JADI

Liew controls 32.2% of Main Market-listed Jadi.

In the last few years prior to 2014, the company has been busy focusing on growing its business at the expense of a ballooning capex. It has spent at least RM100mil over the past four to five years and still has to make depreciation charge-outs.

Net profit margins have also been squeezed to below 3% from the previous double-digits.

Nothwistanding its high capex was mainly internally-generated, was used for investments in “several projects”, which he hopes will eventually bear fruit and lift the company to a new phase of growth.

A M&A strategy is planned for Jadi and it is speaking with several “strategic” investors.

It is also studying new areas of printing, including for commercial packaging.

For the financial year ended Dec 31, 2013, the company made a net profit of RM2.2mil on a revenue of RM75.2mil. In its most recent quarter ended March 31, it registered a net profit of RM170,000 on revenue of RM17.8mil.

The company is the only toner manufacturer in Malaysia and the largest in Asia-Pacific, with a production capacity of about 8,000 tonnes a year. It has have no competitor in Malaysia; its competitors are mainly from China and Taiwan.

In the global after-market, it has about 2% market share.

Almost all of Jadi’s toners are exported, with only about 2% of the sales being local business.


Asia-Pacific is its biggest market at the moment, with South America and Eastern Europe “getting to be important”.

Alam Maritim

It is looking at becoming a one stop service provider for the oil and gsa industry in the region.

It had signed a JV agreement with Wah Seong under which the latter’s wholly owned subsidairy unit, Wasco Energy will subscribe for a 49% stake in Alam Maritim’s unit, Alam PE Holdings Inc for rm106 million.

Alam Maritim expects to enahnce and expand its tendering capabilities for major EPIC works by complementing Wah Seong’s pipe coating and gas compression activities with Alam Maritim’s offshore construction and marine divisions.

Alam-PE’s fleet will be able to complement that of Wah Seong’s 27% owned Petra Energy Bhd. Petro also has a 30% stake in the marginal RSC for the Kapal, Banang and Meranti fields off Peninsular Malaysia.

Earlier 2014, Alam Maritim is in the midst of acquiring a DSV from Singapore estimated to cost about USD80 million for underwater. Inspection, repair and maintenance works.

Following the placement of shares to Tan Sri Quek Leng Chan and his associate Paul Poh in April 2014 which gave them a 15.53% stake in the group, Alam Maritim raised rm166 million.

Shaharuddin Rahmad, executive director and CEO of Alam Maritim owns a 43.47% stale in Alam Maritim.

Meanwhile Alam Maritim is in talks with Ezion Holdings Ltd – a supplier of OSVs for possible collaborations. In April 2014, Quek acquired a 7.7% stake in Ezion for rm396 million.

Alam Maritim besides expanding its footprint with these startegic tie ups, is also exploring other upstream activities such as jack-up rigs that could introduce additional re rating catalysts.

SHL (Net Cash & Investments Worth rm1.27 per share)

The well known master developer of Bandar Sungai Long in Selangor has been sitting on low cost land bank with good accessibility and huge potential development value.

Underpinned by limited and expensive developments in and around the Klang Valley, stronger demand is shifting towards the suburbs, which bodes well for the company.

The company could be worth rm4.26 per share.

The group owns about 433 acres of land bank in Selangor and NS. Besides Bandar Sungai Long (48 acres), it also owns land in Semenyih (118 acres), Alam Budiman (20 acres), Rawang (10 aces) Batang Kali (88 acres), Serendah (48 acres) and Parit Tinggi (101 acres).

However most part is its 160 acre golf course land in Sungai Long, sitting on a book value of rm18 psf. Management had earlier hinted its interest in redeveloping and monetizing the golf course. Based on the market value of rm130 psf, this piece of land could be worth at least rm900 million given the matured township status in Bandar Sungai Long.

Currently (July 2014) its land bank and properties stand at a market value of not less than rm1 billion and could double to rm2 billion (if redevelopment plan kicks in) which is a far cry from its current market cap of rm580 million.

SHL’s balance sheet and operating cash flow are sold. As at financial year 2014 ended March 31 2014 it had net cash and short term liquid investments of rm306 million or rm1.27 per share.

The group has been paying out generous dividend with a minimum of 8% per annum in the last eight years prior to 2014.

Keladi/FCW ... Gear Up To Catch Up Next Upcycle In High End Property !!

Speculation that the company would venture into developing high end properties following the proposed purchase of a prime tract of land in the Klang Valley.

The rm192 million on purchase from GBH would give Keladi ownership of a 14 acre tract of land in Segambut which is close to Mont Kiara township.

The transfer of land from GBH to Keladi is part of an asset unlocking exercise initiated by Tan Sri Robert Tan who is a substantial shareholder in both companies.

Tan is keen to slowly unlock the value of his companies’ prime tracts in the surrounding area.

In Sept 2013, Tan’s 25.5% owned FCW has entered into a JV with IJM Land Bhd to turn four parcels of land in Segambut into a mixed residential development.

The four parcels of land sits next to the one currently (July 2014) being sold to Keladi Maju.

Keladi were mostly involved in developing low to medium cost housing projects in the past, meaning that a JV arrangement would give it the expertise to develop a luxury residential project in Segambut.

It seems like the right time for FCW as well as Keladi to gear up to catch the next upcycle in the high end property market after the cooling measures have subsided.

Prestariang ... Pricey Valuations, Diversify Into Recurring Income Base

It is trading at 20.2 times financial year 2015 price-earnings. Given the lack of clarity on its potential new recurring earnings stream at this juncture (July 2014) and following the surge in its share price (24 July 2014), Prestariang as fully priced-in for now.

