Tuesday, 31 July 2012

Economic Update - US 2Q12 GDP: not a picture of health


Long Term: Neutral

Market pressures on the Fed are growing, to act as real GDP growth slowed further to a tepid 1.5% annualised growth in 2Q (2.0% in 1Q) on weak consumer spending and disappointing business investment, amid modest signs of improvement in the housing sector. We expect further subpar growth and maintain our 2012 growth estimate of 1.5-2.0%. The euro zone’s lingering debt saga and the US’s looming fiscal cliff should continue to impinge on business decisions. We think the Fed will resort to more monetary easing if the economy stalls much further.



Shipping Monitor - Weak Chinese demand hits hard


Long Term: Neutral

The collapse of iron ore price to US$124/tonne has failed to revive capesize rates, unlike in early 2009 and late 2011 when lower prices prompted Chinese steel mills to buy more imported ore, lifting capesize rates. But weak demand is now preventing a recurrence.



Uchi Technologies - The beans are in the bag

Target RM1.13 (Long Term: Neutral)

In a recent conference call, Uchi reaffirmed its dividend guidance for FY12, having bagged enough orders for the rest of 2012. But we suspect that 2Q will be weaker qoq due to supplier issues which will be reversed in the following quarter. We lower our target price as we cut our CY13 P/E basis to 8.6x, after widening the discount to our revised target market P/E from 30% to 35% due to greater uncertainties in the US and eurozone. We reiterate our Neutral call as we see no immediate rerating catalysts. Switch to JCY or Unisem.



Plantations - More taxing times for refiners?

Long Term: Neutral

Malaysia’s reported 2m tonne increase in tax-free CPO export quotas would, if true, be bad news for Malaysian refiners as it would reduce the availability of domestic CPO and reduce refineries’ utilisation rates. Such a move would be positive for CPO producers as it would reduce stocks and boost near-term CPO prices. Pure CPO producers would benefit while integrated players and standalone refiners could see lower downstream earnings. We maintain the sector as a Neutral and keep Sime as our top pick.


CIMB Daybreak - 31 July 2012

What's on the Table...
  • Plantations - More taxing times for refiners?
  • Shipping Monitor - Weak Chinese demand hits hard
  • Uchi Technologies - The beans are in the bag
  • Economic Update - US 2Q12 GDP: not a picture of health

News of the Day...
  • The prequalification process for bids for the RRI land will start by end-2012
  • Lafarge Malayan Cement Bhd will raise the price of its cement from Aug 1
  • A general offer for Bandar Raya Developments Bhd at RM2.90/share?
  • Decision on the Malaysia-Singapore Rapid Transit System project only next year?
  • Japan’s industrial production in Jun down 0.1% mom, smaller than 3.4% fall in May
  • China’s leading index weakened to 99.28 in Jun from a revised 99.58 in May



Click here for the full PDF report

ECM GLOBAL NEWS 31 July 2012


Europe: Euro-area economic confidence drops more than forecast
Economic confidence in the euro area fell more than economists forecast to the lowest in almost three years in July, suggesting the economy’s slump extended into 3Q2012 as governments struggled to tame the debt crisis. An index of executive and consumer sentiment in 17-nation euro area dropped to 87.9 from 89.9 in June. That is the lowest since September 2009. Economists had forecast a drop to 88.9, the median of 26 estimates in a survey showed. (Bloomberg)

Japan: Industrial output falls unexpectedly
Japan’s industrial production unexpectedly declined. Production fell 0.1% in June from May, when it slid 3.4%. The median estimate of 29 economists surveyed was for a 1.5% gain. The government downgraded its assessment of industrial production for the first time since September, saying output is in “a flat trend.” Production of cars for overseas fell in June, it said. While government subsidies for purchases of fuel-efficient cars have bolstered consumer spending and production, those gains may fade in the coming months. (Bloomberg)

