19 November 2008 Newz Bits

November 25, 2008 at 7:35 am 1 comment


Higher risks and debt weigh on valuations of TM International
Valuations have taken a tumble, which we believe is due to the massive RM6.5bn debt taken on as part of TMI’s strategy to expand its presence in India. While growth prospects in India are positive due to low penetration rate of less than 20%, the high capex required to establish a pan-India presence and intense
competition are some of the key risks facing the merged entity of Idea-Spice. Idea recently reported EBITDA margin compression to 28% (2QFY08: 33%) due to network expansion costs and higher A&P expenses on brand building. We maintain our BUY call on TMI, but reduce our target price from RM7.80 to RM5.95.


On Malaysia
• Puncak Niaga plans to venture in Indonesia
• Oil World forecasts Malaysia’s 2009 palm oil output to rise only
On The Global Front
• U.S. wholesale prices fall by a record amount in October
• U.K. inflation rate fall more than economists forecast in October
• TM Int – Higher risks and debt weigh on valuations (Buy;
RM4.18; TP: RM5.95)
• Affin Holdings – Ceasing coverage

Puncak Niaga Holdings Bhd (PNH MK, Buy, TP: RM3.96) plans to venture into Indonesia by making the water project in Banten province in Java Island as a stepping stone. Its subsidiary Puncak Niaga (M) Sdn Bhd has signed a memorandum of understanding (MOU) with the government of Banten province to cooperate on the investment in water infrastructure. “This will be our second overseas venture after China. We are also looking at a few projects in India, such as in Chennai and Madras,” Puncak Niaga general manager Ahmad Marzuki Hashim said. Puncak Niaga will conduct a feasibility study on the water infrastructure project for industrial and residential sectors in the province within three to six months. (BT)
* * * * *
Dialog Group Bhd, which provides technical services to oil companies, said its first quarter net profit rose 11%, led by growth in its specialist products and services division. It is confident of favourable results for fiscal 2009 due to the contracts that it has won in plant maintenance, catalyst handling and the provision of specialist products and services. Dialog also plans to grow its tank terminal business. It made a net profit of RM18.8m for the quarter to September 30 on revenue of RM238.4m, which jumped 30%. (BT)
* * * * *
Bursa Malaysia’s expensive new trading platform for equities trading called Bursa Trade Securities (BTS) will go live on December 1, replacing an 18-year-old SCORE system. The BTS project costs some RM100m but Bursa Malaysia chief believes such an investment on an advanced trading sytem is not only imperative but also very timely. He also said that the trading link plan between Bursa Malaysia and its Singaporean equivalent had been shelved. Instead, Malaysia and Singapore are now working with four other key regional countries to introduce an inter-Asean trading link. (BT)
* * * * *
Malaysia’s 2009 palm oil output will rise only marginally following years of rapid growth, Hamburg-based oilseeds analysts Oil World said yesterday. Malaysia will produce 17.60m tonnes of palm oil in 2009 against an estimated 17.56m tonnes in 2008 and 15.82m tonnes in 2007, it forecasts. “The (palm tree) biological yield cycle is likely to decline further in early 2009, curbing palm oil production in Malaysia,” it said. “It is possible that yields and production will fall below our current estimate in July/December 2009 owing to the delayed effect of reduced fertilizer application, mainly by smaller producers.”
“The near-term palm oil supply fundamentals are bearish, but the medium-term prospects for 2009 point to a tightening of the supply fundamentals and a decline in palm oil stocks.” (BT)
* * * * *
The government will review the need for new power plants by the end of 2009 as electricity consumption has
weakened in the last one year, Energy Minister Datuk Shaziman Abu Mansor said. The decision was made yesterday by a committee, the Jawatankuasa Perancangan Pelaksanaan Pembekalan Elektrik dan Tariff (JPPET), which the minister chairs.
Shaziman noted that demand for electricity has fallen by 4.8% this year. Malaysia has a total installed generation capacity of 19,743 megawatts (MW), while in contrast, the maximum demand was 14,007MW. He said power consumption is expected to increase by 3.0 to 3.5% in five to six years. He said the current 42% reserve is expected to rise to 47% next year with the commissioning of a new independent power producer (IPP) in Jimah, Negri Sembilan. Malaysia’s reserve margin is expected to come down to only 25% as a result of the decommissioning of five IPPs in 2016. (BT)
* * * * *
Starting Jan 1, private cars using the North-South Expressway and the North-South Central Link will enjoy a 10% discount when travelling between midnight and 7am. For travel during festive seasons, they will get a further 10% reduction on travel on selected days if they used the expressways during the same times. The discounts apply only to Class I vehicles namely private cars between Jan 1 next year and Dec 31, 2010. PLUS managing director Noorizah Abd Hamid also announced during a press conference at the Works Ministry yesterday a third incentive – the PLUS Loyalty Programme. Under the programme, Touch ‘n Go and Smart Tag users who spend a minimum of RM200 monthly at PLUS-managed expressways would enjoy a rebate of 5% of the toll paid. (The Star)
* * * * *
The manufacturing sector registered sales of RM51bn in September, a 9.2% rise, driven by petroleum, electronics, chemicals and steel industries. Sales grew by 0.3% from RM50.9bn in August, the Statistics Department said. For the first nine months of the year, the sector posted grew by 14.9% to RM442.7bn. (BT)
* * * * *
