Wednesday, February 26, 2014

Full List Of Areas Affected By Selangor Water Rationing Starting 27 February 2014

Water supply rationing for Hulu Langat, Kuala Langat and Sepang will start on Feb 27 and go on until March 31. "The plan was approved by the National Water Services Commission (SPAN) Monday. It will involve more than 60,000 consumers in 71 affected areas," Syarikat Bekalan Air Selangor (Syabas).

Click HERE to see the list.

Tuesday, February 25, 2014

Karex (High Valuation But Bright Outlook)

At current (24 Feb 2014) share price, it is trading at a PER of nearly 26 times estimated earnings of rm45 million for financial year 2014 ending June 30. The market’s willingness to pay such premium valuation suggests that investors, by and large, hold a robust outlook for the company going forward.

Supported by ongoing capacity expansion plans, Karex will continue to deliver strong double digit earnings growth over the next two to three years from Feb 2014, which would justify its near term premium to the broader market’s average valuations.

The bulk of Karex’s products are exported.

Investors would likely to be patient to crystallize further gains

Karex is benefiting (Feb 2014 & Beyond) from a confluence of positive factors, including a strengthening of USD against the ringgit, falling latex prices, expansion in production capacity and steady demand growth for condoms globally.

Karex is the world larges condom market with production capacity of four billion pieces and about 10% market share.

Karex believes it has strong market positioning in an industry with relatively high barriers to entry. Condoms are regulated medical products with stringent quality requirements and Karex is a pre qualified manufacturer with all the licenses, certifications and accreditation required to supply over 110 countries.

Karex is also in the midst of expansion phase which will double to six billion pieces by 2016.

Total capex is estimate to about rm100 million which will be partly funded by proceeds from the IPO. It had raised about rm75 million and its controlling shareholders retain a 63% stake in the company.

It is also a beneficiary of the strengthening of USD. Export dominated in USD, accounts fro some 91% of its total sales in FY2013.

Meanwhile, among the major cost items, only vulcanized latex – which accounts for some 43% of total raw material costs in FY2013 – is purchased in USD.

Though the stock is not cheap relative to the broader market (25 Feb 2014) – and this may cap its near term upside gains. But the company is expected to enjoy strong growth rates going forward.

It is in a net cash position of rm46 million at end Dec 2013.

With strong cash flow and earnings growth, it can afford to pay small dividends since it its still in an expansionary phase.

Monday, February 24, 2014

KEuro/IJM Corp

It will now (Feb 2014) focus on the execution of its RM6bil West Coast Expressway (WCE).

Mamee-Double Decker (M) Bhd managing director Datuk Wira Pang Tee Chew and his brother, Datuk Wira Pang Tee Nam emerged as substantial shareholders of KEuro with a 9.08% stake or 52.05 million shares via their holdings in United Frontiers Holdings Ltd, a British Virgin Island incorporated company.

Tan Sri Krishnan Tan, the former boss of IJM Corp Bhd, is also likely to join the board because the decision to push on with the WCE was largely his brainchild.

Currently (Feb 2014) the second largest shareholder of KEuro is MWE Holdings Bhd, a company controlled by Tan Sri Surin Upatkoon with a 24.68% stake in the company. In 2013 he bought a 22.15% stake from KEuro’s substantial shareholder Tan Sri Chan Ah Chye for RM155mil.

IJM is the largest shareholder with a 25.1% stake.

Observers opine that it is not just the WCE that attracted MWE and the Pang brothers to put their money in KEuro. After all, concessions’ profits will only kick in at least five years down the road.

While the WCE will be providing the long-term revenue stream for the company, it is the potential of KEuro’s 1,879-acre Bandar Rimbayu mixed development in Shah Alam that appears to be the sweetener.

Also, it is this mixed development with an RM11bil gross development value (GDV) that will likely bring the company back to the black in FY14.

The first two phases launched last year recorded sales of RM600mil, with take-up rates of 100% and 80% respectively.

KEuro presently (Feb 2014) has three main assets: the WCE project, the 40% stake in Bandar Rimbayu development and a 30% stake in associate company Trinity Corp Bhd (now known as Talam Transform Bhd).

Since receiving confirmation from the Government to commence work on the WCE, KEuro has been given 5 years to complete the project effective from Dec 20, 2013.

Construction work on the highway in the Selangor stretch is expected to commence in April 2014 and take three years to complete. This portion of the highway will contain a section of elevated highway.

The WCE project spans Banting in Selangor to Taiping with 233 km of tolled highway (including 40 km of highway to be constructed later).

It is a build-operate-transfer project with a concession period of 50 years. This concession period will be extended a further 10 years if the agreed targeted internal rate of return is not achieved.

Tee Chew is a non-executive director of KEuro.

A government support loan (GSL) of RM2.24bil will be provided at an interest rate of 4% per annum subject to separate negotiations and an agreement to be executed with the Finance Ministry.

Of the RM6bil cost of the WCE, land acquisition cost of up to RM980mil will be borne by the Government.

During the GSL tenure, 70% of excess revenue will be utilised as repayment of the GSL. After settlement of the GSL, the ratio will switch to 30:70 between the government and WCE if the targeted IRR is not achieved and 70:30 if the actual IRR is more than the targeted IRR.

Previously, West Coast Expressway Sdn Bhd chief executive officer Datuk Neoh Soon Hiong (now CEO of KEuro) said that five out of a total of 11 work packages would be dished out in April 2014.

Being an equity owner of the WCE, IJM is obviously a beneficiary and is likely to be appointed the project manager and main contractor.

IJM is eyeing some 70% of the RM5bil project, hence potentially boosting its order book to RM6bil from RM2.5bil as of September 2013.

While KEuro owns 80% of WCE, the rest is held by Road Builder (M) Holdings Bhd, a unit of IJM Corp.

