MaSteel/KUB

Masteel is aiming for its 60% subsidiary MCN to start the Johor Baru Central-Woodlands shuttle train service by end 2013. That is provider MCN obtains all the necessary approvals from the Malaysian government by 1HFY2012.

Nonetheless, it is not known at this juncture if MCN’s shuttle trains service to Woodlands, which involve putting two new diesel trains into service, will be a permanent fixture. The services will be terminated or sustained as an alternative to the RTS. This will depend on future arrangements with the Singapore parties.

By 2018, Malaysia will surrender the Woodlands station and the last station under KTMB will be JB Central. Hence if MCN were to continue with its service to Singapore them it will probably have to negotiate with the Singapore authorities as the Woodlands station and probably even the rail tracks would fall under its jurisdiction.

The JB Cental-Woodlands shuttle train service was set to become operational by end 2012. It is actually part of the more extensive Johor commuter train services that MCN had originally planned to start by end 2013 or early 2014, a year after it commences the shuttle train service to Woodlands.

Besides Masteel, MCN’s other substantial shareholder is KUB which holds the remaining 40% stake. MOF owns 22.55% stake in KUB and Gaya Edisi Sdn Bhd owns 26.62% stake which is linked to UMNO.

OpenSys

It could be seeing some corporate changes. Industry sources said businessman Yeoh Eng Kong, together with some parties, might have been accumulating Opensys shares from the open market.

Why Yeoh would want to take control of Opensys, which makes software for the financial industry, remains unclear at the moment but he is likely to start negotiations with the owners of the company once he accumulates enough shares.

While industry observers are not ruling out a hostile takeover of Opensys by Yeoh, they said he might sell off the shares if talks with the owners fell through.

Yeoh, who is said to be an ex-lawyer, last made news when he emerged as a substantial shareholder in Dis Technology Holdings Bhd (DisTech). He was previously a substantial shareholder in the now-delisted spirulina production company Liqua Health Corp Bhd. He was also a shareholder in technology firm Viztel Solutions Bhd, which has since had its listing status taken over by Systech Bhd.

The single-largest shareholder in Opensys now is chief executive officer Tan Kee Chung, who owns a 15.91% stake. Khazanah Nasional Bhd had disposed of 21.5 million shares, or 10% of Opensys’ paid-up capital, on Dec 12 2012 at 11.5 sen apiece.

In its most recent quarter, Opensys posted a net profit of RM620,000, which was 64% higher than the RM379,000 made in the same quarter a year earlier. Revenue for the period totalled RM6.5mil against RM6.7mil a year ago.

Opensys pioneered the design and development of a class of non-cash dispensing self-service kiosks called Efficient Service Machines (ESM) that accept deposits and payments using cash, cheques, credit and debit cards. ESMs allowed banks, insurance and utility companies as well as government agencies to improve customer service, extend market reach and reduce operational cost.

TGOFFs

Sources say potential suitors have been eyeing oil and gas support service provider TGOFFs as a prospective merger and acquisition target.

A couple of suitors have done prospective M&A scenarios involving TGOFFs but things are still preliminary.

Its net assets per share stood at rm1.27 as at Dec 31, 2011.

With TGOFFs ceasing operations at subsidiary Citech Energy Recovery Systems UK Ltd at a cost of 6.2 million pound, its net assets is expected to be lower.

On news that TFOFFs has become a potential M&A target picked up after Ekuinas emerged as a substantial shareholder in mid 2010. It has increased its stake in TGOFFs to 23.9% stake as at Feb 2012. Its largest shareholder is Khalid Omar who has a 33.6% stake.

But Ekuinas says no party has formally approached it to express interest in TGOFFs. However, Ekuinas did say that its investment horizon is between three and five years during which it aims to create value for the investee company and all stakeholders. Like all other private equity firms, Ekuinas will eventually exit from its investments.

Market observers said that with cleaner operations after shutdown of unprofitable units Citech and probably Tanjung CSI Sdn Bhd. Tanjung Offshore would be a better platform for Ekuinas to consolidate the O&G service providers in Malaysia .

But cutting off these unprofitable units it will stop the company from bleeding further. And with the clean up, it will make Tanjung Offshore a better prospect for any takeover and merger exervise.

Without both loss making businesses, TGOFFs’ business model would be like that of a vessel operator.

But for it now (Feb 2012), it will be a bumpy ride over the near term for Tanjung Offshore.

