18 November 2008 Newz Bits

November 25, 2008 at 2:11 am Leave a comment

TALKING POINT

Sunrise oversold to distressed level
We initiated coverage on Sunrise with a BUY call as we believe its fundamentals remain firmly intact. Its large unbilled sales of RM1.3bn will provide the perfect cushion against slowdown in the property sector. This does not include further conversion of bookings in its MK 11 project (we estimate at least another
RM230m) as well as en bloc sale of MK 20 for RM767m under a call and put option arrangement. It is currently trading at 3.8x P/E based on FY2009 earnings as well as 0.7x P/BV. This is close to the distressed valuation of 1.4x P/E and 0.2x P/BV last seen during the Asian financial crisis. Although these may indicate further downside risk, we believe the fundamentals of the current property market to be stronger than during the Asian financial crisis. We peg a target price of RM2.32 based on 30% discount to RNAV of RM3.32.

HIGHLIGHTS

On Malaysia
• Major shareholder still in talks with bankers to take AirAsia
private
• Petrol and diesel prices reduced by 15 sen

On The Global Front
• Japan’s economy entering the first recession since 2001
• U.S. industrial production rebounded in October

REPORTS
• Sunrise – Oversold to distressed level (Buy; RM1.34; TP:
RM2.32)

Tune Air Sdn Bhd is still in negotiations with financial institutions and prospective investors to fund the potential privatisation of AirAsia Bhd (AIRA MK, Buy, TP: RM1.90). AirAsia said Tune Air was still negotiating the terms and conditions with the institutions and investors and would make an appropriate announcement when Tune Air had formed a firm intention on whether to proceed or not with the privatisation. Air Asia had last month said Tune Air considered taking the carrier private at an indicative price of about RM1.35 per share, subject to change depending on market conditions. (Financial Daily)
* * * * *
The gas-powered plant in the east coast of Sabah needs to be developed quickly to ensure a stable electricity supply throughout the state, said Tenaga Nasional Bhd (TNB MK, Buy, TP: RM10.20) CEO and president Datuk Seri Che Khalib Mohamad Noh. Che Khalib said Petronas has appointed TNB a technical consultant for the 300-megawatt project. He said it was risky to place all the power plants in the west coast and transfer the power to the east as suggested by many. (Financial Daily)
* * * * *
IGB Corp Bhd, which operates Cititel hotel chain, plans to invest RM2bn over the next 5 years to develop tourist class hotels in China under a new brand name. The Group, which considers 3-4 star hotels as tourist class, also has plans for such hotels in other regional cities from Bangkok to Sydney. The aim was to build some 20,000 tourist class rooms in 3rd and 4th tier Chinese cities. The name of the chain would be Cititel Super-Express Hotel and there would be 1000 rooms per hotel. The hotels would be developed locally as well in Kuching, Kota Kinabalu, Penang and Ipoh. (Starbiz)
* * * * *
Tan Chong Motor Holdings Bhd, the distributor and assembler of Nissan vehicles in Malaysia, said net profit nearly tripled to RM95.4m in the third quarter ended Sept 30, as sales hit RM1bn for the first time. Tan Chong launched the all-new Nissan Sylphy at the end of June, the bigger engine capacity “brother” to the popular Grand Lavina and Latio models. Tan Chong said the company sold 10,884 vehicles in the third quarter, up 24% from 8,784 units in the preceding quarter. The total industry volume in the third quarter was up 3.2% from the second quarter. The combined market share of all three brands under its stable – Nissan, UD and Renault – accounted for 6% of the total industry volume during the quarter compared with just 3.8% for the whole of last year. (Starbiz)
* * * * *
MK Land Holdings Bhd will announce plans to return to profitability on November 28 as it seeks to pull itself out of two straight years of losses. “I will announce plans on the future of MK Land on that day at the company’s boardroom,” chief executive officer Tan Sri Mustapha Kamal Abu Bakar told Business Times on Pulau Banding, Perak, yesterday. He declined to give details. (BT)
* * * * *
PLUS Expressway Bhd saw a slide of 15.5% in its net profit to RM241.75m in the third quarter ended Sept 30, 2008 from RM286.23m a year earlier mainly due to higher taxation. No dividend was declared. Toll collection for the quarter was higher by 20.2% y-o-y due to contribution from new subsidiaries as well as growth in same toll collection of 2%. The new subsidiaries are Expressway Lingkaran Tengah Sdn Bhd (Elite), Linkedua (Malaysia) Bhd and Konsortium Lebuhraya Butterworth-Kulim Sdn Bhd. (Financial Daily)
* * * * *
Petrol and diesel are 15 sen cheaper today following the government’s decision to lower fuel prices in line with the downward trend of global oil prices. The pump price of RON97 petrol is now RM2.00 a litre, while that of RON92 petrol and diesel is RM1.90 a litre. (Financial Daily)
* * * * *