The commencement of work is definitely positive for KEuro. It is a beneficiary of the WCE story and will eventually see a new revenue stream from the concession. For now (Feb 2014), its earnings are still very lumpy. Revenue contribution from property will also smoothen out its earnings.

KEuro is now (Feb 2014) in the midst of implementing its rights issue, having obtained the approval of shareholders to raise more than RM400mil to kickstart the WCE.

KEuro will be placing out 429.74 million rights shares and 214.87 million free detachable warrants on the basis of three rights shares for every four existing KEuro shares held and one warrant for every two rights shares.

Property wise, KEuro has Bandar Rimbayu, which is being developed by Radiant Pillar Sdn Bhd, a 50:50 joint venture between KEuro and IJM Land Bhd’s subsidiary IJM Properties Sdn Bhd.

In January 2014, shareholders approved a plan to sell 10% equity stake in Radiant Pillar to IJM Land for RM52.5mil cash. Once the sale is complete, KEuro will only own 40% stake in the project.

After the successful launches of its first two phases, it will launch its third phase in early 2015 with a GDV of RM400mil. Phase one of Bandar Rimbayu was launched in March followed by phase two in August 2014.

Bandar Rimbayu’s GDV of RM11bil will be spread over the next 10 to 12 years. The township is accessible via three highways – Elite, Kesas and the South Klang Valley Expressway.

The original land cost for Bandar Rimbayu is only RM5 per sq ft compared with an average of RM18 per sq ft Tropicana Corp paid for 1,172 acres near Bandar Rimbayu (total cost of about RM1.3bil).

LB Aluminium - undervalued

One of the manufacturers of aluminium extrusion in Malaysia plans to capitalize on the boom of high end properties in Malaysia. Its products include aluminium fittings for various types of doors and windows.

Its main competitor in the high end property segment is Press Metal Bhd. The latter is involved in both aluminium smelting and manufacturing operations while LB is a pure downstream player.

LB commands a market share of 25% to 30% in the domestic extrusion business. Its net asset per share stood at rm0.97.

In the aluminium extrusion business, LB’s small peers include Tong Herr Res and PA Res. Tong Herr Res’s earnings have fluctuated between rm8.41 million and rm36.55 million in its past four financial years while PA Res has suffered losses every year since FY2008.

By comparison LB’s net profit had grown from rm7.74 million in FY2009 to rm\16.7 million in FY2013.

Its shares may seem undervalued (20 Fen 2014) as they are currently trading at around six times historical earnings while for Press Metal and Tong Herr is trading at 11.7 times and 13.71 times respectively.
LB seems to be on track to outperform its FY2013 results, having reported a cumulative net profit of rm11.02 million in 1HFY2014 ended Oct 31 2014.

Sunday, February 23, 2014


For transshipment, the port operator has seen encouraging improvements in major shipping routes, such as intra-Asia, Asia Africa and Asia-Australasia, and industry observers see opportunities to tap emerging routes such as China-Africa or intra-Southeast Asia, or to grow the regional feeder network.

The company remains optimistic that volume throughput growth will be relatively similar to its past performances and expects container volume to grow by five to 10% in 2014.

It will be a 5% on the potential impact of port operator alliance members (P3) re-routing their Asia-Europe/Mediterranean port calls by the second half of 2014.

Westports has nudged up its volume assumption in 2014 to 7.83 million from 7.63 million (at five per cent year-on-year growth), in view of the expected minimal impact of the P3 alliance, since measures are in place to mitigate it.

As such, its earnings forecast for 2014 and 2015 are being nudged up.

Saturday, February 22, 2014

The Inside Story & Real Reason of Why Facebook Buying Whatsapp


Past week rebound of its share price were riding on improved sentiment. But observers believe this could be just a short lived rebound. The fundamentals did not change and remain pessimistic on the stocks.

The concerned are about the year on year figures and not the quarter on quarter results. The seasonal pickup on the sales of the brewers has been factored in.

The anticipated slowdown on consumer spending as a result of government’s subsidy rationalization programme does not make both brewers interesting choices for investors.

To recap, the continuous fall of GAB’s share price was attributed to the uncertainties of the market since mid 2013. Carlsberg has also experienced the fall.

In the near term there is no catalyst for GAB to rebound. There share prices have been falling even without the hike in excise duty.

The fact that both brewers’ sales and volumes shrank in the past two quarters prior to 1QFY2014 coupled with the weaker CSI indicate that spending in beer is not likely to grow.

Nonetheless, the depressed share price would help to lift dividend yield. The near term catalyst for GAB will be the valuation of its dividend yield.

Wednesday, February 19, 2014

The Richest Man In Asia Reveals 11 Steps To Buying A House And Car In 5 Years

Li Ka-Shing - Asia's richest man - runs Hutchison Whampoa, a conglomerate whose interests include ports, retail, energy, infrastructure, properties and mobile networks.

Through Cheung Kong Holdings, his publicly traded investment company, Li also oversees a real estate portfolio that includes residential and commercial properties, as well as hotels and industrial space.

Click HERE to read what is the 11 steps..

*Source: *

Metro Kajang - triple contribution

It expects more than triple contribution from its plantation division to about 50% of total revenue by 2017 from 15% currently (Feb 2014), as its oil palm plantations reach maturity.

The Kajang based property developer which ventured into the palm oil business some five years ago is expecting all of its 14400ha of planted oil palm trees in Indonesia to be mature and able to achieve fresh fruit bunch yields of up to 30 tones per hectare per year.

Expect substantial contribution in terms of revenue from the plantation division by 2017 when all of the planted trees reach their peak from seven years oil.

Apart from the plantation segment, MKH’ core business is also set to expand as the group looks to increase the land bank.

Both the plantation and property will be its core business in its future growth.

Scomies/Scomi Group - Tan Sri Quek Leng Chan

The buyers of the 268.79 million Scomi Energy Services Bhd shares that crossed ownership included parties other than Tan Sri Quek Leng Chan, with the single largest buyer being Paul Poh, a former long-serving employee of the Hong Leong group.

