Friday, September 30, 2011

Catcha ... Sep11

Catcha Media has proposed to acquire the entire equity interest of Singapore’s Haute Groupe Pte Ltd (HGPL) for a total consideration of S$5 million (RM12.4 million), to be satisfied in cash and via new shares.

HGPL runs a luxury fashion sales website,, operating predominantly in Singapore with 25,000 active users.

The proposed acquisition comes with a profit guarantee of S$1.5 million (for a 12-month period commencing after conclusion of the exercise) from the previous shareholders, Long Siew Fong and Low Choong Lang.

This values the acquisition at a three times forward price-earnings ratio (PER), which we deem cheap. HGPL was initially set up to sell luxury goods at a discount for a limited time in warehouses or public halls.

Early 2011, it began operating a luxury flash sales website,, which sells luxury goods online at a discount for a limited time-frame. The website offers up to a 70% discount on luxury items ranging from branded accessories, handbags to watches and sunglasses.

The purchase consideration will be partly satisfied by the issuance of 1.6 million new shares in Catcha Media at 75 sen each, with the remainder to be paid in cash. This could indicate a potential earnings per share (EPS) dilution of 1%, which deem insignificant to have any impact on the share price given the new acquisition’s earnings accretion of more than 30%.

Cash funding should not be an issue given the company’s recent IPO which raised more than RM15 million.

While this marks Catcha Media’s first venture into e-commerce, the strategy is intended to complement its existing business by introducing the exact model in Malaysia leveraging on the strong 10 million active users recorded in MSN and portals.

KUB ... Sep11

Three private equity firms, including foreign ones, are "very" keen to partner KUB
Malaysia Bhd and acquire stakes in the A&W fast-food chain. The company is evaluating proposals from the firms and expects to announce its strategic partner by the year-end (2011).

There is no specific whether KUB wants to dispose of 49 per cent or more of its stake in A&W.

KUB is seeking partner or partners with good money and management skills.

Earlier reports said that KUB was willing to sell as much as 45 per cent of A&W stake to a strategic partner to take the business to greater heights.

KUB is the licensee of A&W in Thailand and Malaysia since 2002. It currently has 45 outlets in Malaysia and 43 in Thailand. It plans to increase the number to 100 each in Thailand and Malaysia by 2015.

KUB’s official denied that QSR Brands Bhd, the parent company of KFC Holdings (M) Bhd, had expressed interest in taking over A&W.

On the RM1.23 billion intra-city commuter train service network in Johor, the company would give an update on the project once it presents the proposal to the Economic Council.

It was reported that the Johor state government had given the approval for the intra-city commuter train service network project to Metropolitan Commuter Network Sdn Bhd (MCN),a joint-venture company between KUB and Malaysia Steel Works (KL) Bhd.

MCN had proposed to the fe-deral government the construction and operation of a rail transit network in Iskandar Malaysia in Johor, with services extending from Johor Baru Sentral to Woodlands, Singapore. The intra-city train service entails the building of seven stations and 16 halts connecting all major suburbs in Iskandar Malaysia, which covers south Johor.

Thursday, September 29, 2011

SCIB ... Sep11

Its precast concrete products and industrialised building systems (IBS) are in demand for the construction of manufacturing plants by energy-intensive industries and access roads to hydroelectric dam projects in Sarawak Corridor of Renewable Energy (Score).

SCIB was now supplying precast concrete products, like foundation piles and U culverts, worth more than RM3mil to Tokuyama Corp and Press Metal Bhd's projects in Samalaju Industrial Park, Bintulu. Tokuyama is constructing a polycrystalline silicon plant while Press Metal is building a new aluminium smelter.

SCIB is expecting more jobs from Tokuyama in its phase II expansion project and Press Metal. SCIB was also looking into supply contracts to other potential clients when they started to build their factories in Samalaju Industrial Park. These clients include Asia Minerals Ltd and OM Materials, which are now both undertaking earth works to set up manganese smelting plants. Another 10 investors were reportedly planning manufacturing facilities in Samalaju to take advantage of the competitive power from the 2,400MW Bakun dam.

SCIB was supplying infrastructure products for the construction of access roads to the 944mw Murum dam under construction and pre-stressed beams for the construction of new bridges.

Due to labour shortage and product quality concerns, more developers had opted for precast concrete products and IBS prefabricated concrete components for their projects.

In the earlier years, SCIB's IBS components were used mainly in the construction of rural public libraries.

SCIB now owns and operates three factories in Kuching under wholly-owned subsidiaries SCIB Concrete Manufacturing Sdn Bhd, SCIB Industrialised Building System Sdn Bhd and SCIB Infrasworks Sdn Bhd.

SCIB's group revenue had been growing by about 15% yearly in the past four years.

Besides catering to the Sarawak market, SCIB which has some RM15mil contracts in hand exports its products to Sabah and Brunei.

For the financial year ended Dec 31, 2010, the SCIB group registered revenue of RM43.9mil and a net profit of RM825,000. It returned to the black last year after several periods of consecutive losses.

For the first half of 2011, the group posted a pre-tax profit of RM1.04mil while revenue stood at RM22.1mil against a pre-tax loss of RM439,000 and revenue of RM20.8mil in the previous corresponding period.

MMHE ... Sep11

The heavy engineering arm of national state oil firm Petronas is in talks for a proposed fabrication yard in Brunei were at a preliminary stage.

The yard announced by Prime Minister Datuk Seri Najib Razak, is one of two projects to be undertaken by Petronas in the Southeast Asian sultanate with the other being a $1.6 billion petrochemical complex.

Malaysia Marine has embarked on an expansion plan, which includes the proposed acquisition of Sime Darby’s fabrication yard in Pasir Gudang for 394 million.

It is bidding for projects valued at as much as RM6 billion in the country and overseas. The company’s order-book currently stands at RM3.1 billion. The group had submitted bids for engineering, procurement, construction, installation and commissioning and, construction projects in the oil and gas industry, mostly in Malaysia.

MHB’s projection for capital expenditure depended on its yard optimisation programme and some RM2.7 billion had been allocated for the purpose. A total of RM700 million has been utilised and the remaining RM2 billion is for over a period until 2014.

Upon completion of MHB’s acquisition of Sime Darby Engineering’s Pasir Gudang yard in Johor, the company’s yard space would increase from 148.8ha to 195.2ha while capacity would rise to about 130 tonnes per year from about 70 tonnes currently.

MHB offers a wide spectrum of engineering and construction, marine conversion and marine repair services from its yard in Pasir Gudang and operates a yard in Kiyanly, Turkmenistan, on behalf of Petronas Carigali (Turkmenistan) Sdn Bhd.

With the acquisition, MHB will be able to pitch for more projects and can increase its margin and profitability.

MHB’s net profit was lower at RM79 million for 1QFY11 ended June, compared with RM110.2 million a year ago. Its revenue came lower at RM957.8 million against RM1.17 billion. Earnings per share dropped to 4.9 sen from 8.2 sen.

MHB has retreated from its peak of RM8.67 recorded on July 6 amid the weak market sentiment. The stock has fallen 29% to RM6.15 from its historical high.

Wednesday, September 28, 2011

Bolton ... Sep11

It will be launching projects with a gross development value (GDV) of RM3 billion over the next 12 months.

The group has three projects to be launched with a total GDV of RM1 billion. It has also received preliminary approval for our proposed revision to the development plan of the 1.74 hectare Jalan Mayang land in the KLCC area, which we plan to launch in 2012.

For the financial year ended March 31, 2010, the group posted a lower pre-tax profit of RM20.3 million as compared to RM50.7 million previously, while revenue was down to RM243.8 million from RM257.5 million.

The decline in pre-tax profit was due to one-off charges, namely, the mark-to-market losses on quoted securities of RM6.5 million and higher marketing expenses of RM17.6 million incurred due to the record sales performance achieved during the year.

BRDB ...Sep11

The fate of BRDB’s proposed asset divestment plan is largely in the hands of offshore
investors, including the company’s single largest shareholder that owns a 23.57% equity stake held by Credit Suisse.

