About Gamuda

The market is pricing in election risk. The flow of contracts could be affected if the opposition coalition wins the election. The opposition has also indicated that it wants to review the mega projects, which could have an impact on projects Gamuda has already secured.

 

Another concerns about Gamuda’s property arm, which is expected to see a slowdown, particularly in Vietnam .

 

In 50:50 JV with MMC Corp, Gamuda has secured the lion’s share of Klang Valley ’s MRT construction and engineering works, including the rm8.2 billion contract to construct a 9.5km underground tunnel and seven underground stations.

 

The MMC-Gamuda JV is the project development partner for the MRT project.

 

This brings Gamuda’s order book to over rm4.8 billion/

 

The stock may rebound when the political risks subside and there is more news flow on infra projects.

 

Another potential catalyst for the construction industry is the proposed second MRT line. A firm decision on it is expected to be made over the next two to three quarter from Oct 2012.

 

Meanwhile speculation that major shareholders and directors of Gamuda reducing their stakes in Gamuda. Market observers said that it could be a usual portfolio reorganization in anticipation of Malaysia ’s impending general election.

 

Major shareholders and directors of Gamuda had disposed of Gamuda in early Oct 2012. The EPF had sold 4.5 million shares. Following the sale the EPF still holds 5.37% stake in Gamuda.

 

Meanwhile Raja Datuk Seri Eleena Azlan Shah, a director in Gamuda, had sold a total of 1.9 million shares in the open market at between rm3.52 and rm3.57 each. Followinf the sale, Eleena still owns an indirect 6.2% and a direct 0.01% stake in Gamuda.

 

Another director, Datuk Ng had disposed three million shares at rm3.50 each leaving him with a remaining direct stake of 1.39% in Gamuda.

AMedia

In Oct 2012 it announced a proposed bonus issue of 250.80 million new shares on a one-for-one basis and also a proposed issue of 250.80 million free warrants on the basis of one warrant for every share held.

 

The steep fall in its share price (08 - 09 Oct 2012) could raise concerns about the exercising of the warrants. According to the Oct 5 2012 announcement, the indicative exercise price of the warrants was assumed at 51.1 sen per warrant, which was the theoretical ex-bonus price, calculated based on the five-day volume weighted average market price of the shares up to and including Oct 4 2012 of RM1.021.

 

In June 2012 Asia Media Group Bhd had fixed the issue price for the final tranche of the private placement shares at 38.5 sen each for the tranche allocation of 11.4 million shares.

 

In 2011 it had placed out 35% of the paid-up in 2011. The private placements entail the issuance of up to 79.80 million new shares to identified Bumiputera investors. The funds from which will also be directed towards building DTDB infra. Along with the CASP-I license, AMedia was also awarded network service provider and network facilities provider licenses.

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Asia Media Group Bhd, the country's largest transit-television network operator, plans to launch a terrestrial digital TV station by as early as the first quarter of 2012.

 

It has allocated as much as RM50 million in capital expenditure in 2013 to help it with the launch in the Klang Valley .

Its first step in the plan to launch the terrestrial digital TV station is to launch the "out-of-home service". Out-of-home service means that people who use public transport such as the Rapid buses and the city's rail service will be able to watch live TV.

Currently (Aug 2012), Asia Media operates transit TV services for the city buses, but most of the feed are pre-recorded, with the content coming from third parties.

Asia Media is expecting to bring in as much as RM50 million in 2012 from advertisements alone.

Most of the shows will be in English and Bahasa Malaysia , with content coming directly from Asia Media.

 

The company also has a licence to operate a radio network. The radio network will focus mainly on the Chinese market.

Apart from the cost, finding the right content is the major drawback, pulling the company away from this path.

For the nine months ended August 30 2011, the firm's pre-tax profit stood at RM11.74 million versus RM8.13 million in the same period a year ago.

 

It plans to expand its reach onto trains and taxis once it fully rolls out its DTTB system

by end of 2012.

 

It controls 73% of the market in its business segment with its major clients being Syariakt Prasarana Negara Bhd, which operates RapidKL and Rapid Penang busess and trains and Konsortium Transnasional Bhd which runs the interstate bus routes.

