Wednesday, March 31, 2010

TSM ... Mar10

S & P Review

• TSM announced on March 3, 2010 that it proposed to acquire a 85.47%-stake in Kenseisha (M) Sdn. Bhd. (KMSB) for MYR15.1 mln, to be satisfied via issuance of 6.5 mln new TSM shares.

• KMSB is involved in the die-casting and precision machining of parts for the HDD industry such as 2.5” and 3.5” HDD base plates, micro drives, spacer rings and combs. More than 90% of its products are exported and major consumer brands using KMSB’s products include Nidec (6594 JP, JPY9,750, Not Ranked), Toshiba (6502 JP, JPY475, Not Ranked), Hitachi (6501 JP, JPY323, 3-STARS), NEC (6701 JP, JPY270, Not Ranked) and Sony (6758 JP, JPY3,470, 2-STARS).

• Following our meeting with management, we are upbeat on TSM’s prospects. Management views the proposed acquisition as an opportunity to diversify its earnings without a large capital outlay. The purchase price represents a P/B of 0.8x, and potentially a low singledigit forward PER once KMSB’s operations improve. KMSB’s business was affected previously due to funding issues faced by its parent
company in Japan at the height of the global financial crisis. TSM’s management is positive that with its experience and financial support, KMSB will turn profitable in the next few months.

• The proposed acquisition is expected to complete in 2HFY11 (Oct). KMSB could potentially add approximately MYR5 mln to the group’s FY11 net profit, based on a six-month contribution. However, pending completion of the acquisition, we have yet to factor in any earnings from KMSB.

Recommendation & Investment Risks
• We maintain our Buy recommendation on TSM with a higher 12-month target price of MYR3.80 (from MYR2.30) on our earnings upgrade.

• Our target price is derived by ascribing a higher target PER of 9x (from 5x) against FY11 earnings after removing the discount assigned earlier following our successful attempt to meet with management, and to reflect the potential forthcoming contributions from KMSB. Our target PER multiple remains within the 6x-11x valuation range for autoparts companies under our coverage. The target price is inclusive of a
projected dividend.

• We remain optimistic on TSM’s outlook. Automotive earnings should continue to rise on recovery in consumer spending and rollout of new vehicle models. Meanwhile, we are positive management is able to turn around KMSB, given its expertise and financial backing. At prospective 7.5x FY11 PER, valuation is undemanding, in our opinion, compared to the group’s potential double-digit earnings growth.

• Risks to our recommendation and target price include slower-thanexpected recovery in consumer spending and failure to turn around the operations at KMSB.

SCOMIEN ... Mar10

Its strategy is to position itself as an urban transportation solutions provider with focus on the monorail sector. SEB will intensify its focus on core engineering activities (urban transportation), strengthen its research and development (R&D) initiatives and invest in new technologies. The proceeds from the machine shop business disposal would be used in building value and R&D projects for the urban transportation business that was taking off quite well currently.

SCOMIENG’s future earning is uncertain as it is in the process of transformation, though its transportation units has received many positive feedback. Scomi Group holds a 70% stake in SEB.

SEB’s machine shop’s revenue drop by more than half in the fourth quarter versus a year ago mostly due to a worldwide drop in drilling activities. Usually machine shop accounts for more than 50% of SEB’s revenue but monorail has overtaken it in terms of contribution especially due to the Mumbai monorail job with consortium partner Larsen & Toubro (L&T).

SEB, Scomi and L&T secured the US$545.02mil (RM1.846bil) Mumbai monorail project in November 2008, where SEB will deliver a total of 60 cars to make up 15 sets of four-car trains. SEB together with its partner, were also recently shortlisted as one of two consortia to undertake a US$1.7bil (RM5.6bil) monorail project in Sao Paolo, Brazil. Industry observers expecting this trend to continue as the group is actively bidding for more jobs in Brazil, Saudi Arabia and India.

SEB’s move to sell the machine shop business and the proposal by sister company Scomi Marine Bhd’s (40%-owned by Scomi Group) to sell its 29% stake in CH Offshore Ltd for S$143.5mil are due to the slipping earnings of these businesses.

This exercise is not part of the Scomi Group Bhd restructuring process, but to enhance the value of SEB’s urban transportation division. The US$110mil is recognised as the full valuation of the machine shop business. Scomi Group holds a 70% stake in SEB. The divestment will allow Scomi Engineering to focus on its monorail business and it is believed that there would be further news flow on the restructuring of the company.

Despite this, Scomi Group would still have a major exposure to the oil and gas industry as Scomi Marine, besides having its own offshore vessels, also holds an 80% equity interest in Indonesia-listed PT Rig Tenders Tbk that has 65 offshore vessels consisting of supply vessels, tug boats, accommodation and work barges. Scomi Group also still has its subsidiary, Scomi Oiltools, a leading provider of drilling fluids solutions and drilling waste management services.

Its official said the divestment or investment by Scomi as a group was driven by the target of 25% return on capital employed from 2011 onwards.

Tuesday, March 30, 2010

QL ... Mar10

• 3QFY10 results were above our expectations. Cumulative net profit for 9 months was RM79.7m or 86% of our full year forecast of RM92.6m.

• On a y-o-y basis, 3QFY10 revenue and net profit rose 15.0% and 32% respectively. EBITDA margin improved to 14.5% from 12.9% in the previous year. Q-o-Q, 3QFY10 revenue increased by 9.8% whilst net profit rose 20.5%, and this is attributable to the overall improvement in margins.

• The Marine Products Division performed much better q-o-q this year, when compared to the previous year. Despite the earlier onset of the monsoon, revenue increased by 1.1% (q-o-q), whereas last year it declined 6.6% q-o-q. Further, pre-tax margin in 3QFY10 was 17.8% compared to 18.2% in 2QFY10 and 13.6% in 3QFY09. The improvements were attributable to both higher sales volumes and selling prices.

• For the 9 months period the Palm Oil Division still remained depressed when compared to the previous year. Q-o-Q, pretax contribution tripled, from RM1.1m to RM3.3m as volume of FFB processed was much higher.

• The Integrated Livestock & Farming Division has been the consistent high achiever of the year, with constantly improving margins. 3QFY10 revenue was 5% higher y-o-y, and 5.3% higher q-o-q whilst pretax margin was at 10% during the quarter, 8.4% in the preceding quarter and 7.5% a year ago. Both poultry and raw material trading increase their margins.

With better than expected performance at the Marine Products Division we are upgrading our FY2010 forecast to revenue of RM1,356m and net profit of RM101m.

QL’s profitability is expected to reflect the continuing improvement in operational efficiencies that has so far distinguished the management.

Further, the continuing improvement in the short term financial position as evidenced by the rising debt service cover, as well as in other financial ratios is reflective of an astute management of leverage.

We therefore believe that QL’s profit growth would continue to outperform its revenue growth.

Based on our forecast and maintaining our fair valuation of 2010PE at 13.5x, the target price is RM4.13

HoHup ... Mar10

Tan Sri Tong Yoke Kim @ Tong Kiot Seng, who controls 19.27% of Bina Puri Holdings
Bhd via a privately held entity, has emerged as a substantial shareholder in Ho Hup with a 7.28% interest.

Tong and his son, Datuk Andrew Tong So Han, own just under 20% of Bina Puri, also a construction company, via their entity Bumimaju Mawar Sdn Bhd, making them the second-largest shareholders. It remains unclear from whom Tong acquired the shares as the deal was done off market.

Little is also known of Tong, other than his interest in Bumimaju and that he is listed on the Chinese Chamber of Commerce & Industry of Kuala Lumpur and Selangor’s website as among its honorary presidents for 2006-2009.

Via Bumimaju, the Tongs had acquired their interest in Bina Puri in September 2009, when the company completed a debt-capitalisation exercise in which it issued 20 million new shares to Bumimaju worth RM20 million, after it had given RM20 million in advances to Bina Puri for working capital.

Bina Puri had carried out the exercise to trim its accumulated debt of RM156 million.

Prior to the exercise, Bumimaju did not have any interest in Bina Puri, whose largest shareholder is Jentera Jati Sdn Bhd with also an under-20% stake.

The emergence of Tong as a substantial shareholder in Ho Hup is bound to raise eyebrows, given that it had just crossed a major hurdle in resolving its boardroom tussle which began in 2008.

The new board is now evaluating both regularisation plans submitted by Low and Lye, with a new plan expected to be submitted in early April 2010.

Low’s plan involves a renounceable one-for-four rights issue of 25.5 million irredeemable convertible preference shares (ICPS) in Ho Hup, with two free warrants for each ICPS subscribed, under an exercise expected to raise an initial RM25.5 million. He also proposed the disposal of non-core land to raise more capital and to enter into joint development deals with other parties. Lye had originally put forth a 95% capital reduction plan and a sizeable new share placement, which would have brought in fresh cash and new controlling shareholders, but this was then scaled down to a 60% capital reduction and a smaller share placement.

The board headed by Lye had made an announcement to Bursa Malaysia just hours before the EGM that Ho Hup’s unit Bukit Jalil Development Sdn Bhd (BJD) had formed a JV development agreement with Malton Bhd’s subsidiary Pioneer Haven Sdn Bhd to develop a parcel of land owned by BJD, entitling BJD to at least RM265 million, while Pioneer Haven would be solely responsible for meeting and defraying the development costs.

Going forward further developments including legal actions not to be ruled out, it was reported that the company’s advisers, AmInvestment Bank Bhd and Newfields Advisors Sdn Bhd, had resigned, presenting another hurdle to its restructuring plans.

