Thursday, March 29, 2012

DIGI ... Mar12

Concerns are pointed to increasingly aggressive MAXIS Bhd, which has just launched its new Hotlink plan and cut IDD rates in an effort to arrest its decline in market share.

DIGI also said special dividends will be a challenge for now (March 2012) as the rm692 million share premium reserve at the holding company cannot be utilized since the cash can only come from its operating subsidiary, DIGITEL, from which proceeds are upstreamed through retained earnings to pay dividends.

Market observers see the downside risks to DIGI’s earnings arising from the more aggressive MAXIS as it has more to lose in the segments that MAXIS is apparently targeting – migrant workers and value conscious customers. MAXIS

MAXIS had earlier said it is prepare to do anything to win back customers and restore its market share, which has been chipped away by DIGI, Celcom and to a lesser extent, U Mobile and Tune Talk. Also there are marketing Lethargy with regards to DIGI’s acquisition and retention campaigns, which is departure from the past when its was a nimble operator and typically led the market.

The company said it will monitor the competitive response before making any decision to retaliate as MAXIS’ packages and tariff adjustments were merely a normalization of its legacy packages, which were priced out of the market.

MAXIS said it can turn on LTE by 4QFY2012 should the company be awarded the 2.6Hz spectrum by the middle of 2012. However, it does not intend to be aggressive with the rollout as LTE devices are still lacking.
Its capex for FY2012 stood at rm700 million to rm750 million. Its network modernization exercise is slated for completion by end 2012.

TM ... Mar12

The main thing supporting TM’s share price since the de merger with Axiata Group was its promise to pay at least rm700 million in dividend annually, or up to 90% of its normalized net profits. However there are concerns of TM’s fledging fixed line voice business and the huge upfront investments needed for its HSBB business where the take up was highly uncertain. All that looks set to change in 2012. For the one, the take up for TM’s HSBB service, UnFi is coming in stronger than expected.

Since its launch in March 24, 2010, TM already has over 300000 UniFi customers. At current rate of 1000 installations per day, TM could achieve its target of 400000 Unifi customers by July 2012.

More importantly, there is a chance of TM’s normalized net profits could exceed rm700 million in 2012. This means current dividend ceiling looks set to exceed the current minimum dividend payout of rm700 million as early as 2012 if not in 2013.

And TM has promised to pay the higher number if 90% of normalized profit after tax and minority interest is more than rm700 million.

While business looks good, it would still be a challenge for TM to keep its cash generation as well as profit figures in 2012 because the group does not have significant non core assets to sell and the rm2.4 billion in HSBB grant from the government will be fully used up in 2012. Less in rm200 million in HSBB government subsidy left in the coffer for 2012 and HSBB related capex is expected to be between rm1.3 billion and rm1.5 billion for 2012 before tapering off in 2013. It needs to bolster the group’s capabilities to better to serve its SME customers going forward.

TM’s capex (HSBB and business as usual) the past two years was lower at rm1.81 billion in FY2011 and rm2.2 billion in FY2010 helped by some rm754 million HSBB grant from the government in FY2011 and rm513 million in FY2010. Its business as usual capex was rm1.13 billion in FY2010 and FY2012 which brought total capex to rm2.71 billion in FY2010 and rm2.56 billion in FY2011.

Market observers stated that TM’s total capex in 2012 to largely the same as the previous two years (rm2.71 billion and 2.56 billon) with the key difference being the lower level of HSBB government grant. The good news is that from 2013, TM is no longer obligated to roll out HSBB network to places it deems commercially unfeasible. From 2013, it would be demand driven basis.

TM’s HSBB sealed a wholesale agreements with Maxis, Celcom, Axiata and Packet One and Redtone, which gives rivals access to its network

TM’s cash and cash equivalent stood at rm4.21 billion as at end 2011.

Going forward, it will consider acquisitions to bolster its capabilities to better serve its SME customers.

SME contributed 26% of TM’s retail revenue if rm7.2 billion in FY2011, the second largest contributor after the consumer segment’s 34% and ahead of contributions from the enterprise and government business segments at 20% each.

TM is also looking to expand in the business process outsourcing market.

Wednesday, March 28, 2012

MEGB ... Mar12

Its group chief executive officer Datuk Seri Edmund Santhara bought more shares in his beleaguered company on 22 March 2012, forking out some RM7.7mil to mop up 7 million shares at a price of RM1.10. This acquisition raised his shareholding in the company to 23.81% or 97.6 million shares.

The rationale for his acquisition isn't yet clear. Masterskill's other substantial shareholder Siva Kumar M. Jeyapalan was just a passive shareholder, and was not aware of any upcoming plans for the company.
Siva had on Oct 5 2011 emerged as a subtantial shareholder of the education group after acquiring 41.2 million shares or a 10.05% stake in the company at approximately RM1.10 a share.

It had been rumoured earlier that Masterkill could be a takeover target by Khazanah Nasional Bhd or Ekuiti Nasional Bhd. Industry observers said that pricing was likely an issue preventing the buyout deals from materialising so far. But market observers would not rule out a potential deal involving Masterskill, perhaps one that did not take the strict privatisation model.