The block of shares belonging to Standard Chartered Private Equity Ltd, which amounted to 11.48%, had been up for sale since late 2013 and posed an overhang to the share price.

Scomi Energy has been bulking its order book and tipped to win a contract to develop a marginal oil field.

Poh, who is said to maintain a close relationship with Quek, bought about 40% of the block of Scomi Energy shares via his private investment vehicle Caprice Capital. Quek, the major shareholder of the Hong Leong group, took up the second largest portion of 30% or 80 million shares.

There were two other institutional shareholders who also jumped at the opportunity to pick up a block in Scomi Energy – Norway’s oil fund, Norges and Lembaga Tabung Haji (LTH). Norges, one of the world’s largest sovereign funds, took up 30 million shares, while LTH bought 50 million.

Norway’s Norges fund had in 2013 taken up 18 million shares in another local oil and gas services firm Daya Material Bhd, indicating the sovereign fund’s appetite for small stakes in Malaysian companies in that sector.

This new group of investors of Scomi Energy are said to have been attracted to the later’s drilling fluids and drilling waste management business.

Speculation that it is close to securing a risk service contract from Petroliam Nasional Bhd to develop a marginal oilfield in the Ophir cluster, off the coast of Terengganu.

At the Scomi Group level, IJM Corp emerged as a shareholder with an interest of 10%. IJM’s stake can go up to about 24% if the construction giant converts a RM110mil convertible debt paper issued by Scomi Group.

The entry of IJM and the subscription of the convertible debt papers stabilised the financials of Scomi Group, that is led by group chief executive officer Shah Hakim Zain who is also its major shareholder.

Tuesday, February 18, 2014

TDM - sungai buloh private hospital

It has obtained coning approval from the Health Ministry to set up a private hospital in Sungai Buloh, Selangor.

Its healthcare division plans to have different centres of excellence in all its four hospitals as it grows the group’s healthcare business.

Its hospitals are KMC, KTS, KJMC and Taman Desa Medical Centre.

In Kuantan the group is undertaking a rm135 million exercise to relocate to a new and bigger hospital.

Construction on a new hospital to replace the one in Kuala Terengganu has also started and could be completed within two years from now (Feb 2014).

Plans are afoot for TDM to set up its healthcare presence in Kelantan.

TDM is 60.7% owned by the Terengannu state government.

The group now owns about 70293ha of palm oil plantations of which 32473ha are in Malaysia and 37856ha in Indonesia . It also owns two mills in Terengganu.


It had entered into a rig-construction contract with PPL Shipyard Pte Ltd to build a third jack-up rig for US$211.5mil (RM653.5mil). Perisai will need to pay 10% by end 2014 whle the remaining 80% will be paid upon delivery.

The contract price includes certain enhancements that had been undertaken with two rigs – Perisai Pacific 101 and Perisai Pacific 102. The contract price is payable in two portions with the initial 20% payable upfront and the balance 80% upon delivery (expected to be by the third quarter of 2016).

The third jack-up rig ordered as it will give Perisai further exposure in the drilling rig sector, which is in the uptrend cycle.

Post the acquisition of this rig, Perisai will own three jack-up rigs.

It will not have any issues with the 20% payment upfront, but it will not be surprised if the company is to look for additional equity funding, moving ahead.

The delivery of the jack-up rig is only in 2016. The earnings accretion from the new rig would only be in 2016.

Perisai is set to receive two jack-up rigs (in mid-2014 and mid-2015), which should be able to secure contracts given that there are at least 17 rig contracts that are expiring from mid-2013 to 2015.

Over 40 jack-up rig contracts in South-East Asia will expire between mid-2013 and 2015. This, coupled with Petronas’ localisation policy, which calls for the use of Malaysian-flagged vessels, should ensure a healthy pipeline of drilling-related jobs for contractors including Coastal Contracts, Perisai Petroleum Teknologi Bhd and UMW Oil & Gas Corp Bhd (UMW-OG).

A typical jack-up drilling rig has a useful life of 25 years without major upgrades. In 2012, some 90% of the global fleet was at least 26 years old, setting the stage for the start of the replacement cycle.

To recap, Perisai had placed an order with SembCorp Marine to acquire a high spec jack up rig for rm678 million to be delivered by July 2014.

While Perisai is close to securing its first jack up rig contract, sources say that the charter rates could be much lower than original charter rate of USD190000 per day as the contract may be longer in tenure. Assuming a charter rate of USD150000 per day, estimate that the rig contract will lift its earnings by rm19 million.

Industry observers are encouraged by the charter commencement of Perisai's FPSO vessel after a delay since late July 2013. It marks the company's entry into the FPSO segment and its transformation from a bareboat charterer to an operator.

Early contributions from the vessel will be reflected in its results for the fourth quarter of FY2013 ended Dec 31, reducing the earnings vacuum caused by two idle assets ... mobile offshore production unit and derrick pipelay barge.

Perisai is currently (Jan 2014) vying for at least two potential contracts for its MOPU.

Also do not discount the possibility of an equity fund raising exercise in 2014 given the strength of Perisai's share price. The company needs to fork out some rm500 million in 2014 to pay for its first jack up rig, to be delivered towards the end of second quarter 2014 and an additional rm500 million for its second jack up rig in 2015.

Anticipate weaker sequential earnings in 4QFY2013 due to the lack of charter income for its MOPU and derrick pipelay barge although the weakness will be partially offset by maiden contributions from its new FPSO vessel and its offshore support vessels.

For 2015, assume full year earnings contributions from its offshore vessels, FPSO, MOPU, derrick pipelay barge and first jack up rig.

Sunday, February 16, 2014


Sources say UMW O&G is in talks to charter Perdana’s workboat for rm70 million. The contract is for two years with an option for one year extension.