The 23.57% equity stake in BRDB held by Credit Suisse is an omnibus account which consist of a few nominees. An omnibus account is one which consists of individual accounts that are combined into one account, allowing for easier management.

Its board has accepted the offer from major shareholder, Ambang Sehati Sdn Bhd, to acquire four of BRDB's investment assets for RM430 million net of liabilities of RM484 million. Following the proposed disposal, BRDB would distribute part of the proceeds to the shareholders via a net cash dividend of 80 sen per share.

Among shareholders with over 3% equity stakes, foreign offshore nominee accounts collectively held about 60.9% shareholding in BDRB. The ultimate owners of these shares were not disclosed in the annual report.

It is not known who ultimately owns the big block of 114.6 million shares that are parked under HSBC Nominee (Asing) Sdn Bhd for Credit Suisse. Even BRDB CEO Datuk Jaganath Sabapathy said he does not know who the company’s largest shareholder is when asked at Monday’s media briefing.

Ambang Sehati Sdn Bhd, which has an 18.9% stake, will abstain from the voting on the proposed asset sale. BRDB chairman Datuk Mohamed Moiz controls Ambang Sehati. Logically, this means BRDB shareholders who hold the remaining 81.1% shareholding would cast their votes at an EGM to be convened later.

And among them, foreign shareholders would be the largest group to decide on whether to permit the BRDB board to part with the company’s four investment properties, including its crown jewel Bangsar Shopping Complex (BSC) for a total consideration of RM914 million, comprising RM430 million cash and net liabilities totalling RM484 million to be assumed by Ambang Sehati.

Meanwhile investors have raised concerns over the lack of clarity on the ownership of a 23.6% block of shares in Bandar Raya Developments Bhd (BRDB) that will hold sway in determining the success or failure of a proposed asset sale to a related party. The authorities need to determine the ultimate shareholder of this nominee account and whether this block of shares is held by a related party.

The largest shareholder of BRDB is the nominee account for Credit Suisse which holds the 23.6% block. MSWG pointed out that this stake amounted to 30% of total disinterested shareholders of BRDB and that “it could be implied that this 30% block may determine the outcome at the EGM as it might comprise more than 50% of the shares of disinterested shareholders actually attending and voting.” BRDB's proposal requires only a simple majority of disinterested shareholders votes to proceed.

Other issues are that BRDB stands to “lose earnings” if the assets are disposed of. The assets contributed RM10mil to the group for FY10. The loss of future stable earnings could be greater than RM10mil per year if rental rates increase and the occupancy rates at CapSquare Retail Centre, BSC and Menara BRDB improve. Therefore the pro (benefit) of interest savings is negated.”

MSWG also questioned the “urgency” in BRDB selling its assets, considering that the board had accepted the offer merely two weeks after the receipt of the offer. BRDB should consider calling for open bidding for the assets and a reasonable time be allocated for that process.

MSWG quoted that the market value for Menara BRDB and BSC as provided by the independent valuer was on the basis of 30% occupancy. BRDB wishes to clarify that the independent valuation of BSC was based on an occupancy rate of 95% while the valuation for Menara BRDB is based on current occupancy rate of 70% and projected long-term occupancy rate of 95%. BSC and Menara BRDB are valued by CH Williams Talhar and Wong.

Going Forward … It is looking to participate in more government-linked property developments, as it
looks to become a full-fledged property player.

BRDB has put in a bid to participate in the Rubber Research Institute (RRI) land in Sungai Buloh as well as the Lever Brothers site in Bangsar. It is among parties that have been shortlisted to put in their proposals for the Lever Brothers land.

BRDB also aims to deliver property developments worth RM1bil in gross development value (GDV) every year, starting from its year ending Dec 31, 2012.

If BRDB's proposed disposal of BR Property Holdings Sdn Bhd which owns Bangsar Shopping Centre (BSC) and Menara BRDB, CapSquare Retail Centre and Permas Jusco Mall for the indicative value of RM914mil goes through, the company will be a lot leaner and will be in a position to capitalise on opportunities. Its gearing automatically drops from about 0.7 time (x) to 0.38x.

The master developer of the RRI land is Kwasa Land Sdn Bhd (KLSB), a 100% subsidiary of the Employees Provident Fund. The development, over 3,300 acres, will consist of an integrated township with a mix of residential, commercial and industrial properties and has been dubbed as the new Klang Valley hub.

BRDB's proposal is skewed more towards residential developments on the RRI land, while for the Lever Brothers land, it will be a mixture of residential and commercial. The Lever Brothers land's, over 20 acres, has been empty since Unilever Malaysia moved out in 2003. Pelaburan Hartanah Bumiputra, a government unit formed to foster bumiputra ownership of property presently owns this prime land.

Currently, BRDB has RM10bil worth of jobs at hand and is expected to be kept busy over the next 3 to 5 years.

For the next two financial years, BRDB will recognise GDV from its projects in Verdana, BluWater, Medang Serai and Elita of The Straits View Residences in Johor.
Jagan said BRDB would maintain its core team to manage BSC.

Tuesday, September 27, 2011

Airasia ... Sep11

News leaked that unit Thai AirAsia may be postponing the proposed initial public offering (IPO) in order to restructure and conduct due diligence before listing in the fourth quarter 2011.

However, AirAsia said the IPO remained on schedule. AirAsia investor relations manager Benyamin Ismail said in an e-mailed statement yesterday that the proposed IPO had not been delayed. The news was incorrect and that the IPO was scheduled for the fourth quarter 2011.

Speculation that the airline, which was targeting to raise US$200mil from the IPO to use as cash reserves and to repay debt, needed more time to restructure and conduct due diligence before listing in Bangkok.

Reuters, quoting CIMB Securities (Thailand) corporate finance head Sithichai Mahakun, said Thai AirAsia had delayed the share sale plan to the first quarter of 2012. CIMB Securities (Thailand) is the financial adviser of the airline.

There was also news that Airasia’s chief executive officer and major shareholder Tan Sri Tony Fernandes was selling out after a share-swap deal with Malaysia Airlines (MAS) in Aug 2011.

Analysts covering the stock said the sell-down on the airline's shares was also in line with the sell-down on stocks with high foreign shareholdings such as CIMB, IJM, and Petronas Chemicals.

Monday, September 26, 2011

WahSeong ... Sep11

It is expected to be a prime beneficiary from the North Malay Basin project which Petronas and its production sharing contract partners will develop, including a new 200km pipeline to transport gas from the fields to Kerteh, Terengganu.

The tight timeline - extracting first gas by 2013 - could see Wah Seong securing a major coating job as soon as 1H12. Petronas might call for bids as early as end-2011 to meet the tight timeline.

Wah Seong’s RM1.3 billion order book would drive its earnings. Its motable major contract wins are the RM137 million APLNG contract (starts in 4Q11) and RM85m Kebabangan contract (starts in 3Q11), which will contribute positively in 2H11 and FY12.

Wah Seong Corporation Bhd is in a better shape to weather a downturn now, compared to 2008, given its strong order book to anchor earnings and a firm balance sheet with only a 15 per cent net gearing.

It is expected to ride on the government’s efforts to fast-track gas field exploration to solve the critical gas shortage.

Proton ... Sep11

There has been renewed interest in Proton, with talks of state controlled investment arm Khazanah Nasioanl looking to hive off its 4274% stake in Proton very soon.

The names surfaced as possible acquirers of the company are DRBHicom, Naza group and the Mofaz group. Other names that are being bandied about include the Sapura Group and two high net worth individuals, one linked to prominent business group and another who is based mainly in the UK.

However all the above mentioned companies have denied being interested in Proton.

There has also been talk of potential management buyout at the auto player, but this remains unsubstantiated. Financing for such effort could be an issue, but the prospect cannot be ruled out completely.

The renewed interest in Proton is induced by its depressed stock valuations as its earnings come under pressure from the massive capital investments in Lotus Group International Ltd.

How Khazanah reacts to new offers, however, remains to be seen. Khazanah will be gald to be rid of Proton even if valuations are low. The fund does not have any board representation.

As at end June 2011, its net assets per share stood at rm9.86, more than 3 ½ times its trading price, which was depressed following the weak financial results.

