It will soon come out of its SPAC status to become a Main Market company. Come March 21 2012, if it gets shareholders' approval for its 35% qualifying acquisition in Lime Petroleum Plc for US$55mil (RM165mil), it would transform into a Main Market company with a core business. Hibiscus will become a full-fledged oil and gas exploration and production company.
Hibiscus isn't an oilfield services provider. It is in the business of oil and gas exploration and having discovered hydrocarbons, it produces them and hence its performance is closely related to oil and gas prices.
To recap, Hibiscus bought into Lime for US$55mil in October2011 through a subscription for new shares (US$50mil) and a purchase of existing shares (US$5mil). Lime has three oil and gas concessions in the Middle East Ras Al Khaimah, Sharjah both in the United Arab Emirates (UAE), and the largest one, in terms of acreage, in Oman . The concession agreements provide for production tenure of at least 20 years.
There is also the expectation of at least one more concession to be included as part of the deal without any change in purchase price. This concession is located in the UAE.
Of most significance is the access to a technology package, developed by the major shareholders of Rex,that gives Lime a unique competitive advantage when it comes to securing concessions.
Hibiscus has also secured the project manager and technical services provider role for all current and future Lime concessions. This means that the company is going to be busy for the foreseeable future.
Shareholders' approval on 21 March 2012 will allow Hibiscus to discard its SPAC status and also allow more institutions to participate in the equity of its company.
Lime is poised to secure a fourth concession without Hibiscus having to fork out another sen under the terms of the acquisition agreement. Securing the fourth concession is a condition precedent to completing the Lime deal. This condition can be waived by Hibiscus if it wished to.
Rex Oil & Gas Ltd is the major shareholder of Lime with a 56.4% stake. Lime has five years exclusive access to these proprietary technologies in the Middle East region.
Meanwhile should Hibiscus strikes oil, it will pay US$5mil to Rex Oil after the first commercial discovery as part of the deal.
Lime is the holding company of Lime Petroleum Ltd, which in turn has substantial interest in three concession companies with concession rights in the offshore oil and gas exploration assets.
Lime Petroleum will be commencing a seismic programme soon to locate the drilling locations and these activities will enhance the value of the assets. In addition, it is working to add new concessions to Hibiscus’ portfolio.
Market observers said that the investment risk in Hibiscus will rise once Hibiscus makes it first asset purchase.
Shareholders are guaranteed a minimum refund of 90% of Hibiscus’ IPO price if the SPAC fails to identify and complete any asset acquisition within three years if investors vote against the proposed acquisitions. This is one of the listing requirements for SPAC. At least 90% of IPO proceeds must be placed in trust accounts managed by an independent custodian.
However, once a qualify acquisition is approved, the refund guarantee is no longer applicable. In other words, the risk escalate at that point when Hibiscus purchases its first asset.
MUCH WILL DEPEND ON WHETHER THEY STRIKE IN THE MIDDLE EAST!
Investors who deiced to maintain their investments will face risk factors such as lack of track record in Lime Engineering and the uncertainty of the commercialization of oil resources.
E&P companies are exposed to risk during the lifecycle of developing oilfield. Results of evaluation and production are uncertain and wells may not produce sufficient crude oil and revenues to return to positive cash flow.
Hibiscus Petroleum may need to obtain more funding in 2012 and farm out contracts to support its development. There is no assurance that additional funding will be available on acceptable terms. And any farm out could dilute the control that Lime has on the concessions.
Other possible risk factors include fluctuation oil and gas prices, which can impact revenue as well as geopolitical risks in the region.
There is also concern that other substantial shareholders might sell down their stakes in Hibiscus. Note that 265 million shares were placed out to selected investors in the IPO.
Substantial shareholders that emerged after the IPO were Lionel Lee Chye Tek (9.6%), Mercury Pacific Marine Ltd (6.7%), Picadilly Middle East Ltd (5.8%) and White Ruby Worldwide Inc (5%). While these new substantial shareholders are not subject to any moratorium, they have not sold down their stakes in the company as at Feb 2012.
Initial investors before the IPO collectively hold only 5% equity interest.
Another 20% of Hibiscus is held by the management via Hibiscus Upstream. As part of the moratorium, management is only allowed to sell, transfer and assign 50% of its held securities after the completion of the QA.
To ally shareholders’ fear, management has signed a binding agreement to discourage members from exiting the company early. If any of the management team wishes to sell his or her shares within a three year period from the listing date, then those shares must be sold to the other team members at a 30% discount to market price. In addition to the 20% stake, management also holds 83.6 million warrants, which when they fully exercised, will bump its stake to 33%.
A drilling programme is being tentatively planned for 4QFY2012. If it makes a discovery, it will seek to commercialize it soon afterwards.
Hibiscus’ 35% stake in Lime Petroleum is valued at between rm1.01 and rm1.33 per share. This is based on a 50% chance of commercialization from the estimated 157.6 million barrels of oil equivalent in the concession.
In addition, Hibiscus can add more concessions in the future.
The shareholders of Lime Petroleum are also eyeing a listing on the AIM in London . This will be after the valuation of Lime has been enhanced from drilling activities and hopefully, after the commercial discovery of hydrocarbons. This will benefit both Lime and Hibiscus as proceeds raised from the potential AIM listing will be used to fund further drilling and/or development activities.
If Lime Petroleum gets listed on AIM, Hibiscus shareholders will not have to part with cash in the future.
Friday, March 30, 2012
Thursday, March 29, 2012
MISC/Ramunia/Armada ( North Malay Basin ) dated March 2012
Sources say US based Hess Corp is expected to award a contract for a floating, production, storage and offloading (FPSO) vessel for the North Malay Basin development soon and plans to start production in the basin later 2012.
The seven fields that make up the North Malay Basin have a combined gas resource potential of 1.3 trillion cu ft.
According to sources, Armada and MISC, with their respective partners are vying head to head for the FPSO contract. Neither company has been notified of any award being made so far.
