To Be A Success Trader

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2011-10-02T23:34:00.003+08:00

Catcha ... Sep11

2011-09-30T14:29:00.000+08:00

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, Hauteavenue.com, 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, www.hauteavenue.com, 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 Lowyat.net portals.

KUB ... Sep11

2011-09-30T08:24:00.000+08:00

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.

SCIB ... Sep11

2011-09-29T14:27:00.000+08:00

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

2011-09-29T08:23:00.000+08:00

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.

Bolton ... Sep11

2011-09-28T14:26:00.002+08:00

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

2011-09-28T08:21:00.000+08:00

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.

Airasia ... Sep11

2011-09-27T08:37:00.002+08:00

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.

WahSeong ... Sep11

2011-09-26T14:39:00.000+08:00

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

2011-09-26T08:32:00.002+08:00

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.

MSM ... Sep11

2011-09-23T13:59:00.000+08:00

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

2011-09-23T07:56:00.000+08:00

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.

LionCor ... Sep11

2011-09-22T13:58:00.001+08:00

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

2011-09-22T07:48:00.001+08:00

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.

Tenaga ... Sep11

2011-09-21T13:57:00.001+08:00

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

2011-09-21T07:47:00.000+08:00

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.

CMSB ... Sep11

2011-09-20T13:56:00.001+08:00

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

2011-09-20T07:46:00.000+08:00

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.

JTB ... Sep11

2011-09-19T14:51:00.000+08:00

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

2011-09-19T08:44:00.000+08:00

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.

PBB ... Sep11

2011-09-15T13:59:00.000+08:00

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

2011-09-15T07:42:00.000+08:00

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.

Uemland ... Sep11

2011-09-14T14:45:00.001+08:00

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

2011-09-14T07:41:00.000+08:00

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.

PMI ... Sep11

2011-09-13T14:44:00.000+08:00

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

2011-09-13T08:36:00.004+08:00

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.

Parkson ... Sep11

2011-09-12T14:43:00.000+08:00

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

2011-09-12T07:32:00.000+08:00

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.

走路10分钟，瘦身1公斤

2011-09-11T09:09:00.000+08:00

工作相当忙碌，家里的事情也不少，还有各种应酬……实在没有时间安排系统的健身计划？那么就别浪费你上下班途中、等车以及乘坐公共汽车的10分钟，因为好好利用这段时间，你就能偷偷变瘦哦！

tvb now,tvbnow,bttvb,tv series,tv drama,movie,bt,download$ G5 M6 P+ Y. s) Y/ G
tvb now,tvbnow,bttvb,tv series,tv drama,movie,bt,download/ H. j$ r6 n' u# g+ H* X$ p# e4 q) r
1．注意走路的姿势
　　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。

　　2．加大走路的步幅
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。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 ]
　　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。
6 T- `0 M) u/ g' C

　　4．甩包炼手臂
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

　　5．等车时的运动www.tvboxnow.com: r% [3 c: H2 \$ a
8 P5 d3 @. q% }: ~9 a6 p
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．坐在公共汽车上! r- ]- U. v# R' l
　　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

　　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。
www.tvboxnow.com! N0 B9 m. p) I4 x5 B3 n+ z

　　7．站在公共汽车上
　　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
8 Q+ d8 f% f. {) b8 k
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
4 b1 ^' _' Y. W7 x5 m7 x
如果够不着车子上面的吊环，可用手握紧栏杆，将脚跟踮高，像芭蕾舞演员一样用脚尖站立，累了再放下，如此反复练习，可以美化小腿的线条。

　　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。

BIMB ... Sep11

2011-09-09T14:49:00.000+08:00

BIMB Holdings Bhd, owner of the country's oldest Islamic bank, bucked the banking trend to show enviable growth in net income margin (NIM) in the second quarter of the year.

The bank's NIM may have expanded close to 20 basis points to about 3.58 per cent from first quarter of 2011 due to a "very liquid" balance sheet that gave it more flexibility than other banks.

BIMB's low financing/deposit ratio of just 54 per cent (which improved from 51 per cent in the first quarter) gives it greater flexibility in managing its NIMs.

BIMB’s offer is a turnaround story of what is now a well-capitalised commercial bank (15.6 per cent core capital ratio) with a very liquid balance sheet (net financing/deposit ratio of just 54 per cent), a well-managed and profitable composite insurance outfit as well as a potential M&A (merger and acquisition) story, given the possibility of shareholding changes.

The group's plan - to expand into the region - is not a priority at this point in time. The banking unit, Bank Islam Malaysia Bhd, has often talked about wanting to expand into markets, like Indonesia and Bangladesh to tap Islamic finance.

BIMB saw financing growth of 8 per cent for the year to date, or 16 per cent on an annualised basis, led by growth in personal financing.

Its insurance arm Syarikat Takaful saw strong earnings, with first half pre-tax profit more than doubled from a year ago, due to a 65 per cent jump in transfers from the family takaful fund.

PChem ... Sep11

2011-09-09T07:48:00.000+08:00

There have been concerns that the natural gas shortages, which led Tenaga Nasional Bhd to a third-quarter FY11 loss of RM500mil in July 2011 could likewise significantly erode Petronas Chemicals' upcoming results.

The intensified gas supply reduction in second-quarter calendar year 2011 (largely stemmed from the continuing shutdown of Bekok C platform off Terengganu and maintenance activities at three major gas platforms.

The supply of natural gas from Petronas' fields to Petronas Gas fell by around 5% quarter-on-quarter in the second quarter but the current curtailment in gas involves only methane, which is essentially used for the generation of electricity and other industrial customers.

The methane gas supplied as feedstock for the production of methanol and fertilisers fell by up to 10% in the second quarter 2011, while the volume of methane used for fuel appeared to be unaffected. But supply of other gases such as ethane, butane and propane are mostly unchanged. All in, the reduction in methane feedstock could shave 10% off the the second-quarter output of Petronas Chemicals' fertilisers and methanol.

Sverage spot prices for polyethylene, polypropylene and xylene had risen by 8%-16% while methanol and granular urea had appreciated slightly more, by 9%-19% in the second quarter.

Hence, for Petronas Chemicals' second-quarter group earnings, the higher product selling prices to easily offset the 10% quarter-on-quarter reduction in fertiliser and methanol output, together with the one-month impact from the hike in natural gas and electricity costs.

Over the near to medium term, concern about the deteriorating global economic outlook which has dampened crude oil prices to US$95/barrel with a similar collateral impact to naphtha and petrochemical prices.

GenM ... Sep11

2011-09-08T14:49:00.002+08:00

Genting Group is further expanding its presence in Miami, Florida several months after it unveiled its US$3 billion Resorts World Miami mixed development project.

Its latest acquisition was in mid-August 2011 when it purchased a 17,500-sq-ft plot of land north of downtown Miami for US$1.25 million from former Sony Music executive Tommy Mottola. Genting’s 42%-owned investment holding company Two Digital, had acquired the property.

Miami-Dade County property records showed Two Digital had also in August 2011 earlier acquired 3.6 acres of mostly vacant land for US$29.4 million. The 3.6 acres of land is within walking distance from the Miami Herald headquarters building acquired by Genting.

In June 2011 reported that Genting Malaysia Bhd had bought the 13.9-acre (5.6ha) Herald property for US$236 million in northern downtown Miami. The property includes parking lots and the building that houses the Herald, which is owned by the McClatchy Co.

Soon after the acquisition of the Herald property, Genting Group head Tan Sri Lim Kok Thay announced the hiring of Miami-based Arquitectonica to create the master plan for the Resorts World Miami mixed development.

It would house hotels, restaurants, residences, entertainment outlets, retail shops and a convention centre. The initial master plan draft was slated for release end-August.

Meanwhile, Luigi Mercurio, a broker with Esslinger Wooten Maxwell in Miami Beach that Genting's plan to redevelop the Herald site has not yet spurred any significant investor activity.

Resorts World Miami is Genting Malaysia’s second venture in the US after Resorts World New York at the historic Aqueduct Racetrack which is slated for opening by year-end.

AnnJoo ... Sep11

2011-09-08T07:46:00.001+08:00

The Lim family, the major stakeholder of Ann Joo Resources Bhd, is expected to pare down its stake in the company although they are not ready to give up the controlling stake currently.

Taking the cue from moves by some overseas steel mills to snap up small stakes in their respective customers to ensure long-term customer relationship, Ann Joo may see its supplier acquire up to 15 per cent stake in the company.

Ann Joo is a key trader of steel plates mainly imported from Japan.

Potential re-rating catalysts for Ann Joo include stronger domestic demand in the second half as construction starts to gain momentum.

While steel prices may have moved at a slower pace, the cost of raw material namely scrap metal rose sharply early 2011, indicating that the profit margins for Ann Joo would remain bleak.Ann Joo posted a net profit of RM75mil for the first half of FY11 ended June 30, which was a 33% drop year-on-year from RM112.4mil.

Its performance was mainly affected by weaker international steel prices, rising costs and a 10% increase in the effective tax rate to 18.5% due to lower export incentives.

Ann Joo's 2Q net profit slid 54% to RM32.7mil from RM70.9mil a year ago. The drop in profits was attributed to the social unrest in the Middle East disrupting demand and the March 11 earthquake disaster in Japan which had disrupted the supply chain.

GDEX ... Sep11

2011-09-07T14:53:00.001+08:00

Inet Research

1. 4QFY11 Results Highlight / Review
- GDEx delivered steady growth on the back of higher demand for its express delivery services.

- Chalked up y-o-y revenue growth of 18.3% to RM25.3m, and PBT growth of 26.2% to RM4.2m
in the quarter.

- Stock has retraced. Trading at FY12 PER of 29.3x and EV/EBITDA of 11.4x, we upgrade GDEX to
BUY.

2. FY11 Results review:
- FY11 financial results came in within our expectations. Topline revenue growth of 13.7% was achieved
driven by higher demand in logistics services on the back of an increasing outsource trend for the delivery
of goods and services in the country.

- FY11 PBT increased by a higher 19.5% to RM9.9m, attributed to the company’s success in improving
operational efficiencies, even as fuel and staff costs rises.
Dividends

- On 25 August 2011, GDEX has proposed to declare the final dividend of 1.25 sen per share in respect of
the financial year ending 30 June 2011 pending approval from shareholders. This translates to a dividend
yield of 1.5sen.

3. Earnings Outlook
- In a highly competitive operating environment, GDEX seems to be doing the right things in driving
efficiencies and delivering steady growth in its logistics business. Management indicated its commitment
to reinvest into the company to further strengthen its position in the industry. In FY11, such reinvestments
amounted to RM29m. The company’s fleet size has since expanded from just under 300 trucks and vans
earlier in the year to about 335 now, and staff strength has also increased from >1,300 to currently >1,700.

- Management’s main focus is to continue improving its service quality, streamlining its process flows at and
increasing handling capacity to tap into the growing outsource trend in the express delivery business. In
that respect, the company’s handling and sorting capacity in its central hub is expected to double when its
new warehouse becomes fully operational next month.

- The partnership with Singapore Post Limited (SingPost) is strategic, and over the longer term, both parties
should be able to reap the benefits of tapping into each others’ customers and products base to further
enhance growth. (SingPost currently holds 22.1% in GDEX via a private share placement in March 2011 at
RM0.80 per share)

4. Valuation and Recommendation
- The stock has retraced from its recent highs. Based on the current share price of RM0.89, GDEX is trading
at PER of 29.3x and 23.7x in FY12 and FY13 respectively, and EV/EBITDA of 11.4x and 10.2x in the
respective years. We upgrade GDEX to BUY, whilst maintaining our price target of RM1.10.

WellCall ... Sep11

2011-09-07T07:45:00.000+08:00

With volatile rubber prices and the weakening US dollar, many companies in the rubber sector have seen lower profits since the beginning of 2010. However, Wellcall Holdings Bhd, the largest exporter of industrial rubber hoses in Malaysia, is one of the few that bucked the trend with its latest quarterly report.
Wellcall posted a 38.34% year-on-year rise in net profit to RM4.86 million for 3QFY11 ended June 30 from RM3.51 million a year ago. Revenue increased by a larger margin of 50.8% to RM38.11 million from RM25.27 million previously. Basic earnings per share (EPS) for the quarter was 3.68 sen compared with 2.66 sen a year ago.

The better quarterly results were also due to the improved utilisation of its production lines and the gradual increase in the selling price of its products. The increase in raw material prices gave Wellcall room to raise selling prices.

Wellcall actually favours the upward increase in raw material prices, but it has to be a gradual and not a drastic increase.

Like other manufacturers, Wellcall has been facing rising raw material costs, in particular synthetic rubber and standard Malaysian rubber (SMR). The stronger ringgit is another headwind as 98% of Wellcall’s transactions are done in US dollars, but it also reduces the cost of imported synthetic rubber and chemicals.

To counter the effects of rising raw material costs and the strengthening ringgit, apart from pricing up its products, Wellcall has improved efficiency by transforming its manufacturing process. Wellcall has been improving its efficiency in the manufacturing process by converting older manual machines to semi-automated ones. This exercise is an ongoing programme to cut labour costs. In certain divisions, Wellcall has managed to reduce the workforce by up to 40%.

To buffer against volatitile raw material prices, Wellcall purchases its materials in bulk. Wellcall has in stock one month’s worth of natural rubber and two to three months of synthetic rubber. Wellcall also has the flexibility to switch between natural and synthetic rubber, giving it room to minimise raw material costs.

Wellcall’s products are sold to distributors and end customers in major application markets. These include the air and water hose, welding and gas, oil and fuel, automobile, ship building, and the food and beverage (F&B) markets.

Unlike rubber glove companies that cater for the mass market, Wellcall produces more for the niche markets, especially in the oil and gas (O&G) sector. Wellcall’s products are tailor-made and meant for the niche segment. So it is easier to pass cost increases to customers.

Wellcall has been focusing on high-value products in the F&B, O&G and mining sectors, riding on the commodity trend and increased mining activities in gold, iron and oil.

With 90% of its revenue derived from foreign markets, Wellcall exports to more than 60 countries. For the nine months ended June 30, 23.4% of sales were from Asia, followed by the Middle East (19.9%), Europe (16.3%), USA/Canada (14.9%), Australia/New Zealand (9.6%), South America (12.3%) and Africa (3.6%). Malaysia only contributed 8.3% of sales. Wellcall is expanding its customer base in places such as Africa, Russia and Latin America.

Wellcall’s revenue of RM99.6 million for 9MFY11 has already equalised its FY10 annual revenue of RM96.6 million. It is 45.6% higher than revenue from the same period last year.

Operational profit from its export and local markets increased by 33.78% and 19.04% respectively, from the same period last year.

Net profit for the nine-month period, however, was marginally lower at RM10.78 million, or 8.17 sen per share, down 2.7% from RM11.08 million a year earlier.

Wellcall has been debt free since its listing in 2006. As at end-June 2011, its balance sheet remained healthy with cash reserves of RM36.48 million.

Industrial hoses last from five weeks to eight months before they are replaced. Because of this, 85% to 90% of Wellcall’s sales come from the replacement market. Because of the continuous demand for hoses in new and old machinery, one could say Wellcall enjoys a “compounding” demand for its products in the future.

Over the past five years, Wellcall’s net profit rose from RM10.88 million in FY06 to a high of RM17.11 million in FY08, before declining to RM13.34 million in FY09 and then rising to RM14.62 million in FY10.

Its net assets per share stood at 59 sen as at June 30 2011.

QL ... Sep11

2011-09-06T14:22:00.000+08:00

ZJ Research

1QFY12 Results Review
• QL’s 1QFY12 net profit of RM27.8 mln constitutes 19% of our full year forecast of RM145.8 mln,
which we deem to be in line broadly with our expectations as 1Q is seasonally weak with
performance generally improve in the remaining quarters. Incidentally, management also noted
in the results that 1Q is historically the weakest quarter, contributing an average of 21% to full
year earnings.

• 1QFY12 revenue rose 18.2% y-o-y to RM384.5 mln on higher contributions from all 3 business
divisions -- Marine Products Manufacturing (MPM), Palm Oil Activities (POA) and Integrated
Livestock Farming (ILF). The MPM (+65.6% y-o-y) and ILF (+10.8% y-o-y) segments, in
particular, generated the bulk of the revenue growth, as illustrated in the table below:-

• The MPM division reported a 25.7% y-o-y decline in PBT on a marginal 1.6% y-o-y increase in
turnover, principally due to lower fishmeal prices and poor fish landing in Sabah during the
quarter under review. To recap, fishmeal prices shot up in 2010 due to decline in supply arising
from reduced fish catch in Peru and Chile. The supply has since normalized and fishmeal prices
have corrected accordingly. Meanwhile, bad weather in 1QFY12 was the culprit for the poor fish
landing in Sabah. We understand from management that the situation has since improved in

2QFY12 with fish landing resumed to the previous level.
• The POA business experienced great improvement in 1QFY12 with revenue and PBT rising
65.6% and 623.5% y-o-y respectively, attributed to i) increase in the average CPO price to
RM3,332/mt from RM2,511/mt); ii) 28% increase in FFB processed; and iii) new contribution
from its listed-associate, Boilermech Holdings Bhd. Correspondingly, PBT margin for POA
expanded to 6.9% from 1.6% in 1QFY11.

• As for the ILF segment, the increase in selling prices of feed raw materials pushed sales higher
by 10.8% y-o-y to RM235.1 mln. Nevertheless, PBT only rose by a marginal 0.6% y-o-y due to
lower profit margin from the trading activities of feed raw materials.

• Overall, 1QFY12 EBITDA margin weakened to 11.6% from 12.3% a year ago, largely due to the
poorer performance of the MPM business, which carries the highest PBT margin. Meanwhile,
on balance sheet strength, net gearing rose slightly to 0.6x as at end-June 2011 from 0.5x in
March 2011, backed by a NTA per share of 92 sen.

• In the longer term, QL’s prospects remain bright, underpinned by the growth in the domestic
market as well as its expansion efforts in overseas. Management indicated that its overseas
ventures are all on track, with the status as follows:-

• In addition, QL’s oil palm plantation venture in Kalimantan, Indonesia, which comprises 20,000
hectares in plantation land, is also ongoing with maiden contribution expected to commence in
FY13.

• At this juncture, we maintain our FY12 net profit estimate of RM145.8 mln (+17.1% y-o-y) on the
expectation of better performance in the remaining quarters to make up for the slack in 1QFY11.
We also expect improvement in EBITDA margin in 2QFY12, driven by better performance from
its MPM division. Overall growth drivers in FY12, meanwhile, include continued increase in demand from the local market, contribution from its recently listed-associate, Boilermech, as
well as from its new breeder farm in Indonesia.

Recommendation
We maintain our Buy recommendation on QL with an unchanged fair value of RM3.60, derived from
ascribing a peer-benchmarked EV/EBITDA multiple of 14x. We continue to like QL for its i) highly
capable management who has led the Group’s outstanding double-digit revenue and net profit growth
over the last decade; ii) continuation of double-digit earnings growth in FY12 and FY13; iii) healthy
fundamentals; iv) new income streams from its overseas ventures; and v) potential upside from its
biogas and palm pellet projects.

