Monday, September 30, 2013

Bina Puri - 13-storey retail complex in Melawati

Bina Puri Holdings Bhd has secured a RM441mil contract from Sime Darby CapitaMalls Asia (Melawati Mall) Sdn Bhd to build the super-structure for a 13-storey retail complex in Melawati here.

The 24-month contract from Sime Darby CapitaMalls Asia would involve building an eight retail floors and a five-storey car park. With the latest contract, it had secured RM775.27mil projects in 2013. The group’s current unbuilt book order was RM1.91bil to date.

Officials from PR1MA say PR1MA has yet to approve any projects undertaken by property developer Gadang Holdings Bhd despite reports that the latter has been awarded a rm1.07 billion job by the government housing agency to build affordable housing Cyberjaya. Bina Puri is also believed to be interested in contributing to PR1MA but the executive says it has yet to receive any proposals from the company.

Meanwhile Gamuda Bhd director Datuk Ng Kee Leen’s son, Ng Keong Wee, has raised his stake in Bina Puri Holdings Bhd to 9.52%. The junior Ng, 28, is speculated to lead construction firm’s property business going forward. He bought another six million shares at RM1 apiece through a private placement.

It was reported that it had appointed Datuk Seri Ong Tee Keat as advisor. Will Ong become a magnet to attract new project for Bina Puri and be a catalyst to help turn around the rather lackluster company?

Market observers say it is unrealistic to expect Ong to have such an impact in the short term. However they suggest Bina Puri could leverage on Ong’s connections as a former transport minister as it seeks to get out if the mess at the delayed KLIA2 project.

For Bina Puri, it had been awarded contracts worth billions in the past five years. This has boosted its order book at an average of rm2.2 billion annually for the last five years.

However having large order book does not necessarily mean that the company’s earnings will grow in tandem with the value of the contract being awarded. It had in the past five years faced an earnings mismatch.

Ong’s appointment is not surprising given that the Tan and Tee families who founded Bina Puri are associated with the MCA.

The company’s largest shareholder is Jentera Jati Sdn Bhd which holds a 15.91% stake and is linked to Tan Sri Syed Mokhtar.

Ekovest - DUKE

Sources say MRCB is mulling the divestment of its 30% stake in the DUKE.

It is understood that MRCB is seeking a valuation of between rm180 million and rm200 million for its 30% stake in DUKE, which has started to generate a healthy cash flow and has met its internal rate of returns.

It is already in talks with several parties although Ekovest which controls the remaining stake in DUKE has the first right of refusal. Such as move by Ekovest to acquire the remaining 30% stake in Nuzen Corp Sdn Bhd will see the company receive full revenue contribution from DUKE.

Furthermore, Ekovest is raising funds through the issue of bonds to construct the Sri Damansara and Tun Razak links, or DUKE 2, which will cost about rm1.2 billion.

Taking another step, Ekovest has submitted a proposal to develop park and ride facilities around the city centre.

Apart from recurring income, the construction of DUKE 2 will benefit Ekovest in terms of construction revenue. DUKE 2 will also improve connectivity to Ekovest’s landbank in the Gombak area where the company plans multibillion ringgit development projects.

Currently (Sept 2013), DUKE concession is a key source of recurring income for Ekovest.

Meanwhile the company has diversified into property development.

Apart from its projects in the Klang Valley, it owns 25ha of undeveloped land in Danga Bay.

Ekovest is likely beneficiary of the projects under IWH, which controls a large landbank in JB.

Ekovest is controlled by Tan Sri Lim Kang Hoo (32.38%) and Datuk Haris Onn Hussein, who is also the brother of Defense Minister Daturk Seri Hishammuddin Hussein (20.81%).

Kang Hoo is also a shareholder of IWH – in which he controls a 70% stake via Credence Res Sdn Bhd.

Ekovest and MRCB are also partners in the River of Life project via Ekovest-MRCB JV Sdn Bhd, a 60:40 JV between the two parties. The JV company was appointed the project delivery partner of the rm2.2 billion Klang river rehabilitation and beautification project.

With the disposal of DUKE, it raises a question if MRCB’s stake, in the ROL, project will be also put on the selling block.

Ekovest new ventures will accord the company assets for recurring income when the construction sector starts to taper down.

Sarawak Cable - who will win the job?

It is seen as the front runner to clinch the estimated rm1 billion 500kV electricity transmission line job in Sarawak. The is because Sarawak Cable is the only integrated power cable and electricity transmission player in the state and region.

A decision on who will win the job is expected to be announced soon.

The power outrage in Sarawak further underscores the need to expedite the implementation of the 500kV line.

As at end May 2013, Sarawak Cable had an order book of rm687 million with an outstanding amount of rm202 million.

It had announced the listing of its rights issue of 77.6 million shares if rm1 each followed by a 1 for 5 bonus issue of 46575000 shares. The rights issue will mostly be used for the financing of future projects and for procurement of war materials.

Datuk Seri Mahmud Abu Bekir Taib added 25557500 shares by subscribing for the rights issue, increasing his stake in the company to 13.79%. Mahmud is also the eldest son of Sarawak Chief Minister Tan Sri Taib Mahmud.

Sarawak Cable’s third largest shareholder and group MD Toh also took up the rights issues on July 5 2013 increasing his stake to 13.81%.

Sunday, September 29, 2013

PetDag - it is not just a petrol station operation

It is not just a petrol station operator. Granted the company runs more than 100 stations nationwide but it is also making good profits from providing aircraft at both domestic and intl airports with fuel and ancillary services.

PDB is the major fuel supplier for all the airports in the country while Shell and Petron are two other players.

PDB commanded 67% of the domestic market in the second quarter of 2013.

