Melati Ehsan awarded RM298m public housing project

KUALA LUMPUR (Nov 4): MELATI EHSAN HOLDINGS BHD []’s unit Pembinaan Kery Sdn. Bhd. has accepted two contracts from the Housing and Local Government to undertake two housing projects worth RM298 million.

It said on Friday, the first project valued at RM88.10 million, was to design and build 500 units of flats and the ancillary works for public housing in Kuala Lumpur. The contract period is 30 months.

The second project, worth RM215.90 million, was to build 1,600 flats and ancillary works, also under the public housing scheme in Kuala Lumpur. The second contract is over 36 months.

Melati said Kery was required to execute the formal contract with the ministry in due course subject to the terms and conditions of the letters of award.

“The project is expected to contribute positively to the earnings per share of Melati for the current financial year ending Aug 31, 2012 and the subsequent financial years during the contract period,” it said.

Malaysia Smelting Corp 3Q net profit RM41.81m, but outlook cautious

KUALA LUMPUR (Nov 4): MALAYSIA SMELTING CORPORATION [] Bhd posted net profit of RM41.81 million in the third quarter ended Sept 30, 2011 compared with net loss of RM37.05 million a year ago where there was impairment provision for goodwill of RM73.63 million.

MSC said on Friday that revenue increased by 25.9% to RM907.04 million from RM719.96 million. Earnings per share were 41.80 sen compared with loss per share of 49.40 sen.

It posted a 121.7% increase in pre-tax profit of RM51.91 million before unusual items from RM23.41 million. This was due to higher profits from its tin mining and smelting operations in Malaysia and Indonesia mainly due to an improved operating performance and higher average tine prices.

There was an impairment provision for goodwill arising from acquisition of subsidiaries totaling RM73.63 million.

“However, for the current year is expected the operating environment to be difficult and challenging due to the weaker demand for commodities due to prevailing global economic slowdown and on-going uncertainty in the global finance markets,” it said. However it expected to remain profitable in the fourth quarter.

For the nine-month period, it recorded net profit of RM106.39 million versus net loss of RM58.20 million in the previous corresponding period. Revenue increased by 25.2% to RM2.497 billion from RM1.994 billion.

It said for the nine-month period in 2010, the impairment provision for goodwill arising from acquisition of subsidiaries was RM121.63 million.

Nestle posts flat 3Q earnings of RM110m on higher raw materials

KUALA LUMPUR (Nov 4): Nestle (Malaysia) Bhd posted net profit of RM110 million in the third quarter ended Sept 30, 2011 marginally lower from the RM113.18 million a year ago as profit margins were affected by higher prices of key raw materials

It said on Friday that operating profit was RM143.16 million, up 3.8% from RM137.83 million. Revenue rose 18.2% to RM1.171 billion from RM991.07 million, boosted by strong domestic and exports sales. Earnings per share were 46.91 sen compared with 48.27 sen.

“The good domestic growth performance was noted for all categories and some with double digit especially for milks, coffee and beverage, confectionery as well as Nestle liquid drinks. The encouraging sales were further driven by higher demand during the fasting month, followed by Hari Raya celebrations,” it said.

Nestle added the sustained economic growth in the region helped drive the group's export performance. The increase demand for coffee creamers and soluble coffees within the Asean region contributed to the strong double digit export growth.

However, escalating prices of key raw materials consumed by the group such as coffee beans, cocoa powder, skimmed milk powder and palm oil have negatively impacted the gross profit margin which reduced by 230bps, despite increasing by 10.3% in absolute terms.

For the nine-month period, its earnings rose 4.8% to RM369.23 million from RM352.14 million. Its revenue increased by 14.6% to RM3.51 billion from RM3.06 billion driven by both domestic and export sales.

KLCI snaps three-day losses, up 15 pt

KUALA LUMPUR (Nov 4): Blue chips snapped their three straight days of losses on Friday, with the FBM KLCI surging on late buying of selected stocks in line with the positive European and key regional markets.

