Thursday, August 30, 2012

MAS ... Aug12

While there are still a lot more that need to be done to bring in consistent profits, sentiment are turning more positive as the carrier undergoes a turnaround slowly and steadily.

MAS delivered another quarter of net loss of RM349mil for the second quarter to June 30, 2012 caused largely by a 6% drop in revenue due to route cuts. MAS' operating loss narrowed to RM101mil from RM443mil reported a year ago. Revenues fell from RM3.4bil to RM3.2bil. While the loss was smaller than the RM526mil reported in the same quarter of the previous year, it was higher than the first quarters net loss of RM171mil. This is MAS' sixth consecutive quarter of losses.

MAS' operating profit came in at RM46mil in the second quarter, its first positive operating profit since the RM257mil registered in the fourth quarter of 2010. This is positive in boosting investor confidence as its turnaround story gains traction. With its year to date operating loss is at only RM182mil so far, and in anticipation of a stronger load and yields in the second half 2012, MAS will possibly chalking an EBITDA of RM34mil for 2012.

Although financial performance appears to be improving, there are too many unknown quantities including largely anticipated volatile fuel environment. While acknowledging the positives such as a business turnaround with new management team, reduced unit operating cost with delivery of new aircrafts, and its leverage on the Oneworld Alliance, risks remain. For example, the restructuring plan is subject to implementation risk, there are competitive pressure on airfare and jet fuel prices that are high.

Wednesday, August 29, 2012


A company involved in shrimp production will offer of 39.2 million of new shares in its initial public offering (IPO). It would have an enlarged issued and paid up share capital of 152 million shares with a par value of 10 sen. Up to 11.7 million IPO shares would be available for application by the public and its eligible directors, employees and persons who have contributed to the company.

Besides shrimp production, the company is also involved in the sale of specific pathogens such as free Nauplii and Post Larvae as well as shrimp grow-out farming.Nauplii are free-swimming larvae developed from fertilised eggs of crustaceans, while Post Larvae are used to refer to animals after metamorphosis from larval stage.
It would utilise RM4.9mil or 48% of its raised proceeds as capital expenditure. It will utilise RM4.4mil for the development of the Badong grow-out farm, while the remaining RM500,000 would be for the development of the Rompin hatchery.

Since its incorporation in 2003, the company has worked very closely with the Department of Fisheries in developing the Malaysian shrimp aquaculture industry. With the support of the government agency in the form of quality certifications, tax incentives, subsidies or grants and technical assistance, our group has expanded its production capacity of Nauplii and Post Larvae via internal expansion as well as various collaborations and joint ventures with various shrimp hatchery and grow-out players.

Its directors include chairman Datuk Mohamed Mahyuddin Mohd Dahan, managing director Lee Kat Choy, Chee Chik Eng, Lee Kim Seng, and Zuridah Osman Merican.
They collectively control 15.05% of the company after its IPO, with the substantial shareholders Lee, and Chee both holding a 7.42% stake.

The company three-year financial performance have seen a steady growth, with its financial year ended Dec 31, 2011, recording a net profit of RM2.66mil over a revenue of RM14.6mil. It recorded a net profit of RM2.3mil for 2010 against a revenue of RM9mil.

While it achieved RM1.9mil in net profit from a revenue of RM5.4mil in 2009.

Lien Hoe: Lien Hoe Corp Bhd has ceased to be a substantial shareholder of Perduren (M) Bhd. Lien Hoe had disposed of 11.32 million shares in Perduren, which represented an 8.4% stake in the company.

Scomi ... Aug12

Scomi Group Bhd is believed to be the front runner for two risk-service contracts (RSCs) to be awarded by Petroliam Nasional Bhd (Petronas) for the Tembikai and Cenang marginal fields off Peninsular Malaysia.

Sources said besides Scomi Group, the other bidders for the contracts included Bumi Armada Bhd, Daya Materials Bhd and Sydney-based AWE Ltd.

A source said Petronas was close to announcing the winners for these two fields with contracts valued at between US$200mil (RM620mil) to US$400mil (RM1.2bil) each.

In June 2012, the company was looking to tender for about US$1bil (RM3.1bil) in oil and gas services contracts within the next year. Scomi presently has an orderbook of about RM1.3bil.

Scomi Group, in the midst of a restructuring exercise, is said to be partnering another Australian company, Cue Energy Resources Ltd, for this bid. Cue Energy is an oil and gas exploration and production company with a presence in South-East Asia and Australasia.

Bidding for these fields were extremely competitive, with some bidders aggressively showcasing technical capabilities and financial muscle to seal the deal.
The value of Tembikai and Cenang of between US$200mil to US$400mil is based on capital expenditure and operating expenditure.

Tembikai and Cenang are the juiciest marginal oilfields, as they are in shallow waters and have the most reserves.

Scomi secured a RM130mil contract from Qatar's state-owned petroleum company Qatar Petroleum for the supply of drilling fluids and engineering services over three years. The contract was secured via Scomi Oiltools (Cayman) Ltd.

Scomi's restructuring exercise involves a merger between the Eastern Hemisphere business of oilfield services and its associate company, Scomi Marine Bhd's offshore support services.

In February 2012, the company announced a corporate restructuring, which would see its businesses and those of Scomi Marine merged under a new, full-fledge integrated oil and gas marine and drilling services provider.

