24 October 2008 – Newz Bits

October 24, 2008 at 9:06 am Leave a comment

The Newz Bits for Oct. 24, 2008:

TALKING POINT
Sime Darby secured RM1.12bn fabrication contracts Sime Darby (SIME MK, Buy, TP: RM7.30) was the biggest winner yesterday when Petronas awarded RM2.8bn worth of fabrication contracts, of which RM1.12bn was secured by Sime Darby. This project would bring orderbook to an estimated RM2.2bn that would last into 2010. Following our downgrade of the oil & gas sector from Overweight to Neutral recently, we expect that come 2010, orderbook replenishment might come in softer FY10 earnings and have reduced earnings from the engineering segment by 2.4% in FY10 accordingly. We have also reduced our CPO price assumption for FY09 from RM2,500 to RM2,300 per MT. Our BUY call is maintained although target price now been reduced from
RM8.20 to RM7.30.

HIGHLIGHTS

On Malaysia :

The Securities Commission (SC) has initiated a probe into the abnormal intra-day trading activities of KNM Group Bhd (KNMG MK, Hold, TP: RM0.85) shares. “We are examining the announcements made by the company on Bursa Malaysia. If there are any indications of wrongdoing or breaches of securities laws, then appropriate regulatory action will be taken,” an SC spokesperson told Business Times. The company was queried on October 15, following a sharp decrease in price and high volume of its shares. In its reply then, KNM said it was unaware of the cause for the unusual market activity. (BT)

* * * * *

Petronas Carigali Sdn Bhd, the exploration and production arm of Petrolium Nasional Bhd (Petronas), has awarded 15 fabrication contracts worth a combined RM2.8bn to five local companies. The largest portion, totalling RM1.17bn, went to Malaysia Marine and Heavy Engineering Sdn Bhd (MMHE), followed by contracts worth RM1.12bn to Sime Darby Engineering Sdn Bhd and RM288m to Kencana HL Sdn Bhd. The remaining contracts worth RM140m and RM102m were awarded to Ramunia Fabricators Sdn Bhd and Oilfab Sdn Bhd respectively. (BT)

* * * * *

RHB Bank Bhd has been granted a licence by the State Bank of Vietnam to open its first representative office in the country. (StarBiz)

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UEM Group Bhd has extended by 14 days the offer period for the conditional takeover of Pharmaniaga Bhd, to Nov 6. UEM Group plans to buy the remaining shares of Pharmaniaga not already held by the group at RM3.61 per share. (BT)

* * * * *

PLUS Expressways Bhd said it has submitted proposals for toll concessions and highway construction jobs in India. PLUS managing director Noorizah Abdul Hamid said the proposals were submitted in response to requests from the National Highway Authority of India. The National Highway Authority of India is expected to call for a tender early next year and name the successful bidders in the first quarter of 2009. (BT)

* * * * *

Bursa Malaysia Bhd will continue its discussions on tie-ups with other stock exchanges, despite a volatile environment in regional stock markets. Its chief executive officer Datuk Yusli Mohamed Yusoff yesterday said the local bourse will continue to hold talks on tie-ups and also push its new products in a bid to increase Bursa Malaysia’s attractiveness as a listing and investment destination. (BT)

* * * * *

Indonesian authorities have ceased investigations into allegations of embezzlement, fraud and money laundering against certain directors and employees of Astro All Asia Networks Plc, PT Direct Vision and PT Adi Karya Visi. In its announcement to Bursa Malaysia, Astro said investigations into the allegations ceased as of 20 October and a formal notice was issued to all the individuals against whom the allegations were made “on grounds that the matter is not a criminal act”. (Financial Daily)

* * * * *

China Harbour Engineering Company (CHEC) has inked the RM2.2bn contract for the Penang Second Crossing. CHEC will start works on the substructure and mainspan jobs from November, according to JKSB Sdn Bhd managing director Tan Sri Zaini Omar. He also said the superstructure portion worth RM1.3bn was still pending as UEM Builders Bhd had yet to agree to the terms of the offer. UEM Builders will be given until next week to accept the offer. Besides the substructure, mainspan and superstructure jobs, another RM800m in land works will also be offered via restricted tender. (Financial Daily)

* * * * *

INVESTMENT RESEARCH

Malaysia

The Association of Banks in Malaysia (ABM) says there is no credit crunch in the country and that the banking sector remains strong and well capitalised despite the turmoil in the global financial markets. According to the ABM, unlike the liquidity crunch that was seizing some of the key developed markets, Malaysia had been relatively unaffected and liquidity level in the banking system was healthy. As at end-August, loan-to-deposit ratio stood at 74.5% compared with the high 90% seen in 1997. (StarBiz)

* * * * *

The government’s income in the form of dividends and taxes from petroleum companies in 2010 may decline if the crude oil price in the global market were to stay in the range of US$70 (RM247) per barrel level in 2009. Second Finance Minister, Tan Sri Nor Mohamed Yakcop, said for 2009, it will remain good as the petroleum companies will pay the taxes based on 2008 incomes, where on average the crude oil price remained at a reasonably high level. (BT)