Proton says the financials were adversely impacted by higher expenses incurred at its Lotus unit. A at end June 2011, Proton had cash, bank balances and deposits of rm1.41 billion, while on the other side of the balance sheet, the company’s long term debt commitments stood at rm668 million and its current liabilities were rm96.14 million. Proton’s cash flow from operation activities was a mere rm4.77 million, compared with rm139 million in the corresponding period a year ago.

While there is no certainty that Khazanah will divest Proton anytime soon, market talk has intensified.

Friday, September 23, 2011

MSM ... Sep11

It is relatively recession-proof business — sugar is a staple product with few substitutes. However despite its dominant market position as the largest sugar refiner in the country, few were overly excited over MSM’s growth prospects. Domestic sugar consumption is forecast to grow in the low single-digit pace annually, going forward.

MSM has adopted a dividend policy to pay out at least 50% of its annual net profits.

On the other hand, investors should bear in mind that while demand for sugar is expected to be fairly recession-proof, MSM’s margin and profits could still be hit by rising costs. In particular, the company is exposed to fluctuations in prices of imported raw sugar while the price of refined sugar in the country is controlled by the government.

Sugar is a staple food product consumed by all households. It is also widely used in the food manufacturing and processing industry — for example in the manufacturing of carbonated soft drinks, non-carbonated drinks, biscuits and cookies, bread and bakery products, chocolate products and sugar confectionery, etc. In short, sugar demand and MSM’s customers hail from a broad cross-section of the economy.

Currently, MSM owns two of the four refineries in the country — Malayan Sugar Manufacturing Company (MSM) in Prai, Penang and Kilang Gula Felda Perlis (KGFP) in Chuping, Perlis. Tradewinds (M) owns and operates the other two refineries, Central Sugar Refineries in Shah Alam, Selangor and Gula Padang Terap in the northern state of Kedah.

Even though sugar demand is expected to grow at a steady pace and there are limited competitive pressures, at least for now, MSM’s earnings are exposed to cost inflation, in particular fluctuations in raw sugar prices. Raw sugar is the company’s single largest cost component, accounting for nearly 87% of cost of sales in 1Q11.

The company owns and leases a sugar cane plantation totalling 5,698ha and operates a sugar cane mill in Chuping, Perlis. However, the bulk of its raw sugar requirement — about 97% of the total consumed in 2010 – is imported mainly from Australia and Brazil.

About half of the company’s raw sugar purchases is sourced under fixed price three-year contracts while the balance is bought from the spot market. The current (Sept 2011) long-term supply contracts were signed in early 2009 at roughly 17.5 sen per pound. Prices under the new contracts are expected to be significantly higher after the current contracts expire at end-2011.

Prices of raw sugar have been trending up over the past few years. Rising raw sugar prices will translate into higher costs for MSM while refined sugar in the country is a price-controlled item. Following the price hike in May 2011, refined sugar now retails at RM2.30 per kg. To make up for the difference between market and domestic selling prices, sugar refiners currently get an additional 20 sen per kg subsidy from the government. But there is no guarantee that selling prices and subsidies will fully cover the higher cost of raw sugar in the future.

Sugar refining is energy intensive. As such, MSM’s margins and profits are also exposed to rising fuel — primarily natural gas and electricity — costs as well as foreign exchange fluctuations.

MSM reported a net profit of RM138.9 million in 1H11, up sharply from RM58.5 million in the previous corresponding period despite a 1.8% drop in revenue. The higher margin was due primarily to fair value gains in derivatives.

The company has net cash totalling RM141.7 million at end-June 2011, including proceeds from its IPO. The strong balance sheet will support future capital expansion plans and dividend payments. About RM320 million of the RM425 million proceeds from the IPO have been earmarked for capital expansion over the next two to three years.

It is also planning to expand the storage capacity for raw sugar and warehouse capacity for refined sugar products as well as increase the raw sugar melt capacity. MSM is also on the lookout for strategic investments, including upstream sugar cane plantation and investments overseas.

JAKS ... Sep11

In diversifying its business into the power sector, it will focus mainly on the Vietnamese market, with plans to expand its power generation capacity to between 5,000 and 10,000 MW over the next five to 10 years.

JAKS is a key player in the water-related industry in Malaysia. It is involved in a wide range of other businesses through its subsidiaries such as water infrastructure construction work, the manufacturing and trading of pipes and related products, general infrastructure and construction works and property development.

Venturing into the power-generating industry is part of a plan to diversify its business.
JAKS' power plant project in the Hai Duong province of Vietnam marked its first venture into that business.

The project, comprising two 600-MW units of coal-fired power plants, was projected to cost US$2bil and will be financed by equity and debt.

Construction of the project was expected to start in June 2012, with the first unit of the 600-MW plants scheduled for commercial operation in the fourth quarter of 2016 while the second unit would start producing power from the second quarter of 2017.

It would be developed under a build-operate-transfer structure and run as an independent power plant with a 25-year power purchase agreement with Vietnamese state-owned national utility Electricity of Vietnam.

The project would be fuelled by domestic coal supplied by state-owned coal company Vinacom in a 25-year agreement. At the expiry of the concession term, the project would be transferred to Vietnam's Industry and Trade Ministry.

JAKS was currently in negotiations with several parties from Asia to become a strategic investor and its joint-venture partner for its power business in Vietnam. The investor would most likely be from China and the partner would take up to 40% equity in its power business.

Thursday, September 22, 2011

LionCor ... Sep11

After turning down the Lion Group’s request for safeguards, the government is now considering proposals to provide alternative assistance to the group’s steel manufacturing unit, Megasteel Sdn Bhd, as a bolster against competition from imported hot- rolled coils (HRC).

The minister explained that the government was unable to grant Megasteel’s request for an additional 35% import tariff on HRCs as it would have big implications on upstream and downstream activities as well as steel-consuming industries like construction.

Lion group boss Tan Sri William Cheng is considering moving his steel manufacturing operations to Indonesia, which imposes a 48% duty on HRC imports to safeguard its local industry. Cheng reiterated his dissatisfaction over what he maintains is unfair competition from imported HRCs from the region that jeopardised Megasteel Sdn Bhd’s steel operations.

He is agreeable to a ceiling price for locally manufactured HRC if the government is concerned that the Lion group is “making too much profit” or behaving like a monopoly.

The tycoon’s remark about moving his steel manufacturing business out of Malaysia was met with scepticism by industry observers, who point out that the move would be a mammoth and expensive endeavour to undertake.

Currently, Cheng is undertaking a RM3.2 billion blast furnace project that will be able to produce about 2.07 million tonnes of liquid hot metal a year, of which 1.57 million tonnes can be converted to slab for sale on the open market.

Megasteel, a unit of the Lion group’s flagship Lion Corp Bhd, is the country’s sole manufacturer of flat steel products producing hot rolled and cold rolled coils.

Lion Corp owns 79% equity interest in Megasteel and another Lion group listed entity, Lion Diversified Bhd, holds the remaining 21% stake.

Former international trade and industry minister Tan Sri Rafidah Aziz is the chairman of Megasteel.

To recap, in May Megasteel filed a safeguard petition to seek an additional 35% import duty on HRC which would bring the total duty payable on HRC up to 60%. Megasteel claimed that rising HRC imports in recent years had harmed the local steel industry and it pointed out that imports of HRC had been growing at faster pace.

Megasteel posted a net profit of RM98 million on revenue of RM3.53 billion for FY10 ended June 30. Its balance sheet shows a deficit of RM146.5 million on its reserves which could be due to accumulated losses.

In late August 2011 however, the ministry of international trade and industry announced it had terminated its investigation on imports of HRC, thus bringing an end to Megasteel’s petition.

Megasteel’s request for safeguards proved to be controversial and divided the steel industry. Foreign HRC exporters and local downstream steel players, including several with Japanese investors, were against the petition. Market observers opined that any move to impose additional import duty on HRCs could cast a shadow on the wellbeing and competitiveness of the entire iron and steel industry.

Some observers pointed out that granting the safeguards to Megasteel would effectively afford “protection” to foreign parties via their equity interest in the Lion group’s assets.