On the foreign, PDB’s wholly owned subsidiary has a presence in five intl airports including the HK Intl Aiport and Heathrow Airports in London.

It also provides technical services to various airlines that fly into Malaysia’s airports and to Engen Petroleum Ltd in South Africa.

Its commercial business, which includes the supply of jet fuel and provision of ancillary services to commercial airlines, generated about 55% of its revenue.

It is also working on getting the business of more airlines in the intl airports where it already operates and is looking to venture into other aviation hubs in the region.

It is crucial for PDB to gain foothold in more intl airpots in Asia to provide its airline customers with a broader range of services.

The group plans to grow its downstream marketing operations in the region.

The supply of jet fuel and also diesel accounts for 80% to 85% of revenue generated by PDB’s commercial business, which means the division’s earnings performance pretty much depends on the flight frequency of the airline customers.

PDB also supplies diesel in bulk to various sectors in Malaysia, such as power generation, upstream oil and gas and manufacturing.

Friday, September 27, 2013

Weida - diversification into property development

The Sarawak based company is planning to make inroads into Peninsular Malaysia. It has a two prolonged plan to expand its presence there – through its manufacturing segment a diversification into property development.

Currently (Sept 2013), it derives 78% of its revenue from Sabah and Sarawak.

Its manufacturing division largely caters for the water treatment sector, in which it produces more than 200 types of building materials.

It is also diversifying into property development segment.

The company has over the years built a steady recurring income source from its provision and maintenance of water systems as well as the lease of telcos towers.

Its recurring income stream accounted for about 50% of its revenue in FY2013.

With the diversification into property development, its earnings portfolio is expected to change in the next five years from 2013.

It relies on long term contracts in the telecom and water treatment sectors. The estimated net rental income for this division in the next five years from 2013 will be about rm70 million.

In the water sector, it receives fixed income from long term contracts for the management, operations and maintenance of three septic sludge treatment plants in Kuching, Sibu and Miri.

The concession period for each of these three contracts is 25 years. The estimated concession income in the next five years from 2013 will be about rm60 million.

Focus Aims - new shareholder EcoWorld

Its key asset, a 1053.80 acre price of land in Kota Masai, Pasir Gudang, Johor is only valued at rm7 psf or rm322 million in its books and has not been revalued since it was acquired in 1994.

Using a conservative market value of rm25 psf, the land alone is worth more than rm1.1 billion. This works out to a revised net asset value of about rm3 per share.

Typically, smaller companies like Focal Aims would command a 40% to 60% discount to RNAV due to the slower rate as at which the value is unlocked. However with EcoWorld’s management at the helm, the value could be unlocked much quicker.

EcoWorld is being spearheaded by SP Setia bhd’s former top management. If the team’s track record is any things to go by, the land could have a higher RNV.

On EcoWorld’s future plans, it is looking at generating more than rm1 billion in unbilled sales before 2015.

The RTO exercise is just the first step of a bigger plan. The next move is expected to be an asset injection by its new shareholder EcoWorld.

Thursday, September 26, 2013

SP Setia

Sources say PNM is exploring ways to unlock the value of its property assets currently (Sept 2013) housed in I&P Group Bhd.

The fund is looking at two options. One is a direct listing of I&P, which is the result of a merger between I&P, PGarden and Pelangi Bhd. The other is to inject I&P’s assets, which could be worth rm10 billion, into 64% owned SP Setia.

It is understood that PNB is more inclined to do the latter because SP Setia is a well established developer and a consolidation between the two companies will enhance the value of I&P’s property projects.

At the same time, SP Setia will become a mega property developer listed on Bursa Malaysia whose projects have a GDV of about rm40 billion.

Sources say PNB has also announced the development of 118 storey tower Warisan Merdeka, this project is not expected to be pumped into SP Setia because its GDV of rm5 billion might put too much on the group’s plate.

IJM Land - strong earning from London properties

Stronger pound and rising property prices reasons to invest in London properties

It is mulling over offers from British investors to develop land in London to tap the booming UK property market.

IJM Land is now the second biggest Malaysian investor in London after the SP Setia Bhd-Sime Darby Bhd joint venture, which launched the RM40 billion Battersea Power station project early 2013.

 IJM Land’s maiden project is called Royal Mint Gardens in Central London which is worth £200 million.

IJM Land holds a 51 per cent stake in the mixed development, while the rest is held by UK investors.

Work on Royal Mint Gardens is expected to begin in early 2014 and slated to complete in 2017.

Wednesday, September 25, 2013

TSH Resource - 77% oil palm plantations are young

About 77% of TSH’s oil palm plantings are still immature and young mature. It expects the strong trend of improving production output from these plantings in the next three years from Sept 2013.

TSH has been growing rapidly as a plantation company. It is now (Sept 2013) seeing some fruitions of our hard work put in several years ago which is just the beginning.

In the second quarter ended June 30, 2013, its profit before tax rose 21.1% to RM24.56mil from RM20.27mil. For the first half ended June 30, its earnings rose a strong 25.2% to RM37.17mil from RM29.68mil in the previous corresponding period.

Selling its 16.78% stake in Pontian United Plantations Bhd to Felda Global Ventures Holdings Bhd for RM196mil cash see it netting RM86mil.

It has also undertaken two private placements of 20.86 million shares each. At an indicative RM2.32 a share, the proposed private placement raised RM48.4mil, of which almost all would be used as additional working capital requirements and/or for potential investment projects.

Long-term outlook remains bright with 77% of its oil palm trees below seven years old which support higher yields going forward. Hence, its plantation can sustain FFB growth of more than 18% per annum over the next three years from Sept 2013.