Tuesday, August 28, 2012

IPO ... Astro

The re listing of Astro Malaysia is expected to raise some rm5.47 billion from the sale of 29.2% of the company. However, only 31.2% of the proceeds raised from the sale of up to 1.52 billion new and existing shares will go to Astro Malaysia . Of the total 1.52 billion shares, slightly over a billion shares are sold by T Ananda and Khazanah Nasional Bhd while the rest are new shares.

 From the sale of the 474.3 million new shares estimated to net around rm1.7 billion, some 58% of the gross proceeds has been earmarked for capex, while 29.35% will go to repay bank borrowings. This leaves 8.6% of proceeds for general working expenses.

Nonetheless the IPO is expected to raise rm5.47 billion for the company and controlling shareholders using the indicative price of rm3.6 a piece. This values Astro Malaysia which is listing without its foreign operations in India and Indonesia , at rm18.7 billion, significantly above the rm8.3 billion the old Astro Malaysia was worth at the rm4.30 privatization price.

Astro Malaysia is widely expected to market itself as a dividend play.

Anandda will continue to control about 50% of Astro’s enlarged share base post IPO. Khazanah’s effective interest will be 20.8%.

As at April 2012, Astro had rm480 million cash. Borrowings and finance lease liabilities stood at rm3.69 billion, of which rm3.66 billion is long term liability.

It will continue to stay the market leader with continued investments of rm1 billion annually in content.

Listing without the foreign pay TV operations housed under the de listed Astro would be sheltered from the ongoing courtroom disputes Ananda and Lippo Group as asll the wider group’s run in with authorities over corruption allegations in India that has yet to be fully laid to rest.

AFG ... Aug12

Temasek’s partnership with Malaysian privately held Langkah Bahafia Sdn Bhd is complicating the Singapore investment agency’s bid to divest its investment in AFG to DBS bank Ltd. One major bugbear to the proposed divestment plan is that the transaction would comply not with domestic banking rules that limit ownership by any single group in a financial institution to 20%. Langkah Bahagia, a private entity linked to former minister Tun Daim said Temasek control of 29.06% stake in AFG through a JV concern called Vertical Theme Sdn Bhd. Temasek’s plan to sell 49% interest in Vertical Theme to DBS would not resolve shareholding issues at AFG. The plan is also being complicated by Langkah Bahagia’s desire to sell its indirect interest in AFG.

BNM wants a transaction that will help comply with the shareholding spread at AFG. DBS cannot take the whole block and finding a partner to take over Langkah Bahagia’s stake does not change the structure.

In early April 2012,AFG noted that it had received notice from Temasek unit Duxton Investments Pte Ltd that DBS had obtained approval from BNM to start negotiations on the planned acquisition. DBS had proposed to acquire Duxton’s 49% stake in Vertical Theme, which in turn owns 29.06% stake in AFG. As such Duxton is effective holding a 14.2% stake in AFG. Vertical Theme is a partnership between Temasek’s Duxton and Langkah Bahagia. Should the talks succeed, DBS will own 14.2% stake in AFG through Vertical Theme.

The Singapore financial group could hold 29.1% stake in AFG should it acquire the balance of 51% ownership in Vertical Theme from Langkah Bahagia.

There has been speculation in 2011 that DBS’ entry into Malaysia includes the acquisition of RHB by parties related to DBS and then merging it with AFG. This would result in Temasek and RHB’s largest shareholder EPF holding stakes in the parent company of the merged banks. It is understood that the plan did not see the light of day then, but the rumor mill has it that this plan is currently (Aug 2012) being explored.

Monday, August 27, 2012

MRCB ... Aug12

MRCB which owns and operates the EDL in JB has had over rm1 billion of debt notes issued to fund the 8.1 km EDL downgraded by RAM. The downgrade came because MRCB Southern Link is seen likely to default on rm1 billion senior and junior sukuk due to the delay in tolling on the expressway. MRCB Southern has a high likelihood of defaulting on both the notes when interest payments are due on Dec 21, 2012. This is the second downgrade in Aug 2012.

RAM Rating Services downgraded the long-term ratings of MRCB Southern Link Bhd's RM845mil secured Senior Sukuk and RM199mil Junior Sukuk and there was a high likelihood of defaulting on both Sukuk on Dec 21, 2012. Malaysian Resources Corporation Bhd, the ultimate project sponsor, does not intend to fund any shortfall in meeting the debt obligations.In the meantime, the implementation of the government's short- and long-term plans to resolve the non-tolling of EDL remains uncertain. Finally, the negative Rating Watch indicates that the ratings could come under further downward pressure in the very near-term, if neither the short- nor long-term solution can be implemented promptly.

Issues ranging from the location of the toll Plazas, to toll charges and the date to start collecting toll have delayed start of tolling on the expressway. Expecting MRCB to incur operating cost of rm7 million a month which would lead to rm30 million to rm40 million operating losses for EDL in the fiscal year ending Dec 31.

The main reason for the downgrade ratings was the non tolling of the highway. MRCB is in talks with the government to resolve the issue and in the meantime the government has passed an interium resolution to bear the operational costs of the project while wait for the final decision.

MRCB has yet to receive any compensation from the government as part of the temporary measures as the interium resolution still needs to be approved by the Cabinet. However MRCB’s CEO said that MRCB Southern Link would have been able to meet its debt obligations had the management not made a rm40 million payment to the contractors, a related company to MRCB group.

The consolidated cash holdings of MRCB Southern Link stood at rm21 million as at end July 2012.

In April 2012, MRCB chairman Tan Sri Azlan said the group was open to options for its EDL, including the sale of the highway.

The EPF is the controlling shareholder of MRCB with 42.2% stake.