The details should be finalized soon or within a couple of weeks for a contract to be drawn up.

The charter rate of rm70 million for two years work out to about USD29000 a day for the workboat.

The workboat is built in 2008 means that an immediate contract with UMW O&G augurs well for Perdana.

Details such as which oilfield UMW O&G plans to utilize the vessel for, remain unclear.

Poh Huat

Surging export sales to the US and a stronger USD, local furniture maker such as Poh Huat have seen their share prices rise sharply.

Its shipments to the US have picked up substantially and the situation continues to improve with the recovery of the world’s largest economy.

The group only bounced back to its FY2007 earnings level in FY2012.

Other furniture makers are Latitude Tree, Lii Hen Industries, SWS Capital Bhd ...

Growth in the US will drive demand in the European markets. Coupled with the Strong USD, Malaysian products would be relatively more competitive.

With the continued recovery of the US market as well as the USD, local furniture makers may continue to see improvements in their earnings.

Friday, February 14, 2014


Sources say it is exploring the possibility of acquiring UEM Builders Bhd to strengthen its construction arm.

It is understood that MRCB has held preliminary talks with UEM Builders, the engineering and construction unit of UEM Group for a possible takeover.

It is unclear why asset rich MRCN, which in Jan 2014 sold two assets for rm1 billion to help pare down its debts of rm2.9 billion, would be interested to buy UEM Builders. UEM Builders is wholly owned by UEM Group, which in turn is controlled by Khazanah Nasional Bhd.

As at Dec 31 2013, UEM Builders’ accumulated losses were at rm599.99 million. However this was an improvement over the accumulated losses of rm635 million recorded in the previous year.

UEM Builders’ wholly owned subsidiary UEM Construction Sdn Bhd and its joint venture partner Bina Puri Sdn Bhd have been in the limelight in recent months due to the delay over the completion of KLIA2 in Sepang.

Thursday, February 13, 2014

Mpay - government's Tourist Refund Scheme

eTRS GTF Systems Sdn Bhd, which is partnering MPay to bid for the management of the government’s Tourist Refund Scheme (TRF), is expected to emerge as a substantial shareholder of MPay.

eTRS – a bumiputera owned company – Mpay and South Korea’s Global Tax Free Co Ltd Dec 2013 set up Managepay GTF Sdn Bhd on a 20:50:30 basis and submitted a bid for the contract that could potentially provide the JV revenue to the tune of rm50 million in the first half of operations.

The scheme will enable foreign tourists to claim a tax refund on goods purchased in Malaysia, which will be introduced in conjunction with the implementation of the GST come April 2015.

eTRS will emerge as a substantial shareholder of MPay via the subscription on new shares under a proposed private placement.

MPay would make a private placement of up to 10% to third party bumiputera investors to be identified later. The proposed private placement is expected to raise as much as rm8.57 million based on an issue price of 15.6 sen per placement shares.

A total of five million MPay shares were sold off market at 17.5 sen per share.

ManagePay GTF is not the only bidder for the TRS contract. The other parties are IRIS, Salihin Consulting Group Sdn Bhd and Islah Wawasan Sdn Bhd.

eTRS is confident that ManagePay GTF will emerge as a winner of the TRS contract. The TRS requires that the company handling the system to first reimburse the tax to tourists before it can make its claims from the government.

Mpay is also a Ministry Finance qualified payment system gateway to provide a secure payment and refund network.

The first part of the selection will see two parties being selected before the winning bidder is announced later in the year.

Frontken (Just Read No Punting)

To recap one block of shares traded off market at 47.6 sen on 29 March 2013. Some 27.63 million shares or a 2.76% stake crossed off market via a direct deal for rm13.15 million.

The pertinent question is on what grounds did Bursa Malaysia give the green light for the shares to be traded at 47.6 sen – a level the counter has never reached since Aug 2007. Under the listing rules, companies are required to obtain the authorities’ approval on share transactions done 15% higher than market value.

The transaction is most likely to be a divestment by OCBC Capital Investment Ltd. OCBC holds 2.74% stake Frontken shares – similar to the block of shares that crossed off market.

German based Jorg Helmut is currently (March 2013) the controlling shareholder holding 28.82% equity interest in Frontken, which provides surface metamorphosis engineering. The company’s main client are the semiconductor, oil and gas and power generation sectors.

The German shareholder emerged as the emerged as shareholder in July 2011. LTH is the second largest shareholder with a 6.29% stake.

Financially, Frontken has been profitable but its earnings have fluctuated. For the 2012 financial year ended Dec 31, the company posted a net profit of rm3.8 million.

On Feb 27 2013 the company was in the news when it informed Bursa of potential accounting irregularities noted in one of its wholly owned subsidiaries. Crowe Horwarth, appointed as special investigate auditor, had noted the irregularities.

It has bagged a US$34.5mil (RM110.6mil) contract in April 2013 from ATT Tanjung Bin Sdn Bhd to be the main contractor for a facility in Tanjung Bin, Johor.

Frontken Malaysia Sdn Bhd’s core activity is providing surface metamorphosis technology using thermal spray coating processes and a series of complementary processes, including mechanical and chemical engineering services. ATT is principally engaged in the development, management and operation of multi-products petroleum facilities.

Wednesday, February 12, 2014

Destini - acquisition of Samudra Oil

It expects the acquisition of Samudra Oil Services Sdn Bhd to start contributing to the group’s earnings by end of 2014. It buys the entire stake in Samudra Oil from KSTB for rm80 million via the issuance of 228.6 million new shares at rm0.35 each.

The shares represent about 39% of Destini’s enlarged share capital.

Destini was removed from the PN17 status after the group regularized its financial condition in April 2013.

The group is looking at about half of its revenue contribution to be driven by Samudra Oil, while its marine and aviation divisions will contribute 25% each.

