About Gas Malaysia .....

It boasts a monopoly of natural gas supply to Peninsular Malaysia’s small and medium users. It is tapping into additional gas supply from new regasficaition terminals including the secured 29% increased in gas supply from Petronas beginning in 2013.

 

More RGT projects in Johor and Terengganu, along with clarity on Malaysia ’s LNG pricing mechanism will catalyst the stock.

 

Gas Malaysia has the highest barrier to entry, being the sole holder of a 20 year license to distribute gas to customers consuming up to two mmscfd.

 

It operates downstream of Petronas Gas Bhd which serves power generation companies and Petronas chemicals bhd. Another barrier to entry is the heavy capex of about rm1 billion.

 

Its growth prospects lie in volume growth. It has secured 29% more gas from Petronas on a stepped up basis, starting FY2013 after LNG imports commence in Sept 2012.

SP Setia June 2012

Its president and CEO Tan Sri Liew has for the first time exercised the put option granted to him by PNB, a move that sees him reduce his stake in the company. Liew had on 25 June 2012 transferred 45.19 million SP Setia shares or 2.35% stake to PNB in exercising the put option extended to him under the management agreement dated Jan 2012 based on a transacted price of rm3.95 a piece.

 

The management agreement between Liew and PNB came about after the latter’s aborted takeover of SP Setia that started in Nov 2011.

 

Following Liew’s exercising the option, he now holds a 5.88% stake in SP Setia while PNB and its unit trust funds under management collectively hold about 73.06% stake.

 

When PNB unexpectedly launched its takeover of SP Setia in 2011, questions abound as to whether Liew would remain with the property developer. After the resistance from the management, the offer was upped to rm3.95 in Jan 2012. Liew and PNB also entered into a management agreement where he would remain at the helm of the company for a three year period and there be no changes to the board during that time. As part of the agreement, Liew was also granted the put option to sell its shares in SP Setia to PNB at rm3.95 each during the period.

Felda Global Ventures Holdings Bhd (FGVH) fair value

Target Price: FGVH: 5.65 (ECM), 5.30 (MIDF), 5.52 (Affin), 5.45 (PBB), 5.65 (M&A)

 

 

The fair value of FGV will be about 20 to 30 per cent above its initial public offering (IPO) price of RM4.55 a share … of between RM5.50 and RM6.00 based on the price earnings ratio of 18 times for the current financial year.

FGV is a large plantation company operating 343,521 hectares of oil palm plantation in Malaysia with production capacity of 5.2 million tonnes of oil palm fruits. It is also presently on an expansion trail, acquiring new plantations and expanding its downstream activities. These measures will attract investor interest and help to support the stability of its share price.

Also the company’s potential geographical expansion and cost reduction when its main focus is trained on business in the international market. The benefits derived from its collaboration with foreign investors will also play an important role not only in respect of economies of scale but also improved competitiveness as well as opening up scope for business expansion.

 

Felda Global Ventures Holdings Bhd (FGVH)'s net profit fell 87% to RM192.17mil in its first quarter ended March 31, 2012, from RM359.05mil a year earlier, on higher cost of sales and administrative expenses as well as the incurrence of fair value changes in a land lease agreement.

 

The higher revenue was primarily a reflection of the sales of crude palm oil and palm kernel by Felda Global Ventures Plantations Malaysia (FGVPM).

This was, however, offset in part by a decrease in revenue from the downstream segment as the result of tolling agreement, following which sales of soy and canola products were no longer recorded.

 

For the month to March 2012 only, revenues of FGVPM included sales of palm kernel. But for periods after that, its revenue will not include palm kernel sales.

 

Revenues of FGVPM for the three months ended March 31, 2012, only comprised sales of fresh fruit bunch.

EPMB Jun 2012

Maju Holdings Sdn Bhd proposed rm1.7 billion sale of MEXX to EPMB appears to be in limbo. It has emerged that Maju Holdings has yet to obtain the government’s proposal to sell the highway concession three months after the proposal was announced. The company and the vendors had mutually agreed to extend the period for the fulfillment of the conditions precedent to the acquisition agreement for a further 60 days to Aug 14 2012 from June 15 2012.

 

Tan Sri Abu Sahid has a 91% stake in Maju Holdings which in turns owns 96.8% stake of MEX. The bone of contention is that Maju Holdings was given rm977 million in government funding for the construction of the elevated portion of the highway that runs between KL and Sepang.

 

The opposition is that the proposed sale. It said the government should buy back the concession shortly after Maju Holdings announced its plan. Several matters pertaining to policies on the highway concession are still being studied by the government.

 

Maju Holdings stands to make a profit of over rm600 million if the proposal goes through and Abu SAhid would be left with an indirect interest of 18.2% stake in MEX through a special purpose vehicle.