Management remains tight-lipped on the utilisation of the funds. The management is likely looking at opportunities to shore up its recurring earnings base which is expected to be unveiled by end third quarter of financial year 2014.

It is a move to diversify from its current (July 2014) contractual earnings base. In mid-2012, management announced its first recurring earnings attempt, via the setting up of a university. Unfortunately, as of second quarter of 2014, the university was still loss-making.

Management guided that it is exploring the possibility of roping in a new shareholder within the next 2-3 months from July 2014 to help boost enrolment. The move, if it materialises, would help its tertiary education outfit to break even by end-financial year 2014 and commence positive earnings accretion come financial year 2015.

Catalysts include potential diversification into a recurring earnings model.

Following the completion of its 10% private placement, Prestariang’s current share base has increased to 484 million and had raised about RM76 million in net proceeds.

PPHB (Trading At Discount To Its Peers) ...

It is a small cap packaging supplier involved in developing, designing, printing and manufacturing paper packaging products. It also manufactures point of purchase displays for consumer brands such as Maybelline, Energizer, Twisties and FisherPrice.

It is currently (July 2014) trading at 8.6 times to 7.3 times financial year 2014 ending Dec 31/FY2015 forward PER which is at an 8% and 40% discount to its packaging peers’ estimated forward PER of 9.3 times and the FBMSC forward PER of 12.7 times.

Its prospects remain bright and has strong profitability track record. Its first quarter ended March 31 2014 year on year earnings growth of 139% is much stronger than its packaging peer’s average of 65% yoy earnings growth.

In the past five years, Japanese companies have been actively acquiring controlling stakes in Malaysian packaging companies.

Locally, we have observed consolidation in this segment … Scientex, GW Plasticcs, Can-One) as packaging players try to capture market share.

On average, the merger and acquisition valuations of acquired companies are 10.1 times based on a range of 6.4 times to 12 times forward PER with a market cal range of rm67 million to rm1.4 billion.

While observers cannot verify whether PPHB is in talks or is a takeover target, it is strongly believe that its valuations are backed by recent M&A activities. Estimate that the company’s valuation should not be far from the 10.1 times average PER of its M&A peers, given its steady growth trajectoty.

However PPHB’s current FY2014 PER of 8.6 times implies a 15% discount to the 10.1 times M&A average.

Why Press Metal (PMetal) Kena Whack UP !!!

Shortage of aluminium has boosted its share price. Industry observers opine there could be leg for the share price rally given that the aluminium smelter is a prime beneficiary of rising metal prices due to low inventories coupled with high demand and cuts in global capacity.

PMetal’s smelters are currently (July 2014) operating at amaximum capacity and have competitive production costs compared to its peers.

Smelters are being shuttered worldwide due to rising costs. At the same time, demand is expecting to grow by 6% annually due to higher usage in automobile, aerospace and other industries.

There is a global aluminium deficit of 930000 tones for 2014.

The PMetal also enjoys the competitive electricity tariff offered by Sarawak Energy Bhd.

Market observers gave a far value of rm6.00. Its PER was also raised to 15 times from 12 times.

PMetal's closet peer is LB Aluminium ....

KUB - A&W

It holds the A&W franchise in Malaysia and Thailand, plans to transform its landmark A&W restaurant in Section 52, PJ into two office towers with a GDV of rm263 million in 2015.

The project will mark KUB’s maiden foray into the property market. Its subsidiary has experience in constructing schools, colleges and stadiums. In 2013, the unit contributed 6% to the group’s revenue.

KUB Malaysia is maintaining its not for sale stance on its 40% stake in A&W Malaysia Sdn Bhd after the loss making fast food chain managed to turn around itself around and made a net profit of rm1.89 million in 2013.

KUB Malaysia said it will not be selling any of its assets or divesting any of its businesses for now (July 2014). Its gearing ratio reduced to 0.28 times and a business yield of 9% in 2013.

It had dismissed reports that it is bidding to build a waste to energy incinerator in Kepong but it plans to bid for more incinerator projects in areas such as Johor, Melaka, and NS.

KUB Malaysia, in a 40:60 JV with Berjaya Corp Bjd, operates a 700 acre landfill in Bukit Tagar, Selangor, under a long term government concession.

As for its agro business, KUB Malaysia targets to grow its land bank particularly in Sabah and Sarawak from its current 20000ha to 50000ha in the next three years from 2014.

The bulk of KUB’s net profit in 2013 was driven by its agro business, which contributed rm10.36 million in net profit.

KUB Malaysia counts UMNO linked Gaya Edisi Sdn Bhd and Minister of Finance Inc as its shareholders with 29.62% and 22.55% stakes respectively.

I-Bhd ... Focus On Property Development & Recurring Income

The master developer of i-City, a 72 acre urban development in Shah Alam is long for its next project as it gears up to reach a market cap of rm1 billion with a series of corporate exercise.

It will look beyond Shah Alam. Any project the group takes on after i-City will still be in the area of urban development as I-Bhd is establishing itself as an urban developer via i-City.

Once the corporate exercise is completed, it will be a rm1 billion market cap company. It is positioning for I-Bhd to go beyond i-City. In Dec 2013, it announced a series of corporate exercises including a share split, rights and bonus issue, as well as the issuance of both RCULS and ICULS raising rm702 million.

The sum will mainly fund I-Bhd’s investment property portfolio.