Monday, March 29, 2010

HELP ... Mar10

Robust 1QFY10, net profit doubles
On track for continued 20% EPS growth in FY10-11
Low P/E of 8x FY11, net cash 98 sen per share
Underlying business, excl cash & building comes “free”

HELP International Corp posted another sterling set of results for 1Q FY Oct 2010. Earnings at the education company continue to expand at a doubledigit clip, underscoring its resilience and strong branding. Margins also expanded significantly, thanks to rising demand for home-grown degrees and financial prudence measures during the recession.

For 1Q FY10, revenue rose 12.7% y-y to RM23.5 million. Pre-tax profit increased more significantly, by 63.4% y-y to RM3.8 million as did net profit, which almost doubled to RM2.4 million.

This accounted for 13% of our full year net profit forecast of RM18.5 million, which is within expectations as its earnings are seasonal. As a comparison, earnings in 1QFY09’s accounted for just 8% of the full year’s total.

HELP’s earnings are highly seasonal as the company recognizes revenue and profits according to the classes conducted for each student enrolled, rather than on a pro-rated basis across the year.

As such, its earnings are traditionally weak for the first and third quarters for its October financial year (Nov-Jan and May-Jul) due to the year-end and mid-year holidays. Earnings are very strong in the second and fourth quarters (Feb-Apr and Aug-Oct) when classes are in full swing.

The growth in turnover and profits reflect increasing student enrolments and fee increases, which are felt over several years. More important is the significant increase in profitability and margins. Pre-tax margin expanded from 11% to 16% y-y, despite being the seasonally slow quarter.

This was due to a higher proportion of students studying for home-grown degrees, ie those awarded under the “HELP University College” banner, which reduced payments to external universities. In addition, it also instituted better cost-management efforts during the recession.

HELP’s balance sheet remains very strong. Despite paying an initial deposit of RM5 million for the purchase of the HELP Residence hostel, its net cash position remained virtually unchanged over the last quarter. HELP Residence will cost RM50 million, but to be paid over five years.

Net cash stood at RM87.2 million in Jan 2010. This is equivalent to a significant 98 sen per share – or 48% of the current share price of RM2.03. The sum includes RM30.8 million for fees paid in advance, but excludes the RM20.3 million allocated for the purchase of 23.3 acres of land for its new campus in Subang 2, Sungei Buloh.

The acquisition of both the Subang 2 land and HELP Residence (the latter for RM50 million, but to be paid over 5 years), are pending regulatory approvals, and will be completed this year.

KNM ... Mar10

Doubts whether a proposal by its managing director Lee Swee Eng to take over its assets and liabilities at an effective price of 90 sen per share could happen.

The company did not extend BlueFire Capital Group Ltd’s (Bidco) exclusivity period for due diligence which had expired on 22 March 2010. While the exclusivity period had ended, KNM said that discussions would continue until April 16 2010 and an announcement would be made when an outcome had been reached.

The extended discussions are making investors lose some confidence. There are a lot of possibilties as to the results such as whether the deal will still be going through, or whether the offer price will be lower.

As detailed information was not given, investors are uncertain if the due diligence has been completed, as well as its outcome. Investors will have to wait the results that will be announced on April 16, 2010. The risk lies in the proposed offer aborted or offer price lowered following the weak set of 4Q09 results.

Due diligence process drags on will disappoint many investors.

KNM reported a 49.2% drop in net profit after minority interest to RM170.7 million for FY09 from RM336.4 million the previous year.

Sunday, March 28, 2010

Saturday, March 27, 2010


A Singapore man's unhappy experience with a PRC lady

Temasek Review

The below email has been circulating around in cyberspace and was forwarded to us for publication. For those of you who knows the identity of the author, please keep it strictly confidential.

Please forward this to all your male Singaporean loved ones and friends. This is something that actually happened to me and I feel that it needs to be shared. I believe my experience will help your male loved one stay out of trouble.

On the morning of 18th February at about 9.50am I was standing at Coffee Bean (Novena Square) counter, ordering my usual cup of mocha latte before heading into the office as usual. Behind me was a row of leather cushions that the mall has provided. In the corner of my eyes, I noticed a middle aged Chinese lady with an umbrella and a cold storage plastic bag, looking really nervous, glancing around every now and then.

The lady had shoulder length hair tied up neatly in a pony tail and looked pretty plain, wearing just a normal t-shirt and jeans – nothing too revealing. She was about mid 20s to early 30s and pretty pleasant looking I must say. But her eyes were scary when she stared intently at me for a short moment I did not pay much attention to her as I thought she was waiting for the slimming centre to open. I carried on my business as usual, glancing through the Today newspaper.

As I made my way towards the direction of Banquet coffee shop, she stood up and walked towards my direction. What happened next caught me completely by surprise.

The lady stopped directly in front me of, stared at me and suddenly screamed “Why you touch me?” Only then did I realise from her unmistakable accent that she is from China. I said “Sorry? What are you talking about?” I was more in shock then angry. The first thing that came to my mind was, is this some woman that I accidentally brushed on the train this morning?

She did not bother to explain but kept on screaming and pointing her index finger at me “Why you touch me!” about 4 or 5 times. She then squatted, covering her face and cried, crying out over and over again that I had touched her. I was really lost. There were some people walking past me and I felt like a criminal standing there, while people gave me this disgusted look. All the while I was trying to talk to the China lady but she remains in a squatted position, covering her face and crying.

At this point of time, a Malay bang in light blue coloured uniform walked over from Banquet. Seeing the situation he asked me what happened. The lady stood up and said that I had “touched”her. She then told the Malay bang that I need to giver her $500 to "see doctor” or else she would report me to the Chinese Embassy. She took out her hand phone and took several photos of me.

The Malay bang then said, “Bro, I think we better call the police”.

At this point of time, I have gotten over my shock and anger was slowly taking over. I nodded to the Malay bang in agreement. I took out my hand phone too. But instead of taking her photo, I dialled 999 immediately. “I am calling the police myself. Let them settle the matter”. I said calmly to the both of them. At this point of time, she picked up her plastic bag and umbrella, and swiftly left towards the direction of Tan Tock Seng hospital – even before my call could connect!

We were left there puzzled. Somehow I was relieved that it was over and did not want to proceed with the call. The Malay bang asked me if I was ok. All I said was “Thanks”. He patted my shoulder and walked away towards the direction of Coffee Bean. Several patrons inside banquet were already witnessing the commotion. I just wanted to get out of there.

In case something like this happens to you or your loved ones, do not make the same mistake I did, trying to console the woman. Immediately take out your hand phone, take a photo of her and call the police. Please help to spread this around to our Singaporean husbands, sons, brothers and friends.

Friday, March 26, 2010

GUH ... Mar10

GUH Holdings Bhd plans to diversify into the healthcare, power generation and waste water treatment business this year and in 2011.

It would bid for waste water treatment projects in several cities in China in 2010 and hoped to secure at least one project. In 2010 they are looking to acquire more oil palm estates in the country to add to its existing 385 acres in Kedah. Next year, the group would explore the possibility of acquiring a healthcare business and bid for power generation projects in the Asean region.

This diversification is targeted at reducing its dependence on the printed circuit board (PCB) business, currently generating about 90% of the group’s revenue. Its aim is to cut the revenue contribution of the PCB segment to 75%. GUH had secured PCB orders till May 2010.

The group was looking to purchase more land in Penang and the Klang Valley for residential property projects.

The group would invest about RM30.3mil as capital expenditure for its operations in Suzhou, China and Malaysia. Next year they are looking at about RM23.4mil.

For the financial year ended Dec 31, 2009, the group posted RM50.4mil in net profit on RM272.8mil revenue, compared with RM24.7mil and RM292.7mil respectively in 2008.

Thursday, March 25, 2010

Formis/ISS ... Mar10

Formis Resources Bhd received shareholders' approval for the reverse takeover of ISS Consulting Solutions Bhd at its extraordinary general meeting (EGM).

ISS is a leading service provider of integrated business solutions in the SAP environment.

The reverse takeover would create a meaningful presence in the SAP solutions segment for the Formis. ISS' growing presence and extensive customer base in Singapore, Thailand and Indonesia will serve as a platform for Formis to capitalise on the growth opportunities in Asia.

The enlarged Formis group with enhanced technical capabilities and financial resources is strongly positioned to pursue more opportunities in the information and communications technology (ICT) sector locally and regionally.

The reverse takeover of ISS is via the injection of Formis' subsidiary Diversified Gateway Bhd into ISS. The other part involves the proposed distribution-in-specie of 185.9 million ISS shares pursuant to the proposed reverse takeover, to Formis shareholders, on the basis of one ISS share for one Formis share. After the distribution in-specie, Formis will hold 59.3 per cent of ISS.

The proposed corporate exercise had received all the relevant approvals, except for the Securities Commission's approval for the proposed dividend-in-specie and mandatory general offer.

Wednesday, March 24, 2010

TimeCom ... Mar10

Time dotCom Bhd is slowly finding its way back into the radar of investors following its recent feat of returning to the black and beginning to get the attention of potential investors.

Helped by three consecutive quarters of posting operating profits, TdC returned to the black with a net profit of RM33.1 million for the financial year ended 2009 from a net loss position previously.
The net profit was recorded on the back of RM286.8 million in revenue, a period which saw TdC recording stronger data and Internet revenue, offset by the loss of revenue from its payphone business that was disposed of in the second quarter of 2009.

The turnaround after TdC’s many years of losses attributied it to aggressive cost-cutting measures, increase in investment income and sharp drop in depreciation.

Between 2004 and 2008, TdC posted net losses with a whopping RM949.63 million in FY2008 and RM833.24 million in 2004. In between those financial years, the company had posted net loss of RM238.9 million in FY05, RM177.78 million in FY06 and RM160.67 million in FY07.

