Kurasia Dec 2011

Kurasia: It announced that it had submitted an application to BNM for the approval of MOF to enter an agreement to possibly dispose of its wholly owned subsidiary Kurnia Insurans Bhd to AmG Insurance Bhd. It was reported that KAB would most likely sell KIMN at around 2.5 to three times the book value of the company. The book value is rm720 million as at March 31, 2011. The deal would be around rm1.8 billion to rm2.2 billion.

Gamuda Dec 2011

Gamuda: It is facing problem of depleting order book as its existing construction projects are reaching the tail end and on expectations of possible hiccups on the execution of the MRT project. The depleting construction order book would translate into weaker future earnings. For now Gamuda has some rm2 billion worth of outstanding building jobs, of which a large chunk comes from the Ipoh-Padng Besar double tracking project which is 71% completed. Nonetheless, the silver lining at this juncture is that MMC-Gamuda JV in which Gamuda holds 50% stake stands a relatively chance pf securing the tunneling works for the Klang MRT project.

As at Oct 31, 2011, Gamuda had cash of rm1.39 billion against debt of rm2 billion, translating into a net debt of rm613 million. Net assets per share stood at rm1.85.

YTL Corp/YTL Cemen Dec 2011

YTL Corp/YTL Cement: YTL Corp is making a voluntary share swap offer for YTL Cement at an offer price of rm4.50 per share. Under the proposed scheme, YTL Cement’s minority shareholders will be getting 3.17 YTL Corp shares for every existing YTL Cement shares held. Based on YTL Corp’s closing price of rm1.54, the takeover offer values the group’s cement unit at rm4.88 per share which is only a 6.12% premium over the market value. Also YTL Corp is offering rm2.21 for every rm1 in ICULS of YTL Cement. This translates into 1.56 YTL Corp shares for each rm1 ICULS. As at Dec 16, 2011, YTL Corp and its investment vehicle YTL Industries Bhd collectively hold 47.8% in YTL Cement.

YTL Corp is seen to be getting a good deal since YTL Cement is priced at lower valuation and is a cash rich balance and steady earnings growth over the past few years. Moreover the offer does not reflect a control premium. YTL Cement is trading at relatively low valuations ay 9.7 times PER and below price to book of 0.97 compared with its historical 10 year average PER and P/B of 10.67 times and 1.31 times respectively.

YTL Cement low valuations could be due to poor liquidity of the stock with top 30 shareholders owning 86.5% of the company as at Sept 30, 2011. Some 52.8% of the company’s already held by parties acting in concert. YTL Cement has rm1.374 billion in cash with some rm867 million bank borrowings as at Sept 30, 2011. The exercise will allow YTL Corp to gain access to YTL Cement’s net cash of rm508 million. The extra cash in YTL Corp’s war chest will be good for the group which could take advantage of the suppressed asset valuations amidst current economic uncertainties.

However, YTL Cement shareholders could easily be invested into YTL POWER, instead of having YTL Corp shares, if they had the cash and gain the exposure directly. YTL Power is the largest contributor to YTL Corp accounting for 81% of the latter’s earnings for FY201 ended June 30.

Jcorp/KFC/QSR

Jcorp/KFC/QSR: Sources say Felda is said to be among those considering to bid for KFC Holdings Bhd (KFCH) and QSR Brands Bhd should Johor Corporation (JCorp) make available its stakes. However, Felda has yet to table the offer and planned to discuss with JCorp regarding the proposal. Felda chairman, Tan Sri Mohd Isa Abd Samad, earlier 2011 expressed interest in buying these two companies as Felda has the experience and strength to manage big entities. However, while Felda may be interested, the chance of it happening is slim as JCorp is unlikely to be willing to part with cash cow. Going forward, Lembaga Tabung Haji (LTH), the largest single minority shareholder of KFC Holdings (M) Bhd with a 23% stake, is likely to hold the key to the proposed privatisation deal of the fried chicken retailer.

Gamuda/MMC/IJM Dec 2011

Gamuda/MMC/IJM: Expecting project flows to be more active in 1H2012 compared with 2H11 as most tenders will be due for award over the next few months (Jan 2012 & Beyond). Year-to-date total major project awards amount to RM8 billion. A shift towards projects of above RM500 million in value, a trend that is set to gain momentum as larger projects make tracks. This should be positive for the entire sector. The value of projects to be awarded in 2012 should be at least double the value in 2011 as infrastructure works for the MRT SBK line alone will be worth about RM18 billion.

Other large-scale projects to be awarded in 2012 are the RM6 billion West Coast Expressway (WCE), about RM1 billion extension of the New Pantai Expressway (NPE) and the RM7 billion railway double tracking project from Gemas to Johor Baru. There is likely to be excitement in 1H2012 in the form of the pending awards for the MRT SBK line. Of the 28 contractors in the running for the elevated, stations and depot works, 14 are listed companies.

Harvest Dec 2011

Harvest: A large block of 31.4 million shares in Harvest equivalent to 17.23% stake has crossed via off market trade for a total of rm7.85 million or 25 sen per share. The share vender could possibly be Affin Bank Bhd and the buyer is likely to be the company’s managing director. Other substantial shareholder are Raymond Chan with 15.64% and Paramountvest Sdn Bhd with 8.58% and Ng with 8.33% stake.

UMW Dec 2011

UMW: Source say UMW Holdings Bhd had made a similar presentation to the government’s investment fund. However UMW has confirmed that it had not submitted any bid to Khazanah Nasional Bhd to acquire its 42.7% stake in Proton. UMW also confirms that it is not in any form of discussion with any parties in this regard. It was reported that the Naza bid could be slightly higher than the rumoured price of RM6 to RM7 a share. A bid at RM7 a share values Proton at RM3.84 billion, which is a steep premium over its current market (15 Dec 2011) value of slightly over the RM2.1 billion mark.It is, however, still much lower than the national carmaker’s book value of RM5.4 billion or RM9.84 per share as at end-March 2011.

JCorp/Kulim/QSR Dec 2011

JCorp/Kulim/QSR: Doubts are the deadline for the joint takeover of QSR Brands Bhd and KFC by JCorp and CVC Capital Partners Asia will be met. If they cannot get the board to accept the offer and fulfill all of its conditions in one week (deadline Dec 21,2011), they stand to lose the deal. Also interested parties from the previous two bids may decide t o rejoin the bid with possibly higher bids. Tan Sri Halim and The Carlyle Group bid for QSR later 2010, offering rm5.60 and then upping the bid to rm6.70 per share. Both offers were rejected by both Kulim and QSR management. It is just 10 sen separates Carlyle’s and JCorp’s latest offer.

The acquirers need to secure the approval of at least 75% of minority shareholders in order for the deal to materialize. It is believed that the deal is likely to get the nod from KFC’s franchisor, YUM Brands, Inc given that JCorp will still be driving the operations and the offer is fair according to market observers.

Press Metal Dec 2011

Press Metal: When Phase 2 of Press Metal’s project kicks off, earnings are expected to soar as its new plant in Sarawak – which originally set to be commissioned in 3Q2012 – will triple its capacity to 360000 tonnes. Given the improvement in Press Metal’s bottom line and valuation, there has been talk that Koon, a substantial shareholder may take it private. This has been denied by the company’s top officials.

KUB Dec 2011

KUB: A few months ago, it came to be known that parts of KUB were up from sale. It was not a new development as KUB had said that it would be open to selling its food business, which comprises the A&W. Sources close to the company says there had been plans for KUB to look for partners given the highly competitive nature of business. There has been some interest from foreign funds for a possible partnership, while locally, Ekuinas also looked at it. KUB is said to be in the running to take over Shell Malaysia Ltd’s Liquefied petroleum gas business, which would be a tremendous boost to the company.

Proton Dec 2011

Proton: Khazanah Nasional Bhd will decide by Dec 2011 on selling its 43 per cent stake in national car maker Proton Holdings Bhd, people who were invited to participate in the bidding process.Khazanah had stressed that one of the core conditions for the bid to be accepted was that the party must buy the entire block. Buying the whole block from the state investment firm will trigger a general offer. The bids placed were between RM6 and RM7 a share.

Sources say Lotus Group Intl Ltd is being courted by a Chinese suitor interested in a possible stake in the US based automobile. Lotus has been dragged on Proton of late. This is mainly due to Lotus’ turnaround plan, which utilizes Proton’s financial muscle. Lotus has taken a 270 million pound loan from a consortium of six banks for a five year turnaround plan while the entire turnaround is expected to cost Proton some 480 million pound. The repayment of the 270 million pound syndicated loan is due from March 31, 2015, and the maturity date is six years from the first drawdown. A major concern is that Proton is only in the second year of a five year turnaround plan for Lotus. Proton expects Lotus to reach break even by 2014.

MAS Dec 2011

MAS: The cash level of MAS has decreased to less than rm1 billion, a trigger point that will normally raise the alarm for MAS. However its top management made it clear that there were no plans to call for a flesh round of fundraising. There were no plans for an equity fundraising and the management is confident of securing of financing soon to pay for new plans that the airline is scheduled to take the delivery. As at Sept 30, 2011, MAS’ cash position stood at rm968 million versus that rm1.53 billion in the preceding quarter.

Lion Corp

Lion Corp: Its net loss ballooned to rm98 million or 5.12 sen a share for 1QFY2012 ended Sept 30. The widening loss was despite revenue gaining by about 29% to rm687 million during the quarter. The higher prices of raw materials and an unrealized foreign exchange loss resulted in a net loss position during the quarter. The group operating cash flow also turned negative. Its current liabilities stood at rm3.52 billion (short term obligations and payables) far outweighed current assets of rm1.23 billion. Lion Corp remains debt heavy with total debt at rm2.81 billion versus cash of rm141.2 million. Total equity stood at only rm190 million as at Set 30, 2011. Lion Corp holds 79% of Megasteel with Lion Diversified holding 21% stake.

SP Setia Dec 2011

SP Setia: Sp Setia to lead a 5.5 billion pound redevelopment project in London came to a halt when lenders to the project declined its preliminary offer. SP Setia said the lenders to the Battersea Power Station development, located along the River Thames in South London , have decided not to engage further on its preliminary offer to take over the debts that amount to 300 million pound at this stage.

