Maybank/BII latest news

It has sold a 9% stake in BII for IDR355 per share. The stake was sold to UBS AG of Switzerland. The price is below the IDR510 per share Maybank paid in 2008 when it bought into the Indonesian lender. UBS was hired by Maybank in Jan 2013 to handle the BII stake sale.

On paper, Maybank would have made a loss of IDR785 billion (rm250 million). However, a point to note is that Maybank managed to get a discount from some of the vendors in 2008. Thus, Maybank’s blended cost of acquiring BII was between IDR429 and IDR455 per share.

It had entered into a commercial arrangement for the sale where the economic exposure resulting from the disposal is being retained.

Sources say although the sale of the 9% stake is below Maybank’s cost of entry into BII, it is beneficiary to both parties. Therefore, Maybank is expected to gain other benefits.

Speculation abound that the block sold to UBS could be temporary solution to comply with the regularization that required Maybank to sell down its stake to 80% by June 30 2013.

Maybank could have sold the 9% stake in BII for a lower price than its blended and entry price cost to show that it was doing something about the divestment.

Maybank have said that there will not be any material financial impact on the group. Thus, it is not too worries about the impact on earnings.

Following the sale of the 9% stake, the free float of BII shares has increased from around 2.7% to 11.7% of its issued and paid capital. Maybank is required to sell another 8.3% in BII as the Indonesian authorities have imposed a mandatory sell down requirement to achieve a 20% public float.

It is seeking more time to fulfill the mandactory sell down of its 97.4% stake in BII to comply with the 20% public float.

When Maybank acquired its stake in BII back in 2008, the Indonesian banking authorities had acquired Maybank to sell down its stake to 80% within two years of the completion of the tender offer which in effect was Dec 2010.

Currently (June 2013), BII only contributes 7% to Maybank’s earnings…

OldTown current and future

Its two primary businesses - the cafe chain and the manufacturing of instant coffee/tea mixes - have being faring well and should continue to underpin earnings growth for the foreseeable growth.

Two capital market fundraising exercises - an IPO in 2011 and private placement in late 2012 - have filled its coffers which will allow the company to comfortably fund its planned expansion and give shareholders a decent yield.

In early April 2013, it had acquired a 70% stake in a coffee products distributor in HK, Macau and Guandong for about rm27 million.

With net cash totaling of rm143 million as at end FY2012, its balance sheet can well support its minimum 50% dividend policy payout policy. In market observers expect the company to gradually raise the payout ratio in line with improving cash flow from operations.

The Oldtown White Coffee cafe business accounted for roughly 60% of OldTown's turnover and 55% of pre tax profit in 2012.

The company intends to maintain a similar pace of expansion for the foreseeable future, with new outlets planned in Malaysia as well as in Indonesia, Singapore and China, the latter under a master franchise plants to set up a central kitchen facility in China within the year, which would speed up the rollout of outlets going forward.

As at end 2012, two thirds of its local outlets had been certified with the rest expected by end of first quarter of 2013.

Its first kiosk, in Suria KLCC is registering better than expected sales. This could be a new driver for growth going forward, capturing a different market segment without cannibalizing the existing cafes.

Its fast moving consumer goods business - manufacturing instant coffee and other beverages - is also facing well in an intensely competitive market.

In 2012, about half of the sales came from overseas markets. With the large addressable market, the company is upbeat on growth going forward.

Notably its foreign shareholding profile has seen sharp increase in the presence of foreign funds since its IPO, to about 37% as at end Feb 2013. OldTowb Intl, the controlling shareholder, pared its stake to 45.5% over the same period while local and institutional also saw their shareholdings decline. While the ability to attract foreign shareholders speaks well for the company's prospects, it may also lead to higher share price volatility in the future.

Positively the company's strong balance sheet - net cash of rm143 million as at end 2012 - and cash flow from operations will underpin steady dividends, which in turn should offer support to its share price.

Star

Its dividend yield has stayed above 6% for the past seven months after the decline in its share price. The high yield compression is seen in companies that pay regular dividends.

he company saw the emergence of Aberdeen Asset Management Ltd as a new substantial shareholder with a stake of just over 5%. Other substantial shareholders such as the EPF and OCBC have divested their stakes. The EPF’s holdings fell to 46.38 million shares as at 17 June 2013 while OCBC shed about two million shares over the same period.

Star’s latest ambition is to transform itseof into an integrated media company and reckons the high dividend yield will limit downside risk, even as the company embarks on the ambitious plan.

Market observers expect adex to pick up now (June 2013) that the election is over.

Star’s online classified offering has been greatly boosted by its acquisition of 90% stake in Ocision Sdn Bhd.

However some cautious on print newspaper publishers due to continued weaker adex momentum to certain extent in the English newspaper segment was due to the ongoing print to digital migration trend.

Star has cash of rm435 million (59 sen per share) as at March 31 2013 and a net cash position of some rm174 million.

Another worrying factor is the perception of growing dissent against mainstream media due to the growing popularity of alternative new portals.

Star takes in tens of millions in dividends annually for MCA, but post election development have led to speculation that the party’s controlling 42.43% stake in Star may be up for sale should it decide to liquidate its assets.

AEON

Investors want more dividends having noticed that AEON has sizeable tax credits to frank them. They also want AEON – which is 51% owned by Japan’s AEON Co Ltd (AEON Japan) – to increase the free float of its shares and follow its parent in explosring the benefits of injecting its many shopping malls into a REIT.

However its executive director said the group is still in growth stage. A reason why a REIT is not materialized anytime soon is due to AEON has rm400 million cash. He declined to comment on whether the board will consider a stock split to broaden its investor base or a share placement to raise cash for expansion.

Whether its cash needs change could depend on how well its negotiations with third parties to set up the first AEON shopping mall in Sabah and Sarawak go. The East Malaysia mall will likely be built and owned by a third party and leased to AEON.