Tropicana - asset rich but tight cash flow

While many were guessing what would be the next asset that Tropicana Corp Bhd would hive off, the company sprang a surprise on the investing public when it announced the purchase of 18 tracts if land in Pulai, Johor for rm366 million cash.

It said the land acquisition is in line with the company’s overall objective of increasing its landbank in strategic locations especially in Johor.

However the land purchase came as a surprise as many expect Tropicana which currently (Sept 2013) has total assets of rm4.58 billion to dispose of some to help reduce its borrowings and ease cash flow.

The group’s balance sheet as at June 30 2013 had total borrowings of rm1.86 billion, including long term debts of rm1.56 billion. Its cash balance was at rm372 million. It had a net gearing ratio of 0.63 times.

It intends to fund the proposed land acquisition and the development cost through internally generated funds and/or bank borrowings.

In Aug 2013, it unveiled its plan to sell its retail mall to CapitaMalls Malaysia Trust.

Tan Sri Danny Tan’s reverse takeover move to inject his 762-acre tract of land into Albedo Ltd may be the only logical move for the tycoon, considering Tropicana Corp Bhd cannot stomach any more big asset injections.

The land situated in Iskandar Malaysia was cited to worth an aggregate value of RM2.71bil as at Aug 30 2013, based on estimations by Knight Frank Malaysia Sdn Bhd.

Tropicana, which is asset-rich but tight on cashflow, underwent an amalgamation exercise a year ago injecting some 73 properties into its coffers for RM948.7mil. The asset injection included Tan’s private property assets.

The group was also in a de-gearing exercise through strategic disposals.

It made sense for Tan to plant his private assets in another company if Tropicana could not take the asset injection. It is important to note that this land deal (with Albedo) came much later than the amalgamation exercise in Tropicana. If (Tan) could not inject any more assets into Tropicana, it is logical for him to look for another vehicle to do so.

Earlier reports said that Singapore-listed Albedo could pose potential rivalry for Tropicana, the latter having its own Iskandar projects.

Market observers said there should not be any conflict of interest given the collaborative possibilities for both companies ... collaborations are highly likely. It is better for both companies to have the same shareholders overseeing the projects. This would create healther competition than if other companies came in.

However Tan’s move could raise some questions on Tropicana’s direction. Some may be confused about where Tan Sri’s focus is now until there is more clarity on what this means for Tropicana.

Tan’s move will enable him to gain controlling stake in Albedo, a steel and raw materials trader.

Albedo has signed a MOU with Tan’s private company, Temasya Cergas Sdn Bhd, to purhase the land in Iskandar, settled via the issue of Albedo shares. Albedo had agreed to a S$774mil (RM1.96bil) takeover deal. It planned to issue 34.55 million new shares at2.24 Singapore cents (5.7 sen) per share to Tan’s Infinite Rewards Inc, which equals 95% of the enlarged Albedo’s stock.

Albedo will then use the proceeds to buy Reflections Oasis Inc, a subsidiary of Infinite Rewards. Infinite Rewards is reported to be acquiring seven parcels of land in Malaysia for commercial, industrial and residential development.

Tuesday, September 24, 2013

TMS - agreement with ZTE Supply Chain

It has been appointed as an agent of China’s ZTE Corp as part of a plan for the Chinese telco giant to provide financing services for information and communication technology (ICT) projects here in Malaysia.

The deal between ACE Market-listed TMS and ZTE should also pave the way for both parties to work together on future projects.

In the latest financing deal, a figure of US$1bil (RM3.16bil) is being bandied about as the amount of money that TMS will help ZTE to loan out, specifically to companies that plan to embark on ICT projects in the Iskandar region, the country’s ambitious development project in Johor.

The funds would come from ZTE’s wholly-owned subsidiary, Shenzhen-based ZTE Supply Chain Co Ltd, which has decades of experience in global integrated supply chain services.

TMS, currently (Sept 2013) in the red, could reap a net profit margin of about 15% from its role as the local partner of the Chinese giant in this financing project, that may entail TMS playing some sort of an “overseer” role of for the financing of the ICT projects.

An agreement between TMS and ZTE Supply Chain is expected to be signed in China this week. It is understood that executives of TMS are already there for this purpose.

It is believed that such a tie-up is the first of a kind for ZTE Supply Chain as its global parent company seeks to gain entrance into the Malaysian market and its surrounding Asean neighbours, hungry for telecommunication networking equipment and consumer products like smartphones.

Currently (Sept 2013), the ZTE group has a presence in the Malaysian market, with DiGi.Com Bhd being one of its major clients for network solutions. It has also teamed up with a local firm to sell telco devices in Malaysia.

For TMS, this partnership with the ZTE group will see its profile enhanced; this could pave the way for more jobs for it both here and abroad.

Monday, September 23, 2013

Hovid - Patent Cliff

With global pharmaceutical industry facing the Patent Cliff, Hovid Bhd is in the happy position of benefiting from the changes that follow.

The Patent Cliff refers to the expiration of numerous patented products over the next five years from 2013, where patented medicine that currently (Sept 2013) generates more than US$133 billion in revenue a year will face competition from generic medicine producers.

The growth opportunities for generic medicine producers like Hovid are significant as there will be a rush by them to enjoy the high margins associated with new generic drugs.

Hovid plans to commence the construction of new plant early 2014 to expand its tablet capsule production capacity and its R&D facility. This will allow the company to target the development and production of new off patent drugs for supply to Malaysia and its export market.

With more countries trimming their healthcare budgets, health authorities are switching from the more expensive patented medicine to the cheaper generic equivalents.

This has created much potential for Hovid given that its principal business is the manufacture, distribution and export of pharmaceutical products.

The new plant will comply with the pharmaceutical production standards of Australia, Europe, and the US Food and Drug Administration and sharpen its competitive edge in Malaysia and its export markets. This will enable it to target the developed nations which will turn fuel its growth.