Masterskill still had an on-going business as well as fixed assets in the form of its campuses. Presently, its main campus is in Cheras, and it has five other smaller campuses in Johor Baru, Ipoh, Kota Baru, Kota Kinabalu and Kuching. Masterskill is also in the process of building its flagship campus in Bangi, Selangor, where it has received RM250mil in financing for the first phase of this project.

Aside from Santhara and Siva, another major shareholder of the company is private equity firm Crescent Point Investment Holdings Ltd with 21.5%.

It recorded a net loss of RM1.57mil for its fourth quarter to Dec 31, 2011 from a previous net profit of RM26.85mil on the back of a 38.81% drop in revenue to RM49.5mil.

For the full year (FY11), net profit was down almost three fold to RM38.14mil from RM102.14mil in FY10 on the back of a 20.77% drop in revenue to RM250.17mil.
The fourth-quarter results were dragged down by weak student intake and higher-than-expected staff costs. For the full year, operating margins almost halved to 26%, partly due to a surge in depreciation.

The 21% decline in full-year revenue resulted mainly from a 35% drop in student intake to 3,500, of which only 250 students enrolled in the second half of the year. The total active students in 2011 stood at 14,000.

Tuesday, March 27, 2012

WahSeong ... Mar12

Sources say it is believed to have secured a contract from Petronas Carigali Sdn Bhd to coat about rm90km of gas pipeline in Turkmentistan. The pipe coating deal is an extension of an existing job that Wah Seong secured in Turkmenistan in 2008.

Coating continues to be Wah Seong’s core business, it is also into the manufacturer of pipes for the oil and gas industry.

Petronas will continue to keep Wah Seong busy with its five year capex of rm300 billion on oil and gas. Wah Seong will be a beneficiary of Petronas’ plan to replace its ageing facilities, given that 60% of the Petronas’ major oil producing fields in Malaysia are around 26 years oil. And there is also vast opportunity in the pipeline rehabilitation programme, given that 800km pipelines are over 30 years and would need to be replaced soon.

Petronas’ RM15 billion North Malay Basin project is another that might require Wah Seong’s pipe coating skills. This involves the construction of a 200km long pipeline to transfer gas from nine fields to Kerteh in Terengannu. The project is expected to rolled out soon, given Petronas ambitious timeline of first production by 2013.

Meanwhile, the Gulf of Mexico would be the next growth frontier for the company with the expected commissioning of its two plants in Louisiana, United States, by the second half of 2012. These plants would be operated via a joint-venture which would springboard Wah Seong's entry into the Gulf of Mexico region by leveraging on its partner’s infrastructure.
Australia would remain a key driver for the company as it would offer huge potential due to large number of liquefied natural gas projects.

Meanwhile, Wah Seong is looking for potential mergers and acquisitions to boost the contribution for its non oil and has division which is part of the initial public offering for its de-merger exercise to unlock value for the company.

As at Dec 31, 2011, its order book stood at rm1.2 billion.

Meanwhile its planned venture into oil palm cultivation in the Republic of Congo is considered risky as the company has no experience in this field. It is also the first listed company to do so in the republic.

The concerned is due to sociopolitical risks in the country. Market observers do not see any catalysts in the short term coming from this venture as it will take some time before Wasco can reap the harvest. If it succeeds in this, the oil palm venture will be good recurring income for the long term.

On Feb 3, 2012, it had entered into an agreement with Silvermark Resources Inc and Ginat Dragon Group Ltd to subscribe for up to 51% equity interest in Atama Resources Inc (ARI) for US$25 million. Silvermark and Giant will hold the remaining 49%.

ARI has a 30 year oil oil palm plantation concession agreement with the government of the Republic of Congo. Under the concession, ARI has the right to occupy 470000 ha to develop oil plam plantations and compexes.

At this juncture, 180000ha or 38% of the concession land has been identified as highly suitable for plantation. ARI will begin planting by 2QFY2013 and the development of the 180000ha is expected to be completed in 10 phases over 15 years.

Wasco will raise half the rm75 million share subscription in ARI via bank borrowings while the rest will com from internally generated funds. As at end Sept 30, 2011 Wasco had rm515 million in cash and rm726 million in borrowings. It has a net gearing of 0.2 times based on its shareholders’ funds of rm987 million.

Although the bank borrowings portion for the share subscription in ARI will only raise Wasco’s gearing to 0.25 times, the venture might become a financial burden in the future. Estimate that it will cost between US$4000 – US$6000 per hectare to develop oil palm to maturity.

Based on the initial 180000ha that have been identified and the US$4000 per hectare development cost, the capex is estimated to be at least US$48 million per year. Wasco will also need to pay RM15 per hectare to the government.

Once ARI becomes a 51% subsidiary of Wasco, its borrowings will need to be capitalized or consolidated in the latter’s balance sheet to develop oil palm plantations. This will undermine Wasco’s ability to seek new borrowings for its oil and gas ventures. This will become a burden unless it manages to hive off its oil and gas business soon, which is currently its bread and butter.