The Lion group confirmed reports that it is in preliminary talks for a prospective strategic partnership, but no concrete decision has been made. The Lion group’s steel assets, including Megasteel and Amsteel Mills Sdn Bhd, have attracted the interest of foreign suitors. Some of the names that have cropped up include Taiwan’s largest steel producer China Steel Corp and China’s second largest steelmaker Baosteel Group Corp.

Going Froward … There is a potential spillover effect from its subsidiary Megasteel’s financial difficulty. 

Lion Corp’s subsidiary Megasteel is not in the best of shape owing to internal weaknesses, weak demand in the flat steel market and high raw material costs. It also has a highly-geared balance sheet.

The prospects of a foreign partner coming into Lion Group are diminishing given that corporations are likely to turn more cautious on acquisitions due to the uncertainty in the global economy. Hence, industry observers are now more neutral about the potential entry of a foreign partner.

There is an increased risk that Lion Corp may be unable to meet the interest and principal payment obligations due to weak operating environment. In the absence of a foreign partner, Lion Corp might need to restructure its debt payment again. LionCorp holds a 25%-stake in Lion Industries. Thus, any restructuring plan by Lion Corp could potentially involve the sale of this equity stake.

CHHB ... Sep11

Tan Sri Lee Kim Yew is said to be moving closer privatizing CHHB a property developer. Sources say local bankers have drawn up preliminary proposals to help fund Lee’s bid to take CHHB private, bit the plans are said to be undergoing some revision.

It is learnt that local banks are prepared to finance a substantial chunk of the privatization costs but Lee would have to come up with the rest.

Lee maintains that he has no immediate plants to privatize CHHB. Lee and his family collectively control about 53.52% stake in CHHB.

In the even that Lee launches a takeover bid, he would need to make an offer fro the remaining 46.48% stake or about 128.15 million shares that Lee family does not own.
Another substantial shareholder of CHHB is Lee’s long time Taiwanese partner Chinghaw Picture Tubes Sdn Bhd, which holds a 13.93% stake and is said to be looking to exit the company.

It remains to be seen what Lee’s offer price for the remaining shares will be if he decides to privatize the company. CHHB’s net assets per share stood at rm2.57 as at Dec 31, 2010. Lee is unlikely to fork out that amount or more considering CHHB’s share price has not traded at those levels in the last 10 years.

CHHB’s net asset per share or book value understates the actual value or the group’s assets, such as its landbank, as they were acquired many years ago. Most of its landbank and properties have not been revalued since the early 1990s.

It is no secret that Lee has been toying with the idea of taking CHHB private for a while now. Could some of Lee’s personal landbank be injected into CHHB or could the group enter into a JV with its founder? In July 2011, Tan Sri Lee said he was scouting for a strategic partner to grow CHHB.

Wednesday, September 21, 2011

Tenaga ... Sep11

Faced with a dire gas shortfall, Tenaga Nasional Bhd (TNB), has to spend an additional estimated RM3 billion on power generation for 2011, while having to raise financing for operations as the only solution to sustain itself.

If no immediate solution was found to address the gas crisis, it would be the first time then, that the company was going to the market to raise money for operations.

Previously, all fund raising was for capital expenditure. The gas curtailment exercise by Petronas has prompted TNB to buy fuel distillates which cost five times more than gas, to keep generating electricity. Power plants in the country were not made to burn distillates. To generate 1,000 MGW using the alternate fuel, it costs us about an extra RM10 million daily.

For the whole of 2011, the extra cost for power generation, will be about RM2.6 billion at the minimum. At the moment, Tenaga is using internal reserves which is draining out fast. Its debt level which stood at RM32 billion in 2001 is down to RM18 billion, and this gives it room to borrow but it can't sustain itself for long.

TNB has also lobbied for the additional fuel costs to be shared with two other industry players, Petronas and independent power producers. In Aug 2011, the utility giant submitted a proposal for cost sharing as an immediate solution to the government but there has been no decision yet.
On average, TNB is getting about 900 million standard cu ft of gas per day (mmscfd), from the usual rate of 1,250 mmscfd for 2011. The power sector is entitled to about 1,350 mmscfd for 2012.

Tenaga hopes there would be sufficient gas supply by July 2012 when Petronas' re-gasification terminal for Liquefied Natural Gas in Malacca is ready.

Tenaga is not looking at passing down the additional cost to the consumers.

Meanwhile TNB will raise RM5bil from a 20-year ringgit-denominated sukuk issuance at the end of Oct 2011 to finance the extension of its Janamanjung power plant. This comes at a time when the national utility company is facing a severe gas supply shortage that may result in it incurring additional fuel cost.

In April 2011, TNB awarded French group Alstom a 650-million-euro (RM2.8bil) contract to build the Janamanjung 1,000-MW supercritical coal-fired power plant. Alstom will engineer, procure, construct and commission a 1,000-MW steam turbine, a generator, a supercritical boiler and auxiliaries. The plant is expected to come online in 2015.

The plant will be the single largest in South-East Asia and will produce enough electricity to power nearly two million households in the country.

The project follows TNB's 1999 contract with Alstom to build the currently operating 2,100-MW Manjung coal-fired power plant.

Meanwhile, TNB is still bogged down by cost concerns whereby it may incur additional fuel costs of up to RM3bil.

Puncak ... Sep11

A proposal is in the works for IWK to be taken over and managed by 1MDB with Puncak Niaga as its partner. These entities will then jointly run the loss making IWK, which is tasked with managing the public sewerage systems for most of Malaysia, excluding Kelantan, Sabah, Sarawak and JB.

Puncak’s executive chairman Tan Sri Rozali Ismail has clarified that the company is in talks with 1MDB on the possible takeover of IWK. However, it will not be taking a majority stake. It will only provide the technical expertises and the systems.

1MDB which is wholly owned by the government had confirmed that it was assessing a partial privatization of IWK in which the government would retain control.

At this juncture, it is uncertain what shape and structure the takeover of IWK will take but it is learnt that its assets and liabilities will be sold for rm1. More crucially, the water and sewerage bills will be consolidated to improve the collection of IWK charges.

Also the takeover of IWK jointly by 1MDB and Puncak Niaga may involve a
commitment by the government to provide up to rm2 billion over the next few years to upgrade and build new sewerage facilities.

IWK’s problem has always been the collection of sewerage bills and this is often cited as one of the reasons the company has been loss making.

It forms part of the government’s attempt to clean up IWK, which will then be followed by a crackdown on the industries that discharge water into the river. IWK will also monitor the levels of wastewater effluence in the rivers.

Sources also says that Puncak Niaga’s 70% subsidiary SYABAS which is responsible for water supply and distribution in Selangor, the Klang Valley and Putrajaya, will eventually run the show at IWK.

The deal is set to happen very soon, with some expecting the issue to be settled before the year end 2011.

There is no question that with two water concessions already under its belt, a wastewater management concession would help strengthen its position as a water player in Selangor. More importantly, the consolidation of the water and waste management bills will finally get rid of a persistent problem for IWK.

What is the rationale behind for taking over IWK? There is value to be had in IWK in spite of its poor financial showing. Sources say the company spent around rm600 million t o rm700 million alone in 2010 on top of the rm540 million opex. These are contracts that will be divided out to subcon as it would prove difficult for IWK to handle every aspect of its business. Thus although the business is loss making, its capex and opex are enough for any operator in the water industry to give it a second look.

And if the injection of funds of up to rm2 billion into IWK to upgrade and build new facilities happens, the company would be an attraction to anybody. The returns from capex works would serve as a sweetener to any company.

Tuesday, September 20, 2011

CMSB ... Sep11

Taib’s children and his late wife, Lejla Taib, collectively own more than 42% of the company. Taib’s eldest son Datuk Seri Mahmud Abu Bekir Taib, CMS deputy chairman, has an 8.92% stake in the company while his younger son, Datuk Seri Sulaiman Abdul Rahman Taib, who was chairman until 2008, holds 8.94%.

CMS has won many major projects in the state as well as the rest of the country. According to its filings with Bursa Malaysia, CMS and its subsidiaries have won over RM1 billion worth of projects from the state and the federal government since end-2004. It plays a major role in the production of cement and other building materials which would account in part for its prominence as a construction firm in the state.