It should be announced soon, latest by the end of March 2012, if Hess wants the job to start by end 2012.
It is understood that Hess is looking at a three year charter for the FPSO, which is to be between 75000 and 115000 deadweight tons.
Charter rates for an FPSO vary considerably, but are likely to be above US$200000 a day.
Armada is understood to have brought in Oslo listed EOC Ltd – in which Singapore’s Ezra Holdings Ltd has a 46% stake – as its partner in bidding for the contract. It is not known if Armada is eyeing the Hess FPSO job for its recently acquired a 107160 deadweight ton tanker for rm68 million.
MISC meanwhile, is understood to have teamed up with Ramunia Holdings Bhd. Ramunia acquired a tanker in Oct 2011 for US$82.5 million or rm249 million then.
MISC and Ramunia are understood to be looking to modify the FPSO at MHHE. MMHE is a 66.5% unit of MISC.
In Dec 2011, news reported that Armada led consortium was the front runner to bag the job, but since then there has been little news. The silence would means that MISC is back in favor with Hess but this remains to be seen.
MISC is a 62.7% unit of Petronas. Block PM 301, which contains six fields is operated by Carigali Hess Mutiara, a JV between Hess and Petronas. It is not clear who Hess is partnering for this field, but Petronas is likely to have a presence.
Bagging this contract could be a boon for MISC.
The seven fields that make up the North Malay Basin have a combined gas resource potential of 1.3 trillion cu ft.
According to sources, Armada and MISC, with their respective partners are vying head to head for the FPSO contract. Neither company has been notified of any award being made so far.
It should be announced soon, latest by the end of March 2012, if Hess wants the job to start by end 2012.
It is understood that Hess is looking at a three year charter for the FPSO, which is to be between 75000 and 115000 deadweight tons.
Charter rates for an FPSO vary considerably, but are likely to be above US$200000 a day.
Armada is understood to have brought in Oslo listed EOC Ltd – in which Singapore’s Ezra Holdings Ltd has a 46% stake – as its partner in bidding for the contract. It is not known if Armada is eyeing the Hess FPSO job for its recently acquired a 107160 deadweight ton tanker for rm68 million.
MISC meanwhile, is understood to have teamed up with Ramunia Holdings Bhd. Ramunia acquired a tanker in Oct 2011 for US$82.5 million or rm249 million then.
MISC and Ramunia are understood to be looking to modify the FPSO at MHHE. MMHE is a 66.5% unit of MISC.
In Dec 2011, news reported that Armada led consortium was the front runner to bag the job, but since then there has been little news. The silence would means that MISC is back in favor with Hess but this remains to be seen.
MISC is a 62.7% unit of Petronas. Block PM 301, which contains six fields is operated by Carigali Hess Mutiara, a JV between Hess and Petronas. It is not clear who Hess is partnering for this field, but Petronas is likely to have a presence.
Bagging this contract could be a boon for MISC.
Wednesday, March 28, 2012
KrisAssets/IGB
Sources say the anticipated REIT offering by IGB Corp could fetch valuations of between rm4.3 billion and rm4.6 billion for the two prime retail malls currently held under IGB’s subsidiary KrisAssets Holdings Bhd. The IPO for the retail REIT is expected to come in the 2HFY2012. The retail REIT is expected to start with two key assets, Mid Valley Megamall and The Garden Mall, both in the Mid Valley City area developed by IGB.
KrisAssets completed its acquisition of The Gardens Mall from IGB Corp in July 2011 for a cash consideration of rm223 million apart from taking over the holding company’s liabilities. Prior to that, KrisAssets only had Mid Valley Megamall in its portfolio.
Following of a recent valuation of the two retail malls, both now have a combined revised market value of about rm3.29 billion (rm2.36 billion for Mid Valley and rm930 million for The Gardens). KrisAssets said the valuations for both malls had been revised upwards following a revaluation exercise undertaken at end Dec 2011. Nevertheless, the valuations for both assets could be further revised upwards during the IPO exercise given that such valuations would place an emphasis of the assets’ earnings potential.
Based on calculation of KrisAssets’ malls shows that the rm2.36 billion revised market value for both malls translates into roughly rm944 psf, which is grossly undervalued compared with Pavilion REIT. Nevertheless, if the REIT exercise prices the two malls at up to rm4.6 billion, the valuation would be around rm1840 psf – still lower than Pavilion REIT’s pricing.
The potential REIT exercise, if it materialized would provide it a big boost to KrisAssets which is 75.66% owned by IGB Corp.
After IGB’s REIT plans come to fruition, question marks remain over KrisAssets’ fate!!! What is certain is that injecting KrisAssets’ malls into the REIT would free up capital for KrisAssets and IGB to undertake their other plans.
KrisAssets completed its acquisition of The Gardens Mall from IGB Corp in July 2011 for a cash consideration of rm223 million apart from taking over the holding company’s liabilities. Prior to that, KrisAssets only had Mid Valley Megamall in its portfolio.
Following of a recent valuation of the two retail malls, both now have a combined revised market value of about rm3.29 billion (rm2.36 billion for Mid Valley and rm930 million for The Gardens). KrisAssets said the valuations for both malls had been revised upwards following a revaluation exercise undertaken at end Dec 2011. Nevertheless, the valuations for both assets could be further revised upwards during the IPO exercise given that such valuations would place an emphasis of the assets’ earnings potential.
Based on calculation of KrisAssets’ malls shows that the rm2.36 billion revised market value for both malls translates into roughly rm944 psf, which is grossly undervalued compared with Pavilion REIT. Nevertheless, if the REIT exercise prices the two malls at up to rm4.6 billion, the valuation would be around rm1840 psf – still lower than Pavilion REIT’s pricing.
The potential REIT exercise, if it materialized would provide it a big boost to KrisAssets which is 75.66% owned by IGB Corp.
