Freight ... May12

Mercury Securities Research ...

Q3 results –within expectations”
Freight Management Holdings’ (FMH) 3Q/FY12 result (for quarter ended 31st March
2012) was within our earlier expectations.

“Most segments performed well”
The group recorded revenue of RM68.7 million and NPATMI of RM4.2 million during 3Q/FY12. This was an increase of 3.3% and 13.3% y-o-y, respectively. Compared with 3Q/FY11, higher revenue was reported in all the group’s business segments, with the exception of “Tug & Barge” services that reported a slight decrease. Group Land Freight and “3PL & Warehousing” segments did particularly well.

The group registered a higher gross profit (GP) margin from 24% in 3Q/FY11 to 27% in 3Q/FY12 due to its ongoing internal exercise on cost control and operation efficiencies. However, the group’s Haulage and Customs Brokerage segments are facing pressures on margins due to costs and price competition.

Looking at 9M/FY12 numbers, group NPATMI is slightly down y-o-y, but we are not unduly
worried. This decrease was due to a higher tax level in 9M/FY12 versus 9M/FY11 and higher
minority interest (MI) from an improved performance from its 51%-owned Tug & Barge
segment subsidiary. 9M/FY11 NPATMI profits had benefited from a tax write-back.

“Weaker q-o-q numbers due to seasonal factor”
Compared to the preceding 2Q/FY12, the group’s 3Q/FY12 revenue and NPATMI were lower by 6.6% and 18.9% q-o-q, respectively. The q-o-q decline in revenue was due to the trading and production slowdown by the group’s customers during the Chinese New Year festive period in February 2012. As such, we are not unduly worried, as the numbers were affected by a seasonal factor.

OUTLOOK/CORP. UPDATES
“Our outlook – cautious but still positive”

We expect that FMH would continue to report a positive performance during its FY12-FY13.
The group’s growth would be underpinned by its core Sea Freight business, supported by solid
numbers from its “3PL & Warehousing”, Land Freight and Air Freight business segments. For
the 3PL segment, FMH has built quite a reputation, particularly for segments such as –
lubricants, apparels and consumer electrical products.


“Minimal exposure to US & Europe”

We note that FMH’s freight business is mostly focused on trade within the Asia-Australia region, as such the group would not be affected that much by the weak business sentiment in the US and Europe. The group’s core Sea Freight segment continues to enjoy growing TEU volumes and margins. This is partly due to its

pricing flexibility arising from its niche in providing one-stop and packaged services to customers.

The group’s FCL (Full Container Load) TEU volumes continued to grow steadily, aided by solid volumes to East Asian ports (which also commanded higher GP margins). Meanwhile, its LCL (Less than a Container Load) TEU volumes were slightly affected by the recent major floods in Thailand during Q2. Nevertheless, its LCL Land Freight volumes are slowly but surely recovering.

“IMF: Growth resuming, risks remain”
According to the IMF’s latest World Economic Outlook (WEO-April 2012), global prospects are gradually strengthening again, but downside risks remain elevated. Improved economic activity in the U.S. during the second half of 2011 and better policies in the Euro area in response to its deepening economic crisis have reduced the threat of a sharp global slowdown. Accordingly, weak recovery is likely to resume in the major advanced economies, and economic activity is expected to remain relatively solid in most emerging and developing economies.


Overall global economic growth is projected to drop from about 4% in 2011 to about 3.5% in 2012, but to recover to 4% in 2012. Given the sovereign debt crisis, the Euro area economy is still expected to go into a mild recession in 2012 as a result of the rise in sovereign yields, the effects of bank de-leveraging on the real economy, and the impact of additional fiscal consolidation. Real GDP growth in the emerging and developing economies is projected to slow (due to policy tightening, external environment and weak demand) from 6.25% in 2011 to 5.75% in 2012 but then to reaccelerate to 6% in 2013, helped by easier macroeconomic policies and strengthening foreign demand.

“BNM: Malaysia’s 2012 GDP expected to be in the 4%-5% range”
Malaysia's gross domestic product (GDP) grew at a slower pace of 4.7% in 1Q/2012 (compared
with 5.1% in 1Q/2011 and 5.2% in 4Q/2011), which is not too surprising, given the challenging external environment. Bank Negara Malaysia (BNM) governor Tan Sri Dr Zeti Akhtar Aziz had said that BNM still expects Malaysia to grow between 4% and 5% during the full year 2012.

Malaysia had reported a reasonable inflation figure (CPI) of 2.3% (1Q/2012). Bank Negara Malaysia (BNM) had still maintained its overnight policy rate (OPR) at an accommodative 3.0%. According to the Malaysian Department of Statistics’ March 2012 data, the country recorded the following – Manufacturing Sales (+3.1% y-o-y), Industrial Production Index (IPI) (+0.6% y-o-y), Exports (-
0.1% y-o-y) and Imports (+1.6% y-o-y). Export growth seems weak currently.

“Still exploring new regional opportunities”
During 9M/FY12, about 23.3% of FMH’s revenues were derived from its overseas operations in Singapore, Australia, Indonesia, Vietnam and Thailand. FMH’s management is still keen on exploring new business opportunities in various ASEAN countries – presumably Cambodia and Myanmar. We are
particularly pleased with the growing contributions from Indonesia while its relatively
new Vietnam operations have started to be profitable.

VALUATION/CONCLUSION
“We expect Dividend Payout to be at the 20-30% range” FMH’s Board of Directors (BOD) has declared
an interim single tier 1.5 sen dividend per share for its FY12 ending 30th June 2012. The dividend will be paid on 16th July 2012 to shareholders registered as at 30th June 2012.

Given FMH’s steadfastly resilient earnings performance and its dividend payout track record of 20% to 30%, we opine that FMH would maintain its dividend payout at this range for its FY12-FY13 as well. FMH (-1.1% YTD) has closely tracked the KLCI (+0.69% YTD) this year. Market conditions have also been volatile during the past year, impacted by the Arab Spring uprisings, the Tohoku natural disaster in Japan, debt-ceiling issue in the US and sovereign debt issue in Europe. As FMH is not an especially large market-cap stock, this may put a dampener on its market visibility and trading volume.