As a conglomerate it runs the gamut with interests in construction, steel manufacturing, road maintenance, property development and financial services.

Given its position and prominence, CMS is expected to win a substantial portion of the construction jobs within the Sarawak Corridor of Renewable Energy (Score). This year marks the start of the second priority phase (2011 to 2015) for road connectivity under Score, although Phase One has yet to be completed. This ties in with the 10th Malaysia Plan’s RM4.6 billion allocation to build more roads and widen electricity and clean water reach to households in Sarawak.

It is worth noting that there were tenders for 27 road packages worth at least RM2 billion closed last year. With the possibility of bagging more jobs, it is no wonder that CMS has always been on the radar of analysts when it comes to a good Sarawak play.
CMS’ most high-profile project so far is the RM7 billion aluminium smelter plant at Samalaju, Sarawak. The smelter is said to source power from the Bakun hydro-electric dam.

CMS subsidiary Similajau Aluminium Industries Sdn Bhd has a 40% interest in the project with the remaining 60% held by Rio Tinto Alcan, a unit of global mining giant Rio Tinto. The smelter will have an initial production capacity of 720,000 tonnes per year with potential output to be more than doubled to 1.5 million tonnes per year.

Given the size of the smelter project, CMS has been building its cash pile and cleaning its balance sheet. It issued RM400 million in bonds and preference shares to refinance its borrowings and for working capital. The sale of its stake in UBG Bhd to Petrosaudi International Ltd for RM465.52 million late last year also helped boost its cash pile.

To recap, UBG, the financial services arm of CMS group formerly known as Utama Banking Group Bhd, acquired a 32.13% stake in RHB banking group in 2003, resulting in a merger between RHB Bank and Bank Utama (Malaysia) Bhd.

In 2007, UBG sold its entire stake in RHB to the Employees Provident Fund (EPF) for RM2.25 billion and, with the proceeds, made a capital repayment of RM1.37 billion, leaving it with RM821.7 million in cash and no core business.

CMS has constantly reinvented itself over the years according to the fortunes of the state. Now that it has exited banking, it will be interesting to see what this sleeping giant takes on next.

E&O ... Sep11

There are worries that Sime Darby might have to launch a mandatory general offer (MGO) for the rest of the shares in Eastern & Oriental Bhd (E&O), which would incur substantial costs for the conglomerate.

Sime Darby's acquisition of the remaining 70% of E&O would cost an additional RM1.8bil on top of the RM766mil cash it was paying for the 30% stake, assuming it paid the RM2.30 per share to buy the 30%. In total, that would rack up a hefty sum of RM2.55bil for Sime Darby.

Based on Sime Darby's historical five-year capital expenditure (capex) of RM2bil annually, the RM2.55bil price would effectively eat up all the company's capex for 2011. In short, there would hardly be any money left to be used to expand its other operations, which include its plantation and automotive businesses.

Sime Darby's current cash pile stood at RM4.9bil.

Sime Darby president and group chief executive Datuk Mohd Bakke Salleh had saidthat Sime Darby would only make a GO at the right time and that he was comfortable with its current 30% stake and purchase price for E&O shares.

Monday, September 19, 2011

JTB ... Sep11

Tin can manufacturer Johore Tin Bhd (JTB) has witnessed the growth of its customers involved in dairy products, in particular the condensed milk segment. It now wants a slice of that pie, which it expects will contribute handsomely to its future earnings.

JTB has supplied tin cans to the leading condensed milk manufacturers in the country — Fraser & Neave Holdings Bhd (F&N) and Etika International Holdings Ltd.

For the six months ended June 30, JTB posted revenue of RM54.2 million and net profit of RM4.16 million. Annualised, its revenue and net profit for FY11 could come in at RM108.4 million and RM8.33 million. In FY10, group revenue and net profit were RM95.6 million and RM6.27 million.

As at June 30, JTB had cash reserves of RM15.63 million against total borrowings of RM18.93 million. Its net assets per share stood at RM1.49.

Its customers are in the food industry which produces products such as biscuits, edible oil, ghee, processed food, beverages, SCM and pineapples, while its other customers are in the industrial sector with products such as paints and chemicals.

GPRO ... Sep11

The company saw the emergence of new major shareholder — Christian Kwok-Leun Yau Heilesen who bought 38.23 million shares or 15.29% equity interest in GPRO Heilesen acquired the shares on the open market for RM3.25 million or 8.5 sen each.

Coincidentally, Vital Research Sdn Bhd, the single largest shareholder in GPRO sold down its stake to 2.1% from 14.88% in two separate transactions on the open market.

Vital Research is controlled by GPRO executive chairman Tang Tiong Seng and Quek Kar Loon, according to the company’s annual report.

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

For FY10 ended Dec 31, GPRO incurred a net loss of RM2.3 million or 0.93 sen per share compared with RM5.14 million or 2.06 sen per share for FY09. Revenue came in at RM1.18 million against RM1.4 million the year before. So far this year, the company is still in the red. It reported a net loss of RM1.34 million against RM1.58 million in the previous corresponding period.

Thursday, September 15, 2011

PBB ... Sep11

PPB Group Bhd is stepping up expansion in Indonesia and Vietnam, where operations are less regulated relative to Malaysia.

FY2011’s capital expenditure has been raised to RM267 million from RM190 million, largely due to doubling capacity of its flour mills in Indonesia to 2,000 tonnes/day.

The expansion in capacity takes place as the group finalises its acquisition of 20% of the first of several flour mills in China run by its 18.3%-owned associate Wilmar International Ltd.

About 70% of revenue for FFM Bhd, PPB’s flour business arm, is from Malaysia, with 18% coming from Indonesia and 9% Vietnam. It also has a flour mill in Thailand. Given that the sale of a 20% stake in FFM to Wilmar was completed in March 2011, PPB saw a slight dilution in its 2Q11 numbers.

FFM’s flour business and contributions from Singapore-listed Wilmar form the bulk of PPB’s grains trading, flour and feed milling segment, which contributed 54.74% of the group’s RM1.26 billion revenue for 1H11 ended June 30, and 48.48% of the RM126 million earnings for the same period. FFM has about 35% of Malaysia’s flour business.

FFM’s flour business is doing “fairly well” in Indonesia, though still “very small” compared with market leader Bogasari produced by Salim Group’s PT Indofood Sukses Makmur.

Like Wilmar, which is expanding in consumer staples like rice and sugar after capturing just under 50% of China’s branded cooking oil market and top three positions in the same business in India, Indonesia and Vietnam, PPB is also working on building long-term value by growing its consumer businesses by introducing more branded products. To counter thinning margins at its local flour business, PPB has diversified into the higher margin sliced bread business here.

PPB expects the broader consumer products division — which contributed 13.86% of top line and 7.09% of earnings in 1H11 — to perform well in 3Q11 due to increased trading during the Hari Raya celebration.

PPB had no plans to list Golden Screen Cinemas Sdn Bhd (GSC), which contributed 10.24% of group revenue and 17% of earnings for 1H11.

Kulim ... Sep11

The disposal of assets by JCorp is not unexpected as the deadline to pay up its first tranche of debts worth RM3.6 billion draws near. However, with Kulim already in a net debt position, questions arise whether Kulim should be buying more assets or selling its own assets to address its net debt position.

Pressure for JCorp to sell anything else now (Sept 2011) is probably much less as they’ve bought themselves some breathing space with the sale to Kulim. The purchase of land for RM700 million and the privatisation of Sindora for RM26 million will increase Kulim’s net debt position of RM1.39 billion as at June 30 2011 by almost 53% to over RM2.12 billion.

Also notable is that Kulim’s net operating cash flow was reduced by 19.2% in 1HFY11 ended June 30, from a year ago to RM343.2 million. This was despite the 257% increase in net profit to RM273.4 million.

Generation of cash flow is expected to be even more challenging moving forward given the decrease in crude palm oil prices. The synergy gain from Sindora is not expected to be that significant to the group.