South Korea: Industrial output falls as confidence sinks
South Korea’s industrial production fell for the first time in three months in June as Europe’s debt crisis and China’s slowing economy curtailed export demand. Output fell 0.4% last month from May when it climbed a revised 1.3%. The median estimate of 12 economists in a survey was for a 0.1% gain. Production rose 1.6% y-o-y. South Korean manufacturers’ confidence dropped to a three-year low for August, the central bank said. (Bloomberg)


Utility: Selangor plans RM1bn to address water woes


The Selangor government plans to spend an estimated RM1bn to increase the capacity of the water treatment plants under its ambit by about 50%, a move that will see sufficient supply of water until 2020. Selangor Menteri Besar Tan Sri Khalid Ibrahim said the state government is seeking preliminary proposals to increase the capacity of the water treatment plants by using the containerised treatment technology which he described as cheaper and faster to implement. He expected to make an announcement on the matter next month. (Financial Daily)


Property: Bidding process for RRI land to start by year-end


The prequalification process for bids for the Rubber Research Institutes of Malaysia (RRI) land in Sungai Buloh, Selangor, will start by the end of this year, says a source. The source said Employees Provident Fund (EPF) would call for the prequalification bids as soon as it gets the government's nod for the proposed development of the land. Pre-qualification bids would be opened to developers who meet the requirements, he said. Among the criteria are strong financing, expertise, reputation and innovation. EPF is the land owner and master developer of the project. It is buying 890ha of the available 1,215ha RRI agricultural land from the Federal Government for over RM2bn. The pension fund is expected to carve out the land in parcels of 20ha to 200ha each, depending on the use of it. The idea is to build low-end to luxury housing and commercial properties. The balance of the RRI land is to house the Malaysian Rubber Board hub (217ha) and the My Rapid Transit (MRT) Sungai Buloh depot (72ha). (Business Times) 


Construction: Joint study on M'sia-S'pore Rapid Transit System


Malaysia and Singapore will make the decision on the Malaysia-Singapore Rapid Transit System (RTS) link project next year. Iskandar Regional Development Authority (Irda) CEO Datuk Ismail Ibrahim said authorities in both countries were currently undertaking a phase one joint engineering study. He said the study, among others, looked into the various alignments, customs, immigration and quarantine-related matters and multimodal terminal locations and other critical perimeters. “Once it is completed, both governments will make a decision on the preferred alignments,” Ismail said. He said there would probably be two options for the RTS project linking Johor Bahru and Singapore for the trains to run above ground (grate) or via undersea tunnel. (StarBiz) 


Economy: PM launches RM26bn financial district


Prime Minister Datul Seri Najib Razak launched the city’s new financial district, called the Tun Razak Exchange (TRX), which has an indicative GDV of RM26bn. TRX, renamed from the Kuala Lumpur International Financial District (KLIFD), is expected to attract over 250 global companies and is slated to become a global centre for international finance, trade and services. With 1Malaysia Development Bhd (1MDB) as the master developer, the TRX will be built on a 60-acre (24ha) land off Jalan Tun Razak and will take 15 years to complete. Najib said 1MDB had managed to lock in an international partner for the entire first phase of TRX and secured over RM3.5bn in FDI. However, details and the identity of the partner will only be revealed in September. (Financial Daily) 


Economy: GST unlikely to be in 2013 Budget


The 2013 Budget is not likely to introduce the goods and services tax (GST), said Deputy Finance Minister Datuk Donald Lim Siang Chai. "We're currently raising public awareness on the importance of implementing GST. It would only be implemented when the public has full understanding of it," said Lim. Prime Minister and Finance Minister Datuk Seri Najib Razak is scheduled to table the 2013 Budget in Parliament on 28 September. The GST Bill was tabled initially for reading in Parliament in December 2009 but its second reading was postponed. Critics of the GST proposal say the government should first address revenue leakages and wastage before introducing new taxes to boost its income. (Business Times) 