Malaysia’s economic slowdown is prompting investors to bet Bank Negara Malaysia (BNM) will lower borrowing costs for the first time since 2003 by March as inflation cools, according to interest-rate futures contracts. The Kuala Lumpur interbank offered rate (Klibor) fell to 3.15% according to the futures contract for March settlement. That’s 50bps lower than the 3.65% local banks charge each other for 3-month loans currently. Traders increased bets BNM will cut interest rates after a government report on Nov 11 showed industrial production fell 1.7% in Sept, the first decline since Mar 2007. (Financial Daily)

* * * * *

 

The government plans to make it mandatory for palm oil millers to buy fresh fruit bunches (FFB) from smallholders, Plantation Industries and Commodities Minister Datuk Peter Chin said. He said the move was necessary as smallholders were hard hit when millers, running at full capacity, turned the smaller planters away. However, he did not say when the regulation would be enforced. Chin also said the price of crude palm oil (CPO) would trade to RM2,000 a tonne next year on improved demand for edible oil. (Financial Daily)
* * * * *
A group of Malaysian builders plans to build commercial and residential properties with development value of up to RM11bn in Shenyang, China. The consortium signed a memorandum of understanding with the Shenyang Province authorities in Kuala Lumpur yesterday. A special purpose vehicle, known as Shenyang-Malaysia Development Sdn Bhd (ShenMas), has been formed to undertake the conceptual planning, land acquisition, funding issues and feasibility studies. ShenMas executive director Datuk Lim Kim Wah said a definitive agreement was expected to be signed in June next year. The project is expected to start by the end of next year. We will form a consortium and Bina Puri will be one of the companies, he told (BT)
* * * * *
The government may further relax rules for the Malaysia My Second Home (MM2H) programme to allow foreigners to work in certain sectors. The move is expected to attract more foreigners, especially those with certain skills, to buy homes in Malaysia. It is not yet clear which sectors could be liberalised for MM2H participants but the services industry is touted as a strong possibility. According to sources, deliberations are ongoing at the sub-committee level of the National Economic Action Committee in the Prime Minister’s Department. (Financial Daily)
* * * * *

 

Stocks slipped in a volatile session Monday, the Dow Jones industrial average lost 223 points, or 2.6%. Stocks tumbled through the morning but turned higher near midday before retreating again in the afternoon. Trading volume was light, with investors holding back ahead of some key economic reports due later in the week and the hearings on the future of the automakers. (CNN Money)
* * * * *
Japan’s economy, unexpectedly shrank in the third quarter, entering the first recession since 2001. Gross domestic product (GDP) fell an annualized 0.4% in the three months ended Sept. 30, the Cabinet Office said. Economists predicted the economy would grow 0.1% after contracting a revised 3.7% in the previous period. The slowdown may deepen as the global financial crisis hurts exports, prompting companies to slash profit forecasts and cut investments. Japan has the lowest interest rates among the 20 biggest economies and public debt that exceeds 180% of GDP, limiting the government’s ability to stimulate growth. (Bloomberg)
* * * * *
US industrial production rebounded in October after refinery shutdowns from Gulf Coast hurricanes caused the biggest drop since 1946 the month before. The 1.3% gain in October wasn’t enough to make up for the 3.7% September plunge, and output shrank by 0.7% in each of the past two months after excluding the effect of the hurricanes and a Boeing Co. strike, the Federal Reserve said. The choking off of credit to businesses is forcing companies to cut back on investments, while the downturn in consumer spending has eroded demand for everything from cars to computers and furniture. The rising danger of a global recession and a collapse in commodity prices has endangered the overseas sales of U.S. exporters such as Caterpillar Inc. and Deere & Co. (Bloomberg)
* * * * *
The U.S. has entered a recession that will persist into next year, and economies around the world will follow suit, according to a survey of business economists. After growing 1.4% this year, the U.S. will contract 0.2% in 2009, according to the median estimate in a poll taken by the National Association for Business Economics. A majority of respondents said the U.K., euro area, Japan, Canada and Mexico are either now, or will soon be, in a recession. The jobless rate, now at a 14-year high of 6.5%, will climb to 7.5% by the end of 2009, according to the median forecast. Similarly, the economists said housing starts won’t bottom until next year. (Bloomberg)
* * * * *

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Sunrise | Oversold to distressed level November 18, 2008 Daily Highlights

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