Monday, January 31, 2011

GUH ... Jan11

It is looking at a horizontal expansion of its printed circuit board (PCB) business this year, via enhancing its product range and also through mergers and acquisitions (M&As).

The enhancement of GUH's PCB business would see capital expansion activities at its sites in Penang and in Suzhou, China.

Its potential targets for M&As are likely to be its local competitors, which are public-listed entities.
The company proposes to invest about RM20 million to increase production of capacity for GUH's double-sided PCB to 50,000 sq m per month in 2011, from 40,000 sq m per month last year. The RM20 million reinvestment for GUH's Penang PCB operations will include the expansion of one site which will be ready by November 2011.

PCBs will remain its income contributors in the next five years. But the percentage is likely to drop from the current 90 per cent to the range of 70 per cent and 80 per cent. This is due to the increased number of properties they are looking at launching, and also the revenue contribution from the water treatment plant project in China's Jiangsu Province.

GUH's subsidiary GUH International (HK) Pte Ltd earlier Jan 2011 announced that it had entered into a preliminary agreement to construct a water treatment plant within the 64 sq km Gaochun Economic Development Zone, which is located three hours away from Shanghai.

Apart from the water and wastewater treatment concessions, H'ng said GUH also wishes to explore power-generation projects (either conventional or renewal energy ones) and potential locations include Cambodia and Indonesia. GUH currently 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.

WCT ... Jan11

WCT had RM2 billion worth of new projects including the LRT extensions, Durkhan highway, other Middle East projects (Yas Island) and additional infrastructure jobs in Iskandar Malaysia and Sabah.

WCT will benefit from a more open tender system. And given its less diversified earnings base, it is also more leveraged to win new contracts.

The revival of the Sabah dam project worth at least RM1 billion was also a wild card.

WCT’s prospects and construction firms are gearing up for a larger slice of the infrastructure spending to be allocated under the 10th Malaysia Plan and Economic Transformation Programme.

Apart from creating a large war chest for new projects, the RM600 million fund-raising exercise could also effectively refinance all of WCT’s short-term borrowings with long-term debt, if it wanted to.

It has a net assets per share of RM1.55 as at Sept 30, 2010.

As at Sept 30, the company had RM544.83 million in long-term borrowings, RM517.11 million in short-term borrowings and RM618.22 million in cash.
That translates into a net debt of RM443.72 million against shareholders’ funds of RM1.22 billion.

For the nine-month period ended Sept 30, WCT’s net profit declined 13.34% to RM99.26 million from RM114.55 million a year ago on the back of a 63.25% drop in turnover to RM1.27 billion from RM3.46 billion.

Earnings per share for the nine months stood at 12.61 sen versus 14.62 sen a year ago.

Sunday, January 30, 2011


I wish I could be loved like this, don't you?

It was a busy morning, about 8:30, when an elderly gentleman in his 80's arrived to have stitches removed from his thumb.  He said he was in a hurry as he had an appointment at 9:00 am.

I took his vital signs and had him take a seat, knowing it would be over an hour before someone would be able to see him.  I saw him looking at his watch and decided, since I was not busy with other patients, I would evaluate his wound.  On exam, it was well healed, so I talked to one of the doctors, got the needed supplies to remove his sutures and redressed his wound.

While taking care of his wound, I asked him if he had another doctor's appointment this morning, as he was in such a hurry.  The gentleman told me no, that he needed to go to the nursing home to eat breakfast with his wife.  I inquired as to her health. He told me that she had been there for a while and that she was a victim of Alzheimer's Disease.

As we talked, I asked if she would be upset if he was a bit late.  He replied that she no longer knew who he was, that she had not recognized him in five years now.

I was surprised, and asked him, 'And you still go every morning, even though she doesn't know who you are?' He smiled as he patted my hand and said, 'She doesn't know me, but I still know who she is.' I had to hold back tears as he left.  I had goose bumps on my arm, and thought, 'That is the kind of love I want in my life.' True love is neither physical, nor romantic.  True love is an acceptance of all that is, has been, will be, and will not be.

With all the jokes and fun that are in e-mails, sometimes there is one that comes along that has an important message.  This one I wanted to share with you.

The happiest people don't necessarily have the best of everything; they just make the best of everything they have.   I hope you share this with someone you care about..  I just did.  'Life isn't about how to survive the storm, But how to dance in the rain.' Enjoy life now --- it has an expiration date, you know!

Saturday, January 29, 2011

Friday, January 28, 2011

SPB ... Jan11

It is potentially poised to be one of the beneficiaries of the Greater Klang Valley mass rail transit (MRT) project.
Currently, the company has a 34-acre developable land bank and 1.2 million sq ft of office space in Pusat Bandar Damansara, where an MRT interchange could possibly be developed.
SelProp is in a good position to bid for the MRT interchange at Pusat Bandar Damansara to be located on its site.

Apart from having strategically located land bank in PBD, SelProp also has a strong balance sheet to leverage on. SelProp’s cash and cash equivalent amounted to RM595.7 million as of Oct 31, against debts of RM397.5 million. This means that it was sitting on a net cash position of almost RM200 million.

SelProp has not undertaken an equity-based fund raising exercise over the past decade.

Though its earnings trend tends to be volatile, the company has been constantly paying cash dividends since its listing in 1987.

For the year ended Oct 31, SelProp posted a net profit of RM42.62 million, up 29.3% from RM33 million in FY09 due to a revaluation surplus of RM29.7 million on its investment properties. Earnings per share was 12.4 sen. Revenue, however, fell 37% to RM203.04 million from RM321.7 million.

The group is majority owned by Kayin Holdings Sdn Bhd, which holds an equity interest of 66.3% interest in the property developer.

Its book value stood at RM5.12 per share.

Some of SelProp’s assets are ripe for revaluation.

Expecting SelProp to register the strongest RNAV growth over the next three to five years with a 60% upside in its RNAV to hit RM11.71 per share by then. This is based on the assumption that land values appreciate to RM 1,300 per sq ft from RM600 per sq ft currently.

Given its strategic land bank, attractive valuation and concentrated shareholding, SelProp could be a potential M&A (merger and acquisition) or joint venture target or privatisation candidate.

SelProp holds a 51% stake in education player Help International Corp Bhd, whose earnings have been expanding steadily, with a four-year compounded annual growth rate of 20%.

SelProp’s further upside could also be driven by redevelopment works. MRT and higher plot ratios under the Revised Draft KL Structure Plan should encourage high-end high density mixed developments in Pusat Bandar Damansara-Damansara Heights.

Pusat Bandar Damansara should be more vibrant with the redevelopment of Johor Corp’s government offices and Guocoland’s RM2 billion Damansara City mixed development, which is slated for launch middle of the year (2011).

Thursday, January 27, 2011

Masteel ... Jan11

By Asia Analytica
- Upbeat domestic demand outlook for steel bars
- Some uncertainties in global steel market
- But earnings expected to trend higher in 2011-2012
- Very attractive valuations 6x 2011E P/E and 0.6x NTA

Recent Developments
Like all steel players in the country, Malaysia Steel Works (Masteel) went through a steep down cycle amid the global financial crisis – and is currently in the early stages of a recovery. After reporting record net profit of RM79.3 million in 2008, the company fell deep into the red in 1H09 on the back of a collapse in both the demand and selling prices for steel related products.

Although market conditions improved in 2H09, Masteel ended that year with a net loss of RM8.5 million. Having said that, it was still a comparatively good set of results.

Clearly, being one of the smaller steel operators has its advantages in terms of production flexibility and lower overheads. The company has also proven to be fairly astute in terms of seeking out niche markets and managing its stock levels.

Demand and steel prices gradually strengthened through the first half of 2010. The global economy rebounded smartly, boosted by massive government stimulus packages and extremely loose monetary policies as well as inventory rebuilding.

Masteel reported a strong 43% y-y sales growth in 1H10. But rising cost of raw materials weighed on margins. Net profit totaled RM14.4 million, much improved from the net loss of RM32.4 million in the previous corresponding period, during the worst of the crisis, but was down from the RM23.9 million
in 2H09.

The nascent demand recovery was still too weak for steel millers to sustain higher selling prices. Prices for steel bars trended higher through the first few months of the year but gave back most of its gains in 2H10.

Indeed, the steel sector recovery continued to be uneven with weakening demand and rising costs pushing some of the bigger players into the red again in 3Q10. In this respect, Masteel, again, fared well compared with its peers.

