Thursday, October 31, 2013


It is looking forward to a better 2014 financial year ending Dec 31 (FY2014) as it seeks to complete its divestment of unprofitable tin mining operations in Indonesia by end of 2013.

Once the divestment is completed, the company expects to have more positive profit prospects and a cleaner balance sheet. PT Koba Tin, MSC’s 75% owned subsidiary, did not receive the Indonesian government’s approval to renew the Contract Of Work which expired in March 2013.

MSC had written off its assets in PT Koba Tin. It is looking to complete the clean up by end 2013 and this impairment will not have an impact on earnings for FY2014.

The company’s strategy for fy2013 besides the divestment of non profitable operations, will include continued improvements in the performance of two profitable assets: Its intl tin smelting operations in Penang and the tin mine in Perak.

It is looking at M&As as for its long term growth.

On its gearing of 2.3 times as the end of second quarter 2013 against 2.21 times as at end 2012, most of its borrowings are to finance its working capital. Hence they are short term and revolving in

MYEG - are going to be exciting

MYEG: Its continued growth is likely to come from the rollout of the CST system which will benefit from the implementation of the 6% GST which takes effect in April 2015.

The CSTM, which would rolled out in the services in Jan 2014, would extend MYEG’s foothold in the retail segment after the implementation of the GST.

The CSTM is targeted to link close to 100000 points of sale terminals from about 20000 restaurants and entertainment outlets in Malaysia. It has been reported that MYEG is working with a local bank to launch mobile payment system that is compatible with the CSTM system.

MYEG has a 40% stake in a consortium of companies that is undertaking the CSTM project.

If there are no hiccups for the CSTM in the service sector, the company is looking to move it to the next phase, which is the retail sector. The company will utilize the system for the first time in Jan 2014.

The first six months of 2014 for MYEG are going to be exciting.

CSTM is part of MYEG’s long term growth plan.

The company has also good chance of getting more contracts from the government as it ha started working on the CSTM system.

It was also reported that the implementation of the GST would be a major catalyst for e services or IT solution providers, which could benefit front runners such as MYEG and Censof.

MYEG services are mainly linked to the RTD such as online vehicle registrations, licensing, summons services as well as utility bill payments.

Wednesday, October 30, 2013


One of the shareholders of Focal Aims is Liew son of Tan Sri Liew Kee Sin. The elder Liew is said to be leaving SP Setia in 2015 and will make Focal Aims his new listed vehicle.

It was reported that the potential deal with UOA Development could be another piece in the puzzle of Liew’s bigger plan as he readies himself to exit SP Setia. A source close to UOA Dev says its co founder and MD Kong Chong Soon is mulling the possibility of selling part or all of his 68% stake in the company.

However UOA Development Bhd said it is not aware of any ongoing negotiations. The company said it would remain committed to its medium to long-term plan, focusing on its core activities.

It is learnt that another developer Tropicana Corp Bhd controlled by the Ta Sri Danny Tan, has had talks with Kong but failed to strike a deal.

It is forgone conclusion that Focal Aims will be the listing vehicle for Eco World following the takeover offer of 65.05% by the latter and Liew’s son Tian Xiong. It is believed there have been offers besides UOA Development for Liew to take over their companies.

Sources say these include from Menang.

DIGI - re-rating

Observers see a re-rating potential from its coverage expansion as well as potential gains from the implementation of the goods and services tax (GST) and dividend gains from the business trust transition.

DiGi, having completed its network modernisation in the third quarter of 2013, will now (Oct 2013) focus on expanding its 3G coverage, which is at 76% currently (Oct 2013), to catch up with Maxis and Celcom. Management is hopeful DiGi can sustain its growth momentum, particularly in the data segment.

It also plans to expand its LTE (long term evolution) coverage to 1,500 sites by end-2014, which is important for DiGi to compete effectively in the medium to long term.

The implementation of GST starting April 2015 could potentially raise DiGi earnings by 8.5% to 11%. DiGi would gain the most given its higher prepaid revenue contribution. However, the higher cost of consumption would also translate to lower usage from end-users.

It is also matter of time before DiGi decided to convert into a business trust structure. This will enable DiGi to undertake capital management initiatives, optimising its balance sheet that is grossly under-geared relative to peers.

While DiGi is liked for its strong management and execution track record, observers are concerned about the increasing competition in the prepaid segment from key mobile players such as Maxis’ bundling free basic Internet with its prepaid subscription and new mobile virtual network operators such as Telin Malaysia (a unit of PT Telkom).

Tuesday, October 29, 2013

Fitch Rating On Budget 2014

The measures announced under 2014 Budget will be enough to reduce the risk of a ratings downgrade and have also put in place conditions to broaden the tax base and cut structural subsidies.

These two fiscal issues are the focus of credit agency Fitch’s concerns. Admittedly, details are absent and the GST (goods and services tax) is time-lined for 2015, but the broad thrust of the budget appears to be in the right direction.

Overall, Prime Minister Datuk Seri Najib Razak has moved to pledge fiscal reforms (GST, subsidy cuts) and introduced property measures to curb speculation and contain household leverage... this should reduce the risk of a ratings downgrade near-term.

On the oil and gas front, `no news as good news’ especially since the government did not ask for increased dividends from Petronas to assist in the balancing of its budget or to keep within the country’s official debt-to-GDP limit.

The 2014 Budget is largely negative on property (because of the real property gains tax, the RM1 million threshold and abolition of the developer interest bearing scheme) and on construction (as projects benefit more small players, and slower property sales).

Banks may also be impacted from slower property transactions.

Although the real property gains tax (RPGT) increase was anticipated, industry observers did not expect the condition for foreign property buyers, where foreigners now (Oct 2013) can only purchase property valued from RM1 million onwards compared with RM500,000 previously.

The banking sector had a 40.3 per cent ex-posure to property loans as at end-August 2013, of which residential property loans accounted for 27.9 per cent, while non-residential property loans accounted for 12.4 per cent.

The construction sector found it disappointing with no big ticket items.

The highly anticipated Klang Valley MRT Line 2, which is worth RM25 billion to RM30 billion, is nowhere to be seen in this budget. Other big projects that have yet to be announced include the Singapore-KL high-speed railway (RM30 billion), West Coast Highway (RM5 billion) and Tun Razak Exchange (RM26 billion).

Pantech - room to up dividend

Its longer term prospects remain bright. The company’s strategy to expand its operations overseas will translate into greater growth potential in the long run .It continues to explore possible mergers and acquisitions opportunities within the oil and gas sector.

In the shorter term, market observers are cautious on the outlook although still expect 2HFY2014 earnings to be stronger than that of the first half.

Sales in the domestic market have not picked up as quickly as anticipated with the conclusion of the GE in May 2013. For 1HFY2014, Pantech’s trading sales fell 19% from the previous corresponding period.

The government’s focus on reining in the budget deficit and public debt will result in prioritization and delays in certain projects. However the O&G sector remains a key focus area under the ETP. That should underpin demand for Pantech’s pipes, fittings and flow control products – even if growth is slower than initially forecast.

Near term outlook for manufacturing is also tempered by the US anti dumping suit filed against Malaysia, Vietnam and Thailand for stainless steel pipes. The higher taxes come into effect in Oct 2013.