Gabungan AQRS: Gets LoA for RM141m contract


Main market-bound, Gabungan AQRS Bhd, has received a letter of acceptance (LoA) from the Public Works Department for a RM141m turnkey contract. The contract, awarded to Gabungan AQRS’ wholly-owned subsidiary, Gabungan Strategik Sdn Bhd, involves road upgrading works in Negri Sembilan. “The contract will begin immediately and is expected to be completed by end- 2014. It is expected to contribute positively to Gabungan AQRS’ earnings for FYE Dec 2012 onwards,” it said. (Financial Daily) 


BRDB: To get takeover offer from Ambang Sehati


Bandar Raya Developments Bhd (BRDB) is close to getting a takeover offer from its major shareholder, Ambang Sehati Sdn Bhd, at an indicative price of RM2.90 per share and RM1.80 per warrant. In a filing with Bursa Malaysia yesterday, BRDB said Ambang Sehati was “in the midst of finalizing the financing, including procuring the necessary approvals for the funding for a potential takeover”. The move comes after Ambang Sehati, which holds an 18.5% stake in BRDB, failed in its bid to acquire a basket of property assets from the latter last year. At RM2.90 per share, Ambang Sehati would need to fork out RM1.17bn to purchase the remaining 81.5% equity interest it does not own in BRDB. (Financial Daily) 


TSH Resources: Extends offer for Pontian


TSH Resources Bhd is extending its takeover offer for Pontian United Plantations Bhd from 5pm on 7 August to 5pm on 22 August, the company said in an announcement to Bursa Malaysia. TSH posted its offer on 16 July, when the company and parties acting in concert then held 1.71m shares (19.72% stake) in Pontian, which owns and manages oil palm estates in Sabah. According to yesterday’s announcement, as at 30 July, none of the offer shares was received as acceptances, acquired or agreed to be acquired by the joint of offerors, comprising TSH and the Lee family of Seremban. TSH’s offer valued the remaining 80% stake in the 60 year-old Pontian at RM624m, 14.6x the last three-year average earnings of Pontian. Half of the offer consideration was to be settled via cash and another half in new TSH shares. (Financial Daily) 


Lafarge Malayan Cement: Confirms cement price hike


Lafarge Malayan Cement (LMC MK, Buy, TP: RM7.97) will raise the price of its cement from 1 August, after taking into consideration rising costs of manufacturing and delivery of the building material, its ED Chen Theng Aik said. “The decision was made unilaterally and taking into consideration our increasing costs associated with manufacture and delivery of cement, which we have endeavored to absorb over the years. Our plants had carried out major shutdowns for scheduled maintenance between February and June this year, which resulted in lower production in 1H2012. We strongly refute the allegation of creating any artificial shortage of cement,” Chen said. LMC’s announcement follows claims by property developers, building materials distributors and builders last week that cement prices will be increased from 1 August by RM1/bag of 50kg from RM16.75 to RM17.75 or RM20/MT from RM320 to RM340. (The Sun) 


AirAsia: Jakarta move a business decision, said Rafidah


Malaysians should not be parochial on AirAsia’s decision to relocate to its Asean base to Jakarta as it is a move to regionalise the no-frills airline, says Air Asia X chairman Tan Sri Rafidah Aziz. She said AirAsia and its long-haul affliate, AirAsia X, made the business decision to establish its hub in Indonesia, while retaining the low-cost airline’s headquarters in Malaysia. In reality, Malaysians should be proud that its home-grown company had set up a hub in another country. (StarBiz) 


IHH: Gets green light to delist Turkey unit


IHH Healthcare Bhd’s (IHH MK, Hold, TP: RM 2.94) plan to delist its unit Acibadem Saglik Hizmetleri ve Ticaret AS (ASH) on the Istanbul Stock Exchange, has been approved by the Capital Market Boards of Turkey. IHH, which bought a 60% stake in Acibadem, has a voluntary tender offer for the balance publicly traded shares of the latter on the stock exchange, the company said in a filing with Bursa Malaysia yesterday. It has been decided that the offer price would be applied during the voluntary tender offer transaction to shareholders of Acibadem Saglik Yatirimlari Holdings A.S. per B class Acibadem share, with a nominal value of TRY24.90. Transactions on the voluntary tender offer will be realised between 3 and 16 August. (StarBiz) 


