Barefoot Investor: February 2011

Malaysian Rating Corp Bhd (MARC) is maintaining its ratings on MAXTRAL INDUSTRY BHD []'s RM100 million debt notes on MARCWatch Negative.

The ratings agency said on Friday, Feb 25 it was maintaining its AID and MARC-2ID/AID ratings on the RM80 million Al-Bai' Bithaman Ajil Islamic Debt Securities (BaIDS) and RM20.0 million Murabahah Underwritten Notes Issuance/Murabahah Medium Term Notes (MUNIF/MMTN).

“The rating actions affect RM40 million of outstanding BaIDS and RM20 million of notes issued under the MUNIF/MMTN programme,” it said.

The ratings remain under review for possible downgrade pending the company's release of its fourth quarter 2010 financial results. Maxtral had earlier reported a pre-tax loss of RM1.3 million for its third quarter and a cumulative pre-tax loss of RM7.7 million for the nine months to Sept 30, 2010.

MARC had placed Maxtral's debt ratings on MARCWatch Negative on Nov 26, 2010 to highlight increased risk of non-compliance with the company's sinking fund schedule as a consequence of its limited balance sheet liquidity relative to the forthcoming RM20 million BaIDS repayment in April 2011.

MARC said it had recently received confirmation from the trustee that Maxtral had met its minimum required sinking fund account balance of RM10 million due on January 2011. MARC also understands from the company that it will be relying on a bridging loan from a financial institution to cover its forthcoming sinking fund payment of RM10.0 million on March 13, 2011.

While MARC said it believes that the risk of missed payment on the rated obligations over the near term has abated, the rating agency remains concerned with the company's ability to improve its financial performance and restore its credit metrics.

The ratings could be lowered if MARC's ongoing assessment of Maxtral leads the rating agency to conclude that the company is unlikely to be able to demonstrate recovery in its credit metrics commensurate with its current ratings over the next 12 months. (


KUALA LUMPUR: The FBM KLCI snapped its three-day losing streak in early trade on Friday, Feb 25 as key regional markets recovered slightly on signs that crude oil prices were stabilising.

Brent oil prices vaulted more than 7 percent to almost US$120 before pulling back on rumours that Libyan leader Muammar Gaddafi had been shot and on Saudi Arabia's reassurances that it could counter Libyan supply disruption, according to Reuters.

The pullback in oil, underpinned late gains in US stocks and caused shares in Asia's key markets to find their feet after a steady decline earlier this week, it said.

At 10am, crude oil eased 34 cents per barrel to US$96.95 on the New York Mercantile Exchange.

The FBM KLCI rose 4.31 points to 1,494.18, although analysts said the recovery might not be sustainable given the overhanging uncertainties from the geopolitical developments.

Gainers beat losers 296 to 202, while 226 counters traded unchanged. Volume was 269.50 million shares valued at RM286.02 million.

At the regional markets, Japan’s Nikkei rose 0.22% to 10,475.68, Singapore’s Straits Times Index added 0.34% to 2,983.17, Taiwan’s Taiex gained 0.13% to 8,552.64 and Hong Kong’s Hang Seng Index opened 0.6% higher at 22,727.04.

The Shanghai Composite Index fell 0.51% to 2,863.79 and South Korea’s Kospi lost 0.27% to 1,944.54.

Maybank Investment Bank Bhd head of retail research and chief chartist Lee Cheng Hooi said he expects the FBM KLCI to remain volatile in the short term and very bearish in the medium term.

As a result, very short-term was the key to the markets.

“We suggest that clients liquidate on rallies and remain more in cash (as there are very few price defensive counters).

“Due to the global market malaise recently, we will see the FBM KLCI in a much weaker posture today. We expect the market to remain weak as the foreign hedge fund money exits Malaysia,” he said.

Meanwhile, BIMB Securities Research said given the hanging concern in Libya as crude oil may continue to be under pressure, it did not expect the buying sentiment will resume anytime soon.

“Hence, expect the selling pressure to continue today albeit at mild momentum,” it said.

On Bursa Malaysia, Paramount was the top gainer in early trade and rose 36 sen to RM4.87; Far East added 39 sen to RM7.40, Tradewinds rose 27 sen to RM7.83, Lysaght 20 sen to RM1.90, MISC and Shell 18 sen each to RM7.63 and RM10.48, RHB Capital 17 sen to RM7.97 and Amway 14 sen to RM8.50.