After IGB’s REIT plans come to fruition, question marks remain over KrisAssets’ fate!!! What is certain is that injecting KrisAssets’ malls into the REIT would free up capital for KrisAssets and IGB to undertake their other plans.
Tuesday, March 27, 2012
TSM Global dated March 2012
It is Malaysia ’s biggest wire harness manufacturer for the auto industry in terms of market share, is up for sale and its board of directors has invited the public to put in competitive bids.
WRC has rejected TSM Global Bhd’s request for better offer terms including the price and this has seen the latter resolving to consider other offers. WRC’s offer price would remain at rm1.25 per share. WRC had agreed to extend the acceptance deadline for the offer. Its MD Datuk Lim holds 60% equity interest in West River while his son Tze Thean holds the rest.
The deadline for acceptance of the offer, which Lim had made on Feb 28, 2012 was extended to April 6, 2012.
West River collectively held a 28.07% stake in TSM Global when it made the takeover offer. Buying out the remaining shares it does not own will cost West River about rm115 million cash.
However, TSM Global’s cash and cash equivalents stood at about rm132 million while bank borrowings amounted to rm19 million as at Oct 31, 2011. In fact, the company is in a net cash position of about rm113.5 million or 89 sen per share.
Given TSM Global’s cash balance, West River will fork out no more than rm20 million for the general offer to take over the company.
TSM Global gas said the board will consider any credible offers for the business undertaking, including all assets and liabilities of the company received by April 2, 2012.
Taking out the company’s cash of about rm100 million, the acquirer is paying a very low price for a profitable business that has growth opportunities and recurring income of over rm30 million a year.
The company had slipped into loss for the nine months ended Oct 31, 2011 because of losses resulting from the liquidation of 85.47% stake owned HDD mfg.
The reported loss does not reflect the fundamental value of TSM Global.
In Fy2011 ended Jan 31, TSM Globa;s net profit jumped when it enjoyed the full impact of its supply contract with Proton.
It is a dominant player in the local wire harness market with more than a 50% market share. Most of the local automakers are its customers.
WRC has rejected TSM Global Bhd’s request for better offer terms including the price and this has seen the latter resolving to consider other offers. WRC’s offer price would remain at rm1.25 per share. WRC had agreed to extend the acceptance deadline for the offer. Its MD Datuk Lim holds 60% equity interest in West River while his son Tze Thean holds the rest.
The deadline for acceptance of the offer, which Lim had made on Feb 28, 2012 was extended to April 6, 2012.
West River collectively held a 28.07% stake in TSM Global when it made the takeover offer. Buying out the remaining shares it does not own will cost West River about rm115 million cash.
However, TSM Global’s cash and cash equivalents stood at about rm132 million while bank borrowings amounted to rm19 million as at Oct 31, 2011. In fact, the company is in a net cash position of about rm113.5 million or 89 sen per share.
Given TSM Global’s cash balance, West River will fork out no more than rm20 million for the general offer to take over the company.
TSM Global gas said the board will consider any credible offers for the business undertaking, including all assets and liabilities of the company received by April 2, 2012.
Taking out the company’s cash of about rm100 million, the acquirer is paying a very low price for a profitable business that has growth opportunities and recurring income of over rm30 million a year.
The company had slipped into loss for the nine months ended Oct 31, 2011 because of losses resulting from the liquidation of 85.47% stake owned HDD mfg.
The reported loss does not reflect the fundamental value of TSM Global.
In Fy2011 ended Jan 31, TSM Globa;s net profit jumped when it enjoyed the full impact of its supply contract with Proton.
It is a dominant player in the local wire harness market with more than a 50% market share. Most of the local automakers are its customers.
Monday, March 26, 2012
MMC Corp, March 2012
It is a strong proxy to ride the IDR inflection point in 2012 with 67% of sum of parts
from Johor. It is in the process of disposing of 202ha of its 1100ha of land in Senai to a developer.
As for the 913ha of Tanjong Bin land, MMC will likely exercise the option to take 20% in Vitol Terminal giving it a steady stream of income in the future.
It is also in talks with other petrochemical companies.
Gas Malaysia will be the first subsidiary to be listed with indicative price of rm2.8 billion.
Its other cash cow, Malakoff could be listed in 2013/2014.
Tanjong Bin has secured rm6.5 billion financing for the additonal 1000MW. It will also be partnering Petronas Power Sdn Bhd and Mitsubishi to bid for new Prai plant.
Its port business continues to flourish … PTP.
The full impact of Johor Port Bhd’s tariff increase will also be felt in FY2012E.
The stock is also an alternative proxy to the MRT.
from Johor. It is in the process of disposing of 202ha of its 1100ha of land in Senai to a developer.
As for the 913ha of Tanjong Bin land, MMC will likely exercise the option to take 20% in Vitol Terminal giving it a steady stream of income in the future.
It is also in talks with other petrochemical companies.
Gas Malaysia will be the first subsidiary to be listed with indicative price of rm2.8 billion.
Its other cash cow, Malakoff could be listed in 2013/2014.
Tanjong Bin has secured rm6.5 billion financing for the additonal 1000MW. It will also be partnering Petronas Power Sdn Bhd and Mitsubishi to bid for new Prai plant.
Its port business continues to flourish … PTP.
The full impact of Johor Port Bhd’s tariff increase will also be felt in FY2012E.
The stock is also an alternative proxy to the MRT.
Saturday, March 24, 2012
Genting Malaysia
The race for a casino license in NY is heating up for Genting group after the lawmakers agreed to amend the state constitution to allow up to seven casino operators in the US state. Genting aside, other well financed groups vying for a license include the big boys Las Vegas operators and Indian tribal groups, all of whom have hired their own army of lobbyists to boost their chances.
Expectations are that the seven full casino licenses would go to the highest bidders. New Yorkers seem to be equally opposed and supportive based on some recent polls. Competition for a license will be intense with global giants like Las Vegas Sands and Wynn Resorts also interested. Genting Mal may have am upper hand, though with Resorts World NY ’s success.