Previously it was impacted by challenges faced by its former subsidiary Carotech. In the de merger it made provisions for the impairment with its investments cost and all amounts due from Carotech.

Now (Sept 2013), its future will no longer be affected by events at Carotech.

It has since improved its financial position. As at June 30 2013, it had shareholders’ funds of rm152 million compared with rm107 million a year ago. As at June 30 2013, its gearing ratio was 0.08 times compared with 0.4 times a year ago.

Ho is Hovid’s largest shareholder with a 41.08% stake, followed by LTH with 5.79%.

Its future will be driven by its export markets, the growth of which is expected to be in the high teens to 20%. Currently (Sept 2013), export sales account for 60% to 70% of its total revenue.

Friday, September 20, 2013

Salcon latest movement

Focal Aims Holdings Bhd has emerged as the most likely candidate for a reverse takeover of Eco World Development Sdn Bhd, disproving earlier theories that Salcon Bhd would be used as the vehicle for Tan Sri Liew Kee Sin’s comeback post-SP Setia Bhd.

Focal Aims’ major shareholders had inked a conditional share sale pact with Eco World Development Holdings Sdn Bhd (EWDH) and Liew Tian Xiong for 164.78 million shares at RM1.40 apiece, valuing the exercise at RM230.69mil.

EWDH, previously known as Maple Quay Sdn Bhd, controls 50% of Eco World and is owned by Tan Sri Abdul Rashid Abdul Manaf and Datuk Eddie Leong Kok Wah – former directors of SP Setia and close associates of Liew. Tian Xiong is Liew’s eldest son.

The takeover by EWDH would make it Focal Aims’ largest shareholder with a 65.05% stake and is expected to trigger a MGO for the company. However, an MGO had yet to be extended, pending the completion of a one-month due diligence.

EWDH plans to first acquire shares in Focal Aims and follow that with an injection of Eco World’s assets into Focal Aims. This is a faster way to grow for Eco World than the traditional listing route, which requires a proven track record of three to four years.

Sources say despite the MGO, Focal Aims’ listing status would remain, the source added.

Focal Aims’ key asset is its 1,011ha Kota Masai township in Iskandar Malaysia.

The company, which had been loss-making for three years until it turned in a profit for the financial year ended Sept 30, 2012, also owns vacant freehold land in Plentong, Johor Baru, measuring 426ha. The land, mostly acquired in 1994 for what must be a bargain at today’s prices (Sept 2013), was valued at RM302.64mil as of September 2012.

It is understood that Focal Aims was chosen as the vehicle because water treatment specialist Salcon, in which Leong has a 13.18% interest, did not have a track record in property development.

Salcon, which has joint-venture agreements with Eco World to develop property in Johor, last week sold its water assets in China for RM518mil.

Eco World came into sharp focus earlier 2013 after the company purchased a staggering 1,214ha for some RM600mil, a feat even listed developers would find hard to stomach. The gross development value of this land-bank is estimated to be worth RM30bil.

An amalgamation of Focal Aims and Eco World, if it pans out, could make the combined entity an attractive stock, given its quality land-bank and close ties to SP Setia, where a number of executives have left to join Eco World. Liew himself is expected to leave before his contract expires in 2015.

Thursday, September 19, 2013

IHH - better than KPJ

It is faring better than KPJ due to its larger hospital network and earnings better, which tempers the impact of start up costs to a certain degrees. The company had some 5463 beds in Malaysia, Singapore, Turkey and India as at end 2012.

Its newly opened hospitals are also turning around faring quickly. The Mount Elizabeth Novena Hospital in Singapore, which opened in June 2012 was already earnings positive in 2QFY2013. The same goes for the Acibadem in Turkey. However, the Acibadem reported lower operating losses in the latest quarter.

IHH has budgeted rm2.75 billion in capex for the next 3 ½ years – for new hospitals in Malaysia, Turkey, India and HK as well as an expansion of existing facilities.

Among the larger projects in the pipeline are the Gleneagles Medini in Iskandar Malaysia, and Gleneagles in HK. The latter in which IHH has a 60% stake – is estimated to cost rm2.1 billion, including land cost, and is targeted for completion by late 2016.

The company is also undertaking management agreements for hospitals in China, Vietnam and UAE, as a means of securing a foothold in these markets. In all, estimate total numbers of bed to grow 70% by 2016.

IHH also plans to unveil a dividend policy by end 2013. Market observers assume a 50% payout ratio. Gearing stood at just 12% as at end June 2013.

Tenaga - Power reforms

The reforms for the power sector will likely benefit Tenaga via the fuel pass through mechanism while the IPPs call for a level playing field in new power generation bids will be answered by the unbundling of Tenaga’s business units.

The catalyzed for the power reforms include the implementation of the FCPT mechanism, which is expected by end 2013. The main beneficiary of the industry reforms is Tenaga as the FCPT will allow it to recover its fuel costs through periodic tariffs adjustments.

Other reforms such as the continuation of FCPT and the implementation of the incentive based regulation are also expected by early 2014. The FCPT will be implemented which will likely result in an electricity tariff increase. This will allow Tenaga to recover its fuel costs every six months, which will bring the electricity tariff in line with market prices. The aim of the FCPT over the next four to five years from 2013 is to match energy costs with market prices.

The likelihood of delays in implementation reforms is low as the government’s political will is strong.

Tuesday, September 17, 2013

Oriental Holdings Bhd - major shareholders have buying more shares recently

Several major shareholders have buying more shares in the company in 2013 despite its poorer financial results for the first half of 2013.

Filings showed that the EPF and Aberdeen Asset Management Plc have increased their shareholdings in the company. EPF has over 61.26 million shares or close to 10% while Aberdeen has 10.44% stake.