Reports said Greece had scrapped its referendum plan while the European Central Bank’s move to cut interest rates had helped shore up investors’ risk appetite.

Greek Prime Minister George Papandreou bowed to cabinet rebels and agreed to step down and make way for a negotiated coalition government if his Socialists back him in a confidence vote on Friday, government sources told Reuters.

The KLCI closed up 15.14 points or 1.04% to 1,477.51. Turnover surged to 2.30 billion shares valued at RM1.51 billion. The broader market was firm with advancers beating decliners 591 to 194 while 248 stocks were unchanged.

Japan’s Nikkei 225 rose 1.86% to 8,801.40, Hong Kong’s Hang Seng Index jumed 3.12% to 19,842.79, Shanghai’s Composite Index 0.81% higher at 2,528.29, Taiwan’s Taiex 1.92% to 7,603.23, South Korea’s Kospi 3.13% to 1,928.41 and Singapore’s Straits Times Index 1.36% to 2,848.24.

At Bursa Malaysia, the strong export numbers for September also supported investors’ appetite for equities.

DiGi rose the most, up 82 sen to RM33.30, Tasek 60 sen to RM8.30, Nestle 50 sen to RM50, HLFG 40 sen to RM11.80 and Dutch Lady 32 sen to RM20.28 while RHB Cap added 24 sen to RM7.53 and MISC 21 sen to RM6.89.

Genting advanced 44 sen to RM10.80, pushing the KLCI up 3.77 points while CIMB’s 17 sen gain to RM7.36 nudged the index up 2.93 points while a 16 sen gain by Tenaga to RM5.88 enabled the index o chalk up 2.0 points.

Harvest jumped 23.5 sen to 87.5 sen with 94.51 million shares and the warrants 16.5 sen to 75 sen with 110.49 million units as speculators ignored Bursa Malaysia Securities Bhd’s query over the unusual market activity regarding its shares and warrants.

F&N posts 4Q net profit of RM66.2m, dividend 62c

KUALA LUMPUR (Nov 4): Fraser & Neave Holdings Bhd (FNHB) posted net profit of RM66.21 million in the fourth quarter ended Sept 30, 2011 , down 85.7% from the RM462.31 million a year ago due to a gain on RM382.03 million from the divestment of its glass container business a year ago.

It said on Friday revenue rose just 0.5% to RM995.46 million from RM990.25 million a year ago which had included revenue from the sale of Ampang development project of RM54 million. Earnings per share were 18.44 sen compared with 129.70 sen. It proposed a final single tier dividend of 47 sen per share together with a special single tier dividend of 15 sen.

For the financial year ended Sept 30, its net profit was RM383.13 million, down 44.8% from RM695.29 million a year ago that included the RM382 million gain on divestment of the glass business. Its revenue rose 7.6% to RM3.915 billion from RM3.637 billion.

FNHB said operating profit from continuing operations rose 14% to RM443.80 million from RM389.30 milion despite higher input costs and sugar subsidy withdrawal in Malaysia.

“It marks another new record and the 11th consecutive year of steady growth for the group,” it said.

FNHB chief executive officer Datuk Ng Jui Sia said: “Despite current challenges that we are facing in terms of higher input costs and the global economic and financial uncertainties, our core business in food and beverages remains strong, with solid growth from soft drinks and broad-based growth in dairies Thailand.”

Ng said the soft drinks division recorded all-time sales record of 69.8 million cases whilst maintaining market share. Revenue was up 16% to RM1.84 billion from RM1.59 billion last year due to good growth from the core brands and promising performance of new products. Operating profit surged 41% to RM274 million from RM194 million.

As for the dairies division, its registered lower volume due to the numerous price increases to offset the higher sugar costs. As for the dairies Thailand, he said FNHB achieved a broad-based domestic volume growth of 9%.

“We made greater inroads into Indochina with a 40% growth and started to move to Vietnam with the appointment of a local distributor,” he said

Commenting on the prospects, Ng said in the absence of Coca-Cola products, the soft drinks division will see an immediate fall in sales volume in the new financial year.