The venture will have a long gestation period. Wasco and its partners are looking at an unplanted area, which may take about five years to see first harvest.

The foray could be a move by management to seek recurring income after hiving off the oil and gas segment. Currently, all of Wasco’s six business divisions are parked under its wholly owned subsidiary Wasco Energy Ltd (WEL).

Under thr proposed demerger exercise, the non oil and gas pipe manufacturing, renewable energy and trading businesses will be parked under Wasco, while WEL will run the oil and gas business. The demerger exercise had been slated for mid 2011, but it was postponed. However, with the new venture, Wasco may be able to complete the demerger soon as the share subscription in ARI is expected to be completed in 2012.

Once Wasco completes the share subscription, it will appoint four of the eight directors in ARI. A director of IGB is also a director in ARI. IGB’s group MD Robert Tan is also the chairman of Wasco, and his family holds a 40% direct and indirect stake in the latter.

Monday, March 26, 2012

Deleum ... Mar12

A provider of oilfield equipment and services to the upstream sector of the oil and gas industry, is partnering Petronas Carigali Sdn Bhd to form a global patent for a breakthrough product that will greatly improve oil extraction rates.

The product will be able to dissolve the layer of wax that clogs the pipes that extract the oil from ground and transport it. Towards this end, Carigali is prepared to undertake a joint venture for the commercial production of the product.

The joint venture will be the global patent holder of this product, and it expects the product to be used by most oil majors.

The sources say the new product has been tested on a pilot oilfield off the coast of Sabah and Carigali is prepared to secure the patent to monetize the opportunity.

Its net assets per share stood at rm1.20 It had rm6.96 million in cash and rm26.82 million in borrowings.

The company indicated in May 2011 that it was tendering for rm200 million worth of jobs in the inventory, services and equipment business. Its portfolio comprised rm1 billion worth projects which will run up to 2016.

Thursday, March 22, 2012

EPMB ... Mar12

TA Securities Research ...

1. Recent Developments
EPMB Buying Maju Expressway? The Edge Financial Daily reported today that EPMB will be
acquiring the Maju Expressway, or popularly known as MEX. Maju Expressway is currently owned by Maju
Holdings Bhd, a Malaysian owned diversified conglomerate. According to the article, the acquisition price is about RM1.7bn, which will be funded via issuance of Sukuk (RM1.2bn) and the balance via debts.

Management is tightlipped about the rumour except for saying that it could involve a significant acquisition that
could run into a few hundred million Ringgit. The stock has been suspended until the end of today. We expect an announcement at the end of market today.

Background on MEX
The owner of MEX, Maju Expressway S/B owns the highway concession linking Kuala Lumpur with Cyberjaya and Putrajaya. It boasts the shortest link between the business capital and the administration capital (about 20 minutes). In addition, MEX is also popular indirect link (compared with PLUS highway) from Kuala Lumpur to the two main airports in the country, KLIA and LCCT Sepang (KLIA - 30 minutes). MEX also provides regional connectivity between the Middle Ring Road 1 (MRR1) and the Middle Ring Road 2 (MRR2).

A Radical Move
The acquisition, if materialises, will significantly alter the profile of the group. Its current core businesses are
manufacturing of auto-parts and sale of smart water meter system. We are not aware of the company having
previous experience in managing highway concessions. The price tag of RM1.7bn, which we believe is the
Enterprise Value of the concession, is some 10x bigger compared with EPMB’s current market capitalisation of RM166mn.

Balance Sheet is Too Small to Absorb This Acquisition Given the relatively small balance sheet, we think that
a cash call is rather unavoidable. Total debts as at Dec 31, 2011 stood at RM163.7mn while cash balance
amounted to RM73.3mn. That translates into a net gearing of 0.3x. With this acquisition, total debts
could raise to close to RM2bn. That said, since MEX is a highway concession, the acquisition could be
partially funded on project financing basis. Assuming a 80%:20% debt:equity ratio on a RM1.7bn price tag,
we estimate that the net increase in holding company debts would amount to approximately RM500mn.
Some Potential in MEX The newspaper article quoted that average daily traffic (ADT) at MEX in 2010 was 78,962. Up to June 2011, that figure rose by another 17.5% to 92,785.

Since MEX is still relatively a new highway, we think there is room for growth. In addition, we expect
traffic volume to increase further if the direct link to KLIA is built according to plan. At this juncture
though, there is not much information available publicly to assess the viability of the highway.

2. Key Investment Risk
Key risk factors are, 1) high dependency to national marques, 2) stricter loan approval guidelines negatively
impacting vehicle sales, 3) margin compression arising from stiff competition and cost cutting measures
implemented by Proton/Perodua, and 4) significant structural reform from the revised NAP (scheduled for
release by June 2012) that could adversely impact domestic auto parts manufacturers.

3. Earnings Outlook
No change in earnings forecasts at this juncture. We shall review our earnings projections once an announcement is made later today.

4. Valuation & Recommendation
Share price has risen above our target price of RM1.11 on the back of speculation on the takeover. At this juncture, for consistency sake, we are leaving our Buy recommendation unchanged and target price unchanged.