In the absence of future large negative writebacks coupled with the stabilisation of TdC’s business, the possibility of the group sustaining profits in the coming years is good.

On Oct 7, 2008, Khazanah announced that it had entered into conditional agreement with Global Transit International Sdn Bhd (GTI), a local telecommunications entity, to improve the operational performance of its investee company TdC.

Khazanah’s move and the new team’s ability to lead the company out of the red was evidence that the move is bearing fruit. Now, it may turn out to be a move that is not only financially benefiting Khazanah, but also lead to TdC’s successful turnaround exercise.

TecNic ... Mar10

Plastic maker Tecnic Group Bhd is set to ride on the economic recovery in 2010.

The company has begun to secure new contracts including a vendor status to provide decorative components for Sony LCD flat panel televisions and to supply containers for Lady’s Choice mayonnaise to Unilever.

It now supply to three major LCD TV producers — Samsung, Panasonic and Sony.

It denied the entry of Unfold Riches Sdn Bhd into the company, with the acquisition of a 10% stake in Tecnic on March 2 2010, was the prelude to further shareholding changes or the entry of another major shareholder. It said these are private parties that they have known for some time and the company (Unfold Riches) was set up recently to hold their investments that include not only Tecnic, but other companies as well.

Its mould-making capabilities housed under 100%-owned Sun Tong Seng Mould-Tech Sdn Bhd. The tool-making is key to a plastic manufacturer. Typically, it makes its own toolings. At present, Tecnic Group has the capability to build moulds weighing up to 1,500 tonnes, said Gan, adding that this was still a rarity.

There are a number of other mould-makers and plastic injection moulding companies in Malaysia, such as VS Industry Bhd, Ralco Corp Bhd, SKP Resources Bhd, LTCH Corp Bhd and Teck See Plastic Sdn Bhd (unlisted) to name a few.

Tecnic Group mostly supplies triple-lock pails to numerous oil and gas multinationals, as well as other moulded plastic products to other sectors such as automotive, medical equipment, electronics and electrical.

Injection moulding contributed about 85% of Tecnic Group’s revenue of RM137.5 million for its financial year ended Dec 31, 2009, while mould making made up the 15% balance.

The company is currently bidding to supply to Shell in Vietnam. For Shell, Tecnic supplies its pails to Malaysia, Singapore, Thailand, the Philippines and Hong Kong.

It also supplies its triple-lock pails to oil and gas majors Shell (in several countries), BP Castrol in Malaysia and ExxonMobil in Singapore.

The company holds the patent for its triple-lock pails.

Being able to supply to all these major oil and gas MNCs does provide a strong testimony to the group’s capability. The vendor selection by these MNCs is a long and tedious process, involving many levels of approvals, auditing of vendor factory, quality assessment etc. As such, MNCs usually do not simply change panel vendors unless the vendor breached contract terms.

Tecnic has been able to achieve strong growth in revenue and profit in FY08 and FY09, despite the weak global and local economy which is due to the resilience of its new focus on producing higher value products for multinational companies.

Tecnic posted a 48.6% jump in net profit to RM12.82 million in FY09 from RM8.6 million in FY08, while revenue grew 25.8% to RM137.5 million from RM109.3 million.

Tecnic had a net debt of about RM40.08 million on its balance sheet as at Dec 31, 2004 that was gradually pared down to RM2.26 million at Dec 31, 2007. The debt situation has changed quite dramatically in the FY09 financial results.

Tecnic has turned to a net cash position of RM5.6 million or 14 sen per share at end-
December 2009, compared with a net debt of RM2.98 million the year earlier.

The company does not at present have a formal dividend policy.

Tuesday, March 23, 2010

MPC ... Mar10

Thailand's government has expressed interest in participating in Malaysia Pacific Corporation Bhd's (MPC) LakeHill Resort development and the RM3 billion Asia Pacific Trade & Expo City (APTEC) in Johor's Iskandar Malaysia.

Thailand's Ministry of Commerce had expressed "keen interest" in APTEC in Iskandar Malaysia following a meeting between the company's CEO Datuk Bill Ch'ng and executive director Datin Kong Yuk Chu with the deputy minister Alongkorn Ponlaboot and the deputy permanent secretary Rachane Potjarasuntorn at the ministry office.

A meeting would be scheduled in due course in respect of a full presentation by Ch'ng to the "Cabinet Committee" for a detailed study and consideration.

MPC had in December 2009 signed a letter of intent with Thailand's Royal Asia Company Ltd and a Thai national, Chutamas Vongvorakit, to explore partnership opportunities in developing APTEC.

It was Chutamas who had informed the company of the Thailand government's "expressed interest" to cooperate and/or to form a joint venture in the development of the resort and APTEC.

It has been reported that MPC was seeking local and international partners to jointly develop APTEC.

HLBank/EONCAP ... Mar10

All the seven resolutions at EON Capital's EGM requisitioned by substantial shareholder Rin Kei Mei were passed with almost 70% shareholder approval on March15 2010.

Six new directors received 69.21% approval from shareholders to be appointed to the board while Wee Hoe Soon @ Gooi Hoe Soon received 97% approval.

It was now up to Bank Negara Malaysia (BNM) whether to approve of the new directors or not, and that the names had been submited fo approval "a few weeks ago".

At the meantime, none of the EONCap's present directors is resigning, and that Rin also did not know about rumours that Affin Holdings was interested in submitting a bid to buy a stake in EONCap.

[Rin's companies] Kualapura (M) Sdn Bhd and Lintang Emas Sdn Bhd would write in to the board of EONCap to ask them to write to Hong Leong Bank and ask them to revisit their offer.

Substantial shareholder Khazanah Nasional Bhd, which has a 10% stake, voted in favour of the new directors, while it was rumoured that the Employees Provident Fund (EPF) abstained.

Rin Kin Mei, a substantial shareholder of EON Capital Bhd (EONCap), has won shareholders’ support to appoint seven directors but Hong Leong Bank Bhd (HLBB) has yet to revive its offer to take over the group’s assets and liabilities.

The banking group was currently reviewing its plan to acquire the assets and liabilities of EONCap. HLBB would reassess the situation following the appointment of seven additional independent directors at EONCap — a move initiated by Rin, who has a 15.4% stake in the banking group.

HLBB is currently reviewing its position and thus will not at present be resubmitting its offer to acquire the entire assets and liabilities of EON Capital.

If HLBB were to resubmit its offer, it would only do so after Bank Negara has approved the appointment of the seven new EONCap directors. This is because a second offer will have a better chance of succeeding with the seven new faces on the board.

Sources say some directors might tender their resignations at the coming board meeting, in response to the proposed appointment of new directors.

The new board line-up, if approved, could be in favour of Rin, as he has eight representatives: six new directors and two from the old line-up versus two representatives from the other major shareholder, Primus Pacific Partners. The other four are independent directors.

If HLBB decides to revive its offer, there is a high probability that the majority of the shareholders would vote in favour as it also believes a new offer would be slightly higher than the original RM7.10 a share.

It would take about two weeks to a month for the central bank to decide if the newly elected are fit for EONCap’s board before they are officially deemed directors. The directors are all from financial institutions so they have passed the fit and proper test to be directors of a financial institution. The thing now is, if they are suitable to be on EON Capital’s board,

The newly appointed directors are Tengku Ahmad Faisal Tengku Ibrahim (ING Insurance’s board), Tengku Azman Ibni Sultan Abu Bakar (Syarikat Takaful Malaysia), Haron Siraj (Jerneh Asia), Zana Rina Zahari (MAA Holdings), Wee Hoe Soon (EON Bank Bhd), Nicholas John Lough (MAAKL Mutual), and Ahmad Riza Basir (Jerneh Asia and Manulife Holdings).

Once the central bank has determined that the candidates are “fit and proper” to become directors in the banking group, Rin would urge the board to write to HLBB to revive its offer.

All said, an offer by HLBB has yet to be seen. Meanwhile, no one can rule out the possibility that other parties may also compete with Tan Sri Quek Leng Chan for EONCap’s banking assets.

Although no official announcement was made, speculation is rife that other banking groups, including Affin Holdings Bhd and Alliance Financial Group Bhd, are also keen on EON Bank Bhd.

On another development, SC came up with a consultation paper on asset sales that will have implications for Hong Leong Banj Bhd’s offer to buy the assets and liabilities of EON Capital. Although the offer has lapsed, there is still talk that HLBB may revive it.

The new ruling will likely be in place in May – June 2010, time is now key to whether the sale of EON Capital will ultimately see the light of the day.

For Primus Pacific Partners, who opposes the sale of the banking group to HLBB, the new ruling works in its favors, since it is EON Capital’s single largest shareholder with a 20.2% block.

However industry observers say the two months before the implementation of the ruling may be challenging for Primus, as EON Capital’s new board will be working furiously to get a revised offer from HLBB, as soon as BNM gives the nod for the entry of its seven new independent directors.

Given the new SC ruling, Primus is no longer the only one racing against the time. The new SC ruling puts some pressure on EON Capital ‘s new board to expedite the banking group’s sale before the requirements kick in.

Note that even if all four of EON Capital’s major shareholders are keen to dispose their stakes in the banking group, the four stakes combined stand at 54.6%, which is insufficient to push through the sale when the threshold is raised to 75%.

However, how quickly Rin can push through the EON Capital deal depends on BNM’s approval of the seven new independent directors. Industry observers say approval for new directors usually takes one and a half months but it is difficult to predict whether or not the central bank might give the nod to the new directors earlier than expected.

There is also news that a group of private investors from Middle East has sought BNM’s approval to negotiate with EON Capital shareholders to acquire a stake in the banking group. It is learnt that the group of investors submitted a proposal to the central bank early March 2010 and is eyeing Rin’s 15.5% stake in EON Capital.