Samudra Oil provides tubular handling equipment services as well as tubular inspection and maintenance services for offshore oil rigs.

Its principal market is currently (Feb 2014) in Malaysia with a 2% revenue comes from Vietnam.

On Destini’s plans to shift its focus to commercial contracts in its aviation division rather than relying on government contracts, the group is pending its EASA certification.

Currently (Feb 2014), most of the aviation division’s contracts are with the government, while its marine division has gone totally commercially. Both divisions have an order book of rm200 million.

Dtasonic - prospects remainn bright

Its share base had been enlarged to 675 million shares after completion of the exercise.

Although categorised under the same group, the businesses of the two companies (MYEG & Dtasonic) are very different, hence, cannot be compared vis-à-vis.

Dtasonic prospects remain bright given the expected continued strong contribution from the secure ID and smart card personalisation solution sector such as the national ID project, passport project and other smart card project for other ministry and government agencies; large scale ICT projects, and new expansion project in CCTV and Security and Surveillance system project as well as e-health project.

Its business opportunities would stem from new application systems for the MyKad and the passport polycarbonate pages. Apart from that, it is involved in the National Border Control, and projects involving CCTVs, and hospital and transportation infomration systems.

As for providing services for the financial sector, the Government has mandate the national migration of One-Time-Pin (OTP) by 2016, which require migration of all credit card in Malaysia to the higher security OTP credit card. A national roll-out will be launched soon.

The evolving trend of credit card issuances and it has started the instant credit card issuance project in Malaysia for Citibank to enable credit cards to be issued instantly at all 15 Citibank branches and megamalls in the Klang Valley .

Datasonic is looking positively to provide its instant issuance system and solutions to more other banks in both locally and overseas. Growth for this segment is also boosted by the increasing number of credit card circulation in the country.

While its MyKad and passport segments are its crown jewels, its over-dependence on contractual-based income also poses a threat.

IRIS' competitor is DSonic.

Based on its financial results for its second quarter ended June 30 2013, the company generated about 70% of its income from the supply of smart cards and consumables, while the remainder was from the supply of hardware consumables and datapages, personalisation solutions, maintenance and technical support services.

Tuesday, February 11, 2014

MBSB, Sarawak-based Companies

It is going to get tougher for MBSB, a significant player in the personal financing space, to deliver the kind of strong earnings and loan growth it has enjoyed in the past few years prior to 2014.

In 2013, BNM introducing stricter lending rules on PF that took effect in July 2013. The group which has a 64.7% stake owned by the EPF is however expected to feel the full brunt of those lending curbs in 2014.

PF accounted for 73% of its total loans in 2013 followed by mortgages 16.9%, corporate loans of 9.2% and auto loans of 0.6%.

Despite still making up 73% of its laon composition, its PF segment grew just 0.08% q-oq in the final quarter as opposed to its historical high of double digit growth. Industry observers expect this downtrend to persist ... as it is believed the new lending guidelines will continue putting a strain on this core earnings driver for MBSB.

Its gross non performing loan ratio improved to 5.4% in 4QFY2013 signaling the lender wants to transform into a full fledged bank.

Currently (Feb 2014) loan growth is a concern instead of NPLs. To grow its corporate loan segment is tough for it to compete with commercial banks.

Its CEO said MBSB is ready to become a full fledged ban and it is up to shareholders now if they want to go to the next stage.

It has also long been speculated that the EPF may privatize MBSB and merge it with the RHB Banking group in which it is also the largest shareholder.

Sarawak-based Companies: Speculation that Tan Sri Abdul Taib would resign as Sarawak Chief minister. However the potential resignation will not affect the stocks linked to him as the successor is bound to continue the steps taken by him. Even if there is a new chief minister, Taib is expected to take the role as Sarawak governor, which still be an influential position.

The term of current (Feb 2014) Head of State Tun Abang Muhmammad Salahuddin expires on Feb 28 2014.

Nonetheless, all eyes will be on Taib’s successor and whether he will bring about changes in state policies that will impact future investments.

Investors are thinking to unload these stocks now (Feb 2014) as they believed that Taib stepped down, many contracts might not be given to the companies.

The chief minister is scheduled to meet all members of the Parti Pesaka Bumiputera Bersatu Supreme Council on Feb 8 2014 and all the elected state BN MPs and state assemblymen on Feb 9 2014.

Taib is expected to use the meeting to make some important announcement and would leave it to the party’s decision making body to decide on how it should be carried out.

JTI (Falling Market Share)

It manufactures Mevius, Winston, Salem and Camel cigarettes in Malaysia has warned of a tough year ahead from Jan 2014 given an expected further decline in sales volume and higher marketing expenses amid inflationary pressures.

Following the latest excise duty hike of 14% in Oct 2013 which saw tobacco companies raising cigarette prices, the tobacco industry saw a more than 10% drop in sales volume in the fourth quarter of 2013 and this is likely to drop even further in 2014.

It will see further contractions in 2014 as more smokers switch to buying illicit cigarettes which accounted for 35% of the market. As such the tobacco industry outlook and the overall industry depends very much on the legal market size.

Inflationary pressures have also led consumers to cut back on their spending.

While the group is optimistic about its efforts to offer consumers more for their money with new product launches, it remains cautious as the size of the market and its development are not within its control.

Monday, February 10, 2014

Top Stocks Held By EPF ...

MBSB - 43.02%
RHB Cap - 41.34%
MRCB - 38.87%
Media Prima - 16.74%
Shell Refining Bhd - 16.74%
AFG - 16.48%
CIMB - 16.91%
Genting Plantations - 15.88%
MBM Res - 15.91%
KL Kepong - 14.93%
AMMB - 14.72%
HL Bank - 14.63%
PBB - 14.78%
UMW - 15.37%
DIGI - 14.23%
Sime DArby - 14.52%
Petrona Gas - 13.62%
Maybank - 13.65%
Asis REIT - 13.41%
Dialog - 13.43%

Public Bank - Technically dislike

Market observers said PBB should be able to maintain a dividend payout ratio of about 44% to 45% for 2014 even if it continues to be in capital conservation mode ahead of potentially more stringent BASEL III rules.