However, he was added the division has focused on deepening and widening its product portfolio over the last few years to prepare for this eventuality.

As for dairies products in Malaysia, he expected it to remain soft, due to the continuation of the selective sugar subsidy policy and volatility in raw material prices globally.

Ng also said in the first half of FY2012, he said the dairies division would be moving to the RM350 million Pulau Indah plant which would increase operating costs in the short term but lead to long term benefits of increased productivity.

He added once operations started in December 2011 or January 2012, the group would be able to crystallise a deferred tax asset of RM76 million in relation to the halal hub tax incentive.

As for the dairies plant at Rojana, Thailand, he said it had temporarily ceased operations due to the massive floods.

“We expect production to recommence approximately three to five months after flood waters recede. To mitigate disruptions to the marketplace and customers, we have plans to ship products from outsourced manufacturing locations.

“We have in place an all risk insurance policy for the business in Thailand. The total sum insured is Baht 5 billion and the indemnity period is for twelve months.”

Ng pointed out the group’s overall results would be bolstered by the non-operating items of deferred tax income.

Fresh impetus for some

PETALING JAYA: The emergence of new, politically connected shareholders and directors appears to be giving fresh impetus to selected small counters on Bursa Malaysia amid the current weak market sentiment.

The companies that have seen politically linked figures come on board in recent months include Harvest Court Industries Bhd, Envair Holding Bhd and Sanichi Technology Bhd.

The three counters, two of which are listed on the ACE Market, saw significant price movements on high trading volume in recent weeks. What is interesting is that all three companies made losses in their last financial years.

Mohd Nazifuddin Najib, the son of Prime Minister Datuk Seri Najib Razak, was appointed a non-executive director of Harvest, which was lifted from its PN17 status in December 2009, at the end of October.

Nazifuddin is also chairman of Sagajuta (Sabah) Sdn Bhd, best known as the developer of the 1Borneo mall in Kota Kinabalu, Sabah. Sagajuta has several ongoing projects including 1Sulaman and 1Likas in Kota Kinabalu, and 1Gateway in Klang. Its controlling shareholder and managing director is Datuk Raymond Chan Boon Siew.

Both Chan and Nazifuddin joined Harvest’s board on Oct 28 after Chan emerged as a substantial shareholder of Harvest 10 days earlier, when he acquired 23.808 million shares, or a 13.85% stake, at 20 sen per share.

The value of Chan’s stake has since tripled, with the stock closing at 64 sen yesterday as investors anticipate he may inject Sagajuta’s assets into Harvest was awarded a contract by Sagajuta for the supply of door leaves for some RM7.03 million.

Chan’s entry into Harvest follows the abortion of earlier plans to inject Sagajuta into Jerneh Asia Bhd.

About a week prior to Chan and Nazifuddin’s appointments, the company received an unusual market activity (UMA) query from Bursa Malaysia on Oct 17.


In response, Harvest said it is unaware of other developments, apart from the discussions between managing director and shareholder Ng Swee Kiat and Affin Bank Bhd for the proposed purchase the entire shares and warrants held by Affin in Harvest.

The query, however, did not stop Harvest shares from rising further, especially after the two appointments.

The counter reached a new high yesterday of 64 sen, a 760% premium to its recent low of 7.5 sen on Sept 26, 2011. The counter gained 334% year-to-date (YTD) compared with 509% in the last three months on an average daily trading volume of 8.34 million.

It is worth noting that for the whole of last year, Harvest posted a net loss of RM2.82 million from a net profit of RM12.16 million a year ago.

While the company posted a net profit of RM168,000 in 2QFY11 ended June 30, it is still in the red for the nine-month period with a net loss of RM678,000.

Envair, meanwhile, appointed Mohd Anuar Mohd Hanadzlah, the brother of Second Finance Minister Datuk Seri Ahmad Husni Mohd Hanadzlah executive director.