The company actually reported better underlying earnings for the quarter although net profit was affected by one-off charges totaling RM9.7 million, which consisted of write-off for its bond investment and loss on disposal of a 55% stake in its biotech venture. (Masteel has since completely repaid the RM50 million loan that was associated with the bond investment).

We believe the better than industry performance in 3Q10 was due to the company’s shorter inventory cycle. Most of the larger players were caught with higher priced raw materials secured in early-2Q10.

For the first nine months of 2010, sales for Masteel totaled RM712.8 million, up 44% from the previous corresponding period while net profit totaled RM19.2 million, a reversal from the net loss of RM19.1 million recorded over the same period.

The company will be releasing its results for the final quarter of 2010 sometime in late-February 2011. We expect sales and net profit to be roughly around the same level as that achieved in 3Q10, but without the one-off charges. That would bring net profit for the full-year to about RM32.3 million, after taking into account the RM9.7 million in one-off losses.

Earnings outlook
For the current year, outlook for the steel sector is cautiously optimistic, though still somewhat hazy.
Whilst demand is likely to keep improving as the global economic recovery gains traction, there are still potential headwinds. Furthermore, strong demand for raw materials and constricted supply over the next few months, at least, is expected to drive costs higher.

With the still ample surplus steel making capacity in the world, steel makers may not be able to fully pass on rising costs. Thus, whilst topline sales are expected to expand, margins and earnings growth are less certain.

Domestic demand expected to pick up steam Demand for steel bars in the domestic market is expected to gradually strengthen, especially towards the later half of this year and going into 2012-2013.

In addition to some RM49.2 billion allocated for development expenditure under the Budget 2011 – for hospitals, schools, infrastructure, etc – some RM12.5 billion of the 52 high impact projects under the Private-Private Partnership (PPP) initiative are to be implemented this year. The latter includes several highways, oil & gas facilities and a coal-fired power plant.

We could also see some of the recently announced large-scale projects kick off later in the year, including the RM36 billion mass rail transit (MRT) system for the Klang Valley and the first phase of the light rail transport (LRT) extension.

Some of the other development projects on the drawing board include the RM10 billion Sungei Buloh mixed development on the 3,300-acre Rubber Research Institute land and the RM5 billion Warisan Merdeka development, which will be undertaken by the EPF and PNB, respectively, as well as the RM26 billion KL International Financial District project.

In January 2011, the government identified another 19 projects under the Economic Transformation Programme worth some RM67 billion.

Thus, we expect volume demand for building materials such as steel bars to register fairly good growth for the next few years.

Outlook for steel prices less clear
On the other hand, the outlook for steel prices is less clear. Local steel makers have raised steel bar prices earlier this month primarily due to higher costs rather than improved demand.

Steel bars are currently selling for around RM2,200-RM2,300 per tonne, compared with the average of just over RM2,000 per tonne in 4Q10 and RM2,100 per tonne in 2010.

Nevertheless, we remain cautious on whether the recent price hike will stick. As mentioned above, steel makers have tried to push prices higher in 1H10 but the move eventually proved unsustainable.

To be sure, the prospects are better this time around on the back of expectations for strengthening domestic demand. On the other hand, developments in the global steel market may yet influence the direction of
local prices.

Improved global outlook but potential pitfalls remain
For the moment, global steel prices are being supported by rising input costs, including that for fuel, iron ore and coking coal.

The quarterly contract prices (roughly based on average spot prices for the preceding three months) for iron ore inched higher in 1Q11 after dipping in 4Q10 – and are expected to rise further in 2Q11 on tight supplies.

Exports from India have reduced in recent months while new supplies are not expected to come onstream until end-2011. Spot prices for iron ore have risen to around US$180 per tonne in recent days, compared with the contract price of roughly US$130-US$140 per tonne in 4Q10-1Q11.

Coking coal prices too have surged in the spot market, driven by the supply disruption in Australia where the worst flooding in decades has resulted in miners declaring force majeure on their contracts. The flood-affected areas are estimated to account for up to a quarter of the world’s output for coking coal. Some expect prices to hit US$300 per tonne in the coming months, compared with the contract price of US$225 per tonne in 1Q11.

Prevailing steel prices are also supported, in part, by stocking up on expectations of even higher prices in the coming months. But the market could still sour quickly if demand growth fails to meet expectations. The World Steel Association estimates steel demand growth will moderate to 5.3% this year, from the growth forecast of 13.1% in 2010.

Despite the prevailing upbeat outlook, there are headwinds for the global economy.

The sharp rebound in 2009-2010 was spurred by massive stimulus programmes and inventory rebuilding, the effects of which will fade this year. Although consumer confidence is up, businesses are still, by and large,
reluctant to spend. It remains to be seen if private consumption can grow fast enough to offset the drop in public spending. In particular, austerity plans in Europe and policy tightening in China will start to bite.

The average utilisation rate for global steel makers has fallen back to around 75% at end-2010, down from a high of almost 83% in April 2010. Intense competition for customers may keep the pressure on prices – despite rising costs. This will be particularly telling should there be a shortfall to prevailing demand growth expectations.

The steel industry in China, for example, remains fragmented despite the government’s efforts to consolidate and close outdated plants. The country’s demand growth is likely to cool somewhat with prevailing tightening policies. That raises the risks of cheap exports given that the industry remains in an overcapacity situation.

Malaysia’s imports of steel bars are fairly negligible at the moment. However, following our own government’s liberalization measures, local producers will have to be wary of competition from imports. The stronger ringgit exacerbates competition, making for even “cheaper” imports.

Help from the government?
Local steel millers, via the newly formed Malaysia Steel Association, are in discussions with the government on various proposals to help buffer against rising costs.

These include the possibility of reinstatement of the 5% import duty on steel bars, higher duty on the export of iron ore and scrap steel, as well as the allocation of economic sized land for mining activities. The steel
manufacturers are also proposing to extend off-peak electricity rates to weekends and public holidays.

Expand capacity to cater to rising volume demand
On balance, we expect to see continued improvement in volume demand for steel bars but margins and earnings for steel makers may gyrate amid heightened cost inflation and competitive pressure. Nevertheless, given its good track record, we expect Masteel will continue to navigate any price volatility well.

Masteel expects its topline sales to expand, underpinned by improvement in domestic demand.

Indeed, the company is planning to expand its rolling mill capacity to cater to the expected demand growth from the government’s announced development and infrastructure projects. It is in the midst of evaluating the
acquisition of a rolling mill. If all goes to plan, the move will add an additional 150,000 metric tonnes to its annual production capacity by 2012.

It is also planning to boost its meltshop capacity (feedstock for the rolling mill) to about 650,000 metric tonnes over this period. Capital expenditure is estimated at around RM100 million for the proposed capacity expansions over the next two years.

At present, the utilisation rates at its meltshop and rolling mill have improved to roughly 80% and 85%, respectively.

The company raised about RM35.4 million last year from a private placement of 16.1 million shares and rights issue of warrants to shareholders on the basis of one warrant for every two shares held.

Even so, gearing will rise with the planned capex, from the 46% at end-3Q10 where net debt totaled RM206.8 million. However, we expect it to remain within relatively comfortable range. We estimate gearing to rise to roughly 67% by end-2012. This is still fairly low compared with the gearing levels for most of its peers in the sector.

Valuation and Recommendation
We forecast the company’s net profit to improve to RM47.3 million and RM57.3 million for 2011-2012, respectively. Based on our earnings estimate, the stock is now trading at modest P/Es of roughly six and five times for the two years, respectively – well below prevailing average valuations for the sector.
Its share price also remains well below net assets of RM2.14 per share at end-3Q10. As such, we are inclined to recommend a BUY on the stock.

Masteel has some 105.4 million warrants outstanding. The warrants have a five-year maturity period and exercise price of 67 sen and are currently trading at 80.5 sen.

SPSetia ... Jan11

The property developer has confirmed securing 40 acres of prime land along Jalan Bangsar.

It also announced a fund-raising exercise via a proposed placement of 15% of new shares to be done via book-building that could easily raise RM1.14 billion. The fund raising comes in tandem with a one-for-two bonus issue.

It had received an approval-in-principle from the Prime Minister’s Department to talk over terms for the proposed development of a new integrated health and research complex for the Ministry of Health (MOH) in Setia Alam. In return, S P Setia’s 50% subsidiary Sentosa Jitra Sdn Bhd gets a piece of prime land along Jalan Bangsar where the present facilities belonging to the health ministry are located.

It is learned that the other 50% of Sentosa Jitra could be owned by parties related to tycoon Tan Sri Syed Mokhtar Al-Bukhary.

