Employee incentive plan:-

Notice

TMC ... Jul11

Inet Research

1. Apr-May 2011/17m May 2011 Results Highlight
= TMC Life (TMC) released two-month results to 31 May 2011 as the group changed its year-end from 31 Dec to 31 May recently. Revenue was within our expectations but losses were deeper than our earlier projections due to inventory adjustments and additional expenses for staff benefits – excluding the two items, TMC would have made a small profit at the operating level.

= Sharp losses incurred during the 17-month period to 31 May 2011 were largely attributable to impairment charges, write-offs and provisions, which were taken in 4Q 2010.

= Management indicated in the results announcement that it is cautiously optimistic of further revenue growth with higher number of specialist doctors and support staff at the hospital and fertility centres, as well as ongoing promotional and marketing activities both locally and around the region. With the cleaning up of
the group’s balance sheet and stricter cost control, TMC is expected to turnaround in FY12.

= We value TMC at RM0.50 per share, based on an RNAV method in the absence of meaningful profits at this stage. We assumed a 17x PER on TMC’s profitable fertility operations (10% discount to local and regional peers), added our estimated book value for the hospital and deducted the group’s estimated net debt position. Our HOLD recommendation stays.

2. Key Investment Risks
Key investment risks for TMC Life (TMC) include:
a) Slower economic growth due to inflationary pressures and global uncertainties, which would affect
existing and potential patients’ spending power on the group’s fertility treatment services and private
healthcare services;
b) Migration of key specialist doctors and medical support staff;
c) Rising cost of training and retaining key medical support staff;
d) Intense competition from other local and regional healthcare providers.

3. Recent Developments
On 18 Sep 2008, TMC entered into an MOU with Berjaya Corporation Berhad and Viet Ha Corporation to
establish a formal relationship in order to jointly carry out activities relating to the design, construction,
furnishing, equipping and operating of a hospital in or near Hanoi, Vietnam.

On 17 Sep 2009 the parties to the MOU mutually agreed to extend the duration of the MOU for a further period of 12 months from 17 Sep 2009 until 17 Sep 2010.

On 17 Sep 2010, TMC announced that the parties to the MOU have mutually extended the duration of the
MOU for a further period of 12 months from 17 Sep 2010 until 17 Sep 2011.

On 20 Sep 2010, the group appointed Mr Francis Lim Poon Thoo as CEO. Mr Francis Lim was previously
group executive director of Singapore listed healthcare group Health Management International Limited (Jul
2002 until May 2010) and executive director/CEO of Mahkota Medical Centre Sdn Bhd (Nov 1998 until May 2010)

On 30 Sep 2010, TMC announced the resignation of the following:
1) Mr Amos Siew Boon Yeong, executive director;
2) Dato’ Wenddi Anne Chong Wai Yeng, executive director;
3) Dato’ Robin Tan Yeong Ching, director; and
4) Yeoh Cheng Lee, alternate director.

On 1 Oct 2010, TMC announced the termination of Tropicana Wellness Sdn Bhd as the marketing agent of the Tropicana Wellness Programme, the group’s subscription-based healthcare programme with effect from 21 Dec 2010. In the announcement, TMC indicated that the group will take over the marketing of the programme internally.\

On 12 Jan 2011, TMC announced the appointment of the following:
1) Dr. Wong Chiang Yin, a Singaporean, as executive director.
Dr. Wong was previously the CEO of Bright Vision Hospital, executive director at Pantai Holdings
Berhad, COO at Changi General Hospital, and COO at Singapore General Hospital;

2) Dr. Lee G. Lam, a Canadian national, as non-executive director.
Dr. Lam has over 28 years’ experience in multinational general management, corporate governances,
investment banking and direct investments. He is currently Chairman of Monte Jade Science and
Technology Association of Hong Kong;

3) Gary Ho Kuat Fong, an Australian national, as non-executive director. Mr Ho is also a non-executive director of UPP Holdings Ltd.; and

4) Dr. Chan Boon Kheng, a Singaporean, as non-executive director.
Dr. Chan was an advisor and interim group CEO of Pantai Holdings Berhad. He also served as an
advisor to various healthcare companies including Mubadala Development Company based in Abu
Dhabi and was CEO and general manager of East Shore Hospital in Singapore under Parkway
Healthcare.

CBSA ... Jul11

CBSA is steadily making its mark in the information technology (IT) and advertising industries.

In mid-June 2011, CBSA entered into an agreement with Google to provide it with business listings in six Southeast Asian countries for tabulation of Google Maps. The countries are Malaysia, Singapore, Indonesia, Thailand, the Philippines and Vietnam.

CBSA will receive licence fees for the licensed content provided and annual update fees for a period of five years, which is renewable after the expiry of the initial term.

To recap, in 2007 CBSA embarked on a partnership with Google to include business listings from its Superpages website in Google Maps for the latter to tabulate the locations on Google Maps. This newly signed agreement extended this partnership to include business listings from CBSA’s Panpages.com in Singapore, Indonesia, Thailand, the Philippines and Vietnam.

CBSA, which was founded in 1996 and listed in 2004, has two business divisions.

The IT unit contributed 70% of its total revenue, or RM7.14 million, for 1QFY11 ended March 31 with the balance from the search and advertising division. The IT division, which the company started with, specialises in radio frequency identification, e-procurement, e-security and enterprise management solutions.

The expansion into search and advertising came in September 2009, when CBSA acquired Infodata Media Sdn Bhd, which owns Super Pages, a classified business directory and Malaysia’s leading business trade portal.

With the acquisition, CBSA now has a bigger recurring income base compared with its project-based IT business, as some 80% of Super Pages advertisers are reportedly repeat customers.

CBSA will receive licence fees and annual update fees amounting to 10% of the initial licence fees during the duration of the new agreement with Google. Charges will now be based on per business listing as opposed to the bundled arrangement under the previous agreement.

CBSA’s revenue has grown by a compounded annual growth (CAGR) rate of 24% between FY06 ended Dec 31 and FY10. Its net profit CAGR was 16% between FY06 and FY10.

For FY10, the company earned a pre-tax profit of RM11.41 million and net profit of RM10.5 million, on the back of revenue totalling RM46.58 million.

For 1QFY11 though, pre-tax profit declined 24.8% year-on-year to RM2.8 million while net profit fell 20.1% to RM2.57 million. The decline in profitability was due to a high base effect in 1QFY10, which included a one-off RM1.74 million gain on the disposal of land. Stripping out the one-off gain.

As at March 31, 2011, CBSA had some RM9.84 million cash and no borrowings, equivalent to net cash per share of 4.1 sen. Its net assets per share stood at 24 sen as at March 31 2011.

The company is also looking at some new businesses to enhance value for its customers. It is looking at how to provide software as a service (SAAS) to the SMEs as well.

The company was inspired to become not just a technology company in its home country, but one that provides a whole spectrum of ICT (information and communications technology) services to its clients in Asia.

It remains to be seen if CBSA, with its latest extension of its licence tie-up with Google, can ride the wave and fulfil its vision “to be the most innovative and trusted IT and search company in Southeast Asia”. If it succeeds, CBSA could well be one of the country’s few successful homegrown technology stories.

Unico ... Jul11

UDP has proposed to distribute shares in the group’s hire purchase (HP) arm ELK-Desa Resources Sdn Bhd pursuant to the listing of the unit.

The question is, will the listing of ELK-Desa Resources be priced at an equal or higher earnings multiple than UDP’s 17.18 times historical earnings? If it is not, the HP business could be better off kept within UDP.

UDP, in which Unico owns a 29.59% stake, proposed to list ELK-Desa Resources. The unit owns 100% of ELK-Desa Capital Sdn Bhd, whose principal activity is HP financing, and ELK-Desa Risk Agency Sdn Bhd, which deals in insurance and automotive trader ELK-Desa Marketing Sdn Bhd.

The listing exercise would involve the distribution of 86.51 million shares or a 86.51% stake in ELK-Desa Resources to UDP shareholders on a 1-for-10 basis while another 13.49 million shares will be offered for sale to UDP shareholders under a restricted offer for sale (ROS). ELK-Desa Resources is also proposing a public issue of 25 million new ordinary shares of RM1 each, representing 20% of its enlarged issued and paid-up share capital.

Given Unico’s shareholding in UDP, it stands to receive 25.6 million distribution shares and is entitled to subscribe for about four million shares in ELK-Desa Resources.

ELK-Desa Resources makes decent profit, having contributed RM15.22 million or 28.8% of UDP’s after-tax profits of RM52.85 million for FY11 ended March 31.

