EPMB ... Sep10

OSK Research

EPMB’s annualized 1H core earnings appeared to fall short of our full-year estimates, no thanks to the higher tax expenses incurred. Nonetheless, we deem results in line in anticipation of a stronger 2H as production will be boosted by the rush in Hari Raya delivery, with additional volume to be contributed by the upcoming launch of the Waja replacement. Cost-wise, we expect EPMB to see lower tax expenses from the higher investment tax allowances going forward. As we roll over our valuations to FY11 numbers, our TP moves up to RM0.82 (from RM0.75) with our BUY call maintained.

In line with estimates. EPMB recorded a core net profit of RM1.86m on the back of revenue of RM157.31m for 2QFY10. 1HFY10 revenue was within our estimates, representing 53% of our full-year forecasts. While the annualized 1HFY10 core net profit may seem to fall short of our forecast due to higher taxation and depreciation charges, we consider EPMB’s bottom-line numbers to be within our forecast as we expect 2H to be a stronger half on the back of higher margins.

Benefiting from Perodua’s localization programme. In tandem with the higher TIV sales q-o-q, y-o-y and YTD, EPMB’s revenue rose 4.7% q-o-q and 38.5% YTD (33% y-o-y) thanks to higher contribution from Perodua as EPMB benefitted from its localization programme. This programme has effectively increased EPMB’s average revenue contribution per Perodua from RM484 (in FY09) to an estimated RM1033 per unit for FY10.

Bottom-line hit by higher taxes. While its core net profit surged 118% y-o-y, the weaker q-o-q numbers (-55% q-o-q) were attributed to the higher tax expenses incurred due to the impact of non tax-deductible expenses in the absence of any investment tax allowances filed for the quarter (there was no capex spending for 1Q FY10 vs the 2QFY10 capex of RM27m). We expect tax expenses to decline going forward due to its high capex spending. During the quarter, EPMB also made exceptional gains totaling RM3.846m, comprising a RM5.13m write-back (from the over-provisions last year on its intangible assets), which
also led to an additional tax expense of RM1.28m. As a better gauge of performance, its core PBT shrank by 18.8% q-o-q (vs core net income q-o-q drop of 55%) although it was significantly better compared to last year increasing by 193% YTD due to the higher revenue base. The weaker q-o-q numbers were also caused by higher depreciation (noting that its CFO increased from RM28.3m in 1QFY10 to RM59m YTD; YTDFY09: RM16m) as its depreciation policy is based on units of activity method. The higher depreciation and amortization have effectively reduced core PBT margins by 0.68ppts although YTD margins have improved significantly by 1.41ppts due to better economies of scale achieved by its production lines.

EVERGRN ... Sep10

OSK Research

On an annualised basis, Evergreen Fibreboard’s (EFB) earnings beat our and consensus estimates. However, in being conservative, we are retaining our earnings estimates and maintain the stock’s target price at RM2.63, with its BUY recommendation intact. We also note that EFB has declared a second interim taxexempt dividend of 2 sen per share, which brings its total payout YTD to 4 sen per share, accounting for 55.5% of our full-year estimate of 7.2 sen per share.

Stellar performance. Thanks to higher average selling prices for medium-density fibreboards (MDF) and increasing orders from its global customers, EFB charted growth at all levels. 1H revenue hit a high of RM480m (+43.1% y-o-y) while PBT came in at RM78m  (+427% y-o-y). Due to cost efficiencies and lower raw material prices achieved in 2Q10, EFB’s q-o-q PBT rose 11% although revenue was flat. Please see our 1HFY10 results preview report on EFB dated 6 Aug 2010 for more details with regard to its quarterly selling prices and raw material cost trend.