The company said that it had received a letter on Sept 24, 2010 by Unit Kerjasama Awam Swasta (UKAS) of the approval-in-principle granted by the Federal government for Sentosa Jitra to enter into negotiations with UKAS and the MOH over terms for the proposed development of a new integrated health and research complex on a 55.33-acre land in Setia Alam by way of land swap for the government land located along Jalan Bangsar.
S P Setia plans to develop the tract of Bangsar land (background) it acquired from the government into a mixed residential and commercial project.S P Setia plans to develop the tract of Bangsar land (background) it acquired from the government into a mixed residential and commercial project.

The proceeds from S P Setia’s fund-raising exercise are partly for the MOH development in Setia Alam that is expected to cost RM600 million to RM700 million. The funds are also to finance its existing projects, general working capital requirements, future expansion plans as well as to defray related expenses.

The funds to be raised are timely especially for the MOH deal and will help expedite the development of Setia City to complement the presence of the 1NIH Complex.

S P Setia’s other development projects are also expected to benefit from the corporate exercise, including its KL Eco City (KLEC) project opposite Mid Valley, and the Fulton Lane project in Melbourne, Australia. The KLEC is a joint venture with City Hall.

S P Setia has plans to redevelop the land in Bangsar into an integrated mixed residential and commercial project where the MOH will have a 20% share of the net profits from the redevelopment under the proposal.

It is understood that the 40 acres could be worth RM523 million to RM871 million, based on the price of RM300 to RM500 psf for residential bungalow land in Bangsar.

If the land has a plot ratio of four times or higher with commercial title, it could be worth several times more. Assuming a plot ratio of four to five times and an average selling price of RM1,200 psf, the gross development value of the Bangsar land would amount to RM8 billion to RM10 billion.

Also assumes that S P Setia has a 50% to 60% stake in the project, which is similar to its effective 60% stake in KLEC, the surplus value from the land at a net cost of RM700 million for the 1NIH Complex alone would be around RM550 million or 48 sen per share, boosting the revised net asset value (RNAV) to RM6.21. There was a possibility of raising it to around RM8 based on the surplus value of the Bangsar land.

There could be further upside to the RNAV as the shift of several thousands of ministry staff to Bandar Setia Alam would make S P Setia’s flagship township and the RM5 billion 158-acre Setia City commercial centre even more attractive.

Potential re-rating catalysts include positive news on the Bangsar land, continued robust sales, newsflow on other landbank and strong earnings growth.

Wednesday, January 26, 2011

IPO ... ABM Fujiya Bhd

It sees an automotive battery manufacturer, sees huge opportunities in exports on the back of a recovering economy and the elimination of tariffs on the regional trade of automotive parts starting 2010 under the Asean Free Trade Agreement (Afta).

Overseas markets contributed 47.5% to ABM Fujiya’s total revenue of RM126 million for FY09 ended Dec 31. Its net profit amounted to RM8.5 million in the financial year under review, which translates into a net profit margin of 6.75%, slightly lower than its direct peer such as Yokohama Industries Bhd of 8.08% for FY09 ended Dec 31.

ABM Fujiya’s initial public offering (IPO) comprises a public issuance of 23 million new shares at 50 sen each and nine million existing shares offered for sale by existing shareholders. The total paid-up share capital upon listing will be 180 million shares.
ABM Fujiya executive director Datuk Tay Chin Kin (left) exchanging documents with AmInvestment Bank Bhd head corporate finance Anuar Omar after the underwriting agreement signing. Looking on are Sarawak Second Finance Minister Datuk Seri Wong Soon Koh (2nd left) and Sarawak Land Development Minister Datuk Seri Dr James Jemut Masing.
Of the 32 million IPO shares, 4.5 million shares will be reserved for eligible directors, employees and business associates of the company and its subsidiaries, 10.5 million shares for the public (at least 50% for bumiputra investors) and 17 million for Malaysian and foreign institutional and selected investors as well as bumiputra investors approved by the International Trade and Industry Ministry.

The group would use the proceeds for working capital purposes and expansion of product ranges as well as its market reach.

Other battery manufacturers could serve as a guide as to how much ABM Fujiya will be valued. Direct peer such as Yokohama is currently (Jan 2011) trading at a price to earnings ratio of 6.4 times. The counter hit a 52-week high of 80 sen on Sept 29, 2010 while its low was 54 sen on Feb 3, 2010. Its dividend yield amounted to 3.68% based on yesterday’s trading price of 68 sen at press time.

Applying a 6.4 times price-earnings multiple on ABM Fujiya’s FY09 net profit of RM8.5 million, the company will have a market capitalisation of at least RM54.4 million.

ABM Fujiya currently operates three plants with a total production capacity of 1.6 million batteries a year. This accounted for 40.9% of Malaysia’s total exports of lead acid batteries in 2009.

Established in 1974, the company produces conventional lead acid battery, low maintenance battery, deep cycle battery, marine application battery and MF battery with 13 brands registered.

Tenaga ... Jan11

Tenaga Nasional Bhd (TNB) is considering an additional capital expenditure (capex) of RM300mil over the next two years, aimed at improving supply reliability in the Iskandar region, Johor.

Currently, he said, the utility giant was concentrating on a big cable project in the Iskandar development to ensure there was enough infrastructure.

The funds for the cable project had been allocated in the 2011 capex.

TNB, had announced earlier that the Capex for fiscal years 2011 and 2012 would stay at between RM4.2bil and RM4.5bil, but may peak to RM6.5bil in 2013 as more funding would be required for three new power plants.

It recently awarded jobs worth RM2.149bil to two consortiums to undertake construction of the Ulu Jelai hydro-electric power plant in Pahang.

It reported earnings of RM712.9 million in the first quarter ended Nov 30, 2010, just a marginal 1% increase from the RM706.3 million a year ago as it was impacted by higher coal prices.

There was an increase in forex translation loss of RM104.8 million as compared to RM45.4 million a year ago due to the strengthening of the yen and US dollar against the ringgit.

Revenue rose 5.3% or RM388.10 million to RM7.726 billion from RM7.338 billion. Earnings per share were 16.38 sen versus 16.28 sen. The 5.3% increase in revenue was maninly due to an increase in sales of electrcity in the peninsula and Sabah Electricity Sdn Bhd (SESB).

The electricity demand has shown a growth of 5% in the peninsula and 6.4% in SESB as compared to the previous corresponding period last financial year.

Operating expenses rose at a faster rate mainly due to higher generation costs as the average contracted coal price was US$95.5 per tonne compared with US$79.5 a tonne a year ago.

When compared to the previous quarter, revenue declined by 1.8% from RM7.869 billion.

Despite the lower revenue, operating profit recorded an increase of 75%, amounting to RM537 million attributing this to lower oeprating expenses in the current quarter.

This resulted in a net profit after tax (attributable to owners of the company) of RM712.9 million, an increase of 83.5% as compared to RM388.4 million reported in the previous quarter.

The lower operating expenses were mainly due to lower fuel costs, down 6.8%, from the fourth quarter.

Tuesday, January 25, 2011

Axreit ... Jan11

Axis Real Estate Investment Trust (REIT) currently has two pending acquisitions, PTP D8 in Johor and Axis Eureka in Cyberjaya, which the property trust expects to complete by the end of January and March respectively.
The two new office buildings in Cyberjaya are part of the seven potential acquisitions currently assessed by Axis-REIT. These include a logistics warehouse and a warehouse in Johor, a warehousing/logistic and manufacturing facility in Shah Alam, and two new logistics warehouses in the Klang Valley.

The (seven) properties have total estimated value of RM365 million.

Axis-REIT is planning for a placement exercise, which could take place within the second quarter 2011, to finance the potential acquisitions. The placement exercise could increase Axis-REIT’s current total of 375.9 million units in circulation by 20%.

The exact timing of the placement exercise will depend on how the property trust’s gearing strategy and investor returns are affected. Historically, fundraising via placement is immediately followed by an acquisition, so as to minimise the impact of dilution to existing shareholders. The third and most recent placement by Axis-REIT was done at RM1.97 per unit in September 2010 and involved 68.82 million units.

Its 4QFY10 ended Dec 31, 2010 posted a net profit of RM40.94 million, up 42% from RM28.77 million in the previous corresponding period. The jump in earnings was boosted by revaluation gain of RM23 million. Revenue for 4Q was RM26.59 million compared with RM19.51 million previously.

For the full year of FY10, net profit totalled RM101.25 million versus RM61.98 million in FY09, while revenue was up 25% y-o-y to RM89.85 million .

