Puncak Niaga

A proposal is in the works for IWK to be taken over and managed by 1MDB with Puncak Niaga as its partner. These entities will then jointly run the loss making IWK, which is tasked with managing the public sewerage systems for most of Malaysia , excluding Kelantan, Sabah, Sarawak and JB.

Puncak’s executive chairman Tan Sri Rozali Ismail has clarified that the company is in talks with 1MDB on the possible takeover of IWK. However, it will not be taking a majority stake. It will only provide the technical expertises and the systems.

1MDB which is wholly owned by the government had confirmed that it was assessing a partial privatization of IWK in which the government would retain control.

At this juncture, it is uncertain what shape and structure the takeover of IWK will take but it is learnt that its assets and liabilities will be sold for rm1. More crucially, the water and sewerage bills will be consolidated to improve the collection of IWK charges.

Also the takeover of IWK jointly by 1MDB and Puncak Niaga may involve a commitment by the government to provide up to rm2 billion over the next few years to upgrade and build new sewerage facilities.

IWK’s problem has always been the collection of sewerage bills and this is often cited as one of the reasons the company has been loss making.

It forms part of the government’s attempt to clean up IWK, which will then be followed by a crackdown on the industries that discharge water into the river. IWK will also monitor the levels of wastewater effluence in the rivers.

Sources also says that Puncak Niaga’s 70% subsidiary SYABAS which is responsible for water supply and distribution in Selangor, the Klang Valley and Putrajaya, will eventually run the show at IWK.

The deal is set to happen very soon, with some expecting the issue to be settled before the year end 2011.

There is no question that with two water concessions already under its belt, a wastewater management concession would help strengthen its position as a water player in Selangor. More importantly, the consolidation of the water and waste management bills will finally get rid of a persistent problem for IWK.

What is the rationale behind for taking over IWK? There is value to be had in IWK in spite of its poor financial showing. Sources say the company spent around rm600 million t o rm700 million alone in 2010 on top of the rm540 million opex. These are contracts that will be divided out to subcon as it would prove difficult for IWK to handle every aspect of its business. Thus although the business is loss making, its capex and opex are enough for any operator in the water industry to give it a second look.

And if the injection of funds of up to rm2 billion into IWK to upgrade and build new facilities happens, the company would be an attraction to anybody. The returns from capex works would serve as a sweetener to any company.

CHHB

Tan Sri Lee Kim Yew is said to be moving closer privatizing CHHB a property developer. Sources say local bankers have drawn up preliminary proposals to help fund Lee’s bid to take CHHB private, bit the plans are said to be undergoing some revision.

It is learnt that local banks are prepared to finance a substantial chunk of the privatization costs but Lee would have to come up with the rest.

Lee maintains that he has no immediate plants to privatize CHHB. Lee and his family collectively control about 53.52% stake in CHHB.

In the even that Lee launches a takeover bid, he would need to make an offer fro the remaining 46.48% stake or about 128.15 million shares that Lee family does not own.

Another substantial shareholder of CHHB is Lee’s long time Taiwanese partner Chinghaw Picture Tubes Sdn Bhd, which holds a 13.93% stake and is said to be looking to exit the company.

It remains to be seen what Lee’s offer price for the remaining shares will be if he decides to privatize the company. CHHB’s net assets per share stood at rm2.57 as at Dec 31, 2010. Lee is unlikely to fork out that amount or more considering CHHB’s share price has not traded at those levels in the last 10 years.

CHHB’s net asset per share or book value understates the actual value or the group’s assets, such as its landbank, as they were acquired many years ago. Most of its landbank and properties have not been revalued since the early 1990s.

It is no secret that Lee has been toying with the idea of taking CHHB private for a while now. Could some of Lee’s personal landbank be injected into CHHB or could the group enter into a JV with its founder? In July 2011, Tan Sri Lee said he was scouting for a strategic partner to grow CHHB.

BJland

A day after BJland redeemed some rm700 million worth of bonds – representing a chunk of its debt – on Aug 15, 2011, the company announced the acquisition of 57.3 acres of land from the Penang Turf Club for rm460 million cash. The tract is for a planned property project worth rm1.52 billion in GDV.

This is BJLand’s first major land acquisition over the past few years and given the huge cash outlay. However, the purchase may not be a signal that BJland, now with a lighter debt burden, is ready to ramp up its property developments. Sources say BJLand is unlikely to aggressively undertake major launches.