Wednesday, March 21, 2012

SKPRES ... Mar12

TA Securities Research ...

We are initiating coverage on SKP Resources Berhad (SKPRB) with a BUY rating and target price of RM0.67. This implies a total potential upside of 28% from current price levels. We like the group due to its good business model, strong balance sheet, solid sales and earnings growth, positive free cash flow, attractive valuations and a rising dividend payment.

One Stop Service Centre In The Making SKPRB is principally involved in the manufacturing of
plastic parts and components, contract manufacturing, precision mould making, the sub-assembly of electronic
and electrical equipment and other secondary processes. It provides a wide range services to its customers with specialty in audio, visual, office automation, personal computers products amongst others. Through the years, the group has also diversified into downstream services by providing assembly facilities as part of its “one stop service centre” concept.

Strong Balance Sheet - Potential to Increase Dividend Payout
SKPRB has a strong balance sheet backed by net cash of RM57mn as at end of December 2011. We opine that the strong balance sheet can adequately steer the future direction of earnings. Looking to 2012, we expect the group to generate double-digit earnings growth and positive operating cash flow while further investing in the long-term growth of the group. The group now has a dividend payout policy of 50% of profit after tax (PAT).

There is potential for the group to increase its dividend payout policy given its solid financial capabilities. We
expect the group to pay 3.0sen DPS in FY12 while in FY13; it should improve to 3.5sen/share. This translates into attractive dividend yield of 5.5% and 6.4%, respectively.

Expect Growth To Remain Strong
We expect SKPRB to continue seeing good growth momentum. We expect the group’s revenue to grow at
a compounded annual growth rate (CAGR) of 20% between FY08-FY13 while net profit should increase at a CAGR of 116.5%. We expect SKPRB’s revenue to reach RM407.7mn and RM443.0mn in FY12 and FY13 while net profit is forecasted to increase to RM35.3mn and RM39.3mn in FY12 and FY13, respectively. The commendable growth is attributed to more value added services for the electrical and
electronics industry and higher utilisation rate.

Benefit From Outsourcing Trend And Dyson’s Expansion
The outsourcing trend by MNCs creates opportunities for players such as SKPRB to be their suppliers. Since
SKPRB has met strict quality requirement, on-time delivery and manufacturing costs, we believe it will be easier for the group to secure more orders from MNCs. We know that the complete assembled production of Dyson on certain models of upright vacuum cleaners was outsourced to SKPRB. Dyson is the world’s leading company in vacuum cleaner industry with 23% share of the global vacuum cleaners market. We understand that the group is currently undergoing the prequalification process with Dyson for some of its new products. Thus, we expect more substantial orders from Dyson in the future and leverage on its expansion.

On the valuation front, at RM0.545, SKPRB is trading at PER of 9.3 in FY12 and 8.3x FY13. We
initiate coverage on the stock with a target price of RM0.67, using a CY12 EPS of 6.4sen and pegging it to
the industry weighted average of 10.4x. We benchmark SKPRB to Meiban Group, VS Industry, Haitian International and Chen Hsong Holdings.

SKP Resources Berhad (SKPRB) is well-known within the plastic industry for its reputation as a “One-Stop Service Centre”. The group was established by experienced leaders from the plastic industry and has reached the world class standard and quality in its field. Due to its expertise, the group manages to attract established global companies to become its customers.

SKPRB is principally involved in the manufacturing of plastic parts and components, contract manufacturing,
precision mould making, the sub-assembly of electronic and electrical equipment and other secondary processes. All of the group’s products are catered for a diversified base of multinational corporations (MNCs) based in Malaysia.

The history of SKPRB traces back to 1994 when Dato’ Gan Kim Huat, founded Syarikat Sin Kwang Plastic Industries Sdn Bhd (SKP) in a joint venture with Mezzanine Capital (Malaysia) Sdn Bhd (MCM) and Delima Kristal Sdn Bhd to manufacture plastic injection products. The group is headquartered in Batu Pahat, Johor, where the group’s main manufacturing and R&D facility is located.

On 12 December 2000, it was converted to a public limited company and assumed the name Vital Conglomerate Berhad. Subsequently on 8 October 2002, it changed its name to SKP Resources Bhd (SKPRB). SKPRB was listed on the Second Market of Bursa Malaysia in 2003. Currently, nearly 73.8% of SKPRB is controlled by Gan Family. Dato’ Gan and his son, Gan Poh San are also holding executive directorships in Tecnic Group Berhad (Tecnic), a listed company on Bursa Malaysia.

Tuesday, March 20, 2012

GWPLAST ... Mar12

Inet Research ...

1. Recent Developments
- GWP Holdings recently held an analysts’ briefing in conjunction with its 4QFY11 results.

- Overall sales volume increased 12.4% to 46,926 mt in FY11 boosted mainly by the commencement of a new stretch line since 3QFY11, additional facilities in new factory block and higher sales of value-added printing products.

- While sales volume of stretch film expanded by 26.7% to 21,399 mt in FY11, sales volume of blown film was flattish at 25,527 mt.