As at FY10, value of assets under management rose by 33.2% to RM1.2 billion from RM884.9 million the preceding year. During the financial year, four properties had been acquired, increasing the number of properties under Axis-REIT’s portfolio to 26 as at Dec 31, 2010.

Axis-REIT had their first disposal, selling off Axis North Port LC1 for RM14.5 million cash, which translated into an estimated net gain of RM764,000. Labrooy said that the property was providing “flat returns”, and that it is essential for the property trust to commit to rotate its assets as long as it is financially viable.

For FY10, Axis-REIT had booked in a revaluation gain of RM45.59 million compared to RM19.1 million in FY09.

As of end-2010, Axis-REIT has 375.9 million units in circulation and a market capitalisation of RM891 million based on its current share price of about RM2.37. The property trust was reclassified as an Islamic REIT in 2008, and focuses mainly on assets within the office and industrial sectors.

Dominan ... Jan11

Dominant Enterprise Bhd (DEB), which makes and sells medium density fibreboard (MDF) mouldings, laminated wood panels, plywood and particle boards, has seen growing market share and expanding sales over the past few years.

Its revenue registered a compound annual growth rate of 14.3 per cent over the past 10 years. The positioning of the company's products has partly contributed to the stable growth in bottom line and sales.

DEB was incorporated in July 1991. The Johor-based company was listed on the second board of Bursa Malaysia on October 20 2003 and two years later, was transferred to the main board on October 20 2005.

DEB supplies its products to furniture manufacturers, building material distributors, door and window manufacturers, building contractors and hardware suppliers.

In 2010 it posted RM19 million profit before tax. In its financial year ended March 31 2010, DEB reported RM14.24 million net profit on the back of RM309.73 million revenue, up from RM11.4 million net profit and RM308.91 million revenue in the previous year.

Other factors contributing to the company's stable income and turnover include diversified export markets, bulk-buying of raw materials, being close to customers and flexibility to to meet customers' requirements.

For the half year ended September 30 2010, DEB reported RM7.18 million net profit on the back of RM168.72 million revenue, compared with RM7.34 million net profit and RM151.2 million revenue in the previous corresponding period.

MDF mouldings manufactured by DEB are used for door casing, door jam, skirting and window reveals; while its wrapped mouldings are for the furniture industry and interior decoration. Its laminated wood panel products are for knocked-down furniture and speaker boxes.

80 per cent of the company's turnover comes from the local market, with the remaining from exports.

The company's gearing is low.

Monday, January 24, 2011

KNM ... Jan11

It has received another four years’ extension until February 2015 for its term loan facility secured from Maybank. The loan’s principal balance outstanding as at Jan 7, 2011 was at RM351.33 million.

The term loan was for the purpose of refinancing the bridging loan that was secured for the high-profile acquisition of German-based Borsig BmbH, which was completed on June 6, 2008.

KNM had on Oct 15, 2008 accepted the three-year term loan facility of €150 million (RM614.4 million) to fully settle the balance bridging loan facility granted by Maybank for the acquisition of Borsig.

The term loan extension should come as a relief to KNM, which has short and long term borrowings of RM1.06 billion as at Sept 30, 2010. Based on its shareholders fund of RM1.76 billion and cash of RM296.29 million, its net gearing is at 0.43 times.

KNM posted a net loss of RM227.02 million in the nine-month period ended Sept 30, 2010 mainly due to a loss on hedge of its investment in foreign subsidiaries. Net operating cash flow from operations was positive at RM19.62 million, but had shrunk from RM298.5 million in the previous corresponding period.

Meanwhile, its cash and cash equivalents had also been reduced to RM296.3 million, from RM571.7 million a year ago.

Nonetheless, it is worth noting that KNM’s job orders are increasing, with the latest win being the RM2.2 billion (£450 million) contract secured from Peterborough Renewable Energy Ltd late 2010. The contract raised its order book to over RM4 billion, its all-time high.

Furthermore, the company is expected to secure some RM3 billion worth of jobs in 2011 from its current RM16 billion tenders.

The extension of loan tenure came as a boon to KNM as it will have more flexibility in terms of cash flow to undertake these new projects.

Industry observers say KNM plans to tap into the potential US$11 billion (RM33.7 billion) worth of local jobs over the next four years, which includes process equipment for enhanced oil recovery projects that would create demand for its process equipment services.

Meanwhile KNM is moving its product mix towards more turnkey contracts, which is understood to have margins in the range of 20% to 30% as there are less competitive pressures. 23% of KNM’s current order book consists of such contracts.

HWGB ... Jan11

Zambry said the state was opening up the tin sector to increase its revenue. Perak stands to receive 5% in royalties from tin players.

They are now in the midst of considering applications both for licensing of exploration and concessions.

In 2009, a 30-year mining concession was awarded to Malaysia Smelting Corp Bhd subsidiary, Rahman Hydraulic Tin Sdn Bhd, for prospecting tin ore and other minerals in a newly identified 14,000ha in Pengkalen Hulu, near Ipoh.

In 2008, HWG Tin Mining Sdn Bhd secured a certificate to mine tin on a 202ha tract in Sungai Endah, Hulu Perak for 10 years until May 2018. HWG will start operations after Chinese New Year. HWG is 51% owned by Ho Wah Genting Bhd, 35% by Jiwa Seribu Sdn Bhd, 10% by Majuperak Holdings Bhd and 4% by Multi Prolific Sdn Bhd.

Meanwhile HWGB plans to start its tin ore mining operations in Perak immediately after the Chinese New Year and expect earnings from the mining operations to be realised in the current financial year.

Potential earnings from the mining operations should bode well for Ho Wah, which is on track to post its highest profit in nine years.

For nine months ended September 30 2010, Ho Wah registered a net profit of RM6.86 million, almost matching its 2001 net profit of RM6.91 million.

All of Ho Wah's revenue came from the group's wire and cable business, but for this year, its tin ore mining will be a major earnings driver.

In 2009, Ho Wah posted a 12-month revenue of RM144.04 million, while up to the nine months of 2010, its revenue stood at RM186.05 million.
Ho Wah's tin mining operations are headed by HWG Tin Mining Sdn Bhd.

The company has a concession from the Perak state government to extract tin until 2018 at a 202.4ha site in Pengkalan Hulu in Grik. Ho Wah targets to extract some 2,000 tonnes of tin ore a year.

On the average, it is about 150 tonnes a month, the tin ore will be sold to Malaysia Smelting Corp Bhd.

On the cost, estimates that it will cost around US$7,000 (RM21,400) to extract one tonne of tin ore.

Sunday, January 23, 2011

Saturday, January 22, 2011

Friday, January 21, 2011

IPO GAS Malaysia

Gas Malaysia Sdn Bhd, a company that distributes natural gas to households and industries, is said to be eyeing a listing on Bursa Malaysia in 2011 but that idea has not yet received the full backing of all of its shareholders.

It is learnt that the other shareholders are deciding on whether to green-light a listing but no decision has yet been made.

MMC Corp Bhd hoped to list Gas Malaysia in 2011. MMC currently owns 41.8% of Gas Malaysia but controls it as a subsidiary.

It is believed the company would be willing to pare down its stake to 20% as long as it can still equity account Gas Malaysia's earnings as an associate.

The company's controlling shareholder is MMC and other shareholders of the company are Petronas Gas Bhd, Shapadu Group and Tokyo Gas-Mitsui & Co.

Gas Malaysia is the sole distributor and retailer of natural gas to non-power companies in the country which consume less than two million mmbtu per day.
There would be interest from institutional investors to any flotation of Gas Malaysia given its steady business and cashflow.

It will be a good dividend yielding stock and the capex risk is quite minimal as it stands. Capital expenditure would be incurred to meet customer demand. The main risk surrounding the company would be the security of its gas supply and the margins it obtained.

In its annual latest report, MMC said Gas Malaysia was a steady provider of cashflow to the group. Gas Malaysia reported an 8% decline in pre-tax profit to RM326mil after its customers consumed 4% less gas after a new gas tariff was announced in March 2009. Revenue in 2009 was RM1.75bil compared with RM1.88bil in 2008.

The company in 2009 signed a formal agreement with Petronas for the supply of 300 million standard cu ft per day (mmscfd) of gas which Gas Malaysia said effectively allowed it strategise its long-term business plan more effectively.

Malaysian Rating Corp Bhd in its rating update on Gas Malaysia's debt in August 2010 said the company faces an ongoing challenge of securing more gas to meet the growing demand of its consumer, commercial and industrial customers.