BJland has several projects in Vietnam and South Korea … its 600ha in Vietnam . Still the value of the bulk of these projects is only on paper, with the group taking its time to develop them.

In Malaysia , some of BJLand’s bigger planned projects include the rm1.6 billion Ritz Carlton in Jln Ampang and the redevelopment of the Selangor Turf Club land in Sungai Besi.

The controversial STC project, the GDV of which was stated as rm6 billion, is still pending approvals as it involves relocating the race course elsewhere in Selangor. As of Ritz Carlton project, which has not progressed much since it was announced in early 2009, the source says BJLand is looking to presell a portion on the offices to investors and hold back the launch the residential units.

To recap, the full redemption by BJLand of rm696 million of outstanding 8% bonds on Aug 15, 2011 has taken a load off the group’s balance sheet. The bonds were stated in BJLand’s balance sheet as at April 30, 2011 with an outstanding value of rm711 million along with short term borrowings of rm584 million and long term borrowings of rm700 million.

With the bonds gone, what remains on BJLand’s balance sheet now are total short and long term borrowings of rm1.26 billion, Medium term notes of rm550 million were also stated in BJland’s balance sheet but these were held by its subsidiary BJToto.

With reduced borrowings, things should be much easier for BJLand, which received rm189 million in dividends from BJToto in FY2010 ended April 30. BJLand owned 42.33% stake of BJToto as at July 2011 after transferring some BJtoto shares to certain bondholders as settlement.

With strong annual dividends from BJtoto and its own operating cash flow from hotel operations and property development, the group can handle its reduced gearing of rm1.26 billion.

It is not clear by how much BJLand is prepared to gear up its balance sheet for the acquisition of the Penang Turf Club land, although the duration of the project is said to be only five years. BJLand had said that the acquisition will be funded through internally generated funds and/or borrowings.

The payment for the Penang Turf Club land will be made on a staggered basis over three years. There will be an initial deposits of rm46 million followed by the first payment of rm138 million some 12 months from the conditional date of the SPA.

The acquisition of Penang Turf Club land is still subject to BJLand obtaining planning permission for the development from the relevant authorities and the approval of the members of the turf club.

Lion Corp

After turning down the Lion Group’s request for safeguards, the government is now considering proposals to provide alternative assistance to the group’s steel manufacturing unit, Megasteel Sdn Bhd, as a bolster against competition from imported hot- rolled coils (HRC).

The minister explained that the government was unable to grant Megasteel’s request for an additional 35% import tariff on HRCs as it would have big implications on upstream and downstream activities as well as steel-consuming industries like construction.

Lion group boss Tan Sri William Cheng is considering moving his steel manufacturing operations to Indonesia , which imposes a 48% duty on HRC imports to safeguard its local industry. Cheng reiterated his dissatisfaction over what he maintains is unfair competition from imported HRCs from the region that jeopardised Megasteel Sdn Bhd’s steel operations.

He is agreeable to a ceiling price for locally manufactured HRC if the government is concerned that the Lion group is “making too much profit” or behaving like a monopoly.

The tycoon’s remark about moving his steel manufacturing business out of Malaysia was met with scepticism by industry observers, who point out that the move would be a mammoth and expensive endeavour to undertake.

Currently, Cheng is undertaking a RM3.2 billion blast furnace project that will be able to produce about 2.07 million tonnes of liquid hot metal a year, of which 1.57 million tonnes can be converted to slab for sale on the open market.

Megasteel, a unit of the Lion group’s flagship Lion Corp Bhd, is the country’s sole manufacturer of flat steel products producing hot rolled and cold rolled coils.

Lion Corp owns 79% equity interest in Megasteel and another Lion group listed entity, Lion Diversified Bhd, holds the remaining 21% stake.

Former international trade and industry minister Tan Sri Rafidah Aziz is the chairman of Megasteel.

To recap, in May Megasteel filed a safeguard petition to seek an additional 35% import duty on HRC which would bring the total duty payable on HRC up to 60%. Megasteel claimed that rising HRC imports in recent years had harmed the local steel industry and it pointed out that imports of HRC had been growing at faster pace.

Megasteel posted a net profit of RM98 million on revenue of RM3.53 billion for FY10 ended June 30. Its balance sheet shows a deficit of RM146.5 million on its reserves which could be due to accumulated losses.

In late August 2011 however, the ministry of international trade and industry announced it had terminated its investigation on imports of HRC, thus bringing an end to Megasteel’s petition.