- Exports, which accounted for 58% of its total turnover in FY11, were the key driver to sales growth in
FY11. Its key export markets are Japan and South Korea, which grew by 32.2% and 24.8% due to strong
demand for stretch film. Reflecting the slower growth of blown film, domestic sales only increased by
2.4% in FY11.

- The 25.8% growth in cast sales was driven by new cast capacity. The decline in overall gross margin was
due to the following factors:
o Start-up expenses arising from the relocation to new factory,
o Higher depreciation on the new cast line while capacity was only ramped up in 4QFY11; and
o Higher raw material prices

2. Earnings Outlook
-  FY12’s earnings will be driven by the full year impact of its new stretch line, better absorption of
depreciation expenses and absence of one-off items such as start-up expenses and forex loss in 4QFY11.

- Arising from stability in resin prices and increased sales mix of value-added printing activities,
profitability is also expected to improve in FY12.

- GWP Holdings has also planned to expand into laminated packaging market, which offers stronger
growth opportunities as the lamination packaging market is much larger than its existing surface-printed
packaging products.
It has committed to purchase an European state-of-the-art laminating machine that is equipped with
solvent free and solvent based capability. Existing players in this region have limited capacity in solvent
free lamination, which is experiencing higher demand due to the cost, health and environmental benefits.
The commercial production is scheduled to commence in 3QFY12.

Upon commencement of the lamination line, GWP Holdings will be the only integrated flexible
packaging provider in Malaysia with in-house blown, cast and lamination production. Its immediate
focus is to fulfil the demand from its current export customers for blown products that also require
laminated products. However, it may face some drop-off in demand from its existing customers involved
in lamination production.

- The effective tax rate dropped to 7.3% (FY11) from 13.5% (FY10) due to the capex on new factory block
and machines amounting to RM35m in FY11. With capex only limited to the laminating machine and
other smaller machines for FY12, its effective tax rate is expected to rise to 15% for FY12.

3. Valuation and Recommendation
- We are reducing our earnings forecast for FY12 by 7% to account for the higher effective tax rate. Hence,
our target price is reduced to RM0.84 sen from the previous RM0.90 by pegging on FY12 P/E of 9x. The
stock is currently trading at a P/E of 8.0x and 7.3x for FY12 and FY13.

- Assuming that FY11’s net dividend of 5 sen is maintained in FY12, the stock offers an attractive yield of
6.8% at current share price of RM0.74. Its share price is also trading at a discount to its NTA of

Monday, March 19, 2012

CIMB ... Mar12

Khazanah Nasional Bhd has increased its stake in Malaysia 's second biggest banking group, CIMB Group Holdings Bhd, by 1% to 29.9% in an open market purchase.

Why is Khazanah acting contrary to its long-term objective of slowly divesting stakes in certain government linked companies (GLCs) under a 10-year GLC transfomation programme? Earlier reports also indicated that Khazanah had divested some of these stakes to foreign parties.

Sources indicated that the purchase on 07 March 2012 could be a prelude to a bigger objective by the sovereign wealth fund which viewed CIMB as a “core competitive asset” in its portfolio.

CIMB is also part of Khazanah's larger strategy of rebalancing its portfolio in line with the times.

Khazanah has been a net-seller in the market in 2011, this move is a prelude for their re-investment into suitable investments. Khazanah had, in 2011, made 13 investments amounting to RM5.8bil but divested eight companies, a move which brought in proceeds of RM7.7bil. Through this process, Khazanah had generated gains amounting to RM2bil. The net gain of RM2bil will need to find its way into the market again, into new avenues of growth.

This purchase of a stake in CIMB is part of Khazanah's strategy of seeking new sources of growth.

In early 2012, Khazanah managing director Tan Sri Azman Mokhtar said the longer term aim for its companies was to “drive them to become regional champions”.

Khazanah has been net sellers of its portfolio in the past few years (prior to early 2012). In the meantime, they are also buying into new growth engines.

Khazanah aims for three of its companies to be transformed into regional champions - Axiata Group Bhd, CIMB and Integrated Healthcare Holdings which is about to be listed sometime in 2012.

Friday, March 16, 2012

UEMLand ... Mar12

It has identified India, Vietnam and Myanmar as potential targets as it gears up to expand into new markets.

In Sabah and Sarawak it is in advanced discussions with landowners.

Its preferred route for a regional expansion would be through an acquisition or JV.

Its developments are primarily focused in Johor and Klang Valley. It has also presence in Canada.

It is bidding for land in strategic hot areas where it may develop up market residential or office building.

It expects to see tipping point soon where it hopes to access a wider market through several projects that are due to finish soon.
In Nusajaya, a number of projetcs will come into completion towards end 2012.
A number of projects will be fully completed and operational by end 2012. These include Coastal Highway, the Legoland theme park and the local campuses.

More than half or rm1.3 billion of 2011’s sales were from developments outside Nusajaya.

It aims to launch projects with a total GDV of rm4.5 billion of which 62% or rm2.8 billion will be derived from outside Nusajaya.