The gas utility managed to secure an additional 82 million mmscfd on top of the current 300 mmscfd in December 2009 until December 2011. Although the additional gas supply addresses current supply constraints to some extent, MARC believes the long-term security of supply remains a key business issue.

The expiry of its gas supply agreement in 2012 further exposes Gas Malaysia to contract renegotiation and gas supply risks. MARC draws comfort from the essentiality of Gas Malaysia's role as the sole piped natural gas utility in Peninsular Malaysia, which in turn supports the rating agency's expectation that the utility will continue to receive strong regulatory support.

Wednesday, January 19, 2011

Huaan ... Jan11

Rising international coal prices due to the floods in Australia's coal-rich state of Queensland are not likely to have a significant impact on metallurgical coke manufacturer Sino Hua-An International Bhd's plant in China.

Besides getting its supply of coking coal from China domestic mines, Sino Hua-An also buys cheaper coking coal in bulk for the winter season.

The company's metallurgical coke plant in Shandong province buys and uses most of its coking coal from mines located in Shandong, Henan and Shanxi provinces. Every year during winter season in North Eastern China, the normal domestic coking coal pricing trend tends to increase a little as the extraction rate from the mines is usually slower than expected.

As part of Sino Hua-An's contingency plan, it usually increase its coking coal inventory during winter season by negotiating and purchasing cheaper coking coal in bulk from its raw material suppliers.

Sino Hua-An, the first China-based company to be listed on Bursa Malaysia, produces metallurgical coke from coal. Coke is a critical raw material in steel-making.
The company's usual coking coal inventory is about 50,000 tonnes but currently, it is more than triple to 170,000 tonnes. This inventory level is enough for more than a month's use.

The company's two main by-products, which are crude benzene and tar oil, are oil-based. Therefore, the rising crude oil prices also 'push' up the selling prices of its by-products accordingly.

IJMLand ... Jan11

With the merger called off, IJM Land’s investors have had their expectations curtailed. It is still possible for IJM Land to revisit a merger with EPF-controlled MRCB, perhaps at a later stage, but until that happens, it will not be sitting still waiting for big projects to drop into its lap.

In fact, IJM Land’s prospects are looking as strong as ever as it kickstarts new development projects for 2011 and next. Meanwhile, it still has its crown jewel, the 2,000-acre Canal City township project in Kuala Langat, Selangor, which it co-owns equally with Kumpulan Europlus Bhd, an associate company of IJM Corp.
IJM Land is not ruling out the possibility of merger opportunities with other players.

Canal City, which is adjacent to Kota Kemuning, has a total gross development value (GDV) of more than RM10 billion. It is IJM Land’s largest ever township project and one that is no less significant than the proposed development for RRIM’s land. Other than the vast size of the township, the low holding cost of the Canal City land, at RM5 per foot, means that the project could potentially be lucrative in terms of development margins.

The first phase of the Canal City will be pushed out to the market in 2012, earlier than the RRIM project, which is still believed to be on the drawing board. IJM Land confirms that the Canal City project will be pushed to the market in 2012. The company is in the final leg of sorting out the development plans and getting the necessary approvals for the project.

It will be IJM Land’s anchor project, along with The Light in Penang (with a GDV of RM4.9 billion). The project will have a long development cycle of 10 to 15 years.

Canal City is expected to give IJM Land a strong boost from next year (2012) onwards. That aside, the company has also lined up property launches with a GDV of RM2 billion in 2011 alone, which is its highest ever. The RM2 billion to be launched in 2011 does not include the Canal City township project.

With its current unbilled sales at RM900 million, which is also a record, further major launches would create ever greater momentum for IJM Land in terms of revenue and earnings growth going forward.

The IJM group and Kumpulan Europlus secured the land parcels in Canal City from the Selangor government as payment in kind for their involvement in the flood mitigation works and construction of the Shah Alam-Shah Alam 2 Expressway. The cost of the projects, undertaken by the IJM group and Kumpulan Europlus, translates into about RM5 psf for the 2,000 acres of land in Canal City, now jointly owned by both IJM Land and Kumpulan Europlus.

In east Malaysia, IJM Land also has a township project in Sandakan, Sabah, with properties selling for RM600 psf. In total, the company is looking at launching RM500 million worth of properties in Sandakan and Kota Kinabalu in 2011.

As for its development in The Light II, Penang, Soam says RM420 million worth of properties are expected to be launched this year, with selling prices of between RM600 and RM900 psf. In Sebana Cove, Johor, IJM Land has earmarked an enclave for the development of vacation or retirement homes.

Apart from the Canal City land and other parcels that have low holding costs, and where development could be stretched over many years to maximise value, the company prefers to adopt a fast-turnover development strategy for most of its landbank. The purpose of this is to recycle the company’s capital quickly enough to undertake new projects in order to sustain its high growth rate.

At this stage, IJM Land is not keen on developing or expanding its portfolio of investment properties. Its strategy now is to develop and sell the properties it has built. Only after it has attained a critical mass for, say a township development, will it develops and keep a portfolio of investment properties for recurring income.

Despite the IJM Land-MRCB deal having been called off for now, the relationship between the two property developers has not soured.

Tuesday, January 18, 2011

KPS ... Jan11

Kumpulan Perangsang Selangor Bhd (KPS) has received the conditional offer by Menteri Besar Selangor Inc (MBI) to acquire all the voting shares in Konsortium Abass Sdn Bhd (Abass) for RM9.39 per share.

KPS received the offer from its 55% owned subsidiary Titisan Modal Sdn Bhd which in turn owns 100% of Abass.

KPS also said has received MBI’s offer to acquire all voting shares in its 30% owned associate company Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (Splash) at cash offer price of RM5.95.

KPS’ announcements did not state the total value of the state government offers for Abass and Splash KPS said its board will review the MBI offers and would update Bursa Malaysia in due course.

Faber ... Jan11

Faber Group Bhd’s subsidiary Faber LLC has received non-renewal notices for three maintenance services contracts worth a total of RM184 million in Abu Dhabi from the Emirate’s Department of Municipal Affairs, Western Region Municipality.

The non-renewal of the contracts will affect Faber’s earnings and its net assets per share of four sen for the financial year ending Dec 31, 2011.

With regard to the operational impact, Faber LLC needs to redeploy its staff and assets that are presently assigned to the projects and it will continue to maintain the office in the region for other potential contracts.

The non-renewed contracts included the provisions of civil, mechanical and electrical maintenance services for low-cost houses at Madinat Zayed and Liwa as well as the improvement, development, upgrade and maintenance of infrastructure facilities and projects at Madinat Zayed-Zone-1.

Faber’s services for the low-cost house contracts will cease with effect from April 2 2011, while its services for the maintenance of infrastructure facilities at Madinat Zayed-Zone-1 will expire on June 1 2011.

Going forward the non-renewal of the contracts will dampen sentiment and create some uncertainty over the fate of Faber’s existing concession in Malaysia.

Nevertheless, with Abu Dhabi’s Western Region Municipality (WRM) expected to invite a fresh round of tenders for its infrastructure contracts, the potential upside catalyst for Faber would be the possibility the company secures new contracts from WRM.

Another catalyst would be the renewal of its concession in Malaysia which could possibly be announced anytime.

Going Forward …

Its earnings growth prospects concerns were raised after the group’s two integrated facilities management (IFM) contracts in Abu Dhabi were not renewed by the authorities in the Gulf.

The news also triggered worries on the renewal of the group’s other contracts locally and abroad resulting in downgrades by investment analysts on the stock.
However, there may be a ray of hope for Faber to win back the contracts later when the authorities open them for re-tendering.

An official from Faber explained that the notice of non-renewal of the contracts was due to the changes in the emirates’ Western Region Municipality’s (WRM) management. The new management is currently reassessing the structure of all the contracts it had awarded earlier.

Faber is not the only company that was affected, this affects other contractors too. They (WRM) will open for re-tendering again soon and Faber will bid for them.

On top of that, Faber was working on several other IFM contracts in Abu Dhabi despite the non-renewal of the two existing ones.

The non-renewed contracts included the provisions of civil, mechanical and electrical maintenance services for low-cost houses at Madinat Zayed and Liwa, as well as the improvement, development, upgrade and maintenance of infrastructure facilities and projects at Madinat Zayed-Zone 1.

Faber’s on-going job in the emirates included the provision of hospital support services for 12 hospitals and clinics in the UAE worth RM16 million per annum.

The non-renewal of the contracts would affect its net assets per share (and earnings per share) by about four sen for the financial year ending Dec 31, 2011. Based on Faber’s issued base of 363 million shares, this works out to RM14.5 million in lost net earnings.