The investors offered to pay between US$300 million and US$400 million which represents an offer price of RM9.20 apiece.

The group is also keen on acquiring Khazanah Nasional’s and Tiong’s stake in EON Capital.

The more imminent issue for now is keeping a balanced board in EON Capital. The central bank is believed to want two out of the four independent directors who resigned to stay to ensure that the EON Capital board is still functioning.

Monday, March 22, 2010

Tgoffs ... Mar10

It has secured long-term contracts from Petronas Carigali Sdn Bhd to provide two vessels for four and five years and the contracts are valued at RM114.6 million.

Its unit Tanjung Offshore Services Sdn Bhd was awarded the contracts for the charter of two anchor handling tug and supply (AHTS) vessels. These contracts are expected to start March 2010 and April 2010.

Tanjung Offshore had on March 6 taken delivery of one of two vessels MV Tanjung Dahan 1 which would expand the fleet to 15 vessels. The second vessel, MV Tanjung Dahan 2 would be announced upon completion and commissioning in April 2010.

The award of long term charter contracts and the deliveries of the two vessels were expected to contribute positively to the future earnings and net assets of Tanjung for the financial years ending Dec 31, 2010 and beyond.

SUCCESS ... Mar10

Its subsidiary Seremban Engineering Sdn Bhd (SESB), which is expected to be spun off by the first quarter of next year (2010), may diversify further into the oil and gas (O&G) sector.

Listing SESB would unlock value as the process equipment unit could fetch much better valuation on its own due to its high-growth potential.

SESB has been growing rapidly. The palm oil industry, which is currently SESB’s biggest customer, has great prospects in the long run. Going forward, SESB has plans to diversify further into the oil and gas sector.

There would be no change in SESB’s management, decision-making process and board structure, as STC and SESB’s businesses are not directly related.

STC proposed to list SESB through an initial public offering (IPO) of 19.9 million new shares, or 24.91% of its enlarged share capital of 80 million shares of 50 sen each. The proposed exercise is expected to pare down STC’s interests in SESB to 65% from 100% currently. The IPO price has yet to be determined.

SESB specialises in the manufacturing of heat exchangers, process equipment and non-pressure tanks for chemical and other industrial storage use. STC itself is mainly involved in manufacturing, design and sales of transformers and lightings, and in industrial engineering design.

STC first bought a 60% stake in SESB in March 2007 for RM14.63 million. It increased the stake to 100% a year later. The acquisition has worked well for SESB, which has seen its fabrication capacity grow to five plants from three previously.

In the first six months of this year (2009), SESB contributed RM4.52 million in net profit, or 35% of STC’s group net profit of RM12.9 million, and RM36 million in revenue or 37% of STC’s total revenue of RM97.4 million.

Although overseas business makes up around 60% of SESB’s business, the company would keep Malaysia as its manufacturing base, as the country offered a strategic location to serve as a low-cost fabrication centre for its European clients.

SESB currently had over RM20 million worth of contracts that would keep it busy until at least the first quarter of next year (2010). It is also bidding for around RM50 million in additional fabrication jobs, mainly from overseas customers.


What’s Up? … Sept 2009

Success Transformer Corporation Bhd’s (STC) subsidiary, Seremban Engineering Bhd (SEB), has entered into a cooperation agreement with Affcom Resources Sdn Bhd towards forming a joint venture (JV) company in the oil and gas (O&G) industry.

The objective was to incorporate a JV company to undertake the design and fabrication of equipment, refinery, lube oil plant and engineering and any other related activities.

Malaysia-incorporated Affcom is an affiliate to an independent integrated oil company and its activities cover trading, marketing, refining, and O&G fabrication in Malaysia and abroad.

SEB is mainly involved in the manufacturing and fabrication of process equipment such as unfired pressure vessels, heat exchangers, tanks, silos and other machinery or parts, including mechanical works, maintenance and shutdown works.

Affcom would provide the expertise in management, consultancy, market information, and any other contribution in the best interest of the mutual business cooperation.

Sunday, March 21, 2010










Saturday, March 20, 2010

2010 Life

We never get what we want,
We never want what we get,
We never have what we like,
We never like what we have.
And still we live & love.
That's life...

The best kind of friends,
Is the kind you can sit on a porch and swing with,
Never say a word,
And then walk away feeling like it was the best conversation you've ever had.

It's true that we don't know
What we've got until it's gone,
But it's also true that we don't know
What we've been missing until it arrives..

Giving someone all your love is never an assurance that they'll love you back!
Don't expect love in return;
Just wait for it to grow in their heart,
But if it doesn't, be content it grew in yours.

It takes only a minute to develop a crush on someone,
An hour to like someone,
And a day to love someone,
But it takes a lifetime to forget someone..

Don't go for looks; they can deceive.
Don't go for wealth; even that fades away.
Go for someone who makes you smile,
Because it takes only a smile to Make a dark day seems bright.
Find the one that makes your heart smile!

May you have
Enough happiness to make you sweet,
Enough trials to make you strong,
Enough sorrow to keep you human,
And enough hope to make you happy.

Always put yourself in others' shoes.
If you feel that it hurts you,
It probably hurts the other person, too.

The happiest of people
Don't necessarily have the best of everything;
They just make the most of everything that comes along their way.

Happiness lies for
Those who cry,
Those who hurt,

Those who have searched,
And those who have tried,
For only they can appreciate the importance of people
Who have touched their lives.

When you were born, you were crying
And everyone around you was smiling.
Live your life so that when you die,
You're the one who is smiling
And everyone around you is crying.

Friday, March 19, 2010

Delloyd ... Mar10

Its net earnings increased 65% to RM33.93mil for the year ended December 2009. Notably, this was supported by its plantation business, which has been growing substantially in the last few years.

While Delloyd expects its Malaysian core business of auto parts manufacturing to ride on the industry’s uptrend, it sees more potential in its Indonesian venture. Since setting up production facilities in Indonesia several years ago, the group has been a vendor for Toyota and in 2009, it started supplying Honda parts.

Over the next five years, Delloyd will supply auto parts for some 150,000 Honda cars, which is likely to translate into revenue of RM6mil per year.

Since 2008, the company has also been building chassis for buses in Indonesia in a collaboration with a German chassis designer.

Delloyd’s 51% bus-assembly subsidiary, PT Asian Auto International, has submitted a tender bid to build buses for Transjakarta Busway, a bus rapid transit system. The outcome is due next month. Expecting this segment to be a new revenue stream for Delloyd and provide a larger contribution, moving forward.

Delloyd’s plantation business has grown substantially since 2006 when it purchased a 60% stake in an Indonesian plantation company for about RM43mil. In 2009, the company’s plantation unit contributed 15.3% of total revenue. In 2010, the percentage is almost certain to rise as the company forecasts fresh fruit bunch (FFB) production to grow by almost 25%.

Revenue from Delloyd’s Indonesian operations will probably overtake that of Malaysia in the next five years. Malaysia currently contributes 75%.

Thursday, March 18, 2010

APM ... Mar10

Its 2009 net earnings of RM72.65mil is a 42% improvement over that of the previous year.

The results were due to a combination of higher original equipment manufacturing (OEM) sales, high operating leverage, and a positive overseas contribution resulting from a price adjustment granted by a major OEM customer.

APM provides leverage to a sector recovery, as its top 10 customers account for over 90% of TIV.

Currently, APM relies rather significantly on the national carmakers, which account for some 51% of its revenue. This is set to change as the contribution from sister company Tan Chong Motor Holdings Bhd is expected to grow substantially within the next two years, from 7% of APM’s revenue currently to 19%.

This will come firstly from Tan Chong’s massive expansion plans to fill up the existing gaps in its model mix locally. Second, Tan Chong’s regional expansion will see APM playing an important role – being a key auto parts supplier for the larger Tan Chong group.

This also lifts APM’s earnings prospects towards the larger regional auto market.

Wednesday, March 17, 2010

IPO ... Hock Heng Stone

It has secured a RM30 million contract to supply stone products for high-end properties.

It is also bidding for RM50 million worth of contracts. The company plans to expand into quarrying of dimension stones as it moves to integrate its operations.

The group recently obtain approval to extract granite from a quarry in Tangkak, Johor which is reported to have about 85,000 cubic metres of stone reserve with commercial potential.

It plans to start the quarrying after the listing. It will use RM2.1 million from the IPO proceeds to buy machinery and clear the land for the quarrying.

Its IPO involves the public issue of 15.34 million new shares and sale of 14.25 million shares at 55 sen each. The listing exercise will raise RM8.43 million for the company and RM7.84 million for the vendors.

Of the RM8.43 million in proceeds, about RM2.12 million would be used for quarrying operations, RM4 million as working capital, RM1.53 million to defray listing expenses and RM788,000 to build a processing plant.

BRDB ... Mar10

It is mulling revisiting the option of selling its stake in chipboard maker Mieco
Chipboard Bhd.

BRDB has 56.8 per cent stake in Mieco, a pioneer in particle board manufacturing using rubber wood.

The developer has been wanting to dispose of its stake in Mieco for the past four years. It spoke to several local and foreign firms but no firm deal was entered into.

Despite being optimistic of prospects for Mieco as furniture manufacturing and the audio segment is improving in tandem with economic and industry growth, BRDB wants to sell its share in the company as it is dragging down its profit. By doing that, BRDB can also focus more on property development and investment, as chipboard and manufacturing is not its expertise.

Mieco posted a loss of RM36.3 million in 2008. It may be in the red in 2009 after posting a loss of RM18.2 million for the first nine months of the year.

Mieco has been in the red because of supply and demand issues, price war, foreign exchange losses and higher operating costs. Mieco is consolidating its operations, allowing it to repay part of its RM150 million debt and save cost.