Had SP Setia been successful in acquiring the land, it would have had to raise 5.5 billion pound to develop the district in the central London . Though it would created a huge presence for SP Setia in London , but funding would have a challenge in the current global conditions. Since the deal has fallen through, SP Setia will probably be looking elsewhere to invest.

Tenaga Dec 2011

Tenaga has received a letter from the government that provides a fuel cost sharing mechanism to address the utility’s increased cost due to the gas shortage. Tenaga, Petronas and the government would each equally share the differential cost incurred by Tenaga due to dispatching on alternative fuels and also imports, from Jan 1, 2010 until Oct 31, 2011 amounting to approximately RM3.07 billion. Presently, Tenaga is facing a higher operational cost due to the extra cost of generation arising from running the power plants on expensive alternate fuels and power import from Singapore and Thailand . In view of the urgency of the matter and the critical financial situation facing Tenaga, Tenaga will be liaising as soon as possible with the relevant parties to implement this mechanism.

Sumatec

Sumatec’s auditors have expressed a disclaimer opinion in the company’s latest audited accounts for the financial year ended Dec 31, 2010. It reported wider losses in its audited results for FY ended Dec 31, 2010.

There was a variance of more than 10% between the loss after tax and minority interest in the announced unaudited fourth quarter result made on Feb 28, 2011 and the audited financial statement made on April 29 2011 for FY 2010. The audited net loss after tax and minority interest is RM35.703 million which is RM28.286 million higher than the unaudited net loss after tax and minority interest of RM9.417 million.

The difference is substantially due to the following arising out of independent valuations dated March 31, 2011 commissioned by the company of some of its current and non current assets pursuant to which the company has incorporated in the financial statement of the company for FY 2010 for any deficit arising from such valuation of the assets.



Sumatec's auditors SJ Grant Thornton was not convinced of the company's ability to secure new contracts.

The auditor highlighted that Sumatec did not impair goodwill on its subsidiary's consolidation and deferred tax assets of RM33.48 million and RM13.15 million respec-tively. It also added that the company's trade receivables of RM5.91 million have been long outstanding and not impaired.

In most cases, the auditors are just making sure that provisions are being made on uncollectable debts. The rule of thumb today is to make provision for debts that can't be collected in six months.

To recap, Sumatec had offered a renounceable rights issue to raise rm18.8 million.



Going forward, will Sumatec bring itself back to profitability and what will become to the assets left within the company? As a PN17 status company, it has 12 months to submit a regularization plan to the authorities.

For FY2010 ended Dec, it appears that losses narrowed for Sumatec due to higher profits at its shipping division and lower losses at its EPCC segment. Revenue also has more than doubled to rm59.2 million.

It last awarded project was in March 2010 when it received a rm49.2 million contract.

Over the past two years, it has been actively working to streamline its operations to concentrate on its EPCC business that serves the O&G industry.



Sumatec’s total borrowings stand at rm578 million and it has negative cash flow of rm230000.

Its auditors’ report points brought up for the disclaimer of opinion included issues on impairment losses and whether the company would be able to recover the receivables stated in the FY2010 results.

It was unable to concur with several assumptions made by Sumatec, such as the use of discounted cash flow projections based on current and future projects, which the auditor notes are an area of uncertainty.

It is uncertain about the recovery of rm72 million worth of receivables as well as the fact that its current liabilities exceed its current assets by rm140 million.

iDimension

Manufacturing software solutions provider iDimension Consolidated Bhd is looking at further growth despite the uncertain outlook for semiconductor manufacturers, given the bearish sentiment in the global economy.

About 57% of its RM14.95mil revenue for the financial year ended Dec 31, 2010 (FY10) was derived from the semiconductor sector. Services-based industries such as aviation and oil and gas accounted for 23.2% of revenue last year, followed by the electronics sector, 12%. The rest came from other manufacturing industries.

iDimension currently had an order-book of RM12mil, of which RM10mil are overseas jobs in semiconductor sector.

The group, which has four subsidiaries and more than 60 employees, was set up in 2001 as a value-added reseller of third-party software. Since then it has progressed to become a developer of its own proprietary manufacturing software solutions.

The group has seen impressive growth in the past three years, recording respectively an after-tax profit and revenue of RM4mil and RM7.7mil in FY08, RM6.5mil and RM11.93mil in FY09, and RM8.24mil and RM14.95mil in FY10.

In-house software solutions contributed 69.6% to its FY10 revenue, followed by third-party software, 15.4%. The balance was from systems maintenance.

Among iDimension's major customers are Unisem (M) Bhd, Renesas Semiconductor KL Sdn Bhd, Lexmark Int (Philippines) Inc and STATS ChipPAC Malaysia Sdn Bhd.

Besides Malaysia , the group provides software solutions to Indonesia , Singapore , China , the United States , the Philippines , Japan and Thailand .

Malaysia is the group's principal market, accounting for 51.8% of revenue in FY10. Singapore was the largest contributor (16.7%) to its overseas revenue last year, followed by China and Indonesia , which contributed 11.7% each.

Malaysia will still be its main market in the future.

iDimension's initial public offering (IPO) was oversubscribed by 6.09 times. The IPO involved a public issue of 38.23 million new shares of 10 sen each at 38 sen apiece. It also involved a private placement of up to seven million shares.

Of the RM14.5mil proceeds, 34.42% will be used for expansion in the group's key markets, 30.97% will be for research and development, 5.69% for working capital and 14.46% as capital expenditure. The balance 14.46% are for listing expenses.

Meanwhile, iDimension posted an unaudited net profit of RM4.2mil on revenue of RM3.98mil its first half ended June 30, 2011. The high net profit was due to the recognition of negative goodwill under other income, which arose from the acquisition of subsidiaries in the first quarter.

KBunai/Petaling Tin

Dated March 2011 …

Cambodia’s China Central Asia Group (CCAG) is teaming up with KBunai in a beachfront mixed development project in Kamabunai which would see CCAG pumping in RM310 million and the latter providing the land.

Karambunai Corp Bhd would provide 75 acres of land for the project valued RM270 million, which is the first phase of the Karambunai integrated resort city (KIRC) development. CCAG, on its part, would invest RM310 million

Both parties signed a joint venture agreement to undertake the project. Under the JV, CCAG will be investor, contractor and joint developer and provide seed capital of USD$100 million (about RM310 million) as a revolving fund to carry out and undertake the development at its own costs.

The JV is in line with the strategic implementation plan of KIRC, that is that Karambunai Corp shall provide the land and its strategic partners, in this case, CCAG shall provide the necessary funds to unlock the value of KIRC.

This strategy shall also allow KCB to achieve its corporate objective of minimising debt in developing KIRC and the vision of creating a win-win venture with strategic partners who bring in capital and expertise.

Most of the funding in the unincorporated joint venture is from CCAG and KCB’s portion of the funding would be from its own funds.

Dated April 2011 …

A consortium comprising gaming tycoon Tan Sri Chen Lip Keong’s group of companies and Prism Crystal Enterprises Ltd are set to invest RM9.6 billion to develop the Karambunai Integrated Resort City in Sabah with the project’s landowners.

The resort is situated on a 1,100ha piece of land, owned by Karambunai Corp Bhd and Petaling Tin Bhd, on the Karambunai peninsula.

Chen has substantial interest in both companies and is the president of both.

The low-profile businessman is the single-largest shareholder of Karambunai Corp, holding a 43.9% stake. Petaling Tin has a 34.08% block.

Petaling Tin has not signed any agreement with any parties pertaining to the resort project and there are no corporate developments that warrant future disclosures to the stock exchange at this juncture.

Little is known about Prism Crystal Enterprises, which is said to be a special purpose vehicle formed to participate in the Karambunai Integrated Resort City project.

At present, details are scarce on the RM9.6 billion investment in the resort but it is learnt that Chen’s two other listed companies — steelmaker FACB Industries Inc Bhd and Hong Kong-listed gaming and leisure company NagaCorp Ltd — are not part of the plans.

Chen, who founded NagaCorp, is currently the group’s CEO and executive director and he holds a controlling 63.07% stake in the group. NagaCorp owns and operates NagaWorld, the only licensed casino in Cambodia’s capital city, Phnom Penh .

Chen also appears to have considerable clout with the Cambodian government, having been appointed as economic adviser to Cambodia ’s prime minister and an adviser with ministerial status to the Cambodian government.

In March 2011, Karambunai Corp had entered into a joint venture with Cambodia-based China Central Asia Group Co Ltd (CCAG) to develop the Karambunai resort’s first phase, the Karambunai Beachfront mixed development project.

CCAG, a shareholder of Prism Crystal Enterprises, will invest a seed capital of US$100 million (RM306 million) as a revolving fund for the joint venture. Karambunai Corp’s subsidiary, Karambunai Resorts Sdn Bhd, will contribute 75 acres of land valued at RM270 million to the joint venture.

Prime Minister Datuk Seri Najib Razak said the Karambunai Integrated Resort City is expected to contribute a gross national income of RM9.3 billion and create about 11,002 jobs by 2020.

Plans for the Karambunai resort include attractions like a water theme park, mangrove research centre and spa village. The project will also house luxury residences, hotel accommodation, retail space and eco-nature facilities. However, questions still linger as to whether the resort will eventually feature a casino despite the company denying reports on the plans.

Karambunai Corp already has hospitality operations in Sabah with its five-star Nexus Resort Karambunai and Nexus Golf Resort. The Karambunai Integrated Resort City will be eveloped over eight years from 2012 to 2019.



Dated June 2011

Tan Sri Dr Chen, who owned 43.9% stake in Kbunai unveiled plans of the multi billion ringgit eco nature integrated resort in Sabah . He has since brought in Cambodian investor along with a consortium comprising his own companies to invest in the Karambunai Integrated Resort City project.

But the question remains as to whether the Malaysian government will issue another casino licence let alone one to Karambunai

Meanwhile his gambling resort in Cambodia has been growing steadily and raking in the returns. Chen’s HK listed NagaCorp Ltd owns operates NagaWorld , Cambodia ’s largest gaming resort which houses a casino and a hotel.

Recently, NagaCorp is said to have signed deal with Chen to acquire a hotel, gaming and retail project located next to the existing NagaWorld site in the capital city of Phnom Penh .

Dated Oct 2010

KBunai has clarified that it has not received any notification from the government nor has it signed any agreement with or have shareholding in special purpose vehicle (SPV) originated by its controlling shareholder, together with a Beijing-based contractor, to develop an integrated eco-nature resort in Karambunai.