With the latest accumulation of shares, it appears that the major shareholders are not put off by Oriental’s poorer financial performance.

Oriental is involved in several businesses. It sells Honda vehicles through a dealership held by its 100% unit Kah Motor Company Sdn Bhd in Malaysia and its distributorship in Singapore and Brunei. It also sells Hyundai cars via its unit.

Its plantation division, which has oil palm estates in Indonesian and Malaysia is also a major earnings contributor to the group.

The group is also involved in the hospitality business with presence in Malaysia, Singapore and Australia, NZ, Thailand and the UK, property development and building materials segment, as well as education/healthcare, via its 70% owned nursing college.

Its cash stood at rm2.62 billion. It is believed that the cash would likely be used to expand its plantation business in Indonesia. By using the cash of over rm2 billion could be a catalyst to its plantation division, which contributes about one third of the group’s earnings.

Oriental is a deep asset play. The company is rich in assets. It has a lot of land assets, hotel assets and over rm2 billion in cash.

Sunday, September 15, 2013

CCB - dividend payment

The amendment of a JV by CCB with principal Daimler AG in relation to an unconditional fixed annual dividend payment could further affect the former’s sluggish performance.

What is seen as a consistent annual dividend income for CCB will have an element of uncertainty now (Sept 2013) that it is no longer fixed following the announcement on July 24 2013.

The reversion to the JV is due to the fact that the unconditional nature of the dividend did not truly reflect the equity nature of the Daimler and CCB partnership in the JV.

About the equity nature of the JV, why is CCB not being paid annual dividends commensurate with its 49% stake in Mercedes Benz that could be five times more than I being enjoyed currently (Sept 2013).

In 2003, CCB subscribed for a 49% stake in Mercedes Benz while Daimler took 51% stake in the JV set up to take over the new wholesale and distribution role from CCB. Daimler had granted certain distributor rights to CCB, under an agency agreement on Oct 30 1974.

This JV effectively relegated CCB’s function to that of retailer of Mercedes Benz vehicles and it saw a downward spiral of its business, as it had previously lost other distribution rights.

It undertook a major restructuring exercise, largely complete by June 2008, which enabled the company to streamline its business portfolio and focus on its Mercedes Benz business.

Minority shareholders who have previously enjoyed bumper dividends, are believed to prefer that CCB cash out its JV and return the cash as dividends to shareholders. Alternatively they are also hoping for CCB’s 59.1% shareholder, Jardine Cycle & Carriage Ltd to take the company private. The other major shareholder of CCB is EPF with a 6.6% stake.

Hovid - expending pharmaceutical business

It will be expanding its pharmaceutical business after sorting out Carotech’s debts

It is on the recovery path after taking steps to sort out Carotech Bhd's debts and is looking to expand the pharmaceutical business in 2014.

After factoring in a non-recurring item, Hovid's third quarter pre-tax profit of RM18.4 million works out to be seven per cent lower than previous year's RM19.9 million.

Carotech was an associate company up to December 22 2011. It has now become a simple investment to Hovid.

In the last three years prior to 2013, Carotech faced difficulty as there was no working capital. One way to raise funds for Carotech is for Hovid to embark on a rights issue of new warrants.

Hovid is set to raise around RM11 million for Carotech's working capital. These warrants, having a five-year lifespan, will replace the original warrants that had expired.

It has been 17 months since Hovid was lifted from PN17 status on January 16 2012.

In Hovid's books, Carotech is written off to RM1. It is still resolving Carotech's debts with the banks and hope it can resolve this by the end of 2013.

Hovid's laboratories in Perak produce antibiotics, antidiabetics, antihypertensives, antimalarial and anti-inflammatory analgesics, ranging from skin care and hair care products to health beverages.

Its products are GMP-compliant and exported to more than 40 countries.

In the consumer market, Hovid is known for its popular Tocovid SupraBio health supplement and Ho Yan Hor Herbal Tea.

The Tocovid SupraBio health supplement is currently the consumer market leader for palm oil Vitamin E extract. Tocotrienols, which are most abundantly found in palm oil, are showing promise in clinical trials that they are capable of reducing risk of degerative diseases such as stroke, heart attack and cancer.

Thursday, September 12, 2013

War on Syria - "from highly possible from a week ago to less likely".

Fears of a possible US-led strike on Syria eased, with the United States appearing open to a Russia plan for Damascus to give up its chemical weapons.

Russia on 10 Sept 2013 called for Syria "to place its chemical weapons under international control and then to have them destroyed in a bid to avoid a US attack on the Assad regime for its alleged use of chemical weapons on its own people

The proposal was greeted by US President Barack Obama as a "significant breakthrough", although he did not discount the option of military intervention.

The US Senate also announced on 10 Sept 2013 that it would be delaying a key vote on authorising the use of force in Syria to let Obama to publicly address the issue.

The possibility has gone "from highly possible from a week ago to less likely".

Libyan oil exports plunged more than 70 percent in August 2013 after protesters, including policemen and border guards, forced export terminals to shut over demands for back pay. The country's production has rebounded to 600,000 barrels a day, and all export terminals will be open by the middle of next week.

Star - earning disappointment

Its disappointing set of earnings resorted to management cutting its interim dividend per share to six sen from its usual nine sen. This is likely the key reason behind its dock price underperformance over the past three weeks prior to 11 Sept 2013.

The probability of the price overshooting the downside appears high given its weak fundamentals and DPS cut, which has also advertently sparked off a selling spree by its major shareholders … Aberdeen Asset ceased to be a major shareholder.