The bulk of the 6.02 million pound will be cash costs, which will deplete Tanjung Offshore’s cash level and raise net gearing to 1.47 times. As at Sept 30, 2011 the company’s cash holdings stood at rm47 million.

While positive about the shutdown of Citech Tanjung Offshore’s tightening cash flow is an immediate concern, restricting its ability to bid for jobs in the near term. Market observers are not ruling out a cash call to address this issue.

Kian Joo/Can-One

The former MD of KJCF and 13 others have filed an application seeking the review of the Federal Court ruling that gave the nod for Can-One Bhd to buy the 32.9% stake of KJCF. The latest development saw that See and 13 other applicants had sought to restrain Ooi Woon Chee and Ng Kim Tuck from distributing the rm241.11 million from the sale of the 146.13 million KJCF shares to Can-One. They also applied for Can-One be restrained from selling and/or disposing of the whole or any part of the 146.13 million KJCF shares purchased from Kian Joo pending the hearing and final disposal of the application.

Expect the formalization of a concession agreement for the WCE in a matter of weeks to boost IJM’s rising order book prospects, where the highway could present over rm4 billion of job opportunities to underpin the group’s rm8 billion to rm9 billion new contract target in 2012.
AirAsia's FY2011 results will be announced on 22 Feb 2012.

Mithril

The government has called a tender fort the Kinara-Damansara highway contract, with seven companies invited to bid for the job. Talk is that Pesona might be the front runner for some of the major components of the project. Little known Pesona made news when it proposed to do a back door listing via Mithril Bhd, owned by the MAA Holdings group, in the middle of 2011. Pesona is owned by two individuals – Wie Hock Beng who has an 80% stake in the company and Chak May Teng who owns the remainder. Wie, Chak and Datuk Subhi Dziyauddin are directors of Pesona. Subhi, wha was appointed Pesona director in Oct 2011, also sits on the board of listed Mtronic Global.

Mithril, a PN17 company, has been disposing of its assets to regularize its financials. The company, which supplies building materials, had in July 2011 announced the acquisition of Pesona for RM96 million as part of its restructuring, which is still subject to the SC’s nod. Pesona has a few notable jobs in it stable worth rm600 million that would last it for the next three to four years. It was also the front runner for the river beautification project and development of the CIQ in Malacca. The Kinara-Damansara concession could be a boost for it as this would mean steady cash flow in the longer term.

Other bidders include Mudajaya, Bina Puri.

Puncak Niaga

It is stepping up efforts to hedge against the possible loss of its water business. The company, which owns water treatment and distribution assets in Selangor, is understood to be close to securing a solid waster management contract in Cambodia .

An announcement pertaining to the award of the solid waste management contract could be made soon, after a few minor issuers are finalized with the Cambodian authorities.

Sources also say that Puncak Niaga, together with a foreign partner, is keen on developing marginal oil fields locally.

Apart from the Cambodian foray, Puncak Niaga has also been attracting attention as an oil and gas outfit.

Sources say that it has submitted a proposal to the Malaysian government seeking support for its bid to develop marginal oil fields and even brownfields. Considering that Puncak Niaga’s controlling shareholder Tan Sri Rozali Ismail is closely linked to UMNO, it is likely to receive support.

Puncak Niaga ventured into the oil and gas sector in May 2011, when its wholly owned unit Puncak Oil and Gas Sdn Bhd acquired 40% equity interest in Global Offshore Malaysia Sdn Bhd and KGL Ltd.

Rumors also said that water consolidation exercise whish was mooted in 2008 would take off soon, leaving the company without a core business, but cash rich from divesting its two main assets – wholly owned water treatment company Puncak Niaga Sdn Bhd and water distribution outfit SYABAS, in which Puncak has 70% equity interest.

SYABAS has the mandate to distribute treated water to KL, Selangor and the federal capital of Putrajaya.

Puncak Niaga has been in a bind as the company has been at loggerheads with the state, and is thus unable to enforce a tariff hike of 37% that was to have been imposed in Jan 2009. That state government has opposed the hike, stating that Rozali and Puncak had breached key terms of the concession agreement, and is thus unable to enforce a tariff hike of 37% that was to have been imposed in Jan 2009.

The state government has opposed the hike, stating that Rozali and Puncak had breached key terms of the concession agreement and has not lived up to non revenue water targets.

Puncak Niaga has been surviving largely as a result of soft loans offered to the company by the federal government, a situation that has understandably further irked that state.