“Maintain Buy Call”
Based on our forecast of FMH’s FY13 EPS and an estimated P/E of 8.5 times, we set a FY13-
end Target Price (TP) of RM1.07. This TP represents a 18.9% upside from its current
market price. Our TP for FMH reflects a P/BV of 1.1 times over its FY13F BV/share.

“Resilient business model”
Even during the times of economic weakness, FMH’s business model had proven to be solid
and resilient. We like FMH due to its one-stop business model, calculated growth strategy,
attractive value (undemanding P/E and P/BV valuations), reasonable dividend yield and ROE.
We also note that FMH has low net gearing levels.

“Set for steady growth”
With a strong management team and a multimodal, asset-light, tight cost-control, operationally efficient and low-gearing business model, FMH seems well-set to grow steadily. FMH also has ample capabilities, financial reserves and operational flexibility to expand organically and also to explore new JV and M&A opportunities. Further earnings upside would be dependent on factors such as freight volumes, freight rates, FMH’s regional business expansion, global economic growth, 3PL client additions and also any future JVs and M&As. As usual, there are possible risks to the global economy - such as the EU sovereign debt
turbulence, volatile financial markets, higher crude oil prices, sustained high unemployment
levels in the US and political upheavals in the Middle East/North Africa. FMH’s profit margins could also be impacted during times of sudden or extreme foreign exchange (FX) and freight rate fluctuations.

QL ... May12

ZJ Research ...

4QFY12 Results Review

• QL’s steady and consistent results steered the Group to yet another brilliant record year with
FY12 net profit hitting RM132.1 mln on the back of RM1.95 bln revenue. The results were within
our expectations.

• FY12 revenue grew 9.6% y-o-y on improved sales from across all business divisions, i.e. the
Marine Products Manufacturing (MPM), Palm Oil Activities (POA) and Integrated Livestock
Farming (ILF). Profitability-wise, the MPM segment posted a marginal PBT decline of 3.0% y-oy,
but this was more than offset by higher contributions from the remaining two divisions.

• To recap, the drop in MPM’s FY12 PBT was owing to poor fish catch in 1HFY12 that affected
overall divisional performance. Nevertheless, QL managed to grow the top line by 5.2% y-o-y
following higher sales of surimi-based products in Malaysia, as well as maiden contribution from
the surimi plant in Indonesia, which has commenced commercial production since July 2011.
MPM’s FY12 PBT margin, at 13.0%, remains the highest in the Group.

• Meanwhile, stronger CPO prices, averaging RM3,150/mt in FY12 vs. RM3,000/mt in FY11
pushed POA’s PBT up by 147.7% y-o-y to RM13.1 mln in the financial year under review. Still,
this division remains the smallest in the Group, having contributed only 18.2% and 7.6% to
consolidated revenue and PBT respectively. PBT margin for POA, at 3.7%, is the also leanest
in FY12 by comparison to the other divisions.

• The largest revenue and profit contributor, the ILF division posted a 12.5% and 6.6% y-o-y rise
in revenue and PBT respectively, on higher farm product prices and higher unit price of animal
feed raw materials. We note that the lower-than-proportionate growth in PBT profit was a result
of lower profit margin from the trading of feed raw materials, plus the initial start-up losses
incurred in its Vietnam layer farm.

• At Group level, FY12 net profit margin was marginally lower at 6.8% vs. 7.0% in FY11. Effective
tax rate was higher at 19.3% by comparison to 15%-17% in the past two years. We understand
from management this was due to expiration of certain pioneer statuses that some subsidiaries
enjoyed earlier. Going forward, we expect the effective tax rate to be in the region of 20%.
Meanwhile, on balance sheet strength, net gearing remained relatively stable at 0.61x as at
end-March 2012, supported by a BV per share of 98 sen.

• After imputing a higher effective tax rate of 20%, our FY13 earnings estimate is now reduced
marginally to RM152.5 mln (-4%). Despite the reduction, the projection still reflects a good 15%
y-o-y increase in net profit. We believe this is achievable on the notion that FY13 would be a
growth year following a consolidation year in FY12. Management focused its attention on a
number of overseas investments in FY12, and these ventures incurred initial start-up costs that
were expensed out, resulting in the lower net profit growth in FY12. Things are set to improve in
FY13 when the operations abroad stabilize and revenues are kicking in.

• In Indonesia, the surimi operations are already profitable, and management is increasing
capacity of by another 5,000 mt/year, which is slated for completion by September 2012. It is
also building a surimi-based production facility in Hutan Melintang with a targeted output of
10,000 mt/year. The products are targeted for export to China as well as other Western
countries. Elsewhere, QL’s other minor capex involves setting up a new frozen fish coldroom in
Endau and a new surimi-based coldroom in Johor Bahru, for a combined investment of RM11
mln.

• Meanwhile, on the ILF projects, the layer farm in Indonesia is currently producing 350,000
eggs/day with the aim of increasing it to 900,000 eggs/day by March 2013. As for the
Indonesian breeder farm, the current output is 1.3 mln Day-Old-Chicks (DOC)/month with plans
to raise it to 2.5 mln DOC/month by March 2013. In Vietnam, QL operates a layer farm that
produces 200,000 eggs/day at present, with the target output of 300,000 eggs/day by March
2013.

• As for the Group’s oil palm plantation in Kalimantan, approximately 10,000 hectares have been
planted, with completion of planting expected in FY14 for all the 15,000 hectares of land. Its
newly built CPO mill which boasts an annual capacity of 400,000 mt has also commenced
operation but current utilization is still relatively insignificant as it awaits the oil palm trees to
mature and produce more Fresh Fruit Bunch.

• The board has recommended a final single-tier dividend of 4.5 sen for FY12, subject to
shareholders’ approval at the upcoming AGM. We note there is a slight increment over FY11’s
dividend of 4.25 sen.

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

IPO ... IHH Healthcare

The MITI invited had approved bumiputera investors to submit expressions of interest in subscribing for shares of IHH Healthcare Bhd which is slated to be listed on Bursa Malaysia and Singapore at end July 2012.

360 million IHH shares are being offered to bumiputera investors.

IHH and its subsidiaries are principally engaged in the provision of private healthcare services and education.