Carlsberg rose 24 sen to RM6.54 after its net profit rose 51.8% to RM30.49 million in the fourth quarter ended Dec 31, 2010 from RM20.09 million a year ago, driven by higher export and contract manufacturing sales.

It announced a final gross dividend of 7.5 sen per and special gross dividend of 43 sen share.

Losers in early trade included Batu Kawan, QSR Brands, KrisAssets, JT International, Malaysia Smelting Corp , AMMB and Hong Leong Bank.

Tanco was the most actively traded counter with 24.89 million shares traded. The counter added four sen to 38 sen. Other actives included HWGB, Transmile, SAAG, KNM, Ramunia and Olympia.


Lor resigns as group CEO of EON Bank
EON Capital Bhd (EON Cap) yesterday announced that group CEO Datuk Michael Lor of wholly owned EON Bank has resigned with immediate effect, and the resignation has been accepted by the bank. This resignation comes in the midst of EON Cap still caught in the middle of a court case involving the takeover of the bank by Hong Leong Bank Bhd (HLB). HLB has proposed to acquire the assets and liabilities of EON Cap at RM5.06bn or RM7.30 per share.(StarBiz)

Motor insurance to cost more?
Vehicle owners may have to pay more for their motor insurance premiums from next year as the Government plans to remove motor insurance tariffs in 2016. Bank Negara Malaysia, tasked to prepare the new motor insurance framework, informed this at a recent meeting with various stakeholders involved in the new scheme recently. A source who attended the meeting said that “Under the new motor insurance framework, the Government plans to gradually increase insurance premiums from 2012 onwards”.(Business Times)

Tanjung Offshore wins job extension
Tanjung Offshore has won a RM33.5m contract extension to provide three off-shore support vessels to Petronas Carigali. The extension is for one year, starting from March and July this year, it said in a statement to Bursa. The contract may be renewed further, depending on Petronas’ needs.(Business Times)

Proton, Perodua roadmaps sought
National car companies Proton and Perodua have been asked to prepare their roadmaps on how they plan to be competitive once the auto industry undergoes wide-ranging liberalization from 2015. Those plans are essential as import duties and approved permits are to be cut and removed from 2015 until the industry is fully liberalized in 2020. “At the end of the day, we want our automotive industry to remain and be competitive,” said Malaysia Automotive Institute chairman Datuk Kamaruddin Ismail.(StarBiz)

Second coal-fired power plant award out in June
The Government is likely to decide on the concessionaire for the second 1,000 megawatt (MW) coal-fired power plant in June, said Energy commission chairman Tan Sri Dr Ahmad Tajuddin Ali. He said the commission has issued the request for proposals on the plant from MMC Corp’s unit, Malakoff Corp and Jimah Energy Ventures SB. The plant would be sited either at Tanjung Bin in Johor, owned by MMC or Jimah in Negeri Sembilan, owned by Jimah Energy. (Financial Daily)


Ramunia Energy and Marine Corp Sdn Bhd disposed of 13.5 million RAMUNIA HOLDINGS BHD from Feb 16 to 21.

A filing with Bursa Malaysia showed its stake was reduced to 59.62 million shares or 8.99% after the disposal of the shares.

Ramunia Energy sold 3.5 million shares on Feb 16 and two million shares the next day. On Feb 18, it disposed of one million shares and seven million shares on Feb 21. It was trading between 67 and 68.5 sen during the period.


The KLCI dropped 12.22 points to 1,513.63 points given external concerns on Libya and the contagion effect on the rest of the oil-rich Middle East region which could potentially disrupt global oil supplies and cause a spike in oil prices, and hence a dampener on global economic growth. Today’s corporate news are TNB has completed the pre-qualification tender for Malaysia’s first solar powered plant, TM and Celcom may enter a 10-year concession that will see TM re-enter the cellular business and Malaysia reported a 8% y-o-y increase in total vehicle sales for the month of Jan 2011. Overnight, Wall Street closed 178.46 points lower on the back of geopolitical risks in the Middle East, which is likely to cap the performance of our local market today. (OSK Research)


Moammar Gaddafi clings to power in Libya, protests continue
Moammar Gaddafi on Tuesday defiantly rejected opposition demands that he give up power, vowing that he would never leave the North African nation he has ruled for more than four decades and would die a "martyr". He spoke after leaders of a popular revolt seized control in some areas of Libya and top officials resigned to protest attacks by security forces that have killed more than 230 civilians. (The Washington Post)