Thursday, March 15, 2012

Bjcorp ... Mar12

A new chapter has opened in Berjaya Corp Bhd (BCorp) under the leadership of its chief executive officer and interim chairman Datuk Robin Tan Yeong Ching, with injection of fresh ideas and expansion drive to propel growth.

Tan, whose father is BCorp founder Tan Sri Vincent Tan, plans to take the group's consumer marketing business and infrastructure division to greater heights.

BCorp has presence in over 15 countries with businesses in consumer marketing; property investment and development; hotel and resort operation; gaming; stockbroking and asset management; as well as food and beverage.

BCorp has interest in automobile; operation of sanitary landfill; media and publishing; trading of lumber-panel and building products; as well as garment and apparel manufacturing.

There is potential to expand significantly the group's consumer marketing business, especially its multi-level direct selling group Cosway Corp Ltd, and its infrastructure division.

Cosway, which is listed on the Hong Kong Exchange with annual revenue in excess of HK$6.23 billion (RM2.4 billion), operates in 15 countries.

The company carries a range of products like health and nutrition, slimming, personal care, skin care, cosmetics, perfumes, household, food and beverage, water filtration systems and kitchenware.

For infrastructure, BCorp is identifying potential jobs like water-related projects as well as the construction and operation of sanitary landfill in Asia, targeting China and the Philippines.

BCorp currently has 85 per cent stake in DSG Holdings Ltd, which holds two potable water supply companies and one wastewater company in China.

The group has sanitary landfill projects in Bukit Tagar, Selangor, and Foshan, China.

The group's net profit fell 73.47 per cent to RM22.95 million for the second quarter ended October 31 2011, compared with a year ago after revenue dropped due to lower property sales and the deconsolidation of the financial results of Berjaya Sompo Insurance Bhd.

The group's revenue was lower at RM1.69 billion compared with RM1.71 billion previously because of the deconsolidation of Berjaya Sompo's financial results from the group revenue, following the disposal of a 40 per cent stake in the latter during the first quarter. The property development business also registered lower sales.

Wednesday, March 14, 2012

YTL ... Mar12

YTL Communications Sdn Bhd, which is part of YTL Corp Bhd, is moving closer to profitability with the launch of its Unlimited Super Postpaid Plans.

The company is targeting to get 500,000 subscribers for the new plans by the end of 2012, bringing its total Yes subscribers close to a million, which is the break-even figure for the company.

Currently (Feb 2012), we have more than 300,000 Yes subscribers.

Yes is a brand under YTL Communications which offers 4G mobile Internet with voice service. The service was launched in November 2010.

Currently, YTL's mobile broadband network segment is still loss-making in terms of earnings due to start-up and fixed operating costs. However, the company saw an improvement in revenue in its latest quarter due to growth in subscriber base.

The company was not ruling out any merger and acquisition (M&A) plans should they “make sense”. It was reported that the YTL Group had approached Asiaspace Sdn Bhd and Green Packet Bhd, both fellow 4G players for possible M&A.

Industry observers said that it is extremely challenging for smaller firms to survive due to the high capital expenditure required in the industry and that merging some companies would be more ideal.

There are currently nine firms in the country which have licences to offer mobile services.

Tuesday, March 13, 2012


EITA Resources Bhd (EITA), an elevator manufacturer and distributor of electrical and electronics components and equipment, plans to venture into high-speed passenger elevator systems to boost its competitive edge in bidding for more projects in Malaysia.

EITA is currently conducting research and development (R&D) in line with the growing trend for skyscraper buildings especially in this country.

The group, which is scheduled for listing on the Main Market of Bursa Malaysia in the first half of 2012, expects to commercialise its high-speed elevators by 2013.

More than 1,450 of its elevators have been installed in commercial and residential properties, government offices, hotels, shopping complexes and universities.

Besides Malaysia, EITA's elevators have also been installed in Singapore, Laos, Vietnam, Philippines, Hong Kong and Saudi Arabia.

Mudajya ... Mar12

Industry sources said the company was also organising a trip for analysts and fund managers to the plant in India.

To recap, Mudajaya ventured into the Indian power sector by taking a 26% stake in RKM Powergen Pvt Ltd via subsidiary Mudajaya Corp Bhd in undertaking a 1,440-MW coal-fired independent power producer (IPP) project in Chhattisgarh, India.

The project comprises four generating units with a nominal capacity of 360 MW each.
The Indian project, however, did not start off well and hit some bumps. In 2010, Mudajaya went to great lengths to explain the power plant project it is undertaking with its partner in India.

It was also probed by the Securities Commission (SC) as a nine-page, anonymously-written letter made its rounds. The company was subsequently cautioned that it must ensure compliance in future.

Among the issues brought up in the letter was the high price of RM871mil Mudajaya paid for its 26% stake. That compares with the RM273mil RK Powergen paid for its 74% stake. Mudajaya has since clarified that the premium it paid was justified as it included approvals, the IPP contracts, coal cost savings and a chance to enter India's power industry.