Details on the seven casinos for NY, including the locations, will reportedly be determined in 2013. But NY can only legalise casinos if two successive legislatures enact bills and voters to legalise casino gambling outside Indian tribal land. NY State has five Indian casinos at present, Genting, which operates RWNY next to Aqueduct Racetrack in Queens , is among the operators licensed to offer video lottery terminals at nine racetracks in the state. But Genting is currently the only one licensed to do so in NY City.
Potential approval of table games (full fledged casino gambling) in NY may see Phase 2 or RWNY (the US$4 billion integrated complex) take off earlier. A binding MOU on the project is to be entered into with the NY State by Nov 30, 2012.
Over Florida, Genting Malaysia’s proposed US$3.8 billion RWM is still without a casino license with the vote on the destination resorts bill – that would allow up to three casino resorts – postponed to 2013.
Funding for both projects should not be a problem since Genting Malaysia is sitting on US$287 million net cash and its Malaysian operation is raking in US$400 million cash flow per annum.
Expectations are that the seven full casino licenses would go to the highest bidders. New Yorkers seem to be equally opposed and supportive based on some recent polls. Competition for a license will be intense with global giants like Las Vegas Sands and Wynn Resorts also interested. Genting Mal may have am upper hand, though with Resorts World NY ’s success.
Details on the seven casinos for NY, including the locations, will reportedly be determined in 2013. But NY can only legalise casinos if two successive legislatures enact bills and voters to legalise casino gambling outside Indian tribal land. NY State has five Indian casinos at present, Genting, which operates RWNY next to Aqueduct Racetrack in Queens , is among the operators licensed to offer video lottery terminals at nine racetracks in the state. But Genting is currently the only one licensed to do so in NY City.
Potential approval of table games (full fledged casino gambling) in NY may see Phase 2 or RWNY (the US$4 billion integrated complex) take off earlier. A binding MOU on the project is to be entered into with the NY State by Nov 30, 2012.
Over Florida, Genting Malaysia’s proposed US$3.8 billion RWM is still without a casino license with the vote on the destination resorts bill – that would allow up to three casino resorts – postponed to 2013.
Funding for both projects should not be a problem since Genting Malaysia is sitting on US$287 million net cash and its Malaysian operation is raking in US$400 million cash flow per annum.
Friday, March 23, 2012
DIGI, March 2012
There were rising competitive risks and special dividends being a tall order.
Concerns are pointed to increasingly aggressive MAXIS Bhd, which has just launched its new Hotlink plan and cut IDD rates in an effort to arrest its decline in market share.
DIGI also said special dividends will be a challenge for now (March 2012) as the rm692 million share premium reserve at the holding company cannot be utilized since the cash can only come from its operating subsidiary, DIGITEL, from which proceeds are upstreamed through retained earnings to pay dividends.
Market observers see the downside risks to DIGI’s earnings arising from the more aggressive MAXIS as it has more to lose in the segments that MAXIS is apparently targeting – migrant workers and value conscious customers. MAXIS
MAXIS had earlier said it is prepare to do anything to win back customers and restore its market share, which has been chipped away by DIGI, Celcom and to a lesser extent, U Mobile and Tune Talk. Also there are marketing Lethargy with regards to DIGI’s acquisition and retention campaigns, which is departure from the past when its was a nimble operator and typically led the market.
The company said it will monitor the competitive response before making any decision to retaliate as MAXIS’ packages and tariff adjustments were merely a normalization of its legacy packages, which were priced out of the market.
MAXIS said it can turn on LTE by 4QFY2012 should the company be awarded the 2.6Hz spectrum by the middle of 2012. However, it does not intend to be aggressive with the rollout as LTE devices are still lacking.
Its capex for FY2012 stood at rm700 million to rm750 million. Its network modernization exercise is slated for completion by end 2012.
Concerns are pointed to increasingly aggressive MAXIS Bhd, which has just launched its new Hotlink plan and cut IDD rates in an effort to arrest its decline in market share.
DIGI also said special dividends will be a challenge for now (March 2012) as the rm692 million share premium reserve at the holding company cannot be utilized since the cash can only come from its operating subsidiary, DIGITEL, from which proceeds are upstreamed through retained earnings to pay dividends.
Market observers see the downside risks to DIGI’s earnings arising from the more aggressive MAXIS as it has more to lose in the segments that MAXIS is apparently targeting – migrant workers and value conscious customers. MAXIS
MAXIS had earlier said it is prepare to do anything to win back customers and restore its market share, which has been chipped away by DIGI, Celcom and to a lesser extent, U Mobile and Tune Talk. Also there are marketing Lethargy with regards to DIGI’s acquisition and retention campaigns, which is departure from the past when its was a nimble operator and typically led the market.
The company said it will monitor the competitive response before making any decision to retaliate as MAXIS’ packages and tariff adjustments were merely a normalization of its legacy packages, which were priced out of the market.
MAXIS said it can turn on LTE by 4QFY2012 should the company be awarded the 2.6Hz spectrum by the middle of 2012. However, it does not intend to be aggressive with the rollout as LTE devices are still lacking.
Its capex for FY2012 stood at rm700 million to rm750 million. Its network modernization exercise is slated for completion by end 2012.
Thursday, March 22, 2012
Bank Of America, March 2012
The company has a large presence in the US so as the economy starts to recover itself this bargain priced bank is bound to grow with it.
The intrinsic value of the stock hasn’t gone down nearly as much as it is worth. The company has a book value per share of $20 and in early March 2012 they passed the Fed’s stress tests. The stress test demonstrated that the company has enough capital to survive another economic downturn and with this capital is earnings potential for the company.
Bank of America has been involved in some huge cost cutting operations of late as well as an effort to raise additional capital and dispose of non-core business aspects. Its focus has been to lower expenses and become a leaner operation.
Now (March 2012) in addition to cutting costs they want to make a profit and this may mean more charges which will irk customers.