In deciding whether or not to go ahead with a REIT, AEON will need to balance the conflict between maximizing profits as a retailer and master tenant of its properties with the role of REIT owner seeking higher rent. It will also have to weigh the potential dilution of income from property management which currently (June 2013) accounts for a sizeable 43% of pre tax earnings.

There is a value in the AEON brand and its earnings have steadily grown at about 15% per annum in the past four years prior to 2013.

Sentiments are likely to be upheld by the group’s strong franchise value, stable growth momentum and expanding base of stable recurring revenue from mall management.

Its parent AEON Japan has embarked on a stock split and seems open to the idea of REIT.

Right now (June 2013), AEON Big is managed independently by AEON Japan and is not part of AEON Malaysia. There is no overlap between AEON and AEON Big in Malaysia due to their different target markets.

AEON Malaysia is first a retailer and then a property manager.

Biosis Group Bhd

It triggered PN17 based on its latest financial results and Bursa Malaysia Securities Bhd’s rules.

The personal and healthcare product distributo
r could have slipped into PN17 since its latest financial results seem to have fulfilled some of the criteria for companies classified under this category. However the company deputy chairman Khairul refuted talk that this was so….

UMNO politician Khairul Azwan Harun emerged as a new substantial shareholder in the company. His entry has reinforced talk of a possible change in the company’s business direction.

Khairul Azwan is head of the BN Perak Youth and is Perak UMNO youth chief. He had acquired seven million shares representing a 5.83% stake. He is the third largest shareholder in the company after Ideal Jacobs Corp (30.38%) and Foo Chong Lee (22.8%).

With Khairul’s extensive network in Perak, it could see more doors opened to the company in the state.

The only son of former PKNP CEO Datuk Harun Ahmad Saruji, Khairul Azwan has been Perak UMNO Youth chief since 2010 and is also a former personal aide of Perak Menteri Besar Datuk Seri Dr Zambry.

He is closely linked to several UMNO youth leaders including UMNO Youth Treasurer Datuk Rozabil Abdul Rahman, who is also group MD of aircraft maintenance, repair and overhaul company Destini.

He stressed that the company has not triggered PN17 status. It is still in the process of auditing Biosis Group’s accounts. The NTA of the company are still healthy.

It is looking at re engineering the pharmaceutical business of Biosis Group. It has partnership arrangement with Pharmaaniaga Bhd to supply certain drugs. With Pharmaniaga expanding its business overseas, the Biosis Group can take advantage of Pharmaniaga’s strengths to tap into its overseas markets.

For the 15 months ended March 31 2012, the company has group shareholders’ funds of rm30.92 million. In the last financial year ended March 31, 2013 the shareholders’ equity of the Biosis Group on a consolidated basis plunged to rm14.8 million.

According to Bursa rules, a company listed on Main Board will be classified under PN17 when it triggers one or more of the criteria for the category, including that the shareholders’ equity of the listed issuer on a consolidated basis is 25% or less of its issued capital, and such shareholder equity is lower than rm40 million.

As long as a listed issuer triggers the criteria under the PN17 category the company will become a PN17 status company. Basically a company’s shareholders’ equity consists of total assets minus total liabilities or share capital plus retained earnings minus Treasury shares.

In the last six financial years since 2008, the company reported losses ranging from rm2.39 million to rm19.59 million.

The company’s total borrowings as of March 31 2013 stood at rm30.2 million and total liabilities at rm52.05 million. It has a paid capital of rm52.5 million.

The company has embarked on several corporate proposals, including a capital reduction exercise, rights issue and a special issue to bumiputera investors, to improve its financial condition.


In Dec 2012, the company proposed capital reduction exercise. It also proposed to capitalize its rm14 million debt through the issue 140 million shares to certain financial creditors.

It also proposed a rights of up to 242 million new shares and a special issue of up to 180 million new shares representing 28.13% of the enlarged paid up share capital to independent third party Bumiputera investors.

Favelle Favco

It is a 62% owned subsidiary of Muhibbah Eng, with its core business in manufacturing customised cranes for the offshore oil and gas, construction and ports/wharf industries.

Its order book stood at rm634 million as at Feb 2013 of which 83% was from overseas customers. Some 88% of the cranes in its order book are O&G cranes while the remaining 12% are destined for towers and shipyards.

When FFB started gaining momentum in securing orders back in 2007, investors conferring a higher valuation on the stock at 20x forward earnings.

FFB had been trading at a lower-than-expected valuation since 2008 due to the low margins it used to fetch from 2007 to 2008. Although margins improved from 2009 to 2012, its valuations continued to remain depressed.

This is attributed to the global financial crisis in 2009, which resulted in the company recording its lowest revenue in 2007, and the crisis facing its parent company, Muhibbah Engineering in relation to Asia Petroleum Hub (APH), which has dampened investor sentiment in the stock.

As the company's orderbook is at a five-year historical high (as at April 2013), this would provide a rerating catalyst for the stock.

Efforts have been made for APH's redevelopment and recovery post-General Election 2013.

About Airasia X.. cont'

Looking at its financial year ended Dec 31 2012 figures, the PE multiple is about 11.1 times based on its net profit of rm33.85 million for FY2012 and current outstanding shares of 266.67 million. Compare this to Airasia Bhd’s FY2012 PE multiple of 10.6 times and it appears that the medium haul low cost carrier commands a higher valuation versus its more established sister airline, Airasia.

There is also a dilution in NTA per share to retail and institutional investors but an increase for existing shareholders post IPO. Based on an enlarged share capital of 2.38 billion shares, its pro forma consolidated NTA per share as at Dec 31 2013 would be rm0.59 representing an increase in NTA of 20 sen to existing shareholders but dilution of 86 sen of the retail price of rm1.45. The audited NTA per share as at Dec 31 2012 stood at rm0.390.