The loss-making Envair, which manufactures, sells and services clean air and containment facilities, made headlines recently when it unveiled plans to sell two million barrels of light crude oil per month to a Chinese company for a five-year period, in a deal worth some US$182 million (RM573 million) per month.

Envair was asked by Bursa Malaysia to clarify the deal. This was one of a number of queries from the exchange on Envair’s announcements since Oct 13 that it wanted to venture into the oil and gas business.

The company has also announced that ZAI Corporate Finance Ltd, a London-based investment banking firm, was interested in subscribing to up to 30% of its share base under a private placement exercise. There have been no updates on this development.

Envair posted a net loss of RM290,000 in 2QFY11 ended June 30 and a net loss of RM816,000 for the nine-month period. For the whole of FY10 ended Dec 31, it made a net loss of RM5.38 million.

Envair shares gained some 204% over the three months on an average trading volume of 1.26 million. YTD the counter put on some 407% to settle at 35 sen yesterday.

ACE Market-listed Sanichi Technology Bhd saw the emergence of Datuk Mohd Wira Dani Abdul Daim, son of former finance minister Tun Daim Zainuddin, as a new substantial shareholder three months ago.

Wira Dani recently bought 10 million shares or 6.12% of the loss-making precision moulds and tools maker for RM6 million or six sen per share. The transacted price was about 20% below the market price 7.5 sen at the time.

Sanichi’s share price shot up by as much as 10% after Wira Dani bought into the company in early August.

But over the recent three months, Sanichi lost over 47% to close at 5 sen yesterday. It reached its 52-week high on Aug 4, 2011 at 11.5 sen and its low of 3.5 sen on Dec 22, 2010.

Sanichi is still in the red with a net loss of RM14.93 million in FY11 ended June 30 on the back of RM9.44 million revenue.

Also notable are two counters that have seen significant movement in their share prices of late: GPRO Technologies Bhd and DVM Technology Bhd.

Interestingly, the reason behind the price movement of both companies appears to be centred around one individual: Christian Kwok-Leun Yau Heilesen.

The movement in its share price prompted Bursa Malaysia to query GPRO Technologies earlier this week.

In response, GPRO said it was not aware of any activity that may have contributed to the unusual price movement and yet, the counter settled at 23.5 sen yesterday, translating into about 200% gain YTD.

To recap, GPRO, whose market capitalisation is barely RM24 million, saw the emergence of Heilesen as a new major shareholder, when he bought 38.23 million shares or a 15.29% stake in the ACE Market-listed IT firm recently.

Heilesen acquired the shares on the open market for RM3.25 million or 8.5 sen each in early September. At current prices, the value of his stake has appreciated nearly three times.

This is the second ACE Market - listed loss-making company that Heilesen has bought into in less than two months. The first was DVM, which he later sold down in less than three weeks in August.

Heilesen made news last month when he bought into DVM and requested an EGM to remove four directors from the company’s board. However, he sold down his stake barely two weeks after the share purchase.

To recap, Heilesen, a Danish national, and Raymond Yip Wai Man from Hong Kong emerged as substantial shareholders in DVM via the acquisition of its shares on the open market. Both had a combined interest of close to 20% in the company before selling down their stakes.

While the duo were picking up shares on the open market, the company’s single largest shareholder, Datuk Goh Kian Seng, was paring down his stake to 5.05%.

DVM closed at 7.5 sen yesterday, an increase of more than 40% YTD, but down 73.2% from its recent high just three months ago.

It reached a high on Aug 2, 2011 of 28 sen, which was a 409% premium to its record low of 5.5 sen last November.


This article appeared in The Edge Financial Daily, November 4, 2011.

Misif against Megasteel’s proposed 15% levy

KUALA LUMPUR: The Malaysian Iron and Steel Industry Federation (Misif) is opposing Megasteel Sdn Bhd’s proposed reduction in import duty from the existing 25% to 15% or RM300 per tonne, whichever is higher, on all flat steel products combined with the abolishment of duty exemption.