Holding estimates. Consensus had recently raised their earnings estimates in view of strong earnings achieved by EFB. Although the annualised earnings were above our estimates, we are however not revising our forecasts. For one, in our 1HFY10 results preview, we had noted that declining rubber wood prices had helped lift EFB’s 2QFY10 earnings. However, we reckon this trend will not last long as the strong regional demand for MDF and particleboards will remain, thus prompting prices to catch up. Other than that, statistics from the Malaysian Meteorological Department indicates that there has been higher than average rainfall in June in certain parts in the south of West Malaysia. Since EFB sources its rubber wood from this area, it likely that rubber wood prices will go up in 3QFY10 as higher rainfall will dampen supply. Orders may slow too as demand for MDF cools off slightly as customers seek substitutes such as particle boards, which are usually priced 60-80% cheaper than MDFs.

Maintain BUY. We are keeping our BUY recommendation for EFB as its fundamentals remain intact. Our target price is maintained at RM2.63, derived from pegging its FY11 EPS at 26.3 sen and ascribing to the stock a higher tier building material PE of 10x.

VOIR ... Sep10

It is exploring several possibilities for expansion, including acquiring rivals and brand extension in the fashion apparel, perfumery, beauty and wellbeing segments.

Voir, which retails women's fashion & casual apparels, shoes and accessories under the Voir, Soda and Applemints brands, said it is exploring several possibilities for expansion, including acquiring rivals and brand extension in the fashion apparel, perfumery, beauty and wellbeing segments.
The new brands can come from either its own in-house brands or brands of international or local fashion owners.

Voir, which also retails the South China Sea, Noir and G & H brands, ventured into the food and beverage (F&B) industry as an extension to its fashion business, with the opening of its first Garden Lifestyle Store & Cafe outlet at 1Utama shopping centre in Petaling Jaya, Selangor, last year.

Voir is expecting an exciting year in 2011, as recent store openings have begun to show results and more new fashion stores and cafes are scheduled to open in the fourth quarter of this year.

In 2009 it made RM149.7 million in revenue. It is forecasting net profit to improve in 2010 from RM5.17 million in 2009, which took a hit because of write-offs for bad loans due to store closures and inventory shrinkage from housekeeping exercise.

Based on results in the first half ended June 30 2010, revenue rose by 18.44 per cent to RM73.81 million compared with RM62.32 million in the same period last year. Net profit in the first half increased to RM1.91 million from RM913,000 previously.

Going forward, Voir is looking at expansion both in its fashion and F&B business.

In 2010 and 2011, Voir plans to invest between RM8 million and RM10 million on outlet expansions, excluding stock.

As at June 2010, Voir operates 37 fashion mono-brands, seven galleries (multi-brands), 375 consignment counters and two cafes.

The company is banking on its F&B division to contribute up to a tenth of group revenue in the financial year ending 2011.

Voir hopes that in 2011, export contributions will be about 3 per cent to 4 per cent of total revenue and it could take at least five years from now for exports to contribute about 10 per cent of total sales.

Currently, the Voir brand is the group's biggest contributor, making up 43 per cent of total sales, followed by Soda (26 per cent) and Applemints (11 per cent).

IPO ... B-Food

The vendor is offering 35.84 million shares of 50 sen each, or 25.35% stake in B-Food via its initial public offering (IPO) exercise. However, it did not state how much the vendor planned to raise or the time frame for the IPO to be completed.

The tranche consisted of 3.53 million shares to be offered to the Malaysian public, 3.53 million shares to the bumiputera public, 9.73 million shares for private placement to selected investors, and 14.13 million to bumiputera investors approved by the Ministry of International Trade and Industry. The remaining 4.9 million shares are offered to its directors, employees, and business associates of B-Food and its subsidiary.

Both B-Retail and B-Food are consumer plays, and offer exposure to Malaysia’s rising consumer spending. But as their names suggest, B-Retail is into retailing and B-Food focuses on food and restaurants. B-Food has a 100% stake in Berjaya Roasters (M) Sdn Bhd, which operates the chain of Kenny Rogers Roasters restaurants in Malaysia.
For the year ended April 30, 2010, B-Food posted a net profit of RM8.68 million on the back of RM60.42 million in revenue. After the acquisition of Berjaya Roasters, B-Food would have pro-forma total assets of RM50 million and total equity of RM40.18 million. Its cash and cash equivalent stood at RM16.24 million, with no borrowings.