Dijaya ... Sep11

2011-09-06T07:44:00.001+08:00

Dijaya Corporation Bhd’s proposed private placement exercise will help it grow with minimal borrowings and allow higher institutional ownership of the company.

It proposed a 30% private placement exercise, amounting to between 136.91 million and 177.47 million shares, depending on the level of outstanding warrants and employees share option scheme.

An issue price has yet to be announced but will be determined based on the five-day volume weighted average market price (VWAMP) immediately prior to the price fixing date, with a discount not more than 10% and a minimum price of RM1.00, the par value of Dijaya’s shares. The VWAMP as of Aug 17 2011 was RM1.49. Using this as an indicative price, Dijaya can expect to raise between RM199.49 million and RM258.83 million.

The private placement will help it partially finance our recent land acquisitions without placing pressure on its gearing which it hopes to keep below 0.5 (times). The private placement will result in a gross gearing of between 0.24 and 0.19 times. However, as payment becomes due on acquisitions, that ratio may rise.

It had purchase of 227 acres (90.8ha) in Plentong, Johor Bahru for RM220 million for a project to be called Tropicana Danga Cove.

It has a net cash of RM240 million in cash and only RM211 million in borrowings.

It is currently talking to a wide range of investors, both local and foreign for the private placement.

If the placement goes according to plan, CEO Tan Sri Tan Chee Sing’s ownership will be diluted from 67.03% to 51.56%. The placement will pave the way for institutional investors to increase their stakes in Dijaya, which has been held firmly by Tan for a long time.

TAEL One Partners Ltd acquired a 5% stake in Dijaya on July 4 2011, and has since raised its stake to 7.25%.

SOP ... Sep11

2011-09-05T14:18:00.000+08:00

Inet Research.

1. 2QFY11 Results Highlight
- Driven by higher CPO prices and higher production output, SOPB’s turnover and net profit surged by 83.0% and 132.2% to RM288.2m and RM68.9m respectively in 2QFY11.

- Based on MPOB data, CPO prices averaged about RM3,344/mt (2QFY11) as compared with
RM2,527/mt (2QFY10), representing a strong 32.4% increase over the same period. Hence, SOPB also
enjoyed a better operating margin of 39.5% in 2QFY11 as compared with 28.9% in 2QFY10.

- Profit performance was also boosted by a 53.2% increase in CPO production output to 85,317 mt in
2QFY11 from 55,696 mt in 2QFY10. This was attributed to its favourable palm profile as 51% of its
planted areas consist of young and prime crops. In addition, another 43% of total planted areas comprise
immature palms.

1HFY11 Results Highlight

- The strong growth in both turnover and net profit for 1HFY11 was driven by higher CPO prices and
production output.

- Based on MPOB data, average CPO prices posted a 38.3% increase from RM2,545/mt (1HFY10) to
RM3,518/mt (1HFY10). The CPO production output achieved by SOPB also grew by 43.5% to 143,556
mt in 1HFY11.

2. Earnings Outlook
- Going forward, backed by its favourable age profile, production yield will continue to improve as
immature areas coming into maturity as well as rising yield of the newly matured palms.

- Although CPO prices have broadly been in a declining trend this year, it still remains above RM3,000/mt.
Hence, we are still keeping our assumption of average CPO price of RM3,100/mt in our FY11 and FY12
forecasts respectively.

3. Valuation and Recommendation
- Annualised 1HFY net profit is 36% above our earnings forecast for FY11. This is attributed to the higher
average CPO prices against our assumption and the higher CPO production output. We have increased
our net profit forecast by 13% and 11% for FY11 and FY12 to reflect the better production output while
keeping our assumption of average CPO price.

- We are maintaining our Buy recommendation on SOPB for its favourable oil palm profile and
undemanding P/E valuation. Its current P/E valuation of 8.0x for FY12 is at a discount as compared with
plantation sector of 13-14x. We have increased our target price to RM5.20 based on a target P/E of 10x
for FY12.

Sime ... Sep11

2011-09-05T07:42:00.001+08:00

There could be potential mergers and acquisitions arising from Sime Darby Bhd's five-year strategy blueprint.

The conglomerate's management had guided for capital expenditure of RM6bil in the current financial year (FY12) which included an allowance for potential mergers and acquisitions.

This may start to take shape during the five-year period and can possibly involve a tie-up with Felda Global Ventures, which owns significant downstream assets outside Malaysia. Sime Darby president and group chief executive Datuk Mohd Bakke Salleh, formerly Felda's chief, has intimate knowledge of these assets, which will help in establishing strategic tie-ups.

Sime Darby's management spoke about landbank expansion for its plantation division, broadening of its industrial business through the potential acquisition of the Bucyrus dealership in Australia's Northern Territory from Caterpillar, and a bigger presence for its motor division in the Asia-Pacific during a recent briefing.

Sime Darby should have no problem funding mergers and acquisitions in view of its low gearing of 8.7 times.

Sime Darby's financial results were above expectations, and pointed out that its plantation, industrial and motor divisions should continue to drive growth in the near future.

Sime Darby posted a 404% year-on-year (y-o-y) jump in net profit to RM3.66bil and a 28.8% year-on-year increase in revenue to RM41.86bil for FY11.

The plantation division was the top earnings contributor with a 56% y-o-y increase in profit before interest and tax (PBIT)) to RM3.3bil, followed by the industrial division which recorded its highest ever PBIT with a 41% y-o-y increase to RM1.1bil, and the motor division which registered a 64% y-o-y increase in PBIT to RM633mil.

The motor division was the highest revenue contributor to the group for the first time ever with RM14.85bil, followed by the plantation division with RM13.17bil.

The industrial division was driven by strong Caterpillar equipment sales in Australia as well as China while the motor division continued to see strong BMW sales in China and Malaysia.

CCK ... Sep11

2011-09-02T14:12:00.001+08:00

WILSON & YORK Research

RESULTS REPORT
YTD 4Q FY11 revenue grew 11.6% year on year, whilst net profits grew 19.6% over the same period. YTD 4Q FY11 operating margins decreased to 6.5% vs 6.9% over the same period in FY10. Operating margins were reduced by higher feed costs and start up costs of a new subsidiary. Profit growth for FY11 was driven by outlet expansion in the retail sector and higher selling prices for poultry. Poultry accounted for circa 29% of
total external revenue for FY 11, whilst retail sales accounted for about 60% of total external revenue for the same period. Both revenue and margins are growing very nicely in the retail segment.

INVESTMENT RISKS

Risks to our recommendation and target price include: i) further increases in the price of feedstock, ii) increases in interest rates, which would crimp personal spending, and iii) a sharp slowdown in the general level of economic activity in Malaysia. Also, there is the issue of rising food costs which up to now have benefitted food producers like CCK; rises in foodrelated feed stock may begin to crimp margins and growth rates in food demand.

RECOMMENDATION
We maintain our BUY recommendation on CCK with a fair value estimate of MYR 1.08. Value investors will be attracted by the combination of steady earnings growth and consistent profitability at very undemanding
earnings multiples. Looking ahead, average ROE is likely to be maintained comfortably above 13%, whilst P-BV is currently standing on 1.0x trailing book value and 0.8x current year book value.

Compared to many of its peers, CCK has higher net margins and a higher payout ratio. In fact one of the many attractive features of CCK is its respectable current dividend yield of 3.8%. As mentioned above, rising
food prices are pinching consumers in many countries, while additional increases in feed costs would pose a risk. At current prices, however, investors are getting a substantial margin of safety on a lovely business
with solid growth prospects.

COMPANY PROFILE
CCK Consolidated Holdings Berhad (“CCK”) was established on 5 August 1996 as an investment holding company and was listed on 10 December 1997. The company’s major lines of business are poultry,
seafood and wholseale food retailing of the above products and others. CCK operates forty wholesale and retail stores, trading departments and factories throughout Sarawak, Sabah and Peninsular Malaysia.

Salcon ... Sep11

2011-09-02T07:57:00.000+08:00

Inet Research

1. 2QFY11 Results Highlight

- Salcon reported a disappointing 2QFY11 results that was affected by exceptional items and startup expenses.

- In 2QFY11, while turnover only declined by 7.4% to RM100.6m, net profit plunged by 97.1% to
RM5.2m. The disappointing results was due to the following reasons:

o 2QFY10 included an exceptional gain from disposal of property amounted to RM5.5m;

o EBIT from Construction division declined by 34.8% to RM1.0m in 2QFY11 due to lower margin of construction projects; and

o Concession division’s EBIT also dropped by 12.4% in 2QFY11 to RM5.0m due to start-up and procurement expenses of China’s Changzhou concession and unrealised foreign currency translation losses. This Changzhou Southeast Industrial WWTP with a capacity of 30 MLD was recently awarded to Salcon in Mar-11. By extrapolating the increase in administrative expenses in 2QFY11, the start-up expenses and unrealised forex loss combined could amount to RM4.1m in 2QFY11.

1HFY11 Results Highlight
- For 1HFY11, while turnover was only marginally lower by 4.8% at RM211.0m, net profit declined sharply by 74.8% to RM4.7m.

- This was mainly attributed to the absence of exceptional gain of RM5.5m which was included in 2QFY10, the start-up and procurement expenses of China’s Changzhou concession and unrealised
foreign currency translation losses.

2. Earnings Outlook
- Annualised net profit for 1HFY11 is significantly below our earnings forecast for FY11. We are still of
the view that earnings performance will be better in 2HFY11 as well as FY12 due to more meaningful
contribution from its China concessions and absence of those exceptional items. Nonetheless, we have
reduced our earnings forecast by 16% for FY11 to account for the lower margin of construction projects
and higher administrative expenses.

- Salcon’s current profit base especially its China concession has yet to reach its full potential as the largercapacityconcessions such as Changle new WTP (100MLD), Changle Raw Water (100MLD) and Nan
An Raw Water (175MLD) will only be commissioned towards the later part of FY11. 2HFY11 should
also see more meaningful contribution from Haining WTP (300MLD) which was commissioned in
4QFY10.

3. Valuation and Recommendation
- For FY11, its earnings base is depressed by exceptional items and costs associated to progressive commissioning of its larger-capacity concessions. However, we are maintaining our Buy recommendation on Salcon for the earnings growth in FY12-FY13 arising from the doubling in production capacity towards the latter part of FY11.

- The stock is currently trading at 37% discount to its book value of RM0.75/share. The slide in its share price is not warranted as it does not reflect the promising long-term prospects of its growing concessionbased
business in China and the doubling in design capacity of its China concession by end-FY11.

Selamat Hari Raya and Happy Holiday

2011-08-29T14:43:00.001+08:00

Selamat Hari Raya to all my muslim ready and happy holiday to others. Drive safely who are on travel long distance.

Tomei ... Aug11

2011-08-29T08:46:00.000+08:00

Mercury Securities Sdn Bhd Research

PERFORMANCE – 2Q/FY11
Tomei’s 1H/FY11 revenue (first half ended 30th June 2011) was above our earlier expectations, while NPATMI (net profit after tax and minority interest) was within.

“1H revenue above expectations, NPATMI within”
The group’s revenue for 2Q/FY11 was RM117.7 million, an increase of 49.0% y-o-y from 2Q/FY10. This increase was mainly due to the improved consumers spending especially on gold investment products and also due to the higher retail gold prices. The acquisition of the brand “Goldheart” with 4 additional retail outlets also contributed positively to group revenue. Group NPATMI for 2Q/FY11 of RM6.4 million was an increase of 51.8% y-o-y.

Group revenue for 1H/FY11 was RM233.0 million, an increase of 39.8% versus 1H/FY10. Meanwhile, group NPATMI for 1H/FY11 was RM14.6 million, 29.1% higher versus 1H/FY10.

The group’s 2Q/FY11 revenue had increased slightly by 2.2% q-o-q versus 1Q/FY11. However, due to as increase in operational expenses brought about by additional new retail outlets, the group’s NPATMI had decreased by 22.6% q-o-q.

OUTLOOK/CORP. UPDATES
Tomei’s group revenues have been on the uptrend during the past few years. The domestic economy has been growing at a reasonable rate during the past year and we expect the group’s revenues to grow at a comfortable rate as well.

“Steady domestic growth”
Malaysia had reported a CPI of 3.4% (July 2011). In early July 2011, Bank Negara Malaysia (BNM) had maintained its overnight policy rate (OPR) at 3.0% but raised the statutory reserve requirement (SRR) for banks from 3% to 4% in order to rein-in inflationary pressures. According to BNM, Malaysia’s 2Q/2011 GDP rose by 4%, following a revised 4.9% GDP growth in 1Q/2011. At the moment, BNM is still expecting a full-year GDP growth of around 5.0% for Malaysia.

“Gold prices above US$1700/ounce”
Amidst economic weakness in the US and Europe, gold spot prices have gone above the US$1700/troy ounce level. The spot rate for gold traded on the NYMEX (New York Mercantile Exchange) is currently around US$1763/troy ounce. If global gold prices keep going higher, this could lead to a slight increase in Tomei’s revenues, given that the group sells gold bars and gold wafers (in denominations between 5g and 1kg). Gold bars, which are 999.9% pure gold, are commonly available between the 5g to 100g weight denominations.

Gold wafers, gold bars and gold-based jewellery are seen by some as a viable inflation-hedge or long-term investment option (e.g. as an alternative to term-deposits and government-issued bonds). Consumers nowadays have the option of investing in gold via commercial banks (via “gold investment accounts”) or even via MLM (multilevel-marketing) companies that may offer gold-based investment products (e.g. gold coins and gold bars). In some countries, gold-related investments could also be done via gold ETFs (exchange traded funds), gold certificates and gold-based derivatives. Nevertheless, gold jewellery are bought largely for ornamental usage e.g. for wedding dowry, ceremonial/formal functions and as gifts to spouses or close family members.

“Integrated Jeweller”
Tomei is an integrated designer, manufacturer, exporter and retailer in gold and jewellery. The group has a balanced focus on both gold and jewellery product segments. The group typically launches around 400 new designs per year and plans to spend around RM4 million for A&P campaigns during 2011. In July 2011, Tomei was given the Malaysian Brand Award by SIRIM and SME Corp.

Tomei plans to make inroads into increasingly affluent suburban locations, including in East Malaysia. Excitingly, the group had ventured into China and Vietnam, and may be exploring other regional markets as well. According to a press statement in May 2011, the group is aiming to expand further by opening more retail outlets this year, comprising 4 in Malaysia, 2 in Vietnam and 4 in China. For the expansion, the group plans to use RM25 million.

Currently, the group has around 64 retail outlets nationwide, 7 kiosks in China and 7 in Vietnam. In China, Tomei had expanded its retail kiosks beyond Shanghai into cities such as Shaoxin, Changsu, Wuxi and Guangzhou. In Vietnam, Tomei has set up a factory in Dong Nai (to manufacture jewellery for the local market as well as export market) while its retail kiosks are mainly centred Ho Chi Minh City and Hanoi.

“Online loyalty programme”
In May 2011, Tomei unveiled a cardless online jewellery loyalty programme named “Jewel Club”, which is reputedly the first of its kind in Malaysia. Membership is open to all Malaysians and working expatriates aged 18 and above. It serves to give customers more benefits and shopping privileges. The loyalty programme enables more savings when making purchases and provides information on promotions offered by all the group’s brands. The group has 5 major umbrella brands namely Tomei, My Diamond, TH Jewelry, Le Lumiere and Goldheart.

“Took over Goldheart’s Malaysian ops”
In March 2011, the group via its wholly-owned Tomei Gold & Jewellery Holdings (M) S/B had entered into a S&P Agreement with Goldheart Jewelry S/B to acquire Goldheart’s retail operations in Malaysia for a total cash consideration of RM5.6 million. Goldheart is a renowned brand for retail jewellery in Malaysia. From our market survey, we note that Goldheart is a popular retail destination for couples seeking wedding or engagement rings.

Goldheart has 4 retail outlets located in major shopping malls in Malaysia. The acquisition is part of Tomei’s business plan and expansion strategy to improve its market share in the retail jewellery industry. We believe that the group is still on the lookout for synergistic M&A opportunities within the industry. In May 2011, the group’s wholly-owned Tomei Retail S/B had acquired 100 shares of RM1 each representing 100%- equity interest in Goldheart (M) S/B and Goldheart Jewelry (M) S/B, for a total cash consideration of RM100 each.

VALUATION/CONCLUSION
Tomei had paid out its FY10 first and final single tier dividend of 3.3 sen per share (amounting to RM4.6 million) to shareholders in June 2011. In recent years, Tomei has managed to pay out dividends of at least 20% of its net earnings, and we foresee that Tomei would follow this trend of having a dividend payout ratio of around 20%.

“Steady dividend payout”
With an adjusted beta (correlation factor) of 0.88 to the KLCI, Tomei (-2.8%) has slightly outperformed the KLCI (-4.5%) this year. Market conditions have also been volatile in recent months, impacted by the Arab Spring uprisings in the Middle East/North Africa, sovereign debt issue in Europe, debt ceiling issue in the US and the Tohoku disaster in Japan. As Tomei is not a particularly large market-cap stock, this may put a dampener on its market visibility and trading volume.

“Maintain Buy Call”
Based on our forecast of Tomei’s FY11 EPS and estimated P/E of 4.5 times, we set a FY11-end Target Price (TP) of RM0.96. This TP represents a 39.3% upside from its current market price. Our TP for Tomei reflects a P/BV of 0.77 times over its FY11F BV/share. The domestic “Clothing & Accessories” sector’s average P/E and P/BV is 9.9 times and 0.78 times, respectively. Tomei’s P/E and P/BV valuations are very undemanding indeed.

“Undemanding Valuations”
We like Tomei due to its diversified business model (in terms of segment and location), reputable brand name, wide product range, strong design expertise, large retail network, calculated expansion strategy, reasonable dividend yield and solid ROE. In terms of business risks, Tomei does face routine risks from any economic downturn, consumer pessimism, uneven monthly sales (due to festive seasons), stiff peer competition, rapidly fluctuating gold prices and FX rates.

Nishin ... Aug11

2011-08-26T15:05:00.001+08:00

WILSON & YORK Research

RESULTS REPORT
YTD 1H FY11 revenue rose 2.7% vs 1H FY10. The convex mirror segment grew more than 18% over the same period, continuing its good performance. Though operating margins are still slightly negative YTD
1H FY11, losses are getting smaller, and we may see a small profit for the full year. In light of the significant slowdown in the Japanese economy over 1H 2011, these results are reasonably good. NHR is looking to Europe for new distributors and customers, and is currently making fairly large promotional and marketing investments. These investments may take two to three quarters to bear fruit.

INVESTMENT RISKS

Risks to our recommendation and target price include: i) increases in the MYR exchange rate, ii) rising promotional costs, iii) a sharp slowdown in the general level of economic activity in the economies of the company’s trading partners, e.g. Japan, Taiwan, Singapore and South Korea, and iv) continued rises in stainless steel prices would be an additional concern.

RECOMMENDATION
Ni Hsin Resources Bhd is facing a number of challenges, however the current share price has discounted many of the headwinds. In addition, management has put in place a number of initiatives that are likely to
result in improved sales and higher factory utilisation. We rate the shares a BUY with a fair value of MYR 0.23.