Puncak Niaga was unaware of any rumors nor did it have any corporate developments that have not been announced with regard to the restructuring of the Selangor water industry. On 08 Feb 2012 Selangor MB Tan Sri Khalid said in a statement Bursa has yet to explain satisfactorily why P Niaga was given a waiver from being listed as a PN17 company. Also he that it would continue to push ahead for the restructuring of the water industry, claiming the water concessionaires will continue to fail the country. It said that Syabas should not be retained as the water services operator in the state.

Genting SP

Industry observers expect more Asian casino operators to hike their dividend payouts even as they continue investing in their properties.

Will Genting SP soon start paying a dividend too? Observers said that Genting certainly appears to have the financial capacity to pay put dividend. Its cash flow in 2011 was well in excess of S$1 billion and its capex needs were only about S$500 million. Part of that money went towards two non gaming developments.

Under the company’s existing debt covenants, however, there are restrictions on dividend distribution unless certain criteria are met. As a result, most are expecting the company will start paying out dividends only from 2013. There is a chance that Genting SP may pay a small dividend.

The flip side of Asian gaming companies upping their the dividend payouts is that they are perhaps not funding sufficient outlets to invest their cash flow, leading some market watchers to wonder whether their high growth phase is now (Feb 2012) coming to end.

In fact, even as its net cash position starts to build up, Genting SP may well decide to put off a significant dividend payout to conserve its bullet for new investment opportunities.

For 2012, the gaming is looking towards Japan , where it hopes that the government will give the green light for the country’s first ever casinos.

Meanwhile gambling has been legalised in the offshore islands of Taiwan , and casino companies are sniffing arounf for a viable first venture on one of the islands closest to China . Genting SP is actively pitching for potential casino projects in North Asia .

Harvard Open Course Positive Psychology

Nice speech about happiness.. 

If you have time, please spend some time on it. 

It sure will give you a different view of your life~

MBSB

Sources say the EPF is considering privatising Malaysia Building Society Bhd (MBSB) as it intends to do much more with the residual properties of the non-bank lender.

The EPF is looking to unlock the values in the properties that MBSB has. The EPF owns 65.5% of MBSB, while institutional fund Permodalan Nasional Bhd is the second largest shareholder with 7.26%.

Based on MBSB's 2010 annual report, the company has 9.21 hectares (ha) in central Johor Baru and another 16.9 ha in Malacca. These pieces of land carry a book value of some RM169.2mil but analysts say they are worth much more now. Besides that, MBSB also has a few pieces of land in Sungai Buloh with a combined area of 5.73 ha and a book value of RM31.9mil.

These properties were inherited by MBSB as many of its delinquent loans of the past were backed by properties in good locations.

The Johor land is particularly valuable given its proximity to Johor's coastline where big plans are being unveiled by the state for a massive integrated waterfront development.

Any plans to develop MBSB's residual properties would tie in nicely with the EPF's plans for its unit called Kwasa Land Sdn Bhd. This 100% subsidiary of EPF is the master developer of the Rubber Research Institute Malaysia land in Sungai Buloh. MBSB's list of properties came about after the lender had ventured in a big way into financing real estate development in the 1990s.

MBSB had adopted the business model to buy and develop land by itself, with the intention to finance the purchasers of the properties. However it did not have the necessary expertise and management skills to execute its plans.

Its non-performing loans (NPLs) stood at 59% in 2002, which stood at about RM2bil, and has gradually been brought down to the current level of 8%. MBSB had also provided guidance that it would strive to reduce their net NPL ratio to between 5% and 6% in 2012, which is substantially below its current level.

It posted RM325.4mil as net profit for its full year ended Dec 31, 2011, more than doubling the RM146mil it achieved in the previous year, driven by a loan growth of 22.8%.

Personal loans made up 40% of MBSB's total loans in second quarter 2011, compared with 28% in fourth quarter 2010.

said MBSB would be able to entice the more affluent civil servants to take up loans by offering more innovative products to them moving forward.

Tebrau

Sources say Danga Bay Sdn Bhd, the master developer of the Danga Bay water front project in Johor, is to be injected into Tebrau, a property development company linked to the Johor government.

The exercise will transform Tebrau, which is majority owned by Johor state investment arm KPRJ, into the bigger owner and developer of sea fronting projects.