 

It is optimistic about renewing its tie up with Prasarana when its contract with the latter expires at end of 2013. It holds a license as content application service provider.

 

A potential new revenue stream being considered by AMedia is the leasing of its excess capacity to other players or those who serve the hotel segment.

 

Its Strength …

 

It belongs to a small group of companies that own free to air (FTA) broadcasting licenses and is essentially able to provide services similar to those offered by RTM and Media Prima.

 

Certainly, this license has enhanced the company’s appeal for it has attracted other players in the media space. Rumors had it in June 2011 that the company was in talks with Star on a possible takeover but its CEO denied.

 

AMedia has not have any discussions with Star but they do want to explore all the opportunities it has. A few entities, local and international, have shown interest in taking up a stake in AMedia in July 2011 but things are at a preliminary stage.

 

Talks were also ongoing with a number of investors, including local media groups, on the purchase of a 10% stake in the company in July 2011.

 

So why would local media company want a stake in Amedia.

 

Apart from its huge margins, the company’s license to provide FTA broadcasting services offers an avenue for bigger media players eyeing a piece of the electronic media market.

 

In 2010, the MCMC awarded AMedia a content application service provider (CASP-i) license, which enables it to enter the digital television, FTA television and radio broadcasting industry.

 

AMedia is one the few companies in Malaysia that are permitted to offer broadcasting services and facilities. A full CASP-I license allows the company to operate nationwide 24 hour non subscription broadcasting, subscription broadcasting and terrestrial radio broascasting services.

 

Currently (July 2011), only Media Prima and RTM hold FTA broadcasting licenses.

 

With CASP-I, AMedia has the right to provide broadcasting services within the frequency in Malaysia and to operate multiple TV, radio and data channels.

 

The company has its eye on digital terrestrial television broadcasting – a service to deliver real time as opposed to pre recorded, content on mobile screens.

 

However, to realize the full potential of services that the CASP-I license enables the company to offer, it needs substantial capex and foothold in the industry. Effectively, AMEdia has to compete with established players like Astro and Media Prima.

 

Its CEO said that it has no immediate plan to venture into digital television. Furthermore, expanding its DTDB segment would absorb most of its capex in the years ahead.

 

AMedia is part of the ETP, under which it plans to invest rm500 million over the next 10 years from 2011 to provide live broadcasting and grow its network of mobile broadcasting on public transport.

 

This will be part of its project to deploy digital broadcasting in stages. It first wants full coverage of the Klang Valley by the end of 2011.

 

Asia Media, Malaysia’a largest transit TV operator, offered a good growth story in a small but fast-growing media segment. Another key attraction is the group’s exposure to the public transportation upgrade in the Klang Valley which will allow it to expand its services to the LRT and MRT systems.

 

It could be catalysed by success in securing the licence to operate on the LRT. Asia Media provides investors with an alternative exposure to growing media segments other than FTA TV and newspaper.

What's NEXT For Scomi Grp/IJM Corp ....

IJM sees Scomi as an ideal investment vehicle to regain a foothold in the oil and gas industry.

 

The group had previously divested its fabrication business in 2007 after having seen its role as the main contractor diminished.

 

Having built up a diversified earnings base (construction, property, plantations, building materials, infrastructure concessions), IJM felt it needed a new growth angle to take the group to the next level.

 

Specifically, Scomi provides the group with an instant platform for IJM to participate in some Petronas jobs that require bumiputra shareholding.

 

IJM had previously highlighted the possibility of forging a joint-venture with Scomi to participate in some engineering works under Petronas' massive RM60bil RAPID project in Pengerang, Johor.

 

The estimated RM149mil proceeds due from IJM would be used to repay part of the group's RM500mil medium term notes.

 

Along with IJM, Maju Holdings' major shareholder Tan Sri Abu Sahid (8.7%) and his associate Datuk Siew Mun Chuang (5.3%) have surfaced as major shareholders of Scomi with a combined 14% stake.

 

For the last three years (2009-2010), the Scomi group had embarked on a series of internal restructuring exercises which include the disposal of under-performing foreign units.

