Genting Bhd/Resorts ... June 2008

Its Prospects

Genting Bhd and its 48%-owned associate Resorts World Bhd seem to have fallen out favour amid worries that the tough operating environment would put the group’s profitability to the test.

Concerns on earnings growth is heightening given that Genting’s international business, which was initially expected to boost its earnings, does not fare well.

Besides concerns on a slowdown in visitor arrival to the hilltop casino, Resorts World’s minimal dividend payment has kept a lid on its share price.

Investors were getting “impatient with the low-payout strategy and were beginning to accord less value to its cash reserves”. Resorts World is hoarding too much cash for too long. Unless there are alternative plans, investors would prefer management to start raising dividend significantly.

Resorts World’s management did make efforts to pay a higher dividend, however, the payout as a percentage of net profit has not progressed much. In the last few years, its dividend payout has been hovering just above the 30% level, translating into a dividend yield of just over 2%, a level considered miserable given Resorts World’s cash flow generating ability.

Resorts World’s cash pile is expected to balloon to more than RM4 billion by year-end (2007) after it sold its equity interest in Star Cruises Ltd and Genting International Ltd.

In addition, the windfall tax that was slapped on independent power producers recently triggered concern that the gaming industry might have to contend with higher tax as the federal government looked for ways to expand its coffers.

The high foreign shareholding placed the share price performance of Genting and Resorts World at the mercy of the foreign managers, who had unloaded their investments on Bursa Malaysia recently due to political uncertainties and inflationary fears.

Furthermore, the valuations of the global gaming stocks were hit by competition concerns as more casinos were sprouting and tighter regulations such as the ban on smoking in casinos in the UK.

Thus, foreign institutional investors were reluctant to pay the hefty premium, which Genting and Resorts World used to command previously.

Its upcoming integrated resort in Singapore is said to be plagued by costlier building materials, besides more expensive labour due to inflation. The value of the project, initially estimated at S$5.2 billion (RM12.4 billion) was revised to S$6 billion after the decision to add six new attractions to the resort, and to make contingency provisions.

Airasia ... Dated June 2008

What’s Up?

AirAsia Bhd said its owes Malaysia Airports Holdings Bhd (MAHB) RM62.6 million in service charges, and not RM110.36 million as quoted by a government minister recently.

On May 2008, Transport Minister Datuk Ong Tee Keat said the airline had accumulated the amount outstanding between 2002 and March 31 2008 for its use of airports in the country. Contrary to claims made, AirAsia said it has been making monthly payments to MAHB and denied allegations raised in Parliament that it has not paid the airport operator since 2002.
Payments made by AirAsia over the last five years (2003-2007) have grown substantially and the amount to date is in excess of RM279.34 million. It said a portion outstanding was pending its request for MAHB to review its charging mechanism.

Since moving into the low-cost carrier terminal in Sepang in March 2006, AirAsia said it has continued to be charged the same rates as those applied at the main terminal building of the KL International Airport (KLIA), which it feels is too high.

It received indication that MAHB would review the terminal charges to reflect the basic facilities available. However, two years on after the move, there is still no commercial agreement prepared.

AirAsia also called for the implementation of an incentive scheme for all carriers flying in and out of Malaysian airports, "that will provide MAHB with growth in the number of passengers and landings as well help achieve tourism growth in Malaysia".

Top 15 Dividend Yield For 2007

BJtoto 9.4%
Bintulu Port 8.4%
Amway 8.3%
BAT 7.9%
Calrsberg 7.9%
IJ Intl 7.4%
Guinness 7.2%
Gamuda 7.1%
KFC 6.6%
Digi.com 6.3%
PBB 6.2%
Star 6.0%
TH Plantations 5.8%
Axis REIT 5.8%
Atrium REIT 5.5%

Genting ... the Edge

KUALA LUMPUR: Genting Bhd and its 48%-owned associate Resorts World Bhd seem to have fallen out favour amid worries that the tough operating environment would put the group’s profitability to the test.

Concerns on earnings growth is heightening given that Genting’s international business, which was initially expected to boost its earnings, does not fare well.

Genting’s share price plunged to RM5.20 — the lowest since November 2006 — last Thursday from its peak of RM9.25 recorded in November last year. It finished at RM5.35 yesterday.
The index-linked heavyweight has slid 32% compared 11.3% fall on the Kuala Lumpur Composite Index year-to-date.