BAC has also had its fill of legal battles since ‘09, some of which resulted in a decent loss of cash, but it seems to have most of this behind it, and that is reason for hope.
BAC has a few scary financials with the main one being that debt exceeds total cash by $100 billion. However this is offset somewhat by the book value of $20. Though with BAC planning to write down 200,000 mortgages currently (March 2012) facing foreclosure, this number may go down - but unless there are more drastic write downs coming soon it is likely that book value will stay above the stock price for the time being which is often a signal to think about buying in.
They have not been focused on giving out meager dividends to satisfy investors but instead have put this money back into the company to help get the debt off of their back. It is better to have a more solid financial foundation which causes it to go up by 5-10% than get a 1% dividend.
BAC has also been focusing on operations in the US which has allowed it to be protected somewhat from recent European debt related price declines.
BAC has wide exposure to a number of liabilities and if the economy takes a turn for the worse again they will be on a slippery slope. However with the economy going to keep headed up (March 2012 & Beyond) for a while and that Europe ’s situation is stabilized for the time being, BAC’s debt may not be the biggest worry.
Yet despite its reputation decrease, Bank of America still has massive assets in the United States and it seems to be making a turnaround. The US economy, at least for the time being (March 2012), seems to be on recovery track, and as the economy goes up it is likely that BAC will follow.
At US$10.00, the questions remain about whether the bank can grow earnings at a sufficient clip to sustain the rally.
Annual earnings growth of 9.78% over the next 15 years (2012 & Beyond) is already priced into the shares of Bank of America.
Bank of America has been shrinking and selling off assets in order to bolster its balance sheet against housing-related shocks. While those efforts have reassured investors and regulators that Bank of America can survive without significant new equity issuance, there are still doubts about the bank's earnings strength.
If Bank of America sees a "faster than anticipated" wind down of its legacy mortgage portfolio and credit metrics continue to improve, the shares would be worth much more than now (US$10.00). However, if housing declines another 10-15% and mortgage losses are worse than expected, Bank of America shares could return to the $5 mark.
Bank of America is likely to get some help, however, if long-term Treasury rates sustain their March 2012 rise.
The intrinsic value of the stock hasn’t gone down nearly as much as it is worth. The company has a book value per share of $20 and in early March 2012 they passed the Fed’s stress tests. The stress test demonstrated that the company has enough capital to survive another economic downturn and with this capital is earnings potential for the company.
Bank of America has been involved in some huge cost cutting operations of late as well as an effort to raise additional capital and dispose of non-core business aspects. Its focus has been to lower expenses and become a leaner operation.
Now (March 2012) in addition to cutting costs they want to make a profit and this may mean more charges which will irk customers.
BAC has also had its fill of legal battles since ‘09, some of which resulted in a decent loss of cash, but it seems to have most of this behind it, and that is reason for hope.
BAC has a few scary financials with the main one being that debt exceeds total cash by $100 billion. However this is offset somewhat by the book value of $20. Though with BAC planning to write down 200,000 mortgages currently (March 2012) facing foreclosure, this number may go down - but unless there are more drastic write downs coming soon it is likely that book value will stay above the stock price for the time being which is often a signal to think about buying in.
They have not been focused on giving out meager dividends to satisfy investors but instead have put this money back into the company to help get the debt off of their back. It is better to have a more solid financial foundation which causes it to go up by 5-10% than get a 1% dividend.
BAC has also been focusing on operations in the US which has allowed it to be protected somewhat from recent European debt related price declines.
BAC has wide exposure to a number of liabilities and if the economy takes a turn for the worse again they will be on a slippery slope. However with the economy going to keep headed up (March 2012 & Beyond) for a while and that Europe ’s situation is stabilized for the time being, BAC’s debt may not be the biggest worry.
Yet despite its reputation decrease, Bank of America still has massive assets in the United States and it seems to be making a turnaround. The US economy, at least for the time being (March 2012), seems to be on recovery track, and as the economy goes up it is likely that BAC will follow.
At US$10.00, the questions remain about whether the bank can grow earnings at a sufficient clip to sustain the rally.
Annual earnings growth of 9.78% over the next 15 years (2012 & Beyond) is already priced into the shares of Bank of America.
Bank of America has been shrinking and selling off assets in order to bolster its balance sheet against housing-related shocks. While those efforts have reassured investors and regulators that Bank of America can survive without significant new equity issuance, there are still doubts about the bank's earnings strength.
If Bank of America sees a "faster than anticipated" wind down of its legacy mortgage portfolio and credit metrics continue to improve, the shares would be worth much more than now (US$10.00). However, if housing declines another 10-15% and mortgage losses are worse than expected, Bank of America shares could return to the $5 mark.
Bank of America is likely to get some help, however, if long-term Treasury rates sustain their March 2012 rise.
Tuesday, March 20, 2012
100% return on Bank of American in just 3 months
Remember my last call on Bank of American on 20th December 2012?
That time, the share price is USD 5, and now it has come to USD 10 already..
I am not sure how many of you bought that shares at that time, but if you bought it that time, you should able to gain 100% return already.
You may read back my previous article~
That time, the share price is USD 5, and now it has come to USD 10 already..
I am not sure how many of you bought that shares at that time, but if you bought it that time, you should able to gain 100% return already.
You may read back my previous article~
Golden chance to accumulate Bank of American
About Telekom
The main thing supporting TM’s share price since the de merger with Axiata Group was its promise to pay at least rm700 million in dividend annually, or up to 90% of its normalized net profits. However there are concerns of TM’s fledging fixed line voice business and the huge upfront investments needed for its HSBB business where the take up was highly uncertain. All that looks set to change in 2012. For the one, the take up for TM’s HSBB service, UnFi is coming in stronger than expected.
Since its launch in March 24, 2010, TM already has over 300000 UniFi customers. At current rate of 1000 installations per day, TM could achieve its target of 400000 Unifi customers by July 2012.
