4 Call Warrants European style cash settle, issuer CIMB listing today 21/12/2010 … HIS-H3,HIS-CE,HSBC,Wynn…
UEM Land proposed takeover of Sunrise has become unconditional after the acceptance of its takeover crossed the 50% threshold. It also announced that the closing date and time for acceptance of the takeover has been extended to Jan 2011.
FABER--BUY or NOT BUY???RISK in the stock?
OSK Research has maintained its "buy" recommendation on Faber Group at an unchanged target price of RM4.00, based on the standard operating procedure valuation.
In a research note today, OSK said its fair value is based on the assumption that the group's bid for the hospital support services (HSS) concession in Sabah, would be renewed as it is.
In view of its track record and expertise, denying Faber the renewal will run counter to the government's recent economic reforms, OSK said.
It has been reported that Warisan Harta Sabah SB (WHSB) has submitted a bid for the HSS in Sabah, which it deemed, is "competitive and on par" with Faber Group's for the concession.
"Although this piece of news will continue to dampen sentiment in the Faber stock, we believe the negative sentiment has been partly priced into the current share price, as it had been on a downtrend since news first emerged in early October.
"We believe the current uncertainty may present a buying opportunity for investors who are still hopeful of a favorable outcome," OSK explained.
The HSS concession under Faber expires in November next year. -BERNAMA
Faber
What’s Up? … dated Dec 2010
Warisan Harta Sabah Sdn Bhd, the wholly owned investment arm of the Sabah state government, has submitted a bid for hospital support services (HSS) in Sabah .
It has submitted a bid which is “competitive” and “at par” with Main Market-listed Faber Group Bhd’s bid for the concession. With the strong backing of the state government, Warisan Harta hopes the federal government will give the proposal serious consideration,
Warisan Harta has the necessary experience and expertise to offer HSS in Sabah , given that it already has business ventures in the healthcare sector in the state. Warisan Harta currently has related businesses in healthcare services, one of which is its associate-owned Tawau Medical Centre Sdn Bhd and two other medical centres in Sabah .
Warisan Harta currently had good indirect relations with Khazanah Nasional and is confident that the submission of bids for HSS which pits Warisan Harta against Faber (34.29% owned by Khazanah Nasional) will not in any way hinder its business cooperation of the new medical centre in Kota Kinabalu.
At the moment, the 15-year concession to maintain hospitals in Sabah and Sarawak and some parts of Peninsular Malaysia are held by Faber which is seeking to renew its contract with the Ministry of Health. If Faber secures the contract, it would give the company guaranteed recurring income and steady cash flow until 2026.
The company reported its nine-month net profit of RM75.87 million till Sept 30 — an impressive 89.15% increase from RM40.11 million while revenue rose to RM684.9 million from RM509.22 million. Earnings per share for the nine months period was at 20.9 sen while net assets at RM1.22 per share.
Faber is set to lose a sizeable chunk of its future earnings stream if it does not clinch the HSS contract in Sabah and Sarawak .
Optimists however, say in view of its track record and expertise, denying Faber the renewal will run counter to the government's recent economic reforms.
Although the piece of news (another bidder) will continue to dampen sentiment in the Faber stock, the negative sentiment has been partly priced into the current share price (21 Dec 2010), as it had been on a downtrend since news first emerged in early October 2010.
The HSS concession under Faber expires in November in 2011.
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PLUS: A little well known private company, Jelas Ulung Sdn Bhd has a takeover offer of RM26 billion in cash for PLUS. It works out to be rm5.20 per PLUS shares. The offer will remain open until March 18, 2011.Sources say former Renong Bhd executive chairman Tan Sri Halim Saad is believed to be behind Jelas Ulung.
MTD Capital: It has received four companies to take it private valuing the company at rm2.35 billion or rm9.50 per share. The offeror did not intend to maintain the company private. Sources say the offer price was likely to be met with some resistance due to rather low price.
More entry point projects are expected to be announced in the second week of Jan 2011, International Trade and Industry Minister Datuk Seri Mustapha said.
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Maybank reinvestment shares will be listed WEF tomorrow 21/12/2010 and ranks pari passu.
Monday, December 20, 2010
2011 MARKET..........
Mergers and acquisitions (M&As) will remain the buzzword in the corporate scene in 2011.
Among the sectors that are likely to see intensified M&A activities are in the electrical and electronic sub-sectors, agro-based companies, plantations, real estate, metal, chemicals, auto, carriers and the education industry.
The potential consolidation and the need for some government-linked companies to diversify their non-core assets and streamline their operations will be a key driver for the merger and acquisition scene in 2011.
The Palm Oil/Biodiesel Industry
The Oil & Gas Industry
The Steel/Aluminium Industry
The Construction Industry
The Housing And Properties Industry
The Water Services Industry
The Electronics Industry 10.5;
The Rubber/Rubber Glove Industry
The Automotive Industry
The Education Industry
The Palm Oil/Biodiesel Industry
The current (Dec 2010) rally in CPO prices is supported by the expected dwindling stock and weaker US dollar.
Despite the rally in CPO futures, there was little excitement shown by big cap plantation stocks … Sime Darby Bhd, Kuala Lumpur Kepong Bhd (KLK), IOI Corp Bhd, Genting Plantations Bhd and Kulim Malaysia Bhd, IJM Plantations Bhd, Batu Kawan Bhd.
Among the smaller plantation stocks were Glenealy Plantations ( Malaya ) Bhd, Sarawak Oil Palms Bhd and Kim Loong Resources Bhd.
The big cap plantation stocks were not sensitive to the movement of CPO futures as they were still considered pricier (mid Dec 2010) than their mid and small cap peers.
Industry observers warned that the risks to the upside of these planters include the cut-back in consumption as the economy slows.
Meanwhile, Malaysian big cap plantation stock valuations are fairly valued at this moment (Dec 2010), thus the limited upside. Small caps are playing catch-up.
Be that as it may, the rally in CPO prices will translate into better profit for planters this quarter (4Q2010).
In a recent technical note, both the near-term and mid-term technical outlook of the CPO market will remain bullish as long as prices stay above the RM2,700 to RM2,800 per tonne mark.
Nevertheless, the market will face a very tough challenge at the formidable RM3,750 per tonne level. Looking back, when CPO prices sharply tumbled in 1Q08, four major failed rebound attempts were seen at the RM3,750 per tonne level in the subsequent four months.
As a result, RM3,750 has become a very tough resistance and the market is now (mid Dec 2010) trading not too far away from this level. However, when the RM3,750 level is breached, RM4,000 per tonne as the next resistance.
Meanwhile Malaysian exports fell 24 per cent in the first 15 days of December 2010. Shipments slumped 29.5 per cent in the same period.
There is a lack of supportive fundamental news. Investors always tend to stay away from the market with the holidays ahead.
Palm oil has surged 37 per cent till Dec 2010, headed for a second annual advance, on speculation that rising demand from China and India may strain global supplies that have been curbed by rain and drought in producing nations.
Output in Malaysia fell to the lowest level in five months in November 2010, while stockpiles slid for the first time in four months. Heavy rainfall caused by a La Nina weather event has also reduced oil-palm yields in Indonesia , the biggest grower.
Malaysian production declined 11 percent to 1.46 million tons in Nov 2010 from 1.64 million tons in October 2010. Inventory dropped 8.7 percent to 1.64 million tons from 1.79 million tons.
India , the second-biggest cooking-oil consumer, imported 668,917 tons of vegetable oils last month, 11 percent less than a year earlier.
The Oil & Gas Industry
Petroliam Nasional Bhd (Petronas) will open marginal oilfields to niche players with strengths in development and production with hopes of recovering an estimated 1.7 billion barrels of oil equivalents over the next two decades.
The news came after Prime Minister Datuk Seri Najib Razak unveiled the tax incentives proposed by Petronas, which would potentially lead to additional petroleum-generated revenue of more than RM50 billion over the next 20 years.
Najib said the tax incentives proproposed by Petronas would be incorporated into the Petroleum Income Tax Act (PITA), stressing that five new incentives were proposed to promote the development of new oil resources, facilitate exploitation of harder-to-reach oil fields and stimulate domestic exploration.
Petronas would encourage both new local and international players to become service contractors to develop these fields.
It entails an investment of between RM70 billion and RM75 billion.
The perks were to make the fields economical, as most of Malaysia ’s oil basins were mature. According to Petronas’ 2010 annual report, production fell to the equivalent of 1.63 million barrels of oil a day in the financial year ended March 31, from 1.66 million barrels a year earlier.
Malaysia has more than 25 marginal fields. If the government does not provide incentives, they will remain undeveloped. The government has come up with a set of incentives worth about RM8 billion, but over 15 years, they will be able to see a tax revenue of RM58 billion.
At present, the average recovery factor for Malaysian oilfields is about 26%. Through the incentives which would in turn boost enhanced oil recovery (EOR), Petronas hopes to increase the recovery rate of oil exploration activity to above 30%.
This new incentive will provide a change in terms of the production and tax regime in the country to promote the development of complex and challenging oilfields.
The new incentives include an investment tax allowance of up to 60% to100% of capital expenditure to be deducted against statutory income to encourage the development of capital-intensive projects, reduction of the tax rate to 25% from the current 38% for marginal oilfield developments and an Accelerated Capital Allowance of up to five years from 10 years where the full utilisation of capital costs deducted could improve project viability.
The other incentives are a Qualifying Exploration Expenditure Transfer between non-contiguous petroleum agreements with the same partnership or sole proprietor to enhance contractor’s risk-taking attitude, and the waiver of export duties on oil produced and exported from marginal field developments to improve project viability.
In line with the nation’s efforts to transform Malaysia into a regional oil and gas hub, Najib also announced that Tanjong Agas Supply Base & Marine Services Sdn Bhd would develop the Tanjong Agas Oil & Gas and Logistics Industrial Park as a one-stop centre to serve and support the region’s rapidly growing upstream and downstream activities. This includes oil and gas exploration, exploitation and production activities. The industrial park project situated on 4,260 acres of land in Pekan, Pahang.
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Minister in the Prime Minister’s Department Senator Datuk Seri Idris Jala says Petroliam Nasional Bhd (Petronas) will be announcing more incentives for the oil & gas industries soon as the government sets the stage for the country to be a regional hub for oilfield service.
There are a lot of opportunities for local players to participate in this – be it in the form of construction work, or providing related oil and gas services. All of this will come into play. The incentives companies could expect were the renegotiation of certain contracts for renewal like for those production sharing contractors such as Shell and Exxonmobil.
Meanwhile deluge of contracts has led to speculation that the oil and gas sector is poised for a good run. What is creating a stir in the market is the redevelopment of old oilfields. T
There are some 600 rigs sitting on old oilfields that Petronas is looking to upgrade and improve on to enhance the oil extraction rate. There platforms are 20 years old and on average and there is a lot of work to be done.
While new technology allows the implementation of what the industry calls enhanced oil recovery (EOR), the platforms and the equipment on them, such as pipes, valves and pumps, have to be changed and upgraded to cater for it. Hence oil and gas players are expecting increased spending by Petronas.
In fact Petronas’ capex has been on the rise in the past few years (Before 2010), except in the just concluded FY2010 ended March 31.
Previously E&P spending was mainly on developing new oilfields to increase reserve, especially deep waters. Moving forward, industry players are expecting more money to go towards EOR projects as cheaper way of increasing reserves.
Petronas commitment to redirect capex to the home market spells spin off benefits and positive prospects for local oil and gas players. Deepwater, shallow, marginal and brownfield as well as gas related and floater construction work contracts are set to dominate the local scene over the next few months (Oct 2010 & Beyond). The following players are the eight contenders for the jobs …
Naim, Dayang, TGOFFs, Kencana, Petra Energy, MMHE, Dialog, Wah Seong, SapCrest
The Steel/Aluminium Industry
After an uneventful year (2010), industry players say local steel players can look forward to a better 2011, thanks to the rolling out of 10th Malaysia Plan (10MP) projects.
This year (2010) has been characterised by a lacklustre demand and low capacity utilisation on the lack of large infrastructure projects and competition from Chinese imports, as well as squeezed margins due to high feedstock prices.
However, industry players might still face headwinds in the near term given the prevailing high and volatile prices of raw materials. This includes scrap and iron ore pellets.
Much of 2010 was challenging for steel players, as they had to contend with both weaker demand and higher raw material prices. The third quarter ended Sept 30, turned out to be the worst in the year for most players, with several such as Kinsteel Bhd and Lion Industries Bhd posting losses. Local steel millers have probably seen the worst in the third quarter of 2010. They are confident the steel players can look forward to a much better 4Q, and a better 2011.
4Q2010 – 1Q2011 …
Expect to see an improvement in the coming quarter (4Q2010 – 1Q2011) especially with selling prices showing signs of recovery. The price of scrap is back to the US$400 (RM1,250) per tonne level, and steel players are also witnessing more enquiries from traders since early November 2010. However, the improvement is nothing to shout about, especially with the unappealing spread between iron ore pellets and hot briquetted iron (HBI) prices, which is expected to persist. It is worth noting that over the past year (2009 – 2010) spot prices of iron ore have more than doubled.