Global unrest puts US stock market in a dive
The US stock market plummeted Tuesday in its biggest drop of the year as escalating tensions in the Middle East and North Africa sent oil prices soaring. The Dow tumbled 178.46 points, or 1.4%, to 12212.79. The S&P index fell 27.57, or 2.1%, to 1315.44. (The Wall Street Journal)

TM & Celcom Axiata collaborate on fixed and mobile convergence solutions
TM signed a MoU with Celcom Axiata for collaboration in providing complete fixed and mobile solutions to Malaysian consumers. TM group CEO Datuk Seri Zamzamzairani Mohd Isa said the MoU encompasses several areas of collaboration, specifically High Speed Broadband (HSBB) services, which comprise HSBB Access and HSBB Transmission. (Bernama)

Total vehicle sales up 8.0% in January
Total vehicle sales in January increased 8.0% to 54,696 units from 50,622 units recorded last year, said the Malaysian Automotive Association. Of the total, passenger vehicle sales rose 7.9% to 49,589 units, amid the rush delivery for Chinese New Year compared with 45,973 units sold in the same month last year. (Bernama)

Malaysia's first solar power plant
TNB has completed the pre-qualification tender process for Malaysia's first solar power plant to be located in Putrajaya. The utility will “very soon” call for tenders for the project that is estimated to cost some RM60m, according to TNB president and CEO Datuk Seri Che Khalib Mohamad Noh. (StarBiz)

MAHB a step closer to venturing into China
MAHB has reached another milestone in its quest to enter China with the signing of a joint cooperation agreement (JCA) with Nagamas Enterprise Hong Kong Ltd. The JCA will allow MAHB to help Nagamas Enterprise, a unit of Malaysia's Nagamas International, develop and expand a small airport in Yongzhou City in Hunan province. (Business Times)

2010 tourist arrivals hit record 24.6m
Tourist arrivals to Malaysia reached a new high of 24.6m last year, or 3.9% more, the highest ever for the sixth straight year. Tourism receipts rose by 5.8% to stand at RM56.5bn for 2010. In 2009, arrivals were recorded at 23.6m. (Business Times)


New plan to resolve water impasse
The Government will come up with a new proposal this month to solve once and for all the water industry impasse in Selangor and the Federal Territories of Kuala Lumpur and Putrajaya. Energy, Green Technology and Water Minister Datuk Peter Chin Fah Kui said the ministry will intervene in Selangor's takeover plan of four water concession companies so that consumers will not continue to be burdened by water issues and the companies get a good deal. The four concession companies are Syarikat Bekalan Air Selangor SB (Syabas), Puncak Niaga SB, Syarikat Pengeluaran Air Sungai Selangor SB (Splash) and Konsortium Abass SB. The proposal is part of the government's effort via the National Water Services Commission to restructure and regulate the country's fragmented water industry, which was previously under the control of each state government. (Business Times)

NPE toll at PJ Selatan 2 cut to RM1
The toll at the Petaling Jaya Selatan 2 (PJS2) toll plaza along the New Pantai Expressway (NPE) near Kampung Medan here will be reduced from RM1.60 to RM1, effective today. This was announced by Prime Minister Datuk Seri Najib Tun Razak on Thursday. He said this was a Chinese New Year gift to the residents in the area. This is the third cut in toll rates announced by the Prime Minister since he tabled the Budget 2011 proposals last year. Meanwhile, Bernama quoted Najib as saying that the Government had promised to do the best for the people and this was one of the examples in line with the 1Malaysia concept. (The Star)

Favelle wins RM123m contract
Favelle Favco (FBB) has secured contracts to supply eight cranes worth RM123.20m. The company told Bursa Malaysia yesterday that the cranes would be delivered to eight buyers between early this year and early 2012. FBB said the contract is expected to contribute positively to its earnings and net assets for the financial year ending 31 Dec 2011 and beyond. (StarBiz)

Higher logs royalty in Sarawak
The Sarawak government has raised the single flat royalty rate on logs by 30% to RM65 per cu m from 1 Jan 2011. The single flat rate, which was introduced three years ago, was RM50 per cu m in 2008 and 2009. Last year's rate was supposed to be RM55 per cu m but it was lowered by RM5 per cu m following an appeal by the Sarawak Timber Association on grounds of poor market situation. With the latest increase of RM15 per cu m, this will generate an additional RM150m (based on 10 million cu m of logs harvested in 2010) in revenue for the Sarawak government's coffers this year. (StarBiz)