The rm502 million raised will be used to acquire two parcels of land in i-City for the Soho and Central Tower developments respectively as well as one parcel on Jalan Changkat Kia Peng. Meanwhile rm200 million raised from the rights issue will be used to fund I-Bhd shopping mall venture and other property development activities in i-City.

The corporate exercise will boost liquidity and increase its public shareholding spread. Currently (July 2014), executive chairman Tan Sri Lim Kim Hong holds some 75% of the company indirectly.

Assuming full conversion of the ICULS and RCULS, Lim’s shareholding will be reduced to 60%.

Its JEWEL is a mixed residential, hospitality and office project in i-City with a GDV of rm2 billion which is the final phase of i-City.

It expects its property development to double 2013’s revenue to rm95 million…

Its unbilled sales is about rm400 million.

For FY2014, it will launch developments with GDV of rm1.6 billion …. Rm820 million Grand Residence project on the Kia Peng land in the KLCC area and three towers in the i-Suite development in i-City.

The property development segment will remain a major contributor. The group is ramping up its property investment portfolio and leisure segments so that when the whole i-City development is completed it will still be able to generating recurring income from the two segments.

The property investment portfolio, comprising car parks and a date centre was valued at rm74 million. This will increase to rm1 billion upon opening of two i-City properties along with 65000 new car parks.

Currently (July 2014), most of the growth comes from more ticket sales per visitor rather than growth in visitors.

IRCB ... Debt-Free, Turnaround, Regularization Plan To Steer Out PN17

Bursa Malaysia had given nod to IRCB to embark on its regularisation plan to steer itself out of Practice Note 17 (PN17) status.

For the past one year or so, the new management had been putting its house in order and it is now (July 2014) on a better platform to rejuvenate the business.

IRCB chairman Lim Boon HuatHe and the MD, Cheang Phoy Ken, came into the company in January 2013, they have pumped in around RM44mil to revive the loss-making company and settle its debts.

IRCB, which has turned debt-free since September 2013, also showed a small net profit in its first quarter ended April 30, 2014.

For the first quarter ended April 30, 2014, IRCB posted a net profit of RM286,000 versus a net loss of RM10.06mil for the corresponding quarter last year.

For FY14, it recorded a net loss of RM19.26mil on a revenue of RM134.70mil.

IRCB’s proposed capitalisation plan mainly entails capital advances of RM44.8mil given in 2013 to be converted into 224 million new IRCB shares and a right to subscribe for 112 million shares granted to Cheang and private investor Keen Setup Sdn Bhd (KSSB). Cheang, together with KSSB, had advanced the RM44.8mil to IRCB to help the company settle its debts.

It expects to complete the regularisation plan within the next six months from July 2014.

Cheang, who is IRCB’s major shareholder with a 16.11% stake, is part of the new management seeking to turn around the fortunes of IRCB, which had slipped into losses from 2011 onwards. A year later, IRCB slipped into PN17 category after its unit, Comfort Rubber Gloves Industries Sdn Bhd (CRG), defaulted on RM71mil worth of debt obligations, which was more than 5% of the net assets of IRCB.

IRCB was once known as Berjuntai Tin Dredging Bhd and had adopted the present name in 2004 when it diversified into the synthetic and natural rubber glove industry a year earlier with the acquisition of CRG.

Cheang had bought the controlling stake in IRCB from Chip Lam Seng Bhd (CLS), which was the private vehicle of the Tan family, who once owned IRCB.

Cheang’s name may ring a bell, especially in the rubber glove manufacturing sector. He was formerly the MD and owner of rubber glove producer Seal Polymer Industries Bhd. Seal Polymer was acquired and privatised by rival Supermax Corp Bhd at RM1.10 a share in 2007 and subsequently delisted during the year.

The Cheang factor in IRCB makes the stock the one to watch. The market would be watching his return to the corporate world via IRCB after an absence of six years and whether it will make a difference.

After the capitalisation exercise, Cheang’s stake in the company may increase up to about 28%. Besides Cheang, the rest of the shareholdings are quite diversified, with the only other party holding above 5% being Lau Joo Yong, who had 6.25% as at June 2, according to IRCB’s 2014 annual report.

For KSSB after the regularisation scheme, it will remain a private investor in IRCB.

IRSB’s products currently (July 2014) account for close to 1% of the global market share of glove products. Malaysia is the world’s largest rubber glove exporter and IRCB produces about two billion gloves per year from its two manufacturing plants based in Taiping, Perak.

At the very top, Bursa’s largest glove manufacturer, Top Glove Corp Bhd, has a commanding 25% of the global market share with its capacity to produce 41.3 billion gloves per year. Supermax, meanwhile, produces up to 16 billion pieces of gloves per year, or approximately 11% of the market share of latex examination gloves.

Via its operating unit CRG, IRCB manufactures powdered and powder-free natural rubber latex and nitrile examination gloves, which are used in hospitals, nursing homes, industrial plants and food-handling processes. Lim says going forward, the focus will be on nitrile rubber gloves, which reap better margins.

Currently (July 2014), the company’s product composition mix is 50% nitrile and 50% natural rubber, unlike other glove manufacturers who may only focus on one type of glove. Its products are mostly exported to countries in the North American, Middle East, European, South American, African and Asia-Pacific regions.

The natural gas cost makes up about 6%-7% of the rubber glove manufacturers’ total operating costs.

MAS ... Best Time To Privatize Now !!!

In the midst of restructuring came another tragedy … the MH17. It will add more uncertainty to its fate. The worst available options – such as bankcruptcy and splitting up the group’s various business units.