Assuming UDP’s 17.18 times price-earnings ratio, the whole of ELK-Desa Resources could be worth some RM261.5 million, with Unico’s stake valued at about RM77.4 million. That is much more than its receipt of dividend income from UDP of about RM30.2 million from FY09 to FY11. But again, that is assuming the HP unit can fetch such high valuation currently attributed to UDP, whose core business is oil palm plantations.

In addition, it is not known whether the distribution shares received by Unico will be distributed to its members or shareholders or that the cooperative will seek to place out some ELK-Desa Resources shares in an initial public offering. Minority shareholders or small members own about 80.62 million shares or 82% of Unico.

How Unico handles the distribution shares of ELK-Desa Resources could attract interest.

Dialog ... Jul11

Its wholly-owned subsidiary, Dialog Systems (Asia) Pte Ltd, has proposed to acquire a 51% stake in Anewa Engineering Pte Ltd, India, for 117.2 million rupees (RM7.9 million). The sellers, the founders of Anewa, will retain the remaining 49% stake. The acquisition will be financed by internally generated funds and/or borrowings and is expected to be completed by end-August 2011.

Incorporated in 2006, Anewa is an engineering, design and consultancy company, servicing the oil and gas, petrochemicals, refinery, chemicals and power plant sectors. Its customers are mainly multinationals in India, the Middle East and Southeast Asia. According to the company’s website, some notable names like UK-listed Petrofac, Italy’s Saipem, Technip India and US-based J Ray McDermott are on its list of clients. Anewa employs about 120 people.

India is one of Dialog’s traditional markets in the sale of specialist products and services. Cooperation with local partners might enhance Dialog’s position there and provide opportunity to access Anewa’s customer network. Management also indicated that the deal will strengthen Dialog’s engineering capabilities through access to Anewa’s skilled and experienced manpower. We understand that Dialog is eyeing India as its potential market for catalyst handling services. Revenue generated from the division was about US$14 million (RM42 million) and management has an ambitious target of achieving US$100 million in five years.

Judging from the fact that Anewa’s net asset value was 39.2 million rupees as at March 2011 and the original cost of investment was about 4 million rupees, it is believed that the company is growing. However, compared with Dialog’s net profit of RM118 million in FY10, we reckon the earnings contribution if any is negligible.

Future earnings catalysts include the Tanjung Pengerang (TP) development and potential marginal oilfield contracts. To recap, Dialog was awarded RM1.9 billion engineering, procurement, construction and commissioning jobs for TP in early June 2010.

LionCor ... Jul11

By the end of July 2011, the Ministry of International Trade and Industry will make a decision on an issue dogging the steel industry – the protection given to Megasteel Sdn Bhd.

Megasteel, the sole producer of HRC or flat steel is seeking additional duties on imported HRC to deter imports while the downstream iron and steel players want the duties removed.

Miti’s deision will likely have a far reaching impact and affect more than the iron and steel industry. It will also put an end to the impasse that has been plaguing the industry since 2010, and which gas caused a split.

Megasteel wants the government to impose an additional 35% duty on imported HRC, on top of the existing 25%, bringing the import tax on HRC to 60%. This, is expected had not gone well with the downstream players.

This new import duty, if imposed, is effectively a protection mechanism for Megasteel. Currently, the downstream players are required to acquire their flat steel products from Megasteel and can only source for the material elsewhere or import if their required specifications for flat steel are not manufactured by Megasteel.

Megasteel has done reasonably well, financially. It had non current assets amounting to rm2.8 billion and current assets worth rm1.71 billion. On the other side, it had current liabilities amounting to rm3.28 billion and non current borrowings of rm785 million.

The high debt levels are due to Megasteel spending rm3.2 billion to step up its flat steel plant in Banting. The investments started at the height of the financial crisis in 1998 and the Lion Group, which owns Megasteel strived to complete the plant despite facing a serious debt crisis.

Because of the hug capital investments, Megasteel sought and is still seeking production in the form of duties for imports of HRC.

The downstream players said that Megasteel should strive for greater efficiency rather than seek continued protection.

The going has been tough for the downstream players as the tax on imported HRC adversely affects pricing, causing local exports of steel products to become uncompetitive. They claim that prices of flat steel by Megasteel are higher than imports.

Coupled with higher gas and electricity costs, the downstream players are feeling the strain. Their lobby for government to deny Megasteel further hikes in duties is supported by other players in the industry.

If Megasteel Sdn Bhd’s petition is approved, many industry players especially the downstream players will suffer as they have to pay a hefty import duty of 60% for HRC. Ultimately, most industries including construction will be affected and higher costs will be passed down to consumers.

Industry players say Miti is under pressure to make a decision. On one hand is Lion Gorup’ who has invested in Malaysia’s steel industry both in long and flat products. On the other are the downstream players some of which have political clout as well.

HIAPTEK ... Jul11

AFTER a period of correction process, Hiap Teck Venture Bhd staged a steep rebound in the wake of renewed bargain hunting interest, which witnessed the shares hitting to a near six-month high of RM1.18 during intra-day session before reversing to finish down nine sen to RM1.05 yesterday.

The recent recovery was backed by encouraging trading volumes and it came after prices had re-tested the 20-month lows of 91 sen on July 14 to form a “double-bottom” pattern.

This stock had penetrated the 14-day simple moving average (SMA), 21-day SMA, 100-day SMA, as well as the 200-day SMA on our radar screen, but we could not confirm that the prevailing trend has shifted to bullish just yet as the mid-term descending line remains intact. The outcome may be known soon and investors should take note that a decisive penetration of the mid-term descending line of RM1.18, also yesterday's intra-day peak, will signal a positive turnaround.

The oscillator per cent K and the oscillator per cent D of the daily slow-stochastic momentum index were fast reaching the overbought area after issuing a buy signal on July 14. Elsewhere, the daily moving average convergence/divergence histogram continued to expand positively against the daily trigger line to retain the bullish note. The 14-day relative strength index retained the bullish posture, fluctuating around the 80-86 points band.

Analysis suggests that if the recent buying momentum is genuine and sustainable, a positive breakout will come about soon, which may see prices scaling higher on bullish-extended mode.

To the upside, stiff resistance is expected at the RM1.57 mark, which is the previous major rally peak. Stop-loss exit is pegged at the 90 sen line.

Computer Down?

What happen when Coffee Machine is broken?

CMMT ... Jul11

CapitaMalls Malaysia Trust (CMMT), the country's largest pure-play shopping mall property trust, is actively looking to add more malls to its portfolio.

CMMT, which was publicly listed in July 2010 was buying East Coast Mall in Kuantan.

When completed, CMMT will have a portfolio of four malls, the rest being Gurney Plaza in Penang, an interest in Sungei Wang Plaza in Kuala Lumpur and The Mines in Selangor. The three malls were valued at RM2.43 billion as at end-June 2011.

CMMT plans to fund any purchase via a combination of funds raised by unitholders as well as bank borrowings.

Any new mall it buys must meet certain criteria, such as having a catchment of at least 300,000 to 400,000 people and sustainable rents.

There was no push for CMMT aims to increase its interest in Sungei Wang to do so at the moment, although "there are always people in talks". CMMT already has control over the mall with its interest of about 62 per cent and it would not make financial sense to buy more now.

HuaYang ... Jul11

WILSON & YORK Research:-

RESULTS REPORT
YTD 1Q FY 12 revenue grew more than 65% year on year, whilst net profits grew more than 134% over the same period. Net margins expanded from 13.1% in 1Q FY11 to 18.7% in 1Q FY12 on the back of better selling prices and lower effective tax rates.
Hua Yang Bhd's land bank buildup of the past few years continues to pay off. Take up rates have been good and both revenue and net profits are set to grow strongly in the quarters ahead.

INVESTMENT RISKS
Risks to our recommendation and target price include: i) increases in the general level of interest rates, ii) possible restrictions on mortgage lending or other related disincentives to property development that are currently being seen in other countries around the region, and iii) a sharp slowdown in the general level of economic activity in Malaysia or among its major trading partners: Singapore, China and the US.

RECOMMENDATION
We maintain our BUY recommendation on Hua Yang Bhd (“HYB”) with a fair value estimate of MYR 2.28. Value investors will be attracted by the combination of solid earnings growth and profitability at earnings multiples well below the company's peers. Looking ahead, average ROE is heading to levels of 13-15%, nearly double the average seen over the period 2006-2009, whilst P-BV remains below 0.8x.
Compared to its peers, HYB offers a higher ROE at lower multiples. See page two of this report for more details. Other heavyweights in the sector trade on 2-3x P-BV, while the average P-BV for the sector is 1.3x. Hua Yang Bhd offers investors an attractive combination of very good growth rates at current year multiples less than 0.8x P-BV and 5x P-E. More importantly, the affordable housing sector that HYB is focused on is far less saturated than the high end segment that so many other listed companies are chasing.