For the financial year ended Dec 31, 2010, revenue contribution from the UAE is expected to account for some 25% of the group’s total. For the nine-month period ended Sept 30, 2010, these contracts had contributed some RM200 million to Faber’s revenue.

Faber’s local hospital support services (HSS) concession will expire in October 2011. A renewal of the concession would provide a major boost for Faber, especially if it comes with a tariff hike.

The concerns on risk of non-renewal of the HSS concession (locally) could cap upside. While this risk is low, Faber has yet to announce any indication of the renewal.

Since Faber is a GLC (it is a unit of Khazanah Nasional’s UEM Group Bhd) and its HSS concession has been run very profitably and efficiently, the risks of non-renewal is low. However, recent news reports suggest that several parties are eyeing parts of the concession, namely the Sabah and Sarawak portions.

Faber’s 15-year HSS concession covers public hospitals in the northern region of Malaysia, Sabah and Sarawak.

Monday, January 17, 2011

SAAG ... Jan11

Its subsidiary has secured a US$78 million (RM239.54 million) contract from Mrails Tram (Melaka) Sdn Bhd to design and build 40 km of tramway in Melaka.

Its overseas subsidiary OGS Asiapac Ltd had secured the design, engineering, procurement, construction and commissioning (EPCC) contract on Dec 23 2010.

Mrails Tram is incorporated in Malaysia and it had signed a principal agreement with the Chief Minister of Malacca (Incorporation) on March 3 2010 for a 25 year concession with the Malacca government to provide 40 km of tramway in the state capital to enhance the public transport facilities.

Dayang ... Jan11

Oil and gas counter Dayang Enterprise Holdings Bhd seems to be preparing for a large-scale contract.

A couple of the proposals to be deliberated upon recently involve Dayang boosting its cash position. Dayang is proposing a one-for-four rights issue of 110 million shares at a price and entitlement date to be determined at a later date.

Dayang is also hiving off its entire 40% stake in Syarikat Borcos Shipping Sdn Bhd for RM135 million cash to AWH Equity Holdings Sdn Bhd, which owns the other 60% stake. Dayang had acquired the stake in Borcos in September 2009. The book value of the stake was RM134.96 million, meaning it is selling out for mere profit of RM43,678.

According to sources familiar with the company, including the sale of Borcos, Dayang is looking at raising in excess of RM250 million. This would add to its gross cash pile of RM63.16 million and trade and other receivables of RM108.54 million as at end-September 2010.

On the other side of the balance sheet, Dayang had borrowings of RM110 million and trade and other payables of RM40.75 million. Its shareholders funds stood at RM355.04 million.

Dayang has also been posting steady profits. For its nine months ended September, Dayang registered a net profit of RM50.06 million on revenue of RM171.97 million. For the corresponding nine months of FY2009, Dayang had raked in a net profit of RM38.34 million from RM157.66 million in sales.

What does Dayang plan to do with all this cash? While murmurs of mergers and acquisitions have popped up, there is a more compelling reason.

Market rumours have it that Dayang is beefing up its balance sheet in the expectation of bagging a large contract soon. Talk has it that the company is the frontrunner to bag the topside and maintenance work of a RM400 million job, doing top side maintenance for the Sarawak region, for oil major Petroliam Nasional Bhd.

This job is part of the larger RM1.6 billion topside and maintenance jobs that covers the whole country but has been broken down to several packages namely Sarawak, Sabah and Peninsular Malaysia.

Initially it was said that Dayang’s tender was not as attractive as the one by private company, Coral Alliance Sdn Bhd, for the Sarawak portion of jobs. Industry sources said Dayang’s bid was indeed competitive and it stands a good chance of bagging the jobs. Some even said that Dayang had put in a lower bid than that of Coral Alliance.
Sources had highlighted that Coral Alliance was the frontrunner for the portions in Sarawak and Peninsular Malaysia at the end of 2010, but there could have been changes since.

Another contender Petra Energy Bhd is also understood to be still in the race bidding for the jobs.

In Peninsular Malaysia, a private company called PFC Engineering Sdn Bhd (formerly Perwaja Fabrication Centre Sdn Bhd) has surfaced as a major contender. PFC is 80%-controlled by Datuk Abu Talib Mohamed, the brother of Tan Sri Abu Sahid Mohamed, the controlling shareholder and patriarch of Maju Group. Checks on the Companies Commission of Malaysia (CCM) reveal that the remainder 20% in PFC is held by Muammar Gadaffi Abu Talib. The company’s directors are Abu Talib, Muammar Gadaffi, Azman Mohd and Abdul Malek Omar.

Its nature of business according to the CCM, is fabrication works, foundry casting, trading and plant maintenance.

For its financial year ended December 2009, PFC raked in some RM13.98 million in after-tax profit, from RM402.15 million in revenue.

Sunday, January 16, 2011

Saturday, January 15, 2011

Friday, January 14, 2011

GUH ... Jan11

GUH Holdings Bhd has signed a preliminary agreement with the Development General Co of Jiangsu Gaochun Economic Development Zone, Jiangsu Province, China, for the construction of a 100 million litre per day (MLD) water treatment plant and distribution network.

GUH Holdings would undertake the construction of the plant on a build-operate-transfer basis. The investment for the project is estimated at 180 million yuan (RM83.5 million), excluding the distribution network, and the implementation will be in two phases of equal capacity.

The project would be funded through a combination of internally generated funds and borrowings, which would be arranged after the feasibility studies were concluded.

For its nine months ended September 2010, GUH posted a net profit of RM32.22 million on the back of RM232.58 million in sales. As at the end of September, GUH had net cash and bank balances of RM85.5 million.

Its shareholders equity as at the end of September stood at RM380.9 million.

This is GUH’s maiden foray into water treatment. GUH has a finger in several businesses, namely electronic, electrical, property development, plantation and power generation.

The electronic division is principally engaged in the manufacture and sale of printed circuit boards, while its electrical division sells electrical goods and appliances.

GUH’s property division arm, meanwhile, is actively involved in a development project in Taman Bukit Kepayang and a mixed development township in Seremban.

The company has also expanded into oil palm cultivation with an estate of 385 acres situated in Kuala Muda, Kedah.

GUH also has an associate company that operates a power plant in Cambodia.

GUH (previously known as Grand United Holdings Bhd) is controlled by its executive chairman Datuk Seri H’ng Bok San.

Thursday, January 13, 2011

Ivory ... Jan11

The Penang property developer Ivory Properties Group Bhd has been actively acquiring land on the island, where it is a prominent developer.

The group is trading at a steep discount (early Jan 2011) to its revised net asset value (RNAV), which will be boosted after the group’s latest acquisition of prime land in Tanjong Tokong. Trading at about RM1.05, Ivory is valued at a discount of 61.1% to its RNAV of RM2.70 per share.

Ivory was listed in July 2010, one of the few IPOs in 2010 that have yet to close below its initial offer price of RM1. The stock hit RM1.41 just three days after listing on July 29 2010, while it saw a low of RM1.03 on Dec 29 2010.

Ivory’s acquisitions of land since its listing involved two tracts of prime land on Penang island.

In August 2010, the company bought prime sea front land measuring 1.1 acres in Batu Ferringhi for RM25 million. Then in September, it had proposed to buy all the remaining shares in Tanjong Tokong Garden Development Sdn Bhd for RM37.6 million. This opened the door for Ivory to develop a 2.3-acre tract of prime freehold land in Tanjong Tokong, where the take-up is expected to be strong due to its strategic location.

The land will be developed into an integrated lifestyle concept area called “City Mall”. “City Mall” comprises 175 condominium units and a retail mall with a gross development value (GDV) of RM368 million. This development is expected to generate a lucrative pre-tax profit of RM154 million or a whopping margin of 42%.

Ivory presently focuses solely on developing premium residential and commercial properties in Penang, albeit it also has plans for future developments in Tanjung Malim, Perak.

Given its exposure to the Penang property market, there were some concerns that the group’s sales would be affected if Penang’s property market were to cool after the present “heat”.

Ivory’s steady growth is evident from its financial performance.

For the nine months ended Sept 30, its revenue of RM122.1 million has already slightly surpassed the whole of last financial year’s RM121 million.

This was attributed to a higher percentage of completion for Phase 2 of Penang Times Square, while the Moonlight Bay project in Batu Ferringhi was completed in 3Q.

Net profit for the nine-month period rose 46% at RM25 million compared with FY09’s full-year net profit of RM17.2 million.