Karambunai Corp's controlling shareholder is low-profile tycoon Tan Sri Dr Chen Lip Keong.

The promoter was a SPV specifically incorporated to assess the feasibility of investing in the Karambunai Peninsula . Together with its local and overseas consultants, including its financial consultant China Construction Bank International, the SPV aims at bringing in foreign direct investments to Malaysia and has presented proposals to the Malaysian government to assess the relevance and importance of developing Karambunai, Sabah to spearhead the growth of tourism in the Eastern corridor of Malaysia.

Up to date, Karambunai Corp has no shareholding in the SPV, nor has it received any official notification from the government or signed any MoU (Memorandum of Understanding) or agreement with the SPV to develop Karambunai yet.

However, both the management of Karambunai Corp and SPV have concrete, specific, clear time-line plans and commitments to the Malaysian government to attain the desired results under Economic Transformation Programmes as envisaged by the Government.

Its board of directors was of the opinion that there were not yet corporate developments which merit disclosure.

KCB said its property was included in the Budget 2011 speech after its Nexus Karambunai Hotel general manager attended the Performance Management and Delivery Unit-driven national key economic areas tourism lab together with other members of the private and public sectors.

The Prime Minister Datuk Seri Najib Tun Razak in his budget speech said Nexus Karambunai, a renowned resort in Sabah , had committed to developing an integrated RM3bil eco-nature resort, the first in the world, by leveraging on its natural beauty and uniqueness.

Najib added that the project would commence in 2011 and the Government would give RM100mil.

UEM Land

UEM Land is a strong candidate for inclusion as an index component of the FBM KLCI being the largest property stock on Bursa Malaysia by market capitalisation and landbank size now.

Despite the company's rather premium valuation against its peers, the stock's potential inclusion into the barometer and positive news flow from Iskandar region would give the boost for an upward rerating.

The acquisition of Sunrise which was completed in February 2011, boosted UEM Land's market capitalisation to about RM11 billion.

Once included as one of the index components, it will be the only pure property stock in the index.

It will raise the company''s profile and visibility, and subsequently justify its premium valuation given that the FBM KLCI top 30 stocks are typically used as a benchmark portfolio.

UEM Land is the flagship company for the real estate investment and development businesses of UEM Group, which is a wholly-owned by Khazanah Nasional, the government's investment holding company.

UEM Land was a good proxy to the government's strategy to propel the domestic economy towards high income status, particularly under the Economic Transformation Programme.

Due to its size and the growth prospects, the company's liquidity was the highest among the listed property stocks as foreign and local institutional interest on the stock had picked up.

Sarawak Plantation

Salcra is understood to be eyeing a 30.3% stake in Sarawak Plantation now held by Cermat Ceria Sdn Bhd.

Cermat Ceria’s shareholders are Tapak Berigin Sdn Bhd (46.2%), Datuk Abdul Hamed (19.9%), Datuk Hasmi (19.7%), Mohamad Bolhair (8.4%) and Perspektif Prestij Sdn Bhd (5.8%). The second largest shareholder is the State Financial Secretary of Sarawak with a 25.4% stake.

Tapak Beringin is close associates of Sarawak Chief Minister Taib Mahmud. Lately, there have been several boardroom changes at Sarawak Plantation, indicating that Tapak Beringin may be letting go of their grip in the company.

There could be a premium for the controlling block.

Sarawak Plantation had a net tangible assets per share of rm1.82.

Although Salcra is a unit of the state government, a MGO may not be triggered.

It is unclear what Salcra has in mind in buying up the controlling block in Sarawak Plantation.

The board of Salcra is made up of mainly state officials, some of whom is close associated to chief minister of Taib.

Ramunia

It is said to be still searching for a compatible partner despite the number of prospective players. According to sources, it is now eyeing some of UMW Holdings Bhd’s O&G assets. But it is not certain which assets Ramunia is looking at specifically.

LTH holds a 25.17% stake in Ramunia as at Dec 2010.

However, UMW official denied that this was the case.

As at Oct 2010, it had cash reserves of about rm130 million, with almost no debts. Since then, it has been on the lookout for core assets.

Ramunia has a July 13, 2011 deadline to submit a regularization plan to the regulators. Things have been looking up over the past years (2010) following a push towards more local O&G activity, as well as LTH’s efforts to facilitate deals with other O&G players.

In 2010, Ramunia has signed several deals, including one with Coastal Contracts Bhd and the acquisition of a fabrication yard in Pulau Indah from Oilfab Sdn Bhd for rm83.3 million earlier 2011. It has also been reported that Ramunia is in talks with Coral Alliance Sdn Bhd, but nothing has come of it yet. The companies see synergistic value between Coral Alliance’s hook up and topside maintenance business and Ramunia’s oil rig fabrication activities.

Industry observers say Ramunia is trying to position itself as a major O&G player as part of its plan to have its PN17 status removed. The plan could include UMW’s three jack up rigs.

With the rigs, it could venture more deeply into marginal oilfields. It has already signed an agreement with two firms. It could also utilize Coastal’s Sandakan yard for its operations since the parties have signed a MOU.

Another view is that it teamed up with both Coastal and Coral Alliance, either in a full merger or as a JV company, it could become a sizeable fabricator. Ramunia is also said to be looking at yards in Indonesia .

Ramunia’s Fabricators Sdn Bhd is one of the few major fabricators in Malaysia that has been licensed by Petronas. The company has expressed that it would like to position itself as an integrated EPIC contractor.

Muhibbah

Muhibbah will benefit from the ramp-up in construction of projects such as the Klang Valley ’s Mass Rapid Transit system, as well as a slew of property developments on privatised state-owned land, such as the 3,300 acre Rubber Research Institute (RRI) land in Sungai Buloh. The focus on the oil and gas (O&G) sector will serve it well as the government allocates more spending under the Economic Transformation Programme (ETP), and with national oil giant Petroliam Nasional Bhd (Petronas) planning to spend RM250 billion in capital expenditure over the next five years. Meanwhile, a likely resolution of longstanding issues surrounding the APH project in Johor, for which Muhibbah has been owed some RM340 million since mid-2009 for works completed but not paid for, could also lift sentiment on the stock. The sums owed are listed as receivables and have not been written down.

MMHE/Sime Darby

MMHE is believed to be looking at taking over either some or all of the assets of Sime Darby Bhd’s oil and gas unit, which is parked under the latter’s troubled energy and utilities divisions.

It is said that MMHE, the heavy engineering arm of Petronas started looking at the assets several months ago. However, it is believed that the plan is still in the preliminary stage has not gone to the board yet.

MMHE has been asked by its parent, Petronas to increase its asset base, as more O&G jobs are being rolled out.

Among the O&G assets that Sime Darby owns are two fabrication yards – one in Pasir Gudang and the other in Teluk Ramunia, Johor.

MMHE is not the only interested party, as there are at least two other O&G players eyeing Sime Darby’s O&G assets.

However, MMHE declined having entered any discussions with Sime Darby for the purchase of any O&G assets. Nevertheless, as an organization, it needs to constantly evaluate additional revenues for growth. This can be achieved through an organic approach. Identification of potential assets is only one of the many steps involved, but it may or may not eventually result in an actual acquisition.

MMHE could become Malaysia ’s largest fabricator should it succeed in acquiring Sime Darby’s O&G assets such as the fabrication yards.

Despite the losses, Sime Darby’s president and group CEO had indicated that it would not hive off the O&G assets, as opportunities still abound for the division. A source says there are differing views among Sime management on whether the group should dispose of its O&G assets.

Meanwhile, both of Sime Darby’s motor and plantation division are doing well.

Industry observers say MMHE, a wholly owned unit of MISC Bhd, should have no problem in obtaining financing for Sime Darby’s O&G assets, as the former is sitting on a big cash pile.

As at Dec 3010, its cash and cash equivalents stood at rm1.79 billion. The company also has virtually no borrowings. Some of the cash is from proceeds raised in its IPO a year earlier.

As at Dec 3010, MMHE had an order book of rm3.6 billion, the bulk of which is for its engineering and construction activities.

Expecting MMHE to clinch between rm4 billion and rm5 billion in new jobs over the next 12 months (April 2011 & Beyond). Furthermore, MMHE will also see new overseas orders.

BHIC

BHIC hopes to conclude its contract to construct littoral combatant ships (LCS) for the Ministry of Defence soon to achieve its target of doubling its order book in 2011.It expects the details of the contract to be ironed out by the middle of 2011.The contract would be in the billions of ringgit and would be valued much higher than the first batch of vessels. BHIC is looking forward to participate in oil and gas projects given Petroliam Nasional Bhd’s (Petronas) substantial capital expenditure programme and plans to develop marginal oilfields. BHIC is among seven companies that have a fabrication licence by Petronas.

IJM Corp

Its order book stood at RM4.1 billion currently, of which 80.5% was from domestic projects. Management appears to be upbeat on its order book prospects. Assuming IJM Corp bags half of the RM4 billion West Coast Expressway, the jobs from the two expressways would total RM2.7billion to RM2.9 billion, which will boost its order book by 65% to 70%. Apart from highway jobs, IJM Corp had also tendered for Package B of the light rail transit (LRT) extension (RM2 billion) and would be bidding for the elevated portion of the Sungai Buloh-Kajang mass rail transit. Also there will be more private sector jobs for the group when the redevelopment of the Rubber Research Institute land and Sungai Besi Airport kicked off.

IOI

Industry observers say IOI Corp Bhd's brush with the Roundtable on Sustainable Palm Oil (RSPO) is not expected to affect the group's operations for now as it will merely delay the certification of new estates and do not expect the suspension to affect the group's operations. Given the group's willingness to work with RSPO, this issue will be resolved amicably in due course.The issue was expected to be resolved amicably in “due course” given the group's willingness to co-operate. IOI has so far obtained RSPO certification for seven out of its 12 palm oil mills in Malaysia and has set a target of having all of its 78 local estates audited by year-end (2011). In the event that the current issue was not resolved quickly, it could eventually affect IOI Corp's sales to key markets like Europe .