Airasia X states that the offer price of rm1.45 per is based on its financial performance and operating history …

Meanwhile industry observers opined that the PE may not be necessarily relevant because this is very high growth company although there is no guidance in terms of profit forecast. Example is Airasi when it went for IPO, it did not have earnings and 90%.

Going by the company’s past performance, it has not had an impressive track record in terms of profitability.

It posted a net profit of rm146.6 million in FY2010 on the back of rm1.29 billion revenue but plunged into the red with a net loss of rm96.7 million in FY2011 despite recording higher revenue of rm1.86 billion.

It was also making a net loss of rm29.1 million for the six months ended June 30 2012 but managed to turn around in a short span of six months with a net profit of rm33.85 million on the back of rm1.97 billion in revenue in the full FY2012 results. Its better FY2012 revenue was mainly due to substantial increase in fuel surcharge to rm148.23 million from rm44.43 million a year ago while ancillary revenue rose to 18% to rm364 million.

For the three months ended March 2013, Airasia X posted an increase in net profit to rm50.2 million from rm48.5 million a year ago.

Airasia X expects to raise up to rm1.3 billion from its IPO.

Investors are puzzled as to why Sir Richard Branson’s Virgin Atlantic Airways Ltd sold its 10% stake in Airasia X for rm66 million in 2012 if the airline is on the high growth road.

Airasia Bhd had on May 10 2013 converted all its outstanding 42.67 million redeemable convertible preference shares into ordinary shares. It had also stated in Oct 2012 that it would not exercise its option, which expired on Oct 28 2012 to purchase a stake in Airasia X. The airline explained that it wanted to focus its resources on its short haul business and use its capital to exploit opportunities in Asia.

About MISC

MISC decided to cease its liner operations as the division was plagued by overcapacity and low freight rates. The combination of those two factors dragged MISC's bottomline into the red for two consecutive quarters ended Dec 31, 2011 and March 31, 2012.

The disposal of its liner business enabled it though to curb losses and create debt headroom, thus allowing the group to tap additional borrowings if needed.

MISC also managed to monetise one of its biggest investment assets to date, the Gumusut-Kakap Semi-Floating Production System with the disposal of its 50% equity interest in GKL That saw the shipping company raise RM5.3bil for the group without seeking additional capital from shareholders or raising further debt.

For 2013, after two offers by its major shareholders to take the company private were unsuccessful, MISC surprised the market with a healthy enough profit for its first quarter ended March 31 2013.

Petronas would have to wait 12 more months from April 2013 before it could launch any new takeover bid for MISC. The EPF is now (May 2013) taking a wait and see attitude on Petronas plans to privatize MISC Bhd. EPF which held a 9.5% stake in MISC as of April 12 2013 has accepted Petronas’ revised offer price of rm5.50 per share from rm5.30.

But is that momentum sustainable to keep the shipping company profitable going forward as two of its divisions, namely the chemical and petroleum tankers, are still loss-making?

Besides this, MISC other businesses in liquefied natural gas shipping, offshore, heavy engineering and tank terminal business are profitable.

The shipping company is on a recovery path towards better profitability. MISC has started on a sustained recovery path. Although petroleum and chemical shipping are likely to remain in the red over the next few quarters, losses are expected to narrow.

MISC chemical division's losses narrowed by 47% in the first quarter of 2013 from a year ago. Stronger demand and slowdown in new vessel deliveries led to higher chemical freight rates.

Losses should continue to fall in the coming quarters on improving supply demand dynamics.

The Gumusut-Kakap facility is completed and testing is in progress. Maiden contributions from this project will help support earnings in the second half of 2013.
The Gumusut-Kakap field is Malaysia's second deepwater development after Kikeh and is expected to produce about 150,000 barrels of oil per day. It is operated by Sabah Shell Petroleum Co, partnering with Murphy Sabah Oil Co, Conoco Philips Sabah and Petronas Carigali.

Market observers upgraded MISC's financial year 2013 (FY13), FY14 and FY15 net profit forecast by 20%, 14% and 14% respectively. This are due to stronger chemical rates, lower cost from the petroleum division that offsets lower forecast for MMHE and de-consolidation of two offshore business units from adoption of Malaysia Financial Reporting Standards 10 and 11.

Expect strong earnings growth over 2013 to 2015, on the back of significantly narrowing or absence of container losses and steady strengthening of LNG as well as oil and gas earnings. This is despite factoring in continued losses for the petroleum and chemical shipping segments for the next two years.

MISC returned to the black in FY12. For the first quarter of this year, it locked in a net profit of RM300.4mil against a net loss of RM469.82mil a year ago, on the back of RM2.38bil in revenue. Revenue increased 7.6% from RM2.21bil in the previous corresponding quarter.

MISC's performance should improve in the next few quarters from May 2013 as the company completes the construction of its Gumusut project in July 2013 and the charter rates for its vessels, especially in petroleum segment, stabilise towards the end of 2013.

Although the buyout offer from its parent Petronas did not succeed, it reinforces its close business links with, and strong parental support for, MISC, both of which are key credit strengths that provide a three-notch uplift included in MISC's current Baa2 rating.

The stable outlook reflects Moody's expectation that the company will not undertake any major debt-funded capital expenditure over the next two to three years from 2013, which would have increased its business risk and that its credit metrics will remain within the tolerance level for its ratings.

On its tank terminal business, MISC is in equal joint-venture with Vitol group via VTTI B.V. The company will invest another RM1bil or so for the second phase of development of its ATT Tanjung Bin (ATB) oil storage terminal in Tanjung Bin, Johor.

In 2009, MISC partnered VTTI, a wholly-owned subsidiary of Vitol and one of the world's biggest energy traders, to develop ATB. This eventually led to MISC acquiring a 50% stake in VTTI for US$840mil (RM2.55bil) in 2010, transforming it into a global player in the tank terminal business in the process.