Its DPR has been on a downtrend since FY2009 despite solid earnings growth. Its DPR slips to 44.8% in 2013.

Based on guidance, market observers opined that a DPR of 43% to 45% for each of the three years from 2014. This should be largely in line with the management’s intention and translate into a yield of around 3%.

Currently (Feb 2014) it is not a dividend stock anymore but it is in demand because people see it as safe stock given its steady growth every year, sound management, strong asset quality and solid ROE.

The group’s common equity tier 1 ratio, which stood at 8.8% as at end Dec 2014 is already comfortably above the minimum 7% that banks need to meet by 2019. However BNM may also considering introducing counter cyclical capital buffers, which may eventually push up the minimum requirement further ... may push by another 2.5% at most.

As it stands, its CET-1 ratio of 8.8% is at the lower end of the industry average of about 12%.

At current price (10 Feb 2014), PBB’s FY2014 PER of 15.5 times is a 34% premium to the sector average of 11.5 times.

It continues to lead its banking peers with non performing loan ratio of just 0.7% and a cost to income ratio of just 30% plus, squeezing further efficiency could be a challenge. Its ROE has peaked and is now (10 Feb 2014) on a declining trend.

Thursday, February 6, 2014

EcoWorld - Second Penang Bridge

The Second Penang Bridge opening is likely to see the entry of Eco World Development Group Bhd in Penang as the company looks to emerge as the biggest landowner in Batu Kawan.

Eco World is participating in a request for proposal (RFP) by Penang Development Corporation (PDC) to buy 190 hectares on a hillock close to the landing point of the new crossing between Batu Kawan in Seberang Prai and Batu Maung on the island.

It is further learnt that the winning bidder will have to develop a golf course on 60ha of the total 190ha plot.

Eco World is currently (Feb 2014) the only company that has shown interest in bidding for the land, for which the bid is expected to open at RM45 per sq ft.

If Eco World succeeds in its bid, an affordable housing component will also feature on mainland Penang, where the company has already acquired some land in Seberang Prai Selatan.

Sources said that if Eco World, with nationwide landbank of 1,200ha (of which about 40ha are in Penang), wins, its chief operating officer Datuk S.Rajoo will be making a comeback to Penang to oversee the development of the mammoth project. Rajoo was formerly SP Setia Bhd’s northern region general manager.

The RFP is for an international theme park and golf resort development at Bandar Cassia in Batu Kawan.

The PDC is said to be inviting local and foreign firms to bid for the purchase and development of 87ha for the international theme park, and the 190ha, which Eco World is making a bid for, is meant for a golf resort development.

The RFP, which was advertised on August 14 2013, listed October 31 2013 as its closing date. No official word, however, is out on the status of the successful bidders.

In Jan 2014, Penang-based property developer Aspen Vision Sdn Bhd had formed a partnership with Ikano Pte Ltd – the regional franchaise holder for Swedish home furnishing store Ikea. Aspen-Ikano Sdn Bhd is to carry out a mixed development project comprising offices and residences over a 99ha site.

The land, which is strategically located at the landing point of the Second Penang Bridge, is set to be developed over 10 years. It will include 12.1ha for the development of an Ikea store and the first phase of a shopping mall development (due to break ground next year and will take five years to complete), 18.2ha for the development of the shopping mall's second phase, and 68.7ha for mixed development.


It expects to make the leap to the Main Market of Bursa Malaysia by as early as the first half of 2014. Inari Amertron has a forward PER of less than 10 times (Feb 2014) as opposed to the Main Market's PER of just above 17 times. For its 2013 financial year, its net profit expanded by more than 100% to RM41.24 million from RM19.28 million last year.

The company has prepared a war chest of as much as RM40 million to expand its capacity.

Inari Amertron is an indirect supplier of parts for Apple Corps Ltd's popular iPhone and iPad products.

Inari Amertron, an electronic manufacturing services player with high exposure to the smart phone and tablet segment within the semiconductor industry, has remained profitable for the last five financial years.

With its recent acquisition of Amertron Global, the group has extended its portfolio from mainly focusing in the S&T segment to the aerospace, defense and automotive industries. This enables the group to ride on the strong wave of the S&T upcycle as well as capitalize on the defensive qualities of the matured high volume semiconductor industries.

If to strip out Amertron’s top line growth, its revenue still grew organically by 39% year on year underpinned by its continual capacity expansion. While the lower blended NP margin post consolidation, the margin could improve further with the higher operational efficiency, going forward, amidst the integration of operations.

Inari’s bread and butter business, that is the assembly of RF chips for Avago Technologies (comprising about 75% of total revenue), has made it a direct proxy to the fast growing S&T segment. With LTE Evolution being the next wave of evolution, Inari’s expertise in RF products has positioned itself well for the next growth phase.

Post Amertron acquisition, the group’s net gearing still remains low at 0.16 times.

With its sustainable earnings profile, the group can offer higher dividend yield.

Wednesday, February 5, 2014


Sources say the suspension of Rex has fuelled speculation that the venture in Oman may have discovered some evidence of hydrocarbon but its commercial value is hard to determine at this point.

Rex, Hibiscus and Schroder & Co Banque SA jointly control Lime Petroleum Plc (Lime) is currently (Feb 2014) undertaking a drilling programme in Oman. The programme to drill in Oman Block 50 is undertaken by Masirah Oil Ltd, a subsidiary of Lime Petroleum.

The drilling of the 3,000 m well is now (04 Feb 2014) completed and the hydrocarbon samples have been sent for testing. This will take a few weeks from 04 Feb 2014 where the flow rate and oil quality will then be determined.