IPO - Bunseng Holdings Bhd

Bunseng Holdings Bhd, a general hardware distributor and marketer, plans to use the proceeds raised from its upcoming IPO to construct a new facility comprising an integrated warehouse and retail centre on a 12.43-acre (4.97ha) piece of land in Jalan Ipoh.

The new integrated warehouse, which is expected to commence construction in the second half 2011, will enable Bunseng to rationalise its existing logistics operations in the Klang Valley as well as expand its capacity.

Bunseng bought the land for RM34 million in 2010.

It would issue 33.3 million new shares and make an offer for sale of 45 million existing shares for the IPO. Bunseng is expected to be listed by the third quarter 2011.

Bunseng mainly markets and distributes its general hardware, such as nails, bolts, nuts and locks to hardware wholesalers, retailers, tradespeople, building contractors, manufacturers and agriculturists.

The company is also the brand owner of several hardware products such as Ace, aman, Colex, ViP, Hitz and Hans.

Bunseng also planned to use part of the proceeds to establish a representative office in Indonesia by the second half 2011 to enhance its marketing and distribution capability in the country.

It will use its subsidiary (Sing Brothers Harwarde Pte Ltd) in Singapore to penetrate the Indonesian market. Exports currently make up 12% of the company’s revenue.

Bunseng made a total profit of RM16 million for the 10-month period ended April 31 on top of RM160 million in revenue, giving the company a net profit margin of 10%. Bunseng posted a net profit of RM20.7 million for its FY10 ended June 30 on the back of RM193.4 million in revenue.

Its closest listed peer is Engtex Group Bhd, currently trading at a price to earnings ratio (PER) of 4.8 times. Bunseng could have a market capitalisation of RM100 million if it is pegged at a similar PER as Engtex upon listing.

AutoV ... Jul11

An autoparts supplier is gearing up for growth as it expands and builds up its autoparts manufacturing business through acquisitions and tie-ups to cater for Proton Holdings Bhd’s upcoming models as well as the potential consolidation of the national carmaker’s vendor supplier base. 

After a surge in earnings in 2010, the company expects its financial results to be flat in 2011 as it mainly relies on Proton’s Exora model for its autoparts sales. Growth is expected to pick up with new models from its primary customer Proton and the newly acquired businesses will add to its bottom line.

Autoparts sales to Proton constitute 70% of the group’s revenue. As the Inspira, Proton’s newest launch, has low local content, AutoV’s parts supply for the model was quite insignificant, explaining the reason behind the decline in revenue in the first quarter (1Q) this year. Slow sales of Exora since its introduction two years ago was another factor.

For 1Q ended March 31, 2011 the group’s revenue fell 11.7% year-on-year from RM26.5 million to RM23.4 million in the current quarter.

In line with the drop in revenue, AutoV also registered a lower net profit of RM2.1 million for the current period, compared with RM3.6 million in the preceding year’s corresponding period.

For the full year ended Dec 31, 2010, the group recorded a higher revenue of RM102.6 million compared with RM86.6 million in 2009, while net profit surged 67.6% from RM6.8 million to RM11.4 million.

BURSA ... Jul11

KUALA LUMPUR: BURSA MALAYSIA BHD []’s earnings rose 30% to RM35.71 million from RM27.49 million a year ago.

It said on Tuesday, July 19 revenue increased by 20% to RM101.05 million from RM84.26 million. Earnings per share were 6.7 sen. It declared an interim dividend of 13 sen a share.

Securities trading revenue increased by 25 percent to RM46.1 million in 2Q11 compared to 2Q10. Daily average trading value for on market trades (OMT) and direct business trades (DBT) was higher at RM1.64 billion (2Q10: RM1.29 billion).

The stock exchange operator said stable revenue increased by 9 percent to RM29.1 million in 2Q11 compared to 2Q10. This was mainly due to higher information services revenue from the increase in subscribers for equities and derivatives fees.

For the first half, its earnings increased by 37.3% to RM76.20 million from RM55.49 million while revenue climbed 25.9% to RM217.16 million from RM172.37 million.

Bursa Malaysia chief executive officer Datuk Tajuddin Atan said: “We recorded our highest half year profit in comparison to other half year profits over the last four years, since 2008, on the back of ongoing market volatility and economic challenges, especially given the uncertainties over eurozone debts”.

He said Malaysia’s capital market was benefiting from the shift in major funds towards emerging markets.

“We would attribute the stronger securities markets performance to the ongoing catalytic activities of the Economic Transformation Programme that has spurred activities in select sectors such as finance and CONSTRUCTION [],” he said.

Securities trading revenue for the first half of 2011, increased by 36% to RM103.8 million, compared to the corresponding period last year.

“We have seen an increase in average trading value by foreign investors by 37% within the same period this year,” he said.

Tajuddin said to drive shareholders’ value, profitability will remain a key performance indicator and it targeted net profit to grow by at least 20% per annum on average over the next three years.

“Liquidity is still a challenge but we are seeing changes in Government linked investment companies progressively releasing their holdings. We hope to ensure that our securities daily average trading value growth is at par with leading listed exchanges in the region; and achieve 50,000 contracts in our derivatives market by 2013,” he said.

CHHB ... Jul11

Taiwanese-controlled Chunghwa Picture Tubes (M) Sdn Bhd is divesting its property investment here — a deal that will see the family of Tan Sri Lee Kim Yew consolidating their stake in Country Heights Holdings Bhd (CHHB).

Sources say the sale of the remaining 13.93% stake in CHHB to the Lee family has been sealed. The transaction will further strengthen Lee’s family shareholdings in CHHB, which shall benefit from new development plans in the Mines Resort area.

The Lee family had on April 20 2011 bought 9.6 million shares or a 3.48% stake in CHHB from Chunghwa, lifting their interest to 53.52%. Acquiring the rest of Chunghwa’s stake would boost the family’s holdings to 67.45%.

Its net asset stood at RM2.58 per share and at is at a great discount to its revised net asset value which should be much higher given the low book cost of the group’s properties, especially in the Mines Resort area.

This is despite the fact that the NTA stated in its books are not a true reflection of the value of the company. Many of its properties have not been revalued since the early 1990s and, as a result, the values stated in its books are grossly undervalued. A case in point is the value of its 19.59 acre freehold land in Kajang. The land carries a net book value of rm5.65 million which works out to rm6.62 psf when the land is acquired. Current market price is rm130 psf that is a whopping 20 times more.

Another example is the 9.07 acre lease hold land for residential use in Mines Resort City, which is valued ay rm9.93 million or rm25.15 psf. Current market price is between rm250 and rm300 psf.

However, the true value of its properties are not as much of a priority to the company as repositioning itself as wellness focused master developer. Over the next two years, Country Heights is embarking on a transformation of its flagship into an integrated one stop wellness resort.

Country Heights and its strategic partners have committed to invest rm3.2 billion over the next 10 years.

Basically, Country Heights has run out of land. Almost all its landbank has been developed, save for some land in Borneo and about 40 acres in Cyberjaya.

Still, there’s no urgency on Lee’s part to take the company private. Among other reasons, the Lee family through their private vehicle own a sizeable tract of land in the Mines Resort area, larger than that held by the listed CHHB, which they already control. For instance, 40 acres of land which is presently the Mines Wonderland Theme Park and over 200 acres of developable area at the South Lake opposite the Serdang KTM commuter station are owned privately by the family.

It is learnt that the family’s priority now is to get funding for the development of the land, which inevitably shall add more value and spur the redevelopment of the existing properties under listed vehicle CHHB such as the Mines Waterfront Business Park, the Palace of the Golden Horses, the Mines Exhibition and most importantly, the North Lake.

The family acquiring more shares in CHHB at this stage, while retaining its listing status, would allow them to realise value when the valuation of the listed company improves, thus in turn raising more funds for the development of the family’s South Lake properties. At the same time, minority shareholders of CHHB will also stand to benefit from the upside. It is a win-win situation.

The development and redevelopment of the larger area at the Mines, involving CHHB’s North Lake properties and the Lee family’s South Lake, fall under the banner of the Mines Wellness City, an Entry Point Project which has an estimated development value of RM5.5 billion by 2020.