VTTI was yet to be a substantial component of MISC's business portfolio relatively in terms of income contribution. But it is positively contributing as it recognised 50% of VTTI's profit. It will be a substantial component in MICS’s business portfolio by 2015 when VTTI and ATB expand.

Another positive factor is the weakening bunker price (May 2013) which constitutes 27% of its operating cost.

Despite the rosy outlook, MISC is prepared to weather another year of rough tides in the shipping sector and will continue to revise its business portfolio to manage its financial resources and capital allocation.

Since the onset of the global financial crisis in 2009 and the resulting downturn of the economy had been a challenging but exciting period for the company. However there is some light at the end of the tunnel as the company had managed to remain profitable since the middle of last year after two consecutive quarters of losses.

The worst fiscal period for MISC is over as its first quarter results are promising and meets expectations. MISC’s management cited possibility of paying dividend for 2013 on expectations of am improving outlook. The worst is over for MISC from May 2013 …

A tough road for MAS

It is only expected to become profit generating in 2015 as the business environment gets tougher due to industry-wide overcapacity, increased competition and continued high jet fuel prices.

International headwinds will continue to weigh down on the achievement of MAS business turnaround plan despite its membership into the oneworld alliance (in February 2013) and ongoing fleet renewal plan.

In the domestic market, MAS also faces intensifying competition from accelerated capacity expansion by AirAsia and the launch of Malindo Air.

Regional full service carriers (FSCs) such as MAS are pursuing the strategy of sacrificing yield in return for a higher load factor thus under immense international competition and yield pressure. MAS’s fare yield dropped by 4.7% year-on-year to 24.2 sen in the first quarter of 2013 despite a leap in passenger load factor by 3.6% to 76.6%.

It was also reported that SIA had embraced aggressive promotional activities and still suffered a yield contraction of 4.3% year-on-year in recent quarters.

Due to eroding market share to the low cost carriers and Middle Eastern carriers, regional FSCs have reacted by expanding international capacity during the first quarter of 2013. SIA and Thai Air increased their capacity by 2.4% year-on-year and 5.5% year-on-year respectively, while the capacity of MAS grew by 11.2% year-on-year.

All these lead us to believe that in the short term, the FSC fare yield will unlikely to rebound to mean level.

Although MAS has replaced its entire fleet of Boeing 747s and a large portion of its 737-400s with the newly acquired Airbus A380 and 737-800 models respectively, it still has 17 777-200ERs with an average age of 13.6 years. MAS is considering either the A350 or 787 Dreamliners to replace the long-haul aircraft.

Due to the worsening market yields and sticky high operating expenses, it is improbable for MAS to be able to turn around its business by FY13-14 as had earlier expected.

Investors are advices to remain on the sideline as MAS business turnaround is taking longer than expected amid continued challenging market environment.

About IPO Airasia X

It is seeking funds for its fleet expansion as it targets buoyant travel demand in Asia Pacific and looks to fend of regional rivals.

It has plans to add 13 Airbus A330 wide bodied planers in total for 2013 and next, to take its fleet to 23 aircraft by 2014.

The company plans to use 33.3% of the proceeds to repay bank loans, with another 33.3% set for capex and 33.3% as growing working capital.

The expansion would come through more flights on existing routes as well as from new routes within some countries where it already operates.

It is banking on retail participation to boost the take up of its impending IPO, will not have cornerstone investors. Bankers familiar with the listing said this will be one of the few large offerings without cornerstone investors.

Besides offering what is to be the largest retail proposal allowed by the SC to date, Airasia X is set to create another milestone in the history of Malaysia’s IPO as it does away with conventional cornerstone investors. In the last few years, major IPOs in Malaysia have normally had a set of cornerstone investors – normally subject to a lock up period of six months. This is to ensure that there is some stability in the share prices in large offerings.





However Airasia X will have several anchor investors keen on taking up a long term position in the airline. It will keep it to about six or seven anchor investors and they will not subject to a lock up period.

The airline is offering 790 million shares and can raise up to rm1.15 billion assuming the shares are taken up at a higher end of the indicative range. It is offering 252 million shares or 10.6% of its enlarged share capital to retail investors.

A carrot for retail investors would be if they hold on to the shares for more than a year, they will receive sweeteners such as free flight tickets.

Sources say Airasia Bhd will holds a 18.3% stake in the company pre IPO, is also looking to pare down its stake to 15%.

Airasia X’s three largest shareholders are looking to reduce their interest are Aero Ventures Sdn Bhd is looking to trim down its stake to 34.4% from 52.2%, Orix Airline Holdings Ltd and Manara Malaysia I Ltd are seeking to reduce its stake in 6.4% each.

Upon the IPO, the three shareholders will hold on aggregate of 1.1 billion shares, which represent 47.2% stake of the company’s enlarged issued and paid up capital compared to a larger stake of 74% before the IPO.

On gross proceeds raised from the listing, the company plans to use 21.5% for capex, 43.8% for the repayment of bank borrowings, 31.5% for general working capital and the remaining 3.2% for listing expenses.

It has been categorized as syariah compliant. This will not only give the airline further mileage, but will lock in bumiputera investors in its soon to be traded shares.

Its Prospects … dated June 2013

It is believed it has cracked the code of creating a sustainable business model for no frills long haul carriers, which will enable it to stay relevant to the industry.

The challenge was to come up with a business model that could deliver a significant unit of cost difference compared with existing legacy carriers.

Apart from leveraging its sister company Airasia Bhd, which has an 18.3% stake in it at the moment (10 June 2013) the management had said that it has managed to create a breakthrough business model.

Its first insight is that it could indeed generate a significant aircraft utilization difference (of over 30%) by bypassing scheduling limitations that legacy carriers apply to cater for the premium paeesngers.

Airasia which currently (June 2013) flies to destinations in Jeddah, China, Australia, Taiwan, South Korea, Japan and Nepal has been able to turn around in just 75 minutes compared with legacy carriers that may only fly out the following day to meet the needs of premium passengers and their flights schedules.