Ivory held cash of RM27.56 million as at Sept 30 2010, against total borrowings of RM100.04 million. Its net debt of RM72.48 million translated to a net gearing ratio of 39.9%, based on shareholders funds of RM181.47 million.

Year-to-date earnings per share totalled 16.5 sen while net assets per share stood at 98 sen.

The group had raised about RM45 million in gross proceeds from its public issue of 44.9 million new shares of 50 sen each.

It had completed about 24.8 acres of development with a total GDV of RM675.6 million, with RM834.1 million of ongoing projects. It estimates the GDV of its future projects at RM1.9 billion.

Some of its completed projects are established buildings in Penang such as Phase One of Penang Times Square, Birch The Plaza condominium and shopping complex in George Town, and The View Twin Towers condominium in Batu Uban.

Wednesday, January 12, 2011

SIGGAS ... Jan11

It is looking to cash in the growing demand for industrial gases, setting up a new hydrogen generating system at its plant and expanding aggressively in East Malaysia to leverage on projects under the SCORE.

It will be targeting new and existing customers across all industries, focusing mainly on the palm oil and biodiesel industries for a start.

The expansion plan is in line with the expected increase in demand for industrial gases in 2011. It will also benefit from the roll out of infra projects by the government as argon and oxygen are needed in construction. SIGGAS will only see the bulk of the contribution from these projects in FY2012 as the rollout is only expected in mid 2011.

Construction on the Kemena plant is expected to start mid 2011 and begin commissioning in 2QFY2012. Kemena is a strategic location for SIGGAS to set up a based in Sarawak in light of the implementation of the SCORE.

While SIGGAS’s main focus is the local market, the Sarawak plant puts it in a position to explore markets in Brunei and Indonesia.

As at Sept 30, 2010 SIGGAS had borrowings amounting to rm13.69 million while cash and bank balances stood at rm19.50 million. In a net cash position SIGGAS can gear up to fund its expansion plans.

For nine months ended Sept 30, 2010, it posted a net profit of rm4.52 million on the back of rm5=41.5 million in revenue.

For FY2009, the group posted a net profit of rm7.11 million on the back of rm54 million in revenue.

JCorp ... Jan11

Johor Corp (JCorp) is considering selling various assets including some landbank, properties and plantation assets to partly repay its current RM3.6bil debt which is due for repayment in July 2012.

The state investment arm first plans to bring down the debt level of RM3.6bil to a “sustainable level” of between RM1bil and RM1.5bil following a debt restructuring exercise.

That would mean that it needs to raise at least RM2.1bil by 2012. About 70% (source of funding) for the RM2.1bil needed has already been identified and this includes selling some of its assets. The group has “saleable assets” of RM2.1bil.

The remaining 30% will come from sales from its stable of local and foreign assets. As for the assets available for sale, they may be grouped into three categories – plantation land, industrial land and commercial property while maintains that JCorp’s stakes in Kulim, QSR and KFC are not for sale.
JCorp does not rule out selling part of Kulim’s 50.75% stake in New Britain Palm Oil Ltd if the need arises.

JCorp's landbank and properties are largely in Johor and this includes up to RM2.5bil in commercial properties. As at March 2010, it had about 2,000ha to be developed in the Iskandar Malaysia region.

The group's remaining debt would be restructured via new loans or instruments.

JCorp has appointed CIMB Bank and Maybank Investment Bhd as advisors for the restructuring. Both banks are also the biggest lenders to JCorp which could probably mean that both banks own the bulk of the bonds due for maturity.

It has RM705mil in cash but a whopping RM6.62bil in debt and with hardly any free cash flow.

The RM3.6bil debt was due to JCorp's investment projects since 2000, “mainly in landed property and industrial areas”.

JCorp is the ultimate shareholder of the lucrative fast-food businesses of QSR and KFC Holdings (M) Bhd. Its interests in both companies are held through its 53%-owned subsidiary Kulim (M) Bhd, which main business is in the plantation sector.

Kulim owns a 57.5% stake in QSR, which in turn, owns a 50.6% stake in KFC.
As one of the country's largest state economic development authorities, JCorp has about 250 companies under its stable from which it currently derives RM90mil in annual dividend income.

There was a possibility some of these might be listed in the future. But the proceeds will not be to repay its current debt due for maturity. Among the businesses slated to be listed is EA Technique Sdn Bhd, a shipping company held by Sindora Bhd, Kulim’s 75.2% subsidiary.

There are also plans to sell assets to JCorp’s listed entities.

JCorp boasts a vast landbank comprising industrial, commercial and residential lands as well as hotel properties in Johor … valued at rm3.8 billion. JCorp plans to unlock the value or develop these lands to generate income for the group. Its close relationship with the state government to will be an added advantage.

JCorp also owns 11% of the land within the central business district in JB.

JCorp's other key assets apart from those in the recent limelight include private healthcare service provider KPJ Healthcare Bhd, property development companies Johor Land Bhd and Damansara Realty Bhd, intrapreneur venture business Sindora Bhd and the London-listed plantation company, New Britain Palm Oil Ltd (NBPO). (Kulim owns about 50% of NBPO). NBPO is one of the world's largest producers of sustainable palm oil.

Tuesday, January 11, 2011

PMetal ... Jan11

The company recorded RM86 million in earnings for the financial year ended 2010.

Press Metal was a proxy to the commissioning of Bakun dam because of its first-mover advantages with its aluminium smelter plant in Mukah.

The plant currently runs on a production capacity of 120,000 metric tonnes.

The resolution of the tariff structure should pave the way for Press Metal to execute Phase II of its capacity expansion plan costing US$600 million, taking advantage of the access to cheap power from Bakun dam.

Press Metal has strong bargaining leverage in securing power off take at favourable terms from the Bakun dam as it is the only energy-intensive player currently operational in the Sarawak Corridor of Renewable Energy (SCORE).

It was reported that the Sarawak state government had in September 2010 offered over RM6 billion to acquire the Bakun dam from the federal government and will raise its bid to more than RM7 billion if the federal government offers a flexible payment mode.

Meanwhile, the ownership status and tariff structure is expected to be finalised soon as the dam is expected to be commissioned by May 2010.

MPMB ... Jan11

Market talk that the group could be firming up plans to relist its gaming subsidiary
Magnum Corp Sdn Bhd.

However, sources say that the group had yet to firm up plans to relist Magnum Corp but could be negotiating with CVC Capital Partners for a deal to pare down the latter’s stake in the gaming firm, before a potential relisting, to a much lower shareholding in the region of 20%.

This could possibly mean MPHB buying back some shares in Magnum Corp from CVC. The pricing would be higher (compared with when Magnum Corp was privatised) because Magnum’s performance has improved. CVC may want to divest some stakes in Magnum Corp given that it has been more than two years since it invested in the privatised gaming outfit in 2008.
Industry observers say it is unlikely that relisting plans are already on the table but believe it is ‘the right time’ for the parties involved to firm up the agenda on the back of a bullish market.

MPHB had told Bursa Malaysia in August 2010 that it was at a “very preliminary stage” of looking at the possible relisting of Magnum Corp and was exploring various options for it.

The group also said it had the intention to maintain a 51% investment in Magnum Corp in the event the listing exercise was undertaken. MPHB pointed out that when Magnum Corp was privatised in 2008, CVC, which owns a 47% stake in the gaming outfit, had its own exit strategies based on timing and expected return.

One of the exit strategies contemplated by CVC was through the relisting of Magnum on the Main Market of Bursa Malaysia. Magnum Corp, the first operator of four-digit numbers forecast betting in the country, was taken private in 2008 in a deal worth RM4 billion.

According to an industry observer, the strong showing in the gaming sector and prevailing market sentiment augured well for CVC to sell its shares but that did not mean MPHB was pushing for a timeline for CVC to exit.

MPHB’s net profit for 3QFY10 surged 70.5% to RM86.49 million from RM50.72 million a year ago on the back of a stronger revenue of RM850.70 million versus RM813.24 million. It posted basic earnings per share of 8.1 sen while net assets per share stood at RM2.14 as at Sept 30.

The sale of four-digit forecast tickets contributed RM3.02 billion or about 90% of the group’s revenue of RM3.32 billion in FY09. As for FY08, the sale of such tickets accounted for RM2.87 billion of MPHB’s revenue of RM3.13 billion.

While there could be many ways to relist Magnum Corp, there was a possibility that the parties involved might explore the possibility of issuing new shares to shareholders as a dividend-in-specie or via placement.