Given the choice location, easy access to major highways and public transport system as well as the massive lake frontage, CHHB’s North Lake and the Lee family’s South Lake are considered hidden jewels in the Klang Valley property sphere. While both the listed company and the family have been trailing other players in the local property scene for the past 10 years, since the Asian financial crisis, the planned new activities at the North and South Lake will catapult them back into the race.

Kurasia ... Jul11

Sources say it is looking to dispose of its insurance business and has already attracted several interested parties. It is ranked among the top five players in the general insurances space.

There is little indication at what price Kurnia Insurans would hived off. But observers opine that the insurance arm could fetch a valuation of between 1.5 times and 2.5 times book value, which is the industry average.

The value of insurance companies has increased of late. Previously, general insurers rarely commanded a premium above 1.5 times book value. But the latest transactions show that deals can be done at more than three times book value such as Jerneh and Pacific.

As at end March 31, 2011, Kurasia’s net asset per share stood at 22.97 sen. Assuming the deal is done at two times book value, it will be about 46 sen.

Valuation for Kurasia’s insurance business should be within industry average. At the lower end, it would be 1.7 to 2 times book value. It will not be lower than MAA’s valuation. MAA sold its insurance its assets at 1.36 times book value.

It is understood that proceeds from the sale of Kurasia Insurans will be used to pare down Kurasia’s debt. Kurasia has borrowings of rm360 million. The company’s cash and cash equivalent stood at rm82.4 million as at March 31, 2011.

Its added advantage is that unlike other insurers, it has a regional reach with its operations in Thailand and Indonesia.

It saw a strong rebound in its 1QFy2011 ended March earnings. Net profit was rm14.5 million compared with a net loss of rm8.5 million in 4QFY2010 ended Dec 31, largely underpinned by lower claims ratio, and better cost control.

The results were mainly contributed by better underwriting results which improved from a loss of rm22.7 million to rm4.5 million.

Y-o-Y, Kurasia’s poor performance had been largely due to Kurasia Insurans portfolio, which heavily relies on motor insurance.

But over the past year, Kurasia has reduced its exposure on motor insurance. It has undertaken efforts to improve the non motor contribution in its business portfolio.

However, Kurasia could be in for better days given the hike in third party insurance premiums slated for Jan 2012. If Kurasia can hold their claims ratio well, then the hike in premiums would go to its bottom line.

Nevertheless, market observers remain cautious about its outlook in the near term, owing to its patchy financial performance over the last few years.

CIHLDG ... Jul11

CIMB Research Report.

Investment highlights
• Maintain BUY. News that Japanese beer maker Asahi is in talks to acquire CI Holdings’ (CIH) wholly-owned Permanis is a positive surprise, especially if the price tag turns out to be the reported US$200m (RM600m). This is 28% above CIH’s market cap, 8x what CIH paid for Permanis. It works out to an attractive FY6/12 P/E of 15x. We maintain our EPS forecasts and target price of RM4.78, which we
continue to peg to our target market P/E of 14.5x. This news could catalyse a rerating, along with CIH’s increasingly marketable product line. Even if this deal does not pan out, CIH will remain an attractive investment proposition at 9-11x FY12-13 P/Es. CIH remains a BUY and our top pick, not only for the F&B sector but also for our small-cap universe.

• Scenario 1: If the acquisition materialises. Should the acquisition by Asahi go through, CIH would be left with its sanitary fittings business. It may prompt management to look more aggressively into opportunities in the food segment. CIH’s MD and largest shareholder Datuk Johari Abdul Ghani has extensive experience in the food business, having been the MD of QSR Brands (QSR MK, Outperform) and its subsidiary KFC Holdings (KFC MK, Not Rated) before 2006 when Johor Corp took over the QSR group and put in its own management team.

• Scenario 2: If the acquisition does not materialise. In the event of no deal, CIH would remain a Buy for its own fundamentals 1) Market leadership – Tropicana has market leadership of the juice market with a 25% slice only three years after its launch. 2) An expanding product portfolio – A new non-carbonated drink, Tropicana Twister in lychee variant, was launched recently. In 3QFY11, non-carbonated drinks accounted for 43% of beverage sales compared with 20% a few years ago. CIH is aiming for a 50:50 sales split between carbonated and non-carbonated in the next few years. 3) Attractive valuations – CIH is trading at 9-11x FY12-13 P/Es.

Recent developments
Yesterday, Bloomberg reported that Japan’s biggest beer producer by sales volume, Asahi Group Holdings Ltd, is in talks with CIH to acquire the latter’s wholly-owned Permanis for about RM600m. Asahi is reportedly competing with another company to buy the beverage maker from CIH. The newswire added that a deal may be concluded in 4-6 weeks’ time.

Permanis has exclusive rights to bottle, distribute and sell drinks under the PepsiCo brand and other peripheral brands (i.e. Mirinda, Seven-Up and Mountain Dew) within Malaysia. It also manufactures its own drinks under various trademarks including Chill, Excel, Bleu and Shot.

Earnings outlook
A positive surprise. The report is a positive surprise as Permanis is in the position of a potential target, a reversal from recent years when its parent company took on more of the role of an acquirer as it scouted for a food business to complement its beverage business.

Potentially an attractive deal. We view the reported offer price of about RM600m as attractive on three counts:
• It is 28% above CIH’s market cap as at yesterday.

• It values Permanis’s business at 15x FY6/12 P/E, higher than our 14.5x target P/E for CIH whose bottomline is driven by Permanis. Permanis makes up 90% of our projected FY6/12 net profit of RM44.3m (RM0.31 per CIH share) for CIH. The remaining 10% comes from sanitary fittings. CIH’s wholly-owned Doe Industries Sdn Bhd is Malaysia’s leading manufacturer of chrome-plated brass taps, faucets, showers and other sanitary fixtures under the Doe brand.

• It works out to a whopping 733% premium over the RM72m price that CIH paid for Permanis in FY04. Permanis became a wholly-owned unit of CIH following a major restructuring at KFCH in which CIH had been the single largest shareholder prior to 1 Apr 04. PepsiCo could compete better with Coca-Cola. We believe that the final decision on the sale of Permanis will be in the hands of PepsiCo. While CIH has no doubt done an exemplary job in lifting Permanis’s sales and profile (Figure 1), PepsiCo may be looking for a stronger partner and platform in Malaysia and the region to better compete with Coca-Cola, which will start operating its 123,024 sq m bottling plant in Nilai by year-end. In a move that could change the landscape of the regional soft drinks segment, Coca-Cola will spend RM1bn in Malaysia – the company’s biggest
investment ever made in the country – over the next five years to boost its presence in Southeast Asia, which will heat up the already sweltering competition with PepsiCo.

Scenario 1: If the acquisition materialises. Should the acquisition by Asahi go through, CIH would be left with its sanitary fittings business. It may prompt management to look more aggressively into opportunities in the food segment. CIH’s MD and largest shareholder Datuk Johari Abdul Ghani has extensive experience in
the food business, having been the MD of QSR Brands and its subsidiary KFCH before 2006, when Johor Corp took over the QSR group and put in its own management team.

Scenario 2: If the acquisition does not materialise. In the event of no deal, CIH would remain a buy on its own fundamentals 1) Market leadership – Tropicana has market leadership of the juice market with a 25% slice only three years after its launch. 2) An expanding product portfolio – A new non-carbonated drink, Tropicana
Twister in lychee variant, was launched recently. It is Permanis’s fourth Tropicana Twister flavour after orange, apple and blackcurrant. In 3QFY11, non-carbonated drinks accounted for 43% of beverage sales compared to 20% a few years ago. CIH is aiming for a 50:50 sales split between carbonated and non-carbonated in the next few years. 3) Attractive valuations – CIH is trading at 9-11x FY12-13 P/Es.

Recommendation
Maintain BUY. Assuming that CIH sells Permanis at RM600m and does not reinvest the proceeds in a new business, we could be looking at a 6% dilution in our target price to RM4.50 based on SOP (Figure 3). We understand that all except RM5m of CIH’s RM124.5m borrowings relate to Permanis. For now, we maintain our EPS forecasts and target price of RM4.78, which we continue to peg to our target market P/E of 14.5x. This news could catalyse a re-rating, along with CIH’s increasingly marketable product line. Even if this deal does not pan out, CIH will remain an attractive investment proposition at 9-11x FY12-13 P/Es. CIH remains a BUY and our top pick, not only for the F&B sector but also for our small-cap universe.

Meeting ...

Wonder....

AFG ... Jul11

While speculation is rife that the Singapore government’s investment arm Temasek Holdings Pte Ltd and co-investor Langkah Bahagia Sdn Bhd are keen to divest their combined stake of close to 30% in Alliance Financial Group Bhd (AFG), sources said they have yet to seek the advice of investment banks on how to proceed. No mandate has been given out yet on this deal.