IHH now 62% owned by government Khazanah Nasional Bhd is targeting to raise between rm4.5 billion and rm6 billion in fresh capital.

IHH is not required to fulfill the bumiputera equity quota for its listing on the local bourse. This is because less than 50% of IHH’s revenue is derived from Malaysia . As such, it would not be not be possible to gauge the size of the offering based on bumiputera tranche offered.

IHH’s IPO is expected to be second largest in Malaysia after FEDLA Global, which is said to be raising rm10 billion form its listing on the local bourse in June 2012.

IHH’s main market are Singapore , Malaysia and Turkey with smaller contributions from other China , HK, India , Vietnam , Brunei .

IHH was incorporated in May 2010 as the holding company for Khazanah’s strategic investments in the medical sector. Its assets include wholly owned Parkway Pantai Ltd, which has a network of 16 hospitals, more than 3000 beds, over 60 medical centres and clinics and ancillary healthcare businesses.

It is the holding company of the Parkway and Pantai healthcare businesses in Singapore and Malaysia .

Parkway Pantai also has investments and operations in China , India , HK, Vietnam and Brunei .

Early 2012, IHH acquired a 60% stake in Turkish healthcare group Acibadem Holdings in Turkey

The group’s other assets include wholly owned IMU Healthcare Sdn Bhd, which operates a healthcare university in Malaysia and stakes in SGX listed Parkway Life REIT and Apollo Hospitals Enterprise listed on India.

Parkway Life REIT, in which IHH Mitsui & Co, Abraaj Capital and Mehmet with 26.6% stake, 7.1% stake and 4.2% stakes repectively.

Mitsui acquired 30% of IHH about a year ago (2011) for rm3 billion, valuing the group at rm11 billion then.

Armada ... May12

Alliance Research ...

Expands vessel fleet
Bumi Armada announced the acquisition of 2 AHTS vessels from Japan’s Sanko Steamship. The vessel purchase is timely as the group has been seeing very healthy demand for offshore support vessels of late. Latest fleet utilisation of the group stood at 96% hence the move to quickly expand their fleet. We continue to be positive on Bumi Armada, expecting healthy newsflow on contracts as the year progresses.

What’s in the news
 Bumi Armada announced that they had taken delivery of two Anchor Handling Towing Supply (AHTS) vessels from Beauty Offshore Limited and Bay Offshore Limited, both subsidiaries of Sanko Steamship, one of Japan’s largest ship owners.

 The 12,000 break horse power (bhp) vessels were designed and constructed in 2009 in Japan. They are 68m long with dynamic positioning capabilities and are ABS-classed offshore support, fire-fighting vessels. The vessels will be renamed Armada Tuah 07 and Armada Tuah 08.

Our comments
 The announcement comes as no surprise as Bumi Armada has mentioned the intention to grow their fleet. Growth by acquisition of ready vessels is appropriate at this juncture as ordering a vessel would incur up to 24 months or more of waiting time to delivery. We believe that each vessel would cost RM60-70m but this has not been confirmed with management.

 We have not factored in any earnings from new acquisitions of vessels into our estimates. Assuming that these 2 vessels are chartered out by June at a rate of US$3.00/bhp/day, it would add roughly RM40m in revenue and RM8m (20% profit margins) in profits over 2HFY12. Given that this makes up less than 2% of our FY12F earnings, we are leaving our estimates unchanged at this juncture. As for FY13 estimates, we leave it unchanged as well as RM16m in estimates profits from the 2 vessels would make up only 2% of full-year estimates.

 We see the group pressing on with their fleet expansion plans as demand for offshore support vessels has intensified. Latest fleet utilisation of the group is at 96%, up from 93% in 3Q11 and up from <80% in 3Q10.

Valuation and recommendation
 We continue to be positive on Bumi Armada and expect more contract flow for the group as the year progresses. The company is now tendering for 5 FPSO vessels supply contracts and we expect more tendering activity to come. It was announced recently that a new prospect for a FPSO has emerged in Gabon, West Africa, where Bumi already has 2 operating charters. Besides this, we are also on the lookout for Chemical Enhanced Oil Recovery (CEOR) contract in Malaysia. The latest contract opened for tender has been Angsi while the St Joseph contract continues to face some delays.
 We maintain our BUY call on Bumi Armada. Our TP of RM5.30 is premised on FY13 EPS of 26.5sen pegging an industry peak cycle PE of 20x.

Tomei ... May12

Mercury Research Securities

PERFORMANCE – 1Q/FY12
Tomei’s 1Q/FY12 revenue (for quarter ended 31st March 2012) was within our earlier expectations. However, group NPATMI was below our expectations.

“Q1 – Revenue within expectations, but NPATMI below”
The group’s 1Q/FY12 revenue was RM155.7 million, a strong increase of 35.1% y-o-y. The increase was mainly due to improved consumers spending particularly on gold investment products. However, the group’s NPATMI decreased by 7.7% y-o-y, mainly due to the fluctuation in gold prices. We also noted higher y-o-y “Selling and Distribution” expenses and finance costs during the quarter.

“Dropping gold prices affect margins”
The group’s Retail segment reported a 33.6% yo-y increase in revenue to RM120.9 million during the quarter, mainly due to the strong consumer demand for gold investment products. The acquisition of the brand “Goldheart” (in Malaysia only) with 4 additional retail outlets also contributed positively. However, due to the fluctuation in gold prices, segmental PBT during the quarter decreased 2.5% to RM 9.2 million.

The group’s “Manufacturing and Wholesales” segment reported a 40.5% y-o-y increase in revenue during the quarter. The improvement was mainly due to the better sales volume to other jewellery retailers. The acquisition of O M Design S/B also contributed positively to the group’s wholesales segment. However, due to the fluctuation in gold prices, PBT during the quarter decreased 23.1% to RM 1.3 million.

The group’s revenue for 1Q/FY12 had increased by 13.5% versus the preceding 4Q/FY11, mainly due the better sales volumes. However, due to the fluctuation in gold prices, the group’s PBT decreased slightly by 2.4%. The group’s Retail segment revenue and profits increased, mainly due to the better sales volume and increase number of retail outlets. The group’s “Manufacturing and Wholesales” segment had a marginal q-o-q drop in revenue during the quarter. However, the segment PBT drop was quite substantial in percentage terms. This was mainly due to the drop in gold prices.