Its local casino operator Resorts World shares also came under persistent selling pressure. The gaming stock has tumbled 27% so far this year. It closed at RM2.82 yesterday.
Besides concerns on a slowdown in visitor arrival to the hilltop casino, Resorts World’s minimal dividend payment has kept a lid on its share price.

Citi Equity Investment Research said investors were getting “impatient with the low-payout strategy and were beginning to accord less value to its cash reserves”.
“Resorts World is hoarding too much cash for too long. Unless there are alternative plans, we believe investors would prefer management to start raising dividend significantly,” it commented.

Resorts World’s management did make efforts to pay a higher dividend, however, Citi Equity Investment Research said the payout as a percentage of net profit has not progressed much.
“In the last few years, its dividend payout has been hovering just above the 30% level, translating into a dividend yield of just over 2%, a level considered miserable given Resorts World’s cash flow generating ability,” the research outfit said.

Resorts World’s cash pile is expected to balloon to more than RM4 billion by year-end after it sold its equity interest in Star Cruises Ltd and Genting International Ltd.

In addition, the windfall tax that was slapped on independent power producers recently triggered concern that the gaming industry might have to contend with higher tax as the federal government looked for ways to expand its coffers, analysts said.

Analysts said the high foreign shareholding placed the share price performance of Genting and Resorts World at the mercy of the foreign managers, who had unloaded their investments on Bursa Malaysia recently due to political uncertainties and inflationary fears.
Furthermore, the valuations of the global gaming stocks were hit by competition concerns as more casinos were sprouting and tighter regulations such as the ban on smoking in casinos in the UK.

Thus, foreign institutional investors were reluctant to pay the hefty premium, which Genting and Resorts World used to command previously, they said.
Its upcoming integrated resort in Singapore is said to be plagued by costlier building materials, besides more expensive labour due to inflation.

“The shares (of Genting) have been sold down a lot, and longer-term issues have been priced in,” said OSK Research Sdn Bhd, which recommends the stock to clients.
The value of the project, initially estimated at S$5.2 billion (RM12.4 billion) was revised to S$6 billion after the decision to add six new attractions to the resort, and to make contingency provisions, according to Genting’s website.

MBSB ... dated June 2008

What’s Up?

It is expected to be taken private next month (July 2008) for shareholders to transform the company into a niche player in the financial market.

Investors from Abu Dhabi, together with the Employees Provident Fund (EPF), are expected to make a general offer of between two and three times the book value of the company that would lead to the Middle Eastern investors taking a 30% stake in the company. Control would reside with EPF.

The only other substantial shareholder in MBSB is PNB with about 15% stake.

Sources say the price being mulled is between two to three times MBSB’s book value. As at end march 2008, MBSB had net assets per share of about Rm1.38.

MBSB has been plagued with NPLs (non-performing loans) for many years and, although the EPF has turned it around, the entry of a strategic Abu Dhabi investor will certainly provide a catalyst to take MBSB to the next level of growth and development with a clean balance sheet.

The shareholders are then expected to clean up the company's balance sheet by setting up an NPL fund that would buy RM1.45bil worth of NPLs from MBSB. The existing real estate portfolio within MBSB will be regrouped and, where possible, injected into a real estate investment trust. MBSB will be asset light.

Shareholders will then take MBSB in a new direction where it will set up a real estate fund specialising in medium-cost houses. The fund would buy and lease the houses to prospective homeowners for a minimum period. After a number of years, tenants would be given the option to buy the houses.

The lease-and-option-to-buy scheme is probably going to be the same cost as the current method of buying a home in Malaysia. MBSB is going back to its original cause and will be using the Middle Eastern money to stimulate the medium- to low-cost housing market.'

MBSB will earn a fee by managing the fund that will start with a size of US$1bil. MBSB also has an avenue to unlock the value of its property fund. NBSB will not carry any risk. It will get income from managing the entire real estate fund whose investors would comprise groups from Abu Dhabi and could also include the EPF.

One avenue being explored by MBSB is to take its business to the Middle East via the help of the new Abu Dhabi investors.

MBSB already has substantial plots of land and buildings which could utilised or divested to finance projects. Some of the plots which could be utilised include a 92000 sq m plot of land in Bdr Yahya Awal, JB, with a net book value of Rm61 million, a 20000 sq m parcel of land in Ampang (net book value: rm47 million) and a 57300 sq m parcel in Sungai Buloh (net book value: rm32 million).’

It has also office buildings in Lebuh Ampang, upmarket Damansara Heights in KL and a hotel in Melaka.

Touch & Go Card expired

Anyone know that Touch & Go card will expired?