* * * * *

The review of the National Automotive Policy (NAP) is expected to be ready and presented to the cabinet in 1Q09, said Deputy International Trade and Industry Minister Datuk Liew Vui Keong. Liew said the NAP review had taken into consideration the developments locally and globally to boost the competitiveness of the country’s automotive industry. He also said the review took into consideration the views and response from those involved in the industry and related government agencies. (Financial Daily)

* * * * *

About 50,000 contract employees in the civil service are expected to be retrenched by year end due to budget constraints, according to the Congress of Union of Employees in the Public and Civil Service (Cuepacs). Its president Omar Osman however said Cuepacs is not buying the lame excuse because the government could well afford to retain the services of these employees. He said Cuepacs had sent an urgent appeal to the Public Service Department (PSD) to help retain these staff, and suggested that the PSD either redeploy these staff or absorb them into the permanent establishment. (Financial Daily)

* * * * *

The government is reviewing the current policy on the iron and steel industry in line with the objectives outlined under the Third Industrial Master Plan (IMP3), the Deputy Minister of International Trade and Industry, Datuk Jacob Dungau Sagan said. He said the reason for the review among others, was to support Malaysia’s commitment towards the Free Trade Agreement (FTAs) and for the Asean Free Trade Area (Afta). Jacob said that the FTAs not only provided market access opportunities for the metal sector but also a more predictable environment for facilitating investment. (Financial Daily)

* * * * *

On Global:

Stocks were mixed Thursday, Dow Jones industrial average gained 2% or 172 points. The Standard & Poor’s 500 index gained 1.3%. But the Nasdaq composite lost 0.7%, recovering a little after touching a new bear-market low around 1,533 during the session. Markets initially rallied after FDIC chairwoman Sheila Bair told a Senate committee that a new plan is on tap to help homeowners avoid foreclosure, if possible. Her comments came after a new indication of weakness in the housing market, with 81,312 homes lost to foreclosure in September, according to a report released Thursday. (CNN Money)

* * * * *

US Commercial banks borrowed a record of $105.8bn a day, on average, from the Federal Reserve’s emergency lending window over the past week, according to Fed data released Thursday. Though the panic has eased somewhat in recent weeks, banks remain skittish about lending to one another and to businesses. The federal government is attempting to ease these concerns, though several of its programs have yet to come online. These include measures such as injecting capital into banks and providing insurance on all non-interest bearing accounts. Investment banks, meanwhile, borrowed $111bn a day, on average, down from $131bn a week ago. (CNN Money)

* * * * *

A key form of lending to major businesses and banks contracted for the sixth week in a row, just days before the Federal Reserve plans to start buying up large amounts of the short-term business debt known as commercial paper. Total commercial paper outstanding shrunk by $61.5bn, or 4.1%, to a seasonally adjusted $1.45trn, from $1.9trn a year ago. The latest weekly contraction marks the second-biggest percentage drop during the recent slide, and is much greater than the 2.6% decline in the previous week. Commercial paper outstanding, which is now at its lowest point since April 2005, has been steadily declining since Lehman Brothers’ bankruptcy filing on Sept. 15. In fact, since then, total commercial paper has plunged by 20.2% – the greatest drop on record. (CNN Money)

* * * * *

The amount of money pulled from stock mutual funds in the past week was on the decline, according to a report released Thursday – an indication that individual investors were getting a little less pessimistic. The amount of money withdrawn from funds that invest in both U.S. and non-U.S. stocks fell to $6.5bn. That’s noticeably less than the $13.9bn withdrawn a week earlier. Though the amount of money being withdrawn from stock mutual funds has slowed, October was still on track to see the largest monthly cash withdrawal ever, according to TrimTabs. (CNN Money)

* * * * *

U.S. foreclosure filings increased 71% in the third quarter from a year earlier to the highest on record as home prices fell and stricter mortgage standards made it harder for homeowners to sell or refinance, RealtyTrac said. A total of 765,558 U.S. properties got a default notice, were warned of a pending auction or were foreclosed on in the quarter, the most since records began in January 2005. Filings rose 3% from the second quarter and fell 12% in September from August as state laws created to keep people in homes slowed the pace of defaults. (Bloomberg)

* * * * *

The intensifying credit crisis has spread to international trade with reports emerging of banks refusing to honour letters of credit from other banks, said Moody’s Economy.com’s economist Matt Robinson. With reports of sellers banks deciding they don’t trust the financial institutions named in buyers letters of credit have come alarming anecdotes of cargo ships being stuck in home ports. With ships not moving, stocks have been piling up and exporters have grown desperate for income from idle inventory. Japan recorded its first-ever seasonally adjusted monthly trade deficit in August, when demand for high tech electronics and motor vehicles by US and European consumers plummeted. South Korea had recorded a string of trade deficits this year, a sharp turnaround from historical results. Letters of credit reflect the financial obligations generated through the contract of sale, and ensure that the exchange of funds occurs when the specified quality and quantity of goods have been satisfactorily delivered. (Financial Daily)

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