Maybank: Inks Legoland deal


Malayan Banking Bhd (MAY MK, Hold, TP: RM8.25) has edged out rivals to become the only retail bank allowed to operate Legoland theme park in the next 5 years, a move that enables it to tap the region's growing tourism market. Legoland Malaysia is set to open in Nusajaya, Johor Baru, on 15 September, with more than 1 million visitors expected in its first full year. "Under this agreement, Maybank will be the sole provider of retail banking services within Legoland Malaysia as well as the upcoming Legoland Malaysia Water Theme Park and Legoland Hotel," said its president and CEO Datuk Seri Abdul Wahid Omar. (Business Times) 


Plantation: Refiners upset over move to boost tax-free CPO exports


The government will increase the duty-free quota for crude palm oil (CPO) exports by another 2m MT, a move which is widely frowned upon by palm oil downstream players. Downstream players have been hoping for the government to heed their call to scrap the quota as they said it lowered the industry's competitiveness and reduced national revenue. “It would be a sad day for the refining industry when the government is giving priority to other countries for the supply of CPO to subsidise their refining industry when we ourselves have invested billions of ringgit to build our refining and manufacturing sector,” said Palm Oil Refiners Association of Malaysia (Poram) CEO Mohammad Jaaffar Ahmad. The plight of the refiners and others in the local downstream palm oil industry was felt more following Indonesia's review of its export tax structure last year to boost its own refining industry. (Business Times)


Comment: This news comes as a surprise to us, as we were under the impression that the government was intending to suspend the issue of duty free export quotas. We believe that the government is trying to maintain its eroding market share in the face of imposed lower export taxes by Indonesia. It is uncertain if the government is planning any additional steps to counter the Indonesian export tax. The additional quota of 2m MT would boost total quotas to 5.5m MT, which would account for 30% of total Malaysian CPO production. We think that this news is negative for local refiners without upstream operations as utilisation rates would be dragged down. However, the lower stock levels combined with higher export is positive for CPO prices which would benefit upstream players. We maintain our Neutral recommendation on the sector. (Aris Sharif) 


Maybank: BII sees 61% rise in earnings

PT Bank Internasional Indonesia Tbk (BII), controlled by Malayan Banking Bhd (Maybank) (MAY MK, Hold, TP: RM8.25), registered a 61% increase y-o-y in net profit to IDR592bn (RM197.76m) for the 1H2012. The performance was BII’s best since 1997, which was mainly supported by solid growth across the bank’s core businesses, improved asset quality and continuing overall operational improvement. Despite tremendous pressure on net interest margins (NIM) across the banking sector, BII managed to improve its NIM to 5.89% in June from 5.43% a year ago. BII also posted a half-year total assets of IDR102trn as at end-June. “I am pleased to report that BII has passed the IDR100trn milestone by recording total assets of IDR102trn as at June 2012” said BII’s president Datuk Khairussaleh Ramli. The bank has also been able to record annualized double-digit ROE of 15.72%, which is a first for the bank since 1997. Separately, Maybank, which has a 97.52% stake in BII, is confident of qualifying for a waiver from Bank Indonesia’s new rule which limits foreign ownership of local banks to 40%. (Financial Daily)

Comment: Maybank’s share of BII’s annualised net profit works out to RM388m, which is 7% of our projected FY12 net profit for Maybank group. Hence, we do not expect much impact on Maybank’s share price from this announcement. Maybank remains one of our preferred banking stocks to HOLD. (Hon Sze) 