Some 40 per cent of Mieco's chipboards are sold in the domestic market. The rest are sold in Asia Pacific, the US and Europe. Mieco's most important markets are Malaysia, India, Indonesia, Vietnam and China.

It has three plants in Pahang, which has the capacity to produce 900,000 m3 of chipboards per annum. But the plants are producing three times less now because of slow demand. Mieco has since closed one plant to save on operational cost. It is not clear if Mieco will sell the plant. The replacement value for the three plants is RM700 million.

Tuesday, March 16, 2010

CAB ... Mar10

CAB’s primary business is integrated poultry farming and processing, while it is also involved in the manufacturing and trading of value-added food products and marine products.

Currently, they are focusing on consolidating its current brands and products and strengthening uts marketing strategy. The company had increased its marketing staff in addition to upping its advertisement space in both local and foreign trade magazines, as well as participating in trade exhibitions.

At a later stage, it will consider venturing into fully-cooked products, and adding more variety of value-added food/seafood products.

CAB, which also owns and operates the Kyros Kebab fast-food chain, was also planning to open two new outlets in the next two years in Senai Airpport and in the northern region, with combined estimated capital expenditure (capex) of RM700,000, he said.

CAB’s restaurants and franchising business contributed 0.5% of total group revenue for the first quarter ended Dec 31, 2009 with a revenue contribution of RM767,000 from RM853,000 a year earlier.

On the group’s foray into the overseas market, sales from the Middle East, United States, Australia and Singapore were “well-maintained”, contributing 6.7% to group revenue for FY09, although it faced a decline from 11.3% contribution in FY08.

CAB’s results for the first quarter ended Dec 31, 2009 saw the marine products manufacturing segment contributed RM387,000 in revenue versus RM22.34 million a year earlier.

At present, CAB would focus on its existing foreign markets although the group would consider entering other markets in the future. For FY09, CAB’s Malaysian operations contributed 93.3% in sales revenue while its US market contributed 5.5%. Its other foreign markets contributed 1.2% of sales revenue.

CAB’s poultry division, which contributed 91.6% or RM122.76 million in group revenue for 1QFY09 from RM117.53 million in 1QFY08, would continue to be the main driver of earnings and revenue.

CAB’s net profit rose 78% to RM2.08 million in its first quarter ended Dec 31, 2009 from RM1.17 million a year earlier, while revenue fell 9.2% to RM133.99 million from RM147.50 million.

Perisai ... Mar10

An Indian oil and gas counter could emerge as a substantial shareholder and possibly even end up with a controlling stake in Perisai.

The Indian company is currently in negotiations with Perisai MD, who has a 17.5% stake in Perisai, to buy his block. The stake is held directly and indirectly via his vehicle.

It is still not clear who the Indian party is. But sources say the Indian company is also looking at injecting oil and gas assets, such as pipe laying barge, into Perisai. This will likely give the Indian party a controlling stake in the company. The size of the barge will determine its price, and in turn now many shares the Indian company will take in Perisai in exchange for the assets.

It is also unclear how Perisai’s largest shareholder Mercury Pacific Marine Pte Ltd (24.6%) will react. The shareholders of Mercury Pacific are Datuk Shahrir and Datuk Ahmad Redza. Shahrir is said to be politically well connected. He is brother of Minster of Women, Family and Community Development Datuk Shahrizat. Despite the large shareholding, the duo do not have any board representation in PErisai.

It is also unclear what the Indian company is after in Perisai, but its interest could stem from Perisai’s mobile offshore production and storage units.

Sources say it could be QNGC, which tends to favour Indian companies.

According to Perisai’s balance sheet for FY2009 ended Dec, the company had non current liabilities amounted to RM93 million while current liabilities stood at RM89 million.

The company’s cash and bank balances as at the end of 2009 stood at RM17.8 million while receivables were RM47.7 million. Its net cash position generated from operations in the 12 month period stood at RM90 million.

It posted a net profit of about rM33 million from RM101 million in revenue. In its 4QFY2009, the company suffered a net loss of rm8.4 million.

Will there be much change in the direction of Perisai once its MD exits and the Indian company comes in?

Monday, March 15, 2010

Bonia ... Mar10

From RHB Research

Within expectations. Bonia’s 1QFY06/10 net profit of RM7.2m was within our and consensus expectations, accounting for 24% and 26% of our and consensus estimates, respectively. As expected, no dividend was declared during the quarter.

Yoy, net profit jumped by 20.3% on the back of: 1) 6.8% yoy increase in revenue due to higher consignment and boutique sales from Mega Sales and Hari Raya activities; and 2) +0.7%-pt improvement in EBIT margin due to better control in overhead operations.

Future prospects. Moving forward, we believe that Bonia’s sales would improve in view of indicators that consumers are becoming more optimistic, given signs that the worst of the global downturn has passed. We maintain our FY10 revenue per outlet growth projections of 10% and 6% for its overseas and local operations respectively, coming from FY09’s low base. Our FY11-12 revenue per outlet growth of 2-8% and 5% for its overseas and local operations respectively remains unchanged. We also maintain our 12-36 p.a. new point-of-sales projection, which pales in comparison to its average 74 new point-of-sales p.a. for the past five years as we believe management will be focusing more on brand-building activities and strengthening of its boutique sales, to help improve the company’s margins. Bonia has an internal target of RM500m revenue and RM50m net profit to be achieved by FY13, which we believe is achievable assuming gradual economic recovery.

Risks to our view. The risks include: 1) weak consumer sentiment and consumer spending; 2) forex risk; 3) cash flow constraint as Bonia has a long debtor collection period of 85 days; and 4) cannibalisation of own brands vs licensed brands.

We maintain our indicative fair value of RM1.33 (current RM1.03 as of 12/Mar/2010, based on unchanged target PER of 9x, representing the lower end of its historical PE band of 9-15x. Maintain our BUY recommendation on Bonia.

Sunday, March 14, 2010

Where to Cross The Border?

If You Cross The North Korean Border Illegally
You get 12 years Hard Labour.

If You Cross The Iranian Border Illegally
You Are Detained Indefinitely.

If You Cross The Afghan Border
Illegally, You Get Shot.

If You Cross The Saudi Arabian Border Illegally
You Will Be Jailed.

If You Cross The Chinese Border Illegally
You May Never Be Heard Again.

If You Cross The Venezuelan Border Illegally
You Will Be Branded A Spy And Your Fate Will Be Sealed.

If You Cross The Cuban Border Illegally
You Will Be Thrown Into Political Prison To Rot.

If You Enter Britain Illegally
You Will be Arrested, Prosecuted And Sent To Prison And Deported


- MyPR (Permanent Residence / Pemastautin Tetap)
- A Driving License,
- Voting Rights
- Job Reservation,
- Special Privilege to be Consider as Bumi,
- Credit Cards,
- Subsidized Rent Or A Loan To Buy A House,
- Free Education,
- Free Health Care,
Oh Malaysia, what a great country!!

Saturday, March 13, 2010



Friday, March 12, 2010

IJM Land ...Mar10

Excluding the RM10.3 million net gain arising from the disposal of a subsidiary (a special-purpose vehicle which holds PJ8 Block C) in 2Q10, IJM Land reported 9MFY03/10 normalised net profit of RM76.5 million (more than 100% rise year-on-year). This was within expectations, accounting for 71% and 74% of our and consensus estimates, respectively.

As at Dec 2009, the company has unbilled sales of about RM800 million, which represents 0.9 time of our FY10 revenue forecast. We understand that the company has achieved close to RM1 billion sales as at Dec 2009.

In view of improving property demand and economic outlook, IJM Land plans to launch the RM165 million Light Collection I in 2Q10 on a seven-acre site next to the Penang Bridge. The project will comprise 152 condominiums and 24 water villas with estimated selling price of RM650 psf and RM800 psf, respectively. The built-up areas for the condominiums range from 1,375 sq ft to 1,580 sq ft while the water villas have a built-up area of 3,169 sq ft.

As for the Light Collection II (with an estimated RM257 million gross development value), it is scheduled to be launched by 2H10. It will comprise 297 condominiums with built-up areas ranging from 516 sq ft to 3,528 sq ft with selling price from RM700 psf onwards.

Meanwhile, the company also plans to launch its RM123 million Maritime Square (mixed development comprising serviced suites, shop and office units) in May. We have incorporated these projects into our earnings forecasts.

Aggressive property launches by developers are not a surprise to us given the economic recovery and improving property demand. Rising inflationary expectation and an excess of liquidity permeating the market due to easy and cheap monetary conditions will enhance house buyers’ affordability. This will be further supported by attractive marketing packages offered by developers.

The risks to our view include: 1) competition from peers; 2) a surge in raw material costs; 3) delays in launches and approvals; and 4) country risk.

Thursday, March 11, 2010

KSENG ...Mar10

It is a cash and assets rich company. As at Dec 31, 2009, the group was sitting on a cash pile of RM332 million with zero gearing. Its reserves stood at RM951 million as at Dec 31, 2009 made up mostly of retained earnings. It also had a high untilised tax credit of RM427 million to be franked as dividends before end 2013.

However, its director say the group has accumulated a huge cash pile for several years now, as it is waiting for acquisition opportunities such as properties and land.

As Keck Seng has until 2013 to utilise its tax credits, the group is not in a hurry to unlock the dividend income to its shareholders.

It is believed that Keck’s Seng real value may emerge from this financial year onwards due to the compulsory disclosure of the market value of its financial assets beginning in 2010.

Keck Seng, which has a sizeable share investment portfolio, benefited strongly from the improvement in global equity markets with income from share investments.