Moving forward, the price of iron ore fines will still strengthen and trade in the band of US$150 to US$170 per tonne until 2012. Any potential dip below US$120 per tonne and China ’s present short iron ore position would trigger re-stocking and thereby lend support to global prices.
Nonetheless, significant steel orders for Budget 2011 projects as well as the longer-term 10MP would start emerging in 2H2011 at the earliest, allowing selling prices to better match current (Dec 2010) high iron ore markets.
Another relief is the strength of the ringgit, which helps cushion the higher prices of iron ore traded in US dollars.
Additionally, the expected appreciation of the yuan, albeit a gradual pace, should see local steel players, whether domestically focused or otherwise, facing less competition from Chinese steel dumping.
Only players with sufficient cash and efficient inventory management will be strong and quick enough to endure and take advantage of feedstock price fluctuations in the spot market.
While steel demand will be boosted by the government’s expansion plans, investors are better exposed to companies with cleaner balance sheets.
It also said upstream players stand to benefit more in the current (Dec 2010) environment of high commodity prices, but any significant re-rating catalyst for the sector will be driven by an increase in demand.
The flexibility to cope with raw material costs is also an area that investors may want to watch out for when investing in a steel player.
Ann Joo Resources as it is one company that can manage better in the face of volatility in raw material prices. Additionally, Ann Joo’s higher export ratio of its production will help to cushion sales when the domestic market is lacklustre, as was the case in 2009 and potentially during the early part of 2011 as well. Furthermore, with the abolishment of the annual iron ore pricing system in April 2010 and a move towards quarterly price contracts, it expects greater volatility in iron ore prices globally.
Ann Joo is therefore able to manage input costs better compared with companies such as Southern Steel, which has similar plant operations, production capacity and market capitalisation.
With the expected commissioning of its mini blast furnace plant in Dec 2010, Ann Joo will now have the flexibility in the usage of feedstock (iron ore and scrap) versus relying mainly on steel scrap for Southern Steel.
Apart from Ann Joo, other steel millers are also upping their capacity in anticipation of rising demand. Kinsteel, for one, will be constructing a steel pelletising plant that is expected to cost some RM200 million.
The Construction Industry
The Construction Industry Development Board (CIDB) expects the construction sector to be buoyant next year (2011) as projects under the 10th Malaysia Plan (10MP) start to roll out from January 2010.
The European debt crises and the slow US economic recovery was worrying and many countries are taking steps to reduce their expenditure in order to improve their budget deficit. Malaysia is taking similar steps in view of the expected crises. The impact will be felt in 2011 as what was experienced in 2009.
However, impact will not be as great as 2009 due to continuation of projects from the Ninth Malaysia Plan (9MP), new jobs under the 10MP and more public-private partnership (PPP) projects coming up.
Under the 10MP, an amount of RM230 billion has been allocated for development, whereby 60 per cent, or RM138 billion, is for infrastructure.
Projects like Matrade Centre, Warisan Merdeka, mass rapid transit and the Malaysian Rubber Board's land development in Sungai Buloh, worth RM70 billion, will contribute to growth in 2011.
In 2010, the government has announced projects to the tune of RM72 billion such as the LRT extension, the New LCCT terminal, power plants and luxury housing projects in Iskandar Malaysia.
These are high-impact projects which will improve the business environment and private investment.
The Housing And Properties Industry
On November 4 2010, UEM Land Holdings Bhd offered RM1.4 billion to buy rival Sunrise Bhd, followed by news of a merger between Malaysian Resources Corp Bhd (MRCB) and IJM Land Bhd to create a group with a market value of RM7 billion. Then, Tan Sri Jeffrey Cheah proposed to combine his companies Sunway Holdings Bhd and Sunway City Bhd (SunCity) in a RM4.5 billion deal.
The first two deals reflect the government's intent to create bigger companies to lure more foreign investors to Malaysia 's stock market.
UEM Land is ultimately controlled by state investment arm Khazanah Nasional Bhd, while both MRCB and IJM Land have the Employees Provident Fund (EPF) as major shareholders. It is quite clear that the EPF is driving the merger as it seeks to develop the strategic and massive Rubber Research Institute land next to Kota Damansara, Selangor.
Both deals are also about securing expertise as the buyer is in a hurry to grow. UEM Land needs Sunrise for high-end property development and marketing, while EPF wants a developer that could build townships ( IJM Land ) as well as commercial projects (MRCB).
But the Sunway deal is more about the ability to fight for bigger jobs and address the liquidity issue. A major problem for Malaysian property companies is there are not enough shares readily available for trading, something that foreign investors love. This means the stock price will have a tough time catching up to its fair value.
But some property executives contend there are downsides to becoming a bigger group. You could end up being a lumbering giant. Example was how Mah Sing Group Bhd was able to buy some 25 hectares of land in Batu Ferringhi, Penang, for RM157 million. Bigger rivals had also bid for the land but Mah Sing was able to win as it moved faster than the competition.
Why the deluge of M&A activities in the sector? It is attributed it to a combination of reasons …
In the cases of Sunrise-UEM Land and MRCB-IJM Land , it is hoped that through these mergers, the government-linked companies (GLCs) can move forward to stamp their mark as regional champions.
Another reason for the current (N0v 2010) consolidation could be players trying to get a bigger slice of land redevelopment projects created by the proposed mass rapid transit (MRT) system.
The mergers between the GLCs and private companies show that there is a significant push for execution and performance. There is now (Nov 2010) a greater urgency for M&As. The formation of two large companies from the mergers of UEM Land-Sunrise and IJM Land-MRCB would pose a threat to other smaller companies in that the former will have more resources and liquidity.
Another disadvantage for these entities which on a stand-alone basis were not too appealing to foreign investors given their size (or lack of it), would post-merger have the economies of scale to draw these investors' attention.
The bigger size of these companies will make them more investable to foreign investors. These companies will now (Nov 2010) be able to compete with their regional counterparts.
Indeed Malaysian corporates are entering an interesting phase in the market. For the first time, GLCs are actively looking for expertise from the private sector to ready themselves for the next phase of development.
In Malaysia , all major land banks are government-owned. The reason why private sector companies such as Sunrise and IJM Land are roped in, is because they have the branding and expertise. Hence, what you're seeing now (Nov 2010) is not just the making of bigger companies, but stronger ones.
If a property company has a good track record but is a small player, it may not be good enough as the company does not have the balance sheet to acquire landbank. On the other hand, what the GLCs may lack in expertise or branding, they make up in landbank and government funds. So the public-private partnership is a formula that should work.
It also makes sense for GLCs to buy over property companies rather than land as valuations of these companies are still relatively attractive, whereas land prices have appreciated significantly. Driving home this point is the fact that property counters are trading at an average of 35% discount to their net asset value (NAV). In fact, most of them are also trading (Nov 2010) at a discount to their net tangible asset. Almost all property companies that merge can break up their assets and unlock more value out of their existing land bank.
There is expectation that the spate of recent (Nov 2010) proposed mergers will unleash another slew of merger activities among other industry players to avoid being left behind in the race to be bigger and better.
The Water Services Industry
Malaysia ’s government is considering bondholder proposals to avoid defaults by water companies operating in Selangor state, including possibly taking over the notes or offering loans.
The government has to look at the viability of these bonds.
Some bondholders asked the government to take control of the bonds, or extend “soft loans” to the Selangor state government’s water distribution company.
Malaysian Rating Corp downgraded about RM7 billion (US$2.2 billion) of bonds issued by seven water- related companies in September, citing regulatory and operational uncertainties.
Selangor hasn’t been able to reach an agreement with the central government and private companies over reorganization of the water industry.
The federal government doesn’t object to Selangor’s plan to buy water assets if it has the financial means to execute it. Implementation “should be done on a willing buyer, willing seller basis whilst honoring the sanctity of existing concession agreements.
Previous bids by Selangor to acquire water assets were rejected by local water distributors as too low. Though a revised proposal was accepted by Syarikat Pengeluar Air Sungai Selangor Sdn. and Konsortium Abass Sdn., the transaction failed when Syarikat Bekalan Air Selangor Sdn. and Puncak Niaga (M) Sdn Bhd continued to hold out for more.
The Malaysian central bank and the Finance Ministry is in talks with bondholders to “allay their anxiousness”. Malaysia ’s commitment to ensure the water will keep flowing, that is something that we will honor.”
The Electronics Industry
Despite the weak 3Q10 results, the technology sector is due to the potential re-rating catalysts. The catalysts were a strong growth in the key end-user segment of handphones and the advent of the corporate replacement cycle, which is admittedly a more gradual one.
The earnings profile for the tech stocks is not expected to improve in the near term as they battle inventory correction, seasonality, slower demand growth and the strong though reversing RM and high raw material costs. But this should start to reverse itself in 2H11 as the industry returns to more typical seasonal patterns. Certain product segments are also still exhibiting fairly robust growth.
Moreover, the long-term secular picture looks favourable given the growing use of electronic devices which require the input of chips and the continued trend of outsourcing. In addition, valuations (Dec 2010) for the semicon stocks are fairly attractive.
Meanwhile the North America-based manufacturers of semiconductor equipment posted US$1.51 billion in orders in November 2010 (three-month average basis) and a book-to-bill ratio of 0.96.
The book-to-bill ratio of 0.96, means that US$96 worth of orders were received for every US$100 of product billed for the month, was the lowest since June 2009’s ratio of 0.80.
The three-month average of worldwide bookings in November 2010 was US$1.51 billion. The bookings figure is 5.3% lower than the final October 2010 level of US$1.59 billion, and is 90.6% above the US$791.8 million in orders posted in November 2009.
The three-month average of worldwide billings in November 2010 was US$1.57 billion. The billings figure is down 3.4% from the final October 2010 level of US$1.62 billion, and is 110.7% above the November 2009 billings level of US$744.2 million.
Following a historic growth period and 18 months of sequential growth, and in accordance with seasonal trends, sales of semiconductor equipment eased in November 2010 This tracks the bookings trend which peaked in July 2010.
The SEMI book-to-bill is a ratio of three-month moving averages of worldwide bookings and billings for North American-based semiconductor equipment manufacturers.
The Rubber/Rubber Glove Industry
The 44.7% decline in the earnings of Malaysia ’s largest glove producer, Top Glove Corp Bhd, is not a sign of things to come for the other glove manufacturers.
According to analysts and industry players, the existing headwinds may indicate tougher times for Malaysian glove manufacturers, but not all earnings profiles are the same.
The financial performance of manufacturers will hinge on their respective product mix and raw material cost structures.
Top Glove was the most affected among the six listed glove manufacturers in Malaysia due to its portfolio of mainly natural rubber or latex gloves. The others are less affected due to their different product mix comprising latex and nitrile gloves.
Other listed glove manufacturers in the country include Supermax Corp Bhd, Kossan Rubber Industries Bhd, Hartalega Holdings Bhd, Latexx Partners Bhd and Adventa Bhd.
Top Glove’s results were not necessarily an indication of how other players will fare in the current environment (Dec 2010) of costlier latex and a weakening US dollar.
Glove players will have less bargaining power [to dictate prices] as there is no shortage of supply. Demand for gloves will, however, still be there but not the “extra demand” seen during recent outbreaks of disease.
Top Glove is most exposed to the rising price of latex as some 90% of its revenue is from gloves made from latex. The other producers tend to have a larger proportion of nitrile gloves, which use synthetic rubber as their core raw material. Nitrile gloves make up about 7% of Top Glove’s revenue. In contrast, nitrile glove sales make up 83% and 38% of the revenue of Hartalega and Kossan, respectively.
Looking ahead, industry observers foresee normalisation of glove demand in the short term, but expects business to pick up in the long term. This will be helped by demand from emerging markets and the global healthcare industry.
Apart from demand normalisation the manufacturer, capable of producing some 34 billion gloves annually, the industry also had to contend with excess capacity. Another crucial concern is that buyers are opting to delay purchases and keep inventory at a minimum as they wait for glove prices to decline.
Nevertheless, this adverse situation will possibly lead to further consolidation among the industry players and Top Glove is in a good position to further enlarge its business when the opportunities arise.
Top Glove plans to dedicate more production lines to manufacture synthetic rubber or nitrile gloves, which fetch higher margins and are not subject to the volatility in natural rubber prices. Synthetic rubber is made from butadiene, a by-product of crude oil. Meanwhile, critics said “a massive and sustained switch to nitrile may not be sustainable” for Top Glove because the cost of nitrile gloves is linked to crude oil prices, which are also rising.
Escalating latex prices will prompt consolidation in the rubber glove industry … a synergistic M&As.