As of July 2010, it has a total of 49 Berjaya Roasters restaurants in Malaysia.

The company said the gross proceeds from the offer of sale would accrue entirely to the offeror, and no part of the proceeds would be received by the company. The offeror will bear all expenses in relation to the listing. All expenses and fees incidental to the offer for sale, including fees to authorities, professional fees, printing and advertising fees, brokerage, commission, underwriting fees, placement fees and miscellaneous expenses, estimated to be approximately RM1.7 million will be borne by the offeror.  

KONSORT ... Sep10

Its executive vice chairman Loo Hooi Keat is in talk to sell his substantial stake in the company with a few parties showing interest. Loo has 14% equity interest in Konsortium.

At his juncture the identity of the parties and the pricing for Loo’s stake are still unclear.

Sources say he is leaving to focus on Pelikan Intl Corp Bhd.

His block of 34 million shares in Konsortium has a market value of close to RM50 million. As at end June 2010, the company had net assets per share of RM1.43.

Despite the rumours of his exit, Loo has been nibbling a small blocks of Konsortium Logistik shares on the open market lately, marginally increasing his shareholding to 14.7%.

As for the pricing of Loo’s shares, since his stake is not the controlling block he is unlikely to get a premium.

Apart from other controlling shareholders, LTH also controls 10.6% equity in the company.

Loo is known to have expressed interest in acquiring state controlled investment arm Khazanah Nasional Bhd’s 32.2% stake in POS. It is not clear if this interest will remain if he sells his stake in Konsortium.

SKPRES ... Sep10

Datuk Gan Kim Huat, the executive chairman and managing director of SKP Resources Bhd, raised his direct and indirect holdings in the plastic components manufacturer to 423.78 million shares or 70.8%, after buying an additional 51.7 million shares or 8.6% stake on Sept 21 and 23 via direct interests.

His indirect stake comes to 371.17 million shares or 62% of SKP, held via four private vehicles — Renown Million Sdn Bhd, Beyond Imagination Sdn Bhd, Graceful Assessment Sdn Bhd and Zenith Highlight Sdn Bhd.

Considering the pace that he had been building up his stakes in SKP over the last few months, and the fact that his total holdings is just a few percentage short of the public float requirement, market talk has it that cash-rich SKP may be taken private. Early this year, Gan held 347.17 million shares via direct and deemed interests, translating into a 57.9% stake in the company.

The 51.7 million shares acquired by Gan were transacted in direct deals worth RM10.86 million or 21 sen each.

The company’s result improved further in 1QFY11 ended June 30 with a quarterly net profit of RM4.48 million.

As at June 30, SKP was sitting on RM43.94 million cash, with no borrowings. Its net assets per share stood at 24 sen.  

It is worth noting that Gan also controls Tecnic Group Bhd, in which he has a direct stake of 31.55%. The company posted a net profit of RM4.1 million in 2QFY10 ended June 30.

Malton ... Sep10

It has small landbank and absence of iconic project. Its net asset value is rm1.26 as at June 30, 2010.

While Malton has been posting reasonable earnings on the back of stable revenue, it is on the lookout for new landbank. Malton is expected to exhaust most of its existing landbank in five to six years.

Speculation Matlon is poised to participate in the development of the 162ha RMAF land in Sungai Besi either directly or through Lim’s private vehicle.

The land has been earmarked for the development of a multibillion ringgit Islamic Financial centre. At the present time, 1MDB has the mandate to develop the urban renewal project in partnership with the QIA.

News has been circulating that a consortium led by 1MDB and LTAT in collaboration with either Lim or Malton, will develop the project. It has been said that 1MDB and LTAT will hold 30% equity interest each while Lim will control 40%.

Malton would be the ideal development vehicle. Given the size of the investment, an equity raising exercise will be required.

Malton has been able to tap other landbank via JV. Malton is expected to launch projects with a gross development value of up to rm1.6 billion.

Going forward, will Malton eventually benefit from Lim’s expertise and connections or will he continue to thrive without Malton?

About Desmond Lim …

Datuk Desmond Lim Siew Choon paid for a piece of land in Jln Bkt Bintang worth a recording price of RM7209 psf. He is also a well connected businessman.