But there may be more to come. Under the FRS 139 that has been effective since Jan 2010, public listed companies are required to fair value their equity investments and reflect unrealised gains or losses in quarterly financial statements.

Keck Seng’s 4Q2009 financial results show that although the total value of its quoted securities is rm254million, the market value as at Dec 31, 2009 stood at RM672 million. This translates to 2.74 times surplus over its book value, or an increase in net assets of RM1.78 a share. However, up to FY2009, the market value was only disclosed as part of the notes to accounts and not reflected yet in its net asset value.

It is learnt that Keck Seng has interested in various local and foreign companies, including Singapore’s Parkways Holdings Ltd, PPB group, Chin Teck Plantations Bhd and Shangri-La Ltd.

Based on calculations that corporate the market value of share investments, Keck Seng’s NAV per share will balloon to RM6.76 from RM4.98 currently (March 2010).

The group’s NAV will reflect the fair value of its share investments in the 1QFY2010 financial results, which will be announced in May 2010. The impact will depend on the classification of its share investments, which the group’s auditors are still working on.

Should Keck Seng’s share investments be classified under held for trading, the unrealised gains or losses on the investments will be reflected in its income statements. But if they are held under the available for sale portfolio, it will impact the group’s balance sheet.

Keck Seng’s officials say that they are held for the long term. However whether or not the quoted securities are parked under held for trading or available for sale, the impact will be reflected in Keck Seng’s net assets.

Additionally, the new estimated NAV does not take into account the market value of Keck Seng’s investment properties and landbank Keck Seng is still using the cost method to value its landbank and properties, but when the land is developed, the group will have to fair value the land to market prices.

The group’s land for agriculture and housing development with various parcels in Johor, have not been revalued since 1980. The book value of the land stood at RM147 million as at Dec 31, 2008. Conservative estimates show that the parcels of land could be valued at more than RM2.46 billion, representing a surplus of RM2.3 billion.

Based on estimates and recent transactions (early 2010), should Keck Seng’s entire landbank, properties and equity investments be revalued, it can lead to a revised NAV per share of RM17.10 or an absolute amount of RM4 billion.

However, Keck Seng’s is not required to revalue its properties and landbank according to market value unless it plans to sell or develop them.

Wednesday, March 10, 2010

KURASIA ... Mar10

JF APEX SECURITIES Review & Highlights

TPBID scheme at “formulation” stage – BNM has announced on last Friday that the proposed Third Party Bodily Injury and Death or “TPBID” scheme by the Government is still at the formulation stage. In the Prime Minister’s Budget speech, it has been mentioned that “this scheme is expected to be introduced by mid-2010”.

Expect positive impact on Kurnia’s earnings – Although the TPBID scheme is still at the formulation stage, we believe that there is high chance of it being passed through due to significantly lower TPBID scheme charges as compared to other
countries. Should it materialized, we expect the insurance industry to benefit from this. As 85% of Kurnia’s revenue (for 6-months period ended Dec-2009) is derived from motor insurance with 6% of it is from pure 3rd party insurance, we expect positive impact on Kurnia’s earnings should this materialize.

Changes in Kurnia boardroom – There is some update on the changes in Kurnia’s boardroom as Datuk Mohd Saufi bin Abdullah has vacated his office as a result of his non attendance of more than 50% of the Board meetings held during the last financial period. Datuk Mohd Saufi holds the position of “Non-Executive Director” and “Member of Audit Committee”.

Upgrade to TRADING BUY with TP RM0.67 – In view of the high chance of new TPBID scheme being passed through coupled with the higher deviation of market price from our estimated fair value of RM0.67, we upgrade our recommendation to TRADING BUY. Our target price and earnings estimate remained unchanged as we have not factored
in the possible new premium of 3rd party as it is still in the formulation stage.

GUH ... Mar10

A PCB maker plans to diversify into new businesses like healthcare and waste water treatment to reduce its overdependence on the cyclical electronics industry.

Currently, about 90 per cent of its revenue comes from its PCB business, while the rest comes from its property division.
It would like to reduce its dependency on the PCB business which currently accounts for the bulk of its revenues.

GUH could borrow as much as RM150 million to fund this expansion. It is also thinking of expanding its power and plantation businesses, which are still not significant contributors.

GUH has a fully-planted 154ha oil palm estate in Kedah where harvesting commenced in 2007. It also holds 20 per cent of a diesel-fired power plant in Phnom Penh, Cambodia, which runs under an 18-year concession from 1997 to 2015.

They are looking at reducing revenue contributions for the PCB segment to 75 per cent within two to three years.

For 2010, GUH plans to spend some RM50 million to buy land on Penang island and in the Klang Valley.

They are also earmarking between RM50 million and RM60 million to buy plantation land in Rompin, Pahang, Kelantan, Sabah and Sarawak in 2010.

Also on the cards for the company in 2010 are plans to invest in a concession project for waste-water treatment in China. They are likely to do this with a joint-venture partner.
GUH could also buy hospitals in highly populated cities.

Another long-term plan is to vie for more power generation projects overseas, and Cambodia is likely to be a preferred country.

Meanwhile, GUH is set to ramp up its PCB production via increased reinvestments next year for its Penang and Suzhou, China plants. Penang will get a RM18 million investment boost, while the Suzhou plant will see a RM5.5 million reinvestment.
The above investments in 2011 are to increase the capacity for our double-sided PCBs, upgrading production capability, while improving production efficiency and product yield.

Tuesday, March 9, 2010

CCK ... Mar10

- CCK Consolidated Holdings’ (CCK) 1HFY10 net profit of RM7.6m was broadly in-line with our expectations , comprising 58% of our FY10 net profit forecast of RM13.3m. 1HFY10 earnings growth came from higher retail prices across the board for most of CCK’s products.

- New store contribution in the retail category drove 1HFY10 revenue up by 9% YoY. The food rations and prawn aquaculture divisions also registered positive sales growth that offset the decrease in sales of poultry products. Pretax profit in 1HFY10 increased by 71% driven by higher average selling prices.

- Exceptional sales in previous 1QFY10 due to Hari Raya seasonality resulted in 2QFY10 revenue dipping by 6% QoQ. All divisions except poultry turned in lower sales QoQ. Pretax profit fell by 18% QoQ du e to higher poultry feedmeal costs and decline in production efficiency from lower sales volumes.

- No interim DPS declared. The company already paid out a special interim DPS of 7.0 sen and a share divided of 1 treasury share for every 30 existing share held, during the quarter.

- FY10 and FY11 earnings estimates unchanged. FY10 will see sales boosted by the opening of 3 new retail outlets in Kota Kinabalu, Kuching, Pontianak and a poultry farm in Kota Kinabalu.

- Maintain BUY recommendation and target price of RM0.76 based on FY09 EPS applied to FY10 EPS of 8.4 sen. A potential rerating catalyst for CCK would be the resumption of seafood exports to the EU.

Dnonce ... Mar10

It is venturing into renewable energy and green technology in partnership with a foreign party and a prominent local player.

The venture, via newly established D’nonce Energy Sdn Bhd, would have US$10 million (RM33.9 million) in external financing.

D’nonce’s foreign partner was a prominent energy player with technical expertise in renewable energy while the local partner was also well established in the field. Their partnership would be formalised soon.

This is a totally new sector which will increase group revenue substantially in the future.

Its E&E sector will still be its core business as it constitutes 60% of its business and the board has approved RM3.5 million in capital investment to expand its packaging facilities in Bangkok and Haadyai while the rest will be for the organic expansion of its other sectors

Monday, March 8, 2010

Faber ... Mar10 ...Continue.

S & P Results Review & Earnings Outlook

• Faber’s 2009 results were above expectations. Turnover and net profit of MYR805.3 mln (+21.8% YoY) and MYR82.7 mln (-46.9% YoY) exceeded our estimates of MYR658.2 mln and MYR57.9 mln respectively.

• The significantly improved results were attributed to the earlier-thanexpected commencement of the MYR142.1-mln infrastructure maintenance contract in Abu Dhabi in 4Q09, ahead of our 1Q10 projection. Faber’s results were also boosted by variation orders on its domestic healthcare Facilities Management Services (FMS) with the
opening of three new hospitals in Kedah and Sarawak. 2009 gross margin was relatively stable at 30.4% (vs. 29.6% in 2008).

• Faber’s prospects have been strengthened by the renewal of a MYR65.5 mln FMS contract for low cost houses in Abu Dhabi, which will contribute to 2010 and 2011 earnings. Domestic FMS earnings will also be boosted by the services rendered to the three new government hospitals. Property development earnings, meanwhile,
are poised to grow over the next two years, with the launch of MYR500 mln worth of new high-end properties in the Klang Valley.

• After factoring higher earnings from its Abu Dhabi FMS contracts, variation orders on government hospitals and improved property development earnings, we raise our 2010 net profit estimate to MYR114.2 mln (from MYR84.8 mln). We also introduce our 2012 net profit forecast of MYR135.3 mln.

Recommendation & Investment Risks
• We maintain our Buy recommendation on Faber, but lift our 12-month target price to MYR2.10 (from MYR1.60) after raising our earnings estimates.

• Our target price remains based on a sum of parts valuation, where we ascribe unchanged target PER multiples of 7x and 5x to its 2010 (unchanged) FMS and property development earnings respectively. The target PER multiple of its FMS operations is similar to the implied PER paid in the acquisition of the remaining 30% stake in Faber Medi-Serve. Meanwhile, the property division’s target multiple remains at the
lower end of the 5x-7x peer average range for the small scale of its projects. Our target price also includes a net DPS estimate of 4.5 sen (from 3.0 sen), which is similar to the quantum it declared for 2009.