Tebrau will have a seamless strip of sea fronting land facing Singapore once the exercise is completed. The majority owner of DBSB, Datuk Lim will drive the development.

Under the exercise, Tebrau will acquire DBSB from its current owners, Credence Resources Sdn Bhd and KPRJ. Lim owns 70% of DBSB via Credence Resources while KPRJ owns the rest. The transaction is said to be satisfied via the issuance of new shares in Tebrau.

KPRJ was established by current Johor Mentari Besar Tans Sri Ghani to spur development in the southern state. Over time, some of the best parcels of land in the KPRJ stable were injected into Tebrau.

The injection of DBSB into Tebrau is the final effort to transform the group into a leading property developer and give it a new lease of life.

Sources say the eastern portion of the waterfront area where Danga Bay is located is owned by Tebrau. The western portion of Danga Bay belongs to DBSB. Once Tebrau purchases DBSB, the group will own the entire Danga Bay stretch.

The development will turn Danga Bay into the largest sea facing waterfront development in Malaysia .

If the deal goes through, Tebrau will become a serious contender in the development of Iskandar Malaysia , competing with the government linked company UEM Land .

Genting Plantations

Sources say that there is a potential sale of the plantations division by the Genting group. While it is cashflow producing, it isn’t exactly their core business.

But at its current price, Genting Plantations has a market capitalisation of some RM7.18bil, which makes it an expensive acquisition target by any party. It is trading at an estimated price-to-earnings ratio of 16 times for the 2012 financial year, somewhat higher than its peers United Plantations Bhd (12 times), and Sime Darby Bhd (15 times), but cheaper thanIOI Corp Bhd’s 17 times.

Another positive factor for Genting Plantations was its bustling Johor Premium Outlets (JPO).

The mall, which sells off-season luxury items at a discount, is the only Premium Outlet in South-East Asia, while 58 others are in countries such as the United States , Japan and South Korea . Its stable of brands include Armani, Burberry, Canali, Coach, Ermenegildo Zegna, Guess, Michael Kors, Ralph Lauren and Salvatore Ferragamo.

JPO is a 50:50 joint venture between Genting Plantations, a Genting Bhd subsidiary, and Premium Outlets, the retail outlet division of Simon Property Group Inc.

Under the second phase of its development, Genting plans to spend RM100mil to increase the number of stores to 130 from the present 70. The company is also expected to invest up to RM1bil to develop the area, including constructing a 2,000-room hotel and a water theme park and a meeting, incentive, conference and exhibition centre.

JCY

With an impressive quarter, investors are wondering if JCY will reward its shareholders with better dividends. However things are looking up for shareholders as JCY has announced a single tier tax exempt dividend of two sen per for 1QFY2012.

Market observers are expecting a jump in dividends in FY2012 as JCY typically pays out 50% of its profit to its shareholders.

Meanwhile rumors have been that JCY is looking to acquire other companies and the names that have cropped up include Eng Tech Bhd. Observers speculate M&As among the component makers following the consolidation of vendors of WD and hitachi GST and Seagate and Samsung. The Thai floods have also provided JCY with a good opportunity to acquire smaller players at cheaper prices.

Wong said that JCY is always looking at increasing its market share however, JCY will look at the two important factors of pricing synergy before acquiring competitor. For now (Feb 2012), JCY’s current strategy is to increase production capacity is enough to drive it forward.

Industry observers said that some component manufacturers are expecting to return to pre floods capacity by 3QFY2012, which may pull down the average selling price of HDDs.

Time Engineering

Khazanah is in the process of evaluating three potential buyers for its 45.03% stake in Time Engineering. It is learnt that the three bidders are ICT consultancy Zamcorp Bhd, IT solutions company MM Tech Corp and an entity linked to prominent Tan Sri Syed Mokhtar.

After disposing TDC in Aug 2011, it was left with three core businesses – e-commerce, IT consultancy firm and IT solution provider. Time Eng sold its 24.7% stake in TCD for rm331.9 million.

After utilizing about 80% stake of this to pay off its debts, the company was left with rm68 million, which it says it available for investments, if any, as and when such opportunities arise and also for committed capital expenditure.

Its appeal is its cash pile, which the buyer will be able to access immediately. As at Sept 30, 2011 the company had rm132 million in cash or its equivalents and rm24.4 million in receivables, deposits and pre payments – and almost no debt. Besides this, there is not much appeal to TEB as its concessions are set too expire soon.