Customer buying trends have shifted to maintaining lowest inventory levels as latex prices remain high. The first half of the year is seasonally a low-production period for latex and, thus, an indication of high prices, glove inventory levels may be kept low in the next few months. However, inventory is expected to rise as the market adjusts to the expectations of higher latex prices.
The Automotive Industry
The Malaysian Automotive Institute (MAI) is understood to have submitted its proposals and recommendations pertaining to the consolidation of the automotive
sector to the government for a final decision on the merger between the players.
Industry sources said MAI had interviewed several of them and submitted the proposal to the government, with a decision likely to be made soon.
MAI was incorporated on April 16 2010 to function as an independent non-profit organisation under the auspices of the Ministry of International Trade and Industry (Miti).
According to its website, MAI serves as a focal point and coordination centre for the development of the local automotive industry in all related matters, including formulating the national automotive policy and coordinating automotive-related research and development, among others.
The consolidation of the auto sector, if it happens, is widely expected to entail a merger between two national automakers, Proton Holdings Bhd and Perusahaan Otomobil
Kedua Sdn Bhd (Perodua), and could possibly include some other players as well.
Meanwhile the government will decide on Nov 2010 whether to allow five foreign carmakers to set up assembly plants in Malaysia .
International Trade and Industry Minister Datuk Seri Mustapa Mohamed said it is still looking through the applications and expected to make an announcement soon.
In September 2010, Malaysian Investment Development Authority was evaluating five foreign carmakers interested in setting up assembly and manufacturing facilities in the country.
Among companies interested included those from Europe, India , China , Japan and South Korea . Mustapa did not dismiss the possibility of the companies using existing facilities for their production.
With the recent review of the National Automotive Policy, foreign carmakers can wholly own facilities that produce luxury vehicles with engine capacity of more than 1,800cc and costing more than RM150,000 per unit.
The Education Industry
While the property sector now (Nov 2010) is in a flurry of consolidation through mergers and acquisitions, the education sector still remains “under the radar”. However, the fast growing private education business in Malaysia, which is valued to be worth some RM7.2 billion, seems to be stirring of late.
Ekuiti Nasional Bhd’s (EKUINAS) recent 51 per cent acquisition of APIIT/UCTI Education Group from Sapura Resources Bhd is seen as trailblazer for consolidation in the private education sector.
This is because of more outright acquisitions, mergers and the entry of fresh foreign players in time to come.
There will be more mergers in the works as education entities that don't merge may risk being left behind. There is urgency for smaller players to bulk up for scale and build up quality as the more renowned and established international players which have made their presence in Malaysia pose healthy competition to the growing market.
This is more so as education has been identified as one of 12 National Key Economic Areas (NKEAs), with private education leading the charge in catapulting Malaysia into the fastest growing education hub in South East Asia .
Among the listed educational entities are Sapura Resources, SEG International Bhd, Help International Corp Bhd and Masterskill (M) Education Group Bhd.
Among the sectors that are likely to see intensified M&A activities are in the electrical and electronic sub-sectors, agro-based companies, plantations, real estate, metal, chemicals, auto, carriers and the education industry.
The potential consolidation and the need for some government-linked companies to diversify their non-core assets and streamline their operations will be a key driver for the merger and acquisition scene in 2011.
The Palm Oil/Biodiesel Industry
The Oil & Gas Industry
The Steel/Aluminium Industry
The Construction Industry
The Housing And Properties Industry
The Water Services Industry
The Electronics Industry 10.5;
The Rubber/Rubber Glove Industry
The Automotive Industry
The Education Industry
The Palm Oil/Biodiesel Industry
The current (Dec 2010) rally in CPO prices is supported by the expected dwindling stock and weaker US dollar.
Despite the rally in CPO futures, there was little excitement shown by big cap plantation stocks … Sime Darby Bhd, Kuala Lumpur Kepong Bhd (KLK), IOI Corp Bhd, Genting Plantations Bhd and Kulim Malaysia Bhd, IJM Plantations Bhd, Batu Kawan Bhd.
Among the smaller plantation stocks were Glenealy Plantations ( Malaya ) Bhd, Sarawak Oil Palms Bhd and Kim Loong Resources Bhd.
The big cap plantation stocks were not sensitive to the movement of CPO futures as they were still considered pricier (mid Dec 2010) than their mid and small cap peers.
Industry observers warned that the risks to the upside of these planters include the cut-back in consumption as the economy slows.
Meanwhile, Malaysian big cap plantation stock valuations are fairly valued at this moment (Dec 2010), thus the limited upside. Small caps are playing catch-up.
Be that as it may, the rally in CPO prices will translate into better profit for planters this quarter (4Q2010).
In a recent technical note, both the near-term and mid-term technical outlook of the CPO market will remain bullish as long as prices stay above the RM2,700 to RM2,800 per tonne mark.
Nevertheless, the market will face a very tough challenge at the formidable RM3,750 per tonne level. Looking back, when CPO prices sharply tumbled in 1Q08, four major failed rebound attempts were seen at the RM3,750 per tonne level in the subsequent four months.
As a result, RM3,750 has become a very tough resistance and the market is now (mid Dec 2010) trading not too far away from this level. However, when the RM3,750 level is breached, RM4,000 per tonne as the next resistance.
Meanwhile Malaysian exports fell 24 per cent in the first 15 days of December 2010. Shipments slumped 29.5 per cent in the same period.
There is a lack of supportive fundamental news. Investors always tend to stay away from the market with the holidays ahead.
Palm oil has surged 37 per cent till Dec 2010, headed for a second annual advance, on speculation that rising demand from China and India may strain global supplies that have been curbed by rain and drought in producing nations.
Output in Malaysia fell to the lowest level in five months in November 2010, while stockpiles slid for the first time in four months. Heavy rainfall caused by a La Nina weather event has also reduced oil-palm yields in Indonesia , the biggest grower.
Malaysian production declined 11 percent to 1.46 million tons in Nov 2010 from 1.64 million tons in October 2010. Inventory dropped 8.7 percent to 1.64 million tons from 1.79 million tons.
India , the second-biggest cooking-oil consumer, imported 668,917 tons of vegetable oils last month, 11 percent less than a year earlier.
The Oil & Gas Industry
Petroliam Nasional Bhd (Petronas) will open marginal oilfields to niche players with strengths in development and production with hopes of recovering an estimated 1.7 billion barrels of oil equivalents over the next two decades.
The news came after Prime Minister Datuk Seri Najib Razak unveiled the tax incentives proposed by Petronas, which would potentially lead to additional petroleum-generated revenue of more than RM50 billion over the next 20 years.
Najib said the tax incentives proproposed by Petronas would be incorporated into the Petroleum Income Tax Act (PITA), stressing that five new incentives were proposed to promote the development of new oil resources, facilitate exploitation of harder-to-reach oil fields and stimulate domestic exploration.
Petronas would encourage both new local and international players to become service contractors to develop these fields.
It entails an investment of between RM70 billion and RM75 billion.
The perks were to make the fields economical, as most of Malaysia ’s oil basins were mature. According to Petronas’ 2010 annual report, production fell to the equivalent of 1.63 million barrels of oil a day in the financial year ended March 31, from 1.66 million barrels a year earlier.
Malaysia has more than 25 marginal fields. If the government does not provide incentives, they will remain undeveloped. The government has come up with a set of incentives worth about RM8 billion, but over 15 years, they will be able to see a tax revenue of RM58 billion.
At present, the average recovery factor for Malaysian oilfields is about 26%. Through the incentives which would in turn boost enhanced oil recovery (EOR), Petronas hopes to increase the recovery rate of oil exploration activity to above 30%.
This new incentive will provide a change in terms of the production and tax regime in the country to promote the development of complex and challenging oilfields.
The new incentives include an investment tax allowance of up to 60% to100% of capital expenditure to be deducted against statutory income to encourage the development of capital-intensive projects, reduction of the tax rate to 25% from the current 38% for marginal oilfield developments and an Accelerated Capital Allowance of up to five years from 10 years where the full utilisation of capital costs deducted could improve project viability.
The other incentives are a Qualifying Exploration Expenditure Transfer between non-contiguous petroleum agreements with the same partnership or sole proprietor to enhance contractor’s risk-taking attitude, and the waiver of export duties on oil produced and exported from marginal field developments to improve project viability.
In line with the nation’s efforts to transform Malaysia into a regional oil and gas hub, Najib also announced that Tanjong Agas Supply Base & Marine Services Sdn Bhd would develop the Tanjong Agas Oil & Gas and Logistics Industrial Park as a one-stop centre to serve and support the region’s rapidly growing upstream and downstream activities. This includes oil and gas exploration, exploitation and production activities. The industrial park project situated on 4,260 acres of land in Pekan, Pahang.
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Minister in the Prime Minister’s Department Senator Datuk Seri Idris Jala says Petroliam Nasional Bhd (Petronas) will be announcing more incentives for the oil & gas industries soon as the government sets the stage for the country to be a regional hub for oilfield service.
There are a lot of opportunities for local players to participate in this – be it in the form of construction work, or providing related oil and gas services. All of this will come into play. The incentives companies could expect were the renegotiation of certain contracts for renewal like for those production sharing contractors such as Shell and Exxonmobil.
Meanwhile deluge of contracts has led to speculation that the oil and gas sector is poised for a good run. What is creating a stir in the market is the redevelopment of old oilfields. T
There are some 600 rigs sitting on old oilfields that Petronas is looking to upgrade and improve on to enhance the oil extraction rate. There platforms are 20 years old and on average and there is a lot of work to be done.
While new technology allows the implementation of what the industry calls enhanced oil recovery (EOR), the platforms and the equipment on them, such as pipes, valves and pumps, have to be changed and upgraded to cater for it. Hence oil and gas players are expecting increased spending by Petronas.
In fact Petronas’ capex has been on the rise in the past few years (Before 2010), except in the just concluded FY2010 ended March 31.
Previously E&P spending was mainly on developing new oilfields to increase reserve, especially deep waters. Moving forward, industry players are expecting more money to go towards EOR projects as cheaper way of increasing reserves.
Petronas commitment to redirect capex to the home market spells spin off benefits and positive prospects for local oil and gas players. Deepwater, shallow, marginal and brownfield as well as gas related and floater construction work contracts are set to dominate the local scene over the next few months (Oct 2010 & Beyond). The following players are the eight contenders for the jobs …
Naim, Dayang, TGOFFs, Kencana, Petra Energy, MMHE, Dialog, Wah Seong, SapCrest
The Steel/Aluminium Industry
After an uneventful year (2010), industry players say local steel players can look forward to a better 2011, thanks to the rolling out of 10th Malaysia Plan (10MP) projects.
This year (2010) has been characterised by a lacklustre demand and low capacity utilisation on the lack of large infrastructure projects and competition from Chinese imports, as well as squeezed margins due to high feedstock prices.
However, industry players might still face headwinds in the near term given the prevailing high and volatile prices of raw materials. This includes scrap and iron ore pellets.
Much of 2010 was challenging for steel players, as they had to contend with both weaker demand and higher raw material prices. The third quarter ended Sept 30, turned out to be the worst in the year for most players, with several such as Kinsteel Bhd and Lion Industries Bhd posting losses. Local steel millers have probably seen the worst in the third quarter of 2010. They are confident the steel players can look forward to a much better 4Q, and a better 2011.
4Q2010 – 1Q2011 …
Expect to see an improvement in the coming quarter (4Q2010 – 1Q2011) especially with selling prices showing signs of recovery. The price of scrap is back to the US$400 (RM1,250) per tonne level, and steel players are also witnessing more enquiries from traders since early November 2010. However, the improvement is nothing to shout about, especially with the unappealing spread between iron ore pellets and hot briquetted iron (HBI) prices, which is expected to persist. It is worth noting that over the past year (2009 – 2010) spot prices of iron ore have more than doubled.
Moving forward, the price of iron ore fines will still strengthen and trade in the band of US$150 to US$170 per tonne until 2012. Any potential dip below US$120 per tonne and China ’s present short iron ore position would trigger re-stocking and thereby lend support to global prices.
Nonetheless, significant steel orders for Budget 2011 projects as well as the longer-term 10MP would start emerging in 2H2011 at the earliest, allowing selling prices to better match current (Dec 2010) high iron ore markets.
Another relief is the strength of the ringgit, which helps cushion the higher prices of iron ore traded in US dollars.
Additionally, the expected appreciation of the yuan, albeit a gradual pace, should see local steel players, whether domestically focused or otherwise, facing less competition from Chinese steel dumping.
Only players with sufficient cash and efficient inventory management will be strong and quick enough to endure and take advantage of feedstock price fluctuations in the spot market.
While steel demand will be boosted by the government’s expansion plans, investors are better exposed to companies with cleaner balance sheets.
It also said upstream players stand to benefit more in the current (Dec 2010) environment of high commodity prices, but any significant re-rating catalyst for the sector will be driven by an increase in demand.
The flexibility to cope with raw material costs is also an area that investors may want to watch out for when investing in a steel player.