ECM Newz Bits 31 July 2012


Malaysian news
§         Maybank: BII sees 61% rise in earnings
§         Plantation: Refiners upset over move to boost tax-free CPO exports
§         Maybank: Inks Legoland deal
§         IHH: Gets green light to delist Turkey unit
§         AirAsia: Jakarta move a business decision, said Rafidah
§         Lafarge Malayan Cement: Confirms cement price hike
§         TSH Resources: Extends offer for Pontian
§         BRDB: To get takeover offer from Ambang Sehati
§         Gabungan AQRS: Gets LoA for RM141m contract
§         Economy: GST unlikely to be in 2013 Budget
§         Economy: PM launches RM26bn financial district
§         Construction: Joint study on M'sia-S'pore Rapid Transit System
§         Property: Bidding process for RRI land to start by year-end
§         Utility: Selangor plans RM1bn to address water woes

Global news
§         Europe: Euro-area economic confidence drops more than forecast
§         Japan: Industrial output falls unexpectedly
§         South Korea: Industrial output falls as confidence sinks


Click here for the full PDF

Monday, 30 July 2012

Alpha Edge - US still in rebound mode?


The S&P500’s rebound since early Jun does not look like it will be over soon. The index has been trading in an uptrend channel for several weeks, with its support trendline at 1,347pts. Until this support trendline is convincingly broken, we cannot discount a slightly longer rebound. Gold prices are showing signs of short-term upside after breaking above their minor triangle pattern. Prices could soon challenge their 200-day SMA, at US$1,655.


Malaysia Airports Holdings - The brakes are on growth


Target RM5.90 (Long Term: Neutral)

MAHB’s slightly disappointing interims, at 44% of our full-year estimates show that route cuts by local carriers early in the year are starting to bite, leading to a slowdown in passenger traffic. We are cutting our passenger growth forecast from 6.9% to 5.4% for 2012. This reduces our DCF-derived target price. We remain Neutral as the stock lacks immediate catalysts and concerns over the delays and costs of KLIA2 will cap share price upside. But our earnings forecasts are upgraded 2-7% as it will no longer equity-account losses from its associate Sabiha. We prefer AirAsia for exposure to the sector.


Malaysian Resources Corp - M&A angle back in play


Target RM2.02 (Short Term: Trading Buy)

MRCB is reportedly looking to acquire property developer Nusa Gapurna. While talks are still preliminary, this is a positive surprise and will renew sentiment on the stock. The injection of the 60-acre land bank locks-in a new earnings stream after KL Sentral. Our target price is still pegged to a 30% discount to RNAV. While the deal, if partially funded by new MRCB shares, may only result in a modest 3% RNAV accretion, we believe there are long-term positives. We expect newsflow on the progress in 2H12. Maintain Trading Buy and not Outperform due to election overhang. M&A news and job wins are catalysts.


Banks - Cheaper cars may come fitted with collateral damage

Long Term: Neutral

Opposition alliance Pakatan Rakyat has vowed to lower car duties if it wins the next election. A consequential drop in car prices will be negative for banks due to (1) slower growth in auto loans, and (2) higher credit costs resulting from the lower resale value for cars. Even without the lowering of car duties, we are concerned about weaker loan growth and margin squeeze affecting Malaysian banks. As such, the sector remains a Neutral despite undemanding CY13 P/E of 10.8x valuation and attractive yield. Maybank is still our top pick. 

CIMB Daybreak - 30 July 2012

What's on the Table...
  • Banks - Cheaper cars may come fitted with collateral damage
  • Malaysian Resources Corp - M&A angle back in play
  • Malaysia Airports Holdings - The brakes are on growth
  • Alpha Edge - US still in rebound mode?
News of the Day...
  • MRCB expected to win RM1bn job for the Sungai Buloh-Kajang (SBK) MRT line?
  • MPHB expects gaming growth to come from migration of illegal to legal games
  • 80,000ha in Sarawak's Baram/Belaga districts developed into oil palm land
  • M&A among Malaysian steel players encouraged to ensure the survival?
  • Greece agree on most of the austerity measures worth €11.5bn for 2013 and 2014
  • US GDP grew at a 1.5% annual rate in 2Q12