With the imminent entry of a new major shareholder, a change in leadership seems to be taking place. TEB announced that Datuk Gan had resigned.

Xingquan

The 4Q2011 listing of two small cap casual wear stocks in HK could leave a footprint in Xingquan, which is well overdue for an upward re rating given its huge valuation discount to the two stocks. The stock could also be catalysed by a resumption of dividends. The two small cap casual wear stocks that were listed in HK in 4Q2011 are now trading at seven times to eight times of CY12 PER. This is much higher than the two times PER for Xingquan, which is also involved in casual wear in China . Xingquan is fairly similar in size to the two companies, with a CY12 net profit forecast in between AGH and COH.

Ex cash, its 2012 PER is less than one times. Most of the China show producers listed on Bursa Malaysia are trading at only two times PER.

Target Price: 1.47 (CIMB)

MAS

Industry observers say Malaysia Airlines (MAS) and Australian carrier Qantas are mulling over a joint venture to set up a premium airline based in Kuala Lumpur , a move that could give a competitive boost to both airlines.

The sources said that both parties had been working towards signing a memorandum of understanding (MoU) but the date had been pushed back indefinitely. The aim of the MoU is for both parties to explore areas of co-operation and/or joint venture before they enter into a definitive agreement.

They have been talking but there are many things that need to be addressed before they can come to the table to ink any sort of agreement. In any case, it is an MoU (that will be signed), so it’s still preliminary and exploratory.

Some industry sources alluded to the possibility that both MAS and Qantas would have equity in the joint venture, with MAS likely to have a controlling 51% stake.

Some say it could involve the long-haul operations but this is unclear, although Qantas has said it is exploring entry into the growing Asian market. If Qantas does set up an airline with MAS, it would be operating from a low-cost place and that would bode well for the airline which has suffered losses from its long-haul operations.

How this would pan out is unclear for now, but if the JV does come true, it would create a major airline that can compete with the regional peers, and it would certainly lift MAS up a few notches.

Qantas made it clear in 2011 that it was eager to enter the Asian market and wanted to set up a premium airline to be based either in Singapore or Kuala Lumpur . But those in the know claim that plan has since been abandoned by the airline due to, among others, pressure from its unions.

This is not the first time the two carriers had wanted to collaborate. They tried in 2008 when Datuk Seri Idris Jala was managing director of MAS and Geoff Dixon helmed Qantas. But things did not work out the way they had wanted, because both could not agree on the shareholding structure.

Qantas is also the MAS sponsor to the Oneworld airline alliance, of which MAS should be a full member by the third quarter 2012.

MAS is also due to launch its premium regional airline mid 2012 to capture a larger Asian market share.

MAS, in its Business Plan 2011, said: “Beyond alliance membership, we are exploring the possibility of JVs with select partners in order to serve multiple markets together, while reducing the financial risks of participating individually. We look forward to sharing details of these initiatives in the months ahead.’’

Redtone

It has been on a losing streak for the past four years, is on track for a profitable year, driven by its government projects and WIFI infra business.

It is aiming to make a profit in FY2012 and all the signs are pointing in that direction. In fact, its latest results are a strong indication that the company is turning around.

Nonetheless, it will be FY2013 that will prove fruitful for the company. This is when the company expects to see the positive impact from its collaboration with other players in 4G/LTE.

Redtone had entered into a 4G/LTE network collaboration and partnership agreement with at least two other telcos. Sources indicate that DIGI and CelCom Axiata could be the company’s potential partners, with possibly a third cellular provider waiting in the wings.

The collaboration agreement will ultimately help reduce the capex and operating expenditure in the long run. At this juncture … final details are still being worked on and will include a commercial agreement. Such agreements usually involve a minimum guaranteed payment, which means that even if the bandwidth is not used, there will still be some cash flow for the companies.

The company can then go to the bank and use the agreement to raise funds for future capex. If there is any excess, there is a possibility that it could eventually be returned to shareholders.

Aside from the 4G/LTE collaboration, Redtone has other plans that will help it to return to the black. It is shifting away from the traditional voice business to data.

The company’s current focus is offering its data services to the government and the small and medium enterprises, which often have a more complex requirement when it comes to managing their bandwidth, which requires multiple types of connectivity.

Redtone is currently bidding for rm800 million worth of government jobs. Its order book currently (Jan 2012) comprises around 10 government contracts worth about rm20 million.