OUTLOOK/CORP. UPDATES
“Europe woes affecting sentiment” The economic and political volatility in Europe is affected the overall consumer and business sentiment. Nevertheless, economic growth in some regions, particularly Asia is still driving international trade. Currently, Malaysia’s economic data is relatively unaffected, safe for some weakness shown in export data. Domestic consumer demand and investment levels remain supportive of GDP growth. Keeping in mind all these factors, group management have allocated RM20 million to open up to 6 new stores nationwide (probably in the Klang Valley, Kedah and Sabah) by year-end in view of strong
domestic demand for gold products.

“Local economy – still OK” Malaysia had reported a reasonable inflation figure (CPI) of 2.3% (1Q/2012). Bank Negara Malaysia (BNM) had still maintained its overnight policy rate (OPR) at an accommodative 3.0%. Meanwhile, Malaysia recorded a reasonably positive 4Q/2011 GDP growth of 5.2%, amidst weak economic growth in the developed regions (US, EU and Japan). According to the Malaysian Department of Statistics’ March 2012 data, the country recorded the following – Manufacturing Sales (+3.1% y-o-y), Industrial Production Index (IPI) (+0.6% y-o-y), Exports (-0.1% y-o-y) and Imports (+1.6% y-o-y). Export growth seems weak currently.

“Gold prices now below US$1550/ounce”
The spot price for gold traded on the NYMEX (New York Mercantile Exchange) is currently  below the US$1550/troy ounce level. The weak global economic sentiment may lead to an increased demand in gold investment products due to the “flight to safety” factor – gold is viewed as a safe and tangible investment product.

Tomei sells gold bars, gold coins and gold wafers (in denominations between 10g and 1kg). Gold wafers, gold bars and gold-based jewellery can be viewed as a viable inflation-hedge or long-term investment option. Consumers also have the option of investing in gold via commercial banks (via “gold investment accounts”) or multilevel-marketing companies that offer gold-based investment products (e.g. gold coins and gold bars). In some countries, gold-related investments could be done via gold ETFs (exchange traded funds), gold certificates and gold-based derivatives. Nevertheless, gold jewellery are bought largely for ornamental usage e.g. for wedding dowry, ceremonial/formal functions and as gifts to spouses or close family members.

“GoldSilver2U generates strong interest”
In November 2011, Tomei had launched its GoldSilver2U.com website, which was specially designed for customers that were interested in pursuing gold and silver investment opportunities, including those that wish to hedge against inflation. Through the website, customers can buy and sell gold and silver at any given time and place. The website offers physical gold and silver purchases for a series of bars and coins ranging from 10 grams to 1kg at the best spot price. This website has been informative and beneficial to Tomei’s actual and prospective clients.

VALUATION/CONCLUSION
“We expect DPS level to be maintained” A first and final single tier 3.5 sen dividend per share (DPS), amounting to RM 4.85 million for the group’s FY11 had been declared and approved by shareholders in the group’s recent AGM. The dividend will be paid on 31st May 2012 to shareholders registered as at 18th May 2012. Currently, we expect that the group would maintain its DPS level for its FY12.

Thus far, Tomei (+6.7% YTD) has outperformed the KLCI (+2.0% YTD) in 2012. Market conditions have also been volatile during the past year, impacted by the Arab Spring uprisings, Europe sovereign debt issue, US debt ceiling issue and the Tohoku disaster in Japan. As Tomei is not a particularly large market-cap
stock, this may put a dampener on its market visibility and trading volume. “Maintain Buy Call, with a cautious TP” Based on our forecast of Tomei’s FY12 EPS and an estimated P/E of 4 times, we set a FY12-end

Target Price (TP) of RM0.93. This TP represents a 16.3% upside from its current market price and reflects our cautious stance (given the weak external sentiment and weak gold prices). Our TP for Tomei reflects a P/BV of 0.63 times over its FY12F BV/share. Tomei’s P/E and P/BV valuations appear quite undemanding, while its dividend yield, ROE and net gearing are at reasonable levels.

Tomei is an integrated designer, manufacturer, exporter and retailer in gold and jewellery. The group has a balanced focus on both gold and jewellery product segments. The group has 5 major umbrella brands namely Tomei, My Diamond, TH Jewelry, Le Lumiere and Goldheart. The group has a diversified business model (in terms of segment and location), a reputable brand name, a wide product range, strong design expertise, a large retail network, a calculated expansion strategy. We believe that the group is still on the lookout for synergistic M&A opportunities within the industry. In terms of risk factors, Tomei does face routine risks from any economic downturn, consumer pessimism, uneven monthly sales (due to festive
seasons), stiff peer competition, rapidly fluctuating precious metals/gold/gem prices and foreign exchange rates.

IGB ... May12

It stands to rake in close to rm1 billion in cash as its 76% stake subsidiary KrisAssets plans to distribute cash proceeds from the planned disposal of its two retail properties to a REIT. KrisAssets plans to dispose of the Mid Valley and The Gardens Mall to IGB REIT for rm4.61 billion. The transaction will be satisfied by the issuance of 3.4 billion new units in IGB REIT at rm1 each while the balance of rm1.2 billion will be settled in cash, to be funded from the drawdown of a portion of syndicated financing facilities by the REIT.

The cash payout by KrisAssets will further expand IGB’s huge cash reserves. As at Dec 31, 2011, IGB had cash of rm821 million against debt obligations of rm1.1 billion. Including the potential cash distribution of rm965 million from KrisAssets, IGB’s cash pile is expected to grow to tm1.79 billion, placing its parent company at a net cash position of rm690 million.

However, IGB is exploring development opportunities in London and Taipei , whereby it is understood that IGB would require about rm1 billion to fund the acquisition of a site in London .

BRAHIMS ... May12

Inflight catering services provider has seen its revenue affected by the route rationalization exercise undertaken by MAS. It acquired a 51% stake in BLSG in 2008. BLSG in turn owns 70% stake in LSG Sky Chef-Brahim Snd bhd, which holds the concession for the provision of inflight catering and related services for MAS. MAS owns the balance 30% in LGSB.