However the management has guided that FY2013 DP would be restored to 18 sen should Star’s FY2013 financial performance match that of FY2012, market observers think that this might be a tall order given an adverse shift in print advertising expenditure trends from the print to the broadcast segment, a shift in English print adex to the vernacular papers and a general lack of mega events to push adex spending.

Going forward, should there be further earnings disappointment in 2HFY2013, it would not be surprised if its final DPS is also be cut.

Market observers remain hopeful that Star’s DPS disappointment will end in its 1HFY2013 results. However given its weaker financial performance, underpinned by weaker adex and losses largely arising from its non print investments, do not rule out the possibility that Star’s lower DPS may become a new norm.

Its investment in its e paper does not seem to be bearing much fruit as advertisers continue to ignore The Star’s increased daily circulation. Although current yields are attractive at 6%, there is downside risk to Star’s DPS payout should the above negative factors materialize.

Wednesday, September 11, 2013

Mulpha Land - reduce debt RM4 million

It plans to reduce its bank borrowings by rm4 million through the disposal of land in Klang for a cahs consideration of rm8.63 million. Part of the proceeds from the disposed disposal will be utilized towards the repayment of MLB Group’s bank borrowings, which will result in a reduction of MLB’s gearing level and in turn reduce the borrowing costs which will translate into interest savings for MLB Group.

The deal is also expected to increase then net assets per share of the group, and reduce its gearing for the group.


It has not received any offer to sell its 55% owned 4G unit, Packet One Networks (M) Sdn Bhd (P1). However, Green Packet said as part of the efforts to maximize shareholder returns, it would continuously pursue possibilities of collaborations and partnerships to complement the company's business strategy.

Meanwhile speculation that Telekom Malaysia may acquire a 30% stake in a subsidiary of Green Packet to complement its fixed broadband services with a wireless platform. The news comes at a time when DiGi, too, is said to be eyeing P1’s spectrum. This subsidiary may be Green Packet’s 55%-owned Packet One Networks SB (P1), which holds 30Mhz of the 2.3Ghz spectrum currently used to roll out P1’s WiMAX broadbrand services.

P1 also holds 20Mhz of the 2.6Ghz spectrum awared in December 2012 for LTE services.

P1’s spectrum will allow TM to expand from its fixed broadband services and offer a wireless platform. While the wireless broadband solutions will not become TM’s key revenue growth driver, it could enhance TM’s market potential while also reducing churn.

However, he deal would mean higher capital expenditure, and this could – from an investor’s point of view – dim prospects of special dividends from TM.

Tuesday, September 10, 2013

Bina Puri - Datuk Seri Ong Tee Keat

It had appointed Datuk Seri Ong Tee Keat as advisor. Will Ong become a magnet to attract new project for Bina Puri and be a catalyst to help turn around the rather lackluster company?

Market observers sat it is unrealistic to expect Ong to have such an impact in the short term. However they suggest Bina Puri could leverage on Ong’s connections as a former transport minister as it seeks to get out if the mess at the delayed KLIA2 project.

For Bina Puri, it had been awarded contracts worth billions in the past five years. This has boosted its order book at an average of rm2.2 billion annually for the last five years.

However having large order book does not necessarily mean that the company’s earnings will grow in tandem with the value of the contract being awarded. It had in the past five years faced an earnings mismatch.

Ong’s appointment is not surprising given that the Tan and Tee families who founded Bina Puri are associated with the MCA.

The company’s largest shareholder is Jentera Jati Sdn Bhd which holds a 15.91% stake and is linked to Tan Sri Syed Mokhtar.

IJM Corp - Selling Kuantan Port for RM334 million cash

It is selling a 40% stake in wholly owned Kuantan Port to China based port operator Guangxi Beibu Gulf intl Port Group Co Ltd for rm334 million cash.

It remains a blue chip laggard and it is likely to dish out positive news in the coming months from Sept 2013.

IJM Corp follows the Malaysian government’s project sequencing move to strengthen the public sector’s financial position. Its tender book mix is however exposed to minimal risk from the project sequencing.

Expect positive progress on the WCE in 2HFY2013 beginning the targeted financial closure on 2013.

The completion of the partial divestment of IJM Corp’s stake in Kuantan Port will pave the way for rm3 billion worth of port extension work which will also be private sector driven.

Saturday, September 7, 2013

Ivory - abandoned Plaza Rakyat

Its 65% unit is buying the property assets of the abandoned Plaza Rakyat project in KL for rm400 million cash or about rm603 psf.

It intends to revise the development plans of the project, which encompasses a comprehensive and integrated residential, commercial and transportation hub.

As the expected completion date of the proposed acquisition will be in the first half of 204, it is expected that there will not be any material effect on the earnings of the group for the financial year ending 31 Dec 2013.

However the interest expense in relation to the borrowings to fund the acquisitions may lead to a decrease in the earnings and the EPS of the group for the financial year ending 31 Dec 2014.

Friday, September 6, 2013

Glove Makers

Industry observers said the increase in energy cost will certainly have an effect on the rubber glove industry. However, the difference is whether the increase will be done on a staggered or a big margin basis.

Rubber glove makers require a big amount of natural gas to heat rubber gloves as part of the production process. The cost of energy constitutes between 9% and 11% of the total production cost for most industry players.

MRCB - bright prospect

Its prospects are bright after the Nusa Gapurna acquisition and its latest RM130 million river rehabilitation contract.

The latest deal should address investors' concerns over MRCB's depleting construction order book, which was RM1 billion before the Nusa Gapurna acquisition.

In late Aug 2013, MRCB won a contract worth RM130 million from the Irrigation and Drainage Department to execute Phase 3 of the Pahang river rehabilitation project, which is targeted to be completed in September 2015.

Its outstanding infrastructure and environmental segment is believed to have dipped below RM80 million.