Pantech is working to fill the void left by the US market by tapping new customers in other countries. Positively, economies in Europe appear to be on the recovery. The acquisition of Nautic – whose products are approved by many of the world’s oil majors – is helping open doors in these new markets. Pantech also intends to product more stainless steel fittings, which are not subjected to the anti dumping duties, for the US market.

Overall, Pantech remains upbeat on the manufacturing business. The company foresees that it will eventually contribute to at least 60% of total sales.

In terms of valuations, it is trading at PER of 9.3 times and 8.1 times estimated earnings for FY2014 and FY2015 respectively.

It has some 74.8 million warrants outstanding, with exercise price of 60 sen and a long expiry in Dec 2020. Even on a fully diluted basis, the stock is still modestly valued at roughly 10.5 and 9.1 times estimated earnings for FY2014 and FY2015 respectively.

There are currently (Oct 2013) no plans for any major expansion on the home front. Expect its gearing to gradually decline over the next three years from 2013. Gearing has fallen to 31% at end 2QFY2014.

Coupled with stronger earnings and cash flow, Pantech has room to up dividends.

Monday, October 28, 2013

Tebrau - privatisation

The market is rife with rumours of a pending corporate exercise involving Johor property counter Tebrau Teguh Bhd.

The market rumours included the possibility that Tebrau could be made a privatisation candidate by its major shareholder Tan Sri Lim Kang Hoo.

In 2012, Lim, who controls Tebrau via Iskandar Waterfront Holdings Sdn Bhd (IWH), had triggered a MGO for the company after he bought an additional 33.15% of shares from Kumpulan Prasarana Rakyat Johor Sdn Bhd (KPRJ), bringing his stake to 47.16%.

He had paid RM168.7mil or 76 sen per share then and said he intended to maintain the listing status of Tebrau.

KPRJ currently (Oct 2013) still owns 8% of Tebrau.

Assuming that Lim now wants to buy out minorities at the current price of RM1.43, he would have to fork out about RM500mil. However, banking sources said that it might be challenging for Lim to raise the funding required for such a buyout.

Meanwhile, other sources reckoned that Tebrau is in focus because it is close to inking a deal to dispose some of its prized Johor land to a major Malaysian property developer.

As at June 2012, the company had about 408ha of undeveloped land in Iskandar Malaysia.

Another possibility is that Lim could be looking to embark on a fund-raising exercise aimed at raising money to carry out property development projects on those parcels of land.

Lim, who is the executive vice-chairman of Tebrau, controls IWH via Credence Resources Sdn Bhd.

IWH is the master developer of several developments including Danga Bay, Iskandar Waterfront and the central business district of Johor. Its 1,619ha forms part of Iskandar Malaysia’s 221,707ha.

Initially slated for a listing in the fourth quarter, IWH’s impending listing which is expected to raise up to RM3bil, has likely been delayed to the first half of 2014.

For the first six months to June 30, Tebrau made a net profit of RM5.56mil or 0.83 sen per share on a revenue of RM96mil against a net profit of RM1.78mil or 0.26 sen per share on a revenue of RM58.7mil for the same period a year earlier.

Sunday, October 27, 2013

Genting Bhd/ Genting SP - Japan's Plan

Its near term catalyst include Japan's plan to revive the liberalisation of its gaming industry.

Japan had started initiating a plan to liberalise casinos via a proposed legislation to allow gambling resorts to be developed in big cities and regional areas. Tokyo and Osaka could potentially be among the sites for the casinos.

If the casino bill is passed during the next legislative session, Japan could open its first casino resort as early as 2019.

Genting Singapore is mandated to represent Genting Group in bidding for large-scale gaming liberalisation in East Asia, including Japan.

This is the most anticipated gaming liberalisation in the region as it has always maintained that should United States offer the most exciting gaming liberalisation theme in the West, then the potential gaming liberalisation in Japan will be the most anticipated gaming event in the East, or even in the gaming world.

This is in view of the sheer size of its economy and the popularity of its existing gaming market with a mere presence of Pachinko and Pachislo.

Japan's casino proposals were first mooted by legislators in 2002, but only to be deferred due to political instability and concerns that legal gambling may lead to corruption, money laundering and other crime.

Japanese Prime Minister Shinzo Abe appears to support the casino plan in view of Tokyo's upcoming hosting of the 2020 Summer Olympics, which may induce Japanese lawmakers to liberalise the sector to provide entertainment to visitors.

Friday, October 25, 2013

Protasco - 100 acres De Centrum City

Protasco: It is a defensive stock given that the company profits highly from its road maintenance and construction division.

Protasco is maintaining about 14000km of federal and state roads under long term maintenance contracts and concession. The outstanding value for these road maintenance and construction works stands at rm1.7 billion which would provide earnings visibility to group for the coming three years from 2013.

Protasco’s crisis is the civil unrest in Libya, which led to the company halting operations in Malaysia in 2011. Protasco has written off rm40 million in provisions over the past two years from 2013 which the company is seeking to claim form the Libyan government.

In spite of the imminent risks, it is not deterred from its work there and is in fact facing considering extending its stay beyond the completion of the suspended works.

It has also announced its intention of getting into the oil and gas sector, and has proposed to acquire a 76% stake in PT Anglo Slavic Indonesia for rm171 million which is waiting due diligence and is expected to be completed in Oct 2013. The acquisition of an upstream oil and gas company will also open up opportunities to provide the downstream services to other concession holders. Protasco plans to get involved in the constructing part of exploration and supply of accessories and equipment.

Also, Protasco owns approximately 100 acres of freehold land in Kajang for a mixed development known as De Centrum City. The land’s GDV alone is worth about 15 times more than the company’s market cap of rm420 million as at 31 July 2013.

It has a 100 acre tract in Kajang will be focusing its resources to develop it into a mixed use property project estimated GDV of rm6 billion.

Property development is still a small part of its business but the group intends to make the segment one of its core businesses. The construction business will remain the largest contributor, contributing rm99.5 million or 96% of its operating profit.

It owns a 40ha plot in Kajang of which it plans a mixed development worth a GDV of rm6.6 billion.

Protasco is in a net cash position of about rm105 million. Cash and its equivalent stood at rm147.13 million as at end FY2012 while total borrowings amounted to rm42.3 million.

Its healthy balance supports its aggressive business expansion. Debt to equity ratio stood at 0.697 times as at end FY2012.

It has an unofficial dividend payout policy of 60% of net income every year.

Tey Por Yee became the second largest shareholder with a 15.13% stake in Adison. Tey is also the CEO, MD and executive director of Nextnation, a director of Protasco Bhd and former executive provider of Petrol One Res Bhd.

Konsortium Logistik - eyeing energy and infra division

An integrated logistics service provider is eyeing up to 10% revenue contribution from its energy and infra division over the next two years from 2013. The division contributed rm3 million or 1% of the group’s revenue in 2012. It plans to expand this division as oil and gas is the key market with abundant ongoing activities in Malaysia for the next three to five years from 2013.

Ekuinas had a 56.5% stake in Konsortium Logistik for rm207 million or rm1.55 per share. In Oct 2010 it makes a takeover offer for all the shares it does not own in Konsortium at rm1.55 per share but KLB will remain as a public listed company after the takeover.

As at June 30 2010, the company had cash of rm38.9 million and rm94.44 million in borrowings. Its net debt of rm55.54 million translates into a net gearing of 0.17 times.