Furthermore, he pointed out that the short haul feeder network connecting over 80 destinations that its affiliate Airasia provides plays a significant role in according its passengers crticial connecting transfers.

In 2012, 40% of Airasia X’s passengers were on connecting flights.

Airasia has benefited from Airasia’s existing infra such as IT infra system, training academy and ready pool of pilots, engineers and airport operations staff.

The airline is operating at the lowest known unit cost of any airline around the world and stimulating demand by 50% to 100% on the routes.

Airasia Group’s multi hub model through JV in Thailand, Indonesia and the Philippines and Japan and the combination of short and long haul networks also give Airasia X a powerful reach across Asia Pacific, far ahead of other regional LCC.

It has the highest ancillary revenue per passenger in 2012.

In its core markets of Australia and North Asia it had a steady track record of profitability for more than three years because of the scale it had built. It will be deploying its capacity to build its pole position in these markets instead of trying to be in many different markets where it end up being subscale.

It had also stated that it will look at the possibilities of reviving its previously axed routes to Europe and India. It is believed that the renewed routes would serve as a feeder for its latest venture into India, given that the domestic aviation rules do not permit new airlines to operate international routes for the first five years of operations.

Meanwhile Airaisa X takes delivery of the Airbus A350-900 aircraft in the next few years from 2013, it might commence flights to Europe and likely revive the London and Paris routes.

Airasia X has firm order of ten A350-900s to be delivered beyond 2017.

Is the long haul low cost model for airlines works?

Such concerns are not unfounded, especially many long haul low cost carriers have had their wings clipped since the 2008/2009 global financial crisis.

New entrant Scoot – a subsidiary of SIA may give Airasia X a run for its money.

In reality this business is highly capex and the gestation period before it reaches a stage where it generates sufficient cash is long.

It is worth nothing here that Airasia X has had a few rounds of capital injection since its birth. The first was when Virgin subscribed for a 20% stake in Airasia X, Then it was the private placement in 2008, which brought in Manara Consortium and Orix Corp. The third was a rights issue involving most of the shareholders. Following the private placement and rights issue, Virgin’s 20% stake was diluted to 10%.

In March 2012, Airasia X proposed to raise US$200 million via a sukuk, but it has postponed the plan for at least another 12 months.

However, Airasia had hinted that it may exit Airasia X via the IPO although, the former later stated that the exit was one of the options that would require further deliberation by its board.

For now the more pressing question is will the other shareholders of Airasia X hold on their stakes or will they also be looking to depart?

About Malton ...

Pusat Bandat Damansara Developmnet …

The long drawn out legal battle between a private company belonging to Datuk Desmond Lim and JCorp for the Pusat Bandar Damansara land appears to have moved closer to a settlement.

Malton disclosed that a third supplement agreement was signed between IESB, a private company that is majority owned by Lim and wife and Bukit Damansara Development Sdn Bhd, subsidiary of Damansara Assets Sdn Bhd which is owned by JCorp.

Under the agreement, IESB will pay rm500 million cash and allocate office space totaling 266668 sq ft in the redeveloped PBD land to BDDSB.

The Tan Sri Abdul Ghani Othman is the (ex MB of Johor), is the head of JCorp. While under Ghani, JCorp had taken companies linked to Lim to court over the PBD land. The case has yet to be settled. However, officials close the state said that the latest development suggests that the case may be coming to a close.

According to Malton’s announcement, the allocation of office space to BDDSB will be broken into two segments of 186667 sq ft and 80000 sq ft. BDDSB will assign the office space measuring 186667 sq ft to Khuan Choo Property Management Sdn Bhd, a subsidiary of Malton Bhd, in return for a 20 storey commercial office building known as VSQ located in PJ. The remaining 80000 sq ft of office space is to be delivered to BDDSB within five years from the date IESB acquires the PBD land.

IESB’s preliminary plan is to redevelop the PBD by building five new towers, comprising two office towers and three residential towers, and a suburban retail mall within the office space.

It is a multi billion development which is expected to be completed over seven to eight years.

The PBD land proposals are expected to affect the net assets and gearing of the Malton group. As at June 30 2012, it recorded net assets of rm587.3 million and gearing of 0.27 times. After the assets exchange, the group is expected to have net assets of about rm625.1 million and gearing of 0.25 times.

Bukit Jalil Development …

Ho Hup was in a dispute with Malton Bhd over a development agreement signed earlier by the Lye-led management. The issue was settled in July 2012 when Ho Hup reached a truce with Malton and entered into a new agreement to jointly develop 60 acres of prime land in Bukit Jalil.

Under the new agreement, Ho Hup retains the sole development rights to a 10 acre tract out of 60 acres, with the remaining 50 acres to be jointly developed by Ho Hup and Malton. The former will provide land while the latter will provide capital.

The new agreement also saw Ho Hup, the owner of the 60 acres increasing its entitlement for the GDV of the project to 18%.

Meanwhile Datuk Desmond Lim is planning to build his next big mall in Bukit Jalil.

Property market observers have labeled the new project Pavilion II and say it could be bigger than Mid Valley Megamall.

Pavilion II will be an integral part of a JV development between Lim’s Malton and Ho Hup Construction Co Bhd on 60 acres in Bukit Jalil with a GDV of rm4 billion.

Under the JV agreement, Ho Hup is to develop 4.05ha while Malton gets to develop the remaining 20.33ha with the condition that it shares 18% of the GDV with Ho Hup, which owns the land. This means Ho Hup will own 18% of the mall when it is completed.

After the mall is completed and when its renal income stabilizes, Lim will probably want to inject it into Pavilion REIT.

Lim and his wife Datin Tan control a 37.52% stake in Pavilion REIT.