POS

Should the government relax the restrictions on the use of land that the Federal Land Commission (FLC) has given to Pos Malaysia, the redevelopment of some of the land could probably earn the group hefty gains. However, all this is dependent on the (amendment of) the Postal Land Act. Thus far, there have been no updates on the proposed amendment to the Act which would allow additional non-post-related services to be carried out on the land. If the amendments are revised favourably in terms of land use, Pos Malaysia’s valuation would increase.

Faber

Following the announcement of the non-renewal of two of Faber’s UAE contracts, the price plunged by 23% and has since maintained at this level. It is believed that all the negative news from the non-renewal of UAE contracts has been priced in. As such, Faber will now refocus on managing its 12 hospitals and clinics in the UAE while at the same time expanding to military hospitals there. Faber’s 15-year concession to provide hospital support services in government hospitals is expiring in October 2011 and the company is currently awaiting approvals from the Ministry of Health and the Economic Planning Unit. The risk of losing the government concession is relatively small.

YTL Power

YTLP, which has a 21-year PPA with TNB until 2015, has a positive potential extension for its first generation PPA as a power plant in operation is better than an idle one. However concerns are over its lower internal rate of return from the power purchase agreement (PPA) extension. The power purchase agreements (PPAs) for the first generation power plants, including YTL Power’s plants, will start to expire beginning 2016. If talks to renew the first generation PPAs’ fail, the government would have to plant up 10, 000 MW of power in the next two to three years. In partnership with Enefit, YTL Power estimates that it can produce power via oil shale 30% cheaper than electricity generated via imported oil and gas feedstock.

DBE/QSR/QL

There are already plans for OSK Investment Bank to sell the stake to another poultry related firms as DBE does not add synergistic value to the investment bank.

Potential buyers are said to be include companies such as QSR Brands and QL.

Its rm12 million from the rights issue will be used to repay its debts. This will decrease its gearing to 0.8 times.

DBE has a full poultry integration system, with breeder farms, hatcheries, broilers and processing plants. About 30% of its chickens are supplied to Tesco, 5% to KFC outlets and the rest to restaurants and hotels in Perak. However DBE has been making losses since FY2006.

However market talk that QSR & QL had turned down the offer

OSK Holdings Bhd’s wholly owned subsidiary OSK Investment Bank Bhd (OSKIB) has emerged as the single largest shareholder of poultry outfit DBE Gurney Resources Bhd, with 180.99 million shares or 26.88% of DBE’s enlarged issued share capital.

Its holding surpassed DBE executive chairman Datuk Ding Chong Chow whose interests via vehicle Fortune Junction Sdn Bhd amount to 25.52%.

OSKIB had ended up with the DBE shares as it had undertaken all unsubscribed shares in DBE pursuant to a renounceable rights issue exercise. The rights issue, which involved 400 million new shares of 10 sen each in DBE, with 200 million free detachable warrants, had only received 52% acceptances from DBE shareholders at the close of acceptance on March 17 2011.

As the underwriter for the rights issue, OSKIB had taken up the rest of the unsubscribed rights shares and is now sitting on some RM10.9 million paper profits. It is estimated that OSKIB’s subscription cost for the 180.99 million DBE shares was RM18.1 million, based on the issue price of 10 sen per rights share.

Apart from the said number of shares, OSKIB had also received 90.5 million free DBE warrants from the rights issue.

It is worth wondering what could be in store for Perak-based DBE, which had been loss-making over the past four financial years.

As at FY10 ended Dec 31, DBE had racked up accumulated losses of RM40.91 million. Meanwhile, total borrowings amounted to RM72.6 million as at Dec 31 versus RM116,000 cash.

Nevertheless, the company had managed to narrow its losses, from RM9.79 million in FY08 and RM18.73 million in FY08, to RM2.9 million and RM202,000 in FY09 and FY10 respectively. Operationally, there was also a significant improvement in its operating profit before working capital changes, which rose to RM13.09 million in FY10 from RM9.52 million in FY09.

The completion of the rights issue may put DBE on a stronger financial footing. Of the RM40 million proceeds , the company plans to set aside RM25.9 million as working capital while RM12 million will be earmarked to repay its bank loans.

DBE had also said it planned to boost the utilisation rate of its existing plant to improve on its profitability.

FCW/GBH… dated April 2011

Both which have Tan Sri Robert Tan as a common and substantial shareholder, have a total of 30.59 acres of land in Segambut, located strategically next to Mon’t Kiara.

Any potential development of the land is likely to spark interest in the two companies as they do not have strong core businesses to generate attractive profile.

GBH is looking the feasibility of developing the land. The company will make the necessary announcements when such plans materialize. As for FCW, it has been a long term plan of the board to earmark the property for redevelopment, but it has yet to embark on any development plan.

FCW bough its 15.73 acres tract in 2007 from GBH at rm86 million cash and subsequently leased back to the latter for its warehousing needs. The land was valued at rm88.26 million as at Aug 2 2010. This translates to about rm129 psf. Meanwhile, GBH’s parcel of 14.86 acres was valued at rm119 million or rm194 psf. The value of the land booked by the two companies is relatively lower than the transacted prices in that area.

As FCW and GBH’s market cap was rm128.7 million and rm329 million respectively based on 07 April 2011 closing price. If the land were developed over 10 years at a 15% profit margin, the two companies could book a total profit of rm41.25 million annually.

The Segambut land’s potential is not reflected in the market cap of both companies, although both FCW and GBH are trading at a premium to their book values. FCW and GBH net assets per share stood at 64.98 sen and rm1.02 as at 31, Dec 2010 respectively. That is because the market value of their land is not reflected in their books.

FCW’s profit for six months ended Dec 31, 2010 with 60.44% from the lease of its Segambut land and warehouses to GBH. Its telecommunications division and contract manufacturing business brought in only rm1.79 million.

Besides the sustainability of the income stream from GBH is uncertain as the clay pipes and sanitary ware marker is still in the red. Nevertheless, competition in the ceramic building materials industry remains intense with imports from China . So unless GBH returns to the black with a sound core business, its ability to pay FCW rent totaling rm5.3 million a year remains uncertain.

But what is certain is that both companies have plans to develop the 30.59 acres of land. And considering its proximity to Mon;t Kiara and Sentul East along Jln Ipoh, the potential development could lead to a possible re rating of both companies when a development plan is finally unveiled.

Shell/KUB/BStead/KKB/Ramunia … dated April 2011

Sources say Royal Dutch Shell plc has shortlisted five potential bidders for its downstream LPG business in Peninsular Malaysia.

It is learnt that the shortlisted companies are BStead, KUB, LTAT (Ramunia/Alam Maritim) KKB and IPS.

The disposal is similar to Shell divesting its LPG business in other parts of Asia in concentrating on the upstream business.

BH Petroleum, a wholly owned subsidiary of BStead Holdings, is said to be the favorite in the shortlist, based on its reach and brand presence. BStead is said to be trying to grow its petroleum related businesses, including LPG. Contributions from the petroleum business has yet to play a significant role in the group earnings,

The other strong contender is said to be Sarawak based KKB Engineering. If KKB wins the bid, it would have a significant presence in the LPG business where Shell is one of the top two LPG distributors in Malaysia .

KUB has an LPG distribution business that is based mainly in East Malaysia . However, the distribution is small and not a significant contributor to the company’s overall business.

As for LTAT, it has some interests in the O&G business via Ramunia Bhd and a JV with Alam Maritim Bhd. However, these listed companies are involved in the upstream O&G industry. Also, Ramunia does not have a core business and it would beneficial for LTAT if it were to purchase the Shell LPG business.

The dark horse is IPS as the former Shell chairman Datuk Saw is one of its directors.

MPHB/MWE..

Investors will now be watching if diversified MPHB acts according to expectations or springs another surprise.

The moves to transform into a pure gaming company may soon result in the divestment of MPHB’s non core assets such as its stockbroking, general insurance and hospitality businesses.

The company plans to raise up to rm1 billion from the disposal of non core assets. The best tack for the company is now to wait for the right time to seek the highest possible for its non core assets.

MPHB has not won over many investors because its non core businesses have had little earnings visibility. But should it embark on a divestment programme, investors would have more confidence in the company and this will lead to a re rating of the stock. This will unlock cash from the businesses, leaving MPHB an NFO counter.

It is worth noting that MPHB Surin also owns a 32.48% indirect state in another listed entity. MWE Holdings Bhd, which is also fairly diversified in nature. MWE has businesses covering garments, electronics, a golf and country club, plantation and properties. Surin’s non independent non executive director and had served as MD of its spinning mills division in 1974.

Three other MWE directors also have served at MPHB or its subsidiaries, namely MWE executive director Lim Kong Yew, independent non executive director Lawrence Lam who is currently Magnum Corp Sdn Bhd’s CEO and Datuk Yogesvaran who also sits on the board of Muli-Purpose Insurans.

Multi Purpose Insurans is one of MWE’s 30 top largest shareholders, with a 3.45% stake equity stake while MPHB itself owns a 1.29% stake.

Industry observers says that MWE may be a convenient place to house MPHB’s property division, as there are no immediately apparent synergies between MPHB’s stockbroking and insurance businesses with MWE’s own divisions.

Century Software.. Dated March 2011

The eventual implementation of a GST stands to benefit Century Software.

Market speculation has it that the financial management software solutions provider could be awarded a government contract worth Rm100 million in the near future. However, the company has already announced that it has submitted bids for several jobs worth about rm200 million.

It is likely that the government may spend more on information, communication and technology in 2011 as it has not done so for a while. So Century Software stands to benefit, especially with the proposed implementation of the GST.

Given that the Royal Malaysian Customs has already taken steps to introduce the idea of the GST to the people, it appears likely that it will be implemented sometime in the second half of 2012 or after the General Election.

One of the largest providers of accounting software to government agencies, it would benefit as every government agency would have to upgrade systems.

The implementation of the GST was indefinitely postponed in Oct 2010 to allow the Ministry of Finance to engage with all segments of society on the imposition of the broad based tax. However, industry observers say the rollout of software could take place very soon given that it may need 15 to 18 months to ensure full compliance.

However, while it is a dominant player in providing government accounting software platforms and maintenance, this also represented a single customer risk as it is highly dependent on the public sector.

The services provided by Century Software are not regarded as being in direct competition with other listed companies.

Following its listing on Jan 31, 2011, it saw the exit of substantial shareholder MAVCAP which disposed of seven million shares. The government established MAVCAP in 2001 to provide financial support of growing ICT companies.