When MAS started closing some of the long haul routes, Barhim will definitely be affected. But that has somehow stabilized and now they are improving the short haul networks and they will have more regional flights. Some industry observers pointed out that the new management of MAS could be looking at reviewing a few operating areas, including the inflight catering contracts, in its bid to restructure its cost base due to its record losses for the financial year ended Dec 31, 2011.

Inflight catering services made up 93% of the group’s total revenue of rm185 million for FY2011. About 80% of its inflight catering services revenue comes from the 25 year contract with MAS which ends in 2028.

Barhim also owns 51% stake of Dewina Host Sdn Bhd, which is an operator of airport F&B outlets. Brahims is a significant player in the F&B scene in KLIA with outlets such as Burger King, Taste of Asia and Café Barbera. Dewina has put up about six proposals to open restaurants in KLIA2. F&B’s contributed to 5% of Brahim’s revenue.

In its effort to diversify its earnings base, it had acquired 60% equity interest in Admuda Sdn Bhd, which has a license for a sugar refinery for the east Malaysia market. It will be the first company producing sugar in east Malaysia . It will finance about rm130 million for capex by bank borrowings but it will do some corporate exercise to restructuring some of external borrowings.

Petra ... May12

Perdana Petroleum Bhd planned to sell its stake in Petra Energy. The stake sale is progressing as planned and the results will be announced in the weeks ahead if anything materialises.

To recap, oil and gas services provider Perdana Petroleum had put its entire 26.9% block in Petra Energy Bhd up for tender late last month with CIMB Investment Bank being appointed to undertake a restricted tender process for the proposed divestment of its 57.7 million shares.

An observer said the potential of a new shareholder entering the company could be a catalyst for the stock moving forward. However, it needs to be noted that naturally investors would prefer the new shareholder to be able to inject value should this tender process move to its next stage.

Perdana Petroleum’s divestment of its entire stake in Petra Energy Bhd would eventually pave the way for Perdana Petroleum to restructure its own financials and operations.

However some market observers noted that Perdana Petroleum was unlikely to either sell its stake at a fire-sale deal or match its previous transaction price.

Shorefield Resources Sdn Bhd could emerge as one of the potential suitors for Perdana’s 26.9% stake in Petra Energy. This is because under the previous management, Perdana Petroleum had in December 2009 sold its 25% stake of 48.8 million shares in Petra Energy to Shorefield for RM93.2mil or RM1.91 per share.

Other potential suitors included institutional funds and business associates in complementary lines.

IPO ... Gas Malaysia

Gas Malaysia Bhd, part of an energy distributor linked to Malaysian billionaire Syed Mokhtar Al- Bukhary, wants to raise about RM734 million (US$234 million) in an IPO.

Existing stockholders, including MMC Corp, plan to sell 333.8 million shares with an indicative price of RM2.20 each for individual investors.

The three major shareholders of Gas Malaysia Bhd will receive a total of RM734mil from the sale of their shares in the former's impending initial public offering (IPO).

Gas Malaysia's IPO will entail only an offer of sale of 333.8 million shares at RM2.20 a piece.

The three main owners of Gas Malaysia stock are MMC-Shapadu (Holdings) Sdn Bhd (55%), Tokyo Gas-Mitsui & Co Holdings Sdn Bhd (25%) and Petronas Gas Bhd (20%). The three will rake in RM403mil, RM183.6mil and RM146.8mil respectively from the sale of Gas Malaysia shares.

Post IPO, MMC-Shapadu would see its stake reduced to 40.7%, while Tokyo Gas-Mitsui at 18.5% and Petronas Gas with a 14.8% stake.

MMC-Shapadu is a 76% owned subsidiary of MMC Corporation Bhd, while Shahpadu Corporation Sdn Bhd owns the rest of the stake, a company that dabbles in a diverse range of businesses ranging from oil and gas to property development.

In February 2012, Gas Malaysia signed a gas supply agreement with Petronas for the supply of 492 million standard cubic per day (mmscfd), a 29% increase from its previous supply of 382 mmscfd. The new agreement starting January 2013 will be for a duration of 10 years with an option to renew for another five years.

For its financial year ended 2011, the company hit a revenue of RM2bil from RM1.8bil recorded previously, driven by the gas tariff revision announced by the government, which took effect on June 1, 2011, in addition to increase in sales volume.

However, its net profit decreased by 23% to RM229mil in 2011 from RM298mil recorded in the previous year due to the new gas tariff, which resulted in Gas Malaysia's average margin declining by 48.9% to RM2.02 per mmBtu, or just 12.5% as margins compared to 26.3% recorded previously.

The company intends to pay out 100% of its net profit for its financial year ending Dec 31, 2012, and subsequently targets a payout ratio of not less than 75% of its net profit moving forward.

Established in 1992 to provide an alternative source of energy to the country, it sell, market and distribute natural gas as well as construct and operate the Natural Gas Distribution System in the peninsular.

Gas Malaysia is the sole licensed seller of natural gas in Peninsular Malaysia. It also has rights to supply liquefied petroleum gas in the region.

It operates a network of approximately 1,800 km of pipelines throughout the peninsular, and source its natural gas supply from Petronas via the Peninsular Gas Utilisation Transmission System which is owned and operated by Petronas Gas Bhd.

While consumption of natural gas in Malaysia has grown from about 315 bcf (1 bcf equals to 1 trillion BTUs) in 1990 to an estimated 1,260 bcf in 2010, the ability to satisfy this demand has been constrained since 2007 due to the shortage of supply.

However, with the completion of the liquefied natural gas regasification facility in Malacca, it will provide a new source of allocation to Peninsular Malaysia. In addition, the volume of gas from the North Malay Basin project will also help sustain the natural gas supply to customers in the Peninsula.

Gas Malaysia is a strong dividend-recurring stock with more potential upside with the new Petronas contract and its commitment to pay most of its profit back to shareholders.

In terms of growth for Gas Malaysia, its infrastructure is already quite well developed with its extensive reach to most industrial estates in the peninsular that entails little capital expenditure to expand its operations.