My card is going to expired (in Nov), and top up lane (tambah nilai) counter tell me that they cannot top up in here, and need to go to nearest office. He will touch the card for me, and ask me to exist in next countered, which not exceed RM1.80, because that is my card balance.
Don't you think that is very funny???
Which mean I need to find an exist, which should not exist RM1.80, replace my card and, enter into the highway again....
This is very RIDICULOUS!

Luckily someone borrow me another card to continue with my journey.

Yes...it is only have 10 years life times.

And you will need to replace a new one (free) in the Touch & Go counter, and transfer your remained balances to the new card.

KUB ... dated 2008

What’s Up?

KUB Malaysia Bhd’s 60%-owned Empirical Systems (M) Sdn Bhd has secured an RM28.3mil contract from the Education Ministry for the physical and ICT infrastructure for schools in Selangor.

The contract would involve the supply, delivery, installation and testing of ICT equipment and furniture to school computer laboratories. The contract tenure is for two years, commencing June 10 until June 9, 2010.

KUB expected the contract to contribute positively to group’s earnings and earnings per share of the group for the financial year ending Dec 31 2008.

There are minimal risks as the contract is based on the current and immediate requirement of the Education Ministry to supply ICT equipment and furniture to all school computer laboratories in

Yeo Hiap Seng ... dated June 2008

What’s Up?

An Indonesian company PT Kharisma Inti Persada has filed a new suit in a Jakarta court against Yeo Hiap Seng (Malaysia) Bhd (YHS) and its subsidiary, PT YHS Indonesia.

PT Kharisma was claiming about RM77mil for an alleged breach of an alleged distribution agreement and an alleged distribution appointment. The company will be contesting the claim and based on advice obtained from the company's Indonesia legal advisors, the directors are of the opinion that the claim is without merit and therefore unsustainable.

MRCB ...dated June 2008

What’s Up?

MRCB and a few partners are understood to be in the initial stage of planning the development of a hydropower plant in Ranau, Sabah, centered on the Liwagu River.

Sources say MRCB’s partners are closely affiliated to political bigwigs in that state, which could help iron out the difficulties faced by the company.

The cost of the construction has not been ascertained yet but the construction could easily come up to RM2 billion. This would not include the electro-mechanical expenses.

MRCB is not known to be involved in the construction of hydroelectric dams. But it is well known as a player in the installation of power transmission lines.

Even top officials as Tenaga or its Sabah Electricity Sdn Bhd unit are said to be in the dark as the plan is still in its infancy.

It is understood that the plans to build the hydropower plant at the Liwagu River is not entirely new and had been mooted in the mid 1990s.In April 2008, Sabah Chief Minister said the state was looking at reviving the Liwagu project but added that the capacity being considered was only about 100MW. The project had been shelved with the Bakun Dam coming onstream, but was mulled with the cancellation of the coal fired power plant in Silam.

The Bakun Dam being built in Sarawak was supposed to supply Sabah with electricity via a grid. But the transmission cost was too high and Sabah was told to build its own power plants.

In April 2008, the Sabah government cancelled the proposed construction of a Rm1.3 billion 300MW coal power plant in Lahad Datu. Now with the cancellation of the project, the people of Sabah will have to face the inevitability of a power crisis situation. Currently, the East Coast of Sabah is served by ageing and polluting diesel powered plants, which are hopeless unreliable.


A Positive Impact On MRCB …

Lately, MRCB has been trading languishing due to uncertainty over the outlook for the company.

Since PKR took the helm of the Penang government from BN, several contracts once considered to be in the bag for MRcb, such as the Penang monorail job and the Penang Outer Ring Road, have cecome dicey propositions.

Thus, if this power plant project takes off, the impact will be positive for MRCB. At present, most of MRCB’s revenue, about 53% is derived from its property development business. Engineering and construction accounted for about a third of the company’s revenue for 1Q2008.

GUH ... dated June 2008

What’s NEXT! … dated June 2008

It is embarking on a RM43 million capital investment at both its manufacturing plants in Bayan Lepas and Suzhou, China to boost the production of multi-layered and silver-through-hole printed circuit boards (PCBs).

The company also expand its investments in the plantation sector. Its existing investment in the 385-acre oil palm plantation in Sungai Petani has already started bearing fruit. Given that the long-term outlook of the oil palm industry remains positive, the group will step up its effort in expanding the division to a sizeable scale by acquiring suitable estates or companies.

They are looking at some plantations in East Malaysia and the east coast states to acquire between 3,000 and 5,000 acres, hopefully by next year (2009). They are looking at spending between RM60 million and RM150 million for the purpose.