The shooting down of MH17 though is not MAS’ mistake, but fear that the airline’s second crash incident within four months would further affect ticket sales, thus decreasing more of its cash flow. A further drop in sales arising from the MH17 incident could deal a severe to blow to its financials.

Nevertheless, the MH17’s victims will be covered by insurance. Hence it will result minimal direct impact on MAS’ cash flow.

Yet, it will be costly affair to rebuild trust in MAS as well as its image. In the interim, MAS will have to continue with its aggressive campaigns by slashing price.

With two major incidents within six months, consumer sentiment on MAS’ safety record has been deeply affected which further dampens its hope to turn around by 2015.

Furthermore, MAS’ position in the OneWorld alliance may be affected due to the poor record.

As MAS practices a load active yield passive strategy, having a poorer passenger turnaround will worsen its losses.

Worse us yet to come as the first quarter results did not fully reflect the impact of MH370’s disappearance on March 8 2014.

Some however opine the MH17 incident might not be as bad as that of MH370. In this case, MAS is a victim. No one can blame it for the crash.

The MH17 is the latest tragedy might be the last straw for MAS given its flailing state and daily cash burn rate of rm5 million.

Observers opine it is now (July 2014) best time for Khazanah Nasional to privatize MAS. Customer perception is bad, and it will take very long time to overturn that.

CIMB/MBSB/RHBCap Merger ... Will Hv To Bash Through All Opposition !!!

Malaysia's national banking union, Umno warlords and the Abu Dhabi government lining up against the proposed merger of CIMB Bank, RHB Bank and Malaysian Building Society Bhd (MBSB).

It was reported that Abu Dhabi had sent a special envoy to Putrajaya to convey unhappiness over the merger, saying that market forces should determine best price for RHB shares of which it owns 21.4%.

Sources said the message sent from Abu Dhabi to Putrajaya is that they will also reconsider multi-billion ringgit oil storage programme in the Petronas Rapid project in Johor if the bank merger goes through without considering the Gulf nation's interests.

They said Abu Dhabi's Aabar Investments PJS, which holds the RHB shares, will not agree to any deal below RM12 per share, which is the total cost incurred by Aabar when it acquired the shares from Abu Dhabi Commercial Bank in 2011.

The Gulf country is also not happy with the 90-day exclusivity given to CIMB Bank to negotiate the deal.

National Union of Bank Employees (NUBE) president Tan Eng Hong expressed disappointment with Bank Negara that it was not consulted over the proposed merger as he feared job losses that happened in previous mergers.

Politically, Umno warlords pointed out that the top executive in CIMB is Prime Minister Datuk Seri Najib Razak's youngest brother, Datuk Seri Nazir Razak.

Nazir has been instrumental in CIMB's previous mergers and acquisition deal for Southern Bank Bhd. The bank announced that Nazir will be made bank chairman while it sought his replacement by September 2014.

But some Umno warlords are wondering why Nazir was appointed to state asset manager Khazanah Nasional Bhd' board or was allowed to push the merger deal, saying it would not look so bad if Putrajaya had asked state-owned Maybank to conduct the merger with RHB and MBSB.

It is unclear if Najib is willing bash through all this opposition, given that he depends on goodwill from Umno, Abu Dhabi which is a heavy investor and also the unions.

The other main shareholder in the banks is the Employees Provident Fund, the country’s biggest pension manager, which owns a 14.5% interest in CIMB and 41.3% in RHB. The fund also owns 65% of MBSB. – July 16, 2014.

About SymLife

The company has a total landbank of 1600 acres with 1000 acres yet to developed.

Several projects are to be launched in FY2014 with a total estimated GDV of rm3.02 billion.

There will be two projects in KL one of which is Star Residences – a JV with United Malayan Land Bhd. Situated on Jalan Mayang, the 4.12 acre mixed use development has an estimated GDV of rm1.8 billion.

There is also the rm360 million 51G on a one acre freehold in Jalan Gurney.

Another project to be launched in FY2014 is a JV in Kota Kinabalu’s Signal Hill with landowner Mobuild Sdn Bhd. It is a rm500 million gated and guarded development.

Another project to be launched is Lot 162 in its ongoing township of Taman Tasik Prima in Puchong on a 2.5 acres of leasehold land with a GDV of rm92 million.

Another pipeline project is a JV in Kelantan with the state government with a GDV of rm420 million.

Apart from these projects, the develop is in the process of converting 625 acres of quarry land in Sungai long to residential land to 99 year leasehold to develop a new township, estimated worth rm6 billion.

It has made its name for itself with its luxury project Tijani in Bukit Tunku in KL.

Titijaya (More Valuation Upside)

It had proposed to raise its stake in Tenang Sempurna Sdn Bhd to 70% via its wholly owned subsidiary, Titijaya Res Sdn Bhd.

With the additional stake, Titijaya will own a total of 105000 shares or 70% stake in TSSB.

TSSB had received a provisional award for a JV on a 5 acre plot of land in KL.

The deal will lift its fair value by rm0.30 and bump up its GDV closer to rm10.00 billion from rm7 billion currently (July 2014).

It is located in one of the last few sizeable tracts of land within KL’s golden triangle.

Titijaya’s revalued net asset value gives a valuation range of rm3.19 to rm3.70. There will be further upside to this valuation as it plans to embark on more earnings and RNAV enhancing acquisitions and JV.

Notion (Focus On Smartphone Components)

Precision parts market is close on clinching two or three deals from Japanese and South Korean firms to manufacture smartphone components, which could bring in rm40 million to rm50 million in annual revenue.