The company’s up to date manufacturing assets alone are worth some MYR 0.15 per share. Thus there is not a great deal of downside for the shares at current levels. The balance sheet is very clean, and management
has been able to operate the company at minimal losses given the severe damage to the Japanese economy. Moreover, should stainless steel prices come off, or capacity utilisation increase in the quarters ahead,
net margins would likely double or triple from their current levels.

COMPANY PROFILE
Ni Hsin Resources Bhd (“NHR”) is one of the leading cookware manufacturers listed in Malaysia. The company has its roots in Taiwan, and was incorporated in Malaysia in 1989 and listed in 2005. About 20% of total revenue is realised in Malaysia, with Japan, Taiwan, Singapore, and South Korea accounting for the lion’s share of the company’s substantial export revenue. Revenue this quarter comprised 53% cookware products, 20% convex mirror and 27% clad metals.

Pmetal ... Aug11

2011-08-26T07:49:00.000+08:00

Come 2012, Press Metal Bhd will be the largest aluminium smelter in terms of capacity in Southeast Asia.

Its first aluminium smelting plant in Mukah is already operational and its second facility in Samalaju Industrial Park, Similajau — both in Sarawak — is slated for commissioning by end-2012. The new plant in Samalaju will triple Press Metal’s smelting capacity to 360,000 tonnes from the current 120,000 tonnes produced at its Mukah plant.

This will put the group in a strong position to benefit from a re-acceleration of aluminium demand within Southeast Asia and contribute to the group’s earnings.

Malaysia could become the regional hub for the production of aluminium products. China, the biggest producer of aluminium products at present, is opposed to exporting and is selling its aluminium products domestically. Furthermore, the power cost in China is expensive; around US$75 [RM223.50] to US$85 per MWh, which is not competitive for smelting companies to set up their plants there. Even the [Chinese] government is not encouraging the industry to grow.

In April 2011, Press Metal was one of four companies which signed power purchase agreement (PPA) term sheets with the state utility Sarawak Energy Bhd (SEB) for the delivery of 1,300MW of power. With the Bakun dam, which commenced electricity production of 300MW in Aug 2011, smelters can enjoy relatively lower power cost in Sarawak than in China or anywhere else.

Press Metal enjoys an “early bird” advantage with its PPA with SEB. It is believed the company’s starting rates for its power supply are about 50% cheaper than that the average power cost of Chinese smelters; at between 11 sen to 12 sen per kWh with an annual escalation of 1.5%.

Most importantly, the PPA paves the way for Press Metal to lock in its long-term power requirements at an attractive rate — and undoubtedly elevate its competitive positioning as an integrated aluminium producer.

Press Metal has an advantage, having made the first move over its rivals as the first smelter operating within Sarawak. Other notable aluminium smelter proposals in the state include Smelter Asia Sdn Bhd’s 700,000 tonne per year smelter and Sarawak Aluminium Co Sdn Bhd’s 1.5 million tonne smelter, both in Similajau.

Apart from Press Metal, there has only been some tangible news flow on an MoU between Gulf International Investment Group Holdings Sdn Bhd (GIIG) and Aluminium Corp of China (Chalco) — which have proposed to set up a US$1.5 billion aluminium smelter in Samalaju which is slated to have an initial capacity of 370,000 tonnes per annum. This project is generally referred to as the Smelter Asia project.

Any new aluminium plant set up to rival Press Metal would probably only be ready in two to three years’ time. Plus, Press Metal would have enjoyed a cost advantage via the long-term electricity supply accord signed with SEB as mentioned earlier.

For 1QFY11 ended March, Press Metal posted a net profit of RM21.49 million on the back of RM471.59 million in revenue. The company’s earnings per share for the three months in review was 4.98 sen. In contrast to a year ago, Press Metals net profit for 1Q slipped by a third despite revenue gaining about 20%.

Century ... Aug11

2011-08-25T15:01:00.000+08:00

Mercury Securities Sdn Bhd Research

Century’s 1H/FY11 results (6-month period ended 30th June 2011) were roughly within our earlier expectations.

“1H results within expectations”
Century recorded revenue of RM74.2 million for its 2Q/FY11, a slight decrease of 1.4% y-o-y. This was mainly due to the lower export shipments from the procurement logistics business segment. Nevertheless, group NPATMI (net profit after tax and minority interest) had increased by 15.8% y-o-y. This was mainly due to the increased business activities from a few new contract logistics corporate customers (e.g. Celcom Axiata, F&N Diaries and Midea Scott & English).

“Contract logistics expanding”
Looking at 1H/FY11 figures, Century recorded revenue of RM141.0 million, an increase of 4.4% from 1H/FY10. Group NPATMI for 1H/FY11 was RM15.1 million, an increase of 7.2% from 1H/FY10.

OUTLOOK/CORP. UPDATES
We remain optimistic on Century’s overall group performance during its FY11 ending 31st December 2011 in spite of the global economic situation. Furthermore, the group’s promising Procurement Logistics, Third Party Logistics (3PL) and Oil & Gas Logistics business segments are expected to perform favourably during the year.

“Concern - external environment”
According to the IMF’s (International Monetary Fund) June 2011 World Economic Outlook (WEO), economic activity is slowing down temporarily, downside risks have increased again and global expansion remains unbalanced. Growth in many advanced economies is still weak, considering the depth of the recent recession. In addition, the mild slowdown observed in the second quarter of 2011 is not reassuring. Growth in most emerging and developing economies continues to be strong. Overall, the global economy expanded at an annualized rate of 4.3% in the first quarter, and forecasts for 2011–12 are broadly unchanged.

However, IMF views that greater-than-anticipated weakness in U.S. activity and renewed financial volatility from concerns about the depth of fiscal challenges in the Euro area pose greater downside risks. Risks also draw from persistent fiscal and financial sector imbalances in many advanced economies, while signs of overheating are becoming increasingly apparent in many emerging and developing economies.

The latest available Malaysian economic data (June 2011) seemed to reveal a weakening in external demand. These data include: IPI (+1.0% y-o-y), Manufacturing Sales (+12.9% y-o-y), Exports (+8.6% y-o-y) and Imports (+6.3% y-o-y). Malaysia had reported stable 1Q/2011 unemployment rate of 3.1% and a CPI of 3.5% (June 2011). In early July 2011, Bank Negara Malaysia (BNM) had maintained its overnight policy rate (OPR) at 3.0% but raised the statutory reserve requirement (SRR) of 3% to 4% in order to rein-in inflationary pressures.

Century’s management continues to take the necessary measures to remain resilient, including focusing on providing value-added logistics solutions as well as maintaining cost efficiencies. The continued expansion of the group’s customer base for its supply chain solutions is encouraging. Century’s solid financial position and low gearing enables the group to maintain strong results as well as embarking on strategic acquisitions to enhance its earnings growth.

The group plans to expand its supply chain solutions offering, and are also focusing on increasing its participation in the oil and gas logistics activities, including diversification upstream and downstream of the sector. In oil and gas logistics, Century currently provides floating storage and trans-shipment services for international oil trading companies. Century also provides procurement logistics services to various multi-national electrical and electronics customers.

VALUATION/CONCLUSION
Century’s BOD (board of directors) had just declared a single tier interim dividend of 5 sen per share for its FY11 ending 31st December 2011. The 4 sen single tier final dividend for Century’s FY10 was paid on 10th June 2011.

“Consistent dividend payout”
Given Century’s strong earnings performance, we expect Century to maintain its recent dividend payout track record of at least 20% of its annual net profits.

With an adjusted beta (correlation factor) of 0.28 to the KLCI, Century (-8.6%) has outperformed the KLCI (-1.1%) this year. Market conditions have also been volatile in recent months, impacted by the Arab Spring uprisings in the Middle East/North Africa, the major Tohoku natural disaster in Japan, debt-ceiling issue in the US and sovereign debt issue in Europe. As Century is not an especially large market-cap stock at the moment, this may put a dampener on its market visibility and trading volume.

“Seriously Undervalued”
Based on our forecast of Century’s FY11 EPS and an estimated P/E of 6 times (within its historical range), we set a FY11-end Target Price (TP) of RM2.60. This TP represents an attractive 52.3% upside from its current market price. Our TP for Century reflects a P/BV of just 1.07 times over its FY11F BV/share. Meanwhile, the local Transportation Service sector’s average P/E and P/BV is 24.6 times and 1.37 times, respectively.

We like Century due to its rather diversified business model, calculated growth strategy, undemanding P/E and P/BV valuations, solid dividend yield and ROE. With a strong management team, dwindling gearing levels, tight cost-control and an efficient operational structure, Century is well poised to have a positive year ahead.

Nevertheless, there are possible routine risks to the logistics sector such as slowing global economic growth rates. The Arab Spring uprisings in the Middle East/North Africa and the Tohoku natural disaster in Japan could also impact international trade to a certain extent. Factors such as foreign exchange fluctuations, lowly sovereign debt ratings in certain European countries and the sustained high unemployment levels in the US could also dampen sentiment, demand and hence international trade levels.

Gpacket ... Aug11

2011-08-25T07:48:00.000+08:00

It is confident of growing its subscriber base to 450,000 in 2011 for its 4G network and hopes to achieve positive Ebitda by year-end (2011).

In 2011 it will focused on growing its 4G penetration and coverage in Malaysia. They are targeting to have 1,600 sites by year-end (2011), 55% coverage in Peninsular Malaysia. They are also looking at an average revenue per user (Arpu) of RM61 in 2011.

Packet One Networks (M) Sdn Bhd (P1) had managed to achieve RM71 Arpu for 2QFY11 ended June 30 2011, which exceeded its target. P1 has also managed to grow its total subscribers to 338,000 from 274,000 at end 2010.

It posted net loss of RM15.24 million in the second uarter ended June 30, 2011 compared with losses of RM18.68 million a year ago, due to higher depreciation of plant and equipment.

Revenue rose 42% to RM127.80 million from RM90.01 million while loss per share was 2,3 sen versus 2,8 sen a year ago.

The 2Q11 loss after tax was higher than 2Q10 mainly attributed by higher depreciation of plant and equipment in accordance with the planned rollout of the broadband infrastructure even with higher revenue from software and broadband business.

Green Packet said for the first half, the net loss was RM34.24 million, narrowing by 21.3% from RM43.50 million in the previous corresponding period but revenue rose 41.1% to RM249.51 million from RM176.82 million.

Total accumulated losses at June 30 was RM317.35 million compared with RM302.11 million as at March 31.

The stronger financial position was due mainly to stronger sales of its modem devices and higher subscriptions for P1 WiMAX services. Modem sales grew 171% year-on-year to RM40.5 million, with 198,400 devices shipped in that quarter.

It managed to secure some new customers from its competitors in 2Q2011 which include Atheed, Wateen, Witribe, and Liberty.

It also sold 185,000 software licences in 2Q 2011.

P1 broadband revenue grew 31% year-on-year to RM68.6 million for 2Q on the back of 33,000 new subscribers with an Arpu of RM75.

For the cumulative six months ended June 30, Green Packet’s net loss shrank to RM34.25 million from RM43.5 million a year earlier. Revenue grew 41% to RM249.5 million from RM176.82 million.

It managed to add 64,000 subscribers in the first half-year (2011), which means that they are on track to hit 450,000 subscribers by year-end (2011). They currently have 338,000 subscribers.

The group has incurred RM679 million in capital expenditure (capex) so far 2011 and has allocated RM250 million for the next 12 months in order to grow the group’s businesses. The group had enough capital for this purpose as it had RM93 million in cash, and another RM232 milllion in bank and vendor financing facilities as at June 30 2011.

Going Forward …

Although Green Packet reported a net loss of RM15.2 million for 2Q, the loss was lower than the previous corresponding period, when it reported a net loss of RM18.7 million. It was a similar story in 1QFY11, when Green Packet also saw its losses narrow to RM19 million from RM24.8 million.

It is the performance of its broadband segment, Packet One Networks (M) Sdn Bhd, which has been dragging down the company’s earnings. However, this is inevitable in any start-up company, especially in the fast-moving technology sector.
Break-even for P1 has been a moving target. Green Packet has previously indicated tentative deadlines as to when it expects P1 to be profitable. However, those times have come and gone. Currently, consensus is expecting Green Packet to see an earnings turnaround during the second half of FY11.

However, although the company has seen subscriber numbers increase as a result of an aggressive marketing campaign, infrastructure restraints have capped growth.

According to the notes accompanying 2QFY11, broadband services reported a net loss of RM73.6 million, an improvement on the RM82.9 million loss chalked up in the previous year’s corresponding quarter.

One of Green Packet’s core issues has always been bandwidth, it needs more bandwidth to offer better services... in terms of more complex offerings.

Currently, the telco sector is undergoing an evolution that sees an increase in the number of partnerships between the players. However, the most immediate development in the sector is the award of the new 2.6 Ghz spectrum. The award of the spectrum by the Malaysian Communications and Multimedia Commission is still pending. The players have already submitted their business plans to the MCMC and are now awaiting the award. The company is confident it will gain a portion of the spectrum.

Meanwhile, Green Packet is “confident” of getting a portion of the 2.5GHz/2.6GHz spectrum announced by Malaysian Communications and Multimedia Commission.

While the industry waits for the announcement about the 2.6 Ghz spectrum, Green Packet is currently in talks with Telekom Malaysia Bhd (TM) to ride its high-speed broadband backbone. Embarking on this kind of wholesale agreement with TM would offer Green Packet better access to customers. The company hopes to enter into a memorandum of understanding with TM soon.

Another positive sign is Green Packet explaining in the note to its earnings that the losses were the result of its plant and equipment in accordance with the planned rollout of its broadband infrastructure.If the company chooses to front-load the depreciation of its equipment, which is what Digi.Com Bhd has also chosen to do, you will then see an impact on its numbers, even though it is a non-cash item. However, the company can be applauded for taking a more conservative stance.

Even so, there is no question Green Packet will continue to face intense competition as other players step up to the plate. Aside from the three main telcos, YTL Communications Sdn Bhd’s YES service is also gaining a lot of attention.

The fear is that in order to increase its subscribers P1 will have to increase its marketing efforts again, which means higher marketing costs. More subscribers also places P1’s network under strain that affects the network’s performance.

Industry observers said Green Packet is under pressure to deliver, especially considering that its major shareholder, South Korea’s SK Telecom, has invested substantially in the venture.

ECS ... Aug11

2011-08-24T14:57:00.000+08:00

Mercury Securities Sdn Bhd research.

ECS ICT’s 1H/FY11 results (for 6-month period ended 30th June 2011) were slightly below our earlier expectations.

“Weaker contribution from ICT Distribution segment, but better contribution from Enterprise Systems”
ECS ICT recorded revenue of RM591.1 million in its 1H/FY11, which was slightly lower by 5.6% y-o-y. This was attributed to a weaker contribution by its ICT Distribution segment (particularly for notebook PCs). However, this drop in revenue was partly off-set by a better contribution from its Enterprise Systems segment.

Comparing y-o-y versus 2Q/FY10, group revenue in 2Q/FY11 was higher by 0.3%. However, group net profit after tax (NPAT) in 2Q/FY11 was lower by 28.2% y-o-y. This was attributable to the lower-margin product mix during 2Q/FY11.

OUTLOOK/CORP. UPDATES
According to International Data Corporation's (IDC) projections, the information and communications technology (ICT) industry in Malaysia is expected to grow at a rate of 9% for 2011. With this, as ECS ICT is a market leader in the local ICT distribution segment, we expect the group to perform positively during 2011. Furthermore, the group had secured a few new ICT leading brands for distribution during the year.

Malaysia had reported stable 1Q/2011 unemployment rate of 3.1% and a CPI of 3.5% (June 2011). In early July 2011, Bank Negara Malaysia (BNM) had maintained its overnight policy rate (OPR) at 3.0% but raised the statutory reserve requirement (SRR) of 3% to 4% to rein-in inflationary pressures.

MSC Malaysia is the national ICT initiative to position the country as one of the world's ICT hubs by attracting local and international companies from various ICT disciplines under the care of the government-owned Multimedia Development Corp (MDeC). According to MDeC, under MSC’s Phase Three (2011-2020), Malaysia’s ICT revenues are expected to increase by 37% to RM142 billion and exports by 75% to RM58 billion.

“Expanding range of ICT brands/products”
ECS ICT’s management is selective on the brands and products that the group chooses to distribute. In order to keep its inventory turnover fast and to meet the expectations of major ICT principals, ECS ICT prefers to distribute popular products, especially those belonging to major brands. ECS ICT’s management plans to continue increasing its product range and also to further develop its higher-margin Enterprise System business segment.

In recent months, ECS ICT had managed to secure the distribution rights for a range of products from major ICT suppliers, such as Samsung (notebooks and tablet PCs), YTL Communications (YES 4G devices) and Dell (desktop PCs, notebooks, gaming and enterprise solutions).

“Targeting Exciting Tablet PC market”
ECS ICT is aiming to be the market leader in the distribution of tablet PCs in Malaysia, targeting to achieve a market share of around 30-40%. Currently, ECS ICT is the distributor of tablet PCs for Samsung, Apple, ASUS and Lenovo. The tablet PC is a relatively new PC segment and is currently the most exciting and fastest growing PC segment globally.

ECS ICT is anticipating a rise in Apple iPad sales once larger shipments arrive during 2H/2011. Meanwhile, the 7-inch Samsung Galaxy Tabs have been selling well sine 1Q/2011. Better sales are expected when Samsung launches the new 10-inch Galaxy Tab 2 during August 2011.

Additionally, ECS ICT had reported strong sales for the ASUS EEE Pad Transformer. In June 2011, ECS ICT’s 100%-owned ECS Astar Sdn Bhd signed an agreement with Lenovo to distribute laptops, desktops and workstations in Malaysia. ECS is the exclusive distributor for Lenovo IdeaPad tablet PCs in Malaysia. The first IdeaPad shipment is expected to arrive in August 2011. Higher sales are expected upon the launch of the new IdeaPad K1 in the Malaysian market.

VALUATION/CONCLUSION
ECS ICT had paid out a single tier final dividend of 4 sen per share, totaling RM4.8 million (for its FY10 ended 31st December 2010) on 14th June 2011. The group’s total net dividend payout for FY10 amounted to 8 sen per share, which constituted more than 30% of group NPAT in FY10. For FY11, we expect that ECS ICT would pay out at least the same level of dividends as in its FY10.

With a relatively close adjusted beta of 0.94 to the KLCI, ECS (+3.8 YTD) has managed to outperform the KLCI (+1.8% YTD) slightly this year. In recent months, global equity markets have been impacted by events such as the sovereign debt situation in Europe, the Tohoku disaster in Japan, the “debt ceiling” issue in the US and also the “Arab Spring” upheavals in the Middle East/ North Africa. As ECS is not an especially large market-cap stock, this may put a dampener on its market visibility and trading volume.

“Maintain Buy Call”
Based on our forecast of ECS’s FY11 EPS and estimated P/E of 6 times, we set a FY11-end Target Price (TP) of RM1.59. This TP represents a Buy Call and offers a reasonable 15% upside from its current market price. Our TP for ECS reflects a P/BV of 1.1 times over its FY11F BV/share. Meanwhile, Bloomberg data shows that the “Computer Services” sector’s average P/E and P/BV is 20.3 times and 1.4 times, respectively.
We have been conservative in our estimate for ECS ICT’s FY11 revenue and earnings. Nevertheless, we would revise our forecasts accordingly if ECS ICT obtains a stronger contribution from Enterprise Systems or tablet PCs during its 2H/FY11.