Although the government has indicated that the imposition of the GST is imminent, the real concern lies in whether the rollout of the tax, and consequently the relevant accounting systems will be done across the board and in a timely manner. Only if this implemented, will it be all systems go foe Century Software.

Benalec.. Dated March 2011

Its specialised niche in marine construction has been reaping high profit margins in the generally low-margin construction industry. Now, the company is also shaping up to be a major landowner and developer, as it will receive some 177.3 acres (70.92ha) of land in Melaka in exchange for reclamation works.

It is open to joint ventures with property developers for the prime seafront land it is reclaiming in Melaka, broadening the company’s previous practice of selling plots of reclaimed land outright.

The company is an integrated marine construction firm with business activities spanning marine construction works, vessel chartering, marine transportation, ship maintenance and building, and marine support services.

Although the company’s first priority is to sell its reclaimed land, Benalec is in talks with several property companies on prospective partnerships. The current trend is for developers to share profits with landowners instead of paying cash upfront for land.


For outright disposals, the company could also sell plots of land along with concept plans for development and would take the step of zoning certain plots for mixed development as an added value for buyers.

Benalec’s unit Jayamas Cekap Sdn Bhd had entered into an agreement with Melaka government-owned Yayasan DMDI to undertake reclamation works for the latter on a portion of the coast in the Kota Laksamana area in Bandar Melaka.

The Melaka government had granted Yayasan DMDI a concession to reclaim the land, which will measure about 250 acres upon the completion of reclamation works.

Jayamas Cekap will be entitled to 177.33 acres of the land upon completion of the reclamation works, which will be retained on its balance sheet as “Land held for sale”. The remainder 72.67 acres will be surrendered to the Melaka government and Yayasan DMDI as consideration for the deed of assignment (DoA) from the latter.

Jayamas Cekap will also have to fork out some RM4.58 million for various payments in respect of the DoA.

The reclamation works will be funded by internally generated funds and bank borrowings, the breakdown of which is not currently available.

Sources say the deal is significant for Benalec as the land concession holds immediate development potential for Benalec once reclamation works are complete.

The Kota Laksamana project is expected to draw attention from property developers as it sits on prime seafront land within Melaka’s city centre and can be further developed for mixed residential or commercial purposes. Benalec may be entering into strategic partnerships with reputable developers to monetise the deep embedded value of this land.

Benalec is expected to fetch over RM30 per sq ft from the Kota Laksamana land having received about RM28psf for an adjourning piece of land in 2009.

Benalec stands to reap a net gain of about RM116 million from land disposals alone over a three-year reclamation period.

Funding is not an issue for Benalec since the group raised up to RM100 million from its IPO in January 2011.

Benalec had also secured another contract , from Glenmarie Cove Development Sdn Bhd, to undertake earth and river protection works for RM37 million at a project in Klang. The scope of works includes earthworks, reclamation works, ground treatment and protection works. It is scheduled for completion within 14 months.

The company is estimated to have clinched new contracts worth RM608 million for the financial year-to-date, compared to RM77 million in 2010. Estimates new order of RM650 million for Benalec for the financial year ending June 30, 2011.

The newly secured RM37 million reclamation contract in Selangor would undoubtedly put Benalec on a stronger footing to clinch more such contracts, both at home as well in the region.

The contract is the second, the group has secured within March 2011, following the Kota Laksamana project in Melaka.

Revenue and profits from reclamation contract works are recognised on a percentage-of-completion method. This is determined on the proportion of actual reclamation contract costs incurred for works performed against the estimated total reclamation costs where the outcome of the project can be estimated reliably.

For land reclamation contracts which are settled in kind, it is able to proportionately recognise the land portion at each stage of completion and the contract sum for such land portion is included as “amounts due from contract customers”.

Benalec’s niche in marine construction and land reclamation gives the company much higher margins than its construction peers.

For its financial year ended June 30 (FY10) , Benalec’s gross profit margin was 48.6% while profit before tax and profit after tax margins were 58.9% and 50.1% respectively. In its second quarter ended Dec 31, Benalec reported a net profit of RM18.91 million and revenue of RM45.22 million. For the six months, its net profit stood at RM48.87 million while revenue was RM97.43 million.



Going forward, its prospects for growth are based on future projects in the pipeline located in Penang, Melaka, Iskandar Malaysia , Port Klang and the Sarawak Corridor of Renewable Energy.

Spritzer… dated April 2011

What’s Up? … dated April 2011

Mineral and drinking water bottler is finalizing a deal to increase exports to Japan to alleviate the shortage there due to radioactivity is seeping into there drinking water.

It expects the seal using present and new dealership channels. The dealers have informed them that there is high demand for mineral water and are expecting to finalize additional supplies to Japan in coming week.

The company says additional orders from Japan may boost its shipment to Japan by 30% to 40%.

It has a fairly healthy balance sheet with strong operating cash flow. As at Nov 30, 2010 it had net dents of rm61.24 million. Its net cash generated from operating activities increased to rm14.24 million as at Nov 30.

It is an associate of its single largest shareholder … Yee Lee Corp Bhd, which has a 46.4% stake. Its next largest shareholder is Amanah Raya Trustess Bhd which holds 5.17% stake.

The additional orders from Japan will help the company expand its market shares. But it may only be temporary as the business is such that when margins improve, more companies jump on the bandwagon.

UEM Land/Jetson/Bolton… dated April 2011

What’s Up? … dated April 2011

Three foreign players among the 10 companies are short listed by the master developer

UDA for the JV deals for the redevelopment of the Pudu Jail site in KL.

It is learn that Dubai based Dama Group is proposing to team up with UEM Land , while the state owned China State Construction Engineering Corp has tied up with Kumpulan Jetson.

Singapore’s Keppel Land Ltd is also said to have submitted proposals for the integrated mixed development project, tentatively named the Bukit Bintang Commercial Centre. Sources say UDA has also short listed seven local companies – Bolton Bhd, Bina Puri, IJM Land, MRCB, Sunway Group, YTL Land and the Naza Group.

Front runners for the JV opportunities in BBCC are said to be Bolton and the UEM Land-Damac and Jetson-China Construction JVs.

The 20ha tract for BBC will be divided into six plots, and will be built in phases over 10 years.

UDA chairman Datuk Nut Jazlan said that the winners of the JV bids will be announced by end March 2011 after each company presents its proposals to UDA’s board on Feb 2011.

The development of BBCC could see the JC partners jointly develop portions of the project or construct buildings on various plots. This means that jobs could be given to several parties among those shorlisted.

BStead/ESSO.. dated April 2011

What’s Up? … dated April 2011

Sources say BStead and its parent LTAT are believed to be eyeing Exxomobil Intl Holdings Inc’s 65% stake in Esso Malaysia Bhd.

It is learnt that Exxonmobil’s stake is up for sake as the oil major is looking to exit its operations in Malaysia , given the relatively low margins here and its preference to focus on exploration and production of oil.

It is not known what price the stake will be transacted.

The value in ESSO is the franchise value of its chain of petrol stations. Esso has a net asset value of rm2.81 per share as at end Dec 31, 2010.

BStead could at a later stage, after its takeover of ESSO, inject BStead Petroleum Marketing Sdn Bhd, which markets and distributes petroleum products through the BH Petrol china of petrol stations.

BStead holds a 70% stake in BPM while the remaining 30% is held by LTAT, which holds a 59.28% stake in BStead.

Esso clarified that it was not aware of any plans to take it private. Nonetheless, its share price continued going north.

The transactions if go through could expand BStead’s network of petrol kiosks. Additionally, Esso has a range of its own lubricants, engine and other speciality products and a refinery in Port Dickson.

Esso has come rm95 million in cash and cash equivalents as at end 2010 while total borrowings were rm616.3 million.

This would be the first time BStead is strengthening its smaller divisions via acquisitions. It had done so through Pharmaniaga. BStead had said it will focus on inorganic growth to provide shareholder value.

BStead had cash and cash equivalents of rm399 million while borrowings of about rm3 billion as at 31, Dec 2010. Net operating cash flow of rm174 million in FY2010.

Coastal Contracts.. dated April 2011

What’s Up? … dated April 2011

It is considering selling its major stake to a strategic partner as it plans to diversify into the fabrication business.

Its executive chairman Ng Chin Heng says the company is in talks with parties on a possible M&A exercise as it hopes to secure fabrication jobs from Petronas Caragali. The sale of the a major stake to a strategic partner is possible in the future.

In Jan 2010, its wholly owned subsidiary signed a MOU with Ramunia to explore the possibility of jointly bidding for fabrication jobs and are finalizing the details of the arrangement and discuss a possible tie up.

LTH is a substantial shareholder in both Coastal and Ramunia.

Coastal Contracts’ derived 95% of its revenue from its shipbuilding activities, but expect the fabrication business to contribute to turnover in 2HFY2011 when its yard is ready.

With Sabah set to become Malaysia ’s oil and gas hub, they are looking to enter a new phase of growth. Thus, it is diversifying into the offshore structure fabrication business and a strategic shareholder will come in handy.

While it is most likely Coastal Contracts’ talks with Ramunia will be fruitful since they have a common shareholder, there are other possible suitors in the industry which Coastal Contracts can pair with such as Alam Maritim Resources and Singapore listed Swiber Offshore.

It is currently in a net cash position with rm150 million cash and borrowings of rm51.5 million.

Its shipping business is also growing strongly with an order book of rm760 million.

Kenanga/ECM.. dated April 2011

What’s Up? … dated April 2011

Sources say ECM and K& Kenanga Holdings Bhd are believed to be exploring a potential merger.

It is learnt that the parties related to the shareholders of both entities have explored the possibility of ECM’s shareholders selling out to Kenanga.

If the deal takes place, the combined entity will be able to free up rm500 million in cash. At present, both of them have to keep rm500 million cash deposits separately with BNM which comes to rm1 billion.

Tan Sri Azman Hashim is the single largest shareholder of ECM with 23.5% stake. He has been looking to exit the investment bank as he also controls AmBAnk Corp. Co founder Lim Kiann Onn and Datuk Seri Kalimullah own 9.48% and 3.97% are also said to be open to selling their stakes.