If successful, the deals would start contributing to the group’s bottom line from financial year ending Sept 30 2015.

The results of the deal would be known in a few weeks’ time which would see Notion expanding beyond HDD and camera component manufacturing.

It has been hit hard by the continued weakness in both its HDD and camera segments, and the outlook and for both markets remains challenging. As such, the move to manufacture smartphone components would help reverse its fortunes.

If the deals go through, regardless of which firm it ties up with, the number of manufacturing units would be huge.

The manufacturing of smartphone hardware components will involve capex, initially in the multiples of rm10 million.

For the first half financial year ended March 31 2014 the group posted a smaller net loss of rm17.38 million on continued weakness in both its HDD and camera segments. This compared with a net loss of rm20.34 million a year ago.

It expects to see a turnaround in the third quarter and remain in positive territory in the fourth quarter.

For FY2013 ended Sept 30 Notion’s net profit halved to rm21.82 million compared with rm19.26 million in the previous year. Revenue shrank to rm224.19 million.

While it deemed the HDD segment as generally quite stable, the laptop and personal computer segments of the HDD market were affected largely to the increasing demand for smartphone phones and tablet devices.

To address the erosion, it is now focusing on the enterprise segment like other HDD players as fewer people are buying laptops.

It had shifted portion of its manufacturing bilk capacity segment of the HDD market from the single lens reflex camera market. There has been a shift of manufacturing machinery to the enterprise segment from camera parts manufacturing.

Its SLR camera parts sales have plunged by 40% of its usual sales revenue.

On the oil and gas segment that delivers equipment, this unit is in the midst of a turnaround which currently (July 2014) contributes less than 5% to Notion’s net profit and revenue.

On its 20% owned associate Alcyone Res Ltd, it will keep its stake in the Australian listed firm.

MBSB ... Listing Vehicle For Banking Group's Islamic Operations !!!

There is a possibility that MBSB could be listed vehicle for the Islamic banking operations of the proposed CIMB/RHB Cap/MBSB.

The hypothetical scenario assumes that CIMB Islamic Bank Bhd is priced at a price to book of 1.7 times year and RHB Islamic Bank at 1.0 times while MBSB will issue shares at a price to book of 1.8 times to acquire both entities.

This translates into an acquisition cost of rm9.7 billion and estimate CIMB-RHB could end up with a 58% stake in MBSB while the EPF’s shareholding would dilute to 27% from 65%.

There is a trading angle to MBSB. Uncertainties now (July 2014) are pricing and structure of the Islamic banking entities’ merger. If the scenario does not pan out, MBSB shareholders will still either get bought out or get to exchange their shares for those of the largest financial institutions in Malaysia.

The downside risk is of the merger falling through or the pricing/structure of the deal being significantly different from what have been envisages.

KGB (Turnaround & Diversify)

An ultra high purity gas and chemical delivery solutions provider, is ready to become a major EPCC contractor.

It had bagged a sizeable EPCC contract from BASF Petronas Chemicals Sdn Bhd for Package 1 of its rm1.6 billion aromas production facility in Gebeng, Kuantan. The job has given Kelington access to the chemical processing sector.

It has pinned its hopes on also securing Packages 2 and 3, which are larger contracts.

The group has also set its sights on EPCC works in the RAPID project.

It is poised to report strong earnings in FY2014 having benefited from a recovery in its core semiconductor business and diversification efforts over the last two years (2012-2013), which saw it increasing its exposure to the healthcare, oil and gas and palm oil industries.

Following the diversification, it can now better respond to market fluctuations in the semiconductor industry.

The group went through hard times in FY2012 and Fy2013 when the semiconductor industry slowed, causing its order book to drop and its earnings to dip.

It diversified into other industries while still maintaining the semiconductor market as one of its main contributors.

KGB’s existing relationship with IHC to land more projects as the healthcare service provider has another two hospital projects in Malaysia in KLCC and Iskandar Malaysia.

It had secured a LOI for the hospital project in KLCC worth rm77 million.

The group is also intent on making renewable energy a major source of profit in the long term. It has set up a subsidiary in Papua New Guinea to provide RE services as solar which has also similar plans in Indonesia.

Its order book stood at rm188 million.

KGB is 47% owned by Palace Star Sdn Bhd. The remaining 40% is owned by others include LTH with a 12.36% stake and Sun Lead International Ltd with a 9.19%.

Parkson Holdings (Capital Intensive Expansion)

Tan Sri William Cheng;s planned comeback in mall ownership and management seems to be gaining traction, with its flagship Parkson Holdings announcing the acquisition of three companies for rm59 million. This would expand the group’s retail portfolio.

The largest of the three acquisitions made was 60% of AUM Hospitality Sdn Bhd at rm48 million. The company’s 12 retail brands include American Burger joint Johnny Rocketsm sandwich retailer Auiznos and Indonesian restaurant Bumbu Desa.

Parkson paid rm8 million for 60% of Giftmate Sdn Bhd which produces premium gift related products, and rm3 million for 50% of menswear fashion apparel company Valino Intl Apparel Sdn Bhd. In Jan 2014, it paid rm15 million for watch retailer Wawatime Group of companies.

The purchases are in line with Cheng’s strategy of moving towards a mega mall owner/operator model.

These acquisitions are unlikely to contribute substantially to Parkson’s bottom line anytime soon. In addition, most remain wary of how the group is using its cash, given that the transition to a mega mall owner/operator will take time to bear fruit.

The long gestation period and the sharp fall in profit contribution from its China units have sent its share price to its lowest level (July 2014).

