payment due to us... so we can ease our cash flow position,” said Che Khalib.

“Petronas wants to see how we derived the figure of RM3.069 billion. We are providing them with all the information so they can audit our figures. Once they complete the audit, they will pay us.”

TNB saw its net profit plunge 84% to RM499.5 million for FY11 ended Oct 31 from RM3.2 billion for FY10. The sharp fall in earnings was due to the substantial increase in operating expenses arising from the extra cost for burning oil and distillate during 3Q and 4QFY11.

Revenue rose 6.2% to RM32.2 billion in FY11 from RM30.3 billion the previous year, while earnings per share declined to 9.16 sen from 58.92 sen.

In order to mitigate the shortfall of gas supply in the medium term, Che Khalib said TNB is in talks with some foreign gas suppliers to source liquefied natural gas (LNG) at market price once Petronas’ new re-gassification terminal in Malacca comes online by August 2012.

“We have already started talks with Shell. A few private traders overseas such as those from Qatar have also approached us. We recently received interest from Total Group too,” he said.

“In the next four to five years, ... we are going to import at market price [an additional] 200 million cu ft [per day]. That is less than 20% of the gas that will ... be provided to the power sector via subsidy,” he said.

Che Khalib said the amount of LNG to be imported only represents 9% of TNB’s total power generation containing a mixture of coal and gas.

In addition, he said TNB plans to call an open tender for additional electricity capacity by the first quarter of next year.

The counter closed one sen or 0.18% lower to RM5.44 yesterday with 3.3 million shares changing hands. TNB shares have declined 18.7% year-to-date.


This article appeared in The Edge Financial Daily, December 16, 2011.



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Harvest Court sees 17% traded off-market

KUALA LUMPUR: A large block of 31.4 million shares in Harvest Court Industries Bhd, equivalent to 17.23%, has crossed via off-market trade for a total of RM7.85 million or 25 sen a share.

The shares changed hands at 4pm yesterday. An hour later some 7.85 million warrants were also traded off-market.

There was no filing with Bursa Malaysia relating to the off-market transaction at press time.

The share vendor could possibly be Affin Bank Bhd and the buyer is likely to be the company’s managing director Ng Swee Kiat.

According to Bloomberg data, Affin Bank is the single largest shareholder in Harvest Court, which has been declared a designated counter on Bursa. The banking group holds 17.23% or 31.4 million shares in Harvest Court.

Other substantial shareholders are Raymond Chan Boon Siew holding 15.64%, Paramountvest Sdn Bhd 8.58% and Ng 8.33%.

To recap, on Oct 25, Ng had accepted Affin’s offer to sell the 31.41 million shares at 25 sen per share together with 7,852,666 attached warrants for a consideration of RM7,852,666.

If Ng was the buyer of the block of shares, his equity in Harvest Court would increase to 25.65%, making him the largest shareholder once again.

Affin acquired its stake in Harvest Court on Nov 26, 2009 as part of a debt-restructuring exercise undertaken by the then PN17-listed Harvest Court.

Harvest Court closed one sen lower at RM1.29 with 528,600 shares traded yesterday.


This article appeared in The Edge Financial Daily, December 16, 2011.



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Axiata grows Sri Lankan unit

KUALA LUMPUR: Axiata Group Bhd announced plans to acquire Suntel Ltd, a fixed telecommunications provider in Sri Lanka, for a maximum price of US$34.9 million (RM111.68 million) in a bid to expand its footprint there.

Axiata said Dialog Broadband Networks (Private) Ltd (DBN), a wholly-owned unit of Axiata’s 84.9%-subsidiary Dialog Axiata PLC (Dialog), had entered into a share purchase agreement to acquire all the ordinary shares of Suntel.

“Suntel [commands] a premium position in Sri Lanka’s fixed telecommunications sector and is ranked second in terms of business and revenue market share [behind Sri Lanka Telecom],” said Axiata in an announcement to Bursa Malaysia yesterday.

After the acquisition of Suntel, DBN and Suntel will be consolidated into a merged entity to provide advanced fixed line and broadband services.

The inclusion of Suntel will more than triple DBN’s market share to 16% from the current 5%, and improve the latter’s revenue by 12% based on its FY10 financials, according to a statement released by Dialog.

Additionally, there will be a projected cost saving of up to 600 million rupees (RM16.78 million) annually.

“The acquisition will elevate the position of Dialog within the fixed and converged services segments to a strong No 2, on a platform of product strength, cost leadership and converged brand strength,” said Dialog’s group chief executive Dr Hans Wijayasuriya.

The statement noted that Suntel’s “best in class” fixed line operations network is completely digital and caters for voice, broadband and data communication services using CDMA, WiMAX as well as other fixed wireless technologies.

Axiata said the purchase price would be at an enterprise value in the range of US$33.9 million and US$34.9 million, corresponding to a valuation multiple of between three and 3.1 times Suntel’s FY10 earnings before interest, tax, depreciation and amortisation (Ebitda).