Malaysia may need to spend up to RM30bn over 15 years to revamp its water management system as the current water supply is incapable of meeting the requirements of major crisis, Water Association of Selangor, Kuala Lumpur and Putrajaya president Tan Sri Rozali Ismail said. He said most states had a buffer level of 5% to 10% above normal consumption, but this was far below that was advisable in the event of a crisis, such as a prolonged draught, especially in Selangor. (StarBiz)
* * * * *
The government is prepared to introduce additional measures to its RM7bn economic stimulus package unveiled earlier this month if this is necessary to further boost growth, said Finance Minister Datuk Seri Najib Razak. He said the key factor to achieving the government’s economic growth targets was ensuring strong domestic demand. He added the economic stimulus package must be on the ground by 1Q09 and credit lines by the banks to Malaysian companies must continue to be relatively strong. Najib said the government could further relax business and investment rules at a gradual pace to improve the ease of doing business in Malaysia. (Financial Daily)
* * * * *
The falling of global crude oil prices to under US$65 (RM234) per barrel has relieved the government of having to subsidise fuel at the pumps, said Domestic Trade and Consumer Affairs Minister Datuk Shahrir Samad. He said that when crude oil is below US$65 per barrel, the government saves 30 sen per litre, and as long as oil trades at the current price range, the government may save some RM10bn. Shahrir said with the dipping crude oil prices, the government would record some revenue due to the difference in the ex-refinery price and the price oil companies sell to station operators. The government had paid out a total of RM15.58bn in subsidy, inclusive of tax foregone this year as at end Oct. The National Economic Council would decide in a meeting next week whether to set a floor price for fuel since crude oil prices had continued to fall. (Financial Daily)
* * * * *
The country’s automotive policy should be overhauled to ensure a fairer and more open industry for both Malaysian and foreign players, industry watchers said. They called for fewer protectionist measures for national car companies and a friendly AP (approved permit) scheme to import vehicles. The government is expected to unveil by March next year the revised National Automotive Policy (NAP), which was first announced in early 2006. (BT)
* * * * *
Stocks ended a volatile session higher Tuesday, the Dow Jones industrial average gained 151.17 points, or 1.8%. Stocks seesawed throughout the day, spiking after officials said the $700 billion bailout was helping and slumping after another brutal housing market report. Homebuilders’ confidence in the housing market fell to a record low in November, according to a National Association of Home Builders (NAHB) report released Tuesday afternoon. Confidence fell to 9 on a scale of 1 to 100, the worst its been since NAHB began tracking the index in 1985. (CNN Money)
* * * * *
US homebuilders’ confidence in the housing market again plunged to a record low. The National Association of Home Builders (NAHB)/Wells Fargo housing market index for November fell to a seasonally adjusted reading of 9, the lowest recorded level since the index began in 1985. Economists surveyed by Thomson/IFR expected the index to remain at 14, the previous record low set in October. A reading below 50 indicates that builders who think home-sales conditions are poor outnumber those who think the environment is positive for sales. (CNN Money)
* * * * *
Home prices fell in four out of every five U.S. cities in the third quarter, a record spurred by distressed foreclosure sales across the country. The median price of a U.S. home declined 9% from a year earlier and sales of properties with mortgages in default accounted for at least a third of all transactions, the National Association of Realtors said. U.S. foreclosure filings totaled 279,561 in October, an increase of 25% from a year ago. (Bloomberg)
* * * * *
US wholesale prices fell by a record amount in October as energy costs continued to decline. The Labor Department’s Producer Price Index (PPI) decreased 2.8% in October, after easing 0.4% in September. It was the sharpest one-month decline on record and much more than the 1.8% decline that economists surveyed by Briefing.com had expected. The socalled core PPI number, which excludes food and energy prices, rose 0.4% – more than the 0.1% increase analysts had forecast. Energy prices plummeted 12.8% in the month after falling 2.9% in September. That includes a 24.9% drop in gasoline prices, which fell 0.5% a month earlier. (CNN Money)
* * * * *
U.K. inflation rate fell more than economists forecast in October. Consumer prices rose 4.5% from a year earlier, compared with 5.2% the previous month, the Office for National Statistics said. Central bank Governor Mervyn King said last week that the economy is probably in a recession, and policy makers will cut borrowing costs as low as needed to stave off deflation. The bank forecasts inflation will slow below the government’s 1% lower limit unless it reduces the benchmark interest rate from the current 3%. (Bloomberg)
* * * * *
Singapore says its fiscal 2008 budget deficit may be more than three times the S$800m initially forecast as it boosts spending to lift the birth rate and help consumers cope with inflation. Government revenue will be constrained by the economic slowdown and falling property transactions, especially in the final two quarters of the fiscal year ending March 31, Finance Minister Tharman Shanmugaratnam said. The city state, which in February reported its biggest budget surplus in at least a decade, said then it planned to give back S$5.4bn to help consumers cope with rising food and energy prices, or about 80% of the S$6.4bn surplus in the year ended March 31, 2008. (Bloomberg)
* * * * *


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CLSA Cuts Malaysia Profit Forecasts, Says Sell Banks, Planters Affin Holdings | 3QFY08: Weak capital markets take a toll

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