Redtone’s other earnings driver going forward is its WIFI infra business, where the company helps to set up Internet Hot Spots that help to cater for the nomadic broadband segment. These hotspots are to be used by both itself and its partners.

In addition to a one off lump sum payment for building the network, Redtone will also generate recurring income from managing the sites. The company is also making inroads into China where it offers not voice services bit also a prepaid shopping card.

Its current major shareholder is deputy chairman Datuk Wira Syed Ali with 28.6% stake in Redtone.

It is also in the midst of identifying the businesses that not profitable and non core, and the mandate is to divest them.

Redtone is also looking at adopting its strategy for its IPTV service which specialises in offering content from China .

SP Setia

State investor Permodalan Nasional Bhd (PNB) roped in Liew as a joint bidder and improved on its September 2011 solo bid of RM3.90 a share for the property developer.

The joint bidders are now offering RM3.95 for each SP Setia share and 96 sen for each warrant, instead of 91 sen before.

The revised offer will be a win-win situation for both parties as PNB could leverage on Liew's expertise in the running of SP Setia while SP Setia will have the backing of a strong shareholder.

Market observers advice investors were better off holding on to the shares given that there will be management continuity for three years.

Under the new deal, Liew will keep his 8.56 per cent stake in SP Setia and remain as its group president and chief executive officer for three years, during which he will have sole responsibility for the mana-gement and general conduct of the business. No changes will be made to the board, and PNB will keep its two board seats.

The news removes uncertainty over the future of SP Setia, particularly with regard to Liew's involvement. With PNB's backing, SP Setia stands an even better chance when bidding for government land parcels.

Liew indicated that SP Setia is soon signing the Bangsar land deal, which is estimated to yield a gross development value of RM10 billion.

It should be noted that minority shareholders can opt to keep their shares to ride the company’s long term’s prospects – especially since PNB intends to keep its listing status. The fund already holds 38.6% of the company.

The question is what does PNB plan to do with its stable of property development companies following the acquisition of SP Setia? PNB gas not specified its intentions, although the market has been talking about a merger of its real estate entities.

However, Liew has said that he does not plan to inject Pelangi, I&P and Petaling Garden into SP Setia.

This is not my game anymore, dispose some shares~

Bursa trading volume recorded high volume at 4.39 billion shares transaction.

I think this is not my game anymore, so I decided to dispose some of my shares. 

Will sell others if this momentum continue~

IJM/KEuro

West Coast Expressway Sdn Bhd, a 64.2 per cent subsidiary of Kumpulan Europlus Bhd, will undertake the proposed construction of the West Coast Expressway, estimated to cost RM7.07 billion.

To enhance the viability of the project, the government would grant a Government Support Loan (GSL) of RM2.24 billion, commencing from 2013 at an interest rate of four percent per annum and an interest subsidy, of up to three per cent from commercial loans for 22 years. The terms of the GSL and the interest subsidy, would be finalised by West Coast with the Finance Ministry.

The toll revenue in excess of an agreed traffic volume would be shared on the basis of 70:30 between the government and West Coast till full settlement of the GSL and subsequently 30:70 after the settlement.

As for land acquisition, the cost of up to RM980 million would be borne by the government.

Meanwhile, construction works for the project would be implemented by West Coast through open tender. Europlus could give IJM Corp up to RM4 billion worth of job to help build the highway from Banting in Selangor to Taiping in Perak while the balance of the work will go for open tender to other contractors.

IJM's outstanding order book may rise up to RM10 billion, assuming it manages to secure half of the total project. This is also assuming that the New Pantai Expressway extension project will be awarded to IJM in the fiscal year 2013.

Excluding the West Coast Expressway project, IJM's outstanding order book stands at RM4.7 billion with the new Klang Valley Mass Rapid Transit project.

WCE is a 22.7 per cent associate of IJM.

The project, which is a build-operate-transfer (BOT) project with a concession period of 60 years, cover a distance of 316 kilometres from Banting in Selangor to Taiping in Perak. Of the total distance, 224 km will be tolled while 92 km will be toll-free.

The proposal involves a 60 year concession term.

On the face of it, the terms look positive for KEURO. But after stripping out the hype, a closer look reveals that the proposed financing structure is essentially one that would make the project comfortable to financiers.

It is structured in such a way that financiers would take some comfort in lending to the projects as the traffic flow for the highway alone (without the government support loan) will not justify its cost.