As at June 30 2011, Kulim had cash of RM707.8 million, borrowings of RM2.1 billion and shareholders’ funds of RM3.86 billion. The net debt of RM1.39 billion translates into a net gearing ratio of 36% — before the latest purchases, which will raise it to around 55%.

Decreasing cash flow and rising debt warrant several pertinent questions: Will Kulim restructure its debts or sell off its assets to lessen the burden on its balance sheet?

After all, disposing of assets is not alien to Kulim, which has been divesting its assets to raise funds to help lower its gearing over the past years.

In March 2010, Kulim proposed to sell Menara Ansar in Johor Bahru to Al-’Aqar KPJ REIT for RM105 million — RM63 million in cash and the balance in the REIT’s units.

There were also proposals from other interested parties to buy its stake in QSR, which fell through following strong protests. The sale of QSR could have netted. Kulim RM1.62 billion in gains, based on its initial investment in QSR at RM280.13 million or RM3.20 per share in 2005. This was based on the two offers, which valued QSR at RM1.94 billion or RM6.70 per share, made by Carlyle Investment Advisors Ltd and Tan Sri Halim Saad’s Idaman Saga Sdn Bhd (ISSB).

Now (Sept 2011) that QSR is out of the question, Kulim has few options left in terms of which of its assets it wants to monetise. Whether or not the disposals would fetch a premium is another question.

For one, there are a few disposals that can match Kulim’s divestment of its 91.4% stake in NatOleo for RM450 million in cash.

One asset that may be lucrative on the selling block is Kulim’s 50.7% stake in London-listed New Britain Palm Oil Ltd, which is valued at RM2.8 billion (£594.2 million) based on share price of £8.10.

And now (Sept 2011) that it owns all of Sindora, the company could also be next on the selling block. The additional 24.5% stake’s earnings contribution from Sindora to Kulim should be negligible. Sindora made RM18.3 million in FY10 compared with Kulim’s net profit of over RM387 million. Sindora has a current valuation of RM250 million, based on Kulim’s takeover price.

Kulim owns a few properties and landbank that can be monetised.

JCorp has plenty of other assets at its disposal that may fetch a hefty premium, including stakes in KPJ Healthcare Bhd and property developer Damansara Realty Bhd. Hence, it is understandable why rumours are running that these latest moves may be only the start of another restructuring exercise for the JCorp group of companies.

Wednesday, September 14, 2011

Uemland ... Sep11

With strong Khazanah Nasional Bhd parentage, UEM Land as one of the frontrunners for government land developments in Singapore and Malaysia. The positive merger with Sunrise has raised its profile given Sunrise’s expertise in high-rise integrated developments and branding.

UEM Land is also starting to reap the fruit of its flagship developments in Iskandar Malaysia.

UEM Land is the frontrunner for government land developments, including the Rubber Research Institute of Malaysia’s 1,214ha in Sungai Buloh. UEM Land is sitting on the advisory panel, assisting EPF in formulating the master plan for the land. The company has also submitted bids for other government land — the 7.7ha Unilever land in Bangsar and 8.5ha Pudu jail redevelopment in Bukit Bintang West in Kuala Lumpur. The securing of these developments will provide a strong impetus to UEM Land’s earnings and valuation.

It has been appointed as project manager for the S$11 billion (RM27 billion) Marina South and Ophir-Rochor government land developments in Singapore. UEM Land’s presence in Singapore has a more positive impact, promoting UEM Land’s RM19 billion of properties in Nusajaya (within Iskandar). UEM Land could also benefit from outright land sale by M+S Pte Ltd, if any.

Iskandar’s property prices should be boosted by a better transport system (Singapore-Johor Bahru intra-city train and rail transit system) and warmer bilateral ties.
Flagship projects in Johor (Pengerang, Tanjung Langsat) will provide the population growth and are re-rating catalysts for the property/land prices in Iskandar.

UEM Land could benefit from the government-linked company’s share divestment plan which will improve its trading liquidity.

Denko ... Sep11

Denko Industrial Corp Bhd manufactures plastic injection moulding, high-precision plastic parts, vacuum foams and packaging materials.

The company which has been in the red in the past two financial.

The company saw several significant shareholding changes. Datuk Ong Choo Meng of Hextar Chemicals Sdn Bhd emerged as a substantial stakeholder with 10.99% of Denko. Also emerging as a substantial shareholder is Tan Chen Wei who has an 8.03% interest.

From whom the individuals acquired the stake is not known. The only announcement came from ABB Nominees, a unit of Affin Bank (loan recovery division) which disclosed last month that it had disposed of 12.1 million shares representing about 11.5% of Denko’s paid-up capital in the open market at an average price of 12.2 sen each between Oct 19 and Dec 31, 2009.

Chong Hut Hoo, a non-independent executive director of Denko, also reduced his interest in the company by divesting 2.5 million shares at 28 sen each. Chong still has 2.89% in Denko.

Denko’s single largest shareholder is its executive chairman Yong Boon Cheong who has a 17.03% stake. The interest held by Ong together with Tan is marginally more than what Yong holds in Denko. Ong and Tan are both from Klang.

While not much is known about Tan, Ong is group managing director of Hextar Chemicals, a company that is involved in trading and distribution of agrochemicals. It is a subsidiary of Hextar Holdings Bhd which was due for listing in 2007 but it withdrew.

Then, Hextar proposed an IPO of 33.28 million shares and offer for sale of 55.9 million shares of 20 sen each at an offer price of 90 sen but withdrew due to the company allegedly being in the midst of resolving tax matters that would have impacted financial performance. It had then returned all monies to potential investors after it withdrew the listing proposal and stated that it would explore all options including listing on Bursa Malaysia in the future.

Hextar Chemicals made a profit after tax of RM19.3 million and raked in revenue of RM252.3 million for the financial year ended Dec 31.

Denko recorded a net loss of RM2.62 million for 1Q11 ended June 30, worsening from the same quarter last year, which saw a loss of RM1.52 million. According to an announcement to Bursa, the increased loss for the current quarter was “mainly due to lower sales and poorer margins”.

For FY11 ended March 31, Denko just managed to stay above water by registering a net profit of RM500,000 on a turnover of RM113.5 million based on its unaudited results.

Tuesday, September 13, 2011

PMI ... Sep11

The proposed privatisation of Pan Malaysian Industries Bhd (PMI) could help Tan Sri Khoo Kay Peng to consolidate his interests in Malayan United Industries Bhd (MUI). PMI holds a 10.27% stake in MUI.

PMI had received a takeover offer from a consortium of three companies to acquire the remaining 558 million shares or 44.17% stake they do not own in PMI at an offer price of 4.5 sen per share.

The consortium comprises Soo Lay Holdings Sdn Bhd with 8.6% equity interest, Hong Kong-based Norcoss Ltd (27.48%) and Cherubim Investment (HK) Ltd (CIL-19.69%) in PMI. Khoo is the controlling shareholder of all three companies.

The joint offerors plan to delist PMI if it is unable to comply with the shareholding spread requirement. The takeover offer needs the approval of the Securities Commission and Bursa Malaysia.

Still, market observers said the offer price of 4.5 sen is low compared with the standard 30% premium for takeover exercises in the past. PMI was trading at 4.5 sen when the offer was made on Aug 26 2011.

It is also important to note that the counter has risen as high as seven sen early 2011. The deal could be foiled as investors could hold onto the shares and force the consortium to offer a higher price.

The proposed privatisation of PMI is seen as a move by Khoo to gain a bigger controlling stake in MUI, in which PMI holds a 10.27% stake. Should the privatisation succeed, Khoo would increase his indirect shareholding in MUI from 49.93% currently to 55.23%.

Apart from that, there is little reason for Khoo to take PMI private. PMI has been a loss-making company for many years and it does not have many assets besides Menara PMI. PMI has been making losses since FY06. For FY11 ended March 31, it posted a net loss of RM300,000 on the back of RM4.7 million in revenue.

As at June 30, it had RM131.52 million in borrowings while cash stood at only RM608,000. Its net assets stood at RM179.35 million or 2.12 sen per share.

At 4.5 sen per share, Khoo would need to pay approximately RM25.1 million to obtain the remaining shares of PMI. That is a small price to pay to consolidate his interests in MUI, where most of his assets are placed.