ECS ICT is well poised to grow organically, taking into account its market leadership position, range of ICT products, extensive distribution infrastructure, partnerships with key ICT principals, strong technical support team and effective financial management systems. We find that ECS ICT’s P/E and P/BV valuations are undemanding. Additionally, the group’s dividend yield and ROE are also quite attractive, while it is in a net cash position.

Typical for any ICT business, ECS’ future earnings performance could be affected by – possible fluctuations in economic conditions, business and consumer sentiment, and also factors such as foreign exchange translation, increased peer competition, issues with account receivables, increased inventory turnover days, slim margins and market acceptance of various ICT products.

Naim ... Aug11

2011-08-24T08:17:00.000+08:00

Sarawak-based property developer Naim Holdings Bhd (Naim) is pursuing projects worth more than RM1 billion.

The projects Naim is bidding for include the construction of a road near Balingan, the new Mukah Airport as well as a 200-unit residential project at Samalaju.

The company is finalising the details of an integrated development project on 13ha of prime land within the Kuching city centre with an estimated gross development value (GDV) of RM1.5 billion.

Naim is also in the process of submitting designs for an integrated development within the 15ha old Bintulu Airport site with an estimated GDV of RM1.5 billion.

Naim has a 39% stake in a tripartite joint venture tasked with developing an integrated township near the proposed Samalaju Industrial Park — home to the bulk of the energy intensive industries under Score — set to be completed by 2013.

For its 1QFY11ended March 31, its net profit fell 43.8% quarter-on-quarter (q-o-q) and 12.6% year-on-year (y-o-y) to RM12.2 million while revenue fell 38% q-o-q and 2% y-o-y to RM120.9 million.

The decline has been attributed to slower progress billing in its property segment and the decline in margins, as well as the lack of new orders replenishment in the construction arm.

As at March 31, its net assets per share stood at 2.89 sen.

There are downside risks to Naim’s earnings this year due to low levels of unbilled property sales, reduction in its stake of the Sabah Oil and Gas Terminal (SOGT) from 30% to 10% and potentially disappointing job wins.

Naim is focusing more on properties and less on construction so it is moving its resources to properties as well as oil and gas.

The company’s order book, which amounts to RM3.2 billion, will sustain the company for the next three to four years.

Naim’s 1,025ha landbank, which will be developed into residential projects, as well as the utilisation of 17ha of land set aside for the Bintulu old airport, should not be overlooked. It also has plans to develop commercial and other properties in Kuching, Bintulu and Miri with a GDV of RM8.3 billion.

Naim’s subsidiary Naim Engineering Sdn Bhd has been shortlisted to bid for jobs under the multi-billion ringgit Prasarana MyRapid Transit project in the Klang Valley.
Naim has a 36% stake in oil and gas player Dayang Enterprise Holdings Bhd which it acquired in 2007.

Dayang Enterprise, through its subsidiaries, provides offshore maintenance services, minor fabrication services, offshore hookups as well as the commissioning and chartering of marine vessels to the oil and gas industry.

Dayang is expected to contribute 30% to 40% of Naim’s bottom line over the next three years.

IPO ... GAS Malaysia

2011-08-23T14:53:00.002+08:00

GMSB’s principal activity includes selling marketing and distributing natural gas as well as constructing and operating the natural gas distribution system within Peninsular Malaysia. It has a network of natural gas pipelines connecting customers to the Peninsular Gas Utilisation transmission system owned and operated by PGB. As at July 20, 2011, the GMSB group has a network of gas pipelines which spans an accumulated length of approximately 1,800 kilometres across Peninsular Malaysia.

MMC Corp Bhd and the other shareholders of the profitable Gas Malaysia Sdn Bhd is undertaking a listing exercise which would involve an offer for sale of 26% of Gas Malaysia’s existing stake.

MMC-Shahpadu (Holdings) Sdn Bhd owns 55% or 353.108 million shares of Gas Malaysia, Tokyo Gas-Mitsui &Co (Holdings) Sdn Bhd 25% (160.503 million shares) and PetGas 20% (128.388 million shares).

Gas Malaysia posted net profit of RM298.27 million in the financial year ended Dec 31, 2010 compared with RM243.14 million in FY2009 and RM269.32 million in FY2008. Revenue was RM1.807 billion in FY2010, RM1.753 billion in FY2009 and RM1.879 billion in FY2008.

MMC’s cost of investment of its effective equity interest of 41.80% in Gas Malaysia since May 16, 1992 was RM18.88 million.

The listing exercise would involve the subdivision of one existing Gas Malaysia share of RM1,000 each into 2,000 shares of 50 sen each, increasing the paid-up from 642,000 existing ssares to 1.284 billion shares.

Gas Malaysia would issue to Petroliam Nasional Bhd one special rights redeemable preference share at an issue price of 50 sen. The shareholders comprising of MMC-Shapadu, Tokyo Gas-Mitsui and Petronas Gas would then offer for sale of 333.84 million Gas Malaysia shares or 26% of the paid-up. There would not be any issue of new Gas Malaysia shares.

147.678 million shares or 11.5% would be offered to Bumiputera institutional and selected investors and 155.820 million shares or 12.14% to Malaysian institutional and selected investors.

The institutional price to be paid by the institutional investors pursuant to the institutional offering is to be determined on the price determination date by way of a bookbuilding exercise.

Under the retail offering, the vendors proposed to offer 30.342 million shares (2.36% of the issued and paid-up share capital) of which 25.68 million shares (2%) would be offered to Malaysian citizens, companies, co-operatives, societies and institutions.

On the number of Gas Malaysia shares to be retained by MMC-Shapadu upon completion of the proposed IPO scheme, its interest would be diluted from 41.80% to 30.93%.

MMC Group stands to record a gain on disposal pursuant to the proposed offer for sale after the completion of the proposed IPO scheme but the quantum of gain can only be ascertained once the institutional price and the retail price have been determined.

The proceeds attributable to MMC by way of dividend payout by MMC-Shapadu will be 76.0% of the proceeds to be received by MMC-Shapadu after taking into account the listing expenses to be incurred in respect of the proposed offer for sale and the related portion of the cost of investment. The proceeds received by MMC are proposed to be utilised for repayment of financial commitments and working capital purposes.

The listing would accelerate the growth of the gas supply and distribution business of the GMSB group.

By creating a separate listed entity, it will provide GMSB with greater capital management flexibility and enable GMSB to optimise its capital structure and cost of capital by accessing the equity capital markets.

The listing would also enable it to pare down existing borrowings to further improve its capital structure.

The proceeds raised from the sale will accrue entirely to the offerors in proportion to the number of shares offered.

Tomei vs PohKong... Aug11

2011-08-23T08:44:00.000+08:00

Tomei’s balance sheet shows that its inventory rose to rm270 million as at March 31, 2011 from rm196 million as at Dec 31, 2008. Its market cap however, is only about rm90 million (at 64.5 sen), barely one third the value of its gold inventory. Logically, its share price should trend in tandem with the price of gold as its inventory is mostly held in gold.

Poh Kong’s inventory was rm420 million as at April 30, 2011 compared with rm399 million as at April 30, 2008. At market cap of 41.5 sen, its market cap stood at 170 million.

The appreciation of the ringgit against the US dollar should be taken into account when accessing the price of gold locally. When the ringgit strengthens the price of gold actually drops in ringgit terms. However, currently the price of gold has increased at a much faster rate than the ringgit’s appreciation against the US dollar and thus is still much higher in ringgit terms.

Tomei’s net profit rose to rm21.3 million or 15.62 sen per share. Revenue surged to a record rm356 million.

The rather high borrowings of jewelers is one factor why their share prices do not climb as fast as the price of gold.

The stronger gold prices and higher value of inventories could come in handy in getting loans to expand.

Tomei’s gearing stood at 0.76 times as at March 31, 2011 based on short and long term borrowings of rm120 million and shareholders; equity of rm158 million. It had cash balance of rm5.9 million. After offsetting its debt obligation of rm120 million, Tomei’s inventory value (net of debt) is worth about rm150 million, this translates into rm1.08 per share.

As for Poh Kong, its gearing as at April 30, is 0.45 times based on long term and short term loans of rm150 million and total equity of rm335 million. Cash reserves amounted to rm26.1 million. Taking into account the rm150 million on its balance sheet, Poh Kong’s inventory, net of debt is about rm297 million which is equivalent to 72.5 sen per share.

IPO ... AirasiaX

2011-08-22T14:52:00.000+08:00

Investment bank Morgan Stanley is expected to finalise the proposed valuation of the 10% stake in AirAsia X to be purchased by Khazanah Nasional Bhd and present it to the long-haul budget carrier's board by September 2011.

While it was too premature to put a price tag on the proposed purchase, Morgan Stanley had been appointed the deal adviser and was currently working on the deal valuation.

Khazanah will be issued new shares in AirAsia X and is expected to come in as a pre-initial public offering (IPO) investor of AirAsia X, ahead of the airline's plans to list in 2012.

In 2008, AirAsia X executed an agreement to place a 20% stake to Bahrain-based Manara Consortium and Japan's Orix Corp for US$75mil (or RM250mil). When the placement was done, it was one year after the long-haul low-cost carrier established operations. The valuation placed on AirAsia X's shares would be higher now (Aug 2011) given the growth and expansion in business experienced by the airline since.

In 2010, AirAsia X achieved a revenue of RM1.3bil with a net profit of RM80mil from carrying some 1.92 million passengers. The airline targets to touch RM2bil in revenue this year, owing to better ancillary income and higher yields, and carry some 2.7 million passengers.

AirAsia X now has a fleet of nine Airbus A330 and two Airbus A340 with a route network to 15 destinations globally.

Everything hinges on the valuation before Khazanah will look to accept the share purchase.

Khazanah's potential participation would signal the entry of a strong institutional investor into the company and would be used as a benchmark for the subsequent IPO price.

Current shareholders of AirAsia X include Aero Ventures Sdn Bhd (52%), AirAsia Bhd (16%), Corvina Holdings (10%), Orix Corp (11%) and Manara Consortium (11%) Malaysia Airlines (MAS), AirAsia and AirAsia X signed a collaboration agreement, whereby the outcome of the agreement will see MAS focus on being a full-service premium carrier, AirAsia on being a regional low-cost carrier (LCC) and AirAsia X, a medium-to-long-haul LCC.

MISC ... Aug11

2011-08-22T08:40:00.000+08:00

Speculating that national carrier MISC Bhd may put in a bid for a fleet of eight liquefied natural gas (LNG) ships owned by shipping giant AP Moller Maersk.

The bids are understood to be due by end-August 2011, with initial estimates valuing the fleet at US$1.3 billion (RM3.9 billion) to US$1.7 billion. AP Moller is understood to have roped in Deutsche Bank to assist with the sale.

Four to seven offers have already been made for Maersk’s fleet of LNG ships, but details were kept “strictly under wraps”. The bidding is likely to be a competitive affair with many large companies looking to partake in the sale.

Sources say MISC has roped in Japanese giant Mitsui & Co for a possible joint bid.

MISC has a fleet of some 180 ships, with about 60 vessels chartered from other owners. Out of this fleet MISC has 29 LNG carriers, which are all owned by the national carrier.

Considering MISC is 62.7% owned by state controlled oil major Petroliam Nasional Bhd (Petronas), and the national carrier is the shipping arm of the oil giant, the acquisition makes sense.

Petronas is in the process of setting up an import or re-gasification terminal for LNG at Sungai Udang Melaka at a cost of RM3 billion. This initiative to import LNG could require more vessels on MISC’s part.

Another shipping giant Mitsui OSK Lines (commonly known as MOL) is also said to have expressed interest in Maersk’s fleet of LNG carriers. Despite the similarity in name, Mitsui & Co and MOL do not any ties in terms of having similar shareholders.

Another Japanese outfit, Marubeni, is understood to be partnering Canadian shipping outfit Teekay Corp and seems likely to join in the race. Both companies have expressed an interest to grow their LNG-shipping assets.

Three other names that have cropped up include Russian giants Sovcomflot, GasLog of Greece and tycoon John Fredriksen’s Golar LNG. GasLog’s current CEO Jeppe Jensen was formerly head of Maersk LNG, and ordered the ships that are now being sold.
In 2009, Fredriksen was ranked the 132nd richest individual in the world and is said to be worth more than US$4 billion. Sovcomflot is Russia’s largest shipping company and is wholly owned by the state.

About 20 companies are understood to have shown interest, but those keen on buying the ships, taking the tender documents, have had to sign several confidentiality agreements.
However, there could be hurdles for the buyers of three of the eight vessels, as oil major Total has to approve the charters on these ships currently servicing Yemen’s LNG project, financed under a French tax lease.

Its earnings fell to RM121.07 million in the quarter ended June 30, 2011 from RM427.98 million a year ago as it was affected by losses in the petroleum business as freight rates fell.

Revenue declined to RM3 billion from RM3.27 billion. Earnings per share shrank to 2.70 sen from 9.6 sen.

The decline in its profit was mainly due to losses in the petroleum business due to the weakening freight rates and higher losses in the liner business.

As for the lower revenue, this was due to a decline in revenue from the heavy engineering and liner businesses. However, higher revenue from the chemicals and offshore businesses helped to cushion the impact.

The group’s liner losses are expected to widen as demand from China eases on monetary tightening.

Of late, demand has also shifted from sea to air, an indication that most container shipping companies have just missed the Christmas shipping season owing to the earlier global supply chain distribution following Japan’s earthquake.

MISC’s FY11 earnings outlook remained unexciting in anticipation of flat earnings from liquefied natural gas shipping while petroleum and chemical shipping is expected to face low charter rates and oversupply of vessels.

The potential de-rating catalysts being these poor results, weak near-term prospects for petroleum and chemical tanker freight rates, and swelling liner losses.

Expect tanker shipping rates to remain depressed owing to prevailing overcapacity and that the problem might be exacerbated by the weakening global economy. However, MISC’s chemical and offshore business to moderate the downside from its shipping.

As at end March 2011, the shipping company had RM3.35 billion in cash, while on the other side of the balance sheet, the company’s long-term debts amounted to RM10 billion and its short-term commitments stood at RM1.25 billion. The company’s shareholders’ funds as at end-March were RM23.07 billion.

What should I do to marry a rich guy?

2011-08-21T10:45:00.000+08:00

A young and pretty lady posted this on a popular forum: Title: What should I do to marry a rich guy?

I'm going to be honest of what I'm going to say here. I'm 25 this year. I'm very pretty, have style and good taste. I wish to marry a guy with $500k annual salary or above. You might say that I'm greedy, but an annual salary of $1M is considered only as middle class in New York. My requirement is not high. Is there anyone in this forum who has an income of $500k annual salary? Are you all married? I wanted to ask: what should I do to marry rich persons like you? Among those I've dated, the richest is $250k annual income, and it seems that this is my upper limit. If someone is going to move into high cost residential area on the west of New York City Garden(?), $250k annual income is not enough. I'm here humbly to ask a few questions:

1) Where do most rich bachelors hang out? (Please list down the names and addresses of bars, restaurant, gym)

2) Which age group should I target?

3) Why most wives of the riches are only average-looking? I've met a few girls who don't have looks and are not interesting, but they are able to marry rich guys.

4) How do you decide who can be your wife, and who can only be your girlfriend? (my target now is to get married)

Ms. Pretty

A philosophical reply from CEO of J.P. Morgan:

Dear Ms. Pretty, I have read your post with great interest. Guess there are lots of girls out there who have similar questions like yours. Please allow me to analyse your situation as a professional investor. My annual income is more than $500k, which meets your requirement, so I hope everyone believes that I'm not wasting time here.

From the standpoint of a business person, it is a bad decision to marry you. The answer is very simple, so let me explain. Put the details aside, what you're trying to do is an exchange of "beauty" and "money" : Person A provides beauty, and Person B pays for it, fair and square. However, there's a deadly problem here, your beauty will fade, but my money will not be gone without any good reason. The fact is, my income might increase from year to year, but you can't be prettier year after year.

Hence from the viewpoint of economics, I am an appreciation asset, and you are a depreciation asset. It's not just normal depreciation, but exponential depreciation. If that is your only asset, your value will be much worse 10 years later. By the terms we use in Wall Street, every trading has a position, dating with you is also a "trading position". If the trade value dropped we will sell it and it is not a good idea to keep it for long term - same goes with the marriage that you wanted.

It might be cruel to say this, but in order to make a wiser decision any assets with great depreciation value will be sold or "leased". Anyone with over $500k annual income is not a fool; we would only date you, but will not marry you. I would advice that you forget looking for any clues to marry a rich guy. And by the way, you could make yourself to become a rich person with $500k annual income.This has better chance than finding a rich fool. Hope this reply helps. If you are interested in "leasing" services, do contact me.

signed, J.P. Morgan CEO

Bank Joint Account in Malaysia

2011-08-20T10:35:00.000+08:00

"Just to share with you one recent article I read and shocked me a lot.

It happened in west Malaysia , about a husband and wife and one son.

The husband passed away due to accident.

The husband had a RM50,000 joint saving account
with wife in a local bank.

What happened is the wife ,like most people think, when husband passes away, she will get the money automatically since it is a joint account.

But to her surprise, She could not withdraw even a single cent from the bank.

Joint saving account is meant for convenience when spouse needs it the most.

But most people always assume once the other holder dies, another half will get the money automatically which is very wrong.

I would like to share my opinion with all of you, you may take it as educational thoughts or for you to be aware.

When one person dies, the other joint holder of the saving account will get the money automatically only if that particular bank practise 'JOINT TENANCY'.

This terms means one party die, the other joint party gets money automatically.

But unfortunately, not all banks practise JOINT TENANCY, some foreign banks practise and most local banks don't practise.

If you want to be sure, just ask your bank whether your joint saving account based on JOINT TENANCY.

If it is yes, get the black and white.

Can you all imagine, when husband passes away, the wife already suffers emotional loss. Now she will have to suffer the problem of having 'NO MONEY', although it is in joint account.

Because of husband's ignorance, now the wife and the son have to pay for it.

Hope the above can help for you.

Just take note.

Gamuda ... Aug11

2011-08-19T08:16:00.001+08:00

There could be changes at Syarikat Prasarana Negara Bhd (SPNB). Urban Public Transport National Key Results Area director Ahmad Suhaili Idrus said during a Performance Management and Delivery Unit (Pemandu) update that the newcomer could be sought to oversee the Klang Valley mass rail transit (MRT) project. This may be a precursor to a change in the role SPNB in the project.

While the nature of the change was not disclosed, an announcement could be made by month’s end (Aug 2011). The status quo on both SPNB’s and the MMC-Gamuda JV’s role as the asset owner and project delivery partner of the MRT project would remain largely intact.

What may change is that the new appointee would likely play a more proactive role in the implementation of the project. It was reported that Marcus Karakashian — a director of the Singapore Land Transport Authority — would be roped in at the top to assist in the MRT project. Karakashian is believed to have extensive experience in MRT systems — having spent more than a decade in Singapore where he worked on the North East Line MRT as well as the Kallang Paya Lebar Expressway Road Tunnel. He was also construction manager of the Jubilee Line in London — in charge of the London Bridge and Southwark stations and tunnels.