Lim’s name does not appear anywhere in the transaction. But is well known fact among industry players that he controls Urusharta Cemerlang KL Sdn Bhd, the company that paid RM210 million for the parcel of land.

Urusharta Cemerlang’s chairman is Tan Sri Zaihol Mahmood who is also the chairman of Pvailion KL Sdn Bhd. Zainol is also a director of Urusharta Cemerlang Development Sdn Bhd, the company that owns 51% Urusharta Cemerlang KL, while the Qatar Investment Authority (QIA) owns the remaining 49%.

The ultimate shareholding of Urusharta Cemerlang Development Sdn Bhd is unknown. According to a companies search, the ultimate shareholder of Urusharta Cemerlang Development, which ahs a issued capital of RM29 million, is British Virgin Islands based Primehill Investments Ltd.

However, Lim had a hand in the Pavilion KL project via Malton, which was the project manager of the development which is located next to the piece of land acquired by Urusharta Cemerlang KL.

Some 11 years ago, Lim took over the redevelopment of the BBGS land via privatization project, Malaysia was still reeling from the Asian financial crisis. Funding was hard to come by, forcing original owners of the project to sell out. The property development in KL was initially given to several well connected personalities via private companies Urusharta Cemerlang and Inai Jaya Sdn Bhd.

At the time of the privatization, Urusharta Cemerlang was a vehicle controlled by late Datuk Seri Wan Adli Wan Ibrahim who sat on the board of several Berjaya Group of companies. Wan Adlu shared a passion for horse riding with former PM Tun Dr Mahathir Mohamad.

It is said Lim got the piece of land cheap because of the tough funding environment. He managed to raise private funding for the conversion of the land and erect a new building elsewhere for BBGS.

At the time, Lim was largely unknown His company Paracorp which has since been delisted. The other linked to Lim is Malton. Lim’s name has also cropped up in the Bakun Hydroelectric Project. However, he dined to comment.

Although Lim was little known then, his wife’s brother, Tan Sri Robert Tan Hua Choon was a familiar face in the corporate circles. Tan is said to be close associate of former finance minister Tun Daim.

Despite his connection with Tan, many did not think Lim would make much headway in the property sector, given that securing financing for the Pavilion KL project was tough. It was RHB Bank’s then executive chairman Datuk Seri Sulaiman Taib was given the loan to fund the Pavilion KL.

His entry cost was low when he embarked on the Pavilion KL project in 2001/2002. But when the project was completed in mid 2008, prices had shot up four times to about 1800 psf.

Lim’s big payout came when KFH not only took up 49% stake but also bought both the condominium blocks in the project. It is said the proceeds from carving out the 49% stake and selling the two high end condominium blocks were enough to fund the entire project, leaving Lim with little to worry about in terms of financing.

KFH’s 49% stake was later sold to a fund under QIA. That was the beginning of a long standing relationship between Lim and QIA. They formed a platform from which they ventured into several property development projects in Malaysia.

Armed with the cash pile from the Pavilion KL project, Lim has set his sights on bigger things in Malaysia and even in China.

Locally, the biggest venture between Lim and QIA is the proposed redevelopment of the RM5 billion Sungai Besi Airport land, which currently houses the RMAF base. The principal developer of the RMAF project is 1MDB.

What seems more certain is Lim’s involvement with Abad Naluri Sdn Bhd – the company given the mandate to develop the no shelved RM25 billion Penang Global City Centre.

In KL, apart from RMAF project, Lim is said to be eyeing the development of Chulan Square and the Seri Melayu Restaurant on a JV basis. Chulan Square comes under the City Hall while the land where the Seri Melayu Restaurant is located belongs to Tan Sri Azman Hashim.

If Lim is successful, he will control a massive piece of development stretching from Rahrenheit88 to Seri Melayu. It is said there plans to build a link between the buildings, creating a mega mall in the city.

Politically, Lim is also well connected. He was close to former PM Tun Abdullah as well and is said to be known to PM Datuk Seri Najib.