Click here for the full PDF report

ECM GLOBAL NEWS 30 July 2012


US: Growth slows as consumers restrain spending
The economy cooled in 2Q2012 as limited job growth prompted Americans to curb spending while state and local governments cut back. GDP rose at a 1.5% annual rate after a revised 2% gain in 1Q. Household purchases, which account for about 70% of GDP, grew at the slowest pace in a year. Bureau of Economic Analysis also issued revisions dating back to 1Q2009. The changes showed the first year of the recovery from the worst recession in the post-World War II era was even weaker than previously estimated. In the first 3 years of this recovery, the economy has grown 6.7% compared with an average 14% gain during comparable periods in expansions dating back to 1948, excluding the short-lived 1980-81 rebound. (Bloomberg)

US: Consumer sentiment gauge falls to lowest this year
Confidence among consumers dropped in July to the lowest level this year as the labor market and broader economy showed few signs of improvement. The Thomson Reuters/University of Michigan final index of sentiment declined to 72.3 this month from 73.2 in June. The gauge was projected to hold at the preliminary reading of 72, according to the median forecast of economists surveyed. A slowdown in hiring in the 2Q2012, which may reflect companies’ concerns about demand as Europe’s economy falters, is damping moods of Americans. (Bloomberg)

China: Pending sales of homes unexpectedly fell 1.4% in June
Chinese industrial companies’ profits fell for a third month in June as decelerating growth in the world’s second-biggest economy hurt corporate earnings. Income fell 1.7% last month from a year earlier, while earnings in the first six months declined 2.2% to CNY2.3trn (US$362bn). Today’s data underscore the impact on company profits of an economic slowdown that may extend into a seventh quarter. The drop in June profit compares with a 5.3% decline in May and 2.2% drop in April. The first-half decrease was after a 2.4% slide in the first five months and 28.7% gain in the same period in 2011. (Bloomberg)

South Korea: Manufacturer confidence drops to 3-year low on Europe woes
South Korean manufacturers’ confidence dropped to the lowest level in more than three years as Europe’s worsening fiscal crisis damped sentiment in a country where exports make up about half the economy. An index measuring expectations for August was at 70, the lowest level since May 2009, after dropping from a revised 81 in July, the Bank of Korea said. A measure of expectations at non-manufacturing companies also dropped to 69 from a revised 76. (Bloomberg)


Plantation: Players positive on CPO prices


Local plantation players say CPO is still fundamentally strong with the average price this year expected in the range of RM2,800 to RM3,000 per MT. Many disagree with international palm oil expert Dorab Mistry, who recently forecast that CPO might decline to RM2,700 per MT by year end due to poor offtakes, and even slump to RM2,200 per MT if there was a repeat of the 2008 financial crisis. (StarBiz)


Steel: M&As can help steel makers better tap strong demand in Asean


Mergers and acquisitions (M&As) are needed among Malaysian steel manufacturers to better tap the strong demand for steel products in the Asean region, said Malaysian Iron and Steel Industry Federation (Misif) president Datuk Soh Thian Lai. “Malaysian steel players need to think about this. A large entity can increase production efficiency and obtain cost savings and economies of scale. The M&As can be either domestic or regional. Companies can look into other Asean contries like Indonesia and the Philippines,” Soh said. He added that Asean countries were still net importers of steel products. “Total usage of steel in Asean in 2011 was 50m MT. But Asean countries only produced 26m MT,” he said. According to South East Asia Iron and Steel Institute (SEAISI) chairman Chow Chong Long, there is no entity in the region to tap the strong demand for steel products in Asean. “Many big global players in steel are also looking at this region for growth. It is already happening. The Japanese and Chinese players are coming here to form strategic alliances,” said Chow. (StarBiz) 