Ann Joo Resources as it is one company that can manage better in the face of volatility in raw material prices. Additionally, Ann Joo’s higher export ratio of its production will help to cushion sales when the domestic market is lacklustre, as was the case in 2009 and potentially during the early part of 2011 as well. Furthermore, with the abolishment of the annual iron ore pricing system in April 2010 and a move towards quarterly price contracts, it expects greater volatility in iron ore prices globally.
Ann Joo is therefore able to manage input costs better compared with companies such as Southern Steel, which has similar plant operations, production capacity and market capitalisation.
With the expected commissioning of its mini blast furnace plant in Dec 2010, Ann Joo will now have the flexibility in the usage of feedstock (iron ore and scrap) versus relying mainly on steel scrap for Southern Steel.
Apart from Ann Joo, other steel millers are also upping their capacity in anticipation of rising demand. Kinsteel, for one, will be constructing a steel pelletising plant that is expected to cost some RM200 million.
The Construction Industry
The Construction Industry Development Board (CIDB) expects the construction sector to be buoyant next year (2011) as projects under the 10th Malaysia Plan (10MP) start to roll out from January 2010.
The European debt crises and the slow US economic recovery was worrying and many countries are taking steps to reduce their expenditure in order to improve their budget deficit. Malaysia is taking similar steps in view of the expected crises. The impact will be felt in 2011 as what was experienced in 2009.
However, impact will not be as great as 2009 due to continuation of projects from the Ninth Malaysia Plan (9MP), new jobs under the 10MP and more public-private partnership (PPP) projects coming up.
Under the 10MP, an amount of RM230 billion has been allocated for development, whereby 60 per cent, or RM138 billion, is for infrastructure.
Projects like Matrade Centre, Warisan Merdeka, mass rapid transit and the Malaysian Rubber Board's land development in Sungai Buloh, worth RM70 billion, will contribute to growth in 2011.
In 2010, the government has announced projects to the tune of RM72 billion such as the LRT extension, the New LCCT terminal, power plants and luxury housing projects in Iskandar Malaysia.
These are high-impact projects which will improve the business environment and private investment.
The Housing And Properties Industry
On November 4 2010, UEM Land Holdings Bhd offered RM1.4 billion to buy rival Sunrise Bhd, followed by news of a merger between Malaysian Resources Corp Bhd (MRCB) and IJM Land Bhd to create a group with a market value of RM7 billion. Then, Tan Sri Jeffrey Cheah proposed to combine his companies Sunway Holdings Bhd and Sunway City Bhd (SunCity) in a RM4.5 billion deal.
The first two deals reflect the government's intent to create bigger companies to lure more foreign investors to Malaysia 's stock market.
UEM Land is ultimately controlled by state investment arm Khazanah Nasional Bhd, while both MRCB and IJM Land have the Employees Provident Fund (EPF) as major shareholders. It is quite clear that the EPF is driving the merger as it seeks to develop the strategic and massive Rubber Research Institute land next to Kota Damansara, Selangor.
Both deals are also about securing expertise as the buyer is in a hurry to grow. UEM Land needs Sunrise for high-end property development and marketing, while EPF wants a developer that could build townships ( IJM Land ) as well as commercial projects (MRCB).
But the Sunway deal is more about the ability to fight for bigger jobs and address the liquidity issue. A major problem for Malaysian property companies is there are not enough shares readily available for trading, something that foreign investors love. This means the stock price will have a tough time catching up to its fair value.
But some property executives contend there are downsides to becoming a bigger group. You could end up being a lumbering giant. Example was how Mah Sing Group Bhd was able to buy some 25 hectares of land in Batu Ferringhi, Penang, for RM157 million. Bigger rivals had also bid for the land but Mah Sing was able to win as it moved faster than the competition.
Why the deluge of M&A activities in the sector? It is attributed it to a combination of reasons …
In the cases of Sunrise-UEM Land and MRCB-IJM Land , it is hoped that through these mergers, the government-linked companies (GLCs) can move forward to stamp their mark as regional champions.
Another reason for the current (N0v 2010) consolidation could be players trying to get a bigger slice of land redevelopment projects created by the proposed mass rapid transit (MRT) system.
The mergers between the GLCs and private companies show that there is a significant push for execution and performance. There is now (Nov 2010) a greater urgency for M&As. The formation of two large companies from the mergers of UEM Land-Sunrise and IJM Land-MRCB would pose a threat to other smaller companies in that the former will have more resources and liquidity.
Another disadvantage for these entities which on a stand-alone basis were not too appealing to foreign investors given their size (or lack of it), would post-merger have the economies of scale to draw these investors' attention.
The bigger size of these companies will make them more investable to foreign investors. These companies will now (Nov 2010) be able to compete with their regional counterparts.
Indeed Malaysian corporates are entering an interesting phase in the market. For the first time, GLCs are actively looking for expertise from the private sector to ready themselves for the next phase of development.
In Malaysia , all major land banks are government-owned. The reason why private sector companies such as Sunrise and IJM Land are roped in, is because they have the branding and expertise. Hence, what you're seeing now (Nov 2010) is not just the making of bigger companies, but stronger ones.
If a property company has a good track record but is a small player, it may not be good enough as the company does not have the balance sheet to acquire landbank. On the other hand, what the GLCs may lack in expertise or branding, they make up in landbank and government funds. So the public-private partnership is a formula that should work.
It also makes sense for GLCs to buy over property companies rather than land as valuations of these companies are still relatively attractive, whereas land prices have appreciated significantly. Driving home this point is the fact that property counters are trading at an average of 35% discount to their net asset value (NAV). In fact, most of them are also trading (Nov 2010) at a discount to their net tangible asset. Almost all property companies that merge can break up their assets and unlock more value out of their existing land bank.
There is expectation that the spate of recent (Nov 2010) proposed mergers will unleash another slew of merger activities among other industry players to avoid being left behind in the race to be bigger and better.
The Water Services Industry
Malaysia ’s government is considering bondholder proposals to avoid defaults by water companies operating in Selangor state, including possibly taking over the notes or offering loans.
The government has to look at the viability of these bonds.
Some bondholders asked the government to take control of the bonds, or extend “soft loans” to the Selangor state government’s water distribution company.
Malaysian Rating Corp downgraded about RM7 billion (US$2.2 billion) of bonds issued by seven water- related companies in September, citing regulatory and operational uncertainties.
Selangor hasn’t been able to reach an agreement with the central government and private companies over reorganization of the water industry.
The federal government doesn’t object to Selangor’s plan to buy water assets if it has the financial means to execute it. Implementation “should be done on a willing buyer, willing seller basis whilst honoring the sanctity of existing concession agreements.
Previous bids by Selangor to acquire water assets were rejected by local water distributors as too low. Though a revised proposal was accepted by Syarikat Pengeluar Air Sungai Selangor Sdn. and Konsortium Abass Sdn., the transaction failed when Syarikat Bekalan Air Selangor Sdn. and Puncak Niaga (M) Sdn Bhd continued to hold out for more.
The Malaysian central bank and the Finance Ministry is in talks with bondholders to “allay their anxiousness”. Malaysia ’s commitment to ensure the water will keep flowing, that is something that we will honor.”
The Electronics Industry
Despite the weak 3Q10 results, the technology sector is due to the potential re-rating catalysts. The catalysts were a strong growth in the key end-user segment of handphones and the advent of the corporate replacement cycle, which is admittedly a more gradual one.
The earnings profile for the tech stocks is not expected to improve in the near term as they battle inventory correction, seasonality, slower demand growth and the strong though reversing RM and high raw material costs. But this should start to reverse itself in 2H11 as the industry returns to more typical seasonal patterns. Certain product segments are also still exhibiting fairly robust growth.
Moreover, the long-term secular picture looks favourable given the growing use of electronic devices which require the input of chips and the continued trend of outsourcing. In addition, valuations (Dec 2010) for the semicon stocks are fairly attractive.
Meanwhile the North America-based manufacturers of semiconductor equipment posted US$1.51 billion in orders in November 2010 (three-month average basis) and a book-to-bill ratio of 0.96.
The book-to-bill ratio of 0.96, means that US$96 worth of orders were received for every US$100 of product billed for the month, was the lowest since June 2009’s ratio of 0.80.
The three-month average of worldwide bookings in November 2010 was US$1.51 billion. The bookings figure is 5.3% lower than the final October 2010 level of US$1.59 billion, and is 90.6% above the US$791.8 million in orders posted in November 2009.
The three-month average of worldwide billings in November 2010 was US$1.57 billion. The billings figure is down 3.4% from the final October 2010 level of US$1.62 billion, and is 110.7% above the November 2009 billings level of US$744.2 million.
Following a historic growth period and 18 months of sequential growth, and in accordance with seasonal trends, sales of semiconductor equipment eased in November 2010 This tracks the bookings trend which peaked in July 2010.
The SEMI book-to-bill is a ratio of three-month moving averages of worldwide bookings and billings for North American-based semiconductor equipment manufacturers.
The Rubber/Rubber Glove Industry
The 44.7% decline in the earnings of Malaysia ’s largest glove producer, Top Glove Corp Bhd, is not a sign of things to come for the other glove manufacturers.
According to analysts and industry players, the existing headwinds may indicate tougher times for Malaysian glove manufacturers, but not all earnings profiles are the same.
The financial performance of manufacturers will hinge on their respective product mix and raw material cost structures.
Top Glove was the most affected among the six listed glove manufacturers in Malaysia due to its portfolio of mainly natural rubber or latex gloves. The others are less affected due to their different product mix comprising latex and nitrile gloves.
Other listed glove manufacturers in the country include Supermax Corp Bhd, Kossan Rubber Industries Bhd, Hartalega Holdings Bhd, Latexx Partners Bhd and Adventa Bhd.
Top Glove’s results were not necessarily an indication of how other players will fare in the current environment (Dec 2010) of costlier latex and a weakening US dollar.
Glove players will have less bargaining power [to dictate prices] as there is no shortage of supply. Demand for gloves will, however, still be there but not the “extra demand” seen during recent outbreaks of disease.
Top Glove is most exposed to the rising price of latex as some 90% of its revenue is from gloves made from latex. The other producers tend to have a larger proportion of nitrile gloves, which use synthetic rubber as their core raw material. Nitrile gloves make up about 7% of Top Glove’s revenue. In contrast, nitrile glove sales make up 83% and 38% of the revenue of Hartalega and Kossan, respectively.
Looking ahead, industry observers foresee normalisation of glove demand in the short term, but expects business to pick up in the long term. This will be helped by demand from emerging markets and the global healthcare industry.
Apart from demand normalisation the manufacturer, capable of producing some 34 billion gloves annually, the industry also had to contend with excess capacity. Another crucial concern is that buyers are opting to delay purchases and keep inventory at a minimum as they wait for glove prices to decline.
Nevertheless, this adverse situation will possibly lead to further consolidation among the industry players and Top Glove is in a good position to further enlarge its business when the opportunities arise.
Top Glove plans to dedicate more production lines to manufacture synthetic rubber or nitrile gloves, which fetch higher margins and are not subject to the volatility in natural rubber prices. Synthetic rubber is made from butadiene, a by-product of crude oil. Meanwhile, critics said “a massive and sustained switch to nitrile may not be sustainable” for Top Glove because the cost of nitrile gloves is linked to crude oil prices, which are also rising.
Escalating latex prices will prompt consolidation in the rubber glove industry … a synergistic M&As.
Customer buying trends have shifted to maintaining lowest inventory levels as latex prices remain high. The first half of the year is seasonally a low-production period for latex and, thus, an indication of high prices, glove inventory levels may be kept low in the next few months. However, inventory is expected to rise as the market adjusts to the expectations of higher latex prices.
The Automotive Industry
The Malaysian Automotive Institute (MAI) is understood to have submitted its proposals and recommendations pertaining to the consolidation of the automotive
sector to the government for a final decision on the merger between the players.
Industry sources said MAI had interviewed several of them and submitted the proposal to the government, with a decision likely to be made soon.
MAI was incorporated on April 16 2010 to function as an independent non-profit organisation under the auspices of the Ministry of International Trade and Industry (Miti).
According to its website, MAI serves as a focal point and coordination centre for the development of the local automotive industry in all related matters, including formulating the national automotive policy and coordinating automotive-related research and development, among others.
The consolidation of the auto sector, if it happens, is widely expected to entail a merger between two national automakers, Proton Holdings Bhd and Perusahaan Otomobil
Kedua Sdn Bhd (Perodua), and could possibly include some other players as well.
Meanwhile the government will decide on Nov 2010 whether to allow five foreign carmakers to set up assembly plants in Malaysia .
International Trade and Industry Minister Datuk Seri Mustapa Mohamed said it is still looking through the applications and expected to make an announcement soon.
In September 2010, Malaysian Investment Development Authority was evaluating five foreign carmakers interested in setting up assembly and manufacturing facilities in the country.
Among companies interested included those from Europe, India , China , Japan and South Korea . Mustapa did not dismiss the possibility of the companies using existing facilities for their production.