Megasteel’s request for safeguards proved to be controversial and divided the steel industry. Foreign HRC exporters and local downstream steel players, including several with Japanese investors, were against the petition. Market observers opined that any move to impose additional import duty on HRCs could cast a shadow on the wellbeing and competitiveness of the entire iron and steel industry.

Some observers pointed out that granting the safeguards to Megasteel would effectively afford “protection” to foreign parties via their equity interest in the Lion group’s assets.

The Lion group confirmed reports that it is in preliminary talks for a prospective strategic partnership, but no concrete decision has been made. The Lion group’s steel assets, including Megasteel and Amsteel Mills Sdn Bhd, have attracted the interest of foreign suitors. Some of the names that have cropped up include Taiwan ’s largest steel producer China Steel Corp and China ’s second largest steelmaker Baosteel Group Corp.

Going Froward … There is a potential spillover effect from its subsidiary Megasteel’s financial difficulty.

Lion Corp’s subsidiary Megasteel is not in the best of shape owing to internal weaknesses, weak demand in the flat steel market and high raw material costs. It also has a highly-geared balance sheet.

The prospects of a foreign partner coming into Lion Group are diminishing given that corporations are likely to turn more cautious on acquisitions due to the uncertainty in the global economy. Hence, industry observers are now more neutral about the potential entry of a foreign partner.

There is an increased risk that Lion Corp may be unable to meet the interest and principal payment obligations due to weak operating environment. In the absence of a foreign partner, Lion Corp might need to restructure its debt payment again. LionCorp holds a 25%-stake in Lion Industries. Thus, any restructuring plan by Lion Corp could potentially involve the sale of this equity stake.

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Coastal Contracts.. 2011

It is considering selling its major stake to a strategic partner as it plans to diversify into the fabrication business.

Its executive chairman Ng Chin Heng says the company is in talks with parties on a possible M&A exercise as it hopes to secure fabrication jobs from Petronas Caragali. The sale of the a major stake to a strategic partner is possible in the future.

In Jan 2010, its wholly owned subsidiary signed a MOU with Ramunia to explore the possibility of jointly bidding for fabrication jobs and are finalizing the details of the arrangement and discuss a possible tie up.

LTH is a substantial shareholder in both Coastal and Ramunia.

Coastal Contracts’ derived 95% of its revenue from its shipbuilding activities, but expect the fabrication business to contribute to turnover in 2HFY2011 when its yard is ready.

With Sabah set to become Malaysia ’s oil and gas hub, they are looking to enter a new phase of growth. Thus, it is diversifying into the offshore structure fabrication business and a strategic shareholder will come in handy.

While it is most likely Coastal Contracts’ talks with Ramunia will be fruitful since they have a common shareholder, there are other possible suitors in the industry which Coastal Contracts can pair with such as Alam Maritim Resources and Singapore listed Swiber Offshore.

It is currently in a net cash position with rm150 million cash and borrowings of rm51.5 million.

Its shipping business is also growing strongly with an order book of rm760 million.

MyEG 2011

Its Prospects … dated March 2011

MyEG Services is Malaysia ’s dominant e-services player, providing a wide range of government-to-citizen (G2C) services.

The company, which started with a concession to provide drivers’ licence theory tests for the Road Transport Department (JPJ), has expanded its portfolio to offer additional services from JPJ and other government agencies. It now offers 19 services from seven service suppliers. Apart from an online presence, MyEG also has a network of 65 e-service centres nationwide.

The company’s earnings are poised to grow rapidly in the next few years, driven by (1) continued growth in the road tax renewal service, (2) increasing network, coverage and market share, with its expanding number of e-service centres, and (3) new products and services, the most important being the immigration and customs service tax monitoring initiatives.


MyEG is now embarking on a new phase of growth as it expands its services to include those from the Immigration Department (for maid and foreign workers’ annual permit renewal), and most significantly, a customs tax-monitoring service with the Royal Malaysian Customs.

Under the customs tax monitoring scheme, MyEG has a 40% stake in a special purpose vehicle (SPV) that will link up point-of-sales (POS) terminals of businesses that are subject to customs’ service taxes, such as restaurants and entertainment outlets.

The SPV will spend RM100 million on capex, but will receive a 20% share of the taxes that were previously found to be under-declared, with the lion’s share of 80% going to the government.