It is uncertain as if this evolving development may cause uncertainty about the chain of command for the MRT project with one more party at the top. It is also unsure how this development will impact the rollout of contract awards for the Sg Buloh-Kajang line, which reportedly could be worth about RM20 billion. Construction is expected to kick off in November 2011.

IJM Corp Bhd and the UEM Group would stand a chance with potential sub-contractor roles for MRCB and WCT. The building materials sector may offer an alternative play on the MRT project. This huge project will likely accentuate demand for basic building materials … Ann Joo Resources Bhd (steel), Lion Industries Corp Bhd (steel), Lafarge Malayan Cement Bhd (cement) and Kimlun Corp Bhd (tunnel lining).

AZRB ... Aug11

2011-08-18T08:15:00.000+08:00

Sources say Terengganu-based construction outfit Ahmad Zaki Resources Bhd (AZRB) has reached financial close with Bank Pembangunan Malaysia Bhd for the RM1.5 billion KL Outer Ring Road (KLORR) project.

This could indicate that AZRB is finalising details of the concession agreement with the government and that work on the project could commence soon. Financial close is the last hurdle before funds can be drawn down to commence work on a project.

AZRB was given the letter of intent to undertake the project back in 2008, building the 40km stretch from Sungai Long to University Islam Antarabangsa in Gombak, linking up with the South Klang Valley Expressway and Kuala Lumpur-Kuala Selangor Expressway, among others.

The job in question could be a boost for AZRB. As at end-March this year, AZRB had an order book of RM1.06 billion. Some of the more prominent jobs were the design and building of Complex Kerja Raya 2 in Jalan Sultan Salahuddin, Kuala Lumpur, for RM266 million, packages 2, 6, 5A and 9C of the East Coast Highway amounting to some RM207 million and Universiti Darul Imam package 3 building works valued at RM192 million.

For the first three months of FY11 ended March, AZRB posted a net profit of RM5.16 million on the back of RM124.66 million in revenue. Earnings per share for the three months in review stood at 1.86 sen. In contrast to the corresponding period a year ago, net profits fell by about 33%, despite revenue gaining some 15%.

Its results were adversely impacted by exceptional losses arising from the termination of the Alfaisal University project in Saudi Arabia, as reported in the final financial quarter of 2010.

As at March 31, 2011, AZRB had cash and cash deposits amounting to RM110.03 million, while on the other side of the balance sheet, it had long-term borrowings amounting to RM46.92 million and short-term debt obligations of RM95.21 million. With net debt of RM32.1 million and shareholders funds of RM186.71 million, the company has a modest net gearing ratio of 17.2. Its net assets per share stood at 65.6 sen per share.

AZRB is 59.24% controlled by Zaki Holdings (M) Sdn Bhd. Zaki Holdings is the vehicle of Datuk Seri Wan Zaki Wan Muda, the executive vice-chairman of AZRB, managing director Datuk Wan Zakariah Wan Muda and executive director Datuk Wan Zulkifli Wan Muda.

Muhibah ... Aug11

2011-08-16T08:14:00.000+08:00

APH and its bankers have reached an understanding, resulting in Datuk Gan Ah Tee of BDO-Binder being discharged as receiver and manager amid talks of new investors emerging to revive the company.

Gan, it seems, was discharged on July 20 2011 after being appointed receiver and manager of APH in May 2011 by CIMB Bank.

APH’s managing director said negotiations with bankers are on-going, but declined to comment further. Abdul Rashid Mohamad Isa, who controls KIC Oil & Gas Ltd — the largest shareholder of APH — was also tight-lipped, and declined to comment on market talk that a new investor was likely in APH.

It is also learnt that Rothschild has been playing a key role in sorting out issues plaguing APH, acting as its financial advisor.

Market talk also has it that APH is in negotiations with a few interested parties keen to come into the company to kickstart a project to build an oil terminal on a bunker island off the coast of Johor. It has been reported that APH requires an additional RM1 billion in funding to restart the project.
At present about 60% of the project has been completed at a cost of approximately RM1.4 billion. From the word go, the project has been fraught with problems.

To recap, APH was given the mandate to build the oil terminal with a storage capacity of more than 940,000 cu m, and multiple jetties to facilitate trans-shipment. CIMB had stepped forward offering a RM1.4 billion, three-year bridging loan, of which some RM840 million has been drawn down for project cost. However, the project has been delayed by more than two years.

Shareholders of APH are KIC Oil & Gas controlling 90% and politically-connected Trek Perintis Sdn Bhd the remaining 10%.

However Tan Sri Syed Mokhtar Al-Bukhary’s Seaport Terminal (Johore) Sdn Bhd was also slated to have some kind of interest in the project but this has not been clearly spelt out. Some say his interest lies in his ownership of the bunker island, while others say Seaport obtained the bunker island via government funds.

At that time the grand plan involved diverting maritime traffic from Singapore to the bunker island, offering bunker facilities, but problems are understood to have surfaced, and the project was delayed by more than two years, with cost overruns exceeding RM400 million.

According to industry players the delays were largely attributable to the need for redesigning, after the soil on the bunker island, which was largely silt, was found to be unsuitable for building structures. Since the island rested on silt, it was rumoured that APH had to incur additional costs in stabilising using a method incorporating the use of perforated vertical drains, which stalled the entire project.

In a nutshell the island was not fit to be transformed into a petroleum hub.

The possible entry of a new investor and the removal of the receiver and manager, should come as a breath of fresh air for Muhibbah Engineering Bhd which was given the contract to build a jetty, conduct soil stabilisation works and civil works for a sum of RM840 million.

There were fears that Muhibbah would slip into the red, having to write down about RM300 million due from APH. When news of receivers taking over the management of APH first emerged in May 2011, Muhibbah tumbled some 20%.

IJM ... Aug11

2011-08-15T14:17:00.000+08:00

Kitchen-sinking is complete and management sees no further provisions in India. Nevertheless there is little catalyst for IJM in India as competition for infrastructure construction remains stiff while the property and toll operations are not major contributors as yet.

Contributions from India are small at 2%-3%.

Having surprised with a loss for the construction division in 4QFY11, management does not envisage any more provisions, particularly in relation to collectibles on earlier jobs in India.

IJM has RM770 million ongoing construction jobs in India, of which 78% relates to two projects — the six lanes of the Chilkaluripet-Vijayawada section of National Highway 5 in Andhra Pradesh, and four lanes of the Pune- Solapur section of National Highway 9 in Maharashtra. This is about 20% of IJM’s RM4 billion outstanding order book but expect thin margins.

The National Highways Authority of India (NHAI) plans to award 7,000km to 8,000km of new roads per annum over the next two to three years, which at an average construction cost of about RM5 million per km, works out to about RM38 billion of potential new works each year. Competition for these jobs, however, continues to be stiff and IJM remains conservative in its pricing.

The group has 155 acres of landbank in India, which comprise two township developments that will sustain near-term earnings. Phase 1 of Raintree Park Hyderabad is completed and construction of the commercial mall and Phase 2 should commence soon. Phase 1 of Raintree Park Dwaraka Krishna should complete in a month, paving the way for Phases 2 and 3. Unbilled sales of RM85 million in India are small vis-à-vis the group’s RM1 billion.

At present, the toll road division of the group’s Indian operations is loss making. Losses nevertheless have narrowed with the build-up in traffic and management is looking to hold close to 100% stake in four of the five tollways for recurring earnings.

Scable ... Aug11

2011-08-15T08:13:00.001+08:00

The state government spending more on infra projects including electricity transmission will improve its earnings prospects.

The federal government is allocating rm5.7 billion under the National Key Result Areas to provide infra to the rural areas. Estimates that rm1.7 billion will be allocated for electricity projects in Sarawak.

Power cable makers SCABLE is one of the few companies with the capability to build transmission lines and substations in the SCORE.

The Bakun dam, which supplies 2400 MW of electricity, is the key selling point for the state government to market SCORE as an investment destination for foreign investors.

Since the dam is expected to be fully commissioned by mid 2013, there will be a lot of new transmission power lines and power stations being built in the state, This is also in anticipation of plans to electrify the rural areas.

One of the key electricity transmission projects in Sarawak is the 500kV Bunut-Kuching line, which will connect all the smaller transmission lines there.

SCB is part of a consortium bidding for the roughly rm2.5 billion job to build transmission lines and substations on the 600 km line. The consortium has reached the pre qualification stage and that the winner will be announced later 2011.

Phase 1 of the 500kV line is targeted for completion by March 2014. SCB will most likely get the lion’’s share of the first phase of the line from Busut to Sibu while the MNC will probably get a big portion in the second phase from Sibu to Kuching.

WCB has been growing its business via acquisitions. It had acquired Sarwaja Timur and Trenergy infra. The two acquisitions will be settled via the issue of new shares. The son of Chief Minister Tan Sri Abdul Taib, Datuk Seri Mahmud will emerge as the largest shareholders in SCB with a total direct and indirect equity stake of 42.11%. Sarawak Energy’s shareholding in SCB will be reduced to 19.19% while Leader Universal’s stake will shrink to 13.67%.

SCB hopes to tap the rural electrification scheme to improve electricity coverage in Sarawak. It sees a lot of potential jobs in this as RES is targeting to boost electricity coverage in East Malaysia to 95%.

With its existing cable manufacturing business, the acquisitions will turn SCB into a fully integrated outfit. The integration will improve its bargaining power when bidding for jobs.

SCB also tied up with ABB Malaysia to bid for projects.

The group is looking at exporting power to Brunei and Indonesia.

Yinson ... Aug11

2011-08-12T07:47:00.000+08:00

Yinson Holdings Bhd is downsizing its current core activities of land transportation and logistic services businesses to focus on building and developing its oil and gas (O&G)-related activities.

The company's long term business objective was to become one of the main regional players in the O&G sector.

The company anticipated that the O&G activities would contribute 80% of its total earnings in the next five years and the balance of 20% from the land transportation logistic services businesses.

The way forward for the company to make its mark in the competitive O&G sector was to team up with another party which was more experienced in offering related services to the O&G clients.

Yinson and PetroVietnam Technical Services Corp (PTSC) had in May 2011 secured floating storage and off-loading (FSO) contract on bareboat charter basis worth US$331mil for a firm period of 10 years with the options to extend for another 10 years.

Vietnam will be a platform and launching pad for Yinson to build up its reputation and capacity before venturing to other countries in the region.

Meanwhile, the company planned to increase the number of its FSO vessel from one now as the sector there required at least four new FSO vessels yearly.

It had proposed renounceable two-call rights issues of up to 131.857 million new ordinary shares of RM1 each at an issue price of RM0.75 sen and the proceeds of RM84mil would be used to part finance the purchase of a new FSO vessel.

The company decided to focus on the offshore support services (OSS) as there were not many players in the region which specialised in the segment.

It is currently bidding for OSS contracts in Malaysia, Indonesia and Thailand worth RM800mil and confident of securing part of it as only five bidders are involved.

For the financial year ended Jan 31, 2011, Yinson recorded RM18.54mil net profit on RM640.81mil revenue against RM7.95mil and RM470.17mil respectively in the previous year.

MahSing ... Aug11

2011-08-11T07:46:00.000+08:00

Mah Sing Group Bhd's wholly-owned unit, Grand Pavilion Development Sdn Bhd, has signed a joint venture agreement with Asie Sdn Bhd and its subsidiary, Usaha Nusantara Sdn Bhd, to develop a 1.63-hectare prime land along Jalan Tun Razak-Jalan Pahang here.

Usaha Nusantara would grant Grand Pavilion the sole and absolute right to undertake the development of the land for an entitlement of RM106.60 million to be settled via 60 per cent in cash and 40 per cent stake in Grand Pavillion.

The joint-venture land formed part of the 23.42ha privatized urban regeneration project in Kuala Lumpur with a gross development value (GDV) of RM9 billion, whereby Asie has been granted full rights of and approvals for a mixed development.

The urban regeneration project would comprise residential and commercial properties and community, leisure, recreation and infrastructure facilities on 15 parcels of development land together with five air rights in Precinct 2-Pekeliling of the River Corridor Development under the Blue Corridor policy of Kuala Lumpur City Plan 2020.

For this first joint venture, Mah Sing intended to develop a niche development, named M Sentral, with an estimated GDV of approximately RM900 million. The M Sentral will comprise smaller-sized and more affordable serviced residences as there is strong demand due to lower entry prices, as well as some retail units.

Asie was established in 1977 with construction and property development as its core business. The company has been involved in other regeneration projects for the Kuala Lumpur City Hall.

Asie’s shareholder is Citivest Sdn Bhd. Filings from the Companies Commission of Malaysia showed shareholders of Citivest are Abu Khalil Akasah and Nik Rahimah Wan Ahmad, both of whom are believed to be connected to the Perlis royal family.

The 4.08-acre development is subject to authorities’ approval and is expected to commence by the first half of 2012 and to be developed over five years.

Currently, Mah Sing has a landbank of about 900 acres (of which 477 acres are located in Johor while 315 acres and 108 acres are in the Klang Valley and Penang respectively), excluding the new parcel, with estimated GDV of RM14 billion over the next five to seven years. Mah Sing, which has been aggressively growing its landbank of late with acquisitions in Jalan Ampang, Batu Ferringhi (Penang) and Cyberjaya since early 2011, has a total of 34 projects in the Klang Valley, Penang and Johor Bahru.

The group is looking at possibly acquiring a large tract of land of more than 1,000 acres to develop a new township. It is also exploring acquisition opportunities in Kota Kinabalu, Sabah. They are looking for landbank that can have a quick turnaround.

The new area, more commonly known as the Pekeliling flats, is ready for immediate development as demolition works, soil investigations and partial earthworks have already been completed.

The group noted that it is in sound financial position to take on new projects. Mah Sing issued a seven-year redeemable convertible secured bonds to raise RM325 million for land acquisition two months ago. Mah Sing had cash in hand of about RM750 million.

As at June 2011 Mah Sing’s net gearing stood at 0.24 times.

The EPF owns a 8.5% stake while Koperaso Permodalan Felda has 7.6% stake in Mah Sing. Leong owns 35.1% stake.

The success of M Sentral will give it more credibility in bidding fore for the development of privatized government lands. It is eyeing more government projects, including the development of the Rubber Research Institute land in Sungei Buloh and the Sungai Besi land currently used by the Royal Malaysian Air Force.

They are also looking at M&A (merger and acquisition) deals. It does not rule out acquisitions to play a bigger role (in property development) and enhance shareholders’ value.

Why This Crisis Differs From the 2008 Version

2011-08-10T13:54:00.000+08:00

It is a parallel that is seducing Wall Street bankers and investors: 2011 as a repeat of 2008, the history of financial turmoil playing in one endless loop.

As a big fund manager muttered darkly this past weekend while heading into the office to prepare for a tumultuous Monday, "The sense of déjà vu is almost sickening."

Those who think of 2011 as "2008 -- The Sequel" now have their very own "Lehman moment." Just substitute Friday's historic downgrade of the U.S. credit rating by Standard & Poor's for the collapse of the investment bank in September 2008, et voilà, you have a carbon copy of an event that made the unthinkable happen and spooked markets around the globe.

They got the last part right. Investors looked decidedly spooked on Monday with Asian and European bourses down sharply and the Dow tumbling 643.76 points, or more than 5%.

[More from WSJ.com: Downgrade Ignites a Global Selloff ]

But market turbulence alone isn't enough to prove that history repeats itself.

To borrow a phrase often used to rationalize investment bubbles, this time is different, and the bankers, investors and corporate executives who look at today's problems through the prism of 2008 risk misjudging the issues confronting the global economy.

There are three fundamental differences between the financial crisis of three years ago and today's events.

Starting from the most obvious: The two crises had completely different origins.

The older one spread from the bottom up. It began among over-optimistic home buyers, rose through the Wall Street securitization machine, with more than a little help from credit-rating firms, and ended up infecting the global economy. It was the financial sector's breakdown that caused the recession.

The current predicament, by contrast, is a top-down affair. Governments around the world, unable to stimulate their economies and get their houses in order, have gradually lost the trust of the business and financial communities.

That, in turn, has caused a sharp reduction in private sector spending and investing, causing a vicious circle that leads to high unemployment and sluggish growth. Markets and banks, in this case, are victims, not perpetrators.

[More from WSJ.com: After Being Laid Off, Get Up]

The second difference is perhaps the most important: Financial companies and households had feasted on cheap credit in the run-up to 2007-2008.

When the bubble burst, the resulting crash diet of deleveraging caused a massive recessionary shock.

This time around, the problem is the opposite. The economic doldrums are prompting companies and individuals to stash their cash away and steer clear of debt, resulting in anemic consumption and investment growth.

The final distinction is a direct consequence of the first two. Given its genesis, the 2008 financial catastrophe had a simple, if painful, solution: Governments had to step in to provide liquidity in droves through low interest rates, bank bailouts and injections of cash into the economy.

A Federal Reserve official at the time called it "shock and awe." Another summed it up thus: "We will backstop everything."

The policy didn't come cheap as governments world-wide poured around $1 trillion into the system. Nor was it fair to the tax-paying citizens who had to pick up the tab for other people's sins. But it eventually succeeded in avoiding a global Depression.

Today, such a response isn't on the menu. The present strains aren't caused by a lack of liquidity -- U.S. companies, for one, are sitting on record cash piles -- or too much leverage. Both corporate and personal balance sheets are no longer bloated with debt.

[More from WSJ.com: Live Blog: Market Tumult]

The real issue is a chronic lack of confidence by financial actors in one another and their governments' ability to kick-start economic growth. If you need any proof of that, just look at the problems in the "plumbing" of the financial system -- from the "repo" market to interbank lending -- or ask S&P or buyers of Italian and Spanish bonds, how confident they are that politicians will sort out this mess.

The peculiar nature of this crisis means that reaching for the weapons used in the last one just won't work.

Consider Wall Street's current clamor for intervention by the monetary authorities -- be it in the form of more liquidity injections (or "QE3") by the Fed or the European Central Bank.

So 2008.

Even if the central banks were inclined that way, pumping more money into an economy already flush with cash would provide little solace. These days, large companies are frowning all the way to the bank, depositing excess funds in safe-but-idle accounts, as shown by Bank of New York's unprecedented move last week to charge companies to park their cash in its vaults.

As for jittery investors, a few more billions minted by Uncle Sam or his Frankfurt cousin are unlikely to be enough to persuade them to jump back into the market.

In 2011, the financial world can't go cap in hand to the political capitals, hoping for a handout. To get out of the current impasse, markets will have to rely on their inner strength or wait for politicians to take radical measures to spur economic growth.

A market-led solution isn't impossible. At some point prices of assets will become so cheap that they will reawaken the "animal spirits" of both investors and companies.

As Warren Buffett once wrote to his shareholders, "we have usually made our best purchases when apprehensions about some macro event were at a peak".

The alternative is to hope that politicians in the U.S and Europe will introduce the fiscal and labor reforms needed to reawaken demand and investment growth. But that is bound to take time.

As often, the past looks a lot simpler than the present. But the reality is that, unlike 2008, governments' money is no good in today's stressed environment.