Market talk has it that Temasek may look to sell its stake in AFG, hot on the heels of its partial stakes divestment in two of China’s biggest banks – Bank of China and China Construction Bank – announced this week.

To recap, one of its major shareholders Temasek Holdings Pte Ltd, said it was rebalancing its portfolio, which sparked speculation of potential mergers and acquisitions M&A.

The Singapore-owned investment company, which announced a major real estate tie-up with its Malaysian counterpart Khazanah Nasional Bhd , raised US$3.63 billion (RM10.9 billion) by selling some of its shares in China Construction Bank and Bank of China — China’s No 2 and No 3 lenders by asset size.

It was previously reported that Langkah Bahagia, a company believed to be linked to former finance minister Tun Daim Zainuddin, has been keen to divest its stake in AFG for quite some time. Essentially, Temasek and Langkah Bahagia have a combined stake of 29.06% in AFG through investment vehicle Vertical Theme Sdn Bhd.

Vertical Theme Sdn Bhd is 51% held by Langkah Bahagia and the balance owned indirectly by Temasek. Thus, Langkah Bahagia’s stake in AFG amounts to some 14.8% while 14.26% is indirectly held by Temasek.

However, some are unsure if Temasek would want to exit AFG, especially since its management has time and time again reiterated Temasek’s interest in having a presence in the local banking scene.

The question has been raised before, and Alliance’s management has maintained that Temasek would not want to sell the stake as it wants to maintain its presence in the Malaysian banking scene notwithstanding Bank Negara Malaysia’s rules on foreign ownership of banks.

In 2010, Singaporean Sng Seow Wah was appointed to lead the group’s banking division, Alliance Bank Malaysia Bhd. He is also a director of AFG. Prior to joining Alliance Bank, Sng was the executive vice-president, head of human resources, special projects and corporate communications at Fullerton Financial Holdings (International) Pte Ltd, which is part of Temasek Holdings.

Also AFG can be an attractive merger and acquisition target for foreign players such as Singapore’s DBS Group Holdings Ltd (which is 27% owned by Temasek also). AFG is the country’s smallest bank by asset size, which stands at RM36.07bil as at financial year ended March 31.

Sng’s appointment may be a sign of Singapore’s DBS Group playing a more direct role in AFG. Alliance was a good takeover target and attached an average book value of two times to a potential takeover deal.

AFG is trading (06 July 2011) at 1.67 times its book value of RM2.17 a share at current levels while its price-to-earnings multiple was 11.9 times as at March 31 2011.

However, it is worth noting that the premium for Malaysian banks has gone up a notch after the aborted takeover bids by Malayan Banking Bhd and CIMB Group Holdings Bhd for RHB Capital Bhd.

Is two times book now seen as a new benchmark for Malaysian banks? Market observers said that smaller banks that are left alone will command lower valuations while those seen as having M&A potential will see higher valuations.

But a wider industry range would be 1.8 times to 2.2 times, since EON Capital Bhd was taken over at 1.4 times book value while the recent stake sale in RHB Capital Bhd by Abu Dhabi Commercial Bank was done at 2.25 times price-to-book value.

Some smaller players may see a premium if the big banks see it as an easier way to gain scale

In retrospect, AFG was last in the limelight in the early part of 2010 due to the spat between its former CEO Datuk Bridget Lai and the board. The bank has since stayed largely under the radar with new group CEO Sng Seow Wah at the helm.

It is said that AFG has gone through a paradigm shift from loan-centric to placing more emphasis on developing non-interest income under its new Singaporean CEO.

Bjcorp ... Jul11

CIMB Research Report.

Investment highlights
• Banking on long-term prospects. B-Corp’s HK$3.5bn (RM1.3bn) proposal to take its 55.5%-owned Cosway private is pricey by Malaysian standards as it is paying HK$1.10 (RM0.42) cash per ordinary share and HK$1.10 per ICULS, which works out to 33x CY12 P/E, more than double Amway’s 15x CY12 consensus EPS. However, we note that Cosway has strong long-term prospects given its robust growth and scalable business. The privatisation could dilute FY12-14 EPS by 1- 7.3% but the impact is much lower in FY14 because of the anticipated strong growth of Cosway. We maintain our numbers pending completion of the deal but change our valuation method for Cosway from 8x P/E to marked-to-market. This increases
our SOP-based target price from RM1.38 to RM1.42 even though we raise our SOP discount from 30% to 45%. The stock remains a HOLD.

• Earnings dilutive. We forecast a 3-year net profit CAGR of 29% for Cosway, driven mainly by the opening of new “free stores”, intensified recruitment activities and the widening of its product portfolio. But the earnings impact of the higher stake will be more than offset by the cost of financing the acquisition. We estimate an additional RM78m interest expense p.a. assuming that it is 100% debt financed at 6.0% cost.
Assuming completion of the deal in 3QFY12, B-Corp’s FY12-14 EPS would be diluted by 1-7.3%. Note that the high dilution in FY12 relates partly to one-off privatisation expenses while the high dilution in FY13 is due to the full-year impact of the privatisation. Although short- to medium-term valuations are expensive, we
note that Cosway has strong long-term prospects given its robust growth and scalable business.

• Higher gearing is expected. As at April 2011, B-Corp’s net gearing stood at 0.44x. It will rise to 0.65x if the purchase is fully funded by borrowings. The interest cover for FY12 will drop from 3.6x to 3.3x.

Recent developments
Proposed privatisation of Cosway. B-Corp has proposed to take its 55.5%-owned subsidiary, Cosway Corporation Limited, private at a cash consideration of HK$1.10 (RM0.42) per ordinary share and HK$1.10 per HK$0.20 nominal amount of ICULS. The offer price of HK$1.10 represents a 45.1% premium over its 5-day volume weighted average market price. The proposed privatisation is subject to the approval of B-Corp’s shareholders as well as the relevant authorities in Hong Kong. As a result of the proposed privatisation, the proposed offer for sale of Cosway ICULS at RM0.09 apiece to B-Corp’s shareholders on the basis of one Cosway ICULS for every two BCorp shares is aborted.

Earnings outlook
Caught by surprise. The proposed privatisation came as a surprise as management had not indicated in the past any plans to take Cosway private. Based on the HK$1.10/share offer price, the privatisation exercise would cost B-Corp HK$2.3bn or RM882m for the shares that it does not own and HK$1.2bn or RM445m for the ICULS that it does not own. We think that the acquisition price or HK$3.5bn or RM1.3bn is
expensive by Malaysian standards as it values Cosway at 33x CY12 P/E, based on our forecast. This is more than double Amway Malaysia’s 15x CY12 consensus EPS.

However, we note that Cosway has a global reach whereas Amway Malaysia is restricted to the Malaysian market. We project an FY10-13 net profit CAGR of 29% for Cosway, driven mainly by the opening of new “free stores”, intensified recruitment activities and a wider product portfolio. “Free stores” are franchised stores where the franchisees place a deposit with Cosway, which, in turn, pays for all the capital expenditure and monthly costs.

Earnings dilutive. Assuming the privatisation is 100% debt-financed at 6.0% interest, B-Corp would incur an additional RM78m in interest expense per annum. This outweighs the additional income arising from a higher stake in Cosway. Assuming completion of the deal in 3QFY12, B-Corp’s FY12-14 EPS would be diluted by 1- 7.3%. Note that the high dilution in FY12 relates partly to one-off privatisation expenses while the high dilution in FY13 is due to the full-year impact of the privatisation. The dilution is much lower in FY14 because of the anticipated strong growth of Cosway. Although short- to medium-term valuations are expensive, we note that Cosway has strong long-term prospects given its robust growth and scalable business

Recommendation
Maintain HOLD while raising target price. Pending the completion of this deal, we make no changes to our EPS forecasts though we flag the potential dilution of 1-7.3% for FY12-14 EPS. In view of this proposed privatisation, we now change our valuation method for Cosway from 8x P/E to marked-to-market. This raises our SOP/share from RM1.97 to RM2.59. However, to factor in the higher gearing needed to take Cosway
private, we widen the discount to its SOP value from 30% to 45%. The net effect of these changes is a rise in our asset-based target price from RM1.38 to RM1.42. The stock remains a HOLD due to its volatile earnings record and potential delays in the development of Berjaya City or the Berjaya Hills landbank. For big-cap exposure to conglomerates, investors should opt for Sime Darby (SIME MK, Trading Buy).

Maybulk ... Jul11

The company, which transports dry bulk cargoes such as iron ore, coal and grains between continents, was badly hit by the global financial crisis in 2008. Its earnings have declined substantially over the last two years.