This will give MyEG a potentially large wildcard from FY June 2013 onwards. However, it is too preliminary to assess at this juncture, as much depends on how much tax was under-declared in the first place. The service will also be compatible with a GST regime that is likely to be implemented at a later stage, giving the company a potentially wider earnings base.

Another key earnings driver will be the immigration services, where MyEG will offer online foreign worker permit renewals, potentially tapping a two million people market.

In the near term, the company’s earnings will continue to be driven by the road tax renewal services which are growing rapidly. The service currently attracts over 5,000 road tax renewals a day, with an estimated 30% market share. The drivers’ licence theory tests and e-insolvency searches, meanwhile, will provide steady income.

Its earnings ability to surprise on the upside from FY12 onwards will be due to the customs tax monitoring, immigration and other services in the pipeline.

The underlying market for MyEG’s services is very large, with relatively resilient and recurring demand. Demand is also being supported by the growing popularity of online services and transactions for convenience and cost reasons.

Road tax renewal and JPJ service: Launched in April 2008, the road tax renewal service has been the main driver of MyEG’s growth over the last two to three years, with the original drivers’ licence theory tests and insolvency search services providing stable income.

The service is likely to continue seeing strong growth in the near term, as it is still rapidly gaining market share and acceptance after a heavy advertising and brand-building exercise.

MyEG has two main business models for the road tax renewal service — an online and a kiosk-based one, both of which have been very well-received.

The market for road tax renewal services is supported by a large number of vehicles and drivers, with road taxes that need to be renewed annually, annual insurance premiums and drivers’ licences renewal due every five years. Other JPJ services in the pipeline include e-application of vehicle registration numbers and online vehicle ownership transfer.

Immigration services: MyEG soft-launched its new e-immigration service in April 2010. This involves the online renewal of foreign workers’ permits. At present, the service caters for domestic maids, but will be extended to cover other foreign workers at a later stage.

Once the service is fully in place, employers of foreign workers — such as factories, businesses and households (for domestic maids) can apply for the renewal of their foreign workers’ permits online, hassle-free and at minimal costs. Most renewals are currently undertaken by agencies, who charge high fees of around RM200 per renewal, especially for domestic maids.

MyEG is offering a cost-effective solution, charging RM50 per transaction, excluding the government levies. We understand the specially printed permits will be personally delivered to the customers’ homes or offices by MyEG’s personnel team, who will affix it to the workers’ passports for security reasons.

With an estimated two million foreign workers in Malaysia , of whom about 250,000 are domestic maids, the potential for this service is large — and recurring. For the domestic maid permit renewal service, we understand MyEG currently has about 70-80 cases a day. Once the service is expanded to cover other workers, we expect volume to increase significantly.

Customs tax monitoring: The Customs tax monitoring service, in conjunction with the Royal Malaysian Customs, will be the most significant of the new services proposed.

This involves linking up POS terminals of businesses that are subject to customs’ sales and service tax (such as restaurants and entertainment outlets) to minimise under-declaration of taxes and administrative paper work.

The service will be undertaken via a SPV, where MyEG will hold a 40% share and several other private parties the balance.

The SPV will undertake the programme and install a software at each POS terminal for the link-up — at the SPV’s cost. We understand the cost is as much as RM5,000 per full system terminal, for those without compatible POS terminals. In return, the SPV will receive a share of the additional service and sales taxes collected.

Earnings visibility for the new service is uncertain at this juncture, as it depends on how much sales and service taxes were “under-declared” in the past, which cannot be ascertained. According to management, the sharing ratios between the government and the SPV are 80% and 20%, respectively, of the under-declared taxes, with a base growth imputed.

The potential market is large.

Equally though, it is a high risk-high return investment on the part of the SPV, given the sizable capex needs. Total capex is estimated at RM100 million for the first phase, of which RM20 million has been spent. Substantially more may be needed for the later stages and when GST is eventually implemented.

The SPV plans to start with a pilot test phase in May 2011, which will continue until the end of the year, with a full rollout of the service in Jan 2012. The pilot phase will involve some 2,500 premises under licence categories C and D, while the actual rollout will capture about 15,000 outlets under these two categories.

Its infrastructure is compatible with a goods and services tax (GST) system as it is essentially a POS system to capture the value of sales. With the likely implementation of GST at a later stage, the scope of the SPV’s business should expand as most businesses will be captured under the GST system, unlike the current service tax regime, which focuses on selected businesses.