-- Francesco Guerrera is the editor of the Wall Street Journal's Money & Investing section.

Perwaja ... Aug11

2011-08-10T07:45:00.000+08:00

Perwaja Holdings Bhd will yield lucrative income if it obtains an iron ore mining concession in Bukit Besi, Dungun, considering the significant material cost savings it could accrue compared with importing the raw material from overseas.

Its immediate savings would be US$100 (RM296) a tonne because the cost of mining was less than US$50 (RM148) per tonne. The potential margin from pelletising should benefit Perwaja as transportation costs would be below US$10 (RM29.60) per tonne compared with the current capesize bulker freight of more than US$10 and US$20 (RM59.20) per tonne from Australia and Brazil, respectively, to bring iron ore here.

Based on the assumption that Perwaja secures a 400ha iron ore mine in Bukit Besi with an initial capital outlay of US$10 million (RM29.6 million), producing 500,000 tonnes of iron ore in 2012, one million tonnes in 2013 and up to two million from 2014 onwards to 2031.

Iron ore was currently imported at a cost of over US$160 per tonne, free-on-board, against local cost of mining which would amount to less than US$50 per tonne.

Terengganu Menteri Besar Datuk Seri Ahmad Said disclosed the findings of a study which revealed that there were approximately 50 million tonnes of high-grade iron ore deposits in the area.

Meanwhile Perwaja Holdings Bhd has received approval in principle from the Terengganu state government to mine iron ore in Bukit Besi near Dungun.

The approval, announced by Terengganu Menteri Besar Datuk Seri Ahmad Said will help Perwaja bring down its costs, especially importing and shipping costs significantly.

Scomi ... Aug11

2011-08-09T07:43:00.000+08:00

Things may be changing at the group as a whole. The strongest indication of this is group CEO Shah Hakim increasing his stake in Scomi Group.

It has been actively accumulating the company’s shares during late July 2011 to early Aug 2011. Currently his latest holding in Scomi Group is 14.9%. The prices he acquired were closed to 33 sen.

The company’s net tangible assets per share stood at rm0.70.

In 2010, the major shareholder Kaspadu Sdn Bhd was loosening its grip on Scomi and might even exit the company in the process. Currently the company holds about 7.23% stake in Scomi Group. Kaspadu was equally owned by Kamaludin Badawi and Shah Hakim.

However, it is understood that under the shareholding realignment, Shah Hakim kept his interest in Kaspadu intact while Kamaludin and Nazima Syed pared down their stakes. It is worth noting that Shah Hakim, via Kaspadu, has been accumulating shares in Scomi Engineering during late July 2011 till early Aug 2011.

Scomi Group owns 69.31% stake in Scomi Engineering. EPF holds more than 5% equity in Scomi Group. Scomi Group has a 42.71% stake in Scomi Marine.

While shareholding changes are in the works, rumors are rife that Scomi Group will dispose of some of its non performing assets overseas. Previous speculation of a group wide restructuring is making the rounds again as the value of the Group’s two listed entities – Scomi Eng and Scomi Marine are not reflected in the holding company.

Based on Scomi Group’s current market cap, Scomi Group’s stakes in the two units are worth rm284 million versus its own market cap of rm392 million. This means that Scomi Group’s existing businesses are reflected only to the tune of rm108 million.

Based on Scomi Engineering and Scomi Marine’s respective book values, Scomi’s stakes in the two units are collectively worth over rm850 million.

Any disposal within the group would so Scomi Group good. As at March 31, 2011, its short term and long term debt stood at some rm1.07 billion while its cash stood at rm49.86 million.

Scomi Group would need to reply on proceeds from the disposal of certain segments within its oilfields service businesses to help it repay debts. Given weaker financial numbers, MARC placed its AA rating on KMCOB Capital Bhd and Scomi Group’s respectively medium term notes on negative watch. KMCOB is a wholly owned subsidiary of Scomi Oiltools Bermudda Ltd, which in turn wholly owned by Scomi Oilfield Ltd.

SOL’s FY2010 pre tax losses widened to US$8.3 million before the company turned around with a pre tax profit of US$2.7 million in 1QFY2011. Scomi Group posted a net loss of rm205 million in FY2010, of which rm111.2 million was the share of impairment of goodwill in Scomi Marine, before turning around with a pre tax profit of rm16.8 million in 1QFy2011.

KMCOB had sough extension from note holders for payment due into its finance service reserve account by June 14, 2011. It is understood that KMCOB’s note holders have consented a three month extension to Sept 2011 for the funding vehicle to meet its deferred FSRA obligations totaling rm75 million.

It should be noted that Scomi Group has seen a rise in earnings and cash flow amid an improving business environment in 1QFY2011.

This may be sign that Scomi Group is on track for financial recovery.

MBSB ... Aug11

2011-08-08T08:34:00.002+08:00

The EPF has not made any decisions to divest its stake in Malaysia Building Society Bhd (MBSB). The EPF said it is comfortable with the present performance of MBSB and looks forward to continuing improvements in their financial results.

Its stake in MBSB stood at 65.5%. After EPF, the second largest shareholder of MBSB is Permodalan Nasional Bhd, with a 11.9% stake.

MBSB is an exempt finance company, a status granted by the Finance Ministry on March 1, 1972, which allows it to carry on a finance business without a licence.

EPF's stake in MBSB has been in the news lately after it was revealed at the Economic Transformation Programme update in July 2011 that 33 government-linked companies were part of a divestment plan, that included the paring down of stakes in five companies, the listing of seven and outright sales of the remaining 21.

MBSB, Malaysia Airlines and Malaysia Airports Holdings Bhd are among those identified as candidates for government-linked investment companies to reduce their shareholdings.

If EPF pared down its stake, MBSB would gain from the improve liquidity in its shares.

Market observers also say EPF should hold on to its stake in MBSB as the latter has “just started to turn around” and needed “a shareholding backing it up to elevate it to a stronger footing.”

There are still things that needed further improvement, like its legacy loans, although it has been positively progressing. On the other hand, MBSB could do with a strategic investor such as consumer credit institution to catapult it to a the next level. MBSB can issue new shares to the strategic investor so that it will have bigger capital for better growth.

Since 2009, MBSB has undertaken a major reform from being a traditional mortgage provider to become a dynamic institution offering more products for the retail and corporate sectors.

For its six-month performance, MBSB net profit reached RM146.5mil from RM92.7 while revenue climbed to RM630.2mil from RM345.2mil a year ago.

Complaint Department

2011-08-06T10:15:00.000+08:00

SMRTECH ... Aug11

2011-08-05T14:41:00.015+08:00

ZJ Research

Investment Highlights / Summary
• Integrated HR solutions provider offering comprehensive products and services ranging from software, consulting, outsourcing, learning and talent search. Its solutions focus on the strategic HR development aspect rather than the transactional aspect such as payroll or timekeeping.

• Turnaround story. SMR was adversely affected during the 2008/09 credit crisis which coincided with its mistimed expansion into the US market, resulting in the Group suffering losses in FY08 and FY09. However, it has since exited the US market, and shifted its focus to the ASEAN and Middle East regions.The realignment efforts paid off with SMR returning to the black in FY10.

• Growth catalysts. SMR clinched a 3-year project worth RM89.5 mln in September 2010 from the MOE in Malaysia (ELT Project). This project is significant as it propels the Group’s revenue base to the next level while lifting earnings back to pre-crisis level. Additionally, earnings contributions from the ASEAN and
Middle East markets are on the rise too.

• Risks include potential changes to regulatory policy that may impact the ELT Project. SMR is also exposed to country and political risks of the countries that it has operations in.

• Substantial earnings growth. We estimate FY11 net profit to surge to RM4.2 mln from RM0.3 mln in FY10, attributable to contribution from the ELT project, as well as its overseas jobs. Furthermore, its current orderbook in excess of RM90 mln provides earnings visibility for the next three years.

• Initiate coverage with Buy recommendation and a fair value of 21 sen by pegging FY11 net profit against 8x PER multiple. We view SMR as a turnaround story with strong earnings growth prospects over the next three years, supported by its local and overseas projects. Current valuation, at FY11 PER of 5.7x, is also undemanding and has yet to reflect its growth potential, in our opinion.

Background
Corporate profile
Kuala Lumpur-based SMR Technologies Bhd (SMR) is an investment holding company while its subsidiaries are principally involved in the provision of Human Resources (HR) solutions for the development of human capital. SMR has been listed on the ACE Market (previously known as the MESDAQ Market) of Bursa Malaysia since March 2006.

The SMR Group, founded by Dato’ Dr. R Palan, was established in 2001 although its flagship software product, HRDPower™, has a longer history where it was first developed in 1998 by Dato’ Dr. Palan. SMR started initially as a HR competency management solutions and HR outsourcing services Group that operates on the HRDPower™ software system. Over the years, SMR’s scope of offerings has expanded rapidly and today, its products and services encompass the areas of Learning & Development, Learning Resources, Consultancy, Outsourcing, Events, Talent Search, as well as Software and Technical Services.

Presently, Dato’ Dr. Palan continues to helm SMR as the Chairman and Chief Executive Officer. Being an internationally recognized HR expert and an author of 12 books on HR-related subject, he also serves as the brand ambassador for the Group. Other members on the SMR’s board of directors include another Executive Director (Dr Nadarajah A/L Manickam) and three Independent Directors.

In terms of shareholdings, substantial shareholders in SMR are Special Flagship Holdings Sdn Bhd (38.2%) in which Dato’ Dr Palan is a major shareholder, and Fikir Wawasan Sdn Bhd (15.9%).

The SMR Group focuses on the strategic aspects of human capital development such as competency issues, performance management and training, instead of the operational matters of HR, i.e. payroll system, staff
leave management or time keeping where competition is more intense. Central to SMR’s offerings is its in-house proprietary software platform, HRDPower.net system (HRDPower™), which is available as installed applications as well as Software as a Service (SaaS). Solutions available under HRDPower™ include:-
• Integrated Competency-based HR Management;
• Entreprise Performance Management;
• Talent Management;
• Succession Planning and Career Development; and
• Enterprise Dashboards.

The software also supports multilingual and multi-database usage, employs advanced encryption to ensure data privacy, and can be interfaced to other existing software systems used by its clients to eliminate multiple data entry. Another key benefit of HRDPower.net® is low total cost of ownership as its licencing is based on number of employees, and there is no licensing limit for concurrent user access. HRDPower.net® can be used by clients from any industries, and SMR has had clients from the oil & gas, telecommunications, airlines, shipyards, hospitals, healthcare, retail, utilities, IT, hospitality, and education sectors.

In terms of new offerings, SMR has successfully commercialized and rolled out three new services in end-2010 following its intensive R&D efforts over the last few years. These are the SaaS, HRDPower™ E-Learning and HRDPower™ Games Combo.

Todate, SMR has worked with over 2,000 companies from various industries across 30-odd countries worldwide. Some of its key local clients include Ministry of Education (MOE), Petronas, Giant, PLUS, Mudajaya Group, Perodua, Murphy Oil Corporation, OSRAM Opto Semiconductors, SHARP
and DST Group, to name a few.

Meanwhile, its current overseas clients are Abu Dhabi Polymers Company Ltd (Borouge) in UAE, Rabigh Refining And Petrochemical Company (Saudi Arabia), Ministry of Works (Bahrain), Authority for Info-Communications Technology Industry (Brunei), and Petrodar Operating Company (Sudan).

In the past 12 months alone, SMR has successfully clinched a number of projects both in Malaysia as well as overseas, with a combined contract value in excess of RM95 mln.

The most notable contract is the Recruitment and Management of ELT Consultants and Implementation of In-Service Teachers Training for EnglishLanguage Teachers (ELT Project) awarded to SMR by the MOE in
September 2010 that amounts to RM89.5 mln. This is the single largest contract bagged by SMR todate. The 3-year project, which SMR won via open tender, involves recruiting and managing up to 120 ELT Consultants to implement In-Service Teachers Training for English Language Teachers for Central and North Malaysia. We understand from management that all ELT Consultants have already been recruited and deployed, and the implementation of the programme is currently progressing on schedule.

On overseas venture, SMR is focusing on the Gulf Co-operation Council (GCC) countries in the Middle East, as well as the ASEAN countries, where management believe have a strong demand for its expertise in human capital development. The Group has so far, made successful in-roads into these targeted countries and secured several projects as listed in the table earlier. To facilitate its marketing activities and customer support services, SMR has representative offices in Singapore, Bahrain and India.

In terms of industry landscape, the HR solutions segment is rather fragmented with a number of foreign and local players. On one end, there are the large foreign players such as Oracle and SAP offering Human Resource Management System (HRMS) which target large MNC clients, while on the
other end, we have smaller local companies such as KaiZenHR, Orisoft, UBS, HR2000 and Timesoft to name a few. We note that some of these peers tend to concentrate on the operational aspect of HR, i.e. payroll, time attendance and leave management. By comparison, SMR’s HRDPower® solutions focus
instead on the strategic areas of HRD, i.e. performance management, talent management, staff competency etc. Furthermore, it also offers other HRrelated services such as outsourcing, consultancy, talent search etc.

Financial Highlights
In the two years following its listing, SMR continued to post healthy revenue and profit growth. In fact, turnover and net profit hit a record high of RM19.0 mln and RM6.2 mln, respectively, in FY07. And given the nature of its business, gross profit margin was commendably high at above 50%.

Unfortunately, the Group was hit hard in FY08 by the global credit crisis that led to lower sales and profit margin squeeze as clients hold back spending on HRD. Profitability was further affected by losses suffered at its operations in the US. Prior to the credit crisis, SMR had identified the North America as a high potential growth market and had invested time and financial resources to grow its services in there. Business slowdown, coupled with the ill-timed investment in the US resulted in the Group registering a net loss of RM7.3 mln in FY08, which saw revenue halved to RM8.5 mln from its peak level in FY07.

Following a slew of cost-cutting and business optimizing measures, SMR’s net loss narrowed to RM2.7 mln in FY09. Management also decided to exit from its unprofitable operations in the US by disposing off the subsidiary in April 2010. The Group finally turned around and returned to the black in FY10, chalking up a small net profit of RM0.3 mln on the back of 56% y-o-y jump in revenue to RM11.8 mln.

Things continue to look up for SMR with its recent remarkable 1QFY11 results with revenue soaring 59.3% q-o-q and 993.7% y-o-y to RM9.0 mln. Net profit of RM1.0 mln in 1QFY11 alone surpassed the FY10 full-year net profit of RM0.3 mln. The much better performance is largely due to overall improving
business environment, and in particular, significant contribution from the ELT Project.

On balance sheet strength, net gearing remains relatively healthy at 0.25x as at end-March 2011, supported by a BV/share of 19.3 sen. Nevertheless, we note that approximately 80% of the 19.3 sen BV/share are non-tangible assets comprising goodwill on consolidation (4.5 sen/share) and development costs (10.7 sen/share), resulting in NTA/share of only 4.1 sen.

The development costs are essentially capitalized R&D expenses incurred in developing new products. In the past years leading up to FY09, the Group had been spending as much as RM6.9 mln a year on R&D efforts. However, we understand from management that going forward, the R&D expenses will be kept at minimal level and on need basis only following the successful commercialization of several key products (i.e. SaaS, HRDPower® Games Combo and HRDPower® E-Learning) in late 2010.

The reduction in development spending is already noticeable, as illustrated in the table above, where it spent only RM0.7 mln and RM0.6 mln in FY09 and F10, respectively. With much lower R&D spending, we expect its NTA/share to rise gradually over time. Currently, the Group is focusing on monetizing its
new products.

Earnings Outlook
SMR’s earnings outlook over the next three years appears to be upbeat. Having exited its unprofitable venture in the US, the Group has turned around and is now firmly back on earnings growth path riding along the gradual recovery in the global economy.

SMR’s contract wins of RM96.8 mln over the past 12 months are a testament that the worst is over for the Group. Its current orderbook, in excess of RM90 mln, will provide earnings visibility for the next three years. These figures are a stark contrast to its historical revenue that ranged between RM7 mln and RM20 mln per annum since listing. Additionally, we understand from management that SMR has also tendered for some RM100 mln worth of projects, mostly in the Middle East, with an estimated success rate of 20%.
This would translate into a potential orderbook replenishment of RM20 mln in the next six to nine months.
For FY11, we project revenue to jump almost threefold to RM34.5 mln from RM11.8 mln in FY10. The significant increase is mainly due to the full year contribution from the ELT Project, which averages approximately RM30 mln per annum for three years, as well as from its overseas projects.

Correspondingly, we expect SMR to turn in RM4.2 mln in net profit vs. RM0.3 mln in FY10, translating into a prospective FY11 net profit margin of 12.3%.

We note that our projected net profit margin is lower compared to the 30%- 40% level attained prior to FY08 as we understand that the ELT Project carries lower profit margin. Nevertheless, based on our estimates and its current orderbook, SMR should achieve its highest ever revenue level in
FY11 since inception.

For FY12, we forecast revenue and net profit to rise 14.3% and 14.8% y-o-y to RM39.4 mln and RM4.9 mln respectively, with growth driven by contributions from its software sales and overseas projects.

Investment Risks
Changes in regulatory policy. With the ELT Project, which was awarded by the MOE, being the single largest contract for SMR at the moment, any changes in the regulatory policy that involve the teaching of the English
subject may have an unfavourable impact on the Group’s earnings.

Country and political risks. The Group is also exposed to the country and political risks in the GCC region as it has several ongoing projects in the region, and plans to further grow its business there.

Valuation
There are no direct comparable companies listed on the Bursa Malaysia that have similar businesses as SMR. Previously, there were Orisoft Technology Bhd and KZEN Solutions Bhd which focused on HR solutions. However, Orisoft had since been taken private by Exact Group B.V. in 2009 while KZEN Solutions has changed name to R&A Telecommunication Bhd and exited the HR business following completion of the reverse takeover by R&A Telecommunication Sdn Bhd recently.

As such, we have selected several companies with exposure to the ICT and software business as a proxy benchmark for valuation comparison.

Based on the selected benchmark, the peers are trading at an average PER of 10.5x. By ascribing SMR’s prospective FY11 net profit of RM4.2 mln against a target PER of 8x, we arrive at a fair value of 21 sen. The target PER is derived after applying a discount of approximately 25% to the peer benchmark, to reflect SMR’s smaller market capitalization.

On the corporate front, SMR is currently undertaking a private placement exercise to place out 14.7 mln ordinary shares representing 10% of its current paid up capital. It has fixed the price of the new shares at 13.3 sen per share, raising RM1.95 mln which will be used for working capital purposes. We understand the shares are being placed out to strategic investors that would add value to SMR’s business prospects. The corporate exercise will increase SMR’s share base to 161.3 mln from 146.7 mln. Nevertheless, the dilution to
FY11 EPS is relatively marginal, from 2.7 sen to 2.6 sen.

Recommendation
We initiate our coverage on SMR with a BUY recommendation and a fair value of 21 sen, translating into a potential share price upside of 40%. In our opinion, SMR offers a strong turnaround story with solid earnings
growth prospects. The financial performance turned around following the decision to exit the unprofitable US market. Moving forward, the growth catalyst lies in the 3-year ELT Project, which gives the much needed booster to elevate SMR’s revenue base to the next level while lifting earnings back to the pre-crisis level. Additionally, the new revenue base is also supported by the Group’s rising contribution from its overseas projects.