For the financial year ended Dec 31, 2011, Mudajaya posted a net profit of RM231mil on revenue of RM1.34bil.
There was a high chance of more power plant-related jobs in the pipeline, which should add to the expected positive news flow from the rollout of other jobs under the 10th Malaysia Plan and the Economic Transformation Programme.

There should also be excitement on the potential winners of the MRT elevated packages which will be awarded over the next six months. We make no changes to out earnings per share forecasts as we continue to assume RM1.5bil worth of new jobs in 2012.

Project wins continued to be the stock's key potential catalyst.

The progress on the India IPP had been substantial, with some US$570mil worth of EP works outstanding equivalent to 40% completion.

Monday, March 12, 2012

Perisai ... Mar12

Perisai Petroleum Teknologi Bhd (Perisai) is expected to see an explosive growth in its
financial year of 2012 (FY12) with 100 per cent fleet utilisation and potential earnings enhancement from asset acquisition.

The completion of Perisai's mobile offshore production unit (MOPU)'s acquisition in January 2012 will more than double its earning to RM85 million in the year.

There could be earnings accretion from the transfer of ownership of Intan's Offshore Sdn Bhd's vessel to a Labuan-registered company which expected to be completed by third quarter 2012.

Perisai is looking at marine assets worth at least US$100 million, as early as the second half of 2012, to mark its entry into the less-competitive market.

Perisai’s ownership of a Petronas license will enable it to bid for Petronas contracts, of which the award timing is likely to be accelerated to meet the national oil company to arrest declining oil production.

Perisai is in the process of transferring ownership of eight vessels owned by Intan Offshore to a Labuan registered company to capitalize on a tax advantage. The exercise is expected to be completed by 3QFY2012 and could raise FY2012 to FY2014 earnings.

Intan Offshore vessels are currently fully chartered out with five expiring by 2HFY2012. But management clarified that the current bare boat charter agreements with Ezra Holdings Ltd for these five vessels may be renewed.

Perisai is looking at asset acquisition as its next major move to enhance its earnings base. While asset injection by Ezra is a possibility, the management does not rule out external purchases. It is looking at a marine asset that is worth at least US$100 million but it might require an equity cash call to fund the acquisition. Assuming 30:70 debt equity financing for the acquisition, Perisai’s net gearing could drop to 75%, though there will be earnings per share dilution impact.

Over the longer term, marginal fields could provide opportunities for Perisai. Its vessels are currently locked under various contracts, but Perisai is able to leverage Ezra’s wide range of vessels in offshore support and subsea services. This could be a major transformation for Perisai as it moves up the value chain into exploration and production.

Friday, March 9, 2012

MBMR ... Mar12

Concerns that its EPS will be diluted after it proposed a renounceable rights issue of 73.65 million. Given the group’s aggressive expansion, it has proposed a rights issue with warrants to fund its plans, as well as a bonus issue to reward shareholders and boost liquidity in its stock.

To recap, it is shoring up cash to expand into the auto assembly business, for which it already has a license. It have already acquired a license and are in negotiations with several brands which are interested in partnering with it to assemble cars in Malaysia . With this particular license, it is attractive to go for passenger vehicles priced under rm150000. It is exploring both options – commercial and passenger vehicles. It will be targeting the middle to upper segment of vehicles.

To fund the expansion, it proposed rights issue with warrants. The group currently has rm247 million in cash as at 4QFY2011 ended Dec 31. The group which has been net cash for the most part, posted net borrowings of rm180 million and net gearing of 10% following subsidiary OMI rm103 million investment in alloy wheel manufacturing plant in mid Jan 2012.

The company hopes to get shareholder approval in early May 2012 and complete the fund raising exercise by June 2012. The group currently has rm247 million in cash on its books as at Dec 31, 2011.

Historically, it has been a dividend yield stock, its gearing has been low and its earnings derived primarily from associate companies like Perodua. This is going to change. For the next three years, until its investments mature, they are going to be a growth stock and expect its shareholders to be rewarded with capital appreciation as the market begins to recognize its potential.

Med Bumikar Mara holds 53.91% equity and the EPF owns a 6.88% stake,

The group which has been a net cash position for the most part, posted net borrowings of rm180 million and net gearing of 10% following subsidiary OMI’s rm103 million investment in an alloy wheel manufacturing plant in mid Jan 2012.

The biggest risk to MBMR’s plans would be an unforeseen change in policy.

MBMR’s portfolio of auto businesses includes distribution of vehicles, post sales servicing, retail of parts and accessories and manufacturing auto parts.

It also plans to expand the group’s vehicle parts manufacturing business. It had acquired Hito and OMI’s plant by year end (2012).

It also has various properties on freehold land in prime areas.

Thursday, March 8, 2012

Ebworx ... Mar12

Ebworx Bhd has received a takeover offer from Hitachi Ltd to buy all of its shares at 90 sen per share which is conditional of a minimum level of acceptances of 85% of the nominal value of its shares, excluding the treasury shares held by Ebworx.

Having deliberated on the contents of the letter, the board has agreed for the potential buyer to proceed with the due diligence (to the extent permitted by applicable laws and regulations) on the company (Ebworx).