IPO ... Malakof

It is expected to relist its 51% owned unit Malakoff Corp Bhd, a move which could involve an offer for sale by MMC Corp of its shares in Malakoff, besides a new share sale in the power generation subsidiary.

MMC Corp planned to relisting could see MMC offering to sell at least a quarter of its 51% block in Malakoff. This could mean MMC lowering its interest to 38.25% thus reducing Malakoff to an associate company.

MMC Corp will use funds raised from its proposed offer for sale in Malakoff to invest in domestic and overseas power assets.

Estimate for Malakoff, the company could be worth between rm17 billion and rm18 billion. The EV estimates have included the company’s net debt of rm7 billion to rm8 billion. Subtracting the net debt from the EV could give a current market cap of some rm9 billion.

Its electricity generation assets include the 2100 MW Tanjung Bin power plant in Johor, besides the 2420 MW facility in Selangor’s Kapar enclave. It also owns power plants in Perak, NS and Penang. Aborad Malakoff has water treatment and power generation operations in Saudi Arabia and Jordan.

The EPF owns 30% while KWAP holds 10%. The remaining 9% is held by private equity funds.

At the time when we delisted Malakoff in May 2006, its value was estimated at RM8.8 billion. Malakoff had grown steadily since its delisting.

It had secured several power projects, both local and abroad, such as the 1,000MW power plant in Tanjung Bin, Johor, and the acquisition of a 40 per cent equity in Hidd Power Company, which is Bahrain 's power and water generation facility.

It is looking at buying more assets and doing more joint ventures. The company was hoping to secure projects in the Middle East and the North African region as well as in Indonesia and Myanmar . Malakoff had sent a team to conduct a preliminary study on the viability of using wind technology to generate power in Pakistan .

Malakoff was looking at increasing its overseas revenue contribution by between five per cent and 10 per cent or at least RM100 million.

On the local front, Malakoff, together with its consortium members comprising Petronas Power Sdn Bhd and Mitsubishi Corp, had been shortlisted, along with eight other groups and firms, to bid for the construction of a 4,500 MW combined-cycle gas turbine in Prai. In March 2012, the Energy Commission had invited the nine shortlisted bidders to purchase the request for proposal (RFP) document for the Prai power plant project and submit the RFP by July 16 2012. The winner will be known by end 2012.

Malakoff was also in discussion with MyPowerCorp for the extension of its power purchase agreement (PPA) as the first-generation PPA will expire by 2017. The government has two choices - build a new plant or extend the PPA. The government set up MyPower to review the much-criticised PPAs between Tenaga Nasional Bhd and independent power producers (IPPs) and to make recommendations to three ministries, namely Energy, Green Technology and Water; Prime Minister's Office and Finance. Set up about a year ago, MyPower will review and discuss the contents of the PPAs and come up with suggestions for both Tenaga Nasional and the IPPs.

KPJ ... May12

It hopes to reach beyond RM2 billion in revenue in 2012 based on its encouraging performance during the last quarter 2011.

Besides looking at acquisition opportunities, the group is keen to grow its medical tourism which currently commands about 5 per cent of its revenue.

The company is the country's largest private medical entity with 20 hospitals under its arm.

KPJ Healthcare teamed up with Naim Land Sdn Bhd to build and operate a hospital in Miri. The joint venture was in line with the group and its subsidiaries' objective to increase its network of hospitals to locations where private healthcare is in demand, enlarge the customer base as well as other areas of healthcare services.

KPJ Healthcare hopes medical tourism contribution will grow between 15 per cent and 25 per cent in another three to four years. Indonesia and the Middle East remains as its largest market for medical tourism and the group plans to set up more representatives in these countries.

In April 2012, KPJ Healthcare acquired 80 per cent stake in Indonesia-based PT Khidmat Perawatan Jasa Medika (PT KPJ Medika) for RM15.84 million. KPJ Healthcare has in fact been managing the hospital in the last 15 years.

The acquisition was in line with the company's strategy to expand its hospital network in Indonesia in order to tap the strong potential demand for private healthcare there.

KPJ Healthcare has also been looking at means to diversify its business activities.

The company is currently talking to relevant parties to set up a retirement village in Kuala Lumpur and Johor, similar to the one it currently manages in Australia.

In 2010, the group made its maiden foray acquiring a controlling stake in Jeta Gardens, a retirement village in Queensland Australia which contributes less than 5 per cent to its revenue at the moment.

Besides healthcare, the company also operates KPJ International University College of Nursing and Health Sciences.

For the financial year ended December 31, 2011, its net profit grew 10.6 per cent to RM131.7 million compared with RM119 million before. Revenue was 14.5 per cent higher to RM1.89 billion against RM1.65 billion in 2010.

CresBld ... May12

Sources say the MRB has awarded the RM1.4bil development on 2.2ha in Jalan Ampang, Kuala Lumpur to Crest Builder and its 49% joint-venture (JV) partner Detik Utuh Sdn Bhd. For the open tender of this land, request for proposals started in June 2011. Various proposals had been submitted by property players which included those from SP Setia Bhd and Naza TTDI Bhd. The land, also known as Lot 76 is opposite the Great Eastern Mall and would be developed over seven years. The development cost would be borne by the Crest Builder and Detik Utuh JV.

MRB, as the landowner would receive 22.5% of the project's gross development value (GDV) for land rights, which translates into about RM300mil. The development would include four towers which consist of one office block, two SoFo' (small office, flexi office), and an apartment block atop a retail mall. This development strategy is similar to the RM1.04bil tower atop the Dang Wangi light rail transit station contract which was also recently secured by Crest Builder and Detik Utuh.

Tendered out by Syarikat Prasarana Negara Bhd, that project consisted of a mixed development fronting Jalan Ampang where Prasarana would receive 21.2% or RM220mil of the project's GDV as payment of land rights.

While Crest Builder is better known as a contractor, it is starting to shift its focus to become a property developer. It currently has a construction orderbook of some RM950mil and unbilled property sales orderbook of RM300mil.

With the MRB land and the Dang Wangi project, this would bring its unbilled property orderbook to over RM2.5bil. Some of its previous construction jobs for other developers included Menara Binjai in Kuala Lumpur , North Shore Gardens in Desa Park City , Kepong, and Twins Damansara in Jalan Semantan, Kuala Lumpur .