Funds Inflow/Outflow

Foreign selling on Bursa Malaysia extended into the week ended June 7 2013, which was the second consecutive week, where they were net sellers of RM523.90mil in Malaysian equities. This was in contrast to that unravelling in Thailand and Indonesia, where selling intensified during that week.

However, the intensity of the selldown reduced as the amount was less than the net selling of RM629.5mil in the week ended May 31 2013.

Even after the liquidation in the last two weeks, the overhang of foreign liquidity remained uncomfortably high. So far till 07 June 2013, foreign investors have bought net RM17.5bil or net US$5.8bil net of Malaysian equity in the open market compared with net RM13.7bil (net US$4.5bil) in 2012.

The local retail market remained resilient and active despite some nervousness of late. Retail investors actually snapped up shares last week, with net purchase amounted to net RM67.4mil. This was the highest since November 2013 on active trading. Participation rate stayed above RM1bil for the fifth week running at RM1.2bil.

Local institutional funds supported the market heavily again last week. Local institutional funds bought net RM456.5mil after mopping up net RM633.2mo; the week before.

About Tropicana Corp

The company is poised to launch RM3 billion worth of properties this year. The launch should add on to Tropicana's current RM1.1 billion worth of unbilled sales, which is good enough to provide for two years of earnings visibility.

Tropicana has strategic presence in three key property hotspots, namely Johor, Penang and the Klang Valley. Tropicana has land bank of 808ha, with a gross development value of RM60 billion.

Additionally, its ongoing asset monetisation initiatives are set to net between RM400 million and RM500 million in gross proceeds.

It had fixed the price of its 86.307 million shares at RM1.78 per placement share. The shares were to be placed out to local and foreign institutional investors. Tropicana was never known to have core institutional funds as substantial shareholders in the company. The exercise will raise gross proceeds of RM153.6 million.

Tropicana also announced that Yau had exercised one million of his employees' share option scheme (ESOS) shares.

On May 31 2013, it seek approval from its shareholders for the proposed renewal of authority to purchase its own shares of up to 10 per cent of the issued and paid-up share capital of the company. Tropicana bought back seven million of its shares from the market on June 5 2013. Prior to the purchase, Tropicana held zero of its own shares as treasury shares.

On June 3 2013, its founder Tan Sri Danny Tan Chee Sing had sold off 18.9 million shares at RM1.78 a share to a Malaysian government-linked institutional investor.

That set tongues wagging that the Employees Provident Fund was the buyer of the shares, and that Tropicana could be the next SP Setia in the making.

On June 5 2013, Tropicana sold some land in Petaling Jaya for RM111.6 million, and that it booked a net gain of RM87 million.

About Zhulian

It is a direct selling company founded in 1989. Its initial core business was in distributing gold plated jewellery through MLM. Its distributors supply a variety of products, including home care products, nutritional beverages, jewellery and more.

The group also manufactures a broad range of self developed high quality products including jewellery and nutritional food and beverages. This gives the group better control over the cost and quality of goods in the event of a hike in petrol, sugar and flour prices. Currently (June 2013), about 75% to 80% of the products are manufactured in house.

Since listing in 2007, the group has been scoring its profit before tax margin above 30%. Its net margin still stood at 24.6%, in 2008 despite the subprime crisis.

Bright prospects for the group will be underpinned by robust distributor growth and periodic introduction of new products. There are also plans to penetrate other Asean countries.

Scomi Group

It had secured a rm98.5 million contract from Dragon Oil Ltd for the provision of drilling and completion fluid services in Turkmenistan. Aside from the Turkmenistan project, Scomi Group can also look for synergistic oil and gas opportunities locally.

The group’s energy and logistics division has a marine fleet dedicated to offshore support services, highly sought after by major oil and gas contractors.

Observers noted that Scomi Group CEO Shah Hakim has been steadily accumulating Scomi shares over the past month, acquiring close to three million shares since early May 2013.

Scomi Group’s 65% owned subsidiary Scomi Energy services Bhd’s prospects are bright due to rm5 billion order book and the prospect of more contracts.

SES also has the potential to secure up to rm400 million worth of contracts by end 2013 which would be a catalyst for further upside. The government’s efforts to increase local O&G production bodes well for SES, which has a market share of 50% in the drilling fluid and drilling waste management segment.

Scomi Group’s transport unit, Scomi Engineering is on the brink of clinching a major monorail project in India. It is one of the two companies still left in the tender process.

Time Eng

Sources says Khazanah is in the final lap of evaluating the three shortlisted companies, which are Skali Group, Censof Holdings Bhd and MyEG Services Bhd.

Government-owned investment agency Khazanah Nasional Bhd is expected to announce the buyer of its entire 45 per cent stake in TIME Engineering Bhd in June 2013.

TEB has been sought by institutional buyers since May 7 2013. They had slowly accumulated shares on that date. On May 20 2013, these funds came back in a big way and they are still in the market now for TEB shares.

In May 21 2013 institutional funds had started buying TEB shares in a big way.

Institutional buying of Time shares comes at a time when the market has been anticipating that its major shareholder Khazanah Nasional Bhd planning to sell its stake in the firm.

TIME Engineering is a loss-making information technology firm that provides solutions in e-commerce and cyber security. The company owns a 71.2 per cent stake in Dagang Net Technologies Sdn Bhd and has been without a chief executive officer since May 2009.

TIME Engineering was once part of the now defunct Renong Bhd, which has since been taken over by UEM Group Bhd, which is Khazanah's wholly-owned subsidiary.

For its financial year ended December 2012, TIME Engineering suffered a net loss of RM7.78 million on the back of a RM144.59 revenue.

TGOFFs

It is looking to tie up with foreign oil and gas players to aid to its competitiveness in securing jobs.

A foreign partner would be able to gain access to local jobs by leveraging Tanjugn Offshore’s various licenses from Petronas.

With a reputable foreign partner, it can leverage on the partner’s branding in bidding for jobs as well as expanding its product offerings.