More importantly, there is a chance of TM’s normalized net profits could exceed rm700 million in 2012. This means current dividend ceiling looks set to exceed the current minimum dividend payout of rm700 million as early as 2012 if not in 2013.
While business looks good, it would still be a challenge for TM to keep its cash generation as well as profit figures in 2012 because the group does not have significant non core assets to sell and the rm2.4 billion in HSBB grant from the government will be fully used up in 2012. Less in rm200 million in HSBB government subsidy left in the coffer for 2012 and HSBB related capex is expected to be between rm1.3 billion and rm1.5 billion for 2012 before tapering off in 2013. It needs to bolster the group’s capabilities to better to serve its SME customers going forward.
Market observers stated that TM’s total capex in 2012 to largely the same as the previous two years (rm2.71 billion and 2.56 billon) with the key difference being the lower level of HSBB government grant. The good news is that from 2013, TM is no longer obligated to roll out HSBB network to places it deems commercially unfeasible. From 2013, it would be demand driven basis.
On top of TM/s HSBB wholesale agreements sealed with Maxis, Celcom, Axiata and Packet One and Redtone, which gives rivals access to its network.
TM’s cash and cash equivalent stood at rm4.21 billion as at end 2011.
Going forward, it will consider acquisitions to bolster its capabilities to better serve its SME customers.
Since its launch in March 24, 2010, TM already has over 300000 UniFi customers. At current rate of 1000 installations per day, TM could achieve its target of 400000 Unifi customers by July 2012.
More importantly, there is a chance of TM’s normalized net profits could exceed rm700 million in 2012. This means current dividend ceiling looks set to exceed the current minimum dividend payout of rm700 million as early as 2012 if not in 2013.
While business looks good, it would still be a challenge for TM to keep its cash generation as well as profit figures in 2012 because the group does not have significant non core assets to sell and the rm2.4 billion in HSBB grant from the government will be fully used up in 2012. Less in rm200 million in HSBB government subsidy left in the coffer for 2012 and HSBB related capex is expected to be between rm1.3 billion and rm1.5 billion for 2012 before tapering off in 2013. It needs to bolster the group’s capabilities to better to serve its SME customers going forward.
Market observers stated that TM’s total capex in 2012 to largely the same as the previous two years (rm2.71 billion and 2.56 billon) with the key difference being the lower level of HSBB government grant. The good news is that from 2013, TM is no longer obligated to roll out HSBB network to places it deems commercially unfeasible. From 2013, it would be demand driven basis.
On top of TM/s HSBB wholesale agreements sealed with Maxis, Celcom, Axiata and Packet One and Redtone, which gives rivals access to its network.
TM’s cash and cash equivalent stood at rm4.21 billion as at end 2011.
Going forward, it will consider acquisitions to bolster its capabilities to better serve its SME customers.
Saturday, March 17, 2012
New Samsung Galaxy Note is going to sell
I have one new SAMSUNG GALAXY NOTE which give by someone,
but after 1 day trial, I feel that it is too big to me.
So I wish to sell it and it just open one day only.
Anyone interested? Selling price RM1,850.00 including screen protector
by SME 1 Year Warranty, 100% Original
by SME 1 Year Warranty, 100% Original
Thursday, March 15, 2012
Axiata
It sees its associate investments in India and Singapore as a strategic holdings and has no imminent plans to change the status quo. In Singapore and India , it is either up of out for them. They are not in the business of holding minority. CEO’s comments sparked questions whether some form of change including stakes sale, may happen over the medium term if things do not pan out the way Axiata wants. Axiata owns 29% stake in M1 Ltd and 19.1% stake of Idea Cellular Ltd.
In 2010, Axiata said its lack of management control at the associate companies reduces its ability to identify and manage risks however, there are exceptions. This is especially so in cases without management control. Nonetheless, Axiata has a long term view on both India and Singapore which represent important and strategic stakes, stressing that the group has every confidence in its partners in the two countries. It is happy with its current stake and have no imminent plans to change the status quo. Even so, it would seem change – either selling or the raising its stake – it is entirely out of the window. Whatever the case, the price tag is often the deciding factor whether any change takes place.
Market observers said that in India , Axiata sees a window of two to three years for it to raise its stake in Idea, after which growth would be slower and the case for investing in Idea would diminish. Axiata is not keen on committing more capital unless it comes with control. Axiata can only raise its stake to a maximum of 20.11% being the threshold allowed by Idea’s major shareholder, the Aditya Birla group. Given the uncertainties in India and the large gap between what Axiata is prepared to pay and what Birla wants, market observers do not think Axiata will raise its stake in Idea in the future.
Though Axiata would consider upping its stake in M1 although there is nothing imminent. One factor in favor of such a move is its ability to gear up given M1’s strong cash flow generation and low cost of funding in Singapore . M1 and Singapore are seen as a test bed for new products and services. Takeover offers usually happen for greater control and exposure of a company in high growth markets. While M1 has room to grow in Singapore , it is faced with competitors with bigger market share and deeper pockets. Singapore is already a matured market.
Should Axiata choose to pare some of its holdings, it could further boost its coffers for investments in faster growing markets like in Sri Lanka and Cambodia, where it is present, but see opportunities to further consolidate its position. There may also opportunities in Indonesia where UAE based Emirates Telecommunciations Corp for instance is said to be looking to sell its 13.3% stake in PT XL Axiata Tbk, in which Axiata controls 67% stake. The sale if happens, would improve XL’s free float to 33.4% from 20.1% but the anticipation of more shares entering the market could weaken XL’s share price.
As it is, Axiata already looking at various ways of improving its return through measures such as infra sharing with rivals to reduce capital and operating expenditure. It is also considering investments in asset light businesses.
