HwangDBS keeps 'buy' call on TM

Telekom Malaysia Bhd (TM) gained nine sen or 1.77 per cent to RM5.17 as at 11am today, buoyed by the better-than-expected financial results reported by the utility company last year.

HwangDBS Vickers Research said the telco player recorded a strong finish for2011 where its fourth quarter 2011 earnings were 49 per cent higher,year-on-year, due to tax incentive from last mile broadband investment and higher turnover.

"We believe Unifi will continue to drive TM's financial year 2012 forecast topline through steady increases in net adds, where 24 per cent of 1.1 million premises passed are Unifi subscriptions," it said in a statement today.

The research firm did not foresee much competition for the year as Maxis Home Broadband's full services would only be launched at the beginning of the second half of the year.

HwangDBS put the price target for TM at RM5.30 and maintained its buy recommendation, backed by its current supremacy in high-speed broadband packages and sustainable earnings momentum.

"However, further tax incentives, which are due to expire in September 2012,have yet to be priced in," it said. -- Bernama



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MBM Resources down on rights issue plan, EPS dilution concerns

KUALA LUMPUR (Feb 27): Shares of MBM Resources were the top loser on Monday on investors’ concerns of earnings per share (EPS) dilution after it proposed a renounceable rights issue of 73.65 million.

At 12.30pm, it was down 20 sen to RM4.42 with 1.20 million shares done. It fell to an intra-morning low of RM4.37.

The FBM KLCI was up 2.66 points to 1,561.43. Turnover was 851.34 million shares valued at RM730.13 million. There were 340 gainers, 330 losers and 310 stocks unchanged.

However, the decline in the share price would also be due to profit taking since the share price had risen from RM3.69 on Jan 27. It reached an intra-day high of RM4.96 last Friday before closing at RM4.62.

Last Friday, MBM Resources had proposed a bonus issue of up to 73.65 million new shares on the basis of three bonus shares for every 10 existing shares held.

It also proposed the rights issue of up to 73.65 million new rights shares together with up to 73.65 million new free detachable warrants on the basis of three rights shares with three free warrants for every 10 existing shares.

OSK Research said MBM Resources’s FY11 earnings were within estimates.

“Given the group’s aggressive expansion, it has announced a rights issue with detachable warrants to fund its plans, as well as a bonus issue to reward shareholders and boost liquidity in its stock,” it said.

The research house said while the enlarged share base and potential 38% dilution to EPS were cause for concern, “we think there is potential price upside as MBM’s total consolidated earnings (including that from newly-acquired Hirotako), could surge by some 50% in FY12”.

“With the stock’s better liquidity and dominance in the auto industry, our SOP-based FV is RM5.34. Hence, we upgrade MBM from SELL to BUY,” said OSK Research.



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MARC suspends rating on Trinity Corp’s debt notes

KUALA LUMPUR (Feb 27): Malaysian Rating Corp (MARC) has suspended its B+ID rating on Trinity Corporation Bhd's (formerly TALAM CORPORATION BHD []) settlement Bithaman Ajil Islamic Debt Securities.

The rating agency said on Monday Trinity had failed to provide important information for the rating agency to carry out its rating surveillance. The outstanding amount of the settlement BaIDS was RM98.2 million as of Feb 24, 2012.

“MARC is unable to carry out its rating surveillance in the absence of Trinity’s business plans, in particular its asset divestment plans, proceeds from which are expected to fund its payment obligations for the settlement BaIDS.

“The rating agency may reinstate the suspended rating if the information required becomes available. Alternatively, MARC will likely withdraw the rating within the next 90 days if the requested information is not forthcoming,” MARC said.



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Envair sees 5.6% stake crossed off-market

KUALA LUMPUR (Feb 27): Envair Holdings Bhd’s 6.70 million shares or 5.65% stake were transacted in an off-market deal on Monday at an average price of 20 sen each, which was 32.2% below Friday’s closing price of 29.5 sen.

The stake is believed to have been disposed of by an executive director Datuk Seri Ung Eng Huat.

Ung had on Feb 16 announced his intention to deal in the shares. His shareholding was 6.70 million shares.

At 11.46am, Envair share price was up 0.5 sen to 30 sen.

Envair’s core business includes providing clean room facilities for the semiconductor industry and pharmaceutical sector and it is also involved in industrial water treatment systems.



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China Stationery rises on active trade

Integrated plastic stationery manufacturer China Stationery Ltd (CSL) that made its debut on the Main Market of Bursa Malaysia on Friday, continued to gain in active trade today.