• We like Faber for the improving outlook of its FMS operations that have been strengthened by the infrastructure maintenance and FMS contracts in Abu Dhabi. We believe this could be a prelude for more FMS contracts in the Middle East, where it is fast establishing a strong foothold. Furthermore, its prospective 2010 and 2011 PERs of 5.6x and 4.8x remain attractive relative to the earnings growth of 38.1% and
18.5% on offer respectively.

• Risks to our recommendation and target price include: (i) rising cost affecting the margins of its FMS operations, (ii) inability to renew its concession agreement to provide FMS to government hospitals and contracts in Abu Dhabi, and (iii) delays in its property launches.

Faber ... Mar10

Faber Group Bhd managing director Adnan Mohammad declined to confirm nor deny speculation that it may be buying Pantai Holdings Bhd’s Malaysian government concession business.

However, he said: “We do meet up but it’s purely on operational side as we exchanged notes on our performance and discuss how to deal with the government on the concession extension matter,” he said, without elaborating.

Nonetheless, Faber Group was “pursuing several merger and acquisition (M&A) activities”. It could be from other services industry such as facility engineering and biomedical. These are the players that we are trying to bring onboard.

Pantai, owned by Khazanah Nasional Bhd and Singapore’s Parkway Group, holds a long-term contract to provide services to public hospitals in three states as well as the concession for foreign worker health checks.

Pantai owns two 15-year concessions ending in 2012 via Fomema and Pantai Medivest. Fomema holds the monopoly to conduct mandatory medical check-ups on foreign workers while Pantai Medivest has the sole right to provide support services to all hospitals and government clinics in Negri Sembilan, Melaka and Johor.

It has been reported that Pantai group is planning to sell its Malaysian government concession businesses as it seeks to focus on growing its hospital division.

Response From Pantai …

Pantai Holdings Bhd does not rule out selling its concession business "if the price is right", said its chairman Tan Sri Mohamed Khatib Abdul Hamid.

While Pantai delivered quality services in both its concessions, the idea of selling them in the near future could not be ruled out.

However, he dismissed speculation of a possible merger between its concession business Pantai Mediwest Sdn Bhd and Faber Group’s Faber Medi-Serve Sdn Bhd.

No, people are thinking that direction because both companies (Pantai and Faber) belong to Khazanah Nasional Bhd," said Pantai chairman "Why should we merge if we belong to the same parent?" he said.

Pantai is wholly-owned by Pantai Irama Venture Sdn Bhd, which is 60%- and 40%-owned by Khazanah and Singapore-listed healthcare group Parkway Holdings Ltd respectively. Khazanah also holds a 24% stake in Parkway. Faber is 34.5%-owned by Khazanah through UEM Group Bhd.

Besides Pantai Mediwest, which provides support services to hospitals in the southern peninsula, Pantai also wholly owns Fomema Sdn Bhd, whose role is to implement, manage and supervise nationwide mandatory health screening programme for all legal foreign workers in Malaysia.

Sunday, March 7, 2010

Correct timing to take water

Correct timing to take water, will maximize its effectiveness to Human body.

- Two (02) glass of water - After waking up - Helps activate internal organs

- One (01) glasses of water - 30 minutes before meal - Help digestion

- One (01) glass of water - Before taking a bath - Helps lower blood pressure

- One (01) glass of water - Before sleep - To avoid stroke or heart attack

Saturday, March 6, 2010


「 如果爸爸媽媽吵架了,你會站在哪一邊?」

Friday, March 5, 2010

Cocoaland ... Mar10

S & P Results Review & Earnings Outlook

• 4Q09 results were in line with our expectations. Full-year net profit of MYR19.7 mln came in close to our forecast of MYR19.9 mln.

• Net profit more than doubled YoY in 2009, on the back of revenue growth of 3.4% and an improved product mix. Higher contribution from high margin products (fruit gummy and cocoa pie) and improved production efficiency helped drive operating margin to 19.6% in 2009 from 9.5% in 2008. Similarly, 4Q09 net profit rose 32% YoY, due to a better product mix.

• Cocoaland reduced its focus on its low-margin snack products, while concentrating on its high-margin fruit gummy and cocoa pie products. As a result, revenue contribution from fruit gummy and cocoa pie products in 2009 rose to 48% (from 45% in 2008) and 10% (from 5% in 2008) respectively.

• The installation of its beverage line has been completed and trial runs should start soon, followed by commercial production. Cocoaland will be launching six own-brand beverage drinks (with flavors such as apple, lime, orange and tea). With start-up costs and A&P expense for the new product line, we do not expect any contribution from the beverage division in the near term.

• Our 2010 net profit forecast is largely unchanged. We project a 13% growth in 2010 net profit driven by fruit gummy sales and lower taxation, partially offset by start-up costs for its beverage division. We also introduce our 2011 net profit forecast.

Recommendation & Investment Risks

• We raise our call on Cocoaland to Buy from Hold with an unchanged 12-month target price of MYR1.60. We like Cocoaland for its strong balance sheet (net cash of MYR15 mln or 12 sen per share), high ROE (2009: 21%) and good dividend yield (7.6% gross or 5.7% net).

• Our target price is based on applying a PER of 9x (unchanged) to its estimated post-placement 2010 EPS, and includes net DPS. Our target implies a discount of about 20% to the consumer staples sector in Malaysia. The discount reflects Cocoaland’s smaller market capitalization

• Risks to our recommendation and target price include sharp increases in raw material prices and inability to raise selling prices, which would hurt margins, execution risks with its beverage division, and a temporary share overhang from the private placement.

Thursday, March 4, 2010

Evergreen ... Mar10

Evergreen Fibreboard Business Getting Better

Revenue came in-line with our expectations on the back of higher medium density fibre board (MDF) sales and improved cost efficiencies. However, bottom line earnings were above our estimates (+15%) in view of a tax overprovision last year.
Going forward, as we see Evergreen Fireboard (EFB) performing much better given i)
higher MDF sales volume and ii) higher MDF selling prices, we maintain our BUY
recommendation for the stock with a new target price at RM1.66 from RM1.62 previously.

Y-o-y better.
On the back of stronger MDF sales momentum, YTD revenue for EFB surged slightly by 5.7%. The key point to note however is its cost cutting measures have effectively
reduced operating and admin cost by 12.5%. This has led to a significant jump in PBT by 26%. Effective cost reduction efforts in this case have widened its PBT margins to 10.4% vs last year at 8.7% despite its finance cost increasing by 36.4% y-o-y.

Growing prospects.
We maintain our revenue forecast for EFB going forward for we reckon that the worse is over for the global property market and orders for MDF should subsequently pick up. But we raise our bottom line earnings estimates (FY10;+8.4%) on slightly lower admin cost and higher gross profit margin assumption - as global MDF selling prices improve. On its website, the company has recorded a slight increase in MDF selling
prices by 2% on a m-o-m basis (January ’10 vs December ’09). We expect MDF selling
price to improve in subsequent quarters.

Dividends healthy.
Just as we envisaged, EFB has declared a tax-exempt dividend of 4sen p/s (gross adjusted at 5.3sen p/s), slightly higher than our initial projection at a gross
dividend of 4.2sen p/s. In FY10, we see gross dividends to potentially increase to 5.6sen p/s premised on similar payout ratio in FY09.

FY10 should be just fine. We reckon EFB’s performance on a y-o-y basis to be better. But we see its bottom line earnings to be flat as it sees lower tax overprovision from its previous year and MI’s clawing back its profits as its loss making subsidiaries turns around. We slightly up our TP for EFB to RM1.66 from RM1.62 previously with its BUY recommendation intact. Our valuation is premised on a higher FY10 EPS at 17.1sen tagged towards a P/E of 9.7x. Potential upside risk to our earnings are i) higher than expected surge in MDF pricing leading to higher operating margins, and ii) higher than expected sales of MDFs.

DIJAYA ... Mar10

S & P Results Review & Earnings Outlook

 Dijaya’s 2009 results were below our expectations, with full-year net profit of MYR49.7 mln vs. our MYR57.0 mln estimate. The variance was due mainly to a MYR11.0 mln of provision for impairment loss made in respect of the JV project with Dijaya Malind JV (Mauritius) Limited. Excluding the exceptional item, its 2009 results would have been broadly within our expectations.

 On a QoQ basis, revenue was higher at MYR101.3 mln in 4Q09 vs. MYR97.3 mln in 3Q09, but pretax profit declined to MYR7.4 mln from MYR41.2 mln in 3Q09. The decline in earnings was due mainly to: (i) the write-down for its JV project and (ii) in 3Q09, a reversal of provision for diminution in value of its quoted investments, which amounted to MYR20.9 mln.

 Going forward, Dijaya is planning to launch its high-end condominium project, Tropicana Grande, and shop-offices, Tropicana Avenue, this year. In addition, Dijaya recently acquired “Bok House” (55,929 sq ft) located near to KLCC Twin Towers, along Jalan Ampang for MYR123 mln for development of an integrated commercial development
comprising an international hotel, serviced suites and/or office suites. Dijaya has sufficient funds to make the acquisition as it recently raised more than MYR100 mln from its 3-for-4 rights issue. We have adjusted our 2010 earnings forecasts slightly and introduce our 2011 forecast earnings.

Wednesday, March 3, 2010

MYEG ... Mar10

S & P Results Review & Earnings Outlook

 2QFY10 (Jun) net profit of MYR4.7 mln (+6.0% QoQ, +1.0% YoY) missed our expectation mainly due to higher advertising expenses.