As for Kenanga, its largest shareholder is CMSB which is said to be keen on driving Kenanga. CMSB has a 25.07% stake in Kenanga and is sitting on a huge cash pile after its completion of the sale of its interest in UBG Group. Deutsche Asia Pacific Holdings Ptd Ltd held a 16.55% stake as at March 31, 2010.

Merge Energy Bhd

What’s Up? … dated Feb 2011
Several interesting changes have been observed lately at civil engineering outfit Merge Energy Bhd.

Its CEO Yusof Badawi, who has led the company since May 2003, stepped down, paving the way for Datuk Abdul Jalil Abdul Karim to take over the helm of the company.

Merge Energy also stated that Abdul Jalil had surfaced as a substantial shareholder after acquiring 50% of the paid-up capital of private company Desa Binapuri Sdn Bhd which has 19.4% equity interest in Merge Energy.

Datuk Muhammad Azaham Abdul Wahab controls the remaining 50% in Desa Binapuri. However, Muhammad Azaham, 70, retired as chairman in September 2010. His position was taken over by former executive director Datuk Raja Shah Zurin Raja Aman Shah who is now the executive chairman. Raja Shah was appointed to the board of Merge Energy in January 2010 as executive director.

Then in October 2010, Maseri Basirah hived off his 10 million shares or 14.93% in Merge Energy to Datuk Mohd Said Mat Saman. Maseri had been a substantial shareholder in Merge Energy since September 2002.

It remained unclear at this juncture what Abdul Jalil and Mohd Said’s plans are for Merge Energy.

Abdul Jalil also controls MPRI Pipes Sdn Bhd (formerly known as Musa & Rahman Plastic Industries Sdn Bhd). MPRI Pipes posted a net loss of RM1.03 million from RM16.67 million in revenue for its financial year ended December 2009.

MPRI has its mainstay in the manufacturing of plastic products and pipes. MPRI’s shares are held by another private company Jalur Cahaya Sdn Bhd, which posted a net profit of RM10.7 million from RM106.85 million revenue for FY December 2009.

Jalur Cahaya, with core businesses in non-revenue water reduction and water treatment, is controlled by private company Darul Jutaria Sdn Bhd, an investment holding company. Darul Jutaria’s shareholders are Abdul Jalil and Aidil Abdul Aziz, who equally control the company. The two are also directors of all three companies. It is also worth noting that former chairman of Merge Energy, Muhammad Azaham, was at one time a director and indirect substantial shareholder of Jalur Cahaya.

In 2008, Jalur Cahaya had awarded Merge Energy a RM90 million civil works contract for the design and construction of permanent meter installations, leak repairs and maintenance of district metering zones among others in Selangor.

Mohd Said meanwhile controls Sri Sekamat Enterprise Sdn Bhd, a company involved in general construction and which in FY08 suffered a loss of RM2.07 million from RM20.79 million revenue.

Several of Sri Sekamat Enterprise’s jobs have involved the water sector as well such as rehabilitating reservoirs.

For its nine months ended October 2010, Merge Energy posted a net profit of RM810,000 from RM21.76 million in revenue.

CCM/CCM Duopharma.. dated April 2011

What’s Up? … dated April 2011

Sources say US-based GlaxoSmithKline Pharmaceuticals plc (GSK) is eyeing a controlling equity stake in local generic drugs maker CCM Duopharma Biotech Bhd.

The source said the acquisition was in line with the trend in the global pharmaceutical industry, in which large players were scouting for takeover targets in emerging markets, as more expiring patents on drugs were generating a significant portion of their earnings.

CCM Duopharma is the largest generic drug maker in Malaysia . This could possibly bode well for GSK in the long run.

In Dec 2010, GSK proposed to take over Maxinutrition Group Holdings Ltd, a UK company that manufactures protein-enhanced functional nutrition products from Darwin Private Equity for £162 million (RM789 million) in cash, including the debt repayment. Its president John Clarke once said the acquisition was a “demonstration of GSK’s strategy to expand through appropriate bolt-on acquisitions that meet its strict
financial criteria”.

The world’s largest drug maker Pfizer Inc had in October last year announced its acquisition of Tennessee-based King Pharmaceuticals Inc for US$3.6 billion (RM11 billion) so that it could offer a fuller spectrum of treatments for patients across the globe who are in need of pain relief and management. Pfizer was paying a 40% premium for the acquisition. CCM Duopharma’s present undemanding valuation could possibly meet GSK’s criteria.

CCM Duopharma is hardly traded on Bursa Malaysia . One reason could be the company’s shares are tightly held. CCM Marketing Sdn Bhd, wholly owned subsidiary of Chemical Company of Malaysia Bhd (CCM), owns 73.37% shareholding in the company.

CMM’s net assets stood at per share of RM1.13 as at Dec 31, 2010.

CCM Duopharma and its parent company CCM said they had “no knowledge of any such move”.

Whether GSK is indeed buying CCM Duopharma remains unconfirmed observers pointed out that while the potential divestment of the controlling stake in CCM Duopharma could help CCM pare down its large debts, but the sales would also create a vacuum in the group’s earnings portfolio.

For FY10 ended Dec 31, CCM has total borrowings of RM836.5 million, consisting of long-term borrowings of RM311.7 million and short-term debts of RM524.8 million, against a cash balance of RM210 million. This translates into a net debt of RM626.5 million.
CCM’s net gearing stood at a high of nearly 85%, based on shareholders’ fund of RM740.76 million.

On the flip side, the disposal of the equity stake in CCM Duopharma would mean a loss of a steady income stream.

For FY10, pharmaceutical division is not the biggest contributor to CCM’s revenue, but it is the second most profitable one after chemicals division. Pharmaceutical business generated RM50 million to CCM’s revenue and RM21.6 million to the group’s pre-tax profit.

Furthermore, CCM Duopharma is rather generous in terms of dividend payment. For FY10, the company paid a total dividend of RM20.48 million, according to its cashflow statement.

Holding 73.37% in the generic drug manufacturer, CCM is expected to receive dividend income of RM15million. The amount will be handy for CCM to pay for about half of CCM’s net interest expense of RM32.2 million for the year.

Unlike its parent, CCM Duopharma has a clean balance sheet that allows the company to be generous in dividend payment.

It had a net cash of RM4.58 million as at Dec 31, 2010, comprising RM10.42 million in long-term borrowings, RM8.33 million in short-term borrowings and RM23.33 million cash.

For FY10, CCM Duopharma’s revenue totaled RM131.44 million, up 6.2% from RM123.8 million from the previous fiscal year while net profit amounted RM28.7 million, marginally lower against RM30.2 million the year before.

CCM Duopharma’s financial performance remains relatively resilient. For the past five years between 2005 and 2009, the company posted a compounded annual growth rate of 5.7% and 4.43% in revenue and earnings per share, respectively.

CCM could be possibly giving up one precious gem if it were to sell CCM Duopharma.

MyEG.. dated March 2011

Its Prospects … dated March 2011

MyEG Services is Malaysia ’s dominant e-services player, providing a wide range of government-to-citizen (G2C) services.

The company, which started with a concession to provide drivers’ licence theory tests for the Road Transport Department (JPJ), has expanded its portfolio to offer additional services from JPJ and other government agencies. It now offers 19 services from seven service suppliers. Apart from an online presence, MyEG also has a network of 65 e-service centres nationwide.

The company’s earnings are poised to grow rapidly in the next few years, driven by (1) continued growth in the road tax renewal service, (2) increasing network, coverage and market share, with its expanding number of e-service centres, and (3) new products and services, the most important being the immigration and customs service tax monitoring initiatives.

MyEG is now embarking on a new phase of growth as it expands its services to include those from the Immigration Department (for maid and foreign workers’ annual permit renewal), and most significantly, a customs tax-monitoring service with the Royal Malaysian Customs.

Under the customs tax monitoring scheme, MyEG has a 40% stake in a special purpose vehicle (SPV) that will link up point-of-sales (POS) terminals of businesses that are subject to customs’ service taxes, such as restaurants and entertainment outlets.

The SPV will spend RM100 million on capex, but will receive a 20% share of the taxes that were previously found to be under-declared, with the lion’s share of 80% going to the government.

This will give MyEG a potentially large wildcard from FY June 2013 onwards. However, it is too preliminary to assess at this juncture, as much depends on how much tax was under-declared in the first place. The service will also be compatible with a GST regime that is likely to be implemented at a later stage, giving the company a potentially wider earnings base.

Another key earnings driver will be the immigration services, where MyEG will offer online foreign worker permit renewals, potentially tapping a two million people market.

In the near term, the company’s earnings will continue to be driven by the road tax renewal services which are growing rapidly. The service currently attracts over 5,000 road tax renewals a day, with an estimated 30% market share. The drivers’ licence theory tests and e-insolvency searches, meanwhile, will provide steady income.

Its earnings ability to surprise on the upside from FY12 onwards will be due to the customs tax monitoring, immigration and other services in the pipeline.

The underlying market for MyEG’s services is very large, with relatively resilient and recurring demand. Demand is also being supported by the growing popularity of online services and transactions for convenience and cost reasons.

Road tax renewal and JPJ service: Launched in April 2008, the road tax renewal service has been the main driver of MyEG’s growth over the last two to three years, with the original drivers’ licence theory tests and insolvency search services providing stable income.

The service is likely to continue seeing strong growth in the near term, as it is still rapidly gaining market share and acceptance after a heavy advertising and brand-building exercise.

MyEG has two main business models for the road tax renewal service — an online and a kiosk-based one, both of which have been very well-received.

The market for road tax renewal services is supported by a large number of vehicles and drivers, with road taxes that need to be renewed annually, annual insurance premiums and drivers’ licences renewal due every five years. Other JPJ services in the pipeline include e-application of vehicle registration numbers and online vehicle ownership transfer.

Immigration services: MyEG soft-launched its new e-immigration service in April 2010. This involves the online renewal of foreign workers’ permits. At present, the service caters for domestic maids, but will be extended to cover other foreign workers at a later stage.

Once the service is fully in place, employers of foreign workers — such as factories, businesses and households (for domestic maids) can apply for the renewal of their foreign workers’ permits online, hassle-free and at minimal costs. Most renewals are currently undertaken by agencies, who charge high fees of around RM200 per renewal, especially for domestic maids.

MyEG is offering a cost-effective solution, charging RM50 per transaction, excluding the government levies. We understand the specially printed permits will be personally delivered to the customers’ homes or offices by MyEG’s personnel team, who will affix it to the workers’ passports for security reasons.

