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.