Investors' interest in MRCB may be sluggish due to slow project replenishment, depleting property portfolio, high maintenance and low traffic growth for Eastern Dispersal Link. However, a better prospect for MRCB after the Nusa Gapurna acquisition.

MRCB's earnings will improve from 2015 onwards as Nusa Gapurna has given a three-year profit-after-tax guarantee of RM50 million.

The company's land bank will increase from 20ha to 33.2ha, with total gross development value of the Nusa Gapurna land estimated at RM5.7 billion. The RM3.4 billion Nusa Gapurna's subsidiary, GHC Sdn Bhd's outstanding orderbook, will boost MRCB's contract flow.

Datuk Mohamed Salim Fateh Din as MRCB managing director emerged as the second largest shareholder in MRCB after Employees Provident Fund, with 12.5 per cent stake.

His hallmark green projects include the 348 Sentral at KL Sentral and the ongoing PJ Sentral Garden City, both hailed as industry benchmarks geared towards the highest standard of the US-based Leadership in Energy and Environmental Design as well as Malaysia's Green Building Index standard for sustainability.

Earlier in his pioneering career, MRCB said Salim had created the "Super Store Petrol Station" concept for leading oil companies, namely Shell, Esso, BP and Caltex. He was responsible for designing the latest distribution centres for retailer Giant, by modernising and improving its food-processing systems while reducing its logistic costs and delivery turnaround time.

Thursday, September 5, 2013

Ringgit & Malaysia

The Ringgit: Offshore funds bought the ringgit after the government cut fuel subsidies to reduce the country's fiscal deficit. Malaysian government bond yields slid.

The subsidy cut "will help support the ringgit in so much as it will reduce the fiscal deficit."

The intensity of support will depend on the budget announcement in October 2013. It is a good start as it will help allay concerns until the budget. The ringgit may outperform other Southeast Asian currencies after the 2014 budget plan and especially if the government takes additional steps such as smaller public spending.

In 2012, Malaysia's budget deficit was 4.5 percent of gross domestic product, the second highest in emerging markets after India. Ratings agency Fitch cited the high budget deficit as one factor when it lowered the outlook on Malaysia's A-/A credit ratings to negative from stable in late August 2013.

The commodity-dependent country's fiscal gap slowing exports and high foreign ownership of government bonds has highlighted its vulnerability to market sell-offs amid the Aug 2013 currency rout.

Still, the ringgit is not free from expectations that the Federal Reserve may start reducing bond-buying programme as soon as Sept 2013.

Malaysia Ratings: Fitch Ratings said that Malaysia’s measures to lower fuel prices is too small to alter its negative outlook on Malaysia’s ‘A’- sovereign rating issued in July 2013.

It said only sustained reform implementation, accompanied by structural measures to broaden the revenue base, could make a difference to the sovereign’s credit profile. But an intensification of reforms that can also withstand potential growth headwinds is not on the cards at present (Sept 2013).

Fitch was already factoring in net 1% of GDP reduction in government expenditures in its fiscal projections for the period to 2015, so these fuel price measures do not significantly alter its economic analysis.

The rating on Malaysia could only be reverted to stable if more steps to improve fiscal sustainability and long term macroeconomic stability are taken.

It believes a more calibrated pace of public investment prioritizing non import intensive projects will limit the risk of near term fiscal overruns and lower the likelihood of the current slipping into a deficit.

Wednesday, September 4, 2013

IRCB - cleared all its debts

It has entered into a debt settlement agreement that cleared all its debts with four banks. This raises the hope that it could be uplifted from PN17 status.

The debts were settled via cash advances of rm44.8 million from its investors. The cash advance agreements were entered into between the company and its investors Cheang Poy Ken and Keen Setup Sdn Bhd for a cash advancement of rm44.8 million to the company for the purpose of its debt settlement.

Due to defaults in debt payments to the lenders, IRCB was classified as a PN17 financially distressed company on Dec 27 2012.

The debt settlement is expected to contribute positively towards the earnings of IRCB for the FY2013 Jan 2014 due to a one off gain from the debt waived by the lenders as well as a reduction in loan interest.

In Jan 2013, Cheang Phoy Ken, a former MD and owner of delisted rubber glove producer, Seal Polymer Industries has secured the management control of rival IRCB. This followed Cheang’s acquisition of a substantial stake in IRCB from its current controlling shareholders with a 11.23% stake at 15 sen each. Tan and his family still owns 11.3% stake after the off market deal.

IRCB’s substantial shareholder Lau Joo Yong had acquired some 4.13 million IRCB shares on Jan 31 2013 from the open market, thus raising his stake in the rubber glove company to 7.57% stake. Lau also bought some 1.2 million IRCB shares from the open market on Jan 29, 2013.

In Feb 2013, Cheang was appointed as MD of IRCB, following the resignation of major shareholder Tan Keng Beng, after his family sold a 10.89% stake to Cheang via an off market deal.

MYEG - MOU with Celcom

It has signed a MOU with Axiata’s wholly owned subsidiary Celcom Axiata to jointly explore business opportunities electronic government services.

The company is looking to tie up with a regional telco company to pursue machine to machine opportunities.

The company is also working on another M2M project, namely the road safety diagnostics system which is still in its infancy.

Its potentially catalysed is the successful implementation of the custom service tax monitoring system network early 2014 and launch of new services.

Based on its existing services alone, the three year EPS compound annual growth rate for MYEG is a strong 32%. Its businesses is defensive and on a recurring basis.

Tuesday, September 3, 2013

Gunung Capital

It derives the bulk of its income from transporting National Service trainees, is going into mini hydro projects – deemed an unchartered territory for many local public private listed companies in a big way.