 

In the United States , Scomi hived off its entire oilfield business where the run rate for jobs had shrunk as much as 80% to around 40%. Similarly, the group is planning to exit the markets in Nigeria and Algeria , and has reduced its UK investments to 20%. Central to its restructuring plans are the internal reorganisation within the group that will see Scomi Marine emerge as an integrated oil and gas marine and drilling services provider. This involves a reverse take-over (RTO) exercise that will marry Scomi's eastern hemisphere oilfield services with Scomi Marine's offshore support services. As part of the exercise, the minority shareholders of SOL and two other units currently parked directly under the Scomi Group ie SKMC and Scomi Sosma would also migrate into the enlarged Scomi Marine entity.

 

Post-restructuring, the effective stake that Scomi will hold in Scomi Marine would rise from 43% to 66%. Scomi Marine made a capital repayment of RM136mil (RM0.18.5 sen per share) on 29 Sept 29 through the reduction of its par value (from RM1 per share to 45 per share) that gave rise to RM525mil. The balance RM330mil is to be set off the entire accumulated losses of Scomi Marine. This would result in Scomi Marine emerging with a cleaner balance sheet and a debt/EBITDA ratio of about two times (including working capital).

 

Taken together, do not discount the possibility of seeing Scomi Marine being chosen as the vehicle to bid for future contract bids rather than its parent, Scomi. By extension, this would also reduce the risk of IJM having to inject more equity into the Scomi group beyond its RM149mil investments.

 

Scomi's management revealed two key engines of growth which it believes would propel Scomi Marine to the next level. One is expanding core product base. Scomi shared that the group has an estimated share of 7% in the Eastern hemisphere drilling fluids and waste management market worth US$5bil.

 

Apart from Malaysia (40%) market share, Scomi is looking to ride the regional exploration & production boom by offering integrated upstream drilling services via an enlarged Scomi Marine.

 

Scomi also confirmed that it had put in bids for risk-service contracts (RSC) for two of Petronas' upcoming marginal oilfields.

QL

It is a leading resource based agriculture company with three main business segments in marine product manufacturing, palm oil and integrated livestock farming.

The group draws from its background in deep sea fishing and is now the largest producer in Asia of surmi based (fish meal) products, and fish and poultry feed. However the group’s largest source of revenue and profit is now ILF business, which generated almost 60% of revenue and more than half of its profit for FY2012.

Through its poultry operations under the ILF arm, the group supplies roughly 15% of the eggs consumed in Malaysia .

The group has taken a more regional focus, and one of its strengths is its ability to replicate its core businesses regionally.

It is expanding its MPM capacity with a plant in Surabaya , Indonesia , that will see it double its surmi capacity to 10000 tones per year by Sept 2013 and fishmeal to 10000 tones per year by March 2013.

It is also expanding its ILF business in Indonesia .

It has set aside rm200 million annual capex from 2013 to 2014 with 60% borrowed and the rest from internally generated funds. The group’s capex will go towards palm oil activities which contributed 8.5% to operating profit in Fy2012.

Most of the capex on palm oil activities will go into planting 2000ha to 25000ha per year of the group’s total 15000ha of plantation land in Indonesia for next few years from 2012. The group has 3000ha of matured oil palm plantaiton land in Sabah .

Palm oil related assets currently make up slightly over 22% of the group’s total assets

Amway

Its net profit fluctuated within a narrow range over the past few years going from rm88 million in 2007 to a high of rm96 million in 2008 before falling back to rm73 million in 2009. Since then, it has done better with earnings rising to rm79 million in 2010 and rm90 million in 2011.

 

Turnover on the hand, has been on a steady uptrend, growing from rm584 million in 2007 to rm736 million in 2011. This indicates a degree of volatility in its operating margins, likely due to exchange rate fluctuations, which affected its cost given that the bulk of Amway’s products and the company’s unwillingness to raise selling prices amid competitive market conditions.

 

Nonetheless, it is more cautious on the outlook for 2H2012. Although the second half of the year is traditionally stronger half, this may not the case in the current (2012) year given the strong earnings reported in 1HFY2012.