SunCon gets RM37m contract
Sunway Holdings’ wholly owned subsidiary, Sunway Construction SB (SunCon), yesterday secured a RM37.36m contract from the Ministry of Transport for upgrading works at Sultan Abdul Aziz Shah Airport in Ipoh. Sunway said the proposed project was expected to commence in March this year with a construction period of 72 weeks. (Financial Daily) Please see accompanying report

Hock Sin Leong (HSL) faces delisting
Hock Sin Leong Group is facing a possible de-listing after failing to submit its regularization plan to the Securities Commission or Bursa Malaysia Securities for approval within the stipulated timeframe. The electrical and electronics retail player said in a filing with the exchange that trading in its securities would be suspended from 25 Feb and its securities delisted on 1 March unless it submitted an appeal to Bursa Securities by 24 Feb. (StarBiz)


Petronas finds new O&G fields offshore Sarawak
State-controlled Petroliam Nasional (Petronas) has made a major oil and gas (O&G) discovery after commencing drilling works at NC3 and Spaoh-1 wells in Blocks SK316 and SK306 respectively, offshore Sarawak. The successful drilling of the NC3 wildcat well in March 2010 and a subsequent appraisal well indicated a significant discovery for the national oil company in Block SK316, with early estimates at 2.6tr standard cubic feet (tscf) of net gas in place. ‘The Spaoh-1, well located in Block SJ306, shows similar promise. It was drilled in Dec 2010 and found both oil and gas,” the national oil company said. Petronas pointed out that preliminary evaluation indicated about 100m stock tank barrels (mmsb) of oil and 0.2 tscf of gas in place respectively. Currently, the well is being prepared for production testing. (FinancialDaily)

IGB to sell The Gardens Mall to subsidiary
IGB Corp plans to sell The Gardens Mall, which has an indicative value of RM820m, to its subsidiary KrisAssets Holdings for cash as part of its ongoing streamlining scheme. KrisAssets, its 75% unit, essentially operates like a real estate investment trust, and the purchase will give it a new source of recurring income. IGB entered into an agreement yesterday for KrisAssets to buy all of the shares in Mid Valley City Gardens SB. The purchase will depend on the net tangible assets of MVCG for the fiscal year ended 31 Dec 2010. (Business Times)

Bidders for Khazanah’s stake in Pos Malaysia to go through vigorous process
Khazanah Nasional will be putting the bidders for its 32.21% equity in Pos Malaysia through a vigorous process that includes a detailed assessment of the business plan and whether there will be a “cultural fit” between the new owners and the postal company. Monday was the deadline for all bidders to submit their offer and sources close to the deal said the format required for the bids was broken up into a few parts. One of them being the business plan, another the indicative office price and a third being the background information on the bidder such as the name of shareholders and partners as well as financial information of all companies in the consortium. (Starbiz)

Plan to relist Magnum put on hold
Multi-Purpose Holdings (MPHB), which has planned to relist its gaming unit, Magnum Holdings is putting the plan on hold. “The board of directors of MPHB wishes to state that the preliminary plans to relist Magnum as announced on 3 and 4 Aug 2010 has been placed on hold for the time being,” MPHB said. (Starbiz)

Handal unit inks RM12m crane deal
Handal Resources wholly owned unit, Handal Offshore Services SB (HOSSB), has signed a RM12m deal with Excell Crane & Hydraulics Inc (ECHI) for the use of the intellectual property rights of the “Seacrane” offshore pedestal crane product line. The “Seacrane” will be used in Asia, Africa, Europe, Australia, New Zealand and other countries. (Business Times)

AirAsia to order 175 A320s
AirAsia say it’s in talks to buy about 175 of the upgraded A320 jet planned by Airbus SAS, as well as some larger A330s with which to add flights to Germany and other European destinations from Kuala Lumpur. The two sides had not yet agreed financial terms for the order, whose size would not be “not dissimilar” to AirAsia’s last 175-plane A320 purchase, chief executive officer Datuk Seri Tony Fernandes said. (Starbiz)


The FBM KLCI plunged 32.08 pts to close at 1,503.99 on extended losses in finance counters and blue chips. Dayang has been awarded a contract by Petronas Carigali SB to provide topside structural maintenance services for about RM802m, the major shareholders of MTD Capital Bhd have revised their offer price higher from RM9.50 to RM11.00 cash per share to take over the company while Integrax Bhd is selling its entire 70.31% stake in its Indonesian subsidiary, PT Indoexchange Tbk to Equatorex SB, for RM9.38m. According to the Malaysian Palm Oil Board, Malaysian CPO production fell 14.18% m-o-m to 1.057m tonnes in January while Malaysia’s industrial production index rose 4.2% y-o-y in December 2010. Finally, the US markets closed mixed while crude oil price was marginally unchanged, up only by USD0.02 to USD86.73/barrel.