MUI has businesses in retailing, hotel, food and confectionery, financial investments and travel services. It owns retailers Metrojaya Bhd and Laura Ashley Holdings plc, which is listed on the London Stock Exchange.

MUI posted RM811,000 in net profit for 1HFY11 ended June 30 on the back of RM443.26 million in revenue, while net assets per share stood at 32.68 sen.

BRDB ... Sep11

Ambang Sehati Sdn Bhd, the major shareholder of Bandar Raya Developments Bhd (BRDB), has offered to buy some of the developer’s assets, including the famous Bangsar Shopping Centre (BSC) and Menara BRDB in Jalan Maarof. The other assets to be acquired by Ambang Sehati are CapSquare Centre in the city and Permas Jusco Mall in Johor Bahru.

The price will be determined later. BRDB will make quite a substantial capital gain from the disposal. Otherwise, it won't make sense to dispose of these income-generating assets. If BRDB is offered a good deal to sell the assets with substantial capital gain, that may outweigh the loss of future income stream. BRDB can generate income from property development projects.

It was reported that the disposal of BSC is being part of a complex corporate exercise to be undertaken by BRDB. The possibilities include disposing of BRDB’s entire or partial stake in BSC in return for development land or a stake in another company.

As at end-FY10, BSC and the 12-storey Menara BRDB located next to it had a combined book value of RM660 million. Both properties sit on a land area of 214,256 sq ft and have a total net lettable area of about 550,000 sq ft. A conservative assumption that BRDB will dispose of BSC and Menara BRDB at one times book value and 20% of the proceeds will be distributed to its shareholders as special dividend, could translate into a special dividend of some 26 sen per share.

Ambang Sehati believes the proposed disposal will enable BRDB to monetise these assets and achieve a more efficient utilisation of its capital, according to an announcement to Bursa Malaysia yesterday. Ambang Sehati owns 18.8% equity interest in BRDB.

News report that BRDB is looking to pay a bumper dividend to its shareholders under a complex corporate exercise that could see it dispose of its most prestigious property assets — BSC and Menara BRDB.

CapSquare had a carrying value of RM214.37 million, BSC and the 12-storey Menara BRDB RM660 million and Permas Jusco RM68 million. The entire assets, worth a total of RM942.37 million, were revalued in 2010.

Sources say based on BRDB’s new-look balance sheet after the disposal of CapSquare, which was completed in Aug 2011, shareholders are expected to receive a bounty from the proceeds of the sale.

Now the that the proposed acquisition will need to get the greenlight from the shareholders. The largest shareholder of BRDB is Credit Suisse with 23% equity. HSBC nominees also holds a 9.67% stake for Credit Suisse.

The shareholders of Ambang Sehati are Datuk Seri Akbar Khan Mohamed Khan and his children Sascha Saleem Khan and Tania Aishah Khan. Other shareholders include BRDB chairman Datuk Mohamed Moiz J M Ali Moiz and Abdul Sathar MSM Abdul Kadir.

As at June 30 2011, BRDB had long-term debt of RM461.2 million while its short-term borrowings amounted to RM307.56 million. It is worth noting that the bulk of BRDB’s debts were tied to CapSquare, a project that had been on its books since the late 1990s.

The bulk of the debts are expected to be cleared because on Aug 5 2011 BRDB announcd the completion of the disposal of two towers in CapSquare to a German fund for RM440 million. This should leave the company with a fairly clean balance sheet. If the debts are reduced after the disposal of the assets it will leave the company, which has a share base of 487.6 million 50 sen shares, a handsome cash pile.

For the quarter ended June 30, 2011, of BRDB's revenue of RM198.9mil, RM152.05mil came from property development while RM28.25mil was generated from property investment. Operating profit derived was RM31.02mil and RM10.62mil respectively.

This acquisition will be fully cash-funded.

As at the first half of 2011, BRDB had retained earnings exceeding RM1bil but held a cash balance of RM41mil only while a chunk of its assets were in the form of investment properties.

Although BRDB does not have large parcels of land in prime areas, it had entered into a joint venture with Multi-Purpose Holdings Bhd (MPHB) to develop the latter’s landbank in the Klang Valley and Penang island. Among the parcels of land is Mimaland in Gombak, Selangor.

Apart from its property assets, BRDB also has a 56.76% stake in Mieco Chipboard Bhd, which is slated for disposal.

Its net asset value stood at RM3.57 (as at June 30 2011).

The proposed corporate exercise could realise hidden value in BRDB’s assets, but it remains to be seen how much above their current carrying value Ambang Sehati has to offer for the assets and how BRDB will reward its shareholders.

Going Forward …

Bandar Raya wants to increase its property development activities to improve earnings, which have been below par lately.

It may sell its prime assets to buy more land in the Klang Valley, Penang and Johor as its current landbank is depleting. It may agree on a price of RM1.2 billion, which is about 27 per cent more than their book value.

BRDB, which has four ongoing projects, has less than 25 hectares of land in Bangsar, Dutamas, Seri Kembangan and Taman Duta, and some 124ha of land in Johor.

Meanwhile the proposed sale will have a negative effect on BRDB's business risk profile over the longer term. Should the proposed deal go through, BRDB would be divesting all of its investment properties, which have been providing a stable source of recurring rental income. The divestment will steer BRDB towards becoming a pure property developer. This heightens the group's business risk.

Moreover there are two big questions are yet to be answered in BRDB’s announced related-party transaction. At what price the key assets will be sold to Ambang Sehati Sdn Bhd and what management plans to do with the cash proceeds from the proposed disposal.

Ambang Sehati is the private vehicle of BRDB chairman Datuk Mohamed Moiz Jabir Mohamed Ali Moiz, who owns 18.8% of BRDB. The assets essentially include the Bangsar Shopping Centre, Menara BRDB, CapSquare Retail Centre and Permas Jusco Mall.
BRDB has up to Sept 19 2011 to revert with its decision. This acquisition will be paid fully by cash. According to BRDB's 2010 annual report, the carrying value for Bangsar Shopping Centre and Menara BRDB is RM660mil while Cap-Square Retail Centre and Permas Jusco Mall are valued at RM214mil and RM68mil, respectively.

The jewel of the assets would be Bangsar Shopping Centre, which is located in the prime Bangsar area and has a net lettable area of 330,000 sq ft. Bangsar Shopping Centre is currently almost fully occupied with average rental rates of about RM10 per sq ft. On the other hand, activity in CapSquare has much room for improvement and is relatively quiet after office hours.

Based on estimates, the four properties would fetch a value of about RM960mil, with Bangsar Shopping Centre accounting for 64% of that, valuing it at RM594mil (or RM1,800 per sq ft).

Currently, the group has a net gearing of about 0.4 times with total borrowings in the region of RM780mil. The bulk of the debt is tied to its CapSquare development. The group could have excess cash of RM120mil to RM150mil, or 25 sen to 30 sen per share, after paying off its outstanding debt.

Critics say that rewarding shareholders with bumper dividends are right at this point. Apart from reducing its gearing, the group would be better off deploying the cash for its property development, either for landbanking or to fund its future development.

BRDB is not as aggressive as other developers in developing its properties and land bank. Without Bangsar Shopping Centre, earnings may not be as stable. Selling it off will only yield a one-time dividend.

An industry observer says BRDB may be doing the right thing by disposing of Bangsar Shopping Centre and the other retail outlets. Are the returns from these outlets actually attractive? Earnings-wise, it is only delivering some 20% to operating profits. This is low when compared to the amount of capital expenditure and debt the company is taking up.

Also it is the F&B segment is doing well in BSC. If Bangsar Shopping Centre continues to charge rentals at a premium, how will the normal retail tenants be able to survive?
In 2008, BRDB was reported to have invested RM250mil to upgrade Bangsar Shopping Centre. The renovation was completed in 2009.

Monday, September 12, 2011

Parkson ... Sep11

The growing interest in Parkson Holdings Bhd from the Government of Singapore Investment Corp Pte Ltd (GIC) could spell good things for the former’s shareholders, in light of the proposed listing of its Asean retail arm, Parkson Retail Asia Pte Ltd (Parkson Asia).