In early May 2012 Crest Builder Holdings Bhd managing director Yong Soon Chow saw his indirect shareholding in the company reduced following the disposal of five million shares or a 4.029% stake. It appeared that the shares were sold to strategic investors that were acting in concert with Crest Builder.

MRB is embarking on a strategy to monetise its landbank. Its most high profile landbank that would be tendered out soon is the development of the Rubber Research Institute Malaysia land measuring 1,215ha in Sungai Buloh, Selangor. MRB's landbank include Menara Getah Asli which fronts the Petronas Twin Towers in Jalan Ampang, the Rubber Research Institute building in Jalan Ampang, and two others, one each in Jalan Stonor and Jalan Lidcol.

BRDB ... May12

It has drawn out plans to sell its investment properties, couples with slow property

sales, have left the company in limbo on its future direction. Questions remain as to whether BRDB is better off forging ahead as a pure property developer or if it should remain as it is; a company with interests in development, assets and manufacturing.

The four assets up for sale are BRDB’s Permas Jusvo Mall in Johor, CapSquare Retail Centre and a holding company which owns BSC and the adjacent Menara BRDB office block in KL.

Almost eight months have passed since BRDB’s major shareholder Ambang Sehati Sdn Bhd made its unsolicited offer in 2011. BRDB’s board has yet to announce further details on the asset disposal except a brief filing with Bursa Malaysia on March 27, 2012 in which BRDB said the tender process was still on going. In the same announcement, BRDB reminded shareholders that Ambang Sehati was still evaluating its plan to increase its stake in the company, which may or may not result in a general offer.

BRDB wants to focus its resources and efforts on property development. Property asset disposal will have a mixed impact on BRDB’s credit standing as it would cease to benefit from its more stable income from property investment. It would exert a negative effect on its business risk profile over the longer term.

In June 2011, BRDB also revised the outlook on BRDB’s debt facilities from stable to negative given BRDB’s weaker financial profile resulting from slower than expected sales and delays in new launches.

Nevertheless, some reacted positively pointed out that BRDB in the short term if it manages to dispose of its assets at a good price. Most investors who want exposure to property stock prefer to own shares in a pure developer rather than an asset owner.

There is also the issue of asset allocation for BRDB. BRDB can focus its resources on working its landbank of about 809ha if it can pare down the debt associated with its CapSquare asset.

BRDB’s net asset value stood at rm3.68 per share as at Dec 31, 2011.

MBMR ... May12

The recent (early May 2012) price surge does not reflect the company’s fundamentals. The sharp spike comes on the back of the company’s announcement of a bonus issue and rights issue and warrants.

The rally is fuelled by speculation that MBM will expand its business to include automotive assembly in the near future. The group acquired Kinabalu Motor Assembly Sdn Bhd from Lion Corp in 2011 which came with assembly license for automobiles. The company can could be holding off plans to finalize a tie up with a foreign auto player until the government announces the NAP, which is expected before June 2012. The potential suitors of MBM will need to evaluate the government’s blueprint for the auto sector.

The group plans to start assembling cars in small volume first for domestic market before expanding for exports. But industry observers said the company may have to consider alternative strategies because Malaysia ’s domestic market is already matured and saturing.

MBM Resources’ automotive parts manufacturing business has a big potential. This is because the group is the only airbag manufacturer in Malaysia through Hiro. The sales of airbags are set to increase with the government making it mandatory that all new passenger cars must be equipped with the vehicle safety device.

Century ... May12

It is eyeing more cooperation with world's largest snack food company PepsiCo in the Asia-Pacific region, after successfully leasing its warehouse facility in Thailand to the latter.

It all began when its wholly-owned subsidiary, Century Resources (Thailand) Ltd, in September 2011 secured a RM7.6 million contract from PepsiCo for the use of the former's state-of-the-art warehouse facility at the Rojana Industrial Park here. The contract was for two years initially, during which PepsiCo would use the warehouse as its main distribution centre country-wide.

The actual physical supply chain would be provided by existing local players as Century Resources would be involved only in strategic planning. For example, if they (PepsiCo) have problems to hit certain target areas, it will draw a plan and solution for them.

PepsiCo has already asked Century Resources to build another warehouse as it wants to expand its distribution centre in the country, and the subsidiary company is studying the matter.

Century Resources established its presence in Thailand in 2005, with the inception of a third-party logistics contract from Nestle. In 2009, it invested a RM3.5 million in its own warehousing facility here, in line with its regional growth strategy.

Since Thailand was PepsiCo's distribution centre for Asia Pacific, Century Resources was eyeing to be its partner in strategic planning for its supply chain management for the region.

Century Logistics is Malaysia's leading provider of value-added supply chain solutions and total logistics services. Besides Malaysia and Thailand, the company also operates in China, Singapore, India, Sri Lanka and Dubai.

Bjcorp ... May12

It has proposed to raise its stake in Atland to 24.97% stake, making it the second largest shareholder in the latter. It now owns 9.18% stake in Atlan after it bought an additional 20 million shares or 7.9% stake at rm4.25 per share. BJcorp plans to buy further 15.8% stake in Atlan from Cipta Nirwana Sdn Bhd for rm170 million or rm4.25 pre share. This would eventually bump up its equity holding to 24.97% stake.

BJCorp plans to settle the purchase consideration by the issuance of five year 5% ICULS in BJcorp worth rm170 million. The ICULS will be accompanied by 170 million detachable warrants in BJCorp. These ICULS will be convertible into new BJCorp shares at the conversion price of rm1 for every one new BJCorp share. The issuance of the new ICULS and warrants would avoid any immediate cash outflow and allow BJCorp the time and flexibility to arrange for an orderly resolution of the put option. BJCorp has granted a put option to Cipta Nirwana that allows the latter to sell back the consideration shares to BJCorp.

It is not known who sold the 7.9% stake in Atland to BJcorp, Distinct Continent Sdn Bhd is currently Atland’s largest shareholder with a 50% stake.

Atlan is primarily involved in duty free trading and retailing, property development, hospitality and automotive parts manufacturer businesses.