At 11am, it jumped 11 sen or 10 per cent to RM1.21 with 558,704 lots traded.

The seventh Chinese company on the Bursa Malaysia, had on Friday opened at 98 sen, three sen higher than its issue price. -- Bernama



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KLCC rises on Q3 profit jump

KLCC Property Holdings Bhd, the owner of Kuala Lumpur’s Petronas Twin Towers, gained 3.7 per cent to RM3.40, on course for its highest close since July 22.

Its third-quarter profit jumped to RM518.7 million from RM67.8 million a year earlier, the company said in a statement. - Bloomberg




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MARC revises DRB-Hicom ratings outlook to negative

KUALA LUMPUR (Feb 27): Malaysian Rating Corp Bhd (MARC)has has revised the outlook on DRB-HICOM BHD []'s (DRB-Hicom) AA-IS sukuk rating on its RM1.8 billion Islamic Medium Term Notes (IMTN) programme to negative from stable.

It said on Monday the outlook revision recognises the potential weakening of DRB-HICOM's near-to-intermediate term financial profile due to its debt-funded acquisition of Proton Holdings Berhad (Proton).

DRB-HICOM is acquiring a 42.74% stake in the national automaker from Khazanah Nasional Bhd for a cash consideration of RM1.29 billion.

The total purchase price of Proton is estimated to be RM3.02 billion including the earlier purchase of 7.27% equity via open market and the cost of the remaining 49.99% stake to be acquired pursuant to a mandatory general offer (MGO).

Below is the statement issued by MARC:

A key rating issue for DRB-HICOM in the context of the Proton acquisition is the more challenging debt maturity profile that would result from acquisition-related interim financing decisions and the execution risk associated with plans to deleverage post-acquisition.

DRB-HICOM is in the midst of obtaining sukukholders approval to revise the proposed utilisation of proceeds from sukuk issued under the rated IMTN programme.

The sukuk proceeds will be used to part fund the acquisition of Proton as opposed to the pay-down of its bridging loan for DRB-HICOM's earlier acquisition of Pos Malaysia Berhad and other growth-related investments.

The repayment of the aforementioned RM622.8 million bridging loan will be extended by a year, and DRB-HICOM will incur additional short-to-medium term debt to finance the MGO.

MARC notes the heavy concentration of debt maturities in FY2014/15 that will occur as a result of the financing decisions, and significantly diminished financial flexibility on the part of DRB-HICOM.

DRB-HICOM's debt-to-equity is expected to increase to 0.64 times on a pro-forma basis respectively following the completion of the transaction, which is weak for the current rating.

DRB-HICOM's consolidated cash flow protection measures would foreseeably come under pressure without a commensurate increase in cash flow generation.

MARC's preliminary assessment of DRB-HICOM's post-acquisition cash flow metrics indicates a weakening of coverages to levels that are no longer consistent with the current rating.

While MARC understands that the holding company plans to place its financial profile on a more sustainable footing by undertaking asset disposals, in particular the divestment of a 30% stake in Bank Muamalat Berhad and insurer Uni Asia Capital Sdn Bhd, execution risks are noted given the general uncertainty around the timing of the targeted asset disposals.

Apart from the integration risks in absorbing the operations of Proton, MARC is also concerned that the lacklustre operating performance of the national automaker could pose a drag on the group's overall profitability. Integration difficulties, capex pressure at Proton and/or weaker-than-expected operating performance would exert pressure on DRB-HICOM's consolidated credit metrics.

MARC expects to resolve the negative outlook within the next six months after the closing of the acquisition. The rating agency expects to have greater clarity with respect to the strategic merits of the acquisition including potential synergies to be derived, and Proton's expected future level of cash flow generation and profitability by such time.

MARC's review will also consider the challenges associated with integrating Proton's operations into DRB-HICOM's automotive operations and the expected timeline to realise meaningful synergies.

The rating could be lowered if DRB-HICOM is unable to substantially reduce its debt in order to stabilise the rating outlook. Alternatively, the outlook could revert to stable if the group's post-acquisition earnings and cash flow generation measures suggest there is no material deterioration in the group's business and financial risk profiles, and DRB-HICOM successfully deleverages within the communicated timeline.



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Latexx slides on Q4 earnings slump

Latexx Partners Bhd, a rubber-glove maker, slid 3 per cent to RM1.63, headed for its lowest close since Oct 21.

Its fourth-quarter earnings slumped to RM926,000 from RM5.6 million a year earlier, according to an exchange filing. - Bloomberg



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