GIC had been actively purchasing shares of Parkson Holdings, increasing its interests to 55.72 million shares or 5.09% as of early Sept 2011 after emerging as a substantial shareholder with a 5% stake or 55.03 million shares on Aug 24 2011, just eight days after Parkson Holdings announced its intention to list Parkson Asia.

The proposed listing could obviously unlock the value of Parkson Asia and fund its future growth.

The proposed listing of Parkson Asia came at a time where parent Lion Group is in need of funds to resume the construction of its RM3.2 billion blast furnace project, which is critical to make its steel operation competitive in light of the infiltration of cheap imports.

The question is whether part of the proceeds from Parkson Asia’s IPO would be channelled to the Lion Group’s steel project. But GIC’s interest in Parkson Holdings signals a potential value inherent in the exercise to take Parkson Asia public.

To recap, Parkson Holdings announced its proposal to list its 90.1%-owned unit Parkson Asia on the main board of the Singapore stock exchange by the end of 2011. Indonesia’s PT Mitra Samaya owns the remaining 9.9% equity interest in Parkson Asia.

Parkson Asia’s net asset as at June 30, 2010 amounted to some S$140.3 million (RM346.28 million). This includes its 36 Parkson-branded stores in Malaysia, seven Parkson-branded stores in Vietnam as well as five Centro-branded stores and one Kem Chicks-branded gourmet supermarket in Indonesia.

Although the amount of proceeds to be raised from Parkson Asia’s IPO was not made known, news reports indicated that it could amount to as much as S$500 million.

Going forward, a lot depends on how the proceeds are used. Another thing is that Parkson Holdings could see smaller earnings contribution from Parkson Asia once it is listed because of its reduced shareholding too.

Parkson Asia is expected to contribute about 15% of Parkson’s FY12 ending June 30 earnings, with the rest contributed by its China retail arm Parkson Retail Group Ltd, which is listed in Hong Kong.

Malton/E&O ... Sep11

The market has been rife with rumors of a new substantial shareholder emerging in E&O and a possible MGO from this party.

A name has been bandied about is Datuk Desmond Lim Siew Choon, the substantial shareholder and executive chairman of Malton Bhd. Market has it that the property tycoon has expressed interest in E&O, the main draw of which is its landbank in Penang. Lim may team up with some shareholders of E&O to make a counter bid. However, Sime Darby’s CEO Bakke is aware of the rumors but adds that they have remained just that.

Apart from the three vendors that clinched the deal with Sime Darby, ECM is a notable shareholder of E&O with about 6.25% stake interest held by its investment funds.

If Lim or anybody elsewhere to make a competing bid for E&O, they would need the support of the ECM Libra, which emerged as a substantial shareholder at end of April 2011 with 5.12% stake. It raised its stake to 6.25% in Aug 20111.

But a lot depend on whether those behind the competing bid can obtain the finances to undertake a GO for E&O. If there were indeed a bid, Sime Darby has the finances to challenge it.

Till now, there was no filing with Bursa Malaysia on Lim surfacing as a substantial shareholder in E&O.

If a new substantial were to emerge at E&O, what would it mean for Sime?

One name that has come into focus is E&O chairman Datuk Azizan Abd Rahman, the spouse of the SC’s chairman Tan Sri Zarinah Anwar.

Sunday, September 11, 2011



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tvb now,tvbnow,bttvb,tv series,tv drama,movie,bt,download/ H. j$ r6 n' u# g+ H* X$ p# e4 q) r
! F7 N/ W7 m" J& F) s& q3 d( h2 ! Z, ~" V8 R( B& A+ J- t2 ^  每天上下班途中,只要能走路时就尽量走路。走路的姿势非常重要,挺胸、收小腹,臀部夹紧,千万不要弓腰驼背。如果走路时不紧缩小腹,不管你走多少路,也无法刺激你的腹部肌肉,你的小腹就不会缩小。此外,驼背会破坏身体的平衡感,降低走路的运动效果。
( J' ?: X6 q+ }# J$ zTVBNOW 含有熱門話題,最新最快電視,軟體,遊戲,電影,動漫及日常生活及興趣交流等資訊。
5 e& u5 M/ p- H" a* U# J1 F. g公仔箱論壇  2.加大走路的步幅
* r  S" o+ E) L: ?7 ?$ ^7 gTVBNOW 含有熱門話題,最新最快電視,軟體,遊戲,電影,動漫及日常生活及興趣交流等資訊。7 [: O: J7 s$ `2 X. O
将走路作为一种减肥的运动,就不能像平常散步一样随便,要适当加大步幅,只有大步流星地向前走,才能运动你的大腿肌肉,避免萝卜腿出现。www.tvboxnow.com4 R" r$ ]7 z1 s- {
tvb now,tvbnow,bttvb,tv series,tv drama,movie,bt,download3 J5 a- Q8 Z& o: M

  3.后脚跟先着地www.tvboxnow.com3 I$ l3 B7 e. q( [7 R2 O+ t3 ]
7 }" Y+ S: {" K  w7 c( I2 d&  后脚跟先着地,而不是整个脚底平放在地面上。将重心放在前脚,每跨出一步,前脚须按照后脚跟、脚心、脚尖的顺序着地,这样走路,后脚跟会自然上提,腿的曲线就会变得紧实匀称。
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- F. ^* j4 T, V& s8 KTVBNOW 含有熱門話題,最新最快電視,軟體,遊戲,電影,動漫及日常生活及興趣交流等資訊。公仔箱論壇9 p+ j9 S# X, Z: d% F  o9 _. P
女性外出一般都会携带提包,在不妨碍别人的情况下,可以把它当成“微型运动器械”前后甩动,这种甩提包的动作可以锻炼手臂肌肉。但要注意如果提包过重就不要前后甩动了,不然不仅容易损伤肩关节,还可能打伤周围的路人。5 z0 E6 @8 |- V5 T4 q6 e

' f8 u6 ~8 R& I% Q9 I% l* u- p公仔箱論壇  5.等车时的运动 r% [3 c: H2 \$ a
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等车、等信号灯的一段时间,你也不是无事可做。可以利用这段时间进行收腹练习。将往意力集中在腹部,全力收紧,感觉仿佛肚脐贴近后背,坚持6秒钟后还原。如此反复这些简单的练习,只要有时间就做吧!2 H4 T. h4 Q& [

6 \1 c5 i# j0 e1 D#  6.坐在公共汽车上! r- ]- U. v# R' l
( A" M. q0 @0 m/ p# A. M6 F6 Y  车上有座位时,你可以轻松地做做运动。腿呈90°摆好,脚跟固定不动,脚尖上上下下反复摆动,这个动作可以锻炼小腿肚的肌肉,让小腿线条更匀称。, M( u7 a9 f- d+ x

4 d$ _. i9 t. S) P1 m( X$ c$  同时,坐着的时候还能够锻炼腹肌,双腿并拢抬至离地面约5公分的高度,将腿悬空,尽量保持这个姿势,能坚持多久就坚持多久。
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7 P% z$ y) m$ K! W % \- M* g9 c6 ]4 s公仔箱論壇  车上没有座位也没有关系。因为站着也能做很多小运动。用手拽住车上的吊环,时而用力握紧,时而放松,反复做,可以让手腕变细。7 B; m- ~! z9 K
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双手抓紧吊环,双脚微微打开,将身体前倾,此时能感觉腹部肌肉紧绷,可以锻炼腹部肌肉。TVBNOW 含有熱門話題,最新最快電視,軟體,遊戲,電影,動漫及日常生活及興趣交流等資訊。3 ~" S( q0 i+ d& A( Z
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  a! E% z! Z. ^$ _tvb now,tvbnow,bttvb,tv series,tv drama,movie,bt,download
- `0 e, m% R% L/ J' Q7 tTVBNOW 含有熱門話題,最新最快電視,軟體,遊戲,電影,動漫及日常生活及興趣交流等資訊。  或者手握住栏杆,一边数拍子,一边用力向内收腹,这种方法能有效紧缩腹部肌肉,使小腹慢慢缩小。