With the recent review of the National Automotive Policy, foreign carmakers can wholly own facilities that produce luxury vehicles with engine capacity of more than 1,800cc and costing more than RM150,000 per unit.
The Education Industry
While the property sector now (Nov 2010) is in a flurry of consolidation through mergers and acquisitions, the education sector still remains “under the radar”. However, the fast growing private education business in Malaysia, which is valued to be worth some RM7.2 billion, seems to be stirring of late.
Ekuiti Nasional Bhd’s (EKUINAS) recent 51 per cent acquisition of APIIT/UCTI Education Group from Sapura Resources Bhd is seen as trailblazer for consolidation in the private education sector.
This is because of more outright acquisitions, mergers and the entry of fresh foreign players in time to come.
There will be more mergers in the works as education entities that don't merge may risk being left behind. There is urgency for smaller players to bulk up for scale and build up quality as the more renowned and established international players which have made their presence in Malaysia pose healthy competition to the growing market.
This is more so as education has been identified as one of 12 National Key Economic Areas (NKEAs), with private education leading the charge in catapulting Malaysia into the fastest growing education hub in South East Asia .
Among the listed educational entities are Sapura Resources, SEG International Bhd, Help International Corp Bhd and Masterskill (M) Education Group Bhd.
任何人，沒辦法把事情一次做到好，這原本是一種挫敗。
有位設計同行最近頻頻抱怨：「真是閒著沒事才來找事。」
「雜誌版都落好了，編輯才跑來要挑照片、換照片。」
由於換照片可能牽動到後續頁面的版型，因此，編輯在截稿前才想到要換照片，等於是讓設計做白工。
換句話說，編輯挑在截稿前而非交付設計作業之前來做這件事，對設計來說，擺明就是至少要花雙倍時間來做一件工作。
瀉藥一樣的設計作品
編輯力求完美無可厚非，但，為什麼沒辦法在交付設計工作之前就力求完美，而非得要在設計落版完成之後，才反過來要挑照片、換照片呢？
「因為編輯總以自己的時間為時間，給需求時總是很忙很趕，隨便給了凌散的資料加上口頭說明，急急就要設計把版面做出來。」
「等畫面出來了，他們已經不忙不趕，甚至閒在等的時候，就開始挑剔，根本不管你忙不忙趕不趕，就是改這改那。」
「要修文案、要調字級大小、要調用色、要換圖……」
「反正，設計好的東西，對那些屁蛋來說，就跟瀉藥一樣。先前什麼都没講的那些屁蛋一看到畫面，真的什麼狗屁都從他們同一張嘴，一下子像瀉肚子的屁眼劈里啪啦什麼都出來了。」
當錯的變成對的
常有人聽不懂什麼叫作「積非成是」。
只好耐著性子跟他解釋說：「原本錯的事，做多了，就變成對的。」
再聽不懂，打個比方說：
任何人，沒辦法把事情一次做到好，這原本是一種挫敗。
這種挫敗，無論出於無能、不經心，或外力阻撓，先不管原因，結果是都沒差。
總之，你就花了足以做好兩件事的時間與流程，才把一件事做到好。
這本質上就是錯的，就是應該努力把它改正過來的。
但，有人偏不把這種挫敗當作挫敗來看，反而認為這是必要之惡。而且，一次做錯對不起，第二次捲土重來不好意思，接下來反而理直氣壯不然你要怎樣那樣要你幫他修補錯誤。
這擺明是給自己的怠惰找藉口，為自己的挫敗想理由。
腦袋有洞
聽完同行的抱怨，我想到十幾年來的設計工作生涯，其實都充斥著類似這樣的事。
除了互吐苦水，就算真正實質做過什麼，除了引發不必要的衝突之外，似乎什麼也不曾改善過。
殘酷但具體的現實是：
做我們設計這一行，每天所要面對的有90%以上都是腦袋有洞的那群人。
他們左搖右晃，始終以為自己聽到了神諭之類的聲音，不間斷地要他們：「改稿！」「改稿！」「改稿！」
「改稿！」「改稿！」「改稿！」
「改稿！」「改稿！」
「改稿！」
http://jas9.blogspot.com/2010/07/blog-post_17.html
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記得有一位很有名但我不知道他是誰的人，曾經說過一句大概像這樣的話：
「登山者從來不曾征服任何一座山，他們征服的是深深發自他們內心的恐懼。」
的確，山始終還是原來那座山。
登山者從卑下的山腳，努力攀越至高聳的峰頂，除了征服那惟恐無法克服萬難、走完全程的恐懼之外，並不曾征服過山的什麼。
如果你也是一位Designer，即使從未登過山，大概或多或少也能意會：改稿就像登山。
「登山者從來不曾征服任何一座山，他們征服的是深深發自他們內心的恐懼。」
客戶每一個發自內心的恐懼，都牽動著Designer的每一次改稿。
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在設計這個專業裡，關於改稿，有一個似是而非的論調，像是：「所有Designer都討厭改稿，甚至痛恨改稿。」
事實上，幾乎所有Designer都不討厭改稿，甚至應該說是熱愛改稿。
這一點，很容易可以從Designer在一頭栽進設計這一行時幾乎共有的初衷－－「反覆嘗試，以臻於完美」得到佐證。
Designer之所以不討厭改稿，主要是因為設計工作本來就在反覆嘗試、再三改稿以追求完美。除非你根本不喜歡做設計，否則，理當樂此不疲於設計工作的修修改改。
那麼，「所有Designer都討厭改稿，甚至痛恨改稿」這個似是而非的論調又是從何而來呢？
如果你藉由以上論述，能夠稍微知悉「設計工作的本質」與「驅使Designer投入設計工作的初衷」，那麼，應該會很清楚「所有Designer都討厭改稿，甚至痛恨改稿」這個似是而非的論調，顯然是人們不求甚解的產物。
因為，以追求完美為前提，所有Designer都不討厭改稿，甚至是熱愛改稿。
反之，所有Designer當然都討厭不明所以而且愈改愈爛的改稿，甚至痛恨這種以「猜」或「換手氣」為出發點的改稿。
xxxxxxxxxxxxxx
我希望讀到這篇文章的人，最主要是我自己，能夠長久謹記這段話：
就算我們賺了錢，或贏得了名聲，在我們誠實無欺的自省裡，倘若真相是我們反覆一再以錯誤的方式來執行我們的工作，我們依然是失敗的。
通常在一段密集趕忙的工作之後，我會希望有一小段時間用於自省，即便是等待電腦開機或PhotoShop跑濾鏡的那幾秒鐘或幾分鐘也好。
我得要弄清楚自己的步調與能耐才行，知道自己一步可以跨多遠；一段路可以走多快；拉一段漸層裡會有多少色階，然後，我就能夠自我調整最好的狀態，去面對每一個狀態。
許多時候，我們被迫勉強自己去做勉強之事，那對別人而言，當然滿足了別人他們是件當然的好事。倘使你或有遲疑，他們將趕忙不假思索地要你學他們的不假思索，且說是在激發自我潛能。沒錯，每個人都有充足且或許是開發不盡的滿足大我之自我潛能，是這樣沒錯。
只是，為何我是小我，你是大我？
我很難不去聯想刻石板訂規章的，總是永遠不會被犧牲的一群人，換言之，亦即名為大我的既得利益階層。除此之外，我們經常也不難發現，在許多組織或團隊裡，並沒有任何真正偉大被執行去實現的目標。
勉強說來，或許只有受目標驅使的關於制度與打破制度的人。有時候，制度只是建立於不妥，就是說，一個組織，事實上並沒有為許多事去設置導引、指南、籓籬或限度，然而，一旦你一路往它的底線、痛處挑戰而去，它就會忍不住哎出聲來告訴你：這就是底線，你不能再往前逾越、要求更多了。然而，無論事實最後究竟能否要求更多，制度大概就是這樣被形成的：由無贘但將背負破壞制度污名的組織成員與組織所共創。在絕大多數時候，組織都可因為制度破壞者的被消耗而獲致零和式的完全得利。
想到這些，也想起叔本華說過「要不是我配不上這個時代，就是這個時代配不上我」，公司團體同樣也是如此，你有什麼專業被一家公司需索著，你就去專注於那個面向滿足他也就是了，專業並不需要多方逢迎曲從，沒有誰餵養誰或誰依附誰這樣的問題。
然而，工作職場上終究還是很難長久普遍存在平等、制度與原則，就好像每次老大不願意去配合搶救告急的專案，其實也只是諸多前仆後繼、絡繹不絕而來的急就章專案之一罷了。那些埋首賣命去完成的專案內容到底是什麼，恐怕直到做完交件時也依然是一知半解。
這大概是何以設計（Designer）經常在趕稿後，在鬆了一口氣的同時，莫名的罪惡感也油然而生的緣故。
設計工作的屬性是必須時時為自己訂定目標，要做到這一點，平時就必須廣為涉獵設計相關的資訊，或者多方觀摩設計個案，無論從哪個切入點，都能夠作為一個個單一課題來進行設計能力的演練。
至於，設計需要哪些方面的設計演練？大抵上，設計首先需要的是實作的經驗與技術能力，其次設計需要創意的發想能力。設計工作大抵上是從點子概念發想，一直到創意執行的一整個流程。在設計工作進行的當下，極其倚賴與co-worker的溝通協調能力，一旦進入專案執行階段，又得要有自我掌控資源，逐步去做專案管理、時間管理與目標管理的工作，這些工作流程上會應用得上的能力，其實也都是設計平時有空就要去演練的能力。
但，在每一次急就章、趕稿，或者，每一個重結果輕忽過程的企業、公司、組織、團隊的專案運作裡，設計的專業經常只是被磨耗消費來補洞救急。任何懷抱自省意識的Designer都不免身陷如是矛盾，嚐試自省以把持不被扭曲的價值浪潮所滅頂：就算我們賺了錢，或贏得了名聲，在我們誠實無欺的自省裡，倘若真相是我們反覆一再以錯誤的方式來執行我們的工作，我們依然是失敗的。
回頭再看許多最後淪為壓榨末端執行者的專案作法，與其說那是一種有彈性的調整，不如說是全然缺乏通盤規劃。但，可預見的是，依然有人得意於這種有彈性的調整。
得意自誇總是特別容易的一件事，只要忽視那些隱忍且認命接下爛攤子的受害者，把缺乏全盤規劃的事實盡拋腦後，得意自誇者的笑容將更為燦爛可掬。
「雜誌版都落好了，編輯才跑來要挑照片、換照片。」
由於換照片可能牽動到後續頁面的版型，因此，編輯在截稿前才想到要換照片，等於是讓設計做白工。
換句話說，編輯挑在截稿前而非交付設計作業之前來做這件事，對設計來說，擺明就是至少要花雙倍時間來做一件工作。
瀉藥一樣的設計作品
編輯力求完美無可厚非，但，為什麼沒辦法在交付設計工作之前就力求完美，而非得要在設計落版完成之後，才反過來要挑照片、換照片呢？
「因為編輯總以自己的時間為時間，給需求時總是很忙很趕，隨便給了凌散的資料加上口頭說明，急急就要設計把版面做出來。」
「等畫面出來了，他們已經不忙不趕，甚至閒在等的時候，就開始挑剔，根本不管你忙不忙趕不趕，就是改這改那。」
「要修文案、要調字級大小、要調用色、要換圖……」
「反正，設計好的東西，對那些屁蛋來說，就跟瀉藥一樣。先前什麼都没講的那些屁蛋一看到畫面，真的什麼狗屁都從他們同一張嘴，一下子像瀉肚子的屁眼劈里啪啦什麼都出來了。」
當錯的變成對的
常有人聽不懂什麼叫作「積非成是」。
只好耐著性子跟他解釋說：「原本錯的事，做多了，就變成對的。」
再聽不懂，打個比方說：
任何人，沒辦法把事情一次做到好，這原本是一種挫敗。
這種挫敗，無論出於無能、不經心，或外力阻撓，先不管原因，結果是都沒差。
總之，你就花了足以做好兩件事的時間與流程，才把一件事做到好。
這本質上就是錯的，就是應該努力把它改正過來的。
但，有人偏不把這種挫敗當作挫敗來看，反而認為這是必要之惡。而且，一次做錯對不起，第二次捲土重來不好意思，接下來反而理直氣壯不然你要怎樣那樣要你幫他修補錯誤。
這擺明是給自己的怠惰找藉口，為自己的挫敗想理由。
腦袋有洞
聽完同行的抱怨，我想到十幾年來的設計工作生涯，其實都充斥著類似這樣的事。
除了互吐苦水，就算真正實質做過什麼，除了引發不必要的衝突之外，似乎什麼也不曾改善過。
殘酷但具體的現實是：
做我們設計這一行，每天所要面對的有90%以上都是腦袋有洞的那群人。
他們左搖右晃，始終以為自己聽到了神諭之類的聲音，不間斷地要他們：「改稿！」「改稿！」「改稿！」
「改稿！」「改稿！」「改稿！」
「改稿！」「改稿！」
「改稿！」
http://jas9.blogspot.com/2010/07/blog-post_17.html
xxxxxxxxxxxx
記得有一位很有名但我不知道他是誰的人，曾經說過一句大概像這樣的話：
「登山者從來不曾征服任何一座山，他們征服的是深深發自他們內心的恐懼。」
的確，山始終還是原來那座山。
登山者從卑下的山腳，努力攀越至高聳的峰頂，除了征服那惟恐無法克服萬難、走完全程的恐懼之外，並不曾征服過山的什麼。
如果你也是一位Designer，即使從未登過山，大概或多或少也能意會：改稿就像登山。
「登山者從來不曾征服任何一座山，他們征服的是深深發自他們內心的恐懼。」
客戶每一個發自內心的恐懼，都牽動著Designer的每一次改稿。
xxxxxxxx
在設計這個專業裡，關於改稿，有一個似是而非的論調，像是：「所有Designer都討厭改稿，甚至痛恨改稿。」
事實上，幾乎所有Designer都不討厭改稿，甚至應該說是熱愛改稿。
這一點，很容易可以從Designer在一頭栽進設計這一行時幾乎共有的初衷－－「反覆嘗試，以臻於完美」得到佐證。
Designer之所以不討厭改稿，主要是因為設計工作本來就在反覆嘗試、再三改稿以追求完美。除非你根本不喜歡做設計，否則，理當樂此不疲於設計工作的修修改改。
那麼，「所有Designer都討厭改稿，甚至痛恨改稿」這個似是而非的論調又是從何而來呢？
如果你藉由以上論述，能夠稍微知悉「設計工作的本質」與「驅使Designer投入設計工作的初衷」，那麼，應該會很清楚「所有Designer都討厭改稿，甚至痛恨改稿」這個似是而非的論調，顯然是人們不求甚解的產物。
因為，以追求完美為前提，所有Designer都不討厭改稿，甚至是熱愛改稿。
反之，所有Designer當然都討厭不明所以而且愈改愈爛的改稿，甚至痛恨這種以「猜」或「換手氣」為出發點的改稿。
xxxxxxxxxxxxxx