MAS Jun 2012

The current Malaysian accounting system enables MAS to treat the junior sukuk as equity financing as it ranks below the claims of other present and future creditors but ahead of other common shareholders.

Hence the issuance will not impact its gearing ratio. MAS’s net gearing ratio stood at 5.9 times.

Market observes view the full subscription of MAS’s perpetual sukuk as it will able to shore up its capital base without deteriorating its net gearing ratio.

MAS is also expected to announce another round of rm5.3 billion fund raising for its aircraft leasing.

However there is still a long way to go for a MAS turnaround. Lingering issues that the airline still has to resolve include: Reducing its high operating costs, increasing its yield to be a par with peers, re attracting passengers and increasing load factors and maintaining its five star status with Skytrax.

ECM/Kenanga Jun 2012

K&N Kenanga has sealed the deal to purchase ECM Libra’s investment bank and stockbroking businesses for rm875 million. The purchase will be satisfied by rm650 million and the issuance of 95 million ULS and 120 million new Kenanga shares to ECM Libra.

 

The price tag values at 1.27 times over is book value of rm688 million as at Jan 31, 2012.

 

The total payout for the deal is 68 sen pre share, while the new Kenanga shares and loan stocks are valued at 63 sen and five sen each respectively.

 

If the deal goes through, ECM will have another 12 months to find a new business. After the divestment ECM will retain its asset management and unit trust business. It will also have a sizeable cash to acquire assets.

 

Upon completion of the deal, Kenanga will emerge as one of the three largest stockbroking outfits in Malaysia . The deal cannot be satisfied entirely in cash as Kenanga does not have the financial muscle. The loan stock deal would also prevent ECM from holding a large stake in Kenanga. The 120 million Kenanga shares issued in the deal will see ECM Libra emerge with a 16.39% stake in Kenanga.

 

ECM Libra’s major shareholder is Tan Sri Azman with a 16.18% stake. He also holds 17% stake in AMMB Holdings.

Unico-Desa

A court victory over a disputed parcel of prime plantation land in Sabah and a record pre tax profit of rm103 million for the latest financial year.

The High Court ruled in favor of the company in a suit brought by the ACCCIM which had claimed rights to roughly half od Unico-Desa’s plantation acreage. However, ACCCIM maintains it is the right owner of the roughly 17000 acres of land in Unico-Desa books, has decided to appeal against the High Court’s decision.

Unico-Desa’s MD Teoh through his investment vehicle ELK Group Sdn Bhd holds 29.65% stake. In 2004, he led Unico-Desa, which was then a pure plantation firm, to diversify into the hire purchase business. The diversification drew strong criticism from some members of Unico Holdings Bhd which is also a substantial shareholder in Unico-Desa with a 29.59% stake.

Unico-Desa has proposed to reorganize the group which calls for the public listing of the hire purchase division on the Main Board.

Under the proposed demerger exercise, shareholders would be entitled to the shares in ELK-Desa Resources Sdn Bhd on the basis of one ELK-Desa share for every 10 shares held in Unico-Desa.

Shareholders are also entitled to the offer for sale of 13.49 million shares.

The demerger would allow shareholders to have choices. Those who prefer a pure plantation firm could sell shares in ELK-Desa and put more money in Unico-Desa.

The company’s hire purchase business focuses on used car purchase. It currently (May 2012) accounts for about 20% of Unico-Desa pre tax profit.

The group wants to focus on improving the efficiency of the group’s plantation business, which is dominated by oil palm.



Unico-Desa embarked on an ongoing replanting initiative to ensure sustainable yield and productivity. About 37% of the company’s total planted area is covered with trees aged between 16 and 20 years while 27% is in the range of 11 to 15 years. The young trees aged less than four years make up about 16% of the planted areas.



After the demerger, Unico-Desa will go back to the old days when it was a pure plantation firm.

Silver Bird … dated June 2012

Speculation that one or two while knights emerging at Silver Bord. Names that have cropped up even included people without access to the company’s books.

Market talk that an eventual white knights if any would likely come from Silver Bird’s existing pool of substantial shareholders.

There is some value lies in Silver Bird which is its plant.

LTH is Silver Bird’s largest shareholder with a 22.19% stake, followed by Tan Sri Vincent Tan’s Berjaya Corp Snd Bhd with a 20.53% stake. That Koperasi Permodalan Felda Malaysia Bhd has a 12.7% stake had fueled speculation of FELDA coming to the rescue, given the latter’s desire to grow bigger in the halal food segment.

Collectively, the top three shareholders own 55.4% of the company. The fourth largest shareholder with a 9.07% stake is Australian private equity firm CVC Ltd.

LTD is said to be considering a tie up with FELDA to take over Silver Bird, something that could not be immediately confirmed at press time.