 

Do not expect any further lift from currency exchange for the next 12 months from Oct 2012. Amway has locked in the ringgit-US dollar rate for its purchases from its parent company effectively taking out all foreign exchange exposure. Additionally product costs have been raised by 3.5% since July 2012. On the other hand, the company is not planning any corresponding increase in its selling prices. Its last price increase was back in March 2010.

 

As such expect slightly weak earnings in 2HFY2012 compared with the first six months of the year and only modest growth in 2013.

 

Amway has a strong balance sheet and is sitting on net cash totaling rm158 million as at end June 2012. With no major capex planned for the foreseeable future, it can maintain a high dividend payout ratio.

 

However future dividends will be capped by its limited retained earnings reserves. Having paid out more than its annual net profits in the past three years (2009-2011), reserves have been whittled down to some rm26 million as at end 2011.

 

Dividends going forward will be capped to its annual net profit. The company indicated that it has no intention of undertaking any capital management exercise, such as capital reduction, to return excess cash to shareholders.

 

Its current range of consumer goods include personal care, nutrition and wellness, beauty and skin care, home tech and home care, totaling 250 products. There are plans to launch several new products each year.

Perak Corp/Integrax/MajuPerak/Gunung (Perak-based) 2012

There could be several material developments in Perak-based companies listed. Sources say that there could be changes as the helm of some of these companies and a shift in their strategic assets before the general election is called.

It is all linked to politics and the upcoming general election.

PKNP (The state’s development corporation) has almost 53% equity interest in PErak Corp, whose main asset is its wholly owned Taipan Merit Sdn Bhd. Taipan Merit has 50% plus one share in Lumut Maritim Terminal Sdn Bhd (LMT), while the remaining equity is held by port operator Interagx Bhd.

The state via PKNP, has an indirect 15.45% stake in Integrax via Taipan Merit and Perak Equity Sdn Bhd. Apart from LMT, Integrax also has an 8-% stake in deepwater port Lekir Bulk Lumut Sdn Bhd.

LMT operates Lekir Bulk Terminal. LMT and the Lekir Bulk Terminal collectively form Lumut Port.

Perak Corp is under appreciated by market, so a shifting of assets could be deemed as extracting value by taking some assets out. As as end Dec 2011, Perak Corp’s net assets per share stood at rm4.31.

It is worth nothing that the concession for LMT expires in 2015 and what will happen after this is anyone’s guess.

Many other assets held by Perak Corp have not been revalued since 1997. For instance, Perak Corp is sitting on a 189.62 acre of freehold tract of agricultural land, which was approved for mixed development and valued at rm23.24 million as at end 1997.

There is also 72.54 acre used as a yard, which is part of the Lumut Port with a book value of rm82.74 million as at April 1997.

In addition, Perak Corp has a 12.88 acre freehold parcel in Kinta district valued at rm14.17 million in 2010.

Apart from Perak Corp and Integrax, the Perak government has considerable equity is in MajuPerak Holdings Bhd.

PKNP has slightly more than 52% equity interest in MajuPerak. Other substantial shareholders include KUB with 10.99% stake.

Its book value of the land as at Dec 2011 was around rm1.78 million. A few of MajuPerak’s properties have not been revalued since the 1980s and 1990s.

Another Perak related company is Gunung Capital Bhd.

As at end Dec 2011, Gunung Capital had cash and bank balances amounting to rm15.51 million. Its short term borrowings stood at rm3.94 million and its long term debt stood at rm45.07 million.

Gunung Capital completed a private placement of 10 million shares at 40 sen per share in Feb 2012.

Among those sitting on the board of Gunung Capital is well connected Datuk Ahmad who is independent non executive director. He is the president of Malaysia Haulers, and the chairman of Mexter Technology Bhd.

Other political wings in Gunung Capital include chairman and executive director Datuk Syed Abu Hussin, the former deputy head of the Bukit Gantang UMNO division.

In Jan 2012, Low Bok Tek, who has been with Gunung Capital since 1996 stepped down. Low’s other investment is in Latexx. He still owns 16.55% stake in Gunung Capital.

While there has yet to be any real shifting of assets or key management positions, will the talk of changes become a reality?