Konsortium Logistiks core business of logistics and charter is highly competitive and its earnings while steady can hardly be classified as stellar.

Ekuinas has board representation in Konsortium.

Its CEO had stated in 2010 that its next step would be a widening of its reach. The plan for the company is to expand its logistics services for other industries such as oil and gas. In 2010, the auto sector is Konsortium Logistik biggest presence.

Among the reasons Ekuinas chose the company was that it is one of Malaysia’s leading providers with a considerable underutilised balance sheet and assets, which offers significant value creation.

But could it also be part of a much bigger plan? In June 2010 Ekuinas had acquired a 20% stake in Tanjung Offshore Bhd which offers services to the oil and gas industry.

Notably Ekuinas seems to have a knack for picking companies where there is a possibility of securing a big block. It was reported in Sept 2010 that Loo who had a 14.7% stake in KLB was in talks to sell his substantial stake in the company.

At that juncture, the identities of the interested parties and the pricing for Loo’s stake are still unclear. People familiar with him confirmed that he is in talks to sell his block, which will see him exiting the company.

Loo is also CEO of Pelikan Intl with majority stakes held.

The controlling shareholders of Konsortium Logistik are Che Azizudin Che Ismail, Zulkifi Sarkam, Mohd Amunudin Mustapha and Izhar Che Mee, who own Dream Hectares Sdn Bhd which has a 25.8% stake in Konsortium Logistik. Another substantial shareholder is LTH holds 10.6% stake in the company.

Loo has been on the board of Konsortium Logistik since Oct 1992, a month after his former partner Mirzan Mahathir joined.

Mirzan exited the company in Aug 2007, ceasing to be a substantial shareholder. Two months before his exit, Mirzan had stepped down as chairman and executive director of the company. At that time, Loo and Mirzan together controlled about 38% of the company.

Konsortium Perkapalan, the predecessor of Konsortium Logistik, was floundering after the Asian Financial Crisis, with debts westimated at rm1.7 billion. Petronas unit, MISC stepped and acquired Konsortium Perkapalan’s assets for US$220 million.

Loo is an old hand in the logistics and transportation business. He has been on the board of Transmile Bhd and he ran Konsortium Perkapalan Bhd and Diperdana Holdings Bhd (Pelikan Intl).

Loo and Mirzan were also partners in Pelikan…

Thursday, October 24, 2013

Catcha - JV with

It has attractive prospects and big plans ahead. For one it is targeting earnings of rm10 million within the first year of a JV with to create what it considers to be one of the largest digital advertising businesses in Malaysia.

Youth Asia is the owner of Says Sdn Bhd, which in turn holds, an online advertising platform that serves more than 80 brands such as Nike, Coca-Cola and Maxis. It has a strong presence in Malaysia, India, the Philippines and Singapore.

Coming together as a merged entity will allow them to go for an IPO (for the digital advertising business). Catcha Media will have to complete the integration of the companies first.

The company is already talling to a few strategic overseas partners to invest in the IPO and proceeds from the exercise will be used for regional expansion.

It has four businesses – publishing, online media, e-commerce and online classifieds.

The online classifieds segment comprises iCar Asia Ltd, which houses used car trading websites and was listed on the ASX in Sept 2012. Catcha Media has a 30% stake in iCar Asia.

iCar Asia is currently (July 2012) its most valuable asset valued at rm85 million. It is currently (Oct 2013) No 1 in Malaysia in terms of volume of listing.

It has been toying with the idea of going private if the company’s share price continues to languish.

It was reported that Catcha has a target price of rm0.90 for the company based on a sum of parts valuation, which takes into account its 30% stake in iCar Asia. Bit in the long term, if the share price remains undervalued, it is only logical to consider a privatization at the end of 2013.

It posted an encouraging financial performance for the financial period of January 1 to December 31 last year with an after-tax gain of RM2.5 million.

Market observers regarded the company as severely undervalued with zero value given its advertising and e-commerce business, as well as its fundamental strength.

 It is worth noting that its market (15 Oct 2013) capitalisation is just slightly higher than the value of its 29.18 per cent stake in Australia-listed iCar Asia Ltd. Australia-listed iCar Asia is 30%-owned by Catcha Media and Asean's top online auto classified portal.

However its CEO says in May 2013 would not be taken private for the time being, although major shareholders might do so if its shares remained flat till the end of the year (2013). Several private equity funds had approached him about the possibility of buying out the company.

Two funds, one local and the other a US-based firm regionally headquartered in Singapore, had expressed interest in taking Catcha Media, which debuted on the ACE Market in 2011 at 75 sen a share, off the market.

Management is seeking to sell equity in Catcha Media's subsidiaries, which would establish their valuations.

Grove has an indirect stake of 58.5% in Catcha Media as at May 2013. It is followed by HSC Healthcare Sdn Bhd, Datuk Justin Leong of Genting Bhd and Star Publications Bhd.

Wednesday, October 23, 2013

The Property Sector - Higher RPGT could push up property price

Higher RPGT may push property prices higher instead of reining in speculation.

It had short live impact in the past and could push house prices higher as sellers may pass on the incremental to the buyers.

Higher RPGT could also spur sellers to postpone disposals and developers to hold back launches in view of weaker sentiment, leading to even tighter supply in the market.

While raising stamp duty may have a bigger impact, sellers would also try to pass on the incremental costs to the buyers.

Any hike will not only affect new projects but also those under construction – especially strata titled and projects under master title whose titles have yet to be transferred.

It could spur sellers to postpone property disposals and developers to hold back launches in view of weaker sentiment, leading to even higher supply in the market.

Tighter regulations are likely to have the unintended effect of discouraging home ownership instead of curbing speculation.

Tightening measures in 2013 could reduce supply in both the secondary and the primary markets as developers may also delay launches due to poorer take up.

House prices in Malaysia have proven to be resilient in the past, driven by inadequate supply to meet demand for landed property and prime areas.

High property prices are attributed to shortage of supply, marked up prices for new launches, demographic changes, rising construction and compliance costs.

Tuesday, October 22, 2013

IPO - Caring Pharmacy Group Bhd - Tan Sri Vincent Tan is one of the owner

Caring Pharmacy Group Bhd is offering for sale 35 million new shares at RM1.25 each to raise RM43.75m as it seeks a listing on the Main Market of Bursa Malaysia Securities.

It is offering 10.88 million new shares to the public while 5.71 million would be offered to eligible directors and employees, another 4.2 million shares offered to approved Bumiputera investors.

The pharmacy chain operator said that the remaining 14.198 million shares could be placed out.

The RM43.75mil, 41% of the proceeds would be used for new pharmacy outlets while 26.76% would be used for working capital.

The proceeds will goes towards increasing the number of the chain’s pharmacies across Penang Malaysia as well as working capital and renovation of the group’s head office and warehouse.

On its dividend policy, shareholders can expect dividends of not less than 30% of its annual profit.

The pharmacy is ranked amongst the top three community pharmacy operators in Malaysia with an estimated market share of 4% based on the number of community pharmacy outlets.

Based on its IPO price and enlarged issued and paid-up share capital of 217.7 million shares, its total market capitalisation is about RM272.133mil.

The IPO price of RM1.25 per share represents a premium of 172% to the pro forma consolidated NA per share, and price to book ratio of about 2.72 times.