The group is already bidding for several local contractors and a foreign partner will increase its chances of winning.

It is incurring losses currently (June 2013) and it will need to find a fresh flow of contracts to return to the black for 2013.

As at Sept 30 2012 the group incurred an accumulated net loss of rm51.14 million, compared to an accumulated net profit of rm20.6 million at the beginning of 2012.

This was mainly due to rm127.97 million in dividend payout following the disposal of the group’s marine vessel arm to its major shareholder is Ekuiti Nasional Bhd for rm220 million in cash.

In the wake of the sale of its core marine vessels arm, it will be focusing equally on all its remaining core businesses – engineering, maintenance and trading. All are involved in the O&G sector. The sale of Kapal has left it with a stronger balance sheet to pursue more projects.

Redtone

News report that BJCorp and owner of U Mobile Sdn Bhd, Tan Sri Vincent Tan Chee Yioun, had lifted his stake in the company to 13.13%.

The same day, a strong partner line up that included financial backing from the Johor royal family for its bid against two others for the multi million DTTB infra tender.

Its largest shareholder is Indah Pusaka Sdn Bhd with a 32.79% stake as at Oct 9 2012. Datuk Wira Syed Ali Syed became chairman on Nov 2012 controls Indah Pusaka.

It was speculating that Tan could be mulling some sort of collaborating and even a backdoor listing for U Mobile via Redtone. Both Redtone and U Mobile have the 2.6GHz 4G long term evolution (LTE) spectrum allocations and active network sharing agreements with Maxis Bhd.

Redtone’s co founder and MD Datuk Wei however said that Tan has not indicated any intention of a strategic collaboration between U Mobile and Redtone or expressed desire to seek board representation at Redtone as the latter’s second largest shareholder/

Redtone is on track to launching its own mobile services riding on MAXIS’ network by Sept 2013.

Positive developments within the group would likely lead to a price to earnings band expansion.

The other shortlisted for the DTTB bids are i-Media Broadcasting Solutions Sdn Bhd and Puncak Semangat Sdn Bhd which is also a 4G LTE spectrum holder and is linked to businessmen Tan Sri Syed Mokhtar.

Bids are to be submitted by June 3 2013 and the results are expected to be announced by the MCMC in July 2013. DTTB rollout is expected to be start in 2014 with full nationwide coverage by end 2015 upon which the existing analogue TV broadcast is to be terminated.

To recap, Redtone had entered into an agreement to divest 21% stake in its subsidiary Redtone Network Sdn Bhd to Sultan Ibrahim Ismail Lbni Almarhum Sultan Mahmud Iskandar of Johor.

The Berjaya linked firm said consideration for the divestment of 315000 shares of rm1.00 each which represents 21% of RN’s paid up capital was rm315000.

Upon divestment, RN will be a 49% company of Redtone and Sultan Ibrahim will hold 51% stake in RN. Prior to divestment, RN was a 70% subsidiary of Redtone whilst the balance 30% was held by Sultan Ibrahim.

RN had been shortlisted by the MCMC as one of the three companies for the digital terrestrial broadcast (DTTB) infra contract in Nov 2012.

DTTB infra will provide the necessary platform for current free to air broadcasters to migrate from the current (May 2013) analogue system to a digital broadcasting method.

The three short listed companies are now (May 2013) required to submit more detailed business plan based on their original submission.

The first rollout of DTTB services to the public is expected be in 2014 with full nationwide coverage targeted for end 2015.

REDTONE notes that the DTTB business will involve continuous investment and full management commitment and D.Y.M.M. Sultan Ibrahim has agreed to invest in DTTB business should the contract be awarded to RN.

It is working with three big global in its DTTB bid. The bid is undertaken by RN.

RN is expected to submit a detailed business plan June 2013 in round two of the tender process.

After four straight years in the red, it made a net profit of rm2.15 million for the fiscal year end May 31 2012.

USP project and synergies arising from its network service agreement with MAXIS as near term catalysts for the stock.

Its future earnings are likely to depend on its ability to secure more USP projects and the degree of MAXIS’ 4G LTE services rollout which it had yet to impute in the forecast.

ICap: It became a target of a hostile takeover by European hedge fund Laxey Partners in 2012, could itself find itself fending off yet another unfriendly bod.

A large block of 3.58 million shares representing a 2.56% stake was traded in several off market deals on May 8 2013. It has found that another European fund, City London Investment Management, has been consistently buying up ICap shares to increase its stake.

The foreign fund manager has been increasing its stake and its nearing the crucial 10%, a lelve which gives it the power to call for an EGM. As of May 28 2013, it holds a 9.13% stake in ICap Biz.

In 2012, Laxey Partners had also built up its stake in ICap to 6.9% stake prior to AGM to put forward a request to have board representation. So will City London follow Laxey Partners’ original lead to ask for board representation?

The biggest fear is that the two European funds might team up as the combined shares held by both parties will be of a significant size.

Both funds had said that most shareholders would like to see the ICap trade closer to NAV.

MISC Bhd: It ceased its container shipping operations early 2012, enabling the shipping giant to cut its losses and return to the black with a renewed focus on energy transportation and energy-related businesses.

MISC decided to cease its liner operations as the division was plagued by overcapacity and low freight rates. The combination of those two factors dragged MISC's bottomline into the red for two consecutive quarters ended Dec 31, 2011 and March 31, 2012.

The disposal of its liner business enabled it though to curb losses and create debt headroom, thus allowing the group to tap additional borrowings if needed.

MISC also managed to monetise one of its biggest investment assets to date, the Gumusut-Kakap Semi-Floating Production System with the disposal of its 50% equity interest in GKL That saw the shipping company raise RM5.3bil for the group without seeking additional capital from shareholders or raising further debt.

For 2013, after two offers by its major shareholders to take the company private were unsuccessful, MISC surprised the market with a healthy enough profit for its first quarter ended March 31 2013.