With an estimated two million foreign workers in Malaysia , of whom about 250,000 are domestic maids, the potential for this service is large — and recurring. For the domestic maid permit renewal service, we understand MyEG currently has about 70-80 cases a day. Once the service is expanded to cover other workers, we expect volume to increase significantly.

Customs tax monitoring: The Customs tax monitoring service, in conjunction with the Royal Malaysian Customs, will be the most significant of the new services proposed.

This involves linking up POS terminals of businesses that are subject to customs’ sales and service tax (such as restaurants and entertainment outlets) to minimise under-declaration of taxes and administrative paper work.

The service will be undertaken via a SPV, where MyEG will hold a 40% share and several other private parties the balance.

The SPV will undertake the programme and install a software at each POS terminal for the link-up — at the SPV’s cost. We understand the cost is as much as RM5,000 per full system terminal, for those without compatible POS terminals. In return, the SPV will receive a share of the additional service and sales taxes collected.

Earnings visibility for the new service is uncertain at this juncture, as it depends on how much sales and service taxes were “under-declared” in the past, which cannot be ascertained. According to management, the sharing ratios between the government and the SPV are 80% and 20%, respectively, of the under-declared taxes, with a base growth imputed.

The potential market is large.

Equally though, it is a high risk-high return investment on the part of the SPV, given the sizable capex needs. Total capex is estimated at RM100 million for the first phase, of which RM20 million has been spent. Substantially more may be needed for the later stages and when GST is eventually implemented.

The SPV plans to start with a pilot test phase in May 2011, which will continue until the end of the year, with a full rollout of the service in Jan 2012. The pilot phase will involve some 2,500 premises under licence categories C and D, while the actual rollout will capture about 15,000 outlets under these two categories.

Its infrastructure is compatible with a goods and services tax (GST) system as it is essentially a POS system to capture the value of sales. With the likely implementation of GST at a later stage, the scope of the SPV’s business should expand as most businesses will be captured under the GST system, unlike the current service tax regime, which focuses on selected businesses.

MEGB.. dated Feb 2011

Its Prospects … dated Feb 2011

Masterskill turned in a strong set of results for the financial year ended Dec 31, 2010 with full-year net profit rise RM4.9% to RM102.14 million while revenue climbed 15.5% to RM315.74 million.

With earnings per share of 33 sen, the stock is trading at a historical price-to-earnings ratio (PER) of just 5.6 times.

Masterskill also has a strong balance sheet, with RM99.41 million in net cash and offers shareholders a decent dividend yield. It paid an interim dividend of seven sen on Oct 13, 2010, and is expected to announce a final dividend for the year.

Since November 2011, the company’s share price, however, has come under selling pressure on concerns over PTPTN funding. With some 95% of Masterskill’s students reliant on PTPTN loans, those concerns were justified. However, some quarters argue that the concerns may be over-blown as all private colleges would have students who are reliant on PTPTN funding — although to lesser degree.

Moreover, PTPTN, as a national education funding scheme, is unlikely to be discontinued given its important social implications.

Of late (Feb 2011), Masterskill’s share price slumped further as foreign selling exacerbated, notably by two US-based funds, Fidelity Management and Research (FMR) LLC and SmallCap World Fund. After months of selling, both FMR and SmallCap World Fund ceased to be substantial shareholders of Masterskill on Feb 10 and Feb 16 2011 respectively.

Masterskill, on the other hand, is in the education industry which is relatively resilient, defensive and cash generating.

JIT News - Zeland.. 25/3/2011

Zeland may require a new shareholders mandate if it were to continue disposing its shares in IJM Corp Bhd, which is key to distress financial position. Even after the aggressive disposing exercise in the past year, Zeland is estimated to still have around 66.56 million in IJM shares with a current market value of just over rm400 million. However, its mandate by shareholders to dispose 30 million shares in the IJM Corp has fully utilized.

The sale of the remaining IJM shares will be key to repairing Zeland’s finances, although the company could be left without much operating assets if the shares are sold. The IJM shares could easily cover its borrowings. AS at Dec 31, 2011 Zelan had rm36.51 million in cash and rm203 million in borrowings or net debt of rm166 million. The company had rm471 million in payables and rm552 million in receivables.

It also faces the further prospect of losses from its JV in Indonesia .

MCIL.. March 2011

Its Prospects … dated March 2011

MCIL’s profit may overtake Star’s by FY11 ending March 31.

For 9MFY11, MCIL’s net profit rose 48.6% to RM139 million from RM93.5 million a year earlier.

MCIL is the publisher of local Chinese papers such as Sin Chew Daily, Nanyang Siang Pau, China Press and Guang Ming Daily, as well as Ming Pao in Hong Kong .

MCIL’s earnings are expected to soon overtake that of industry leader Star.

The English market is already saturated. At the same time, MCIL is already a market leader of the local Chinese print media with growing and loyal Chinese readership.

The English print media has been challenged by the proliferation of free alternative news providers on the Internet while local Chinese-based alternative news is scarce.

There are very few Chinese blogs or news portals online compared with English sites. As such, MCIL should see its readership grow or maintain. On the other hand, more people are going online to obtain English news, which leads to declining circulation in the English print medium.

For FY10, MCIL recorded a net profit of RM134.2 million or 7.96 sen a share. It also recently distributed 50% of its profits, or 3.98 sen per share, as dividends to its shareholders.

MCIL’s earning also grew 48.7% year-on-year for its 9MFY11 compared with Star’s slower growth of 27.8% for FY10.

MCIL has strong balance sheet with RM272 million cash and no borrowings.

In only two years since MCIL emerged as part of a merger in 2008, its net profit had soared 118% to RM134.2 million in FY2010.

MCIL: 1.35 (MBB), 1.65 (OSK)

JIT News - Benalec, RGB.. 23/3/2011

Benalec: Its specialized niche in marine construction has been reaping high margin construction industry. It is shaping to be a major landowner and developer as it will receive some 177.3 acres of land in Melaka in exchange for reclamation land. It is open to JV with property developers for the prime seafront land it is reclaiming in Melaka, broadening the company’s previous practice of selling plots of reclaimed land outright. Although the company first priority is to sell its reclaimed land, it is in talks with several property companies on prospective partnerships.

Earlier it announced that its unit had entered into an agreement with Melaka government owned Yayasan DMDI to undertake reclamation works for the latter on a portion of the coast in the Kota laksamana area in Bandar Melaka. The Melaka government had granted Yayasan DMDI a concession to reclaim the land, which will measure about 250 acres upon the completion of reclamation works. Benalec will entitled to 177.33 acres of land upon completion of the reclamation works, which will be retained on its balance sheet as ‘Land Held For Sale’. The remainder 72.67 acres will be surrendered to the Melaka government and Yayasan DMDI.

The reclamation works will be funded by internally generated funds and bank borrowings. Funding is not an issue since the group raised up to rm100 million from its IPO in Jan 2011.

Going forward, observers view the deal is significant for Benalec as the land concession holds immediate development potential for Benalec once reclamation works are complete. The Kota Lakasamana project is expected to draw attention from property developers as it sits on prime seafront land within Melaka’s city centre can can be further developed for mixed development. Based on estimates, Benalec stands to reap a net gain of about rm116 million from land disposals alone over a three year reclamation period.

1.90 (AMResearch), 1.42 (OSK), 1.95 (MBB)


RGB: It hopes to pare down its borrowings and set aside cash for working capital following the commencement of operations at the Cebu Park Mall Satellite Casino in the Philippines under an agreement in the Pagcor.

The group had borrowings of rm1289 million and US$6.17 million as at Dec 31, 2011.

According to the company, the operation of RGB’s latest outlet, which has 108 slot machines, in the Philippines began in March 11, 2011. This is the first project under a concession signed with Pagcor for the placement of 1700 machines and is RGB’s 16th operating outlet in Philippines . Tehre was no initial capital outlay for the venture as RGB is using existing machines.

RGB: 0.06 (CIMB)

AMMB/RHB Capital.. March 2011

What’s Up? … dated March 2011

Source say a proposal to merge AMMB and RHB Capital, which first surfaced in 2007 is back on the table. However, whether or not it will successfully cross the finishing line this time round remains to be seen.

The merger has been proposed to the top officials of both banks but is till too early to say and things are still fluid.

The proposed merger will involve a number of things. One is Abu Dhabi Commercial Bank (ADCB), which is in the process of trying to well its 25% stake in RHB Capital. Then, there is ANZ, which is said to be keen to raise its stake in AMMB. A merger between AMMB and RHB Capital could pave the way for both foreign banks to realize their plans. ANZ could acquire ADCB’s stake and eventually end up with a bigger stake in the enlarged banking group. This is subject to BNM approval. The EPF would also hold a substantial stake in a larger banking group.

ADCB will eventually have to sell its stake because the National Bank of Abu Dhabi has received a licence to operate in Malaysia from 2011.

An investor cannot hold substantial stakes in two banks in Malaysia . Both ADCB and NBAD share the same shareholder – Abu Dhabi Investment Bank, which is the Abu Dhabi government’s investment arm.

The rationale for the merger makes sense. There is obvious synergy between the two. AMMB will benefit from the deposit base that RHB Capital will gain from AMMB’s foreign partnership. Both banks will also be able to beef up their investment banking business together. They will benefit from having strong shareholders and a large balance sheet.

About Tenaga ... March

Tenaga which has large amounts of yen denominated loans, is turning out to be an indirect casualty of Japan ’s massive earthquake. With Japanese currency rallying to record highs in the aftermath of the disaster, It could be sitting on potential forex losses of rm182 million. According to its latest financial statements for the period ended Nov 30, 2010, Tenaga had rm5.26 billion in yen denominated debt, which accounted for a quarter of its total debt of rm21.28 billion.

These forex translations losses, however, will not likely be reflected in Tenaga’s upcoming results for the quarter ended Feb 28 (2Q2011) as most of its 3.5% rally in the yen occurred after the March 11 earthquake.

As of Nov 30, 2010, Tenaga also had debts totaling rm4.5 billion denominated in the US dollar, which has been weakening against the ringgit. Hence, some of the losses from its yen denominated loans will be offset against the forex gains from its greenback debt.