Logistics: ‘Privatisation vital for long-term survival of Penang Port’


Penang Port Sdn Bhd must be privatised to boost competitiveness, efficiency and create new business opportunities. Former Penang Port Commission chairman Datuk Seri Zahrain Mohamed Hashim said privatisation can help ensure the port’s long-term survival. “The success of a port is due to a lot of factors, which include workers’ morale. They have to be motivated so that they don’t feel that they are government servants, giving their best in a competitive world which can translate positively to the port operators’ bottom line,” Zahrain told Business Times recently. “Privatisation makes good business sense as it will enable Penang Port to prosper and exporters enjoy an efficient port, which translates into cost-saving for the port.” (Business Times) 


Construction: Ipoh-Padang Besar EDTP about 85% complete


The Ipoh-Padang Besar electrified double-tracking railway project (EDTP) is about 85% into completion on an overall basis, said MMC-Gamuda Joint Venture Sdn Bhd director Datuk Mohd Nor Idrus. He said the RM12.48bn project, which runs through Perak, Penang, Kedah and Perlis, was ahead of schedule. The railway project, which began in January 2008, is expected to be completed by the end of 2014. To date, Mohd Nor said system work was about 55 per cent into completion with design, procurement, installation and testing advancing ahead of schedule. All three divisions of system work, namely electrification, communications and signalling, are progressing smoothly with system vendor Balfour Beatty - Ansaldo Systems working diligently on the project.” Mohd Nor said the double-tracking and electrification of the Ipoh - Padang Besar stretch was the government’s initiative to continue work already done on the 180km Ipoh- Rawang route. The other completed tracks are Rawang - Seremban (105km), Sentul - PortKlang (45km) and Sentul - Batu Caves (7.5km). (Business Times)  


Construction: Firms keen on high-speed rail job must bid via tender exercise


The Land Public Transport Commission (SPAD) will not be considering proposals submitted previously by several companies for the high-speed rail project linking Kuala Lumpur and Singapore, a key official said. SPAD chief development officer Azmi Abdul Aziz said companies which have submitted proposals and are still interested in the high-speed rail project will have to participate in the tender exercise to be called next year. (Business Times) 


Building Materials: MBAM urges Government to check on possibility of higher cement prices


Master Builders Association Malaysia (MBAM) is urging the Government to look into the possibility of an increase in cement prices which it expects will have an impact on local construction players. MBAM said that it had been notified by a major cement manufacturer that effective 1 August, the price of a cement bag would increase to RM17.75 from RM16.75 previously while the price of cement bulk per MT would be raised to RM340 from RM320. MBAM has appealed to the Government, in particular the Domestic Trade, Co-operatives and Consumers Ministry, to look into the matter immediately, adding that the said increase will definitely increase construction cost as prices of concrete and all cement-based products will be affected. (StarBiz) 


Oil & Gas: Petronas raises Progress Energy offer after rival bid


Progress Energy Resources Corp said Malaysia's state oil company Petronas has agreed to raise its offer to buy the Canadian natural gas producer by 8% after Progress received an unsolicited proposal from a third party. Petronas, which in June launched a CAD20.45 per share offer for Progress, will now pay CAD22.00 for each share, or CAD5.17bn (USD5.12bn) in total. Progress did not name the third party that made the unsolicited offer, but said its board has approved Petronas's latest offer. (StarBiz) 


KYM: Steel mill project needs US$5bn funding


KYM Holdings Bhd says the proposed steel mill at its industrial park project in Perak will need a US$5bn (RM16bn) investment to produce 5m MT pa. KYM has formed a partnership with the Perak State Development Corp (PKNP) to reclaim 1,376 ha in Bagan Datoh for the industrial park. They have set up a special purpose vehicle (SPV) called Perak Eco Industrial Development Sdn Bhd to help reclaim the land, build infrastructure and look for investors. KYM holds an indirect 30% stake in the SPV while PKNP holds 20% and the rest is held by private investors. The project forms Phase One of the multi-billion ringgit Perak eco-industrial hub by the state, centred on iron and steel industries. KYM COO Allan Chin Kong Yaw said all preliminary works for the project are in progress. (Business Times) 