我希望讀到這篇文章的人，最主要是我自己，能夠長久謹記這段話：
就算我們賺了錢，或贏得了名聲，在我們誠實無欺的自省裡，倘若真相是我們反覆一再以錯誤的方式來執行我們的工作，我們依然是失敗的。
通常在一段密集趕忙的工作之後，我會希望有一小段時間用於自省，即便是等待電腦開機或PhotoShop跑濾鏡的那幾秒鐘或幾分鐘也好。
我得要弄清楚自己的步調與能耐才行，知道自己一步可以跨多遠；一段路可以走多快；拉一段漸層裡會有多少色階，然後，我就能夠自我調整最好的狀態，去面對每一個狀態。
許多時候，我們被迫勉強自己去做勉強之事，那對別人而言，當然滿足了別人他們是件當然的好事。倘使你或有遲疑，他們將趕忙不假思索地要你學他們的不假思索，且說是在激發自我潛能。沒錯，每個人都有充足且或許是開發不盡的滿足大我之自我潛能，是這樣沒錯。
只是，為何我是小我，你是大我？
我很難不去聯想刻石板訂規章的，總是永遠不會被犧牲的一群人，換言之，亦即名為大我的既得利益階層。除此之外，我們經常也不難發現，在許多組織或團隊裡，並沒有任何真正偉大被執行去實現的目標。
勉強說來，或許只有受目標驅使的關於制度與打破制度的人。有時候，制度只是建立於不妥，就是說，一個組織，事實上並沒有為許多事去設置導引、指南、籓籬或限度，然而，一旦你一路往它的底線、痛處挑戰而去，它就會忍不住哎出聲來告訴你：這就是底線，你不能再往前逾越、要求更多了。然而，無論事實最後究竟能否要求更多，制度大概就是這樣被形成的：由無贘但將背負破壞制度污名的組織成員與組織所共創。在絕大多數時候，組織都可因為制度破壞者的被消耗而獲致零和式的完全得利。
想到這些，也想起叔本華說過「要不是我配不上這個時代，就是這個時代配不上我」，公司團體同樣也是如此，你有什麼專業被一家公司需索著，你就去專注於那個面向滿足他也就是了，專業並不需要多方逢迎曲從，沒有誰餵養誰或誰依附誰這樣的問題。
然而，工作職場上終究還是很難長久普遍存在平等、制度與原則，就好像每次老大不願意去配合搶救告急的專案，其實也只是諸多前仆後繼、絡繹不絕而來的急就章專案之一罷了。那些埋首賣命去完成的專案內容到底是什麼，恐怕直到做完交件時也依然是一知半解。
這大概是何以設計（Designer）經常在趕稿後，在鬆了一口氣的同時，莫名的罪惡感也油然而生的緣故。
設計工作的屬性是必須時時為自己訂定目標，要做到這一點，平時就必須廣為涉獵設計相關的資訊，或者多方觀摩設計個案，無論從哪個切入點，都能夠作為一個個單一課題來進行設計能力的演練。
至於，設計需要哪些方面的設計演練？大抵上，設計首先需要的是實作的經驗與技術能力，其次設計需要創意的發想能力。設計工作大抵上是從點子概念發想，一直到創意執行的一整個流程。在設計工作進行的當下，極其倚賴與co-worker的溝通協調能力，一旦進入專案執行階段，又得要有自我掌控資源，逐步去做專案管理、時間管理與目標管理的工作，這些工作流程上會應用得上的能力，其實也都是設計平時有空就要去演練的能力。
但，在每一次急就章、趕稿，或者，每一個重結果輕忽過程的企業、公司、組織、團隊的專案運作裡，設計的專業經常只是被磨耗消費來補洞救急。任何懷抱自省意識的Designer都不免身陷如是矛盾，嚐試自省以把持不被扭曲的價值浪潮所滅頂：就算我們賺了錢，或贏得了名聲，在我們誠實無欺的自省裡，倘若真相是我們反覆一再以錯誤的方式來執行我們的工作，我們依然是失敗的。
回頭再看許多最後淪為壓榨末端執行者的專案作法，與其說那是一種有彈性的調整，不如說是全然缺乏通盤規劃。但，可預見的是，依然有人得意於這種有彈性的調整。
得意自誇總是特別容易的一件事，只要忽視那些隱忍且認命接下爛攤子的受害者，把缺乏全盤規劃的事實盡拋腦後，得意自誇者的笑容將更為燦爛可掬。
世界上最重要的事，可能是設計工作之外的任何事。
設計是一門極容易獲得口頭讚賞，但，相對不容易獲得實質回報的行業。
任何一位Designer可能早已疲乏無感於「好漂亮」、「好厲害」、「好可愛」、「好專業」、「好有設計感」……，就好像你在網路上看人點個「讚」，或馬路上瞥見有人丟垃圾一樣，司空見慣到絲毫無關緊要了。
從事設計工作，你最好趁早找到一件世界上最重要的事。
一件讓你別無選擇，讓你的人生目標變得更短淺，同時，卻也變得更具體、更踏實的一件事。
否則，或遲或早，你將失去靈魂，淪為行屍走肉的設計工匠；或者，只剩靈魂，化為怨念滿盈的設計厲鬼。
然而，到底怎樣的事才算得上是世界上最重要的事呢？
世界上最重要的事，簡單地說，就是一件讓你別無選擇，讓你的人生目標變得更短淺，同時，卻也變得更具體、更踏實的一件事。
對Designer來說，那樣的事當然絕不可能存在設計這門行業自身，否則也不可能會有淪為工匠或厲鬼的落魄下場無時無刻威脅著。
世界上最重要的事，可能是設計工作之外的任何事。
就我而言，世界上最重要的事，就是每天下班到保母家去接回我的孩子們。
除此之外，其他都是狗屁。
http://jas9.blogspot.com/2010/06/blog-post.html
任何一位Designer可能早已疲乏無感於「好漂亮」、「好厲害」、「好可愛」、「好專業」、「好有設計感」……，就好像你在網路上看人點個「讚」，或馬路上瞥見有人丟垃圾一樣，司空見慣到絲毫無關緊要了。
從事設計工作，你最好趁早找到一件世界上最重要的事。
一件讓你別無選擇，讓你的人生目標變得更短淺，同時，卻也變得更具體、更踏實的一件事。
否則，或遲或早，你將失去靈魂，淪為行屍走肉的設計工匠；或者，只剩靈魂，化為怨念滿盈的設計厲鬼。
然而，到底怎樣的事才算得上是世界上最重要的事呢？
世界上最重要的事，簡單地說，就是一件讓你別無選擇，讓你的人生目標變得更短淺，同時，卻也變得更具體、更踏實的一件事。
對Designer來說，那樣的事當然絕不可能存在設計這門行業自身，否則也不可能會有淪為工匠或厲鬼的落魄下場無時無刻威脅著。
世界上最重要的事，可能是設計工作之外的任何事。
就我而言，世界上最重要的事，就是每天下班到保母家去接回我的孩子們。
除此之外，其他都是狗屁。
http://jas9.blogspot.com/2010/06/blog-post.html
/>Sunday, December 19, 2010
Lion Industries, Tecnic/SKP, Frontken , Mudajaya
Lion Industries
What’s Up? … dated Dec 2010
Shareholders can now expect higher dividend payment under the company debts restructuring scheme, dating back to 2003, has finally been lifted.
As at Sept 2010, Lion Corp had a direct stake of 25.16% whole Cheng, who controls the Lion Group, had a direct stake of 14.21%.
The fact that debt laden Lion Corp – which needs money for debt repayment – and Cheng are direct shareholders may motivate Lion Industries to raise dividend payments.
In mid Dec 2010, Lion Industries announced that it had made full and final redemption of its ringgit denominated bonds and US dollar denominated consolidated and rescheduled debts.
The announcement also said the restriction on dividend payment under the company’s restructuring scheme has been lifted.
To recap, under the covenants governing the debt restructuring scheme proposed in 2003, the company was prohibited from paying any cash dividends exceeding 1% par value of its share, until it had discharged its obligations under the scheme.
In a nutshell, proceeds from Lion Industries’ assets disposals and the bulk of its operating cash flow – generated mainly from its steel division – had gone to bonds and debt redemption over the past seven years, rather than for dividends.
The gradual redemption of Lion Industries’ bonds and USD debts had strengthened its balance sheet. From a net debt of RM2.18 billion or 1.16 times gearing as at FY2003, Lion Industries balance sheet as at Sept 2010, showed consolidated cash reserves of RM644 million versus rm337 million long term borrowings. It short term borrowings amounted to RM359 million – mainly trade financing for the steel operations. Meanwhile, the outstanding bonds and USD debts had shrunk to RM50 million as at Sept 30, 2010.
Its balance sheet has improved with shareholders’ equity increased to RM3.4 billion now.
The company within the Lion Group that needs capital contribution is its parent Lion Corp Bhd, whose core business is hot rolled coil mfg. Lion Corp still carried a relatively high net gearing of RM2.79 billion as at Sept 30, 2010 versus shareholders’ funds of RM534 million.
Tecnic/SKP Resources Bhd
What’s Up? … dated Dec 2010
Datuk Gan Kim Huat, the executive chairman of Tecnic Group Bhd, increased his
indirect stake in the company to 38.71% after buying 4.035 million shares, or 9.98% equity interest, for RM8.99 million.
The four million shares were purchased from Unfold Riches Sdn Bhd, via his private vehicle Graceful Assessment Sdn Bhd. Following the purchase, Gan now holds a 19.88% indirect stake in Tecnic via Graceful Assessment Sdn Bhd, and another 18.82% indirect stake via Zenith Highlight Sdn Bhd. Combined with his 31.55% direct stake, Gan now has a total of 70.25% equity interest in Tecnic.
According to a source close to the matter, there is no intention to take the company private.
It is believed that Gan has chose to increase his stake because he felt the company was undervalued and saw upside in the stock price.
What’s interesting is that following the purchase, Gan’s direct and indirect stake in Tecnic crosses the 33% threshold, which triggers a mandatory general offer. So far there has been no announcement whether a mandatory general offer will be coming or if Gan will not be required to do one.
Gan is also the substantial shareholder in SKP Resources Bhd, where he holds a 70.99% stake, consisting of 8.99% direct equity interest and a 62% indirect stake held via four private vehicles including Graceful Assessment and Zenith Highlight. The other two private vehicles are Renown Million Sdn Bhd and Beyond Imagination Sdn Bhd.
In the past few months, there has been speculation that Gan would take Tecnic and SKP Resources private as he had slowly been building up his stake in both companies in the past few months.
Tecnic is involved in plastic moulding design and fabrication, plastic injection and blow moulding and provision of assembly services for the manufacturing of plastic products. SKP manufactures plastic parts and components for the electronic and electrical sector.