The group is not the only one suffering post crisis as other shipping companies, such as Swee Joo Bhd, have been in the red in the last two years.

While the global economy has picked up since then, the shipping industry is still reeling from the overbuilding of vessels during the glory days. The shipping industry, which was badly hit by the global financial crisis, seems far from a recovery as the Baltic Dry Index (BDI) continues to trend south.

Note that while commodity prices have skyrocketed since the 2008 financial crisis, shipping rates have moved in the opposite direction, pointing to severe over-capacity in the shipping industry.

The BDI, which tracks various dry bulk rates over routes on a time charter and voyage basis, is also trading near the post-crisis level at about 1,413 points. The index peaked at 11,793 points in May 2008 before plunging to a low of 663 points in December that year.

However, given that the index and Maybulk’s share price are close to their lows of December 2008, when every indicator was at its bleakest level, the question now is whether this is the bottom of the down-cycle.

Although Maybulk has been heading south, there is limited downside as prospects of lower earnings have already been priced in.

From a share price perspective, it is already (early July 2011) near liquidation level. Even if sentiment is badly affected by a potentially bad 2Q, the price may quickly rebound to its asset value.

As at end-March 2011, Maybulk’s net assets per share was RM1.71.

Although earnings prospects may not be at their best, note that Maybulk is in the process of expanding its fleet, which may indicate that prices are at very depressed levels and may be near the lows.

Maybulk CEO Kuok Khoon Kuan has said now is the best time to buy vessels again as prices have come down and the company is looking at rebuilding its fleet after disposing some of it in 2008 at a good profit. Maybulk is mainly capitalising on the weakness in freight rates rather than looking at it as a bottom. So this appears to be an opportune time for them to buy vessels.

Maybulk has sailed through the tides well and has been credited with being able to read the cycles well. While shipping companies were buying vessels when freight rates were at their peak, Maybulk made good money by reducing its fleet.

Although the company’s net profit halved in FY09 ended December, to RM243.8 million from RM460.9 million in the previous year, it was because there was a substantial gain from the disposal of vessels in 2008. In FY10, net profit fell only marginally to RM242.7 million.

Maybulk’s 1QFY11 results were a pleasant surprise despite the lull in the shipping industry. Thanks to foreign exchange gain, net profit for the quarter rose 2.5% to RM52.7 million from RM51.4 million in the previous corresponding quarter. This is despite revenue coming in lower at RM84.9 million from RM114.4 million previously, the result of a 28% fall in the hire rates.

Early 2011, Maybulk’s directors expected the BDI to remain volatile and likely to get worse, citing overcapacity as a main concern.

It is worth nothing that mid 2011 is expiry of the lucrative Tenaga [Nasional Bhd] contract. In addition valuations for Maybulk were rather pricey at over 20 times price-earnings multiple compared with regional peers at 15 times. Maybulk would be a laggard in an up-cycle because of its high valuations.

At the moment, recovery seems more likely to come later rather than sooner. But if you hold a long-term view, then Maybulk is worth a look now. More importantly, Maybulk is in a better position to leverage the up-cycle.

IPO ... AQRS

Engineering and property based Gabungan AQRS (AQRS) has been given the nod by the Securities Commission to list on the Main Market of Bursa Malaysia Securities Bhd.

The company, which is an enlarged group of four main building, civil engineering construction and property development companies will make a public issue of 62 million new shares of with par value of 25 sen each and an offer for sale of 30 million new shares with par value of 25 sen each enroute to listing.

As part of the listing exercise, it would acquire the entire issued and paid up capital of building and civil engineering construction companies Gabungan Strategik Sdn Bhd, Pembinaan Megah Ikhlas Sdn Bhd and Motibina Sdn Bhd as well as property development company AQRS The Building Company Sdn Bhd for RM73.38 million which will be satisfied through a share swap.

The integrated group was streamlined into two distinct divisions with construction being the core activity and property development, the complementary activity.

Meanwhile, wholly-owned subsidiaries Gabungan Strategik, Megah Ikhlas and Motibina make up the construction division while the other wholly-owned subsidiary, AQRS, helms the property development division.

Gabungan Strategik’s two property development associate companies, Grand Meridian Sdn Bhd and Nusvista Development Sdn Bhd, are wholly-owned subsidiaries of AQRS.

Grand Meridian and Nusvista make up the property division together with AQRS and AQRS’ wholly-owned subsidiary Bright Reach Sdn Bhd and its 64%-owned Crystal Aspect Sdn Bhd.

The company was essentially a synergistic integration that merged the resources, experience, expertise, skills and strengths of companies that have individually and independently carved their own niche and built their own success.

As an enlarged group with extensive exposure and depth of experience in particular construction, AQRS is therefore well positioned to seize the opportunities available in the construction and property development industries in the country.

AQRS, having the ability to tap the capital market following the public listing, would be able to further expand and propel itself to a new level of growth and success.

MBSB ... Jul11

In 2009, it decided to go big on personal financing and Islamic banking had paid off going by its record earnings in FY2009 and FY2010.

If MBSB’s growth momentum persists, industry observers say it will put it in a good stead to offer a wider range of financial products.

In 2009, it kicked off a two year plan to push the group beyond its traditional base of being a property financier, offering a wider range of facilities to retail and corporate customers including in the Islamic financial products market.

It also planned to issue credit cards and other services targeted at government later in 2011. Market talk has it that it is mulling the acquisition of a stock brokerage however its CEO denied.

Unlike conventional banks which are governed under the BAFIA, MBSB was granted the status of an Exempt Finance Company by the Ministry of Finance, which allow it to undertake financing business in the absence of a banking license.

Its two biggest shareholders are the EPF and PNB which hold a 65.5% and 13.81% stake respectively.

Besides the persona; financing sector, MBSB is making inroads into certain market segments, especially high net worth clientele in the mortgage market. Also MBSB moved into contract financing where it provides financing to companies that have secured government contracts in the oil and gas sector.

As at end March 2011, MBSB had cash and cash equivalents of rm834 million.

Over 90% of its top and bottom line was contributed by its financing segment, while hotel operations brought in a small contribution.

It is also planning to grow its branch network across Malaysia.

MBSB is in a prime position to benefit from a significant vacuum in the personal financing market clampdown on lending by cooperatives.

After cementing its place in offering financing to civil servants, MBSB may even want to ventures out to fight for a slice of the mass retail market.

Landmark ... Jul11

A proposal for a new casino on Bintan, an Indonesian island off the coast of Singapore, was shot down in Feb 2011 by Indonesian president Susilo.

His message was a stern warning to the Riau government, which was toying with the idea of legalizing gaming for the first time in Indonesia to attract tourists away from Singapore.

PT Wisata had, in Jan 2008, zoned Treasure Bay Bintan as an exclusive integrated tourism zone with permission to conduct certain licensed activities, including gaming. Wisata which is authorized by the Riau government to assign zones for certain licensed activities, has also zoned Treasure Bay Bintan for medical tourism, multimedia and IT hosting and other entertainment.

Under the zoning agreement, Wisata is entitled to a limited share of profits from Landmarks’ unit, Bintan Treasure Bay Pte Ltd, for specific plot of land in its development.

The company has already forked out rm760 million to acquire the land in Bintan island. It does not really have any strong core business apart from the Andaman Resorts in Langkawi.

According to its latest annual report, Landmarks is soldering on with its planned development in Bintan, which was stalled by the global financial crisis late 2008. In the two years that the project was stalled, Landmarks revised its development master plan for Treasure Bay Bintan and negotiated for favorable development rates and raw material costs.

Landmarks started site works in Bintan in 3Q2010 and is expected to spend most of 2011 putting the structures in place.

The 338ha tract in Bintan was revalued at S$242 million psm in 2008 following the zoning by Wisata and revisions to its master plan.

As the project to develop the resort gets off the grounds, industry observers are wondering when Landmarks will see returns from its Bintan venture.

Based on preliminary studies, Landmarks says its lifestyle hotel, resort and residential and commercial development projects in Treasure Bbay Bintan would cost about S$921 million to develop.

Nevertheless, a gaming license will be the biggest wildcard for Treasure Bay Bintan. It is believed that it is only a matter of time before the government of Indonesian endorses that granting a license for gaming operations in Indonesia would help to attract more visitors.

WCT ... Jul11

WCT’s 2011 job win target remains at RM2 billion riding on a sizeable RM10 billion tender book. This will provide the lift to its RM3.4 billion outstanding order book.