Mubarak is set to turn over power
President Hosni Mubarak will meet the demands of the protestors, military and ruling party officials said Thursday in the strongest indication yet that Egypt’s long-time president may be about to give up power and that the armed forces were seizing control. Gen Hassan al-Roueini, military commander for the Cairo area, told thousands of protestors in central Tahrir Square, “All your demands will be met today.” The military supreme council was meeting Thursday, without the commander in chief, Mr. Mubarak, and announced on state TV its “support of the legitimate demands of the people.” A spokesman read a statement that the council was in permanent session to explore “what measures and arrangement could be made to safeguard the nation, its achievement and the ambitions of the great people”. The head of the ruling party, Hossam Badrawi, told The Associated Press that he expects that Mr Mubarak will “address the people tonight to respond to protestors demands.” (International Herald Tribune)

Dayang gets RM802m service contract from Petronas Carigali
Oil and gas firm Dayang Enterprise Holdings Bhd has secured a five-year service contact from Petronas Carigali SB (PCSB) estimated to be worth about RM802m. The Sarawak-based company said the contract is a ‘call-up contract’ made up of work orders, which will be awarded at the discretion of PCSB during the duration of the contract, and the values of the work orders are based on the contract schedule of rates, it said in a filing to the exchange yesterday. The contract for the provision of topside structural maintenance services for PCSB’s Sarawak, Sabah and Peninsular Malaysia operations will run from 2 Feb 2011 to 1 Feb 2016.(Malaysian Reserve)

Suitors up offer for MTD Cap to RM11 a share
The major shareholders of MTD Capital Bhd (MTC Cap) that had proposed to take over the company for RM9.50 ash per share previously have revised their offer to RM11 cash per share. In MTD Cap said it had received notice of the revised offer from Maybank Investment Bank Bhd, the financial adviser to the joint offerors Nikvest SB, Alloy Consolidated SB, Alloy Concrete Engineering Consolidated SB and Alloy Capital SB. The joint offerors, which are also the major shareholders of MTD Cap, are the private investment vehicles of Datuk Nik Hussain Abdul Rahman and Datuk Azmil Khalili, the group executive chairman and president, and CEO of MTD Cap, respectively. (Financial Daily)

Ann Joo eyes more Malaysia, foreign steel mills
Steel maker Ann Joo Resources Bhd is continuously looking at opportunities to buy other steel mills both locally and overseas to expand. Yesterday, Ann Joo signed a deal to raise RM500m from a bond sale to finance its investment in a blast furnace project. The blast furnace plant, the first of its kind in the country and the second in Asia after Thailand, will increase its production capacity to 1.1m tonnes from 800,000 tonnes a year. The plant is 95% completed and is targeted to start production by April this year. It consist of a 450m3 blast furnace and 75m3 sintering plant, in addition to an upgraded electric arc furnace. The new upgraded plant would help Ann Joo save 40 per cent of its electricity costs. It would also have the capacity and technology to switch between iron ore, coke and scrap, depending on the market's raw material prices. (Business Times)

Magnum relisting put on hold
Contrary to wide market expectations, Multi-Purpose Holdings Bhd (MPHB)'s plan to relist its numbers forecast operator (NFO) Magnum Corp Bhd has been put on hold, as the company shifts its focus to reformatting its business structure. “There is no plan to relist Magnum for the time being,” MPHB managing director Datuk Surin Upatkoon said in reply to a StarBiz query. Following its proposed acquisition of the balance 49% stake it does not already own in Magnum Holdings SB on Wednesday, MPHB in a statement expressed its intention to make gaming its core business, while it would work towards the rationalisation of its non-core assets such as insurance and stockbroking through a divestment programme. It gave no hint of the widely expected relisting of Magnum shares on Bursa Malaysia. (StarBiz)


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