Apart from PCBs, GUH is also involved in the trading of electrical goods and appliances as well as property development.

GUH had, in November 2007, decided to cease the manufacturing of electrical goods due to fierce competition, unsophisticated technology products and volatile raw material prices after that division posted a pre-tax loss of RM900,000 in FY07 versus a pre-tax profit of RM3.5 million in FY06.

Through its subsidiary, GUH Properties Sdn Bhd, the group is also actively involved in its flagship property development in Taman Bukit Kepayang which is strategically located adjacent to the Seremban interchange of the North-South Highway.

Financial Results …

For the financial year ended Dec 31 2007, the group’s turnover increased to RM298.1 million from RM274.3 million in FY06.

AWC Facility ... dated June 2008

AWC, primarily engaged in integrated facility management (IFM) and M&E engineering services, provided the centralised waste collection system for the Prime Minister’s residence and office in Putrajaya and Singapore Changi Airport Terminal 3. It has a 20 years’ experience in building automation and air-conditioning system controls as its competitive advantage.

What’s NEXT!

Facility management outfit AWC Facility Solutions Bhd aims to go full steam in the Middle East market by January 2009 after the completion of its current restructuring exercise.

It is looking to tap into the Middle Eastern mechanical and electrical (M&E) engineering services market either via a local partnership or a standalone venture to market our automated vacuum waste collection system - Stream - to that region.

The firm would also focus on the Singaporean M&E business market by riding on the country’s strong construction demand, specifically commercial, industrial and high-rise residential buildings.

According to an analyst, the firm’s M&E engineering business has a strong market presence locally, and it has undertaken works in 70% of Klang Valley buildings in the past 10 years.

AWC was currently undergoing the second and implementation stage of its restructuring exercise and expected the revamp to reach completion by the end of this year (2008).

AWC will incur restructuring and other related costs, with its M&E services’ order book thinning, but the management is confident that it will capture more market share next year (2009).

Financial Results …

The firm slipped into the red for its second quarter ended Dec 31, 2007 (2QFY08), even though turnover increased 3% to RM27.8 million from RM27 million a year earlier due to lower margins of certain businesses in its M&E division.
AWC’s net profit for the fiscal year ended June 30, 2007 (FY07), rose 24% to RM6.2 million from RM5 million the previous year due mainly to the inclusion of Infinite QL Sdn Bhd.

Revenue grew 24% to RM107.2 million from RM86.5 million a year ago, while net cash from operations jumped to RM22.9 million from RM2.6 million. Long-term debt narrowed to RM2.7 million from RM3.2 million.

AWC’s IFC division, which derives most of its revenue from public contracts to maintain buildings and facilities, also enjoys a stable stream of revenue that provides recurring cash flow.

The division currently holds a 10-year concession agreement, which will end 2008 with a renewal option for another five years, to maintain federal government buildings in Johor, Melaka, Negeri Sembilan and Sarawak.

AWC generated minimum revenue of RM25 million annually from the contracts, which is expected to increase upon the renewal for another five years due to the increase in raw material prices.

It had also landed a three-year RM10 million worth of jobs early 2008 to undertake building maintenance works at the Prime Minister’s office in Putrajaya.

AWC would also expand into the private sector and expected revenue contribution from both sectors to equal within two to three years. The private sector currently contributes less than 30% to group revenue.

The firm was currently bidding for RM100 million worth of building and facilities maintenance works.

Eonmetall Group Bhd ... dated June 2008

Eonmetall Group Bhd, which has traditionally been focused on the manufacturing of secondary flat steel products steel storage system, is now ready to move upstream in steel processing.

The company was in the midst of finalising the necessary documentations and approvals for its expansion into upstream steel processing. More than RM75 million had been set aside for capital expenditure this year for its expansion plans.

They are poising themselves to capitalise on the rising steel prices, with China removing export rebates for Chinese suppliers, making Chinese production more expensive. Even in Malaysia itself, it is believed the market will be favourable to the Malaysian steel manufacturers.

Meanwhile, Eonmetall has embarked on a joint-venture project since May 2007 in the United Arab Emirates involved in the business of electromechanical equipment installation, building and designing centralised district cooling systems (DCS) and chilled water system cleaning and maintenance services.

Eonmetall expected the UAE venture to contribute towards 40% of the group’s revenue this year. With its 30% stake, the JV contributed RM1.1 million to the group’s turnover in 2007.