WCT includes potential works in Abu Dhabi and Saudi Arabia. Domestic jobs include a government building job and the LRT Package B in which WCT has participated in the tender. The award for one of two lines (Kelana Jaya) is expected soon while the other (Ampang) at end-3Q or early-4Q.

WCT has also participated in the contractors pre-qualification for the Klang Valley MRT (Sg Buloh-Kajang line) elevated structure works, which closed on April 13 2011. Despite more than 70 contractors having participated, we are positive on WCT being pre-qualified. The elevated structure, spanning an estimated 41.5km, offers a revised works value of RM12 billion to RM13 billion, we understand. The call for tender is expected in July 2011, and work awards towards end-2011.

1Medini condominium (gross development value raised to RM700 million from RM600 million) is still on track for its maiden launch in September. Unbilled sales of RM264 million (73% at Bandar Parklands, 27% in Sabah) should provide for stronger property earnings ahead. The terms are still being finalised with financing issues being sorted out.

WCT has a 70% stake in the concession, together with Malaysia Airports (30%).

TGoffs ... Jul11

Tanjung Offshore Bhd's outlook remains given the slow performance of its non-marine chartering division which has been a drag on rofitability.


Tanjung Offshore has been awarded long-term charter contracts from Petronas for three offshore service vessels (OSVs) collectively valued at RM50 million. The long-term contracts for the OSVs are for a period of between one and three years, effective June and July 2011, respectively, with options to extend for a period of between one and two years.

At this junction, market observers are not too optimistic about the company given its two consecutive quarterly net losses, even though the bulk of its OSVs are on long-term charter with Petronas and its production-sharing contracts contractors.

The immediate catalyst to Tanjung Offshore's share price recovery would be the listing of Bumi Armada, which is expected to boost the sentiment of all oil and gas vessel players in Malaysia.

GKent ... Jul11

George Kent (Malaysia) Bhd, an engineering group, is confident of winning the Ampang-Line Light Railway Transit (LRT)'s extension mega infrastructure project worth RM1.5 billion.

Prasarana Bhd is expected to announce the winner of the Ampang LRT extension project by September 2011.

George Kent is also said to be one of the bidders for the RM5 billion double tracking job from Gemas to Johor Bahru.

The company's bid for the project was strengthened by George Kent's previous experience of handling government contracts and its achievements

The company also produces water meters and the casing for the meters has embarked on a RM50 million plan to upgrade its manufacturing facilities in Puchong, Selangor to accommodate higher sales in the meter and Original Equipment Manufacturing businesses.

George Kent's pre-tax profit for the first quarter ended Apr 30, 2011 jumped to RM4.8 million from RM3.9 million in the same quarter last year. Its revenue, however, slipped to RM30.7 million from RM32.5 million previously.

Meanwhile George is planning to double its net profit every three years on the back of stronger order book for both its water meter manufacturing and construction divisions.

While you were out...

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Help ... Jul11

By Insider Asia.

- Weak 2QFY11 due to higher costs and one-off factors
- Hit by delays in Fraser campus, Vietnam enrolment
- New campuses, overseas expansion to spur growth
- Earnings downgraded but maintain Buy

HELP’s results for 2QFY Oct 2011 (1 Feb- 30 April 2011) were below expectations due to several one-off factors. Revenue for the quarter rose 1.3% y-o-y to RM31.4 million. However, pre-tax profit was flattish, gaining just 0.5% to RM10.2 million while net profit declined 6.7% to RM6.5 million. For 1HFY2011, revenue rose 2.2% to RM55.7 million, while pre-tax profit increased 3.1% to RM14.3 million and net profit dipped 1.7% to RM9.2 million. This accounted for 40% of our earlier full year net profit forecast of
RM22.8 million.

The relatively weak results in 2QFY2011 were due to several one-off factors locally and overseas, as well as higher personnel costs. On the local front, the shifting of HELP-ICT from the Klang campus to Fraser
Business Park in Kuala Lumpur was delayed from Jan to April, due to handing over delays by the developer.
As such, we understand the company did not undertake enrolment during the January intake period, as it had wanted to market courses at the new and better-located campus.

With the shift to Fraser Business Park now completed, we understand that it has since enrolled 200 new students in May, and this will be reflected in the coming quarters. The shift also increased relocation and renovation costs. Another issue was the Ministry of Higher Education’s directives for education
institutes to streamline their twinning programmes. As a result, HELP’s twinning programmes were transferred from HELP University College to another subsidiary, HELP Academy.

This transitional period had affected the intake of students for twinning programmes, especially the University of East London programmes. Since then, HELP Academy has obtained the approvals to recruit foreign students and for local students to apply for government loans.

We maintain our BUY recommendation, but are revising our FY2011 forecast down by 8.3%.

Much of the issues in Vietnam (due to government regulations) and Fraser Business Park (due to the delay in its campus shifting exercise) have been rectified and will be reflected in the next two quarters, although the company will miss out on half a year’s enrolment in Vietnam.

Fully operational since April, the Fraser Business Park campus on Jalan Sungei Besi in downtown Kuala Lumpur is being occupied by HELP-ICT. HELP is leasing about 220,000 sq ft of space at a preferential rate, which can accommodate up to 5,000 students. The campus will cater largely for postgraduate, technical and vocational courses, and will host a wide range of new courses such as culinary, hospitality, performing arts and physiotherapy, among others.

HELP-ICT has recruited 200 new students in May, bringing its student base to 1,200 with the remaining 1,000 relocated from the Klang campus. The HELP group currently has a total of 12,000 students, with about 10,800 students in Damansara Heights. This excludes students overseas studying for its accredited courses in Vietnam, China and Indonesia.

We understand its degrees in Vietnam have been audited and approved, and the partner, Vietnam National University, should be able to undertake enrolment in 2H2011, after missing out on the first half of the year.
Going forward, cost pressures, especially for personnel expenses, will also continue to rise as HELP prepares to upgrade itself to full University status from University College at present.

Apart from a full-fledged university campus, some of the other requirements include a lower staff-to-student ratio and a higher number of teachers with PhD qualification. These issues, as well as costs associated with its new campus in Subang 2, may dampen earnings growth in the next 1-2 years.

Nonetheless, we continue to like HELP’s strong business model and brand name, which has helped to expand its student population base, extend its presence overseas and increase the appeal of its own degrees.
The increasingly prohibitive cost of overseas degrees, and HELP’s branding and academic standing will continue to increase its student base and ability to increase fees in the future, especially for twinning degrees.

HELP has mapped out a growth strategy for the next few years – both domestically and internationally. HELP aims to grow its domestic student base from around 12,000 at present to 16,000 by 2016. Its domestic expansion will be anchored by two new campuses, in Fraser Business Park and the 23.3-acre Subang 2 campus, the latter will see groundbreaking this month. HELP will also widen its target market by increasing the levels of education and courses – from mainly tertiary to postgraduate, secondary schooling, certificate and vocational courses.

The flagship Subang 2 campus is expected to cost around RM150 million in total, including land cost, with total built-up space of one million sq ft. However, construction will be staggered in phases, with preliminary plans for a first phase of 300,000 sq ft of built-up space.

The international strategy involves expanding HELP’s footprint and branding throughout the region.
HELP is expanding its overseas base further. It is in the process of setting up new affiliations in Indonesia, China, Cambodia, India, the Maldives, UK and Singapore, apart from an education arm in Australia and a venture into online learning.

With these new tie-ups, the company should see significant overseas income from FY2011 onwards, and expects overseas revenue to grow from 10% at present to 50% by 2016.

HELP’s earnings have grown at a double-digit clip since FY2004, with net profit rising from RM5.7 million that year to RM19.1 million in FY10. Following the earnings revision, we now expect net profit to rise 9.3% to RM20.9 million in FY11 and 15% to RM24 million in FY12, with EPS of 14.7 sen and 16.9 sen, respectively.

At the current price of RM2.59, they are trading at 17.6 times FY11 and 15.3 times FY12 earnings. While the stock appears fairly valued for now, we continue to like its longer-term growth prospects and strategy, strong branding and defensive qualities.

Leader ... Jul11

TA Securities Research:-

Leader Universal is set for a bountiful harvest in 2H11. The impending big ticket projects such as the KVMRT,
Phase 2 of the LRT extension projects, construction of power plants and sustained demand from Tenaga
Nasional Berhad would see the group through for the second half of the year. Its overseas market demand
looks rosy and should also contribute significantly to the group’s earning.

Demand for Cable & Wires
We believe that the demand for cable & wires would remain buoyant for the remaining part of the year as contractors and project owners are expecting to start sourcing for raw materials for impending projects. In‐progress and upcoming projects such as the KVMRT, LRT extension projects and SCORE works (dams, new transmission lines, sub‐station, smelter plants etc) would be the group’s near to medium term focus its cable and wire supply business.