However Parkson has been buying back its shares on the open market and reward shareholders with share distribution.

The near term outlook for the retail group is bleak as its main operations in China are facing a stiff challenge. Currently (July 2014) 60% of the group’s revenue is derived from its China operations.

Although SSSG of China department stores is slowing, they are still posting flat to slightly positive SSSG. For Parkson, it is still posting negative to flat SSSG.

Observers opine China business is unlikely to recover as the demographics there is very different from what they have been and is not confident their mall ownership project there is going to take off as well.

Parkson’s expansion trail, which is capital intensive, could shrink the cash rich company’s bank account. As at March 31 2014 the company’s cash balance stood at rm2.83 billion while total borrowings amounted to rm1.7 billion. However its payables were high at rm2.16 billion.

Cheng aims to have at least 10 self managed malls in 10 years.

Parkson owns the KL Festival City Mall. The group is building a sea fronting mall on reclaimed land in Melaka and a mall in Qingdao, China.

Wah Seong ... Demerge O&G Biz

It may revive a plan to demerge its core oil and gas (O&G) business in 2015 that its various units are on stronger footing.

The demerger, which had been mooted in 2005, was shelved just months before the listing was to have taken place in the first quarter of 2012. The structure being considered then was a 1-to-10 share split for Wasco Energy, which houses the O&G operations, a dividend-in-specie of Wah Seong’s entire holding in Wasco Energy to the former’s shareholders and a public issue of new shares in Wasco Energy.

After a washout 2013, Wah Seong bounced back in the first quarter of 2014 with a net profit of RM20.6mil from a net loss of RM1.55mil a year earlier as its two major pipe-coating jobs, namely the RM627mil Polarled project for Statoil in Norway and RM232mil contract from Petroliam Nasional Bhd (Petronas) in the North Malay Basin, got underway.

Its pre-tax margins for pipe-coating have also recovered to 10% as at the first quarter from 5.33% in 2013.

Wah Seong had acquired 49% of Alam-PE Holdings (L) Inc, a joint-venture with Alam Maritim Resources Bhd, facilitating its entry into the offshore support vessel (OSV) business. Together with its 26.9% stake in brownfield O&G services provider Petra Energy, Wah Seong expects to reduce the wild swings in its earnings and establish a predictable baseline.

Wah Seong currently (10 July 2014) trades at 14.3 times projected earnings versus an average of 21.2 times for Malaysian O&G stocks, partly weighed down by its conglomerate discount.

Should a demerger take off, the group’s fast-growing renewable energy arm will have to fill the vacuum left by Wasco Energy.

Its renewable energy unit reported a pre-tax profit of RM64.63mil in 2013 on revenue of RM339.13mil, or a profit margin of 19.1%, easily the best of Wah Seong’s four main segments.

The standalone Wasco Energy deserves a scarcity premium for being among a handful of O&G pipe-coaters in the world with a market share of 10%. Once detached from the group’s loss-making plantation venture in Congo and low-margin industrial trading and services units, Wasco Energy could be valued at between 15 to 20 times earnings.

Alam-PE operates five OSVs, comprising an anchor handling tug supply vessel, two workboats and two supply vessels. All ships are on multi-year charters ranging from two to five years. The purchase will be immediately accretive to Wah Seong’s earnings, boosting its estimated net profit by 3.3% and 10.6% in 2014 and 2015, respectively.

What Wah Seong brings to the table is its international network in the oil-rich regions of West Africa, the Gulf of Mexico and the North Sea.

Both parties are already talking about cross-selling, and although their operational synergies are not readily apparent, Maccagno says they can leverage on each other’s customer base. He also hints at a possible three-way tie-up between Alam, Petra Energy and Wah Seong for marketing or operations.

Wah Seong is sitting on an RM1.7bil orderbook, 70% of which is for O&G work. The bulk of its RM700mil in outstanding pipe-coating orders will be completed in 2014.

The group has an orderbook of RM4bil if jobs from its associate and jointly-controlled companies is wholly accounted for.

The group is waiting on some RM4bil in tenders it has submitted for O&G jobs in South-East Asia, Central Asia and West Africa.

Wah Seong is also set to recognise profit from Petra Energy’s RSC in the second half of 2015 after production commences in all three fields, namely the Kapal, Banang and Meranti cluster offshore Terengganu. The RSC is a 70:30 JV between Thailand’s Coastal Energy and Petra Energy.

Gamuda (Contracts & Projects)

It was reported that Gamuda will bid for the role of project delivery partner for an integrated transportation project on Penang island worth rm5.5 billion. The project could be the next kicker to its earnings growth.

Meanwhile the delay in the formal approval for the KVMRT Line 2 project is due to the more for studies. The project will most likely go through and MMC-Gamuda KVMRT Sdn Bhd has already started the preliminary works.

Management is now (July 2014) more sanguine that the issue involving its associate SPLASH will be resoled.

The entire MRT construction expected to stretch till 2021, will provide long term order book visibility for Gamuda. In addition, clinching the Gemas-Johor Baru doubled track rail, KL-Singapore HSR and the Penang integrated transport projects will also boost its order boon significantly and enhance its future earnings growth.

The disposal of SPLASH could be resolved by end 2014 or early 2015 and the eventual pricing could be closer to its NAV of rm2.54 billion as at end Dec 2013.

About IOI Corp (Most Efficient Planter)

With the demerger and relisting of IOI Properties on Jan 15 2014, IOI Corp has become one of the world’s largest vertical integrated palm oil producers. Its businesses include producing FFB and speciality fats, and processing oleo chemicals. This vertical integrated business model allows products and services offered externally and consumed along the value chain to gain further value before reaching end consumers.