Currently (June 2012) the top management is reoccupied with the FELDA Global listing so things might not move until after the listing June 28, 2012.

Many sees synergies in LTH and FELDA working together to grow bigger in the halal food business.

FGVH’s MD had previously said that the group would acquire suitable downstream businesses for growth should the right opportunities come along. That was in addition to growing ots own house brands parked under Delima Oil Products Sdn Bhd – a subsidiary of FGVH’s 49% owned Felda Holdings Bhd. KPF’s owns 51% of Felda Holdings which is not part of the FGVH IPO.

A strong downstream business would raise the goup’s profile outside Malaysia , apart from giving some demand stability to its upstream and mid stream output.

Its MD admits that the bread and confectionery could be an interesting area to explore.

Silver Bird’s MD said that it will only consider potential investors or white knights after it proposed regularization plan had been approved by shareholders and its creditors.

Silver Bird had negative shareholders’ equity of rm94 million after rm297 million worth of write offs. It had rm224 million in liabilities which exceeded assets worth of rm140 million.

Funds Flow In Malaysia Equities Market

Foreign funds were net buyers of Malaysian stocks for the eighth consecutive months, despite the heavy selldown during the later part of May 2012. Foreign funds invested RM8.74 billion in stocks and sold RM8.29 billion worth of stocks in May 2012, making them net buyers of more than RM400 milllion. However, the figure is some 75 per cent lower than that registered in April 2012, when foreigners were net buyers of more than RM1.6 billion worth of stocks.

A part of the selldown is attributed to the eurozone crisis in the second half of 2012. Nevertheless, the buying picked up again during late May 2012 is partly because the selling was overdone and the slump had left many stocks at valuations that made them attractive to long-term investors.

Foreigners were net seller of RM81.1 million during the second half of May 2012. If not for the renewed interests in Malaysian stocks in the final three days of May 2012, which represents a net buying of RM315.89 million, the eight-month streak would have been snapped.

Monitoring foreign investors’ buying interests in Malaysian stocks is important as it reflects their risk appetite for the local market. Also, their investment decisions have a direct impact on the market’s movements.

The Malaysian stock market is trading at slightly over 15 times the price-earnings (PE) ratio, which is significantly higher than Singapore 's market of about nine times PE and slightly higher than Thailand 's market of about 14 times PE.

Genting Malaysia

It is no longer the only party New York is talking to for a planned US$4 billion mega convention centre that could come with a casino license. This is the second wall that Genting Malaysia has hit in the US within months, after a stalled casino bill in the state of Florida put its Miami casino plans on hold.

Its governor stated that the conversations between Genting have not really work due to the non binding talks New York entered into with Genting in Jan 2011. So it had started to bring in other gaming companies.

MGM Resorts Intl is among companies in the queue for the New York casino.

It is not immediately known if Guomo’s public announcement means the preliminary non binding agreement – entered between Genting New York State Urban Development Corp’s business entity, Empire State Development Corp – is officially off. Both parties had initially given themselves until Nov 2012 to enter into a binding agreement.

Yinson

Sources say Yinson together with its Vietnam partner PetroVietnam Technical Services Corp are tipped to be the front runners for a US$500 million job from Lam Son – a joint entity of Vietnam ’s oil major Petro Vietnam Petronas. The job, which is to supply Lam Son a FPSO vessel with a 10 year charter contract had before attracted bids from Ramunia Bhd and Fred Olsen Production, which emerged as the winner. However, after being issued with the letter of intent four months ago, Fred Olsen said to be facing financing issues resulting in its exit.

The Lam Son contract, if successful, will be the second major league job for Yinson, a budding oil and gas outfit with a market cap of rm400 million only. The company together with PTSC, a unit of PetroVietnam, won a rm1.01 billion contract from Vietnam ’s oil major in Dec 2011 to supply FSO vessel with a 20 year charter contract.

Prior to securing the FSO contract jointly with PTSC, the company on its own managed to bag a smaller rm88 million PSV charter contract in May 2010, and another rm75 million AHTS charter contract in June 2011, all from the Vietnam’s oil major. The PSV and AHTS which are on seven years’ charter, are still ongoing.

Yinson has just completed some fundraising activities and management has hinted that it is prepared to take on more major jobs, and another FSO or FPSO is highly likely given its close relationship with PTSC and hence PetroVietnam.

The Lam Son job is likely to be undertaken via a joint venture in which PTSC will own 51% and Yinson 49%, which is the same as in the partnership’s arrangement for the rm1.01 billion FSO job secured in Dec 2011.

To finance the FSO job, the joint venture between PTSC and Yinson has taken up 80% funding, equivalent to US$105 million, with the balance via equity financing. It is expected that Lam Son job is to have a similar financing arrangement.