The company reckons that the demand from Tenaga Nasional Berhad (TNB) is still coming in very strong and is expected to sustain at least until end of FY11. Industry players also noted that TNB’s capital expenditure for fiscal years ending Aug 31, 2011 and 2012 will remain between RM4.2bn and RM4.5bn but could peak to RM6.5bn in 2013 as additional funds would be needed to complete its three new power plants.

Regional demand has also picked up strongly and is expected to sustain over the near term into early next 2012. The group’s global outlook remains robust as demand is still very encouraging and is expected to remain so over the next three to six months. The group guided that they continue to receive orders from customers in the new markets of the African region, South America and the Middle East. Global
outlook is expected to be exceptionally strong for aluminium rod until mid of next year due to the surge of demand (from cable manufacturers) and the shortage of supplies. Its recent breakthrough into South America is also expected to bring positive impact on its second half orders.

Current Order Book – Cable & Wire Segment
As of May 31, Leader’s outstanding order book is RM873.5mn. The group believes that this figure would
be replenished on a month‐on‐month basis and we believe that this figure would be called‐up by year end
FY11.

Power Business
The power generation outlook for Cambodia remains positive. The group noted that Cambodia needs more
new power plant generation capacity to fulfil its load demand, and its second power generation project
which will come on‐stream in mid‐2013 is part of the generation plan of the Cambodian government to meet
this power shortfall.

Recall that in May 2011, the group was rumoured to have been close to securing a USD30mn contract to
help build a power plant in Laos, which the group later announced that there is no truth in the rumour.

The group however noted that it is always on the lookout for new investments in power plant and power transmission projects. We believe that given the group’s present situation where it is currently busy with its two ongoing power projects in Cambodia, we do not foresee the group investing in new power related projects in the very near future, perhaps after the existing projects have been completed and up and running.

Valuation & Recommendation
We maintain our target price of RM1.20/share by pegging a market cap weighted average FY11 PER of 9.8x to it. We are bullish on the stock based on an impending strong demand on the local front for industrial cables & wires and its overseas power generating and supply ventures. Maintain Buy on the stock.

Kfima ... Jul11

Sources say a corporate exercise could be in the offing in Kfima to extract better value for two listed companies in the group.

The major shareholders are looking at how the value of Kfima and its 60.9% owned subsidiary Fima Corp Bhd can be better reflected as the current structure is inefficient.

No specified have been hammered out as yet as the major shareholders are looking at various possibilities.

Roslan Hamir is MD for Kfima and Fima Corp.

Sources say both companies have fairly large plantation operations and it would make sense for them to operate under one roof.

Kfima is a conglomerate with businesses ranging from bulking terminal operations to property and plantations. It owns some 21235 ha of oil palm and pineapple plantations in Malaysia and Indonesia.

Fima Corp produces security and confidential documents in Malaysia. Apart from renting and managing commercial properties, it also involved in the palm oil sector and owns some 19794ha of agricultural land.

Indeed, both companies are relatively undervalued – trading at single multiples – and have healthy balance sheets. As at March 31, Kfima had rm151 million in net cash while Fima Corp’s net cash position stood at rm130 million.

If all the plantations are put under one roof, the structure would be more efficient.

A share swap – similar to Sunway Holdings and Sunway City – would be a better alternative. As both companies are trading at almost similar valuations, such a transaction is possible,

Kfima’s major shareholders are accumulating its shares. BHR Enterprise Sdn Bhd, Rozilawati Basir and Rozana Zeti Basir have been buying the company’s shares in June 2011.

It is worth nothing that BHP Enterprise is the largest shareholder in NationWide Express Courier Services Bhd with a 51.89% stake.

Valuations wise Kfima was trading at a historical PER of 11.1 times. As for Fima Corp, it was trading at a historical PER of 6.18 times.

Among the biggest plantations firms, Genting Plantations Bhd is trading at a historical PER of 17.21 times. It is worth nothing that Kfima and Fima Corp are not directly comparable with their plantation peers as the oil palm business only contributed 19.4% of Kfima’s PBT for FY2011 ended March 31 and 32.11% of Fima Corp’s FY2-11 PBT.

KFima was trading at discount to its net assets per share of rm1.76 as at March 31 or 0.94 times price to book. Fima Corp is trading at 1.29 times price to book based on its net assets per share of rm4.73.

BStead ... Jul11

Out of its six core businesses, plantation is the biggest earnings contributor, followed by shipbuilding and property development.
In the first quarter ended March 2011, Boustead Holdings' plantation division contributed RM99 million or 73.6 per cent of its pre-tax group profits.

There is also the injection of two estates and a mill into the REIT that will see to improved performance.

With the RM189.2 million acquisition and leaseback of the Sutera Estate, Taiping Rubber Plantation and the Trong Oil Mill, Al-Hadharah Boustead REIT's total asset value has surpassed RM1 billion. Total asset size has also expanded to some 20,000ha from 16,391ha previously.

Boustead Holdings, the parent of Al-Hadharah Boustead REIT, has an agriculture landbank of 97,648ha. To-date, 76 per cent of the landbank had already been planted with oil palms.

While 20,000ha of Boustead's 74,354ha planted area had been injected into the Al-Hadharah Boustead REIT, Lodin emphasised the REIT is actually open to inclusion of assets from other estate owners.

For the past 25 years, it had partnered Kuala Lumpur Kepong Bhd (KLK) to produce high yielding hybrid oil palm seeds and bred smaller-sized oil palm trees that allow for high density planting.

Boustead's collaboration with the University of Nottingham, for the last decade, that resulted in a Malaysian campus at Semenyih, Selangor.  Its 66 per cent stake in the Nottingham University campus is our contribution in value adding to Malaysia's tertiary education.

UMCCA ... Jul11

TA Securities Research:-

Key Investment Risk
Key risk to our earnings forecasts/recommendation are, 1) sharp correction in CPO price, 2) FFB harvest
disappoints, and 3) sharp correction in crude oil price.

Recent Developments
A Decent Year 4Q10 net profit grew on both QoQ (+21.5%) and YoY (+59.7%) basis to RM22.8mn, thanks to higher CPO and palm kernel price, partially offset by lower CPO production. For the whole year, net profit increased by 28.7% YoY to RM81.4mn on the back of a 15.2% increase in revenue to RM205.7mn. Bulk of the increase in earnings was attributable to higher CPO price and full year
contribution from the Millian – Labau estates. Average CPO selling price in FY11 was RM2,971/tonne (4Q:
RM3,597/tonne), a 24.3% increase compared with RM2,390/tonne in the preceding year.

Below Expectations Due to Weak CPO Production The results were some 8% below our expectations.
This was attributable to, 1) higher than expected depreciation, 2) lower than expected CPO production.
FY11 FFB harvest declined by a marginal 0.1% YoY but CPO production (excluding CPO processed from
external FFB source) declined by 12.1% YoY. CPO production contracted sharply particularly in the
Jan/Feb period. Recall that La‐Nina peaked during that period, impacting production via, 1) lower harvest as
harvesting and evacuation processes was hindered by wet weather, and 2) poor fruit quality resulting in
lower OER, which declined to between 18% ‐ 19%, in our estimate, during the period compared with the
typical 20% ‐ 21%.

Delivered On Dividends
United Malacca declared a final single‐tier (net) dividend of 17.5 sen/share. Combined with interim
dividend of 7.5 sen, total dividend for the year amounted to 25 sen/share (FY10: 23.33 sen). That
figure came in slightly above our expectations of 24 sen/share. At the current price, the final dividend
translates into 2.5% net yield.

Earnings Outlook
Revision In Earnings Forecasts FY12 and FY13 earnings forecasts revised lower by 1.7% and 2.5% respectively to take into account the higher depreciation rate and mature acreage estimates. Despite
the downward revision, our revise FY12 earnings forecasts still implies a 46% YoY growth in EPS. The
growth will be driven by in FFB harvest and OER, thanks to normalising weather condition as well as higher yield from the newly matured acres.

Valuation
We value the stock based on PER methodology. The target PER pegged at the 5‐year historical rolling average of 13x. Based on revised FY12 EPS of 58.8 sen, we have adjusted our target price on the stock slightly lower to RM7.64 (RM7.76 previously).

Recommendation Maintain As Hold
No change in our recommendation. United Malacca remains as a Hold with potential capital upside of 10%.
Key re‐rating catalyst is the company engaging in value accretive acquisitions.