IOI Corp as Malaysia fourth largest plantation company, currently (July 2014) owns and operates 91 oil palm estates and 14 palm oil mills with annual milling capacity of 4.4 million tones of FFB.

As of March 2014 the company’s total planted area reached 172140ha of which 150643ha consist of mature oil palm trees. About 66% of its oil palm plantation land bank is located in Sabah and Sarawak, 27% in Peninsular Malaysia and the remaining in Indonesia.

IOI Corp also owns a 31.3% stake in Bumitama Agri Ltd, a Singapore listed plantation group with 115000ha of planted land.

Despite losing income from the property division after the demerging exercise and the unattractive tree age profile currently (July 2014), IOI corp is still one of the most efficient and respected integrated palm oil players in Malaysia.

It has one of the highest FFB yields among stocks with 24.46 tones against its peers and industry’s yield of 19 tones.

Scomies - Petronas

Its RSC from Petronas to develop and produce petroleum from the Ophir field, offshore Malaysia, has a tenure of even years with production volumes estimated at 5.1 million barrels.

The development cost is estimated at USD135 million with up to 120% recoverable and first oil expected to be produced in 18 months or Dec 15 2014.

The first 30% of revenue will be distributed to Petronas while the remaining 70% will cover operating expenditure, capex.

Scomies will continue to build up its capability and its looking at brownfield and marginal field opportunities in Malaysia and Indonesia, as well as Russia.

Graphene nano fluids are set to be a game changer in the company as it will help the company to offer new products a formulations and chemicals.

It expects to complete the product testing with Petronas and Myanmar in the third quarter of 2014 which will lead to product commercialization.

In the marine segment, the new accommodation barge is expected to be delivered in July 2014 and put to work by end 2014. It will continue to reduce its presence in the coal logistics business.

It is liked for its strong order book, earnings growth from the Ophir RSC and new grapheme products going forward.

Estimate that the RSC will contributes about rm40 million to rm50 million to Scomi’s bottom line.

Its latest order book stands at rm5.4 billion with Petronas accounting for 48% of the contract value.

CIMB - Datuk Seri Nazir Razak

Investors react negatively to news that Datuk Seri Nazir Razak was stepping down as its group CEO. He will remain with the banking group but as non executive chairman come Sept 1 2014.

Nazir will relinquish his position as group CEO to become its non executive chairman from Sept 1 2014.

It is worth nothing that Nazir will also chair a soon to be established executive committee of the board, whose role is to focus on key strategic matters, such as deciding on potential acquisitions and setting policies, and enhancing the board’s oversight functions.

With the executive committee in place, all key strategic decisions will ultimately still go through Nazir. As such his actual involvement in the group would not be any lesser than before.

Market observers opine it is unlikely that the appointment of the new group CEO will rock the counter for now (July 2014).

Expectations also remain low for CIMB given the challenging macro environment in Indonesia which accounts for nearly 30% of the group earnings.

There will still be lingering concerns such as leadership, longer term direction and this could weigh on its share price.

BFoods ... SSSG Still Growing !!!

Its Starbucks Coffee is doing well registering same store sales growth in the mid teens despite stiff competition and weak consumer demand.

The SSSG is still growing in double digits for fifth consecutive year.

BJFood shares half the profits of Starbucks in Malaysia by virtue of its 50% stake in Berjaya Starbucks Coffee Co Sdn Bhd, a JV between itself and Starbucks Foccee Intl Inc.

Aside from Starbucks Coffee, BJFood also operates food restaurants Kenny Rogers in Malaysia and Indonesia and Jollibean Foods in Singapore.

KRR was the second largest contributor to BJFood.

It is seeking actively strategic locations to build and operate Starbucks Coffee drive throughs, which will likely boost its sales.

Its Indonesia’s restaurants is still making losses which still need some gestation period.

BJFood opens its first Starbucks Coffee in Brunei.

Up to 65% of BJFood’s revenue comes from local operations and the rest of it from Indonesia, Singapore and Brunei. The company sees overseas sales contributing 40 % to revenue in the next two years from 2014.

With the Indonesia’s outlets still making losses, those in Malaysia contribute the bulk of the group’s profit followed by Singapore.

BJFOOD has been removed from the SC’s shariah compliant securities list.

Central Bank Meeting on 10th July 2014

BNM is expected to announce by next Thursday (10 July 2014) whether Malaysia’s first interest-rate hike in two years will happen in July 2014 or later.

The consensus view has been that Bank Negara would raise the country’s benchmark overnight policy rate (OPR) by at least 25 basis points (bps) from the current 3.0% to 3.25% before year-end (2014).

There are only three meetings left for the year ended 2014 for Bank Negara’s Monetary Policy Committee (MPC) to set the direction of the country’s interest rates. After July 10 2014, the next two meetings will be on Sept 18 and Nov 6 2014.

The OPR, which is essentially the rate at which banks lend to each other, has wide implication on the country’s economy. Changes in the OPR tend to be passed on to consumers through changes in the base lending rate, or BLR, of commercial banks and financial institutions.

KNM ... A Game Changer!!

Observer expects to bag a total of rm2.2 billion contracts as the firm is one of the main beneficiaries for the RAPID project.

With assumptions of 12% market share, expect the firm to bag rm54 million per annum based on contract duration of four years.

Market observers expect KNM’s net profit to grow at a stronger pace with compounded annual growth rate of 74% from FY2013 to FY2016.