Meanwhile BJCorp’s proposed acquisition of an associate stake in diversified entity could give the buyer access into prime tracts in Penang.

Atland owns prime freehold land in Penang’s north eastern enclave. These tracts have a combined area of 1.17 sq meters with a net book value of rm38 million.

BJcorp via subsidiary BJLand is making inroads into the Penang real estate market. BJLand made news in Aug 2011 when it acquired a 23ha portion of the Penang Turf Club tract for rm459 million.

YSPSAH ... May12

What’s The News
YSP announced that its Indonesia subsidiary had entered into a sale and purchase agreement with an
Indonesian Vendor for the acquisition of two pieces of leasehold industrial land measuring 3.1k sq m
together with buildings erected thereon in Jawa Barat, Indonesia for a total cash consideration of
RM3.4mn (IDR10.3bn).

Currently the buildings (i.e. 2 storey office building and single storey production building) are still
under construction, expecting to be completed by June 2012. The property acquired is for the setup of
manufacturing plant in Indonesia.

Our Take
We view positively the company’s active capacity expansion plan. During early part of this year, the
company also acquired similar type of properties in Bandar Baru Bangi, Selangor. Year-to-date, this
marks the second acquisition effort by the company.

The company already has two existing commissioning plants in Bangi and Vietnam. We understand that the average utilisation rate at the existing factories have already reached 80%. Hence, we think the capacity addition is timely to cater for the expected strong surge in demand going forward. Moreover, the locations of the newly acquired plants are also strategic to capture the growing demand in the Asean region. This would translate into cost saving in terms of logistic as the company could strategically plan to produce the drug based on the targeted export destination.

Operating cost would also be lower, in our view. Cost such as, say, labour could be lower due to ample supply of labour in the republic.

Based on the valuer’s findings, the entire property is valued at IDR11bn, which approximately 7% above the purchase price. As such, we view that the acquisition price is fair.

As at end of 2011, the company has a healthy cash pile of RM58.3mn. Taking into consideration the
borrowings, net cash position stands at RM38.4mn. Thus, we view that the purchase, which is internally
funded, would not have a grave impact on the financial position of the company.

Impact
We are leaving our earnings forecasts unchanged. At this juncture, there is little information on the capacity of the new plant. We shall review our forecasts once we receive the relevant information from the management.

Outlook
The local pharmaceutical industry is expected to grow by 8% this year to RM610mn. Given the nascent
stage of the pharmaceutical industry, there is still high reliant on imports. Moving forward, with government funding of RM96mn from 2010 to 2012 to construct manufacturing facilities for the production of generic drugs which may help to reduce reliance on import drugs.

Valuation
We maintained our BUY recommendation on the stock as well as our target price of RM1.27 based on
FY12 PER of 9.5x. Key risks include 1) active M&A play; 2) delay in scheduled plant commissioning and
3) delay in rolling out original drugs which in turn may affect that of generic drugs.

IPO ... Felda Global

The Felda group’s acquisition of Robert Kuok’s sugar business in 2009 has given the impending listing of Felda Group Ventures Holdings Bhd considerable boost with the unit contributing 30.7% to its group revenue for financial year ended Dec, second to the plantations business’ 44%. The balance 25.3% stake was contributed by its downstream business.

The sugar segment is undertaken through its 54% subsidiary MSM Malaysia Holdings Bhd.

The Malaysian government’s sugar subsidy to FGVHB’s sugar segment declined in 2011 as the price ceiling for refined white sugar was raised. However, the subsidy is expected to increase in 2012 due to higher global sugar prices while retail prices will remain unchanged in view of the impending 13^th general election.

Volatility in the global price of raw sugar led the government to introduce a subsidy of 60 sen per kg of refined sugar in 2009. This was raised to 80 sen per kg in 2010 before rising again to 54 sen per kg currently (May 2012).

MSM is the leading sugar producer in Malaysia, producing 56.9% stake of total production volume of refined sugar in 2011.

MSM owns Klang Gula Felda Perlis Sdn Bhd and Malayan Sugar Manufacturing Co Bhd. Fela Global Ventures also bought PPB’s Group’s sugarcane plantation for rm45 million and its 50% interest in KGFP for rm26.3 million.

MSM also holds a 20% stake in Tradewinds Malaysia Bhd, which operates Central Sugar Refinery Sdn Bhd and Gula Padang Terap Bhd.

Under Felda Global Ventures, the sugar business held under MSM was floated in June 2011, raising rm423 million.

Nevertheless whole the sugar business may make FELDA Global Ventures different from other plantation stocks, it will not add much to its valuation. This is due to MSM’s business model where its margins are much static.

In Malaysia, refined white sugar products are controlled goods and the government has historically set price ceiling for these products. In recent years, there has been a sharp increase in the price of raw sugar in the international markets. Following such increases in raw sugar price, the government introduced a sugar price subsidy in 2009 so that the increase in the price of raw sugar would not be fully passed on to consumers of refined sugar products in Malaysia. Its performance thus depends partly on the government’s policies with respect to the sugar industry such as the level of subsidy which are beyond its control.

It was revealed that the government has locked in new sugar prices at 26 US cents per lb for the next three years compared with 17.5 cents previously leading to higher sugar subsidy bill in 2012.

Under the 10^th Malaysian Plan, the government had started to slash subsidies on fuel and sugar as it undertakes reform of subsidies. However subsidy rationalization has been suspended as the government prepares for the general election which must be held by early 2013.

For MSM however, the higher sugar subsidy may not cover fully the rise in raw sugar costs in 2012 unless the ringgit strengthens.

Under the new structure, Felda Global Ventures operates 340000ha of oil palm estates under tenancy agreements with the Federal Land Development Authority (FELDA).

However some settlers against the cooperative Koperasi Permodalan FELDA to transfer of its 51% stake in FELDA Holdings to Felda Global Ventures. This means that FELDA Holdings remains a 49% associate of FELDA Global Ventures and KPF will not own any shares in the listed vehicles. Nevertheless, sources say the door still open for KPF to come in at a later time, likely with the cooperative taking up a stake in FELDA Global Ventures.

The funds raised from the IPO will be used for the acquisition of assets in the upstream and downstream sectors, loan repayments, capex.