MPHB can also undertake other forms of corporate exercises if they merely want to raise funds. Relisting of Magnum is just one of the many ways and such talks have been for a while now.

MPHB could also dispose certain businesses under its umbrella which lack “economies of scale” as well as sell several pieces of prime land in the city and its surrounding areas for a handsome price.

Monday, January 10, 2011


3 IPOs Ballot today, there are:-

TAMBUN INDAH LAND BERHAD - an overall oversubscription rate of 14.90 times, click here

K.SENG SENG CORPORATION BERHAD - an oversubscription rate of 14.88 times, click here

BENALEC HOLDINGS BERHAD - an oversubscription rate of 4.92 times, click here

Kenanga ... Jan11

RAM Rating Services Bhd has revised the long-term ratings of Kenanga Investment Bank Bhd’s (Kenanga IB) from stable to negative on expectation of the bank’s significant group level pre-tax loss for the financial year ended Dec 31, 2010.

Its expectations of a pre-tax loss was based on additional loan-impairment charges from further write-downs in collateral values and an impairment on its investment in an associate, following the cleanup of the bank’s loan book and investments.

The negative outlook also reflects concern about the decline in Kenanga IB’s market share in stockbroking.

Despite the negative outlook, RAM Ratings reaffirmed Kenanga IB’s long- and short-term financial institution ratings at A3 and P1, respectively.

While pre-impairment profits remained healthy, Kenanga IB’s group level pre-tax loss of RM29.4 million in the first nine months of FY2010 (9M FY Dec 2009: pre-tax profit of RM15.2 million) stemmed from RM58.6 million of impairment charges on its corporate loans and share margin-financing facilities.

As at end-September 2010, the Bank’s Tier-1 and overall risk-weighted capital adequacy ratios stood at 37.7% and 38.4%, respectively (end-December 2009: 38.7% and 39.5%).

In light of the expected losses, the Bank’s parent, K&N Kenanga Holdings Berhad had made a RM40 million capital injection in November 2010.

Based on our estimates, RAM Ratings does not expect a deterioration in the bank’s capitalisation level.

Given Kenanga IB’s focus on maintaining a highly liquid position, its liquid-asset ratio had increased to 84.6% as at end-September 2010 (end-December 2009: 73.4%), through significant cash holdings as well as short-term funds and government securities.

However, Kenanga IB’s rating outlook may be revised to stable if it can demonstrate sustainable profits and successfully defend its market share in the stockbroking business; the ratings may be downgraded if its loss position and business fundamentals deteriorate beyond RAM Ratings’ expectations.

Ekovest/MRCB ... Jan11

Sources say Ekovest together with MRCB is on the verge of receiving a letter of award from the government for a portion of the Klang Valley cleaning project.

It will be a joint venture between MRCB and Ekovest, with that portion worth a potential RM8 billion. It could potentially involve some 80 acres, specially on the WP side of the Klang River. The river itself spans 120 km, with 40 km under the purview of the federal government and the remaining 80 km under the Selangor government.

MRCB-Ekovest is very close to getting the award, with an announcement on the matter expected to be made soon.

The government had announced the Klang River clean up, which forms part of a RM15 billion rehabilitation and development plan for the river, under the Economic Transformation Programme.

It could potentially cost rm3 billion for sewerage and sullage management and rm533 million for drainage and flow management to transform the state of the Klang Valley.

The name that was previously linked to the river cleaning project is YTL Corp and I-Bhd.

Sunday, January 9, 2011

Saturday, January 8, 2011

Friday, January 7, 2011

Glomac ... Jan11

GLOMAC recorded a higher Net Profit of RM15.9m for 2QE Oct 2010 against RM9.3m same quarter a year earlier, due to contributions from on-going progress completion from Glomac Tower and Glomac Cyberjaya. PBT for 2QE Oct 2010 almost doubled to RM32m from RM16.3m previously. Revenue for the period was 86.3% higher at RM140.9m versus RM75.6m same quarter a year ago.

For 1HE Oct 2010, GLOMAC recorded a Net Profit of RM31.4m on Revenue of RM267.2m.

GLOMAC said its Unbilled Sales at end Oct 2010 was RM572m, and this remained one of the key earnings growth drivers for the Group going forward.

We are confident that our sales momentum can be sustained. GLOMAC is well positioned, having more than RM2.5 bil worth of development projects for launch, Group EC, FD MANSOR said in a statement. Our Balance Sheet is healthy, giving us the capacity to further seek out landbank acquisition opportunities, he said.

NHFATT ... Jan11

The recovering economy and the elimination of duties on auto and parts under the AFTA scheme in 2010 worked in favor of the domestic auto parts industry.

With its business strongly correlated to the Malaysian passenger car market, New Hoong Fatt – which is Malaysia’s largest replacement parts maker by market shares - has great prospects.

The trend is likely to continue in future, judging by Malaysia’s favourable young population demography.

Its focus on the replacement equipment market is not subject to the volatility of new car sales. It is able to sustain its revenue and profit growth during the global financial crisis in 2008 and 2009.

It is underperformance could be due to the tight liquidity of the stock and the volatility of steel and plastic resin war material prices. It is also because of heightened competitiveness in the replacement parts market. AFTA scheme may open new avenues for auto and auto parts players, it can also be a threat to others, with more competitive pricing and a greater number of players in the market. Also, unlike with the OEM or OEM market, replacement parts manufacturers have no cornerstone customers and buyers tend to opt for the cheapest products.

In the face of heightened competition, it is allocating some rm30 million for capex in FY2011.

Its net gearing ratio increased to 5.6% year on year. Its net assets per share rise to rm3.27 as at Dec 31, 2009.
Its re rating hinges on its ability to develop new export markets to expand its scale of business.

Thursday, January 6, 2011

SPSetia ... Jan11


SP SETIA's Net Profit rose 47% to RM251.81m for FYE Oct 2010 from RM171.23m for FYE Oct 2009 due to property development activities carried out in the Klang Valley, Johor Bahru and Penang.

The Company said Dec 9, 2010 that Revenue rose 24% to RM1.745 bil from RM1.408 bil a year ago while EPS was 24.77 sen versus 16.84 sen. " .... The current year PAT was arrived at after expensing approximately RM17m for employee share options granted pursuant to the Company's ESOS which was launched in May 2009.

" .... Selling and marketing expenses include the cost of financial incentives of RM33m borne by the Group pursuant to its successful '5/95', 'Best for the Best and Invest Setiahomes' campaigns ...." said the Company.


Bjtoto ... Jan11

Speculation is rife that BJtoto will be privatized by its holding company … BJLand.

Currently, BJCorp directly and indirectly via BJLand, holds about 51% in BJToto. Privatization exercises among NFOs are not rare because gaming companies are known for their strong cash flow.

The apparent reason for such a move is that BJLand’s rm711 million exchangeable bonds issued in Aug 2006 are due for redemption on Aug 15, 2011. The bonds are pledge to BJtoto shares. This means the property arm of BJCorp is in need of cash.

The bondholders have the option of either converting the debt papers into BJToto shares or receiving cash payment. Whatever the case, it is an issue that BJLand has to face.

If bondholders were to convert the debt paper into BJToto shares, BJLAnd’s shareholding in the NFO would be diluted. This would not augur well for BJLAnd since it has enjoyed good dividend payment from BJTOto.

One of the reasons driving the possibility of BJToto’s privatization is to keep the Berjaya group (Direct & Indirect)’s interest in BJToto, whish is some 51% intact.

BJLand is likely to use the dividends received from BJToto to redeem the exchangeable bonds. However, BJtoto’s operating profit has dwindled recently mainly due to higher taxes.

Hence it makes more sense for BJLand to take the complete control of BJToto’s cash. Privatizing BJtoto would give BJLand more access to the dividends, as BJtoto would be a wholly owned unit of BJLand. Also, BJLand would be able to get some cash to help it redeem the bonds.

If BJCorp were used as a vehicle to privatize BJtoto, however, it would be a cash absorbing exercise for the former, as it holds a very small direct stake in the gaming company. The bulk of about 43.5% stake is held via BJLand.

It ahs been reported that the entry of a strategic investor could be a main driver for the potential privatization of BJtoto. Privatization of BJtoto would also enable BJLand to realize some value on its investment in the NFO if a strategic partner were to take a stake in BJtoto later. The proceeds from the equity sales could be used to redeem its exchangeable bonds.

Industry observer says it is possible that BJtoto’s shareholders will privatize BJToto before bringing in a strategic partner.
Based on BJToto operating cash flow, BJLand wpuld have no problems raising capital for a potential privatization via borrowings.