The acquisition will be paid entirely in cash from internally generated funds.

Axiata said the exercise is not subject to shareholders approval.

Axiata’s Sri Lankan operations — Dialog — contributed 7.6% or RM927.05 million to its overall revenue for its nine months ended Sept 30, as it displayed improved margins and profitability due to aggressive de-scaling of its operating cost structure.

“Revenue (for Dialog) was up 10% on a year-to-date basis, mainly from improvements in the mobile business and in particular, increased consumption of voice and mobile broadband,” said Axiata in a recent media release.

Despite its higher performance, Dialog is still the smallest contributor to Axiata’s revenues behind the company’s operations in Malaysia, Indonesia and Bangladesh.

Axiata saw net profit for its third quarter ended Sept 30, drop 7.74% to RM589.6 million from RM639.1 million a year ago as revenue improved 6.5% to RM4.19 billion from RM3.94 billion.

It said operating costs increased 9.4% year-on-year (y-o-y) to RM6.87 million mainly due to Celcom, Dialog and Indonesia’s XL Axiata.

However, capital expenditure is expected to slow down after next year.

OSK Research noted that Axiata’s chief financial officer James Maclaurin, in a briefing with analysts on Wednesday, guided that capital expenditure would peak in 2012 after which there may be scope to distribute more returns to its shareholders.

OSK maintained its “buy” call and fair value of RM5.60 for Axiata.

Maclaurin also said the recent agreement signed between Celcom Axiata Bhd and Broadcast Australia in a bid for the country’s RM2 billion digital terrestrial television broadcast network (DTTB) is not a move into TV broadcasting.

The move is to further monetise Celcom’s mobile infrastructure, which the latter earlier said comprised 98% of the infrastructure required for the DTTB network.

In addition, Maclaurin said Axiata’s revenue growth next year will be sustained at the 2011 level as Ebitda margins undergo pressure from XL Axiata, which will be ramping up its capital expenditure and infrastructure deployment to grow its data segment.

Axiata said the data segment presents a “tremendous opportunity” as data usage has grown 278% and y-o-y revenue from this segment grew 50% in the recent quarter.


This article appeared in The Edge Financial Daily, December 16, 2011.



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Deadline poser for QSR, KFCH deal

KUALA LUMPUR: Analysts are doubtful the tight deadline for the joint takeover offer of QSR Brands Bhd and KFC Holdings (M) Bhd (KFCH) by Johor Corp (JCorp) and private equity firm CVC Capital Partners Asia III Ltd’s Massive Equity Sdn Bhd will be met.

“If they cannot get the board to accept the offer and fulfil all of its conditions in one week [deadline is Dec 21], they stand to lose the deal,” said an analyst with a bank-backed research house.

“Also, the interested parties from the previous two bids may decide to rejoin the bid with possibly higher bids,” he added.

Tan Sri Halim Saad and The Carlyle Group bid for QSR late last year, offering RM5.60 and and then upping the bid to RM6.70 per share. Both offers were rejected by both Kulim (M) Bhd and QSR’s management.

“It is hard to say [for certain] if they will rejoin the biding as the current offer is at 20 times FY12 price-earnings ratio (PER),” he said, adding, “It is no longer cheap.”

Still, it should be noted that just 10 sen separates Carlyle’s previous offer of RM6.70 and JCorp’s latest offer of RM6.80 per share for QSR.

The acquirers need to secure the approval of at least 75% of minority shareholders in order for the deal to materialise.

In a research note, Foong Wai Mun, food and beverage analyst at CIMB IB Research, believes the deal is likely to get the nod from KFC’s franchisor, Yum! Brands, Inc given that JCorp will still be driving the operations.

Foong along with other industry analysts agree the offer of RM6.80 and RM4 per share for QSR and KFCH respectively was a fair and attractive offer.

“Especially in the current volatile market conditions, investors may view the 13.3% premium as attractive. However, some investors may lament the lack of investment opportunities in strong consumer franchisers like QSR after this sale,” he added.

In terms of PER valuations, this offer is higher than Kulim’s first offer to privatise Sindora Bhd (about 15 times FY11 PER) but lower than what Asahi paid for Permanis (about 24 times FY12 PER), noted Kang Chun Ee of Maybank IB Research in his report.

“Valuations as such are about in line with consumer peers and this is a decent offer in our view,” he added.

“As this is an offer for KFCH’s business, an uncertainty this stage is how KFCH would deal with the funds once the exercise is completed, though the logical step would be to distribute the entire proceeds back to the shareholders,” Kang said.

Foong, however, said if JCorp and CVC Capital are serious about buying the assets and liabilities, there may be a sweetener in the form of a special dividends to entice the minority shareholders to vote for the deal in the upcoming EGM.
If the deal materialises, analysts said that both QSR and KFCH will have cash totalling RM3.2 billion and RM2.1 billion respectively as they will be left as shell companies.