Handy Tips ... 1

Ants Problem : Ants hate cucumbers. Keep the skin of cucumbers near the place or ant hole.

To get pure and clean ice : Boil water first before freezing.

To make the mirror shine : Clean with spirit

To remove chewing gum from clothes : Keep the cloth in the freezer for an hour.

To whiten white clothes : Soak white clothes in hot water with a slice of lemon for 10 minutes

To give a shine to hair : Add one teaspoon of vinegar to hair, then wash hair.

WORKPLACE ORGANIZATION CHART

WHEN TOP LEVEL GUYS LOOK DOWN, THEY SEE ONLY SHIT;
WHEN BOTTOM LEVEL GUYS LOOK UP, THEY SEE ONLY ASSHOLES.

SUNREIT ... Sep10

Sunway Real Estate Investment Trust (Sun­REIT) may add four more major assets from its sponsor Sunway City Bhd (SunCity) to its list of potential property acquisitions over the next few years.

The properties are likely to be Sunway Lagoon, The Pinnacle (completion in 2013), Lost World Hotel (completion 2011), and Sunway Velocity shopping mall (completion in 2015).

SunCity will continue to grow its property investment portfolio (which include the said four properties) aiming for future injection into SunREIT. The REIT would seek to double its asset base from RM3.78 billion in a five-to seven-year timeframe. This is to be achieved via acquiring properties from SunCity or from third parties.

While it is possible that SunCity would inject the properties into SunREIT, The company would also consider an en-bloc sale of any of its properties to a third party, if the price was right.

Currently, SunREIT has four assets within the Bandar Sunway township: Sunway Pyramid Shopping Mall, Sunway Resort Hotel & Spa, Pyramid Tower Hotel and Menara Sunway. Its other assets, Sunway Carnival Shopping Mall, Sunway Hotel Seberang Jaya, Sunway Tower and SunCity Ipoh Hypermarket, are located in Penang, Kuala Lumpur and Ipoh.

Its major shareholders are SunCity (38.3% stake via deemed interests), and Minister for Finance Inc Singapore (43.3% deemed interests mainly held through its investments arm GIC which has a joint venture with SunCity).

SCOMIEN ... Sep10

Scomi Engineering Bhd has targeted its overseas market to contribute about 80 per cent of its revenue going forward.

The overseas business would be the main growth driver as the local market for the rail industry was relatively small. The Mumbai project is a good test bed that stamps approval for it to move forward globally among the major players such as Bombardier and Hitachi.

Scomi Engineering and Indian partner, Larsen and Toubro Ltd, won a RM1.85 billion contract to build a monorail system in the Mumbai Metropolitan Region in November 2008. The 20km monorail route stretches from the west side of Mumbai at Gadge Maharaj Chowk (Jacob's Circle) heading north-east to Chembur via Wadala, with one central depot and 18 user-friendly and highly-secured stations. The Indian project contributed 40 per cent to the revenue last year and is expected to contribute 30 per cent this year and in 2011.

In 2009, Scomi recorded a revenue of RM573 million.

To-date (Till Sept 2010) Scomi Engineering has submitted tenders for Manaus Monorail and Tirradentes Monorail project in Brazil. It is also looking into securing the Pune Monorail Project, Thane-Bhiwandi-Kalyan Monorail Project and Bangalore Monorail Project in India.

They are already working towards tapping projects in Saudi Arabia. Going forward, they are eyeing Thailand, Jakarta and Sri Lanka. They are among the developing nations that plan to develop mass transport infrastructures.

India has nine monorail plans with 184 km in its masterplan while Brazil has identified 23 monorail lines with the World Cup 2014.

On the local front, Scomi Engineering has tendered for KL monorail fleet expansion project and is looking into Kelana Jaya Line light rail transit (LRT) and Ampang Line LRT expansion projects.

Scomi Engineering has reported a lower pre-tax profit of RM1.595 million for its second quarter ended June 30, compared with RM29.283 million in the same quarter last year.

The drop is due to its overall estimate of cost increase for the Mumbai project and potential delay experienced by its Indian client.