Based on its profit after tax and minority interest of RM20.55mil for 2013 and its enlarged issued and paid-up share capital of 217.7 million shares upon listing, its net price-to-earnings stood at 13.24 times.

Currently (Oct 2013), Motivasi Optima owns a 60% stake in Caring and BJCorp founder Tan Sri Vincent Tan holds a 20.35% stake.

Monday, October 21, 2013

Malton - project shopping mall in Bukit Jalil

The company has obtained shareholders’ approval for a property swap and will soon unveil a project in Bukit Jalil that will boast a shopping mall.

The property swap will see Malton exchanging its 20 storey office tower – V Square in PJ – for new units in a redeveloped Pusat Damansara while the 50 acre Bukit Jalil project will be jointly undertaken with Ho Hup Construction Bhd.

As at June 30, 2013 Malton had rm115.19 million of RCSLS outstanding, bearing an annual coupon of 6% for seven years from July 2011, With a par value of rm1, each of the RCSLS is exchangeable for a new share in Malton.

 Its net asset per share stood at rm1.46 as at June 2013.

Putting its shares and RCSLS together, the combined market worth of Malton is rm497 million. This is the same as the company’s EV as its total cash holding of rm89.98 million more or less squares off against its borrowings of rm88.57 million.

Desmond Lim and wife and Datin Tan together control a 37.9% stake.

Of Malton’s market worth of close to half a billion, its PDB entitlement in the propery swap accounts for rm200 million. The remaining rm300 million ascribed to the company trails its potential gains from the Bukit Jalil project, which Ho Hup’s management estimated had a GDV of more than rm4 billion three years ago (2011).

Apart from these, Malton also owns pockets of development land in various parts of the Klang Valley.

It has a JV agreement with Batu Kawan Development Sdn Bhd as well as to develop 300 acres with an estimated GDV of rm3.8 billion in southern Prai, Penang over 10 years. Malton is entitled to 82% of the GDV and landowner Batu Kawan the remaining 18% or not less than rm300 million.

In the property swap, Malton is to dispose of V Square, which has a net lettable area of 163504 sqf and parking bay to BDDSB, an indirect subsidiary of JCorp. In exchange, it will receive from BDDSB 186667 sq f of NLA valued at rm140 million in a redeveloped PBD.

On a psf bsisi, the NLA at V Square is valued rm680 while the parking bays are worth rm30000 each. In comparison, Malton’s entitled NLA in a redeveloped PBD is valued at about rm750 psf, which indicates a upside potential. The two MRT stations coming up in Jalan Semantan and PBD too augur well for the redevelopment project.

On top of the property swap, Impian Ekspresi Sdn Bhd, a private vehicle controlled by Lim and two other individuals, has granted Malton a put option to sell its entitled 186667 sq ft in a redeveloped PBD at rm825 psf at the beginning of a four year period to rm1050 psf at the end of period.

This works out to about 10% to 40% higher than rm750 psf which means Malton could sell the entitlement to Impian Ekspesi for rm154 million to rm196 million cash within the next four years. Depending on its capital needs, the group could opt to exercise the put option to raise cash for its project in Bukit Jalil.

Impian Ekspresi is acquiring the 9.6 acre PBD land from BDDSB, having agreed to pay rm500 million cash and to deliver 266667 sq ft of office space in a redeveloped PBD to the latter. While Malton is not the project owner, the speculation is that it may be project manager fro the PBD redevelopment like it was for Lim’s privately owned Pavilion project in KL.

Nonetheless, the joint development with Ho Hup in Bukit Jalil is set to be a game changer for Malton. It is entitled to 82% of the project’s GDV while land owner Ho Hup’s share is 18%.

Malton had indicated that it will launch new property projects in the Klang Valley including the Bukit Jalil in FY2014.

Sunday, October 20, 2013

After Extending Debt Ceiling, What's NEXT !!!

The US overcame a political impasse on its ever increasing debt limit but the deal struck by US policymakers is merely a temporary solution.

In a few months’ time from Oct 2013, we will be faced with yet another round of the same cycle, as the US government is expected to run out of money to pay its bills again by mid-January 2014. This will certainly pose the threat of another round of government shutdown, unless policymakers in the world’s largest economy really get their act together to resolve this complicated matter.

The US Congress’ passed a bill in mid Oct 2013 to end the 16-day government shutdown and raise the country’s US$16.7 trillion (RM52.55 trillion) debt limit. The temporary deal will fund the US government operations until Jan 15 2014, and extend its debt limit through Feb 7, 2014.

The traditional US January 2014 blues will be heightened by concerns that there could be a repeat of Oct 2013’s political farce.

However observers opine that the temporary measures agreed upon to keep the federal government running until Jan 15 2014 and lift the debt ceiling until Feb 7, 2014 is not likely to lead to another round of political brinkmanship.

Firstly, the Republicans have taken a beating in the opinion polls, and although they have put on a brave face, they are unlikely to force another stand-off. Secondly, there is now (Oct 2013) more scope for the Treasury to extend the debt ceiling as political campaigning for the mid-term elections in November 2014 would well be underway by then and “both sides would like the debt ceiling can to have been kicked further down the road.

Market optimism has also been tempered with the Oct 2013 assessment of the US economy by the Federal Reserve’s (Fed) Beige Book, which noted that there was only “modest to moderate” growth overall, with “an increase in uncertainty” due to events in Washington.

Clearly, just as the debt ceiling issue has been pushed back by a few months from Oct 2013, so has the likely start of the Fed tapering of the QE.

The Federal Reserve will likely delay bond purchase tapering until March 2013, possibly even June 2013, following the political brinkmanship and shutdown of the US government which has “delayed, distorted and depressed.

The shutdown will have depressed US growth as although workers will receive back pay and contractors can get back to work, there will be many who have lost out on spending that will not return.

Estimation that the political shenanigan in Washington has cost the US economy US$24bil, or about 0.6% off annualised GDP for Q4, is likely on the high side.

Meanwhile a wave of U.S. economic data is set to hit financial markets in coming week.

US Labor Department would release its employment report for September 2013 on 22 Oct 2013 as it provided a fresh schedule for some data that had been delayed by the 16-day partial government shutdown.

Among other data was the consumer price index for September, which will now be released on October 30 2013, and the producer price index for September, now due on October 29 2013.

Thursday, October 17, 2013

GPacket - gearing 1.93 times

So far (15 April 2013) there has been no further details or confirmation of negotiations related to reports that DIGI, YTL Comm and TM involved in the bidding for P1. Nonetheless such deal in one form or other has to happen. It is solely in need of a game changer if it is to turn the company around.

It has been mired in losses since the launch of its broadband WiMAX services in Aug 2008. P1 started off strongly but the launch of TM’s UNIFI in March 2010 turned out to be a major headwind for P1.

P1’s subscriber acquisition lost momentum in 2011 and slowed significantly in 2012 and in the first half of 2013, pushing back its target for achieving critical mass and profitability.

As things stands, it is difficult to envision how P1 can regain positive momentum.

To compete fully in the 4G mobile services market, P1 would need nationwide coverage. That means substantially more capex which would be difficult without corresponding improvement in revenue and cash flow.

Its gearing rose to 1.93 times as at end June 2013 from 1.33 times at end 2012 and 0.68 times in 2011. Taking into account prevailing intense competition in the market, it may no longer be financially feasible to push ahead as it is.