Another Namewee video~ UNDILAH

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Shares BuyBack by directors

Tan Sri Jeffrey (Sunway’s chairman) has been actively buying shares in the company on the open market in Sept 2011 increasing its stake to 47.92% as at Sept 7, 2011.

CSC Steel’s major shareholder Gan has been actively buying increasing its stake to 7.75% stake as at 07 Sept 2011. 

Maxwell’s chairman raised its stake to 57.2% stake as at 8 Sept 2011. 

SingPost had also raised its stake in E-Solutions to 20.82% stake as 02 Sept 2011. 

UOA Dev’s major shareholder UOA Holdings had also raised its stake to 67.01% as at 06 Sept 2011. 

Kim Hin Industry largest shareholder Kim Hin Sdn Bhd raised its stake to56.53% as at Sept 2011. 

Director of KumLun acquired 300000 shares on the open market to 40.99% stake as at Sept 2011.

Insider buying also been seen in Lii Hen, Hap Seng and Rexit.

RCE Capital news @ 09/09/11

RCE Capital: It is focusing on strengthening its loan book after Kowaja ceased disbursing new personal loans sourced from RCE Capital to its members between Dec 2010 and June 2011. RCE provides loans to Kowaja which in turn utilizes the funds to provide personal loans to its members primarily civil servants, through an on lending arrangement. The loans are repaid to RCE via a salary deductions from the individual borrowers. Kowaja is the largest borrower of RCE.

After six month freeze, the disbursements resumed in July 2011, after Kowaja received approval from CCM to borrow from RCE but with a limit of rm200 million. The freeze did have some impact on RCE’s loan book as reflected in its loans and receivables, during that six month freeze’s period. Going forward, RCE is more concern about the new players. Any M&As will be an opportunities.

XingQuan's quarter report 30/6/2011

What is Selling Short?

In "selling short" a stock, you make a bet that its share price will go down, not up. Shorting is a three-step process:

First, you borrow shares from someone who owns them; then you immediately sell the borrowed shares; finally, you replace them with shares you buy later. If the stock drops, you will be able to buy tour replacement shares at a lower price.

The difference between the price at which you sold your borrowed shares and the price you paid for the replacement shares is your gross profit (reduced by dividend or interest charges, along with brokerage costs).

However, if the stock goes up in price instead of down, your potential loss is unlimited-making short sales unacceptably speculative for most individual investors.

*Above sentences are copied from "The Intelligent Investor" .

Do you guys know whether bursa allow us to selling short? I saw there are some stocks are allowed to do and Airasia is one of them..

Top Stocks Pick For 2011 as at Sept 2011…

Construction: IJM Corp, Gamuda, WCT, Sunway, Mudajaya, KimLun

Gaming: Genting Bhd, Genting Mal, BJtoto, Genting Singapore, Genting HK, MPHB

Industrial: Lion Ind/Lion Corp, Perwaja/Kinsteel, Ann Joo, Uchi Tech, Tong Herr, Opcom

Plantation : TH Plantations, Sime Darby, PPB, Kulim, Genting Plantations, IOICorp, IJM Plantations

Logistics: Maybulk, Century Logistics, MISC, Armada

Services: POS, JobSreet, MAS, Parkson, MAHB, Airasia, AEON, AEON Credit, Freight Management, Padini, Faber

Oil & Gas: Kencana, Dialog, SapCrest, Perisai, PetGas, PChem, MHB, PetDag

Technology: Unisem, MPI 

F&B: KFC, F&N, CI Holdings, Guinness, Mamee, AJI, Nestle, Carlsberg, QL, BAT, JTI, MSM, PPB

Banking/Finance: Maybank, AFG, HL Bank, Bursa, RHB Capital, BIMB, CIMB, PBB

Healthcare: KPJ, TDM

Telcos: Axiata, MAXIS, TM

Property Developer: Glomac Bhd, SP Setia, IJM Land , Mah Sing, Gamuda Land, KLCCP, IGB, UEM Land, E&O, YTL Land, KSL, Benalec, L&G, Dutaland, MRCB

Autos: Tan Chong, APM, MBM, Proton, Hiro

Education: HELP, SEGI, SapRes

Conglomerate/Diversified: Sime Darby, BStead, KFima/Fima Corp (Food & Plantation), MSM

Media: Media Prima, MCIL, Catcha

Utilities: Tenaga, Sarawak Energy, CyPark, YTL Power

Sarawak-Based Companies: HSL, SCB, PMetal, SEB, Bintulu Port , Naim

Are your stock in the list above? :p