For the nine months ended Sept 30, Tecnic’s net profit rose 23.8% to RM12.18 million or 30.15 sen per share, on the back of RM125.83 million in revenue. Net assets per share as at Sept 30 was RM1.89 compared with RM1.75 as at Dec 31, 2009. It is also sitting on a net cash position of RM10.87 million with no bank borrowings.
In comparison, SKP has also seen its net profit rise 56.3% to RM10.62 million, or 1.77 sen per share, on the back of RM109.2 million in revenue for the six months ended Sept 31. SKP is also sitting on a RM45.64 million cash pile with no bank borrowings.
Frontken
What’s Up? … dated Dec 2010
It had increased its shareholding in Taiwan based Ares Green Technology (AGT) to 50.58%. It paid rm4.96 million for an additional 8.5% stake in AGT, a company listed on the GreTai Securities Market – the OTC market in Taiwan .
The purchase of AGT shares may signify the start of corporate restructuring exercises in Frontken.
It would be logical to assume that AGT could be a vehicle for Frontken to float its business in Taiwan . This allows Frontekn to explore a more effective way to consolidate its global semiconductor, solar, TFI-LCD technological services support businesses.
The company is involved in the provision of surface metamorphosis technology engineering for equipment maintenance in Asia Pacific, serving three main industries – semiconductor, power generation and oil and gas.
ACT specializes in the servicing and maintenance of equipment in the semiconductor and thin film transistor liquid crystal display industries.
Its official said that it is of the view that it makes business sense to consider a possible merger of its semiconductor related businesses with AGT. Since already hold a 42% stake in AGT, this could be handy for a direct listing on the Taiwan Stock Exchange but no concrete plan yet for such an exercise. Eventually it wants to park its business in the right place in order to optimize stake in Frontken.
If Frontken was to inject its semiconductor division into AGT, it would make the latter the largest service provider of such technological solutions in Asia .
AGT’s listing on the main board of the Taiwan Stock Exchange would be possible subject to the success of the group’s restructuring and consolidation.
For 9MFY2010 ended Sept 30, Frontken’s revenue came in at RM104 million. Net profit rose to RM9.37 million. The semiconductor and O&G divisions account for about 35% of Frontken’s revenue while the power generation makes up 30%
AGT dipped into losses in FY2009, incurring a net loss of NT$24.8 million. However it posted a net profit of NT$7.08 million for 1HFY2010 ended June 30.
With the acquisition, AGT is now a subsidiary of Frontken and the earnings could be consolidated into its books in the future.
Currently, Malaysia and Singapore generate about 90% of its Frontken’s revenue.
Mudajaya
What’s NEXT! … dated Dec 2010
Recently the company has been actively buying back its shares. The most recent buyback was on Dec 15, 2010 when it acquired 20000 shares at RM3.09 for a total purchase consideration of RM78569. To date, cumulative outstanding treasury shares number just over three million.
Mudajaya has been buying back its shares since May 2010. The usual rationale when it comes to share buybacks – which can be seen as a show of confidence – is that companies do it to stabilise their share price, or because they feel their shares are undervalued.
It has cash and bank balances of RM186 million and no debt.
However its third quarterly earnings show a slowdown in growth, with net profit declining q-to-q to RM46.5 million form RM54.2 million. Top line numbers also fell q-to-.
Despite concerns in India , Mudajaya appers to be ploughing ahead with its plans to expand regionally.
So ultimately, while there is still growth on the horizon for Mudajaya, buying into the company at this point of time (Dec 2010) would mean belief in its long term prospects. Although a stronger 4Q2010 would definitely add some support for Mudajaya;s counter, it is unlikely to mimic the performance seen in the first half of 2010.
Certainly its progress in India will be closely watched. To recap, RK Powergen Pvt Ltd – in which Mudajaya holds 26% stake – signed an agreement with the government of Chhattisgarch for 1 1440 MV coal fired power plant.
Mudajaya was subsequently awarded the EP contract for Phase 1 and of the power plant, which is due to be completed in 2012. The company had intended to use its experience in Chhattisgarch as a springboard to bid for the various ultra mega power plants planned by the Indian government.
However, the ultra mega power plants have since bee delayed, which puts a question mark over Mudajaya’s near term outlook in India .
What’s Up? … dated Dec 2010
Shareholders can now expect higher dividend payment under the company debts restructuring scheme, dating back to 2003, has finally been lifted.
As at Sept 2010, Lion Corp had a direct stake of 25.16% whole Cheng, who controls the Lion Group, had a direct stake of 14.21%.
The fact that debt laden Lion Corp – which needs money for debt repayment – and Cheng are direct shareholders may motivate Lion Industries to raise dividend payments.
In mid Dec 2010, Lion Industries announced that it had made full and final redemption of its ringgit denominated bonds and US dollar denominated consolidated and rescheduled debts.
The announcement also said the restriction on dividend payment under the company’s restructuring scheme has been lifted.
To recap, under the covenants governing the debt restructuring scheme proposed in 2003, the company was prohibited from paying any cash dividends exceeding 1% par value of its share, until it had discharged its obligations under the scheme.
In a nutshell, proceeds from Lion Industries’ assets disposals and the bulk of its operating cash flow – generated mainly from its steel division – had gone to bonds and debt redemption over the past seven years, rather than for dividends.
The gradual redemption of Lion Industries’ bonds and USD debts had strengthened its balance sheet. From a net debt of RM2.18 billion or 1.16 times gearing as at FY2003, Lion Industries balance sheet as at Sept 2010, showed consolidated cash reserves of RM644 million versus rm337 million long term borrowings. It short term borrowings amounted to RM359 million – mainly trade financing for the steel operations. Meanwhile, the outstanding bonds and USD debts had shrunk to RM50 million as at Sept 30, 2010.
Its balance sheet has improved with shareholders’ equity increased to RM3.4 billion now.
The company within the Lion Group that needs capital contribution is its parent Lion Corp Bhd, whose core business is hot rolled coil mfg. Lion Corp still carried a relatively high net gearing of RM2.79 billion as at Sept 30, 2010 versus shareholders’ funds of RM534 million.
Tecnic/SKP Resources Bhd
What’s Up? … dated Dec 2010
Datuk Gan Kim Huat, the executive chairman of Tecnic Group Bhd, increased his
indirect stake in the company to 38.71% after buying 4.035 million shares, or 9.98% equity interest, for RM8.99 million.
The four million shares were purchased from Unfold Riches Sdn Bhd, via his private vehicle Graceful Assessment Sdn Bhd. Following the purchase, Gan now holds a 19.88% indirect stake in Tecnic via Graceful Assessment Sdn Bhd, and another 18.82% indirect stake via Zenith Highlight Sdn Bhd. Combined with his 31.55% direct stake, Gan now has a total of 70.25% equity interest in Tecnic.
According to a source close to the matter, there is no intention to take the company private.
It is believed that Gan has chose to increase his stake because he felt the company was undervalued and saw upside in the stock price.
What’s interesting is that following the purchase, Gan’s direct and indirect stake in Tecnic crosses the 33% threshold, which triggers a mandatory general offer. So far there has been no announcement whether a mandatory general offer will be coming or if Gan will not be required to do one.
Gan is also the substantial shareholder in SKP Resources Bhd, where he holds a 70.99% stake, consisting of 8.99% direct equity interest and a 62% indirect stake held via four private vehicles including Graceful Assessment and Zenith Highlight. The other two private vehicles are Renown Million Sdn Bhd and Beyond Imagination Sdn Bhd.
In the past few months, there has been speculation that Gan would take Tecnic and SKP Resources private as he had slowly been building up his stake in both companies in the past few months.
Tecnic is involved in plastic moulding design and fabrication, plastic injection and blow moulding and provision of assembly services for the manufacturing of plastic products. SKP manufactures plastic parts and components for the electronic and electrical sector.
For the nine months ended Sept 30, Tecnic’s net profit rose 23.8% to RM12.18 million or 30.15 sen per share, on the back of RM125.83 million in revenue. Net assets per share as at Sept 30 was RM1.89 compared with RM1.75 as at Dec 31, 2009. It is also sitting on a net cash position of RM10.87 million with no bank borrowings.
In comparison, SKP has also seen its net profit rise 56.3% to RM10.62 million, or 1.77 sen per share, on the back of RM109.2 million in revenue for the six months ended Sept 31. SKP is also sitting on a RM45.64 million cash pile with no bank borrowings.
Frontken
What’s Up? … dated Dec 2010
It had increased its shareholding in Taiwan based Ares Green Technology (AGT) to 50.58%. It paid rm4.96 million for an additional 8.5% stake in AGT, a company listed on the GreTai Securities Market – the OTC market in Taiwan .
The purchase of AGT shares may signify the start of corporate restructuring exercises in Frontken.
It would be logical to assume that AGT could be a vehicle for Frontken to float its business in Taiwan . This allows Frontekn to explore a more effective way to consolidate its global semiconductor, solar, TFI-LCD technological services support businesses.
The company is involved in the provision of surface metamorphosis technology engineering for equipment maintenance in Asia Pacific, serving three main industries – semiconductor, power generation and oil and gas.
ACT specializes in the servicing and maintenance of equipment in the semiconductor and thin film transistor liquid crystal display industries.
Its official said that it is of the view that it makes business sense to consider a possible merger of its semiconductor related businesses with AGT. Since already hold a 42% stake in AGT, this could be handy for a direct listing on the Taiwan Stock Exchange but no concrete plan yet for such an exercise. Eventually it wants to park its business in the right place in order to optimize stake in Frontken.
If Frontken was to inject its semiconductor division into AGT, it would make the latter the largest service provider of such technological solutions in Asia .
AGT’s listing on the main board of the Taiwan Stock Exchange would be possible subject to the success of the group’s restructuring and consolidation.
For 9MFY2010 ended Sept 30, Frontken’s revenue came in at RM104 million. Net profit rose to RM9.37 million. The semiconductor and O&G divisions account for about 35% of Frontken’s revenue while the power generation makes up 30%
AGT dipped into losses in FY2009, incurring a net loss of NT$24.8 million. However it posted a net profit of NT$7.08 million for 1HFY2010 ended June 30.
With the acquisition, AGT is now a subsidiary of Frontken and the earnings could be consolidated into its books in the future.
Currently, Malaysia and Singapore generate about 90% of its Frontken’s revenue.
Mudajaya
What’s NEXT! … dated Dec 2010
Recently the company has been actively buying back its shares. The most recent buyback was on Dec 15, 2010 when it acquired 20000 shares at RM3.09 for a total purchase consideration of RM78569. To date, cumulative outstanding treasury shares number just over three million.
Mudajaya has been buying back its shares since May 2010. The usual rationale when it comes to share buybacks – which can be seen as a show of confidence – is that companies do it to stabilise their share price, or because they feel their shares are undervalued.
It has cash and bank balances of RM186 million and no debt.
However its third quarterly earnings show a slowdown in growth, with net profit declining q-to-q to RM46.5 million form RM54.2 million. Top line numbers also fell q-to-.
Despite concerns in India , Mudajaya appers to be ploughing ahead with its plans to expand regionally.
So ultimately, while there is still growth on the horizon for Mudajaya, buying into the company at this point of time (Dec 2010) would mean belief in its long term prospects. Although a stronger 4Q2010 would definitely add some support for Mudajaya;s counter, it is unlikely to mimic the performance seen in the first half of 2010.
Certainly its progress in India will be closely watched. To recap, RK Powergen Pvt Ltd – in which Mudajaya holds 26% stake – signed an agreement with the government of Chhattisgarch for 1 1440 MV coal fired power plant.
Mudajaya was subsequently awarded the EP contract for Phase 1 and of the power plant, which is due to be completed in 2012. The company had intended to use its experience in Chhattisgarch as a springboard to bid for the various ultra mega power plants planned by the Indian government.
However, the ultra mega power plants have since bee delayed, which puts a question mark over Mudajaya’s near term outlook in India .
GHL Sys,KNM,Top Glove,YTL Land,Eurospan
GHL SYS
What’s Up? … dated Dec 2010
The company saw the emergence of a new substantial shareholder, Simon Loh Wee Hian, in late Oct 200 after his off market purchase of a 12.05% stake at 44 per share in a married deal.
Since his entry, Loh has been actively buying up GHL SYS shares at 41 sen to 45 sen apiece to increase his stake to 15.44% as at Nov 29, 2010 making him the single largest shareholder.
He has also been quick to exercise his clout, as seen in his requisitioning an EGM to remove interim chairman and group MD Tay from the board with immediate effect.
It is understood that Loh is also the MD of e-pay Asia Ltd, a provider of electronic top up services for prepaid mobile users in SEA that is listed on both the Australian Stock Exchange and the AIM segment of the London Stock Exchange.
According to 2009 annual reports, the largest shareholder of GHL SYS was non independent non executive director Goh with 12.77% stake as at March 30, 2010. The second largest shareholder was BSNC Corp with a 12.05% stake followed by Tay who at the time held a 4.48% equity.