Clearly one of the options is an outright sale of P1. SK Telecom bought a 25.8% stake in the operator for US$100 million back in 2010 implying an EV of some rm1.24 billion. GPacket has net debt of rm198 million at end June 2013. Assuming all the debt is related to P1, it could come out ahead with some rm600 million for its stake or equivalent to about 86 sen per share.

YTL Comm should see greater benefits in acquiring P1’s broadband subscribers which would complement its existing base. It could expand the business as it already has nationwide coverage on its own network.

There is less rationale for TM to take and build on the WiMAX platform as it is already directly competing with P1.

DIGI would be less interested in P1’s existing fixed line business and subscribers than its spectrum blocks in a world of tech convergence.

Still GPacket may well opt to retain its stake in P1. The broadband business is its primary thrust going forward – among its other business, the devices unit is very competitive and loss making while margins for the communications units are wafer thin with limited prospects. There is also the potential complication related to SK Telecom’s – a competing telco – stake in P1.

GPacket could still share infra and spectrum with DIGI, much like MAXIS-REDTONE agreement. Both companies could then continue to, independently, offer their suite of services. P1 would save on future capex to expand coverage – which is needed if it is to grow subscribers – while DIGI would gain greater capacity.

Wednesday, October 16, 2013

PChem - positive impact on US Dollar

The strengthening of the US dollar would have a positive impact on the company’s earnings.

PChem derives 58%-59% of its revenue from overseas while its domestic product prices are typically referenced to intl benchmarks, which are quoted in US dollar.

Estimated for every 1% appreciation in US dollars against the ringgit PChem’s earnings will be enhanced by 1.5%.

It has many great attributes – it is free of debt, has rn10.7 billion of cash in is coffers and generates a free cash flow of more than rm2 billion per annum.

However its growth prospect is limited as there is no new capacity up to 2015 and any growth is premised on higher ASPs which is expected to be flat in the near term.

Moreover with Petronas expects to push back the commissioning of its US$20bil Rapid project in Johor by nine months to Jan 2018. The project was to commence operations by March 2017, which in itself was already a delay given that the Rapid project was originally scheduled to kick off in March 2016.

This newsflow will generate some negative sentiment … for O&G companies that are potentially leveraged to this project are: (i) Dialog (tank terminal operations, regasification plant); (ii) KNM Group Bhd, MMHE, Muhibbah Engineering Bhd, SAKP (onshore fabrication works and process equipment); (iii) Gas Malaysia and Petronas Gas (natural gas transmission, additional volume); and (iv) Petronas Chemicals Bhd (petrochemicals).

Sunday, October 13, 2013

New IPO - UMW Oil & Gas

Company Name: UMW Oil & Gas
Date of Listing: 01 Nov 2013
Issue Price: RM2.80
Closing Date: 14 Oct 2013

It has tremendous demand from institutional investors vying for the 127 million shares allocated to them.

It has set aside 648.6 million shares to Malaysian and foreign institutional and selected investors including 248.63 million shares for bumi investor and 399 million shares for cornerstone investors.

With strong demand from both institutional and cornerstone investors, UMW-OG managed to offer the shares for these investors at a narrow range of indicative prices of between rm2.70 and rm2.80 valuing the company at a market cap of rm6.1 billion.

Two of the cornerstone investors are the founder of RHB Bank Tan Sri Abdul Rshid Hussain and Tan Sri Chua Ma Yu. Tan Sri Hamad Kama Piah, the president and group CEO of PNB Bhd is one of the cornerstone investors.

At rm2.80 per share, the forward PER is slightly above 17 times which is reasonable when compared to other O&G players in Malaysia. Estimated PER of O&G service providers with a market cap of less than rm7 billion for 2014 from 9.2 times to 24.04 times.

It will stand to raise total gross proceeds of rm1.71 billion while the remainder will be raised from the sale of its existing shares.

About 58% of the proceeds will be used for acquisition of drilling rigs and hydraulic work over units. About rm580 million will be sued for repayment of amounts owing to parent UMW Holdings due to UMW-OG’s internal reorganization.

The capex will be mainly used to buy more assets to ensure growth and stability.

It will be focusing on its drilling business and with the IPO it will be expanding its fleet.

About 93% of UMW O&G’s revenue comes from its drilling services business.

The firm currently (Oct 2013) has a total of eight rigs. Another premium jack up named Naja 6 will be delivered in May 2014.

UMW O&G’s gearing level will be less than 0.5 times after the IPO.

There is a shortage of locally-owned rigs domestically. As of September 2013, there were 16 jack-up rigs operating in Malaysia but only two were locally-owned (Naga 3 & 4).

Fourteen foreign jacks-up rig contracts are expected to expire within two years from Oct 2013 with three in the second half of 2013, four in first half of 2014, five in second half 2014 and two in 2015.

Hence, expects tender and contract award to accelerate in the next two years from Oct 2013 with the early call for tender by end-2013.

The average age of jack-up rigs is around 13 years compared with UMW O&G’s new rigs at below three years. Industry players indicated that oil majors preferred to spend more to charter newer rigs

Domestically, the ETP-driven RM300bil capex to enhance exploration, enhanced oil recovery and marginal fields requires massive level of drilling activities which the financial market has underestimated.

UMW O&G is the only pure rig-related domestic play with sizeable market capitalisation which makes it likely to attract premium valuations.

It expects to raise RM1.7bil from the IPO with RM1bil allocated to acquire drilling rigs and hydraulic workover units.

Assumes UMW O&G will acquire at least two more new rigs after the IPO with net gearing remaining manageable at 0.35 times in the financial year ending Dec 31, 2014 (FY14), which suggests more room for asset expansion.

Full contribution from Naga 5 and Naga 6 will only be reflected in FY15.

Saturday, October 12, 2013

New IPO - World's largest condom manufacturer, Karex Bhd

Company Name: Karex
Closing Date: 23 Oct 2013
Issue Price: RM1.85
Listing Date: 06 Nov 2013

World's largest condom manufacturer, Karex Bhd, en route to a listing on Bursa Malaysia on Nov 6 2013, aims to raise RM75mil from sales of its 40.5 million new shares at RM1.85 each.

From the total proceeds, RM42mil will be used for capital expenditure, RM14mil for working capital, RM10mil to repay bank borrowings, RM5mil for listing expenses and RM4mil for research and development.

The listing will enable it to leverage on the growing opportunities in the global condom industry.

The fund raised for the group's capital expenditure would be used to expand the manufacturing facilities.

The group was ready to develop its largest factory in Pontian, Johor, which was not far from the company's existing plant.

Karex, which currently has 10% of the global market share, expected it to increase to double digits with the increase in demand for condoms worldwide.

The IPO involved the offer of 67.5 million shares comprising the public issue of 40.5 million new shares and an offer for sale of 27 million existing shares. Of these, 47.25 million IPO shares are for institutional and selected investors in Malaysia, Singapore and Hong Kong while 20.25 million shares are for Malaysian retail investors.

The retail offering of 20.25 million shares would comprise of 13.50 million offer shares to the public and the remaining 6.75 million issue shares to eligible directors, employees and business associates.

For its financial year ended Dec 31, 2012, the company posted RM12.01mil in net profit on revenue of RM188.75mil. That compares with the 2011 net profit of RM6.98mil and revenue of RM181.75mil.