At the end of FY2010, it was estimated that Japanese investors held around US$2 trillion in foreign assets, net of reserves. Since the earthquake, the yen has been surging against currencies, including the US dollar, euro and the ringgit, due to speculation that Japanese insurers and investors will repatriate their overseas assets to pay for damage, claims and reconstruction activities in their homeland.

Going forward, these forex losses may be temporary if the yen reverses its course later. Repatriation may support the yen in the short term, but the longer picture depends on economic fundamentals. The long term of the yen is negative. After the earthquake, we will see higher imports of capital and construction goods and lower exports due to damaged plants and infra. That will narrow Japan ’s current account surplus.

Tenaga has managed to trim its borrowings substantially over the years. Tenaga also not expecting to secure a tariff hike until after the general elections.

JIT News - SEGI ... 17/3/2011

SEGI: Its MD Datuk Clement Hii has upped his stake further in the education group to 32.17%. He acquired another 10.8 million shares to bring the toal to 79.4 million shares. At the same time, Rextar Capital Sdn Bhd ceased to be a substantial of 10.8 million SEGI shares. It is not known if Rextar is the vendor of the block by Hii.

JIT News - Faber.. 16/3/2011

Faber is positive that its 15 year concession for government hospital support services, which expires in Oct 2011 will soon be renewed for another 15 years based on the group’s experience and track record. Its MD said the company was well positioned for the renewal based on of its financial ability. They are waiting for a detailed discussion with the authorities. It is just a matter of time. The ball is now in the government’s court. But he declined in disclose the contents of the renewal application but stressed that its proposition was status quo in terms of services for government hospitals in the six states, including Sabah and Sarawak.

Place Yr Bet - PetDAG,CyPark,MYEG ... 2/4/2011

Petronas Dagangan Bhd, controlled by Malaysia ’s state oil and gas company, is seeking to acquire assets to strengthen its retail network. The company is debt-free and has a cash-pile of RM1 billion.


CyPark: A country's largest publicly traded renewable energy company, has submitted proposals to the government to take over as many as 32 non-sanitary landfills and to design, build and manage integrated waste disposal sites. It had submitted the proposals sometime late 2010, and expects to know the outcome for the landfills in the current financial year (2011). On the integrated waste disposal sites, the government had said that it will cost as much as RM270 million to build, design and manage nine waste disposal sites. This cost, however, does not include the cost of acquiring the land. The company may know by 2011 if it is chosen to run the fresh waste disposable sites. Much of this will also depend on the passing of the Renewable Energy Act. If passed, the act will be a boon for Cypark as it had started converting landfills into RE parks.

2.98 (OSK), 1.45 (MIMB)


MYEG: The company’s earnings are poised to grow rapidly in the next few years, driven by (1) continued growth in the road tax renewal service, (2) increasing network, coverage and market share, with its expanding number of e-service centres, and (3) new products and services, the most important being the immigration and customs service tax monitoring initiatives.

MyEG is now embarking on a new phase of growth as it expands its services to include those from the Immigration Department (for maid and foreign workers’ annual permit renewal), and most significantly, a customs tax-monitoring service with the Royal Malaysian Customs.

In the near term, the company’s earnings will continue to be driven by the road tax renewal services which are growing rapidly. Its earnings ability to surprise on the upside from FY12 onwards will be due to the customs tax monitoring, immigration and other services in the pipeline.

Place Yr Bet - JCY,TRC,MEGB.. 1/4/2011

JCY: JCY International Bhd is in the midst of courting one of the world's leading electrical and electronic (E&E) companies from Japan as its new client. In its financial year 2010, the company had secured contracts to supply hard disk drive (HDD) mechanical components to two new major customers in the E&E industry from Japan and South Korea .

1.88 (CIMB), 0.94 ( Alliance ), 1.90 (UBS), 1.31 (RHB), 0.85 (OSK)



TRC Synergy: TRC is one of few West Malaysian-based contractors licensed to bid for state-funded projects in Sarawak . It is in the final stages of clinching four packages in the Sarawak Corridor of Renewable Energy (Score) worth about RM500 million out of RM1.5 billion outstanding bids. TRC has also bid for Phase 2 of the LRT extensions worth about RM2.2 billion, where it hopes to leverage on its lower mobilisation fees and machinery costs with the first phase already in hand. The tender has closed mid-March 2011 with possible award in June 2011. TRC’s 26% stake in PetroBru (B) Sdn Bhd may bear fruit soon. Project approval is pending a revised blueprint for Pulau Muara Besar, Brunei , where the refinery will be built. Investor interest in the refinery is also rising, which should lend weight to an official approval by the Brunei government. This will pave the way for about RM2 billion worth of infrastructure and reclamation works on the island and US$4.3 billion (RM13 billion) to construct the refinery.

2.25 (HDBS), 1.80 (RHB)


MEGB: Its key re-rating catalysts are more affirmative indications in relation to PTPTN’s loan allocation and the potential approval of courses at its new Kuching campus.

4.90 (HDBS), 2.47 ( Alliance ), 3.44 (OSK), 4.48 (CIMB)

JIT News - DBE, YTL Land/YTL Power .... 31/3/2011

DBE: OSK’s wholly owned subsidiary OSK Investment Bank Bhd has emerged as the single largest shareholder of DBE with 26.88% of DBE’s enlarged issued share capital. As at FY2010 ended Dec 31, DBE had racked up accumulated loses of RM40.91 million. Meanwhile, total borrowings amounted to RM72.6 million as at Dec 31 versus rm116000 cash. The completion of the rights issue may put DBE on a stronger financial footing. Of the rm40 million proceeds, the company plans to set aside rm25.9 million as working capital and rm12 million will be earmarked to repay its bank loans.


YTL Land/YTL Power: YTLand has the biggest exposure to the potential MRT interchange at 66% of realisable net asset value via Sentul (119 acres), KL Sentral (five acres) and Bukit Bintang (5 acres). YTLP, which has a 21-year PPA with TNB until 2015, has a positive potential extension for its first generation PPA as a power plant in operation is better than an idle one. However concerns are over its lower internal rate of return from the power purchase agreement (PPA) extension.

About PacicMas ...March 2011

Following the announcement of a special dividend the company will be left with a fund management arm and hire purchase leasing operation that collectively generated a net profit of less than rm15 million.

To recap, PacificMas announced that it was rewarding shareholders with a proposed total dividend of rm1.698 per share comprising an interim dividend of rm1.398 per share gross (of rm1.0485 net per share) and a single tier dividend of 30 sen per share tax exempt. In all, shareholders will receive a net dividend of rm1.349.

It should be noted that the dividends are one off and will not be repeated. The dividends are from the sale of PacificMas’s insurance arm. The Pacific Insurance Bhd which was completed and profits from the sale had already been fully reflected in its books for Dec FY2010. The sale of rm216.48 yielded a gain of rm72.34 million for PacificMas in FY2010.

Its net assets per share stood at rm3.83 as at Dec 31, 2010. This already included the sale of PacificMas Insurance. With a net of tax dividend payout of rm1.349 per share and 170.994 million shares issued, it implies a total payout of rm230.6 million, which will reduce the net assets per share to rm2.48.

Once PacificMas’ shares trade ex for dividends, its share price should be adjusted by the amount of gross dividends declared. With a residual net assets per share of rm2.482. the stock would be trading at relatively high price to book of 1.65 times for a company that will essentially left with a fund management arm, Pacific Mutual and PacLesase Sdn Bhd. The combined net profit of rm13.59 million versus a market cap of rm700 million implies a historical price to earnings multiple of 51.5 times.

OCBC owns 67.07% in PacificMas. Market observers do not preclude the possibility of future corporate developments involving PacificMas if OCBC group decides to list some of its Malaysian assets.

BJCorp/Cosway Corp Ltd

What’s Up? … dated March 2011

BJCorp owns 67% stake in Cosway Corp Ltd and is listed in HK.

Speculating that Cosway is unlikely to be privatized. Rather it could soon commence ground operations in China . The group may start with Guangzhou , which is geographically close to HK where Cosway already has a successful business.

Cosway’s management has been tightlipped in the company’s progress in China with HKSE or communication to shareholders on the status of its plan to set up shop in the mainland. However, the company had mentioned a plan to enter China is in the pipeline.

It is probably in relation to this that busloads of potential Chinese dealers have been visiting Wismas Cosway for introductory courses on the Cosway business model. Meanwhile, the group’s China website has been going all out to woo dealers, or better known as business partners. In the mainland with a list of frequently asked questions and information on Cosway.

In March 2010, Cosway ( China ) Daily Consumerables Ltd had been successfully registered in Guangzhou . A posting said this entity would allow Cosway to leap from its current web presence to commence ground marketing and selling activities in China within 12 months.

Cosway China is believed to be the vehicle of the Cosway group to commence ground operations in China . Cunrrently, purchases of Cosway products by China residents are made thorough the e-cosway online shopping website in HK/Macau and then shipped to China .

These transactions are booked as part of the revenue derived from HK, Macau and Taiwan , which are categorized as one geographical segment in Cosway’s financial statement. The two special administrative regions and Taiwan contributed 38.8% to Cosway’s revenue in the first six months of FY2011.

There are two other entities registered in Guangzhou – Guangzhou Cosway Comestic Products Mfg Ltd and Guangzhou Cosway Commerical Services Ltd. The former’s principal activity is the manufacture of personal care products while the latter provides support services.

These three entities are, however are not listed subsidiaries of Cosway in its FY2010 annual report.

Market observers may want to get everything ready before making a big bang in the China .

A big push into China may boost Cosway’s stock price, which lacks a China Story to justify its high valuation. Even at 80 sen, Cosway’s total market cap – taking into account the number of new shares to be issued via the conversion of the remaining ICULS – stands at HK$9.6 billion. This 41 times the group’s annualized net profit for FY2011.

To justify such a high valuation and to attract investors, market observers say Cosway needs to grow its earnings at a faster pace. This means coming up with a solid plan to penetrate and expand in China . At thus stage, the group has yet to commence operations China except to sell though the online channel, which is not creating as much growth as physical presence world.

As Cosway prepares to enter new market, especially China , its total expense have escalated 57% from 2010, outpacing the 47% growth in revenue in the first nine months of FY2011.

But it us possible that one the group commences ground operations in China, and with the pre launch expenses tapering off, earnings could grew in tandem with revenue expansion.