Thereafter, analysts believe both companies may be classified as PN17 companies and will be required to acquire other businesses within one year to regularise their listing status.
The bulk of the sale proceeds are expected to be distributed back to shareholders in the form of capital repayment and special dividend.

JCorp has large debts, including RM3.6 billion due in July 2012, which an analyst says can be serviced more easily if KFCH’s dividends and cash flows accrue directly to JCorp rather than through different layers of holding companies.

JCorp’s effective interest in QSR, once the exercise is completed, will increase to 51% from 30% while its stake in KFCH will rise to 51% from 15%. At present, JCorp owns a 57.05% stake in Kulim, which in turn holds 58.78% of QSR. QSR is the major stakeholder of KFCH with a 50.64% stake.

On the contrary, in a report by Alvin Tai of OSK Research on Kulim, he noted that this seemed like an unusual move on the part of debt-saddled JCorp to take over QSR and KFCH.

However, this exercise will be carried out together with CVC, a sizeable private equity firm, he added. “We believe JCorp may have struck a back-to-back agreement with CVC or another party to flip QSR/KFCH at a higher price,” he said.

Viewed together with JCorp’s sale of 13,687ha of oil palm estates to Kulim, this is essentially an asset swap between Kulim and JCorp, which will transform Kulim into an even purer plantation play, he explained.

At the closing bell yesterday, the JCorp stable of companies — QSR, KFCH and Kulim— were among top five gainers on Bursa Malaysia bucking the downward trend on the local bourse.

QSR closed up 44 sen to RM 6.44, KFCH increased 39 sen to RM3.80 and Kulim rose 28 sen to RM 3.97.


This article appeared in The Edge Financial Daily, December 16, 2011.



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KL shares slightly high at midafternoon

KUALA LUMPUR:Share prices on Bursa Malaysia remained slightly higher at mid-afternoon today, boosted by persistent buying in selected bluechips and quality stocks, dealers said.

At 3pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) rose 5.4 points or 0.4 per cent to 1,469.51.

The Finance Index rose 39.74 points to 13,118.12 and the Plantation Index shed 5.89 points to 7,900.2 and the Industrial Index rose 18.84 points to 2,663.98.

The FBM Emas Index increased 37.109 points to 10,075.22, the FBM Mid 70 Index added 50.25 points to 11,081.64 and the FBM ACE Index gained 16.33 points to 4,130.53.

Gainers led losers by 354 to 302 with 289 counters traded unchanged.

Turnover stood at 1.18 billion lots worth RM694.86 million.

For the actives, JCY-CD gained one sen to 32 sen, Proton-CG lost three sen to 54.5 sen and Proton-CH fell two sen to 48 sen.

Among heavyweights, Maybank declined two sen to RM8.21, Sime Darby rose three sen to RM8.98 and CIMB was up two sen at RM6.94. - Bernama



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Mah Sing’s M Residence@ Rawang gets 80% take up for Phase 1

KUALA LUMPUR (Dec 16): MAH SING GROUP BHD []’s Phase 1 of its new 226-acre township, M Residence@ Rawang saw an 80% take-up rate in a single day on Friday when the company previewed the project for priority registrants.

In a statement Friday, the company said the township, which has an estimated gross development value of RM948 million had drawn 2,500 registrants since the land was acquired in October 2011.

It said PROPERTIES [] in Phase 1 comprising 214 units of 18’x70’ link homes with built up of approximately 1,650sq.ft were indicatively priced from RM360,800.

Meanwhile, Mah Sing said Phase 2 of the project comprising 233 units 22’x80’ superlink homes priced from RM558,800 would be opened for bookings on Dec 17 and 18 (Saturday and Sunday) at the sales gallery opposite Jaya Jusco in Rawang, it said.

Mah Sing chief operating officer James Bryuns said M Residence@Rawang meets the current need for quality housing at accessible entry level.

“We believe that Phase 2 shall see equally strong interest as we are offering semi-detached layouts in our superlink homes, at link home pricing,” he said.

He said the 22 footers in M Residence@Rawang have an expansive layout boasting 3 bedrooms with en-suites on the first floor, whilst the ground floor houses the living room, dry and wet kitchen, a guest room, bathroom and powder room, adding they also came with a 10ft yard area at the back.

M Residence@Rawang is 5km away from the matured townships of Anggun 1&2@Kota Emerald and 8km from Emerald East and West.

Mah Sing said besides Rawang town itself, the project had a large target market catchment from Kuala Lumpur, Petaling Jaya, Shah Alam, Bukit Jelutong, Subang Jaya, USJ, Kepong and Selayang who are looking for an affordable alternative in a well connected location.

Furthermore, there are large catchments of upgraders from Batu Arang, Kundang, Kuang, Sungai Buloh, in search of new township schemes offering a lifestyle concept, it said.

Bukit Badong Forest Reserve is located next to M Residence@Rawang and extensive green reserves namely Templer’s Park, Kanching Forest Park and Commonwealth Forest Park are all within the radius of 15km of the project, it said.



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