If it was true that Masirah Oil would be sending the samples for testing, it pointed to evidence of hydrocarbon. The hydrocarbon has to be of good enough thickness and saturation. They could also be doing tests to analyse the potential source area.

The current (Feb 2014) drilling programme conducted by Hibiscus is the second in the Block 50 Oman concession area.

It planted its first spud in December 2013 but stopped drilling due to safety reasons even without reaching the target depth. The company discovered hydrocarbon but was of non-commercial value.

Meanwhile its audited financial statement for the fiscal year ended March 31 2013, rm181.4 million or 74% of its rm245 million pre IPO and IPO proceeds has been utilised. The rm79.48 million raised from the portion of its first CRPS tranche has also been fully used up.

In Oct 2013, Hibiscus proposed to issue a second tranche of CRPS to raise up to 10% of its share base to rasie cash. It has until April 19 2014 to issue a circular to shareholders to seek approval for the propsoed fund raising.

For the six months ended Sept 30 2013 it made rm2.8 million in net profit compared with a rm4.06 million net loss in the same period last year. Revenue rose nearly 70% year on year to rm6.56 million from rm3.87 million before.

Brahim’s Holdings Bhd

2014 may see Datuk Ibrahim Ahmad Badawi, who holds an indirect 54.89% stake in Brahim’s Holdings Bhd, injecting more assets via privately held Dewina Holdings Sdn Bhd into the listed in-flight caterer-cum-restaurant operator.

The exercise could happen in the next few months from Feb 2014.

Datuk Ibrahim did not discount a separate listing for Desatera Sdn Bhd, a JV between Dewina and Koperasi Angkatan Tentera Malaysia Bhd, which has been awarded a contract to operate military cookhouses up till 2026.

Other ventures under Dewina, which might be potentially acquired by Brahim’s, were Dewina Food; a plant manufacturing meals in Jordan in a 50:50 JV with a Jordanian government agency, an upcoming plant in Saudi Arabia, and a plant with a farm, including an abattoir and facilities for value-added products, in Ningxia, China, in which Dewina has a 49% stake.

Early October 2013, KPF emerged as a substantial shareholder in Brahim’s with a 5.2% stake, while pilgrimage fund LTH, already a major shareholder with a 5.3% stake, acquired another 366,500 shares in early January 2014.

KPF has a 20% stake in MSM Malaysia Holdings Bhd, which operates a sugar duopoly in the peninsula together with Central Refinery Sdn Bhd, part of the Tradewinds group.

Brahim’s RM150mil sugar refinery near Kuching would be completed by the end of 2015. The company plans to initially provide 180,000 tonnes of refined sugar in Sabah and Sarawak, where annual demand has been estimated to be around 300,000 tonnes.

Tuesday, February 4, 2014

Metro Kajang - plantation proxy

It is a niche township developer in Kajang with an uninterrupted 25 year profit track record. Its venture into palm oil cultivation in Indonesia since 2008 had started to bear fruit, driving up core profit by 96% in FY2013.

It had a young age profile of circa of 4 years for its 14.4k ha of palm oil estates in East Kalimantan.

The longer term, MKH might float its plantation operations upon full maturity of its young oil palms which is currently (Feb 2014) undervalued to unlock value for shareholders.

At current valuation (04 Feb 2014) the marker is assigning zero value to its plantation business which estimate is worth more than rm1 billion.

The group is currently (Feb 2014) in talks to acquire 49421 acres of land in Kalimantan to expand its plantation land bank, which will sustain its long term growth prospects.

Its property sales are unlikely to be affected by the cooling measures introduced by the government, largely because its properties are targeted at the mass market.

It has rm503 million unbilled sales. It will launch rm890 million worth of new projects in FY2014.

Metro Kajang is a well-known brand equity in Kajang and Semenyih. With a land bank of 202.34ha there, it is set to benefit from the rising land prices, given its low land cost and strategic tracts adjacent to two mass rapid transit (MRT) stations.

Its recorded unbilled sales of RM503mil in FY13 is underpinned by the rising demand for mid-market housing, improved connectivity via MRT and growing affluence in its focus market,

Catalysts …
– Fast growing, cheap plantation play.
– Under appreciated.
– Beneficiary of MRT connectivity.
– Record unbilled sales buoyed by strong demand for affordable housing.

Risks …
– Heavy focus on Kajang/Semenyih development
– Fluctuation in crude palm oil prices
– Headwinds in the property market

UMW O&G (Valuation Exceeded Its Peers)

Its market cap stood at rm9 billion on Jan 22 2014.

Its president said that the incoming deliveries of new jack up drilling rigs will boost the group’s earnings substantially over the next two years from Jan 2014. Drilling services contributed 94% to its total revenue for the first nine months of 2013.

It also said that NAGA 5, the group’s latest premium JU rig is scheduled for delivery in May 2014. It has already secured a USD7 million contract from Mido Petroleum Philippines Pty Ltd for the provision of drilling services by the new rig.

Apart from its JU fleet, the group is also the sole Malaysian operator of hydraulic work over units with four currently (Jan 2014) being deployed in three countries on short and long term tenures.

Coupled with a rm1 billion war chest from its IPO proceeds after decuting 2013’s expenses, it is confident that the group can leverage on its working relationship with Petronas and other oil majors to secure new contracts for its JU rigs and HWUs.

It believed that it is able to finance a significant number of new rigs and also secure new contracts due to the increasing regional demand.

The bullish view argues that the delivery of another two JU rigs – NAGA 6 and NAGA 7 – by 2015 warrants premium valuation on the stock.

Moreover its core net profit and core earnings per share will triple within two years from Jan 2014 after taking account the additional revenue boost from the three upcoming JU rigs.

However it is worth noting that new contracts are lifeblood of oil and gas companies. UMW O&G’s contract backlog stands at rm1.45 billion, a small figure compared with the order books of other big caps such as SKPetro and Bumi Armada.