Its products are sold via commercial, tender and original brand manufacturers (OBM) markets. In fiscal 2012, commercial, tender and OBM markets constituted approximately 56.9%, 39.3% and 3.8%, respectively, to the group's revenue.

Besides condoms, Karex also produces catheters, latex probe covers and lubricating jelly.

Friday, October 11, 2013

POS Malaysia

Its catalysts include its future growth and possible special dividend.

The company’s five-year strategic plan remained on track and that the special dividend due to the tax credit expiring at the end of 2013 made investing in the company all the more sweeter.

The special dividend speculated by many could be lower, as management has indicated that it would allocate some money for capital expenditure. Nevertheless, it is still a bonus.

It is relatively cheap (10 Oct 2013), trading at 18 times earnings compared to international peers trading at the range of 25 to 30 times earnings.

The group’s Section 108 tax credits amounted to RM215mil or 40 sen per share as at March 2013, and would expire by end-2013. A special payout is possible, given its net cash of RM1.23 per share as at end-June 2013, and strong recurring cashflow from its core businesses.

The company is primed for future merger and acquisition activities as it looks for opportunities to expand its operations.

Discussions with the Middle Eastern potential target could bear fruit soon while closer to home, it might also be looking at regional expansion with opportunities arising from the intra-regional courier business.

The company had taken steps to further improve its earnings power by offering new initiatives. Besides the expansion of its Islamic pawn-broking business, Pos Malaysia was venturing into the logistics business very cautiously due to the competitive nature of the industry.

It has been leveraging on sister company Proton Holdings Bhd to kick-start its logistics business. Since January 2013, Pos Malaysia has been transporting auto parts between Proton’s vendors and its manufacturing plants. Proton is currently its sole client in the business.

Pos Malaysia’s prized asset was its landbank, notably, the plot of land located in KL Sentral measuring 117,563 sq ft worth an estimated RM176mil. However, while management intended to develop the company’s landbank, it was in no hurry to do so.

Pos Malaysia has larger growth potential compared to SingPost, whose current business model is approaching maturity stage (10 Oct 2013).

Thursday, October 10, 2013

BJFood - expand in Brunei

The proposed JV to undertake Starbucks Coffee chain in Brunei would enhance earnings for the group in the medium to long term.

It will have management and planning rights of Starbucks’ operations in Brunei, while Deluxe Daily Food Sdn Bhd will assist in obtaining the relevant operation licenses and café sites in Brunei.

This development also represents a good opportunity for BJFood to expand and establish footprint in the F&B industry in Brunei.

The cash of rm6.2 million will be funded either by internally generated funds or bank borrowings.

Its strong balance sheet is supportive of its expansion into Brunei, given its debt free status and cash pile of rm11 billion as of 1QFY2014.

The group plans to increase the Starbucks store count in Brunei to 10 in five years.

MAHB - healthy traffic growth

Healthy traffic growth will serve as a re rating catalyst for MAHB.

The battle for supremacy among Malaysian carriers will be very good for MAHB as sharply lower fares will spur passenger traffic.

The intense competition among the airlines is likely to persist in 2014 and will lead to a healthy traffic growth, serving as MAHB’s key re rating catalyst.

MAHB’s share price has done well because of the massive success of Airasia Bhd as a business over the past decade.

There is more upside for MAHB as new entrant Malindo has triggered a new round of price competition. MAS and Airasia has been injecting capacity since May 2013.

MAHB’s share price has down well since the 2009 restructuring, which cleared investors deep reservations about the viability of the business. This enabled MAHB so settle its KLIA dues to the government by end 2012 just four years later.

The commission of KLIA2 by 2014 or early 2015 will provide even more upside for lone term investors.

The commission of KLIA2 will double MAHHB’s retail space at the entire Sepang airport complex.

MAHB is the best net on tourism flows during Visit Malaysia Year 2014 without the worry of oil prices, exchange rate and depressed air fares.

Tuesday, October 8, 2013

CAP - thumb down

In just nine months after being listed in Bursa Malaysia, CAP announced a private placement exercise of up to 60 million new shares, representing up to 10% of its total share capital.

The timing of the placement exercise may raise eyebrows considering that CAP’s share price had tumbled from its IPO price of 68 en to 35 sen on04 Oct 2013.

The company said the private placement is being undertaken mainly to enlarge the shareholder base of the company which had raised rm61.2 million via the IPO of 90 million new shares at 68 sen per share.
CAP’s cash and cash equivalents stood at rm195.8 million as at June 30 2013.

Fund Inflows on last week

Foreign buying of Malaysian-listed equities jumped to a net RM328.8mil in the week ended Oct 4 compared with only RM36.5mil in the week before.

The buying bucked regional trend as foreign funds bought almost every day last week, except on last Thursday. Buying was especially strong on last Monday, when net RM251mil was mopped up.

The surplus last week increased the overhang of foreign portfolio capital which entered the Malaysian equity market in 2013 to net RM8.71bil or net US$3.05bil (based on weighted average exchange rates at the point of entry).

For money which had flowed in since January 2011, estimate the cumulative overhang to remain at net RM24.3b or net US$8.1bil.

Local institutions took the opportunity to reduce their equity exposure further. Net sale by local funds amounted to net RM221.3mil, compared with net RM132.8mil the week before. Participation rate is tapering, although it remained elevated at RM1.57bil.

Retailers appear to be jittery over events in the US opting to offload net RM107.5mil, after nibbling in the market the week before. Participation rate fell to below RM1bil.

Monday, October 7, 2013

SP Setia - Tan Sri Liew likely to retire sooner than expected

With Tan Sri Liew likely to retire from SP Setia sooner rather than expected, PNB may need to go into hyperdrive to unlock the value of its current (Oct 2013) property assets. It will have to grapple with expertise issues, especially Liew takes several senior management personnel with him when he leaves.

PNB will most likely to inject its property assets current (Oct 2013) housed under I&P Group Sdn Bhd worth rm10 billion into SP Setia as a consolidation of the two companies will enhance the value of I&P’s property projects.

Industry observers are certain that such a substantial asset injection exercise if it materializes, will experience teething issues with integration and this may lead to further departures of talent.

While SP Setia has a sizeable outstanding GDV of rm69 billion, market observers opine that the vulnerability of the management team after Liew’s departure could be a threat to its operations.

And with the possibility of UOA Development Bhd being merged with Eco World Dev, along with Focal Aims and Salcon Bhd, the newly enlarged EcoWorld may well be a serious threat to SP Setia and UEM Sunrise.

Operationally, EcoWorld has accumulated 1214ha with potential GDV of rm30 billion in Penang, Klang Valley and Johor. That’s not counting the land bank from UOA Dev.

Another source close to PNB says SP Setia had announced a succession plan which has been approved by PNB. Should the worst case scenario occur and all the senior management move, PNB could consider absorbing SP Setia into its other companies.

FGV - raise its stake in Felda Holdings Bhd

FGV is in talks to optimise and possibly raise its 49% stake in Felda Holdings Bhd (FHB), the world’s No. 1 crude palm oil (CPO) producer by volume.

The shareholding structure may be reorganised. Some of the assets are better off with FGV.