As the Malaysian financial services sector grows its regional and digital footprints, banking solutions provider eBworx has been purusing growth by riding on the sector’s dynamics.

Its client base include almost all the local banks as well as those in Singapore, Indonesia, China , Thailand and the Philippines.

The software requirements of financial service providers change as and when central banks tweak regulatory guidelines. The impending implementing of the Basel III global regulatory standards will also require banks to revaluate their internal frameworks.

Recurring income now makes up about 70% of eBworx’s top line after the group reoriented its business strategy away from one off software licensing sales.

Its order book stood at rm60 million. Its cash and bank balance stood at rm35.2 million.

Its three largest shareholder collectively control about 70.69% stake in the company. Tan holds 16.12%, CSE-Infotech Ltd and OSK Ventures Intl Bhd’s unit OSK Capital Partners Sdn Bhd own 29.21% and 25.36% equity interest.

By building its regional presence, its future focus will be on growing its presence in Singapore, Indonesia and China.

For the past five years, more than 80% of its revenue comes from its exiting customers.

Wednesday, March 7, 2012

KUB ... Mar12

Sources say KUB is said to have been successful in its bid for Shell LPG business in Malaysia, held under its listed arm Shell Refining Co.

According to sources, KUB was willing to pay between rm300 million and rm350 million for Shell’s Malaysian PLG business.

Nonetheless, based on rm50 million pre tax profits, a value of rm300 million to rm350 million for the LPG business would mena a minimum of six times earnings. When Shell sold its Singapore LPG business, it was at 10 times earnings.

Shell has been gradually disposing of its LPG business globally. Given that the LPG business deals mostly in cash, the division had contributed to Shell Malaysia’s cash pile.

On the flipside, Shell’s LPG business would help to provide a boost and give anchor to the KUB group, which is currently in the red.

Obtaining Shell’s LPG business would help turn KUB’s energy division around. In terms of top line contribution, the energy business accounted for 59.3% of revenue for FY2011 ended Dec 31.

KUB’s LPG business is not considered as one of the company’s core segments. However KUB had stated previously that if it managed to obtain Shell’s local LPG business, then the company would work on reshuffling its portfolio.

KUB already appears to be undergoing an internal organization judging by the slew of announcements concerning changes to the board.

The new management setup at KUB and its prospect of securing Shell’s local LPG assets are certainly worth watching.

It is UMNO linked holds a 29.6% stake while the Ministry of Finance owns a 22.5% stake.

Tuesday, March 6, 2012

Tenaga ... Mar12

It is expected to perform better in the current second quarter ended Feb 2012 due to higher average gas supply from Petronas as well as the RM2bil compensation as part of fuel cost-sharing mechanism.

It has been giving an average 1,100 million metric standard cu ft per day (mmscfd) and its requirement is 1,250 mmscfd. It still need to burn distillates and oil from time to time but burn less of this.

TNB's financial performance would be better, given that it burned less distillates and oil, which was five times more expensive. Previously TNB incurred an additional RM400mil a month to replace the shortfall in gas but the amount would be lower now (Feb 2012).

TNB was expected to record profit once more in the second quarter once it booked the RM1bil that it had received from the Government under the fuel cost sharing mechanism between the Government, TNB and Petronas. TNB reported its third consecutive net loss of RM224.7mil in its first quarter to Nov 30, 2011, against its preceding quarter net loss of RM453.9mil.

TNB had received fully the compensation and would now be able to write-back RM2bil from Petronas and the Government. However, the compensation of RM2bil was only up to October 2011. The three major stakeholders TNB, Petronas and the Government had agreed to share the RM3bil incurred between January 2010 and October 2011.

It still have to burn distillates and oil after October 2011 and are still discussing with the Government on further compensation.

Monday, March 5, 2012

Muhibbah ... Mar12

Its turnaround is likely anchored by APH and project wins. Its outstanding order book stands at rm3.1 billion of which construction/infra jobs make up some rm2.5 billion. This should last till 2014. Estimate of rm1 billion worth of new contracts in 2012. The key drivers are potential MRT packages and marine/port related jobs, both local and overseas. The restructuring of the APH project is still on the cards and expect some news flow on the progress in the next three to four months (from March 2012).

For Muhibbah, which is the main contractor for APH, a resolution could lead to a stake in APH and additional job scope from the balance of works.

As one of the contractors for the rm1.4 billion bunkering island project in Johor, has a filed a suit against the promoter, APH and the MD contractor, ZAQ Sdn Bhd for overdue claims amounting to rm381 million.

If the court proceedings are successful, it will have a positive impact on the company. Muhibbah is among the leading contractors for the project undertaken by APH. The project has been saddled by cost overruns and delays, prompting its lead financier, CIMB to stop the line of credit.

In Dec 2011, CIMB managed to get a court order to appoint receivers and managers on APH. Following that, there were reports of CIMB and Muhibbah possibly converting the amount due into equity and taking over the project in an effort to restructure APH. However, it is learnt that not all the creditors of APH are keen to convert their debt into equity which may stall the restructuring of APH. For the restructuring to go through, it needs 75% creditors’ support.

Sunday, March 4, 2012