Target Price: 5.80 (CIMB), 5.50 (UOBKayHian), 5.50 (MBB), 4.46 (Affin), 5.15 (RHB), 5.85 (MIDF), 5.10 (JP Morgan), 5.60 (OSK), 5.15 (HDBS), 5.48 (CIMB)
In 2010, Axiata said its lack of management control at the associate companies reduces its ability to identify and manage risks however, there are exceptions. This is especially so in cases without management control. Nonetheless, Axiata has a long term view on both India and Singapore which represent important and strategic stakes, stressing that the group has every confidence in its partners in the two countries. It is happy with its current stake and have no imminent plans to change the status quo. Even so, it would seem change – either selling or the raising its stake – it is entirely out of the window. Whatever the case, the price tag is often the deciding factor whether any change takes place.
Market observers said that in India , Axiata sees a window of two to three years for it to raise its stake in Idea, after which growth would be slower and the case for investing in Idea would diminish. Axiata is not keen on committing more capital unless it comes with control. Axiata can only raise its stake to a maximum of 20.11% being the threshold allowed by Idea’s major shareholder, the Aditya Birla group. Given the uncertainties in India and the large gap between what Axiata is prepared to pay and what Birla wants, market observers do not think Axiata will raise its stake in Idea in the future.
Though Axiata would consider upping its stake in M1 although there is nothing imminent. One factor in favor of such a move is its ability to gear up given M1’s strong cash flow generation and low cost of funding in Singapore . M1 and Singapore are seen as a test bed for new products and services. Takeover offers usually happen for greater control and exposure of a company in high growth markets. While M1 has room to grow in Singapore , it is faced with competitors with bigger market share and deeper pockets. Singapore is already a matured market.
Should Axiata choose to pare some of its holdings, it could further boost its coffers for investments in faster growing markets like in Sri Lanka and Cambodia, where it is present, but see opportunities to further consolidate its position. There may also opportunities in Indonesia where UAE based Emirates Telecommunciations Corp for instance is said to be looking to sell its 13.3% stake in PT XL Axiata Tbk, in which Axiata controls 67% stake. The sale if happens, would improve XL’s free float to 33.4% from 20.1% but the anticipation of more shares entering the market could weaken XL’s share price.
As it is, Axiata already looking at various ways of improving its return through measures such as infra sharing with rivals to reduce capital and operating expenditure. It is also considering investments in asset light businesses.
Target Price: 5.80 (CIMB), 5.50 (UOBKayHian), 5.50 (MBB), 4.46 (Affin), 5.15 (RHB), 5.85 (MIDF), 5.10 (JP Morgan), 5.60 (OSK), 5.15 (HDBS), 5.48 (CIMB)
Tuesday, March 13, 2012
Plus is now looking at taking over SILK highway..
Plus is now looking at taking over SILK highway under SILK Holdings Bhd.
SILK Holdings operates only one highway and has three substantial shareholders: Johan Zainuddin, Abdul Rahman Ali and former Proton Holdings Bhd chairman Datuk Mohd Azlan. The three individuals had direct and deemed interests of 36.61%, 23.6% and 20.04% respectively in SILK Holdings.
Market sources say the substantial shareholders in SILK Holdings are likely to welcome the idea of selling the company’s highway concession if the price is right.
It is believed that PLUS has sent out some feelers to the management of SILK Holdings.
Sources say PLUS motivation to explore the takeover of SILK highway assets is to expand its earnings and spare the government from having to commit to the scheduled toll rate increases of highway concessions.
It is worth nothing that the SILK highway was due for a toll rate increase in 2010, which did not happen.
Issues of compensation for delayed toll rate increases were the reason the government had in 2010 decided to privatize PLUS.
The SILK highway has a 33 year concession which runs until 2037.
SILK Holdings operates only one highway and has three substantial shareholders: Johan Zainuddin, Abdul Rahman Ali and former Proton Holdings Bhd chairman Datuk Mohd Azlan. The three individuals had direct and deemed interests of 36.61%, 23.6% and 20.04% respectively in SILK Holdings.
Market sources say the substantial shareholders in SILK Holdings are likely to welcome the idea of selling the company’s highway concession if the price is right.
It is believed that PLUS has sent out some feelers to the management of SILK Holdings.
Sources say PLUS motivation to explore the takeover of SILK highway assets is to expand its earnings and spare the government from having to commit to the scheduled toll rate increases of highway concessions.
It is worth nothing that the SILK highway was due for a toll rate increase in 2010, which did not happen.
Issues of compensation for delayed toll rate increases were the reason the government had in 2010 decided to privatize PLUS.
The SILK highway has a 33 year concession which runs until 2037.
Monday, March 12, 2012
About 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.
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.
Sunday, March 11, 2012
Litrak - LDP toll rate is going to increase?
PLUS is looking at taking over Litrak.
Litrak, in which Gamuda Bhd has a 45.65% stake, owns and operates the traffice heavy LDP and holds 50% of the SPRINT highway concession.
The toll tate on the LDP was supposed to increase from RM1.60 to rm2.10 in Jan 2011 but this was delayed. The rate on the Damansara link of the SPRINT highway was also supposed to increase from rm1 to rm1.50 in Jan 2010 but this has not taken place.
Lintrak’s performance has been steady despite the lack of growth catalyst caused by the indefinite delay in toll rate hikes by the government.
Litrak, in which Gamuda Bhd has a 45.65% stake, owns and operates the traffice heavy LDP and holds 50% of the SPRINT highway concession.
The toll tate on the LDP was supposed to increase from RM1.60 to rm2.10 in Jan 2011 but this was delayed. The rate on the Damansara link of the SPRINT highway was also supposed to increase from rm1 to rm1.50 in Jan 2010 but this has not taken place.
Lintrak’s performance has been steady despite the lack of growth catalyst caused by the indefinite delay in toll rate hikes by the government.
Saturday, March 10, 2012
Envair
It is seeking shareholders’ approval for its proposed plan to diversify its business into the oil and gas industry. In October 2012 it had entered into a joint collaboration with Resscom Petroleum Sdn Bhd for the distribution and trading of oil and gas products.