The cost of the project estimated at rm7.07 billion excludes the cost of the land acquisition at rm980 million that would be borne by the government. Assuming the project is done on 30% equity and 70% debt, the required loan amount will be about rm5 billion.

The group will utilise the rm2.24 billion government support loan with 4% interest which will incur interest payment of about rm89.6 million a year and take out a commercial loan of about rm2.76 billion with a likely interest rate of 8% to 9%.

The government has agreed to provide up to a 3% interest subsidy to West Coast for 22 years on its commercial loans, which would translate into rm82.8 million per annum. What this means is that the subsidy that West Coast will get for its commercial loan will almost equal to the interest in the government loan. Effectively, West Coast will not need to pay the government for its support loan. All the cash flow from the highway in the early years will go towards servicing the commercial loan which should be of some comfort to banks.

Assuming the commercial loan incurs an interest rate of 8%, stripping out of the 3% subsidy from the government, the interest payment on the rm2.76 billion loan will be about rm140 million pa. That amount will be easier to manage for a highway concessionaire.

Of interest is the sharing of toll revenue that is in excess of an agreed traffic volume on the expressway. The sharing basis between the government and West Coast will be 70:30 until the latter repays the loan from the government. After that, the sharing will become 30:70.

This will be to West Coast’s advantage as the 316 km expressway from Banting and Taiping – of which 224 km will be tolled – is not expected to see much traffic, especially during its early years.

What would be interesting is how KEURO, which has seen net losses in the last two years, will finance the equity portion of the project. Given its poor financial standing, it will be quite difficult for the group to take on the equity portion of rm1.5 billion to rm2 billion to fund the project. This is where IJM comes in. It has the balance sheet strength to see through the project.

The concession will pave the way for the eventual award of at least rm4 billion worth of projects to IJM. With the construction of WCE together with the MRT Package V5 contract, will help boost IJM’s outstanding order book by as much as rm6 billion.

The WCE will further complement IJM’s increasing number of concessions. With KEURO’s poor financial results, there is a good chance that the WCE will ultimately land in IJM’s stable.

The concession is significant as the WCE will be the second longest toll road in Malaysia . This would make IJM a serious toll road concessionaire.

The company currently operates three toll roads in Malaysia – Besraya Highway and New Pantai Highway , Kajan-Seremban Highway or Lekas. IJM also has three toll concession operations in India and a 21 year concession in Argentina . All its overseas toll concessions are seeing growing traffic flows and increasing revenue.

The group was awarded an extension project in April 2011 to add 10km to its New Pantai Expressway. The extension project is estimated to cost rm1 billion.

With the WCE concession finally firming up and a bankable structure behind it, this concession could provide IJM with positive recurring income.

Malaysia sub prime mortgage crisis

US sub prime mortgage crisis is due to leading money to those lower income group and having higher risk group of people. Whatever banker do, they will go for profit first. If no profit, they will not do it, because no profit.

Now Malaysia government want to borrow 1.5 billion ringgit from EPF and lend to lower income and higher risk group of people and government stated these money is to help them because banker do not want to lend them money.

That's mean our hard earn money now will borrow to lower income group of people and the risk is very high, because bank also do not want to do that. What a sad story and step taken by our government. They do not understand finance at all, just know how to use future money to protect their position.

We have given them 54 years already.. shall we give them another 5 years?

Carotech

It could see renewed investor interest following announcement of the oil palm based producer’s corporate revamp under its regularization plan which could result in a change of ownership in the company. This is by virtue of a proposed private placement of new shares to potential investors under the regularization plan. Market interest in Catotech in loss making Carotech’s prospects could hinge on the entry of new substantial shareholders or white knights who may inject fresh capital into the firm and strengthen its balance sheet.

Carotech said it expects to rope in new major shareholders under a planned private placement of 400 million new shares and 200 million new warrants in the company. That could see new shareholders holding 64% of the company’s expanded issued base. Additionally Carotech has indicated that should any investor acquire more than 33% of the company under the placement, the buyer will have to make a MGO for the remaining shares in Carotech.

However Carotech had not identified investors for the placement shares, only indicating that there may be several purchasers for the placement units. Potential suitors include investors in related fields and those with financial muscle to finance the expansion of Carotech. The key questions include who the potential investors are and whether David Ho, chairman and MD and its parent Hovid will continue to play a major role in the day to day operations of Carotech? Meanwhile upon completion of this proposed corporate exercise, Carotech’s parent Hovid’s stake in the former will also drop substantially to 6.4%.