Its balance sheet was expected to improve further with KNM’s net gearing falling to 0.16 times in FY2016 from 0.33 time in FY2013.

On the construction of the EnergyPark Peterborough that KNM expects will commence in the fourth quarter 2014. It is a game changer for KNM as its earnings contribution is expected to flow in FY2017.

Expect Phase 1 to generate around rm40 million to the company’s bottom line. Phase 1 may add potential relisting of Borsig in the next few years from 2014 might give better value to KNM.

Titijaya ... Low PER and Its Mall Is Worth >> Its Market Cap

It is experienced in sourcing value accretive land deals in mature residential neighbors.

It is currently (03 July 2014) trading at FY2015F PE of 9x when compared with its larger peers of 15x.

It is developing a mall in Shah Alam which will underpin the take up rate of its residential pre sales. Based on its estimated selling price of rm1000 psf, the mall is worth about rm1.3 billion which is more than its current (01 July 2014) market cap of rm847 million.

Its two land deals in Brickfields and Batu Maur since its listing in Nov 2013 would double its GDV to rm7 billion. The two projects are expected to be launched in FY2016.

Its net gearing stood at 0.1 times giving ample room for any acquisition of landbanks or projects.

It could be looking to pay out 20% of its profits as dividends.

SeaLink - Worst Is Over !!

Its net profit hit a peak in 2008 – at rm57.9 million before falling sharply with the onset of the global financial crisis. Earnings deteriorated over the next few years culminating in a net loss of rm10 million in 2012, weighted down by losses in shipbuilding arm.

The net loss was attributed to a slew impairments and provisions. Its earnings finally recovered in 2013 though net profit of rm12.5 million remains well below the pre crisis high.

Going forward, Sealink is cautiously optimistic that the worst is over and that 2013’s recovery will continue to unfold and strengthen , underpinned by the chartering of offshore support vessels business for the oil and gas sector.

In fact, the chartering business had held up fairly well over the past few years prior to 2014 even as the shipbuilding arm floundered. The company currently (April 2014) operates a fleet of some 42 vessels that include anchor handling tugs/supply, landing craft, multi-purpose platform supply vessels, tug boats and barges.

Going forward, demand for offshore support vessels is expected to strengthen with more project flows, including new deepwater projects, enhanced oil recovery from existing oilfields as well as projects tapping into previously non viable marginal oilfields.

Sealink has undertaken a fair number of kitchen sinking exercises in 2012 and 2013. This included nearly rm26 million in impairments of fixed assets, related to a ship building contract with BStead Penang Shipyard for two uncompleted vessels. As the company is upbeat that the clean slate will translate into better growth going forward.

The commissioning of two hybrid multipurpose platform supply vessels cum anchor handling tugs in the 2H2013 will underpin earnings in the current year.

It is planning to add two more similar vessels to its fleet by 2015 – 2016 as part of its fleet expansion and modernization programme.

The chartering business will be the key earnings driver going forward. The ship building arm is likely to continue to underperform for the foreseeable future.

It had two ship yards in Miri. But since the global financial crisis, utilization has fallen sharply and the activities are now consolidated in one location.

The company expects to break even in the current year and plans to start work on several vessels – for both in house and external sales – to be completed over 2015 – 2016 but the total value and contribution is not expected to be significant.

In the absence of additional provision, estimate its net profit to improve in 2014 and further in 2015 and 2016…

The company may resume dividend payments to shareholders should its outlook continue to improve.

Seacera - Aim To Be A Big Construction Cum Property Player

It had entered into a MOU with intelligent Fence Sdn Bhd to bid for a project to build and operate an electric security fence along Malaysia Thai border.

It has also ventured into the construction , property development and building material industries as well.

In Jan 2014, it acquired a 60% stake in SPAZ Sdn Bhd for rm3 million to make inroads into the construction sector. It had bagged a road construction project in Kelantan worth rm20.3 million.

It has also 500 acres in Sungai Long, Cheras with an estimated GDV of rm3 billion waiting to be developed.

The company had partnered two of China’s largest construction companies – Sinohydro Corp Ltd and Shanghai Construction Group Co Ltd – to bid for the 118 storey Warisan Merdeka.

SPZA has been in the construction for more than 20 years and has projects in hand that are worth rm350 million.

On June 2014, it had entered into a MOU with SPAZ, Sinohydro and Shanghai Construction to bid for the construction of Warisan Merdeka.

The pre qualified parties for the rm3 billion project are expected to be announced as early as July 2014. The tower is due for completion in 2018.

Seacera is bidding for the super structure of the project, not all of it, which is estimated to cost about rm1 billion to rm1.5 billion. The four parties will forms a JV or consortium if they get past the pre qualification stage.

International players will hold a dominant stake of 60% in the project while the local contractors will hold 40%.

In terms of funding of the mega projects, Seacera will not have a problem because it had completed two private placements and a rights issue.

Seacera is also looking at making property development a major part of its business, seeing that has a total of 570 acres in Cheras, Perak and Melaka.

Seacera bought the 250 acres in 2007. The value of the tract had doubled since Seacera had bought it. Once this development begins, expect a contribution of about rm300 million per annum for the next 10 years.

The group aims to be a big property developer.

Seacera has proposed to buy a 37 acre tract in Sri Alai, Meleka for m32.7 million and has 33 acre tract in Kamunting, Perak, where it plans to relocate its tile operation from Selayang.

On the company building material division, its tile business will remain the chief contributor to earnings. It had invested rm15 million in capex.

Its CEO sees Seacera becoming a property cum construction company in the next five years from 2014.