We also take comfort that the management, led by Dato’ Dr. Palan, is very experienced and
hands-on We believe SMR’s current valuation at FY11 PER of 5.7x is also undemanding and has yet to reflect its growth potential. Furthermore, with the expected significant improvement in earnings, we opine there could be a possibility of SMR resuming its dividend payout. The Group last paid a 1 sen dividend in 2007 in respect of FY06, and has not had any payout since. A 0.5 sen dividend payout would translate into a yield of 3.3% while a 1 sen payout would push yield to 6.7%. Nevertheless, in reflecting prudence in our
projection, we have not factored in any dividend payout at this juncture.

LionFib ... Aug11

2011-08-05T08:12:00.000+08:00

It intends to grow its plantation business by acquiring land in Southeast Asian countries to undertake the cultivation of oil palm, rubber and other industrial crops. It was eyeing assets in Indonesia, Cambodia, Thailand, Vietnam, Myanmar and Laos.

LFIB is acquiring close to 10,000ha of plantation land in Cambodia for US$3.9 million (RM11.5 million) cash from the Cambodian government. The purchase will grant LFIB the concession rights for these assets for a period of more than 70 years. It wholly owned subsidiary Harta Impiana Sdn Bhd had engaged Cambodia-based Seng Enterprise Co Ltd to facilitate the purchase of the land where the acquirer plans to cultivate oil palm and rubber trees.

Following the disposal of LFIB’s tyre operations both in Malaysia and China, the group has been studying and identifying a new core business. The proposal allows the LFIB group the opportunity to tap into a new core business and also to diversify its earnings stream by investing in land for the plantation of rubber and/or oil palm.

The land acquisition, to be financed with LFIB’s internally generated funds, is due for completion in the second half of 2011.

The purchase is not expected to have a material effect on the company’s earnings in the current FY12 ending June 30.

The company’s plan to expand its plantation assets in the region comes at a time when palm oil and rubber prices have risen in the past one year.

LFIB forms part of the Lion Group which has five companies listed on Bursa Malaysia with another two each in Indonesia and Singapore, and one in Hong Kong. The conglomerate is controlled by tycoon Tan Sri William Cheng.

In March 2011, LFIB had announced its intention to sell its local tyre manufacturing unit Silverstone Bhd for RM462 milllion to Japan’s Toyo Tire & Rubber Co Ltd.

In Malaysia, Lion Group’s plantation business is undertaken under Akurjaya Sdn Bhd while its Indonesian units comprise PT Lion Intimung Malinau and PT Kebunaria. Compared with other businesses under the Lion Group banner, the plantation unit is still deemed small.

Plantations contributed RM7 million to the group’s annual revenue of RM17.99 billion in the year ended June 30, 2010. This compares with the retail and trading division, which is the largest contributor, accounting for RM9 billion or half of the group’s revenue.

Its steel division came in second, with RM7.25 billion or 40% of the conglomerate’s top line during the period.

EPMB ... Aug11

2011-08-04T14:29:00.000+08:00

TA Securities.

We initiate coverage on EP Manufacturing Berhad (“EPMB”) with a BUY conviction. We term EPMB as a
contract manufacturer for Proton and Perodua as it is a leading tier1 vendor of critical and safety components to the two biggest national car manufacturers. We value EPMB at RM1.16 based on 6x FY12 EPS of 19.3sen. This translates to an upside potential of 17% based on its closing price of RM0.99/share.

1 Investment Case
1.1 Supplier of modular assemblies, safety and critical chasis and body components to Proton and
Perodua

1.2 Moving up the value chain – Key to sustain the relationship with Proton and Perodua

1.3 Prospect of the two biggest national car manufacturers, Proton and Perodua.

1.1 Supplier of modular assemblies, safety and critical chasis and body components to Proton and
Perodua
EPMB has been supplying car parts to Proton and Perodua since 1994 and 1999 respectively. To minimise possible supply disruption, EPMB has invested sizeable amounts of capital into plants and machineries to ensure sufficient capacity to meet the demand. We believe this would act as a deterrent to new entrants from entering the fray due to the high barrier of entry set by this circumstance.

To reimburse this high investment, the automakers will impose a temporary cost plus amortization pricing scheme whereby the sales of every car set will incorporate the amortization of toolings and dies. This scheme would last for several years until EPMB reclaims its investment as these tooling and dies are car specific. Each car model would have its own variant of tooling and dies. When the scheme lapsed, the selling price per car set would revert to the original price agreed between the two parties. The whole production and pricing mechanism ensure a winwin situation for EMPB and automakers.

Steel, a significant raw material in EPMB’s production process, is sourced from steel suppliers in Japan and
Korea. The group leverages on Proton and Perodua’s greater bargaining power with overseas steel
suppliers for the procurement of steel at reasonable prices. Proton and Perodua will negotiate the bulk
purchase of steel with the overseas steel suppliers on behalf of EPMB and the other auto parts
manufacturers. Negotiated steel prices with the overseas steel suppliers are reviewed on a quarterly
basis and in the event of any rapid increase in steel prices, the price increase will be reimbursed back to
EPMB by Proton and Perodua. Hence, EPMB is not exposed to any rapid fluctuations in steel prices.

Furthermore, the whole production process and inventory system require EPMB to carry minimal
amount of raw materials, providing some flexibility to cash management. EPMB only stocks up the steel
requirements to one‐day of operation due to the close proximity of steel suppliers’ plants. After processing
the raw material into different car sets, the finished products will be shipped to Proton and Perodua’s
neighbouring plants everyday as semi‐finished products for their assembly process. Due to the short
distance between EPMB’s manufacturing plant and the latter, EPMB is also able to reduce its logistic cost
to the minimum as the turnaround time is short.

In its present state, EPMB’s manufacturing plant in Batang Kali does not cover the entire land bank of
22.6 acres. The vacant land bank of 6.6 acres can be earmarked for future development and expansion
when EPMB has reached its maximum production capacity. Currently, EPMB is operating at 70‐80% of
its total production capacity.

1.2 Moving up the value chain – Key to sustain the relationship with Proton and Perodua
EPMB is expected to gain economies of scale due to the possibility of carrying over some common sets of
components like fuel tank into various car models. This allows the group to spread its cost of investment
over several car models and recoup the investment within a shorter time frame. However, all this cannot
be done without the trust from the two automakers to outsource the parts supply to EPMB. As such, it is
imperative for the company to maintain its favourable relationship with Proton and Perodua.

To do this, the company has been striving to produce new products, which fit into Proton and Perodua’s
requirement. For instance, the company created the Integrated Air Fuel Module (“IAFM”) which is now
being used in every Campro engine produced by Proton. Given the group’s endeavour to move up the
value chain, we believe EPMB’s position is less intimidating and the company would continue to play
an important role in the production process of Proton and Perodua’s vehicles.

To keep abreast with the new technology in the automotive sector, the company established a strategic
partnership with Bosch, the world’s no.1 supplier to Original Equipment Manufacturer (“OEM”) for various
technology items as well as Koito, the world’s largest lamp maker. These technical tie‐ups and continuous R&D with these partners would provide the much needed technology knowhow to EPMB and also created
international standard practices in EPMB. EPMB’s plants are strategically located near Proton and
Perodua’s plants in Batang Kali and Shah Alam to accommodate to the two automakers’ JIT inventory
system. Also, this will provide cost savings to EPMB in terms of fuel and logistic expenses.

All in, we see slim chances that Proton and Perodua will move away from EPMB as the latter has always been “value‐add” to the production of Proton and Perodua.

1.3 Prospect of the two biggest national car manufacturers, Proton and Perodua.
Sales to Proton and Perodua collectively contributed > 70% to the group’s total revenue from 2007 to 2010 (see Figure 1). As such, the sales of Proton and Perodua cars are important factors to determine the profitability of EPMB.

For 2011, we expect TIV to drop by 2% due to certain hiccups such as supply disruptions from Japan due to the recent earthquake and tsunami in Japan as well as the amended Hire Purchase Act (“HPA”) 1967. However, moving forward, we expect car sales to pick up by 1% in 2012 and 2013 (See Figure 5).

As far as Proton and Perodua’s car sales are concerned, we expect Perodua’s car sales to increase significantly next year following the success of the new Myvi launch in mid‐June this year. Based on our in‐house forecasts, we project Perodua’s car sales to increase by 21% YoY given the overwhelming response to the new Myvi model. Our channel check indicates that Perodua has received bookings of 19,000 units of Myvi. For Proton, our automotive analyst projects car sales to increase by 3.8% as the new Persona Replacement model is target for launch next year. The estimated strong growth in car sales augurs well for EPMB as this would translate into higher sales of car components from EPMB to Proton and Perodua.

Besides that, both Proton and Perodua have begun implementing the localisation programme. Under this
programme both car manufacturers strive to have high local contents for its productions. The outcome of this
programme can be seen in the new Myvi replacement model. For the new Myvi replacement model, the revenue per car set has increased four times due to additional parts supply compared to the old Myvi.

2 Investment Risk
From our perspective, we view EPMB to be in a very strategic business position. However, we also
acknowledge that the dependency on the two main car manufacturers may pose a threat should the
barrier of entry be breached by new suppliers who manage to offer the same products as EPMB. If either
Proton or Perodua decide to switch to another manufacturer, this would have a great detrimental effect on EPMB.

3 Company Background
EPMB is an investment holding company. The company, through its subsidiaries, concentrates on
two lines of businesses namely the automotive division and the water division, where the company is
involved in the manufacture, assembly and sale of automotive parts and water meters, respectively. (See
Figure 2 and 3)

Established in 1989, EPMB has two manufacturing facilities located in Shah Alam and Batang Kali with
built up areas of 16,000 sq ft and 428,000 sq ft respectively. The Shah Alam’s plant concentrates on
manufacturing plastic engineering auto parts as well as water meters whereas the latter manufactures
metal auto parts. Both facilities are strategically located to service Proton and Perodua, who are
EPMB’s main customers. This leads to savings on logistic cost as well as facilitates Just‐In‐Time (“JIT)
delivery.

Under the water division, a pilot project in Kedah has been completed for the installation of smart meters
and electro‐magnet flow meters with automatic meter reading (“AMR”) capabilities. In another case, EPMB
also has a water treatment project in Serang City, Indonesia. Under phase 1 of this project, EPMB will
work closely with the relevant authorities to construct a water facility with the capacity to dispense 25 litres/second of clean water via a network of pipes to 2,500 households within the vicinity of Desa Dalung. Upon the completion of phase 1, the next phase will concentrate on supplying up to 600 litres/second of clean water to 50,000 households in Serang City. The water division is barely breakeven at this juncture.

4 Financial Review
EPMB has managed to increase its topline from RM468mn in FY09 to RM587.5mn in FY10. This
increase has led to a jump in bottomline from RM7.9mn in FY09 to RM26.1mn or 230% increase
YoY in FY10 (See Figure 4). This growth was mainly due to the increase in TIV in Malaysia. For 1Q11,
EPMB reported a higher net profit of RM8.6mn (vs. 1Q10’s RM4.2mn) despite lower revenue. This was
mainly due to higher operating efficiency that enhanced profit margin.

5 Industry Landscape / overview
Automotive Industry
The car industry is dominated by Proton and Perodua with Myvi and Saga representing the best and 2nd best selling models. Both the manufacturers have a combined market share of 57%. In 2010, Total‐Industry‐Volume (TIV) was at a record high of 605,156 units due to economic expansion and lower HP rate.
MAA and Frost & Sullivan project TIV to grow to 608,000 and 615,900 units respectively for 2011. However, TA Research projects TIV to contract 2% to 587,000 units due to 1) high‐base effect; and 2) supply disruptions following the recent earthquake and Tsunami in Japan. YTD‐June, TIV has contracted 1.3% as compared to a growth of 3.4% in May‐11.

6 Recent Development
Following the March 11 earthquake and tsunami, Japan car manufacturers have taken a beating. Production of car parts was disrupted. Nevertheless, MAA projects car production to recover to the pre‐disaster level from August onwards.

Sales of Perodua’s Myvi, its bestselling model, has been gloomy as the market was anticipating the new Myvi replacement model. Following the launch of new Myvi on 16 June, we expect Perodua to reclaim the fall in sales in 1H11. With the localisation programme with Perodua in place, the new Myvi has approximately 90% of local content, of which EPMB is one of the largest supplier of
auto parts for this model.

7 Earnings Outlook
We expect the automotive division to remain the key earnings contributor for FY11‐13. We expect EPMB’s
FY11‐13 net profit to grow by 14% underpinned by revenue growth of 17%. Our earnings projections are based on the following assumptions:

i) Rolling out of new models from time to time;

ii) Expected increase in revenue per car set due to incorporation of more auto parts which is in line
with the localisation programme being implemented; and

iii) Projected increase in TIV for FY12 and FY13.

8 Dividend Policy
EPMB does not have a formal dividend policy. The company has declared a gross dividend of 3 sen for
FY10 which translate to a dividend yield of 3% based on the group’s share price of RM1.00. We believe the
group will strive to maintain its dividend payout ratio for the years to come.

9 Valuation & Recommendation
We choose to value EPMB by making comparison to its peers with forward PER estimations.

New Hoong Fatt Holdings Berhad markets, distributes and trade automotive spare parts and accessories. It also operates in metal stamping and cathodic electrodeposition painting services and manufactures and trades
automotive body stamped parts.

Delloyd Ventures Berhad manufactures, trades, retails and exports automotive and electronic automotive parts and accessories. The company, through its subsidiaries, also provides repair and maintenance service for motor vehicles, cultivates palm oil, manufactures and distributes agri‐chemicals, and manages a website portal. APM Automotive Holdings Berhad manufactures and distributes automotive parts and components including air‐conditions, electrical components, coil springs, metal component parts, PVC body side moulding, shock absorbers, tapered leaf springs, vehicle interior linings, seat radiators and other automotive parts.

These companies were chosen for its similar business models with EPMB. More importantly, the profitability of these companies depends largely on Proton and Perodua’s car sales.

Valuation wise, we value EPMB at RM1.16/share, based on 6x FY12 EPS of 19.3sen, which is a discount of 33% to our target PER of 9x for the automotive sector. We believe this is justifiable due to its smaller market capitalization as compared to car manufacturers. At 6x, this is also comparable to the auto parts manufacturer’s average PER for FY12 of 5.8x. Note that the group has been actively buying back its own shares from the market. YTD, a total of 1,712,800 shares had been bought back at prices ranging from RM0.53 to RM1.08. This indicates that EPMB is currently undervalued at least from their point of view.
Given the upside potential of 17%, we recommend a Buy on EPMB.

HuaYang ... Aug11

2011-08-04T08:10:00.001+08:00

It is banking on strong demand for affordable houses from Malaysia's large young population to more than double its revenue to over RM500 million by 2015.

While most property developers are targeting high-end market to ride on the rising income of Malaysians, Hua Yang prefers to focus on the niche, untapped market of medium-cost properties.

The loan-to-value ratio of 70 per cent for housing loans will not impact its target market (first-time home buyers).

Backed by 30 years experience in property development, Hua Yang has built over 10,000 units of commercial and residential worth RM1.2 billion.

The company is currently involved in a dozen projects throughout the country with an estimated gross development value (GDV) of RM650 million. The total GDV for 2011 will reach RM1 billion inclusive of project launches until year-end (2011).

The group has a 314.8ha of undeveloped land with a GDV of RM2.2 billion. Its landbank is located in Selangor, Johor, Perak and Negri Sembilan.

For the year ended March 31 2011, Hua Yang reported RM25.2 million net profit on the back of RM188.9 million revenue, up 82 per cent and 118 per cent from the net profit and revenue achieved in the previous year.

The company's profit margin is comparable with other developers because Hua Yang controls the land cost and construction process, thus enhancing the efficiency.

Pantech ... Aug11

2011-08-03T14:22:00.002+08:00

InsiderAsia.

- Sales in 1QFYFeb12 up 31% q-q and 6% y-y
- Demand pick up expected to gain momentum
- To resume double-digit growth in FY12-FY15
- Very attractive FY12E P/E of 7.1x with 5.9% net yield

Pantech Group Holdings’ earnings results for 1QFYFeb2012 were broadly in line with our expectations.
Turnover improved to RM95.3 million, up 30.8% from the lows in 4QFY11.

Trading sales accounted for roughly 68% of total turnover while the manufacturing arm contributed to the balance.

As previously mentioned, the recovery in the domestic oil & gas sector had been relatively slow since the end of the global financial crisis. As such, while trading sales, which cater primarily to domestic demand for pipes, fittings and flow control products (PFF), improved to RM65.2 million in 1QFY12, from RM51.7 million in 4QFY11, they remain at levels well below the highs recorded before the crisis.

Positively, domestic demand is visibly picking up momentum on the back of the rollout of projects under the various government initiatives, including those under the Economic Transformation Programme (ETP).

The recovery in Pantech’s manufacturing arm has been much sharper, boosted by export demand for its PFF products. Manufacturing sales rose to RM30.2 million in 1QFY12, up from RM21.2 million in the immediate preceding quarter and RM22.8 million in 1QFY11. Apart from stronger overseas demand, sales were also boosted by contributions from the company’s new stainless steel manufacturing plant in Johor Baru.

Utilisation for the first six production lines at this new plant has been rising smartly over the past few months. Nevertheless, the plant remains in the red, having started operations only early this year.

Meanwhile, the old plant in Klang is running at full capacity. Pantech has order books up to October 2011 and is currently negotiating for contracts beyond this period.

As a result of start-up losses at the new plant, operating profit for manufacturing declined to RM1.3 million in the latest quarter, down from RM1.7 million in 4QFY11. Pantech expects the new production lines to
turnaround in 2HFY12.

The decline in manufacturing operating profit was offset by higher trading operating profit, of RM8.9 million, up from just RM4.8 million in 4QFY11. Total operating profit improved to RM10.2 million, compared with RM6.5 million in the immediate preceding quarter, but still lower than the RM12.3 million recorded in 1QFY11. The lower margin – turnover was up 5.6% y-y – was attributed to greater pricing competition with demand still in the nascent stage of recovery.

Pantech’s total net profit stood at RM6.2 million, an improvement from RM5.1 million in 4QFY11 – but lower compared with the RM8.4 million in 1QFY11 due to lower operating margin as well as a higher effective tax rate.

Earnings Outlook
We expect Pantech’s earnings to continue to improve in the coming quarters, as project rollout in the domestic oil & gas sector gains momentum. Indeed, we forecast the company’s revenue and net profit will register double-digit growth annually for the next few years.

Outlook for the domestic oil & gas sector, Pantech’s single biggest customer group, is robust. The Malaysian government has pinpointed the sector as one of the key focus areas under its ETP. The sector accounted for a
substantial share of the total value of the projects that have been announced so far.

The gradual rollout of these projects over the next few years will translate into greater demand for downstream support services, including demand for Pantech’s PFF products. The company’s trading division caters, primarily, to the domestic market.