The company also plans to undertake a regularization plan which includes a capital reduction and share consolidation besides a rights issue and a private placement of new shares in the company. The company had cash of rm2.8 million against debts of rm273 million translating into a net debt of rm270 million as at Sept 2011.

MKH

Its disposal of its non halal livestock farming business was beginning to attract institutional investors that seek syariah compliant stocks as well as government linked funds as EPF, LTH and PNB. After exiting its non halal business, it will focus on its core business in property development and oil palm plantation in Indonesia . It still has close to 242.8 ha of land bank in Kajang/Sememyih that carried at less than rm10 psf, and have mostly converted for development purposes. The group’s borrowings stood at rm315 million as at Sept 30, 2011 translated into a net gearing of 42.9% which is set to reduce with the rm64 million proceeds from the disposal. Its book value stood at rm2.77.

Tebrau

The stock jumped more than the takeover price of rm0.76 sen. Speculating ahead that the takeover price of 76 sen is unlikely to spark a high take up rate. Tebrau’s book value stood at 75 sen as at Sept 30, 2011 which many say is undervalued, given its large land bank in Iskandar Malaysia and the possibility of further corporate developments with the entry of Datuk Lim Kang Hoo and Ekovest Bhd. With the takeover by KPRI, the Johor state investment arm, will remain a major shareholder of Tebrau, Tebrau could potentially be a stock to watch for exposure to Johor.

The jewel in the company is its large land bank in Iskandar Malaysia measuring about 1022 acres and has a book value of rm592 million based on 2003 prices (rm13.30 psf) which is on the low side given the land values there have appreciated substantially over the past nine years. Assuming the price has been risen 50% to rm20 psf), Tebrau could be sitting on potential revaluation gains of rm296 million. Based on 669.73 million shares, those potential revaluation gains could be worth 44 sen on top of the company’s current book value of rm75 sen per share.

Lim’s entry into Tebrau also raises speculation that some of his privately owned assets such as Danga Bay Sdn Bhd may be injected into the company later. DBSB owns Danga Bay and is one of the largest owners and developers of sea fronting projects in Johor.

Muhibbah

Sources say Muhibbah and CIMB could end up as shareholders n APH through a debt to equity swap. Muhibbah and CIMB, which each owns over 75% of the unsecured and secured debt of APH respectively, will take charge of the Johor hub. They are targeting to complete the project within the next two to three years. This provides a conclusion to the project which has been delayed for over two years. APH still owes Muhibbah rm371 million for the project.

APH owes CIMB a reported rm840 million, which was drawn down from a rm1.4 billion three year bridging loan and the bank gave to APH in 2006. Early Jan 2012, CIMB placed APH into receivership for the second time, and appointed Pricewaterhouse Coopers to facilitate a restructuring exercise.

However it is learnt that Muhibbah and CIMB have yet to make any provisions regarding the project. This development should now ease investor concerns over the need for provisions, a risk which had been highlighted in Muhibbah’s annual report and affected sentiment for the stock. Industry observers say the progress should finally help the project take off and could provide APH the strong backing it needs.

APH’s existing two shareholders are private terminal operator KIC Oil & Gas, which owns 90% stake. With the latest developments, it is unsure what APH’s future path with new shareholders – CIMB and Muhibbah.

SP Setia

State investor Permodalan Nasional Bhd (PNB) roped in Liew as a joint bidder and improved on its September 2011 solo bid of RM3.90 a share for the property developer.

The joint bidders are now offering RM3.95 for each SP Setia share and 96 sen for each warrant, instead of 91 sen before.

The revised offer will be a win-win situation for both parties as PNB could leverage on Liew's expertise in the running of SP Setia while SP Setia will have the backing of a strong shareholder.

Market observers advice investors were better off holding on to the shares given that there will be management continuity for three years.

Under the new deal, Liew will keep his 8.56 per cent stake in SP Setia and remain as its group president and chief executive officer for three years, during which he will have sole responsibility for the mana-gement and general conduct of the business. No changes will be made to the board, and PNB will keep its two board seats.

The news removes uncertainty over the future of SP Setia, particularly with regard to Liew's involvement. With PNB's backing, SP Setia stands an even better chance when bidding for government land parcels.

Liew indicated that SP Setia is soon signing the Bangsar land deal, which is estimated to yield a gross development value of RM10 billion.