“Misif, after consultation with its members, rejected Megasteel’s proposal and has conveyed its position to Miti (Ministry of International Trade and Industry) during the meeting between Miti and Misif,” the steel association said in a statement.

Misif was responding to The Edge Financial Daily’s front page report yesterday.

Flat steel products include hot rolled coil, cold rolled coil, coated sheets, pipes and tubes.

Misif president Chow Chong Long told the financial daily that there would be both winners and losers should the proposal go through.

The reduction in duty from 25% to 15% would be welcomed, but the abolishment of duty exemption could be detrimental to many sectors of the downstream flat steel players.

Exporters and steel players that depend on imported steel grades which are not produced locally could be adversely affected.

To allow exporters to remain competitive, Megasteel has proposed to have a duty drawback principle implemented for re-exporters.

“While the duty drawback system will reduce the possibility of abuse by importers, it adds a big financial burden to the exporters,” Chow said.

On the other hand, he pointed out, “The duty drawback will have an impact on the cash flows of businesses. They will have to pay more upfront for their raw materials and wait until they actually export the goods to reclaim the duty paid.”

“Megasteel, being the sole producer of hot rolled coil (HRC), is also a major part of the flat steel value chain and Misif would like to see a win-win solution for the upstream, mid stream and downstream,” he added.

It is important to note the current levy of 25% and Megasteel’s proposal will only affect imports from non-free trade agreement nations (NFN). Since Malaysia is part of the Asean Free Trade Agreement (Afta), imports by Asean members are not taxed.

Chow added that the biggest concern for Malaysian steel producers is China, which has become a threat since the Asean-China FTA.

MIDF Research released a report on Lion Industries Corp Bhd in which it downgraded the steel player to a “trading sell” on the expectation of negative earnings growth this year and weak industry fundamentals.

Lion Industries is the holding company of Megasteel.

The report entitled “The lion is trapped” revised the target price for Lion Industries down to RM1.12, below its closing price of RM1.53 yesterday.

The stock has fallen 24.26% year-to-date compared with the FBM KLCI’s 5.09% decline.

MIDF expects negative earnings growth due to the declining price trend for long steel products and slowing demand in both domestic and export markets.

“Currently, long steel prices are trending downwards with both billet and bar prices having declined 6.2% month-on-month and 9% m-o-m respectively,” the report said.

It also pointed out that contractors which use steel products for construction have also adopted a wait-and-see approach, keeping their inventories low on the expectation of a further decline in steel prices.

The blast furnace joint venture (JV) proposed in March by the Lion Group worth RM3.22 billion has yet to materialise, it added.

Partners of the JV, which include Lion Forest (20%), Lion Industries (29%) and Lion Diversified (51%), are on hold pending shareholders’ approval for a corporate guarantee on a RM2.3 billion loan from China Construction Bank

Shareholders were initially supposed to meet to approve the guarantee of the loan facility earlier this year on March 3. On Monday, the group announced that the date would be extended to March 2 next year.


This article appeared in The Edge Financial Daily, November 4, 2011.

MHB wins RM1.4b ExxonMobil job

KUALA LUMPUR: Malaysia Marine and Heavy Engineering Holdings Bhd (MHB) has clinched a contract from ExxonMobil Exploration and Production Malaysia Inc as part of the Tapis enhanced oil recovery (EOR) project to the tune of RM1.4 billion.

In a filing with Bursa Malaysia yesterday, MHB said the contract was signed by its wholly-owned subsidiary Malaysia Marine and Heavy Engineering Sdn Bhd with ExxonMobil.

“The scope of work under the contract includes procurement, fabrication, testing, load-out, transportation, installation and commissioning of the integrated Tapis R offshore platform deck, as well as two inter-platform bridges,” said the statement, adding the contract is expected to contribute positively toward the group’s future earnings.

The Tapis EOR project is expected to be completed by end-2013.


This article appeared in The Edge Financial Daily, November 4, 2011.