For a start, the group is investing rm200 million in two mini hydro projects in Perak that have an installed capacity of 10MW each. The investment will be funded by the issuance of sukuk. The JV is between Gunung and PHREC to develop the mini hydro projects.

Gunung had tightened its grip on the business in Aug 2013 by acquiring an 85% stake in PHSB – which in turn owns 60% of PHREC – for rm9 million. The Perak government owns the remaining 40% in PHREC.

The rationale for Gunung’s investment in PHREC is the latter’s exclusive water rights agreement to build, operate and own 25 mini hydro dams.

Gunug was looking for a long term concession.

Expects the two mini hydro projects to generate cash by 2016. The concession is for 21 years.

It is also looking at acquiring 100% ownership of a few Greenfield projects, which are expected to contribute an additional installed capacity of 57MW. Eventually, the company plans to have access to some 240 MW of hydropower in Perak.

The common perception is that hydro dam projects require heavy capex. In Perak’s case, the cost of developing its mini hydro projects with an estimated combined installed capacity of 240MW could be as much as rm2.4 billion based on an average cost of rm10 million per MW.

The financing for the project, the group only has to fork out 15% of the total cost of constructing the hydro plants.

The model is similar to that of a first generation IPPs where Tenaga must take up all the capacity generated by the power plant.

At the moment (Sept 2013), only seven of Gunung’s JV or associates with an estimated installed capacity of 58MW have secured FIT approval and PPAs.

It had already got support letters from a bank for rm200 million. The only thing outstanding is a power system study to be submitted to Tenaga.

Moving forward, mini hydro business will be Gunung’s core business although it will still be involved in transport.

The company has reaped rm12 million in profit a year from transporting National Service trainees since 2011. However its agreement with the government is up for renewal in 2014.

Monday, September 2, 2013

Kimlun Corp - order book RM 1.7 billion

It is expanding its concrete products business as it seeks to increase the segment’s contribution as well as complement its construction operation.

Its concrete products segment contributes about 30% of the group’s operating profit.

Its subsidiary was the designated supplier of SBGs and TSLs for the Klang Valley MRT Sungari Buloh Kajang line project, for rm223 million and rm49 million respectively.

The low margin supply contracts for the KVMRT project failed t o lift Kimlun as lesser jobs in its construction division caused a 38% decline in the group’s first half earnings to rm16 million.

As at end June 2013, the group had an estimated order book balance of rm1.7 billion.

The group also won the tender to supply and deliver TSLs to the east and west transmission cable tunnel project in Singapore for a contract value of rm60 million on June 26 2013. It put in a bid to supply its concrete products for the Thomson Line MRT extension project in the island republic.

It has also embarked on its maiden property development. It has acquired 17.26ha of feeehold agricultural land in Nilai for a total consideration of rm28 million. It has also ventured into property development in Medini, Iskandar Malaysia.

Tropicana - Danga BAy

The Tan family is creating another listed property arm – Albedo – for its planned major activity in Iskandar Malaysia brings up the question of competition to Tropicana, which also has projects in Iskandar, although mainly in Danga Bay.

The RTO is said to be paid for via new Albedo shares, thus giving Tan control over the Singaporean company.

The parties had agreed to include the deal two additional parcels in the same area. This will bring the tract in question to 919 acres.

It was quoted as saying that Tropicana could benefit from Albedo by helping the latter manage its property development projects in Iskandar. However there no firm plans at the moment.

Market observers do not think there is a conflict of interest competition wise because Albedo’s product mix is largely industrial and commercial. Tropicana, on the other hand, builds mostly residential properties.

Tropicana is unlikely to buy more land in Nusajaya where Albedo’s tract is located. Tropicana’s existing developments are in Danga Bay, out of Albedo’s competitive reach at the moment (Sept 2013).

Given Tropicana’s high gearing, Tropicana was not in a position to take on more assets, so Tan decided to do it in a private capacity with Albedo. Tropicana’s net gearing stands at 0.75 times which it aims to reduce to 0.5 times.

At the moment (Sept 2013), market observers do not think Tan will inject Albedo into Tropicana. People are very watchful of his moves because they are expecting Tropicana to lower its gearing and start delivering earnings.

While an asset injection does not appear likely, Tan is said to be open to a merger between the two in the future. However this is far off and speculative.

Another option that the market opines is on the cards is a joint venture between Tropicana and Albedo, which would eliminate any conflict of interest. Bit Tan will avoid this as investors are mindful of related party transactions that would arise from such a move.

In another development, Tropicana has sent a letter of intent to CapitaMalls Malaysia REIT management Sdn Bhd to explore the potential purchase of Tropocana’s assets, the Tropicana City Mall, and the Tropicana Office Tower. The parties are in talks at the moment and Tropicana could announce a decision as early as mid Sept 2013.

If the sale which is part of Tropicana’s de gearing exercise, actually comes through, it will be positive for the group.

Sunday, September 1, 2013

Digistar - property development, key contributor

It has secured a rm280 million turnkey contract to build a government training centre in Melaka. The contract might be just what the company needs for its latest results have left ina lot to be desired.

Its diversification into property development in 2012 does not seem to have gone down well with investors as the new venture is a vastly different from its core business of ICT.

While a new business activity, property development has become the key contributor to its income, pending revenue from fresh ICT projects.

It also sees opportunities in the 2015 deadline for the migration of television broadcasting from analogue to digital broadcasting.

Meanwhile it is said to have reached an agreement with Puncak Semangat Sdn Bhd, which is bidding for the government’s rm2 billion digital television broadcasting project.

Market observers say Puncak Semangat is expected to carve out the digitalization of RTM for Digistar. This portion of the project is worth over rm500 million.

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Please note that all data given are merely blogger's opinion. It is strongly recommended that you do your own analysis and research before investing.