Unlike the integrated players, it extracts the palm oil and it goes to FHB for refining. Operationally, FGV and FHB are seamless.

FGV could see significant gains from a controlling stake in downstream-focused FHB, which controls 6% of global CPO production and 18% domestically. If it pans out, such a move would render FHB a subsidiary of FGV instead of an associate currently, allowing the plantation giant to consolidate FHB’s revenue and earnings.

FGV has RM2.6bil left in its coffers following the Pontian exercise, which it will deploy to buy land for greenfield and brownfield rubber and palm oil plantations in Myanmar, Cambodia and even Africa.

Sunday, October 6, 2013

Rumours & Speculation - MISC

Petronas’s CEO say that its decision to build its own LNG fleet is not a move to make a second attempt at taking MISC private.

There will not be another attempt to privatize MISC.

It is defending Petronas’s decision to own LNG tankers in a reaction to Petronas’ failed attempt to take MISC private at rm5.50 per share.

Nevertheless critics say MISC’s earnings will be adversely affected because its LNG tanker charter division is its bread and butter and Petronas is its main client. The shipping group will not be able to tap Petronas’s future transport needs as the latter grows its LNG business.

Accordingly, the charter rate of LNG tankers is about US$80000 a day. If the management fee is based on a percentage of the charter rate, the revenue earned from being a manager will be much less.

However its CEO stressed that Petronas’ move will help ease the strain on MISC’s financials as the shipping giant need not acquire new LNG tankers.

Given the current (Oct 2013) health of MISC’s balance sheet and possibly high borrowing cost, the shipping subsidiary does not have the financial muscle to expand its fleet to cope with Petronas’ growing demand.

As at June 30 2013, MISC had a cash balance of rm3.41 billion and total borrowings of rm9.2 billion, including short term debt of rm2.86 billion. Estimate the group’s gearing for FY2013 ending Dec 31 2 at 30% to 40%.

Petronas has the resources to buy LNG tankers for its own needs but Petronas does not have the expertise whereas MISC does have.

Saturday, October 5, 2013


GPacket: Speculation that its mobile broadband unit P1 has become a takeover target of larger operators looking to acquire valuable spectrum.

It was reported that there could be a three-way fight for the acquisition of a controlling stake in P1, with the three possible parties being DiGi.Com Bhd, the YTL group and Telekom Malaysia Bhd (TM).

DiGi could be in talks to buy out WiMAX players for their wireless spectrum in order to sustain its growth plans in Malaysia. DiGi was believed to be the closest to clinching a deal with P1, with negotiations having started more than a year ago.

As for YTL’s interest, industry sources had been quoted as saying that fellow WiMAX operator YTL Communications Sdn Bhd, a unit of YTL Power International Bhd, was also keen on buying a controlling stake in P1. This had been speculated before.

Sources said the YTL group sent a due diligence team to P1 recently. From a technological perspective, they pointed out that YTL was the best fit for P1, as both companies operated on the same type of spectrum, the 4G-LTE (Long Term Evolution) (2.6 gigahertz or GHz), which is time division-based, and WiMAX.

On the contrary,TM clarified that it had not announced any interest to bid for a stake in WiMAX operator P1, or sought any approval to do so.

P1 is a 57% unit of listed Green Packet and owns valuable wireless spectrum. It owns 30 megahertz (MHz) in the 2.3GHz band (that is used for its WiMAX network), and was one of the eight companies to be awarded last year with 20MHz of the 2.6GHz spectrum, which would be suitable for LTE or 4G-LTE type of services in the future.

Friday, October 4, 2013

Focal - SP Setia Bhd's Tan Sri Liew Kee Sin

The doors are now wide open for the potential entry of SP Setia Bhd's Tan Sri Liew Kee Sin into Focal Aims Holdings Bhd after the latter accepted his eldest son's takeover bid.

Focal had accepted the offer by Liew Tian Xiong and Eco World Development Sdn Bhd to buy a 65 per cent stake at RM1.40 per share. Subsequently, Liew, who is seen as a proxy for his father, and Eco World have extended their offer to buy the remaining Focal Aims shares.

Liew had confirmed his departure from SP Setia and is likely to retire in March 2014 when the third put option at RM3.95 per share for his remaining stake in SP Setia is due.

Liew reportedly has 67.79 million shares, or 2.76 per cent stake, left in the country's largest property company by sales.

Prior to the takeover offer, Focal Aims is a low-key property developer with large tracts of land in Johor. Its share price had lingered below 60 sen for the past few years.

The men behind Eco World are Tan Sri Abdul Rashid Abdul Manaf and Datuk Leong Kok Wah. Both had been long-time board members of SP Setia.

The duo's close connection with Liew, who is SP Setia's president and chief executive, has led to speculation that Focal Aims would be a vehicle for him to mould after SP Setia.

BHIC - RM9 billion contract

Its 21% owned BStead Naval Shipyard Sdn Bhd has received an amended acceptance letter from the ministry of defense for an earlier award in Dec 2011 to design, construct, equip, test and deliver six second generation patrol vessels called LCS, for the Royal Malaysian Navy.

This essentially confirms that the contract value has been fixed at rm9 billion compared with an earlier indicative ceiling price of the same sum.

Currently (Oct 2013), the group has gross and net order books of rm10 billion and rm3 billion respectively.

Expect further news flow of new contracts in the pipeline pending the announcement of Budget 2014 and against the backdrop of the Lahad Datu, Sabah, incursion earlier 2013 which highlighted the dire need for tighter security measures.

Additionally, the group which has a Petronas Nasional Bhd major fabrication license, is still open to non military based projects.

Thursday, October 3, 2013

TSH - Strong growth for next few years

It was among the few plantation companies where earnings held up fairly well in the first half of 2013 amid falling CPO prices.

Its earnings underscore the strength of its production output on the back of young tree profile which more than offset persistent weakness in CPO prices.

Recall that the company acquired its first land bank in Indonesia in 2006 and only started new planting in earnest in 2009. About 4000ha and 3000had of planted areas will come into maturity in 2013 and 2014 respectively – underpinning growth for the next few years from 2013.

The company is committed to acquiring more land bank and expanding its planted area.

The company still has over 68000ha of unplanted land in Indonesia and is keen to acquire more. It is also exploring opportunities in Sabah, where it currently (Sept 2013) has some 4500ha of planted oil palm.

It intends to undertake some 4000ha at least, in new planting each year going forward to maintain output growth momentum although the pace of growth will decline due to larger base effect. TSH completed about 1500ha of new planting in 1HFY2013 and expects to pick up the pace in 2HFY2013.

The successful sale of its 16% stake in Pontian United Plantation to FGV will bolster its cash flow for new planting activities as well as acquisition of more land. A comparatively high gearing – of 107% at end June 2013 – had previously kept a lid on the scope of its expansion.

The sale will net some rm196 million in proceed and rm86 million gains.

TSH’s balance sheet is further strengthened by three private placements undertaken in 2013 for a total of some 63 million new shares that raised some rm140 million.

Monies from Pontian sale and cash calls will reduce both gearing level and borrowing costs and allow the company to undertake more aggressive planting up.

Cost of production is expected to trend lower as economies of scale kick in with the rising FFB volume particularly as newly mature trees move into higher yielding brackets.

Strong growth in FFB and lower costs are expected to drive TSH’s earnings over the next two to three years from 2013 even if CPO prices remain at current (Oct 2013) levels.

