Supermax rebounds after plunging 16.5% as chief faces insider trading charge

KUALA LUMPUR (Dec 16): Glove maker Supermax Corp Bhd rebounded six sen or 3.7% after plunging 16.5% yesterday as its chief faces insider trading charges.

The Securities Commission (SC) had charged Supermax executive chairman and group managing director Datuk Seri Stanley Thai for insider trading involving APL Industries Bhd (APLI) shares. APLI is a former unit of Supermax.

The SC also charged Thai's spouse Tan Bee Geok and Bee Geok’s sister Tan Bee Hong for insider trading involving APLI shares.

Today, Supermax was traded at RM1.68 at 10.21am after rising as much as 11 sen or 7% to RM1.73 earlier. The FBM KLCI fell 7.31 points or 0.4%.  

Yesterday, Supermax shares fell 32 sen or 16.5% to close at RM1.62. Weak broader market sentiment also weighed on its share price.

The KLCI declined 35.68 points or 2.06% to close at 1,697.31 points.

In a press statement yesterday, the SC said Thai, 54, was charged at the Kuala Lumpur Sessions Court for communicating non-public information between October 26 and 29, 2007 to Tiong Kiong Choon, a remisier with a stock broking company.

Tiong was earlier charged by the SC last Tuesday at the Kuala Lumpur Sessions Court for disposing of 6.2 million APLI shares on October 26 and 29, 2007 while in possession of the information.

In addition, the SC also charged Thai’s spouse Bee Geok for communicating non-public information to Bee Hong between October 23 and 31, 2007.

The regulator alleged that Bee Hong had on October 31, 2007 sold 350,000 APLI shares held in her account while in possession of the information.

AFG gets Joel Kornreich as new group chief executive officer

TA Securities
(Dec 15, RM4.72)
Maintain “sell” with unchanged target price of RM4.35. Last Friday, Alliance Financial Group Bhd (AFG) announced the appointment of Joel Kornreich as its group chief executive Officer (CEO). His appointment will take effect on Jan 1, 2015. According to the press release, Kornreich has over 23 years of experience in the financial services industry. Before joining Alliance Bank, he was with Citigroup for 20 years in various roles around the world.

We are excited about this new appointment for AFG. We believe the new CEO can revive AFG’s consumer banking operations and imbue the bank with the wealth of his global experience.  Kornreich is reportedly well-known for his successful management of consumer banking businesses, built around superior service and innovative solutions.

Operationally, we believe AFG continues to lag its peers in the consumer banking space — reporting decreases in the credit card and personal loan segments in 2013 before accelerating only in 2014.  Its mortgage portfolio remained buoyant with growth of 15% to 20% year-on-year (y-o-y). While still eyeing double-digit loan growth, momentum is expected to slow down in the coming quarters.  Housing loans are expected to come off to 11% due to the impact of new regulations to control household debt. The HP portfolio has also been recording average growths of close to 50% y-o-y since 2013.

Its consumer market share is still shy of 3%. AFG accounts for 2.7% of the entire loan market in Malaysia. — TA Securities, Dec 15

This article first appeared in The Edge Financial Daily, on December 16, 2014.

IJM appointed main contractor for WCE

IJM Corp Bhd
(Dec 15, RM6.42)
Upgrade to “buy” with an unchanged target price of RM7.20. The IJM Construction Sdn Bhd (IJMC)-Kumpulan Europlus Bhd (KEB) joint venture (JV) recently accepted the letter of award (LoA) from West Coast Expressway Sdn Bhd, appointing the JV the engineering, procurement and construction contractor to undertake and complete the construction works for the West Coast Expressway (WCE) from Taiping to Banting for a fixed sum not exceeding RM5 billion.

Pursuant to the LoA, the JV shall award to IJMC the WCE construction works for packages 3,4,5,8 and 9 at a cost not exceeding RM2.83 billion.

The construction period is five years. We are not surprised with the JV appointment as a main contractor as it was announced by KEB that the government had given the nod for the appointment in May this year.

We opine the above appointment could lead to an open tender stage for the remaining RM2.2 billion packages of the WCE project in the coming weeks and the contract award stage in the following months. We do not rule out the possibility of IJM Corp participating in the other work packages. Winning the other work packages could provide an earnings surprise for IJM Corp in terms of higher construction job replenishment and more demand for its industry products.

We make no changes to our earnings forecasts. Going forward, we expect to hear more positive news flow on the WCE development. On its recent share price weakness, we upgrade IJM Corp to “buy” with an unchanged target price of RM7.20. We advise investors to take opportunity to accumulate this stock. — MIDF Research, Dec 15

This article first appeared in The Edge Financial Daily, on December 16, 2014.

Kossan continues landbanking activities

Kossan Rubber Industries Bhd
(Dec 15, RM4.60)
Maintain “buy” with unchanged target price of RM5.05. Kossan announced last Friday the acquisition of a 13.3 acre (5.38ha) piece of freehold industrial land at Mukim Kapar in Klang, Selangor, for a cash consideration of RM39 million.

The purchase consideration implies a price tag of RM68 per sq ft. This is 40% higher than the price it previously paid for 9.3 acres of industrial land located close by in late 2013.

The acquisition will be funded via internally generated funds and/or bank borrowings, and is expected to be completed by the first quarter of financial year 2015 ending December 2015 (1QFY15).

Funding should not be an issue given the group’s low gearing level of 0.1 times as at end-3QFY14.

We understand the land is located near its existing plants. As such, we believe the site is well connected to necessary infrastructure for glove manufacturing, including natural gas supply. This should reduce the associated execution risks in the construction of new plants.

Management plans to develop this land after it completes the construction of two plants at the adjacent 15-acre site in 2016.