Despite the call by Loh to remove him from his position, Tay does not appear to be bowing out quietly.
Tay has also been aggressively acquiring GHL shares on the open market. Tay has upped his stake to 5.21%. GHL has been actively buying back its own shares.
The company bough back 2.08 million own shares for 42.5 sen to 47 sen in Dec 2010 apiece, bringing the total share buyback operation to RM930300.
GHL is involved in end to end payment services, recognized by organizations such as Visa, Mastercard and MEPS.
The group has been loss making for the past two financial years, despite posting consistent revenue. In FY2009, it posted a net loss of RM7 million while in FY2008, it posted a net loss of RM6.2 million.
It has been aggressively expanding its business in China . However the home market was the main contributor to revenue in FY2009.
e-pay Asia operates the largest electronic payment network in the region. For FY2009 ended Dec 31, e-pay posted a net profit of A$84000 but making a loss of A$4.36 million in FY2008.
The question now is what Loh as a new substantial shareholders, hopes to achieve by his entry into GHL.
KNM
What’s Up? … dated Dec 2010
Process equipment maker KNM Group Bhd has formed a strategic collaboration with a Sabah state-owned unit to offer support services to oil and gas (O&G) majors operating there.
The company had signed a joint venture (JV) agreement with Petrosab Logistik Sdn Bhd on Dec 13 to establish a JV company — KNM Petrosab Sdn Bhd. KNM and Petrosab Logistik will own 51% and 49% respectively in the new entity.
The investments are generally aimed to tap into various existing and future capital expenditure for oil, gas and petrochemical projects in Sabah, which is in line with KNM’s overall objective of expanding and growing the businesses of KNM and its group of companies throughout Malaysia .
Petrosab Logistik is a jointly owned entity of Yayasan Sabah Group and Asian Supply Base Sdn Bhd to offer O&G services to O&G majors, and contractors.
Under its deal with Petrosab Logistik, KNM would spearhead fund raising to finance future projects via issuance of new shares, and bonds, apart from financial derivatives and convertible instruments.
KNM repositions itself to undertake more global business.
The firm is not only expanding its geographical markets, but also widening its scope of offerings to include technology and plant services which fetch better margins amid less competition.
KNM is now looking homeward, eyeing the many oil and gas projects expected to be rolled out in Sabah from 2011.
KNM and Petrosab’s 51:49 partnership will see a newly established joint venture company called KNM Petrosab Sdn Bhd competing for various O&G jobs up for grabs in Sabah .
The company said the investments are generally aimed to tap into various existing and future capital expenditure for oil, gas and petrochemical projects in Sabah which is in line with KNM’s overall objective of expanding and growing the businesses of KNM and its group of companies throughout Malaysia .
The KNM partnership has been hailed as good match given Yayasan Sabah Group’s links and KNM’s expertise. This partnership is mutually beneficial. Petrosab’s state owned status fulfils the local requirement aspect and its network should propel the joint venture’s prospects for securing Sabah related projects. KNM will provide technical support.
Petrosab is a part of a consortium that has been awarded contracts for work on Sabah-Sarawak Gas Pipeline project. The other members of the consortium are Dialog and India ’s Punji Llyod Ltd.
Another point to note is that Yayasan Sabah Group is also in partnership with Alam Maritim Resources Bhd for O&G projects in Sabah , with the collaboration reportedly also targeting the Sabah Oil and Gas Terminal Project and pipe-laying projects.
Many view the KNM’s joint venture positive with Petrosab because fabrication opportunities in East Malaysia are aplenty, riding on Petroliam Nasional Bhd’s rising domestic capex spend.
Of the prized projects Sabah could offer the prime target remains the SOGT in Kimanis, given its scale of an expected daily capacity of crude oil and gas.
Moving into 2011, all eyes will be on the type of projects KNMP manages to clinch and the potential earnings could generate.
KNM will lead fund raising for the projects and seek optimize capitalization for the project companies throughout the development and operation stage of the projects. This could be done by issuing new shares and bonds, financial derivatives by convertible instruments.
As at Sept 30, 2010, KNM’s borrowings stood at RM575 million while its cash pile was RM285 million.
Given that many of the projects are still at in the tender stage, KNM is only expected to make further announcements of jobs clinched early 2011.
It had secured a US$216 million (RM676 million) gas condensate project in Uzbekistan from Russian O&G major Lukoil Uzbekistan Operating Co.
KNM and South Africa-listed Aveng Ltd had also formed a JV company on a 49% and 51% basis, enabling the former to capitalise on its foreign partner’s business links in the energy and mining business.
KNM had also settled an old score with a Canadian client Fort Hills Energy LP where KNM received payment from the latter for the termination of a contract in the North American country.
Top Glove Corp Bhd
Its Prospects … dated Dec 2010
Top Glove was the most affected among the six listed glove manufacturers in Malaysia due to its portfolio of mainly natural rubber or latex gloves.
The others are less affected due to their different product mix comprising latex and nitrile gloves.
Other listed glove manufacturers in the country include Supermax Corp Bhd, Kossan Rubber Industries Bhd, Hartalega Holdings Bhd, Latexx Partners Bhd and Adventa Bhd.
Glove players will have less bargaining power [to dictate prices] as there is no shortage of supply.
Demand for gloves will, however, still be there but not the “extra demand” seen during recent outbreaks of disease.
Top Glove is most exposed to the rising price of latex as some 90% of its revenue is from gloves made from latex.
The other producers tend to have a larger proportion of nitrile gloves, which use synthetic rubber as their core raw material. Nitrile gloves make up about 7% of Top Glove’s revenue. In contrast, nitrile glove sales make up 83% and 38% of the revenue of Hartalega and Kossan, respectively.
Looking ahead, industry observers foresee normalisation of glove demand in the short term, but expects business to pick up in the long term. This will be helped by demand from emerging markets and the global healthcare industry.
Apart from demand normalisation the manufacturer, capable of producing some 34 billion gloves annually, the industry also had to contend with excess capacity.
Another crucial concern is that buyers are opting to delay purchases and keep inventory at a minimum as they wait for glove prices to decline.
Nevertheless, this adverse situation will possibly lead to further consolidation among the industry players and Top Glove is in a good position to further enlarge its business when the opportunities arise.
Top Glove plans to dedicate more production lines to manufacture synthetic rubber or nitrile gloves, which fetch higher margins and are not subject to the volatility in natural rubber prices.
Synthetic rubber is made from butadiene, a by-product of crude oil. Meanwhile, critics said “a massive and sustained switch to nitrile may not be sustainable” for Top Glove because the cost of nitrile gloves is linked to crude oil prices, which are also rising.
Escalating latex prices will prompt consolidation in the rubber glove industry … a synergistic M&As.
Financial Results …
Its earnings fell 44% to RM36.05 million for the first quarter ended Nov 30 from RM65.21 million a year ago as it was impacted by the high latex prices and a weak US dollar.
Revenue rose 4% to RM491.51 million from RM472.30 million while earnings per share were 5.83 sen compared with 10.76 sen.
The three months to Nov 30, 2010 has been a challenging quarter for the group due to headwinds such as persistently high latex prices and the continued weakening of the US dollar coupled with the time lag in passing on the higher costs to its customers, which have affected the group’s profit margins.
Average latex prices rose by 57% from RM4.58 per kg in 1Q2010 to RM7.20 per kg in 1Q2011 while the average US dollar weakened against the ringgit by 9.3% (RM3.43 in 1Q2010 versus RM3.11 in 1Q2011).
The firm has a cash pile of RM346.95 milllion versus debt obligations of RM3.97 million, hence, a net cash position of RM342.98 million or 55 sen a share. The company has an issued base of 618.3 million shares.
Demand for rubber gloves, which has been normalising coupled with the excess capacity situation, have also impacted the industry. Customers kept their inventory level at a minimum level due to high selling prices of latex gloves, which reflected the increasing cost of latex prices.
YTL Land
Its Prospects … dated Dec 2010
YTL Corp – which owns 60.72% of YTL Land – proposed to inject development land, including prime land in KL’s Golden Triangle and in Singapore into its property arm. There are already development plans in place for some of the parcels, and this could immediately step up the level of activity at YTL Land .
Many would find it difficult to relate growth with YTL Land ’s performance over the past five years. After many years, the company’s jewel in the crown remains the former railway depot land in Sentul, which it took a long time to develop and still has an outstanding development area of 116.9 acres. Its slow pace could be because management wants to benefit from the appreciating land prices in the area.
But given the strength of its balance sheet, YTL Land could have done more. It could see a strong start in 2011 with the asset injection exercise underway.
To recap, YTL Corp proposed to inject assets into YTL Land for a consideration of RM476 million. The assets comprise 1000 acres in Bidor, Perak; a private company that has the development right for a parcel of KTMB land in Brickfields; and eight other companies that own land in KL and Singapore and two tranches in Sentosa Cove.
The consideration of RM476 million for the Bidor land and the nine companies would include the settlement of certain outstanding inter company balances owed by YTL Land to YTL Corp, amounting to RM262 million. The nine companies have a total net assets value of RM152 million.
To facilitate the RM476 million acquisition, YTL Land will pay RM223 million in cash and issue YTL Corp RM253 million 10 year 3% ICULS at 100% of nominal value of 50 sen.
YTL Land will fund the RM223 million cash payment by undertaking a rights issue of ICULS to raise RM253 million YTL Corp’s portion of the rights issue will be RM153 million.
In addition to RM476 million, YTL Land has to settle another RM1.04 billion with its parent, being inter company balances owed to YTL Corp by the company that owns the Orchard Boulevard land in Singapore. However, the sum will only be settled later via other funding arrangements which YTL Land did not elaborate.
So the total purchase consideration for all the assets is RM1.52 billion, which is at a discount to the total market value of the landbank that will be injected into YTL Land of RM1.82 billion.
Gains from theses developments, if they materialize will certainly have a significant impact on YTL Land given its current small market.
With its exposure in the Singapore property market, which is more buoyant than the domestic one, and several parcels of land in prime locations in KL, YTL Land ’s prospects look more promising than before.
But how fast its landbank translates into profits will depend on YTL Land ’s development.
Eurospan
What’s Up? … dated Dec 2010
There have been some shareholding movements in Eurospan over the past few months, promoting speculation as to what could be in store for the Penang based furniture maker.
Since early Nov 2010, its chairman and managing director Guan has been selling down his direct equity interest. He is not alone in disposing of shares, as his brother and sons who are also substantial shareholders and directors in Eurospan, have been trimming their personal holdings.
It is not known whether the disposals are a precursor to the emergence of new shareholders.
However, their percentage of indirect equity stake they currently hold in Eurospan remains at 42%.
The company had announced special dividend of 40 sen per share in respect of its results for 1QFY20111 ended Aug 31, despite being in the red. The generous dividend was announced on Oct 25, 2010.
Nevertheless, with the entitlements for the special dividends only going ex from Jan 6, 2011, the Guan’s trimming of their personal holdings ahead of the entitlement is bewildering.
Guan held a 9.28% direct stake in Eurospan as at Sept 2, 2010. But in three months, his stake has been reduced to 3.82% as at Dec 15, 2010. Meanwhile his brother and sons also reduced their stakes lately. The Guans sold their shares in the open market.
Nonetheless, the family still has a firm grip on Eurospan, with their private vehicle TBHL Holdings still holding a 42% stake.
Eurospan has one institutional shareholder, Pheim Unit Trusts, which has a 0.36% stake.
Eurospan, an exporter of wood dinning sets to Europe, the US , Australia and other Asian markets, has seen pressure on its bottom line of late due to the global economic slowdown which dampened demand for its products, as well as debt concerns in the Eurospan.
For 1QFY2011 ended Aug 31, the company posted a net loss of RM57000 on revenue of RM20 million. Bet loss per share was 0.14 sen while net assets per share for the quarter stood at rm1.58.
But despite this Eurospan still declared a sizeable special interium dividend of 40 sen per share from its internally generated funds. However, the special dividend, which would translate into a total payment of RM16.2 million would halve the company’s cash reserves of RM30.1 million as at Aug 31, 2010. This again surprising as Eurospan has recently seen its operations weakening and would probably need as much as cash it can muster as a buffer.
It is worth nothing that in the company’s 1QFY2011 ended Aug 31, operating profit before working capital changes, a measure of operating cash flow shrank to RM392000 for the period.
100% of the company’s revenue is from export sales and denominated in US dollars. YTD, the ringgit gas 8.4% appreciated against the US dollars. In 2009, Eurospan exports accounted for 33.18% of revenue, while Asia accounted for 12.83%.
For FY2010 Eurospan posted a net profit of RM359000 on revenue of RM62 million, It had attributed the 90% dip in net profit to the adoption of a different product mix, higher operating costs and the stronger ringgit.
Given the selling of shares by company insiders as well as dismal FY2010 earnings performance, the sharp rise in Eurospan’s share price does raise some eyebrows.
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