Its shares are currently (Sept 2013) are trading at 24 times estimated 2013 earnings, expect valuations to narrow quickly over the next few year from 2013 on the back of earnings expansion.

Wednesday, October 2, 2013

POS - possibly be a special dividend in place

The group’s core values are premised on rapid expansion of its courier segment, tis five year strategic plan which should see healthy growth in its non mail segment and potential mergers and acquisitions which are in the pipeline. It was reported that POS is currently (Sept 2013) in talks with a Middle Eastern postal company for possible collaborations.

Going forward, the company could potentially set up an intl gateway in the Middle East to capture inbound courier volume from the Middle Eastern mass markets.

It is currently in the second year of its strategic plan, which sets out to diversify the company into the supply chain and digital businesses. It ultimately intends to establish itself as a regional postal and logistics player.

It has successfully rolled out its Islamic pawnshop service.

While Post Malaysia has a policy of paying at least 50% of its earnings as dividends, it has paid at 45% since 2008.

As at end FY2013 it has a Section 108 tax credit balance of approximately rm216 million.

Hence there could possibly be a special dividend in place, subject to funds needed for the expansion of its businesses for 2013.

Zealand - restructuring exercise

Loss making is set to clean up its balance sheet after shareholders approved a corporate restructuring exercise.

The restructuring will effectively wipe out its accumulated losses and pare down its debts.

It has an order book of about rm4 billion including its concession.

The restructuring exercise is aimed at reducing its accumulated losses and debt level. As at 1QFY2014 ended June 30, its accumulated losses stood at rm385 million while total borrowings were rm417 million.

The proposed par value reduction (from 50 sen to 10 sen) will enable it to reduce its accumulated losses via the cancelation of its issued and paid up capital that is not represented by the available assets of its company.

The existing Zeland shares have been trading below its existing par value of 50 sen for the past one year and its not conducive for it to embark on any fund raising and corporate exercise involving a new issuance of shares without undertaking the proposed par value reduction.

Its biggest shareholder MMC Corp has agreed to subscribe to its full entitlement of Zeland rights shares, which is 39.25% of the 281.63 million proposed rights shares.

The restructuring is expected to be completed by end FY2014 ending march 31.

Tuesday, October 1, 2013


It had denied that it was close to winning a significant contract which claimed that the company was a frontrunner for the contract refereed to as SK316 project.

This contradicts with the MD and CEO’s view that THHE and McDermott Intl incorporated have equal chances of winning the project.

To recap it was reported that it is close to winning a significant contract that would likely give it a re-rating of sorts.

9.29% owned by pilgrim fund Lembaga Tabung Haji holds 29.59% and in which tycoon Tan Sri Quek Leng Chan has about 9.09% via GuoLine Capital Ltd (GCL) and his own name.

Market talk is that THHE is the frontrunner for the massive fabrication job by Petroliam Nasional Bhd (Petronas) for the latter’s SK316 field. That THHE had jointly bid for the US$1bil (RM3.22bil) job with McDermott International Inc has already been announced.

Petronas would announce the winner in Oct 2013.

Meanwhile the transformation of THHeavy remains on track as it is set to finalise its share swap and JV agreement with McDermott Intl Inc within weeks.

Once the share swap and JVA are completed, THHeavy will have four core companies than can provide the full spectrum of EPIC jobs within the oil nad gas construction and fabrication industry.

It is also in the midst of acquiring a 200 acre site on Pulau Indah to expand its yard costing the group about rm200 million. It will have to spend an additional rm100 million on the infra.

It has yet to finalise how it will fund the yard expansion. It may embark on rights issue or private placement.

It stated that it is close to closing a charter (FPSO vessel require by Lundin Pet and JX Nippon Oil & Gas Exploration) by end 2013 which is worth not less than US$400 million to US$500 million.

Despite delay in the conclusion of the share swap and JVA, TTHeavy and McDermott are jointly bidding for fabrication and marginal field risk service contracts worth a combined value of more than rm8 billion.

TTHeavy is awaiting the outcome of the award of rm500 million worth of fabrication jobs in one or two months time from Sept 2013.

Together with McDermott, TTHeavy has out in bids for the construction of two central processing platforms for the SK136 block worth about US$1 billion and for the Sepat oilfield. The group is also bidding for a wellhead and pipelaying installation contract in Sabah.

It has also bid for Pan Malaysia umbrella contracts for transportation and installation jobs worth about rm10 billion.

It is also bidding for the development of marginal fields.

It has an order book of about rm300 million.

Puncak Niaga's background

Among the four water concessionaires in Selangor, Puncak Niaga is the largest.

Although Puncak Niaga has remained status quo on the takeover of its water assets by the state government, talk is rife that both parties are on talking terms to come to an amicable solution.

Puncak Niaga started its water treatment business in Selangor in the 1990s. The company widened its role in 2004 when it was awarded a 30-year concession to manage Syabas.

The agreement was signed by the federal and Selangor state governments. The two other companies with concessions to supply treated water to Syabas are Konsortium Abass and Splash.

The other major water player in Selangor, apart from Puncak Niaga, is KDEB, which holds a stake in various water assets via its 61%-owned Kumpulan Perangsang Selangor (KPS).

KPS has a 55% stake in Konsortium Abass, 30% in Splash, 30% in Syabas and 20% in Taliworks Corp Bhd, another player in the Selangor water sector.

Splash also has Gamuda Bhd as a 40% shareholder, while the remaining 30% stake is held by The Sweetwater Alliance Sdn Bhd.

And although federal government vehicle PAAB is responsible for facilitating the consolidation of water assets in the respective states, in the case of Selangor, the mandate had been placed on KDEB in February 2008.

If the takeover happens, a source at Puncak says that the company has over the years been investing in the latest technology in the water business and that can be replicated elsewhere in the region.

The sale of Puncak Niaga’s water assets will unlock the value of its assets into cash, free the company from high receivables from Syabas amounting to RM2bil and provide the company with a stronger financial footing to expand.

In mid-2008, Puncak Niaga entered the China market via its 80%-owned subsidiary Sino Water Pte Ltd, a company incorporated in Singapore which focuses primarily on potential markets in China. Puncak Niaga later increased its stake in Sino Water to 98.65%.

Sino Water has established various subsidiaries in China to undertake potable water and wastewater projects in several provinces there.

For Asean countries, Puncak Niaga has formed a wholly-owned Singapore subsidiary, Puncak Niaga Overseas Capital Pte Ltd, which will spearhead its entry into Vietnam, Cambodia and Laos.

Apart from expanding its expertise in the water services sector, the source says Puncak Niaga is also very interested in expanding its O&G business. It has the expertise in the O&G fracking process that requires very high water pressures. In the longer run, Puncak Niaga also has the aspiration to be involved in the exploration and production of oil.

At the end of 2012, the company’s O&G subsidiary, GOM Resources, had a positive impact on the group’s overall results, contributing 20.8% to the group’s revenue.

At present (Sept 2013), Puncak Niaga’s O&G capabilities involve construction and subsea services and marine support services to the offshore services segment.

However, the unit is exploring many other areas, both mid-stream and upstream, and is looking to expand locally and overseas.

In 2012, GOM Resources set up the exploration and production division to evaluate business development opportunities, both locally and overseas.

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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.