We are positive on this acquisition as it will help the group to achieve its long-term growth plan. Including this site, Kossan has 95 acres of vacant land available to drive its expansion plans.

Management guided that it could put up a warehouse and two plants with total annual capacity of 3.8 billion to  four billion gloves. This represents 18% to 19% of the group’s estimated production capacity at end-2015.
We maintain our “buy” rating on Kossan with an unchanged RM5.05 target price, based on 18 times FY15 earnings per share. We are keeping our earnings forecast unchanged, pending further details on the development plans for the land. — Alliance DBS Research, Dec 15

This article first appeared in The Edge Financial Daily, on December 16, 2014.

Perwaja Steel to undertake retrenchment exercise

PETALING JAYA: Perwaja Holdings Bhd has came out to clarify that its its wholly-owned subsidiary, Perwaja Steel Sdn Bhd (PSSB) has in fact ceased all material operations since August 2013 when its dry gas and electricity supplies were curtailed.

"Given the cessation of operations, PSSB intends to undertake a company-wide retrenchment programme for its employees," it told Bursa Malaysia yesterday.

To date, it said that PSSB has about 1,000 employees under its employment.
"All the employees have been informed on the Proposed Retrenchment Programme, and PSSB is currently undertaking a consultation process with the employees via their appointed representatives."
Perwaja said the financial impact of the proposed retrenchment programme can only be determined once the plan is finalised.

RHB Research upgrades aviation sector to Overweight, top pick AirAsia

KUALA LUMPUR (Dec 16): RHB Research has upgraded the aviation sector to “Overweight” from Neutral and said the slump in oil prices would benefit the aviation sector.

In a note Tuesday, the research house said while it does not see demand growing strongly, sector earnings will be underpinned by yield recovery, with an additional positive impact from lower jet fuel prices.
“As such, we upgrade the sector to Overweight from Neutral.

“AirAsia Bhd is our Top Pick for the Malaysian aviation sector. AirAsia X Bhd remains a Sell as losses will continue into FY15,” it said.

At 10am, AirAsia rose 0.36% or one sent to RM2.81 with 1.37 million shares done while AirAsia X fell 0.73% or half a sen to 68 sen with 969,300 shares traded.

CIMB Research maintains Hold on KLCC Property, target price RM6.90

KUALA LUMPUR (Dec 16): CIMB Research has maintained its “Hold” rating on KLCC Property Holdings Bhd at RM6.50 with an unchanged target price of RM6.90 and said that in the current market conditions, REITs could provide a safe haven for capital preservation given its stable dividend yields.

In a note Tuesday, the research house said during its recent tour of some of KLCCP's assets, it was pleasantly surprised that Menara ExxonMobil still looked relatively new despite being almost 18 years old.

“This gives us confidence that it will not face issues extending its tenancy when it expires in 2017. We were also impressed by Menara 3, which was more recently built (in 2011) and houses Petronas's offices and other O&G companies.

“While the offices were impressive, we understand that KLCCP's acquisition pipeline remain scarce in the next 1-2 years.

“We maintain our Hold call and DDM-based target price of RM6.90. For exposure to M-REITs, we prefer Axis REIT,” it said.

The edge: Hibiscus’ shareholders raised interest, says MD

KUALA LUMPUR: Key shareholders of junior oil and gas exploration company Hibiscus Petroleum Bhd have increased their shareholding since its initial public offering (IPO) in 2011, said managing director Dr Kenneth Pereira.

Pereira, in a written response to a story published by The Edge this week, noted that Hibiscus’ top nine shareholders have been raising their interest in the company since its listing to 67% currently.

According to data presented by Pereira and collected from Bloomberg, as of yesterday, through Hibiscus Upstream Sdn Bhd, the company’s management team held an 18.75% interest in Hibiscus. Its shareholdings rose from an initial 83.61 million shares post-IPO to 167.22 million shares currently.

Several other shareholders in the private oilfield services sector and an investor in technology companies have also accumulated their shareholdings in Hibiscus after its listing in 2011. According to Bloomberg, current substantial shareholders of Hibiscus include Mercury Pacific Marine Pte Ltd (8.17%), Littleton Holdings Pte Lte (5.99%) and Chye Tek Lee (5.06%), among others. Note that Chye is the group chief executive officer and managing director of Singapore-listed Ezra Holdings Limited and also non-executive chairman of EMAS Offshore Limited.

Yesterday, Hibiscus announced to Bursa Malaysia that Datuk Sri Muhammad Syafiq Baljit Abdullah increased his shareholding to 12.78% by acquiring 4.12 million shares from three transactions between Dec 8 and 12, making him the company’s second-largest shareholder. Hibiscus shares shed 6.32% yesterday to close at 89 sen a share, translating into a market capitalisation of RM793.6 million. Year-to-date, the stock has fallen 49.17%.

The story in The Edge highlighted accumulating losses at Hibiscus which may have contributed to the stock’s recent poor performance.

“It is well known and widely reported that the share prices of oil and gas companies have been adversely affected by the slide in oil prices, both in Malaysia and worldwide. We do not understand the grounds for stating that the share price decline is due to accumulating losses when other oil and gas companies are also suffering from price declines,” said Pereira.

He also noted that Hibiscus’ share price has been resilient, substantiated by the fact that even with a 99.6% warrant conversion rate in July 2014, the company’s market capitalisation has been reasonably stable.
Meanwhile, Pereira also emphasised that Hibiscus had drilled two wells from November 2013 to February 2014, culminating in the first offshore discovery in the east of Oman after almost 40 years of exploration in the region by several other companies.

“Our 50% success rate in exploration drilling is significantly higher than the global average, where approximately one out of seven wells are successful,” said Pereira.

This article first appeared in The Edge Financial Daily, on December 16, 2014.