At the same time, outlook for its manufacturing division – where the bulk of products are currently exported worldwide – is also upbeat. Pantech’s carbon steel PFF manufacturing facility in Klang is effectively
running at full capacity. To cater to the expected demand growth, a new piece of land adjacent to its existing plant (acquired in FY09) is being outfitted to manufacture, primarily, high frequency induction long bends. It will also house a heat treatment facility. The new plant is slated for completion by end-2011.

Meanwhile, operations at the new stainless steel manufacturing plant in Johor Baru are progressing on track. All six initial production lines are up and running with utilisation already reaching 85%. Pantech has orders in hand up to October 2011 and is currently negotiating for better prices for contracts beyond this period.

Pantech is in the midst of adding machineries for another four lines at the facility – which would expand its current production range to include biggersized pipes and also fittings.

If all goes to plan, total production capacity at this plant will rise to 12,000 metric tonnes per annum by 1Q2012, from the current 7,000 metric tonnes per annum.

The company is also actively exploring various options to further expand its range to encompass higher value exotic products such as copper-nickel, duplex and super duplex pipes and fittings that are corrosion resistant.
The move would expand its customer base and market reach – and is the final piece in Pantech’s five-year plan to hit sales target of RM1 billion. Bythen, the company expects manufacturing sales to account for at least 40% of total sales. Domestic demand will also account for a higher percentage of manufacturing sales, as a result of import substitution.

Valuation and Recommendation
We expect Pantech’s sales and net profit to register strong double-digit growth annually for the next few years on the back of strengthening demand supported by the company’s expansion plans.

To be sure, net profit was still weak in 1QFY12, although an improvement from the immediate preceding quarter. This was attributed to pricing competition as there is currently excess capacity in the industry with demand just starting to pick up pace. Margins will gradually improve as the slack is taken up by strengthening demand.

Thus, we believe that Pantech’s earnings will be much stronger in 2HFY12 compared to the first half of its financial year. We are fine-tuning our earnings forecast. Net profit is estimated at RM37.7 million in FY12 – up 30% from the RM29.4 million in FY11 – and is expected to grow further to RM46.1 million
by FY13.

Based on our forecast, the stock is trading at very modest P/E valuations of only 7.1 and 5.8 times, respectively for the two years. Plus, the stock is trading below its net asset of 72 sen per share.

Pantech’s valuations compare very favorably against most oil & gas stocks listed on the local bourse, which are now trading at P/E multiples of around 15 times earnings, on average.

Thus, we believe there is significant upside potential for Pantech, particularly for those with a slightly longer investment horizon. We maintain our BUY recommendation on the stock.

Investors can also expect attractive yields
On top of potential capital gains, shareholders can also look forward to prettygood yields from the stock.
Dividends totaled 3.3 sen per share in FY11. With stronger earnings going forward, Pantech is likely to gradually raise its dividends. We estimate dividends will rise to 3.5 sen per share in FY12, which will earn shareholders an attractive net yield of 5.9% at the current share price. This is above the average yield for the broader market as well as prevailing interest rates on bank deposits.

Warrants and ICULS for lower entry price points
For lower entry price points, investors could consider the company’s ICULS and warrants.
Pantech has some 735 million outstanding ICULS, carrying a 7% coupon rate with a conversion ratio of six to one, exercisable at anytime up to December 2017. Based on the current share price of 59.5 sen, the ICULS,
Pantech-LA, would be “in the money” at roughly 9.92 sen. They last traded at 10.5 sen.

The company also has some 74.8 million outstanding warrants, Pantech-WA. The warrants have a longer maturity period, up to December 2020, and exercise price of 60 sen. The warrants are now trading at 28 sen, implying a 48% premium.

Upon full conversion of the ICULS and warrants, Pantech’s share base will be enlarged to some 650 million shares from 452.6 million at present. The larger share capital – in step with its growing business – would improve liquidity and increase the stock’s attractiveness to investors over time.

Padini/Bonia/Voir ... Aug11

2011-08-03T08:07:00.000+08:00

Padini …

Padini is the largest and most profitable of Malaysia’s homegrown fashion companies. Between 2006 and 2010, its revenue rose from RM286.11 million to RM520.88 million while net profit surged from RM27.69 million to RM60.97 million, representing a 21.8% compound annual growth rate (CAGR).

With a market capitalisation of RM717.12 million, the stock trades at 10.58 times

(July 2011) earnings for its current year ending June 30 2011.

Bonia …

Bonia is Malaysia’s leading brand for leather handbags, with a growing line of shoes, menswear and other accessories. Over the past four years, the company’s revenue grew at a CAGR rate of 13% a year from RM221.37 million in 2006 to RM360.1 million in 2010, while net profit grew a robust 24.8% per year — from RM13.83 million to RM33.55 million.

With a market capitalisation of RM338.64 million, the stock is trading at eight times (July 2011) current year earnings.

Voir …

Voir, which focuses on ladies’ apparel, has seen fairly stagnant earnings despite rising revenues over the last four years. Between 2006 and 2010, net profit declined from RM8.12 million to RM7.7 million although revenue increased at an average of about 9% a year from RM117.15 million to RM165.19 million. Still, Voir has been profitable since its listing in 2007 and is the only fashion stock trading below its book value, which suggests no premium for its long-established brand names.

The stock is trading some 30% (July 2011) below book value and at a historical price-to-earnings ratio of eight times.

In contrast, the three fashion-related stocks in Hong Kong listed during May 2011 – June 2011 have rallied strongly, despite coming to the market at already lofty valuations.

Prada’s shares have rallied 19% since the company’s IPO raised US$2.46 billion (RM7.3 billion) in Hong Kong just over a month ago (June 2011). The stock now (July 2011) trades at a valuation of about 28 times 2011’s earnings. Milan Station has seen its stock surge 28% since its debut. Samsonite’s IPO was priced at 18.3 times projected 2011 earnings. With the stock now (July 2011) up 9% since then, it would be trading at close to 20 times.

Malaysian fashion players are also targeting overseas markets as the key to growing their revenues and their brand. And they are linking up with international players to widen their distribution network.

In going overseas, Bonia is the most successful of the lot, with 25% of its revenues contributed by overseas sales. Padini’s sales abroad contribute 10% to its revenue while Voir’s stands at just 2%.

With large numbers of Middle East tourists in Malaysia, it is little wonder that the Middle East is a destination favoured for overseas expansion as they are familiar with Malaysian brands. Products of the Bonia and Padini, and to a smaller extent Voir, are already being sold in the Middle East. Voir announced an expansion to Ghana and Pakistan while Bonia is now trying to tackle arguably the most discerning market in the world — Italy and Europe.

To be sure, it is not all rosy in the fashion industry. All players have been subjected to rising raw material costs, in particular cotton, leather and labour. The price of cotton had surged three-fold between early 2010 and March 2011. They have since eased (July 2011) about 30% from their March 2011 peaks, but are still nearly twice their levels of a year ago (2010).

Most of Bonia’s mens shirts are made from 100% cotton. Its business development general manager Geoffroy de Drouas said although both the textile manufacturers and Bonia shouldered some of the burden, the prices of cotton-made apparel had to ultimately be increased.

Padini also had to take the same path, the company could not adjust the prices to cost increases too closely as it would cause too much of a fluctuation.

Voir’s long relationship between his company and the buying houses helped in negotiations to keep price changes in cotton to a minimal.

IPO ... Kan Sam

2011-08-02T14:13:00.001+08:00

Kan Sam’s roots date back to the 1980s when its substantial shareholder JB Cocoa Group Bhd was established in Muar, Johor.

JB Cocoa was formerly known as Guan Chong Group Sdn Bhd, whose principal business was the processing of cocoa beans. Then in 1990, a cocoa processing plant was built in Pasir Gudang under Guan Chong Cocoa Manufacturer Sdn Bhd (GCCM).

Kan Sam chairman Tey Kan Sam @ Tey Hin Ken and his son, the company’s managing director Tey How Keong, were involved in the setting up of both the plant and the company. In fact, GCCM was at one point a subsidiary of JB Cocoa until the latter disposed of the former to Guan Chong Resources Sdn Bhd as part of a restructuring exercise in 2003.

Guan Chong Resources is currently the holding company of the listed Guan Chong. A look at the directors of the listed Guan Chong show even further ties, with a director Tay Chi @ Tay Chin Chuan cited as one of the founding members of JB Cocoa. Guan Chong managing director Tay Hoe Lian has been with GCCM since 1997.

It is learned that the heads of both companies are in fact related. They are apparently cousins who started the business of cocoa together. However, the two then amicably parted ways due to differences in business directions.

In terms of earnings, Kan Sam posted a net profit of RM48.1 million on the back of RM504.2 million in revenue. This was higher than the previous year when net profit stood at RM23 million and revenue was RM386.2 million.

Among Kan Sam’s future plans is the expansion of its plant in the Port of Tanjung Pelepas, in an exercise expected to cost RM44 million to be implemented over two years.

In addition, Kan Sam has also been granted a call option to acquire a stake in PT Koko, which has plans to construct a cocoa liquor facility in Indonesia that is expected to commence in mid-2012. The company has also been granted a call option to acquire a stake in Kakao GmbH, which intends to construct a cocoa butter melting, deodorising and warehouse facility in Germany.

E&O ... Aug11

2011-08-02T08:06:00.000+08:00

E&O owns some of the choicest parcels of land in Penang and Johor. It does not have a substantial shareholder with an outright majority. And some of its shareholders – who together hold more than 20% equity interest – are willing to divest their stakes in the company.

But a corporate exercise would depend on how well the acquirer carves out the fragmented shareholding to secure a major block that can be used to take over the company.

Sources say shareholders with more than 20% equity interest in the company are willing to cash out at a slightly less than rm2.50 a share, but the not the largest shareholder, Datuk Tham Ka Hon. Some of the major shareholders are willing to sell at about rm2.40 apiece, but Tham wants a higher price.

Tham holds 15.7% stake while Singaporean CKG Investment Holdings Ltd holds 11.7%. Puan Sri Nik Anida holds 11.8% stake while ECM Libra holds 5.4% stake. Together these strategic shareholders hold 45% equity interest in E&O.

Although Tham is seen as the face of E&O, the company is run by professional managers led. This coupled with the company’s fragmented shareholding, raises the possibility of a new shareholder coming in. Sources expect the emergence of a strategic investor with more than 20% equity interest.

Assuming an entity buts up the stakes of GKG Investment and Nil Anida, it would not trigger a MGO but it would be good enough to spark demand for shares in the property developer. Anybody coming in with less than 30% would start mopping up more shares to hit the 32% threshold.

Another source says if such a situation arises, ECM Libra may also dispose its block as it is a strategic investor. It should be noted than ECM only emerged as a substantial shareholder not long ago and is likely to exit at a good price.

It is learnt that GKG, a long time shareholder of E&O, is willing to cash out at lower price than what is being sought by Tham. Nik Anisa’s family could also dispose its stakes at about the same price. But holding them back is their long term relationship with Tham

He has a good relationship with the other shareholders and they would not sell without giving Tham ample opportunity to work out a deal to meet their requirements. If they sold without Tham disposing its interest, it would leave him in difficult position. So it is likely that all the strategic shareholders will exit the company triggering a MGO for E&O.

Sources say major shareholders of SP Setia Bhd, Malaysia's biggest developer, plan to buy a strategic stake in property and hospitality company Eastern and Oriental Bhd (E&O).
Shareholders of SP Setia had made overtures with certain shareholders of E&O, who may have included Temasek Holdings (Pte) Ltd director Goh Yew Lin.

SP Setia's three biggest shareholders currently are Permodalan Nasional Bhd with a 32.9 per cent stake, the Employees Provident Fund with a 14.47 per cent interest, and SP Setia president and chief operating officer Tan Sri Liew Kee Sin, with 11.96 per cent.

As at July 30 2010, Singapore's G.K. Goh Holdings Ltd owned 13 per cent of E&O.

E&O managing director Datuk Tham Ka Hon and spouse Datin Chua Cheng Boon collectively own about 17 per cent of the company.

Liew did not confirm or deny if indeed SP Setia is interested in buying E&O. SP Setia is always looking for new acquisitions including land deals and strategic stakes. Management is not in acquisition talks with any party at the present time and cannot speak on behalf of the shareholders.

Funding the takeover of E&O will not be cheap, but it is feasible. The company has a market cap of rm1.42 billion and a share base of 910.7 million.

Of its existing landbank, its largest tract in the Kl;ang Valley is the 309.5 acre in Ampang area which is estimated to be worth rm400 million versus book value of r,106 million.

E&O is known for its 20 story Dua Residency developments in Jln Tun Razak, KL.

Also notable is its 50% stake in the 210 acre Wellness City Development in Iskandar Malaysia. The project is a JV with Temasek Holdings and Khazanah Nasional Bhd.

However, its dominance in Penang that makes it such an attractive target for bigger players like SP Setia.

In Penang, besides development, E&O is also in the hospitality and lifestyle business. Its E&O Hotel is considered landmask on the island while its Lone Pine Hotel is well known.

The prime attraction is its Seri Tanjung Pinang Project, which stretches over 980 acres of reclaimed land. The first phase of the project is estimated to fetch rm4 billion in GDV while the second phase is expected to generate three times that amount.

A major drawback of the Seri Tanjung Pinang project is the huge reclamation costs involved. However, E&O has the required approvals to get the project off the ground. The company could undertake a fundraising exercise or enlist a JV to start the reclamation work.

Given the increasing land values in Penang, it certainly makes sense for other developers to want to take over E&O. But they would first have to deal with the company’s fragmented shareholding.

Pewaja ... Aug11

2011-08-01T14:11:00.000+08:00

Debt-laden Perwaja Holdings Bhd is making a cash call to its major shareholder Kinsteel Bhd to raise RM280 million under a planned restricted issue of redeemable convertible unsecured loan stocks (RCULs).

The steel manufacturer is also proposing an issue of free warrants on the basis of one free warrant for every two existing shares held.

The seven-year RCULs, with a coupon rate of 7%, will be issued to Kinsteel. Both parties have signed a conditional subscription agreement to formalise the exercise.

The gross proceeds will be used to finance the working capital needs of Perwaja, in which Kinsteel owns a 37.34% stake.

Under the restricted issue, Perwaja will issue the RCULs to Kinsteel at 100% of the securities’ nominal value.

The proposed restricted issue of RCULs is expected to be completed by year-end (2011). Upon completion, Kinsteel will undertake a renounceable restricted offer for sale (ROS) of the RCULs it owns to the entitled shareholders of Perwaja. This will be done on the basis of RM1 nominal value of RCULs for every two existing Perwaja shares held.

Kinsteel is the largest shareholder of Perwaja, followed by Equal Concept Sdn Bhd with 27.84% equity interest and Maju Holdings Sdn Bhd with 3.87%.

The proposed restricted issue will enable Perwaja to raise proceeds for Perwaja group’s working capital requirements and to defray the expenses incidental to the proposals and the proposed ROS.

Further, the proposed restricted issue is in line with Perwaja’s financing plan which is intended to address the overall financing needs of Perwaja group, taking into consideration the expected increase in turnover of Perwaja group upon the implementation of the Economic Transformation Programme and Perwaja’s plan for cost reduction which is envisaged via a concentration and pelletising plant.

Kinsteel’s decision to subscribe for the RCULs is an indication of the parent company’s confidence in the earnings outlook of Perwaja.

The restricted issue of RCULs is not expected to have a material effect on the company’s earnings in the current year ending Dec 31.

Kinsteel bought into Perwaja in 2006 and floated the company on Bursa in August 2008. As at March 31, Perwaja’s long-term borrowings amounted to RM336.1 million and short-term debts (including bank overdraft) was RM598.2 million.

Industry observers say Perwaja Holdings Bhd's move to raise RM280 million via restricted issues is a good avenue to address working capital needs, especially now that its financing needs are expected to escalate. As Perwaja has put into motion plans to reduce costs via a concentration and pelletising plant costing RM200 million, the company’s financing needs are expected to escalate.

The implementation of various mega projects under the government’s Economic Transformation Programme soon is also expected to spur demand for steel products, which will in turn increase the group’s working capital requirement.

Perwaja’s move to raise funds via RCULS will minimise the immediate dilution effect given that the instrument can only be converted after five years from the date of issue and the fixed coupon rate would enable the company to secure its cost of funds during the tenure of the RCULS, especially with interest rates looking to inch higher.

Meanwhile, Perwaja’s gearing is expected to stay below 1x upon full exercise of the RCULS.

For Kinsteel, it is deemed an earnings accretive move, but caution that the cash call will strain Kinsteel’s balance sheet.

A full subscription of Perwaja’s RCULS would raise its gearing from 2.2 times to 2.6 times. Kinsteel has said it would finance the subscription RCULS with its internal funds and bank borrowings. KinSteel will undertake a ROS of the RCULS it owns to the entitled shareholders of Perwaja.

Perwaja’s decision to undertake a ROS of RCULS to Kinsteel could also be due to concerns that the securities might not appeal to other shareholders in Perwaja.

Assuming Perwaja shareholders fully subscribe their entitlements under the ROS. Kinsteel would need to fork out about rm105 million for the RCULS.

Should Kinsteel decide to finance half of the securities by borrowings, its net gearing would increase to 1.12 times from 1.09 times as at March 31, 2011.

As at end March 31, 2011, Kinsteel had debt obligation of rm1.85 billion compared to a cash pile of rm81 million, translating into a net debt of rm1.76 billion. Perwaja had rm935 million worth of debts against cash of rm20.51 million, hence net borrowings of rm914 million.

Tenaga ... Aug11

2011-08-01T08:05:00.000+08:00

Given the current circumstances, Tenaga is looking more like a prime privatization candidate. This is because despite getting its long awaited tariff hike in both Peninsula Malaysia and Sabah, the company’s share price has been depressed over fuel worries which has obscured its true value.

So it may be argued that taking Tenaga private and breaking it up could possibly unlock better value of its various divisions as well as expose any potential weaknesses within.

Khazanah hold 35.63% stake, EPF holds 13.96% while Amanahraya Trustees Bhd Skim Amanah Saham Bumiputera holds 9.84% equity interest.

If Khazanah and EPF were to team up again to take Tenaga private, it would cost the two organizations about rm16.7 billion at current valuations to mop up shares these entities does not own.

Outlook for the company is still foggy. Although Tenaga is expecting to be a better year for Tenaga, the thorny issue of fuel costs casts a question mark on whether the company will be able to absorb the increases. Coal in particular has remained a persistent issue for Tenaga, with increased usage of unsubsidized coal putting a dampen in margins.

With so much uncertainty hanging over the company, taking it private at this stage would mean shielding its shareholders from the fossil fuel roller coaster. Another potential catalyst for the stock is the government’s plan to gradually reduce its subsidy burden, which has not always gone over well with the public.

This does not mean that all of Tenaga should be privatized. Breaking the company up into its various divisions could enable the company to finally rid itself of its legacy issues by identifying the deadwood. And there is nothing to stop Tenaga’s major shareholders from re listing the company once it is on better footing.

Privatization would also give Tenaga greater freedom to expand its overseas aspirations, as it seeks to secure more deals in the Middle East without exposing its shareholders to the risks.

It appears that Tenaga has reached a crossroads. Although there is potential to grow the company further, there seems to be a number of roadblocks in its way.

Employee incentive plan:-

2011-07-31T10:14:00.000+08:00

Notice

2011-07-30T10:13:00.000+08:00