UMG O&G’s valuation has exceeded its peers whose shares are currently (Jan 2014) trading at lower PER.

At the moment (27 Jan 2014), a huge chunk of UMW O&G’s revenue comes from contracts awarded by Pertronas Carigali Sdn Bhd with three out of four rigs deployed for the upstream player’s needs.

Apart from PCSB, UMW O&G’s client base for the JU rigs consists of HESS, Japan Vietnam Petroleum Co and Nido Petroleum.

Underlining its regional expansion plans, the group is working towards achieving a 50:50 revenue contribution from domestic and overseas operations. For 9MFY2013, 66% of its revenue came from Malaysia.

NAGA 3 will be moved to Vietnam while NAGA 5 will be operating in the Philippines.

The bullish outlook is mainly supported by the upcoming expiration of a whopping 41 JU rig contracts in SEA in 2014. In Malaysia, there are currently (Jan 2014) 18 Jus of which 16 are foreign owned.

However it is apparent that the group will have to aggressively expand its operations and secure new contracts in a consistent basis, either one of which is no small task.

The drilling servies industry also remains highly competitive, and there is no shortage of international oil and gas operators bidding for the same projects that UMW O&G is gunning for.

UMW O&G will be spending its cash pile on two new rigs – NAGA 6 and &. Will Petronas which is the company’s major client, also deploy the new jack up rigs? That will determine whether the bullishness on the stock is justifiable.

Monday, February 3, 2014

Gadang - remained healthy

Its construction order book remained healthy at rm1.18 billion. On the construction front, most of its construction projects will be coming to a tail end when the MRT project is completed in 2016 to 2017. Estimate construction revenue to make up 75% of FY2014 total revenue, with the bulk coming from the MRT project.

Currently (Jan 2014), the company has an outstanding construction order book of rm1.18 billion. Estimate that these construction jobs would contribute about 7% to its earnings.

The next key driver will be its project in Tampai, Johor. It had entered into a joint venture agreement with Capital City Project Sdn Bhd to co develop a site in Tampoi. Gadang will act merely as a landowner in this deal and in exchange it will receive rm57.5 million for the proposed land which will be re developed.

Gadang will also receive additional gross development while proceeds of up to rm324 million of the final GDV of rm1.8 billion, which translates into a net gain of about rm219.7 million or 73 sen per share.

Gadang could potentially recognize rm40 million yearly.

It has the potential to re rate upwards driven by strong earnings growth visibility and lucrative concessions that provide stable cash flows.

Sunday, February 2, 2014

Pantech - long term outlook remain bright

Its stock price come under selling pressure after its earnings results for the third quarter ended Nov 30 of financial year 2014 were below market expectations.

Nevertheless, its longer term outlook remain bright. Its valuations are still attractive relative to the oil and gas sector as well as the broader market. The stock is now (27 Jan 2014) trading at a PER of 9.4 times and 8.2 times estimated earnings for FY2014 and FY2015 respectively.

With no major capex in the plans – barring any new acquisition – expect gearing to gradually decline over the next few years from Jan 2014. Gearing had fallen to 29% at end 3FY2014, down 47% at end FY2013.

The lower turnover for that quarter was due to a sharp drop in manufacturing sales while trading sales remained weak. The lower turnover was attributed to anti dumping duties imposed by the US on stainless steel pipes which came into effect in Oct 2013.

As a result of the hefty tax, Pantech has stopped shipping to the country, one of its major customers. Estimate stainless steel pipes to the US account for up to a quarter of capacity previously.

Since then the company has shifted about half of the freed capacity to produce stainless steel fittings. On a more positive note, with the loss of the stainless steel pipe sales, higher value added products – accounted for a higher percentage of total manufacturing sales.

Petronas is expected to spend over rm300 billion on capex between 2011 and 2015 which should underpin demand for Pantech’s pipes, fittings, and flow control products.

The acquisition of Nautic Steels-is helping open doors in new markets.

As a result of the US setback, the stainless steel plant remains around break even level instead of making profits.

Saturday, February 1, 2014


It believes there were “potentially more oil and gas reserves in the field than those already certified”.

It has undertaken initial extraction of crude oil reserves at its Rakushenchnoye oil and gas field in Kazakhstan since Jan 25 2014.

It is carrying out an internal review of the oil and gas reserves in the Rakushechnoye oil field in Kazakhstan. Oil output is estimated at 150 barrels per day at the field known as the Shelly oil field. Oil production at the second well will follow about two week’s time as planned. Sumatec will provide further details as soon as it is available.

However, the company said this would only be confirmed by a new reserves certification to be conducted by an independent competent body and expected to be completed in the later half of 2014.

Sumatec was clarifying a news report that it is believed to have found a larger pool of oil and gas at its oil field in Kazakhstan.

It also corrected the news report that the discovery of additional oil and gas resources may warrant a change in its forecast net profit of RM86mil for the 2013 financial year and RM69mil for 2014.

Sumatec said while it expected the enlarged certified reserves would contribute significantly to the company’s long term earnings, but with immaterial impact to the earnings for 2014.

The company therefore does not intend to revise the forecast earnings for 2013 and 2014.

Sumatec also clarified the report that it would have to reimburse Markmore Energy the cost of exploring and developing the oil field amounting to US$135mil (RM450mil), and spend another US$60mil on infrastructure to speed up production.

The company pointed out that under the joint investment agreement signed in March 2012, Sumatec paid US$95mil to Markmore Energy for the rights to share the oil profit with Markmore, and another US$40mil as performance guarantee.

The performance guarantee is to be recovered by Sumatec from future royalty payments to Markmore. Sumatec expects to spend about US$60mil for capital expenditure over the next 12 to 24 months from Jan 2014, which is fully recoverable from CaspiOilGas LLP, the concession owner.

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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.