The loss-making air and water filter manufacturer said it was vital for the company to seek other sources of revenue to improve its financial performance.
Envair also proposed a private placement of up to 35.56 million new shares of 10 sen each, representing up to 30% of its share capital to directors Mohd Anuar Mohd Hanadzlah and Mohd Shukri Abdullah, managing director Deepak Jaikishan and third-party investors to be identified at a later date. The indicative allocations of the placement shares are 50.6% for Jaikishan, 45.2% for third-party investors, and the balance for Mohd Anuar and Mohd Shukri.
Meanwhile Deepak Jaikishan has been appointed as the managing director of Envair Holdings Bhd. He was seeking to take control of Envair and inject some oil and business into the company. He and parties aligned to him also intended to take up the entire 30 per cent placement block in Envair.
This is the second time Deepak is emerging in Envair. The first time around, Deepak stuck around for three weeks, as reports had claimed that he could not get a larger slice of the company for the right price.
He directly owns 14.7 million Envair shares. Such a stake would give Deepak a 12.39 per cent stake in Envair.
This is the first time the reclusive Deepak has emerged in a public-listed company with an executive role. The 39-year-old Deepak is a director in privately-held Carpet Raya Sdn Bhd. It was noted that from 2000 to 2009, Deepak had completed a few property investment projects, totalling about RM3 billion.
Apart from Deepak, another Carpet Raya director was also appointed to the board of Envair.
Mohd Shukri Abdullah was appointed non-executive director. Mohd Shukri is director in a number of companies such as TJ Oil Land Services Sdn Bhd, Asia Canggih Sdn Bhd, Affluent Corridor Sdn Bhd, Radiant Splendour Sdn Bhd, Dekad Darat Sdn Bhd and Prudent Plus Sdn Bhd.
Through these companies, he oversees the acquisition and sale of landmark properties in Kuala Lumpur such as Wisma Angkasa Raya, Glomac Tower , offices and residences within the KLCC vicinity.
6.7 million shares or 5.66% stake were transacted in off market at an average price of 0.20 per share. The stake is believed to have been disposed by an executive director Datuk Ersi Ung.
The loss-making air and water filter manufacturer said it was vital for the company to seek other sources of revenue to improve its financial performance.
Envair also proposed a private placement of up to 35.56 million new shares of 10 sen each, representing up to 30% of its share capital to directors Mohd Anuar Mohd Hanadzlah and Mohd Shukri Abdullah, managing director Deepak Jaikishan and third-party investors to be identified at a later date. The indicative allocations of the placement shares are 50.6% for Jaikishan, 45.2% for third-party investors, and the balance for Mohd Anuar and Mohd Shukri.
Meanwhile Deepak Jaikishan has been appointed as the managing director of Envair Holdings Bhd. He was seeking to take control of Envair and inject some oil and business into the company. He and parties aligned to him also intended to take up the entire 30 per cent placement block in Envair.
This is the second time Deepak is emerging in Envair. The first time around, Deepak stuck around for three weeks, as reports had claimed that he could not get a larger slice of the company for the right price.
He directly owns 14.7 million Envair shares. Such a stake would give Deepak a 12.39 per cent stake in Envair.
This is the first time the reclusive Deepak has emerged in a public-listed company with an executive role. The 39-year-old Deepak is a director in privately-held Carpet Raya Sdn Bhd. It was noted that from 2000 to 2009, Deepak had completed a few property investment projects, totalling about RM3 billion.
Apart from Deepak, another Carpet Raya director was also appointed to the board of Envair.
Mohd Shukri Abdullah was appointed non-executive director. Mohd Shukri is director in a number of companies such as TJ Oil Land Services Sdn Bhd, Asia Canggih Sdn Bhd, Affluent Corridor Sdn Bhd, Radiant Splendour Sdn Bhd, Dekad Darat Sdn Bhd and Prudent Plus Sdn Bhd.
Through these companies, he oversees the acquisition and sale of landmark properties in Kuala Lumpur such as Wisma Angkasa Raya, Glomac Tower , offices and residences within the KLCC vicinity.
6.7 million shares or 5.66% stake were transacted in off market at an average price of 0.20 per share. The stake is believed to have been disposed by an executive director Datuk Ersi Ung.
Friday, March 9, 2012
DRBHicom/Proton
DRBHicom is evaluating three rival plans for Proton Holdings Bhd put forward by some of the world’s biggest players.
General Motors Corp plans to make a pitch to gain control of half of Proton’s production lines at its factory in Tanjung Malim, Perak. The Tanjung Malim plant currently has a production capacity of about 250,000 cars a year, but it can be expanded to some one million units a year. The deal is valued at about RM800 million and was brokered way before DRB-HICOM emerged as a dominant force in Proton..
In January 2012, DRB-HICOM struck a deal to buy Khazanah Nasional Bhd’s 42.7 per cent stake in Proton for RM1.29 billion or RM5.50 per share. Subsequently, DRB-HICOM plans to take Proton private by March 2012.
The proposal by GM is the least preferredby DRB-HICOM as it will not add value to Proton.
It is believed that DRB-HICOM is keen to work with Volkswagen AG (VW), Europe ’s biggest carmaker, to produce a small Malaysian car using German technology. Such a move could be similar to what VW had done with Skoda Auto, a fledgling lossmaking car manufacturer based in the Czech Republic, which the German firm helped turn around.
In 2011, Skoda cars, powered by engines developed by VW, recorded sales of some 879,200 units globally as opposed to 172,000 cars it sold in 1991.
The third proposal is from Mitsubishi Motors Corp, Japan ’s sixth largest carmaker. It is understood that the Japanese are proposing to utilise Proton’s spare capacity to produce some 200,000 engines with a horse power of between 1,600cc and 2,000cc.
They haven’t decided on the chassis yet, but mostly it is for the export market. A chassis is the underpart of a motor vehicle consisting of the frame (on which the body is mounted) with the wheels and machinery.