CMS: CMS Cement says it will not raise price


CMS Cement Sdn Bhd, a unit of Cahya Mata Sarawak Bhd (CMS) and Sarawak’s sole cement producer and manufacturer, will not raise the price of cement despite recent reports of a nationwide cement price hike, group MD Datuk Richard Curtis said. He said CMS Cement had always remained committed to the state’s socio-economic growth and would not increase its prices although cement production in Sarawak posed a logistical challenge due to terrain, raw materials and geographical population spread. (StarBiz) 


Crescendo: To launch Johor township with GDV of RM3bn


Crescendo Corp Bhd is preparing to launch its Bandar Cemerlang Township, a development spanning 1,390 acres in Johor. The project will have a gross development value (GDV) of RM3bn over 10 to 15 years. “We will start with some medium-cost houses in phase one and these will have a GDV of about RM150m. “The township is strategically located near Ulu Tiram town and can be accessed via Johor Baru-Kota Tinggi Highway,” said MD Gooi Seong Lim. Crescendo is also enjoying good demand for its Nusa Cemerlang Industrial Park (NCIP) in view of Singapore government's strategy to relocate some of its medium and small industries to Johor. “We have developed 30% of our NCIP land bank and hope to develop about 50% in the next couple of years,” he said. (StarBiz) 


MRCB: In line for RM1bn MRT job


Malaysia Resources Corp Bhd (MRCB) is expected to win a contract worth about RM1bn this week for the Sungai Buloh-Kajang MY Rapid Transit (MRT) line. If awarded, this will be the first railway-related job for MRCB this year. MRCB, which is 42% owned by the Employees Provident Fund, also won a RM1.33bn contract for the Ampang Light Rail Transit (LRT) extension project in August 2011. The MRT contract is expected to boost MRCB's existing order book to more than RM2.5bn. (Business Times) 


MAHB: Airport charges won’t be any more taxing


Malaysia Airports Holdings Bhd (MAHB) rebutted all allegations relating to the construction of KLIA2, stressing that airport charges will remain the same at RM4bn when the new low-cost carrier terminal opens for business. The airport operator said KLIA2 in Sepang will be completed in April 2013 and within the budget. It also said airport charges at the LCCT will remain as they are until the government revises them according to the   schedule. Currently, the airport tax at the LCCT is RM6 for domestic flights and RM32 for international flights. (Business Times) 


RHB Capital: Plans to boost customer base


RHB Bank Bhd, a unit of RHB Capital Bhd, whose retail banking currently contributes between 40% and 50% of the group's revenue, is aggressively looking to enlarge its customer base in a bid to have a stronger foothold in retail banking. Its director for retail banking, Vince Au Yoong, said to grow its retail banking business it would focus on 5 key areas which would enlarge its customer base. The 5 areas are the delivery system, product innovation, risk management, customer service and customer engagement with the focus on the last 2 areas over the next 12 to 24 months. (StarBiz) 


DRB-Hicom Bhd (Initiating Coverage): Unlocking synergies (BUY, TP: RM3.45)

(BUY, TP: RM3.45)

We initiate coverage on DRB-Hicom Bhd (DRBH), recommending a Buy with target price of RM3.45. We see strong growth potential in its automotive division mainly from its collaboration with Volkswagen and the inclusion of Proton Holdings under its large stable of companies. Although contribution from the services and property, asset and construction (PAC) segments are relatively smaller, these businesses will provide the Group with stable recurring income. (refer to report for details)

ECM Newz Bits 30 July 2012

Highlights of the day
  • DRB-Hicom Bhd (Initiating Coverage): Unlocking synergies (BUY, TP: RM3.45)
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Global news
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