Petronas would have to wait 12 more months from April 2013 before it could launch any new takeover bid for MISC. The EPF is now (May 2013) taking a wait and see attitude on Petronas plans to privatize MISC Bhd. EPF which held a 9.5% stake in MISC as of April 12 2013 has accepted Petronas’ revised offer price of rm5.50 per share from rm5.30.

But is that momentum sustainable to keep the shipping company profitable going forward as two of its divisions, namely the chemical and petroleum tankers, are still loss-making?

Besides this, MISC other businesses in liquefied natural gas shipping, offshore, heavy engineering and tank terminal business are profitable.

The shipping company is on a recovery path towards better profitability. MISC has started on a sustained recovery path. Although petroleum and chemical shipping are likely to remain in the red over the next few quarters, losses are expected to narrow.

MISC chemical division's losses narrowed by 47% in the first quarter of 2013 from a year ago. Stronger demand and slowdown in new vessel deliveries led to higher chemical freight rates.

Losses should continue to fall in the coming quarters on improving supply demand dynamics.

The Gumusut-Kakap facility is completed and testing is in progress. Maiden contributions from this project will help support earnings in the second half of 2013.

The Gumusut-Kakap field is Malaysia's second deepwater development after Kikeh and is expected to produce about 150,000 barrels of oil per day. It is operated by Sabah Shell Petroleum Co, partnering with Murphy Sabah Oil Co, Conoco Philips Sabah and Petronas Carigali.

Market observers upgraded MISC's financial year 2013 (FY13), FY14 and FY15 net profit forecast by 20%, 14% and 14% respectively. This are due to stronger chemical rates, lower cost from the petroleum division that offsets lower forecast for MMHE and de-consolidation of two offshore business units from adoption of Malaysia Financial Reporting Standards 10 and 11.

Expect strong earnings growth over 2013 to 2015, on the back of significantly narrowing or absence of container losses and steady strengthening of LNG as well as oil and gas earnings. This is despite factoring in continued losses for the petroleum and chemical shipping segments for the next two years.

MISC returned to the black in FY12. For the first quarter of this year, it locked in a net profit of RM300.4mil against a net loss of RM469.82mil a year ago, on the back of RM2.38bil in revenue. Revenue increased 7.6% from RM2.21bil in the previous corresponding quarter.

MISC's performance should improve in the next few quarters from May 2013 as the company completes the construction of its Gumusut project in July 2013 and the charter rates for its vessels, especially in petroleum segment, stabilise towards the end of 2013.

Although the buyout offer from its parent Petronas did not succeed, it reinforces its close business links with, and strong parental support for, MISC, both of which are key credit strengths that provide a three-notch uplift included in MISC's current Baa2 rating.

The stable outlook reflects Moody's expectation that the company will not undertake any major debt-funded capital expenditure over the next two to three years from 2013, which would have increased its business risk and that its credit metrics will remain within the tolerance level for its ratings.

On its tank terminal business, MISC is in equal joint-venture with Vitol group via VTTI B.V. The company will invest another RM1bil or so for the second phase of development of its ATT Tanjung Bin (ATB) oil storage terminal in Tanjung Bin, Johor.

In 2009, MISC partnered VTTI, a wholly-owned subsidiary of Vitol and one of the world's biggest energy traders, to develop ATB. This eventually led to MISC acquiring a 50% stake in VTTI for US$840mil (RM2.55bil) in 2010, transforming it into a global player in the tank terminal business in the process.

VTTI was yet to be a substantial component of MISC's business portfolio relatively in terms of income contribution. But it is positively contributing as it recognised 50% of VTTI's profit. It will be a substantial component in MICS’s business portfolio by 2015 when VTTI and ATB expand.

Another positive factor is the weakening bunker price (May 2013) which constitutes 27% of its operating cost.

Despite the rosy outlook, MISC is prepared to weather another year of rough tides in the shipping sector and will continue to revise its business portfolio to manage its financial resources and capital allocation.

Since the onset of the global financial crisis in 2009 and the resulting downturn of the economy had been a challenging but exciting period for the company. However there is some light at the end of the tunnel as the company had managed to remain profitable since the middle of last year after two consecutive quarters of losses.

The worst fiscal period for MISC is over as its first quarter results are promising and meets expectations. MISC’s management cited possibility of paying dividend for 2013 on expectations of am improving outlook. The worst is over for MISC from May 2013 …

Sarawal Cable (Scable)

Market observers are expecting the company to secure a number of transmission jobs in Sarawak including the lucrative 500 kilovolt (kV) backbone power line in Sarawak (transmission package worth RM1bil) from Sarawak Energy Bhd.

Sarawak Cable is poised to secure the 500kV backbone package, which is expected to be awarded by year-end (2013); and the acceleration of the state government's rural electrification scheme (RES) to meet the state's original target of 95% by year-end (2013) (currently at 60%).

After a long delay, the 500kV package is expected to be awarded in 2013, as there was “urgency to meet the needs of power-intensive industries, notably, in the Sarawak Corridor of Renewable Energy”.

The award of the job to Scable is only awaiting state approval and do not foresee any problems, as Sarawak Cable is the biggest transmission engineering, procurement and construction outfit in the state and SEB is a major shareholder of Sarawak Cable.

Apart from the 500kV job, the company is expected to benefit from the RES, as only 60% is completed, and RM400mil worth of jobs is expected to be tendered out in 2013.

Note that Sarawak Cable is the dominant supplier of fabricated steel poles and cables via units Sarwaja and Universal Cable, respectively. Sarawak Cable would get 80% of the RES jobs to be tendered out in 2013.

Sarawak Cable is also eyeing a number of smaller transmission jobs with a potential total value of RM400mil. This includes the Tanjung Manis-Bintulu and Mambong-Kalimantan lines.

Sarawak Cable currently (May 2013) has an order book of RM687mil, with an outstanding amount of RM202mil.