 Advertising expenses grew 117% QoQ to MYR1.3 mln in 2QFY10 as a of result of its brand awareness campaign. This, coupled with higher staff cost partly offset stronger QoQ revenue contributions (16% of sales vs. 15% in the previous quarter) from its online road tax renewal and insurance services. EBITDA margins slipped to 41.7%, from 42.7% in 1QFY10. On cumulative basis, 1HFY10 net profit stood at MYR9.2 mln (+4.1%YoY), accounting for 47.1% of our FY10 forecast.

 Meanwhile, its new online custom tax monitoring system is well underway for a pilot launch in April 2010. Management expects to start deploying hardware estimated to cost approximately MYR40 mln, targeting entertainment outlets in the Klang Valley. While this could potentially offer MYEG earnings upside in the long term, earnings visibility for the new service is limited at this juncture.

 In anticipation of a stronger 2HFY10 amid greater uptake of JPJrelated services during the school holidays and higher adoption of the online road tax renewal service, we are maintaining our earnings projections for FY10. Our projections for FY11 remained unchanged. We exclude potential revenue from the new online custom tax
monitoring service in our forecast, given the lack of track record and execution risks (and significant upfront investment).

Recommendation & Investment Risks

 We maintain our Buy recommendation on MYEG and our 12-month target price at MYR0.55.

 MYEG continues to draw strength from the government concession stable income base, while upside potential to its earnings growth can come from new e-service applications. In a bid to cement its stronghold of e-government services, it plans to establish linkages with as many government agencies as possible to increase product stickiness and enhance its advantage over potential competitors.

 Our 12-month target price of MYR0.55 is based on DCF valuation, given its relatively stable income stream. Key assumptions include 9.5%-10.3% WACC and 1% terminal growth rate (both unchanged). Additionally, our target price also includes a projected net dividend of 1.4 sen (unchanged).

 Risks to our recommendation and target price include: (i) the revocation of the government concession, (ii) significant delay in project approvals, (iii) the entry of new competing concessionaires, which will significantly affect the company’s recurring income, as well as (iv) excessive investment and execution risk for the new online custom tax monitoring service.

HUAAN ... Mar10

S & P Results Review & Earnings Outlook

• Hua-An reported a 2009 net loss of MYR20.6 mln (vs. 2008 net profit of MYR545,000). The results were below consensus and our expectations, mainly due to lower coke price and higher cost of sales.

• 2009 revenue fell 12.0% YoY to MYR1.28 bln on the back of a 27.4% YoY decrease in the average selling price of coke. However, the average price of coking coal (raw material) only dropped by 21.1% YoY. As a result, Hua-An registered a gross margin of 0.4% in 2009, which was not enough to cover its operating expenses.

• On a positive note, Hua-An has returned to profitability since 2H09. Stripping out the one-off asset write-off of CNY5 mln, Hua-An should have registered a minor net profit of MYR306,000 in 4Q09 (vs. net profit of MYR18.5 mln in 3Q09).

• Although China’s steel industry was affected by a temporary oversupply in China in 4Q09 (Hua-An’s earnings are highly dependent on demand from steel manufacturers), management has since seen signs of improvement and expects steel rebar prices to gradually recover.

• We reduce our net profit forecast for 2010 by 16.4% to MYR73.9 mln, taking into account the slower-than-expected recovery in coke price. We also introduce our 2011 earnings estimate of MYR95.2 mln.

Recommendation & Investment Risks

• We maintain our Buy recommendation on Hua-An with a lower 12-month target price of MYR0.55 (from MYR0.63), after revising our earnings forecasts.

• We continue to use a relative PER approach to arrive at our target price. The target price is based on assigning an 8.0x PER multiple (unchanged) to our estimated 2010 EPS, in line with our target PERs for companies in the steel sector. There are no direct local peer comparisons for Hua-An, given that the group is purely involved in the coke business. As such, we have used the steel sector as a proxy.

• Given the strong operating leverage, we believe Hua-An’s results could turn around significantly once the recovery phase for China’s steel industry sets in. Furthermore, Hua-An’s balance sheet remains healthy (net cash of MYR24.4 mln as at Dec. 31, 2009).

• Risks to our recommendation and target price include political and regulatory issues that could seriously affect Hua-An’s business operations in China, volatile raw material prices, and a downturn in China’s steel industry.

Tuesday, March 2, 2010

What happen to RHB Stock Challenge?

I have been trying to login to this website, yesterday and today, till now I 'm not able to login to the main screen. It is loading and loading......and finally porompt "The page cannot be displayed."

Anyone manage to login to take the challenge?

Is this only applicable to RHB office?
Since outsider not able to login.

Is this only applicable to non-office hour?
Since during office hour not able to login.

Does the existing RHBInvest customer also having this problem?
I'm guessing not, because when the page is loading it is pointing to I hope the actual investment customer is not experience this.

I'm wondering why no information was share for this problem. I doubt I'm the only one has this problem.

Sealink ... Mar10

It has secured contracts for two long-term charters of its offshore support vessels and the sale of a similar vessel to a foreign buyer. The contracts are worth a total RM58mil.

The charter contracts were awarded to wholly-owned subsidiary Sealink Sdn Bhd while the vessel sale was secured by Sealink Engineering and Slipway Sdn Bhd, another 100%-owned subsidiary.

One contract is for a two-year charter of a utility vessel, beginning this month. The vessel was built by wholly-owned unit Sealink Shipyard Sdn Bhd. The second contract was for a one-year charter of an offshore supply vessel, starting in September. This vessel is now being built by Sealink Engineering and Slipway. The sale of the offshore support vessel was expected to be concluded in the next three months.

The (three) contracts are expected to contribute positively to the earnings and net assets of Sealink for the financial year ending Dec 31 (FY10).

Sealink, which owns two shipyards in Miri capable of building up to 17 vessels a year, now operates a diverse fleet of 33 offshore support vessels used mostly in the oil and gas industry.

The company, one of the largest tug and barge operators in Malaysia, plans to increase its fleet to 40 vessels by end 2010.

For the fourth quarter ended Dec 31, Sealink recorded a net profit of RM8.26mil on a turnover of RM26.1mil, down from RM7.97mil and RM42.3mil respectively in the previous corresponding period.

For FY09, its net profit was 13.5% lower to RM50.1mil as revenue dropped 18.4% to RM192.8mil compared with RM57.9mil and RM236.3mil respectively in FY08.

Support ... Mar10

Supportive International Holdings Bhd will raise US$35mil (RM120mil) over the
next three years for working capital via the issuance of new shares to new US-based stakeholder, the Global Emerging Markets Group (GEM).

GEM had offered to pay RM120mil for up to 19.9% equity stake in the enlarged capital of Supportive, which has an existing paid-up share capital of 218 million shares.

It had agreed to the offer and would sign the final subscription agreement within a month. Under the terms and conditions of the offer, GEM would take up to 19.9% in Supportive in tranches over the next three years at the discretion of Supportive. How many shares the 19.9% stake will translate into will depend on Supportive’s share price at the time of issue.

GEM should be able to complete the share acquisition by 2013, generating RM120mil for Supportive to be used as working capital.

Monday, March 1, 2010

JAKS ... Mar10

It is one of the beneficiaries of the roll out of construction projects in 2010. The company recently awarded an irrigation dam project in Besut, Terengganu said to be worth RM300 million.

Sources say a consortium led by JAKS is believed to have the job for the construction of the Paya Peda Dam virtually in the bag, but a final letter of award has not yet been issued. Its officials say it has yet to be finalise the terms with its pert
The officials say the company is expected to make an announcement on the contract this week.

It remains unclear what JAKS’ portion of the contract would be. But being a manufacturer of pipes and a contractor for their installation, the company is expected to secure a reasonable sum of the contract work.

Apart from the Paya Peda Dam, JAKS is also looking for jobs in the RM5 billion Pahang Selangor raw water transfer project to turn the company around.

For FY2009 ended Oct 31, it recorded a net loss of rm6.75 million.

In terms of water projects, JAKS has relied on jobs from the federal government for the past few years as it has a legal dispute with the main player in Selangor.

Its expertise in water piping and fitting should stand the company in good stead to land some jobs ins selected packages of the Rm1.8 billion Selangor Pahang interstate raw water transfer project that is expected to be rolled out over the next one to two quarters.

It has submitted a joint bid with another local contractor for the piping works worth RM300 million for the project designed to transfer raw water from Pahang to Hulu Langat in Selangor.

The company also is part of the a consortium that is bidding for the pipe works from the Langat 2 water treatment plant that will process the raw water from Pahang. The entire water treatment plan project is worth about RM4.5 billion.

It is also attempting to diversify into power plant construction.

LBS ... Mar10

Sources say it is in talks with HK listed Jiuzhou Development Co Ltd to divest itself of equity interest in a property development project in Zhuhai to the latter.

According to the sources, the divestment could fetch a price of at least HK$1 billion (RM438 million), or even higher should the talks bear fruit.

It is believed that the negotiations are in the final stage. The main issue now is the final pricing of the property project and other nitty gritty details.

If the deal materializes, it will be a boost for LBS which has made losses. Assuming sales proceeds of RM500 million, the money will be more than enough to settle its borrowings and will probably put LBS in a net cash position. The divestment will certainly strengthen its balance sheet substantially.

The company’s balance sheet as at Dec 31, 2009 showed that it has a total borrowings of RM308 million compared with cash plus bank deposit of rm65.8 million. Its negative operating cash flow for the past two financial years does not reflect well on its financial health.

For the financial year ended Dec 31, 2009, LBS incurred a net loss of Rm16.8 million. It had negative cash flow of Rm42 million during the year.

The cash will come in handy for LBS to launch more projects on its own turf to enhance its earnings. LBS major cost from the Zhuhai project is probably the opportunity cost, which is the potential earnings it could make from it.

Considering LBS’s financial position, it may be wise move to dispose of its 60% stake in the development project to get the injection of cash.