It has an order book of RM100 million in several cities in the UAE to build and design the district cooling systems.

The group was positioned positively to take advantage of the continuous spiralling of record oil prices through its investments in the DCS-related projects in the UAE and the successful development and handover of the country’s first palm fibre oil extraction plant (PFOE).

The intensive pace of development in the Middle East by oil rich countries will drive the DCS business while PFOE will be driven by the potential of oil recovery from the palm fibre. The group anticipates that these two areas will enable it to diversify and enhance future income.

Masteel ... Dated June 2008

Malaysia Steelworks (KL) Ltd (Masteel) plans to appeal against a Court of Appeal decision that allowed Mukand Ltd’s claim of US$206,639 (RM656,532).

Masteel legal advisor was in the process of submitting its appeal against the decision to the Federal Court within the allowable time frame.

On May 15 2008, the Court of Appeal had ruled Mukand’s claim be allowed and the counterclaim of Masteel be dismissed.

The judgment had given to the plaintiff an amount of US$206,639.95, which represented the balance sale price only and interest at 8% per annum from May 10, 1999 and cost. Masteel said there was no order for the sums of US$91,500 and US$5,000 claimed by Mukand.

Ken ... May 2008

What’s NEXT!

It has projects in hand with a gross development value (GDV) of RM650mil, which would keep it busy for the next five years.

The group was also looking for land in the Klang Valley, Penang, Perak and Terengganu to add to its land bank.

The projects in the pipeline include an exclusive serviced apartment with a GDV of RM120mil in Bukit Bandaraya, Bangsar, extended low-cost apartments and shoplots with GDV of RM30mil as well as a mixed development project with a GDV of RM400mil, both in Shah Alam.

In 2007, the company had acquired two pieces of land in Taman Tun Dr Ismail, Kuala Lumpur, for a commercial development, which would partly be used to house its corporate office.

The company also has undeveloped land in Perak and Penang. They have about 50 acres (in Perak) near the Lata Kinjang waterfall that is surrounded by Government-owned land. The company was waiting to see how the new Perak government developed the land.

The company currently had cash in hand of RM22mil.

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CCM Duopharma ... May 2008

What’s NEXT!

CCM Duopharma Biotech Bhd is hoping to expand its presence in the premium market segment of pharmaceutical products in the local and overseas markets amidst challenging conditions.

CCMD is already planning a handful of product launches in the coming months, all targeted to the premium OTC (over-the-counter) segment of the pharmaceutical market.
Its future growth would come from the OTC segment.

At the moment, the bulk of CCMD’s earnings comes from Malaysia with only 10% from overseas. They have a presence in 26 countries and are working to expand its footprint. They have already put in applications to market some of its products there but the approval process takes time.

CCMD was also looking to tap into the blossoming private medical sector as another area of growth.

CCMD also has in its bag a few contracts from the government, most notably for the supply of methadone and drugs for the treatment of HIV.

Financial Results …

Rising raw material costs had put pressure on margins as indicated by CCMD’s first quarter results where it saw its net profit fall year-on-year to RM7.3 million from RM7.9 million.

HLA/Tasek ...Dated May2008

What’s Up?

A minority shareholder of Tasek Corp Bhd has written to the authorities, voicing his dissatisfaction over the company’s proposed purchase of Hong Leong Asia Ltd’s (HLA) building materials business for S$323.5 million (RM773.6 million) to be satisfied by new Tasek shares.

The shareholder complained to the company’s independent directors, major shareholders such as Lembaga Tabung Haji and the regulators, seeking a better deal for the minorities.

Describing himself as a long-time value investor, the shareholder said he does not question the value of HLA’s assets but reckons Tasek’s shares are “worth much more” and should be issued “at a much higher price” than the proposed RM3.54 per share.

The transaction is tied to a 54-sen special dividend, which means the Tasek shares are valued at RM4.08. The value was based on the average market price when the deal was proposed. The net tangible asset per share of RM4.29 as at March 31 2008, is higher than the proposed issue price.

A higher issue price for the new Tasek shares would mean that HLA gets fewer Tasek shares in exchange for the assets it is selling.

Both HLA and Tasek are companies under the Hong Leong Group which is controlled by Tan Sri Quek Leng Chan.

Based on the proposed issue price of RM3.54, 212.25 million new Tasek shares, or 53.5% of its enlarged share capital, are to be issued for the purchase. This would more than double the HLA group’s stake in Tasek from 31.92% to 68.34%, making the latter its subsidiary.

HLA is seeking a waiver from undertaking a mandatory general offer.