JIT News - Petra, IJM Land/MRCB, Maybulk/Hubline ... 4/1/2011

Petra Energy/Petra Perdana: Sources say Petra Energy Bhd is close to securing a rm100 million contract from Murphy Oil for hook up and commissioning works. It is learnt that Petra Energy Bhd could make an announcement to the local bourse soon after ironing out a few minor issues. Petra Energy is 29% owned by Petra Perdana.

Target Price: 1.21 (OSK), 1.92 (CIMB), 0.98 (CIMB), 1.26 (ECM)

IJM Land/MRCB: Despite the termination of merger talks between IJM Land and MRCB, prospects of both MRCB and IJM Land are still upbeat. In fact, industry observers said the aborted plans may work out to be a blessing in disguise in favor of MRCB. MRCB is well regarded as the front runner in securing the lead developer role, if not a major participation in the development of the 3300 acre RRIM land in Sungai Buloh. This is by virtue of the fact that the EPF is MRCB’s controlling shareholder with a 41.63% stake.

For EPF to maximize its returns from the RRIM Land , MRCB holds a significant interest has to play a major role. If the merger talks were to be reignited after it is being firmed up that MRCB would have a major role in the RRIM land, the latter’s shareholders – which include the EPF – would benefit from a higher swap ratio against IJM Land shares.

While details on why the deal fell through remain doubts at this stage, it is believed that a contributing factor was the pricing for MRCB’s concession assets. They were rationalized by IJM Land and would make up the potential cash payout on top of the swap price of rm2.30 for MRCB. The ref price for IJM Land was set at rm3.65. The termination of the merger deal is less negative for MRCB given its lower valuation for the swap price.

However, optimists did not expect this would not be the end to possible future partnerships between the two entities. With MRCB and IJM Land having the EPF as a common major shareholder, it is inevitable that both will enter into future partnerships or contemplating another merger again.

Target Price: IJM Land : 3.88 (ECM), 3.50 (RHB), 3.88 (AmResearch), 3.20 (Credit Suisse)

MRCB: 2.90 (HDBS), 1.96 (RHB), 2.30 (OSK)

Maybulk/Hubline: The Baltic Dry Index (BDI) a barometer of global shipping prices for the dry bulk cargoes including coal, iron ore, and grain fell 41% to 1773 points on year end 2010 compared with a high of 2995 in Sept 2010. The dwindling demand for dry bulk cargo such as iron ore and an oversupply of vessels have resulted in lower charges for transporting these items. This has lent credence to expectations that dry bulk shipping companies profitability in the near future could be under threat as vessel capacity supply grows faster than the growth in dry bulk cargo consumption.

Target Price: Maybulk: 2.70 (CIMB), 3.70 (OSK)